OLD NATIONAL BANCORP /IN/ Q3 FY2024 earnings call

• Strong third quarter results driven by organic growth strategy, including investment in new markets and talent, organic deposit growth, prudent loan growth, durable margin management, and focused fee income growth. • Balance sheet improvement with continued liquidity and capital position, CET1 ratio at 11%, and expected capital accretion. • Loan growth in commercial book, investment portfolio increased 3% with duration decreasing to under four years, and total deposits grew 8.5% annualized from 2Q. • Adjusted efficiency ratio low at 51.2%, net interest income grew as expected, and adjusted noninterest income was $94 million. • Credit metrics with total net charge-offs at 19 basis points, nonperforming loan ratio increased 8 basis points, but delinquency and charge-off ratios well below peer averages.

GAAP earnings per common share were $0.44, with adjusted EPS at $0.46. Adjusted ROA TCE for the quarter was 16.8% and adjusted ROA was 1.13%. The adjusted efficiency ratio was a low 51.2%. Core deposit growth was strong at 10.1% annualized, with noninterest-bearing deposits growing nearly $100 million during the quarter. Commercial loans were up 4.1% annualized. Tangible common book value per share rose 8% since the second quarter of 2024 and 21% year-over-year. Core deposits ex-brokered were up 10% annualized, and brokered deposits decreased to 4.2% of total deposits.

• Net interest income expected to grow modestly in 4Q '24 with marginal funding costs in low 4% range. • Full year pre-provision net revenue unchanged from initial expectations. • Loan growth and NII in line with original expectations, fee income with seasonality factors. • CET1 ratio at 11% with potential for capital build and possible buybacks in future. • Approximately $2 billion in cash flows expected over next 12 months from investment portfolio.

• Competitive pressures on lending and deposit gathering. • Potential credit risk migration due to higher interest rates and conservative risk rating framework. • Seasonality impacts on fee income, with mortgage and capital markets having varying trends. • Uncertainties related to Fed rate actions and their impact on net interest income and deposit costs.

Q: Scott Siefers from Piper Sandler asked about the fourth quarter NII guide and updated thoughts on NII base advancement.

A: John Moran responded that the NII guide is affected by the belly of the curve being lower and $2 billion in cash flows from the investment portfolio over next 12 months, with most cash flow likely reinvested in securities.

Q: Brendan Nosal from Hovde Group asked about margin and NII dynamics for 2025.

A: Jim Ryan stated that NIM may bottom in 3Q/4Q and then increase, with de-inverting yield curve and franchise growth helping.

Q: Ben Gerlinger from Citi asked about hiring appetite and integration cost savings.

A: Mark Sander and Jim Ryan mentioned being opportunistic in hiring, particularly in fee income businesses, and integration cost savings of around $30 million annually fully realized in 4Q.

Q: Terry McEvoy from Stephens asked about common themes in nonaccrual loans and Shared National Credit exam impact.

A: Mark Sander said nonaccruals were from four larger credits with unique issues, and risk rating migration was due to conservative framework and rate increases, but charge-off guidance unchanged.

Q: Jared Shaw from Barclays asked about fee income decline and capital build.

A: Jim Ryan noted seasonality in fee income, and Jim Ryan mentioned CET1 ratio at 11% with opportunity for buybacks in future.

Q: Chris McGratty from KBW asked about positive operating leverage and investments in 2025.

A: Jim Ryan said they would keep running the playbook, investing in long-term growth areas.

Q: David Long from Raymond James asked about revenue growth impact on Tennessee investments.

A: Jim Ryan said they would prioritize investments in expansion markets like Tennessee.

Q: Jon Arfstrom from RBC Capital Markets asked about exception pricing gap closing and credit trends.

A: John Moran said they would stay on offense with deposits, and Mark Sander said delinquencies were administrative and would decrease, with potential for some risk rating migration but manageable.