OLD NATIONAL BANCORP /IN/ Q2 FY2024 earnings call

• Second quarter GAAP earnings were $0.37 per common share, adjusted EPS was $0.46. Adjusted return on average tangible common equity was 17.2% and adjusted ROA was 1.12%. Adjusted efficiency ratio was 52.6%. • Partnership with CapStar Bank closed on April 1, and all banking center and systems conversion was successfully completed by July 15. • Focus on growing wealth management, treasury management, and capital markets businesses. • Balance sheet shows stability in liquidity and capital position, with tangible book value per share growing 10% from a year ago. • Loan growth: Excluding CapStar, total loans grew 5.9% annualized. Investment portfolio increased 3% due to CapStar transaction. • Deposit growth: Excluding CapStar, total deposits grew 2.4% annualized. Broker deposits as a percentage of total deposits are 4.6%. Deposit costs leveled out at 216 basis points. • Credit trends: Delinquency ratio stable, nonperforming loan ratio decreased 4 basis points. Total net charge-offs were 16 basis points, 11 basis points excluding PCD loans. Allowance for credit losses to total loans was 108 basis points.

The loan portfolio is diversified with approximately 40% C&I (including owner-occupied CRE), 30% investor CRE, and 30% highly rated consumer. Investor CRE is $11.7 billion, owner-occupied CRE is $4.3 billion. Excluding CapStar Bank, total deposits grew 2.4% annualized and total loans grew 5.9% annualized. Including CapStar, deposits grew $2.3 billion and loans grew $2.6 billion. The total cost of deposits for the quarter remained at 216 basis points.

• NII expected to increase modestly for the remainder of 2024. • Guidance essentially unchanged with a modest increase in NII and a slightly wider provision range. • Second half charge-offs expected to run modestly higher than first half but full year outlook remains 15 basis points to 20 basis points. • Anticipating a declining rate deposit beta of approximately 30% in a noninterest-bearing deposit mix that falls 22% by year-end.

• Potential impact of interest rate changes on deposit costs and loan margins. • CRE market conditions could pose risks, though Old National's CRE portfolio is well diversified and underwritten with conservative metrics. • Dependence on deposit growth to fund loan growth, which could be affected by market dynamics.

Q: Could you explain the beta assumption of 30% down beta and how it would trend after 4Q '24?

A: Most of the down beta comes from the exception price book which is $12.3 billion. Expect 85% beta on the way down, and 2025 more about fixed asset repricing.

Q: Where would the TCE ratio need to be before considering share repurchase?

A: Jim Ryan said they will continue to evaluate each day, but at this point, don't need to rush into anything and will let the back half of the year play out.

Q: Are new origination yields margin accretive?

A: John Moran said new origination yields in the high 7% range and marginal funding costs in the mid-4% range make new production margin accretive.

Q: What's the outlook for noninterest-bearing deposits by year-end?

A: John Moran said they're towards the bottom, with 80% of relationships less than $25,000, and most of the cash sorting done.