Bank South's ads blasting North Carolina banks as invaders in Georgia prompted First Union to punch back. "I just got sick and tired of it," said First Union of Georgia's CEO.

ATLANTA -- We're mad as hell, and we're not going to take it anymore. So says First Union National Bank of Georgia to Bank South Corp.

Responding to recent Bank South advertising campaigns that targeted North Carolina-based banks, the Georgia subsidiary of Charlotte, N.C.-based First Union has gone ballistic.

At the beginning of the month, First Union ran its own full-page ads attacking Bank South, in an unusual move that has shaken the once genteel world of bank advertising.

"I just got sick and tired of it," said Harald R. Hansen, CEO of First Union of Georgia, referring to Bank South ads that portrayed First Union as an out-of-state interloper voraciously gobbling up Georgia banks.

Turnabout Is Fair Play

Mr. Hansen returned the fire with a personally penned, open letter to Atlanta newspaper readers. "Bank South seemed to suggest that if a bank -- any bank -- stood still long enough, First Union would swallow it whole," he groused.

But that's just not so, Mr. Hansen's jeremiad continued, noting that Bank South has done its own acquisitions recently, purchasing four community banks in the past year. "Busy, aren't they?" he said.

A second First Union ad, which ran a few days later, took aim at Bank South's 38 Kroger supermarket branches in metropolitan Atlanta.

Graphic Put-Down

Under the heading "Yes, we have no bananas," next to a photo of some rather unappetizing overripe peels, First Union pooh-poohed the very notion of banking at a grocery store: "Long lines, noisy surroundings, no privacy, and bankers working the produce aisle," were among the horrors to be found there, according to First Union.

This prompted an annoyed response from Robert Phelan, Kroger Co.'s advertising head in Atlanta. Mr. Phelan sent Mr. Hansen three cases of bananas with a letter that said: "I read with great interest your ad in Thursday's paper about not having bananas. This is indeed a sad situation. Please accept these three cases of bananas, and I hope that this will rectify your problem."

Bank South is facing the counterattack with cheerful aplomb. "It's good publicity for us," said chief executive Patrick L. Flinn. "We're flattered that a company of that size would find that we're annoying to them and respond the way they did.

"They can get mad at us, but they're not paying our salaries."

Bank South, based in Atlanta, has $6 billion in assets. First Union has $73 billion in total assets, with $9.3 billion in Georgia.

Independent marketing experts agree that First Union's fusillade against Bank South probably missed its mark. "I don't think Harald [Hansen] got good advice from his marketing people," said Robert A. Carper, former head of Bank South's marketing, who left the company several years ago to run his own consulting company in Atlanta.

"The implication is that Bank South's campaign made a difference. It makes First Union look frustrated."

Mr. Hansen concedes that he was frustrated, particularly over the charge that First Union of Georgia had no local roots. "We've got 3,000 employees, fine folks who are here to serve a whole lot of real loyal customers," Mr. Hansen said.

First Union Is Reloading

"They were feeling the hurt and frustration of that targeted advertising, and it's time for all of us to stand up and do what we think is right."

And there may be more where that came from. Mr. Hansen warned that First Union is ready to continue fighting back. "The course of it will be determined by what comments, if any, or advertising plans, if any, Bank South has to target First Union. We will not stand still for that," Mr. Hansen said.

One curious aspect of the whole affair is that most of Bank South's attack ads have not targeted First Union per se. These print, radio, and billboard ads have poked fun at the entire class of out-of-state banks that entered Atlanta in recent years, including First Union; NationsBank Corp., Charlotte, N.C.; Wachovia Corp., Winston-Salem, N.C.; Barnett Banks Inc., Jacksonville, Fla.; and Birmingham, Ala.-based South Trust Corp.

Lighthearted Ads

One print ad showed logos of these other banks with the caption: "Fe fi fo fum. Despite what they'd have you believe, these giants live in a land far, far away."

Bank South did run one animated television spot that showed TV monitors with First Union logos merrily pouncing on those sporting logos of two Atlanta area thrifts that First Union acquired. But that ad stopped appearing about 10 months ago.

Mr. Flinn thinks he knows why First Union waited this long to retaliate: "Because we're moving business."

The latest deposit share data from the Federal Deposit Insurance Corp. show Bank South gaining ground in Atlanta while First Union and the other North Carolina-based banks experience some erosion. The implication is that Bank South is gaining at the others' expense, but this cannot be proved from the data.

Free Advice: 'Lighten Up'

Mr. Hansen admits First Union lost some customers from the two thrifts, but "nothing significant, as far as we're concerned."

Whatever its effects on customers of either First Union or Bank South, the advertising war has prompted some response from other quarters. John C. Freebairn, president of a like-named advertising company in Atlanta, took out his own newspaper ad to advise Mr. Hansen to "lighten up a little."

Mr. Freebairn, whose company had handled advertising for one of the thrifts First Union acquired, chided First Union for "overreacting to a little Atlanta bank one-tenth your size." Mr. Freebairn went on to suggest First Union "could use the help of a growing Georgia ad agency" to tell its side of the story.

First Union used a Florida-based agency, William Cook of Jacksonville, to design its attack on Bank South.

First Union's cat fight with Bank South is symptomatic of the types of problems First Union has encountered ever since it entered Georgia in 1986. A highly centralized organization, First Union had the misfortune to buy Augusta-based First Railroad and Banking Co., which oversaw a loose confederation of community banks spread across the state.

To bring First Railroad up to its own standards of credit quality and profitability, First Union had to impose centralization, which drove away most of the acquired managers, who then founded competing banks and bad-mouthed First Union.

Further bad publicity ensued in late 1992, when word leaked of First Union's plans to close two of its three branches in Newnan, Ga., a small city outside Atlanta. First Union had to restore one of the branches in the wake of vociferous community protest.

In Atlanta itself, First Union generated negative press from employee layoffs that inevitably followed its acquisition of two large thrifts last year.

When it rains it pours: Earlier this month, a columnist for The Atlanta Journal-Constitution reported that First Union was one of two out-of-state banks that did not have an Atlantan on its holding company board.

For the past several years, First Union has been considered a potential suitor for Bank South, the most attractive acquisition candidate left in Atlanta. But the bitter war of words between the two banks makes that marriage appear increasingly unlikely.

"I don't see that happening," Mr. Flinn said with a laugh. The animosity between the two banks "took one buyer out of the market."

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