Old National Bancorp · NASDAQ:ONB
Old National Bancorp — Investor Presentation (November 2017)
61 slides from Old National Bancorp's investor presentation, Nov 16, 2017
Slide 1: Investment Thesis
Investment Thesis Financial Data as of September 30, 2017 Dated: November 16, 2017 Exhibit 99.1
Slide 2: Investment Thesis Executive Summary
Investment Thesis Executive Summary Slides 2 to 18 Financial Data as of September 30, 2017 Dated: November 16, 2017
Slide 3: Forward-Looking Statements
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 National Bancorp’s (“Old National’s”) financial condition, result
Slide 4: 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 5: Snapshot of Old National
Snapshot of Old National Largest financial services bank holding company headquartered in Indiana with financial centers located in Indiana, Kentucky, Michigan, Wisconsin and Minnesota 174 financial centers + 18 newly acquired in Minnesota 216 ATMs + 17 newly acquired in Minnesota Focused on communi
Slide 6: A Strategic Framework for Creating Long-Term Shareholder Value
A Strategic Framework for Creating Long-Term Shareholder Value Attractive footprint that offers room to expand in higher-growth markets and leading share in mature markets Consistent financial performance with focus on building tangible book value and providing adequate return for our shareholders D
Slide 7: Old National's Footprint
Old National’s Footprint Kentucky $0.8 billion deposits 6% of total franchise Michigan $1.3 billion deposits 10% of total franchise Wisconsin $1.7 billion deposits 13% of total franchise Indiana $6.8 billion deposits 55% of total franchise Based on FDIC Summary of Deposits as of June 30, 2017 Illino
Slide 8: A Look at Top Markets
A Look at Top Markets Source: SNL Financial
Slide 9: ONB's Transformational Journey
ONB’s Transformational Journey Since 2011, Old National has transformed its franchise by reducing low-return businesses and low-growth markets and investing in higher-growth markets Acquisitions 8 whole-bank, 1 FDIC and 1 branch purchase Divestitures Insurance agency business Exited Southern Illinoi
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
Slide 12: Lower Risk Balance Sheet vs. Peers
Lower Risk Balance Sheet vs. Peers Implies $1.4 billion increase in RWA to meet peer average Peer Group data per SNL Financial - See Appendix for definition of Peer Group 1 As of September 30, 2017 Risk weighted assets / total assets
Slide 13: Strong Core Deposit Funding Base with Favorable Cost of Deposits
Strong Core Deposit Funding Base with Favorable Cost of Deposits Deposit Composition Deposit Growth ($ in millions) ($ in billions) 2012 – Q3 2017 CAGR: 8.0% Cost of Deposits Peer Group data per SNL Financial - See Appendix for definition of Peer Group 1 As of September 30, 2017 1
Slide 14: Quality Low-Cost Deposit Franchise
Quality Low-Cost Deposit Franchise Deposit Beta1 Analysis – 3Q 2015 to 3Q 2017 1 Deposit beta defined as increase in cost of interest bearing deposits divided by increase in fed funds rate since 3Q15 2 Data as of 9/30/17 3Last rate hike cycle from 1Q04 to 2Q07 4 No financial disclosure during last c
Slide 15: 3Q17 Highlights
3Q17 Highlights Net income of $39.4 million, or $0.29 per share Results include the following pre-tax charges: $2.1 million for branch consolidations $1.9 million related to a client experience improvement initiative $0.4 million in merger and integration charges $0.3 million in severance 12.0% annu
Slide 16: Pre-Tax, Pre-Provision Income
Pre-Tax, Pre-Provision Income1 3Q16 2Q17 3Q17 Net Interest Income (FTE Basis) $113,123 $109,976 $114,099 Noninterest Income 47,243 49,271 46,366 Total Revenue (FTE Basis) $160,366 $159,247 $160,465 Noninterest Expense (108,062) (102,811) (103,702) Pre-Tax, Pre-Provision Income1 $52,304 $56,436 $56,7
Slide 17: Additional Branch Rationalization Actions
Additional Branch Rationalization Actions Continued focus on operating expenses and efficiency 14 ONB branches consolidated November, 2017 Cost savings of approximately $4.0 million in 2018 One-time charges of approximately $5.0 million in 2017 14.9% Increase Deposits Per Branch 1 Based on Anchor Ba
Slide 18: Commitment to Excellence
Commitment to Excellence = ETHISPHERE a | 2017 ETHICS SEALOF DistiNeTION & CERTIFICATION waonnoroanzanonon |e] S| DISABILITY Jasssuny — a= for oN VolunteerMatch ( Bloomberg } \ oes Corporate Engagement AWARD OF SIETHICAL, BEST BANKS S 0 eee a COMPANIES FOR 2017 Points of Light Institute
Slide 19: Investment Thesis
Investment Thesis Financial Data as of September 30, 2017 Dated: November 16, 2017
Slide 20: Loan Growth
Loan Growth $ in millions – End of Period Balances 1 Includes Loans Held for Sale 1 1 Annualized Growth of 7.3% Annualized Growth of 12.0% YTD Annualized Commercial Loan Growth of 9.8%
Slide 21: Commercial & Commercial Real Estate Loans
Commercial & Commercial Real Estate Loans $ in millions 1New Production includes 50% credit for line of credit unfunded commitments 2Yield is based on funded balances only New Production1 Production Yield2 Loan Pipeline Production Growth of 40.2%
Slide 22: Loan Production & Yield Trends
Loan Production & Yield Trends $ in millions New quarterly production includes unfunded commitments – Yield is based on funded balances only Quick Home Refinance (residential mortgage product) is included in the Residential Mortgage graph Direct Consumer includes Home Equity Lines of Credit Consumer
Slide 23: Commercial Loan Portfolio Concentrations
Commercial Loan Portfolio Concentrations As of September 30, 2017 $ in millions 1 Includes held for sale Total C&I and CRE - $5,419 (Classed by Product Type)
Slide 24: Commercial Real Estate Loan Concentrations
Commercial Real Estate Loan Concentrations As of September 30, 2017 $ in millions CRE - $3,370 (Classed by Property Type) Multifamily by Product Type - $1,036 Multifamily by State - $1,036 (State Determined by Primary Address of Pledged Collateral)
Slide 25: Auto Loan Portfolio
Auto Loan Portfolio $ in millions Total portfolio average original loan term of 70 months and weighted average FICO score of 765 Total Portfolio yield of 2.99% 30+ Days Delinquency at 9/30/2017 is 0.58% Loans are originated within the ONB footprint
Slide 26: Credit Quality Trends
$ in millions Credit Quality Trends
Slide 27: Net Charge-Offs / Provision
Net Charge-Offs / Provision $ in millions 2017 YTD net charge-offs of $1.7 million & provision expense of $2.0 million
Slide 28: Conservative Lending Limits/Risk Grades
Conservative Lending Limits/Risk Grades Borrower Asset Quality Rating (Risk Grades) In-House Lending Limit1 ($ in millions) 0 – Investment Grade $45 1 – Minimal Risk $40 2 – Modest Risk $35 3 – Average Risk $30 4 – Monitor $25 5 – Weak Monitor $17.5 6 – Watch $7.5 7 – Criticized (Special Mention) $5
Slide 29: Acquired Loans
Acquired Loans $ in millions – as of September 30, 2017 PCI = Purchased Credit Impaired
Slide 30: Net Interest Margin
Net Interest Margin1 1 Fully taxable 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 2 Accretion income is interest income in excess of contractual interest income associate
Slide 31: Projected Purchase Accounting Impact
Projected Purchase Accounting Impact Actual Accretion Projected Accretion1 Actual Discount Projected Discount1 $ in millions 1 Updated quarterly – subject to change IA = Indemnification Asset Manageable declines in purchase accounting impact expected in future periods Actual IA Amortization Net Inco
Slide 32: Investment Portfolio Purchases 3Q17
Investment Portfolio Purchases 3Q171 1 Data as of September 30, 2017
Slide 33: Investment Portfolio
Investment Portfolio 1Includes market value for both available-for-sale and held-to-maturity securities Investment Portfolio yield of 2.91% in 3Q17 vs. 2.93% in 2Q17
Slide 34: Modeled Interest Rate Sensitivity
$ in millions Change to Net Interest Income based on a two year time horizon Refer to “Interest Rate Curves” slide for rate curves Total non-maturity, interest-bearing accounts increase from 0.10% to 0.39% in the “Up 100 bps” scenario 18.15% of total non-interest bearing DDA are considered rate sens
Slide 35: Interest Rate Curves
Interest Rate Curves Up 100 vs. Base i 1M 2M 3M 4M SM 6M 9M lY 15Y 2¥ 25Y 3Y 4Y SY 7.5Y 10Y 15Y 20Y 30Y —Base ‘Up 100 Forward Curves ———— 1M 2M 3M 4M 5M 6M 9M 1Y 15Y 2¥ 25Y 3Y 4Y SY 7.SY 10Y 15Y 20Y 30Y — 9/30/2017 9/30/2018 9/30/2019
Slide 36: 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 Growth of 7.0% Growth of 4.6%
Slide 37: DFAST Disclosure
DFAST Disclosure 1 Loss % is calculated by adding the nine quarters of losses and dividing by the nine-quarter average loan balance for each portfolio 2 Commercial real estate includes multifamily, construction loans, and non-farm non-residential loans $ in millions
Slide 38: DFAST Disclosure
DFAST Disclosure 1 Calculated by dividing the nine-quarter cumulative totals for each line by average total assets over the same time period 2 Pre-Provision Net Revenue includes estimates for operational losses resulting from the hypothetical severely adverse scenario 3 Each Ratio, excluding the lev
Slide 39: Fee-Based Business Revenue
Fee-Based Business Revenue $ in millions
Slide 40: Noninterest Expense
$ in millions 1 Adjusted noninterest expenses = total noninterest expense less merger/integration costs, branch consolidation charges, severance, client experience initiative charges and intangible amortization. Adjusted noninterest expenses is a non-GAAP financial measure which Management believes
Slide 41: Rationalizing Distribution Channels
Rationalizing Distribution Channels Driving efficiencies through increased branch size and investment in mobile and online banking Consolidated 61 branches since January 1, 2014 Increased average deposits per branch by 31% Launched new online and mobile solution January 16, 2016 Increased mobile use
Slide 42: Tax Credits
Tax Credits YTD 9-30-17 as Reported 4Q17 Forecast1 Full-Year 2017 Forecast1 Tax credit amortization (Recognized in Noninterest Expense) $0 $12.7 to $22.2 $12.7 to $22.2 Income tax benefit $6.1 $8.8 to $19.0 $14.9 to $25.1 After-tax income (loss) on tax credits2 $6.1 ($3.9) to ($3.2) $2.2 to $2.9 Aft
Slide 43: 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 44: 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 45: Improving Unit Level Economics and FTE Productivity
Improving Unit Level Economics and FTE Productivity Core Deposits per Branch Branches $ in millions Noninterest Expenses per Average Assets Average Assets
Slide 46: Update on Anchor Minnesota Partnership
Update on Anchor Minnesota Partnership Partnership completed on November 1, 2017 90% stock / 10% cash 1.35 common shares of ONB + $2.625 in cash for each share of Anchor Bancorp Issued approximately 16.5 million shares of ONB Meeting or exceeding merger model assumptions Anticipate $3 million contri
Slide 47: Expanding Big Presence in Growth Markets
Expanding Big 10 Presence in Growth Markets ONB Anchor Pro Forma Branch Footprint Minneapolis MSA Deposit Market Share 1 1 Source: SNL Financial; based on Summary of Deposits as of 6/30/17 Consistent with our strategy of expansion into metropolitan markets with attractive growth prospects and compet
Slide 48: Success With Wisconsin Market Extension
Success With Wisconsin Market Extension Since September, 2016 conversion 11.4% growth in total commercial loans 38% of ONB’s consolidated 3Q17 total commercial production 9% increase in commercial pipeline 28% of ONB’s consolidated 3Q17 total pipeline Deposit attrition lower than modeled Wisconsin M
Slide 49: Indiana at a Glance
by the numbers Population: 6,633,053 Total Resident Labor Force:3,336,799 Unemployment Rate:3.6% (Apr. 2017, Seasonally Adjusted) GDP: $341.9B Exports:$34.7B 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 larg
Slide 50: 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 2nd best large city to start a business – Wallet Hub, 2016 7th “Best Places to Live” – U.S. News and World Report, 2016 Ann Arbor, Michigan Highe
Slide 51: Attractive Midwest Markets
Attractive Midwest Markets Source: SNL Financial, based on MSAs $ in thousands Average of ONB Footprint Average of ONB Footprint
Slide 52: 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 53: 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 54: 2017 Executive Compensation
2017 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 P
Slide 55: Appendix
Appendix Ml OLD NATIONAL BANCORP”
Slide 56: Non-GAAP Reconciliations
Non-GAAP Reconciliations $ in millions
Slide 57: Net Interest Income and Margin Reconciliation
3Q16 2017 3Q17 Net Interest Income (§ in 000's) $107,803} $104,333} $108,478] ible Equivalent $113,123} $109,976} Sit Average arms Assets $12,575,454] $12,844,504) $12,959, Net Interest Mc 3% 3.25% Net Interest itasin~ Fully Taxable Equivalent 3.60%] 3.42%|
Slide 58: Non-GAAP Reconciliations
Non-GAAP Reconciliations $ in millions
Slide 59: Non-GAAP Reconciliations
Non-GAAP Reconciliations = Q Q Q Total Noninterest Expense As Reported ($ in 000's) $108,062] $102,811] $103,702 Less: Intangible Amortization 233) (2.781)) (2,640) i L izati $104,829] $100,030] $101,061 Less: ida E i itiati g (1684) (4,332) Less: Merger and Integration Charges (6487) (369) [Adjuste
Slide 60: Old National's 2017 Peer Group
Old National’s 2017 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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