Indiana Banks and Banks and Mergers & Acquisitions and Banking & Finance and Deals and Finances

Greensfork Township State Bank to acquire local startup that failed to live up to high hopes

November 24, 2008
A rural Indiana bank that specializes in farm lending has agreed to buy Symphony Bank for less than the ambitious startup spent to build its extravagant branch on 96th Street.

Greensfork Township State Bank of Lynn (population 1,143) will pay about $3.9 million in cash to buy all the outstanding shares of Symphony. Shareholders will get about $2.55 per share, a roughly 75-percent discount to the initial offering price of $10 three years ago.

The deal still must win shareholder approval and the blessing of government regulators.

Symphony has lost more than $2 million each year since its June 2005 founding, and it's on its third management team. The bank's biggest albatross was its lone branch location, a $5 million palace outfitted with a copper roof, heated parking lot and wide ATM lanes designed to accommodate extra-large SUVs. The building tied up more than a third of the bank's equity capital from day one.

Bank officials have been working for 18 months on plans to either raise new capital or sell, said Symphony President Bill Olds, who plans to remain in the position after the deal. Without such an early start, the effort might not have succeeded, he said.

"In this market, it's a situation where you get the additional capital, merge with someone, or you're going to die a slow death," Olds said. "Partnering up with someone like Greensfork is a huge success for the bank and its customers. It gives us plenty of room to grow."

Greensfork is owned by Michael F. Petrie and Randall Rogers, who run Carmel-based P/R Mortgage and Investment Corp., a quiet giant that has originated more than $2.2 billion in multifamily loans since it was founded in 1990. The company continues to service about $1.4 billion in loans.

Petrie and Rogers acquired Greensfork in 2004 and began operating P/R as a subsidiary of the bank, placing the loans on the bank's books. The bank does little residential lending, never touched subprime, and hasn't had a loan loss in four years, said Petrie, a former president of the Mortgage Bankers Association. For P/R, only one loan in its history has gone sour, and it was worth about $2 million.

Petrie and Rogers are former executives at Merchants National Bank, a predecessor to National City. Many in the top brass of Symphony Bank, including Olds, also are veterans of Merchants.

The new owners eventually plan to rename Symphony, but it won't take the Greensfork moniker. That name's recognition is limited to Randolph County, where the bank has two branches serving eastern Indiana and western Ohio.

They aren't looking to acquire other banks or to expand Symphony's footprint beyond its one branch. The main goal is to build on existing customer relationships.

"We do a lot of business with people in the Indianapolis marketplace, but we don't have a larger banking relationship," Petrie said. "It's our intent to build on the mortgage business we do with them."

State and federal regulators had been pushing Symphony to either raise capital or find a buyer.

Most startup banks are profitable at the end of three years, so regulators grew concerned as Symphony lost money year after year, eroding its equity position. The bank saw its equity capital slip from $12 million in 2005 to less than $7 million in September, with $4.3 million of that tied up in the bank's office and equipment.

The state should finish its review of the merger in about 60 days, said Kirk Schreiber, a senior bank analyst with the Indiana Department of Financial Institutions.

Shareholders also will have to approve the deal. The bank's nearly 200 initial investors included 17 founders, many of which are well-known in Hamilton County. They include Bedel Financial Consulting Inc. founder Elaine Bedel; J.S. Marten Jewelers founder Jan Marten; and Paula Quinn, founder of Cornerstone Properties. Jasper-based German American Bancorp bought a 9.7-percent stake in Symphony for $1.49 million.

The sale of the bank, scheduled to close Jan. 1, 2009, would cap a rocky ride.

"It was very unsuccessful from an investor's perspective, and obviously a big disappointment," said John Reed, a banking expert and executive vice president in the local office of Chicago-based David A. Noyes & Co. "They've been strapped from the beginning with an inordinately large office building."

Greensfork, on the other hand, values its main branch and equipment at about $251,000. The bank's 1998-style Web site features an animated harvest scene and a quote from the naturalist Henry Beston: "The leaves fall, the wind blows, and the farm country slowly changes from the summer cottons into its winter wools."

The modest bank will survive another season.

But for the fancy bank that coddled upscale customers with Hershey's Symphony chocolate bars, the music is about to stop.
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