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Banking Special Issue: Images from the Fed

Table of Contents


The Future of Bank Imaging

The green wall

Relationship Banking

Proof of Deposit

POD Case Study

Designing Forms for a Banking Environment

File Folders

Thrashing Folders

Staging Folders

Using COLD (a case study)

Check Processing: The need for Speed

Printing Your Own Checks

Check Processing 101

Images from the Fed

First National Bank & the Fed (case study)

Glossary of Bank Image Technology


by Joe Devlin

The Fed Saves Cash & Headaches

First National Bank Case Study

"Our President, Robert Ewing, has always been mystified as to why our customers insisted that they had to receive a copy of all their checks in every statement. Credit Union customers seem content not to get their checks back -- why were OUR customers so adamant that we had to continue to support this expensive endeavor?" mused Jerry Johnson, Senior VP at First National Bank in Burkburnett, an $83 million two-branch bank headquartered in the small town of Burkburnett TX.

Given his misgivings about killing trees, it isn't surprising that Ewing quickly jumped when he heard about a new imaging project that would use equipment provided by the Federal Reserve Bank of Dallas. The key to eliminating dealing with all those loose checks was to pass them on to the imaging equipment housed at the local branch of Federal Reserve Bank of Dallas.

These days, First National no longer receives a sack full of incoming checks each day from the Fed. Instead, those checks are immediately processed by the high-speed image scanners provided by the Fed. First National Bank also downloads onto the Fed many of the processing headaches it formerly encountered when dealing with on-us checks. "Every check that is deposited at our bank is MICR-encoded by our personnel using our single-pocket proof machine. Then, we bundle all the checks together and ship them off to the Fed--one bundle for our outgoing checks, another bundle for checks drawn on other banks," explained Jerry Johnson, proudly.

When these checks arrive at the Fed they go their separate ways. On-us checks go the imaging department; all others are forwarded to their respective banks. "The next day I get two 8mm cassettes back. One cassette holds the incoming cash letter for checks coming in from other banks. The other cassette provides an incoming cash letter for the on-us checks I had sent to the Fed the previous day," continued Johnson.

Thanks to the imaging equipment and expertise of the Fed's imaging department, President Robert Ewing's dream of thin, no-checks-in-the-envelope statements has been achieved. Customers are happy too because each bank statement includes image printouts of each check. Of course, the same goal could have been accomplished if the bank had purchased its own imaging equipment, but the $300,000 cost for a new camera-equipped sorter could not be rationalized for a bank of First National's size.

"We print our own statements and use the images to speed up research--but by downloading the expensive imaging portion, we share the cost of an expensive set of high speed equipment with other Fed imaging customers," said Johnson.

First National chose Dataware's RECALL-ITEMS Federal Reserve Customer Check Imaging System to manage their new image archive and to help print image statements and to research information stored in the archive. The system is built around an NCR Pentium-based 3430 UNIX system with a 2Gyte hard drive array. The disk is big enough to hold several months' worth of check images. First National backs it up regularly to 8mm tape and uses the same 8mm drive to archive old, infrequently accessed check records. "If I need to, I can restore old records to the hard drive in a couple of minutes, but that is rarely necessary," Johnson told us.

Johnson added, "We are really very happy with the Dataware software. It allows us to retrieve any check record by keying in any of the identifying fields provided by the MICR line of the original check. I can't tell you how much faster research now is. For example, a few months ago, a Federal court subpoena required us to look up four years' worth of checks issued by one customer. The two years of checks that were imaged took us 30 minutes to retrieve. It took us 30 hours to look up the other two years worth in the microfiche archive."

RECALL-ITEMS also includes a built-in signature verification module that has made signature verification of high-dollar item checks easy to accomplish. "When it comes time to verify the signatures, we ask the system to present all checks with values above $2,500. The system pulls up the list of checks above that amount, looks at the MICR for the customer code and up pops a copy of each check on the upper part of the screen and corresponding signature card on the bottom of the screen," Johnson said.

Of course, no system is perfect. For example, checks that have been damaged and placed in one of those opaque carriers don't scan very well. On the other hand, such items are much easier to read in a scanned version than in the old microfiched version. And, the images are retrieved much faster than microfiche could be. And, anyway, added Johnson, "The Fed holds the checks long enough for us to resolve any problems before they are shredded. We have only had to ask for a half dozen checks in the two years we have been using the Fed imaging system."

The actual printing of image statements is done in several batches a month on a Hewlett-Packard 4SI Laser Printer. The Printer has two paper trays. The 200 sheet tray holds paper with preprinted with First National's logo and is used for the first page; all of the other pages come off of the 500 page tray which holds blank paper.

Although both sides of the check are imaged, the software is set up to print just the fronts. First National could, of course, change that, "but there has not been a lot of call to do so," Johnson told us. "The software allows us to do custom printing with great ease. For example, I have one old gentleman with a demand-deposit account that exceeds a quarter of a million dollars. When he let us know he was having trouble reading the new statements, we changed his customer profile so that all his statements now include two blown-up checks per page."

There's little Jerry Johnson and First National Bank have found to complain about in their new system: "We were concerned that we were going to lose customers when we went with the image statement. It was a misplaced concern--we lost only two small clients. In general, our customers could not be happier. They like the fact that they can come to the office and get a duplicate of any statement within a few minutes. They like the fact that checks are now returned in numeric sequence and the fact that they can store a year's worth of statements in a small manila folder. All statement pages come three-hole punched and some of our customers store the statements in the three ring binder we have provided. Those binders have our logo prominently displayed, making them great advertising."

And, Johnson added, "We probably like the new statements even more than the customers do. The chief reason is that they have lowered our postage costs considerably. Most statements go out with ten checks printed on front and back of the paper. That arrangement insures that almost all statements can be mailed for the lowest possible postage. The last paper check statement mailing we did cost us $2400 in postage. The following month, we mailed out the new image statements for a tad under $1300."

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