Old National Bancorp, which has not bought a bank since 2000, is embracing the time-tested acquisition strategy of courting potential targets.
The $8.2 billion-asset Evansville, Ind., company has promoted Harold "Slug" Clemmons Jr. to senior vice president of mergers and acquisitions. His job: developing relationships with banks that might sell over the next few years.
"We hope, if we can establish a good enough relationship with some of these, we may not have to go through an auction process," Mr. Clemmons said in an interview Monday.
Chief financial officer Christopher A. Wolking said Old National is looking for banks in Indiana, southern Illinois, and western Kentucky with $300 million to $500 million of assets. It is also interested in buying branches from larger banks aiming to trim their operations in slower-growing markets.
Old National knows its area well and could use those branches to generate more business, Mr. Wolking said. "They're good branches," but larger banks "may not share the commitment to those markets that we do."
His company's last banking deal was the July 2000 purchase of the $502 million-asset Permanent Bancorp Inc., also of Evansville, for $92 million. Since then Old National has bought six insurance companies, a technology company, and an investment consulting firm, but it has sold 15 branches.
Mr. Wolking said Old National is making its move now because it has improved its operations and earnings.
"You hate to go out looking for an acquisition when you don't feel like you have your own house in order," he said.
Old National has been retooling since 2000, when James A. Risinger, then its president and chief executive officer, launched an efficiency drive that included consolidating the company's 21 charters into one. In 2003, Old National hired EHS Partners LLC of Chicago for efficiency help; Mr. Risinger resigned in February 2004 after hoped-for earnings improvements did not materialize.
In June 2004 the company announced it was laying off 300 employees and taking a $24 million restructuring charge. Robert G. Jones took over as the president and CEO that September and continued to make changes, including cutting loan production offices, delegating pricing authority to regional presidents, and eliminating some managerial posts to gain more direct control over the business.
In April of this year Michael R. Hinton resigned as chief operating officer to pursue other interests, the company said. His successor has not been named.
From 2002 to 2004, Old National's earnings per share fell 50%, to 90 cents. By last year they had inched up to 93 cents. In the first quarter the earnings rose 48% from a year earlier, to 31 cents.
Last year Old National's return on equity improved to 11.72%, from 9.23% at the end of 2004, and its efficiency ratio improved to 63.2%, from 72.96%, according to Federal Deposit Insurance Corp. statistics.
John S. Poelker, the company's CFO until he retired early last year, said Mr. Clemmons is not its first acquisitions officer; the last person to hold the post also retired early last year.
Banks often think about selling themselves and lining up potential buyers two to three years before a deal is announced, said Mr. Poelker, now the managing director of Poelker Consultancy Inc., a bank consulting firm in Atlanta. That means a bank needs to build and maintain relationships with banks it might want to buy, he said.
"Over the long pull, it makes sense for Old National, and banks of that size, to have someone to keep their ear to the ground, who gets out and knows the markets the bank is interested in," he said.
Mr. Clemmons, who joined Old National in 2002, was senior vice president of retirement products. Before that he had been the senior vice president in charge of operations.
His nickname came from his sister's Sunday school teacher, who sent a card to his mother when he was born. The card read, "Congratulations on the new slugger." The nickname stuck and was shortened to "Slug" when his younger brother could not say "Slugger."
