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.
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
<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 $4,888,521 ========== ========== ========== </TABLE> The accompanying notes are an integral part of this statement. 3
<TABLE> <CAPTION> OLD NATIONAL BANCORP CONSOLIDATED STATEMENT OF INCOME Three Months Ended Six Months Ended ($ 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
<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
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
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
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
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
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
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
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
INDEX OF EXHIBITS Regulation S-K Reference (Item 601) 11 Statement re Computation of Per Share Earnings 27 Financial Data Schedule 14