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First Bancorp of Indiana is a thrift that is working hard to be a
full service community bank as they are making a tremendous impact in commercial lending
Savings & Loans
First Bancorp of Indiana Inc.
5001 Davis Lant Drive
PO Box 1111
Evansville, IN 47715
Michael H. Head
President, CEO and Director
Interview conducted by:
Walter Banks, Publisher
Published March 15, 2007
Michael H. Head is the President and Chief Executive Officer of the Company and First
Federal. Mr. Head joined First Federal in 1980 and served as a Vice President, Manager of
the loan department and Senior Vice President before becoming Executive Vice President in
1996. In 1998, Mr. Head added the title of Chief Operating Officer and in 2000, Mr. Head
was named President and Chief Operating Officer of First Federal. In 1999, Mr. Head was
named Vice President of the Company. In July 2004, Mr. Head succeeded Harold Duncan as
President and Chief Executive Officer of the Company and First Federal.
CEOCFO: Mr. Head,
youve been with First Bancorp of Indiana since 1980; can you give us some highlights
on changes that have occurred?
Mr. Head: In 1980, when I started, our
company name was First Federal Savings and Loan Association of Evansville. We were a
mutual institution at that time and we had been in business for 76 years, having been
founded in 1904. We had 3 locations, with 2 in Evansville and 1 in Mount Vernon, Indiana
and we had assets of approximately $80 million, with 22 employees.
I started out as a management trainee, the first
mortgage loan application that I took was in 1981, and the rate at that time was 13½%.
Therefore, I got in the business when loan activity was kind of slow. During that time,
the interest rates where high and there were problems that were going on in the savings
and loan industry across the country, the bank made money every year except one year and
that was 1982. However, we had always been a very conservative institution and at that
time, the bank had about a 14% capital ratio. If you were a mutual institution,
capital was king.
First Federal Savings and Loan Assoication offered
pass book savings accounts, certificates of deposit, first and second mortgages. When you
look back, what the bank products are now as opposed to then, it is amazing.
CEOCFO: Tell us about where you are today.
Mr. Head: As of today we are
approximately $365 million in total assets. We have 9 locations, 5 of which are in Evansville,
we have one office in Newburgh, which is in Warrick County, a county immediately east of Evansville
and we have an office in St. Philip, Indiana, which is in Posey County immediately west of
Evansville. `The bank also has offices in Petersburg and Washington, Indiana, which are
approximately 45 minutes and an hour north of Evansville. These two northern offices
operate under the name of Home Building Savings Bank.
The Bank has approximately 95 employees and this
spring construction was completed on our new corporate headquarters at 5001 Davis Lant
Drive, in Evansville, Indiana. For the last 5 years we have had 4 departments
operating in 3 locations, in addition to our corporate office; we had just grown so
quickly we had out grown everything.
Today, First Federal Savings Bank is a stock
chartered, OTS supervised, thrift conducting business as a full service community bank
offering all the services of a commercial bank with the exception of a trust department,
which we do not have at this point. Our Investment Services department has been
established and will begin operations on March 1, 2007.
CEOCFO: Are acquisitions your major strategy
for growth or do you also grow through de novo?
Mr. Head: Our St. Philips office was
opened as a de novo branch in November 2005 and it is up to about $5 million in deposits,
so while we dont have a huge staff there as we only have 4 people. The acquisition
of Home Building Bancorp was a strategic decision. When we went public in 1999, we capital
in excess of 30% and we now have our capital ration down to about 9.4% and we are
continuing to emphasize franchise growth.
Yes, the Bank is open to acquiring other institutions
to further our growth, in the future.
Tell us about trends in banking when you look at your competition and why customers are
choosing to bank with you.
Mr. Head: Vanderburgh County, in
Southwestern Indiana is an interesting market in that basically it is dominated by one
super regional in Fifth Third Bank (NASDAQ: FITB) that purchased the old Citizens National
Bank in Evansville and has a local presence of about $8 billion in assets. Old
National Bank (NYSE: ONB), which is headquartered in Evansville and is about $9 billion in
assets. Integra Bank has approximately $3 billion in assets. Therefore, we have
three huge players and then we would be considered the biggest of the small banks at $365
million. United Bank another converted thrift, has approximately $210 million in assets.
Bank of Evansville which was a de novo - that is about 5 years old is around $240 million
in assets, plus there are two local credit unions in excess of $250 million. Recently,
Evansville Commerce Bank was started as a de novo and three banks from southern Illinois
have established branches in Evansville.
The thing that has set us apart from the field - has
really been the personal service aspect that we are able to bring and how we approach
business. We use a philosophy dating back to the 70s and 80s where you could
walk in and talk to a business customer, agree that you are going to work with them and
shake hands. If we tell someone that we are going to work with them along this certain
direction, we hold to that. In order to make their life a little bit easier for our
commercial customers, our commercial loan officers know about that business before they go
out and call on it. This enables us to bring practical solutions to their business. To
help and ease their operations we provide deposit pick-ups to our commercial customers.
When you look at what it takes for a customer to have a person get the deposit ready, go
to the bank, stand in line and come back and multiply that times five days a week, we are
providing our customers with a good service.
Through our data processor, which is FiServe, the
banks cash management system is very interactive and easy for the commercial banking
customer to learn and utilize. That product really helps make their cash management
problems a lot easier to solve. The biggest thing is really the genuine interest that our
people take in working with the customers one-on-one, where the larger banks may have good
people; it is just the situation that they are put into, because one loan officer at a
large financial institution cannot effectively take care of 400 to 500 accounts. That is
where we are able to take on the big banks and our customer portfolio when you look down
the names; it is becoming some pretty prominent business leaders in the Evansville and
southern Indiana market who are now customers of our bank.
CEOCFO: Tell us about your decision making
structure; does everything go up to the top or do you give your officers decision making
Mr. Head: It is a combination of both.
At the department level, I feel that we have excellent people, with many years of
experience. Each of our department heads on average, have about 20 years of banking
experience. Therefore, we give them the authority to be able to run their departments and
when it comes to underwriting, they handle the underwriting process.
On larger commercial loan credits, we do utilize a
central senior committee. The department makes the loan presentation and as a committee,
we decide if we would be moving forward on this potential credit or not.
Tell us about the communities that your branches are located in and if they are strong
enough financially to support the growth of your bank.
Mr. Head: I dont think the
people in Evansville and Southwest Indiana as a whole appreciate the economy that we have.
The bigger cities will tell people that we are probably 15 years behind, but we are very
lucky here in Southwest Indiana that we have a good combination of businesses. Toyota
Motor Manufacturing has a plant facility in Princeton, Indiana, which is about 20 minutes
just north of Evansville, which employs with their suppliers about 10,000 employees. To
the east of Evansville, in Warrick County, you have Alcoa Inc. (NYSE: AA), which is
probably a 4,000 work force. To the west of us in Posey County, we have a large GE
(General Electric-NYSE: GE) facility. In Evansville itself, as far as manufacturing we
have a Bristol Myers Squibb facility, with around 2,500 employees. We also have 2 major
hospitals and one private university and two state universitys (University of
Southern Indiana and IVY Tech Community College) combined there are close to 20,000
students. We have a nice mix of service industries, manufacturing, education and
medical. In addition, we are the retail center for a 60 miles radius in southern Indiana,
western Illinois and western Kentucky.
CEOCFO: In closing, could you address
potential investors and the things they should be aware of?
Mr. Head: As a former thrift that is
working hard to be a full service community bank, a good portion of our portfolio is real
estate based. One place that we have made a tremendous impact would be in the commercial
lending area. Two years ago, when I became CEO, we had 3 people in our commercial area and
today we have 3 commercial loan officers, 3 support people and 2 business development
people. Each of the last 2 years, we have been able to increase our total out standings in
commercial lending which is now opening the door to realigning our deposit base - to get
more commercial deposits and municipal deposits, which 3 or 4 years ago we had none
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