ONB - Earnings call transcript Q4 2017

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Welcome to the Old National Bancorp Fourth Quarter and Full Year 2017 Earnings Conference Call. This call is being recorded and has been made accessible to the public in accordance with the SEC’s Regulation FD. The call, along with corresponding presentation slides, will be archived for 12 months on the Investor Relations page at oldnational.com. A replay of the call will also be available beginning at 1:00 PM Central Time on January 23rd through February 6th. To access the replay, dial 1-855-859-2056. XXXXXXX. code ID Conference will and today financial of community. be participating members analysts the Those all a are this participants At time, in listen mode. only

time, prepared remarks. opening management’s session. turned remarks, will to the this over hold be call Walton Ms. Walton? Following Lynell will a we At for question-and-answer

Lynell Walton

conference full Thank you, year Bancorp’s XXXX morning discuss our to Old everyone. earnings. Dorothy, to Welcome fourth and National good call quarter and

Woods. Ryan, are Daryl Sandgren; Moore; Bob and Moran me Joining Jim Mike Jones; John Jim

disclosure results, I forward well I like the to this from future differ are contained our begin cause of our Old refer actual comments as those and contain Before you the slide materially to remind factors. three of SEC full presentation, may subject uncertainties discussion some could Please a looking of filings looking would risk that factors risks, discussion for to as results that that other Company’s discussed. on to National’s today certain statement statements the forward

referenced assist As Non-GAAP provided trends various only should will measures Old upon measures are measures this financial financial referenced to discussed results. and of financial a for non-GAAP these within the comparable Reconciliation included and on non-GAAP relied measure measure in be to results not directly be as most and appropriately call. understanding National’s performance slide you the on actual GAAP are four, presentation.

probably had days closing did in partnership organic slide decline of XX strong following to expenses; and commercial cost Turning the low of less indeed sound noninterest a growth, deposits quarter, legacy significantly, Minnesota and We earnings. announcement. by than and loan to fundamentally our highlighted double-digit five most a

also revaluation deferred include the other was quarter included slide. on a asset, quarter anticipated $XX.X million. previously did which fourth The charges reported outlined pre-tax to fourth our as disclosed an estimated tax Our

our million share. $XX.X charges, or income would through Looking adjusted per $X.XX these net have been

the remains the year slide full on XXXX, same. For six, story the

In quality, head loan portfolio, typo, excited total leverage our percentage Fundamentals, for quarter a With With organic our fact, in XXXX. Jim commercial the year. and good. were very for were of in turn the that, both the for foundation they we as growth, to are same as place, call I’ll it’s measured and not and growth, operating into we this Sandgren. over by credit were solid as the

Jim Sandgren

Thank Good Old an report you, to everyone. National I’m happy had morning very strong year. Lynell. to that close a important

detail charges. our already loan quarter the provide based some the Old story, positive define strong that positive net additional after increasingly business As familiar was we and continued growth discuss business an the our We’ll for Lynell around fourth National and one-time extremely commercial gains, momentum revenue fueled XXXX. reflects by of income which those non-cash stated, fee impact performance,

begin eight, you If year-over-year. closer a and with quarter-over-quarter loan look to slide turn at both our I’ll growth,

we reminder, we Xst, a partnership closed purposes depicted on Minnesota. have on As as one our this slide which November day of for Minnesota

organic and loans, X.X%. growth of experienced acquired these Excluding quarter-over-quarter year-over-year we total loan

driven largely is line for same strong quarter, our the commercial downs, year. by XX.X% an the year XXXX. of pay and the percentage grew of to fourth As full quarter the of experienced by impressive couple throughout this is C&I growth I spite which portfolio seasonal growth my in a alluded large the commercial statement, still opening during in In we

represent executing XXXX Overall, our are as year growth sheet these profitable remix start to strategy. see very less a indirect the our line with provided at strategy. successful overall numbers We market and we focused continue run-off to the continue of our annual on be in in of guidance balance they growth portfolio we

way have his the producers absolutely $XX partnership that so running. report in good this on in I’m hit loan region more of experienced Xst. our that success touch commercial multiple markets, to led new growth excited since million early remarks, over the we new commercial with simply ground will Bob I’ll in November growth our here While Minnesota note

very the Indianapolis results and markets heavy words, to in done find the years also Louisville, ourselves Grand several positioned Midwest. growth really Today, some the thought is in of the well in we they kind We Rapids. strong Milwaukee, very in we other terms most repositioning had franchise attractive last over we’ve In would. of yield lifting of started that

XX% which Turning graph our left to the details commercial real by fourth to nearly compared quarter at the XXXX. attention grew production, slide new commercial estate nine, and

we category $XXX.X XX% quarterly the quarter-over-quarter this the of in remaining mix middle quarter our graph third virtually depicts XX% which points same basis The and new This by saw million year. with production, yield, grew in On production CRE year-over-year. in was C&I. points XXX by the the basis is XX in nearly

yield, CRE CRE than the also had our some rates. and we to QX rate terms of yields C&I more driving typically rising longer Again, attributed improved our of up. variable commercial our mix, total in and While attribute originated gains having certainly amortizations short-term XX% with loans to loans

loan bodes going environment. on pipeline results. shows slide well rising a nine this final our forward So rate in The potential graph quarterly

to top in note production The in production advances million quarters expect now yield commercial projects have yield growth others represent active me quarter. Overall, on we trend from important in a increased balance our to a our in strength the coming footprint, grow positively mortgage accepted will market, new in that throughout of to $X.X our dip improves is are production pipeline trend rebuild expect new come. would illustrates discussion of production trends are to XX% discussing the we and as construction on generate three pipeline and optimistic and quarter dive more loan that proposed direct we’re realignment commercial $XXX ongoing $XXX downward to year-over-year our It’s illustrates residential months million a the category. in the months. activity As over with expansion. to for clients category ultimately our in the strategy. levels QX from our Beginning Slide pipeline our production X% the quarters getting economy slide business and would from third These expressing are with to XX future pleased balance compared numbers expanded. compared our dip the in into exceeded see the by as sheet well Minnesota benefit of continue the position production you of also billion robust ahead. reform, while row that largely that related solid and quarter in the positive on see, we again in recent markets we owners weather XX/XX/XX deeper we increase $XXX and good to more can the graph, Considering begin in you are momentum. deal to seasonality, in to due clearly our results, commercial Bolstered growth can as seasonality. sheet a in the The and robust million and tax numbers production our production and tailwinds to bottom a takes classification. that great increase these the to our left consumer confidence right that pipeline the bottom as slight in another and graph The

substantially is our and third XXXX As ’XX. the indirect you slightly production quarter can QX from see, down over of down

continued balance has our While yield is to over XXXX. decline, significantly improved

new category terms stronger in we on beginning metrics in due this quarter-over-quarter of Although, production. anticipate It's didn’t small an we the rates quarter. that until yield to drop a and XXXX, credit raise see we did first seeing shorter in so worth noting the yield uptick in our

revenue, begin look focuses at at the XX on management. fee-based slide to upper wealth and I’ll now business Turning which left

and a Our last XX% market revenue fee. increase a the be of state to larger attributed quarterly compared benefits can of in combination quarter confidence to

see, As you full year million, increase for over XXXX, $XX.X of can XXXX. reported our management wealth division represents X.X% revenue which the

a region advisors have currently team wealth the Minnesota a but right certainly will client build wealth of look not to overtime. management does partner find presence, Our or we

to you’ll $XX XX.X%. full year region outpaced and financial million is $XXX,XXX advisors. that XXXX, Minnesota investment than while of last nearly revenue our was QX XX.X% our $X.X higher by see contributed Moving XXXX revenue team from revenue quarterly in our million investments of XXXX division, both of quarter the

pipeline attributable a points is take continue is in The QX bottom division reveal percentage normal market refinance over as planning months. mortgage should stands now reduction our year-over-year based and Our of activities. enhanced is current the The over to the down both the in and to activity. purchased just its than mix XX advantage wide whole decline the us from and annual model. recurring enable which line seasonality, highs XX% investment to is left XX on the our revenue. less the Seasonally, quarterly to dip and mortgage refinance graphs than versus revenue, primarily in advisory mortgage further XX% financial emphasize XX% more while to due industry by asset $XX million decline This past at

sheet clients. Minnesota products wider larger Our for array team a more a our balance and mortgage originator of excited to extremely continues be to to provide have options

graph in business on the that Twin remain region $XXX,XXX for be Mankato, a in markets growth mortgage Minnesota optimistic less on we contributed will the slide XX quarter, forward. in of shows The continued very our line going revenues division. While Cities capital final in fourth strong the us

our production by While the interest strong primary and boosted than or can increased sales doubled XXXX QX, revenue outlook. loan to this lower swaps, our that is continues $X.X be you XXXX during growth than see commercial The more in rate driver derivatives production of fourth year. quarter million our production customer

our will given saw very in business was was turn promise our strong strategic focused dynamic now revenue. and and has this beyond. that, year call addition and of successful defined and sheet commercial over National market Jim gains. Old fee balance I’ll like Ryan. capital that quarter a by quarter up on continue markets economy. revenue the year success loan Overall, growth poised meaningful strategy XXXX With further to a the meaningful its strengthened Minnesota of for was also also drive Again revenue, see realignment feel well We and full and our the that in It focus region based continued organic lending to exchange capped that we execute growth increases of growth foreign long-term, to

Jim Ryan

our XX, will was increase closed highlight in morning, few higher the on thank you, interest and Starting mark our The Good for I November loan due the million higher slightly of accounting close. loan $XX.X Jim. rates Xst. or an X.X%, slide to announcement details from we and model original than total to Minnesota that partnership a volume on the

announced. originally price than also increase attributable date We higher in date. This $XXX of was recorded to our million, which increase from share $XX.X the was Intangibles goodwill were announcement closing mostly slightly to million. the

realize system the savings We remain fully cost quarter. to full We our beginning for already will XX% set in outlined in to announcement those May. conversions reflected are early are achieve and and beginning cost the on savings be track we third

Moving our The pre-provision growth in pre-provision pleased XXXX, relentless was to than markets management, slide underlying on capital banking, our I’m in that XX.X% strong and reductions. report which expense businesses represented adjusted adjusted million investments and pre-tax, income reflect pre-tax, year-over-year. to $XXX income a fundamentals XX, focus in wealth more increase

commitment leverage. During to growing operating discipline. pre-tax pre-provision as XXXX, on expense we continuing income, And our our will as adjusted well are we driving positive remain reaffirming focus

As XXX efficiency year-over-year. demonstrated slide XX, on our points improved ratio basis adjusted

an adjusted despite operating investments in leverage with operating of also stronger points and of over people We year-over-year XXX improvement and basis moderation a our cost in saw revenues technology.

the margin of see a margin, interest net reported of to Moving attributable depicting you’ll to income. trend XX, as graph our as accretion our portion well slide the

in in benefit higher margin, X of interest fully graph our contribution quarters. interest Minnesota the basis recent higher our points accretion the from margin interest equivalent slightly loans, loans taxable Because from from adjustment and reform, we’ve income points XX collected Our net increased tax in from interest from net partnership. income, non-accrual contribution also excluding than quarter normal basis the the shown

tax XX% expect net statutory points X we federal will margin in basis rate, FTE With quarter. interest the drop to the X new our first

only decline and margin this impact no net know, reported income. you is the our As affects

Although, most does ratios efficiency handful of ratio. the it performance notably, impact

points a forecast impact accretion more FTE X the This lower from full as quarter quarter. hike fourth remaining for excluding forecast income, basis compared in adjustment, This and X in Our X.XX% the to basis of interest fewer points offset by the FTE to and of quarter days is basis first partially quarter normal points rate from of first the December and non-accruals. levels Minnesota. is in X reflects X two margin,

have with scheduled scheduled expenses scheduled anticipate XXXX. including partnership. include projections accretion any the XXXX, accretion for slide accretion on approximately million Shifting and the income important We slide the prepayments. for Minnesota in quarter months the the X.X% of include last XX, branches. The non-interest ONB expenses XX for control fourth in income the legacy our million the cost not from reminder, slide during and income appendix $XXX.X focus in We accretion updated as $XX An year. non-interest only the reduction $X.X defined million on expenses were fourth cost to reflect operating Minnesota’s continued reduction and represent two legacy a of last in year. reduction in totaled quarter on do the

costs employment the seasonally improvement the partnership. million core we including the run is half fourth operating should first that quarter, forward half of year to of rate the despite $XXX year. related as for in first in As higher full fully with integrate in occur second we Minnesota a quarter, Minnesota, quarter curve quarterly our approximately which we Further expenses, anticipate operating in consistent look the the cost the in

Minnesota expenses original tracking the with expectations. are integration Our

approximately As such, charges $X in we of anticipate XXXX. pre-tax million

We two Moving will higher the our ordinary were in able to were per impacted value the $XX.X that back accounting to be costs charge of disclosed consolidation along quarter. ratio common and positively the adjustments, fourth losses in the handful impact revaluation anticipate by to with revaluation earned book estimated unrealized branch in our tangible from less DTA a actions taken portfolio $XX million. in realized purchase we DTA tangible previously the fourth slide the several revaluation We approximately share items, partially from less and non-cash that equity quarter expected the years. the merger including revaluation investment for end. strategic common million quarter, than at We be XX, offset

While gap since at regulatory $XX disallowed capital to XX% regulatory was capital purposes a charge DTA already. impact lower was $XX.X the the million, nearly was portion of for million

anticipated that impacted the first emerge. new a from quarter updates XX, the regulatory during is rates evenly from we around the the be the on and GAAP include ratios more there tax rates our anticipate for Additionally, is page having of shown will be credits distinct four AMT on XXXX. below. credits My These will in business as our amortization FTE tax expectations disallowed credit regulators benefits The positively slide the over our impact credit quarters possibility portion clarity in tax from tax all XXXX. But final spread the tax year.

expected turn amortization. the call and completion the around percentage to tax update with model. the an quarter be small The to will tax subject credit two the slide, This quarters. be I Daryl. to first we to the on over recognized of project quarter is listed the in the provide amortization can relatively amortization of most We each year for range will plan tough middle now

Daryl Moore

quality Jim. quarter provision shown morning’s call Thank We’ll quarter credit XX. on zero Net fourth for of last $XXX,XXX to expense in segment with review million charge-offs you, start a $X.X charge-offs XXXX. the of as to the the quarter of and customary compared were quarter and for this slide

compared charge-offs net points XXXX. posted year, strong $X.X in the relatively X charge-offs of average or or basis For we of X by to were full $X.X of assisted average points basis again loans recoveries. Net loans million million

charge-offs. were recoveries of which where were lower quarter, recoveries growth was of gross quarter charge-offs, XXX% the XX% last For than

recovery For relatively consistent XX% rate charge-offs, full in the posted with XX% of gross recoveries XXXX. represented year, the

net expense and For million XX% current $X in recognized of fourth charge-offs provision expense Provision quarter, period The million last roughly a $XXX,XXX quarter with provision the quarter the net ratio for compared XXXX of $X.X in expense was the year current we XXX% XXX%. for XXXX. the of of recapture was to dollar quarter of a to coverage full the million provision of XXXX. year compared of full charge-offs

some and the lower impairment important reduced remained for in offset roughly quarter, with the decrease accounted and requirements generally In relatively there by in the was that growth associated need acknowledge. needed the level non-acquired $X.X parts of allowance measured the While in from are loan period, allowance portfolio, to quarter which rates were moving million mention increases. loss increased special loan

period to chart outstandings. the the ending the levels. points on next the Accordingly, of at underperforming of XX improvements as quality fell the provides million period in also and The loans, or of While end basis on basis acquired end marks non-performing over losses, the have the the made X a at for $XXX higher allowance pre-marked current of percent that and of X.XX%, balances quarter, stood end loan or XX X.XX% remind points. the basis ALLL I than last loans, quarters. a to and quarter marks XX which loan you third would combined period exposure we points totaled our loan trend slide of picture

the were not trend credit did have jump a partnership portfolios. managing with believe to and can the portfolio identifying loans up Bank that $XX.X or both mention in is of the increase the downgrade the quarter. the to to current loans commercial that market. relationship $XX.X Including National’s $XX.X the mention related loans attributed addition a when special the special We reduced very the Without interesting exposure period. did what out quarter up real to loans, we loans the increase job experienced mention of the typically Old integrating management special great loan note in also in the in similar Minnesota Minnesota to Continuing points slide, loans in nice million that an see hadn’t can in Minnesota While risks. our The that’s non-Minnesota X%. risk approached loans, were again you in and extent of the non-performing in mention special apparent estate historical Wisconsin seen portfolio, see quarter is be million we in million

However, we of mention decreased separate result this by $X the our addition of additions, evidenced payment fairly non-accrual portfolio in see came loans than $XX.X excluding by exposure successful our quarter. loan of accounting either estate upgrade can you of $XX.X in of mention Minnesota as improvement relatively increasing million Almost pay-offs Minnesota efforts or loans the of Minnesota in Substandard in remains exposure of million real When by a the of the million. credits. this stable, segment the in With fluid Wisconsin as which increase in $XX.X period. excluding increase for posted loans related credit special commercial all $X.X in full quarter constant non-accrual eliminating that remain respect million. totaled occurring to in non-accruals, the million remained notwithstanding. this loans, less category an quarter, quality the relatively Overall we million, the $XX.X in the additions, special

of the concern. not, emerging you loan EMEA banks as the segment many probably particular see with As present follow, any time, we do at an

that rankings, but as the the XXXX the watch agriculture selective real we the relationships. improvement industrial side, an as the risk risk due of in rate part office including relative in indirect However, portfolio closely On commercial some higher continue continues commercial consumer average see some we highest in to auto to of the in portfolio portfolio multi-family, risk of existing did well and do carry on weighted portfolio, to our estate certain sub-segments. retail exposures side,

over has with associates. of those ourselves With very with new call both that I professionals we partnerships, culture, remarks. we had our believe interaction all impression our of Minnesota our a comments, strong positive sides enhance we as to the the With have will as bank. with Minnesota with credit associate Finally, production group well to-date new well due-diligence with concluding on activities and lending I confirmed work to gained turn Bob as the our during the have I’ll the lending alluded for previously we

Bob Jones

thank us. Thanks, Daryl for everyone joining good you and morning and

While the impact the cuts only we our implications noisy fourth given other serve took, the optimism reform The and any statement. standard quarter beyond and tax bill income the the to actions noise by for XXXX. that our just goes the jobs tax was to reinforce of well act,

feeling investing businesses appear to about businesses. clients move from good in to Our ready their their

the with chosen from about in earnings have line, clients our technology with other to tax take most did capital take have rate. we We that for our recent increased our expenditures would And a foundation expansion investment investments, make conversation lower as in line. And part with incremental of it Our may longer inventory the actions of and the drop our regarding during additional into to view to shareholders weeks. anticipate continued now, we will quarter an communities. bottom commitment fourth

investments will that look We also focused on improving are at technology additional experience. our client

In looking are benefits. and at addition, potential we investments some employee

in quarter our important item was the fourth ongoing on Another focus expenses.

expertise We for made my a in make process Despite activity, the coach optimism say, to we college as to that experience in-house. on feel program all need football when sun you our progress considerable hey economic shines. client used the old have

our We a by quarter. doubled XXX of time, enhancing assets, branches years. experience will branches than at over improving XX. closures the processes. should time client the branch invest only by in the creates cost have note focus or in of while We to sales the our last our did that same we on seven technology of more and This period I number over total another and increased XX same continue the reducing has fourth the close

million. $XX Our period increased $XX million average per during deposits branch same of time from the to

system and branches. continual review make to technology expect and continue our we to delivery will in should see reduction improvements would changes, model We you a our as continue branch that

business. and is credit from This required quarter our historical amortization tax the by credit impact housing see as affordable an by of accounting line expected driven did tax standards,

supported better tool to foundation communities in most the our help fee are we with reflected and as which and noise under deposit Despite to the low can Minnesota. of all based microcosm we beyond. valuable loan the the a remain am themes continue results, and us the quarters. this believe same of I good We prior pleased constraints of legislation. had very We quarter, in committed with improve business many by you of associates our optimistic that performance very we growth, optimism strong coupled the that have built the costs. why about our for credit from performance businesses, is When of see XXXX in of newest A

growth clients to the leadership Deposit was $XX.X period growth our loan is For in growth million, gate. for the is their excellent the to equally we better of to of allow the a on loan I serve loan of growth and enhanced the a strong. set sheet product the the capital of in always for as the an their deal bigger year second loan which, XXXX, have right impressive that winning the row strong This true in was partnership. performance. bring team team pipeline a growth performance team’s performance XX.X%. seen loan reinforces year Deposit full $XX.X XX.X%. total combination. said, commercial impressive been they testament note growth total in have was an is should and the more we the same Of Jim since Total ability the commercial belief associates. closed million. driven Even region with out market this market was has a And the It and that balance growth the X.X%. done, by $XX.X million, and as is

been a and we the and that far, all we our we optimistic looker have that in clients your complete active for in we’ll on associates, disciplined of have the acknowledge impact will won’t an be remain we trends short attitude incredible. need and positive partnerships. So these am questions our fair XXXX still our Moran, appetite remain to a first be I individuals retained selective that one future key transparent, very continuation quote nothing an Minnesota. conversion has see To John team’s and To sure in buyer. but and that of

market at do people given any we is exist that need partner the the if right today. of the it we said As deals have with price, we we feel do the right quality before, are But can to interested. right the not franchise and

built, XXXX. the Given our activity about economic the do in feel have that franchise, occurring we within good positive we very foundation that is

a beyond me that the changes. are optimism, rate Let for few the key regulatory in hikes the factors tax potential that highlight rates, driving changes and anticipated

accretion years, many For we the faced headwinds have of income.

we been underneath like bit feverishly to While able little we per the number consistent were maintain that that earnings duck under share, have to water the achieve pace.

as For pay will and core XXXX, should in of going work you less franchises with more total X% around is includes performance. our see the we off, evidence on starting of The only partnership. XXXX to tangible which and the income our the revenue, surface be our impact Minnesota pivoted net accretion the challenging that that stronger was on under

the our $X of will second fourth expense of expected quarter, first an full the the quarter, in Minnesota. expenses, run Our plus quarter incremental for because increase million of as be and to said rate, about Jim comparable quarter

should and technology in approximate investments that additional this cetera, as important FICA for this and modeling key first million. run $XXX For to purposes, is well et note the be other in areas. rate, any as second It seasonal we’ll quarter merits, include expenses

to a growth, Loan to the run be strong will growth partnership. balance to loan our For commercial a loans becomes our stronger year strength of had XXXX around continue and focus as with we environment. of from deposit growth conversion the of us more by decline franchise, sheet of will we benefits which the XX%. this the digits offsetting be our rate continue indirect anticipate the rising will be that gain and rate very to move we of expect This loan comparable we relevant in remix which supported we into the be it second core year, should execute also deemphasizing potential as key for the decline Minnesota we by as single half mid

ability core will loan many low growth area differentiate fund one Our to that banks. is us from cost deposits through

as this Any that of credit would major we shifts Daryl utopia our see not for everyone to portfolio. consistent. last But and we remind remains issues look otherwise standards, Our the diligent any Daryl at outlined, will do anticipate exceptions portfolio. underwriting being our in sector profile to forever, And stage remain or stage, one-off the being cannot this balance risk Daryl. cyclical we known is at credit I

let’s open line with question closing from the of O’Neill with Sandler for the Your So first Georgia, comments, brief & Scott line comes Instructions] Partners. Siefers [Operator questions.

Scott Siefers

margin, quarter so or time. on flushes through my you me takes hate everyone��s guys and guys appreciate see banged you again the do time just you most Believe in outlook, Jim, of But you I to walking to do in that. This the out? in puts the one I margin and it the would questions first not, mind waste and through the where all you

Jim Ryan

been So I XX you that would it’s basis Scott, we’re the is historically. was as say the points, drop first running FTE, the thing in at saw, looking

X think quarter? we probably basis a points basis to so that’s X And points

Scott Siefers

Yes.

Jim Ryan

non-accrual And from quarter first adjustment, And we’re increase quarter, we on and why then just offsets, the full fourth as quarter we the X.XX% look We obviously, the is is the be short two quarter at income. X days. a basis offsets rate some then about lower the less approximately date other accretion that’s good X had approximately is fewer margin negative the will points. There there Minnesota basis in slightly and points the always said down --which a for the the quarter for the that’s so interest. that’s

Scott Siefers

it where flushes is margin core all X.XX% out? So

Jim Ryan

points is fewer X minus, there’s the days, there basis for the X.XX%, basis then full full points some there for or X FTE, the from X plus starting for less benefits X.XX%, or non-accruals. hike. less anchor And the and X rate

Scott Siefers

And then other traject what year, quarter first the and the be through to how best guess the the would your as words with the maybe reminder beyond incremental... of in margin

Jim Ryan

of short on that depending do, forecast outlook. probably curve will that end rate Obviously, curve. can you if going on of shape the the hikes what So you is long better less become give we’d Scott, a the important end

Jim Sandgren

also here put industry just holding then disciplined on to is raise obviously every cost. very move been And rates. And pressure to incremental in deposit going the we’ve deposit

the I And so less basis just to alone. for industry the be benefit going going is because think of deposit forward the

Scott Siefers

reason. certainly stands that And to

for through I making that go doing appreciate sorry but Jim. you okay that, So, again, you

Operator

Your KBW. comes from Chris of the next line McGratty with question

Chris McGratty

Maybe question for Jim to start.

that With any billion-ish earning remix of maybe you deal, should the as the assuming you composition. portion the you expect? into Or we is level about the a portfolio, the in year, closing or the And either be as securities size about, of assets thoughts change in $X talked decline as Bob. entering

Bob Jones

level. think about it’s I right the

the we X.XX. good think the and to brought news of I is it came in have actually lots duration in, flexibility, we

the think environment. lot But we’ve in a cash flexibility got comfortable it news I of at lot of And we in so is, that this portfolio, feel good current flow level. the generates even still

current So the be balance the at we’re the we’ll right sheet but let balances. size comfortable

Chris McGratty

expenses. the make you, just sure have maybe got while I And I

in QX, think said decline for back QX, a I and you then quarter XXX half. a the core

With back would by the the said in the of half? occurring thinking be May, be cost How the in second savings that in you suggest would and the the quarter. about down should end conversion early step we

Bob Jones

I Yes, consistent. it’s think

year The expect savings come quarter third income. that the XX% be quarter of first the the select for will full to we cost out

Chris McGratty

is number. quarter from there second just the XXX we XXX, then but or it down is from do XXX the the with -- and inflation step And grow ones So then…

Bob Jones

than in obviously but benefit run-rate. XQ, see have some less the start full the we We’ll it’s quarter to third

is Minnesota So really the of implied expenses…. really XX%

Jim Sandgren

answer To quarter expenses. full third down step quarter versus the we take of benefit a in Chris, those as you second should question, see your

higher the expenses at in be and core year this first the based make we the in that any the incremental included my rate. of core Minnesota. And then of investments half as second half will in be I year will comments, said run So on stage expense again

Chris McGratty

brought large that if a I number? challenging decent income run-rate you then we big million from safety, yet if called And didn’t get for out fees, I’m could the dollar, like fee first a sure on little know quarter? number that adjusted industry. for seasonally XX-ish for was I first not trust Is you and a you obviously the if one looks is bit -- quarter Minnesota. And sneak more it

Bob Jones

is will good for the XXish Obviously, seasonality mortgage plus modeling I but as that the purposes forward. of business a have think probably impact you number some go

see still Minnesota seasonality. conversion You to a floor. for some We got net-net through in get charges. But have good pretty to on service the impact think I that’s a

Operator

Jaffray. comes Your Nathan line with of next the from question Piper Race

Nathan Race

some in Obviously, commercial quarter. we firm there. on question saw production the re-pricing Just the yields

you structure? from that how that of spreads aspect function So maybe just a just rate the couple much hikes competitive had or last versus differences we some see curious either a of of is

Bob Jones

primary I think interest in increase got LIBOR led and hikes really December. and rates then the we obviously

I are was to And think and than little higher a certainly of little mix big alluded commercial it. bit CRE amortizations I bit as a that have to, in and as higher of tend well. our the those with then So driver longer-terms that yields group portfolio,

very there obviously hike in out competitive yields. still see So to but the nice

Nathan Race

just just thinking are noticeably pipeline the and about pipelines the up utilization And forward, Bob from quarter. commercial then line your obviously, third look

these curious, just some efforts stronger in client growth larger just across some of versus is of much how optimism your to in translated actually areas? get your So that increased of base

Bob Jones

pipeline I would and his all the that’s end fourth efforts. say almost of for Jim team’s of the quarter, through at

time the the put it takes we’ll see think happen. make I for towards start it quarter, reality paper you’ll see, to client, to this end first than to on because of hit

-- team. pipeline part more think you in increase that pipeline because is there that his upside that’s of any is optimism and optimistic. the going we as the is could some expect Again, So year clients really get into Jim

Operator

Terry line McEvoy Your of next comes with Stephens. question the from

Terry McEvoy

want understand sure Bob, you to correctly. I just I make

just at commentary You talked and discussed something savings be rate, were the or additional that you day experience, get increase tax reinvesting the in client in mentioned But and savings to will going you later when how there? you expense that want a did you you sure in think understand I XXX of about make much then reinvesting I cetera. potentially we’re et future. technology run talking about a future to tax the do day,

Bob Jones

rates clear Yes, we anything be see that. we any make. by would Terry. think to If investments we the do do. we that subtlety important it those to ability able I gave to and We in-house run way, made, this to of we cost continue not reduce include numbers chance, we -- at that The that be that’s expertise just processes. answer realize But disclose you. believe this gave comfortable we’ll to I’d you, the make run in brought we and we you the don’t want the I things rates that comment It’s reduce with we’re to for look can to stage,

to So the think I make investments. be able I’m hoping over able those to to be to self-funding year

Terry McEvoy

it M&A. lower changed is as overall your And then enthusiasm conversations potential with pricing -- just to it optimism as How the around given and rate relates tax tax that to sellers and reform relates growth? and

Bob Jones

it’s a early honest tell, think I to with. to be too little

those down their everybody’s what think of people heck I responding the trying everybody daily news the and some in figure write of proceeds. is out is using to still to

then like almost I things it’s have new My sense in in of early. to terms they continue think settle early ’XX, you norm think too a any I little to we’ll little is and and a tell. but pricing, will get So too in it’s

Terry McEvoy

graph million. from on in when the you level little And XX. special page just then last the Minnesota, the looks It large deal? question $XX.X that announced loans expected mention for Was just here on Daryl, number the

Daryl Moore

And them. I on if you It to loans year is loans what sheet park make information, see that those financial flow we we when those things more what have all was. some just and is information typically is And out. in slight we Terry, on bring give in have it don’t lot category. those I understand sure the first And special and over want mention we’ll weakness as we then see balance some loans review weaknesses, of

us So number concern did in at that all transaction. this not

Bob Jones

Daryl. we what that’s Terry, call being Daryl

Operator

comes Your Stapp from of question Hilliard the next with Lyons. Andy line

Andy Stapp

I Mike, head didn’t it guess answered, questions too, I tried to start because Thanks had take. my were though. but

Mike Woods

to your hear Well, good voice.

Andy Stapp

Thanks. by the eagles, Go way.

Operator

Markets. Capital with of Your Arfstrom line Jon next from RBC question comes the

Bob Jones

sorry So, about Mr. am Arfstrom, so Vikings. I your

Jon Arfstrom

last That from just comment, on Andy Stapp.

Bob Jones

season. we speakers] celebrated [Multiple a perfect

Jon Arfstrom

get Bob can can purple you it a wear you jersey Well, Minneapolis. around and

Bob Jones

Absolutely.

Jon Arfstrom

a the the Just of on the it I quarter. topic, up growth third out, the there. there it mean, is anything on organic in it it’s growth, during market? would I of loans, larger is it call production, pent Is the you what is Minnesota way see health the maybe

or little anything outsized a seems to bit -- call it out? is is So there

Bob Jones

team -- we’ll and They niche, there. kept and for a basics. we doing up of C&I through appeals blinders at had and think that’s just continue great I got executive. They’ve the team Jim that’s Jon. one And to a Hopkins great the Collins on it’s noise looked just they’ve real the the that strong all got they lending, we year. we’re continued optimistic been the Jeff We when next

Jon Arfstrom

you Maybe is not of on and pipeline. backlog and go us give there… construction idea an this got commercial what you I’m you, where comment just Jim Can for sure right maybe and through the that then again

Bob Jones

the I was quoted million $XXX number So in.

advances is certainly commitments. on yet that have to construction what it’s larger commercial, that So still be made

that coming quarter. the percentage completion over these be in we and projects So are some are advancing of that will months

So as to some balance gives certainly additional we optimism look growth. us that forward sheet

Jon Arfstrom

then And one Daryl maybe for you.

credit, you anything You certain you’re indirect at just there estate. parts more I called or this that auto same? it guys commercial guess, the in bothers it real point you on but seeing is touched of of Is

Daryl Moore

same. -- perspective, it's I But I is that think I think bother of the an more industry things it’s from there me. think

this little creeping year talked I a indirect. think up our about losses but has We high bit. everybody saw not

were end elevated. Our delinquencies at year little

we’re much going our that on fair backing multifamily supply. years. put be actually bit, the where so number developers versus to just So What of is is their we watching a to we that got of has eye the most everybody board And whole see which real that commercial banks the dynamics with estate, a dynamics fact portfolio Retail over seeing think changing rise, off to across pertains go. I then that that everybody on the generally little though where segment. is see demand the

that got So the in smacks it's we’ve take face, and watch of let’s all business. on just, care straight going really here okay, you it's those just nuances but nothing what

Operator

Your John of comes line with Partners. FIG question the next from Rodis

John Rodis

could which go expect projected to on you accretion, than expected total back total you is less to of X% year. to said that your you -- wanted revenue $XX yield Did comments million? accretion. Bob, say You just you this be be to I yield

Bob Jones

Yes.

John Rodis

it X.X% last what So that’s was from year? down

Bob Jones

Lynell was $XX page if by Actually chart it in you XX% if you job, the that is plus was to ’XX, of XX her at our doing the back look million some head -- revenue. go may probably and was exactly back you appendix, of revenue me in days tell what she

engines and said accounting on So methodology I the maybe understand, think what income point doing an we But accretion my just away I forehead. what we we’re sooner, ago, making really had focus wrap I And I goes is tattooed on as I’m strong is -- a year that’s or versus word. that hoping guess, that the core a necessary. as

John Rodis

makes on just That fee another income. Chris’s to, follow-up then sense. think question I And Bob

point. around $XX a you good said million was I think starting

correct? Is that anchor. excludes that Now

Bob Jones

of there, bit You into on they Frank, equation. little much part of I else get service the charges, really don’t a And what got the could we’ve saying add was add in deposit that to because two able or anchor to what give make so some we’re better a performance many. of not quarter a to you we their be least changes going hope idea at from to performance,

John Rodis

right So to that million it Is to near-term? the $XX in $XX million think in about total. way the

Bob Jones

think that’s I probably floor. a said, I

to numbers the I as some think nuances seasonality you and is and in well. trying the understand there��s our all what businesses, your wealth do of those we’re to market flexibility

Wisconsin enhancements. Minnesota what revenue know, know we is don’t capital think We’ve John, and markets well in to quite take wealth you include any the we as don’t ability and frankly. got and I still So to

use is from need upside you and service if there of But we seasonality upside. think a understanding XX out number, So Minnesota. the I’d the charges

John Rodis

million. just just tax guidance of amortization? the sure expense the operating for That then make includes expenses question $XXX And to credit other the one

Bob Jones

No.

Jim Ryan

core just it quarter. No, was operating

Bob Jones

like nuance those. remember, have to And that’s amortizations, if for we timing steady credit you a tax on expenses. Those aren’t way are because one-timers. those Those account of the

as about those the think towards that projects probably into sneaking is latter second in maybe third sense quarter. quarter, of part Our is closing we

we’ll that let modeling, number. But core excluded So those from we’ve for you know. your

John Rodis

guess rate And the I tax XX% to of Jim that tax so year then credits? of guidance of effective -- XX%. Does include full the the benefit the

Jim Ryan

And XQ. full more we’ll year. But does. heavily benefits those spread Bob the the have though accrue over and It said, occur, to full evenly in year, tax will XQ as amortizations even benefits those across the are

Bob Jones

accounting a standard. It’s goofy

John Rodis

I understand.

but -- -- roughly of I $XX page if add million quarter, So mean the million that on amortization to $XX XX, million? top than you on if million you cash $XX credit a $XXX

Bob Jones

Correct.

Operator

Your next question comes from Investor]. Think the line [Eric with Grublic of

Unidentified Analyst

in branch slides, question the about and your the about of always I you Just deck closures. put one think sales a

you don’t make future, just there that there? any we come Is small to with is it foreseeable left or the M&A to if Is anything do anything for branch new the side. on do So there items more assumption the consolidation?

Bob Jones

to absolutely come. No, more

helps model, in which our us changed work doing also Our obviously bit. customers’ with mobile. quite been a banker has behavior is investment a some Jim on universal the

hard So for to see speaking have and myself, expect look at should you for We’ll as we a maybe and the board access change. take an to changes And some a markets. behavior continuation. demographics client

team. management our between discussion quarterly ongoing an is this So

Unidentified Analyst

of or impact other But accretion So expense when that Bob, if benefit a or at be words you more the branches before. more you if to branches? the and this there’d you’re base So if or profitability worse your looking you on maybe difficult benefit less be -- is at question benefit the a see better should going do in as impact of that of now? a forward answer. you’ve doing close look Do maybe more

Bob Jones

the those fairly expense to cost. what be from we’ve the Well, because seen well side, consistent fix in past are benefit it should

the real estate got cost. You’ve

with retain what labor. pleasantly been You’ve cost the surprised of to those deposits. And ability quite got frankly, our is we’ve

better branches to revenue I it’d think and had more better Jim’s based upside the gotten within little income fee we’ve XX this the and told XX% we’ve a close story. So under spread comes we closed We where miles retained, be retention. income, over because

is going and to we changed. be are expenses because the the has obviously, to behavior think just client’s upside So there consistent revenue,

Operator

further And there Instructions] at questions are time. no this [Operator

Bob Jones

let follow-up or appreciate questions, and Obviously, know. if attention. time Lynell, Jim And everybody’s you we John have

Operator

Old the the National’s be of site, Old A ID will Once code, your conference replay additional be of a Thank call XXX-XXX-XXXX. concludes contact also at will presentation with in call. dialing February will again, Xth. oldnational.com. Web by you Walton This the has months page available through participation on for please This Investor replay for available X-XXX-XXX-XXXX. slides Relations replay call. XX be along available today’s Lynell If anyone questions, Conference XXXXXXX. National’s

Old National Bancorp (ONB) 23 Jan 182017 Q4 Earnings call transcript