Old National (ONB) Q3 2026 Earnings Call Transcript

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DATE

Wed, Oct. 21, 2026

CALL PARTICIPANTS

• Chairman and Chief Executive Officer - James C. Ryan
• John Vincent Moran
• Timothy Burke Jr.

TAKEAWAYS

• Adjusted EPS -- $0.66, representing a record high for the company and matching the reported GAAP figure.
• Net Income -- $250.0 million, reaching a record level driven by strong deposit and disciplined loan growth.
• Net Interest Income (FTE) -- $592.0 million, increasing 4% annualized from the second quarter due to earning asset generation and favorable rate/volume mix.
• Net Interest Margin (FTE) -- 3.52%, declining 2 basis points from the prior quarter as rate and volume benefits were offset by increased funding costs.
• Adjusted Efficiency Ratio -- 44.9%, marking a record low while the company continued to invest in technology, artificial intelligence, and talent.
• Total Deposits -- $57.6 billion, growing 11% annualized primarily through 1 billion of organic business account increases and seasonal public fund strength.
• Total Loans -- $51.2 billion, increasing 3% annualized from the prior quarter with growth led by high-quality commercial production.
• Commercial and Industrial Loans -- $16.3 billion, rising 12% year over year as the company expanded capabilities and talent in metro markets.
• Commercial Real Estate Loans -- $22.7 billion, up 3% year over year despite portfolio management activities that moderated reported growth.
• Commercial Loan Pipeline -- $4.4 billion, growing 6% year over year but declining 20% from record levels reached at the end of the second quarter.
• Adjusted Noninterest Expense -- $354.7 million, decreasing from the prior quarter and expected to fall at the lower end of the $1.435 billion to $1.455 billion annual range.
• Adjusted Noninterest Income -- $127.5 million, reflecting resilient core banking, wealth, and capital markets fees.
• Mortgage Banking Revenue -- $9.0 million, reflecting softness due to the rising interest rate environment and seasonal factors.
• Common Equity Tier 1 Ratio -- 11.11%, remaining strong while supporting organic growth and capital returns.
• Return on Average Tangible Common Equity -- 19.6%, indicating top-decile profitability relative to peers.
• Net Charge-offs -- 24 basis points excluding purchased credit deteriorated loans, which management characterized as a normalized level consistent with expectations.
• Share Repurchases -- $100 million, involving the buyback of 3.9 million shares during the third quarter.
• Remaining Buyback Authorization -- $177 million, which management expects to utilize opportunistically through February 2027.
• Tangible Book Value Per Share -- $13.77, growing 5% year over year despite the impact of higher interest rates on accumulated other comprehensive income.
• Full Year EPS Guidance -- 15% or more growth, maintained by management despite volatility in the operating environment throughout the year.
• Full Year Loan Growth Guidance -- 6% to 8%, with management expecting fourth quarter results to fall at the lower end of this range.
• Net Interest Income Guidance -- Management expects full-year results to fall at the lower end of its stated range due to balance sheet growth dynamics and the yield curve shape.
• Dividend Payout Ratio -- 22%, based on a quarterly cash dividend of $0.145 per common share.
• Loan-to-Deposit Ratio -- 89%, declining from the prior quarter as deposit growth outpaced earning asset generation.

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RISKS

• John Vincent Moran stated, "mortgage fees reflect some softness given the rapidly changing rate environment," as higher interest rates impacted production.
• John Vincent Moran warned that "mathematically, we expect full year NII to come in on the lower end of the stated range," reflecting balance sheet dynamics and the current yield curve.
• Timothy Burke Jr. noted that "line utilization for the quarter was slightly down," which management tracks as an indicator of commercial client demand.

SUMMARY

Old National Bancorp (NASDAQ:ONB) reported record financial results for the third quarter, driven by disciplined execution across its core banking, wealth, and capital markets platforms. Management highlighted the strength of the company's deposit franchise and its ability to attract top-tier talent, including the addition of 26 relationship managers across key markets. The institution achieved record efficiency while continuing to invest in technology and process improvements. Despite volatility in the interest rate environment, the company maintained its full-year guidance for earnings growth and credit quality. Management reiterated its commitment to returning capital to shareholders through dividends and opportunistic share repurchases.

• The company expanded its client-facing capacity by adding 26 relationship managers, including four commercial performers in the expansion markets of Cleveland and Columbus, Ohio.
• Seasonal strength in public funds contributed approximately $450 million to total deposit growth during the quarter.
• James C. Ryan stated, "we believe our brand and go to market strategy will resonate" in expansion markets as the company builds its C&I and wealth management pipelines.
• John Vincent Moran noted that the current interest rate environment is modestly helpful to the net interest margin and expects a 2-basis-point positive impact to margin in the fourth quarter.
• Management reported that credit quality remains stable, with criticized and classified loans declining 9% during the quarter and 16% year over year.
• James C. Ryan indicated that the company will prioritize organic growth and share repurchases over mergers and acquisitions for the foreseeable future.
• Timothy Burke Jr. stated that the current decline in line utilization could provide a future tailwind as commercial clients look to build inventory.

INDUSTRY GLOSSARY

• FTE (Fully Taxable Equivalent): A method of adjusting interest income to make tax-exempt income comparable to taxable income.
• AOCI (Accumulated Other Comprehensive Income): A component of stockholders' equity that includes unrealized gains and losses, such as those from available-for-sale securities.
• CET1 (Common Equity Tier 1): A regulatory capital measure representing high-quality capital, primarily common equity.
• PCD (Purchased Credit Deteriorated): Loans that have experienced more-than-insignificant credit deterioration since origination.
• C&I (Commercial and Industrial): Loans made to businesses for working capital, capital expenditures, or other commercial purposes.
• CRE (Commercial Real Estate): Loans secured by income-producing real estate properties.
• NIM (Net Interest Margin): The difference between interest income generated and the amount of interest paid out to lenders, relative to earning assets.
• NII (Net Interest Income): The difference between the revenue generated from a bank's assets and the expenses associated with paying out its liabilities.
• PPNR (Pre-provision Net Revenue): A measure of a bank's revenue before subtracting the provision for credit losses and income taxes.
• ROATCE (Return on Average Tangible Common Equity): A financial ratio measuring the profit a company generates with its tangible common equity.

Full Conference Call Transcript

Operator: Welcome to the Old National Bancorp Third Quarter Earnings Conference Call. This call is being recorded and has been made accessible to the public in accordance with the SEC's Regulation FD. The audio webcast and 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 assist investors' understanding of performance trends. Reconciliations for these numbers are contained within the appendix of this presentation. I would now like to turn the call over to Old National's Chairman and CEO, James C. Ryan, for opening remarks. Mr. Ryan?

James C. Ryan: Good morning. Earlier today, Old National reported another record quarter with third quarter EPS of $0.66 and new records in net income, adjusted diluted EPS, and adjusted efficiency ratio. These results reflect the strength of our franchise and disciplined execution of our strategy. Growing profitable relationships, funding that growth with core deposits, maintaining strong credit standards, and operating efficiently. Growth remained healthy and balanced with strong deposit growth and continued expansion of both C&I and CRE lending. Active portfolio management moderated reported loan growth during the quarter. Despite the increased competition, we were disciplined and pursued opportunities that met our pricing, relationship, and credit hurdles.

These results reflect our consistent focus on full relationships, sensible pricing, strong underwriting, and core deposit funding. Revenue trends remain constructive with continued growth in net interest income and broadly stable fee income performance. As John Vincent Moran will discuss, we believe the current rate environment is modestly helpful to net interest margin going forward. Operating discipline remained a clear strength. We delivered record efficiency while reducing adjusted expenses from the prior quarter even as we continued to invest in technology, AI, process improvements, and talent. This balance supports strong current returns and durable shareholder value. Credit quality remains stable and consistent with our expectations.

We continue to manage credit proactively, maintain rigorous underwriting standards, and stay close to our clients. Our diversified portfolio and straightforward banking model should serve us well. Our capital position remains strong, supported by continued significant capital generation and tangible book value growth. This strength gives us flexibility to support organic growth, invest in the business, and pursue additional capital returns with discipline. During the quarter, we added 26 relationship managers across commercial and wealth, expanding client facing capacity and supporting continued organic growth. Commercial hires included 4 proven performers in Ohio. 2 in Cleveland and 2 in Columbus, important expansion markets where we believe our brand and go to market strategy will resonate.

We also added leaders in our fintechs, FX, food and beverage businesses broadening capabilities that support key strategic priorities. We are pleased with the caliber of talent we attracted and developed during the quarter. We will continue to invest selectively in high quality bankers, and specialized expertise where we see attractive opportunities to drive organic growth deepen client relationships, and expand fee income. In summary, this was another record quarter with disciplined growth exceptional efficiency, stable credit, and strong capital. We remain focused on the fundamentals that create durable shareholder value profitable organic growth, deeper client relationships, disciplined investment, and strong risk management. I want to thank our team members for their continued commitment to our clients, and 1 another.

With that, I will turn the call over to John Vincent Moran to discuss the quarter's financial results in more detail.

John Vincent Moran: As James C. Ryan mentioned, we delivered a strong quarter highlighted by record earnings and efficiency, very strong deposit growth, balanced loan growth, disciplined expense management, stable credit performance, and meaningful capital return to shareholders. Beginning on slide 5, we reported GAAP 3Q earnings per share of $0.66 Less than $1 million of merger related expenses were offset by a similarly sized valuation gain on the settlement of the legacy Bremer pension plan. Excluding these, our adjusted earnings per share were also $0.66. Results were driven by strong deposit and disciplined loan growth stable fee income, and well controlled expenses. Credit remained in a normalized with 24-basis-points of non PCD charge offs.

Our profitability profile remained top decile as compared to our peers with return on assets of 1.37% and return on tangible common equity of 19.6%. Capital finished the quarter with CET1 over 11% and we grew tangible book value per share 5% year over year. But for the impact of higher rates on AOCI, tangible book value would have increased an even stronger 13% annualized from the prior quarter. We continued to return capital to shareholders through cash dividends and share repurchases in the third quarter, with a combined payout ratio of 62% of net income to common. On slide 6, you can see our quarterly balance sheet trends. Underscoring continued strength in our liquidity and capital positions.

Driven by strong deposit growth, our loan to deposit ratio declined to 89% and the CET1 ratio remains above 11%. Again, we compounded tangible book value per share year over year despite the impact of merger charges and the increased pace of capital return. We repurchased $100 million or 3.9 million shares during the current quarter and $327 million or 13.4 million shares over the last year. As we have stated in the last several quarters, we continue to believe that the best investment we can make today is in ourselves. On slide 7, we show trends in earning assets. Total loans grew 3% annualized from last quarter and 7% annualized year-over-year.

This growth was led by our commercial portfolio with C&I up 12% and CRE up 3% year-over-year. Production this quarter was balanced across our commercial book and remained predominantly floating rate. The next few quarters should be supported by a pipeline of $4.4 billion up 6% from a year ago. The investment portfolio declined due to rate driven market valuation with new purchases coming on at higher yields. We expect $1.8 billion in cash flow over the next 12 months. Today, new money yields are approximately 6%, which are well above back book yields of 4.2%. Loan growth ongoing repricing across both loans and securities and deposit pricing discipline supports continued growth in spread revenue into the fourth quarter.

Moving to slide 8, we show trends in deposits. Period end total deposits increased 11% annualized primarily driven by $1 billion of organic increases in business accounts seasonal strength in public funds. Non-interest-bearing deposits grew $182 million and represent 22% of total deposits. Like our loan pipelines, deposit pipelines remain healthy. Both total deposit costs and interest bearing deposit costs increased 8 basis points linked quarter. We remained on offense with respect to client acquisition in a competitive deposit environment. The spot rate on total deposits was 187 basis points at September 30. Overall, our deposit strategy outperformed our expectations even after adjusting for normal seasonal strength in public funds. Slide 9 shows our quarterly income statement trends.

As I mentioned earlier, adjusted earnings per share were a record $0.66 for the quarter and our profitability remains peer leading. Moving on to slide 10, we present details of our net interest income and margin. NII grew 4% annualized from 2Q levels. Total margin was down modestly in the quarter with rate volume and day count benefits offset by increased funding costs. We anticipate fourth quarter growth in NII dollars to be supported by continued earning asset generation disciplined deposit growth, fixed asset repricing, and the slightly higher mix of floating rate loans.

We remain well positioned to the forward curve and based on current spot rates for loans, deposits and securities, and assuming a static balance sheet, we would expect a 2-basis-point positive impact to margin, all else equal. Slide 11 shows trends in adjusted noninterest income, which was $128 million for the quarter. Core banking, wealth, and capital markets fees continue to perform well while mortgage fees reflect some softness given the rapidly changing rate environment. Continuing to slide 12, adjusted noninterest expense was $355 million for the quarter. Run-rate expenses remain well controlled driving positive operating leverage. Both quarter over quarter and year over year while delivering a record-low 44.9% adjusted efficiency ratio. As James C.

Ryan mentioned upfront, we continue to invest in top talent across our footprint in both commercial and wealth. Third quarter saw strong pull through from the talent, with many of these hires happening late in the quarter. I will discuss the anticipated expense impact on our outlook slide. On slide 13, we present our credit trends. Total net charge offs were 27 basis points or 24-basis-points excluding charge offs on PCD loans. Criticized and classified loans declined 9% this quarter and are down 16% from a year ago. Nonaccrual loans remained relatively stable linked quarter at 92 basis points of total loans, but are likewise down meaningfully from a 123 basis points last year.

The third quarter allowance for credit losses to total loans including the reserve for unfunded commitments of 120 basis points. down 1 basis point from the prior quarter, primarily driven by charge offs on PCD loans and improved credit quality. On slide 14, you can see our strong capital position at the end of the quarter. Tangible book value per share was up 5% year-over-year. Overall, regulatory capital ratios were up modestly linked quarter with strong earnings absorbed by loan growth and continued share repurchases. As previously mentioned, we repurchased $100 million of common stock during the third quarter We have $177 million remaining under our program. Slide 15 includes our outlook for the full-year 2026.

Our overall expectations remain unchanged from the guidance that we first provided in January of this year. We continue to expect positive operating leverage growth in tangible book value and EPS growth exceeding 15%. Expect to achieve these results even as we have navigated a markedly different operating environment over the course of the year, and our 2026 estimates prove to be durable. As you can see, we believe our year to date results and current pipeline continue to support full year loan growth of 6% to 8%. You will recall that we increased this range last quarter given the strong performance in the first half of the year.

With 3Q results and a focus on striking the right balance between growth of full relationships that come with sensible pricing and credit discipline, we now expect mid single digit growth for the fourth quarter. Which would bring us to the lower end of the annual range. Our NII guidance is unchanged. Obviously, the exact path of NIM and NII in the fourth quarter will be dependent on balance sheet growth dynamics, the shape of the yield curve, production mix, and the deposit landscape. However, we believe our balance sheet is well positioned to the forward curve and as previously mentioned, our spot margin is up slightly from 3Q levels.

That said, given the year to date results, mathematically, we expect full year NII to come in on the lower end of the stated range. With 4Q NII dollars expected to show continued growth from 3Q levels. Our fee income guidance, which had also been increased earlier in the year, remains unchanged. We expect our core fee businesses to continue to perform well with mortgage fees softness likely to continue in 4Q amid the rising rate environment and seasonal factors. Our outlook for expenses is likewise unchanged, and given year to date results is now expected to fall near the lower end of the annual range.

Robust hiring at the end of the third quarter is expected to run rate into 4Q and next year. The outlook for credit and tax rates are also unchanged. Finally, we expect to fully utilize the remaining buyback plan opportunistically over the course of the current authorization which runs through the end of February 27. In aggregate, we continue to expect 15%-plus EPS growth positive operating leverage, peer leading profitability, normalized credit, and sustained growth in tangible book value per share. Importantly, the durability of that outlook has now been tested across 3 consecutive quarters of volatility in the operating environment. It has held, and it is expected to result in record EPS for 2026.

To close, this was a strong quarter for Old National. Record earnings, record efficiency, very robust deposit growth, improving credit trends, and continued capital return. These are not onetime results. They are the direct output of the franchise we have built. A franchise with peer leading profitability, sustainable growth, a diversified and growing fee income platform, and a capital base that gives us the flexibility to invest in talent and technology while returning meaningful capital to shareholders. We are not just performing well today. We are investing to ensure Old National is a stronger company in 2027 and beyond. With those comments, I would like to open the call for your questions.

Operator: We will now begin the question and answer session. Please limit yourself to 1 question and 1 follow-up. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. If you would like to submit a question on the webcast, please press *1 as a reminder. Please stand by while we compile the Q&A roster. Your first question is from Daniel Tamayo with Raymond James. Your line is now open. Please go ahead.

Daniel Tamayo: Thank you. Good morning, everyone.

John Vincent Moran: Good morning, Daniel. Just starting. Yes. Good morning.

Daniel Tamayo: Maybe just starting on the on the margin. John Vincent Moran. The guidance, I think you said up 2 basis points is your thoughts for the fourth quarter, if I am not mistaken. And then I think I saw on the slide deck that the spot rate was up 2 basis points at the end of the quarter. So implying kind of stable in the fourth quarter. Just trying to think through where the trend goes from here. I mean, you have been talking about that continuing to move up. Is that still the overall thought that the margin would be kind of moving higher from here?

Is the fourth quarter just kind of some impact from rising deposit costs following the hike in September and anticipation for 1 in December. If you could just talk through the margin dynamics.

John Vincent Moran: Yeah for sure. The 2 basis point spot that we that we talked about is what it would look like right here, right now today, not factoring in anything else for what might come later this year. Mostly based on you know, sort of Fed funds futures and forward curve, probably we are gonna get a little bit more help, and that. That will be that will be modestly I think, to the quarter. So I think in general for 4Q, we could expect to see NII dollars continue to move up.

I think that will have, you know, as opposed to the $5.92 level that we were at in 3Q, probably has a 6 in front for 4Q, and then a margin that will expand a couple of basis points from here. From the 3Q average level.

Daniel Tamayo: Correct? $3.52?

John Vincent Moran: Yeah. Correct. The $3.52 today would be $3.54. If we get a little bit more help would be even better than that. And so I think the expectation of a, you know, modest improvement in margin is probably the right way to be thinking about 4Q.

Daniel Tamayo: Got it. Okay. Thank you, John Vincent Moran. And then maybe just digging into the deposit pricing if I can for a second. Was this a little bit more. I mean, you know, the margin was down a bit in the quarter. Was the deposit pricing or the rise in deposit costs more than you guys expected? And then just looking in, zeroing in on the money market and checking account, it looked like you had a decent increase there. If you could just kind of give us a little color on what drove that, that would be helpful.

John Vincent Moran: Yes. So 8 basis points in the quarter. 4 basis points of that was just the growth that we put on. And that growth is coming on a little bit more expensive than probably what we would have thought earlier this year, but, you know, we have been talking all year about it. it is a competitive environment for deposits We are staying on our front foot. We are very interested in continuing to grow deposits in line with our earning asset growth.

The other factor in this quarter is a little bit usually 3Q seasonal strength in the public fund side of things, and those can be a touch pricier that had a couple of basis points impact on the quarter's deposit cost. But I think overall, we are we are in really good shape continuing to, you know, fight it out in a competitive environment and an interest in growing core client deposit. And I think. Look. You know, when you look year on year, C&I up 12%, those do not all show up on day 1 and Timothy Burke Jr. and team are really actively getting after it in terms of getting to Boston and the bank.

Daniel Tamayo: So the increase in the money market and checking was not so much repricing as it was or maybe some repricing, but it was more incremental. Is that what you are saying?

John Vincent Moran: Yeah. I think a lot more incremental. Backbook, we continue to work hard.

Daniel Tamayo: Okay. Alright. Well, thanks for the color. I appreciate it, and I will step back.

Operator: Your next question is from David Chiaverini with Jefferies. Your line is now open. Please go ahead.

David Chiaverini: Hi, guys. Thanks for taking the questions.

Timothy Burke Jr.: Good morning.

David Chiaverini: So on the loan side, can you talk about the pipelines? It sounds like up nicely versus a year ago, 6%. I guess, to the extent you can talk about how much higher rates in this backdrop is impacting loan demand of your clients.

Timothy Burke Jr.: Sure. Good morning, David. We talk to our clients every day, and we continue to be impressed with their ability to navigate the uncertainty in the rate environment, and we do not see a change in demand right now for commercial lending. We continue to be optimistic about the pipelines We see good growth in the pipelines and feel good about where they are at and where they are trending.

David Chiaverini: And would you say. Looks like C&I has a bit more momentum than CRE. Is that the expectation for the next few quarters as well?

Timothy Burke Jr.: Yes. I think that is a fair way of saying it. We have got really strong C and I results John Vincent Moran mentioned, we are up 12% year over year. Our pipelines in C&I continue to look good. We are investing in talent and capabilities there that I think have us well positioned in the market.

David Chiaverini: And I think when you think about the interest rate environment going forward, you will see that impact 19 commercial relationship managers that you brought on, are they, focused more on C and I than CRE, or do they kind of offer kind of both products?

Timothy Burke Jr.: Yeah. The majority of those bankers that we hired are going to be primarily focused on C&I bankers. We have a great CRE team that we continue to increase and improve. But for the most part, the majority of those 19 bankers are going to be C and I focused in our metro markets.

David Chiaverini: Very helpful. Thank you. Thank you.

Operator: Your next question is from Brendan Nosal from Hovde Group. Your line is now open. Please go ahead.

Brendan Nosal: Good morning, everybody. Thanks for taking the questions.

John Vincent Moran: Morning.

Brendan Nosal: Maybe to shift gears here to, to Capital. Just kind of curious if this quarter's fair TCE position just following the AOCI drag blessings the enthusiasm, for how you think about share repurchase going forward?

John Vincent Moran: No. Not at all, Brendan. I think we have plenty of both reg cap and GAAP cap. You know, we feel good about where we are, especially against risk that we take on the balance sheet. You know, I think no change to plans Continue to expect to execute the $177 million that is left on the on the repurchase authorization. You know, maybe a little bit more opportunistically over the balance of this, but we would expect to exhaust that.

Brendan Nosal: Okay. Perfect. Maybe shifting gears to this quarter's commercial hires. I have not heard you folks talk about Ohio in a long time. But now you have got 4, you know, new people on the ground there. Maybe just talk about the opportunity that Old National has kind of in those markets and what you ultimately want to accomplish there?

Timothy Burke Jr.: Oh, thank you. And, well, just personally speaking, I have spent 30 years in Northeast Ohio personally and professionally, so I feel like I have a good understanding of the market, the talent. And when you think about Cleveland and Columbus, they are very similar to our other large Midwestern cities. You know, strong C&I, middle market, manufacturing, the types of business banking clients that we think we are very well positioned to continue to grow. So their markets we know well, we know the talent that we hired. We think there is opportunities in those markets to expand, and we feel our story resonates very well there. So we are excited about the opportunity.

Brendan Nosal: Okay. Great for taking my questions.

Operator: Your next question is from Brandon Rud with Stephens Inc. Your line is now open. Please go ahead.

Brandon Rud: Morning. Thanks for taking my questions. I guess if I could start, Timothy Burke Jr. mentioned new loan originations are focused more on the floating rate side of things. I am just kind of curious what that blended new origination yield is compared to the roll off rate of about 5.1% on page 10.

John Vincent Moran: Yeah. We are. Compared to the back book, fixed repricing. So fixed to fixed is gonna be well north of 100 basis points, but fixed into what we have been putting on is kind of 100 basis points against the back book. We have got, again, to remind you, 4.6 billion of fixed-rate coming out of loan portfolio. And then on the securities side, you did not ask about securities, but I will I will give it to you anyway. 1.8 billion there, and that is, you know, 180 basis points or better in terms of in terms of what we are putting on there.

In terms of yields themselves, up 5 basis points linked quarter. that is closer to 10 basis points on a spot on a spot basis. And again, I think if we get the forward curve and fed moving the way that the market expects it to, we would see a lift starting in November on that book just to, you know, the flow the float mix on the balance sheet has shifted a little bit over the last year. And so we will get a little bit of a helper there.

Brandon Rud: Gotcha. Okay. Thank you. And I think you mentioned the increase in deposit costs is more related to new growth rather than back book repricing. I guess, when you. And then. And I know your guy does not include additional rate hike, but when you think about this hiking cycle, kind of what are your initial expectations for interest bearing or total deposit betas as you work through these hikes?

John Vincent Moran: Yes. I think, look, non-interest-bearing show pretty good growth this quarter, up $182 million. You know, we are we are pleased with that. Absolutely. I think the more C and I business that we are doing, the more shots on goal we have with companies for operating accounts, and we intend to grow that bucket. I think in terms of cash sorting, everybody that is gonna sort has sorted. We have been in a cash sorting environment for the last 3, you know, 3-plus years, at this point. So I would not expect too much to change on that.

The other the other thing that is kind of interesting about us the median balance for our total deposits are $3.8 thousand. If you rip out the CDs, closer to $3 thousand. Like, there is just not a lot to do with sorting And so, you know, I think I think where we are in terms of mix is probably gonna be pretty stable.

Brandon Rud: Got it. Okay. And I guess I was asking more about the betas on incremental rate hikes from here.

John Vincent Moran: Right. Yes. Expectations there. I think there is nothing. Nothing that we see in our in our book today that changes our expectations. Like, we were 40% up. We were 40% down. We are, you know, I think based on what we see in our back book today, our expectation would be that we would you know, be about in line with what the historical average has been. The interesting thing out of that exception book though, is that our churn in the book and our retention there has been way better than what we thought. And so maybe there is a little bit more opportunity to kinda test and learn in that.

But again, you know, we want to stay focused on growth of deposits.

Brandon Rud: Got it. Okay. Thanks very much.

Operator: Your next question is from Brian Foran with Truist. Your line is now open. Please go ahead.

Brian Foran: Hey. I have got a bunch of investor inbound questions just on the deposit growth. So, hopefully, I can just hit through them real quick. I mean, obviously, the 11% annualized is a great result. But first, do you happen to have the brokered balance at the end of 3Q Did that contribute at all to the growth?

John Vincent Moran: Brokered was actually down in the quarter. It was a really strong organic 0.25 for us. I would say 1 billion was kind of organic and then we had a win in the public side. It was a little bit of a larger deposit relationship. And then the normal seasonal strength in public funds added probably $450 million or so. To the quarter's balance.

Brian Foran: Perfect. That was my second question. Then back to the question about the money market growth. I see on the website, there is a 3.85% promo. I am not sure when that started. Any chance you have got a breakdown of how much of the growth was from that promo offer?

John Vincent Moran: That 1, we might have to follow-up with you. After. I am not sure that I have that number handy.

Brian Foran: Got it. And then the last 1, just on the legacy Bremer footprint. I mean, I have never loved the FDIC market share reports. And very cognizant that things like rehousing commercial deposits can move things a lot. But some people pointed to this year, printed it, I believe, a 2.9% share for Old National. At least in the Minneapolis MSA. And last year, it was 3.5%. Can you kind of walk through how you think about how the Bremer footprint is doing Do you think there is been any share erosion? Or maybe is it things like moving some corporate relationships to the old national headquarters or something like that?

John Vincent Moran: Yeah. Yeah. That is exactly what is going on. You know, that summary deposits report is I would describe that thing as directionally correct, but specifically wrong. And how you household municipal deposits, broker deposits, large corporate deposits, can sort of swing that around in any given year and yeah. So I think underneath the surface, the core Bremer franchise I would describe as very stable. We have seen a pickup in the pipelines from our legacy Bremer footprint that leads us to believe strongly that the results going forward will continue to be stable we will be able to build and grow those markets as well.

Brian Foran: Got it. I am not sure you will answer that 1, but I will try. Some people have pointed to the margin in consensus region of 3.65% or so by second half next year. Any thoughts on what you think a normalized or achievable margin over time is? Or maybe I will just leave it like that and let you decide.

John Vincent Moran: I think that the curve, should it play out, will be helpful for us. Modestly helpful. And so I think that we can we can see improvement in 4Q and then maybe sustained improvement into 2027. But we will we will come back in January and, and refresh you on that set of assumptions.

Brian Foran: Thank you for taking my 7-part question.

Operator: Your next question is from Nathan Race with Piper Sandler. Your line is now open. Please go ahead.

Timothy Burke Jr.: Morning, Nathan.

Nathan Race: Hi, guys. Good morning. Thanks for taking my questions. I was hoping just to walk through some of the takes from a loan growth perspective in the quarter. You know, I think you are coming off a record loan pipeline coming out of June. Yeah. I think James C. Ryan alluded to some portfolio optimization in the quarter. So just curious kind of what you saw in terms of kind of a payoff in production. I am sorry, from a payoff perspective in the quarter. And just any thoughts on why the pipeline heading to 4Q is down from a commercial perspective, 20% or so?

Timothy Burke Jr.: Morning, Nathan. Thanks for the question. Yeah. We feel very good about where we landed the quarter. When you think about navigating the competitive landscape having strong pricing discipline, which allowed us, as John Vincent Moran mentioned, to increase loan pricing by 5 basis points and 10 basis points in our spot rates. Now that said, we delivered 3% loan growth for the quarter. We feel good about our ability to hit our increased loan growth range for year end. Speaking on payoffs, we had a couple of payoffs on the CRE side. I think when you have projects and you see rates going up, you know, there is gonna be some payoffs and pay downs there.

We had a couple of those that happened right near quarter end. But like I said, we feel good about the pipelines, our conversion rates, and our ability to continue to grow loans at a clip that, you know, we have provided guidance on. So feel good about where we are at and good about where we are going.

Nathan Race: Okay. that is helpful. And, John, I appreciate you speaking to kind of the lower end of the end guide for the quarter, but maybe just looking to expenses as maybe an offset relative to maybe more conservative thoughts from a top line perspective there. But, you know, is it fair that maybe expenses come in kind of the low end of the expense guide for the year? Obviously, really good cost controls in the quarter, but just curious on kind of how you see the expense run rate trend into 4Q?

John Vincent Moran: Yeah. Think you have got it, Nathan. Correctly there. I think, you know, when you look at that range, $1.435 billion to $1.455 billion on the year, our expectation would be it would be at the low end of that range. I think we do tick up as compared to 3Q. And again, a lot of the hiring that we did was kinda back-end loaded in this quarter. So 4Q will run higher than 3Q. But absolutely, we think for the year, we are gonna end up at the low end of that of that prior annual guide.

Timothy Burke Jr.: And Nathan, 1 thing I would share back on the loan growth. Our line utilization for the quarter was slightly down. So we think there is some embedded you know, demand that we will see that pick up as, you know, c and I companies are looking to build inventory and other items. So we think that is also. Could be a tailwind for us going forward.

Nathan Race: Okay. Great. And then just going back to some of the commercial hires in the quarter, lastly, it seems like good momentum there. Just curious to what extent, if any, you are having some attrition with some of your commercial bankers maybe seeing some competitors pay up more for talent these days, or do you kind of expect kind of kind of continued net growth in kind of your commercial banker producer headcount as we get into next year? Or are you seeing kind of increased competition for kinda some of the high quality producers these days?

Timothy Burke Jr.: Yeah. I mean, the market is. The market's very aggressive right now for talent. You know, from a timing perspective as we are sitting here in October, you know, I would expect that to wane. But, you know, year end in Q1 until bonuses are paid out. But it is very competitive, and we feel we are doing a very good job of being proactive. To keep our top bankers and know, continue to give them a platform to succeed. As far as adding new bankers on a net basis, yes, that. That will continue be the plan to invest in top talent. And continue to grow our banker base. You know, we see an opportunity that.

For our story to resonate in the market very well. The conversations we are having you know, are the talent that we are talking to, I think, are excited about the We will continue to have those conversations and look to grow that bankers up as we move forward.

Nathan Race: Okay. Great. I appreciate all the color. Thanks, guys.

Operator: Your next question is from Janet Lee with TD Cowen. Your line is now open. Please go ahead.

Janet Lee: Good morning. Good morning. Given the seasonality of public deposits in the third quarter, it seems like it may come down in the fourth quarter. What is the implication on the deposit cost? Because if I on the slides, it says spot rate of 1.87%, which is a bit of an increase versus the average. But if the deposit growth on the public side moderates a bit, like, is could that help on the magnitude of the deposit increase in the fourth quarter being a little bit less than the third quarter? And spot rate Could it be below the spot rate of 1.87%? Or is that too optimistic?

John Vincent Moran: I would say that is probably optimistic. I do think those. The, you know, muni flowing out could help deposit costs by a couple of basis points, call it call it 2 basis points, 3 basis points, something like that. And that is again kind of normal seasonal flows. Those are still sitting there at the early part of this quarter, but they flow out.

Janet Lee: Got it. And the 40% beta you mentioned, that is on the interest bearing deposits?

John Vincent Moran: No. Total. Total.

Janet Lee: Got it. I heard your message around your intent to use up use up all of the remaining buyback authorization. On a go forward, is there a good target payout ratio that you keep in mind you did 62% on a combined basis. Is that a good level? On a go forward?

John Vincent Moran: We have not really targeted a combined payout ratio I. But I think, look, the fact is we are putting up returns on tangible common equity in the high teens. Those are sort of pure leading sort of profitability. So we stack capital up very, very quickly. And we would continue our plan certainly would be to continue to return that capital to shareholders So, you know, I think that is been running 60-ish percent, plus or minus, the last couple of quarters. And, you know, we will we will rerack things and come up with a new authorization in February.

Janet Lee: K. Got it. Thank you. Sure.

Operator: Your next question is from Timur Braziler with UBS. Your line is now open. Please go ahead.

Timur Braziler: Hi. Good morning, everyone.

John Vincent Moran: Morning, Timur.

Timur Braziler: On the on the CD side or on the on the time deposit side, I am just wondering some of the growth there if you are able to lock in duration and maybe capture some of the albeit, higher cost, lock that in for a little bit longer here if that customer appetite is maybe changing. And then maybe more broadly in terms of how you are thinking about deposits, I mean, what matters more? Just being in a hire for longer environment in terms of where deposit costs might go, or do you still ultimately think that thinking of a beta is the right way to think about ultimately where deposit costs can end up.

John Vincent Moran: Yeah. Thanks. The absolutely. We put on some CDs this quarter. And I think that is gonna look really smart in a quarter or 2 or 3 or 4. I. You know, our thoughts in this quarter was that the funding curve was probably in front of the Fed. And leaning in was probably a good thing to do in 3Q, so we did. And I think we will get benefit from that. 1Q, 2Q of next year. I think in terms of higher or longer, on balance, it is it is modestly helpful, as we have as we have spelled out, and that is kind of a function of balance sheet mix and alco.

So we have sort of pivoted ever so slightly asset sensitive here over the last couple of quarters. The impact on deposit costs, think higher for longer suggests that gonna stay competitive for longer. And, again, you know, we are we are we are. Our stated objective is grow deposits in line with earning assets. And so we will stay competitive Okay.

Timur Braziler: And then maybe a follow-up on the expense question from before. So your unchanged guide, to your point, does Imply a step up in expenses in 4Q. But thinking kind of low point versus mid versus high, is there is there any kind of granularity or any of insight you can give on where within that range we can end up on expenses in the fourth quarter and what could take it away from kind of the lower end of the range into something more middle or upper end.

John Vincent Moran: Yeah. I think middle or upper end is very unlikely. I mean, if I were gonna. If you were gonna force me to kinda pick a number, I would say take the $355 million in the 3Q. And add to it for 4Q just on the hiring and then normal kind of year end factors. And that would probably be as good a place as any to kinda to kinda land.

Timur Braziler: Great. You.

Operator: Your next question is from Jon Arfstrom with RBC Capital Markets. Your line is now open. Please go ahead.

Jon Arfstrom: Hey, good morning.

John Vincent Moran: Good morning, John Vincent Moran.

Jon Arfstrom: Question for you guys on the competitive environment and lending in the pipelines. How competitive is it out there And then on the pipeline numbers, would you describe the pipeline right now as full or healthy? Or do you do you think. Does your gut tell you that pipeline goes higher or lower? Over time? depending on what you are seeing?

Timothy Burke Jr.: Sure. You know, thanks, John Vincent Moran. Yeah. I would say it is certainly competitive out there. Know, and I do not think that is going to change anytime soon. I feel pipelines are solid. I never feel they are full. They can always get better. But I think what we are hearing from our clients is that demand is going to continue. And you know, I think as I said earlier, I think they are navigating. Our clients are navigating uncertainty better than ever. You know, I think people are used now to a high degree of uncertainty, and people are continuing to invest through that.

As we continue to add new bankers, you know, those bankers, it takes up a quarter or 2 to ramp up pipelines. Very pleased with the pipelines we already have. In fact, we have a couple signed term sheets already from new hires that we just made this quarter. So I feel very good about the pipelines where they are where they are at today, but I feel like there is upside going forward to continue to grow those pipelines as we continue to add bankers and grow and build capabilities on corporate banking and specialty banking side.

James C. Ryan: Yep. John, I would just add Timothy Burke Jr. and the and the leadership team done a really good job making sure that the pipeline is really clean and you know, to the extent that we do not believe there is a full relationship available to us or it is gonna be harder to come by. You know, we are cleaning those out of the pipeline. We are not looking those opportunities to the extent We do not think it is gonna meet our pricing hurdles, and there is just too much competition. Cleaning those out of our pipeline.

So I feel really good about the work that Timothy Burke Jr. and the entire commercial leadership team have done to have a really even better pipeline, you know, going into the to the year end that is, high quality more so than even the past.

Jon Arfstrom: Yep. Okay. Okay. Good. And then, of course, Jim, since you have the mic, the 1 question that has not been asked What are your thoughts on M and A from here I know that people talk about Bremer, but I am looking at a 19 and a half percent ROTCE and 15% EPS growth. Seems like it is worked You know, what kind of an appetite do you have and any interest at all?

James C. Ryan: Yes. Thanks, John Vincent Moran. We appreciate that. We do believe it is worked, and, we have a lot of empirical evidence suggest that we have created real shareholder value. Over the multiple deals we have done in the organization. You know us in good as anybody or better than most and you can see that. But having said that, I think there is a time and place, and I do not think this is the time or place for us to thinking about more m and a. Obviously, the market's a little bit difficult too with rising rates, and everybody's really focused in on, you know, day 1 tangible value dilution.

And quite frankly, you know, we do not need it to support know, the kinds of returns we are putting up. We do not need it for the growth we are putting up. I think growing our organically, and going out and being very active in the hiring and talent front think, has allowed us to stay really front footed. that is where we are gonna spend our time and effort. And there may be a time where m and a might make sense, but I do not see it in the foreseeable future here. I think it is just sticking to our knitting and doing the things we know really well.

And, honestly, as we talked about, the investment ourselves, you know, the returns that John Vincent Moran did will put back through the buyback program. Are really strong. And that makes a lot of sense. And I think investors obviously are supportive of that. But I also just think taking the time to invest back in ourselves and continuing to build the foundation to be a larger organization. Will put us in a really good position and that makes sense in a couple years to think about, and A again, but it is not something we spend any time on today.

Jon Arfstrom: Yep. Okay. Alright. Thank you. Thank you.

Operator: Your next question is from Chris McGratty with KBW. Your line is now open. Please go ahead.

James C. Ryan: Hey, Chris.

Chris McGratty: John, for you on the deposits, listening to the call, it reminds me of kinda what you did during the last cycle where you kinda got the bad news out of the way with the deposit repricing and everyone caught up. Obviously, every cycle is different. Is there an element of that repeating itself?

John Vincent Moran: I would. I you know, I. I do not know that I would say that there is an element of that repeating itself. I think you know, look, the quarter the quarter was a great growth quarter for deposits. Half of that deposit cost increase was on that growth. And, you know, it is it is a competitive environment out there. Right? You know, maybe to the extent that we are seeing deposit costs increase, I do not think we are we are wildly out of line. With what I have seen from other reporters. And, and I think if people are interested in growing deposits, they are gonna be paying Right?

Chris McGratty: So Okay. Worth a shot. Thanks. And then for kinda putting the pieces together, is operating leverage based on the crosscurrents right now, is that something that is in the cards you know, over the. Beyond the quarter? Into next year?

James C. Ryan: it is it is. As you know, and again, you know us for a long time. Right? it is a philosophical approach to every budget that we cut. We are trying to drive positive operating leverage. And I think we have got. Look. You know, obviously, this quarter's results a little bit softer on top line. We have got some pressure in the mortgage business. We have got some pressure on NII. But I think when you look at the forward curve, we have got we have got more tailwinds than headwinds there. And so that should set up a better revenue environment, and we are working hard on expenses. Yeah.

As you know, Chris, I mean, this is a real focus of ours. We have been really disciplined you know, between John, Timothy, and I. We have regular arm wrestling matches over much we can afford to invest. Versus how much we need to, you know, let drop to the bottom line. I think we are striking the right balance between investing in the future you know, which means investing in growth and also, you know, driving positive operating leverage. We have all. We have said, you know, we cannot beholden to this you know, really low operating efficiency level forever. Like, we are gonna have to continue to invest in ourselves.

Obviously, to the extent that, you know, John's pointed out, if. To the extent that we get benefits from rates, and that allows us a little bit more flexibility. But we are striking the right tension. Deliver the right strong shareholder returns, but also delivering a really way. But I never wanna sacrifice our future for lack of investment. And, you know, especially when we did. We have such awesome opportunity to continue to tell our story, and there is actually nobody better at telling our story to relationship managers, but Timothy Burke Jr. has been So, we need to take advantage of that while we can, and, continue to grow the business and make the right long term decisions.

Chris McGratty: Okay. Great. Thank you.

Operator: Your next question is from Jared David Shaw with Barclays. Your line is now open. Please go ahead.

Jared Shaw: Hey, thanks. Good morning. I guess, you know, maybe just on the capital side, you continue to see really strong CET1 capital with the growth even with the buyback, how should we think about a target capital ratio, especially sort of given the potential tailwinds coming out of out the regulatory side as we go forward?

John Vincent Moran: No target. Has been set, but we are super comfortable with where we are. Right? And north of 11% CET1 feels like a ton of capital for the risk that we take on the balance sheet. If those changes in Basel III become you know, go in as written I think we get, you know, probably a rough top of 100 basis points of additional CET1, and that may allow us to reconsider the size of the repurchase authorization when get to in February.

Jared Shaw: Okay. And then on the fee income side, know, any new initiatives or how should we think about sort of the trajectory of the income growth as we exit the year?

John Vincent Moran: Feel great about where we are in the in the core banking fees, wealth management, and capital markets. Mortgage, obviously, a little bit of softness. Just given the rate environment, and then we have got normal seasonality in 4Q. Jo not think mortgage is gonna be a big grower for us next year. The good news there is that there is a there is an obvious and easy expense offset because everybody that works in mortgages variable comp in terms of production. And if it if it is soft enough, we have got some other levers that we can pull in terms of the fixed cost piece of that business.

Timothy, I know if you wanted to add some color on some of the initiatives that we have got in other parts of the bank.

Timothy Burke Jr.: Yeah, we continue to invest in our noninterest income businesses. I think about specialty banking. I think about corporate banking. We have made investments. FX fintech, syndications, wealth management, really across the board, either in people and or the platform, and are continuing to do that. As we look at 2027. So I think you will you will continue to see investments in the businesses. And we feel good about where the pipelines are today and where we seem going short of, you the rate environment as it relates to mortgage.

Jared Shaw: Thanks.

Operator: Your next question is from Anthony Elian with JPMorgan. Your line is now open. Please go ahead.

Anthony Elian: Morning. Morning, and thank you. On expense, you are pointing us to the lower end of the range. You called out earlier your efficiency ratio is a record-low 45%. How do you think about maintaining that efficiency ratio at that level while you keep investing in some of the areas you call out on slide 12,

John Vincent Moran: We have for a really long time been good about driving expense out of the bank in the back and middle office. And just kinda how we move things around. And we take those dollars and recycle them into revenue generation, and, and some client facing technology. And so we have we have. This is the path that we have been on for heck, 10 years, may. Maybe more than that. And I think what you are seeing in the efficiency ratio is really the result of the scale that we tacked on with Bremer and realizing you know, those onetime saves. Or not 1 time saves.

Those expected saves dropping to the to the bottom line of the run rate. Right. So I think that is what is allowed us to sort of drive efficiency ratio sub 50. We will continue to work at it real hard. We work at it every year.

Anthony Elian: Thank you. And then your adjusted ROE has been around 20% for several quarters now. Does this feel like the right level where the company should be operating at? Or do you see upside from here given your earlier comments on the levers the company has to rising rates? Thank you.

James C. Ryan: Would end. Like, hey. We feel really good about where we are at from a profitability perspective. And, you know, to the extent that we get a little help, you know, on the revenue side, there is possibility to be higher here, but, you know, I think we are leading most peer group with those kinds of numbers. We feel like this is a great spot to be in and run at. And, you know, we are obviously working every day to continue to improve our overall profitability. We will not let the. You know, we will not stop investing in our business to continue to have it grow.

So that. that is just again, the tension we find ourselves in every single day is the ability to invest and maintain that high degree of operating efficiency. And have long term growth in our business.

Anthony Elian: Thank you.

Operator: Your next question is from Terry McEvoy with Wells Fargo. Your line is now open. Please go ahead.

James C. Ryan: Good morning, Terry. Welcome back, Thanks.

Terry McEvoy: Good morning, everybody. Morning. Thank you. If I think about 19 bankers or RMs they could eventually, in theory, support a multibillion dollar bank. And I think CapStar was. I have not had a chance to look, but call it $3 billion. So question is, how do you think about an earn back on new hires? Then just as a follow-up, were any of those new hires maybe upgrades where there is a cost savings, or some cost savings component to it? Thank you.

John Vincent Moran: Terry, I can take the earn back question, and then Timothy Burke Jr. will Timothy Burke Jr. will clean this up. You know, for commercial talent, our earn backs tend to be very quick. And very quick, I mean, like, inside a year, year and a half. On the wealth side, when we hire new wealth people, that can be a little bit extended because it is harder for them to move relationships. But the right commercial talent, we have said for a long time, pays for itself very, very quickly.

Timothy Burke Jr.: Yeah. On that 39 of those bankers were net new, 7 replacements. The total of 26 new, just to give you that breakdown. Yeah. You know, as far as expectations, you know, what I will tell you is we are very disciplined. Who we are hiring, and we are looking to hire bankers that we know are top performers in market that we know our story resonates very well. And I think if you have seen the expansion markets in our history and our track record of going into new markets, because we have that approach, we have been very successful. And I think we have been successful quickly, and I expect that to continue.

You know, as we look at the pipelines that are already growing and building from the new bankers we have hired, we feel very good about them to be able to pay for themselves and then some. And when you think about the business they are bringing on, that core C and I business that are coming with primacy and good core operating noninterest bearing deposits, that is sticky business that provides recurring revenue that helps build that top line, and, we feel very good about the trajectory of that growth as well as the bankers that we have hired and their ability to pay for themselves very quickly.

James C. Ryan: You know, I think we have done a really good job focusing on quality over quantity. And that quality, though, comes at a price. As Timothy Burke Jr. said, these are top performers in the marketplaces. I think the also interesting fact is many of those folks are gonna sit across from Timothy Burke Jr. and I and John Vincent Moran and others right here at headquarters. You know, we are we are very hands on in this process. Both from a recruiting perspective and telling our story perspective, but making sure these are gonna be really great fits for us from a cultural perspective.

And I think that is helped us make sure that the people we hire stick around, last long, and are really productive right out of the gate. And I am not sure how other banks approach it, but we wanna make sure we get the best of the best that come workforce.

Timothy Burke Jr.: And just building on that point, we. You know, the discipline we have. We are hiring back that for the most part, 1 of our leaders usually me or 1 of my directs, have worked, with them directly. So we know not just what they are producing. We know how they are producing it, and we know the types of clients that they are going after with primacy in mind. And sustainable recurring revenue from delivering the entire bank in a collaboration perspective as well. So we feel good about what they will do, not just in C and I, but driving our wealth business driving other areas, of the bank, based on client need.

Terry McEvoy: that is great. Thank you very much.

Operator: There are no further questions at this time. I would like to turn the call back to James C. Ryan for closing remarks.

James C. Ryan: Well, thank you all for having so much interest. This may be a record, duration, for a long time. Everybody's high level of interest and detailed questions. Of course, we are gonna be around all day to take any follow-up questions. And, John, thank you for all your hard work. Make sure we had a successful call. Have a great day, everyone.

Operator: Thank you so much, Jim Ryan. 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. If anyone has any additional questions, please contact Lynell Durchholz at (812) 464-1.37 thousand. Thank you for your participation in today's conference call.

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