Old National Bancorp · NASDAQ:ONB
Old National Bancorp — Investor Presentation (February 2014)
68 slides from Old National Bancorp's investor presentation, Feb 10, 2014
Slide 1: Old National Bancorp Investment Thesis
Dated: February 10, 2014 Old National Bancorp Investment ThesisFinancial Data as of 12-31-13
Slide 2: Executive Summary
Dated: February 10, 2014 Old National Bancorp Investment Thesis Executive SummarySlides 2 to 15Financial Data as of 12-31-13
Slide 3: Additional Information for Shareholders of Tower Financial Corporation
Additional Information for Shareholders of Tower Financial Corporation Communications in this presentation 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
Slide 4: Additional Information for Shareholders of United Bancorp, Inc.
Additional Information for Shareholders of United Bancorp, Inc. Communications in this presentation 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 ("Old N
Slide 5: Forward-Looking Statement
Forward-Looking Statement 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 National's financial condition, results of operations, asset and c
Slide 6: Non-GAAP Financial Measures
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 adj
Slide 7: Why Old National Bancorp?
Why Old National Bancorp? Focused on driving core net incomeConservative and consistently applied credit stance since before current cycle has led to strong credit qualityNo subprime businessLending to clients we know in our footprintTransforming footprint to higher-growth marketsCommitment to provi
Slide 8: Commitment to Excellence
Commitment to Excellence Commitment to Excellence BANKING INDUSTRY ETHISPHERE 2013
Slide 9: Corporate Summary
Corporate Summary Corporate Summary Corporate Summary Corporate Summary Investor Inquiries:Lynell J. Walton, CPASVP - Director of Investor Relations812-464-1366 lynell.walton@oldnational.com 1 Non-GAAP financial measure - refer to Appendix for reconciliation
Slide 10: The Old National Landscape
The Old National Landscape Old National has banking centers across the four-state area. In the markets below, Old National ranks first or second in deposit share. * Indicates markets with recent partnerships. Proforma Ownership as of 2/3/2014. Source: SNL Financial FDIC Summary of Deposits. MSA Mark
Slide 11: Deposit / Unemployment Distribution
Deposit / Unemployment Distribution Deposit / Unemployment Distribution 44.9% / 5.7% 0.5% / 6.0% 3.1% / 6.8% 0% / 8.0% 42.3% / 6.1% 9.2% / 5.8% % of ONB's Indiana deposits1 / Regional unemployment Unemployment data provided by Indiana Department of Workforce Development and Bureau of Labor Statistic
Slide 12: Our Indiana Footprint Economic Vital Signs
Our Indiana Footprint Economic Vital Signs Economic Vital Signs Strong Stable or Mixed Decline Sources: US Bureau of Labor Statistics, US Dept. of Labor, Stats Indiana, Indiana Association of Realtors, Yahoo Finance, IN Dept. of Revenue
Slide 13: Indiana's Economic Achievements
Indiana's Economic Achievements "AAA" Credit Rating - Fitch, Moody's and Standard and Poor2nd Most Competitive State - Site Selection Magazine3rd Best U.S. State for Manufacturing Jobs - CNBC 5th Best State for Business - CEO Magazine8th Fastest Growing State Economy - USA Today280 new manufacturing
Slide 14: Executing the Plan - 4Q13 Highlights
Executing the Plan - 4Q13 Highlights Executing the Plan - 4Q13 Highlights 1 See Appendix for Non-GAAP reconciliation
Slide 15: Executing the Plan - 2013 Highlights
Executing the Plan - 2013 Highlights Executing the Plan - 2013 Highlights 1 See Appendix for Non-GAAP reconciliation
Slide 16: Old National Bancorp Investment Thesis
Dated: February 10, 2014 Old National Bancorp Investment Thesis Financial Data as of 12-31-13
Slide 17: Pre-Tax, Pre-Provision Income
Pre-Tax, Pre-Provision Income1 1 Non-GAAP financial measure which Management believes is useful in evaluating the financial results of the Company - see Appendix for Non-GAAP reconciliation $ in millions Increase of 16.8% 4Q12 to 4Q13 $34.0 $31.2 $39.7 $127.8 $142.7 11.7% 27.2%
Slide 18: Net Interest Margin
Net Interest Margin1 1 Fully taxable equivalent basis 2 ONB Core includes contractual interest income of Monroe, Integra and IN Community loans 2 Earning assets reflect purchased assets, net of discount 4.34% 4.04% 3.97% 3.96% 4.11%
Slide 19: Asset/Liability/Revenue Composition
Asset/Liability/Revenue Composition *Consumer Loans consist of 17% direct, 52% indirect and 31% HELOC. Period-End 12-31-13 Fourth Quarter 2013 Assets Liabilities Total Revenues, excluding Securities Gains *Other Income includes 0.5% for Mortgage Banking Revenue, 1.2% for Company-Owned Life Insurance
Slide 20: Organic Growth - Loan Production
Organic Growth - Loan Production $ in millions Commercial loans at face value - new lines of credit assume 50% utilization
Slide 21: Average Total Loan Trends
Average Total Loan Trends $ in millions - Quarterly averages - excludes residential loans and leases held for sale 4Q12 to 4Q13 increase of $44.1 million, or 1%, in average non-covered loansSold $11.6 million in leases in mid-3Q13 and $96.9 million in residential mortgage late-3Q13
Slide 22: Commercial Loans
Commercial Loans $ in millions $ in millions ONB 2007-2008 Average = 39.9%
Slide 23: Loan Portfolio at December 31, 2013
Loan Portfolio at December 31, 2013 $ in millions - period-end balances $29.3 Comml, $81.9 CRE, $78.7 Consumer, $27.9 Resi Mortg Covered Loans (Integra) 5%
Slide 24: Loan Concentrations - Excluding Covered Loans
Loan Concentrations - Excluding Covered Loans At 12-31-13 Commercial Commercial Real Estate Diversified Commercial Loan Portfolio Diversified Commercial Loan Portfolio (CHART)
Slide 25: Conservative Lending Limits/Risk Grades
Conservative Lending Limits/Risk Grades Conservative Lending Limits/Risk Grades In-house lending limits conservative relative to ONB's legal lending limit at 12-31-13 of $108.0 million per borrower 1Includes entire relationship with borrower Borrower1 Asset Quality Rating (Risk Grades) 8 - Classifie
Slide 26: Credit Quality - Net Charge-Offs
Credit Quality - Net Charge-Offs $ in millions 1 Excludes covered loans Consolidated Provision for Loan Losses decreased from $5.0 million in 2012 to ($2.3) million in 2013
Slide 27: Credit Quality - Excluding Covered Loans
Credit Quality - Excluding Covered Loans
Slide 28: Credit Quality - ALLL and Mark Summary
Credit Quality - ALLL and Mark Summary $ in millions 1 Non-GAAP financial measure which Management believes useful to demonstrate that the remaining discount considers credit risk and should be included as part of total coverage N/A = not applicable
Slide 29: Covered Assets / Risk Grades
Covered Assets / Risk Grades $ in millions - period-end balances *Covered loans shown net of $96.3 million discount Commercial Loans On this portfolio of covered loans*, the FDIC will reimburse Old National for 80% of the losses up to $275.0 million, 0% of losses from $275.0 million up to $467.2 mil
Slide 30: Credit Quality - Excluding Covered Loans
Credit Quality - Excluding Covered Loans Peer Group data per SNL Financial See Appendix for definition of Peer Group 1As a % of end of period total loans
Slide 31: Credit Quality - Excludes Covered Loans
Credit Quality - Excludes Covered Loans 30+ Day Delinquent Loans Specific Segment Overview (As a % of End of Period Total Loans)
Slide 32: Credit Quality - Excluding Covered Loans
$ in millions Refer to Appendix for ONB Risk Grade Table Credit Quality - Excluding Covered Loans
Slide 33: Shared National Credits - Excludes Covered Loans
Shared National Credits - Excludes Covered Loans *All but one in Indiana, Kentucky or Illinois **ONB's risk grade scale is 0 (investment grade) to 9 (nonaccrual)
Slide 34: Investment Portfolio
Investment Portfolio 1Includes market value for both available for sale and held to maturity securities
Slide 35: Investment Portfolio Purchases
Investment Portfolio Purchases 4Q131 1 Data as of December 31, 2013, for purchases made throughout 4Q13
Slide 36: Securities with OTTI
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Slide 37: Municipal Bond Portfolio by State
Municipal Bond Portfolio by State Based on book value at 12-31-13 Illinois exposure consists of 26 bonds representing 1.1% of entire municipal portfolio
Slide 38: CD Maturity Schedule
CD Maturity Schedule Represents CD maturities at December 31, 2013
Slide 39: Tangible Common Book Value
Tangible Common Book Value1 Acquired Monroe Bancorp 1-1-11 FDIC acquisition of Integra Bank 7-29-11 1 Non-GAAP financial measure management believes is useful in evaluating the financial results of the Company - see Appendix for Non-GAAP reconciliation Acquired IN Community Bancorp 9-15-12 Old Natio
Slide 40: Interest Rate Curves
nterest Rate Curves Up 200 vs. Base é IPP PS tte ry af oon ee oe ‘St ot Forward Curves ——== é oP PSS Pt PP es tet wes ot 2prpos —npipo nips
Slide 41: Capital Ratios
Capital Ratios Peer Group data per SNL Financial See Appendix for definition of Peer Group $ in millions 4Q13 included the repurchase of 889,124 shares of ONB common stock on the open marketOn January 23, 2014, ONB announced a 10% increase to the quarterly cash dividend and authorized a stock- repur
Slide 42: Capital Ratios
Capital Ratios Peer Group data per SNL Financial See Appendix for definition of Peer Group
Slide 43: Interest Rate Sensitivity
Interest Rate Sensitivity Change in Net Interest Income1 Interest Rate Sensitivity 1 Comparisons from flat rates, which assume stable rates and a stable balance sheet. These scenarios do not take into account changes in customer behavior that could result in changes to mix and/or volumes in the bala
Slide 44: BSA/AML - Cost to Comply
BSA/AML - Cost to Comply $ in millions 4Q13 included $.5 million in BSA/AML penalties
Slide 45: Total Revenue
Total Revenue Revenue Less Securities Gains and Accretion Income has increased 12.2% since 2009
Slide 46: Annual Efficiency Ratio
Continuous improvement for four years Annual Efficiency Ratio1 Peer Group data per SNL Financial See Appendix for definition of Peer Group 11.9% improvement 3.8% deterioration 1 Calculation excludes net securities gains and intangible amortization
Slide 47: Quarterly Efficiency Ratio
Incentive basis calculation excludes merger and integration charges and impact for new MI / IN branches Quarterly Efficiency Ratio1 1 Calculation excludes net securities gains and intangible amortization
Slide 48: 20% increase in total assets with 7.3% decrease in FTE
20% increase in total assets with a corresponding 7.3% decrease in FTE FTE and Asset Change $ in millions 1 Acquired Monroe Bancorp January 1, 2011, increasing FTE by 177 2 Acquired Integra Bank July 29, 2011, increasing FTE by 4493 Acquired IN Community Bank September 25, 2012, increasing FTE by 11
Slide 49: M&A Strategy
M&A Strategy Branch acquisition FDIC assisted transaction Whole bank purchase Must enhance Old National's mission of being a true "community bank" Must align both strategically and culturally Must meet/exceed financial targets Must pass rigorous due diligence process
Slide 50: M&A Strategy
M&A Strategy Focus on community banking, client relationships and consistent quality earningsTarget geographic marketsMid-sized markets within or near existing franchise with average to above average growth ratesIn market community banks where significant cost saves could be achieved
Slide 51: Transforming Old National's Landscape
Transforming Old National's Landscape1 Shifting to higher-growth markets from lower- growth marketsEntry and fill-in of existing higher-growth markets through strategic acquisitions Acquired 175 branches +25 pendingSale or consolidations in lower-growth, non-core marketsConsolidated 125 branches Sol
Slide 52: Returned to community bank model
Returned to community bank model 2004 2005 Sold non- strategic market - Clarksville, TN - 5 branches 2006 Sold non- strategic market - O'Fallon, IL - 1 branch 2007 2008 2009 2010 2011 2012 2013 Acquired St. Joseph Capital - Entry into Northern IN market February, 2007 Acquired 65 Charter One branche
Slide 53: Transforming Old National's Landscape
2004 2014 53 Pending Tower and United locations Transforming Old National's Landscape
Slide 54: ONB to Partner With UBMI
ONB to Partner With UBMI Compelling Strategic Rationale Strengthen ONB's Michigan footprint by expanding into new, high-quality markets Adds 18 full-service branches - $806 million in deposits and $643 million in loans2 Adds attractive fee business with $869 million in wealth management assets under
Slide 55: ONB to Partner With TOFC
ONB to Partner With TOFC Compelling Strategic Rationale Strengthen ONB's objective of being Indiana's bank by continuing to develop the Northern Indiana region Adds 7 full service branches - $581.6 million in deposits and $438.6 million in loans Adds attractive fee businesses with $523.3 in trust as
Slide 56: ONB Acquired Monroe Bancorp
ONB Acquired Monroe Bancorp Transaction closed 1-1-11Provides #1 market share in Monroe County (Bloomington, Indiana)Home to Indiana UniversityMarket has above-average growth rates and lower unemployment vs. state of IndianaSystems conversion occurred 5-14-11Balance sheet acquired1$419.4 million in
Slide 57: FDIC Acquisition of Integra Bank, NA
FDIC Acquisition of Integra Bank, NA Transaction Due DiligenceFinancial ImpactCapitalClosing / Conversion Purchased $1.8 billion in assets1 and assumed $1.8 billion of liabilities2 from the FDIC as receiver of Integra Bank, NA, Evansville, IN Approximately $.7 billion in loans covered by FDIC loss s
Slide 58: ONB Acquired Indiana Community
ONB Acquired Indiana Community Transaction Due DiligenceFinancial ImpactCapitalTARP RepaymentAcceptable Risk ProfileClosing Consideration: 100% stock transaction at an exchange ratio of 1.9455, resulting in 6.6 million shares issued Deal value = $88.5 million based on average ONB closing price of $1
Slide 59: ONB Acquired Bank of America Branches
ONB Acquired 24 Bank of America Branches 24 full-service branches4 in Northern Indiana20 in Southwest MichiganTotal deposits of $575 million1Total loans of $5 million12014 accretion of $.03 to $.05 per shareOne-time acquisition/conversion costs of $5.0 millionTransaction closed July 12, 2013 1 Depos
Slide 60: Appendix
Old National Bancorp Appendix
Slide 61: Committed to Strong Corporate Governance
Committed to Strong Corporate Governance Stock ownership guidelines have been established for named executive officers as follows:As of December 31, 2013, each named executive officer has met their stock ownership requirement ownership requirement ownership requirement ownership requirement ownershi
Slide 62: Executive Compensation
Executive Compensation Tied to long term shareholder value: Long Term Incentive Plan (CFO,CBA, CCO, Chief Legal Counsel) Long Term Incentive Plan (CFO,CBA, CCO, Chief Legal Counsel) Performance Measure Weight Performance-based 75% Service-based 25% Short Term Incentive Plan (CBA, CCO) Short Term Inc
Slide 63: Pre-Tax, Pre-Provision Income
Pre-Tax, Pre-Provision Income1 1Non-GAAP financial measure management believes is useful in evaluating the financial results of the Company 27.2% 16.8% (7.4%) 11.7% .7% (.2%)
Slide 64: Non-GAAP Reconciliations
Non-GAAP Reconciliations $ in millions
Slide 65: Non-GAAP Reconciliations
Non-GAAP Reconciliations $ in millions
Slide 66: Non-GAAP Reconciliations
Non-GAAP Reconciliations Sin thousands 4a12 1013 2013 3013 4013 Net Interest Income $84,361] $79,051 $79,191] $77,996| |Taxable Equivalent Adjustment 3,545) 3,912) 4,243) 4362] Net Interest Income — Taxable Equivalent $87,906] $82,962] $83,434] $82,358] |Average Earning Assets $8,093,291] $8,210,526
Slide 67: ONB's Peer Group
ONB's Peer Group ONB's Peer Group Like-size, publicly-traded financial services companies, generally in the Midwest, serving comparable demographics with comparable services as ONB
Slide 68: Investor Contact
Investor Contact Additional information can be found on theInvestor Relations web pages atwww.oldnational.comInvestor Inquiries:Lynell J. Walton, CPASVP - Director of Investor Relations812-464-1366lynell.walton@oldnational.com
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