First Indiana sells bank

December 31, 2007

Indiana's largest locally based bank, First Indiana Corp., decided to end 92 years of independence in 2007, agreeing in July to sell itself to Milwaukee-based Marshall & Ilsley Corp. for $529 million in cash, or $32 a share.

The sale, which valued First Indiana at a 45-percent premium to where its shares were trading, is expected to close in January.

Sale rumors had dogged First Indiana for more than a decade. But whenever a possible suitor surfaced, the bank would roll out another "we're here to stay" ad campaign, and talk would die down.

This time, though, the sale was real. First Indiana employees figured as much when they received a call on a Sunday night about an important meeting the next morning, July 9.

First Indiana CEO Robert B. Warrington said the deal came about "fairly quickly" with an organization the bank knows well. In January 2006, M&I acquired First Indiana's trust division. Later that same year, First Indiana began using software from M&I data processing subsidiary Metavante.

Warrington also is a friend of M&I CEO Mark Furlong. They worked together as executives of Grand Rapids, Mich.-based Old Kent Bank before it was acquired by Fifth Third Bancorp in 2001.

Shareholders approved the sale in mid-December. At the meeting, First Indiana patriarch Bob McKinney and his daughter, Marni, who chairs the board, bade farewell to shareholders and directors. The McKinneys have been involved with First Indiana for more than 50 years.

Bob McKinney said he and the board didn't want to sell, but decided it was the best deal for shareholders. Share prices have dropped for most banks in the last six months, underscoring the wisdom of the board's decision to close the deal in cash rather than stock.

M&I shares, for example, lost nearly half their value between the deal's announcement and mid-December.

"It's a sad day but a happy day, happy because we did the right thing," Bob McKinney said. "It's sad because we're no longer First Indiana Bank; obviously that's sad to me."

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