Locals know best

If we buy a bank, we depend on the people there to continue running it. We provide guidance, but they still run it.”
—Jim Lindemann,
Industry Bancshares

Based in a town of just over 300 people, Industry Bancshares has grown exponentially through acquisitions. The secret? Letting the banks it buys continue to run the show.

By Ed Avis

Jim Lindemann knows there is a lot of value in the deep community knowledge that local bank employees typically have. Since becoming president of Industry Bancshares in Industry, Texas, in 1988, Lindemann has grown the institution from $18 million in assets to $3.6 billion by acquiring small-town banks and letting the existing local staff do their jobs.

“I really think that’s a major difference between us and some other banks,” Lindemann says. “If we buy a bank, we depend on the people there to continue running it. We provide guidance, but they still run it.”

Lindemann grew up in Industry, and his great-grandfather was the founder of Industry Bank. Lindemann, however, did not even live in town when the president role at Industry State Bank became available nearly 30 years ago.

“I was working for Teneco in Houston, and I had been there 23 years when this opportunity came up,” Lindemann says, adding that he had been on the board of the bank since 1983. “The person who was president of the bank wanted to retire, and I just decided it was time for a change, so I came back home.”

Family affair—Jim Lindemann with his son, Brad, who is CFO of Industry Bancshares.

Lindemann had worked in the finance department of Teneco, so he understood some aspects of the banking business. But there was much on-the-job education ahead of him.
“One of my early learning experiences was that one of the loans I made early on went bad,” he remembers. “It was just a small consumer loan, but that experience got the point home. After that, I understood how that worked.”

Growth by acquisition
The bank was already 77 years old when Lindemann stepped into the corner office. It had weathered some rough times—at one point before World War II, the bank had a total of $2,500 in loans outstanding—but it persevered. In fact, the bank had paid a dividend to its shareholders every year since 1938.

However, the population of Industry in 1988 was 304, so the potential for expanding the bank locally was minimal. The solution: acquisitions.

“There was a bank, New Ulm State Bank, about five miles away that we competed with,” Lindemann says. “They made some bad loans, so we had the opportunity to buy them in 1989. That was our first acquisition.”

In 1993, Lindemann and his colleagues changed the bank to a holding company, Industry Bancshares. This made acquisitions easier and opened the door to insurance sales. Today, Industry Bancshares has about 730 shareholders, none of whom owns more than 5 percent of the corporation.

The first acquisition after making the corporate change came in 1998, when Industry Bancshares acquired Citizens State Bank in Buffalo, Texas, a community of about 2,000 people 126 miles north of Industry.

Four more acquisitions followed in subsequent years, all in small towns in central Texas.

“We have chosen to stay out of the big cities,” Lindemann says. “The small banks in small towns have been a really good niche for us. And there’s money in small towns.”

Powered by people
In each of Industry Bancshare’s acquisitions, the owners either wanted to retire or they realized growth could be facilitated by joining Industry Bancshares. But when Lindemann’s organization takes over, he depends on the local management to continue running things.

“We are not a big bank that has a lot of people in reserve that we can send out to the banks we acquire,” Lindemann says. “We count on the people who are already there to keep running the bank. They know the people and the area, so we can spend our time on more important things than trying to learn about the area and train a new staff.”

Each acquired bank also keeps its local board of directors.

“Our success is the people who work for us. They live in the town, work there, go to school there, go to church there,” he says. “They are small-town people and they fit in with what we want to do.”

Though the local staff remains in place, Industry Bancshares finds cost savings by taking over some tasks that it can do better, including IT, compliance, internal audit and human resources.

But even in those areas, the local employees still have essential input. Hiring, for example, is done locally. Industry Bancshares’ HR department just provides guidance.

A key area that remains in local control is lending. “The loan policies are unique to the bank, and they make and collect the loans in their area,” Lindemann explains. Lending ranges from agricultural to small-business to home loans, he adds. “We try to do whatever lending the area needs.”

The individual banks that are part of the holding company have grown. Citizens State Bank had one location and $55 million in assets when Industry State Bank acquired it 19 years ago. Today, it has six locations and $895 million in assets.

Lindemann says continued growth is important to Industry Bancshares, but he cannot predict when or where his next acquisition will occur. He does know it’s likely to be a small bank in a small town.

“We have been very fortunate in the small towns we have gone into,” he says. “We look for smaller towns where the people are involved in community affairs, and the bank can just be part of the community. It’s like banking in the old days.

Ed Avis is a writer in Illinois.