Old National’s 4th quarter includes strong commercial loan growth and another successful partnership

4th Quarter 2017 Highlights:

  • Organic commercial and commercial real estate loan growth1 of 10.1% annualized from 3rd quarter of 2017
  • Cost of total deposits remained low at 0.20%, up just 1 basis point from 3rd quarter of 2017
  • Legacy noninterest expenses2 declined 6.8% from 4th quarter of 2016
  • Anchor Bancorp, Inc. (Anchor-Minnesota) partnership closed November 1, 2017, less than 90 days following announcement

2017 Highlights:

  • Organic loan growth1 of almost 5%; organic commercial and commercial real estate loan growth1 of 10.1%
  • Cost of total deposits increased just 2 basis points to 0.19%
  • Credit quality metrics remain strong, with net charge-offs of just 0.03% of average total loans
  • Adjusted operating leverage improved over 350 basis points2 from 2016

1 Excludes acquired loans; includes loans held for sale 2 Non-GAAP measure – refer to Tables 3 and 4 for Non-GAAP reconciliations

EVANSVILLE, Ind., Jan. 23, 2018 (GLOBE NEWSWIRE) -- Today Old National Bancorp (the “Company” or “Old National”) (NASDAQ:ONB) reported a 4th quarter 2017 net loss of $18.5 million, or $0.13 per diluted share. Full-year 2017 net income was $95.7 million, or $0.69 per diluted share.

As was previously disclosed in a Current Report on Form 8-K filed by Old National with the Securities and Exchange Commission on December 22, 2017, the 4th quarter results included an estimated revaluation of the Company’s deferred tax asset due to the new “H.R.1” tax reform law. Old National recorded $39.3 million of additional tax expense to estimate the impact of a reduction to its deferred tax asset. Also included in the 4th quarter were the following pre-tax charges: $11.9 million for merger and integration, $3.0 million for branch consolidations, $1.6 million in severance, $1.3 million for Foundation funding and $0.7 million for a client experience improvement initiative. Excluding these items from the current quarter and netting out securities gains, Old National would have reported net income of $32.7 million, or $0.22 per share. Refer to Table 5 for Non-GAAP net income reconciliation.

“Old National capped off a very successful 2017 with another strong quarter,” said Old National Chairman and CEO Bob Jones. “Our 4th quarter saw a continuation of strong operating results highlighted by double digit commercial loan growth coupled with strong credit quality, controlled deposit costs and steady core expenses. We accomplished all of this while expanding into Minnesota with the successful closing of our Anchor-Minnesota partnership. We are optimistic as we look ahead to 2018 given the strength of our franchise and the foundation we have built for sustained, positive operating leverage.

“While the immediate impact of the Tax Cut and Jobs Act is the necessary writedown of a portion of our deferred taxes, the positive impact that reduced taxes will have on Old National and our clients will be significant in 2018 and beyond,” continued Jones. “We are already hearing from our clients about increased investments in technology and other capital expenditures. This is a similar story for us, as we expect to use some of the benefit to enhance our client experience through increased investments in technology. We continue to be a leader in investments in our communities, underscoring our commitment by making a contribution to our Foundation.”

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 13 years:

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

Balance Sheet and Net Interest Margin

At December 31, 2017, total period-end loans, including loans held for sale, increased $1.708 billion to $11.136 billion from $9.428 billion at September 30, 2017. Total loans acquired through the partnership with Anchor-Minnesota were $1.595 billion as of the date of closing. Excluding these acquired loans, Old National reported organic loan growth during the 4th quarter of $112.4 million, or 4.8% on an annualized basis. Old National’s portfolio of commercial and commercial real estate loans grew by $1.653 billion from the 3rd quarter. Of this increase, $1.516 billon was acquired through the Anchor-Minnesota partnership, resulting in $136.5 million, or 10.1% annualized, of organic commercial loan growth.

For the full-year 2017, Old National’s total loan portfolio grew $2.035 billion. Organic loan growth was $439.5 million, or 4.8%. The Company’s portfolio of commercial and commercial real estate loans grew $2.024 billion for the full year, of which $507.8 million was organic growth, an increase of 10.1% compared to 2016.

Total period-end core deposits, including demand and interest-bearing deposits, increased $1.949 billion to $12.441 billion at December 31, 2017, compared to $10.492 billion at September 30, 2017. Total core deposits assumed through the Anchor-Minnesota partnership were $1.777 billion as of the date of closing, of which $579.4 million were noninterest-bearing demand deposits. Excluding these assumed deposits, Old National reported organic deposit growth of $172.0 million for the 4th quarter while noninterest-bearing deposit balances increased $66.8 million during that same period. Old National’s cost of total deposits remained well controlled at 0.20% in the 4th quarter of 2017 compared to 0.19% in the 3rd quarter of 2017 and 0.18% in the 4th quarter of 2016.

Net interest income for the 4th quarter of 2017 totaled $118.6 million compared to $108.5 million in the 3rd quarter of 2017, and $109.9 million in the 4th quarter of 2016. On a fully taxable equivalent basis, net interest income was $124.7 million for the 4th quarter of 2017 and represented a net interest margin on total average earning assets of 3.47%. These results compare to net interest income on a fully taxable equivalent basis of $114.1 million and a margin of 3.52% in the 3rd quarter of 2017. In the 4th quarter of 2016, Old National reported net interest income on a fully taxable equivalent basis of $115.4 million and a margin of 3.63%. Refer to Table 6 for Non-GAAP taxable equivalent reconciliations.

As part of net interest income, Old National recorded $7.5 million in accretion income, which represents 21 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 3rd quarter of 2017 and the 4th quarter of 2016 reported by Old National was $11.1 million, or 34 basis points of the net interest margin, and $16.8 million, or 53 basis points of the net interest margin, respectively.

Noninterest Income

For the 4th quarter of 2017, total noninterest income amounted to $44.8 million and compares to $46.4 million reported in the 3rd quarter of 2017 and $62.8 million in the 4th quarter of 2016. As compared to the 3rd quarter, the 4th quarter of 2017 saw seasonal declines in service charge income (excluding the $0.9 million contribution from Anchor-Minnesota) and mortgage revenue as well as lower capital markets income. The 4th quarter of 2016 included a $12.8 million pre-tax deferred gain related to the repurchase of various bank properties as well as $6.4 million of recoveries on loans from the Company’s 2016 Wisconsin acquisition. For the two months since the closing of the partnership, Anchor-Minnesota contributed $2.6 million in noninterest income to the 4th quarter of 2017.

Noninterest Expenses

Noninterest expenses for Old National totaled $140.4 million for the 4th quarter of 2017. The current quarter included $18.5 million of pre-tax charges: $11.9 million for merger and integration, $3.0 million for branch consolidations, $1.6 million in severance, $1.3 million for Foundation funding and $0.7 million for a client experience improvement initiative. Old National also incurred $11.7 million in amortization of tax credit investments in the 4th quarter. Excluding these charges from the current quarter, Old National’s adjusted noninterest expense was $110.2 million. The newly acquired Anchor-Minnesota operations contributed $9.5 million in noninterest expenses during the 4th quarter for the two months since the closing of the partnership. Refer to Table 3 for Non-GAAP noninterest expense reconciliation.

For the 3rd quarter of 2017, Old National reported total noninterest expenses of $103.7 million, which included $4.7 million of 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 integration and $0.3 million in severance. In the 4th quarter of 2016, noninterest expenses totaled $126.3 million and included $18.3 million of pre-tax charges: $9.8 million for the termination of the Company’s pension plan, $5.1 million related to branch consolidations, $1.8 million in merger and integration charges and $1.6 million in severance. Old National consolidated 14 branches in the 4th quarter of 2017. With the addition of the newly acquired Minnesota branches, Old National currently operates 191 branches throughout its franchise.

Capital

At December 31, 2017, Old National’s capital position remained well above regulatory guideline minimums with regulatory tier 1 and total risk-based capital ratios of 10.4% and 11.4%, respectively, compared to 12.0% and 12.5% at September 30, 2017, and 11.7% and 12.2% at December 31, 2016. Old National did not repurchase any stock in the open market during the 4th quarter or full-year 2017.

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





Table 1
Fully Phased-In Regulatory Guidelines Minimum

Consolidated ONB at December 31, 2017
Tier 1 Risk-Based Capital Ratio> 8.5%10.4%
Total Risk-Based Capital Ratio> 10.5%11.4%
Common Equity Tier 1 Capital Ratio > 7.0%10.5%
Tier 1 Leverage Capital Ratio> 4.0%8.3%

Old National’s ratio of tangible common equity to tangible assets was 7.65% at December 31, 2017, compared to 8.50% at September 30, 2017, and 7.92% at December 31, 2016. Refer to Table 13 for Non-GAAP reconciliations.

Credit

Old National recorded a provision expense of $1.0 million and had net charge-offs of $0.8 million in the 4th quarter of 2017. These results compare to $0.3 million in provision expense and net charge-offs of $1.1 million, and a provision recapture of $1.8 million and net charge-offs of nearly zero, in the 3rd quarter of 2017 and the 4th quarter of 2016, respectively. Net charge-offs for the 4th quarter of 2017 were 0.03% of average total loans on an annualized basis, compared to net charge-offs of 0.05% of average total loans in the 3rd quarter of 2017 and 0.00% in the 4th quarter of 2016.

Delinquencies remained low as Old National reported 30-89 day delinquent loans of 0.37% in the 4th quarter of 2017 compared to 0.34% in the 3rd quarter of 2017. Old National’s 90+ day delinquent loans for the 4th quarter of 2017 were 0.01%, unchanged from the 3rd quarter of 2017.

For the full-year 2017, Old National recorded provision expense of $3.1 million and had net charge-offs of $2.5 million, or 0.03% of average total loans. This compares to the full-year 2016 provision expense of $1.0 million and net charge-offs of $3.4 million, or 0.04% of average total loans.

Old National’s allowance for loan losses at December 31, 2017, was $50.4 million, or 0.45% of total loans, compared to an allowance of $50.2 million, or 0.53% of total loans at September 30, 2017, and $49.8 million, or 0.55% of total loans, at December 31, 2016. The coverage ratio (allowance to non-performing loans) stood at 35% at December 31, 2017, compared to 37% at September 30, 2017, and 34% at December 31, 2016.

When reviewing Old National’s credit quality trends, it is important to remember that, 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 December 31, 2017, the remaining discount on these acquired loans was $136.5 million, of which $46.1 million is applicable to loans acquired in the Anchor-Minnesota partnership.

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

Table 2 ($ in millions)4Q17 Excluding Anchor-Minnesota

4Q17 Anchor-Minnesota




4Q17 Consolidated






3Q17






4Q16
Non-Performing Loans (NPLs)$128.0$16.5$144.5$137.1$145.8
Problem Loans (Including NPLs)199.227.4226.6209.5220.4
Special Mention Loans141.646.5188.1130.295.5
Net Charge-Off (Recoveries) Ratio0.03%-
0.03%0.05%0.00%
Provision for Loan Losses$1.0$-$1.0$0.3$(1.8)
Allowance for Loan Losses50.4-
50.450.249.8
Remaining Loan Discount on Acquired Loans90.446.1136.596.5129.7

Income Taxes

On a fully taxable-equivalent basis, Old National reported $46.5 million in income tax expense in the 4th quarter of 2017. Included in this number is a $39.3 million estimate for the revaluation of the Company’s deferred tax asset. This revaluation resulted from the new “H.R.1” tax reform law which was signed on December 22, 2017. As an estimate, this amount could be adjusted during the measurement period, which will end in December 2018.

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 $17.5 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, Wisconsin and Minnesota. In addition to providing extensive services in retail and commercial banking, Old National offers comprehensive wealth management, investments and brokerage services. For more information and financial data, please visit Investor Relations at oldnational.com.

Conference Call
Old National will hold a conference call at 10:00 a.m. Central Time on Tuesday, January 23, 2018, to discuss 4th quarter and full-year 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 January 23 through February 6. To access the replay, dial 1-855-859-2056, Conference ID Code 6268317.

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 Reconciliation-Noninterest Expenses

($ in millions)4Q174Q16
Noninterest Expense As Reported$140.4$126.3
Less: Merger and Integration Charges(11.9)(1.8)
Less: Amortization of Tax Credit Investments(11.7)-
Less: Pension Termination Charges-(9.8)
Less: Branch Consolidations, Severance, Foundation Funding and Client Experience Initiative Charges (6.6) (6.7)
Adjusted Noninterest Expenses$110.2$108.0
Less: Anchor-Minnesota Expenses (9.5)-
Legacy ONB Noninterest Expenses$100.7$108.0

Table 4 – Non-GAAP Reconciliation-Operating Leverage

($ in millions) 2017 2016
Noninterest Expense As Reported$448.8$454.1
Less: Merger and Integration Charges(12.3)(15.9)
Less: Amortization of Tax Credit Investments(11.7)-
Less: Pension Termination Charges-(9.8)
Less: Branch Consolidations, Severance, Foundation Funding and Client Experience Initiative Charges(14.0)(13.7)
Adjusted Noninterest Expenses$410.8$414.7
Net Interest Income As Reported$437.2$402.7
FTE Adjustment23.121.3
Net Interest Income (FTE Basis)$460.3$424.0
Total Noninterest Income As Reported$183.4252.8
Less: Securities Gains(9.1)(5.8)
Adjusted Noninterest Income$174.2$247.0
Total Revenue Less Securities Gains (FTE Basis)$634.5$671.0
Less: Gain on Sale of Insurance-$(41.9)
Less: Gain on Repurchased Bank Properties, Other Gains(.2)(12.0)
Adjusted Total Revenue Less Securities Gains (FTE Basis)$634.3$617.1
Operating Leverage1 (basis points)(426)
Adjusted Operating Leverage2 (basis points)373

1 Year-over-year basis point change in noninterest expenses plus change in total revenue
2 Year-over-year basis point change in adjusted noninterest expenses plus change in adjusted total revenue

Table 5 – Non-GAAP Reconciliation-Adjusted Net Income

($ in millions, shares in 000s)Reported 4Q17Adjustments1Adjusted 4Q17
Total Revenues (FTE Basis)$169.5$(1.6)$167.9
Less: Provision for Loan Losses(1.0)-(1.0)
Less: Noninterest Expenses(140.4)18.5(121.9)
Income before Income Taxes (FTE)$28.1$16.9$45.0
Income Taxes(46.6)34.3(12.3)
Net Income (Loss)$(18.5)$51.2$32.7
Average Shares Outstanding146,875-146,875
Earnings (Loss) Per Share$(0.13)$0.35$0.22

1 Tax-effect calculations use estimated full-year 2017 FTE tax rate excluding the $39.3 million deferred tax asset revaluation

Table 6 – Non-GAAP Reconciliation-Fully Taxable Equivalent Net Interest Margin

($ in millions)4Q173Q174Q16
Net Interest Income$118.6 $108.5 $109.9
Taxable Equivalent Adjustment 6.1 5.6 5.5
Net Interest Income – Taxable Equivalent$124.7 $114.1 $115.4
Average Earning Assets$14,389.5 $12,959.7 $12,713.3
Net Interest Margin 3.47% 3.52% 3.63%

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 merger with Anchor-Minnesota 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.

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

Table 7
Financial Highlights (unaudited)
($ and shares in thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31,September 30,December 31, December 31,December 31,
2017 2017 2016 2017 2016
Income Statement
Net interest income$ 118,556 $ 108,478 $ 109,917 $ 437,168 $ 402,703
Provision for loan losses 1,037 311 (1,756) 3,050 960
Noninterest income 44,825 46,366 62,751 183,382 252,830
Noninterest expense 140,432 103,702 126,258 448,836 454,147
Net income (loss) (18,493) 39,372 33,456 95,725 134,264
Per Common Share Data (Diluted)
Net income (loss) available to common shareholders$ (0.13)$ 0.29 $ 0.25 $ 0.69 $ 1.05
Average diluted shares outstanding 146,875 135,796 135,383 138,513 128,301
Book value 14.17 14.07 13.42 14.17 13.42
Stock price 17.45 18.30 18.15 17.45 18.15
Dividend payout ratio N/M 43% 52% 75% 50%
Tangible common book value (1) 8.37 9.02 8.30 8.37 8.30
Performance Ratios
Return on average assets -0.45% 1.05% 0.91% 0.63% 0.98%
Return on average common equity -3.51% 8.31% 7.33% 4.98% 7.84%
Return on average tangible common equity (1) -5.05% 13.58% 12.57% 8.59% 13.73%
Net interest margin (FTE) 3.47% 3.52% 3.63% 3.48% 3.58%
Efficiency ratio (2) 81.60% 64.17% 69.53% 68.87% 65.82%
Net charge-offs (recoveries) to average loans 0.03% 0.05% 0.00% 0.03% 0.04%
Allowance for loan losses to ending loans 0.45% 0.53% 0.55% 0.45% 0.55%
Non-performing loans to ending loans 1.30% 1.46% 1.62% 1.30% 1.62%
Balance Sheet
Total loans$ 11,118,121 $ 9,398,124 $ 9,010,512 $ 11,118,121 $ 9,010,512
Total assets 17,518,292 15,065,800 14,860,237 17,518,292 14,860,237
Total deposits 12,605,764 10,606,784 10,743,253 12,605,764 10,743,253
Total borrowed funds 2,578,204 2,411,111 2,152,086 2,578,204 2,152,086
Total shareholders' equity 2,154,397 1,906,823 1,814,417 2,154,397 1,814,417
Capital Ratios (1)
Risk-based capital ratios (EOP):
Tier 1 common equity 10.5% 11.7% 11.5% 10.5% 11.5%
Tier 1 10.4% 12.0% 11.7% 10.4% 11.7%
Total 11.4% 12.5% 12.2% 11.4% 12.2%
Leverage ratio (to average assets) 8.3% 8.8% 8.4% 8.3% 8.4%
Total equity to assets (averages) 12.69% 12.65% 12.44% 12.57% 12.55%
Tangible common equity to tangible assets 7.65% 8.50% 7.92% 7.65% 7.92%
Nonfinancial Data
Full-time equivalent employees 2,801 2,592 2,733 2,801 2,733
Number of branches 191 188 203 191 203
(1) See non-GAAP measures on Table 13.
(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 amortization of intangibles 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 N/M - Not meaningful

Table 8
Income Statement (unaudited)
($ and shares in thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31,September 30,December 31, December 31,December 31,
2017 2017 2016 2017 2016
Interest income$ 135,134 $ 123,525$ 121,849 $ 495,336$ 447,134
Less: interest expense 16,578 15,047 11,932 58,168 44,431
Net interest income 118,556 108,478 109,917 437,168 402,703
Provision for loan losses 1,037 311 (1,756) 3,050 960
Net interest income after provision for loan losses 117,519 108,167 111,673 434,118 401,743
Wealth management fees 9,801 8,837 8,593 37,316 34,641
Service charges on deposit accounts 10,913 10,535 10,448 41,331 41,578
Debit card and ATM fees 4,756 4,248 4,183 17,676 16,769
Mortgage banking revenue 3,933 5,104 4,399 18,449 20,240
Insurance premiums and commissions 180 170 152 617 20,527
Investment product fees 5,791 5,193 5,155 20,977 18,822
Capital markets income 923 1,843 965 6,544 3,227
Company-owned life insurance 2,366 2,022 2,198 8,654 8,479
Change in FDIC indemnification asset - - - - 233
Other income 4,496 5,400 25,354 22,466 40,448
Net gain on sale of ONB Insurance Group, Inc. - - - - 41,864
Gains (losses) on sales of securities 1,588 2,972 1,239 9,135 5,848
Gains (losses) on derivatives 78 42 65 217 154
Total noninterest income 44,825 46,366 62,751 183,382 252,830
Salaries and employee benefits 74,785 57,783 72,344 246,738 252,892
Occupancy 12,168 11,670 11,591 46,511 50,947
Equipment 3,498 3,485 3,675 13,560 13,448
Marketing 3,803 2,646 3,495 13,172 14,620
Data processing 8,776 7,696 7,961 32,306 32,002
Communication 2,419 2,163 2,805 9,284 9,959
Professional fees 5,523 4,589 3,904 16,840 15,705
Loan expenses 1,730 1,542 1,963 6,596 7,632
Supplies 686 547 885 2,406 2,865
FDIC assessment 2,666 2,197 2,583 9,480 8,681
Other real estate owned expense 741 511 944 3,376 4,195
Amortization of intangibles 3,399 2,641 3,241 11,841 12,486
Amortization of tax credit investments 11,733 - - 11,733 -
Other expense 8,505 6,232 10,867 24,993 28,715
Total noninterest expense 140,432 103,702 126,258 448,836 454,147
Income before income taxes 21,912 50,831 48,166 168,664 200,426
Income tax expense 40,405 11,459 14,710 72,939 66,162
Net income (loss)$ (18,493)$ 39,372$ 33,456 $ 95,725$ 134,264
Diluted Earnings Per Share
Net income (loss)$ (0.13)$ 0.29$ 0.25 $ 0.69$ 1.05
Average Common Shares Outstanding
Basic 146,073 135,120 134,670 137,821 127,705
Diluted 146,875 135,796 135,383 138,513 128,301
Common shares outstanding at end of period 152,040 135,523 135,159 152,040 135,159

Table 9
Balance Sheet (unaudited)
($ in thousands)
December 31, September 30, December 31,
2017 2017 2016
Assets
Federal Reserve Bank account$ 54,361 $ 32,333 $ 36,496
Money market investments 13,318 17,382 9,642
Investments:
Treasury and government sponsored agencies 669,838 582,051 541,190
Mortgage-backed securities 1,674,584 1,458,385 1,535,659
States and political subdivisions 1,207,353 1,095,975 1,131,003
Other securities 453,765 451,082 441,110
Total investments 4,005,540 3,587,493 3,648,962
Loans held for sale 17,930 30,221 90,682
Loans:
Commercial 2,717,269 2,049,054 1,917,099
Commercial and agriculture real estate 4,354,552 3,370,211 3,130,853
Consumer:
Home equity 507,509 477,100 476,439
Other consumer loans 1,371,738 1,382,639 1,398,591
Subtotal of commercial and consumer loans 8,951,068 7,279,004 6,922,982
Residential real estate 2,167,053 2,119,120 2,087,530
Total loans 11,118,121 9,398,124 9,010,512
Total earning assets 15,209,270 13,065,553 12,796,294
Allowance for loan losses (50,381) (50,169) (49,808)
Non-earning Assets:
Cash and due from banks 222,753 202,652 209,381
Premises and equipment 458,074 412,488 429,622
Goodwill and other intangible assets 881,147 684,253 692,695
Company-owned life insurance 403,753 356,897 352,956
Net deferred tax assets 110,857 137,951 181,863
Loan servicing rights 24,661 24,900 25,561
Other real estate owned 8,810 10,259 18,546
Other assets 249,348 221,016 203,127
Total non-earning assets 2,359,403 2,050,416 2,113,751
Total assets$ 17,518,292 $ 15,065,800 $ 14,860,237
Liabilities and Equity
Noninterest-bearing demand deposits$ 3,680,807 $ 3,034,696 $ 3,016,093
NOW accounts 3,115,822 2,539,233 2,596,595
Savings accounts 3,035,622 2,932,488 2,954,709
Money market accounts 1,139,077 648,378 707,748
Other time deposits 1,470,118 1,337,156 1,353,614
Total core deposits 12,441,446 10,491,951 10,628,759
Brokered CD's 164,318 114,833 114,494
Total deposits 12,605,764 10,606,784 10,743,253
Federal funds purchased and interbank borrowings 335,033 317,021 213,003
Securities sold under agreements to repurchase 384,810 285,409 367,052
Federal Home Loan Bank advances 1,609,579 1,589,367 1,353,092
Other borrowings 248,782 219,314 218,939
Total borrowed funds 2,578,204 2,411,111 2,152,086
Accrued expenses and other liabilities 179,927 141,082 150,481
Total liabilities 15,363,895 13,158,977 13,045,820
Common stock, surplus, and retained earnings 2,204,669 1,941,020 1,873,789
Accumulated other comprehensive income (loss) (50,272) (34,197) (59,372)
Total shareholders' equity 2,154,397 1,906,823 1,814,417
Total liabilities and shareholders' equity$ 17,518,292 $ 15,065,800 $ 14,860,237

Table 10
Average Balance Sheet and Interest Rates (unaudited)
($ in thousands)
Three Months Ended Three Months Ended Three Months Ended
December 31, 2017 September 30, 2017 December 31, 2016
AverageIncome (1)/Yield/ AverageIncome (1)/Yield/ AverageIncome (1)/Yield/
Earning Assets: BalanceExpenseRate BalanceExpenseRate BalanceExpenseRate
Money market and other interest-earning
investments $ 54,611 $ 870.63% $ 32,755 $ 851.03% $ 40,791 $ 370.36%
Investments:
Treasury and gov't sponsored agencies 611,982 3,0311.98% 585,354 2,8441.94% 551,665 2,7542.00%
Mortgage-backed securities 1,573,578 8,1392.07% 1,456,034 7,2351.99% 1,504,887 7,1821.91%
States and political subdivisions 1,178,113 13,3124.52% 1,103,721 13,0654.73% 1,141,703 13,4584.72%
Other securities 454,824 3,1262.75% 453,782 3,0432.68% 445,877 2,8682.57%
Total investments 3,818,497 27,6082.89% 3,598,891 26,1872.91% 3,644,132 26,2622.88%
Loans: (2)
Commercial 2,480,987 26,5774.19% 2,021,614 20,7314.01% 1,871,338 17,4533.65%
Commercial and agriculture real estate 3,989,684 47,6834.68% 3,298,435 43,6465.18% 3,125,500 45,3755.68%
Consumer:
Home equity 502,837 5,4424.29% 479,492 5,0654.19% 485,984 4,5973.76%
Other consumer loans 1,371,986 12,2483.54% 1,384,057 12,2423.51% 1,384,017 11,9423.43%
Subtotal commercial and consumer loans 8,345,494 91,9504.37% 7,183,598 81,6844.51% 6,866,839 79,3674.60%
Residential real estate loans 2,170,900 21,6283.99% 2,144,478 21,1903.95% 2,161,583 21,6894.00%
Total loans 10,516,394 113,5784.26% 9,328,076 102,8744.35% 9,028,422 101,0564.42%
Total earning assets$ 14,389,502 $ 141,2733.88% $ 12,959,722 $ 129,1463.95% $ 12,713,345 $ 127,3553.97%
Less: Allowance for loan losses (50,601) (51,130) (52,691)
Non-earning Assets:
Cash and due from banks$ 201,520 $ 233,017 $ 209,957
Other assets 2,046,544 1,845,612 1,806,507
Total assets $ 16,586,965 $ 14,987,221 $ 14,677,118
Interest-Bearing Liabilities:
NOW accounts $ 2,905,440 $ 7140.10% $ 2,570,321 $ 5440.08% $ 2,560,533 $ 4300.07%
Savings accounts 3,010,761 1,3240.17% 2,934,445 1,2890.17% 2,952,666 1,1380.15%
Money market accounts 994,574 3940.16% 661,635 1420.09% 703,904 1420.08%
Other time deposits 1,443,050 3,2030.88% 1,347,095 2,8000.82% 1,392,410 2,7140.78%
Total interest-bearing deposits 8,353,825 5,6350.27% 7,513,496 4,7750.25% 7,609,513 4,4240.23%
Brokered CD's 154,521 4891.26% 119,707 3501.16% 132,901 2930.88%
Total interest-bearing deposits and CD's 8,508,346 6,1240.29% 7,633,203 5,1250.27% 7,742,414 4,7170.24%
Federal funds purchased and interbank borrowings 172,838 5331.22% 220,918 6551.18% 79,913 1070.53%
Securities sold under agreements to repurchase 370,095 4000.43% 315,285 2800.35% 354,709 3700.41%
Federal Home Loan Bank advances 1,543,690 6,8711.77% 1,506,606 6,6181.74% 1,264,368 4,3831.38%
Other borrowings 241,695 2,6504.39% 219,241 2,3694.32% 218,860 2,3554.30%
Total borrowed funds 2,328,318 10,4541.78% 2,262,050 9,9221.74% 1,917,850 7,2151.50%
Total interest-bearing liabilities$ 10,836,664 $ 16,5780.61% $ 9,895,253 $ 15,0470.61% $ 9,660,264 $ 11,9320.49%
Noninterest-Bearing Liabilities
Demand deposits $ 3,486,412 $ 3,049,503 $ 3,006,263
Other liabilities 159,243 146,271 184,598
Shareholders' equity 2,104,646 1,896,194 1,825,993
Total liabilities and shareholders' equity$ 16,586,965 $ 14,987,221 $ 14,677,118
Net interest rate spread 3.27% 3.34% 3.48%
Net interest margin (FTE) 3.47% 3.52% 3.63%
FTE adjustment $ 6,139 $ 5,621 $ 5,506
(1) Interest income is reflected on a fully taxable equivalent basis (FTE).
(2) Includes loans held for sale.

Table 11
Average Balance Sheet and Interest Rates (unaudited)
($ in thousands)
Twelve Months Ended Twelve Months Ended
December 31, 2017 December 31, 2016
AverageIncome (1)/Yield/ AverageIncome (1)/Yield/
Earning Assets: BalanceExpenseRate BalanceExpenseRate
Money market and other interest-earning
investments $ 35,584 $ 2580.72% $ 32,697 $ 1300.40%
Investments:
Treasury and gov't sponsored agencies 578,640 11,4531.98% 672,659 13,2071.96%
Mortgage-backed securities 1,506,677 30,7822.04% 1,295,749 24,1741.87%
States and political subdivisions 1,134,532 53,3594.70% 1,125,713 53,0034.71%
Other securities 450,127 11,8632.64% 438,832 10,3912.37%
Total investments 3,669,976 107,4572.93% 3,532,953 100,7752.85%
Loans: (2)
Commercial 2,083,779 85,7474.11% 1,835,317 70,5913.85%
Commercial and agriculture real estate 3,426,757 171,4835.00% 2,648,911 150,5925.69%
Consumer:
Home equity 483,310 20,0034.14% 459,648 20,3564.43%
Other consumer loans 1,392,221 48,1393.46% 1,336,381 45,0203.37%
Subtotal commercial and consumer loans 7,386,067 325,3724.41% 6,280,257 286,5594.56%
Residential real estate loans 2,146,279 85,3403.98% 1,995,060 80,9634.06%
Total loans 9,532,346 410,7124.31% 8,275,317 367,5224.44%
Total earning assets$ 13,237,906 $ 518,4273.92% $ 11,840,967 $ 468,4273.96%
Less: Allowance for loan losses (50,845) (52,215)
Non-earning Assets:
Cash and due from banks$ 207,677 $ 192,401
Other assets 1,907,963 1,661,200
Total assets $ 15,302,701 $ 13,642,353
Interest-Bearing Liabilities:
NOW accounts $ 2,676,760 $ 2,2240.08% $ 2,389,143 $ 1,5290.06%
Savings accounts 2,964,875 4,9800.17% 2,595,622 3,7230.14%
Money market accounts 762,540 8310.11% 763,909 8400.11%
Other time deposits 1,363,529 10,9070.80% 1,209,414 9,8980.82%
Total interest-bearing deposits 7,767,704 18,9420.24% 6,958,088 15,9900.23%
Brokered CD's 123,548 1,4141.14% 152,233 1,2930.85%
Total interest-bearing deposits and CD's 7,891,252 20,3560.26% 7,110,321 17,2830.24%
Federal funds purchased and interbank borrowings 187,426 1,9661.05% 137,997 6730.49%
Securities sold under agreements to repurchase 336,539 1,2700.38% 368,757 1,5090.41%
Federal Home Loan Bank advances 1,481,314 24,8181.68% 1,121,413 15,5471.39%
Other borrowings 224,793 9,7584.34% 222,708 9,4194.23%
Total borrowed funds 2,230,072 37,8121.70% 1,850,875 27,1481.47%
Total interest-bearing liabilities$ 10,121,324 $ 58,1680.57% $ 8,961,196 $ 44,4310.50%
Noninterest-Bearing Liabilities
Demand deposits $ 3,111,672 $ 2,776,140
Other liabilities 146,060 192,443
Shareholders' equity 1,923,645 1,712,574
Total liabilities and shareholders' equity$ 15,302,701 $ 13,642,353
Net interest rate spread 3.35% 3.46%
Net interest margin (FTE) 3.48% 3.58%
FTE adjustment $ 23,091 $ 21,293
(1) Interest income is reflected on a fully taxable equivalent basis (FTE).
(2) Includes loans held for sale.

Table 12
Asset Quality (EOP) (unaudited)
($ in thousands)
Three Months Ended Twelve Months Ended
December 31,September 30,December 31, December 31,December 31,
2017 2017 2016 2017 2016
Beginning allowance for loan losses$ 50,169 $ 50,986 $ 51,547 $ 49,808 $ 52,233
Provision for loan losses 1,037 311 (1,756) 3,050 960
Gross charge-offs (3,278) (2,821) (3,472) (12,717) (14,610)
Gross recoveries 2,453 1,693 3,489 10,240 11,225
Net (charge-offs) recoveries (825) (1,128) 17 (2,477) (3,385)
Ending allowance for loan losses$ 50,381 $ 50,169 $ 49,808 $ 50,381 $ 49,808
Net charge-offs (recoveries) / average loans (1) 0.03% 0.05% 0.00% 0.03% 0.04%
Average loans outstanding (1)$ 10,509,552 $ 9,320,868 $ 9,018,280 $ 9,525,888 $ 8,265,169
EOP loans outstanding (1)$ 11,118,121 $ 9,398,124 $ 9,010,512 $ 11,118,121 $ 9,010,512
Allowance for loan losses / EOP loans (1) 0.45% 0.53% 0.55% 0.45% 0.55%
Underperforming Assets:
Loans 90 Days and over (still accruing)$ 894 $ 879 $ 328 $ 894 $ 328
Non-performing loans:
Nonaccrual loans (2) 124,927 119,256 131,407 124,927 131,407
Renegotiated loans 19,589 17,886 14,376 19,589 14,376
Total non-performing loans 144,516 137,142 145,783 144,516 145,783
Foreclosed properties 8,810 10,259 18,546 8,810 18,546
Total underperforming assets$ 154,220 $ 148,280 $ 164,657 $ 154,220 $ 164,657
Classified loans - "problem loans"$ 226,583 $ 209,524 $ 220,429 $ 226,583 $ 220,429
Other classified assets 4,556 7,526 7,063 4,556 7,063
Criticized loans - "special mention loans" 188,085 130,197 95,462 188,085 95,462
Total classified and criticized assets$ 419,224 $ 347,247 $ 322,954 $ 419,224 $ 322,954
Non-performing loans / EOP loans (1) 1.30% 1.46% 1.62% 1.30% 1.62%
Allowance to non-performing loans (3) 35% 37% 34% 35% 34%
Under-performing assets / EOP loans (1) 1.39% 1.58% 1.83% 1.39% 1.83%
EOP total assets$ 17,518,292 $ 15,065,800 $ 14,860,237 $ 17,518,292 $ 14,860,237
Under-performing assets / EOP assets 0.88% 0.98% 1.11% 0.88% 1.11%
EOP - End of period actual balances
(1) Excludes loans held for sale.
(2) Includes renegotiated loans totaling $34.0 million at December 31, 2017, $43.7 million at September 30, 2017 and $26.3 million at December 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.

Table 13
Non-GAAP Measures (unaudited)
($ in thousands)
Three Months Ended Twelve Months Ended
December 31,September 30,December 31, December 31,December 31,
2017 2017 2016 2017 2016
Actual End of Period Balances
GAAP shareholders' equity $ 2,154,397 $ 1,906,823 $ 1,814,417 $ 2,154,397 $ 1,814,417
Deduct:
Goodwill 828,051 655,018 655,018 828,051 655,018
Intangibles 53,096 29,235 37,677 53,096 37,677
881,147 684,253 692,695 881,147 692,695
Tangible shareholders' equity $ 1,273,250 $ 1,222,570 $ 1,121,722 $ 1,273,250 $ 1,121,722
Average Balances
GAAP shareholders' equity $ 2,104,646 $ 1,896,194 $ 1,825,993 $ 1,923,645 $ 1,712,574
Deduct:
Goodwill 776,862 655,018 655,041 685,729 635,440
Intangibles 37,802 30,502 39,239 34,392 40,317
814,664 685,520 694,280 720,121 675,757
Average tangible shareholders' equity $ 1,289,982 $ 1,210,674 $ 1,131,713 $ 1,203,524 $ 1,036,817
Actual End of Period Balances
GAAP assets $ 17,518,292 $ 15,065,800 $ 14,860,237 $ 17,518,292 $ 14,860,237
Add:
Trust overdrafts 59 45 122 59 122
Deduct:
Goodwill 828,051 655,018 655,018 828,051 655,018
Intangibles 53,096 29,235 37,677 53,096 37,677
881,147 684,253 692,695 881,147 692,695
Tangible assets $ 16,637,204 $ 14,381,592 $ 14,167,664 $ 16,637,204 $ 14,167,664
Risk-weighted assets$ 12,491,430 $ 10,495,407 $ 10,099,613 $ 12,491,430 $ 10,099,613
GAAP net income (loss)$ (18,493)$ 39,372 $ 33,456 $ 95,725 $ 134,264
Add:
Amortization of intangibles (net of tax) 2,210 1,717 2,107 7,697 8,116
Tangible net income (loss)$ (16,283)$ 41,089 $ 35,563 $ 103,422 $ 142,380
Tangible Ratios
Return on tangible common equity -5.12% 13.44% 12.68% 8.12% 12.69%
Return on average tangible common equity -5.05% 13.58% 12.57% 8.59% 13.73%
Return on tangible assets -0.39% 1.14% 1.00% 0.62% 1.00%
Tangible common equity to tangible assets 7.65% 8.50% 7.92% 7.65% 7.92%
Tangible common equity to risk-weighted assets 10.19% 11.65% 11.11% 10.19% 11.11%
Tangible common book value (1) 8.37 9.02 8.30 8.37 8.30
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$ 1,298,327 $ 1,254,790 $ 1,176,849 $ 1,298,327 $ 1,176,849
Deduct:
Trust Preferred Securities (2) - 45,000 45,000 - 45,000
Additional Tier 1 capital deductions (10,000) (13,498) (30,968) (10,000) (30,968)
(10,000) 31,502 14,032 (10,000) 14,032
Tier 1 common equity $ 1,308,327 $ 1,223,288 $ 1,162,817 $ 1,308,327 $ 1,162,817
Risk-weighted assets 12,491,430 10,495,407 10,099,613 12,491,430 10,099,613
Tier 1 common equity to risk-weighted assets 10.47% 11.66% 11.51% 10.47% 11.51%
(2) Trust Preferred Securities are now included in Tier 2 capital as a result of exceeding the $15 billion asset threshold from the Anchor-Minnesota acquisition.



Source:Old National Bancorp