Trying a different path to bolster its noninterest income, Michigan National Corp. is selling software to other banks.

The $10.6 billion-asset banking company threw its has into the software ring over the summer when it completed the purchase of Dallas-based BancA Corp., a five-year-old software company that supplies front-line commercial lending packages to a number of large institutions, including PNC Financial Corp., Society Corp., and CoreStates Financial Corp.

Although BancA operates as an independent arm of the holding company, experts said it was unusual for an institution of Michigan National's size to become involved in the highly technical business of selling bank software.

A Creative Effort

As such, Michigan National purchase is a considered a prime example of the creative revenue-raising efforts needed in a banking environment in which new sources of interest-based income are increasingly hard to come by.

"It's pretty uncommon for a bank to be involved in activities of this sort," said J. Kevin McGrath, partner at the Indiana accounting and consulting firm Crowe Chizek. "But with the push toward improved lending processes, [commercial lending automation] is a good business to be in these days."

Michigan National said its purchase of BancA is an outgrowth of its firsthand experience with the company's flagship software package, which automates the process of approving, documenting and closing commercial loans.

"It's is a nice match in that we use the tools that they are building," said Charles Kight, executive vice president at Michigan National. "Our relationship will ensure that they make any newly-developed products available to us early in the game."

Through the second quarter, Michigan National posted improved earnings in almost every business category. The exception to this general upswing has been commercial banking, which continues to be hampered by real estate problems.

While BancA's line of software will not enable the bank to specifically address the problems of reducing its commercial real estate loan portfolio, the improved efficiencies resulting from implementing the software will help to offset the cost of the effort, experts said.

Development Funds Available

John Cook, president and chief executive, said BancA, originally funded by venture capitalists including Banc One Capital Corp. and presidential candidate Ross Perot, had little extra cash for development of new products in recent years.

But with its acquisition by Michigan National, BancA is accelerating its work on client-server products, and it has tentative plans for building an expert system for commercial lending.

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