Old National could look at National City branches, other acquisitions after approval for treasury capital injection, CEO says

Old National (NYSE:ONB), the Evansville, Illinois-based bank, could look at acquisitions if it decides to take the USD 150m capital injection that has been approved by the Treasury, said Chief Executive Officer Bob Jones. 
The bank, whose market capitalization is currently more than USD 1.2bn, is waiting for the Treasury to issue details of the plan before it decides whether or not to take the capital, said Jones. "We want to make sure we understand the covenants and restrictions involved," he said. 
If it decides to participate, it would use some of the funds for lending and some for acquisitions in its core markets of Indianapolis, northern Indiana, and the area between Indianapolis and Louisville, said Jones. 
Old National has worked with a number of legal and financial advisors in the past, and would decide on advisors for potential deals "depending on the deal, depending on the market," said Jones.
For its last acquisition, that of Mishawaka, Indiana-based St Joseph Capital, an approximately USD 500m asset-size bank purchased for USD 75.6m, which closed early last year, Old National was advised by Sandler O'Neill & Partners and its legal counsel was Ice Miller, according to regulatory documents. Old National's auditor is Crowe Chizek and Company, also according to regulatory documents. 
Jones told this news service in April that branches of National City that would be divested after it was taken over, would be of interest to Old National. If branches of National City are divested as a result of PNC's purchase, Old National is interested in them, said Jones.
The Louisville market is not highly concentrated, according to government Herfindahl-Hirschman Index calculations, thus compelled divestitures may not be occurring on the basis of high concentration, industry sources familiar with regulation and market concentration issues said. However, National City ranks number one there in terms of deposit market share, with more than USD 3.9bn in deposits, while PNC ranks third with more than USD 2.1bn, according to industry figures, thus giving rise to the possibility of divestitures, either voluntary or otherwise, said the industry sources. A spokesperson for National City told this news service last week "that there will be some divestitures of branches with strong market share" and that Louisville was one of the markets where there is "overlap." 
Old National could also look at acquiring regional banks that are having problems, said Jones. 
When asked about acquisition multiples, Jones pointed to the PNC/National City deal at just over book value as a possible barometer for future deals, while saying that in the end, the market will determine deal values. 
In Fort Wayne, Indiana's second largest city, Old National could likely benefit adding to its one-office presence there through a potentially opportune acquisition, such as Tower Bank & Trust, said the sources. With nearly USD 691.3m in assets as of 30 June, according to regulatory documents, Tower Bank, owned by NASDAQ-listed and Fort Wayne-based Tower Financial, is concentrated in Fort Wayne, an important Indiana market, and can be seen as trading at less than 0.9 price/book, the sources said. Tower has a market capitalization of USD 34.55m. Its shares closed today at USD 8.46, down from a 52-week high of USD 14.24. Tower did not comment. 
A bank that could be seen trading at about 1.15 price/book, based on its current price and most recent quarter, which could potentially fit well with Old National, said the sources, is Bloomington, Indiana-based and NASDAQ-listed Monroe Bancorp. Monroe has the number one deposit market share in the Bloomington market, and could boost Old National in other areas, including adding a presence in Noblesville, just north of Indianapolis, where Old National has a significant presence. The sources said the fact that Old National holds the number four - a fairly relatively distant number four - market share position in Bloomington may not preclude any deal based on regulatory grounds. A deal could be greatly beneficial to Old National. Monroe has a market capitalization of more than USD 63.2m. Monroe CEO Mark Bradford declined to comment. 
Old National has 20 days from the date of approval by the Treasury, which was 27 October 2008, to decide whether or not to use the funds. 
The company has not decided how much of the capital would be allocated for acquisitions and how much would support bank business, such as lending and the development of its local communities. "We have an important role to play in economic development," said Jones.