Earnings Announcement: Old National Bancorp Reports Steady Q3 Results, Sets Sights on the Future

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Earnings Announcement: Old National Bancorp Reports Steady Q3 Results, Sets Sights on the Future

Old National Bancorp (ONB) announced its financial results for the third quarter of 2024, with earnings per share (EPS) meeting market expectations. Chairman and CEO Jim Ryan reported a GAAP EPS of $0.44 and an adjusted EPS of $0.46. These results were supported by a 10.1% annual growth in core deposits and a 4.1% increase in commercial loans.

The bank also recorded an 8% increase in tangible book value per share since the second quarter of 2024, marking a 21% rise year-over-year. Despite a softer outlook for the fourth quarter due to interest rate changes, the bank anticipates steady loan growth and net interest income (NII), focusing on maintaining a strong capital position.

Key Highlights:

  • GAAP EPS of $0.44 and adjusted EPS of $0.46 met expectations.
  • Core deposits grew by a strong 10.1% annually, with a 4.1% increase in commercial loans.
  • Adjusted return on tangible common equity was 16.8%, with an adjusted efficiency ratio of 51.2%.
  • Tangible book value per share rose 8% since the 2nd quarter and 21% annually.
  • CET1 ratio stood at 11%, with annual loan growth at 2.7%.
  • Expected cash flow of $2 billion from the investment portfolio to increase NII.
  • Charge-off guidance narrowed to 17-20 basis points, indicating normalizing credit levels.
  • Selective hiring focused on fee income businesses, with expected savings of $30 million annually from CapStar integration by the fourth quarter.

Company Outlook:

  • Modest NII growth expected in Q4 due to $2 billion cash flow from the investment portfolio.
  • Annual increase of approximately 100 basis points in CET1 ratio anticipated.
  • Plans to rapidly rebuild capital, with potential for share buybacks next year.
  • Focus on long-term investments to maintain positive operating leverage.

Negative Highlights:

  • Softer outlook for Q4 compared to previous expectations.
  • Fee income expected to decline slightly due to seasonal factors.
  • Nonaccrual loans rose to $25 million, attributed to individual credit issues.

Positive Highlights:

  • Strong capital position with an 11% CET1 ratio.
  • Maintained positive operating leverage and low efficiency ratio.
  • Optimism about increased demand for commercial loans post-elections.

Misses:

  • Fee income expected to drop by approximately $8 million in Q4 due to seasonality and softer mortgage activity.

Q&A Highlights:

  • Management addressed the rise in nonaccrual loans, emphasizing that it reflects unique issues rather than systemic trends.
  • Delinquency and troubled loan trends are seen as manageable, with expectations of stability and potential improvements.
  • Selective hiring to boost fee income business and monitor expenses.
  • Mergers and acquisitions are not a priority but will be considered if they offer high shareholder value.

Old National Bancorp continues to navigate a challenging economic environment by focusing on core deposit growth, prudent loan expansion, and maintaining a strong capital position. The bank's conservative approach to growth and risk management allows it to be resilient against interest rate changes and capitalize on opportunities in markets such as Tennessee. With a disciplined strategy for hiring and investments, Old National Bancorp aims to achieve sustainable growth and deliver value to its shareholders.