Q2 2022 Old National Bancorp Earnings Call
Ladies and gentlemen, please remain holding the call will begin momentarily again, please remain holding the call will begin momentarily.
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Yeah.
And to the old National Bancorp second quarter 2022 earnings conference call. This call is being recorded and has been made accessible to the public in accordance with the S. E. C is regulation SP.
Corresponding presentation slides can be found on the Investor relations page at old National Dot Com and will be archived there for 12 months.
Management would like to remind everyone that certain statements on todays call maybe 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.
The company's risk factors are fully disclosed and discussed within its SEC filings. In addition, certain slides contain non G. A a P measures, which management believes provide more appropriate comparison. These non G. A a P 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 Jim Ryan for opening remarks, Mr. Ryan. Please proceed.
Good morning, we're pleased to discuss our outstanding second quarter results and update you on our systems and branding changes from our transformational merger.
I'll start on slide four.
We recently completed our systems and brand conversion, it's been a busy couple of weeks the data and systems conversion went very well overall and our commercial clients have quickly and successfully adapted to the new systems as expected our branches and contact centers have experienced elevated activity levels, but have started to normalize I want to thank all of our team members for their hard.
Work and dedication to serving our clients and communities completing the data and systems convergent should accelerate our ability to achieve our model synergies Brendan will fill you in on our progress later in the presentation.
I'm gratified to share the despite the merger activities. Our teams achieved outstanding loan brokers. All can continue to build robust pipelines I can't imagine a better result, especially given the distractions lastly, we started branding campaigns in Chicago and some of our metropolitan markets and are receiving good feedback from those efforts.
Moving to slide five we reported GAAP earnings for the second quarter of <unk> 38 per share.
The second quarter included pre tax charges of $36 6 million in merger expenses.
Excluding these charges from the current quarter adjusted EPS was <unk> 46 per common share or $135 million.
Our adjusted average tangible common equity and assets with a strong 20% and 1.21% respectively. Our adjusted efficiency ratio was approximately 54%.
Our focused execution of our merger and growing our commercial business drove these robust results and leading returns we saw higher balances in nearly every portfolio and market across our commercial and community banking business.
Total loan growth was 19% in the commercial business grew 18% on an annualized basis.
The higher loan growth paired with the benefit of higher interest rates, primarily contributed to a 45 basis point margin expansion.
Quality remains excellent, but we remain diligent with new credit request, our pipeline ended at a record $5 $9 billion overall clients in our markets have strong balance sheets and continue to grow and expand as evidenced by a record pipeline.
We were pleased to hold deposits quarter over quarter, while maintaining our deposit pricing discipline.
Much of the government and municipal clients stimulus funds are yet to be invested therefore balances remain high and grew during the quarter.
A quick update on hiring we successfully welcomed 17, new client facing commercial and wealth management relationship managers during the quarter our.
Our talent pipeline remains robust and we will continue to make more new investments throughout the year.
While 2022 continues to bring its own set of unique challenges our businesses are performing very well.
Business and consumer sentiment are worsening slightly but we remain optimistic that our balance sheet will continue to grow.
We are well positioned withstand any new challenges.
Thank you I will now turn the call over to Brendan for further details.
Thanks Kim.
Turning to the quarter's results on slide six.
We reported GAAP net income applicable to common shares of $111 million or <unk> 38 per share reported earnings were impacted by $37 million of merger related charges. Excluding these charges as well as debt securities gains our adjusted earnings per share was <unk>, 46%.
Slide seven shows the trend in total loan growth on a historical combined basis, excluding PPP loans.
Q2 represents our eighth consecutive quarter of organic loan growth with total loans, increasing 19% on an annualized basis, driven by robust commercial growth of 18% and consumer growth of 22%.
Growth within consumer loans was driven by residential mortgage which reflects lower saleable production and is net of the transactional book run off of $58 million.
The balance of the transaction a book at quarter end was approximately $1 7 billion.
The investment portfolio decreased modestly by approximately $200 million quarter over quarter with the overall mix remaining largely unchanged.
And I note, we have deployed a significant portion of the cash outstanding at the end of last quarter in support of loan growth.
And that's in the form of lift portfolio yields improved significantly to 237% with new money yield of 368%.
Effective duration was stable despite the dramatic shift in the yield curve with new money purchases focus on the shorter end and.
In addition, we transferred another $1 billion of securities into our HTM portfolio to help mitigate future OCI impact.
Slide eight provides further details of our commercial loans and pipeline. The strong second quarter growth was well distributed with 20% annualized growth in C&I and 16% annualized growth in CRE we.
We were also pleased that despite the strong second quarter production our pipeline ended the quarter at a record $5 $9 billion, which is a 9% increase over Q1.
Turning briefly to pricing new money yields on C&I increased 80 basis points from Q1 to four 2% with new CRE production yields up 53 basis points to 367%.
Slide nine shows details of our Q2 commercial production byproduct and market the $2 $2 billion of production with well balanced across all product lines and major markets. The Chicago market continued its strong momentum with nearly $1 billion of production, but all of our legacy in expansion markets had strong quarters as well. In addition, all of our product lines, both a quarter.
Quarter loan growth, a clear reflection of the strong loan demand throughout our footprint.
Moving to slide 10, and appear deposits were stable quarter over quarter, Although we did see some deployment of deposits in our commercial and retail clients that was largely offset by seasonal increases in municipal and government funds.
Total cost of deposits continues to be low at six basis points up just one basis point from the prior quarter. We are prepared to defend deposits through rate actions, if necessary, but we have ample funding sources and asset liquidity to support future commercial loan growth.
Next on Slide 11, you will see details of our net interest income and margin.
Both improved meaningfully due to strong loan growth improved earning asset mix and higher interest rates.
NIM expanded 45 basis points quarter over quarter to 333% core margin, excluding accretion and PPP income increased 34 basis points to $2 nine 8%.
Slide 12 provides additional details on our asset liability position and projected margin range.
Margin is expected to continue to expand meaningfully over the next two quarters, albeit at a slower pace the assumptions in our outlook include a fed funds target rate of three 5% at year end, a static balance sheet and deposit betas that increased from 3% today to a December cycle to date beta in the range of 20% to 25%.
We believe we have opportunities to outperform this outlook through continued strong loan growth remixing of earning assets and a longer deposit pricing lag.
Also while we remain well positioned for rising rates, we have been proactively hedging the balance sheet over the last several quarters to protect our margin from the possibility of a hard economic landing and quick reversal in fed policy. We currently have over $1 billion, and downright protection, including Florida, and collars, which we will continue to build over the remainder of the year.
Slide 13 shows trends in adjusted noninterest income, which was $89 million for the quarter slightly better than expected due to $4 million of discrete items related to equity investment return and recovery from fully charged off acquired loans that we don't expect to recur.
Mortgage production was higher than anticipated, however, normalizing gain on sale margins and a higher percentage of portfolio production did negatively impact fee revenue.
Next slide 14 shows the trend in adjusted noninterest expenses adjusting for merger charges and tax credit amortization noninterest expense was $239 million and our adjusted efficiency ratio was 53, 9%.
Expenses were slightly higher than anticipated due to a year to date true up of incentive accruals to reflect better than planned performance. We continued to run slightly ahead of our planned cost synergies, but expect the bulk of the savings to begin late third quarter.
<unk> charges are also tracking in line with their diligence estimates with approximately $65 million for me.
Slide 15 provides further details on our path to achieving the cost savings of $109 million with the systems conversion now behind US we have completed the last major milestone required prior to realizing the remaining cost saves expectations on timing are unchanged with 85% of the cost synergies on an annualized basis realized in the fourth quarter and the remainder to come early in 2020.
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Note our <unk> run rate was updated to include higher incentive related expenses, resulting from better than planned performance.
Slide 16 shows our credit trends of both historical old National and first Midwest credit conditions continue to be benign and our commercial and consumer portfolios continue to perform exceptionally well. We ended Q2 with positive trends and better than peer results in all key credit metrics net charge offs were a modest two basis points.
On Slide 17, you will see the details of our first quarter allowance, which stands at $288 million up from $281 million at the end of Q1.
The reserve build was driven by strong loan growth any more pessimistic economic forecast, partly offset by lower specific reserves reserves and improved asset quality in our commercial book the financial health of our clients remained strong and while we are not seeing any signs of credit deterioration in our portfolio. Today. We believe it is prudent to maintain elevated levels of qualitative reserves until the cloud of echo.
With uncertainty lifts and.
In addition to the $288 million in total reserves, we also carrying $131 million of credit marks.
Slide 18 provides details on our capital position at quarter end as you can see it remains strong with a CET one ratio of nine 9%. The modest 14 basis point quarterly decrease reflects robust loan growth, which more than offset our strong retained earnings we continue to monitor our balance sheet for economic stress and feel very comfortable with our capital levels.
As I wrap up my comments here are some key takeaways, we couldnt have scripted a better result in the first full quarter. Following the closing of our partnership Klein in RM retention has been exceptional leading to another quarter of broad based positive loan growth led by our Chicago market.
Rate increases brought welcome margin expansion that was meaningfully higher than our peers.
We recently completed the major system conversion on schedule credit conditions remain benign and we are tracking ahead of our planned cost synergies.
19 includes thoughts on our outlook for the remainder of 2022, we ended the quarter with a record commercial pipeline, which supports our favorable outlook on loan growth, albeit at a potentially slower pace in Q2, given waning consumer and business sentiment net.
Net interest income and margin should benefit from continued loan growth and fed rate increases consistent with the margin guidance, we outlined earlier.
We expect our fee businesses to continue to perform well despite headwinds we expect solid organic growth in our wealth business that AUM will continue to be under pressure for market fluctuations in both equities and fixed income.
Mortgages following industry patterns with fee revenue under pressure from normalizing gain on sale margins as well as a higher percentage of portfolio production.
<unk> activity should support continued strong capital markets revenues and lastly, we anticipate pressure on deposit service charges consistent with industry trends.
We are targeting adjusted Q4 expenses of $227 million in it.
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Ladies and.
Gentlemen, please remain holding we have lost connection with the speaker line and we are reconnecting.
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[music] moving towards <unk>.
Very good.
Ladies and gentlemen, we do have the speaker line back on please.
Please proceed with the presentation.
Thank you.
We are targeting adjusted Q4 expenses of $227 million and expect to realize the majority of cost synergies by year end.
Credit conditions are benign, but we will continue to take a conservative approach to reserving in the near term.
Lastly, a brief update on taxes, we expect we are expecting approximately $7 million in tax credit amortization for the remainder of the year with a corresponding full year effective tax rate of approximately 23% on a core FTE basis, and 19% on a GAAP basis.
In closing we believe we have strong earnings catalysts that should differentiate us from our peers as we finished the year and head into 2023, while.
While the equity markets habits discounted relative to our peers. We believe this delta should narrow as we continue to deliver commercial loan growth execute on the promised cost synergies maintain our customary credit discipline and leverage our best in class deposit franchise for better than pure margin expansion.
Those comments I'd like to open the call for your questions and we do have the full team available, including Mark Sander, Jim Sandgren and John Murray.
Certainly if you would like to ask a question. Please press star followed by one on your telephone keypad.
Any reason you would like to remove that question. Please press star followed by two again to ask a question Press Star one as a reminder, if you are using a speaker phone. Please remember to pick up your handset before asking your question. Our first question comes from the line of Scott <unk> with Piper Sandler Scott. Your line is now open.
N.
Good morning, guys. Thanks, Scott.
Yes, so really good to hear from you sorry about the challenge with the line this morning.
Likewise, no no problems I have to say Brendan picked it back up without missing a beat that was very impressive.
While there was a lot of ASIC.
We are in the room as you can imagine, but glad we were able to complete the call and I. Appreciate you coming back to your rightful spot is number number one on the question list. So good job.
Thank you for that I appreciate that.
Wanted to ask just a couple a couple of questions. So when you talk about the the loan growth outlook, you know potentially slowing I guess I sort of meant that to mean just because the <unk> was just so extraordinarily strong you noted in the written comments on the outlook.
Client sentiment and there was just hoping you could expand on that comment and what your what your customers are seeing in saying to you guys.
Yeah, I'll give you a high level view, and maybe mark or Jim jump in here.
Just just like everybody else I think we are cautiously optimistic that we will continue to close the pipeline.
But we can't take into account.
Declining sentiment somewhat higher interest rates all of those things are kind of weighing on our mind, but we still feel really good about our pipeline and the fact that grew to record levels.
So FX rates for a very good and our clients are innovative and they find ways to still get their deals done but.
But we are also just cautious like everybody else.
Alright, I would add as you alluded to we Havent really strong second quarter, so expecting $900 million every every quarter, perhaps might be a bit much but the pipeline would indicate and our clients. Our commercial clients revenues and profitability would indicate that things are still quite strong out there and we grew the pipeline even as we had a great second quarter. So.
In the near term I would say, we feel good about our outlook for loan growth, but again, perhaps not at that $900 million level. This quarter. We also got boosted a little bit by line draws line draws.
<unk> ticked up a couple of hundred million dollars of that.
Okay wonderful. Thank you and then if I could switch over to the funding side for a second virtually no increase in deposit costs, which is great and I appreciate the beta commentary in the deck. Just curious what you guys are thinking for deposit betas once the fed stops raising rates in other words sort of the full through the cycle beta versus.
The.
The year end that you cite there and then would be curious if there is any difference in pricing pressure that you guys seeing or seeing in the old or sort of the legacy old national footprint versus the newer Chicago portion of the.
<unk>.
Yes, Scott I think pricing pressure is picking up a little bit but not not.
Not unexpectedly we're starting to see it for the first time, so we're getting the typical cost from the more price sensitive customers and where spot responding accordingly.
In terms of what the total betas at the end of the cycle hard to tell at this point. We know we believe we have a competitive advantage with our deposit franchise and our expectations that will be better than the average bank at the end of this right now our models are showing a through the cycle of around 25%.
But we'll see where it ends up.
Perfect.
Yeah.
Alright, great. Thank you guys very much I appreciate it.
Thanks Scott.
Thank you for your question Scott. Our next question comes from the line of Ben Garlinger with hard Sigrid Dan. Your line is now open.
Hey, good morning, everyone. Good morning, Ben Yes, good morning.
It looks like I got to dial in two minutes earlier.
Anyway.
A slide deck together.
We put the slide deck together deserves a round recall. This thing is very very helpful, especially the couple of new slides in there.
So kind of answering her following up on Scott's question about deposits. When you guys think about the funding.
Two the pricing is there any kind of pressure points that you guys are seeing.
I guess that you have to balance both sides of the balance sheet here, but.
As loan pricing still more.
The headache, or you're starting to see a little bit more pressure on kind of the more sensitive clients.
For calling a bit more frequently on the funding side.
I would say spreads on the loan side have held up quite well. So we're not seeing pressure there and the deposit side I guess, we're anticipating it coming more than seeing it right now and we're going to stay competitive in our marketplaces and so we.
We won't be the first but we won't be the last kind of thing.
Gotcha. Okay. That's helpful. And then I guess in your guidance Youre, assuming the fed moves 75 on Wednesday, but on Friday. It was at the first Q2 look on GDP and adverse sneaking suspicion Laguna technical recession.
Does that change the way you guys are approaching.
Overall growth in <unk>.
Cross London categories is there any areas that you might be.
Pressing the gas or tapping the brakes to some degree on just broadly speaking.
Again, I'll jump into rest of the team to follow up.
Maybe you don't get it right, but I don't believe so you know again, it's a client by client situation. There are some clients in some industries that maybe you think are more vulnerable that will continue to lend to and then there is some industries that.
We may be cautious about but it really hasnt changing our outlook at all regardless of what the GDP numbers to report.
Our clients overall very healthy whether it's the personal side or the business side were overall very healthy and continue to come into this very well prepared.
And I don't think as I've talked to other banks in our marketplace and across the country. I don't think our approach is that much different than what I'm hearing from others.
I think we're all optimistic that we will continue to have growth opportunities in and I think I think there is still very healthy demand out there to continue to want to do business.
Gotcha.
That's very fair.
We've never really had much of a credit issue. So it sounds like you have the good clients, which is a big positive going into any kind of economic slowdown.
One for me you have a much bigger balance sheet.
Do you have any kind of new updated thoughts on.
Joining guide rails or anything like that for the loan to deposit ratio and I'm feeling we're nowhere near the high end, but is there a high end and where your comfort level would be.
Well, certainly we talked about that internally here, but we've got no published stated targets out there I do think we could withstand a better remix of the balance sheet. That's been a goal of ours for quite some time is to remix our balance sheet and I think youre seeing the fruits of that labor well with a strong commercial growth.
No.
I don't think we're anywhere near any limits.
We do forecast multiyear forecast and look at these items on capital and liquidity and feel very comfortable with where we're positioned today and kind of the trend line of growth.
Gotcha.
Grabs heck of a quarter I'll step back.
Thanks, Ben I appreciate your support.
Thank you for your question Ben Our next question comes from the line of Chris Mcgratty with <unk>, Chris Your line is now open.
Hey, good morning, everybody.
Good morning, Chris good to hear from you.
Yeah. Thanks, Thanks, Brian .
Maybe Brian start with you on slide 12.
Great great detail on the on the components and the outlook.
The one thing that sticks out is the static balance sheet.
Assumption.
Can you walk through it given you guys are redeployed all the cash in the quarter, how how the core margin.
Would the sensitivity of those metrics if you do get a dynamic balance sheet, maybe not the same level of growth but.
Got a little bit.
A little bit of growth.
Yes, Chris I think maybe the shorthand would be we'd be near the higher end of that range.
With some some normalized solid loan growth over the remaining of the.
The remainder of the year.
And then better performance on deposit betas from these assumptions.
Let me go through that top end range, but that's part of the shorthand.
Okay.
Yeah, and then maybe on costs.
The 227 that you lay out.
In the in the fourth quarter.
That will assume all the cost saves are like by the end of the quarter I'm, just trying to get a lift off point it seems like a.
900, plus range exiting the year I'm, just trying to get a sense for next year what level of cost inflation, we should be baking in.
Yeah, So it's 85% of the cost save so you'd have another.
Rough and tough $17 million to come on an annualized basis in 'twenty three.
Okay.
And then maybe if I could sneak one in you talked about the I think 17, new new parcel in wealth relays.
Relationship managers.
Any attrition given how competitive the markets are for talent today.
Unexpected to date that you would you would call out.
I don't think so you know we look at those or Tricia reports very regularly and on our attrition has been running at a really close to our three year kind of averaged just more broadly speaking across the entire company.
And certainly you know, we'll have pockets here and there.
But quite honestly, we've had really strong attrition numbers.
But I do think we will continue to recruit talent.
It's not we're not replacing always replacing positions we are adding talent to markets, where we think we have the opportunity to continue to grow and.
And we also have opportunities with our bigger balance sheet right and certainly some of the specialty businesses that first Midwest brought to us to continue to grow and invest in those businesses and so, particularly as we think about our broader footprint. So we'll just continue to do that but I don't see anything in the attrition numbers that gives me any kind of pause and in fact as we've talked about historically.
Our relationship managers in the Chicago market have been excellent we've had very little if any attrition in that market. So we feel really good about our ability and you know what.
Having success helps right and I think we're showing a great deal of success, particularly in the legacy first Midwest footprint.
Great great. Thanks, Thanks, Tim and then maybe last one on the buyback can you talk about just rebuild near term.
What are the I guess, the medium term thoughts on resuming that.
Obviously, I know loan growth is one consideration.
Yes.
Chris Yes, we have no plans in the near or medium term to turn that back on and we'd like to see capital build back before we start.
Okay. Thanks.
Thanks, Chris.
Thank you for your question Chris. Our next question comes from the line of Terry Mcevoy with Stephens Terry Your line is now open.
Thank you and good morning, everyone.
Good morning, Jerry.
You ran through some of the puts and takes to deposits in the second quarter, but it was nice to see balances flat quarter over quarter.
Given some of what your competitors have reported could you maybe talk about your expectations for deposits in the second half of this year and then given the conversion that occurred this month.
A noticeable change in deposit balances over the last month.
First I'll take the I'll start no noticeable change in deposit balances over the past over the past months our expectations. All along in this year is that deposits private come under pressure as people deploy liquidity.
That said, we are we are out there and working on things to start growing deposits as we head into this this liquidity cycle and so we're prepared to defend what we have in and proactively get on offense and start and start gathering deposits.
Thank you and another question for you Brendan Brennan.
And your outlook for fees you kind of started your discussion with you feel good about the momentum, but then as I look at some of the items wealth mortgage service charges. It implied some pressure. So if you kind of normalize that other line and then think about the trends that are on slide 19 could you be little more precise in your fee outlook.
Okay.
Operator did we lose the connection again.
It looks like the connection has once again been last please standby as we reconnect.
Our speaker team is better on the call and Terry Your line is still open.
Sorry about that Terry Brendan will answer your question.
Okay. Thank you.
Yes, Gary I think I got the gist of it. Please let me know if I missed something.
The fee is clearly under pressure I think we've had really strong organic growth in AUM in the wealth and brokerage, but equity markets and fixed income market is obviously, putting pressure there and you're starting to see that come through on the fee line. Obviously the mortgage story is the same as everybody else's in the industry.
So, let's see lines that will be under pressure, but we feel really good about the organic growth in those in that space.
Okay.
Thanks for that and then one last question you added.
On slide nine your new loan production markets. There was a new color versus last quarter could you just talk about where you've opened up some new Lps and what was behind that was at $73 million of production.
Yeah, Hey, Terry this is Jim Sandgren.
As we've talked about we've been in St. Louis now since 2019 and have built out a nice team there we've got.
Market, President and two corporate <unk> that are doing a great job.
Treasury management representative in a credit person there in St Louis and they've.
They've continued to grow both on the corporate and commercial real estate side, we just recently got into Kansas City.
Earlier, this year really in January and higher too.
Two great middle market.
<unk> Big bank background, and they're off to a off to a really good start so a combination of kind of middle market and CRE opportunities that have helped spur the growth in those two markets.
Thanks, Jim Nice to hear your voice and thanks, everyone for the for the time.
Thanks for your page Eric here.
Thanks for your question Terry Our next question comes from the line of John Armstrong with RBC. John Your line is now open.
Hey, Thanks, good morning, everyone.
Good morning, John .
Yeah.
I was going to say Jim you are supposed to have the call dropped on bad quarters, but good quarter.
This is the first that I have ever been here, we had three drops in a row I don't know whats going on it's raining cats and dogs out right now so I don't know if the bad weather is causing us some some technical issues here, but we apologize.
Alright.
Slide 12, just a couple of follow ups.
Brendan what's what's can you go into little more detail about overall goals of the hedging strategy.
Are you, giving anything up on the upside in.
In pursuing this or not.
No we're trying to structure the hedging to allow us to take advantage of all the upside would actually protect from the downside. So that's why the collar structure and floor structure are in place.
And the objective is to not not the 5% asset sensitive when the fed funds at the top of our exit of some slowly manage this thing back to.
Our neutral position as we reached the peak without making any big bets. So same thing we did in last rate cycle. We're trying to do the same thing here.
Okay.
Chris Mcgratty asked about under your assumptions a static balance sheet I just wanted to get one more further down the 20% to 25% cumulative deposit beta by year and it seems a little bit high.
Since we're almost already in August .
Barely seen anything budge just.
Opportunity to outperform that type of assumption of 20% to 25% cumulative by the end of the year.
Yes, I think I think there is an opportunity we're starting to see some pressure.
That assumption was built off of looking at the last rate cycle, and where the fed funds rate was that you know when it was at $2 50, where deposit costs, where but this is happening much faster it is different.
So we may have an opportunity to lag pricing a little longer it's definitely an opportunity to outperform.
Okay.
A couple more here on slide 17.
Also appreciate all of the information here, but it's a pretty draconian model input for your reserve levels and I guess I applaud you for that.
What's your thinking on provisioning in reserves as a percentage of loans going forward from here because it already seems like you have some pretty challenging economic scenarios built in.
Yes, we're going to continue to watch this the economic forecast and see where this might play out we're putting through a fairly pessimistic forecast, but we expect to grow continue to grow loans will go up we'll continue to provision for that and.
And we will not.
Don't believe in the near term, we're going to be pulling back related to a more optimistic forecast in the near term I just feel like this is the right approach for us in this economic environment. There just so much uncertainty out there. We're just going to continue to do the right thing and make sure we have plenty of reserves and obviously provide for the you know the great growth.
Expect to see for the rest of the year.
Okay.
<unk> provided a segue into my last question, Jim, but obviously there is a difference between what we all read about and what we're seeing in your numbers.
Another bank numbers as well, so maybe the segway as to the integration.
There's been some public stocks with the integration maybe didn't go as well as planned, but it's pretty easy to cherry pick.
A challenging scenario and amplify it so how do you think you did.
And it sounded like in your earlier comments you said, it's starting to normalize again, so just give us an update on that thanks.
Yes sure.
Feel like first of all the data and systems conversion went incredibly well.
He was in here on a couple of Sundays ago, when we balanced out very early on Sunday morning.
Our commercial clients are adapted to our new systems very well Theres just a lot of retail we had 300000 clients and there's just a lot of clients.
Getting them to register their debit cards, and giving them through their online and mobile channels. So we feel really good about it.
Overall and certainly.
Again, it's easy to pick the handful of clients.
That may be have said something.
We continue to believe overall, we feel really pleased with the rat and more importantly, it's largely behind us in our rearview mirror going forward. So.
No Mark what else would you add to that.
We're in a good spot with our clients in all of our business segments. As you said earlier, we had a busy couple of weeks that were on the back half of now and so.
I've spent a lot of time in the last couple of weeks visiting with commercial clients and our banking centers and so you see the connection that our teams have with their clients.
Think we're in a really good spot in total.
Okay. Thank you appreciate it.
Thanks, Sean.
Thank you for your question John Our next question comes from the line of David Long with Raymond James David Your line is now open.
Good morning, everyone.
Good morning, David.
Yeah.
I wanted to ask about the little bit longer term on the net interest margin looking out to maybe 2023 and I. Appreciate the guidance that you gave for the next couple of quarters, but as you look to 2023.
Do you see some pressure on the reported NIM and at all as deposit betas pick up and maybe some of the purchase accounting accretion Wayne's event.
<unk>, we will start to burn off of accretion as we get into 'twenty three.
But right now we got fed funds rate increases that theyre moving out beyond.
So we will continue to benefit from that and we're also repricing a big chunk of our loan book at a much higher kind of medium term.
Yield so I think we still have some room to grow that and expand that margin into 'twenty three.
Got it thanks, Brendan and then.
On the M&A side of things it sounds like across the industry talks are down right now, but just curious how you guys are thinking about you know maybe into next year.
Do you have an appetite to to bolt something on our make another larger acquisition is there any appetite for that or.
How are you thinking about.
Yes.
The next step in in the M&A cycle for you guys.
Well I would start with never say never but we are incredibly focused in on you know.
Continuing to integrate.
This partnership this was a transformational partnership.
And we feel really good about where we're at with the integration of the clients and the team members, but there's still work to do and so we will continue to do that as a team.
And if opportunities come along.
We'll definitely take a look at them, but we really need to be focused on the current integration and growing organically first.
And I do think things are very quiet out there as you can imagine I still stay very close to what's going on in the world and I think things are very quiet out there.
But our first job is to take care of our existing clients and grow organically and if the timing is right.
And the opportunity is good enough and the pricing is right we'll.
I will definitely take a look.
Got it thanks for the color thanks for taking my questions.
Thanks, Thanks, David good to hear from you.
Thank you for your question David.
No further questions at this time I would like to turn the call back to Jim Ryan for closing remarks.
Well great to be with everybody in this quarter, Lenovo and Brendan and John the whole team is ready for any follow up questions. We appreciate your patience as we had to dial in a couple of times here hope everyone has a great day and look forward to talking with you soon thank you.
This concludes old nationals 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 old National Dot com.
A replay of the call will also be available by dialing 8668139403 access code 9468 43.
This replay will be available through August nine if anyone has additional questions. Please contact <unk> Walton at 812464136. Thanks. Thank you for your participation in today's conference call.
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