Old National Bancorp records $12 million loss on single loan, shares fall

Old National takes $12 million hit from loan

EVANSVILLE, Ind. — Old National Bancorp said Wednesday it expects to record a $12 million loss from a single loan, although non-performing loans declined 9 percent overall compared with three months earlier.

Shares of Old National fell 38 cents, or 3.2 percent, to $11.65 in midday trading.

The Evansville-based financial services holding company, which is due to release fourth-quarter and full-year results on Feb. 1, said the $12 million loss resulted from deterioration in a “non-real estate loan participation” that the company held.

In commercial lending, a participation loan involves multiple lenders, with one participant acting as the servicing lender. Such loans make it possible for borrowers to secure bank financing when the amount exceeds the legal lending limit of an individual bank.

Old National said it does not believe the loan is a “systemic issue,” with net charge-offs — loans written off as unpaid — expected to range from $21 million to $22 million in the fourth quarter.

The company also said it expects to record a credit loss of $9 million to $10 million in the fourth quarter in its portfolio of mortgage-backed securities, or mortgages that are pooled together and sold as investments. The company said deterioration in collateral underlying the securities could lead to more such impairment charges.

Non-performing loans — those considered past due — declined to $67 million at the end of December from $73.7 million at the end of September. The company’s said its reserve position for covering soured loans “remains very strong.”

Old National expects its fourth-quarter provision for loan and lease loss expense will be about $22 million.

Old National also said its net interest margin — the difference between what it costs banks to borrow and what they pay to depositors — is expected to range from 3.3 percent to 3.35 percent in the fourth quarter, down from the company’s previous guidance of 3.4 percent to 3.45 percent.

The company did not offer an estimate of its fourth-quarter profit. Analysts surveyed by Thomson Reuters are expecting a profit of 5 cents per share, on average.