Old National Bancorp(US:ONB)2022-07-26 20:46Financial Data and Key Metrics Changes - The company reported GAAP earnings for Q2 2022 of $0.38 per share, with adjusted EPS of $0.46 after excluding $36.6 million in merger expenses [8][15] - Total loan growth was 19%, with commercial loans growing 18% on an annualized basis, contributing to a 45 basis point margin expansion [10][16] - The adjusted efficiency ratio was approximately 54%, indicating effective cost management [9][29] Business Line Data and Key Metrics Changes - Consumer loan growth was 22%, driven by residential mortgages, while the investment portfolio decreased by approximately $200 million quarter-over-quarter [16][17] - The commercial loan pipeline ended at a record $5.9 billion, reflecting a 9% increase over Q1 [19] - New money yields on commercial and industrial (C&I) loans increased by 80 basis points to 4.2% [20] Market Data and Key Metrics Changes - The company maintained stable deposits quarter-over-quarter, with total cost of deposits at 6 basis points, up just 1 basis point from the prior quarter [22][23] - The investment portfolio yields improved significantly to 2.37%, with new money yield at 3.8% [18] Company Strategy and Development Direction - The company completed its systems and brand conversion, which is expected to accelerate model synergies [6][7] - The focus remains on organic growth and maintaining a strong commercial pipeline, despite potential challenges from declining business sentiment [13][37] - The company is targeting adjusted Q4 expenses of $227 million and expects to realize the majority of cost synergies by year-end [40] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding loan growth, despite potential slowing due to higher interest rates and declining sentiment [48][49] - The company is well-positioned to withstand economic challenges, with strong client balance sheets and a robust pipeline [11][13] - Credit conditions remain benign, with net charge-offs at a modest 2 basis points [32] Other Important Information - The company has over $1 billion in down rate protection to mitigate margin risks [26] - The CET1 ratio stands at 9.9%, reflecting a strong capital position [35] Q&A Session Summary Question: Loan growth outlook and client sentiment - Management noted that while there is cautious optimism for continued loan growth, higher interest rates and declining sentiment are factors to consider [48][49] Question: Deposit pricing pressure - Management acknowledged that pricing pressure is beginning to emerge, particularly from price-sensitive customers, but they believe they have a competitive advantage in their deposit franchise [51][52] Question: Expectations for deposits in the second half of the year - Management expects deposits may come under pressure as liquidity is deployed, but they are actively working to grow deposits [74] Question: Fee outlook amidst market pressures - Management indicated that fee lines are under pressure due to market fluctuations, but they remain optimistic about organic growth in wealth and brokerage [78] Question: Integration progress and client adaptation - Management reported that the data systems conversion went well, and clients have adapted effectively to the new systems [91]