Eleven community banking organizations in Indiana and Michigan are doing their best to save an endangered species: the multibank peer group.

The holding companies and their ancestors have been participating for 40 years in Financial Associates, meeting twice a year to look over each others' books, discuss mutual concerns, and share approaches to solving problems.

The regional peers abide by a noncompete agreement: If one bank finds itself in competition with another, it will leave the group.

"It's an informal group," said John Perry, secretary of $1 billion-asset First Financial Corp. of Terre Haute, Ind., and senior vice president of Terre Haute First National Bank. "The CEOs can bounce ideas and thoughts off one another and get feedback from other banks."

Such peer advisory groups are not unknown to the banking industry or to segments within it. But Financial Associates has outlived others that folded because of consolidations and other structural changes that reduced the number - or the willingness-of bankers to divulge intimate business details to peers.

Edward Furash, chairman of the Washington consulting firm Furash & Co., said community bankers could benefit greatly from such groups-assuming they could find willing partners that do not serve overlapping markets.

"They're difficult to manage, but they do have some value," Mr. Furash said. "They're good for CEOs because they don't have anyone to talk to back in their home banks."

Financial Associates started out as a social gathering place for Indiana bankers in the days when they were not allowed to offer services across county lines.

The peer group's mission has changed with the industry, said Stefan S. Anderson, chairman and chief executive officer of $1 billion-asset First Merchants Corp., Muncie, Ind.

When Mr. Anderson joined the group 20 years ago, all business discussions stopped at 8 p.m. so members could play bridge. Now the group is all business, spending about four days a year in an Indianapolis hotel conference center working late into the night on agenda items chosen by the members.

While the banks in Financial Associates have access to educational workshops sponsored by state and national bank associations, Mr. Anderson said Indiana and Michigan group members benefit because they are literally peers, with assets ranging from $250 million to $3.5 billion.

"Being involved in this group allows us to form an agenda that is size- specific," Mr. Anderson said. "We are talking about lifeblood types of issues that affect each one of us."

At their last meeting, for example, members spent considerable time discussing Internet programs and how to use customer data analyses for marketing purposes.

Mr. Anderson acknowledged that he has the option of attending peer sessions sponsored by consulting firms, but "I value this because I don't have to go to Hilton Head or the Homestead to have a conference," he said. "I can drive to Indianapolis and work for two days."

David S. Hickman, chairman and CEO of $710 million-asset United Bank and Trust Co. in Tecumseh, Mich., said he has attended a sharer group sponsored by Austin, Tex.-based Alex Sheshunoff Management Services Inc., but he likes Financial Associates' informal, trusting atmosphere.

"When you get an opportunity to meet with good people from good banks, you don't pass that up," he said.

Mr. Hickman, who tried unsuccessfully to form a similar peer group in Michigan several years ago, said the key to Financial Associates' success and longevity is the strictly enforced noncompete clause. Whenever a member begins competing with another, the instigator is asked to leave the group.

While the noncompete pact has been one of Financial Associates' defining characteristics, it may also lead to its demise. Mr. Sheshunoff, president of the eponymous management consulting company, said many peer groups that started about 20 years ago disbanded after well-run member banks were acquired.

"The noncompeting aspect is harder and harder to achieve," he said.

Financial Associates' noncompete rule drove away about 10 of the original 15 members, and market lines are increasingly blurred with the spread of electronic banking.

"There may be a day when we're all competing against one another," Mr. Perry said. But he suggested at least one of its human qualities will endure: "Some real fine friendships have developed from this group." u

competing aspect is harder and harder to achieve," he said.

Financial Associates' noncompete rule drove away about 10 of the original 15 members, and market lines are increasingly blurred with the spread of electronic banking.

"There may be a day when we're all competing against one another," Mr. Perry said. But he suggested at least one of its human qualities will endure: "Some real fine friendships have developed from this group."

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