Union Federal Bank to Merge with Sky Financial

One of the city's last locally owned banks is moving its headquarters out of state. Union Federal Bank has put its name on the Colts complex. Now that relationship and many jobs are in question as it announces a merger with Sky Financial.

Many customers say they'd rather work with a bank that's headquartered close to home.

"You get a better feel for the bank, the people who work there. It's not big business. It's kind of home grown, and people are comfortable with that,” said Brent Willoughby, customer.

Starting this fall, Indianapolis will have one fewer homegrown banking institution. Union Federal says it's merging with Sky Financial, which is headquartered in Bowling Green, Ohio.

Our newsgathering partners at the Indianapolis Business Journal say it's a sale, not a merger and it's worth $330 million in cash and stock value.

Union Federal is the city's third largest bank, and over the years, its brand has become closely connected with Indianapolis. Union Federal calls itself the official bank of the Indianapolis Colts, and forged a tight association with central Indiana in commercials that state: "Union Federal Bank has become a keystone of our communities, and our game plan is to stay there."

Financial analyst LH Bailey says customers take the bond with their bank seriously. "It's really about relationships, and if the people are not here that can make the difference, then the relationship is not here," said Bailey.

Union Federal officials say their name will be different, but the relationship will be the same.

"We think people bank with people. Our clients won't see a significant change, if any, in the way we do business,” said Kit Stolen, Union Federal chairman and CEO.

Union Federal's sale leaves just two major Indianapolis banks with local ties, at least for now. "It's a possibility that you will see some of the remaining banks that are headquartered here, First Indiana and National Bank of Indianapolis. They must also look at markets, maximize best shareholder value, and so their boards will consider any such offers in the future," said Bailey.

Beginning this fall, Union Federal joins a long list of names: American Fletcher, Merchants Bank, and Indiana National Bank are also no longer part of the city skyline.

Experts say losing a banking headquarters costs a community jobs, office space, and administrative experience. Union Federal officials say it’s too early to determine the long-term impact on their move.

Indiana is accustomed to bank takeovers, but the Indiana Bankers Association says the Union Federal deal is the first in recent years to involve an out-of-state buyer. Lately, most have been Indiana banks joining forces. The association also says Indiana still has about 180 banks chartered and operating almost exclusively in the state.

Old National based in Evansville is the largest with $8 billion in assets. Irwin Union of Columbus is next with assets worth $3.8 billion. First Indiana based in Indianapolis follows with a value of $1.8 billion.

What are people saying about mortgages today:

Rates on 30-year mortgages edged down last week to a seven-month low. Mortgage-giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages fell to 6.3 percent, down slightly from 6.31 percent two weeks ago. It put rates at the lowest level since they were at 6.24 percent the first week of March.

Bank of Hawaii, Central Pacific Bank, Territorial Savings Bank and Wells Fargo Home Mortgages all cut their 30-year mortgage rates to 5.75 percent this week.

Most people think of a mortgage as a means to an end. After all, you buy a house, not a home loan. But a mortgage is much more than the path to homeownership. It is a financial instrument that must be managed, just like any other financial investment.