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Carmel's Merchants Bancorp aims to raise $50M for growth

January 9, 2015

Carmel-based Merchants Bancorp, one of Indiana's largest privately held banks, aims to raise $50 million in capital by selling new shares, according to a recent U.S. Securities and Exchange Commission filing.

The capital influx could bring as many as 500 new shareholders to Merchants, who has been owned by just two families. Bank officials couldn't be reached for comment, and those with City Securities Corp., which is representing Merchants, declined to comment. But a former adviser said he understands the funds are aimed at organic growth.

"Because of their ability to grow their balance sheet—asset balances and deposit balances—they've got to have certain levels of equity to support that growth," said Carmel-based banking consultant Mike Renninger, who's familiar with but not involved in this offering.

"The banking industry is heavily regulated, and they need to keep certain capital levels to satisfy regulators," Renninger said.

Merchants, parent of Merchants Bank of Indiana, has seen rapid growth in recent years, Renninger said, tripling assets to $1.8 billion since 2011. The company had $5.1 million in net income in 2008, a figure that grew to just under $39 million in 2013, according to a February 2014 proxy statement. Over that same period, deposits grew from $102 million to $1 billion.

At a time when low interest rates have put a squeeze on banks' interest income, Renninger said, Merchants' mortgage unit, P/R Mortgage & Investment Co., has been a boon because of the robust fee income it generates. The mortgage division is a heavyweight in apartment and health care facility financing.

Using the new capital for a bank acquisition isn't out of the question, Renninger said, but the money likely will be used to beef up internal operations first. This time last year, Merchants seemed well on its way to acquiring Mooresville-based CITBA Financial Corp., parent of Citizens Bank, but the deal fell through in the spring.
Neither company shed light on what derailed the transaction.

Renninger characterized the $50 million private placement as fairly large. Raising the funds will substantially broaden ownership, which has been limited to the families of Merchants principals Michael Petrie and Randall Rogers.

Asked about the potential for an initial public offering down the road, Renninger said, "I don't think Merchants is in a hurry to become a public company. My personal opinion is that they might do it someday in concert with an acquisition."

The Dec. 29 SEC filing said Merchants began selling stakes on Dec. 12 and had about $7 million raised at the time of the filing. The minimum investment amount is $100,000, which means up to 500 investors could grab a stake. Renninger said he expects a couple of hundred investors to take part.

Petrie and Rogers, alumni of the former Merchants National Bank, started P/R Mortgage in 1990, a year before that bank was acquired by Cleveland-based National City Corp. They decided to revive the Merchants moniker in 2009 after acquiring Greensfork Township State Bank of Lynn and Symphony Bank of Indianapolis.

Today, Merchants has three branches in Marion and Randolph counties.

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