8-K: Old National Bancorp Reports Strong Fourth Quarter and Full-Year 2024 Results

Old National Bancorp reported a solid fourth quarter and full-year 2024, driven by deposit growth, disciplined expense management, and strong net interest income.

Summary

• Old National Bancorp reported net income applicable to common shares of $149.8 million, or $0.47 per diluted share, for the fourth quarter of 2024.
• Adjusted net income for the quarter was $156.0 million, or $0.49 per diluted share, excluding merger-related charges and debt securities losses.
• Full-year net income applicable to common shares was $523.1 million, or $1.68 per diluted share, and adjusted full-year net income was $578.1 million, or $1.86 per diluted share.
• Total deposits remained consistent at $40.8 billion, with core deposits increasing by 1.9% annualized.
• Total loans decreased by 1.6% annualized to $36.3 billion due to outsized payoff activity.
• Net interest income on a fully taxable equivalent basis was $400.0 million, with a net interest margin of 3.30%.
• The company's efficiency ratio was 54.4%, and the adjusted efficiency ratio was 51.8%.
• The return on average tangible common equity was 16.4%, and the adjusted return was 17.0%.
• Preliminary regulatory Tier 1 common equity to risk-weighted assets was 11.38%, up 38 bps.

Sentiment

Score: 7

Explanation: The sentiment is positive due to strong earnings, deposit growth, and solid capital ratios, but there are some concerns about loan growth and margin compression.

Positives

• The company experienced continued growth in its deposit franchise.
• Disciplined expense and credit management contributed to the positive results.
• Net interest income and margin performance were solid.
• Total deposits grew nearly 10% year-over-year.
• Total loans grew 10% year-over-year.
• Tangible book value grew 8% year-over-year.
• The company has a granular low-cost deposit franchise.
• The loan to deposit ratio of 89% provides strong liquidity.
• Credit quality remains resilient.
• The company saw an increase in wealth fees and other income.

Negatives

• Total loans decreased by 1.6% annualized due to outsized payoff activity.
• Net interest margin decreased by 2 bps to 3.30%.
• Noninterest expense increased due to higher performance-driven incentive accruals and tax credit amortization.
• Capital markets and mortgage fees were lower.

Risks

• The company faces risks related to competition, government regulations, and economic conditions.
• Changes in liquidity, credit quality, and interest rates could impact the company's performance.
• The merger with Bremer Financial Corporation is subject to regulatory approvals and other conditions.
• Integration of acquired businesses may present challenges.
• Operational risks, cybersecurity threats, and technological changes could affect the company.
• The company is exposed to the effects of climate change and political and economic instability.

Future Outlook

The company's financial outlook is detailed in a slide presentation available on the Investor Relations section of the company's website, which will be discussed during the conference call.

Management Comments

• Old National's successful 4th quarter was driven by continued growth in our peer-leading deposit franchise, disciplined expense and credit management, and solid net interest income and margin performance.
• These excellent results punctuate a strong year of earnings that included nearly 10% growth in total deposits, 10% total loan growth, and 8% growth in tangible book value.
• Thanks to Marks strong and steady leadership, Old National is now one of the premier banks in the nation.
• On behalf of all of us at Old National, I want to thank him for embodying our organizational values of collaboration, inclusion, and integrity every day.
• I also want to emphasize how grateful we are to have a leader of Dan Hermanns character, stature, and experience to build upon the significant contributions that Becky has made in this critical role.

Industry Context

Old National Bancorp, as the sixth-largest commercial bank headquartered in the Midwest, is navigating the current economic environment with a focus on deposit growth and credit management, which are key factors for regional banks in the current market. The pending partnership with Bremer Financial Corporation is a strategic move to expand its footprint and market share.

Comparison to Industry Standards

• Old National's ROATCE of 16.4% is strong compared to the industry average for regional banks, which typically ranges from 10% to 14%.
• The efficiency ratio of 54.4% is competitive, but some top-performing banks achieve ratios below 50%.
• The net interest margin of 3.30% is within the typical range for regional banks, but some banks with a higher proportion of low-cost deposits may achieve higher margins.
• Compared to peers like Fifth Third Bancorp (FITB) and Huntington Bancshares (HBAN), Old National's deposit growth of nearly 10% is a positive indicator of its competitive position.
• The loan growth of 10% is also strong, but the decrease of 1.6% annualized in the quarter indicates some challenges in loan origination or increased payoffs.
• The preliminary Tier 1 common equity ratio of 11.38% is healthy and above the regulatory minimum, indicating a strong capital position, similar to other well-capitalized regional banks.

Management Changes

Corporate Governance

Stakeholder Impact

• Shareholders will likely view the results positively due to the strong earnings and capital ratios.
• Employees may be impacted by the leadership changes and ongoing integration efforts.
• Customers should see continued stability and service from the bank.
• Suppliers and creditors will likely see the company as a stable and reliable partner.

Next Steps

• Old National will host a conference call and live webcast on January 21, 2025, to review the fourth quarter and full-year financial results.
• The company will continue to focus on integrating the pending partnership with Bremer Financial Corporation.

Key Dates

Keywords

financial results, net income, earnings per share, deposits, loans, net interest income, net interest margin, credit quality, efficiency ratio, capital ratios, merger, banking