Four Letters. Infinite Potential.

Bank of Wedowee Case Study

The Bank of Wedowee was founded in 1906, with an initial investment of $25,000. Today, with assets of $126 million, the bank offers stable, hometown banking services through its locations in the rural Alabama communities of Wedowee, Woodland and Roanoke.

Addressing the need to improve revenue and service

In order to provide its customers with assistance when they encountered a financial emergency or made an error in their checkbook, the bank implemented an overdraft program in 2004. After six years, bank management decided that they would not renew their provider contract but would continue to maintain the overdraft service, using the interface provided by their core processor.”

However, when the bank hired Mitch Key as president in 2013, it was facing a drop in earnings that needed to be addressed. “When I got here, I knew we needed to do something about the bank’s return on assets,” Key explained. As a former chief financial officer at another Alabama bank, Key went right to the financials to determine what changes could be implemented fairly quickly to improve the bank’s earnings.”

“I started building relationships with staff to get their input and together we reviewed a lot of different areas to determine where we might find quick fixes that wouldn’t have a negative impact on the bank,” he said. “When I looked at the NSF income, I knew this was the place to start.”

According to Carol Taylor, Bank of Wedowee chief financial officer, previous bank management had taken a cautious approach with its overdraft program to avoid any compliance risk after FDIC guidelines were announced in 2010-2011. “The program was really locked down. As a result the percentage of active users was very low and income was limited,” she said. “We needed a different strategy to return income to a more healthy level.”

Wanted: Experience in compliance and performance improvement
By looking at the monthly income reports, Key recognized that the bank had taken an extreme stance on regulatory guidance with the restrictions it had placed on program use – such as the maximum number of daily NSF checks allowed. Thanks to his previous experience, he had a solution for the situation – a proven, worry-free, compliance-guaranteed, income-producing overdraft privilege program. He picked up the phone and called Waid Thompson, regional director at John M. Floyd & Associates (JMFA), and said, “Waid, I need your help.”

He went on to explain, “I knew that we could rely on JMFA’s compliance expertise in the area of overdrafts. I also knew that with their support we could have the confidence to make the changes in our program parameters that were necessary to get back to driving revenue again.”

Initial review uncovers ways to increase program effectiveness
For Key, having JMFA’s guidance was totally reassuring. “When JMFA’s consultants came into the bank, I appreciated that they took the time to sit down with me to share their recommendations and explain how each one applied to our unique circumstances,” he said. “We talked about what made sense and what didn’t. Then, they gave us the opportunity to adopt as many of the recommendations as were possible – or reasonable at the time.”

Taylor explained that before the bank implemented JMFA OVERDRAFT PRIVILEGE®, not all customers had access to overdraft protection. “We were able to offer our customers a valuable service more easily, knowing we had JMFA’s guidance on how to best explain appropriate use so customers understand how to use it responsibly,” she said.

Proper training is essential for a successful customer experience
According to Key, JMFA’s staff training and customer communication materials have helped to increase the number of opt-ins for overdraft coverage on ATM and electronic transactions. “All of our front line staff attend the trainings because it is important to keep compliance at the forefront of the sales process,” he explained.
“This is one item that you can’t let slide,” Key continued. “Good training is essential to providing staff with the tools they need to give customers the most up-to-date information when opening an account. This helps to ensure that customers understand the value and responsibility of opting in to overdraft coverage.” 

Overall program results speak for themselves
When Key joined the bank in 2013, it was typically earning between $10,000 and $12,000 a month in gross NSF fees. Since implementing JMFA OVERDRAFT PRIVILEGE®, the bank’s fee income has nearly doubled. Plus, customer usage of the overdraft service has increased by 31 percent, with charge offs and waivers remaining vey low. “This has been a tremendous boost to putting the bank on a path to reaching its performance goals more quickly,” Key stated. 

Customers benefit from program changes
Reaction to program changes has been very positive for both customers and the bank. “Sometimes it gets lost in the shuffle from the bank’s perspective, but overdraft privilege helps our customers,” said Key.”

He described situations where customers might have their work hours reduced due to an industry slowdown. While they would find a new job quickly, there was a span of time between jobs and paychecks where they were without a financial cushion to rely on to pay their expenses.”

According to Key, if it weren’t for the services provided by the bank’s overdraft program, these customers would have experienced a harmful blow to their credit. The good news is, by having access to the overdraft privilege program they were able to take care of their responsibilities with more peace-of-mind.”

“This situation could have been disastrous for affected customers if they hadn’t had this safety net,” Key said. “All of our customers appreciate the service very much. In fact, I have never had a customer say – ‘you paid these checks for me and charged me a fee for each one. I wish you would have returned them.’”

Collaborative consulting approach simplifies the process
For many financial institutions, implementing new processes and keeping up with all of the latest regulations and best practices can be overwhelming. But for Key and Taylor, JMFA’s experience and expertise has simplified the bank’s ability to effectively manage its overdraft program.”

“When JMFA identifies something that we need to monitor or areas we need to watch, they send us a review of these items, along with their recommendation,” Key shared. “Then, when they come in to talk about the program, we have been able to consider their recommendations and make informed decisions. Since we don’t have a lot of resources to keep our thumb on everything, this level of service is very helpful.”

Advice to other banks is simple
Switching to JMFA OVERDRAFT PRIVILEGE® was an easy decision for Key since he had seen its benefits while working in another bank. Plus, he had experienced the difference proven expertise can bring to a program that has been self-managed for a period of time. “I think JMFA OVERDRAFT PRIVILEGE® is worth every dollar; our numbers show it,” he said.”

“We can talk theoretically all you want, but – in today’s regulatory environment – if a bank is interested in recovering lost revenue, I believe JMFA OVERDRAFT PRIVILEGE® is a simple, effective component that can make that happen,” Key concluded. “If someone asked my advice, I would say just follow JMFA’s recommendation – it works!”