Old National Bancorp(ONB) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported GAAP earnings of $0.37 per common share, with adjusted EPS at $0.46, exceeding consensus estimates [49][53] - Adjusted return on average tangible common equity for the quarter was 17.2%, and adjusted ROA was 1.12% [8] - The adjusted efficiency ratio was a low 52.6% [8] - Total deposits grew by $2.3 billion, with $2.1 billion attributable to the CapStar acquisition [11][54] - Total loans increased by $2.6 billion, with $2.1 billion from CapStar, and organic loan growth was 5.9% annualized [54][56] Business Line Data and Key Metrics Changes - Adjusted noninterest income was $87 million for the quarter, with CapStar contributing $7 million [18] - The investment portfolio increased by 3% due to the CapStar transaction, improving total portfolio yields [51] - Noninterest expenses were $264 million for the quarter, with CapStar contributing $18 million [14] Market Data and Key Metrics Changes - The company maintained a low total cost of deposits at 216 basis points, which is a competitive advantage [13][52] - The allowance for credit losses to total loans was 108 basis points, up 5 basis points from the prior quarter [15] Company Strategy and Development Direction - The company is focused on accelerating its wealth management, treasury management, and capital markets businesses [2] - The integration of CapStar Bank has expanded the company's footprint into several strong southeastern markets [3] - The company aims to continue organic loan growth funded by core deposits, with a disciplined approach to operating expenses [76] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability of the balance sheet and the ability to manage rate risk effectively [33] - The outlook for net interest income (NII) is expected to increase modestly in the third and fourth quarters, with a focus on maintaining a neutral rate risk position [30][34] - Management remains optimistic about growth opportunities in the Nashville and Southeast markets following the CapStar acquisition [82] Other Important Information - The company reported a 10% year-over-year growth in tangible book value per share [10][54] - The company has a well-diversified loan portfolio, with a focus on maintaining strong credit metrics [19][20] Q&A Session Summary Question: Insights on the beta assumption and its future trend - Management indicated that the down beta is primarily from the exception price book, which is expected to drop significantly [40] Question: Loan growth sources and future trends - Loan growth was broad across the footprint, with contributions from both commercial real estate (CRE) and commercial & industrial (C&I) sectors [42] Question: Funding for loan growth and deposit assumptions - The company plans to fund loan growth primarily through core deposits, with the capacity to utilize brokered and wholesale funding if necessary [76] Question: Credit migration trends and metrics - Management noted that there was migration into criticized and classified categories, primarily from CapStar, but overall credit metrics remain strong [72] Question: Outlook on net interest income and margin trends - Management expects a slight improvement in margins in the fourth quarter, with new production being margin accretive [69][93]