October 31, 2012
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of regional bank provider Old National Bancorp (NYSE: ONB ) probably wishes the market had remained closed with its shares dropping as much as 10% after reporting third-quarter earnings results on Monday.
So what: For the quarter, Old National Bancorp reported EPS of $0.20, which includes charges and expenses related to its purchase of Indiana Community Bancorp. Wall Street had been looking for $0.24 in EPS, but it's unclear whether that figure was meant to include Old National's acquisition costs. On the bright side, net interest margin expanded by 13 basis points over the previous year, tier-1 capital ratios rose year over year, and delinquency rates remain near record lows. On the flipside, problem loans increased, and many sequential comparisons to the second quarter are down.
Now what: Overall, this wasn't nearly as bad of a report as investors are making it out to be. The acquisition of Indiana Community Bancorp will add $493.5 million in loans and $784.6 million in core deposits, and Old National's net interest margin and delinquency rates are better than those of many of its peers. It's not an exceptional value at roughly 1.1 times book value, but all things considered, you could do much worse in the regional banking sector at the moment.
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