Merger Backlash?

It's been almost a year since the announcement of the acquisition that sent shockwaves throughout the Southwest Florida banking scene. On Aug. 29, 1997, Two major Southwest Florida players, Jacksonville-based Barnett Bank and North Carolinian NationsBank, told the world of their plan to become one entity.

In Southwest Florida the combination seemed to deal a smarting blow to the already competitive banking community. Before the merger was announced, FDIC numbers show that Barnett, a large local community player, held Collier's biggest market share, 20.09 percent, and Lee's number three position with 15.30 percent market share. NationsBank held Collier's fourth spot at a 9.76 percent and Lee's second-place spot at 20.61 percent, just below First Union at 21.77 percent.

But nearly a year after the plans were unveiled, the powerhouse created by the merger hasn't seemed to hurt the rest of the banking community very much. On the contrary, many local banking representatives say they have gained in one way or another from the transition. There appears to be enough business to go around.

The Benefits of Fallout

For The Huntington National Bank, headquartered in Columbus, Ohio, the merger has been a great opportunity to acquire new Florida branches from Barnett after the merger. "It's been a big help to Huntington," says Bruce Page, market executive director for Southwest Florida.

This summer Huntington acquired 60 different Barnett branches that were divested by NationsBank as part of a federal mandate. Seven of the branches, including a trademark nine-story high rise in downtown Fort Myers, are located in Lee County, a new territory for the bank.

On top of providing individualized community-bank services, Page says that Huntington has the competitive advantages of its Midwestern roots, a potential draw for many regional transplants to Southwest Florida, and its solid banking history. And like NationsBank, Huntington is big enough -- more than 600 branches and 1,300 ATMs internationally -- to provide technological conveniences such as computer and telephone banking. "We think we have a niche," Page says.

Locally-owned Edison National Bank, located in south Fort Myers, was perhaps the most surprised by the acquisition. The bank opened its doors on Aug. 29, the same day the deal was announced. "It was a major surprise," says Edison National President Robbie Roepstorff, "I think it was one of the best kept secrets in town."

But a potentially devastating situation didn't turn out that way at all, Roepstorff claims. In fact, the new bank experienced an increase in business among clients who wanted to retain a small-community bank feel. And whereas Barnett was before considered a "large community" bank, the new merger created an entity too large for some. "It kept us much busier then we planned," she says.

Edison also offers several services, for example a courier service for business clients and free ATM use for individual clients, that have drawn a loyal following of those who want to stick to community-based banking. The bank is now well positioned to celebrate its first anniversary, Roepstorff says. "Word of mouth does travel fast."

Colleen Kvetko, president/CEO/ board chairman of Fifth Third Bank, says her bank has also benefited from the Barnett acquisition, gaining customers who have decided to make the change to locally owned banks. Kvetko calls the phenomenon "runoff," a usual phenomenon caused by customers' aversity to change. "People don't like change," Kvetko says, "and they won't stick around."

Kvetko says she's experienced the runoff effect from mergers her bank has been involved in on the acquisition side. There are two types of customers who will often leave a bank after an acquisition or merger: those who will leave immediately after finding out and those who wait until after the merger and then switch at the slightest inconvenience, even if it has nothing to do with the merger itself.

First Union Regional President Richard Bothoff, too, says he knows what runoff feels like. It's painful in the beginning. "We at First Union have had our share of mergers," he says. "There was the same type of reaction."

Bothoff further agrees that the fallout has given other banks in the market something new, either clients, facilities or staff members. "All the banks have benefited from whatever fallout there is," he says, adding his own bank has had "exceptional growth" in the last year, although he could not directly attribute it to customers who switched because of merger fallout.

He also says the merger hasn't done anything unexpected in the past year. "I don't think it has been any better or any worse than expected," he says. 'The very best mergers in the world are nightmares."

Both Kvetko and Bothoff say that customer service will be the reason business customers ultimately make up their minds to stay or go. "People don't deal with banks, they deal with people," Kvetko says. "Staffing is vital during acquisitions."

Other local bankers agree that business has been none the worse in the year after the announcement of the acquisition. SunTrust's Charles Idleson, for one, says his bank has received new employees due to the transition. "The merger has created a lot of opportunities to hire individuals from the consolidating banks," Idleson says.

Idleson says that SunTrust, although a statewide bank, has a decentralized management structure which allows a better community focus. "Our company's philosophy has been decentralization in management," he explains, "and that has been our success. We are a local bank with a local budget and local decision makers."

And SunTrust has had its own share of changes on the national level. On June 4 SunTrust Banks Inc., the Atlanta parent holding company for SunTrust Southwest Florida branches, announced it is acquiring Citizens Bancorporation in North Florida. On July 20, SunTrust announced a merger with Virginia-based Crestar Financial Corporation. The deal, expected to close by the end of the year, will make SunTrust the 10th largest banking company in the United States.

South Florida Bank President and CEO Bill Valenti says the merger has driven more business his way, as customers who liked Barnett's small-town approach fear they'll get lost in the new mega-bank. "Our account openings are up," Valenti says. "We've had a lot of people looking for somewhere where they won't be a commodity."

He also says that bigger isn't necessarily better -- his bank, which is an independent community bank, can go "toe-to-toe" with the bigger branches, offering nearly all the same services except for insurance and mutual funds. "The technology is such that even small banks can offer the same services," he says.

Bob Guididas, president of Naples-based Community Bank, agrees. "People are averse to change," he says, "and bigger isn't necessarily better." Guididas,