WHETHER IT'S AS acquirer or acquiree, Firstier Financial Inc.'s short-term strategy definitely includes acquisitions.
The Omaha-based bank holding company is working on improving its efficiency and profitability to look better to Wail Street. To this end, it has installed a new loan accounting system to be used by both its corporate and retail lending arms to boost productivity while cutting costs.
Since the new system was installed in the summer of 1992, $3.1 billion-asset Firstier has boosted its return on assets to a strong 1.61%.
In February of this year, the four-bank holding company with Banc One Corp. after a decline in the Ohio company's stock price.
When the deal was first announced in April of 1993, it called for Banc One to pay $60 per share based on the price of its stock.
But, when Banc One's stock price fell below the minimum per share price required by Firstier, the deal was canceled.
From the deal's announcement to the time it was called off, Banc One stock dropped 27%.
In the high forties when the deal collapsed, Firstier's stock initially dropped to $44.50. But it has since recovered to $47.50 where it has remained for several weeks.
Approximately one month after the deal with Banc One was terminated, Firstier announced a deal to acquire Cornerstone Bank Group Inc., a four-bank holding company with $365 million in assets based across the Missouri River in Council Bluffs, Iowa. The deal is pending regulatory approval.
"We want to remain independent and actively pursue the acquisition of other financial institutions," said David A. Rismiller, chairman, chief executive, and president of the 1,500- employee Firstier.
"Because we are a publicly traded company we are obliged to review any head-turning offers, but due to the current value of bank stocks and the price/ earnings ratios, there are few companies at this time who could afford to make us a head-turning offer."
Keefe, Bruyette & Woods Inc. ranked the shares of Firstier No. 1 out of the 135 banks it follows.
Kay C. Lister, an assistant vice president at the New York investment banking firm, said Firstier seems to be following a strategy of independence with acquisitions.
"They are going to remain independent until they get an offer they can't refuse," she said. "But, the thought of seeing an offer like the Banc One deal is not realistic. By making acquisitions, Firstier will be able to increase its price-to-earnings ratio."
Firstier's technology strategy should also impress analysts, since it figures to lower the bank's efficiency ratio - the ratio of noninterest expense per dollar of revenue. The efficiency ratio dropped from 61.5% in 1991 to a lean 55.6% in the first quarter of 1994.
"Management realized that we needed a system to increase the efficiencies of our consumer and installment loan operation," said Leonard Olsen, vice president of loan operations.
"We wanted software that would handle both installment and commercial loans while giving us the opportunity to increase the efficiencies of the operation," he said.
The bank purchased loan accounting software from Shaw Systems Associates Inc., Houston.
The systems, called CL2000 and IL2000, automate the commercial loan and installment loan sides. The systems assess late charges, produce Internal Revenue Service documents and reports for management, and perform accounting functions.
The use of this new technology has not had a significant effect on the size of Firstier's loan portfolio, which is hovering at around $1.7 billion following slow growth over the last three years.
Mr. Olsen said the software allows Firstier to meet the needs of its customers by providing a complete loan accounting system that is able to handle all of its commercial, agricultural, and commercial real estate loans, and personal lines of credit.
The bank operates the software through its International Business Machines Corp. 3090 mainframe.
Once a loan is made, the note's financial information is entered into a data base, which starts the billing and reporting functions.
Firstier has been able to set up the data base with the critical loan data on the first screen. Thus customer service representatives rarely need to access more than one screen during an inquiry, which speeds up servicing time.
"This allows us to keep better records of our loans and provide answers to customers more efficiently, because the system presents the information in a cleaner fashion," said Mr. Olsen.
Firstier has also made a change in the way the information appears on-screen and the fields to which data are assigned.
"We are able to set up the input screens by product; by customizing the screens, we can cut down on the time it takes to input the information," Mr. Olsen said. "This allows us to service the loans quicker because information gets into the system faster."
The Shaw system also provides tools to create a variant of a customer information file.
"It allows us to see the full scope of our portfolio exposure regarding industries, geographic locations, and customer size," said Mr. Olsen.
Firstier is also using a feature of the software called "shadow note processing," which eliminates the manual process of keeping track of the contractual balance of the loan.
The shadow note keeps track of the contractual balance of the loan, which is the principal and interest owed to the bank as well as applies payments according to the original terms of the loan.
"On the bank's general ledger, all of payments are applied to the principal of the loan, which reduces the loan's outstanding from the bottom line," said Mr. Olsen.
"By having the shadow notes we can see how the principal is being paid back and the amount of interest the loan is accruing.
"These software programs provide us with a complete accounting system that allows us to keep track of the book balance for the general ledger and the contractual balance for customer servicing," he continued. "Should a customer call one of the service representatives and ask about prepayment, we now have all the information on-screen. Before, it had to be done manually."
Mr. Olsen said Firstier plans on installing a loan origination system within the next year.
"Once we install a loan platform system, we will be able to use both it and the accounting systems to make our operation more efficient and increase the level of service we can provide," he said. At a Glance: Firstier Financial Inc. Headquarters: Omaha Assets: $3.1 billion Employees: 1,500 Return on assets: 1993: 1.61% 1992: 1.44% 1991: 1.15% Efficiency ratio: 1Q94: 55.6% 1993: 56.5% 1992: 57.3% 1991: 61.5% 1990: 64.3% 1989: 67.8%
