Alltel Corp. said Friday that it will take a $32 million restructuring charge related to the community banking and check processing businesses of its bank outsourcing subsidiary, Systematics Information Services Inc.
The fourth-quarter, after-tax charge amounts to a writedown of the two Systematics businesses hardest hit by the consolidation wave that continues to winnow down the number of commercial banks by the hundreds each year.
After trying to cover the entire breadth of the banking landscape, Systematics officials now concede that most of their new business opportunities are coming from banks with assets above $1 billion.
The writeoff is the first such business setback for Little Rock- based Systematics since it was acquired by the regional telephone company Alltel in 1990. Systematics - one of the largest firms in bank technology outsourcing - has become a key contributor to Alltel's earnings growth.
Systematics quadrupled its revenues over the last four years and was responsible for 23% of Alltel's $519 million in 1993 operating income.
Systematics officials were quick to point out that the restructuring charge affects a small part their business. The check processing and community banking divisions account for about 10% of revenues, which should exceed $800 million for 1994.
"The estimate is community banks will shrink in number from about 12,000 today to 6,000 to 7,000 by the year 2000," said Systematics chief executive John Steuri. "This was just a prudent accounting transaction.
"If we have assets that aren't getting a proper rate of return because of a shrinking market, we have an obligation to examine those assets and make adjustments."
But according to M. Arthur Gillis, a community bank technology consultant based in New Orleans, Systematics also found itself up against many fierce competitors, including the Bisys Group, Broadway & Seymour Inc., Fiserv Inc., and Jack Henry & Associates.
"I have a lot of respect for Systematics in bank outsourcing, but they've never been a powerhouse in community banks," Mr. Gillis said. "There are some very capable companies that focus just on this niche."
The written-down assets include check sorting facilities in Northern California and New Jersey. Systematics acquired the two processing centers from the federal Home Loan banks of San Francisco and New York in 1991 and 1992, respectively.
The check centers serve mainly community banks, though the New Jersey center has the $36 billion-asset Republic National Bank of New York as a client.
The charge also covered assets acquired when Systematics purchased a community banking software company, Horizon Financial Services, in 1990.
Mr. Steuri said Systematics is not planning layoffs in the two units.
In more positive news for Alltel, Standard & Poor's Corp. said last week it would put the Little Rock-based company on the S&P 500 list after the close of trading Dec. 20. Alltel will replace Borden Inc. in the widely followed index.
Alltel's stock closed at $30.25 per share Friday, up $2.375 for the week.
In other news affecting financial systems firms, payments processor National Data Corp. announced that earnings for its second fiscal quarter increased by 36% to $3.52 million and 26 cents per share, compared with $2.58 million and 20 cents for the same quarter last year.
Revenue increased by 18% to $59.8 million, compared with $50.9 million the second quarter last year. It was the fifth successive quarter of revenue increases, company officials said.
"This is the second consecutive quarter of double-digit growth in revenue," said Robert A. Yellowlees, chairman and chief executive officer. "We continue to benefit from investments in our unique national health care network and from expansion to a full range of integrated payment system offerings. This should provide sustained, quality growth for our shareholders."
Common stock of Atlanta-based National Data closed at $22.75 per share Friday, up $1.25 for the week.
J.P. Morgan Securities said Thursday it initiated coverage of First Financial Management Corp. with a "buy" recommendation and a 12- to 18-month price target of $68 to $70 per share.
First Financial's stock closed at $61 per share Friday, up $3.75 for the week.