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Rating Action:

Moody's confirms Old National (Senior Unsecured A3) following acquisition of Anchor Bancorp

02 May 2016

New York, May 02, 2016 -- Moody's Investors Service has confirmed the long term ratings of Old National Bancorp and its lead bank subsidiary, Old National Bank (collectively Old National), following the acquisition of Anchor BanCorp Wisconsin Inc. (Anchor, not rated) of Wisconsin in a stock and cash transaction that closed as of 1 May 2016. Old National Bank has a long-term deposit rating of Aa3 and an issuer rating of A3. Moody's also confirmed the bank's standalone baseline credit assessment (BCA) and adjusted BCA of a2 and its long-term Counterparty Risk Assessment of A1(cr). Moody's also confirmed Old National Bancorp's issuer and senior unsecured debt ratings of A3 and subordinated shelf rating of (P)A3, as well as junior subordinated and preferred shelf ratings of (P)Baa1 and non-cumulative preferred shelf rating of (P)Baa2. At the same time, Moody's affirmed Old National Bank's Prime-1 short-term deposit rating and Prime-1(cr) short-term Counterparty Risk Assessment.

The rating outlook is now stable. The rating actions conclude the rating review initiated on 14 January 2016.

The following action has been taken on the below ratings and assessments:

Issuer: Old National Bancorp

.... Issuer Rating, Confirmed at A3

....Senior Unsecured Shelf, Confirmed at (P)A3

....Subordinate Shelf, Confirmed at (P)A3

....Junior Subordinated Shelf, Confirmed at (P)Baa1

....Preferred Shelf, Confirmed at (P)Baa1

....Preferred Shelf Non-cumulative, Confirmed at (P)Baa2

....Senior Unsecured Regular Bond/Debenture, Confirmed at A3

..Outlook Actions:

....Outlook, Changed To Stable From Rating Under Review

Issuer: Old National Bank

.... Adjusted Baseline Credit Assessment, Confirmed at a2

.... Baseline Credit Assessment, Confirmed at a2

.... Counterparty Risk Assessment , Confirmed at A1(cr)

.... Issuer Rating, Confirmed at A3

....LT Deposit Rating, Confirmed at Aa3

.... Counterparty Risk Assessment, Affirmed P-1(cr)

.... ST Deposit Rating, Affirmed P-1

..Outlook Actions:

....Outlook, Changed To Stable From Rating Under Review

RATINGS RATIONALE

The confirmation of Old National's long term ratings with a stable outlook was based on Moody's view that Old National will maintain its solid financial metrics and conservative risk posture even though the Anchor Bancorp acquisition will weaken Old National's asset quality and capital profile modestly in the short-term.

Regarding asset risk, Moody's noted that the Anchor acquisition increases Old National's problem loan ratios and its commercial real estate concentration. An offset to the increase in problem loans is the credit mark that Old National has taken on the acquired portfolio. Moody's also highlighted that Anchor's nonperforming assets have declined steadily since the third quarter of 2011, and Anchor has also reported the release of loan loss provisions in the past six quarters.

Moody's noted that the acquisition will increase Old National's commercial real estate concentration from 142% on a standalone basis to 196% of the estimated tangible common equity of the combined bank. Moody's believes Old National's strong credit culture and prudent management of sectorial and single borrower concentrations will help mitigate this concentration risk.

Moody's also said that the integration challenges presented by this out-of-market acquisition will be partially mitigated by Old National's strong track record in acquiring banks with a limited negative impact to its operations or risk profile.

Moody's expects a modest negative impact on the combined institution's capital ratios given both institutions' strong tangible capital levels. Old National's plan to sell its insurance operations was also an important factor in the confirmation decision. The sale will help reduce goodwill and free up tangible capital, bringing capital ratios more in line with historical levels.

Moody's noted that Anchor's good core funding base will also contribute relevant deposit market share to Old National, particularly in the Madison, Wisconsin region.

WHAT COULD CHANGE THE RATING UP

There is little upward rating pressure on Old National's BCA given its significant growth through acquisitions in recent years and its above average BCA.

WHAT COULD CHANGE THE RATING DOWN

Downward movement of the BCA could emerge if Moody's believes that Old National's underwriting standards have become more aggressive, leading to a weakening of the bank's risk profile or its capital position.

The principal methodology used in these ratings was Banks published in January 2016. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology.

Old National Bancorp is a regional bank holding company headquartered in Evansville, Indiana, and reported $11.9 billion in total assets as of 31 March 2016. Anchor BanCorp Wisconsin Inc. is a regional bank holding company headquartered in Madison, Wisconsin, and reported $2.2 billion in total assets as of 31 December 2015.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Jeanne Del Casino
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Robert Young
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's confirms Old National (Senior Unsecured A3) following acquisition of Anchor Bancorp
No Related Data.
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