Loans and Allowance for Credit Losses (Tables)

3 Months Ended

Mar. 31, 2015

The composition of loans by lending classification was as follows:


	March 31,			December 31,
(dollars in thousands)	2015			2014
Commercial (1)	$	1,668,275		$	1,629,600
Commercial real estate:
Construction		150,711			134,552
Other		1,662,868			1,576,558
Residential real estate		1,625,354			1,519,156
Consumer credit:
Heloc		374,079			360,320
Auto		897,190			846,969
Other		137,222			103,338
Covered loans		136,840			147,708

Total loans		6,652,539			6,318,201
Allowance for loan losses		(46,675	)		(44,297	)
Allowance for loan losses - covered loans		(2,203	)		(3,552	)

Net loans	$	6,603,661		$	6,270,352

(1)	Includes direct finance leases of $18.9 million at March 31, 2015 and $19.3 million at December 31, 2014.

Schedule of Activity in Allowance for Loan Losses

Old National’s activity in the allowance for loan losses for the three months ended March 31, 2015 and 2014 is as follows:


(dollars in thousands)	Commercial			Commercial Real Estate			Consumer			Residential			Unallocated		Total
2015
Allowance for loan losses:
Balance at January 1, 2015	$	20,670		$	17,348		$	6,869		$	2,962		$	—	$	47,849
Charge-offs		44			710			(1,604	)		(374	)		—		(1,224	)
Recoveries		1,182			167			875			28			—		2,252
Provision		2,807			(4,418	)		1,309			303			—		1

Balance at March 31, 2015	$	24,703		$	13,807		$	7,449		$	2,919		$	—	$	48,878


2014
Allowance for loan losses:
Balance at January 1, 2014	$	16,565		$	22,401		$	4,940		$	3,239		$	—	$	47,145
Charge-offs		(1,147	)		(168	)		(1,125	)		21			—		(2,419	)
Recoveries		792			1,095			821			82			—		2,790
Provision		3,296			(4,018	)		742			17			—		37

Balance at March 31, 2014	$	19,506		$	19,310		$	5,378		$	3,359		$	—	$	47,553

Schedule of Recorded Investment in Financing Receivables

The following table provides Old National’s recorded investment in financing receivables by portfolio segment at March 31, 2015 and December 31, 2014 and other information regarding the allowance:


(dollars in thousands)	Commercial		Commercial Real Estate		Consumer		Residential		Unallocated		Total
March 31, 2015
Allowance for loan losses:
Individually evaluated for impairment	$	9,986	$	1,838	$	—	$	—	$	—	$	11,824
Collectively evaluated for impairment		13,635		10,830		7,180		2,905		—		34,550
Noncovered loans acquired with deteriorated credit quality		486		1,139		63		14		—		1,702
Covered loans acquired with deteriorated credit quality		596		—		206		—		—		802

Total allowance for loan losses	$	24,703	$	13,807	$	7,449	$	2,919	$	—	$	48,878

Loans and leases outstanding:
Individually evaluated for impairment	$	48,295	$	53,094	$	—	$	—	$	—	$	101,389
Collectively evaluated for impairment		1,625,819		1,728,376		1,456,851		1,625,370		—		6,436,416
Loans acquired with deteriorated credit quality		2,735		35,068		6,233		131		—		44,167
Covered loans acquired with deteriorated credit quality		5,255		33,540		11,671		20,101		—		70,567

Total loans and leases outstanding	$	1,682,104	$	1,850,078	$	1,474,755	$	1,645,602	$	—	$	6,652,539


December 31, 2014
Allowance for loan losses:
Individually evaluated for impairment	$	7,280	$	2,945	$	—	$	—	$	—	$	10,225
Collectively evaluated for impairment		12,163		13,354		6,519		2,945		—		34,981
Noncovered loans acquired with deteriorated credit quality		406		1,049		67		17		—		1,539
Covered loans acquired with deteriorated credit quality		821		—		283		—		—		1,104

Total allowance for loan losses	$	20,670	$	17,348	$	6,869	$	2,962	$	—	$	47,849

Loans and leases outstanding:
Individually evaluated for impairment	$	38,485	$	45,335	$	—	$	—	$	—	$	83,820
Collectively evaluated for impairment		1,598,352		1,631,794		1,359,537		1,519,171		—		6,108,854
Loans acquired with deteriorated credit quality		2,770		37,394		7,073		133		—		47,370
Covered loans acquired with deteriorated credit quality		7,160		37,384		12,507		21,106		—		78,157

Total loans and leases outstanding	$	1,646,767	$	1,751,907	$	1,379,117	$	1,540,410	$	—	$	6,318,201

Schedule of Risk Category of Loans

As of March 31, 2015 and December 31, 2014, the risk category of loans, excluding covered loans, by class of loans is as follows:


(dollars in thousands)
					Commercial Real Estate-				Commercial Real Estate-
Corporate Credit Exposure	Commercial				Construction				Other
Credit Risk Profile by	March 31,		December 31,		March 31,		December 31,		March 31,		December 31,
Internally Assigned Grade	2015		2014		2015		2014		2015		2014
Grade:
Pass	$	1,490,032	$	1,442,904	$	137,433	$	119,958	$	1,456,118	$	1,374,191
Criticized		77,490		89,775		3,495		2,229		102,945		102,805
Classified - substandard		49,070		58,461		3,588		5,866		38,602		38,659
Classified - nonaccrual		50,641		38,003		6,195		6,499		63,031		59,771
Classified - doubtful		1,042		457		—		—		2,172		1,132

Total	$	1,668,275	$	1,629,600	$	150,711	$	134,552	$	1,662,868	$	1,576,558

Schedule of Recorded Investment in Residential and Consumer Loans Based on Payment Activity

The following table presents the recorded investment in residential and consumer loans based on payment activity as of March 31, 2015 and December 31, 2014, excluding covered loans:


(dollars in thousands)	Consumer						Residential
	Heloc		Auto		Other
March 31, 2015
Performing	$	370,047	$	895,946	$	136,653	$	1,610,932
Nonperforming		3,073		1,262		1,510		14,422

Total	$	373,120	$	897,208	$	138,163	$	1,625,354


December 31, 2014
Performing	$	357,205	$	845,708	$	101,811	$	1,505,188
Nonperforming		3,115		1,261		1,527		13,968

Total	$	360,320	$	846,969	$	103,338	$	1,519,156

Schedule of Impaired Loans that are Individually Evaluated

The following table shows Old National’s impaired loans, excluding covered loans, which are individually evaluated as of March 31, 2015 and December 31, 2014, respectively. Of the loans purchased without FDIC loss share coverage, only those that have experienced subsequent impairment since the date acquired are included in the table below.


(dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
March 31, 2015
With no related allowance recorded:
Commercial	$	27,873	$	28,194	$	—
Commercial Real Estate - Construction		2,330		2,333		—
Commercial Real Estate - Other		43,508		45,594		—
Consumer		776		851		—
Residential		906		1,012		—
With an allowance recorded:
Commercial		15,559		15,567		8,715
Commercial Real Estate - Construction		234		234		10
Commercial Real Estate - Other		7,022		9,263		1,828
Consumer		1,441		1,441		72
Residential		1,475		1,475		74

Total Loans	$	101,124	$	105,964	$	10,699


December 31, 2014
With no related allowance recorded:
Commercial	$	25,483	$	25,854	$	—
Commercial Real Estate - Construction		2,168		1,397		—
Commercial Real Estate - Other		28,637		30,723		—
Consumer		685		748		—
Residential		588		658		—
With an allowance recorded:
Commercial		7,471		10,488		4,883
Commercial Real Estate - Construction		98		98		11
Commercial Real Estate - Other		14,432		16,503		2,934
Consumer		1,543		1,543		77
Residential		1,476		1,476		74

Total Loans	$	82,581	$	89,488	$	7,979

Schedule of Average Balance and Interest Income Recognized on Impaired Loans

The average balance of impaired loans, excluding covered loans, and interest income recognized on impaired loans during the three months ended March 31, 2015 and 2014 are included in the table below.


(dollars in thousands)	Average Recorded Investment		Interest Income Recognized (1)
Three Months Ended March 31, 2015
With no related allowance recorded:
Commercial	$	26,849	$	42
Commercial Real Estate - Construction		2,250		3
Commercial Real Estate - Other		38,801		85
Consumer		731		1
Residential		747		—
With an allowance recorded:
Commercial		11,516		48
Commercial Real Estate - Construction		166		—
Commercial Real Estate - Other		10,728		1
Consumer		1,492		20
Residential		1,475		61

Total Loans	$	94,755	$	261


Three Months Ended March 31, 2014
With no related allowance recorded:
Commercial	$	17,151	$	33
Commercial Real Estate - Construction		1,007		—
Commercial Real Estate - Other		17,542		54
Consumer		394		2
Residential		116		—
With an allowance recorded:
Commercial		11,045		54
Commercial Real Estate - Construction		—		—
Commercial Real Estate - Other		19,851		112
Consumer		975		12
Residential		2,185		17

Total Loans	$	70,266	$	284

(1)	The Company does not record interest on nonaccrual loans until principal is recovered.

Schedule of Past Due Financing Receivables

Old National’s past due financing receivables as of March 31, 2015 and December 31, 2014 are as follows:


(dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Recorded Investment > 90 Days and Accruing		Nonaccrual		Total Past Due		Current
March 31, 2015
Commercial	$	2,486	$	1,774	$	—	$	51,683	$	55,943	$	1,612,332
Commercial Real Estate:
Construction		927		—		—		6,195		7,122		143,589
Other		2,271		2,096		—		65,203		69,570		1,593,298
Consumer:
Heloc		839		140		—		3,073		4,052		370,027
Auto		2,441		490		83		1,263		4,277		892,913
Other		727		223		44		1,510		2,504		134,718
Residential		10,191		847		—		14,422		25,460		1,599,894
Covered loans		1,089		524		15		12,543		14,171		122,669

Total loans	$	20,971	$	6,094	$	142	$	155,892	$	183,099	$	6,469,440


December 31, 2014
Commercial	$	649	$	813	$	33	$	38,460	$	39,955	$	1,589,645
Commercial Real Estate:
Construction		—		—		—		6,499		6,499		128,053
Other		3,834		1,468		138		60,903		66,343		1,510,215
Consumer:
Heloc		577		376		—		3,115		4,068		356,252
Auto		3,349		695		203		1,261		5,508		841,461
Other		969		129		83		1,527		2,708		100,630
Residential		11,606		3,959		1		13,968		29,534		1,489,622
Covered loans		1,477		584		—		15,124		17,185		130,523

Total loans	$	22,461	$	8,024	$	458	$	140,857	$	171,800	$	6,146,401

Schedule of Loans by Class Modified as Troubled Debt Restructuring

The following table presents loans by class modified as TDRs that occurred during the three months ended March 31, 2015:

(dollars in thousands)

Number of
Loans

Pre-modification
Outstanding Recorded
Investment

Post-modification
Outstanding Recorded
Investment

Troubled Debt Restructuring:

Commercial

1,741

Commercial Real Estate - construction

1,187

Commercial Real Estate - other

385

Residential

366

Consumer - other

161

Total

3,840

The following table presents loans by class modified as TDRs that occurred during the three months ended March 31, 2014:


(dollars in thousands)	Number of Loans		Pre-modification Outstanding Recorded Investment		Post-modification Outstanding Recorded Investment
Troubled Debt Restructuring:
Commercial		7	$	188	$	188
Commercial Real Estate - construction		1		484		484
Commercial Real Estate - other		3		246		246
Residential		1		22		22
Consumer - other		9		294		294

Total		21	$	1,234	$	1,234

Schedule of Activity in Trouble Debt Restructurings

The following table presents activity in TDRs for the three months ended March 31, 2015 and 2014:


(dollars in thousands)	Commercial			Commercial Real Estate			Consumer			Residential			Total
2015
Troubled debt restructuring:
Balance at January 1, 2015	$	15,205		$	15,226		$	2,459		$	2,063		$	34,953
(Charge-offs)/recoveries		586			248			(11	)		(15	)		808
Payments		(2,198	)		(1,608	)		(164	)		(33	)		(4,003	)
Additions		1,741			1,573			174			352			3,840

Balance at March 31, 2015	$	15,334		$	15,439		$	2,458		$	2,367		$	35,598


2014
Troubled debt restructuring:
Balance at January 1, 2014	$	22,443		$	22,639		$	1,441		$	2,344		$	48,867
(Charge-offs)/recoveries		123			121			(30	)		1			215
Payments		(1,133	)		(2,531	)		(49	)		(28	)		(3,741	)
Additions		188			730			294			22			1,234

Balance at March 31, 2014	$	21,621		$	20,959		$	1,656		$	2,339		$	46,575

Schedule of Activity of Purchased Impaired Loans

For these noncovered loans that meet the criteria of ASC 310-30 treatment, the carrying amount is as follows:


(dollars in thousands)	March 31, 2015		December 31, 2014
Commercial	$	2,735	$	2,770
Commercial real estate		35,068		37,394
Consumer		6,233		7,073
Residential		131		133

Carrying amount	$	44,167	$	47,370

Carrying amount, net of allowance	$	42,465	$	45,831

Allowance for loan losses	$	1,702	$	1,539

Schedule of Accretable Yield of Noncovered Loans, or Income Expected to be Collected

Accretable yield of noncovered loans, or income expected to be collected, is as follows:


(dollars in thousands)	Monroe			Integra Noncovered			IBT			Tower			United			LSB			Founders			Total
Balance at January 1, 2015	$	3,564		$	1,389		$	13,354		$	4,559		$	1,516		$	2,409		$	—		$	26,791
New loans purchased		—			—			—			—			—			—			1,812			1,812
Accretion of income		(362	)		(147	)		(1,403	)		(322	)		(225	)		(293	)		(128	)		(2,880	)
Reclassifications from (to) nonaccretable difference		9			71			519			(163	)		466			755			—			1,657
Disposals/other adjustments		—			—			—			32			40			—			—			72

Balance at March 31, 2015	$	3,211		$	1,313		$	12,470		$	4,106		$	1,797		$	2,871		$	1,684		$	27,452

Schedule of Receivables for which Contractually Required Payments would not be Collected

At acquisition, purchased loans, both covered and noncovered, for which it was probable at acquisition that all contractually required payments would not be collected were as follows:


(dollars in thousands)	Monroe			Integra Bank (1)			IBT			Tower			United			LSB			Founders
Contractually required payments	$	94,714		$	921,856		$	118,535		$	22,746		$	15,483		$	24,493		$	11,103
Nonaccretable difference		(45,157	)		(226,426	)		(53,165	)		(5,826	)		(5,487	)		(9,903	)		(2,684	)

Cash flows expected to be collected at acquisition		49,557			695,430			65,370			16,920			9,996			14,590			8,419
Accretable yield		(6,971	)		(98,487	)		(11,945	)		(4,065	)		(1,605	)		(2,604	)		(1,812	)

Fair value of acquired loans at acquisition	$	42,586		$	596,943		$	53,425		$	12,855		$	8,391		$	11,986		$	6,607

(1)	Includes covered and noncovered.