Loans and Allowance for Loan Losses (Tables)

3 Months Ended

Mar. 31, 2017

The composition of loans by lending classification was as follows:


	March 31,			December 31,
(dollars in thousands)	2017			2016
Commercial (1)	$	1,910,536		$	1,917,099
Commercial real estate:
Construction (2)		357,055			357,802
Other (2)		2,865,810			2,773,051
Residential real estate		2,112,262			2,087,530
Consumer credit:
Home equity		464,911			476,439
Auto		1,199,580			1,167,737
Other		221,619			230,854

Total loans		9,131,773			9,010,512
Allowance for loan losses		(49,834	)		(49,808	)

Net loans	$	9,081,939		$	8,960,704

(1)	Includes direct finance leases of $9.9 million at March 31, 2017 and $10.8 million at December 31, 2016.

(2)	Certain commercial real estate construction loans were reclassified from commercial real estate - other due to a misclassification at December 31, 2016.

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, 2017 and 2016 was as follows:


				Commercial
(dollars in thousands)	Commercial			Real Estate			Residential			Consumer			Unallocated		Total
Three Months Ended March 31, 2017
Balance at January 1, 2017	$	21,481		$	18,173		$	1,643		$	8,511		$	—	$	49,808
Charge-offs		(470	)		(568	)		(414	)		(1,787	)		—		(3,239	)
Recoveries		603			1,225			79			1,011			—		2,918
Provision		494			(877	)		428			302			—		347

Balance at March 31, 2017	$	22,108		$	17,953		$	1,736		$	8,037		$	—	$	49,834

Three Months Ended March 31, 2016
Balance at January 1, 2016	$	26,347		$	15,993		$	2,051		$	7,842		$	—	$	52,233
Charge-offs		(1,527	)		(279	)		(140	)		(1,996	)		—		(3,942	)
Recoveries		818			840			26			634			—		2,318
Provision		(517	)		(783	)		(188	)		1,579			—		91

Balance at March 31, 2016	$	25,121		$	15,771		$	1,749		$	8,059		$	—	$	50,700

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, 2017 and December 31, 2016 and other information regarding the allowance:


			Commercial
(dollars in thousands)	Commercial		Real Estate		Residential		Consumer		Unallocated		Total
March 31, 2017
Allowance for loan losses:
Individually evaluated for impairment	$	4,980	$	3,793	$	—	$	—	$	—	$	8,773
Collectively evaluated for impairment		17,050		14,141		1,736		7,704		—		40,631
Loans acquired with deteriorated credit quality		78		19		—		333		—		430

Total allowance for loan losses	$	22,108	$	17,953	$	1,736	$	8,037	$	—	$	49,834

Loans and leases outstanding:
Individually evaluated for impairment	$	37,754	$	49,409	$	—	$	—	$	—	$	87,163
Collectively evaluated for impairment		1,872,067		3,147,808		2,099,114		1,878,769		—		8,997,758
Loans acquired with deteriorated credit quality		715		25,648		13,148		7,341		—		46,852

Total loans and leases outstanding	$	1,910,536	$	3,222,865	$	2,112,262	$	1,886,110	$	—	$	9,131,773

December 31, 2016
Allowance for loan losses:
Individually evaluated for impairment	$	4,561	$	3,437	$	—	$	—	$	—	$	7,998
Collectively evaluated for impairment		16,838		14,717		1,643		8,334		—		41,532
Loans acquired with deteriorated credit quality		82		19		—		177		—		278

Total allowance for loan losses	$	21,481	$	18,173	$	1,643	$	8,511	$	—	$	49,808

Loans and leases outstanding:
Individually evaluated for impairment	$	45,960	$	57,230	$	—	$	—	$	—	$	103,190
Collectively evaluated for impairment		1,870,289		3,040,849		2,073,950		1,866,815		—		8,851,903
Loans acquired with deteriorated credit quality		850		32,774		13,580		8,215		—		55,419

Total loans and leases outstanding	$	1,917,099	$	3,130,853	$	2,087,530	$	1,875,030	$	—	$	9,010,512

Schedule of Risk Category of Commercial and Commercial Real Estate Loans

The risk category of commercial and commercial real estate loans by class of loans at March 31, 2017 and December 31, 2016 was as follows:


(dollars in thousands)					Commercial				Commercial
					Real Estate -				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	2017		2016		2017		2016		2017		2016
Grade:
Pass	$	1,796,685	$	1,750,923	$	357,055	$	347,325	$	2,699,177	$	2,669,890
Criticized		40,599		45,614		—		9,258		55,282		40,590
Classified - substandard		36,566		63,978		—		49		62,960		19,715
Classified - nonaccrual		33,533		53,062		—		1,170		38,560		33,833
Classified - doubtful		3,153		3,522		—		—		9,831		9,023

Total	$	1,910,536	$	1,917,099	$	357,055	$	357,802	$	2,865,810	$	2,773,051

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 at March 31, 2017 and December 31, 2016:


(dollars in thousands)			Consumer
			Home
	Residential		Equity		Auto		Other
March 31, 2017
Performing	$	2,094,446	$	460,295	$	1,197,713	$	215,618
Nonperforming		17,816		4,616		1,867		6,001

Total	$	2,112,262	$	464,911	$	1,199,580	$	221,619

December 31, 2016
Performing	$	2,069,856	$	472,008	$	1,166,114	$	223,786
Nonperforming		17,674		4,431		1,623		7,068

Total	$	2,087,530	$	476,439	$	1,167,737	$	230,854

Schedule of Impaired Loans

The following table shows Old National’s impaired loans at March 31, 2017 and December 31, 2016, respectively. Only purchased loans 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, 2017
With no related allowance recorded:
Commercial	$	28,559	$	29,659	$	—
Commercial Real Estate - Other		34,755		36,272		—
Residential		2,253		2,274		—
Consumer		1,847		2,089		—
With an allowance recorded:
Commercial		9,195		9,214		4,980
Commercial Real Estate - Other		14,654		15,200		3,793
Residential		1,154		1,154		58
Consumer		2,081		2,081		104

Total	$	94,498	$	97,943	$	8,935

December 31, 2016
With no related allowance recorded:
Commercial	$	29,001	$	29,634	$	—
Commercial Real Estate - Other		30,585		32,413		—
Residential		1,610		1,631		—
Consumer		827		946		—
With an allowance recorded:
Commercial		16,959		17,283		4,561
Commercial Real Estate - Other		26,645		27,177		3,437
Residential		1,081		1,081		54
Consumer		1,924		1,924		96

Total	$	108,632	$	112,089	$	8,148

Schedule of Average Balance of Impaired Loans

The average balance of impaired loans during the three months ended March 31, 2017 and 2016 are included in the table below.


	Three Months Ended
	March 31,
(dollars in thousands)	2017		2016
Average Recorded Investment
With no related allowance recorded:
Commercial	$	28,780	$	34,085
Commercial Real Estate - Other		32,671		27,149
Residential		1,931		1,362
Consumer		1,377		1,019
With an allowance recorded:
Commercial		8,743		18,283
Commercial Real Estate - Construction		—		234
Commercial Real Estate - Other		20,650		14,097
Residential		1,118		1,001
Consumer		2,003		2,651

Total	$	97,273	$	99,881

Schedule of Past Due Financing Receivables

Old National’s past due financing receivables at March 31, 2017 and December 31, 2016 were 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, 2017
Commercial	$	512	$	—	$	—	$	36,686	$	37,198	$	1,873,338
Commercial Real Estate:
Construction		—		—		—		—		—		357,055
Other		899		—		80		48,391		49,370		2,816,440
Residential		16,351		472		2		17,816		34,641		2,077,621
Consumer:
Home equity		1,185		544		—		4,616		6,345		458,566
Auto		3,379		643		185		1,867		6,074		1,193,506
Other		2,538		2,141		114		6,001		10,794		210,825

Total loans	$	24,864	$	3,800	$	381	$	115,377	$	144,422	$	8,987,351

December 31, 2016
Commercial	$	847	$	279	$	23	$	56,585	$	57,734	$	1,859,365
Commercial Real Estate:
Construction		—		—		—		1,170		1,170		356,632
Other		1,652		150		—		42,856		44,658		2,728,393
Residential		17,786		3,770		2		17,674		39,232		2,048,298
Consumer:
Home equity		1,511		423		—		4,431		6,365		470,074
Auto		5,903		1,037		242		1,623		8,805		1,158,932
Other		3,561		1,919		61		7,068		12,609		218,245

Total loans	$	31,260	$	7,578	$	328	$	131,407	$	170,573	$	8,839,939

Schedule of Activity in Trouble Debt Restructurings

The following table presents activity in TDRs for the three months ended March 31, 2017 and 2016:


				Commercial
(dollars in thousands)	Commercial			Real Estate			Residential			Consumer			Total
Three Months Ended March 31, 2017
Balance at January 1, 2017	$	16,802		$	18,327		$	2,985		$	2,602		$	40,716
(Charge-offs)/recoveries		35			355			—			(100	)		290
Payments		(3,827	)		(1,751	)		(142	)		(508	)		(6,228	)
Additions		9,442			—			564			1,924			11,930
Interest collected on nonaccrual loans		2,170			358			—			11			2,539

Balance at March 31, 2017	$	24,622		$	17,289		$	3,407		$	3,929		$	49,247

Three Months Ended March 31, 2016
Balance at January 1, 2016	$	23,354		$	14,602		$	2,693		$	3,602		$	44,251
(Charge-offs)/recoveries		(826	)		62			32			(18	)		(750	)
Payments		(3,565	)		(1,106	)		(348	)		(309	)		(5,328	)
Additions		1,542			9,476			133			385			11,536

Balance at March 31, 2016	$	20,505		$	23,034		$	2,510		$	3,660		$	49,709

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, 2017 and 2016:


			Pre-modification		Post-modification
	Number		Outstanding Recorded		Outstanding Recorded
(dollars in thousands)	of Loans		Investment		Investment
Three Months Ended March 31, 2017
Troubled Debt Restructuring:
Commercial		6	$	9,442	$	9,442
Residential		3		564		564
Consumer		5		1,924		1,924

Total		14	$	11,930	$	11,930

Three Months Ended March 31, 2016
Troubled Debt Restructuring:
Commercial		10	$	1,542	$	1,542
Commercial Real Estate - Other		7		9,476		9,476
Residential		1		133		133
Consumer		8		385		385

Total		26	$	11,536	$	11,536

Schedule of Activity of Purchased Impaired Loans

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


	March 31,			December 31,
(dollars in thousands)	2017			2016
Commercial	$	715		$	850
Commercial real estate		25,648			32,774
Residential		13,148			13,580
Consumer		7,341			8,215

Carrying amount		46,852			55,419
Allowance for loan losses		(430	)		(278	)

Carrying amount, net of allowance	$	46,422		$	55,141

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)	2017			2016
Balance at January 1,	$	33,603		$	45,310
Accretion of income		(4,685	)		(8,661	)
Reclassifications from (to) nonaccretable difference		610			2,870
Disposals/other adjustments		6			367

Balance at March 31,	$	29,534		$	39,886

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

PCI loans purchased during 2016 for which it was probable at acquisition that all contractually required payments would not be collected were as follows:


(dollars in thousands)	Anchor (1)
Contractually required payments	$	29,544
Nonaccretable difference		(6,153	)

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

Fair value of acquired loans at acquisition	$	20,174

(1)	Old National acquired Anchor effective May 1, 2016.