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First Midwest Capital Trust I -- Moody's confirms Old National's ratings (long-term senior unsecured A3) and upgrades First Midwest's ratings (subordinate to A3 from Baa2) following merger completion, concluding review; outlook stable

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Rating Action: Moody's confirms Old National's ratings (long-term senior unsecured A3) and upgrades First Midwest's ratings (subordinate to A3 from Baa2) following merger completion, concluding review; outlook stableGlobal Credit Research - 16 Feb 2022New York, February 16, 2022 -- Moody's Investors Service (Moody's) has confirmed the long-term ratings of Old National Bancorp (Old National, long-term senior unsecured debt A3) as well as the long-term ratings and assessments, including the a2 standalone Baseline Credit Assessment (BCA) of its banking subsidiary, Old National Bank (long-term deposits Aa3). Old National Bank's short-term Prime-1 Counterparty Risk Rating was also confirmed. The rating outlook for Old National Bancorp and Old National Bank is stable.In the same action, Moody's upgraded all long-term ratings and assessments of First Midwest Bancorp, Inc. (First Midwest) and its bank subsidiary, First Midwest Bank to the same level as Old National. The holding company subordinated debt was upgraded to A3 from Baa2 and its non-cumulative preferred stock was upgraded to Baa2(hyb) from Ba1(hyb). First Midwest Bank's BCA was upgraded to a2 from baa1, and its long-term deposit rating was upgraded to Aa3 from A2. Following this ratings upgrade, Moody's will withdraw all outstanding First Midwest ratings, except for ratings on debt or preferred stock that remain outstanding, because these entities have been merged into Old National.This rating action concludes the reviews on the ratings for Old National Bancorp and First Midwest Bancorp, Inc. that began on 2 June 2021, following the announcement of their merger between.A complete list of affected ratings and entities within both banking groups can be found at the end of this press release.RATINGS RATIONALEThe confirmation of the BCA and long-term ratings of Old National reflects Moody's view that its risk profile is broadly unchanged as a result of the merger with First Midwest and that the combined bank should continue to outperform its US regional bank peers, whose median BCA is a3, over the long-term.The all-stock merger between two banks of about equal size creates a midwestern US regional bank with approximately $46 billion of total assets, which will operate under the Old National brand. Old National's shareholders have an ownership stake of approximately 56% of the combined company. The combined company's branch footprint covers seven midwestern states with most deposits coming from Illinois and Indiana. The larger balance sheet and geographic footprint enhances diversity and scale, which will also allow continued investments in technology and digitization. The combination also modestly reduces Old National's concentration in commercial real estate (CRE) as a percentage of loans, though this is partially offset by lower capitalization. The liquidity profile of the combined company is strong, reflecting the ample and low-cost deposit funding at each company and their sizeable holdings of liquid assets.Moody's noted the strength of Old National's credit risk management framework, which has resulted in better than peer performance through economic cycles, and a long history of successful acquisitions. These factors will support Old National's ability to align First Midwest, which has a higher credit loss history, with its more conservative credit stance, in Moody's view. Additionally, the CRE concentration of the combined entity will be slightly lower, equaling an estimated 2.3 times tangible common equity (TCE), lower than the 2.5 times TCE of Old National prior to the merger. Moody's has assessed that credit marks, equal to approximately 1.6% of First Midwest's loans, are conservative and a source of creditor protection against higher losses that might arise from the First Midwest loan portfolio.Regarding profitability, Old National expects to realize cost savings equal to 11% of combined noninterest expense, which along with the greater geographic and business diversity, will strengthen core earnings. Capitalization will be weaker for the combined company as indicated by the management forecast of a Common Equity Tier 1 (CET1) capital ratio of 10.5%, following the close, which is significantly less than Old National's reported CET1 ratio of 12.04% and 11.75% as of 31 December 2021 and 2020, respectively. As such, Moody's expects that its measure of TCE as a percentage of risk-weighted assets (RWA) will remain below 11%.The upgrade of the BCA and ratings of First Midwest reflects the benefit to creditors from the increased scale and diversification of the merger. The subordinated debt and preferred stock originally issued by First Midwest Bancorp have been assumed by Old National. Moody's will withdraw the other ratings of First Midwest Bancorp, Inc. and First Midwest Bank following the upgrade because these entities have been merged into Old National and no longer exist.The stable outlook on Old National's ratings reflects Moody's expectation of little change in the bank's credit profile over the next 12-18 months, as it proceeds with the merger integration.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSSince Old National has a higher BCA than the median US regional bank and is in the middle of a major integration and transformation, an upgrade of the BCA is unlikely over the next 12 to 18 months. However, the BCA could be upgraded if the bank increased its capitalization materially, reduced its CRE concentration, and achieved higher profitability levels. A higher BCA would likely lead to higher ratings.A downgrade of the BCA and ratings could occur if capitalization declines below Moody's TCE/RWA of 10% or if the bank's asset quality or core deposit funding of its loan portfolio weakens. Missteps in the integration process, which Moody's does not expect, would also be negative for the ratings. LIST OF AFFECTED RATINGS: Confirmations: ..Issuer: Old National Bancorp....LT Issuer Rating, Confirmed at A3, Stable From Ratings Under Review....Senior Unsec. Shelf (Local Currency), Confirmed at (P)A3....Subordinate Shelf (Local Currency), Confirmed at (P)A3....Pref. Shelf (Local Currency), Confirmed at (P)Baa1....Pref. Shelf Non-cumulative (Local Currency), Confirmed at (P)Baa2....Senior Unsecured Regular Bond/Debenture (Local Currency), Confirmed at A3, Stable From Ratings Under Review..Issuer: Old National Bank.... Adjusted Baseline Credit Assessment, Confirmed at a2.... Baseline Credit Assessment, Confirmed at a2.... LT Counterparty Risk Assessment, Confirmed at A1(cr).... LT Counterparty Risk Rating (Foreign Currency), Confirmed at A2.... LT Counterparty Risk Rating (Local Currency), Confirmed at A2.... ST Counterparty Risk Rating (Foreign Currency), Confirmed at P-1.... ST Counterparty Risk Rating (Local Currency), Confirmed at P-1.... LT Issuer Rating, Confirmed at A3, Stable From Ratings Under Review.... LT Deposit Rating (Local Currency), Confirmed at Aa3, Stable From Ratings Under ReviewUpgrades:..Issuer: First Midwest Bancorp, Inc.....LT Issuer Rating (Local Currency), Upgraded to A3 from Baa2, Stable From Ratings Under Review....Pref. shelf Non-cumulative (Local Currency), Upgraded to (P)Baa2 from (P)Ba1....Pref. Stock Non-cumulative Preferred Stock (Local Currency), Upgraded to Baa2(hyb) from Ba1(hyb)....Subordinate Regular Bond/Debenture (Local Currency), Upgraded to A3 from Baa2..Issuer: First Midwest Bank.... Adjusted Baseline Credit Assessment, Upgraded to a2 from baa1.... Baseline Credit Assessment, Upgraded to a2 from baa1.... LT Counterparty Risk Assessment, Upgraded to A1(cr) from A3(cr).... ST Counterparty Risk Assessment, Upgraded to P-1(cr) from P-2(cr).... LT Counterparty Risk Rating (Foreign Currency), Upgraded to A2 from Baa1.... ST Counterparty Risk Rating (Foreign Currency), Upgraded to P-1 from P-2.... LT Counterparty Risk Rating (Local Currency), Upgraded to A2 from Baa1.... ST Counterparty Risk Rating (Local Currency), Upgraded to P-1 from P-2.... LT Issuer Rating (Local Currency), Upgraded to A3 from Baa2, Stable From Ratings Under Review.... LT Deposit Rating (Local Currency), Upgraded to Aa3 from A2, Stable From Ratings Under Review..Issuer: First Midwest Capital Trust I....Preferred Stock (Local Currency), Upgraded to Baa1(hyb) from Baa3(hyb)Affirmations:..Issuer: Old National Bank.... ST Counterparty Risk Assessment, Affirmed P-1(cr).... ST Deposit Rating (Local Currency), Affirmed P-1..Issuer: First Midwest Bank.... ST Deposit Rating (Local Currency), Affirmed P-1Outlook Actions:..Issuer: Old National Bancorp....Outlook, Changed To Stable From Rating Under Review..Issuer: Old National Bank....Outlook, Changed To Stable From Rating Under Review..Issuer: First Midwest Bancorp, Inc.....Outlook, Changed To No Outlook From Rating Under Review..Issuer: First Midwest Bank....Outlook, Changed To No Outlook From Rating Under Review..Issuer: First Midwest Capital Trust I....Outlook, Changed To No Outlook From Rating Under ReviewThe principal methodology used in these ratings was Banks Methodology published in July 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1269625. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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 credit rating action on the support provider and in relation to each particular credit 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 credit rating action, and whose ratings may change as a result of this credit 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.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. 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Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The below contact information is provided for information purposes only. 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