What's in a name? A different approach for community bank mergers.

• Author: Held, Shari
• Position: Banking

BANK CONSOLIDATIONS are nothing new nationwide. Nearly 5,000 mergers took place from 1990 to 2003, according to financial research firm SNL Financial, and Indiana institutions were revolved in 109 of them. The question on the minds of many Hoosiers today is: What does the future hold for Indiana's longtime community banks?

The prevailing business model is to collapse bank charters and unite banks under a common name, a model used by Evansville-based Old National Bancorp, the largest multistate bank-holding company based in Indiana. But other holding companies have taken a different approach.

"The competitive advantage of the national and regional players is that they can deliver state-of-the-art products and services and they can deliver them very competitively priced because they have economies of scale," says Mark Schroeder, president and CEO of Jasper-based German American Bancorp. "The advantages of the very small players are that they know their customers, they know their market, there is local decision-making and they can out-service the large players."

German American Bancorp consists of five separately chartered and individually named Indiana banks located in Jasper, Tell City, Petersburg, Vincennes and Washington. "Because of our size, we can compete with the large players in terms of enhanced and expanded products and services," says Schroeder, "but because of our structure, we maintain that local touch on a bank-by-bank basis."

Bank holding companies must factor other issues into the equation when determining a philosophy.

"Is it more efficient and productive to operate under a single-charter bank as opposed to multi-charter banks? That seems to be the $64,000 question in our industry right now," says Michael L. Cox, president and CEO of First Merchants Corp. "We believe in the multi charter structure. We have 10 individually chartered banks and we believe that type of architecture works very well in our service area to the benefit of our customers."

Six of Muncie-based First Merchants Corp's 10 banks are located in rural Indiana county seats.

"Our banks have histories in their communities that go back, in some cases, 120 years," says Cox. "Preserving that heritage and that service-delivery mechanism is very important to us. We don't engage in what I call a 'tear-down project' where you basically buy the market share and then reshape the delivery system. We would rather measure the delivery system on the front-end of the decision...