Old National Posts Profit Increase

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Evansville-based Old National Bancorp (Nasdaq: ONB) is reporting a full-year profit of $100.9 million, compared to $91.7 million in 2012. The company says the figure is the highest in a dozen years. February 3, 2014

News Release

EVANSVILLE, Ind. - Today Old National Bancorp (NASDAQ: ONB) reported 4th quarter 2013 net income of $24.5 million, or $.25 per share. These results represent an 8.7% increase over the earnings per share of $.23 reported in both the 4th quarter of 2012 and the 3rd quarter of 2013.

For the 12 months ended December 31, 2013, net income was $100.9 million, or $1.00 per share. These results represent increases of 10.1% and 5.3%, respectively, to full-year 2012 net income of $91.7 million and earnings per share of $.95.

On January 23, 2014, the Company also announced an increase of 10% in its quarterly cash dividend - to $.11 per share from $.10 per share. The dividend is payable March 17, 2014, to shareholders of record on March 3, 2014.

"Our strong fourth quarter results are a fitting conclusion to a year that saw Old National attain the highest net income since 2002 and our lowest full year net charge-off ratio in nearly three decades," said Bob Jones, Old National President & CEO. "When you couple these achievements with partnership activity that expanded our footprint into Southern Michigan and will dramatically increase our presence in Fort Wayne, it truly was a historic year for Old National."

Committed to our Strategic Imperatives

Old National's strong, steady performance amid continued economic and political headwinds, 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 reported provision expense of $2.3 million in the 4th quarter of 2013, compared to a recapture of $1.7 million in the 3rd quarter of 2013 and provision expense of $2.2 million in the 4th quarter of 2012. Net charge-offs for the 4th quarter of 2013 were $2.4 million, or .19% of average total loans on an annualized basis, compared to $.3 million, or .03% of average total loans in the 3rd quarter of 2013 and $2.2 million, or .17% of average total loans in the 4th quarter of 2012.

Excluding covered loans, Old National's net charge-offs for the 4th quarter of 2013 were $1.9 million, compared to $.3 million reported in the 3rd quarter of 2013 and $3.2 million reported in the 4th quarter of 2012. Old National recorded provision expense, excluding covered loans, of $1.3 million in the 4th quarter of 2013, compared to a provision recapture of $1.3 million and provision expense of $1.8 million in the 3rd quarter of 2013 and the 4th quarter of 2012, respectively.

Excluding covered loans, Old National's allowance for loan losses at December 31, 2013, was $41.7 million, or .86% of total loans, compared to an allowance of $42.3 million, or .88% of total loans at September 30, 2013, and $49.0 million, or 1.02% of total loans, at December 31, 2012. The coverage of allowance to non-performing loans, excluding covered loans, stood at 38% at December 31, 2013, compared to 35% at September 30, 2013, and 31% at December 31, 2012.

"Our 4th quarter results continued to demonstrate that our credit metrics remain strong, as evidenced by declines in non-performing and accruing problem loans compared to both 3rd quarter 2013 and 4th quarter 2012 results," said Daryl Moore, Old National's Chief Credit Officer. "We were very pleased with our full year net charge-off ratio of .10%, Old National's best result in 29 years."

2. Enhance Management Discipline

Expense Management

Old National continued to improve efficiency during the 4th quarter of 2013 and reported total noninterest expenses of $88.2 million, which represented an efficiency ratio of 66.56%. These results compare favorably to the $96.7 million in expenses and an efficiency ratio of 72.96% and expenses of $99.4 million and an efficiency ratio of 72.15%, reported in the 3rd quarter of 2013 and the 4th quarter of 2012, respectively. Included in Old National's 4th quarter 2013 noninterest expenses were $2.5 million of merger and integration charges as well as $.5 million in a BSA/AML penalty. Included in Old National's expenses for the 3rd quarter of 2013 were $2.3 million of merger and integration charges as well as $2.7 million in costs associated with branch closures.

Capital Management

Maintaining a strong capital position continues to be a top priority as Old National strategically pursues growth opportunities. Despite a year of extensive partnership activity, Old National's capital position remained above industry requirements at December 31, 2013, with regulatory tier 1 and total risk-based capital ratios of 14.3% and 15.2%, respectively, compared to 14.2% and 15.1% at September 30, 2013, and 13.6% and 14.7% at December 31, 2012. Old National repurchased 889,124 shares of stock in the open market during the 4th quarter of 2013 compared to the repurchase of 250,000 shares made in the 3rd quarter of 2013.

At December 31, 2013, Old National's ratio of tangible common equity to tangible assets was 8.52%, compared to 8.41% at September 30, 2013, and 9.01% at December 31, 2012. Refer to Table 1 for Non-GAAP reconciliations.

3. ACHIEVE CONSISTENT QUALITY EARNINGS

Balance Sheet and Net Interest Margin

At December 31, 2013, total period-end loans increased to $5.091 billion from $5.080 billion at September 30, 2013. The portfolios of loans with the largest increases were other consumer and residential mortgage, which increased $36.7 million and $15.2 million, respectively, during that same period. These increases were partially offset by declines in commercial and commercial real estate loans ($7.8 million and $4.9 million, respectively) as well as the $33.0 million decline in covered loans. On average, total loans declined $114.0 million, from $5.181 billion at September 30, 2013, to $5.067 billion at December 31, 2013. Of this decline, covered loans decreased $42.3 million while sales of residential mortgage loans during the 3rd quarter accounted for $96.9 million of the decrease.

Total investments, including money market accounts, declined $10.7 million to $3.195 billion, from $3.206 billion at September 30, 2013. On average, total investments, including money market accounts, increased $126.9 million, from $3.128 billion at September 30, 2013, to $3.255 billion at December 31, 2013. During the 4th quarter of 2013, Old National sold $61.5 million of securities and had $7.5 million of securities called, resulting in securities gains (net of $1.0 million of other-than-temporary impairment not related to the Volcker rule) of $.3 million compared to $.2 million of securities gains (and no other-than-temporary impairment) in the 3rd quarter of 2013.

Total core deposits, including demand and interest-bearing deposits, remained stable at $7.211 billion, compared to the $7.208 billion at September 30, 2013. While total deposits remained relatively flat, the 4th quarter showed a nice shift in mix, with increases in noninterest-bearing demand deposits and low-cost NOW accounts and declines in higher-cost money market and time accounts. On average, total core deposits increased to $7.260 billion during the 4th quarter of 2013 compared to $7.220 billion during the 3rd quarter of 2013.

For the 4th quarter of 2013, Old National reported net interest income of $81.2 million compared to $78.0 million in the 3rd quarter of 2013, and $84.4 million for the 4th quarter of 2012. Net interest income on a fully taxable equivalent basis was $85.5 million for the 4th quarter of 2013 and represented a net interest margin on total average earning assets of 4.11%. These results compare to net interest income on a fully ta