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.
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