Old National Bancorp in Evansville, Ind., announced Wednesday that it will lay off 300 to 350 people, or 11% of its workforce, in the next 18 months and take a $24 million restructuring charge this quarter.
The $9.3 billion-asset company said that the staff reductions and other initiatives would add $77 million to annual pretax earnings, or 77 cents per share, beginning in 2006. In the meantime, though, the one-time charge would take a significant bite out of second-quarter earnings.
Old National made $19.3 million in the January-March quarter and $27.8 million in last year's second quarter.
Chief financial officer John S. Poelker said the company would set companywide standards on hiring and staffing, based on the amount of business generated in each of its 143 branches. The aim, he said, is to bring its efficiency ratio, which was 67.29% on March 31, in line with industry averages.
The restructuring is at the least third the company has undertaken since 1998, when it began to meld its 21 banks into one under the Old National name. In 2001 the company took a $5.9 million charge related to the charter consolidation, halving its administrative regions to three. In 2002 it closed and sold some branches that were either underperforming or duplicative.
But despite the repeated restructurings, credit troubles dogged the company and cost chairman and chief executive officer James A. Risinger his job. Mr. Risinger resigned in March.
Larry E. Dunigan, the interim chairman of the board, said in a conference call Wednesday that the company expects to announce a new CEO in July or early August and that the field has been narrowed to four candidates.
Mr. Poelker said that when the charters were consolidated, the company gave local officers a lot of autonomy. After looking at data such as the number of transactions per hour in different branches and comparing the staffing in those branches, Old National executives determined it can do a better job managing its network.
"Even when you get the credit quality turned around, there is a perception that we have not made enough progress in getting the franchise to deliver on expectations," he said.
Scott Siefers, an analyst with Sandler, O'Neill & Partners LP in New York, said he thinks the restructuring would improve Old National's efficiency.
"They're just taking a more proactive approached toward the expense structure and realizing the value of the franchise," Mr. Siefers said.
He added that investors would not mind the second-quarter charge because the long-term benefits outweigh the short-term costs.
"People are more prone to look at the $77 million [in potential earnings] than the costs," he said.
Old National's stock closed at $24.50 Wednesday, up 3.64%.
