Old National Bancorp · NASDAQ:ONB
Old National Bancorp — Q4 2021 Earnings Presentation
45 slides from Old National Bancorp's earnings presentation, Feb 1, 2022
Slide 1: Investment Thesis
Investment Thesis FINANCIAL DATA AS OF December 31, 2021 DATED: February 1, 2022 Exhibit 99.1
Slide 2: Executive Summary
Executive Summary Slides 5-17
Slide 3: Forward-Looking Statements
3 Forward-Looking Statements This communication includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to
Slide 4: Non-GAAP Financial Measures
4 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 a
Slide 5: Snapshot of Old National
5 Snapshot of Old National Summary Company Description • Largest bank holding company headquartered in Indiana with financial centers located in Indiana, Kentucky, Michigan, Minnesota and Wisconsin • 162 financial centers and 192 ATMs Our strategic vision--The ONB Way • We are a leading commercially
Slide 6: Footprint map
6 IndianaIllinois Missouri Minnesota Michigan Kentucky Fort Waynet r yo t a net t rr yyo t a net o t a ne Champaigniiha pa gniiiiiiha pa gnha pa gn Grand Rapids ir sand apid i irr ssand apidiand apid IndianapolisI i liI ia a lisI i liI i liI dianapo isI i iI ia a is Louisvillei illisvillLou ei lli l
Slide 7: Attractive Midwest Markets
7 Attractive Midwest Markets Source: S&P Global Market Intelligence, based on MSAs Loans & Deposits in millions Excludes PPP $92.1 $73.7 $71.0 $72.2 $67.5 $71.9 $83.3 $66.1 $65.0 $84.5 $70.6 Median Household Income 2022 (000s) 10.6% 12.3%13.5%12.4% 9.5% 10.4%10.6% 7.8% 11.6%11.7% 10.2% Projected Hou
Slide 8: Why ONB? Our Investment Thesis
8 Why ONB? Our Investment Thesis The Old National Proposition Granular & Diversified Loan Portfolio Average Commercial & Industrial loan size ~$204,000 and average Commercial Real Estate loan size ~$940,000; diversified by product type with no significant industry concentrations; primarily to client
Slide 9: Franchise Evolution Built a Better Bank
9 Franchise Evolution Built a Better Bank Source: S&P Global Market Intelligence $ in millions unless noted otherwise $5,447 $7,279 $18,569 $47 $40 $115 2007 2012 2021 Core Deposits Core Deposits/Branch $7,846 $9,544 $24,454 $3.15 $3.56 $10.30 2007 2012 2021 Total Assets Assets/FTE 193 215 725 2007
Slide 10: Quality Low-Cost Deposit Franchise
10 $2.4 $2.5 $3.0 $3.7 $4.0 $4.1 $5.6 $6.3 $6.1 $5.8 $7.6 $8.7 $10.2 $10.4 $11.3 $12.3 $8.5 $8.3 $10.6 $12.4 $14.2 $14.5 $16.9 $18.6 2014Y 2015Y 2016Y 2017Y 2018Y 2019Y 2020Y 2021Y Noninterest-bearing Interest-bearing Noninterest- bearing Demand 33.9% NOW 28.7% Savings 20.5% Money Market 11.7% Time
Slide 11: Granular & Diversified Loan Portfolio
11 CRE Non-Owner Occupied 35% CRE Owner Occupied 12% C&I 24% Residential Real Estate 17% Other Consumer 8% HELOC 4% Multifamily 37% Office 16% Retail 12% Warehouse/ Industrial 10% Single Family 6% Mixed Use 5% Senior Housing 4% Self Storage 2% Other 8% Granular & Diversified Loan Portfolio1,2 $ in b
Slide 12: Strong Credit Culture
12 Strong Credit Culture Peer Group data per S&P Global Market Intelligence as of 9/30/2021 - See Appendix for definition of Peer Group 1 Excludes loans held for sale ; 2 Full Years 2006-2020, includes banks with 15-years of NCO’s 3 and 15-Year Cumulative NCOs/ Avg. Loans1 0.03% 3.14% 0.54% 5.86% 0.
Slide 13: Conservative Lending Limit/Risk Grades
13 Conservative Lending Limit/Risk Grades In-house lending limits conservative relative to ONB’s legal lending limit of $318mm per borrower $ in millions Borrower Asset Quality Rating (Risk Grades) In-House Direct Lending Limit 0 – Investment Grade $100.0 1 – Minimal Risk $100.0 2 – Modest Risk $87.
Slide 14: Capital Trends
14 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 8.64% 8.55% 8.30% 4Q20 3Q21 4Q21 Tangible Common Equity to Tangible Assets1 $11.43 $11.83 $11.70 4Q20 3Q21 4Q21 Tangible Co
Slide 15: Commitment to Corporate Social Responsibility
15 Commitment to Corporate Social Responsibility Old National’s inaugural Environment, 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 • St
Slide 16: ONB's ESG At A Glance — 2020
a ONB’s ESG At A Glance — 2020 (). Strengthening and Supporting Our Communities ‘ in Community Reinvestment Act (CRA)-eligible (A) community development loans that supported Ce i ‘committed to affordable housing, economic development and Diversity, Equit Corporate community revitalization/stabllizat
Slide 17: Commitment to Excellence
a Commitment to Excellence Corporate Engagement gee ETHISPHERE TT [ETHICS INSIDE Points of Light Institute nN ETHICAL ™ a -.-e ‘ABA Foundation —_ c CONIMUNITY i |[COMPANIES: tnscon COMMITMENT WWW.ETHISPHERE.COM 6 Cte 10-TIME HONOREE ial | BEST PLACE TO WORK FOR a NATIONAL ORGANIZATION ON LEADING | =
Slide 18: Financial Details
Financial Details FINANCIAL DATA AS OF December 31, 2021 DATED: February 1, 2022
Slide 19: 2021 Highlights
19 2021 Highlights 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 the impact of PPP loans EPS / Net Income $1.67/ $277.5mm Adj. EPS/Net Income1 $1.73/ $286.5mm Adj PPNR1 $342.9m
Slide 20: 4th Quarter Highlights
20 4th Quarter Highlights Performance Drivers • End of period commercial loans (excluding PPP) increase +6.9% annualized; $1.1bn production • End of period core deposits increase $373mm • Allowance for credit losses recapture of $1.9mm; net recoveries of $1.4mm • Net interest income (excluding PPP i
Slide 21: Partnership Update
21 Partnership Update Q4 Momentum Accomplishments and Next Steps Established joint Integration Office with experienced integration leaders across both companies Strong team member commitment and excitement about opportunities in the larger, combined company SEC and bank regulatory filings completed;
Slide 22: Fourth-Quarter 2021 Results
22 Change vs. 4Q21 3Q21 4Q20 End of period total loans 13,637$ 1$ (213)$ annualized growth 0.0% End of period core deposits 18,569 373 1,531 annualized growth 8.2% Net interest income (FTE) 150.2 (4.9) (14.4) Provision for credit losses (1.9) 2.7 (0.8) Noninterest income 51.5 (3.0) (7.0) Noninterest
Slide 23: Commercial Loans and Earning Assets
23 Commercial Loans1 and Earning Assets1 Total commercial loans • Increase of $643mm YoY +7% • Increase of $162mm from 3Q21 +7% annualized 4Q21 new production avg yields1 • Commercial and industrial: 3.39% • Commercial real estate: 2.59% (83% floating) • 72% of commercial production is floating rate
Slide 24: Deposits/Funding
24 Deposits/Funding Core deposit balances increased $373mm from 3Q21 Deposit costs continue to decline • 4Q21 total deposit costs of 5 bps • Total interest-bearing liabilities costs were 28 bps, down 1 bp from 3Q21 Low loan to deposit ratio of 73% $ in millions $9,971 $10,347 $10,678 $10,664 $11,000
Slide 25: Net Interest Income & Net Interest Margin
25 3.46% 3.08% 2.93% 3.26% 2.92% 2.77% 0.35% 0.29% 0.28% 4Q20 1Q21 2Q21 3Q21 4Q21 Net Interest Income & Net Interest Margin1 Key Performance Drivers • Net interest income (excluding PPP) decreased $0.3mm • PPP 1% coupon + fees • $4.5mm decrease to NII • 5 bps decrease to NIM • NIM decreased 15 bps v
Slide 26: Noninterest Income
26 Noninterest Income Key Performance Drivers • 4Q21 adjusted noninterest income • $3.5mm decrease in mortgage income • $3.9mm decrease in pipeline valuation • $0.2mm decrease in gain on sales • Gain on sale margins declined to 2.22% in 4Q21 vs. 2.40% in 3Q21 • 4Q21 Mortgage activity • Production wa
Slide 27: Noninterest Expense
27 Noninterest Expense Key Performance Drivers • 4Q21 adjusted noninterest expense • Increases in salaries & benefits and marketing expense • Other Expenses includes $0.7mm increase in Provision for Unfunded Commitments • 4Q21 adjusted efficiency ratio of 60.0% $ in millions 1Non-GAAP financial meas
Slide 28: Paycheck Protection Program (PPP)
28 Paycheck Protection Program (PPP) $ in millions 1 Net of unearned fees $6.4mm in unamortized fees remaining at 12/31/21 $355 ($186) $169 3Q21 Forgiveness/Paydowns 4Q21 Paycheck Protection Program Balances1
Slide 29: Credit
29 -1.05% 2.32% 1.71% 1.08% 3.86% 1.80% -0.01% -0.94% -9.49% -4.44% 13.78% 16.42% 17.00% 25.19% 25.66% 21.11% 19.12% 19.89% 6.39% 2015Y 2016Y 2017Y 2018Y 2019Y 2020Y 1Q21 2Q21 3Q21 4Q21 Net Charge-offs / NPL's ONB Peer Avg -0.02% 0.04% 0.03% 0.02% 0.05% 0.02% 0.00% -0.01% -0.09% -0.04% 0.15% 0.17% 0
Slide 30: Allowance for Credit Losses
30 Allowance for Credit Losses 1 Excludes loans held for sale $ in millions $107.9 ($1.0) ($1.5) $1.9 $107.3 Allowance 9/30/2021 Economic Forecast Portfolio Changes Qualitative Factors Allowance 12/31/2021 Allowance for Credit Losses Key Economic Assumptions Other Key Model Inputs • Commercial Asset
Slide 31: Outlook
31 Outlook Category Outlook Commercial Loans Healthy pipeline heading into 1Q bodes well for future growth; Expect majority of the remaining PPP balances to run off in the first half of 2022 Net Interest Income / Net Interest Margin Net interest income, excluding PPP, should remain relatively stable
Slide 32: Appendix
Appendix = OLD NATIONAL BANCORP’
Slide 33: Projected Purchase Accounting Impact
33 Projected Purchase Accounting Impact $ in millions 1 Projections are updated quarterly, assumes no prepayments and are subject to change Does not include the impact of the pending merger with First Midwest Actual Accretion Projected Accretion1 Actual Discount Projected Discount1 $57.2 $40.7 $40.7
Slide 34: Scrutinized Industries
34 Scrutinized Industries 6.5% Other Loans 93.5% Credit Quality Scrutinized Industries 1 Includes loans held for sale $ in millions Data as of 12/31/2021 Excludes PPP Loans % of Industry Balance Total Loans Exposure CRE - Senior Housing $254 1.9% $273 Restaurants $206 1.5% $241 Arts/Entertainment $1
Slide 35: Asset Liability Management Position
35 • 49% of loans are variable/floating-rate1 • $500mm of loan collar hedges with a weighted average 1-month LIBOR strike of 0.97% and cap of 1.83% • $100mm floor hedge with a 1-month LIBOR strike of 0.75% • Strong deposit franchise and disciplined pricing • 4Q21 total cost of deposits was 5 bps, im
Slide 36: Commitment to Strong Corporate Governance
36 Commitment to Strong Corporate Governance • Stock ownership guidelines have been established for named executive officers as follows: • As part of Old National’s Proxy filed March 8, 2021, each named executive officer has met their stock ownership requirement Position or Salary Target Ownership G
Slide 37: 2021 Executive Compensation
37 2021 Executive Compensation • Tied to long term shareholder value Performance Measure Weight Corporate EPS 60% ROATCE 20% Efficiency Ratio 20% Short Term Incentive Plan Proxy 5 Performance Measure Weight Performance-based (50% TSR & 50% ROATCE) 75% Service-based 25% Long Term Incentive Plan Proxy
Slide 38: Board of Directors
38 Board of Directors Director Market Background Andrew E. Goebel Evansville, IN 34-year career in the energy industry, most recently serving as President and Chief Operating Officer of Vectren Corporation Jerome F. Henry Jr. Ft. Wayne, IN Owner and President of Midwest Pipe & Steel, Inc., a company
Slide 39: Non-GAAP Reconciliations
39 Non-GAAP Reconciliations $ in millions, except per share data 4Q21 Net Income $56.2 Risk-Weighted Assets $16,588.5 Return on Risk-Weighted Assets 1.35% 4Q20 3Q21 4Q21 2021 As Reported: Net Interest Income (FTE) $164.6 $155.1 $150.2 $610.3 Add: Fee Income 58.5 54.5 51.5 214.2 Total Revenue (FTE) $
Slide 40: Non-GAAP Reconciliations
40 Non-GAAP Reconciliations $ in millions 4Q21 2021 As Reported: Net Interest Income (FTE) $150.2 $610.3 Add: Fee Income 51.5 214.2 Total Revenue (FTE) $201.7 $824.5 Less: Noninterest Expense 131.9 500.5 Pre-Provision Net Revenue (PPNR) $69.8 $324.0- Revenue Adjustments: Less: Debt Securities Gains/
Slide 41: Non-GAAP Reconciliations
41 Non-GAAP Reconciliations $ in millions 4Q20 1Q21 2Q21 3Q21 4Q21 2020 2021 Noninterest Expense As Reported $142.3 $117.7 $129.6 $121.3 $131.9 $541.4 $500.5 Less: ONB Way Charges (3.6) (1.5) (0.4) - - (42.6) (1.9) Less: Merger-Related Charges - - (6.5) (1.4) (6.7) - (14.6) Noninterest Expense Less
Slide 42: Non-GAAP Reconciliations
42 Non-GAAP Reconciliations $ in millions , except per share data 4Q20 3Q21 4Q21 Net Interest Income As Reported $161.1 $151.6 $146.8 FTE Adjustment 3.5 3.5 3.4 Net Interest Income (FTE) $164.6 $155.1 $150.2 Average Earning Assets $20,182.0 $21,228.6 $21,670.7 Net Interest Margin 3.19% 2.86% 2.71% N
Slide 43: Non-GAAP Reconciliations
43 Non-GAAP Reconciliations $ in millions 4Q21 Net Income As Reported $56.2 Less: Debt Securities Gains/Losses (net of tax) (0.3) Add: Merger-Related Charges (net of tax) 5.0 Adjusted Net Income $60.9 Average Total Assets $24,272.7 Return on Average Assets 0.93% Adjusted Return on Average Assets 1.0
Slide 44: Peer Group
44 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 Bank OZK OZK Cadence Bancorporation CADE Commerce Bancshares, Inc. CBSH F.N.B. Corporation FNB First Financial Ban
Slide 45: Old National Investor Relations Contact
45 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