Old National Bancorp (ONB) 2010 Q3 法說會逐字稿

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  • Operator

  • 00 AM Central November 2 through November 15. To access the replay, dial 1-800-642-1687, conference ID code 17766785.

  • Those participating today will be analysts and members of the financial community. At this time, all participants are in a listen-only mode. Then we will hold a question-and-answer session and instructions will follow at that time.

  • At this time, the call will be turned over to Lynell Walton, Director of Investor Relations, for opening remarks. Ms. Walton?

  • Lynell Walton - IR Director

  • Good morning everyone. Joining me today on Old National Bancorp's third-quarter 2010 earnings conference call are management members Bob Jones, Chris Wolking, Barbara Murphy, Daryl Moore, and Joan Kissel.

  • On Slide 4, I would like to remind you that, as we proceed, our presentation today, along with the Q&A session, will contain forward-looking statements. Such statements are based on information and assumptions that are available at this time and are subject to certain risks and uncertainties that could cause the Company's actual future results to materially differ from those discussed. These risks and uncertainties include, but are not limited to those which are contained in the slide and in Old National's filings with the SEC.

  • Turning to Slide 5, you'll see our non-GAAP financial measures information. Various numbers in this presentation have been adjusted for certain items to provide more comparable data between periods and as an aid to you in establishing more realistic trends going forward. We feel these adjusted metrics to be helpful in understanding Old National's results of operations and core performance trends. Included in the presentation are the reconciliations for such non-GAAP data.

  • If you turn to Slide 6, you'll see our agenda for the call. First, Bob will provide a high-level overview of our third-quarter 2010 financial performance, our view of the current economic and regulatory environment, as well as discuss the activities surrounding our pending acquisition of Monroe Bancorp. We will then provide more detailed financial data as Chris will highlight the progress we have made and plans for future -- for further reducing our non-interest expense base, our balance sheet strategy for operating in a continued slow growth, low rate environment, and maintaining our strong capital position. Daryl will then discuss our current credit quality trends and our outlook for these trends going forward. Following our prepared remarks, we will be happy to open the line and take your questions.

  • Just as a reminder, we do have an Appendix to this presentation that does include additional disclosures regarding our investment portfolio, additional credit trends and net interest margin that may be helpful to you in your review of Old National's third-quarter results.

  • With that, I'll turn the call over to Bob.

  • Bob Jones - President, CEO

  • Good morning. Beginning on Slide 8, I'd like to review Old National's third-quarter performance. In light of the continued headwinds of a slow economic recovery, the beginnings of a new regulatory environment, and the ramifications of that combination of challenges on our industry, this morning we were pleased to announce earnings of $11.9 million, or $0.13 per share. These earnings per share represent a 120% increase over the third quarter of 2009 and an 8.3% increase over the second quarter of 2010. On a year-to-date basis, Old National's earnings per share through three quarters are 27.2% improved over the same period last year.

  • Given the still-tepid loan demand, our earnings were driven by our continued focus on reducing our non-interest expenses, which were down $1.8 million from last quarter. It is important to note that, during the quarter, we did take additional actions to further reduce costs by eliminating an additional 91 FTE, which resulted in a severance charge of $1.3 million in the third quarter. These actions will further reduce our expense base in future quarters.

  • The quarter also benefited from a reduced credit cost. Our provision for the quarter was $6.4 million versus net charge offs of $6.1 million, as compared to a provision cost of $8 million last quarter and $12.2 million in the third quarter of 2009.

  • I do want to comment on our view of provisioning in today's environment. Given our continued conservative philosophy towards the economy, a philosophy that believes our markets are in a slow recovery with continued high unemployment and our still-cautious view towards commercial real estate, we still believe there is heightened risk in all bank credit portfolios. While we recognize that our portfolio is of a higher quality than most, we still believe we have not seen the type of sustainable, positive trends for a sufficient amount of time to reduce our level of allowance for loan losses at this time.

  • We continue to maintain our commitment towards our strategic imperatives, which are to continuously improve our risk profile with proper management discipline so as to ensure you consistent quality earnings. This same philosophy which allows us to focus on prudent long-term strategies resulted in a stable net interest margin for the quarter based on actions that Chris and Barbara have taken over the last few quarters by reducing our dependency on wholesale funding and working very closely to reduce the deposit cost.

  • While acknowledging that loan demand is still soft, I did want to highlight a few statistics that may be of interest regarding our loan activity. Our commercial loan pipeline for the third quarter was approximately 17% higher this quarter than last, while at the same time our commercial line utilization has remained unchanged with the second quarter at 31.9%. Finally, our mortgage pipeline is the highest it has been in some time, as we have seen a significant increase in residential mortgage refinancing.

  • Turning to Slide 9, as we mentioned on last quarter's call, we did announce in July that effective mid-September we would eliminate our free checking product. While it is very, very early in the process, the account attrition to date is less than we expected at 7.3%. The vast majority of the accounts we have lost have been those with average balances of less than $100. Our retail DDA balances have been relatively stable since we made the announcement. We obviously will continue to monitor these accounts but still feel the decision to eliminate free checking was the right decision.

  • As it pertains to Dodd-Frank, we have a task force reviewing the impact that it may have on our industry, Old National, and our clients. We have been in constant contact with our regulators and feel we are well prepared when the many new rules are announced. While we may not agree with all of the ramifications of the bill, we do believe that as long as the rules are applied consistently and the playing field is level, we can compete very effectively. The long-term implications of these changes have the potential to alter our industry. As part of our planning process, we are looking at how best to compete in this new environment while continuing to meet our mission of exceeding our clients', communities', associates', and shareholders' expectations.

  • On slide 10, I want to close with a quick update on Monroe. The reaction from the Bloomington and other communities that Monroe serves, as well as the Monroe Associates, has been very positive. The interaction between the Monroe team and Old National team has been very strong, with 19 integration teams off and working very hard towards a 1-1-11 closing. We still feel very good about the positive impact financially that we discussed with you on October 6.

  • As you're thinking about your models for our fourth quarter and 2011, we estimate that the one-time charges associated with the transaction will be $2 million in the fourth quarter of 2010 and approximately $8 million in 2011, with the timing in 2011 dependent upon when we close specific branches. We should be able to give you better clarity on our next call.

  • As far as accretion, we still feel comfortable that Monroe should provide a positive impact in 2011 of approximately $0.03 to $0.04 per share before one-time charges. As we told you on that October 6 call, we expect a 7% to 8% annual accretion thereafter, all of this driven by expense reductions with no revenue synergies built in these numbers.

  • Monroe did release their quarterly earnings last Thursday and they were consistent with our expectations, showing a 10% improvement in pretax, preprovision earnings when comparing the third quarter of 2010 to the same quarter in 2009. They also continued to aggressively manage their watchlist loan portfolio and the progress they showed was consistent with our expectations.

  • I would like to emphasize a key point that we do feel as though we still have the capacity and the capital to do other deals, and would look towards markets in the state of Indiana except Chicagoland, in Louisville, Lexington and other key markets in Kentucky as well as Southwest Michigan. While we continue to monitor the potential for an FDIC deal, we've seen a slowing of activity, particularly in our target markets. We also feel, with the right partner like Monroe, a traditional deal that provides positive impact to our shareholders may make sense.

  • Let me now turn the call over to Chris.

  • Chris Wolking - EVP, CFO

  • In my portion of the call, I will discuss the actions we are taking in the face of continued low interest rates, unprecedented regulatory change, and an economy that, at best, is improving slowly.

  • On slide 12, you can see that interest income and non-interest income declined from the second quarter of this year. Average loans were up $35 million in the quarter compared to second quarter, but total earning assets decline $193 million. Even with the 2 basis point improvement in net interest margin, the decline in total earning assets caused net interest income to decline $1 million compared to the second quarter. Fees, service charges and other revenue were also down approximately $900,000 from the second quarter, driven by the $800,000 decline in service charges on deposit accounts.

  • On slide 13, I reiterate that which we said last quarter. Because revenue continues to be under pressure, we believe it is critical that we continue to reduce operating expenses, further reduce wholesale funding in the investment portfolio, and maintain a balance sheet that will generate increased net interest income when rates increase. Our aspiration to drive expenses to hit a 65% efficiency ratio in 2012 is still in place. All of these actions should both improve near-term earnings at the Company and position us for stronger performance when the economy improves.

  • The next several slides discuss in more detail our actions thus far in these areas. On Slide 14, you'll see that third-quarter non-interest expenses totaled $76.1 million, down $1.8 million from the second quarter of 2010. We are pleased that year-to-date through the third quarter, 2010 expenses are $17.1 million lower than for the same three quarters in 2009.

  • Slide 15 provides a more detailed comparison of third-quarter 2010 non-interest expense to second-quarter 2010 expense. I adjusted these expenses for unusual expense items in both quarters so you can see a run-rate comparison of operating expenses.

  • There are two items on this slide that I want to point out. As Bob noted, we took $1.3 million in severance charges in the third quarter and, like we did in the second quarter, we terminated wholesale funding, which resulted in a $900,000 charge in the third quarter. Second-quarter expenses included a $1.4 million charge due to the early retirement of wholesale funding.

  • On Slide 16, I highlighted several of the more significant changes and improvements we've made since the beginning of 2010 to reduce non-interest expense. Through the third quarter, we have closed eight branches acquired in the 2009 transaction with Charter One. One of these branches was closed during the third quarter, and we expect to close three more branches in the fourth quarter. Of the 65 branches we acquired in those transactions, we've close 19 thus far.

  • In addition to the staff reductions associated with the branch closings, we reduced staff in nearly -- in virtually every area of the Company. All of these reductions were due to excess capacity in our business units.

  • Marketing expense year-to-date through the third quarter is down 37% compared to 2009 because we have focused our advertising on those markets like Indianapolis and Louisville where we are building market share. Many of our cost savings and productivity improvement initiatives will show results in 2011 and 2012, but I've highlighted some early successes that reduced expenses in 2010. With input from throughout the organization, our accounting department tightened policies related to travel, entertainment and supplies, which has helped reduce unnecessary expenditures. Our Information Technology organization reduced our processing expenditures by renegotiating contracts related to software maintenance and support, programming, and communication.

  • Slide 17 shows the reduction of full-time equivalent employees since second quarter 2009. Full-time equivalent employees are down 290, or just over 10% through the third quarter, and we expect additional reductions in the fourth quarter.

  • I highlighted on Slide 18 some of the initiatives we have underway that should generate meaningful savings in 2011 and 2012. We are realigning our vendor management and procurement functions and centralizing what in the past have been decentralized purchasing decisions. We expect this will make vendor selection and approval easier, plus give us purchasing volumes in services and products that will reduce our costs. We are evaluating 23 different process improvement initiatives with our credit personnel that should improve both productivity and customer service and credit when implemented.

  • Our banking operations area is also evaluating multiple process improvement ideas. One of their objectives is to reduce their office and processing space requirements. Exiting the leased space occupied primarily by operations should save us $900,000 annually in lease and leasehold improvement expense when implemented.

  • And, of course to our acquisition of Monroe Bancorp is important to our cost-savings effort. As we discussed in the conference call when we announced the acquisition, we expect to reduce expenses by the equivalent of 50% of annual Monroe operating expenses when Monroe is fully integrated into Old National. Based on projected earnings contribution from Monroe, we estimate this will contribute about 3% in improvement to our efficiency ratio when fully integrated. Banks of the quality of Monroe Bancorp that have similar cost savings opportunities will continue to be a focus of our acquisition effort.

  • Moving to Slide 19, you'll note we continue to reduce our wholesale funding and investment portfolio. Total investments declined $186 million on average from second quarter 2010. The largest change in average balances came in our money market investments where balances at the Federal Reserve decline $76.5 million. Recall that balances at the Federal Reserve only yield 25 basis points.

  • Wholesale Funding, including brokered CDs, declined $114.5 million on average from the second quarter. We terminated $49 million in wholesale funding in the second quarter of 2010, and $25 million in the third quarter. Additionally, $24.4 million in brokered CDs matured in the second quarter and $25.2 million matured in the third quarter. All of these transactions acted to reduce average balances in Wholesale Funding.

  • Slides 20 and 21 show the trends in Wholesale Funding and the investment portfolio since fourth quarter 2007. We intend to continue to reduce our wholesale funding either through early extinguishment or maturity, and use investment portfolio cash flows to fund any reduction in Wholesale Funding. We expect to reduce the investment portfolio at least at the same rate as we reduce our Wholesale Funding. We had several scheduled maturities of Wholesale Funding in 2011, most notably the $150 million of bank subordinated debt which matures in October 2011. We are evaluating other debt extinguishment opportunities and will keep you apprised of further decisions we make.

  • Slide 22 shows our tangible common equity ratio to tangible assets enough. Slide 23 shows tangible common equity to risk weighted assets. As you're aware, both of these capital ratios are significantly stronger than our peer group's average ratios.

  • TCE as a percentage of risk weighted assets is a good proxy for the proposed Basel III common equity ratio. As you can see, we are well in excess of the proposed BASEL common equity ratio of 7%. We are currently stress testing our capital ratios for various economic scenarios and possible acquisitions to establish new capital targets, and we plan to discuss capital targets and dividend policy further in our January conference call.

  • Slide 24 recaps our interest rate sensitivity as of September 30, 2010. Our models indicate that net interest income will increase with an immediate 200 basis point increase in rates all along the yield curve. With the reduction in our money market investments, increased duration of the non-money market investment portfolio, plus some lengthening of the duration of our loan portfolio due to higher residential mortgage balances, we are less asset-sensitive at September 30 than we were at the end of the second quarter.

  • Because we expect cash flows from the investment portfolio to be heavy in the fourth quarter, we will have the opportunity to reduce the duration and/or the size of the investment portfolio further. My desire is to have the duration of the portfolio in the range of 3.5 to 3.6 which we believe supports an appropriate level of asset sensitivity, given our current mix of funding and assets.

  • On Slide 25, you will see the details on the size and current duration of our investment portfolio. Note that the largest increase was in agency mortgage-backed securities. Most of the additions to this portfolio were Ginnie Mae pass-through securities consisting of Ginnie Mae adjustable-rate mortgages and Ginnie Mae hybrid ARMs. These are relatively short duration securities with interest rates in the range of 65 basis points to 2.5%. Cash flows from the investment portfolio should be about $900 million over the next 12 months.

  • In the Appendix of the slide deck, I've added a slide with detail of the changes in the market value of the investment portfolio, along with a recap of the other-than-temporary impairment charges by security in 2009 and 2010. We had only $39,000 in OTTI in the third quarter.

  • I'll now turn the presentation over to Daryl for a discussion on credit.

  • Daryl Moore - EVP, Chief Credit Officer

  • Thank you Chris.

  • Beginning on Slide 27, we see that the current quarter brought relatively little change in the allowance for loan losses as the $6.4 million provision effectively matched the $6.1 million in net charge offs for the period. The charge offs to average loans were 66 basis points in the quarter, our best quarterly performance of the year, and substantially better than 125 basis point performance posted in the third quarter of last year.

  • With respect to individual portfolio performance, the commercial real estate portfolio continues to experience higher losses than does our commercial and industrial portfolio. This is true for both the quarter as well as year-to-date results.

  • Quarterly loss rates in the small business and one-to-four family portfolios were lower in the quarter than year-to-date averages, while losses in the consumer portfolio for the quarter were higher than year-to-date loss rates for that segment.

  • As you can see from the slide the year-to-date provision for loan losses has exceeded net charge offs through September 30, adding $2.6 million to the allowance for loan losses since the end of the year. I'll have some additional comments at the end of my presentation with respect to our outlook on the credit front.

  • Trends in our criticized and classified loans this quarter were mixed, as shown on Slide 28. We saw a rise in our classified loans of roughly $13 million to a level of $170.9 million. With this classified loan -- within this classified loan set, nonaccrual loans rose less than $1 million to $69.8 million.

  • In our criticized loan bucket, it was encouraging in the quarter to not see the movement of loans out of this category backfilled by new additions. Criticized loan outstandings fell $25.7 million to $75 million at quarter's end. It is very difficult to say whether any of these movements are the beginning of a trend, so we will continue to watch these categories closely over the next several quarters.

  • Slide 29 shows that 30-plus day delinquent accounts at 76 basis points were in line with results from last quarter and better than the 94 basis points reported at the end of the third quarter last year.

  • Slide 30 reflects trends in our allowance coverage of nonperforming assets compared to that of our peer group. As you can see, the coverage of nonperforming assets remained relatively steady in the quarter and continues to exceed our peer group average.

  • Finally, with regard to our outlook on credit, acknowledging that our loan book continues to perform very favorably as compared to most peers, it remains a difficult environment to judge the future trends of quality within our loan portfolio. Certainly, we fall squarely into the camp that we have probably not seen the full fallout of the commercial real estate market, and would expect to see continued elevated losses out of that portfolio.

  • Commercial and industrial loans were a bit more difficult to judge. Many of our borrowers in this portfolio have cut expenses as far as they can and are using what capital base they have to survive the times. It will be very important to these borrowers to see improvement in their topline revenues in the very near future in order to keep them from possibly slipping into higher risk loan categories over the coming quarters.

  • Our retail portfolio has performed relatively well over this cycle. We would expect to see the usual seasonal uptick in delinquency and loss rates as we head into the fourth quarter as well as continued higher loss, given fault rates in our real estate secured portfolio. We believe that only a rebound in consumer confidence and the ensuing firming of the residential real estate market will help in that regard.

  • Future credit portfolio performance is going to depend greatly on the timing and significance of any improvements in the economy going forward. We realize that almost half of the banks that have reported earnings have not covered charge off with new provisions. However, we do not know if positive trends we are seeing are sustainable and have not seen these trends for a sufficient amount of time to reduce our level of allowance for loan losses. We believe our current level of provisioning is appropriate, even in light of our higher-quality loan portfolio.

  • With that, operator, we will open the call to questions.

  • Operator

  • (Operator Instructions). Jeff Davis, Guggenheim Partners.

  • Jeff Davis - Analyst

  • Two-part question -- first for you, Bob, and then unrelated, Chris. Did I hear you correct, Bob, that the pool or availability of possible banks to acquire is contracted or for some reason smaller than it might have been three or four months ago?

  • Bob Jones - President, CEO

  • I wouldn't say the pool has decreased. What I said was the pace has decreased. We're just not seeing the activity in our markets that I guess we had expected to see at this stage. Clearly, there are still banks out there with either regulatory actions or Texas ratios that we think could portend that they could potentially be an FDIC deal. The FDIC seems to be focused on other markets at this stage. We had the flurry of activity in Chicago, and then they seem to have less than left the Midwest for any significant activity.

  • Jeff Davis - Analyst

  • Okay, but it's not a function of open banks like the Monroe deal where you just see additional issues and you want to step back and see how things play out on a given portfolio.

  • Bob Jones - President, CEO

  • No, no. As you think about the activity, it would be a better question for you to ask the FDIC regulators than me.

  • Jeff Davis - Analyst

  • Then secondly, Chris, in the investment book, the $160 million of some-odd private-label MBS, could you comment on, from your perspective, the lawsuit that BlackRock, the Federal Reserve Bank of New York, Neuburger Europe, etc., in terms of suing Bank of America, in terms of put back, whether there is -- and I realize I assume you're not in the same deals, and there are many, many of these deals, but your thoughts on whether the suit has merit? Is there something there, or these guys just made bad investments and are trying to get out of them at par?

  • Chris Wolking - EVP, CFO

  • Jeff, I think and my perspective on those lawsuits is we're all big boys. We all made intelligent decisions and good decisions about what we saw in the prospectus and what we understood those investments to be. If in fact what was relayed to us in various prospectuses, and in fact wasn't what was included in those security tranches, then I think that cases like that have an awful lot of merit. We're very interested to see how that plays out, particularly as discovery continues and more information comes to light. So I look at it from that perspective.

  • If indeed what was in there wasn't what we as an industry thought it was going to be, those cases have merit. Certainly, if they're just looking at a way to recover some income because they are upset with their investments, I feel like that's not appropriate.

  • Jeff Davis - Analyst

  • So not to put words in your mouth, but you are not on the verge of a lawsuit yourself? Where I'm headed is, in effect, are we going to see -- do you think we see a wave of similar suits for holders of this product throughout the banking universe trying to put it back to whoever sold it to them or whoever originated the product?

  • Chris Wolking - EVP, CFO

  • I don't think so. That's why I'm so interested to see what the discovery is and what we hear about some of these individual mortgage-backed securities.

  • Jeff Davis - Analyst

  • Thank you for your time.

  • Operator

  • Stephen Geyen, Stifel Nicolaus.

  • Stephen Geyen - Analyst

  • I know -- I realize that this is kind of an open-ended question, but I'll throw it out there anyway. I'm just wondering if there's potential for some reserve release, or when you might be able to take that. Certainly, with provisions at some point matching net charge-offs, what would you like to see in that scenario before you (multiple speakers)?

  • Bob Jones - President, CEO

  • I think consistency of sustainable trends in the credit portfolio. We are conservative, and I just think until Daryl and I and others can get comfortable that we see that sustainability of that credit improvement, then we are going to continue to take the approach we have seen in the past.

  • Stephen Geyen - Analyst

  • Okay. Daryl, you actually mentioned that there were lower inflows of criticized loans. How do you feel about the financials of the credits in CRE, those that are nonaccrual classified special mention?

  • Daryl Moore - EVP, Chief Credit Officer

  • Stephen, I would say that we have not seen any meaningful improvement in any of those financials that are secured by non owner occupied commercial real estate. We still think there is some room for continued lowering of lease rates, which would then translate to lower net operating income. So we would still think that we've got some -- a little bit of pain to work through in that portfolio before we see any significant turnaround.

  • Stephen Geyen - Analyst

  • And last question, a question on the account attrition. Do you think that has pretty much run its course? How would you peg that as far as their contribution to fee income in the past, those accounts that were lost?

  • Bob Jones - President, CEO

  • I think we are actually at the early stages of the attrition. We'll see, over the next few quarters, as they actually get their statements with the charges there, what happens. The relatively profitability of those accounts I would say is not significant in the grand scheme of what we are looking at. Again, these are mostly low-balance accounts, and significant -- and not significant overdraft users as well.

  • Stephen Geyen - Analyst

  • Thank you.

  • Operator

  • Scott Siefers, Sandler O'Neill.

  • Scott Siefers - Analyst

  • I guess either Chris or Bob, the first question is probably the most appropriate for you, just on the potential for additional FTE reductions, as we look out at least into the next quarter. Would you anticipate I guess, one, sort of relative size -- I think you eliminated 91 positions if I heard correctly in the third quarter. On a relative basis, a larger, smaller number next quarter, then would you anticipate any additional severance accruals related to those in the fourth quarter?

  • Bob Jones - President, CEO

  • You heard the number right. We did eliminate 91 FTE in the third quarter. Those will be reflected. As you know, we take the charge and those positions go away, so the benefit of that will be seen in the upcoming quarters.

  • I think, as you think about ongoing FTE reduction, realizing that is a very important lever for us to pull to get to that 65% aspiration, I think it is safe to say you will continue to see some FTE reduction, and you may see some severance associated with that. But specific numbers at this stage I am not comfortable giving to you.

  • Scott Siefers - Analyst

  • Okay. Then next question, I just wanted to follow up on the account attrition. Either Bob or Barbara, is your sense that those accounts -- are those now going to other banks, or there's this theory that there are some people that have multiple small accounts at an individual bank so they might just be consolidating all of those into one account at Old National. Do you have any sense for how that is looking?

  • Barbara Murphy - EVP, Chief Banking Officer

  • This is Barbara. It pretty much is consolidation in transferring from the free product to another product. It's just really the closure of those accounts. We are not seeing those balances. The balances are relatively stable. We are not seeing any influence on the balances. These are accounts that almost 90% of the attrition is from balances less than $100.

  • Scott Siefers - Analyst

  • But by and large it sounds like it's staying within Old National, then?

  • Barbara Murphy - EVP, Chief Banking Officer

  • Yes.

  • Scott Siefers - Analyst

  • Perfect. I guess final question, Daryl, probably best for you. As you look at I guess the potential for reserve releases -- what maybe just sort of a more broad question. As you look into sort of the new reserve world, so to speak, what will be the metrics that you look at most closely to decide what an appropriate reserve is? Some of your competitors that did not fare as well, they really had to boost up their reserves substantially, which is not something you guys had to do anywhere near that agree. So if we look at the reserve-to-loan ratio, it might not have as much room to fall down by consequence. But what will be the numbers that you guys are looking at as you look forward?

  • Daryl Moore - EVP, Chief Credit Officer

  • We have a committee that deals with this on a quarterly basis. One of the things we struggle with first kind of meeting that committee is what are the historic loss rates, and how do they compare to the environment we're in today? So as Bob talked about, we're going to have to see some kind of material -- or improvement for the committee members to get comfortable with the fact that our historic loss rates maybe have hit their peak, and we're going to see things turn down in the coming quarters.

  • I also think what's very important for at least us to consider, and we do, is kind of the level of nonperforming assets and the inflow into nonperforming assets. Right now, we have not seen significant improvement in either one of those. I think all we are all a little reluctant to start releasing reserves until we start to see that trend.

  • Scott Siefers - Analyst

  • Okay, that sounds great. Thank you very much.

  • Operator

  • John Barber, KBW.

  • John Barber - Analyst

  • I'm doing well. Thank you. I just had two questions. If I look at the Appendix on the credit quality trend slide, it looks like you had two nonaccrual relationships over $2 million added to nonaccrual status this quarter. Were those previously identified and can you give us any color on those relationships?

  • Bob Jones - President, CEO

  • Those were previously identified. Both came from the substandard category. One is a commercial real estate project, and one is a manufacturing company.

  • John Barber - Analyst

  • Okay, thank you. The last question, do you have the margin for the month of September?

  • Chris Wolking - EVP, CFO

  • We didn't include the monthly chart. I would say that, for each month, in the month, I don't have them right in front of me. It was pretty stable. There really wasn't a material change in the monthly numbers.

  • Bob Jones - President, CEO

  • John, we'll get you the specific number, but I don't think it is material in terms of the change from the quarter.

  • John Barber - Analyst

  • Great, thank you.

  • Bob Jones - President, CEO

  • You caught us on a slide we left out.

  • Chris Wolking - EVP, CFO

  • Yes (multiple speakers) have to thin up the Appendix a little bit. Sorry.

  • Bob Jones - President, CEO

  • Sorry about that.

  • Operator

  • At this time, there are no further questions. Presenters do you have any closing remarks?

  • Bob Jones - President, CEO

  • No, we just appreciate everybody's time and attention. As always, if you have any specific questions that weren't asked, call in now at 812-464-1366 and we look forward to seeing everybody soon. Have a good day.

  • Operator

  • This concludes Old National's call. Once again, a replay, along with the presentation slides, will be available for 12 months on the Investor Relations page of Old National's website at www.OldNational.com. A replay of the call will also be available by dialing 1-800-642-1687, conference ID code 17766785. This replay will be available through November 15. If anyone has additional questions, please contact Lynell Walton at 812-464-1366. Thank you for your participation in today's conference call.