<PAGE>
SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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 24.8 million shares outstanding at September 30, 1996.
<PAGE>
OLD NATIONAL BANCORP
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION
Item 1.Financial Statements Page No.
Consolidated Balance Sheet
September 30, 1996 and 1995, and December 31, 1995 . . . . . .3
Consolidated Statement of Income
Three and nine months ended September 30, 1996 and 1995. . . 4
Consolidated Statement of Cash Flows
Nine months ended September 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
September 30, September 30, December 31,
($ in thousands) (unaudited) 1996 1995 1995
Assets
<S> <C> <C> <C>
Cash and due from banks. . . . . . . . . . $165,066 $172,547 $176,737
Money market investments . . . . . . . . . 19,275 10,697 88,162
Investment Securities:
U.S. Treasury . . . . . . . . . . . . . . 163,016 209,787 191,464
U.S. Government agencies
and corporations. . . . . . . . . . . . 767,488 736,441 751,205
Obligations of states and political
subdivisions. . . . . . . . . . . . . . 453,524 431,440 442,300
Other . . . . . . . . . . . . . . . . . . 37,828 29,299 30,489
--------- --------- ---------
Total Investment Securities . . . . . . 1,421,856 1,406,967 1,415,458
Loans: --------- --------- ---------
Commercial. . . . . . . . . . . . . . . . 791,124 735,635 780,755
Commercial Mortgage. . . . . . . . . . . . . . 644,225 555,025 514,602
Residential Mortgage. . . . . . . . . . . 1,108,904 1,080,486 1,077,167
Consumer credit, net of unearned income . . . . . 739,326 683,758 694,070
Financial . . . . . . . . . . . . . . . . 15,000 1,500 5,167
--------- --------- ---------
Total Loans . . . . . . . . . . . . . . 3,298,579 3,056,404 3,071,761
Allowance for loan losses . . . . . . . (43,290) (42,206) (40,581)
--------- --------- ---------
Net Loans . . . . . . . . . . . . . . . 3,255,289 3,014,198 3,031,180
Other assets . . . . . . . . . . . . . . . 186,123 173,618 176,984
--------- --------- ---------
Total Assets. . . . . . . . . . . . . . $5,047,609 $4,778,027 $4,888,521
========= ========= =========
Liabilities
Deposits:
Noninterest bearing demand. . . . . . . . $471,616 $454,355 $474,297
Interest bearing:
Savings, daily interest checking
and money market accounts . . . . . . . 1,530,381 1,458,961 1,581,656
Certificates of deposit of
$100,000 and over . . . . . . . . . . . 279,917 285,393 276,010
Other time. . . . . . . . . . . . . . . 1,700,472 1,709,073 1,697,697
--------- --------- ---------
Total Deposits. . . . . . . . . . . . . 3,982,386 3,907,782 4,029,660
--------- --------- ---------
Short-term borrowings. . . . . . . . . . . 501,814 309,509 280,981
Subordinated debentures. . . . . . . . . . 30,564 31,545 31,515
Medium term notes. . . . . . . . . . . . . 44,000 50,000 50,000
Other liabilities. . . . . . . . . . . . . 58,316 52,746 60,257
--------- --------- ---------
Total Liabilities . . . . . . . . . . . . 4,617,080 4,351,582 4,452,413
--------- --------- ---------
Shareholders' Equity
Preferred stock . . . . . . . . . . . . . --- --- ---
Common stock. . . . . . . . . . . . . . . 24,760 24,315 25,343
Capital surplus . . . . . . . . . . . . . 223,939 212,234 247,173
Retained earnings . . . . . . . . . . . . 181,562 188,855 153,380
Net unrealized gain (loss) on investment
securities. . . . . . . . . . . . . . . 268 1,041 10,212
--------- --------- ---------
Total Shareholders' Equity. . . . . . . . 430,529 426,445 436,108
--------- --------- ---------
Total Liabilities and Shareholders'
Equity. . . . . . . . . . . . . . . . . $5,047,609 $4,778,027 $4,888,521
========= ========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
3
<PAGE>
<TABLE>
<CAPTION>
OLD NATIONAL BANCORP
CONSOLIDATED STATEMENT OF INCOME
Three Months Ended Nine Months Ended
($ in thousands except share September 30, September 30,
and per share data) (unaudited) 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Interest Income
Loans including fees:
Taxable . . . . . . . . . $72,900 $68,441 $210,977 $197,479
Non-taxable . . . . . . . 1,013 901 2,835 2,691
Investment securities:
Taxable . . . . . . . . . 15,972 15,604 46,750 46,939
Non-taxable . . . . . . . 6,014 5,847 17,708 17,639
Federal funds sold and securities
purchased under agreement to resell 121 701 2,258 1,956
Deposits with banks. . . . 41 69 287 211
------- ------- ------- -------
Total Interest Income . . 96,061 91,563 280,815 266,915
------- ------- ------- -------
Interest Expense
Savings, daily interest checking and
money market accounts . . 11,061 11,772 34,322 33,994
Certificates of deposit of $100,000
and over. . . . . . . . . 3,074 3,524 10,844 9,687
Other time deposits. . . . 24,241 24,090 71,229 67,870
Federal funds purchased. . 1,009 263 1,537 1,948
Securities sold under agreements to
repurchase. . . . . . . . 2,424 2,533 7,023 7,495
Other borrowings . . . . . 3,545 3,191 8,929 9,062
------- ------- ------- -------
Total Interest Expense. . 45,354 45,373 133,884 130,056
------- ------- ------- -------
Net Interest Income . . . 50,707 46,190 146,931 136,859
Provision for loan losses. 3,205 1,981 7,268 4,383
------- ------- ------- -------
Net Interest Income After Provision
For Loan Losses . . . . . 47,502 44,209 139,663 132,476
------- ------- ------- -------
Noninterest Income
Trust fees . . . . . . . . 2,496 2,201 7,461 6,978
Service charges on deposit accounts 3,983 3,623 11,509 10,374
Loan servicing fees. . . . 1,404 1,484 4,056 4,264
Securities gains (losses), net. . 2 10 49 45
Other income . . . . . . . 3,177 2,521 9,300 7,541
------- ------- ------- -------
Total Noninterest Income. 11,062 9,839 32,375 29,202
------- ------- ------- -------
Noninterest Expense
Salaries and employee benefits. . 21,027 19,046 61,172 57,101
Occupancy expense. . . . . 2,345 2,236 6,844 6,532
Equipment expense. . . . . 2,786 2,654 8,386 8,033
Marketing expense. . . . . . . . . 1,364 1,290 3,887 3,808
FDIC insurance expense . . 1,341 (271) 1,730 4,064
Data processing expense. . 1,273 1,505 3,625 4,283
Supplies expense . . . . . . . . . . 1,044 1,076 3,233 3,258
Communication and transportation exp 1,751 1,442 4,998 4,271
Other expenses . . . . . . 4,112 5,350 14,938 15,396
------- ------- ------- -------
Total Noninterest Expense. . . 37,043 34,328 108,813 106,746
------- ------- ------- -------
Income before income taxes 21,521 19,720 63,225 54,932
Provision for income taxes 6,297 5,723 18,914 14,831
------- ------- ------- -------
Net Income. . . . . . . . $ 15,224 $ 13,997 $ 44,311 $ 40,101
======= ======= ======= =======
Net Income Per Common Share
Primary . . . . . . . . . $ 0.61 $ 0.54 $ 1.76 $ 1.55
======= ======= ======= =======
Fully Diluted . . . . . . $ 0.59 $ 0.53 $ 1.71 $ 1.51
======= ======= ======= =======
Weighted average common shares outstanding:
Primary . . . . . . . . . 24,918,324 25,719,023 25,137,528 25,899,224
========== ========== ========== ==========
Fully Diluted . . . . . . 26,284,453 27,127,286 26,503,657 27,307,487
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this statement
4
<PAGE>
<TABLE>
<CAPTION>
OLD NATIONAL BANCORP
CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ended
September 30,
($ in thousands) (unaudited) 1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . $ 44,311 $ 40,101
------- -------
Adjustments to reconcile net income to cash provided
from operating activities:
Depreciation. . . . . . . . . . . . . . 6,258 5,760
Amortization of intangible assets . . . 834 1,391
Net premium amortization (discount accretion) on
investment securities . . . . . . . . (1,672) 1,206
Provision for loan losses . . . . . . . 7,268 4,383
Gain on sale of investment securities . (49) (45)
Gain on sale of assets. . . . . . . . . (120) (309)
Increase in interest receivable . . . . (1,713) (4,861)
(Increase) decrease in other assets. . . . . . . . (5,461) 2,824
Increase (decrease)in accrued expenses and
other liabilities. . . . . . . . . . 5,581 6,061
------- -------
Total adjustments . . . . . . . . . . 10,926 16,410
------- -------
Net cash flows provided by operating activities. . 55,237 56,511
------- -------
Cash flows from investing activities:
Purchase of investment securities held to maturity. --- (58,111)
Purchase of investment securities available for sale . . . (272,353) (192,957)
Proceeds from maturities and paydowns of investment
securities held to maturity . . . . . . --- 94,035
Proceeds from maturities and paydowns of investment
securities available for sale . . . . . 231,214 133,588
Proceeds from sales of investment securities available
for sale. . . . . . . . . . . . . . . . 18,996 22,114
Net principal collected from (loans made to) customers:
Commercial . . . . . . . . . . . . . . (21,266) 61,763
Mortgage . . . . . . . . . . . . . . . (191,111) (175,814)
Consumer . . . . . . . . . . . . . . . (48,466) (53,650)
Proceeds from sale of mortgage loans . . 29,684 29,921
Proceeds from sale of premises and equipment. . . . 527 339
Purchase of premises and equipment . . . (9,682) (7,314)
------- -------
Net cash flows used in investing activities. . . . (262,457) (146,086)
------- -------
Cash flows from financing activities:
Net increase (decrease) in deposits and short-term borrowings:
Noninterest bearing demand. . . . . . . (2,681) 6,481
Savings, daily interest checking and money market deposits. (51,275) (22,814)
Certificates of deposit of $100,000 and over . . . 3,907 72,095
Other time deposits . . . . . . . . . . . 2,775 126,585
Short-term borrowings . . . . . . . . . . 220,833 (146,662)
Issuance (Payment) of medium-term notes .. . . . . . . . . (6,000) 18,000
Cash dividends paid. . . . . . . . . . . . (15,629) (15,325)
Common stock repurchased . . . . . . . . . (27,823) (35,908)
Common stock reissued, net of shares used to convert
subordinated debentures. . . . . . . . . 2,555 4,628
------- -------
Net cash flows provided by financing activities . . 126,662 7,080
------- -------
Net decrease in cash and cash equivalents. (80,558) (82,495)
Cash and cash equivalents at beginning of period. . 264,899 265,739
------- -------
Cash and cash equivalents at end of period $184,341 $183,244
======= =======
Total interest paid . . . . . . . . . . . $135,683 $125,313
======= =======
Total taxes paid. . . . . . . . . . . . . $ 19,650 $ 11,416
====== ======
</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 September 30, 1996 and 1995 and December 31, 1995, and the
results of its operations for the three and nine months ended September 30,
1996 and 1995 and its cash flows for the nine months ended September 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
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 received the approvals of Workingmen's shareholders and
requlatory authorities. As of September 30, 1996 Workingmens consolidated
financial statements reflected $208 million in total assets, net loans of $181
million, total deposits of $150 million and net income for the nine months
then ended of $851 thousand. This merger was consummated October 19, 1996.
4. Investments
The market value and amortized cost of investment securities as of September
30, 1996 are set forth below ($ in thousands):
Market Value Amortized Cost
Held-to-maturity, at amortized cost $ -- $ --
Available-for-sale, at market value 1,421,856 1,421,399
----------- -----------
$ 1,421,856 $ 1,421,399
=========== ===========
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.
6
<PAGE>
Beginning September 15, 1998, debenture holders are entitled to an annual
sinking fund of $2.5 million principal amount of debentures annually less
conversions and redemptions. The debentures are subordinated in right of
payment to all senior indebtedness of ONB. As of September 30, 1996, 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 September 30,
1996, 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 September 30, 1996, ONB has $55 million in unsecured lines of credit
with unaffiliated banks. These lines of credit include various informal
arrangements to maintain compensating balances. The compensating balances are
maintained for the benefit of the parent company by affiliate banks which
normally maintain correspondent balances with unaffiliated banks. As of
September 30, 1996, $40.5 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 September 30,
1996, as compared to September 30, 1995 and December 31, 1995, and the results
of operations for the three and nine month periods ended September 30, 1996
and 1995.
Financial Condition
ONB's total assets at September 30, 1996 were $5.05 billion, a 5.6% increase
over the prior year and a 3.3% increase from December 31, 1995. Earning
assets, which consist primarily of money market investments, investment
securities and loans, rose 5.9% over the prior year and a 3.6% increase since
year-end. During the past year, the mix of earning assets has changed
slightly with loans growing 7.9% while investment securities and money market
investments combined increased only 1.7%. Since year-end, loans increased
7.4% compared to a 4.2% 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 September 30, 1996, under-performing assets (defined as loans 90 days or
more past due, nonaccrual and restructured loans and other real estate)
increased to $18.4 million from $13.5 million as of December 31, 1995. As of
these respective dates, under-performing assets in total were 0.56% and 0.44%
of total loans and other real estate.
Past Due Total as %
90 Other of Total Loans
Days Nonaccrual Restructured Real and Other
Or More Loans Loans Estate Total Real Estate
September 30, 1996 $4,221 $12,482 $ 948 $781 $18,432 0.56%
December 31, 1995 5,160 6,724 1,120 541 13,545 0.44
As of September 30, 1996, the recorded investment in loans for which
impairment has been recognized in accordance with SFAS No. 114 and 118 was
$4.9 million with no related allowance and $49.6 million with $12.2 million of
related allowance.
ONB's policy for recognizing income on impaired loans is to accrue earnings
unless a loan becomes nonaccrual. When loans are classified as nonaccrual,
interest accrued during the current year is reversed against earnings;
interest accrued in the prior year, if any, is charged to the allowance for
loan losses. Cash received while a loan is classified nonaccrual is recorded
to principal.
For the nine months ended September 30, 1996, the average balance of impaired
loans was $54.7 million and $2.8 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. The portfolio is primarily composed of loans
8
<PAGE>
to our customers in our tri-state markets. ONB has minimal exposure to
construction lending or leveraged buyouts and no exposure in credits to
foreign or lesser-developed countries.
Total deposits at September 30, 1996, grew $74.6 million or 1.9% from
September 30, 1995 and decreased $47.3 million or 1.2% since year-end. Over
the past year 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 increased by $4.1 million since September 1995 and
decreased $5.6 million since December 1995. During the first nine months of
1996, net unrealized gain on investment securities decreased $9.9 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:
<TABLE>
<CAPTION>
Minimum
Regulatory Well- September 30, September 30, December 31,
Ratios Capitalized 1996 1995 1995
<S> <C> <C> <C> <C> <C>
Risk Based Capital:
Tier 1 Capital to Total Assets 3.00% 5.0% 8.23% 8.59% 8.40%
(Leverage Ratio)
Tier 1 Capital to Risk Adjusted 4.00% 6.0% 12.88% 13.52% 13.44%
Total Assets
Total Capital to Risk Adjusted 8.00% 10.0% 14.99% 15.77% 15.63%
Total Assets
Shareholders' Equity to N/A N/A 8.53% 8.93% 8.92%
Total Assets
</TABLE>
Each of ONB's affiliate banks have capital ratios which exceed regulatory
minimums.
Liquidity and Asset/Liability Management
ONB continually monitors its liquidity and actively manages its
asset/liability position. The purpose of liquidity management is to match the
sources of funds with anticipated customer borrowings and withdrawals and
other obligations. The primary purpose of asset/liability management is to
minimize the effect on net income of changes in interest rates and to maintain
a prudent match within specified time periods of rate-sensitive assets and
rate-sensitive liabilities.
As of September 30, 1996, ONB's rate-sensitive assets were 75% of rate-sensitive
liabilities in the 1-180 day maturity category and 91% in the 181-365 day
category. These figures compared to 80% and 96% on December 31, 1995
and 79% and 94% on September 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. In addition, simulation is used to
estimate the possible net interest income impact of interest rate changes and
to improve earnings.
9
<PAGE>
Results of Operations
Net Income
Net income for the nine months ended September 30, 1996 was $44.3 million, an
10.5% increase from the same period 1995. Net income for the third quarter of
1996 was up 8.8% over 1995. Primary net income per common share for the third
quarter of 1996 and for the nine months ended September 30, 1996 were $0.61
and $1.76, respectively. Earnings per common share for both periods in 1996
exceeded the results for the similar periods in 1995 by 13.0% or more.
The company's return on average assets (ROA) for the third quarter of 1996 was
1.23%. This compared to 1.17% for the same period in 1995. Year-to-date ROA
percentages were 1.21% in 1996 compared to 1.13% for 1995. Return on average
equity (ROE) for the quarter and the first nine months of 1996 were 14.20% and
13.85%, respectively, excluding unrealized security gains(losses). These
compare favorably to 1995 ROE results of 13.24% and 12.65% 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 $157,128, a 7.0% increase over
1995. Net interest income for the third quarter of 1996 was $54,171 compared
to $49,606 in 1995, a 9.2% increase over the prior year. The net interest
margin for the third quarter was 4.63% and 4.42% for 1996 and 1995,
respectively. The year-to-date net interest margin percentage in 1996 was
4.53% compared to 4.41% 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 $3.2 million in the third quarter of 1996
compared to $2.0 million in the third quarter of 1995. Year-to-date, the
provision for loan losses of $7.3 million compares to $4.4 million in 1995.
ONB's net charge-offs were 0.31% of average loans for the current quarter,
compared to 0.37% to the third quarter of 1995. For the first nine months,
net charge-offs were 0.19% in 1996 compared to 0.17% in 1995. The provision
and net charge-off levels in the first half of 1995 were historically low.
Levels in 1996 are more comparable with the second half of 1995. Similar to
the increases in consumer loan delinquencies and charge-offs within the
national banking industry in 1996, ONB has experienced some increased charge-
offs in this area.
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 was 1.31% at
September 30, 1996 compared to 1.38% 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 covered all
under-performing assets by 2.3 times at September 30, 1996 compared to 3.0
times at December 31, 1995.
10
<PAGE>
Noninterest Income
Excluding securities gains (losses), noninterest income increased 12.5% in the
three months ended September 30, 1996 as compared to the same period in 1995.
For the first nine months, this increase was 10.9%. Both increases were
fueled by an increase in service charges which were up 9.9% in the third
quarter versus last year and 10.9% for the first nine months and other income
increased 26.0% and 23.3% for the quarter and nine 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 7.9% in the third quarter of 1996 compared to
1995. For the first nine months noninterest expense increased 1.9% from 1995.
Salaries and benefits, together the largest individual component of
noninterest expense, increased 10.4% in the third quarter of 1996 compared to
1995. For the first nine months, this percentage increased 7.1%. Part of
this increase relates to the recognition of incentive expenses given ONB's
strong performance in the first nine-months of 1996. Equipment expense was up
5.0% quarter-to-quarter and 4.4% 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 decreased 23.1% over the
third quarter of 1995 and 3.0% over 1995 year-to-date. Most other categories
of noninterest expense experienced relatively small changes between the years.
On September 30, 1996 President Clinton signed into law the recapitalization
of the FDIC's Savings Association Insurance fund ("SAIF") pertaining to thrift
deposits. This law required a one-time assessment on thrift deposits and
deposits acquired from thrifts of 65.7 basis points or 52.6 basis points per
$100 deposits, respectively. This charge was accrued as of September 30, 1996
and amounted to $1.2 million. Effective January 1, 1997, deposits insured by
the FDIC's BIF fund will be 1.29 basis points per $100 deposits, an increase
over the $2,000 annual charge per bank in 1996. SAIF insured deposits will
decrease from approximately 23 basis points per $100 deposits to 6.44 basis
points per $100 deposits for thrift deposits and 2.43 basis points per $100
deposits for deposits acquired from thrifts.
Provision for Income Taxes
The provision for income taxes, as a percentage of pre-tax income, increased
in the third quarter to 29.3% compared to 29.0% in 1995. For the first nine
months, this percentage was 29.9% for 1996 and 27.0% in 1995. The earning
assets growth has been primarily in taxable loans with tax-exempt securities
remaining fairly level. The resulting increase in taxable sources of revenue
has increased our effective tax rates.
11
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. Legal Proceedings
NONE
ITEM 2. Changes in Securities
NONE
ITEM 3. Defaults Upon Senior Securities
NONE
ITEM 4. Submission of Matters to a Vote of Security Holders
None
ITEM 5. Other Information
See Note 3 to the consolidated financial statements for discussion of pending
mergers.
ITEM 6. Exhibits and Reports on Form 8-K
(a) NONE
(b) ONB did not file a current report on Form 8-K during the quarter ended
September 30, 1996.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OLD NATIONAL BANCORP
(Registrant)
By: s/s Steve H. Parker
Steve H. Parker
Senior Vice President
Chief Financial Officer
Date: November 14, 1996
13
<PAGE>
INDEX OF EXHIBITS
Regulation S-K
Reference
(Item 601)
11 Statement re Computation of Per Share Earnings
27 Financial Data Schedule
14
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11
PAGE 1 OF 2
OLD NATIONAL BANCORP
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
($ IN THOUSANDS EXCEPT PER SHARE)
Three Months Ended Nine Months Ended
September 30, 1996 September 30, 1996
Primary Fully Diluted Primary Fully Diluted
<S> <C> <C> <C> <C>
Net Income. . . . . . . . . . . . . . . $15,224 $15,224 $44,311 $44,311
Interest expense foregone on assumed
conversion of 8% convertible subordinated
debentures, net of tax . . . . . . . . . -- 369 -- 1,108
------- ------- ------- -------
Adjusted net income. . . . . . . . . . . $15,224 $15,593 $44,311 $45,419
Weighted average common shares
outstanding. . . . . . . . . . . . . . 24,851,840 24,851,840 25,071,044 25,071,044
Additional shares outstanding upon assumed
conversion of 8% convertible subordinated
debentures. . . . . . . . . . . . . . -- 1,364,469 -- 1,364,469
Additional shares outstanding upon assumed
exercise of stock options. . . . . . . 66,484 68,144 66,484 68,144
----------- ---------- ---------- ----------
Adjusted weighted average shares
outstanding. . . . . . . . . . . . . . 24,918,324 26,284,453 25,137,528 26,503,657
========== ========== ========== ==========
Earnings per share . . . . . . . . . . $ .61 $ .59 $ 1.76 $ 1.71
========== ========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11
PAGE 2 OF 2
OLD NATIONAL BANCORP
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
($ IN THOUSANDS EXCEPT PER SHARE)
Three Months Ended Nine Months Ended
September 30, 1995 September 30, 1995
Primary Fully Diluted Primary Fully Diluted
<S> <C> <C> <C> <C>
Net Income. . . . . . . . . . . . . . . $13,997 $13,997 $40,101 $40,101
Interest expense foregone on assumed
conversion of 8% convertible subordinated
debentures, net of tax . . . . . . . . . -- 381 -- 1,143
------- ------- ------- -------
Adjusted net income. . . . . . . . . . . $13,997 $14,378 $40,101 $41,244
Weighted average common shares
outstanding. . . . . . . . . . . . . . . 25,653,953 25,653,953 25,834,154 25,834,154
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. . . . . . . . . . . . . . . 25,719,023 27,127,286 25,899,224 27,307,487
========== ========== ========== ==========
Earnings per share . . . . . . . . . . . $ .54 $ .53 $ 1.55 $ 1.51
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM OLD
NATIONAL BANCORP'S SEPTEMBER 30, 1996 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 165,066
<INT-BEARING-DEPOSITS> 749
<FED-FUNDS-SOLD> 18,526
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,421,856
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 3,298,579
<ALLOWANCE> 43,290
<TOTAL-ASSETS> 5,047,609
<DEPOSITS> 3,982,386
<SHORT-TERM> 501,814
<LIABILITIES-OTHER> 58,316
<LONG-TERM> 74,564
0
0
<COMMON> 24,760
<OTHER-SE> 405,769
<TOTAL-LIABILITIES-AND-EQUITY> 5,047,609
<INTEREST-LOAN> 213,812
<INTEREST-INVEST> 64,458
<INTEREST-OTHER> 2,545
<INTEREST-TOTAL> 280,815
<INTEREST-DEPOSIT> 116,395
<INTEREST-EXPENSE> 133,884
<INTEREST-INCOME-NET> 146,931
<LOAN-LOSSES> 7,268
<SECURITIES-GAINS> 49
<EXPENSE-OTHER> 14,938
<INCOME-PRETAX> 63,225
<INCOME-PRE-EXTRAORDINARY> 44,311
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 44,311
<EPS-PRIMARY> 1.76
<EPS-DILUTED> 1.71
<YIELD-ACTUAL> 4.53
<LOANS-NON> 12,482
<LOANS-PAST> 4,221
<LOANS-TROUBLED> 948
<LOANS-PROBLEM> 112,210
<ALLOWANCE-OPEN> 40,581
<CHARGE-OFFS> 9,541
<RECOVERIES> 4,982
<ALLOWANCE-CLOSE> 43,290
<ALLOWANCE-DOMESTIC> 43,290
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
