Old National Profit Jumps

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Evansville-based Old National Bancorp (Nasdaq: ONB) is reporting a third quarter profit of $23.9 million, compared to $19.7 million for the same period last year. Within the quarter, the company acquired two dozen former Bank of America branches in northern Indiana and Michigan as well as Fort Wayne-based Tower Financial Corp. (Nasdaq: TOFC). October 28, 2013

News Release

EVANSVILLE, Ind. - Today Old National Bancorp (NASDAQ: ONB) reported 3rd quarter 2013 net income of $23.9 million, or $.23 per share. These results represent a 21.3 percent increase over the net income of $19.7 million, or $.20 per share, reported in 3rd quarter 2012.

The company's 3rd quarter results were impacted by $2.3 million of charges related to the July 12, 2013, merger and integration of 24 former Bank of America branches in Northern Indiana and Southwestern Michigan. In addition, as part of Old National's transformation into higher-growth markets, the company incurred $2.7 million in costs associated with branch closures during the current quarter.

"Our 3rd quarter results, specifically our strong credit metrics and stable net interest margin, reinforce Old National's position as a strong, secure and well-capitalized community bank," said Bob Jones, Old National President & CEO. "Additionally, the completion of our Bank of America branch acquisition and the announcement of our partnership with (Fort Wayne-based) Tower Financial reflect our continued focus on seeking growth opportunities that benefit our clients and shareholders."

Old National Bancorp's Board of Directors declared a quarterly cash dividend of $.10 per share on the Company’s outstanding shares. This dividend is payable December 16, 2013, to shareholders of record on December 2, 2013. For purposes of broker trading, the ex-date of the cash dividend is November 27, 2013.

Committed to our Strategic Imperatives

Old National’s strong performance through the most recent economic downturn, as well as its strong credit and capital positions, can be attributed to its unwavering commitment to the following strategic imperatives:

1. Strengthen the risk profile.

2. Enhance management discipline.

3. Achieve consistent quality earnings.

1. STRENGTHEN THE RISK PROFILE

Credit Quality

In the 3rd quarter of 2013, Old National continued the trend of improvement in overall credit quality metrics as the company reported decreases in non-performing, problem and special mention loans as well as industry low net charge-offs. Old National reported a provision recapture of $1.7 million in the 3rd quarter 2013, compared to a recapture of $3.7 million in the 2nd quarter of 2013 and provision expense of $.4 million in the 3rd quarter of 2012. Net charge-offs for 3rd quarter 2013 were $.3 million, or .02% of average total loans on an annualized basis, below the $.5 million, or .04% of average total loans in the 2nd quarter of 2013 and the $.4 million, or .03% of average total loans in the 3rd quarter of 2012.

Excluding covered loans, Old National’s net charge-offs for the 3rd quarter of 2013 were $.3 million and were slightly higher than the $.1 million reported in the 2nd quarter of 2013 and the net recoveries of $.4 million reported in the 3rd quarter of 2012. Continued positive trends in credit quality allowed Old National to recapture $1.3 million of provision expense in the 3rd quarter of 2013, excluding covered loans, compared to recaptures of $3.3 million and $.3 million in the 2nd quarter of 2013 and the 3rd quarter of 2012, respectively.

Excluding covered loans, Old National’s allowance for loan losses at September 30, 2013, was $42.3 million, or .88% of total loans, compared to an allowance of $43.9 million, or .90% of total loans at June 30, 2013, and $50.4 million, or 1.05% of total loans, at September 30, 2012. The coverage of allowance to non-performing loans, excluding covered loans, stood at 35% at September 30, 2013, compared to the 32% at June 30, 2013, and 29% at September 30, 2012.

"With regard to our overall credit metrics, this was another very strong quarter for Old National,” said Daryl Moore, Old National's Chief Credit Officer. "I'm especially pleased at our continued progress in reducing net charge-offs, which were at an industry low for the quarter."

2. ENHANCE MANAGEMENT DISCIPLINE

Expense Management

For the 3rd quarter of 2013, Old National reported total noninterest expenses of $96.7 million, which represented an efficiency ratio of 72.96%. This ratio was significantly impacted by a number of charges in the quarter, as detailed in the table below. In addition to the merger and integration charges related to the acquisition of the Bank of America banking centers, Old National recorded an additional $3.0 million in ongoing operational expenses from these newly acquired banking centers.

Included in Old National’s 3rd quarter 2013 noninterest expenses were the following items:

($ in millions)

Branch closure charges $2.7

Merger and integration charges 2.3

Funding of the Old National Foundation 1.2

Provision for unfunded commitments .5

Pension plan adjustment .3

Capital Management

Maintaining a strong capital position is a top priority for Old National, as it remained above industry requirements at September 30, 2013, with regulatory tier 1 and total risk-based capital ratios of 14.2% and 15.1%, respectively, compared to 14.4% and 15.4% at June 30, 2013, and 12.9% and 14.1% at September 30, 2012. Old National repurchased 250,000 shares of stock in the open market during the 3rd quarter of 2013 compared to the repurchase of 500,000 shares made in the 2nd quarter of the current year.

3. ACHIEVE CONSISTENT QUALITY EARNINGS

Balance Sheet and Net Interest Margin

Total period-end loans declined from $5.201 billion at June 30, 2013, to $5.080 billion at September 30, 2013. This decrease was largely attributable to sales of $96.9 million in residential mortgage loans and $11.6 million in leases during the current quarter.

Total investments, including money market accounts, increased $40.2 million to $3.206 billion, from $3.166 billion at June 30, 2013. Average total investments decreased $94.5 million to $3.128 billion at September 30, 2013, from $3.223 billion at June 30, 2013. During 3rd quarter 2013, Old National sold $9.9 million of securities and had $16.8 million of securities called, resulting in securities gains of $.2 million compared to $1.8 million of securities gains in the 2nd quarter of 2013. Old National has not incurred any other-than-temporary impairment related to its securities portfolio in 2013.

At September 30, 2013, total core deposits, including demand and interest-bearing deposits, climbed to $7.208 billion, an increase of $368.3 million, from the $6.840 billion at June 30, 2013. On average, total core deposits increased to $7.220 billion during 3rd quarter 2013 compared to $6.952 billion during 2nd quarter 2013. The increases during the current quarter were the result of the purchase of 24 Bank of America banking centers previously discussed. These deposits totaled $508.6 million at the end of the 3rd quarter and averaged $462.6 million for the 3rd quarter.

Old National reported net interest income of $78.0 million for 3rd quarter 2013 compared to $79.2 million in 2nd quarter 2013, and $74.1 million for 3rd quarter 2012. Net interest income on a fully taxable equivalent basis was $82.4 million for 3rd quarter 2013 and represented a net interest margin on total average earning assets of 3.96 percent. These results compare to net interest income on a fully taxable equivalent basis of $83.4 million and a margin of 3.97% in 2nd quarter 2013 and net interest income on a fully taxable equivalent basis of $77.5 million and a margin of 4.09 percent for 3rd quarter 2012. Refer to Tables A and B for Non-GAAP taxable equivalent reconciliations.

Fees, Service Charges and Other Revenue

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