By Dan Shaw, Evansville Courier & Press
Old National Bank is the latest of several local banks to announce it has accepted federal money.
The bank, based in Evansville, announced Friday that it will receive $100 million from the U.S. Treasury Department. In exchange, the government will gain preferred, not-voting stock in Old National.
Bob Jones, bank president and chief financial officer, said participating gives the bank the opportunity to have "more funds available to lend to qualified borrowers and invest in our markets."
The money will also let the bank pursue its growth plans and give it an extra cushion of capital during the economic difficulties which many experts believe will persist for the next 18 to 24 months, Jones said.
Several other banks in Evansville have said they will take part in the government's program, which is meant to encourage lending from institutions deemed to be "healthy." In November, Integra Bancorp said it would welcome the injection of capital, of which it stands to receive between $27 million and $80 million. And Fifth Third Bank, a regional affiliate in Evansville, has been approved to receive $3.45 billion.
Meanwhile, German American Bancorp, based in Jasper, Ind., has yet to decide if it will take part in the program, which would give it as much as $25 million. Marc Schroeder, German American president and CEO, said executives are still reviewing the rules which accepting would force the bank to operate under.
The deadlines for various institutions are staggered, and German American has at least another 30 days to decide, he said.
As for Old National, it will have to follow a schedule for paying back the government's money. It will pay 5 percent of the $100 million during each of the first five years and nine percent during each year afterward.
Old National has taken several months to decide if it would participate. It was in October that the federal government had first asked the bank to accept federal capital. It was authorized to receive as much as $150 million.
Bank officials hesitated because they were uneasy about any strings which might come attached. Among the causes for concern were limits the government may have placed on the bank's ability to raise its dividends - something Old National has been able to do for 26 years in a row. Executives have since learned that the dividend can be raised with the permission of federal regulators.
Old National today proposed several uses of the money, one being to buy other banks. In November, Old National enlarged its presence in Indiana through the purchase of 65 Charter One branches formerly owned by Citizens Financial Group. The deal is expected to cost $15.9 million and to close in the first quarter of 2009.
That sale will take place without the use of the federal money.
"Our current capital position is strong, and one of our primary objectives for participating in the capital purchase program is to take every measure to ensure that Old National is strongly positioned for the future," Jones said.