Jack Henry Banking On De Novos Surge
April 11, 2018 Alex Woodie
The future of computing might be headed to clouds, blockchain, and analytics everywhere, but that doesn’t mean it’s the end of big iron. In fact, banking software developer Jack Henry & Associates reports that sales of its flagship IBM i-based SilverLake software are going strong, particularly among de novo banks in the past year.
Jack Henry has a solid reputation for developing banking software used by midsized banks and credit unions. The Missouri company has more than 9,000 customers, including a fair number that use SilverLake, which is considered a best-in-class banking platform.
In recent months, Jack Henry has been capitalizing on a surge in de novos, or new banks that have recently been formed. The software vendor says that five de novos banks selected SilverLake in 2017, which is a good indication that both the Jack Henry software and the IBM i platform are seen as solid bets among some of the most risk-averse businessmen you can find.
One of the de novos that selected SilverLake is Beacon Community Bank, a Charleston, South Carolina, firm that offers personal and business banking services. The bank, which opened in January, is running SilverLake through Jack Henry’s JHA OutLink Processing Services (JHA OPS), which in turn is hosted by Gladiator Hosted Network Solutions, an outsourcing option unveiled by Jack Henry’s subsidiary ProfitStars back in 2014.
“Jack Henry Banking offered the most complete suite of offerings that met our bank’s requirements for form and functionality,” Beacon Community Bank’s Chief Operating Officer Craig Johnson says in a press release. “The Jack Henry brand is regarded for bringing superior products to market that are well integrated and that work the way they should. That reputation, coupled with the highest marks for service and customer support, demonstrates the blend of culture and technology that we were seeking in a partner.”
Stacey Zengel, president of Jack Henry Banking (another Jack Henry & Associates subsidiary) says the company is catching its share of business thanks to the growth in de novos.
“This past year marked an exciting turning point for new bank activity,” Zengel says in a press release. “Jack Henry Banking is being trusted by Beacon Community Bank and several of its peer de novos to give them their start, and we do not take that lightly. We are enthusiastic about the opportunity to partner with Beacon Community Bank and other emerging institutions to provide them with the technology and tools to grow and effectively serve their respective markets.”
The de novo market is growing at a clip not seen in recent years. “De novo activity is slowly picking up steam, ending a lengthy lull that followed the financial crisis,” writes Paul Davis in a February story at American Banker. “While new charter activity is nowhere near as brisk as it was during the pre-crisis days, at least eight banks are in various stages of formation.”
According to American Banker, other de novos that have already launched or are in the process of launching include Endeavor, a Carlsbad, California; bank that’s raised $27 million; Coastal Community Bank, which has raised $22 million in Hollywood, Florida; Sterling Bank in Las Vegas, Nevada; Grasshopper Bank, which intends to raise $100 million to focus on New York City’s “innovation economy”; Marathon Community Bank, which is seeking to raise up to $25 million to serve Washington D.C.’s Ethiopian-American community; Studio Bank, which aims to raise $40 million in Nashville, Tennessee; CommerceOne Bank, and Birmingham, Alabama bank that hopes to raise $30 million to $50 million.
Jack Henry says twice as many U.S. banks opened in 2017 than the number of bank openings between 2011 and 2016 combined. The fact that the combination of Jack Henry’s SilverLake running on IBM i was able to capture the bulk of this new bank activity speaks well to the future of both products.