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Old National Bancorp Reports Operating Results (10-Q)

July 30, 2010 | About:
10qk

10qk

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Old National Bancorp (ONB) filed Quarterly Report for the period ended 2010-06-30.

Old National Bancorp has a market cap of $928.3 million; its shares were traded at around $10.65 with a P/E ratio of 48.4 and P/S ratio of 2.3. The dividend yield of Old National Bancorp stocks is 2.7%.ONB is in the portfolios of Chuck Royce of Royce& Associates, Bruce Kovner of Caxton Associates, Steven Cohen of SAC Capital Advisors.

Highlight of Business Operations:

During the second quarter of 2010, net income available to common shareholders was $10.5 million, compared to $9.6 million at June 30, 2009. Results for the second quarter of 2010 were impacted by securities gains of $6.0 million, other-than-temporary impairment of $2.8 million, loss on debt extinguishment of $1.4 million and expense of $0.9 million associated with five financial centers which were consolidated during the quarter. Diluted earnings per share available to common shareholders were $0.12 per share, compared to earnings of $0.15 per share in the second quarter of 2009. The additional shares issued as a result of the Companys successful stock offering in the third quarter of 2009 impacted diluted earnings per share in 2010.

Net interest income was $55.2 million and $110.3 million for the three and six months ended June 30, 2010, down from the $60.8 million and $120.0 million reported for the three and six months ended June 30, 2009. Taxable equivalent net interest income was $58.6 million and $117.5 million for the three and six months ended June 30, 2010, down from the $66.3 million and $131.4 million reported for the three and six months ended June 30, 2009. The net interest margin on a fully taxable equivalent basis was 3.40% and 3.37% for the three and six months ended June 30, 2010, compared to 3.58% and 3.60% for the three and six months ended June 30, 2009. The decrease in both net interest income and net interest margin is primarily due to the decrease in the yield on interest earning assets being greater than the decrease in the cost of interest-bearing liabilities, combined with a change in the mix of interest earning assets and interest-bearing liabilities. The yield on average earning assets decreased 58 basis points from 5.13% to 4.55% while the cost of interest-bearing liabilities decreased 31 basis points from 1.81% to 1.50% in the quarterly year-over-year comparison. In the year-to-date comparisons, the yield on average assets decreased 58 basis points from 5.17% to 4.59% while the cost of interest-bearing liabilities decreased 32 basis points from 1.87% to 1.55%.

Average earning assets were $6.893 billion for the three months ended June 30, 2010, compared to $7.406 billion for the three months ended June 30, 2009, a decrease of 6.9%, or $513.3 million. Average earning assets were $6.980 billion for the six months ended June 30, 2010, compared to $7.298 billion for the six months ended June 30, 2009, a decrease of 4.4%, or $318.0 million. Significantly affecting average earning assets at June 30, 2010 compared to June 30, 2009, was the increase in the size of the investment portfolio combined with the increase in interest earning cash balances held at the Federal Reserve and the reduction of the size of the loan portfolio. During the six months ended June 30, 2010, $524.7 billion of investment securities were purchased and $434.1 million of investment securities were called by the issuers or sold. During the third quarter of 2009, approximately $258.0 million of leases held for sale were sold. In addition, commercial and commercial real estate loans have been affected by continued weak loan demand in our markets, more stringent loan underwriting standards and our desire to lower future potential credit risk by being cautious towards the real estate market. A $286.1 million decrease in average commercial loans was combined with a $104.6 million decrease in average commercial real estate loans. Year over year, the investment portfolio, which generally has an average yield lower than the loan portfolio, has increased as a percent of interest earning assets.

Net securities gains were $3.2 million and $6.2 million for the three and six months ended June 30, 2010, compared to net securities gains of $2.4 million and $5.6 million for the three and six months ended June 30, 2009. Included in the second quarter and first six months of 2010 are securities gains of $6.0 million and $9.5 million, respectively, resulting primarily from managements decision to shorten the duration of the portfolio. The shorter duration will result in lower yields in future periods, but will reduce capital exposure when interest rates begin to rise. Partially offsetting these gains were other-than-temporary-impairment charges of $2.8 million and $3.3 million, respectively, on two pooled trust preferred securities and ten non-agency mortgage-backed securities.

Total funding, comprised of deposits and wholesale borrowings, was $6.583 billion at June 30, 2010, a decrease of 7.9% from $7.151 billion at June 30, 2009, and an annualized decrease of 10.1% from $6.934 billion at December 31, 2009. Included in total funding were deposits of $5.647 billion at June 30, 2010, a decrease of $151.5 million, or 2.6%, compared to June 30, 2009, and a decrease of $256.5 million compared to December 31, 2009. In the last twelve months, we called $14.6 million of retail certificates of deposit. Noninterest-bearing deposits increased 11.9%, or $124.6 million, compared to June 30, 2009. Time deposits decreased 14.0%, or $291.4 million, while money market deposits decreased 20.3%, or $91.5 million, compared to June 30, 2009. Savings deposits increased 11.7%, or $108.8 million compared to June 30, 2009. Year over year, we have experienced an increase in noninterest-bearing demand deposits.

We paid cash dividends of $0.07 and $0.14 per share for the three and six months ended June 30, 2010, respectively, which reduced equity by $12.2 million. We paid cash dividends of $0.07 and $0.30 per share for the three and six months ended June 30, 2009, respectively, which reduced equity by $19.9 million. We also accrued dividends on the preferred shares for the three months ended March 31, 2009, which reduced equity by $1.2 million. We repurchased shares of our stock, reducing shareholders equity by $0.5 million during the six months ended June 30, 2010, and $0.4 million during the six months ended June 30, 2009. The repurchases related to our employee stock based compensation plans. The change in unrealized losses on investment securities increased equity by $20.4 million during the six months ended June 30, 2010, and increased equity by $4.3 million during the six months ended June 30, 2009. Shares issued for reinvested dividends, stock options, restricted stock and stock compensation plans increased shareholders equity by $1.4 million during the six months ended June 30, 2010, compared to $2.5 million during the six months ended June 30, 2009.

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10qk
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