OVER THE LAST few years Fourth Financial Corp. has been on a shopping spree that makes even the most acquisitive banks seem downright timid.
Since 1990, the Wichita, Kan.-based banking company has purchased between 10 and 12 institutions a year.
Currently, the company owns two banking units - Bank IV Kansas and Bank IV Oklahoma - with a combined 140 branches and assets of $7.7 billion. Fourth Financial has grown at approximately $1 billion a year for the last three years.
Joseph A. Stieven, senior banking analyst at the St. Louis-based investment banking firm Stifel, Nicolaus & Co., said Fourth Financial has combined strong financial performance with a string of successful acquisitions that has solidified its market hammerlock in Kansas while expanding its presence in Oklahoma.
"They have used the stock as the currency, which has fueled the acquisitions," he said. "Its strength has allowed them to dominate the markets in which they operate.
"The burden of proof is on the bank to prove that the acquisitions that they have made will add to earnings per share," he continued.
Mr. Stieven said while Fourth Financial has the ability to remain independent and continue to do well, the attractiveness of the franchise will lure numerous suitors.
"They are like the prettiest gal in the class and homecoming is right around the corner; you know she is going to get asked, you just don't know when," he said.
The company has been laden with what executive vice president Clayton D. Pledger calls a"tremendous conversion burden" of folding the acquisitions into its existing operation.
Mr. Pledger said Fourth Financial decided four years ago to outsource its data processing to various vendors.
Doing so has meant that the company does very little programming in-house and most of its applications are handled from the outside.
"We think this is the most cost-effective approach to running the operation, but it makes us somewhat dependent on vendors, particularly in the area of conversions," Mr. Pledger said.
"We have been dependent on multiple vendors, which has been less then totally successful in the past.
"We realized a few years ago we needed some alternatives," he said.
One of the main problems the bank found was that some suppliers were experiencing employee turnover. This caused inconsistencies in Fourth Financial's operation because the replacements were not used to meeting the bank's needs.
"We had no control over the vendor's operation - which resulted in less-than-efficient-and-accurate conversions," Mr. Pledger said.
"Our employees were forced to do a great deal of last-minute work to make sure things were handled right and to our specifications."
The solution the bank came up with was systems conversion software by Quincy, Mass.-based Atlantic Data Services Inc.
The software, called the Conversion Productivity Tool, allows Fourth Financial Corp. to work with an acquired bank to determine how to translate all of the information to the company's core accounting systems.
"The CPT allows us to work with the donor bank and perform the analysis and data-mapping work all in a user-friendly environment without any programming," said Mr. Pledger.
"It is a nonprogramming task, which allows us to convert any of the bank's systems we are acquiring into ours with ease and without worry about not meeting our specifications," he added.
The system runs on Fourth Financial's International Business Machines Corp. mainframe.
To date, the bank has performed two conversions with the CPT and has found it to be successful both times.
"The main reason we have been successful with using this system is that we are now in control of the process and are not dependent on outside companies to handle the tasks we need to get the job done," Mr. Pledger said.
"We can work with the analysts who have worked with the other banks and use their knowledge to effect the conversion in positive manner - instead of having it handled by people who do not work for the bank," he added.
Previously, the information was sent blindly to outsourcers, who used it at their discretion to perform the conversion.
"We have eliminated layers of communications that used to be necessary for the conversions to take place," Mr. Pledger said.
"By using the product, Fourth Financial has been able to move faster and more efficiently through the conversion process," he added.
Fourth Financial also has found the Conversion Productivity Tool to be cost effective.
Although management would not comment on how much it paid for the system, Mr. Pledger said the company expects it to have paid for itself within the next 12 to 18 months.
Hans call for Fourth Financial to continue on its buying spree with probability of six to eight more acquisitions by yearend.
For the most part, Fourth Financial is buying community banks with assets of between $100 million and $200 million.
Most recently, the bank has been targeting the Oklahoma City area.
"We are in the process of building a presence in the Oklahoma market and we feel that the CPT will allow us to handle the acquisitions better than before," Mr. Pledger said.
"With the new system, we can perform one or two conversions a month quicker and more efficiently, at a much lower cost."
For the most part, the banks that Fourth Financial purchases are using either outsourcers or a prepackaged system for their data processing operations.
The bank's main objective is to put each acquisition on its systems and have it run on the mainframe in Wichita with its existing products.
"We want to operate in a standard way and have the data processed in our consolidated back office - which effectively branches the the bank into our operation," Mr. Pledger said.
"In order to do that, we have to take the bank's system in whatever form it may be in and their products and translate all of it into our product line.
"Once we do that, on the conversion day we take a series of tapes or files and load it into our system and we are up and running," he continued. "When they come up the next morning they look like Bank IV."
Mr. Pledger said the key to the success of the conversions rests on the people behind the systems.
"Sometimes people think systems are a little more magical than they are," he said. "Systems are just systems.
"Successful conversions are not performed by systems and software. They are performed by people, and the tool just increases productivity," he continued.
"The secret to our success is the people behind the tools."
At a Glance
FOURTH FINANCIAL CORP.
Headquarters: Wichita, Kan.
Assets: $7.7 billion
Return on equity: