Mergers slowed the growth of small-business lending among the nation's largest banks in the first half of the year, according to an American Banker survey.

The small-business portfolios of the top 50 banking institutions grew by only 2.18%, to $91.8 billion, in the year that ended June 30. Outstandings at all banking companies, meanwhile, grew 5.48%, to $184.9 billion, the survey found.

The findings suggest that smaller lenders are picking up market share as their larger competitors work to integrate multiple acquisitions.

Community institutions "do a pretty good job of picking off customers," said James Lientz, a small-business lending executive at BankAmerica Corp. of Charlotte, N.C. Community bank lenders said the high level of personal attention at smaller institutions is helping them win new borrowers.

"But convenience and service are very important, and that's where we have it over them," Mr. Lientz said.

The survey, based on data from Sheshunoff Information Services, tracks commercial and industrial loans of less than $1 million. Nonbank lenders such as American Express Co. and Merrill Lynch & Co. are not included.

Small-business lenders make money from the loans themselves, as well as from fees from related small-business services, including checking and cash management.

Overall, the findings demonstrate the business "remains very robust," with lenders benefiting from the strong economy and aggressive marketing, said Charles Wendel, president of Financial Institutions Consulting in New York.

Mr. Wendel said customers are "more aware of their options," and that "there are a lot more small-business credit facilities being offered."

To be sure, the nation's 50 largest banking companies still account for considerable volume. They held 2.1 million of the fivemillion small- business loans outstanding at midyear.

But the portfolios of some of the largest lenders got smaller.

At NationsBank Corp.-the leading small-business bank lender for four consecutive years-outstandings declined 13%, to $6.18 billion, in the 12 months ended June 30.

A spokesman for the banking company, which merged with BankAmerica Corp. on Sept. 30, said the data do not reflect a decline in business. Rather, they represent a more accurate picture of the bank's portfolio after the integration of several mergers.

As NationsBank consolidates its operation with that of BankAmerica, it plans to use "best practices" to become a more effective small-business lender, Mr. Lientz said. On a pro forma basis, a combined NationsBank- BankAmerica held nearly $10 billion in small-business loans on June 30.

"Our approach revolves around having the proper channels of access and keeping current with the needs of customers," Mr. Lientz said.

Wells Fargo & Co., the No. 2 small-business lender, merged with Norwest Corp., the No. 3 lender, on Nov. 2. At midyear the new Wells Fargo, based in San Francisco, had nearly $10 billion in small-business loans on its books on a pro forma basis.

Like the new BankAmerica, the emboldened Wells Fargo plans to take the best from both organizations as it combines operations with Norwest, said Colleen Anderson, executive vice president for small-business lending.

This includes giving loan officers the power to approve loans, which speeds the application process, Ms. Anderson said.

Small-business lenders use a variety of approaches to attract borrowers- most notably direct contact with customers through loan officers who frequently call on businesses. Lenders are also increasingly adding automated services, such as phone solicitations and Internet access, to their accounts.

Bigger bank lenders point to larger networks and troops of loan officers as plusses when it comes to fulfilling customers' needs. But executives at smaller banks say they are staying competitive.

At Community First Bankshares in Fargo, N.D., small-business loans make up 83% of the overall commercial and industrial portfolio, representing the highest concentration in the industry.

The weighting "is not a stated strategy but more a function of what customers at each of our banks want," said Ronald Strand, vice chairman for financial services at Community First.

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