Good things have always come in small packages for Crittson Financial Corp.

A servicer of credit card programs for nearly a decade, the Elkhart, Ind., company has focused almost exclusively on small banks - usually those with under $300 million of assets.

Unlike most similar processors, Crittson provides a full-service, soup-to-nuts array of back-office support to banks that may not have the wherewithal to handle all those functions themselves.

Through agreements with Financial Card Services, a Banc One Corp. unit in Columbus, Ohio, and the Westlake, Ohio-based Bancsystems Association, Crittson operates on both the merchant processing and card-issuing sides of the business.

Small Potatoes

Its customers, in 24 states predominantly in the Midwest, typically have only about 1,000 accounts and $700,000 in outstanding card balances. On the average, the banks deal with about 200 merchants.

To put it into perspective, Crittson's 250 customers' aggregate client base of 380,000 accounts is equal to the 75th-largest credit card issuer in the country.

A Helping Hand

Crittson was established in March 1984 by Robert Crothers and Dennis Lochmandy, who are preparing to pass the reins to a new generation of management. Robert Gordon and Ken Howard, currently president and vice president of operations, are already assuming more of a leadership role.

Both Mr. Crothers and Mr. Gordon said the changes at the top will not alter Crittson's mission. Ushering small banks into the card business will be paramount.

Crittson enables some banks that are "uncomfortable" about committing to a credit card program to enter the business, Mr. Crothers said.

While the servicer's growth may not have been as rapid as that of some third-party processors catering to large b;inks, the company did sprout from three employees and $75,000 in initial capital to more than 100 employees and $6.5 million in capital today.

"We're trying to fill a niche that the large processors don't want to deal with," said Mr. Gordon.

Out of the Loop

Before starting their own programs, many of Crittson's banks initially entered into servicing or agent contracts with larger banks that controlled approvals, rates, and credit line limits.

That."pretty much left them out of the decision-making process," Crothers said. The special aid that Crittson provides small bank programs lies in the turnkey nature of the service.

As most small banks do not have the staff or systems to run all the back-office services, Crittson handles all disputes, chargebacks, computer systems, and account processing.

"We handle the details," Mr. Gordon said.

The community banks that make up the majority of Crittson's client base offer cards and merchant services almost entirely within their communities, according to Mr. Gordon. That gives the banks an invaluable familiarity with their cardholders.

Competitive Rates

"Our customers, as a rule, do not leave local communities to issue," he said. The banks stay competitive with larger national issuers by charging low fees and interest rates - about 15% on average, with some as low as 10% - and by maintaining strict underwriting standards and collection procedures.

While Visa statistics put the national delinquency rate at 5% and losses at 3.5% of outstandings, Crittson claims that its clients have averaged 2.65% and 1.2%, respectively, over the past two years.

For Crittson's largest client bank, United Postal Savings Association in St. Louis, the numbers added up to a highly successful program on a smaller than average scale.

With 1.4 billion in total assets and 22 branches throughout Missouri, United Postal had previously acted as an agent for a larger bank in its credit card program. Dissatisfied with the lack of control and yielding only part of the fee income, the bank enlisted Crittson's services to mount its own program in 1989, according to Nancy Chapman, the bank's vice president.

"We weren't experts in that area," Ms. Chapman said.

Variety of Offerings

With Crittson's servicing, the bank now offers a variety of credit plans providing lowered annual fees and rates, or fixed rates - between 9.9% and 17.9% - based on the cardholder's behavior and balance. Since the program's inception, the bank has built up 40,000 card accounts and $22 million in outstanding balances.

"One of the most important factors," Ms. Chapman said, "was that they were flexible with us, adaptable, and very open to new ideas."

Looking Beyond the Midwest

Although the mission remains the same, Crittson is looking to expand its reach in the credit card servicing market beyond its current stronghold in the Midwest.

Currently the company handles accounts in 24 states, but according to Mr. Gordon, it will look to increase its presence from New York to California.

"We want to grow, and show banks the opportunities that they're passing up," he said.

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