Community Bank, a $735 million-asset institution headquartered in Pasadena, Calif., recently signed an outsourcing agreement with Electronic Data Systems Corp. that gives the technology company an additional foothold in the Southern California market.
In addition to its internal data processing functions, Community also handled technology chores for about 30 smaller banks. Electronic Data Systems, through a cross-marketing effort by the bank, will have the opportunity to bid on those contracts as they expire.
"EDS is among the largest companies in the data processing business. Yet in California, they were in a relatively weak position in the commercial banking market," said John Getzelman, Community Bank's president and chief executive.
Throughout its 48-year history, the privately held Community Bank's core business has been commercial lending. It has offered correspondent banking since the 1970s, maintaining correspondent relationships with about 80 banks, according to Mr. Getzelman. The data processing business began as an extension of the correspondent business.
The bank's local rival for data processing business had been City National Information Services, a subsidiary of City National Corp., Beverly Hills. That bank, which has been hit hard by the slump in California real estate, sold the unit to Systematics Information Services Inc. in 1992.
"We decided to seek an outsourcing arrangement because we concluded we could add more value to the banking side of the business," said Mr. Getzelman.
Trouble of Its Own
Community Bank has had its own financial woes. Mr. Getzelman said the bank became "overenamored" of commercial real estate lending, which resulted in a string of losses, a $38 million charge against capital, and a reduction in assets from over $1 billion to the current total.
Mr. Getzelman. who joined the bank in July 1992 as president and chief executive, was formerly chairman and chief executive of the Security Pacific Bank, Northwest, a subsidiary of the former Security Pacific Corp.
As part of the 10-year agreement with EDS, the data processing firm will take over Community Bank's 37,000-square-foot data center, located in Burbank, and offer jobs to its 120 employees.
Switching to Unisys
At the bank's request, EDS also will convert the bank's existing International Business Machines 4381 mainframe environment. It will switch to Unisys mainframes running an integrated software package from Information Technologies Inc. The conversion should be completed by May.
Mr. Getzelman said the conversion will have little impact on Community Bank's correspondent banking business. The correspondent customers who also use Community Bank for data processing will be given the option of switching to the
new platform or using EDS' banking software. EDS maintains another data center for that system in El Segundo.
Community Bank and EDS also will pursue a joint marketing arrangement. EDS will promote the bank's correspondent banking services to prospective data processing customers, while Community Bank will pitch data processing services along with correspondent banking.