Old National Bancorp · NASDAQ:ONB
Old National Bancorp — Investor Presentation (February 2018)
67 slides from Old National Bancorp's investor presentation, Feb 6, 2018
Slide 1: Investment Thesis
Investment Thesis Financial Data as of December 31, 2017 Dated: February 6, 2018 Exhibit 99.1
Slide 2: Investment Thesis Executive Summary
Investment Thesis Executive Summary Slides 2 to 24 Financial Data as of December 31, 2017 Dated: February 6, 2018
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 191 financial centers 233 ATMs Focused on community banking with a full suite of product offerings: Retail and smal
Slide 6: 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 7: Old National's Footprint Demographics
Old National’s Footprint 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 Branches $ in millions CAGR: 16.3% CAGR: 1.8% CAGR: -7.4% CAGR: -1.5% 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
Deposit Composition Deposit Growth ($ in millions) ($ in billions) 2012 – 2017 CAGR: 11.2% Cost of Total Deposits Peer Group data per SNL Financial - See Appendix for definition of Peer Group 1 As of December 31, 2017 1 Quality Low-Cost Deposit Franchise
Slide 14: Low Deposit Betas
Low Deposit Betas 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 Peer data as of 9/30/17 - ONB data as of 12/31/17 3Last rate hike cycle from 1Q04 to 2Q07 4 No financia
Slide 15: Improved Balance Sheet Mix
Improved Balance Sheet Mix Increase of 26.3% 1 Includes loans held for sale
Slide 16: Strong Credit Culture
Strong Credit Culture Net Charge-Offs1 ALLL to Organic Loans Credit Quality2 Remaining Discount to Acquired Loans Peer Group data per SNL Financial - See Appendix for definition of Peer Group 1Peer Data is through 9/30/2017 2 As a % of end of period loans, excludes loans held for sale
Slide 17: Strong Credit Culture
Strong Credit Culture Peer Group data per SNL Financial as of 9/30/2017 - See Appendix for definition of Peer Group 1 Excludes loans held for sale 2 Source: Regulatory Call Report Legal lending limit at December 31, 2017 of $218.8 million per borrower 3-Year Cumulative NCOs / Avg. Loans1 CRE Concent
Slide 18: Low-Risk Balance Sheet
Low-Risk Balance Sheet Implies $1.3 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 September 30, 2017 Risk Weighted Assets / Total Assets
Slide 19: 4Q17 Highlights
4Q17 Highlights Net loss of $18.5 million, or $0.13 per share Results include an estimated $39.3 million deferred tax asset revaluation as well as the following pre-tax charges: $11.9 million in merger and integration charges $11.7 million in tax credit amortization $6.6 million for branch consolida
Slide 20: 2017 Financial Highlights
2017 Financial Highlights Reported net income of $95.7 million, or $0.69 per share Results include an estimated $39.3 million deferred tax asset revaluation as well as the following pre-tax charges: $12.3 million in merger and integration charges $11.7 million in tax credit amortization $14.0 millio
Slide 21: Taxes: Full-Year 2018 Forecast
Taxes Tax Credit Business Full-Year 2018 Forecast Tax credit amortization (Recognized in Noninterest Expense) $17 to $20 Income tax benefit $20 to $23 After-tax income (loss) on tax credits1 ~ $3.0 After-tax income (loss) on tax credits1 (per share) ~ $0.02 $ in millions except per-share data Income
Slide 22: Pre-Tax, Pre-Provision Income
Pre-Tax, Pre-Provision Income1 10.5% increase $ in thousands 1 Non-GAAP financial measure which Management believes is useful in evaluating the financial results of the Company
Slide 23: Efficiency Ratio
Efficiency Ratio1 $ in thousands 1 Non-GAAP financial measure which Management believes is useful in evaluating the financial results of the Company 230 bps improvement Over 370 basis point improvement year-over-year in adjusted operating leverage
Slide 24: Commitment to Excellence
Commitment to Excellence = ETHISPHERE a | con ETH ICS SEALOF DISTINCTION (oil B CERTIFICATION DISABILITY | = EE | - VolunteerMatch Bloomberg setae ———— BESTBANKS = &|GoIMPANIES” Points of Light Institute TO WORK y ETHISPHERE I! ae FOR 2017 MW ETHISPRERECOM
Slide 25: Investment Thesis
Investment Thesis Financial Data as of December 31, 2017 Dated: February 6, 2017
Slide 26: Loan Growth
Loan Growth $ in millions – End of Period Balances 1 Includes Loans Held for Sale 1 1 Annualized Organic Growth of 4.8% Annualized Organic Growth of 10.1% Organic Growth of 4.8% Organic Growth of 10.1% 1 1
Slide 27: 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 22.9%
Slide 28: 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 29: Commercial Loan Portfolio Concentrations
Commercial Loan Portfolio Concentrations As of December 31, 2017 $ in millions 1 Includes held for sale Total C&I and CRE - $7,072 (Classed by Product Type)
Slide 30: Commercial Real Estate Loan Concentrations
Commercial Real Estate Loan Concentrations As of December 31, 2017 $ in millions CRE - $4,355 (Classed by Property Type) Multifamily by Product Type - $1,125 Multifamily by State - $1,125 (State Determined by Primary Address of Pledged Collateral)
Slide 31: Auto Loan Portfolio
Auto Loan Portfolio $ in millions Total portfolio average original loan term of 70 months and weighted average FICO score of 764 Total Portfolio yield of 3.08% 30+ Days Delinquency at 12/31/2017 is 0.73% Loans are originated within the ONB footprint
Slide 32: Investment Portfolio Purchases
Investment Portfolio Purchases 4Q171 1 Data as of December 31, 2017
Slide 33: Investment Portfolio
Investment Portfolio 1Includes market value for both available-for-sale and held-to-maturity securities Investment Portfolio yield of 2.89% in 4Q17 vs. 2.91% in 3Q17
Slide 34: 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 35: 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 36: 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 Interest Rate Sensitivity models use a 38% beta with no lag on non-maturity, interest bearing deposits 18% of total non-interest bearing DDA are considered rate sensitiv
Slide 37: Interest Rate Curves
Interest Rate Curves Up 100 vs. Base ——_ 1M 2M 3M 4M 5M 6M 9M 1Y 15Y 2Y 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 7.5Y 10Y 15Y 20Y 30Y 12/31/2017 12/31/2018 12/31/2019
Slide 38: Fee-Based Business Revenue
Fee-Based Business Revenue $ in millions Wealth Management Investments Mortgage Capital Markets 7.8% Increase 11.7% Increase 102.8% Increase
Slide 39: Noninterest Expense
$ in millions 1 Legacy noninterest expenses = total noninterest expense less merger/integration costs, branch consolidation charges, severance, client experience initiative charges, Foundation funding, tax credit amortization, MN expenses and pension termination expense. Legacy noninterest expenses
Slide 40: 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 52% Launched new online and mobile solution January 16, 2016 Increased mobile use
Slide 41: Credit Quality Trends
$ in millions Credit Quality Trends
Slide 42: Net Charge-Offs / Provision
Net Charge-Offs / Provision $ in millions 2017 net charge-offs of $2.5 million & provision expense of $3.1 million
Slide 43: Conservative Lending Limits/Risk Grades
Conservative Lending Limits/Risk Grades Borrower Asset Quality Rating (Risk Grades) In-House Lending Limit1 ($ 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 44: Acquired Loans
Acquired Loans $ in millions – as of December 31, 2017 PCI = Purchased Credit Impaired
Slide 45: 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 $0.26, or 40%, of the 3Q17 to 4Q17 reduction was due to the estimated $39.3 million deferred tax asset revaluation
Slide 46: 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 47: 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 48: Minnesota Partnership – November 1, 2017
Minnesota Partnership – November 1, 2017 Day 1 balance sheet Loans (net of discount) of $1,595.4 million Deposits of $1,777.4 million Total loan mark of $47.4 million, or 2.9% Goodwill recorded of $173.0 million Intangibles recorded of $27.3 million Issued 16.5 million shares of common stock Convers
Slide 49: Expanding Big 10 Presence in Growth Markets
90 90 94 35 94 72 74 70 64 57 39 43 75 69 75 64 65 65 74 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 metropo
Slide 50: Indiana at a Glance
by the numbers Population: 6.7 million Total Resident Labor Force:3.3 million Unemployment Rate:3.4% (Dec. ‘17, 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 l
Slide 51: 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 52: Attractive Midwest Markets
Attractive Midwest Markets Source: SNL Financial, based on MSAs $ in thousands Average of ONB Footprint Average of ONB Footprint
Slide 53: 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 54: Appendix
Appendix Ml OLD NATIONAL BANCORP”
Slide 55: 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 56: 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 57: 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 58: 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 59: 4Q17 Noninterest Expense Detail
4Q17 Noninterest Expense Detail 1 Charges include $11.9 million for merger/integration, $3.6 million for branch consolidation and client experience initiative, $1.6 million for severance and $1.3 million for Foundation funding
Slide 60: Non-GAAP Reconciliations
Non-GAAP Reconciliations $ in thousands
Slide 61: Net Income (Loss)
Net Income (Loss) |Average Total Assets Net Income (Loss) 2017 $9 $15, 4Q17 (61 Deduct: Securities Gains (net of tax) |Add: M&A Charges (net of tax) |Add: Branch Consolidations, Severance, Foundation Funding, Client |Adjusted Net Income Return on Average Assets |Adjusted Return on Average Assets Exp
Slide 62: Reconciliations
No Reconciliations 2010 2017 Net Income (Loss) $38.2] $95.7] |Add: Intangible amortization (net of tax) $4.0) $7.7] Tangible Net Income (Loss) $42.2] $103.4} Average Total Equity $869.2] $1,923.6 Less: Average Goodwill (167.9) (685.7)} Less: Average Intangibles (29.1)} Average Tangible Shareholders'
Slide 63: Non-GAAP Reconciliations
Non-GAAP Reconciliations $ in thousands
Slide 64: Non-GAAP Reconciliations
Non-GAAP Reconciliations 1 Tax-effect calculations use estimated full-year 2017 FTE tax rate excluding the estimated $39.3 million deferred tax asset revaluation
Slide 65: Non-GAAP Reconciliations
Non-GAAP Reconciliations $ and shares in millions
Slide 66: 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
Slide 67: 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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