April 3, 2006
Sign of the times | Camden National Corp. plans to merge its UnitedKingfield subsidiary under the Camden National name to increase efficiency
By Jonathan Swartz
Camden National Bank president Gregory Dufour says his customers overwhelmingly want a bank that stays close to its community. Formal surveys and informal conversations deliver the same conclusion. "It's really about employees and clients greeting each other by name and asking how things are going ˆ developing a personal sense of caring" he says.
That said, Dufour is overseeing a change that some customers might see as a step away from that cozy relationship. In January, the bank announced a merger that will result in a second name change in six years for customers of Camden National's subsidiary, UnitedKingfield Bank. Pending regulatory approval, UnitedKingfield, with 15 branches in central and western Maine, will be merged under the Camden National banner before year's end, a move intended to reduce the regulatory and marketing costs of maintaining two separate banks while increasing brand recognition for Camden National. There will be no layoffs, Dufour says.
Acquisitions and mergers are nothing new in the national or local banking industry, of course. Last year, Portland-based Banknorth eliminated the Peoples Heritage name in Maine following a buyout by Canadian TD Bank. Now, the bank's branches here and across New England carry the TD Banknorth moniker. The merger between Bank of America and FleetBoston Financial in 2003-2004 made headlines as well, as the Fleet Bank name disappeared from Maine.
What distinguishes the trend in Maine is that mergers and the subsequent name changes often are done a little more carefully here, according to John Carusone, president of the Bank Analysis Center, a consulting firm in Hartford, Conn. "The culture of Maine is a little more insisting on local identification," Carusone says. "As you get closer to New York City they're changing signs everyday. Maine, to their credit, is a little more careful about disturbing expectations."
With all 320 employees keeping their jobs, Camden National is billing the upcoming merger in a press release as "in so many ways only a name change." By contrast, there were staff reductions when Camden National merged its two separate subsidiaries, United and Kingfield Banks, into one bank to create UnitedKingfield in 2000, Dufour says. "We went through the hard part six years ago," he says.
Still, whether "only a name change," merging two banks is a highly complex process, and customer loyalty can depend on a smooth transition. Only 27% of respondents said they believed bank customers benefit from mergers in a 2004 survey by Maritz Research, a St. Louis, Mo.-based market research firm. And a 2001 Gallup Poll sponsored by American Banker, found that 54% of customers were displeased with the service they receive after a bank merger. The challenge exemplified by Camden National and other Maine banks, then, is to grow in an industry that favors consolidation, while preserving the local connection that the Maine customer, in particular, wants.
A plan six years in the making
Camden National Corp., the holding company of Camden National Bank and UnitedKingfield, began its expansion with the purchase of United Bank of Bangor in 1995, then added Kingfield Savings Bank in 1999. It merged the two as UnitedKingfield Bank in 2000.
Bank leaders chose to run Camden National and UnitedKingfield separately for nearly six years, but all 15 UnitedKingfield branches will carry the Camden National name by year's end, Dufour expects. The combined bank will feature 27 branches and 28 ATMs. "Every year we talked about whether we should merge them," Dufour says. "UnitedKingfield and Camden were two different cultures and we were happy with how it was working. The benefits outweighed the costs of keeping them separate."
But over the years of joint ownership, the banks have "really gelled together," he says, and the estimated one-time costs of up to $500,000 for the merger began to make more sense. "This is really a post-acquisition decision to improve efficiency, streamline structure and capture expense savings to bring more value to shareholders," says Carusone. "The only thing that's unusual is that they waited six years to do it. It shows the company was sensitive to local expectations."
Many of the factors that make bank mergers attractive elsewhere played into Camden National's decision. Regulatory costs were a major factor, especially because the two banks are chartered differently and therefore report to different oversight agencies. Like Camden National today ˆ which is chartered federally ˆ the merged bank will answer to the federal Office of the Comptroller of Currency and the Federal Reserve Bank of Boston, but it will no longer have to report to state regulators and the Federal Deposit Insurance Corp., which reviewed UnitedKingfield because of its state charter. Camden National expects savings in fees and time from the change will be significant, but Dufour declined to give specific figures.
Dufour also cites federal regulations associated with the USA Patriot Act that compel banks to screen all clients against terrorist watch lists as a cause for the growing cost of compliance. Those regulations add incentive for banks to grow in order to spread such costs over a larger customer base. "The regulatory burden over the last ten years and especially over the last three or four years falls harder on smaller banks," agrees Carusone.
Merging the banks also will cut marketing costs by eliminating the duplication of advertising and other communications. And it could increase brand recognition by spreading the Camden National name beyond the coast to communities in the central third of the state. Dufour declined to give specific figures for marketing and regulatory savings or current expenditures, though he said the bank expects to recover merger costs by next fiscal year.
Hard work behind the scenes
To customers and the public, the impact of a bank merger is most clearly displayed outside the building. "Most people think of it as a simple changing of signs," says Thomas Dyck, director of marketing and small business lending at TD Banknorth, which has conducted 26 mergers in the last ten years. In fact, he says, a vast array of detailed work is going on behind the scenes to synchronize employees, technology, documents and logos.
Employee training is critical from the start, Dyck says, focusing on issues like learning a new customer service approach to details as small as using the same fonts on documents. Many employees feel attached to their old banks, so making them comfortable with the merger is necessary for maintaining customer service through the transition, he adds. Thoroughly explaining the reasons for the merger to employees is often an important first step, he says, followed by constant communication to introduce details like new data entry screens.
Even when employee integration has a head start, as with Camden National and UnitedKingfield, numerous technical details remain. Camden National has a team of between 12 and 18 managers and employees working on the merger. To date, they've identified more than 500 steps in the process ˆ from reworking brochures and policies to lining up reliable contractors ˆ but that number is sure to climb by the time the new signs go up sometime around October, Dufour says. "A lot of it is in the minutiae of banking. Execution of a plan is what it boils down to."
Synchronizing two computer systems while continuing normal operations is the costliest part of Camden National's merger expenses. New stationery, ATM cards, marketing materials and signs must be ordered and delivered on time. The question of how to phase out old checks can be tricky because of different customer preferences, but UnitedKingfield customers will be able to use their old checks until they're gone, Dufour says.
Dyck agrees that integrating technology is often the most time-consuming part of a merger. One of the most difficult challenges TD Banknorth has faced has been changing all of its subsidiaries' Web links and other information flung out over cyberspace. Tracking down and updating it all is like following a "great big complicated maze," he says. In addition, huge amounts of relevant account data must be transferred to parent company files. Conversely, Dyck says, huge quantities of obsolete paperwork and other material stored for years in the subsidiary bank needs tossing or re-filing.
Success also depends on an initial marketing push to introduce and explain the merger. "We typically mail every single customer an overview of what is changing and what isn't changing," says Dyck of TD Banknorth's marketing efforts. The bank also runs print ads and offers toll free lines to answer customer queries. Camden National will use a similar approach, relying on public notices, mailings and advertising to get the message across.
Dufour says he expects the Camden National name to play well in communities far from the coastal town. That's because annual customer surveys show that the bank's reputation is strong throughout the region served by United Kingfield, he says. Moreover, a bank's name is often less important to customers than two other deciding factors, says Dyck: The convenience of its location to home and work, and the way they're treated when they walk through the door.
Regardless of a bank's size or growth rate, the conventional wisdom in Maine is to try to treat those customers like they've walked through the door of their hometown bank. "At the end of the day banking really is a local business," Dyck says. "For us, success is that our customers have felt comfortable throughout the [merger] process."
That said, Dufour is overseeing a change that some customers might see as a step away from that cozy relationship. In January, the bank announced a merger that will result in a second name change in six years for customers of Camden National's subsidiary, UnitedKingfield Bank. Pending regulatory approval, UnitedKingfield, with 15 branches in central and western Maine, will be merged under the Camden National banner before year's end, a move intended to reduce the regulatory and marketing costs of maintaining two separate banks while increasing brand recognition for Camden National. There will be no layoffs, Dufour says.
Acquisitions and mergers are nothing new in the national or local banking industry, of course. Last year, Portland-based Banknorth eliminated the Peoples Heritage name in Maine following a buyout by Canadian TD Bank. Now, the bank's branches here and across New England carry the TD Banknorth moniker. The merger between Bank of America and FleetBoston Financial in 2003-2004 made headlines as well, as the Fleet Bank name disappeared from Maine.
What distinguishes the trend in Maine is that mergers and the subsequent name changes often are done a little more carefully here, according to John Carusone, president of the Bank Analysis Center, a consulting firm in Hartford, Conn. "The culture of Maine is a little more insisting on local identification," Carusone says. "As you get closer to New York City they're changing signs everyday. Maine, to their credit, is a little more careful about disturbing expectations."
With all 320 employees keeping their jobs, Camden National is billing the upcoming merger in a press release as "in so many ways only a name change." By contrast, there were staff reductions when Camden National merged its two separate subsidiaries, United and Kingfield Banks, into one bank to create UnitedKingfield in 2000, Dufour says. "We went through the hard part six years ago," he says.
Still, whether "only a name change," merging two banks is a highly complex process, and customer loyalty can depend on a smooth transition. Only 27% of respondents said they believed bank customers benefit from mergers in a 2004 survey by Maritz Research, a St. Louis, Mo.-based market research firm. And a 2001 Gallup Poll sponsored by American Banker, found that 54% of customers were displeased with the service they receive after a bank merger. The challenge exemplified by Camden National and other Maine banks, then, is to grow in an industry that favors consolidation, while preserving the local connection that the Maine customer, in particular, wants.
A plan six years in the making
Camden National Corp., the holding company of Camden National Bank and UnitedKingfield, began its expansion with the purchase of United Bank of Bangor in 1995, then added Kingfield Savings Bank in 1999. It merged the two as UnitedKingfield Bank in 2000.
Bank leaders chose to run Camden National and UnitedKingfield separately for nearly six years, but all 15 UnitedKingfield branches will carry the Camden National name by year's end, Dufour expects. The combined bank will feature 27 branches and 28 ATMs. "Every year we talked about whether we should merge them," Dufour says. "UnitedKingfield and Camden were two different cultures and we were happy with how it was working. The benefits outweighed the costs of keeping them separate."
But over the years of joint ownership, the banks have "really gelled together," he says, and the estimated one-time costs of up to $500,000 for the merger began to make more sense. "This is really a post-acquisition decision to improve efficiency, streamline structure and capture expense savings to bring more value to shareholders," says Carusone. "The only thing that's unusual is that they waited six years to do it. It shows the company was sensitive to local expectations."
Many of the factors that make bank mergers attractive elsewhere played into Camden National's decision. Regulatory costs were a major factor, especially because the two banks are chartered differently and therefore report to different oversight agencies. Like Camden National today ˆ which is chartered federally ˆ the merged bank will answer to the federal Office of the Comptroller of Currency and the Federal Reserve Bank of Boston, but it will no longer have to report to state regulators and the Federal Deposit Insurance Corp., which reviewed UnitedKingfield because of its state charter. Camden National expects savings in fees and time from the change will be significant, but Dufour declined to give specific figures.
Dufour also cites federal regulations associated with the USA Patriot Act that compel banks to screen all clients against terrorist watch lists as a cause for the growing cost of compliance. Those regulations add incentive for banks to grow in order to spread such costs over a larger customer base. "The regulatory burden over the last ten years and especially over the last three or four years falls harder on smaller banks," agrees Carusone.
Merging the banks also will cut marketing costs by eliminating the duplication of advertising and other communications. And it could increase brand recognition by spreading the Camden National name beyond the coast to communities in the central third of the state. Dufour declined to give specific figures for marketing and regulatory savings or current expenditures, though he said the bank expects to recover merger costs by next fiscal year.
Hard work behind the scenes
To customers and the public, the impact of a bank merger is most clearly displayed outside the building. "Most people think of it as a simple changing of signs," says Thomas Dyck, director of marketing and small business lending at TD Banknorth, which has conducted 26 mergers in the last ten years. In fact, he says, a vast array of detailed work is going on behind the scenes to synchronize employees, technology, documents and logos.
Employee training is critical from the start, Dyck says, focusing on issues like learning a new customer service approach to details as small as using the same fonts on documents. Many employees feel attached to their old banks, so making them comfortable with the merger is necessary for maintaining customer service through the transition, he adds. Thoroughly explaining the reasons for the merger to employees is often an important first step, he says, followed by constant communication to introduce details like new data entry screens.
Even when employee integration has a head start, as with Camden National and UnitedKingfield, numerous technical details remain. Camden National has a team of between 12 and 18 managers and employees working on the merger. To date, they've identified more than 500 steps in the process ˆ from reworking brochures and policies to lining up reliable contractors ˆ but that number is sure to climb by the time the new signs go up sometime around October, Dufour says. "A lot of it is in the minutiae of banking. Execution of a plan is what it boils down to."
Synchronizing two computer systems while continuing normal operations is the costliest part of Camden National's merger expenses. New stationery, ATM cards, marketing materials and signs must be ordered and delivered on time. The question of how to phase out old checks can be tricky because of different customer preferences, but UnitedKingfield customers will be able to use their old checks until they're gone, Dufour says.
Dyck agrees that integrating technology is often the most time-consuming part of a merger. One of the most difficult challenges TD Banknorth has faced has been changing all of its subsidiaries' Web links and other information flung out over cyberspace. Tracking down and updating it all is like following a "great big complicated maze," he says. In addition, huge amounts of relevant account data must be transferred to parent company files. Conversely, Dyck says, huge quantities of obsolete paperwork and other material stored for years in the subsidiary bank needs tossing or re-filing.
Success also depends on an initial marketing push to introduce and explain the merger. "We typically mail every single customer an overview of what is changing and what isn't changing," says Dyck of TD Banknorth's marketing efforts. The bank also runs print ads and offers toll free lines to answer customer queries. Camden National will use a similar approach, relying on public notices, mailings and advertising to get the message across.
Dufour says he expects the Camden National name to play well in communities far from the coastal town. That's because annual customer surveys show that the bank's reputation is strong throughout the region served by United Kingfield, he says. Moreover, a bank's name is often less important to customers than two other deciding factors, says Dyck: The convenience of its location to home and work, and the way they're treated when they walk through the door.
Regardless of a bank's size or growth rate, the conventional wisdom in Maine is to try to treat those customers like they've walked through the door of their hometown bank. "At the end of the day banking really is a local business," Dyck says. "For us, success is that our customers have felt comfortable throughout the [merger] process."
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