ATLANTA -- Bank South is betting heavily that customers care whether a bank is locally owned.

The fifth-largest Georgia bank, which has seen its bigger rivals gobbled up by out-of-state holding companies, is emphasizing its local roots in advertising. On billboards that show the logos of competing banks is Bank South's theme: "While other banks changed names, we changed banking."

While there is evidence that consumers prefer to bank at community-based institutions - 67% said so in the American Banker's national consumer survey last year - rapid industry consolidation may weaken that loyalty.

"The hometown position is certainly valid," said Barry Deutsch, a marketing consultant based in Coral Springs, Fla. "But the risk is whether or not it's sustainable." For example, what happens if Bank South gets acquired, as many analysts are expecting?

Since the beginning of the year, Bank South has been running print and radio ads positioning itself as one of the last sizable independents left in town. In one radio spot, Bob, "an average Georgia citizen," comes home from work to find his wife, children, and dog replaced on orders from "headquarters in North Carolina."

When bob protests that he loved his old family, new wife "Charlotte" archly replies: "That's hardly the point, is it?" The voice-over explains that Bob had allowed his life to be shattered "by bureaucrats in another state."

It is supposed to be symbolic of the onslaught into Georgia of the North Carolina giants Nations Bank Corp., Wachovia Corp., and First Union Corp.

McCann-Erickson Inc. designed the campaign for Bank South, principal subsidiary of the $4.5 billion-asset Bank South Corp.

Risky Business

Other banks that sounded a similar marketing theme have found themselves subsequently taken over by an out-of-state megabank. A recent case in point is Tacoma, Wash.-based Puget Sound Bancorp, which was forced to yank its ads favoring local control after it agreed to be acquired by KeyCorp of Albany, N.Y.

Last year, when Miami-based Southeast Banking Corp. was taken over by First Union Corp. of Charlotte, First Florida Banks Inc. of Tampa ran ads stressing its local ties and warning its region's customers of possible service disruptions. Just last month, First Florida itself succumbed to a buyout offer from Jacksonville-based Barnett Banks Inc.

First Florida claims not to be embarrassed - at least the acquirer wasn't from North Carolina. "We are going to be part of another entity with more than 100 years of Florida history," said First Florida spokeswoman Jeri Franz.

It remains unclear how appealing local control really is. Fisher Broadcasting Inc. of Seattle did a survey last fall asking 1,100 people about their financial institution choices. Convenience was the most cited reason for choosing an institution, with 22% of responses, just ahead of habit, 21%.

An Attractive Niche

Local ownership garnered only 2%.

"It's a secondary issue," said Carole Aaron, Fisher Broadcasting's director of marketing research. "There are other things that are more compelling."

Two percent "may not sound like a lot. But if you can get that sort of market share plus market share you would pick up simply through distribution, it's an attractive niche," said Don Piercy, Puget Sound's marketing director.

Puget Sound's advertising did achieve a high awareness level. Fisher Broadcasting recently found that 26% of Seattle-area people had seen Puget Sound's advertising in the past 30 days, up from 20% in 1990 and second only to the 44% of Bank-America Corp.'s Seafirst Bank.

Mr. Piercy said people who care about local control are likely to be either long-time residents or newcomers attracted by an area's quality of life, which is a big factor in the Pacific Northwest.

Different Perspectives

Mr. Deutsch has concluded from several studies he's done that business borrowers are more likely to care than depositors.

"Depositors, in general, have so many concerns about |safety and soundness' that they frequently see the larger out-of-state banks as sort of adding a degree of security," Mr. Deutsch said.

"Localness does make a big difference in the borrowing community because there's this notion of: |If they know me, I've got a better chance of getting a yes than if they're strangers.' A local bank can play the local card very effectively in its business-to-business marketing."

Bank South's competitors in Atlanta, such as NationsBank, do not appear concerned about Bank South's campaign.

"My experience has been, in other places where this happened, that a bank that has nothing else to sell other than [local orientation] is grasping for straws," said Kenneth D. Lewis, president of NationsBank's retail operation, which has its headquarters in Atlanta. "The customer needs more than that."

To be sure, Bank South's advertising doesn't rely on the local angle alone. The radio and newspaper ads stress that Bank South offices in Kroger supermarkets provide the most convenient banking hours in town.

Bank South also has been running a Trade in Your Bank campaign in which customers are invited to switch to Bank South at favorable rates, with the bank offering to handle all the paperwork.

First Florida directed local-control ads at disaffected Southeast customers for only a month. Ms. Franz said the bank used the campaign as a prelude to a more sustained effort to target small businesses.

Bank South claims its promotion has sparked a 54% jump in checking account openings over the average week last year, while installment loans, mostly automobile, are being booked at four times the 1991 weekly rate.

Proprietary surveys show the antimerger them has struck a nerve, said marketing director Ina Beindorff. "Of course, not everybody cares. But a large percentage of the customers are concerned. People are more likely to respond if they experience problems" when their bank is acquired, she said.

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