BEHIND THE NEWS: Banker ready to make Salin a force in state's largest city

August 25, 2008

Alvin "Kit" Stolen is back atop an Indianapolisbased bank, albeit one many locals have never heard of.

But Salin Bank & Trust Co. has big plans to get noticed-and get customers-here. After establishing strong market positions in south-central and northern Indiana, it finally has its sights on the center of the state.

For now, Salin has just one Indianapolis-area branch, its headquarters near Keystone at the Crossing. But plans are in motion for two Hamilton County locations. And while bank officials won't predict they'll have a specific number of locations by a specific date, they have their eyes on locations in Boone County and other locales in the Indianapolis area.

"Frankly, there are a lot of attractive markets in and around Indianapolis," said Stolen, Salin's newly appointed president and chief operating officer. "We'll look at any place that offers good growth over the next couple of decades."

He should know. Stolen spent five years as CEO of Indianapolis-based Union Federal Bank before helping orchestrate its $321 million sale to Ohio-based Sky Financial Group in the fall of 2006. Just a few months later, another Buckeye bank, Huntington Bancshares Inc., gobbled up Sky.

After leaving Union Federal in January 2007, he became a vice president of Achievant, a locally based consulting firm. While working for Achievant, he served as interim CEO and interim chief financial officer of Rehabilitation Hospital of Indiana.

Stolen's return to banking coincides with the expiration of an 18-month non-compete agreement he signed with Union Federal.

The timing was opportune for Salin, a family-owned bank that was looking to add to its management firepower.

Records show that in January of this year, Salin entered into an agreement with state and federal banking regulators promising to address deficiencies in its internal controls and risk-management processes.

Bank officials say they'd already addressed those shortcomings when they began talking to Stolen about coming aboard to help grow the business.

CEO Bill Salin II, 51, previously also had served as president. His father, 77-year-old Bill Salin, Indiana's secretary of state from 1968-1970, remains chairman.

Alluring market

Stolen is quick to emphasize that Salin's push into Indianapolis doesn't mean it has lost interest in its existing markets. He said they've served the bank well and will continue to be a focus for expansion.

But the allure of the big city is obvious. The population of Indianapolis is growing modestly, while some suburban counties, like Hamilton, are expanding at a brisk pace. In contrast, the population of many other counties in Indiana is flat, or declining.

"If you want to grow, you want to be in a growth market," said John Reed, a veteran banking observer who serves as president of David A. Noyes & Co.'s Investment Banking Group.

Crowded field

But Indianapolis isn't for the fainthearted. The market already is packed with banking competitors clawing for business, especially in the affluent northern suburbs. Many of the combatants-including New Castle-based Ameriana Bancorp and Muncie-based First Merchants Corp.-share Salin's smaller-city roots.

Yet Salin doesn't have to become an Indianapolis heavyweight for its strategy to pay off. As Reed notes, winning a small slice of the Indianapolis market translates into more business for Salin than if it made major inroads on a competitor in one of its small markets.

And the timing might be right to exploit opportunities. Many banks in Indianapolis-from National City to Irwin Union-are ailing, dragged down by mortgage-related woes. Banks that are retrenching aren't the most formidable foes.

In contrast, Salin has plenty of financial horsepower. A few years ago, the bank put the brakes on growth, concluding an expansion into Fort Wayne and other moves had strained its capital base.

As a result, assets have fallen to $830 million from a peak of $1 billion in 2005. Profits also are down. They totaled $10 million in 2007, down from $17 million a year earlier, according to www.FDIC.gov. But along the way, a key measure of capital swelled to 14 percent, well above the Federal Reserve's "well-capitalized" threshold of 6 percent.

Stolen also intends to tout his employer's local ownership, just as he did at Union Federal before it changed hands.

Don't bet on the same ending this time around, however. Stolen said that before he took the job, members of the Salin family assured him they intend to pass the bank on to the next generation.

He said the stability was a selling point for him, and has helped attract employees and customers.

"They have some confidence the platform is going to stay as it is, and not go through the chaos of the whole merger game," Stolen said.
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