Old National Bancorp · NASDAQ:ONB
Old National Bancorp — Investor Presentation (August 2017)
61 slides from Old National Bancorp's investor presentation, Aug 28, 2017
Slide 1: Investment Thesis
Investment Thesis Financial Data as of June 30, 2017 Dated: August 28, 2017 Exhibit 99.1
Slide 2: Investment Thesis Executive Summary
Investment Thesis Executive Summary Slides 2 to 23 Financial Data as of June 30, 2017 Dated: August 28, 2017
Slide 3: Additional Information for Shareholders of Anchor Bancorp, Inc.
Additional Information for Shareholders of Anchor Bancorp, Inc. Communications in this document do not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the proposed merger, Old National Bancorp (“ONB”) wil
Slide 4: Forward-Looking Statements
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, statements about the expected timing, completion, financial benefits and other effect
Slide 5: Non-GAAP Financial Measures
Non-GAAP Financial Measures These slides contain non-GAAP financial measures. For purposes of Regulation G, a non-GAAP financial measure is a numerical measure of the registrant's historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adj
Slide 6: Snapshot of Old National
Snapshot of Old National Largest financial services bank holding company headquartered in Indiana with financial centers located in Indiana, Kentucky, Michigan and Wisconsin 188 financial centers 223 ATMs Focused on community banking with a full suite of product offerings: Retail and small business
Slide 7: A Strategic Framework for Creating Long-Term Shareholder Value
A Strategic Framework for Creating Long-Term Shareholder Value Attractive footprint that offers room to expand in higher-growth markets and leading share in mature markets Consistent financial performance with focus on building tangible book value and providing adequate return for our shareholders D
Slide 8: Commitment to Excellence
Commitment to Excellence ja) sirascon Corporate Engagement AWARD OF Points of Light Institute 2017 SEAL OF DISTINCTION ( Bloomberg y Xi ‘AMERICAN BANKER. BEST BANKS TO WORK FOR 2016 ETHISPHERE ICS ° INSIDE CERTIFICATION Ea VolunteerMatch | WORLD'S MosT ™ ° ETHICAL. nN co MPANIES°
Slide 9: ONB to Partner with Anchor Bank in Minnesota
Franchise extends to Twin Cities– a commercially dense MSA with attractive growth demographics and competitive dynamics that favor ONB’s basic bank strategy ONB enters with immediate scale (over $2 billion in assets) and a #7 deposit market share position1 Market leading C&I lending team (34% of 6-3
Slide 10: Expanding Big Presence in Growth Markets
Expanding Big 10 Presence in Growth Markets Pro Forma Branch Footprint Minneapolis MSA Deposit Market Share 1 1 Source: SNL Financial; based on Summary of Deposits as of 6/30/16 Consistent with our strategy of expansion into metropolitan markets with attractive growth prospects and competitive dynam
Slide 11: Transaction Consideration & Multiples
~89% ONB / ~11% Anchor Customary regulatory approvals – Shareholder approval of Anchor Expected to close early first quarter 2018 with conversion in the second quarter Transaction Consideration & Multiples Consideration Valuation Multiples Pro Forma Ownership Required Approvals Expected Closing/Conv
Slide 12: Financial Impact & Assumptions
Financial Impact & Assumptions Estimated $15 million in 2018 Estimated $20 million thereafter; ~36% of Anchor’s total noninterest expense base Gross credit mark on Anchor’s loan portfolio of 1.23% or $19.4 million Comprehensive review process; credit quality strong with NPAs 0.45% of assets Credit r
Slide 13: Success With Wisconsin Market Extension
90 94 43 75 69 75 64 65 72 74 70 64 57 39 65 74 Success With Wisconsin Market Extension Since September, 2016 conversion 7.1% growth in total commercial loans 26% of ONB’s consolidated 2Q17 total commercial production 60% increase in commercial pipeline 31% of ONB’s consolidated 2Q17 total pipeline
Slide 14: ONB's Transformational Journey
ONB’s Transformational Journey Since 2011, Old National has transformed its franchise by reducing low-return businesses and low-growth markets and investing in higher-growth markets Acquisitions 7 whole-bank, 1 FDIC and 1 branch purchase Pending acquisition of Minnesota’s Anchor Bank Divestitures In
Slide 15: Our Transformational Journey
Our Transformational Journey 2011 Monroe Bancorp $771M 15 Branches 2012 Indiana Community $818M 17 Branches 2014 Tower Financial $618M 7 Branches 2014 United Bancorp $851M 18 Branches 2013 24 Branches (Bank of America) 2011 Integra Bank (FDIC) $1.8B 52 Branches 2014 LSB Financial $337M 5 Branches 20
Slide 16: Old National's Pro Forma Footprint
Old National’s Pro Forma Footprint Kentucky $0.8 billion deposits 6% of total franchise Michigan $1.3 billion deposits 11% of total franchise Wisconsin $1.8 billion deposits 15% of total franchise Indiana $6.5 billion deposits 53% of total franchise Based on FDIC Summary of Deposits as of June 30, 2
Slide 17: Indiana at a Glance
by the numbers Population: 6,633,053 Total Resident Labor Force:3,336,799 Unemployment Rate:3.6% (Apr. 2017, Seasonally Adjusted) GDP: $341.9B Exports:$34.7B Land Area:35,867 sq mi crossroads of America $4.6 billion and 13,300 new jobs from international investment (2012 – 2014) Home to the 2nd larg
Slide 18: Growth Opportunities in the Midwest
Growth Opportunities in the Midwest Louisville, Kentucky Highest population MSA and highest median household income MSA in Kentucky Grand Rapids, Michigan 2nd best large city to start a business – Wallet Hub, 2016 7th “Best Places to Live” – U.S. News and World Report, 2016 Ann Arbor, Michigan Highe
Slide 19: Attractive Midwest Markets
Attractive Midwest Markets 1 Assuming closure of announced partnership with Minnesota’s Anchor Bancorp Source: SNL Financial, based on MSAs $ in thousands Average of ONB Footprint Average of ONB Footprint 1 1
Slide 20: Attractive Midwest Markets
Attractive Midwest Markets Minneapolis, MN1 Indianapolis, IN Milwaukee, WI Louisville, KY Grand Rapids, MI MSA Population: 3.6 million MSA Population: 2.0 million MSA Population: 1.6 million MSA Population: 1.3 million MSA Population: 1.1 million Major industries include: Manufacturing, applied rese
Slide 21: 2Q17 Highlights
2Q17 Highlights Net income of $38.9 million, or $0.28 per share Results include $0.5 million in pre-tax net branch consolidation charges and $1.0 million in pre-tax charges related to a client experience improvement initiative 10.0% annualized growth in commercial and commercial real estate loans 14
Slide 22: Pre-Tax, Pre-Provision Income
Pre-Tax, Pre-Provision Income1 2Q16 1Q17 2Q17 Net Interest Income (FTE Basis) $104,607 $111,489 $109,976 Noninterest Income 93,385 42,920 49,271 Total Revenue (FTE Basis) $197,992 $154,409 $159,247 Noninterest Expense (121,472) (101,891) (102,811) Pre-Tax, Pre-Provision Income1 $76,520 $52,518 $56,4
Slide 23: Additional Branch Rationalization Actions
Additional Branch Rationalization Actions Continued focus on operating expenses and efficiency 14 ONB banking centers expected to close November, 2017 Cost savings of approximately $4.0 million in 2018 One-time charges of approximately $5.0 million in 2017 14% Increase Deposits Per Branch 1 Excludes
Slide 24: Investment Thesis
Investment Thesis Financial Data as of June 30, 2017 Dated: August 28, 2017
Slide 25: Loan Growth
Loan Growth $ in millions – End of Period Balances 1 Includes Loans Held for Sale 1 1 Annualized Growth of 4.8% Annualized Growth of 10.0%
Slide 26: Commercial & Commercial Real Estate Loans
Commercial & Commercial Real Estate Loans $ in millions 1New Production includes 50% credit for line of credit unfunded commitments 2Yield is based on funded balances only New Production1 Production Yield2 Loan Pipeline Production Growth of 41.7%
Slide 27: Loan Production & Yield Trends
Loan Production & Yield Trends $ in millions New quarterly production includes unfunded commitments – Yield is based on funded balances only Quick Home Refinance (residential mortgage product) is included in the Residential Mortgage graph Direct Consumer includes Home Equity Lines of Credit Consumer
Slide 28: Commercial Loan Portfolio Concentrations
Commercial Loan Portfolio Concentrations As of June 30, 2017 $ in millions 1 Includes held for sale Total C&I and CRE - $5,262 (Classed by Product Type)
Slide 29: Commercial Real Estate Loan Concentrations
Commercial Real Estate Loan Concentrations As of June 30, 2017 $ in millions CRE - $3,260 (Classed by Property Type) Multifamily by Product Type - $907 Multifamily by State - $907 (State Determined by Primary Address of Pledged Collateral)
Slide 30: Auto Loan Portfolio
Auto Loan Portfolio $ in millions Total portfolio average original loan term of 70 months and weighted average FICO score of 765 Total Portfolio yield of 2.90% 30+ Days Delinquency at 6/30/2017 is 0.37% Loans are originated within the ONB footprint
Slide 31: Credit Quality Trends
$ in millions Credit Quality Trends
Slide 32: Net Charge-Offs / Provision
Net Charge-Offs / Provision $ in millions
Slide 33: DFAST Disclosure
DFAST Disclosure 1 Loss % is calculated by adding the nine quarters of losses and dividing by the nine-quarter average loan balance for each portfolio 2 Commercial real estate includes multifamily, construction loans, and non-farm non-residential loans $ in millions
Slide 34: DFAST Disclosure
DFAST Disclosure 1 Calculated by dividing the nine-quarter cumulative totals for each line by average total assets over the same time period 2 Pre-Provision Net Revenue includes estimates for operational losses resulting from the hypothetical severely adverse scenario 3 Each Ratio, excluding the lev
Slide 35: Conservative Lending Limits/Risk Grades
Conservative Lending Limits/Risk Grades Borrower Asset Quality Rating (Risk Grades) In-House Lending Limit1 ($ in millions) 0 – Investment Grade $45 1 – Minimal Risk $40 2 – Modest Risk $35 3 – Average Risk $30 4 – Monitor $25 5 – Weak Monitor $17.5 6 – Watch $7.5 7 – Criticized (Special Mention) $5
Slide 36: Investment Portfolio Purchases
Investment Portfolio Purchases 2Q171 1 Data as of June 30, 2017
Slide 37: Investment Portfolio
Investment Portfolio 1Includes market value for both available-for-sale and held-to-maturity securities
Slide 38: Net Interest Margin
Net Interest Margin1 1 Fully taxable equivalent basis, non-GAAP financial measure which Management believes is useful in evaluating the financial results of the Company – see Appendix for Non-GAAP reconciliation 2 Accretion income is interest income in excess of contractual interest income associate
Slide 39: Acquired Loans
Acquired Loans $ in millions – as of June 30, 2017 PCI = Purchased Credit Impaired
Slide 40: Projected Purchase Accounting Impact
Projected Purchase Accounting Impact Actual Accretion Projected Accretion1 Actual Discount Projected Discount1 $ in millions 1 Updated quarterly – subject to change IA = Indemnification Asset Manageable declines in purchase accounting impact expected in future periods Actual IA Amortization Net Inco
Slide 41: Strong Core Deposit Funding Base with Favorable Cost of Deposits
Strong Core Deposit Funding Base with Favorable Cost of Deposits Deposit Composition Deposit Growth ($ in millions) ($ in billions) 2012 – Q2 2017 CAGR: 8.6% Cost of Deposits Peer Group data per SNL Financial See Appendix for definition of Peer Group
Slide 42: Modeled Interest Rate Sensitivity
$ in millions Change to Net Interest Income based on a two year time horizon Refer to slide 43 for rate curves Total non-maturity, interest-bearing accounts increase from 0.10% to 0.39% in the “Up 100 bps” scenario 19.01% of total non-interest bearing DDA are considered rate sensitive Investment por
Slide 43: Interest Rate Curves
Interest Rate Curves Up 100 vs. Base Oe 1M 2M 3M 4M 5M 6M 9M 1Y 15Y 2Y 25Y 3Y 4Y SY 7.5Y 10Y 15Y 20Y 30Y —Base —up 100 Forward Curves 3.0% 2.5% 2 az 15% 1.0% 0.5% 1.0% 1M 2M 3M 4M 5M 6M 9M lY 15Y 2Y 25Y 3Y 4Y SY 7.5Y 10Y 15Y 20Y 30Y —6/1/2017 6/1/2018 6/1/2019
Slide 44: Capital Trends
Capital Trends 1 Non-GAAP financial measure which Management believes is useful in evaluating the financial results of the Company – see Appendix for Non-GAAP reconciliation Growth of 7.5% Growth of 31 bps
Slide 45: Fee-Based Business Revenue
Fee-Based Business Revenue $ in millions
Slide 46: Noninterest Expense
$ in millions 1Operational expenses = total noninterest expense less Foundation/community support, merger/integration costs, branch consolidation charges, severance and client experience initiative charges. Operational expenses is a non-GAAP financial measure which Management believes is useful in e
Slide 47: Total Revenue
$ in millions Total Revenue $150.8
Slide 48: Historic Tax Credit Business
Historic Tax Credit Business We anticipate our full-year 2017 effective tax rate on an FTE basis to be 31% and on a GAAP basis to be 22% The improvement in our tax rates is the result of historic tax credit projects that are expected to be placed in service in 2017 We anticipate investment impairmen
Slide 49: Improving Unit Level Economics and FTE Productivity
Improving Unit Level Economics and FTE Productivity Core Deposits per Branch Branches $ in millions Noninterest Expenses per Average Assets Average Assets
Slide 50: Rationalizing Distribution Channels
Rationalizing Distribution Channels Driving efficiencies through increased branch size and investment in mobile and online banking Consolidated 47 branches since January 1, 2014 Increased average deposits per branch by 33% Launched new online and mobile solution January 16, 2016 Increased mobile use
Slide 51: Transforming Old National's Landscape
2011 2012 2013 Acquired Monroe Bancorp – Enhanced Bloomington, IN presence January, 2011 Acquired Indiana Community – Entry into Columbus, IN September, 2012 FDIC-assisted acquisition of Integra Bank July, 2011 Sold non-strategic market – Chicago-area - 4 branches Consolidation of 21 branches Acquir
Slide 52: Commitment to Strong Corporate Governance
Position or Salary Target Ownership Guidelines Chief Executive Officer 5X salary in stock or 200,000 shares Chief Operating Officer 4X salary in stock or 100,000 shares Salary equal to or greater than $250,000 3X salary in stock or 50,000 shares Salary below $250,000 2X salary in stock or 25,000 sha
Slide 53: 2017 Executive Compensation
2017 Executive Compensation Short Term Incentive Plan (CEO, CFO, COO, CCE, Chief Legal Counsel) Performance Measure Weight Corporate EPS 60% ROATCE 20% Efficiency Ratio 20% Tied to long term shareholder value: Long Term Incentive Plan (CFO, COO, CCE, Chief Legal Counsel) Performance Measure Weight P
Slide 54: Appendix
Appendix Ml OLD NATIONAL BANCORP
Slide 55: Non-GAAP Reconciliations
Non-GAAP Reconciliations $ in millions
Slide 56: Net Interest Income
2016 1017 2Q17 Net Interest Income ($ in 000's) $99,340] $105,801] $104,333] jaxal in 5,267| erage aie Asse ts Net Interest Mi ‘Net Interest = Fully Taxable Equivalent
Slide 57: Non-GAAP Reconciliations
Non-GAAP Reconciliations $ in millions
Slide 58: Non-GAAP Reconciliations-Anchor MN
Non-GAAP Reconciliations-Anchor MN Note: Model assumes a 12/31/17 closing date 1 Simple earnback is calculated as tangible book value per share dilution at closing, inclusive of restructuring charges incurred in 2018, implying tangible book value per share dilution of approximately $0.37, divided by
Slide 59: Non-GAAP Reconciliations-Anchor MN
Non-GAAP Reconciliations-Anchor MN Note: Model assumes a 12/31/17 closing date. 1 $20 million of pre-tax cost savings in 2018 and $20.8 million in 2019; phased 75% in 2018, 100% thereafter 2 Based on the redemption of all outstanding preferred equity, $4.7M of TruPs (8.25% fixed), $5.0M of TruPs (8.
Slide 60: Old National's 2017 Peer Group
Old National’s 2017 Peer Group Like-size, publicly-traded financial services companies, generally in the Midwest, serving comparable demographics with comparable services as ONB Associated Banc-Corporation ASB IberiaBank Corporation IBKC BancorpSouth, Inc. BXS International Bancshares Corp IBOC Bank
Slide 61: Old National Investor Relations Contact
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
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