Old National Bancorp. (NASDAQ:ONB) Q3 2019 Earnings Conference Call - Final Transcript

Oct 21, 2019 • 08:00 am ET

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Old National Bancorp. (NASDAQ:ONB) Q3 2019 Earnings Conference Call - Final Transcript

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Presentation
Executive
James C. Ryan III

changed, we remain an active looker and a selective buyer. We are patient and continue to wait for the perfect pitch, while we remain focused on execution. We have fully integrated our Klein partnership and have realized all of the cost savings now. Our Minnesota operations continue to perform in line with expectations and we remain enthusiastic around the opportunities in that key market.

Next Brendon is going to walk you through this quarter's details.

Executive
Brendon B. Falconer

Thank you, Jim. Turning to the quarter on Slide 4, both our GAAP earnings per share and our adjusted earnings per share were $0.41. Adjusted earnings per share excludes $1.3 million in merger-related charges, as well as $400,000 in debt securities gains.

Moving to Slide 5. Adjusted pre-tax pre-provision net revenue was 27% higher year-over-year. This result was driven by increased scale from our most recent Minnesota partnership, low credit cost, strong low-cost deposit base and a continued focus on expense management. We also improved operating leverage by 624 basis points year-over-year.

Slide 6 shows the trend in outstanding loans. As Jim referenced, our commercial loan production of $680 million was the largest in our company's history and represents a $52 million increase over prior quarter.

We ended the quarter with a record $2 billion pipeline and commercial activity remains strong. Despite a record commercial loan production and solid CRE growth total loans fell slightly in the quarter. Elevated levels of payoffs along with lower line utilization this quarter contributed to the slight decline. Loan portfolio, yields excluding accretion and interest collected on non-accrual declined 7 basis points, and new production yields were down 24 basis points to 4.15% .

Moving to slide 7, period end deposits increased during the quarter, but declined slightly on an average basis. Our total cost of deposits is unchanged quarter-over-quarter at a very low 52 basis points. We continue to actively manage deposit costs in this down rate cycle and are pleased that of September total cost of deposits was 49 basis points, 3 basis points below our third quarter average. With nearly $1 billion in deposits indexed to Fed funds and proactive management of our exception price book, we are confident in our ability to thoughtfully manage deposit costs to lower in response to future Fed actions.

Slide 8 shows our year-over-year change in loan mix as well as our earning asset mix for the third quarter. We have continued to remix the loan portfolio toward more productive commercial and commercial real estate loans and out of indirect and other loans. The investment portfolio yield was down 16 basis points quarter-over-quarter, with 13 basis points of the decline due to higher premium amortization resulting from the sharp decline in long-term rates in August.

Next on Slide 9, you'll see the detailed changes in our third quarter net interest income and corresponding margin. We are pleased with the performance of the margin given the challenges presented by the interest rate environment. Net interest margin, excluding accretion was in line