Q1 2025 Old National Bancorp Earnings Call
Speaker Change: Welcome to the Old National Bancorp first quarter 2025 earnings conference call. This call is being recorded and has been made accessible to the public in accordance with the SEC's regulation F.T.
Speaker Change: Good morning earlier today old National reported our first quarter earnings these better than expected results demonstrate our ability to navigate a challenging and uncertain economic environment setting us up favorably as we move into the second quarter and importantly, as we prepare for the close the integration of our partnership with Brammer Bank.
Speaker Change: Our strong deposit franchise of solid loan growth drove results for the past quarter.
Speaker Change: Net interest income and margin performance met expectations non interest income benefited from the gain on sale of some previously acquired loans and from higher fees for mortgages and service charges.
Speaker Change: Our disciplined expense management as reflected in our efficiency ratio net charge offs were in the expected range and we took the opportunity to increase our allowance for credit loss, incorporating global trade and economic uncertainty in our reserve level.
Speaker Change: Additionally, our tangible book value increased meaningfully compared to both the previous quarter and year over year.
Speaker Change: In summary, our first quarter results showcase our disciplined expense management, our ability to maintain margins through careful deposit pricing growth in core deposits and loans and strong credit quality.
Speaker Change: Despite the uncertain macroeconomic environment, we remain confident in our strength supported by a robust balance sheet diverse revenue streams and resilient Midwest markets now.
Speaker Change: Now bolstered by our partner Brummer Bank.
Speaker Change: With over 190 years of experience navigating through uncertainty we are committed to controlling what we can do to serve and support our clients communities and shareholders.
Speaker Change: Before I turn the call over to John I also want to provide an update on our rubber bank partnership.
John: I'm excited to share that we have received all necessary regulatory approvals and anticipate a legal close date of May one.
Speaker Change: We expect conversion of the banking centers and systems to occur in mid October.
Speaker Change: We are thrilled to officially welcome our new clients and team members from across the bremmer footprint, including Minnesota, North Dakota and Wisconsin.
Speaker Change: I've traveled extensively throughout the bremmer footprint meeting team members and clients and I'm, even more convinced that this partnership will be one of our best the individual's and these markets are ones, we know and appreciate.
Speaker Change: Not only does this partnership significantly enhance our footprint, providing greater scale and density in the upper Midwest, but it also offers a valuable booths for our balance sheet and earnings growth in an uncertain environment.
Speaker Change: Which should translate into more value creation for our shareholders then the industry can provide today.
Speaker Change: Thank you I will now turn the call over to John to discuss the quarter results in more detail.
Speaker Change: Thanks, Jim turning to slide four we reported GAAP <unk> earnings per diluted common share of <unk> 44.
Speaker Change: Excluding <unk> <unk> per share of merger related charges adjusted earnings per share were <unk> 45.
Speaker Change: Results were driven by growth in loans and deposits net interest income and margin that were in line with our expectations stable fee income controlled expenses and a favorable tax rate.
Speaker Change: Was benign with normalized levels of charge offs and our return profile as measured on assets and on tangible common equity remained high.
Speaker Change: On slide five you can see our quarterly balance sheet trends, which again highlights stability in our liquidity with continued improvement in our capital position.
Speaker Change: Deposit growth over the last year has again allowed us to organically fund our loan growth, while minimizing our borrowings and broker deposits. We grew our tangible book value per share by 5% as compared to last quarter and by 13% over the last year. We ended the quarter with a strong CET one ratio of 11.62% up 86 basis points from a year.
Speaker Change: With capital levels higher than we had originally modeled at the time, we announced bremmer last November and rates lower we have significant flexibility around the size of our contemplated commercial real estate loan sale post close.
Speaker Change: On slide six we show trends in our earning assets end of period total loans increased one 5% annualized from last quarter or two 3%, excluding approximately $70 million of CRE loan sales in the quarter in line with the lower end of our <unk> guidance production for the quarter was strong throughout our commercial book quarterly.
Speaker Change: New loan production rates are in the high 6% range and marginal funding costs are in the mid 3% range. The investment portfolio increased two 6% from prior quarter due to the reinvestment of cash flows and favorable changes in fair values.
Speaker Change: Duration pulled and modestly linked quarter to just under four we expect approximately $1 7 billion in cash flow over the next 12 months today, new money yields are approximately 150 basis points above back book yields on securities and fixed rate loans.
Speaker Change: The repricing dynamics in both loans and securities combined with loan growth and the Brammer partnership support our expectation that net interest income and net interest margin will grow in 2025.
Speaker Change: Moving to slide seven we show trends in deposits total deposits were up two 1% annualized and core deposits ex brokered were up nearly 1.7% annualized as we remain focused on growth in this key funding source.
Noninterest bearing deposits were 23% of core deposits relatively stable with fourth quarter levels business noninterest bearing and public funds saw a normal seasonal outflows while community deposits grew.
Speaker Change: Our broker deposits were stable and at three 8% as a percentage of total deposits. Our use of brokered continues to be less than half peer levels. The loan to deposit ratio was 89% consistent with last quarter.
Speaker Change: With respect to deposit costs, the 17 basis point linked quarter decrease in our cost of total deposits played out as we expected and total deposit costs held steady throughout the quarter consistent with fed actions.
Speaker Change: Our spot rate on total deposits at March 31 was 190 basis points.
Speaker Change: Moreover, our exception price deposits have experienced a 103% down data since we started lowering rates in that book in early <unk> of 2024, our accumulative total deposit beta came in at 37%, which was favorable to our expectations.
Speaker Change: Overall, we remain confident in the execution of our deposit strategy. We are prepared to proactively respond to future fed rate actions, while staying on offense with new and existing clients to drive above peer deposit growth at reasonable costs.
Speaker Change: Slide eight shows our quarterly income statement trends as I mentioned earlier adjusted earnings per share were 45 cents for the quarter with all key line items in line with our prior guidance.
Speaker Change: Moving on to slide nine we present details of our net interest income and margin net interest income decreased as we had expected and guided with net interest margin likewise down modestly due to lower accretion and fewer days in the quarter.
Speaker Change: Away from accretion and days net interest margin would have been up six basis points with lower deposit costs more than offsetting rate and volume dynamics on the asset side.
Speaker Change: Slide 10 shows trends in adjusted noninterest income, which was $94 million for the quarter and above our guidance. Our primary fee businesses performed well with bank fees, showing normal seasonality and wealth mortgage and capital markets all stable. Despite choppy market conditions late in the quarter other income benefited $4 $8 million from a gain on the.
Speaker Change: Previously mentioned sale of approximately $70 million of commercial real estate loans as a reminder, looking back to fourth quarter. Other income was elevated by approximately $8 million of discreet items continuing to slide 11, we show the trend in adjusted noninterest expenses of $263 million for the quarter, which was moderately better than our.
Speaker Change: Guidance due to lower other expenses predominantly professional fees FDIC assessment and tax credit amortization run rate expenses remained well controlled and we again generated positive linked quarter operating leverage.
Speaker Change: On slide 12, we present, our credit trends total net charge offs were 24 basis points or 21 basis points, excluding three basis points related to PCI loans.
Speaker Change: The delinquency ratio improved from the fourth quarter, while the NPL ratio increased modestly.
Speaker Change: The fourth quarter allowance for credit losses to total loans, including the reserve for unfunded commitments was 116 basis points up two basis points from the prior quarter consistent with the fourth quarter, our qualitative reserves incorporate a 100% weighting on the Moody's as two scenario with additional qualitative factors to capture global trade and economic uncertainty.
Speaker Change: <unk>.
Speaker Change: Also we remind you that our allowance for credit losses, plus the discount remaining on acquired loans. The total loans now stands at nearly 150 basis points.
Speaker Change: Slide 13 presents key credit metrics relative to peers, our proactive approach to credit monitoring has led to above peer levels of npls, the delinquency and charge off ratios that are below peer averages over time.
Speaker Change: Our steadfast approach to client selection conservative structuring and our proactive stance on workouts have long been hallmarks of OMB credit discipline. This in part explains our lower NPL to NCO conversion rates. It is also worth noting that roughly 40% of our npls are from acquired books with appropriate <unk>.
Speaker Change: <unk> and marks.
Speaker Change: On Slide 14, we review our capital position at the end of the quarter all regulatory ratios increased driven by strong retained earnings tangible book value per share was up 5% linked quarter and 13% year over year, and we expect <unk> to improve approximately 10% were $65 million by year end.
Speaker Change: Slide 15 includes updated details on our rate risk position and net interest income guidance.
Speaker Change: This guidance continues to include the original M&A marks and $2 4 billion of loan sales, but NII was updated to reflect the close of brammer on may 1st versus our assumption of July 1st in our prior guidance away from this update our guidance is relatively unchanged with NII expected to increase with the addition of brammer.
Speaker Change: And with the benefit of fixed asset repricing and growth our.
Speaker Change: Our assumptions are listed on the slide, but I would highlight a few of the primary drivers.
Speaker Change: First we assumed three rate cuts of 25 basis points, each which generally aligns with the current forward curve second we assume a five year treasury rate that stabilizes at 4%.
Speaker Change: Third we anticipate our total down rate deposit beta to increase from 37% in first quarter to approximately 40% by <unk>, which is in line with our terminal operate betas and fourth we expect the noninterest bearing mix to remain relatively stable as a percentage of core deposits importantly, our guidance.
Speaker Change: Would be unchanged for one fed cut or no cuts as our balance sheet remains neutrally positioned to short term rates.
Speaker Change: Slide 16 includes our outlook for the second quarter and full year 2025, with the exception of loan growth. All guidance includes brammer closing on May one to two months earlier than the July 1st assumption in our original 2025 guidance again. This guidance continues to include the original M&A marks and $2 $4 billion of loan sales.
Speaker Change: Excluding this update our guidance is essentially unchanged. We believe our current pipeline support full year loan growth, excluding the impact of bremmer of 4% to 6%, which is expected to ramp up over the course of the year. We anticipate continued success in the execution of our deposit strategy and expect to meet or exceed the industry growth in 2025.
Speaker Change: Other key line items are highlighted on the slide at the midpoint of the range on these lines. You'll note that we expect full year results that yield earnings per share in line with current analyst consensus estimates and again feature positive operating leverage and a peer leading return profile with good growth in fees controlled expenses and normalized credit.
Speaker Change: As we noted the bottom of the slide uncertainty surrounding global trade and the macroeconomic outlook, if prolonged could widen the range of possible outcomes. This year with respect to both growth and rates that said the pending bremmer closed creates interesting alternatives a few thoughts there as compared to the M&A model.
Speaker Change: <unk> that we presented last November OMB is capital starting points are almost 30 basis points higher than we had expected parameters underlying performance has also tracked slightly better <unk>.
Speaker Change: <unk> stock is lower and rates are approximately 40 basis points lower across the board, suggesting lower marks all else equal on balance. This is expected to result in higher legal day, one capital levels, creating significant balance sheet optionality more specifically, while our guidance continues to incorporate up.
Speaker Change: The $2 $4 billion of loan sales, we believe more day, one capital can support a larger pro forma balance sheet, a tremendous lever to have in a year that looks likely to be more uncertainty than we would have guessed. When we last spoke in January we will provide an update to this guidance with <unk> earnings once we finalize accounting marks.
Speaker Change: In summary, echoing Jim's opening comments, we had a strong start to 2025.
Speaker Change: We remained on offense with growth in both loans and deposits, we showcased stability in fee income and disciplined expense management, we continued to execute against our deposit pricing strategy. We maintained strong credit quality and finally, we anticipate closing our brammer partnership two months earlier than expected on May <unk> and.
Speaker Change: Look forward to welcoming our newest team members and clients Bremmer will not only provide greater scale and density in the upper Midwest, but also provides meaningful balance sheet flexibility and earnings growth in an uncertain environment with those comments I'd like to open the call for questions.
Speaker Change: At this time I would like to remind everyone in order to ask a question. Please press Star then the number one on your telephone keypad.
Speaker Change: For just a moment to compile the Q&A roster.
Speaker Change: Your first question comes from the line of Jared Shaw with Barclays. Please go ahead.
John: Hi, This is John <unk> on for Jared Good morning.
Speaker Change: Good morning.
John: Just maybe starting with brammer.
Speaker Change: A better capital.
Speaker Change: It's good to hear because that is what impacted that.
Speaker Change: Maybe the outlook is there less accretion is just like a ballpark.
Speaker Change: And the accretion assumes versus the last quarter, yes.
Speaker Change: Yes, John So for 2025, what we've got in there is still the original M&A assumption. So it's the same model that we would have presented back in November of last year and that would include still $2 $4 billion of commercial real estate loans and I think what we're trying to message here today is day, one legal day, one close capital.
Speaker Change: <unk> is in all likelihood if we re rack is today going to result in much higher capital levels.
Speaker Change: So that $2 $4 billion is very likely to be less than $2 $4 billion, which would be an offset to the <unk>.
Speaker Change: Pork on purchase accounting accretion that will be coming off on the right Mark.
Speaker Change: Okay. That's helpful.
Speaker Change: And then just on some of the guidance.
Speaker Change: But 40% deposit beta.
Speaker Change: Does that include brammer.
Speaker Change: It does not Thats core OMB and look I would just note on that that's where we expect to be at at <unk>, We've still got.
Speaker Change: Fairly large exception price book that where.
Speaker Change: We're grinding down.
Speaker Change: Over time, I think our expectation was that we were going to match our operate beta on the downside will be there by the end of <unk>, but I think there is room to go yet and so we will continue to work that book.
Speaker Change: Okay, perfect and then just.
Speaker Change: Last one for me.
Speaker Change: The other in other fee income has had a kind of a lumpy a couple of quarters, let's say good run rate for that.
Speaker Change: Grammar.
Speaker Change: In a normal environment.
Speaker Change: Yes, it's been bouncing around a little bit and obviously, we had the loan sale in there. This this quarter last quarter, we had $8 million of discrete items.
Speaker Change: If you look at <unk> and kind of back out 8 million Bucks look at this quarter back out about 5 million Bucks Thats, a pretty good run rate for that.
Speaker Change: Aggregate, though if you look at the guide I mean, the guidance basically unchanged, but for two extra months of brammer in there on the 2025 guidance that we've got.
Speaker Change: Okay perfect. Thank you well that's all for me.
Speaker Change: Yeah.
Ben Garlinger: Your next question comes from the line of Ben Garlinger with Citi. Please go ahead.
Ben Garlinger: Good morning, Ben.
Speaker Change: I know you guys haven't you said the unique position of potentially selling or not selling capital looks better assuming rates don't go crazy here over the next week so.
Speaker Change: So when you're thinking about like what would be the driving factors for that decision I mean, it's probably somewhere in the middle maybe you saw some maybe you saw dumped or not all of it I guess you can say, but is there something specifically you are looking for other than just better capital because I would assume you don't do anything changing.
Ben Garlinger: Yeah, Ben I think it's three things really that we're focused on one is.
Speaker Change: Double digit CET one.
Speaker Change: It is important to us.
Speaker Change: I think we're going to land there again to your point barring rates going absolutely crazy here in the next.
Speaker Change: Less than two weeks.
Speaker Change: I think double digit CET one.
Speaker Change: It's really important to us at total is up in the second effect total risk base is the second consideration and the CRE as a percentage of total risk based would be that would be the third one.
Speaker Change: <unk> base.
Speaker Change: Based on what we know today, we're going to land in a really good place on all three of those and so that gives a significant flexibility Ben I would just say this is a nice offset.
Speaker Change: If we think growth is more challenging today than we thought it was when we began the year. This is a nice offset to that which is the <unk>.
Speaker Change: Tailwind that most don't have today, and we're really lucky that we have that for us.
Speaker Change: Got it no I really appreciate that point because it's essentially.
Speaker Change: Quite a year, but a pretty healthy couple of quarters worth of potential growth that you have in your back pocket.
Speaker Change: Thinking like when you look at the original guidance you kind of assume the two plus billion sale. So if you don't sell any.
Speaker Change: That is either some upside on your own.
Speaker Change: All year 'twenty outlook.
Speaker Change: Yes at Woodbine.
Speaker Change: Okay.
Speaker Change: It really does incorporate the wholesale day, one which is now may 1st rather than July 1st.
Speaker Change: Just making sure I have that correct.
Speaker Change: That's correct.
Speaker Change: Sure I appreciate the time thanks, guys.
Speaker Change: Thanks Pat.
Speaker Change: Your next question comes from the line of Scott <unk> with Piper Sandler. Please go ahead.
Speaker Change: Good morning, Scott morning, guys. Thanks for.
Speaker Change: Taking the question maybe.
Speaker Change: You sort of walk us through broadly where are your customers' heads are at or just sort of what they are telling you.
Speaker Change: And sort of where they are relative to say January when we last spoke and then I guess just as importantly, what.
Speaker Change: Has to happen to get them back on track with how they might have been thinking about things before.
Speaker Change: All this tariff turmoil.
Speaker Change: Started or they could we see a snapback in activity or are they sort of guarding in for a lower growth higher inflation environment.
Speaker Change: People thinking.
Speaker Change: I'm going to push it over to mark since he's in the room with us.
Speaker Change: Scott.
Speaker Change: Yes.
Speaker Change: Yes, good good good to hear from you. This is overall are doing well and as you say get back on track I would say, it's been more of a pause, but they havent really changed our plans suddenly.
Speaker Change: Certainly over the last couple of months as well.
Speaker Change: About a little bit more of a wait and see a little bit of a pause, but it hasnt had anybody changed their plans. Our pipelines are still really strong which is why as we look at our production in Q1 and what our pipelines look like now we haven't changed our guidance yet even as people are taking a little bit more.
Speaker Change: This is going to turn out.
Speaker Change: Approach.
Speaker Change: And then CRE.
Speaker Change: I'd also emphasize CRE is pretty active these days.
Speaker Change: Even the rate gyrations of the last few weeks has tempered, what's becoming an increasingly competitive market. So there is still a decent level of activity out there.
Speaker Change: Okay perfect. Thank you for that Mark and then maybe John can you sort of help us with.
Speaker Change: What are the underlying NII cadence through the through the year I know you know you suggested in your prepared remarks, both margin and NII should increase I presume that means sort of organic ex <unk>, but just maybe sort of the puts and takes since it's going to be kind of a noisy couple of quarters with brammer layered in starting 90 days.
Speaker Change: Now.
Speaker Change: Yes.
Speaker Change: I think 15 of the deck gives you gives you our best guess at exactly how thats going to play out I think on a core basis, we would expect to see some some.
Speaker Change: Better core margin <unk> and NII dollars growth.
Speaker Change: And that would that would continue in <unk> and then obviously.
Speaker Change: Prime are coming in in May early gives us gives us a nice lift.
Speaker Change: Yep.
Speaker Change: Gotcha, Okay perfect. Thank you guys very much thanks.
Scott: Thanks Scott.
Your next question comes from the line of Chris Mcgratty with <unk>. Please go ahead.
Chris: Good morning, Chris.
Chris Mcgratty: Hey, Jim Hey, John.
Chris: A question on the loan growth.
Chris: I think in your prepared remarks, you talked about a little bit of a ramp over the course of the year.
Chris: I guess, how do we reconcile that with all the macro.
Chris: Our pipeline are you confident in the pipeline poultry.
Chris: Maybe talk me through kind of the guidance on the loan growth.
Chris: I'd say it this way.
Chris: Chris It's mark and the pipeline is up 30% from a year ago or accepted categories up 50% from a year ago. So against that would seem to indicate we're going to have nice strong loan growth. So we've tempered that a little bit with the caution I spoke of a few minutes ago and Thats what gets us back to that mid single digit that we saw.
I believe yes.
Speaker Change: The pull through rates and C&I I think are holding up the pull through rates and CRE candidly are down a little bit. It's just a more competitive marketplace, but again with the pipeline up 30% I think that bodes well for continued growth and as Chris as I look at the total year I think mark is absolutely right.
Speaker Change: There is more uncertainty around what that forecast could look like and then we started the year with but again I'd just point back to we have a lot of flexibility is coming alive post closing here and I think that allows us.
Speaker Change: To take into account.
Speaker Change: Through those loan sales or lack of loan sales Eddie kind of offset to any organic growth. We might have here, which is something unique we can offer today.
Speaker Change: Okay. Thanks, Thanks for that Jim just more broadly on capital.
Speaker Change: Any thoughts on on restarting the buyback post close given the where the stocks.
Speaker Change: We certainly thought about it.
Speaker Change: It's just too early to tell we're really going to see how what the marks come through.
How much balance sheet flexibility, we want to use that extra capital. We didn't think we would have.
Speaker Change: And all things being equal I guess, Chris I'd, rather have a bigger balance sheet is stronger capital levels that I would to buyback today.
Speaker Change: Given this our attractively priced.
Speaker Change: But I do think the best for our shareholders is to have a slightly bigger balance sheet than we anticipated.
Speaker Change: And then and then we are going to generate capital very rapidly so.
Speaker Change: I think that becomes a question for the back half of the year and into 2006 is how do we optimize capital, but I think just stay one here would be really focused on getting the right size of the balance sheet with the right capital stack.
Speaker Change: And then look at.
Speaker Change: Alternative uses of capital, including the buyback okay.
Speaker Change: Thank you.
Your next question comes from the line of David Long with Raymond James. Please go ahead.
Speaker Change: Good morning, everyone. Good morning, David.
Speaker Change: Hey.
Speaker Change: In this more uncertain backdrop versus what we're looking at in January you guys kept your loss provision guide and just wanted to see how how maintaining that guide squares with the worsening economic forecast and potential incremental risks that you may see.
Speaker Change: Yes, still still feel really good about our ultimately feel really good about what the loss content looks like right. So the provisional kind of cover that plus plus.
Speaker Change: Plus growth.
Speaker Change: Again, David as you know, we're 100% weighted against an asset to scenario today.
Speaker Change: We've thrown a little bit extra just for the global trade.
Speaker Change: Trade and.
Speaker Change: And macroeconomic uncertainty.
Speaker Change: In this quarter's results and feel feel really good about where we're provision so and all of our credit metrics came in right, where we thought they would.
Speaker Change: Got it got it great. Thanks for that color and then second question I had relates to your prior acquisition down in Nashville.
Speaker Change: Just wanted to get an update on expansion plans, there and investments there and has the backdrop changed your appetite to grow that at the pace you are contemplating earlier in the year.
Speaker Change: Yes, I don't think the economic environment has changed our desires at all that would be an area, we want to continue to grow and invest in.
Speaker Change: We've got some great teams on the ground.
Admittedly, we're probably subscale, where we ultimately want to be in that marketplace. So I think this is a long term investment play both of talent and probably some infrastructure over time.
Speaker Change: We feel like that's still we still feel really good about that initial investment and the investments. We've made so far and importantly, I think that will be an area that will get an outsized portion of investment going forward.
Speaker Change: Great. Thanks, a lot guys I appreciate it.
Speaker Change: Thanks, Sir.
John Armstrong: Your next question comes from the line of John Armstrong with RBC capital markets. Please go ahead.
Speaker Change: Thanks, Good morning, good morning.
John Armstrong: John Good to hear from you.
John Armstrong: Thank you.
John Armstrong: John brand for you just maybe a follow up.
John Armstrong: David's question on reserves.
Speaker Change: <unk> quango qualitative reserves.
Speaker Change: 25% of your total ACO, how does that compare to history.
Speaker Change: It's up a little bit as compared to where it was I think we were running low twenty's a couple of quarters back in 24 in the first quarter. So it's it's up just a touch.
Speaker Change: Okay, Okay got it.
Speaker Change: And then on.
Speaker Change: Slide 715, you guys. It looks like you had a nice step down in deposit costs.
Speaker Change: How much more room do you think you have you flagged the $7 billion and time in brokered and just curious how much more room, you think you have been bringing deposit costs down.
Speaker Change: I think we've got some room to run here, obviously, there is an opportunity and the timing broker, particularly in the broker time bucket.
Speaker Change: We have intentionally kept that very short as you know so we get a couple of bites at that on the way down if things change and then.
Speaker Change: Exception book still sit in.
Speaker Change: $3 34, and a good chunk of the deposits in the bank today.
Speaker Change: Mike and his team continue to grind that book lower.
Speaker Change: And thats kind of.
Speaker Change: How we do it around here I mean, this is hand to hand kind of combat that.
Speaker Change: A very very granular process very very detailed but I think we've got opportunity in that book to bill Okay.
Speaker Change: Okay.
Jim: Just maybe one more if I can Jim first couple of things you want to tackle them.
Jim: May 1st or second when brummer closes.
Jim: Yes.
Jim: Heading your way this afternoon to spend some time with our team members up there and.
Jim: Just pleased and we've had the chance to travel footprint.
Jim: Including being in Fargo in February So we were we.
Jim: We were really pleasantly.
John: Pleased with well all the team members of clients. We've met so I think it's just it's more of the cultural integration John I think that's what we do exceptionally well and we're just going to spend an awful lot of time up there, making sure that the team has welcomed the clients know that we want to continue to serve them. The way. They have been served in the past and really leverage the strength now.
Jim: Greater scale and density.
John: That footprint that we previously had so.
John: I guess, it's a little bit more of the same but obviously this is a big partnership for us and so we're going to give it the investment that's going to be required to ensure a successful.
John: Just to elaborate on that.
John: Tackling that well prior to may 1st right. So thats been yes, we are.
John: Now that we've been up their presence and.
Combined I think a few weeks ago, we had 30 different locations across North Dakota and Minnesota.
John: And so we'll be doing more of the same or the spring and into the summer.
Speaker Change: Okay. Thank you very much.
Speaker Change: Before going to the next question again, if you would like to ask a question press Star one on your telephone Keypad. Your next question comes from the line of Terry Mcevoy with Stephens. Please go ahead.
Speaker Change: Good morning, Jerry.
Terry Mcevoy: Hi, Good morning, maybe John I, just wanted to make sure you agree with my math just hypothetically if you held the $2 $4 billion of CRE loans that.
Terry Mcevoy: That would be that would have an impact of about $34 $6 million of NII. When I look at your presentation and Thats about 910 cents of earnings so again hypothetical but am I am I accurate there.
Speaker Change: Hypothetically, Terry Youre accurate Youre Directionally correct.
Speaker Change: Okay. Thank you for that and then I guess I'll stick with the NII seem what drives that step up in the fourth quarter of 2005, it seems like Youre pretty neutral and I asked that question just because based on our math I'm getting a larger step up in Q3 close to closer to that Q4 run rate that's on page 15.
Terry Mcevoy: It's the it's the role of the fixed asset repricing Terry is a good chunk of that and just kind of timing of some of that role.
Terry Mcevoy: And then growth being back end loaded in.
Terry Mcevoy: The year on a core organic basis.
Terry Mcevoy: Perfect Great. Thanks for taking my question I appreciate it Terry I would just add you know.
Terry Mcevoy: I think the the up to number I encourage us to continue to look at some selective pruning regardless of where the capital comes in I think it is an opportunity that you get with the purchase accounting marks.
Terry Mcevoy: <unk> optimize the portfolio so.
Terry Mcevoy: I encourage us to continue to look for those opportunities to make sure that it is the portfolio, we want to own for a long time so.
Terry Mcevoy: I would be shocked if we're able to keep a number that you just suggested.
Terry Mcevoy: But nonetheless, it will be something that.
Terry Mcevoy: We will look at really hard once we get the capital in <unk>.
Terry Mcevoy: From the day one marks.
Jim: Great Thanks for that Jim.
Jim: There are no further questions at this time I'd like to turn the call back to Jim Brian for closing remarks.
Jim: Well, we appreciate all your participation as usual the full team will be here all day long to answer any questions you might have thank you very much.
Jim: 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 of National Dot Com.
Jim: The call will also be available by dialing 800, 700 702030 access code 5176690.
Jim: This replay will be available through may six.
Jim: Anyone has additional questions. Please contact lanell darcos at 824641366. Thank you for your participation in today's conference call.
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