ALICE CULP South Bend Tribune firstname.lastname@example.org
South Bend Tribune
8:27 AM EDT, August 18, 2013
SOUTH BEND - Just 11 days after Abraham Lincoln delivered the Gettysburg Address, a small bank opened in South Bend.
Then, it was known as First National Bank of South Bend. Today, it is known as 1st Source Bank.
Though it has grown to about 76 locations over the past 150 years, the bank's main focus is still on the local community. And, that is where its directors and leaders wish it to remain.
"The bank's objective is to serve the northern Indiana-southwestern Michigan area and the businesses here," says Christopher Murphy III, chairman and CEO of the bank. "We are trying to help people who are living here, working here and growing business from here."
1st Source, which has been run by the same family since the 1930s, has grown primarily one customer at a time, Murphy says. It has branches as far north as Kalamazoo and as far south as Lafayette, Ind. It offers a full range of deposit savings and investment loans for individuals and businesses.
While it is not the largest bank in Indiana, 1st Source has been honored by Forbes as one of America's best banks and was named one of the top 1,000 banks in the world for 2013 by The Banker, an industry magazine.
"We are involved across the fabric of this community," Murphy says. "Our interests are here. We employ people here. We care about what happens to the businesses here and how they grow and succeed."
The University of Notre Dame was just 21 years old and the Civil War was in its final months when several local men organized First National Bank of South Bend.
It was the city's second bank.
"Judge (Thomas) Stanfield, a very prominent judge in the area at the time, was one of the original founders," Murphy says. "Schuyler Colfax was one of the early investors. He went on to Êbecome vice president (of the United States under Ulysses S. Grant) a few years later."
The bank moved several times and, in 1928, it became the 15th bank in the nation to replace teller cages with an open counter system, which allowed bankers to provide more personal service.
Then came "Black Tuesday." Between 1930 and 1932, 11 of South Bend's 18 banks closed. But First National survived and, in 1931, it merged with another bank to form First Bank & Trust Co.
The move was engineered by Ernest M. Morris, founder and president of Associates Investment Co., and Vincent Bendix, founder and president of Bendix Aviation Corp.
"E.M. Morris and Vincent Bendix each put a half a million dollars into it to make sure that in the depths of the Depression there was a strong bank serving businesses and individuals across the community," Murphy says.
After President Franklin D. Roosevelt declared a bank holiday in 1933, the first South Bend bank to reopen without restrictions of any kind was First Bank. In fact, that first day its deposits exceeded withdrawals according to a history of the bank written by First Source.
"That is emblematic of what has happened to us over time," Murphy says, explaining that in the recent recession 1st Source did not participate in the losses that came in the mortgage markets because it didn't do ALT-A or subprime lending.
"We believed that we were responsible to and for our clients, and we didn't want to put them into houses they couldn't afford," he says, explaining that the bank's mission is to help clients "achieve security, build wealth and realize their dreams" and "sometimes that means teaching them delayed gratification."
A bank is a reflection of the communities it serves, Murphy says, and the stronger those communities are, the stronger the bank is going to be. So, 1st Source invests in its communities through both its financial services and its volunteer efforts.
"I think that's been a basic tenet of the family since the beginning, and it has carried over to all of us who have joined the institution over the generations," Murphy says.
Financial institutions using their resources to strengthen their communities is the kind of longevity that matters, says Paul Marsh, president and CEO of Teacher's Credit Union, also based in South Bend.
"Financial institutions like TCU and 1st Source have great responsibility to the community to not only provide financial stability, but to also give back and bolster the success of the community as a whole because all boats rise in high tide," he says.
This was noticeable in 1963 when the Studebaker plant closed and left 7,000 men and women unemployed. 1st Source's loan department deferred many of the employees' payments and made loans to others.
This type of situation is why, when it comes to business, Jeff Rea, president and CEO of St. Joseph County Chamber of Commerce, says: "We like to have the headquarters and decision-makers here."
Often, he explains, economic challenges happen when a company makes decisions about local growth and operations somewhere else.
"I would be hard pressed to come up with a list of businesses that have been in the community that long. It's a real testament to 1st Source's roots and their investment in the community."
Because of its early connection with Associates, the bank had valuable knowledge of commercial finance. It used that knowledge to build a set of financial businesses across the country.
1st Source Corp., the bank's parent company, has 22 special finance businesses across the U.S., says Murphy, who also serves as chairman, president and CEO of the corporation.
"Those have allowed us to balance the business so that we are not reliant on any one geography or any one particular type of business."
The company is involved in lending and leasing in markets as diverse as heavy trucking, funeral cars, shuttle buses, personal and business aircraft, construction machinery and environmental equipment.
On the banking side, the company opened its first branch in 1935, with more branches following in the 1950s, but the bank was restricted geographically to St. Joseph County.
"In the early days, you weren't allowed to branch outside the county in which your home office was located," Murphy says. "And even then you were not allowed to branch into a town or township in which the home office of another bank was located."
The laws eventually changed, but Indiana and Illinois were two of the last states to adopt new rules, which is why there are no really large banks headquartered in the region. That fact has allowed 1st Source to thrive.
Today, 1st Source will occasionally make an acquisition, but it prefers to grow one client at a time. Its "stock and trade" is locally owned and controlled businesses.
"Small businesses are critical to us," Murphy says. "That's where your innovation comes from, where your growth comes from, where the majority of your employment comes from."
Today, 1st Source, which has about $4.6 billion in assets, focuses on giving its clients "straight talk and sound advice," Murphy says. "And keeping their best interests in mind for the long term."
It serves all types of clients from businesses such as Data Realty and BioMet, to individual homeowners and farmers.
"I think the main thing people enjoy about the bank is that we started here and we're staying here," says Ernestine M. Raclin, E.M. Morris' youngest daughter and former chairman of the bank.
"They like the size and the fact that we know the customers and they know us," she says. "In this day and age, when everything is so impersonal, that's wonderful."
With the onset of technology, Raclin has seen many changes in the way the bank does business, from an increase in the number of times a week people do transactions to the massive amount of regulation and the need for greater security.
Raclin took over as chairman of the bank when her husband, Michael Carmichael, died in 1976. She soon called Murphy -- her son-in-law was at one of the largest banks in the nation -- and asked him to come help run the bank.
Together, they oversaw a brand change in the 1980s, when the bank finally became known as 1st Source Bank.
"We would ask customers what our real name was before and they couldn't tell you," Raclin says, explaining that people constantly confused First Bank and FBT Bancorp -- the name the bank had before 1st Source -- with other "First" banks.
"We really wanted to be the source of all your financial needs," Murphy says, explaining that 1st Source is committed to South Bend and the Michiana region and that its intention is to remain independent.
To that end, the bank has a very detailed succession planning process at all levels and is continually training and developing employees, even sending them to Harvard and the University of Michigan.