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

Welcome to the Old National Bancorp Third Quarter 2019 Earnings Conference Call. This call is being recorded and has been made accessible to the public in accordance with the SEC's Regulation FD. Corresponding presentation slides can be found on the Investor Relations page at oldnational.com and will be archived there for 12 months.

Before turning the call over, management would like to remind everyone that, as noted on slide 2, certain statements on today's call may be forward-looking in nature and are subject to certain risks, uncertainties and other factors that could cause actual results to differ from those discussed. The company's risk factors are fully disclosed and discussed within its SEC filings.

In addition, certain slides contain non-GAAP measures, which management believes provide more appropriate comparisons. These non-GAAP measures are intended to assist investors understanding of performance trends. Reconciliation for these numbers are contained within the appendix of the presentation.

I'd now like to turn the call over to Jim Ryan, for opening remarks, Mr Ryan?

Good morning. I would characterize our third quarter results as consistent with our stated strategy and slightly better than our own expectations. Net income was $69.8 million and earnings per share were $0.41. When adjusted for merger charges and debt securities gain, net income was slightly higher at $70.5 million.

We were pleased that adjusted earnings per share is up more than 10% from a year ago. As your view our results, you'll see that our core margin change was in line with our previous guidance. We also had a strong quarter in our fee income businesses, but do expect them to return to their normal seasonal patterns. And lastly we demonstrated good expense control.

As you can see on Slide 3, our adjusted return on average assets was 1.4% and our adjusted return on average tangible common equity was a strong 17.2%. During the quarter we did see record new commercial loan production. Commercial real estate loans grew nicely but were offset by continued elevated levels of commercial industrial client selling their businesses and lower line usage. As a result, total loans were essentially flat for the second quarter. I remain confident that we are losing clients or opportunities, because we are competitive. In fact, our markets remain strong and our clients continue to be optimistic as evidenced by our record commercial production. Today, our commercial pipeline remains a strong $2 billion.

As you come to expect from us and given the global backdrop and the inconsistent economic data. We are also staying disciplined and continue to focus on lending our footprint. Total deposits increased 2.4% annualized and total cost of deposits in September were 49 basis points versus 52 basis points for the full third quarter. We've deliberately started to reprice our core deposits in reaction to recent Fed moves and the inverted yield curve. Loans and deposits are also a strong 84% and we remain a low-cost core deposit funded bank. Regardless of the interest rate environment of the day, we