Old National Bancorp
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Earnings Call Transcript

Earnings Call Transcript
2018-Q1

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Operator

Welcome to the Old National Bancorp First Quarter 2018 Earnings Conference Call. This call is being recorded and has been made accessible to the public in accordance with the SEC's Regulation FD. Corresponding presentation slides can be found on the Investor Relations page at oldnational.com and will be archived there for 12 months.

At this time, the call will be turned over to Bob Jones for opening remarks. Mr. Jones?

R
Robert Jones
Chairman & CEO

Great. Thank you, Dorothy. As we begin this call, let me remind everyone that as noted on Slide 2, certain statements we will make may be forward-looking. And as such, they will be identified with the appropriate terms. In addition, certain slides do contain non-GAAP measures, which we believe provide for more appropriate comparisons. A reconcilement of these numbers is not - is contained in the appendix.

Now with all that being said, let me welcome everyone to Old National Bank's First Quarter 2018 Earnings Call. We do appreciate your interest and flexibility with our change in date and time. This change, as well as the changes to the format of our slides, was really based on your input. Our goal is to provide you with greater detail on the slides and for our comments to be focused on the substance behind those slides, much like the old radio show, Paul Harvey: The Rest of the Story.

While Jim Ryan and I will be the sole presenters on the call, we are joined by Jim Sandgren, Daryl Moore, John Moran and Lynell Walton. And all of us will be available to answer questions after the brief presentation.

By the way, Mr. Moran has forbidden me from making any jokes or corny analogies as I've done in the past. You'll see if I can do my best to abide.

Slide 3 does provide an excellent overview of our quarter. It's the best quarter of earnings in the history of our company. I could just stop there, but let me add some highlights and insights into the drivers and opportunities that we see that exist for our company.

Every quarter, I do a letter to our board prior to our meeting, which, much like what we hope to accomplish with these slides, allows for more discussion. In that letter, I told the board that I feel like we are hitting on 6 to 7 cylinders of an eight-cylinder car and not to be confused with my wife's Prius. Point being, while we feel very good about the quarter, opportunities still exist to improve our performance by focusing on our operating leverage, getting stronger performance with our fee-based businesses, for example.

This quarter was very consistent with our stated strategies, and we are clearly benefiting from the transformation of our franchise. As I think about that transformation of our franchise, Jim Ryan has coined the phrase, "demographically accretive" as a descriptor of this strategy.

Client optimism drove a great deal of our loan growth. And at this stage, that optimism remains, as evidenced by the pipeline. Our core deposit growth and low deposit beta are symbolic of who we are as a bank, with a terrific mix of economically vibrant loan markets and a great core deposit franchise.

There are some external concerns that could tamper our clients' optimism, such as the potential impact that a trade war might have on the agricultural segment. But just as a reminder that only 2% of our loan book is tied to agriculture. Rising rates could also dampen loan growth, but at this stage, our clients have shown great resiliency.

As to what keeps me up at night, besides which draft choice my beloved Browns will screw up again this year, clearly, the shape of the yield curve could present challenges going forward. Also, while we do not see anything imminent in the credit markets, we are taking a cautious view on certain segments within CRE, including retail and multifamily. And there are certain segments of the indirect auto business, such as longer-term credits, high LTV loans with lower FICO scores, that cause us angst.

Before moving on to the next slide, while the topic is not highlighted, our strategy for M&A remains the same, we are an active looker and a selective buyer. I should note we have seen a significant impact in books beginning later in the first quarter.

Finally, a few brief words on Senate Bill 2155, which, while not perfect, we believe it does form a platform for additional regulatory relief down the road, and I feel moderate optimism that the House and Senate will come together to pass it in some form. The immediate impact for us is minimal, with no expected impact to our financial performance.

Slide 4 highlights two branch actions that we are announcing in concert with today's earnings release. These include the sale of 10 branches within Wisconsin to Marine Credit Union. This sale will allow us to provide greater focus on our key Wisconsin markets of Madison, Milwaukee and the Fox Valley. For your planning purposes, we do not see a material financial impact in 2018.

We also are announcing our intent to close an additional 10 branches in 2018. The majority of those branches will close later in the second quarter, and we'll have one closing in the third quarter. The annualized expense savings will be slightly more than $3 million.

I should note, for your modeling purposes again, that these closures were included in the guidance that we gave you for the second half of this year, and that any impact to your models would be in 2019.

I'd like to note, with these 10 branches, we will have closed 158 branches since 2010. And we have seen our average deposits per branch increase over 50% during the same time to over $70 million per branch.

Let me now turn the call over to Jim Ryan.

J
James Ryan
SVP & CFO

Good morning, and thank you, Bob. Starting on Slide 5, I will highlight a few items we think are important to our strong first quarter results. Adjusted earnings per share was $0.34, which was $0.12 better than the fourth quarter and $0.07 better than a year ago. Adjusted earnings per share for the first quarter excludes $2.3 million of merger charges, $2.8 million of branch consolidation charges, and $800,000 of securities gains. Overall, we are pleased with the almost 11% commercial loan growth, which continues to highlight the dynamic markets we've entered recently.

Moving to Slide 6. Adjusted pretax preprovision net revenue was more than 16% higher year-over-year. This result was driven by our stated strategy of, one, remixing our balance sheet towards higher-yielding commercial loans; two, maintaining our strong low-cost deposit base; and three, improving our operating leverage, which saw a 184 basis point improvement in the first quarter. On Slide 7, we wanted to highlight our strong C&I growth of almost 14% during the quarter. Importantly, our commercial volume was up 21% from the fourth quarter to $1.7 billion despite the strong pull-through we experienced in the first quarter. This is particularly encouraging considering typical first quarter seasonal factors and broader industry trends.

Our loan yields increased 16 basis points, aided by the increase in short-term rates during the quarter and improved mix and a full quarter of our Minnesota partnership. Slide 8 demonstrates our year-over-year changes in earning assets. Again, this is very consistent with our ongoing remix strategy. As a percentage of total earning assets, commercial loans are up over 7%, and indirect lending is down almost 2%. Our securities book is also more than 2% lower.

Moving to Slide 9. You can see that we more than funded our loan growth to deposit growth. We continue to believe that stable low-cost core funding creates a sustainable competitive advantage. Our deposit beta is now just 6.7% current cycle to date. Next, on Slide 10, our net interest margin exceeded our expectations and the outlook we provided to you last quarter. Just as a reminder, our margin declined 9 basis points due to the change in the federal tax rate and the resulting impact on our FTE adjustments.

Our net interest margin, excluding accretion, was 3.17% and benefited from short-term rate increases and an improving mix. This was offset somewhat by more normal levels of interest on nonaccrual and fewer days in the quarter. Accretively, yield was up somewhat from the fourth quarter and reflected a full quarter's impact from our Minnesota partnership. We have provided the normal schedule for accretion in the appendix. Slide 11 shows the trends in adjusted noninterest income. Mortgage revenue was seasonally softer, and wealth management declined from the fourth quarter due to a large estate fee collected late last year and market volatility.

Next, Slide 12 shows the trend in adjusted noninterest expenses. We guided towards $115 million in the first quarter, but the quarter did benefit from a disciplined management, some earlier-than-expected savings from our Minnesota partnership and the timing of certain technology projects. Second quarter expenses will be closer to $115 million due to the completion of projects, merit increases that went into effect in April and an enhancement in certain employee benefits to remain competitive.

Importantly, our core compensation of benefit costs held steady versus the fourth quarter despite a full quarter's impact of our Minnesota partnership and annual resets on FICA and other benefit programs. Expense control remains a key focus for us in 2018, and we are committed to generating positive operating leverage. Slide 13 has our credit metrics. Most credit metrics saw an improvement during the quarter, with our net charge-offs at just one basis point. Our provision for the quarter covered those charge-offs. With 63 basis points against organic loans and 3.1 - 3.77% loan mark against those acquired loans, we continue to have adequate reserve coverage.

Next, Slide 14 shows an update on our tax rate expectations. Our statutory rate is expected to be 24.5% for the year. This is the rate you should use to adjust for noncore nonreoccurring items. For the full year, we now expect a net after-tax benefit from our tax credit business of approximately $3 million, resulting in a full year GAAP tax rate between 6% and 8%. The FTE ranges are also listed. We now expect tax credit amortization of $25 million to $30 million for the full year. It's important that your models reflect this increase in our nonoperating expenses.

As we discussed last quarter, the exact timing of these projects can be difficult to project since many of these are construction projects on historical buildings. We continue to expect that tax credit amortization will be higher in the second and third quarters of this year. Our estimate for the second quarter tax credit amortization is approximately $15 million to $18 million. As a reminder, these projects generate loan and deposit relationships, provide community goodwill, and CRA credit.

Slide 15 provides some key takeaways from the quarter. 2018 is off to a strong start with good execution against our strategic objectives. We continue to show commercial loan growth funded by low-cost deposits, remixed our balance sheet into more productive earning assets, controlled our expense growth and drove positive operating leverage, saw clean credit metrics and remained very well capitalized and grew tangible book value per share. Slide 16 provides details around our updated outlook. Our expectations are very consistent with the outlook we framed last quarter. Our view on loan growth is unchanged. For NIM, we expect a stable outcome in the second quarter, assuming no further rate changes, excluding accretion income. We remain positioned to benefit from short-term rates, with 40% of the commercial book tied to short-term indices. Fees should pick up somewhat in the second and third quarters following normal historical and seasonal patterns. As already highlighted, we expect noninterest expenses to increase slightly in the second quarter on annual merits, the timing of technology spend and benefits cost, before again declining in the third and fourth quarters.

We continue to track for early May in Minnesota systems conversion, and we expect to realize approximately $5 million in quarterly cost savings beginning in the third quarter. We've already covered tax matters in detail on Slide 14.

Finally, with respect to our Minnesota performance, we couldn't be more pleased. From Day one to the end of the first quarter, loans are up 13% on an annualized basis. This is the second partnership in a row that has seen loan growth right out of the starting gates. Minnesota is a great platform with great people. The larger balance sheet and increased product capability that Old National brings to an already excellent platform continues to be well received in the marketplace. Retention of both clients and associates has been excellent.

With that, we're happy to answer any questions that you might have. And as Bob already mentioned, we do have the rest of the team with us here, including Jim Sandgren and Daryl Moore.

Operator

[Operator Instructions]. Your first question comes from the line of Scott Siefers with Sandler O'Neill.

R
Robert Jones
Chairman & CEO

We can change the starting time or the date, and you still get that first Q.

S
Scott Siefers
Sandler O'Neill Partners

I try. I've been in the queue since about 4:30 this morning.

R
Robert Jones
Chairman & CEO

For this call? We could have had the call, just you and I, at that time. I was in.

S
Scott Siefers
Sandler O'Neill Partners

That's right, that's right. We'll do that next quarter. That is a generous offer. But no, I appreciate you guys taking the question. So let's see. Jim, wanted to just make sure I'm fully understanding the costs that - they're the expense expectation. So 2Q costs of just under $112 million and then an additional - and that's before the tax credit business. So we add in like $15 million, $16 million, so that implies a reported expense number sort of in the ballpark of $134 million to $137 million. That's the way you're looking at it as well, right?

J
James Ryan
SVP & CFO

Right.

S
Scott Siefers
Sandler O'Neill Partners

Okay. And then - so the tax credit costs will be highest in the second and third quarters. Would you be willing to sort of venture a guess as to what the reported number might look like as we get to the fourth quarter? Or maybe even directionally, when we talk about the tax credit business expenses being highest in the 2Q and 3Q, what's the order of magnitude of reduction in the fourth quarter? Like if we have, after the second quarter, call it $10 million-or-so, in tax credit business expenses left, how much of that occurs in the third, how much in the fourth?

J
James Ryan
SVP & CFO

I would say majority of it's going to appear in the third quarter and just a little bit in the fourth quarter, Scott. I think it'll be closer to the first quarter in this case, but - so there'll just be a little bit left in the fourth quarter to take.

S
Scott Siefers
Sandler O'Neill Partners

Okay, perfect. That's very helpful. I appreciate that. So another one...

R
Robert Jones
Chairman & CEO

Yes. Scott, as you know, there's timing on these projects, and the number for the noncore amortization's up a little bit over our prior guidance. And it's really - it's all the store credits we had in Minnesota that came on a little quicker than expected. But it's still, in our mind, a good business. It's going to give us $3 million in net benefit, plus we get the ancillary benefits that come with it and we're comfortable that we're accounting for it accurately.

S
Scott Siefers
Sandler O'Neill Partners

Okay, perfect. And then so I guess what that implies is you're really going to be - at least on a reported basis, you'd be ending this year with potentially significantly lower expense base than you'll have in the second quarter and third quarter - second and third quarters of this year, right?

R
Robert Jones
Chairman & CEO

Absolutely. If we don't, then we've got big problems.

S
Scott Siefers
Sandler O'Neill Partners

Yes. Okay, all right. And then if I can sneak one additional one in, can - Bob, maybe if you can just talk - or Jim, if you can talk a little bit about the fee momentum. Wasn't a huge delta but came in a little softer than I had anticipated this quarter. And then, Bob, you touched on fees as a sort of an area for improvement in your remarks. Maybe just...

R
Robert Jones
Chairman & CEO

Yes. Yes, great question, Scott. So mortgage clearly was a little softer in the first quarter, which is not abnormal. It's a seasonal business. And I think when you start getting rates to move around, you get a little bit of apprehension, but the pipelines build up very nicely. March was a very strong month for us. So we feel optimistic. The other big delta change was Capital Markets. And again, that's just a pull-through on terms of the derivative in the foreign exchange business. But Chris feels relatively comfortable. We've built the pipeline up there in sales. Jim hit on the wealth. The comparison during the fourth quarter and the first quarter, we did have a significant fee out in the state that matured. And that - obviously, that's - those are - we can't predict those. But - and then you get a little bit of volatility there because of the equity markets, but - and actually the bond markets. So we feel good about the guidance we gave you, which is kind of that mid-40s, and I think over time, we're going to be able to get to that level. I just - seasonality is what it is. I should note service charges, which was another large component of that, we're actually pleased with the performance in the first quarter on a relative basis. We saw some stability there. And as you know, we've been fighting that headwind for a while. So feel good about the stability that we finally have achieved in the service charge area.

Operator

Your next question comes from the line of Chris McGratty with KBW.

C
Christopher McGratty
KBW

I'm interested in your deposit commentary. Your beta cycles to date have been, I think, probably top decile in the group. Wondering if there's any pricing differences that you could speak of by market, any changes you might have seen since the March hike. Any color would be great.

R
Robert Jones
Chairman & CEO

Yes. I think, first of all, the overall commentary would be, it's really reflective of the franchise that we've built. I use this word, "demographically accretive" just because I really like it. But - so we've been able to get into these markets that are able to give us much better economics and grow loans. But we still have what is the legacy franchise. It is just a great deposit generator. So that balance has allowed us really, Chris, to stay away from a lot of special pricing. We've got some special pricing, it's on an ad hoc basis. It's less than 7% of our markets, if I had to do anything in. And as you well know, we're not a huge believer in public funds and municipal deposits. So we've been saying for years that there's going to be value in core deposit franchises, and I think now with this environment, we're starting to see that. So we're not getting a lot of pressure on deposits yet. I think - I judge a lot of that by the e-mails or the phone calls I get or Jim gets from the field. And so far, so good, and again, reflects kind of our brand as well as our market share in some of these existing markets.

C
Christopher McGratty
KBW

That's great. If I could add one on M&A, Bob. You talked about the - I think, the increase in books that are being moved around. Interested if there's any change in the size of banks that are becoming available, given the hopeful progress that we're seeing on the $50 billion.

R
Robert Jones
Chairman & CEO

Yes. I don't know that the Senate Bill 2155 has really changed much. Obviously, if you move those artificial bright lines, then you might see some of the larger banks that are pushing the $50 billion or above, get back into business. I'd say the books are consistent with what we've seen in the past. They tend to be that $500 million to $3 billion banks that either has succession issues or realizing the cost to continue to compete is difficult. And so again, we're seeing a lot of books, but we're going to be very selective in any partnering that we do.

C
Christopher McGratty
KBW

Great. And if I could sneak one for Jim. The 40% of the commercial book, the short term, I think, tied. How much of the total book is tied to LIBOR?

J
James Ryan
SVP & CFO

I don't know if I have the exact percentage. Scott?

S
Scott Evernham
EVP, Wealth Management

It's 26% is tied to the one-month LIBOR on a variable rate. So 51% of our book is variable. 26% of that is tied to the one-month LIBOR, if that helps, Chris.

Operator

Your next question comes from the line of Nathan Race with Piper Jaffray.

N
Nathan Race
Piper Jaffray Companies

Just a question on loan growth to start. Obviously, you had good growth this quarter, and looks like you're getting good production out of Wisconsin in the Twin Cities. So just curious on your updated thoughts, in terms of if you need to add any more folks in any of those two states to really increase your production out of there or you feel pretty comfortable with the team you have in each of those areas.

R
Robert Jones
Chairman & CEO

Yes. Just a great question, and it's the conversation I have with Jim Sandgren probably every day. We've actually been able to add some talent in both markets. We've added some really excellent, both C&I and CRE lenders, that have come to some of the larger banks. So we will continue to selectively invest in markets like that, like Indianapolis and others, where we believe that our model works very effectively and that we can get some folks to join. Our focus really in Wisconsin would be on the C&I side and might be just a little bit different in the Twin Cities where we could grow our CRE book because they've got such a strong C&I team. Indianapolis, quite frankly, we could grow both C&I and CRE and still feel very, very good about where we are.

N
Nathan Race
Piper Jaffray Companies

Got it. And then just going back to the discussion around acquisitions, Bob, just curious if you could kind of give us a little more color, just in terms of the type of franchises that are coming up for sale. Are these more of the demographically accretive transactions, as you put it earlier? Or are these kind of more tuck-in deals in certain other areas?

R
Robert Jones
Chairman & CEO

Yes. It's a little of both. Clearly, our focus will be on the demographically accretive, and I think Ryan ought to copyright that term. I think, as you think of the success that we had in Wisconsin and the success we had in Minnesota, those will be clearly the types of transactions we would love to do, the kind of partnerships we would like to do. And we also don't want to stray from who we are as a company and the core values and the strategies that we've laid out.

N
Nathan Race
Piper Jaffray Companies

Got it. And if I can just sneak one last one in for Jim. On the FHLB advances this quarter, they're up a little bit. Was that just kind of a timing aspect along with the branch sales that are coming due later this year?

J
James Ryan
SVP & CFO

Yes, that's correct. And obviously, whenever we have opportunities to take advantage of special, we'll take advantage of some of those special that occur. And so I think that's what you saw in this quarter.

Operator

Your next question comes from the line of Terry McEvoy with Stephens Inc.

T
Terence McEvoy
Stephens Inc.

Thanks for the new slide format. Very efficient from my seat. I appreciate it.

R
Robert Jones
Chairman & CEO

It's all Mr. Moran. Just so you all know, when you address him, it's Mr. Moran.

T
Terence McEvoy
Stephens Inc.

Okay. Well, thank you, Mr. Moran. Very helpful on a Monday morning.

J
John Moran

Sure.

T
Terence McEvoy
Stephens Inc.

If we could start, maybe a question for Jim. Slide 8, the earning asset mix. What are your thoughts on building out the securities portfolio? In the margin guidance, it looks like yields are going to come down three basis points. And then maybe a year from today, so 1Q '19, how does that slide change?

J
James Ryan
SVP & CFO

Well, I think the good news is we have a lot of flexibility here, Terry. We'll continue to look for liquidity. As Bob said, we're not going to always play the hot special on the deposit pricing side, so a lot of liquidity in this portfolio. I think generally speaking, as we think about that remix, we'd like to see that as a lower percentage of total and as a store of liquidity and help us manage our interest rate risk. But just generally speaking, I see that coming down versus going up from here.

T
Terence McEvoy
Stephens Inc.

And then there's always a lot of talk about the lending environment in your more urban metro markets. What's going on in the community markets? Are you seeing any growth at all? I'm just trying to get a feel for the local economy and overall business activity in those markets.

R
Robert Jones
Chairman & CEO

Yes. I'll give a high-level answer, Terry, then I'll turn it over to Jim Sandgren. But one of our better markets was Evansville. While it's not a demographically accretive market, it clearly reflects what really the legacy franchise looks like. And we're seeing good opportunities throughout the franchise. It's competitive, but I don't think it's as hypercompetitive as we've seen in past cycles. And clearly, we're able to compete. We haven't had to reduce price a lot. We're able to compete on value proposition versus price and credit, and we've continued to adhere to the credit standards we've had. So Jim?

J
James Sandgren
President & COO

No, I think that's a good assessment. We continue to see growth in both our newer markets and our legacy markets. I think sometimes in the legacy markets where we face a lot more of the maybe smaller community bank competition, that's where sometimes, from a credit perspective, structure gets a little loose, whether it's guarantees or loan to value. So obviously, we're very disciplined on that front, and we continue to find ways to do deals, but there's certainly deals that we'll step away from. I think on the larger metro markets, as we're competing against some of the larger banks, I think for the most part, they are good competitors from a credit perspective. So yes, we still feel good about our ability to compete, build long-term relationships. And I think this quarter is another reflection of being able to do that.

T
Terence McEvoy
Stephens Inc.

And then just one last question. You mentioned, it sounded like pushing out some technology spending. Could you just talk about where you're spending on the technology side? And is it more defense as you compete against the very large banks? Or are there areas where it's more offensive in nature to grow the business?

R
Robert Jones
Chairman & CEO

A little of both, Terry. So one of our larger spends - two of our larger spends this year will be on a new mortgage servicing system, Black Knight, which we implemented over this last couple of weekends, it's been well received. And we've got a significant treasury management system that we're going to put in place latter half of this year, which will allow us to be much more competitive in the treasury management. And as we've entered these demographically accretive markets, it really allows us to do that. And then you've got that core system that it's kind of just the opposite. Our view of that would be, let's eliminate redundancy and complexity and go to a basic system so that can remove costs. So - and then obviously, the whole issue around digital and mobile banking, we've really taken a position there to partner with folks. And we'll continue to invest in that partnership and continue to invest in that product set. But I don't think we're arrogant enough to think that we can go out and build our own system to be competing with what our friends at JPMorgan Chase and others are doing. And - but we can find the right partner to do that.

Operator

[Operator Instructions]. Your next question comes from the line of Jon Arfstrom with RBC Capital Markets.

J
Jon Arfstrom
RBC Capital Markets

A few follow-ups. You talked about an increase in the number of - when we were - you were talking about acquisitions and increase in the number of books that you're seeing. Why is that? Is there a theme?

R
Robert Jones
Chairman & CEO

I think a couple of reasons. I think that you get through the budget planning, the implementation, the boards look at it, and you kind of get through the holidays, and you think about timing of the increase in books, you kind of have board meetings. So I think banks make decisions that maybe, "Let's go out and explore the opportunity." Without being arrogant, I think we see a lot of books because, one, we've got a strong track record of execution, and we've got great relations with the regulators. And we've clearly stated that in the right opportunity, that we want to be a partner. And then just the reputation from our current partners. You get folks from Wisconsin and Minnesota and other parts that talk to other bankers, and people make phone calls. So - but I mean, ultimately, let's be honest, we're still an industry that's got a capacity hitch, we've got way too many banks serving far too many clients, and you need to give consolidation. And I think there's a lot of hope that Senate Bill 2155 will kind of break through some of that, and while it's incremental, it's directionally correct. So I think all of the above gets us to a point in time where people are making the decision to see what's the right thing to do for their owners.

J
Jon Arfstrom
RBC Capital Markets

Okay, good. On lending, you all sound pretty optimistic on commercial and commercial real estate. What's driving that? Is it larger loans? Is it new customers that you're bringing into the bank? Is it existing customers that are borrowing more? Can you maybe touch on that?

J
James Ryan
SVP & CFO

Yes. Yes, so Jon, it's really a mix of both. We are bringing in a lot of new customers. In some of the markets obviously, there's some market disruption with some acquisitions. So we certainly take advantage of that when we can. We're always deepening our existing relationships, and I think it's really been a good mix. Our focus, as Bob mentioned earlier, is to continue to add talent. And we've been able to do that and really have focused on larger banks where folks come up - over, and they're very strong from a credit perspective. And their ability to build relationships with our product set is really working out well.

J
Jon Arfstrom
RBC Capital Markets

Okay, okay, good. And then, Bob, just one. In your prepared comments, you talked about running on 6 or 7 cylinders. What gets you to 8? Is it just the expense work and maybe optimizing fees a bit? Or is there something else that's on your mind?

R
Robert Jones
Chairman & CEO

A couple of things. One, I'm not sure I'd ever get to eight because I think I'd always upgrade my car. And so I never want to rest on the laurels, I want to push. But clearly, we have an opportunity to increase our operating leverage, and it's really on both sides of the equation. I think we're just beginning to see the value of the revenue engine that we've kind of built over the years and a lot - ability to focus clearly. As I've talked about, systems integrations and systems opportunities, removing some of the redundancy and complexity allows us to become much more efficient. Just the branch closures, I don't know that we get enough credit for the magnitude of the change we've put through the branches. And while it's only $3 million in savings in '19 for your modeling, this is a consistent process that we'll look at. So it's all of the above. And I think we'll run on seven cylinders for a while, and we'll continue to kind of push to that 8-cylinder that - they do make 12-cylinder cars, too. So again, my wife's Prius has only got one, but...

J
Jon Arfstrom
RBC Capital Markets

I could you see rolling at a 12-cylinder, Bob.

R
Robert Jones
Chairman & CEO

If you want to get a great visual, look at me driving that Prius for 8 hours.

Operator

There are no further questions at this time. Are there any closing remarks?

R
Robert Jones
Chairman & CEO

Yes, just a couple. One, clearly, this is a new format, both in terms of slides and presentation. Your feedback to Mr. Moran or Lynell would be valuable. And then as always, if you have any follow-up questions, reach out to Lynell and we'll get back - right back to you. Appreciate everybody's interest and time.

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, oldnational.com. A replay of the call will also be available by dialing 1-855-859-2056, conference ID code 7676787. This replay will be available through April 7. If anyone has any additional questions, please contact Lynell Walton at 812-464-1366. Thank you for your participation in today's conference call.