OLD NATIONAL BANCORP /IN/ - 10-Q Quarterly Report

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________________

FORM 10-Q

[x]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2003

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from ____________ to ____________

INDIANA	35-1539838
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

420 Main Street Evansville, Indiana	47708 (Zip Code)
(Address of principal executive offices)
----------------
(812) 464-1434
(Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to the filing requirements for at least the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]

Indicate the number of shares outstanding of each of the issuer's classes of common stock. The Registrant has one class of common stock (no par value) with 63,372,000 shares outstanding at April 30, 2003.

OLD NATIONAL BANCORP

FORM 10-Q

INDEX

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements	Page No.

	Consolidated Balance Sheet March 31, 2003 and 2002, and December 31, 2002	3

	Consolidated Statement of Income Three months ended March 31, 2003 and 2002	4

	Consolidated Statement of Cash Flows Three months ended March 31, 2003 and 2002	5

	Notes to Consolidated Financial Statements	6

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21

Item 4.	Controls and Procedures	21

PART II	OTHER INFORMATION	22

SIGNATURES		23

FORM OF SECTION 302 CERTIFICATION		24

INDEX OF EXHIBITS		26




Old National Bancorp
Consolidated Balance Sheet
($ and shares in thousands) (Unaudited)		March 31,			December 31,
	2003		2002			2002
	-----------------		-----------------	------------------
Assets
Cash and due from banks	$210,980		$173,218	$223,007
Money market investments	5,916		19,669	13,219
	---------------		---------------	---------------
Total cash and cash equivalents	216,896		192,887	236,226
Investment securities - available-for-sale, at fair value	3,077,911		2,599,803	3,077,798
Investment securities - held-to-maturity, at amortized cost
(fair value of $236,825 at March 31, 2003)	236,825		-	-
Loans:
Commercial	1,690,403		1,693,608	1,696,347
Commercial real estate	1,871,861		1,848,925	1,883,303
Residential real estate	1,027,328		1,349,644	1,136,414
Consumer credit, net of unearned income	1,050,317		1,035,750	1,053,571
	---------------		---------------	---------------
Total loans	5,639,909		5,927,927	5,769,635

Allowance for loan losses	(83,993)		(76,791)	(87,742)
	---------------		---------------	---------------
NET LOANS	5,555,916		5,851,136	5,681,893
	---------------		---------------	---------------
Goodwill	110,648		82,772	110,648
Core deposit-related and other intangible assets	27,044		4,951	27,042
Mortgage servicing rights	10,464		10,158	11,367
Other assets	489,472		427,368	467,582
	---------------		---------------	---------------
TOTAL ASSETS	$9,725,176		$9,169,075	$9,612,556
	=========		=========	=========
Liabilities
Deposits:
Noninterest-bearing demand	$727,077		$708,578	$778,429
Interest-bearing:
Savings, NOW and money market	2,506,225		2,275,557	2,429,866
Time deposits	3,087,641		3,637,853	3,230,985
	---------------		---------------	---------------
TOTAL DEPOSITS	6,320,943		6,621,988	6,439,280

Short-term borrowings	974,835		635,405	918,349
Other borrowings	1,379,988		1,128,809	1,247,857
Guaranteed preferred beneficial interests in
subordinated debentures	150,000		50,000	150,000
Accrued expenses and other liabilities	156,373		85,827	116,360
	---------------		---------------	---------------
TOTAL LIABILITIES	8,982,139		8,522,029	8,871,846
	---------------		---------------	---------------
Shareholders' Equity
Common stock, $1 stated value, 150,000 shares authorized	63,593		61,161	63,856
Capital surplus	522,404		471,812	528,379
Retained earnings	110,795		108,488	96,652
Accumulated other comprehensive income, net of tax	46,245		5,585	51,823
	---------------		---------------	---------------
TOTAL SHAREHOLDERS' EQUITY	743,037		647,046	740,710
	---------------		---------------	---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$9,725,176		$9,169,075	$9,612,556
	=========		=========	=========
The accompanying notes are an integral part of this statement.

Old National Bancorp

Consolidated Statement of Income

($ and shares in thousands, except per share data)

Three Months Ended

(Unaudited)

March 31,

2003

2002

Interest Income

----------------

Loans, including fees:

Taxable

$84,955

$103,776

Nontaxable

4,264

4,344

Investment securities, available-for-sale

Taxable

25,982

24,944

Nontaxable

8,029

7,185

Investment securities, held-to-maturity

Taxable

277

Money market investments

101

-----------

-----------

TOTAL INTEREST INCOME

123,578

140,350

-----------

-----------

Interest Expense

Savings, NOW and money market deposits

6,205

7,233

Time deposits

31,874

41,506

Short-term borrowings

2,574

2,425

Other borrowings

13,122

14,729

-----------

-----------

TOTAL INTEREST EXPENSE

53,775

65,893

-----------

-----------

NET INTEREST INCOME

69,803

74,457

Provision for loan losses

9,000

7,500

-----------

-----------

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

60,803

66,957

-----------

-----------

Noninterest Income

Trust and asset management fees

7,360

4,990

Service charges on deposit accounts

10,778

9,343

Mortgage banking revenue

4,403

3,418

Insurance premiums and commissions

8,247

4,183

Investment product fees

2,678

1,772

Bank-owned life insurance

1,685

1,484

Net securities gains

2,730

1,565

Other income

5,039

3,752

-----------

-----------

TOTAL NONINTEREST INCOME

42,920

30,507

-----------

-----------

Noninterest Expense

Salaries and employee benefits

41,660

36,204

Occupancy

4,521

3,809

Equipment

3,698

3,836

Marketing

2,427

1,944

FDIC insurance premiums

259

290

Processing

4,192

2,954

Communication and transportation

3,119

2,971

Professional fees

2,416

1,938

Core deposit-related and other intangible amortization

524

242

Other expenses

7,349

7,076

-----------

-----------

TOTAL NONINTEREST EXPENSE

70,165

61,264

-----------

-----------

Income before income taxes

33,558

36,200

Provision for income taxes

7,298

8,339

-----------

-----------

Net Income

$26,260

$27,861

======

Net income per common share:

Basic

$0.41

$0.43

Diluted

$0.41

$0.43

Weighted average number of common shares outstanding:

Basic

63,704

64,184

Diluted

63,757

64,281

Dividends per common share

$0.19

$0.16

The accompanying notes are an integral part of this statement.

Old National Bancorp
Consolidated Statement of Cash Flows
	($ in thousands) (Unaudited)		Three Months Ended
			March 31,
				2003	2002
			----------------		----------------
Cash flows from operating activities:
Net income			$26,260		$27,861
			-------------		------------
Adjustments to reconcile net income to cash provided by (used in) operating activities:

		Depreciation	3,197		3,196
		Amortization of core deposit-related and other intangible assets	524		242
		Net premium amortization on investment securities	2,773		1,300
		Provision for loan losses	9,000		7,500
		Gain on sales of investment securities	(2,730)		(1,565)
		Gain on sales of assets	(2,822)		(174)
		Mortgage loans originated for sale	(261,559)		(211,895)
		Proceeds from sale of mortgage loans	264,499		212,110
		Increase in other assets	(13,183)		(50,301)
		Increase in accrued expenses and other liabilities	43,862		2,366
			------------		------------
		Total adjustments	43,561		(37,221)
			------------		------------
		Net cash flows provided by (used in) operating activities	69,821		(9,360)
			-----------		-----------
Cash flows from investing activities:
Purchases of investment securities available-for-sale			(580,903)		(651,775)
Proceeds from maturities, prepayments and calls of investment securities available-for-sale			293,445		198,979
Proceeds from sales of investment securities available-for-sale			278,085		86,789
Purchases of investment securities held-to-maturity			(236,846)		-
Net principal collected from (loans made to) customers:
		Commercial	(3,689)		47,318
		Mortgage	118,945		126,540
		Consumer	1,721		26,119
Proceeds from sales of premises and equipment			249		1,163
Purchases of premises and equipment			(12,083)		(2,553)
			------------		------------
		Net cash flows used in investing activities	(141,076)		(167,420)
			------------		------------
Cash flows from financing activities:
Net increase (decrease) in deposits and short-term borrowings:
		Noninterest bearing demand deposits	(51,352)		(25,236)
		Savings, NOW and money market deposits	76,359		69,396
		Time deposits	(143,344)		(38,612)
		Short-term borrowings	56,486		33,093
Payments for maturities on other borrowings			(69,469)		(4,237)
Proceeds from issuance of other borrowings			201,600		50,000
Cash dividends paid			(12,117)		(10,402)
Common stock repurchased			(12,571)		(6,699)
Common stock reissued under stock option and stock purchase plans			6,333		5,998
			------------		------------
		Net cash flows provided by financing activities	51,925		73,301
			------------		------------
Net decrease in cash and cash equivalents			(19,330)		(103,479)
Cash and cash equivalents at beginning of period			236,226		296,366
			------------		------------
Cash and cash equivalents at end of period			$216,896		$192,887
			=======		=======
		Total interest paid	$55,490		$67,620
		Total taxes paid	$1,735		$ -

The accompanying notes are an integral part of this statement.

Old National Bancorp
Notes to Consolidated Financial Statements

1. Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of Old National Bancorp and its wholly-owned affiliate entities ("Old National"). All significant intercompany transactions and balances have been eliminated. In the opinion of management, the consolidated financial statements contain all the normal and recurring adjustments necessary for a fair statement of the financial position of Old National as of March 31, 2003 and 2002, and December 31, 2002, and the results of its operations and its cash flows for the three months ended March 31, 2003 and 2002. Interim results do not necessarily represent annual results.

2. Impact of Accounting Changes

In April 2003, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." The changes in SFAS No. 149 improve financial reporting by requiring that contracts with comparable characteristics be accounted for similarly. This statement clarifies under what circumstances a contract, with an initial net investment, meets the characteristic of a derivative; clarifies when a derivative contains a financing component; amends the definition of an underlying to conform it to language in Financial Accounting Standards Board Interpretation No. 45; and amends certain other existing pronouncements. The changes will result in more consistent reporting of contracts as either derivatives or hybrid instruments. The majority of SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003. The impact of SFAS No. 149 is not expected to have a material impact on results of operations, financial position, or liquidity.

In November 2002, Financial Accounting Standards Board Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" was issued. FIN 45 elaborates on the disclosures to be made by a guarantor in its financial statements about its obligations under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. Certain guarantee contracts are excluded from both the disclosure and recognition requirements of FIN 45, including, among others, residual value guarantees under capital lease arrangements, commercial letters of credit, and loan commitments. The disclosure requirements of FIN 45 are to be applied prospectively to guarantees issued or modified after December 31, 2002. Old National adopted FIN 45 on January 1, 2003, the effect of which was not mate rial.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-based Compensation - Transition and Disclosure," which provides guidance on how to transition from the intrinsic value method of accounting for stock-based compensation under Accounting Principles Board ("APB") Opinion No. 25 to SFAS No. 123's fair value method of accounting, if a company so elects.

Old National applies APB Opinion No. 25 and related Interpretations in accounting for the stock option plan. Accordingly, no compensation costs have been recognized, as all options granted had an exercise price equal to the market value of the underlying common stock on the date of grant. Had compensation cost for Old National's stock option plan been recorded based on the fair value at the grant dates for awards under the plan consistent with the method prescribed by SFAS No. 123, net income and net income per share would have been adjusted to the proforma amounts indicated below:


	For the Three Months Ended March 31,
($ in thousands except per share data)		2003 - ----------------	2002 - ------------------
Net income:
As reported Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects Proforma Basic net income per share: As reported Proforma Diluted net income per share: As reported Proforma	$26,260 (1,099) - ------------- $25,161 ======== $0.41 0.39 0.41 0.39		$27,861 (645) - ------------- $27,216 ======== $0.43 0.42 0.43 0.42

3. Acquisition and Divestiture Activity

Subsequent to quarter end, May 1, 2003, Old National completed the purchase of the James L. Will Insurance Agency, Inc., based in Evansville, Indiana. Old National issued 206,852 common shares in the approximately $4.6 million transaction which was accounted for as a purchase in accordance with SFAS No. 141, "Business Combinations."

On July 1, 2002, Old National completed the purchase of Fund Evaluation Group, Inc. ("FEG"), a Cincinnati, Ohio- based investment consulting firm. The cash purchase of approximately $25 million was accounted for in accordance with SFAS No. 141. Definite-lived intangible assets of $9.0 million were recorded from this purchase, which are being amortized over ranges of 4 to 40 years. An indefinite-lived intangible asset of $2.8 million was also recorded. In addition, goodwill of $12.6 million was recorded from the acquisition. As of June 30, 2002, FEG's unaudited financial statements reflected $3.0 million in total assets and net income for the six months then ended of $440 thousand.

On December 1, 2002, Old National completed the purchase of Terrill Group, Inc. ("TGI"), an insurance agency located in St. Louis, Missouri. The approximately $20 million transaction, including Old National's issuance of 656,180 common shares as a part of the transaction, was accounted for as a purchase in accordance with SFAS No. 141. Definite-lived intangible assets of $11.2 million were recorded and are being amortized from 21 to 24 years. Goodwill of $15.5 million was also recorded. As of November 30, 2002, TGI's unaudited financial statements reflected $10.0 million in total assets and total revenue of $14.7 million for the eleven months then ended.

During the third quarter of 2002, Old National finalized the sales of eight branches resulting in a pre-tax gain totaling $12.5 million. The branch sales resulted in a decrease in total loans of $107.3 million and total deposits of $202.9 million.

4. Net Income Per Share

Net income per common share computations are based on the weighted average number of common shares outstanding during the periods presented. A 5% stock dividend was paid January 27, 2003, to shareholders of record on January 6, 2003. All share and per share data presented herein have been restated for the effects of the stock dividend. Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance.

Earnings Per Share Reconciliation
($ and shares in thousands except per share data)

	Three Months Ended March 31, 2003			Three Months Ended March 31, 2002
	Income - --------------	Share - ----------------	Per Share Amount - -------------	Income - --------------	Shares - -------------	Per Share Amount - --------------


Basic EPS
Net income from operations available to common stockholders	$26,260	63,704	$0.41	$27,861	64,184	$0.43
			====			====
Effect of dilutive securities: Stock options	- --	53		- --	97
	----------	----------		----------	----------
Diluted EPS
Net income from operations available to common stockholders plus assumed conversions	$26,260	63,757	$0.41	$27,861	64,281	$0.43
	======	======	====	======	======	====

5. Investment Securities

Old National has classified all investment securities as available-for-sale or held-to-maturity on the date of purchase. Securities available-for-sale are recorded at fair value with the unrealized gains and losses, net of tax effect, recorded as a separate component of shareholder's equity. Securities classified as held-to-maturity, which management has the intent and ability to hold to maturity, are reported at amortized cost.

The following tables summarize the amortized cost and fair value of the available-for-sale and held-to-maturity investment securities as of March 31, 2003 and 2002.
($ in thousands)

2003	Amortized Cost	Unrealized Gain	Unrealized Loss	Market Value
Available-for-sale
U.S. Treasury	$ 5,096	$ 220	$ -	$ 5,316
U.S. Government agencies and corporations	625,000	10,809	(375)	635,434
Mortgage-backed securities	1,605,246	30,856	(2,314)	1,633,788
States and political subdivisions	649,280	34,850	(404)	683,726
Other securities	116,335	3,422	(110)	119,647
	-------------	-------------	-------------	-------------
Total available-for-sale securities	$3,000,957	$80,157	$(3,203)	$3,077,911
	========	========	========	========
Held-to-maturity
Mortgage-backed securities	$236,825	$ -	$ -	$236,825
	========	========	========	========

2002	Amortized Cost	Unrealized Gain	Unrealized Loss	Market Value
Available-for-sale
U.S. Treasury	$ 5,161	$ 73	$ -	$ 5,234
U.S. Government agencies and corporations	594,850	3,221	(9,351)	588,720
Mortgage-backed securities	1,283,982	9,959	(5,591)	1,288,350
States and political subdivisions	590,016	13,173	(1,602)	601,587
Other securities	114,543	1,437	(68)	115,912
	-------------	-------------	-------------	-------------
Total available-for-sale securities	$2,588,552	$27,863	$(16,612)	$2,599,803
	========	========	========	========

Proceeds from sales of investment securities available-for-sale were $278.1 million and $86.8 million for the three months ended March 31, 2003 and 2002, respectively. As of March 31, 2003, realized gains were $2.7 million. As of March 31, 2002, realized gains were $1.6 million. At March 31, investment securities were pledged to secure public and other funds with a carrying value of $1.466 billion in 2003 and $1.062 billion in 2002.

The amortized cost and fair value of the investment securities portfolio at March 31, 2003 and 2002 are shown below by expected maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

($ in thousands)	March 31, 2003		March 31, 2002
Maturity of available-for-sale securities	Amortized Cost	Fair Value	Amortized Cost	Fair Value
Within one year One to five years Five to ten years Beyond ten years Total Maturity of held-to-maturity securities One to five years Five to ten years Total	$ 643,962 1,592,771 358,112 406,112 - ------------- $3,000,957 ======== $ 50,000 186,825 - ------------- $236,825 ========	$ 654,384 1,631,409 368,746 423,372 - ------------- $3,077,911 ======== $ 50,000 186,825 - ------------- $236,825 ========	$ 325,098 1,563,618 375,416 324,420 - ------------- $2,588,552 ======== $ - - - - ------------- $ - ========	$ 329,094 1,565,837 378,890 325,982 - ------------- $2,599,803 ======== $ - - - - ------------- $ - ========

6. Goodwill and Other Intangible Assets

At March 31, 2003 and 2002, Old National had goodwill in the amount of $110.6 million and $82.8 million, respectively. Old National performed its annual impairment testing resulting in no impairment for 2002. At March 31, 2003, the community banking segment and non-bank services segment had goodwill of $70.9 million and $39.7 million, respectively. There was no change in the carrying amount of goodwill by segment for the three month period ended March 31, 2003.

Old National continues to amortize core deposit-related and other definite-lived intangible assets over the estimated remaining life of each respective asset. At March 31, 2003, Old National had $27.0 million in unamortized identifiable intangible assets, which included $2.8 million of indefinite-lived assets. At March 31, 2002, unamortized identifiable intangible assets were $5.0 million. The following table shows the gross carrying amounts and accumulated amortization for intangible assets as of March 31, 2003 and 2002.

	March 31, 2003 - ------------------------------------------------------------------
($ in thousands) Amortized intangible assets: Core deposit Books of business Non-compete agreements Technology Total amortized intangible assets Unamortized intangible assets: Trade name Total unamortized intangible assets	Gross Carrying Amount - ------------------- $5,574 19,720 1,100 1,300 - ---------------- $27,694 ========== $2,800 - ---------------- $2,800 ==========	Accumulated Amortization - ------------------- $(2,556) (638) (42) (214) - ---------------- $(3,450) ==========	Net Carrying Amount - ------------------- $3,018 19,082 1,058 1,086 - ---------------- $24,244 ==========

	March 31, 2002 - ------------------------------------------------------------------
($ in thousands) Amortized intangible assets: Core deposits Books of business Total amortized intangible assets	Gross Carrying Amount - ------------------ $5,574 1,364 - ---------------- $6,938 ==========	Accumulated Amortization - ------------------ $(1,846) (141) - ---------------- $(1,987) ==========	Net Carrying Amount - ------------------ $3,728 1,223 - ---------------- $4,951 ==========

Total amortization expense associated with intangible assets in the first quarter of 2003 and 2002 was $524 thousand and $242 thousand, respectively. Below is the estimated amortization expense for the future years:

For the years ended:
($ in thousands)

2004
2005
2006
2007
2008

$1,979
1,906
1,732
1,309
1,199

7. Mortgage Servicing Rights

Loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balance of mortgage loans serviced for others at March 31 was $1.627 billion in 2003 and $1.288 billion in 2002. The key economic assumptions used to estimate the value of the mortgage servicing rights at March 31, 2003, include a discount rate of 8.5% and a weighted average prepayment rate of 558 PSA.

The fair value of capitalized mortgage servicing rights, net of valuation allowance, at March 31 was $10.5 million in 2003 and $10.2 million in 2002.

The following summarizes balances of mortgage servicing rights:

($ in thousands)

Three
Months Ended March 31, 2003

Three
Months Ended March 31, 2002

Mortgage servicing rights:
Balances at beginning of year, net of valuation allowance
   Rights capitalized
   Amortization
   Impairment
   Additions to valuation allowance

Balances at end of period, net of valuation allowance

Valuation allowance:
Balances at beginning of year
   Additions to valuation allowance

Balances at end of period

$11,367
2,290
(932)
- -
(2,261)
- --------------
$10,464
========

$(2,056)
(2,261)
- --------------
$(4,317)
========

$8,820
2,190
(735)
(117)
- -
- --------------
$10,158
========

$ -
- -
- --------------
$ -
========

8. Borrowings

Other borrowings consisted of the following:
($ in thousands)	March 31, 2003 - -----------------	March 31, 2002 - -----------------
Old National Bancorp: Medium-term notes, Series A Medium-term notes, Series 1997 (fixed rates 6.79% to 7.03%) - maturities August 2003 to November 2007 Old National Bank: Securities sold under agreements to repurchase (fixed rate 2.36% and variable rates 0.81% to 2.57%) - maturities September 2003 to May 2008 Federal Home Loan Bank advances (fixed rates 3.59% to 8.34% and variable rates 2.14% to 3.27%) - maturities April 2003 to October 2022 Senior unsecured bank notes (variable rates 1.29% to 1.93%) - maturities June 2004 to February 2008 Subordinated bank notes (fixed rate 6.75%) - maturing October 2011 Total other borrowings	$ - 43,200 183,000 843,788 160,000 150,000 - ----------------- $1,379,988 ==========	$23,000 59,300 83,000 813,509 - - 150,000 - ---------------- $1,128,809 ==========

Federal Home Loan Bank advances had weighted average rates of 5.42% and 5.76% at March 31, 2003 and 2002, respectively. These borrowings are secured by investment securities and mortgage loans up to 150% of outstanding debt.

Subordinated bank notes qualify as Tier II Capital for regulatory purposes and are in accordance with the senior and subordinated global bank note program in which Old National Bank may issue and sell up to a maximum of $1 billion. Notes issued by Old National Bank under the global note program are not obligations of, or guaranteed by, Old National Bancorp.

At March 31, 2003 and 2002, Old National Bancorp had $25 million in an unsecured line of credit with an unaffiliated bank. The line bears interest at various spreads over the Federal funds rate

($ in thousands)	Three Months Ended March 31, 2003			Three Months Ended March 31, 2002
Mortgage servicing rights: Balances at beginning of year, net of valuation allowance Rights capitalized Amortization Impairment Additions to valuation allowance Balances at end of period, net of valuation allowance Valuation allowance: Balances at beginning of year Additions to valuation allowance Balances at end of period		$11,367 2,290 (932) - - (2,261) - -------------- $10,464 ======== $(2,056) (2,261) - -------------- $(4,317) ========	$8,820 2,190 (735) (117) - - - -------------- $10,158 ======== $ - - - - -------------- $ - ========