Evansville-based Old National Bank plans to sell off its insurance business and use a portion of the sales proceeds to terminate its pension plan.
As part of its first-quarter earnings report on Monday, Old National announced that it has agreed to sell its ONB Insurance Group, Inc. to Prime Risk Partners Inc. for $93 million cash. The deal is expected to close by the end of this quarter. At that time, the business will begin operating as ONI Risk Partners.
Old National decided to sell its insurance business for a couple of reasons, said President and Chief Executive Officer Bob Jones. Financial returns weren't as high as with other parts of the company, and keeping it competitive would have required a significant investment in people and technology.
"This is a business that needed more fuel to grow, and we think Prime Risk Partners is the one to do it," Jones told the Courier & Press.
As of March 31, Old National Insurance had 279 employees. Last year, it had total revenues of approximately $42.7 million and direct expenses of about $36.3 million.
About half of Old National Insurance's employees work in Indianapolis, Jones said, and Prime Risk Partners plans to turn that office into its Midwest headquarters. All Old National Insurance employees will get to keep their jobs, he said.
Old National said it expects to realize an after-tax gain of $16-$18 million from the sale.
The bank will use a portion of that gain — an estimated $11-12 million — to terminate its pension plan.
Old National froze its pension plan in 2005. In other words, after that date participating employees no longer saw their pension benefits increase. Employees who joined the company after 2005 were not eligible for the pension at all.
The company has about 600 active employees who are part of the pension plan, Jones said.
During the fourth quarter, Jones said, Old National will terminate its pension plan by distributing lump-sum payouts to plan participants.
Payouts will reflect the current value of each person's plan, and amounts will vary depending on an individual's circumstances.
Jones said all the affected employees have been notified of the pending change.
Also on Monday, Old National said its previously announced acquisition of Wisconsin-based Anchor BanCorp has been completed. The deal includes 46 banking centers; $1.7 billion in total loans and $1.8 billion in total deposits.
Regarding Old National's overall quarterly earnings: the bank reported net profits of $27 million (24 cents per common share), up 29 percent from the $20.9 million (18 cents per common share) it earned during the same period a year ago.
Net interest income — the amount the bank earned in interest, less the amount it paid out in interest — totaled $85.6 million for the quarter, down 6 percent.
Noninterest income dropped 11 percent, to $49.5 million. This category of income includes things like deposit service charges, debit card and ATM fees, insurance premiums and commissions and other income.
Noninterest expenses dropped 15 percent, to $98.4 million. Noninterest expenses include employee salaries and benefits, occupancy and equipment expenses, professional fees and other items.
Shares of Old National closed at $12.91 Monday on the Nasdaq market, down 49 cents (4 percent) from Friday's close.