Old National Bancorp Q3 FY2025 earnings call

• Delivered third quarter performance at or above guidance across all major income statement line items, beating earnings expectations with adjusted 20% return on average tangible common equity and 1.3% plus ROA.
• Efficiency ratio sub 50% with improved credit metrics, including decline in thirty-plus day delinquencies and criticized/classified loans.
• Successfully completed systems conversion and branding for Bremer Bank partnership, operating as Old National with former Bremer locations.
• Leveraging leading market position, investing in talent, and strategically recruiting top-tier talent to build a stronger franchise.
• Capital management prioritized, with high return profile driving capital generation and share repurchases late in the quarter.

In the third quarter, Old National delivered strong performance across major income statement line items. Adjusted 20% return on average tangible common equity, 1.3% plus ROA, and sub 50% efficiency ratio. Total deposits increased 4.8% annualized with core deposits ex brokered up 5.8% annualized. Total loans excluding Bremer grew 3.1% annualized, investment portfolio increased ~$430M from prior quarter. Net interest income and margin expected to be stable to improving. Provision and charge-offs aligned with expectations, with criticized and classified loans declining 6%.

• Net interest income and net interest margin expected to be stable to improving in 2025, driven by repricing dynamics of loans and securities, and loan growth in the Bremer partnership.
• Full year 2025 loan growth excluding Bremer expected 4% to 5%.
• Fee income guidance increased to reflect strong third quarter performance, with other line items unchanged.
• Anticipate continued success in deposit strategy, expecting to meet or exceed industry growth in 2025.

• Mentions industry discussions of potential credit cracks, but Old National is well reserved, well capitalized, and has robust operating results serving as a buffer for potential credit changes. Also, normal attrition in certain loan portfolios from acquired businesses is noted as a normal transition period factor.

Q: Scott Siefers asked about the reduction in NII expectations for the fourth quarter.

A: John Moran said it's a stable and small reduction, viewing it as a normal part of slicing the cheese on a large earning asset base.

Q: Scott Siefers asked about M&A and capital return.

A: Jim Ryan stated M&A is off the table for now, with focus on organic growth and opportunistic share buybacks, threading the needle between capital generation and returning capital to shareholders.

Q: Jared Shaw asked about loan attrition from acquired Bremer loans.

A: Jim Ryan said it's normal attrition in lines of business not planned to continue, not expecting dramatic swings.

Q: Ben Gerlinger asked about fourth quarter loan growth guidance.

A: John Moran said legacy Old National Bank pipelines are up close to 40%, putting the bank in a good position to achieve the guidance.

Q: Brendan Nosal asked about loan yield increase.

A: John Moran said fixed asset repricing drove bulk of loan yield improvement, with fair value mark relatively unchanged and credit component adding ~1 basis point.

Q: Terry McEvoy asked about NDFI loans and Old National's approach.

A: Jim Ryan said it's old fashioned basic banking, focusing on known and trusted clients, not chasing large specialty teams.

Q: Brian Foran asked about Bremer's impact on loan and deposit growth.

A: Jim Ryan said Bremer should contribute similarly to loan and deposit growth going forward, with similar mix to Old National's legacy business.

Q: Chris McGratty asked about capital buybacks.

A: Jim Ryan said there's a tension between capital growth and returning capital, with opportunities to let capital come down over time and being sensitive to shareholder and ratings agency views.

Q: Jeanette Lee asked about Bremer loan runoff and fee income.

A: John Moran said Bremer loan runoff is normal attrition, and fee income had an exceptional quarter but expected to normalize, with mortgage seasonally strong in Q3.

Q: Jon Arfstrom asked about Bremer-related efficiencies and credit environment.

A: John Moran said Bremer efficiencies will be more evident in Q1 next year, and credit environment is stable to improving with comfortable outlook.