National Commerce Financial Consolidates Lending

Executives at National Commerce Financial Corp. ($23 billion in assets) knew by 2001 that the bank needed a new commercial loan software system to provide better management information on the financial institution's loan portfolio. "We wanted to find new and better ways to look at the types of loans we were giving at any time, and at things like credit scores," remembers Scott Edwards, chief administrative officer and chief credit officer at the Memphis-based bank.

But they also realized that the consumer side of the business, where loan officers were still inputting loan information manually, needed updating, too. "The idea intrigued us - could we replace both at one time?" Edwards recalls. "That would be the best thing for the future, and we would have one provider we worked with."

The bank's former system "was not posing a problem, but at the time we started looking at this, our bank had just done a merger of equals," Edwards says. National Commerce Bancorporation and CCB Financial Corp. merged in 2000 to form the current company. "Now we needed to keep the same controls for a $16 billion facility," he says, referring to the company's assets at the time of the merger. "We had systems that fit a company half the size of the one we were preparing to run. We knew that if we did not have a better system, we would be hard-pressed to be as good a lender."

Edwards and his colleagues began considering vendors in the fall of 2001 and ultimately decided to consolidate the bank's consumer and commercial lending technology using software from application service provider Automated Financial Systems (AFS; Exton, Pa.). The AFSCommerce platform for straight through loan processing that it picked incorporates integrated applications such as the front-end tools AFS Origination and AFS Paralender. The new system went live in September 2003 at the bank, which has almost 500 branches in the Southeast. "For us," Edwards says, "AFS is the whole system, from start to finish."

In ASP We Trust

Trusting its entire lending operation to an ASP is a first for a tier-one bank, according to AFS. Edwards acknowledges that National Commerce Financial officials had to give it serious thought. "The concern was, 'Are we dealing with a company that is there to stay?'" he says. But since many of the country's largest banks use AFS technology, he adds, they were comfortable moving forward.

The bank is doing straight through processing for retail loans, Edwards says, but has not yet done it for commercial loans. On the retail side, it saves on personnel costs because "we get the benefit of not having to replicate the input of the loan," he says. It also facilitates better internal communication when processing loans.

The new system does not include mortgages, however. "That is not going to be an easy fit to work out right now," Edwards says. "It is really a very different business."

The conversion has brought some typical challenges, Edwards says. For instance, the standard bill for commercial customers is not as customer-friendly as the bank wants, so at press time the bank had plans to get tools from AFS to change that.

The project's other challenges were outside the technological realm. "We were redesigning our lending process for about 3,000 of our bankers," Edwards says. "It was not just new software. That was a whole new education. What we found is that the younger, more computer-literate folks loved it." Others had to make more of an adjustment, he says.

Edwards is confident that the AFS system will save the bank money. "Primarily, the savings will come from better control of losses on the retail side," he says. "We will be consistent in all our branches."

Now that its retail bankers have begun inputting loan setup information via computer rather than doing so manually, the bank plans to make the same transition for the commercial side of the business. But there is no timetable yet. Says Edwards, "I would like to get this cooking first."

Snapshot

Institution: National Commerce Financial Corp. (Memphis).

Assets: $23 billion.

Business Challenge: Consolidate consumer and commercial lending applications.

Solution: Automated Financial Systems (Exton, Pa.) AFSCommerce loan processing platform.