As the nation's biggest banks look to expand their small-business lending, community banks are getting more aggressive in their approach to the business. Take Advantage Bancorp in Kenosha, Wis. Since forming a commercial banking division nine years ago, the $980 million asset savings bank has built a $96 million portfolio of small business loans. "We've been growing at a net pace of about 25% a year," said Wesley Ricchio, vice president and head of the commercial banking division. In an effort to continue this growth, Advantage is looking to invest in new technologies, such as credit scoring software, that can help it keep pace with the rising competition for small business loans. But bringing in new business also requires technology investments in back- room operations. "The portfolio was getting to a size that we were not able to maintain it properly with the amount of staff that we have where it was cost effective," said Nancy Rupp, commercial banking administrative officer. To better track its portfolio and improve efficiency, Advantage has upgraded its systems in recent years and has installed software from Baker Hill of Indianapolis. The software, called React, tracks loan exceptions. "Prior to React, we were tracking exceptions on index cards," said Mr. Ricchio. Advantage subsequently bought three other Baker Hill products. A risk management tool, called Stan, analyzes financial statements. A sales support tool helps manage customer and prospect information. And the "lending library" supplies a data base of Robert Morris Associates loan information. "The fact that React shared the same customer information screens as the other Baker Hill products gave them a slight edge as we purchased more," said Mr. Ricchio.

Baker Hill of course, faces competition from well-known names in bank technology, including Financial Proformas Inc., Broadway & Seymour, and CFI Proservices Inc., among others.

But Patricia McGinnis, a technology consultant with Tower Group in Wellesley, Mass., noted that Baker Hill is the first firm to market an integrated Windows-based system that handles so many small-business-lending tasks. That product is new to market. Called OnePoint, it also includes a profitability modeling tool. OnePoint has not been installed at Advantage, which has been using an earlier DOS-based software. Mr. Ricchio said the bank has examined OnePoint but must wait for its service bureau, Fiserv Inc., to provide adequate links with its processing system. That problem has also delayed installation of Baker Hill's profitability modeling product, called Price. "One of our key goals in the next 12 months is to smooth out problems between Fiserv and Price and start using it," said Mr. Ricchio. Still, the automation already in place has dramatically improved Advantage's productivity. The clerical staff has not grown since 1990, although the number of commercial loans has jumped from 300 to more than 1,000 today. Another benefit has been greater consistency in credit file maintenance. Previously, loan files were maintained in branches. Now, that task in centralized. "Our file quality is light years ahead of what it was back then," said Mr. Ricchio.

Centralizing administrative tasks has doubled the time loan officers spend with customers and prospects. Tower's Ms. McGinnis said this kind of improvement is critical for banks to remain competitive. "Apart from which platform you are on, or which user interface you've got, it's true across the board that lending, particularly small-business and middle market lending, is a business where you have to reduce the amount of labor that goes into each relationship," she said.

In addition to reducing costs, technology is important in improving customer service, Advantage bankers say. "Our key competitive edge is turnaround with approving or denying credits," said Mr. Ricchio. "We don't want people hanging on for a long time." In its market, between Chicago and Milwaukee, Advantage competes with some of the nation's bigger banks, including Firstar Corp. and Banc One Corp. But with its technological capability and knowledge of the local market, Advantage doesn't fear those big players. "We've been very successful on the commercial side, mainly in our home market of Kenosha," said Mr. Ricchio, "because of the fact that our lending officers have roots in the community. We can provide exceptional personal service to the small businesses and to the individuals running those small businesses."

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