8-K: Old National Bancorp Reports Solid First Quarter 2024 Results, Completes CapStar Acquisition

Old National Bancorp announced first quarter 2024 results with a net income of $116.3 million, and completed the acquisition of CapStar Financial Holdings.

Summary

• Old National Bancorp reported a net income of $116.3 million, or $0.40 per diluted share, for the first quarter of 2024.
• Adjusted net income was $130.8 million, or $0.45 per diluted share, excluding certain non-recurring items.
• Net interest income was $362.7 million on a fully taxable equivalent basis, with a net interest margin of 3.28%, down 11 basis points.
• Total deposits reached $37.7 billion, up 5.0% annualized, with core deposits up 3.2% annualized.
• Total loans were $33.6 billion, up 7.5% annualized.
• The company's provision for credit losses was $18.9 million, and net charge-offs were $11.8 million, or 14 bps of average loans.
• The return on average tangible common equity was 14.9%, or 16.7% on an adjusted basis.
• Old National completed its acquisition of CapStar Financial Holdings on April 1, 2024, adding approximately $3.0 billion in assets.

Sentiment

Score: 7

Explanation: The sentiment is positive due to solid earnings, deposit and loan growth, and the successful acquisition of CapStar. However, the decrease in net interest margin and increase in non-performing loans temper the overall positive outlook.

Positives

• The company experienced continued growth in its deposit franchise.
• Disciplined loan growth was achieved.
• Tangible book value increased year-over-year.
• Credit quality remained stable.
• The acquisition of CapStar Financial Holdings was successfully completed.
• Capital ratios remained strong with preliminary total risk-based capital at 12.74% and Tier 1 capital at 11.40%.

Negatives

• Net interest margin decreased by 11 basis points to 3.28%.
• Net interest income decreased to $362.7 million compared to $370.5 million in the previous quarter.
• Non-performing loans as a percentage of total loans increased to 0.98% from 0.83%.

Risks

• The company faces risks related to competition, government regulations, and economic conditions.
• Changes in interest rates and inflation could impact the company's performance.
• There are risks associated with managing credit risk and maintaining an adequate allowance for credit losses.
• The integration of CapStar Financial Holdings may present challenges.
• Operational risks, cybersecurity threats, and technological changes could affect the company.

Future Outlook

Old National expects system conversions related to the CapStar transaction to be completed in the third quarter of 2024.

Management Comments

• Old National's positive quarterly results were highlighted by continued growth in our granular, peer-leading deposit franchise, disciplined loan growth, a year-over-year tangible book value increase, and stable credit quality, said Chairman and CEO Jim Ryan.
• We accomplished these strong results while driving toward a successful close (on April 1) of our partnership with Nashville-based CapStar Bank.

Industry Context

The results reflect the current interest rate environment with lower net interest income and margin compression, which is a common trend in the banking industry. The acquisition of CapStar is a strategic move to expand Old National's presence in high-growth markets.

Comparison to Industry Standards

• Old National's net interest margin of 3.28% is lower than some of its peers, reflecting the current rate environment.
• The company's loan growth of 7.5% annualized is solid, but needs to be compared to other regional banks to assess its relative performance.
• The return on average tangible common equity of 14.9% is a good result, but needs to be compared to other banks of similar size and risk profile.
• The efficiency ratio of 58.3% is higher than some of the best performing banks, indicating room for improvement in cost management.
• Companies like Fifth Third Bancorp and Huntington Bancshares are comparable regional banks that can be used for benchmarking.

Stakeholder Impact

• Shareholders will be impacted by the financial results and the acquisition of CapStar.
• Employees will be affected by the integration of CapStar and any related changes.
• Customers will benefit from the expanded services and market presence.
• Suppliers and creditors will be impacted by the company's financial performance and strategic decisions.

Next Steps

• Old National will complete system conversions related to the CapStar transaction in the third quarter of 2024.
• The company will continue to focus on disciplined expense management and maintaining strong credit quality.

Key Dates

Keywords

financial results, net income, earnings per share, net interest margin, deposits, loans, credit quality, capital ratios, acquisition, CapStar, banking