Loans and Allowance for Credit Losses (Tables)

3 Months Ended

Mar. 31, 2014

The composition of loans by lending classification was as follows:


	March 31,			December 31,
(dollars in thousands)	2014			2013
Commercial (1)	$	1,367,486		$	1,373,415
Commercial real estate:
Construction		92,536			88,630
Other		1,064,057			1,072,260
Residential real estate		1,356,233			1,359,569
Consumer credit:
Heloc		251,300			251,102
Auto		649,680			620,473
Other		96,828			99,683
Covered loans		194,161			217,832

Total loans		5,072,281			5,082,964
Allowance for loan losses		(41,539	)		(41,741	)
Allowance for loan losses - covered loans		(6,014	)		(5,404	)

Net loans	$	5,024,728		$	5,035,819

(1)	Includes direct finance leases of $24.7 million at March 31, 2014 and $27.8 million at December 31, 2013.

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, 2014 and 2013 is as follows:


				Commercial
(dollars in thousands)	Commercial			Real Estate			Consumer			Residential			Unallocated		Total
2014
Allowance for loan losses:
Beginning balance	$	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

Ending balance	$	19,506		$	19,310		$	5,378		$	3,359			—	$	47,553


				Commercial
(dollars in thousands)	Commercial			Real Estate			Consumer			Residential			Unallocated		Total
2013
Allowance for loan losses:
Beginning balance	$	14,642		$	31,289		$	5,155		$	3,677			—	$	54,763
Charge-offs		(1,110	)		(1,736	)		(1,902	)		(257	)		—		(5,005	)
Recoveries		715			889			1,234			40			—		2,878
Provision		2,720			(1,996	)		198			(77	)		—		845

Ending balance	$	16,967		$	28,446		$	4,685		$	3,383			—	$	53,481

Schedule of Recorded Investment in Financing Receivables

The following tables provide Old National’s recorded investment in financing receivables by portfolio segment at March 31, 2014 and December 31, 2013 and other information regarding the allowance:


(dollars in thousands)	Commercial		CRE		Consumer		Residential		Unallocated		Total
March 31, 2014
Allowance for loan losses:
Ending balance: individually evaluated for impairment	$	9,727	$	2,818		—		—		—	$	12,545

Ending balance: collectively evaluated for impairment	$	9,527	$	13,108	$	4,871	$	3,319		—	$	30,825

Ending balance: noncovered loans acquired with deteriorated credit quality	$	252	$	1,442	$	148	$	40		—	$	1,882

Ending balance: covered loans acquired with deteriorated credit quality		—	$	1,942	$	359		—		—	$	2,301

Total allowance for credit losses	$	19,506	$	19,310	$	5,378	$	3,359		—	$	47,553

Loans and leases outstanding:
Ending balance: individually evaluated for impairment	$	36,611	$	41,795		—		—		—	$	78,406

Ending balance: collectively evaluated for impairment	$	1,343,470	$	1,100,350	$	1,046,482	$	1,356,226		—	$	4,846,528

Ending balance: loans acquired with deteriorated credit quality	$	610	$	18,534	$	11,243	$	159		—	$	30,546

Ending balance: covered loans acquired with deteriorated credit quality	$	9,430	$	64,714	$	16,412	$	26,245		—	$	116,801

Total loans and leases outstanding	$	1,390,121	$	1,225,393	$	1,074,137	$	1,382,630		—	$	5,072,281


(dollars in thousands)	Commercial		CRE		Consumer		Residential		Unallocated		Total
December 31, 2013
Allowance for loan losses:
Ending balance: individually evaluated for impairment	$	6,156	$	2,190		—		—		—	$	8,346

Ending balance: collectively evaluated for impairment	$	9,980	$	14,816	$	4,494	$	3,088		—	$	32,378

Ending balance: non covered loans acquired with deteriorated credit quality	$	429	$	2,025	$	80	$	35		—	$	2,569

Ending balance: covered loans acquired with deteriorated credit quality		—	$	3,370	$	366	$	116		—	$	3,852

Total allowance for credit losses	$	16,565	$	22,401	$	4,940	$	3,239		—	$	47,145

Loans and leases outstanding:
Ending balance: individually evaluated for impairment	$	34,213	$	34,997		—		—		—	$	69,210

Ending balance: collectively evaluated for impairment	$	1,355,608	$	1,106,971	$	1,019,576	$	1,359,564		—	$	4,841,719

Ending balance: loans acquired with deteriorated credit quality	$	648	$	23,618	$	12,725	$	154		—	$	37,145

Ending balance: covered loans acquired with deteriorated credit quality	$	12,281	$	77,232	$	17,673	$	27,704		—	$	134,890

Total loans and leases outstanding	$	1,402,750	$	1,242,818	$	1,049,974	$	1,387,422		—	$	5,082,964

Schedule of Risk Category of Loans

As of March 31, 2014 and December 31, 2013, the risk category of loans, excluding covered loans, by class of loans is as follows:


(dollars in thousands)
Corporate Credit					Commercial Real Estate-				Commercial Real Estate-
Exposure	Commercial				Construction				Other
by Internally	March 31,		December 31,		March 31,		December 31,		March 31,		December 31,
Assigned Grade	2014		2013		2014		2013		2014		2013
Grade:
Pass	$	1,234,435	$	1,237,983	$	77,690	$	74,815	$	948,964	$	943,781
Criticized		72,311		90,545		10,656		9,383		29,340		35,473
Classified—substandard		33,260		16,252		1,675		2,559		46,623		42,516
Classified—nonaccrual		27,480		27,635		2,515		1,873		39,130		49,406
Classified—doubtful		—		1,000		—		—		—		1,084

Total	$	1,367,486	$	1,373,415	$	92,536	$	88,630	$	1,064,057	$	1,072,260

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, 2014 and December 31, 2013, excluding covered loans:


March 31, 2014	Consumer
(dollars in thousands)	Heloc		Auto		Other		Residential
Performing	$	249,156	$	648,274	$	95,250	$	1,345,672
Nonperforming		2,144		1,406		1,578		10,561

	$	251,300	$	649,680	$	96,828	$	1,356,233


December 31, 2013	Consumer
(dollars in thousands)	Heloc		Auto		Other		Residential
Performing	$	249,152	$	618,911	$	97,877	$	1,349,236
Nonperforming		1,950		1,562		1,806		10,333

	$	251,102	$	620,473	$	99,683	$	1,359,569

Schedule of Impaired Loans that are Individually Evaluated

The following table shows Old National’s impaired loans, excluding covered loans, that are individually evaluated as of March 31, 2014 and December 31, 2013. Of the loans purchased during 2012 and 2011 without FDIC loss share coverage, only those that have experienced subsequent impairment since the date acquired are included in the table below.


			Unpaid
	Recorded		Principal		Related
(dollars in thousands)	Investment		Balance		Allowance
March 31, 2014
With no related allowance recorded:
Commercial	$	17,235	$	17,542	$	—
Commercial Real Estate - Construction		1,488		1,596		—
Commercial Real Estate - Other		19,334		24,295		—
Consumer		335		353		—
Residential		98		99		—
With an allowance recorded:
Commercial		12,807		15,831		6,105
Commercial Real Estate - Construction		—		—		—
Commercial Real Estate - Other		20,973		21,744		2,818
Consumer		1,077		1,124		57
Residential		2,241		2,311		113

Total Loans	$	75,588	$	84,895	$	9,093

December 31, 2013
With no related allowance recorded:
Commercial	$	17,066	$	17,417	$	—
Commercial Real Estate - Construction		525		633		—
Commercial Real Estate - Other		15,746		22,550		—
Consumer		324		342		—
Residential		106		106		—
With an allowance recorded:
Commercial		9,282		12,304		4,723
Commercial Real Estate - Construction		—		—		—
Commercial Real Estate - Other		18,726		19,358		2,190
Consumer		835		888		43
Residential		2,239		2,295		112

Total Loans	$	64,849	$	75,893	$	7,068

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, 2014 and 2013 are included in the tables below.


	Average		Interest
	Recorded		Income
(dollars in thousands)	Investment		Recognized (1)
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.


	Average		Interest
	Recorded		Income
(dollars in thousands)	Investment		Recognized (1)
March 31, 2013
With no related allowance recorded:
Commercial	$	7,252	$	—
Commercial Real Estate - Construction		1,142		—
Commercial Real Estate - Other		16,598		4
Consumer		192		1
Residential		49		—
With an allowance recorded:
Commercial		21,289		10
Commercial Real Estate - Construction		2,875		—
Commercial Real Estate - Other		30,562		109
Consumer		648		2
Residential		1,345		5

Total Loans	$	81,952	$	131

(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, 2014 and December 31, 2013 are as follows:


					Recorded
					Investment
	30-59 Days		60-89 Days		> 90 Days and				Total
(dollars in thousands)	Past Due		Past Due		Accruing		Nonaccrual		Past Due		Current
March 31, 2014
Commercial	$	673	$	12	$	—	$	27,480	$	28,165	$	1,339,321
Commercial Real Estate:
Construction		763		—		—		2,515		3,278		89,258
Other		1,377		687		79		39,130		41,273		1,022,784
Consumer:
Heloc		517		366		—		2,144		3,027		248,273
Auto		2,688		369		53		1,406		4,516		645,164
Other		834		97		19		1,578		2,528		94,300
Residential		7,106		1,004		42		10,561		18,713		1,337,520
Covered loans		1,619		303		—		27,289		29,211		164,950

Total loans	$	15,577	$	2,838	$	193	$	112,103	$	130,711	$	4,941,570

December 31, 2013
Commercial	$	1,532	$	13	$	—	$	28,635	$	30,180	$	1,343,235
Commercial Real Estate:
Construction		—		139		—		1,873		2,012		86,618
Other		1,017		27		—		50,490		51,534		1,020,726
Consumer:
Heloc		527		119		—		1,950		2,596		248,506
Auto		3,795		716		89		1,562		6,162		614,311
Other		844		317		100		1,806		3,067		96,616
Residential		8,588		2,823		35		10,333		21,779		1,337,790
Covered loans		1,831		730		14		31,793		34,368		183,464

Total loans	$	18,134	$	4,884	$	238	$	128,442	$	151,698	$	4,931,266

Schedule of Loans by Class Modified as Troubled Debt Restructuring

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


			Pre-modification		Post-modification
	Number of		Outstanding Recorded		Outstanding Recorded
(dollars in thousands)	Loans		Investment		Investment
Troubled Debt Restructuring:
Commercial		7	$	193	$	188
Commercial Real Estate—construction		1		525		484
Commercial Real Estate—other		3		253		246
Residential		1		22		22
Consumer—other		9		303		294

Total		21	$	1,296	$	1,234

The TDRs described above resulted in immaterial changes in the allowance for loan losses and charge-offs during the three months ended March 31, 2014.

The following table presents loans by class modified as troubled debt restructurings that occurred during the twelve months ended December 31, 2013:


			Pre-modification		Post-modification
	Number of		Outstanding Recorded		Outstanding Recorded
(dollars in thousands)	Loans		Investment		Investment
Troubled Debt Restructuring:
Commercial		35	$	16,196	$	15,155
Commercial Real Estate—construction		1		60		60
Commercial Real Estate—other		36		10,585		9,791
Residential		14		1,936		1,901
Consumer—other		49		1,622		1,484

Total		135	$	30,399	$	28,391

Schedule of Troubled Debt Restructurings for which there was Payment Default

The following table presents loans by class modified as TDRs during the first quarter of 2014 for which there was a payment default within the last twelve months. The impact of the defaults was immaterial.


	Number of		Recorded
(dollars in thousands)	Contracts		Investment
Troubled Debt Restructuring
That Subsequently Defaulted:
Commercial		4	$	1,323
Commercial Real Estate		2		122

Total		6	$	1,445

The following table presents loans by class modified as TDRs during 2013 for which there was a payment default within the last twelve months.:


	Number of		Recorded
(dollars in thousands)	Contracts		Investment
Troubled Debt Restructuring
That Subsequently Defaulted:
Commercial		3	$	32
Commercial Real Estate		2		85

Total		5	$	117

Schedule of Activity in Trouble Debt Restructurings

The following table presents activity in troubled debt restructurings for the three months ended March 31, 2014 and 2013:


				Commercial
(dollars in thousands)	Commercial			Real Estate			Consumer			Residential			Total
2014
Troubled debt restructuring:
Balance, 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 March 31, 2014	$	21,621		$	20,959		$	1,656		$	2,339		$	46,575


				Commercial
(dollars in thousands)	Commercial			Real Estate			Consumer			Residential			Total
2013
Troubled debt restructuring:
Balance, January 1, 2013	$	12,660		$	18,422		$	473		$	499		$	32,054
(Charge-offs)/recoveries		(27	)		(2	)		(87	)		—			(116	)
Payments		(1,286	)		(1,722	)		(12	)		(34	)		(3,054	)
Additions		668			949			472			5			2,094

Balance March 31, 2013	$	12,015		$	17,647		$	846		$	470		$	30,978

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:


	March 31,		December 31,
(dollars in thousands)	2014		2013
Commercial	$	610	$	648
Commercial real estate		18,534		23,618
Consumer		11,243		12,725
Residential		159		154

Carrying amount	$	30,546	$	37,145

Carrying amount, net of allowance	$	28,664	$	34,576

Allowance for loan losses	$	1,882	$	2,569

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:


				Integra
(dollars in thousands)	Monroe			Noncovered			IBT			Total
Balance at January 1, 2014	$	6,787		$	2,425		$	19,079		$	28,291
Accretion of income		(1,253	)		(258	)		(4,879	)		(6,390	)
Reclassifications from (to) nonaccretable difference		(1,383	)		(82	)		3,504			2,039
Disposals/other adjustments		633			—			—			633

Balance at March 31, 2014	$	4,784		$	2,085		$	17,704		$	24,573

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 are as follows:


	Monroe			Integra
(dollars in thousands)	Bancorp			Bank (1)			IBT
Contractually required payments	$	94,714		$	921,856		$	118,535
Nonaccretable difference		(45,157	)		(226,426	)		(53,165	)

Cash flows expected to be collected at acquisition		49,557			695,430			65,370
Accretable yield		(6,971	)		(98,487	)		(11,945	)

Fair value of acquired loans at acquisition	$	42,586		$	596,943		$	53,425

(1)	Includes covered and noncovered.