Old National Bank will spend $66.2 million to buy back some of its leased bank branches, a move that the company said is accounting-related and won't affect day-to-day operations.
On Thursday, the Evansville-based bank announced it has reached agreements to acquire 14 bank properties that until now it has been leasing from two different property owners. Some of the properties are in the Evansville area, while others are elsewhere in Indiana and Kentucky.
The acquisitions are expected to close by the end of the year.
Chris Wolking, Old National's chief financial officer, said all 14 locations are properties that Old National owned up until 2007. In that year, the bank executed a number of sale-leaseback deals in which Old National sold dozens of its branch properties to outside entities, then turned around and leased the properties from those new owners.
Old National leases its Downtown Evansville headquarters, but this property is not part of the deals announced Thursday.
At the end of 2006, Old National owned 93 of its 120 banking centers and leased the remaining 27. By the end of 2007, the bank owned only 16 of its 115 banking centers, leasing the other 99 locations.
Wolking said many companies made similar moves because from an accounting perspective it was more financially advantageous to lease than to own.
"It was an opportunity to move some assets off of our books and then just treat it (the properties) as an ongoing expense," he said.
But expected accounting rules changes will alter the equation, Wolking said. The proposed changes have to do with how companies account for leases in their financial statements.
"We felt, at some point this was going to be an accounting issue for us anyway, so we said why not just buy them back?" Wolking said.
The 14 properties are currently owned by two different entities. Entities known as ONB CTL Portfolio Landlord #2, LLC and ONB Portfolio Landlord #4, LLC own 11 of the 14 properties. According to the Indiana Secretary of State's office, both of these LLCs have a listed address in Old Westbury, New York.
The other three properties are owned by either North Main Bank LLC or Bubeck LLC. Both of those LLCs are registered to Patrick Rayburn of Evansville.