Economy & Finance

Old National to buy 24 Bank of America branches, expand into Michigan

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— After eyeing the Michigan market for some time, Old National Bank has decided it’s time to take the plunge.

On Wednesday, the Evansville-based bank announced its plans to purchase 24 banking centers from Charlotte, N.C.-based Bank of America.

The purchase agreement includes four branches in the Indiana cities of South Bend and Elkhart; and 20 branches in the Michigan cities of Adrian, Battle Creek, Benton Harbor, Blissfield, Brooklyn, Constantine, Jackson, Kalamazoo, Niles, Paw Paw, Portage and St. Joseph.

The deal, which is expected to close in the third quarter, will mark the company’s first presence in Michigan. It will also double Old National’s current presence in northern Indiana.

Currently, the bank operates locations in Indiana, Illinois and Kentucky. Once the current deal closes, the company will have more than 200 banking centers in four states.

Bob Jones, Old National’s president and chief executive officer, said the deal is part of a larger strategy the company has held since 2004 — expanding its presence in higher-growth markets while pulling back from lower-growth or noncore markets.

Northern Indiana and Southwestern Michigan fit this strategy, Jones said, because they are poised for growth.

“We’re getting into the economy at a time when we’re seeing a recovery,” he said.

In a presentation it shared with analysts and investors during a conference call Wednesday, Old National presented economic data about the two acquisition markets.

As of October, the data said, the six Michigan metro areas which Old National is entering had unemployment rates ranging from 6.1 percent to 7.3 percent. The state average was 9.1 percent.

For that same month, the Northern Indiana metro areas had unemployment rates slightly above Indiana’s state average of 8.0 percent. The South Bend/Mishawaka metro area in Indiana and Michigan had unemployment of 8.2 percent, and the Elkhart/Goshen metro had a rate of 8.3 percent.

But, Jones said, Old National has met its growth goals in Northern Indiana since it entered that market in 2007.

Elkhart was hit particularly hard by the recent economic downturn, but Jones said since then the area “has seen good economic recovery since it became the de facto poster child for the Great Recession.”

As part of the deal Old National will acquire about $778.8 million in deposits and $7.7 million in loans associated with the 24 branch offices. Bank of America is retaining possession of most of the loans associated with the branches, Jones said.

As part of the deal Old National will pay Bank of America a 2.94 percent deposit premium.

Old National said it does not anticipate any job losses, since it is acquiring the 24 branches with the intent of keeping them all in operation.

That aspect was especially attractive to Bank of America, said Diane Wagner, a spokeswoman for that bank.

The branch sales are part of a larger Bank of America plan to trim back its branch network, Wagner said.

By selling branches to a regional bank rather than closing them, Bank of America could rid itself of those locations without laying off employees or forcing customers to find a new bank, Wagner said.

In its 2011 annual report, Bank of America discussed its plans to reduce costs by $5 billion a year by 2014. As part of this plan, which it calls Project New BAC, the bank said it planned to reduce its workforce by about 30,000. These reductions, the bank said, would come mostly through attrition or eliminating unfilled positions.

Shares of Old National closed Wednesday at $12.87, up 9 cents.
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