Banking software developer Jack Henry & Associates announced last week it is forming a division aimed at developing, marketing and supporting its own line of check imaging systems.

Officials at Monett, Mo.based Jack Henry, a leading supplier of core accounting systems for community banks, .said the new division will be focused initially on developing software that will allow banks to electronically scan and store digitized pictures of cleared checks.

The new systems will be able to produce so-called image statements that contain laser-printed copies of checks, and also to allow back-office workers the ability to easily retrieve items for research requests and payment verification.

A more futuristic application of the technology will be the exchange of check images between banks, rather than physically transporting the paper items between depositing and paying institutions, Jack Henry executives noted.

Check imaging is just emerging from its technological infancy, with about 20 large banks currently deploying systems from a handful of vendors, including AT&T Global Information Solutions Corp., Banctec Inc., International Business Machines Corp., and Unisys Corp.

While these companies initially have been targeting big banks as the prime candidates for check imaging, there is a pent-up demand for the technology in community banks, said Jack Henry president Mike Wallace. "We surveyed our clients and found they are very excited about, using the technology in order to provide superior customer service, and to use imaging as a competitive weapon," Mr. Wallace said.

He added that market research has found that 50% of community banks indicated they expect to invest in check image systems within the next two to three years, with a typical investment of $300,000 to $600,000 per bank.

But unlike big banks, which have traditionally justified their multimillion-dollar investments through significant back-office productivity gains, Mr. Wallace said that rationale is not as compelling to smaller institutions.

"Community banks are generally not interested in systems that are paid for only by laying off employees," he explained. "They are more interested in technology that gives them the ability to provide better service to their customers, and to sell them additional fee-based products."

Mr. Wallace added that he expects Jack Henry's check imaging unit to begin rolling out new products by the middle of next year.

In other news, Jack Henry reported higher earnings and revenues for the first quarter of fiscal 1995 ended Sept. 30.

The company reported net income for the quarter of $1.8 million, or 15 cents per share, compared to a $1.4 million profit, or 12 cents per share, in the year-earlier period.

Revenues for the first quarter totalled $9.7 million, up 5% from the first quarter of fiscal 1994.

Jack Henry said it expected the firm's board of directors to maintain its current quarterly dividend policy of 5 cents per share.

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