Old National Reports 1Q Earnings, $1.2M Donation To COVID-19 Fight

CEO COMMENTARY:

FIRST QUARTER HIGHLIGHTS²:

Net Income

• Net income of $22.6 million
• Earnings per share of $0.13

Net Interest Income/NIM

• Net interest income on a fully taxable equivalent basis was $147.1 million compared to $152.2 million
• Net interest margin on a fully taxable equivalent basis was 3.31% compared to 3.46%

Operating Performance

• Pre-provision net revenue¹ (“PPNR”) was $45.9 million
• Adjusted PPNR¹ was $77.4 million, up 2.9% over first quarter of 2019
• Noninterest expense was $158.7 million
• Adjusted noninterest expense¹ was $122.0 million
• Efficiency ratio¹ was 77.71%
• Adjusted efficiency ratio¹ was 59.31%, a 166 basis point improvement

Loans and Credit Quality

• End-of-period total loans³ were $12,438.8 million compared to $12,164.4 million
  • Represents 9.0% annualized growth
• End-of-period commercial and commercial real estate loans were $8,330.0 million
  • Represents 13.6% annualized growth
• First-quarter total commercial production was $647.3 million; March 31 pipeline was $2.8 billion
• Provision for credit losses was $17.0 million
• Net charge-offs were $6.5 million, or 0.21% annualized, compared to net charge-offs of $3.6 million
• Non-performing loans were 1.16% of total loans compared to 1.19%

Return Profile & Capital

• Return on average common equity was 3.20%
• Return on average tangible common equity¹ was 5.86%
• Adjusted return on average tangible common equity¹ was 10.35%
• Repurchased 4.9 million shares of common stock during the current quarter

Notable Items

• Day one increase to the allowance for credit losses was $41.3 million and to the unfunded commitment liability was $4.5 million due to the adoption of CECL
• $31.2 million in ONB Way charges
• $5.5 million in tax credit amortization

¹ Non-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

OLD NATIONAL’S RESPONSE TO COVID-19

COMMITTING $1.2 MILLION TO COVID-19 RELIEF EFFORTS WITHIN OUR COMMUNITIES

To best serve our communities during this time of need, Old National is committing $1.2 million for COVID-19 relief.
This includes:

• $600,000 in funding focused on meeting the immediate needs in our communities, with an emphasis on low-to-moderate income communities.
• $600,000 in Old National Bank Foundation grant funding that will focus on longer-term restorative and transformational needs within our communities.

SUPPORTING OUR CLIENTS THROUGH RELIEF MEASURES

To assist our consumer and business clients during this time of need, Old National is providing relief in several ways:

• Approving loan payment extensions and waiving or refunding certain banking fees for clients experiencing a COVID-19-related hardship.
• Aiding thousands of our clients by administering the Small Business Administration’s Paycheck Protection Program (PPP). Through April 16, 2020, we have approved approximately $1.35 billion in total loan volume through the PPP.

THE ONB WAY: OLD NATIONAL’S NEW STRATEGIC PLAN

Old National is implementing a new strategic plan – and overall way of doing business – designed to keep our clients at the center of all we do. Known as The ONB Way, it includes:

• Realigning the organization into clearly defined segments to align leaders and relationship managers with the client segment they can best serve (while not wavering on our commitment to community).

• Deepening client relationships through integrated Commercial, Community Banking and Wealth teams.

• Simplifying and improving the end-to-end banking/borrowing journey while adhering to strong risk management principles.

• Creating a new Wealth Division that combines wealth management, investments and private banking for a simplified, highly consultative client experience firmly rooted in financial planning.

• Investing in our operational and IT infrastructure to meet our clients “where they are” and ensure that we keep pace with technology and client digital expectations.

BRANCH NETWORK OPTIMIZATION

Another component of The ONB Way is the optimization of our branch network. This optimization, which includes 31 banking center consolidations scattered throughout the footprint, reflects an ongoing shift among our clients toward digital banking solutions. The consolidation of 12 of these banking centers occurred on April 13, 2020, and the remaining 19 are anticipated to be consolidated on April 24, 2020.  Many of the facilities to be consolidated are in smaller markets, several of which were added in recent years through partnership activity.  By state, these consolidations include 10 banking centers in both Wisconsin and Indiana, five in Michigan, four in Minnesota and two in Kentucky.

RESULTS OF OPERATIONS

Old National Bancorp reported first-quarter 2020 net income of $22.6 million, or $0.13 per diluted share.

Included in the first quarter were pre-tax charges of $31.2 million for ONB Way.  Excluding these charges from the current quarter and netting out debt securities gains, adjusted net income was $42.1 million, or $0.25 per diluted share.

LOANS
Strong commercial activity resulted in double-digit commercial loan growth.

• Period-end total loans were $12,438.8 million at March 31, 2020, compared to $12,164.4 million at December 31, 2019, and represents an increase of 9.0% annualized growth.
• Commercial and industrial loans increased $156.3 million to $3,046.6 million, or 21.6% annualized growth; commercial real estate loans increased $116.7 million to $5,283.5 million, or 9.0% annualized growth; consumer loans increased $0.6 million to $1,726.7 million and residential mortgage loans increased $0.9 million to $2,382.1 million.
• Commercial loan production in the first quarter was $647.3 million; period-end pipeline totaled $2.8 billion.
• Average total loans in the first quarter were $12,192.3 million, an increase of $123.2 million from the fourth quarter of 2019.

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

• Period-end total deposits were $14,305.4 million at March 31, 2020, a decrease of $248.0 million from the fourth quarter of 2019.
• On average, total deposits in the first quarter were $14,327.8 million, compared to $14,602.9 million in the fourth quarter of 2019.

NET INTEREST INCOME AND MARGIN
Net interest income and margin lower with decline in accretion income and fewer days.

• Net interest income decreased to $143.8 million in the first quarter of 2020 from $148.9 million in the fourth quarter of 2019.
• The net interest margin on a fully taxable equivalent basis decreased 15 basis points to 3.31% compared to 3.46% in the fourth quarter of 2019.
• Accretion income was $6.7 million, or 15 basis points of net interest margin, in the first quarter of 2020 compared to $9.5 million, or 21 basis points of net interest margin, in the fourth quarter of 2019.  In the first quarter of 2020, accretion income was 3.4% of adjusted total revenue.
• Interest collected on nonaccrual loans was $0.7 million, or 1 basis point of net interest margin, in the first quarter of 2020 compared to $2.4 million, or 5 basis points of net interest margin, in the fourth quarter of 2019.
• The cost of total deposits declined 9 basis points to 0.34% in the first quarter of 2020 while the cost of total interest-bearing deposits decreased 11 basis points to 0.48%.

CREDIT QUALITY AND CECL
Strong credit quality remains a hallmark of the Old National franchise.

• Day one increase to the allowance for credit losses was $41.3 million due to the adoption of CECL.  Of this day one amount, $27.1 million applies to previously acquired loans.
• Day one increase to the unfunded commitment liability was $4.5 million due to the adoption of CECL.
• Provision for credit losses was $17.0 million in the first quarter of 2020, driven higher by the economic forecast which now includes the impact of novel coronavirus pandemic.
• Net charge-offs in the first quarter were $6.5 million, or 0.21% of total average loans, and 30-89 day delinquencies of 0.26%.
• Non-performing loans decreased as a percentage of total loans to 1.16%.
• Loans acquired from previous acquisitions were recorded at fair value at the acquisition date.  As of March 31, 2020, the remaining discount on these acquired loans was $67.0 million.
• The allowance for credit losses was $106.4 million, or 0.86% of total loans at March 31, 2020.

NONINTEREST INCOME
Noninterest income increased due to strong mortgage banking revenue and an increase in capital markets income.

• Total noninterest income for the first quarter of 2020 was $57.5 million, an increase of $9.8 million from the fourth quarter of 2019.
• Mortgage banking revenue increased $5.5 million and capital markets income increased $1.3 million when compared to the fourth quarter of 2019.

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

• Noninterest expense for the first quarter of 2020 was $158.7 million and included $31.2 million in ONB Way charges and $5.5 million in tax credit amortization.
• Excluding these items, adjusted noninterest expense for the first quarter was $122.0 million, compared to the $125.6 million in adjusted noninterest expense in the fourth quarter of 2019.
• The first quarter efficiency ratio was 77.71%, while the adjusted efficiency ratio was 59.31%.
• Adjusted operating leverage¹ was +102 basis points for the first quarter of 2020 as compared to the first quarter of 2019.

INCOME TAXES

• On a fully taxable-equivalent basis, income tax expense in the first quarter was $6.3 million, resulting in a 21.7% FTE tax rate.
• Income tax expense included $1.8 million in tax credit benefit.

CAPITAL AND LIQUIDITY
Capital ratios remain strong.

• At the end of the first quarter, total risk-based capital was 12.3% and regulatory tier 1 capital was 11.4%.
• Tangible common equity to tangible assets was 8.81% at the end of the first quarter compared to 9.09% in the fourth quarter of 2019.
• The Company repurchased 4.9 million shares of common stock during the first quarter of 2020 at a weighted average price of $16.05, excluding commissions.
• A low loan to deposit ratio of 87%, combined with existing funding sources plus available unencumbered, high-quality collateral, provides strong liquidity.

NON-GAAP RECONCILIATIONS

CONFERENCE CALL AND WEBCAST
Old National will host a conference call and live webcast at 8:00 a.m. Central Time on Monday, April 20, 2020, to review first-quarter 2020 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 11:00 a.m. Central Time on April 20 through May 4.  To access the replay, dial 1-855-859-2056, Conference ID Code 9178738.

ABOUT OLD NATIONAL
Old National Bancorp (NASDAQ: ONB), the holding company of Old National Bank, is the largest bank holding company headquartered in Indiana. With $20.7 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 nine consecutive years.  Since its founding in Evansville in 1834, Old National Bank has focused on community banking by building long-term, highly valued partnerships and keeping our clients at the center of all we do. This is an approach to business that we call The ONB Way. 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, investment and capital market services. For more 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, such as statements about the potential impacts of the COVID-19 pandemic. 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: the severity, magnitude and duration of the COVID-19 pandemic, including impacts of the pandemic and of businesses’ and governments’ responses to the pandemic on our operations and personnel, and on commercial activity and demand across our and our customers’ businesses; market, economic, operational, liquidity, credit and interest rate risks associated with Old National’s business(including developments and volatility arising from the COVID-19 pandemic); 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, including the anticipated impact from the ONB Way strategic plan that may differ from current estimates; 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, including the impact of the new CECL standard as well as changes to address the impact of COVID-19; 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.

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

Source: Old National Bancorp