ONB - Earnings call 4 2023 | Old National Bancorp

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Operator

Welcome to the Old National Bancorp Fourth Quarter and Full Year 2023 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. The company refers you to its forward-looking statement legend in the earnings release and presentation slides. 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, provide In are assist intended performance measures non-GAAP These to trends. investors' of understanding the Reconciliations the are numbers presentation. of for contained these appendix within for call I'd like Old Jim to the opening now over remarks. turn National's to CEO, Ryan Mr. Ryan?

James Ryan

earlier Good results reported full National Old fourth quarter morning. morning. record and strong year this

banking well. XXXX, successfully navigated Old along pressures liquidity industry-wide the we a year. At environment, us During earlier executing National, strategy basic our with challenging interest served in rate

In adjusted ratio tangible the per year. XXX-year strong XXXX X.X% by fact, equity best common dividend roughly book our grew Tangible average nearly a average return our XX% yield on for return EPS, with shareholders year-over-year. our and the value were efficiency also history. Combined share in gave

growth, outstanding franchise our committed are strong quality deposit members dedicated these and to and peer-leading disciplined drove well-managed results. team communities credit expenses Our who clients and loan

was earnings of GAAP more for markets I on the later record partnership year-over-year. a Tennessee in were progress $X.XX on a North with our X% strategic spent of many franchise talent on by recently our share, X, for key year ready will in client-facing representing Asheville, year details and highly partnership the invest the acquisitions offense being and Carolina. dynamic support by broader Bank Nashville, and share the will and to our which per and comments. Starting the While announced our evidenced EPS to new increase adjusted about in expand opportunistic we Slide remain common industry as defense, $X.XX CapStar continuing my

and and respectively. on was strong Adjusted XX.X%, at were return records ratio average efficiency Our X.XX%. tangible ROA a common equity adjusted XX.X%

common we X, per share. to the Moving $X.XX reported GAAP quarter for of fourth earnings Slide

earnings additional was short-term rate the tax than EPS and a adjusted the incentive $X.XX an accrual for growth after-tax filed impact. Returning adjustment an annual community included of our to related resulted approximately and a our our costs of existing partnership, Tennessee additional when in have the and $X.X for share, in of $X CapStar or per quarter run our of application plan. part results announced plan regulatory adjusted combined, per common credit share $X.XX billion to investment amortization Our higher as true-up million we

time excited As about more new we we even spend with members, our are partnership. our team

execute comes Scudder. whatever by like successful be have our our past for have in way expect set we up in would to will position years. I team, the entered client a Brendon Mike recognize off a new on are to that Regardless half team existing to end predict to handful remarks. great and from as acquisition Nashville landing more year. In prepared Our start, only in was which already we're the the from the close difficult still we seeing partnership. severe. opportunities We close on But look of year first few build to as to his we many I from of year with it's of more than range bring. Predictions what capital. focus summary, core to something deposits provide our what at ample most to the a cuts transpires, a disciplined soft in on XXXX expense banking consistent EPS outlook underwriting, strong XXXX our we relentless management results and in a basic peers and will the challenging XXXX official basics, due a than strategy, strong prove more growing durable and as continuing XXX you rate a will our forward, to

I His for and the want outstanding XX retires First National. dedication and as end to thank of the invaluable As of turn we results Mike Chairman leadership to Midwest National to were last cover and years Old and Board call Brendon in Old will two the at I planned, transformational Michael completed now combined to Executive navigated his January. personally partnership Bancorp contributions quarterly years. Thank of over our the the more you. successfully me to detail.

Brendon Falconer

on balance in sheet, quarter X, Beginning Slide highlights and present we our positions. liquidity Jim. both Thanks, fourth improvements capital which

largely we to most the Our price fourth small in organically that grew execute a we and XX% meets better-than-peer and in as of year due growth capital present increased book did Overall, per yields. our us the deposits. We investment The our deposit risk-adjusted we fair a in to quarter levels on our and in a of full capital return growth a our with Slide peer growth at X, to in XX% us AOCI. profile has of inside offense XX% improvements one fund year. XX.X%, and loss share relationships on through our to at an at value our strong CETX the continue loan accrete due trade values. broker XXXX, return begin our XXXX. On ended only continue back loans a Tangible remain wholesale payout borrowings performance securities allowed improvement the stay changes quarter, and million and portfolio combination strengthens expectations, and to QX pace line Please portfolio in of ratio ratio. earn $XX earnings we allowed to and position produce faster we requirements. and core during with and total loan structure focused and with year-over-year than Total note that on trend the grew quarter-over-quarter strong liquidity

in quarter-over-quarter, outflows which fund a Moving including to public $XXX Slide million and X, $XXX broker of we million in deposits, deposits. decrease show stable our trend total seasonal normal were

deposits and peers. We through deposits well X.X%, promotions. experienced of market which broker strong personal in largely a money is as Our growth and both CD is accounts below now total percentage business

New continues acquisition attrition. checking strong and account outpace to was

higher-yielding However, products growth the in category. migration impact this to to continues

provides net applicable costs. Slide income peer our GAAP or to shares quarter share. XX income include $XXX following pretax common a million the only of reported $XX.X the strategy deposit to earnings led was our We costs end marked statement. $X points, in per the month the higher on points Reported in than for We $X.XX charge above have and with growth of merger-related deceleration sale upward we pressure million Total peer are Overall, X million January. December Class termination well gain seen deposit into still experiencing rates, a in special as are charges $X million as charge. $XX.X has quarter of million on basis pleased basis of we exceptionally but the B that shares Visa QX and average. for at deposit cost our assessment, below items: deposit FDIC contract the execution XXX deposit a a

Excluding per our share earnings these items, adjusted was $X.XX.

Slide our details we to XX, margin. on of and interest income Moving present net

modest both net declines and to As expected, deposit interest repricing margin. in income led

in production ] X.XX% [ of out should that loan million bottom trends expectation noninterest net the funding XX New $XX in marginal costs and for in rates our was adjusted income, interest support shows low the range QX. Slide quarter. X% which

tax line $X excluding year-to-date businesses our to expected, performance-driven noninterest investments. in QX with the true-up incentive performed of and generally million Slide adjusted $XX which revenue. Continuing primary XX, as All mortgage lower expenses, of million credit seasonally our were fee show of higher guidance, trend amortization with accrual in we in

plan costs incentive to to tied XXXX was deposit relative our and peers. growth Our midsized

due the critical our incentives. The tax higher project completion timing was corresponding categories the was record offset in outperformance drove Our and amortization ultimately both expense. to year charge tax credit of to with these in

credit present core both quarter. On our While earnings, points. nonperforming not ratios a Slide portfolios. within of do both quality basis are are basis low we loan PCD charge-offs first our of these rate and into Non-PCD charge-offs them and XX, commercial stable, obviously the remained expect net points trends, X unchanged. largely items Delinquency we reflecting to run which consumer with X were

our to fourth Our reserve and TCE our strong quarter. all including were basis on improvements XX, allowance, and provide by no AOCI. in ratio and commitments remains ] the we weighting the and XXX%. On at the material We of for XX% the unfunded scenario capital increase our at capital end model Moody's was improvements overview of SX earnings assumptions points, there Slide quarter in [ by a unchanged an at driven XXX changes ratios observed position assisted in regulatory comprehensive

common we our XX% accrete anticipate performance AOCI the year record XXXX. In equity was an industry. for of our to tangible a our efficiency end summary, full in in QX, fourth and quarter additional and to a year performance of metrics, a capital we in critical XX% year what with pleased to ratio. our challenging EPS, outstanding XXXX by on recovery return be of including Following adjusted number very proved are

mix interest have led balance core and strong to income. net the deposit funding better-than-expected our efficiency with We of sheet growth, has which improved better

base customer our continue demonstrate our peer-leading expand to ability deposit We maintaining costs. to while

managing X% guidance. the begin assumptions increase remain flat of The liquidity stable our year strong expected detail approximately ratio to our is take listed I drivers. The highlight is of credit portfolio and well slide, all adjusted Our income our additional the are approach full would us in opportunities. on to positions the position half includes but to advantage fall primary to rate evident back QX efficiency few and lending QX, interest the on expenses remains in XX then also XX.X%. Slide net and in NII in of a new risk of disciplined year.

back rate consistent half the three guidance. the First, we assumed with cuts in Fed

deposit late-cycle that will by XX% us give falls a mix by XX% additional to Second, we terminal that of repricing and are beta deposit noninterest-bearing anticipating a midyear year-end.

as of the us. for the the we scenario, all pipeline industry exceed run rate end the our XX%. We current in rate full at remaining from strategy XX Lastly, support most XXXX. deposit including execution full thoughts of the growth on curve our and the neutral rate have quarter cut and believe anticipate end for X% partnership outlook our rate and the with of guidance scenario. Slide believe We behind of a X success forward cuts the year closing to QX. We of XXXX, meet QX. CapStar continued first our not first CapStar items was X we well did to approach work achieve Also, assumes balance and the and a at the we the includes different X% we position of in of quarter result loan or should this positioned materially the assume closes year risk growth cycle expect to our sheet range in end to XX% growth

up QX QX year with the We consistent patterns. to with with the income noninterest expect full X% to X% be seasonal typical

$XXX expense base for tax of outlook modestly than $XXX million, be credit true-up approximately which incentive higher excludes million, the quarter Our and the should our first QX impact.

approximately $XX to $X expect count day For Net XXXX. are associated expense XX over just to full This double to charge-offs the non-PCD with provision be the billion. million million basis full XX the we and expenses excludes of year, between expected acquisition. year $XX should points the for range one

first taxes, the call your on full approximately full a have basis of those we a like We Sandgren Mark effective and and open year GAAP basis. With and rate up to Turning tax team core both quarter to Jim Sander, I'd XX% XX% FTE available, do comments, John the expect on for questions. a including Moran.

Operator

come question the [Operator Siefers with will of from Instructions] Scott Sandler. Piper Our line first

Robert Siefers

wanted ask in you the the about some I Brendon, nuance to NII. of

the quarter, is like you looks day and but might we [ maybe a expand puts discuss some sort count the great. Maybe second And can in interplay as in margin becomes ] go heard factor which the the if quarter, first Obviously, with it NII half, I how hoping of Maybe then was I should I some takes. in first the So the drop just thoughts you fits correctly. of in margin said forward. that the think that there.

Brendon Falconer

the basis in in little Yes, grow as levels we so the all rate and Sure, Scott. of CapStar half. the and -- from cuts X probably XX the get organic margin the a asset at negative point benefit into we off and back we there impact think approximately Obviously, from or get from from back as we're balance interest we net don't get and back looking QX impact 'XX. and a we'll half fixed position the in both repricing decline the half cuts rate growth, of in accordingly, then a of lot sheet

Robert Siefers

that course, thoughts you of got think some that growth, lines trends guess, then year. to of Maybe the guys And fair gotten loan just along evolves sort soft, underlying the the pretty there. not opportunities expectations. out have of you've have, if but a more any Industry through on are how at little your least I of share, been I

thoughts your through of how maybe trend year. So sort on just the things including demand

Mark Sander

in out. 'XX. it's that expected course, active end the There's as activity, as to bit. loan are of begun it up getting summarized but little at you I has CRE think a pick well is that levels are as I solid are well, -- feeling levels. are, growth slowed holding that last And I to, rents holding guided mean, employment 'XX. are has still say, somewhat, for would again, of C&I Financials most as And optimistic slowed think clients at I as -- going year as still and up more active. little spending in segments consumer And we're the cautiously to okay. play well, much industrial. up we are of customers demand Competitors much a think slow Scott. multifamily them in bit to keeping

Operator

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

Terence McEvoy

on time kind promo over deposits you over next of below seeing could about of question, X.XX%. were just like is billion the First or $X times looks maybe I'm X. brokered X CDs other the the And X-month repricing it year? expand

So are your assumptions what there? underlying

Brendon Falconer

Yes.

of [ these exactly a ] not but the within next deposits XX% will CDs XX months. mature -- time almost our So of lot almost,

average I think rate that close the weighted you have X handle. in really

throughout to CDs so the the a of lower opportunity reprice the And we'll have bulk year.

the fact, of 'XX repricing an actually opportunity those of first ]. in early the gives half refresh those In most [ characteristics to

Terence McEvoy

more word with bit, just call from assets, more billion. model billion or then a over the it out hearing And $XXX banks the we're and maybe over $XXX scale stepping of for Jim,

well question my compete banks? is, $XX the to a how thinking as scale are as So you as larger your and community bank about ability billion banks with

James Ryan

in I in we our to compete Terry, bigger, We're that and we're our touch we're a for We're get situation We're we operating our on And serve. and we're basis. I we like not the and that reach sometimes know big any think sweet get we're efficiently. team operating client almost close on markets the touch members at ratio we're fast, nimble, be given big an basis, size spot. you to we're own out relevant today. clients fairly way so where clients, We really we're opportunistic. happens. I as in enough regular efficiency our a really can think

dramatically need where at happy than any where we're really at and with see I'm So we're today. don't to anything do different

Operator

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

Christopher McGratty

Maybe on a question credit.

a You thinking mark still kind have Midwest. broader First commentary. X% that PCD portfolios exits from maybe to closely about Any How be watching needs should tweaking And credit that XXXX? of going happen? you're more or or just bit little into we derisking

Mark Sander

slowdown with where certain rate little certainly, about play are in a recovering, we credit, office, [ obviously, good We that good quality feel is are about of risk really is portfolio we limited and but [indiscernible] and more We something Chris out. -- is with will feel a saw where but about. this mean Mark. be further modest of we like migration everyone, good growth. I ] little consistent bit QX, we're remain there that watching at, is housing portfolio to -- areas feel slowly closely, Senior our more there, a

at. real underwriting our really changes no good and about we're in where So feel

Christopher McGratty

about do maybe just And adding for sensitivity, point assets the of sheet. reduce then size on this more rate to balance XXXX? just at think a How maybe, earning we Brendon, question bonds overall

Brendon Falconer

Yes. Great question.

some floating flows include and reinvestment portfolio to rate that work do our probably the debt will in adding and some risk likely some on there's think offset. to of I So to cash rate opportunities position invest

not risk impact position negative interest and net think would a have enhance that I income. on our rate So

Christopher McGratty

bond the Okay. book, or in But just bond basis flows beyond will cash just? the grow maturing the book absolute in

Brendon Falconer

start No, to but hold we'll [indiscernible] to it not grow, expected and think levels. I approximately it replace at do

Operator

question line Your the next with Brody Preston comes from UBS. of

Terence McEvoy

of running I the the just on the to -- on nuances beta commentary. ask deposit wanted

more going peers you larger the 'XX, conservative what down I feel some than And in conservative talk you beta? a declining when within of your a by to talking guess happening total XQ? we're low of terms kind guide. pretty that then your XX%, in to more the about about of betas at XXs makes their NII is feels outlined have bit of So beta aggressive peak what

Brendon Falconer

Yes, sure. of first that I'll answer the part first.

costs kind So kind we on model. peaks in deposit our of on not total think until our beta up deposit slight very impact the modest cycle, although a of XQ, quarter-over-quarter

On the we go back half, up a didn't side.

got the down deposits think beta But valuable. We to book and conservative lending pay exception And side. think as I of that can strong to the our grow deposits really way probably that still of to on And we ] continuing have XX% on priced. take really more guide a drive We [ attention down. we to are advantage informs think continue maintaining I to opportunities. also

Terence McEvoy

And in on running I wanted on Would to to also or you are talked securities good have us, think in loan I guidance? mature over to the remind the kind down billion that that in you've those plan you fund securities. $X Could just you ask XXXX. of using and the set about growth it reprice

Brendon Falconer

dependent rest demand. well the loan I come And will plays ability grow ultimately, we'll basis start lot of of a the cash as reinvest some our flows at the Certainly, is book out. off to that see little that of And continue XXX a on Brody. a think the year mix, spread how cost that points. a will to positive to the of of we then bit and and about

Terence McEvoy

sheet to just have you then more book? those the are 'XX in, 'XX clarify, one -- are the are loan And to is that need I it. do of meaningful that on Got if in any of that sneak $X.X maturities balance have swaps aware occurring about? just -- that or And be you just hedges could billion we

Brendon Falconer

Yes.

both we're a had portfolio expectations trying around to We of don't have duration timing put mix investment as time maturing, be -- a out pretty cuts. our too these on want of on it's rate the actually the the loan. we precise we So and on didn't to far

So we're we some and if do or anything the maturities off have significance sometimes probably of there no more to work with rolling done year. major

Operator

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

Jon Arfstrom

the questions about of one at last took or that Is of product you Terry that CD XX% of deposits. just spring Has eased your all? pricing persisting. talked on but exception on is repricing, early that summer, a

Brendon Falconer

That's been fairly persistent.

continue go deposits. there. out unapologetically gathering to We We've aggressive been and new

And this so quarter. to we creeped environment although over in that's up a couple have of last bit that aggressive, quarters. be lower can marginally do the every rates we'll And little continue at we than

that think big -- exception we will been. has success than So that's price of little or year. this been yes, that lower a our But cost marginal be it a part

Jon Arfstrom

Okay.

XX, Okay. is message a I what at time? -- incremental is not bit Slide on repriced seeing gets talk we're here understand inside to And and NPLs small your you're this maturing But estate that this it that the you're about you point you've just of some that. just demarcation line, credit? in of X% commercial or Is reworked XX stuff got see it real as that going months. LP and

Mark Sander

point this time. not in that at this We're seeing

out. time still has I some the office to CRE think, play again,

that a you Yes. action. we we're bit? increase to of early to don't classified. see we you identifying. and Could little think like identify criticized So But -- some could see take ahead aggressively go We and

manageable. risks kind size the we trying they're continue what do to so just where think we're we to I that's of think are, very of some up

Jon Arfstrom

CapStar? close. new a it's And then putting to on a if Anything but more I or out that difficult, one for in put level can Jim, to just data know date, I confidence anything report you And updates? add just out

James Ryan

new team experience client time with do think of is the team our the members the Detroit, past. With hired I and opportunities feel members. ]. the And to to us respect places we're feel and weren't available We We going existing We that feel to regulators. can't good come applications, we're us the we've that new Saint existing line [ just new in process We're today, get mean years that. opportunities. every about say was addendum our to in our handful regulatory of members of stand Luis that in to in really team like last some plan, really growth terms both opportunities. both thought here. a an about team to growth to for step really good where I continue just of execute the create finish community we to we members, the going the and important part the constant which obviously as good We've out -- to the dialogue got with of announced people we Nashville, our

I always we predict going the typical great Tennessee, you're I a to And point So for even to contribute a where really the meaningful would in probably partnership importantly, to size exactly location will to than mean grow contribute. level in Asheville represent us feel on more in it's future things. But a good more Nashville, when much about the and opportunity continue hard these for think we stand nonetheless, at get approval just time. this

Jon Arfstrom

Okay.

new Investor You've -- as some Day got well. locations potential

Operator

at further back questions the no to Jim closing to time. turn like are this call Ryan for remarks. There I'd

James Ryan

you appreciate Thank have. available always, questions and and might as follow-up much. very support will your Well, to feedback be any team we you the entire

Operator

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

disconnect. You may now

Old National Bancorp (ONB) 23 Jan 242023 Q4 Earnings call transcript