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

1^ST Quarter 2017 Highlights:

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

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

EVANSVILLE, Ind., April 25, 2017 (GLOBE NEWSWIRE) -- Today Old National Bancorp (the “Company” or “Old National”) (NASDAQ: ONB) reported 1^st quarter 2017 net income of $36.0 million, or $0.27 per diluted share.  Included in the current quarter were $1.4 million in pre-tax branch consolidation charges related to the 15 banking centers that were consolidated by the Company in January 2017.  This current quarter net income represents an increase of 33.4% over the 1^st quarter of 2016 net income of $27.0 million and a 7.6% increase over 4^th quarter 2016 net income of $33.5 million.  Contributing to this year-over-year increase was the successful redeployment of the proceeds from the sale of Old National’s insurance subsidiary into the more profitable banking business with the Anchor Bank (“Anchor”) partnership.  Both transactions closed in the 2^nd quarter of 2016.  During the 4^th quarter, Old National recognized $12.8 million in pre-tax gains related to the repurchase of various bank properties.  Also included in the 4^th quarter of 2016 were pre-tax pension termination charges of $9.8 million, pre-tax branch consolidation charges of $5.1 million, pre-tax merger and integration charges of $1.8 million and severance charges of $1.6 million. 

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

Committed to our Strategic Imperatives

Old National’s continued steady performance and strong credit and capital positions can be attributed to the Company’s unwavering commitment to the three strategic imperatives that have guided Old National for 12 years: 

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

Balance Sheet and Net Interest Margin

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

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

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

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

Noninterest Income

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

Noninterest Expenses

Noninterest expenses for Old National totaled $101.9 million for the 1^st quarter of 2017 and included $1.4 million in charges relating to the Company’s 15 banking centers consolidated in January 2017.  Noninterest expenses for the 4^th quarter of 2016 totaled $126.3 million and included a $9.8 million pre-tax charge for the termination of the Company’s pension plan, $5.1 million in pretax charges related to branch consolidations, $1.8 million in pre-tax merger and integration charges and $1.6 million in severance.  The 1^st quarter of 2016 included $1.4 million in pre-tax merger and integration charges.  Following Old National’s 15 branch consolidations in January, the Company now operates 188 branches throughout its franchise.

Capital

Old National’s capital position at March 31, 2017, remained well above regulatory guideline minimums with regulatory tier 1 and total risk-based capital ratios of 11.7% and 12.2%, respectively, compared to 11.7% and 12.2% at December 31, 2016, and 12.5% and 13.2% at March 31, 2016.  Old National did not repurchase any stock in the open market during the 1^st quarter of 2017.

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

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

Credit

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

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

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

In accordance with current accounting practices, the loans acquired from Anchor during the 2^nd quarter of 2016 were recorded at fair value with no allowance recorded at the acquisition date.  When considering both the allowance for loan losses plus the purchase accounting marks, Old National believes it remains appropriately reserved, as demonstrated by the table below.

¹ Includes discount on loans acquired through previous partnerships.

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

About Old National

Old National Bancorp (NASDAQ: ONB), the holding company of Old National Bank, is the largest financial services holding company headquartered in Indiana. With $14.9 billion in assets, it ranks among the top 100 banking companies in the U.S. and has been recognized as a World’s Most Ethical Company by the Ethisphere Institute for six consecutive years.  Since its founding in Evansville in 1834, Old National Bank has focused on community banking by building long-term, highly valued partnerships with clients. Today, Old National’s footprint includes Indiana, Kentucky, Michigan and Wisconsin. In addition to providing extensive services in retail and commercial banking, Old National offers comprehensive wealth management, investments and brokerage services. For more information and financial data, please visit Investor Relations at oldnational.com.

Conference Call

Old National will hold a conference call at 10:00 a.m. Central Time on Tuesday, April 25, 2017, to discuss 1st quarter 2017 financial results, strategic developments, and the Company’s financial outlook. The live audio web cast of the call, along with the corresponding presentation slides, will be available on the Company’s Investor Relations web page at oldnational.com and will be archived there for 12 months. A replay of the call will also be available from 1:00 p.m. Central Time on April 25 through May 9. To access the replay, dial 1-855-859-2056, Conference ID Code 3913117.

Use of Non-GAAP Financial Measures

This earnings release contains GAAP financial measures and non-GAAP financial measures where management believes it to be helpful in understanding Old National’s results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in the tables of this release.

Table 4 – Non-GAAP Reconciliations-Core Net Interest Margin

¹ Accretion related to purchase accounting discounts on acquired loan portfolios.

Forward-Looking Statement

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, descriptions of Old National Bancorp’s (“Old National’s”) financial condition, results of operations, asset and credit quality trends and profitability. Forward-looking statements can be identified by the use of the words “anticipate,” “believe,” “expect,” “intend,” “could” and “should,” and other words of similar meaning. These forward-looking statements express management’s current expectations or forecasts of future events and, by their nature, are subject to risks and uncertainties and there are a number of factors that could cause actual results to differ materially from those in such statements. Factors that might cause such a difference include, but are not limited to: expected cost savings, synergies and other financial benefits from the recently completed mergers might not be realized within the expected timeframes and costs or difficulties relating to integration matters might be greater than expected; market, economic, operational, liquidity, credit and interest rate risks associated with Old National’s business; competition; government legislation and policies (including the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and its related regulations); ability of Old National to execute its business plan; changes in the economy which could materially impact credit quality trends and the ability to generate loans and gather deposits; failure or circumvention of our internal controls; failure or disruption of our information systems; significant changes in accounting, tax or regulatory practices or requirements; new legal obligations or liabilities or unfavorable resolutions of litigations; disruptive technologies in payment systems and other services traditionally provided by banks; computer hacking and other cybersecurity threats; other matters discussed in this press release and other factors identified in our Annual Report on Form 10-K and other periodic filings with the SEC. These forward-looking statements are made only as of the date of this press release, and Old National does not undertake an obligation to release revisions to these forward-looking statements to reflect events or conditions after the date of this press release.

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