Old National Bancorp · NASDAQ:ONB
Old National Bancorp — Investor Presentation (February 2020)
65 slides from Old National Bancorp's investor presentation, Feb 3, 2020
Slide 1: Investment Thesis
Investment Thesis FINANCIAL DATA AS OF December 31, 2019 DATED: February 3, 2020 Exhibit 99.1
Slide 2: Executive Summary
Executive Summary SLIDES 2 TO 26
Slide 3: Forward-Looking Statements; Non-GAAP; New Accounting Standards
Forward-Looking Statements; Non-GAAP; New Accounting Standards 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 N
Slide 4: Snapshot of Old National
Snapshot of Old National Largest bank holding company headquartered in Indiana with financial centers located in Indiana, Kentucky, Michigan, Wisconsin and Minnesota 192 financial centers 226 ATMs Focused on community banking with a full suite of product offerings: Retail and small - medium size bus
Slide 5: Old National's Footprint
Old National’s Footprint 75 69 74 70 64 57 39 75 64 65 90 94 43 65 74 35 94 Indiana1 $7.6 billion deposits 52% of total franchise Michigan $1.4 billion deposits 10% of total franchise Wisconsin $1.4 billion deposits 10% of total franchise Kentucky $0.9 billion deposits 6% of total franchise Minnesot
Slide 6: The ONB Way – Writing The Next Chapter in the Old National Story
The ONB Way – Writing The Next Chapter in the Old National Story In May 2019 we launched The ONB Way, starting with a performance improvement diagnostic to define our go-forward strategy and identify revenue and efficiency opportunities across the bank In August 2019 we launched the “Design Phase,”
Slide 7: Our Vision for The ONB Way
Our Vision for The ONB Way We are a leading commercially-oriented regional bank with a distinctive client-centric value proposition based on strong relationships, streamlined operating model, and an exceptional work environment that empowers our team members to deliver their best
Slide 8: Six Key Pillars Of Our ONB Way Strategy
Six Key Pillars Of Our ONB Way Strategy Old National is a commercially-oriented regional bank that consistently delivers top quartile performance to clients, team members, shareholders and communities Commercial salesforce aligned to client’s size or loan type Relationship Manager (RM) aligned to se
Slide 9: The ONB Way – Major Initiatives
The ONB Way – Major Initiatives Revenue Enhancements (Expected Net Revenue Improvement in 2021) Expense Opportunities Rationalize real estate Streamline reporting layers Improve back room processes Deepen client relationships Initiatives Objectives Improve analytics to better identify opportunities
Slide 10: The ONB Way – Projected Financial Impact
The ONB Way – Projected Financial Impact1 Recurring Benefit Implementation Costs Expense Opportunities Net Impact -$1 -$2 $-8 -$33 -$1 $5 $9 $40 $ in millions and are pre-tax 1 Based on estimates as of January 21, 2020 Estimated Implementation Costs by Type $25 related to branch facilities $10 in se
Slide 11: Old National's Top MSAs
Old National’s Top 10 MSAs Demographics in Top 5 (56% of deposits) and Top 10 (69% of deposits) markets are better than national averages Expansion markets tend to be much better than national average demographics Source: S&P Global Market Intelligence using FDIC Summary of Deposits as of June 30, 2
Slide 12: Strategy to Drive Long-Term Shareholder Value
Strategy to Drive Long-Term Shareholder Value Larger balance sheet capabilities with a strong product offering, delivered in-market with unequalled client care – “Out-product Community Banks, Out-service Large Regionals” Basic Bank…Broader Reach M&A Repositioned Franchise with Better Growth Dynamics
Slide 13: Franchise Evolution
Franchise Evolution Built a Better Bank… Source: S&P Global Market Intelligence
Slide 14: With Improved Scale
… With Improved Scale Source: S&P Global Market Intelligence using FDIC Summary of Deposits as of June 30, 2019 33% increase 78% increase
Slide 15: Successful Execution and Integration Has Driven Improved Profitability
Successful Execution and Integration Has Driven Improved Profitability 1 Non-GAAP financial measure which Management believes is useful in evaluating the financial results of the Company – see Appendix for Non-GAAP reconciliations – Peer Group data per S&P Global Market Intelligence and as of most r
Slide 16: Deposit Composition
Deposit Composition Deposit Growth 2012 – 4Q19 CAGR: 10.3% Cost of Total Deposits Peer Group data per S&P Global Market Intelligence - See Appendix for definition of Peer Group $ in millions 1 As of December 31, 2019, 3 Peers with no financial disclosure Quality Low-Cost Deposit Franchise
Slide 17: Improved Balance Sheet Mix
Improved Balance Sheet Mix Increase of 11.8% 1 Includes loans held for sale
Slide 18: Credit
Credit Peer Group data per S&P Global Market Intelligence - See Appendix for definition of Peer Group
Slide 19: Strong Reserve Coverage & CECL
Strong Reserve Coverage & CECL $ in millions Current Expected Credit Losses (CECL) On track for 1Q20 implementation Estimated day 1 increase to allowance for loan losses of $35mm to $45mm Driven largely by the $2.3bn acquired loan portfolio Modest increase in reserves for the legacy portfolio
Slide 20: Strong Credit Culture
Strong Credit Culture Peer Group data per S&P Global Market Intelligence as of 09/30/2019 - See Appendix for definition of Peer Group 1 Excludes loans held for sale; 2 Source: Regulatory Call Report 3 Full Years 2004-2018, includes banks with 15-years of NCO’s Legal lending limit at December 31, 201
Slide 21: Low-Risk Balance Sheet
Low-Risk Balance Sheet Implies $2.1bn increase in RWA to meet peer average Peer Group data as of 3Q19 and per S&P Global Market Intelligence - See Appendix for definition of Peer Group Risk Weighted Assets / Total Assets
Slide 22: Fourth-Quarter 2019 Key Performance Indicators
Fourth-Quarter 2019 Key Performance Indicators Earnings: Net income of $49.2mm, or $0.29 per diluted share Adjusted net income1 increased 2% from a year ago to $55.2mm, or $0.32 per diluted share, Excludes $8.2mm in ONB Way charges and $0.2mm in merger charges Loans and Deposits2: Record high commer
Slide 23: Full-Year 2019 Key Performance Indicators
Full-Year 2019 Key Performance Indicators Earnings: Net income of $238.2mm, or $1.38 per diluted share Adjusted net income1 increased 23.8% from 2018 to a record $249.9mm, or $1.45 per diluted share Excludes $11.4mm in ONB Way charges and $6.0mm in merger charges Loans and Deposits: Record high comm
Slide 24: Branch Actions
Branch Actions Driving efficiencies through increased branch size and investment in mobile and online banking Consolidated 72 branches since January 2014 Increased core deposits per branch by 120% since 2009 Launched new online and mobile solution January 2016 Increased mobile users by over 500% As
Slide 25: Outlook
Outlook Category 4Q19 Adjusted Results1 Commercial Loan Production Record production of $681mm; pipeline of $2.2bn Net Interest Margin FTE NIM was 3.46%, including 21 bps of accretion income and 5 bps of interest collected on nonaccrual loans Noninterest Income $47.3mm, excluding debt securities gai
Slide 26: Commitment to Excellence
Commitment to Excellence AMERICAN BANKER. sicascow & Hecate Bloomberg Gander-Squsiy inde beend | BEST PLACE TO WORK FOR Fis ETHISPHERE jammy | DISABILITY INCLUSION Fq [ETHICS INSIDE 100% DISABILITY EQUALITY INDEX _ . pl eo ©)|WORLD’S MOST = AWARD OF SIETHICAL f wit) “@|COMPANIES’ WWW.ETHISPHERE.COM
Slide 27: Financial Details
Financial Details FINANCIAL DATA AS OF December 31, 2019 DATED: February 3, 2020
Slide 28: Fourth-Quarter 2019 Results
Fourth-Quarter 2019 Results Performance Drivers Net interest margin, less accretion, down just 1 bp Total deposits increased 2.9% Seasonal declines in several fee income businesses Reported noninterest expense includes $8.2mm in ONB Way charges and $0.2mm in merger charges $ in millions, except per-
Slide 29: Pre-Provision Net Revenue
Pre-Provision Net Revenue Adjusted pre-provision net revenue1 increased 23.3% Y/Y Improvement driven by successful execution of our stated strategy Low credit costs Low cost core deposit funding Strong expense management Positive operating leverage continues 636 bps 2018 to 2019 improvement 392 bps
Slide 30: Average Balance Sheet Mix
Average Balance Sheet Mix $ in millions Loans Total commercial loans: 66.5% of total loans, down 0.1% Y/Y Indirect auto: 5.2% of earning assets, down 0.8% Y/Y Securities Duration of 3.86 vs. 3.04 in 3Q19 4Q19 yield was 2.74% 4Q19 new money yield was 2.74% Estimated NTM cash flows of $1,043mm Net unr
Slide 31: Loans
Loans1 $ in millions 1 Includes loans held for sale 2 Reflects closing of Klein Partnership Average Balances Period-End Balances Quarterly commercial production of $681mm Average new production size < $1mm Commercial pipeline at quarter end of $2.2bn Line utilization was 32.1% at quarter end Loan yi
Slide 32: Commercial Loan Portfolio Concentrations
Commercial Loan Portfolio Concentrations As of December 31, 2019 $ in millions 1 Includes held for sale Total C&I and CRE - $8,057 (Classed by Product Type)
Slide 33: C&I Loan Portfolio Concentrations
C&I Loan Portfolio Concentrations As of December 31, 2019 $ in millions C&I by State - $2,890 (State Determined by Primary Address of Borrower)
Slide 34: Commercial Real Estate Loan Concentrations
Commercial Real Estate Loan Concentrations CRE - $5,167 (Classed by Property Type) Multifamily by Product Type - $1,178 Multifamily by State - $1,178 (State Determined by Primary Address of Pledged Collateral) *Owner Occupied CRE is 29% As of December 31, 2019 $ in millions
Slide 35: Auto Loan Portfolio
Auto Loan Portfolio Total portfolio average original loan term of 70 months and weighted average FICO score of 766 Total portfolio LTV of 85% Total Portfolio yield of 3.81% 30+ Days Delinquency at 12/31/2019 = 0.86% Loans are originated within the ONB footprint As of December 31, 2019 $ in millions
Slide 36: Investment Portfolio Purchases 4Q19
Investment Portfolio Purchases 4Q191 1 Data as of December 31, 2019
Slide 37: Investment Portfolio
Investment Portfolio $ in millions 1 Includes market value for both available-for-sale and held-to-maturity securities Investment Portfolio yield of 2.74% in 4Q19 vs. 2.82% in 3Q19
Slide 38: Declining Funding Costs
Declining Funding Costs Average Balances Period-End Balances 4Q19 total deposit costs of 43 bps December total deposit costs of 40 bps Total Interest-bearing deposit costs were 59 bps, down 12 bps from 3Q19 Low loan to deposit ratio of 83.6% $ in millions 1 Reflects closing of Klein 1
Slide 39: Net Interest Income & Net Interest Margin
Key Performance Drivers Rate cuts in September and October NIM decreased 11 bps vs. 3Q19 - 10 bps accretion - 12 bps asset yields + 11 bps funding costs Net Interest Income & Net Interest Margin1 $ in millions 1Tax Equivalent Basis; Non-GAAP financial measure which Management believes is useful in e
Slide 40: Projected Purchase Accounting Impact
Projected Purchase Accounting Impact Actual Accretion Projected Accretion1 Actual Discount Projected Discount1 Manageable declines in purchase accounting impact expected in future periods Actual IA Amortization Net Income Statement Contribution $ in millions 1 Projections are updated quarterly, assu
Slide 41: Asset Liability Management Position
Asset Liability Management Position 41% of loans are variable-rate $510mm of asset hedges, 100% of which are in the money when 1-month LIBOR is below 2.0% 11% of loans have floors Actively manage deposit costs in current down rate cycle 4Q19 total cost of deposits was 43bps, improving 9bps from 3Q19
Slide 42: Noninterest Income
Noninterest Income $ in millions 1Non-GAAP financial measure which management believes is useful in evaluating the financial results of the Company – see Appendix for Non-GAAP reconciliation Residential mortgage production includes quick home refinance product Key Performance Drivers 4Q19 adjusted n
Slide 43: Noninterest Expense
Noninterest Expense $ in millions 1Non-GAAP financial measure which management believes is useful in evaluating the financial results of the Company – see Appendix for Non-GAAP reconciliation Key Performance Drivers 4Q19 adjusted noninterest expense1 Includes $4.0 in additional incentive compensatio
Slide 44: Conservative Lending Limits/Risk Grades
Conservative Lending Limits/Risk Grades Borrower Asset Quality Rating (Risk Grades) In-House Lending Limit1 ($ in millions) 0 – Investment Grade $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
Slide 45: 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 2 Excludes commissions Shares in millions Total board authorization of up to 7.0mm shares to be repurchased, as conditions war
Slide 46: 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 47: 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 48: Indiana at a Glance
by the numbers Population: 6.7 million Total Resident Labor Force:3.4 million Unemployment Rate:3.2% (Dec. ‘19, Seasonally Adjusted) GDP: $366.8B Exports:$39.3B Land Area:35,826 sq mi crossroads of America $4.6 billion and 13,300 new jobs from international investment (2012 – 2014) Home to the 2nd l
Slide 49: 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 7th “10 Big Cities with the Fastest Growing Economies” – Forbes 2018 13th best large city to start a business – Wallet Hub, 2018 13th “Best Place
Slide 50: Attractive Midwest Markets
Attractive Midwest Markets Source: S&P Global Market Intelligence, based on MSAs $ in thousands Average of ONB Footprint Average of ONB Footprint
Slide 51: Attractive Midwest Markets
Attractive Midwest Markets Minneapolis, MN Indianapolis, IN Milwaukee, WI Louisville, KY Grand Rapids, MI MSA Population: 3.7mm MSA Population: 2.1mm MSA Population: 1.6mm MSA Population: 1.3mm MSA Population: 1.1mm Major industries include: Manufacturing, applied research and technology Major indus
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: 2019 Executive Compensation
2019 Executive Compensation Short Term Incentive Plan (CEO, CFO, COO, CIO, 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, CIO, Chief Legal Counsel) Performance Measure Weight Pe
Slide 54: 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
Slide 55: Board of Directors
Board of Directors Director Market Background Alan W. Braun Evansville, IN Senior Advisor to Industrial Contractors Skanska with 45+ years as a construction executive; formerly Chairman, President and CEO of Industrial Contractors, Inc. Andrew E. Goebel Evansville, IN 34-year career in the energy in
Slide 56: Appendix
Appendix Hi OLD NATIONAL BANCORP’
Slide 57: Non-GAAP Reconciliations
Non-GAAP Reconciliations $ in millions, except per share data
Slide 58: Non-GAAP Reconciliations
Non-GAAP Reconciliations $ in millions
Slide 59: Non-GAAP Reconciliations
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
Slide 60: Non-GAAP Reconciliations
Non-GAAP Reconciliations $ in millions, except per-share data
Slide 61: Non-GAAP Reconciliations
Non-GAAP Reconciliations $ in millions 4Q17 2Q18 3Q18 2Q19 3Q19 4Q19 2018 2019 Noninterest Expense As Reported $140.43199999999999 $130.46199999999999 $119.376 $128.119 $122.584 $134.744 $517.30600000000004 $508.48699999999997 Less: ONB Way Charges 0 0 0 -1.4 -1.8 -8.2159999999999993 0 -11.416 Less:
Slide 62: Non-GAAP Reconciliations
Non-GAAP Reconciliations $ in millions
Slide 63: Non-GAAP Reconciliations
Non-GAAP Reconciliations $ in millions
Slide 64: Peer Group
Peer Group Like-size, publicly-traded financial services companies, generally in the Midwest, serving comparable demographics with comparable services as ONB
Slide 65: 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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