First Security Corp. is setting up a wholly owned technology subsidiary aimed at investigating new technologies while managing costs at its rapidly expanding bank, officials said.
The bank "has launched a major organizational restricturing and strategic repositioning of information technology" that will "provide technology services to all entities of the corporation," according to an internal memo.
The $7.2 billion-asset bank is shopping around for its first chief technologist, who will be both an officer of the bank holding company and CEO of the new unit, First Security Information Technology Inc.
Benefit to Branches Seen
The new unit could help the Salt Lake City-based bank provide consistent services to its branch network - 203 branches, 108 of them in Utah - and could help it consolidate future acquisitions and further reduce its costs.
The bank hired the consulting firm of Rubicon West, based in Portland, Ore., to help plan the new organization. Under the plan, the bank already has cut its technology staff by 10%, to 200.
First Security has expanded rapidly over the past three years, snapping up community banks and thrifts in Utah, Iowa, and Oregon.
Its strategy has been to leave lending departments intact but slash back-office operations, allowing the bank to add earnings from its acquisitions very quickly, analysts said.
The bank is interested in new technologies such as check imaging, according to Phil Hudson, executive vice president of First Security.
In addition, analysts say the bank could move into providing outsourcing services, in which the bank would take over data center operations of client banks for a fee.
"We weren't comfortable that the position of technology was as it should be, and that we had a structure that would allow us to react as quickly as we needed to," said Mr. Hudson. "We want to be able to focus clearly on all the areas available to us with the maximum efficiency so our costs stay low."
First Security, the No. 1 bank in Utah and No. 2 in Idaho, is considered a prime takeover target by any bank wanting a presence in the region. The bank's loan quality and capital reserves are well above average.
Company Well Defended
"Their philosophy is fortress-like," said Robert A. Eisthen, a research analyst with Securities Corporation of Iowa, Cedar Rapids. Wall Street has rewarded the banking company; its stock went from $15 a share to $24 a share in the last eight months.
But one area the bank could strengthen is fee income, which comprised 27% of total income in 1991, Mr. Eisthen said. First Security has an aggressive program to market cardholder processing services - providing credit card authorizations, accounting, and statement generation - to credit unions.