ONB - Earnings call transcript Q1 2022

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

Operator

Good morning. Welcome to the Old National Bancorp First Quarter 2022 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. Management would like to remind everyone that certain statements on today's call may be forward-looking in nature and are subject to certain risks, uncertainties and other factors that could cause actual results or outcomes to differ from those discussed. to presentation statement slides. you earnings in refers and release company its legend forward-looking the The The and SEC discussed risk within company's factors its filings. are fully disclosed

for which appropriate In presentation. believes investors' I'd remarks. of turn are understanding opening Reconciliations to are non-GAAP contained slides trends. addition, assist the measures, now performance to these certain intended to like provide These Jim comparisons. Ryan? call the for more of non-GAAP within measures contain appendix Ryan management Mr. over numbers the

Jim Ryan

Amber. Good you, morning. Thank

We you are pleased with and to discuss our first on First quarter results merger update our transformational Midwest.

on start X. Let's slide

First, can our find highlight recently you website. our report, which I'd like on published to ESG

sustainability. of just for have Old equitable learn recently National communities, Second, the and the of XXth start being Old most one governance, supporting recognized by the National corporate commitments long-standing on practice our ESG ethical to invite we good thinking corporate reviewing companies. recently, page ethical, our year and social inclusive, responsibility by being about our I about website. being didn't you demonstrating committed consecutive was world's a more Ethisphere as Institute to

were Midwest close the reported pleased X. merger with closing. our First since merger slide to include the Moving on We All XX. of February to results impact

our just systems MRQ conversion Our and [ph] weekend. branding place in first successful completed over changes and we take July will conversion the

should more which into confidence MRQ give two we We conversions, July. even planning us head are as more

you in and million, with will relationships those details. hire Later talent client in will footprint. already to top some retention the growth outlined energy you this I'm and amongst team, are of our call, client-facing talent revenue-generating is see merger to the on and the excitement strong we're we our a on particularly track new starting for $XXX Chicago the of achieve deck existing of model results. the fill benefits. of have There robust we pleased started strong this translated some As to and energy our synergies realize in market. Brendon excitement and in that to slide more and

above Our profile we benefits. expected of as us more realize to growth strong merger performance, the should peer lead return and

to Moving slide X.

anticipated, As first of loss we for a reported $X.XX quarter we GAAP the share. per

expense first pre-tax merger The $XX included quarter million of in and in provision initial million the $XX charges expenses.

saw quality more charges $X.X combined these We X% quarter, adjusted was than common pipeline Excluding commercial growth EPS during the and to strong our $X.XX doubled a quarter credit excellent from quarter, per loan over record full share. the billion.

Our adjusted XX%. efficiency was tangible average on approximately adjusted XX% common was our ratio return equity and

broadly. pleased We and the we from than Chicago, XX had more in new we've the for An a with seen. and hiring are update pace benefits rates. We operating on further them five hiring higher success managers, to in previously and Indianapolis. is significant hires commercial This quicker new merger in relationship metrics three three expect in strong improve including Minneapolis,

year. the we pipeline to make robust will talent throughout investments Our continue and remains these

St. Lastly, over call visits, turn Kansas recent Brendon LPOs based latest two are the to City to our excited for to now the starts. in Louis on further I'm I'll solid that details. report off and

Brendon Falconer

Jim. Thanks

results quarter's the to Turning on X. slide

one in million impacted $X.XX in net common day per provisioning anticipated, or $XX and other by As merger-related charges. of million, million a Reported we GAAP $XX reported $XX were share. loss earnings

was and both $X.XX. shows mix total $XXX per end. accounting of items result as investment quarter gains, Slide basis from PPP or X% Excluding billion in offset book balance production at new the new purchase share organic $X.X seventh million Yields basis, combined of performance mortgage stable driven of improved higher adjusted commercial X% runoff our this quarter approximately increasing historical The the $XXX with transaction on largely money loans in loans was trend Consumer shorter flat, an securities on our the significantly book. common represents on the adjustments. portfolio loan QX the these by annualized. quarter growth increased million growth F&B quarter were the as total transaction Portfolio the focused debt dramatic purchases overall that shift legacy duration X a strong curve merger despite remaining loan of portfolio end. annualized The a as yields consecutive excluding to unchanged. well loans which X.XX%. as with in of with earnings X.XX% money with was full grew yield

we addition, OCI record grew quarter to impact. We're securities the quarter by, details pipeline Slide pipeline. our QX mitigate $X.X HTM growth the in led The combined higher move of fourth future proactively XX% commercial spite further quarter in strong provides In loans to did our strong X C&I and $X pleased of that billion pipeline. which a ended the XX% annualized. billion, also production than at first was

C&I pricing, which well yields above are now were Turning portfolio on to money briefly new X.X%, yields.

rate billion significantly with details is across our XX% well all rates. QX Slide New production tied commercial product short-term end rate markets. quarter-over-quarter heavy production The CRE XX by at as $X.X balanced production shows this The enter to products was and mix we X.XX% welcomed market. yields cycle. major floating of rising production higher were

We existing are understood our From merger the and the from Chicago new engaged the of taking with day has Chicago remained of market. particularly pleased and team focused care our one logic and strategic clients. results both

Total historical quarter-over-quarter stable some consumer accounts were shift declines in eight we basis borrowing were see quarter-over-quarter. increase public. deposits an down deposits combined of seasonal were quarter unchanged points basis offset in points while costs commercial cost by XX, the basis and slide on at as mix although, did other five a for to Moving was

to Slide interest by $XXX higher with basis SMB's XX the income asset largely X.XX%. prior and peer floating XX from XX expectations quarter points to betas come. consistent on this basis the again interest or accretion supported on Next XX combined loan our line of from lead and you margin March high industry-leading our large provides impact increased additional Net deposit with quarter book, X.XX%. of details Margin plan expectations. increased of six at increase with sensitivity. loans slide was rate Note asset on NII which a The rate liability income cash trends non-interest the for percentage and of ad should benefit was was due position an from million above points yield average PPP will production in and to and million. details to asset income margin. on income position, excluding basis was $XXX growth. full largely to loan hikes. see still hike interest future this quarter Net was net strong legacy in Slide adjusted the shows $XX rate Mortgage

account fair higher our term is were gain-on-sale production value. transactional near in the not the did offset we runoff. a strong increase we for or on see of of that market $X MSR the $XXX margins lower and did at revenue, portfolio the million as will high normalizing in MSR a value reflected our the However, we rather help in than quarter percentage million cost mortgage a Also, this end but quarter. book mortgage basis a of of which Pipelines at impact production revenues expect percentage portfolio

adjusted XX.X%. shows slide merger Adjusting Next tax ratio XX credit our $XXX the non-interest non-interest and and amortization expenses. trend million was charges in was for efficiency expense adjusted

reserves perform ended to that quarter acquisition. better-than-peer realize our related purchased you majority systems of previously synergies with we Slide have and all related stands qualitative million With achieving established planned changes now charge-offs cost the with day and in running our loans and Net PCD trends million quarter realized benign net $XX deteriorated to which further QX. consumer details our allowance forecast part were ahead was of metrics. National XXXX. with on year. the allowance see an be were path are portfolio cost on one to conversion well. acquisition Slide non-PCD both line cost sales expect and remaining. credit results and back the first on charges estimates quarter. the details $XXX and the of in with allowance by of we up provides half and slightly a by that the key $XXX is synergies charge-offs the loans the and Credit be credit from lower to savings in our million continue expense. established established end related at annualized of continue also our factors our are the provision million of diligence to XX shows exceptionally through Higher of offset historical million basis Midwest. on Merger as $XX points On our announced. $XXX conditions million basis We We commercial of at quarter the of of early XX% Old allowance majority to fourth the XX, track, assumption the credit portfolios XX will First approximately the economic $XXX tracking in July five modest slide remainder of in an expect

following unrest While are this levels the hard striking of economic qualitative credit maintaining and reserves we elevated our geopolitical on remains optimistic, landing given cycle. rate outlook potential

in total million we provides carry marks, at in merger. $XXX reserves, our which XX capital our Slide $XXX addition credit end. F&B position is the also In $XXX on to million related to million of quarter details

share earnings available remains accounting ratio The initially Goodwill capital by came capital losses of to ratios XX%. with quickly. discount declined on and higher unrealized than flow us As and strong regulatory investment sale portfolio through anticipated higher capital Overall allow to our we expected position activity. modeled. we merger-related will asset SMB's back build a purchase and in repurchase CETX larger items, growth slightly due driven than

wrap As are here comments takeaways. some up I my key

on with We planned of pleased in our with synergies. our thoughts Slide earlier. sensitivity a continued are Fed The and Credit XXXX. as XXXX. our had growth. loan track. commercial pipeline performance on growth from benign loan we consistent record tracking remain growth margin first outlook quarter. and benefit outlined with includes on our activities the loan very we for commercial will NII are cost XX We increases strong we quarter ended integration supports and remains asset the rate quarter We favorable get ahead outlook which

continue businesses We expect to our headwinds. perform despite to well fee

A percentage business, We solid wealth gain-on-sale lastly, our following AUM deposit pressure brief under update fluctuations capital fixed is markets pressure in Mortgage higher normalizing both a support activity revenue as from higher industry And and growth income. service organic pressure portfolio margins fee will expect patterns trends. as on be with under in but market equities with of charges revenues. consistent should expect Strong taxes. commercial on well industry production. we from

income benefit FTE the $X.X XX.X% rate. in in quarter was million first Our tax resulting a tax

of and $X.X payments benefits rate of remainder XX% remeasurement tax a tax expecting included an amortization of to the quarter assets. FTE share-based related million tax XX% first GAAP The the to full XX% on a the to basis. of approximately in on and and deferred year year $X in effective XX% million vesting We're for post-merger rate corresponding approximately with basis

final turn comments, back Ryan. over to I some For Jim call the will

Jim Ryan

Brendon. you, Thank

to the As Brendon also the and XXXX few closing as wrap like look to I deep and a a X, discount would would up we to forward. outlook, I but we highlight KRX. share on key relative more like slide broadly our few differentiators peers shared thoughts

production As by combination Old quarter relationships. new our very retention of to We this illustrated is well National reflecting with is and as morning, ended of and growth strong First going a client throughout plan. momentum our the Midwest according record commercial pipeline commercial progressing indicated the strong call and client

our and story top more. industry-leading our hires balance than as a will hire to from we better historical rising by sheet, have rates talent We most. continue tremendous revenue-producing is well-positioned benefit and betas for With our evidenced ability our recruiting new XX to

mergers. conversions systems track expect meeting or exceeding record in and strong previous model a synergies timely have brand We our like and of merger

am points We underwriting loss losses inherent tailwind discount basis adequate successful capital. net and and transformational uncertainty very reserves When more have to with loan record the know lower be disciplined combine of charge-offs. maintain of of will I allowance for the XXX combination. time and you about money take historically in coverage marks recover future Still a and any and mergers credit We the track my optimistic we we and than our strong of level most loan our the is us. on have excited executions. in

highly remain we merger, transformational our and communities. on from focused distractions serving potential despite Lastly, clients our

communities and hundreds the engage also great Mark along laser success the are serving and are in day. focused Moran I each those of team that for think I'm Sander, conversion all that less I the answer clients Sandgren, Jim to efforts. and here the With for our systems on results quarter our illustrate our the John members said, of with branding any Brendon, questions.

Operator

Thank you.

now will line Scott session. Q&A with now the question is your Our Siefers open. We begin comes Scott, Instructions] Sandler. from [Operator first Piper

Jim Ryan

Good morning, Scott.

Scott Siefers

Good guys. morning

Jim Ryan

to Congratulations. Way to your return position. back core

Scott Siefers

Thank you. I'm by of embarrassed here. trigger me I'm slow tired my and for

the wanted running PAAs, you the if and PPP for the I X.XX% around the to So appreciate margin guys I In words, ask acknowledgment. balance Brendon first the a quarter out appreciate a you, the more bit combined so. or for maybe of I reflect that's we the so does we'll or just underlying Would taking sheet, say based is there questions. so pull there? have is you on full accurately point appropriate upside combined FMBI in an company? it launching other simply

Brendon Falconer

Yes.

think to back -- FMBI, a than XX closer pull little X.XX% I days rate X.XX%. you if add and think launch you higher out your is I accretion actually PPP that if

way think think the that's the to about talked we sensitivity asset right I about.

on the So annualized from. based right X% to place that the curve. forward That's grow

Scott Siefers

points later X% do first margin Thank later words, on of versus you. trajects so how so asset versus basis the change, along rate lines XXX In with of cycle the the And beginning maybe thought Fed little in hikes on? or Good. assumptions a Okay. at sort how a fund those other your then the cycle? sensitivity, of

Brendon Falconer

rate over the get. grow a of We expected a It's consistent question. basis months. little and good It a the next rest slowed point hikes early here mentioned with get I slowdown hike should Yes, a May. faster little in path down XX to early. rate the the XX of

Scott Siefers

Got Perfect. perfect. right, it. much. you Thank All guys very

Brendon Falconer

Thanks, Scott.

Operator

Scott. you, Thank

from Ben, is comes question Ben Gerlinger Group. now with Hovde next Our open. your line

Brendon Falconer

morning, Good Ben.

Ben Gerlinger

some story morning everyone. looking is was continuation expectations the And curious, then juxtapose about you positive of and out few the the no for of if I Jim, from the think you hires more any with numbers I to areas talk and combined Chicago know entire to degree. beneficent the think But which the to grow that, hear definitely there with you is was entity. front Good I across there when could we kind you real laid hiccups wages than a of hiring footprint, against about going inflation how kind others? balance you're forward raising kind do the two? shows

Jim Ryan

rates, Good for revenue-generating think There's those about right? that this rates We an And it always at are for talent. type have unending of way. Ben. like top I'd to it's market talent, room market whatever question times. appetite at

continue literally great at we I believe hiring make will to right is So, -- that a even cost, if we are And opportunity in investments. the market. it's now. paying comes we we're higher what because the on a end the best those

great there. There's of a have out plenty to tell. people We unhappy story

focused to particularly think and in and I so our will opportunity And space the Those talent the continue primarily some advantage of IT go metropolitan have we conversations were in again, markets, looking major continue. where that that aren't to other and wealth to probably on take after. to talent but management be it And we spaces. top really will areas, the in continue for it hire. commercial in we key mean biggest doesn't and need be support most the And -- our we

Mark Sander

add frankly revenue opportunistic. I all strategically as good the in to again, We're fill. said, -- quickly, talking Well pay themselves just it's gaps Jim would and our have talent like market we for we Meaning opportunistic to so time. the Mark. producers just Ben, want top folks

Ben Gerlinger

Got you.

deal time like digest. it of this And then and one a about sure done bit is much And picture kind value kind little Okay. will When I'm National to pre-pandemic. take a historically of obviously here. more roughly then book, think a is you Old larger, tangible year bigger shareholder through

think more Just tangible obviously, sheet, deal earnings, is book capital longer bigger of you when about with a it the we a tangible little So plan move the forward? to to your balance term, kind think a year, bit how or opportunistic needle, a how should about takes that going intangible value of grow managing sense repurchases? you're

Jim Ryan

Yeah, would fewer. meaningful do the impact more more we opportunities. believe great be because order mostly, any question. I going to to suggest to have do probably of I won't fewer have a deals to just And Strategically, lack because we done deal meaningful than accretion. a But have we're historically in we've it deals,

going be ones. it that, relates forward there's fewer to We'll us. for be disciplined particularly kind to of plenty value meaningful in to but any tangible but think I approach continue opportunities book going we more maybe as how of dilution deals

Ben Gerlinger

Okay. year. great. Great to That's Congrats. start the

Jim Ryan

Thanks, Ben. your support. Appreciate

Operator

Thank you, Ben.

open. Our with comes your McEvoy line Terry, Stephens. is now Terry question from next

Terry McEvoy

Thanks. everyone. Good morning,

Jim Ryan

Hi. the understand Jim, page for about? or initiatives message achieving a just the where it wanted the question you've on maybe says of to that revenue expenses Is that to of ahead of plan. lines correctly, bottom of the along X the understand I connected you. by benefits and merger – that talked recruiting fourth growth and quarter, some the XX% is are

Jim Ryan

and Yes, yes. and yes, Yes.

of all the from I palpable. every room can markets you of – to the I And our across had We combination. going away results really think was think commercial results excellent take plan. saw recently. today RM's a single is we our commercial is against And the rally according see to in We the our for feel energy about everything just one message portfolios. good the

to I synergies, We're going the like would according we to starting say, it's so expected. plan. realize And

are branding been retention has member well. conversions strong. been retention Client going and systems strong. has Our Team

stand to results. with set So be think happy of we we sum the couldn't up, more where I current it with today

Terry McEvoy

then And a about – is on is quarter? that think first a growth static sheet. here? should like there question from deposit X% we loan in for And just of kind rate the How any runoff had the we balance sensitivity plans portfolio growth

Brendon Falconer

Yeah.

first. the will that book, right opportunities likely given anything environment book. us we that difficult. with transactional for while, a of around answer Transactional to do dispose part that last have will or be I'll So the loan

NII portfolio, million going significant $XXX can optimistic So help continue Loan mortgages I on some forward. very we're growth But a us insensitive That that growth. longer to than others. we're And around runoff of that to most franchise. still amount think, when offset help to have to a bet anybody's we deposits, I And tell that going likely it's guess. continue. will said, of comes about headwind. I'd ours will expand you it best rate pretty stick that, to deposit us loan

Terry McEvoy

Okay. push one last question. more in feel conservative And underwriting and to back Chicago team philosophy? is maybe for just a handling the free one on your Mark, How

Mark Sander

it's there think I – you philosophies the is really are think Terry. underwriting think more there. I than don't I Well, slower think a pushback

other's about this I Again, think to speaks speak we each kind from thought bit all along. we fit cultural a little of frankly. language the

credit the I cultures similar. quite think are actually

took the very couple credit of and large, some a more where perhaps little there's of similar. the So, cultures consumer are stuff But, a by in did. we portfolios risk we

Jim Ryan

that are risk would we little went had areas There I were risk areas were a as more bit few a in they quite in. policies Terry, there little some through more the frankly, -- that. second a more have and just we

It's those the And taking worked as together. nicely of come the out so, credit best teams both really we're just policies. really

the teams I energized. are think more is, importantly

And do underwriting see there Our lending in relationships. standards growing and to the them. forward of energized they out that of a regardless that are front teams pathway are

about the speak So, our of pretty excitement do I I think to that. And well. the kind there's results to and general ability that think pipeline

Mark Sander

the what in growth we was QX, did combined it -- a And with Chicago loan credit you culture. the of the came out at lot look team of

Jim Ryan

Absolutely.

Terry McEvoy

I everyone. appreciate it. Thanks

Jim Ryan

Thanks, Terry.

Operator

Thank Terry. you,

KBW. your with comes question open. is Chris, Chris McGratty now line from next Our

Chris McGratty

Great. Good morning.

Jim Ryan

Good morning, Chris.

Chris McGratty

retail National Old you FMBI Hey, good mix well sensitivity rate are the has the morning. just a proforma? lot of commercial and their what deposit from deposits of base gotten Can and remind too. as Historically us

John Moran

Moran. balance It's --- XX% XX% about retail, the is it's about public Chris, of John funds.

Chris McGratty

XX% Okay retail.

terms savings. can where ratio in the the And efficiency great. in and in But, the you for Okay, inflationary we on the about thoughts Thanks. the also at of a the saves? cost think leverage, go quarter of ratio math operating given high-level plug kind but pressures efficiency of kind can you talked

Brendon Falconer

that definitely have think lower. move we down I to room

into more drive the you there's numerator As and you we're our efficient. definitely the we get to still continue a to as down path, plenty in of but make math, good said, as help back opportunities can there's well really back do on to revenue opportunities to And that denominator. right office XXXX

Chris McGratty

Brendon maybe The you. write-up the then in And while comment great. you the just have Okay, on on comment can the repeat MSR, quarter? the

Brendon Falconer

flow Yeah. -- a did cost through for account We at that The increased not we Chris. MSR market. that to million, lower value actually revenue, did but $X not

So, why value up that mortgage some in that in and and that account revenue show for line. I to our helpful others didn't know was that's their revenue fair

Chris McGratty

very you Thank much. Okay.

Jim Ryan

Chris. Thanks,

Operator

Arfstrom RBC is your line with Instructions] Thank question Markets. from Jon Our comes now John, you, Capital next Chris. [Operator open.

Jon Arfstrom

Thanks. Good morning, everyone.

Jim Ryan

Jon. morning, Good

Jon Arfstrom

Hey, good morning.

Jim Ryan

[indiscernible]

Jon Arfstrom

little you comments do feel a the a think is XX% the Thank you'd And point you pipeline? kind at combined guys attribute you growth being talk what this more on basis. of I the quarter? that saw past bit to? you. prepared like this talked about pace loan up Can about curious accelerating you And above

Mark Sander

it. to about it. X.X% I'll think to simple all a I the XX%. the The usual across We as It's Mark. of missed the it's attribute X.X%. a teams sounds to from is really pipeline And business that up end Jon is Hey, at want teams have year beat. as a stab across you not Sandgren, the categories that all in little and externally take add then to I'd focused. it maybe and Yes. bit Jim as

Jim you add? would -- So anything

Jim Sandgren

well Yes. they think supply even we're year there's doing right are point. really XQ the but They're at to this lot invest of I in doing second and clients of labor, really optimistic be And spite of the about now find still demand. just and labor a chain could they'd -- the still challenges, half better willing if

our until on laser-focused change and of is great things done taking care team So a clients they've job.

Jon Arfstrom

Good. maybe then for And you. Okay. Brendon

your putting And highlighted you about on a to balances guys that little of maturity for sheet. work your kind and You cash that profile to idea to what plan have held balance you bit the talk then of transferred give of the us an that? guys

Brendon Falconer

longer-dated transferred to And terms that putting Yes. so of we work over we in to continue Again about work have $X.X new really put billion to cash. going HTM We're munis money to time. that. to billion $X of in

would continue to the next I to come So cash down expect quarter slowly that over balance two. or

Jon Arfstrom

just simple but of? us And $XXX and about positive. is then to on -- puts the maybe any quarter guidance guess a quite as expect you expenses seems you want you what bit fourth expenses, mean, us environment, simple And talked -- or be there question for Okay. it I we've and pretty a revenue other same million are that takes it seems it's there is aware telling your I a like are

Brendon Falconer

XX that's – trying that's days access -- you the to right. get if Yes, what

Jon Arfstrom

That's -- to Okay. wanted I you know what helpful. that's right? Good. never But

Jim Ryan

clarification. the appreciate No Yes. we

Jon Arfstrom

I all had. That’s Thanks. Yes.

Jim Ryan

Okay.

Operator

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

Old National Bancorp (ONB) 26 Apr 222022 Q1 Earnings call transcript