2012 CFO OF THE YEAR: Mark K. Hardwick

Top Honoree, Public Companies

When the economy went south in 2008, the executive management team at First Merchants Corp.—central Indiana’s largest financial services holding company, with a presence in 24 Indiana counties and two in Ohio—decided to do some very personal handholding with the firm’s roughly 1,200 employees.

Instead of sending written memos about the company’s condition, they delivered the news in-person via “town hall meetings.” CFO Mark K. Hardwick was present for all of them.

“We aggressively leaned into the challenges before us and took immediate actions that were difficult, but provided a framework for long-term success and corporate health,” Hardwick said.

“Our commitment to our highest-performing employees, proven processes, and stakeholder communications were keys to success as we emerged from the challenges of the Great Recession as a much stronger company.”

Belt tightening and keeping a careful eye on the books didn’t just help Hardwick’s bank weather hard times. It also positioned it to reap rewards. In 2012 First Merchants seems set to establish a new record for total net income, which stood at $31.4 million through the first three quarters. Hardwick has overseen First Merchants’ books since 1997, when he signed on as corporate controller. Since then, the bank has grown from managing assets of roughly $1 billion to more than $4.2 billion, while the number of employees and locations has more than tripled. First Merchants, with Hardwick’s considerable input, also acquired Shelby County Bank last February.

“Our risk management practices afford us the confidence to feel that we are prepared for whatever the future brings,” Hardwick said. “First Merchants expects to press forward and provide its customers with a service-driven alternative to the super-regional bank competitors in Indiana and Ohio, regardless of macro economic conditions.”

Hardwick has been instrumental in his company’s slow-but-steady accumulation of assets. In 2010 he brokered a strategy in which the bank’s preferred stock was exchanged for trust preferred securities, resulting in an after-tax gain of roughly $10 million. Besides creating a pile of cash, the move also added several strong institutional bank stock investors to First Merchants’ shareholder base. And in 2011 Hardwick was instrumental both in raising $21.2 million in a direct private placement of the bank’s common stock, and repaying the company’s TARP obligation in full.

To improve First Merchants’ efficiency, Hardwick also helped consolidate all affiliate bank charters into Merchants’ single remaining full-service bank charter. Though the task was handled with minimal disruption to customers, the heavy lifting required to execute the project wasn’t too different in scale and complexity from that of a bank acquisition.

Such work is essential in an industry where the rule “go big or go home” is in full force. During the past 20 years the number of US banks has shrunk from roughly 15,200 to 7,500, with the largest 100 increasing their market share from 30 percent to 80 percent. So for Hardwick and First Merchants, the writing is on the wall: grow or die.

“Our industry is one that truly captures financial economies of scale so we anticipate consolidation to continue,” Hardwick said. “We expect to accelerate our growth both organically and through acquisition. We are planning to excel despite increasing regulatory requirements, like Dodd-Frank and Basel III’s increasing capital standards, to mention a couple.”

First Merchants’ chairman of the board Charles R. Schalliol said that one of Hardwick’s biggest challenges is guiding the company through the tougher post-financial-meltdown regulatory thicket. “The responsibility is significant and ever-changing in producing a safe and sound environment,” Schalliol said. “With Mark at the helm, First Merchants has increased its stock price nearly 250 percent in the last 36 months.”

Nevertheless Hardwick expects 2013 to be another challenging year, with national GDP in the 1 to 3 percent range. A lot depends on US economic policies and whether the European Union can get its tottering financial house in order. But whatever comes, he’s confident the bank can handle it.•

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