Old National Bancorp · NASDAQ:ONB
Old National Bancorp — Investor Presentation (August 2012)
54 slides from Old National Bancorp's investor presentation, Aug 10, 2012
Slide 1: Old National Bancorp Investment Thesis
Old National Bancorp Investment Thesis Financial Data as of 6-30-12 Dated: August 10, 2012
Slide 2: Commitment to Excellence
Commitment to Excellence Commitment to Excellence
Slide 3: 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, descriptions of Old National's financial condition, results of operations, asset and c
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: The Old National Distinction
The Old National Distinction Through execution of a sound strategy, ONB is well positioned for the future Strengthen the risk profile Consistent application of conservative underwriting standards has led to strong loan quality relative to peers (excluding covered loans) 2Q12 net charge-offs of . 13%
Slide 6: Strong 2Q12 Earnings Performance
Strong 2Q12 Earnings Performance Net income of $27.2 million, or $.29 per share vs. $21.7 million, or $.23 per share, in 1Q12 vs. $17.0 million, or $.18 per share, in 2Q11 Period end, noncovered loans increased $112.2 million from 1Q12 Net interest margin increased to 4.26% Noninterest-bearing deman
Slide 7: Committed to Strong Corporate Governance
Committed to Strong Corporate Governance Stock ownership guidelines have been established for named executive officers as follows: As of December 31, 2011, each named executive officer has met their stock ownership requirement Position or Salary Target Ownership Guidelines Chief Executive Officer 5X
Slide 8: Adapting and Reshaping our Business For Growth
Adapting and Reshaping our Business For Growth Streamlining processes to make it simple, easy and fast for clients to do business with Old National Commercial Banking Unit 2nd review committee for new lending opportunities Focus on cross sell of insurance and wealth management Introduction of Quick
Slide 9: Pre-Tax, Pre-Provision Income
Pre-Tax, Pre-Provision Income1 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 Pre-Tax, Pre-Provision Income, Net of Securities Gains and Merger and Integration Expenses 18 17 16.8 9.2 26.6 27.8 28.6 34.4 32.4 33.1 1 Non-GAAP financial measures management believes is useful in evaluating the finan
Slide 10: Net Interest Margin
Net Interest Margin 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 ONB Core 0.0333 0.034 0.0342 0.0346 0.0341 0.0329 0.0328 0.0351 0.0352 0.035 Monroe Accretion 0.0021 0.0038 0.0029 0.0037 0.0016 0.0021 Integra Accretion 0.0039 0.0032 0.0052 0.0055 Net interest margin1 increased to 4.26% Includes
Slide 11: Corporate Summary
Corporate Summary MARKET STATISTICS AND SUMMARY OVERVIEW ($ in millions) MARKET STATISTICS AND SUMMARY OVERVIEW ($ in millions) MARKET STATISTICS AND SUMMARY OVERVIEW ($ in millions) Headquarters Headquarters Evansville, Indiana Evansville, Indiana Evansville, Indiana Evansville, Indiana Stock Excha
Slide 12: New Old National Landscape
New Old National Landscape Old National Indiana Community Strategic fill-in of attractive I-65 corridor in South Eastern Indiana On January 25, 2012, Old National announced its intent to acquire Indiana Community Bancorp (INCB) headquartered in Columbus, Indiana INCB shareholders approved transactio
Slide 13: Deposit / Unemployment Distribution
Deposit / Unemployment Distribution Deposit / Unemployment Distribution 56.9% / 7.7% .5% / 8.1% 1.6% / 8.8% 0% / 9.0% 40.5% / 8.3% .5% / 7.5% % of ONB's Indiana deposits1 / Regional unemployment Unemployment data provided by Indiana Department of Workforce Development and Bureau of Labor Statistics
Slide 14: Our Indiana Footprint Economic Vital Signs
Our Indiana Footprint Economic Vital Signs Indicator Outlook Latest Statistics (June 2012) Latest Statistics (June 2012) Trend (YOY change from June 2011) Jobs Nonfarm Employment* Unemployed* 2,883,400 265,800 Jobs increased 48,500 Unemployment rate decreased to 8.0 % (June 2011 rate was 9.1%) Unemp
Slide 15: Asset/Liability Composition
Asset/Liability Composition NOW & Savings Demand Deposits Money Markets Other Time Borrowings Brokered CDs Other Liability 0.43167 0.24264 0.03717 0.16304 0.08137 0.00133 0.04278 Investments Commercial Loans Commercial Real Estate Loans Consumer Loans* Residential Real Estate Covered Loans Other Ass
Slide 16: Loan Concentrations - Excluding Covered Loans
Loan Concentrations - Excluding Covered Loans At 6-30-12 Commercial Commercial Real Estate Diversified Commercial Loan Portfolio
Slide 17: Conservative Lending Limits
Conservative Lending Limits Borrower1 Asset Quality Rating In-House Lending Limit1 ($ in millions) 0 $25 1, 2, or 3 $20 4 $15 5 $10 6 (Watch) $7.5 7 (Special Mention) $5 In-house lending limits conservative relative to ONB's legal lending limit at 6-30-12 of $107.3 million per borrower 1Includes ent
Slide 18: Proactive Risk Management
Proactive Risk Management No subprime business line Conservative stance on commercial real estate Starting mid-year 2006 Reduction in higher-risk residential loans Sold $405.6 million in 2004 Sale of credit card portfolio June 2000 Minimal construction and land loan exposure 1Q12 at 3.03% vs. 1Q12 p
Slide 19: Credit Quality - Excluding Covered Loans
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 Provision Expense 21.9 5.7 6.8 17 17.3 12 12.2 21.8 9.3 8 6.4 7.1 3.3 3.2 0 0.1 1 -3.4 Quarterly Net Charge-Offs 6.1 15.9 5.5 13.4 12.6 13.6 12.7 21.8 6.7 8.2 6.1 6.9 2.9 5.8 4.9 8.2 3.4 0.9 2008 2009 2010 $40.
Slide 20: Credit Quality - Net Charge-Offs
Credit Quality - Net Charge-Offs 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 ONB Core 0.0031 0.0053 0.0053 0.0055 0.002 0 Monroe -0.0009 0.0075 0.0018 0.0322 0.0127 0.0099 Integra - - -0.0036 0.002 0.0078 0.005 $5.2 $4.9 $5.0 $3.0 $1.8 $ in millions ($.1) $.8 $.2 $3.0 $1.1 ($.5) $.4 $1.2 $.9 $.7 1 Includes both c
Slide 21: Credit Quality - Excluding Covered Loans
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 ONB Consolidated 0.9273 0.9477 0.9527 0.9448 0.5366 0.547 0.486 0.4615 0.454 0.4525 ONB Excluding Monroe 0.84 0.83 0.68 0.65 0.67 0.59 Peer Group data per SNL Financial See Appendix for definition of Peer Group Credit Quality - Excluding Covered Loan
Slide 22: Credit Quality - ALLL and Mark Summary
Credit Quality - ALLL and Mark Summary Allowance For Loan and Lease Loss/Loan Mark Summary Allowance For Loan and Lease Loss/Loan Mark Summary Allowance For Loan and Lease Loss/Loan Mark Summary Allowance For Loan and Lease Loss/Loan Mark Summary Allowance For Loan and Lease Loss/Loan Mark Summary A
Slide 23: Covered Assets Grades
Covered Assets Grades 1 through 6 $281.9 $230.5 $179.5 $160.4 Criticized - Grade 7 26.9 23.0 20.2 16.2 Classified - Grade 8 16.5 16.7 27.5 23.3 Nonaccrual - Grade 9 196.4 179.7 158.5 137.7 Retail Loans 189.6 176.5 162.9 151.7 Total Covered Loans $711.3 $626.4 $548.6 $489.3 Other Real Estate Owned $3
Slide 24: Agricultural Portfolio
Agricultural Portfolio Corn crops seriously damaged by drought Crop insurance will mitigate some damage to crop producers Recent strong years will help cushion impact $ of Exposure % of Comm'l Exposure % of Capital + ALLL Crop Farming $239 7.1% 24.2% Livestock $49 1.4% 5.0% Other $7 0.2% 0.7% Total
Slide 25: Credit Quality - 30+ Day Delinquent Loans
Credit Quality - Excluding Covered Loans 30+ Day Delinquent Loans Specific Segment Overview 30+ Day Delinquent Loans 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 Commercial .32% .36% .29% .26% .35% .35% .51% .29% .16% .24% Commercial Real Estate .26% .52% .23% .12% .36% .19% .34% .78% .25% .19%
Slide 26: Credit Quality - Excluding Covered Loans
4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 ONB Consolidated 124.855 86.587 101.019 94.607 103.5 104.861 100.652 75 84 115.8 105.6 98.5 80.1 77.1 103.1 ONB Excluding Monroe 94.6 85.8 77.6 62.2 59.88 92.2 $ in millions Refer to Appendix for ONB Risk Grade Table Credit Q
Slide 27: Credit Quality - Excluding Covered Loans
4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 ONB Consolidated 116.1 122.4 113.6 101 90.1 92.4 88.8 101 103.4 102 110.9 101.6 88.8 71 46.9 ONB Excluding Monroe 83 98.7 90.6 79.3 64.448 43.8 $ in millions Refer to Appendix for ONB Risk Grade Table Credit Quality - Excludi
Slide 28: Credit Quality - Excluding Covered Loans
4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 ONB Consolidated 64 77.4 77.7 73.7 67 68.1 68.86 69.8 70.9 121.4 118.4 124.8 115.3 113 99.5 ONB Excluding Monroe 82.4 79.7 84.2 78.4 79.885 72.9 $ in millions Refer to Appendix for ONB Risk Grade Table Credit Quality - Exclud
Slide 29: Purchased Impaired Loans
Purchased Impaired Loans 1/1/2011 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 Non Accretable Difference 39.8 39.8 27.6 21.1 17.2 15.4 12.3 Accretable Difference 7 5.8 14 16.2 15.5 16.2 16 Loan Interest Income 0 1.2 5.2 9.5 14.1 15.2 18.5 $ in millions 7/29/2011 3Q11 4Q11 1Q12 2Q12 Non Accretable Difference 222.5
Slide 30: Loan Portfolio at June 30, 2012
Loan Portfolio at June 30, 2012 Commercial Commercial Real Estate Consumer Residential Mortgage HELOC Covered Loans 3Q11 1205.6 1042.6 649.3 1127.2 206 489.3 Commercial $1,205.6 Commercial Real Estate 1,042.6 Consumer 649.3 Residential Mortgage 1,127.2 HELOC 206.0 Covered Loans (Integra) 489.3 Total
Slide 31: Credit Area Enhancements
Credit Area Enhancements Separate Loss Share Division created Commercial credit underwriting officers and special assets associates Engaged a third-party firm with FDIC Loss Share experience to provide guidance to include Actions necessary to preserve Loss Share coverage Types of actions/decisions p
Slide 32: Credit Area Enhancements
Credit Area Enhancements Separate staff allows Focus on FDIC requirements in workout (and currently performing) to maximize Loss Share benefits Separation of Loss Share bank efforts from legacy portfolio credit administration to insure we don't diminish strong underwriting practices and management o
Slide 33: Capital Management - Recent Actions
Capital Management - Recent Actions Redeemed $13 million of 10% subordinated notes on 6-30-12 Approved share repurchase program 1-26-12 Up to 2.0 million shares of ONB common stock Ends 1-31-13 Approved 28.6% increase in cash dividend to $.09 from $.07 per common share Retirement of $150 million of
Slide 34: Strong Capital Position
Strong Capital Position 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 ONB 0.1304 0.1398 0.1458 0.145 0.1408 0.1482 0.1342 0.1446 0.1488 0.155 Peer Group Average 0.1071 0.1113 0.1139 0.1125 0.1146 0.1176 0.1186 0.1184 0.1189 Capital levels remain strong Among the best capitalized in our peer grou
Slide 35: Investment Portfolio
Investment Portfolio ($ in millions) Book Value Mar. 31, 2012 Book Value Jun. 30, 2012 Market Value* Mar. 31, 2012 Market Value* Jun. 30, 2012 Market Value $ Change Federal National Mortgage Association $405.4 $452.0 Federal Home Loan Mortgage Corporation 53.8 79.5 Federal Home Loan Bank 3.0 3.0 Fed
Slide 36: Municipal Bond Portfolio by State
Municipal Bond Portfolio by State IN TX PA KY MO All Other 0.381 0.096 0.054 0.067 0.05 0.352 Based on book value at 6-30-12 Illinois exposure consists of 1 bond representing ..03% of entire municipal portfolio
Slide 37: M&A Strategy
M&A Strategy Branch acquisition FDIC assisted transaction Whole bank purchase Must enhance Old National's mission of being a true "community bank" Must align both strategically and culturally Must meet/exceed financial targets Must pass rigorous due diligence process
Slide 38: M&A Strategy
M&A Strategy Focus on community banking, client relationships and consistent quality earnings Target geographic markets Mid-sized markets within or near existing franchise with average to above average growth rates In market community banks where significant cost saves could be achieved
Slide 39: ONB Acquired Monroe Bancorp
ONB Acquired Monroe Bancorp Transaction closed 1-1-11 Provides #1 market share in Monroe County (Bloomington, Indiana) Home to Indiana University Market has above-average growth rates and lower unemployment vs. state of Indiana Systems conversion occurred 5-14-11 Balance sheet acquired1 $419.4 milli
Slide 40: FDIC Acquisition of Integra Bank, NA
FDIC Acquisition of Integra Bank, NA Transaction Due Diligence Financial Impact Capital Closing / Conversion Purchased $1.8 billion in assets1 and assumed $1.8 billion of liabilities2 from the FDIC as receiver of Integra Bank, NA, Evansville, IN Approximately $.7 billion in loans covered by FDIC los
Slide 41: ONB to Acquire INCB - Highlights
ONB to Acquire INCB - Highlights Transaction Due Diligence Financial Impact Capital TARP Repayment Acceptable Risk Profile Closing Consideration: 100% stock transaction at an exchange ratio of 1.90, resulting in 6.6 million shares issued Deal value = $79.2 million at ONB price of $12.00 Tangible pre
Slide 42: Possible Credit-Related Adjustments to Exchange Ratio
Possible Credit-Related Adjustments to Exchange Ratio Deal value subject to change based on increase or decrease of credit mark and delinquencies 1.9987 to 1.3396 Loan mark based on changes in impairment Delinquencies based on changes in "delinquent loans" from announcement date to closing date Deli
Slide 43: Appendix
Appendix Old National Bancorp
Slide 44: Pre-Tax, Pre-Provision Income
Pre-Tax, Pre-Provision Income1 ($ in millions) 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 Total Revenues $91.6 $98.1 $98.1 $96.1 $96.2 $104.2 $105.9 $119.9 $125.7 $123.4 $124.5 Less: Provision for Loan Losses (21.8) (9.3) (8.0) (6.4) (7.1) (3.3) (3.2) .1 (1.0) (2.1) (.4) Less: Noninteres
Slide 45: CD Maturity Schedule
CD Maturity Schedule Bucket Amount ($ in 000's) Rate 0-30 days $82,405 1.07% 31-60 days 115,642 1.80% 61-90 days 54,393 .87% 91-120 days 27,526 .63% 121-150 days 36,503 1.01% 151-180 days 60,095 .68% 181-210 days 36,902 .83% 211-240 days 35,397 .91% 241-270 days 60,839 1.11% 271-300 days 49,655 1.10
Slide 46: Other Classified Assets
Other Classified Assets ($ in millions) Book Value Mar. 31, 2012 Book Value Jun. 30, 2012 Market Value Mar. 31, 2012 Market Value Jun. 30, 2012 Corporate Bonds $7.2 $9.8 $6.5 $9.6 Pooled Trust Preferred Securities $25.5 $25.3 $7.8 $8.5 Non-Agency Mortgage Backed Securities $73.7 $67.3 $71.8 $63.9 To
Slide 47: Shared National Credits - Excludes Covered Loans
Shared National Credits - Excludes Covered Loans ($ in millions) 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 Count (#)* 7 7 7 7 7 7 Total exposure $68.2 $70.6 $70.5 $65.0 $64.5 $63.8 Dollar outstanding $24.4 $21.4 $22.9 $19.1 $18.0 $22.1 Largest exposure $15.0 $15.0 $15.0 $10.0 $10.0 $10.0 Weighted average risk g
Slide 48: ONB Loan Risk Grades
ONB Loan Risk Grades Grade Name 0 Investment Grade 1 Minimal Risk 2 Modest Risk 3 Average Risk 4 Monitor 5 Weak Monitor 6 Watch 7 Criticized (Special Mention) 8 Classified (Problem) 9 Nonaccrual
Slide 49: Securities with OTTI
Securities with OTTI *Lowest credit rating provided by any nationally recognized credit rating agency. ($ in thousands) Vintage Lowest Credit Rating* Book Value at Jun. 30, 2012 OTTI 2Q12 OTTI YTD 2012 OTTI Life to Date BAFC Ser 4 2007 CCC $13,176 $84 $160 $302 CWALT Ser 73CB 2005 D 2,772 117 117 40
Slide 50: Quick Home Refi (QHR) Product Statistics
Quick Home Refi (QHR) Product Statistics Term 10 years 28% 15 years 39% 20 years 13% 25 years 5% 30 years 15% Based on June 30, 2012 portfolio data Average loan outstanding $78,670 Average yield of closed loans 4.19% Average Credit Score 779 Average FICO 299 Average debt to income 20% Average loan t
Slide 51: Non-GAAP Reconciliations
Non-GAAP Reconciliations (end of period balances- $ in millions) 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 Total Shareholders' Equity $843.8 $855.5 $874.7 $895.7 $878.8 $984.0 $1,008.3 $1,027.7 $1,033.6 $1,050.4 $1,073.7 Deduct: Goodwill and Intangible Assets (200.2) (198.6) (197.1) (19
Slide 52: Non-GAAP Reconciliations
Non-GAAP Reconciliations (end of period balances- $ in millions) 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 Total Shareholders' Equity $843.8 $855.5 $874.7 $895.7 $878.8 $984.0 $1,008.3 $1,027.7 $1,033.6 $1,050.4 $1,073.7 Deduct: Goodwill and Intangible Assets (200.2) (198.6) (197.1) (19
Slide 53: ONB's Peer Group
ONB'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 BancorpSouth, Inc.
Slide 54: Investor Contact
Investor 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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