<PAGE>
SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File Number 0-10888
OLD NATIONAL BANCORP
(Exact name of Registrant as specified in its charter)
INDIANA 35-1539838
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
420 Main Street
Evansville, Indiana 47708
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code, (812)464-1200
NOT APPLICABLE
Former name, former address and former fiscal year,
if changed since last reports.
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to the filing
requirements for at least the past 90 days. Yes x No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock. The Registrant has one class of common stock (no par value)
with approximately 22.7 million shares outstanding at September 30, 1995.
<PAGE>
OLD NATIONAL BANCORP
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page No.
Consolidated Balance Sheet
September 30, 1995 and 1994, and December 31, 1994 . . . . . 3
Consolidated Statement of Income
Three and nine months ended September 30, 1995 and 1994. . . 4
Consolidated Statement of Cash Flows
Nine months ended September 30, 1995 and 1994. . . . . . . . 5
Notes to Consolidated Financial Statements. . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . . . .10
PART II. OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . .14
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
INDEX OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . .16
2
<PAGE>
OLD NATIONAL BANCORP AND AFFILIATES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
September 30, September 30, December 31,
($ in thousands) (unaudited) 1995 1994 1994
Assets
<S> <C> <C> <C>
Cash and due from banks. . . . . . . . . . $166,293 $189,587 $185,824
Money market investments . . . . . . . . . 17,411 48,421 76,931
Investment Securities:
U.S. Treasury . . . . . . . . . . . . . . 193,459 231,926 208,951
U.S. Government agencies
and corporations. . . . . . . . . . . . 675,222 665,900 649,637
Obligations of states and political
subdivisions. . . . . . . . . . . . . . 412,208 419,251 411,894
Other . . . . . . . . . . . . . . . . . . 24,021 23,773 20,831
--------- --------- ---------
Total Investment Securities . . . . . . 1,304,910 1,340,850 1,291,313
Loans:
Commercial. . . . . . . . . . . . . . . . 782,913 785,660 775,045
Mortgage. . . . . . . . . . . . . . . . . 1,393,123 1,286,889 1,330,451
Consumer credit, net of unearned income . 664,520 591,605 609,998
Financial . . . . . . . . . . . . . . . . 1,500 2,101 2,546
--------- --------- ---------
Total Loans . . . . . . . . . . . . . . 2,842,056 2,666,255 2,718,040
Allowance for loan losses . . . . . . . (40,056) (41,877) (39,814)
--------- --------- ---------
Net Loans . . . . . . . . . . . . . . . 2,802,000 2,624,378 2,678,226
Other assets . . . . . . . . . . . . . . . 157,037 149,609 154,545
--------- --------- ---------
Total Assets. . . . . . . . . . . . . . $4,447,651 $4,352,845 $4,386,839
========= ========= =========
Liabilities:
Deposits:
Noninterest bearing demand. . . . . . . . $417,937 $445,358 $464,811
Interest bearing:
Savings, daily interest checking
and money market accounts . . . . . . . 1,391,259 1,358,291 1,362,313
Certificates of deposit of
$100,000 and over . . . . . . . . . . . 258,921 228,427 200,035
Other time. . . . . . . . . . . . . . . 1,555,561 1,428,470 1,443,156
--------- --------- ---------
Total Deposits. . . . . . . . . . . . . 3,623,678 3,460,546 3,470,315
--------- --------- ---------
Short-term borrowings. . . . . . . . . . . 295,766 389,346 418,307
Subordinated debentures. . . . . . . . . . 31,545 39,732 38,049
Medium term notes. . . . . . . . . . . . . 50,000 32,000 32,000
Other liabilities. . . . . . . . . . . . . 49,615 38,461 36,945
--------- --------- ---------
Total Liabilities . . . . . . . . . . . . 4,050,604 3,960,085 3,995,616
Shareholders' Equity --------- --------- ---------
Common stock. . . . . . . . . . . . . . . 22,712 22,430 23,347
Capital surplus . . . . . . . . . . . . . 203,506 198,046 225,181
Retained earnings . . . . . . . . . . . . 169,621 176,540 149,813
Net unrealized gain (loss) on investment
securities. . . . . . . . . . . . . . . 1,208 (4,256) (7,118)
--------- --------- ---------
Total Shareholders' Equity. . . . . . . . 397,047 392,760 391,223
Total Liabilities and Shareholders' --------- --------- ---------
Equity. . . . . . . . . . . . . . . . . $4,447,651 $4,352,845 $4,386,839
========= ========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
3
<PAGE>
OLD NATIONAL BANCORP AND AFFILIATES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
($ in thousands except share September 30, September 30,
and per share data) (Unaudited) 1995 1994 1995 1994
Interest income
Loans including fees:
<S> <C> <C> <C> <C>
Taxable . . . . . . . . . . . . . . . $63,796 $54,430 $184,271 $155,215
Non-taxable . . . . . . . . . . . . . 899 712 2,685 1,989
Investment securities:
Taxable . . . . . . . . . . . . . . . 14,284 13,933 42,972 41,837
Non-taxable . . . . . . . . . . . . . 5,574 5,782 16,835 17,402
Federal funds sold and securities
purchased under agreement to resell . 1,067 304 2,447 1,443
Deposits with banks. . . . . . . . . . 44 63 171 222
------ ------ ------- -------
Total Interest Income . . . . . . . . 85,664 75,224 249,381 218,108
------ ------ ------- -------
Interest Expense
Savings, daily interest checking and
money market accounts . . . . . . . . 11,088 8,883 31,884 26,882
Certificates of deposit of $100,000
and over. . . . . . . . . . . . . . . 3,373 2,293 9,089 6,143
Other time deposits. . . . . . . . . . 21,683 16,140 61,218 47,143
Federal funds purchased. . . . . . . . 793 995 3,023 1,584
Securities sold under agreements to
repurchase. . . . . . . . . . . . . . 2,501 1,732 7,402 4,628
Other borrowings . . . . . . . . . . . 2,813 2,021 8,019 5,633
------ ------ ------- -------
Total Interest Expense. . . . . . . . 42,251 32,064 120,635 92,013
------ ------ ------- -------
Net Interest Income . . . . . . . . . 43,413 43,160 128,746 126,095
Provision for loan losses. . . . . . . 1,938 1,485 4,121 4,503
------ ------ ------- -------
Net Interest Income After Provision
For Loan Losses . . . . . . . . . . . 41,475 41,675 124,625 121,592
------ ------ ------- -------
Noninterest Income
Trust fees . . . . . . . . . . . . . . 2,201 2,193 6,978 6,001
Service charges on deposit accounts. . 3,441 3,200 9,835 9,047
Loan servicing fees. . . . . . . . . . 1,466 976 4,202 2,990
Securities gains (losses), net . . . . 11 11 46 35
Other income . . . . . . . . . . . . . 2,401 2,658 7,196 8,033
------ ------ ------- -------
Total Noninterest Income. . . . . . . 9,520 9,038 28,257 26,106
------ ------ ------- -------
Noninterest Expense
Salaries and employee benefits . . . . 18,152 17,584 54,406 51,653
Occupancy expense. . . . . . . . . . . 2,093 2,096 6,132 6,007
Equipment expense. . . . . . . . . . . 2,549 2,395 7,728 7,002
FDIC insurance expense . . . . . . . . (799) 1,971 3,190 5,960
Data processing expense. . . . . . . . 1,404 1,051 3,983 3,023
Other expenses . . . . . . . . . . . . 8,588 8,484 24,702 24,734
------ ------ ------- -------
Total Noninterest Expense . . . . . . 31,987 33,581 100,141 98,379
------ ------ ------- -------
Income before income taxes . . . . . . 19,008 17,132 52,741 49,319
Provision for income taxes . . . . . . 5,555 4,802 14,973 13,355
------ ------ ------- -------
Net Income. . . . . . . . . . . . . . $13,453 $12,330 $37,768 $35,964
====== ====== ====== ======
Net Income Per Common Share
Primary . . . . . . . . . . . . . . . $ 0.59 $ 0.52 $ 1.64 $ 1.52
====== ====== ====== ======
Fully Diluted . . . . . . . . . . . . $ 0.57 $ 0.51 $ 1.60 $ 1.48
====== ====== ====== ======
Weighted average common shares outstanding:
Primary . . . . . . . . . . . . . 22,849,910 23,531,065 23,032,618 23,623,599
========== ========== ========== ==========
Fully Diluted . . . . . . . . . . 24,191,109 25,220,350 24,373,817 25,312,884
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this statement
4
<PAGE>
Old National Bancorp and Affiliates
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
($ in thousands) (unaudited) 1995 1994
Cash flows from operating activities:
<S> <C> <C>
Net income . . . . . . . . . . . . . . . . . . . . . . $ 37,768 $ 35,964
------- -------
Adjustments to reconcile net income to cash provided
from operating activities:
Depreciation. . . . . . . . . . . . . . . . . . . . . 5,496 5,361
Amortization of intangible assets . . . . . . . . . . 1,391 1,336
Net premium amortization (discount accretion) on
investment securities . . . . . . . . . . . . . . . 1,355 4,657
Provision for loan losses . . . . . . . . . . . . . . 4,121 4,503
Gain on sale of investment securities . . . . . . . . (46) (35)
Gain on sale of assets. . . . . . . . . . . . . . . . (309) (131)
Increase in interest receivable . . . . . . . . . . . (5,801) (3,687)
(Increase) decrease in other assets . . . . . . . . . 3,196 (3,441)
Increase in accrued expenses and
other liabilities. . . . . . . . . . . . . . . . . 7,156 699
------- -------
Total adjustments . . . . . . . . . . . . . . . . . 16,559 9,262
------- -------
Net cash flows provided by operating activities. . 54,327 45,226
------- -------
Cash flows from investing activities:
Purchase of investment securities held-to-maturity . . (55,240) (162,028)
Purchase of investment securities available-for-sale . (183,349) (107,159)
Proceeds from maturities and paydowns of investment. .
securities held-to-maturity . . . . . . . . . . . . . 92,858 202,227
Proceeds from maturities and paydowns of investment
securities available-for-sale . . . . . . . . . . . . 122,551 95,692
Proceeds from sales of investment securities available-
for-sale. . . . . . . . . . . . . . . . . . . . . . . 22,114 20,769
Net principal collected from (loans made to) customers:
Commercial . . . . . . . . . . . . . . . . . . . . . (7,945) (16,969)
Mortgage . . . . . . . . . . . . . . . . . . . . . . (92,639) (144,506)
Consumer . . . . . . . . . . . . . . . . . . . . . . (57,051) (75,995)
Proceeds from sale of mortgage loans . . . . . . . . . 29,921 25,164
Proceeds from sale of premises and equipment . . . . . 339 312
Purchase of premises and equipment . . . . . . . . . . (6,985) (9,382)
------- -------
Net cash flows used in investing activities . . . . . (135,426) (171,875)
------- -------
Cash flows from financing activities:
Net increase (decrease) in deposits and short-term borrowings:
Noninterest bearing demand. . . . . . . . . . . . . . (46,874) (10,907)
Savings, daily interest checking and money market
deposits. . 28,946 (46,654)
Certificates of deposit of $100,000 and over. . . . . 58,886 14,763
Other time deposits . . . . . . . . . . . . . . . . . 112,405 19,052
Federal funds purchased and securities sold under
agreements to repurchase . . . . . . . . . . . . (133,883) 111,774
Other short-term borrowings . . . . . . . . . . . . . 11,342 29,988
Redemption of 10% subordinated debentures. . . . . . . --- (4,502)
Proceeds from issuance of medium-term notes. . . . . . 18,000 ---
Cash dividends paid. . . . . . . . . . . . . . . . . . (15,325) (14,605)
Common stock repurchased . . . . . . . . . . . . . . . (35,908) (13,715)
Common stock reissued, net of shares used to convert
subordinated debentures. . . . . . . . . . . . . . . 4,459 5,201
------- -------
Net cash flows provided by financing activities . . . 2,048 90,395
------- -------
Net decrease in cash and cash equivalents. . . . . . . (79,051) (36,254)
Cash and cash equivalents at beginning of period . . . 262,755 274,262
------- -------
Cash and cash equivalents at end of period $183,704 $238,008
======= =======
Total interest paid . . . . . . . . . . . . . . . . . $115,036 $91,666
======= =======
Total taxes paid. . . . . . . . . . . . . . . . . . . $10,959 $14,217
======= =======
</TABLE>
The accompanying notes are an integral part of this statement.
5
<PAGE>
Old National Bancorp
Notes To Consolidated Financial Statements
1. Basis of Presentation
The accompanying consolidated financial statements include the accounts of Old
National Bancorp and its affiliate entities (ONB). All significant
intercompany transactions and balances have been eliminated. In the opinion
of management, the consolidated financial statements contain all the normal
and recurring adjustments necessary to present fairly the financial position
of ONB as of September 30, 1995 and 1994 and December 31, 1994, and the
results of its operations for the three and nine months ended September 30,
1995 and 1994 and its cash flows for the nine months ended September 30, 1995
and 1994. These financial statements should be read in conjunction with ONB's
1994 Annual report on Form 10-K.
2. Net Income Per Common Share
Net income per common share computations are based on the weighted average
number of common shares outstanding during the periods presented. A 5% stock
dividend was paid February 10, 1995 to shareholders of record on January 27,
1995. All share and per share data presented herein have been restated for
the effects of this stock dividend.
3. Merger Activities
Completed Mergers
On March 31, 1995, ONB and Oblong Bancshares, Inc., Oblong, Illinois,
consummated a merger in which ONB issued 456,643 common shares in exchange for
all of the shares of Oblong. This transaction was accounted for as a pooling-
of-interests. Net income prior to merger included in these statements for the
three months ended March 31, 1995 was $231 thousand.
On April 30, 1995, ONB and Citizens National Bank Corporation, Tell City,
Indiana, consummated a merger in which ONB issued 992,861 common shares in
exchange for all of the shares of Citizens. This transaction was accounted
for as a pooling-of-interests. Net income prior to merger included in these
statements for the four months ended April 30, 1995 was $664 thousand.
Pending Mergers
On September 30, 1994, ONB and First United Savings Bank (FUSB), Greencastle,
Indiana announced the execution of a letter of intent to merge and
subsequently executed a definitive merger agreement. On November 3, 1995 ONB
issued 520,353 common shares in exchange for all of the outstanding common
shares of FUSB. The transaction was accounted for as a pooling-of-interests.
As of September 30, 1995, FUSB's consolidated financial statements reflected
$145.5 million in total assets, net loans of $126.5 million, total deposits of
$115.9 million and net income for the nine months then ended of $175 thousand.
Since this merger took place after September 30, 1995, it is not reflected in
6
<PAGE>
these financial statements.
On February 23, 1995, ONB and Shawnee Bancorp, parent company of The Bank of
Harrisburg, Harrisburg, Illinois announced the execution of a letter of intent
to merge. They have subsequently signed a definitive merger agreement.
Pursuant to the terms of this agreement, ONB will issue common shares in
exchange for all of the outstanding common shares of Shawnee Bancorp. The
minority shareholders of the Bank of Harrisburg will receive cash. The
transaction will be accounted for as a pooling-of-interests. The merger is
subject to the approvals of Shawnee Bancorp's shareholders and regulatory
authorities. As of September 30, 1995, Shawnee Bancorp's consolidated
financial statements reflected $28.8 million in total assets, net loans of
$14.6 million, total deposits of $24.4 million and net income for the nine
months then ended of $100 thousand. This merger is expected to be consummated
in December 1995.
On April 26, 1995, ONB and City National Bancorp, parent company of City
National Bank, Fulton, Kentucky announced the execution of a letter of intent
to merge and subsequently signed a definitive merger agreement. On October 31,
1995 the merger was consummated and ONB issued 551,573 common shares in
exchange for all of the outstanding common shares of City National Bancorp.
The transaction was accounted for as a pooling-of-interests. As of September
30, 1995, City National Bancorp's consolidated financial statements reflected
$103.1 million in total assets, net loans of $39.2 million, total deposits of
$87.9 and net income for the nine months then ended of $818 thousand. Since
this merger took place after September 30, 1995, it is not reflected in these
financial statements.
4. Investments
The market value and amortized cost of investment securities as of September
30, 1995 are set forth below ($ in thousands):
Market Value Amortized Cost
Held-to-maturity, at amortized cost $ 875,796 $ 863,609
Available-for-sale, at market value 441,301 439,296
---------- -----------
$ 1,317,097 $ 1,302,905
========== ===========
5. Borrowings
ONB has outstanding $31.5 million of 8% convertible subordinated debentures
which are due September 15, 2012, unless previously converted or redeemed.
The debentures are convertible at any time prior to maturity into shares of
common stock of ONB at a conversion rate of 42.517 shares for each one
thousand dollars principal amount of debentures. Interest on the debentures
is payable on March 15 and September 15 of each year. The debentures are
redeemable in whole or in part at the option of ONB at a premium to par value.
Beginning September 15, 1998, debenture holders are entitled to an annual
sinking fund of $2.5 million principal amount of debentures annually less
conversions and redemptions. The debentures are subordinated in right of
payment to all senior indebtedness of ONB. As of September 30, 1995, 1.3
7
<PAGE>
million authorized and unissued common shares were reserved for conversion of
the debentures.
ONB has registered Series A Medium Term Notes in the principal amount of $50
million. The notes may be issued with maturities ranging from nine months to
thirty years and rates may be either fixed or variable. As of September 30,
1995, a total of $50 million of the notes were outstanding, with maturities
ranging from one to eight years and fixed interest rates ranging from 5.5% to
7.1%.
As of September 30, 1995, ONB has $40 million in unsecured lines of credit
with unaffiliated banks. These lines of credit include various informal
arrangements to maintain compensating balances. The compensating balances are
maintained for the benefit of the parent company by affiliate banks which
normally maintain correspondent balances with unaffiliated banks. As of
September 30, 1995, $13.9 million was outstanding under these lines bearing
interest rates that averaged 6.48%.
6. Impact of Accounting Changes
Effective January 1, 1995, ONB adopted the provisions of Statement of
Financial Accounting Standards No. 114 and No. 118, "Accounting for Creditors
for Impairment of a Loan" (SFAS No. 114 and SFAS No. 118). A loan is
considered impaired when it is probable that contractual interest and
principal payments will not be collected for either the amounts or the dates
as scheduled in the loan agreement.
As of September 30, 1995, the recorded investment in loans for which
impairment has been recognized in accordance with SFAS No. 114 and 118 was
$6.2 million with no related allowance and $57.7 million with $16.7 million of
related allowance.
ONB's policy for recognizing income on impaired loans is to accrue earnings
unless a loan becomes nonaccrual. When loans are classified as nonaccrual,
interest accrued during the current year is reversed against earnings;
interest accrued in the prior year, if any, is charged to the allowance for
loan losses. Cash received while a loan is classified nonaccrual is recorded
to principal.
For the nine months ended September 30, 1995, the average balance of impaired
loans was $59.4 million and $3.9 million of interest was recorded.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of". ONB is required to adopt
this statement January 1, 1996. Implementation of this statement is not
expected to have a material effect on ONB's financial position or results of
operations.
The Financial Accounting Standards Board has also issued Statement of
Financial Accounting Standard No. 122, "Accounting for Mortgage Servicing
8
<PAGE>
Rights". ONB is required to adopt this statement January 1, 1996.
Implementation of this statement is not expected to have a material effect on
ONB's financial position or results of operations.
9
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following management's discussion and analysis is presented to provide
information concerning the financial condition of ONB as of September 30,
1995, as compared to September 30, 1994 and December 31, 1994, and the results
of operations for the three and nine month periods ended September 30, 1995
and 1994.
Financial Condition
ONB's total assets at September 30, 1995 were $4.4 billion, a 2.2% increase
over the prior year and a 1.4% increase from December 31, 1994. Earning
assets, which consist primarily of money market investments, investment
securities and loans, rose 2.7% over the prior year and a 1.9% increase since
year-end. During the past year, the mix of earning assets has changed
slightly with loans growing 6.6% while investment securities and money market
investments combined declined 4.8%. Since year-end, loans increased 4.6%
compared to a 3.4% decrease in investment securities and money market
investments. The continued loan growth reflects the generally healthy
economies in the company's tri-state market areas. The decrease in money
market investments and investment securities was the result of using
redemptions and maturities to partially fund loan growth.
At September 30, 1995, under-performing assets (defined as loans 90 days or
more past due, nonaccrual and restructured loans and other real estate)
increased to $14.9 million from $13.7 million as of December 31, 1994. As of
these dates, under-performing assets in total were 0.52% and 0.50%,
respectively, of total loans and other real estate.
<TABLE>
<CAPTION>
Past Due Total as %
90 Other of Total Loans
Days Nonaccrual Restructured Real and Other
Or More Loans Loans Estate Total Real Estate
<S> <C> <C> <C> <C> <C> <C>
September 30, 1995 $4,848 $7,995 $1,204 $864 $14,911 0.52%
December 31, 1994 3,338 9,077 633 647 13,695 0.50
</TABLE>
ONB's consolidated loan portfolio is well diversified and contains no
concentrations of credit in any particular industry. A concentration
generally exists when more than 10% of total loans outstanding are to
borrowers of the same industry. ONB has minimal exposure to commercial real
estate, construction lending or leveraged buyouts and no exposure in credits
to foreign or lesser-developed countries.
Total deposits at September 30, 1995, grew $163.1 million or 4.7% from
September 30, 1994 and increased $153.4 million or 4.4% since year-end. The
mix of deposits has relatively unchanged with growth being primarily in small
certificates of deposit (CDS) as deposit interest rates have risen. This
deposit growth has enabled ONB to reduce other borrowing levels.
10
<PAGE>
Capital
Total shareholders' equity increased by 1.5% over year-end 1994 and 1.1% over
September 30, 1994. ONB continues its quarterly cash dividend of $0.23 per
share. In conformity with its stock repurchase program, ONB purchased $7.1
million and $35.9 million of its capital stock in the third quarter of 1995
and year-to-date in 1995, respectively.
ONB's consolidated capital position remains strong as evidenced by the
following comparisons of key industry ratios:
<TABLE>
<CAPTION>
Minimum
Regulatory September 30, September 30, December 31,
Ratios 1995 1994 1994
Risk Based Capital:
<S> <C> <C> <C> <C>
Tier 1 Capital to Total Assets 3.00% 8.60% 8.78% 8.71%
(Leverage Ratio)
Tier 1 Capital to Risk Adjusted 4.00% 13.48% 14.06% 13.92%
Total Assets
Total Capital to Risk Adjusted 8.00% 15.81% 16.56% 16.50%
Total Assets
Shareholders' Equity to
Total Assets N/A 8.93% 9.02% 8.92%
</TABLE>
Each of ONB's affiliate banks have capital ratios which exceed regulatory
minimums.
Liquidity and Asset/Liability Management
ONB continually monitors its liquidity and actively manages its
asset/liability position. The purpose of liquidity management is to match the
sources of funds with anticipated customer borrowings and withdrawals and
other obligations. The primary purpose of asset/liability management is to
minimize the effect on net income of changes in interest rates and to maintain
a prudent match within specified time periods of rate-sensitive assets and
rate-sensitive liabilities.
As of September 30, 1995, ONB's rate-sensitive assets were 79% of rate-
sensitive liabilities in the 1-180 day maturity category and 94% in the 181
- -365 day category. These figures compared to 87% and 102% on December 31, 1994
and 85% and 98% on September 30, 1994. These positions are considered
acceptable by management. ONB's increased lending activity combined with the
shift in deposits to CDS contributed to the these ratio changes. ONB's funds
management committee meets monthly to closely monitor and effect changes as
needed in the consolidated rate-sensitivity position.
Results of Operations
Net Income
Net income for the nine months ended September 30, 1995 was $37.8 million, a
5.0% increase from the same period 1994. Net income for the third quarter of
1995 was up 9.1% over 1994. Primary net income per common share for the third
quarter of 1995 was $0.59, up 13.5% and for the nine months ended September
11
<PAGE>
30, 1995 was $1.64, up 7.9%.
The company's return on average assets (ROA) for the third quarter of 1995 was
1.21% compared to 1.15% in 1994. Year-to-date ROA percentages were 1.15% in
1995 compared to 1.13% for 1994. Return on average equity (ROE) for the
quarter and the first nine months of 1995 were 13.65% and 12.85%,
respectively. These compare favorably to 1994 ROE results of 12.56% and
12.33% for similar periods.
Net Interest Income/Net Interest Margin (taxable equivalent basis)
Year-to-date net interest income for 1995 was $138,475 a 2.0% increase over
1994. Net interest income for the third quarter of 1995 was $46,850 compared
to $46,255 in 1994. The net interest margin for the third quarter was 4.49%
and 4.61% for 1995 and 1994, respectively. The year-to-date net interest
margin percentage in 1995 was 4.47% compared to 4.55% in 1994. Though higher
deposit rates experienced so far in 1995 reduced the net interest margin,
average earning assets for the quarter and year-to-date resulted in higher net
interest income.
Provision and Allowance for Loan Losses
The provision for loan losses was $1.9 million in the third quarter of 1995
compared to $1.5 million in the third quarter of 1994. Year-to-date, the
provision for loan losses of $4.1 million compares to $4.5 million in 1994.
ONB's net charge-offs were 0.40% of average loans for the current quarter, up
from 0.22% in the third quarter of 1994. For the first nine months, net
charge-offs were 0.19% in 1995 compared to 0.16% in 1994. A few individually
large charge-offs account for the increase in the third quarter. While up
over the prior year, the year-to-date charge-off figures reflect the continued
strength of the loan portfolio and the sound economies in the communities ONB
serves. These historically low levels of charge-offs may be difficult to
sustain in the future.
The allowance for loan losses is continually monitored and evaluated both
within each affiliate bank and at the holding company level to provide
adequate coverage for potential losses. ONB maintains a comprehensive loan
review program to provide independent evaluations of loan administration,
credit quality, loan documentation, and adequacy of the allowance for loan
losses. The allowance for loan losses to end-of-period loans of 1.41% at
September 30, 1995 compares to 1.57% in 1994. The loan portfolio's strength
enabled ONB to add loan growth with minimal increase in the allowance
resulting in the ratio decline. The allowance for loan losses covers all
under-performing assets by 2.7 times at September 30, 1995 compared to 2.9
times at December 31, 1994.
Noninterest Income
Excluding securities losses, noninterest income increased 5.3% in the three
months ended September 30, 1995 as compared to the same period in 1994. For
the first nine months, this increase was 8.2%. Loan servicing fees fueled the
12
<PAGE>
growth as they increased 50.2% for the third quarter and 40.5% year-to-date.
Mortgage banking activities grew as long term mortgage rates declined. Most
other categories of noninterest income were slightly ahead of last year except
for other income which declined slightly.
Noninterest Expense
Noninterest expense decreased 4.7% in the third quarter of 1995 compared to
1994. For the first nine months, 1995 exceeded 1994 by 1.8%. During the third
quarter the Federal Deposit Insurance Corporation, (FDIC), refunded
approximately 19 basis points per hundred of the 23 basis points per hundred
paid for deposit insurance premium since June 1, 1995. ONB received a refund
of $2,150 in the third quarter. The data processing expense increase is due
to the company's significant investments in data processing facilities, data
processing conversions and consolidation activities. With fourteen affiliate
banks already using our in-house data center, ONB will continue to convert the
data processing for each of its affiliate banks from third party services.
This has resulted in higher fixed equipment, occupancy, and personnel costs in
1995, with benefits anticipated from lower third party fees as conversions are
completed. Salaries and benefits, the largest individual component of
noninterest expense, increased 3.2% in the third quarter of 1995 compared to
1994 and for the first nine months increased 5.3%. Equipment expense rose
6.4% quarter-to-quarter and 10.4% year-to-year. These increases while above
normal levels because of the conversion and consolidation activities are
rising at a slower pace compared to earlier in 1995 and the growth experienced
in 1994. Other categories of noninterest expense experienced relatively small
changes between the periods.
Provision for Income Taxes
The provision for income taxes, as a percentage of pre-tax income, remained
relatively unchanged in the third quarter at 29.2% compared to 28.0% in 1994.
For the first nine months, this percentage is 28.4% for 1995 and 27.1% in
1994. Higher effective state tax rates in our multi-state environment resulted
in the increased effective income tax rates in 1995.
13
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. Legal Proceedings
NONE
ITEM 2. Changes in Securities
NONE
ITEM 3. Defaults Upon Senior Securities
NONE
ITEM 4. Submission of Matters to a Vote of Security Holders
None
ITEM 5. Other Information
See Note 3 to the consolidated financial statements for discussion of pending
mergers.
ITEM 6. Exhibits and Reports on Form 8-K
(a) NONE
(b) ONB did not file a current report on Form 8-K during the quarter ended
September 30, 1995.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OLD NATIONAL BANCORP
(Registrant)
By: s/s Steve H. Parker
Steve H. Parker
Senior Vice President
Chief Financial Officer
Date: November 14, 1995
15
<PAGE>
INDEX OF EXHIBITS
Regulation S-K
Reference
(Item 601)
11 Statement re Computation of Per Share Earnings
27 Financial Data Schedule
16
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11
PAGE 1 OF 2
OLD NATIONAL BANCORP
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
($ IN THOUSANDS EXCEPT PER SHARE)
Three Months Ended Nine Months Ended
September 30, 1995 September 30, 1995
Primary Fully Diluted Primary Fully Diluted
<S> <C> <C> <C> <C>
Net Income . . . . . . . . . . . . . . . . $13,453 $13,453 $37,768 $37,768
Interest expense foregone on assumed
conversion of 8% convertible subordinated
debentures, net of tax . . . . . . . . . . -- 381 -- 1,143
------ ------ ------ ------
Adjusted net income. . . . . . . . . . . . $13,453 $13,834 $37,768 $38,911
====== ====== ====== ======
Weighted average common shares
outstanding. . . . . . . . . . . . . . . . 22,787,957 22,787,957 22,970,665 22,970,665
Additional shares outstanding upon assumed
conversion of 8% convertible subordinated
debentures . . . . . . . . . . . . . . . . -- 1,341,199 -- 1,341,199
Additional shares outstanding upon assumed
exercise of stock options. . . . . . . . . 61,953 61,953 61,953 61,953
---------- ---------- ---------- ----------
Adjusted weighted average shares
outstanding. . . . . . . . . . . . . . . . 22,849,910 24,191,109 23,032,618 24,373,817
========== ========== ========== ==========
Earnings per share . . . . . . . . . . . . $ .59 $ .57 $ 1.64 $ 1.60
========== ========== ========== ==========
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11
PAGE 2 OF 2
OLD NATIONAL BANCORP
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
($ IN THOUSANDS EXCEPT PER SHARE)
Three Months Ended Nine Months Ended
September 30, 1994 September 30, 1994
Primary Fully Diluted Primary Fully Diluted
<S> <C> <C> <C> <C>
Net Income . . . . . . . . . . . . . . . . $12,330 $12,330 $35,964 $35,964
Interest expense foregone on assumed
conversion of 8% convertible subordinated
debentures, net of tax . . . . . . . . . . -- 480 -- 1,440
------ ------ ------ ------
Adjusted net income. . . . . . . . . . . . $12,330 $12,810 $35,964 $37,404
====== ====== ====== ======
Weighted average common shares
outstanding. . . . . . . . . . . . . . . . 23,468,906 23,468,906 23,561,440 23,561,440
Additional shares outstanding upon assumed
conversion of 8% convertible subordinated
debentures . . . . . . . . . . . . . . . . -- 1,689,285 -- 1,689,285
Additional shares outstanding upon assumed
exercise of stock options. . . . . . . . . 62,159 62,159 62,159 62,159
---------- ---------- ---------- ----------
Adjusted weighted average shares
outstanding. . . . . . . . . . . . . . . . 23,531,065 25,220,350 23,623,599 25,312,884
========== ========== ========== ==========
Earnings per share . . . . . . . . . . . . $ .52 $ .51 $ 1.52 $ 1.48
========== ========== ========== =========
18
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM OLD NATIONAL
BANCORP'S SEPTEMBER 30, 1995 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 166,293
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 17,411
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 441,301
<INVESTMENTS-CARRYING> 863,609
<INVESTMENTS-MARKET> 875,796
<LOANS> 2,842,056
<ALLOWANCE> 40,056
<TOTAL-ASSETS> 4,447,651
<DEPOSITS> 3,623,678
<SHORT-TERM> 295,766
<LIABILITIES-OTHER> 49,615
<LONG-TERM> 81,545
<COMMON> 22,712
0
0
<OTHER-SE> 374,335
<TOTAL-LIABILITIES-AND-EQUITY> 4,447,651
<INTEREST-LOAN> 186,956
<INTEREST-INVEST> 59,807
<INTEREST-OTHER> 2,618
<INTEREST-TOTAL> 249,381
<INTEREST-DEPOSIT> 102,191
<INTEREST-EXPENSE> 120,635
<INTEREST-INCOME-NET> 128,746
<LOAN-LOSSES> 4,121
<SECURITIES-GAINS> 46
<EXPENSE-OTHER> 24,702
<INCOME-PRETAX> 52,741
<INCOME-PRE-EXTRAORDINARY> 37,768
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37,768
<EPS-PRIMARY> 1.64
<EPS-DILUTED> 1.60
<YIELD-ACTUAL> 4.47
<LOANS-NON> 7,995
<LOANS-PAST> 4,848
<LOANS-TROUBLED> 1,204
<LOANS-PROBLEM> 102,125
<ALLOWANCE-OPEN> 39,814
<CHARGE-OFFS> 6,222
<RECOVERIES> 2,343
<ALLOWANCE-CLOSE> 40,056
<ALLOWANCE-DOMESTIC> 40,056
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
