Small banks are hiring mapping firms to help them figure out if they have potential problems in complying with the Community Reinvestment and Home Mortgage Disclosure acts.

That's the trend spotted by Parsippany, N.J.-based Vamcom Banking Services, which has been offering the service for about a year and is developing maps for 12 banks.

The maps enable banks to see, with varying degrees of detail, which neighborhoods are most - and least represented in their loan files.

But it's the documentation itself that the banks are after, says Vamcom co-founder William P. Schott.

"In the early '90s, a lot of banks that had |satisfactory' or |outstanding' CRA evaluations saw their ratings drop, and the reason was that the agencies, after 1990, started asking for a lot more evidence to show they [banks] were lending where they said they were."

Mr. Schott was senior vice president of marketing and retail operations for New Jersey's Summit and Elizabeth Trust when, in 1985, he left to start Vamcom.

At that time, he says, "we had the idea of developing PC-based microeconomic forecasting models to help banks determine loan growth potential in various categories.

A Gradual Process

"As the mapping technology got more affordable, we started doing it for de novos and de novo branching, mergers and acquisitions screening, and customer profitability. All that led to the CRA and HMDA mapping."

Geographic information Systems technology breaks down the maps into census tracts, which have populations of 5,000.

Mr. Schott says he has not seen any examiner applying this method of analysis to data provides by banks, but says it is rumored that the Federal Reserve has been using the technology internally.

Moreover, "Examiners who have seen the maps have told me that they find them helpful. They tend to be reasonable people, and they don't expect banks to have computer generated maps.

"But if a bank is clearly trying to do something special, they'll appreciate it."

Costs for Vamcom mapping vary widely. The firm has developed lending maps for $900 when "they're interested in a tight market and all the information's on a floppy disk," says Mr. Schott.

"We've also developed maps with many multiple overlays for as much as moderate, five-figure amounts.

"The mapping we do is a bit sophisticated for small banks that want to buy a PC and shrink-wrapped software off the shelf."

|Isn't Easy to Do'

One bank that has set up its own mapping program is United National Bancorp, Plainfield, N.J.

"It certainly isn't easy to do," says Pierce Baugh, who heads both marketing and CRA compliance for the $800 million-asset company.

"We have a PC with a lot of memory, a software package, and an outside source geocodes our accounts," Mr. Baugh added.

"The image is small, and where you have a saturation, the results don't show up that well. But the examiners liked it, and it does have marketing implications."

Trade Group Offers Mapping Service

Brian Smith, director of policy development for the Savings and Community Bankers Association, says more of the trade group's members are turning to maps now that costs are coming down.

And the association is offering a mapping service of its own - a practice Mr. Schott says is unusual for a bank trade group.

"The associations historically have been lobbying and education groups, so it's a bit outside their mission. It might make sense for them to offer the service through a vendor, but then you're getting into an explicit endorsement and all the risks that go with it."

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