Old National Bancorp Q1 2025 Earnings Report

Old National Bancorp EPS Results

• Actual EPS: $0.45
• Consensus EPS: $0.42
• Beat/Miss: Beat by +$0.03
• One Year Ago EPS: N/A

Old National Bancorp Revenue Results

• Actual Revenue: $486.87 million
• Expected Revenue: $478.37 million
• Beat/Miss: Beat by +$8.51 million
• YoY Revenue Growth: N/A

Old National Bancorp Announcement Details

• Quarter: Q1 2025
• Date: 4/22/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, April 22, 2025
• Conference Call Time: 10:00AM ET

Old National Bancorp (NASDAQ:ONB) operates as the bank holding company for Old National Bank that provides various financial services to individual and commercial customers in the United States. It accepts deposit accounts, including noninterest-bearing demand, interest-bearing checking, negotiable order of withdrawal, savings and money market, and time deposits; and offers loans, such as home equity lines of credit, residential real estate loans, consumer loans, commercial loans, commercial real estate loans, agricultural loans, letters of credit, and lease financing. The company also provides debit and automated teller machine cards, telephone access, online banking, and other electronic and mobile banking services; cash management, private banking, brokerage, trust, investment advisory, and other traditional banking services; wealth management, investment, and foreign currency services; and treasury management, merchant, and capital markets services, as well as community development lending and equity investment solutions. The company was founded in 1834 and is headquartered in Evansville, Indiana.

Old National Bancorp Q1 2025 Earnings Call Transcript

Key Takeaways

• Delivered adjusted EPS of $0.45 in Q1, with net interest income and margin in line with guidance, non-interest income boosted by loan sale gains and mortgage/service fees, and disciplined expense management driving an improved efficiency ratio.
• Maintained strong credit quality with net charge‐offs in the expected range, increased the allowance for credit losses to reflect macroeconomic and trade uncertainty, and saw tangible book value rise 5% QoQ and 13% YoY.
• Strengthened the balance sheet organically, growing loans and core deposits while lowering deposit costs, ending the quarter with a CET1 ratio of 11.62% and significant capital flexibility for up to $2.4 billion of CRE loan sales if needed.
• Secured regulatory approval for the Bremer Bank acquisition with a legal close on May 1 and system conversion in mid-October, expanding Old National’s Midwestern footprint and promising greater scale, earnings growth, and balance sheet optionality.
• Reaffirmed 2025 guidance with expectations for net interest income and margin growth supported by asset repricing and the Bremer deal, 4–6% core loan growth, stable non-interest income and expenses, and EPS in line with analyst consensus.

Presentation

[Operator]

Welcome to the Old National Bancorp First Quarter twenty twenty five 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 twelve months. Management would like to remind everyone that certain statements on today's call may be forward looking in nature and are subject to certain risks, uncertainties and other factors that could cause actual results or outcomes to differ from those discussed. The company refers you to its forward looking statement legend in the earnings release and presentation slides.

[Operator]

The company's risk factors are fully disclosed and discussed within its SEC filings. In addition, certain slides contain non GAAP measures, which management believes provide more appropriate comparisons. These non GAAP measures are intended to assist investors' understanding of performance trends. Reconciliations for these numbers are contained within the appendix of the presentation. I'd now like to turn the call over to Old National's Chairman and CEO, Jim Ryan, for opening remarks.

[Operator]

Mr. Ryan?

[James Ryan, CEO & Chairman at Old National Bancorp]

Good morning. Earlier today, Old National reported our first quarter earnings. These better than expected results demonstrate our ability to navigate a challenging and uncertain economic environment, setting us up favorably as we move into the second quarter and importantly as we prepare for the close integration of our partnership with Bremer Bank. Our strong deposit franchise and solid loan growth drove results for the past quarter. Our net interest income and margin performance met expectations.

[James Ryan, CEO & Chairman at Old National Bancorp]

Non interest income benefited from the gain on sale of some previously acquired loans and from higher fees from mortgages and service charges. Our disciplined expense management is reflected in our efficiency ratio. Net charge offs were in the expected range and we took the opportunity to increase our allowance for credit loss incorporating global trade and economic uncertainty in our reserve level. Additionally, our tangible book value increased meaningfully compared to both the previous quarter and year over year. In summary, our first quarter results showcase our disciplined expense management, our ability to maintain margin through careful deposit pricing, growth in core deposits and loans and strong credit quality.

[James Ryan, CEO & Chairman at Old National Bancorp]

Despite the uncertain macroeconomic environment, we remain confident in our strength supported by our robust balance sheet, diverse revenue streams and resilient Midwest markets. Now bolstered by our partner Bremerbank, with over one hundred and ninety years of experience navigating through uncertainty, we are committed to controlling what we can do to serve and support our clients, communities and shareholders. Before I turn the call over to John, I also want to provide an update on our Bremerbank partnership. I'm excited to share that we have received all necessary regulatory approvals and anticipate a legal close date of May 1. We expect conversion of the banking centers and systems to occur in mid October.

[James Ryan, CEO & Chairman at Old National Bancorp]

We are thrilled to officially welcome our new clients and team members from across the Bremer footprint, including Minnesota, North Dakota and Wisconsin. I've traveled extensively throughout the Bremer footprint, meeting team members and clients, and I'm even more convinced that this partnership will be one of our best. The individuals in these markets are ones we know and appreciate. Not only does this partnership significantly enhance our footprint, providing greater scale and density in the Upper Midwest, but it also offers a valuable boost for our balance sheet and earnings growth in an uncertain environment, which should translate into more value creation for our shareholders than the industry can provide today. Thank you.

[James Ryan, CEO & Chairman at Old National Bancorp]

I will now turn the call over to John to discuss the quarter results in more detail.

[John Moran, CFO at Old National Bancorp]

Thanks, Jim. Turning to slide four, we reported GAAP 1Q earnings per diluted common share of $0.44 Excluding $01 per share of merger related charges, adjusted earnings per share were $0.45 Results were driven by growth in loans and deposits, net interest income and margin that were in line with our expectations, stable fee income, controlled expenses and a favorable tax rate. Credit was benign with normalized levels of charge offs and our return profile as measured on assets and on tangible common equity remained high. On Slide five, you can see our quarterly balance sheet trends, which again highlights stability in our liquidity with continued improvement in our capital position. Total deposit growth over the last year has again allowed us to organically fund our loan growth while minimizing deposits.

[John Moran, CFO at Old National Bancorp]

We grew our tangible book value per share by 5% as compared to last quarter and by 13% over the last year. We ended the quarter with a strong CET1 ratio of 11.62%, up 86 basis points from a year ago. With capital levels higher than we had originally modeled at the time we announced Bremer last November and rates lower, we have significant flexibility around the size of our contemplated commercial real estate loan sale post close. On Slide six, we show trends in our earning assets. End of period total loans increased 1.5% annualized from last quarter or 2.3% excluding approximately $70,000,000 of CRE loan sales in the quarter, in line with the lower end of our 1Q guidance.

[John Moran, CFO at Old National Bancorp]

Production for the quarter was strong throughout our commercial book. Quarterly new loan production rates are in the high 6% range and marginal funding costs are in the mid 3% range. The investment portfolio increased 2.6% from prior quarter due to the reinvestment of cash flows and favorable changes in fair values. Duration pulled in modestly linked quarter to just under four. We expect approximately $1,700,000,000 in cash flow over the next twelve months.

[John Moran, CFO at Old National Bancorp]

Today, new money yields are approximately 150 basis points above back book yields on securities and fixed rate loans. The repricing dynamics in both loans and securities combined with loan growth and the Bremer partnership support our expectation that net interest income and net interest margin will grow in 2025. Moving to Slide seven, we show trends in deposits. Total deposits were up 2.1% annualized and core deposits ex brokered were up nearly 1.7% annualized as we remain focused on growth in this key funding source. Non interest bearing deposits were 23% of core deposits, relatively stable with fourth quarter levels.

[John Moran, CFO at Old National Bancorp]

Business non interest bearing and public funds saw normal seasonal outflows while community deposits grew. Our broker deposits were stable and at 3.8% as a percentage of total deposits, our use of brokered continues to be less than half peer levels. The loan to deposit ratio was 89% consistent with last quarter. With respect to deposit costs, the 17 basis point linked quarter decrease in our cost of total deposits played out as we expected and total deposit costs held steady throughout the quarter consistent with Fed actions. Our spot rate on total deposits at March 31 was 190 basis points.

[John Moran, CFO at Old National Bancorp]

Moreover, our exception price deposits have experienced a 103% down beta since we started lowering rates in that book in early 2Q of twenty twenty four. Our cumulative total deposit beta came in at 37%, which was favorable to our expectations. Overall, we remain confident in the execution of our deposit strategy. We are prepared to proactively respond to future Fed rate actions while staying on offense with new and existing clients to drive above peer deposit growth at reasonable costs. Slide eight shows our quarterly income statement trends.

[John Moran, CFO at Old National Bancorp]

As I mentioned earlier, adjusted earnings per share were $0.45 for the quarter with all key line items in line with our prior guidance. Moving on to slide nine, we present details of our net interest income and margin. Net interest income decreased as we had expected and guided with net interest margin likewise down modestly due to lower accretion and fewer days in the quarter. Away from accretion and days, net interest margin would have been up six basis points with lower deposit costs more than offsetting rate and volume dynamics on the asset side. Slide 10 shows trends in adjusted non interest income, was $94,000,000 for the quarter and above our guidance.

[John Moran, CFO at Old National Bancorp]

Our primary fee businesses performed well with bank fees showing normal seasonality and wealth, mortgage and capital markets all stable despite choppy market conditions late in the quarter. Other income benefited 4,800,000 from a gain on the previously mentioned sale of approximately $70,000,000 of commercial real estate loans. As a reminder, looking back to fourth quarter, other income was elevated by approximately $8,000,000 of discrete items. Continuing to Slide 11, we show the trend in adjusted non interest expenses of $263,000,000 for the quarter, which was moderately better than our guidance due to lower other expenses, predominantly professional fees, FDIC assessment and tax credit amortization. Run rate expenses remain well controlled, and we again generated positive leverage.

[John Moran, CFO at Old National Bancorp]

On Slide 12, we present our credit trends. Total net charge offs were 24 basis points or 21 basis points excluding three basis points related to PCD loans. The delinquency ratio improved from the fourth quarter while the NPL ratio increased modestly. The fourth quarter allowance for credit losses to total loans, including the reserve for unfunded commitments was 116 basis points, up two basis points from the prior quarter. Consistent with the fourth quarter, our qualitative reserves incorporate a 100% weighting on the Moody's S2 scenario with additional qualitative factors to capture global trade and economic uncertainty.

[John Moran, CFO at Old National Bancorp]

Also, we remind you that our allowance for credit losses plus the discount remaining on acquired loans to total loans now stands at nearly 150 basis points. Slide 13 presents key credit metrics relative to peers. Our proactive approach to credit monitoring has led to above peer levels of NPLs, but delinquency and charge off ratios that are below peer averages over time. A steadfast approach to client selection, conservative structuring and our proactive stance on workouts have long been hallmarks of ONB's credit discipline. This in part explains our lower NPL to NCO conversion rates.

[John Moran, CFO at Old National Bancorp]

It is also worth noting that roughly 40% of our NPLs are from acquired books with appropriate reserves and marks. On Slide 14, we review our capital position at the end of the quarter. All regulatory ratios increased driven by strong retained earnings. Tangible book value per share was up 5% linked quarter and 13% year over year, and we expect AOCI to improve approximately 10% or $65,000,000 by year end. Slide 15 includes updated details on our rate risk position and net interest income guidance.

[John Moran, CFO at Old National Bancorp]

This guidance continues to include the original M and A marks and $2,400,000,000 of loan sales, but NII was updated to reflect the close of Bremer on May 1 versus our assumption of July 1 in our prior guidance. Away from this update, our guidance is relatively unchanged with NII expected to increase with the addition of Bremer and with the benefit of fixed asset repricing and growth. Our assumptions are listed on the slide, but I would highlight a few of the primary drivers. First, we assume three rate cuts of 25 basis points each, which generally aligns with the current forward curve. Second, we assume a five year treasury rate that stabilizes at 4%.

[John Moran, CFO at Old National Bancorp]

Third, we anticipate our total down rate deposit beta to increase from 37% in first quarter to approximately 40% by 2Q, which is in line with our terminal up rate betas. And fourth, we expect the non interest bearing mix to remain relatively stable as a percentage of core deposits. Importantly, our guidance would be unchanged for one Fed cut or no cuts as our balance sheet remains neutrally positioned to short term rates. Slide 16 includes our outlook for the second quarter and full year 2025. With the exception of loan growth, all guidance includes Bremer closing on May 1, '2 months earlier than the July 1 assumption in our original 2025 guidance.

[John Moran, CFO at Old National Bancorp]

Again, this guidance continues to include the original M and A marks and 2,400,000,000 of loan sales. Excluding this update, our guidance is essentially unchanged. We believe our current pipeline support full year loan growth, excluding the impact of Bremer of 4% to 6%, which is expected to ramp up over the course of the year. We anticipate continued success in the execution of our deposit strategy and expect to meet or exceed the industry growth in 2025. Other key line items are highlighted on the slide.

[John Moran, CFO at Old National Bancorp]

At the midpoint of the range on these lines, you'll note that we expect full year results that yield earnings per share in line with current analyst consensus estimates and again feature positive operating leverage and a peer leading return profile with good growth in fees, controlled expenses and normalized credit. As we note at the bottom of the slide, uncertainty surrounding global trade and the macroeconomic outlook, if prolonged, could widen the range of possible outcomes this year with respect to both growth and rates. That said, the pending Bremer close creates interesting alternatives. A few thoughts there. As compared to the M and A model assumptions that we presented last November, ONB's capital starting points are almost 30 basis points higher than we had expected.

[John Moran, CFO at Old National Bancorp]

Bremer's underlying performance has also tracked slightly better. ONB stock is lower and rates are approximately 40 basis points lower across the board, suggesting lower marks all else equal. On balance, this is expected to result in higher legal day one capital levels, creating significant balance sheet optionality. More specifically, while our guidance continues to incorporate up to $2,400,000,000 of loan sales, we believe more day one capital can support a larger pro form a balance sheet, a tremendous lever to have in a year that looks likely to be more uncertain than we would have guessed when we last spoke in January. We will provide an update to this guidance with 2Q earnings once we finalize accounting marks.

[John Moran, CFO at Old National Bancorp]

In summary, echoing Jim's opening comments, we had a strong start to 2025. We remained on offense with growth in both loans and deposits. We showcased stability in fee income and disciplined expense management. We continued to execute against our deposit pricing strategy. We maintained strong credit quality.

[John Moran, CFO at Old National Bancorp]

And finally, we anticipate closing our Bremer partnership two months earlier than expected on May 1 and look forward to welcoming our newest team members and clients. Bremer will not only provide greater scale and density in the Upper Midwest, but also provides meaningful balance sheet flexibility and earnings growth in an uncertain environment. With those comments, I'd like to open the call for questions.

[Operator]

Your first question comes from the line of Jared Shaw with Barclays. Please go ahead.

[Jonathan Rau, Vice President at Barclays]

Hi. This is John Rao on for Jared. Good morning.

[James Ryan, CEO & Chairman at Old National Bancorp]

Good morning.

[Jonathan Rau, Vice President at Barclays]

Just maybe starting with Bremer, Better Capital at day one, it's good to hear. Does that is what impact did that have on maybe the NII outlook? Is there less accretion assumed in there? Just like a ballpark difference in the accretion assumed versus last quarter?

[John Moran, CFO at Old National Bancorp]

Yes, John. So for 2025, what we've got in there is still the original M and A assumptions. So it's the same model that we would have presented back in November of last year. And that would include still $2,400,000,000 of commercial real estate loans. And I think what we're trying to message here today is, look, day one legal, day one closed capital is in all likelihood, if we re rack this today, going to result in much higher capital levels.

[John Moran, CFO at Old National Bancorp]

And so that $2,400,000,000 is very likely to be less than $2,400,000,000 which would be an offset to the, the foregone purchase accounting accretion that would be coming off of the rate mark.

[Jonathan Rau, Vice President at Barclays]

Okay. Perfect. That's helpful. And then just on, some of the guidance, the the the 40% deposit beta, does that include Bremer?

[John Moran, CFO at Old National Bancorp]

It it does not. That's core o and b. And look, I I would just note on that. That's where we expect to be at at two q. We've still got a a fairly large exception price book that we're we're grinding down, you know, over time.

[John Moran, CFO at Old National Bancorp]

I think our expectation was that we were going to match our up rate beta on the downside. We'll be there by the end of 2Q, but I think there's room to go yet. And so we'll continue to work that book.

[Jonathan Rau, Vice President at Barclays]

Okay. Perfect. And then just last one for me. The other fee income has had a kind of a lumpy couple of quarters. What's a good run rate for that ex Gremor just in a normal environment?

[John Moran, CFO at Old National Bancorp]

Yeah. It's it's been bouncing around a little bit. And obviously, we had the loan sale in there this, this quarter. Last quarter, we had $8,000,000 of discrete items. I I'd say if you look at 4Q and kind of back out $8,000,000, look at this quarter, back out about $5,000,000, that that's a pretty good run rate for that.

[John Moran, CFO at Old National Bancorp]

In aggregate, though, if you look at the guide, I mean, the guide is basically unchanged but for two extra months of Bremer, in there on 2025 guidance that we've got.

[Jonathan Rau, Vice President at Barclays]

Okay. Perfect. Thank you. That's all for me.

[Operator]

Your next question comes from the line of Ben Garlinger with Citi. Please go ahead.

[James Ryan, CEO & Chairman at Old National Bancorp]

Good morning, Ben.

[Ben Gerlinger, Vice President of Equity Research at Citigroup]

I know you guys have the, like you said, the unique position of potentially selling or not selling. Capital looks better, rates don't go crazy here over the next week. So when you think about, like, what would be the driving factors for that decision, I mean, it's probably somewhere in the middle. Maybe you sell some, maybe you sell don't. Not not all of it, I guess, you could say.

[Ben Gerlinger, Vice President of Equity Research at Citigroup]

But is there something specifically you're looking for other than just better capital levels? Because I would assume you don't do anything changing.

[John Moran, CFO at Old National Bancorp]

Yeah, Ben. I I think it's it's three things really that we're we're focused on. One is double digit CET1 is important to us. And I think we're going to land there. Again, to your point, barring rates going absolutely crazy here in the next less than two weeks, You know, I think double digit CET1 is is is really important to us.

[John Moran, CFO at Old National Bancorp]

Total is a is a second, sec so total risk base is a second consideration. And the CRE, as a percentage of total risk base would be the would be the third one. And I think, you know, based on what we know today, we're gonna land in a really good place on on all three of those. And so that gives significant flexibility.

[James Ryan, CEO & Chairman at Old National Bancorp]

Ben, would just say this is a nice offset to you know, if we think growth is is more challenging today than we thought it was as we began the year, this is a nice offset to that, which, you know, is a tailwind that most don't have today, and, we're we're really lucky that we have that for us.

[Ben Gerlinger, Vice President of Equity Research at Citigroup]

Got it. Yeah.

[Ben Gerlinger, Vice President of Equity Research at Citigroup]

No. I really appreciate

[Ben Gerlinger, Vice President of Equity Research at Citigroup]

that point because it's it's essentially maybe not quite a year, but a a pretty healthy couple quarters worth of potential growth that you have in your back pocket. So I was kinda thinking, when you look at the original guidance, you kind of assumed the 2 plus billion sale. So if you don't sell any, would that imply there's some upside on your full year twenty five NII outlook?

[John Moran, CFO at Old National Bancorp]

Yeah. It would been. Yep.

[Ben Gerlinger, Vice President of Equity Research at Citigroup]

Okay. And is it because it it it really does incorporate the full sale day one, is now May 1 rather than July 1. Just making sure I have that correct.

[John Moran, CFO at Old National Bancorp]

That's correct.

[Ben Gerlinger, Vice President of Equity Research at Citigroup]

Gotcha. Okay.

[Ben Gerlinger, Vice President of Equity Research at Citigroup]

I appreciate your time. Thanks, Chris.

[James Ryan, CEO & Chairman at Old National Bancorp]

Thanks, Ben.

[Operator]

Your next question comes from the line of Scott Saphers with Piper Sandler. Please go ahead.

[R. Scott Siefers, Managing Director at Piper Sandler Companies]

Good morning, Scott. Good morning, guys. Thanks for hey. Thanks for taking the question. Jim, maybe, can you sort of walk us through broadly where your customers' heads are at or or just sort of what they're telling you, and sort of where they are relative to say January when we last spoke, know?

[R. Scott Siefers, Managing Director at Piper Sandler Companies]

And then I guess just as importantly, what has to happen to get them back on track with how they might have been thinking about things before all this tariff turmoil started? Are they could we see a snapback in activity? Or are they sort of girding in for a lower growth, higher inflation environment? Where are people thinking?

[James Ryan, CEO & Chairman at Old National Bancorp]

I'm going push it over to Mark since he's in the room with us.

[Mark Sander, President & COO at Old National Bancorp]

This is over yeah. Good good to good to hear from you. Businesses overall are are doing well. And and as you say, back on track, I would say it's been more of a pause, but they haven't really changed their plans. You know?

[Mark Sander, President & COO at Old National Bancorp]

Certainly, the the uncertainty over the last couple of months has brought a little bit more of a wait and see and a little bit of a pause, but it hasn't had anybody changed their plans. Our pipelines are still really strong, which is why and as we look at our production in Q1 and what our pipelines look like now, we haven't changed our guidance yet even as people are taking a little bit more of a how is this going to turn out approach. And in CRE, just would also emphasize, CRE is pretty active these days. You know, even the rate gyrations of the last few weeks hasn't tempered what's becoming an increasingly competitive market. So there's still a decent level of activity out there.

[R. Scott Siefers, Managing Director at Piper Sandler Companies]

Okay.

[R. Scott Siefers, Managing Director at Piper Sandler Companies]

Perfect. Thank you for that, Mark. And then maybe, John, can you sort of help us with sort of the underlying NII cadence through the through the year? I know you know you suggested in your prepared remarks both margin and NII should increase. I presume that means sort of organic ex ex Bremer, but just maybe sort of the puts and takes since it's gonna be, kind of a a noisy couple quarters with Bremer layered in starting ninety days from now.

[John Moran, CFO at Old National Bancorp]

Yeah. So, you know, I think I think 15 of the deck gives you gives you our best guess of exactly how that's gonna play out. I think, you know, on a on a core basis, we'd expect to see some some, you know, better core margin two q and NII dollar growth, and and that would that would continue in March. And then, obviously, Bremer coming in, in May early gives us a nice lift.

[R. Scott Siefers, Managing Director at Piper Sandler Companies]

Your

[Operator]

next question comes from the line of Chris McGratty Please go ahead.

[James Ryan, CEO & Chairman at Old National Bancorp]

Good morning, Chris.

[Christopher Mcgratty, MD & Head of U.S. Bank Research at Keefe, Bruyette & Woods (KBW)]

Hey, Jim. Hey, John. Hey, Mark. A question on the loan growth. I think in your prepared remarks, talked about a little bit

[Christopher Mcgratty, MD & Head of U.S. Bank Research at Keefe, Bruyette & Woods (KBW)]

of a ramp over the course of the year.

[Christopher Mcgratty, MD & Head of U.S. Bank Research at Keefe, Bruyette & Woods (KBW)]

I guess, how do we reconcile that with with all the macro? Our our pipeline are you confident in the pipeline pull through? Guess, maybe talk me through kind of the the guidance on the on the loan growth.

[Mark Sander, President & COO at Old National Bancorp]

I'd say it this way, Chris. It's it's Mark. The pipeline is up 30% from a year ago. Our accepted category is up 50% from a year ago. So against that would seem to indicate we're gonna have nice strong loan growth.

[Mark Sander, President & COO at Old National Bancorp]

So we've tempered that a little bit with the caution I I spoke of a a few minutes ago, and that's what gets us back to that mid single digit that we still believe. You know, the the pull through rates in C and I, I think, are holding up. The pull through rates in CRE candidly are down a little bit. It's just a more competitive marketplace. But again, with the pipeline up 30%, I think

[James Ryan, CEO & Chairman at Old National Bancorp]

that bodes well for continued growth. Chris, as I look at the total year, I think Mark's absolutely right. I mean, there is more uncertainty around what that forecast could look like than than we started the year with. But, I just point back to we have a lot of flexibility that's coming online, you know, post closing here. And I think that allows us to to take into account, you know, through those loan sales or lack of loan sales, any kind of offset to any organic growth we might have here, which is something unique we can offer today.

[Christopher Mcgratty, MD & Head of U.S. Bank Research at Keefe, Bruyette & Woods (KBW)]

Okay. Thanks. And Jim, just more broadly on capital. Any thoughts on restarting the buyback post close given where the stock's at?

[James Ryan, CEO & Chairman at Old National Bancorp]

We certainly thought about it. I think it's just too early to tell. We're really going to see how what the marks come through, how much balance sheet flexibility we wanna use of that that extra capital we didn't think we would have. And all things being equal, guess, Chris, I'd rather have a bigger balance sheet and stronger capital levels than I would, you know, to to buy back today. I mean, I I give it given it's all attractively priced.

[James Ryan, CEO & Chairman at Old National Bancorp]

But I do think the best bet for our shareholders is is to have a slightly bigger balance sheet than we anticipated. And then and then, you know, we are gonna generate capital very rapidly. So I think that becomes a question for the back half of the year and and into '26 is how do we optimize capital. But I think this day one here will be really focused on getting the right size of the balance sheet with the right capital stack. And then and then look at, alternative uses of capital, including the buyback.

[Christopher Mcgratty, MD & Head of U.S. Bank Research at Keefe, Bruyette & Woods (KBW)]

Okay. Perfect. Thank you.

[Operator]

Your next question comes from the line of David Long with Raymond James. Please go ahead.

[David Long, Managing Director at Raymond James Financial]

Good morning, everyone.

[James Ryan, CEO & Chairman at Old National Bancorp]

Good morning, David.

[David Long, Managing Director at Raymond James Financial]

Hey. In this more uncertain backdrop versus what we're looking at in January, you guys kept your loss provision guide. And just want to see how how, you know, maintaining that that that guide squares with the worsening economic forecast and potential incremental risks that you may see.

[John Moran, CFO at Old National Bancorp]

Yeah. Look. We still still feel really good about our ultimately, feel really good about what the lost content looks like. Right? And so the provisional kinda cover that, plus, plus growth.

[John Moran, CFO at Old National Bancorp]

And and, you know, again, David, as as you know, we're a % weighted against an s two scenario today. We've thrown a little bit extra, just for for the global, sort of trade, and macroeconomic uncertainty, in in this this quarter's results, and feel feel really good about where we're provisioned.

[Mark Sander, President & COO at Old National Bancorp]

So And all of our credit metrics came in right where we thought they would.

[David Long, Managing Director at Raymond James Financial]

Got it. Got it. Great. Thanks for that color. And then second question I had relates to your prior acquisition down in Nashville.

[David Long, Managing Director at Raymond James Financial]

And just wanna get an update on expansion plans there and investments there. And and has the backdrop changed your appetite to to grow that at the pace you were contemplating earlier in the year?

[James Ryan, CEO & Chairman at Old National Bancorp]

Yeah. I don't think the economic environment has changed our desires at all. That would be an area we'd we'd wanna continue to to grow and invest in. You know, we've got some great teams on the ground. Admittedly, you know, we're we're probably subscale where we ultimately wanna be in that marketplace.

[James Ryan, CEO & Chairman at Old National Bancorp]

So I think this is a long term investment play, both of talent and probably some infrastructure over time. We feel like that still we still feel really good, about that initial investment and the investments we made so far. And importantly, I think that will be an area that will get an outsized portion of investment going forward.

[David Long, Managing Director at Raymond James Financial]

Great. Thanks a lot guys.

[David Long, Managing Director at Raymond James Financial]

Appreciate it.

[James Ryan, CEO & Chairman at Old National Bancorp]

Thanks, sir.

[Operator]

Your next question comes from the line of Jon Arfstrom with RBC Capital Markets. Please go ahead.

[Jon Arfstrom, Managing Director - Associate Director of US Research at RBC Capital Markets]

Hey, thanks. Good morning.

[James Ryan, CEO & Chairman at Old National Bancorp]

Good morning, Jon. Good to hear from you.

[Jon Arfstrom, Managing Director - Associate Director of US Research at RBC Capital Markets]

Yes. Thank you. Jon, Moran, for you, just maybe a follow-up on David's question on reserves. You flagged a qualitative reserve at 25% of your total ACO. How does that compare to history?

[John Moran, CFO at Old National Bancorp]

It's up a little bit as compared to where it was. I think we were running low 20s a couple quarters back and 24% in the first quarter. So it's up just a touch.

[Jon Arfstrom, Managing Director - Associate Director of US Research at RBC Capital Markets]

Okay. Okay. Got it. And then on slide seven and fifteen, you guys it looks like you had a nice step down in deposit costs. How much more room do you think you have?

[Jon Arfstrom, Managing Director - Associate Director of US Research at RBC Capital Markets]

You flagged the $7,000,000,000 in time and brokered. And just curious how much more room do think you have on bringing deposit costs down?

[John Moran, CFO at Old National Bancorp]

I think we've got some room to run here. Obviously, there's an opportunity in the timing broker, particularly in the brokered time bucket. And we have intentionally kept that very short, as you know. So we get a couple of bites at that the way down if things change. And then the exception book still sitting, $3.34 and a good chunk of the deposits in the bank today, Mike and his team continue to grind that book lower.

[John Moran, CFO at Old National Bancorp]

And and that's kinda you know you know how we do it around here. I mean, this is this is hand to hand kinda combat and a very, very granular process, very, very detailed, but I think we've got opportunity in that book still.

[Jon Arfstrom, Managing Director - Associate Director of US Research at RBC Capital Markets]

Yeah. Okay. And then just maybe one more if I can. Jim, first couple of things you want to tackle on May 1 or second when Bremer closes?

[James Ryan, CEO & Chairman at Old National Bancorp]

Yeah. I mean, we're heading heading your way, this afternoon, to spend some time with our team members up there. And, you know, we're really just pleased. And and, you know, we've had the chance to travel including being in Fargo in February. So we were, we we were really pleasantly, pleased with all the team members and clients we've met.

[James Ryan, CEO & Chairman at Old National Bancorp]

So I I think it's just it's more of the cultural integration, John. I think that's what we do exceptionally well. And we're just going to spend an awful lot of time up there making sure that the team is welcome. The clients know that we want to continue to serve them the way they've been served in the past and really leverage the strength now of a much greater scale and density in that footprint than we previously had. So, I guess it's a little bit more of the same, but obviously this is a big partnership for us.

[James Ryan, CEO & Chairman at Old National Bancorp]

And so we're going to give it the investment that's going to be required to ensure it's successful.

[Mark Sander, President & COO at Old National Bancorp]

And just to elaborate on that, we've been tackling that, well, prior to May 1. Right? So that's been, since we announced that we've been up there present and, combining I think a

[James Ryan, CEO & Chairman at Old National Bancorp]

few weeks ago, we had 30 different locations, across, North Dakota and Minnesota. And so, you know, we'll we'll be doing more in the same here this spring and into the summer.

[Jon Arfstrom, Managing Director - Associate Director of US Research at RBC Capital Markets]

Okay. Thank you very much.

[Operator]

Before going to Your next question comes from the line of Terry McEvoy with Stephens. Please go ahead.

[John Moran, CFO at Old National Bancorp]

Good morning, Terry.

[Terry Mcevoy, Managing Director at Stephens Inc]

Hi, good morning. Maybe John, I

[Terry Mcevoy, Managing Director at Stephens Inc]

just want to make sure you agree with my math. Just hypothetically, if you held the $2,400,000,000 of CRE loans, that would be that would have an impact of what $34,600,000 of NII when I look at your presentation and that's about $09 $0.01 0 of earnings. So again hypothetical, but am I accurate there?

[John Moran, CFO at Old National Bancorp]

Hypothetically, Terry, you're accurate. You're directionally correct.

[Terry Mcevoy, Managing Director at Stephens Inc]

Okay. Thank you for that. And then I guess I'll stick with the NII theme. What drives that step up in the fourth quarter of twenty twenty five? It seems like you're pretty neutral.

[Terry Mcevoy, Managing Director at Stephens Inc]

And I asked that question just because based our math, I'm getting a larger step up in q three, close to that q four run rate that's on page 15.

[John Moran, CFO at Old National Bancorp]

It's the role of the fixed asset repricing, Terry, is a good chunk of that and just kind of timing of some of that role. And then growth being back end loaded in in the year on a on a kind of core organic basis.

[Terry Mcevoy, Managing Director at Stephens Inc]

Perfect. Great. Thanks for taking my questions. Appreciate it.

[James Ryan, CEO & Chairman at Old National Bancorp]

Terry, I would just add, you know, I think the up to number, I've encouraged us to continue to look at some selective pruning regardless of where the capital comes in. I think it is an opportunity that you get with the purchase accounting marks to optimize the portfolio. So I've encouraged us to continue to look for those opportunities to make sure that it's the portfolio we want to own for the long time. So I would be shocked if we're able to keep a number that you've just suggested. Nonetheless, it'll be something that we'll look at really hard once we get the capital in from the day one marks.

[Terry Mcevoy, Managing Director at Stephens Inc]

Great. Thanks for that, Jim.

[Operator]

There are no further questions at this time. I'd like to turn the call back to Jim Bryant for closing remarks.

[James Ryan, CEO & Chairman at Old National Bancorp]

Well, we appreciate all your participation. As usual, the full team will be here all day long to answer any questions you might have. Thank you very much.

[Operator]

This concludes Old National's call. Once again, a replay along with the presentation slides will be available for twelve months on the Investor Relations page of Old National's website, oldnational.com. A replay of the call will also be available by dialing (800) 770-2030, access code 5176690. This replay will be available through May 6. If anyone has additional questions, please contact Lonelle Darkholz at (812) 464-1366.

[Operator]

Thank you for your participation in today's conference call.

Participants

Executives

• James Ryan, CEO & Chairman
• John Moran, CFO
• Mark Sander, President & COO

Analysts

• Jonathan Rau, Vice President at Barclays
• Ben Gerlinger, Vice President of Equity Research at Citigroup
• R. Scott Siefers, Managing Director at Piper Sandler Companies
• Christopher Mcgratty, MD & Head of U.S. Bank Research at Keefe, Bruyette & Woods (KBW)
• David Long, Managing Director at Raymond James Financial
• Jon Arfstrom, Managing Director - Associate Director of US Research at RBC Capital Markets
• Terry Mcevoy, Managing Director at Stephens Inc