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Loans and Allowance for Credit Losses (Tables)

6 Months Ended

Jun. 30, 2016

The composition of loans by lending classification was as follows:


	June 30,			December 31,
(dollars in thousands)	2016			2015
Commercial (1)	$	1,893,700		$	1,804,615
Commercial real estate:
Construction		263,496			185,449
Other		2,680,029			1,662,372
Residential real estate		2,099,770			1,644,614
Consumer credit:
Heloc		473,550			359,954
Auto		1,145,198			1,050,336
Other		274,415			133,478
Covered loans		—			107,587

Total loans		8,830,158			6,948,405
Allowance for loan losses		(51,804	)		(51,296	)
Allowance for loan losses - covered loans		—			(937	)

Net loans	$	8,778,354		$	6,896,172

(1)	Includes direct finance leases of $12.7 million at June 30, 2016 and $14.4 million at December 31, 2015.

Schedule of Activity in Allowance for Loan Losses

Old National’s activity in the allowance for loan losses for the three and six months ended June 30, 2016 and 2015 is as follows:


				Commercial
(dollars in thousands)	Commercial			Real Estate			Residential			Consumer			Unallocated		Total
Three Months Ended June 30, 2016
Balance at April 1, 2016	$	25,121		$	15,771		$	1,749		$	8,059		$	—	$	50,700
Charge-offs		(432	)		(783	)		(80	)		(1,382	)		—		(2,677	)
Recoveries		876			547			187			852			—		2,462
Provision		(1,409	)		2,673			(397	)		452			—		1,319

Balance at June 30, 2016	$	24,156		$	18,208		$	1,459		$	7,981		$	—	$	51,804

Three Months Ended June 30, 2015
Balance at April 1, 2015	$	24,703		$	13,807		$	2,919		$	7,449		$	—	$	48,878
Charge-offs		(1,872	)		(514	)		(22	)		(1,494	)		—		(3,902	)
Recoveries		789			1,009			59			1,087			—		2,944
Provision		(186	)		2,023			(375	)		809			—		2,271

Balance at June 30, 2015	$	23,434		$	16,325		$	2,581		$	7,851		$	—	$	50,191

Six Months Ended June 30, 2016
Balance at January 1, 2016	$	26,347		$	15,993		$	2,051		$	7,842		$	—	$	52,233
Charge-offs		(1,959	)		(1,062	)		(220	)		(3,378	)		—		(6,619	)
Recoveries		1,694			1,387			213			1,486			—		4,780
Provision		(1,926	)		1,890			(585	)		2,031			—		1,410

Balance at June 30, 2016	$	24,156		$	18,208		$	1,459		$	7,981		$	—	$	51,804

Six Months Ended June 30, 2015
Balance at January 1, 2015	$	20,670		$	17,348		$	2,962		$	6,869		$	—	$	47,849
Charge-offs		(2,421	)		(101	)		(396	)		(3,098	)		—		(6,016	)
Recoveries		2,564			1,473			87			1,962			—		6,086
Provision		2,621			(2,395	)		(72	)		2,118			—		2,272

Balance at June 30, 2015	$	23,434		$	16,325		$	2,581		$	7,851		$	—	$	50,191

Schedule of Recorded Investment in Financing Receivables

The following table provides Old National’s recorded investment in financing receivables by portfolio segment at June 30, 2016 and December 31, 2015 and other information regarding the allowance:


			Commercial
(dollars in thousands)	Commercial		Real Estate		Residential		Consumer		Unallocated		Total
June 30, 2016
Allowance for loan losses:
Individually evaluated for impairment	$	7,489	$	3,949	$	—	$	—	$	—	$	11,438
Collectively evaluated for impairment		16,374		14,082		1,446		7,781		—		39,683
Loans acquired with deteriorated credit quality		293		177		13		200		—		683

Total allowance for loan losses	$	24,156	$	18,208	$	1,459	$	7,981	$	—	$	51,804

Loans and leases outstanding:
Individually evaluated for impairment	$	52,132	$	60,359	$	—	$	—	$	—	$	112,491
Collectively evaluated for impairment		1,839,760		2,830,350		2,084,652		1,882,832		—		8,637,594
Loans acquired with deteriorated credit quality		1,808		52,816		15,118		10,331		—		80,073

Total loans and leases outstanding	$	1,893,700	$	2,943,525	$	2,099,770	$	1,893,163	$	—	$	8,830,158

December 31, 2015
Allowance for loan losses:
Individually evaluated for impairment	$	7,467	$	4,021	$	—	$	—	$	—	$	11,488
Collectively evaluated for impairment		18,295		11,439		2,038		7,614		—		39,386
Loans acquired with deteriorated credit quality		247		533		13		70		—		863
Covered loans acquired with deteriorated credit quality		338		—		—		158		—		496

Total allowance for loan losses	$	26,347	$	15,993	$	2,051	$	7,842	$	—	$	52,233

Loans and leases outstanding:
Individually evaluated for impairment	$	60,959	$	41,987	$	—	$	—	$	—	$	102,946
Collectively evaluated for impairment		1,750,397		1,779,062		1,644,631		1,590,288		—		6,764,378
Loans acquired with deteriorated credit quality		691		28,499		127		3,925		—		33,242
Covered loans acquired with deteriorated credit quality		2,893		19,424		16,577		8,945		—		47,839

Total loans and leases outstanding	$	1,814,940	$	1,868,972	$	1,661,335	$	1,603,158	$	—	$	6,948,405

Schedule of Risk Category of Commercial and Commercial Real Estate Loans

As of June 30, 2016 and December 31, 2015, the risk category of commercial and commercial real estate loans by class of loans is as follows:

(dollars in thousands)

Commercial

Real Estate -

Corporate Credit Exposure

Commercial

Construction

Other

Credit Risk Profile by

June 30,

December 31,

June 30,

December 31,

June 30,

December 31,

Internally Assigned Grade

2016

2015 (1)

2016

2015 (1)

2016

2015 (1)

Grade:

Pass

1,774,857

1,672,672

256,427

182,701

2,484,795

1,508,309

Criticized

38,867

55,570

4,014

3,300

64,005

75,477

Classified - substandard

25,422

24,723

1,572

1,857

56,982

49,091

Classified - nonaccrual

52,226

58,469

1,483

830

64,338

39,521

Classified - doubtful

2,328

3,506

—

9,909

7,886

Total

1,893,700

1,814,940

263,496

188,688

2,680,029

1,680,284

(1)	Includes loans previously covered by loss share agreements with the FDIC.

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 June 30, 2016 and December 31, 2015:


	Residential		Consumer
(dollars in thousands)			Heloc		Auto		Other
June 30, 2016
Performing	$	2,082,585	$	469,711	$	1,143,932	$	266,649
Nonperforming		17,185		3,839		1,266		7,766

Total	$	2,099,770	$	473,550	$	1,145,198	$	274,415

December 31, 2015 (1)
Performing	$	1,645,293	$	410,243	$	1,048,763	$	138,031
Nonperforming		16,042		3,051		1,573		1,497

Total	$	1,661,335	$	413,294	$	1,050,336	$	139,528

(1)	Includes loans previously covered by loss share agreements with the FDIC.

Schedule of Impaired Loans

The following table shows Old National’s impaired loans as of June 30, 2016 and December 31, 2015, respectively. Only purchased loans 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
June 30, 2016
With no related allowance recorded:
Commercial	$	36,975	$	34,584	$	—
Commercial Real Estate - Other		41,334		45,139		—
Residential		1,353		1,374		—
Consumer		904		1,041		—
With an allowance recorded:
Commercial		18,903		18,905		7,489
Commercial Real Estate - Other		15,279		15,353		3,949
Residential		1,105		1,105		55
Consumer		2,785		2,785		139

Total	$	118,638	$	120,286	$	11,632

December 31, 2015 (1)
With no related allowance recorded:
Commercial	$	40,414	$	41,212	$	—
Commercial Real Estate - Other		26,998		30,264		—
Residential		1,383		1,422		—
Consumer		1,201		1,305		—
With an allowance recorded:
Commercial		16,377		16,483		7,111
Commercial Real Estate - Construction		237		237		6
Commercial Real Estate - Other		14,752		14,802		4,015
Residential		985		985		49
Consumer		2,525		2,525		126

Total	$	104,872	$	109,235	$	11,307

(1)	Does not include $4.2 million of loans that were previously covered by loss share agreements with the FDIC.

Schedule of Average Balance and Interest Income Recognized on Impaired Loans

The average balance of impaired loans and interest income recognized on impaired loans during the three months ended June 30, 2016 and 2015 are included in the table below.


(dollars in thousands)	Average Recorded Investment		Interest Income Recognized (1)
Three Months Ended June 30, 2016
With no related allowance recorded:
Commercial	$	32,951	$	33
Commercial Real Estate - Other		34,344		162
Residential		1,348		2
Consumer		871		1
With an allowance recorded:
Commercial		19,546		79
Commercial Real Estate - Construction		116		—
Commercial Real Estate - Other		12,230		134
Residential		1,060		—
Consumer		2,781		—

Total	$	105,247	$	411

Three Months Ended June 30, 2015 (2)
With no related allowance recorded:
Commercial	$	30,769	$	85
Commercial Real Estate - Construction		2,107		1
Commercial Real Estate - Other		38,758		189
Residential		920		1
Consumer		869		1
With an allowance recorded:
Commercial		25,069		355
Commercial Real Estate - Construction		117		—
Commercial Real Estate - Other		10,274		121
Residential		1,469		2
Consumer		1,518		29

Total	$	111,870	$	784

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

(2)	Does not include $4.7 million of loans that were previously covered by loss share agreements with the FDIC.

The average balance of impaired loans and interest income recognized on impaired loans during the six months ended June 30, 2016 and 2015 are included in the table below.


(dollars in thousands)	Average Recorded Investment		Interest Income Recognized (1)
Six Months Ended June 30, 2016
With no related allowance recorded:
Commercial	$	38,029	$	61
Commercial Real Estate - Other		38,197		257
Residential		1,359		2
Consumer		981		2
With an allowance recorded:
Commercial		17,641		92
Commercial Real Estate - Construction		119		—
Commercial Real Estate - Other		15,016		182
Residential		1,035		38
Consumer		2,695		37

Total	$	115,072	$	671

Six Months Ended June 30, 2015 (2)
With no related allowance recorded:
Commercial	$	31,505	$	127
Commercial Real Estate - Construction		2,025		4
Commercial Real Estate - Other		32,402		274
Residential		761		1
Consumer		824		2
With an allowance recorded:
Commercial		21,359		403
Commercial Real Estate - Construction		49		—
Commercial Real Estate - Other		13,980		122
Residential		1,469		64
Consumer		1,568		49

Total	$	105,942	$	1,046

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

(2)	Does not include $4.7 million of loans that were previously covered by loss share agreements with the FDIC.

Schedule of Past Due Financing Receivables

Old National’s past due financing receivables as of June 30, 2016 and December 31, 2015 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
June 30, 2016
Commercial	$	496	$	227	$	175	$	54,554	$	55,452	$	1,838,248
Commercial Real Estate:
Construction		—		—		—		1,483		1,483		262,013
Other		1,779		—		—		74,247		76,026		2,604,003
Residential		14,221		1,726		101		17,185		33,233		2,066,537
Consumer:
Heloc		1,286		220		240		3,839		5,585		467,965
Auto		2,962		684		104		1,266		5,016		1,140,182
Other		7,251		3,119		50		7,766		18,186		256,229

Total loans	$	27,995	$	5,976	$	670	$	160,340	$	194,981	$	8,635,177

December 31, 2015
Commercial	$	802	$	100	$	565	$	57,536	$	59,003	$	1,745,612
Commercial Real Estate:
Construction		—		—		—		749		749		184,700
Other		438		135		—		46,601		47,174		1,615,198
Residential		9,300		2,246		114		14,953		26,613		1,618,001
Consumer:
Heloc		283		402		—		2,369		3,054		356,900
Auto		3,804		730		202		1,573		6,309		1,044,027
Other		830		165		25		1,256		2,276		131,202
Covered loans		809		312		10		7,336		8,467		99,120

Total loans	$	16,266	$	4,090	$	916	$	132,373	$	153,645	$	6,794,760

Schedule of Activity in Trouble Debt Restructurings

The following table presents activity in TDRs for the six months ended June 30, 2016 and 2015:


(dollars in thousands)	Commercial			Commercial Real Estate			Residential			Consumer			Total
Six Months Ended June 30, 2016
Balance at January 1, 2016	$	23,354		$	14,602		$	2,693		$	3,602		$	44,251
(Charge-offs)/recoveries		(742	)		108			42			(23	)		(615	)
Payments		(10,819	)		(4,035	)		(462	)		(425	)		(15,741	)
Additions		11,233			10,581			335			385			22,534
Other		1,251			173			—			—			1,424

Balance at June 30, 2016	$	24,277		$	21,429		$	2,608		$	3,539		$	51,853

Six Months Ended June 30, 2015
Balance at January 1, 2015	$	15,205		$	15,226		$	2,063		$	2,459		$	34,953
(Charge-offs)/recoveries		574			648			(15	)		(27	)		1,180
Payments		(3,505	)		(3,135	)		(85	)		(320	)		(7,045	)
Additions		5,573			3,321			419			681			9,994

Balance at June 30, 2015	$	17,847		$	16,060		$	2,382		$	2,793		$	39,082

Schedule of Loans by Class Modified as Troubled Debt Restructuring

The following table presents loans by class modified as TDRs that occurred during the six months ended June 30, 2016 and 2015:


(dollars in thousands)	Number of Loans		Pre-modification Outstanding Recorded Investment		Post-modification Outstanding Recorded Investment
Six Months Ended June 30, 2016
Troubled Debt Restructuring:
Commercial		16	$	11,233	$	10,681
Commercial Real Estate - Other		9		10,581		10,581
Residential		3		335		335
Consumer		8		385		385

Total		36	$	22,534	$	21,982

Six Months Ended June 30, 2015
Troubled Debt Restructuring:
Commercial		18	$	5,573	$	5,573
Commercial Real Estate - Construction		5		1,162		1,162
Commercial Real Estate - Other		14		2,159		2,159
Residential		3		419		419
Consumer		18		681		681

Total		58	$	9,994	$	9,994

Schedule of Activity of Purchased Impaired Loans

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


(dollars in thousands)	June 30, 2016			December 31, 2015 (1)
Commercial	$	1,808		$	3,584
Commercial real estate		52,816			47,923
Residential		15,118			16,704
Consumer		10,331			12,870

Carrying amount		80,073			81,081
Allowance for loan losses		(683	)		(1,359	)

Carrying amount, net of allowance	$	79,390		$	79,722

(1)	Includes loans previously covered by loss share agreements with the FDIC.

Schedule of Accretable Yield of Purchased Credit Impaired Loans, or Income Expected to be Collected

Accretable yield of purchased credit impaired loans, or income expected to be collected, is as follows:


(dollars in thousands)	Acquisitions Prior to 2015 (1)			Founders (2)			Anchor (2)			Total
Balance at January 1, 2016	$	42,498		$	2,812		$	—		$	45,310
New loans purchased		—			—			3,217			3,217
Accretion of income		(12,137	)		(505	)		(348	)		(12,990	)
Reclassifications from (to) nonaccretable difference		5,191			428			—			5,619
Disposals/other adjustments		487			—			43			530

Balance at June 30, 2016	$	36,039		$	2,735		$	2,912		$	41,686

(1)	Includes loans previously covered by loss share agreements with the FDIC.

(2)	Old National acquired Founders effective January 1, 2015 and Anchor effective May 1, 2016.

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

PCI loans purchased during the six months ended June 30, 2016 and 2015 for which it was probable at acquisition that all contractually required payments would not be collected were as follows:


(dollars in thousands)	Founders			Anchor
Contractually required payments	$	11,103		$	29,544
Nonaccretable difference		(2,684	)		(6,153	)

Cash flows expected to be collected at acquisition		8,419			23,391
Accretable yield		(1,812	)		(3,217	)

Fair value of acquired loans at acquisition	$	6,607		$	20,174