Old National's 2nd Quarter Results Supported by Strong Deposit Franchise, Ample Capital, Stable Credit and Expense Discipline

EVANSVILLE, Ind., July 25, 2023 (GLOBE NEWSWIRE) --

Old National Bancorp ( ONB) reports 2Q23 net income applicable to common shares of $151.0 million, diluted EPS of $0.52; $156.3 million and $0.54 on an adjusted1 basis, respectively.

CEO COMMENTARY:

SECOND QUARTER HIGHLIGHTS²:

_{¹ Non-GAAP financial measure that management believes is useful in evaluating the financial results of the Company – 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
⁴ Includes the provision for unfunded commitments ⁵ Includes expenses related to the tragic April 10 event at our downtown Louisville location ⁶ Uninsured and uncollateralized deposits include the estimate of Old National Bank federally uninsured deposits for regulatory purposes, as adjusted for $1.5 billion of affiliate deposits and $4.2 billion of collateralized or otherwise insured deposits}

LOUISVILLE UPDATE
Our Old National Bancorp ("Old National") family continues to recover and heal from the Louisville tragedy on April 10 that claimed the lives of five of our team members and impacted many others. More than three months later, our ONB family continues to do our best to love, care and support one another. Additionally, in June, our downtown Louisville team began serving clients at a new location: 400 West Market Street in the heart of downtown Louisville. Once again, Old National wants to say thank you to the countless individuals and organizations who have cared for and supported our family during this challenging time.

RESULTS OF OPERATIONS
Old National reported second quarter 2023 net income applicable to common shares of $151.0 million, or $0.52 per diluted common share.

Included in the second quarter were pre-tax charges of $3.4 million for Louisville expenses⁵, $2.4 million related to the February 15, 2022 merger with First Midwest Bancorp, Inc. ("First Midwest") and $0.2 million for property optimization. Excluding these transactions from the current quarter, adjusted net income was $156.3 million, or $0.54 per diluted common share.

DEPOSITS AND FUNDING
Growth in low-cost deposits including normal seasonal patterns in public funds.

• Period-end total deposits were $36.2 billion at June 30, 2023, up 3.8%; core deposits increased 2.4%.
  • Reflect continuing effective competition for new client relationships.
  • Include normal seasonal patterns in public funds.
• On average, total deposits for the second quarter were $35.1 billion, an increase of 0.6%.
• Granular low-cost deposit franchise; total deposit costs of 115 bps and a cycle to date total deposit beta of 23% (interest-bearing deposit beta of 33%).
• Deposits that were either insured or collateralized⁶ at June 30, 2023 were more than 70% of total deposits.
• A loan to deposit ratio of 90% at June 30, 2023, combined with existing funding sources provides strong liquidity.

LOANS
Broad-based disciplined commercial loan growth.

• Period-end total loans³ were $32.5 billion at June 30, 2023, up 2.2% from March 31, 2023.
• Total commercial loan production in the second quarter was $1.9 billion; period-end commercial pipeline totaled $3.1 billion, down from $5.4 billion at March 31, 2023.
• Average total loans in the second quarter were $32.3 billion, an increase of $985.0 million from the first quarter of 2023.

CREDIT QUALITY
Strong credit quality continues to be a hallmark of Old National.

• Provision⁴ expense in the second quarter of 2023 was $14.8 million, compared to $13.4 million in the first quarter of 2023, reflecting loan and unfunded commitment growth, as well as economic factors.
• Net charge-offs in the second quarter were $10.1 million, or 13 bps of average loans compared to net charge-offs of 21 bps of average loans in the first quarter of 2023.
  • Excluding PCD loans that had an allowance for credit losses established at acquisition, net charge-offs to average loans were 6 bps for the second quarter and 5 bps for the first quarter of 2023.
• 30+ day delinquencies as a percentage of loans were 0.12% at the end of the second quarter of 2023, compared to 0.14% at the end of the first quarter of 2023.
• Non-performing loans as a percentage of total loans were 0.91% compared to 0.74% for the first quarter of 2023, up due primarily to migration of PCD loans.
• Loans acquired from previous acquisitions were recorded at fair value at the acquisition date. As of June 30, 2023, the remaining discount on these acquired loans was $90 million.
• The allowance for credit losses, including the allowance for credit losses on unfunded commitments, stood at $337.6 million, or 1.04% of total loans at June 30, 2023, compared to $332.9 million, or 1.05% of total loans at March 31, 2023.

NET INTEREST INCOME AND MARGIN
Growth in net interest income; margin compression reflective of the rate environment.

• Net interest income on a fully taxable equivalent basis increased to $388.0 million in the second quarter of 2023 compared to $387.2 million in the first quarter of 2023, driven by loan growth, the higher rate environment and more days in the quarter, which were partly offset by higher funding costs and lower accretion income on loans.
• Net interest margin on a fully taxable equivalent basis decreased 9 bps to 3.60% compared to the first quarter of 2023.
• Accretion income on loans and borrowings was $6.6 million, or 6 bps of net interest margin, in the second quarter of 2023 compared to $7.9 million, or 8 bps of net interest margin, in the first quarter of 2023.
• Cost of total deposits was 1.15%, increasing 43 bps and the cost of total interest-bearing deposits increased 57 bps to 1.66% in the second quarter of 2023.

NONINTEREST INCOME
Higher bank fees, mortgage banking revenue and other income.

• Total noninterest income for the second quarter of 2023 was $81.6 million.
• Excluding realized debt securities gains/losses for both periods, adjusted noninterest income for the second quarter was up 8.8% compared to the first quarter of 2023, driven by higher service charges on deposit accounts, debit card and ATM fees, mortgage banking revenue, company-owned life insurance and other income.

NONINTEREST EXPENSE
Disciplined expense management.

• Noninterest expense for the second quarter of 2023 was $246.6 million and included $3.4 million of Louisville expenses⁵, $2.4 million of merger-related charges and $0.2 million for property optimization.
• Excluding these items, adjusted noninterest expense for the second quarter was $240.6 million, compared to $234.8 million for the first quarter of 2023; increase was driven by higher salary and employee benefits resulting from performance-driven incentive accruals.
• The efficiency ratio¹ was 51.2%, while the adjusted efficiency ratio¹ was 49.4% for the second quarter of 2023 compared to 52.8% and 48.8%, respectively, for the first quarter of 2023.

INCOME TAXES

• Income tax expense in the second quarter of 2023 was $47.4 million, resulting in an effective tax rate of 23.4% compared to 22.0% in the first quarter of 2023. On an adjusted fully taxable equivalent ("FTE") basis, the effective tax rate was 25.2% in the second quarter compared to 24.1% in the first quarter.
• Income tax expense included $3.1 million of tax credit benefit.

CAPITAL
Capital ratios remain strong.

• All regulatory capital ratios grew in the quarter with preliminary total risk-based capital up 18 bps to 12.14% and preliminary regulatory Tier 1 capital up 15 bps to 10.79%, driven by retained earnings, partly offset by loan growth and merger-related charges.
• Tangible common equity to tangible assets was 6.33% at the end of the second quarter compared to 6.37% in the first quarter of 2023.

CONFERENCE CALL AND WEBCAST
Old National will host a conference call and live webcast at 9:00 a.m. Central Time on Tuesday, July 25, 2023, to review second quarter 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. (888) 300-3045 or International (646) 568-1027, Access code 5258325. A replay of the call will also be available from approximately noon Central Time on July 25, 2023 through August 8, 2023. To access the replay, dial U.S. (800) 770-2030 or International (647) 362-9199, Access code 5258325.

ABOUT OLD NATIONAL
Old National Bancorp ( ONB) is the holding company of Old National Bank, which is the sixth largest commercial bank headquartered in the Midwest. With approximately $48 billion of assets and $29 billion of assets under management, Old National ranks among the top 30 banking companies headquartered in the U.S. Tracing our roots to 1834, Old National Bank has focused on community banking by building long-term, highly valued partnerships with clients and in the communities it serves. 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
The Company's accounting and reporting policies conform to U.S. generally accepted accounting principles ("GAAP") and general practices within the banking industry. As a supplement to GAAP, the Company provides non-GAAP performance results, which the Company believes are useful because they assist investors in assessing the Company's operating performance. 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 at the end of this release.

The Company presents EPS, the efficiency ratio, return on average common equity, and return on average tangible common equity, all adjusted for certain notable items. These items include the current expected credit loss ("CECL") Day 1 non-PCD provision expense, Louisville expenses⁵, merger-related charges associated with completed acquisitions, gain on sale of health savings accounts, property optimization charges and gains/losses on sales of debt securities. Management believes excluding these items from EPS, the efficiency ratio, return on average common equity, and return on average tangible common equity may be useful in assessing the Company's underlying operational performance since these items do not pertain to its core business operations and their exclusion may facilitate better comparability between periods. Management believes that excluding merger-related charges and the CECL Day 1 non-PCD provision expense from these metrics may be useful to the Company, as well as analysts and investors, since these expenses can vary significantly based on the size, type, and structure of each acquisition. Additionally, management believes excluding these items from these metrics may enhance comparability for peer comparison purposes.

Income tax expense, provision for credit losses, and the certain notable items listed above are excluded from the calculation of pre-provision net revenues, adjusted due to the fluctuation in income before income tax and the level of provision for credit losses required. Management believes pre-provision net revenues, adjusted may be useful in assessing the Company's underlying operating performance and their exclusion may facilitate better comparability between periods and for peer comparison purposes.

The Company presents adjusted noninterest expense, which excludes Louisville expenses⁵, merger-related charges and property optimization charges, as well as adjusted noninterest income, which excludes the gain on sale of health savings accounts and gains/losses on sales of debt securities. Management believes that excluding these items from noninterest expense and noninterest income may be useful in assessing the Company’s underlying operational performance as these items either do not pertain to its core business operations or their exclusion may facilitate better comparability between periods and for peer comparison purposes.

The tax-equivalent adjustment to net interest income and net interest margin recognizes the income tax savings when comparing taxable and tax-exempt assets. Interest income and yields on tax-exempt securities and loans are presented using the current federal income tax rate of 21%. Management believes that it is standard practice in the banking industry to present net interest income and net interest margin on a fully tax-equivalent basis and that it may enhance comparability for peer comparison purposes.

In management's view, tangible common equity measures are capital adequacy metrics that may be meaningful to the Company, as well as analysts and investors, in assessing the Company's use of equity and in facilitating comparisons with peers. These non-GAAP measures are valuable indicators of a financial institution's capital strength since they eliminate intangible assets from stockholders' equity and retain the effect of accumulated other comprehensive loss in stockholders' equity.

Although intended to enhance investors' understanding of the Company's business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP. In addition, these non-GAAP financial measures may differ from those used by other financial institutions to assess their business and performance. See the previously provided tables and the following reconciliations in the "Non-GAAP Reconciliations" section for details on the calculation of these measures to the extent presented herein.

FORWARD-LOOKING STATEMENTS
This communication contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”), notwithstanding that such statements are not specifically identified as such. In addition, certain statements may be contained in our future filings with the SEC, in press releases, and in oral and written statements made by us or with our approval that are not statements of historical fact and constitute forward‐looking statements within the meaning of the Act. These statements include, but are not limited to, descriptions of Old National’s financial condition, results of operations, asset and credit quality trends, profitability and business plans or opportunities. Forward-looking statements can be identified by the use of the words "anticipate," "believe," "contemplate," "could," "estimate," "expect," "intend," "may," "outlook," "plan," "should," and "will," and other words of similar meaning. These forward-looking statements express management’s current expectations or forecasts of future events and, by their nature, are subject to risks and uncertainties. There are a number of factors that could cause actual results or outcomes to differ materially from those in such statements. Factors that might cause such a difference include, but are not limited to: competition; government legislation, regulations and policies; the ability of Old National to execute its business plan; unanticipated changes in our liquidity position, including but not limited to changes in our access to sources of liquidity and capital to address our liquidity needs; changes in economic conditions and economic and business uncertainty which could materially impact credit quality trends and the ability to generate loans and gather deposits; inflation and governmental responses to inflation, including increasing interest rates; market, economic, operational, liquidity, credit, and interest rate risks associated with our business; our ability to successfully manage our credit risk and the sufficiency of our allowance for credit losses; uncertainty about the discontinued use of LIBOR and the transition to an alternative rate; the potential impact of future business combinations on our performance and financial condition, including our ability to successfully integrate the businesses and the success of revenue-generating and cost reduction initiatives; failure or circumvention of our internal controls; operational risks or risk management failures by us or critical third parties, including without limitation with respect to data processing, information systems, cybersecurity, technological changes, vendor issues, business interruption, and fraud risks; significant changes in accounting, tax or regulatory practices or requirements; new legal obligations or liabilities; disruptive technologies in payment systems and other services traditionally provided by banks; failure or disruption of our information systems; computer hacking and other cybersecurity threats; the effects of climate change on Old National and its customers, borrowers, or service providers; political and economic uncertainty and instability; the impacts of pandemics, epidemics and other infectious disease outbreaks; other matters discussed in this communication; and other factors identified in our Annual Report on Form 10-K for the year ended December 31, 2022 and other filings with the Securities and Exchange Commission. These forward-looking statements are made only as of the date of this communication and are not guarantees of future results, performance or outcomes, and Old National does not undertake an obligation to update these forward-looking statements to reflect events or conditions after the date of this communication.