Business Overview and History Old National Bancorp was founded in 1834 in Evansville, Indiana, initially serving the local community. Over the decades, the bank has undergone strategic expansions and acquisitions, establishing itself as a prominent player in the Midwest and Southeast banking landscape. In its early years, Old National focused on providing basic banking services to its local customers, demonstrating resilience during economic challenges such as the Great Depression. The company's growth trajectory accelerated in the 2000s, with several key acquisitions shaping its current market position. In 2006, Old National acquired Monroe Bancorp, solidifying its presence in central and southern Indiana. This was followed by the acquisitions of Integra Bank Corporation in 2011 and United Commerce Bancorp in 2013, further strengthening the company's market share. Despite facing challenges during the financial crisis of the late 2000s, Old National successfully maintained strong capital levels and credit quality, allowing it to continue its expansion strategy. More recent acquisitions include First Midwest Bancorp in 2022 and CapStar Financial Holdings in 2024, significantly increasing the bank's presence in the Midwest and Southeast regions. As of December 31, 2023, Old National Bancorp had become the sixth largest commercial bank headquartered in the Midwest, with over $54 billion in assets. In 2024, the company made another significant move by acquiring Bremer Financial Corporation, a Minnesota-based bank with $16.2 billion in assets. This transaction bolstered Old National's presence in the attractive Twin Cities market, making it the third-largest bank in the region.
Financials As of September 30, 2024, Old National Bancorp reported total assets of $53.60 billion, a substantial increase from the $49.09 billion reported at the end of 2023. For the third quarter of 2024, the company reported revenue of $679,925,000 and net income of $143,802,000. The company's net income for the first nine months of 2024 was $373.21 million, with a diluted earnings per share of $1.21. The bank's efficiency ratio, a measure of its cost-effectiveness, stood at a commendable 56.37% during this period, showcasing its ability to generate strong profitability.
Old National Bancorp's financial performance in Q3 2024 was in line with expectations, with GAAP earnings of $0.44 per share and adjusted EPS of $0.46. The company's adjusted ROA TCE for the quarter was 16.8%, and adjusted ROA was 1.13%. The adjusted efficiency ratio improved to 51.2% in Q3 2024, demonstrating the bank's commitment to operational excellence.
The company's net interest income increased by 4.4% in the third quarter of 2024 compared to the same period in 2023, driven by loan growth as well as higher asset yields and accretion. For the nine-month period, net interest income remained flat compared to the prior year. Noninterest income grew by 16.3% in the third quarter and 11.0% for the nine-month period, largely due to the acquisition of CapStar, as well as increases in service charges, mortgage fees, capital markets income, and other income.
However, the provision for credit losses increased by 49.4% in the third quarter and 76.8% for the nine-month period, primarily due to credit migration, allowance for credit losses on individually evaluated loans, and the establishment of an allowance on acquired non-PCD loans related to the CapStar acquisition. Noninterest expense increased by 11.2% in the third quarter and 10.2% for the nine-month period, which included merger-related expenses, separation costs, and other charges related to the CapStar acquisition and integration.
Liquidity Old National Bancorp maintains a robust liquidity position, with a cash and cash equivalents balance of $1.19 billion as of September 30, 2024. The company's loan-to-deposit ratio was 89.2% at the end of the third quarter, indicating ample funding sources to support its lending activities. Furthermore, Old National's capital ratios remained well above regulatory requirements, with a Common Equity Tier 1 ratio of 11.0% and a Total Capital ratio of 12.94% as of the same date.
The bank's core deposit growth was impressive at 10.1% annualized in Q3 2024, with non-interest bearing deposits growing nearly $100 million. The total cost of deposits remained low at 225 basis points in Q3 2024, reflecting the bank's strong deposit franchise and effective cost management strategies.
Diversified Revenue Streams Old National Bancorp's revenue streams are well-diversified, with a balanced contribution from interest income and noninterest income. The company's net interest income, which accounted for 81.0% of total revenues in the first nine months of 2024, grew by 0.2% year-over-year. Noninterest income, which includes fees from wealth management, capital markets, and mortgage banking activities, increased by 11.0% during the same period, demonstrating the bank's ability to generate diverse and resilient sources of revenue.
Credit Quality and Risk Management Old National Bancorp has maintained a disciplined approach to credit risk management, as evidenced by its relatively low nonperforming loan ratio of 1.22% as of September 30, 2024. The company's net charge-offs, an indicator of loan losses, stood at 0.16% of average loans during the first nine months of the year, well within its target range. The bank's proactive credit monitoring and risk mitigation strategies have enabled it to navigate the evolving economic landscape effectively.
For the full year 2024, Old National expects net charge-offs to be in the 17-20 basis point range, reflecting the bank's continued focus on maintaining strong credit quality. However, the company anticipates that full year 2024 provision expense will be slightly higher than originally expected due to grade migration from its proactive credit management approach.
Outlook and Growth Initiatives Looking ahead, Old National Bancorp remains focused on organic growth initiatives, including expanding its presence in high-growth markets like the Twin Cities and Southeast regions. The company's management has emphasized a "high hurdle" for future mergers and acquisitions, prioritizing disciplined capital deployment and integration strategies. Furthermore, the bank continues to invest in technology, digital capabilities, and talent development to enhance its competitive positioning and serve its clients more effectively.
Old National expects net interest income to grow modestly in Q4 2024. The bank's guidance incorporates two 25 basis point rate cuts in Q4 2024, consistent with the forward curve. The company anticipates a declining rate total deposit beta of approximately 30% and expects the non-interest bearing to total deposit mix to remain stable at 24%.
The full year 2024 outlook for pre-provision net revenue remains unchanged from the initial expectations shared in January 2024. Old National expects full year 2024 loan growth and net interest income to be in line with original expectations, reflecting the company's confidence in its growth strategies and market positioning.
Conclusion Old National Bancorp has established itself as a Midwest banking powerhouse, with a diversified business model, strong financial performance, and a prudent risk management approach. The company's recent acquisition of Bremer Financial has bolstered its footprint in the attractive Twin Cities market, while its organic growth initiatives and focus on operational efficiency position it well for continued success. As Old National Bancorp navigates the evolving financial landscape, investors can take comfort in the bank's demonstrated ability to deliver consistent results and create long-term value for its shareholders. The company's solid Q3 2024 performance, coupled with its positive outlook for the remainder of the year, underscores its resilience and adaptability in a dynamic banking environment.