• GAAP Earnings Per Share (EPS): $0.44 per common share.
• Adjusted EPS: $0.46.
• Adjusted Return on Average Tangible Common Equity (ROATC): 16.8%.
• Adjusted Return on Assets (ROA): 1.13%.
• Adjusted Efficiency Ratio: 51.2%.
• Core Deposit Growth: 10.1% annualized.
• Noninterest Bearing Deposits Growth: Nearly $100 million during the quarter.
• Total Cost of Deposits: 225 basis points.
• Commercial Loans Growth: 4.1% annualized.
• Tangible Common Book Value Per Share Growth: 8% since the second quarter of 2024 and 21% year over year.
• Common Equity Tier 1 (CET1) Ratio: 11%.
• Total Loans Growth: 2.7% annualized from last quarter.
• Investment Portfolio Increase: 3% in the quarter.
• Total Deposits Growth: 8.5% annualized from 2Q.
• Adjusted Noninterest Income: $94 million for the quarter.
• Adjusted Noninterest Expenses: $263 million for the quarter.
• Total Net Charge Offs: 19 basis points.
• Allowance for Credit Losses to Total Loans: 112 basis points.

• Warning! GuruFocus has detected 8 Warning Signs with ONB.

Release Date: October 22, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Old National Bancorp (NASDAQ:ONB) reported strong organic deposit growth of 10.1% annualized, with noninterest-bearing deposits increasing by nearly $100 million during the quarter.
• The company achieved a low adjusted efficiency ratio of 51.2%, indicating effective cost management.
• Tangible common book value per share increased by 8% from the previous quarter and 21% year over year, highlighting strong capital growth.
• The company's CET1 ratio stands at a robust 11%, providing a solid capital foundation.
• Old National Bancorp (NASDAQ:ONB) demonstrated strong performance in fee income businesses, with adjusted noninterest income exceeding expectations at $94 million for the quarter.

Negative Points

• Net interest income growth is expected to be modest in the fourth quarter, partly due to lower yields in the five-year belly of the curve.
• The nonperforming loan ratio increased by 8 basis points, primarily due to four borrowers in unrelated sectors.
• Provision expenses were slightly higher than originally expected due to grade migration driven by a more conservative risk rating framework.
• The company experienced a 9 basis point increase in deposit rates compared to the prior quarter, reflecting competitive pressures.
• Old National Bancorp (NASDAQ:ONB) anticipates a decline in fee income in the fourth quarter due to seasonality and non-recurring items from the third quarter.

Q & A Highlights

Q: Can you provide more details on the NII expectations for the fourth quarter and the impact of cash flows on NII growth? A: John Moran, CFO, explained that the NII outlook is influenced by the lower five-year belly of the curve. Approximately $2 billion in cash flows from securities over the next 12 months will provide a 110 basis point pickup against the backbook, which will mostly be reinvested into the securities book.

Q: What are the reasons behind the higher credit costs this quarter, and will this trend continue? A: John Moran, CFO, stated that the increase in credit costs is part of the normalization of credit. The provision in the quarter covered charge-offs and built a little reserve, aligning with the year's guidance of 17 to 20 basis points on charge-offs.

Q: How do you expect the net interest margin (NIM) to trend in 2025 if there are significant rate cuts? A: John Moran, CFO, anticipates a slight increase in NIM in the fourth quarter, with a positive outlook for 2025 due to de-inverting yield curves and continued franchise growth, which should benefit the entire industry.

Q: What is your approach to hiring and talent acquisition, particularly in fee income businesses? A: Mark Sander, President and COO, mentioned that they are open to opportunistic hiring, especially in fee income businesses like treasury and wealth management, which have longer earn-back periods but are seen as long-term investments.

Q: Can you discuss the increase in nonaccrual loans and classified loans? A: Mark Sander, President and COO, noted that the increase in nonaccrual loans was due to four larger credits, each manageable and previously on the radar. The increase in classified loans is attributed to a more conservative risk framework, focusing on primary repayment sources.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.