KC bank experiment will test where customers will do their banking

This article was published originally on Feb. 18, 2007. The banks have announced plans to merge into one bank under the name Security Bank of Kansas City.

Kansas City’s third-largest bank group is about to embark on an experiment to learn where consumers will do their banking.

Few consumers realize this bank group exists. It operates 43 branches in the area – more than UMB Bank, US Bank or Bank Midwest – but even its own customers don’t see the group’s reach.

They will, if a marketing campaign set to run from April through October does its job.

Bank groups in other states have attempted aspects of what the $2.7 billion Valley View Financial Group plans to do here. None has gone quite so far or on quite the same scale.

Others are watching to see whether it works, whether customers will do their banking at another bank’s branches.

“I think it’s a tough assignment for them,” said Margaret Bosley, executive vice president of deposit operations at Bank Midwest.

Each of the seven banks in Valley View Financial Group plans to open its doors to customers of all the other banks in the group. But the banks don’t plan to merge or even adopt the same name. Think of it as having Commerce Bank branches all over the city but operating under seven different names.

For example, Bank of Lee’s Summit customers will be able to stop at any of Valley View State Bank’s branches in southern Johnson County and do their regular banking. Or they could pop into a First Bank of Missouri branch north of the river.

All of the group’s customers will be able to bank at all 43 area branches, including those at Mission Bank, Security Bank of Kansas City and Industrial State Bank. They will have five more branches in St. Joseph and Paola, Kan.

Only Bank of America, with 54 branches, and Commerce, with 45, have more branches in the seven counties around Kansas City.

To help customers find the other banks’ branches, Valley View Financial plans to roll out its stylized green leaf logo to all seven banks. It also coined a brand – BancAbility – to show customers of the assorted banks where they’ll be able to bank.

One branding consultant labeled the concept ripe for confusion, saying marketing dollars would be better spent promoting one new name for all the banks.

A new name was exactly what Pat D’Amico recommended when the Valley View group hired him as its marketing chief five months ago.

“I said, ‘Guys, we need to have one name,’ and they sat me down and said, ‘This is why we can’t,’” D’Amico said.

Community banks

Kansas Citians don’t know about Valley View Financial Group because its seven banks operate independently in most of the ways customers would notice. They have separate bank presidents, separate boards of directors, separate identities, separate customers and separate bank charters.

For the most part, their branches operate in different parts of the metro area.

“We serve distinct communities, some of which have distinct personalities,” said Clay Coburn, president of Mission Bank, which serves mostly northeast Johnson County. “We have longstanding core customers in each of these communities that consider us their bank.”

“I’ll further that,” said Ken Hollander, president of First Bank of Missouri, whose branches are in Platte and Clay counties as well as St. Joseph. “The Northland is a distinct different market from Wyandotte County and eastern Jackson County.”

And, the bankers agreed during a recent joint interview, the separations make the banks more attractive to their customers.

Customers want to know that decisions are being made in their communities, that they can walk into the president’s office, and that their relationships will enjoy some continuity in the future.

At the same time, however, the seven banks have combined in many ways less evident to consumers.

They’ve merged their back office operations to avoid the costs of building and running separate processing centers. At times, they have combined their separate lending limits to handle loans that are larger than any one of them could take on alone.

Ownership of all seven banks has been consolidated into one company, Valley View Bancshares Inc. It is owned chiefly by the families of Sherman Dreiseszun and the late Frank Morgan.

At one time, the group included the significantly larger Merchants Bank, Metro North State Bank and Home Savings Association. All three fell into regulators’ hands in the early 1990s amid real estate loan problems, a run on deposits, and investigations, but the remaining banks were largely unaffected.

Since then, the banking group has grown in part through mergers and acquisitions. Because all the banks are owned by one company, a 1994 federal law allows them to open their doors to one another’s customers.

In a city blanketed by branches, the trick will be teaching customers which branches they can use. The BancAbility branding campaign will use television, print, outdoor, radio and direct mailings.

“That’s where the challenge is: seven different names, seven different cultures,” D’Amico said. “It’s not an easy feat. We’re putting a lot of energy behind this.”

The bankers hope the payoff will be new customers.

Branding consultant Scott Yaw called the group’s plan unusual but said the strategy is “probably not going to serve them for the long term.” Yaw, a partner at Deskey Associates near Philadelphia, said asking customers to do their banking at places with different names would open opportunities for genuine confusion.

Customers face a long learning curve to identify their “new” branches, and teaching them will cost the banks a lot, he said.

“You’re really pushing water up a sand hill,” Yaw said.

Lots in a name

The obvious solution would be to merge all the banks and use one bank name. The nation’s largest banking networks were built that way.

U.S. Bank and Bank of America branches here are parts of single nationwide banks, created by merging hundreds of bank charters. Customers can walk into the nationwide bank’s branches anywhere and do their banking seamlessly, as long as the merged banks have their back office operations connected as well.

Some regional bank groups, however, have allowed customers to do business across banks’ separate branch networks without merging the banks.

For example, customers of Simmons First National Corp. in Arkansas can use any of its 10 banks’ 86 branches in 48 communities throughout the state. But relatively few customers realize they are dealing with a different bank when they go to a different city, controller David Garner said. All the banks have the Simmons First name.

The banks also have no overlapping markets, and Garner said only about 3 percent of bank transactions cross banks’ branch networks.

Associated Banc-Corp. had operated the same way in Illinois, Wisconsin and Minnesota for several years, always using the Associated name on its banks. More recently, the group combined its banks into one bank charter.

Presidents of the Valley View Financial Group reject the idea of one name for all, even within the Kansas City area. A common name would rob each bank of its hometown appeal, which the bankers say customers want.

“We think we can do it a different and better way,” said Wayne Forgey, president of the Bank of Lee’s Summit.

The group wants its customers to have their metrowide network of branches and keep their familiar local banks, too. It has already happened at one Arkansas banking group.

Home BancShares Inc. owns five banks, three of which operate in the Little Rock, Ark., area. Customers of the three banks can make deposits and do other banking at the two other banks in the area. The banks have kept their separate names – Twin City, Community and First State -- and adopted a common logo.

A blue diamond outline surrounds each bank’s name on its signs. The diamond outline has been enough for customers to find the alternate banking locations, said Brian Davis, director of financial reporting for the group.

“In our case, it has been pretty easy because the logo is exactly the same,” Davis said.

Two of the banks have used the blue diamond logo since they opened in 1999 and 2000. The third bank didn’t pick up the blue diamond until 2003, its centennial year of operation, when Home BancShares bought it.

The Valley View group’s experiment will find out whether a similar approach will work across seven banks’ networks in which the banks and their identities have been around for decades.

Still building

Connecting all seven banks has meant a concerted effort and lots of meetings with the computer programmers, said Jim Lewis, president of Security Bank and Industrial State Bank in the group.

Tellers have to know bank identifiers in account numbers that quickly tell them where a customer banks. Some customer account numbers have to change to avoid duplicates at the other banks.

But opening the network doesn’t guarantee that customers will use it.

“If it’s convenient for them, I think they’ll try it,” said Bosley, of Bank Midwest. “They won’t hesitate if the news is communicated clearly.”

Kansas City banking consultant Jerry Swords said there is a natural demand for the banks’ customers to use branches of the other banks. His research in Lee’s Summit showed that more than half its residents work elsewhere in the Kansas City area, where Bank of Lee’s Summit doesn’t have branches.

Though its branch network is large, the Valley View group thinks it still has gaps to fill. It’s doing some of that work through acquisitions.

Last month, Security Bank completed its purchase of First Community Bank in Kansas City, Kan., adding three branches and $225 million in assets.

Lewis said the group continues to shop locally. It has also looked at acquiring banks in Lawrence, in Wichita, near the Lake of the Ozarks, and in Columbia, Springfield and Colorado.

If all goes as planned, customers will start this spring to look for the leaf logo and BancAbility brand without worrying about the bank name on the sign.

“We believe the customer doesn’t care as long as they’re served and they know where they can be served,” Forgey said.

This story was originally published July 15, 2016 at 6:55 AM with the headline "KC bank experiment will test where customers will do their banking."