Three big software suppliers waging a war for market share.

As regulatory demands grow, so do the software companies that help bankers automate complialice.

In the past few years, Bankers Systems Inc., CFI Proservices, and Formation Technologies Inc., have pulled away from scores of smaller competitors.

While all three companies have the same goal making a killing out of what comes out of Washington -- they have completely different personalities that shape the way they do business.

Bankers Systems is currently king, with software in 7,000 banks and $96 million in annual revenues. With 3,000 customers and annual income of $26 million, CFI ranks second. Formation Technologies iS third, with 2,500 banks and yearly revenues of $13 million.

But mergers and acquisitions are fast changing the complexion of the compliance software industry, so those rankings could shift.

Family-run for 42 years, Bankers Systems in St. Cloud, Minn., is being bought by an investment partnership. The deal, expected to be completed next month, could mean a modernization of Bankers Systems' business. But the company will have to be careful not to alienate current customers who like its oldfashioned style.

Bankers Systems is regarded as the war-horse compliance provider, making its name as a forms vendor and venturing into technology later to meet market demand. But its printing presses still run 24 hours a day, producing everything from disclosure forms to holiday cards.

"We focus on the needs of the marketplace, whether it's forms or software," said Jack Locknet, senior vice president of Bankers Systems.

The Clemens family's sale of Bankers Systems has been rocky, but the deal appears on track. As announced in July, Bankers Systems was to be sold to Chase Capital, an equity investing arm of Chase Manhattan, and Goldner Hawn Johnson & Morrison Inc., a Minneapolis investment company.

But Chase pulled out in October and BancBoston Ventures Inc., an investment area of Bank of Boston, stepped in.

Bankers Systems chief executive William E. Clemens, 74, has been casing out of day-to-day operations. "It is time to move on and let the next generation take over," he said.

Formation Technologies, founded in 1983 by R. Gaylord Layton also was recently sold John H. Harland Co., the giant Atlanta-based check printing company, bought the Denverbased compliance company in March.

Harland plans to grow Formation Technologies quickly, pumping in its power and money.

Mr. Gaylord, who gained a passion for computers at IBM and Olivetti, was expected to stay on as president, but he stepped down last month. Joe Alan Rose, an executive vice president at Harland, is acting president. Mr. Layton will remain on the board, and act as a consultant.

CFI Proservices, rounded in 1978, is the only one of the three to remain independent. To raise cash for acquisitions, CFI went public in August 1993. Since then, the stock is up 40% to $13.75 a share.

The Portland, Ore., company's biggest buy to date was in September when CFI took over Genesys Solutions Group, which specializes in automating lending by phone. CFI plans to use Genesys to attract larger banks.

Matthew W. Chapman, CFI's chief executive, and Robert P. Chainhess, executive vice president, are two of the best-known speakers on the compliance conference circuit.

CFI's lifeblood is the network of lawyers it retains in all 50 states to keep up with regulations. By contrast, Bankers Systems has an equivalent number of in-house lawyers.

Formation also employs lawyers, but only a few, and places more emphasis on research and development.

At a recent conference of CFI lawyers, some of whom work for the other two companies, Mr. Chapman made it clear he plans to best his rivals.

"We intend to dwarf them," he said. "We intend to make them irrelevant. If you want to go down with their ship, feel free."

But Mark Winz, executive vice president at Formation Technologies, predicted his company will top the others because its products perform broader functions. He called his competitors' compliance solutions too narrowly focused on lightening the regulatory load.

"Our goal is also to alleviate the compliance burden, but we're automating everything from the time customers walk in the door," Mr. Winz said.

By contrast, Bankers Systems plans on gaining market share by producing specific, user-friendly solutions. "We've always been the compliance company as opposed,to the software company," said Mr. Locknet.

CFI and Bankers Systems have mostly community bank customers, while Formation Technologies serves mainly big banks.

"You can't continue to survive unless you have solutions for both large and small banks," Mr. Chapman said.

All three companies have found they must-make alliances to compete with each other and attract customers. In order to satisfy their markets, decisions are constantly made whether to do the R&D themselves, to partner with a company that can bring in new resources, or to buy out an existing company.

CFI has found success in buying and merging with companies that already have the Software it wants.

In 1990, CFI acquired Financial Micro Systems Inc., Laguna Beach, Calif., which created its popular Truth-in-Savings product, Deposit Pro. CFI is expected to complete several other mergers in the coming year.

Mergers and acquisitions also has been a growth strategy of Bankers Systems. The company chose businesses that met whatever customers called for at the time, which eventually led them to computer technology.

"The most exciting thing for us is the strategic relationships," said Mr. Lockner. "We leverage relationships to meet market needs."

But Harlind's backing will probably make Formation Technologies the most active of the three in mergers and acquisitions.

"Our focus is on good solid businesses with solid products," said Mr. Rose. He said he will expand Formation Technologies aggressively. "We don't want to create any artificial expectations, but we'll bring accelerated growth to the business," he said.

Each company has recently partnered with a geomapping business to create fair-lending/Community Reinvestment Act compliance software that shows banks where and who potential customers are.

Bankers Systems' "Census Traks Plus" was introduced in April and includes technology from DataMap, Minneapolis. Mr. Lockner said it's peak season for such a product, now that the new Home Mortgage Disclosure Act data are out. "We're swamped with customers," he said.

CFI also is finding success with its fair-lending product, Pro Active, released in July and developed with Strategic Mapping, Santa Clara, Calif.

Mr. Chapman said he expects fair-lending enforcement from regulators and the Justice Department to be tougher in the coming months. "If you're not doing something that's a genuine solution, they're going to slap you," he said.

Formation Technologies' fairlending software, "App Form," will be out in January, and also will use DataMap's technology.

App Form is an electronic form that creates a data base to track applicants from the time they walk into the bank until the loan is closed. It also reminds the officer to make CRA 'and Real Estate Settlement Procedures Act disclosures.

All three software companies view the 12,500 credit unions as a new market opportunity. As they become more regulated, credit unions will need software as much as banks.

Bankers Systems has built a Truth-in-Savings compliance product geared to credit umons, according to Hal Andrews, a vice president at the company. "This is a big change for credit unions," he said.

CFI is going after credit unions, too. Mr. Chapman agreed they need help with Truth-in-Savings and said he expects credit unions to eventually be covered under CRA, which would spark a compliance explosion for that industry.

Credit unions also will be good customers for CFI's electronic banking product, "Personal Branch," Mr. Chapman said. "We think that technology is necessary for their need to reach out to their members."

Formation Technologies' Mr. Rose said his company is pursuing credit unions as well as insurance and brokerage companies.

Although these three companies compete with each other daily, they don't fear smaller or start-up businesses. CFI's Mr. Chapman said it takes so much knowledge to run a compliance company that it is next to impossible to enter the business.

"It's not a cost restraint," he said. "It's a learning restraint."

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