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01/11 16:22
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presented mixed signals. While there were positive elements such as tangible book value growth, strong capital position, and potential share buybacks, there are also concerns about the impact of loan sales on NII, competitive pressures, and macroeconomic uncertainties. The Q&A section revealed unclear responses from management, particularly regarding the Bremer partnership's impact. The overall sentiment appears balanced, with neither strong negative nor strong positive indicators, thus justifying a neutral rating.
Earnings per diluted common share $0.44 (up from $0.39 year-over-year); adjusted earnings per share were $0.45, driven by growth in loans and deposits, net interest income, stable fee income, controlled expenses, and a favorable tax rate.
Tangible book value per share Increased by 5% from the previous quarter and by 13% year-over-year, reflecting strong capital position and retained earnings.
CET1 ratio 11.62% (up 86 basis points year-over-year), indicating improved capital position.
Total loans Increased by 1.5% annualized from the last quarter or 2.3% excluding approximately $70 million of CRE loan sales, indicating strong loan production.
Net interest income Decreased as expected; net interest margin down modestly due to lower accretion and fewer days in the quarter.
Adjusted non-interest income $94 million for the quarter (above guidance), benefiting from a gain on the sale of approximately $70 million of commercial real estate loans.
Adjusted non-interest expenses $263 million for the quarter (moderately better than guidance), reflecting controlled expenses and positive leverage.
Total net charge offs 24 basis points (21 basis points excluding PCD loans), indicating stable credit quality.
Allowance for credit losses to total loans 116 basis points (up 2 basis points from the prior quarter), reflecting proactive credit monitoring.
Total deposits Up 2.1% annualized, with core deposits (excluding brokered) up nearly 1.7% annualized, indicating a focus on growth in key funding sources.
Cost of total deposits Decreased by 17 basis points linked quarter, with a spot rate on total deposits at March 31 of 190 basis points.
Cumulative total deposit beta Came in at 37%, favorable to expectations.
Bremer Bank Partnership: Old National Bancorp has received all necessary regulatory approvals for the partnership with Bremer Bank, with a legal close date anticipated on May 1. This partnership is expected to enhance Old National's footprint and provide greater scale and density in the Upper Midwest.
Net Interest Income and Margin: Net interest income and margin performance met expectations, with net interest income expected to grow in 2025 due to the Bremer partnership and fixed asset repricing.
Deposit Growth: Total deposits increased by 2.1% annualized, with core deposits growing nearly 1.7% annualized, reflecting a focus on growth in this key funding source.
Expense Management: Disciplined expense management is evident in the efficiency ratio, with adjusted non-interest expenses reported at $263 million, better than guidance.
Loan Growth Guidance: Old National anticipates full-year loan growth of 4% to 6%, supported by a strong pipeline that is up 30% from a year ago.
Capital Position: The company expects to maintain a strong capital position with a CET1 ratio of 11.62%, providing flexibility for future growth and potential loan sales.
Economic Uncertainty: The company acknowledges the uncertain macroeconomic environment, which could widen the range of possible outcomes for growth and rates.
Credit Loss Allowance: The allowance for credit losses was increased to incorporate global trade and economic uncertainty, reflecting a proactive approach to credit monitoring.
Regulatory Approvals: While the company has received all necessary regulatory approvals for the Bremer Bank partnership, the integration poses challenges that need to be managed carefully.
Competitive Pressures: The competitive market for commercial real estate (CRE) loans is noted, with increased activity despite rate fluctuations, indicating potential challenges in maintaining margins.
Deposit Strategy: The company is prepared to respond proactively to future Federal Reserve rate actions, which could impact deposit costs and overall funding strategy.
Loan Growth: While the pipeline for loans is strong, there is caution regarding the potential impact of macroeconomic factors on actual loan growth.
Market Conditions: The uncertainty surrounding global trade and macroeconomic outlook may affect client behavior and overall business activity.
Bremer Bank Partnership: The partnership with Bremer Bank is expected to enhance Old National's footprint, providing greater scale and density in the Upper Midwest, and is anticipated to close on May 1, 2025.
Loan Growth Guidance: Old National expects full year loan growth of 4% to 6%, ramping up over the course of the year.
Deposit Strategy: The company remains focused on executing its deposit strategy, aiming to meet or exceed industry growth in 2025.
Credit Quality Management: Old National continues to maintain strong credit quality and proactive credit monitoring.
Earnings Per Share Guidance: The company expects full year earnings per share in line with current analyst consensus estimates.
Net Interest Income (NII) Outlook: NII is expected to increase in 2025, supported by the Bremer partnership and fixed asset repricing.
Capital Position: Old National anticipates a strong CET1 ratio of over 10% post-Bremer close, providing balance sheet flexibility.
Deposit Costs: The company expects further reductions in deposit costs, with a target deposit beta of approximately 40% by Q2.
Tangible Book Value Growth: Tangible book value per share increased by 5% compared to the previous quarter and by 13% year over year.
Capital Flexibility: The company has significant flexibility around the size of its contemplated commercial real estate loan sale post close, with capital levels higher than originally modeled.
Potential Share Buyback: Management is considering the possibility of restarting share buybacks post-close of the Bremer partnership, but it is too early to make a definitive decision.
Loan Sales Impact: The guidance includes up to $2,400,000,000 of loan sales, which could impact net interest income (NII) and earnings per share.
The earnings call summary presents a mixed sentiment. The financial performance and product updates are positive, with strong loan growth and successful systems conversion. However, uncertainties in fee income sustainability and lack of specific guidance details temper the positivity. The Q&A section reveals stable credit quality and capital strategies, but also highlights management's vagueness on share repurchase plans. Without clear guidance or strong positive catalysts, the overall sentiment remains neutral, suggesting a limited stock price movement in the near term.
The earnings call reflects strong financial performance with EPS growth, increased tangible book value, and a solid CET1 ratio. Despite a decrease in net interest income, the company exceeded noninterest income guidance and maintained controlled expenses. The Q&A session highlighted strong loan growth potential and balance sheet flexibility post-Bremer partnership. While management avoided specifics on buybacks and NII impact, the overall sentiment is positive, supported by robust loan pipelines and strategic growth plans. The absence of a market cap suggests a mid-to-large cap, moderating the stock price reaction.
The earnings call presented mixed signals. While there were positive elements such as tangible book value growth, strong capital position, and potential share buybacks, there are also concerns about the impact of loan sales on NII, competitive pressures, and macroeconomic uncertainties. The Q&A section revealed unclear responses from management, particularly regarding the Bremer partnership's impact. The overall sentiment appears balanced, with neither strong negative nor strong positive indicators, thus justifying a neutral rating.
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