OLD NATIONAL BAN(ONBPP) - 2023 Q4 - Annual Report

Financial Performance - Net income applicable to common shareholders reached $565.9 million, or $1.94 per diluted common share, reflecting a strong performance compared to previous year [224] - Net income available to common shareholders rose to $565,857, up 36.6% from $414,169 in the previous year [232] - The diluted net income per share increased to $1.94, compared to $1.50 in 2022, reflecting a 29.3% growth [232] - Total assets grew to $49,089,836, a rise of 4.8% from $46,763,372 in the previous year [232] - Total deposits increased to $37,235,180, up 6.4% from $35,000,830 in 2022 [232] - Return on average assets improved to 1.21%, compared to 0.99% in 2022, showing enhanced profitability [232] - Total loans increased to $32.99 billion as of December 31, 2023, compared to $31.12 billion a year earlier [230] Income and Expenses - Net interest income increased to $1.5 billion in 2023, up from $1.3 billion in 2022, driven by higher interest rates and loan growth [223] - Noninterest income decreased from $399.8 million in 2022 to $333.3 million in 2023, primarily due to a prior year gain on the sale of health savings accounts [225] - Noninterest expense decreased by $11.9 million in 2023 compared to 2022, despite including $28.7 million of merger-related expenses [225] - The efficiency ratio improved to 53.70%, down from 57.97% in the previous year, indicating better cost management [232] - Net interest income for 2023 reached $1,503,153, an increase of 13.2% from $1,327,936 in 2022 [232] Credit Quality - The company maintains a strong credit quality with net charge-offs to average loans at 0.17% [224] - Provision for credit losses decreased significantly to $58,887 from $144,799, indicating improved credit quality [232] - The allowance for credit losses on loans was $307.6 million at December 31, 2023, slightly up from $303.7 million in 2022 [293] - Net charge-offs for the year 2023 totaled $55.9 million, significantly higher than $16.1 million in 2022, reflecting increased credit risk [327] - The net charge-offs to average loans outstanding ratio for total loans was 0.17% in 2023, compared to 0.06% in 2022, indicating a deterioration in credit quality [327] Loan and Deposit Growth - Deposits grew by 6% year-over-year, indicating a solid deposit franchise [224] - The loan to deposit ratio stood at 89%, showcasing effective management of deposits and loans [224] - Total loans reached $32,241,367 thousand in 2023, an increase of $4.6 billion compared to 2022 [258] - Total deposits increased by $2.23 billion, or 6%, to $37.24 billion at December 31, 2023, compared to $35.00 billion at December 31, 2022 [296] Mergers and Acquisitions - The company announced a definitive merger agreement to acquire CapStar, which has approximately $3.3 billion in total assets, expected to close in Q2 2024 [226] Market and Economic Conditions - The Federal Funds Rate increased to a target range of 5.25% to 5.50% by December 31, 2023, compared to 4.33% at the end of 2022 [246] - Management believes that changes in macroeconomic forecasts, particularly the national unemployment rate, could significantly impact estimated credit losses [366] Risk Management - The company maintains a liquidity risk management strategy, ensuring the ability to fund balance sheet growth and meet obligations in a timely manner [341] - The company uses interest rate swaps, collars, and floors to mitigate interest rate risk, with a net asset position of $4.5 million at December 31, 2023 [340] - Old National Bancorp maintains frameworks and internal controls to mitigate operational risks, including cybersecurity threats and compliance with regulatory requirements [351][352] Taxation - The company is subject to complex U.S. income tax laws, which are reviewed quarterly for tax expense and deferred tax assets [371] - Management must make judgments and estimates regarding the application of tax laws, which may lead to disputes subject to court review or settlement with tax authorities [371]