AGM 2020

Apr 30, 2020

Slides

Good morning. Thanks for joining us. We welcome shareholders, as many of our shareholders join us through the webcast. I'm Becky Skillman. On behalf of our board of directors, we thank you for your investment in the company and people. This is your company, and we also appreciate your faith and confidence in the company's leadership. The directors are committed to driving long-term shareholder value for Old National owners, and we believe the board's time is best spent looking forward, always planning for the circumstances and the opportunities that drive success for the company. Now, we could not have predicted a global pandemic, but the mission remains the same. The company's fundamentals are strong. We realized record performance in several measures this past year, as our CEO will share with you this morning. Let's remember that Old National was founded 185 years ago. As always, we work to ensure the company remains competitive and strong for the long term. Serving and strengthening and supporting the company's customers, communities, and team members, that's been the cornerstone of Old National's culture since its founding, and this strong culture has served the company very well during this challenging time. We are proud of CEO Jim Ryan and the leadership team for their exceptional care, attention, and accommodation to customers and to team members alike. Jim and the leadership team, well, they've been tried and tested during this period, and that may continue for a while, but I believe they are a stronger team today. The commitment to values and ethics is on display every day. We take great pride in Old National's ethical standards, and we hope you share that pride as owners. We begin every corporate board meeting with an ethics message, and we thought that would be a great way to start the annual meeting as well. To deliver the ethics message, I introduce Joan M. Kissel. Joan M. Kissel is Old National's Chief People Officer. She excels at recruiting and maintaining the team that helps the company outperform the competition. Joan M. Kissel. Thank you so much, Becky. As Becky mentioned, at Old National, it is tradition to have one of our team members share an ethics message at the start of our leadership and board members, and it is my honor to start the annual shareholder meeting with the ethics message today. As one of the world's most ethical companies, we talk routinely about ethics being the core of our company, the fabric we are made of, and the true foundation on which we build our business. We talk often about ethical behavior in leadership, the importance of ethics in our industry, and what differentiates ethical companies from the rest. While I think we understand the benefits of our ethical culture, we don't spend a lot of time talking about them. Over the recent weeks, we all have battled this COVID-19 enemy. As we have, I have experienced firsthand the real benefits of our ethical culture and am proud to be able to share them with you today. During times of crisis, when people need stability more than ever, our ethical culture has given us a firm foundation on which to stand. That firm foundation has enabled us to prioritize clearly, quickly, and decisively. We haven't had to stop and debate what was good or what was right, what was valued or what we believed. We all just knew. In the first audio communication to all associates, very early on in this pandemic, our priorities and the focus of the message were clear. Take care of yourselves and your families. Take care of people. We work from that foundation in everything we do. Whether it was how to handle team members who are at higher health risk or how to handle sensitive issues impacting the people we serve, those priorities have not wavered, not in how we've made decisions or in what we have deemed important. This global pandemic has caused all of us to change our lives at a remarkable pace and scale. Our ethical culture has allowed us to be nimble, which was another priority our CEO, Jim Ryan, established for us from the beginning. Knowing that information and circumstances were evolving quickly, it was imperative that we move swiftly, confidently, and together to make things happen. Our shared priorities and values and the foundation of trust that we have in our team allow us to navigate this uncharted territory. During a time when there's a lot of critical work to do and the actions you take are important, we have had to count on each other at a whole new level. The relationship capital and the trust that you have built over time has to be the foundation from which you work. Trusting in your partners to perform their role to the best of their ability, and knowing they are trusting you to do the same. Trusting how your partners will think and act. Trusting each other to be transparent in communication and decision-making. Trusting that as you are working to clear a new path that may be there for a long time to come, they are right there clearing it with you. While Jim has provided a steady hand at the helm, keeping us encouraged, strong, and focused on what matters the most, Old National associates through our footprint are following that lead. They've demonstrated what it means to go above and beyond living our values, whether it was delivering groceries to a client in need, making surgical masks for healthcare workers, finding different ways to cash relief checks, or staying up all night, literally around the clock, to get clients' loan applications through for PPP funding or to create critical work systems and tools. Our team members have consistently put other people's needs before their own. They have shown true commitment, care, and compassion for each other, for our clients, and for our communities. Some of you listening today know Old National very well, so this does not surprise you. For those of you who may just know us in part, this is who we are, and this is what ethics in action means to us, even in the most challenging of times. There is a proverb that promises the seeds you plant, you will harvest. Old National team members have planted seeds of ethics for years. Those seeds were harvested through COVID-19, when the benefits of a culture that breeds integrity, teamwork, trust, ethics, and heart have allowed us to be the best Old National Bank we could be during these unprecedented times. With that, it is my honor to introduce our leader, our Chairman, and our CEO, Jim Ryan. Thank you, Terry. Thank you, Becky. Well, good morning, everyone. I hope you and your families remain safe and healthy. Our Corporate Secretary, Jeff Knight, has advised me shortly before this meeting began that shareholders have been appropriately notified of today's meeting and a quorum is present. Starting on slide 5, we've asked our shareholders to vote on these 5 proposals. On slide 6, the board looks at these important attributes. Members of our board must have an active interest in our business and communities we serve. They must possess the willingness to represent the best interest of all shareholders and be able to objectively appraise management and performance. Each director should have the highest personal and professional ethics, integrity, and values. Each director should possess broad professional experience and be able to comprehend and advise management on complicated issues that face our company and our board. In making its selections, the nominating corporate governance committee also reviews suggestions from shareholders. Your proxy lists the individuals nominated to serve on Old National's board of directors. Given the COVID-19 pandemic and the governor's shelter at home order, many directors are participating via webcast today, with some directors here in person at the meeting. On slide seven, the nominees are as follows. Andy Goebel, Jerry Henry, Dan Hermann, Ryan Kitchell, Pete Lambert, Austin Ramirez, Jim Ryan, Tom Salmon, Randy Shepard, Becky Skillman, Derek Stewart, Kathy White, and Linda White. The company has an extremely well-qualified board of directors that is well-balanced across the company's footprint and is also diverse. Turning to slide eight. As a part of an administrative enhancement to our articles and to update our articles with respect to the number of shares of preferred stock, and since this Article 4 has not been amended or changed since 1985, the company requests that shareholders approve an amendment to Article 4 to increase the number of authorized shares of capital stock from 302 million to 330 million and preferred stock from 2 million to 30 million. Next, on slide 9, as a part of the company's regular and ongoing desire to implement governance best practices, the next item that shareholders are asked to approve is an amendment to Article 8, which will allow our shareholders to amend the bylaws of the company. The board concluded that it's in the best interest of the company and shareholders to allow shareholders to amend the By-Laws, and therefore, the board unanimously recommended that the shareholders vote for the approval of the amendment. Turning to slide 10, in 2017, the company recommended to shareholders, and shareholders ratified, to have the company present its non-binding advisory proposal on executive compensation on an annual basis. As stated in the company's proxy, we believe that executive management of the company has successfully managed the company in a competitive and ever-changing economic and banking environment. We are committed to achieving a high level of return to our shareholders and have executed strategic partnerships in the past several years that have placed the company in higher growth markets, which we believe enhance shareholder value. Additionally, in 2019, we worked on implementing the ONB Way strategic initiative, which we believe positions the company to enhance shareholder value even further. Our Board of Directors recommended a vote for this proposal because as described by the company's proxy under the compensation discussion and analysis section, the Board believes that the company's goals of rewarding sustained financial performance aligns our executives' long-term interest with those of shareholders and motivates the executives to remain with the company for long and productive careers. Lastly, on slide 11, as is our custom, the Board of Directors presents to shareholders on an annual basis the ratification of the Audit Committee's appointment of our company's outside auditor. The Audit Committee has retained Crowe LLP as the independent registered public accounting firm for the company and its subsidiaries for the fiscal year ending December 31st, 2020. Although ratification by shareholders is not required, the company and the board deem it desirable to continue our established practice of submitting this election to shareholders. Unfortunately, because of COVID-19 and the current shelter-in-place order issued by the Indiana governor, a representative of Crowe LLP was not able to be present at today's meeting, but is participating via webcast. The board recommended that shareholders vote for the ratification of the appointment of Crowe LLP as the independent registered public accounting firm. Next, on slide 12. I've been advised by our stock transfer agent, Continental Stock Transfer & Trust Company, and also by our corporate secretary, Jeff Knight, that the shareholders voted as follows. With the exception of amendment four, increasing the preferred stock, I'm pleased to report shareholders approved all of the other proposals included in my proxy statement. Thank you. Next, on slide 13, time to recognize Alan W. Braun for 32 years of board service. Alan W. Braun joined the board in 1988. Alan W. Braun served alongside 55 other directors. He provided valuable insights, perspective, and guidance. He was the chairman of the Finance and Corporate Development Committee, served on the Funds Management Committee, Enterprise Risk Committee, Audit Committee during his tenure. Alan W. Braun was also inducted into the Junior Achievement Evansville Regional Business Hall of Fame. Alan W. Braun had a 45+-year career at Industrial Contractors and helped shape the riverfront in downtown Evansville, including building the Old National Bank headquarters. Importantly, Alan W. Braun has been a great supporter of me, been a great mentor to me, and I'm forever grateful for all you've done for me, Alan W. Braun. Thank you very much on behalf of the board, and thank you on behalf of the entire leadership team here at Old National. Thank you. Also, since our last meeting, Bob Jones retired as Chairman of the Board January 30th. Bob had 15 years of tireless service. He helped transform our headquarters city of Evansville. Bob encouraged other businesses to get more involved in the communities that we work and live. In honor of all of Bob's contributions, we named a community room in the headquarters after his family earlier this year. Today, fortunately for us, the city of Evansville, Bob is helping lead our COVID-19 response. Thank you, Bob. Having concluded the business as set forth in Old National's proxy statement, I hereby adjourn the meeting of shareholders. Next, I would like to provide an update on our operations. Starting on slide 16, this slide is to remind those attending the meeting that certain forward-looking statements may be used in today's presentation, including words such as "anticipate," "believe," "expect," "could," "should," or other words of similar meaning. The forward-looking statements express management's current expectations of the forecast of future events, and by their nature are subject to the risks and uncertainties, such as statements about the potential impact of COVID-19 pandemic and a number of other factors as set forth on this slide. Moving to slide 17, the slides in today's presentation also contain non-GAAP financial measures. Reconciliations for these measures can be found in the appendix of the presentation. Next, it's my great honor to recognize team members in our regions for their remarkable contributions to our company. On slide 18, the 2019 Community Team winner is our Minnesota region. More than 60 Minnesota team members used their day off to volunteer at three locations of Feed My Starving Children. Julie Anderson, Christy Cotner, Kristi Jacobson led our teams. Feed My Starving Children is a nonprofit who works with community partners and volunteers to purchase, pack, and distribute nutritious food to children in need around the world. Feed My Starving Children hosts an event as a battle of the banks, and our ONB teams prevailed as winners in all three locations. In total, these three teams packed over 26,000 meals in a single day. Congratulations to our Minnesota team. Moving to Slide 19, I want to first recognize our 2019 Volunteer of the Year, Janet Voss. Janet has served Old National for 32 years at our Evansville headquarters. She has worked in many capacities in human resources, and for the past 15 years has served as the president of the Old National Bank Foundation. In 2019, Janet served more than 220 volunteer hours and has provided almost 2,000 hours of volunteer service over the past decade. Janet not only volunteered thousands of hours personally, but she advocated we all do more in our communities. Because of that, collectively, we've impacted thousands of lives because of Janet. Janet has supported many organizations, including the American Cancer Society and the University of Southern Indiana. Janet has been a finalist for the ATHENA Award. Janet will be retiring next month, and she will be missed greatly. Thank you, Janet, for all you did for our company and our communities. Next is our 2019 ONe Vision Award winner. Old National team members nominate colleagues for the ONe Vision Award to recognize individuals who would exceed expectations and exemplify our values. This year's winner is Deana Eckert. Deana has been with Old National since 2016 and serves as the banking center manager in our Lexington, Kentucky office. Known for always going the extra mile, Deana will meet a client almost any time of the day. Frequently, those meetings are outside of business hours and often at the client's home or place of business. Deana is extremely dedicated to Old National Bank. She serves selflessly of her time to ensure the success of her branch, and she mentors its different associates. Thank you, Deana, and thank you to all of the award winners for your amazing contributions. Next, on slide 20, I'd like to cover our 2019 highlights. As Becky said earlier, one of the best ways to describe 2019 was record-setting. Not only did we set new net income and loan production records, we improved our company's efficiency with very low credit cost. Throughout most of 2019, many of our leaders were internally focused, and I challenged our leadership team to think about ways we can better serve our clients, our team members, and our communities, and very importantly, our shareholders. As a result, we rolled out a new strategic plan called The ONB Way. The ONB Way plan was delivered on three key objectives. First, transform Old National into a leading commercially oriented regional bank with a distinctive client-centric value proposition delivered through a client-focused organization. Secondly, lay the foundation to be a top-performing independent bank by streamlining our operating model and strengthening our risk and credit processes to provide a seamless client experience. Thirdly, improve our operating leverage, invest in our operational and IT infrastructure to meet our clients where they are, and to ensure that we keep pace with technology and client digital expectations through a balanced portfolio of revenue and cost initiatives to help us deliver top-quartile performance. With respect to our first quarter performance, on April 20th, we announced our first quarter earnings and provided an update on our ONB Way initiatives. Our earnings press release and investor presentations with detailed information are on our website. While we are pleased with our first quarter fundamentals and the implementation of the ONB Way strategic initiatives, our commitment today is to focus on supporting our clients, our team members, and our communities during this COVID-19 pandemic. Moving to slide 21. I'd like to first start by thanking our team members for their hard work and dedication to serving our clients and communities during this difficult time. The health and safety of our team members and clients is paramount. We granted additional sick time for team members, along with additional paid time off for all team members to assist with unforeseen personal leaves. We also expanded paid family medical leave for people who are at risk or who have an at-risk person in their household. We enabled many team members to work remotely. Daily, we have more than 1,000 team members working remotely. Lastly, we've expanded our ONe Wish Program for team members with unforeseen financial needs. Today, all branches are open via drive-throughs with lobby appointments only. We've provided information on digital banking options and changed our service delivery model via oldnational.com, email, direct mail, and social media platforms. As a result, we have seen healthy increases in our mobile and online platform usage. Today, we have provided relief to more than 3,000 clients by approving payment extensions. We are not initiating new foreclosures or repossessions. We are not reporting payment deferrals to credit bureaus, and we are waiving or refunding service charges for clients that are impacted by COVID-19. We continue to provide credit for personal and business needs. We are proactively reaching out to clients and we are approving loan payment extensions. We've helped nearly 8,000 clients with the SBA Paycheck Protection Program. I'm pleased to report we've secured SBA approvals for all of the first-round applicants. Approximately 96% of our applications were for loans under $1 million, and 67% of our applications were for loans under $100,000. Our median loan size was $51,000. We are primarily serving small businesses in our communities with this program, and we know this has saved tens of thousands of jobs. We recently announced a $1.2 million commitment to immediate and near-term relief efforts, $600,000 for immediate needs with an emphasis on low to moderate income communities, and $600,000 from the foundation with a funding focus on long-term restoration. Lastly, on slide 22, Becky Skillman also said, "Thank you for investing at Old National. We don't take your investment lightly." During 2019, we paid to you, our shareholders, 37% of our earnings out in dividends. When you combine the dividends with the share repurchases, our total payout ratio is 79%. We were pleased to also announce a 7.7% increase in our quarterly dividend for 2020 to $0.14 per share. We have also purchased 4.9 million shares under the current 7 million share authorization during the first quarter of 2020. However, we did suspend our program given the current economic conditions. After reviewing various stress tests with our board, we don't anticipate any other capital actions, and we expect to maintain our current dividend. Those are the end of my prepared remarks. As I conclude that, I open it up for any questions in the room here. Are there any questions in the room? All right, hearing none, I encourage you to reach out to Lynell if you have any questions. She will be happy to get me or any one of the other executives on the phone to discuss. Thank you for your continued investment in Old National, and please remain safe and healthy. Thank you.