Q1 2024 Old National Bancorp Earnings Call

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Operator: Welcome to the Old National Bancorp first quarter 2024 earnings conference call. This call is being recorded and has been made accessible to the public in accordance with the SEC's regulation. Corresponding presentation slides can be found on the Investor Relations page at oldnational.com and will be archived there for 12 months. Management would like to remind everyone that certain statements on this call today 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.

Well it didn't get the old National Bancorp first quarter 2024 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.

Old National Dotcom and will be archived there for 12 months.

Management would like to remind everyone that certain statements on this today's call maybe forward looking in nature and are subject to certain risks uncertainties and other factors that could cause actual results or outcomes could differ from those discussed the company refers you to its forward looking.

Operator: The company refers you to its forward-looking statement legend in the earnings release and presentation slide. The company's risk factors are fully disclosed and discussed in 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 in their 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 CEO, Jim Ryan, for opening remarks. James Ryan, please go ahead.

Statement legend in the earnings release and presentation slides.

Company's risk factors are fully disclosed and discussed within its S. E T filings.

In addition, certain slides contain non G. A a P <unk> measures, which management believes provides more appropriate comparisons.

<unk> non G. A a P measures are intended to assist investors understanding of performance trends the conciliation would be.

How much are contained within the appendix of the presentation.

I'd now like to turn the call over to old National's CEO, Jim Ryan for opening remarks, Mr. Ryan. Please go ahead.

James C. Ryan: This morning, Old National reported its first quarter 2024 results. Our peer-leading, low-cost deposit franchise, above-average deposit and loan growth, disciplined expense control, and stable credit performance during the quarter drove these better-than-consensus results and set us up favorably as we move into the second quarter. Before I delve into the first quarter highlights, I want to underscore the strategic importance of our partnership with Nashville-based Capstar Bank, which we closed in April. Not only has this partnership expanded our franchise to robust and dynamic southeastern markets, but it also accelerates our growth potential.

James C. Ryan: This morning old National reported its first quarter 2024 results, our pure leading low cost deposit franchise above average deposit and loan growth disciplined expense control and stable credit performance during the quarter drove these better than consensus results and sets us up favorably as we move.

James C. Ryan: In the second quarter.

Speaker Change: Four I delve into the first quarter highlights I want to underscore the strategic importance of our partnership with Nashville based cap Star Bank, which we closed on April one.

Speaker Change: Not only has this partnership expanded our franchise too robust and dynamic southeastern markets, but it also accelerates our growth potential. It's a milestone that officially welcomed caps our clients and team members to our old National families capture a bank will operate as a division of old National Bank until the banking center and systems conversions, which we anticipate will occur in.

James C. Ryan: It's a milestone that officially welcomes Capsar clients and team members to our Old National Bank. Capsar Bank will operate as a division of Old National Bank until the Banking Center and Systems Convergence, which we anticipate will occur in the third quarter.

Speaker Change: Third quarter, let's focus on our first quarter earnings starting on page four which have laid a strong foundation for the year, We reported GAAP earnings of <unk> 40 per common share for the first quarter and our adjusted EPS was <unk> 45.

James C. Ryan: Let's focus on our first quarter earnings, starting on page 4, which have laid a strong foundation for the year. We reported GAAP earnings of $0.40 per common share for the first quarter, and our adjusted EPS was $0.45. Notably, our adjusted earnings per share exceeded consensus estimates by 5%. This accomplishment was driven by above average deposit loan growth, stable credit performance, and importantly, disciplined expense management, which underscores our financial strength and consistent quality returns.

Speaker Change: Notably our adjusted earnings per share exceeded consensus estimates by 5%.

Speaker Change: This accomplishment was driven by above average deposit loan growth stable credit performance, and importantly, disciplined expense management, which underscores our financial strength and consistent quality returns.

James C. Ryan: Our adjusted ROA TCE for the quarter was 16.7, and our adjusted ROA was 1.1%. Our adjusted efficiency ratio was a low 53.4% despite the challenging interest rate environment. Total deposit growth was 5% annualized during the quarter despite seasonal outflows by businesses and public sector clients. Loan growth was 7.5% annualized. Our total cost of deposits for the quarter remains at a low 201 basis points.

Speaker Change: Our adjusted ROA TCE for the quarter was $16 seven and our adjusted ROA was one 1% our adjusted efficiency ratio was a low 53, 4% despite the challenging interest rate environment.

Speaker Change: Total deposit growth was 5% annualized during the quarter, despite seasonal outflows by businesses and public sector clients loan growth was seven 5% annualized our total cost of deposits for the quarter remains at a low 201 basis points.

James C. Ryan: Year-over-year, we saw total deposit growth of 8% and total loan growth of 6%. Meanwhile, our tangible common book value grew 2% during the first quarter and 11% year-over-year. Our year-over-year trends once again demonstrate our consistent financial strength and quality returns. In summary, our first quarter results have set a solid foundation for 2024. Our strong deposit loan growth, stable credit performance, and effective expense management demonstrate our ability to excel in a challenging banking environment.

Speaker Change: Year over year, we saw total deposit growth of 8% and total loan growth of 6%. Meanwhile, our tangible common book value grew 2% during the first quarter and 11% year over year.

Speaker Change: Our year over year trends once again demonstrated our consistent financial strength and quality returns.

Speaker Change: In summary, our first quarter results have set a solid foundation for 2024, our strong deposit loan growth stable credit performance and effective expense management demonstrate our ability to excel in a challenging banking environment.

James C. Ryan: As we progress into the year, we reiterate our steadfast commitment to sustainable growth, disciplined expense management, and strategic talent acquisition. We are confident in our ability to navigate the market and deliver strong results. Before turning the call over to John Moran, I'd like to briefly address our Chief Financial Officer position. As you might expect, we will not comment today, and I will refer you to the 8K that we filed on April 1st. We will provide any updates in the future when appropriate. That said, we are focused on running our business as usual.

Speaker Change: As we progress into the year, we reiterate our steadfast commitment to sustainable growth disciplined expense management and strategic talent acquisition.

We are confident in our ability to navigate the market and deliver strong results.

Speaker Change: Before turning the call over to John ran I'd like to briefly address our chief financial officer position.

As you might expect we will not comment today and I'll refer you to the 8-K that we filed on April one.

Speaker Change: We will provide any updates in the future when appropriate.

Speaker Change: Said, we are focused on running our business as usual as I said earlier in this call. We had a great first quarter and look forward to another strong year.

James C. Ryan: As I said earlier in this call, we had a great first quarter and look forward to another strong year. We already have an exceptionally talented finance, accounting, and treasury team in place. For example, Mike Lloyd, our treasurer, and Angela Putnam, our chief accounting officer, who are both on a call with us today, are very seasoned, and each has 10 years or more of experience with us. John Moran, who you already know from his tenure with us, and as a Wall Street analyst covering banks like Old National, has seamlessly taken on the interim chief financial officer role.

Speaker Change: We already have an exceptionally talented finance accounting treasury team in place for example, Mike Lloyd our Treasurer, Angela Putnam, our Chief Accounting Officer, who are both on a call with US today are very season, and each has 10 years plus experience with us.

Speaker Change: John Moran, who you already know from his tenure with us and as a wall Street analyst covering banks like old National has seamlessly taken on the interim Chief financial officer role.

James C. Ryan: In addition, John has been a CFO at a publicly traded bank holding company. He also was identified as a primary successor during our succession planning process. I have complete confidence in John and the entire team. I'm also pleased to introduce Terry Goldfeder, our new Chief Credit Officer, who will join us on our quarterly calls from now on. Kerry, who came to us from Capital One and previously worked at GE Capital, brings to our leadership team a wealth of experience and expertise.

Speaker Change: In addition, John has been CFO of publicly traded bank holding company.

Speaker Change: He also was identified as a primary successor during our succession planning process.

Speaker Change: I have complete confidence in John and the entire team.

Speaker Change: I'm also pleased to introduce Terry Goldfeder, our new Chief Credit Officer, who will join us on our quarterly calls from now on.

Terence James McEvoy: Carey, who came to us from capital one and previously worked at GE capital brings our leadership team a wealth of experience and expertise.

James C. Ryan: Despite her relatively short tenure with us, she is already making a significant impact. Her addition to our leadership team further strengthens our commitment to excellence in all aspects of our operation. With that, I will now turn the call over to John.

Terence James McEvoy: Despite her relatively short tenure with us she is already making a significant impact <unk>.

Terence James McEvoy: Her addition to our leadership team further strengthens our commitment to excellence in all aspects of our operations and with that I will now turn the call over to John.

John Kamin: Thanks, Jim. Turning to slide five, you can see our first quarter balance sheet, which highlights stability in our liquidity and capital positions. Our first quarter deposit growth has again allowed us to organically fund loan growth while holding our borrowings and brokered deposits consistent. Over the last year, we have grown deposits 8%, 200 basis points faster than our 6% year-over-year loan growth, while increasing tangible book value 11%. We entered the quarter with a strong CET1 ratio of 10.76 percent, and we continue to expect that we will accrete capital at a faster pace than most through the combination of a better-than-peer return profile and a targeted 30 percent dividend payout.

John Kamin: Thanks, Jim.

John: Going to slide five you can see our first quarter balance sheet, which highlights stability in our liquidity and capital positions are first quarter deposit growth has again allowed us to organically fund loan growth, while holding our borrowings and brokered deposits consistent.

John: Over the last year, we have grown deposits, 8% 200 basis points faster than our 6% year over year loan growth, while increasing tangible book value of 11%.

John: We ended the quarter with a strong CET one ratio of 10, 76% and we continue to expect that we will accrete capital at a faster pace than most through the combination of a better than peer return profile and a targeted 30% dividend payout ratio.

John Kamin: Our liquidity and capital levels continue to provide a strong foundation, which positions us well into 2020. On slide six, we show the trend in total loan growth and portfolio yields. Total loans grew 7.5 percent annualized from last quarter, slightly above our expectations. We remain focused on full relationships and structure at prices that meet our risk-adjusted return requirements.

John: Our liquidity and capital levels continue to provide a strong foundation, which positions us well into 2024.

John: On slide six we show the trend in total loan growth and portfolio yields total loans grew seven 5% annualized from last quarter slightly above our expectations. We remain focused on full relationships and structure at prices that meet our risk adjusted return requirements new loan production rates in the high 7% range and marginal funding.

John Kamin: New loan production rates in the high 7% range and marginal funding costs in the low 4% range support our expectation that net interest income has bottomed out in the first quarter. The investment portfolio increased very modestly in the quarter due to reinvestment of cash flows partly offset by changes in fair values, and the duration was effectively unchanged. As we've mentioned in past calls, NewMoney Yields are running 200 basis points above BackBook Yields, and we have approximately $1.3 billion in cash flows expected over the next 12 months.

John: Costs in the low 4% range support our expectation that net interest income as bottomed out in the first quarter.

John: The investment portfolio increased very modestly in the quarter due to reinvestment of cash flows partly offset by changes in fair values and the duration was effectively unchanged.

John: As we've mentioned in past calls new money yields are running 200 basis points above back book yields and we have approximately $1 $3 billion in cash flow is expected over the next 12 months.

John Kamin: Moving to slide seven, we show our trend in total deposits, which grew 5% annualized from 4Q, despite normal seasonal outflows in public funds and business non-interest bearing deposits. Our broker deposits as a percentage of total deposits are now 3.2%, which remains well below peers. Dollar balances grew in both retail and commercial, and new checking account production remains strong.

John: Moving to slide seven we show our trend in total deposits, which grew 5% annualized from <unk>, despite normal seasonal outflows in public funds and business noninterest bearing.

John: Broker deposits as a percentage of total deposits is now three 2%, which remains well below peers.

John: Balances grew in both retail and commercial and new checking account production remains strong.

John Kamin: We did experience upward pressure on deposit rates over the course of the quarter, as we remained focused on better-than-industry growth in our deposit base. That said, we did see a marked deceleration in deposit costs later in the quarter, with total deposit costs for the month of March at 205 basis points, only four basis points higher than our 1Q average, and a spot rate on March 31st that was down a few basis points from there. As a reminder, the addition of Cap Star is expected to increase our total deposit costs by approximately five basis points in the second quarter.

John: We did experience upward pressure on deposit rates over the course of the quarter as we remained focused on better than industry growth in our deposit base that said, we did see a marked deceleration in deposit costs later in the quarter with total deposit costs for the month of March of 205 basis points, only four basis points higher than our <unk> average and a.

John: Bart rate at March 31 that was down a few basis points from there.

As a reminder, the addition of <unk> is expected to increase our total deposit costs by approximately five basis points in the second quarter.

John Kamin: Overall, we remain very pleased with the execution of our deposit strategy, which continues to drive above-peer deposit growth at below-peer cost. Slide eight provides our quarter-end income. We reported a gap net income applicable to common shares of $116 million, or $0.40 per share.

Overall, we remain very pleased with the execution of our deposit strategy, which continues to drive above peer deposit growth at below peer costs. So.

John: Slide eight provides our quarter end income statement, we reported GAAP net income applicable to common shares of $116 million or <unk> 40 per share.

John Kamin: Reported earnings include the following pre-tax items: $13 million non-cash expense associated with the distribution of excess pension assets with the resolution of the Legacy First Midwest Plan, an additional $3 million charge related to the FDIC special assessment, and $3 million in merger-related charges. Excluding these items, our adjusted earnings per share was $0.45.

Ported earnings include the following pre tax items of $13 million noncash expense associated with the distribution of excess pension assets with the resolution of the legacy first Midwest plan.

John: An additional $3 million charge related to the FDIC special assessment and $3 million in merger related charges. Excluding these items our adjusted earnings per share was <unk> 45.

John Kamin: Moving on to slide nine, we present details of our net interest income and margin. As expected, deposit repricing led to modest declines in both net interest income and margins that were in line with our guidance. Our low total deposit cost of 201 basis points remains a key competitive advantage. Again, we have put up better deposit growth at a lower cost than most. Slide 10 shows trends in adjusted non-interest income, which was $78 million for the quarter.

John: Moving on to slide nine we present details of our net interest income and margin.

John: As expected deposit repricing led to modest declines in both net interest income and margin that were in line with our guidance.

John: Our low total deposit costs of 201 basis points remains a key competitive advantage again, we have put up better deposit growth at a lower cost than most banks.

John: Slide 10 shows trends in adjusted noninterest income, which was $78 million for the quarter.

John Kamin: Our primary fee businesses perform generally in line with expectations with seasonally lower bank. Continuing to slide 11, we show the trend in adjusted non-interest expenses, which were favorable to our guidance due to better occupancy costs, the result of a mild winter for the upper Midwest, lower tax credit amortization, and lower professional fees, along with lower various other expenses. On slide 12, we present our credit trends, which remain stable, reflecting the quality of both our commercial and consumer portfolios. The delinquency ratio declined slightly, and the rise in non-performing loans stems from the migration of three credits.

John: Primary fee businesses performed generally in line with expectations with seasonally lower bank fees.

John: Continuing to slide 11, we show the trend in adjusted noninterest expenses, which were favorable to our guidance due to better occupancy costs. The result of a mild winter for the upper Midwest lower tax credit amortization and lower professional fees, along with lower various sundry other expenses.

John: On slide 12, we present, our credit trends, which remains stable, reflecting the quality of both our commercial and consumer portfolios. The delinquency ratio declined slightly and horizon nonperforming loans stems from the migration of three credits.

John Kamin: Migration into adverse categories has slowed from prior quarters, and as has historically been the case, we maintain a proactive approach to grading and resolution. Total net charge-offs were a low 14 basis points and were split evenly between PCD and non-PCD loans. Our first quarter allowance, including reserve for unfunded commitments, was unchanged at 103 basis points. There were no material changes to our model assumptions, and the weighting on the Moody's S3 scenario remains 100%.

John: Gration into adverse categories has slowed from prior quarters and as has historically been the case, we maintain a proactive approach to creating and resolution.

John: Total net charge offs were a low 14 basis points and were split evenly between PCB and non PCI loans are first quarter allowance, including reserve for unfunded commitments was unchanged at 103 basis points. There were no material changes to our model assumptions and the waiting on the Moody's S. III scenario remains 100% on.

John Kamin: On slide 13, we review our capital position at the end of the quarter. Improvements were seen in all regulatory capital ratios, with the move in rates muting the impact of strong retained earnings on our TCE. Slide 14 includes updated details on our rate risk position and net interest income guidance. NII is expected to increase in the second quarter with the inclusion of CapStar and then continue to modestly increase in the back half of the year. Our assumptions are listed on the slide, but I will highlight a few of the primary drivers.

John: Slide 13, we review our capital position at the end of the quarter improvements were seen in all regulatory capital ratios with the move in rates muting the impact of strong retained earnings on our TCE belt.

John: Slide 14 includes updated details on our rate risk position and net interest income guidance.

John: NII is expected to increase in the second quarter with the inclusion of cap Star and then continue to modestly increase in the back half of the year our.

John: 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 consistent with the fed dot plot.

John Kamin: First, we assume three rate cuts of 25 basis points each consistent with the Fed DOP. Second, we are anticipating additional late-cycle deposit repricing that will result in a terminal beta of 40% by mid-year in a non-interest-bearing deposit mix that falls to 23% by year-end. Lastly, we assume the final cap star acquisition accounting marks are consistent with those used at DL Analysis. We believe we have positioned the balance sheet well as we approach the end of this rate cycle with the work to achieve a neutral rate risk position behind us. Also, closing CapStar a quarter early modestly helped our neutrality. In addition to the three-cut scenario, we did run a forward curve, including one-and-a-half rate cuts, and a static curve through our model.

John: We are anticipating additional late cycle deposit repricing that will result in a terminal beta of 40% by mid year, and our noninterest bearing deposit mix. It falls to 23% by year and lastly, we assumed the final cap Star acquisition accounting marks are consistent with those used at deal announcement.

John: We believe we have positioned the balance sheet well as we approach the end of this rate cycle with the work to achieve a neutral rate risk position behind us.

John: Also closing cap star quarter early modestly helped our neutrality.

John: In addition to the three cuts scenario, we did run a forward curve, including one and a half rate cuts in a static curve through our models. The results of each were not materially different from our three rate cuts scenario again, suggesting that we have effectively managed the balance sheet to neutral.

John Kamin: The results of each were not materially different from our three-rate cut scenario, again suggesting that we have effectively managed the balance sheet to neutral. Slide 15 includes thoughts on our outlook for the remaining items for the second quarter and full year 2024. All guidance has been updated to include the cap start close on April 1st and purchase accounting assumptions in line with our transaction modeling, which is subject to change as we finalize these initial adjustments in the second quarter. As you can see, our guidance is unchanged.

John: Slide 15 includes thoughts on our outlook for the remaining items for the second quarter and full year 2024. All guidance has been updated to include the caps are closed on April one purchase accounting assumptions in line with our transaction modeling, which is subject to change as we finalize these initial adjustments in the second quarter as you can see our guidance is unchanged.

John Kamin: In summary, we had a strong start to 2024 with first quarter results better than our expectations and strong performance metrics. More importantly, we continue to demonstrate our ability to execute against our strategic priorities. First, we are organically funding our loan growth with deposits up 8% year-over-year, 200 basis points better than our loan growth. Second, our adjusted return profile remains top quartile against peers at nearly 17% on tangible common equity. Third, we remain disciplined on operating expenses with an adjusted efficiency ratio of 53%.

John: In summary, we had a strong start to 2024 with first quarter results better than our expectations and strong performance metrics more importantly, we continue to demonstrate our ability to execute against our strategic priorities first we are organically funding our loan growth with deposits up 8% year over year 200 basis points better than our loan growth.

John: Second our adjusted return profile remains top quartile against peers at nearly 17% on tangible common equity.

John: Third we remain disciplined on operating expenses with an adjusted efficiency ratio of 53%.

John Kamin: Fourth, we have a clean credit book with non-PCD net charges of just seven basis points. And finally, we are continuing to rapidly compound tangible book value per share, which was up 11% year over year. With those comments, I'd like to open the call to your questions. And we do have the full team available, including Mark Sander and Jim Sangre.

John: Fourth we have a clean credit book with non <unk> net charge offs of just seven basis points and finally, we are continuing that rapidly compound tangible book value per share, which was up 11% year over year with those comments I'd like to open the call for your questions and we do have the full team available, including Mark Sander and Jim Sandgren.

Operator: We are now opening the floor to questions and answers. If you'd like to ask a question, please press star and number one on your telephone keypad. Our first question comes from Scott Sievers from Piper Sandler. Your line is now open.

Speaker Change: We are now opening the floor.

Speaker Change: And the answer session, if you'd like to ask a question. Please press star and number one I will turn upon key pump.

Speaker Change: Our first question comes from comps.

Mark G. Sander: From Piper Sandler Your line is now open.

Robert Scott Siefers: Morning, guys. Thanks for taking the question. Hey, I was hoping first maybe we could discuss some of those deposit pricing metrics, John, that you mentioned, sort of late in the first quarter and then the spot rates as well. Just maybe overall competitive dynamics, what's kind of giving you comfort that it sounds like in places you're able to lower rates exactly, just maybe overall competition and thoughts on your own positioning as well.

Good morning, guys. Thanks for taking the question.

Hi, I was hoping first maybe you could discuss some of those deposit pricing metrics, Dan that you mentioned.

Comps: What are the late first quarter and then the spot rates as well just maybe overall competitive dynamics, what kind of giving you comfort.

Comps: It sounds like in places you are able to lower rates exactly just maybe overall competitive in and thoughts on your own positioning as well.

John Kamin: Yeah, thanks, Scott. Look, I'd say it's still a competitive deposit environment out there. We are on offense, and we're unapologetic about that. I mean, you know, as long as we can continue to do good business at incremental margins, that makes sense. We'll continue to be focused on growing our deposits.

Dan: Yes, Thanks, Scott look I'd say, it's still a competitive deposit environment out there we're on offense and we are unapologetic about that.

Speaker Change: As long as we can continue to put on.

Scott: Good business.

Scott: And incremental margins that makes sense, we will continue to be focused on growing our deposits. We did see costs start to abate late in the quarter and Thats, what I was trying to get that with the.

John Kamin: We did see costs start to abate late in the quarter, right? And that's what I was kind of getting at with the 205 basis points in March, which was only four basis points higher than average. And our spot rate at March 31st was actually a couple basis points below that. So, knock on wood, hopefully a little bit less competitive, but, but, you know, we're still on offense.

Scott: 205 basis points in March, which was only four basis points higher than average and our spot rate at March 31 was actually a couple of basis points below that.

Scott: So knock.

Scott: Knock on wood, hopefully a little bit less competitive, but but we're still on offense.

Robert Scott Siefers: Okay, perfect. Thanks, John. And then I was hoping you could also touch on loan growth a little. I'd say your growth seems to be holding in better than what we're seeing from most peers this quarter, so just maybe some thoughts on demand, overall customer behavior, you know, are you sort of seeing demand accelerate, decelerate, stay the same, just maybe overall dynamics. Please.

Speaker Change: Okay perfect. Thanks, John and then was hoping you could also touch on loan growth a little I'd say your growth seems to be holding in better than what we're seeing from us peers. This quarter. So just maybe some thoughts on demand overall customer behavior.

Speaker Change: We're seeing.

Speaker Change: Demand accelerate decelerate stay the same just maybe overall dynamics split.

Mark G. Sander: Thanks, Scott. It's Mark.

Mark G. Sander: Okay, Scott its mark.

Mark G. Sander: Low growth came in a little bit above what we expected in Q1, but just a little bit above. I would say C&I clients are still in a solid position, and you're seeing decent demand out there. We're not looking for anything robust, but I think we can slightly outgrow the industry, which is what we've put out there. We also had the benefit of some tailwinds from our construction book that funded this quarter and will fund the next couple of quarters. That probably was about half of our low growth.

Scott: Yes loan growth came in a little bit above what we expected in Q1, but just a little bit above and I would say C&I clients are still in a solid position and youre seeing decent demand up there. So we're not looking for anything robust, but I think we can slightly outgrow the industry, which is what we've put out there. We also had the benefit of some tail winds from our construction book that funded this.

Scott: <unk> and will for the next couple of quarters. So thats, probably was about half of our loan.

Robert Scott Siefers: Okay, perfect. All right, thanks guys very much. I appreciate it. Thanks, guys.

Speaker Change: Okay perfect Alright, thanks, guys very much appreciate it.

Speaker Change: Thanks Scott.

Speaker Change: Our next question comes from Kevin Chiang from Citi. Your line is now open.

Benjamin Tyson Gerlinger: Our next question comes from Ben Challenger from Citi. Your line is now open.

Benjamin Tyson Gerlinger: I just want to touch base on the growth thing again. I get that you guys don't move your credit box; you have the market kind of come to you and kind of know where your time to shine is. Is there anything that can be done to potentially exceed the growth guidelines you had? I mean, from here, I completely understand you're not changing credit, but if the market offers because competitors aren't in the market as much, or you're seeing risk-adjusted yields, would you be able to grow loans faster than deposits or have the appetite to do so?

Kevin Chiang: Hi, good morning.

Kevin Chiang: Good morning, Ben.

Kevin Chiang: I just wanted to touch based on the growth I get that.

Kevin Chiang: I don't move your credit box you have the market kind of come to you and kind of where your time to shine.

Kevin Chiang: There anything that can be done and potentially exceed the growth guidance you had from the ear.

Kevin Chiang: I understand youre, not changing credit, but the market offers because competitors are in the market as much or you're seeing risk adjusted yields would you be able to grow loans faster than deposits or have the appetite to do so.

Mark G. Sander: You know, we'll continue to have the appetite to grow good, profitable, long-term relationships, and we're very much open to business. And so I'd say the answer to your question is more dependent, to some degree, on how other competitors react if they have that same kind of view. You know, some people are a little more closed, I would suggest, than we are. So I think it's possible, but our five to seven percent organic growth is a little bit above what we think the industry average would be.

Kevin Chiang: Yes.

Kevin Chiang: We continue to have the appetite to grow good profitable long term relationships and we're very much open for business and so I'd say to answer. Your question is more dependent to some degree on what how other competitors. If they have that same kind of view. Some people are little more closed I would suggest and we are so I think its possible, but were 5% to 7%.

Kevin Chiang: Organic growth is.

Kevin Chiang: A little bit above what we think the industry average.

John Kamin: Ben, I would just add, you know, we're going to continue to take advantage of the new talent we've acquired. You know, some of them are new markets, and some of them are existing markets, but each one of them is at varying degrees of being onboarded and running through any obligations they have. So I think there's a great opportunity for us to get traction there and then add on, you know, the closing of our partnership in Tennessee.

Speaker Change: Ben I would just add we're going to continue to take advantage of the new talent we've acquired.

Speaker Change: Some of them are new markets and some of them are existing markets, but each one of them are in varying degrees of being on boarded and running through any obligations. They have so I think theres great opportunity for us to to get traction there and then add on the closing of our partnership in Tennessee.

John Kamin: We think that just offers great opportunities to accelerate, you know, their growth, and our growth in that marketplace. Obviously, we've got some system conversions and things to get through, but, you know, the back half of the year really should be getting after it, and we're looking to have, you know, great growth coming out of Tennessee and Asheville.

Speaker Change: We think that just offers great opportunities to accelerate their growth our growth in that marketplace. Obviously, we've got there is some systems conversions and things to get through.

Speaker Change: But the back half of the year really should be getting after it and really looking to have great growth coming out of Tennessee in Asheville.

Benjamin Tyson Gerlinger: Gotcha. The other question I had would be more of this high level on credit. You guys have always done a great job. It's where you hang your hat, to be honest. But when you think about this credit across your footprint, are there any geographies which are experiencing, for lack of a better word, frothy pricing, maybe commercial real estate, or just are you in a pencil down mode on any CRE type lending products?

Speaker Change: Got you and the other question I had would be more of a high level on credit you guys have always been.

Speaker Change: Our job is for you hang your hat to be honest, but when you think about this credit across your footprint are there any geographies which are experiencing.

Speaker Change: Lack of a better word frothy pricing maybe in commercial real estate or are you in our pencil and downloaded CRA type of lending products.

Mark G. Sander: Now, we're not penciled down in any products. Obviously, with the rate environment right now, the numbers just don't work for the same level of profit, you know, at the same level that they used to. So CRE volume across our footprint is down just because of market dynamics, not because we've changed our underwriting. We're still selectively adding new clients in CRE as well, but certainly more of the growth is going to come in CNI.

Speaker Change: No, we're not pencil down spend and any and any products, obviously with the rate environment right now the numbers just don't work for the same level.

Speaker Change: At the same level that they used to so CRE volume across our footprint is down.

Speaker Change: Just by market dynamics, not because we've changed our underwriting we are still selectively, adding new clients and CRE as well.

Speaker Change: More of the growth is going to come in C&I, where we think we're really well positioned.

John Kamin: You know, I would just add, Ben, too, that comes with full pricing, you know, full relationships as usual. Obviously, that discipline has been an important part of how we've been successful, but it's ever so more present today that, you know, we need to ensure that we get our terms. And at our terms, we will continue to...

Speaker Change: <unk> been through that that comes with full pricing full relationships as usual, obviously that discipline has been an important part of how we've been successful, but it's ever so more present today that we need to ensure that we get our terms.

Speaker Change: And at our terms, we will continue to take advantage of every opportunity that comes our way and with that same underwriting our terms requires more equity.

Mark G. Sander: really comes our way. And with that same underwriting, our terms require more equity. Right?

Benjamin Tyson Gerlinger: Gotcha. All right. Well, I appreciate it. Thanks for your time, guys.

Speaker Change: Gotcha, Alright, well I appreciate it thanks for the time guys.

Speaker Change: Ben.

Terence James McEvoy: Our next question comes from Terry McEvoy from Stevens. Your line is now open.

Speaker Change: Our next question comes from Matthew.

Speaker Change: Matthew Boss from Stephens. Your line is now open.

Terence James McEvoy: Hi, good morning. Thanks for taking my questions. Good morning, Terry. I may start with slide 17. Could you just expand on the comments about the manageable volume of loans subject to refinance risk? I'm guessing a part of it is multifamily, and while you're at it, if you could comment on the multifamily trends that you're seeing in your markets.

Matthew Boss: Hi, good morning, Thanks for taking my questions.

Matthew Boss: Good morning, Jerry.

Matthew Boss: Maybe start with slide 17 could you just expand on the comments manageable volume of loan subject to refinance risk I'm.

Matthew Boss: I'm guessing a part of it is multifamily and it may be while youre at it if you could comment on multifamily trends that youre seeing in your markets.

Mark G. Sander: So I'll start. Terry, it's Mark.

Mark G. Sander: So I'll start Terry it's mark.

Mark G. Sander: As we say, a manageable level, and it's based on the data that we provided there. We have $2.8 billion coming due in the next 18 months. When we underwrite, we stress everything at a 300 basis point cushion. So that's why we show above 4% and less than 4%. So we have 400 million in loans maturing in the next 18 months that would bump up against our underwriting parameters. I would say of that 400 million, less than half of it is what we really have a keen eye on that might have some stress.

Mark G. Sander: Say most manageable level, that's based on the data that we've provided there with $2 $8 billion coming due in the next 18 months when we underwrite we stress everything at a 300 basis point cushion. So thats why we show above 4% and less than 4%. So we have $400 million of loans.

Mark G. Sander: Churn in the next 18 months that would bump up against our underperforming parameters I would say of that $400 million less than half of it is what we really have a keen eye on that might have some stress.

Mark G. Sander: So that's why less than $200 million in our portfolio, we think, is very manageable. I guess that's the comment there. To your question on multifamily, multifamily in our markets is holding up really well. I don't know how to describe it better than that. We didn't have the highs that some of the coasts perhaps had, and so you're still seeing rent growth. It's modest rent growth, but it's after many years of really strong rent growth that has more than accounted for the increase in expenses that have happened over those years. So we feel really good about our multifamily portfolio.

So that's why 100 less than $200 million on our portfolio. We think is very manageable I guess is the comment there to your question on multifamily multifamily in our markets is holding up really well I don't know how to how to describe it better than that we didn't have the highest some of the coasts, perhaps head and so you are still seeing rent growth.

Mark G. Sander: Modest rent growth, but its after many years of really strong rent growth that has more than.

Mark G. Sander: Accounted for the increase in expenses is happened over those years. So we feel really good about our multifamily portfolio.

Terence James McEvoy: Thanks. And then as a follow-up, a question on security yields, they were up a basis point quarter over quarter, the portfolio was up, and new money yields were 561. So I guess what was behind just the slight increase in security yield? The more modest increase was really a chunk of very short-term US government bonds that matured.

Speaker Change: Thanks, and then as a follow up question on security yields they were up one basis point quarter over quarter.

Speaker Change: Portfolio was up in new money yields were 561, so I guess what was what's what's behind just the slight increase in security yields.

The more modest increase was really.

Speaker Change: Chunk of very short term U S treasuries.

Speaker Change: Matured in the quarter.

John Kamin: And just last, a quick one, the NII bottoming out in the first quarter, John, is that with and without CapStar? I just want to make sure I understand that statement. Yes. Perfect. Thanks for taking my questions.

Speaker Change: And then just last quick one the NII bottoming out in the first quarter John is that we.

Speaker Change: With and without <unk> I, just want to make sure I understand that statement yes.

Speaker Change: Yes.

Speaker Change: Perfect. Thanks for taking my questions.

Terence James McEvoy: Our next question comes from John Arfstrom from RBC Capital Markets. Your line is now open.

Speaker Change: Our next question comes from Jon <unk> from RBC capital markets. Your line is now open.

Jon Glenn Arfstrom: Okay, thanks. Good morning. Good morning, John. Hey, good morning. Where are you guys finding opportunities to grow deposit balances and relationships? Can you touch on that?

Jon: Hey, Thanks, good morning.

Jon: Good morning, John.

Morning.

What are you guys finding opportunities to grow deposit balances and relationships can you touch on that.

John Kamin: You know, in every one of our lines of business, so in our consumer business, their primary objectives and goals are active checking accounts, and so it is literally gaining market share one by one on a daily basis and seeing that new accounts are opened, exceeding what runs out the door. In commercial banking, as we said earlier, we're still very much open for business, so that's when the whole focus is on long-term relationships that require deposit balances to come with it.

Jon: And every one of our lines of business. So in our consumer business their primary objectives and goals as active checking accounts and so it is literally gaining market share one by one.

Jon: On a daily basis and seeing that.

Jon: New accounts opened exceeding.

Jon: Runs out the door in commercial as we said earlier, we're still very much open for business. So thats one.

Jon: Whole focus is on long term relationships that require the deposit balances to come with it it partially self fund itself and then our private banking team in wealth has done a really nice job with our money market promotions getting out there getting after it I guess nothing more than good old fashioned blocking and tackling with a really good team.

John Kamin: It partially self-funds itself. And then our private banking team in wealth has done a really nice job with our money market promotions. Getting after it, I guess, nothing more than good old-fashioned blocking and tackling with a really good team.

John Kamin: John, I would just add, you know, starting in the fall of 22, I personally was around the entire company pounding the table saying, we are all deposit gatherers, and I don't care whether you're face-to-face with clients or you're in treasury or you're in marketing; we are all deposit gatherers, and that's been the mantra, you know, which has, I think, helped drive our success.

Speaker Change: John I would just add starting in the fall of 'twenty two.

Speaker Change: I personally was around the entire company pounding the table, saying, we are all deposit gathers and I don't care, whether your face off with clients or you are in treasury or youre in marketing, we are all deposit gatherers and that's been our mantra.

Speaker Change: Which is I think helped drive our success.

Jon Glenn Arfstrom: Okay, good. Fair enough. On non-interest bearing, I know there's some seasonal factors in there, but does it feel like that has bottomed or is close to a bottom, that, you know, $9 billion and change?

Speaker Change: Okay Fair enough and then.

Speaker Change: Noninterest bearing I know theres, some seasonal factors in there, but does it feel like that.

Speaker Change: As bottomed or as close to a bottom.

Speaker Change: $9 billion and change.

John Kamin: Yeah, John, I feel like we're getting close. It's probably a little early to call the bottom, but what we saw this quarter was January was outflows. Some of that was February, we saw stability, and we actually started to grow in March. So, you know, we feel good about the guidance that we've got out there. We do think it'll continue to kind of come down a little bit, but not much.

Speaker Change: Yes, John I feel like we're getting close it's probably a little early to call the bottom, but what we saw this quarter was January was some outflows and some of that is seasonal February we saw stability and we actually started to grow in March. So we feel good about the guidance that we've got out there. We do think it will it will continue to kind of come down a little bit.

Speaker Change: But not much from here.

Jon Glenn Arfstrom: Okay, good. Just one more on credit. Thank you for the provision guide. I think that helps, but how do you guys expect the NPL balances to progress throughout the year? Is it safe to assume they're going to continue to go up, or is that the wrong read on that?

Speaker Change: Okay. Good and then just one more on credit.

Speaker Change: For the provision guide I think that helps but how do you how do you guys expect.

Speaker Change: The NPL balances to progress throughout the year is it safe to assume theyre going to continue to go up or is that is that the wrong read on that.

John Kamin: I wouldn't assume that, John. You know, as things, as we work things through the pipeline, we're certainly looking to move things out of NPAs as well and will, I think. So it's hard always to predict when someone isn't going to pay you, but I think we're well ahead of that view, if you can, as much as you can with our quarterly problem asset reviews. So I wouldn't necessarily assume it's going to go up from here, but certainly some of the criticized and classifieds will work their way through the pipe over these next 12 to 18 months.

Speaker Change: I wouldn't assume that John.

Speaker Change: As things as we work things through the pipe.

Speaker Change: Certainly looking to move things out of them periods, as well and will I think so.

Speaker Change: It's hard to always to predict when someone isn't going to pay your rent.

Speaker Change: But I think I think we're well ahead of.

Speaker Change: That view, if you can as much as you can without with our quarterly problem asset reviews. So I wouldn't necessarily assume it's going to go up from here, but certainly.

Speaker Change: Some of the criticized and classifieds will work their way through the through the pipe over these next 12 to 18 months.

Speaker Change: Okay Alright. Thank you everyone appreciate it thanks.

Jon Glenn Arfstrom: Okay. All right. Thank you, everyone. I appreciate it. Thanks, John.

Speaker Change: Thanks, Jeff.

Speaker Change: Our next question comes from Chris Thank you Keith.

Christopher Edward McGratty: Our next question comes from Chris McGraty from KDW. Your line is now open.

Chris: Your line is now open.

Christopher Edward McGratty: Jim or John, we have a question just on slide 15, the outlook. If you kind of zoom out and look at the different line items, where do you think that either the biggest opportunity or risk is relative to what you've laid out for us?

Chris: Alright, good morning.

Chris: Good morning, Chris.

Speaker Change: Jim or John maybe a question just on slide 15, the outlook, if you kind of zoom out and look at the different.

Chris: Line item guys, where do you think that the biggest opportunity or risk is relative to.

Speaker Change: So you've laid out for us.

Speaker Change: Yes, Chris I would say the biggest risk is probably just what happens in terms of noninterest bearing and again, we feel pretty good that we're bottoming out there based on the trends that we saw in the quarter, but that would be.

John Kamin: You know, Chris, I'd say the biggest risk is probably just what happens in terms of non-interest bearing. And again, we feel pretty good that we're bottoming out there based on the trends that we saw in the quarter, but that would be the biggest downside risk. I think the biggest upside risk might be for us on the fee line. You know, I think capital markets were a touch soft this quarter; a few swaps one way or another can make a difference there. And you know, it's hard to kind of get really too excited about mortgages, but pipelines there are up pretty solidly, so maybe we'll have a nice spring selling.

Speaker Change: The biggest downside risks I think the biggest upside risk might be for us on the fee line.

Speaker Change: I think capital markets was a touch soft this quarter, a few swaps one way or another can make a difference there.

Speaker Change: <unk>.

Speaker Change: Yes.

Speaker Change: It's hard to kind of get really too excited about mortgage but pipelines, they're up pretty pretty solidly. So maybe we will have a nice spring selling season here.

Christopher Edward McGratty: Okay. And then maybe, Jim, thoughts on just capital return once you get through the integration? Any thoughts on buyback later in the year?

Speaker Change: Okay.

Speaker Change: And then.

Speaker Change: Maybe Jim on thoughts on just capital return once you get through the integration.

Jim: Hi back later in the year.

James C. Ryan: Yeah, a great question and certainly a topic of conversation around here. I think you're right.

Jim: Yes, great Great question and certainly.

Jim: Topic of conversation around here I think you are right I think we're focused on getting through the integration of <unk> kind of getting a better read on what we think the balance of the year looks like.

Christopher Edward McGratty: I think we're focused on getting through the integration of CapStar, kind of getting a better read on what we think the balance of the year looks like. And then, as we get to the back half of the year, I think that could be something that's a serious part of our conversation. You know, unchecked capital grows pretty quickly, and so I think there'll be opportunities to think about capital a little differently than we have in the last couple of years.

Jim: Then as we get into the back half of the year I think that could be something that's a serious part of our conversation.

Jim: Unchecked capital grows pretty quickly and so I think there'll be opportunities to think about capital a little differently than we have the last couple of years.

Christopher Edward McGratty: Okay. And then maybe the final one on a lot of discussion from your peers about de-risking. You guys don't have the concentrations. Is there anything in the portfolio that might be considered to accelerate, just move on, and kind of de-risk while you can?

Jim: Okay.

Speaker Change: And then maybe final one on a lot of discussion from your peers about de risking you guys don't have the concentrations is there anything in the portfolio that.

Speaker Change: Might be.

Speaker Change: Being considered to accelerate just move it move on and kind of Derisk, while while you could.

James C. Ryan: From a high level, from my perspective, there's nothing that we need to do different in our portfolio management. Obviously, it's a constant source of conversation around optimization, but usually it means slowing things down, turning things up, more than it is about moving assets off the balance sheet. So while there's always ongoing portfolio management discipline around that, on the margin, we'll continue to have conversations around asset classes where we think we can get the best return for our capital allocation, and we will make those decisions. But they'll have a de minimis effect quarter in, quarter out.

Speaker Change: From a high level from my perspective, there is nothing that we need to do different or portfolio management, obviously, it's a constant source of conversation around optimization.

Speaker Change: But usually it means slowing things down I'll turn things up than it is about moving assets off the balance sheet. So.

Speaker Change: While theres always always ongoing portfolio management discipline around that on the margin will continue to have conversations around asset classes. We think we can get the best return for our capital allocation and we will make those decisions, but but they'll have a de minimis effect quarter in quarter out.

David Joseph Long: Our next question comes from David Long from Raymond James. Your line is now open.

Speaker Change: Okay. Thanks Robert.

Speaker Change: Thanks.

Speaker Change: Our next question comes from David Long.

David Joseph Long: Good morning, everyone, and thanks for taking my question. Good morning, David.

Speaker Change: James Your line is now open.

David Joseph Long: Good morning, everyone and thanks for taking my question.

David Joseph Long: Good morning, David D wanted to talk about the Nonperformer nonperforming loan line you were up about 20% in the quarter.

David Joseph Long: I wanted to talk about the non-performing loan line. You were up about 20% in the quarter. I think someone mentioned that maybe there's a few credits involved there, but specifically, what happened there in the non-performing loan line and to drive it up 20% in the quarter.

David Joseph Long: I think someone mentioned that maybe there is a few credits involved there, but specifically what's what happened there in the nonperforming loan line.

David Joseph Long: To drive it up 20% in the quarter.

David Joseph Long: Yes.

Mark G. Sander: David, it's Mark. I think it's just the natural ebb and flow of credit. You know, it was three credits that drove it. The largest was a multifamily property that I'm not worried about, candidly, at all. I don't think there's risk of loss there. And then we had two C&I credits that were not related, not symptomatic of any broader concerns. So just episodic three credits

David Joseph Long: David It's Marc I think it's just the ebb and flow of the natural ebb and flow of credit three credits that drove it. The largest was was a multifamily property that I'm not worried about candidly at all I don't think there is risk of loss. There and then we had two C&I credits that were not related that's symptomatic of any.

David Joseph Long: <unk> broader concerns so just episodic three credits.

David Joseph Long: Got it. Thank you, Mark.

David: Got it. Thank you Mark and then operating expenses seem very well managed in the quarter I know you have cap star coming on here.

David Joseph Long: And then operating expenses seemed very well managed in the quarter. I know you have CapStar coming on here. But ex-CapStar, what's going on just with the core operating expenses? It seemed better than expected. Were there any, you highlighted a few items that we took out. Anything else in the quarter that was maybe non-recurring or expenses that maybe you missed out on this quarter?

David: But ex cap star, what's going on just with the core operating expenses. It seems it seems better than expected were there any you highlighted a few items that we.

David: We took out.

David: Anything else in the quarter that that was maybe nonrecurring or expenses that maybe you missed out on this quarter.

John Kamin: Now, I wouldn't characterize anything as non-recurring in there other than what we had called out separately. It was, as you know, sitting in Chicago, a milder winter. We moved less snow around this winter, and that helped. I mean, you know, there's sort of six or seven good guys in there that I would just kind of caution, don't take one cue and run rate it and add a cap star onto it. I think we have a little bit of a lift here in the second quarter, and that's reflected.

Speaker Change: No I wouldn't characterize anything as nonrecurring in there other than what we had called out separately. It was as you know sitting in Chicago, a milder winter, we moved less snow around this winter that helps I mean, there is.

Speaker Change: Theres sort of six or seven good guys in there.

Speaker Change: I would just kind of caution.

Speaker Change: <unk>.

Run rate it and add cap star onto it I think we have a little bit of lift here in the second quarter and Thats reflected in the guidance.

David Joseph Long: Got it. Thanks, John. Thanks for taking my questions, guys.

Speaker Change: Got it thanks, John Thanks for taking my questions guys.

Operator: Thank you. There are no further questions at this time. I'd now like to turn the call back to James Ryan for closing remarks. Well, thank you.

Speaker Change: Thanks, David.

Speaker Change: Thank you.

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

James C. Ryan: Well, thank you, Ellie. As always, we really appreciate your participation. The whole team is going to be available all day today to take any questions you might have as follow-ups. Thank you so much.

James C. Ryan: Well, thank you Ali.

James C. Ryan: As always really appreciate your participation the whole team is going to be available all day today to take any questions you might have as follow ups. Thank you so much.

Operator: This concludes Old National's call. Once again, a replay along with the presentation slides will be available for 12 months on the Investor Relations page of Old National's website, oldnational.com. A replay of the call will also be available by dialing 800-770-2030 with access code 399-2332. This replay will be available through May 7th. If anyone has additional questions, please contact Linnell through calls at 812-464-1368. Thank you for your participation in today's conference call.

Speaker Change: This concludes old nationals.

Speaker Change: <unk> com once again, a replay along with the presentation slides will be available for 12 months on Investor Relations page of Masimo website.

Speaker Change: National Dotcom.

Speaker Change: Play of the call will be available by dialing 877 zero.

Danielle: Thank you Danielle.

Danielle: Ms Karen Greene like mine.

Karen Greene: Thank you.

Karen Greene: This replay will be available through may.

Karen Greene: If anyone has additional questions. Please contact Michele gave calls why Q4 6413.

Speaker Change: Thank you for your participation.

In today's conference call and have a wonderful day.

Speaker Change: And have a wonderful day.