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Old National Bancorp Reports Operating Results (10-Q)

May 02, 2009 | About:

Old National Bancorp (ONB) filed Quarterly Report for the period ended 2009-03-31.

Old National Bancorp is a bank holding company that operates banking offices and ATMs throughout Indiana Illinois Ohio Kentucky and Tennessee. Through various subsidiaries Old National provides a broad range of banking services as well as trust and investment management services insurance brokerage services for both individuals and companies and investment products. (Company Press Release) Old National Bancorp has a market cap of $869.3 million; its shares were traded at around $13.12 with a P/E ratio of 13.9 and P/S ratio of 1.5. The dividend yield of Old National Bancorp stocks is 7.1%. Old National Bancorp had an annual average earning growth of 5.7% over the past 5 years.

Highlight of Business Operations:

Net income for the first quarter of 2009 is $9.4 million, compared to $6.6 million and $19.3 million for the quarters ended December 31, 2008 and March 31, 2008, respectively. Results for the first quarter of 2009 were impacted by a $3.0 million charge for direct acquisition costs related to the acquisition of Charter Ones Indiana franchise and net securities gains of $5.6 million, which were partially offset by other-than-temporary impairment of $2.4 million realized during the quarter. The first quarter of 2009 also includes $2.4 million of seasonal insurance contingency revenue.

Also affecting margin was an increase in noninterest-bearing demand deposits and time deposits. Included in deposits at March 31, 2009 are $89.8 million of noninterest-bearing deposits and $162.8 million of time deposits from the Citizens Financial branch acquisition. During 2008, $137.6 million of high cost brokered certificates of deposit were called or matured and $100.5 million of retail certificates of deposit were called. A $50 million bank note matured in the first quarter of 2008 and $100 million of medium-term notes matured in the second quarter of 2008. In addition, $51 million of FHLB advances matured in the last half of 2008 and a revolving credit facility with $55 million outstanding was paid off in the fourth quarter of 2008. During the first quarter of 2009, $65.0 million of high cost brokered certificates of deposit were called and $50.9 million of retail certificates of deposit were called. In addition, $25.0 million of FHLB advances were prepaid in the first quarter of 2009. Year over year, brokered certificates of deposit, which have an average interest rate higher than other types of deposits, have decreased as a percent of interest-bearing liabilities. Borrowed funds have increased as a percent of interest-bearing liabilities, due to our ability to obtain low-cost short-term borrowings. Year over year, noninterest-bearing demand deposits have increased as a percent of total funding.

Total funding, comprised of deposits and wholesale borrowings, was $7.492 billion at March 31, 2009, an increase of 9.8% from $6.822 billion at March 31, 2008, and an annualized increase of 33.9% from $6.907 billion at December 31, 2008. Included in total funding were deposits of $5.855 billion at March 31, 2009, an increase of $508.3 million, or 9.5%, compared to March 31, 2008, and an increase of $432.5 million compared to December 31, 2008. Included in total deposits at March 31, 2009 is $427.6 million from the acquisition of the Indiana retail branch banking network of Citizens Financial Group. In 2008, we called $100.5 million of retail certificates of deposit; and $137.6 million of high cost brokered certificates of deposit were called or matured. During the first quarter of 2009, $65.0 million of high cost brokered certificates of deposit were called and $50.9 million of retail certificates of deposit were called. Noninterest-bearing deposits increased 20.7% or $178.2 million compared to March 31, 2008. Time deposits increased 22.2% or $384.2 million compared to March 31, 2008. Year over year, we have experienced a shift into lower cost deposit types.

Effective January 1, 2008, we elected the fair value option under SFAS No. 159 prospectively for certain retail certificates of deposit. The carrying value of these retail certificates of deposit was $6.0 million, $49.3 million and $41.4 million as of March 31, 2009, December 31, 2008 and March 31, 2008, respectively. The carrying values at March 31, 2009, December 31, 2008 and March 31, 2008 were comprised of contractual balances of $5.9 million, $48.5 million and $41.1 million and fair value adjustments of $0.1 million, $0.8 million and $0.3 million, respectively.

We use wholesale funding to augment deposit funding and to help maintain our desired interest rate risk position. At March 31, 2009, wholesale borrowings, including short-term borrowings and other borrowings, increased $161.7 million, or 11.0%, from March 31, 2008 and increased $152.6 million, or 41.1%, annualized, from December 31, 2008, respectively. Wholesale funding as a percentage of total funding was 21.9% at March 31, 2009, compared to 21.6% at March 31, 2008, and 21.5% at December 31, 2008. Short-term borrowings have increased $186.6 million since March 31, 2008 while long-term borrowings have decreased $24.9 million since March 31, 2008. We purchased $380.0 of million low-cost FHLB advances during 2008. In addition, $100 million of medium-term notes matured in the second quarter of 2008, $51.0 million of FHLB advances matured in the last half of 2008 and a revolving credit facility with $55.0 million outstanding was paid off in the fourth quarter of 2008. During the first quarter of 2009, $25.0 million of FHLB advances were prepaid.

During the fourth quarter of 2007, we declared a cash dividend of $0.23 per share to be paid in the first quarter of 2008, which was included in the fourth quarter 2007 financial results. We declared cash dividends of $0.23 per share for the three months ended March 31, 2009, which reduced equity by $15.3 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 $0.3 million during the three months ended March 31, 2009, and $0.2 million during the three months ended March 31, 2008. The repurchases related to our employee stock based compensation plans. The change in unrealized losses on investment securities increased equity by $4.9 million during the three months ended March 31, 2009, and $2.4 million during the three months ended March 31, 2008. Shares issued for stock options, restricted stock and stock compensation plans increased shareholders equity by $2.3 million during the three months ended March 31, 2009, compared to $0.9 million during the three months ended March 31, 2008.

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