Old National Bancorp · NASDAQ:ONB
Old National Bancorp — Investor Presentation (November 2018)
61 slides from Old National Bancorp's investor presentation, Nov 1, 2018
Slide 1: Investment Thesis
Investment Thesis FINANCIAL DATA AS OF September 30, 2018 DATED: November 1, 2018 Exhibit 99.1
Slide 2: Executive Summary
Executive Summary SLIDES 2 TO 22
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 190 financial centers1 230 ATMs1 Focused on community banking with a full suite of product offerings: Retail and small - medium size b
Slide 5: Old National's Footprint
Old National’s Footprint1 75 69 74 70 64 57 39 75 64 65 90 94 43 65 74 35 94 Indiana2 $7.2 billion deposits 51% of total franchise Michigan $1.3 billion deposits 9% of total franchise Wisconsin $1.4 billion deposits 10% of total franchise Kentucky $0.8 billion deposits 6% of total franchise Minnesot
Slide 6: Old National's Top MSAs Demographics
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 7: 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 8: Franchise Evolution: Built a Better Bank
Franchise Evolution Built a Better Bank… Source: S&P Global Market Intelligence 1 Proforma for Klein partnership (using Klein’s 9-30-18 Call Report) and the sale of 10 Wisconsin branches
Slide 9: With Improved Scale
… With Improved Scale Source: S&P Global Market Intelligence using FDIC Summary of Deposits as of June 30, 2018 1 Proforma for Klein partnership and the sale of 10 Wisconsin branches 25% increase 78% increase
Slide 10: 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 rec
Slide 11: Quality Low-Cost Deposit Franchise
Deposit Composition Deposit Growth 2012 – 3Q18 CAGR: 9.7% 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 September 30, 2018 Quality Low-Cost Deposit Franchise
Slide 12: Low Deposit Betas
Low Deposit Betas Deposit Beta1 Analysis – 3Q 2015 to Most Recent Quarter 1 Deposit beta defined as the increase in cost of interest bearing deposits divided by the increase in the end of period fed funds target rate since 3Q15 2 ONB & Peer data as of 09/30/18 3Last rate hike cycle from 1Q04 to 2Q07
Slide 13: Improved Balance Sheet Mix
Improved Balance Sheet Mix Increase of 13.9% 1 Includes loans held for sale
Slide 14: Non-Performing Loans
Non-Performing Loans 0.03% 0.01% Net charge-offs Under Performing Loans + OREO
Slide 15: Strong Credit Culture
Strong Credit Culture Peer Group data per S&P Global Market Intelligence as of 06/30/2018 - See Appendix for definition of Peer Group 1 Excludes loans held for sale 2 Source: Regulatory Call Report Legal lending limit at September 30, 2018 of $235 million per borrower 3-Year Cumulative NCOs / Avg. L
Slide 16: Low-Risk Balance Sheet
Low-Risk Balance Sheet Implies $1.2 billion increase in RWA to meet peer average Peer Group data per S&P Global Market Intelligence - See Appendix for definition of Peer Group 1 Peer data as of June 30, 2018 Risk Weighted Assets / Total Assets
Slide 17: Third Quarter 2018 Key Performance Indicators
Third Quarter 2018 Key Performance Indicators Earnings: Record net income of $51.3mm, a 30% increase over third quarter of 2017 Earnings per share of $0.34, an increase of 17% Adjusted net income1 was $52.4mm and adjusted EPS1 was $0.34 when excluding the following pre-tax items: $0.1mm in securitie
Slide 18: Branch Actions
Branch Actions Sold 10 Wisconsin branches October 26, 2018 Approximately $231 million in deposits No loans are associated with the deal Consolidation of 10 branches in 2018 9 in late 2Q18 and 1 in early 3Q18 Driving efficiencies through increased branch size and investment in mobile and online banki
Slide 19: Tax Matters
Tax Matters 3Q18 tax credit business impact After-tax impact of tax credits: ($1.2mm) or ($0.01) per share Tax credit amortization (recognized in noninterest expense): $9.2mm 4Q18 tax credit business forecast After-tax impact of tax credits: ~$0.03 per share Tax credit amortization (recognized in no
Slide 20: Outlook
Outlook Mid-single digit organic total loan growth Organic commercial and commercial real estate loan growth of approximately 8% to 10% Balances stable with strong end of period pipeline 3Q18 Adjusted1 Results 4Q18 Outlook Loan growth FTE NIM, excluding accretion income, should be stable to moderate
Slide 21: Commitment to Excellence
Commitment to Excellence tnaiscos & Hecate fee] BEST PLACE TO WORK FOR Fo feed | DISABILITY INCLUSION Fx 100% DISABILITY EQUALITY INDEX WORLD'S MOST ™" COMPANIES° WWW.ETHISPHERE.COM ©) onl So eal WorldatWork. 2017 VolunteerMatch Bloomberg Gender- Equality Index ETHISPHERE AMERICAN BANKER. BEST BANKS
Slide 22: Financial Details
Financial Details FINANCIAL DATA AS OF September 30, 2018 DATED: November 1, 2018
Slide 23: Third Quarter 2018 Results
Third Quarter 2018 Results Performance Drivers Net income up $7.3mm driven mostly by expense control Credit metrics remain strong – net charge-offs of 0.06% Reported noninterest income decrease after a $2.2mm gain on the sale of student loans in 2Q18 Reported noninterest expense includes $1.7mm in m
Slide 24: Pre-Provision Net Revenue
Pre-Provision Net Revenue Adjusted pre-provision net revenue1 increased 21.0% Y/Y Improvement driven by successful execution of our stated strategy Improved balance sheet mix Low cost core deposit funding Strong expense management Positive operating leverage continues 434 bps Y/Y improvement 287 bps
Slide 25: 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 2.2% Y/Y Total commercial loans: 49% of earning assets, up 8% Y/Y Indirect auto: 6.7% of earning assets, down 1.9% Y/Y Securities Duration of 4.49 vs. 4.46 in 2Q18 3Q18 yield wa
Slide 26: 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 YTD Commercial & industrial loan growth of over 11% annualized 3Q Total loans decreased 0.3%1 - 1.8% Commercial & in
Slide 27: Commercial Loan Portfolio Concentrations
Commercial Loan Portfolio Concentrations As of September 30, 2018 $ in millions 1 Includes held for sale Total C&I and CRE - $7,431 (Classed by Product Type)
Slide 28: Commercial Real Estate Loan Concentrations
Commercial Real Estate Loan Concentrations As of September 30, 2018 $ in millions CRE - $4,482 (Classed by Property Type) Multifamily by Product Type - $1,185 Multifamily by State - $1,185 (State Determined by Primary Address of Pledged Collateral)
Slide 29: Auto Loan Portfolio
Auto Loan Portfolio $ in millions as of September 30, 2018 Total portfolio average original loan term of 70 months and weighted average FICO score of 764 Total Portfolio yield of 3.38% 30+ Days Delinquency at 9/30/2018 is 0.66% Loans are originated within the ONB footprint
Slide 30: Investment Portfolio Purchases 3Q18
Investment Portfolio Purchases 3Q181 1 Data as of September 30, 2018 Q3 2018 Purchases- Book Value Treasuries - Agencies 53,705,386 Pools 13,675,574 CMO 125,107,685 Municipals 13,706,409 Corporates 7,060,897 ABS - Equity - Total 213,255,951
Slide 31: Investment Portfolio
Investment Portfolio $ in millions 1 Includes market value for both available-for-sale and held-to-maturity securities Investment Portfolio yield of 2.82% in 3Q18 vs. 2.77% in 2Q18
Slide 32: Stable Funding Costs
Stable Funding Costs Average Balances Period-End Balances 13.0% deposit beta2 through the current interest rate cycle Total deposit costs of 36 bps Total Interest-bearing deposit costs were 49 bps, up 8 bps from 2Q18 Sold 10 Wisconsin branches with approximately $231mm in deposits on October 26, 201
Slide 33: Key Performance Drivers: Net Interest Margin
Key Performance Drivers NIM decreased 4 bps vs. 2Q18 0 bps interest rate increase/volume/mix - 11 bps accretion + 4 bps interest collected on nonaccruals + 3 bps # of days Net Interest Income & Net Interest Margin1 $ in millions 1Tax Equivalent Basis; Non-GAAP financial measure which Management beli
Slide 34: 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 35: 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 36: 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 37: 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 of $108.4mm Reflects ongoing focus on disciplined expen
Slide 38: Conservative Lending Limits/Risk Grades
Conservative Lending Limits/Risk Grades Borrower Asset Quality Rating (Risk Grades) In-House Lending Limit1 ($ 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 39: 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 40: 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 41: 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 42: 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, 2018 “Out-product Small Banks, Out-service Large Regionals” Highly complementary footprint and business mix that creates a $3B+ Minneapolis franchise #7 deposit market sh
Slide 43: Klein Improves Low Cost Deposit Franchise
Klein Improves Low Cost Deposit Franchise Source: S&P Global Market Intelligence and proforma for Klein partnership (using Klein’s 9-30-18 Call Report) & sale of 10 Wisconsin branches 1 Deposit beta calculated as change in cost of interest-bearing deposits over change in federal funds rate Cost of I
Slide 44: Indiana at a Glance
by the numbers Population: 6.7 million Total Resident Labor Force:3.3 million Unemployment Rate:3.5% (Sept. ‘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 45: 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 46: 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 47: Attractive Midwest Markets
Attractive Midwest Markets Minneapolis, MN1 Indianapolis, IN Milwaukee, WI Louisville, KY Grand Rapids, MI MSA Population: 3.7 million MSA Population: 2.1 million MSA Population: 1.6 million MSA Population: 1.3 million MSA Population: 1.1 million Major industries include: Manufacturing, applied rese
Slide 48: Commitment to Strong Corporate Governance: Ownership Guidelines
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 49: 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 50: 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 51: Appendix
Appendix Hi OLD NATIONAL BANCORP’
Slide 52: Non-GAAP Reconciliations
Non-GAAP Reconciliations $ in millions
Slide 53: Non-GAAP Reconciliations
Non-GAAP Reconciliations $ in millions
Slide 54: 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 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
Slide 58: Non-GAAP Reconciliations
Non-GAAP Reconciliations $ in millions
Slide 59: Non-GAAP Reconciliations
Non-GAAP Reconciliations $ in millions
Slide 60: Peer Group
Peer Group Like-size, publicly-traded financial services companies, generally in the Midwest, serving comparable demographics with comparable services as ONB
Slide 61: 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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