A throwback to an age when tellers greeted customers by name, Richland County Bank ($105 million in assets) struggles to stay current with rapid technological and regulatory change while preserving its community bank identity. Take check imaging, for example. Telecom companies have been slow to deploy broadband services in rural America and the Richland Center, Wis.-based bank only recently was equipped with DSL capabilities. Fortunately for Richland, it has a CTO who isn't afraid to get his hands dirty. Corey Davis is a one-man IT shop, responsible for ensuring that the bank remains up to date with new technology. Davis, who recently was named an "Industry Rising Star for 2005" by the Independent Community Bankers of America (ICBA), discusses the challenge with InformationWeek's Steven Marlin.
BS&T: How do you cope with the rising tide of new government regulations?
Davis: The No. 1 issue is integrating technology with compliance requirements, whether it's Check 21, FACTA, the USA PATRIOT Act or the Bank Secrecy Act. Technology has helped in many ways. For example, we had installed a loan document imaging system in 2002. A year later, the USA PATRIOT Act's know-your-customer rules went into effect, requiring banks to verify a new customer's identity and retain copies of proof of identity. We employed the loan documentation system for that purpose as well. But there's still a lot of manual work involved.
BS&T: What's the attitude among smaller banks toward Check 21?
Davis: A lot of community bankers feel that compliance requirements should be adjusted to the size of the bank. We haven't jumped on the Check 21 bandwagon. The economics simply don't justify it. We're not in a major metropolitan area; we just recently got DSL service. For the volume of checks we process, the cost of installing telecommunications lines outweighs any savings in transportation costs from not having to ship checks. However, the Federal Reserve can compel banks to implement Check 21 through the way they price products. In other words, they'll charge more to process a cash letter than to process an image file.
BS&T: Describe Richland County Bank's technology infrastructure?
Davis: Our core system is Jack Henry & Associates' [Monett, Mo.] CIF 20/20 system running on an IBM [Armonk, N.Y.] AS/400. The system uses a jukebox device with 200 GB of storage capacity, which lasts us a long time. We do tape backups at the end of each day. We also do a full system backup every month.
The Jack Henry system is highly reliable; it hasn't gone down in three years. And it's provided huge efficiencies. The system cost $1.2 million. When we installed it in 2002, we expected a four-and-a-half-year payback. We're ahead of target - we're on track to achieve full payback in four years. We implemented check imaging in 2002 as well; the system provides customers image copies of checks along with their statements.
BS&T: What was your previous core system?
Davis: We had been using the same third-party service provider since 1969. But we were becoming disenchanted with the service. We'd transmit electronic files to this provider and frequently the files would got lost. By bringing processing in-house, we can rely on our own staff to process the files, which assures they don't get lost.
We also wanted to establish Internet and telephone banking and drive-through tellers, and we determined we could do it cheaper by going in-house. We also believed we could provide better customer service with an in-house system.
BS&T: Did you consider outsourcing your IT infrastructure?
Davis: Yes, but we would have had to transmit electronic files to a remote processing site, and the communications in our area are not the most reliable. The determining factors in going in-house versus outsourcing were economics, telecommunications and support. I narrowed it down to three companies, visited banks and selected Jack Henry.
BS&T: What's the size of your IT staff?
Davis: I'm it. I'm also a loan officer, administration officer and the network security officer. I devote 40 percent of my day to IT-related issues. First thing every morning, I take an hour to check out all the security logs and reset passwords if I have to - all the things a normal security officer would do.
The core processing system receives one major update each year; that's done over a weekend. There are also monthly program fixes.
BS&T: What happens when you're away?
Davis: I have a backup guy who handles security reports, and our head bookkeeper handles networking tasks. The head bookkeeper and I attended three IBM training classes on the AS/400. And Jack Henry is very helpful in terms of support.
BS&T: How many employees does the bank have?
Davis: We've got 32 full-time equivalents. Technology has made us a lot more productive. Take loan processing, for example. Our loan documentation department is located upstairs and the loan officers are downstairs. Before we installed the imaging system, loan officers would be constantly running upstairs to deliver documentation; now it's done through the system. It's saved us a lot of running around.
BS&T: How has the bank's new core system improved customer service?
Davis: Customers can view 90 percent of their banking transactions and accounts on a single screen. We're also looking at e-mailing statements to customers instead of mailing them; we send out 6,000 statements a month. The Internet and telephone banking systems are fully integrated. Our Internet site is hosted at a Jack Henry location. Customers can go into that site and view check images, pay bills, view transactions and transfer funds. The telephone banking system provides live support during banking hours.
BS&T: What about ATMs?
Davis: We will soon be switching our ATM processing system to Jack Henry's PassPort. The network availability is far superior to what we're experiencing through our current processor. The PassPort system will be online, so we can process transactions nonstop, to and from any ATM network. Now we have to process transactions in batches, which causes a lag between the time a transaction is performed at the ATM and the time it shows up on the customers' 90 percent screens. We want to give our customers immediate access to their account information.
BS&T: Who is your disaster recovery provider?
Davis: We are required by regulations to develop and maintain a plan for disaster backup and recovery. We've contracted with Jack Henry's Centurion Disaster Recovery subsidiary in Minneapolis. One of my concerns as IT director is that we don't have any branches to use as a backup center. If our building was trashed, we'd have to find another building to move into. I'm investigating augmenting our current method of storing tapes at an off-site facility with a hot-site facility with full data-mirroring capabilities.
BS&T: Does a bank in a town of 5,000 people have to deal with competition?
Davis: It's there. We've got four banks, a savings and loan, a credit union, check cashers and investment firms.