The large-scale mechanization of agriculture in Indiana after 1850 encouraged the growth of banks to lend money to farmers to buy farm machinery, using their land as collateral. The financial panic of 1893 caused most banks in the state to suspend operations, and the depression of the 1930s caused banks to foreclose many farm mortgages and dozens of banks to fail. The nation's subsequent economic recovery, together with the federal reorganization of the banking system, helped Indiana banks to share in the state's prosperity during and after World War II.
In September 2002 there were 214 insured banks in the state, of which 122 were state-chartered. The total assets of insured banks amounted to $118 billion. Twenty of Indiana's insured institutions were less than nine years old as of 2002.
Indiana's bankruptcy levels are relatively high and growing. Indiana's community banks (those with less than $1 billion in assets) saw an increase in profitability in 2002, however, due to improved net interest margins (NIMs) (the difference between the lower rates offered to savers and the higher rates charged on loans). The largest institutions (with assets over $1 billion) realized improved performance as well, with lower delinquencies compared with 2001.
The Department of Financial Institutions regulates the operations of Indiana-chartered banks, savings and loan associations, and credit unions, and monitors observance of a Uniform Consumer Credit Code. The department is headed by a seven-member board, each board member serves a four-year term and no more than four members may be of the same political party. A full-time director, also appointed by the governor to a four-year term, is the department's chief executive and administrative officer.