Old National Bancorp · NASDAQ:ONB
Old National Bancorp — Investor Presentation (July 2018)
64 slides from Old National Bancorp's investor presentation, Jul 30, 2018
Slide 1: Investment Thesis
Investment Thesis FINANCIAL DATA AS OF June 30, 2018 DATED: July 30, 2018 Exhibit 99.1
Slide 2: Executive Summary
Executive Summary SLIDES 2 TO 23
Slide 3: Additional Information for Shareholders of Klein Financial, Inc.
Additional Information for Shareholders of Klein Financial, Inc. Communications in this document do not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the proposed merger, Old National Bancorp (“ONB”) wi
Slide 4: 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 5: 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 183 financial centers 225 ATMs Focused on community banking with a full suite of product offerings: Retail and small - medium size bus
Slide 6: 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 $7.0 billion deposits 57% of total franchise Michigan $1.3 billion deposits 10% of total franchise Wisconsin $1.7 billion deposits 13% of total franchise Kentucky $0.8 billion deposits 6% of total franchise Minnesot
Slide 7: Old National's Top MSAs
Old National’s Top 10 MSAs Demographics in Top 5 (50% of deposits) and Top 10 (65% of deposits) markets are more in line with national averages Expansion markets tend to be better than national average demographics Source: SNL Financial
Slide 8: 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 9: 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 SNL Financial and as of most recent quarter avail
Slide 10: Franchise Evolution Built a Better Bank
Franchise Evolution Built a Better Bank… Source: SNL Financial
Slide 11: With Improved Scale
… With Improved Scale…. Source: SNL Financial 33% increase 89% increase
Slide 12: and Better Efficiency
… and Better Efficiency $ in millions CAGR: 14.3% CAGR: 0.6% CAGR: -7.0% -499 bps 1 Non-GAAP financial measure which Management believes is useful in evaluating the financial results of the Company – see Appendix for Non-GAAP reconciliations
Slide 13: Quality Low-Cost Deposit Franchise
3 Deposit Composition Deposit Growth 2012 – 2Q18 CAGR: 10.1% Cost of Total Deposits Peer Group data per SNL Financial - See Appendix for definition of Peer Group $ in millions 1 As of June 30, 2018 Quality Low-Cost Deposit Franchise
Slide 14: Low Deposit Betas
Low Deposit Betas 14 Deposit Beta1 Analysis – 3Q 2015 to Most Recent Quarter 1 Deposit beta defined as increase in cost of interest bearing deposits divided by increase in fed funds rate since 3Q15 2 ONB & Peer data as of 06/30/18 3Last rate hike cycle from 1Q04 to 2Q07 4 No financial disclosure dur
Slide 15: Improved Balance Sheet Mix
Improved Balance Sheet Mix Increase of 13.5% 1 Includes loans held for sale
Slide 16: Credit
Credit $58 1.56% 0.75% I i 0.63% 0.64% 2015 3Q15 4015 1016 2016 316 4Q16 1017 2017 3Q17 4017 1018 2018 2011 2012 2013-2014 «2015-216 -«2017,-s«staIB ae i MEEEALLL Organic ——ALLL to Total Organic Loans $253 $224 0.05% 19.55% oO 0.03% 0.01%, 0.01% = Zz hue 0.03% 2017 3017 4017 1018 2038 2011 2012 2013
Slide 17: Strong Credit Culture
Strong Credit Culture Peer Group data per SNL Financial as of 03/31/2018 - See Appendix for definition of Peer Group 1 Excludes loans held for sale 2 Source: Regulatory Call Report Legal lending limit at June 30, 2018 of $230 million per borrower 3-Year Cumulative NCOs / Avg. Loans1 CRE Concentratio
Slide 18: Low-Risk Balance Sheet
Low-Risk Balance Sheet Implies $1.2 billion increase in RWA to meet peer average Peer Group data per SNL Financial - See Appendix for definition of Peer Group 1 Peer data as of March 31, 2018 Risk Weighted Assets / Total Assets
Slide 19: Second Quarter 2018 Key Performance Indicators
Second Quarter 2018 Key Performance Indicators Earnings: Net income of $44.0mm, a 13% increase over second quarter of 2017 Earnings per share of $0.29, an increase of 4% Adjusted net income1 was $44.1mm and adjusted EPS1 was $0.29 when excluding the following pre-tax items: $2.2mm gain on sale of st
Slide 20: Branch Actions
Branch Actions Entered into a branch purchase and assumption agreement for the sale of 10 Old National branches in Wisconsin to Marine Credit Union of La Crosse, Wisconsin Sale of approximately $261 million in deposits No loans are associated with the deal Anticipated closing1 in the fourth quarter
Slide 21: Tax Matters
Tax Matters 2Q18 tax credit business impact After-tax impact of tax credits: ($4.1)mm or ($0.03) per share Tax credit amortization (recognized in noninterest expense): $11.9mm 3Q18 tax credit business forecast After-tax impact of tax credits: ~($0.01) per share Tax credit amortization (recognized in
Slide 22: Outlook
Outlook Mid-single digit organic total loan growth Organic commercial and commercial real estate loan growth of approximately 10% 4.6% annualized total loan growth2 net of student loan sale 21.5% annualized commercial and industrial loan growth2 2Q18 Adjusted1 Results Balance of the Year Outlook Loa
Slide 23: Commitment to Excellence
Commitment to Excellence sinscow & SORT Chadd feed | BEST PLACE TO WORK FOR Fol fd | DISABILITY INCLUSION Fq 100% DISABILITY EQUALITY INDEX 0) WORLD'S MOST ™ &|COMPANIES: WWW.ETHISPHERE.COM BEST BANKS TO WORK FOR 2017 waTOnALoncaNzaronn | H DISABILITY Jasssuiry Corporate Engagement AWARD OF | OLD NA
Slide 24: Financial Details
Financial Details FINANCIAL DATA AS OF June 30, 2018 DATED: July 30, 2018
Slide 25: Second Quarter 2018 Results
Second Quarter 2018 Results Performance Drivers Total loan growth2 of 4.6% annualized (net of $64.9mm in student loans sold) Strong commercial and industrial loan growth2 of 21.5% annualized Credit metrics remain strong – net recoveries of 0.03% Reported noninterest income increase includes a $2.2mm
Slide 26: Pre-Provision Net Revenue
Pre-Provision Net Revenue Adjusted pre-provision net revenue1 increased 19.5% Y/Y Improvement driven by successful execution of our stated strategy Strong commercial and industrial loan growth Improved balance sheet mix Low cost core deposit funding Strong expense management Positive operating lever
Slide 27: Average Earning Asset Mix
Average Earning Asset Mix $ in millions 1 On the available-for-sale (AFS) portfolio Loans Loans: 74% of earning assets, up 2.7% Y/Y Total commercial loans: 48% of earning assets, up 8% Y/Y Indirect auto: 7% of earning assets, down 2% Y/Y Securities Duration of 4.46 vs. 4.30 in 1Q18 2Q18 yield was 2.
Slide 28: Loans
Loans $ in millions 1 Includes loans held for sale; based on period-end balances; growth is annualized 2 Reflects closing of Minnesota Partnership Average Balances Period-End Balances Total loans increased 4.6%1 Net of $64.9mm student loans sold + 21.5% Commercial & industrial + 0.2% Commercial real
Slide 29: Commercial Loan Portfolio Concentrations
Commercial Loan Portfolio Concentrations As of June 30, 2018 $ in millions 1 Includes held for sale Total C&I and CRE - $7,415 (Classed by Product Type)
Slide 30: Commercial Real Estate Loan Concentrations
Commercial Real Estate Loan Concentrations As of June 30, 2018 $ in millions CRE - $4,452 (Classed by Property Type) Multifamily by Product Type - $1,160 Multifamily by State - $1,160 (State Determined by Primary Address of Pledged Collateral)
Slide 31: Auto Loan Portfolio
Auto Loan Portfolio $ in millions as of June 30, 2018 Total portfolio average original loan term of 70 months and weighted average FICO score of 764 Total Portfolio yield of 3.27% 30+ Days Delinquency at 6/30/2018 is 0.65% Loans are originated within the ONB footprint
Slide 32: Investment Portfolio Purchases 2Q18
Investment Portfolio Purchases 2Q181 1 Data as of June 30, 2018
Slide 33: Investment Portfolio
Investment Portfolio $ in millions 1 Includes market value for both available-for-sale and held-to-maturity securities Investment Portfolio yield of 2.77% in 2Q18 vs. 2.74% in 1Q18
Slide 34: Stable Funding Costs
Stable Funding Costs Average Balances Period-End Balances 10.3% deposit beta through the current interest rate cycle Total deposit costs increased 6 basis points to 29 bps Seasonal decline in end-of-period total deposits Quarterly increase in average total deposits $ in millions 1 Reflects closing o
Slide 35: Net Interest Income & Net Interest Margin
Net Interest Income & Net Interest Margin1 $ in millions 1Tax Equivalent Basis; Non-GAAP financial measure which Management believes is useful in evaluating the financial results of the Company – see Appendix for Non-GAAP reconciliation Total Earning Assets Yield Net Interest Margin Interest-Bearing
Slide 36: 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 37: Modeled Interest Rate Sensitivity
$ in millions Change to Net Interest Income based on a two year time horizon Modeled Interest Rate Sensitivity Interest Rate Sensitivity models use a 41% beta with no lag on non-maturity, interest bearing deposits in increasing rate scenarios 19% of total non-interest bearing DDA are considered rate
Slide 38: 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 Adjusted nonint
Slide 39: 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 Adjusted noninterest expense in line with projections and include increased salary a
Slide 40: 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 $60.0 1 – Minimal Risk $52.5 2 – Modest Risk $47.5 3 – Average Risk $40.0 4 – Monitor $32.5 5 – Weak Monitor $22.5 6 – Watch $10.0 7 – Criticized (Special
Slide 41: 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 The estimated $39.3 million deferred tax asset revaluation recorded in 4Q17 reduced TBV by $0.26
Slide 42: 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 43: 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 44: Creating Minnesota's Preeminent Community Bank
Creating Minnesota’s Preeminent Community Bank Source: S&P Global Market Intelligence and FDIC Summary of Deposits as of June 30, 2017 “Out-product Small Banks, Out-service Large Regionals” Highly complementary footprint and business mix that creates a $3B+ Minneapolis franchise #5 deposit market sh
Slide 45: Klein Improves Low Cost Deposit Franchise
Klein Improves Low Cost Deposit Franchise Source: S&P Global Market Intelligence and Company documents 1 Rank based on most recent quarter data per S&P Global Market Intelligence for banks and savings banks headquartered in the Midwest, excluding merger targets 2 Deposit beta calculated as change in
Slide 46: Highly Complementary Product Mix
Highly Complementary Product Mix Old National (MN only) Klein Pro Forma (MN Only) Loans Deposits Total: $1.7B Total: $1.1B Total: $2.8B Total: $1.8B Total: $1.7B Total: $3.5B Source: S&P Global Market Intelligence and Company documents. Pro Forma Minnesota Franchise - Loan & Deposit Composition as o
Slide 47: Indiana at a Glance
by the numbers Population: 6.7 million Total Resident Labor Force: 3.3 million Unemployment Rate:3.2% (May ‘18, Seasonally Adjusted) GDP: $368.0B Exports: $37.7B Land Area:35,867 sq mi crossroads of America $4.6 billion and 13,300 new jobs from international investment (2012 – 2014) Home to the 2nd
Slide 48: 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 1st “10 Big Cities with the Fastest Growing Economies” – Forbes 2017 2nd best large city to start a business – Wallet Hub, 2016 7th “Best Places
Slide 49: Attractive Midwest Markets
Attractive Midwest Markets Source: SNL Financial, based on MSAs $ in thousands Average of ONB Footprint Average of ONB Footprint
Slide 50: Attractive Midwest Markets
Attractive Midwest Markets Minneapolis, MN Indianapolis, IN Milwaukee, WI Louisville, KY Grand Rapids, MI MSA Population: 3.6 million MSA Population: 2.0 million MSA Population: 1.6 million MSA Population: 1.3 million MSA Population: 1.1 million Major industries include: Manufacturing, applied resea
Slide 51: 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 52: 2018 Executive Compensation
2018 Executive Compensation Short Term Incentive Plan (CEO, CFO, COO, CCE, 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, CCE, Chief Legal Counsel) Performance Measure Weight Pe
Slide 53: Board of Directors
Board of Directors Director Market Background Alan W. Braun Evansville 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 indust
Slide 54: Appendix
Appendix Hi OLD NATIONAL BANCORP’
Slide 55: Non-GAAP Reconciliations
Non-GAAP Reconciliations $ in millions
Slide 56: Non-GAAP Reconciliations
Non-GAAP Reconciliations $ in millions
Slide 57: 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 58: Non-GAAP Reconciliations
Non-GAAP Reconciliations 2017 3017 4017 1018 2018 Net Interest Income As Reported $104.3 $108.5 $1186 $128.5 $132.0 8. FTE Adjustment 61 28 28 Net Interest Income (FTE) 110.0 1144 1247 131.3 134.8 Average Earning Assets $12,844.5 $12,959.7 $14,389.5 $15,205.9 $15,176.7 Net Interest 3.25% 35% 1% 3.38
Slide 59: Non-GAAP Reconciliations
Non-GAAP Reconciliations $ in millions
Slide 60: Non-GAAP Reconciliations
Non-GAAP Reconciliations $ in millions
Slide 61: Non-GAAP Reconciliations
Non-GAAP Reconciliations $ in millions
Slide 62: Non-GAAP Reconciliations
Non-GAAP Reconciliations $ in millions
Slide 63: Peer Group
Peer Group Like-size, publicly-traded financial services companies, generally in the Midwest, serving comparable demographics with comparable services as ONB
Slide 64: 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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