Old National Bancorp ((ONB)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Old National Bancorp’s recent earnings call painted a picture of strong performance in the second quarter, marked by impressive earnings growth and successful strategic moves. The sentiment was largely positive, with notable achievements such as the integration of the Bremer partnership and improved credit metrics. However, the company acknowledged challenges, including increased competition in loan growth and ongoing economic uncertainties.
Strong Second Quarter Earnings
Old National Bancorp reported robust earnings for the second quarter, with GAAP earnings per share (EPS) reaching $0.34. When excluding $0.19 of net merger-related expenses, the adjusted EPS was $0.53. This represents an 18% increase over the previous quarter and a 15% increase year over year, showcasing the company’s solid financial performance.
Successful Bremer Partnership
The partnership with Bremer Bank was successfully closed two months ahead of schedule, which contributed to higher than expected capital levels. This strategic move enabled Old National to retain commercial real estate (CRE) loans that were initially slated for sale, further strengthening their financial position.
Improved Credit Metrics
Old National Bancorp reported a reduction in legacy criticized and classified assets by 9%, alongside an 8 basis point improvement in the allowance for credit losses, now standing at 1.24%. These improved credit metrics reflect the company’s effective risk management strategies.
Growth in Core Deposits
The company experienced significant growth in core deposits, which increased by $13.3 billion. Notably, core deposits excluding brokered deposits rose by $11.6 billion. Non-interest-bearing deposits now represent 25% of core deposits, marking a 2% increase from the previous quarter.
Increase in Tangible Book Value
Despite the impact of the Bremer partnership, Old National Bancorp’s tangible book value increased by 14% year over year. This growth underscores the company’s ability to enhance shareholder value even amidst significant strategic changes.
Competitive Loan Growth Environment
The company anticipates loan growth to be at the lower end of the 4% to 6% range due to heightened competition, particularly in the commercial real estate market. This competitive environment presents a challenge for achieving higher growth rates.
Regulatory and Economic Uncertainty
Old National Bancorp is navigating through uncertainties surrounding global economic conditions and trade. These factors, coupled with a prolonged macroeconomic outlook, could potentially impact growth and interest rates.
Forward-Looking Guidance
Looking ahead, Old National Bancorp expects continued growth in net interest income and margin, driven by loan growth, the integration of Bremer, and favorable repricing dynamics. The company projects full-year loan growth, excluding Bremer’s impact, to be in the 4% to 6% range, albeit likely toward the lower end due to competition and economic uncertainties. The integration of Bremer is on track for systems conversion by mid-October, and the company remains optimistic about its future performance.
In summary, Old National Bancorp’s earnings call highlighted a strong second quarter performance with significant achievements such as the Bremer partnership and improved credit metrics. While the company faces challenges from increased competition and economic uncertainties, its strategic initiatives and forward-looking guidance suggest a positive outlook for continued growth.