8-K: Old National Bancorp Reports Strong Third Quarter 2024 Results, Driven by Deposit Growth and Disciplined Expense Management

Old National Bancorp announced solid third-quarter 2024 results, highlighting strong deposit growth, disciplined expense management, and a robust capital position.

Summary

• Old National Bancorp reported its third-quarter 2024 financial results, showcasing a strong performance.
• The company's total deposits grew by 8.5% annualized, with core deposits increasing by 10.1% annualized.
• The cost of total deposits was a low 225 basis points.
• The loan portfolio saw a 2.7% annualized growth, driven by disciplined lending practices.
• Net interest income was $398 million, and noninterest income reached $94 million.
• The adjusted efficiency ratio was 51.2%, reflecting disciplined expense management.
• The company's tangible book value per share increased to $11.97, up 8% from the previous quarter and 21% year-over-year.
• The return on average tangible common equity (ROATCE) was 16.8% on an adjusted basis.
• Net charge-offs were 0.19%, or 0.16% excluding purchased credit deteriorated (PCD) loans.
• The company maintains a strong capital position with a CET1 capital to risk-weighted assets ratio of 11.00%.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results, good growth metrics, and a solid capital position. There are some minor negatives, but the overall tone is optimistic.

Positives

• The company experienced strong deposit growth, with total deposits up 8.5% annualized and core deposits up 10.1% annualized.
• Old National has a low cost of total deposits at 225 basis points.
• The adjusted efficiency ratio of 51.2% demonstrates effective expense management.
• The tangible book value per share increased significantly to $11.97, up 8% from the previous quarter and 21% year-over-year.
• The adjusted return on average tangible common equity (ROATCE) was a strong 16.8%.
• The company has a low net charge-off rate of 0.16% excluding PCD loans.
• Old National maintains a strong capital position with a CET1 capital to risk-weighted assets ratio of 11.00%.

Negatives

• The net interest margin (NIM) decreased slightly by 1 basis point compared to the previous quarter.
• Non-performing loans increased due to four borrowers in unrelated sectors.
• The company experienced a slight decrease in net income applicable to common shares compared to the same quarter last year.

Risks

• The company faces potential risks from changes in economic conditions, which could impact credit quality and loan growth.
• Interest rate fluctuations could affect the company's net interest income and margin.
• There are risks associated with the integration of acquired businesses, including potential adverse reactions or changes to business relationships.
• The company is exposed to operational risks, including cybersecurity threats and technology disruptions.
• The company is exposed to risks associated with climate change and its impact on customers and service providers.

Future Outlook

The company expects full-year 2024 net interest income to be approximately $1,555 million, noninterest income to be around $345 million, and noninterest expense to be about $1,030 million. The net charge-off ratio is expected to be between 0.17% and 0.20%.

Management Comments

• Management believes that excluding certain items from EPS, the efficiency ratio, return on average common equity, and return on average tangible common equity may be useful in assessing the Company's underlying operational performance.
• Management believes that it is standard practice in the banking industry to present net interest income and net interest margin on a fully tax-equivalent basis.
• Management views tangible common equity measures as meaningful in assessing the Company's use of equity and in facilitating comparisons with peers.

Industry Context

Old National Bancorp's performance is being compared to its peers in the banking industry, with a focus on metrics such as ROATCE, efficiency ratio, and deposit growth. The company is positioning itself as a top-quartile performer in the Midwest region.

Comparison to Industry Standards

• Old National's adjusted ROATCE of 16.8% is positioned in the top quartile of its peer group.
• The company's adjusted efficiency ratio of 51.2% is also competitive within its peer group.
• Old National's deposit growth of 8.5% annualized is strong compared to industry averages.
• The company's net charge-offs of 0.16% excluding PCD loans are low compared to peers.
• The company's CET1 capital ratio of 11.00% is above the regulatory minimum and compares favorably to peers.
• The document references a peer group of publicly traded financial services companies including Associated Banc-Corp, BOK Financial Corporation, Cadence Bancorporation, Columbia Banking System, Inc., Comerica Incorporated, F.N.B. Corporation, First Horizon Corporation, Hancock Whitney Corporation, Pinnacle Financial Partners, Inc., Synovus Financial, UMB Financial Corporation, Valley National Bancorp, Webster Financial Corporation, Western Alliance Bancorporation, Wintrust Financial Corporation, and Zions Bancorporation.

Stakeholder Impact

• Shareholders should benefit from the company's strong financial performance and increased tangible book value.
• Employees may benefit from the company's commitment to investing in its team members.
• Customers should benefit from the company's focus on being a trusted partner in the communities it serves.
• The company's strong financial position should provide stability for suppliers and creditors.

Next Steps

• The company will continue to focus on executing its strategic objectives.
• Management will continue to monitor and manage the company's risk profile.
• The company will provide updates on its performance in future investor communications.

Key Dates

Keywords

banking, financial results, deposits, loans, net interest income, efficiency ratio, capital, credit quality, ROATCE, tangible book value