Banking on Monett: Jack Henry & Associates

The key, says co-founder Jack Henry, 71, was “to hire people who are a lot smarter than we are.”

“That sounds elementary,” Henry says 30 years later, “but it’s really not. You’ll see a lot of companies headed up by guys who are afraid to surround themselves with good people.”

When Henry and co-founder Jerry Hall, 63, laid out their plans for a banking software company in 1976, they had some specific principles in mind: Do the right thing, do whatever it takes, and have fun doing it.

“It’s really simple,” Hall adds. “Give (good employees) a job to do and stay out of their way.”

That formula has worked out well: In its first year incorporated, Jack Henry & Associates generated $9,360; 30 years and a public offering later, it hit a record $592.2 million in revenue.

Now, the publicly traded company (Nasdaq: JKHY) has more than 5,900 financial institution customers. And due to the company’s knack for hiring and promoting good people and the light-hearted company philosophy, the two semiretired founders say they are enjoying life and are pleased with the way the “young guys” are running the company.

New generation

Henry and Hall were each victims of corporate mergers and acquisitions, prompting them to start their own venture.

Henry worked for Gillioz Bank & Trust, “a perfectly nice little bank,” which sold to United Missouri, and Hall worked for Jumping Jacks shoe company, which sold out to U.S. Shoe.

The two were working across the street from one another in downtown Monett, and they weren’t happy with where the changes left them.

Acquisitions now have become key to the success of Jack Henry & Associates, but the company strives to do them with as little consolidation as possible.

“A lot of companies will do acquisitions and look to pay for the acquisitions by cutting out a lot of costs,” says CEO Jack Prim, who joined by way of acquisition in 1995. “When we do an acquisition, we look to make it pay by increasing revenues, selling the products into our customer base, selling our other products back into the acquired set of customers.”

Through acquisitions, the company has been able to keep up with changing needs in the banking software industry. Jack Henry & Associates’ 45 offices employ more than 3,400 employees – 1,200 of them at the Monett headquarters.

Company officials say a few critical moves positioned the company for long-term growth.

One was going public in 1985. Over the years, institutional owners have grown a liking to the stock and now hold nearly 65 percent ownership. Earnings per share in 2006 were 96 cents, up from 81 cents a year ago and 68 cents in 2004.

Another was acquiring Liberty, where Prim was employed, in 1995, which entered Jack Henry & Associates into the outsourcing market. At the time of the Liberty acquisition, 60 percent of banks did their own processing.

“If you’ve got 40 percent of the market that you don’t have a solution for, that’s not good,” Prim says. “So they began offering outsourcing, and that business has taken off significantly.”

Today, Prim says eight out of 10 new customers that sign up with Jack Henry & Associates prefers outsourcing to in-house processing.

Another strategic move came in 2000, when Jack Henry & Associates acquired San Diego-based Symitar, marking its entrance into the credit union system market.

The company also recently accepted the fact that fewer banks and credit unions are interested in completely replacing their systems. A new strategy, implemented in the 15 acquisitions executed during the last three years, pushes add-on services and products that complement a core system already installed by a competitor.

Hometown pride

With such growth, outsiders have wondered if the company would relocate to a larger city.

But Hall has never lived outside Monett, and except for a short time away in the 1960s, Henry, too, has always called Monett home. Keeping the business at home just made sense, they say.

The two, who each live less than 15 minutes from the Monett campus, don’t get too involved in the company’s day-to-day activities but are very active on the board. They typically come in several hours each day.

“We’ll come in at 10 a.m. and leave at 3 p.m., use the company’s 800-numbers to make telephone calls, access the Internet, eat cheap food at the cafeteria,” Henry jokes.

Their offices are in J-1, the original cottage structure on the 130-acre campus, which holds nine buildings, some of them more than 80,000 square feet.

Reasonable costs for living, labor and construction are why Monett also is a great place for the company, Prim says.

“One other thing that I think has been important to the success of the company over the years is the people that are in the Monett area,” said Prim. “You’ve got folks that want to be here, and I think that there is more loyalty than you might find in some larger cities around the country.”

Jack Henry & Associates is vital to Monett’s economy, says Suzy McElmurry, executive director of the Monett Chamber of Commerce.

“Any community would be extremely proud to have such a wonderful facility,” McElmurry says. “It’s very inviting. Jack Henry is known throughout the United States.”

Recently, the company added an underground-bunker type of facility that houses all of its critical systems. Prim says the tornado that tore through Pierce City in 2003 prompted the addition.

“They tell me that an F5 class tornado can sit down on top of the facility, and we’d be able to continue to operate without any problems,” Prim says. “That was a substantial investment just to make sure that we would be able to continue to serve our customers no matter what might happen.”

Jack Henry & Associates

Founded: 1976

Address: 663 W. Highway 60, Monett, MO 65708

Phone: (417) 235-6652

Fax: (417) 235-1765

Web site: www.jackhenry.com

Services/Products: Software and services for financial institutions

2006 revenues: $592 million

Employees: 3,400

Stocks: JKHY (Nasdaq); $21.69 as of Dec. 14; 52-week range of $17.40 to $23.77)[[In-content Ad]]