The FRB issued an order (the “Order”) approving the application of Old National Bancorp (“ONB”), Evansville, Indiana to acquire Indiana Community Bancorp (“ICB”), and thereby indirectly acquire ICB’s subsidiary bank, Indiana Bank and Trust Company (“IBTC”), both of Columbus, Indiana. ONB and ICB have banking subsidiaries that compete directly in three banking markets, but, the FRB states in the Order that it is only in one of those markets, the Seymour, Indiana banking market (the “Seymour Market”), that anti-competitive concerns are raised. The FRB states in the Order that upon consummation of ONB’s acquisition of ICB, ONB would become the largest insured depository organization in the Seymour Market with a market share of 29.5%. Moreover, ONB would have a share of deposits in the Seymour Market that would exceed the Department of Justice’s competitive guidelines (the “DOJ Guidelines”) because, as a result of the transaction, ONB would increase its share of deposits as measured by the Herfindahl-Hirschman Index (“HHI”) by 203 points (which is above the 200 point limit in the DOJ Guidelines). In the Order, however, the FRB noted that after consummation of the transaction, eight other commercial banking competitors would remain in the Seymour Market and the second largest competitor would control 27.6% of deposits, only approximately 2% less than ONB.
Most significantly, the FRB found that there was an active community credit union, Centra Credit Union (“Centra”), in the Seymour Market and the FRB determined that, although credit unions’ deposit shares are usually not counted in FRB competitive analyses of banking markets, Centra’s deposit share should be considered in the competitive analysis of the Seymour Market. The FRB stated that Centra has broad membership criteria that includes most residents in the Seymour Market and that its range of activities is broad and the FRB concluded that Centra exerts a competitive influence in the Seymour Market. After adding Centra’s deposits to the Seymour Market, ONB’s market share would be reduced to 28.8% and its HHI share of deposits in the Seymour Market would increase by only 173 points as a result of the transaction, which is less than the 200 point limit in the DOJ Guidelines.
The FRB accordingly concluded that “competitive” considerations are consistent with approval and the FRB approved ONB’s acquisition of ICB. The Order is the first FRB decision since 2007 in which the FRB considered a credit union’s deposits in its competitive analysis of a bank holding company’s acquisition transaction.
In another interesting finding made by the FRB in the Order, the FRB noted that ONB’s lead bank subsidiary, a national bank, Old National Bank (“ONBK”) was subject to a Consent Order, dated June 4, 2012, with the OCC related to deficiencies in ONBK’s Bank Secrecy Act/anti-money laundering (“BSA/AML”) compliance. In approving the Order the FRB said, however, that, since 2011 “ONBK has devoted significant time and resources toward improving its BSA/AML program and has made substantial progress towards fully addressing program weaknesses.”