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Old National’s 1st quarter net income improves 33.4% and earnings per share increases 12.5% over 1st quarter 2016

1ST Quarter 2017 Highlights:

  • Earnings of $36.0 million, or $0.27 per share
  • Commercial and commercial real estate loan growth of 6.8% annualized from 4th quarter 2016
  • Tangible book value1 increase of 9.5% from 1st quarter 2016
  • Strong expense control
  • Consolidation of 15 branches throughout footprint

1 Non-GAAP measures – refer to Tables 4 & 10 for Non-GAAP reconciliations

EVANSVILLE, Ind., April 25, 2017 (GLOBE NEWSWIRE) -- Today Old National Bancorp (the “Company” or “Old National”) (NASDAQ: ONB) reported 1st quarter 2017 net income of $36.0 million, or $0.27 per diluted share. Included in the current quarter were $1.4 million in pre-tax branch consolidation charges related to the 15 banking centers that were consolidated by the Company in January 2017. This current quarter net income represents an increase of 33.4% over the 1st quarter of 2016 net income of $27.0 million and a 7.6% increase over 4th quarter 2016 net income of $33.5 million. Contributing to this year-over-year increase was the successful redeployment of the proceeds from the sale of Old National’s insurance subsidiary into the more profitable banking business with the Anchor Bank (“Anchor”) partnership. Both transactions closed in the 2nd quarter of 2016. During the 4th quarter, Old National recognized $12.8 million in pre-tax 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 charges of $1.6 million.

“With a 33% year-over-year increase in net income, strong commercial loan growth and well-controlled expenses, this was a strong 1st quarter for Old National and our stakeholders,” said Old National Chairman and CEO Bob Jones. “This performance demonstrates our continued focus on execution and our commitment to driving shareholder value.”

Committed to our Strategic Imperatives

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 12 years:

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

Balance Sheet and Net Interest Margin

Old National’s period-end loans, including loans held for sale, at March 31, 2017, totaled $9.149 billion, an increase of $47.9 million from the $9.101 billion at December 31, 2016. The Company’s residential mortgage loans held for sale declined $73.3 million during this same period. Commercial and commercial real estate loans grew by 6.8%, annualized, from the 4th quarter of 2016 to the 1st quarter of 2017.

Total period-end core deposits, including demand and interest-bearing deposits, increased $75.2 million, or 2.8% annualized, to $10.704 billion at March 31, 2017, compared to $10.629 billion at December 31, 2016.

Net interest income for the 1st quarter of 2017 totaled $105.8 million compared to $109.9 million in the 4th quarter of 2016, and $85.6 million in the 1st quarter of 2016. On a fully taxable equivalent basis, net interest income was $111.5 million for the 1st quarter of 2017 and represented a net interest margin on total average earning assets of 3.50%. These results compare to net interest income on a fully taxable equivalent basis of $115.4 million and a margin of 3.63% in the 4th quarter of 2016. In the 1st quarter of 2016, Old National reported net interest income on a fully taxable equivalent basis of $90.8 million and a margin of 3.52%. Refer to Table 4 for Non-GAAP taxable equivalent reconciliations.

Old National recorded $12.6 million in accretion income as part of net interest income, or a 40 basis point contribution to the net interest margin, in the 1st quarter of 2017. Accretion income is related to purchase accounting discounts from the Company’s various acquisitions. Total accretion income in the 4th quarter of 2016 and the 1st quarter of 2016 reported by Old National was $16.8 million, or a 53 basis point net interest margin contribution, and $11.2 million, or a 44 basis point net interest margin contribution, respectively. Excluding accretion income, the core net interest margin was 3.10% in the 1st quarter of 2017, compared to 3.10% in the 4th quarter of 2016 and 3.08% in the 1st quarter of 2016. Refer to Table 4 for Non-GAAP reconciliations.

Noninterest Income

Total noninterest income for the 1st quarter of 2017 amounted to $42.9 million and compares to $62.8 million reported in the 4th quarter of 2016 and $49.5 million in the 1st quarter of 2016. The current quarter included $1.5 million of recoveries on Anchor loans that had been fully charged-off prior to the acquisition. During the 4th quarter of 2016, Old National recognized pre-tax gains of $12.8 million relating to the repurchase of various bank properties as well as $6.4 million of recoveries on Anchor loans. The 1st quarter of 2016 included $13.1 million in insurance income, compared to relatively none in both the 4th quarter of 2016 and the 1st quarter of 2017.

Noninterest Expenses

Noninterest expenses for Old National totaled $101.9 million for the 1st quarter of 2017 and included $1.4 million in charges relating to the Company’s 15 banking centers consolidated in January 2017. Noninterest expenses for the 4th quarter of 2016 totaled $126.3 million and included 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. The 1st quarter of 2016 included $1.4 million in pre-tax merger and integration charges. Following Old National’s 15 branch consolidations in January, the Company now operates 188 branches throughout its franchise.

Capital

Old National’s capital position at March 31, 2017, 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 11.7% and 12.2% at December 31, 2016, and 12.5% and 13.2% at March 31, 2016. Old National did not repurchase any stock in the open market during the 1st quarter of 2017.

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
March 31, 2017
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%11.4%
Tier 1 Leverage Capital Ratio> 4.0%8.5%

Old National’s ratio of tangible common equity to tangible assets was 8.16% at March 31, 2017, compared to 7.92% at December 31, 2016, and 7.88% at March 31, 2016. Refer to Table 10 for Non-GAAP reconciliations.

Credit

Old National recorded a provision expense of $0.3 million and had net charge-offs of $0.3 million in the 1st quarter of 2017. These results compare to $1.8 million in provision recapture and net recoveries of $17 thousand, and provision expense of $0.1 million and net charge-offs of $1.6 million, in the 4th quarter of 2016 and the 1st quarter of 2016, respectively. Net charge-offs for the 1st quarter of 2017 were 0.01% of average total loans on an annualized basis, compared to net charge-offs of 0.00% of average total loans in the 4th quarter of 2016 and net charge-offs of 0.09% of average total loans in the 1st quarter of 2016.

Delinquencies remained low as Old National reported 30+ day delinquent loans of 0.32% in the 1st quarter of 2017 compared to 0.43% in the 4th quarter of 2016. Old National’s 90+ day delinquent loans for the 1st quarter of 2017 and the 4th quarter of 2016 were near zero.

At March 31, 2017, Old National’s allowance for loan losses was $49.8 million, or 0.55% of total loans, compared to an allowance of $49.8 million, or 0.55% of total loans at December 31, 2016, and $50.7 million, or 0.72% of total loans, at March 31, 2016. The coverage ratio (allowance to non-performing loans) stood at 38% at March 31, 2017, compared to 34% at December 31, 2016, and 38% at March 31, 2016.

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 March 31, 2017 ($ in millions) ONB
Excluding
Anchor1
AnchorONB
Consolidated
Allowance for Loan Losses (ALLL)$49.8 $0.0 $49.8
Remaining Loan Discount 62.0 55.1 117.1
Total ALLL + Remaining Loan Discount$111.8 $55.1 $166.9
Pre-Discount Loan Balance$7,844.8 $1,404.0 $9,248.8
ALLL/Pre-Discount Loan Balance 0.64% 0.00% 0.54%
Mark/Pre-Discount Loan Balance 0.79% 3.93% 1.27%
Combined ALLL & Discount/Pre-Discount Loan Balance 1.42% 3.93% 1.80%

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) 1Q17 4Q161Q16
Non-Performing Loans (NPLs)$130.3 $145.8 $132.0
Problem Loans (Including NPLs) 219.9 220.4 200.3
Special Mention Loans 95.9 95.5 132.5
Net Charge-Off (Recoveries) Ratio 0.01% 0.00% 0.09%
Provision for Loan Losses$0.3 ($1.8)$0.1
Allowance for Loan Losses 49.8 49.8 50.7

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. and has been recognized as a World’s Most Ethical Company by the Ethisphere Institute for six consecutive years. 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, April 25, 2017, to discuss 1st quarter 2017 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 April 25 through May 9. To access the replay, dial 1-855-859-2056, Conference ID Code 3913117.

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)1Q174Q161Q16
Net Interest Income$105.8 $109.9 $85.6
Taxable Equivalent Adjustment 5.7 5.5 5.2
Net Interest Income – Taxable Equivalent$111.5 $115.4 $90.8
Less Accretion1 12.6 16.8 11.2
Core Net Interest Income – Taxable Equivalent Less Accretion$98.9 $98.6 $79.6
Average Earning Assets$12,742.9 $12,713.3 $10,331.0
Core Net Interest Margin – Fully Taxable Equivalent 3.10% 3.10% 3.08%

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
March 31,December 31,March 31,
2017 2016 2016
Income Statement
Net interest income$105,801 $109,917 $85,643
Provision for loan losses 347 (1,756) 91
Noninterest income 42,920 62,751 49,451
Noninterest expense 101,891 126,258 98,355
Net income 35,992 33,456 26,977
Per Common Share Data (Diluted)
Net income available to common shareholders$0.27 $0.25 $0.24
Average diluted shares outstanding 135,431 135,383 114,563
Book value 13.63 13.42 13.19
Stock price 17.35 18.15 12.19
Dividend payout ratio 48% 52% 54%
Tangible common book value (1) 8.54 8.30 7.80
Performance Ratios
Return on average assets 0.98% 0.91% 0.91%
Return on average common equity 7.89% 7.33% 7.18%
Net interest margin (FTE) 3.50% 3.63% 3.52%
Efficiency ratio (2) 64.66% 69.53% 68.76%
Net charge-offs (recoveries) to average loans 0.01% 0.00% 0.09%
Allowance for loan losses to ending loans 0.55% 0.55% 0.72%
Non-performing loans to ending loans 1.43% 1.62% 1.88%
Balance Sheet
Total loans$9,131,773 $9,010,512 $7,007,074
Total assets 14,869,645 14,860,237 11,932,326
Total deposits 10,821,352 10,743,253 8,588,895
Total borrowed funds 2,066,617 2,152,086 1,662,191
Total shareholders' equity 1,846,359 1,814,417 1,508,643
Capital Ratios (1)
Risk-based capital ratios (EOP):
Tier 1 common equity 11.4% 11.5% 12.0%
Tier 1 11.7% 11.7% 12.5%
Total 12.2% 12.2% 13.2%
Leverage ratio (to average assets) 8.5% 8.4% 8.6%
Total equity to assets (averages) 12.36% 12.44% 12.63%
Tangible common equity to tangible assets 8.16% 7.92% 7.88%
Nonfinancial Data
Full-time equivalent employees 2,659 2,733 2,615
Number of branches 188 203 160
(1) See non-GAAP measures on Table 10.
(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
March 31,December 31,March 31,
2017 2016 2016
Interest income$118,468$121,849 $95,329
Less: interest expense 12,667 11,932 9,686
Net interest income 105,801 109,917 85,643
Provision for loan losses 347 (1,756) 91
Net interest income after provision for loan losses 105,454 111,673 85,552
Wealth management fees 8,999 8,593 8,121
Service charges on deposit accounts 9,843 10,448 9,639
Debit card and ATM fees 4,236 4,183 3,785
Mortgage banking revenue 4,226 4,399 2,920
Insurance premiums and commissions 107 152 13,121
Investment product fees 4,989 5,155 3,905
Company-owned life insurance 2,149 2,198 2,038
Change in Indemnification Asset - - (655)
Other income 6,825 26,319 5,424
Gains (losses) on sales of securities 1,500 1,239 1,106
Gains (losses) on derivatives 46 65 47
Total noninterest income 42,920 62,751 49,451
Salaries and employee benefits 56,564 72,344 56,972
Occupancy 12,134 11,591 12,844
Equipment 3,227 3,675 2,893
Marketing 3,050 3,495 2,486
Data processing 7,608 7,961 7,123
Communication 2,414 2,805 1,864
Professional fees 2,651 3,904 3,368
Loan expenses 1,631 1,963 1,333
Supplies 579 885 583
FDIC assessment 2,487 2,583 1,919
Other real estate owned expense 1,115 944 424
Intangible amortization 3,020 3,241 2,647
Other expense 5,411 10,867 3,899
Total noninterest expense 101,891 126,258 98,355
Income before income taxes 46,483 48,166 36,648
Income tax expense 10,491 14,710 9,671
Net income$35,992$33,456 $26,977
Diluted Earnings Per Share
Net income$0.27$0.25 $0.24
Average Common Shares Outstanding
Basic 134,912 134,670 113,998
Diluted 135,431 135,383 114,563
Common shares outstanding at end of period 135,435 135,159 114,352

TABLE 7
Balance Sheet (unaudited)
($ in thousands)
March 31, December 31, March 31,
2017 2016 2016
Assets
Federal Reserve Bank account$24,460 $36,496 $20,516
Money market investments 7,601 9,642 1,783
Investments:
Treasury and government sponsored agencies 595,172 541,190 757,745
Mortgage-backed securities 1,484,561 1,535,659 1,005,588
States and political subdivisions 1,144,412 1,131,003 1,112,599
Other securities 446,830 441,110 431,368
Total investments 3,670,975 3,648,962 3,307,300
Loans held for sale 17,373 90,682 22,546
Loans:
Commercial 1,910,536 1,917,099 1,792,988
Commercial and agriculture real estate 3,222,865 3,130,853 1,922,754
Consumer:
Home equity 464,911 476,439 347,776
Other consumer loans 1,421,199 1,398,591 1,293,560
Subtotal of commercial and consumer loans 7,019,511 6,922,982 5,357,078
Residential real estate 2,112,262 2,087,530 1,649,996
Total loans 9,131,773 9,010,512 7,007,074
Total earning assets 12,852,182 12,796,294 10,359,219
Allowance for loan losses (49,834) (49,808) (50,700)
Non-earning Assets:
Cash and due from banks 184,974 209,381 153,259
Premises and equipment 420,866 429,622 198,065
Goodwill and intangible assets 689,675 692,695 617,077
Company-owned life insurance 353,786 352,956 342,292
Net deferred tax assets 165,376 181,863 98,712
Loan servicing rights 25,446 25,561 10,534
FDIC Indemnification Asset - - 7,703
Other real estate owned 12,547 18,546 13,522
Other assets 214,627 203,127 182,643
Total non-earning assets 2,067,297 2,113,751 1,623,807
Total assets$14,869,645 $14,860,237 $11,932,326
Liabilities and Equity
Noninterest-bearing demand deposits$3,024,111 $3,016,093 $2,491,767
NOW accounts 2,635,317 2,596,595 2,178,690
Savings accounts 2,997,919 2,954,709 2,271,341
Money market accounts 697,287 707,748 561,250
Other time deposits 1,349,303 1,353,614 919,213
Total core deposits 10,703,937 10,628,759 8,422,261
Brokered CD's 117,415 114,494 166,634
Total deposits 10,821,352 10,743,253 8,588,895
Federal funds purchased and interbank borrowings 61,016 213,003 165,320
Securities sold under agreements to repurchase 345,550 367,052 379,060
Federal Home Loan Bank advances 1,441,030 1,353,092 899,418
Other borrowings 219,021 218,939 218,393
Total borrowed funds 2,066,617 2,152,086 1,662,191
Accrued expenses and other liabilities 135,317 150,481 172,597
Total liabilities 13,023,286 13,045,820 10,423,683
Common stock, surplus, and retained earnings 1,894,924 1,873,789 1,538,228
Other comprehensive income (48,565) (59,372) (29,585)
Total shareholders' equity 1,846,359 1,814,417 1,508,643
Total liabilities and shareholders' equity$14,869,645 $14,860,237 $11,932,326

TABLE 8
Average Balance Sheet and Interest Rates (unaudited)
($ in thousands)
Three Months Ended Three Months Ended Three Months Ended
March 31, 2017 December 31, 2016 March 31, 2016
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$27,482 $310.46% $40,791 $370.36% $44,499 $490.45%
Investments:
Treasury and gov't sponsored agencies 540,422 2,7802.06% 551,665 2,7542.00% 730,379 3,4771.90%
Mortgage-backed securities 1,511,388 7,8182.07% 1,504,887 7,1821.91% 1,050,520 5,0781.93%
States and political subdivisions 1,133,373 13,6074.80% 1,141,703 13,4584.72% 1,103,467 13,0094.72%
Other securities 445,235 2,8282.54% 445,877 2,8682.57% 428,324 2,8372.66%
Total investments 3,630,418 27,0332.98% 3,644,132 26,2622.88% 3,312,690 24,4012.95%
Loans: (2)
Commercial 1,887,929 19,0884.04% 1,871,338 17,4533.65% 1,781,711 17,1613.81%
Commercial and agriculture real estate 3,171,005 40,3245.09% 3,125,500 45,3755.68% 1,896,951 28,0385.85%
Consumer:
Home equity 476,353 4,6593.97% 485,984 4,5973.76% 413,796 4,2794.16%
Other consumer loans 1,408,100 11,7673.39% 1,384,017 11,9423.43% 1,210,993 9,6803.22%
Subtotal commercial and consumer loans 6,943,387 75,8384.43% 6,866,839 79,3674.60% 5,303,451 59,1584.49%
Residential real estate loans 2,141,571 21,2543.97% 2,161,583 21,6894.00% 1,670,389 16,9214.06%
Total loans 9,084,958 97,0924.29% 9,028,422 101,0564.42% 6,973,840 76,0794.35%
Total earning assets$12,742,858 $124,1563.91% $12,713,345 $127,3553.97% $10,331,029 $100,5293.88%
Less: Allowance for loan losses (50,710) (52,691) (52,077)
Non-earning Assets:
Cash and due from banks $195,620 $209,957 $166,351
Other assets 1,877,849 1,806,507 1,458,537
Total assets $14,765,617 $14,677,118 $11,903,840
Interest-Bearing Liabilities:
NOW accounts $2,585,814 $4560.07% $2,560,533 $4300.07% $2,114,798 $2370.05%
Savings accounts 2,969,866 1,1570.16% 2,952,666 1,1380.15% 2,224,151 7800.14%
Money market accounts 706,990 1490.09% 703,904 1420.08% 552,475 900.07%
Other time deposits 1,332,912 2,3680.72% 1,392,410 2,7140.78% 913,347 2,1150.93%
Total interest-bearing deposits 7,595,582 4,1300.22% 7,609,513 4,4240.23% 5,804,771 3,2220.22%
Brokered CD's 107,519 2530.95% 132,901 2930.88% 127,287 2720.86%
Total interest-bearing deposits and CD's 7,703,101 4,3830.23% 7,742,414 4,7170.24% 5,932,058 3,4940.24%
Federal funds purchased and interbank borrowings 189,070 3560.76% 79,913 1070.53% 110,378 1220.45%
Securities sold under agreements to repurchase 331,400 2560.31% 354,709 3700.41% 386,044 3730.39%
Federal Home Loan Bank advances 1,429,977 5,3121.51% 1,264,368 4,3831.38% 1,106,691 3,4171.24%
Other borrowings 218,965 2,3604.31% 218,860 2,3554.30% 218,320 2,2804.18%
Total borrowed funds 2,169,412 8,2841.55% 1,917,850 7,2151.50% 1,821,433 6,1921.37%
Total interest-bearing liabilities$9,872,513 $12,6670.52% $9,660,264 $11,9320.49% $7,753,491 $9,6860.50%
Noninterest-Bearing Liabilities
Demand deposits $2,917,053 $3,006,263 $2,473,091
Other liabilities 150,392 184,598 174,296
Shareholders' equity 1,825,659 1,825,993 1,502,962
Total liabilities and shareholders' equity$14,765,617 $14,677,118 $11,903,840
Net interest rate spread 3.39% 3.48% 3.38%
Net interest margin (FTE) 3.50% 3.63% 3.52%
FTE adjustment $5,688 $5,506 $5,200
(1) Interest income is reflected on a fully taxable equivalent basis (FTE).
(2) Includes loans held for sale.

TABLE 9
Asset Quality (EOP) (unaudited)
($ in thousands)
Three Months Ended
March 31,December 31,March 31,
2017 2016 2016
Beginning allowance for loan losses$49,808 $51,547 $52,233
Provision for loan losses 347 (1,756) 91
Gross charge-offs (3,239) (3,472) (3,942)
Gross recoveries 2,918 3,489 2,318
Net (charge-offs) recoveries (321) 17 (1,624)
Ending allowance for loan losses$49,834 $49,808 $50,700
Net charge-offs (recoveries) / average loans (1) 0.01% 0.00% 0.09%
Average loans outstanding (1)$9,078,672 $9,018,280 $6,970,578
EOP loans outstanding (1)$9,131,773 $9,010,512 $7,007,074
Allowance for loan losses / EOP loans (1) 0.55% 0.55% 0.72%
Underperforming Assets:
Loans 90 Days and over (still accruing)$381 $328 $357
Non-performing loans:
Nonaccrual loans (2) 115,377 131,407 117,866
Renegotiated loans 14,969 14,376 14,155
Total non-performing loans 130,346 145,783 132,021
Foreclosed properties 12,547 18,546 13,522
Total underperforming assets$143,274 $164,657 $145,900
Classified loans - "problem loans"$219,929 $220,429 $200,297
Other classified assets 7,306 7,063 6,566
Criticized loans - "special mention loans" 95,881 95,462 132,475
Total classified and criticized assets$323,116 $322,954 $339,338
Non-performing loans / EOP loans (1) 1.43% 1.62% 1.88%
Allowance to non-performing loans (3) 38% 34% 38%
Under-performing assets / EOP loans (1) 1.57% 1.83% 2.08%
EOP total assets$14,869,645 $14,860,237 $11,932,326
Under-performing assets / EOP assets 0.96% 1.11% 1.22%
EOP - End of period actual balances
(1) Excludes loans held for sale.
(2) Includes renegotiated loans totaling $34.2 million at March 31, 2017, $26.3 million at December 31, 2016 and $35.7 million
at March 31, 2016.
(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.

Non-GAAP Measures (unaudited)
($ in thousands)
Three Months Ended
March 31,December 31,March 31,
2017 2016 2016
Actual End of Period Balances
GAAP shareholders' equity$1,846,359 $1,814,417 $1,508,643
Deduct:
Goodwill 655,018 655,018 584,634
Intangibles 34,657 37,677 32,443
689,675 692,695 617,077
Tangible shareholders' equity $1,156,684 $1,121,722 $891,566
Average Balances
GAAP shareholders' equity$1,825,659 $1,825,993 $1,502,962
Deduct:
Goodwill 655,018 655,041 584,634
Intangibles 36,097 39,239 33,783
691,115 694,280 618,417
Average tangible shareholders' equity $1,134,544 $1,131,713 $884,545
Actual End of Period Balances
GAAP assets$14,869,645 $14,860,237 $11,932,326
Add:
Trust overdrafts 86 122 48
Deduct:
Goodwill 655,018 655,018 584,634
Intangibles 34,657 37,677 32,443
689,675 692,695 617,077
Tangible assets $14,180,056 $14,167,664 $11,315,297
Risk-weighted assets$10,171,517 $10,099,613 $7,795,646
GAAP net income$35,992 $33,456 $26,977
Add:
Intangible amortization (net of tax) 1,963 2,107 1,720
Tangible net income$37,955 $35,563 $28,697
Tangible Ratios
Return on tangible common equity 13.13% 12.68% 12.88%
Return on average tangible common equity 13.38% 12.57% 12.98%
Return on tangible assets 1.07% 1.00% 1.01%
Tangible common equity to tangible assets 8.16% 7.92% 7.88%
Tangible common equity to risk-weighted assets 11.37% 11.11% 11.44%
Tangible common book value (1) 8.54 8.30 7.80
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$1,191,735 $1,176,849 $975,717
Deduct:
Trust Preferred Securities 45,000 45,000 45,000
Additional Tier 1 capital deductions (16,100) (30,968) (7,625)
28,900 14,032 37,375
Tier 1 common equity $1,162,835 $1,162,817 $938,342
Risk-weighted assets 10,171,517 10,099,613 7,795,646
Tier 1 common equity to risk-weighted assets 11.43% 11.51% 12.04%


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