Q2 2024 Old National Bancorp Earnings Call
Operator: Welcome to the Old National Bancorp second quarter 2024 earnings conference call. This call is being recorded and has been made accessible to the public in accordance with the SEC's regulations.
Welcome to the old National Bancorp second quarter 2024 earnings Conference call. This call is being recorded and has been made accessible to the public in accordance with the S. E. CS regulation FD corresponding presentation slides can be found on the Investor relations page at old National Dot Com.
Operator: 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 today's call may be forward-looking in nature and are subject to certain risks, uncertainties, and other factors that could cause actual results or outcomes to differ from those disclosed. The company refers you to its forward-looking statement legend in the earnings release and presentation slides.
And will be archived there for 12 months.
Speaker Change: 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 disclosed.
Speaker Change: The company refers you to its forward looking statement legend in the earnings release and presentation slides.
Speaker Change: The company's risk factors are fully disclosed and discussed within its S E SEC filings.
In addition, certain slides contain non-GAAP measures, which management believes provides more appropriate comparisons.
These non-GAAP measures are intended to assist investors' understanding of performance trends reconciliations for these numbers are contained with the appendix of the presentation.
Operator: The company's risk factors are fully disclosed and discussed within its SEC filings. In addition, certain slides contain non-GAAP measures, which management believes provide more appropriate comparisons. These non-GAAP measures are intended to assist investors' understanding of performance trends. Reconciliations for these numbers are contained in the appendix of the presentation. I'd now like to turn the call over to Old National's Chairman and CEO, Jim Ryan, for opening remarks. Mr
Speaker Change: I'd now like to turn the call over to old National's, Chairman and CEO, Jim Ryan for opening remarks, Mr. Ryan.
James C. Ryan: Good morning. Earlier today, Old National reported our second quarter 2024 results. Our earnings per share exceeded expectations due to better than expected revenue growth and lower expenses, which led to positive operating leverage. These strong second quarter results were driven by our investments in new markets and talent in our footprint, supported by our peer-leading low cost deposit franchise, solid credit performance, and ample capital. We remain focused on the acceleration of our wealth management, treasury management, and capital markets businesses.
James C. Ryan: Good morning earlier today, all National reported our second quarter 2024 results our earnings per share exceeded expectations due to better than expected revenue growth and lower expenses, which led to positive operating leverage.
These strong second quarter results were driven by our investments in new markets and talent in our footprint supported by our pure leading low cost deposit franchise solid credit performance and ample capital.
Speaker Change: We remain focused on the acceleration of our wealth management Treasury management and capital markets businesses.
James C. Ryan: Before moving to our second quarter highlights, I also want to provide you an update on our previously announced partnership with the Nashville-based Capstar Bank, which closed on April 1st and expanded our franchise to several strong and vibrant southeastern markets. I'm pleased to share that last week we successfully completed all banking center and systems conversion for this partnership. As of July 15th, all former Capstar branches have been converted to Old National Banking Centers, and all legacy Capstar team members are now operating in the Old National Network.
Speaker Change: Moving to our second quarter highlights I also want to provide you an update on our previously announced partnership with the Nashville based cap Star Bank, which closed on April one and expanded our franchise to several strong and vibrant southeastern markets.
Speaker Change: Pleased to share that last week, we successfully completed all banking center and systems conversion for this partnership.
Speaker Change: As of July 15th all former cap star branches have been converted to old national banking centers at all legacy caps. Our team members are now operating and the old National network.
James C. Ryan: The success of our partnership would not have been possible without our team members' hard work, passion, professionalism, and collaboration. And I want to take this opportunity to acknowledge and thank everyone involved in the integration for a job extremely well done. Now, moving to our second quarter highlights on slide 5, we reported GAAP earnings of $0.37 per common share, and our adjusted EPS was $0.46. These adjusted earnings per share results exceeded consensus estimates by 2 cents, or 5%.
Speaker Change: Success of our partnership would not have been possible without our team members' hard work passion professionalism and collaboration.
Speaker Change: And I want to take this opportunity to acknowledge and thank everyone involved in the integration for a job extremely well done.
Speaker Change: Now moving to our second quarter highlights on slide five we reported GAAP earnings up 37 per common share and our adjusted EPS was <unk> 46 cents.
Speaker Change: These adjusted earnings per share results exceeded consensus estimates by <unk> <unk> or 5%.
James C. Ryan: Our adjusted return on average changeable common equity for the quarter was 17.2%, and our adjusted ROA was 1.12%. Additionally, our adjusted efficiency ratio was a low 52.6 percent. Excluding deposits and loans assumed in the CapStar transaction, our total deposit growth was 2.4% annualized during the quarter, and our loan growth was 5.9% annualized, including CapStar deposits were up a total of $2.3 billion, and loans were up $2.6 billion in the quarter. Our total cost of deposit for the hoarder remains at a low 216 basis points.
Speaker Change: Our adjusted return on average tangible common equity for the quarter was 17, 2% and our adjusted ROA was 1.1% 2%.
Speaker Change: Our adjusted efficiency ratio was a low 52, 6%.
Speaker Change: Excluding deposits and loans assumed in the cap star transaction, our total deposit growth was two 4% annualized during the quarter and our loan growth was five 9% annualized.
Speaker Change: Including caps, our deposits were up a total of $2 3 billion and loans were up $2 6 billion in the quarter.
Speaker Change: Our total cost of deposits further water remains at a low 216 basis points.
James C. Ryan: At the same time, we remain focused on growing our tangible common book value per share, which grew 10% from a year ago. In summary, our second quarter 2024 earnings evidenced another strong on-plan quarter for Old National. We exceeded analysts' expectations due to our strong deposit franchise, disciplined loan growth, solid credit quality, and ample capital. With that, I'll now turn the call over to John.
Speaker Change: At the same time, we remain focused on growing our tangible common book value per share, which grew 10% from a year ago.
John: Thanks, Jim. Turning to slide six, you can see our second quarter balance sheet, which highlights continued stability in our liquidity and our capital position. Our balance sheet also reflects the close of the CapStar transaction on April 1st. Total deposit growth over the last year has again allowed us to organically fund loan growth while holding borrowings flat. Additionally, we were able to grow our tangible book value per share by 10% over the last year.
In summary, our second quarter 2024 earnings evidenced another strong on planned quarter for old National we exceeded analysts' expectations due to our strong deposit franchise disciplined loan growth solid credit quality and ample capital.
Speaker Change: With that I'll now turn the call over to John.
John: Thanks, Jim turning to slide six you can see our second quarter balance sheet, which highlights continued stability in our liquidity and our capital position.
John: Our balance sheet also reflects the close of the cap star transaction on April one.
John: Total deposit growth over the last year has again allowed us to organically fund loan growth, while holding borrowings flat.
John: Additionally, we were able to grow our tangible book value per share 10% over the last year.
John: Given its relative size and our strong retained earnings in the quarter, the addition of CapStar was essentially capital neutral, with our CET1 ratio unchanged despite closing the deal. 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 30% dividend payout ratio. Our loan-to-deposit ratio ticked up modestly due to a planned deposit runoff of approximately $400 million at CapStar.
John: Given its relative size and our strong retained earnings in the quarter. The addition of cap star was essentially capital neutral with our CET one ratio unchanged. Despite closing the deal.
John: 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 30% dividend payout ratio.
John: Our loan to deposit ratio ticked up modestly due to planned deposit runoff of approximately $400 million of cap star our liquidity and capital levels continue to provide a strong foundation, which positions us well as we enter the back half 2024.
John: Our liquidity and capital levels continue to provide a strong foundation that positions us well as we enter the back half of 2024. On slide seven, we show the trend in total loan growth and portfolio. Total loans grew $2.6 billion, with $2.1 billion attributable to CapStar. Excluding CapStar, total loans grew 5.9% annualized from last quarter, in line with our expectations. We remain focused on full relationships and structure at prices that meet our risk-adjusted return requirements.
John: On slide seven we show the trend in total loan growth and portfolio yields total loans grew $2 6 billion with $2 1 billion attributable to cap star Excluding cap Star total loans grew by one 9% annualized from last quarter in line with our expectations.
John: We remain focused on full relationships and structure at prices that meet our risk adjusted return requirements.
John: New loan production rates in the high 7% range and marginal funding costs in the mid 4% range support our expectation that net interest income will grow modestly for the remainder of 2024. The investment portfolio increased 3% in the quarter due to the CapStar transaction. Shortly after closing, we repositioned CapStar Investments, which improved our total portfolio yields. Overall, fair values and duration were effectively unchanged.
John: New loan production rates in the high 7% range and marginal funding cost in the mid 4% range support our expectation that net interest income will grow modestly for the remainder of 2020 for the investment portfolio increased 3% in the quarter due to the cap star transaction. Shortly after closing, we reposition cap star investments, which improved our <unk>.
Portfolio yields overall fair values and duration were effectively unchanged as we've mentioned in past calls new money yields continue to run 200 basis points above back book yields and we have approximately $1 $3 billion in cash flows expected over the next 12 months.
John: As we've mentioned in past calls, new money yields continue to run 200 basis points above back book yields, and we have approximately $1.3 billion in cash flows expected over the next 12 months. Moving to slide 8, we show our trend in total deposits, which grew $2.3 billion, with $2.1 billion tributable to CapStar. As mentioned earlier, we intentionally ran approximately $400 billion of higher-cost deposits out of CapStar at closing.
John: Moving to slide eight we show our trend in total deposits, which grew to $3 billion with $2 1 billion attributable to cap star as mentioned earlier, we intentionally ran approximately $400 million of higher cost deposits out of cap star at closing excluding.
John: Excluding CapStar, total deposits grew 2.4% annualized, with normal seasonal outflows in commercial and retail deposits offset by public fund and broker deposit increases. However, our broker deposits as a percentage of total deposits are 4.6% and remain well below peer level. We did see a 15 basis point increase in deposit rates compared to the prior quarter, with Capstar driving approximately five basis points at that upward pressure. That said, deposit costs leveled out at 216 basis points and were steady over the course of the quarter, which was consistent with our spot rate at June 30.
John: Excluding cap star total deposits grew two 4% annualized with normal seasonal outflows in commercial and retail deposits offset by public funds and broker deposit increases our broker deposits as a percentage of total deposits are four 6% and remained well below peer levels.
John: We did see a 15 basis point increase in deposit rates compared to the prior quarter with cap star driving approximately five basis points of that upward pressure that said deposit costs leveled out at 216 basis points and were steady over the course of the quarter, which was consistent with our spot rate at June 30 over.
John: Overall, we remain pleased with the execution of our deposit strategy, and we believe we are stabilizing with respect to both total cost and the non-interest-bearing mix. Slide nine provides our quarterly and income. We reported GAAP net income applicable to common shares of $117 million, or $0.37 per share. Reported earnings include the following pre-tax items. $19 million in merger-related charges and $15 million of CECL Day 1 non-PCD provision expense. Excluding these items, our adjusted earnings per share was 46 cents.
John: Overall, we remain pleased with the execution of our deposit strategy and we believe we are stabilizing with respect to both total cost and the noninterest bearing mix.
John: Slide nine provides our quarter end income statements.
John: We reported GAAP net income applicable to common shares of $117 million or <unk> 37 per share reported earnings include the following pre tax items $19 million in merger related charges and $15 million of seasonal day, one non PCB provision expense.
Excluding these items our adjusted earnings per share was <unk> 46 cents.
John: Moving on to slide 10, we present details of our net interest income in March. The spread revenue and margin were both slightly better than forecast, primarily due to higher asset yields and accretion. Our low total deposit cost of 216 basis points remains a key competitive advantage. Year over year, we again showed deposit growth that essentially kept pace with asset generation while maintaining a low total cost of funds. On slide 11, we show trends in adjusted non-interest income, which was $87 million for the quarter, with CapStar contributing $7 million.
John: Moving on to Slide 10, we present details of our net interest income and margin.
John: Spread revenue and margin were both slightly better than forecast, primarily due to higher asset yields and accretion.
John: Our low total deposit cost of 216 basis points remains a key competitive advantage year over year. We again showed deposit growth that essentially kept pace with asset generation, while maintaining a low total cost of funding.
John: On Slide 11, we show trends in adjusted noninterest income, which was $87 million for the quarter with cap star contributing $7 million.
John: Our primary fee businesses performed well, with bank fees in line with our expectations, mortgage benefiting from seasonality and modest improvements in production and pipelines, and capital markets returning to more normalized levels. Continuing to slide 12, we show the trend in adjusted non-interest expenses of $264 million for the quarter, with CapStar contributing $18 million. Expenses were in line with our guidance and remain very well controlled. On slide 13, we present our credit trends, which remain stable, reflecting the quality of both our commercial and consumer portfolios.
John: Our primary fee businesses performed well with bank fees in line with our expectations mortgage benefiting from seasonality and modest improvements in production and pipelines and capital markets returning to more normalized levels.
John: Continuing to slide 12, we show the trend in adjusted noninterest expenses of $264 million for the quarter with cap star contributing $18 million expenses were in line with our guidance and remain very well controlled.
John: On slide 13, we present, our credit trends, which remained stable, reflecting the quality of both our commercial and consumer portfolios. The delinquency ratio remained stable in the nonperforming loan ratio decreased four basis points total net charge offs were 16 basis points and a low 11 basis points, excluding five basis points related.
John: The delinquency ratio remains stable, and the non-performing loan ratio decreased four-base points. Total net charge-offs were 16 basis points and a low 11 basis points, excluding 5 basis points related to PCD loans. Our second quarter allowance for credit losses to total loans, including reserve for unfunded commitments, was 108 basis points, up five basis points from the prior quarter. There were no material changes to our model assumptions, and the weighting on the Moody's S3 scenario remains 100%.
John: <unk> loans.
John: Our second quarter allowance for credit losses to total loans, including reserve for unfunded commitments was 108 basis points up five basis points from the prior quarter. There were no material changes to our model assumptions.
John: And the weighting on the Moody's S. Three scenario remains 100%. It is also worth mentioning that our allowance for credit losses, plus the discount remaining on acquired loans to total loans now stands at 161 basis points.
John: It is also worth mentioning that our allowance for credit losses, plus the discount remaining on acquired loans to total loans, now stands at 161 basis points. Slide 14 presents key credit metrics relative to peers. As you can see, our proactive approach to credit monitoring has led to above-peer levels of NPLs but delinquency and charge-off ratios that are well below peer averages over long periods of time. We have long practiced conservatism here, and we believe the results speak for themselves. With CRE remaining in focus, we have enhanced disclosure in this quarter's presentation. I'll turn it over to Mark on slide 15.
Slide 14 presents key credit metrics relative to peers as you can see our proactive approach to credit monitoring has led to above peer levels of mpls, but delinquency and charge off ratios that are well below peer averages over long periods of time.
John: We have long practice conservatism here and we believe the results speak for themselves.
John: With CRE remaining in focus we have enhanced disclosure in this quarter's presentation I'll turn it over to Marc on Slide 15.
Mark: Thanks, John. Given the heightened focus on credit and CRE in particular, this quarter, we decided to dive deeper into our loan portfolio and specifically expand on certain segments that we have been watching more closely for some time. Slide 15 breaks down our $36 billion portfolio, which is well diversified across our desired and actual mix of approximately 40% C&I, which includes owner-occupied CRE given it is underwritten as C&I, 30% Investors Series, and 30% highly rated consumer.
Marc: Thanks, John given the heightened focus on credit and CRE in particular this quarter, we decided to dive deeper into our loan portfolio and specifically expand on certain segments that we have been watching more closely for some time.
Marc: Slide 15 breaks down our $36 billion portfolio, which is well diversified across our desired and actual mix of approximately 40% C&I, which includes owner occupied CRE given it is underwritten as C&I.
Marc: 30% Investor CRE, and 30% highly rated consumer <unk>.
Mark: The investor's theory of $11.7 billion is well diversified across subsegments, the most noteworthy of which I will talk about in a minute. Importantly, owner-occupied CRE represents $4.3 billion of our portfolio, with a modest risk profile in line with the rest of our C&I book. Lastly, on this page, our diversity is reflected geographically across our footprint as well, with modest out-of-market exposures driven almost entirely by in-market relationships. We have presented looks similar to slide 16 many times, so to briefly reiterate, we believe our pending maturity schedule is extremely manageable.
Marc: Investor CRE of $11 7 billion is well diversified across sub segments. The most noteworthy of which I will talk about in a minute.
Importantly, owner occupied CRE represents $4 3 billion of our portfolio with a modest risk profile in line with the rest of our C&I book.
Marc: Lastly on this page our diversity as reflected geographically across our footprint as well with modest out of market exposures driven almost entirely by end market relationships.
Speaker Change: We are.
Speaker Change: Rented looks similar to slide 16, many times so to briefly reiterate we believe our pending maturity schedule is extremely manageable.
Mark: We have always stressed our CRE loans in underwriting at 300 basis points over current rates, such that the vast majority of our pending maturities have interest rates still within that range. We have only about 400 million maturing over the next 18 months, which are at rates outside of this underwriting cushion, and most of those have since seen rent growth well beyond our originally underwritten level. CRE office space has been a concern industry-wide for some time, so we thought more color was warranted, as seen on slide 17.
Speaker Change: We have always stressed our CRE loans in underwriting at 300 basis points over current rates such that the vast majority of our pending maturities have interest rates still within that range.
Speaker Change: We have only about $400 million maturing over the next 18 months, which are at rates outside of this underwriting cushion and most of those have since seen rent growth well beyond our originally underwritten levels.
Speaker Change: CRE office has been a concern industry wide for some time. So we thought more color was warranted as seen on slide 17.
Mark: Though sometimes a segment gets painted with the same brush, not all office loans are alike. With an average loan size of $2.9 million, our portfolio looks a great deal like the picture on the left, which is generally a lower risk than the one on the right. Our office exposure is well diversified by loan size and geography. The lowest risk segments in this space, investment grade tenants and or medical office buildings, comprise over 40% of our office exposure, and the highest risk segment, central business districts, less than 14%.
Speaker Change: So sometimes a segment gets painted with the same brush not all office loans are like with.
Speaker Change: With an average loan size of $2 9 million our portfolio looks a great deal like the picture on the left which is generally lower risk than the one on the right.
Speaker Change: Our office exposure is well diversified by loan size and geography.
Speaker Change: The lowest risk segments in this space investment grade tenants <unk> medical office buildings comprise over 40% of our office exposure and the highest risk segment central business districts less than 14%.
Mark: The credit metrics overall of our office portfolio are strong, with an average debt service coverage of nearly 1.5 times and a weighted average loan-to-value of 64%. As in all of our portfolios, we are well-disciplined around maximum individual credit exposure. In this case, the largest is $50 million, and the top 10 drop dramatically from there.
Speaker Change: The credit metrics overall of our office portfolio are strong with an average debt service coverage of nearly one five times and a weighted average loan to value of 64%.
Speaker Change: As in all of our portfolios, we are well disciplined around maximum individual credit exposures. In this case, the largest is $50 million and the top 10 dropped dramatically from there.
Mark: On slide 18, we cover multifamily, our largest segment in investor CRE at $5.5 billion. Our multifamily lending trends much more towards middle-income tenants than Class A high-rises in major metro-MUR. This book is also well-diversified and granular, with an average loan size of just over $5 million. Overall, this asset class remains stable in our markets, although prolonged higher interest rates have impacted some more recent projects. Here again, we have strong credit metrics in terms of debt service coverage ratios and loan-to-values, and the portfolio is well-diversified by dollar exposure and location. Our largest exposures are well within our moderate risk tolerance, represent long-term tenured relationships, and tend to have stronger credit metrics. I'll now turn the call back to John.
Speaker Change: Yes.
Speaker Change: On slide 18, we cover multifamily our largest segment and investor CRE at $5 5 billion.
Speaker Change: Our multifamily lending trends much more towards middle income tenants than class a high rises in major metro markets.
Speaker Change: This book is also well diversified and granular with an average loan size of just over $5 million.
Speaker Change: Overall this asset class remains stable in our markets, although prolonged higher interest rates have impacted some more recent projects.
Speaker Change: Here again, we have strong credit metrics in terms of debt service coverage ratios and loan to values and the portfolio is well diversified by dollar exposure and location.
Speaker Change: Our largest exposures are well within a moderate risk tolerance represent long tenured relationships and tend to have stronger credit metrics.
Speaker Change: Now I'll turn the call back to John.
John: Thanks, Mark. On slide 19, we review our capital position at the end of the quarter. As expected, ratios were essentially unchanged from the first quarter, with the impact of the close of the CapStar transaction absorbed by strong retained earnings. Slide 20 includes updated details on our rate risk position and net interest income guidance. NII is expected to increase modestly in the third and fourth quarters. Our assumptions are listed on the slide, but I will highlight a few of the primary drivers.
John: Thanks, Marc on Slide 19, we review our capital position at the end of the quarter as expected ratios were essentially unchanged from the first quarter with the impact from the close of the cap star transaction absorbed by strong retained earnings.
Speaker Change: Slide 20 includes updated details on our rate risk position and net interest income guidance NII is expected to increase modestly in the third and fourth quarters are assumptions are listed on the slide but I would highlight a few of the primary drivers first we assumed two rate cuts of 25 basis points each consistent with the forward curve.
John: First, we assumed two rate cuts of 25 basis points each, consistent with the forward curve. Second, we are now anticipating a declining rate deposit beta of approximately 30 percent in a non-interest bearing deposit mix that falls 22 percent by year end. We continue to believe that we have positioned the balance sheet well as we reach the end of this rate cycle, and we have achieved a neutral rate risk position. In addition to the two-cut scenario, we ran a three-cut scenario and a static curve through our models.
Speaker Change: Second we are now anticipating a declining rate deposit beta of approximately 30% and a noninterest bearing deposit mix that false 22% by year end.
Speaker Change: We continue to believe that we have positioned the balance sheet well as we reached the end of this rate cycle and we have achieved at neutral rate risk position.
Speaker Change: In addition to the two cuts scenario, we did run a three cuts scenario and a static curve through our models. The results of each were not materially different from our base case scenario again, suggesting we have effectively managed the balance sheet to neutral.
John: The results of each were not materially different from our base case scenario, again suggesting we have effectively managed the balance sheet to neutral. Slide 21 includes thoughts on our outlook for the remaining items in the third quarter and the full year 2024. As you can see, our guidance is essentially unchanged with a modest increase in NII reflecting this quarter's results in a slightly wider provision. That range reflects loan growth and annual charge-offs that are unchanged.
Speaker Change: Slide 21 includes thoughts on our outlook for the remaining items in the third quarter and the full year of 2024 as you can see our guidance is essentially unchanged with a modest increase in NII, reflecting this quarter's results and a slightly wider provision range.
Speaker Change: That range reflects loan growth in annual charge offs that are unchanged, although second half charge offs are expected to run modestly higher than the 15 basis points. We have experienced in the first half we remain comfortable with our full year outlook of 15% to 20 basis points.
John: Although second-half charge-offs are expected to run modestly higher than the 15 basis points we experienced in the first half, we remain comfortable with the full-year outlook of 15 to 20 basis points. In summary, we had an excellent first half of 2024, with second 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 continue to organically fund our long-term growth.
Speaker Change: In summary, we had an excellent first half of 2024 with second 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 continue to organically fund our loan growth second our adjusted return profile remains top quartile against.
Speaker Change: Peers at 17% on tangible common equity.
Speaker Change: Third we remain disciplined on operating expenses with an adjusted efficiency ratio below 53% fourth we have clean credit with non PCB net charge offs was just 11 basis points, along with a well diversified and granular loan book and fifth we are continuing to rapidly compound tangible book value per share, which was up 10% year over.
John: Second, our adjusted return profile remains top quartile against peers at 17% on Tangible Common Act. Third, we remain disciplined on operating expenses with an adjusted efficiency ratio below 53%. Fourth, we have clean credit with non-PCD net charge-offs at just 11 basis points, along with a well-diversified and granular loan book. And fifth, we are continuing to rapidly compound tangible book value per share, which was up 10% year over year. With those comments, I'd like to open the call.
Speaker Change: Per year.
Speaker Change: With those comments I'd like to open the call for your questions.
Operator: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. If you would like to withdraw your question, simply press star 1 again. Your first question comes from the line of Scott Siefers with Piper Sandler. Your line is open. Good morning, everyone.
Speaker Change: Thank you if you would like to ask a question. Please press star one on your telephone keypad. If you would like to withdraw your question simply press Star one again.
Scott <unk>: Your first question comes from the line of Scott <unk> with Piper Sandler Your line is open.
Robert Scott Siefers: Thanks for taking the question. Okay. I guess, yeah, likewise. Thank you.
Scott <unk>: Good morning, everyone. Thanks for taking the question.
Eric: Hey, good Eric I guess.
Speaker Change: Likewise, thank you.
John: Wanted to ask on just sort of the beta assumption, maybe John when you. When you think of the 30% down beta maybe just sort of the inside baseball on.
John: I wanted to ask about just sort of the beta assumption. Maybe, John, when you think of the 30 percent down beta, maybe just sort of the inside baseball on sort of why you think that's the right number and maybe some thoughts on how that would trend after 4Q24. You know, presumably there's some catch-up later on as time marches on, but just curious how that would sort of flex into 2025 as well.
Speaker Change: So why are you thinking that's the right number and maybe some thoughts on how that would trend after.
Speaker Change: For Q2, 'twenty four you know, presumably there is some some catch up.
Speaker Change: Later on.
As time marches on but just curious how that would sort of flex into 2025 as well.
John: Yeah, thanks, Scott. So, you know, I think most of where we're going to get the down beta from is really out of the exception price book. That book today is $12.3 billion, 31% or so of total deposits, 38% of our total transaction deposits. And that's, you know, at the quarter end, sort of 430 was the cost on that book.
Scott <unk>: Yeah. Thanks, Scott so.
I think most of what we're going to get the down data from is really out of the exception price book that book today is $12 3 billion, 31% or so of total deposits of 38% of our total transaction deposits and thats at the quarter sort of $4 30 was that was the cost on that book and we think we'll be able to drop that pretty quick.
Scott <unk>: I mean, I think I think that will be close to 85% kind of beta on the way down so thats, where most of it will be.
John: And we think we'll be able to drop that pretty quick. I mean, I think that'll be close to, you know, 85% of beta on the way down. So that's where most of it will be. And then, you know, depending on the path of the short-term rates into 2025, I think that'll sort of influence what we're able to do with the exception price book. 2025, I think, is more about fixed asset repricing, though, and shaping the curve.
Scott <unk>: And then depending on the path to short term rates into 2025, I think that'll that'll sort of influence what we're able to do with that with the exception price book 2025, I think is more about fixed asset repricing, though and shape of the curve.
Robert Scott Siefers: Okay, perfect. Thank you. And then maybe switching gears for a second to the loan growth, maybe just a broad thought or two on where that growth is coming from. I ask, sort of in the context of it, you know, it's been a very weak backdrop for the rest of the industry that you all seem to be outperforming, you know, maybe sort of where that is coming from and then maybe over the next several months, do you see trends getting better or worse and why would that be the case?
Speaker Change: Okay perfect. Thank you and then maybe switching gears for a second to the loan growth, maybe just a broad thought or two on where that growth is coming from ask sort of in the context of it it's been a very weak backdrop for the rest of the industry that you all seem to be outperforming.
Speaker Change: Maybe sorry.
Speaker Change: Where is it coming from and then maybe over the next several months do you see trends getting better or worse and why would that be the case.
Mark: Hey Scott, it's Mark.
Mark: Hey, Scott its mark.
Scott <unk>: Loan growth this quarter was broad across the footprint.
Mark: The loan growth this quarter was broad across the footprint. It was about evenly split between CRE and C&I. In CRE, we had some construction draws that helped boost it a bit. And in C&I, some of the hires we've made over the last few years in our expansion markets gave us some outsized growth. And this quarter, we had a really nice quarter from our business banking team. That's our core business that has full relationships. And
Speaker Change: About evenly split between CRE and C&I.
Speaker Change: Here, we had some construction draws it helped boosted a bit and in C&I and just some of the hires we've made over the last few years in our expansion markets give us some outsized growth in this quarter, we had a really nice quarter from our business banking team. That's our that's our core business, that's full relationships and so it's nice to see them grow nearly $100 million this quarter. So what.
Speaker Change: Widely diversified.
Speaker Change: Okay.
Robert Scott Siefers: Perfect. All right. Thank you for taking the questions.
Speaker Change: Perfect Alright, thank you for taking the questions.
Speaker Change: Scott.
Brendon B. Falconer: Your next question comes from the line of Brendon Nosal with the Hovde Group. Your line is open.
Speaker Change: Your next question comes from the line of Brendan Nosal with Husky Group. Your line is open.
Brendon B. Falconer: Hey, good morning, guys. I hope you're doing well. Thanks, Brendon. It's good to hear from you. Let me just start off on kind of the outlook overall at a high level. I mean, you've broadly reiterated the guide for the rest of this year, but it feels like a fair bit has changed environmentally since April, especially with respect to the rate outlook and the environment. I mean, I guess I'm just wondering if you had a bias or feeling better or worse about the outlook you've offered now for the past two quarters, where would you focus on that?
Brendon B. Falconer: Hey, good morning, guys hope you're doing well.
Speaker Change: Thanks, Brendan good to hear from you.
John: Yeah, look, I think the balance sheet is neutral. So NII, I mean, we've been saying for a couple quarters now, it doesn't really matter what happens with short rates.
Brendon B. Falconer: Maybe just to start off on kind of the outlook overall at a top level and you've probably reiterated the guide for the rest of this year, but it feels like a fair bit changed environmentally since April, especially with respect to the rate outlook <unk> environment. I guess I'm. Just wondering if you had a bias you're feeling better or worse about the outlook <unk> offering out in the past two quarters.
Speaker Change: You folks salt life.
Speaker Change: Yes look I think the balance sheet as neutral so NII I mean, we've been saying for a couple of quarters now it doesn't really matter what happens with short rates.
John: You know, I think if there were... perhaps some room for upside. I'd point to the fee lines where we continue to invest in wealth management. Those investments are starting to bear some fruit. Mortgage is bouncing along the bottom but was seasonally better in 2Q than maybe what we would have expected. That'd be where I think we might have a little bit of upside to the guide out there.
Speaker Change: I think if there were.
Speaker Change: Perhaps some room for upside I point to the fee lines, where we continue to invest in wealth management those investments are starting to bear some fruit.
Speaker Change: Mortgages bouncing along the bottom but was plus.
Speaker Change: Seasonally better in <unk> than maybe what we would've expected.
Speaker Change: It would be February I think we might have a little bit of upside to the guide out there.
Brendon B. Falconer: Perfect, thanks. Maybe one more from me before I step back. Can you help us unpack the NII guide for the rest of the year in terms of how you see the margin trending in the back half, especially in light of the core margin firming up this quarter?
Speaker Change: Okay. Thanks, maybe one more from me before I step back.
Speaker Change: Can you help us unpack the NII guide for the rest of the year in terms of how you see the margin trending in the back half, especially in light of the core margin terming out this quarter.
John: Yeah, I think it's a couple of basis points one way or another in the third quarter and then fourth quarter. We'd expect to see things start to pick up.
Speaker Change: Yes, I think I think it's a couple of basis points, one way or another in third quarter, and then fourth quarter, we would expect to see things start to improve.
Brendon B. Falconer: All right. Fantastic. Thanks for taking the questions. Thank you.
Speaker Change: Alright fantastic thanks for taking the questions.
Speaker Change: Thank you.
Jared Shaw: Your next question comes from the line of Jared Shaw with Barclays. Your line is open.
Speaker Change: Your next question comes from the line of Jared Shaw with Barclays. Your line is open.
Jared Shaw: Hey, good morning.
Jared Shaw: Morning, John.
Jared Shaw: Maybe just sticking with the NII and margin, can you share with us what accretion was this quarter and what the expectation is for accretion as we go into the third and fourth quarters?
Jared Shaw: Maybe just sticking with with the NII and margin.
Speaker Change: Can you share with us what accretion was this quarter and what the expectation is for accretion as we go into third and fourth quarter.
John: I would say the difference in accretion versus the last quarter was about five and a half million bucks that came in from Capstar, rough, tough, a three basis point helper, and I'd expect that to be pretty flat for the balance.
Speaker Change: I would say the difference in accretion versus the versus the last quarter was about $5 5 million Bucks that came in from cap star.
Speaker Change: Up top at three basis point helper and I'd expect that to be pretty flat for the balance of this year.
Jared Shaw: Okay, so stable at this, you know, let's call it, you know, 11-6 in the second quarter. Okay, um, and then... Any color on credit migration within Criticize Classified and how you're looking at those?
Speaker Change: Okay. So stable at this let's call it 11 six and.
Speaker Change: Second quarter.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change:
Speaker Change: And then.
Speaker Change: Any any color on credit migration within criticized classified.
Speaker Change: And and how your Youre looking at.
Speaker Change: Those trends.
Mark: Yeah, Jared, it's Mark again. In this quarter's weeks, we saw about 75 million come in and criticize and classify from Cap Star, which is what we expected. And then multifamily drove the bulk of the rest of the migration this quarter, not unexpected. You had some properties with a little slower lease up, and so the excess cash flow has tightened a bit, but we still feel really good about those properties. They're really solid properties, with strong sponsor support and very low loss content.
Speaker Change: Yes, Joe it's Marc again in.
Speaker Change: In this quarter, we saw about $75 million coming to criticize and classified from cap start which is what we expected and then multifamily drove the bulk of the rest of the migration this quarter not unexpected had some properties.
Speaker Change: Although slower lease up and so the excess cash flows tightened a bit but we still still feel really good about those properties, they're really solid properties strong sponsor support and very low loss content, we believe.
Jared Shaw: Okay, and then looking at the debt service coverage ratio on Office, it looks like that improved or increased this quarter. Any color on what was driving that, and is that sort of a stable level, you think, for the category? I think, you know, that remains to be seen.
Speaker Change: Okay, and then looking at the debt service coverage ratio on the office it looks like that improved our increase this quarter.
Speaker Change:
Speaker Change: Any any color on what was driving that and is that sort of a stable stable level you think for the category.
Mark: I think, you know, that remains to be seen, but, you know, we haven't seen the deterioration in those ratios to any effect at this point, so the best we have is what's happening right now, and it seems to be stabilized.
Speaker Change: Thanks.
Speaker Change: Remains to be seen but we haven't seen the deterioration in those ratios.
Jenny: Jenny effect at this point so the best eyesight, we have is what's happening right now and it seems to be stabilizing.
Jenny: Great. Thank you.
Terence James McEvoy: Your next question comes from the line of Terry McEvoy with Stevens. Your line is open.
Jenny: Your next question comes from the line of Terry Mcevoy with Stephens. Your line is open.
Terence James McEvoy: Thank you, everyone.
Terence James McEvoy: Hi, good morning, everyone.
Speaker Change: Good morning, Terry good to hear from you.
John: Same here. Thanks for slides 17 and 18. I always like pictures. Maybe a question for John, just, yeah, I guess, simple: how do you do that?
Terence James McEvoy: Same here.
Speaker Change: Thanks for slide 17, and 18 always like pictures.
Speaker Change: Maybe a question for John.
Speaker Change: Can you just I guess simple how do you fund, 5% to 7% annualized loan growth, what's your assumptions on deposit growth use of wholesale funding.
John: For Q3 in the back half of the year.
John: Yeah, so certainly, Terry, the mission around here has been for... For a really long time, but we probably got even more focused on it last year, you know We are all deposit gatherers And and so certainly the the intention would be to fund our asset generation with with core core deposits And we've been able to do that so far. So if you look year over year
Terence James McEvoy: Yes, so certainly Terry the mission around here has been for.
Speaker Change: For a really long time, but we probably got even more focused on it last year.
Speaker Change: All deposit gathers.
And so certainly the intention would be to fund our asset generation with that with core core deposits.
Been able to do that so far so if you look year over year, our asset generation is basically kept pace with our with our deposit generation.
Speaker Change: That would be the plan going forward to the extent that we have a quarter that.
Speaker Change: Assets are a little bit lighter than the asset generation, we've got plenty of capacity on brokered and a lot of a lot of capacity on wholesale as well if we if we chose to.
James C. Ryan: And I would just remind you, we've said this publicly before, but we're going to remain on the offense. You know, to the extent that there are banks that will continue to be aggressive, as rates fall, we will remain on the offense. And we just believe this is a good long-term play for us. So I look forward to that opportunity if it presents itself.
Speaker Change: I'll just remind you we said this publicly before but we're going to remain in the office.
Speaker Change: To the extent that there are banks that will continue to be aggressive.
Speaker Change: Rates fall, we will remain on the offense and we just believe this is a good long term play for us. So I look forward to that opportunity if it presents itself.
Terence James McEvoy: And from prior conversations, you've been really conscious of the TCE ratio, which is called 7%. I guess my question is, where would that ratio need to be today before you'd think about share repurchase?
Speaker Change: Thanks for that and.
Speaker Change: From prior conversations you've been real conscious of the TCE ratio, which is call it 7%.
Speaker Change: I guess my question is where would that ratio need to be today before you'd think about share repurchase.
James C. Ryan: Ian Terry, this is Jim. You know, certainly it's a tool we're very conscious of. Clearly, the TCE ratio is in a better spot, you know, post our partnership in Chicago. Obviously, the stock price, and we're sensitive to the earn back, and if you look at today's stock price, which we're very pleased to have that earn back extend out, it's a little less attractive to it than it once was. But I think we'll just continue to evaluate, you know, each day to see if the tool makes sense to use. At this point in time, though, I don't think we need to rush into anything and just let the back half of the year play out.
Speaker Change: Yes, Terry this is Jim.
Speaker Change: Certainly it's a tool it's a tool we're very conscious of clearly the TCE ratios in a better spot post.
Speaker Change: Our partnership in Chicago.
Speaker Change: Obviously, the stock price and we're sensitive to the earn back and if you look at today's stock price, which we're very pleased to have that earn back extend out.
Speaker Change: It's a little less attractive to us than it once was.
Speaker Change: But I think we'll just continue to evaluate.
Speaker Change: Each day.
Speaker Change: To see if the tool makes sense to us at this point in time, though I don't I don't think we need to rush into anything and just let the back half of the year play out.
Terence James McEvoy: And maybe just stepping out of the earnings model, could you talk about kind of synergies in the national market between wealth and banking and vice versa, and maybe retention in that market now that the deal's been closed for three or four months?
Speaker Change: Okay.
Speaker Change: Maybe just stepping onto the earnings model could you talk about kind of synergies in the Nashville market between wealth and banking and vice versa, and maybe retention in that market now that the deal's been closed for three or four months.
John: Let me just give you a high-level overview, and I'll let Mark or Jim jump in as well. I got to tell you, I was just down there not too long ago and met with a bunch of different clients. We're bringing our board meeting down there in August, and so we're going to have a client event down there with 150-plus clients and have a chance to interact and really talk about the future of Nashville, and the future of the Southeast for us as we just kind of evaluate the opportunities.
Let me just give you a high level view and I'll, let mark or Jim jump in as well I got to tell you.
Speaker Change: Down there not too long ago and met with.
Speaker Change: A bunch of different clients, we're bringing our board meeting down there in August and so we're going to have a client event down there with the 150 plus clients and have a chance to interact and really talk about the future of Nashville, the future of the southeast for US as we just kind of evaluate the opportunities and I am I continue to be.
John: And I continue to be blown away by the opportunities that present themselves to us. There's obviously no shortage of good banks that are down there, but that doesn't mean we can go out and compete effectively. We've got a great team down there. There's just so much organic growth, which is going to present opportunities for us. And while we've always been bullish on that opportunity, every single time we're down there, we get reinforced that the opportunities are endless with us in terms of our team members that are down there and completely engaged, as well as new business opportunities.
Speaker Change: Blown away by the opportunities that present themselves to US there are obviously no shortage of good banks that are down there, but that doesn't mean, we can go out and compete effectively we got a great team down there. There's just so much organic growth, which is going to present opportunities for us and while we've always been bullish on that opportunity every.
Speaker Change: Single time, we're down there we get reinforced.
Speaker Change: But the opportunities are endless with us in terms of our team members that are down there are completely engaged as well as well as the new business opportunities.
Mark: Retention has been really high, Terry, and it's early, but I just would say this team is really excited to join Old National. I think they look at the cultural fit and the capabilities that we bring to the table, and they're excited about them. And to the first part of your question, we haven't even begun to tap the wealth opportunities that are there. This wasn't something that Capstar did much of, candidly, and I think we've got a really strong capability. We've got a strong team that was already there, if you can recall. So both sides of that equation are very excited.
Speaker Change: Yes retention has been really high dairy and it's early but I just would say this team is really excited to join old National I think they look at the cultural fit and the capabilities that we bring to the table and they are excited about and to your the first part of your question.
Speaker Change: We haven't even begun to tap the wealth opportunities that are there. This wasn't something that cap star did much of candidly and I think we've got a really strong capability. We've got a strong team that was already there. If you may recall, so both sides of that equation are very excited.
Speaker Change: Okay.
Terence James McEvoy: Thanks, everyone. Have a great day. Thank you, Terry.
Speaker Change: Thanks, everyone have a great day, thank you Terry.
Christopher Edward McGratty: Your next question comes from the line of Chris McGratty with KBW. Your line is open.
Speaker Change: Your next question comes from the line of Chris Mcgratty with <unk>. Your line is open.
Speaker Change: Hey, good morning.
Chris: Good morning, Chris.
Christopher Edward McGratty: Um, Jim, any, uh... Any thoughts of tweaking any exposures in the back half of the year? Either post-deal?
Jim any.
Christopher Edward McGratty: Any thoughts of tweaking any exposures in the back half of the year either post deal I mean, there is not you don't have a CRE problem, but.
James C. Ryan: I mean, you don't have a CRE problem, but... There's decent liquidity for certain assets. Anything that's on the books that might not be core going into 25.
Chris: Yes.
Speaker Change: There's decent liquidity for certain assets any anything it's on the books that might not be core going into 'twenty five.
Christopher Edward McGratty: Well, you know, I think all banks retain a certain amount of their balance sheets that's got flexibility around. And while we have, there's no specific plans for us anywhere, I think we need to continually look to optimize the balance sheet. You know, and so, you know, we'll need to continue to look at how we're able to bring core funding in to support new growth. One thing's for sure, we're going to continue to acquire new relationships.
Speaker Change: Well I think all banks retain a certain amount of its balance sheet, that's got flexibility around and while we have no specific plans for us anywhere.
Speaker Change: We'd need to continually look to optimize the balance sheet.
Speaker Change: And so.
Speaker Change: We will need to continue to look at how we're able to bring core funding and to support new growth one thing for sure we're going to continue to acquire new relationships.
Speaker Change: When those relationships are full relationships, we have a huge appetite to continue to grow and you can clearly see we have demonstrated that.
Christopher Edward McGratty: You know, when those relationships are full relationships, we have a huge appetite to continue to grow, and you can clearly see we've demonstrated that. You know, one of the challenges we have had in the past was our ability to grow. That is clearly not a challenge today. We've got great markets, great people, and great growth opportunities ahead of us. So to the extent that there are non-core assets that are on the balance sheet or have limited relationships, I think that there is an opportunity for us to continue to optimize the balance sheet.
Speaker Change: One of the challenges you followed us for a long time and one of the challenges we had in the past was our ability to grow that is clearly not a challenge today, we've got great markets great people great growth opportunities ahead of us so to the extent that there are non core assets that are on the balance sheet or have limited relationships. I think there is an opportunity for us to continue to optimize the balance sheet, but none.
Christopher Edward McGratty: But nothing big or wholesale in nature that would dramatically change, you know, what you'd expect to see us looking like in the back after the year. But it's something we've got to continually challenge ourselves to look at.
Speaker Change: Big are wholesale in nature that would dramatically change what you would expect to see us looking like in the back half of the year, but it's something we've got to continually challenge ourselves to look at.
James C. Ryan: Okay, perfect. Maybe dovetailing on the buyback question, any change in how you're thinking about strategic M&A into 25? I know organics is the focus, but any change there? Yeah, I really don't see it, you know...
Speaker Change: Okay perfect.
Speaker Change: Maybe dovetailing on the buyback question.
Speaker Change: Any any change in how youre thinking about strategic M&A and the 25.
Speaker Change: I know organics, the focus but any any change there would be great.
James C. Ryan: Yeah, I really don't see why. I think there will be plenty of opportunities for presenters to present themselves to us in the coming years. Our appetite, I think I would express, is very limited right now. I think just given the organic growth opportunities, the execution that we have in our core markets and the markets we've added through talent, and obviously now in Tennessee and North Carolina, I think we owe it to ourselves and owe it to our shareholders to continue to focus on that.
Speaker Change: Yes, I really don't see why I think there'll be plenty of opportunities that presented present themselves to us in the coming years.
Speaker Change: Our appetite I think I would express is very limited right now.
Speaker Change: I think just given the organic growth opportunities the execution that we have.
Speaker Change: In our core markets and the markets, we've added through talent and obviously now in Tennessee, and North Carolina, I think I think we owe it to ourselves a note to our shareholders to continue to focus in on that and as we've talked about previously before the idea of compounding tangible book value and a double digit clip.
James C. Ryan: And as we've talked about before, the idea of compounding tangible book value at a double-digit clip for the next few years sounds really appealing and really attractive, and I think, ultimately, may drive the highest reward for our shareholders.
Speaker Change: For the next few years, so it's really appealing a really attractive I think ultimately may drive the highest reward for our shareholders.
Speaker Change: Got it thanks.
Jon Glenn Arfstrom: Once again, ladies and gentlemen, if you have a question, it is star 1. Your next question comes from the line of John Arfstrom with RBC. Your line is open.
Speaker Change: Once again, ladies and gentlemen, if you have a question it is star one.
Jon Glenn Arfstrom: Your next question comes from the line of Jon <unk> with RBC. Your line is open.
Jon Glenn Arfstrom: Good morning. Good morning, John. How are you? Good. I'll start with you.
Jon Glenn Arfstrom: Hey, Thanks, good morning.
John: Hey, good, good. Maybe we could start with you, John.
Jon Glenn Arfstrom: Morning, John how are you hey, good good.
Speaker Change: Maybe start with you John you talked about the high 7% on new origination yields and mid four funding costs.
Jon Glenn Arfstrom: You talked about the high 7% on new origination yields and the mid for funding costs. Would you say the new production is margin accretive at this point, or is it margin neutral? Margin of creative, um, on the deposit costs. [inaudible] Slide 8, I see that flat deposit cost of $216 at the end of the quarter. What do you think that looks like in a quarter or two? What's the message you're trying to send there? Is the pressure stopped?
Speaker Change: Would you say the new production is margin accretive at this point or is it margin neutral.
Speaker Change: Margin accretive.
Jon Glenn Arfstrom: Okay.
Speaker Change: On the deposit costs.
Jon Glenn Arfstrom: Slide.
Speaker Change: <unk> I see that flat.
Speaker Change: Deposit costs of $2 16 at the end of the quarter.
Speaker Change: Do you think that looks like in a quarter or two what's the message you're trying to send there is the pressure stopped.
John: I think that the pressure has largely... Moderated, I do think it's still competitive out there. And again, as long as we can continue to do margin of creative business, we're going to stay on our front foot. So if you were to go out to Old National's website today, you'd see us running specials that are very competitive. We are open for business, and we're going to fund this bank.
Speaker Change: I think the pressure has largely.
Speaker Change: Moderator.
Speaker Change: I do think it is still it's still competitive out there and again as long as we can continue to do margin accretive business, we're going to stay on our front foot right. So if you were to go out the old National's website today, you'd see you'd see us running specials that are that are very competitive.
Speaker Change: We are open for business and we're going to fund this bank.
Speaker Change: I think that it's it's moderating the worst of it is clearly behind us could we see a little drift up in third quarter, Yes, thats possible.
John: I think that it's moderating. The worst of it is clearly behind us. Could we see a little drift upward in the third quarter? Yeah, that's possible.
Jon Glenn Arfstrom: Okay. Tying that into the non-interest-bearing guide to 22% by the end of the year, do you feel like that's it? Or do you think that continues to leak lower naturally? Or do you feel like we're getting to the bottom on that percentage?
Okay.
Speaker Change: Tying into that the noninterest bearing guide the 22% by the end of the year.
Speaker Change: Do you feel like Thats, it or does that do you think that continues to leak lower naturally or do you feel like we're getting to the bottom on that percentage.
John: I think we're getting there. I think we're toward the bottom, and part of the secret sauce around here, as you know, is just the granularity of the book, right? I mean, something like 80% of the relationships here are less than $25,000. The average on that book is like $4,500, right? At some level, there's still probably a little bit of cash sorting that needs to happen, but I think we're
Speaker Change: I think we're getting there I think we're towards the bottom in part and part of that part of the secret sauce around here is as you know it's just the granularity of the book right I mean, something like 80% of the relationships here are less than $25000. The average on that book is like 4500 box right at some level there.
Speaker Change: Probably a little bit of cash sorting that needs to happen, but but I think we're through most of it.
Jon Glenn Arfstrom: Okay, okay. And then just to wrap up, you feel like a cut or two isn't necessarily beneficial to your outlook, but maybe just the new production is beneficial to the margin outlook. Is that a fair way to look at it, or am I misreading that?
Speaker Change: Okay, Okay, and then just to wrap up.
Speaker Change: You feel like a cut or two.
Speaker Change: Isn't necessarily beneficial so your outlook, but but maybe just the new production is beneficial to the margin outlook is that a fair way to look at it or am I Miss reading that.
Jon Arfstrom: Is that a fair way to look at it, or am I misreading that?
John: Yeah, no, that's a fair way to look at it, John. Yeah, okay.
Unknown Executive: Yeah, no, that's a fair way to look at it, Jon. Yeah, okay.
Yes, that's a fair way to look at it John.
Jon Glenn Arfstrom: Okay. All right. Thank you very much.
Jon Arfstrom: All right, thank you very much.
Speaker Change: Okay.
John: Alright, Thank you very much.
Sean: Yes, Sean.
Unknown Executive: There are no further questions at this time.
James C. Ryan: There are no further questions at this time. I'd like to turn the call back to Jim Ryan for closing remarks.
John: There are no further questions at this time I would like to turn the call back to Jim Ryan for closing remarks.
James Ryan: I'd like to turn the call back to Jim Ryan for closing remarks. Well, thank you for your support today. As always, the team will be here to answer any follow-up questions you have.
James C. Ryan: Well, thank you for your support today. As always, the team will be here to answer any follow-up questions you have. Hope you all have a great day.
James C. Ryan: Well. Thank you for your support today as always the team will be here to answer any follow up questions you have.
James Ryan: Hope you all will have a great day.
James C. Ryan: Hope you all have a great day.
Unknown Executive: 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. Access code 297-3663. This replay will be available through August 6th.
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, access code 297-3663. This replay will be available through August 6th. If anyone has additional questions, please contact Linnell Durkholz at 812-464-1366. Thank you for your participation in today's conference call. You may now disconnect.
Speaker Change: 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, all national Dot Com a replay of the call will also be available by dialing 807 7020.
Speaker Change: L. Three zero access code 290 73663.
Speaker Change: This replay will be available through August six if anyone has additional questions. Please contact Linda out their calls.
Unknown Executive: If anyone has additional questions, please contact Lionel Dirkles at 812-464-1366. Thank you for your participation in today's conference call.
Speaker Change: Eight one to 4641366.
Speaker Change: Thank you for your participation in today's conference call you may now disconnect.
Unknown Executive: You may now disconnect.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Sure.
[music].