Old National Bancorp(US:ONB)2023-10-24 21:27Financial Data and Key Metrics Changes - The company reported an EPS of $0.49 for the quarter, with adjusted EPS at $0.51 per common share, reflecting strong profitability [63][66] - The adjusted efficiency ratio remained under 50%, specifically at 49.7%, indicating effective cost management [9][67] - Total and core deposit balances increased by 3% during the quarter, demonstrating effective competition for new deposits [9][80] - The total cost of deposits was 161 basis points, with a low-30% total deposit beta cycle-to-date, which helped exceed margin expectations [9][11] Business Line Data and Key Metrics Changes - Adjusted non-interest income was $81 million for the quarter, with all primary fee businesses performing as expected [2] - Total loans grew in line with expectations, with a 1.7% increase excluding $389 million in non-relationship C&I loans sold at par [65][81] - The investment portfolio declined as expected, with cash flows projected to be $1.4 billion over the next 12 months [65][70] Market Data and Key Metrics Changes - Non-interest-bearing deposits as a percentage of total deposits fell to 28% at quarter-end, with expectations for a continued downward trend [11] - Interest-bearing deposit costs increased by 56 basis points to 2.22%, reflecting upward pressure on deposit rates [11] Company Strategy and Development Direction - The company aims to continue expanding its customer base while maintaining peer-leading deposit costs, focusing on deposit acquisitions and new lending opportunities [80][84] - The management expressed confidence in the ability to manage deposit rates effectively throughout the rate cycle, leveraging successful deposit promotions to attract new clients [1][9] - The company plans to support fourth-quarter growth in the low-single-digit range and anticipates a 3% to 4% decline in net interest income in Q4, equating to a 13% year-over-year increase [70][84] Management's Comments on Operating Environment and Future Outlook - Management noted that while the loan pipeline has declined, there are still opportunities to win new loan business and develop full relationships [79] - The company expects to navigate the challenging operating environment effectively, with a focus on maintaining strong credit quality and managing expenses [80][81] - Management remains optimistic about long-term growth in both treasury management and wealth management sectors [70] Other Important Information - The company reduced broker deposit exposure to only 3.2% of total deposits, compared to the industry average of 10.6% [69] - The allowance for loan losses stood at $337 million, or 103 basis points of total loans, largely unchanged from the prior quarter [68] Q&A Session Summary Question: Can you discuss any near-term capital targets and stock repurchase plans? - Management indicated no current capital targets or plans for stock repurchase, focusing instead on capital growth [91] Question: What are the expectations for expense growth next year? - Management stated there are no specific targets for expense growth, emphasizing a track record of controlling expenses while investing in growth [22] Question: How is the loan pipeline changing in the current economic environment? - Management noted a decline in the loan pipeline but highlighted opportunities due to competitors' reduced appetite, allowing for selective growth [28][99] Question: Can you provide insights on the downgrades from the SNC review? - Management clarified that downgrades were primarily related to debt service coverage and did not indicate broader portfolio weaknesses [39][44] Question: What is the outlook for net interest income in the coming quarters? - Management anticipates a 3% to 4% decline in net interest income in Q4, largely due to deposit cost pressures, but expects to bolster NII through fixed-rate repricing [95][54]