Old National Bancorp · NASDAQ:ONB
Old National Bancorp — Q2 2022 Earnings Presentation
27 slides from Old National Bancorp's earnings presentation, Jul 26, 2022
Slide 1: 2nd Quarter 2022 Financial Review
2nd Quarter 2022 Financial Review July 26, 2022
Slide 2: Forward-Looking Statements
Forward-Looking Statements These materials contain 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’s financial condition, results of operations, asset and c
Slide 3: Non-GAAP Financial Measures
Non-GAAP Financial Measures The Company's accounting and reporting policies conform to U.S. generally accepted accounting principles ("GAAP") and general practices within the banking industry. As a supplement to GAAP, the Company provides non-GAAP performance results, which the Company believes are
Slide 4: Premier Midwest Banking Franchise
Premier Midwest Banking Franchise Completed February 15, 2022 - Next Steps (ONB + FMBI) Completed branding and majority of systems conversion in July 2022 On track to achieve ~$109 million in cost savings as outlined at announcement Strong talent and client retention; continuing to invest in top rev
Slide 5: Second-Quarter 2022 Highlights
Second-Quarter 2022 Highlights EPS / Net Income Adj. EPS1/Net Income1 Adj. ROA1 $0.38 / $0.46 / 1.2% $111 million $135 million Adj. ROATCE1 Total Loan Growth1,2 Adj. Eff. Ratio1 20.4% 19% 53.9% ▪ Completed branding and majority of systems conversion in early July 2022 ▪ Strong net interest margin (F
Slide 6: Second-Quarter 2022 Results
Second-Quarter 2022 Results Performance Drivers - Impacted by Merger 2Q22 1Q22 2Q21 Completed Mid 1Q22 • Strong total loan growth1 of 19%, annualized; End of period total loans1 $29,472 $28,131 $13,064 commercial up 18% and consumer up 22% End of period deposits 35,539 35,607 17,869 • Consistent bal
Slide 7: Total Loans and Earning Assets
Total Loans and Earning Assets Total Loans1 Up 8% YoY Historical Combined 2 Total loans1 $29,472 • Growth of $1.3 billion, +19% annualized $27,392 $27,634 $27,792 $28,131 • Commercial growth of $882 million, +18% annualized $12,425 $12,477 $12,391 • Total consumer3 growth of $459 million, $26,355 $2
Slide 8: Commercial Loans
Commercial Loans Total Commercial Loans1 oY Up 8% Y Historical Combined 2 $20,639 $19,079 $19,348 $19,422 $19,757 Total commercial loans1 • Growth of $882 million, +18% annualized • Well distributed across markets and products • +20% commercial and industrial $9,269 $9,441 $9,603 • +16% commercial r
Slide 9: Commercial Loan Production
Commercial Loan Production Strong $2.2 billion of production throughout the entire commercial loan portfolio and across the combined expanded market footprint Production by Product Line Production by RM Location $28 $73 $87 $174 $529 $147 $967 $161 $1,137 $513 $315 $283 Illinois Indiana CRE Business
Slide 10: Deposits
Deposits Total Deposits Historical Combined 1 $35,813 $34,838 $35,142 $35,551 $35,607 $35,539 Deposit balances stable compared $2,544 $2,479 to 1Q22 • Gradual deployment of commercial and $26,905 $12,463 $12,388 retail deposits partly offset by the seasonal increase in municipal deposits Deposit cos
Slide 11: Net Interest Income & Net Interest Margin
1 Net Interest Income & Net Interest Margin 1 Net Interest Income Key Performance Drivers $342 • Net interest income increased $115 million $2 $35 • NIM increased 45 bps vs. 1Q22 • + 33 bps rate / volume mix $227 • + 14 bps accretion $4 $16 • + 2 bps interest collected on nonaccrual $153 $155 $150 •
Slide 12: Asset Liability Management
Asset Liability Management 1 Net Interest Margin Sensitivity Actual Projection Ranges Well-positioned for Rising Rates 3.33% 3.35%-3.40% 3.33%-3.42% • 56% of loans are variable/floating-rate 0.20% 0.15% • 88% reprice in 3 months or less 0.34% 2.88% • Peer leading deposit franchise 0.20% 3.15%-3.20%
Slide 13: Noninterest Income
Noninterest Income 1 Key Performance Drivers Adjusted Noninterest Income $89 • Mortgage banking continues to be impacted by higher rate environment, $16 lower gain on sale margins, and higher $65 $7 mix of portfolio production $7 • Offset by higher other income due to $10 $51 $53 $51 $4 equity inves
Slide 14: Noninterest Expense
Noninterest Expense 1 Adjusted Noninterest Expense Key Performance Drivers • 2Q22 adjusted noninterest expense well $239 controlled $25 • Includes year-to-date incentive accrual true- $26 $173 up reflective of strong performance $32 $26 • 2Q22 adjusted efficiency ratio1 of 53.9% $121 $118 $123 $19 $
Slide 15: Path to Cost Saves
1 Path to Cost Saves $235 $227 Key Performance Drivers • ~85% of cost saves target (~$109 million $6 annualized) realized by 4Q22 $7 $2 • Full run rate expected by early 2023 $23 million (~$92 million annualized) $212 2 2Q21 4Q22 Expected Combined Expense Incremental Intangibles Merit & Strategic In
Slide 16: Credit
Credit 30+ Day Delinquency Net Charge-offs 0.44% 0.27% 0.34% 0.06% 0.24% 0.02% 0.17% 0.05% 2017Y 2018Y 2019Y 2020Y 2021Y 1Q22 2Q22 2017Y 2018Y 2019Y 2020Y 2021Y 1Q22 2Q22 ONB FMBI Peer Average ONB FMBI Peer Average Non-Performing Loans Net Charge-offs/NPL’s 39.80% 0.88% 14.18% 0.78% 0.70% 3.05% 0.54
Slide 17: Allowance for Credit Losses
Allowance for Credit Losses Allowance for Credit Losses $11 $288 $281 $5 Key Model Inputs $(2) • Economic assumptions (upper bound) $(7) • GDP (-6.1%) • Unemployment (7.2%) • BBB Spread / 10Y Treasury (2.9x) • Commercial Asset Quality Ratings • Consumer Credit Bureau Score • Loan To Value Allowance
Slide 18: Capital
Capital Key Performance Drivers 2Q21 3Q21 4Q21 1Q22 2Q221 • 2Q22 ratios decreased as robust loan growth and merger related charges more than Regulatory Capital Ratios: offset strong retained earnings • Capital expected to build back CET1 capital to RWA 11.95 % 12.08 % 12.04 % 10.04 % 9.90 % quickly
Slide 19: Outlook
Outlook Category Outlook Commercial Loans • Record pipeline heading into 3Q bodes well for future growth, albeit at a potentially slower pace than 2Q given client sentiment Net Interest Income / • Net interest income and NIM, excluding PPP and accretion, should continue to expand as a result of Net
Slide 20: Appendix
Appendix oS OLD NATIONAL BANCORP?’
Slide 21: Projected Acquisition Accounting Impact
Projected Acquisition Accounting Impact 1,2 Contractual Accretion Accretion on acquired loans and $28 $26 borrowings • $35 million recognized in 2Q22 $19 • $28 million contractual for remainder of 2022 3Q-4Q 2022 2023 2024 1 Projected Remaining Loan Discount Discount on acquired loan portfolio • $13
Slide 22: Non-GAAP Reconciliation
Non-GAAP Reconciliation 2Q21 1Q22 2Q22 As reported: Net interest Income (FTE) $153.4 $226.6 $341.8 Add: Fee income 51.5 65.2 89.1 Total Revenue (FTE) $204.9 $291.8 $430.9 Less: Provision for Credit Losses 4.9 (97.6) (9.2) Less: Noninterest Expense (129.6) (226.7) (277.4) Pre-Tax Income $80.2 $(32.5)
Slide 23: Non-GAAP Reconciliation
Non-GAAP Reconciliation 2Q21 3Q21 4Q21 1Q22 2Q22 As reported: Net interest Income (FTE) $153.4 $155.1 $150.2 $226.6 $341.8 Add: Fee income 51.5 54.5 51.5 65.2 89.1 Total Revenue (FTE) $204.9 $209.6 $201.7 $291.8 $430.9 Less: Noninterest Expense 129.6 121.3 131.9 226.7 277.4 Pre-Provision Net Revenue
Slide 24: Non-GAAP Reconciliation
Non-GAAP Reconciliation 2Q21 3Q21 4Q21 1Q22 2Q22 Noninterest Expense As Reported $129.6 $121.3 $131.9 $226.7 $277.4 Less: ONB Way Charges (0.4) 0.0 0.0 0.0 0.0 Less: Merger-Related Charges (6.5) (1.4) (6.7) (52.3) (36.6) Noninterest Expense Less Charges $122.7 $119.9 $125.2 $174.4 $240.8 Less: Amort
Slide 25: Non-GAAP Reconciliation
Non-GAAP Reconciliation 2Q21 3Q21 4Q21 1Q22 2Q22 Net interest Income As Reported $149.9 $151.6 $146.8 $222.8 $337.5 FTE Adjustment 3.5 3.5 3.4 3.8 4.3 Net Interest Income (FTE) $153.4 $155.1 $150.2 $226.6 $341.8 Average Earnings Assets $21,095.3 $21,228.6 $21,670.7 $31,483.6 $41,003.3 Net Interest M
Slide 26: Non-GAAP Reconciliation
Non-GAAP Reconciliation 2Q21 3Q21 4Q21 1Q22 2Q22 Old National Commercial Loans $9,990 $9,796 $9,772 $19,962 $20,721 Less: Old National PPP Loans (721) (355) (169) (205) (82) Legacy First Midwest Commercial Loans1 10,516 10,291 10,050 0 0 Less: Legacy First Midwest PPP Loans (706) (384) (231) 0 0 His
Slide 27: Peer Group
Peer Group Like-size, publicly-traded financial services companies, serving comparable demographics with comparable services as Old National Bancorp Associated Banc-Corp ASB BOK Financial Corporation BOKF Cadence Bancorporation CADE Comerica Incorporate CMA F.N.B. Corporation FNB First Horizon Corpo