Old National Bancorp Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
July 22, 2025

Key Takeaways

  • Positive Sentiment: We achieved adjusted EPS of $0.53 for 2Q, marking an 18% increase over the prior quarter and exceeding all previous guidance.
  • Positive Sentiment: Our partnership with Bremer Bank closed two months early on May 1, with systems conversion planned for mid-October and merger model assumptions outperforming expectations.
  • Positive Sentiment: Balance sheet growth was robust, with total loans up $11.5 billion, deposits up $13.3 billion, tangible book value up 14% YoY, and CET1 at 10.74%—about 50 bps above projections.
  • Positive Sentiment: Credit metrics strengthened as legacy criticized and classified assets fell 9%, net charge-offs remained within guidance, and the allowance for credit losses improved by eight basis points to 1.24%.
  • Negative Sentiment: For full-year loan growth, management expects 4%–6% annualized organic growth excluding Bremer—likely at the lower end due to heightened competition, especially in commercial real estate.
AI Generated. May Contain Errors.
Earnings Conference Call
Old National Bancorp Q2 2025
00:00 / 00:00

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Operator

Welcome to the Old National Bancorp Second 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. Mr. Ryan?

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

Good morning. Earlier today, National reported impressive second quarter earnings and announced the appointment of Tim Burke as our new president and COO. Today is Tim's first day with us, and we've opted not to include him on the call to allow him time to get oriented. Mark Sanders' last day is also today. Mark will always be a part of the Old National family, and I am incredibly grateful for his partnership.

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

Thank you, Mark. We wish you the absolute best in retirement. Tim and his family are relocating from Northeast Ohio, and he has dedicated nearly thirty years of his banking career to serving clients and communities right here in The Midwest. Most recently, he held an executive position at a super regional bank where he oversaw a comprehensive range of commercial banking services across 12 Midwestern markets, including those in Illinois, Indiana, and Michigan. I am confident that Tim possesses the experience, energy, optimism, and passion necessary to ensure that Old Nashville continues to outperform our peers, exceed our clients' expectations, strengthen our communities, and deliver outstanding returns for our shareholders.

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

I look forward to the positive impact that he will undoubtedly make in the months and years to come. Now back to our quarterly results. We met or exceeded all of our previous guidance for the second quarter. These impressive results were driven by a strong focus on the fundamentals, growing our balance sheet, improving our fee based businesses and maintaining a well controlled expenses. Furthermore, we were pleased to close our partnership with Bremer Bank ahead of schedule on May 1.

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

We remain on track for the systems conversion of Bremer to occur in mid October. Net charge offs fell within our expected range. We made meaningful progress in portfolio management by reducing legacy criticized and classified assets by 9% and improving our allowance for credit losses by eight basis points to 1.24%. Our CET1 ratio was better than expected at 10.74%. Our tangible book value increased by 14% year over year despite the impact of our Bremer partnership.

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

In a moment, John will walk you through the quarter results in more detail. We have also provided information regarding the merger accounting associated with Bremer. John will compare our modeled expectations at announcement to where we stood at closing. Across the board, our expected results are better than our original expectations. We have a long history of meeting or exceeding our merger model assumptions, and this partnership is no exception.

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

In summary, we are well positioned for the remainder of the year, benefiting from a larger balance sheet and a stronger capital position. Our second quarter results demonstrate our ability to deliver consistent, high quality earnings in any environment and our newest partner further strengthens our position. With over one hundred and ninety years of experience navigating uncertainty, we are committed to controlling what we can to exceed the expectations of our clients, communities and shareholders. Thank you. I will now turn the call over to John to discuss the quarter results in more detail.

John Moran
John Moran
CFO at Old National Bancorp

Thanks, Jim. Beginning on Slide four, we reported GAAP 2Q earnings per share of $0.34 Excluding $0.19 of net merger related expenses, adjusted earnings per share were $0.53 which is an 18% increase over the prior quarter and a 15% increase year over year. Net merger related expenses include the following pretax items: dollars 76,000,000 of CECL day one non PCD provision expense and $41,000,000 of merger charges, partially offset by a $21,000,000 gain associated with freezing the legacy Bremer pension plan. Results were driven by the additional two months of Bremer operations, organic growth in loans and deposits, margin expansion, growth in fee income, and well controlled expenses.

John Moran
John Moran
CFO at Old National Bancorp

Credit remained benign with a reduction in legacy criticized and classified loans and normalized levels of charge offs. Our return profile is measured on assets and on tangible common equity remained high. Lastly, our capital position is solid with CET1 at 10.47%, approximately 50 basis points higher than we expected. On Slide five, you can see our quarterly balance sheet trends, highlighting stability in our liquidity and our strong capital position. Our balance sheet also reflects the close of the Bremer partnership on May 1.

John Moran
John Moran
CFO at Old National Bancorp

On a combined basis, our deposit growth over the last year has continued to allow us to fund our loan growth. We grew tangible book value per share by 14% over the last year, even with the impact of the Bremer close reflected in this quarter's numbers. A favorable stock price, lower rate marks and organic capital generation between announcement and close, combined with strong retained earnings at Bremer and the day one repositioning of their securities portfolio, all contributed to the higher than expected CET one ratio. Given our capital levels are higher than we modeled at the time we announced Bremer last November, we have significant flexibility around our balance sheet, leaving us in a position to retain all CRE loans that we had originally contemplated selling. On slide six, we show trends in our earning assets.

John Moran
John Moran
CFO at Old National Bancorp

Period end loans increased $11,500,000,000 Excluding Bremer, total loans grew 3.7% annualized from last quarter, which was in line with our 2Q guidance. Production for the quarter was strong throughout our commercial book, which drove 4.6% annualized growth in this portfolio, excluding Bremer. Of note, our CRE book was down, and this quarter was particularly strong for C and I. 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 $3,400,000,000 from the prior quarter due primarily to Bremer as well as the reinvestment of cash flows and favorable changes in fair values.

John Moran
John Moran
CFO at Old National Bancorp

Shortly after deal closing, we repositioned Bremer's investments, which improved our total portfolio yield, duration and risk weighted assets. We expect approximately $2,300,000,000 in cash flow over the next twelve months. Today, new money yields approximately 110 basis points above back book yields on securities as the repositioning of the Bremer book lifted our back book. 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 continue to grow in the second half of twenty twenty five. Moving to slide seven, we show trends in deposits.

John Moran
John Moran
CFO at Old National Bancorp

Total deposits increased $13,300,000,000 and core deposits ex brokered increased $11,600,000,000. Excluding Bremer, core deposits were up just under 1% annualized. Noninterest bearing deposits represent 25% of core deposits, up 2% from first quarter levels. Business noninterest bearing and public funds increased, while community deposits had normal seasonal outflows related to tax payments. Our brokered deposits increased due to Bremer, and at 6% of total deposits, our use of brokered continues to be below peer levels.

John Moran
John Moran
CFO at Old National Bancorp

The loan to deposit ratio was 88%, down one percent from last quarter. With respect to deposit costs, the two basis point linked quarter increase in our cost of total deposits played out as we expected due to the close of Bremer. Our spot rate on total deposits at June 30 was 193 basis points. Moreover, our exception price deposits, which now include Bremer, represent 36% of total deposits. Overall, we remain confident in the execution of our deposit strategy.

John Moran
John Moran
CFO at Old National Bancorp

We are prepared to proactively respond to the potentially evolving rate environment 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. As I mentioned earlier, adjusted earnings per share were $0.53 for the quarter with all key line items in line or modestly better than our prior guidance. Moving on to slide nine, we present details of our net interest income and margin. Net interest income and margin increased as we had expected and guided, driven primarily by Bremer, organic loan growth and repositioning of the Bremer securities portfolio.

John Moran
John Moran
CFO at Old National Bancorp

Slide 10 shows trends in adjusted noninterest income, which was $112,000,000 for the quarter. All line items showed increases reflecting Bremer and organic growth in our primary fee businesses. On an organic basis, we were pleased with our growth in wealth, mortgage and capital markets. Continuing to Slide 11, we show the trend in adjusted noninterest expenses of three forty four million dollars for the quarter, reflective of two months of Bremer operations. Run rate expenses remained well controlled, and we generated positive operating leverage year over year.

John Moran
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 charge offs on PCD loans. Our non accrual loans as a percentage of total loans declined five bps during the quarter. Importantly and positively, criticized and classified loans decreased $254,000,000 or approximately 9% excluding Bremer, reflective of the focus on active portfolio management that we have discussed in prior calls. The fourth quarter allowance for credit losses to total loans, including the reserve for unfunded commitments, was 124 basis points, up eight basis points from the prior quarter, primarily driven by Bremer.

John Moran
John Moran
CFO at Old National Bancorp

Consistent with the first quarter, our qualitative reserves incorporate a 100% weighting on the Moody's s two scenario with additional qualitative factors to capture global economic uncertainty. Slide 13 presents key credit metrics relative to peers. Our proactive approach to credit monitoring has led to above peer levels of non accruals, but below peer averages in delinquency and charge off ratios over time. A steadfast approach to client selection, conservative structuring and our proactive stance on workouts have long been hallmarks of O and B's credit discipline. This, in part, explains our lower nonaccrual to NCO conversion rates.

John Moran
John Moran
CFO at Old National Bancorp

It's also worth noting that roughly 60 of our nonaccruals are from acquired books with appropriate reserves and or marks. In addition, roughly 60% of our nonaccrual loans are paying principal and interest or interest only, and approximately half of our classified and criticized assets are in commercial real estate, where we continue to have confidence in collateral values and the quality of our sponsors. On Slide 14, we review our capital position at the end of the quarter. All regulatory ratios decreased linked quarter due to the close of the Bremer partnership. As already explained, our CET1 ratio of 10.74% came in approximately 50 basis points stronger than we had expected post Bremer.

John Moran
John Moran
CFO at Old National Bancorp

Tangible book value per share was up 14% year over year, and we expect AOCI to improve approximately 6% or $37,000,000 by year end. Slide 15 provides a comparison of our Bremer partnership assumptions at announcement first close. Overall, we closed two months earlier than expected, adding to our 2025 earnings momentum with financial metrics tracking to exceed the expectations we set at announcement. Higher capital and lower purchase accounting marks shortened the TBD earn back by approximately half a year. And as we look to 2026, a larger balance sheet with a $2,400,000,000 in CRE that we had previously contemplated selling is expected to offset the lower marks from an earnings perspective.

John Moran
John Moran
CFO at Old National Bancorp

As previously mentioned, we restructured the majority of Bremer's 3,400,000,000 securities book. This action increased the book yield from 2.85% to 5.54%, reduced total duration from 6.4 to 4.7, and improved RWA density from 19% to 13%. This is now cash yield as opposed to accounting yield. A quick word on loan accretion income. We view the rate component as locked in and repeatable, similar to how we would think about the accretion in our investment portfolio if we had decided not to restructure that book.

John Moran
John Moran
CFO at Old National Bancorp

The credit marks added only one basis point to our net interest margin this quarter. Old National legacy loan yields were up 10 bps. And even with the newly marked Bremer loans reflected in our numbers, our current origination deals are 65 basis points above our back book yields. Slide 16 includes updated details on our rate risk position and net interest income guidance reflecting the close of Bremer on May 1. NII is expected to increase on the addition of Bremer, the benefit of fixed asset repricing and continued growth.

John Moran
John Moran
CFO at Old National Bancorp

Our assumptions are listed on the slide, but I would highlight a few of the primary drivers. First, we assume two cuts of 25 basis points each, which aligns with the current forward curve. Second, we assume a five year treasury rate that stabilizes at 4%. Third, we anticipate our total down rate deposit beta to be approximately 40%, 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.

John Moran
John Moran
CFO at Old National Bancorp

Importantly, our guidance would be unchanged for one Fed cut or no cuts as our balance sheet remains neutrally positioned to short term rates and the addition of Bremer did not materially alter our rate risk position. Slide 17 includes our outlook for the third quarter and full year 2025. With the exception of loan growth, all guidance includes Bremer. We believe our current pipeline support full year loan growth, excluding the impact of Bremer, of 4% to 6%, but likely toward the lower end of that range given first half results, current competition, the uncertain geopolitical environment and active portfolio management. We anticipate continued success in the execution of our deposit strategy and expect to meet or exceed industry growth in 2025.

John Moran
John Moran
CFO at Old National Bancorp

Other key line items are highlighted on the slide. Note that we have increased NII and fee income guidance with our other lines unchanged. At the midpoint of the ranges, you'll also see 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 economic and trade activity and a macroeconomic outlook, which has dragged on longer than we would have hoped, could widen the range of possible outcomes this year with respect to both growth and rates. That said, our larger balance sheet for the Bremer partnership creates a meaningful positive offset.

John Moran
John Moran
CFO at Old National Bancorp

In summary, echoing Jim's opening comments, we had a strong first half of twenty twenty five. We remained on offense with growth in both loans and deposits. We showcased growth in fee income and disciplined expense management. We continued to execute against our deposit pricing strategy, and we maintained strong credit quality. Finally, we closed our Bremer partnership two months earlier than originally expected on May 1 and welcomed our newest team members and clients.

John Moran
John Moran
CFO at Old National Bancorp

I joined Jim in welcoming Tim Burke to Old National. Look forward to partnering with him to continue driving the success of the organization. With those comments, I'd like to open the call for your questions.

Operator

At this time, I would like to remind everyone, in order to ask a question, Your first question comes from the line of Scott Siefers with Piper Sandler. Please go ahead.

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

Good morning, Scott.

R. Scott Siefers
R. Scott Siefers
MD & Senior Research Analyst at Piper Sandler Companies

Good morning, guys. Hey. Thanks for taking the question. Let's see. Jim, was hoping you could maybe just make some sort of some broader comments on kind of client sentiment, how they're they're feeling about these about things these days. And then either Kim or John, was hoping you can sort of expand upon John's loan growth outlook comments just regarding full year growth being maybe toward the lower end of the organic range. Guess I asked because some others are beginning to get a little more constructive. So interesting to hear you all a touch more cautious. Is that a function of demand or pricing or all of the above?

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

Yes. Maybe I'll start and then ask the team to jump in here. From my perspective, we feel really good about the first half and our ability to kind of navigate some less than clear times. But we're hearing competition really heating up here, particularly in the commercial real estate world. And I think that just, you know, shades our our conservatism on the loan growth estimates.

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

We're just not going to go compete on price. We're not going to go compete on structure. We're not going to give up on the fundamentals that we think really matter here in this kind of market. So I think that's why we're just a little bit more cautious about kind of our full year outlook or maybe others are maybe more optimistic about it. But we saw a good C and I growth for the quarter, which we're really pleased with.

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

That's an area we've been spending a lot of time on. And so to the extent that maybe it's a little bit more competitive in the commercial real estate market, maybe we can make it up a little bit for it. But think I that's just where we're at. You know, Jim Sjanger has a little bit on client sentiment. Jim, you want talk a little bit about sentiment here lately? We know we just did a survey here.

James Sandgren
James Sandgren
CEO - Commercial Banking at Old National Bancorp

Yeah. Sure, Scott. Yeah. We've recently surveyed. We do this typically annually with with all of our clients.

James Sandgren
James Sandgren
CEO - Commercial Banking at Old National Bancorp

And, you know, while there's still a lot of uncertainty out there, I think economic optimism is on the rise. And so I think our clients continue to be cautiously optimistic, about their, abilities to to grow and and, invest in their businesses. So I think there's some really encouraging things there. When you think about tariffs and trade policies, it certainly had less of an impact than originally thought. There might have been a little bit of inventory build early in the second quarter.

James Sandgren
James Sandgren
CEO - Commercial Banking at Old National Bancorp

But now that some of that clarity has come, we've seen that kind of normalize. So, I think optimistic. But given some of the increased competition, I think that's why we're looking at the lower end of the range.

John Moran
John Moran
CFO at Old National Bancorp

Scott, it's John. One other thing I might just add to that is a little bit of this is just a math equation. Right? So if you take the TriNet loan sale out of the first quarter results, we were kind of 4% in the first quarter. Second quarter here, we're just below 4% annualized. So to hit the top end of the range mathematically would suggest that we got to do kind of 8% growth in in 3Q, 4Q, and and we just don't see that materializing given the given the competitive environment that Jim and Jim just referenced.

R. Scott Siefers
R. Scott Siefers
MD & Senior Research Analyst at Piper Sandler Companies

Yeah. Got it. That that all makes sense, I appreciate the sort of the inside baseball on it. And then then let's see. John, maybe it was something you could kind of walk through the linked quarter increase in NPAs.

R. Scott Siefers
R. Scott Siefers
MD & Senior Research Analyst at Piper Sandler Companies

I'm talking about just dollar values there. It can always be a little tricky when there's a merger involved, at least from the understand the outside to, you know, understand what's happening at the legacy versus the combined companies. I I know the bulk of your non accruals in the aggregate are from acquired books, but just maybe the the sequential increase, if you could address that, please.

John Moran
John Moran
CFO at Old National Bancorp

Yeah. So dollar wise, a lot of that is just primer coming into the fold. Actually, on a on a you know, against the entire balance sheet, NPAs as a percentage are are down a little bit. Feel good about where we are. And so it's just a little bit of noise on, on closing the deal.

R. Scott Siefers
R. Scott Siefers
MD & Senior Research Analyst at Piper Sandler Companies

Terrific. Okay. Good. Thank you, guys. Appreciate it.

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

Thanks, Scott.

Operator

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

Ben Gerlinger
Ben Gerlinger
VP - Equity Research at Citigroup

Good morning.

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

Good morning, Ben. Good to hear from you.

Ben Gerlinger
Ben Gerlinger
VP - Equity Research at Citigroup

You guys went through a lot of numbers. I apologize if I missed it. I know you said new loan yield versus back book. I was curious. Could you just provide the spot rate on either loans or or bonds?

John Moran
John Moran
CFO at Old National Bancorp

Yeah. So spot rate versus what was sitting in the average balance sheet on this quarter. If you were to if you were to reflect the you know, a full quarter of Bremer, we'd be looking probably seven basis points higher than what was reported on securities, five basis points higher than what was reported on, on loans. And, new new money yields, you know, if if you look at kinda 85% floating on on loans, 15% fixed, the weighted average there gets you kinda high sixes, call it six eight, and on securities, we're mid fives in in terms of new money. Yeah.

Ben Gerlinger
Ben Gerlinger
VP - Equity Research at Citigroup

Yeah. Helpful. And think that's the one question first. But okay.

Ben Gerlinger
Ben Gerlinger
VP - Equity Research at Citigroup

So moving more towards the strategy perspective, when you think about kind of growth relative to the CRE loans still not happening and then also capital, it seems like you're a better capital position from the post deal flows, and then the non CRE sale kind of eats up into a little bit of that capital. The growth in the back half of the year seems steady, by no means as robust as some peers, but I'm totally fine with that. When you think about just capital deployment, and I know you said earnings projections are basically in line with consensus. So to me, it's like you're two turns below peers with a projected ROP fee that's basically 200 plus basis points better than peers? Is is a buyback something we can expect this calendar year, or is it kind of more so just building capital at this point?

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

I I would lean you towards our past comments. And and I think we are interested in building a little bit of capital here, you know, And we've got a little bit of wood to chop with respect to our conversion here, happening later this year. But we are much, much closer to that decision today than we thought we would be just given capital came in so much better. So I think it's something that's definitely on the horizon for us, we're going take a hard look at it. But nothing to report right now.

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

Really focused on just getting through the conversion and getting off to a really strong start for next year.

Ben Gerlinger
Ben Gerlinger
VP - Equity Research at Citigroup

Got it. That's helpful color. Thanks, guys.

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

Thanks, Ben.

Operator

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

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

Jim or John, just more broadly, what's the deregulatory environment mean for Old National? From here, obviously, there's an expense equation, but I'm interested in kind of your opinion there. Thanks.

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

Right? I mean, the conversation and tone is look, we've always enjoyed incredibly positive relationships with all of our regulators, but it's just that much more constructive today for us going forward as an industry and us as Old National.

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

I think we're a couple months away from kind of really fully understanding it, you know, how any regulatory thresholds might change. But that all seems like that's on a positive trajectory, the best we can tell. I think they're really close to filling out all of the agency heads, which will just be allow the industry to move forward. I've been personally involved with the ABA and the NBC, as you know, working on deposit insurance reform, which I think is really important for the midsized space. And so we'll continue to push for those reforms.

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

But I would just say all of this is all this tone is very much constructive. All the same rules still apply, broadly speaking, and so there's no free passes anywhere. But it is more constructive. And I think it'll allow our industry to maybe grow, you know, where where we wanna grow going forward.

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

Thanks for that. And then just as a follow-up, you you mentioned threshold. I mean, you've previously talked about not wanting to flirt with 100 in assets. Does that evolve over the next six to twelve months? Is that something you're obviously working on the integration, but do deals opportunistically make it more likely?

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

I would just back point back to some of our previous comments.

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

We're really focused on organic growth. We're we actually got one in the hand here that we've to get across the finish line and and execute well, and and we're off to a great start there. And, you know, it's one of those things. There's nothing on there's nothing in our playbook right now. There's nothing we're looking at.

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

We've you know, I would just soon not test that water. And, again, I don't know what what the thresholds are gonna look like going forward. But the good news is we don't do anything. Right? We've got great organic growth opportunities.

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

We got top decile profitability ratios across the board here. So we got lots of flexibility just to continue to to run this place and and grow organically. If the perfect pitch comes along and it and it makes a ton of sense, you know, something like something like Bremer where it just made an absolute home run sense, we would absolutely have to take a look at that as you would expect. But we're not interested in going testing those waters anytime soon. And I do think we need several more months before we understand exactly what that new landscape is going to look like.

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

Perfect. Thanks, Jim.

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

Thanks. Appreciate the interest, Chris.

Operator

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

Jon Arfstrom
Jon Arfstrom
MD & Associate Director - US Research at RBC Capital Markets

Hey, thanks. Good morning.

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

Hey, John. Good to hear from you.

Jon Arfstrom
Jon Arfstrom
MD & Associate Director - US Research at RBC Capital Markets

Yeah, thanks. Just a question back on the loan growth guide. John, you used the term active portfolio management, and I'm curious what you mean by that. And then also curious on the characteristics of the CRE loans that you had planned on selling that you now, may not sell. Does that does that fit typical ONB characteristics?

Jon Arfstrom
Jon Arfstrom
MD & Associate Director - US Research at RBC Capital Markets

So just kind of all in one active portfolio management in that 2,400,000,000.0. Thanks.

John Moran
John Moran
CFO at Old National Bancorp

Yeah. Absolutely. So, yeah, active portfolio management, John, when you look at the reduction in classified and criticized out of the legacy Old National book this quarter, roughly half of that was from total payoffs or refis away from And so we think that there's still some more of that to come. Right?

John Moran
John Moran
CFO at Old National Bancorp

And and, you know, we've we've talked about this for several quarters now. Really, deal by deal, loan by loan, getting in there and and working that book. So we we remain really focused on on on that work, and and I think that'll continue to be a feature in the back half of this year. With respect to the $2,400,000,000 in commercial real estate loan sales, very much similar to to the way that we underwrote, the way that we think about real estate. There could still be something opportunistically that we could trim, but, you know, I I think that would look more like what we did in the first quarter with the CapStar TriNet book, than something bigger or broader that we had originally contemplated back in November.

Jon Arfstrom
Jon Arfstrom
MD & Associate Director - US Research at RBC Capital Markets

Okay. Good. Fair enough. And then, you may have touched on this, but on slide 16, you flagged the 10,400,000,000.0 in deposit maturity, time deposit maturity. Can you walk through some of the metrics around that again in terms of the cadence and kind of the cost of rolling off and the replacement costs?

John Moran
John Moran
CFO at Old National Bancorp

Yes, sure. The bigger chunk of that actually comes in the next quarter, a little over $5,500,000,000 in the next quarter, and then about $3,000,000,000 in 4Q. In aggregate, there's going to be a little bit of a pickup on that book as it rolls. The bigger opportunities are in our brokered buckets. That's about 2.4 next quarter.

John Moran
John Moran
CFO at Old National Bancorp

That's hanging out in mid fours, and that that would roll with a with a more significant opportunity for us in terms of repricing down.

Jon Arfstrom
Jon Arfstrom
MD & Associate Director - US Research at RBC Capital Markets

Mhmm. Okay. And any any idea of the magnitude on that, just ballpark?

John Moran
John Moran
CFO at Old National Bancorp

On the, on the broker piece, $22,400,000,000.0 in in in the next ninety days, four and a half ish is the is the current deal.

Jon Arfstrom
Jon Arfstrom
MD & Associate Director - US Research at RBC Capital Markets

Okay. Okay. Thanks a lot. I appreciate it.

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

Thanks, John.

Operator

Your next question comes from the line of Brian Foran with Truist Securities. Please go ahead.

Brian Foran
Brian Foran
Managing Director at Truist Securities

Hi. Just to make sure I understand the EPS comments on the deal slide. So two things. One, when you say it's modestly better than originally assumed, and I know it's early days, so you probably even haven't fully got into a lot of the underlying business. But is it just the $2,400,000,000 at the current moment, CRE loan sale, 2,400,000,000.0 that's changed in that EPS assumption?

Brian Foran
Brian Foran
Managing Director at Truist Securities

Or is there anything else you're signaling, in terms of other deal accretion, that's better?

John Moran
John Moran
CFO at Old National Bancorp

No. Yeah. No. Not signaling anything in addition. It's just the $2,400,000,000 in commercial real estate offsetting and then just a little bit better than what what was originally in the model on the on on the rate mark.

Brian Foran
Brian Foran
Managing Director at Truist Securities

The rate the rate mark being a little lower, so less Correct. DAA. Right? Okay.

John Moran
John Moran
CFO at Old National Bancorp

Correct. Yep.

Brian Foran
Brian Foran
Managing Director at Truist Securities

And then just the base we're talking about, I mean, think in the deal presentation, it was two sixty bps in 2026. It seems like the Old National side is more or less tracking. So I mean, can we just say $2.60 plus a little bit for the CRE sale is kind of the updated number?

John Moran
John Moran
CFO at Old National Bancorp

I think that's fair to say, Brian. Yep.

Brian Foran
Brian Foran
Managing Director at Truist Securities

Okay. I guess that's it. Yes, think that's the only question I had. Thank you.

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

Thanks, Ryan.

John Moran
John Moran
CFO at Old National Bancorp

Thanks.

Operator

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

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

Good morning, Jared.

Jared Shaw
Jared Shaw
Managing Director at Barclays Capital

Good morning. Hey, thanks. I guess the only one left for me is just on the fee income guide and the outlook there. Anything to call out in terms of seeing strength? I mean, is a lot of that just coming from a little bit of a stronger mortgage base than expected? Or anything special to think of there?

John Moran
John Moran
CFO at Old National Bancorp

Yes. Think I can get it right. Mortgage was pretty good this quarter. Wealth continues to track along nicely as well. And then look, capital markets for us continues to be a pretty it's a small but good business for us, and this quarter looked good there. And so we're encouraged by the results there.

John Moran
John Moran
CFO at Old National Bancorp

But yes, I think in terms of outlook, relatively other than the upside captured from this quarter, relatively unchanged on the back half of this year.

Jared Shaw
Jared Shaw
Managing Director at Barclays Capital

Great. Thanks a lot.

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

Thanks, Jared.

Operator

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

Terry Mcevoy
Managing Director at Stephens Inc

Maybe just the first question. Why wasn't the second half twenty five net interest income outlook increased given the decision to hold the CRE loans, or will we see more of that lift in 2026?

John Moran
John Moran
CFO at Old National Bancorp

Well, it's the the there's a couple of dynamics at at work there, Carrie. Right? So the CRE loans, come coming in, are are very much offsetting kinda dollar for dollar, the lower marks that that were ultimately realized as compared to what we had announced.

Terry Mcevoy
Managing Director at Stephens Inc

And I guess on page 15, the positive earnings per share when you talk about the larger balance sheet offsets those marks. I guess that that's behind my question. I'm trying to true up that that sentence there.

John Moran
John Moran
CFO at Old National Bancorp

Right. So if you if you run that math out, right, there's rough top a $100,000,000 and lower rate mark and a 50 ish million dollar lower credit mark that was realized. If you were to build that schedule out and kinda look at what would have come from that mark in the back half of of twenty twenty five, the $2,400,000,000 in commercial real estate offsets the foregone income on the accretion marks.

Terry Mcevoy
Managing Director at Stephens Inc

Perfect. And then I noticed you hired a new Chief Investment Officer earlier, maybe July 1, I think. Can you just talk about the technology investments? Jim, you made some comments about continuing to invest and and meet your clients' needs. So any any commentary there would be helpful.

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

Yeah. Thanks, Terry. Yeah. Matt Keane joined our organization. He was actually had recently hired as as the CIO at Bremer Bank.

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

So ironically, we were in the market looking for a new CIO. Our current one's gonna retire here towards the end the year, and we had one sitting there in Minnesota. So Matt is a great you know, we we did a search, you know, far and wide, and and Matt turned out to be the best possible candidate for us. So I think we feel really good about his experience. And quite frankly, we're actually able to build a continue to build and invest in the IT team right there in Minnesota.

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

We just found great talent sitting there given the other larger institutions that are already there plus the Fortune 500 companies. So that's a nice win for us. But, you know, as as we've done early assessments around all of our technology, I think we feel really good around our technology stack. We continue to look for ways to build out a stronger ecosystem for the wealth management, the bankers to move kind of seamlessly across those platforms. Treasury management is an area we continue to invest in and look for ways to to be better, particularly as we think about going upstream towards that upper middle market, you know, ways to connect more deeply within their systems.

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

But we don't see, you know, any large gaps in any of our our systems. And and we we've got a long list like everybody else does of investments we wanna make, but but nothing that's stopping us from being successful and and building, you know, core deep relationships with our clients. So that's the good news. You know, as we as we become a large institution, we'll continue to invest in our own infrastructure, particularly around data. We're obviously looking at AI, you know, very intensely right now and how AI could help, you know, shape all of our technology.

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

But but, again, you know, no no gaps anywhere there. Just just an opportunity to continue to be better as we go forward. And I think Matt is the right person to help lead us in that effort. So we're excited about that. You know, obviously, we have that technology partner emphasis, which also comes alongside us and helps us really kind of think through a lot of our technology and ways to get more efficient, more effective.

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

So I I think it's just all really positive and really glad to have, you know, Matt. Now we got Tim on the team as of today. So, we got a full team and ready to go.

Operator

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

James Ryan
James Ryan
CEO & Chairman at Old National Bancorp

Thanks, Eric. As usual, we appreciate everybody's interest. Appreciate the great questions. The whole team, John, Mike, Linnell, Scott, are all gonna be available for questions all day. Look forward to catching up with everybody. Have a great afternoon.

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 939-4540. This replay will be available through August 5. If anyone has additional questions, please contact Llano Durkolz at (812) 464-1366. Thank you for your participation in today's conference call.

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