Old National Bancorp(US:ONB)2024-10-22 19:54Financial Data and Key Metrics Changes - The company reported GAAP earnings of $0.44 per common share, with adjusted EPS at $0.46, reflecting solid performance in line with expectations [3][8] - Adjusted ROA TCE for the quarter was 16.8%, and adjusted ROA was 1.13% [3] - The adjusted efficiency ratio was a low 51.2%, indicating effective cost management [3] - Core deposit growth was strong at 10.1% annualized, with noninterest-bearing deposits increasing by nearly $100 million during the quarter [3][7] - Tangible common book value per share rose by 8% since the second quarter of 2024 and 21% year-over-year [5][3] Business Line Data and Key Metrics Changes - Commercial loans increased by 4.1% annualized due to disciplined client selection [3][5] - Total loans grew 2.7% annualized from the previous quarter, in line with industry performance [5] - Adjusted noninterest income was $94 million for the quarter, exceeding expectations, with strong performance in bank fees and capital markets [9] Market Data and Key Metrics Changes - Total deposits grew 8.5% annualized from the second quarter, with core deposits (excluding brokered) up 10% annualized [7] - The company maintained a low total cost of deposits at 225 basis points, benefiting from recent Fed actions [3][7] - The loan-to-deposit ratio was driven below 90%, indicating a strong deposit base [7] Company Strategy and Development Direction - The company remains focused on organic growth strategies, investing in new markets and talent [2][4] - There is a commitment to maintaining a strong capital position, with a CET1 ratio of 11% [5] - The company is prepared to respond proactively to future Fed rate actions while driving above-peer deposit growth at reasonable costs [7][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the execution of their deposit strategy and the ability to manage credit effectively [7][10] - The outlook for net interest income (NII) is expected to grow modestly in the fourth quarter, with assumptions of two rate cuts of 25 basis points each [12][15] - Management noted that the economic environment is stabilizing, with expectations for a soft landing becoming clearer [41][48] Other Important Information - The allowance for credit losses to total loans was 112 basis points, reflecting a conservative risk rating posture [10] - The company expects to realize $30 million in annual cost savings from the integration of CapStar, fully reflected in the fourth quarter [23] Q&A Session Summary Question: Insights on NII guidance for the fourth quarter - Management acknowledged that the NII guidance was impacted by the belly of the curve and timing of Fed moves, with expectations for $2 billion in cash flows over the next 12 months [15][16] Question: Credit cost expectations - Management indicated that the increase in credit costs is a normalization process, with charge-off expectations adjusted to 17-20 basis points [16][19] Question: Fee income outlook - Management noted that the expected decline in fee income for the fourth quarter is due to seasonality, particularly in mortgage and capital markets [32] Question: Capital build and M&A opportunities - Management stated that any future M&A opportunities would have a high hurdle, focusing on organic growth opportunities [50][51] Question: Competitive landscape and loan demand - Management observed increasing competitive pressures in lending and deposit gathering, but remains confident in their ability to win [45]