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, 1997 [ ] 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 26.4 million shares outstanding at June 30, 1997. OLD NATIONAL BANCORP FORM 10-Q INDEX PART I. FINANCIAL INFORMATION Item 1. Financial Statements Page No. Consolidated Balance Sheet June 30, 1997 and 1996, and December 31, 1996. . . . 3 Consolidated Statement of Income Three and six months ended June 30, 1997 and 1996. . 4 Consolidated Statement of Cash Flows Six months ended June 30, 1997 and 1996. . . . . . . 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 <TABLE> <CAPTION> OLD NATIONAL BANCORP CONSOLIDATED BALANCE SHEET June 30, June 30, December 31, ($ in thousands) (unaudited) 1997 1996 1996 Assets <S> <C> <C> <C> Cash and due from banks. . . . . . . . . . $149,211 $148,896 $180,405 Money market investments . . . . . . . . . 3,918 13,064 6,698 Investment Securities: U.S. Treasury . . . . . . . . . . . . . . 136,187 175,875 154,524 U.S. Government agencies and corporations. . . . . . . . . . . . 966,627 783,318 856,263 Obligations of states and political subdivisions. . . . . . . . . . . . . . 452,773 450,516 462,378 Other . . . . . . . . . . . . . . . . . . 42,447 46,163 41,484 --------- --------- --------- Total Investment Securities . . . . . . 1,598,034 1,455,872 1,514,649 --------- --------- --------- Loans: Commercial. . . . . . . . . . . . . . . . 848,305 773,641 796,313 Commercial Mortgage. . . . . . . . . . . 698,014 632,406 668,671 Residential Mortgage. . . . . . . . . . . 1,340,959 1,243,044 1,303,283 Consumer credit, net of unearned income . 743,289 724,865 755,033 Financial . . . . . . . . . . . . . . . . 1,800 154 --- --------- --------- --------- Total Loans . . . . . . . . . . . . . . 3,632,367 3,374,110 3,523,300 Allowance for loan losses . . . . . . . (47,082) (42,939) (44,053) --------- --------- --------- Net Loans . . . . . . . . . . . . . . . 3,585,285 3,331,171 3,479,247 Other assets . . . . . . . . . . . . . . . 201,683 187,515 185,592 --------- --------- --------- Total Assets. . . . . . . . . . . . . . $5,538,131 $5,136,518 $5,366,591 ========= ========= ========= Liabilities Deposits: Noninterest bearing demand. . . . . . . . $463,723 $460,568 $512,281 Interest bearing: NOW accounts. . . . . . . . . . . . . . 442,740 485,426 449,486 Savings accounts. . . . . . . . . . . . 470,981 445,424 480,303 Money market accounts . . . . . . . . . 659,194 682,511 714,261 Certificates of deposit of $100,000 and over . . . . . . . . . . . 318,544 260,417 257,988 Other time. . . . . . . . . . . . . . . 1,877,979 1,795,405 1,853,705 --------- --------- --------- Total Deposits. . . . . . . . . . . . . 4,233,161 4,129,751 4,268,024 --------- --------- --------- Short-term borrowings. . . . . . . . . . . 696,350 427,800 499,666 Subordinated debentures. . . . . . . . . . 30,474 30,570 30,564 Medium term notes. . . . . . . . . . . . . 44,000 44,000 44,000 Other liabilities. . . . . . . . . . . . . 68,398 56,440 65,811 --------- --------- --------- Total Liabilities . . . . . . . . . . . . 5,072,383 4,688,561 4,908,065 --------- --------- --------- Shareholders' Equity Common stock. . . . . . . . . . . . . . . 26,401 26,074 26,778 Capital surplus . . . . . . . . . . . . . 252,354 237,930 265,584 Retained earnings . . . . . . . . . . . . 178,377 188,897 158,284 Net unrealized gain (loss) on investment securities. . . . . . . . . . . . . . . 8,616 (4,944) 7,880 --------- --------- --------- Total Shareholders' Equity. . . . . . . . 465,748 447,957 458,526 --------- --------- --------- Total Liabilities and Shareholders' Equity. . . . . . . . . . . . . . . . . $5,538,131 $5,136,518 $5,366,591 ========= ========= ========= The accompanying notes are an integral part of this statement. </TABLE> <TABLE> <CAPTION> OLD NATIONAL BANCORP CONSOLIDATED STATEMENT OF INCOME Three Months Ended Six Months Ended ($ in thousands except share June 30, June 30, and per share data) (unaudited) 1997 1996 1997 1996 <S> <C> <C> <C> <C> Interest income Loans including fees: Taxable . . . . . . . . . . . . . $80,457 $73,447 $158,134 $145,497 Non-taxable . . . . . . . . . . . 1,073 924 2,043 1,822 Investment securities: Taxable . . . . . . . . . . . . . 18,900 15,861 36,802 31,277 Non-taxable . . . . . . . . . . . 5,931 5,877 11,927 11,694 Federal funds sold and securities purchased under agreement to resell 123 588 226 2,130 Deposits with banks. . . . . . . . 119 182 224 411 ------- ------- ------- ------- Total Interest Income . . . . . . 106,603 96,879 209,356 192,831 ------- ------- ------- ------- Interest Expense Savings, daily interest checking and money market accounts . . . . . . 11,279 11,729 22,423 23,776 Certificates of deposit of $100,000 and over. . . . . . . . . . . . . 4,031 3,873 7,807 7,769 Other time deposits. . . . . . . . 26,274 24,930 51,481 50,579 Federal funds purchased. . . . . . 927 301 1,921 522 Securities sold under agreements to repurchase. . . . . . . . . . . . 2,742 2,246 5,111 4,599 Other borrowings . . . . . . . . . 6,438 3,323 12,125 6,472 ------- ------- ------- ------- Total Interest Expense. . . . . . 51,691 46,402 100,868 93,717 ------- ------- ------- ------- Net Interest Income . . . . . . . 54,912 50,477 108,488 99,114 Provision for loan losses. . . . . 3,756 2,103 7,513 4,105 ------- ------- ------- ------- Net Interest Income After Provision For Loan Losses . . . . . . . . . 51,156 48,374 100,975 95,009 ------- ------- ------- ------- Noninterest Income Trust fees . . . . . . . . . . . . 2,752 2,462 5,553 4,965 Service charges on deposit accounts 4,056 3,886 7,978 7,535 Loan servicing fees. . . . . . . . 1,391 1,411 2,796 2,692 Securities gains (losses), net . . (4) (8) (10) 47 Other income . . . . . . . . . . . 3,095 3,444 6,406 6,218 ------- ------- ------- ------- Total Noninterest Income. . . . . 11,290 11,195 22,723 21,457 ------- ------- ------- ------- Noninterest Expense Salaries and employee benefits . . 22,479 20,937 44,532 40,826 Occupancy expense. . . . . . . . . 2,296 2,286 4,678 4,602 Equipment expense. . . . . . . . . 3,183 2,910 6,222 5,668 Marketing expense. . . . . . . . . 1,416 1,314 2,712 2,556 FDIC insurance expense . . . . . . 178 276 328 563 Data processing expense. . . . . . 1,330 1,188 2,618 2,430 Supplies expense . . . . . . . . . 1,072 1,106 2,158 2,215 Communication and transportation expense . . . . . 1,659 1,701 3,398 3,282 Other expense. . . . . . . . . . . 5,494 5,742 10,615 11,159 ------- ------- ------- ------- Total Noninterest Expense. . . 39,107 37,460 77,261 73,301 ------- ------- ------- ------- Income before income taxes . . . . 23,339 22,109 46,437 43,165 Provision for income taxes . . . . 7.067 6,839 14,107 13,223 ------- ------- ------- ------- Net Income. . . . . . . . . . . . $16,272 $15,270 $32,330 $29,942 ======= ======= ======= ======= Net Income Per Common Share Primary . . . . . . . . . . . . . $ 0.61 $ 0.56 $ 1.21 $ 1.09 ======= ======= ======= ======= Fully Diluted . . . . . . . . . . $ 0.60 $ 0.54 $ 1.18 $ 1.05 ======= ======= ======= ======= Weighted average common shares outstanding: Primary . . . . . . . . . . . . . 26,549 27,515 26,649 27,682 ======= ======= ======= ======= Fully Diluted. . . . . . . . . . . 27,980 28,951 28,081 29,118 ======= ======= ======= ======= The accompanying notes are an integral part of this statement </TABLE> 4 <TABLE> <CAPTION> OLD NATIONAL BANCORP CONSOLIDATED STATEMENT OF CASH FLOWS Six Months Ended June 30, ($ in thousands) (unaudited) 1997 1996 <S> <C> <C> Cash flows from operating activities: Net income . . . . . . . . . . . . . . . . . . . . $ 32,330 $ 29,942 -------- -------- Adjustments to reconcile net income to cash provided from operating activities: Depreciation. . . . . . . . . . . . . . . . . . . 4,697 4,247 Amortization of intangible assets . . . . . . . . 642 639 Net premium amortization (discount accretion) on investment securities . . . . . . . . . . . . . 780 1,137 Provision for loan losses . . . . . . . . . . . . 7,513 4,105 (Gain) loss on sale of investment securities. . . 10 (47) Gain on sale of assets. . . . . . . . . . . . . . (126) (29) (Increase) decrease in interest receivable. . . . (1,311) 1,085 Increase in other assets. . . . . . . . . . . . . (14,842) (5,152) Increase in accrued expenses and other liabilities. . . . . . . . . . . . . . . 2,098 4,042 -------- -------- Total adjustments . . . . . . . . . . . . . . . (539) 10,027 -------- -------- Net cash flows provided by operating activities . 31,791 39,969 -------- -------- Cash flows from investing activities: Purchase of investment securities available for sale . . . . . . . . . . . . . . . (243,057) (239,670) Proceeds from maturities and paydowns of investment securities available for sale . . . . 139,396 149,924 Proceeds from sales of investment securities available for sale. . . . . . . . . . . . . . . . 20,711 38,054 Net principal collected from (loans made to) customers: Commercial . . . . . . . . . . . . . . . . . . . (53,488) (22,209) Commercial real estate . . . . . . . . . . . . . (29,343) (58,577) Residential real estate. . . . . . . . . . . . . (48,850) (25,339) Consumer . . . . . . . . . . . . . . . . . . . . 7,116 (29,257) Proceeds from sale of mortgage loans . . . . . . . 11,112 21,038 Proceeds from sale of premises and equipment . . . 45 403 Purchase of premises and equipment . . . . . . . . (5,294) (6,530) -------- -------- Net cash flows used in investing activities . . . (201,652) (172,163) -------- -------- Cash flows from financing activities: Net increase (decrease) in deposits and short-term borrowings: Noninterest bearing demand. . . . . . . . . . . . (48,558) (15,151) NOW accounts. . . . . . . . . . . . . . . . . . . (6,746) 143,134 Savings . . . . . . . . . . . . . . . . . . . . . (9,322) (17,743) Money market accounts . . . . . . . . . . . . . . (55,067) (120,550) Certificates of deposit of $100,000 and over. . . 60,556 (25,044) Other time deposits . . . . . . . . . . . . . . . 24,274 (17,977) Short-term borrowings. . . . . . . . . . . . . . . 196,684 112,668 Payment of medium-term notes . . . . . . . . . . . --- (6,000) Cash dividends paid. . . . . . . . . . . . . . . . (11,924) (11,230) Common stock repurchased . . . . . . . . . . . . . (18,223) (21,173) Common stock reissued, net of shares used to convert subordinated debentures. . . . . . . . . . 4,213 3,243 -------- -------- Net cash flows provided by financing activities . 135,887 24,177 -------- -------- Net decrease in cash and cash equivalents. . . . . (33,974) (108,017) Cash and cash equivalents at beginning of period . 187,103 269,977 -------- -------- Cash and cash equivalents at end of period . . . . $153,129 $161,960 ======== ======== Total interest paid . . . . . . . . . . . . . . . $ 98,804 $ 95,454 ======== ======== Total taxes paid. . . . . . . . . . . . . . . . . $ 14,061 $ 13,159 ======== ======== The accompanying notes are an integral part of this statement. </TABLE> 5 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, 1997 and 1996 and December 31, 1996, and the results of its operations for the three and six months ended June 30, 1997 and 1996 and its cash flows for the six months ended June 30, 1997 and 1996. 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 January 29, 1997 to shareholders of record on January 8, 1997. All share and per share data presented herein have been restated for the effects of this stock dividend. 3. Investments The market value and amortized cost of investment securities as of June 30, 1997 are set forth below ($ in thousands): Market Value Amortized Cost Held-to-maturity, at amortized cost $ -- $ -- Available-for-sale, at market value 1,598,034 1,583,675 ----------- ----------- $ 1,598,034 $ 1,583,675 =========== =========== 4. Borrowings ONB has outstanding $30.5 million of 8% convertible subordinated debentures which are due September 15, 2012, unless previously converted or redeemed. The debentures are convertible at any time prior to maturity into shares of common stock of ONB at a conversion rate of 46.875 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, 1997, 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, 1997, a total of $44 million of the notes were outstanding, with maturities ranging from one to six years and fixed interest rates ranging from 6.1% to 7.0%. On June 18, 1997, ONB filed a registration statement on Form S-3 (the "Registration Statement") with the Securities and Exchange Commission (File 6 No.333-29433) with respect to ONB's offering from time to time of up to $150,000,000 aggregate initial offering price of its Medium-Term Notes Due Nine Months or More from Date of Issue (the "Notes"). The Registration Statement was declared effective by the Securities and Exchange Commission on July 23, 1997. Net proceeds from the Notes will be used for repayment of indebtedness, investments in and advances to subsidiaries of ONB, common stock repurchases by ONB and other general corporate purposes, including possible future acquisitions. As of June 30, 1997, ONB has $80 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, 1997, $75.0 million was outstanding under these lines bearing interest rates that averaged 6.12%. 5. Impact of Accounting Changes Effective January 1, 1997, ONB adopted certain provisions of Statement of Financial Accounting Standards (SFAS) No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." This statement provides accounting standards for sales, securitization, and servicing of receivables, and other financial assets, secured borrowing and collateral transactions, and the extinguishment of liabilities. Certain other provisions of this statement are not effective until January 1, 1998. The adoption of the above statement did not have a material impact on ONB's financial condition and its results of operations. In February 1997, the Financial Accounting Standards Board issued SFAS No. 128, "Earnings per Share" (EPS). This statement establishes standards for computing and presenting EPS. The statement is effective for financial statements issued for periods ending after December 15, 1997. ONB doesn't expect the impact to be material to its EPS calculation. 7 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, 1997, as compared to June 30, 1996 and December 31, 1996, and the results of operations for the three and six month periods ended June 30, 1997 and 1996. Financial Condition ONB's total assets at June 30, 1997 were $5.54 billion, a 7.8% increase over the prior year and a 3.2% increase from December 31, 1996. Earning assets, which consist primarily of money market investments, investment securities and loans, rose 8.1% over the prior year and a 3.8% increase since year-end. During the past year, the mix of earning assets has remained steady with loans growing 7.7% while investment securities and money market investments combined increased only 9.1%. Since year-end, loans increased 3.1% compared to a 5.3% increase in investment securities and money market investments. The continued loan growth reflects the generally healthy economies in our tri-state market areas. At June 30, 1997, under-performing assets (defined as loans 90 days or more past due, nonaccrual and restructured loans and forclosed properities) increased to $26.2 million from $20.9 million as of December 31, 1996. As of these dates, under-performing assets in total were 0.72% and 0.59%, respectively, of total loans and forclosed properities. <TABLE> <CAPTION> Past Due Total as % 90 of Total Loans Days Nonaccrual Restructured Foreclosed and Forclosed Or More Loans Loans Properties Total Properties <S> <C> <C> <C> <C> <C> <C> June 30, 1997 $4,815 $13,849 $ 389 $7,181 $26,234 0.72% December 31, 1996 2,945 12,501 746 4,703 20,895 0.59 </TABLE> As of June 30, 1997, the recorded investment in loans for which impairment has been recognized in accordance with SFAS No. 114 and 118 was $6.0 million with no related allowance and $47.1 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 six months ended June 30, 1997, the average balance of impaired loans was $57.2 million and $1.7 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. Total deposits at June 30, 1997, grew $103.4 million or 2.5% from June 30, 8 1996 and decreased $34.9 million or 0.8% since year-end. Seasonality and a strong stock market contributed to the decrease since year-end. Short-term borrowings, comprised of Federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings, increased $268.6 million since June 1996 and $196.7 million since December 1996. This increase helped fund additional assets and offset the decline in deposits since year-end. Capital Total shareholders' equity increased by $17.8 million since June 1996 and $7.2 million since December 1996. 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 1997 1996 1996 Risk Based Capital: Tier 1 Capital to Total Assets 3.00% 8.18% 8.64% 8.16% (Leverage Ratio) Tier 1 Capital to Risk Adjusted 4.00% 12.46% 13.38% 12.94% Total Assets Total Capital to Risk Adjusted 8.00% 14.56% 15.45% 14.97% Total Assets Shareholders' Equity to N/A 8.41% 8.72% 8.54% 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. ONB also uses net interest income simulation modeling to better quantify the impact of potential interest rate fluctuations on net interest income. With this understanding management can best determine possible balance sheet changes, pricing strategies, and appropriate levels of capital and liquidity which allows ONB to generate strong net interest income while controlling and monitoring interest rate risk. As of June 30, 1997, ONB's rate-sensitive assets were 79% of rate-sensitive liabilities in the 1-180 day maturity category and 89% in the 181-365 day category. These figures compared to 85% and 89% on December 31, 1996 and 81% and 94% on June 30, 1996. These positions are within acceptable ranges as determined from time-to-time by management. ONB's funds management committee meets bi-monthly to closely monitor and effect changes as needed in the consolidated rate-sensitivity position. 9 Results of Operations Net Income Net income for the six months ended June 30, 1997 was $32.3 million, an 8.0% increase from the same period 1996. Net income for the second quarter of 1997 was up 6.6% over 1996. Primary net income per common share for the second quarter of 1997 and for the six months ended June 30, 1997 were $0.61 and $1.21, respectively. The company's return on average assets (ROA) for the second quarter of 1997 was 1.20%. This was equal to the same period in 1996. Year-to-date ROA percentages were 1.20% in 1997 compared to 1.18% for 1996. Return on average equity (ROE) for the quarter and the first six months of 1997 were 14.37% and 14.32%, respectively, excluding unrealized security gains(losses). These compare favorably to 1996 ROE results of 13.57% and 13.25% for similar periods. Growth in net interest income generated the net income improvements. Net Interest Income/Net Interest Margin (taxable equivalent basis) Year-to-date net interest income for 1997 was $115,346 a 9.0% increase over 1996. Net interest income for the second quarter of 1997 was $58,342 compared to $53,925 in 1996, an 8.2% increase over the prior year. The net interest margin for the second quarter was 4.52% and 4.48% for 1997 and 1996, respectively. The year-to-date net interest margin percentage in 1997 was 4.51% compared to 4.41% in 1996. Increases in earning assets contributed to the improved net interest income. Provision and Allowance for Loan Losses The provision for loan losses was $3.8 million in the second quarter of 1997 compared to $2.1 million in the second quarter of 1996. Year-to-date, the provision for loan losses of $7.5 million compares to $4.1 million in 1996. ONB's net charge-offs were 0.36% of average loans for the current quarter, compared to 0.14% in the second quarter of 1996. For the first six months, net charge-offs were 0.33% in 1997 compared to 0.15% in 1996. The provision and net charge-off levels in the first half of 1996 were low. Levels in 1997 are comparable with the second half of 1996. 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 1.30% at June 30, 1997 compares to 1.27% in 1996. The allowance for loan losses covers all under-performing loans by 2.5 times at June 30, 1997 compared to 2.7 times at December 31, 1996. Noninterest Income Excluding securities gains (losses), noninterest income increased slightly in the three months ended June 30, 1997 as compared to the same period in 1996. For the first six months, this increase was 6.2%. Both increases were fueled by an increase in trust fees which were up 11.8% for both second quarter and the first six months and service charges which increased 4.4% and 5.9% for the quarter and six months ended. Most other categories of noninterest income were comparable to last year's results. 10 Noninterest Expense Noninterest expense increased 4.4% in the second quarter of 1997 compared to 1996. For the first six months noninterest expense increased 5.4% from 1996. Salaries and benefits, together the largest individual component of noninterest expense, increased 7.4% in the second quarter of 1997 compared to 1996. For the first six months, this percentage increased 9.1%. This increase arose primarily from the combination of a new subsidiary, Consumer Acceptance Corporation, which was formed in the second quarter of 1996 and accelerated incentive accruals in 1997 due to the stronger results during the first six months. Communications expense exceeded prior year due to the installation of a wide-area network (WAN). Equipment expense was up 9.4% quarter-to-quarter and 9.8% year-to-year. Additional depreciation has resulted from updating computer systems during installation of the WAN. Other expense decreased 4.3% over the second quarter of 1996 and 4.9% over 1996 year-to-date. Most other categories of noninterest expense experienced relatively small changes between the years. Provision for Income Taxes The provision for income taxes, as a percentage of pre-tax income, decreased in the second quarter to 30.3% compared to 30.9% in 1996. For the first six months, this percentage was 30.4% for 1997 and 30.6% in 1996. 11 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 None ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits as required by Item 601 of Regulation S-K. (10) Employees' Savings and Profit Sharing Plan of Old National Bancorp, as amended. (11) Statement re computation of per share earnings. (27) Financial Data Schedule (b) ONB did not file a current report on Form 8-K during the quarter ended June 30, 1997. 12 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, 1997 13 INDEX OF EXHIBITS Regulation S-K Reference (Item 601) 10 Employees' Savings and Profit Sharing Plan of Old National Bancorp, as amended. 11 Statement re Computation of Per Share Earnings 27 Financial Data Schedule 14