Old National Touting 'Transformational Year'

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Evansville-based Old National Bancorp (Nasdaq: ONB) is reporting full-year net income of $103.7 million, compared to $100.9 million in 2013. It is also marking a fourth quarter profit of $29.3 million, compared to $24.5 million for the same period one year earlier. Chief Executive Officer Bob Jones says the acquisitions of Tower Financial Corp., United Bancorp and LSB Financial Corp. continue Old National's "transformation." February 2, 2015

News Release

EVANSVILLE, Ind. - Today Old National Bancorp (the "Company" or "Old National") (Nasdaq:ONB) reported 4th quarter 2014 net income of $29.3 million, or $.25 per share. These quarterly results represent an increase of 19.1% over the net income of $24.5 million in the 4th quarter of 2013 and a .4% increase over the net income of $29.1 million recorded in the 3rd quarter of 2014.

Benefitting current quarter results was $16.6 million of accretion income which was partially offset by a $6.2 million adjustment to the FDIC indemnification asset. Also included in the current quarter were $3.1 million of pre-tax merger and integration expenses. Included in 3rd quarter 2014 results were $3.6 million of merger and integration expenses, a $19.1 million unfavorable change in the indemnification asset and $34.3 million in accretion income. Included in 4th quarter 2013 results were $2.5 million of merger and integration expenses, a $3.4 million unfavorable change in the indemnification asset and $16.8 million in accretion income.

For the twelve months ended December 31, 2014, net income was $103.7 million, or $.95 per share. This net income represents an increase of 2.7% to full-year 2013 net income of $100.9 million, or $1.00 per share. Included in 2014 earnings were $86.5 million in accretion income which was partially offset by a $43.2 million adjustment to the FDIC indemnification asset and $15.6 million in pre-tax merger and integration expenses. Included in 2013 earnings were $59.0 million in accretion income which was partially offset by a $9.3 million adjustment to the FDIC indemnification asset and $5.9 million in merger and integration expenses. Earnings per share calculations were impacted by the shares issued in conjunction with the Company's recent acquisition.

On January 22, 2015, the Company announced an increase of 9.1% to its quarterly cash dividend – to $.12 per share from $.11 per share. The dividend is payable March 16, 2015, to shareholders of record on March 2, 2015. For purposes of broker trading, the ex-date of the cash dividend is February 26, 2015.

"Our strong fourth quarter results, which included $51.9 million in organic loan growth for the quarter and a 19.1% increase over 4th quarter 2013 earnings, served as a fitting conclusion to an exceptional year for Old National," said President & CEO Bob Jones. "Not only did we produce organic loan growth for the year of nearly $340 million while at the same time maintaining stellar credit quality, we did so while completing the acquisitions of Tower Financial Corp., United Bancorp and LSB Financial Corp. These successful partnerships continue Old National's transformation into a franchise that is strategically positioned for continued growth in vibrant, healthy markets."

Committed to our Strategic Imperatives and 2014 Initiatives

Old National's continued steady performance and strong credit and capital positions can be attributed to the Company's unwavering commitment to the three strategic imperatives that have guided Old National for 10 years: 1. Strengthen the risk profile; 2. Enhance management discipline; and 3. Achieve consistent quality earnings.

Guided by these three strategic imperatives, Old National's primary initiatives for 2014 were: 1. Continue to grow core revenue; 2. Reduce operating expense; and 3. Transform the franchise into higher-growth markets, all while maintaining a strong credit culture and capital position.

Grow Core Revenue

Balance Sheet and Net Interest Margin

Total period-end loans, including loans held for sale, at December 31, 2014, increased $276.4 million to $6.532 billion from $6.255 billion at September 30, 2014. The acquisition of LSB Financial Corp. ("LSB") added $235.1 million to December 31 balances while $51.9 million of the increase (excluding covered loans) resulted from organic loan growth.

On average, total loans increased $417.2 million to $6.400 billion in the 4th quarter of 2014 compared to $5.983 billion in the 3rd quarter of 2014. The acquisition of LSB added approximately $158 million to quarterly average balances in the 4th quarter. Partially offsetting this increase was an $11.0 million decrease in average covered loan balances during the 4th quarter of 2014.

Excluding covered loans acquired in the 2011 FDIC-assisted acquisition of Integra Bank, total loans increased $287.0 million to $6.384 billion at December 31, 2014, from $6.097 billion at September 30, 2014. The acquisition of LSB added $235.1 million to December 31, 2014, balances. The Michigan/Northern Indiana branches, the Terre Haute, Indiana market and the Western Kentucky market contributed $25.9 million, $15.5 million and $14.0 million, respectively, to this increase in loan volume.

At December 31, 2014, total core deposits, including demand and interest-bearing deposits, increased $286.5 million to $8.454 billion, compared to the $8.168 billion at September 30, 2014. The acquisition of LSB added $288.5 million to December 30, 2014, period-end core deposit balances. On average, total core deposits increased $435.4 million to $8.381 billion during the 4th quarter of 2014 compared to $7.945 billion during the 3rd quarter of 2014. The acquisition of LSB added $191.4 million in average core deposits to 4th quarter 2014 balances.

Total investments, including money market accounts, increased $145.4 million to $3.579 billion from $3.434 billion at September 30, 2014. On average, total investments, including money market accounts, decreased $3.5 million, to $3.458 billion in the 4th quarter of 2014, from $3.462 billion in the 3rd quarter of 2014. The primary driver of the increase in end of period balances can be attributed to the acquisition of LSB in the 4th quarter of the current year. During the 4th quarter of 2014, Old national sold $61.5 million of securities and $83.5 million of securities were either called or matured, resulting in securities gains of $4.9 million compared to $2.7 million of securities gains in the 3rd quarter of 2014.

Old National reported net interest income of $90.0 million in the 4th quarter of 2014 compared to $108.4 million in the 3rd quarter of 2014, and $81.2 million in the 4th quarter of 2013. Net interest income on a fully taxable equivalent basis was $94.4 million for the 4th quarter of 2014 and represented a net interest margin on total average earning assets of 3.83%. These results compare to net interest income on a fully taxable equivalent basis of $112.9 million and a margin of 4.78% in the 3rd quarter of 2014 and net interest income on a fully taxable equivalent basis of $85.5 million and a margin of 4.11% for the 4th quarter of 2013. Refer to Tables A and B for Non-GAAP taxable equivalent reconciliations.

Fees, Service Charges and Other Revenue

Total fees, service charges and other revenue represent an important component of Old National's revenue stream and amounted to $45.6 million for the 4th quarter of 2014. This compares to $31.7 million in the 3rd quarter of 2014 and $44.1 million in the 4th quarter of 2013. The current quarter contained a $6.2 million unfavorable change in the indemnification asset relating to the 2011 FDIC-assisted acquisition of Integra Bank, compared to unfavorable changes of $19.1 million and $3.4 million recorded in the 3rd quarter of 2014 and the 4th quarter of 2013, respectively.

"We continued to make good progress in resolving several large impaired loans acquired in our FDIC-assisted transaction,"