Old National Bancorp · NASDAQ:ONB
Old National Bancorp — Investor Presentation (August 2020)
53 slides from Old National Bancorp's investor presentation, Aug 10, 2020
Slide 1: Investment Thesis
Exhibit 99.1 Investment Thesis August 10, 2020
Slide 2: Executive Summary
Executive Summary Slides 3-18
Slide 3: Forward-Looking Statements; Non-GAAP
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 Na
Slide 4: Snapshot of Old National
Snapshot of Old National Summary Company Description Headquarters Evansville, IN • Largest bank holding company headquartered in Indiana with financial centers located in Indiana, Kentucky, Michigan, Market Cap (millions) $2,450 Wisconsin and Minnesota P/ TBV 138% • 162 financial centers and 205 ATM
Slide 5: Old National's Footprint
Old National’s Footprint Wisconsin $1.4 billion deposits 10% of total franchise Minnesota Wisconsin St.St. PaulPaul MinneapolisMinneapolis Michigan EauEau ClaireClaire $1.4 billion deposits AppletonAppleton 10% of total
Slide 6: Credit Quality
Credit Quality Vulnerable Industries % of Industry Balance Total Loans Exposure Other CRE - Senior Housing $278 2.3% $332 Loans Vulnerable Restaurants $181 1.5% $191 93.0% Industries 7.0% Arts/Entertainment $138 1.1% $160 C&I - Retail $121 1.0% $246 Hotels $83 0.7% $86 Oil/Gas $57 0.4% $117 Total $8
Slide 7: Client Relief Programs as of June
Client Relief Programs as of June 30 Deferrals Commercial Booked Deferrals by Industry/CRE Collateral Arts, Entertainment & Booked Booked Booked Recreation 3% 1 Other Type # $ % of Portfolio Retail Trade 4% 7% Commercial 1,668 $1,170 14% Manufacturing 5% Consumer 2,159 $55 3% CRE - Retail 24% Mortga
Slide 8: Strategy to Drive Long-Term Shareholder Value
Strategy to Drive Long-Term Shareholder Value Basic Bank… Larger balance sheet capabilities with a strong product offering, delivered in-market with Broader Reach unequalled client care- “Out-product Community Banks, Out-service Large Regionals” M&A Repositioned Positioned in faster-growth Midwester
Slide 9: Franchise Evolution
Franchise Evolution Built a Better Bank… % Change 2007 2012 2Q20 2012 to 2Q20 Number of Branches 115 180 162 -10% Core Deposits/Branch ($Millions) $47 $40 $100 150% Total Assets ($Millions) $7,846 $9,544 $22,102 132% Total FTE 2,494 2,684 2,530 -6% Assets/FTE ($Millions) $3.15 $3.56 $8.74 146% Franc
Slide 10: With Improved Scale
…With Improved Scale Number of MSAs with Top 5 Rank Number of MSAs with Top 10 Rank 16 32 12 12 23 18 2007 2012 2019 2007 2012 2019 Number of MSAs with Top 5 Rank Number of MSAs with Top 10 Rank 43 22 19 32 16 15 27 26 13 24 FNB ASB ONB FFBC GWB FNB ONB GWB ASB FFBC 10 Source: S&P Global Market Inte
Slide 11: Old National Top MSAs
Old National Top 10 MSAs Percent of 2020-2025 2020 2020-2025 ONB Market Deposits 2020 Total 2010-2020 Projected Median Projected Franchise Share Per Branch Population Population Population Household HH Income (%) Rank ($M) (Actual) Change (%) Change (%) Income ($) Change (%) Minneapolis-St. Paul-Blo
Slide 12: Quality Low-Cost Deposit Franchise
Quality Low-Cost Deposit Franchise Deposit Composition Deposit Growth $16.2 Time $14.2 $14.5 $14.2 Money 8.1% $12.4 Market Noninterest- $10.6 11.7% $11.0 bearing $8.5 $8.3 $10.2 $10.4 $10.1 Savings Demand $7.3 $7.2 $8.7 19.6% 32.3% $7.6 $6.1 $5.8 $5.3 $5.2 NOW $5.2 $4.0 $4.1 $4.1 $3.0 $3.7 28.3% $2.
Slide 13: Improved Balance Sheet Mix
Improved Balance Sheet Mix Average Commercial Loans/Average Average Indirect Loans/Average Assets Assets 41.9% 40.3% 39.8% 40.3% 7.8% 36.0% 7.5% 7.3% 32.9% 30.3% 28.5% 28.8% 6.2% 5.8% 5.0% 4.7% 4.7% 4.5% 2013 2014 2015 2016 2017 2018 2019 1Q20 2Q20 2013 2014 2015 2016 2017 2018 2019 1Q20 2Q20 Exclud
Slide 14: Credit
Credit 30+ Day Delinquency Net Charge-offs 0.47% 0.26% 0.43% 0.41% 0.23% 0.39% 0.21% 0.37% 0.37% 0.20% 0.40% 0.17% 0.18% 0.38% 0.35% 0.15% 0.31% 0.27% 0.25% 0.05% 0.17% 0.04% 0.02% 0.03% 0.02% -0.02% 2015Y 2016Y 2017Y 2018Y 2019Y 1Q20 2Q20 2015Y 2016Y 2017Y 2018Y 2019Y 1Q20 2Q20 ONB Peer Avg ONB Pee
Slide 15: Allowance for Credit Losses
Allowance for Credit Losses Allowance for Credit Losses $22.5 $128.4 Key Economic Assumptions $17.0 $106.4 $41.3 $95.9 ($0.5) 2Q20 3Q20 4Q20 2021 2022 2023 ($6.5) GDP Change -33.4% 19.8% 0.1% 1.6% 6.6% 4.7% Unemployment Rate 14.0% 9.1% 9.5% 9.3% 7.0% 4.9% $54.6 BBB Spread/10Y Treasury 3.2% 3.2% 2.0%
Slide 16: Strong Credit Culture and CRE Concentration
Strong Credit Culture 3 and 15-Year Cumulative NCOs/ Avg. Loans1 CRE Concentration (% of Loans)1,2 CRE/ Total RBC 214% 208% 223% 7.55% 33.0% 32.0% 6.08% 30.0% 3.84% 0.60% 0.62% 0.15% 3-Year 15-Year³ ONB Peer Average Banks $10B - $50B ONB Peer Average Banks $10B-$50B 15-Year Peak NCOs Average Loan Si
Slide 17: Low-Risk Balance Sheet
Low-Risk Balance Sheet Implies $2.2B increase in RWA to meet peer average 106% 91% 81% 72% 68% 70% Peer Min Lower Quartile Average Upper Quartile Peer Max ONB Risk Weighted Assets/ Total Assets ONB Excludes PPP Loans 17 Peer Group data as of 1Q20 and per S&P Global Market Intelligence - See Appendix
Slide 18: Commitment to Excellence
U Commitment to Excellence Corporate Engagement ETHISPHERE AWARD OF Points of Light Institute i Bloomberg Gender-Equality Index © | WORLD'S MOST Ay AMERICAN BANKER. SE yIGAL siamo | [mer panns WWW.ETHISPHERE.COM A FOR 2017 ABA Foundation COMMU NITY D — | aes: NATIONAL ORGANIZATION ON wre H COMMITMEN
Slide 19: Financial Details
Financial Details Financial Data as of June 30, 2020 Dated: August 10, 2020
Slide 20: Second-Quarter 2020 Results
Second-Quarter 2020 Results Change vs. 2Q20 1Q20 2Q19 Linked-Quarter Performance Drivers PPP loans Increased balances $1.46bn End of period total loans $ 13,738 $ 1,299 $ 1,654 • End of period total deposits 16,319 2,014 1,956 • Increase due to PPP funds/increased savings rates Net interest income (
Slide 21: Pre-Provision Net Revenue
Pre-Provision Net Revenue Adjusted Pre-Provision Net Revenue $91.5 $92.1 • Adjusted pre-provision net revenue $85.6 increased 7.6% Y/Y $77.4 $73.9 • Improvement driven by successful execution of our stated strategy • Improved fee income • Low cost core deposit funding • Strong expense management 2Q1
Slide 22: Earning Assets
1 Earning Assets 2Q PPP loan production of $1.54bn Total Loans $13,738 $13,450 $1,125 $12,439 $1,463 $12,091 $12,074 $12,069 $12,192 Commercial loans, excl. PPP $2,924 $3,047 $2,845 • Commercial production of $658mm $3,064 $3,019 $2,892 $2,907 • Average new production size <$1mm • Commercial pipelin
Slide 23: Total Loan Portfolio Concentrations
Total Loan Portfolio Concentrations1,2 By Product Type - $12,275 Repricing Type HELOC 5% Floating Other 6% Consumer 9% CRE Owner Occupied 31% Residential Real Variable 36% Estate Fixed 58% 19% CRE Non- C&I Owner 23% Occupied 13% 23 $ in millions As of 6/30/2020 1 Includes loans held for sale 2 Exclu
Slide 24: C&I Loan Portfolio
C&I Loan Portfolio1 C&I - $2,845 Repricing Type Manufacturing 16% Floating Other 19% 24% Public Admin 9% Fixed Ag, Forestry, Fishing, 53% and Hunting RE/Rental/Leasing 5% 8% Other Services Variable (Except Public Construction 28% Admin) 8% 5% Finance & Insurance 6% Educational Services 7% Health Car
Slide 25: Commercial Real Estate Loan Concentrations
Commercial Real Estate Loan Concentrations Construction & Land Development - $612 CRE - $5,403 (Classed by Property Type) Other CRE Religion 2% 23% Multifamily Construction & Single Family 35% Mixed Use 2% Land Dev 11% 2% Senior Housing Other CRE Mixed Use 5% 4% 14% Single Family Retail 5% Office 15
Slide 26: Auto Loan Portfolio
Auto Loan Portfolio Direct $70 • Total portfolio average original loan term of 70 months and weighted average FICO score of Indirect 766 (Dealer) $934 • Total portfolio LTV of 86% • Total portfolio yield of 3.81% • 30+ Days Delinquency at 6/30/2020 = 0.43% New $422 Used $582 Loans are originated wit
Slide 27: Investment Portfolio Purchases
Investment Portfolio Purchases 2Q201 Duration of Purchases Treasuries 0.04 Agencies 4.95 Pools 4.74 CMOs 4.47 Q2 2020 Municipals 10.79 Purchases- Book Corporates 5.75 Value ABS 0.00 Total 5.03 Treasuries 25,498,853 Agencies 74,366,331 0.00 2.00 4.00 6.00 8.00 10.00 12.00 Pools 102,667,969 CMO 347,99
Slide 28: Investment Portfolio
Investment Portfolio Market Book Value Book Value Market Value Market Value Value $ Mar 31, 2020 Jun 30, 2020 Mar 31, 2020 Jun 30, 2020 Change Federal Farm Credit Bank $311.10 $251.20 $313.50 $253.40 Federal Home Loan Bank and Other 204.1 198.6 205.7 200.1 Subtotal U.S. Government Agencies-Senior De
Slide 29: Deposits
Deposits Total Deposits $16,319 $15,653 $1,472 $14,603 $14,370 $14,331 $14,328 $1,446 $14,305 PPP funds on deposit plus increased $1,752 $1,992 $1,915 $1,646 $1,541 savings rates lead to higher deposit $5,218 $4,871 balances $4,047 $3,812 $3,842 $3,965 $4,059 0.52% 0.52% 0.43% Deposit costs continue
Slide 30: Net Interest Income & Net Interest Margin
Net Interest Income & Net Interest Margin1 Net Interest Income Key Performance Drivers $159 $156 • Rate cuts in March $152 $12 $147 $149 Lower new business yields $13 $10 • $7 $7 $6 • PPP 1% coupon + fees • Increases NII, decreases NIM • NIM decreased 17 bps vs. 1Q20 • - 22 bps asset yields • +13 bp
Slide 31: Projected Purchase Accounting Impact
Projected Purchase Accounting Impact Manageable declines in purchase accounting impact expected in future periods Projected Accretion Income Projected Remaining Discount $57.2 $40.7 $42.9 $40.7 $129.7 $136.5 $121.3 $77.8 $19.8 $54.2 $44.0 $36.2 $10.2 $7.8 2016 2017 2018 2019 2020 2021 2022 2016 2017
Slide 32: Asset Liability Management Position
Asset Liability Management Position Disciplined balance sheet management and well-positioned to both defend margin against lower rates and benefit from higher rates Interest Rate Risk Position Loan and Deposit Mix • 42% of loans are variable/floating-rate Loans Deposits Floating • $400mm of downrate
Slide 33: Noninterest Income
Noninterest Income Adjusted Noninterest Income1 $58 $53 Key Performance Drivers $52 $9 $50 2Q20 adjusted noninterest income $47 • $8 $7 $7 $6 • $6.2mm increase in mortgage banking $5 $7 $4 revenue $3 $3 • $5.0mm related to pipeline valuation $7 $9 $6 $11 $17 • $0.8mm MSR impairment • $1.9mm increase
Slide 34: Noninterest Expense
Noninterest Expense Key Performance Drivers Adjusted Noninterest Expense1 • 2Q20 adjusted noninterest expense • Additional ONB Way cost savings $126 2Q20 adjusted efficiency ratio of 53.79% $123 $122 • $118 $115 • 552 bps improvement from 1Q20 $25 $25 $24 $24 $22 $12 $13 $12 $11 $13 $14 Majority of
Slide 35: Conservative Lending Limit/Risk Grades
Conservative Lending Limit/Risk Grades Borrower Asset Quality Rating In-House Lending Limit1 (Risk Grades) 0 – Investment Grade $67.5 1 – Minimal Risk $57.5 2 – Modest Risk $52.5 3 – Average Risk $45.0 4 – Monitor $35.0 5 – Weak Monitor $25.0 6 – Watch $10.0 7 – Criticized (Special Mention) $5.0 Bor
Slide 36: Capital Trends
Capital Trends Tangible Common Equity to Tangible Tangible Common Book Value1 Assets1 $10.75 $10.48 $9.86 8.92% 8.81% 8.45% 2Q19 1Q20 2Q20 2Q19 1Q20 2Q20 Share Repurchase Activity2 Shares Weighted Avg Price 1Q20 4.9 $16.05 2Q20 0 N/A Total board authorization of up to 7.0mm shares to be repurchased,
Slide 37: Branch Actions
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 194% since 2009 • Launched new online and mobile solution January 2016 • Increased mobile user by ove
Slide 38: Outlook
Outlook COVID-19 will impact performance going forward Category Outlook Commercial Loans Strong pipeline heading into the 3rd quarter but pull through rates likely to be impacted; PPP runoff expected late in the year Net Interest Margin FTE NIM, excluding accretion income, under pressure given the l
Slide 39: Old National's Footprint
Old National’s Footprint) Wisconsin Population: 5.82 million Total Resident Labor Force: 3.88 million Unemployment Rate: 12.0% Minnesota (May ‘20, Seasonally adjusted) Minnesota GDP (2019): $347.3B Population: 5.64 million Exports (2019): $21.7B Total Resident Labor Force: 3.93 million Wisconsin St.
Slide 40: Attractive Midwest Markets
Attractive Midwest Markets Median Household Income 2020 Projected Household Income Change $84.2 2020-2025 $77.7 $75.9 15.4% $67.4 13.8% $65.3 $65.1 $63.8 $62.0 $65.0 12.2% $58.9 $58.2 Average 11.5% 11.6%11.9% 11.2% 10.6% 10.9% of ONB 9.8% 9.2% Footprint Projected Population Change 2020-2025 4.4% 3.9
Slide 41: Attractive Midwest Markets
Attractive Midwest Markets Minneapolis, MN Indianapolis, IN Milwaukee, WI Louisville, KY Grand Rapids, MI MSA Population: 3.7mm MSA Population: 2.1 mm MSA Population: 1.6mm MSA Population: 1.3mm MSA Population: 1.1mm Major industries include: Major industries include: Major industries include: Major
Slide 42: Commitment to Strong Corporate Governance
Commitment to Strong Corporate Governance • Stock ownership guidelines have been established for named executive officers as follows: 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 shar
Slide 43: 2020 Executive Compensation
2020 Executive Compensation • Tied to long term shareholder value Short Term Incentive Plan Proxy 5 Performance Measure Weight Corporate EPS 60% ROATCE 20% Efficiency Ratio 20% Long Term Incentive Plan Proxy 5 Performance Measure Weight Performance-based (50% 75% TSR & 50% ROATCE) Service-based 25%
Slide 44: Commitment to Diversity & Inclusion
Commitment to Diversity & Inclusion Old National is fully committed to supporting a rich culture of diversity as a cornerstone to our success • 29% of Old National’s Executive Operating Group are women • 67% of all Old National associates are women 44
Slide 45: Board of Directors
Board of Directors Director Market Background 34-year career in the energy industry, most recently serving as President and Chief Operating Officer of Vectren Andrew E. Goebel Evansville, IN Corporation Jerome F. Henry Jr. Ft. Wayne, IN Owner and President of Midwest Pipe & Steel, Inc., a company he
Slide 46: Appendix
Appendix Ml OLD NATIONAL BANCORP”
Slide 47: Non-GAAP Reconciliations
Non-GAAP Reconciliations 2Q19 1Q20 2Q20 As Reported: Net Interest Income (FTE) $158.5 $147.1 $149.0 Add: Fee Income 51.2 57.5 58.5 Total Revenue (FTE) $209.7 $204.6 $207.5 Less: Provision (1.0) (17.0) (22.5) Less: Noninterest Expense (128.1) (158.7) (120.2) Pre-Tax Income $80.6 $28.9 $64.8 Less: Inc
Slide 48: Non-GAAP Reconciliations
Non-GAAP Reconciliations 2Q19 3Q19 4Q19 1Q20 2Q20 As Reported: Net Interest Income (FTE) $158.5 $156.3 $152.2 $147.1 $149.0 Add: Fee Income 51.2 53.9 47.7 57.5 58.5 Total Revenue (FTE) $209.7 $210.2 $199.9 $204.6 $207.5 Less: Noninterest Expense 128.1 122.6 134.7 158.7 120.2 Pre-Provision Net Revenu
Slide 49: Non-GAAP Reconciliations
Non-GAAP Reconciliations 2Q19 1Q20 2Q20 Noninterest Expense As Reported $128.1 $158.7 $120.2 Less: ONB Way Charges (1.4) (31.2) (4.9) Less: Merger and Integration Charges (3.2) - - Noninterest Expense Less Charges $123.5 $127.5 $115.3 Less: Amortization of Tax Credit Investments (0.6) (5.5) (0.3) Ad
Slide 50: Non-GAAP Reconciliations
Non-GAAP Reconciliations 4Q19 1Q20 2Q20 Net Interest Income As Reported $148.9 $143.8 $145.6 FTE Adjustment 3.3 3.3 3.4 Net Interest Income (FTE) $152.2 $147.1 $149.0 Average Earning Assets $17,577.8 $17,774.0 $19,007.7 Net Interest Margin 3.39% 3.24% 3.06% Net Interest Margin (FTE) 3.46% 3.31% 3.14
Slide 51: Non-GAAP Reconciliations
Non-GAAP Reconciliations 2Q20 Net Income As Reported $51.7 Less: Securities Gains/Losses (net of tax) (0.4) Add: ONB Way Charges (net of tax) 3.7 Add: Loss on Branch Action (net of tax) 0.1 Adjusted Net Income $55.1 Average Total Assets $21,617.8 Return on Average Assets 0.96% Adjusted Return on Ave
Slide 52: Peer Group
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. Corporation F
Slide 53: Old National Investor Relations Contact
Old National Investor Relations Contract 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 53
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