In merger traffic, Bank One Rockford believes slower is better.

NOWADAYS, THE success of a merger is often measured by how quickly it took place. But a bank in Rockford, Ill., has taken an alternative approach.

"I guess you could say that we've created our own assimilation model, one that's a lot slower that most," said R. Richard Bastian 3d, chief executive officer of what is now Bank One Rockford. "We purposely violated the rules that say slam everything together; take all the damage up front and then do the cleanup later."

The slow pace of mergers has worked well for the bank -- first as it merged four separate banks within one bank holding company and then when it became part of the Banc One family.

The story behind Bank One Rockford is set within the context of Illinois, one of the last states in the country to permit multibank holding companies and full-scale branch banking as it's known in states like New York and California.

In 1990, when regulations were loosened and banks were permitted to expand their mandates, executives at Bank One Rockford -- known then as First Community Bancorp -- took a careful look at their franchise. What they saw was Rockford, the second largest city in Illinois, and their institution -- a $650 million holding company operating four separate banks. Because of the onerous banking law, those banks had different names and performed different functions.

For example, operating just a few miles away from the $500 million-asset flagship, First National Bank and Trust, was a sister institution, the First Community National Bank of Rockford, a community bank with $100 million dollars of assets.

Executives at the holding company made a decision to merge the two institutions.

"We were really dealing with one market and it didn't make sense to offer one customer base community banking services and then offer another set of customers something else," said Mr. Bastian. "In terms of maximizing market dollars and improving our service, combining the banks made sense."

Senior management at First National Bank and Trust decided that they would take 18 months to consolidate the two banks.

Technology integration was not the key challenge; the systems issues were minimal because both banks had out-sourced their back office processing to M&I Data Services Inc. Management's chief concerns were customer acceptance and employee participation.

"Eighteen months may seem agonizingly long but in a service business when you've got customers coming in and validating or invalidating the affiliation, we felt that it was appropriate to take our time," said Mr. Bastian.

Key to his approach was developing a communications program that supported decision-making from the bottom up.

"We communicated to the press, to our directors, to frontline personnel, to customers, so that each group would be equipped with information," explained Mr. Bastian. "Tellers, for example, were briefed in advance so that they could answer customer questions and help customers with their concerns. Managers were briefed to answer employee questions as well."

Communications also played an important role in implementing changes at the consolidated bank. Frontline employees, for example, were vested with responsibility for improving the way they did their jobs.

"When we knew a teller system change was going to be implemented, a committee of tellers got together to decide what the best method would be," said John Murphy, senior vice president and director of communications at First National and now at Bank One Rockford.

Mr. Murphy also reported that after the assimilation, account loss was minimal. In a bank survey, more than 90% of the customers polled said that they were extremely happy with how the assimilation was handled and would continue their banking relationship as usual.

Six months after this intrabank assimilation was finished, the remaining two institutions were merged into the fold and First Community decided the time was right to find a merger partner, a larger bank with a wide range of products and services that could be leveraged into the Rockford community.

"The same reasons that drove us to consolidate also brought us to the altar, so to speak," Mr. Bastian said. "To serve our shareholders and customers and to provide our employees with ongoing opportunity, we thought we should really begin looking at affiliating with a larger company."

It just so happened that with the loosening of the state banking laws, Banc One had moved into Illinois in 1992. Both parties were interested in becoming partners, so yet another merger began.

"Although Banc One was clearly the larger partner, both institutions learned from each other as we went on," said Mr. Bastian.

Again, a formal communications program was orchestrated and information was provided to the press, senior management, line employees, and others. Banc One distributed a conversion booklet to all First Community customers to let them know what was going to take place. Employees worked together in committees to study and make recommendations on issues such as pricing policies.

"The program that First National had in place and the care they show their people is perfectly in sync with our approach," said Tom Cartwright, chief financial officer of Banc One Illinois Corp., Banc One's Springfield-based holding company for its Illinois banks.

Since the merger was formalized in May, the newly named Bank One Rockford has introduced mutual funds and brought in Banc One's corporate finance and capital market group services. Banc One Illinois Corp., on the other hand, is modeling its real estate mortgage program on Bank One Rockford's procedures. The Rockford unit boasts the highest mortgage penetration in the region.

"This share and compare philosophy, is the strength of the Banc One merger strategy," said Francis X. Suozzo, a bank analyst at S.G. Warburg & Co., New York. "One of the key reasons why Banc One's profitability goes up after mergers is that the acquiring bank implements the best practices of the bank that has been acquired and vice versa."

Mr. Murphy said that in the coming months, Bank One Rockford would slowly introduce additional Banc One products and services.

"The timing may be a little long, but Banc One is always careful about making sure that a smooth integration takes place," said Mr. Suozzo, the analyst.

"Now we are offering the standard Banc One product line," said Mr. Murphy. "But we won't offer anything new until our house is completely in order. The wait is longer, but we've learned that the results are better. The customer is happier."

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER