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Old National’s strong 3rd quarter driven by 12% annualized commercial loan growth

3rd Quarter 2017 Highlights:

  • Earnings of $39.4 million, or $0.29 per share
  • Adjusted pre-tax, pre-provision income1 of $61.1 million
  • Commercial and commercial real estate loan growth of 12.0% annualized from 2nd quarter 2017
  • Cost of interest-bearing deposits (excluding brokered CD’s) increased just 2 basis points to 0.25%
  • Tangible book value1 increase of 1.9% from 2nd quarter 2017

1 Non-GAAP measures – refer to Table 3 and Table 11 for Non-GAAP reconciliations

EVANSVILLE, Ind., Oct. 24, 2017 (GLOBE NEWSWIRE) -- Today Old National Bancorp (the “Company” or “Old National”) (NASDAQ:ONB) reported 3rd quarter 2017 net income of $39.4 million, or $0.29 per diluted share. Included in the current quarter were the following pre-tax charges: $2.1 million for branch consolidations, $1.9 million for a client experience improvement initiative, $0.4 million for merger and integrations, and $0.3 million in severance. This current quarter net income represents an increase of 1.3% over the 2nd quarter of 2017 net income of $38.9 million. During the 2nd quarter, Old National incurred $0.5 million in pre-tax net branch consolidation charges and $1.0 million in pre-tax charges for the client experience improvement initiative.

“This quarter is a good illustration of the transformation of the Old National franchise.” said Old National Chairman and CEO Bob Jones. “Our recent entry into many of the higher growth markets in the Midwest is reflected in the strong commercial loan growth we have seen now for 10 quarters. This consistent growth, coupled with the ability to fund our balance sheet through core deposits and take advantage of low funding costs provides for stable margins and positions us well for future growth.

“Our transformation continues with the anticipated November 1 closing of our newest partnership with St. Paul, Minnesota-based Anchor Bancorp,” Jones continued. “This entry into yet another vibrant Midwestern market provides Old National with another quality platform to execute our basic bank strategy.”

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 September 30, 2017, totaled $9.428 billion, an increase of $168.8 million, or 7.3% annualized, from the $9.259 billion at June 30, 2017. Importantly, Old National’s portfolio of commercial and commercial real estate loans grew by 12.0%, annualized, from the 2nd quarter to the 3rd quarter of 2017.

Total period-end core deposits, including demand and interest-bearing deposits, decreased $69.3 million to $10.492 billion at September 30, 2017, compared to $10.561 billion at June 30, 2017. Noninterest-bearing deposit balances increased $23.5 million during that same period, from $3.011 billion to $3.035 billion.

Net interest income for the 3rd quarter of 2017 totaled $108.5 million compared to $104.3 million in the 2nd quarter of 2017, and $107.8 million in the 3rd quarter of 2016. On a fully taxable equivalent basis, net interest income was $114.1 million for the 3rd quarter of 2017 and represented a net interest margin on total average earning assets of 3.52%. These results compare to net interest income on a fully taxable equivalent basis of $110.0 million and a margin of 3.42% in the 2nd quarter of 2017. In the 3rd quarter of 2016, Old National reported net interest income on a fully taxable equivalent basis of $113.1 million and a margin of 3.60%. Refer to Table 4 for Non-GAAP taxable equivalent reconciliations.

In the 3rd quarter of 2017, Old National recorded $11.1 million in accretion income as part of net interest income, which represents 34 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 2nd quarter of 2017 and the 3rd quarter of 2016 reported by Old National was $9.7 million, or 30 basis points of the net interest margin, and $15.9 million, or 51 basis points of the net interest margin, respectively.

Noninterest Income

Total noninterest income for the 3rd quarter of 2017 amounted to $46.4 million and compares to $49.3 million reported in the 2nd quarter of 2017 and $47.2 million in the 3rd quarter of 2016. The current quarter included $0.6 million of recoveries on loans originated by AnchorBank, fsb that had been fully charged-off prior to the acquisition; the 2nd quarter of 2017 included $1.6 million of such recoveries.

Noninterest Expenses

Noninterest expenses for Old National totaled $103.7 million for the 3rd quarter of 2017. The current quarter included $4.7 million in pre-tax charges: $2.1 million related to branch consolidations, $1.9 million related to a client-experience improvement initiative, $0.4 million for merger and integrations and $0.3 million in severance. Old National did not incur any tax credit amortization in noninterest expenses in the 3rd quarter of 2017 as originally projected. Noninterest expenses for the 2nd quarter of 2017 totaled $102.8 million and included $1.7 million in pre-tax charges: $0.7 million related to branch consolidations and $1.0 million related to the client-experience improvement initiative. In the 3rd quarter of 2016, noninterest expenses totaled $108.1 million and included $5.5 million in pre-tax merger and integration charges. Old National consolidated 15 branches in the 1st quarter of 2017 and plans to consolidate another 14 branches in the 4th quarter of the current year. Old National currently operates 188 branches throughout its franchise.

Capital

Old National’s capital position at September 30, 2017, remained well above regulatory guideline minimums with regulatory tier 1 and total risk-based capital ratios of 12.0% and 12.5%, respectively, compared to 11.8% and 12.3% at June 30, 2017, and 11.9% and 12.5% at September 30, 2016. Old National did not repurchase any stock in the open market during the 3rd 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
September 30, 2017
Tier 1 Risk-Based Capital Ratio> 8.5%12.0%
Total Risk-Based Capital Ratio> 10.5%12.5%
Common Equity Tier 1 Capital Ratio > 7.0%11.7%
Tier 1 Leverage Capital Ratio> 4.0%8.8%

Old National’s ratio of tangible common equity to tangible assets was 8.50% at September 30, 2017, compared to 8.41% at June 30, 2017, and 8.13% at September 30, 2016. Refer to Table 11 for Non-GAAP reconciliations.

As part of the Dodd-Frank Act Stress Test requirements, on October 24, 2017, Old National publicly disclosed the results of its 2017 stress test. These results can be found on the Company’s website at oldnational.com.

Credit

Old National recorded a provision expense of $0.3 million and had net charge-offs of $1.1 million in the 3rd quarter of 2017. These results compare to $1.4 million in provision expense and net charge-offs of $0.2 million, and provision expense of $1.3 million and net charge-offs of $1.6 million, in the 2nd quarter of 2017 and the 3rd quarter of 2016, respectively. Net charge-offs for the 3rd quarter of 2017 were 0.05% of average total loans on an annualized basis, compared to net charge-offs of 0.01% of average total loans in the 2nd quarter of 2017 and 0.07% in the 3rd quarter of 2016. On a year-to-date basis, Old National recorded provision expense of $2.0 million and had net charge-offs of $1.7 million.

Delinquencies remained low as Old National reported 30+ day delinquent loans of 0.34% in the 3rd quarter of 2017 compared to 0.32% in the 2nd quarter of 2017. Old National’s 90+ day delinquent loans for the 3rd quarter of 2017 were 0.01% compared to near zero for the 3rd quarter of 2016.

At September 30, 2017, Old National’s allowance for loan losses was $50.2 million, or 0.53% of total loans, compared to an allowance of $51.0 million, or 0.55% of total loans at June 30, 2017, and $51.5 million, or 0.58% of total loans, at September 30, 2016. The coverage ratio (allowance to non-performing loans) stood at 37% at September 30, 2017, compared to 37% at June 30, 2017, and 31% at September 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 September 30, 2017, the remaining discount on these acquired loans was $96.5 million.

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

Table 2 ($ in millions)3Q172Q173Q16
Non-Performing Loans (NPLs) $137.1 $139.6 $165.3
Problem Loans (Including NPLs) 209.5 238.0 233.5
Special Mention Loans 130.2 99.5 125.8
Net Charge-Off (Recoveries) Ratio 0.05% 0.01% 0.07%
Provision for Loan Losses $0.3 $1.4 $1.3
Allowance for Loan Losses 50.2 51.0 51.5
Remaining Loan Discount on Acquired Loans 96.5 107.6 144.3

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 $15.1 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, October 24, 2017, to discuss 3rd 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 7:00 a.m. Central Time on October 25 through November 7. To access the replay, dial 1-855-859-2056, Conference ID Code 93364517.

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 – Pre-Tax, Pre-Provision Income

($ in millions)3Q17
Net Interest Income (FTE Basis)$114.1
Noninterest Income 46.4
Total Revenue (FTE Basis)$160.5
Noninterest Expense (103.7)
Pre-Tax, Pre-Provision Income$56.8
Securities Gains$3.0
Branch Consolidations, Severance and Client Experience Initiative Charges 4.3
Merger and Integration Charges 0.4
Tax Credit Amortization -
Intangible Amortization 2.6
Adjusted Total Revenue (FTE Basis)$157.5
Adjusted Noninterest Expenses($96.4)
Adjusted Pre-Tax, Pre-Provision Income$61.1

Table 4 – Non-GAAP Reconciliations-Fully Taxable Equivalent Net Interest Margin

($ in millions)3Q172Q173Q16
Net Interest Income$108.5 $104.3 $107.8
Taxable Equivalent Adjustment 5.6 5.7 5.3
Net Interest Income – Taxable Equivalent$114.1 $110.0 $113.1
Average Earning Assets$12,959.7 $12,844.5 $12,575.5
Net Interest Margin 3.52% 3.42% 3.60%

Additional Information for Shareholders of Anchor Bancorp, Inc.
Communications in this document do not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the proposed merger, Old National Bancorp (“ONB”) has filed with the Securities and Exchange Commission (“SEC”) a Registration Statement on Form S-4 (Registration Statement No. 333-220434) that includes a Proxy Statement of Anchor Bancorp, Inc. (“Anchor”) and a Prospectus of ONB, as well as other relevant documents concerning the proposed transaction. Anchor shareholders are urged to read the Registration Statement and the Proxy Statement/Prospectus regarding the merger and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information. A free copy of the Proxy Statement/Prospectus, as well as other filings containing information about ONB and Anchor, may be obtained at the SEC’s Internet site (http://www.sec.gov). You will also be able to obtain these documents, free of charge, from ONB at www.oldnational.com under the tab “Investor Relations” and then under the heading “Financial Information” or from Anchor by accessing Anchor’s website at www.anchorlink.com under the tab “About Us.”
ONB and Anchor and certain of their directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of Anchor in connection with the proposed merger. Information about the directors and executive officers of ONB is set forth in the proxy statement for ONB’s 2017 annual meeting of shareholders, as filed with the SEC on a Schedule 14A on March 6, 2017. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the Proxy Statement/Prospectus regarding the proposed merger when it becomes available. Free copies of this document may be obtained as described in the preceding paragraph.

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 proposed merger with Anchor might not be realized within the expected timeframes and costs or difficulties relating to integration matters might be greater than expected; satisfaction of closing conditions for the Anchor merger; 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 Nine Months Ended
September 30,June 30,September 30, September 30,September 30,
2017 2017 2016 2017 2016
Income Statement
Net interest income$ 108,478 $ 104,333 $ 107,803 $ 318,612 $ 292,786
Provision for loan losses 311 1,355 1,306 2,013 2,716
Noninterest income 46,366 49,271 47,243 138,557 190,079
Noninterest expense 103,702 102,811 108,062 308,404 327,889
Net income 39,372 38,854 34,709 114,218 100,808
Per Common Share Data (Diluted)
Net income available to common shareholders$ 0.29 $ 0.28 $ 0.25 $ 0.84 $ 0.80
Average diluted shares outstanding 135,796 135,697 135,011 135,693 125,839
Book value 14.07 13.92 13.59 14.07 13.59
Stock price 18.30 17.25 14.06 18.30 14.06
Dividend payout ratio 43% 46% 52% 46% 49%
Tangible common book value (1) 9.02 8.85 8.43 9.02 8.43
Performance Ratios
Return on average assets 1.05% 1.05% 0.96% 1.02% 1.01%
Return on average common equity 8.31% 8.33% 7.62% 8.18% 8.03%
Net interest margin (FTE) 3.52% 3.42% 3.60% 3.48% 3.56%
Efficiency ratio (2) 64.17% 64.05% 66.05% 64.29% 64.50%
Net charge-offs (recoveries) to average loans 0.05% 0.01% 0.07% 0.02% 0.06%
Allowance for loan losses to ending loans 0.53% 0.55% 0.58% 0.53% 0.58%
Non-performing loans to ending loans 1.46% 1.51% 1.86% 1.46% 1.86%
Balance Sheet
Total loans$ 9,398,124 $ 9,232,040 $ 8,904,985 $ 9,398,124 $ 8,904,985
Total assets 15,065,800 14,957,281 14,703,071 15,065,800 14,703,071
Total deposits 10,606,784 10,683,714 10,646,708 10,606,784 10,646,708
Total borrowed funds 2,411,111 2,259,918 2,023,099 2,411,111 2,023,099
Total shareholders' equity 1,906,823 1,886,594 1,834,457 1,906,823 1,834,457
Capital Ratios (1)
Risk-based capital ratios (EOP):
Tier 1 common equity 11.7% 11.5% 11.8% 11.7% 11.8%
Tier 1 12.0% 11.8% 11.9% 12.0% 11.9%
Total 12.5% 12.3% 12.5% 12.5% 12.5%
Leverage ratio (to average assets) 8.8% 8.7% 8.4% 8.8% 9.2%
Total equity to assets (averages) 12.65% 12.56% 12.60% 12.53% 12.59%
Tangible common equity to tangible assets 8.50% 8.41% 8.13% 8.50% 8.13%
Nonfinancial Data
Full-time equivalent employees 2,592 2,652 2,910 2,592 2,910
Number of branches 188 188 201 188 201
(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 Nine Months Ended
September 30,June 30,September 30, September 30,September 30,
2017 2017 2016 2017 2016
Interest income$ 123,525$ 118,209$ 119,713 $ 360,202$ 325,285
Less: interest expense 15,047 13,876 11,910 41,590 32,499
Net interest income 108,478 104,333 107,803 318,612 292,786
Provision for loan losses 311 1,355 1,306 2,013 2,716
Net interest income after provision for loan losses 108,167 102,978 106,497 316,599 290,070
Wealth management fees 8,837 9,679 8,572 27,515 26,048
Service charges on deposit accounts 10,535 10,040 11,054 30,418 31,130
Debit card and ATM fees 4,248 4,436 4,330 12,920 12,586
Mortgage banking revenue 5,104 5,186 7,718 14,516 15,841
Insurance premiums and commissions 170 160 132 437 20,375
Investment product fees 5,193 5,004 5,038 15,186 13,667
Capital markets income 1,843 2,747 849 5,621 2,262
Company-owned life insurance 2,022 2,117 2,163 6,288 6,281
Change in Indemnification Asset - - - - 233
Other income 5,400 6,776 5,668 17,970 15,094
Net gain on sale of ONB Insurance Group, Inc. - - - - 41,864
Gains (losses) on sales of securities 2,972 3,075 1,647 7,547 4,609
Gains (losses) on derivatives 42 51 72 139 89
Total noninterest income 46,366 49,271 47,243 138,557 190,079
Salaries and employee benefits 57,783 57,606 60,861 171,953 180,548
Occupancy 11,670 10,539 12,944 34,343 39,356
Equipment 3,485 3,350 3,564 10,062 9,773
Marketing 2,646 3,673 3,528 9,369 11,125
Data processing 7,696 8,226 8,242 23,530 24,041
Communication 2,163 2,288 2,755 6,865 7,154
Professional fees 4,589 4,077 3,252 11,317 11,801
Loan expenses 1,542 1,693 2,213 4,866 5,669
Supplies 547 594 799 1,720 1,980
FDIC assessment 2,197 2,130 2,149 6,814 6,098
Other real estate owned expense 511 1,009 728 2,635 3,251
Intangible amortization 2,641 2,781 3,233 8,442 9,245
Other expense 6,232 4,845 3,794 16,488 17,848
Total noninterest expense 103,702 102,811 108,062 308,404 327,889
Income before income taxes 50,831 49,438 45,678 146,752 152,260
Income tax expense 11,459 10,584 10,969 32,534 51,452
Net income$ 39,372$ 38,854$ 34,709 $ 114,218$ 100,808
Diluted Earnings Per Share
Net income$ 0.29$ 0.28$ 0.25 $ 0.84$ 0.80
Average Common Shares Outstanding
Basic 135,120 135,085 134,492 135,040 125,366
Diluted 135,796 135,697 135,011 135,693 125,839
Common shares outstanding at end of period 135,523 135,516 134,985 135,523 134,985


TABLE 7
Balance Sheet (unaudited)
($ in thousands)
September 30, June 30, September 30,
2017 2017 2016
Assets
Federal Reserve Bank account$ 32,333 $ 22,117 $ 31,634
Money market investments 17,382 9,815 4,513
Investments:
Treasury and government sponsored agencies 582,051 586,258 622,726
Mortgage-backed securities 1,458,385 1,470,687 1,495,683
States and political subdivisions 1,095,975 1,118,437 1,148,147
Other securities 451,082 449,045 449,614
Total investments 3,587,493 3,624,427 3,716,170
Loans held for sale 30,221 27,425 60,465
Loans:
Commercial 2,049,054 2,001,621 1,836,380
Commercial and agriculture real estate 3,370,211 3,259,998 3,092,575
Consumer:
Home equity 477,100 472,198 481,995
Other consumer loans 1,382,639 1,398,849 1,388,803
Subtotal of commercial and consumer loans 7,279,004 7,132,666 6,799,753
Residential real estate 2,119,120 2,099,374 2,105,232
Total loans 9,398,124 9,232,040 8,904,985
Total earning assets 13,065,553 12,915,824 12,717,767
Allowance for loan losses (50,169) (50,986) (51,547)
Non-earning Assets:
Cash and due from banks 202,652 230,809 224,893
Premises and equipment 412,488 413,933 333,266
Goodwill and intangible assets 684,253 686,894 696,128
Company-owned life insurance 356,897 354,875 351,431
Net deferred tax assets 137,951 146,780 169,466
Loan servicing rights 24,900 25,023 25,920
Other real estate owned 10,259 11,071 23,719
Other assets 221,016 223,058 212,028
Total non-earning assets 2,050,416 2,092,443 2,036,851
Total assets$ 15,065,800 $ 14,957,281 $ 14,703,071
Liabilities and Equity
Noninterest-bearing demand deposits$ 3,034,696 $ 3,011,156 $ 2,944,331
NOW accounts 2,539,233 2,639,813 2,486,190
Savings accounts 2,932,488 2,924,689 2,963,637
Money market accounts 648,378 672,391 687,895
Other time deposits 1,337,156 1,313,199 1,400,068
Total core deposits 10,491,951 10,561,248 10,482,121
Brokered CD's 114,833 122,466 164,587
Total deposits 10,606,784 10,683,714 10,646,708
Federal funds purchased and interbank borrowings 317,021 227,029 125,121
Securities sold under agreements to repurchase 285,409 298,094 347,804
Federal Home Loan Bank advances 1,589,367 1,515,628 1,331,379
Other borrowings 219,314 219,167 218,795
Total borrowed funds 2,411,111 2,259,918 2,023,099
Accrued expenses and other liabilities 141,082 127,055 198,807
Total liabilities 13,158,977 13,070,687 12,868,614
Common stock, surplus, and retained earnings 1,941,020 1,917,714 1,853,286
Other comprehensive income (34,197) (31,120) (18,829)
Total shareholders' equity 1,906,823 1,886,594 1,834,457
Total liabilities and shareholders' equity$ 15,065,800 $ 14,957,281 $ 14,703,071


TABLE 8
Average Balance Sheet and Interest Rates (unaudited)
($ in thousands)
Three Months Ended Three Months Ended Three Months Ended
September 30, 2017 June 30, 2017 September 30, 2016
AverageIncome (1)/Yield/ AverageIncome (1)/Yield/ AverageIncome (1)/Yield/
Earning Assets: BalanceExpenseRate BalanceExpenseRate BalanceExpenseRate
Money market and other interest-earning
investments $ 32,755 $ 851.03% $ 27,222 $ 550.80% $ 21,923 $ 230.42%
Investments:
Treasury and gov't sponsored agencies 585,354 2,8441.94% 575,940 2,7981.94% 671,295 3,3902.02%
Mortgage-backed securities 1,456,034 7,2351.99% 1,485,582 7,5902.04% 1,414,753 6,3531.80%
States and political subdivisions 1,103,721 13,0654.73% 1,122,769 13,3754.76% 1,139,983 13,3294.68%
Other securities 453,782 3,0432.68% 446,521 2,8662.57% 446,870 2,5662.30%
Total investments 3,598,891 26,1872.91% 3,630,812 26,6292.93% 3,672,901 25,6382.79%
Loans: (2)
Commercial 2,021,614 20,7314.01% 1,938,751 19,3523.95% 1,861,906 18,2683.84%
Commercial and agriculture real estate 3,298,435 43,6465.18% 3,240,318 39,8304.86% 2,975,029 41,9065.51%
Consumer:
Home equity 479,492 5,0654.19% 474,308 4,8374.09% 483,678 4,8954.03%
Other consumer loans 1,384,057 12,2423.51% 1,405,226 11,8813.39% 1,404,947 11,9603.39%
Subtotal commercial and consumer loans 7,183,598 81,6844.51% 7,058,603 75,9004.31% 6,725,560 77,0294.56%
Residential real estate loans 2,144,478 21,1903.95% 2,127,867 21,2684.00% 2,155,070 22,3434.14%
Total loans 9,328,076 102,8744.35% 9,186,470 97,1684.21% 8,880,630 99,3724.41%
Total earning assets$ 12,959,722 $ 129,1463.95% $ 12,844,504 $ 123,8523.84% $ 12,575,454 $ 125,0333.94%
Less: Allowance for loan losses (51,130) (50,937) (52,809)
Non-earning Assets:
Cash and due from banks$ 233,017 $ 200,209 $ 204,991
Other assets 1,845,612 1,860,676 1,721,772
Total assets $ 14,987,221 $ 14,854,452 $ 14,449,408
Interest-Bearing Liabilities:
NOW accounts $ 2,570,321 $ 5440.08% $ 2,643,123 $ 5110.08% $ 2,461,799 $ 4560.07%
Savings accounts 2,934,445 1,2890.17% 2,944,314 1,2090.16% 2,708,307 9620.14%
Money market accounts 661,635 1420.09% 684,911 1460.09% 936,232 3260.14%
Other time deposits 1,347,095 2,8000.82% 1,330,026 2,5360.76% 1,352,876 2,7040.79%
Total interest-bearing deposits 7,513,496 4,7750.25% 7,602,374 4,4020.23% 7,459,214 4,4480.24%
Brokered CD's 119,707 3501.16% 111,972 3221.15% 174,375 3710.85%
Total interest-bearing deposits and CD's 7,633,203 5,1250.27% 7,714,346 4,7240.25% 7,633,589 4,8190.25%
Federal funds purchased and interbank borrowings 220,918 6551.18% 166,690 4221.02% 178,770 2260.50%
Securities sold under agreements to repurchase 315,285 2800.35% 329,182 3340.41% 355,734 3750.42%
Federal Home Loan Bank advances 1,506,606 6,6181.74% 1,443,453 6,0171.67% 1,129,756 4,1371.46%
Other borrowings 219,241 2,3694.32% 219,085 2,3794.34% 218,720 2,3534.30%
Total borrowed funds 2,262,050 9,9221.74% 2,158,410 9,1521.70% 1,882,980 7,0911.50%
Total interest-bearing liabilities$ 9,895,253 $ 15,0470.61% $ 9,872,756 $ 13,8760.56% $ 9,516,569 $ 11,9100.50%
Noninterest-Bearing Liabilities
Demand deposits $ 3,049,503 $ 2,988,147 $ 2,895,945
Other liabilities 146,271 128,231 215,620
Shareholders' equity 1,896,194 1,865,318 1,821,274
Total liabilities and shareholders' equity$ 14,987,221 $ 14,854,452 $ 14,449,408
Net interest rate spread 3.34% 3.28% 3.44%
Net interest margin (FTE) 3.52% 3.42% 3.60%
FTE adjustment $ 5,621 $ 5,643 $ 5,320
(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)
Nine Months Ended Nine Months Ended
September 30, 2017 September 30, 2016
AverageIncome (1)/Yield/ AverageIncome (1)/Yield/
Earning Assets: BalanceExpenseRate BalanceExpenseRate
Money market and other interest-earning
investments $ 29,172 $ 1710.78% $ 29,979 $ 930.42%
Investments:
Treasury and gov't sponsored agencies 567,403 8,4221.98% 713,285 10,4541.95%
Mortgage-backed securities 1,484,132 22,6432.03% 1,225,528 16,9921.85%
States and political subdivisions 1,119,846 40,0474.77% 1,120,344 39,5454.71%
Other securities 448,544 8,7382.60% 436,466 7,5222.30%
Total investments 3,619,925 79,8502.94% 3,495,623 74,5132.85%
Loans: (2)
Commercial 1,949,921 59,1714.00% 1,823,223 53,1383.83%
Commercial and agriculture real estate 3,237,053 123,8005.04% 2,488,888 105,2175.55%
Consumer:
Home equity 476,729 14,5604.08% 450,805 15,7594.67%
Other consumer loans 1,399,040 35,8903.43% 1,320,386 33,0783.35%
Subtotal commercial and consumer loans 7,062,743 233,4214.42% 6,083,302 207,1924.55%
Residential real estate loans 2,137,982 63,7123.97% 1,939,148 59,2744.08%
Total loans 9,200,725 297,1334.28% 8,022,450 266,4664.40%
Total earning assets$ 12,849,822 $ 377,1543.90% $ 11,548,052 $ 341,0723.92%
Less: Allowance for loan losses (50,927) (52,054)
Non-earning Assets:
Cash and due from banks$ 209,752 $ 186,506
Other assets 1,861,261 1,612,410
Total assets $ 14,869,908 $ 13,294,914
Interest-Bearing Liabilities:
NOW accounts $ 2,599,696 $ 1,5110.08% $ 2,331,596 $ 1,0990.06%
Savings accounts 2,949,412 3,6550.17% 2,475,739 2,5850.14%
Money market accounts 684,346 4370.09% 784,057 6980.12%
Other time deposits 1,336,729 7,7040.77% 1,147,969 7,1840.84%
Total interest-bearing deposits 7,570,183 13,3070.24% 6,739,361 11,5660.23%
Brokered CD's 113,111 9251.09% 158,724 1,0000.84%
Total interest-bearing deposits and CD's 7,683,294 14,2320.25% 6,898,085 12,5660.24%
Federal funds purchased and interbank borrowings 192,343 1,4331.00% 157,499 5660.48%
Securities sold under agreements to repurchase 325,230 8700.36% 373,474 1,1390.41%
Federal Home Loan Bank advances 1,460,293 17,9471.64% 1,073,414 11,1641.39%
Other borrowings 219,097 7,1084.33% 224,000 7,0644.20%
Total borrowed funds 2,196,963 27,3581.66% 1,828,387 19,9331.46%
Total interest-bearing liabilities$ 9,880,257 $ 41,5900.56% $ 8,726,472 $ 32,4990.50%
Noninterest-Bearing Liabilities
Demand deposits $ 2,985,386 $ 2,698,873
Other liabilities 141,616 195,078
Shareholders' equity 1,862,649 1,674,491
Total liabilities and shareholders' equity$ 14,869,908 $ 13,294,914
Net interest rate spread 3.34% 3.42%
Net interest margin (FTE) 3.48% 3.56%
FTE adjustment $ 16,952 $ 15,787
(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 Nine Months Ended
September 30,June 30,September 30, September 30,September 30,
2017 2017 2016 2017 2016
Beginning allowance for loan losses$ 50,986 $ 49,834 $ 51,804 $ 49,808 $ 52,233
Provision for loan losses 311 1,355 1,306 2,013 2,716
Gross charge-offs (2,821) (3,380) (4,519) (9,440) (11,138)
Gross recoveries 1,693 3,177 2,956 7,788 7,736
Net (charge-offs) recoveries (1,128) (203) (1,563) (1,652) (3,402)
Ending allowance for loan losses$ 50,169 $ 50,986 $ 51,547 $ 50,169 $ 51,547
Net charge-offs (recoveries) / average loans (1) 0.05% 0.01% 0.07% 0.02% 0.06%
Average loans outstanding (1)$ 9,320,868 $ 9,180,987 $ 8,865,400 $ 9,194,396 $ 8,012,299
EOP loans outstanding (1)$ 9,398,124 $ 9,232,040 $ 8,904,985 $ 9,398,124 $ 8,904,985
Allowance for loan losses / EOP loans (1) 0.53% 0.55% 0.58% 0.53% 0.58%
Underperforming Assets:
Loans 90 Days and over (still accruing)$ 879 $ 201 $ 443 $ 879 $ 443
Non-performing loans:
Nonaccrual loans (2) 119,256 125,519 151,484 119,256 151,484
Renegotiated loans 17,886 14,123 13,860 17,886 13,860
Total non-performing loans 137,142 139,642 165,344 137,142 165,344
Foreclosed properties 10,259 11,071 23,719 10,259 23,719
Total underperforming assets$ 148,280 $ 150,914 $ 189,506 $ 148,280 $ 189,506
Classified loans - "problem loans"$ 209,524 $ 237,997 $ 233,469 $ 209,524 $ 233,469
Other classified assets 7,526 7,449 6,634 7,526 6,634
Criticized loans - "special mention loans" 130,197 99,502 125,840 130,197 125,840
Total classified and criticized assets$ 347,247 $ 344,948 $ 365,943 $ 347,247 $ 365,943
Non-performing loans / EOP loans (1) 1.46% 1.51% 1.86% 1.46% 1.86%
Allowance to non-performing loans (3) 37% 37% 31% 37% 31%
Under-performing assets / EOP loans (1) 1.58% 1.63% 2.13% 1.58% 2.13%
EOP total assets$ 15,065,800 $ 14,957,281 $ 14,703,071 $ 15,065,800 $ 14,703,071
Under-performing assets / EOP assets 0.98% 1.01% 1.29% 0.98% 1.29%
EOP - End of period actual balances
(1) Excludes loans held for sale.
(2) Includes renegotiated loans totaling $43.7 million at September 30, 2017, $46.2 million at June 30, 2017 and $29.9 million
at September 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 11
Non-GAAP Measures (unaudited)
($ in thousands)
Three Months Ended Nine Months Ended
September 30,June 30,September 30, September 30,September 30,
2017 2017 2016 2017 2016
Actual End of Period Balances
GAAP shareholders' equity $ 1,906,823 $ 1,886,594 $ 1,834,457 $ 1,906,823 $ 1,834,457
Deduct:
Goodwill 655,018 655,018 655,210 655,018 655,210
Intangibles 29,235 31,876 40,918 29,235 40,918
684,253 686,894 696,128 684,253 696,128
Tangible shareholders' equity $ 1,222,570 $ 1,199,700 $ 1,138,329 $ 1,222,570 $ 1,138,329
Average Balances
GAAP shareholders' equity $ 1,896,194 $ 1,865,318 $ 1,821,274 $ 1,862,649 $ 1,674,491
Deduct:
Goodwill 655,018 655,018 655,519 655,018 628,859
Intangibles 30,502 33,189 42,522 33,242 40,679
685,520 688,207 698,041 688,260 669,538
Average tangible shareholders' equity $ 1,210,674 $ 1,177,111 $ 1,123,233 $ 1,174,389 $ 1,004,953
Actual End of Period Balances
GAAP assets $ 15,065,800 $ 14,957,281 $ 14,703,071 $ 15,065,800 $ 14,703,071
Add:
Trust overdrafts 45 31 47 45 47
Deduct:
Goodwill 655,018 655,018 655,210 655,018 655,210
Intangibles 29,235 31,876 40,918 29,235 40,918
684,253 686,894 696,128 684,253 696,128
Tangible assets $ 14,381,592 $ 14,270,418 $ 14,006,990 $ 14,381,592 $ 14,006,990
Risk-weighted assets$ 10,495,407 $ 10,367,804 $ 9,703,233 $ 10,495,407 $ 9,703,233
GAAP net income$ 39,372 $ 38,854 $ 34,709 $ 114,218 $ 100,808
Add:
Intangible amortization (net of tax) 1,717 1,807 2,101 5,487 6,009
Tangible net income$ 41,089 $ 40,661 $ 36,810 $ 119,705 $ 106,817
Tangible Ratios
Return on tangible common equity 13.44% 13.56% 12.93% 13.06% 12.51%
Return on average tangible common equity 13.58% 13.82% 13.11% 13.59% 14.17%
Return on tangible assets 1.14% 1.14% 1.05% 1.11% 1.02%
Tangible common equity to tangible assets 8.50% 8.41% 8.13% 8.50% 8.13%
Tangible common equity to risk-weighted assets 11.65% 11.57% 11.73% 11.65% 11.73%
Tangible common book value (1) 9.02 8.85 8.43 9.02 8.43
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$ 1,254,790 $ 1,222,250 $ 1,156,274 $ 1,254,790 $ 1,156,274
Deduct:
Trust Preferred Securities 45,000 45,000 45,000 45,000 45,000
Additional Tier 1 capital deductions (13,498) (14,977) (30,466) (13,498) (30,466)
31,502 30,023 14,534 31,502 14,534
Tier 1 common equity $ 1,223,288 $ 1,192,227 $ 1,141,740 $ 1,223,288 $ 1,141,740
Risk-weighted assets 10,495,407 10,367,804 9,703,233 10,495,407 9,703,233
Tier 1 common equity to risk-weighted assets 11.66% 11.50% 11.77% 11.66% 11.77%

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