Community bankers around the country are engaged in the fight of their lives. As the money-centers and superregionals extend their reach, smaller banks are retrenching in an attempt to hold on to existing customers, attract new business, increase productivity, and raise the level of customer service they provide.
The weapon of choice in this battle is the personal computer.
The personal computer provides community banks with a new opportunity to access technology, said D. Trent Fleming, a consultant with Memphis-based Reynolds, Bone & Griesbeck, which recently conducted a survey of community banking technology.
"The personal computer provides access to both a central processor that has core banking applications and a system for access to marketing and platform automation packages," he said. "Bankers can expect to get more and more applications off the shelf, which will allow them to keep their costs under control while adding functionality."
The Reynolds, Bone & Griesbeck survey of 600 banks with assets under $500 million showed that about half had some sort of personal computer application in place. What's more, half of the remaining respondents said they were planning to install the machines by the end of this year.
The $220 million-asset Tanglewood Bank in Houston was one of the first of its size to move to a client-server environment through its data processing outsourcer, Electronic Data Services Corp.
'A Demanding Market'
"We are a niche bank that serves a demanding market, and the only way we can compete is to offer a higher quality of customer service," said Jerome Simon, executive vice president of the two-branch bank. "Technology is one of the methods we use to provide us with the information to meet and exceed our clients' needs.
"Our philosophy is, the more we know about our customers, the better we can serve them," he added. "We rely on technology to give us the customer information we need. So we decided to put a personal computer on every desk and the result is a tremendous productivity boost, which has translated into better service for our customers."
The bank has 70 PCs throughout its operation, one for each of its full-time employees.
"We don't always want to be on the cutting edge of technology, but when new technology is brought down to a level that we can participate at, we will go after it and use it to our advantage," Mr. Simon said.
Mr. Simon said Tanglewood's next move will be into imaging. The bank plans to buy a system that will allow it to image all of the loan documentations, collateral pictures, and correspondents for its commercial and residential mortgage operations.
Watchword Is Efficiency
"We realize the important role imaging can play in the operation," he said. "We would like to use the technology to a point where we can retrieve almost all of our paper on screen."
"Once we get imaging in place, we will be able to be a lot more responsive to our customers' needs through a personal computer," he continued. "We will be able to cut down on redundancy and make our operation much more efficient."
Efficiency is the word repeated time and time again by community bankers who have adopted PC technology.
For example, at Amboy National Bank, Old Bridge, N.J., PC use has increased efficiency dramatically.
In some cases, the $900 million-asset bank has been able to speed up its operation by 70%, which allows it to get more done with less staff.
"We are using fewer people to process paperwork ," said Robert Babin, vice president and director of operations. "We hit a home run when we installed personal computers and started using them to take the paper out of our operation."
One area in particular where the bank has seen a dramatic reduction in paper is its interoffice reporting function.
To date the bank has reduced its paper output by 50% and expects to see the number increase to 80% by the end of the month.
It has also improved the management reporting function.
No More Paper
"We have given department heads the ability to get information on-line and have therefore done away with paper," Mr. Babin said. "The fewer reports we generate, the better."
Amboy is also expanding its use of its customer information file through personal computers.
"We are going back to square one and are analyzing all of the customers to see which ones are profitable and which ones make sense to work with," said Mr. Babin. "The customer information file will give us the sophistication to get the right information into the right people's hands in order to get the cross-sell down and make it work for us. The result is a lot of new business through the use of the personal computer."
Not all banks see the personal computer as the answer in the fight for market share.
In particular, Hannibal (Mo.) National Bank is eliminating the use of personal computers in its operation.
Management at the $93 million-asset bank decided instead to install so-called dumb terminals to handle its operational needs.
"Installation of dumb terminals is a cheaper and easier way for us to bring technology into our operation," said Jerry Trower, the bank's president. "By using dumb terminals we are able to perform the functions of a personal computer and in some cases run the programs more efficiently than we would have on the PC."
Although the bank still uses personal computers for its trust operations, Mr. Trower said he would like to see all of the systems integrated, which he believes will make the operation more efficient.
"I am hoping that within a year we will be able to bring all of our systems onto the mainframe and add an imaging function," he said. "By using the terminals we have been able to better communicate through E-mail and other functions, which is making our bank more productive. And I think by expanding the use of the machines we will continue to do that."
Mr. Trower, is however, a contrarian when it comes to PC use in community banks. Most smaller banks are eager to install them.
The personal computer is "a major tool" in the operation of $520 million-asset Riverside National Bank in Fort Pierce, Fla.
Ray Ammons, a vice president and data processing manager, said the use of personal computers is helping increase productivity.
"Currently, we are still in the learning curve when it comes to implementing the technology," he said. "But, when all is said and done and we get people trained, personal computers will help us reduce staff.
"The personal computer will allow one individual to do more during the day than they used to," he continued. "And we are going to start to rely heavily on local and wide area networks to get our jobs done."
Waiting for Lower Price
Riverside National is using PCs for loan documentation and for savings and certificate of deposit information.
Mr. Ammons said management is excited about the possibilities check and statement imaging will bring to the operation but it is waiting for the price of the technology to stabilize before they bring it on board.
"Once we get imaging in place, we would also like to install an optical disk storage and retrieval system," he said. "We have the plan laid out; we are waiting for the prices to come down."
Wayne Weidner, president of National Penn Bank, said that if it weren't for the PC his operation could not survive in the ever-changing banking world.
"Without the personal computer, we would be without one of the main tools," he said.
The Boyertown, Pa.-based bank recently implemented laptop computers in its commercial loan operation.
National Penn has also installed a local area network, which allows all of its branch personnel to communicate better and operate more efficiently.
"We are working to increase the level of professionalism of our operation and the use of personal computers is helping us," Mr. Weidner said. "Personal computers are also letting us communicate better as an organization, which leads us to providing the best level of service possible."