First Indiana Bank has signed a seven- year check processing agreement with Electronic Data Systems.

The deal would let the bank offer these services to other Indiana community banks by the second quarter of next year.

The agreement calls for EDS to convert the bank from a standard check processing system to an image-capture process, in which paper checks are digitized and stored on disks.

In addition to imaging checks for First Indiana's retail customers, the conversion is to let First Indiana's correspondent banking division offer imaging services to small and midsize banks.

"There are two main advantages of this agreement for the community banks we serve," said Tim O'Neill, senior vice president of the $1.7 billion- asset bank. "First, these banks will be able to offer the benefits of new technology to their customers. Second, the image processing will be performed near their home offices without the large financial commitment to equipment, space, software, and personnel."

EDS will manage item processing operations in the bank's Greenwood, Ind., technology center and execute processing contracts with correspondent banks.

First Indiana is to supply equipment and software.

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