<PAGE>
SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File Number 0-10888
OLD NATIONAL BANCORP
(Exact name of Registrant as specified in its charter)
INDIANA 35-1539838
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
420 Main Street
Evansville, Indiana 47708
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code, (812)464-1200
NOT APPLICABLE
Former name, former address and former fiscal year,
if changed since last reports.
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to the filing
requirements for at least the past 90 days. Yes x No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock. The Registrant has one class of common stock (no par value)
with approximately 24.9 million shares outstanding at June 30, 1996.
<PAGE>
OLD NATIONAL BANCORP
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION
Item 1.Financial Statements Page No.
Consolidated Balance Sheet
June 30, 1996 and 1995, and December 31, 1995. . . . . . . . 3
Consolidated Statement of Income
Three and six months ended June 30, 1996 and 1995. . . . . . 4
Consolidated Statement of Cash Flows
Six months ended June 30, 1996 and 1995. . . . . . . . . . . 5
Notes to the Consolidated Financial Statements. . . . . . . . 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . . . . 8
PART II. OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . .12
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
INDEX OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . .14
2
<PAGE>
<TABLE>
<CAPTION>
OLD NATIONAL BANCORP
CONSOLIDATED BALANCE SHEET
June 30, June 30, December 31,
($ in thousands) (unaudited) 1996 1995 1995
Assets
<S> <C> <C> <C>
Cash and due from banks. . . . . . . . . $146,326 $158,809 $176,737
Money market investments . . . . . . . . 14,413 13,777 88,162
Investment Securities:
U.S. Treasury . . . . . . . . . . . . . 175,375 215,677 191,464
U.S. Government agencies
and corporations. . . . . . . . . . . 778,058 752,346 751,205
Obligations of states and political
subdivisions. . . . . . . . . . . . . 450,642 426,445 442,300
Other . . . . . . . . . . . . . . . . . 34,659 29,522 30,489
---------- ---------- ----------
Total Investment Securities . . . . . 1,438,734 1,423,990 1,415,458
---------- ---------- ----------
Loans:
Commercial. . . . . . . . . . . . . . . 773,631 726,363 780,755
Commercial Mortgage. . . . . . . . . . . 627,681 555,056 514,602
Residential Mortgage. . . . . . . . . . 1,069,371 1,065,637 1,077,167
Consumer credit, net of unearned income 719,511 671,064 694,070
Financial . . . . . . . . . . . . . . . 154 650 5,167
---------- ---------- ----------
Total Loans . . . . . . . . . . . . . 3,190,348 3,018,770 3,071,761
Allowance for loan losses . . . . . . (42,563) (43,022) (40,581)
---------- ---------- ----------
Net Loans . . . . . . . . . . . . . . 3,147,785 2,975,748 3,031,180
Other assets . . . . . . . . . . . . . . 182,878 172,744 176,984
---------- ---------- ----------
Total Assets. . . . . . . . . . . . . $4,930,136 $4,745,068 $4,888,521
========== ========== ==========
Liabilities
Deposits:
Noninterest bearing demand. . . . . . . $458,503 $437,702 $474,297
Interest bearing:
Savings, daily interest checking
and money market accounts . . . . . . 1,582,590 1,461,880 1,581,656
Certificates of deposit of
$100,000 and over . . . . . . . . . . 254,784 239,129 276,010
Other time. . . . . . . . . . . . . . 1,682,384 1,708,280 1,697,697
---------- ---------- ----------
Total Deposits. . . . . . . . . . . . 3,978,261 3,846,991 4,029,660
---------- ---------- ----------
Short-term borrowings. . . . . . . . . . 400,143 363,614 280,981
Subordinated debentures. . . . . . . . . 30,570 31,545 31,515
Medium term notes. . . . . . . . . . . . 44,000 32,000 50,000
Other liabilities. . . . . . . . . . . . 55,288 47,822 60,257
---------- ---------- ----------
Total Liabilities . . . . . . . . . . . 4,508,262 4,321,972 4,452,413
---------- ---------- ----------
Shareholders' Equity
Common stock. . . . . . . . . . . . . . 24,908 24,493 25,343
Capital surplus . . . . . . . . . . . . 230,755 218,302 247,173
Retained earnings . . . . . . . . . . . 170,867 179,372 153,380
Net unrealized gain (loss) on investment
securities. . . . . . . . . . . . . . (4,656) 929 10,212
---------- ---------- ----------
Total Shareholders' Equity. . . . . . . 421,874 423,096 436,108
---------- ---------- ----------
Total Liabilities and Shareholders'
Equity. . . . . . . . . . . . . . . . $4,930,136 $4,745,068 $4,888,521
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
3
<PAGE>
<TABLE>
<CAPTION>
OLD NATIONAL BANCORP
CONSOLIDATED STATEMENT OF INCOME
Three Months Ended Six Months Ended
($ in thousands except share June 30, June 30,
and per share data) (unaudited) 1996 1995 1996 1995
Interest income
Loans including fees:
<S> <C> <C> <C> <C>
Taxable . . . . . . . . . . . . . $69,782 $66,121 $138,077 $129,038
Non-taxable . . . . . . . . . . . 924 915 1,822 1,791
Investment securities:
Taxable . . . . . . . . . . . . . 15,598 15,781 30,778 31,336
Non-taxable . . . . . . . . . . . 5,877 5,904 11,694 11,792
Federal funds sold and securities
purchased under agreement to resell 595 566 2,136 1,256
Deposits with banks. . . . . . . . 100 66 246 142
------- ------- ------- -------
Total Interest Income . . . . . . 92,876 89,353 184,753 175,355
Interest Expense
Savings, daily interest checking and
money market accounts . . . . . . 11,457 11,687 23,261 22,222
Certificates of deposit of $100,000
and over. . . . . . . . . . . . . 3,681 3,238 7,577 6,162
Other time deposits. . . . . . . . 23,364 23,092 47,180 43,781
Federal funds purchased. . . . . . 308 533 528 1,686
Securities sold under agreements to
repurchase. . . . . . . . . . . . 2,246 2,519 4,599 4,962
Other borrowings . . . . . . . . . 2,782 2,903 5,384 5,871
------- ------- ------- -------
Total Interest Expense. . . . . . 43,838 43,972 88,529 84,684
------- ------- ------- -------
Net Interest Income . . . . . . . 49,038 45,381 96,224 90,671
Provision for loan losses. . . . . 2,082 1,301 4,063 2,402
------- ------- ------- -------
Net Interest Income After Provision
For Loan Losses . . . . . . . . . 46,956 44,080 92,161 88,269
------- ------- ------- -------
Noninterest Income
Trust fees . . . . . . . . . . . . 2,462 2,421 4,965 4,777
Service charges on deposit accounts 3,881 3,493 7,525 6,751
Loan servicing fees. . . . . . . . 1,396 1,397 2,652 2,780
Securities gains (losses), net . . (8) 33 47 35
Other income . . . . . . . . . . . 3,408 2,580 6,124 5,019
------- ------- ------- -------
Total Noninterest Income. . . . . 11,139 9,924 21,313 19,362
------- ------- ------- -------
Noninterest Expense
Salaries and employee benefits . . 20,600 19,047 40,145 38,055
Occupancy expense. . . . . . . . . 2,237 2,143 4,499 4,297
Equipment expense. . . . . . . . . 2,875 2,628 5,600 5,380
Marketing expense. . . . . . . . . 1,302 1,300 2,523 2,518
FDIC insurance expense . . . . . . 189 2,148 389 4,335
Data processing expense. . . . . . 1,148 1,314 2,352 2,778
Supplies expense . . . . . . . . . 1,090 1,059 2,188 2,182
Communication and
transportation expense . . . . . 1,684 1,365 3,247 2,829
Other expenses . . . . . . . . . . 5,564 5,191 10,826 10,043
------- ------- ------- -------
Total Noninterest Expense. . . . 36,689 36,195 71,769 72,417
------- ------- ------- -------
Income before income taxes . . . . 21,406 17,809 41,705 35,214
Provision for income taxes . . . . 6,534 4,365 12,618 9,110
------- ------- ------- -------
Net Income. . . . . . . . . . . . $14,872 $13,444 $29,087 $26,104
======= ======= ======= =======
Net Income Per Common Share
Primary . . . . . . . . . . . . . $ 0.59 $ 0.52 $ 1.15 $ 1.00
======= ======= ======= =======
Fully Diluted . . . . . . . . . . $ 0.58 $ 0.51 $ 1.12 $ 0.98
======= ======= ======= =======
Weighted average common shares outstanding:
Primary . . . . . . . . . . . . 25,101,001 25,881,516 25,247,981 25,990,818
========== ========== ========== ==========
Fully Diluted . . . . . . . . . 26,468,636 27,289,779 26,615,616 27,399,081
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this statement
4
<PAGE>
<TABLE>
<CAPTION>
OLD NATIONAL BANCORP
CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Ended
June 30,
($ in thousands) (unaudited) 1996 1995
Cash flows from operating activities:
<S> <C> <C>
Net income . . . . . . . . . . . . . . . . . . . . $ 29,087 $ 26,104
-------- --------
Adjustments to reconcile net income to cash provided
from operating activities:
Depreciation. . . . . . . . . . . . . . . . . . . 4,185 3,796
Amortization of intangible assets . . . . . . . . 639 1,561
Net premium amortization (discount accretion) on
investment securities . . . . . . . . . . . . . 1,118 541
Provision for loan losses . . . . . . . . . . . . 4,063 2,402
Gain on sale of investment securities . . . . . . (47) (35)
Gain on sale of assets. . . . . . . . . . . . . . (29) (216)
(Increase) decrease in interest receivable. . . . 1,198 (855)
Increase in other assets. . . . . . . . . . . . . (5,919) (891)
Increase in accrued expenses and
other liabilities. . . . . . . . . . . . . . . 4,948 1,721
-------- --------
Total adjustments . . . . . . . . . . . . . . . 10,156 8,024
-------- --------
Net cash flows provided by operating activities . 39,243 34,128
-------- --------
Cash flows from investing activities:
Purchase of investment securities held to maturity. --- (32,034)
Purchase of investment securities available for sale (236,575) (130,114)
Proceeds from maturities and paydowns of investment
securities held to maturity . . . . . . . . . . . --- 52,266
Proceeds from maturities and paydowns of investment
securities available for sale . . . . . . . . . . 149,389 84,430
Proceeds from sales of investment securities available
for sale. . . . . . . . . . . . . . . . . . . . . 38,054 7,585
Net principal collected from (loans made to) customers:
Commercial . . . . . . . . . . . . . . . . . . . 12,593 73,512
Mortgage . . . . . . . . . . . . . . . . . . . . (126,350) (144,829)
Consumer . . . . . . . . . . . . . . . . . . . . (27,846) (40,061)
Proceeds from sale of mortgage loans . . . . . . . 21,038 13,926
Proceeds from sale of premises and equipment . . . 403 313
Purchase of premises and equipment . . . . . . . . (6,474) (4,901)
-------- --------
Net cash flows used in investing activities . . . (175,768) (119,907)
-------- --------
Cash flows from financing activities:
Net increase (decrease) in deposits and short-term borrowings:
Noninterest bearing demand. . . . . . . . . . . . (15,794) (10,172)
Savings, daily interest checking
and money market deposits . . . . . . . . . . . 934 (19,895)
Certificates of deposit of $100,000 and over. . . (21,226) 25,831
Other time deposits . . . . . . . . . . . . . . . (15,313) 125,792
Short-term borrowings . . . . . . . . . . . . . . 119,162 (92,557)
Payment of medium-term notes . . . . . . . . . . . (6,000) ---
Cash dividends paid. . . . . . . . . . . . . . . . (10,907) (10,320)
Common stock repurchased . . . . . . . . . . . . . (21,173) (28,656)
Common stock reissued, net of shares used to convert
subordinated debentures. . . . . . . . . . . . . 2,682 2,603
-------- --------
Net cash flows provided by (used in)
financing activities . . . . . . . . . . . . . 32,365 (7,374)
-------- --------
Net decrease in cash and cash equivalents. . . . . (104,160) (93,153)
Cash and cash equivalents at beginning of period . 264,899 265,739
-------- --------
Cash and cash equivalents at end of period . . . . $160,739 $172,586
======== ========
Total interest paid . . . . . . . . . . . . . . . $ 90,240 $ 81,146
======== ========
Total taxes paid. . . . . . . . . . . . . . . . . $ 12,800 $ 8,721
======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
5
<PAGE>
Old National Bancorp
Notes To Consolidated Financial Statements
1. Basis of Presentation
The accompanying consolidated financial statements include the accounts of the
Old National Bancorp and its affiliate entities (ONB). All significant
intercompany transactions and balances have been eliminated. In the opinion
of management, the consolidated financial statements contain all the normal
and recurring adjustments necessary to present fairly the financial position
of ONB as of June 30, 1996 and 1995 and December 31, 1995, and the results of
its operations for the three and six months ended June 30, 1996 and 1995 and
its cash flows for the six months ended June 30, 1996 and 1995. All prior
period information has been restated for the effects of business combinations
accounted for as pooling-of-interests.
2. Net Income Per Common Share
Net income per common share computations are based on the weighted average
number of common shares outstanding during the periods presented. A 5% stock
dividend was paid February 20, 1996 to shareholders of record on February 5,
1996. All share and per share data presented herein have been restated for
the effects of this stock dividend.
3. Merger Activities
Completed Mergers
On May 31, 1996, ONB and The National Bank of Carmi (Carmi), Carmi, Illinois,
consummated a merger in which ONB issued 388,462 common shares in exchange for
all of the shares of Carmi. This transaction was accounted for as a
pooling-of-interests. Net income prior to merger included in these statements
for the five months ended May 31, 1996 was $226 thousand.
Pending Mergers
On April 8, 1996, ONB and Workingmens Capital Holdings (Workingmens) of
Bloomington, Indiana announced the execution of a definitive merger agreement.
ONB will issue common shares in exchange for all of the outstanding common
shares of Workingmens. The transaction will be accounted for as a
pooling-of-interests. The merger is subject to the approvals of Workingmen's
shareholders and requlatory authorities. As of June 30, 1996 Workingmens
consolidated financial statements reflected $208.2 million in total assets,
net loans of $183.4 million, total deposits of $149.7 million and net income
for the six months then ended of $863 thousand. This merger is expected to be
consummated in October 1996.
4. Investments
The market value and amortized cost of investment securities as of June 30,
1996 are set forth below ($ in thousands):
Market Value Amortized Cost
Held-to-maturity, at amortized cost $ -- $ --
Available-for-sale, at market value 1,438,734 1,446,510
------------ ------------
$ 1,438,734 $ 1,446,510
============ ============
6
<PAGE>
5. Borrowings
ONB has outstanding $30.6 million of 8% convertible subordinated debentures
which are due September 15, 2012, unless previously converted or redeemed.
The debentures are convertible at any time prior to maturity into shares of
common stock of ONB at a conversion rate of 44.643 shares for each one
thousand dollars principal amount of debentures. Interest on the debentures
is payable on March 15 and September 15 of each year. The debentures are
redeemable in whole or in part at the option of ONB at a premium to par value.
Beginning September 15, 1998, debenture holders are entitled to an annual
sinking fund of $2.5 million principal amount of debentures annually less
conversions and redemptions. The debentures are subordinated in right of
payment to all senior indebtedness of ONB. As of June 30, 1995, 1.4 million
authorized and unissued common shares were reserved for conversion of the
debentures.
ONB has registered Series A Medium Term Notes in the principal amount of $50
million. The notes may be issued with maturities ranging from nine months to
thirty years and rates may be either fixed or variable. As of June 30, 1995,
a total of $44 million of the notes were outstanding, with maturities ranging
from two to seven years and fixed interest rates ranging from 6.0% to 7.1%.
As of June 30, 1995, ONB has $45 million in unsecured lines of credit with
unaffiliated banks. These lines of credit include various informal
arrangements to maintain compensating balances. The compensating balances are
maintained for the benefit of the parent company by affiliate banks which
normally maintain correspondent balances with unaffiliated banks. As of June
30, 1996, $19.6 million was outstanding under these lines bearing interest
rates that averaged 5.89%.
6. Impact of Accounting Changes
Effective January 1, 1996, ONB adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No 122, "Accounting for Mortgage
Servicing Rights". This statement modifies the accounting for mortgage
servicing rights to allow the recognition of a servicing asset whether they
are purchased or originated.
Effective January 1, 1996, ONB adopted the provisions of SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of".
The adoption of both above statements did not have a material impact on ONB's
financial condition and its results of operations.
7
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following management's discussion and analysis is presented to provide
information concerning the financial condition of ONB as of June 30, 1996, as
compared to June 30, 1995 and December 31, 1995, and the results of operations
for the three and six month periods ended June 30, 1996 and 1995.
Financial Condition
ONB's total assets at June 30, 1996 were $4.93 billion, a 3.9% increase over
the prior year and a 0.9% increase from December 31, 1995. Earning assets,
which consist primarily of money market investments, investment securities and
loans, rose 4.2% over the prior year and a 1.5% increase since year-end.
During the past year, the mix of earning assets has changed slightly with
loans growing 5.7% while investment securities and money market investments
combined increased only 1.1%. Since year-end, loans increased 3.9% compared
to a 3.4% decrease in investment securities and money market investments. The
continued loan growth reflects the generally healthy economies in our
tri-state market areas. Redemptions and maturities in money market investments
and investment securities were used to partially fund our loan growth.
At June 30, 1996, under-performing assets (defined as loans 90 days or more
past due, nonaccrual and restructured loans and other real estate) increased
to $17.7 million from $13.5 million as of December 31, 1995. As of these
dates, under-performing assets in total were 0.55% and 0.44%, respectively, of
total loans and other real estate.
<TABLE>
<CAPTION>
Past Due Total as %
90 Other of Total Loans
Days Nonaccrual Restructured Real and Other
Or More Loans Loans Estate Total Real Estate
<S> <C> <C> <C> <C> <C> <C>
June 30, 1996 $4,499 $11,423 $ 902 $854 $17,678 0.55%
December 31, 1995 5,160 6,724 1,120 541 13,545 0.44
</TABLE>
As of June 30, 1996, the recorded investment in loans for which impairment has
been recognized in accordance with SFAS No. 114 and 118 was $3.9 million with
no related allowance and $51.1 million with $14.3 million of related
allowance.
ONB's policy for recognizing income on impaired loans is to accrue earnings
unless a loan becomes nonaccrual. When loans are classified as nonaccrual,
interest accrued during the current year is reversed against earnings;
interest accrued in the prior year, if any, is charged to the allowance for
loan losses. Cash received while a loan is classified nonaccrual is recorded
to principal.
For the six months ended June 30, 1996, the average balance of impaired loans
was $54.7 million and $1.9 million of interest was recorded.
ONB's consolidated loan portfolio is well diversified and contains no
concentrations of credit in any particular industry. A concentration
generally exists when more than 10% of total loans outstanding are to
borrowers of the same industry. ONB has minimal exposure to construction
lending or leveraged buyouts and no exposure in credits to foreign or
lesser-developed countries.
8
<PAGE>
Total deposits at June 30, 1996, grew $131.3 million or 3.4% from June 30,
1995 and decreased $51.4 million or 1.3% since year-end. The mix of deposits
has remained relatively unchanged with a slight shift to savings, daily
interest checking and money market accounts. This deposit growth has enabled
ONB to fund asset growth.
Capital
Total shareholders' equity decreased by $1.2 million since June 1995 and $14.2
million since December 1995. During the first six months of 1996, net
unrealized gain on investment securities decreased $14.9 million as interest
rates increased and the market value of ONB's available-for-sale investment
portfolio declined.
ONB's consolidated capital position remains strong as evidenced by the
following comparisons of key industry ratios:
Minimum
Regulatory June 30, June 30, December 31,
Ratios 1996 1995 1995
Risk Based Capital:
Tier 1 Capital to Total Assets 3.00% 8.35% 8.56% 8.40%
(Leverage Ratio)
Tier 1 Capital to Risk Adjusted 4.00% 13.04% 13.51% 13.44%
Total Assets
Total Capital to Risk Adjusted 8.00% 15.18% 15.77% 15.63%
Total Assets
Shareholders' Equity to N/A 8.56% 8.92% 8.92%
Total Assets
Each of ONB's affiliate banks have capital ratios which exceed regulatory
minimums.
Liquidity and Asset/Liability Management
ONB continually monitors its liquidity and actively manages its
asset/liability position. The purpose of liquidity management is to match the
sources of funds with anticipated customer borrowings and withdrawals and
other obligations. The primary purpose of asset/liability management is to
minimize the effect on net income of changes in interest rates and to maintain
a prudent match within specified time periods of rate-sensitive assets and
rate-sensitive liabilities.
As of June 30, 1996, ONB's rate-sensitive assets were 81% of rate-sensitive
liabilities in the 1-180 day maturity category and 94% in the 181-365 day
category. These figures compared to 80% and 96% on December 31, 1995 and 84%
and 96% on June 30, 1995. These positions are within acceptable ranges as
determined from time-to-time by management. ONB's funds management committee
meets monthly to closely monitor and effect changes as needed in the
consolidated rate-sensitivity position.
Results of Operations
Net Income
Net income for the six months ended June 30, 1996 was $29.1 million, an 11.4%
increase from the same period 1995. Net income for the second quarter of 1996
was up 10.6% over 1995. Primary net income per common share for the second
quarter of 1996 and for the six months ended June 30, 1996 were $0.59 and
$1.15, respectively. Earnings per common share for both periods in 1996
9
<PAGE>
exceeded the results for the similar periods in 1995 by 13.5% or more.
The company's return on average assets (ROA) for the second quarter of 1996
was 1.22%. This compared to 1.14% for the same period in 1995. Year-to-date
ROA percentages were 1.20% in 1996 compared to 1.11% for 1995. Return on
average equity (ROE) for the quarter and the first six months of 1996 were
14.05% and 13.67%, respectively, excluding unrealized security gains(losses).
These compare favorably to 1995 ROE results of 12.80% and 12.36% for similar
periods. Growth in net interest income and noninterest income generated the
net income improvements.
Net Interest Income/Net Interest Margin (taxable equivalent basis)
Year-to-date net interest income for 1996 was $102,956, a 5.9% increase over
1995. Net interest income for the second quarter of 1996 was $52,487 compared
to $48,646 in 1995, a 7.9% increase over the prior year. The net interest
margin for the second quarter was 4.56% and 4.38% for 1996 and 1995,
respectively. The year-to-date net interest margin percentage in 1996 was
4.48% compared to 4.40% in 1995. Reduced deposit costs and increased lending
contributed to the improved net interest income.
Provision and Allowance for Loan Losses
The provision for loan losses was $2.1 million in the second quarter of 1996
compared to $1.3 million in the second quarter of 1995. Year-to-date, the
provision for loan losses of $4.1 million compares to $2.4 million in 1995.
ONB's net charge-offs were 0.09% of average loans for the current quarter,
equal to the second quarter of 1995. For the first six months, net charge-
offs were 0.13% in 1996 compared to 0.07% in 1995. The provision and net
charge-off levels in the first half of 1995 were historically low. Levels in
1996 are comparable with the second half of 1995.
The allowance for loan losses is continually monitored and evaluated both
within each affiliate bank and at the holding company level to provide
adequate coverage for potential losses. ONB maintains a comprehensive loan
review program to provide independent evaluations of loan administration,
credit quality, loan documentation, and adequacy of the allowance for loan
losses. The allowance for loan losses to end-of-period loans of 1.33% at June
30, 1996 compares to 1.43% in 1995. The loan portfolio's strength enabled ONB
to add loan growth with minimal increase in the allowance. As a result, the
this ratio declined. The allowance for loan losses covers all
under-performing assets by 2.4 times at June 30, 1996 compared to 3.0 times at
December 31, 1995.
Noninterest Income
Excluding securities gains (losses), noninterest income increased 12.7% in the
three months ended June 30, 1996 as compared to the same period in 1995. For
the first six months, this increase was 10.0%. Both increases were fueled by
an increase in service charges which were up 11.1% in the second quarter
versus last year and 11.5% for the first six months and other income increased
32.1% and 22.0% for the quarter and six months ended. The growth in other
income was mainly from stronger brokerage and annuity sales. Most other
categories of noninterest income were comparable to last year's results.
Noninterest Expense
Noninterest expense increased 1.4% in the second quarter of 1996 compared to
10
<PAGE>
1995. For the first six months noninterest expense decreased 0.9% from 1995.
Salaries and benefits, together the largest individual component of
noninterest expense, increased 8.2% in the second quarter of 1996 compared to
1995. For the first six months, this percentage increased 5.5%. Part of this
increase relates to the recognition of incentive expenses given ONB's
performance in the first half of 1996. Equipment expense was up 9.4% quarter-
to-quarter and 4.1% year-to-year. Data Processing expense continues to
decline as more banks are processed at our internal data operations center.
Communications expenses exceeded prior year due to the installation of a wide-
area network. Other expense increased 7.2% over the second quarter of 1995
and 7.8% over 1995 year-to-date. Most other categories of noninterest expense
experienced relatively small changes between the years.
FDIC insurance premiums dropped $2.0 millions for the second quarter compared
to 1995 and $3.9 million for the six months compared to 1995. Premiums on
deposits dropped from approximately 23 basis points per $100 deposits annually
to the FDIC's minimum charge of $2,000. For deposits insured by the Savings
Association Insurance Fund ("SAIF") the rates did not drop. A one-time
recapitalization proposal is being considered by the U.S. Congress. ONB has
less than 6% of its deposits insured by SAIF and expects if it passes such a
charge to have minimal impact on net income.
Provision for Income Taxes
The provision for income taxes, as a percentage of pre-tax income, increased
in the second quarter to 30.5% compared to 24.5% in 1995. For the first six
months, this percentage was 30.3% for 1996 and 25.9% in 1995. The earning
assets growth has been primarily in taxable loans with tax-exempt securities
remaining fairly level. The resulting increase in taxable sources of revenue
has increased our effective tax rates.
11
<PAGE
PART II
OTHER INFORMATION
ITEM 1. Legal Proceedings
NONE
ITEM 2. Changes in Securities
NONE
ITEM 3. Defaults Upon Senior Securities
NONE
ITEM 4. Submission of Matters to a Vote of Security Holders
None
ITEM 5. Other Information
See Note 3 to the consolidated financial statements for discussion of pending
mergers.
ITEM 6. Exhibits and Reports on Form 8-K
(a) NONE
(b) ONB did not file a current report on Form 8-K during the quarter ended
June 30, 1996.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OLD NATIONAL BANCORP
(Registrant)
By: s/s Steve H. Parker
Steve H. Parker
Senior Vice President
Chief Financial Officer
Date: August 14, 1996
13
<PAGE>
INDEX OF EXHIBITS
Regulation S-K
Reference
(Item 601)
11 Statement re Computation of Per Share Earnings
27 Financial Data Schedule
14
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11
PAGE 1 OF 2
OLD NATIONAL BANCORP
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
($ IN THOUSANDS EXCEPT PER SHARE)
Three Months Ended Six Months Ended
June 30, 1996 June 30, 1996
Primary Fully Diluted Primary Fully Diluted
<S> <C> <C> <C> <C>
Net Income. . . . . . . . . . . . . . . $14,872 $14,872 $29,087 $29,087
Interest expense foregone on assumed
conversion of 8% convertible subordinated
debentures, net of tax. . . . . . . . . -- 369 -- 739
------- ------- ------- -------
Adjusted net income. . . . . . . . . . $14,872 $15,241 $29,087 $29,826
Weighted average common shares
outstanding . . . . . . . . . . . . . . 25,035,482 25,035,482 25,182,462 25,182,462
Additional shares outstanding upon assumed
conversion of 8% convertible subordinated
debentures. . . . . . . . . . . . . . . -- 1,364,737 -- 1,364,737
Additional shares outstanding upon assumed
exercise of stock options . . . . . . . 65,519 68,417 65,519 68,417
------- ------- ------- -------
Adjusted weighted average shares
outstanding . . . . . . . . . . . . . . 25,101,001 26,468,636 25,247,981 26,615,616
---------- ---------- ---------- ----------
Earnings per share. . . . . . . . . . . $ .59 $ .58 $ 1.15 $ 1.12
========== ========== ========== ==========
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11
PAGE 2 OF 2
OLD NATIONAL BANCORP
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
($ IN THOUSANDS EXCEPT PER SHARE)
Three Months Ended Six Months Ended
June 30, 1995 June 30, 1995
Primary Fully Diluted Primary Fully Diluted
<S> <C> <C> <C> <C>
Net Income. . . . . . . . . . . . . . . $13,444 $13,444 $26,104 $26,104
Interest expense foregone on assumed
conversion of 8% convertible subordinated
debentures, net of tax. . . . . . . . . -- 381 -- 762
------- ------- ------- -------
Adjusted net income . . . . . . . . . . $13,444 $13,825 $26,104 $26,866
Weighted average common shares
outstanding . . . . . . . . . . . . . . 25,816,446 25,816,446 25,925,748 25,925,748
Additional shares outstanding upon assumed
conversion of 8% convertible subordinated
debentures . . . . . . . . . . . . . . -- 1,408,263 -- 1,408,263
Additional shares outstanding upon assumed
exercise of stock options. . . . . . . 65,070 65,070 65,070 65,070
------- ------- ------- -------
Adjusted weighted average shares
outstanding. . . . . . . . . . . . . . 25,881,516 27,289,779 25,990,818 27,399,081
---------- ---------- ---------- ----------
Earnings per share . . . . . . . . . . $ .52 $ .51 $ 1.00 $ .98
========== ========== ========== ==========
</TABLE>
16
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM OLD NATIONAL
BANCORP'S JUNE 30, 1996 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 146,326
<INT-BEARING-DEPOSITS> 1,636
<FED-FUNDS-SOLD> 12,777
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,438,734
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 3,190,348
<ALLOWANCE> 42,563
<TOTAL-ASSETS> 4,930,136
<DEPOSITS> 3,978,261
<SHORT-TERM> 400,143
<LIABILITIES-OTHER> 55,288
<LONG-TERM> 74,570
0
0
<COMMON> 24,908
<OTHER-SE> 396,966
<TOTAL-LIABILITIES-AND-EQUITY> 4,930,136
<INTEREST-LOAN> 139,899
<INTEREST-INVEST> 42,472
<INTEREST-OTHER> 2,382
<INTEREST-TOTAL> 184,753
<INTEREST-DEPOSIT> 78,018
<INTEREST-EXPENSE> 88,529
<INTEREST-INCOME-NET> 96,224
<LOAN-LOSSES> 4,063
<SECURITIES-GAINS> 47
<EXPENSE-OTHER> 10,826
<INCOME-PRETAX> 41,705
<INCOME-PRE-EXTRAORDINARY> 29,087
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,087
<EPS-PRIMARY> 1.15
<EPS-DILUTED> 1.12
<YIELD-ACTUAL> 4.48
<LOANS-NON> 11,423
<LOANS-PAST> 4,499
<LOANS-TROUBLED> 902
<LOANS-PROBLEM> 95,348
<ALLOWANCE-OPEN> 40,581
<CHARGE-OFFS> 4,649
<RECOVERIES> 2,568
<ALLOWANCE-CLOSE> 42,563
<ALLOWANCE-DOMESTIC> 42,563
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
