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

3^rd 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 2^nd 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 2^nd 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 3^rd 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 2^nd quarter of 2017 net income of $38.9 million.  During the 2^nd 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 2^nd quarter to the 3^rd 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 3^rd quarter of 2017 totaled $108.5 million compared to $104.3 million in the 2^nd quarter of 2017, and $107.8 million in the 3^rd quarter of 2016.  On a fully taxable equivalent basis, net interest income was $114.1 million for the 3^rd 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 2^nd quarter of 2017.   In the 3^rd 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 3^rd 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 2^nd quarter of 2017 and the 3^rd 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 3^rd quarter of 2017 amounted to $46.4 million and compares to $49.3 million reported in the 2^nd quarter of 2017 and $47.2 million in the 3^rd 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 2^nd quarter of 2017 included $1.6 million of such recoveries.

Noninterest Expenses

Noninterest expenses for Old National totaled $103.7 million for the 3^rd 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 3^rd quarter of 2017 as originally projected.  Noninterest expenses for the 2^nd 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 3^rd 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 1^st quarter of 2017 and plans to consolidate another 14 branches in the 4^th 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 3^rd 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 8.50% 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 3^rd 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 2^nd quarter of 2017 and the 3^rd quarter of 2016, respectively.  Net charge-offs for the 3^rd 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 2^nd quarter of 2017 and 0.07% in the 3^rd 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 3^rd quarter of 2017 compared to 0.32% in the 2^nd quarter of 2017.  Old National’s 90+ day delinquent loans for the 3^rd quarter of 2017 were 0.01% compared to near zero for the 3^rd 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:

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 3^rd 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 

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

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.