Four Letters. Infinite Potential.

The Bank of Marion Case Study

Enhancing Traditional Customer Service with Proven Overdraft Strategy Achieves Exceptional Results

Established in 1874, The Bank of Marion is headquartered in Marion, VA. With $351 million in assets, the institution has 14 locations in Southwest Virginia and an additional branch situated across the state line in Johnson City, TN. While the bank has continued to embrace the latest technology to ensure the very best in customer convenience over the years, it has remained committed to its original mission of excellent customer service and independent hometown banking.

Overdraft program vendor review connects bank with industry expert
While the bank had seen some success from an overdraft program implemented several years prior, by 2008 revenue had started to decline. In 2012, when the provider of their original program sold its software to another company, bank management determined it was time to review their options – whether to stay with the purchasing company or look for another overdraft solution. After some discussion, the decision was made to open up the selection process; bank representatives met with two additional providers – one of which was JMFA.

Two of the companies they considered offered dynamic overdraft solutions – with no pre-established limits for account holders. On the other hand, JMFA OVERDRAFT PRIVILEGE® provided a fully disclosed option with established limits which bank management believed would be the best choice moving forward. “This aspect of JMFA’s solution was similar to the bank’s previous program, so we felt it would be easier for everyone to understand,” explained Bank of Marion CFO Chris Snodgrass.

Another key factor in the selection process was finding a provider that had proven expertise in the overdraft arena and the ability to offer the level of support necessary to ensure the program would be successful for the bank and its customers. “While our previous provider had a good process and decent implementation, once the program was up and running we didn’t hear much from our account manager,” Snodgrass said. “As we were considering our three options, we identified JMFA as the overdraft specialists.”

What stood out in JMFA’s favor was the fact that the company had an experienced and dedicated sales force, which the other providers the bank was considering didn’t provide. “We were impressed that JMFA thinks enough of their markets to have experts in the field to provide on-going client service and support, Snodgrass said.” Plus, the other vendors being considered wanted to charge a flat upfront fee for their programs. JMFA’s contingency-based fee is linked to the program’s success, so it’s in their interest for us to do well,” he added.

And finally, the bank was looking for results. According to Snodgrass, all but three of the bank’s branches are located in areas where the population is stagnant, with no new flow of development. To reduce its risk levels, the bank had changed its strategic plan, limiting loan business to inside of its trade area. This closed the doors on existing income opportunities.

“As part of its due diligence, JMFA studied the bank’s communities and identified that an overdraft program would work well for us,” Snodgrass explained. “The bottom line: as we looked at fee income opportunities, JMFA gave us a better idea of how they could help us make more money for our shareholders.”

Technology upgrades help to boost participation and performance
When the bank implemented its original overdraft program in 2003, it did not have the technology or capacity to allow overdrafts on point-of-sale transactions. After steps were taken to upgrade the bank’s technology, the decision was made to not allow overdraft coverage on electronic or ATM transactions. But when JMFA recommended providing this option for customers, bank management decided to take their advice. “They are the experts so we decided to do what they recommended,” said Snodgrass. “And we have been amazed and thrilled with the results.”

Results speak for themselves
Offering overdraft coverage on electronic and ATM transactions was just one of JMFA’s many recommendations that the bank implemented in retooling its overdraft program that has paid off beyond anyone’s expectations. Initially the bank’s Reg E opt-in rate was zero. According to Snodgrass, after tracking the program for six months, that rate had increased to 51.3 percent and income had increased 68 percent. Within a year, the bank’s ROA increased from .75 to .94.

Snodgrass believes that JMFA’s fully communicated solution played a key role in the success of program usage. “The fact that JMFA OVERDRAFT PRIVILEGE® is fully disclosed to customers has meant that account holders know about it and the benefits it offers, so they sign up.”

He went on to explain that the communications tools and materials provided by JMFA have been helpful in educating customers about the program and its benefits. “With our previous provider, customers didn’t know they were in the program until they got a letter telling them that they had overdrawn their account and that it would be covered up to a certain amount,” he said.

“JMFA’s process involves keeping customers informed that the service is available to them, so there is less confusion about their options and what happens should they make an inadvertent mistake on their account. Plus, JMFA’s training has been excellent in advising our employees how to explain to customers how the program works. Follow-up materials and consultation have also been helpful in reinforcing those messages.”

Compliance expertise is a big bonus
In addition to helping to ensure that the program is working effectively, regarding revenue generation and customer service, Snodgrass finds JMFA’s regulatory expertise to be an invaluable bonus for the bank. “When our JMFA relationship manager Ken Sanders came in recently, bank President and CEO Ed Stringer and I were discussing some things that the FDIC had announced and Ken knew all about it,” Snodgrass recalled. “When Ken left, I told Ed I’m glad we have JMFA in our corner!”

When he learned that JMFA had met with members of the Consumer Financial Protection Bureau (CFPB) and continues to communicate with them about the benefits of fully communicated overdraft programs, he felt an even greater sense of confidence in JMFA’s ability to keep the bank up to speed on any compliance issues. “How much better can you get than with a company that is so proactive with the regulators. I don’t think they could do it any better!”

Keys to overall success

From the beginning of the conversion to JMFA OVERDRAFT PRIVILEGE®, it was important for bank management to get it right. “We weren’t familiar with what exactly we should be looking for in order to make the program work most effectively,” Snodgrass explained. “JMFA’s process is extremely detailed – they have given us great advice on the information we should be using to measure our results, along with how to benchmark those results with other institutions in our marketplace and beyond to see how we’re performing. What’s more, they are in touch with us on a regular basis to point out how we can make adjustments for better program management.”

He went on to explain, “It has been a combination of their focus on detail, the effective tracking provided by their software, ongoing monitoring and follow-up recommendations for improvement that have made our program work so well.” As a result of the program’s success, bank management has been able to incorporate other new initiatives to increase performance and improve customer service.

Satisfied and passing it along
Since implementing JMFA OVERDRAFT PRIVILEGE®, Snodgrass continues to share the bank’s experience with other banks and says he absolutely refers any institution that is interested in increasing revenue or improving its overdraft program to JMFA. “JMFA is an exceptional firm that has helped us accomplish things we didn’t think were possible. They have made a big impact on the bank’s success,” he concluded.

About JMFA

JMFA is a leading provider of profitability and performance-improvement consulting. For more than 35 years, JMFA has been recognized as one of the most trusted names in the industry, helping financial institutions reach their goals. JMFA is recognized for earnings enhancement and expense control programs, executive placement, as well as product, service, pricing and technology-improvement consulting. Simply stated, JMFA’s programs and services are designed to increase income or reduce expenses. JMFA is proud to be a preferred provider for performance-enhancement consulting services among many industry groups.

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