Old National Bancorp (ONB) 2024 Q4 法說會逐字稿

Welcome to the National Bank and Full Year 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 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 discussed.

The company refers you to its forward-looking statement legend in the earnings release and presentation slides.

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 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 National's Chairman and Jim Ryan for opening remarks.

Mr. Ryan?

Good morning.

Old National reported strong results for the fourth quarter and the full year this morning.

In 2024, we successfully navigated an -- environment while maintaining an offensive growth strategy, investing in client facing a key support talent and remaining opportunistic for new acquisitions.

Our basic banking strategy has served us well.

A hallmark of this strategy is our focus on low-cost core deposits, which grew by approximately 10% in 2024, funding a corresponding 10% growth in loans.

Since 2022, total deposits and loans have experienced a compounded annual growth rate of 8%.

Our total cost of deposits finished the year at 1.93%, driven by a 93% down beta on our exception price deposits.

Our peer-leading deposit franchise, disciplined loan growth, strong credit quality well-managed expenses and dedicated team members who are committed to serving our clients and communities enabled us to exceed our expectation set as we began 2024.

Our full year results can be found on slide 4.

GAAP per common share for the year were $1.68 with adjusted earnings per common share of $1.86. Our adjusted return on average tangible common equity was [16.9%] and -- net return on average assets was 1.14%.

Notably, the adjusted efficiency ratio stood at 52%.

At the same time, our net charge-offs were low at 17 basis points.

Our tangible book value per share also grew by 8% year-over-year, and our total shareholder return significantly outperformed the KRX and our executive peer group in 2024.

During the first half of 2024, we successfully closed and converted CapStar Bank and Old National Bank, strengthening our presence in Nashville and other high-growth eastern markets.

During the year, we announced our partnership with Bremer Bank enhancing our -- Mid-west and expanding our footprint across Minnesota, North Carolina and Wisconsin.

We have recently filed our with the SEC and our regulatory applications to the OCC in the Federal Reserve in connection with our partnership, a forthcoming community growth plan will accompany this partnership too.

After a recent visit with Bremer team members, we report the genuine enthusiasm for our combination, and we are excited to collaborate with the executive team and our new team members as we start the integration process.

We still anticipate closing the partnership by midyear and completing our integration in the latter half of the year with 100% of the cost savings projected to be realized in 2026.

In summary, our 2024 EPS results were more resilient than previous years in a challenging year, thanks to our relentless focus on fundamentals, growth of costs, strong underwriting practices and disciplined expense management.

John will provide our official 2025 outlook at the end of his prepared remarks.

Looking ahead, I'm confident in our ability to navigate changes in short-term interest rates shifts in the yield curve and overall economic conditions as we have for the past 190 years.

I want to take a moment to discuss two leadership changes announced in this morning's news release.

As mentioned in the release, our President and COO, Mark Sander, will retire on June 30.

Mark has been an invaluable partner over the past few years.

Although my time working alongside Mark has been brief compared to his lengthy and distinguished career, steady leadership has planned a significant role in older -- transformation into a high-performing bank.

He has helped solidify our position as one of the premier banks in the country.

I would also like to acknowledge Mark's lasting impact on the Chicago land community, where he's been a prominent banking leader and a dedicated community advocate.

On behalf of all of us at Old National, I express our gratitude for his daily embodiment of our organizational values.

We have begun searching for Mark's successor considering internal and external candidates.

Additionally, we announced today that Dan Hermann, a highly respected business leader and a significant contributor to our corporate Board for the past five years has succeeded Becky Skillman as our Lead Independent Director.

On behalf of our executive leadership team and the Board, I want to thank Becky for her invaluable guidance in this role since 2016.

On a personal note, she has been an excellent mentor and partner during my tenure CEO.

I'm pleased that she will continue to serve as a key member of our corporate board.

I want to emphasize how fortunate we are to have Dan as our lead independent director.

He brings a wealth of leadership experience, and I'm confident that our Board will continue to sell under his guidance, providing strong support to our executive leadership team.

Thank you.

With that, I will now turn the call over to John to discuss the quarter results in more detail.

Thanks, Jim.

Turning to slide 5.

Reported GAAP 4Q earnings per share of $0.47, excluding $0.02 per share of merger charges, adjusted earnings per share were $0.49. Results were by net interest income and margin were in line with expectations, strong fee income and a favorable tax rate, partially offset by incentive true ups.

Credit remained benign with normalized levels of charge-offs and our return profile as measured on assets and on tangible common equity remain light.

On slide 6, you can see our fourth quarter balance sheet, which highlights stability in our liquidity and continued improvement in our capital position.

Total deposit growth over the last year has again allowed us to organically fund loan growth while minimizing borrowings.

Since 2022, our 8% CAGR in both loans and deposits has exceeded H8 industry growth.

As Jim mentioned, we grew real book value per share by 8% over the last year.

We also accreted nearly 70 points of CET1 for the year, ending 2024 with a strong CET -- ratio of 11.38%.

We continue to expect that we will accrete capital at a faster pace than most.

These liquidity and capital levels continue to provide a strong foundation, which strengthens our position as we begin 2025.

On slide 7, we show trends in our earning assets.

Total loans decreased 1.6% annualized from last quarter with some production in our commercial book, offset by $600 million of outsized payoffs and lower line utilization.

For the full year, we saw total loans grow 10% before excluding CapStar.

Quarterly new loan production rates are in the 7% range and marginal funding costs are in the high 3% range.

The investment portfolio was consistent with the prior quarter and duration is now just over 4%.

We have approximately $1.5 billion in cash flow expected over the next 12 months.

Today, new money yields are currently running approximately 180 basis points above back book yields on securities and fixed rate loans.

The reflex in both loans and securities support our expectation that net interest margin will be stable to improving in '25.

Moving to slide 8, we show our trend in total deposits. core deposits ex brokered continued to grow and were up nearly 2% annualized as we remain focused on growth in this key funding source.

Noninterest-bearing deposits were 24% of core deposits, consistent with third quarter levels.

Private banking and community deposits were up [34] during order while public funds saw normal seasonal decreases.

Our brokered deposit is approximately $200 million and at [3.7%] as a percentage of total deposits, our use of brokered remains less than half peer levels.

The total loan-to-deposit ratio was 89%, consistent with last quarter.

With respect to deposit costs, a 17 basis point decrease in deposit rates compared to the prior quarter played out as we expected and total deposit costs decreased in the quarter, consistent with Fed action.

Our spot rail deposits at December 31 was 193 basis points.

Moreover, our exception price deposits have experienced a 93% down beta since we started lowering rates in that book in early 2Q.

Our fourth quarter total deposit beta came in at 28%, which was in line with our expectations and accelerated over the course of the quarter.

Overall, we are highly confident in the execution of our deposit strategy, and it continues to unfold as expected.

Prepared to proactively respond to future Fed actions in the evolving environment while staying focused on driving above peer deposit growth at reasonable costs.

As we have mentioned in past calls, we remain front-footed with respect to client action.

Slide 9 provides our quarter end income statement.

We reported GAAP net income applicable to common shares of $150 million or $0.47 per share.

Excluding $0.02 per share of merger related to adjusted earnings per share were $0.49. A quick note on taxes.

This quarter included additional tax credit benefits, which were partially offset in the operating expense line and also benefited from the resolution of certain tax matters.

Without those items, our FTE tax rate would have been in line with the 25% we had guided.

Moving on to slide 10.

We present details of our interest income and margin.

Net interest income was relatively stable as expected and net interest margin was likewise flattish as lower deposit costs and higher accretion were offset by increased paydowns and lower line utilization.

Year-over-year, we again showed deposit growth that essentially kept pace with asset generation while maintaining a low cost of funding.

Slide 11 shows trends in adjusted noninterest income, which was [$9 million] for the quarter and above our expectations.

Our primary fee businesses performed well with wealth, mortgage and bank fees ahead of expectations, while capital markets declined as a result of lower CRE production.

Other income benefited from $8 million create items.

As a reminder, looking back to third quarter, other income was also elevated by approximately $3 million primarily related to market valuation gains.

Continuing to slide 12, we show the trend in adjusted noninterest expenses of $269 million for the quarter.

This was slightly higher than expectations due to a $5 million year-to-date performance-driven incentive accrual true-up as well as $1.2 million in higher tax credit amortizing that is offset within the tax line that I mentioned earlier.

Run rate expenses remain well controlled, and we again generated positive linked quarter operating leverage.

On slide 13, we present our credit trends, which reflect the quality of both our commercial and consumer portfolios.

Total net gross were 21 basis points and a low 17 basis points, 64 basis points related to PCD loans.

The nonperforming loan ratio and delinquency ratios were relatively stable from last quarter.

The fourth quarter allowance for credit losses to total loans, including the reserve for unfunded commitments was 114 basis points, up 2 basis points from the prior quarter.

Consistent with third quarter, our qualitative reserves incorporate a 100% weighting on the Moody's S2 scenario with additional qualitative factors to capture stability of grade migration.

Also, we remind you that our credit losses plus the discount remaining on acquired loans to total loans now stands at nearly 100 basis points.

Slide 14 presents key debt metrics relative to peers.

We remind you again that our proactive approach to credit monitoring has led to above -- delinquency and charge-off ratios that are below peer averages over time.

We have long practice convertism here, and we continue to believe that the results will speak for themselves.

On slide 15, we reaped the capital position at the end of the quarter.

Again, all regulatory ratios increased driven by strong key earnings.

The increase in rates at the intermediate weights of the yield curve led to a modest decrease ECE and tangible book value per share, given a $142 million linker AOCI headwind.

Despite that headwind, tangible book value was up 8% year-over-year, and we expect AOCI to improve approximately 15% or $110 million over the next 12 months.

Slide 16 includes updated details on our rate risk position and net interest income guidance.

NII is expected to be relatively stable in the first half of 2025 excluding the impact of two fewer days in the first quarter and then increasing in the back half of the year with the benefit of fixed asset repricing, growth and the anticipated closing of our Bremer partnership.

Our assumptions are listed on the slide, but I would highlight a few of the primary drivers.

First, we assumed 2 rate cuts of 25 basis points each, which is one up more than the current forward curve.

Second, we anticipate our total deposit beta to accelerate from 28% 4Q to approximately 40% as we move through 2025, in line with our terminal up betas.

And third, we expect the noninterest-bearing mix to remain stable at 24% of total core deposits.

Importantly, our guidance would be unchanged for one cut or no cuts as our balance remains neutrally positioned.

On slide 17, we include our outlook for the first quarter and full year 2025.

The exception of loan growth, all guidance includes Bremer and assumes a July 1 close.

We believe current line's support full year loan growth 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 industry growth in 2025.

Other key line items are highlighted on the slide.

At the point of the rain on these lines, you'll note that we expect full year yield earnings per share above the current analyst consensus estimates and again feature positive operating leverage, a peer-leading return profile, good group fees, controlled expenses and the lines credit.

In summary, 2024 results were excellent with run rate fourth quarter results in line with our expectations.

We remained on offense, and we continue to demonstrate our ability to execute against strategic priorities.

First, we organically grew deposits at a sufficient pace to fund our asset generation, both deposits and loans were ahead of overall industry growth rates.

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

Third, we remain disciplined on expenses, driving positive operating leverage and an adjusted efficiency ratio in the low 50s.

Fourth, our credit remained resilient, and we believe we have ample reserve coverage along with a well-diversified and granular book.

And fifth, we are continuing to compound tangible book value per share, which was up 8% year-over-year.

With those comments, I'd like to open the call for questions.

(Operator Instructions) Ben Gerlinger, Citi.

It seems like you guys got a good start to the year.

When you think about the guidance that you laid out for expenses, this is more of a clarification question anything.

Are you backing out any CDI or any sort of noncore -- than the merger-related expenses for closing?

Yes.

Ben just the related expenses are backed out, everything else is fully loaded.

Got you.

Okay.

Helpful.

And then when you think about just the outlook for '25 and '26, I know you already have kind of the table set in front here with the closing and then back half of the year, game plans already laid out you think about just capital allocation on the AOCI coming back and the deal price incredibly well, is there anything that you got in the medium term, either outside of this core growth, either share repurchase or just to anything about allocation over the next 12, 18, 24 months?

Yes.

I think it's a bit early for us to make a decision about how capital will be allocated.

Clearly, the first priority is always growth.

But I do think our -- we'll have more capital flexibility if things play out the way we things to play out.

And I think we'll be in a position probably by midyear to have better optics into how capital management looks going forward.

Got you.

And if I could sneak one more in.

It seems like loan growth across the banking industry is still a little bit muted, but it seems to be rain shoots -- have you guys seen anything within your book, either geographically or lending?

Like I mean, any subsectors of C&I or CRE transa could be a little bit more of a leading indicator for improved growth, not just for you guys.

Just kind of what are you hearing from carry on your clients you serve?

Ben, it's Mark.

I would say it's cautiously optimistic is the best thing we say and we've guided as such.

I think -- we think the first quarter come the quarter where we had outsized payoffs and decreases in line utilization that has us a little more cautious about our first quarter growth.

But we do think underlying fundamentals are still really solid there.

And so that's why we have -- we feel really confident about that 4% to 6% we have for the full year.

Got you.

That's helpful.

I appreciate it.

Thank you.

Scott Siefers, Piper Sandler.

Let's see, maybe, John, first question for you.

So you've got a good strong NII outlook for the year.

I was hoping you could help us to understand a little more of the nuance of the stand-alone margin in coming quarters?

I mean, certainly, everything on slide with the broad assumptions.

But just when you think about OMB on a stand-alone basis, I think you said stable to improving this year for the margin.

I think you're talking stand-alone, but sort of big puts and takes as you see them, in other words, what would be sort of the potential choke points that you'd worry about.

And by contrast, maybe things where you think things could come in a little better as you look out over the year.

Yes, Scott.

Yes, you're correct.

When I said stable to improving [IMN] of core underlying, I think when we go out into this year, what drives that is our ability to continue to grow assets, right?

So loan growth will be important there in the fixed asset repricing dynamics are favorable to us today.

And a little bit of steepness in the curve versus what -- I mean, heck, we've been living inverted for a long time here, right?

So see, miss in the curve, an improvement in the valley is certainly something that I think could help us out a little bit -- about a little bit of a tailwind.

Perfect.

Okay, great.

Thank you very much.

Thanks Scott.

Maybe just going back to Ben's discussion around capital.

Just looking at CET1, it's really strong and continues to grow.

You mentioned some of those tailwinds.

Well, I understand you're going to wait a little while to sort of get into maybe some alternative uses of capital.

Where do you think the model needs?

What capital level do you think the model needs to be at here with the new administration, maybe the new regulatory outlook and better than feared credit do you think that ultimately this model gets back down to 10% or below CET1?

Well, that's a good question.

And the reality is, I don't think we have the answer to that question yet.

I think we need to have some more time through the year to have our optics into that.

Capital is running a little bit ahead of our own internal expectations.

So that's a good thing.

I think that also gives us some flexibility as we think about the Bremer partnership and the balance sheet optimization.

Maybe we end up with more assets in the balance sheet than we originally modeled up just because of capital comes in a touch stronger there.

And then obviously, we have other stakeholders out there, right?

You have the rating agencies view of that.

And to the extent that, that view, changes over time, I think that's something that we'll have to watch for.

So we'll try to manage all the stakeholders.

And importantly, our shareholders and that we want to have the right amount of capital, but not too much capital.

And so that a bit of a needle that we'll try to thread as we get just more clarity as the year unfolds here.

Okay.

And then on NII and beta, should we be thinking that deposit beta is sort of a linear move through the year?

Or is there maybe an expectation that it's not so much linear?

And then, I guess, within that, how sensitive is your NII expectation to the long end of the curve.

Yes, it's a good question.

Look, I'd love to say that it'd be linear.

I don't know that it plays out exactly that way, but I think point over the course of the year, we fully expect that we're going to capture what we gave up on upside beta.

We were kind of down beta over the course of the year, and we're working hard on doing that.

In any given quarter, it could come in a little bit better or a little bit worse.

But I think for modeling purposes, linear is probably a pretty good guesstimate.

Okay.

And then just the sensitivity to long in rates with the longer end being up.

Sorry, that was the second part of that question -- sorry about that, Jared.

Yes.

I think our real sensitivity is really -- it's barely a curve for the most part.

A couple of portfolios are going to reprice off of the 10-year, mostly that would be in the consumer side of the house, but our real sensitivity is belly curve.

So kind of think a three-year, five-year point on the curve.

Okay.

And just finally for me, what's the accretion expectations within that NII guide for '25?

In total, so we had a -- yes.

Accretion ran a little bit heavy in the fourth quarter.

That was in part due to the accelerated paydowns that we referenced.

We expect that, that drops to about $10.5 million in the first, second quarter.

And there's a schedule on that in the back, and then we'll update that schedule with the full Bremer piece of it when it becomes clear.

But I think for now, I would just go back to what we announced with the deal announcement in terms of accretion to the back half of '25 on the Bremer piece.

Great.

Thanks a lot.

Brendan Nosal, Hovde Group.

Just to circle back to the loan growth guide.

Just kind of curious if you could unpack that a little bit and around how much you need to see paydowns and line utilization pressure ease off to help you get to that guide versus how much is going to be a pickup in originations?

I'd say this -- our production is still solid and strong, and our pipeline at $2.7 billion gives us plenty of ammunition, so to speak, to grow this 4% to 6%.

So yes, if we get -- if we see $600 million a quarter of outsized payoffs.

That will be a headwind that will be tough to fight.

But it would be very unusual for us to see that.

There's really outsized this quarter like we haven't seen before.

So I think you get any bit of normalcy in paydowns and in line utilization.

I think that 4% to 6% is a really good guide.

Yes.

Okay.

Perfect.

Maybe more for me.

If I just look at average earning assets outside of the loan piece, I mean, average cash and average securities were up a fair bit this quarter.

So there was some liquidity build that helped the NII number.

Just kind of curious in the guide for NII, how much non-loan earning asset growth you have contemplated?

I think it will be pretty flat.

I don't think we're going to build the securities book.

And this quarter was probably a little bit of liquidity drag, all else equal, because of the paydowns that we referenced.

Yeah.

Okay.

Fantastic.

Thank you for taking the questions.

Terry McEvoy, Stephens.

Not much.

First, just congrats news of your retirement.

Enjoyed working with you the last two decades.

And then maybe for Jim, your thoughts on kind of filling that role.

I know you talked about it a bit in your prepared remarks.

And maybe how important is it to have somebody with a kind of a -- Chicago land background kind of given the franchise there?

I would start with, well, it's incredibly important to have leaders sitting right there in Chicago.

Obviously, it's the biggest part of our franchise.

And we're going to have succession that's going to happen over the next handful of years, as expected is kind of normal succession.

And we'll make sure that we have our fair share of leaders sitting right there in Chicago.

That's important, I'm heading there this afternoon as we speak.

So this is a place that we spent an awful lot of time in.

We've got an awful lot of resources dedicated and we'll work through all the succession that will ultimately happen across their entire footprint.

But I believe in having leaders in those markets.

And I would add [Milo] that, we've got a number of leaders today in the Twin Cities area, and we continue to have leaders there.

So it's yet to be determined exactly how this all plays out.

But to your point, Mark has been an amazing partner.

It's been important to us.

It's really helped us execute on our partnership not only in Chicago, but across our entire company. and big shoes to fill.

And the good news is we think we have some internal candidates, and we will go on to see just as we're a large organization and the complexities of our organizations continue to change and see what's available to us out there.

And Terry, I'll just add, I thank you for your kind comments.

I appreciate it.

I've enjoyed work you and so many people on this line and get a little bit more time.

I'm not going anywhere for a bit.

So more work to do over these next five months.

Good to hear.

And Jim, you guys no stranger to M&A with your time in ONB.

And maybe your thoughts on just new administration, more buyers at the table.

How does that change pricing, which the last couple of deals appear to have worked in your favor.

And maybe are you hearing anything at all about that $100 billion threshold maybe moving higher under the new administration?

Yes.

It's so hard to really kind of completely appreciate all of the changes that are going to occur and how that might impact the $100 billion regulatory cliff the new acting share of the FDIC put out some new guidance today and what the FDIC is looking at.

So we're just trying to absorb it all clearly, one of the biggest challenges for the $100 billion mark is the TLAC.

And I feel like that's going to be under review.

So that could be an interesting opportunity for banks that are going to cross that.

We're nowhere crossing that today and have no plans to cross that in any time in the near future.

But I think as we just look ahead, that's something that's on our radar screen.

When it comes to pricing, I don't know.

I still think that as long as we've been doing this, I feel like there's still only one or two really good buyers for a potential partner and I think what we have demonstrated here is that if the partners are truly willing to look past the day one premium and look the future about how do we create a really valuable organization.

And that's a little bit hard to do sometimes.

But I think we have shown that that's the recipe for success to get a partnership that performs incredibly well on day two and beyond, I think it's going to be -- these things to all work together.

I think everybody is hopeful that the approval processes will be more streamlined for us, that hasn't been a challenge, but I think people are hopeful for that.

But nonetheless, I still think it's going to come down to finding [2%] that are willing to make long-term investments to each other and part of that comes through how do you price these things to really perform well post announcement.

Great.

A quick modeling question for John.

Can you just remind me what percentage of your securities are floating rate today?

Maybe we'll have to get back to you on that one real quick.

But I don't think it's a big -- it's not a big piece.

We'll come back to you hope for the call here.

13%, 13%, yes.

Thank you.

Okay, thanks, guys.

Thanks, Terry.

Jon Arfstrom, RBC Capital Markets.

We know we're warmer than the Twin Cities this morning.

So we're grateful for this.

Yes, you are.

Just can you talk a little bit more about the payoff trends, just kind of anything unusual to call out?

I mean, I know you said it was abnormally large, but anything to call out there?

You just had a little bit more capital markets activity and some secondary market refinancings and a couple of outsized ones that won't repeat.

I can -- I'm quite certain of.

So a little bit more, like I said, secondary market activity and then a couple of larger ones in that skew.

And I think the borrowing of the secondary market is helpful.

That's generally a good thing for us.

I mean, yes, we might see some increased payoffs as people access the capital markets.

But I think, generally speaking, we have good healthy capital markets section.

So while maybe a little bit of short-term disappointment in the balance sheet didn't grow exactly like we thought we said market production was still really good.

It's just with the line utilization being off and a couple of unique transactions that just hit us towards year-end here.

But I think that's generally a favorable thing for all financial institutions.

Yes, I agree.

Okay.

Anything new on the nonperformers and classified and criticized -- it looks pretty soon but curious of your overall assessment on credit from here?

Yes. we feel good about credit.

It's continued to normalize, and our activity was kind of equal on both sides.

We moved some things out and continue to see some migration as we get through the and review cycle.

So kind of a quiet quarter on credit right where we expected it to be.

Okay.

Good.

And then do you have anything on Bremer.

Just curious what kind of feedback you're getting and updated thoughts now that you're not working in the dark night and keeping it quiet updated thoughts on what you expect from the combination?

I got to tell you, and maybe I'm a broken record here, but we spent a couple of days there last week and the executive team and all of the leaders we met are incredibly enthusiastic about this partnership.

And I don't say those words lightly.

I think there looking forward to the opportunities to grow and invest in their franchise, take a great organization and continue to build on that greatness, bringing our two organizations together.

We think there is awesome talent there both on the client-facing side and the support side just as we become a larger organization and need more talent.

I walked away, even more enthusiastic after last week than we did kind of heading into the announcement heading to year-end.

I continue to be impressed by the depth and breadth the people.

And again, as we think about opportunities, not only lead what's happening in Minnesota and North Dakota and Wisconsin, but I really think there's opportunities for folks to lead entire parts of our franchise sitting right there in the Twin Cities.

So I mean -- and I'm not saying this for their benefit or any benefit, but this is an amazing opportunity for us. that I think we'll look back on and say that was a pivot point in our transformation.

Chris McGratty, KBW.

First off, Mark, echo the congrats on the retirement.

It's been great working with you over the years.

John, maybe a question on slide 16, if you could, the quarterly cadence of NII, just to get in the week for a minute. i think I understand the first quarter down 10% or so because of the accretion that you laid out in your earlier -- can you help us with just the ramp in Q2?

Is that entirely -- you had a lot of resets in back book [15] is a decent jump in the second quarter?

Don't forget too that there's two less days in 1Q, so we get those two days back in 2Q, which is a helper.

And it's back book repricing a little bit of growth.

Okay.

And then coming to just the closing -- the midyear closing and the CRE loans, you've talked about selling or not bringing over.

Is there a broader evaluation of just the balance sheet at a time with either securities restructuring, you have all the capital to do.

Is there a willingness to do something more that you're not quite ready to tell us that could unlock some NII?

No, I don't think so.

I think what's on the table is we will take a hard look at their investment advantage of purchase accounting marks to reposition that likely on day two.

And then the CRE sale that we play.

To Jim's point, capital came in better this quarter than what we had expected, depending on ultimately where things kind of move around over the next months, we might be able to do more or less of that, but we'll continue to look at that one closely.

Yes.

I would say other than kind of normal balance sheet adjustments that we've done in every single one of our past partnerships don't expect a big balance sheet transformation here.

We just don't need it, quite frankly.

And I think we're sitting in a pretty good spot to deliver the balance sheet.

We thought we were going to deliver when we started this process.

Okay.

So it seems to that you're going to keep capital for growth first and foremost, and then the buyback would certainly need to come into the narrative the back half of the year, early '26.

Yes.

I'm not quite sure we ever get really paid back for doing big balance sheet transformations.

And so I just think all things being equal, still deliver the capital balance sheet we thought we were going to deliver when we started out.

All right, great.

Thank you.

Thanks.

There are no further questions at this time.

I'd like to turn the call back over to Jim Ryan for closing remarks.

Well, we're all huddled here cold with heaters on trying to navigate this polar vortex.

We hope you guys are all staying on them and really appreciate your support.

The whole team will be here all day to answer any follow-up questions you have.

Have a great day.

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 9682-197.

This replay will be available through February 4.

If anyone has additional questions, please contact Lynell Durchholz at (812) 464-1366.

Thank you for your participation in today's conference call.