Indiana bank crosses the line


Old National Bank picked up 24 retail bank branches from Bank of America, including many in Kalamazoo, Portage and surrounding cities. Photo by AP|Richard Drew

Old National Bank, a $9.7 billion, 178-year-old business that is the largest bank headquartered in Indiana, recently completed its acquisition of 24 retail bank branches it bought from Bank of America earlier this year.

Some are in northern Indiana but many are in Michigan communities that include Kalamazoo, Portage, Battle Creek, St. Joseph, Benton Harbor, Niles, Paw Paw and Constantine.

The move marks Old National’s entry into the state of Michigan, which also includes new locations in the Adrian area.

The acquisitions added $780 million in Bank of America deposits to Old National’s portfolio, plus $7.7 million in loan business.

The bank said the acquisition will position Old National with more than 200 banking centers and enables the company to expand its branch network in Northern Indiana and into the communities of Southwest Michigan. Old National does not anticipate any job losses as a result of the transaction.

Growing in the Northern Indiana region and “entering the state of Michigan have long been a focus of Old National,” the bank said in a statement.

The bank expanded northward in 2007 with the acquisition of St. Joseph Capital Corp. in Mishawaka. It then opened two new locations: one in Granger, Ind., in 2009; and another in South Bend’s Eddy Street Commons in 2010.

The latest deal with Bank of America doubles the number of Old National branches in northern Indiana and gives current customers in the South Bend and Elkhart areas an expanded network of branches.

It is Old National’s first entry into Michigan, with five of the 20 new Michigan branches being in Kalamazoo and two in nearby Portage. Three of the branches are located in Battle Creek.

Old National Bancorp President and CEO Bob Jones said the transaction with Bank of America “allows us to fulfill our previously stated desire to expand our franchise into Southwest Michigan communities.”

Old National’s legal advisor in the deal was Krieg DeVault LLP, a Midwest law firm founded more than 130 years ago in Indianapolis.

Old National said it ranks among the top 100 banking companies in the U.S. Since its founding in Evansville in southwest Indiana in 1834, the bank has expanded into a footprint that encompasses Indiana, southern Illinois and western Kentucky. It also owns Old National Insurance, which it said is one of the 100 largest insurance brokers in the U.S.

When asked why Old National decided to move into southwest Michigan, Jones replied, “We love the demographics and the economy of southwest Michigan. It looks a lot like Indiana, and we have such good success in Indiana, it was just a natural extension.”

“We also believe there is a role for a strong community-focused bank in these markets,” he added. “Our opinion is, Michigan has a real opportunity for a bank that wakes up every day and worries about the market they are located in,” said Jones.

Jones said Old National’s commercial loan portfolio is just under $4 billion and it looks for locally owned businesses seeking loans for expansion — either in new equipment or real estate — with commercial lending “one of our strong suits.”

Jones described a larger chunk of lower Michigan as Old National’s target for future expansion. The area, bordered on the east by U.S. 23, by Grand Rapids on the north, and by the lakeshore on the west, “is our target market for where we think our model works best,” he said, adding, “There’s always room for good banks.”

“We like the Grand Rapids market quite a bit,” said Jones.

Old National came through the Great Recession very well, he said, and was “the first bank to repay TARP (Troubled Asset Relief Program), after we really didn’t want it. We were strongly encouraged to take it, as many banks were at the time.”

Old National borrowed $100 million in TARP funds from the federal government at the height of the financial industry crisis and repaid it in December 2008.

TARP was signed into law by President George W. Bush Oct. 3, 2008. Jones said the intent of the TARP loan was to support healthy banks that would be expected to help the government deal with weaker banks that were in danger of failing.

There was a public backlash to TARP as a “bailout” of banks, and Jones said “the tenor of what it was intended to do changed dramatically. It just didn’t fit our culture” to borrow government funds it did not need.

Jones said Old National had to fill out a more complicated application form to repay the TARP loan early than the original application to get the loan.

Iberia Bank in Louisiana has claimed it was first to repay TARP, but Jones said, “We’re pretty sure we were.”

Jones said Old National is a community-focused bank that lends only to customers in its market, and that it does not “do a lot of these sophisticated, syndicated credits” within the industry.

“Our bread and butter is just old-fashioned community banking, where we are lending to folks we see at church, on the golf course, in restaurants,” adding that it helps to “know your market so well. Because of that, we fared very well” during the recession.

Jones said there are many strong commercial banks in the Grand Rapids market, and some “very good locally owned credit unions.” Old National, he said, is between the larger, super-regional banks at one end and the smaller locally owned community banks at the other.

Phil Harbert, Old National’s Michigan regional president, noted that Chemical Bank, based in Midland, is about the same size as Old National and also active in the larger geographic markets that Old National will be in. He described Chemical as “a very well run bank, as well.”

Jones serves on the Federal Reserve Board at the District 8 office in St. Louis, where the talk is always about the economy. He said the recovery now is slow, but “given the depth of the recession, I don’t think that’s abnormal.”

The Obama administration decision to deal with budget cuts by sequestration of spending and the tax law changes both are adding to the uncertainty.

“There has been so much unease put into the economy that the recovery is going to be at this slow pace,” said Jones.

The Federal Reserve is also a source of uncertainty regarding its strategy of buying back bonds and the future impact on the interest rate.

“You’ve got no clear direction coming out of Washington,” said Jones.

Dan Doan is Old National’s central region CEO, which includes the Michigan region.

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