Old National Bancorp Q1 FY2025 earnings call

• Earnings Results: GAAP EPS $0.44, adjusted EPS $0.45, driven by loan and deposit growth, stable fee income, controlled expenses, and favorable tax rate.
• Bremer Bank Partnership: Received all regulatory approvals, legal close date May 1, conversion mid-October; enhances footprint in Upper Midwest, boosts balance sheet and earnings growth.
• Balance Sheet: Tangible book value increased 5% QoQ and 13% YoY; CET1 ratio 11.62%, up 86 bps YoY.
• Deposit Strategy: Focus on core deposits, controlled deposit costs, proactive response to Fed rate actions.
• Credit Quality: Proactive credit monitoring, below peer average charge-off ratios, NPL to NCO conversion rates lower.

Net Interest Income: Met expectations; net interest margin down modestly due to lower accretion and fewer days in the quarter, but would have been up 6 basis points excluding those factors. Noninterest Income: Benefited from gain on sale of loans and higher fees from mortgages and service charges; adjusted noninterest income was $94 million, above guidance. Expenses: Disciplined expense management; adjusted noninterest expenses were $263 million, moderately better than guidance. Credit: Net charge-offs in expected range; allowance for credit loss increased to incorporate economic uncertainty; delinquency ratio improved, NPL ratio increased slightly. Deposits: Total deposits up 2.1% annualized, core deposits ex-brokered up nearly 1.7% annualized; cost of total deposits decreased 17 basis points quarter-over-quarter. Loans: End-of-period total loans increased 1.5% annualized, production strong in commercial book.

• 2025 Outlook: Excluding Bremer close timing change, guidance unchanged; full year loan growth expected 4%-6%, anticipate meeting or exceeding industry deposit growth; earnings per share in line with analyst consensus, positive operating leverage.
• Bremer Impact: Legal close May 1, 2 months earlier than previous assumption, providing balance sheet flexibility and earnings growth.

• Macroeconomic Uncertainty: Global trade and economic uncertainty could widen growth and rate outcomes.
• Credit Risk: Continued monitoring needed due to economic uncertainties affecting credit quality.
• Regulatory and Integration Risks: Integration of Bremer Bank could face challenges, though regulatory approvals received.

Q: Jerry Shaw with Barclays asks about Bremer's impact on NII outlook and deposit beta.

A: James Ryan responds on M&A assumptions, deposit beta, and other fee income run rate.

Q: Ben Gerlinger with Citi asks about driving factors for loan sale decision and capital buyback.

A: James Ryan and John Moran discuss capital flexibility, buyback considerations.

Q: Robert Siefers with Piper Sandler asks about customer sentiment and loan growth pipeline.

A: Mark Sander and James Ryan discuss customer pause but strong pipeline, loan growth guidance.

Q: Chris McGratty with KBW asks about loan growth pipeline and capital buyback.

A: Mark Sander and James Ryan discuss pipeline strength and buyback timing.

Q: David Long with Raymond James asks about loss provision and Nashville expansion.

A: Robert Siefers and James Ryan discuss provisioning and Nashville investment.

Q: Jon Arfstrom with RBC Capital Markets asks about reserve and deposit costs.

A: John Moran and James Ryan discuss reserve levels and deposit cost room.

Q: Terry McEvoy with Stephens asks about CRE loans impact on NII and NII drivers.

A: James Ryan discusses hypothetical impact and NII drivers