Q2 2025 Old National Bancorp Earnings Call
Welcome to the Old National Bank Corp. Second 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 FD.
Corresponding presentation, slides can be found on the investor relations page at old national.com.
And will be archived there for 12 months.
Management would like to remind everyone that certain statements on today's call may be forwarded looking in nature and our subject to certain risks uncertainties and other factors that could cause actual results or outcomes to differ from those discussed.
The company refers you to its forward-looking statement legend in the earnings release and presentation slides.
The company's risk risk factors are fully disclosed and discussed within its SEC filings.
in addition, certain slides contain non-gaap measures, which management believes provide provide more appropriate comparisons,
These non-gaap measures are intended to assist investors understanding of performance trends.
Reconciliations for these numbers are contained within the appendix of the presentation.
I'd now like to turn the call over to Old Nationals, chairman and CEO, Jim Ryan for opening remarks
Mr. Ryan
Jim Ryan: Good morning earlier today. Old Nash reported an impressive second quarter earnings and announced the appointment of Tim Burke as our new president and coo.
Jim Ryan: Today is Tim's first day with us and we've opted not to include him on the call to allow him time to get oriented.
Speaker Change: Mark Sanders last days. Also today, Mark will always be a part of the Old National family. And I am incredibly grateful for his partnership. Thank you, Mark, we wish you the absolute best of retirement.
Speaker Change: Tim and his family are relocating from Northeast Ohio, and he has dedicated nearly 30 years of his banking career to serving clients and communities right here in the Midwest. Most recently, he held an executive position at a Super Regional Bank where he oversaw a comprehensive range of commercial, banking services, across 12, Midwestern markets, including those in Illinois, Indiana and Michigan.
I am confident that Tim possesses The Experience. Energy optimism, and passion necessary to ensure that Old National continues to outperform, our peers exceed, our client's expectations, strengthen our communities, and deliver outstanding returns for our shareholders. I look forward to the positive impact that he will undoubtedly make in the months and years to come.
Speaker Change: Now, back to our quarterly results, we met or exceeded all of our previous guidance. For the second quarter, these impressive results were driven by a strong focus on the fundamentals, growing our balance sheet and proving our feed based businesses and maintaining a well-controlled expenses.
Speaker Change: Furthermore, we were pleased to close our partnership with Bremer Bank ahead of schedule on May 1st.
Speaker Change: We remain on track for the systems conversion of Bremer to our in mid October.
Speaker Change: That charge all fell within our expected range. We made meaningful progress and portfolio management by reducing Legacy criticizing classified assets by 9% and improving. Our allowance for credit losses by 8 basis points to 1.24%,
Our cet1 ratio was better than expected at 10.74%. Our tangible Book value increased by 14% year-over-year despite the impact of our Bremer partnership.
Speaker Change: In a moment, John will walk you through the quarter results in more detail. We have also provided information regarding the merger counting associated with Bremer. John will compare our modeled expectations at announcement to where we stood at closing the board. Our expected results are better than our original expectations. We have a long history of meeting or exceeding, our merger model assumptions, and this partnership is no exception.
Speaker Change: In summary, we are well, positioned for the remainder of the Year. Benefiting from our larger balance sheet and a stronger Capital position. Our second quarter results, demonstrate our ability to deliver consistent high-quality earnings in any environment and our newest partner further strengthens our position.
Speaker Change: Many years of experience, navigating uncertainty, we are committed to controlling what we can to exceed the expectations of our clients. Communities and shareholders.
Speaker Change: Thank you. I will now turn the call over to John to discuss the quarter results in more detail.
John: Thanks Jim beginning on slide 4, we reported Gap, 2q earnings per share of 34 cents.
John: Excluding 19 cents of net merger related expenses, adjusted earnings per share worth 53 cents which is an 18% increase over the prior quarter and a 15% increase year-over-year.
John: That expenses include the following pre-tax items, 766 million of Cecil day 1 non PCD provision expense and 41 million of merger charges. Partially offset by a 21 million gain associated with freezing, the Legacy grammar pension plan.
John: Results were driven by the additional 2 months of Bremer operations or organic growth, in loans and deposits margin expansion growth in fee income, and well-controlled expenses.
Credit remained benign with a reduction in Legacy criticizing classified loans and normalized levels of charge offs. Our return profile is measured on assets and on tangible common Equity remained High
John: Lastly, our Capital position is solid with cet1 at 10.47% approximately 50 basis points, higher than we expected.
John: On slide 5, you can see our quarterly balance sheet Trends highlighting stability in our liquidity, and our strong Capital position. Our balance sheet also reflects the close of the Bremer partnership on May 1st.
John: On a combined basis, our deposit growth over the last year, has continued to allow us to fund our loan growth.
John: We grew tangible book value per share by 14% over the last year, even with the impact of the Bremer close reflected in this quarter's numbers.
John: A favorable stock price lower rate marks and organic, Capital generation between announcement and close combined with strong retained earnings at Bremer. And the day, 1 repositioning of their Securities portfolio, all contributed to the higher than expected. Cet1 ratio
Given our Capital levels are higher than we modeled. At the time. We announced grammar last November, we have significant flexibility around our balance sheet leaving us in a position to retain all CRA loans that we had originally contemplated selling
John: on slide 6, we show Trends in our earning assets.
John: Period end loans. Increased 11.5 billion. Excluding Bremer total loans. Grew 3.7% annualized From last quarter which was in line with our 2q guidance.
John: Production, for the quarter was strong throughout our commercial book which drove 4.6% annualized. Growth in this portfolio. Excluding Bremer.
John: Of note, our CRA book was down and this quarter was particularly strong for cni.
John: Quarterly new Loan Production rates are in the highest 6% range in marginal funding costs are in the mid 3% range.
The Investment Portfolio increased 3.4 billion dollars from the prior quarter. Due primarily to Bremer as well as the reinvestment of cash flows and favorable changes in Fair values.
John: Shortly after deal closing, we repositioned Bremer's Investments, which improved our total portfolio, yield duration, and risk weighted assets. We expect approximately 2.3 billion dollars in cash flow over the next 12 months today. New money yields are approximately 110 basis points above bakbuk. Yields on Securities as the repositioning of the Bremer book. Lifted our back book
John: The repricing Dynamics in both loans and securities combined with loan growth, and the Bremer partnership support our expectation, that net interest income and net interest margin will continue to grow in the second half of 2025.
John: Moving the slide 7 we show Trends in deposits. Total deposits, increased 13.3 billion and core deposits. X, brokered increased 11.6 billion. Excluding Bremer core deposits were up just under 1% annualized.
John: Non-interest bearing deposits, represent. 25% of core. Deposits up 2% from first quarter levels business, non-interest bearing and public funds. Increased while Community deposits had normal seasonal, outflows related to tax payments.
John: Our brokered deposits increase due to Bremer and at 6% of total deposits are use of brokerage continues to be below. Peer levels. The loan deposit ratio was 88% down 1% from last quarter.
John: With respect to deposit costs, the 2 basis point link quarter increase in our cost of total deposits played out as we expected due to the close of Bremer,
John: Our spot rate on total deposits at June 30th was 193 basis points.
Moreover, our exception price deposits, which now include Bremer represent, 36% of total deposits.
John: Remain confident in the execution of our deposit strategy. We are prepared to proactively respond to the potentially evolving rate environment, while staying on offense with new and existing clients to drive above peer deposit growth at reasonable costs.
John: Slide 8 shows our quarterly income statement trends.
John: As I mentioned earlier, adjusted earnings per share were 53 cents for the quarter with all key line items in line or modestly better than our prior guidance.
Moving on to slide 9, we present the details of our net interest income and margin and interest, income, and margin increase as we had expected and guided driven primarily by Bremer or organic loan growth and repositioning of the Bremer Securities portfolio.
John: By 10 shows Trends in adjusted non-interest income, which was 112 million for the quarter.
John: All line items showed increases reflecting Bremer and organic growth in our primary fee businesses on an organic basis. We were pleased with our growth in wealth mortgage, and capital markets.
John: Continuing to slide 11. We show the trend in adjusted non-interest, expenses of 344 million for the quarter reflective of 2 months of Bremer operations.
John: Run rate, expenses. Remain well controlled and we generated positive operating Leverage year-over-year.
John: On slide 12, we present our credit trends.
John: Total, net charge offs were 24, basis, points, or 21 basis points, excluding charge offs on PCD loans.
John: Our non-accrual loans is a percentage of total loans declined, 5 Pips during the quarter.
John: Importantly, and positively criticized and classified loans, decreased 254 million or approximately 9% excluding Bremer reflective of the focus on active portfolio management that we have discussed in Prior calls.
John: The fourth quarter allowance for credit losses, to Total loans, including the reserved for unfunded commitments was 124 basis points. Up 8 basis points for the prior quarter, primarily driven by Bremer consistent with the first quarter, our qualitative reserves incorporate a 100% weighting on the Moody's. S2 scenario with additional qualitative factors to capture global economic uncertainty.
John: Slide 13 presents Key, Credit metrics, relative to peers. Our proactive approach to credit monitoring has led to above peer levels of non-accruals. But below pure averages and delinquency and charge operators over time.
John: a steadfast approach to client, selection, conservative, structuring, and our proactive stance on workouts, have long been Hallmarks of omb's credit discipline,
John: This in part explains our lower non-accrual to NCO conversion rates. There's also worth noting that roughly 60% of our non across or from acquired books with appropriate reserves, Andor marks.
John: In addition roughly 60% of our non-accrual loans. Are paying principal and interest or interest only and approximately half of our classified. And criticized assets are in commercial real estate where we continue to have confidence in collateral values and the quality of our sponsors.
John: On, slide 14. We review our Capital position at the end of the quarter. All regulatory ratios decrease, the length quarter due to the close of the brand partnership.
John: Has already explained. Our cet1 ratio of 10.74% came in approximately 50 basis points stronger than we had expected, post primer tangible book. Value per share was up 14% year-over-year And we expect aoci to improve approximately 6% or 37 million dollars by year end.
John: Slide. 15 provides a comparison of our Bremer partnership assumptions and announcements. First close.
John: overall, we closed 2 months earlier than expected, adding to our 2025 earnings momentum with financial metrics tracking to exceed the expectations, we set at announcement
Higher capital and lower purchase accounting marks. Shortened the tbv earned back by approximately half a year and as we looked at 2026, a larger balance sheet, with a 2.4 billion dollars in CRA that we had previously contemplated selling is expected to offset the lower marks from an earnings perspective.
John: As previously mentioned, we restructured the majority of Bremer's 3.4 billion Securities but this action increased, the book yield from 2.85% to 5.54% reduced total duration from 6.4 to 4.7 and improved our wa density from 19% to 13%.
John: This is now cash yield as opposed to a accounting yield.
A quick word on loan accretion income, we view the rate component as locked in and repeatable similar to how we would think about the accretion in our Investment Portfolio. If we had decided not to restructure that book.
John: The credit marks added only 1 basis, point to our net, interest margin this quarter.
John: And even with the newly marked Bremer loans reflected in our numbers, our current origination deals are 65 basis points above our bakbuk yields.
Slide 16 includes updated details on our rate risk position and net interest income guidance reflecting the close of Bremer on May 1st. Nii is expected to increase on the addition of Bremer the benefit of fixed asset repricing and continued growth.
John: Our assumptions are listed on the slide but I would highlight a few of the primary drivers. First, we assumed 2 cuts of 25 basis Points. Each which aligns with the current forward curve second, we assume a 5-year treasury rate that stabilizes at 4%.
John: Third. We anticipate our total down rate deposit data to be approximately 40%, which is in line with our terminal. Upright, betas and forth. We expect a non-interest-bearing mix to remain relatively stable as a percentage of core deposits.
John: Importantly, our guidance would be unchanged for 1 fed cut or no Cuts. As our balance sheet remains neutrally, positioned to short-term rates. And the addition of Bremer did not materially alter our rate risk position.
Slide 17 includes our outlook for the third quarter and full year 2025, with the exception of loan growth. All guidance includes grammar,
John: We believe our current pipeline support full year loan growth excluding the impact of Bremer a 4 to 6% but likely toward the lower end of that range. Given first half results, current competition, the uncertain geopolitical environment, and active portfolio management.
John: We anticipate continued success in the execution of our deposit strategy and expect to meet or exceed industry growth in 2025.
John: Other key line items are highlighted on the slide, note that we have increased knee and fee income Guidance with our other lines unchanged.
John: At the midpoint of the ranges. You'll also see that we expect full year results, that yield earnings per share in line with current analyst, consensus estimates. And again feature positive operating leverage and a peer leading, return profile with good growth and fees, controlled expenses and normalized credit.
John: As we noted at the bottom of the slide uncertainty surrounding global economic and trade activity, and the macroeconomic Outlook which has dragged on longer than we would have hoped could widen the range of possible outcomes this year with respect to both growth and rates.
John: That said, our larger balance sheet with the Bremer partnership creates a meaningful, positive offset.
John: In summary, echoing, Jim's opening comments. We had a strong first half of 2025, we remained on offense, with growth in both loans and deposits. We showcased growth in fee income and disciplined expense management.
John: We continued to execute against our deposit pricing strategy and we maintained strong credit quality. Finally, we closed our Bremer partnership 2 months earlier than originally expected. On May 1st, Welcome to our newest team members and clients
I joined Jim and welcome to Tim Burke to Old National.
Speaker Change: Look forward to partnering with him to continue driving the success of the organization with those comments. I'd like to open a call for your questions.
Speaker Change: At this time, I would like to remind everyone in order to ask a question. Please press star. Followed by the number 1 on your telephone keypad.
Speaker Change: Your first question comes from the line of Scott cafres with Piper Sandler.
Please go ahead.
Speaker Change: Good morning. Scott morning guys. Hey, thanks for taking the question. Um, let's see. Jim was hoping you could maybe just make some sort of some broader comments on, kind of client sentiment, how they're they're feeling about these about things these days. And then either Jim or John was hoping you could sort of expand upon John's loan growth. Uh, Outlook comments just regarding full year. Growth being maybe toward the the lower end of the organic range. Um, get I asked because some others are, you know, beginning to get a little more constructive. So, in interesting to hear you all a
Much more cautious, you know, is that a function of demand or pricing or all of the above?
Yeah, maybe I'll start.
Speaker Change: Uh and then ask the team to jump in here, you know, from my perspective.
Speaker Change: We feel really good about the first half.
Speaker Change: And our ability to kind of navigate some, you know, uh, less than clear times. Um, but we here in competition really heating up here, uh, particularly the commercial real estate, uh, orals. And I think that just, you know, shades are are conservatism uh, on the loan growth estimates. Uh, we're just not going to go compete on price, we're not going to go compete on structure. We're not going to give up on the fundamentals that we think, you know, really matter here in this kind of market. So I think I think that's why we're just a little bit more cautious about kind of our full year outlook where maybe others.
Speaker Change: And the commercial real estate market, maybe we can make it up a little bit for it. But, uh, I think that's just where we're at. You know, Jim Sandra had a little bit on client side but Jim, you want to talk a little bit about sentiment here, lately, we know we just did a survey here. Yeah, sure. Scott. Um, yeah, we've recently surveyed, we do this typically annually with, with all of our clients and, um, you know, while there's still a lot of uncertainty out there, I think economic optimism is on the rise. And so I think our clients continue to be cautiously optimistic about their, uh, abilities to, to grow and, and, uh, invest in their businesses. So, I think there's some really encouraging things there when you think about terrorists and trade policies. Um, it it certainly had less of an impact in originally thought. Um, there might have been a little bit of inventory build early in the second quarter, but now that, uh, some of that Clarity has come, um, we've seen that kind of normalized. So, um, you know, I think optimistic but, uh, giving some of the increased competition. I think that's why we're looking at the lower end of the, of the range Scott. It's John here, 1 1, other thing. I might just add to that.
John: Is is, is a little bit of this, is just a math equation, right? So if you take you, take the TriNet, uh, loan sale out of the first quarter results. We were kind of 4% in the first quarter. Second quarter here we're just below 4%, uh, annualized. So to hit the top end of the range mathematically, it would suggest that we got to do kind of 8% growth in, in 3, Q4 q. And and we just don't see that materializing, given the given the competitive environment that Jim and Jim just referenced
Speaker Change: Yeah, got it, that, that all makes sense. And I appreciate the sort of the inside, baseball on it. Um, and then then let's see, John, maybe he was hoping you could kind of walk through the length quarter increase in npas. I'm talking about just dollar values. There, you can always be a little tricky when there's a merger involved, at least from the understand the outside to, you know, understand what's happening at the Legacy versus the combined companies. I know the bulk of your nonacus, in the aggregate are from acquired books, but just maybe this, this sequential increase, if you could address that please,
Speaker Change: Yeah, so Dollar Wise, a lot of that is just Bremer coming into the fold, uh, actually on a on a, you know, against the entire balance sheet npas is a percentage are down a little bit. Feel good about where we are. Uh and so it's really just a little bit of noise on uh, on closing the deal.
Speaker Change: Terrific. Okay, good. Thank you guys. Appreciate it. Thanks Scott.
Ben Gerlinger: Your next question comes from the line of Ben gerlinger with City.
Speaker Change: Please go ahead.
Good morning, been good to hear from you.
Speaker Change: Um, you guys went through a lot of numbers, I'm so I apologize if I missed it. Um, I know you said
Speaker Change: New loan yields versus back book. I was curious, could you just provide the spot rate on either loans or, or bonds?
Speaker Change: Yeah, so spot rate versus what was sitting in the average. Balance sheets. Uh on this quarter. If you were to, if you were to reflect that you know a full quarter of Bremer we'd be looking probably 7 basis points higher than what was reported on Securities 5 basis points higher than what was reported on uh, on loans. And again, new new money yields, you know? If if you look at kind of 85% floating on on loans, 15% fixed the weighted average there gets you kind of i6s call it 68 uh and on Securities were mid fives.
Speaker Change: In terms of new money. Yeah.
Speaker Change: Yeah, helpful. I think that's the model in question first. But um, okay, so moving more towards the strategy perspective. When you think about
Kind of growth relative to the CRA runs, they'll not happening and then also Capital, it seems like you're in better Capital position from the post deal flows and then they non series sale. Kind of eats up into a little bit of that Capital, the growth in the back half of the Year, seems steady by no means is robust of some peers, but I'm totally fine with that. What do you think about this Capital deployment? And I know you said,
Speaker Change: Earnings projections are basically in line with consensus. So it's to me, it's like your 2 turns below peers with a projected, Roxy, that's basically 200 plus basis points of matter. That appears is a buyback, something where we can expect these calendar year or is it kind of more. So the building Capital at this point.
towards our past, common
Speaker Change: I think we are.
Speaker Change: Capital here, you know. And uh, we've got a little bit of wood to chop, with respect to our conversion here, you know, having later this year. Um, but we are a much much closer to that decision today, uh, than we thought we would be just giving Capital payments so much better. So I think it's something that's definitely on the horizon for us and we're going to take a hard look at it. Uh but nothing to report right now, uh really focus on just getting through the conversion and and getting off to a really strong start for next year.
Speaker Change: Thanks Ben.
Speaker Change: Please go ahead.
Hey, good morning.
Morning. Chris.
Speaker Change: Jim or John just more broadly. What's what's the deregulatory environment mean for Old National? Um from here obviously there's an expense equation. Um, but I'm interested in kind of you, uh, your opinion there. Thanks.
Speaker Change: yeah, I was
Speaker Change: very constructive.
Speaker Change: In conversation and tone is, is, you know, look, we've always enjoyed incredibly positive relationships with all of our regulars, but it's just that much more constructive today, uh, you know, for us going forward as an industry and, and us as Old National. Um, I think we're a couple months away from kind of really fully understanding it. Uh, you know how, any regulatory thresholds might change, uh, but that all seems like that's in a positive trajectory the best we can tell, you know, I think they're really close to filling out all of the agency heads which will just be allow the industry to move forward. Uh, you know, I've been personally involved with the Ava and the NBC, as you know, working on Deposit Insurance reform, which I think is a really important for the midsize space. And so we'll continue to push for those reforms, but I I would just say, all of this is all this tone is very much constructive, uh, you know, all the same rules, still apply, broadly speaking. And so you know, there's no free passes anywhere, but but but it is more constructive and I think it'll allow our industry to maybe grow.
Speaker Change: Uh, you know, where where we want to grow going forward?
Thanks for that. And then just as a follow-up. You mentioned threshold. I mean, you've previously talked about not wanting to, to flirt with a 100 in assets, um, does that evolve over the next? You know, 6 to 12 months is that something? You know, you obviously working on the integration but do deals opportunistically, uh, make it more likely.
Speaker Change: You know, I I would just back point back to some of our previous comments, we're really focused on organic growth. We always got 1 in the hand here that we got to get across the finish line and and execute well. And and uh and we're off to a great start there. Uh, and you know, it's 1 of those things. There's nothing on. There's nothing in our Playbook right now. There's nothing we're looking at. Uh, we, you know, I just assumed not test that water. Uh, and again, I don't know what what the thresholds are going to look like going forward, but the good news is we don't have to do anything, right. We've got great organic growth opportunities. We got top decile profitability ratios across the board here. Uh, so we got lots of flexibility, just to continue to, to run this place, and, and grow organically if the perfect pitch comes along and it and it makes a ton of sense, you know, something like something like Bremer where it just made an absolute home run. Since we would absolutely have to take a look at that as you would expect, but but we're not interested in going testing those Waters anytime soon and I do think we need to. I think we need several more months before, we understand exactly what that new landscape is going to look like,
Speaker Change: Perfect. Thanks.
Speaker Change: Thanks, appreciate appreciate the interest Chris.
Speaker Change: Your next question comes from the line of John Armstrong with RBC Capital markets.
John Armstrong: Please go ahead. Hey, thanks. Good morning.
Speaker Change: Hey, John, good to hear from you. Yeah, thanks. Um, just a question back on the loan growth guide, uh John, you use the term active portfolio management and I'm curious what you mean by that and then uh also curious on
The characteristics of the CRA loans that you had planned on selling that you now may not sell. Does that? Does that fit typical om characteristics? So just kind of All In 1, active portfolio Management in that 2.4 billion. Thanks.
Speaker Change: Yeah, absolutely. So yeah, active portfolio management. John when you, when you look at the, the reduction in classified and criticized out of the Legacy Old National book, this quarter roughly half of that was from, you know, uh, total payoffs or, or refis away away from the bank. And so we think that there's still some more of that to come, right? Um and and you know, we we've talked about this for several quarters now. Um, really deal by deal loan by loan getting in there and work in that book and so we we remain really focused on on on that work. And and I think that will continue to be a feature in the back half of this year um with respect to the 2.4 billion dollars in commercial real estate loan sales. Very much uh similar to to the way that we underwrote and the way that we think about real estate, there could still be
Speaker Change: Something opportunistically that we could trim. Um, but, you know, I I think that would look more like what we did in the first quarter with the Capstar TriNet book. Uh, then something bigger or broader that we had originally contemplated back in November.
Speaker Change: Okay. Good, fair enough. And then um,
Speaker Change: You may have touched on this but on slide 16, you flagged the 10.4 billion.
Speaker Change: In deposit, maturity time, deposit maturity can can you walk through some of the metrics around that again, in terms of the Cadence and kind of the cost of rolling off and the replacement costs?
Speaker Change: The bigger chunk of that actually comes in in the next quarter. Uh, a little over 5 and a half billion dollars in the next quarter. Uh, and then about 3 billion in in 4 q. Um, in in aggregate, you know, there's going to be a little bit of a pickup, uh, on on that book as it rolls the bigger opportunities are in our brokerage buckets. Uh, that's about 2.4 next quarter, uh, that's hanging out in mid fours. Uh, and that, that would roll with a, with a more significant, uh, uh, opportunity for us in terms of repricing down.
Speaker Change: Okay, in any any any idea of the magnitude on that, just ballpark.
On the, uh, on the broker piece 2 2.4 billion dollars in in, in the next 90 days, 4 and a half is the uh, is the current deal.
Speaker Change: Okay.
Speaker Change: Okay. Okay, thanks a lot. I appreciate it.
Speaker Change: Thanks John.
Speaker Change: Your next question comes from the line of Brian fan with truist securities.
Speaker Change: Please go ahead.
Speaker Change: Hi. Uh, just to make sure I understand the EPS comments on the deal slide. Uh, so 2 things 1, when you say it's modestly better than originally assumed, uh, and I know it's early days, so you probably even haven't fully got into uh, a lot of the the
Speaker Change: Underlying business. But is it just the 2.4 billion at the current moment? Uh, CRA loan sale 2.4 billion that's changed in that APS, assumption or, is there anything else you're signaling, uh, in terms of other deal accretion? Uh, uh, that's better.
Speaker Change: No, yeah, no, not signaling. Anything. In addition, it's just the 2.4 billion dollars in commercial real estate offsetting and then just a little bit better than what, what was originally in the model on, uh, on on the rate mark.
Speaker Change: Uh, the rate, the rate, Mark, being a little lower, so less paa, right, correct. Okay, correct. Yep.
Um and then just the base we're talking about, I mean I I think in the deal presentation, it was 260 of DPS in 2026. It seems like the old national side is more or less tracking so
Speaker Change: I mean, can we just say 260 plus a little bit uh for this CRA sale is is kind of the updated number.
I think that's fair to say Brian. Yep.
Speaker Change: Okay.
Speaker Change: Um,
Speaker Change: I guess that's it. Uh uh yeah. I think that's. That's the only question I have. Thank you.
Speaker Change: Thanks, Brian. Thanks.
Speaker Change: hey, next question, comes from the line of Jared, Shaw with Berkeley's
Speaker Change: Please go ahead morning, Jared.
Morning hey thanks. Um, guess the only 1 left for me is uh just on the the fee income guide. Um
Speaker Change: And in the Outlook there uh anything anything to call out in terms of seeing strength. I mean is, is a lot of that just coming from a little bit of a, a stronger mortgage base and than expected or anything special to to think of their
Speaker Change: Yeah, I think I can get it.
Quarter wealth continues to track along nicely as well and then um, you know, Capital markets for us to continue to be a a a pretty it's a small but good business uh, for us and this quarter looked looked good there. Uh, and so we're encouraged by the results there. But, yeah, I think, uh, I think, in terms of Outlook relatively, um, you know, other than the upside captured from this quarter relatively unchanged, on the back half of this year.
Speaker Change: Great. Thanks a lot.
Jared: Thanks Jared.
Speaker Change: Your next question comes from the line of Terry mackoy with Stevens.
Speaker Change: Please go ahead.
Speaker Change: Good morning, Terry. Hi, good morning everybody. Um maybe just the first question. Um, why wasn't the second half 25? Net interest income Outlook increased given the decision to hold the CRA loans or will we see more of that lifts in 2026?
Speaker Change: Well, it's the the there's a couple of Dynamics at at work there, Terry, right? So the CRA loans, um, come coming in. Um, are are very much offsetting kind of dollar for dollar, the lower, uh, marks that uh, that were ultimately realized as compared to what we had announced.
Speaker Change: And I guess on page 15, the positive earnings per share when you talk about the larger balance sheet, offsets those marks, um I guess that that's behind my question. I'm trying to up that that sentence there.
Speaker Change: Right? So if you if you run that math out, right there's Rough Top 100 million dollars in lower rate Mark and a 50-ish million dollar lower credit Mark, that was realized.
Speaker Change: .4 billion in commercial real estate offsets the foregone income on on the accretion marks.
Speaker Change: Perfect. Thanks for that. And then I noticed you hired a new Chief investment officer earlier, maybe July 1st, I think. Um, could you just talk about the technology Investments? Jimmy made some comments about continuing to invest in and and meet your client's needs. So any any commentary there would be helpful.
Yeah. Thanks Terry.
Speaker Change: Uh, joined our organization. He was actually, uh, had recently hired at as the CIO at Bremer Bank. Uh, so uh, ironically we were in the market looking for a new CIO. Our current 1 is going to retire here towards the end of the year and, uh, we had 1, uh, sitting, uh, there in Minnesota. So Matt is a great, uh, you know, we did a search, you know, far and wide and, and Matt turned out to be the best possible candidate for us. Um, so I think we feel really good about his experience and quite frankly, we're actually able to build a um continue to build and invest in the IT team, right there in Minnesota. Uh, we just sound great talent sitting there giving the other larger institutions that are already there plus the Fortune 500 companies. Uh, so that's a nice win for us. Um, but you know, as, as we've done, as early assessments around all of our technology, I think we feel really good around our technology stack. We continue to look for ways to build out a stronger ecosystem for the wealth management and the bankers to move kind of seamlessly across those platforms.
Speaker Change: Treasury management is an area. We continue to invest in and look for ways to to to be better particularly as we think about going Upstream towards that Upper Middle Market. You know, ways to connect more deeply within their systems. But we don't see, you know, any large gaps in any of our our systems and we we've got a long list like everybody else does of Investments. We want to make but but nothing that's stopping us from being successful and and building, you know, core deep relationships with our clients. Uh, so that's the good news, you know, to be as we become a larger institution. Uh, we'll continue to invest in our own infrastructure, particularly around data. We're obviously looking at AI, um, you know, very intensely right now and how AI could help, you know, shape, uh, all of our technology. But but again, you know, no, no gaps anywhere there, just just an opportunity to continue to be better, uh, as we go forward. And I think Matt is the right person to help lead us in that effort. So we're excited about that. You know, obviously we have that technology partner emphasis which also comes alongside us. And helps us really kind of think through a lot of our technology and ways to get more efficient, more effective.
Speaker Change: So I I think it's just all really positive and really glad to have, you know, Matt uh now we got Tim on the team as of today. So uh we got a full team and ready to go.
Speaker Change: Great. Thanks for taking my questions.
Terry: Thanks Terry. Good to hear from you.
Speaker Change: There are no further questions at this time. I'd like to turn the call back to Jim Ryan for closing remarks.
Speaker Change: Thanks Eric, uh, as usual appreciate, everybody's interest. Appreciate the great questions the whole team. Uh, John and Mike, Lenell Scott. We're all going to be available for questions all day. Look, forward to catching up with everybody. Have a great afternoon.
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 Nationals website, old national.com.
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