Baltimore Bancorp's lead bank, the Bank of Baltimore, has agreed to outsource most of its technology operations to Mellon Bank Corp.'s data processing subsidiary.

Bank of Baltimore expects savings of almost $3 million a year by 1994 from the arrangement with Mellon Information Services.

Rumors concerning the bank's back-office restructuring could have fueled the 20% rise during the past few weeks in Baltimore Bancorp's stock price, analysts said.

Last summer, six directors were ousted from the board in the wake of heavy real estate loan losses, and a few management team up in place. In late September, the parent company eliminated 32 middle-management jobs.

"The bank is turning the corner in terms of their financial problems," said one analyst, who asked not to be named. "Outsourcing is one part of the [new management team's] strategy."

The $2.8 billion-asset holding company is one of Mellon's larger outsourcing customers. After years of supplying community banks with outsourcing services, Mellon last year began targeting $1 billion-plus banks.

Splitting the Work

Bank of Baltimore will run its own item-processing operations but will turn over most other operations, including systems programming, application programming, and loan and deposit processing, according to Mellon officials.

The bank's data center operations will go to Mellon's data center in Pittsburgh during the next nine months, said William F.X. O'Neil, group head for financial institutions outsourcing at Mellon.

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