FORT WAYNE – When Tower Bank's founders opened the doors to depositors in 1999, they stressed that local bankers would evaluate customers' loan requests.
It was an important selling point at that time, because Fort Wayne National had been acquired by a Cleveland-based regional bank, leaving the market without a locally based lender.
When Tower's CEO met with The Journal Gazette on Tuesday, he stressed that the staff will retain that community bank mentality – even after Tower is acquired by Evansville-based Old National Bancorp in a deal estimated at $107.7 million.
Mike Cahill, Tower Financial Corp.'s president and CEO, said no lending decisions will be made outside the state.
"There's a lot of comfort in that," he said. "You don't lose focus."
Even so, the CEOs of two rival banks said Tuesday that they see an opportunity to pick up market share because their companies moved into the Fort Wayne market after Tower opened and remain based here.
Old National will pay Tower stockholders 1.2 shares of Old National stock and $6.75 cash for each share of Tower Financial common stock. The estimated total value of the deal is based on the Sept. 5 closing price of Old National's shares.
The transaction is expected to close before March 31, pending approval of Tower's shareholders and federal and state regulators.
Tower has almost $681 million in total assets and seven branches. Old National has $9.6 billion in assets and 176 branches.
Tower Bank branches are scheduled to be renamed Old National between April 1 and June 30. The six existing Fort Wayne branches and one Warsaw branch will all remain open.
Bob Jones, Old National's president and CEO, said Tower's location and culture are a perfect fit for his company.
"Our stated objective is to be Indiana's bank," he said. "And when you look at (Old National's) state footprint, we really had a gaping hole in the northeast area."
Old National, the largest Indiana-based bank, is keeping Tower's management team intact, relying on established relationships to ease the transition. Cahill will become regional president.
"I don't know Fort Wayne, and Fort Wayne doesn't know me. But they know Mike Cahill, and they trust Mike Cahill," Jones said. "Our job is not to screw that up."
Old National is also reaching out to Tower's board. Keith Busse, Tower's chairman, will chair Old National's Fort Wayne advisory board. It's unclear how much power, if any, that body will have.
Busse was offered a seat on Old National's board of directors but declined because of the company's mandatory retirement age of 72. Busse would have been allowed to serve only one year before the rule would force him out.
Three more Tower directors have accepted roles as advisers, Busse said. He declined to say who. Tower's board includes Jerry Henry, Midwest Pipe & Steel Inc.; Bob Taylor, Do it Best Corp.; Scott Glaze, Fort Wayne Metals Research Products Corp.; and Irene Walters, IPFW; among others.
The deal for Tower was a long time in the making, the executives said. Jones and Cahill have been on speaking terms for about eight years. The subject of acquisition had come up from time to time.
"Bob would say, 'If you ever … keep us in mind,' " Cahill said.
Old National has been aggressively adding to its statewide presence, acquiring banks based in Bloomington, Columbus and Evansville, among other cities. Since 2007, the company has acquired 175 branches, not including the seven that are part of Tuesday's announcement.
Tower's board recently decided to explore ownership alternatives, including partnering with another bank.
Increasing regulations – and compliance costs – are making it harder for smaller banks to compete, he said. The weak economy is keeping banks from offsetting escalating expenses with more loans.
Busse said Tower's board didn't immediately jump at Old National's offer.
"Because Tower is in such excellent shape, a lot of people had dialogue with us," he said.
Jones and Cahill consider this acquisition a partnership because each bank brought strengths to the table.
Old National has well-developed agriculture lending and insurance businesses, which open new revenue opportunities in the Fort Wayne market. Also, its larger asset base allows the bank to make bigger loans than Tower has been able to make.
In return, Tower offers local relationships and a thriving health savings accounts business.
Tower's shareholders still have to approve the sale, but early comments have been positive.
Cahill on Tuesday received an email from a shareholder who'd heard the news. In large, bold letters, the message simply said, "Congrats. Thank you."
That, the CEO said, was typical of the feedback he received throughout the day. Investors, he said, were thrilled.
Some of Tower's 165 employees are likely less excited by the news. Although Old National plans to keep the management team, tellers and loan officers, some workers who toil in the background will lose jobs as the companies combine operations.
The final number of job cuts hasn't yet been decided.
Old National has promised to work with displaced employees, offering them opportunities to bid for openings throughout the company, Busse said.
The acquiring company, he said, "is going almost overboard and out of the way to find a place for them."
Or they might find jobs with the competition.
The leaders of Star Bank and iAB Bank – which are both headquartered in Fort Wayne – said their organizations will have an opportunity to woo Tower customers who prefer a locally based bank.
Jim Marcuccilli, Star's president and CEO, recalled Tower's formation by local business leaders who wanted local decision-making.
"They've basically given that up," he said.
Mike Marhenke, iAB's president and CEO, agreed.
"I think all along that was Tower's mantra: We're the local bank that will provide the services the other banks don't offer," he said. "Now they'll be telling the same story as everyone else" that isn't based in Fort Wayne.
Busse, Tower's chairman, thinks customer-hungry competitors will be disappointed because Tower customers will like the service and products they get from Old National, which he described as an Indiana community bank.
"I don't think customers are going to notice any difference," Busse said.