Banks
Old National posts record Q3 profit as deposit costs edge up and margin narrows
The Midwest lender earned $250 million, bought back $100 million of stock and grew deposits 10.6% annualised, but its net interest margin slipped to 3.52%.
HedgeWeekly News Desk ·
Old National Bancorp reported record third-quarter net income applicable to common shares of $250.0 million on Wednesday, or $0.66 a diluted share, compared with $178.5 million, or $0.46, a year earlier. Adjusted EPS was also $0.66, up from $0.65 in the second quarter and $0.59 a year ago.
Net interest income rose to $592.0 million from $586.5 million in the prior quarter. The fully taxable-equivalent net interest margin fell 2 basis points from the second quarter to 3.52%, and was 12 basis points below the 3.64% of a year earlier, as total deposit costs rose 8 basis points to 1.79%. Period-end deposits rose to $57.6 billion, a 10.6% annualised gain from the second quarter, while loans grew 2.9% annualised to $51.1 billion, led by commercial real estate and commercial and industrial lending.
Credit metrics were mixed. Net charge-offs were $34.1 million, or 27 basis points of average loans, up from 26 basis points, while 30-day-plus delinquencies fell to 0.25% from 0.29%. Nonaccrual loans were 0.92% of the book, little changed on the quarter but down from 1.23% a year ago. The bank returned $155 million to shareholders, including $100 million of buybacks covering 3.9 million shares, and its preliminary CET1 ratio rose to 11.11%.
Why it matters: Old National's quarter shows a pattern allocators are tracking across regional lenders, with profit growth coming from scale and cost control rather than spread. Its adjusted efficiency ratio hit a record 44.9% and merger-related charges dropped to $0.7 million from $12.1 million in the second quarter as integration costs fade, even as the margin compressed year on year. With deposits growing far faster than loans and deposit costs rising, the direction of funding costs and loan demand will be the key variables to watch in the fourth quarter.