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Old National Bancorp Reports Operating Results (10-Q)

April 30, 2010 | About:
10qk

10qk

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Old National Bancorp (ONB) filed Quarterly Report for the period ended 2010-03-31.

Old National Bancorp has a market cap of $1.21 billion; its shares were traded at around $13.92 with a P/E ratio of 77.4 and P/S ratio of 3. The dividend yield of Old National Bancorp stocks is 2%.ONB is in the portfolios of Chuck Royce of Royce& Associates.

Highlight of Business Operations:

Average earning assets were $7.067 billion for the three months ended March 31, 2010, compared to $7.177 billion for the three months ended March 31, 2009, a decrease of 1.5%, or $110.9 million. Significantly affecting average earning assets at March 31, 2010 compared to March 31, 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 three months ended March 31, 2010, $281.7 billion of investment securities were purchased and $128.0 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 $281.7 million decrease in average commercial loans was combined with a $98.7 million decrease in 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.

The investment securities available-for-sale portfolio had net unrealized losses of $1.0 million at March 31, 2010, a decrease of $56.0 million compared to net unrealized losses of $57.0 million at March 31, 2009, and a decrease of $12.0 million compared to net unrealized losses of $13.0 million at December 31, 2009. A $0.5 million charge was recorded during the first three months of 2010 related to other-than-temporary-impairment on six non-agency mortgage-backed securities. A $24.8 million charge was recorded during 2009 related to other-than-temporary-impairment on six pooled trust preferred securities and ten non-agency mortgage-backed securities. Contributing to the volatility in net unrealized losses over the past twelve months are changes in interest rates and the financial crisis affecting the banking system and financial markets. See Note 5 to the consolidated financial statements for the impact of other-than-temporary-impairment in other comprehensive income and Note 6 to the consolidated financial statements for details on managements evaluation of securities for other-than-temporary-impairment.

In June 2009, Old National transferred $370.2 million of leases to held for sale status. During the third quarter, $258.0 million of these leases were sold at a price above par; however the transaction resulted in a loss of $1.4 million after transaction fees. Approximately $46.0 million of the remaining leases were transferred from held for sale back to the loan portfolio at the lower of cost or market in the third quarter of 2009 and approximately $0.5 million of the remaining leases were transferred from held for sale back to the loan portfolio at the lower of cost or market in the first quarter of 2010. Approximately $52.2 million of finance leases remained available for sale at March 31, 2010. The leases held for sale have maturities ranging from 1.3 years to 17 years and interest rates ranging from 3.76% to 9.73%. All of the leases held for sale are to municipalities, with various types of equipment securing the leases, and all of the leases are current.

Goodwill and other intangible assets at March 31, 2010, totaled $198.6 million, a decrease of $7.0 million compared to $205.6 million at March 31, 2009, and a decrease of $1.6 million compared to $200.2 million at December 31, 2009. During the first quarter of 2009, we recorded $19.8 million of goodwill and other intangible assets associated with the acquisition of the Indiana retail branch banking network of Citizens Financial Group, which is included in the Community Banking column for segment reporting. During the fourth quarter of 2009 we recorded $0.5 million of impairment of intangibles due to the loss of an insurance client at one of our insurance subsidiaries. The remaining decreases were the result of standard amortization expense related to the other intangible assets.

Total funding, comprised of deposits and wholesale borrowings, was $6.750 billion at March 31, 2010, a decrease of 9.9% from $7.492 billion at March 31, 2009, and an annualized decrease of 10.6% from $6.934 billion at December 31, 2009. Included in total funding were deposits of $5.691 billion at March 31, 2010, a decrease of $163.2 million, or 2.8%, compared to March 31, 2009, and a decrease of $212.0 million compared to December 31, 2009. In 2009, we called $81.0 million of high cost brokered certificates of deposit and $70.0 million of retail certificates of deposit. Noninterest-bearing deposits increased 13.5%, or $140.5 million, compared to March 31, 2009. Time deposits decreased 12.5%, or $264.2 million, while money market deposits decreased 27.0%, or $140.9 million, compared to March 31, 2009. Savings deposits increased 13.8%, or $126.4 million, while NOW deposits decreased 2.0%, or $25.0 million, compared to March 31, 2009. Year over year, we have experienced an increase in noninterest-bearing demand deposits.

We paid cash dividends of $0.07 per share for the three months ended March 31, 2010, which reduced equity by $6.1 million. We paid 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 $0.5 million during the three months ended March 31, 2010, and $0.3 million during the three months ended March 31, 2009. The repurchases related to our employee stock based compensation plans. The change in unrealized losses on investment securities increased equity by $7.0 million during the three months ended March 31, 2010, and increased equity by $4.9 million during the three months ended March 31, 2009. Shares issued for reinvested dividends, stock options, restricted stock and stock compensation plans increased shareholders equity by $0.6 million during the three months ended March 31, 2010, compared to $2.3 million during the three months ended March 31, 2009.

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10qk
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