BANKING ON GROWTH
In Greater Lafayette, lenders are helping finance a period of remarkable expansion while confronting the financial realities of a changing banking industry
By Shelby White | June 2, 2026
For most of the past decade, American community bankers have worried about markets standing still: too little population growth, too little business investment, too little demand for loans. In Greater Lafayette, they face a different conundrum.
The region, anchored by Purdue University and a manufacturing base that includes Subaru, Caterpillar, Wabash and GE Aerospacehas spent the last several years generating the kind of commercial activity that financial institutions ordinarily spend considerable effort trying to attract.
A semiconductor supply chain is forming around Purdue’s research park. A new emergency department is headed to West Lafayette. Industrial parks are filling. Population has grown by roughly 39,000 residents since 2000, and it has not stopped.
Banks are busy. That is not the same thing as banks being comfortable. The institutions competing for Greater Lafayette’s financial relationships are operating in an environment where growth no longer guarantees easy money.
Deposits are more expensive to attract and hold than they were three years ago. Commercial real estate projects require harder scrutiny. Technology costs are rising faster than many smaller institutions budgeted for. And the single largest deposit holder in the market is not a bank at all; it is a credit union founded on a university campus in the late 1960s.
Greater Lafayette is not a troubled banking market. It is a productive one, and productivity, here as everywhere, has extracted its price. The same growth that fills loan pipelines has driven up the cost of the deposits that fund them. The same expanding economy that justifies every branch in Tippecanoe County has made every branch harder to sustain.
The deposit war
For a long time, the money just sat there.
It sat in checking accounts and savings accounts and certificates of deposit, patient and cheap, asking nothing of the institutions that held it. Community banks and regional lenders built their business models around its stillness, funding loans at spreads that felt, in retrospect, almost generous. It was not a strategy so much as a condition, the financial equivalent of good weather, reliable enough that you stopped noticing it.
Then, in 2022, the weather changed.
When the Federal Reserve began raising rates, those deposits started moving into money market funds, Treasury bills, higher-yield accounts at online platforms operated by national banks that never needed a branch in Tippecanoe County to compete for the business.
The FDIC’s Quarterly Banking Profile for the first quarter of 2026, released in late May, showed the industry on solid footing in aggregate — $80.5 billion in net income, a 1.26% return on assets, and domestic deposits rising for a seventh consecutive quarter. But the report also showed industry net interest margin declining eight basis points from the prior quarter to 3.31%, as earning asset yields fell faster than funding costs. For community banks specifically, the yield on earning assets dropped 18 basis points while the cost of funds fell only 12, a six-basis-point squeeze that has become the defining pressure of the current operating environment.
The Conference of State Bank Supervisors’ Annual Survey of Community Banks has tracked this shift in real time. Net interest margins were cited as the most important external risk facing community banks in its most recent results. In the Independent Community Bankers Association’s (ICBA) 2026 CEO Outlook survey, nearly 60% of community bank leaders said growing deposits was their greatest business challenge, a near-reversal from 2022, when most said the challenge was finding borrowers for the flood of pandemic-era deposits on their books.
The rate cycle permanently reshuffled how banks, investors and analysts think about deposit quality.
“Deposits represent the true value of a banking franchise. What that means in practice is that not all deposits are equal — institutions with high concentrations of low-cost, stable accounts now command premium valuations over those that had to pay up to keep money on their books,” said Nathan Stovall, director of financial institutions research at S&P Global Market Intelligence in a 2025 analysis of community bank deposit franchises.
In Greater Lafayette, that competition is playing out in a market unusually dense for a community of its size. Forty-four branches of 17 banks serve Tippecanoe County, according to the FDIC's Summary of Deposits as of June 30, 2025, not counting credit union locations operated by Purdue Federal and IFCU, which do not appear in FDIC deposit tallies.
Total bank deposits in Tippecanoe County stood at $3.9 billion. The broader Lafayette Metropolitan Statistical Area (MSA), which spans multiple counties, carries a larger deposit pool — First Merchants has cited a figure of roughly $14 billion in its investor materials — but the county figures are the most precise apples-to-apples comparison available.
No bank in Greater Lafayette holds more deposits than Purdue Federal Credit Union
Before any bank is counted, the largest deposit holder in Greater Lafayette is Purdue Federal Credit Union.
Organized on the Purdue campus in 1969 and headquartered in West Lafayette, the credit union holds $1.802 billion in total shares and deposits, according to its most recent quarterly financial filing with the National Credit Union Administration. That figure does not appear in FDIC deposit data, which excludes credit unions entirely — but it exceeds the county deposits of JPMorgan Chase, First Merchants, and every other bank in the market. Purdue Federal’s $1.802 billion outpaces Chase’s $1.163 billion by $639 million.
Its financial profile is strong. The net worth ratio stood at 10.9% at year-end 2025, above the federal well-capitalized floor of 7% and near the national credit union median. It carries $225.5 million in net worth against $2.1 billion in total assets, $1.52 billion in loans, and a delinquency rate on balances 60 days or more past due of less than 0.2%. Its 111,039 members span 13 locations across Greater Lafayette, Crown Point and La Porte.
That capital funds competitive pricing. The credit union’s member-giveback program returned $7.6 million to members in the most recently reported full year — a direct offer to any faculty member, staff employee or Purdue-affiliated contractor choosing where to bank. As Cherry Bekaert noted in its 2026 banking report, credit unions have become increasingly active acquirers of banks, with target assets hitting their highest annual total ever in 2024. Purdue Federal doesn’t need to acquire anyone. It is already larger than any bank in this market, and it is growing.
Among banks, Chase holds nearly 30% of the market
Somewhere along the way, a threshold was crossed. The institution that came to hold more deposits in Tippecanoe County than any other was not the one with the longest history here, or the deepest knowledge of the market, or the most familiar name on a downtown marquee. It was JPMorgan Chase, a bank that, for most practical purposes, was already in Lafayette before it arrived.
According to the FDIC Summary of Deposits as of June 30, 2025, Chase held $1.163 billion in Tippecanoe County deposits across three branches — a 29.75% share of the county bank market, nearly seven percentage points ahead of the next largest institution. That is a striking concentration for a $4 trillion bank whose Greater Lafayette presence is three branches.
The explanation is structural. Purdue University enrolls more than 50,000 students, a significant share of whom arrive with Chase accounts established in their home markets and never switch. Faculty and staff recruited nationally bring the same inertia. A Purdue professor with a Chase account from a previous city does not automatically leave it when they move to West Lafayette. That accumulated loyalty, replicated tens of thousands of times, is how a bank with no particular roots in Lafayette comes to hold more local deposits than any institution that has been here for decades.
Chase competes in the market largely on brand recognition, digital infrastructure and the sheer weight of an existing customer base. Its deposit dominance is less a statement about local banking relationships than about how national scale moves money and stays put.
First Merchants bets on scale
The dominant commercial lender in Tippecanoe County is First Merchants Bank, the retail arm of Muncie-based First Merchants Corporation, which trades on the Nasdaq under the ticker FRME.
The bank operates six branches across the Lafayette-West Lafayette area, more than any other locally-rooted institution in the market and held $888.2 million in Tippecanoe County deposits as of June 30, 2025, a 22.73% share and the second-largest position in the county, according to FDIC Summary of Deposits data.
The bank’s answer to that competitive pressure has been to get bigger. In September 2025, First Merchants announced a $241.3 million all-stock deal to acquire First Savings Financial Group, a southern Indiana lender headquartered in Jeffersonville, and closed it on February 1 of this year. The transaction added $2.4 billion in assets and $1.7 billion in deposits — giving the combined institution a balance sheet of $21.1 billion and a statewide footprint that now stretches from the Wabash Valley to the Louisville suburbs.
The first quarter of 2026 showed what that kind of growth costs before it pays off. Reported net income fell to $27.7 million from $54.9 million a year earlier, weighed down by $17 million in acquisition charges and a $29.8 million loss on low-coupon mortgage loans reclassified for sale.
But those are one-time items, and the underlying business told a different story: adjusted earnings per share rose 9.6% over the prior year, net interest margin climbed to 3.35%, and management projected continued improvement through the end of 2026 as integration costs burn off.