Old National’s strong 3rd quarter driven by commercial loan growth of 7% annualized

EVANSVILLE, Ind., Oct. 19, 2023 (GLOBE NEWSWIRE) —  

CEO COMMENTARY:

THIRD QUARTER HIGHLIGHTS²:

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

RESULTS OF OPERATIONS
Old National Bancorp (“Old National”) reported third quarter 2023 net income of $71.7 million, or $0.43 per diluted share.

Included in the third quarter were pre-tax charges of $1.4 million for the pending merger with First Midwest Bancorp, Inc. Excluding these charges from the current quarter and netting out debt securities gains, adjusted net income was $71.8 million, or $0.43 per diluted share.

LOANS
Strong commercial production results in over 7% annualized commercial loan growth.

• Period-end total loans were $13,636.1 million at September 30, 2023, a decrease of $198.7 million, or 5.7% annualized, when compared to the $13,834.8 million at June 30, 2023.
• Paycheck Protection Program (PPP) loans declined $366.1 million to $354.9 million at September 30, 2023, compared to $721.1 million at June 30, 2023.
• Excluding the $366.1 million decrease in PPP loans during the quarter, total loans increased $167.5 million, or 5.1% annualized.
• Excluding PPP loans, total commercial loans increased $171.7 million, or 7.4% annualized.
• Total commercial loan production in the third quarter was $1.0 billion; period-end pipeline totaled $2.7 billion.
• Consumer loans decreased $15.1 million to $1,564.2 million and residential mortgage loans increased $9.7 million to $2,224.8 million.
• Average total loans in the third quarter were $13,687.3 million, a decrease of $308.0 million from the second quarter of 2023.
• Excluding PPP loans, average total loans in the third quarter increased $185.8 million from the second quarter of 2023.

DEPOSITS
Total deposit growth bolstered by strong increase in noninterest-bearing demand deposits.

• Period-end total deposits were $18,196.1 million at September 30, 2023, an increase of $327.2 million, or 7.3% annualized, when compared to the $17,868.9 million at June 30, 2023.
• Noninterest-bearing deposits increased $297.8 million to $6,440.5 million at September 30, 2023 from $6,142.7 million at June 30, 2023.
• On average, total deposits in the third quarter increased $122.9 million to $17,976.0 million, compared to $17,853.1 million in the second quarter of 2023.

NET INTEREST INCOME AND MARGIN
Net interest income and margin both increase as funding costs stabilize.

• Net interest income increased to $151.6 million in the third quarter of 2023 compared to $149.9 million in the second quarter of 2023.
• The net interest margin on a fully taxable equivalent basis increased 1 basis point to 2.92% compared to 2.91% in the second quarter of 2023.
• PPP interest and net fees combined were $12.2 million, or 16 basis points of net interest margin, in the third quarter of 2023 compared to $11.9 million, or 9 basis points of net interest margin, in the second quarter of 2023.
• Accretion income was $3.0 million, or 6 basis points of net interest margin, in the third quarter of 2023 compared to $5.1 million, or 10 basis points of net interest margin, in the second quarter of 2023.
• Interest collected on nonaccrual loans was $2.3 million, or 4 basis points of net interest margin, in the third quarter of 2023 compared to $1.2 million, or 2 basis points of net interest margin, in the second quarter of 2023.
• The cost of total deposits remained unchanged at 0.06% in the third quarter of 2023 and the cost of total interest-bearing deposits also remained unchanged at 0.09%.

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

• Old National recorded a provision recapture in the third quarter of 2023 of $4.6 million, compared to $4.9 million in provision recapture recorded in the second quarter of 2023.
• Net recoveries in the third quarter were $3.0 million, compared to net recoveries of $336 thousand in the second quarter of 2023.
• 30-89 day delinquencies were 0.10% at the end of the third quarter.
• Non-performing loans decreased as a percentage of total loans to 0.94%.
• Loans acquired from previous acquisitions were recorded at fair value at the acquisition date. As of September 30, 2023, the remaining discount on these acquired loans was $37.7 million.
• The allowance for credit losses stood at $107.9 million, or 0.79% of total loans at September 30, 2023.

NONINTEREST INCOME
Noninterest income increased primarily due to higher mortgage banking revenue.

• Total noninterest income for the third quarter of 2023 was $54.5 million, an increase of $3.0 million from the second quarter of 2023.
• Mortgage banking revenue increased $3.0 million when compared to the second quarter of 2023, due primarily to a stabilizing pipeline valuation.
• Gains on sales of debt securities increased $0.5 million when compared to the second quarter of 2023.

NONINTEREST EXPENSE
Decline in third quarter expenses due to reductions in personnel and occupancy expenses.

• Noninterest expense for the third quarter of 2023 was $121.3 million and included $1.4 million in diligence, integration and merger charges and $1.7 million in tax credit amortization.
• Excluding these items, adjusted noninterest expense for the third quarter was $118.2 million, compared to the $120.9 million in adjusted noninterest expense in the second quarter of 2023.
• The third quarter efficiency ratio was 56.86%, while the adjusted efficiency ratio was 55.38%.

INCOME TAXES

• On a fully taxable-equivalent basis, income tax expense in the third quarter was $21.2 million, resulting in a 22.8% FTE tax rate, compared to 21.7% in the second quarter of 2023.
• Income tax expense included $1.5 million in tax credit benefit.

CAPITAL AND LIQUIDITY
Capital ratios remain strong.

• At the end of the third quarter, preliminary total risk-based capital was 12.84% and preliminary regulatory tier 1 capital was 12.08%.
• Tangible common equity to tangible assets was 8.55% at the end of the third quarter compared to 8.47% in the second quarter of 2023.
• The Company did not repurchase any shares of common stock during the third quarter.
• A low loan to deposit ratio of 74.9%, combined with existing funding sources plus available unencumbered, high-quality collateral, provides strong liquidity.

NON-GAAP RECONCILIATIONS

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

⁵ Tax-effect calculations use the current statutory FTE tax rates (federal + state)

CONFERENCE CALL AND WEBCAST
Old National will host a conference call and live webcast at 9:00 a.m. Central Time on Tuesday, October 19, 2023, to review third-quarter 2023 financial results. The live audio webcast link and 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. To listen to the live conference call, dial U.S. (877) 660-9071 or International (929) 517-9523, Conference I.D. 4242648. A replay of the call will also be available from Noon Central Time on October 19 through November 2. To access the replay, dial (855) 859-2056, Conference ID Code 4242648.

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 $24.0 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 ten 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, Minnesota and Wisconsin. 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 STATEMENTS
This communication includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to Old National’s future plans, objectives, performance, revenues, growth, profits, operating expenses or Old National’s underlying assumptions; First Midwest’s and Old National’s beliefs, goals, intentions, and expectations regarding the proposed transaction, revenues, earnings, loan production, asset quality, and capital levels, among other matters; our estimates of future costs and benefits of the actions we may take; our assessments of expected losses on loans; our assessments of interest rate and other market risks; our ability to achieve our financial and other strategic goals; the expected timing of completion of the proposed transaction; the expected cost savings, synergies and other anticipated benefits from the proposed transaction; and other statements that are not historical facts.

Forward‐looking statements are typically identified by such words as “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project,” “should,” “will,” and other similar words and expressions, and are subject to numerous assumptions, risks, and uncertainties, which change over time. These forward-looking statements include, without limitation, those relating to the terms, timing and closing of the proposed transaction.

Additionally, forward‐looking statements speak only as of the date they are made; Old National does not assume any duty, and does not undertake, to update such forward‐looking statements, whether written or oral, that may be made from time to time, whether as a result of new information, future events, or otherwise. Furthermore, because forward‐looking statements are subject to assumptions and uncertainties, actual results or future events could differ, possibly materially, from those indicated in such forward-looking statements as a result of a variety of factors, many of which are beyond the control of Old National. Such statements are based upon the current beliefs and expectations of the management of Old National and are subject to significant risks and uncertainties outside of the control of the parties. Caution should be exercised against placing undue reliance on forward-looking statements. The factors that could cause actual results to differ materially include the following: the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the definitive merger agreement between First Midwest and Old National; the outcome of any legal proceedings that may be instituted against First Midwest or Old National; the possibility that the proposed transaction will not close when expected or at all because required regulatory or other approvals are not received or other conditions to the closing are not satisfied on a timely basis or at all, or are obtained subject to conditions that are not anticipated (and the risk that required regulatory approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the proposed transaction); the ability of First Midwest and Old National to meet expectations regarding the timing, completion and accounting and tax treatments of the proposed transaction; the risk that any announcements relating to the proposed transaction could have adverse effects on the market price of the common stock of either or both parties to the proposed transaction; the possibility that the anticipated benefits of the proposed transaction will not be realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where First Midwest and Old National do business; certain restrictions during the pendency of the proposed transaction that may impact the parties’ ability to pursue certain business opportunities or strategic transactions; the possibility that the transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events; diversion of management’s attention from ongoing business operations and opportunities; the possibility that the parties may be unable to achieve expected synergies and operating efficiencies in the merger within the expected timeframes or at all and to successfully integrate First Midwest’s operations and those of Old National; such integration may be more difficult, time consuming or costly than expected; revenues following the proposed transaction may be lower than expected; First Midwest’s and Old National’s success in executing their respective business plans and strategies and managing the risks involved in the foregoing; the dilution caused by Old National’s issuance of additional shares of its capital stock in connection with the proposed transaction; effects of the announcement, pendency or completion of the proposed transaction on the ability of First Midwest and Old National to retain customers and retain and hire key personnel and maintain relationships with their suppliers, and on their operating results and businesses generally; risks related to the potential impact of general economic, political and market factors on the companies or the proposed transaction and other factors that may affect future results of First Midwest and Old National; uncertainty as to the extent of the duration, scope, and impacts of the COVID-19 pandemic on First Midwest, Old National and the proposed transaction; and the other factors discussed in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of each of First Midwest’s and Old National’s Annual Report on Form 10‐K for the year ended December 31, 2020, in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of each of First Midwest’s and Old National’s Quarterly Report on Form 10‐Q for the quarter ended June 30, 2023, and in other reports First Midwest and Old National file with the U.S. Securities and Exchange Commission (the “SEC”).

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