Old National Bancorp · NASDAQ:ONB
Old National Bancorp — Q4 2022 Earnings Presentation
45 slides from Old National Bancorp's earnings presentation, February 2023
Slide 1: Investment Thesis
Investment Thesis Financial Data as of December 31, 2022 Dated: February 2023
Slide 2: Executive Summary
Executive Summary Slides 6 —14 2
Slide 3: 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 4: 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 5: The Best of Offense and Defense
The Best of Offense and Defense Financial data as of or for the year ended December 31, 2022, except as noted 1 Non-GAAP financial measure that management believes is useful in evaluating the financial results of the Company - see Appendix for Non-GAAP reconciliation 2 Excludes Paycheck Protection P
Slide 6: Commitment to Excellence
7 Commitment to Excellence Bloomberg Gender- Equality Index 2022 _COMMUNITY COMMITMENT. Ctawds Moobpy’s INVESTORS SERVICE AD ISABIL MPLOVER * Newsweek *~ {a = BEST PLACE TO WORK FOR a” NATIONAL ORGANIZATION ON PF | sisasicrry inctusion Filla DISABILITY 100% DISABILITY EQUALITY INDEX " ISS QualitySco
Slide 7: Commitment to Corporate Social Responsibility
Commitment to Corporate Social Responsibility Old National’s 2021 Environmental, Social and Governance (“ESG”) Report showcases our commitment to: • Strong corporate governance • Putting our clients at the center of all we do • Investing in our team members • Diversity, equity and inclusion • Streng
Slide 8: Snapshot of Old National
Snapshot of Old National Summary1 Company Description Headquarters Evansville, IN • 6th largest commercial bank headquartered in Market Cap $5,189 Midwest - top 35 banking company based in the U.S. by assets P/ TBV 188% • 263 branches and 354 ATMs Dividend Yield 3.2% LTM Average Daily Volume (Actual
Slide 9: Accomplished an Exceptional Transformation
Accomplished an Exceptional Transformation Loans Deposits Adj. PPNR2 ($ in billions) ($ in billions) ($ in millions) $35 $921 $33 $15 $12 $326 $11 $9 $202 1 1 1 2016 2019 2023E 2016 2019 2023E 2016 2019 2023E 2016-2023E CAGR 24% Adj. EPS2 Adj. PPNR / Avg. Earning Assets2 Adj. ROATCE2 $2.17 2.23% 21%
Slide 10: ONB - A Premier Midwest Banking Franchise
ONB - A Premier Midwest Banking Franchise Completed Merger February 15, 2022 (ONB + FMBI) 12% of total Growth and return profiles positioned for franchise above-peer performance 8% of total franchise 5% of total franchise Positioned to be the Midwest’s leading financial services provider 0.3% of tot
Slide 11: Meaningful Upside
Meaningful Upside Price / TBV Key Performance Catalysts1 • Strong commercial pipeline of $4.6 billion As of 09/30/2022 1.8x 1.9x • Asset sensitivity better than peers • Deposit betas better than peers (22% last cycle); cycle to date deposit beta of 12% ONB ^KRX • ~$109 million of merger cost saves •
Slide 12: Quality Low-Cost Deposit Franchise
Quality Low-Cost Deposit Franchise Deposit Mix Cost of Deposits 0.80% Time Deposits Money Market 9% 15% 0.54% 0.30% 0.32% 0.29% 0.48% Demand 0.15% Savings 0.19% 0.18% 0.10% 18% Deposits 34% 0.06% 2017Y 2018Y 2019Y 2020Y 2021Y 2022Y NOW 24% ONB Peer Median Deposit Growth 3% $35.0 2 CA GR: 2 201 7-202
Slide 13: Granular & Diversified Loan Portfolio
1,2 Granular & Diversified Loan Portfolio Other HELOC Consumer 3% Senior Housing Self Storage 5% 2% 1% Mixed Use Other 4% 10% CRE Non- Single Family Use Residential Owner 4% Real Estate Occupied 21% 29% Warehouse/ Industrial Multifamily 12% 41% Retail C&I CRE Owner 11% Office 31% Occupied 15% 11% :
Slide 14: Outlook
Outlook Category Outlook Loans • Healthy pipeline heading into 1Q23 bodes well for future growth; expect 4Q22 mid single digit growth to continue in 2023 Net Interest Income / • Net interest income and NIM, excluding accretion, should be consistent with projection on slide 24 Net Interest Margin • C
Slide 15: Financial Details
Financial Details Financial Data as of December 31, 2022
Slide 16: Fourth-Quarter 2022 Highlights
Fourth-Quarter 2022 Highlights EPS / Net Income Adj. EPS1 / Net Income Adj. ROA1 $0.67 / $0.56 / $164 million 1.46% $197 million 10% Increase QoQ Adj. ROATCE1 Total Loan Growth1,2 Adj. Eff. Ratio1 26.5% 8% 47.5% ▪ Strong net interest margin (FTE)1 expansion of 14 bps, reflective of robust loan growt
Slide 17: 2022 Highlights
2022 Highlights EPS / Net Income Adj. EPS1 / Net Income Adj. ROA1 $1.50 / $1.96 / $541 million 1.28% $414 million 13% Increase YoY Adj. ROATCE1 Total Loan Growth1,2 Adj. Eff. Ratio1 21.1% 12% 51.6% ▪ Completed transformational merger with First Midwest Bancorp, Inc. on February 15, 2022 and systems
Slide 18: Fourth-Quarter 2022 Results
Fourth-Quarter 2022 Results Performance Drivers - Impacted by Merger 4Q22 3Q22 4Q21 Completed Mid 1Q22 End of period total loans1 $31,091 $30,485 $13,432 • Strong total loan growth1 of 8%, annualized • Sale of $382 million of HSA, client deployment of excess End of period deposits 35,001 36,054 18,5
Slide 19: Total Loans and Earning Assets
Total Loans and Earning Assets Total Loans1 Up 12% YoY Historical Combined 2 Total loans1 $30,485 $31,091 $29,472 • Growth of $606 million, +8% annualized $27,792 $28,131 5.08% • Commercial growth of $438 million, +8% 4.54% annualized 4.01% • Total consumer3 growth of $168 million, 3.64% 3.56% +8% a
Slide 20: Commercial Loans
Commercial Loans Total Commercial Loans1 Up 13% YoY Historical Combined 2 $21,495 $21,933 $20,639 Total commercial loans1 $19,422 $19,757 • Growth of $438 million, +8% annualized • Well distributed across markets and products • +8% commercial and industrial • +7% commercial real estate 4Q21 1Q22 2Q2
Slide 21: Commercial Loan Production
Commercial Loan Production Strong $2.7 billion of production throughout the entire commercial loan portfolio and across the combined expanded market footprint Production by Product Line Production by RM Location $64 $116 $199 $539 $168 $92 $1,194 $1,530 $364 $363 $211 $190 $384 CRE - Non-OO CRE - OO
Slide 22: Deposits / Funding
Deposits / Funding Total Deposits Historical Combined 1 $35,813 $35,843 $36,054 $35,551 $35,391 $2,393 $35,001 Average deposit balances down $2,776 1%, excluding HSA sale • Sale of $382 million of HSAs in November $26,905 $12,400 • Seasonal public funds outflows $11,931 • Client deployment of excess
Slide 23: Net Interest Income & Net Interest Margin
1 Net Interest Income & Net Interest Margin 1 Net Interest Income Key Performance Drivers $396 $382 $10 • Net interest income increased $14 million $2 $342 $25 • NIM increased 14 bps vs. 3Q22 $2 $35 • Robust loan growth2 of +8% annualized $227 • Commercial of +8% annualized $4 $16 • Total consumer3
Slide 24: Asset Liability Management
Asset Liability Management 1 Net Interest Margin Sensitivity Projection Well-positioned for Rising Rates Actual Range 3.85% • 56% of loans are variable/floating-rate 3.71% 3.74% 3.72%-3.77% 0.10% 0.07% • 88% reprice in 3 months or less 0.25% 3.33% • Peer leading deposit franchise 0.34% • Noninterest
Slide 25: Noninterest Income
Noninterest Income Adjusted Noninterest Income 1 Key Performance Drivers $89 • Lower capital markets $81 • Bank fees impacted by service charge $16 $74 program enhancements and sale of HSAs $11 $65 $7 $10 • Mortgage banking continues to be $9 $10 $6 $5 impacted by higher rate environment; $5 $51 $4
Slide 26: Noninterest Expense
Noninterest Expense 1 Adjusted Noninterest Expense Key Performance Drivers • 4Q22 adjusted noninterest expense well $239 $237 $230 controlled $38 $41 $42 • Salaries & Employee benefits lower $173 $28 $24 $24 $33 $33 $22 • Merger cost saves fully achieved in $123 $34 $22 $26 4Q22 (annualized) $19 $14
Slide 27: Credit
Credit 30+ Day Delinquency Net Charge-offs 0.46% 0.10% 0.05% 0.22% 0.06% 0.05% 0.19% 0.02% 2018Y 2019Y 2020Y 2021Y 1Q22 2Q22 3Q22 4Q22 2018Y 2019Y 2020Y 2021Y 1Q22 2Q22 3Q22 4Q22 ONB ONB, excluding PCD Peer Average ONB Peer Average Non-Performing Loans Key Performance Drivers • Net charge-offs of 5
Slide 28: Allowance for Credit Losses
Allowance for Credit Losses 1 Allowance for Credit Losses $10 $336 $328 $4 Key Model Inputs $(6) • Economic assumptions (upper bound) • GDP (-3.6%) • Unemployment (7.2%) • BBB Spread / 10Y Treasury (2.6x) • Commercial Asset Quality Ratings • Consumer Credit Bureau Score • Loan To Value Allowance Por
Slide 29: Capital
Capital Key Performance Drivers 4Q21 1Q22 2Q22 3Q22 4Q221 • 4Q22 ratios up as retained earnings including the gain on the sale of HSAs were partly Capital Ratios: offset by strong loan growth • Total capital impacted by the CET1 capital to RWA 12.04 % 10.04 % 9.90 % 9.88 % 10.03 % phase-out of ~$2 m
Slide 30: Appendix
Appendix oS OLD NATIONAL BANCORP?’
Slide 31: Projected Acquisition Accounting Impact
Projected Acquisition Accounting Impact 1,2 Contractual Accretion Accretion on acquired loans and borrowings $22 • $10 million recognized in 4Q22 $21 $18 • $22 million contractual for 2023 2023 2024 2025 1 Remaining Loan Discount Discount on acquired loan portfolio $86 • $102 million remaining as of
Slide 32: Commitment to Strong Corporate Governance
Commitment to Strong Corporate Governance • Stock ownership guidelines have been established for 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 shares Sal
Slide 33: 2021 Executive Compensation
2021 Executive Compensation • Tied to long term shareholder value Short Term Incentive Plan Performance Measure Weight Corporate EPS 60% ROATCE 20% Efficiency Ratio 20% Long Term Incentive Plan Performance Measure Weight Performance-based (50% TSR & 50% ROATCE) 75% Service-based 25% 33
Slide 34: Board of Directors
Board of Directors Director Market Background Barbara A. Boigegrain Chicago, IL Former CEO and General Secretary of Wespath Benefits and Investments Former Senior Vice President and CFO of RLI Corp. (NYSE), a specialty insurer serving diverse niche Thomas L. Brown Chicago, IL property, casualty and
Slide 35: Non-GAAP Reconciliation
Non-GAAP Reconciliation 4Q21 3Q22 4Q22 Net interest income (FTE) $150.2 $381.5 $396.5 Add: Fee income 51.5 80.4 165.0 Total revenue (FTE) $201.7 $461.9 $561.5 Less: Provision for credit losses 1.3 (15.5) (11.4) Less: Noninterest expense (131.4) (262.4) (282.7) Income before income taxes $71.6 $184.0
Slide 36: Non-GAAP Reconciliation
Non-GAAP Reconciliation 4Q21 1Q22 2Q22 3Q22 4Q22 Net interest income (FTE) $150.2 $226.6 $341.8 $381.5 $396.5 Add: Fee income 51.5 65.2 89.1 80.4 165.0 Total revenue (FTE) $201.7 $291.8 $430.9 $461.9 $561.5 Less: Noninterest expense (131.4) (215.6) (277.5) (262.4) (282.7) Pre-Provision Net Revenue (
Slide 37: Non-GAAP Reconciliation
Non-GAAP Reconciliation 4Q21 1Q22 2Q22 3Q22 4Q22 Noninterest expense $131.4 $215.6 $277.5 $262.4 $282.7 Less: Intangible amortization (2.6) (4.8) (7.2) (7.1) (6.8) Noninterest expense, excluding intangible amortization 128.8 210.8 270.3 255.3 275.9 Adjustments: Less: Merger related charges1 (6.7) (4
Slide 38: Non-GAAP Reconciliation
Non-GAAP Reconciliation 4Q21 1Q22 2Q22 3Q22 4Q22 Net interest income $146.8 $222.8 $337.5 $376.5 $391.1 FTE adjustment 3.4 3.8 4.3 5.0 5.4 Net interest income (FTE) $150.2 $226.6 $341.8 $381.5 $396.5 Average earnings assets $21,670.7 $31,483.6 $41,003.3 $41,180.0 $41,206.7 Net interest margin 2.71 %
Slide 39: Non-GAAP Reconciliation
Non-GAAP Reconciliation 3Q21 4Q21 1Q22 2Q22 4Q22 Old National commercial loans $9,772 $19,962 $20,721 $21,539 $21,966 Less: Old National PPP loans (169) (205) (82) (44) (33) Legacy First Midwest commercial loans1 10,050 0 0 0 0 Less: Legacy First Midwest PPP loans (231) 0 0 0 0 Historical combined c
Slide 40: Non-GAAP Reconciliation
Non-GAAP Reconciliation 4Q22 GAAP shareholders’ common equity $4,884.9 Less: Goodwill and intangible assets (2,125.1) Tangible shareholder’s common equity $2,759.8 Common shares issued and outstanding 292.9 Tangible common book value $9.42 GAAP shareholders’ common equity $4,884.9 Less: Goodwill and
Slide 41: Non-GAAP Reconciliation
Non-GAAP Reconciliation 2016 2019 Net interest income (FTE) $424.0 $617.2 Add: Fee income 252.8 199.3 Total revenue (FTE) $676.8 $816.5 Less: Noninterest expense 454.1 508.5 PPRN $222.7 $308.0 Adjustments: Debt securities gains $(5.8) $(1.9) Gain on sale of insurance (41.9) 0.0 Gain on repurchased b
Slide 42: Non-GAAP Reconciliation
Non-GAAP Reconciliation 2016 2019 Net interest income (FTE) $424.0 $617.2 Add: Fee income 252.8 199.3 Total revenue (FTE) $676.8 $816.5 Less: Provision for credit losses (0.9) (4.7) Less: Noninterest expense (454.1) (508.5) Income before income taxes $221.8 $303.3 Less: Income taxes (FTE) 87.5 65.1
Slide 43: Non-GAAP Reconciliation
Non-GAAP Reconciliation 2016 2019 Net income applicable to common shares $134.3 $238.2 Add: Intangible amortization (net of tax)1 8.1 12.8 Tangible net income applicable to common shares $142.4 $251.0 Less: Debt securities gains (net of tax)1 $(3.8) $(1.4) Less: Gain on sale of insurance (net of tax
Slide 44: 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 Bank CADE Comerica Incorporated CMA F.N.B. Corporation FNB First Horizon Corporation FH
Slide 45: 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 45