The Herald Bulletin

March 27, 2012

Local banks saw a year of growth

By April Abernathy
The Herald Bulletin

— During 2011, banks saw modest growth, returning to the industry despite a rough year in the media spotlight.

“There’s a cautious optimism moving forward, said Mike Baker, regional president of North Central and Muncie regions of First Merchants Bank. “We’ve started to see a renewed confidence from consumers and business clients.”

Rod Lasley, vice president of products and services for the Indiana Bankers Association, said business customers have spent the past year paying off debts.

“Rather than investing or expanding, people held onto their cash and paid off these debts,” he said. “People will go back into the market, and businesses will stimulate the economy.”

Lasley said he doesn’t expect to see much investment or business expansion until after November’s presidential election.

On the consumer side, Baker said, people are finally starting to trust and build confidence in banking in the aftermath of the recession.

“The negative media spotlight highlighted Wall Street banking and firms and government-sponsored mortgage investment companies,” Baker said.

“There’s a concern in the industry statewide about the reputation and perception of banks,” Lasley said. “Here in the Midwest, we’re pretty safe in what we did; however, we still got that perception, and it’s an issue.”

Lasley said the Bankers Association talked to its people to brainstorm ideas and ways to create a positive awareness and image in banking.

Of the 13 banks in Madison County, eight are Indiana-based.

“That’s reassuring because funds will stay local and be invested locally,” Lasley said. “The county only lost one bank office from 2010 to 2011.”

Lasley and Baker have cautiously optimistic outlooks for 2012.

“We see an opportunity to grow our balance sheet. We’re beginning to see growth in the pipelines,” Baker said. “There is a mentor opportunity with business clients. Consumers are more confident, and interest rates for refinancing are low. It’s the best economic climate we’ve seen in three years.”

Lasley said he thinks progress in the banking industry in 2012 will sputter along.

“There are small pockets of growth and decline,” he said. “It won’t be a rapid change.”

Both men see growing regulations in the banking industry as a stumbling block for future growth.

“The industry is adjusting to significant regulatory reform,” Baker said. “It continues to be a major challenge for all banks, especially smaller banks because their resources are stretched significantly.”

“These smaller institutions have to decide if they can fight,” Lasley agreed. “You’ll see smaller banks consider having to sell or merge.”