Preparing for 2000 is costing community banks more than expected, a survey shows.
The typical community bank spent $62,160 last year to ugrade systems for 2000, Grant Thornton LLP found. That's about 2.5 times what such banks projected in the consulting firm's survey two years earlier. Diane M. Casey, managing partner of financial services at Grant Thornton, said the poll shows community banks are doing what is necessary to prepare for the century date change-even if that means going over budget. "We suggested last year that they were underestimating their costs," she said. "They did spend the money to get ready."
Thomas J. Sheehan, president of Grafton (Wis.) State Bank, said bankers misjudged their year-2000 costs because they did not realize the magnitude of the problem at the outset. His $107 million-asset bank will spend about $100,000 over three years on new year-2000-compliant equipment, such as an ATM and personal computers.
"I don't think that banks fully understood what they were getting into," he said.
More than 800 bankers responded to the sixth annual survey.
Community banks are not the only ones that misjudged the cost of fixing the year-2000 computer bug. Chase Manhattan Corp., for example, raised its projection by 45%, to $363 million, between April 1997 and September 1998.
Of the banks surveyed, 53% said they spent more than $25,000 last year on hard year-2000-related costs, such as computer equipment, telephone systems, and other technology. Personnel costs were not included in the bankers' tallies.
The bankers plan to keep spending in 1999 to correct computer programming errors. On average, community banks will each spend $50,060 this year, the poll shows.