officer James A. Risinger looks out an 11th-floor window of his company's headquarters and contemplates the changing local banking market.
He sees a sign atop his chief rival's downtown skyscraper that reads "Civitas Bank." But later this year Civitas and its parent, $7.2 billion-asset CNB Bancshares, is to be acquired by $31.6 billion-asset Fifth Third Bancorp of Cincinnati. Once that purchase is completed, Fifth Third -- which now operates just 28 branches in Indiana -- will be the largest banking company in Evansville and third-largest in Indiana.
Mr. Risinger seems unfazed by the prospect. "As sure as the sun goes down at night, there will be inefficiencies when you merge two major organizations," he said.
But neither is he unaware of the challenge. "As sure as the sun comes up the next day, they're going to get their act together and become very tough competition," he added.
Fifth Third is considered one of the nation's best-run banking companies; it routinely receives high marks for customer service, and its efficiency ratio is among the best in the country for banks its size. It is rarely outbid on acquisitions, thanks to its hefty stock price.
But if Old National officials fear it, they are not letting on. In an interview, the company's top executives expressed little doubt that $6.9 billion-asset Old National will beat Fifth Third in Indiana.
"We're not being cocky about it, but we don't view the entry of Fifth Third into our markets as some seminal event that will change how we serve our customers," said chief financial officer John Poelker. "It will make us better, and we'll have to work harder and stand tough, but they don't have any particular advantage over us."
Old National is already on the offensive. In late July it announced its largest deal acquisition ever -- a $212 million agreement to buy ANB Corp. in Muncie, Ind. Adding $784 million-asset ANB would boost Old National's Indiana assets to $3.7 billion, ranking it first among banks headquartered in the Hoosier state.
But Old National would still be fourth overall behind out-of-state rivals Bank One Corp. of Chicago, National City Corp. in Cleveland, and Fifth Third after the CNB deal is completed.
Mr. Risinger said Old National wants to be the leader in its main markets, such as Evansville and Muncie. "We don't want to be a midpack player," he said. "We want to be on top."
Toward that goal, the company is trying to increase efficiency by consolidating its 21 banks under one name. The charter conversion, expected to be completed in early 2000, will save the company about $8 million a year.
"Old National's management is focused on the right things," said Joseph Stieven, an analyst with Stifel Nicolaus in St. Louis. "While growth in assets sounds great, it's all for naught if banks don't fuel earnings-per-share growth. Old National has done both."
Old National's climb began almost two decades ago. Anticipating the Indiana legislature's change to a law barring holding companies from owning multiple banks, Old National negotiated its first acquisition in 1982.
Just months after the law changed in 1984, $700 million-asset Old National closed the deal to buy Merchants National Bank in Terre Haute and never looked back. The ANB deal is Old National's 39th acquisition in 15 years.
"With the changes coming, we saw three options," said Ronald Lankford, Old National's president and chief operating officer. "We either could just continue the way we were going and someone would probably buy us, or we could acquire other banks in other cities, or we could let the grass grow under our feet."
Yet even as it was expanding into other cities, Old National maintained a firm grip on its hometown. Unlike the state's other population centers, namely Fort Wayne and Indianapolis, that have lost most of their hometown banks, Evansville is still primarily served by its three local banks -- Old National, Civitas, and National City Bank (unrelated to Cleveland-based National City Corp.).
"Evansville is a unique place," said Brock Vandervliet, an analyst with Keefe Bruyette & Woods Inc. in New York. "The players there have grown up over time as the city developed around them. It's been tough for new banks to penetrate there."
But Old National has also expanded into Kentucky and Illinois and will soon enter Tennessee with its pending deal for $228 million-asset Heritage Financial Services in Clarksville.
Rather than pay astronomical sums for banks and then slashing operating costs and personnel to make mergers profitable, Old National prefers to minimize customer disruption by keeping most managers in place after an acquisition.
That way of thinking impressed ANB, its chief executive officer said.
"When we sat down to talk, we started hearing the same philosophies told to us that we said to other companies we had courted," said James Schrecongost, who is also ANB's president. "It was the same approach. We were just sitting on the other side of the table."
Those first informal talks were held in the summer of 1998. A year later ANB decided to sell and called Old National.
"Once both parties got serious, it didn't take long to see whether we were going to get together or not," said Thomas Clayton, Old National's senior vice president of operations. Roughly 30 other banks and thrifts have heard Old National's pitch.
"We want these banks to know if they decide it's time, we'd like to buy them," Mr. Poelker said. "We're not trying to convince them to sell, but we want them to know our story."
But in the future Old National's story might not be enough.
Because of local banking loyalties, the company will probably fare well against Fifth Third in competing for loans, deposits, and other business, said Mr. Stieven, the Stifel Nicolaus analyst. But Old National might have a hard time outbidding Fifth Third for acquisitions. Fifth Third's stock trades at more than five times book value; Old National's trades at 2.6 times book.
"Fifth Third is arguably the best-run bank in the United States," Mr. Stieven said. "Competing with them on an acquisition basis can be a little like playing basketball with one arm tied behind your back.
"But Fifth Third likes to make money, so they don't price acquisitions irrationally. I'd rather compete with a well-run bank like that than one that moves irrationally."
Fifth Third's stock-price advantage is not lost on Old National executives.
"We're not going to be able to pay the same price that they can pay," Mr. Poelker said. "Does that mean we'll miss some opportunities? Yes, it does. All other things being equal, there will be some banks that we'd love to buy but won't pay what it takes to get them."