Newcomer banks slice into ‘overheated’ Indianapolis market

During 1990s, merger-mania banks new to the Indianapolis-area market rolled out feel-good commercials. They touted free checking and teaser rates. Their branches wafted of fresh cookies, free Internet and comfy chairs as if you’d really want to hang out.

These days, newer entrants might be more likely to seek market share through more convenient hours, promises of local decisions on loans, and by pursuing a narrower niche of customers rather than full-service retail banking.

And they might not even run commercials.

Ever heard of Marine Bank? Probably not. Yet this relative newcomer has been in the market for more than a decade, first as CIB Bank. The Waukesha, Wis.-based financial institution is doing just fine with only one office in the city and only about $18 million in local deposits as of mid-2012.

Consider that market leader Chase Bank had $8.2 billion in deposits in the Indianapolis market and one-fourth of the market share.

So how in J.P. Morgan’s blessed name did relative newcomer Marine penetrate a place that’s home to 50 banking companies and hold its own?

Marine specializes in commercial lending between $500,000 and $7 million. It prides itself on being small and nimble.

“You can market for brand-name recognition. But business lending is done on a one-to-one basis,” said Brian Chaffin, president of Marine’s metro-area division and a veteran of Indianapolis’ biggest banks.

A focus on lending to Hoosier manufacturers is how Warsaw-based Lake City Bank has built a deposit base locally, closing in on $80 million in just two years.

It established a Carmel office in the hope of tapping some of the 6,000 manufacturers as well as health care firms and other companies in the region with revenue from $1 million to $30 million (it also offers retail banking).

Only about 5,000 businesses in its target demographic operate where Lake City has traditional strongholds elsewhere in the state.

“It’s a very singular focus,” said CEO David Findlay. “The Indianapolis market has more targeted companies for us as a commercial lender.”

Targeting a narrow niche of clients also worked for Louisville-based Stock Yards Bank & Trust, which galloped into town about 10 years ago without a single client.

“Nobody knew who we were,” recalled Joe Kirsch, president of the Indianapolis division of Stock Yards. “The first three or four years, I had to make people know we were a real bank, a high-performing bank.”

Stock Yards deliberately wanted “to fly under the radar,” Kirsch recalled, seeking to scout for its own promising group of clients. They include upper-echelon professional practices.

Stock Yards gradually built out a retail presence. In late 2011, it opened a third branch, near Binford Boulevard and 71st Street.

“We’re out looking right now for a fourth location,” Kirsch added.

Convenience, credibility

Other newcomers aren’t narrowing their audience focus as much as trying to appeal to the masses through convenience.

Other than by walking into a Walmart, chances are you’ve not heard of Woodforest National Bank.

The Texas-based bank entered Indianapolis about five years ago, relying on its in-store branches within eyeshot of people waiting to check out at the cash registers. It’s in seven Walmart stores in the area.

Woodforest was sitting on $5.1 million metro deposits at mid-2012, according to the most recent Federal Deposit Insurance Corp. data.

Judging by the fliers in the branch, there’s nothing especially impressive about its rates. Even in this low-interest-rate environment, the 0.25 percent it offered recently on a three-year CD is dismal. But Woodforest draws them in with non-bankers’ hours such as staying open until 8 p.m. on weeknights and from noon to 4 p.m. on Sundays.

These days, “Not everybody competes on price. Maybe it’s convenience,” for example, said Greg McBride, an analyst at Bankrate.com.

For newcomers to a market who expect to operate as full-service retail branches, there is still a need to build brand awareness, McBride added.

That might consist of television commercials, sponsoring community events or even buying name rights to a stadium.

Flying under the radar wasn’t an option for full-service bank First Financial, based in Cincinnati, when it entered the metro area in 2009 by snapping up assets of the failed Irwin Union Bank.

By mid-2012, the bank with the unusual, pale yellow logo had $389 million in deposits. Still, that was only about 1.2 percent of metro-area deposits.

It went the route of full-page print ads and television commercials. It struck up a partnership with the Indianapolis Colts. The bank also gets involved with community organizations and lets it be known that President and CEO Claude Davis Jr. has local street cred—earning his degree in accounting and playing basketball at Butler University, where he is a trustee.

“Being brand new to a market can be tough,” said Kevin Langford, president of consumer banking at First Financial.

Still room for competition

You bet it can, agreed Marine Bank’s Chaffin.

The Ellettsville native had worked at the old-line Indianapolis banks, such as American Fletcher National Bank and Merchants National Bank, and he knew the challenges of cracking their stranglehold. A former boss who later got involved in Marine took him golfing one day and asked if he’d be interested in piloting the launch of a new institution here.

“I looked at him and said, ‘You’re nuts.’ My golf game fell apart at that point. I told him the last thing we needed in Indianapolis was a new bank.”

But Chaffin took the bait and soon found himself tapping customer connections he’d made at his previous employers—while trying not to run afoul of non-compete agreements. Marine started at an office near Geist Lake. “We kind of joked that we somewhat started the bank in my house.”

He lassoed other veterans of the local banking market and they all tapped their connections to start building a loan portfolio. Staying small has allowed Marine to remain nimble enough and close to clients, he said. That includes quick decisions on whether to approve a business loan.

“The worst thing you can do with a client is to have a long, drawn-out ‘no,’” he said.

A number of bankers said it might seem counterintuitive for a newcomer to take aim on a highly banked city such as Indianapolis. But, Kirsch said, “Every metro area is overbanked.”

Added Findlay: “There’s always a place for competition.”•