Old National Bank -- a Leader in Performance Management

PROFILES OF BEST-IN-CLASS ORGANIZATIONS Old National Bank A Leader in Performance Management Executive Summary Evansville, Ind.-based Old National Bancorp embarked on a transformation shortly after President and CEO Robert G. Jones joined the community bank in late 2004. The change it planned and implemented qualifies as both straightforward and profound for a community banking company that celebrated its 175th anniversary in 2009. At the most basic level, Old National Bank shifted its orientation from a reactive business to a proactive one. This shift in decision-making perspective also required an extensive, multi-year overhaul of the bank’s “enterprise management reporting” capabilities (a phrase the company uses to broadly define budgeting, forecasting, balanced scorecard and other business performance management processes). The transformation so far has delivered significant improvements within each of the company’s three core strategic imperatives: • Strengthen the Risk Profile • Enhance Management Discipline • Achieve Consistent Quality Earnings The improvements have helped Old National Bank become one of the top 25 best performing banks in the United States, according to Forbes, for the past two years. Old National also was among the first four banks in 2009 to return all of the money it received through the Troubled Asset Relief Program (TARP) the U.S. Trea- sury Department created in the wake of the global financial crisis. In addition to the honors and recognition Old National has received for its community-support activities and its commitment to workforce diversity, the bank continues to deliver on its mission of consistently exceeding the expectations of clients, associates and shareholders. The company’s 2010 financial performance reflected both a vast improvement in net income (up 290 percent compared to 2009) and an ongoing commitment to cost-reduction efforts. Old National reduced expenses by more than 7 percent, or $24.7 million, during 2010. Despite these achievements, the transformation continues as the executive team and the corporate finance function, with the active support of the board of directors and its finance committee, strive to further strengthen the execution of the company’s three strategic imperatives. PROTIVITI • OLD NATIONAL BANK • 1 Old National Bank Is Ready for the Future “IN PREPARING FOR BATTLE I HAVE ALWAYS FOUND THAT PLANS ARE USELESS, BUT PLANNING IS INDISPENSIBLE.” DWIGHT D. EISENHOWER President Eisenhower, who spent his formative years in the Midwest, might have appreciated community banking leader Old National Bancorp’s budgeting, forecasting and planning transformation. When the Evansville, Ind.-based financial services holding company realized that its plans – its annual budget and quarterly forecasts, in particular – were less than useful, the organization’s CEO, with support from the board of directors, directed the corporate finance team to overhaul the bank’s business performance management capabilities (the company refers to these capabilities as “enterprise management reporting”). The effort, which began in 2004 and continues today, includes: • Revamping a balanced scorecard program; • Streamlining the budgeting process; • Moving to a rolling forecast; • Achieving a better understanding of profitability throughout the company; • Implementing supporting technology (from SAP); • Creating more effective links between incentive compensation and performance; and • Harvesting data to produce insights that strengthen scenario planning efforts as well as decision-making at all levels of the company. This ongoing transformation has succeeded in clarifying the link between Old National Bank’s strategic objectives and individual business unit and branch performance; strengthened accountability throughout the enterprise; and enhanced the bank’s risk profile as well as its ability to provide shareholders with consistent, quality return. Not coincidentally, for two years running, Old National has been identified by Forbes Magazine as one of the 25 best performing banks in the United States. PROTIVITI • OLD NATIONAL BANK • 2 About Old National Bancorp Old National Bancorp, which celebrated its 175th anniversary in 2009, is the largest financial services holding company headquartered in Indiana and, with $8.1 billion in assets, ranks among the top 100 banking companies in the United States. Since its founding in Evansville in 1834, Old National has focused on community banking by building long-term, highly valued partnerships with clients in its primary footprint of Indiana, Illinois and Kentucky. In addition to providing extensive services (through roughly 200 branch offices) in retail and commercial banking, wealth management, investments, and brokerage, Old National also owns one of the largest independent insurance agencies headquartered in Indiana, offering complete personal and commercial insurance solutions. “You don’t receive this type of performance recognition through your good looks,” notes Old National Bancorp President and CEO Robert G. Jones, “you get there because you’re providing value to your shareholders.” One of the most immediate benefits of the new performance management capability is that the company now is able to complete its annual budget in November rather than in February, two months into the new fiscal year. “More important,” Jones continues, “the tools and insights we have been able to provide to decision-makers from the board level down to the branch level have helped us become much more proactive. And our new processes and tools enable our CFO to provide investors with a far more detailed analysis of our financial performance.” The benefits of Old National’s shift to more proactive decision-making also include early responses to the likely financial impacts of the Federal Reserve Board Regulation E (Reg E) rules changes and the more sweeping Dodd–Frank Wall Street Reform and Consumer Protection Act. By understanding the nature of these regulatory (and related balance sheet) risks, Old National was among the first banks to make adjustments that successfully offset the eventual decline of some fee-based revenue streams. “A number of [banking] CEOs have come up to me and either said, ‘We wish we had the foresight to respond how you responded to Reg E,’ or asked, ‘How did you know the challenge was going to be so big?’” Jones explains. “We knew about this and were able to take action early because of our management reporting system.” To understand how continuous planning became indispensible at Old National Bank, it helps to understand the previous state of its management reporting and how it continues to evolve. Starting from Scratch Shortly after Jones joined Old National in September 2004, he called the company’s market presidents. “I introduced myself and then asked how they were doing toward their budget,” Jones recalls. “The common response was, ‘We don’t have budgets at the bank level, or the market level, let alone at the branch level.’” At the time, the company budgeted at an enterprise level, but the budget was not well vetted deeper in the organization. The annual budget was frequently approved in the first quarter of the fiscal year, and it was largely based on the company’s performance early in the first quarter. “Our existing system did not allow for managers at the grassroots level of the company to contribute information that could be rolled up at the PROTIVITI • OLD NATIONAL BANK • 3 The Accountability Payoff Old National Bancorp’s implementation of a new performance management capability – a transformation driven by executive leadership’s desire for greater accountability throughout the organization – has delivered a number of strategic benefits, including improvements in its three strategic imperatives: • Strengthen the Risk Profile: Old National analyzed the potential financial impact of the Federal Reserve Board Regulation E rules changes before the changes were finalized; then, the company adjusted fees on other product lines to offset the revenue loss the rules changes would eventually cause. Additionally, Old National was one of the first banks to return all of its Troubled Asset Relief Program (TARP) money to the U.S. Treasury Department. • Enhance Management Discipline: Rather than completing its annual budget two months into the new fiscal year, Old National now finalizes and approves its annual budget two months before the fiscal year begins. Additionally, the forecasting process, which previously was conducted almost entirely by the corporate finance team, is now a collaborative, and more accurate, effort: The finance function owns the process and tools while the business units own the data. • Achieve Consistent, Quality Returns: The new budgeting, forecasting and reporting capabilities have freed up corporate finance personnel to focus more on the future growth opportunities and less on the manual gathering and review of data related to past performance. corporate level. Our budgeting and forecasting were not accurate and these processes did not deliver timely information,” recalls Chris Wolking, who joined the company in 1999 as treasurer and was appointed CFO shortly after Jones became CEO. “At this point,” Jones recalls, “we were a loose confederation of community banks that had a single banner but little to no accountability … we started from scratch compared to where we are today in terms of management reporting that drives accountability throughout our entire organization.” Jones and Wolking discussed the challenges

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