Texas bank blazes path with check imaging.

AT STATE NATIONAL Bank in Texas, the executives fancy themselves as bankers intent on changing the image of banking.

To the outside observer, however, that may seem an understatement.

When compared with its peers, the $120 million-asset bank in Big Spring, Tex., may be portrayed more accurately as blazing a path into the future of banking.

Consider some of its technological goals and accomplishments. The bank - located on the rural plains of west Texas is in the midst of installing a sophisticated imaging system that will convert to electronic form most of the paper that flows into and out of its check processing operation. Functions that are being converted to imaging include proof-of-deposit, check archiring and research, signature verification, customer communications, and statement rendering.

Whereas most imaged check statements contain printouts of digitized images of cleared checks, State National hopes by next year to be delivering such images via CD-ROM disks to farms and other commercial customers, according to Robert Bucknet, first vice president.

In the area of electronic funds transfer, State National has been making strides in terms of both retail and wholesale payments systems. It owns and operates two automated teller machines and drives point of sale debit card terminals at 14 merchant locations. It also originates automated clearing house transactions (primarily direct deposit payments) on behalf of several government and commercial customers in Big Spring - population 23,000 - and in nearby towns that have no banks.

State National also offers telephone bill payment and provides customers with the capability to routinely check account balances using a telephone voice-response system.

The linchpin of the bank's technology strategy, though, is the personal computer. Virtually every function at the bank - from the opening of new accounts and the loan application process to the dissemination of regulatory changes and personnel policy changes - is accomplished using a network of PCs running various applications on a Windows platform.

And when the imaging system is fully operational, its PCs will be linked to State National's existing network so employees will be able to retrieve check images from virtually any PC in the bank.

Jim R. Purcell, president and chief executive, is fond of saying that the bank employs more PCs (50) than people (35). Mere to the point, Mr. Purcell said, State National Bank has been able to shave its payroll by 15 over the past seven years, thanks in large part to the power of the PC.

That a bank, particularly a community bank, would take on any one of these technology projects is impressive. But actually implementing and integrating so many advanced technologies within a relatively short period places State National in the vanguard of its industry, experts agree.

"They're the prototype for the 'virtual bank' of the future," said Joe Petruzella, a vice president at Banctec Financial Systems, a unit of Dallas-based Banctec Inc.

"In terms of community banks, this is a premier example of a virtual bank," observed Greg Schmergel, vice president of The Tower Group, Wellesley, Mass.

A virtual bank is one that leverages the expertise of various vendors and integrates in a seamless fashion the technologies offered by those vendors.

"The cohesiveness of it all really increases the total impact to more than the sum of the parts," Mr. Schmergel said.

To Mr. Bucknet, State National's technology point man. leveraging the expertise of outsiders is the key to the bank's technology program.

"Our whole strategy is to use off-the-shelf software and bring it together in-house," he said. "We don't have the time to develop [computer] code ourselves."

Instead, bank executives prefer to make banking easy for the customers.

"People don't like to go to the bank; time is more critical than ever before," said Mr. Bucknet. "Our goal is to allow customers to do all their banking functions without having to travel to the bank to meet our hours.

"Our motto is 'We're making banking easier for you,' and we really believe that," he added.

The fact that State National Bank is located in a rural region, where branch banking is 1he exception rather than the rule, helps advance its technology strategy. For many people, a trip to lhe bank can mean a 60-mile drive, Mr. Purcell noted. If State National Bank can eliminate that drive by providing customers with remote. access to bank services via telephones, ATMs, and point of sale terminals - even fax machines and compact disks - the bank stands a betmr chance of holding onto those customers, he suggested.

"We have developed a stance as a technology innovator in our community," said Mr. Purcell. "We've engendered a lot of trust in our customers."

The bank's locale also makes advertising a good buy, and not only because rates are relatively cheap. "It's easier for us to get air time and space in local newspapers. Our advertising probably reaches a higher percentage of our market than if we were in a big city," observed Mr. Buckher.

Then there is the issue of size. As a small bank, State National isn't burdened with many of the decision-making quagmires that stymie larger banks' efforts to invest in new technologies.

"Probably because of their size they can make decisions to enter these types of programs without the interferences of bureancracy that many other banks have to deal with," suggested Stan Paur, president of Pulse, the Texas-based ATMpoint of sale network in which Slate National Bank participates.

And the size of the bank often makes investments in technologies like imaging more affordable, which helps with the justification. Carrying a price tag of $500,000, State National Bank's new imaging system, purchased from Banctec, represents a near doubling of the bank's technology investment over the past five years, according to Mr. Purcell. But it's far less money than the millions of dollars a large bank would have to spend on an image system with comparable functionality.

As for cost-justifying the bank's new imaging system, Mr. Purcell said: "The payback, in terms of pure dollars and cents, is less than a wash," at least in terms of direct costs. "But what those calculations don't take account of is the improvement in se|ice and the ability to do more for our customers," he added.

"It's going to allow us to do a lot more for our cash management customers," noted Mr. Buckher.

Some of the plans on the bank's imaging drawing board include checking account statements customized to the individual consumer's preferences, daily transmission of check imaages to corporate customers, a positive pay service that will allow corporate customers to verify on a daily basis the authenticity of checks that clear against their accounts, and enhanced research services.

For example, the imaging system will allow State National to store images of all checks that pass through its equipment, both those drawn on customer accounts and those presented by customers. So if a customer's bank records are subpoenaed, bank employees can pull together years worth of records and print out reports that look just like the customer's original monthly statements.

Mr. Buckner said he is particularly hopeful about prospects for improving the efficiency of subpoena research via imaging technology. Theoretically, a search and retrieval process which generally can take two to three hours to complete can be done in less than a minute with the help of imaging and optical jukebox storage, he said. As a result, employees are freed up to perform more functions and the bank can generate greater revenues.

"Time is money," observed Mr. Purcell. "The more time we can save our customers the more money we have an opportunity to make. Just because we're more efficient doesn't mean we let our employees off earlier."

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