ONB - Old National reports 4th quarter net income of $47.5 million or $0.28 earnings per share

January, 22 2019 06:30 AM Old National Bancorp

EVANSVILLE, Ind., Jan. 22, 2019 (GLOBE NEWSWIRE) --

Old National Bancorp (NASDAQ: ONB) reports 4Q18 net income of $47.5 million, diluted EPS of $0.28.
Adjusted¹net income of $54.1 million, or $0.32 per diluted share.
2018 annual net income of $190.8 million, diluted EPS of $1.22.
Adjusted¹ 2018 annual net income of $201.8 million, diluted EPS of $1.29.

CEO COMMENTARY:

“Old National’s strong 4^th quarter — punctuated by the 2nd highest commercial loan production in our history - capped a year of outstanding performance that included $283.2 million in organic commercial loan growth, positive operating leverage and strong credit and capital ratios,” said Old National Chairman & CEO Bob Jones. “The 4^th quarter also saw us continue to execute our growth strategy by closing on our KleinBank partnership, which effectively doubles our presence in the state of Minnesota.”

FOURTH-QUARTER HIGHLIGHTS²:

Net Income

Net income of $47.5 million
Earnings per share of $0.28

Net Interest Income/NIM

Net interest income on a fully taxable equivalent basis was $149.3 million, up 11.7%
Net interest margin on a fully taxable equivalent basis was 3.64% compared to 3.51%

Operating Performance

Pre-provision net revenue¹ (“PPNR”) was $57.2 million
Adjusted PPNR¹was $67.0 million, up 16.0% over fourth quarter of 2017
Noninterest expense was $150.3 million
Adjusted noninterest expense¹ was $126.9 million
Efficiency ratio¹ was 70.33%
Adjusted efficiency ratio¹was 63.31%, a 27 basis point improvement from fourth quarter of 2017

Loans and Credit Quality

End-of-period total loans³ were $12,258.8 million compared to $11,314.0 million
End-of-period commercial and industrial loans were $3,233.0 million compared to $2,949.3 million
Fourth quarter total commercial production was $594.0 million; December 31 pipeline was $1.5 billion
Provision for loan losses was $3.4 million compared to $0.8 million
Net charge-offs were $0.6 million, or 0.02% annualized, compared to net charge-offs of $1.7 million
Non-performing loans were 1.43% of total loans compared to 1.47%

Capital Returns

Return on average common equity was 7.59%
Return on average tangible common equity¹ was 13.84%
Adjusted return on average tangible common equity¹ was 15.62%

Notable Items

Closing of Klein partnership on November 1, 2018
Sale of 10 Wisconsin branches resulting in a $14.0 million net gain
$14.8 million in merger/integration charges and $7.5 million in ONB Foundation funding
$7.6 million in incentive compensation annual true-ups and benefit adjustments driven by higher hospitalization costs
$1.1 million in tax credit amortization

¹Non-GAAP financial measure that Management believes is useful in evaluating the financial results of the Company — please refer to the Non-GAAP reconciliations contained in this release ² Comparisons are on a linked-quarter basis, unless otherwise noted ³ Includes loans held for sale

RESULTS OF OPERATIONS

Old National Bancorp reported fourth-quarter 2018 net income of $47.5 million, or $0.28 per diluted share.

Included in the fourth quarter were pre-tax charges of $14.8 million for merger and integration and $7.5 million in ONB Foundation funding. The current quarter also included a $14.0 million net gain resulting from the sale of 10 Wisconsin branches. Excluding these items from the current quarter and netting out securities gains, Old National would have reported net income of $54.1 million, or $0.32 per share. The fourth quarter also included $7.6 million in incentive compensation annual true-ups and benefit adjustments driven by higher hospitalization costs.

As was previously disclosed, Old National closed on its partnership with Minnesota-based Klein Financial, Inc. (Klein) as of November 1, 2018.

LOANS
Pipeline and production remain strong with paydowns impacting outstandings; quarterly balances benefitted from the Klein partnership.

Period-end total loans increased to $12,258.8 million at December 31, 2018 from $11,314.0 million at September 30, 2018.
Total loans acquired though the partnership with Klein were $1,049.1 million as of the date of closing.
Fourth quarter commercial loan production was $594.0 million, second highest in company history, while period-end pipeline totaled $1.5 billion.
On average, total loans in the fourth quarter were $11,972.6 million, up from $11,291.7 million in the third quarter of 2018.
For the full-year 2018, total loans grew $1,122.8 million. Excluding the $1,049.1 million in loans acquired from Klein and the $64.9 million in student loans sold in the second quarter, organic loan growth for the full year was $138.6 million.
For the full-year 2018, total commercial loans increased to $8,191.8 million. Excluding the $836.8 million in commercial loans acquired from Klein, organic commercial loan growth was $283.2 million.

DEPOSITS
A low-cost core deposit franchise continues to be one of Old National’s strengths.

Period-end total deposits increased to $14,349.9 million at December 31, 2018, from $12,598.2 million at September 30, 2018.
Total deposits assumed from Klein were $1,713.1 million. Total deposits sold during the fourth quarter (as part of the Wisconsin branch sale) totaled $230.6 million. Excluding these transactions, organic deposit growth for the quarter was $269.3 million, or 8.5% annualized.
On average, total deposits in the fourth quarter were $13,620.6 million, compared to $12,597.8 million in the third quarter of 2018.
For the full-year 2018, total deposits grew $1,744.2 million. Excluding the deposits assumed and the deposits sold (as noted above), organic deposit growth was $261.7 million, or 2.1%, for the year.

NET INTEREST INCOME AND MARGIN
Controlled deposit costs and the Klein partnership benefited both net interest income and margin in the fourth quarter.

Net interest income increased to $146.2 million in the fourth quarter of 2018 from $130.8 million in the third quarter of 2018, benefitting primarily from the Klein partnership.
The net interest margin on a fully taxable equivalent basis increased 13 basis points to 3.64% compared to 3.51% in the third quarter of 2018.
Accretion income was $11.3 million, or 27 basis points of net interest margin, in the fourth quarter of 2018 compared to $7.3 million, or 19 basis points of net interest margin, in the third quarter of 2018. In the fourth quarter of 2018, accretion income was 5.8% of adjusted total revenue.
Loan yields, excluding accretion income, increased 11 basis points to 4.42%.
The cost of total deposits rose 4 basis points to 0.40% in the fourth quarter of 2018 while the cost of total interest-bearing deposits rose 7 basis points to 0.56%.

CREDIT QUALITY
Strong credit quality remains a hallmark of the Old National franchise, with larger quarterly provision driven mostly by two specific reserves.

Asset quality remained strong with net charge-offs in the fourth quarter of $0.6 million, or 0.02% of total average loans, and 30-89 day delinquencies of 0.39%.
Provision expense for the fourth quarter was $3.4 million, driven primarily by two specific reserves.
Non-performing loans as a percentage of total loans was 1.43%.
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, 2018, the remaining discount on these acquired loans was $121.3 million.
The allowance for loan losses was $55.5 million, or 0.45% of total loans at December 31, 2018.

NONINTEREST INCOME
Noninterest income included a gain on sale of Wisconsin branches and demonstrated normal seasonal patterns in several fee income businesses.

Total noninterest income for the fourth quarter of 2018 was $58.2 million, an increase of $12.2 million from the third quarter of 2018.
Included in noninterest income in the fourth quarter was a net gain of $14.0 million from the sale of 10 Wisconsin branches.
Klein contributed $2.8 million to noninterest income during the quarter (for the two months since the closing of the partnership), which was offset by lower capital markets income (down $1.9 million) and the normal seasonal decline in mortgage banking revenue.
Securities losses were $0.4 million, compared to securities gains of $0.1 million in the third quarter of 2018.

NONINTEREST EXPENSE
Fourth quarter results demonstrated continued discipline with respect to expense management, helping to drive positive operating leverage¹.

Noninterest expense for the fourth quarter of 2018 was $150.3 million and included $14.8 million in merger and integration charges, $7.5 million in ONB Foundation funding and $1.1 million in tax credit amortization.
Excluding these items, adjusted noninterest expense for the fourth quarter was $126.9 million, compared to the $108.4 million in adjusted noninterest expense in the third quarter of 2018.
Klein noninterest expenses were $7.4 million during the fourth quarter (for the two months since the closing of the partnership).
The fourth quarter of 2018 also included $7.6 million in incentive compensation true-ups and benefit adjustments, which is included in adjusted noninterest expense defined above.
The fourth quarter efficiency ratio was 70.33%, while the adjusted efficiency ratio was 63.31%.
For the full year 2018, the efficiency ratio was 67.74%, while the adjusted efficiency ratio was 61.56%.
Adjusted operating leverage¹ was +215 basis points in for the full-year 2018 as compared to 2017.

INCOME TAXES

On a fully taxable-equivalent basis, income tax expense in the fourth quarter was $6.3 million, resulting in a 11.7% FTE tax rate.

CAPITAL
Strong quarterly earnings drove capital ratios higher.

At the end of the fourth quarter, total risk-based capital was 12.3% and regulatory tier 1 capital was 11.4%.
Tangible common equity to tangible assets was 8.47% at the end of the fourth quarter compared to 8.08% in the third quarter of 2018.

NON-GAAP RECONCILIATIONS

($ in millions, except EPS, shares in 000s)
4Q18
Adjustments⁴
Adjusted 4Q18
Total Revenues (FTE)
$
207.5

$
(13.6
)
$
193.9

Less: Provision for Loan Losses

(3.4
)

-


(3.4
)
Less: Noninterest Expenses

(150.3
)

22.3


(128.0
)
Income before Income Taxes (FTE)
$
53.8

$
8.7

$
62.5

Income Taxes

(6.3
)

(2.1
)

(8.4
)
Net Income
$
47.5

$
6.6

$
54.1

Average Shares Outstanding

167,992


-


167,992

Earnings Per Share
$
0.28

$
0.04

$
0.32

⁴Tax-effect calculations use the 2018 statutory FTE tax rates (federal + state)

($ in millions, except EPS, shares in 000s)

2018

Adjustments⁴
Adjusted 2018
Total Revenues (FTE)
$
744.3

$
(18.7
)
$
725.6

Less: Provision for Loan Losses

(7.0
)

-


(7.0
)
Less: Noninterest Expenses

(517.3
)

33.3


(484.0
)
Income before Income Taxes (FTE)
$
220.0

$
14.6

$
234.6

Income Taxes

(29.2
)

(3.6
)

(32.8
)
Net Income
$
190.8

$
11.0

$
201.8

Average Shares Outstanding

156,539


-


156,539

Earnings Per Share
$
1.22

$
0.07

$
1.29

⁴Tax-effect calculations use the 2018 statutory FTE tax rates (federal + state)

($ in millions)
4Q18
3Q18
Net Interest Income
$
146.2

$
130.8

FTE Adjustment

3.1


2.8

Net Interest Income (FTE)
$
149.3

$
133.6

Average Earning Assets
$
16,398.3

$
15,213.4

Net Interest Margin (FTE)

3.64
%

3.51
%

($ in millions)
4Q18
3Q18
Net Interest Income
$
146.2

$
130.8

FTE Adjustment

3.1


2.8

Net Interest Income (FTE)
$
149.3

$
133.6

Total Noninterest Income
$
58.2

$
46.0

Noninterest Expense

150.3


119.4

Pre-Provision Net Revenue
$
57.2

$
60.2

Less: Securities Gains/Losses

0.4


(0.1
)
Less: Gain on Branch Actions

(14.0
)

(0.2
)
Add: Merger and Integration Charges

14.8


1.7

Add: Branch Action Charges and Severance

-


0.1

Add: ONB Foundation Funding

7.5


-

Add: Amortization of Tax Credit Investments

1.1


9.2

Adjusted Pre-Provision Net Revenue
$
67.0

$
70.9

($ in millions)
4Q18
3Q18
4Q17

2018


2017

Noninterest Expense
$
150.3

$
119.4

$
140.4

$
517.3

$
448.8

Less: Merger and Integration Charges

(14.8
)

(1.7
)

(11.9
)

(21.3
)

(12.3
)
Less: Branch Action Charges, Severance, ONB Foundation Funding and Client Experience Initiative Charges

(7.5
)

(0.1
)

(6.6
)

(12.0
)

(14.0
)
Noninterest Expense less Charges
$
128.0

$
117.6

$
121.9

$
484.0

$
422.5

Less: Amortization of Tax Credit Investments

(1.1
)

(9.2
)

(11.7
)

(22.9
)

(11.7
)
Adjusted Noninterest Expense
$
126.9

$
108.4

$
110.2

$
461.1

$
410.8

Less: Intangible Amortization

(4.1
)

(3.3
)

(3.4
)

(14.4
)

(11.8
)
Adjusted Noninterest Expense Less Intangible Amortization
$
122.8

$
105.1

$
106.8

$
446.7

$
399.0

Net Interest Income
$
146.2

$
130.8

$
118.6

$
537.5

$
437.2

FTE Adjustment

3.1


2.8


6.1


11.5


23.1

Net Interest Income (FTE)
$
149.3

$
133.6

$
124.7

$
549.0

$
460.3

Total Noninterest Income
$
58.2

$
46.0

$
44.8

$
195.3

$
183.3

Total Revenue (FTE)
$
207.5

$
179.6

$
169.5

$
744.3

$
643.6

Less: Securities Gains/Losses

0.4


(0.1
)

(1.6
)

(2.0
)

(9.1
)
Less: Gain on Student Loan Sale

-


-


-


(2.2
)

-

Less: Gain on Branch Actions

(14.0
)

(0.2
)

-


(14.5
)

(0.2
)
Adjusted Total Revenue (FTE)
$
193.9

$
179.3

$
167.9

$
725.6

$
634.3

Efficiency Ratio

70.33
%

64.71
%

81.60
%

67.74
%

68.87
%
Adjusted Efficiency Ratio

63.31
%

58.67
%

63.58
%

61.56
%

62.90
%






Operating Leverage⁵ (basis points)

1,536




40


Adjusted Operating Leverage⁶ (basis points)

30




215

⁵ Year-over-year basis point change in noninterest expenses plus change in total revenue
⁶Year-over-year basis point change in adjusted noninterest expense plus change in adjusted total revenue

($ in millions)
4Q18
3Q18
Net Income (Loss)
$
47.5

$
51.3

Add: Intangible Amortization (net of tax⁷)

3.3


2.6

Tangible Net Income (Loss)
$
50.8

$
53.9

Less: Securities Gains/Losses (net of tax⁷)

0.3


(0.1
)
Less: Gain on Branch Sale (net of tax⁷)

(10.6
)

-

Add: Merger & Integration Charges (net of tax⁷)

11.2


1.3

Add: Branch Action Charges (net of gains) and Severance (net of tax⁷)

-


(0.1
)
Add: ONB Foundation Funding (net of tax⁷)

5.7


-

Adjusted Tangible Net Income (Loss)
$
57.4

$
55.0

Average Total Shareholders’ Equity
$
2,503.8

$
2,212.7

Less: Average Goodwill

(969.4
)

(828.8
)
Less: Average Intangibles

(66.9
)

(43.7
)
Average Tangible Shareholders’ Equity
$
1,467.5

$
1,340.2

Return on Average Tangible Common Equity

13.84
%

16.10
%
Adjusted Return on Average Tangible Common Equity

15.62
%

16.42
%

⁷Tax-effect calculations use the 2018 statutory FTE tax rates (federal + state)

CONFERENCE CALL AND WEBCAST

Old National will host a conference call and live webcast at 7:00 a.m. Central Time on Tuesday, January 22, 2019, to review fourth-quarter and full-year 2018 financial results. 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 10:00 a.m. Central Time on January 22 through February 5. To access the replay, dial 1-855-859-2056, Conference ID Code 5499497.

ABOUT OLD NATIONAL
Old National Bancorp (NASDAQ: ONB) is the holding company of Old National Bank. Headquartered in Evansville with $19.7 billion in assets, it is a top 100 U.S. bank, the largest Indiana-based bank and has been recognized as a World’s Most Ethical Company by the Ethisphere Institute for seven consecutive years. For nearly 185 years, Old National has been a community bank committed to building long-term, highly valued relationships with clients. With locations in Indiana, Kentucky, Michigan, Minnesota and Wisconsin, Old National provides retail and commercial banking services along with comprehensive wealth management, investment and capital markets services. For information and financial data, please visit Investor Relations at oldnational.com.

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.

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. 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 Klein that 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.









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,



2018


2018


2017



2018


2017


Income Statement







Net interest income
$
146,225

$
130,842

$
118,556


$
537,602

$
437,168


Provision for loan losses

3,390


750


1,037



6,966


3,050


Noninterest income

58,154


45,957


44,825



195,305


183,382


Noninterest expense

150,268


119,376


140,432



517,261


448,836


Net income (loss)

47,498


51,348


(18,493
)


190,830


95,725


















Per Common Share Data (Diluted)







Net income (loss) available to common shareholders
$
0.28

$
0.34

$
(0.13
)

$
1.22

$
0.69


Average diluted shares outstanding

167,992


152,784


146,875



156,539


138,513


Book value

15.36


14.58


14.17



15.36


14.17


Stock price

15.40


19.30


17.45



15.40


17.45


Dividend payout ratio

46
%

38
%
N/M


42
%

75
%

Tangible common book value (1)

9.00


8.86


8.37



9.00


8.37


















Performance Ratios







Return on average assets

1.01
%

1.18
%

-0.45
%


1.07
%

0.63
%

Return on average common equity

7.59
%

9.28
%

-3.51
%


8.42
%

4.98
%

Return on average tangible common equity (1)

13.84
%

16.10
%

-5.05
%


14.97
%

8.59
%

Net interest margin (FTE)

3.64
%

3.51
%

3.47
%


3.54
%

3.48
%

Efficiency ratio (2)

70.33
%

64.71
%

81.60
%


67.74
%

68.87
%

Net charge-offs (recoveries) to average loans

0.02
%

0.06
%

0.03
%


0.02
%

0.03
%

Allowance for loan losses to ending loans

0.45
%

0.47
%

0.45
%


0.45
%

0.45
%

Non-performing loans to ending loans

1.43
%

1.47
%

1.30
%


1.43
%

1.30
%

















Balance Sheet







Total loans
$
12,243,892

$
11,292,659

$
11,118,121


$
12,243,892

$
11,118,121


Total assets

19,728,435


17,567,759


17,518,292



19,728,435


17,518,292


Total deposits

14,349,949


12,598,200


12,605,764



14,349,949


12,605,764


Total borrowed funds

2,493,793


2,576,039


2,578,204



2,493,793


2,578,204


Total shareholders' equity

2,689,570


2,220,680


2,154,397



2,689,570


2,154,397


















Capital Ratios (1)







Risk-based capital ratios (EOP):







Tier 1 common equity

11.4
%

11.1
%

10.5
%


11.4
%

10.5
%

Tier 1

11.4
%

11.1
%

10.4
%


11.4
%

10.4
%

Total

12.3
%

12.1
%

11.4
%


12.3
%

11.4
%

Leverage ratio (to average assets)

9.2
%

8.6
%

8.3
%


9.2
%

8.3
%









Total equity to assets (averages)

13.28
%

12.69
%

12.69
%


12.74
%

12.57
%

Tangible common equity to tangible assets

8.47
%

8.08
%

7.65
%


8.47
%

7.65
%

















Nonfinancial Data







Full-time equivalent employees

2,892


2,554


2,801



2,892


2,801


Number of branches

191


182


191



191


191










(1) See "Non-GAAP Measures" table.







(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









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,



2018

2018

2017


2018
2017

Interest income
$
175,234

$
155,369
$
135,134


$
632,045
$
495,336

Less: interest expense

29,009


24,527

16,578



94,443

58,168

Net interest income

146,225


130,842

118,556



537,602

437,168

Provision for loan losses

3,390


750

1,037



6,966

3,050

Net interest income after provision for loan losses

142,835


130,092

117,519



530,636

434,118









Wealth management fees

9,069


9,022

9,801



36,863

37,316

Service charges on deposit accounts

11,474


11,028

10,913



44,026

41,331

Debit card and ATM fees

5,565


4,706

4,756



20,216

17,676

Mortgage banking revenue

3,928


4,348

3,933



17,657

18,449

Investment product fees

5,369


5,073

5,791



20,539

20,977

Capital markets income

840


2,700

923



4,934

6,544

Company-owned life insurance

2,591


2,958

2,366



10,584

8,654

Other income

5,700


5,986

4,676



24,402

23,083

Net gain on branch divestitures

13,989


-

-



13,989

-

Gains (losses) on sales of securities

(357
)

135

1,588



2,060

9,135

Gains (losses) on derivatives

(14
)

1

78



35

217

Total noninterest income

58,154


45,957

44,825



195,305

183,382









Salaries and employee benefits

87,346


63,158

74,785



281,275

246,738

Occupancy

13,210


12,578

12,168



51,941

46,511

Equipment

3,916


3,652

3,498



14,861

13,560

Marketing

4,782


3,406

3,803



15,847

13,172

Data processing

9,418


8,628

8,776



36,170

32,306

Communication

2,537


2,473

2,419



10,846

9,284

Professional fees

5,615


3,235

5,523



14,503

16,840

Loan expenses

1,877


1,564

1,730



7,028

6,596

Supplies

705


707

686



3,037

2,406

FDIC assessment

2,110


2,722

2,666



10,638

9,480

Other real estate owned expense

176


157

741



878

3,376

Amortization of intangibles

4,134


3,283

3,399



14,442

11,841

Amortization of tax credit investments

1,142


9,233

11,733



22,949

11,733

Other expense

13,300


4,580

8,505



32,846

24,993

Total noninterest expense

150,268


119,376

140,432



517,261

448,836









Income before income taxes

50,721


56,673

21,912



208,680

168,664

Income tax expense

3,223


5,325

40,405



17,850

72,939

Net income (loss)
$
47,498

$
51,348
$
(18,493
)

$
190,830
$
95,725









Diluted Earnings Per Share







Net income (loss)
$
0.28

$
0.34
$
(0.13
)

$
1.22
$
0.69









Average Common Shares Outstanding







Basic

167,044


151,930

146,073



155,675

137,821

Diluted

167,992


152,784

146,875



156,539

138,513









Common shares outstanding at end of period

175,141


152,352

152,040



175,141

152,040



Balance Sheet (unaudited)

($ in thousands)










December 31,

September 30,

December 31,




2018



2018



2017



Assets







Federal Reserve Bank account
$
26,182


$
65,878


$
54,361



Money market investments

6,980



5,859



13,318



Investments:







Treasury and government-sponsored agencies

707,438



690,709



669,838



Mortgage-backed securities

2,336,415



1,640,254



1,674,584



States and political subdivisions

1,245,657



1,099,535



1,207,353



Other securities

488,802



496,199



453,765



Total investments

4,778,312



3,926,697



4,005,540



Loans held for sale, at fair value

14,911



21,384



17,930



Loans:







Commercial

3,232,970



2,949,277



2,717,269



Commercial and agriculture real estate

4,958,851



4,481,554



4,354,552



Consumer:







Home equity

589,322



498,325



507,507



Other consumer loans

1,214,345



1,197,300



1,371,740



Subtotal of commercial and consumer loans

9,995,488



9,126,456



8,951,068



Residential real estate

2,248,404



2,166,203



2,167,053



Total loans

12,243,892



11,292,659



11,118,121



Total earning assets

17,070,277



15,312,477



15,209,270











Allowance for loan losses

(55,461
)


(52,713
)


(50,381
)


Non-earning Assets:







Cash and due from banks

284,003



215,024



222,753



Premises and equipment, net

485,912



450,253



458,074



Goodwill and other intangible assets

1,113,274



870,938



881,147



Company-owned life insurance

444,224



405,245



403,753



Net deferred tax assets

87,048



94,667



110,857



Loan servicing rights

24,497



24,336



24,661



Other real estate owned and repossessed personal property

3,232



3,563



8,810



Other assets

271,429



243,969



249,348



Total non-earning assets

2,713,619



2,307,995



2,359,403



Total assets
$
19,728,435


$
17,567,759


$
17,518,292











Liabilities and Equity







Noninterest-bearing demand deposits
$
3,965,380


$
3,588,370


$
3,680,807



Interest-bearing:







Checking and NOW accounts

3,788,339



3,011,544



3,115,822



Savings accounts

2,944,092



2,920,712



3,035,622



Money market accounts

1,627,882



1,185,439



1,139,077



Other time deposits

1,845,149



1,667,055



1,470,118



Total core deposits

14,170,842



12,373,120



12,441,446



Brokered CD's

179,107



225,080



164,318



Total deposits

14,349,949



12,598,200



12,605,764











Federal funds purchased and interbank borrowings

270,135



450,031



335,033



Securities sold under agreements to repurchase

362,294



319,831



384,810



Federal Home Loan Bank advances

1,613,481



1,554,515



1,609,579



Other borrowings

247,883



251,662



248,782



Total borrowed funds

2,493,793



2,576,039



2,578,204



Accrued expenses and other liabilities

195,123



172,840



179,927



Total liabilities

17,038,865



15,347,079



15,363,895











Common stock, surplus, and retained earnings

2,734,520



2,300,610



2,204,669



Accumulated other comprehensive income (loss), net of tax

(44,950
)


(79,930
)


(50,272
)


Total shareholders' equity

2,689,570



2,220,680



2,154,397



Total liabilities and shareholders' equity
$
19,728,435


$
17,567,759


$
17,518,292





























Average Balance Sheet and Interest Rates (unaudited)


($ in thousands)































Three Months Ended

Three Months Ended

Three Months Ended



December 31, 2018

September 30, 2018

December 31, 2017



Average
Income (1)/
Yield/

Average
Income (1)/
Yield/

Average
Income (1)/
Yield/


Earning Assets:
Balance
Expense
Rate

Balance
Expense
Rate

Balance
Expense
Rate


Money market and other interest-earning













investments
$
39,207

$
205
2.07
%

$
35,928

$
140
1.54
%

$
54,611

$
87
0.63
%


Investments:













Treasury and government-sponsored agencies

694,409


3,874
2.23
%


685,919


3,748
2.19
%


611,982


3,031
1.98
%


Mortgage-backed securities

2,011,275


13,688
2.72
%


1,595,630


9,381
2.35
%


1,573,578


8,139
2.07
%


States and political subdivisions

1,187,404


11,147
3.76
%


1,103,347


10,110
3.67
%


1,178,113


13,312
4.52
%


Other securities

493,426


4,017
3.26
%


500,837


4,116
3.29
%


454,824


3,126
2.75
%


Total investments

4,386,514


32,726
2.98
%


3,885,733


27,355
2.82
%


3,818,497


27,608
2.89
%


Loans: (2)













Commercial

3,133,153


37,358
4.67
%


2,928,744


33,381
4.46
%


2,480,987


26,577
4.19
%


Commercial and agriculture real estate

4,834,589


65,461
5.30
%


4,465,105


57,377
5.03
%


3,989,684


47,683
4.68
%


Consumer:













Home equity

562,801


7,159
5.05
%


495,161


6,070
4.86
%


502,837


5,442
4.29
%


Other consumer loans

1,203,436


11,702
3.86
%


1,215,583


11,263
3.68
%


1,371,986


12,248
3.54
%


Subtotal commercial and consumer loans

9,733,979


121,680
4.96
%


9,104,593


108,091
4.71
%


8,345,494


91,950
4.37
%


Residential real estate loans

2,238,588


23,672
4.23
%


2,187,130


22,536
4.12
%


2,170,900


21,628
3.99
%
















Total loans

11,972,567


145,352
4.78
%


11,291,723


130,627
4.56
%


10,516,394


113,578
4.26
%
















Total earning assets
$
16,398,288

$
178,283
4.30
%

$
15,213,384

$
158,122
4.11
%

$
14,389,502

$
141,273
3.88
%
















Less: Allowance for loan losses

(53,045
)




(53,734
)




(50,601
)


















Non-earning Assets:













Cash and due from banks
$
232,360




$
205,446




$
201,520





Other assets

2,275,907





2,068,469





2,046,544



















Total assets
$
18,853,510




$
17,433,565




$
16,586,965



















Interest-Bearing Liabilities:













Checking and NOW accounts
$
3,391,630

$
2,004
0.23
%

$
3,026,289

$
1,180
0.15
%

$
2,905,440

$
714
0.10
%


Savings accounts

2,919,900


2,225
0.30
%


2,974,147


2,119
0.28
%


3,010,761


1,324
0.17
%


Money market accounts

1,482,022


1,922
0.51
%


1,153,906


1,254
0.43
%


994,574


394
0.16
%


Other time deposits

1,769,243


6,519
1.46
%


1,669,039


5,780
1.37
%


1,443,050


3,203
0.88
%


Total interest-bearing deposits

9,562,795


12,670
0.53
%


8,823,381


10,333
0.46
%


8,353,825


5,635
0.27
%


Brokered CD's

193,455


1,024
2.10
%


178,283


856
1.90
%


154,521


489
1.26
%


Total interest-bearing deposits and CD's

9,756,250


13,694
0.56
%


9,001,664


11,189
0.49
%


8,508,346


6,124
0.29
%
















Federal funds purchased and interbank borrowings

312,730


1,938
2.46
%


238,514


1,191
1.98
%


172,838


533
1.22
%


Securities sold under agreements to repurchase

351,392


634
0.72
%


352,998


535
0.60
%


370,095


400
0.43
%


Federal Home Loan Bank advances

1,649,304


9,441
2.27
%


1,624,661


8,880
2.17
%


1,543,690


6,871
1.77
%


Other borrowings

250,926


3,302
5.26
%


250,255


2,732
4.37
%


241,695


2,650
4.39
%


Total borrowed funds

2,564,352


15,315
2.37
%


2,466,428


13,338
2.15
%


2,328,318


10,454
1.78
%
















Total interest-bearing liabilities
$
12,320,602

$
29,009
0.93
%

$
11,468,092

$
24,527
0.85
%

$
10,836,664

$
16,578
0.61
%
















Noninterest-Bearing Liabilities













Demand deposits
$
3,864,302




$
3,596,159




$
3,486,412





Other liabilities

164,771





156,614





159,243





Shareholders' equity

2,503,835





2,212,700





2,104,646



















Total liabilities and shareholders' equity
$
18,853,510




$
17,433,565




$
16,586,965



















Net interest rate spread


3.37
%



3.26
%



3.27
%
















Net interest margin (FTE)


3.64
%



3.51
%



3.47
%
















FTE adjustment

$
3,049



$
2,753



$
6,139

















(1) Interest income is reflected on a fully taxable equivalent basis (FTE).











(2) Includes loans held for sale.











Average Balance Sheet and Interest Rates (unaudited)


($ in thousands)























Twelve Months Ended

Twelve Months Ended



December 31, 2018

December 31, 2017



Average
Income (1)/
Yield/

Average
Income (1)/
Yield/


Earning Assets:
Balance
Expense
Rate

Balance
Expense
Rate


Money market and other interest-earning









investments
$
48,240

$
630
1.31
%

$
35,584

$
258
0.72
%


Investments:









Treasury and government-sponsored agencies

673,171


14,433
2.14
%


578,640


11,453
1.98
%


Mortgage-backed securities

1,707,646


41,493
2.43
%


1,506,677


30,782
2.04
%


States and political subdivisions

1,153,315


42,326
3.67
%


1,134,532


53,359
4.70
%


Other securities

490,464


15,633
3.19
%


450,127


11,863
2.64
%


Total investments

4,024,596


113,885
2.83
%


3,669,976


107,457
2.93
%


Loans: (2)









Commercial

2,924,878


131,471
4.49
%


2,083,779


85,747
4.11
%


Commercial and agriculture real estate

4,536,897


235,876
5.20
%


3,426,757


171,483
5.00
%


Consumer:









Home equity

513,111


25,029
4.88
%


483,310


20,003
4.14
%


Other consumer loans

1,258,253


46,660
3.71
%


1,392,221


48,139
3.46
%


Subtotal commercial and consumer loans

9,233,139


439,036
4.76
%


7,386,067


325,372
4.41
%


Residential real estate loans

2,195,078


89,888
4.09
%


2,146,279


85,340
3.98
%












Total loans

11,428,217


528,924
4.63
%


9,532,346


410,712
4.31
%












Total earning assets
$
15,501,053

$
643,439
4.15
%

$
13,237,906

$
518,427
3.92
%












Less: Allowance for loan losses

(52,316
)




(50,845
)














Non-earning Assets:









Cash and due from banks
$
210,716




$
207,677





Other assets

2,130,588





1,907,963















Total assets
$
17,790,041




$
15,302,701















Interest-Bearing Liabilities:









Checking and NOW accounts
$
3,146,309

$
4,973
0.16
%

$
2,676,760

$
2,224
0.08
%


Savings accounts

2,995,484


7,464
0.25
%


2,964,875


4,980
0.17
%


Money market accounts

1,225,220


4,424
0.36
%


762,540


831
0.11
%


Other time deposits

1,654,548


21,012
1.27
%


1,363,529


10,907
0.80
%


Total interest-bearing deposits

9,021,561


37,873
0.42
%


7,767,704


18,942
0.24
%


Brokered CD's

185,426


3,404
1.84
%


123,548


1,414
1.14
%


Total interest-bearing deposits and CD's

9,206,987


41,277
0.45
%


7,891,252


20,356
0.26
%












Federal funds purchased and interbank borrowings

238,408


4,793
2.01
%


187,426


1,966
1.05
%


Securities sold under agreements to repurchase

344,964


1,962
0.57
%


336,539


1,270
0.38
%


Federal Home Loan Bank advances

1,665,689


34,925
2.10
%


1,481,314


24,818
1.68
%


Other borrowings

249,832


11,486
4.60
%


224,793


9,758
4.34
%


Total borrowed funds

2,498,893


53,166
2.13
%


2,230,072


37,812
1.70
%












Total interest-bearing liabilities
$
11,705,880

$
94,443
0.81
%

$
10,121,324

$
58,168
0.57
%












Noninterest-Bearing Liabilities









Demand deposits
$
3,657,234




$
3,111,672





Other liabilities

159,600





146,060





Shareholders' equity

2,267,327





1,923,645















Total liabilities and shareholders' equity
$
17,790,041




$
15,302,701















Net interest rate spread


3.34
%



3.35
%












Net interest margin (FTE)


3.54
%



3.48
%












FTE adjustment

$
11,394



$
23,091













(1) Interest income is reflected on a fully taxable equivalent basis (FTE).








(2) Includes loans held for sale.









Asset Quality (EOP) (unaudited)

($ in thousands)










Three Months Ended

Twelve Months Ended


December 31,
September 30,
December 31,

December 31,
December 31,



2018


2018


2017



2018


2017










Beginning allowance for loan losses
$
52,713

$
53,660

$
50,169


$
50,381

$
49,808










Provision for loan losses

3,390


750


1,037



6,966


3,050










Gross charge-offs

(2,969
)

(4,261
)

(3,278
)


(12,969
)

(12,717
)

Gross recoveries

2,327


2,564


2,453



11,083


10,240


Net (charge-offs) recoveries

(642
)

(1,697
)

(825
)


(1,886
)

(2,477
)









Ending allowance for loan losses
$
55,461

$
52,713

$
50,381


$
55,461

$
50,381










Net charge-offs (recoveries) / average loans (1)

0.02
%

0.06
%

0.03
%


0.02
%

0.03
%









Average loans outstanding (1)
$
11,967,241

$
11,284,531

$
10,509,552


$
11,422,967

$
9,525,888










EOP loans outstanding (1)

12,243,892

$
11,292,659

$
11,118,121


$
12,243,892

$
11,118,121










Allowance for loan losses / EOP loans (1)

0.45
%

0.47
%

0.45
%


0.45
%

0.45
%









Underperforming Assets:







Loans 90 Days and over (still accruing)
$
1,353

$
980

$
894


$
1,353

$
894










Non-performing loans:







Nonaccrual loans (2)

157,484


148,816


124,927



157,484


124,927


Renegotiated loans

17,356


17,547


19,589



17,356


19,589


Total non-performing loans

174,840


166,363


144,516



174,840


144,516










Foreclosed properties

3,232


3,563


8,810



3,232


8,810










Total underperforming assets
$
179,425

$
170,906

$
154,220


$
179,425

$
154,220










Classified and Criticized Assets:







Nonaccrual loans (2)

157,484


148,816


124,927



157,484


124,927


Substandard accruing loans

175,948


107,257


100,762



175,948


100,762


Loans 90 days and over (still accruing)

1,353


980


894



1,353


894


Total classified loans - "problem loans"
$
334,785

$
257,053

$
226,583


$
334,785

$
226,583










Other classified assets

2,820


3,070


4,556



2,820


4,556


Criticized loans - "special mention loans"

238,752


181,165


188,085



238,752


188,085










Total classified and criticized assets
$
576,357

$
441,288

$
419,224


$
576,357

$
419,224










Non-performing loans / EOP loans (1)

1.43
%

1.47
%

1.30
%


1.43
%

1.30
%









Allowance to non-performing loans (3)

32
%

32
%

35
%


32
%

35
%









Under-performing assets / EOP loans (1)

1.47
%

1.51
%

1.39
%


1.47
%

1.39
%









EOP total assets
$
19,728,435

$
17,567,759

$
17,518,292


$
19,728,435

$
17,518,292










Under-performing assets / EOP assets

0.91
%

0.97
%

0.88
%


0.91
%

0.88
%









EOP - End of period actual balances







(1) Excludes loans held for sale.







(2) Includes renegotiated loans totaling $26.3 million at December 31, 2018, $29.9 million at September 30, 2018, and $34.0 million

at December 31, 2017.







(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.









Non-GAAP Measures (unaudited)

($ in thousands)










Three Months Ended

Twelve Months Ended


December 31,
September 30,
December 31,

December 31,
December 31,



2018


2018


2017



2018


2017










Actual End of Period Balances







GAAP shareholders' equity
$
2,689,570

$
2,220,680

$
2,154,397


$
2,689,570

$
2,154,397










Deduct:







Goodwill

1,036,258


828,804


828,051



1,036,258


828,051


Intangibles

77,016


42,134


53,096



77,016


53,096




1,113,274


870,938


881,147



1,113,274


881,147










Tangible shareholders' equity
$
1,576,296

$
1,349,742

$
1,273,250


$
1,576,296

$
1,273,250










Average Balances







GAAP shareholders' equity
$
2,503,835

$
2,212,700

$
2,104,646


$
2,267,327

$
1,923,645










Deduct:







Goodwill

969,403


828,804


776,862



864,079


685,729


Intangibles

66,927


43,685


37,802



52,209


34,392




1,036,330


872,489


814,664



916,288


720,121










Average tangible shareholders' equity
$
1,467,505

$
1,340,211

$
1,289,982


$
1,351,039

$
1,203,524










Actual End of Period Balances







GAAP assets
$
19,728,435

$
17,567,759

$
17,518,292


$
19,728,435

$
17,518,292










Add:







Trust overdrafts

11


118


59



11


59










Deduct:







Goodwill

1,036,258


828,804


828,051



1,036,258


828,051


Intangibles

77,016


42,134


53,096



77,016


53,096




1,113,274


870,938


881,147



1,113,274


881,147










Tangible assets
$
18,615,172

$
16,696,939

$
16,637,204


$
18,615,172

$
16,637,204










Risk-weighted assets
$
14,248,562

$
12,715,665

$
12,491,430


$
14,248,562

$
12,491,430










GAAP net income (loss)
$
47,498

$
51,348

$
(18,493
)

$
190,830

$
95,725










Add:







Amortization of intangibles (net of tax)

3,266


2,593


2,210



11,410


7,697










Tangible net income (loss)
$
50,764

$
53,941

$
(16,283
)

$
202,240

$
103,422










Tangible Ratios







Return on tangible common equity

12.88
%

15.99
%

-5.12
%


12.83
%

8.12
%

Return on average tangible common equity

13.84
%

16.10
%

-5.05
%


14.97
%

8.59
%

Return on tangible assets

1.09
%

1.29
%

-0.39
%


1.09
%

0.62
%

Tangible common equity to tangible assets

8.47
%

8.08
%

7.65
%


8.47
%

7.65
%

Tangible common equity to risk-weighted assets

11.06
%

10.61
%

10.19
%


11.06
%

10.19
%

Tangible common book value (1)

9.00


8.86


8.37



9.00


8.37










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
$
1,617,936

$
1,409,775

$
1,298,327


$
1,617,936

$
1,298,327










Deduct:







Tier 1 capital adjustments

-


-


(10,000
)


-


(10,000
)



-


-


(10,000
)


-


(10,000
)









Tier 1 common equity
$
1,617,936

$
1,409,775

$
1,308,327


$
1,617,936

$
1,308,327










Risk-weighted assets

14,248,562


12,715,665


12,491,430



14,248,562


12,491,430










Tier 1 common equity to risk-weighted assets

11.36
%

11.09
%

10.47
%


11.36
%

10.47
%

Media: Kathy A. Schoettlin (812) 465-7269
Investors: Lynell J. Walton (812) 464-1366

Company Name:	Old National Bancorp
Stock Symbol:	ONB
Market:	NASDAQ
Website:	oldnational.com

Twitter