Established in 1985, Heartland Tri-State Bank is a full-service community bank that prides itself on being “locally owned and community focused.” With $130 million in assets and four branches across Kansas, the bank has experienced a stretch of growth, having recently acquired two smaller banks.
These acquisitions, and the work involved in completing them, represented a huge undertaking for Heartland Tri-State CEO Shan Hanes. It became the catalyst for seeking outside help and expertise with contract negotiations, but first he had to clear one hurdle: convincing his Board of Directors that it would be both necessary and profitable.
ONE CONTRACT NEGOTIATION LEADS TO ANOTHER
Hanes had first met Regional Sales Director Andre Branning at an industry event, where they had briefly discussed that the bank’s core processing contract would expire in approximately 24 months. Branning suggested that before Hanes sign the renewal, he let JMFA take a look and see how much they could save by doing the renegotiation. Having nothing to lose, Hanes agreed, and was contacted later by National Sales Director Kelly Flynn to begin the free analysis.
Around the same time, Hanes had begun discussions with his current vendor for the two core bank conversions of the acquisitions. He was shocked and dismayed when they gave him a $150,000 quote just to convert the two new banks to their service.
“I kind of lost it,” Hanes said. “I thought, ‘We’re done! We’re going to another vendor.’” He even requested a proposal from another core provider, eager to get that cost down. “Credit to JMFA and Mary Soergel, our project manager,” he said. “She allowed me to lose it for a minute; part of the value she provided throughout the process was keeping a level head.” (JMFA would later use that proposal as leverage while negotiating with the bank’s current vendor.)
SECURING BOARD APPROVAL
When Hanes first suggested hiring JMFA to renegotiate the bank’s contracts, he experienced unexpected pushback from his Board of Directors. They wanted to do it in-house and didn’t think it made sense to outsource such a project. Undeterred, Hanes laid out his reasoning.
For starters, he and his staff were much too busy with the bank acquisitions to successfully take on the renegotiations themselves.
However, the main selling point was the estimate that JMFA had put together for Heartland Tri-State. It detailed specific savings across five services: core processing, debit card processing, item processing, bill pay and fees for card plastics. Hanes took that estimate to his Board, who then realized how much work was actually involved in the renegotiation process.
“JMFA broke down every line item,” Hanes explained. “That, to me, was above and beyond, but that’s what it takes [with vendors]. You can’t just go in saying, ‘I want to save $150,000.’ That’s the difference between a banker negotiating and JMFA.”
Of course, the projected savings also impressed the Board. Of an annual vendor spend of $333,430, JMFA estimated they could secure $43,481 in yearly savings. With JMFA’s long-standing reputation for meeting and exceeding projections, the Board confidently signed off on the proposal. It was now time for JMFA to get to work.
INSIDE THE NEGOTIATION PROCESS
JMFA began contract negotiations with the bank’s current service provider, knowing that if they wouldn’t budge, Hanes would be willing to move to another vendor. They used the proposal he had secured earlier to their advantage, letting the current vendor know what others were willing to concede to and opening the door for more attractive concessions.
The first response from the current vendor was $50,724 in annual savings—more than initially predicted in JMFA’s analysis. But, the vendor still wanted a large fee to convert the acquisitions. JMFA knew they could do better and answered with an aggressive counteroffer, getting creative in breaking down the savings among the five services and multitude of line items. In this case, the vendor feared losing their client to the other vendor JMFA and Hanes had in their back pockets and had to go to higher-ups to sign off on the offer. And sign off on it they did.
When all was said and done, JMFA negotiated an annual savings of $83,461 for Heartland Tri-State Bank, as well as $250,000 in signing bonuses that would more than offset the cost of the two bank conversions. Additionally, JMFA secured a co-terminous date for the bank’s debit card processing contract (which, unlike the other contracts being negotiated, was not set to renew until 2022—a range typically too far off to begin renegotiations).
With the new year fast approaching, Hanes relied on JMFA to complete the negotiations while he tended to his many other projects. “Year-end is busy for me,” he explained, “and I didn’t have time to stay on top of the vendor. My plate was full. I knew the clock was ticking, but I wasn’t worried. I had huge peace of mind and trust in JMFA.”
IN HINDSIGHT, THE CHOICE WAS OBVIOUS
Once the deal was done, the year had ended and the bank acquisitions were completed, Hanes had time to reflect on the entire process with JMFA.
With all the moving parts involved, follow-up calls and questions for the vendors, and pages and pages of contractual language to comb through and negotiate, Hanes wholeheartedly recommends JMFA for the savings they provide, in terms of both money and time.
“I’ve already addressed with the Board that this was the smartest decision we could have made,” he said. “Now that I’m through it, it’s the only way to do it. As a banker, you don’t have the time to go into all the details involved.”
In addition to the savings, Heartland Tri-State can also count on JMFA’s ongoing monitoring and support. JMFA will review the bank’s vendor invoices annually, ensuring that what was agreed upon is reflected in the bills. Plus, with the services now all terminating on the same date, JMFA will know precisely when to start the renegotiations to get the best deal, and will proactively reach out to Heartland Tri-State at that time.
In the case of Heartland Tri-State Bank, as with so many other JMFA Contract Optimizer clients, all it took to get the ball rolling toward major savings was requesting a free analysis.