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Old National’s 2nd quarter net income increases 8.0% over prior quarter; includes 10% annualized commercial loan growth

2nd Quarter 2017 Highlights:

  • Earnings of $38.9 million, or $0.28 per share
  • Commercial and commercial real estate loan growth of 10.0% annualized from 1st quarter 2017
  • Tangible book value1 increase of 3.6% from 1st quarter 2017

1 Non-GAAP measure – refer to Table 10 for Non-GAAP reconciliation

EVANSVILLE, Ind., July 25, 2017 (GLOBE NEWSWIRE) -- Today Old National Bancorp (the “Company” or “Old National”) (NASDAQ:ONB) reported 2nd quarter 2017 net income of $38.9 million, or $0.28 per diluted share. Included in the current quarter were $0.5 million in pre-tax net branch consolidation charges and a $1.0 million pre-tax charge for a client experience improvement initiative. This current quarter net income represents an increase of 8.0% over the 1st quarter of 2017 net income of $36.0 million. During the 1st quarter, Old National incurred $1.4 million in pre-tax branch consolidation charges related to the 15 banking centers that were consolidated by the Company in January 2017.

“Our strong 2nd quarter results are reflective of our transformation into higher growth markets and executing on our stated initiatives,” said Old National Chairman and CEO Bob Jones. “With strong commercial loan growth and low credit costs, coupled with revenue growth and well-maintained expenses, this was a successful quarter of execution for Old National.”

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 June 30, 2017, totaled $9.259 billion, an increase of $110.4 million, or 4.8% annualized, from the $9.149 billion at March 31, 2017. Importantly, Old National’s portfolio of commercial and commercial real estate loans grew by 10.0%, annualized, from the 1st quarter to the 2nd quarter of 2017.

Total period-end core deposits, including demand and interest-bearing deposits, decreased $142.7 million to $10.561 billion at June 30, 2017, compared to $10.704 billion at March 31, 2017.

Net interest income for the 2nd quarter of 2017 totaled $104.3 million compared to $105.8 million in the 1st quarter of 2017, and $99.3 million in the 2nd quarter of 2016. On a fully taxable equivalent basis, net interest income was $110.0 million for the 2nd quarter of 2017 and represented a net interest margin on total average earning assets of 3.42%. These results compare to net interest income on a fully taxable equivalent basis of $111.5 million and a margin of 3.50% in the 1st quarter of 2017. In the 2nd quarter of 2016, Old National reported net interest income on a fully taxable equivalent basis of $104.6 million and a margin of 3.57%. Refer to Table 3 for Non-GAAP taxable equivalent reconciliations.

In the 2nd quarter of 2017, Old National recorded $9.7 million in accretion income as part of net interest income, which represents 30 basis points of the Company’s net interest margin. Accretion income is related to purchase accounting discounts from the Company’s various acquisitions. Total accretion income in the 1st quarter of 2017 and the 2nd quarter of 2016 reported by Old National was $12.6 million, or 40 basis points of the net interest margin, and $14.2 million, or 49 basis points of the net interest margin, respectively.

Noninterest Income

Total noninterest income for the 2nd quarter of 2017 amounted to $49.3 million and compares to $42.9 million reported in the 1st quarter of 2017 and $93.4 million in the 2nd quarter of 2016. The current quarter included $1.6 million of recoveries on loans originated by AnchorBank, fsb that had been fully charged-off prior to the acquisition; the 1st quarter of 2017 included $1.5 million of such recoveries. During the 2nd quarter of 2016, Old National recognized a $41.9 million pre-tax gain on the sale of its insurance subsidiary. The 2nd quarter of 2016 also included $7.1 million in insurance income, compared to essentially none in both the 1st quarter of 2017 and the 2nd quarter of 2017.

Noninterest Expenses

Noninterest expenses for Old National totaled $102.8 million for the 2nd quarter of 2017. The current quarter included $1.7 million in pre-tax charges: $0.7 million related to branch consolidations and $1.0 million related to a client-experience improvement initiative currently in process at the Company. Noninterest expenses for the 1st quarter of 2017 totaled $101.9 million and included $1.4 million in pre-tax charges related to branch consolidations. In the 2nd quarter of 2016, noninterest expenses totaled $121.5 million and included the following pre-tax charges: $7.2 million for merger and integration, $4.9 million for the Old National Bank Foundation and community support and $1.1 million for branch consolidations. Old National currently operates 188 branches throughout its franchise.

Capital

Old National’s capital position at June 30, 2017, remained well above regulatory guideline minimums with regulatory tier 1 and total risk-based capital ratios of 11.8% and 12.3%, respectively, compared to 11.7% and 12.2% at March 31, 2017, and 11.8% and 12.4% at June 30, 2016. Old National did not repurchase any stock in the open market during the 2nd quarter of 2017.

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
June 30, 2017
Tier 1 Risk-Based Capital Ratio> 8.5%11.8%
Total Risk-Based Capital Ratio> 10.5%12.3%
Common Equity Tier 1 Capital Ratio > 7.0%11.5%
Tier 1 Leverage Capital Ratio> 4.0%8.7%

Old National’s ratio of tangible common equity to tangible assets was 8.41% at June 30, 2017, compared to 8.16% at March 31, 2017, and 8.10% at June 30, 2016. Refer to Table 10 for Non-GAAP reconciliations.

Credit

Old National recorded a provision expense of $1.4 million and had net charge-offs of $0.2 million in the 2nd quarter of 2017. These results compare to $0.3 million in provision expense and net charge-offs of $0.3 million, and provision expense of $1.3 million and net charge-offs of $0.2 million, in the 1st quarter of 2017 and the 2nd quarter of 2016, respectively. Net charge-offs for the 2nd quarter of 2017 were 0.01% of average total loans on an annualized basis, compared to net charge-offs of 0.01% of average total loans in both the 1st quarter of 2017 and the 2nd quarter of 2016, respectively.

Delinquencies remained low as Old National reported 30+ day delinquent loans of 0.32% in the 2nd quarter of 2017 compared to 0.32% in the 1st quarter of 2017. Old National’s 90+ day delinquent loans for the 2nd quarter of 2017 were near zero compared to 0.01% for the 2nd quarter of 2016.

At June 30, 2017, Old National’s allowance for loan losses was $51.0 million, or 0.55% of total loans, compared to an allowance of $49.8 million, or 0.55% of total loans at March 31, 2017, and $51.8 million, or 0.59% of total loans, at June 30, 2016. The coverage ratio (allowance to non-performing loans) stood at 37% at June 30, 2017, compared to 38% at March 31, 2017, and 30% at June 30, 2016.

In accordance with current accounting practices, the loans acquired from recent acquisitions were recorded at fair value with no allowance recorded at the acquisition date. As of June 30, 2017, the remaining discount on these acquired loans was $107.6 million.

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

Table 2 ($ in millions)2Q171Q172Q16
Non-Performing Loans (NPLs)$139.6 $130.3 $174.2
Problem Loans (Including NPLs) 238.0 219.9 250.2
Special Mention Loans 99.5 95.9 106.9
Net Charge-Off (Recoveries) Ratio 0.01% 0.01% 0.01%
Provision for Loan Losses$1.4 $0.3 $1.3
Allowance for Loan Losses 51.0 49.8 51.8
Remaining Loan Discount on Acquired Loans 107.6 117.1 159.4

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 $15.0 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, July 25, 2017, to discuss 2nd 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 July 25 through August 8. To access the replay, dial 1-855-859-2056, Conference ID Code 49543317.

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 3 – Non-GAAP Reconciliations-Fully Taxable Equivalent Net Interest Margin

($ in millions)2Q171Q172Q16
Net Interest Income$104.3 $105.8 $99.3
Taxable Equivalent Adjustment 5.7 5.7 5.3
Net Interest Income – Taxable Equivalent$110.0 $111.5 $104.6
Average Earning Assets$12,844.5 $12,742.9 $11,726.4
Net Interest Margin 3.42% 3.50% 3.57%

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 4
Financial Highlights (unaudited)
($ and shares in thousands, except per share data)
Three Months Ended Six Months Ended
June 30,March 31,June 30, June 30,June 30,
2017 2017 2016 2017 2016
Income Statement
Net interest income$ 104,333 $ 105,801 $ 99,340 $ 210,134 $ 184,983
Provision for loan losses 1,355 347 1,319 1,702 1,410
Noninterest income 49,271 42,920 93,385 92,191 142,836
Noninterest expense 102,811 101,891 121,472 204,702 219,827
Net income 38,854 35,992 39,122 74,846 66,099
Per Common Share Data (Diluted)
Net income available to common shareholders$ 0.28 $ 0.27 $ 0.31 $ 0.55 $ 0.55
Average diluted shares outstanding 135,697 135,431 127,973 135,641 121,273
Book value 13.92 13.63 13.42 13.92 13.42
Stock price 17.25 17.35 12.53 17.25 12.53
Dividend payout ratio 46% 48% 42% 47% 47%
Tangible common book value (1) 8.85 8.54 8.23 8.85 8.23
Performance Ratios
Return on average assets 1.05% 0.98% 1.16% 1.01% 1.04%
Return on average common equity 8.33% 7.89% 9.22% 8.11% 8.26%
Net interest margin (FTE) 3.42% 3.50% 3.57% 3.46% 3.54%
Efficiency ratio (2) 64.05% 64.66% 60.22% 64.35% 63.76%
Net charge-offs (recoveries) to average loans 0.01% 0.01% 0.01% 0.01% 0.05%
Allowance for loan losses to ending loans 0.55% 0.55% 0.59% 0.55% 0.59%
Non-performing loans to ending loans 1.51% 1.43% 1.97% 1.51% 1.97%
Balance Sheet
Total loans$ 9,232,040 $ 9,131,773 $ 8,830,158 $ 9,232,040 $ 8,830,158
Total assets 14,957,281 14,869,645 14,420,262 14,957,281 14,420,262
Total deposits 10,683,714 10,821,352 10,451,602 10,683,714 10,451,602
Total borrowed funds 2,259,918 2,066,617 1,935,555 2,259,918 1,935,555
Total shareholders' equity 1,886,594 1,846,359 1,811,117 1,886,594 1,811,117
Capital Ratios (1)
Risk-based capital ratios (EOP):
Tier 1 common equity 11.5% 11.4% 11.6% 11.5% 11.6%
Tier 1 11.8% 11.7% 11.8% 11.8% 11.8%
Total 12.3% 12.2% 12.4% 12.3% 12.4%
Leverage ratio (to average assets) 8.7% 8.5% 8.9% 8.7% 9.5%
Total equity to assets (averages) 12.56% 12.36% 12.56% 12.46% 12.59%
Tangible common equity to tangible assets 8.41% 8.16% 8.10% 8.41% 8.10%
Nonfinancial Data
Full-time equivalent employees 2,652 2,659 2,919 2,652 2,919
Number of branches 188 188 206 188 206
(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 5
Income Statement (unaudited)
($ and shares in thousands, except per share data)
Three Months Ended Six Months Ended
June 30,March 31,June 30, June 30,June 30,
2017 2017 2016 2017 2016
Interest income$ 118,209$ 118,468$ 110,243 $ 236,677$ 205,572
Less: interest expense 13,876 12,667 10,903 26,543 20,589
Net interest income 104,333 105,801 99,340 210,134 184,983
Provision for loan losses 1,355 347 1,319 1,702 1,410
Net interest income after provision for loan losses 102,978 105,454 98,021 208,432 183,573
Wealth management fees 9,679 8,999 9,355 18,678 17,476
Service charges on deposit accounts 10,040 9,843 10,437 19,883 20,076
Debit card and ATM fees 4,436 4,236 4,471 8,672 8,256
Mortgage banking revenue 5,186 4,226 5,203 9,412 8,123
Insurance premiums and commissions 160 107 7,122 267 20,243
Investment product fees 5,004 4,989 4,724 9,993 8,629
Capital markets income 2,747 1,031 794 3,778 1,413
Company-owned life insurance 2,117 2,149 2,080 4,266 4,118
Change in Indemnification Asset - - 888 - 233
Other income 6,776 5,794 4,621 12,570 9,426
Net gain on sale of ONB Insurance Group, Inc. - - 41,864 - 41,864
Gains (losses) on sales of securities 3,075 1,500 1,856 4,575 2,962
Gains (losses) on derivatives 51 46 (30) 97 17
Total noninterest income 49,271 42,920 93,385 92,191 142,836
Salaries and employee benefits 57,606 56,564 62,715 114,170 119,687
Occupancy 10,539 12,134 13,568 22,673 26,412
Equipment 3,350 3,227 3,316 6,577 6,209
Marketing 3,673 3,050 5,111 6,723 7,597
Data processing 8,226 7,608 8,676 15,834 15,799
Communication 2,288 2,414 2,535 4,702 4,399
Professional fees 4,077 2,651 5,181 6,728 8,549
Loan expenses 1,693 1,631 2,123 3,324 3,456
Supplies 594 579 598 1,173 1,181
FDIC assessment 2,130 2,487 2,030 4,617 3,949
Other real estate owned expense 1,009 1,115 2,099 2,124 2,523
Intangible amortization 2,781 3,020 3,365 5,801 6,012
Other expense 4,845 5,411 10,155 10,256 14,054
Total noninterest expense 102,811 101,891 121,472 204,702 219,827
Income before income taxes 49,438 46,483 69,934 95,921 106,582
Income tax expense 10,584 10,491 30,812 21,075 40,483
Net income$ 38,854$ 35,992$ 39,122 $ 74,846$ 66,099
Diluted Earnings Per Share
Net income$ 0.28$ 0.27$ 0.31 $ 0.55$ 0.55
Average Common Shares Outstanding
Basic 135,085 134,912 127,508 134,999 120,753
Diluted 135,697 135,431 127,973 135,641 121,273
Common shares outstanding at end of period 135,516 135,435 135,005 135,516 135,005

TABLE 6
Balance Sheet (unaudited)
($ in thousands)
June 30, March 31, June 30,
2017 2017 2016
Assets
Federal Reserve Bank account$ 22,117 $ 24,460 $ 56,433
Money market investments 9,815 7,601 5,514
Investments:
Treasury and government sponsored agencies 586,258 595,172 694,264
Mortgage-backed securities 1,470,687 1,484,561 1,349,805
States and political subdivisions 1,118,437 1,144,412 1,128,700
Other securities 449,045 446,830 437,669
Total investments 3,624,427 3,670,975 3,610,438
Loans held for sale 27,425 17,373 44,422
Loans:
Commercial 2,001,621 1,910,536 1,893,700
Commercial and agriculture real estate 3,259,998 3,222,865 2,943,525
Consumer:
Home equity 472,198 464,911 473,550
Other consumer loans 1,398,849 1,421,199 1,419,613
Subtotal of commercial and consumer loans 7,132,666 7,019,511 6,730,388
Residential real estate 2,099,374 2,112,262 2,099,770
Total loans 9,232,040 9,131,773 8,830,158
Total earning assets 12,915,824 12,852,182 12,546,965
Allowance for loan losses (50,986) (49,834) (51,804)
Non-earning Assets:
Cash and due from banks 230,809 184,974 205,973
Premises and equipment 413,933 420,866 231,656
Goodwill and intangible assets 686,894 689,675 699,760
Company-owned life insurance 354,875 353,786 350,193
Net deferred tax assets 146,780 165,376 179,448
Loan servicing rights 25,023 25,446 25,756
Other real estate owned 11,071 12,547 24,254
Other assets 223,058 214,627 208,061
Total non-earning assets 2,092,443 2,067,297 1,925,101
Total assets$ 14,957,281 $ 14,869,645 $ 14,420,262
Liabilities and Equity
Noninterest-bearing demand deposits$ 3,011,156 $ 3,024,111 $ 2,883,917
NOW accounts 2,639,813 2,635,317 2,456,963
Savings accounts 2,924,689 2,997,919 2,616,365
Money market accounts 672,391 697,287 1,015,336
Other time deposits 1,313,199 1,349,303 1,300,611
Total core deposits 10,561,248 10,703,937 10,273,192
Brokered CD's 122,466 117,415 178,410
Total deposits 10,683,714 10,821,352 10,451,602
Federal funds purchased and interbank borrowings 227,029 61,016 263,536
Securities sold under agreements to repurchase 298,094 345,550 354,123
Federal Home Loan Bank advances 1,515,628 1,441,030 1,099,240
Other borrowings 219,167 219,021 218,656
Total borrowed funds 2,259,918 2,066,617 1,935,555
Accrued expenses and other liabilities 127,055 135,317 221,988
Total liabilities 13,070,687 13,023,286 12,609,145
Common stock, surplus, and retained earnings 1,917,714 1,894,924 1,834,734
Other comprehensive income (31,120) (48,565) (23,617)
Total shareholders' equity 1,886,594 1,846,359 1,811,117
Total liabilities and shareholders' equity$ 14,957,281 $ 14,869,645 $ 14,420,262

TABLE 7
Average Balance Sheet and Interest Rates (unaudited)
($ in thousands)
Three Months Ended Three Months Ended Three Months Ended
June 30, 2017 March 31, 2017 June 30, 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$ 27,222 $ 55 0.80% $ 27,482 $ 31 0.46% $ 23,604 $ 21 0.36%
Investments:
Treasury and gov't sponsored agencies 575,940 2,798 1.94% 540,422 2,780 2.06% 738,642 3,586 1.94%
Mortgage-backed securities 1,485,582 7,590 2.04% 1,511,388 7,818 2.07% 1,209,231 5,562 1.84%
States and political subdivisions 1,122,769 13,375 4.76% 1,133,373 13,607 4.80% 1,117,367 13,207 4.73%
Other securities 446,521 2,866 2.57% 445,235 2,828 2.54% 434,089 2,119 1.95%
Total investments 3,630,812 26,629 2.93% 3,630,418 27,033 2.98% 3,499,329 24,474 2.80%
Loans: (2)
Commercial 1,938,751 19,352 3.95% 1,887,929 19,088 4.04% 1,825,627 17,709 3.84%
Commercial and agriculture real estate 3,240,318 39,830 4.86% 3,171,005 40,324 5.09% 2,589,342 35,273 5.39%
Consumer:
Home equity 474,308 4,837 4.09% 476,353 4,659 3.97% 454,581 6,586 5.83%
Other consumer loans 1,405,226 11,881 3.39% 1,408,100 11,767 3.39% 1,344,288 11,438 3.42%
Subtotal commercial and consumer loans 7,058,603 75,900 4.31% 6,943,387 75,838 4.43% 6,213,838 71,006 4.60%
Residential real estate loans 2,127,867 21,268 4.00% 2,141,571 21,254 3.97% 1,989,612 20,009 4.03%
Total loans 9,186,470 97,168 4.21% 9,084,958 97,092 4.29% 8,203,450 91,015 4.42%
Total earning assets$ 12,844,504 $ 123,852 3.84% $ 12,742,858 $ 124,156 3.91% $ 11,726,383 $ 115,510 3.93%
Less: Allowance for loan losses (50,937) (50,710) (51,269)
Non-earning Assets:
Cash and due from banks$ 200,209 $ 195,620 $ 187,974
Other assets 1,860,676 1,877,849 1,655,720
Total assets $ 14,854,452 $ 14,765,617 $ 13,518,808
Interest-Bearing Liabilities:
NOW accounts $ 2,643,123 $ 511 0.08% $ 2,585,814 $ 456 0.07% $ 2,416,761 $ 405 0.07%
Savings accounts 2,944,314 1,209 0.16% 2,969,866 1,157 0.16% 2,492,202 843 0.14%
Money market accounts 684,911 146 0.09% 706,990 149 0.09% 861,791 282 0.13%
Other time deposits 1,330,026 2,536 0.76% 1,332,912 2,368 0.72% 1,175,435 2,367 0.81%
Total interest-bearing deposits 7,602,374 4,402 0.23% 7,595,582 4,130 0.22% 6,946,189 3,897 0.23%
Brokered CD's 111,972 322 1.15% 107,519 253 0.95% 174,338 357 0.82%
Total interest-bearing deposits and CD's 7,714,346 4,724 0.25% 7,703,101 4,383 0.23% 7,120,527 4,254 0.24%
Federal funds purchased and interbank borrowings 166,690 422 1.02% 189,070 356 0.76% 183,115 217 0.48%
Securities sold under agreements to repurchase 329,182 334 0.41% 331,400 256 0.31% 378,838 391 0.42%
Federal Home Loan Bank advances 1,443,453 6,017 1.67% 1,429,977 5,312 1.51% 983,174 3,610 1.48%
Other borrowings 219,085 2,379 4.34% 218,965 2,360 4.31% 235,022 2,431 4.14%
Total borrowed funds 2,158,410 9,152 1.70% 2,169,412 8,284 1.55% 1,780,149 6,649 1.50%
Total interest-bearing liabilities$ 9,872,756 $ 13,876 0.56% $ 9,872,513 $ 12,667 0.52% $ 8,900,676 $ 10,903 0.49%
Noninterest-Bearing Liabilities
Demand deposits $ 2,988,147 $ 2,917,053 $ 2,725,417
Other liabilities 128,231 150,392 195,091
Shareholders' equity 1,865,318 1,825,659 1,697,624
Total liabilities and shareholders' equity$ 14,854,452 $ 14,765,617 $ 13,518,808
Net interest rate spread 3.28% 3.39% 3.44%
Net interest margin (FTE) 3.42% 3.50% 3.57%
FTE adjustment $ 5,643 $ 5,688 $ 5,267
(1) Interest income is reflected on a fully taxable equivalent basis (FTE).
(2) Includes loans held for sale.

TABLE 8
Average Balance Sheet and Interest Rates (unaudited)
($ in thousands)
Six Months Ended Six Months Ended
June 30, 2017 June 30, 2016
AverageIncome (1)/Yield/ AverageIncome (1)/Yield/
Earning Assets: BalanceExpenseRate BalanceExpenseRate
Fed Funds sold, resell agr, Fed Reserve
Bank account, and money market$ 27,352 $ 86 0.63% $ 34,051 $ 70 0.41%
Investments:
Treasury and gov't sponsored agencies 558,279 5,579 2.00% 734,511 7,063 1.92%
Mortgage-backed securities 1,498,414 15,408 2.06% 1,129,876 10,639 1.88%
States and political subdivisions 1,128,042 26,981 4.78% 1,110,417 26,216 4.72%
Other securities 445,881 5,694 2.55% 431,206 4,956 2.30%
Total investments 3,630,616 53,662 2.96% 3,406,010 48,874 2.87%
Loans: (2)
Commercial 1,913,480 38,440 4.00% 1,803,669 34,871 3.82%
Commercial and agriculture real estate 3,205,853 80,154 4.97% 2,243,147 63,311 5.58%
Consumer:
Home equity 475,325 9,496 4.03% 434,189 10,865 5.03%
Other consumer loans 1,406,655 23,648 3.39% 1,277,640 21,118 3.32%
Subtotal commercial and consumer loans 7,001,313 151,738 4.37% 5,758,645 130,165 4.55%
Residential real estate loans 2,134,681 42,522 3.98% 1,830,000 36,930 4.05%
Total loans 9,135,994 194,260 4.25% 7,588,645 167,095 4.39%
Total earning assets$ 12,793,962 $ 248,008 3.87% $ 11,028,706 $ 216,039 3.91%
Less: Allowance for loan losses (50,824) (51,673)
Non-earning Assets:
Cash and due from banks$ 197,927 $ 177,162
Other assets 1,869,215 1,557,129
Total assets $ 14,810,280 $ 12,711,324
Interest-bearing Liabilities:
NOW accounts $ 2,614,627 $ 967 0.07% $ 2,265,779 $ 643 0.06%
Savings accounts 2,957,020 2,367 0.16% 2,358,177 1,623 0.14%
Money market accounts 695,890 295 0.09% 707,133 372 0.11%
Other time deposits 1,331,460 4,903 0.74% 1,044,391 4,481 0.86%
Total interest-bearing deposits 7,598,997 8,532 0.23% 6,375,480 7,119 0.22%
Brokered CD's 109,758 575 1.06% 150,812 628 0.84%
Total interest-bearing deposits and CD's 7,708,755 9,107 0.24% 6,526,292 7,747 0.24%
Federal funds purchased and interbank borrowings 177,818 778 0.88% 146,747 340 0.47%
Securities sold under agreements to repurchase 330,285 590 0.36% 382,441 764 0.40%
Federal Home Loan Bank advances 1,436,752 11,329 1.59% 1,044,933 7,027 1.35%
Other borrowings 219,025 4,739 4.33% 226,671 4,711 4.16%
Total borrowed funds 2,163,880 17,436 1.62% 1,800,792 12,842 1.43%
Total interest-bearing liabilities$ 9,872,635 $ 26,543 0.54% $ 8,327,084 $ 20,589 0.50%
Noninterest-Bearing Liabilities
Demand deposits 2,952,797 2,599,253
Other liabilities 139,250 184,694
Shareholders' equity 1,845,598 1,600,293
Total liabilities and shareholders' equity$ 14,810,280 $ 12,711,324
Net interest rate spread 3.33% 3.41%
Net interest margin (FTE) 3.46% 3.54%
FTE adjustment $ 11,331 $ 10,467
(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 Six Months Ended
June 30,March 31,June 30, June 30,June 30,
2017 2017 2016 2017 2016
Beginning allowance for loan losses$ 49,834 $ 49,808 $ 50,700 $ 49,808 $ 52,233
Provision for loan losses 1,355 347 1,319 1,702 1,410
Gross charge-offs (3,380) (3,239) (2,677) (6,619) (6,619)
Gross recoveries 3,177 2,918 2,462 6,095 4,780
Net (charge-offs) recoveries (203) (321) (215) (524) (1,839)
Ending allowance for loan losses$ 50,986 $ 49,834 $ 51,804 $ 50,986 $ 51,804
Net charge-offs (recoveries) / average loans (1) 0.01% 0.01% 0.01% 0.01% 0.05%
Average loans outstanding (1)$ 9,180,987 $ 9,078,672 $ 8,191,544 $ 9,130,112 $ 7,581,061
EOP loans outstanding (1)$ 9,232,040 $ 9,131,773 $ 8,830,158 $ 9,232,040 $ 8,830,158
Allowance for loan losses / EOP loans (1) 0.55% 0.55% 0.59% 0.55% 0.59%
Underperforming Assets:
Loans 90 Days and over (still accruing)$ 201 $ 381 $ 670 $ 201 $ 670
Non-performing loans:
Nonaccrual loans (2) 125,519 115,377 160,340 125,519 160,340
Renegotiated loans 14,123 14,969 13,904 14,123 13,904
Total non-performing loans 139,642 130,346 174,244 139,642 174,244
Foreclosed properties 11,071 12,547 24,254 11,071 24,254
Total underperforming assets$ 150,914 $ 143,274 $ 199,168 $ 150,914 $ 199,168
Classified loans - "problem loans"$ 237,997 $ 219,929 $ 250,214 $ 237,997 $ 250,214
Other classified assets 7,449 7,306 6,392 7,449 6,392
Criticized loans - "special mention loans" 99,502 95,881 106,886 99,502 106,886
Total classified and criticized assets$ 344,948 $ 323,116 $ 363,492 $ 344,948 $ 363,492
Non-performing loans / EOP loans (1) 1.51% 1.43% 1.97% 1.51% 1.97%
Allowance to non-performing loans (3) 37% 38% 30% 37% 30%
Under-performing assets / EOP loans (1) 1.63% 1.57% 2.26% 1.63% 2.26%
EOP total assets$ 14,957,281 $ 14,869,645 $ 14,420,262 $ 14,957,281 $ 14,420,262
Under-performing assets / EOP assets 1.01% 0.96% 1.38% 1.01% 1.38%
EOP - End of period actual balances
(1) Excludes loans held for sale.
(2) Includes renegotiated loans totaling $46.2 million at June 30, 2017, $34.2 million at March 31, 2017 and $38.1 million
at June 30, 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.

TABLE 10
Non-GAAP Measures (unaudited)
($ in thousands)
Three Months Ended Six Months Ended
June 30,March 31,June 30, June 30,June 30,
2017 2017 2016 2017 2016
Actual End of Period Balances
GAAP shareholders' equity $ 1,886,594 $ 1,846,359 $ 1,811,117 $ 1,886,594 $ 1,811,117
Deduct:
Goodwill 655,018 655,018 655,523 655,018 655,523
Intangibles 31,876 34,657 44,237 31,876 44,237
686,894 689,675 699,760 686,894 699,760
Tangible shareholders' equity $ 1,199,700 $ 1,156,684 $ 1,111,357 $ 1,199,700 $ 1,111,357
Average Balances
GAAP shareholders' equity $ 1,865,318 $ 1,825,659 $ 1,697,624 $ 1,845,598 $ 1,600,293
Deduct:
Goodwill 655,018 655,018 646,131 655,018 615,383
Intangibles 33,189 36,097 45,710 34,635 39,747
688,207 691,115 691,841 689,653 655,130
Average tangible shareholders' equity $ 1,177,111 $ 1,134,544 $ 1,005,783 $ 1,155,945 $ 945,163
Actual End of Period Balances
GAAP assets $ 14,957,281 $ 14,869,645 $ 14,420,262 $ 14,957,281 $ 14,420,262
Add:
Trust overdrafts 31 86 337 31 337
Deduct:
Goodwill 655,018 655,018 655,523 655,018 655,523
Intangibles 31,876 34,657 44,237 31,876 44,237
686,894 689,675 699,760 686,894 699,760
Tangible assets $ 14,270,418 $ 14,180,056 $ 13,720,839 $ 14,270,418 $ 13,720,839
Risk-weighted assets$ 10,367,804 $ 10,171,517 $ 9,624,966 $ 10,367,804 $ 9,624,966
GAAP net income$ 38,854 $ 35,992 $ 39,122 $ 74,846 $ 66,099
Add:
Intangible amortization (net of tax) 1,807 1,963 2,188 3,770 3,908
Tangible net income$ 40,661 $ 37,955 $ 41,310 $ 78,616 $ 70,007
Tangible Ratios
Return on tangible common equity 13.56% 13.13% 14.87% 13.11% 12.60%
Return on average tangible common equity 13.82% 13.38% 16.43% 13.60% 14.81%
Return on tangible assets 1.14% 1.07% 1.20% 1.10% 1.02%
Tangible common equity to tangible assets 8.41% 8.16% 8.10% 8.41% 8.10%
Tangible common equity to risk-weighted assets 11.57% 11.37% 11.55% 11.57% 11.55%
Tangible common book value (1) 8.85 8.54 8.23 8.85 8.23
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$ 1,222,250 $ 1,191,735 $ 1,134,978 $ 1,222,250 $ 1,134,978
Deduct:
Trust Preferred Securities 45,000 45,000 45,000 45,000 45,000
Additional Tier 1 capital deductions (14,977) (16,100) (30,760) (14,977) (30,760)
30,023 28,900 14,240 30,023 14,240
Tier 1 common equity $ 1,192,227 $ 1,162,835 $ 1,120,738 $ 1,192,227 $ 1,120,738
Risk-weighted assets 10,367,804 10,171,517 9,624,966 10,367,804 9,624,966
Tier 1 common equity to risk-weighted assets 11.50% 11.43% 11.64% 11.50% 11.64%

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