HOWELL N. GAGE, Merchants National Bank's chief executive, is one community banker who tries to keep up with technology but won't spend himself into a hole doing so.

"We're not buying technology just to have the newest toy," said Mr. Gage, who is also chairman of the $172 million-asset bank, based in Vicksburg, Miss. "The main thrust needs to be doing a better job of serving our customers."

A case in point is Merchant National's approach to check statements. The bank is considering replacing its current system with new equipment that would allow the bank to send its customers monthly statements with images of checks instead of the actual checks. Imaging statements have the advantage of flexibility: Checks can be shown in numerical sequence or blown up for customers with poor eyesight. Mailing and sorting costs should fall.

But Merchants National is taking a hard look at the system before it buys. Executive vice president James R. Wilkerson Jr., the bank's technology and operations chief, recently visited North Carolina to talk with people at a bank that had purchased the system. He also dropped in on that bank's competitors to gauge their reaction.

"We want to make sure we have our ducks in a row," Mr. Wilkerson said.

Mr. Gage said that image statements might prove attractive for many of his customers but that the new technology must be introduced as part of a broader marketing strategy. As a community banker, he knows his real competitive advantage lies in personal service. Any successful new technology will quickly be adopted by rivals, leaving him with a fleeting advantage.

"Technology really comes into play, in my mind, as support for our people, giving them the things they need to take care of customers," Mr. Gage said. "If we can maintain our technological capability and do a better job of personal service, that's really where I think we're going to be successful in the long run,"

If Merchants National adopts image processing, it will be the first bank in Vicksburg to do so. That would continue the bank's tradition of technology innovation in this riverfront city of 27,000. Merchants National had been the first bank in town to introduce automated teller machines and is now considering replacing its existing units with improved models.

The bank spun off its operations department into a separate subsidiary in 1985, primarily for the tax advantages. Merchants Data Services Inc., headed by Mr. Wilkerson, contributes a little noninterest income to the bottom line ($120,000 last year) by processing for two small correspondent banks.

Mr. Wilkerson is clearly the principal advocate for new systems within the bank. He must sell these ideas first to Mr. Gage and then to the board, a task made easier by the fact that he's a member of senior management himself.

"I understand that the bottom line determines whether this thing makes sense," Mr. Wilkerson said. "I go to Howell with an idea, and he says, |Okay, justify it. Why do I want to spend the money?'"

"Howell kind of puts the reins on me and pulls me back, but it's a good blend. His job is to look at the total picture."

Mr. Gage is somber and thoughtful in the face of Mr. Wilkerson's exuberance, but he seems genuinely pleased with Mr. Wilkerson's advocacy. "James is the push in our organization," he said. "I accuse him of going off to trade shows just to tinker and play with the latest toys. But he keeps us aware of the technology that's out there."

Mr. Wilkerson joined Merchants National in 1965, right out of the Army. He took an entry-level teller job and won swift promotion to head teller. In 1967, the bank decided to form its own computer department, which opened up a new position: data processing manager.

Even though he lacked any formal training in data processing, Mr. Wilkerson managed to beat out the other candidates in a round of tests. His job has since expanded to include all the bank's operations and deposit collection functions.

Merchants National's biggest move, from a technology standpoint, came in 1981, when the board voted to bring all the data processing in-house. The bank had previously routed its processing work through Jackson-based Deposit Guaranty Corp., the state's largest bank. Deposit Guaranty's decision to open a branch in Vicksburg and compete directly with Merchants National brought that relationship to an end.

Mr. Gage arrived at Merchants National shortly after that decision was made. Initially the second-in-command, he was made president within six months. He was already well prepared for the role.

A fourth-generation banker, Mr. Gage earned an engineering degree at the Georgia Institute of Technology and an MBA from Harvard. After working a few years as engineer, he finally bowed to tradition and spent 10 years with the family bank in Port Gibson, Miss., his home town. Banking, he said, "is in my blood."

Banking in Vicksburg, as in most small towns in the rural South, operates at a slower pace than in the big cities. Merchants National closes its doors every day from 1 to 2:30 p.m. to allow employees to take a lunch break and balance their books. Saturday hours are unheard of.

But the market is competitive in its own way. Merchants National must tussle for business with First National Bank of Vicksburg, the other major independent, which has $231 million in assets, and the local outpost of mighty Deposit Guaranty. There's also a branch of Tupelo-based Bank of Mississippi, a thrift branch, and a couple of credit unions.

Deposit Guaranty has the advantage with larger companies, and First National has traditionally been a strong commercial bank as well. Merchants National, therefore, puts most of its effort into winning the retail business in Vicksburg. Mr. Gage freely admits that a lot of his bank's technology is done for "defensive" reasons, to keep customers from straying.

Merchants National earned $1.4 million last year for a respectable 0.83% return on assets and 14.5% return on equity. Performance has been steady at that level since 1987, despite a sluggish local economy.

"Growth has been flat the last couple of years, and we're tired of it," Mr. Gage said. "We're not in a hurry, but we'd like to do better."

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