Old National Bancorp · NASDAQ:ONB
Old National Bancorp — Q2 2014 Earnings Presentation
51 slides from Old National Bancorp's earnings presentation, Jul 28, 2014
Slide 1: Filed by Old National Bancorp Pursuant to Rule 425
Filed by Old National Bancorp Pursuant to Rule 425 under the Securities Act of 1933 Subject Company: Founders Financial Corporation. Commission File No.: 001-15817 The following presentation slides were reviewed by the executive officers of Old National Bancorp (“Old National”) in connection with Ol
Slide 2: Second-Quarter 2014 Earnings and Intent to Acquire Founders Financial Corporation
Old National Bancorp Second-Quarter 2014 Earnings and Intent to Acquire Founders Financial Corporation July 28, 2014
Slide 3: Lynell Walton, Investor Relations
Lynell Walton Investor Relations
Slide 4: Additional Information for Shareholders of Founders Financial Corporation
Additional Information for Shareholders of Founders Financial Corporation This communication does 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 Nation
Slide 5: Additional Information for Shareholders of LSB Financial Corp.
Additional Information for Shareholders of LSB Financial Corp. This communication does 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 National”) has fi
Slide 6: 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, statements about the expected timing, completion, financial benefits and other effects
Slide 7: 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 8: Executing the Plan – 2Q14 Highlights
Executing the Plan – 2Q14 Highlights 1 • Organicloangrowthof$139.6million , or11.4%annualized, over1Q14and 1 Continue to growthof$214.0million, or4.0%,from2Q14 2 Grow Core • Totalrevenuegrowthof4.1%from2Q13 Revenue • Organic growth in Banking, Wealth Management and Insurance 3 • Operational expenses
Slide 9: 2Q14 Financials
2Q14 Financials Net income of $18.8 million or $.18 per share Included in 2Q14 are the following items – $6.3 million in pre-tax merger and integration charges – $10.5 million unfavorable pre-tax change in indemnification asset – $.8 million pre-tax in other expense items – $1.0 million unfavorable
Slide 10: Chris Wolking, Chief Financial Officer
Chris Wolking Chief Financial Officer
Slide 11: Adjusted Income – Strong Growth
Adjusted Income1 – Strong Growth $117.0 $100.4 $89.9 CAGR of 14.1% $61.5 from 2011 to 2013 CAGR of 13.4% from 2011 to 1H2014 2011 2012 2013 YTD June 30, 2014 Adjusted income represents income before taxes less accretion income, change in indemnification assets, merger/integration expenses and costs
Slide 12: Total Revenue – Increasing Core Revenues
Total Revenue – Increasing Core Revenues $123.5 $122.4 Growth of $4.5 $123.6 million, or 4.1%, 2Q13 to 2Q14 in core revenue 2Q13 1Q14 2Q14 Accretion Income Revenue Less Securities Gains, Accretion Income and Amortization of Indemnification Asset Amortization of Indemnification Asset 11 $ in millions
Slide 13: Net Interest Margin
1 Net Interest Margin 4.22% 4.07% 3.97% 2Q13 1Q14 2Q14 Total NIM 3.97% 4.22% 4.07% Tower Accretion N/A N/A 0.06% IN Community Accretion 0.29% 0.33% 0.15% Integra Accretion 0.32% 0.48% 0.56% Monroe Accretion 0.07% 0.05% 0.04% ONB Core² 3.29% 3.36% 3.26% 1 Fully taxable equivalent basis, non-GAAP fina
Slide 14: Noninterest Expense – Well Controlled
Noninterest Expense – Well Controlled $98.1 $3.2 $2.2 $88.3 $0.9 2Q14 operational $86.9 $3.3 $6.3 expenses include $1.2 $0.9 $0.8 $2.5 $0.8 $.8 million in annual merit increases Anticipated $85.2 $83.6 $84.7 acquisition costs in 3Q14 of $3 million to $5 million ($0.4) ($1.9) 2Q13 1Q14 2Q14 *Other Ex
Slide 15: Interest Rate Sensitivity
Interest Rate Sensitivity 1 Change in Net Interest Income 3.41% 2.19% 2.36% 1.45% 1.67% 1.68% 1.13% 1.26% 2.24% 1.54% 0.46% 3Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 - 0.08% -2.55% -3.36% -3.34% -5.18% NII 200 Up NII Forward 1 Comparisons from flat rates, which assume stable rates and a stable balance shee
Slide 16: Tangible Common Book Value
Tangible Common Book Value 1 Acquisition Acquired Bank of Acquired Tower Of Integra America Financial Bank From Acquired IN Branches 7-12-13 Corporation FDIC Community 4-25-14 7-29-11 Bancorp 9-15-12 Originally estimated $8.35 $8.23 $8.08 TBV at Tower $7.79 $7.85 $7.92 close of $7.68 2Q11 2Q12 2Q13
Slide 17: Jim Sandgren, Chief Banking Officer
Jim Sandgren Chief Banking Officer
Slide 18: Loan Growth – Excluding Covered Loans
Loan Growth – Excluding Covered Loans $214.0 $5,379.1 $360.8 $4,912.8 $108.5 2Q13 Loan Sales Loans Obtained Organic Growth 2Q14 Through Acquisitions 17 End of period balances - $ in millions
Slide 19: Commercial Loans
Commercial Loans Commercial Loan Pipeline Commercial Line Utilization $524 $530 $507 2007-2008 Average 39.9% $58 $98 $93 36.5% 36.6% $131 $83 34.0% $160 $335 $349 $254 2Q13 1Q14 2Q14 2Q13 1Q14 2Q14 Discussed Proposed Accepted 18 $ in millions
Slide 20: Fee-Based Business Revenue
Fee-Based Business Revenue Wealth Management Insurance Investments $7.5 $0.6 $4.1 $4.1 $6.4 $9.8 $9.3 2Q13 2Q14 2Q13 2Q14 2Q13 2Q14 $ in millions 19
Slide 21: Daryl Moore, Chief Credit Officer
Daryl Moore Chief Credit Officer
Slide 22: Net Charge-Offs / Provision
Net Charge-Offs / Provision 1.94% 0.51% Non-Covered Covered 0.01% 0.01% -0.02% -0.39% 2Q13 1Q14 2Q14 2Q13 1Q14 2Q14 Consolidated NCOs 0.04% (0.03%) 0.07% Provision for Loan 1 ($3.3) ($0.4) $1.1 Losses Consolidated Provision ($3.7) $0.0 ($0.4) for Loan Losses $ in millions 1 Excludes FDIC-covered loa
Slide 23: Credit Quality – Excluding Covered Loans
Credit Quality – Excluding Covered Loans ONB Risk Grade Special Mention Loans Grade Name 0 Investment Grade $152.8 1 Minimal Risk 2 Modest Risk 3 Average Risk $112.3 $112.9 4 Monitor 1 5 Weak Monitor $98.8 6 Watch 2Q13 1Q14 2Q14 7 Criticized (Special Mention) 8 Classified (Substandard Accruing) 9 No
Slide 24: Bob Jones, Chief Executive Officer
Bob Jones Chief Executive Officer
Slide 25: Update on Acquisitions
Update on Acquisitions Michigan / Northern Indiana Branches Tower Financial Corporation –Fort Wayne, IN United Bancorp, Inc. –Ann Arbor, MI LSB Financial Corp. –Lafayette, IN 24
Slide 26: ONB to Acquire Founders Bank & Trust
ONB to Acquire Founders Bank & Trust Founders Bank & Trust offers 4 branches, $466 million in total assets and $378 2 million in deposits in Grand Rapids, giving ONB a strong opportunity to enter this vibrant market Includes $353 million in assets under management Expansion in Grand Rapids is a key
Slide 27: Promising Markets
Promising Markets Grand Rapids, Michigan 2014 Population Second highest population in Michigan 1,017,542 May, 2014 unemployment rate of 5.4%, compared to the national rate of 6.3% Ranked 24th in Forbes’ 2013 “Best cities to find jobs” 424,258 354,530 332,269 209,563 163,845 80,847 Kent county market
Slide 28: Transaction Rationale
Transaction Rationale Consideration of3.25common sharesofONB 1 + $38.00pershareincash(fixed)foreachcommon shareofFounders Impliedtransactionvalueof approximately$83.08per Foundersshareand $88.2millionin the aggregate, assuming ONB price of $13.87 (closing price as of July 25, 2014) Approximately 54%
Slide 29: Thank You Q&A
Old National Bancorp Thank You Q&A
Slide 30: Appendix
Old National Bancorp Appendix
Slide 31: Transforming Old National's Landscape
Transforming Old National’s Landscape Pending acquisition of United Bancorp , Inc.– Acquired Monroe Entry into Acquired IN Bancorp– Enhanced Ann Arbor, MI Bloomington, IN Community – Acquired St. Entry into Sold non- Joseph Capital – presence Columbus, IN strategic Entry into January, 2011 Acquired
Slide 32: Balance Sheet Mix as of March 31, 2014
Balance Sheet Mix as of March 31, 2014 1 1 Old National Bancorp Founders Bank & Trust Pro Forma Yield on Loans: 5.16% Yield on Loans: 4.58% Yield on Loans: 5.13% Total Loans: $6,407,379 Total Loans: $346,482 Total Loans: $6,753,861 Old National Bancorp 1 Founders Bank & Trust Pro Forma 1 Cost of Dep
Slide 33: Covering Durbin
Covering Durbin 1 Anticipated 2015 earnings per share accretion from recent acquisitions : Tower Financial Corp. $.08 to $.10 United Bancorp $.06 $.19 to $.21 cumulative accretion LSB Financial Corp. $.03 Founders Financial Corp. $.02 Durbin amendment expected to impact earnings $.04 to $.07 per sha
Slide 34: Interest Rate Curves
Interest Rate Curves Up 200 vs. Base 6% 5% 4% 3% 2% 1% 0% 1M 2M 3M 4M 5M 6M 9M 1Y 1.5Y 2Y 2.5Y 3Y 4Y 5Y 7.5Y 10Y 15Y 20Y 30Y Base Up 200 Forward Curves 4% 4% 3% 3% 2% 2% 1% 1% 0% 1M 2M 3M 4M 5M 6M 9M 1Y 1.5Y 2Y 2.5Y 3Y 4Y 5Y 7.5Y 10Y 15Y 20Y 30Y 6/30/2014 6/30/2015 6/30/2016 33
Slide 35: Investment Portfolio
Investment Portfolio Book Book Market Market 1 1 Value Value Value Value Market Mar. 31, June 30, Mar. 31, June 30, Value $ $ in millions 2014 2014 2014 2014 Change Federal National Mortgage Association $417.1 $423.7 Federal Home Loan Mortgage Corporation 161.4 213.1 Federal Farm Credit Bank 75.8 76
Slide 36: Investment Portfolio
Investment Portfolio Effective Effective Book Book Duration Duration Value Value Mar. 31, June 30, Mar. 31, June 30, $ in thousands 2014 2014 2014 2014 1 Money Market Investments 0.01 0.01 $12,827 $15,958 Treasuries 1.84 2.37 15,560 11,025 Agencies 4.03 3.55 674,709 804,063 Pools 2.47 2.28 523,766 4
Slide 37: Average Total Loan Trends
Average Total Loan Trends $5,380 $5,184 $5,070 $254 $345 $222 $244 $4,839 $4,826 $4,904 2Q13 1Q14 2Q14 1 Core ONB Integra Bank Tower Financial Corp. $ in millions 1 36 Includes both covered and non-covered loans
Slide 38: Loan Portfolio at June 30, 2014
Loan Portfolio at June 30, 2014 $21.6 Comml, $51.0 CRE, $73.5 Consumer, $25.0 Resi Mortg HELOC Covered Loans 5% (Integra) Residential 3% Mortgage 26% Commercial 27% Commercial $1,498.8 Commercial Real Estate 1,354.7 Consumer 808.5 Residential Mortgage 1,425.2 HELOC 280.5 Covered Loans (Integra) 171.
Slide 39: Covered Assets / Risk Grades
Covered Assets / Risk Grades ONB Risk Grade 2Q13 1Q14 1Q14 Grade Name Loans 90+ Days & Over $- $- $0.1 0 Investment Grade 1 Minimal Risk 2 Modest Risk Grades 1 through 6 - Pass $89.1 $56.7 $46.1 3 Average Risk Special Mention 14.0 7.5 6.5 4 Monitor Substandard Accruing 6.6 2.7 3.0 5 Weak Monitor 6 W
Slide 40: Credit Quality – Excluding Covered Loans
Credit Quality – Excluding Covered Loans 30+ Day Delinquent Loans 1 90+ Day Delinquent Loans 1 1.07% 0.85% 0.44% 0.30% 2Q13 1Q14 2Q14 2Q13 1Q14 2Q14 ONB Peer Group Average ONB Peer Group Average 1 As a % of end of period total loans Peer Group data per SNL Financial 39 See Appendix for definition of
Slide 41: Credit Quality – ALLL and Mark Summary
Credit Quality – ALLL and Mark Summary Allowance For Loan and Lease Loss/Loan Mark Summary ONB IN At June 30, 2014 Legacy Monroe Integra Community Tower Total Allowance for Loan Losses (ALLL) $40.4 $1.5 $3.9 $0.1 $0.2 $46.2 Loan Mark N/A $8.9 $70.5 $28.9 $26.0 $134.3 Total ALLL/Mark $40.4 $10.4 $74.
Slide 42: CD Maturity Schedule
CD Maturity Schedule Bucket Amount Rate ($ in 000’s) 0-30 days 87,962 0.55% 31-60 days 70,228 0.66% 61-90 days 66,387 0.48% 91-120 days 51,787 0.47% 121-150 days 47,046 0.43% 151-180 days 51,746 0.47% 181-210 days 33,767 0.82% 211-240 days 28,877 0.89% 241-270 days 39,501 0.69% 271-300 days 36,968 1
Slide 43: Capital Ratios
Capital Ratios Tier 1 Risk-Based Capital Ratio Tangible Common Equity to Tangible Assets 1 14.8% 14.4% 8.8% 14.0% 8.7% 8.4% 8.4% 8.1% 13.1% 13.1% 2Q13 1Q14 2Q14 2Q13 1Q14 2Q14 ONB Peer Group Average ONB Peer Group Average Tangible Common Equity – 3/31/2014$808.4 2Q Earnings 18.8 2Q Dividend (11.6) I
Slide 44: Noninterest Income
Noninterest Income $44.3 $39.9 $37.9 $5.7 $6.5 $5.9 $21.4 $22.3 $22.7 $6.7 $8.1 $7.4 $11.8 $11.1 $11.8 $(1.5) $(7.3) $(10.5) 2Q13 1Q14 2Q14 Debit Card and ATM Fees Fee-based business: Wealth Management, Insurance, Mortgage and Investments Other Income Service Charges on Deposits Amortization of Idem
Slide 45: Non-GAAP Reconciliations
Non-GAAP Reconciliations 2Q13 1Q14 2Q14 Total Revenues $125.4 $124.0 $124.1 Less: Provision for Loan Losses $3.7 $0.0 $0.4 Less: Noninterest Expense ($86.9) ($88.3) ($98.1) Pre-tax Income $42.2 $35.7 $26.4 Add: Provision for Loan Losses ($3.7) $0.0 ($0.4) Pre-Tax, Pre-Provision Income $38.5 $35.7 $2
Slide 46: Non-GAAP Reconciliations
Non-GAAP Reconciliations end of period balances 2Q13 1Q14 2Q14 Total Shareholders’ Equity $1,167.0 $1,185.2 $1,277.3 Deduct: Goodwill and Intangible Assets (364.4) (376.8) (439.3) Tangible Common Shareholders’ Equity $802.6 $808.4 $838.1 Total Assets $9,641.1 $9,544.8 $10,387.9 Add: Trust Overdrafts
Slide 47: Non-GAAP Reconciliations
Non-GAAP Reconciliations end of period balances 2Q13 1Q14 2Q14 end of period balances2Q13 1Q14 2Q14 Total Shareholders’ Total Shareholders’ Equity $1,167.0 $1,185.2 $1,277.3 Equity $1,167.0 $1,185.2 $1,277.3 Deduct: Goodwill and Deduct: Goodwill and Intangible Assets (364.4) (376.8) (439.3) Intangib
Slide 48: Non-GAAP Reconciliations
Non-GAAP Reconciliations 2Q13 1Q14 2Q14 Net Interest Income $79,191 $83,478 $84,482 Taxable Equivalent Adjustment 4,243 3,931 4,256 Net Interest Income – Taxable Equivalent $83,434 $87,409 $88,738 Average Earning Assets $8,406,635 $8,276,267 $8,730,063 Net Interest Margin 3.77% 4.03% 3.87% Net Inter
Slide 49: Non-GAAP Reconciliations
Non-GAAP Reconciliations Efficiency Ratio - As Reported 2Q13 1Q14 2Q14 Net Interest Income (FTE) $83.4 $87.4 $88.7 Noninterest Income Less Security Gains 44.4 40.1 38.0 Revenue Less Security Gains 127.8 127.5 126.7 Noninterest Expense 86.9 88.3 98.1 Intangible Amortization 1.8 1.8 2.0 Noninterest Ex
Slide 50: Old National's Peer Group
Old National’s Peer Group Like-size, publicly-traded financial services companies, generally in the Midwest, serving comparable demographics with comparable services as ONB 1st Source Corporation SRCE Heartland Financial USA, Inc. HTLF BancFirst Corporation BANF IBERIABANK Corporation IBKC BancorpSo
Slide 51: 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 50