Old National Bancorp · NASDAQ:ONB
Old National Bancorp — Investor Presentation (November 2019)
59 slides from Old National Bancorp's investor presentation, Nov 4, 2019
Slide 1: Investment Thesis
Investment Thesis FINANCIAL DATA AS OF September 30, 2019 DATED: November 4, 2019 Exhibit 99.1
Slide 2: Executive Summary
Executive Summary SLIDES 2 TO 20
Slide 3: Forward-Looking Statements; Non-GAAP; New Accounting Standards
Forward-Looking Statements; Non-GAAP; New Accounting Standards 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 N
Slide 4: Snapshot of Old National
Snapshot of Old National Largest bank holding company headquartered in Indiana with financial centers located in Indiana, Kentucky, Michigan, Wisconsin and Minnesota 192 financial centers 227 ATMs Focused on community banking with a full suite of product offerings: Retail and small - medium size bus
Slide 5: Old National's Footprint
Old National’s Footprint 75 69 74 70 64 57 39 75 64 65 90 94 43 65 74 35 94 Indiana1 $7.6 billion deposits 52% of total franchise Michigan $1.4 billion deposits 10% of total franchise Wisconsin $1.4 billion deposits 10% of total franchise Kentucky $0.9 billion deposits 6% of total franchise Minnesot
Slide 6: Old National's Top MSAs
Old National’s Top 10 MSAs Demographics in Top 5 (56% of deposits) and Top 10 (69% of deposits) markets are better than national averages Expansion markets tend to be much better than national average demographics Source: S&P Global Market Intelligence using FDIC Summary of Deposits as of June 30, 2
Slide 7: 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 8: Franchise Evolution
Franchise Evolution Built a Better Bank… Source: S&P Global Market Intelligence
Slide 9: With Improved Scale
… With Improved Scale Source: S&P Global Market Intelligence using FDIC Summary of Deposits as of June 30, 2019 33% increase 78% increase
Slide 10: 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 S&P Global Market Intelligence and as of most r
Slide 11: Deposit Composition
Deposit Composition Deposit Growth 2012 – 3Q19 CAGR: 10.5% Cost of Total Deposits Peer Group data per S&P Global Market Intelligence - See Appendix for definition of Peer Group $ in millions 1 As of September 30, 2019, 3 Peers with no financial disclosure Quality Low-Cost Deposit Franchise
Slide 12: Improved Balance Sheet Mix
Improved Balance Sheet Mix Increase of 11.5% 1 Includes loans held for sale
Slide 13: Credit
Credit Peer Group data as of 2Q19 and per S&P Global Market Intelligence - See Appendix for definition of Peer Group
Slide 14: Strong Reserve Coverage & CECL
Strong Reserve Coverage & CECL $ in millions Current Expected Credit Losses (CECL) On track for January 1, 2020 implementation Estimated day 1 increase to allowance for loan losses of $35mm to $45mm Driven largely by the $2.7bn acquired loan portfolio Modest increase in reserves for the legacy portf
Slide 15: Strong Credit Culture
Strong Credit Culture Peer Group data per S&P Global Market Intelligence as of 06/30/2019 - See Appendix for definition of Peer Group 1 Excludes loans held for sale; 2 Source: Regulatory Call Report 3 Full Years 2004-2018, includes banks with 15-years of NCO’s Legal lending limit at September 30, 20
Slide 16: Low-Risk Balance Sheet
Low-Risk Balance Sheet Implies $2.2bn increase in RWA to meet peer average Peer Group data as of 2Q19 and per S&P Global Market Intelligence - See Appendix for definition of Peer Group Risk Weighted Assets / Total Assets
Slide 17: Third-Quarter 2019 Key Performance Indicators
Third-Quarter 2019 Key Performance Indicators Earnings: Record net income increased 36% from a year ago to $69.8mm, or $0.41 per diluted share Adjusted net income1 of $70.5mm, or $0.41 per diluted share, excludes $1.3mm in merger charges Loans and Deposits2: Record high commercial production at $680
Slide 18: Branch Actions
Branch Actions Sold 10 Wisconsin branches October 26, 2018 Approximately $230.6mm in deposits No loans were associated with the deal Consolidation of 10 branches in 2018 9 in late 2Q18 and 1 in early 3Q18 Driving efficiencies through increased branch size and investment in mobile and online banking
Slide 19: Outlook
Outlook Category 3Q19 Adjusted Results1 Commercial Loan Production Record production of $680.0mm; pipeline of $2.0bn Net Interest Margin FTE NIM was 3.57%, including 31 bps of accretion income and 5 bps of interest collected on nonaccrual loans Noninterest Income $53.5mm, excluding debt securities g
Slide 20: Commitment to Excellence
Commitment to Excellence AMERICAN BANKER. sicascow & Hecate Bloomberg Gander-Squsiy inde beend | BEST PLACE TO WORK FOR Fis ETHISPHERE jammy | DISABILITY INCLUSION Fq [ETHICS INSIDE 100% DISABILITY EQUALITY INDEX _ . pl eo ©)|WORLD’S MOST = AWARD OF SIETHICAL f wit) “@|COMPANIES’ WWW.ETHISPHERE.COM
Slide 21: Financial Details
Financial Details FINANCIAL DATA AS OF September 30, 2019 DATED: November 4, 2019
Slide 22: Third-Quarter 2019 Results
Third-Quarter 2019 Results Performance Drivers Net income increase of $6.8mm vs. 2Q19 Credit metrics remain strong – net charge-offs of 0.03% Reported noninterest expense includes $1.3mm in merger charges $ in millions, except per-share data Amounts tax-effected using the current statutory FTE tax r
Slide 23: Pre-Provision Net Revenue
Pre-Provision Net Revenue Adjusted pre-provision net revenue1 increased 26.5% Y/Y Improvement driven by successful execution of our stated strategy Low credit costs Low cost core deposit funding Strong expense management Positive operating leverage continues 624 bps Y/Y improvement 1 Up 26.5% YoY $
Slide 24: Average Balance Sheet Mix
Average Balance Sheet Mix $ in millions 1 On the available-for-sale (AFS) portfolio Loans Total commercial loans: 66.7% of total loans, up 1.3% Y/Y Indirect auto: 5.3% of earning assets, down 1.4% Y/Y Securities Duration of 3.04 vs. 3.34 in 2Q19 3Q19 yield was 2.82% 3Q19 new money yield was 2.61% Es
Slide 25: Loans
Loans1 $ in millions 1 Includes loans held for sale 2 Reflects closing of Klein Partnership Average Balances Period-End Balances Quarterly commercial production of $680mm Average new production size < $1mm Commercial pipeline at quarter end of $2.0bn Line utilization was 33.5% at quarter end Loan yi
Slide 26: Commercial Loan Portfolio Concentrations
Commercial Loan Portfolio Concentrations As of September 30, 2019 $ in millions 1 Includes held for sale Total C&I and CRE - $8,063 (Classed by Product Type)
Slide 27: C&I Loan Portfolio Concentrations
C&I Loan Portfolio Concentrations As of September 30, 2019 $ in millions C&I by State - $2,951 (State Determined by Primary Address of Borrower)
Slide 28: Commercial Real Estate Loan Concentrations
Commercial Real Estate Loan Concentrations CRE - $5,112 (Classed by Property Type) Multifamily by Product Type - $1,165 Multifamily by State - $1,165 (State Determined by Primary Address of Pledged Collateral) *Owner Occupied CRE is 29% As of September 30, 2019 $ in millions
Slide 29: Auto Loan Portfolio
Auto Loan Portfolio Total portfolio average original loan term of 70 months and weighted average FICO score of 765 Total portfolio LTV of 85% Total Portfolio yield of 3.81% 30+ Days Delinquency at 9/30/2019 = 0.70% Loans are originated within the ONB footprint As of September 30, 2019 $ in millions
Slide 30: Investment Portfolio Purchases 3Q19
Investment Portfolio Purchases 3Q191 1 Data as of September 30, 2019 Security Purchases by Month July August September Total Book Value $ ,224,520,031.43000001 $ ,224,238,952.59000003 $ ,290,133,900.70999998 $ ,738,892,884.73000002 Market Value $ ,224,520,031.43000001 $ ,224,238,952.59000003 $ ,290,
Slide 31: Investment Portfolio
Investment Portfolio $ in millions 1 Includes market value for both available-for-sale and held-to-maturity securities Investment Portfolio yield of 2.82% in 3Q19 vs. 2.98% in 2Q19
Slide 32: Stable Funding Costs
Stable Funding Costs Average Balances Period-End Balances 3Q19 total deposit costs of 52 bps September total deposit costs of 49 bps Total Interest-bearing deposit costs were 71 bps, up 1 bp from 2Q19 Low loan to deposit ratio of 83.6% $ in millions 1 Reflects closing of Klein 1
Slide 33: Key Performance Drivers: Net Interest Margin
Key Performance Drivers NIM decreased 9 bps vs. 2Q19 + 4 bps accretion + 2 bps change due to # of days - 3 bps rate/volume/mix - 4 bps premium amortization - 8 bps interest collected on nonaccruals Net Interest Income & Net Interest Margin1 $ in millions 1Tax Equivalent Basis; Non-GAAP financial mea
Slide 34: Projected Purchase Accounting Impact
Projected Purchase Accounting Impact Actual Accretion Projected Accretion1 Actual Discount Projected Discount1 Manageable declines in purchase accounting impact expected in future periods Actual IA Amortization Net Income Statement Contribution $ in millions 1 Projections are updated quarterly, assu
Slide 35: Asset Liability Management Position
Asset Liability Management Position 42% of loans are variable-rate $510mm of asset hedges, 100% of which are in the money when 1-month LIBOR is below 2.0% 11% of loans have floors Actively manage deposit costs in current down rate cycle September total cost of deposits was 49bps versus Q3 2019 avera
Slide 36: Noninterest Income
Noninterest Income $ in millions 1Non-GAAP financial measure which management believes is useful in evaluating the financial results of the Company – see Appendix for Non-GAAP reconciliation Residential mortgage production includes quick home refinance product Key Performance Drivers Adjusted nonint
Slide 37: Noninterest Expense
Noninterest Expense $ in millions 1Non-GAAP financial measure which management believes is useful in evaluating the financial results of the Company – see Appendix for Non-GAAP reconciliation Key Performance Drivers Adjusted noninterest expense1 Reflects ongoing focus on disciplined expense manageme
Slide 38: 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 $67.5 1 – Minimal Risk $57.5 2 – Modest Risk $52.5 3 – Average Risk $45.0 4 – Monitor $35.0 5 – Weak Monitor $25.0 6 – Watch $10.0 7 – Criticized (Special
Slide 39: 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 2 Excludes commissions Shares in millions Total board authorization of up to 7.0mm shares to be repurchased, as conditions war
Slide 40: 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 41: 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 42: Indiana at a Glance
by the numbers Population: 6.7 million Total Resident Labor Force:3.4 million Unemployment Rate:3.2% (Sept. ‘19, Seasonally Adjusted) GDP: $366.7B Exports:$39.3B 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
Slide 43: 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 7th “10 Big Cities with the Fastest Growing Economies” – Forbes 2018 13th best large city to start a business – Wallet Hub, 2018 13th “Best Place
Slide 44: Attractive Midwest Markets
Attractive Midwest Markets Source: S&P Global Market Intelligence, based on MSAs $ in thousands Average of ONB Footprint Average of ONB Footprint
Slide 45: Attractive Midwest Markets
Attractive Midwest Markets Minneapolis, MN Indianapolis, IN Milwaukee, WI Louisville, KY Grand Rapids, MI MSA Population: 3.7mm MSA Population: 2.1mm MSA Population: 1.6mm MSA Population: 1.3mm MSA Population: 1.1mm Major industries include: Manufacturing, applied research and technology Major indus
Slide 46: 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 47: 2019 Executive Compensation
2019 Executive Compensation Short Term Incentive Plan (CEO, CFO, COO, CIO, 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, CIO, Chief Legal Counsel) Performance Measure Weight Pe
Slide 48: Commitment to Diversity & Inclusion
Commitment to Diversity & Inclusion Old National is fully committed to supporting a rich culture of diversity as a cornerstone to our success 27% of Old National’s Executive Leadership Operating Committee are women 67% of all Old National associates are women
Slide 49: Board of Directors
Board of Directors Director Market Background Alan W. Braun Evansville, IN Senior Advisor to Industrial Contractors Skanska with 45+ years as a construction executive; formerly Chairman, President and CEO of Industrial Contractors, Inc. Andrew E. Goebel Evansville, IN 34-year career in the energy in
Slide 50: Appendix
Appendix Hi OLD NATIONAL BANCORP’
Slide 51: Non-GAAP Reconciliations
Non-GAAP Reconciliations $ in millions, except per share data
Slide 52: Non-GAAP Reconciliations
Non-GAAP Reconciliations $ in millions
Slide 53: Non-GAAP Reconciliations
Non-GAAP Reconciliations $ in millions 1 Year-over-year basis point change in noninterest expense plus change in total revenue 2 Year-over-year basis point change in adjusted noninterest expense plus change in adjusted total revenue
Slide 54: Non-GAAP Reconciliations
Non-GAAP Reconciliations $ in millions, except per-share data
Slide 55: Non-GAAP Reconciliations
Non-GAAP Reconciliations $ in millions
Slide 56: Non-GAAP Reconciliations
Non-GAAP Reconciliations $ in millions
Slide 57: Non-GAAP Reconciliations
Non-GAAP Reconciliations $ in millions
Slide 58: Peer Group
Peer Group Like-size, publicly-traded financial services companies, generally in the Midwest, serving comparable demographics with comparable services as ONB
Slide 59: 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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