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Old National’s 3rd quarter results highlighted by continued loan growth and increase in tangible book value(1)

3rd Quarter vs. 2nd Quarter 2016 Highlights:

  • Earnings of $34.7 million, or $0.25 per common share
  • Loan growth of 4.1% annualized
  • Tangible book value1 increase of 2.4%
  • Stable Core Net Interest Margin1
  • Decline in Noninterest Expenses
  • Successful conversion of Anchor BanCorp
  • Current dividend yield of 3.6%

1 Non-GAAP measures – refer to Tables 4 & 11 for Non-GAAP reconciliations

EVANSVILLE, Ind., Oct. 31, 2016 (GLOBE NEWSWIRE) -- Today Old National Bancorp (the “Company” or “Old National”) (NASDAQ:ONB) reported 3rd quarter 2016 net income of $34.7 million, or $0.25 per share. Included in the current quarter were pre-tax merger and integration charges of $5.5 million related to the recently completed partnership with Anchor BanCorp Wisconsin Inc. (“Anchor”). These quarterly results compare to net income of $39.1 million in the 2nd quarter of 2016 and $37.7 million recorded in the 3rd quarter of 2015. The 2nd quarter of 2016 contained $7.2 million in pre-tax merger and integration charges.

Also today, the Company announced its quarterly cash dividend of $0.13 per share. The dividend is payable December 15, 2016, to shareholders of record on December 1, 2016. For purposes of broker trading, the ex-date of the cash dividend is November 29, 2016.

“Our 3rd quarter results represent a continuation of several positive trends from previous quarters, including meaningful organic loan growth, increased tangible book value, well controlled operating expenses and strong credit metrics,” said Chairman and CEO Bob Jones. “The fact that we achieved these gains in a challenging, low-rate environment while also successfully completing the conversion of Anchor is a testament to our ability to execute our growth plan. We remain focused on improving efficiencies, as evidenced by our recent decision to consolidate an additional 15 banking centers in the 1st quarter of 2017.”

Committed to our Strategic Imperatives and 2016 Initiatives

Old National’s continued steady performance and strong credit and capital positions can be attributed to the Company’s unwavering commitment to the three strategic imperatives that have guided Old National for 11 years:

1. Strengthen the risk profile; 2. Enhance management discipline; and 3. Achieve consistent quality earnings.

Guided by these three strategic imperatives, Old National’s primary initiatives for 2016 are: 1. Continue to grow organic revenue; 2. Improve operating leverage; and 3. Prudent use of capital, all while maintaining a strong credit culture.

Grow Organic Revenue

Balance Sheet and Net Interest Margin

Total period-end loans, including loans held for sale, increased $90.9 million to $8.966 billion at September 30, 2016, from $8.875 billion at June 30, 2016. This increase represents a 4.1% annualized growth rate. Old National’s new Wisconsin region, the Louisville, Kentucky market, including the Company’s new Lexington office, and the Western Kentucky region all experienced nice growth in their loan portfolios during the 3rd quarter.

Total period-end core deposits, including demand and interest-bearing deposits, increased $208.9 million to $10.482 billion at September 30, 2016, compared to $10.273 billion at June 30, 2016.

For the 3rd quarter of 2016, net interest income totaled $107.8 million compared to $99.3 million in the 2nd quarter of 2016, and $97.1 million in the 3rd quarter of 2015. On a fully taxable equivalent basis, net interest income was $113.1 million for the 3rd quarter of 2016 and represented a net interest margin on total average earning assets of 3.60%. These results compare to net interest income on a fully taxable equivalent basis of $104.6 million and a margin of 3.57% in the 2nd quarter of 2016. In the 3rd quarter of 2015, Old National reported net interest income on a fully taxable equivalent basis of $102.1 million and a margin of 3.94%. Refer to Table 4 for Non-GAAP taxable equivalent reconciliations.

As part of net interest income, Old National recorded $15.9 million, or a 51 basis point contribution to net interest margin, from accretion income in the 3rd quarter of 2016 related to purchase accounting discounts from various acquisitions. Total accretion income in the 2nd quarter of 2016 and the 3rd quarter of 2015 reported by Old National was $14.2 million, or a 49 basis point net interest margin contribution, and $20.6 million, or an 80 basis point net interest margin contribution, respectively. Excluding accretion income, the core net interest margin was 3.09% in the 3rd quarter of 2016, compared to 3.08% in the 2nd quarter of 2016 and 3.14% in the 3rd quarter of 2015. Refer to Table 4 for Non-GAAP reconciliations.

Noninterest Income

Total noninterest income amounted to $47.2 million in the 3rd quarter of 2016 and compares to $93.4 million reported in the 2nd quarter of 2016 and $59.7 million in the 3rd quarter of 2015. Included in the 2nd quarter of 2016 was a $41.9 million pre-tax gain on the sale of ONB Insurance Group, Inc. Included in the 3rd quarter of 2015 was a $15.4 million gain relating to branch sales.

Improve Operating Leverage

For the 3rd quarter of 2016, Old National’s noninterest expenses totaled $108.1 million. Included in this total are $5.5 million in merger and integration charges related to the partnership with Anchor. Noninterest expenses for the 2nd quarter of 2016 were $121.5 million and for the 3rd quarter of 2015 were $102.6 million. Items impacting noninterest expenses for the 2nd quarter of 2016 include foundation/community support, branch consolidation and severance expenses totaling $6.2 million, as well as merger and integration charges of $7.2 million. As of September 30, 2016, Old National has 201 branches throughout its franchise.

Prudent Use of Capital

Old National’s capital position remained well above regulatory guideline minimums at September 30, 2016, with regulatory tier 1 and total risk-based capital ratios of 11.9% and 12.5%, respectively, compared to 11.8% and 12.4% at June 30, 2016, and 12.5% and 13.2% at September 30, 2015. Old National did not repurchase any stock in the open market during the 3rd quarter of 2016.

The following table presents Old National’s risk-based and leverage ratios compared to industry requirements:



Table 1
Fully Phased-In
Regulatory
Guidelines Minimum

Consolidated ONB at
September 30, 2016
Tier 1 Risk-Based Capital Ratio> 8.5% 11.9%
Total Risk-Based Capital Ratio> 10.5% 12.5%
Common Equity Tier 1 Capital Ratio > 7.0% 11.8%
Tier 1 Leverage Capital Ratio> 4.0% 8.4%

Old National’s ratio of tangible common equity to tangible assets was 8.13% at September 30, 2016, compared to 8.10% at June 30, 2016, and 7.56% at September 30, 2015. Refer to Table 11 for Non-GAAP reconciliations.

Maintain a Strong Credit Culture

In the 3rd quarter of 2016, Old National recorded provision expense of $1.3 million and had net charge-offs of $1.6 million. These results compare to $1.3 million in provision expense and net charge-offs of $0.2 million, and provision expense of $0.2 million and net recoveries of $0.9 million, in the 2nd quarter of 2016 and the 3rd quarter of 2015, respectively. Net charge-offs for the 3rd quarter of 2016 were 0.07% of average total loans on an annualized basis, compared to net charge-offs of 0.01% of average total loans in the 2nd quarter of 2016 and net recoveries of 0.05% of average total loans in the 3rd quarter of 2015.

Old National continues to report low delinquencies, with 30+ day delinquent loans of 0.36% in the 3rd quarter of 2016 compared to 0.34% in the 2nd quarter of 2016. Old National’s 90+ day delinquent loans for the 3rd quarter were near zero compared to 0.01% in the 2nd quarter of 2016.

At September 30, 2016, Old National’s allowance for loan losses was $51.5 million, or 0.58% of total loans, compared to an allowance of $51.8 million, or 0.59% of total loans at June 30, 2016, and $51.2 million, or 0.75% of total loans, at September 30, 2015. The coverage ratio (allowance to non-performing loans) stood at 31% at September 30, 2016, compared to 30% at June 30, 2016, and 33% at September 30, 2015.

In accordance with current accounting practices, the loans acquired from Anchor are recorded at fair value with no allowance recorded at the acquisition date. When considering both the allowance for loan losses plus the purchase accounting marks, Old National believes it remains appropriately reserved, as demonstrated by the table below.

Table 2 – At September 30, 2016 ($ in millions) ONB
Excluding
Anchor1


Anchor

ONB
Consolidated
Allowance for Loan Losses (ALLL)$51.5 $0.0 $51.5
Remaining Loan Discount 78.8 65.5 144.3
Total ALLL + Remaining Loan Discount$130.3 $65.5 $195.8
Pre-Discount Loan Balance$7,469.8 $1,579.5 $9,049.3
ALLL/Pre-Discount Loan Balance 0.69% 0.0% 0.57%
Mark/Pre-Discount Loan Balance 1.05% 4.15% 1.59%
Combined ALLL & Discount/Pre-Discount Loan Balance 1.74% 4.15% 2.16%

1 Includes discount on loans acquired through previous partnerships.

The following table presents certain credit quality metrics related to Old National’s loan portfolio:

Table 3 ($ in millions) 3Q16 ONB
Excluding
Anchor

3Q16
Anchor

3Q16 ONB
Consolidated


2Q16


3Q15
Non-Performing Loans (NPLs)$130.7 $34.6 $165.3 $174.2 $154.8
Problem Loans (Including NPLs) 194.2 39.3 233.5 250.2 252.4
Special Mention Loans 109.1 16.7 125.8 106.9 141.2
Net Charge-Off (Recoveries) Ratio 0.06% 0.1% 0.07% 0.01% (0.05)%
Provision for Loan Losses$0.8 $0.5 $1.3 $1.3 $0.2
Allowance for Loan Losses 51.5 0.0 51.5 51.8 51.2

About Old National

Old National Bancorp (NASDAQ:ONB), the holding company of Old National Bank, is the largest financial services holding company headquartered in Indiana. With $14.7 billion in assets, it ranks among the top 100 banking companies in the U.S. Since its founding in Evansville in 1834, Old National Bank has focused on community banking by building long-term, highly valued partnerships with clients. Today, Old National’s footprint includes Indiana, Kentucky, Michigan and Wisconsin. In addition to providing extensive services in retail and commercial banking, Old National offers comprehensive wealth management, investments and brokerage services. For more information and financial data, please visit Investor Relations at oldnational.com.

Conference Call

Old National will hold a conference call at 10:00 a.m. Central Time on Monday, October 31, 2016, to discuss 3rd quarter 2016 financial results, strategic developments, and the Company’s financial outlook. The live audio web cast of the call, along with the corresponding presentation slides, will be available on the Company’s Investor Relations web page at oldnational.com and will be archived there for 12 months. A replay of the call will also be available from 1:00 p.m. Central Time on October 31 through November 14. To access the replay, dial 1-855-859-2056, Conference ID Code 93788114.

Use of Non-GAAP Financial Measures

This earnings release contains GAAP financial measures and non-GAAP financial measures where management believes it to be helpful in understanding Old National’s results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in the tables of this release.

Table 4 – non-GAAP Reconciliations-Core Net Interest Margin

($ in millions)3Q162Q163Q15
Net Interest Income$107.8 $99.3 $97.1
Taxable Equivalent Adjustment 5.3 5.3 5.0
Net Interest Income – Taxable Equivalent$113.1 $104.6 $102.1
Less Accretion1 15.9 14.2 20.6
Core Net Interest Income – Taxable Equivalent Less Accretion $97.2 $90.4 $81.5
Average Earning Assets$12,575.5 $11,726.4 $10,364.7
Core Net Interest Margin – Fully Taxable Equivalent 3.09% 3.08% 3.14%

1 Accretion related to purchase accounting discounts on acquired loan portfolios.

Forward-Looking Statement

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, descriptions of Old National Bancorp’s (“Old National’s”) financial condition, results of operations, asset and credit quality trends and profitability. Forward-looking statements can be identified by the use of the words “anticipate,” “believe,” “expect,” “intend,” “could” and “should,” and other words of similar meaning. These forward-looking statements express management’s current expectations or forecasts of future events and, by their nature, are subject to risks and uncertainties and there are a number of factors that could cause actual results to differ materially from those in such statements. Factors that might cause such a difference include, but are not limited to: expected cost savings, synergies and other financial benefits from the recently completed mergers might not be realized within the expected timeframes and costs or difficulties relating to integration matters might be greater than expected; market, economic, operational, liquidity, credit and interest rate risks associated with Old National’s business; competition; government legislation and policies (including the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and its related regulations); ability of Old National to execute its business plan (including integrating the recently completed merger with Anchor Bancorp Wisconsin Inc.); changes in the economy which could materially impact credit quality trends and the ability to generate loans and gather deposits; failure or circumvention of our internal controls; failure or disruption of our information systems; significant changes in accounting, tax or regulatory practices or requirements; new legal obligations or liabilities or unfavorable resolutions of litigations; disruptive technologies in payment systems and other services traditionally provided by banks; computer hacking and other cybersecurity threats; other matters discussed in this press release and other factors identified in our Annual Report on Form 10-K and other periodic filings with the SEC. These forward-looking statements are made only as of the date of this press release, and Old National does not undertake an obligation to release revisions to these forward-looking statements to reflect events or conditions after the date of this press release.

TABLE 5
Financial Highlights
($ and shares in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30,June 30,September 30, September 30,September 30,
2016 2016 2015 2016 2015
Income Statement
Net interest income$107,803 $99,340 $97,104 $292,786 $280,194
Provision for loan losses 1,306 1,319 167 2,716 2,439
Noninterest income 47,243 93,385 59,744 190,079 170,018
Noninterest expense 108,062 121,472 102,617 327,889 328,463
Net income 34,709 39,122 37,669 100,808 84,731
Per Common Share Data (Diluted)
Net income available to common shareholders$0.25 $0.31 $0.33 $0.80 $0.73
Average diluted shares outstanding 135,011 127,973 115,153 125,839 116,800
Book value 13.59 13.42 12.89 13.59 12.89
Stock price 14.06 12.53 13.93 14.06 13.93
Dividend payout ratio 52% 42% 36% 49% 49%
Tangible common book value (1) 8.43 8.23 7.45 8.43 7.45
Performance Ratios
Return on average assets 0.96% 1.16% 1.26% 1.01% 0.95%
Return on average common equity 7.62% 9.22% 10.27% 8.03% 7.63%
Net interest margin (FTE) 3.60% 3.57% 3.94% 3.56% 3.80%
Efficiency ratio (2) 66.05% 60.22% 61.97% 64.50% 69.38%
Net charge-offs (recoveries) to average loans 0.07% 0.01% -0.05% 0.06% -0.02%
Allowance for loan losses to ending loans 0.58% 0.59% 0.75% 0.58% 0.75%
Non-performing loans to ending loans 1.86% 1.97% 2.26% 1.86% 2.26%
Balance Sheet
Total loans$8,904,985 $8,830,158 $6,847,898 $8,904,985 $6,847,898
Total assets 14,703,071 14,420,262 11,913,786 14,703,071 11,913,786
Total deposits 10,646,708 10,451,602 8,621,325 10,646,708 8,621,325
Total borrowed funds 2,023,099 1,935,555 1,593,843 2,023,099 1,593,843
Total shareholders' equity 1,834,457 1,811,117 1,476,002 1,834,457 1,476,002
Capital Ratios (1)
Risk-based capital ratios (EOP):
Tier 1 common equity 11.8% 11.6% 12.1% 11.8% 12.1%
Tier 1 11.9% 11.8% 12.5% 11.9% 12.5%
Total 12.5% 12.4% 13.2% 12.5% 13.2%
Leverage ratio (to average assets) 8.4% 8.9% 8.4% 9.2% 8.4%
Total equity to assets (averages) 12.60% 12.56% 12.30% 12.59% 12.42%
Tangible common equity to tangible assets 8.13% 8.10% 7.56% 8.13% 7.56%
Nonfinancial Data
Full-time equivalent employees 2,910 2,919 2,675 2,910 2,675
Number of branches 201 206 164 201 164
(1) See non-GAAP measures on Table 11.
(2) Efficiency ratio is defined as noninterest expense before amortization of intangibles as a percent of FTE net interest income and noninterest revenues, excluding net gains from securities transactions. This presentation excludes intangible amortization and net securities gains, as is common in other company releases, and better aligns with true operating performance.
FTE - Fully taxable equivalent basisEOP - End of period actual balances


TABLE 6
Income Statement
($ and shares in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30,June 30,September 30, September 30,September 30,
2016 2016 2015 2016 2015
Interest income$119,713 $110,243 $105,671 325,285 $304,229
Less: interest expense 11,910 10,903 8,567 32,499 24,035
Net interest income 107,803 99,340 97,104 292,786 280,194
Provision for loan losses 1,306 1,319 167 2,716 2,439
Net interest income after provision for loan losses 106,497 98,021 96,937 290,070 277,755
Wealth management fees 8,572 9,355 8,290 26,048 26,253
Service charges on deposit accounts 11,054 10,437 11,010 31,130 33,333
Debit card and ATM fees 4,330 4,471 3,887 12,586 17,694
Mortgage banking revenue 7,718 5,203 3,170 15,841 10,395
Insurance premiums and commissions 132 7,122 9,938 20,375 32,223
Investment product fees 5,038 4,724 4,427 13,667 13,549
Company-owned life insurance 2,163 2,080 2,195 6,281 6,540
Change in Indemnification Asset - 888 (6,582) 233 (9,091)
Other income 6,517 5,415 7,122 17,356 19,539
Net gain on sale of ONB Insurance Group, Inc. - 41,864 - 41,864 -
Net gain on branch divestitures - - 15,355 - 15,355
Gains (losses) on sales of securities 1,647 1,856 861 4,609 4,056
Gains (losses) on derivatives 72 (30) 71 89 172
Total noninterest income 47,243 93,385 59,744 190,079 170,018
Salaries and employee benefits 60,861 62,715 58,151 180,548 187,093
Occupancy 12,944 13,568 13,009 39,356 41,443
Equipment 3,564 3,316 2,977 9,773 10,327
Marketing 3,528 5,111 2,727 11,125 8,641
Data processing 8,242 8,676 6,622 24,041 21,289
Communication 2,755 2,535 2,301 7,154 7,480
Professional fees 3,252 5,181 2,435 11,801 8,948
Loan expenses 2,213 2,123 1,420 5,669 4,562
Supplies 799 598 445 1,980 1,710
FDIC assessment 2,149 2,030 1,733 6,098 5,590
Other real estate owned expense 728 2,099 584 3,251 2,221
Intangible amortization 3,233 3,365 2,872 9,245 8,930
Other expense 3,794 10,155 7,341 17,848 20,229
Total noninterest expense 108,062 121,472 102,617 327,889 328,463
Income before income taxes 45,678 69,934 54,064 152,260 119,310
Income tax expense 10,969 30,812 16,395 51,452 34,579
Net income$34,709 $39,122 $37,669 $100,808 $84,731
Diluted Earnings Per Share
Net income$0.25 $0.31 $0.33 $0.80 $0.73
Average Common Shares Outstanding
Basic 134,492 127,508 114,590 125,366 116,272
Diluted 135,011 127,973 115,153 125,839 116,800
Common shares outstanding at end of period 134,985 135,005 114,523 134,985 114,523


TABLE 7
Balance Sheet
($ in thousands)
September 30, June 30, September 30,
2016 2016 2015
Assets
Federal Reserve Bank account$31,634 $56,433 $10,901
Money market investments 4,513 5,514 4,590
Investments:
Treasury and government sponsored agencies 622,726 694,264 797,713
Mortgage-backed securities 1,495,683 1,349,805 1,154,134
States and political subdivisions 1,148,147 1,128,700 1,079,678
Other securities 449,614 437,669 429,392
Total investments 3,716,170 3,610,438 3,460,917
Loans held for sale 60,465 44,422 18,783
Loans:
Commercial 1,836,380 1,893,700 1,740,394
Commercial and agriculture real estate 3,092,575 2,943,525 1,845,889
Consumer:
Home equity 481,995 473,550 362,055
Other consumer loans 1,388,803 1,419,613 1,145,232
Subtotal of commercial and consumer loans 6,799,753 6,730,388 5,093,570
Residential real estate 2,105,232 2,099,770 1,640,289
Covered loans - - 114,039
Total loans 8,904,985 8,830,158 6,847,898
Total earning assets 12,717,767 12,546,965 10,343,089
Allowance for loan losses (51,547) (51,804) (51,226)
Nonearning Assets:
Cash and due from banks 224,893 205,973 157,919
Premises and equipment 333,266 231,656 130,341
Goodwill and intangible assets 696,128 699,760 622,758
Company-owned life insurance 351,431 350,193 339,352
Net deferred tax assets 169,466 179,448 117,374
Loan servicing rights 25,920 25,756 10,283
FDIC Indemnification Asset - - 8,905
Other real estate owned 23,719 24,254 13,705
Other assets 212,028 208,061 221,286
Total nonearning assets 2,036,851 1,925,101 1,621,923
Total assets$14,703,071 $14,420,262 $11,913,786
Liabilities and Equity
Noninterest-bearing demand deposits$2,944,331 $2,883,917 $2,388,854
NOW accounts 2,486,190 2,456,963 2,001,077
Savings accounts 2,963,637 2,616,365 2,201,066
Money market accounts 687,895 1,015,336 1,043,135
Other time deposits 1,400,068 1,300,611 926,982
Total core deposits 10,482,121 10,273,192 8,561,114
Brokered CD's 164,587 178,410 60,211
Total deposits 10,646,708 10,451,602 8,621,325
Short-term borrowings 422,924 567,659 474,894
Other borrowings 1,600,175 1,367,896 1,118,949
Total borrowed funds 2,023,099 1,935,555 1,593,843
Accrued expenses and other liabilities 198,807 221,988 222,616
Total liabilities 12,868,614 12,609,145 10,437,784
Common stock, surplus, and retained earnings 1,853,286 1,834,734 1,510,382
Other comprehensive income (18,829) (23,617) (34,380)
Total shareholders' equity 1,834,457 1,811,117 1,476,002
Total liabilities and shareholders' equity$14,703,071 $14,420,262 $11,913,786


TABLE 8
Average Balance Sheet and Interest Rates
($ in thousands)
Three Months Ended Three Months Ended Three Months Ended
September 30, 2016 June 30, 2016 September 30, 2015
AverageIncome (1)/Yield/ AverageIncome (1)/Yield/ AverageIncome (1)/Yield/
Earning Assets: BalanceExpenseRate BalanceExpenseRate BalanceExpenseRate
Fed Funds sold, resell agr, Fed Reserve
Bank account, and money market$21,923 $23 0.42% $23,604 $21 0.36% $33,215 $4 0.05%
Investments:
Treasury and gov't sponsored agencies 671,295 3,390 2.02% 738,642 3,586 1.94% 820,424 3,926 1.91%
Mortgage-backed securities 1,414,753 6,353 1.80% 1,209,231 5,562 1.84% 1,123,701 5,179 1.84%
States and political subdivisions 1,139,983 13,329 4.68% 1,117,367 13,207 4.73% 1,052,494 12,610 4.79%
Other securities 446,870 2,566 2.30% 434,089 2,119 1.98% 440,588 2,773 2.52%
Total investments 3,672,901 25,638 2.79% 3,499,329 24,474 2.80% 3,437,207 24,488 2.85%
Loans:
Commercial (2) 1,861,906 18,268 3.84% 1,825,627 17,709 3.84% 1,765,028 20,106 4.46%
Commercial and agriculture real estate (2) 2,975,029 41,906 5.51% 2,589,342 35,273 5.39% 1,856,893 34,303 7.23%
Consumer:
Home equity (2) 483,678 4,895 4.03% 454,581 6,586 5.83% 433,517 4,230 3.87%
Other consumer loans (2) 1,404,947 11,960 3.39% 1,344,288 11,438 3.42% 1,140,330 9,976 3.47%
Subtotal commercial and consumer loans 6,725,560 77,029 4.56% 6,213,838 71,006 4.60% 5,195,768 68,615 5.24%
Residential real estate loans (2) 2,155,070 22,343 4.14% 1,989,612 20,009 4.03% 1,698,501 17,529 4.13%
Total loans (2) 8,880,630 99,372 4.41% 8,203,450 91,015 4.42% 6,894,269 86,144 4.93%
Total earning assets$12,575,454 $125,033 3.94% $11,726,383 $115,510 3.93% $10,364,691 $110,636 4.22%
Less: Allowance for loan losses (52,809) (51,269) (51,418)
Non-Earning Assets:
Cash and due from banks$204,991 $187,974 $168,229
Other assets 1,721,772 1,655,720 1,444,911
Total assets 14,449,408 $13,518,808 $11,926,413
Interest-Bearing Liabilities:
NOW accounts $2,461,799 $456 0.07% $2,416,761 $405 0.07% $2,099,658 $148 0.03%
Savings accounts 2,708,307 962 0.14% 2,492,202 843 0.14% 2,278,466 797 0.14%
Money market accounts 936,232 326 0.14% 861,791 282 0.13% 607,060 104 0.07%
Other time deposits 1,352,876 2,704 0.79% 1,175,435 2,367 0.81% 973,729 2,351 0.96%
Total interest-bearing deposits 7,459,214 4,448 0.24% 6,946,189 3,897 0.23% 5,958,913 3,400 0.23%
Brokered CD's 174,375 371 0.85% 174,338 357 0.82% 43,201 74 0.68%
Total interest-bearing deposits and CD's 7,633,589 4,819 0.25% 7,120,527 4,254 0.24% 6,002,114 3,474 0.23%
Short-term borrowings 484,505 324 0.27% 528,437 410 0.31% 527,368 141 0.11%
Other borrowings 1,398,475 6,767 1.92% 1,251,712 6,239 2.00% 1,230,541 4,952 1.59%
Total borrowed funds 1,882,980 7,091 1.50% 1,780,149 6,649 1.50% 1,757,909 5,093 1.15%
Total interest-bearing liabilities$9,516,569 $11,910 0.50% $8,900,676 $10,903 0.49% $7,760,023 $8,567 0.44%
Noninterest-Bearing Liabilities
Demand deposits 2,895,945 2,725,417 2,500,495
Other liabilities 215,620 195,091 199,218
Shareholders' equity 1,821,274 1,697,624 1,466,677
Total liabilities and shareholders' equity$14,449,408 $13,518,808 $11,926,413
Net interest rate spread 3.44% 3.44% 3.78%
Net interest margin (FTE) 3.60% 3.57% 3.94%
FTE adjustment $5,320 $5,267 $4,965
(1) Interest income is reflected on a fully taxable equivalent basis (FTE).
(2) Includes loans held for sale.


TABLE 9
Average Balance Sheet and Interest Rates
($ in Thousands)
Nine Months Ended Nine Months Ended
September 30, 2016 September 30, 2015
AverageIncome (1)/Yield/ AverageIncome (1)/Yield/
Earning Assets: BalanceExpenseRate BalanceExpenseRate
Fed Funds sold, resell agr, Fed Reserve
Bank account, and money market$29,979 $93 0.42% $26,103 $18 0.09%
Investments:
Treasury and gov't sponsored agencies 713,285 10,454 1.95% 849,697 12,423 1.95%
Mortgage-backed securities 1,225,528 16,992 1.85% 1,138,591 15,289 1.79%
States and political subdivisions 1,120,344 39,545 4.71% 1,002,100 36,227 4.82%
Other securities 436,466 7,522 2.33% 448,893 8,267 2.46%
Total investments 3,495,623 74,513 2.85% 3,439,281 72,206 2.80%
Loans:
Commercial (2) 1,823,223 53,138 3.83% 1,747,199 59,039 4.46%
Commercial and agriculture real estate (2) 2,488,888 105,217 5.55% 1,862,351 90,741 6.43%
Consumer:
Home equity (2) 450,805 15,759 4.67% 444,814 13,262 3.99%
Other consumer loans (2) 1,320,386 33,078 3.35% 1,099,912 29,622 3.60%
Subtotal commercial and consumer loans 6,083,302 207,192 4.55% 5,154,276 192,664 5.00%
Residential real estate loans (2) 1,939,148 59,274 4.08% 1,726,006 53,721 4.15%
Total loans (2) 8,022,450 266,466 4.40% 6,880,282 246,385 4.75%
Total earning assets$11,548,052 $341,072 3.92% $10,345,666 $318,609 4.08%
Less: Allowance for loan losses (52,054) (49,817)
Non-Earning Assets:
Cash and due from banks$186,506 $178,366
Other assets 1,612,410 1,447,875
Total assets $13,294,914 $11,922,090
Interest-bearing Liabilities:
NOW accounts $2,331,596 $1,099 0.06% $2,192,440 $469 0.03%
Savings accounts 2,475,739 2,585 0.14% 2,330,265 2,415 0.14%
Money market accounts 784,057 698 0.12% 626,498 313 0.07%
Other time deposits 1,147,969 7,184 0.84% 1,032,254 7,148 0.93%
Total interest-bearing deposits 6,739,361 11,566 0.23% 6,181,457 10,345 0.22%
Brokered CD's 158,724 1,000 0.84% 56,076 223 0.53%
Total interest-bearing deposits and CD's 6,898,085 12,566 0.24% 6,237,533 10,568 0.23%
Short-term borrowings 486,447 916 0.25% 483,076 349 0.10%
Other borrowings 1,341,940 19,017 1.89% 1,016,361 13,118 1.73%
Total borrowed funds 1,828,387 19,933 1.46% 1,499,437 13,467 1.20%
Total interest-bearing liabilities$8,726,472 $32,499 0.50% $7,736,970 $24,035 0.42%
Noninterest-Bearing Liabilities
Demand deposits 2,698,873 2,506,414
Other liabilities 195,078 198,398
Shareholders' equity 1,674,491 1,480,308
Total liabilities and shareholders' equity$13,294,914 $11,922,090
Net interest rate spread 3.42% 3.66%
Net interest margin (FTE) 3.56% 3.80%
FTE adjustment $15,787 $14,380
(1) Interest income is reflected on a fully taxable equivalent basis (FTE).
(2) Includes loans held for sale.


TABLE 10
Asset Quality (EOP)
($ in thousands)
Three Months Ended Nine Months Ended
September 30,June 30,September 30, September 30,September 30,
2016 2016 2015 2016 2015
Beginning allowance for loan losses$51,804 $50,700 $50,191 $52,233 $47,849
Provision for loan losses 1,306 1,319 167 2,716 2,439
Gross charge-offs (4,519) (2,677) (2,508) (11,138) (8,524)
Gross recoveries 2,956 2,462 3,376 7,736 9,462
Net (charge-offs) recoveries (1,563) (215) 868 - (3,402) 938
Ending allowance for loan losses$51,547 $51,804 $51,226 $51,547 $51,226
Net charge-offs (recoveries) / average loans (1) 0.07% 0.01% -0.05% 0.06% -0.02%
Average loans outstanding (1)$8,865,400 $8,191,544 $6,791,601 $8,012,299 $6,711,061
EOP loans outstanding (1)$8,904,985 $8,830,158 $6,847,898 $8,904,985 $6,847,898
Allowance for loan losses / EOP loans (1) 0.58% 0.59% 0.75% 0.58% 0.75%
Underperforming Assets:
Loans 90 Days and over (still accruing)$443 $670 $569 $443 $569
Non-performing loans:
Nonaccrual loans (2) 151,484 160,340 140,664 151,484 140,664
Renegotiated loans 13,860 13,904 14,121 13,860 14,121
Total non-performing loans 165,344 174,244 154,785 165,344 154,785
Foreclosed properties 23,719 24,254 13,705 23,719 13,705
Total underperforming assets$189,506 $199,168 $169,059 $189,506 $169,059
Classified loans - "problem loans"$233,469 $250,214 $252,397 $233,469 $252,397
Other classified assets 6,634 6,392 11,310 6,634 11,310
Criticized loans - "special mention loans" 125,840 106,886 141,187 125,840 141,187
Total classified and criticized assets$365,943 $363,492 $404,894 $365,943 $404,894
Non-performing loans / EOP loans (1) 1.86% 1.97% 2.26% 1.86% 2.26%
Allowance to non-performing loans (3) 31% 30% 33% 31% 33%
Under-performing assets / EOP loans (1) 2.13% 2.26% 2.47% 2.13% 2.47%
EOP total assets$14,703,071 $14,420,262 $11,913,786 $14,703,071 $11,913,786
Under-performing assets / EOP assets 1.29% 1.38% 1.42% 1.29% 1.42%
EOP - End of period actual balances
(1) Excludes loans held for sale.
(2) Includes renegotiated loans totaling $29.9 million at September 30, 2016, $38.1 million at June 30, 2016 and $38.6 million at September 30, 2015.
(3) Includes acquired loans that were recorded at fair value in accordance with ASC 805 at the date of acquisition. As such, the credit risk was incorporated in the fair value recorded and no allowance for loan losses was recorded on the acquisition date.


TABLE 11
Non-GAAP Measures
($ in thousands)
Three Months Ended Nine Months Ended
September 30,June 30,September 30, September 30,September 30,
2016 2016 2015 2016 2015
Actual End of Period Balances
GAAP shareholders' equity$1,834,457 $1,811,117 $1,476,002 $1,834,457 $1,476,002
Deduct:
Goodwill 655,210 655,523 584,634 655,210 584,634
Intangibles 40,918 44,237 38,124 40,918 38,124
696,128 699,760 622,758 696,128 622,758
Tangible shareholders' equity $1,138,329 $1,111,357 $853,244 $1,138,329 $853,244
Actual End of Period Balances
GAAP assets$14,703,071 $14,420,262 $11,913,786 $14,703,071 $11,913,786
Add:
Trust overdrafts 47 337 127 47 127
Deduct:
Goodwill 655,210 655,523 584,634 655,210 584,634
Intangibles 40,918 44,237 38,124 40,918 38,124
696,128 699,760 622,758 696,128 622,758
Tangible assets $14,006,990 $13,720,839 $11,291,155 $14,006,990 $11,291,155
Risk-weighted assets$9,703,233 $9,624,966 $7,597,349 $9,703,233 $7,597,349
GAAP net income$34,709 $39,122 $37,669 $100,808 $84,731
Add:
Intangible amortization (net of tax) 3,213 3,171 2,596 8,788 8,071
Tangible net income$37,922 $42,293 $40,265 $109,596 $92,802
Tangible Ratios
Return on tangible common equity 13.33% 15.22% 18.88% 12.84% 14.50%
Return on tangible assets 1.08% 1.23% 1.43% 1.04% 1.10%
Tangible common equity to tangible assets 8.13% 8.10% 7.56% 8.13% 7.56%
Tangible common equity to risk-weighted assets 11.73% 11.55% 11.23% 11.73% 11.23%
Tangible common book value (1) 8.43 8.23 7.45 8.43 7.45
Tangible common equity presentation includes other comprehensive income as is common in other company releases.
(1) Tangible common shareholders' equity divided by common shares issued and outstanding at period-end.
Tier 1 capital$1,156,274 $1,134,978 $950,915 $1,156,274 $950,915
Deduct:
Trust Preferred Securities 45,000 45,000 45,000 45,000 45,000
Additional Tier 1 capital deductions (30,466) (30,760) (11,392) (30,466) (11,392)
14,534 14,240 33,608 14,534 33,608
Tier 1 common equity $1,141,740 $1,120,738 $917,307 $1,141,740 $917,307
Risk-weighted assets 9,703,233 9,624,966 7,597,349 9,703,233 7,597,349
Tier 1 common equity to risk-weighted assets 11.77% 11.64% 12.07% 11.77% 12.07%

Contacts: Media: Kathy A. Schoettlin – (812) 465-7269 Executive Vice President – Communications Financial Community: Lynell J. Walton – (812) 464-1366 Senior Vice President – Investor Relations

Source:Old National Bancorp