GORDON LEWIS Chief executive officer Fredonia State Bank Nacogdoches, Tex.

We do all data processing for deposits and lending and general ledger functions in-house. We moved in-house in the 1970s because we felt it would allow us better control over the product and process. We also thought it would be more profitable.

Our credit card and automated teller machine operations are handled by an outside vendor. For products that require substantial investment in hardware and technology, where a bank our size clearly doesn't have the volume that a much larger bank would have, it is absolutely necessary to outsource.

T. LINCOLN MORISON Chairman Frist National Bank of Ipswich Ipswich, Mass.

We use a service bureau, but we do the check sorting and coding here.

About a year, we decided to investigate complete outsourcing. The initial proposals looked very attractive from a dollar standpoint. But my conversations with other banks led me to believe that the initial proposals can be deceiving. Not purposefully deceiving, but as you get into it, the initial cost savings dissipates pretty quickly.

I'm skeptical that total outsourcing is the way to go. But as an $85 million-asset institution, an in-house arrangement is not right for us either. That's why we like the service bureau arrangement.

I think that some functions like credit card processing and ATM processing should be handled by an outsourcing vendor, especially for an institution of our size.

JANE ELLEN RAWDON Vice president Community First Bank Germantown. Tenn.

We do most of our data processing in-house. We thought we'd have more flexibility that way.

We do outsource some lines of business. For example, our ATM network is managed partly by us and partly through an arrangement with another company. We outsource our payroll. For our size, $220 million assets, we don't need flexibility there. Plus, with all the tax changes, it makes more sense for an outside company to handle it.

We don't have credit cards right now, but I expect we will introduce them soon and when we do we will probably outsource them. We outsoutce mortgage loans. Our philosophy is that in the areas of business where we feel we would need expertise or staff that we don't currently have, we would definitely consider outsourcing.

KEVIN M. TIERNEY Senior vice president Salem (Mass.) Five Cents Savings Bank

We have a mix-and-match strategy. We outsource the majority of our data processing, especially high transaction processing areas of the business. But we also maintain in-house ancillary departmental technology. For example, we purchased a mortgage loan processing system that automates loan origination functions and we use it in-house. We also maintain our delinquent loan system in-house rather than outsource.

Our service provider did not have these areas of functionality, so we purchased the systems in-house and then tied them to our service bureau.

JESSE G. FOSTER Chief executive officer Inland Empire Bank Hermiston, Ore.

We changed to an in-house system about 15 years ago because we're in a remote part of eastern Oregon and our only other choice was to use a large bank about 30 miles away. The cost just kept going higher and higher. Because we wanted to control those costs and control our own destiny, we purchased an in-house system.

But with all the new technology that's available today, it might actually be more economical to go with an outsourcer.

While we like the flexibility that having an in-house system provides, if we thought outsourcing - whether it were our entire data processing operation or particular lines of business - would achieve us cost efficiencies, then we would definitely consider it.

ANDERSON CHANDLER Chairman Fidelity State Bank and Trust Co. Topeka, Kan.

We outsource everything: all deposit functions, all loan functions, general ledger, everything. Because we're $75 million in assets, we felt it was more cost-effective to outsource completely than try to keep any processing for any lines of business in-house. In the past year, we switched outsourcing vendors, and have since reduced the number of employees from 45 to 42, which has meant significant savings for us.

TED PETERS Chief executive officer National Bank of the Main Line Wayne, Pa.

Since we started this bank in 1985, we've outsourced all of our data processing operations with Mellon. As a small bank, we like the convenience and hassle-free operations that outsourcing affords us. We don't have to worry about programmers; we don't have to worry about equipment. From our point of view, we couldn't cost-justify bringing it in-house.

We are now a part of a $3.3 billion-asset bank holding company, Keystone Financial Inc., and so sometime in the next month we will be transferring our data processing operations to Keystone Data Systems. But as far as we're concerned, that's the same as outsourcing, because it will still be handled somewhere else.

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