Old National Bancorp ((ONB)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Old National Bancorp’s recent earnings call conveyed a strong financial performance, marked by record growth in core metrics and successful integration of Bremer Bank. The company highlighted robust capital management and improved credit metrics, projecting a positive outlook for continued organic growth. However, concerns were raised regarding loan runoff from Bremer and future merger-related expenses.
Outstanding Financial Performance
Old National Bancorp exceeded earnings expectations, achieving an impressive adjusted 20% return on average tangible common equity and a 1.3% return on assets (ROA). The efficiency ratio improved to below 50%, and core earnings per share (EPS) have grown 7.6% annually since 2018, underscoring the company’s solid financial footing.
Strong Deposit and Loan Growth
The company reported a 5.8% annualized growth in core deposits and a 3.1% annualized increase in total loans, excluding Bremer. The loan-to-deposit ratio stands at 87%, and the tangible book value per share rose by 4% from the previous quarter and 10% over the last year, reflecting healthy financial growth.
Successful Integration of Bremer Bank
The integration of Bremer Bank was completed successfully, with systems conversion and branding fully implemented. The full quarter impact of Bremer operations significantly contributed to the financial results, showcasing the strategic value of this partnership.
Improved Credit Metrics
Old National Bancorp reported a 6% decrease in criticized and classified loans, alongside a meaningful decline in thirty-plus day delinquencies. These improvements in credit metrics highlight the company’s effective risk management strategies.
Share Repurchase and Capital Management
The company repurchased 1,100,000 shares late in the quarter and increased its capital by 28 basis points, despite incurring merger-related charges. This demonstrates Old National’s commitment to returning value to shareholders and maintaining strong capital management.
Bremer Loan Runoff
A $200 million runoff in loans from Bremer was noted, attributed to strategic portfolio management. While this affected loan growth figures, it reflects a deliberate approach to optimizing the loan portfolio.
Future Earnings Guidance Concerns
Guidance for net interest income (NII) in the fourth quarter was adjusted down by $5 million, though it remains stable. This adjustment indicates cautious optimism amidst changing market conditions.
Merger-Related Expenses
Merger-related expenses amounted to $70 million this quarter, with an additional $50 million anticipated in the fourth quarter. These expenses are a necessary part of the integration process, impacting short-term financials but expected to yield long-term benefits.
Forward-Looking Guidance
Looking ahead, Old National Bancorp anticipates maintaining stable to improving net interest income and net interest margin, driven by loan growth and strategic investments. The company remains optimistic about its financial trajectory, supported by strong capital management and ongoing integration efforts.
In conclusion, Old National Bancorp’s earnings call highlighted a robust financial performance with record growth in key metrics and successful strategic initiatives. While concerns about loan runoff and merger-related expenses were noted, the overall sentiment remains positive, with expectations for continued growth and stability.