Old National Bancorp(ONB) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported an adjusted return on average tangible common equity of 20% and a return on assets (ROA) of 1.3% for Q3 2025, with an efficiency ratio below 50% [3][10] - Adjusted earnings per share (EPS) for the quarter were $0.59, an 11% increase from the prior quarter and a 28% increase year over year [9][10] - Common equity tier 1 (CET1) capital increased by 28 basis points to over 11% despite merger-related charges [6][10] Business Line Data and Key Metrics Changes - Total loans grew 3.1% annualized from the previous quarter, with production up 20% from the prior quarter [11][12] - Adjusted noninterest income was $130 million for the quarter, exceeding guidance, driven by strong performance in capital markets [16][17] - Noninterest expenses were $376 million, reflecting a full quarter impact of Bremer operations, with a low efficiency ratio of 48% [17][20] Market Data and Key Metrics Changes - Total deposits increased by 4.8% annualized, with core deposits (excluding brokered) increasing by 5.8% [13][14] - Noninterest-bearing deposits remained at 24% of core deposits, with brokered deposits decreasing modestly [13][14] - The cost of total deposits increased by four basis points linked quarter, reflecting the full quarter impact of Bremer's cost of deposits [14] Company Strategy and Development Direction - The company is focused on organic growth and returning capital to shareholders, emphasizing that the best acquisition is itself [7][8] - Management is strategically recruiting top-tier talent and enhancing efficiency while investing in future growth opportunities [5][6] - The company aims to maintain a strong capital position while pursuing opportunities for growth in its existing markets [6][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the credit environment, stating that current credit issues are manageable and not indicative of larger problems [4][19] - The company anticipates stable to improving net interest income and net interest margin in 2025, driven by loan growth and asset repricing [22][23] - Management expects to meet or exceed industry growth in 2025, with a loan growth guidance of 4% to 5% excluding Bremer [23][24] Other Important Information - The company successfully completed the systems conversion and branding for the Bremer Bank partnership, which is expected to enhance growth opportunities [8][26] - The company repurchased 1,100,000 shares late in the quarter, reflecting confidence in its capital position [6][21] Q&A Session Summary Question: Insights on NII expectations for Q4 - Management indicated a slight reduction in NII expectations for Q4, attributing it to lower starting points and market dynamics [28][30] Question: Discussion on capital allocation and buybacks - Management confirmed a focus on organic growth as the primary use of capital, with opportunistic buybacks expected to continue [32][34] Question: Update on Bremer loan dynamics - Management clarified that loan sales were not significant, and any reductions in Bremer loans were part of normal attrition [41][42] Question: Credit environment outlook - Management described the credit environment as stable to improving, with a focus on active portfolio management [117][118] Question: Expectations for future hiring - Management confirmed plans to hire new talent to capitalize on market opportunities, emphasizing the importance of having the right team in place [50][51] Question: Bremer's impact on loan and deposit growth - Management expects Bremer to contribute positively to loan and deposit growth, aligning with overall company objectives [87][89]