2013 Dynamic Dozen No. 7: Jack Henry & Associates Inc.

Monett-based Jack Henry & Associates Inc. (Nasdaq: JKHY) is no startup. And the last three years have not been the best of times for many in the banking industry. So, it may seem surprising that the company founded in 1976 that produces integrated computer systems and processes ATM and debit card transactions for bank and credit unions would have grown its revenues by more than 22 percent between 2010 and 2012. But that is exactly what happened.

Jack Henry Chief Financial Officer Kevin Williams says acquisitions of Elizabeth, Ky.-based iPay Technologies LLC, Seattle-based Pemco Technologies and Norcross, Ga.-based Goldleaf Financial Solutions Inc. in fiscal 2010 have played a role in the company’s recent growth. Its 2010 revenues were $836.6 million and climbed to break the billion-dollar threshold at $1.02 billion in 2012.

“In that year, we actually did three of the largest acquisitions in the history of the company,” Williams says. “But we’ve also continued to grow organically on top of that as we add banks and credit unions to our customer list.”

Since March, three companies with more than $7 billion in assets combined – Washington-based firms Kitsap Credit Union and Washington Trust Bank, along with North Carolina-based Coastal Credit Union – have signed on to receive technology services from Jack Henry.

Williams says organic growth is due to two primary factors: demand for electronic payment and outsourced processing services. Jack Henry’s electronic-payment revenue has increased by about 15 percent during the last three years, he says.

“Our electronic-payment business now represents about 35 percent of our total revenue. Just 10 or 11 years ago, electronic payment represented just 5 percent of our revenue,” Williams says. “That is one of the biggest drivers of our growth.

“Second to that, our outsourcing business, which is where we do the data processing and back-office processing for banks and credit unions, has grown in two ways. One, the vast majority of new core customers that have come to us in the last three years and longer have gone outsourcing rather than buying licenses and doing their own in-house processing. Combined with that, is that we continue to see a very strong trend with long-term, existing in-house customers electing to move to outsourcing, which drives growth in our financial statements.”

The technology banks and credit unions use have become more complicated throughout the years, and customers, Williams says, would rather rely on Jack Henry’s expertise.

“If a bank has an information technology staff, it probably has a handful of people, whereas we have hundreds, if not thousands, of IT people,” Williams says.

Great Southern Bank Vice President and Director of Information Services Lin Thomason says the Springfield-based bank utilizes Jack Henry’s SilverLake core processing software across its 107 branches, among other ancillary products. That software, he says, is critical to its operations.

“In a bank, core processing is the software that posts all of your customer’s transactions, produces their account statements and pays down their loan – everything we do from a customer account standpoint. The nuts and bolts of the accounting and the processing of those accounts are handled through the SilverLake product,” Thomason says.

Great Southern converted to SilverLake in 1998, when the bank had only 30 branches and total assets of roughly $700 million. Today, Great Southern’s assets total about $4 billion, and the company has more than tripled its number of branches. Much of that growth is due to Federal Deposit Insurance Corp.-assisted acquisitions with four banks in Missouri, Kansas and Iowa. Thomason says Jack Henry has played a critical role in ensuring those transitions went smoothly.

“(Jack Henry) was necessary, to say the least, to take that data from whatever system that acquired bank was using and convert into our system. That is what they do, and they do it very well,” Thomason says.[[In-content Ad]]