Sentiment Analysis of the earnings transcript to help figure out if there are any bullish or bearish sentiments that could be gathered from it. We're doing ML and AI based analysis on the earnings call to get some more insights.
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| Statement |
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| Our strong performance was bolstered by the 0.25 point rate hike by the Fed in May and our better-than-expected deposit growth |
| Despite the challenging rate environment, our net interest income grew quarter-over-quarter, largely due to the strong execution of our deposit strategy |
| Simply put, the quarter was business as usual for Old National, with growth in deposits, solid liquidity and credit quality, disciplined loan growth and well-managed expenses |
| The strength of our franchise remains evident in the results outlined on Slide 4 |
| We observed improvements in all regulatory capital ratios and maintain stability in our TCE ratio despite facing the negative impact of increasing AOCI |
| In summary, our strong second quarter performance marked the successful conclusion of the first half of 2023, with results slightly exceeding our expectations |
| So I think we're in a really strong spot to be for the next few years |
| So I think we're in a great spot |
| We have improved the efficiency ratio of our balance sheet through a better earning asset mix, strong core deposit growth led to a better funding mix, and we grew tangible book value per share by 15%, excluding OCI impact |
| We remain confident in our client selection and underwriting |
| We are pleased to be with you today to share details about our strong second quarter performance |
| While it's challenging to estimate the terminal beta, we had a strong track record of managing deposit rates and are confident we can maintain our funding cost advantage throughout the remainder of the rate cycle |
| Our expenses were well controlled and consistent with the previous quarter, excluding a $5 million increase in incentive accruals related to our strong year-to-date performance |
| Our below peer deposit costs should drive a funding advantage, we expect to see organic growth of our wealth management client base and we continue to focus on disciplined expense management, while building tangible book value |
| And haven't raised the expense guidance, which I think has been a real positive surprise |
| We have demonstrated an ability to both expand our customer base while maintaining peer-leading deposit costs |
| It's important to highlight that we maintain strong enduring relationships with our deposit customers, 50% of which have been with the bank for over 15 years |
| So obviously, really good performance |
| As a result, our loan-to-deposit ratio improved by 100 basis points, while strong earnings bolstered our capital levels and contributed to tangible book value growth despite facing AOCI headwinds |
| While these maturing credits have surpassed the original underwriting stress coupon, we have observed improved net operating income from higher rents |
| Our profitability continues to be strong with an adjusted return on average tangible common equity of 22.1% and adjusted return on average assets of 1.33% |
| One thing we're certainly confident is we can be better than peers |
| Our disciplined approach to exception pricing has allowed us to successfully defend deposit balances and our targeted promotions have resulted in above peer deposit growth |
| This approach has served us well in the past and you see evidence of that stance this quarter's work to address any credit deterioration aggressively |
| And we have always been in the position of having good regulatory relationships, and this is now not the time to reduce any emphasis on the work you do, right? And so we just got to continue to improve at every single thing we do to meet regulatory expectations, exceed regulatory expectations |
| Both metrics surpassed our expectations as we reported a linked quarter increase in net interest income and experienced lower-than-anticipated margin compression |
| Furthermore, we continue to make progress towards achieving our targeted neutral rate risk position by the end of the rate cycle, while prudently adding protection against any sudden reversal and Fed rate policy |
| Our above peer return on tangible common equity, coupled with our peer average dividend payout ratio should result in us accreting capital at a faster rate than most |
| Returns look really good |
| We continue to effectively navigate the challenging operating environment, achieving a more efficient balance sheet |
| Statement |
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| And yet we'll maybe miss some of the toughest things that come to our industry |
| Our average core deposit balance is meaningfully lower than peers |
| It's not like it's robust and there aren't much in the way of new opportunities, certainly, but the risk there exists |
| I mean, certainly, CRE markets have retracted a bit and they are not as active |
| Lastly, our broker deposits were 3.5% of total deposits at the end of the quarter, which we expect to be well below peer average |
| The investment portfolio decreased by 2%, mainly due to portfolio cash flows and declines in fair values |
| We continue to rely on a 100% weighted Moody's S3 scenario that projects peak unemployment of 7.2% and negative GDP growth of 3.1% |
| You guys kind of historically modeled for the worst-case scenario based on Moody's S3 and with that as the backdrop, if you guys are slowing loan growth, does that kind of negate the economic factors associated with CECL? Or is it more bad could get worse and their modeling, therefore, you go lower |
| I can tell you today, the velocity does seem to have slowed |
| We remain watchful and consistent with other banks, are focused on potential pockets of softness |
| I think it's perhaps a little overly stressed in the media |
| But certainly, there's more probably downside pressure than upside opportunity at this point |
| And as it relates to the non-interest bearing deposits, which -- so I think we have gone down to -- or assume they go down to 28% from roughly 30% today |
| Barring any significant deterioration beyond these economic assumptions, we expect provision expense to remain limited to portfolio performance and loan growth |
| As a result of these actions and strong Q2 production, our pipeline has decreased to $3.1 billion and is consistent with low to mid-single-digit loan growth we expect in the back half of the year |
| I think the pace of deposit repricing has slowed a little bit |
| I don't think that competition has eased |
| But as I see those things, I think that the toughest one seemed to be aimed at banks north of $100 million |
| We have slowed the pace of hiring this year largely because we don't need to add folks, we just are being opportunistic |
| Market conditions continue to put upward pressure on deposit rates with interest-bearing deposit costs increasing 57 basis points to 1.66% and resulting in a cycle-to-date interest-bearing deposit beta of 33% |
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