Old National Bancorp · NASDAQ:ONB
Old National Bancorp — Q4 2020 Earnings Presentation
44 slides from Old National Bancorp's earnings presentation, Feb 3, 2021
Slide 1: Investment Thesis
Investment Thesis FINANCIAL DATA AS OF December 31, 2020 DATED: February 3, 2021 Exhibit 99.1
Slide 2: Executive Summary
Executive Summary Slides 3-15
Slide 3: Forward-Looking Statements; Non-GAAP
3 Forward-Looking Statements; Non-GAAP Forward-Looking Statements: This presentation contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, descriptions of Old National Bancorp’s (“Old
Slide 4: Snapshot of Old National
4 Snapshot of Old National Summary Company Description • Largest bank holding company headquartered in Indiana with financial centers located in Indiana, Kentucky, Michigan, Minnesota and Wisconsin • 162 financial centers and 187 ATMs Our new strategic vision--The ONB Way • We are a leading commerci
Slide 5: Footprint map
5 IndianaIllinois Missouri Minnesota Michigan Kentucky Fort Waynet r yFo t a net t rr yyFo t a net Fo t a ne Champaigniha paigniiiha paigniha paign Grand Rapids ir sand apid i irr ssand apid iand apid IndianapolisI i liIndianapolisI i liI i liIn ia a lisI i liIn ia a lis Louisvillei illsvLoui illei
Slide 6: Attractive Midwest Markets
6 Attractive Midwest Markets Source: S&P Global Market Intelligence, based on MSAs Loans & Deposits in millions $86.4 $69.2 $66.2 $66.6 $64.5 $68.8 $78.2 $63.9 $60.9 $78.8 $66.7 Median Household Income 2021 (000s) 10.0% 9.6% 8.8% 9.4% 9.8% 10.2% 11.3% 9.6% 9.5% 12.6% 9.4% Projected Household Income
Slide 7: Why ONB? Our Investment Thesis
7 Why ONB? Our Investment Thesis The Old National Proposition Granular & Diversified Loan Portfolio Average Commercial & Industrial loan size ~$352,000 and average Commercial Real Estate loan size ~$816,000; diversified by product type with no significant industry concentrations; primarily to client
Slide 8: Franchise Evolution: Built a Better Bank
8 Franchise Evolution Built a Better Bank Source: S&P Global Market Intelligence $ in millions unless noted otherwise $5,447 $7,279 $16,918 $47 $40 $104 2007 2012 4Q20 Core Deposits Core Deposits/Branch $7,846 $9,544 $22,961 $3.15 $3.56 $9.39 2007 2012 4Q20 Total Assets Assets/FTE 193 215 725 2007 2
Slide 9: Quality Low-Cost Deposit Franchise
9 $2.0 $2.0 $2.4 $2.5 $3.0 $3.7 $4.0 $4.1 $5.6 $5.3 $5.2 $6.1 $5.8 $7.6 $8.7 $10.2 $10.4 $11.3 $7.3 $7.2 $8.5 $8.3 $10.6 $12.4 $14.2 $14.5 $16.9 2012Y 2013Y 2014Y 2015Y 2016Y 2017Y 2018Y 2019Y 2020Y Noninterest-bearing Interest-bearing Noninterest- bearing Demand 33.3% NOW 28.8% Savings 20.1% Money
Slide 10: Granular & Diversified Loan Portfolio
10 CRE Non-Owner Occupied 33% CRE Owner Occupied 13% C&I 23% Residential Real Estate 18% Other Consumer 9% HELOC 4% Multifamily 33% Office 17% Retail 13% Warehouse/ Industrial 10% Single Family 6% Senior Housing 5% Mixed Use 3% Self Storage 3% Other 10% Granular & Diversified Loan Portfolio1,2 $ in
Slide 11: Strong Credit Culture
11 34.1% 29.3% 31.8% ONB Peer Average Banks $10B - $50B Strong Credit Culture Peer Group data per S&P Global Market Intelligence as of 9/30/2020 - See Appendix for definition of Peer Group 1 Excludes loans held for sale & PPP ; 2 Source: Regulatory Call Report 3 Full Years 2005-2019, includes banks
Slide 12: Conservative Lending Limit/Risk Grades
12 Conservative Lending Limit/Risk Grades In-house lending limits conservative relative to ONB’s legal lending limit of $296mm per borrower $ in millions 1 Includes entire relationship with borrower Borrower Asset Quality Rating (Risk Grades) In-House Lending Limit1 0 – Investment Grade $70.0 1 – Mi
Slide 13: Capital Trends
13 Capital Trends Board authorization of up to $100mm in stock to be repurchased, as conditions warrant, through January 31, 2022 1 Non-GAAP financial measure which Management believes is useful in evaluating the financial results of the Company – see Appendix for Non-GAAP reconciliation 9.09% 8.58%
Slide 14: Commitment to Excellence
u Commitment to Excellence Corporate Engagement ETHISPHERE AWARD OF Tics NSD] CERTIFICATION © Points of Light Institute WWW.ETHISPHERE.COM D — {| BEST PLACE TO WORK FOR Hi NATIONAL ORGANIZATION ON ure 2 DISABILITY INCLUSION [4 — Cy {00% DISABILITY EQUALITY INDEX DISABILITY Jusssury i HOLD NATIONAL B
Slide 15: Commitment to Diversity & Inclusion
15 Commitment to Diversity & Inclusion Old National is fully committed to supporting a rich culture of diversity as a cornerstone to our success • 27% of Old National’s Executive Operating Group are women • 68% of all Old National associates are women
Slide 16: Financial Details
Financial Details FINANCIAL DATA AS OF December 31, 2020 DATED: February 3, 2021
Slide 17: 2020 Highlights
17 2020 Highlights Record Performance • Record commercial loan production $3.5bn • Record core deposit growth $2.5bn • Record mortgage production $2.2bn • Record capital markets revenue $22.5mm • Originated $1.5bn in PPP loans • Successful implementation of The ONB Way strategic initiative 1 Non-GAA
Slide 18: 4th Quarter Highlights
18 4th Quarter Highlights Performance Drivers • End of period commercial loans (excluding PPP) $473mm increase +22.3% annualized due to strong production • End of period core deposits $468.1mm increase, driven by checking and savings deposit growth • Allowance for credit losses unchanged; net recove
Slide 19: Fourth-Quarter 2020 Results
19 Change vs. 4Q20 3Q20 4Q19 End of period total loans 13,850$ (128)$ 1,686$ annualized growth -3.7% End of period total deposits 17,038 531 2,485 annualized growth 12.9% Net interest income (FTE) 164.6 15.6 12.4 Provision for credit losses (1.1) (1.1) (2.4) Noninterest income 58.5 (6.2) 10.8 Nonint
Slide 20: Pre-Provision Net Revenue
20 Pre-Provision Net Revenue1 • Adjusted Positive operating leverage continues • 460 bps full year improvement • Full year adjusted pre-provision net revenue increased 9.8% • Improvement driven by successful execution of our stated strategy • Strong commercial loan production • Improved fee income •
Slide 21: Earning Assets and Loans
21 $3,126 $3,148 $3,129 $3,097 $3,040 $3,079 $3,033 $5,130 $5,189 $5,341 $5,546 $5,830 $5,702 $5,947 $2,892 $2,907 $2,924 $2,798 $2,911 $2,785 $3,013 $1,125 $1,477 $1,222 $1,479 $943 $12,069 $12,192 $13,450 $13,849 $13,928 $13,978 $13,850 4.64% 4.35% 3.96% 3.81% 3.73% $921 $948 $931 $931 $925 $933 $
Slide 22: Deposits
22 Deposits Growth in noninterest-bearing and savings lead to higher deposit balances Deposit costs continue to decline • 4Q20 total deposit costs of 9 bps • Total interest-bearing deposit costs were 35 bps, down 7 bps from 3Q20 Low loan to deposit ratio of 81% $ in millions $8,804 $8,717 $9,336 $9,
Slide 23: Net Interest Income & Net Interest Margin
23 4.05% 3.29% 3.46% 3.46% 3.03% 3.26% 0.84% 0.42% 0.35% 0.21% 0.11% 0.10% 4Q19 1Q20 2Q20 3Q20 4Q20 Net Interest Income & Net Interest Margin1 Key Performance Drivers • Net interest income (excluding PPP) increased $1.8mm • Lower new business yields • PPP 1% coupon + fees • $13.8mm increase to NII •
Slide 24: Noninterest Income
24 Noninterest Income Key Performance Drivers • 4Q20 adjusted noninterest income • $1.9mm decrease in mortgage banking revenue • Mortgage activity • 4Q20 production was $531mm • 53% purchase / 47% refi • 61% sold in secondary market • Quarter end pipeline at $361mm $ in millions 1Non-GAAP financial
Slide 25: Noninterest Expense
25 $75 $72 $67 $69 $77 $14 $14 $13 $14 $13 $12 $12 $13 $9 $12 $25 $24 $22 $22 $27 $126 $122 $115 $114 $129 4Q19 1Q20 2Q20 3Q20 4Q20 Adjusted Noninterest Expense1 Salary & Employee Benefits Occupancy Data Processing/Communication Other Noninterest Expense Key Performance Drivers • 4Q20 adjusted nonin
Slide 26: Client Relief Programs
26 Client Relief Programs Paycheck Protection Program (PPP) Deferrals $ in millions Data as of 12/31/2020 1 Excludes PPP loans 2 Data of 1/14/2021 Active Deferrals by Industry/CRE Collateral CRE - Office 16% CRE - Retail 9% CRE - Other 11% Accomodation & Food Services 20%Arts, Entertainment & Recrea
Slide 27: Credit Quality
27 -1.05% 2.32% 1.71% 1.08% 3.86% 18.15% 1.50% -7.50% -2.67% 13.69% 15.78% 16.95% 27.51% 26.53% 28.71% 24.66% 25.02% 2015Y 2016Y 2017Y 2018Y 2019Y 1Q20 2Q20 3Q20 4Q20 Net Charge-offs / NPL's ONB Peer Avg -0.02% 0.04% 0.03% 0.02% 0.05% 0.21% 0.02% -0.09% -0.03% 0.15% 0.17% 0.18% 0.23% 0.20% 0.26% 0.2
Slide 28: Credit Quality: Scrutinized Industries
28 1-4 Family $2,312 Other Consumer $165 HELOC $556 Indirect $914 Credit Quality Scrutinized Industries Consumer Portfolio1 Average FICO 767 756 783 751 2.1% of total consumer loans are subprime (FICO < 660) 1 Includes loans held for sale $ in millions Data as of 12/31/2020 Scrutinized Industries 7.
Slide 29: Allowance for Credit Losses
29 Allowance for Credit Losses 1Beginning January 1, 2020, calculation is based on current expected loss methodology Prior to January 1, 2020, calculation was based on incurred loss methodology 2Excludes loans held for sale $ in millions $131.4 ($18.7) $1.5 $17.2 $131.4 Allowance 09/30/2020 Economic
Slide 30: Outlook
30 Outlook COVID-19 will impact performance going forward Category Outlook Commercial Loans Healthy pipeline heading into 2021; remaining PPP runoff expected to be concentrated in the first half of 2021 Net Interest Margin Net interest income should remain stable given expected earning asset growth
Slide 31: Appendix
Appendix = OLD NATIONAL BANCORP’
Slide 32: Projected Purchase Accounting Impact
32 Projected Purchase Accounting Impact $ in millions 1 Projections are updated quarterly, assumes no prepayments and are subject to change 2 Non-GAAP financial measure which management believes is useful in evaluating the financial results of the Company – see Appendix for Non- GAAP reconciliation
Slide 33: Net Interest Income Sensitivity
33 Fixed 57% Variable 38% Floating 5% Noninterest- bearing 33% CDs (Maturing/ Repricing ≤ 1-Year) 5% Other Interest- bearing 62% Year 1&2 NII Impact vs Rates Unchanged +50 bps Parallel Shock -50 bps Parallel Shock $22.8 2.1% $(30.2) -2.8% • 43% of loans are variable/floating-rate1 • $400mm of downra
Slide 34: Branch Actions
34 Branch Actions • Driving efficiencies through increased branch size and investment in mobile and online banking • Consolidated 103 branches since January 2014 • Increased core deposits per branch by 208% since 2009 • Launched new online and mobile solution January 2016 • Increased mobile user by
Slide 35: Commitment to Strong Corporate Governance
35 Commitment to Strong Corporate Governance • Stock ownership guidelines have been established for named executive officers as follows: • As part of Old National’s Proxy filed March 9, 2020, each named executive officer has met their stock ownership requirement Position or Salary Target Ownership G
Slide 36: 2020 Executive Compensation
36 2020 Executive Compensation • Tied to long term shareholder value Performance Measure Weight Corporate EPS 60% ROATCE 20% Efficiency Ratio 20% Short Term Incentive Plan Proxy 5 Performance Measure Weight Performance-based (50% TSR & 50% ROATCE) 75% Service-based 25% Long Term Incentive Plan Proxy
Slide 37: Board of Directors
37 Board of Directors Director Market Background Andrew E. Goebel Evansville, IN 34-year career in the energy industry, most recently serving as President and Chief Operating Officer of Vectren Corporation Jerome F. Henry Jr. Ft. Wayne, IN Owner and President of Midwest Pipe & Steel, Inc., a company
Slide 38: Non-GAAP Reconciliations
38 Non-GAAP Reconciliations $ in millions, except per share data 4Q19 3Q20 4Q20 2020 As Reported: Net Interest Income (FTE) $152.2 $149.0 $164.6 $609.7 Add: Fee Income 47.7 64.7 58.5 239.2 Total Revenue (FTE) $199.9 $213.7 $223.1 $848.9 Less: Provision (1.3) - 1.1 (38.4) Less: Noninterest Expense (1
Slide 39: Non-GAAP Reconciliations
39 Non-GAAP Reconciliations $ in millions 4Q19 1Q20 2Q20 3Q20 4Q20 2019 2020 As Reported: Net Interest Income (FTE) $152.2 $147.1 $149.0 $149.0 $164.6 $617.2 $609.7 Add: Fee Income 47.7 57.5 58.5 64.7 58.5 199.3 239.2 Total Revenue (FTE) $199.9 $204.6 $207.5 $213.7 $223.1 $816.5 $848.9 Less: Noninte
Slide 40: Non-GAAP Reconciliations
40 Non-GAAP Reconciliations $ in millions 1 Year-over-year basis point change in noninterest expense plus change in total revenue 2 Year-over-year basis point change in adjusted noninterest expense plus change in adjusted total revenue 4Q19 3Q20 4Q20 2019 2020 Noninterest Expense As Reported $134.7
Slide 41: Non-GAAP Reconciliations
41 Non-GAAP Reconciliations $ in millions, except per share data 2Q20 3Q20 4Q20 Net Interest Income As Reported $145.6 $145.6 $161.1 FTE Adjustment 3.4 3.4 3.5 Net Interest Income (FTE) $149.0 $149.0 $164.6 Average Earning Assets $19,007.7 $19,654.3 $20,182.0 Net Interest Margin 3.06% 2.96% 3.19% Ne
Slide 42: Non-GAAP Reconciliations
42 Non-GAAP Reconciliations $ in millions 2020 4Q20 Net Income As Reported $226.4 $74.1 Add: Intangible Amortization (net of tax) 10.6 2.4 Tangible Net Income $237.0 $76.5 Less: Securities Gains/Losses (net of tax) (8.1) (0.2) Add: ONB Way Charges (net of tax) 32.0 2.7 Add: Gain/Loss on Branch Actio
Slide 43: Peer Group
43 Peer Group Like-size, publicly-traded financial services companies, generally in the Midwest, serving comparable demographics with comparable services as ONB Associated Banc-Corp ASB BancorpSouth Bank BXS Bank OZK OZK Commerce Bancshares, Inc. CBSH Cullen/Frost Bankers, Inc. CFR F.N.B. Corporatio
Slide 44: Old National Investor Relations Contact
44 Old National Investor Relations Contact Additional information can be found on the Investor Relations web pages at www.oldnational.com Investor Inquiries: Lynell J. Walton, CPA SVP – Director of Investor Relations 812-464-1366 lynell.walton@oldnational.com