Undeterred by stepped-up competition and tough margins, Fort Wayne-based Star Financial Bank is building an Indianapolis regional hub and has lined up land for four new locations.
The privately held bank launched an Indianapolis-area expansion effort in 2001, and now has seven offices here-including three in Fishers, one in Carmel and one in Noblesville.
The latest expansion salvo includes 25,000 square feet of leased space within an office building under construction at Keystone at the Crossing, next door to the Marriott North. The bank also has purchased property for new locations at 146th Street and Hazel Dell Parkway in Carmel, State Road 32 and State Road 37 in Noblesville, State Road 32 and John Street in Noblesville, and State Road 67 and Mount Comfort Road in McCordsville.
While some publicly traded banks, such as Evansville-based Old National Bancorp, have reined in their Indianapolis expansions, Star's family ownership allows it to take a long view despite a tough banking environment, said CEO James C. Marcuccilli.
The interest rates banks pay to borrow money have been perilously close to the rates they can charge customers for loans, narrowing profit margins. For many of Indiana's publicly traded banks, that challenge has been reflected in depressed stock prices.
"Our interest is to become a player permanently," Marcuccilli said. "In their case, they have to be careful how they invest and where they invest, timing-wise."
In the last several years, plenty of banks have invested in fast-growing Hamilton County. More than 35 branches have opened in three years. From 2004 to 2006, overall deposits in the county grew 38 percent, to $3.7 billion, according to Charlottesville, Va.-based SNL Financial.
And that number will likely continue to rise, since the research firm estimates the county's population will increase another 30.2 percent in the next five years.
Among Star's competitors for the lucrative market is Tower Bank of Central Indiana, the offspring of another Fort Wayne bank, Tower Financial Corp. The new Tower will have financial backing and backroom support from its Fort Wayne office.
But the strategies for Star and Tower differ. While Tower plans a focus on business banking with a minimal retail branch presence, Star has its sights set on several locations competing for individual and small-business banking clients.
The Hamilton County area is a natural market for Star, and adding branches seems like a sound strategy, said John Reed, a banking expert and executive vice president of Chicago-based investment firm David A. Noyes & Co.
"Everyone wants cheap deposits, and to do that they need branch offices," Reed said.
In the early 1990s, Star had a storefront location in downtown Indianapolis it inherited after acquiring a small bank. But when a lease expired, the bank moved the operations to its then-recently opened branch in Carmel, said Thomas W. Wright, president of the bank's Community Banking Group.
Star's expansion efforts aren't limited to the Indianapolis area. The bank, which has assets exceeding $1.6 billion and 43 branches, is planning a few more offices in Fort Wayne and just opened an office in Muncie. All the bank's northeast Indiana branches are in the vicinity of the Interstate 69 corridor.
"We think the Indy market and Fort Wayne market give us a lot of opportunity," Wright said.
Star will have about 60 employees in its Indianapolis hub office, including executives and commercial and retail lenders.
When the new branches open, the bank expects to have 120 employees in the area.