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Old National’s 2016 net income is highest in the Company’s history increasing 15% over 2015 with organic loan growth exceeding 7%

2016 HIGHLIGHTS:

  • Earnings of $134.3 million, or $1.05 per share
  • Organic loan growth1 of 7.1%; organic commercial and commercial real estate growth of 10.7%
  • Tangible book value2 increase of 8.9% over 2015

4TH QUARTER VS. 3RD QUARTER 2016 HIGHLIGHTS:

  • Earnings of $33.5 million, or $0.25 per share
  • Organic loan growth1 of 6.1% annualized; organic commercial and commercial real estate growth of 9.7% annualized
  • Stable Core Net Interest Margin2

1 Excludes acquired loans; includes loans held for sale
2 Non-GAAP measures – refer to Tables 4 & 11 for Non-GAAP reconciliations


EVANSVILLE, Ind., Jan. 24, 2017 (GLOBE NEWSWIRE) -- Today Old National Bancorp (the “Company” or “Old National”) (NASDAQ:ONB) reported full-year 2016 net income of $134.3 million, or $1.05 per diluted share. This net income represents an increase of 15.0% over full-year 2015 net income of $116.7 million, or $1.00 per diluted share, and represents the highest yearly earnings in the Company’s history. The successful conversion and integration of the Company’s largest partnership, strong loan growth and consistently low credit metrics all contributed to this positive year-over-year performance.

For the 4th quarter of 2016, Old National reported net income of $33.5 million, or $0.25 per diluted share. During the current quarter, Old National recognized $12.8 million in pre-tax deferred gains related to the repurchase of various bank properties. Also included in the 4th quarter of 2016 were pre-tax pension termination charges of $9.8 million, pre-tax branch consolidation charges of $5.1 million, pre-tax merger and integration charges of $1.8 million and severance of $1.6 million. These quarterly results compare to net income of $34.7 million in the 3rd quarter of 2016 and $32.0 million recorded in the 4th quarter of 2015. The 3rd quarter of 2016 contained $5.5 million in pre-tax merger and integration charges.

“A strong fourth quarter, driven by 6.1% annualized organic loan growth, capped a year of excellent growth for Old National,” said Chairman and CEO Bob Jones. “Not only did we increase our net income by 15% over 2015 while maintaining exceptional credit quality and increasing our tangible book value by nearly 9%, we accomplished all of this while expanding our franchise into Wisconsin with the largest partnership in our history.”

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 were: 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

At December 31, 2016, period-end loans, including loans held for sale, totaled $9.101 billion, an increase of $135.7 million from the $8.966 billion at September 30, 2016. This increase represents a 6.1% annualized organic growth rate. Old National’s Louisville, Kentucky market, including the Company’s new Lexington office, the South Bend market and the Ft. Wayne region all contributed significantly to this loan portfolio growth during the 4th quarter. Old National’s portfolio of commercial and commercial real estate loans grew by 9.7%, annualized, from the 3rd quarter to the 4th quarter of 2016. On an annual basis, period-end loans, including loans held for sale, increased $2.139 billion from December 31, 2015. Excluding the $1.647 billion in loan balances acquired from the Anchor partnership, organic loan growth was $491.9 million, or 7.1%. Commercial and commercial real estate loans grew $395.5 million on an organic basis, net of the $968.6 million acquired from Anchor.

Total period-end core deposits, including demand and interest-bearing deposits, increased $146.6 million, or 5.6% annualized, to $10.629 billion at December 30, 2016, compared to $10.482 billion at September 30, 2016. On an annual basis, period-end deposits, including demand and interest-bearing deposits, increased $2.327 billion from December 31, 2015. Excluding the $1.853 billion in deposit balances assumed from the Anchor partnership, organic deposit growth was $473.9 million, or 5.7%.

Net interest income for the 4th quarter of 2016, totaled $109.9 million compared to $107.8 million in the 3rd quarter of 2016, and $85.9 million in the 4th quarter of 2015. On a fully taxable equivalent basis, net interest income was $115.4 million for the 4th quarter of 2016 and represented a net interest margin on total average earning assets of 3.63%. These results compare to net interest income on a fully taxable equivalent basis of $113.1 million and a margin of 3.60% in the 3rd quarter of 2016. In the 4th quarter of 2015, Old National reported net interest income on a fully taxable equivalent basis of $91.1 million and a margin of 3.50%. Refer to Table 4 for Non-GAAP taxable equivalent reconciliations.

Old National recorded $16.8 million in accretion income as part of net interest income, or a 53 basis points contribution to the net interest margin, in the 4th quarter of 2016. Accretion income is related to purchase accounting discounts from the Company’s various acquisitions. Total accretion income in the 3rd quarter of 2016 and the 4th quarter of 2015 reported by Old National was $15.9 million, or a 51 basis point net interest margin contribution, and $12.3 million, or a 48 basis point net interest margin contribution, respectively. Excluding accretion income, the core net interest margin was 3.10% in the 4th quarter of 2016, compared to 3.09% in the 3rd quarter of 2016 and 3.02% in the 4th quarter of 2015. Refer to Table 4 for Non-GAAP reconciliations.

Noninterest Income

For the 4th quarter of 2016, total noninterest income amounted to $62.8 million and compares to $47.2 million reported in the 3rd quarter of 2016 and $60.6 million in the 4th quarter of 2015. During the 4th quarter of 2016 and the 4th quarter of 2015, Old National recognized pre-tax deferred gains relating to the repurchase of various bank properties in the amount of $12.8 million and $10.8 million, respectively.

Improve Operating Leverage

Old National’s noninterest expenses totaled $126.3 million for the 4th quarter of 2016. Included in this total is a $9.8 million pre-tax charge for the termination of the Company’s pension plan, $5.1 million in pretax charges related to branch consolidations, $1.8 million in pre-tax merger and integration charges and $1.6 million in severance. Noninterest expenses for the 3rd quarter of 2016 were $108.1 million and for the 4th quarter of 2015 were $102.5 million. Items impacting noninterest expenses for the 3rd quarter of 2016 include pre-tax merger and integration charges of $5.5 million. Old National consolidated five branches during 2016 and has closed an additional 15 branches in January 2017. As of December 31, 2016, Old National has 202 branches throughout its franchise.

Prudent Use of Capital

At December 31, 2016, Old National’s capital position remained well above regulatory guideline minimums with regulatory tier 1 and total risk-based capital ratios of 11.7% and 12.2%, respectively, compared to 11.9% and 12.5% at September 30, 2016, and 12.6% and 13.3% at December 31, 2015. Old National did not repurchase any stock in the open market during the 4th quarter or during the entire year of 2016.

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

Table 1Fully Phased-In
Regulatory
Guidelines Minimum
Consolidated ONB at
December 31, 2016
Tier 1 Risk-Based Capital Ratio> 8.5%11.7%
Total Risk-Based Capital Ratio> 10.5%12.2%
Common Equity Tier 1 Capital Ratio > 7.0%11.5%
Tier 1 Leverage Capital Ratio> 4.0%8.4%

Old National’s ratio of tangible common equity to tangible assets was 7.92% at December 31, 2016, compared to 8.13% at September 30, 2016, and 7.66% at December 31, 2015. Refer to Table 11 for Non-GAAP reconciliations.

Maintain a Strong Credit Culture

Old National recorded a provision recapture of $1.8 million and had net recoveries of $17 thousand in the 4th quarter of 2016. These results compare to $1.3 million in provision expense and net charge-offs of $1.6 million, and provision expense of $0.5 million and net recoveries of $0.5 million, in the 3rd quarter of 2016 and the 4th quarter of 2015, respectively. Net charge-offs for the 4th quarter of 2016 were 0.00% of average total loans on an annualized basis, compared to net charge-offs of 0.07% of average total loans in the 3rd quarter of 2016 and net recoveries of 0.03% of average total loans in the 4th quarter of 2015.

Delinquencies remained low as Old National reported 30+ day delinquent loans of 0.43% in the 4th quarter of 2016 compared to 0.36% in the 3rd quarter of 2016. Old National’s 90+ day delinquent loans for the 4th and 3rd quarters of 2016 were near zero.

For the full year of 2016, Old National reported net charge-offs of $3.4 million, or 0.04% of average total loans, and recorded provision expense of $1.0 million. This compares to the full year of 2015 with net recoveries of $1.5 million, or 0.02% of average total loans, and provision expense of $2.9 million.

Old National’s allowance for loan losses at December 31, 2016, was $49.8 million, or 0.55% of total loans, compared to an allowance of $51.5 million, or 0.58% of total loans at September 30, 2016, and $52.2 million, or 0.75% of total loans, at December 31, 2015. The coverage ratio (allowance to non-performing loans) stood at 34% at December 31, 2016, compared to 31% at September 30, 2016, and 36% at December 31, 2015.

In accordance with current accounting practices, the loans acquired from Anchor during the 2nd quarter of 2016 were 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 December 31, 2016 ($ in millions) ONB
Excluding
Anchor1
AnchorONB
Consolidated
Allowance for Loan Losses (ALLL)$49.8 $0.0 $49.8
Remaining Loan Discount 70.6 59.1 129.7
Total ALLL + Remaining Loan Discount$120.4 $59.1 $179.5
Pre-Discount Loan Balance$7,660.8 $1,479.4 $9,140.2
ALLL/Pre-Discount Loan Balance 0.65% 0.00% 0.54%
Mark/Pre-Discount Loan Balance 0.92% 4.00% 1.42%
Combined ALLL & Discount/Pre-Discount Loan Balance 1.57% 4.00% 1.96%

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) 4Q163Q164Q15
Non-Performing Loans (NPLs)$145.8 $165.3 $146.7
Problem Loans (Including NPLs) 220.4 233.5 213.3
Special Mention Loans 95.5 125.8 134.3
Net Charge-Off (Recoveries) Ratio 0.0% 0.07% (0.03)%
Provision for Loan Losses$(1.8)$1.3 $0.5
Allowance for Loan Losses 49.8 51.5 52.2

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 $14.9 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 Tuesday, January 24, 2017, to discuss 4th quarter and full-year 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 January 24 through February 7. To access the replay, dial 1-855-859-2056, Conference ID Code 50911607.

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)4Q163Q164Q15
Net Interest Income$109.9 $107.8 $85.9
Taxable Equivalent Adjustment 5.5 5.3 5.2
Net Interest Income – Taxable Equivalent$115.4 $113.1 $91.1
Less Accretion1 16.8 15.9 12.3
Core Net Interest Income – Taxable Equivalent Less Accretion$98.6 $97.2 $78.8
Average Earning Assets$12,713.3 $12,575.5 $10,414.8
Core Net Interest Margin – Fully Taxable Equivalent 3.10% 3.09% 3.02%

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; 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 (unaudited)
($ and shares in thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31,September 30,December 31, December 31,December 31,
2016 2016 2015 2016 2015
Income Statement
Net interest income$ 109,917 $ 107,803 $ 85,922 $ 402,703 $ 366,116
Provision for loan losses (1,756) 1,306 484 960 2,923
Noninterest income 62,751 47,243 60,614 252,830 230,632
Noninterest expense 126,258 108,062 102,469 454,147 430,932
Net income 33,456 34,709 31,985 134,264 116,716
Per Common Share Data (Diluted)
Net income available to common shareholders$ 0.25 $ 0.25 $ 0.27 $ 1.05 $ 1.00
Average diluted shares outstanding 135,383 135,011 114,716 128,301 116,255
Book value 13.42 13.59 13.05 13.42 13.05
Stock price 18.15 14.06 13.56 18.15 13.56
Dividend payout ratio 52% 52% 43% 50% 48%
Tangible common book value (1) 8.30 8.43 7.62 8.30 7.62
Performance Ratios
Return on average assets 0.91% 0.96% 1.07% 0.98% 0.98%
Return on average common equity 7.33% 7.62% 8.63% 7.84% 7.88%
Net interest margin (FTE) 3.63% 3.60% 3.50% 3.58% 3.72%
Efficiency ratio (2) 69.53% 66.05% 66.42% 65.82% 68.65%
Net charge-offs (recoveries) to average loans 0.00% 0.07% -0.03% 0.04% -0.02%
Allowance for loan losses to ending loans 0.55% 0.58% 0.75% 0.55% 0.75%
Non-performing loans to ending loans 1.62% 1.86% 2.11% 1.62% 2.11%
Balance Sheet
Total loans$ 9,010,512 $ 8,904,985 $ 6,948,405 $ 9,010,512 $ 6,948,405
Total assets 14,860,237 14,703,071 11,991,527 14,860,237 11,991,527
Total deposits 10,743,253 10,646,708 8,400,860 10,743,253 8,400,860
Total borrowed funds 2,152,086 2,023,099 1,920,246 2,152,086 1,920,246
Total shareholders' equity 1,814,417 1,834,457 1,491,170 1,814,417 1,491,170
Capital Ratios (1)
Risk-based capital ratios (EOP):
Tier 1 common equity 11.5% 11.8% 12.1% 11.5% 12.1%
Tier 1 11.7% 11.9% 12.6% 11.7% 12.6%
Total 12.2% 12.5% 13.3% 12.2% 13.3%
Leverage ratio (to average assets) 8.4% 8.4% 8.5% 8.4% 8.5%
Total equity to assets (averages) 12.44% 12.60% 12.42% 12.55% 12.42%
Tangible common equity to tangible assets 7.92% 8.13% 7.66% 7.92% 7.66%
Nonfinancial Data
Full-time equivalent employees 2,733 2,910 2,652 2,733 2,652
Number of branches 202 201 160 202 160
(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 basis EOP - End of period actual balances

TABLE 6
Income Statement (unaudited)
($ and shares in thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, September 30, December 31, December 31, December 31,
2016 2016 2015 2016 2015
Interest income$ 121,849 $ 119,713 $ 94,960 447,134 $ 399,189
Less: interest expense 11,932 11,910 9,038 44,431 33,073
Net interest income 109,917 107,803 85,922 402,703 366,116
Provision for loan losses (1,756) 1,306 484 960 2,923
Net interest income after provision for loan losses 111,673 106,497 85,438 401,743 363,193
Wealth management fees 8,593 8,572 8,142 34,641 34,395
Service charges on deposit accounts 10,448 11,054 10,039 41,578 43,372
Debit card and ATM fees 4,183 4,330 3,646 16,769 21,340
Mortgage banking revenue 4,399 7,718 2,145 20,240 12,540
Insurance premiums and commissions 152 132 10,491 20,527 42,714
Investment product fees 5,155 5,038 4,375 18,822 17,924
Company-owned life insurance 2,198 2,163 2,064 8,479 8,604
Change in Indemnification Asset - - 57 233 (9,034)
Other income 26,319 6,517 17,686 43,675 37,224
Net gain on sale of ONB Insurance Group, Inc. - - - 41,864 -
Net gain on branch divestitures - - 272 - 15,627
Gains (losses) on sales of securities 1,239 1,647 1,662 5,848 5,718
Gains (losses) on derivatives 65 72 35 154 208
Total noninterest income 62,751 47,243 60,614 252,830 230,632
Salaries and employee benefits 72,344 60,861 56,782 252,892 243,875
Occupancy 11,591 12,944 11,796 50,947 53,239
Equipment 3,675 3,564 2,856 13,448 13,183
Marketing 3,495 3,528 1,769 14,620 10,410
Data processing 7,961 8,242 6,020 32,002 27,309
Communication 2,805 2,755 2,106 9,959 9,586
Professional fees 3,904 3,252 2,808 15,705 11,756
Loan expenses 1,963 2,213 1,811 7,632 6,373
Supplies 885 799 565 2,865 2,275
FDIC assessment 2,583 2,149 1,913 8,681 7,503
Other real estate owned expense 944 728 482 4,195 2,703
Intangible amortization 3,241 3,233 2,816 12,486 11,746
Other expense 10,867 3,794 10,745 28,715 30,974
Total noninterest expense 126,258 108,062 102,469 454,147 430,932
Income before income taxes 48,166 45,678 43,583 200,426 162,893
Income tax expense 14,710 10,969 11,598 66,162 46,177
Net income$ 33,456 $ 34,709 $ 31,985 $ 134,264 $ 116,716
Diluted Earnings Per Share
Net income$ 0.25 $ 0.25 $ 0.27 $ 1.05 $ 1.00
Average Common Shares Outstanding
Basic 134,670 134,492 114,103 127,705 115,726
Diluted 135,383 135,011 114,716 128,301 116,255
Common shares outstanding at end of period 135,159 134,985 114,297 135,159 114,297

TABLE 7
Balance Sheet (unaudited)
($ in thousands)
December 31, September 30, December 31,
2016 2016 2015
Assets
Federal Reserve Bank account$ 36,496 $ 31,634 $ 125,724
Money market investments 9,642 4,513 2,783
Investments:
Treasury and government sponsored agencies 541,190 622,726 768,564
Mortgage-backed securities 1,535,659 1,495,683 1,082,403
States and political subdivisions 1,131,003 1,148,147 1,100,501
Other securities 441,110 449,614 428,951
Total investments 3,648,962 3,716,170 3,380,419
Loans held for sale 90,682 60,465 13,810
Loans:
Commercial 1,917,099 1,836,380 1,804,615
Commercial and agriculture real estate 3,130,853 3,092,575 1,847,821
Consumer:
Home equity 476,439 481,995 359,954
Other consumer loans 1,398,591 1,388,803 1,183,814
Subtotal of commercial and consumer loans 6,922,982 6,799,753 5,196,204
Residential real estate 2,087,530 2,105,232 1,644,614
Covered loans - - 107,587
Total loans 9,010,512 8,904,985 6,948,405
Total earning assets 12,796,294 12,717,767 10,471,141
Allowance for loan losses (49,808) (51,547) (52,233)
Nonearning Assets:
Cash and due from banks 209,381 224,893 91,311
Premises and equipment 429,622 333,266 196,676
Goodwill and intangible assets 692,695 696,128 619,942
Company-owned life insurance 352,956 351,431 341,294
Net deferred tax assets 181,863 169,466 109,984
Loan servicing rights 25,561 25,920 10,468
FDIC Indemnification Asset - - 9,030
Other real estate owned 18,546 23,719 12,498
Other assets 203,127 212,028 181,416
Total nonearning assets 2,113,751 2,036,851 1,572,619
Total assets$ 14,860,237 $ 14,703,071 $ 11,991,527
Liabilities and Equity
Noninterest-bearing demand deposits$ 3,016,093 $ 2,944,331 $ 2,488,855
NOW accounts 2,596,595 2,486,190 2,133,536
Savings accounts 2,954,709 2,963,637 2,201,352
Money market accounts 707,748 687,895 577,050
Other time deposits 1,353,614 1,400,068 901,352
Total core deposits 10,628,759 10,482,121 8,302,145
Brokered CD's 114,494 164,587 98,715
Total deposits 10,743,253 10,646,708 8,400,860
Federal funds purchased and interbank borrowings 213,003 125,121 291,090
Securities sold under agreements to repurchase 367,052 347,804 387,409
Federal Home Loan Bank advances 1,353,092 1,331,379 1,023,491
Other borrowings 218,939 218,795 218,256
Total borrowed funds 2,152,086 2,023,099 1,920,246
Accrued expenses and other liabilities 150,481 198,807 179,251
Total liabilities 13,045,820 12,868,614 10,500,357
Common stock, surplus, and retained earnings 1,873,789 1,853,286 1,525,967
Other comprehensive income (59,372) (18,829) (34,797)
Total shareholders' equity 1,814,417 1,834,457 1,491,170
Total liabilities and shareholders' equity$ 14,860,237 $ 14,703,071 $ 11,991,527

TABLE 8
Average Balance Sheet and Interest Rates (unaudited)
($ in thousands)
Three Months Ended Three Months Ended Three Months Ended
December 31, 2016 September 30, 2016 December 31, 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$ 40,791 $ 37 0.36% $ 21,923 $ 23 0.42% $ 94,660 $ 29 0.12%
Investments:
Treasury and gov't sponsored agencies 551,665 2,754 2.00% 671,295 3,390 2.02% 770,472 3,658 1.90%
Mortgage-backed securities 1,504,887 7,182 1.91% 1,414,753 6,353 1.80% 1,134,521 5,356 1.89%
States and political subdivisions 1,141,703 13,458 4.72% 1,139,983 13,329 4.68% 1,088,917 12,935 4.75%
Other securities 445,877 2,868 2.57% 446,870 2,566 2.30% 431,541 2,635 2.44%
Total investments 3,644,132 26,262 2.88% 3,672,901 25,638 2.79% 3,425,451 24,584 2.87%
Loans:
Commercial (2) 1,871,338 17,453 3.65% 1,861,906 18,268 3.84% 1,773,804 16,861 3.72%
Commercial and agriculture real estate (2) 3,125,500 45,375 5.68% 2,975,029 41,906 5.51% 1,860,536 27,496 5.78%
Consumer:
Home equity (2) 485,984 4,597 3.76% 483,678 4,895 4.03% 424,013 4,218 3.95%
Other consumer loans (2) 1,384,017 11,942 3.43% 1,404,947 11,960 3.39% 1,160,652 9,747 3.33%
Subtotal commercial and consumer loans 6,866,839 79,367 4.60% 6,725,560 77,029 4.56% 5,219,005 58,322 4.43%
Residential real estate loans (2) 2,161,583 21,689 4.00% 2,155,070 22,343 4.14% 1,675,707 17,188 4.10%
Total loans (2) 9,028,422 101,056 4.42% 8,880,630 99,372 4.41% 6,894,712 75,510 4.32%
Total earning assets$ 12,713,345 $ 127,355 3.97% $ 12,575,454 $ 125,033 3.94% $ 10,414,823 $ 100,123 3.80%
Less: Allowance for loan losses (52,691) (52,809) (52,677)
Non-Earning Assets:
Cash and due from banks$ 209,957 $ 204,991 $ 118,494
Other assets 1,806,507 1,721,772 1,460,768
Total assets 14,677,118 $ 14,449,408 $ 11,941,408
Interest-Bearing Liabilities:
NOW accounts $ 2,560,533 $ 430 0.07% $ 2,461,799 $ 456 0.07% $ 2,063,815 $ 289 0.06%
Savings accounts 2,952,666 1,138 0.15% 2,708,307 962 0.14% 2,207,640 784 0.14%
Money market accounts 703,904 142 0.08% 936,232 326 0.14% 828,501 263 0.13%
Other time deposits 1,392,410 2,714 0.78% 1,352,876 2,704 0.79% 909,985 2,123 0.93%
Total interest-bearing deposits 7,609,513 4,424 0.23% 7,459,214 4,448 0.24% 6,009,941 3,459 0.23%
Brokered CD's 132,901 293 0.88% 174,375 371 0.85% 80,951 141 0.69%
Total interest-bearing deposits and CD's 7,742,414 4,717 0.24% 7,633,589 4,819 0.25% 6,090,892 3,600 0.23%
Federal funds purchased and interbank borrowings 79,913 107 0.53% 178,770 226 0.50% 114,174 83 0.29%
Securities sold under agreements to repurchase 354,709 370 0.41% 355,735 375 0.42% 415,586 378 0.36%
Federal Home Loan Bank advances 1,264,368 4,383 1.38% 1,129,756 4,137 1.46% 927,988 2,714 1.16%
Other borrowings 218,860 2,355 4.30% 218,719 2,353 4.30% 218,178 2,263 4.15%
Total borrowed funds 1,917,850 7,215 1.50% 1,882,980 7,091 1.50% 1,675,926 5,438 1.29%
Total interest-bearing liabilities$ 9,660,264 $ 11,932 0.49% $ 9,516,569 $ 11,910 0.50% $ 7,766,818 $ 9,038 0.46%
Noninterest-Bearing Liabilities
Demand deposits 3,006,263 2,895,945 2,483,234
Other liabilities 184,598 215,620 208,696
Shareholders' equity 1,825,993 1,821,274 1,482,660
Total liabilities and shareholders' equity$ 14,677,118 $ 14,449,408 $ 11,941,408
Net interest rate spread 3.48% 3.44% 3.34%
Net interest margin (FTE) 3.63% 3.60% 3.50%
FTE adjustment $ 5,506 $ 5,320 $ 5,163
(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 (unaudited)
($ in thousands)
Twelve Months Ended Twelve Months Ended
December 31, 2016 December 31, 2015
AverageIncome (1)/Yield/ AverageIncome (1)/Yield/
Earning Assets: BalanceExpenseRate BalanceExpenseRate
Fed Funds sold, resell agr, Fed Reserve
Bank account, and money market$ 32,697 $ 130 0.40% $ 43,383 $ 47 0.11%
Investments:
Treasury and gov't sponsored agencies 672,659 13,207 1.96% 829,728 16,080 1.94%
Mortgage-backed securities 1,295,749 24,174 1.87% 1,137,565 20,645 1.81%
States and political subdivisions 1,125,713 53,003 4.71% 1,023,983 49,162 4.80%
Other securities 438,832 10,391 2.37% 444,520 10,903 2.45%
Total investments 3,532,953 100,775 2.85% 3,435,796 96,790 2.82%
Loans:
Commercial (2) 1,835,317 70,591 3.85% 1,754,141 75,900 4.33%
Commercial and agriculture real estate (2) 2,648,911 150,592 5.69% 1,862,055 118,237 6.35%
Consumer:
Home equity (2) 459,648 20,356 4.43% 439,657 17,480 3.98%
Other consumer loans (2) 1,336,381 45,020 3.37% 1,115,430 39,370 3.53%
Subtotal commercial and consumer loans 6,280,257 286,559 4.56% 5,171,283 250,987 4.85%
Residential real estate loans (2) 1,995,060 80,963 4.06% 1,712,636 70,908 4.14%
Total loans (2) 8,275,317 367,522 4.44% 6,883,919 321,895 4.68%
Total earning assets$ 11,840,967 $ 468,427 3.96% $ 10,363,098 $ 418,732 4.04%
Less: Allowance for loan losses (52,215) (50,538)
Non-Earning Assets:
Cash and due from banks$ 192,401 $ 163,275
Other assets 1,661,200 1,451,125
Total assets $ 13,642,353 $ 11,926,960
Interest-bearing Liabilities:
NOW accounts $ 2,389,143 $ 1,529 0.06% $ 2,160,019 $ 758 0.04%
Savings accounts 2,595,622 3,723 0.14% 2,299,357 3,199 0.14%
Money market accounts 763,909 840 0.11% 677,414 577 0.09%
Other time deposits 1,209,414 9,898 0.82% 1,001,436 9,270 0.93%
Total interest-bearing deposits 6,958,088 15,990 0.23% 6,138,226 13,804 0.23%
Brokered CD's 152,233 1,293 0.85% 62,346 364 0.58%
Total interest-bearing deposits and CD's 7,110,321 17,283 0.24% 6,200,572 14,168 0.23%
Federal funds purchased and interbank borrowings 137,997 673 0.49% 126,124 265 0.21%
Securities sold under agreements to repurchase 368,757 1,509 0.41% 406,117 1,488 0.37%
Federal Home Loan Bank advances 1,121,413 15,547 1.39% 793,703 8,122 1.02%
Other borrowings 222,708 9,419 4.23% 217,978 9,030 4.14%
Total borrowed funds 1,850,875 27,148 1.47% 1,543,922 18,905 1.22%
Total interest-bearing liabilities$ 8,961,196 $ 44,431 0.50% $ 7,744,494 $ 33,073 0.43%
Noninterest-Bearing Liabilities
Demand deposits 2,776,140 2,500,571
Other liabilities 192,443 200,994
Shareholders' equity 1,712,574 1,480,901
Total liabilities and shareholders' equity$ 13,642,353 $ 11,926,960
Net interest rate spread 3.46% 3.61%
Net interest margin (FTE) 3.58% 3.72%
FTE adjustment $ 21,293 $ 19,543
(1) Interest income is reflected on a fully taxable equivalent basis (FTE).
(2) Includes loans held for sale.

TABLE 10
Asset Quality (EOP) (unaudited)
($ in thousands)
Three Months Ended Twelve Months Ended
December 31,September 30,December 31, December 31,December 31,
2016 2016 2015 2016 2015
Beginning allowance for loan losses$ 51,547 $ 51,804 $ 51,226 $ 52,233 $ 47,849
Provision for loan losses (1,756) 1,306 484 960 2,923
Gross charge-offs (3,472) (4,519) (4,353) (14,610) (12,877)
Gross recoveries 3,489 2,956 4,876 11,225 14,338
Net (charge-offs) recoveries 17 (1,563) 523 (3,385) 1,461
Ending allowance for loan losses$ 49,808 $ 51,547 $ 52,233 $ 49,808 $ 52,233
Net charge-offs (recoveries) / average loans (1) 0.00% 0.07% -0.03% 0.04% -0.02%
Average loans outstanding (1)$ 9,018,280 $ 8,865,400 $ 6,891,197 $ 8,265,169 $ 6,756,135
EOP loans outstanding (1)$ 9,010,512 $ 8,904,985 $ 6,948,405 $ 9,010,512 $ 6,948,405
Allowance for loan losses / EOP loans (1) 0.55% 0.58% 0.75% 0.55% 0.75%
Underperforming Assets:
Loans 90 Days and over (still accruing)$ 328 $ 443 $ 916 $ 328 $ 916
Non-performing loans:
Nonaccrual loans (2) 131,407 151,484 132,373 131,407 132,373
Renegotiated loans 14,376 13,860 14,285 14,376 14,285
Total non-performing loans 145,783 165,344 146,658 145,783 146,658
Foreclosed properties 18,546 23,719 12,498 18,546 12,498
Total underperforming assets$ 164,657 $ 189,506 $ 160,072 $ 164,657 $ 160,072
Classified loans - "problem loans"$ 220,429 $ 233,469 $ 213,294 $ 220,429 $ 213,294
Other classified assets 7,063 6,634 6,857 7,063 6,857
Criticized loans - "special mention loans" 95,462 125,840 134,347 95,462 134,347
Total classified and criticized assets$ 322,954 $ 365,943 $ 354,498 $ 322,954 $ 354,498
Non-performing loans / EOP loans (1) 1.62% 1.86% 2.11% 1.62% 2.11%
Allowance to non-performing loans (3) 34% 31% 36% 34% 36%
Under-performing assets / EOP loans (1) 1.83% 2.13% 2.30% 1.83% 2.30%
EOP total assets$ 14,860,237 $ 14,703,071 $ 11,991,527 $ 14,860,237 $ 11,991,527
Under-performing assets / EOP assets 1.11% 1.29% 1.33% 1.11% 1.33%
EOP - End of period actual balances
(1) Excludes loans held for sale.
(2) Includes renegotiated loans totaling $26.3 million at December 31, 2016, $29.9 million at September 30, 2016 and $30.0 million at December 31, 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 (unaudited)
($ in thousands)
Three Months Ended Twelve Months Ended
December 31,September 30,December 31, December 31,December 31,
2016 2016 2015 2016 2015
Actual End of Period Balances
GAAP shareholders' equity $ 1,814,417 $ 1,834,457 $ 1,491,170 $ 1,814,417 $ 1,491,170
Deduct:
Goodwill 655,018 655,210 584,634 655,018 584,634
Intangibles 37,677 40,918 35,308 37,677 35,308
692,695 696,128 619,942 692,695 619,942
Tangible shareholders' equity $ 1,121,722 $ 1,138,329 $ 871,228 $ 1,121,722 $ 871,228
Actual End of Period Balances
GAAP assets $ 14,860,237 $ 14,703,071 $ 11,991,527 $ 14,860,237 $ 11,991,527
Add:
Trust overdrafts 122 47 29 122 29
Deduct:
Goodwill 655,018 655,210 584,634 655,018 584,634
Intangibles 37,677 40,918 35,308 37,677 35,308
692,695 696,128 619,942 692,695 619,942
Tangible assets $ 14,167,664 $ 14,006,990 $ 11,371,614 $ 14,167,664 $ 11,371,614
Risk-weighted assets$ 10,101,539 $ 9,703,233 $ 7,718,065 $ 10,101,539 $ 7,718,065
GAAP net income$ 33,456 $ 34,709 $ 31,985 $ 134,264 $ 116,716
Add:
Intangible amortization (net of tax) 3,192 3,213 2,545 11,979 10,593
Tangible net income$ 36,648 $ 37,922 $ 34,530 $ 146,243 $ 127,309
Tangible Ratios
Return on tangible common equity 13.07% 13.33% 15.85% 13.04% 14.61%
Return on tangible assets 1.03% 1.08% 1.21% 1.03% 1.12%
Tangible common equity to tangible assets 7.92% 8.13% 7.66% 7.92% 7.66%
Tangible common equity to risk-weighted assets 11.10% 11.73% 11.29% 11.10% 11.29%
Tangible common book value (1) 8.30 8.43 7.62 8.30 7.62
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$ 1,176,849 $ 1,156,274 $ 968,772 $ 1,176,849 $ 968,772
Deduct:
Trust Preferred Securities 45,000 45,000 45,000 45,000 45,000
Additional Tier 1 capital deductions (30,968) (30,466) (10,725) (30,968) (10,725)
14,032 14,534 34,275 14,032 34,275
Tier 1 common equity $ 1,162,817 $ 1,141,740 $ 934,497 $ 1,162,817 $ 934,497
Risk-weighted assets 10,101,539 9,703,233 7,718,065 10,101,539 7,718,065
Tier 1 common equity to risk-weighted assets 11.51% 11.77% 12.11% 11.51% 12.11%

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

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