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

Oct 21, 2019 • 08:00 am ET


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


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James C. Ryan III

believe the key to long-term success is a low-cost core deposit base.

We remain focused on improving our operating leverage despite the challenging revenue environment. Operating leverage improved 624 basis points year-over-year and our adjusted efficiency ratio was a low 55.6%, which improved 341 basis points year-over-year. Exceptional credit quality remains a hallmark of our Company, with our lower in-house lending limits, a diversified mix and a granular loan portfolio.

Our average new commercial credit remains well under $1 million despite the record production. We recorded $1.4 million in provision and net charge-offs were only $800,000. And those that have followed us for a while can appreciate, we are very quick to identify weakness in credits, we are hard-graders and we work through issues in a very timely fashion. Our NPAs did fall slightly to 1.31%.

On the capital front, we did repurchase 2.2 million shares at an average price of approximately $16.80 this quarter. Despite these repurchases tangible book value per share grew by 3.2% and tangible common equity to assets stood at a strong 8.95%. We expect to be opportunistic with the remaining authorization as we have been year-to-date. Brendon is going to provide more details on our anticipated day-one increase to the allowance for loan losses related to the adoption of CECL. Under current economic conditions, we don't see a material change in our total reserve for our legacy portfolio, as a result of our conservative lending standards and mix.

However, we do need to establish a reserve for the acquired loans accounted for under purchase accounting. As I've mentioned in prior calls, we spent the year internally focus and I challenged our executive team to think about ways we can get better. We've generated some terrific ideas, we've also partnered with a leading consulting firm to help us think through some of this work.

I wanted to provide you with a quick update. Today, we are moving towards redefining and restructuring the way we do business. This includes examining everything from how we deliver our products and services, move paper across the company, to how we allocate capital and much more. The goal of the program is to improve the overall efficiency of the organization, while improving our client experiences.

We are just concluding this comprehensive analysis of every business, every department, every function within the company. From this analysis, we are developing initiatives that we plan to execute over the next year. As we complete our review and final initiatives, what I can share with you now is it appears we have meaningful opportunities to leverage our infrastructure, improve our operating efficiency and drive more revenue.

Given the extensive nature of this review, we plan to provide more detailed information around the opportunities identified in our next quarterly earnings call. At that time, we should be able to provide details regarding the benefits we anticipate the related cost of implementation and a timeline for achieving the results.

A quick update on M&A. Our strategy hasn't