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SECURITIES & EXCHANGE COMMISSION
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
For the fiscal year ended December 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
For the transition period from ________________ to ________________
Commission file Number 0-10888
OLD NATIONAL BANCORP
(Exact name of the 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)
The Registrant's telephone number, including area code, (812) 464-1434
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, No Par Value
8% Subordinated Convertible Debentures, due 2012
Medium Term Notes, Series A
The Registrant 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
(or for such shorter period that the registrant was required to file such
reports) and has been subject to such filing requirements for the past 90 days.
The aggregate market value (bid price) of the Registrant's voting common
stock held by non-affiliates of the Registrant as of February 29, 1996 was
approximately $820 million. The total number of shares outstanding as of that
date was 24,835,361.
The Registrant's Proxy Statement for the Annual Meeting of Shareholders to
be held April 18, 1996 is incorporated by reference into Parts I and III of this
Form 10-K.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
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OLD NATIONAL BANCORP
1995 ANNUAL REPORT ON FORM 10-K
Table of Contents
PART I. PAGE
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . 9
Item 4. Submission of Matters to a Vote of Security Holders. . . . . 9
PART II.
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . 9
Item 6. Selected Financial Data. . . . . . . . . . . . . . . . . . . 9
Item 7. Management Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . 9
Item 8. Financial Statements and Supplementary Data. . . . . . . . . 9
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . 9
PART III.
Item 10. Directors and Executive Officers of the Registrant . . . . . 9
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . .10
Item 12. Security Ownership of Certain Beneficial Owners and
Management. . . . . . . . . . . . . . . . . . . . . . . .10
Item 13. Certain Relationships and Related Transactions . . . . . . .10
PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K . . . . . . . . . . . . . . . . . . . . . . .10
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
INDEX OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . . .13
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OLD NATIONAL BANCORP
1995 ANNUAL REPORT ON FORM 10-K
PART I
Item 1. BUSINESS
Old National Bancorp (the "Registrant") is a multibank holding company
incorporated in the State of Indiana and maintains its principal executive
offices in Evansville, Indiana. As a bank holding company, the Registrant
engages in banking and related activities authorized under the federal Bank
Holding Company Act of 1956, as amended. Through its nonbank
affiliates, the Registrant provides services incidental to banking, such as
data processing, reinsurance of credit life, accident and health insurance of
consumer borrowers and property ownership. Since its formation, the
Registrant has acquired seventeen banks and one thrift located in Indiana; six
banks located in Kentucky; and nine banks and one thrift located in Illinois.
Banking Affiliates
As of December 31, 1995, the Registrant's affiliate banks operated 118 banking
offices throughout Indiana, Illinois, and Kentucky. The following chart lists
the affiliate banks by state:
<TABLE>
<CAPTION>
Indiana Kentucky Illinois
<S> <C> <C>
Clinton State Bank First State Bank (Greenville) First National Bank (Harrisburg)
Old National Bank (Evansville) Farmers Bank & Trust Co. Peoples National Bank
First Citizens Bank & (Madisonville) (Lawrenceville)
Trust Company (Greencastle) Morganfield National Bank Security Bank & Trust Co.
People's Bank & Trust Co.(Mt. Vernon) Farmers Bank & Trust Co. (Mt. Carmel)
Gibson County Bank (Princeton) (Henderson) Palmer-American National Bank
Rockville National Bank City National Bank (Fulton) (Danville)
Merchants National Bank (Terre Haute) First National Bank (Oblong)
Security Bank & Trust Co. (Vincennes)
United Southwest Bank (Washington)
Dubois County Bank (Jasper)
Bank of Western Indiana (Covington)
Indiana State Bank (Terre Haute)
Orange County Bank (Paoli)
Citizens National Bank (Tell City)
ONB Bank (Bloomington)
</TABLE>
The Registrant also has acquired Southern Indiana Bank and Trust Company
(Newburgh, Indiana), which was merged into Old National Bank; Warrick National
Bank (Boonville, Indiana), which was merged into Old National Bank; Bank
South, Federal Savings Bank and The Bank of Harrisburg which was merged into
First National Bank of Harrisburg; City Financial Bancorp and its three
banking subsidiaries which were merged with Palmer-American National Bank;
Citizens Union Bank (Central City, Kentucky) which was merged with First State
Bank and certain assets of Henderson Home Savings and Loan Association, which
were combined with Farmers Bank and Trust Company (Henderson, Kentucky). The
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Registrant anticipates consummating a merger with a bank in Carmi, Illinois
during 1996.
The Registrant's affiliate banks are engaged in a wide range of
commercial and consumer banking activities, including accepting demand,
savings and time deposits; making commercial, consumer and real estate loans;
performing fiduciary, trust and money management services; and providing other
services relating to the general banking business. Certain of the
Registrant's affiliated entities also offer electronic data processing,
brokerage and correspondent banking services; issue credit cards; originate,
market and service mortgage loans; and rent safe deposit facilities.
Regulation and Supervision
The Registrant is registered as a bank holding company and is subject to
the regulations of the Board of Governors of the Federal Reserve System
("Federal Reserve") under the Bank Holding Company Act of 1956, as amended
("BHC Act"). Bank holding companies are required to file periodic reports
with and are subject to periodic examination by the Federal Reserve. The
Federal Reserve has issued regulations under the BHC Act requiring a bank
holding company to serve as a source of financial and managerial strength to
its subsidiary banks. It is the policy of the Federal Reserve that, pursuant
to this requirement, a bank holding company should stand ready to use its
resources to provide adequate capital funds to its subsidiary banks during
periods of financial stress or adversity. Additionally, under the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), a bank
holding company is required to guarantee the compliance of any insured
depository institution subsidiary that may become "undercapitalized" (as
defined in the statute) with the terms of any capital restoration plan filed
by such subsidiary with its appropriate federal banking agency up to the
lesser of (i) an amount equal to 5% of the institution's total assets at the
time the institution became undercapitalized, or (ii) the amount that is
necessary (or would have been necessary) to bring the institution into
compliance with all applicable capital standards as of the time the
institution fails to comply with such capital restoration plan. Under the BHC
Act, the Federal Reserve has the authority to require a bank holding company
to terminate any activity or relinquish control of a nonbank subsidiary (other
than a nonbank subsidiary of a bank) upon the Federal Reserve's determination
that such activity or control constitutes a serious risk to the financial
soundness and stability of any bank subsidiary of the bank holding company.
The Registrant is prohibited by the BHC Act from acquiring direct or
indirect control of more than 5% of the outstanding shares of any class of
voting stock or substantially all of the assets of any bank or savings
association or merging or consolidating with another bank holding company
without prior approval of the Federal Reserve. The BHC Act also prohibits the
Registrant from acquiring control of any bank operating outside the State of
Indiana unless such action is specifically authorized by the statutes of the
state where the bank to be acquired is located. Additionally, the Registrant
is prohibited by the BHC Act from engaging in or acquiring ownership or
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control of more than 5% of the outstanding shares of any class of voting stock
of any company engaged in a nonbanking business unless such business is
determined by the Federal Reserve to be so closely related to banking as to be
a proper incident thereto. The BHC Act does not place territorial
restrictions on the activities of such nonbanking-related activities.
Bank holding companies are required to comply with the Federal Reserve's
risk-based capital guidelines, which require a minimum ratio of total capital
to risk-weighted assets (including certain off-balance sheet activities such
as standby letters of credit) of 8%. In addition to the risk-based capital
guidelines, the Federal Reserve has adopted a Tier 1 (leverage) capital ratio
under which the bank holding company must maintain a minimum level of Tier 1
capital to average total consolidated assets of 3% in the case of bank holding
companies which have the highest regulatory examination ratings and are not
contemplating significant growth or expansion. All other bank holding
companies are expected to maintain a ratio of at least 1% to 2% above the
stated minimum.
The Registrant's affiliate banks which are national banks are
supervised, regulated and examined by the Office of the Comptroller of the
Currency ("OCC"). The Registrant's affiliate banks which are state banks
chartered in Indiana are supervised, regulated and examined by the Indiana
Department of Financial Institutions. The Registrant's affiliate banks
chartered in Kentucky are supervised, regulated and examined by the Kentucky
Commissioner of Financial Institutions and its affiliate banks chartered in
Illinois are supervised, regulated and examined by the Illinois Commissioner
of Banks and Trust Companies. In addition, the Registrant's affiliate banks
which are state banks and members of the Federal Reserve are supervised and
regulated by the Federal Reserve, and those which are not members of the
Federal Reserve are supervised and regulated by the Federal Deposit Insurance
Corporation ("FDIC"). Each regulator has the authority to issue cease-and-
desist orders if it determines that activities of a bank represent an unsafe
and unsound banking practice or a violation of law.
Both federal and state law extensively regulate various aspects of the
banking business such as reserve requirements, truth-in-lending and truth-in-
savings disclosure, equal credit opportunity, fair credit reporting, trading
in securities and other aspects of banking operations. Current federal law
also requires banks, among other things, to make deposited funds available
within specified time periods.
Insured state-chartered banks are prohibited under FDICIA from engaging
as principal in activities that are not permitted for national banks, unless
(i) the FDIC determines that the activity would pose no significant risk to
the appropriate deposit insurance fund, and (ii) the bank is, and continues to
be, in compliance with all applicable capital standards.
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The FDIC and the OCC have adopted risk-based capital ratio guidelines to
which state-chartered banks and national banks under their respective
supervision are subject. The guidelines establish a systematic analytical
framework that makes regulatory capital requirements more sensitive to
differences in risk profiles among banking organizations. Risk-based capital
ratios are determined by allocating assets and specified off-balance sheet
commitments to four risk weighted categories, with higher levels of capital
being required for the categories perceived as representing greater risk.
Like the capital guidelines established by the Federal Reserve, these
guidelines divide a bank's capital into two tiers. Banks are required to
maintain a total risk-based capital ratio of 8%. The FDIC or OCC may,
however, set higher capital requirements when a bank's particular
circumstances warrant. Banks experiencing or anticipating significant growth
are expected to maintain capital ratios, including tangible capital positions,
well above the minimum levels. All of the Registrant's affiliate banks
exceeded the risk-based capital guidelines of the FDIC and OCC as of December
31, 1995.
Branching by the Registrant's affiliate banks in Indiana, Kentucky and
Illinois is subject to the jurisdiction, and requires the prior approval of,
the bank's primary federal regulatory authority and, if the branching bank is
a state bank, of the Indiana Department of Financial Institutions, Kentucky
Department of Financial Institutions or Illinois Commissioner of Banks and
Trust Companies, depending upon the location of the principal office of the
bank.
The Registrant's affiliate banks are subject to the Federal Reserve Act,
which restricts financial transactions between banks and affiliated companies.
The statute limits credit transactions between a bank and its executive
officers and its affiliates, prescribes terms and conditions for bank
affiliate transactions deemed to be consistent with safe and sound banking
practices, and restricts the types of collateral security permitted in
connection with a bank's extension of credit to an affiliate.
FDICIA also requires, among other things, federal bank regulatory
authorities to take "prompt corrective action" with respect to banks which do
not meet minimum capital requirements. For these purposes, FDICIA establishes
five capital tiers: well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized. FDICIA further directs that each federal banking agency
prescribe standards for depository institutions and depository institution
holding companies relating to internal controls, information systems, internal
audit systems, loan documentation, credit underwriting, interest rate
exposure, asset growth, management compensation, a maximum ratio of classified
assets to capital, minimum earnings sufficient to absorb losses, a minimum
ratio of market value to book value of publicly traded shares and such other
standards as the agency deemed appropriate. The federal banking agencies have
issued certain advance notices of proposed rulemakings, soliciting comments on
the implementation of these FDICIA provisions. The Registrant cannot predict
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in what form such rules will eventually be adopted or what effect such rules
will have on its affiliate banks.
The deposits of Registrant's affiliate banks are insured up to $100,000
per insured account, by the Bank Insurance Fund ("BIF"), except for deposits
acquired in connection with affiliations with savings associations, which
deposits are insured by the Savings Association Insurance Fund ("SAIF").
Accordingly, deposit insurance premiums are paid to both BIF and SAIF.
FDICIA required the FDIC to issue regulations effective January 1, 1994,
which establish a system for setting deposit insurance premiums based upon the
risks a particular bank or savings association poses to the deposit insurance
funds. Effective January 1, 1993, the FDIC adopted a final rule that
implements a risk-based assessment system whereby a base insurance premium
will be adjusted according to the capital category and subcategory of an
institution to one of three capital categories consisting of (1) well
capitalized, (2) adequately capitalized, or (3) undercapitalized, and one of
three subcategories consisting of (a) health, (b) supervisory concern, or (c)
substantial supervisory concern. An institution's assessment rate will depend
upon the capital category and supervisory category to which it is assigned.
Prior to June 1, 1995 assessment rates ranged from 0.23% for an institution in
the highest category (i.e., well capitalized) to 0.31% for an institution in
the lowest category (i.e. undercapitalized and substantial supervisory
concern) for both BIF and SAIF. As of June 1, 1995 the BIF rates were adjusted
to a range of 0.04% to 0.31%, with most of ONB's banks paying 0.04%. On
January 1, 1996, this rate was dropped to 0.0% except for a minimum payment.
For deposits insured by SAIF, a one-time recapitalization charge of 0.85% or
less may be approved by the U.S. Congress sometime in 1996. ONB has less than
6% of its deposits insured by SAIF. The supervisory subgroup to which an
institution is assigned by the FDIC is confidential and may not be disclosed.
Deposit insurance assessments may increase depending upon the category and
subcategory, if any, to which the bank is assigned by the FDIC. Any increase in
insurance assessments could have an adverse effect on the earnings of ONB's
affiliate banks.
The Riegle Community Development and Regulatory Improvement Act of 1994
("Act") became law in 1994. The Act contains seven titles pertaining to
community development and home ownership protection, small business capital
formation, paperwork reduction and regulatory improvement, money laundering
and flood insurance. The Act grants authority to several federal agencies to
promulgate regulations under the Act.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
allows for interstate banking and interstate branching without regard to
whether such activity is permissible under state law. Beginning September 29,
1995, bank holding companies may acquire banks anywhere in the United States
subject to certain state restrictions. Beginning June 1, 1997, an insured
bank may merge with an insured bank in another state without regard to whether
such merger is prohibited by state law. Additionally, an out-of-state bank
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may acquire the branches of an insured bank in another state without acquiring
the entire bank; provided, however, that the law of the state where the branch
is located permits such an acquisition. States may permit interstate
branching earlier than June 1, 1997, where both states involved in the bank
merger expressly permit it by statute. Further, bank holding companies may
merge existing bank subsidiaries located in different states into one bank.
Additionally, an insured bank subsidiary may act as agent for an affiliated
bank or thrift in offering limited banking services (receive deposits, renew
time deposits, close loans, service loans and receive payments on loans
obligations) both within the same state and across state lines. The
Registrant cannot predict with certainty the impact of these new laws on the
banking industry generally or on its business or future financial performance.
In addition to the matters discussed above, the Registrant's affiliate
banks are subject to additional regulation of their activities, including a
variety of consumer protection regulations affecting their lending, deposit
and collection activities and regulations affecting secondary mortgage market
activities. The earnings of financial institutions are also affected by
general economic conditions and prevailing interest rates, both domestic and
foreign and by the monetary and fiscal policies of the United States
Government and its various agencies, particularly the Federal Reserve.
Additional legislation and administrative actions affecting the banking
industry may be considered by the United States Congress, state legislatures
and various regulatory agencies, including those referred to above. It cannot
be predicted with certainty whether such legislation or administrative action
will be enacted or the extent to which the banking industry in general or the
Registrant and its affiliate banks in particular would be affected thereby.
Item 2. PROPERTIES
The principal office of the Registrant is located in leased space in the
multi-story Old National Bank building located at 420 Main Street, Evansville,
Indiana. The building is owned by a non-affiliated third party.
The Registrant's affiliate banks conduct business primarily from facilities
owned by the respective affiliate banks. Of the 118 banking offices operated
by the Registrant's affiliate banks, 95 are owned by the banks and 23 are
leased from non-affiliated third parties.
Old National Realty Company, Inc., a bank-related subsidiary of the
Registrant, owns certain real properties in downtown Evansville, Indiana,
which generally are incidental to banking operations. It does not engage in
real estate brokerage services.
Old National Service Corporation, the Registrant's data processing subsidiary,
has acquired a commercial building in downtown Evansville. Over the next two
years, the data processing operations for the Registrant's affiliate banks, as
well as for a certain number of non-affiliated third party customers, will be
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transferred in-house from outside service bureaus. These operations will be
performed primarily in this facility.
Item 3. LEGAL PROCEEDINGS
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders of the Registrant
during the fourth quarter of 1995.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
Page 52 of the Registrant's Annual Report to Shareholders for the year ended
December 31, 1995 is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Page 14 of the Registrant's Annual Report to Shareholders for the year ended
December 31, 1995 is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Pages 13 through 30 of the Registrant's Annual Report to Shareholders for the
year ended December 31, 1995 are incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Pages 32 through 47 of the Registrant's Annual Report to Shareholders for the
year ended December 31, 1995 are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None. PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
This information is omitted from this report pursuant to General Instruction G
of Form 10-K as the Registrant intends to file with the Commission its
definitive Proxy Statement pursuant to Regulation 14-A of the Securities
Exchange Act of 1934, as amended, not later than 120 days after December 31,
1995.
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ITEM 11. EXECUTIVE COMPENSATION
This information is omitted from this report pursuant to General Instruction G
of Form 10-K as the Registrant intends to file with the Commission its
definitive Proxy Statement pursuant to Regulation 14-A of the Securities
Exchange Act of 1934, as amended, not later than 120 days after December 31,
1995.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This information is omitted from this report pursuant to General Instruction G
of Form 10-K as the Registrant intends to file with the Commission its
definitive Proxy Statement pursuant to Regulation 14-A of the Securities
Exchange Act of 1934, as amended, not later than 120 days after December 31,
1995.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information is omitted from this report pursuant to General Instruction G
of Form 10-K as the Registrant intends to file with the Commission its
definitive Proxy Statement pursuant to Regulation 14-A of the Securities
Exchange Act of 1934, as amended, not later than 120 days after December 31,
1995.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements:
Report of Independent Public Accountants
Consolidated Balance Sheet - December 31, 1995 and 1994
Consolidated Statement of Income -
Years Ended December 31, 1995, 1994 and 1993
Consolidated Statement of Changes in Shareholders' Equity -
Years Ended December 31, 1995, 1994 and 1993
Consolidated Statement of Cash Flows -
Years Ended December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
(b) No reports on Form 8-K were filed with the Commission during the fourth
quarter of 1995.
(c) Exhibits - The following exhibits are filed herewith:
Exhibit 11 - Statement re Computation of Per Share Earnings
Exhibit 13 - Annual Report to Shareholders for the year ended December 31,
1995
Exhibit 22 - Subsidiaries of the Registrant
Exhibit 24 - Consent of Independent Public Accountants
(d) Financial Statement Schedules - This information is omitted since the
required information is not applicable to the Registrant.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: s/s Ronald B. Lankford
Ronald B. Lankford, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
By:____________________________ ________
David L. Barning, Director Date
By: s/s Richard J. Bond 3/27/96
Richard J. Bond, Director Date
By:____________________________ ________
Alan W. Braun, Director Date
By:____________________________ ________
John J. Daus, Jr., Director Date
By:s/s Wayne A. Davidson 3/27/96
Wayne A. Davidson, Director Date
By: s/s Larry E. Dunigan 3/27/96
Larry E. Dunigan, Director Date
By:____________________________ ________
David E. Eckerle, Director Date
By:____________________________ ________
Thomas B. Florida, Director Date
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By:s/s Phelps L. Lambert 3/27/96
Phelps L. Lambert, Director Date
By: s/s Ronald B. Lankford 3/27/96
Ronald B. Lankford, Date
President and Director
(Chief Operating Officer)
By:____________________________ ________
Lucien H. Meis, Director Date
By:s/s Dan W. Mitchell 3/27/96
Dan W. Mitchell, Director Date
By:s/s John N. Royse 3/27/96
John N. Royse, Chairman Date
of the Board and Director
(Chief Executive Officer)
By:s/s Marjorie Soyugenc 3/27/96
Marjorie Soyugenc, Director Date
By:____________________________ ________
Charles D. Storms, Director Date
By:s/s Edward T. Turner, Jr. 3/27/96
Edward T. Turner, Jr., Director Date
By:s/s Steve H. Parker 3/27/96
Steve H. Parker, Date
Senior Vice President
(Chief Financial Officer)
By:s/s Ronald W. Seib 3/27/96
Ronald W. Seib, Date
Vice President-
Corporate Controller
(Principal Accounting Officer)
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INDEX OF EXHIBITS
Regulation S-K
Reference
(Item 601)
3.01 Articles of Incorporation of the Registrant (incorporated by
reference to the Registrant's Form S-4 Registration Statement, File
No. 33-57502, dated January 22, 1993)
3.02 By-Laws of the Registrant (incorporated by reference to the
Registrant is Pre-Effective Amendment No. 1 to Form S-4
Registration Statement, File No. 33-55935, dated September 17,
1990)
10 Material contracts (incorporated by reference to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31,
1991)
11 Statement re Computation of Per Share Earnings
13 Annual Report to Shareholders for the year ended December 31, 1995
22 Subsidiaries of the Registrant
24 Consent of Arthur Andersen LLP
27 Financial Data Schedule
13
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EXHIBIT 11
PAGE 1 OF 3
OLD NATIONAL BANCORP
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
($ AND SHARES IN THOUSANDS EXCEPT PER SHARE)
1995
Primary Fully Diluted
Net income $ 51,694 $ 51,694
Interest expense foregone on assumed
conversion of 8% convertible subordinated
debentures, net of tax -- 1,523
_________ __________
Adjusted net income $ 51,694 $ 53,217
Weighted average common shares outstanding 25,305 25,305
Additional shares outstanding upon assumed
conversion of 8% convertible subordinated
debentures -- 1,408
Additional shares outstanding upon assumed
exercise of stock options 65 65
________ ___________
Adjusted weighted average
shares outstanding 25,370 26,778
======== ===========
Earnings per share $ 2.04 $ 1.99
======== ===========
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EXHIBIT 11
PAGE 2 OF 3
OLD NATIONAL BANCORP
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
($ AND SHARES IN THOUSANDS EXCEPT PER SHARE)
1994
Primary Fully Diluted
Net income $ 46,472 $ 46,472
Interest expense foregone on assumed
conversion of 8% convertible subordinated
debentures, net of tax -- 1,839
_______ _______
Adjusted net income $ 46,472 $ 48,311
Weighted average common shares outstanding 26,031 26,031
Additional shares outstanding upon assumed
conversion of 8% convertible subordinated
debentures -- 1,699
Additional shares outstanding upon assumed
exercise of stock options 65 65
________ _______
Adjusted weighted average
shares outstanding 26,096 27,795
======== =======
Earnings per share $ 1.78 $ 1.74
======== =======
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EXHIBIT 11
PAGE 3 OF 3
OLD NATIONAL BANCORP
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
($ AND SHARES IN THOUSANDS EXCEPT PER SHARE)
1993
Primary Fully Diluted
Net income $ 48,032 $ 48,032
Interest expense foregone on assumed
conversion of 8% convertible subordinated
debentures, net of tax -- 1,936
_______ _______
Adjusted net income $ 48,032 $ 49,968
Weighted average common shares outstanding 26,029 26,029
Additional shares outstanding upon assumed
conversion of 8% convertible subordinated
debentures -- 1,789
Additional shares outstanding upon assumed
exercise of stock options 65 65
-------- -------
Adjusted weighted average
shares outstanding 26,094 27,883
======== =======
Earnings per share $ 1.84 $ 1.79
======== =======
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EXHIBIT 13
[Picture of Pocketwatch]
OLD NATIONAL BANCORP
1995 ANNUAL REPORT
SET YOUR WATCH BY US
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TABLE OF CONTENTS
Financial Highlights. . . . . . . . . . . . . . . 1
Management Letter to Shareholders . . . . . . . 2-3
A Commitment as Constant as Time Itself . . . . 4-9
Affiliate Bank Information and Locations. . . 10-11
Management's Discussion and Analysis. . . . . 12-30
Report of Management. . . . . . . . . . . . . . .31
Report of Independent Public Accountants. . . . .32
Consolidated Financial Statements . . . . . . 33-36
Notes to Consolidated Financial Statements. . 37-47
Directors and Executive Officers. . . . . . . 48-51
Stock Information . . . . . . . . . . . . . . . .52
<PAGE>
Old National Bancorp
Financial Highlights
($ in thousands except per share data)
Graphs
Year-End Year-End Net Income Cash Dividends Paid
Total Assets Total Loans Per Share Per Share
1991 4,156 2,407 1.53 0.66
1992 4,196 2,431 1.75 0.69
1993 4,487 2,616 1.84 0.72
1994 4,643 2,890 1.78 0.84
1995 4,823 3,038 2.04 0.88
Percent
1995 1994(1) Change
Income Statement Summary ----------------------------------
Interest income . . . . . . . . . . . . $355,272 $312,244 13.8%
Interest expense. . . . . . . . . . . . 174,078 135,676 28.3
Net interest income . . . . . . . . . . 181,194 176,568 2.6
Net income. . . . . . . . . . . . . . . 51,694 46,472 11.2
Balance Sheet Summary
Total assets. . . . . . . . . . . . . . $4,822,628 $4,642,723 3.9%
Investment securities and
money market investments . . . . . . . 1,476,141 1,452,396 1.6
Loans, net of unearned income . . . . . 3,037,733 2,890,313 5.1
Deposits. . . . . . . . . . . . . . . . 3,973,675 3,669,186 8.3
Shareholders' equity. . . . . . . . . . 428,077 408,612 4.8
Averages
Total assets. . . . . . . . . . . . . . $4,693,587 $4,509,671 4.1%
Investment securities
and money market investments . . . . . 1,443,500 1,509,446 (4.4)
Loans, net of unearned income . . . . . 2,968,335 2,725,608 8.9
Deposits. . . . . . . . . . . . . . . . 3,814,650 3,676,012 3.8
Shareholders' equity. . . . . . . . . . 413,297 413,794 (0.1)
Per Common Share (2)
Net income per share - primary. . . . . $ 2.04 $ 1.78 14.6%
Net income per share - fully diluted. . 1.99 1.74 14.4
Cash dividends paid . . . . . . . . . . 0.88 0.84 4.8
Book value per share. . . . . . . . . . 17.15 15.86 8.1
Stock price at year end . . . . . . . . 33 1/8 33 1/8
Selected Ratios
Return on average assets. . . . . . . . 1.10% 1.03%
Return on average shareholders'
equity (3) . . . . . . . . . . . . . . 12.59 11.08
Average shareholders' equity to
average assets . . . . . . . . . . . . 8.81 9.18
Total capital to risk-adjusted assets . 15.60 16.34
Net interest margin . . . . . . . . . . 4.41 4.47
Dividend payout . . . . . . . . . . . . 40.84 43.06
Other Data
Number of full-time equivalent
employees. . . . . . . . . . . . . . . 2,221 2,157
Number of shareholders. . . . . . . . . 12,585 12,571
Number of shares traded . . . . . . . . 3,753,200 2,892,900
(1) Financial information has been restated for mergers accounted for as
poolings-of-interests.
(2) Restated for all stock dividends, including a 5% stock dividend paid to
shareholders on February 20,1996
(3) Excludes unrealized gains (losses) on investment securities.
1
<PAGE>
MANAGEMENT LETTER TO SHAREHOLDERS
January 1996
Dear Shareholders:
Old National Bancorp proved once again to be a stable investment for its
shareholders in 1995. An impressive net income fo $51.7 million was posted,
an increase of 11% over the previous year. This noteworthy performance
reflects the company's commitment to sound, steady growth.
Old National Bancorp's assets reached $4.82 billion in 1995, an increase of
16% over $4.15 billion reported in last year's annual report. This increase
in assets is a direct result of the company's prudently planned and carefully
implemented internal and external expansion efforts. In 1995, we completed
acquisitions with five banks, and have announced plans to merge with one
other, bringing our total number of banking affiliates to 26. The First
National Bank of Oblong, Oblong, Illinois; Citizens National Bank, Tell City,
Indiana; First United Savings Bank (name changed to ONB Bank), Greencastle and
Bloomington, Indiana; The Bank of Harrisburg, Harrisburg, Illinois (merged
into First National Bank, Harrisburg); and City National Bank, Fulton,
Kentucky, became our newest affiliates. Additionally, we announced our intent
to merge with The National Bank of Carmi, Carmi, Illinois.
Our new partners meet Old National Bancorp's stringent criteria established
when we began the company's expansion program in 1985 that has since served as
its foundation. These partners offer strong earnings potential, capable
managment that remains dedicated to the bank and its community, and
philosophies that are compatible with our goals. We continue to search for
additions to our family of banks who will help us increase the services we can
provide to our customers, and the value we can provide to our shareholders.
While our expansion comes from our recognition of the strength that lies in
numbers, we also appreciate the diversity of the individual geographic areas
served. That's why we've realigned our operation, dividing them into four
independent regions. One is based in Terre Haute (Northern Region) and is led
by Regional Executive Bill Britt; another is based in Jasper (Central Region)
and is led by Regional Executive David Eckerle; a third is based in Evansville
(Evansville Region) and is led by Regional Executive Jim Risinger; and our
fourth is based in Madisonville (Southern Region) and is led by Regional
Executive Morris Coffman. One of our philosophies is keeping our decision
making as close to the customer as possible. So each of our banks in all of
our regions is encouraged to specialize in what it does best - serving its own
communities.
Throughout our expansion efforts, we're pleased to report that we've produced
fine earnings growth, and have maintained sound performance ratios. Old
National Bancorp ended 1995 with a return on average equity of 12.59%, while
our return on average assets continued to be strong at 1.10%. At year end,
Tier 1 capital was 8.37% of total assets.
We continue to focus on diversified loan portfolios to maintain our excellent
loan quality. Maintaining our strong loan culture remains on of our top
priorities. We believe our history of successfuly growing and managing loans
effectively positions Old National Bancorp for continued growth throughout the
decade, and well into the next century.
2
<PAGE>
[Picture of Mr. Royse, Chairman and Mr. Lankford, President]
We're pleased that so many shareholders have entrusted their investment to us.
Some 12,600 shareholders now hold nearly 25 million shares of Old National
Bancorp stock. That's quite an increase from when we first began our
expansion program with 1,500 shareholders and 2 million shares outstanding.
To us, it's the highest compliment - and challenge- there is. Our goal is
continued appreciation of our stock price. Since the creation of Old National
Bancorp, we've seen an average annual appreciation of our stock price of more
than 15%. In fact, since 1983, Old National's common stock has outperformed
the Dow Jones Industrial average by 126%. It's a tough act to follow, but
we're committed to making your investment a rewarding one over the long term.
Technology is another key to our future success. For instance, we're going on
line with our own personal computer banking service, PC Bank ConnectSM, to
enable people to use their personal computer and a modem to pay their bills
electronically, retrieve account information, such as account balances and
statement histories, and transfer funds between accounts. Another home
service, Touch Tone BankingSM, will allow people to receive those same
services by using a touch tone phone. Now our customers can feel like they
have their own ATM, right in their own home or anywhere in the United States,
24 hours a day and seven days a week.
While the banking industry is rapidly changing to meet the ever-changing needs
of its customers, one thing remains constant...the need for steady direction
from knowledgeable management. At Old National Bancorp, members of our senior
management team are preparing the company to successfully meet the challenges
of this changing industry. Rich in experience and leadership, this team and
all of our extremely competent people are working together to strengthen our
solid position as the leading financial services company in our area.
At Old National Bancorp, we're proud of our efforts that have historically
provided a fine return on our shareholders' investments. We're confident that
with the continued support of shareholders, customers and employees, we'll be
in an excellent position to meet the challenges of 1996 in protecting...and
growing...these investments.
Sincerely,
John N. Royse
Chairman
Ronald B. Lankford
President
3
<PAGE>
[Picture of Grandfather Clock]
4
<PAGE>
A TIME-HONORED TRADITION OF DEPENDABILITY
You treasure your grandfather's antique pocketwatch. You trace its worn, yet
still beautifully intricate engravings with your fingertips. You gently open
its clasp, marveling how after years of time-keeping, its delicate hands
continue to move in precision.
When you carry it, you carry a piece of a man who knew what he stood for. A
man you could trust to be as dependable and constant as the passing of time
itself.
In today's chaotic financial world, where bank mega-mergers and acquisitions
seem to occur by the minute, it's comforting to know that one constant exists
- - Old National Bancorp. Old National bagan in Evansville, Indiana, in
1834...even before Evansville was granted its city charter..and remains one of
the region's financial leaders today with over $4.8 billion in assets.
There is never any question about what Old National Bancorp stands for - solid
performance and service. And its centruy-and-a-half heritage is proof that,
when it comes to choosing a bank, characteristics like trust and stability
transcend time.
[Picture of Old National Bank building in 1916]
5
<PAGE>
[Picture of clock gears]
6
<PAGE>
SYNCHRONIZED EFFORTS FOR PRECISE RESULTS
In age-old clock-making communities of Switzerland, Austria, and Germany, no
single craftsman ever created a complete clock. Instead, each dial painter,
frame maker, and case carver joined efforts to produce one extraordinary
timepiece.
Much like the clock-making craftsmen, Old National Bancorp's four
regions...based in Evansville, Terre Haute, Jasper, and
Madisonville...represents the strength that comes from knowing their markets.
Old National Bancorp encourages each of its regions to specialize in what it
does best - serving its own communities.
Watch the gently spinning pendulum of an anniversary clock and you'll
understand why these communities depend on Old National Bancorp to meet their
financial needs. You may see only its galss dome, dial, and hands, but inside
are its delicate gears and springs...the heart of the timepiece whose efforts
must be in exact alignment to keep proper time. An Old National Bank customer
may see only his savings account book, or branch lobby. But it's the 2,200
Old National Bancorp employees who are the heart of the company...and whose
behind-the-scenes efforts are really what make Old National Bancorp tick.
[Picture of Dave Eckerle, Central Regional Executive, Bill Britt, Northern
Regional Executive, Jim Risinger, Evansville Regional Executive, and Morris
Coffman, Southern Regional Executive]
7
<PAGE>
[Picture of Clock]
8
<PAGE>
STEADY ADVANCES AND SWEEPING MOVEMENTS
While there are many different ways to mark time...from a grandfather clock to
a stopwatch to a sundial...there's still no way to stop it. Time marches on.
And so does Old National Bancorp.
Thousands of families depend on Old National Bancorp to help them prepare
financially for the many different times of their lives. Getting married.
Buying a home. Welcoming a new baby. Establishing a college education fund.
Enjoying a comfortable retirement. Different times demand different
strategies. That's why Old National Bancorp continues to develop customized
products and services, from home loans to home banking, or from investments to
insurance, all desigend to meet the individual needs of each of these
families.
Old National Bancorp. Like a sweeping second hand, it always moves forward,
striving to meet the ever-changin financial needs of the communities it
serves. In successfully helping its customers not just keep up with today,
but better prepare for tomorrow, it has established itself as a company that
is ahead of its time.
[Picture of Family on Front Porch]
9
<PAGE>
ONB AFFILIATE BANKS
($ in thousands as of December 31, 1995)
Year of
Name of Affiliate Banking Affiliation Shareholders'
(Principal Office) Offices With ONB Assets Equity
- -------------------------------------------------------------------------------
Old National Bank
(Evansville, Indiana) 15 1983 $1,248,997 $116,861
Merchants National Bank
(Terre Haute, Indiana) 9 1985 376,879 35,644
First Citizens Bank & Trust Co.
(Greencastle, Indiana) 3 1985 165,957 12,652
People's Bank & Trust Co.
(Mt. Vernon, Indiana) 3 1986 118,611 11,543
Rockville National Bank
(Rockville, Indiana) 3 1986 54,250 5,305
Clinton State Bank
(Clinton, Indiana) 2 1986 61,920 5,866
Gibson County Bank
(Princeton, Indiana) 2 1987 77,832 7,404
Security Bank & Trust Co.
(Vincennes, Indiana) 6 1987 161,379 15,884
Farmers Bank & Trust Co.
(Madisonville, Kentucky) 4 1987 180,275 17,251
Peoples National Bank
(Lawrenceville, Illinois) 1 1988 83,900 8,834
First State Bank
(Greenville, Kentucky) 5 1989 180,919 17,122
Morganfield National Bank
(Morganfield, Kentucky) 5 1989 108,968 10,525
First National Bank
(Harrisburg, Illinois) 6 1989 199,508 20,186
Farmers Bank & Trust Co.
(Henderson, Kentucky) 3 1990 187,707 16,259
Security Bank & Trust Co.
(Mt. Carmel, Illinois) 2 1990 113,944 11,261
United Southwest Bank
(Washington, Indiana) 6 1992 189,909 17,834
Palmer-American National Bank
(Danville, Illinois) 7 1992 306,464 30,457
Dubois County Bank
(Jasper, Indiana) 10 1993 327,509 31,368
Bank of Western Indiana
(Covington, Indiana) 7 1994 115,993 11,064
Indiana State Bank*
(Terre Haute, Indiana) 4 1994 91,711 9,128
Orange County Bank
(Paoli, Indiana) 3 1994 76,981 7,439
First National Bank
(Oblong, Illinois) 2 1995 89,884 8,282
Citizens National Bank
(Tell City, Indiana) 5 1995 149,349 14,417
ONB Bank
(Bloomington, Indiana) 2 1995 107,631 10,314
City National Bank
(Fulton, Kentucky) 3 1995 104,969 9,403
Pending Affiliate:
The National Bank of Carmi
(Carmi, Illinois) 2 66,143 8,317
*Indiana State Bank is expected to be combined into Merchants National Bank,
April 1996.
10
<PAGE>
[Picture of Map of Illinois, Indiana, and Kentucky and various locations of
banks in the states]
11
<PAGE>
[Picture of various clocks with the quote, "Hold fast the time! Guard it, watch
over it,every hour, every minute! Unregarded it slips away..."
THOMAS MANN (1875-1955) THE BELOVED RETURNS(1939), centered on the page.]
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INTRODUCTION TO OLD NATIONAL BANCORP
Old National Bancorp (ONB) is a multi-bank holding company headquartered in
Evansville, Indiana. Its twenty-five affiliate banks conduct business in 118
office locations in southwestern Indiana, southeastern Illinois, and western
Kentucky. A complete listing of ONB's affiliate banks, including pending
affiliations, is presented on page 10. The banks provide a wide range of
financial services, such as making commercial and consumer loans; originating,
marketing, and servicing mortgage loans; issuing and servicing credit cards;
leasing; offering a wide range of deposit products; issuing letters of credit;
issuing credit life, accident and health insurance; providing safe deposit
facilities; and providing alternative investments and brokerage services. ONB
also has six non-bank affiliates which provide services incidental to ONB's
operations, including data processing, issuance and reinsurance of credit
life, accident, health, property and casualty insurance, investment services,
fiduciary and trust services, and property ownership.
The following information is an analysis of the major components of ONB's
operations for the years 1993 through 1995 and financial condition as of
December 31, 1995 and 1994. This information should be read in conjunction
with the accompanying consolidated financial statements and footnotes thereto
beginning on page 33. The information has been restated to reflect mergers
accounted for as pooling-of-interests as if they had occurred at the beginning
of the first year presented. Purchases have been included in reported results
from the date of the transaction.
Tax-exempt interest income in the following information has been increased to
an amount comparable to interest subject to income taxes using federal
statutory rates in effect of 34% in 1990-1992 and 35% in 1993-1995. An
offsetting increase of the same amount is made in the income tax section of
the Selected Financial Data. Net income is unaffected by these taxable
equivalent adjustments.
MERGER ACTIVITY
During 1995, ONB consummated five mergers with banks in Indiana (2), Illinois
(2), and Kentucky (1) with total assets over $500 million. All of these were
accounted for as pooling-of-interests. Presently, ONB has one pending
transaction with The National Bank of Carmi, in Illinois, which has total
assets of $66.1 million at December 31, 1995. This transaction is
anticipated to close in mid-1996.
ONB completed in 1994 mergers adding nearly $300 million in total assets with
Citizens Union Bank, Central City, Kentucky; Orange County Bank, Paoli,
Indiana; Indiana State Bank, Terre Haute, Indiana; and Bank of Western
Indiana, Covington, Indiana. All transactions used pooling-of-interests
accounting. Citizens Union Bank was merged into ONB's existing affiliate,
First State Bank, Greenville, Kentucky. Bank of Western Indiana was combined
with another ONB bank, The Citizens State Bank, Williamsport, Indiana, with
Bank of Western Indiana's charter surviving.
OVERVIEW OF FINANCIAL RESULTS
As a whole, the banking industry reported solid earnings in 1995 aided by
continued economic growth and reduced FDIC insurance premiums. While interest
rates generally dropped by the end of 1995, many financial institutions faced
interest margin pressures as short-term rates declined less quickly than the
long-term rates. Additionally, the 1994 rise in interest rates sparked
competitive pressures on deposits which carried over to 1995. Strong loan
growth and expense control contributed to the industry's earnings.
ONB recorded record earnings in 1995 with net income of $51.7 million, an
11.2% increase over restated earnings for 1994. Over the last five years,
ONB's earnings have grown at a compounded rate of 8%. A healthy net interest
margin, controlled loan losses, and improved fee income contributed to ONB's
performance. Expenses benefited from the lower FDIC premiums and by added
volume at the company's internal operations center. The remaining sections of
this management's discussion will present additional details of ONB's
operating results.
13
<PAGE>
<TABLE>
<CAPTION>
Selected Financial Data
($ in thousands except per share data)
Five
Year
1995 1994 1993 1992 1991 1990 Growth
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Results Of Operations
(Taxable equivalent basis)
Interest income . . . . . . $368,478 $324,857 $319,285 $332,868 $369,429 $378,518
Interest expense. . . . . . 174,078 135,676 134,484 156,056 205,192 226,875
----------------------------------------------------------------------------
Net interest income . . . . 194,400 189,181 184,801 176,812 164,237 151,643 5.1%
Provision for loan losses . 6,657 7,682 10,189 11,859 11,885 10,114 -8.0
----------------------------------------------------------------------------
Net interest income after .
provision for loan losses. 187,743 181,499 174,612 164,953 152,352 141,529 5.8
Noninterest income . . . . 39,170 34,809 33,598 29,153 26,496 23,986 10.3
Noninterest expense . . . . 142,777 142,842 131,223 119,611 114,102 108,175 5.7
----------------------------------------------------------------------------
Income before income taxes. 84,136 73,466 76,987 74,495 64,746 57,340 8.0
Income taxes. . . . . . . . 32,442 26,994 28,955 28,519 24,302 21,543 8.5
----------------------------------------------------------------------------
Net income. . . . . . . . . $ 51,694 $ 46,472 $ 48,032 $ 45,976 $ 40,444 $ 35,797 7.6%
============================================================================
Year-End Balances
Total assets. . . . . . . .$4,822,628 $4,642,723 $4,487,232 $4,195,633 $4,156,401 $4,102,015 3.3%
Total loans -
net of unearned income. . 3,037,733 2,890,313 2,616,046 2,431,357 2,407,090 2,391,696 4.9
Total deposits . . . . . . 3,973,675 3,669,186 3,694,577 3,533,882 3,444,129 3,423,621 3.0
Shareholders' equity. . . . 428,077 408,612 403,955 375,880 352,743 331,851 5.2
Per Share Data (1)
Net income - primary. . . . $ 2.04 $ 1.78 $ 1.84 $ 1.75 $ 1.53 $ 1.32 9.1
Net income -
fully diluted (2) . . . . 1.99 1.74 1.79 1.70 1.50 1.30 8.9
Cash dividends paid . . . . 0.88 0.84 0.72 0.69 0.66 0.63 6.9
Book value at year-end. . . 17.15 15.86 15.37 14.17 13.31 12.10 7.2
Selected Performance Ratios
(based on averages)
Return on assets . . . . . 1.10% 1.03% 1.10% 1.11% 1.00% 0.90%
Return on equity (3) . . . 12.59 11.08 12.42 12.75 12.00 10.87
Equity to assets . . . . . 8.81 9.18 8.82 8.67 8.31 8.30
Primary capital to assets. 9.70 10.12 9.70 9.53 9.11 9.09
Net charge-offs to
average loans . . . . . . 0.28 0.30 0.26 0.33 0.41 0.58
Allowance for loan losses
to average loans. . . . . 1.34 1.52 1.67 1.55 1.39 1.39
(1) Restated for all stock dividends and stock splits.
(2) Assumes the conversion of ONB's subordinated debentures.
(3) Excludes unrealized gains (losses) on investment securities.
</TABLE>
14
<PAGE>
RESULTS OF OPERATIONS
NET INCOME
Graph of Net Income ($ in Millions)
1991 40.4
1992 46.0
1993 48.0
1994 46.5
1995 51.7
ONB recorded $51.7 million of net income in 1995, a $5.2 million or 11.2%
increase over 1994 results. Primary net income per share for 1995 rose 14.6%
to $2.04 compared to $1.78 in 1994. Growth in net interest income and other
income combined with lower loan loss provision and noninterest expense
generated the improvement. The specific effects of each of these factors are
discussed in the following paragraphs.
ONB's 1994 net income was $46.5 million which is down 3.2% from 1993. Prior
to restating 1994 and 1993 for the 1995 merger activity, ONB showed net
income growth of 1.0%. One of the acquisitions made in 1995 experienced a
$2.7 million loss in 1994 primarily due to a loss on a real estate investment.
Net interest income, other income, and lower loan loss provision positively
contributed to net income. Increased personnel, equipment, and data
processing expense negatively impacted earnings.
NET INTEREST INCOME
A major share of ONB's earnings results from net interest income, the
difference between interest and fees on earning assets, such as loans and
investments, and the interest paid on deposits and other liabilities obtained
to fund them. The net interest margin is net interest income, on a taxable
equivalent basis, expressed as a percentage of average earning assets. This
permits comparability incorporating the tax savings on certain assets. The
margin is influenced by a number of factors, such as the volume and mix of
earning assets and funding sources, the interest rate environment and income
tax rates. The level of earning assets funded by interest free funding
sources (primarily noninterest-bearing demand deposits and equity capital)
also impacts net interest margin. ONB can control the effect of some of these
factors through its management of credit extension and interest rate
sensitivity, both of which are discussed in detail later in this report.
External factors such as the overall condition of the economy, strength of
credit demand, Federal Reserve Board monetary policy and changes in tax laws
can also have a significant effect on changes in net interest income from one
period to another.
On a taxable equivalent basis net interest income increased $5.2 million or
2.8% over the prior year. Average earning assets increased 4.2% or $176.8
million between years while the net interest margin declined slightly from
4.47% to 4.41%. During 1995, the mix of earning assets changed significantly
as the average balances of higher yielding loans rose $242.7 million (8.9%)
while investments, securities and money market combined, decreased $65.9
million (4.4%). The yield on the assets increased 69 basis points primarily
due to the loan yield rising from 8.37% to 9.06%. Interest bearing
liabilities grew $151.1 million or 4.2%. ONB experienced a significant shift
away from savings and daily interest checking, down 10.7%, to higher paying
money market accounts, up 15.1%, and certificates of deposit, up 8.4%. This
shift, combined with interest rate pressures in 1995, caused our cost of
interest-bearing liabilities to rise to 4.61%, an 87 basis point increase.
Graph of Net Interest Income (Taxable Equivalent Basis)($ in Millions)
1991 164.2
1992 176.8
1993 184.8
1994 189.2
1995 194.4
In 1994 net interest income rose 2.4% or $4.4 million and reached $189.2
million. Average earning assets rose 3.2% or $130.1 million. While the
yields for most categories dropped, the overall yield dropped only 11 basis
points to 7.67% as earning assets shifted toward the higher yielding loan
portfolio which grew 8.8%. Many older, higher yielding assets were repaid
during 1994. Deposits grew 1.2% while total interest-bearing liabilities grew
2.7%. The rates on liabilites decreased 7 basis points as the cost of
deposits trended downward. The overall net interest margin was 4.47%, down 3
basis points from 1993.
Table 1 on page 16 details the changes in the components of net interest
income. Table 2 on page 16 attributes those fluctuations to the impact of
changes in the average balances of assets and liabilities and the yields/rates
earned or paid thereon. Table 3 on page 17 presents a three year average
balance sheet and for each major asset and liability category its related
interest income and yield or its expense and rate.
15
<PAGE>
<TABLE>
<CAPTION>
Changes in Net Interest Income (Table 1)
(Taxable equivalent basis, $ in thousands) % Change From
Prior Year
-----------------
1995 1994 1993 1995 1994
Interest income on: ------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loans. . . . . . . . . . . $269,020 $228,257 $215,085 17.9% 6.1 %
Investment securities. . . 95,864 93,871 98,875 2.1 (5.1)
Federal funds sold and
securities purchased under
agreements to resell . . . 3,393 2,391 4,130 41.9 (42.1)
Interest-bearing
deposits in other banks . . 201 338 1,195 (40.5) (71.7)
------------------------------------------------------
Total interest income . . . 368,478 324,857 319,285 13.4 1.7
------------------------------------------------------
Interest expense on:
Savings and daily interest
checking . . . . . . . . . 24,056 25,181 26,656 (4.5) (5.5)
Money market deposits. . . 21,620 13,226 12,818 63.5 3.2
Certificates of deposit of
$100,000 and over. . . . . 14,472 8,774 9,221 64.9 (4.8)
Other time deposits. . . . 89,578 70,373 72,500 27.3 (2.9)
Federal funds purchased and
ecurities sold under
agreements to repurchase . 12,155 9,406 6,545 29.2 43.7
All other borrowings . . . 12,197 8,716 6,744 39.9 29.2
------------------------------------------------------
Total interest expense . . 174,078 135,676 134,484 28.3 0.9
------------------------------------------------------
Net interest income. . . . . $194,400 $189,181 $184,801 2.8% 2.4%
======================================================
Net interest margin. . . . . 4.41% 4.47% 4.50%
================================
</TABLE>
<TABLE>
<CAPTION>
Net Interest Income - Rate/Volume Analysis (Table 2)
(Taxable equivalent basis, $ in thousands)
1995 vs. 1994 1994 vs. 1993
------------------------- ---------------------------
Attributed to Attributed to
Total ---------------- Total ----------------
Change Volume Rate Change Volume Rate
------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest income on:
Loans. . . . . . . . . . . . . . . . $40,763 $21,163 $19,600 $13,172 $18,603 $(5,431)
Investment securities. . . . . . . . 1,993 (3,911) 5,904 (5,004) 212 (5,216)
Federal funds sold and
securities purchased under
agreements to resell . . . . . . . . 1,002 (118) 1,120 (1,739) (2,693) 954
Interest-bearing deposits
in other banks . . . . . . . . . . (137) (240) 103 (857) (667) (190)
------------------------- ---------------------------
Total interest income. . . . . . . 43,621 16,894 26,727 5,572 15,455 (9,883)
------------------------- ---------------------------
Interest expense on:
Savings and daily
interest checking . . . . . . . . . . (1,125) (2,798) 1,673 (1,475) 215 (1,690)
Money market deposits. . . . . . . . 8,394 2,412 5,982 408 1,220 (812)
Certificates of deposit of
$100,000 and over. . . . . . . . . 5,698 1,807 3,891 (447) (543) 96
Other time deposits. . . . . . . . . 19,205 5,486 13,719 (2,127) (129) (1,998)
Federal funds purchased and securities
sold under agreements to repurchase. . 2,749 (708) 3,457 2,861 1,476 1,385
All other borrowings . . . . . . . . 3,481 3,192 289 1,972 983 989
------------------------- ---------------------------
Total interest expense. . . . . . . 38,402 9,391 29,011 1,192 3,222 (2,030)
------------------------- ---------------------------
Net interest income. . . . . . . . . . $ 5,219 $ 7,503 $(2,284) $4,380 $12,233 $(7,853)
========================= ===========================
*The variance not solely due to rate or volume is allocated equally between the rate and volume variances.
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Three-Year Average Balance Sheet And Net Interest Analysis (Table 3)
(Taxable equivalent basis, $ in thousands)
1995 1994 1993
----------------------------------------------------------------------------------------------
Average Interest Yield/ Average Interest Yield/ Average Interest Yield/
Balance & Fees Rate Balance & Fees Rate Balance & Fees Rate
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earning Assets:
Money market investments:
Interest-bearing deposits
in other banks . . . . . . . . $ 3,826 $ 201 5.25% $ 9,208 $ 338 3.67% $ 24,957 $ 1,195 4.79%
Federal funds sold and
securities purchased under
agreements to resell . . . . . 57,400 3,393 5.91 59,801 2,391 4.00 136,517 4,130 3.03
Investment securities:
U.S. Treasury and Government
agencies (1). . . . . . . . . 933,388 58,445 6.26 970,179 55,441 5.71 1,031,108 63,006 6.11
State and political subdivisions 420,189 35,556 8.46 427,686 36,155 8.45 367,394 33,165 9.03
Other securities . . . . . . . 28,697 1,863 6.49 42,572 2,275 5.34 38,769 2,704 6.97
----------------------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES . 1,382,274 95,864 6.94 1,440,437 93,871 6.52 1,437,271 98,875 6.88
----------------------------------------------------------------------------------------------
Loans: (2) (3)
Commercial and financial. . . 742,942 72,407 9.75 702,921 58,132 8.27 715,428 61,613 8.61
Mortgage . . . . . . . . . . 1,567,980 132,349 8.44 1,430,431 115,842 8.10 1,313,527 103,721 7.90
Consumer, net of unearned
income . . . . . . . . . . 630,560 59,667 9.46 566,261 49,686 8.77 452,006 45,316 10.03
Credit card . . . . . . . . . 26,853 4,597 17.12 25,995 4,597 17.68 25,230 4,435 17.58
----------------------------------------------------------------------------------------------
TOTAL LOANS . . . . . . . . . 2,968,335 269,020 9.06 2,725,608 228,257 8.37 2,506,191 215,085 8.58
----------------------------------------------------------------------------------------------
TOTAL EARNING ASSETS. . . . . 4,411,835 368,478 8.36% 4,235,054 324,857 7.67% 4,104,936 319,285 7.78%
Less: Allowance for loan losses (41,819) ==== (42,617) ==== (38,846) ====
Non-Earning Assets:
Cash and due from banks . . . 157,622 159,414 168,022
Other assets. . . . . . . . . 165,949 157,820 151,302
---------- --------- ---------
TOTAL ASSETS. . . . . . . . . . $4,693,587 $4,509,671 $4,385,414
========== ========= =========
LIABILITIES AND EQUITY
Interest-Bearing Liabilities:
Savings and daily
interest checking. . . . . $ 876,175 $ 24,056 2.75% $ 981,571 $25,181 2.57% $ 973,476 $ 26,656 2.74%
Money market deposits . . . . 585,805 21,620 3.69 509,071 13,226 2.60 463,587 12,818 2.76
Certificates of deposit
of $100,000 and over . . . . 256,253 14,472 5.65 218,836 8,774 4.01 232,472 9,221 3.97
Other time deposits . . . . . 1,647,172 89,578 5.44 1,537,599 70,373 4.58 1,540,377 72,500 4.71
----------------------------------------------------------------------------------------------
TOTAL INTEREST BEARING
DEPOSITS . . . . . . . . . . . 3,365,405 149,726 4.45 3,247,077 117,554 3.62 3,209,912 121,195 3.78
Federal funds purchased
and securities sold under
agreements to repurchase . . 230,960 12,155 5.26 246,573 9,406 3.81 204,467 6,545 3.20
All other borrowings. . . . . 182,216 12,197 6.69 133,866 8,716 6.51 117,784 6,744 5.73
----------------------------------------------------------------------------------------------
TOTAL INTEREST BEARING
LIABILITIES. . . . . . . . . 3,778,581 174,078 4.61% 3,627,516 135,676 3.74% 3,532,163 134,484 3.81%
Noninterest-Bearing Liabilities:
Demand deposits . . . . . . . 449,245 428,935 425,068
Other liabilities . . . . . . . 52,464 39,426 41,431
Shareholders' equity. . . . . 413,297 413,794 386,752
--------- --------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY. . . . .$4,693,587 $4,509,671 $4,385,414
========= ========= =========
Interest Margin Recap:
Interest income/earning
assets . . . . . . . . . . . . $368,478 8.36% $324,857 7.67% $319,285 7.78%
Interest expense/earning
assets . . . . . . . . . . . . 174,078 3.95 135,676 3.20 134,484 3.28
------- ---- ------- ---- ------- ----
Net interest margin . . . . . . $194,400 4.41% $189,181 4.47% $184,801 4.50%
======= ==== ======= ==== ======= ====
(1) Includes Government agency mortgage-backed securities.
(2) Includes principal balances of nonaccrual loans. Interest income relating to nonaccrual
loans is not included.
(3) The amount of loan fees is not material in any of the years presented.
</TABLE>
17
<PAGE>
INTEREST RATE SENSITIVITY AND LIQUIDITY MANAGEMENT
Managing the net interest margin is a critical element in optimizing the
earnings of a banking organization. A movement in interest rates and the
corresponding effect on the net interest margin may significantly affect
profitability. The impact of interest rate changes can be mitigated by
maintaining a balance between interest-rate sensitive assets and liabilities
within given time frames. With the goal of consistent earnings growth with
minimal interest rate risk, ONB's Funds Management Committee oversees this
process by establishing guidelines for its affiliate banks to manage the
sensitivity and repricing of their assets and liabilities. This committee and
similar committees at the affiliate banks monitor these guidelines monthly on
a consolidated basis and at the bank level.
The difference between assets and liabilities within a given repricing period
is expressed as a ratio and as a dollar amount known as the "gap," both of
which are used as a measure of interest rate risk. A ratio of 100% suggests a
balanced position between rate-sensitive assets and liabilities within a given
repricing period. While the measurement process and related assessment of
risk are somewhat imprecise, ONB believes its asset/liability management
program allows adequate reaction time for trends in the market place as they
occur, thereby minimizing the potential negative effect of its gap position
against the event of interest rate changes. Additionally, ONB has
implemented a simulation process whereby the impact of potential interest rate
fluctuations and balance sheet changes on net interest income can be
quantified and monitored.
Table 4 below reflects ONB's interest rate sensitivity position both
individually within specified time periods and cumulatively, over various time
horizons. In the table, assets and liabilities are placed in categories based
on their actual or expected repricing date. As indicated in the table, a
significant percentage of ONB's assets and liabilities reprice within 180
days. In the 365 day cumulative time frame, assets and liabilities are
closely matched at 96%.
<TABLE>
<CAPTION>
Analysis of Interest Rate Sensitivity at December 31, 1995 (Table 4)
($ in thousands)
1-180 181-365 1-5 Beyond
Days Days Years 5 years Total
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Rate sensitive assets:
Money market investments . . . . . . . . $ 85,665 $ 100 $ 196 $ 0 $ 85,961
Investment securities . . . . . . . . . 301,131 107,361 581,063 400,625 1,390,180
Loans, net of unearned income. . . . . . 1,211,349 525,435 922,933 378,016 3,037,733
--------------------------------------------------------
Total rate sensitive assets. . . . . . . 1,598,145 632,896 1,504,192 778,641 4,513,874
----------------------------------------------==========
Rate sensitive liabilities:
Savings and time deposits. . . . . . . . 1,750,162 308,920 606,130 839,255 3,504,467
Other borrowed funds . . . . . . . . . . 258,713 12,930 26,737 63,416 361,796
--------------------------------------------------------
Total rate sensitive liabilities . . . . 2,008,875 321,850 632,867 902,671 3,866,263
----------------------------------------------==========
Interest sensitivity gap
per period . . . . . . . . . . . . . . . $ (410,730) $311,046 $ 871,325 $(124,030)
Cumulative gap . . . . . . . . . . . . . $ (410,730) $(99,684) $ 771,641 $ 647,611
Cumulative ratio at
December 31, 1995 (1) . . . . . . . . . . 80% 96% 126% 117%
Cumulative ratio at ==========================================
December 31, 1994 (1). . . . . . . . . . 85% 100% 127% 117%
==========================================
(1) Rate sensitive assets/rate sensitive liabilities
</TABLE>
In addition to the interest rate sensitivity the Funds Management Committee
monitors the company's liquidity requirements. The objective of liquidity
management is to ensure the ability to meet cash flow needs of customers, such
as borrowings and deposit withdrawals, while at the same time maximizing
lending and investment opportunities. Failure to properly manage liquidity
requirements can result in the need to satisfy customer withdrawals and other
obligations on less than desirable terms. ONB and its affiliates maintain
adequate liquidity with sufficient levels of liquid assets, deposit growth,
and other funding sources, such as the Federal Home Loan Bank.
The Funds Management Committee monitors the quality of the investment
portfolio by establishing guidelines for the types and quality of securities
acceptable for purchase. ONB has a consistent, conservative investment
strategy. Any exceptions to these guidelines must be approved by the
committee. The committee reviews on a regular basis the quality of the
portfolios, especially the obligations of corporations and state and political
subdivisions.
18
<PAGE>
NONINTEREST INCOME
Besides our focus on net interest income, ONB has looked to expand its ability
to generate additional noninterest income from both our core business and
newer initiatives, such as brokerage/alternative investments. ONB's banks and
nonbank affiliates strive to improve their noninterest income performance
every year. Noninterest income, excluding securities transactions, increased
11.5% in 1995. With the formation of ONB's trust companies, an even more
concertive effort is being made to develop new sources of revenue in this line
of business. In 1995 trust fees increased 17.4% and is becoming a larger
portion of noninterest income. This growth is attributable to a growth in
assets under management and an increase in the standard fee schedule.
Service charges on deposit accounts grew 7.0%. Opportunities to improve such
fee income are continuously reviewed and weighed against competitive
pressures in each separate market. Loan servicing fees increased 14.6% as
long-term interest rates dropped generating higher levels of refinancing
activity. Other income rose 11.3% fueled by ONB's alternative investments and
brokerage business and credit life insurance sales.
During 1994, noninterest income grew 5.4%. This growth was the result of a
19.3% and 6.3% increase in trust fees and deposit service charges,
respectively. The base of accounts for both areas rose and the fees charged
were reviewed and adjusted where necessary. Loan servicing fees rose 13.7% as
mortgage banking activities, while affected by higher interest rates, remained
fairly strong.
ONB realized net securities gains (losses) of $0.1, ($0.3), and $0.3 million
in 1995, 1994, and 1993, respectively. Generally, ONB has had minimal sales
of securities. In 1994 certain lower yielding investments were sold in order
to reinvest in higher yielding assets. In 1993 ONB sold a portion of its
Student Loan Marking Association stock resulting in a gain.
Table 5 below presents changes in the components of noninterest income for the
years 1993 through 1995.
<TABLE>
<CAPTION>
Noninterest Income (Table 5) ($ in thousands)
% Change From
Prior Year
------------------
1995 1994 1993 1995 1994
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Trust fees. . . . . . . . . . . . . . $ 9,216 $ 7,851 $ 6,580 17.4% 19.3%
Service charges on deposit accounts . 14,025 13,110 12,330 7.0 6.3
Loan servicing fees . . . . . . . . . 5,614 4,898 4,306 14.6 13.7
Other income. . . . . . . . . . . . . 10,260 9,215 10,070 11.3 (8.5)
---------------------------------------------------------
Subtotal. . . . . . . . . . . . . 39,115 35,074 33,286 11.5 5.4
Net securities gains (losses) . . . . 55 (265) 312 N/M N/M
---------------------------------------------------------
Total noninterest income. . . . . $ 39,170 $34,809 $33,598 12.5% 3.6%
=========================================================
N/M = Not meaningful
</TABLE>
19
<PAGE>
NONINTEREST EXPENSE
Total noninterest expense has a significant impact on ONB's financial
performance. Improving the quality of our service yet controlling such costs
can be achieved through improved efficiencies and management attention. In
1995 noninterest expense decreased slightly compared to 1994. Salaries and
benefits, which comprise over 50% of total noninterest expense, grew 3.2% in
1995. Marketing expense rose 13.1% from a combination of the newly formed
trust companies and new efforts which contributed to the deposit and loan
growth. Data processing expense, which includes external processing and
software costs for our internal data operations, rose 1.5%. The external
component decreased while the internal component increased as our banks
prepare to convert. With sixteen ONB's banks processed internally, our data
center is better able to support its initial up-front expenses for people and
equipment. Equipment expense increased 12.8% primarily as a result of costs at
the internal operations and data center and at affiliate banks for banking
systems conversions. In 1995 other expenses dropped 5.7%. A newly acquired
bank experienced a $2.5 million loss in 1994 on the sale of a real estate
investment.
These increases were offset when the FDIC lowered its premium on bank deposits
as of June 1, 1995. For most of ONB's affiliate banks the cost dropped from 23
basis points to 4 basis points per $100 of deposits. This rate change drove
the 42.1% drop in ONB's FDIC insurance premiums in 1995. This premium was
dropped further as of January 1, 1996, for at least the first six months of
1996. For deposits insured by the Savings Association Insurance Fund,
("SAIF"), rates did not drop. A one-time recapitalization charge is expected
to be approved by the U.S. Congress sometime in 1996. ONB has less than 6% of
its deposits insured by SAIF and expects such a charge to have minimal impact
on the 1996 results.
In 1994 total noninterest expense grew 8.9%. Salaries and benefits increased
8.8% while equipment expense and data processing expense rose 19.2% and 34.8%,
respectively. Higher staffing levels, equipment purchases and maintenance,
and software costs were incurred in 1994 in preparation for handling higher
numbers of affiliate banks at our internal data processing center.
Table 6 below presents changes in the components of noninterest expense for
the years 1993 through 1995.
<TABLE>
<CAPTION>
Noninterest Expense (Table 6) ($ in thousands) % Change From
Prior Year
-------------------
1995 1994 1993 1995 1994
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Salaries and employee benefits. . . . . . . $ 75,281 $ 72,962 $ 67,036 3.2% 8.8%
Occupancy expense . . . . . . . . . . . . . 8,706 8,661 8,283 0.5 4.6
Equipment expense . . . . . . . . . . . . . 10,816 9,589 8,046 12.8 19.2
Marketing expense . . . . . . . . . . . . . 5,201 4,597 3,943 13.1 16.6
FDIC insurance premiums . . . . . . . . . . 4,884 8,431 7,875 (42.1) 7.1
Data processing expense . . . . . . . . . . 5,881 5,793 4,296 1.5 34.8
Supplies expense. . . . . . . . . . . . . . 4,454 4,211 3,762 5.8 11.9
Communications and transportation expense . 5,756 5,480 4,915 5.0 11.5
Other expenses. . . . . . . . . . . . . . . 21,798 23,118 23,067 (5.7) 0.2
-------------------------------------------------------------
Total noninterest expense . . . . . . . $142,777 $142,842 $131,223 0.0% 8.9%
=============================================================
</TABLE>
20
<PAGE>
PROVISION FOR INCOME TAXES
ONB records a provision for income taxes currently payable and for taxes
payable in the future because of differences in the timing of recognition of
certain items for financial statement and income tax purposes. The major
differences between the effective tax rate applied to ONB's financial
statement income and the federal statutory rate are caused by interest on
tax-exempt securities and loans and state income taxes. See Note 7 to the
consolidated financial statements for the additional detail of ONB's income
tax provision.
ONB's effective tax rate was 27.1%, 23.6%, and 26.7% in 1995, 1994, and 1993,
respectively. The fluctuation among the years came primarily from the
elimination of a deferred asset valuation allowance in 1994 which reduced
1994's tax expense by $1.6 million.
INTERIM FINANCIAL DATA
The following table provides a detailed summary of quarterly results of
operations for the years ended December 31, 1995 and 1994. These results
contain all normal and recurring adjustments of a material nature necessary
for a fair and consistent presentation.
<TABLE>
<CAPTION>
Interim Financial Data (Table 7)
(Unaudited, $ and shares in thousands except per share data)
Quarter Ended
-------------------------------------------------
December 31 September 30 June 30 March 31
1995 -------------------------------------------------
<S> <C> <C> <C> <C>
Interest income. . . . . . . . $91,912 $90,358 $88,153 $84,849
Interest expense . . . . . . . 45,661 44,808 43,413 40,196
-------------------------------------------------
Net interest income. . . . . 46,251 45,550 44,740 44,653
Provision for loan losses. . . 2,282 1,977 1,298 1,100
Noninterest income . . . . . . 10,118 9,776 9,885 9,391
Noninterest expense. . . . . . 37,341 33,919 35,747 35,770
-------------------------------------------------
Income before income taxes . 16,746 19,430 17,580 17,174
Income taxes . . . . . . . . . 4,558 5,671 4,310 4,697
-------------------------------------------------
Net income . . . . . . . . . $12,188 $13,759 $13,270 $12,477
=================================================
Net income per share:
Primary. . . . . . . . . . . $0.49 $0.54 $0.52 $0.49
=================================================
Fully diluted. . . . . . . . $0.47 $0.53 $0.51 $0.48
=================================================
Weighted average shares:
Primary. . . . . . . . . . . 25,098 25,273 25,444 25,674
=================================================
Fully diluted. . . . . . . . 26,505 26,682 26,852 27,298
=================================================
1994
Interest income. . . . . . . . $82,164 $80,125 $75,997 $73,958
Interest expense . . . . . . . 36,721 35,024 32,383 31,548
-------------------------------------------------
Net interest income. 45,443 45,101 43,614 42,410
Provision for loan losses. . . 3,042 1,528 1,686 1,426
Noninterest income . . . . . . 7,880 9,597 8,837 8,495
Noninterest expense. . . . . . 38,216 35,745 35,916 32,965
-------------------------------------------------
Income before income taxes 12,065 17,425 14,849 16,514
Income taxes . . . . . . . . . 1,367 5,005 3,739 4,270
-------------------------------------------------
Net income . . . . . . . . . $10,698 $12,420 $11,110 $12,244
=================================================
Net income per share:
Primary. . . . . . . . . . . $0.41 $0.48 $0.43 $0.46
=================================================
Fully diluted. . . . . . . . $0.40 $0.47 $0.42 $0.45
=================================================
Weighted average shares:
Primary. . . . . . . . . . . 25,975 26,035 26,128 26,250
=================================================
Fully diluted. . . . . . . . 27,674 27,809 27,905 28,054
=================================================
</TABLE>
21
<PAGE>
FINANCIAL CONDITION
ANALYSIS OF CHANGES IN BALANCE SHEET
Total assets increased $179.9 million or 3.9% at December 31, 1995 compared to
the prior year end. Loan growth comprised the majority of the increase in
total assets as loans grew by $147.4 million or 5.1%. By December 31, 1995,
total liabilities had grown $160.4 million or 3.8% over 1994. Total deposits
increased $304.5 million or 8.3% as deposit interest rates rose early in 1995
and attracted customer funds.
LENDING AND LOAN ADMINISTRATION
Graph of Allowance/Average Loans
1991 1.39
1992 1.55
1993 1.67
1994 1.52
1995 1.34
The primary responsibility and accountability for day-to-day lending
activities rests with ONB's affiliate banks. Loan personnel at each bank have
the authority to extend credit under guidelines established by ONB's Board of
Directors and administered by the Credit Policy Committee. This committee
meets quarterly and is comprised of members of ONB's executive management and,
on a rotating basis, outside members of the Board of Directors and affiliate
bank management. The committee monitors credit quality through the review of
information such as delinquencies and other problem loans and charge-offs.
The committee regularly reviews the status and prospects for specific
industries in which the company extends credit and also establishes corporate
loan policy and reviews qualifying applications of the affiliate banks.
Executive and credit committees at the banks provide further knowledge,
judgment and experience to ONB's lending administration.
ONB maintains a continuous and comprehensive corporate loan review program.
ONB's loan review system provides independent evaluation of loan
administration, credit quality, loan documentation, compliance with corporate
loan standards, and the adequacy of the allowance for loan losses. This
program includes regular reviews of problem loan reports, delinquencies, and
charge-offs.
Graph of Net Charge-Offs/Average Loans
1991 0.41
1992 0.33
1993 0.26
1994 0.30
1995 0.28
The adequacy of the allowance for loan losses is formally evaluated on a
quarterly basis at both the affiliate bank and holding company level. This
evaluation is based on reviews of specific loans, changes in the type and
volume of the loan portfolios given current and anticipated economic
conditions, and historical loss experience. Loans are charged off when they
are deemed uncollectible. Charge-offs, net of recoveries, were $8.2 million
in 1995, compared to $8.2 million in 1994 and $6.4 million in 1993.
ONB's affiliate banks make monthly provisions for possible loan losses in
amounts estimated to be sufficient to maintain the allowance for loan losses
at a level considered necessary by management to absorb estimated losses in
the loan portfolios. The consolidated provision for loan losses was $6.7
million in 1995, down from $7.7 million in 1994 and from $10.2 million in
1993. The continued economic strength of ONB's market area and the adoption
of ONB's conservative credit culture by our affiliate banks continues to yield
a solid loan portfolio. The provision decrease also reflects continued low
levels of under-performing assets and a general improvement in the condition
of the loan portfolios at several of ONB's affiliates. Further improvement of
these historically low levels of non-performing assets may be difficult.
Table 8 on page 23 summarizes activity in the allowance for loan losses for the
years 1991 through 1995 and an allocation of the year-end balances, along with
related statistics for the allowance and net charge-offs.
22
<PAGE>
<TABLE>
<CAPTION>
Allowance for Loan Losses (Table 8)
($ in thousands)
1995 1994 1993 1992 1991
Analysis: ----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for loan losses,
January 1. . . . . . . . . . . . $41,335 $41,833 $37,290 $33,393 $30,369
Loans charged off: ----------------------------------------------------------
Commercial . . . . . . . . . . . 4,910 4,511 5,662 7,126 7,049
Mortgage . . . . . . . . . . . . 960 692 2,667 2,127 2,598
Consumer credit. . . . . . . . . 5,316 5,446 2,806 3,105 3,321
----------------------------------------------------------
Total charge-offs. . . . . . . 11,186 10,649 11,135 12,358 12,968
----------------------------------------------------------
Recoveries on charged-off loans:
Commercial . . . . . . . . . . . 1,593 1,173 3,504 3,093 1,976
Mortgage . . . . . . . . . . . . 296 176 315 459 369
Consumer credit. . . . . . . . . 1,111 1,120 906 844 854
----------------------------------------------------------
Total recoveries . . . . . . . 3,000 2,469 4,725 4,396 3,199
----------------------------------------------------------
Net charge offs. . . . . . . . . . 8,186 8,180 6,410 7,962 9,769
Provision charged to expense . . . 6,657 7,682 10,189 11,859 11,885
Acquisitions under
purchase accounting. . . . . . . -- 0 764 0 908
----------------------------------------------------------
Allowance for loan lossses,
December 31, . . . . . . . . . . $39,806 $41,335 $41,833 $37,290 $33,393
==========================================================
Average loans for the year . . . . $2,968,335 $2,725,608 $2,506,191 $2,409,660 $2,396,295
Allowance/year-end loans . . . . . 1.31% 1.43% 1.60% 1.53% 1.39%
Allowance/average loans. . . . . . 1.34 1.52 1.67 1.55 1.39
Net charge-offs/average loans. . . 0.28 0.30 0.26 0.33 0.41
Allocation at December 31,
Commercial . . . . . . . . . . . . $21,690 $23,008 $22,046 $21,818 $17,767
Mortgage . . . . . . . . . . . . . 11,122 10,824 12,683 10,008 9,762
Consumer credit. . . . . . . . . . 6,994 7,503 7,104 5,464 5,864
----------------------------------------------------------
Total. . . . . . . . . . . . . . . $39,806 $41,335 $41,833 $37,290 $33,393
==========================================================
</TABLE>
Assets determined by the various evaluation processes to be under-performing
receive special attention by ONB and the affiliate banks. Under-performing
assets consist of 1) nonaccrual loans where the ultimate collectibility of
interest is uncertain, but the principal is considered collectible; 2) loans
which have been renegotiated to provide for a reduction or deferral of
interest or principal because the borrower's financial condition deteriorated;
3) loans with principal or interest past due ninety (90) days or more; and 4)
other real estate owned. Each month, problem and "watch" loans reports are
prepared and reviewed at both the affiliate banks and holding company. These
reports include loans where the customers' operations or net worth may not be
sufficient to repay the loan, the loan has been criticized in a regulatory
examination, accrual of interest has been suspended, or for other reasons
where either the ultimate collectibility of the loan is in question or the
loan has characteristics requiring special monitoring. In addition to the
loans classified as under-performing, management closely monitors loans
totaling $96.7 million as of December 31, 1995, for the borrowers' ability to
comply with present repayment terms. For these loans, the existing conditions
do not warrant either a partial charge-off or classification as nonaccrual.
Management believes it has taken a conservative approach in its evaluation of
under-performing credits and the loan portfolio in general, both in
acknowledging the general condition of the portfolio and in establishing the
allowance for loan losses.
23
<PAGE>
Table 9 below presents the components of under-performing assets as of
December 31, 1995, 1994, and 1993. Under-performing assets decreased 15.7% in
1995 after a 9.9% increase in 1994. In 1995 nonaccruals dropped 28.0% after a
1994 increase when a large, monitored loan deteriorated in the fourth quarter.
Loans past due over 90 days rose in 1995 by $456 thousand, though as a percent
of outstanding loans they are comparable at 0.16% in 1995 and 0.15% in 1994.
Under Performing Assets (Table 9)
($ in thousands)
1995 1994 1993
--------------------------
Nonaccrual loans . . . . . . . $ 6,623 $ 9,201 $ 6,473
Renegotiated loans . . . . . . 1,120 1,280 833
Past due loans (90 days or more): --------------------------
Commercial . . . . . . . . . 1,153 995 1,854
Mortgage . . . . . . . . . . 2,578 2,077 2,553
Consumer . . . . . . . . . . 1,050 1,253 856
--------------------------
Total. . . . . . . . . . . 4,781 4,325 5,263
--------------------------
Other real estate owned. . . . 515 669 1,508
--------------------------
Total under-performing assets $13,039 $15,475 $14,077
==========================
Under-performing assets as a %
of total loans and other
real estate owned. . . . . . 0.43% 0.54% 0.54%
==========================
Interest income of approximately $0.9 million would have been recorded in 1995
on nonaccrual and restructured loans if such loans had been accruing interest
throughout the year in accordance with their original terms. The amount of
interest income actually recorded in 1995 on nonaccrual and restructured loans
was $0.3 million.
24
<PAGE>
SOURCES OF FUNDS
ONB's primary funding source is its base of core customer deposits which
consist of noninterest-bearing demand, regular savings and money market
accounts and small denomination certificates of deposit. Other short-term
sources of funds are large denomination certificates, overnight borrowings
from other financial institutions, securities sold under agreements to
repurchase, and lines of credit. Longer term funds are provided by medium
term notes and subordinated debentures. Table 10 below presents changes
between years in the average balances of all funding sources.
<TABLE>
<CAPTION>
Funding Sources - Average Balances (Table 10)
($ in thousands)
% Change From
Prior Year
-----------------------
1995 1994 1993 1995 1994
Core Deposits: ------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Demand deposits. . . . . . . $ 449,245 $ 428,935 $ 425,068 4.7% 0.9%
Savings and daily interest
checking . . . . . . . . . 876,175 981,571 973,476 (10.7) 0.8
Money market deposits. . . . 585,805 509,071 463,587 15.1 9.8
Other time deposits. . . . . 1,647,172 1,537,599 1,540,377 7.1 (0.2)
------------------------------------------------------------------
Total core deposits. . . 3,558,397 3,457,176 3,402,508 2.9 1.6
------------------------------------------------------------------
Certificates of deposit of
$100,000 and over. . . . . 256,253 218,836 232,472 17.1 (5.9)
Federal funds purchased and
securities sold under
agreements to repurchase. . 230,960 246,573 204,467 (6.3) 20.6
Other short-term borrowings. 107,782 61,328 36,512 75.7 68.0
Subordinated debentures. . . 33,918 40,538 49,272 (16.3) (17.7)
Medium term notes. . . . . . 40,516 32,000 32,000 26.6 0.0
------------------------------------------------------------------
Total funding sources. . $4,227,826 $4,056,451 $3,957,231 4.2% 2.5%
==================================================================
</TABLE>
CORE DEPOSITS
Average core deposits increased 2.9% in 1995 compared to the 1.6% increase in
1994. A major shift occurred in 1995 as funds left savings and daily interest
checking and entered money market deposits and certificates of deposit. The
combination of a down stock market in 1994, new marketing efforts, and rising
interest rates in late 1994 and early 1995 attracted deposits, especially into
money market accounts tied to indices.
During 1994, core deposits on average grew 1.6%. Most categories changed less
than 1%, except for money market deposits which grew 9.8%. Deposit interest
rates were fairly low most of the year and customers often placed available
funds into money market accounts while they reviewed their investment options.
25
<PAGE>
SHORT-TERM BORROWINGS
Additional sources of funding for ONB are various short-term borrowings which
consist primarily of federal funds purchased from other financial institutions
on an overnight basis, secured repurchase agreements which generally mature
within 30 days, borrowings under U.S. Treasury demand notes, and lines of
credit.
Collectively, the average short-term borrowings rose $30.8 million or 10.0% in
1995. At December 31, 1995, short-term borrowings decreased $175.0 million
from 1994, as ONB replaced these funds with core deposit growth.
Table 11 below presents the distribution of ONB's short-term borrowings and
the weighted average interest rates thereon for each of the last three years.
Short-Term Borrowings (Table 11)
($ in thousands)
Other
Funds Repurchase Short-term
Purchased Agreements Borrowings
1995: ----------------------------------------
Average amount outstanding . . $ 36,588 $194,372 $107,782
Maximum amount outstanding at
any month-end. . . . . . . . 91,820 199,961 131,792
Weighted average interest rate:
During year. . . . . . . . . 5.99% 5.13% 6.26%
End of year. . . . . . . . . 5.71 5.08 5.65
1994:
Average amount outstanding . . $ 55,955 $190,618 $ 61,328
Maximum amount outstanding at
any month-end. . . . . . . . 124,475 222,953 107,743
Weighted average interest rate:
During year. . . . . . . . . 4.39% 3.65% 4.86%
End of year. . . . . . . . . 5.54 3.84 5.78
1993:
Average amount outstanding . . $21,351 $183,116 $ 36,512
Maximum amount outstanding at
any month-end. . . . . . . . 33,433 198,334 58,407
Weighted average interest rate:
During year. . . . . . . . . 2.87% 3.23% 3.48%
End of year. . . . . . . . . 2.96 3.23 2.49
OTHER FUNDING SOURCES
Other funding sources consist of large denomination certificates of deposit,
medium term notes, and convertible subordinated debentures. Large
certificates grew $37.4 million or 17.1% in 1995 compared to 1994. The growth
resulted from the higher interest rate environment for this type of deposit in
1995. Table 12 below presents a maturity distribution for certificates of
deposit with denominations of $100,000 or more.
During 1995, holders of ONB's 8% convertible debentures converted principal
amounts of $6.5 million. These conversions resulted in the issuance of 278
thousand shares of common stock and an offsetting increase in shareholders'
equity.
ONB issued the remaining $18 million of a medium term note program started in
1993. The notes for the entire program have a weighted average effective
interest rate of 6.58% and mature between 1996 and 2003. The funds were used
to reduce ONB's lines of credit.
<TABLE>
<CAPTION>
Certificates of Deposit of $100,000 and Over (Table 12)
($ in thousands)
Maturity Distribution
-----------------------------------------
Year-End 1-90 91-180 181-365 Beyond Interest Average
Balance Days Days Days 1 Year Expense Rate
-----------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
1995 . . . . . . . . . $276,010 $123,002 $54,881 $37,288 $60,839 $14,472 5.65%
1994 . . . . . . . . . 213,298 90,818 51,944 27,524 43,012 8,774 4.01
1993 . . . . . . . . . 225,545 99,014 52,731 33,227 40,573 9,221 3.97
</TABLE>
26
<PAGE>
USES OF FUNDS
A significant challenge in the financial services industry is to employ
available sources of funds as profitably as possible in a changing interest
rate environment without incurring an undesirable amount of credit or interest
rate risk. Primary uses of available funds are loans to customers, investment
securities, and various short-term deposits in other institutions.
LOANS
ONB's affiliate banks lend to commercial customers in various industries
including manufacturing, agribusiness, transportation, mining, wholesaling,
and retailing. ONB's policy is to concentrate its lending activity in the
geographic market areas it serves, primarily southwestern Indiana,
southeastern Illinois, and western Kentucky. ONB has no concentration of
loans in any single industry exceeding 10% of its portfolio nor does its
portfolio contain any loans to finance speculative transactions, such as
large, highly leveraged buyouts. ONB does not engage in lending to foreign
countries.
Total loans, net of unearned, increased $147.4 million or 5.1% between 1994
and 1995. Growth primarily occurred in commercial loans, mortgage loans and
consumer loans, net of unearned, which grew 5.0%, 3.7% and 9.8%, respectively.
The portfolio is well diversified with 25% of the portfolio in commercial
loans, 52% in mortgage loans, primarily residential, and 23% in consumer
credit. In 1994 loans grew 10.5% as mortgage loans increased 10.8% and
consumer loans rose 17.8%.
ONB's commercial lending is primarily to small to medium-sized businesses in
various industries in its region. These industries are generally stable in
ONB's market area which provides opportunity for growth.
Mortgage loans represent the most significant portion of ONB's loan portfolio,
with the majority of these loans being for 1-4 family residential property.
While ONB's affiliates do make commercial real estate loans, they do so only
on a selective basis in their geographic market areas and these amount to
$335.7 million at December 31, 1995.
Consumer loans include automobile loans, personal and home equity loans and
lines of credit, student loans, and credit card loans and represented the
largest area of growth in 1995.
Table 13 on page 28 presents the composition of the loan portfolio for each of
the last five years. Loans in all categories have grown steadily over the
five year period shown. Commercial loans increased an average of 5.6% per
year between 1991 and 1995. Mortgage loans and consumer loans increased 5.5%
and 11.1%, respectively, during this period.
Table 14 on page 28 presents the maturity distribution and rate sensitivity of
loans and an analysis of loans with predetermined and floating interest rates.
A significant percentage of commercial and financial loans are due within one
year, reflecting the demand nature of a large portion of these loans.
27
<PAGE>
<TABLE>
<CAPTION>
Loan Portfolio At Year-End (Table 13)
($ in thousands)
Four Year
1995 1994 1993 1992 1991 Growth Rate
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commercial. . . . . . . . . . . . . . . . $ 737,743 $ 702,459 $ 665,136 $ 600,130 $ 593,114 5.6%
Financial . . . . . . . . . . . . . . . . 5,167 7,546 10,000 24,861 50,032 (43.3)
Economic development bonds. . . . . . . . 27,675 30,928 35,094 42,113 48,993 (13.3)
Mortgage. . . . . . . . . . . . . . . . . 1,579,596 1,523,215 1,374,355 1,298,812 1,273,465 5.5
Consumer credit . . . . . . . . . . . . . 713,435 655,514 560,035 492,718 468,824 11.1
--------------------------------------------------------------------
Total loans . . . . . . . . . . . . . 3,063,616 2,919,662 2,644,620 2,458,634 2,434,428 5.9%
Less: Unearned income . . . . . . . . 25,883 29,349 28,574 27,277 27,338
Allowance for loan losses . . . . . . 39,806 41,335 41,833 37,290 33,393
--------------------------------------------------------
Net loans . . . . . . . . . . . . . . $2,997,927 $2,848,978 $2,574,213 $2,394,067 $2,373,697
=======================================================
Composition of Loan Portfolio by Type
Commercial/ financial/ development. . . . 25.4% 25.6% 27.2% 27.4% 28.8%
Mortgage. . . . . . . . . . . . . . . . . 52.0 52.7 52.5 53.5 52.8
Consumer credit . . . . . . . . . . . . . 22.6 21.7 20.3 19.1 18.4
</TABLE>
Distribution of Loan Maturities at December 31, 1995 (Table 14)
($ in thousands)
Within 1-5 Beyond
1 Year Years 5 Years Total
-------------------------------------------
Commercial and financial . . . $330,595 $210,986 $201,329 $742,910
Economic development bonds . . 2,823 5,673 19,179 27,675
-------------------------------------------
Total. . . . . . . . . . . $333,418 $216,659 $220,508 $770,585
===========================================
Predetermined interest rates . $ 80,911 $106,341 $ 53,170 $240,422
Floating interest rates. . . . 252,507 110,318 167,338 530,163
-------------------------------------------
Total. . . . . . . . . . . $333,418 $216,659 $220,508 $770,585
===========================================
28
<PAGE>
INVESTMENT SECURITIES
Investment securities at December 31, 1995, increased $27.2 million, 2.0% over
the prior year. Much of this growth arose from the market value adjustment on
the available-for-sale securities which are reported on the balance sheet at
fair value. Amortized cost decreased slightly since December 31, 1994. The
lower, long-term interest rates increased the available-for-sale portfolio's
fair value by $31.0 million. Increases based on amortized cost occurred
primarily in agencies and mortgage-backed securities where better yield
opportunities existed. In 1994 the growth was in municipal securities with
their higher taxable equivalent returns with minimal incremental risk.
As discussed in Note 3 to the consolidated financial statements, ONB
reclassified at December 31, 1995, the remaining held-to-maturity securities
as available-for-sale as permitted by the Financial Accounting Standards
Board's guide to implementation of SFAS No. 115. The reclassification has no
impact on ONB's earnings, but permits maximum flexibility to adapt to interest
rate changes.
Investment securities comprise 31% of ONB's earning assets. The cashflow of
principal and interest along with the ability to liquidate, if necessary,
available-for-sale securities allows ONB to meet unforeseen liquidity needs.
The entire portfolio has an approximate weighted average maturity of 4.3
years.
At December 31, 1995, ONB held investment securities issued by the states of
Indiana and Illinois and their political subdivisions that had an aggregate
market value of $79.2 million and $62.3 million, respectively. There were no
other concentrations of investments securities issued by an individual state
and its political subdivisions which were greater than 10% of shareholders'
equity.
Average yields of the investment securities portfolio are calculated on a
taxable equivalent basis. Yields are based on the amortized cost and are
weighted for the scheduled maturity of each investment. Average yields for
the entire portfolio were 6.99%, 6.84%, and 6.76% for 1995, 1994, and 1993,
respectively. The portfolio yield increased during the year due to resets on
adjustable rate securities tied to trailing indices and the maturity of lower
yielding investments.
Table 15 below presents the maturity distribution of the investment portfolio,
along with weighted average yields thereon.
<TABLE>
<CAPTION>
Maturity Distribution of Investment Securities (Table 15)
($ in thousands)
December 31, 1995
----------------------------------------
Within 1 - 5 5 - 10 Beyond
Fair Value: 1 Year Years Years 10 Years Total 1994 1993
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
United States Treasury $ 70,944 $117,323 $ -- $ -- $ 188,267 $ 218,266 $ 243,932
U.S. Government agencies and
corporations. . . . . . . . . 107,599 87,244 2,605 -- 197,448 166,477 225,716
Mortgage-backed securities 175,276 258,891 111,807 600 546,574 504,130 565,615
State and political
subdivisions . . . . . . . . 21,797 119,256 260,552 34,301 435,906 411,729 438,168
Other securities . . . . . . . 2,551 1,712 76 17,646 21,985 24,706 26,638
-----------------------------------------------------------------------------
Total. . . . . . . . . . . $378,167 $584,426 $375,040 $52,547 $1,390,180 $1,325,308 $1,500,069
=============================================================================
Amortized Cost:
United States Treasury . . . . $ 70,835 $115,127 $ -- $ -- $ 185,962 $ 225,246 $ 239,787
U.S. Government agencies
and corporations . . . . . . 107,724 86,606 2,558 -- 196,888 172,284 222,085
Mortgage-backed securities . . 175,119 256,549 112,140 556 544,364 532,337 561,563
State and political
subdivisions . . . . . . . . 21,550 114,382 255,570 33,401 424,903 423,225 415,246
Other securities . . . . . . . 2,548 1,926 61 16,548 21,083 23,909 26,455
-----------------------------------------------------------------------------
Total. . . . . . . . . . . $377,776 $574,590 $370,329 $50,505 $1,373,200 $1,377,001 $1,465,136
=============================================================================
Weighted average yield,
based on amortized cost
(taxable equivalent basis) 6.51% 7.04% 7.28% 7.87% 6.99% 6.84% 6.76%
=============================================================================
</TABLE>
29
<PAGE>
CAPITAL RESOURCES
Graph of Book Value per Share
1991 13.31
1992 14.17
1993 15.37
1994 15.86
1995 17.15
Shareholders' equity was $428.1 million or 8.9% of total assets at December
31, 1995, and $408.6 million or 8.8% at December 31, 1994. ONB paid cash
dividends in 1995 totalling $21.1 million or $0.88 per share (restated for the
5% stock dividend paid in February 1996).
Treasury shares are repurchased throughout the year as part of an ongoing
program to provide shares for reissuance under ONB's dividend reinvestment and
stock purchase plan and for future stock dividends. Treasury shares
repurchased during 1995 reduced shareholders' equity by $42.8 million.
Shares reissued pursuant to the above programs and in connection with
conversions of ONB's subordinated debentures added $12.8 million to
shareholders' equity in 1995.
Capital adequacy in the banking industry is evaluated primarily by the use of
ratios which measure capital against assets that are weighted based on risk
characteristics. These risk-based capital ratios are presented in Table 16
below. ONB's consolidated capital ratios substantially exceed regulatory
minimums and compare favorably to industry averages.
Capital Structure Under Risk-Based Capital Guidelines (Table 16)
($ in thousands)
December 31,
---------------------------------
1995 1994 1993
Tier 1 capital: ---------------------------------
Shareholders' equity (1) . . . . . . . . . $ 417,742 $ 417,189 403,955
Less intangibles . . . . . . . . . . . . . (13,862) (15,641) (17,167)
Tier 1 capital . . . . . . . . . . . . 403,880 401,548 386,788
Tier 2 capital: ---------------------------------
Subordinated debentures. . . . . . . . . . 31,515 38,049 44,567
Qualifying allowance for loan losses . . . 34,938 34,524 32,341
Total capital. . . . . . . . . . . . . . 470,333 474,121 463,696
---------------------------------
Risk adjusted assets . . . . . . . . . . . $3,015,712 $2,901,689 $2,760,866
=================================
Tier 1 capital to risk-adjusted assets . . 13.39% 13.84% 14.01%
Total capital to risk-adjusted assets. . . 15.60 16.34 16.80
Tier 1 capital to total assets
(leverage ratio) . . . . . . . . . . . . 8.37 8.65 8.62
(1) Excludes unrealized gains (losses) on investment securities.
30
<PAGE>
REPORT OF MANAGEMENT
MANAGEMENT'S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS
Management is responsible for the preparation of the financial statements and
related financial information appearing in this annual report. The financial
statements and notes have been prepared in conformity with generally accepted
accounting principles and include some amounts which are estimates based upon
currently available information and management's judgment of current
conditions and circumstances. Financial information throughout this annual
report is consistent with that in the financial statements.
SYSTEM OF INTERNAL ACCOUNTING CONTROLS
Management maintains a system of internal accounting controls which is
believed to provide, in all material respects, reasonable assurance that
assets are safeguarded against loss from unauthorized use or disposition,
transactions are properly authorized and recorded, and the financial records
are reliable for preparing financial statements and maintaining accountability
for assets. In addition, ONB has a corporate code of conduct under which
employees are to maintain high levels of ethical business standards. All
systems of internal accounting controls are based on management's judgment
that the cost of controls should not exceed the benefits to be achieved and
that no system can provide absolute assurance that control objectives are
achieved. Management believes ONB's system provides the appropriate balance
between costs of controls and the related benefits.
In order to monitor compliance with this system of controls, ONB maintains an
extensive internal audit program. Internal audit reports are issued to
appropriate officers and significant audit exceptions, if any, are reviewed
with management and the Audit Committee of the Board of Directors.
AUDIT COMMITTEE OF THE BOARD
The Board of Directors, through an Audit Committee comprised solely of outside
directors, oversees management's discharge of its financial reporting
responsibilities. The Audit Committee meets regularly with the Company's
independent public accountants, Arthur Andersen LLP, and the managers of
internal auditing and loan review. During these meetings, the committee has
the opportunity to meet privately with the independent public accountants as
well as with internal audit and loan review personnel to review accounting,
auditing, loan, and financial reporting matters. The appointment of the
independent public accountants is made by the Board of Directors upon the
recommendation of the Audit Committee.
INDEPENDENT PUBLIC ACCOUNTANTS
The financial statements in this annual report have been audited by Arthur
Andersen LLP, for the purpose of determining that the financial statements are
presented fairly in all material respects. Arthur Andersen's report on the
financial statements appears on page 32. Their audit included a review of
ONB's system of internal accounting controls, for the purpose of setting the
scope and timing of their auditing procedures.
31
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND THE BOARD OF DIRECTORS
OF OLD NATIONAL BANCORP:
We have audited the accompanying consolidated balance sheet of Old National
Bancorp (an Indiana corporation) and affiliates as of December 31, 1995 and
1994, and the related consolidated statements of income, changes in
shareholders' equity, and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Corporation's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Old
National Bancorp and affiliates as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1995, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Indianapolis, Indiana
January 24, 1996
32
<PAGE>
<TABLE>
<CAPTION>
Old National Bancorp
Consolidated Balance Sheet
($ and shares in thousands)
December 31,
----------------------------
1995 1994
Assets ----------------------------
<S> <C> <C>
Cash and due from banks. . . . . . . . . . . . . . . . . . . . $ 175,116 $ 173,404
Money market investments:
Interest-bearing deposits in other banks . . . . . . . . . . 6,501 2,854
Federal funds sold and securities purchased under agreements
to resell. . . . . . . . . . . . . . . . . . . . . . . . . 79,460 86,582
----------------------------
Total money market investments. . . . . . . . . . . . . . 85,961 89,436
----------------------------
TOTAL CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . 261,077 262,840
Investment securities ----------------------------
Held-to-maturity, at amortized cost
(fair value $ 865,596 in 1994) -- 903,248
Available-for-sale, at fair value 1,390,180 459,712
----------------------------
TOTAL INVESTMENT SECURITIES . . . . . . . . . . . . . . . 1,390,180 1,362,960
Loans, net of unearned income. . . . . . . . . . . . . . . . . 3,037,733 2,890,313
Allowance for loan losses. . . . . . . . . . . . . . . . . . . (39,806) (41,335)
----------------------------
NET LOANS . . . . . . . . . . . . . . . . . . . . . . . . 2,997,927 2,848,978
----------------------------
Premises and equipment, net. . . . . . . . . . . . . . . . . . 72,398 69,351
Accrued income receivable. . . . . . . . . . . . . . . . . . . 45,113 39,337
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . 55,933 59,257
----------------------------
TOTAL ASSETS. . . . . . . . . . . . . . . . . . . . . . . $4,822,628 $4,642,723
Liabilities ============================
Deposits:
Noninterest-bearing demand . . . . . . . . . . . . . . . . . $ 469,208 $ 442,225
Interest-bearing:
Savings, daily interest checking and money market . . . . 1,562,320 1,461,882
Certificates of deposit of $100,000 and over . . . . . . . 276,010 213,298
Other time . . . . . . . . . . . . . . . . . . . . . . . . 1,666,137 1,551,781
----------------------------
TOTAL DEPOSITS. . . . . . . . . . . . . . . . . . . . . . 3,973,675 3,669,186
----------------------------
Federal funds purchased. . . . . . . . . . . . . . . . . . . . 11,775 124,475
Securities sold under agreements to repurchase . . . . . . . . 164,206 222,953
Other short-term borrowings. . . . . . . . . . . . . . . . . . 104,300 107,843
Accrued expenses and other liabilities . . . . . . . . . . . . 59,080 39,605
Subordinated debentures. . . . . . . . . . . . . . . . . . . . 31,515 38,049
Medium term notes. . . . . . . . . . . . . . . . . . . . . . . 50,000 32,000
----------------------------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . 4,394,551 4,234,111
Commitments and contingencies
Shareholders' Equity
Preferred Stock, 2 million shares authorized, no shares
issued or outstanding. . . . . . . . . . . . . . . . . . . . . -- --
Common stock, $1 stated value, 30 million shares authorized,
24,955 and 24,543 shares issued and outstanding, respectively 24,955 24,543
Capital surplus. . . . . . . . . . . . . . . . . . . . . . . . 245,420 232,278
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . 147,367 160,368
Net unrealized gain(loss) on available-for-sale investment
securities . . . . . . . . . . . . . . . . . . . . . . . . . . 10,335 (8,577)
----------------------------
TOTAL SHAREHOLDERS' EQUITY . . . . . . . . . . . . . . . 428,077 408,612
----------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY . . . . . . . $4,822,628 $4,642,723
============================
The accompanying notes to consolidated financial statements are an integral part of this statement. <PAGE>
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
Old National Bancorp
Consolidated Statement of Income
($ and shares in thousands except per share data)
Years Ended December 31,
------------------------------------
1995 1994 1993
Interest Income ------------------------------------
<S> <C> <C> <C>
Loans including fees:
Taxable. . . . . . . . . . . . . . . . . . . . . . . . . . . $263,609 $223,724 $211,117
Nontaxable . . . . . . . . . . . . . . . . . . . . . . . . . 3,578 2,995 2,858
Investment securities:
Taxable. . . . . . . . . . . . . . . . . . . . . . . . . . . 61,273 58,861 66,928
Nontaxable . . . . . . . . . . . . . . . . . . . . . . . . . 23,218 23,935 21,572
Deposits with banks. . . . . . . . . . . . . . . . . . . . . . 201 338 1,195
Federal funds sold and securities purchased under
agreements to resell . . 3,393 2,391 4,130
------------------------------------
TOTAL INTEREST INCOME . . . . . . . . . . . . . . . . . . 355,272 312,244 307,800
Interest Expense ------------------------------------
Savings, daily interest checking and money market deposits . . 45,676 38,407 39,474
Certificates of deposit of $100,000 and over . . . . . . . . . 14,472 8,774 9,221
Other time deposits. . . . . . . . . . . . . . . . . . . . . . 89,578 70,373 72,500
Federal funds purchased. . . . . . . . . . . . . . . . . . . . 2,192 2,456 597
Securities sold under agreements to repurchase . . . . . . . . 9,963 6,950 5,948
Other borrowings . . . . . . . . . . . . . . . . . . . . . . . 12,197 8,716 6,744
------------------------------------
TOTAL INTEREST EXPENSE. . . . . . . . . . . . . . . . . . 174,078 135,676 134,484
------------------------------------
NET INTEREST INCOME . . . . . . . . . . . . . . . . . . . 181,194 176,568 173,316
Provision for loan losses. . . . . . . . . . . . . . . . . . . 6,657 7,682 10,189
------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES . . . 174,537 168,886 163,127
------------------------------------
Noninterest Income
Trust fees . . . . . . . . . . . . . . . . . . . . . . . . . . 9,216 7,851 6,580
Service charges on deposit accounts. . . . . . . . . . . . . . 14,025 13,110 12,330
Loan servicing fees. . . . . . . . . . . . . . . . . . . . . . 5,614 4,898 4,306
Net securities gains(losses) . . . . . . . . . . . . . . . . . 55 (265) 312
Other income . . . . . . . . . . . . . . . . . . . . . . . . . 10,260 9,215 10,070
------------------------------------
TOTAL NONINTEREST INCOME. . . . . . . . . . . . . . . . . 39,170 34,809 33,598
Noninterest Expense ------------------------------------
Salaries and employee benefits . . . . . . . . . . . . . . . . 75,281 72,962 67,036
Occupancy expense. . . . . . . . . . . . . . . . . . . . . . . 8,706 8,661 8,283
Equipment expense. . . . . . . . . . . . . . . . . . . . . . . 10,816 9,589 8,046
Marketing expense. . . . . . . . . . . . . . . . . . . . . . . 5,201 4,597 3,943
FDIC insurance premiums. . . . . . . . . . . . . . . . . . . . 4,884 8,431 7,875
Data processing expense . . . . . . . . . . . . . . . . . . . 5,881 5,793 4,296
Supplies expense . . . . . . . . . . . . . . . . . . . . . . . 4,454 4,211 3,762
Communication and transportation expense . . . . . . . . . . . 5,756 5,480 4,915
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . 21,798 23,118 23,067
------------------------------------
TOTAL NONINTEREST EXPENSE . . . . . . . . . . . . . . . . 142,777 142,842 131,223
------------------------------------
Income before income taxes . . . . . . . . . . . . . . . . . . 70,930 60,853 65,502
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 19,236 14,381 17,470
------------------------------------
NET INCOME. . . . . . . . . . . . . . . . . . . . . . . . $ 51,694 $ 46,472 $ 48,032
====================================
Net income per common share:
Primary . . . . . . . . . . . . . . . . . . . . . . . . . $2.04 $1.78 $1.84
====================================
Fully diluted . . . . . . . . . . . . . . . . . . . . . . $1.99 $1.74 $1.79
====================================
Weighted average number of common shares outstanding:
Primary . . . . . . . . . . . . . . . . . . . . . . . . . 25,370 26,096 26,094
====================================
Fully diluted . . . . . . . . . . . . . . . . . . . . . . 26,778 27,795 27,883
====================================
The accompanying notes to consolidated financial statements are an integral part of this statement. <PAGE>
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Old National Bancorp
Consolidated Statement of Changes in Shareholders' Equity
($ and shares in thousands)
Net
Unrealized
Common Stock Loss on Total
------------------- Capital Retained Investment Shareholders'
Shares Amount Surplus Earnings Securities Equity
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1992. . 22,918 $22,918 $179,432 $173,530 $ -- $375,880
Net income . . . . . . . . . . -- -- -- 48,032 -- 48,032
Cash dividends . . . . . . . . -- -- -- (17,278) -- (17,278)
5% stock dividend . . . . . . 930 930 33,215 (34,145) -- --
Stock repurchased. . . . . . . (442) (442) (14,463) -- -- (14,905)
Stock reissued under dividend
reinvestment and stock
purchase plan. . . . . . . 151 151 4,891 -- -- 5,042
Stock reissued due to conversion
of subordinated debentures . 277 277 6,907 -- -- 7,184
----------------------------------------------------------------------------
Balances, December 31, 1993 . 23,834 23,834 209,982 170,139 -- 403,955
Net income. . . . . . . . . . -- -- -- 46,472 -- 46,472
Cash dividends. . . . . . . . -- -- -- (20,009) -- (20,009)
5% stock dividend . . . . . . 1,043 1,043 35,191 (36,234) -- --
Stock repurchased . . . . . . (615) (615) (21,755) -- -- (22,370)
Stock reissued under dividend
reinvestment and stock purchase
plan . . . . . . . . . . . . 200 200 6,929 -- -- 7,129
Stock reissued due to conversion
of subordinated debentures . 81 81 1,931 -- -- 2,012
Net unrealized loss on investment
securities. . . . . . . . . . -- -- -- -- (8,577) (8,577)
----------------------------------------------------------------------------
Balances, December 31, 1994 . 24,543 24,543 232,278 160,368 (8,577) 408,612
Net income . . . . . . . . . -- -- -- 51,694 -- 51,694
Cash dividends. . . . . . . . -- -- -- (21,110) -- (21,110)
5% stock dividend . . . . . . 1,184 1,184 42,401 (43,585) -- --
Stock repurchased . . . . . . (1,238) (1,238) (41,570) -- -- (42,808)
Stock reissued under dividend
reinvestment and stock
purchase plan. . . . . . . . 188 188 6,055 -- -- 6,243
Stock reissued due to conversion
of subordinated debentures . 278 278 6,256 -- -- 6,534
Net unrealized gains on
investment securities. . . . -- -- -- -- 18,912 18,912
----------------------------------------------------------------------------
Balances, December 31, 1995 . 24,955 $24,955 $245,420 $147,367 $10,335 $428,077
============================================================================
The accompanying notes to consolidated financial statements are an integral part of this statement.
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
Old National Bancorp
Consolidated Statement of Cash Flows ($ in thousands)
Years Ended December 31,
-----------------------------------
1995 1994 1993
Cash flows from operating activities: -----------------------------------
<S> <C> <C> <C>
Net income . . . . . . . . . . . . . . . . . . . . . $ 51,694 $ 46,472 $ 48,032
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation . . . . . . . . . . . . . . . . . . . 7,653 7,066 6,367
Amortization of intangible assets. . . . . . . . . 1,231 1,853 1,802
Net premium amortization on investment securities. 1,591 5,008 4,454
Provision for loan losses. . . . . . . . . . . . . 6,657 7,682 10,189
(Gain) loss on sale of investment securities . . . (55) 265 (312)
(Gain) loss on sale of equipment . . . . . . . . . (291) (1) 322
Decrease in interest receivable. . . . . . . . . . (5,776) (2,737) 1,970
(Increase) decrease in other assets. . . . . . . . 2,093 (563) (1,289)
Increase (decrease) in accrued expenses and other.
liabilities . . . . . . . . . . . . . . . . . . 7,832 (1,289) 1,169
-----------------------------------
Total adjustments. . . . . . . . . . . . . . . . 20,935 17,284 24,672
-----------------------------------
Net cash flows provided by operating activities. . 72,629 63,756 72,704
-----------------------------------
Cash flows from investing activities:
Purchase of investment securities held-to-maturity . (62,585) (162,873) (687,308)
Purchase of investment securities available-for-sale (262,978) (176,676) --
Proceeds from maturities of investment securities
held-to-maturity. . . . . . . . . . . . . . . . . 107,340 204,561 546,441
Proceeds from maturities of investment securities
available-for-sale. . . . . . . . . . . . . . . . 184,812 170,830 --
Proceeds from sales of investments securities
held-to-maturity. . . . . . . . . . . . . . . . . -- -- 70,880
Proceeds from sales of investments securities
available-for-sale. . . . . . . . . . . . . . . . . 35,210 51,085 --
Net principal collected from (loans made to)
customers:
Commercial and financial.. . . . . . . . . . . . . 38,665 (37,487) (51,159)
Mortgage, net of loans originated for sale . . . . . (128,679) (133,422) (42,880)
Consumer . . . . . . . . . . . . . . . . . . . . . (65,592) (97,671) (54,208)
Mortgage loans originated for sale . . . . . . . . . (36,322) (33,872) (98,368)
Proceeds from sale of mortgage loans . . . . . . . . 36,541 27,070 96,644
Proceeds from sale of premises and equipment . . . . 1,258 755 2,011
Purchase of premises and equipment . . . . . . . . . (11,886) (12,012) (18,729)
Acqusition of affiliate. . . . . . . . . . . . . . . 0 12,591 15,273
-----------------------------------
Net cash flows used in investing activities. . . . (164,216) (187,121) (221,403)
-----------------------------------
Cash flows from financing activities:
Net increase (decrease) in deposits and
short-term borrowings:
Noninterest-bearing demand deposits. . . . . . . . 26,983 (9,988) 20,468
Savings, daily interest checking and money market
deposits . . . . . . . . . . . . . . . . . . . . 85,501 (31,813) 79,961
Certificates of deposit of $100,000 and over . . . 62,712 (16,623) (34,809)
Other time deposits. . . . . . . . . . . . . . . . 129,293 21,135 (3,618)
Federal funds purchased and securities sold under
agreements to repurchase . . . . . . . . . . . . (171,447) 131,380 (1,192)
Other short-term borrowings. . . . . . . . . . . . (3,543) 46,759 (2,837)
Net proceeds from medium term notes. . . . . . . . . 18,000 -- 32,000
Redemption of 10% subordinated debentures. . . . . . -- (4,506) --
Cash dividends paid. . . . . . . . . . . . . . . . . (21,110) (20,009) (17,278)
Common stock repurchased . . . . . . . . . . . . . . (42,808) (22,370) (14,905)
Common stock reissued, net of shares used to
convert 8% subordinated debentures. . . . . . . . 6,243 7,129 5,042
-----------------------------------
Net cash flows provided by financing activities. . 89,824 101,094 62,832
-----------------------------------
Net decrease in cash and cash equivalents. . . . . . (1,763) (22,271) (85,867)
Cash and cash equivalents at beginning of period . . 262,840 285,111 370,978
-----------------------------------
Cash and cash equivalents at end of period . . . . . $261,077 $262,840 $285,111
===================================
The accompanying notes to consolidated financial statements are an integral part of this statement.
</TABLE>
36
<PAGE>
OLD NATIONAL BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of Old
National Bancorp ("ONB") and its wholly-owned affiliates and have been
prepared in conformity with generally accepted accounting principles and
prevailing practices within the banking industry. Such principles require
management to make estimates and assumptions that affect the reported amounts
of assets, liabilities, and the disclosures of contingent assets and
liabilities at the date of the financial statements and amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
All significant intercompany transactions and balances have been eliminated.
The statements have been restated to reflect mergers accounted for by the
pooling-of-interests method of accounting (see Note 2). A summary of the more
significant accounting and reporting policies used in preparing the statements
is presented below.
NATURE OF OPERATIONS
ONB, a multi-bank holding company headquartered in Evansville, Indiana,
operates in Indiana, Illinois, and Kentucky. Through its bank and non-bank
affiliates, ONB provides to its customers an array of financial services
including loan, deposit, trust, investment, and insurance products.
INVESTMENT SECURITIES
According to Statement of Financial Standards ("SFAS") No. 115, "Accounting
for Certain Investments in Debt and Equity Securities", securities are
classified into one of three categories as follows: "Held-to-maturity"
includes debt securities which ONB has the intent and ability to hold until
maturity. They are recorded at amortized cost. "Trading" includes debt and
equity securities purchased with the intent to sell in the near-term and are
carried at fair value. Unrealized gains and losses are included in income.
"Available-for-sale" includes all other securities. These securities are
recorded at fair value with the unrealized gains and losses, net of tax
effect, recorded as a separate component of shareholders' equity. Realized
gains and losses affect income and the prior fair value adjustments are
reversed. As discussed in Note 3, all of ONB's investment securities are
classified as available-for-sale at December 31, 1995.
LOANS
Loans are stated at the principal amount outstanding. Interest income on
nondiscounted loans is accrued on the principal balances of loans outstanding.
Interest income on discounted loans is recognized using other methods that
generally approximate the interest method. A loan is generally placed on
nonaccrual status when principal or interest becomes 90 days past due, unless
it is well secured and in the process of collection or earlier when concern
exists as to the ultimate collection of principal or interest. Interest
accrued during the current year on such loans is reversed against earnings;
interest accrued in the prior year, if any, is charged to the allowance for
loan losses.
As an element of managing interest rate risk exposure, certain of ONB's
affiliate banks pre-sell fixed rate mortgage loans to third parties. As of
December 31, 1995, approximately $3.0 million of such mortgage loans were held
and carried at cost which approximates market value.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained at a level believed adequate by
management to absorb potential losses in the consolidated loan portfolio.
Management's evaluation of the adequacy of the allowance is an estimate based
on reviews of individual loans, the risk characteristics of the various
categories of loans given current economic conditions and other factors such
as historical loss experience, the financial condition of the borrower, and
fair market value of the collateral and growth of the loan portfolio. The
allowance is increased through a provision charged to operating expense.
Loans deemed to be uncollectible are charged to the allowance. Recoveries of
loans previously charged off are added to the allowance.
Effective January 1, 1995, ONB adopted the provisions of the SFAS No. 114 and
No. 118, which address the accounting and disclosure requirements by creditors
for impairment of loans. Because these statements did not significantly
change the method by which ONB has historically analyzed impaired loans,
implementation of these statements did not have a material effect on ONB's
financial position and results of operation.
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. ONB's policy for recognizing income
on impaired loans is to accrue earnings unless a loan becomes nonaccrual.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is charged to operating expense over the useful lives of the
assets, principally on the straight-line method for building and leasehold
improvements and the declining-balance method for equipment. Maintenance and
repairs are expensed as incurred while major additions and improvements are
capitalized.
37
<PAGE>
OTHER ASSETS
Real estate properties acquired as a result of foreclosure are valued at the
lower of the recorded investment in the related loan or fair value of the
property less estimated costs to sell. The recorded investment is the sum of
the outstanding principal loan balance, any accrued interest which has not
been received and acquisition costs associated with the loan. Any excess of
the recorded investment over the fair value of the property received is
charged to the allowance for loan losses. Any subsequent write-downs are
charged to expense, as are the costs of operating the properties. Such costs
are not material to ONB's results of operation.
Identifiable intangible assets and the excess of total acquisition costs over
the fair value of net assets acquired ($1.1 million and $12.8 million,
respectively, at December 31, 1995) are being amortized on the straight-line
basis over periods ranging from 8 to 25 years. Such assets are periodically
evaluated as to the recoverability of their carrying value.
NET INCOME PER SHARE
Primary net income per share is computed by dividing net income by the
weighted average number of common shares outstanding during each year,
adjusted to reflect all stock dividends (Note 9) and all mergers accounted for
as pooling-of-interests (Note 2) as if they had occurred at the beginning of
the earliest year presented. Net income per share, assuming full dilution, is
computed as above and assumes the conversion of outstanding subordinated
debentures (Note 10). For the fully diluted computation, net income is
adjusted for the elimination of interest expense, net of income tax effects,
and a total of 1.4 million, 1.7 million, and 1.8 million common shares are
assumed to be issued in 1995, 1994, and 1993, respectively, in connection with
the conversion of the remaining outstanding debentures.
INCOME TAXES
Deferred tax assets and liabilities are recorded based on differences between
the financial statement and tax bases of assets and liabilities at income tax
rates currently in effect. For ONB, this results in a net deferred tax asset
which relates principally to differences in the recognition of loan losses for
book and tax purposes.
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
In the ordinary course of business, ONB's affiliate banks have entered into
off-balance-sheet financial instruments consisting of commitments to extend
credit, commitments under credit card arrangements, commercial letters of
credit, and standby letters of credit. Such financial instruments are
recorded in the financial statements when they become payable.
STATEMENT OF CASH FLOWS DATA
For the purpose of presentation in the accompanying Statement of Cash Flows,
cash and cash equivalents are defined as cash, due from banks, and money
market investments. Cash paid during the years ended December 31, 1995, 1994,
and 1993 for interest was $168.2 million, $133.9 million, and $136.3 million,
respectively. Total income tax payments during 1995, 1994 and 1993 were $15.8
million, $21.5 million, and $21.8 million, respectively.
IMPACT OF ACCOUNTING CHANGES
The Financial Accounting Standards Board has issued SFAS No. 122, "Accounting
for Mortgage Servicing Rights", which modifies the accounting for mortgage
servicing rights to allow the recognition of a servicing asset whether they
are purchased or originated. ONB will adopt the provisions of this statement
effective January 1, 1996, and does not expect the adoption of this statement
to be material to its financial condition and results of operation.
The Financial Accounting Standards Board has issued SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of." ONB will adopt the provisions of this statement effective
January 1, 1996. ONB does not expect the impact to be material to its
financial condition and results of operation.
RECLASSIFICATIONS
Certain 1994 and 1993 amounts in the consolidated financial statements have
been reclassified to conform with the 1995 presentation. Such
reclassifications had no effect on net income.
NOTE 2 - BUSINESS COMBINATIONS
<TABLE>
<CAPTION>
MERGERS - CONSUMMATED
ONB consummated the following mergers in 1995:
Date Company & Subsidiary Shares Issued
- -------- -------------------------------------------------------------------- -------------
<S> <C> <C>
March 31 Oblong Bancshares, Inc. - First National Bank (Oblong, Illinois) 437,932
April 30 Citizens National Bank Corporation - Citizens National Bank 992,861
(Tell City, Indiana)
October 31 City National Bancorp, Inc. - City National Bank (Fulton, Kentucky) 551,573
November 3 First United Savings Bank ("United") (Greencastle, Indiana) 520,353
December 7 Shawnee Bancorp - The Bank of Harrisburg (Illinois) 142,780
</TABLE>
38
<PAGE>
These transactions were accounted for as pooling-of-interests. Upon
consummation, United's branches in Greencastle were merged into an existing
ONB affiliate, First Citizens Bank & Trust Co. United's remaining operations
are located in Bloomington, Indiana, and it has been renamed ONB Bank. The
Bank of Harrisburg was merged into an existing ONB affiliate, First National
Bank, Harrisburg, Illinois.
Net income earned in 1995 by these companies prior to their respective mergers
with ONB totalled $2.7 million. The following table presents a restatement of
net interest income, net income, and primary net income per common share to
reflect these pooling-of-interests transactions ($ in thousands, except per
share data):
1994 1993
As reported in the 1994 Annual Report: -------- --------
Net interest income $159,445 $156,694
Net income 46,043 45,587
Primary net income per share,
as restated for stock dividend 1.98 1.96
As restated herein:
Net interest income $176,568 $173,316
Net income 46,472 48,032
Primary net income per share 1.78 1.84
MERGERS - PENDING
During 1995, ONB entered into an agreement to merge with The National Bank of
Carmi, Carmi, Illinois, which has $66.1 million in total assets as of December
31, 1995. Under the agreement, ONB will issue an estimated 388,500 shares.
The merger will be accounted for as a pooling-of-interests and is subject to
the approvals of the institution's shareholders and the applicable regulatory
authorities. The transaction is expected to be consummated in mid-1996.
NOTE 3 - INVESTMENT SECURITIES
The following tables summarize the amortized cost and fair value of the
investment securities portfolio at December 31, 1995 and 1994, and the
corresponding amounts of unrealized gains and losses therein ($ in thousands):
<TABLE>
<CAPTION>
Held-to-Maturity Available-for-Sale
December 31,1995 ------------------------------------------------ -----------------------------------------------
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
Cost Gains Losses Value Cost Gains Losses Value
------------------------------------------------ -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury... $ -- $ -- $ -- $ -- $ 185,962 $ 2,678 $ (373) $ 188,267
U.S. Government agencies
and corporations -- -- -- -- 196,888 1,487 (927) 197,448
Mortgage-backed securities. . -- -- -- -- 539,521 4,465 (2,265) 541,721
State and political
subdivisions -- -- -- -- 424,903 12,814 (1,812) 435,905
Other securities . -- -- -- -- 25,926 1,138 (225) 26,839
------------------------------------------------ -----------------------------------------------
Total. . $ -- $ -- $ -- $ -- $1,373,200 $22,582 $(5,602) $1,390,180
================================================ ===============================================
December 31, 1994:
U.S. Treasury.. $ 3,457 $ -- $ (101) $ 3,356 $ 221,789 $ 97 $ (6,976) $ 214,910
U.S. Government agencies
and corporations .. 11,952 -- (517) 11,435 160,332 498 (5,788) 155,042
Mortgage-backed
securities. 460,701 477 (26,007) 435,171 71,636 75 (2,752) 68,959
State and political
subdivisions .. 415,319 5,203 (16,705) 403,817 7,906 125 (119) 7,912
Other securities . 11,819 1 (3) 11,817 12,090 860 (61) 12,889
------------------------------------------------ -----------------------------------------------
Total. . $903,248 $5,681 $(43,333) $865,596 $ 473,753 $ 1,655 $(15,696) $ 459,712
================================================ ===============================================
</TABLE>
39
<PAGE>
In November 1995 the Financial Accounting Standards Board issued a guide to
the implementation of SFAS No. 115 which allowed a one-time reclassification
of securities between the categories. As of December 31, 1995, ONB
reevaluated its portfolio and reclassified its remaining held-to-maturity
securities as available-for-sale. The reclassification maximizes flexibility
in future interest rate environments by allowing sales, if deemed necessary.
The securities transferred had an amortized cost of $886.7 million and
unrealized gain of $13.8 million.
The amortized cost and fair value of the investment securities portfolio at
December 31, 1995 and 1994, are shown below by contractual or expected
maturity. Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without
call or prepayment penalties.
Proceeds from sales of investment securities available-for-sale during 1995
and 1994 were $35.2 million and $51.1 million, respectively. In 1995, gains
totalling $0.1 million were realized on these sales. In 1994, realized losses
were $0.3 million.
Investment securities with a carrying value of $452 million and $382 million
at December 31, 1995 and 1994, respectively, were pledged to secure public and
other funds as required.
($ in thousands) 1995 1994
---------------------------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
Maturity ---------------------------------------------
Within one year. . . $ 377,776 $ 378,167 $ 152,146 $ 150,975
One to five years. . 574,590 584,426 612,618 595,761
Five to ten years. . 370,329 375,040 527,273 497,215
Beyond ten years . . 50,505 52,547 84,964 81,357
---------------------------------------------
Total. . . . . . $1,373,200 $1,390,180 $1,377,001 $1,325,308
=============================================
NOTE 4 - LOANS
The composition of loans at December 31, 1995 and 1994 by lending classification
was as follows ($ in thousands):
December 31,
---------------------------
1995 1994
---------------------------
Commercial. . . . . . . . . . $ 737,743 $ 702,459
Financial . . . . . . . . . . 5,167 7,546
Economic development bonds. . . . 27,675 30,928
Mortgage loans. . . . . . . . 1,579,596 1,523,215
Consumer credit, net. . . . . . . 687,552 626,165
---------------------------
Total loans . . . . . . . . $3,037,733 $2,890,313
===========================
ONB's banking affiliates make loans to customers in various industries
including manufacturing, agribusiness, transportation, mining, wholesaling,
and retailing predominately in its tri-state region. The loan portfolio is
diversified with no single industry exceeding 10% of the total.
In the normal course of business, the banking affiliates make loans to their
officers and directors, and to related companies and individuals. These loans
are made on substantially the same terms, including interest rates and
collateral, as those prevailing at the same time for comparable transactions
with unrelated parties and they involve no unusual risk of collectibility. An
analysis of the 1995 activity of these loans is as follows ($ in thousands):
Balance, January 1, 1995 . . . . . . . . . . . . . . $112,732
New loans. . . . . . . . . . . . . . . . . . . . . 66,354
Repayments . . . . . . . . . . . . . . . . . . . . (58,912)
Officer and director changes . . . . . . . . . . . 13,274
--------
Balance, December 31, 1995 . . . . . . . . . . . . . $133,448
========
40
<PAGE>
NOTE 5 - ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses during the years 1995, 1994 and 1993
was as follows ($ in thousands):
December 31,
--------------------------------------
1995 1994 1993
--------------------------------------
Balance at beginning of year . . $41,335 $41,833 $37,290
Additions:
Provision charged to expense . 6,657 7,682 10,189
Acquisition under purchase
accounting. . . . . . . . . -- -- 764
Deductions:
Loans charged off. . . . . . . 11,186 10,649 11,135
Recoveries . . . . . . . . . . (3,000) (2,469) (4,725)
--------------------------------------
Net charge-offs. . . . . . . 8,186 8,180 6,410
--------------------------------------
Balance at end of year . . . . . $39,806 $41,335 $41,833
======================================
As of December 31, 1995, the recorded investment in loans for which impairment
has been recognized in accordance with SFAS No. 114 and 118 was $5.7 million
with no related allowance and $47.5 million with $13.4 million of related
allowance.
For the year ended December 31, 1995, the average balance of impaired loans
was $57.9 million, and $4.3 million of interest was recorded.
NOTE 6 - FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments",
requires entities to disclose the fair value of financial instruments, both
assets and liabilities recognized and not recognized in the consolidated
balance sheet, for which it is practicable to estimate fair value. The
following methods and assumptions were used to estimate the fair value of each
type of financial instrument.
CASH, DUE FROM BANKS AND MONEY MARKET INVESTMENTS
For these instruments, the carrying amount is a reasonable estimate of fair
value.
INVESTMENT SECURITIES
For investment securities, fair values are based on quoted market prices, if
available. For securities where quoted prices are not available, fair value
is estimated based on market prices of similar securities.
LOANS
The fair value of loans is estimated by discounting future cash flows using
current rates at which similar loans would be made to borrowers with similar
credit ratings and for the same remaining maturities.
DEPOSITS
The fair value of noninterest-bearing demand deposits and savings, daily
interest checking, and money market deposits is the amount payable as of the
reporting date. The fair value of fixed-maturity certificates of deposit is
estimated using rates currently offered for deposits of similar remaining
maturities.
FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Federal funds purchased and securities sold under agreements to repurchase
generally have an original term to maturity of 30 days or less and, therefore,
their carrying amount is a reasonable estimate of fair value.
MEDIUM TERM NOTES AND SUBORDINATED DEBENTURES
The fair value of medium term notes is estimated using rates currently offered
for obligations of similar remaining maturities. The fair value of
subordinated debentures is estimated using rates currently available to ONB
for debt with similar terms and remaining maturities.
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
Loan commitments and standby letters of credit are generally short-term and
therefore, their carrying amount is a reasonable estimate of their fair value.
41
<PAGE>
<TABLE>
<CAPTION>
The estimated carrying and fair values of ONB's financial instruments as of
December 31, 1995, are as follows ($ in thousands):
Carrying Fair
Value Value
Financial Assets: -------------------------------
<S> <C> <C>
Cash, due from banks and money market investments . . . . . . $261,077 $261,077
Investment securities . . . . . . . . . . . . . . . . . . . . 1,390,180 1,390,180
Loans, net. . . . . . . . . . . . . . . . . . . . . . . . . . 2,997,927 3,007,838
Financial Liabilities:
Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . 3,973,675 3,972,170
Short-term borrowings . . . . . . . . . . . . . . . . . . . . 280,281 280,281
Medium term notes. . . . . . . . . . . . . . . . . . . . . . . 50,000 51,485
Subordinated debentures. . . . . . . . . . . . . . . . . . . . 31,515 46,563
Off-Balance-Sheet Financial Instruments:
Commitments to extend credit. . . . . . . . . . . . . . . . . 638,042 638,042
Letters of credit . . . . . . . . . . . . . . . . . . . . . . 26,092 26,092
</TABLE>
NOTE 7 - INCOME TAXES
Following is a summary of the major items comprising the difference in taxes
computed at the federal statutory rate and as recorded in the consolidated
statement of income:
1995 1994 1993
-------------------------------------
Provision at statutory rate . . . 35.0% 35.0% 35.0%
Tax exempt income . . . . . . . . (11.4) (13.8) (11.9)
NOL utilization . . . . . . . . . -- -- (0.5)
State income taxes. . . . . . . . 3.2 3.4 3.3
Reduction in deferred tax
asset valuation allowance. . . . -- (2.6) --
Other, net. . . . . . . . . . . . 0.3 1.6 0.8
--------------------------------------
Actual tax rate . . . . . . . . . 27.1% 23.6% 26.7%
======================================
The provision for income taxes consists of the following
components ($ in thousands):
1995 1994 1993
--------------------------------
Income taxes currently payable - federal . . $14,971 $13,081 $14,822
Income taxes currently payable - state . . . 3,533 3,878 3,936
Deferred income taxes related to:
Provision for loan losses . . . . . . . . (70) (285) (697)
Reduction in deferred tax asset
valuation allowance. . . . . . . . . . - (1,599) -
Other, net. . . . . . . . . . . . . . . . 802 (694) (591)
---------------------------------
Deferred income tax expense (benefit). . . . 732 (2,578) (1,288)
---------------------------------
Provision for income taxes . . . . . . . . . $19,236 $14,381 $17,470
=================================
42
<PAGE>
Significant components of ONB's net deferred tax asset as of December 31, are as
follows ($ in thousands):
1995 1994
Deferred Tax Assets: -----------------------
Allowance for loan losses, net of recapture. . $14,220 $14,150
Benefit plan accruals. . . . . . . . . . . . . 2,514 2,853
Net operating loss carryforwards . . . . . . . 2,797 3,149
Unrealized loss on available-for-sale
investment securities . . . . . . . . . . . . -- 5,448
Purchase accounting adjustments. . . . . . . . 647 --
Other, net . . . . . . . . . . . . . . . . . . -- 141
----------------------
Total deferred tax assets . . . . . . . . . 20,178 25,741
----------------------
Deferred Tax Liabilities:
Premises and equipment. . . . . . . . . . . . . (2,795) (2,205)
Purchase accounting adjustments . . . . . . . . -- (675)
Accretion on investment securities. . . . . . . (860) (663)
Unrealized gain on available-for-sale
investment securities . . . . . . . . . . . . (6,653) ---
Lease receivable, net . . . . . . . . . . . . . (1,019) (706)
Other, net. . . . . . . . . . . . . . . . . . . (192) --
---------------------
Total deferred tax liabilities . . . . . . . (11,519) (4,249)
---------------------
Net deferred tax assets. . . . . . . . . . . . . $8,659 $21,492
=====================
As of December 31, 1995, ONB had $5.5 million Federal net operating loss
carryforwards which expire between 2002 and 2009. These net operating loss
carryforwards are attributable to several of ONB's affiliate banks. Tax law
imposes a limitation on the utilization of net operating loss carryforwards
generated by an acquired entity. For ONB, this annual limitation is
approximately $1.7 million of taxable income generated by the acquired banks.
A valuation allowance is provided when it is more likely than not that some
portion of the deferred tax asset will not be realized. The valuation allowance
was reversed in 1994 due to the continued and expected profitability of the
affiliate banks to which the allowance related.
NOTE 8 - EMPLOYEE BENEFIT PLANS
RETIREMENT PLAN
ONB has a noncontributory defined benefit retirement plan covering substantially
all full-time employees. Retirement benefits are based on years of service and
compensation during the highest paid five years of employment. ONB's policy is
to contribute at least the minimum funding requirement determined by the
plan's actuary.
<TABLE>
<CAPTION>
The table below sets forth the plan's funded status and the amount recognized in
the consolidated balance sheet at December 31, 1995, 1994, and 1993. The table
includes for all years affiliates that were part of ONB prior to 1993. The
affiliates at Indiana State, Covington, and Paoli, were added in 1995.
Danville, Williamsport, and Jasper affiliates joined the plan in 1993. The
recognition of the affiliates acquired in 1995 will begin in 1996.
($ in thousands):
1995 1994 1993
<S> <C> <C> <C>
Actuarial present value of the accumulated benefit ---------------------------------
obligation, including vested benefits of $14,086 in 1995,
$11,575 in 1994, and $11,142 in 1993. . . . . . . . . . . $15,233 $12,730 $11,995
=================================
Actuarial present value of the projected benefit obligation,
for service rendered to date. . . . . . . . . . . . . . . . $21,091 $20,372 $18,817
Plan assets, primarily common stocks, bonds and
guaranteed investment contracts . . . . . . . . . . . . . . 19,943 15,284 17,039
---------------------------------
Plan assets less than projected benefit obligation . . . . . (1,148) (5,088) (1,778)
Unrecognized net loss during the year. . . . . . . . . . . . 784 3,880 2,716
Unrecognized prior service cost. . . . . . . . . . . . . . . 473 1,318 1,060
Remaining unrecognized overfunding at date of adoption of
SFAS Statement No. 87, being recognized over 18.5 years. . (3,058) (3,400) (3,742)
---------------------------------
Accrued pension cost included in other liabilities . . . . . $(2,949) $(3,290) $(1,744)
=================================
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
The net pension expense and its components were as follows:
1995 1994 1993
($ in thousands) -----------------------------------
<S> <C> <C> <C>
Service cost - benefits earned during period . . . $1,667 $ 1,617 $ 1,349
Interest cost on projected benefit obligation. . . 1,562 1,384 1,328
Actual return on plan assets . . . . . . . . . . . (2,785) 313 (1,264)
Net amortization and deferral. . . . . . . . . . . 1,020 (1,769) (398)
-----------------------------------
Net pension expense. . . . . . . . . . . . . . . . $ 1,464 $ 1,545 $ 1,015
===================================
</TABLE>
Each year, ONB consults with its actuary to assess the appropriateness of
assumptions used in the determination of retirement plan expense and funded
status information for the discount rate, the long-term rate of return on
assets, and the rate of salary progression. The assumptions reflected in the
table above include a discount rate at December 31 of 7.75% in 1995, 8.00% in
1994, and 7.50% in 1993, a long-term rate of return of 8.00% in 1995, and
7.50% in 1994 and 1993, and a rate of salary progression of 5.00% in 1995,
1994, and 1993. The total retirement plan expense for all plans was $1.5
million in 1995, $1.7 million in 1994, and $1.2 million in 1993.
PROFIT SHARING PLAN
ONB has a profit sharing plan for all employees who have completed one year of
service. Contributions to the plan are made when certain consolidated profit
conditions are met. Additionally, employees may participate by contributing a
percentage of their salary, a portion of which is matched by ONB. ONB's
profit sharing expense for the years 1995, 1994, and 1993 was $3.8 million,
$3.6 million, and $3.2 million, respectively.
RESTRICTED STOCK PLAN
ONB has a restricted stock plan which covers certain officers of ONB and its
affiliates. Shares are earned each year based on the achievement of return on
equity targets. Shares vest over a four year period. Unvested shares are
subject to certain restrictions and risk of forfeiture by the participants.
Shares vesting in 1995, 1994, and 1993 totalled 22,794, 22,439, and 22,234
shares, respectively. Expense recorded in 1995, 1994, and 1993 was $0.7
million, $0.8 million and $0.8 million, respectively.
NOTE 9 - SHAREHOLDERS' EQUITY
STOCK DIVIDEND
A 5% stock dividend was declared on December 15, 1995, and distributed on
February 20, 1996. All average share and per share amounts have been
retroactively adjusted to reflect this stock dividend.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
ONB has a dividend reinvestment and stock purchase plan, under which common
shares issued may be either repurchased shares or authorized and previously
unissued shares. As of December 31, 1995, 1,343,257 authorized and unissued
common shares were reserved for issuance under the plan.
SHAREHOLDER RIGHTS PLAN
ONB has adopted a Shareholder Rights Plan whereby one right was distributed
for each outstanding share of ONB's common stock. The rights become
exercisable on the tenth day following a public announcement that a person has
acquired or intends to acquire beneficial ownership of 20% or more of ONB's
outstanding common stock. Upon exercising the rights, the holder is entitled
to buy 1/100 of a share of Junior Preferred Stock at $60 for every right held.
Upon the occurrence of certain events, the rights may be redeemed by ONB at a
price of $.01 per right.
In the event an acquiring party becomes the beneficial owner of 20% or more of
ONB's outstanding shares, rights holders (other than the acquiring person) may
purchase two shares of ONB common stock for the price of one share at the then
market price. If ONB is acquired and is not the surviving corporation, or if
ONB survives a merger but has all or part of its common stock exchanged, each
rights holder will be entitled to acquire shares of the acquiring company with
a value of two times the then exercise price of the rights for each right
held.
44
<PAGE>
NOTE 10 - FINANCING ACTIVITIES
SUBORDINATED DEBENTURES
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 into shares of ONB common stock at a conversion
rate of 44.643 shares per $1,000 principal amount of debentures. During 1995,
$6.5 million principal amount of debentures were converted into 277,806 shares
of ONB common stock.
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. Debenture holders are entitled to an annual
sinking fund beginning September 15, 1998, 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
December 31, 1995, 1.4 million authorized and unissued common shares were
reserved for conversion of the remaining debentures.
MEDIUM TERM NOTES
At December 31, 1995, ONB has outstanding $50 million of medium term notes.
These notes bear interest at a weighted average rate of 6.58% and mature
between 1996 and 2003.
LINES OF CREDIT
At December 31, 1995, ONB had $40 million in unsecured lines of credit with
unaffiliated banks to support its merger activity. Of this amount, $21.4
million was unused. The lines bear interest at the bank's federal funds rate
plus 60 to 80 basis points. During the years 1995, 1994, and 1993, the
average interest rates on the lines were 6.71%, 5.52%, and 3.77%,
respectively. The lines of credit include various arrangements to maintain
compensating balances or pay fees to maintain the line.
At December 31, 1995, ONB had $69.6 million borrowed from various Federal Home
Loan Banks (FHLB). Of these borrowings, $57.0 million have floating rates and
mature in 1996. The remaining borrowings have a fixed interest rate and
mature between 1996 and 2013. The weighted average rate of the FHLB
borrowings were 5.92% and 6.53% at December 31, 1995 and 1994, respectively.
A portion of these borrowings is secured by specific mortgage loans which have
a current book value of approximately $73.7 million. FHLB requires collateral
market value equal to 170% of the amount borrowed.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
LEASES
ONB rents certain premises and equipment under operating leases which expire
at various dates. Many of these leases provide for payment by ONB of property
taxes, insurance premiums, maintenance, and other costs. In some cases,
rentals are subject to increase in relation to a cost-of-living index. Total
rental expense was $3.8 million in 1995, $3.3 million in 1994, and $2.2
million in 1993.
Following is a summary of future minimum lease commitments ($ in thousands):
1996 . . $2,832 1999 . . . . . . .$1,511
1997 . . 1,980 2000 . . . . . . . 1,276
1998 . . 1,599 2001 and after . . 6,481
LETTERS AND LINES OF CREDIT
In the normal course of business, ONB's banking affiliates have entered into
various agreements to extend credit, such as loan commitments of $638 million,
including $285 million of short-term commitments with fixed-rates, and letters
of credit of $26.1 million at December 31, 1995. These commitments are not
reflected in the consolidated financial statements. No material losses are
expected to result from these transactions.
LITIGATION
At December 31, 1995, various legal actions and proceedings were pending against
ONB and certain of its affiliate banks. These actions and proceedings are
incidental to the banking business and are not expected to have a material
adverse effect upon the financial position of ONB or its affiliates.
45
<PAGE>
NOTE 12 - REGULATORY RESTRICTIONS
RESTRICTIONS ON CASH AND DUE FROM BANKS
ONB's affiliate banks are required to maintain reserve balances on hand and with
the Federal Reserve Bank which are non-interest bearing and unavailable for
investment purposes. The average amount of those reserve balances for the years
ended December 31, 1995 and 1994, were $55.7 and $30.7 million, respectively.
RESTRICTIONS ON TRANSFERS FROM AFFILIATE BANKS
As of December 31, 1995, ONB's affiliate banks could pay cash dividends, without
prior approval of regulatory authorities, equal to the amount of net income for
1993, 1994, and 1995, less dividends actually paid during that period of time
and minimum capital requirements for each bank. At December 31, 1995, affiliate
banks could pay aggregate dividends to ONB of approximately $43.7 million
without prior regulatory approval.
NOTE 13 - PARENT COMPANY FINANCIAL STATEMENTS
The following are the condensed parent company only financial statements of
Old National Bancorp ($ in thousands)
Old National Bancorp (Parent Company Only)
Condensed Balance Sheet
December 31,
--------------------
1995 1994
ASSETS --------------------
Deposits in affiliate banks. . . . . . . . . . . . . . $ 664 $ 1,990
Investment in affiliates:
Banks, including purchase accounting intangible assets
of $9,320 in 1995 and $10,551 in 1994. . . . . . . . 472,651 476,717
Non-Banks. . . . . . . . . . . . . . . . . . . . . . 3,678 4,401
Advances to affiliates . . . . . . . . . . . . . . . . 16,044 13,969
Other assets . . . . . . . . . . . . . . . . . . . . . 41,452 5,081
----------------------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . $534,489 $502,158
======================
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings. . . . . . . . . . . . . . . . . $ 18,554 $ 16,995
Other liabilities. . . . . . . . . . . . . . . . . . . 6,343 6,502
8% convertible subordinated debentures, due 2012 . . . 31,515 38,049
Medium term notes. . . . . . . . . . . . . . . . . . . 50,000 32,000
Shareholders' equity . . . . . . . . . . . . . . . . . 428,077 408,612
-----------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY . . . . . $534,489 $502,158
=======================
Old National Bancorp (Parent Company Only)
Condensed Statement of Income
Years Ended December 31,
---------------------------------
1995 1994 1993
INCOME ---------------------------------
Dividends from affiliates. . . . . . . . $86,000 $31,078 $28,398
Income on other investments. . . . . . . 1,202 1,204 1,014
Other income from affiliates . . . . . . 5,090 4,805 3,873
---------------------------------
TOTAL INCOME . . . . . . . . . . . . . 92,292 37,087 33,285
---------------------------------
EXPENSE
Interest on borrowings . . . . . . . . . 7,023 5,886 5,258
Amortization of intangibles. . . . . . . 1,231 1,228 1,199
Other expenses . . . . . . . . . . . . . 7,676 6,806 5,417
---------------------------------
TOTAL EXPENSE. . . . . . . . . . . . . 15,930 13,920 11,874
---------------------------------
Income before income taxes and equity in
undistributed earnings of affiliates. . 76,362 23,167 21,411
Income tax benefit . . . . . . . . . . . (3,409) (2,945) (2,188)
---------------------------------
Income before equity in undistributed
earnings of affiliates . . . .. 79,771 26,112 23,599
Equity in undistributed earnings of
affiliates . . . .. (28,077) 20,360 24,433
---------------------------------
NET INCOME . . . . . . . . . . . . . . $51,694 $46,472 $48,032 <PAGE>
=================================
46
<PAGE>
Old National Bancorp (Parent Company Only)
Condensed Statement of Cash Flows
Years Ended December 31,
----------------------------
1995 1994 1993
Cash flows from operating activities: ----------------------------
Net Income . . . . . . . . . . . . . . . . . . . $51,694 $46,472 $48,032
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation . . . . . . . . . . . . . . . . . 204 196 101
Amortization of intangible assets. . . . . . . 1,231 1,228 1,199
Increase in other assets . . . . . . . . . . . (37,608) (1,601) (417)
Increase (decrease) in other liabilities . . . (159) 1,055 1,282
Equity in undistributed earnings of affiliates 28,077 (20,360) (24,433)
----------------------------
Total adjustments. . . . . . . . . . . . . . (8,255) (19,482) (22,268)
----------------------------
Net cash flows provided by operating activities 43,439 26,990 25,764
----------------------------
Cash flows from investing activities:
Net advances to affiliates . . . . . . . . . . . (6,451) (8,371) (9,589)
Purchase of premises and equipment . . . . . . . (198) (946) (146)
Sale acqusition of affiliate . . . . . . . . . . -- 948 (4,773)
----------------------------
Net cash flows used by investing activities. . (6,649) (8,369) (14,508)
----------------------------
Cash flows from financing activities:
Net proceeds from short-term borrowings. . . . . 1,559 15,295 (14,387)
Net proceeds from medium term notes. . . . . . . 18,000 -- 32,000
Cash dividends paid. . . . . . . . . . . . . . . (21,110) (20,009) (17,278)
Common stock repurchased . . . . . . . . . . . . (42,808) (22,370) (14,905)
Common stock reissued, net of shares used to
convert 8% subordinated debentures. . . . . . . 6,243 7,129 5,042
----------------------------
Net cash flows used in financing activities. . (38,116) (19,955) (9,528)
----------------------------
Net increase (decrease) in cash and cash
equivalents. . . . . . . . . . . . . . . . . (1,326) (1,334) 1,728
Cash and cash equivalents at beginning of period 1,990 3,324 1,596
----------------------------
Cash and cash equivalents at end of period . . . $ 664 $ 1,990 $ 3,324
============================
47
<PAGE>
Directors and Executive Officers
ONB Bank,
Bloomington, Indiana
Directors
John W. Bender
Alan B. Chandler
Dan L. Doan
Clarence Doninger
Harold A. Harrell
Joyce Poling
Executive Officers
Dan L. Doan
Alan B. Chandler
Jack Dickhart
Michael Yeager
Clinton State Bank, Clinton, Indiana
Directors
Daniel L. DeBard
Norman L. Edris
Bernard R. Giacoletto
Betty R. Mooney
Robert J. Rendaci
John W. Scott
E. Stanley Shew
Herman White, II
Executive Officers
Robert J. Rendaci
B. Earle Nield
Milinda J. Wright
Bank of Western Indiana, Covington, Indiana
Directors
Henry K. Bilsland
Lloyd E. Chambers
Mirriam Newmark Fogel
Paul O. Galloway
Vincent F. Grogg
Edward C. Grubb
Eugene A. Grubbs
Robert Michael Henderson
Harold Lee Hesler
Thomas James Leak
Thomas A. McGurk
Thomas Andrew McGurk, Jr.
Carol Myers
John A. Rader
Ogle Snider
Lee Williams
Executive Officers
Lee Williams
Carol Owens
Robert D. Smith
Old National Bank, Evansville, Indiana
Directors
Howard S. Abrams
David L. Barning
Alan W. Braun
Steven E. Chancellor
John J. Daus, Jr.
Peter R. Dolan
Larry E. Dunigan
John M. Dunn
Michael R. Hinton
Robert C. Jeffries
Robert M. Leich
R. Jack Lewis, Jr.
Dan W. Mitchell
D. Patrick O'Daniel
Lawrence D. Prybil
James A. Risinger
C. A. Robinson
J. Steven Rudolph
John C. Schroeder
Marjorie Z. Soyugenc
Charles D. Storms
Joseph T. Theby, III
John W. Weyerbacher
Executive Officers
James A. Risinger
Michael R. Hinton
Wayne F. Henning
John W. Stanley
F. Gene Smith
First Citizens Bank
and Trust Company, Greencastle, Indiana
Directors
Kenneth L. Ames
Charles L. Butler
Anne K. Clark
Earl Eugene Clodfelter
Dan L. Doan
Kenneth J. Eitel, Jr.
Robert W. Evans
David G. Jackman
William M. Marley
Gary R. Pershing
Alan Gene Stanley
Richard Sunkel
Robert A. York, Sr.
Executive Officers
Dan L. Doan
David G. Jackman
John N. Kemper
R. Joe Ferguson
Kenneth R. Heeke
Dubois County Bank, Jasper, Indiana
Directors
Norbert C. Alles
John S. Chappell
David E. Eckerle
Glenn H. Gramelspacher
Jerry C. Jackle
Andrew B. Krempp
Jack E. Newton
James J. Sonderman
Ed J. Stenftenagel
Executive Officers
David E. Eckerle
Paul R. Nolting
Donald E. Routson
William R. Hauser
People's Bank &
Trust Company,
Mt. Vernon, Indiana
Directors
Milford R. Ashworth, Jr.
Arthur W. Bayer
Steven A. Bennett
Stephen A. Dausmann
Ronald B. Lankford
Paul W. Mauer
Richard R. McClish
John W. Stephan
Gordon A. Vogel, M.D.
Joseph T. Weinzapfel
Executive Officers
Steven A. Bennett
Phyllis A. Hawley
Eleanor L. Hogan
William H. Newman
Barbara Tennyson
Orange County Bank, Paoli, Indiana
Directors
R. Russel Bledsoe
Dan L. Doan
Randall L. Doan
Raymond Lewis Farlow
Eric Marshall Harmon
John W. Key
Michael D. McCracken
David K. Ross
John T. Stout
Executive Officers
John W. Key
Janis K. Main
Phillip W. Fortner
Gibson County Bank,
Princeton, Indiana
Directors
Raymond Phillip Hofman
Burt King
Stephen R. Lankford
Jerome A. Marx
Joseph R. Maxey
Ralph G. Welp, DVM
Executive Officers
Burt King
Sharon S. Schmits
48
<PAGE>
Rockville National Bank, Rockville, Indiana
Directors
Warren D. Crooks
Norval W. Dixon, Jr.
Patricia C. Dixon
Gregory A. Harbison
Robert W. Hill
Kevin B. Jacks
Donald C. Swaim
Bert M. Wimmer
Executive Officers
Gregory A. Harbison
Donald C. Swaim
Dale W. Barnes
Citizens National Bank, Tell City, Indiana
Directors
Jerome W. Fischer
Paul J. Koressel
John H. Noble
Fred Smith, Jr., M.D.
Lawrence A. Vogel
John R. Werner
Executive Officers
Paul J. Koressel
Jonathan Hartz
R. Bruce Knox
James R. Schmitt
Indiana State Bank*,
Terre Haute, Indiana
Directors
Buena Chaney
Daniel L. DeBard
Jeremy Einstandig
John C. Figg
Robert S. Ratcliffe
John William Thompson
Executive Officers
Daniel L. DeBard
Darlene W. Zook
Merchants
National Bank,
Terre Haute, Indiana
Directors
Robert M. Boyer
Joseph B. Card
Charles S. Combs
Daniel L. DeBard
John W. Dinkel
Thomas L. Francis
David H. Goeller
Vernon E. Hux
Lucien H. Meis
Marilyn W. Pendergast
John N. Royse
Donald W. Scott
R. Frank Shelton
John A. Templeton, II
Edward T. Turner, Jr.
Executive Officers
Charles S. Combs
Daniel L. DeBard
Gina L. Stuart
Jeffery W. Sims
Security Bank & Trust Company, Vincennes, Indiana
Directors
Robert V. Bierhaus, Jr.
Richard J. Bond
Louie O. Dayson, M.D.
Ronald B. Lankford
John D. Miller
James R. Milligan
George S. Ridgway
Robert J. Stryzinski
P. R. Sweeney
Executive Officers
P. R. Sweeney
James B. Wyant
Richard E. Faulkner
Dan T. Harkins
Linda J. Laue
United Southwest Bank, Washington, Indiana
Directors
James E. Burch
Jack L. Colbert
Michael V. Crouch
John G. Gilley
James E. Gillooly
William A. Lannan
Flavian E. Myers, Jr.
Malcolm Radcliffe, Jr.
Joe W. Singleton
William E. Summers
Donald Joe Traylor
Executive Officers
Joe W. Singleton
Jack L. Colbert
William E. Summers
Gerald A. Frette
Palmer-American National Bank,
Danville, Illinois
Directors
James D. Anderson
William R. Britt
Samuel P. Cannon
Thomas C. Crays
David M. Dillman, M.D.
Dennis J. Doran
Douglas P. Herr
Louis L. Mervis
Judd C. Peck
George E. Richards, DVM
Richard W. Whiteman
Executive Officers
Richard W. Whiteman
James D. Anderson
First National Bank, Harrisburg, Illinois
Directors
David H. Clemmons
William E. Cook
Donald R. DeArmon
Fred G. Denny
Ronald W. Gibbons
Lannie Gribble
Olive H. Johnson
Rick J. Lane
Hieronymus E. Mitchell
Larry G. Noah
Ruth P. Patton
Larry J. Perrotto
George R. Rawlinson
Charles E. Seten, III, M. D.
Denzil C. Simpson
Executive Officers
Ronald W. Gibbons
William E. Cook
Robert D. Doty
Wayne H. Hale
Charles F. Will
James H. Humphrey
*Indiana State Bank is expected to be combined with Merchants National Bank
in Terre Haute, April 1996.
49
<PAGE>
Peoples National Bank, Lawrenceville, Illinois
Directors
Micheal P. Macey
John R. McKim
M. David Paddock
Harry J. Rice
Lee D. Smith
Ward A. Warner
H. Edward Williams
Executive Officers
M. David Paddock
Bradley P. Wolfe
Karen A. Caudell
Security Bank and
Trust Co., Mt. Carmel, Illinois
Directors
Philip Barnhard
J. Roy Dee, III
Stephen J. Lovellette
Robert E. Mundy, II
Craig Newman
James D. Price
Robert A. Reasor
Lawrence R. Tedford
Executive Officers
Robert A. Reasor
Gary F. Mohrman
Gary G. Rumsey
The First National
Bank of Oblong,
Oblong, Illinois
Directors
Ronald K. Bailey
Wilfred J. Cross
Robert Glezen
Jerry J. Harmon
William E. Holt
Keith A. Riker
Jack L. Wade
Executive Officers
Wilfred J. Cross
William E. Holt
City National Bank, Fulton, Kentucky
Directors
R. Ward Bushart
Kenneth E. Crews
Kent Hutchins
Roger Kephart
Louis M. McBride
Rodney A. Miller
Executive Officers
Kenneth E. Crews
Robert K. Burrow
First State Bank, Greenville, Kentucky
Directors
Joseph R. Boggess, M.D.
L. Wayne Cisney, Jr.
Richard P. Countzler
Larry J. Draper
W. Lee Fauntleroy
R. Fredric Geibel
Elizabeth K. Gentry
Curtis C. Hardison
Samuel E. Levinson, Jr.
Shelby G. Stewart
John A. Stovall
Ben A. Topmiller, Jr.
Joe B. Tucker
Joyce M. Waddle-McGraw
Peggy M. Williams
Executive Officers
Peggy M. Williams
A. P. Cornette, Jr.
Charles E. Dukes
Michael H. Mercer
Rhonda Beliles
Sharon Stovall
Farmers Bank &
Trust Company, Henderson, Kentucky
Directors
Herman C. Alles
Rodger P. Bird
Stephen D. Gray
William P. Hazelwood
Phelps L. Lambert
Steve H. Parker
Earl W. Peters
H. Charles Shade
Lawrence Simon
Isaac B. Utley
Keith A. Utley
Executive Officers
Earl W. Peters
Keith A. Utley
Wanda H. Jett
Farmers Bank &
Trust Company, Madisonville, Kentucky
Directors
Thomas F. Clayton
C. Morris Coffman
Barry T. Eveland
Thomas B. Florida
William E. Groves
Joseph E. Knight
Barclay B. McCoy
James A. Miner, Jr.
H. Lee Owen, Jr.
Chesley W. Riddle, Sr.
Robert E. Smith
Larry E. Wilson
Executive Officers
C. Morris Coffman
H. Lee Owen, Jr.
R. Steven Cox
M. Robert McElwain
Morganfield
National Bank, Morganfield, Kentucky
Directors
Charles Allen
William S. Anderson
John T. Davis
Mike F. Geiger
H. T. Shouse
Harold M. Smith, DDS
Joe Walt Wells
Executive Officers
H. T. Shouse
Jerry R. Ruark
David Presser
Wayne Hooper
50
<PAGE>
Indiana Old National Insurance Company
(IONIC)
Directors
Wayne F. Henning
Jeff D. Kniese
Ronald B. Lankford
Dan W. Mitchell
Steve H. Parker
John N. Royse
James R. Schmitt
H. T. Shouse
Jeff W. Sims
F. Gene Smith
Executive Officers
Wayne F. Henning
Jeff D. Kniese
ONB Insurance
Directors
Jack L. Dye
Wayne F. Henning
John D. Hodge
Steve H. Parker
John N. Royse
Joe W. Singleton
James B. Studwell
William E. Summers
Executive Officers
Jack L. Dye
James B. Studwell
Old National
Service Corporation
Directors
William R. Britt
Thomas F. Clayton
Daniel L. DeBard
David E. Eckerle
Michael R. Hinton
Phelps L. Lambert
Steve H. Parker
J. Steven Rudolph
Peggy M. Williams
Executive Officers
Thomas F. Clayton
Gary L. McDowell
Mark E. Neidig
Old National
Trust Company
Directors
David L. Barning
William R. Britt
Charles S. Combs
David H. Goeller
William B. Kelley
Ronald B. Lankford
Lucien H. Meis
Paul R. Nolting
H. Lee Owen, Jr.
Steve H. Parker
Robert A. Reasor
James A. Risinger
C. A. Robinson
John N. Royse
Marjorie Z. Soyugenc
Isaac B. Utley
Executive Officers
Thomas F. Clayton
William B. Kelley
John S. Staser
Marvin H. Sunderman
Old National Bancorp
Directors
David L. Barning
Richard J. Bond
Alan W. Braun
John J. Daus, Jr.
Wayne A. Davidson
Larry E. Dunigan
David E. Eckerle
Thomas B. Florida
Phelps L. Lambert
Ronald B. Lankford
Lucien H. Meis
Dan W. Mitchell
John N. Royse
Marjorie Z. Soyugenc
Charles D. Storms
Edward T. Turner, Jr.
Executive Officers
John N. Royse,
Chairman
Ronald B. Lankford,
President
Thomas F. Clayton,
Senior Vice President
Steve H. Parker,
Senior Vice President-Chief
Financial Officer
Jeffrey L. Knight,
Secretary-General Counsel
Daryl D. Moore,
Vice President-Chief
Credit Officer
Regional Executives
Central Region
David E. Eckerle
Evansville Region
James A. Risinger
Northern Region
William R. Britt
Southern Region
C. Morris Coffman
51
<PAGE>
Annual Meeting
The Annual Meeting of Shareholders will be held Thursday, April 18, 1996,
at 10:30 a.m., Central Daylight Time, in the Auditorium at the Vanderburgh
Auditorium Convention Center, 715 Locust Street, Evansville, Indiana.
Corporate Office
420 Main Street
Evansville, Indiana 47708
812-464-1434
Stock Information
The stock of the company is traded over-the-counter on the NASDAQ National
Market System under Ticker Symbol OLDB. The Stock Transfer Agent is:
Old National Bancorp
Post Office Box 718
Evansville, Indiana 47705-0718
In December 1995, a one-for-twenty (5%) stock dividend was declared to
shareholders of record on February 5, 1996. There were 12,585 shareholders
of record as of December 31, 1995.
Market Makers
The following firms make a market in Old National Bancorp's stock:
Herzog, Heine, Geduld
J.J.B. Hilliard, W.L. Lyons
Keefe, Bruyette & Woods, Inc.
McDonald & Company Sec., Inc.
NatCity Investments, Inc.
Smith Barney Shearson
Dividend Reinvestment and
Discount Stock Purchase Plan
The company offers an automatic Dividend Reinvestment and Discount Stock
Purchase Plan to its shareholders. For information concerning this convenient
method of purchasing additional shares of stock, contact:
Shareholder Services Department
Old National Bancorp
Post Office Box 718
Evansville, Indiana 47705-0718
812-464-1296
Additional Information
Shareholders and interested investors may obtain information about the
company upon written request or by calling:
John Claybon, CFA
Investor Relations Officer
Old National Bancorp
Post Office Box 718
Evansville,Indiana 47705-0718
812-464-1442
Form 10-K
The Annual Report on Form 10-K, as required to be filed with the Securities
and Exchange Commission, is available without charge upon written request or
by calling:
Ronald W. Seib, CPA
Vice President-Corporate Controller
Old National Bancorp
Post Office Box 718
Evansville, Indiana 47705-0718
812-464-1530
Equal Opportunity Employer
The company maintains its commitment to equal opportunity and affirmative
action in employment and promotion policies and pledges to recruit, hire,
train, and promote persons in all job classifications without regard to race,
color, religion, sex, age, or handicap.
The table below lists the NASDAQ price quotes and dividend data for Old
National Bancorp stock over the last two years.*
Price Per Share Share Dividend
High Low Volume Declared
1995
First Quarter $34 1/8 $32 5/8 1,243,300 $ .22
Second Quarter 33 1/8 32 3/8 1,151,600 .22
Third Quarter 32 7/8 32 5/8 663,000 .22
Fourth Quarter 33 1/8 32 1/8 695,300 .22
1994
First Quarter $34 1/8 $32 7/8 795,500 $ .21
Second Quarter 33 1/8 32 5/8 640,700 .21
Third Quarter 33 3/4 32 5/8 685,900 .21
Fourth Quarter 33 5/8 33 1/8 770,800 .21
*Data adjusted for all stock dividends, including a 5% stock dividend to
shareholders of record on February 5, 1996, paid on February 20, 1996.
52
<PAGE>
EXHIBIT 22
OLD NATIONAL BANCORP
SUBSIDIARIES OF THE REGISTRANT
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
Jurisdiction of Business Name
Name of Subsidiary Incorporation of Subsidiary
<S> <C> <C>
Old National Bank in Evansville United States of America Old National Bank
(Evansville, Indiana)
Merchants National Bank United States of America Merchants National Bank
of Terre Haute
(Terre Haute, Indiana)
First Citizens Bank and Indiana First Citizens Bank and
Trust Company Trust Company
(Greencastle, Indiana)
People's Bank & Trust Co. Indiana People's Bank & Trust Co.
(Mt. Vernon, Indiana)
The Rockville National Bank United States of America Rockville National Bank
(Rockville, Indiana)
Clinton State Bank Indiana Clinton State Bank
(Clinton, Indiana)
Gibson County Bank Indiana Gibson County Bank
(Princeton, Indiana)
Security Bank & Trust Co. Indiana Security Bank & Trust Co.
(Vincennes, Indiana)
Farmers Bank & Trust Co. Kentucky Farmers Bank & Trust Co.
(Madisonville, Kentucky)
The Peoples National Bank United States of America The Peoples National Bank
of Lawrenceville of Lawrenceville
(Lawrenceville, Illinois)
First State Bank of Kentucky First State Bank
Greenville Kentucky, Inc.
(Greenville, Kentucky)
Morganfield National Bank United States of America Morganfield National Bank
(Morganfield, Kentucky)
The First National Bank of United States of America First National Bank
Harrisburg
(Harrisburg, Illinois)
Security Bank & Trust Co. Illinois Security Bank & Trust Co.
(Mt. Carmel, Illinois)
Farmers Bank & Trust Company Kentucky Farmers Bank & Trust
(Henderson, Kentucky) Company
United Southwest Bank Indiana United Southwest Bank
(Washington, Indiana)
Palmer-American National Bank United States of America Palmer-American National
(Danville, Illinois) Bank
Old National Realty Company, Inc. Indiana Old National Realty Company,
(Evansville, Indiana) Inc.
Indiana Old National Insurance Arizona IONIC
Company (Evansville, Indiana)
Old National Service Corporation Indiana Old National Service
(Evansville, Indiana) Corporation
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Business Name
Name of Subsidiary Incorporation of Subsidiary
<S> <C> <C>
Dubois County Bank Indiana Dubois County Bank
(Jasper, Indiana)
Bank of Western Indiana Indiana Bank of Western Indiana
(Covington, Indiana)
Indiana State Bank Indiana Indiana State Bank
(Terre Haute, Indiana)
Orange County Bank Indiana Orange County Bank
(Paoli, Indiana)
First National Bank United States of America First National Bank
(Oblong, Illinois)
Citizens National Bank United States of America Citizens National Bank
(Tell City, Indiana)
ONB Bank Indiana ONB Bank
(Bloomington, Indiana)
City National Bank United States of America City National Bank
(Fulton, Kentucky)
Old National Trust Company United States of America Old National Trust Company
(Evansville, Indiana)
Old National Trust Company-
Old National Trust Company- United States of America Kentucky
Kentucky (Morganfield, Kentucky)
Old National Trust Company- United States of America Old National Trust Company-
Illinois (Mt. Carmel, Illinois) Illinois
</TABLE>
<PAGE>
EXHIBIT 24
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report incorporated by reference in this Form 10-K into the Registrant's
previously filed Registration Statement File No. 2-90678.
ARTHUR ANDERSEN LLP
Indianapolis, Indiana,
March 26, 1996
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM OLD NATIONAL
BANCORP'S DECEMBER 31, 1995 FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 175,116
<INT-BEARING-DEPOSITS> 6,501
<FED-FUNDS-SOLD> 79,460
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,390,180
<INVESTMENTS-CARRYING> 1,390,180
<INVESTMENTS-MARKET> 1,390,180
<LOANS> 3,037,733
<ALLOWANCE> 39,806
<TOTAL-ASSETS> 4,822,628
<DEPOSITS> 3,973,675
<SHORT-TERM> 280,281
<LIABILITIES-OTHER> 59,080
<LONG-TERM> 81,515
0
0
<COMMON> 24,955
<OTHER-SE> 403,122
<TOTAL-LIABILITIES-AND-EQUITY> 4,822,628
<INTEREST-LOAN> 267,187
<INTEREST-INVEST> 84,491
<INTEREST-OTHER> 3,594
<INTEREST-TOTAL> 355,272
<INTEREST-DEPOSIT> 149,726
<INTEREST-EXPENSE> 174,078
<INTEREST-INCOME-NET> 181,194
<LOAN-LOSSES> 6,657
<SECURITIES-GAINS> 55
<EXPENSE-OTHER> 21,798
<INCOME-PRETAX> 70,930
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 51,694
<EPS-PRIMARY> 2.04
<EPS-DILUTED> 1.99
<YIELD-ACTUAL> 4.41
<LOANS-NON> 6,623
<LOANS-PAST> 4,781
<LOANS-TROUBLED> 1,120
<LOANS-PROBLEM> 96,700
<ALLOWANCE-OPEN> 41,335
<CHARGE-OFFS> 11,186
<RECOVERIES> 3,000
<ALLOWANCE-CLOSE> 39,806
<ALLOWANCE-DOMESTIC> 39,806
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
