ONB - Earnings call transcript Q1 2020

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Operator

Welcome to the Old National Bancorp First Quarter 2020 Earnings Conference Call. This call is being recorded and has been made accessible to the public in accordance with the SEC’s Regulation FD. Corresponding presentation slides can be found on the Investor Relations page at oldnational.com and will be archived there for 12 months.

Before turning the call over, management would like to remind everyone that as noted on Slide 2, certain statements on today’s call maybe forward-looking in nature and are subject to certain risks, uncertainties and other factors that could cause actual results to differ from those discussed. The company’s risk factors are fully disclosed and discussed within its SEC filings.

contain which slides more believes certain comparisons. appropriate addition, non-GAAP management measures, provides In are assist intended performance measures non-GAAP These to trends. investors of understanding the Reconciliation the are numbers, presentation. of for contained these appendix within

remarks, the I now to for like turn Mr. would call Ryan. to Jim over Ryan opening

Jim Ryan

you Thank of morning, finds Good safe families Dorothy. I hope your you, call and this everyone. all and healthy.

is our ONB on dedication and communities trends clients and and of the during Way While members initiatives, I fundamental focus our and we team work our the would to supporting core for today are clients, difficult team also and this first quarter their hard serving pleased thank commitment strategic with members our communities. to implementation our like time.

first including $XX.X our for loss charges. income on the $XX.X higher Way ONB loan quarter Slide $XX.X CECL. in net which adoption quarter million, income Adjusted was provisions first million, at X, was net higher million includes Starting of

see margin were basis able results, XX total rate challenging to We our curve. review the points. due costs by yield deposit cuts and our basis Fund was that you to you Fed to points down the As will X core lower

production million seasonally commercial was Our higher. $XXX of

the of As a higher grew and payoffs over annualized. line some production, result good usage, lower quality XX% loans commercial

this we regulatory was it us I with $XX midsized in Once CECL very impact known. as for won’t accounting the speculate of the adopting to from ultimately are provision for and we hopeful The felt place even standard future CECL. the I be was relief our see the will to you is of country to put suspect to to we as needs, economic the X. extended, impact losses but provision the all clearly Midwest in with parts CECL crisis quarter hasn’t determined and other new multiple and is coupled the blunt of million we very sense recorded the or proceed adoption have programs forecast. economic January will provision this of that made programs temporary relief impact on We same variances expense related during of quarter clients. banks the relief the this adapted yet broad-based. wide governmental depth as in The capital various

business. Old in celebrating XXXth year National is our

As being a know, basic bank. ourselves you pride on foreign we

Our will but impacts understanding of magnitude is the been time granular the crisis, future truly diverse, loan understand portfolio this better overall ever before economic it’s need as losses. we that’s and into strong more heading to

have forecasts Board We stress run various Directors economic of and tests. shared our with multiple and

open business and As we new for for credit. long-term. a We are result, still manage extending the

sheet help through and on side. the our challenging confident I are us capital we am that markets diverse time. Our manage team other are and strong, balance will emerge experienced our will this even stronger

to deliver discussed We on provide on in Way. as in quarter are details, XXXX and on changes were in achieved $XX call. all we efficiency progress savings ONB million made the but XXXX the full track we for revealed initiatives Brendon $XX the successful making and organizational million under last will significant we we run-rate the the quarter’s cost last

own various pressing and revenue make some initiatives, have need government our continue the reprioritized progress been programs them internal We given investments the relief programs. for relief to on but admittedly the of in

don’t the we our dividend. actions anticipate capital we current program an the We given million other front, did board, repurchase uncertain did suspend price After any to at shares average with capital reviewing the the our maintain conditions. stress and economic of On various expect $XX.XX. during tests X.X quarter we our

team all our clients off communities. members and COVID-XX Slide time along for clients, detailed safety members, paid we sick The personal additional team to response for members of We team granted is with team and X, health members assist for time to paramount. additional our needs. unforeseen Moving and with

expanded who household. their will person have at or those benefits are We also an at-risk and to risk leave family medical in

remotely. All enabled expanded have many members ONe only. appointment have more And home. for lobbies working by drive-through program are with team Wish We team branches opened unforeseen members members to X,XXX lastly, Daily, financial work we from we with via than our team needs. our

service oldnational.com, platforms. our We and have e-mails, options mail, digital change provided on via direct and social information banking delivery media in model

seen We definitely on platforms. increases healthy mobile our have and online

to for approving clients deferrals credit payment reporting bureaus COVID-XX. impacted extensions, We and not a by monthly are waving overdraft by clients and payment refunding providing relief charges service

needs purposes. We payment income we moderate extensions. Today, to the our lend that business continue to general emphasis pleased $XXX,XXX $XXX,XXX on with I’m immediate commitment approving and immediate low with announced Payment and million X,XXX we communities for a proactively to nearly efforts, in on reaching We’ve a for to and near-term working clients businesses our out foundation for loan with capital SBA are Protection an relief restoration. helped clients focus to Program $X.X long-term qualified and

country. about – see and Slide governmental to Executive, the highest the our in no less today. Michigan will cases has return I’m reopen. crisis. to our us work. ways Chief their have almost roles XX% X, joining the we can COVID-XX been same are on experienced teams Officer, Both our where branches. to has have with be the Risk financial safe impactful the Evernham, businesses for than talking the parts Scott their impact the open Midwest in optimistic leaders footprint in in footprint, other our among of Credit reported In some concentrated leaders the and Daryl are our you Chief of to states As in footprint the many of earliest call XXXX the are that business and on and Moore,

have has hoping finish turn was career glad his he this We been to his having never given earnings conference slides to by have Daryl’s over our in with and National XX experience again, to He than to environment, Daryl. will more today, the I now Old are to really fortunate call call present for but in years. I’m experience

Daryl Moore

Thank gives portfolios. of a consumer you, Jim. our review both high level commercial of and composition the us Slide X of

that there’s segments While denying the many will in negatively the the most have disproportionately top you crisis. commercial for suffer been have no in this industry we believe outlined impacted outbreak, industries that by chart COVID-XX

immune segments identify do and attempted in most a to mitigation to most structure see, part can participate risk will appropriate not with be the most have industry but to years, industries our segments for be perform the of in place. those not book, to participate going segments, certainly and consumer in tried Over volatile these well chart as difficulties managed loans. not well the anticipated loan either you believe into size to could to of our cycle. you appears in we’ve less exposure that those be in that vulnerable the There are would are bottom-left will doubt the portfolio of the With the fact see of and in to We types and cycle, or going the can significant quadrant these respect that in a at when no the because sub-prime, experience than breakout slide, consumer we scores us the of unemployment, increase that looking cycle. again, of portfolio into portfolio size none the we our these scores fairly any this developing the we product originated average considered in in the have well is difficulties within X.X% address this portfolio. that of we But and FICO positioned difficulties different FICO the

HELOC end also line utilization seen prior was increase to at predominantly XX.X% generally Just a of right-hand the seen asset increase from last quality on commercial being the with those line as couple in days the We’ve within utilization, lower the the clients at strong. March ratings. XX quality in comments line with an compared reflected the we in applications quadrant, XX of about XX.X% Commercial utilization very have an stronger of applications chart quarter.

are determine the liquidity definitively if are for continues an time be a economy While many commercial stressed lengthy we more clients why category, consumer up that uptick our borrowers seeing suspect the of the we period. in able we of to following our particular this are not backed loan wanting to lead

deferral wanted to we Next, we have those Program the loan information and volume approvals you granted along have give laid out the on X. of an Paycheck idea of Protection Slide some with

representing have the requests commercial XX% of from totaling On roughly outstandings. billion, $X.X commercial total we side, borrowers approved XXX

While XX% category. in have the of booked the are CRE to-date loan deferrals we

see application in to to of this as higher have process. approved been CRE book requests to on appears continue as proportion deferral we the requests expect drop early We a percentage

portfolio area. is deferrals amount loan lower the those the As numbers penetration of you the and deferrals of suspect, might consumer while in in than the area, the commercial dollar number are higher

right the borrowers. on assistance many the As hand Protection of of roughly provide the exhaustive in Program of X,XXX team to $X.X helped we members, shown billion have our work slide, side Paycheck to

was end at the of XXXX trends this of and additional in appropriate. prior the underperforming any the to lower of in write-down subject slightly we years. provides in posted our the about end take fourth in chose and quarter non-performing X charge-offs. in than larger credit loans appraisals recap felt new to was level credits. were quarter X that quarter new environment, quarter Charge-offs have and to of on Both the Slide quarter We particular economic million first higher year-end Being than the write-down relationship values collateral an two concerned $X.X for fell related commissioned any lower we quarter XXXX results. levels the an the past additional to

million had action quarter for promised working charge-off a by investment extended larger other time we the been the period of a was outside capital been with on The borrower. waiting the that have in credit an $X.X on

apparent investment change would it exposure were loan certain the the write-off not determined economy, materialize that to When back the the entirely not appropriate. the in be we this chose and we for given by we made, capital loss that XXXX. would investment in the quarter the of impair a purposes that complete reserve became of loan fully end As was

portfolio, We At but that time, do issues credit are in not we will in relationship forward. credit occur this this continue pre-COVID-XX the general events these going portfolio. in feel collection over reflective isolated any any represent of point to pursue on write-downs time efforts

this about our a changing newly comments part I before of my this to environment. Just discussion couple end approach of

we to respect change, has how that plan years, communicated the at It to have the changed. the is with with unparalleled. that cycles. economic current recognize clearly is hand to the for is important numerous found have we have pace an Over item we minimizing this challenge What intentional environment, economic breadth first and dealt conditions the everyone this hand become approach will apparent is losses. of at In

is obvious sounds this we days accomplish, in While just production new team full to most getting and have remember switch simple production loan members for to mode banks that tough call accomplished to were be to ago, to XX has mode the having clients necessary, and quickly for the of new conversations about vitally both when client important and the bank. benefit economic with realities the

new the infusion about most continue this are the In bank capital borrowers time making first minimum Protection as touch Program enterprise other times the availability credit. the fund such liquidity, business to resourceful and borrower’s Liquidity liquidity these basic Paycheck downturn environment, and necessities can’t structure different government the otherwise emphasizing without the we of the What every loan survive. of we that adequacy is a a and this and at the is we offerings. is through ability is of and in evaluate concern must to

to challenge. are to hopeful to seen amounts yet through While it this these them be going whether our to at are under bridge levels we are programs borrowers be is able the draw sufficient

the outside The unanticipated challenge them not borrowers capital sheet through have begin we to with next do to concern them have about what current is sufficient to setbacks. – up that resources talked line adequacy their that them and a we raise to to believe to reserve capital at as our is disposal balance borrowers that availability they to we the encourage If may cover have of get our capital and remind remember them those or setbacks, needed resources. to capital they that

we require of review collateral the loan and support. a final point, structure current As a

acquisition that of emphasizing structures terms be if our in We available on are the our the considered must of guarantees table discussion covenants and collateral in to with be to and opportunities strengthen additional borrowers. has

loss an of are also think and might We the given in collateral how ultimately have values place to current false the beginning impact about challenges on shelter assumptions.

fact I Foreclosures are Courts passage does are put most and houses locations. time many downturn. an proven could hold. the not on It’s in valuable in time have in Auto go a closed on. more get currently in auction with been collateral not operation economic instances that of

liquidation yet I risk values these collateral associated to because believe issue. can fairly its bank’s demand out I seen ultimate discipline the to strategies role be obvious play difference a Our fundamentals given may around of pent-up stopping a and a outlined potential make play the very these portfolios. with that has items, this basic the performance in

think recovery bank it the supporting efforts. needs our embraces in I to each role Finally, it’s to the vital that communities’ important reaffirm of play

that every this in help this responsible and also I the environment, on our belief we as back country cycle. clients will to to to be imperatives at understand opportunity basic to have get opportunity My every our provide obligation the properly come out that these focusing on successful While credit very fundamentals credit is two how addressed understand banks critically our to of feet. is have balance important we

I With over call turn will to the Brendon. that,

Brendon Falconer

you, Thank Daryl.

turning provide additional to CECL some like Before financials, X. allowance we our Slide would on on quarterly the to color

The our reserve the reserve increase were range. of X from The reserves our economic in the inputs pandemic The in million the immediate $XX middle portfolio outlines CECL projected The a large March X but year $XX.X severe in to XXXX. was right the than by The economic $XX decline forecast also and a on less of models quarter derived for day published in projected critical is over current impact end scenario year used slide in driven Our GDP variables million primarily of sharp remain by million unemployment key return in XX. used elevated day model. QX relatively Moody’s expectations, and scenario expense and assumes the growth were provision coronavirus. our in through does end. macroeconomic our variables and increase

in more In also assessment, than our unemployment factors our that final inputs, work we and to GDP, addition long forecast. the to prove severe quantitative qualitative for economic several and decline, reserve the risk specifically considered the baseline including be

we consumer and the relief mitigating sponsored benefits unprecedented will stimulus, provide We also payments unemployment took well enhanced various government consideration loan impact direct the programs, the of into including as individuals, which fiscal borrowers. expect as to commercial

as relatively unknown reviewed, fallout severity individuals Daryl bridge expected, exposure on be the as from impacted. this this considered response and Lastly, low is the of vulnerable to to yet is for industry we The a most a to the ultimate crisis. future providing effectiveness as economic of the businesses virus government the

more we adjust As and will our will times on, have goes levels on clarity accordingly. reserve both

level the we in estimate reflects of said, the today. reserve our As believe our portfolio current credit best losses

million $X.XX earnings excludes and ONB $XX.X in on quarter $X.XX. securities GAAP well share, share Turning earnings was related was charges in debt share, as per as to gains. Adjusted million the Slide XX, our $X.X per per earnings our adjusted Way

leverage strong from Way needs. year-over-year. expenses revenue a XX, by savings driven higher X% prior pre-tax provision This businesses provide environment, pre-tax progress operating operating and believe higher we a points net the Slide in to by ONB X% result We improved expected increased Despite as challenging buffer led adjusted reduction as fee quarter. over from our the net year-over-year towards pre-provision by quarterly capital well mortgage operating income against adjusted our and initiative. the resulting will was basis was achieving Moving future our markets revenue XXX our pre-provision

increase real and driven of was increase outstanding largely in and $XXX to Commercial in of current the fees impact December lower. given resulted which utilization. the yields $X.X period loans. Slide The rates in quality our XX would line a production in concentrated the quarters. solid loan shows quarter-over-quarter recent drove on coupled on stands highest commercial than pipeline, first was categories. loan in be coupons loans slowing increase portfolio we new with production, X.X% utilization increased currently higher the lower commercial commercial $XXX lower The End expect economic estate of line existing in was But activity our uncertainty, rate by which borrowers. full billion. quarter, loans, million trend during sizable high million, The at our cut prepayment overall pull-through

We expect XXXX. shift continue dramatic asset curve pressure the in to will the yield on in put yields

fund during quarter declines seasonal and CD Moving in accounts the to modest public operating period-end Slide decreased deposits realm. and to XX, average both due

Our deposit basis emergency the a basis reacted March very quickly total total to the ended in expense XX CD costs. maturing three month our quarter, X.XX% cuts basis We decline. XX points the XX points but quarter-over-quarter deposits cost next our continue rates Bank quarters interest should low in and of to points. averaged to during the months, of approximately deposit in rate declined at with X book

pleased with core while in strategy results We pricing client reduction deposit meaningful in the for a our has base. resulted that maintaining costs, deposit are

shows XX points purchases mix. this Slide productive mix quarter with X.XX% quarter-over-quarter yielding more yield commercial basis real sheet growth our goal to X Strong and was down The X.XX%. asset to our supports first in loan just new loans. of investment remixing earning and portfolio change our estate loan commercial quarter quarter-over-quarter commercial balance

we performance detailed accretion, corresponding lower than growth margin. Next, changes on Net income quarter. of at in are interest with expectations the X.XX% Strong Slide XX, compared net interest the to interest excluding slightly the interest of X.XX% last our challenges rate pleased given was environment. the will margin to our you and quarter asset our earning net contributed the see first and income margin,

yields, and core The reductions was was help points, nearly funding in re-pricing collected negative However, our basis margin non-accrual reduction asset basis continue to costs. just by and the sheet were down X in our down mitigate offset for points. the loans, core balance deposit adjusting XX earning interest on margin. book of Active which lower on strategies day impact impact

XX trends adjusted income. shows Slide in non-interest

Our our business pipeline mortgage and million of line but banking revenue, capital a change first a non-interest charge take be The $X categories be swaps likely result included valuation. will interest from margins netted spot which driven quarter-over-quarter strong was pressure that of is bright impairment million. Other in shows our the gain a against benefited rate also come on revenue. slide MSR to this to fee sale in for change by attractive XX% refi quarter of did as generally increased $X.X our $X.X accounted Low under to quarter, support $XXX in of rates continue income quarter. The mortgage clients. very mortgage our to the Also an a We summary which portfolio this quarter activities but on healthy our increase the production. production continue a is second was quarter, stable were which continues to adjusted strong million in production. for in million markets interest activity

allowance that almost QX It’s also shows amortization, reflects Adjusting which slightly we adjustment than $X.X our Next, expenses, these our plan. management. included expense the expense and $X.X to we better and ongoing one-time strategic million. million One-time of for $XX.X non-interest noting on a focus million quarter, ONB Slide non-interest unfunded expense a for commitments this expected Way CECL-related million XX charges projected. quarter-over-quarter, is remain adjusted from in credit trend our track on to non-interest realize tax were worth which $XX was the our charges savings down day-two

basis representing ratio low improvement of is adjusted XX.X%, over XXXX. for a Our the QX efficiency quarter XXX point

some up key on I discussion the quarter, As wrap are my takeaways. here

environment. of demonstrated in the pre-provision the core are performance fundamentals posted our in net well without with on defended We as pre-tax loan strong improved overall as the by annualized business our revenue. We X% increasingly an our compromising were pleased quarter challenging credit. rate We margin growth

expense in markets, capital posted and savings Our outlined quarter. delivered promised we growth, revenue healthy fee mortgage on particularly the and businesses last we

XXXX virus strong COVID-XX includes performance. of impact our with XX on have in and XXXX. loan the second pipeline. The the the thoughts quarter we was quarter for a remainder will activity our meaningful Slide a Commercial ended on outlook healthy our

to on balance these and outstandings stay growth. a uncertainty economic expected that to may is how add on loans sheet. have to uncertainty near-term rates our there However, some in will impact mute PPP expected are negative long pull-through future $X.XX our QX, loans loan is billion but

rate curve, impact and is a We average are through room of their within lower and have of deposit at on margin most coupons. on rates that meaningfully but carry to margin mitigated reductions move a the on portfolios going while also After terms. CD there loans fee us. defense. short put will and X% book accretive behind impact deposit And pressure cost to These transaction our an the asset component our lower, our forward. net long-term margin particularly low PPP as investment level loans interest our re-pricing, X% our yields the coupon yield over loan be continue re-priced a will now margins end historically portfolio, has been the key approximately will two-year account of of

accretive early, loans be paid are immediately. will fees As to income any remaining off

economic Several pressure the also come fee items under likely slowdown. will from

were and the of sharply will as limited management that fees evaluation investment near-term. Our seen in income assets last services. decline March place essential the with to in shelter businesses their Overdraft orders and in a impact under week wealth interchange our spending have management began consumers of to the and in comply down fees

Although to we’ve likely until in the economy reopened. stay early activity April, is at in pickup seen a low the trend we are

weeks revenue the quarter mortgage build. pipeline this pipeline decline. revenue driver pipelines earlier, come. typically I could to the mortgage at mentioned ended of reverses That increased we but record – the in fourth fallout was quarter We see large As as to related A could highs. the in see our

housing the in disruption it quickly. the given may So market, reverse more

merit we net to QX. of reflect reductions communicated beginning XXXX with ONB last the the increases We Ways of that expect expense in remainder quarter associated

decrease in now to a the ONB Way which total related estimate one-time million. XXXX to million, be $XX original is charges are of estimating $XX from We

initiatives of closure our April the XX. including expense track, branches planned All by on remained of XX

like authorization the the you of CETX of abundance capacity ratio depending buyback also any based to use And on program current XX.X%. with outlook. we We and future would the on suspended with later ended and an circumstances our We our have performance, to of caution, capital and would quarter we we update a facts capital the temporarily healthy give that in of in our outlook on the our position reiterate also current XXXX believe levels I present year. maintain our have dividend.

recently And We horizon. adverse X-quarter test stress in CCAR at lowest model. have also updated our capitalized the remained point the we the well under scenario, severely

also have positions Our with unencumbered plenty flexibility security to of and XX%, liquidity strong ratio and low of sources needs. various respond loan-to-deposit position very to of our strong cash we liquidity, other remains funding

any The basis approximately was which Lastly, credit expected project, rate an on tax XX.X% tax to we from in additional amount tax actual other includes tax timing be model primarily other you impacted majority XXXX generated Project projects million QX. delays which $X.X historic tax XX.X% year GAAP expenses operating in our included credit rate, the than in quarter. Please amortization basis. remove your that a FTE have tax credits This QX. our our quarter related project estimates. the COVID-XX full the our to of amortization in on in included by guidance the tax provided some placed is effective have credit credit have and service were in of this a on million in historic last $X caused

the quarter remaining We the of will update next you timing projects. regarding

that recognized date service the while line. though credit over reminder, the spread the quarter tax full is tax placement with expenses amortization the is the benefit a the through As in corresponds tax year

we we Jim happy answer Scott Evernham. and have may the and to With questions Sandgren have team here, that, that do any full you are including

Operator

Instructions] [Operator first from Sandler. comes Siefers Piper Scott line the of with Your question

Jim Ryan

Good morning, Scott.

Scott Siefers

everyone how guys. Good morning, doing? Hey, is

Jim Ryan

too. you Hope, fine. doing are well doing We are

Scott Siefers

We are.

you Thank very much the are. appreciate asking. questions. I We for taking you

and First a I world point And of ones in just compares there consider basis a maybe on loan sort on have CECL then the means to well to XX credit, and first you ratio guys losses for of updated so that the remain a scenario? ask stress to wanted in what of reserve and that you sort kind what second refresher just just of maybe just stress reserves the curious how you in point, that might capitalized even your terms just still adequacy? guys noted low existing at basically scenario

Jim Ryan

Scott, off in. sure. I start Yes, and Daryl can will chime

as a year at the we million at reserve started $XX reminder, just So so end.

sitting and at still We are million on now million $XXX $XX those the of marks loans. outstanding remains

totals portfolio As to out concerns, the test test come we stress X% have recession recent range. net stress ran far as our X.X% the and charge-offs with great roughly at cumulative most models through that are in with line

[indiscernible]. the be points our XX basis comparable right would So to that

Scott Siefers

Okay, comp slide. the just perfect. loans, you addition to maybe And on planning you. you of a put tutorial for the in I another question in bit are had PPP guess I Thank on little then guidance them what to how a

that everything have have guys actually guys looks then you the all, fees, that you the funded So will like right, based gets the as – first what origination on And outlook? those all those well. it margin approved flow of through in

bump as margin in term, would think guess in they of here be the accelerate we margin of kind you get sort I up but the about that payoff, than is a you right forgiven as dilutive see the they are So way planned immediate to the so to the could presuming PPP it?

Jim Ryan

Exactly right, it. Scott. how seeing That’s are we

Scott Siefers

guys much. you very Alright. perfect. Okay, Thank

Jim Ryan

Thanks, Scott.

Operator

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

Jim Ryan

Good morning, Chris.

Chris McGratty

Hey, everyone. good morning

the PPP to the shorter out lot of are go much the years question on X the in that Scott’s Just a back I want programs to you laid I loans think than slide. think

it up we how the by a of X how and is amount that the case bumped that is over growth doing the sense billion. $X.X modeling reasonable loan I kind next quarter My of second the base you months, For it? of mean, purposes are structuring with come in are you unwind most will

Brendon Falconer

amortize – margin then would bump Chris, these our to forgiven to within are forgiven things you a be you expectation the But up life not loans. too, That’s but all see initially, they in QX. are QX of to set have dilutive the if the there, but they if so till does it it QX, if

Daryl Moore

Chris, about rules be would we lot that the published. with add, of there to still determined is to are details I forgiveness compliance yet or a be even verify written just how

for quarters it could couple take So unwind. this kind of a to of all

it the are to we but get exactly is know to rules it’s be since we think fast reality going play hopeful quickly, to these are loans don’t unwinds determine difficult forgiven. all going I how to by,

Chris McGratty

And then with loan-to-deposit the qualify, government the some programs balance either to expectation the have is sheet or is Okay. that through that of them right? you flexibility with fund

Brendon Falconer

Yes.

Federal or We the planning are to actively participate Treasury with Reserve’s the department’s program.

Chris McGratty

that. appreciate I Okay,

industry. more, am X, map Just and X and to trying Slides I vulnerable the the one deferrals

your clients? some – maybe or portfolios I deferral. be of that book think in CRE some you you the being Any other for restaurant of of the prepared color terms terms might remarks might in on with your extend about stress trying test to big be talked a the piece working

Daryl Moore

from deferrals, see through we Certainly are. Yes. with see where those we those until I restaurants Chris, we – at there will have least working this days think there – get within a back have requests of come would don’t and XX them we I fair is amount is and the again that Daryl. clients. been

retail with the those you of exposure very it the been that family that either hotels, that much have have retail from CRE might for little as have most been the we has On in down. And of most or imagine. associated the on closed comes deferrals asking piece, hotel

early on of Some their kind concerned bit were tenants about those things approval rent. pay of anything on requestors ability at just We mall, types were a looked in retail, of also deferral early process. strip and the apartments to little heavy then of that

Chris McGratty

to them make sure to your you having through having as And with are more you borrower, the in and are of hook? the you what skin Daryl, going conversations terms in you on are process game not work of kind put kind of with this

Daryl Moore

the some given are have early had so a uncertainty did lot clients, they these strains, those but on, just with mostly to of we the we knew Chris, Yes. conversations we cash that going deferrals. fact and

see they before, had history, reasonable back look and then hadn’t thought look on their to just moved we on. what operating was Just problems if

this the to to turned have XX are days, some hit we XX and financial As I sponsors on conversations if end around. and information – that of we be we days, going for updated in the will some asking have sit to we hasn’t those cases on down tough did

we on, borrowers, made XXX-day do Some extensions it to sense because did that.

start relationship capital our they and conversations gather talking will matters impacted out is those beginning about additional right those of be how going fluid financial through All or understand have or are been to in to It collateral deeply how now. start days to this. have with XX clients so to we information, work

Chris McGratty

Thank you much. very

Operator

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

Jim Ryan

Good morning, Terry.

Terry McEvoy

accounting deferrals, the of about if assume into provide into and did impact just outlook keep – start I today? you insight that and you accruing could could Maybe yield morning. some consumer what lower? commercial the talk type for your and is you would could projections built so the And now but it’s good Hi, have

Brendon Falconer

Terry, how relatively cash but in, impact for normally there accrue accrue on change No will to that, would. continue Obviously, is we to a those as flow them. minor, but we we

Terry McEvoy

today maybe expand months just rates balance Okay. rates X sheet on what And you the market I average said on think next, are? kind CD then pricing the or you over XX could the well of current

Brendon Falconer

Yes.

quarters at meaningfully months. said, I you am tenor, next a not And I but as the depending they on that maturity of sitting that, So will number over are re-price specific the the on Three X.XX%. giving be they lower book XX will we and are today. than

Terry McEvoy

or just late help the impact transactional model And what quarter some on fee in Maybe quick revenue to actions those can from you on some year-over-year the took clients? March to last out of the help color you of kind on happened maybe one just income basis in some the first in us talk quarter lines? a one, about of your just

Jim Ryan

didn’t Yes. with of of and would from really part in the waivers first so a March impact. coming de some the of have I the all minimis was middle say meaningful impact quarter kind fee

charges, think is be – I get the to right think, we Brendon think as slowdown, better lower. on everybody permanent service seen across hard a It’s seeing out spend how industry pointed I I everybody though, saw for the a just and us handle have already in pickup April.

for is long to the for have a – how it’s exact be. hard so this impact on and what just lasts going a really pickup to view And us

Terry McEvoy

Thank you. Understood.

Jim Ryan

Thanks, Terry.

Operator

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

Jim Ryan

Good morning, Jon.

Jon Arfstrom

alluded about things. I comments couple magnitude? morning. activity. is or very, you talk all talked in the you to magnitude consumer and meaningful it just Good Brendon Can Jim, think thanks. the of in early? just the I just you increase at on about to Is just of follow-up Hey, wanted it a it your very

Brendon Falconer

just start of down clearly, some fully conversations are end and earliest and things going but some you economy I Midwest, spend I spend country. is maybe to return early. we a what will I back lot and normal. optimistic optimistic in that people a see I And tell start speed, the just and back very, having I very I time you the I going to hopefully think am industry. impact know get the our great think am Midwest. entire food And understand. the I that is. but up I of what to out is I the other of you in it’s for to I will impact about work. about, restart to But here very to optimistic card back and the Midwest card have will it’s April, return whole the – kind of in and early will up guess, to know take by mean, of lot so on, restaurants it’s think Jon buying I exact an the state the am I think is, that’s too to understand still

Jon Arfstrom

today, you for look what or or the talked the seeing does it what ago? may areas question initially, what A demand draws all compared guys does weeks demand X as like you well that demand? about today the like it X big are not through, It maybe look line to on X like the the pipeline but pull loan but are where was looks today you it was what and loan

James Sandgren

Yes. of kind C&I. Jon, this commercial is breakdown real bit. say Jim is a little estate pipeline that balance down would pipeline of XX% Sandgren. is the I and The still

this of see to their is back going it’s think look step a category, about XX% taking all we industries. particular Of at kind accepted everyone to XX% I typically impact how pipeline is the when the likelihood. to

deals a our those closer deals. to with leaders, close still to reviewing drops going commercial think I of think but to booked, be to After are We number that lot segment XX%, I to cautious going there two, be a investments certainly is to and a get going little borrowers, a of be some and see. quarter delayed kind may projects or wait so are they or

Jim Ryan

in offshore. be produced someplace that could much that today This in how add. be might expect chain might over saying about how longer critical and people think here should are is I else. and done versus think U.S. but at I this bit And looking onshore chain suppliers much investment and increased the Jon, of view, Midwest two a those of some supply am or versus coming manufacturers really their little optimistic see supply the year their I term

kind be a of think long-term the of beneficiary new I the supply so chain And can of view Midwest that dynamics.

Jon Arfstrom

deferred curious with a to keep that Maybe curious don’t negative. in deferral at Daryl could do this and you or Scott, you guess of I guess. see have am you a percentage I view book of from more you going think far talked I here? I deferrals where just increases go? have how be follow-ups as as CRE And if I questions, to any am about the what you expect couple shot I areas think but could I increase could

Daryl Moore

Yes, Jon. This is Daryl.

considerably significant I has I back or up think just forward. most of that don’t have the now, see the after behind PPP. changes increases going think pick deferral But us. to slowed requests you’re It maybe we going

Jon Arfstrom

The industry PPP, And one an you, the curious. the don’t about the for then businesses quality, think loan assessment longer want of observation, I’m that health Daryl, in are any should maybe PPP program business, to I more, more term? we of that say just of but

Daryl Moore

that’s Jon, interesting. really Yes.

they of talking advantage little businesses sure borrowers businesses I’m concerned those, about not the took So, this come? it was cash. does loans none across right? all we’re asking think all very have the through just of of when So, review some of had that have PPP the do we the strength small gamut, then verification we those goes Anecdotally, it to also on strong that and any about now. with is anything board. all got what if as We’ve I financial by you really who program, very very them some And at know to we program, this are some who money work did of the

Jon Arfstrom

think that? on you These things out will or eventually a find we we and are more quarter know two will when

Daryl Moore

really keep suggested things can open is our markets, the through to employed. we able they’ll have is more a fairly extent positive these as risk as with bridge these at started to get think have borrowers up these meant again. we longer that program be. being to respect that up that in so begin a well we’ll PPP won’t the to it The programs quickly, The program people as I effective to businesses impact Jim Yes. to And goes, least be

Jon Arfstrom

taking Alright. question. Thanks for my

Jim Ryan

Thanks, Jon.

Operator

James. the next comes Your of Long Instructions] with Raymond line [Operator question from David

Jim Ryan

Good morning, David.

David Long

GDP? – appreciate curious you could far as specific forecast. I inputs taking you it relates provided have the been built in reserving if as Good that us tell Thank color you your the pandemic Moody’s tell may But question. unemployment me with the my economic what into everyone. morning, critical for to you

Brendon Falconer

Yes.

we at models the of look what XXth them and XXth, the We through from XXth. every run sensitized the is, did the our David, and one we So, all forecast the model. of Moody’s

the at one that it model V-shaped on adjustments a the is sharply, did rebound in top – critical XXXX, we of put stays growth for qualitative two So And then consider was down and through level Those key growth comes pace time. and same model. the manner the pretty of X%, about then there economic on a GDP around it X% actually starts at The and then goes all the went period think XXth. for we was QX, one baseline in forecasts. unemployment into a elevated an of the in up extended in X% starts are to I kind prior. again and did through as inputs

David Long

And frequently you you. have it. providing Got Thank with how they been updates?

Brendon Falconer

came one the quarter They’re we but there believe our I the one XX ran the was that’s end, model. one – XX, run through one another that through But not was that April the out. the through last on models so, we our

Jim Ryan

per And just one as a quarter. forecast reminder, we to receive expected only

having timing this the of the forecasts we out if is especially interesting come adopted. quarter, first So, multiple throughout quarter

Daryl Moore

point Yes. obviously it in is assume to I But we that can get some would here per new this the to them. quarter at future hopefully one but...

David Long

guys. Thanks, color. the appreciate I Okay.

Jim Ryan

add. also will I David,

management lot a of Our of sense a is, banks forecasts, bunch of used of bunch with a of a notes overlays. lot as lot compared we’ve different obviously and a different banks different different

view going see, wide you a this, look around as variance I I comments, economics pandemic. just kind said at the just every And think you’re in how day of of a this. difference we prepared so, the how my to of And future makes

in a that have us we’re and place going wait very adjust you And and the put to so, see time. sense for continue at better But every thought and we made necessary. forecast day, we to supportable as optics

David Long

you, Got it. Thank Jim.

Jim Ryan

David. Thanks,

Operator

remarks? are there there Are questions this further no closing any And time. at

Jim Ryan

support. any for everybody’s here you are as Thank very much. safe And we and appreciate We usual, questions. stay healthy. follow-up Please

Operator

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

Old National Bancorp (ONB) 20 Apr 202020 Q1 Earnings call transcript