The future of community banking.

• Author: Beck, Bill
• Position: Indiana - Industry Overview

In the past seven years, half the banks in Indiana have been sold, merged or acquired. What's next?

People's Bank, the venerable Indianapolis financial institution that celebrated its 100th anniversary last year, has been running a rather cheeky print advertisement in Hoosier media this spring. The ad talks about the endangered and extinct species of Indianapolis banking, and uses the Merchants National Corp. frog, the INB Financial Corp. buffalo and others to illustrate its point that a lot of denizens of the local financial food chain have been gobbled up of late.

The ad is a not-so-subtle reminder that the Indiana banking community has been convulsed by change during the past seven years.

In 1984, there were 376 independently owned commercial banking organizations in Indiana. Since that time, only one new bank has opened in the state. Literally half of the banks that were in existence in 1984 have been sold, merged or acquired during the past seven years. Banking names that had been familiar to generations of Hoosiers--American Fletcher National Bank, Summit Bank, Merchants National Bank, Indiana National Bank, Gainer Bank--were disappearing. New regional money-center banks from north and east of Indiana, like Banc One, NBD Corp. and Society Bank of Cleveland, came to the Hoosier state and snatched up local banks left and right.

John Reed, president of the Capital Markets Group of David A. Noyes & Co. in Indianapolis, moved to the Hoosier capital city from out east in 1985 to take advantage of the opportunities afforded by the new legislation. He ticks off the list of mergers and acquisitions since 1985: 67 announcements the first year of the new legislation; 61 announcements in 1986; 28 announcements in 1987.

The actual numbers of sales, mergers and acquisitions slowed considerably after 1988, Reed says, but the takeover candidates got considerably larger. Since October 1991, INB, Merchants and Summcorp of Fort Wayne all have announced impending sales. "That represents a tremendous amount of financial assets," Reed says. "And there will be more," he adds candidly.

So, does that mean that the smalltown, or for that matter, the large-city bank in Indiana is doomed to fade quietly from the business scene? Not necessarily, say Indiana bankers and other observers of the Hoosier financial community.

"I don't subscribe to at all" to the theory that the community bank in Indiana is going through its eventual demise, says Dan Mitchell, chairman...