Old National Bancorp

10/19/2021 | Press release | Distributed by Public on 10/19/2021 06:12

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

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

Company Release - 10/19/2021 8:00 AM ET
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EVANSVILLE, Ind., Oct. 19, 2021 (GLOBE NEWSWIRE) --

Old National Bancorp (NASDAQ: ONB) reports 3Q21 net income of $71.7 million, diluted EPS of $0.43.
Adjusted1 net income of $71.8 million, or $0.43 per diluted share.

CEO COMMENTARY:

"Old National's excellent 3rd quarter results were driven by multiple success factors, including strong commercial loan growth, good deposit growth, increased fee income, reduced expenses and strong credit metrics," said Chairman and CEO Jim Ryan. "In addition, we continued to make smooth, steady progress throughout the quarter on activities related to our merger of equals with First Midwest Bank, which we expect to be completed as soon as we receive Federal Reserve approval. As previously disclosed, we have already received approval from the OCC."

THIRD QUARTER HIGHLIGHTS2:

Net income
  • Net income of $71.7 million
  • Earnings per diluted share of $0.43
Net interest
income/NIM
  • Net interest income on a fully taxable equivalent basis of $155.1 million compared to $153.4 million
  • Net interest margin on a fully taxable equivalent basis of 2.92% compared to 2.91%
Operating
Performance

  • Pre-provision net revenue1 ("PPNR") of $88.3 million
  • Adjusted PPNR1 of $90.2 million
  • Noninterest expense of $121.3 million
  • Adjusted noninterest expense1 of $118.2 million
  • Efficiency ratio1 of 56.86%
  • Adjusted efficiency ratio1 of 55.38%
Loans and Credit Quality
  • End-of-period total loans3 of $13,636.1 million compared to $13,834.8 million
    • Total commercial loans increased $171.7 million, excluding the $366.1 million decrease in PPP loans
  • Third-quarter total commercial production of $1.0 billion
  • Provision for credit losses was a recapture of $4.6 million
  • September 30 pipeline of $2.7 billion
  • Net recoveries of $3.0 million compared to net recoveries of $336 thousand
  • Non-performing loans of 0.94% of total loans compared to 1.03%
Return Profile & Capital
  • Return on average common equity of 9.48%
  • Return on average tangible common equity1 of 15.13%
  • Adjusted return on average tangible common equity1 of 15.16%
  • No shares of common stock were repurchased during the current quarter
Notable Items
  • $1.7 million in tax credit amortization
  • $1.4 million in merger charges

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 2021 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, 2021, a decrease of $198.7 million, or 5.7% annualized, when compared to the $13,834.8 million at June 30, 2021.
  • Paycheck Protection Program (PPP) loans declined $366.1 million to $354.9 million at September 30, 2021, compared to $721.1 million at June 30, 2021.
  • 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 2021.
  • Excluding PPP loans, average total loans in the third quarter increased $185.8 million from the second quarter of 2021.

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, 2021, an increase of $327.2 million, or 7.3% annualized, when compared to the $17,868.9 million at June 30, 2021.
  • Noninterest-bearing deposits increased $297.8 million to $6,440.5 million at September 30, 2021 from $6,142.7 million at June 30, 2021.
  • 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 2021.

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 2021 compared to $149.9 million in the second quarter of 2021.
  • 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 2021.
  • PPP interest and net fees combined were $12.2 million, or 16 basis points of net interest margin, in the third quarter of 2021 compared to $11.9 million, or 9 basis points of net interest margin, in the second quarter of 2021.
  • Accretion income was $3.0 million, or 6 basis points of net interest margin, in the third quarter of 2021 compared to $5.1 million, or 10 basis points of net interest margin, in the second quarter of 2021.
  • Interest collected on nonaccrual loans was $2.3 million, or 4 basis points of net interest margin, in the third quarter of 2021 compared to $1.2 million, or 2 basis points of net interest margin, in the second quarter of 2021.
  • The cost of total deposits remained unchanged at 0.06% in the third quarter of 2021 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 2021 of $4.6 million, compared to $4.9 million in provision recapture recorded in the second quarter of 2021.
  • Net recoveries in the third quarter were $3.0 million, compared to net recoveries of $336 thousand in the second quarter of 2021.
  • 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, 2021, 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, 2021.

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

  • Total noninterest income for the third quarter of 2021 was $54.5 million, an increase of $3.0 million from the second quarter of 2021.
  • Mortgage banking revenue increased $3.0 million when compared to the second quarter of 2021, due primarily to a stabilizing pipeline valuation.
  • Gains on sales of debt securities increased $0.5 million when compared to the second quarter of 2021.

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

  • Noninterest expense for the third quarter of 2021 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 2021.
  • 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 2021.
  • 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 2021.
  • 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

($ in millions, except EPS, shares in 000s) 3Q21 Adjustments4 Adjusted 3Q21
Total Revenues (FTE) $ 209.6 $ (1.2 ) $ 208.4
Less: Provision for Credit Losses 4.6 - 4.6
Less: Noninterest Expenses (121.3 ) 1.4 (119.9 )
Income before Income Taxes (FTE) $ 92.9 $ 0.2 $ 93.1
Income Taxes (FTE) (21.2 ) (0.1 ) (21.3 )
Net Income $ 71.7 $ 0.1 $ 71.8
Average Shares Outstanding 165,939 - 165,939
Earnings Per Share - Diluted $ 0.43 $ - $ 0.43

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

($ in millions) 3Q21 2Q21
Net Interest Income $ 151.6 $ 149.9
Add: FTE Adjustment 3.5 3.5
Net Interest Income (FTE) $ 155.1 $ 153.4
Average Earning Assets $ 21,228.6 $ 21,095.3
Net Interest Margin (FTE) 2.92 % 2.91 %
($ in millions) 3Q21 3Q20
Net Interest Income $ 151.6 $ 145.6
Add: FTE Adjustment 3.5 3.4
Net Interest Income (FTE) $ 155.1 $ 149.0
Add: Total Noninterest Income 54.5 64.7
Less: Noninterest Expense 121.3 120.2
Pre-Provision Net Revenue $ 88.3 $ 93.5
Less: Debt Securities Gains/Losses (1.2 ) (4.9 )
Add: Diligence, Acquisition and Integration Charges 1.4 -
Add: ONB Way Charges - 2.9
Add: Amortization of Tax Credit Investments 1.7 3.1
Adjusted Pre-Provision Net Revenue $ 90.2 $ 94.6
($ in millions) 3Q21 2Q21 3Q20
Noninterest Expense $ 121.3 $ 129.6 $ 120.2
Less: ONB Way Charges - (0.4 ) (2.9 )
Less: Diligence, Acquisition and Integration Charges (1.4 ) (6.5 ) -
Noninterest Expense less Charges $ 119.9 $ 122.7 $ 117.3
Less: Amortization of Tax Credit Investments (1.7 ) (1.8 ) (3.1 )
Adjusted Noninterest Expense $ 118.2 $ 120.9 $ 114.2
Less: Intangible Amortization (2.8 ) (2.9 ) (3.4 )
Adjusted Noninterest Expense Less Intangible Amortization $ 115.4 $ 118.0 $ 110.8
Net Interest Income $ 151.6 $ 149.9 $ 145.6
FTE Adjustment 3.5 3.5 3.4
Net Interest Income (FTE) $ 155.1 $ 153.4 $ 149.0
Total Noninterest Income 54.5 51.5 64.7
Total Revenue (FTE) $ 209.6 $ 204.9 $ 213.7
Less: Debt Securities Gains/Losses (1.2 ) (0.7 ) (4.9 )
Adjusted Total Revenue (FTE) $ 208.4 $ 204.2 $ 208.8
Efficiency Ratio 56.86 % 62.05 % 55.93 %
Adjusted Efficiency Ratio 55.38 % 57.74 % 53.06 %
($ in millions) 3Q21 2Q21
Net Income $ 71.7 $ 62.8
Add: Intangible Amortization (net of tax5) 2.1 2.2
Tangible Net Income $ 73.8 $ 65.0
Less: Securities Gains/Losses (net of tax5) (0.9 ) (0.5 )
Add: Diligence, Acquisition and Integration Charges (net of tax5) 1.1 4.9
Add: ONB Way Charges (net of tax5) - 0.3
Adjusted Tangible Net Income $ 74.0 $ 69.7
Average Total Shareholders' Equity 3,027.9 2,992.7
Less: Average Goodwill (1,037.0 ) (1,037.0 )
Less: Average Intangibles (38.6 ) (41.4 )
Average Tangible Shareholders' Equity $ 1,952.3 $ 1,914.3
Return on Average Tangible Common Equity 15.13 % 13.58 %
Adjusted Return on Average Tangible Common Equity 15.16 % 14.56 %

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, 2021, to review third-quarter 2021 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, 2021, and in other reports First Midwest and Old National file with the U.S. Securities and Exchange Commission (the "SEC").

Financial Highlights (unaudited)
($ and shares in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
2021 2021 2020 2021 2020
Income Statement
Net interest income $ 151,572 $ 149,927 $ 145,573 $ 449,619 $ 435,015
Tax equivalent adjustment (1) 3,501 3,470 3,379 10,471 10,069
Net interest income - tax equivalent basis 155,073 153,397 148,952 460,090 445,084
Provision for credit losses (4,613 ) (4,929 ) - (26,898 ) 39,495
Noninterest income 54,515 51,508 64,759 162,735 180,722
Noninterest expense 121,274 129,618 120,234 368,632 399,099
Net income 71,746 62,786 77,944 221,350 152,289
Per Common Share Data
Weighted average diluted shares 165,939 165,934 165,419 165,862 166,370
Net income (diluted) $ 0.43 $ 0.38 $ 0.47 $ 1.33 $ 0.92
Cash dividends 0.14 0.14 0.14 0.42 0.42
Common dividend payout ratio (2) 33 % 37 % 30 % 31 % 46 %
Book value $ 18.31 $ 18.05 $ 17.67 $ 18.31 $ 17.67
Stock price 16.95 17.61 12.56 16.95 12.56
Tangible common book value (3) 11.83 11.55 11.10 11.83 11.10
Performance Ratios
Return on average assets 1.20 % 1.06 % 1.40 % 1.25 % 0.95 %
Return on average common equity 9.48 % 8.39 % 10.79 % 9.85 % 7.11 %
Return on tangible common equity (3) 15.05 % 13.58 % 17.56 % 15.49 % 11.66 %
Return on average tangible common equity (3) 15.13 % 13.58 % 17.88 % 15.84 % 12.12 %
Net interest margin (FTE) 2.92 % 2.91 % 3.03 % 2.92 % 3.15 %
Efficiency ratio (4) 56.86 % 62.05 % 55.93 % 58.14 % 63.11 %
Net charge-offs (recoveries) to average loans (0.09 ) % (0.01 ) % (0.09 ) % (0.03 ) % 0.04 %
Allowance for credit losses to ending loans 0.79 % 0.79 % 0.95 % 0.79 % 0.95 %
Non-performing loans to ending loans 0.94 % 1.03 % 1.15 % 0.94 % 1.15 %
Balance Sheet (EOP)
Total loans $ 13,584,828 $ 13,784,677 $ 13,892,509 $ 13,584,828 $13,892,509
Total assets 24,018,733 23,675,666 22,460,476 24,018,733 22,460,476
Total deposits 18,196,149 17,868,911 16,506,494 18,196,149 16,506,494
Total borrowed funds 2,536,303 2,559,113 2,725,731 2,536,303 2,725,731
Total shareholders' equity 3,035,892 2,991,118 2,921,149 3,035,892 2,921,149
Capital Ratios (3)
Risk-based capital ratios (EOP):
Tier 1 common equity 12.08 % 11.95 % 11.84 % 12.08 % 11.84 %
Tier 1 12.08 % 11.95 % 11.84 % 12.08 % 11.84 %
Total 12.84 % 12.73 % 12.81 % 12.84 % 12.81 %
Leverage ratio (to average assets) 8.54 % 8.38 % 8.15 % 8.54 % 8.15 %
Total equity to assets (averages) 12.69 % 12.61 % 12.97 % 12.69 % 13.33 %
Tangible common equity to tangible assets 8.55 % 8.47 % 8.58 % 8.55 % 8.58 %
Nonfinancial Data
Full-time equivalent employees 2,410 2,465 2,484 2,410 2,484
Banking centers 162 162 162 162 162
(1) Calculated using the federal statutory tax rate in effect of 21% for all periods.
(2) Cash dividends per share divided by net income per share (basic).
(3) Represents a non-GAAP financial measure. Refer the "Non-GAAP Measures" table for reconciliations to GAAP financial measures.
September 30, 2021 capital ratios are preliminary.
(4) Efficiency ratio is defined as noninterest expense before amortization of intangibles as a percent of FTE net interest income and
noninterest revenues, excluding net gains from debt securities transactions. This presentation excludes amortization of intangibles
and net debt securities gains, as is common in other company releases, and better aligns with true operating performance.
FTE - Fully taxable equivalent basis EOP - End of period actual balances
Income Statement (unaudited)
($ and shares in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
2021 2021 2020 2021 2020
Interest income $ 162,026 $ 160,458 $ 160,086 $ 481,721 $ 490,059
Less: interest expense 10,454 10,531 14,513 32,102 55,044
Net interest income 151,572 149,927 145,573 449,619 435,015
Provision for credit losses (4,613 ) (4,929 ) - (26,898 ) 39,495
Net interest income after provision for credit losses 156,185 154,856 145,573 476,517 395,520
Wealth management fees 10,134 10,734 9,239 30,576 27,547
Service charges on deposit accounts 8,926 8,514 8,698 25,564 26,357
Debit card and ATM fees 4,942 5,583 5,276 15,668 15,106
Mortgage banking revenue 10,870 7,827 18,110 35,222 46,542
Investment product fees 6,475 6,042 5,351 18,381 16,070
Capital markets income 6,017 5,871 5,428 15,603 15,935
Company-owned life insurance 2,355 2,783 2,830 7,852 8,878
Other income 3,589 3,462 4,906 9,977 13,681
Gains (losses) on sales of debt securities 1,207 692 4,921 3,892 10,606
Total noninterest income 54,515 51,508 64,759 162,735 180,722
Salaries and employee benefits 71,005 72,640 69,860 211,762 215,589
Occupancy 12,757 14,054 13,930 41,683 42,308
Equipment 3,756 4,506 3,754 12,231 12,912
Marketing 3,267 2,632 2,140 7,961 7,632
Data processing 11,508 11,697 9,628 35,558 28,724
Communication 2,372 2,411 2,241 7,661 7,335
Professional fees 3,416 8,528 3,083 14,668 10,921
FDIC assessment 1,628 1,226 1,319 4,461 4,942
Amortization of intangibles 2,779 2,909 3,459 8,763 10,847
Amortization of tax credit investments 1,736 1,813 3,115 4,751 8,917
Other expense 7,050 7,202 7,705 19,133 48,972
Total noninterest expense 121,274 129,618 120,234 368,632 399,099
Income before income taxes 89,426 76,746 90,098 270,620 177,143
Income tax expense 17,680 13,960 12,154 49,270 24,854
Net income $ 71,746 $ 62,786 $ 77,944 $ 221,350 $ 152,289
Diluted Earnings Per Share
Net income $ 0.43 $ 0.38 $ 0.47 $ 1.33 $ 0.92
Average Common Shares Outstanding
Basic 165,258 165,175 164,773 165,144 165,748
Diluted 165,939 165,934 165,419 165,862 166,370
Common shares outstanding at end of period 165,814 165,732 165,333 165,814 165,333
Balance Sheet (unaudited)
($ in thousands)
September 30, June 30, September 30,
2021 2021 2020
Assets
Federal Reserve Bank account $ 600,581 $ 287,446 $ 87,682
Money market investments 16,294 15,294 13,437
Investments:
Treasury and government-sponsored agencies 1,803,273 1,657,079 501,771
Mortgage-backed securities 3,354,701 3,280,983 3,382,280
States and political subdivisions 1,609,283 1,567,931 1,426,495
Other securities 442,503 441,037 462,958
Total investments 7,209,760 6,947,030 5,773,504
Loans held for sale, at fair value 51,306 50,121 85,091
Loans:
Commercial 3,505,183 3,802,943 4,264,568
Commercial and agriculture real estate 6,290,632 6,187,318 5,701,493
Consumer:
Home equity 554,322 549,951 549,115
Other consumer loans 1,009,909 1,029,409 1,112,034
Subtotal of commercial and consumer loans 11,360,046 11,569,621 11,627,210
Residential real estate 2,224,782 2,215,056 2,265,299
Total loans 13,584,828 13,784,677 13,892,509
Total earning assets 21,462,769 21,084,568 19,852,223
Allowance for credit losses (107,868 ) (109,444 ) (131,388 )
Non-earning Assets:
Cash and due from banks 180,583 188,391 229,631
Premises and equipment, net 476,036 484,879 463,253
Operating lease right-of-use assets 69,912 72,207 77,482
Goodwill and other intangible assets 1,074,245 1,077,024 1,086,252
Company-owned life insurance 461,310 459,565 455,975
Other assets 401,746 418,476 427,048
Total non-earning assets 2,663,832 2,700,542 2,739,641
Total assets $ 24,018,733 $ 23,675,666 $ 22,460,476
Liabilities and Equity
Noninterest-bearing demand deposits $ 6,440,526 $ 6,142,724 $ 5,463,007
Interest-bearing:
Checking and NOW accounts 4,956,012 4,921,430 4,588,432
Savings accounts 3,708,807 3,675,701 3,287,302
Money market accounts 2,097,967 2,126,537 1,904,404
Other time deposits 992,837 1,002,519 1,206,658
Total core deposits 18,196,149 17,868,911 16,449,803
Brokered deposits - - 56,691
Total deposits 18,196,149 17,868,911 16,506,494
Federal funds purchased and interbank borrowings 34 1,523 1,259
Securities sold under agreements to repurchase 375,247 396,129 399,141
Federal Home Loan Bank advances 1,890,054 1,891,143 2,087,648
Other borrowings 270,968 270,318 237,683
Total borrowed funds 2,536,303 2,559,113 2,725,731
Operating lease liabilities 76,771 81,333 88,552
Accrued expenses and other liabilities 173,618 175,191 218,550
Total liabilities 20,982,841 20,684,548 19,539,327
Common stock, surplus, and retained earnings 2,979,082 2,928,856 2,771,865
Accumulated other comprehensive income (loss), net of tax 56,810 62,262 149,284
Total shareholders' equity 3,035,892 2,991,118 2,921,149
Total liabilities and shareholders' equity $ 24,018,733 $ 23,675,666 $ 22,460,476
Average Balance Sheet and Interest Rates (unaudited)
($ in thousands)
Three Months Ended Three Months Ended Three Months Ended
September 30, 2021 June 30, 2021 September 30, 2020
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 $ 467,572 $ 177 0.15 % $ 232,723 $ 48 0.08 % $ 137,880 $ 59 0.17 %
Investments:
Treasury and government-sponsored agencies 1,730,553 6,968 1.61 % 1,637,396 5,967 1.46 % 454,005 2,457 2.17 %
Mortgage-backed securities 3,313,027 14,509 1.75 % 3,287,254 15,067 1.83 % 3,342,284 17,478 2.09 %
States and political subdivisions 1,586,743 12,609 3.18 % 1,503,447 12,364 3.29 % 1,383,765 11,860 3.43 %
Other securities 443,393 2,638 2.38 % 439,197 2,690 2.45 % 487,405 2,922 2.40 %
Total investments 7,073,716 36,724 2.08 % 6,867,294 36,088 2.10 % 5,667,459 34,717 2.45 %
Loans: (2)
Commercial 3,645,197 36,139 3.88 % 4,019,553 34,715 3.42 % 4,274,894 33,223 3.04 %
Commercial and agriculture real estate 6,200,144 57,820 3.65 % 6,146,057 57,655 3.71 % 5,546,486 55,891 3.94 %
Consumer:
Home equity 549,229 4,448 3.21 % 538,999 4,201 3.13 % 551,380 4,336 3.13 %
Other consumer loans 1,018,385 9,690 3.77 % 1,034,439 9,747 3.78 % 1,120,681 11,635 4.13 %
Subtotal commercial and consumer loans 11,412,955 108,097 3.76 % 11,739,048 106,318 3.63 % 11,493,441 105,085 3.64 %
Residential real estate loans 2,274,347 20,529 3.61 % 2,256,215 21,474 3.81 % 2,355,512 23,604 4.01 %
Total loans 13,687,302 128,626 3.70 % 13,995,263 127,792 3.62 % 13,848,953 128,689 3.66 %
Total earning assets $ 21,228,590 $ 165,527 3.08 % $ 21,095,280 $ 163,928 3.09 % $ 19,654,292 $ 163,465 3.29 %
Less: Allowance for credit losses (111,216 ) (117,020 ) (132,447 )
Non-earning Assets:
Cash and due from banks $ 272,855 $ 238,326 $ 346,343
Other assets 2,479,079 2,520,937 2,405,517
Total assets $ 23,869,308 $ 23,737,523 $ 22,273,705
Interest-Bearing Liabilities:
Checking and NOW accounts $ 4,873,914 $ 484 0.04 % $ 4,948,773 $ 513 0.04 % $ 4,607,427 $ 886 0.08 %
Savings accounts 3,678,944 500 0.05 % 3,647,952 492 0.05 % 3,232,375 634 0.08 %
Money market accounts 2,110,981 438 0.08 % 2,081,286 433 0.08 % 1,902,407 724 0.15 %
Other time deposits 998,060 1,156 0.46 % 1,024,777 1,293 0.51 % 1,253,058 2,852 0.91 %
Total interest-bearing core deposits 11,661,899 2,578 0.09 % 11,702,788 2,731 0.09 % 10,995,267 5,096 0.18 %
Brokered deposits - - 0.00 % 9,890 1 0.05 % 150,545 201 0.53 %
Total interest-bearing deposits 11,661,899 2,578 0.09 % 11,712,678 2,732 0.09 % 11,145,812 5,297 0.19 %
Federal funds purchased and interbank borrowings 689 - 0.00 % 1,460 - 0.02 % 18,347 12 0.25 %
Securities sold under agreements to repurchase 384,724 90 0.09 % 406,251 95 0.09 % 385,149 160 0.16 %
Federal Home Loan Bank advances 1,890,916 5,326 1.12 % 1,906,078 5,218 1.10 % 2,021,468 6,709 1.32 %
Other borrowings 270,597 2,460 3.64 % 269,259 2,486 3.69 % 237,811 2,335 3.93 %
Total borrowed funds 2,546,926 7,876 1.23 % 2,583,048 7,799 1.21 % 2,662,775 9,216 1.38 %
Total interest-bearing liabilities $ 14,208,825 $ 10,454 0.29 % $ 14,295,726 $ 10,531 0.30 % $ 13,808,587 $ 14,513 0.42 %
Noninterest-Bearing Liabilities and Shareholders' Equity
Demand deposits $ 6,314,100 $ 6,140,424 $ 5,291,037
Other liabilities 318,448 308,680 284,536
Shareholders' equity 3,027,935 2,992,693 2,889,545
Total liabilities and shareholders' equity $ 23,869,308 $ 23,737,523 $ 22,273,705
Net interest rate spread 2.79 % 2.79 % 2.87 %
Net interest margin (FTE) 2.92 % 2.91 % 3.03 %
FTE adjustment $ 3,501 $ 3,470 $ 3,379
(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)
Nine Months Ended Nine Months Ended
September 30, 2021 September 30, 2020
Average Income (1)/ Yield/ Average Income (1)/ Yield/
Earning Assets: Balance Expense Rate Balance Expense Rate
Money market and other interest-earning
investments $ 357,151 $ 313 0.12 % $ 94,149 $ 442 0.63 %
Investments:
Treasury and government-sponsored agencies 1,509,931 17,820 1.57 % 513,055 9,187 2.39 %
Mortgage-backed securities 3,304,200 45,408 1.83 % 3,231,439 54,474 2.25 %
States and political subdivisions 1,523,175 37,174 3.25 % 1,317,136 35,026 3.55 %
Other securities 445,298 8,071 2.42 % 493,016 9,361 2.53 %
Total investments $ 6,782,604 $ 108,473 2.13 % $ 5,554,646 $ 108,048 2.59 %
Loans: (2)
Commercial 3,878,630 106,421 3.62 % 3,745,803 94,005 3.30 %
Commercial and agriculture real estate 6,109,795 171,221 3.70 % 5,359,254 176,337 4.32 %
Consumer:
Home equity 544,111 12,801 3.15 % 554,800 14,180 3.41 %
Other consumer loans 1,037,038 29,613 3.82 % 1,141,399 35,384 4.14 %
Subtotal commercial and consumer loans 11,569,574 320,056 3.70 % 10,801,256 319,906 3.96 %
Residential real estate loans 2,268,142 63,350 3.72 % 2,365,037 71,732 4.04 %
Total loans 13,837,716 383,406 3.67 % 13,166,293 391,638 3.93 %
Total earning assets $ 20,977,471 $ 492,192 3.11 % $ 18,815,088 $ 500,128 3.52 %
Less: Allowance for credit losses (120,619 ) (107,860 )
Non-earning Assets:
Cash and due from banks $ 266,543 $ 322,318
Other assets 2,495,512 2,392,893
Total assets $ 23,618,907 $ 21,422,439
Interest-Bearing Liabilities:
Checking and NOW accounts $ 4,895,539 $ 1,608 0.04 % $ 4,381,919 $ 4,820 0.15 %
Savings accounts 3,608,078 1,479 0.05 % 3,040,889 2,669 0.12 %
Money market accounts 2,060,325 1,293 0.08 % 1,843,902 4,141 0.30 %
Other time deposits 1,034,389 4,058 0.52 % 1,397,222 11,823 1.13 %
Total interest-bearing core deposits 11,598,331 8,438 0.10 % 10,663,932 23,453 0.29 %
Brokered deposits 55,312 31 0.08 % 101,112 940 1.24 %
Total interest-bearing deposits 11,653,643 8,469 0.10 % 10,765,044 24,393 0.30 %
Federal funds purchased and interbank borrowings 1,096 - 0.00 % 184,397 1,296 0.94 %
Securities sold under agreements to repurchase 396,495 305 0.10 % 355,039 729 0.27 %
Federal Home Loan Bank advances 1,907,322 15,953 1.12 % 2,043,617 21,321 1.39 %
Other borrowings 267,650 7,375 3.67 % 243,255 7,305 4.00 %
Total borrowed funds 2,572,563 23,633 1.23 % 2,826,308 30,651 1.45 %
Total interest-bearing liabilities 14,226,206 32,102 0.30 % 13,591,352 55,044 0.54 %
Noninterest-Bearing Liabilities and Shareholders' Equity
Demand deposits $ 6,072,310 $ 4,710,969
Other liabilities 323,310 263,841
Shareholders' equity 2,997,081 2,856,277
Total liabilities and shareholders' equity $ 23,618,907 $ 21,422,439
Net interest rate spread 2.81 % 2.98 %
Net interest margin (FTE) 2.92 % 3.15 %
FTE adjustment $ 10,471 $ 10,069
(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 Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
2021 2021 2020 2021 2020
Beginning allowance for credit losses $ 109,444 $ 114,037 $ 128,394 $ 131,388 $ 54,619
Impact of adopting ASC 326 on 01/01/2020 - - - - 41,347
Provision for credit losses (4,613 ) (4,929 ) - (26,898 ) 39,495
Gross charge-offs (1,215 ) (980 ) (4,169 ) (3,765 ) (14,846 )
Gross recoveries 4,252 1,316 7,163 7,143 10,773
Net (charge-offs) recoveries 3,037 336 2,994 3,378 (4,073 )
Ending allowance for credit losses $ 107,868 $ 109,444 $ 131,388 $ 107,868 $ 131,388
Net charge-offs (recoveries) / average loans (1) (0.09 ) % (0.01 ) % (0.09 ) % (0.03 ) % 0.04 %
Average loans outstanding (1) $ 13,675,436 $ 13,984,295 $ 13,827,019 $ 13,824,569 $ 13,150,805
EOP loans outstanding (1) 13,584,828 13,784,677 13,892,509 13,584,828 13,892,509
Allowance for credit losses / EOP loans (1) 0.79 % 0.79 % 0.95 % 0.79 % 0.95 %
Underperforming Assets:
Loans 90 Days and over (still accruing) $ 113 $ 9 $ 90 $ 113 $ 90
Non-performing loans:
Nonaccrual loans (2) 111,586 128,268 137,611 111,586 137,611
TDRs still accruing 16,420 14,222 22,037 16,420 22,037
Total non-performing loans 128,006 142,490 159,648 128,006 159,648
Foreclosed properties 1,943 520 1,248 1,943 1,248
Total underperforming assets $ 130,062 $ 143,019 $ 160,986 $ 130,062 $ 160,986
Classified and Criticized Assets:
Nonaccrual loans (2) 111,586 128,268 137,611 111,586 137,611
Substandard accruing loans 164,192 160,995 189,524 164,192 189,524
Loans 90 days and over (still accruing) 113 9 90 113 90
Total classified loans - "problem loans" $ 275,891 $ 289,272 $ 327,225 $ 275,891 $ 327,225
Other classified assets 4,300 4,305 3,860 4,300 3,860
Criticized loans - "special mention loans" 240,215 228,264 272,859 240,215 272,859
Total classified and criticized assets $ 520,406 $ 521,841 $ 603,944 $ 520,406 $ 603,944
Non-performing loans / EOP loans (1) 0.94 % 1.03 % 1.15 % 0.94 % 1.15 %
Allowance to non-performing loans 84 % 77 % 82 % 84 % 82 %
Under-performing assets / EOP loans (1) 0.96 % 1.04 % 1.16 % 0.96 % 1.16 %
EOP total assets $ 24,018,733 $ 23,675,666 $ 22,460,476 $ 24,018,733 $ 22,460,476
Under-performing assets / EOP assets 0.54 % 0.60 % 0.72 % 0.54 % 0.72 %
EOP - End of period actual balances
(1) Excludes loans held for sale.
(2) Includes non-accruing TDRs totaling $12.8 million at September 30, 2021, $13.6 million at June 30, 2021, and $7.7 million at September 30, 2020.
Non-GAAP Measures (unaudited)
($ in thousands)
Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
2021 2021 2020 2021 2020
Actual End of Period Balances
GAAP shareholders' equity $ 3,035,892 $ 2,991,118 $ 2,921,149 $ 3,035,892 $ 2,921,149
Deduct:
Goodwill 1,036,994 1,036,994 1,036,994 1,036,994 1,036,994
Intangibles 37,251 40,030 49,258 37,251 49,258
1,074,245 1,077,024 1,086,252 1,074,245 1,086,252
Tangible shareholders' equity $ 1,961,647 $ 1,914,094 $ 1,834,897 $ 1,961,647 $ 1,834,897
Average Balances
GAAP shareholders' equity $ 3,027,935 $ 2,992,693 $ 2,889,545 $ 2,997,081 $ 2,856,277
Deduct:
Goodwill 1,036,994 1,036,994 1,036,994 1,036,994 1,036,994
Intangibles 38,585 41,410 50,926 41,447 54,488
1,075,579 1,078,404 1,087,920 1,078,441 1,091,482
Average tangible shareholders' equity $ 1,952,356 $ 1,914,289 $ 1,801,625 $ 1,918,640 $ 1,764,795
Actual End of Period Balances
GAAP assets $ 24,018,733 $ 23,675,666 $ 22,460,476 $ 24,018,733 $ 22,460,476
Add:
Trust overdrafts 116 24 17 116 17
Deduct:
Goodwill 1,036,994 1,036,994 1,036,994 1,036,994 1,036,994
Intangibles 37,251 40,030 49,258 37,251 49,258
1,074,245 1,077,024 1,086,252 1,074,245 1,086,252
Tangible assets $ 22,944,604 $ 22,598,666 $ 21,374,241 $ 22,944,604 $ 21,374,241
Risk-weighted assets (2) $ 16,227,070 $ 15,971,711 $ 14,770,750 $ 16,227,070 $ 14,770,750
GAAP net income $ 71,746 $ 62,786 $ 77,944 $ 221,350 $ 152,289
Add:
Amortization of intangibles (net of tax) 2,084 2,182 2,595 6,572 8,152
Tangible net income $ 73,830 $ 64,968 $ 80,539 $ 227,922 $ 160,441
Tangible Ratios
Return on tangible common equity 15.05 % 13.58 % 17.56 % 15.49 % 11.66 %
Return on average tangible common equity 15.13 % 13.58 % 17.88 % 15.84 % 12.12 %
Return on tangible assets 1.29 % 1.15 % 1.51 % 1.32 % 1.00 %
Tangible common equity to tangible assets 8.55 % 8.47 % 8.58 % 8.55 % 8.58 %
Tangible common equity to risk-weighted assets (2) 12.09 % 11.98 % 12.42 % 12.09 % 12.42 %
Tangible common book value (1) 11.83 11.55 11.10 11.83 11.10
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 common equity (2) $ 1,960,340 $ 1,908,053 $ 1,748,150 $ 1,960,340 $ 1,748,150
Risk-weighted assets (2) 16,227,070 15,971,711 14,770,750 16,227,070 14,770,750
Tier 1 common equity to risk-weighted assets (2) 12.08 % 11.95 % 11.84 % 12.08 % 11.84 %
(2) September 30, 2021 figures are preliminary.

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


Source: Old National Bancorp