Lending at Old National Bancorp should be stronger than the industry average in the coming quarters, bank executives said Tuesday.
The $49 billion-asset bank added 3% to its deposit base in the third quarter, part of an effort to prepare for the anticipated loan growth. The strategy raised costs on interest-bearing deposits to 2.22% in the third quarter, well above the 1.66% rate of the same quarter last year.
Banks across the country are balancing the short-term pain caused by higher deposit costs against the longer-term benefits of having those deposits on hand to cover potential increases in loan activity. Old National is in some ways more insulated from the problem than its peers, thanks to the bank's size, stellar credit quality and high quality of its existing deposits.
"The midsize banks that have deposits and capital are positioned to grow because of the risk-weighted asset diet larger banks are on," said Terry McEvoy, managing director and research analyst at Stephens.
Total loans rose 7% to $32.7 billion in the third quarter from a year ago. The uptick came even as Old National sold $389 million worth of loans to customers who lack a broader relationship with the bank. Old National expects loan growth in the low single-digits in the fourth quarter, executives said.
"We think we're positioned to outgrow the industry," Chief Operating Officer Mark Sander said on a call with analysts Tuesday morning. "Industry growth is going to be a little more muted going forward."
The Evansville, Indiana, company introduced a boutique-style wealth management business called 1834, which caters to high-net-worth clients.
Old National shares closed down about 2.7% at $13.49 on Tuesday. The bank's stock price has fallen 25% since the beginning of 2023, but Old National shares have fared better than many other banks, including larger ones. The KBW Nasdaq Banking Index, which tracks share prices across 24 leading U.S. banks, is down more than 28% on the year.
The Evansville, Indiana bank also reported a one-time charge-off of $12 million, which may have weighed on the bank's stock price Tuesday. The charge-off is related to "a single C&I credit that is not representative of broader credit concerns," the bank said.
Profit at Old National rose to $143.8 million in the third quarter, up almost 6% from the same period a year ago. Net interest income rose more than expected in the quarter, executives said, in part powering the increase in profit. NII, a measure of a bank's lending profit, totaled $381 million in the third quarter, roughly flat from the same quarter last year, but above the bank's own forecast.
Executives at Old National said they have no current plans to resume share buybacks, which the bank paused earlier this year. Old National's common equity Tier 1 capital rose to 10.4% during the third quarter, up from 10.1% in the second quarter.
"We'll continue to kind of run the play and grow capital," said Old National Chief Financial Officer Brendon Falconer.
