PLUS! 2022 IBA Annual Convention NOVEMBER / DECEMBER 2022
Honor the shining stars of banking in your community by nominating the leaders, past and present, who have helped lead your institution to excellence. For more information about the annual IBA Leaders in Banking Excellence awards and nomination process, please contact Rod Lasley at the IBA, 317-387-9380, rlasley@indiana.bank. This prestigious distinction, IBA’s highest honor, celebrates exceptional bankers throughout Indiana’s history who have left their mark in BankingCommunity Service Civic Involvement Please consider the current and past presidents, CEOs, directors and others who have played an integral part in the success of your institution at the local level, as well as in the Indiana banking community. Now through April 30, 2023, the Indiana Bankers Association is accepting nominations for the 2023 CLASS of the IBA Leaders in Banking Excellence.
DIRECTORS & STAFF HOOSIER BANKER MAGAZINE indiana.bank Celebrating 125 Years Publisher: Amber R. Van Til Editor: Laura Wilson Assistant Editor: Evan Hoffmeyer Advertising: Rod Lasley Design: The Westcott Group Inc. Submissions: HB@indiana.bank Advertising: Media kits are available at indiana.bank. Advertising is reserved exclusively for members and associate members of the Indiana Bankers Association. Deadlines: Editorial and ad reservations are due the 20th of the month, two months before publication. Subscriptions: Subscriptions are provided free of charge to members and associate members of the Indiana Bankers Association. About: 8LI ƥEKWLMT TYFPMGEXMSR SJ XLI -RHMERE &EROIVW Association, Hoosier Banker is distributed to all banks and thrifts headquartered in Indiana, IBA- member banks headquartered out-of-state and IBA associate members. Publication Disclaimer Hoosier Banker (ISSN 0018 473X) is published bimonthly by the IBA Service Corp., a subsidiary of IBA Holding Company Inc., which is a wholly owned subsidiary of the Indiana Bankers Association. Material published in Hoosier Banker and on the IBA website is the property of the IBA. All rights reserved. Contact IBA )QEMP -&% WXEJJ YWMRK ƤVWX REQI MRMXMEP ERH PEWX REQI TPYW “@indiana.bank” – example: jdoe@indiana.bank Indiana Bankers Association ;SSHƤIPH 'VSWWMRK &PZH 7YMXI ) Indianapolis IN 46240-7321 317-387-9380 Vol. 106 No. 6 OUR ASPIRATION The Indiana Bankers Association strives to grow stronger banks and stronger communities. OUR VALUES -R JYPƤPPMRK SYV QMWWMSR [I [MPP Maintain the highest ethics, integrity and respect for others; Serve with professionalism, innovation and resourcefulness; Instill passion, positive attitude and enthusiasm; Remain mindful that the success of the IBA is judged by the success of its members. IBA BOARD OF DIRECTORS 3JƤGIVW Garry D. Kleer, Chairman.............................................................................. First Bank Richmond Jamie R. Shinabarger, First Vice Chairman .............. Springs Valley Bank & Trust Company, Jasper Benjamin J. Bochnowski, Second Vice Chairman ..................................... Peoples Bank, Munster Michael S. Zahn, Immediate Past Chairman....................... First Federal Savings Bank, Huntington Amber R. Van Til, President and CEO............................ Indiana Bankers Association, Indianapolis Constituent Directors Michael K. Bauer, ABA Membership Council ..................................WesBanco Bank, Wheeling, WV Michael H. Head, ICBA State Director ..................................First Federal Savings Bank, Evansville Jon-Myckle D. Price, FLD President ............................Security Federal Savings Bank, Logansport Joseph F. Breen, Non-IN Headquartered Bank Director ... Huntington National Bank, Columbus, OH Regional and At-Large Directors David M. Findlay, At-Large ...................................................................... Lake City Bank, Warsaw Kent A. Liechty, At-Large ............................................................................... First Bank of Berne Jeffrey W. Gump, North Region ............................................Farmers and Merchants Bank, Laotto J. Daniel Maddox, North Region .................................................. Citizens State Bank, New Castle Jacqueline M. Ruge-Perkins, North Region ...........................................First State Bank of Porter Lisa Arnold, South Region...................................................................... Home Bank, Martinsville Gregory Inman, South Region....................................... Scottsburg Building and Loan Association John M. Kennedy, South Region ...................................................................KFG&%2/ +VIIRƤIPH IBA FUTURE LEADERSHIP DIVISION ADVISORY BOARD Jon-Myckle D. Price, President ................................... Security Federal Savings Bank, Logansport Brock C. Goggins, Vice President .................................................German American Bank, Jasper Greg Barnes Jr. .......................................................................................STAR Bank, Fort Wayne Emily Boardman ..................................................................................Crossroads Bank, Wabash Jenilee Bransteter .........................................................................................First Bank of Berne Michael J. Clampitt ................................................................................North Salem State Bank Ryan Cook ....................................................................................Mutual Savings Bank, Franklin Kyle Goodwin ...............................................................................................DeMotte State Bank 'LVMWXSTLIV +VMJƤXL .........................................................................First Harrison Bank, Corydon Ryan Hart ...............................................................................................Lake City Bank, Warsaw Zach Hockersmith ..................................................Hoosier Heartland State Bank, Crawfordsville Andrea McGordon .......................................................................... Old National Bank, Evansville Amanda Morris-Feldman ................................................... First Federal Savings Bank, Rochester Laura Shake ............................................................................The National Bank of Indianapolis IBA STAFF Amber R. Van Til ........................................................................................... President and CEO Rod Lasley .............................................................................................. 'LMIJ 3TIVEXMRK 3JƤGIV Dax Denton .................................................................................................. 'LMIJ 4SPMG] 3JƤGIV Christina M. Bennett, CMP ....................................................Vice President - Meetings & Events Josh Myers .......................................................................Vice President - Member Engagement Laurie A. Rees ...................................................................Vice President - Education & Training Ross Teare .......................................................................Vice President - Government Relations Laura Wilson ........................................................................... Vice President - Communications Evan Hoffmeyer ....................................................... Assistant Vice President - Communications Emily Brooks ........................................................................................... Digital Media Manager Maria L. Dowers ...................................................Executive & Government Relations Coordinator Susan Clark ......................................................................Events & Products/Services Assistant Elizabeth DeHaven .......................................................................................Education Manager Beth Abney .................................................................................Education Meeting Coordinator Timothy Fry .....................................................................................................Staff Accountant Tracy Kubly ................................................................................................Technology Manager Silvia Peraza ..................................................................Receptionist & Administrative Assistant
Hoosier Banker 5 CONTENTS 10 COVER STORY Progress and Change 22 The Last Quarter Century 38 ARTICLE SPOTLIGHT IBA Annual Convention Evan Hoffmeyer, IBA FEATURES 6 Vantage Viewpoint Amber R. Van Til, IBA 7 Chairman’s Report Garry D. Kleer, First Bank Richmond 9 IBA Calendar of Events 26 Builders of Banking 32 Members of the Indiana Bankers Association in the Year 1898 34 Member-Banks of the Indiana Bankers Association 2022 36 Turning a Page to the Future Emily Brooks, IBA 42 Robbing Banks Doesn't Pay Jay L. Zagorsky, Boston University 50 Digital Assets Robert S. Nichols, ABA 52 Together We Flourish Rebeca Romero Rainey, ICBA 91 Pay vs. Performance Disclosures Mike Ososki and Anne Coughlan, FORVIS 96 Workspace Variety in the Workplace Lauren Elliott, Design Collaborative 98 The US Dollar and Central Bank Digital Currencies Gov. Christopher J. Waller, Federal Reserve System FLD FOCUS 46 2022 FLD Leadership Conference Josh Myers, IBA SALES & MARKETING 54 Building Relationships Tony Cole, Anthony Cole Training Group LLC HUMAN RESOURCES 56 Whistleblower Risk – Is Your Bank Prepared? Debra A. Mastrian, Amundsen Davis LLC 60 Retirement Saving in the Gig Economy Jodie Norquist, Ascensus DIRECTORS / SENIOR MANAGEMENT 64 Interest Rate Risk Management Dave Sheller, The Baker Group COMPLIANCE CONNECTION 66 Does Indiana Law Recognize Religious ID? Brett J. Ashton, Krieg DeVault LLP GR SUMMIT 68 Summer Study Committees Dax Denton and Ross Teare, IBA INDIANA BANK & THRIFT STOCK UPDATE 71 Stock Analysis Michael A. Renninger, Renninger & Associates LLC PSP SHOWCASE 77 PSP Year-End Summary 2022 Rod Lasley, IBA CLOSING NOTE 1146IXMVIQIRX 6IƥIGXMSRW Laura Wilson, IBA DEPARTMENTS 51 Banking Center News 55 Anniversary Milestones 58 From the Board Room 58 IBA ‘High Five’ Award 62 In Memory of 69 Taking It Easy 72 Honorable Mentions 86 Associate Members’ Corner 88 Banking on Community 103 Bankers on the Move 113 Advertisers Index 38 114 In This Issue 10 “The IBA has been my work dream.” Indiana Bankers Association from 1897 to Today Celebrating 125 Years
6 NOVEMBER / DECEMBER 2022 As 2022 winds down and we prepare for 2023, I am struck by just how much is going on in the banking industry. Though in my 20 years working with bankers, I also can’t think of a time when there wasn’t. From the return of community infrastructure improvement districts next year to Central Bank Digital Currency and forced access legislation, there’s plenty to tackle, but as my dad says, “bankers are pretty resilient,” and that is especially true in Indiana where we have such a strong community among our banks. Speaking of my father, I’d like to congratulate him on being named a Sagamore of the Wabash by Gov. Eric J. Holcomb. He was surprised with the presentation at Annual Convention in September by Indiana Senate President Pro Tempore Rodric Bray and the Federal Home Loan Bank of Indianapolis. He has always been an inspiration to me, and it was truly a special moment to see him recognized so highly by his peers. IBA Chairman Garry D. Kleer was also named a Sagamore of the Wabash at Convention. Kip White, chairman and CEO of The Fountain Trust Company, received the honor in October in conjunction with his 50th anniversary with the bank. I would be remiss if I did not also recognize Laura Wilson. After 35 years as IBA’s vice president of communications, she is ready for a wellearned retirement at the end of the year. Thank you, Laura, for making all of us sound and look good! Be sure to read her Closing Note at the back of this issue. We’ve spent the year recognizing the contributions of the association, our member-banks, their employees and more, not only to the industry but also to their communities. You can find many of these examples on social media with the hashtag #IBA125Years and on the VANTAGE VIEWPOINT Don’t Miss Out! IBA website at indiana.bank/history. Just a few examples: % Family Leadership: There are seven examples of a father and son or two brothers who both served as volunteer leader of the IBA or one of its predecessor organizations, most recently Stephen E. Zahn who chaired the Indiana League of Savings Institutions 1996-97, followed by his son Michael S. Zahn serving as IBA chairman last year. % National Leaders: Two IBA-member bank employees have served as head of the American Bankers Association, one chaired the former America’s Community Bankers and Lucas White of The Fountain Trust Company is in line to chair the Independent Community Bankers of America in 2024. % Expanding Education: In 1997, our centennial year, we offered 80 educational sessions reaching 3,000 bankers. Thanks in part to the evolution of online education, we offered 830 educational sessions last year, reaching 4,300 bankers. There is another statistic that is hard to ignore: our membership has decreased by 91 banks over the past 25 years due to mergers and acquisitions. It is a trend across the country that will only continue. As the industry becomes increasingly competitive, the IBA is ready to provide the tools needed for our member-banks to succeed well into the future. Whether you’re looking at business, professional development or advocacy, we represent a resilient industry – and we do it with an immense amount of pride. HB Amber R. Van Til President and CEO Indiana Bankers Association avantil@indiana.bank @grbanker 50th Midwest Agricultural Banking School Nov. 28-Dec. 1 • West Lafayette 0IEVR XLI PEXIWX EFSYX EK GVIHMX ERH ƤRERGI EX Purdue University. Economic Outlook Luncheon Dec. 2 • Carmel Join us at the Renaissance Indianapolis North Hotel to learn about what to expect in the economic landscape for 2023. -&% 0IKMWPEXMZI &VMIƤRK 6IGITXMSR Jan. 31, 2023 • Indianapolis Meet face-to-face with Indiana lawmakers at the Hyatt Regency downtown to discuss issues of the day. For event updates, visit: indiana.bank/calendar A cake at Annual Convention in September celebrating the IBA’s 125th anniversary.
Hoosier Banker 7 It has been an honor to serve as your 2022 chairman as this year has been a momentous one in the history of our association as we celebrated our 125th anniversary. Also, Gov. Eric J. Holcomb recognized the Indiana Bankers Association with the Governor’s Century Business Award in honor of the over 100 years the IBA has served the Hoosier State. In addition, First Bank Richmond celebrated its 135th anniversary this year. Our industry stabilized this year after the flurry of Paycheck Protection Program activity. Businesses have reopened, masking and distancing protocols have normalized, and the IBA events that we look forward to each year returned to their normal schedule and frequency. % The Legislative Briefing and Reception resumed in January after a hiatus last year. % Mega Conference (which celebrated its 30th anniversary this year) returned to its normal May time slot in our calendar after combining with the Annual Convention as a joint hybrid event in 2020 and then shifting to October last year to give the COVID-19 virus a chance to wane. % We returned to a full slate of eight regional meetings after only five last year and none in 2020. % Our Leaders in Banking Excellence returned to being recognized at their own standalone event after the event was postponed in 2020 to a combined awards event in 2021 at the Annual Convention. % And speaking of the Annual Convention, it returned to its normal late-summer schedule in mid-September. Next year, we’ll be back in French Lick in late summer, but slightly earlier, from August 27-29. I hope to see all of you there. I’m proud that this was a year for stability, not stagnancy. Our 125th year as an association was also the first year of our most recent strategic plan. That plan includes five key areas: next-level government relations, next-level banking talent, next-level operational effectiveness, new ventures for Indiana banks and positioning the IBA for future opportunities. We have seen growth in all these areas, but I want to specifically recognize our government relations efforts this year. While states across the country adopted forced access legislation, our GR team – supported by IBA-member bank grassroots efforts – defeated a similar bill in the Indiana General Assembly after a significant amount of engagement. We also raised a record amount for Indiana BANKPAC at this year’s silent auction. With incoming chairman Jamie Shinabarger’s challenge at Annual Convention to increase our BANKPAC goal next year by $50,000 to a record $400,000 – and his bank’s pledge to donate $10,000 on top of their normal contribution to help achieve that goal – 2023 is sure to be another marquee year for IBA’s advocacy efforts. I would like to thank my wife, Cheryl, for her support as we CHAIRMAN’S REPORT ;E]RI &ERO 8VYWX 'SQTER]ɄŵɄ$[E]RIFERO ŵ 7IT It’s been a great morning of document shredding! We’re glad to help keep our communities’ personal information secure. Thanks to all who stopped by! #WayneBank #YourFriendInBanking Springs Valley &ERO 8VYWX 'SQTER]ɄŵɄ$7TVMRKW:EPPI]&8 Sep 22 Lori Martin, Springs Valley’s Business Development Banker for Gibson & surrounding counties was the Games Coordinator for the Gibson County Relay for Life event on September 10th! She enjoyed supporting Relay for Life and helping make a difference MR XLI ƤKLX EKEMRWX GERGIV Citizens State BankɄŵɄ$'7&C-RHMERE ŵ 7IT We were thrilled to present Raintree Habitat for Humanity with $2700 from funds raised by associates and our FUN Committee! #TeamCSB living our mission! WX 7SYVGI &EROɄŵɄ$ WX7SYVGI&ERk • Sep 15 Thank you to our LaPorte area team for volunteering at the recent Deserving Children Roofsit event! Funds raised support children in need in LaPorte County and ensure they have a happy holiday season. #communityleadership +IVQER %QIVMGER &EROɄŵɄ$C+IVQER%QIVMGER ŵ %YK Members of our Gibson County team were excited to help welcome Oakland City University students back to campus at today’s Organization Day event! Our team enjoyed supporting the local community and meeting new smiling faces at this back to school celebration! *SPPS[ -&% 8[MXXIV $MRHMEREFEROIVW NOTABLE QUOTES Bank Community Service on Twitter Garry D. Kleer Chairman Indiana Bankers Association Chairman, President and CEO First Bank Richmond traveled to national conventions. I would not have been successful this year or in my career without her love and support. I would also like to thank my directors, senior management and staff at First Bank Richmond who have picked up my slack while I was out of the bank for my duties as IBA Chairman. They are a group of dedicated professionals, and I appreciate their support so that I could serve as the Chairman this year. After 125 years, we still have a lot of life left in us. As they say…the best is yet to come. HB
8 NOVEMBER / DECEMBER 2022 Make BHG loans part of your strategy. To learn more about BHG, Please Contact: Nellie Szczech EVP, Institutional Relationships 315.383.9648 | nellie@bhg-inc.com BHGLoanHub.com/IN More than 170+ data scientists, engineers and quantitative analysts $12B in loan origination data collected over 20+ years Monthly credit intelligence from major credit bureaus and vendors Community banks on BHG’s Bank Network have earned $1 billion in combined interest income since 2001. That success is largely due to our proprietary credit models and the team behind them, featuring: Credit models worth $1 BILLION to community banks Congratulations to the Indiana Bankers Association on celebrating 125 years!
Hoosier Banker 9 View full calendar and register online at indiana.bank/calendar, or click on the icons above in HB Digital. IBA Center for Professional Development | 8425 Woodfield Crossing Blvd., Suite 155E | Indianapolis, IN 46240 | 317-387-9380 ONLINE Build knowledge via webinars or on-demand. CLASSROOM Learn with peers in a classroom setting. SCHOOLS Deepen understanding through multi-day learning. EVENTS Experience a variety of IBA gatherings. CONFERENCES Convene and connect at signature IBA events. Celebrating 125 Years Calendar of Events CALENDAR UPDATE &VERGL 1EREKIQIRX 7IVMIW 7IWWMSR Nov. 8 • IBA Center Emerging Leaders Digital Program Nov. 9 • Virtual Professional Development/Education/Trainer Forum Nov. 9 • IBA Center Administering Construction Loans Nov. 10 • IBA Center Community Bankers for Compliance Program - 7IWWMSR Nov. 15 • IBA Center Nov. 16 • Indiana Wesleyan University Fort Wayne 6MWO 1EREKIQIRX 3JƤGIV *SVYQ Nov. 16 • IBA Center Human Resources Directors Forum Nov. 17 • IBA Center 50th Midwest Agricultural Banking School Nov. 28-Dec. 1 • Purdue University West Lafayette Ag Clinic Dec. 1 • Purdue University • West Lafayette Economic Outlook Luncheon Dec. 2 • Renaissance Indianapolis North Hotel Carmel Emerging Leaders Digital Program Dec. 6 • Virtual Home Mortgage Disclosure Act Seminar Dec. 7 • IBA Center Internal Bank Audit School Dec. 13-14 • IBA Center BSA Graduate School Jan. 11-12, 2023 • IBA Center Branch Management Series – Session 1 Jan. 18 • IBA Center 7IRMSV 6IXEMP &EROMRK 3JƤGIV *SVYQ Jan. 19 • IBA Center &ERO 7IGYVMX] 3JƤGIV *SVYQ Jan. 24 • IBA Center &7% 3JƤGIV *SVYQ Jan. 25 • IBA Center 0IKMWPEXMZI &VMIƤRK ERH 6IGITXMSR Jan. 31 • Hyatt Regency Indianapolis 'SQTPMERGI 3JƤGIV *SVYQ Feb. 2 • IBA Center Senior Lender Forum – Group 1 Feb. 8 • IBA Center Senior Lender Forum – Group 2 Feb. 9 • IBA Center Community Bankers for Compliance Program – Session 1 Feb. 14 • IBA Center IRA Basics & IRA Advanced Feb. 15-16 • IBA Center Sales Leadership Excellence School Feb. 15-16 • IBA Center Marketing Directors Forum Feb. 21 • IBA Center CFO Forum – Group 1 Feb. 23 • IBA Center CFO Forum – Group 2 Feb. 24 • IBA Center Leadership Development Program – Session 1 Feb. 28-March 2 • Abe Martin Lodge Brown County State Park -8 3TIVEXMSRW 3JƤGIV *SVYQ ũ +VSYT March 1 • IBA Center -8 3TIVEXMSRW 3JƤGIV *SVYQ ũ +VSYT March 2 • IBA Center Professional Development/Education/Training Forum March 7 • IBA Center Essentials of Commercial Credit Analysis Series Session 1 March 7 • IBA Center Essentials of Banking 101 – Session 1 March 8 • Virtual Retail Lending Series – Session 1 March 8 • IBA Center Risk Management Forum March 9 • IBA Center Human Resources Directors Forum March 14 • IBA Center New Account Documentation & Compliance March 16 • IBA Center Branch Management Series – Session 2 April 11 • IBA Center Essentials of Commercial Credit Analysis Series Session 2 April 12 • IBA Center NOTE: For the latest information about IBA event dates, locations and format, please visit: indiana.bank/calendar
10 NOVEMBER / DECEMBER 2022 COVER STORY Progress and Change History of the IBA through 1997 Dr. Douglas V. Austin President Austin Financial Services Inc. Toledo, Ohio David D. Austin Vice President Austin Financial Services Inc. Toledo, Ohio When songwriter Billy Joel penned a popular song in the 1980s, he wrote, “Only the good die young.” How wrong can one be? Here we are, in 1997, celebrating the centennial of the Indiana Bankers Association. The celebration marks 100 years of serving the banking industry in the state of Indiana! For perspective consider that 90% of all new businesses fail within the first five years. More than 30% of all the top Fortune 500 firms from 30 years ago do not exist today as separate companies. Since 1985, 14 of the largest 25 banking institutions in Indiana are owned by out-of-state bank holding companies. Two Indiana bankers in 1891 formed the original IBA. The bankers, R.E. Niven, First National Bank of Thorntown, and C.S. Andrews, First National Bank of Brazil, organized the first IBA meeting at the Grand Hotel in Indianapolis, with 100 bankers in attendance. The goal was to provide an avenue for the free discussion and exchange of ideas for the promotion of the general welfare of the commercial banks in Indiana. An early success, the Indiana Bankers Association held its second annual meeting in West Baden in 1892. However, according to Niven, the IBA was “lost in the shuffle” during the Financial Panic of 1893 and disbanded. In 1896 J.E. Shirk called again for the creation of an Indiana Bankers Association where bankers, banks and The following is a reprint of a cover article that the Indiana Bankers Association commissioned in 1997 for a centennial edition of Hoosier Banker in celebration of the IBA’s 100-year anniversary. trust companies could become members for $5 per year. In 1897 a group of Indiana bankers – led by A.M. Fletcher, Fletcher Bank; C.T. Lindsey, Citizens National Bank, South Bend; E.L. McKee, Indiana National Bank; and Mord Carter, First National Bank, Danville – attended the American Bankers Association convention in Detroit. Afterward the present-day IBA began to take form. The IBA corporate mission of 1897 expressed the Association’s role: “In order to promote the general welfare and usefulness of banks and banking institutions and to secure uniformity of action, together with the practical benefits to be derived from personal acquaintance, and from the discussion of subjects of importance to the banking and commercial interests of country and especially in order to secure the proper consideration of questions relating to the financial and commercial usages, customs and laws which affect the banking interests of the state of Indiana, and for protection against loss by crime, we, the members of the Indiana Bankers Association, appreciating the importance of concert in
Hoosier Banker 11 action, do hereby agree to be governed by the following Constitution and By-Laws …” The success of the IBA under Fletcher’s leadership was immediate. By 1898 the IBA had 152 member organizations, roughly 50% of the banks in Indiana. The membership has changed dramatically during the last 100 years, but the IBA maintains its focus as an agency of Indiana bankers, helping Indiana bankers. History of Indiana Banking Commercial banking commenced in Indiana in 1814. The industry has changed phenomenally during the past 183 years. Changing economic conditions and banking rules and regulations have affected banking in Indiana, both positively and adversely. The state of Indiana, the Indiana Bankers Association and Indiana bankers form a microcosm of our economic development during the past 200 years. Indiana was settled from the Ohio River northward. The first territorial capital was in Corydon, just north of the Ohio River. Commercial banking started in Indiana two years before Indiana was admitted to the Union. In the summer of 1814, the Indiana Territorial Legislature ordered the formation of Vincennes Bank. Three days later, the Legislature awarded a second charter to Farmers and Mechanics Bank, Madison. These charters were enacted into state law in 1816 when Indiana joined the United States of America and formed a state government. Unfortunately both of these banks were short-lived. Farmers and Mechanics Bank operated from 1814 until it closed its doors in 1824, driven out of business by the Second Bank of the United States. Headquartered in Philadelphia, the Second Bank of the United States refused to exchange the notes of Farmers and Mechanics Bank at its offices in Cincinnati and Louisville, Kentucky. This
12 NOVEMBER / DECEMBER 2022 policy hastened the demise of the Indiana bank. Vincennes Bank was chartered with an original listing of 14 branch sites, representing banking districts, but it established branches only in Brookville, Vevay and Corydon. Due to unsafe and insolvent banking practices and lack of cooperation by Farmers and Mechanics Bank, Vincennes Bank closed in 1821, when its president declared it insolvent. Thus the first two Indiana commercial banks of permanent nature were temporary in existence and failed ignominiously within a decade of their establishment. The period from 1824 to 1834 in Indiana saw “wildcat banking.” Redemption of bank notes occurred where only the wildcats roamed. There were no permanent banks in Indiana, and the medium of exchange arose from specie being circulated by the Second Bank of the United States. The election of President Andrew Jackson in 1832 signaled the death of the Second Bank of the United States. In January 1834 the Indiana Legislature established the Second State Bank of Indiana, of which the state of Indiana was a major stockholder. Initially there were to be 10 branches of the Second State Bank – in Indianapolis, Lawrenceburg, Richmond, Madison, New Albany, Evansville, Vincennes, Bedford, Terre Haute and Lafayette. Although headquartered in Indianapolis, there was no parent bank, and all branches had equality. Expenses allocated for the opening of each branch were $614.25 (excluding the salaries for the president and manager/secretary of each branch). The bank was not to deal in real estate, and branches were to be established throughout Indiana as economic development demanded. The Indiana General Assembly left the impression that the state would help to regulate the safety and solvency of the Second State Bank. The Assembly elected the president of the Second State Bank for a five-year term. It also chose the directors for the bank and selected one director per branch. The Indiana Legislature also established a bank board of four individuals, which was expanded later to six and still exists. The bank board’s role was to carry out examinations, to request call reports on an unscheduled basis and to present an annual report to the Indiana Assembly. The Second State Bank was capitalized for $1.6 million, with 50% of the stock being purchased by the state of Indiana. In order to achieve wide diversity of shareholders for the remaining capital, the Indiana state government assisted shareholders in purchasing shares in the Second Indiana Bank by permitting them to borrow from the state, using real estate holdings as collateral. The bank operated honorably and survived the financial panic of 1837. It also supplied funds to Indiana during the Mexican War in 1848 and again during the Civil War, when bankruptcy loomed. The Second Bank of Indiana was progressive. Presidents of the branches earned $1,200 per year, and secretaries earned $1,000. Even bank directors were paid exorbitant fees: an annual fee of $288, plus $150 for mileage. On a present-value basis, 1stsource.com | Member FDIC congrats! Congratulations to the Indiana Bankers Association on 125 years of service to our local communities. 1st Source Bank considers you a trusted partner as we celebrate our long history together. Thank you for being the voice for so many of us. Reprinted from 1997 centennial Hoosier Banker.
Hoosier Banker 13 utilizing a compound annual growth rate of 3.1%, the presidents’ salaries in 1997 would be $173,917, and annual fees for the board of directors would be $62,755. Regulatory requirements governing the Second State Bank were strict following the era of wildcat banking. Many of the regulations sound familiar: 1. Thirty-day notices were posted in local newspapers announcing annual meetings of stockholders for board-of-director elections; 2. Directors received weekly reports on the condition of the branch; 3. State boards received quarterly summary reports; 4. Audit committees reviewed branch books quarterly; 5. Books were balanced on May 1 and Nov. 1, identifying all bad debt and chargeoffs; and 6. Free and immediate access to any bank examiner was granted unconditionally. Because of the success of the Second State Bank, legislators bowed to pressure and allowed the addition of competitive institutions. The Indiana Legislature ushered in the state’s “free banking” era in 1852 by passing the General Bank Act, which established multiple private commercial banks. Rapid growth in the issuance of bank notes characterized this era of free banking. The result was chaotic and unsafe banking conditions throughout the 1850s. Unlike the Second State Bank, the free banks were huge failures, with large losses to depositors. By 1855 the Second State Bank started to call in its notes in circulation, because its charter was to expire in 1859. Anticipating this deadline, the Indiana Legislature established the Third State Bank of Indiana in 1855. Unlike the Second State Bank, the state had no shareholdings. The first president of the Third Bank of Indiana was Hugh McCulloch, more famous for being the first comptroller of the currency and later secretary of the Treasury under Presidents Andrew Johnson, Ulysses S. Grant and Chester A. Arthur. The first secretary of the Third State Bank of Indiana was James M. Ray, who had been secretary of the Second State Bank of Indiana. The Third State Bank lasted until the National Banking System was established during the Civil War, which drove it out of business in 1865. Most of its branches – Lima, LaPorte, Plymouth, South Bend, Fort Wayne, Lafayette, Logansport, Indianapolis, Richmond, Connersville, Rushville, Madison, Jeffersonville, New Albany, Bedford, Vincennes, Terre Haute, Muncie and Lawrenceburg – converted to national banks. The Third State Bank of Indiana was the last statewide branching, commercial bank system until July 1, 1985. It has taken us 100 years to get back to where we were before! An act of the Indiana General Assembly in 1869 allowed for the establishment of mutual savings banks. Savings banks never grew in popularity because of tight operating restrictions. Directors and officers had limited salaries, and all earnings, except additions to reserves, had to be turned over to the customers. Although amended repeatedly through 1919, only 10 savings banks were established under this act. Only within the last decade have stock savings banks become more popular. By far the most important bank act in Indiana in the 19th century was the Discount and Deposit Act of 1873. This legislation arose out of the monopolization of note issuance by national banks following the Civil War and the unequal competitive position of state banks. The Indiana Legislature instated the act to bring parity to the banking environment in Indiana. The act stipulated that, with a minimum of five incorporators wanting to establish a state bank, the secretary of state had no discretion in whether the bank could be chartered if more than 50% of the capital funds were raised. Furthermore, all such state banks were able to carry on general banking business and could act as trustees (which today is carried forward with state banks having trust powers built into their charters). The auditor of the state of Indiana was the Hugh McCulloch Reprinted from 1997 centennial Hoosier Banker.
NOVEMBER / DECEMBER 2022 supervisor of the state commercial banking system from 1873 until the Southworth-Symons Act of 1919, which established a precursor of the present-day Department of Financial Institutions. In the latter 1800s and early 1900s, two other types of banking organizations flourished in Indiana. In 1893 the Indiana Legislature permitted the establishment of trust companies, which could not only act as fiduciaries, but also could carry on general banking business. These institutions proved to be extremely competitive to banks chartered under the Discount and Deposit Act of 1873. Private banks (i.e., partnerships and proprietorships not within the ambit of the Indiana state government) were created in Indiana upon enactment of the Private Banking Act of 1907. In 1915 these private banks also received trust powers. Since 1915 all state-chartered banks have been able to provide a full range of banking services, including trust. This range of abilities has permitted Indiana banks to remain competitive with national banks. The proliferation of state banks, trust companies and private banks called for increased supervision. With the passage of the Southworth-Symons Act in 1919, the Department of Banking became effective, replacing the banking division of the auditor of the state of Indiana. Although the 1920s were unsettled times in Indiana, the Department of Banking stabilized banking conditions and created laws to enhance the safety and solvency of Indiana banks. Such legislation included a limitation on the borrowings of any single borrower and the liability of shareholders and bank holding companies owning bank stock. The Charter Act of 1915 also assisted in maintaining the safety and soundness of banking institutions by permitting banking authorities, for the first time, to evaluate the incorporators of charter banks in formation and to deny such chartering if the incorporators were unsuitable. Chartering promoters also had to pass a public necessity test – i.e., whether the establishment of the bank would be in the public interest, and whether such charter would meet the needs and conveniences of the public. The latter half of the decade of the 1920s saw substantial numbers of bank failures in Indiana. State banks failed more than national banks, and banks in the northeast and northwest sections of Indiana failed in greater numbers and percentages than in other areas. In 1921 there were 1,113 banks in Indiana. By contrast, as of year-end 1996, there were only 210 Indiana commercial banks. Failures of Indiana banks also correlate with the collapse of the national economy. The situation prompted a study commission in 1931. After two years of analysis, the study commission presented to the Indiana General Assembly recodification of Indiana banking laws, covering not only commercial banks but building and loan societies, mutual savings banks, small loan companies, pawn shops, etc. The DFI also was established in 1933. Indiana University graduates may recall that the secretary of the study commission was a gentleman by the name of Herman B Wells. After enactment of the legislation in 1933, Wells became the first DFI commissioner. In 1935 he resigned from the DFI to become dean of the IU School of Business Administration – at the age of 32. Three years later Wells was named president of the university. This author can still remember the Sunday drives that President Wells and his mother took through campus. Students and faculty members alike blocked streets to show the president what needed to be fixed next. I also remember that it took an 18-wheeler to move the legendary Wells wine cellar out of the president’s house after his retirement in 1962. One final note concerning Dr. Wells – he was part-time field secretary for the Indiana Bankers Association from 1928 to 1932, prior to his post as secretary of the bank Herman B Wells SPRY HELPS YOU MARKET & MANAGE YOUR BRAND WITH ABSOLUTE EFFICIENCY. 800.821.5368 | sprybrands.com To succeed in highly competitive, substance-rooted markets today, you need a brand optimization partner to help your business run as it should. When we say “brand,” we mean any place where any person encounters your business and has the opportunity to have an opinion about that encounter. YOUR BRAND OPTIMIZED & DELIVERED PRINT & PROMOTION Physical Brand Expressions. STREAMLINED OPERATIONS Operational Brand Expressions. CREATIVE SERVICES Intellectual Brand Expressions. HAPPY 125TH ANNIVERSARY TO THE IBA! Reprinted from 1997 centennial Hoosier Banker.
Hoosier Banker 15
16 NOVEMBER / DECEMBER 2022 study commission in the early ’30s. Herman B Wells has had a long, illustrious career in Indiana banking, as well as at Indiana University, where he now serves as chancellor. The decade of the 1930s saw a massive adjustment for state banks in Indiana through the advent of the Reconstruction Finance Corp. and the establishment of the Federal Deposit Insurance Corp. in 1935. State banks, unless they were members of the Federal Reserve System, had to undergo stringent examinations in order to become FDIC-insured. The Great Depression, followed quickly by World War II, influenced significantly the balance sheets and income statements of Indiana banks. In essence, Indiana banks became depositories during the Second World War, with lending almost eliminated. When the United States came out of World War II, banks had high levels of investments and few loans, and they participated in the sale of war bonds. In fact in 1944, this author won an engraved Schaffer fountain pen in a local war bond sales contest in Hagerstown, Indiana. The then Second National Bank of Richmond (later presided over by IBA’s Bill King) sponsored the contest. I sold 100 war bonds of $50 each, which was 75 war bonds more than any other child in Hagerstown sold. In all honesty, I should note that I sold 99 bonds to one doctor in town – and the other one to my mom and dad. The decades of the ’50s, ’60s and ’70s were relatively quiet for Indiana banking. Research into the activities of the Indiana Legislature reveal few historic battles over banking legislation during that time. One issue was that of “escheat” laws, which impacted significantly who had control over dormant funds at financial institutions. The changes in this law were a direct result of the rise of technology in banking. As computers became mainstream in financial institutions, the tracking of funds in dormant accounts became less of a burden, thus affecting the control and distribution of funds to the state. From a structural standpoint, Indiana fell behind adjacent states during this time. Ohio established laws governing multibank holding companies in 1929. By 1970 Ohio could branch into contiguous counties and expand through holding companies statewide. In Michigan, as of 1970, multibank holding companies were permitted – even though there was restrictive branching. Several significant statewide bank holding companies were born: NBD Bancorporation, Comerica, Michigan National Corp., Manufacturer’s National Corp., First of America and Old Kent Financial Corp. Kentucky’s laws also expanded banking operations by permitting statewide bank holding companies and contiguous county branching. Recognizing these events, the Indiana Legislature developed 1985's Senate Bill 1, which would change the state’s banking structure forever. Change did not take place overnight. Forces marched to and fro on the Indiana landscape for almost half a decade prior to the passage of SB1. The IBA in 1983-84 shifted from a position of neutrality Together, our current 40 year bankers have dedicated a combined total of 294 years to community banking in Indiana. Happy 125th Anniversary to the IBA! The Farmers Bank has supported community banking in Indiana since 1876! DŽDŽDŽȹƤĸĘİîƐŝĘƐƘĉîşőȹĊŪŝ ȀǿǾɍǿǾǽɍȁȀǼǺ David A. Coulter, the third president of The Farmers Bank, was also the third president of the IBA from 1899-1900. ØĘ îƐĘ 'îNJ ǻǹǻǻ Reprinted from 1997 centennial Hoosier Banker.
Hoosier Banker 17 Andrew Smith to that of supporting changes in banking structure. Conversely, the former Independent Bankers Association of Indiana, now the Community Bankers Association of Indiana, fought forcefully for the status quo. The League of Economic Development, dominated by the major Indianapolis banks, fought for banking structural change. The forces were set for a battle, which in 1985 resulted in SB1. The most significant banking legislation in Indiana’s modern-day history was the passage of SB1, effective July 1, 1985. This bill approved both the expansion of bank holding companies across county lines (i.e., the establishment of multibank holding companies) and branching into contiguous counties. SB1 also approved interstate banking, a phenomenon of vast repercussions. As of July 1, 1985, the largest three banks headquartered in Indiana were American Fletcher National Bank, Merchants National Bank and Indiana National Bank. As a direct result of SB1, all of these financial institutions have been acquired by out-of-state bank holding companies (Banc One Corp., National City Corp. and First Chicago/NBD Corp., respectively.) Only the three major banks in Evansville, Fort Wayne National Corp. and 1st Source Corp., South Bend, remain as multibillion-dollar bank holding companies not affected by interstate banking. Interstate banking has also seen the entrance of Huntington Bancshares, First of America, Star Bancorporation, Fifth Third Bancorporation, PNC Corp., KeyBank and others. The aggregate effect of SB1 is indicated by the decrease in the number of independent banks in Indiana. As of July 1, 1985, there were more than 375 independent commercial banks operating in Indiana. By Dec. 31, 1996, the number of charters had dropped to 210. What nobody heeded in the mid-1980s was that, because of Indiana’s history of restrictive branching and holding company structure, banks in Ohio and Michigan were better-positioned than Hoosier banks to install their holding company affiliates in Indiana. In 1995 the Indiana Legislature approved legislation which permitted interstate branching. This legislation permits Indiana bank holding companies to operate in surrounding states, and at the same time permits out-of-state bank holding companies to change their holding company affiliates in Indiana into massive branch networks. What started in 1985 as a small landslide became an avalanche. Commercial bank holding companies, headquartered out-ofstate, entered Indiana banking. Structure is not the only change in banking laws. This year, through the efforts of the IBA, Indiana law permits commercial banks to sell insurance throughout the state. Indiana banks will be permitted to own insurance agencies and to provide full-service insurance sales and service in direct competition with the insurance industry. This change is an indication of the types of products and services Indiana commercial banks will offer in direct competition with other depository and nondepository financial intermediaries into the future. History of the Indiana Bankers Association The Indiana Bankers Association established its own office in 1905 when Andrew Smith, its first long-term secretary, commenced operations in an office in the Commercial Club. Not until 1996, a full 99 years after its formation, did the IBA purchase an office building at 3135 N. Meridian Street, Indianapolis. The new facility houses the IBA executive and staff offices and the Center for Professional Development, the site of frequent banker training sessions. As of July 10, the Indiana League of Savings Institutions has been operating its headquarters out of the building as well. During the first decade of the IBA, the secretary (later called executive vice president) was usually a member of the staff of the volunteer president’s bank. The first four IBA secretaries were Mord Carter, First National Bank, Danville; Samuel A. Morrison, Fletcher National Bank, Indianapolis; Orlando M. Packard, Indianapolis (bank affiliation unknown); and Charles L. Farrell, Capital National Bank, Indianapolis. Andrew Smith served as secretary from 1903 to 1924. He joined the IBA on a part-time basis, maintaining his position as vice president of Capital National Bank, Indianapolis, which later merged with Indiana National Bank of Indianapolis. Under Smith’s supervision IBA membership grew from 300 banking institutions in 1903 to more than 1,100 in 1924. During his tenure the legislative influence of the IBA also grew. The Association formed legislative committees and legal and protective departments. Ill health forced Smith to resign in 1924. The IBA Council of Administration bestowed upon him the honorary title of secretary emeritus. He died shortly after his resignation. Forba McDaniel became secretary upon Smith’s retirement. She originally joined the IBA in 1910 as Smith’s assistant after prior experience as a switchboard operator at Russiaville State Bank. Before taking on responsibilities as secretary, McDaniel founded Hoosier Banker. In January 1916 she published the first issue, a bulletin of four pages. In less than two years the publication grew to 48 pages. In 1933 McDaniel resigned from the IBA to join an investment firm and later became executive secretary to Herman B Wells, then-president of Indiana University. She subsequently served as secretary of the Chicago District Bankers Association and returned to Indianapolis to work for a stock brokerage firm. She died in 1970. While serving as IBA secretary, McDaniel was instrumental in developing the Association’s bank guard program – the precursor of the Indiana State Police – and the warning card system. Hoosier Banker lent $1,000 to the IBA in 1925 to assist with the bank guard program. In the 1920s armed bank robberies were becoming increasingly prevalent. The IBA spearheaded an attempt to foil robbers. Today’s Protective Bulletin, sent to Indiana bankers, established its roots from this time Forba McDaniel Reprinted from 1997 centennial Hoosier Banker.
18 NOVEMBER / DECEMBER 2022 period when the IBA sent warning cards to bankers, notifying them of suspicious characters. In addition, the IBA formed vigilante groups of armed bank guards, made up of the bankers themselves, to protect the Indiana institutions. In 1925 the IBA issued 886 rifles, 1,210 revolvers and 2,000 shotguns to bankers for the protection of their institutions. At one time the IBA had more than 3,000 deputy bank guards, but only 1,113 members. From 1926 to 1942, the IBA hosted an annual “shoot” at Fort Benjamin Harrison to reward bankers for their participation. In 1926 the IBA also sponsored a bill which established the Indiana Bureau of Identification and Investigation. This bureau was enlarged in 1932, through the financial support of the IBA, into the Department of Public Safety, which includes the Indiana State Police. Don E. Warrick took over Forba McDaniel’s position as IBA secretary when she resigned in 1933. His 34-year career with the IBA encompasses one-third of the Association’s history. During his term the IBA experienced dramatic growth. The Association began sending out availability slips for persons looking for employment, encouraged member banks to set up retirement programs, sponsored the first group insurance program for member banks, set up the first Agricultural Clinic at Purdue University and held the first consumer credit conference. Originally Warrick began his career as a teacher. He later became a bank examiner for the Indianapolis Clearing House. Warrick attended Central Normal College and the Benjamin Harrison Law School. He retired as executive manager of the IBA in 1967 and died in 1987. Robert C. Nelson joined the IBA in 1954, was named secretary in 1957 and became executive manager in 1967, when Warrick retired. Though he retired in 1988, he remains committed to the banking industry. He is a frequent presence at IBA events and conferences. For six years after his retirement, Nelson was a part-time member relations consultant for the American Bankers Association liaison. He now fills the same position for the IBA. Nelson’s career began with the LaPorte Bank and Trust Company. During World War II he served in the finance department of the U.S. Army Air Corps in Europe. He also was employed by Associates Investment Company, South Bend, for five years. A graduate of the Indiana University School of Business, Nelson attended Oxford University while stationed in England. William H. King has been president of the IBA since 1988, when Nelson retired. King joined the IBA as executive vice president in 1987 after serving as chairman of the board of Second National Bank of Richmond. He was instrumental in the development of the 1985 Indiana Bank Legislation. A veteran banker, King’s career began in 1957 with Terre Haute First National Bank. He is a graduate of Indiana State University. King represents only the fifth lead executive of the IBA since 1903. This committed leadership is one reason the IBA is strong and vibrant today. Another strength of the IBA over the years has been the family relationships which have assisted its leadership. Burr S. Swezey Jr. became volunteer president of the IBA in 1964-65, following in the footsteps of his father, who served in the same position for the period 1943-44. Another father-son team was L.S. Armstrong (1956-57) and Jon S. Armstrong (1986-87) who served as IBA volunteer leaders. (The elder Armstrong held the position of “president”; his son was “chairman.”)* Two sets of brothers (J.P. Frenzel Jr., president in 1914-15, and Otto M. Frenzel, president in 1944-45; and James M. Givens, president in 1953-54 and William P. Givens, president in 1962-63) also wove family ties through this history of IBA presidents. The famous have also represented the IBA and Indiana bankers through the years. Carl D. Erskine, former Dodgers pitcher and chairman of the IBA in 1991-92, has been a banker far longer than he was a major league pitcher. Another athlete to excel in banking was Frank McKinney Jr., chairman of American Fletcher National Bank. McKinney was an Olympic swimming champion in his pre-banking days. Banker/politicians have also played a role in Indiana’s banking history. The first In 1963, Indiana Gov. Matthew E. Welsh (front center), a former director of Security Bank, Vincennes, signed a proclamation recognizing 100 years of commercial banking. Witnessing the signing are IBA representatives (back row, from left) S. Edgar Lauther, Columbus; William P. Givens, Muncie; Jan N. Zigler, IBA staff; Robert C. Nelson, IBA secretary; James M. Givens, Indianapolis; and Don C. Warrick, IBA executive manager. Robert C. Nelson William H. King Don E. Warrick Reprinted from 1997 centennial Hoosier Banker.
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