Old National Bancorp Earnings Call Nuggets: Loan Portfolio Movement, OREO Revaluation

On Monday, Old National Bancorp (NYSE:ONB) reported its first quarter earnings and discussed the following topics in its earnings conference call. Here are the key takeaways from executives.

Loan Portfolio Movement

Stephen Geyen – Stifel Nicolaus: Maybe just a couple of questions for Daryl. You mentioned the movement in the loan portfolio of the grade 1 through 6 outside of your footprint and just curious how much credits remain outside of your footprint and whether you intend to move those off the books as well?

Daryl D. Moore – EVP and CCO: I don’t have the numbers in the dollars for you. I would tell you that we have Integra borrowers that have no relationship with us and they are outside of our footprint. Our strategy is to move those clients out over time. We can get back to you with the dollars but I don’t have those with me today.

Stephen Geyen – Stifel Nicolaus: The loan provision was driven I guess in part by classified and criticized loans. Just curious, did you guys have any sales or was it just primarily driven by paydowns?

Daryl D. Moore – EVP and CCO: Just paydowns work out through our special assets, we did not have any sales in the quarter

OREO Revaluation

Scott Siefers – Sandler O’Neill & Partners: Chris, I guess first question is probably for you. Just on the OREO revaluation, I just want to get a little clear perspective on how we should think about that maybe going forward? It sounds like this was pretty much a one-time thing, at least the overall dollar value being this high, but how frequently will those revaluations occur? Is that something that’s kind of captured in the one year you look back you have from an accounting standpoint or how can we think about that going forward?

Christopher A. Wolking – Senior EVP and CFO: Both Daryl and I will share some information on this. Scott, that large adjustment was related to other real estate owned which as you know has a little different impact on the IA than what would be normally expected with normal cash flow expectations. So, we would not expect to see anything of that magnitude going forward. It was largely taken care of this quarter, not to say that something couldn’t happen with appraisals, but that was a big number and something that we wouldn’t anticipate going forward,

Daryl D. Moore – EVP and CCO: We order and update appraisals on our OREO property at least annually. So, as Chris said, it could be that we have appraisals that come in something lower than we have on our books today, but this was a very unusual circumstance of very large relationship (indiscernible) we would not anticipate to have this magnitude of adjustment in the OREO going forward.

Robert G. Jones – President and CEO: Scott just to add to that I think Chris said in his remarks this is a property down in the Southeast portion of the country and as you all know better than we do, the real estate values still haven’t recovered in that portion at least yet.

Scott Siefers – Sandler O’Neill & Partners: Then just separate question Bob probably best for you. Just curious as you look at the changing complexion of the portfolio you’ve had I guess a lot of runoff just in the acquired portfolios over the last several quarters, but then you’ve got the residential real estate piece that’s showing some pretty nice growth and is becoming an increasingly large part of the overall portfolio. How do you think about the way the portfolio is changing, how largely would you let the residential real estate piece go I guess any color you can provide on your thoughts there I’d appreciate?

Robert G. Jones – President and CEO: Scott I think we’re comfortable with the growth as we see it for the upcoming quarters, obviously we’d like to C&I growth which may tamper some of our enthusiasm for keeping some of those real estate assets on the balance sheet. But given the rate environment and given the quality of that portfolio we’re still very comfortable with it. In the perfect world I’ll grow that as well as my C&I portfolio and get to that top line revenue growth number we’ve talked about. But at this we’re comfortable and again if you go back to the appendix on Slide 40, you can see the quality of that portfolio continues to be very, very solid.

Christopher A. Wolking – Senior EVP and CFO: This is Chris. I might add just one point too. I think that strong growth in the core deposit footings also gives us some comfort about adding those types of assets, adding real estate assets to the portfolio. When you have that kind of core deposit growth, it gives you a lot more flexibility with the asset side of the balance sheet and making decisions about asset growth.