Old National Bancorp · NASDAQ:ONB
Old National Bancorp — Q4 2023 Earnings Presentation
45 slides from Old National Bancorp's earnings presentation, Feb 12, 2024
Slide 1: 4th Quarter 2023 Investment Thesis
4th Quarter 2023 Investment Thesis February 12, 2024
Slide 2: Executive Summary
Executive Summary Slides 6 —16
Slide 3: Forward-Looking Statements
Forward-Looking Statements These materials contain certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”), notwithstanding that such statements are not specifically identified as such. In addition, certain statements may be contain
Slide 4: Non-GAAP Financial Measures
Non-GAAP Financial Measures The Company's accounting and reporting policies conform to U.S. generally accepted accounting principles ("GAAP") and general practices within the banking industry. As a supplement to GAAP, the Company provides non-GAAP performance results, which the Company believes are
Slide 5: Additional Statements
Additional Statements Additional Information and Where To Find It In connection with the proposed Merger, Old National has filed with the SEC a preliminary Registration Statement on Form S-4 that includes a Proxy Statement of CapStar and a Prospectus of Old National, as well as other relevant docume
Slide 6: Corporate Strategy
Corporate Strategy Old National’s primary strategic objective is to be a top quartile performing “basic bank” that is a primary, trusted partner to our clients in the communities we serve, and a highly respected, highly valued employer that continually empowers our team members to grow, develop and
Slide 7: Snapshot of Old National
Snapshot of Old National Summary1,2 Company Description Headquarters Evansville, IN • 6th largest commercial bank headquartered in Market Cap $4,726 Midwest - top 30 banking company based in the U.S. by assets P/ TBV 147% • 258 branches and 350 ATMs Dividend Yield 3.5% LTM Average Daily Volume (Actu
Slide 8: The Best of Offense and Defense
The Best of Offense and Defense OFFENSE DEFENSE Top quartile FY2023 Quality, peer-lending deposit franchise financial metrics • Cycle to date total deposit beta of 35% 1 • 21.3% Adj. ROATCE with low 4Q23 cost of 185 bps • 50.4% Adj. Efficiency. Ratio1 • 75% of core deposits have tenure >5 years • 5%
Slide 9: Low-Risk Balance Sheet Relative to Peers
Low-Risk Balance Sheet Relative to Peers Risk-Weighted Assets / Total Assets1 3 and 15-Year Cumulative NCOs / Avg. Loans2 92% 85% 6.35% 81% 77% 76% 1.89% 0.27% 0.30% Lower Average Upper Peer Max ONB 3-Year 15-Year Quartile Quartile ONB Peer Average Financial data as of or for the quarter ended 12/31
Slide 10: ONB is Building Capital Faster than Peers
ONB is Building Capital Faster than Peers ROA1 ROATCE1 2024E Payout Ratio2 Equity Retention Rate3 WBS 1.5% WBS 20.3% CMA 54% CADE 30.2% FNB 1.3% ZION 19.3% VLY 44% ONB 12.4% HWC 1.2% ONB 19.0% FHN 42% WTFC 9.3% ONB 1.2% FNB 17.3% ASB 41% WBS 9.0% SNV 1.2% UMBF 17.0% CADE 40% WAL 8.6% UMBF 1.1% CADE
Slide 11: Strong TBV Per Share Growth Glidepath
Strong TBV Per Share Growth Glidepath $13.52 $12.11 Ex. 7% R of $11.70 AOCI1 G $11.43 CA -2021 $11.00 6 201 $10.35 $11.00 $9.42 $9.00 $9.42 $8.30 $8.37 $7.85 $7.67 $7.62 TBV Per Share CAGR (%) ex. AOCI Old National KRX 3-Year 9.0% 8.9% (3.8)% Incl. AOCI 1.3% Incl. AOCI 5-Year 7.0% 7.0% 2.2% Incl. AO
Slide 12: ONB has Dramatically Enhanced Franchise Value
ONB has Dramatically Enhanced Franchise Value 2013 2024E Added Scale Assets ($B) $10 $53 + $43B in assets AUM ($B) $6 $291 + $35B in Deposits Core EPS 2 $1.05 $1.83 + $23B in AUM TBV Per Share $7.85 $12.43 New Markets5 Efficiency Ratio 67% 54% Chicago ~$16B in Deposits #10Mkt Share Minneapolis ~$4B
Slide 13: Pending Partnership with CapStar Financial Holdings, Inc.
Pending Partnership with CapStar Financial Holdings, Inc. Expanding Nashville Presence; Positioned for Growth in Highly Attractive Markets CapStar is a dynamic $3 billion asset bank with top 10 deposit market share in Nashville Leverage ONB Meaningful expansion in growth markets MN Capabilities in O
Slide 14: Peer-Leading Deposit Franchise
Peer-Leading Deposit Franchise Period End Total Deposits Key Performance Drivers $35.0 $37.3 $1.2 $37.2 $1.0 • Period end deposits consistent; core deposits up $0.2 $3.2 $3.9 $3.6 0.4% $13.6 $13.5 $13.5 • Includes normal seasonal patterns in public funds; down ~$340 million $19.1 • Noninterest-beari
Slide 15: Net Interest Income Outlook
Net Interest Income Outlook 2024 Net Interest Income Outlook Gradually Managing to $1,527 $1,482 ~ $40 ~ $80 ~ $1,530 Neutral Rate Risk Position ~ $(2) 4Q ~$(70) • 55% of loans are variable/floating-rate $370 • ~$4.8 billion fixed-rate loans and securities expected to reprice over NTM 3Q $381 • 30%
Slide 16: Outlook (includes CapStar)
2 Outlook (includes CapStar) 1Q24 Outlook Full-Year 2024 Outlook (Vs. 4Q23 baseline annualized) EOP loans up 12% - 13% up 1% - 2% (up 4% - 6% excl. CapStar) (Including HFS) Total revenue (FTE basis)1 up ~4% down 1% - 2% (flat to down 1% excl. CapStar) (4Q23 baseline: $450 million) Net interest incom
Slide 17: Financial Details
Financial Details Data as of December 31, 2023
Slide 18: Record 2023 Highlights
Record 2023 Highlights Reported Adjusted1 Highlights EPS $1.94 $2.05 ▪ Strong reported results and record adjusted1 EPS, ROATCE, and efficiency ratio Net Income $566 $599 Key Performance Drivers Return on Average Assets 1.21% 1.28% ▪ Granular, peer-leading deposit franchise with Return on Average TC
Slide 19: Strong Fourth-Quarter 2023 Highlights
Strong Fourth-Quarter 2023 Highlights Reported Adjusted1 Key Performance Drivers EPS $0.44 $0.46 ▪ Granular, peer-leading deposit franchise with Net Income $128 $135 growth in core deposits of 0.4% and low total deposit beta of 35% Return on Average Assets 1.09% 1.14% ▪ Net interest income performan
Slide 20: Liquid, Well-Capitalized Balance Sheet
Liquid, Well-Capitalized Balance Sheet % Change End of Period Balances 4Q23 3Q23 4Q22 4Q23 vs. 3Q23 4Q23 vs. 4Q22 Available-for-sale securities, at fair value $6,713 $6,415 $6,774 5% (1)% Held-to-maturity securities, at amortized cost $3,013 $3,028 $3,089 —% (2)% Total loans1 $33,024 $32,700 $31,136
Slide 21: Total Loans and Earning Assets
Total Loans and Earning Assets Total Loans1 Up 6% YoY $31,136 $32,700 $33,024 Total loans1 • Disciplined growth of $324 million,+1.0% from 3Q23 5.42% 5.08% 6.06% • Commercial growth of $311 million, +1.3% 5.98% • $1.3 billion total production 5.08% • $870 million on balance sheet • $1.7 billion tota
Slide 22: Fourth-Quarter 2023 Results
Fourth-Quarter 2023 Results % Change 4Q23 3Q23 4Q22 4Q23 vs. 3Q23 4Q23 vs. 4Q22 Net Interest Income (FTE)1,2 $370 $381 $397 (3%) (7%) Provision for credit losses 12 19 11 (37%) 9% 1 Adjusted noninterest income 79 81 74 (2%) 7% Gain on sale of Visa Class B restricted shares 22 — — N/M N/M Gain on sal
Slide 23: Net Interest Income & Net Interest Margin
1 Net Interest Income & Net Interest Margin 1 Net Interest Income Key Performance Drivers • Net interest income1 decrease reflective of the $397 $381 rate environment $370 • NIM1 decreased 10 bps vs. 3Q23 • Strong low-cost deposit franchise; total deposit costs of 185 bps 3.85% • Low cycle to date t
Slide 24: Noninterest Income
Noninterest Income 4Q23 3Q23 4Q22 Key Performance Drivers Bank Fees $29 $29 $29 • Increase in wealth fees more than offset by lower mortgage fees and capital markets Wealth Fees 28 27 26 • 4Q23 mortgage activity • Production was $194 million2 Mortgage Fees 4 5 4 ▪ 92% purchase / 8% refi ▪ 55% sold i
Slide 25: Noninterest Expense
Noninterest Expense 4Q23 3Q23 4Q22 Key Performance Drivers • Salaries & employee benefits higher in Salary & Employee Benefits $137 $127 $131 4Q23 resulting from $10 million year-to- date performance-driven incentive Occupancy & Equipment 35 34 34 accrual true-up • Other expense higher due to an add
Slide 26: Credit Quality
Credit Quality Asset Quality Net Charge-Offs 0.91% 0.81% 0.24% 0.83% 0.25% 0.12% 0.05% 0.03% 0.19% 0.12% 0.22% 0.05% 4Q22 2Q23 4Q23 4Q22 3Q23 4Q23 30+ Day Delinquency Non-Performing Loans ONB ONB, excluding PCD Allowance for Credit Losses 1 $337 $3 $339 Key Performance Drivers $(1) • Net charge-offs
Slide 27: Conservative Lending Limit/Risk Grades
Conservative Lending Limit/Risk Grades Borrower Asset Quality Rating In-House Direct Lending Limit (Risk Grades) 0 - Investment Grade $100.0 1 - Minimal Grade $100.0 2 - Modest Grade $87.5 3 - Average Risk $75.0 4 - Monitor $60.0 5 - Weak Monitor $45.0 6 - Watch $25.0 Borrower Asset Quality Rating (
Slide 28: CRE Non-Owner Occupied Details
CRE Non-Owner Occupied Details CRE NOO - Office CRE NOO CRE NOO 4% of Total Loans Maturing <18 Mos. Maturing <18 Mos. Current Int. Rate Int. Rate <4% ~1% of Total Loans Suburban and other Office 2% Central Business $1.4 District $0.4 Other billion <1% >4% $2.7 billion <4% billion Multifamily Medical
Slide 29: Granular, Long-Tenured Deposit Base
Granular, Long-Tenured Deposit Base Average Core Account Balance Deposit Highlights • Insured deposits2 >70% of total deposits $1.5mm • Granular low-cost deposit franchise • Top 20 deposit clients represents only 6% $1.0mm of total deposits; weighted average tenure > 30 years; ~75% collateralized or
Slide 30: Strong Capital Position
Strong Capital Position 4Q23 3Q23 4Q22 Key Performance Drivers • 4Q23 ratios increased due to strong retained CET1 capital to RWA 10.70% 10.41% 10.03% earnings • HTM securities pre-tax unrealized losses of Tier 1 capital to RWA 11.35% 11.06% 10.71% $412 million (~$309 million net of tax) • No shares
Slide 31: Appendix
Appendix Lo OLD NATIONAL BANCORP’
Slide 32: Projected Acquisition Accounting Impact
Projected Acquisition Accounting Impact (excludes pending acquisition of CapStar Financial Holdings, Inc.) 1,2 Contractual Accretion Accretion on acquired loans and borrowings • $6 million recognized in 4Q23 $20 • $20 million contractual for 2024 $17 $13 2024 2025 2026 1 Projected Remaining Loan Dis
Slide 33: Commitment to Strong Corporate Governance
Commitment to Strong Corporate Governance • Stock ownership guidelines have been established for executive officers as follows: 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 Sal
Slide 34: Commitment to Excellence
Commitment to Excellence Bloomberg Gender-Equality Index 2023 NATIONAL ORGANIZATION ON DISABILITY [H28Krr] een | BEST PLACE TO WORK FOR [¥ . feet) | DISABILITY INCLUSION [4 100 DISABILITY EQUALITY INDEX Moopy’s INVESTORS SERVICE MM OLD NATIONAL BANCORP’ | 34
Slide 35: Commitment to Corporate Social Responsibility
Commitment to Corporate Social Responsibility Old National’s 2022 Environmental, Social and Governance (“ESG”) Report showcases our commitment to: • Strong corporate governance • Putting our clients at the center of all we do • Investing in our team members • Diversity, equity and inclusion • Streng
Slide 36: ESG At A Glance - 2022
ESG At A Glance - 2022 $600! in Community Reinvestment Act (CRA)-eligible community development loans that supported affordable housing, economic development and community revitalization/stabilization $870,000 seinen $386 MILLION 46,739 In CRA-eligible loan originations to small businesses and small
Slide 37: 2022 Executive Compensation
2022 Executive Compensation • Tied to long term shareholder value Short-Term Incentive Compensation Performance Measure Weight Corporate EPS 70% ROATCE 15% Merger-Related Cost Savings 15% Long-Term Equity Compensation Performance Measure Weight Performance-based (50% TSR & 50% ROATCE) CEO 60% All ot
Slide 38: Board of Directors and Corporate Governance
Board of Directors and Corporate Governance 93% Independent 47% Racial minority and gender diversity Tenure1 53% Other public company Lead Independent Since 2016, Rebecca Skillman has 20% experience Director served as lead Independent Director 0-5 years 33% 6-10 years Annual Elected each year for St
Slide 39: Non-GAAP Reconciliation
Non-GAAP Reconciliation 4Q23 3Q23 4Q22 2023 Net interest income $364.4 $375.1 $391.1 $1,503.1 FTE Adjustment 6.1 5.8 5.4 23.4 Net interest income (FTE) $370.5 $380.9 $396.5 $1,526.5 Add: Fee income 100.1 81.0 165.0 333.4 Total revenue (FTE) $470.6 $461.9 $561.5 $1,859.9 Less: Provision for credit lo
Slide 40: Non-GAAP Reconciliation
Non-GAAP Reconciliation 4Q23 3Q23 4Q22 Noninterest income $100.1 $81.0 $165.0 Less: Debt securities losses 0.8 0.2 0.2 Less: Gain on sale of Visa Class B restricted shares (21.6) 0.0 0.0 Less: Gain on sale of health savings accounts 0.0 0.0 (90.7) Adjusted noninterest income $79.3 $81.2 $74.5 Nonint
Slide 41: Non-GAAP Reconciliation
Non-GAAP Reconciliation 4Q23 3Q23 4Q22 2023 Noninterest Expense $284.2 $244.8 $282.7 $1,026.3 Less: Intangible amortization (5.9) (6.0) (6.8) (24.2) Noninterest expense, excluding intangible amortization 278.3 238.8 275.9 1,002.1 Adjustments: Less: FDIC Special Assessment (19.1) 0.0 0.0 (19.1) Less:
Slide 42: Non-GAAP Reconciliation
Non-GAAP Reconciliation 4Q23 3Q23 4Q22 2023 Net income applicable to common shares $128.5 $143.8 $196.7 $565.8 Add: Intangibles amortization, net of tax 4.4 4.6 5.1 18.1 Tangible net income applicable to common shares $132.9 $148.4 $201.8 $583.9 Total adjustments, net of tax $6.1 $5.4 $(32.4) $33.4
Slide 43: Non-GAAP Reconciliation
Non-GAAP Reconciliation 4Q23 3Q23 4Q22 Shareholders' equity $5,562.9 $5,239.5 $5,128.6 Less: Preferred equity (243.7) (243.7) (243.7) Shareholders' common equity 5,319.2 4,995.8 4,884.9 Less: Goodwill and other intangible assets (2,101.0) (2,106.8) (2,125.1) Tangible shareholders' common equity 3,21
Slide 44: 2023 Peer Group
2023 Peer Group Like-size, publicly-traded financial services companies, serving comparable demographics with comparable services as Old National Bancorp Associated Banc-Corp ASB BOK Financial Corporation BOKF Cadence Bancorporation CADE Comerica Incorporated CMA F.N.B. Corporation FNB First Horizon
Slide 45: 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. Durchholz, CPA SVP - Director of Investor Relations 812-464-1366 lynell.durchholz@oldnational.com 45