Old National Reports Profit Increase

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Evansville-based Old National Bancorp (NYSE: ONB) is reporting a second quarter profit of $28.5 million, compared to $27.2 million for the same period last year. The company says strong growth in its commercial loan business helped boost the bottom line. July 29, 2013

News Release

EVANSVILLE, IN -- Today Old National Bancorp (NYSE: ONB) reported 2nd quarter 2013 net income of $28.5 million, or $.28 per share. These 2nd quarter results compare favorably to the net income of $23.9 million, or $.24 per share, that Old National reported in 1st quarter 2013, and net income of $27.2 million, or $.29 per share, that Old National reported in 2nd quarter 2012. Earnings per share comparisons are impacted by the 6.6 million shares Old National issued in the 3rd quarter of 2012 for the Indiana Community Bancorp acquisition.

"These results represent a continuation of the positive momentum we have experienced over the past several quarters," said Bob Jones, Old National Bancorp President and CEO. "Not only were we able to increase our net income over the previous quarter while growing loan volume, we did so while continuing to control noninterest expenses and credit quality. These positive indicators, coupled with our July 12, 2013, expansion in Northern Indiana and into Southwestern Michigan through the acquisition of 24 Bank of America branches, indicate that Old National remains a strong, secure and growing community bank."

Old National Bancorp's Board of Directors also declared a quarterly cash dividend of $.10 per share on the Company's outstanding shares. This dividend is payable September 17, 2013, to shareholders of record on September 3, 2013. For purposes of broker trading, the ex-date of the cash dividend is August 29, 2013.

Committed to our Strategic Imperatives

Old National's strong performance through the most recent economic downturn, as well as its strong credit and capital positions, can be attributed to its unwavering commitment to the following strategic imperatives:

1. Strengthen the risk profile.

2. Enhance management discipline.

3. Achieve consistent quality earnings.

1. Strengthen the Risk Profile

Credit Quality

Old National continued the trend of improvement in overall credit quality metrics as the company reported decreases in non-performing and problem loans and lower net charge-offs in the 2nd quarter of 2013. Provision expense in the 2nd quarter of 2013 was a recapture of $3.7 million, compared to expense of $.8 million in the 1st quarter of 2013 and $.4 million in the 2nd quarter of 2012. Net charge-offs for 2nd quarter 2013 were $.5 million, or .04% of average total loans on an annualized basis, below the $2.1 million, or .17% of average total loans in 1st quarter 2013 and the $1.5 million, or .13% of average total loans, in 2nd quarter 2012.

Old National's net charge-offs for the 2nd quarter, excluding covered loans, were $.1 million and were below the $1.1 million reported in 1st quarter 2013 and the $.9 million in net charge-offs reported in 2nd quarter 2012. Continued positive trends in credit quality allowed Old National to recapture $3.3 million of provision expense in the 2nd quarter of 2013, excluding covered loans, compared to recaptures of $.6 million and $3.4 million in the 1st quarter of 2013 and the 2nd quarter of 2012, respectively.

Old National's allowance for loan losses at June 30, 2013, excluding covered loans, was $43.9 million, or .90% of total loans, compared to an allowance of $47.3 million, or .99% of total loans at March 31, 2013, and $50.4 million, or 1.19% of total loans, at June 30, 2012. The coverage of allowance to non-performing loans, excluding covered loans, stood at 32% at June 30, 2013, compared to the 31% at March 31, 2013, and 50% at June 30, 2012.

"Managing credit risk continues to be a constant focal point of our community banking strategy," said Daryl Moore, Old National's Chief Credit Officer. "We are particularly pleased with the lower levels of non-performing and problem loans in the quarter as well as the relatively low levels of net charge-offs."

2. Enhance Management Discipline

Expense Management

Total noninterest expenses for the 2nd quarter of 2013 totaled $86.9 million and represented an efficiency ratio of 66.52%. This performance compares favorably to the $90.2 million and $86.0 million reported in 1st quarter 2013 and 2nd quarter 2012, respectively. These results also represent improvements over the efficiency ratios of 68.34% and 69.20% reported in the 1st quarter of 2013 and 2nd quarter of 2012, respectively, and represent continued progress toward Old National's efficiency ratio target of 65%. Included in noninterest expenses in the 1st quarter of 2013 were $.6 million in branch optimization expense, $1.7 million in BSA/AML project expenses, and $.7 million in debt extinguishment charges.

Capital Management

Maintaining a strong capital position is a top priority for Old National, as it remained above industry requirements at June 30, 2013, with regulatory tier 1 and total risk-based capital ratios of 14.4% and 15.4%, respectively, compared to 14.1% and 15.1% at March 31, 2013, and 14.6% and 15.7% at June 30, 2012. Old National repurchased 500,000 shares of stock in the open market during the 2nd quarter of 2013 compared to no open market purchases made in the 1st quarter of the current year.

At June 30, 2013, Old National's ratio of tangible common equity to tangible assets was 8.65%, compared to 8.96% at March 31, 2013, and 9.40% at June 30, 2012. Refer to Table 1 for Non-GAAP reconciliations.

3. ACHIEVE CONSISTENT QUALITY EARNINGS

Balance Sheet and Net Interest Margin

Total period-end loans stood at $5.201 billion at June 30, 2013, an increase of $74.8 million from the $5.127 billion Old National reported at March 31, 2013. The commercial loans and leases segment (excluding covered loans) experienced its strongest quarterly performance since the 4th quarter of 2008, growing by $94.4 million in the 2nd quarter. The residential real estate portfolio also continued its positive momentum, growing $45.9 million in the current quarter. These segments of growth were partially offset by the $32.3 million decline in commercial real estate and the $37.8 million decline in Old National's covered loan portfolio.

Total investments, including money market accounts, decreased $136.2 million to $3.166 billion, from $3.302 billion at March 31, 2013. Average total investments increased $159.8 million to $3.223 billion at June 30, 2013, from $3.063 billion at March 31, 2013. During 2nd quarter 2013, Old National sold $145.4 million of securities and had $26.9 million of securities called, resulting in securities gains of $1.8 million compared to $1.0 million of securities gains in the 1st quarter of 2013. Old National has not incurred any other-than-temporary impairment related to its securities portfolio in 2013.

At June 30, 2013, total core deposits, including demand and interest-bearing deposits, declined to $6.840 billion, a decrease of $226.2 million, from the $7.066 billion at March 31, 2013. On average, total core deposits decreased to $6.952 billion during 2nd quarter 2013 compared to $7.067 billion during 1st quarter 2013.

Old National reported net interest income of $79.2 million for 2nd quarter 2013 compared to $79.0 million in 1st quarter 2013, and $76.0 million for 2nd quarter 2012. Net interest income on a fully taxable equivalent basis was $83.4 million for 2nd quarter 2013 and represented a net interest margin on total average earning assets of 3.97%. These results compare to net interest income on a fully taxable equivalent basis of $83.0 million and a margin of 4.04% in 1st quarter 2013 and net interest income on a fully taxable equivalent basis of $79.2 million and a margin of 4.26% for 2nd quarter 2012. Refer to Tables A and B for Non-GAAP taxable equivalent reconciliations.

Fees, Service Ch