To accommodate strong growth in its auto dealer finance division, U.S. Bancorp plans to install a $1 million computer system.
Over the past year, the Bellevue, Wash.-based unit has nearly doubled its monthly automobile loans, to $65 million. Lending is expected to grow another 20% this year, forcing the division to buy new computers, said Michael Luiten, senior vice president of the unit.
"We're looking for a way to become more productive, to control fixed costs as we as increase production," he
He said the dealer finance division of U.S. Bancorp, a $20.8 billion-asset bank holding company in Portland, Ore., is among the 30 largest indirect automobile lenders in the country. Its loans are originated by dealers, but booked by a bank.
For years, U.S. Bancorp has used a mainframe computer to manage this business. But Mr. Luiten said the division has squeezed all the economies of scale it could out of this machine, and needs a new system.
The new computer system consists of software from Credit Management Solutions Inc., of Columbia, Md., running on a Hewlett-Packard Co. midrange computer hooked over a telecommunications network to personal computers in bank offices in Oregon, Washington California, Idaho, and Nevada.
Goal Is Higher Productivity
The system is slated for installation in the first quarter of next year. It is intended to make the 120 employees of the dealer finance division more productive.
For example, with the new computer system, an underwriter should be able to produce an average of about $4 million loans a month, instead of the $2 million a month average with the older computer system.
The new computer system will let the dealer finance division respond to a request for a car loan in about half of the 45-minute average with its existing mainframe-based system, Mr. Luiten said. The new software should also eliminate much of time-consuming data entry rampant in the older system.
"We double productivity on back office and clerical operations," Mr. Luiten said.
Mr. Luiten added that no staff will be laid off as a result of the new system. Instead, staff will be retained and redeployed to accommodate the growing business.
Credit Management, a small, privately held vendor, has sold its dealer finance software to a handful of banks, including NationsBank, Charlotte, N.C., and Boatmen's Bancshares, St. Louis.
Mr. Luiten said he visited the NationsBank dealer-finance operation, one of the largest in the country, and was impressed with what he saw.
Mr. Luiten also said he examined Credit Management's financials and found them to be acceptable. "We think they're going to be around for a while," he said. "Otherwise we wouldn't be doing a seven-figure investment with them."
The U.S. Bancorp contract is a boon for Credit Management, especially since it comes on the heels of what president James DeFrancesco called "a 22-month ordeal" to buy back a major stake in the company from the Resolution Trust Corp.
The RTC obtained the stake from Perpetual Savings Bank, Vienna, Va., when the troubled thrift, which had owned the asset, was put into the RTC's accelerated resolution program.