Old National Bancorp (ONB) Ratings Placed on Review by Moody's

Moody's Investors Service has placed on review for downgrade the ratings of Old National Bancorp (Nasdaq: ONB) and its lead bank subsidiary, Old National Bank (collectively, Old National) following the announcement that it has agreed to acquire Anchor Bancorp of Wisconsin (unrated) in a stock and cash transaction expected to close in the second quarter 2016. Old National Bank has long-term bank deposit ratings of Aa3, an issuer rating of A3, a standalone baseline credit assessment (BCA) of a2, an adjusted BCA of a2, and a long-term Counterparty Risk (CR) Assessment of A1 (cr). Old National Bancorp has an issuer rating of A3, senior unsecured debt rating of A3, subordinated shelf rating of (P)A3, junior subordinated shelf rating of (P)Baa1, and preferred stock cumulative and non-cumulative shelf ratings of (P)Baa1 and (P)Baa2, respectively. The bank's short term Prime-1 deposit rating and counterparty risk (CR) assessment of Prime-1(cr) were affirmed in this action.

RATINGS RATIONALE

The review for downgrade of Old National's long term ratings reflects Moody's view that its planned acquisition of Anchor Bancorp of Wisconsin could hurt the bank's current capitalization levels and increase its asset risk relative to its comparatively high a2 BCA. The review will focus on Old National's capital plans, the appropriateness of its credit mark on the assets it will acquire, and its integration risk. In Moody's view, Anchor Bank is a much weaker bank than Old National, having suffered an unusually high level of asset quality problems during the recent downturn, such that its holding company was driven into bankruptcy. Although it was recapitalized and emerged from bankruptcy in 2013, it continues to be highly concentrated in commercial real estate lending.

WHAT COULD CHANGE THE RATING UP

Old National's long term ratings are on review for downgrade. Its ratings could be confirmed if Moody's believes that the proposed acquisition of Anchor Bancorp will not weaken its risk profile even though its capital ratios will fall modestly.

WHAT COULD CHANGE THE RATING DOWN

A downgrade of Old National's standalone BCA could occur if Moody's believes the planned merger with Anchor Bancorp will weaken its risk profile through a combination of a riskier loan portfolio and modestly lower capital levels.

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