Executives of the acquisitive Old National Bancorp in Evansville, Ind., recently said they plan to take an M&A breather, but then in the same conversation they kept talking about wanting a bigger presence in a coveted out-of-state market.

So which is it, stand pat or buy more?

It's a common question for banks like the $10 billion-asset Old National, which has spent the last year on a buying spree, investment bankers say. Dealmaking can transform a sleepy company into a high-performing one, but the fear of one too many deals can raise concerns among shareholders and regulators.

"Old National is doing a nice job in building a great franchise and getting into quality new markets, but acquisitive banks like them need to be opportunistic on one hand, but mindful of what shareholders and regulators think on the other," says Charles Crowley, a managing director at Boenning & Scattergood. "These bankers know there is a slight risk in doing too much too soon."

The best solution is to volunteer to pause before someone forces you to do so, Crowley says.

Old National has announced four whole-bank deals in the past year, including one on Monday to buy Founders Financial in Grand Rapids, Mich.

The deals have taken it to higher-growth markets, including: Columbus, Ohio; Bloomington, Fort Wayne and West Lafayette in Indiana; and Ann Arbor, Mich.

Chief Executive Bob Jones said repeatedly in a conference call Monday that he still very much wants to do a deal in Kentucky. But he seemed to acknowledge that it might be time to tap the brakes.

"We are in the right markets we want to be in. Would I like to be bigger in Louisville? Absolutely," Jones says. "Quite frankly in all candor, I think there are probably some investors that would want us to take a deep breath and prove that we have used their capital in the right way."

In a follow-up interview on Wednesday, Jones said the bank will take a break out of respect to shareholders.

"We owe it to our shareholders to build upon the foundation they've allowed us to build," Jones said. "M&A is exciting, but you have to remember you do it to create shareholder value."

Old National has a strong middle-market team in Louisville, and it does well with its insurance business there, but it only has a handful of branches. "What I don't have there is a very large retail presence," he said.

But his plans to expand in Louisville might not materialize for awhile even if Old National weren't taking the break.

"As much as I'd love to be bigger there, I just don't see any of the banks there giving up their independence," Jones said.

The investor pushback might have started already. Old National trades at a 16% discount to the KBW Regional Banking Index, Chris McGratty, an analyst at Keefe, Bruyette & Woods, wrote in a note on Monday.

"From here, emphasis towards organic growth and away from M&A could ultimately close the valuation gap to peers," McGratty wrote.

Other analysts said Old National is making the right move in eyeing a break.

"They've done a lot and they have a lot to assimilate and integrate," said John Rodis, an analyst at FIG Partners.

To be sure, Old National's strategy of expanding into higher growth markets is starting to pay off with organic loan growth.

It reported that organic loan growth rose 2.5% from the first quarter to the second. Rodis said he was expecting loan growth of 0.5% in the quarter. Several other analysts noted the unexpected growth, too.

"The [Founders] deal announcement perhaps overshadowed a [quarter] whose highlights included the strongest organic loan growth [Old National] has posted in some time," Scott Siefers, an analyst at Sandler O'Neill, said in a research note.

Executives were a bit modest — saying the improving economy also played a major role in the growth.

"I think it's a combination of us being in the right markets, more growth markets, as well as our borrowers are really starting to feel a little bit more comfortable about the economy and willing to invest and grow strategies for their businesses," said Jim Sandgren, chief banking officer.

Showing organic growth is an important part of any M&A strategy — it fulfills the classic sales pitch that one plus one can equal something more than two in dealmaking.

Grand Rapids is often touted as the most attractive market in Michigan. With $465 million in assets and at No. 9 in market share, Founders is a good beachhead, but analysts wanted to know on the call if the company would consider fill-in acquisitions or even adding branches itself. Both are possibilities, but Jones again returned to Louisville.

De novo expansion "may be a prudent way to expand a little bit, but we've got some other markets, like Louisville and others, that de novo also may make some sense," Jones said.

Robert Barba is one of American Banker's community banking reporters.

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