Welcome to the Old National Bancorp second quarter 2025 Earnings Conference Call. This call is being recorded and has been made accessible to the public in accordance with the SEC's regulation FD. Corresponding presentation slides can be found on the Relations page at OldNational.com and will be archived there for twelve 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 the presentation. I'd now like to turn the call over to Old National's Chairman and CEO, Jim Ryan, for opening remarks. Mr. Ryan, good morning.

Good morning. Earlier today, Old National reported impressive second quarter earnings and announced the appointment of Tim Burke as our new president and COO. Today is Tim's first day with us, and we've opted not to include him on the call to allow him time to get oriented. Mark Sanders' last day is also today. Mark will always be a part of the Old National family, and I am incredibly grateful for his partnership. Thank you, Mark. We wish you the absolute best in retirement. Tim and his family are relocating from Northeast Ohio. He has dedicated nearly thirty years of his banking career to serving clients' communities right here in the Midwest. Most recently, he held an executive position at a super-regional bank where he oversaw a comprehensive range of commercial banking services across twelve Midwestern markets, including those in Illinois, Indiana, and Michigan. I am confident that Tim possesses the experience, energy, optimism, and passion necessary to ensure that Old National continues to outperform our peers, exceed our clients' expectations, strengthen our communities, and deliver outstanding returns for our shareholders. I look forward to the positive impact that he will undoubtedly make in the months and years to come. Now back to our quarter results. We met or exceeded all of our previous guidance for the second quarter. These impressive results were driven by a strong focus on the fundamentals, growing our balance sheet, improving our fee-based businesses, and maintaining well-controlled expenses. Furthermore, we were pleased to close our partnership with Bremer Bank ahead of schedule on May first. We remain on track for the systems conversion of Bremer to occur in mid-October. Net charge-offs fell within our expected range. We made meaningful progress in portfolio management by reducing legacy criticized and classified assets by 9% and improving our allowance for credit losses by 8 basis points to 1.24%. Our CET1 ratio was better than expected at 10.74%. Our tangible book value increased by 14% year over year despite the impact of our Bremer partnership. In a moment, John will walk you through the quarter results in more detail. We have also provided information regarding the merger accounting associated with Bremer. John will compare our modeled expectations at announcement to where we stood at closing. Across the board, our expected results are better than our original expectations. We have a long history of meeting or exceeding our merger model assumptions, and this partnership is no exception. In summary, we are well-positioned for the remainder of the year, benefiting from a larger balance sheet and a stronger capital position. Our second quarter results demonstrate our ability to deliver consistent high-quality earnings in any environment, and our newest partner further strengthens our position. With over one hundred ninety years of experience navigating uncertainty, we are committed to controlling what we can to exceed the expectations of our clients, communities, and shareholders. Thank you. I will now turn the call over to John to discuss the quarter results in more detail.

Thanks, Jim. Beginning on slide four, we reported GAAP 2Q earnings per share of $0.34. Excluding $0.19 of net merger-related expenses, adjusted earnings per share were $0.53, an 18% increase over the prior quarter and a 15% increase year over year. Net merger-related expenses include the following pre-tax items: $76 million of CECL day one non-PCD provision expense, and $41 million of merger charges partially offset by a $21 million gain associated with freezing the legacy Bremer pension plan. Results were driven by the additional two months of Bremer operations, organic growth in loans and deposits, margin expansion, growth in fee income, and well-controlled expenses. Credit remained benign with a reduction in legacy criticized and classified loans and normalized levels of charge-offs. Our return profile, as measured on assets and on tangible common equity, remained high. Lastly, our capital position is solid with CET1 at 10.47%, approximately 50 basis points higher than we expected. On slide five, you can see our quarterly balance sheet trends, highlighting stability in our liquidity and our strong capital position. Our balance sheet also reflects the close of the Bremer partnership on May first. On a combined basis, our deposit growth over the last year has continued to allow us to fund our loan growth. We grew tangible book value per share by 14% over the last year, even with the impact of the Bremer close reflected in this quarter's numbers. A favorable stock price, lower rate marks, organic capital generation between announcement and close, combined with strong retained earnings at Bremer, and the day one repositioning of their securities portfolio, all contributed to the higher than expected CET1 ratio. Given our capital levels are higher than we modeled at the time we announced Bremer last November, we have significant flexibility around our balance sheet,…

Your first question comes from the line of Scott Siefers with Piper Sandler. Please go ahead. Good morning, Scott.

Good morning, guys. Hey, thanks for taking the question. Let's see. Jim, was something you could maybe just make some sort of some broader comments on kind of client sentiment, how they're feeling about things these days. And then either Jim or John, I was hoping you can sort of expand upon John's loan growth outlook comments just regarding full-year growth being maybe toward the lower end of the organic range. Guess I asked because some others are, you know, beginning to get a little more constructive. So interesting to hear you all a touch more cautious. You know, is that a function of demand or pricing or all of the above?

Yes. Maybe I'll start and then ask the team to jump in here. You know, from my perspective, we feel really good about the first half and our ability to kind of navigate and, you know, less than clear times. But we heard competition really heating up here, particularly in the commercial real estate world. And I think that just shades our concern estimates. We're just not gonna go compete on price. We're not gonna go compete on structure. We're not gonna give up on the fundamentals that we think, you know, really matter here in this kind of market. So I think that's why we're just a little bit more cautious about kind of our full-year outlook where maybe others are maybe more optimistic about it, but we saw good C&I growth for the quarter, which we're really pleased with. That's an area we've been spending a lot of time on. And so the extent that maybe it's a little bit more competitive in the commercial real estate market, maybe we can make it up a little bit for it. But I think that's just where we're at. You know, Jim Sandgren had a little bit on client sentiment. Jim, you wanna talk a little about sentiment here lately? We know we just did a survey here.

Yeah. Sure, Scott. Yeah. We've recently surveyed, we do this typically annually with all of our clients, and you know, while there's still a lot of uncertainty out there, I think economic optimism is on the rise. And so I think our clients continue to be cautiously optimistic about their abilities to grow and invest in their businesses. So I think there's some really encouraging things there when you think about tariffs and trade policies. It certainly had less of an impact than originally thought. There might have been a little bit of inventory build early in the second quarter, but now that some of that clarity has come, we've seen that kind of normalize. So you know, I think optimistic, but given some of the increased competition, I think that's why we're looking at the lower end of the range. Scott, it's John. One other thing I might just add to that is a little bit of this is just a math equation. Right? So if you take the TriNet loan sale out of the first quarter results, we were kind of 4% in the first quarter. Second quarter here, we're just below 4% annualized. So to hit the top end of the range mathematically, it would suggest that we gotta do kind of 8% growth in 3Q, 4Q, and we just don't see that materializing given the competitive environment that Jim and Jim just referenced.

Yeah. Got it. That all makes sense. I appreciate the inside baseball on it. And then let's see. John, maybe it was something you could kind of walk through the linked quarter increase in NPAs. I'm talking about just dollar values there. It can always be a little tricky when there's a merger involved, at least from the outside, to understand what's happening at the legacy versus the combined companies. I know the bulk of your non-accruals in the aggregate are from acquired books, but just maybe the sequential increase if you could address that, please.

Yeah. So dollar-wise, a lot of that is just Bremer coming into the fold. Actually, on a, you know, against the entire balance sheet, NPAs as a percentage are down a little bit. Feel good about where we are. And so it's really just a little bit of noise on closing the deal.

Perfect. Okay. Good. You, guys. Appreciate it.

Your next question comes from the line of Ben Gerlinger with Citi. Please go ahead.

Hey. Good morning.

Good morning, Ben. Good to hear from you.

You guys went through a lot of numbers. I'm so I apologize if I missed it. I know you said new loan yield versus back book. I was curious. Could you just provide the spot rate on either loans or bonds?

Yeah. So spot rate versus what was sitting in the average balance sheets on this quarter, if you were to reflect a full quarter of Bremer, we'd be looking probably seven basis points higher than what was recorded on securities. Five basis points higher than what was reported on loans. And, again, new money yields, you know, if you look at kind of 85% floating on loans, 15% fixed, the weighted average there gets you kind of high sixes, call it 6.8, and on securities, we're mid-fives in terms of new money.

Yeah. Helpful. Hate to ask the bottom question first. But okay. So moving more towards the strategy perspective, when you think about kind of growth relative to the CRE loan sale not happening and then also capital. It seems like you're in a better capital position from the post-deal close, and then the CRE sale kind of eats up into a little bit of that capital. The growth in the back half of the year seems steady. By no means, it is robust as some of the peers, but I'm totally fine with that. When you think about just capital deployment, and I know you said earnings projections are basically in line with consensus. So to me, it's like the two turns below peers with a projected ROC that basically two hundred plus basis points better than peers. Is the buyback something where you can expect this calendar year or kind of more so the building cap at this point?

I would lean in towards our past comments. And I think we are interested in building a little bit of capital here, you know. And we've got a little bit of wood to chop with respect to our conversion here, you know, having later this year, but we are much much closer to that decision today than we thought we would be just given capital came in so much better. So it's something that's definitely on the horizon for us, and we're gonna take a hard look at it. But nothing to report right now. Really focused on just getting through the conversion and getting off to a really strong start for next year.

Thanks.

Your next question comes from the line of Chris McGratty with KBW. Please go ahead.

Hey. Good morning.

Good morning, Chris.

Jim or John, just more broadly, what's the deregulatory environment mean for Old National? From here, obviously, there's an expense equation. I'm interested in kind of your opinion there. Thanks.

Yeah. I would say it's very constructive. Right? I mean, the conversation and tone is, you know, we've always enjoyed incredibly positive relationships with all of our regulators. But it's just that much more constructive today, you know, for us going forward as an industry and us as Old National. Think we're a couple months away from kind of really fully understanding it, you know, how any regulatory thresholds might change. But that all seems like that's in a positive trajectory, the best we can tell. I think they're really close to filling out all of the agency heads, which will just allow the industry to move forward. You know, I've been personally involved with the ABA and the NBCAs, you know, working on deposit churn reform, which I think is really important for the midsize space. And so we'll continue to push for those reforms. But I would just say all of this is all this tone is very much constructive. You know, all the same rules still apply broadly speaking, so, you know, there's no free passes anywhere, but it is more constructive, and I think it'll allow our industry to maybe grow, you know, where we wanna grow going forward.

Thanks for that. And then just as a follow-up, you mentioned threshold. I mean, you've previously talked about not wanting to flirt with a hundred in assets. Does that evolve over the next, you know, six to twelve months? Is that something, you know, obviously working on the integration, but the deals opportunistically make it more likely?

You know, I would just point back to some of our previous comments. We're really focused on organic growth. We've always got one in the hand here that we gotta get across the finish line and execute well, and we're off to a great start there. And, you know, it's one of those things. There's nothing in our playbook right now. There's nothing we're looking at. We've, you know, I'll just soon not test that water. And, again, I don't know what the thresholds are gonna look like going forward. But the good news is we don't have to do anything. Right? We've got great organic growth opportunities. We got tough decile profitability ratios across the board here. So we got lots of flexibility to continue to run this place and grow organically. If the perfect pitch comes along and it makes a ton of sense, you know, something like Bremer where it just made an absolute home run sense, would actually have to take a look at that as you would expect. But we're not interested in going testing those waters anytime soon. And I do think we need several more months before we understand exactly what that new landscape is gonna look like.

Perfect. Thanks, Jim. Appreciate the interest, Chris.

Your next question comes from the line of Jon Arfstrom with RBC Capital Markets. Please go ahead.

Hey. Thanks. Good morning.

Hey, Jon. Good to hear from you.

Yep. Thanks. Just a question back on the loan growth guide. John, you used the term active portfolio management, and I'm curious what you mean by that. And then also curious on the characteristics of the CRE loans that you had planned on selling that you now may not sell. Does that fit typical Old National characteristics? So just kind of all in one active portfolio management in that $2.4 billion? Thanks.

Yeah. Absolutely. So, yeah, active portfolio management, Jon, when you look at the reduction in classified and criticized out of the legacy Old National book this quarter, roughly half of that was from, you know, total payoffs or refis away from the bank. And so we think that there's still some more of that to come. Right? And, you know, we've talked about this for several quarters now. Really, deal by deal, loan by loan, getting in there and working that book. And so we remain really focused on that work, and I think that'll continue to be a feature in the back half of this year. With respect to the $2.4 billion in commercial real estate loan sales, very much similar to the way that we underwrote, the way that we think about real estate. There could still be something opportunistically that we could trim, but, you know, I think that would look more like what we did in the first quarter with the CapStar TriNet book than something bigger or broader that we had originally contemplated back in November.

Okay. Good. Fair enough. And then you may have touched on this, but on slide sixteen, you flagged the $10.4 billion in deposit maturity, time deposit maturity. Can you walk through some of the metrics around that again in terms of the cadence and kind of the cost of rolling off and the replacement cost?

Yeah. Sure. The bigger chunk of that actually comes in the next quarter. A little over $5.5 billion in the next quarter. And then about $3 billion in 4Q. In aggregate, you know, there's gonna be a little bit of a pickup on that book as it rolls. The bigger opportunities are in our brokered bucket, that's about $2.4 billion next quarter. That's hanging out in mid-fours, and that would roll with a more significant opportunity for us in terms of repricing down.

Mhmm. Okay. And any idea of the magnitude on that? Just ballpark? On the broker piece, $2.4 billion in the next ninety days. Four and a half is the current deal.

Okay.

Okay. Thanks a lot. I appreciate it.

Thanks, Jon. Your next question comes from the line of Brian Foran with Truist Securities. Please go ahead.

Hi. Just to make sure I understand the EPS comments on the deal slide, so two things. One, when you say it's modestly better than originally assumed, and I know it's early days, so you probably even haven't fully got into a lot of the underlying business. But is it just the $2.4 billion at the current moment, CRE loan sale $2.4 billion that's changed in that EPS assumption, or is there anything else you're signaling in terms of other deal accretion that's better?

No. Yeah. No. Not signaling anything in addition, just the $2.4 billion in commercial real estate offsetting and then just a little bit better than what was originally in the model on the rate market.

The rate mark being a little lower. So less DAA. Right?

Okay. Correct.

Yep. And then just the base we're talking about, I mean, think in the deal presentation, it was $2.60 of bps in 2026. It seems like the Old National side is more or less tracking. So I mean, can we just say $2.60 plus a little bit for this CRE sale if kind of the updated number?

I think that's fair to say, Brian. Yep.

Okay. I guess that's it. I think that's the only question I have. Thank you.

Thanks, Brian. Thanks.

Your next question comes from the line of Jared Shaw with Barclays. Please go ahead.

Good morning, Jared.

Morning. Hey. Thanks. Guess the only one left for me is just on the fee income guide. And the outlook there. Anything to call out in terms of seeing strength? I mean, is a lot of that just coming from a little bit of a stronger mortgage base than expected? Or anything special to think of there?

Yeah. I think I could get it right. Mortgage was pretty good this quarter. Wealth continues to track along nicely as well. And then, you know, well, capital markets for us continues to be a pretty, it's a small but good business for us, and this quarter looked good there. And so we're encouraged by the results there. But, yeah, I think in terms of outlook, relatively other than the upside captured from this quarter, relatively unchanged on the back half of this year.

Great. Thanks a lot.

Thanks, Jared.

Your next question comes from the line of Terry McEvoy with Stephens. Please go ahead.

Good morning, Terry.

Hi. Good morning, everybody. Maybe just the first question. Why wasn't the second half 2025 net interest income outlook increased given the decision to hold the CRE loans, or will we see more of that lift in 2026?

Well, there's a couple of dynamics at work there, Terry. Right? So the CRE loans coming in are very much offsetting kind of dollar for dollar the lower marks that were ultimately realized as compared to what we had announced.

And I guess on page fifteen, the positive earnings per share when you talk about the larger balance sheet offsets those marks. I guess that's behind my question. I'm trying to true up that sentence there.

Right. So if you run that math out, right, there's roughly $100 million in lower rate mark and a $50-ish million lower credit mark that was realized. If you were to build that schedule out and kind of look at what would have come from that mark in the back half of 2025, the $2.4 billion in commercial real estate offsets the foregone income on the accretion marks.

Perfect. Thanks for that. And then I noticed you hired a new chief investment officer earlier, maybe July first, I think. Can you just talk about the technology investments? Jamie made some comments about continuing to invest and meet your clients' needs. So any commentary there would be helpful.

Yeah. Thanks, Terry. Yeah. Matt Keane joined our organization. He was actually recently hired as the CIO at Bremer Bank. So ironically, we were in the market looking for a new CIO. Our current one's gonna retire here towards the end of the year. And we had one sitting there in Minnesota. So Matt is a great, you know, we did a search, you know, far and wide, and Matt turned out to be the best possible candidate for us. So I think we feel really good about his experience. And quite frankly, we're actually able to build a continue to build and invest in the IT team right there in Minnesota. We just found great talent sitting there given the other larger institutions that are already there, plus the Fortune 500 companies. So that's a nice win for us. But, you know, as we've done early assessments around all of our technology, I think we feel really good around our technology stack. We continue to look for ways to build out a stronger ecosystem for the wealth management, the bankers to move kind of seamlessly across those platforms. Treasury management is an area we continue to invest in and look for ways to be better, particularly as we think about going upstream towards that upper middle market, you know, ways to connect more deeply within their systems. But we don't see, you know, any large gaps in any of our systems. And we've got a long list like everybody else does of investments we wanna make. But nothing that's stopping us from being successful and building, you know, core deep relationships with our clients. So that's the good news. You know, as we've become a large institution, we'll continue to invest in our own infrastructure, particularly around data. We're obviously looking at AI, you know, very intensely right now and how AI could help shape all of our technology. But, again, you know, no gaps anywhere there, just opportunity to continue to be better as we go forward. And I think Matt is the right person to help lead us in that effort. So we're excited about that. You know, obviously, we have that technology partner emphasis, which also comes alongside us and helps us really kind of think through a lot of our technology and ways to get more efficient, more effective. So I think it's just all really positive and really glad to have, you know, Matt. Now we got Tim on the team as of today. So, we got a full team and ready to go.

Great. Thanks for taking my questions.

Terry. Good to hear from you.

There are no further questions at this time. I'd like to turn the call back to Jim Ryan for closing remarks.

Thanks, Eric. As usual, we appreciate everybody's interest. Appreciate the great questions. The whole team, John, Mike, Lynell, Scott, we're all gonna be available for questions all day. Look forward to catching up with everybody. Have a great afternoon.

This concludes Old National's call. Once again, a replay along with the presentation slides will be available for twelve 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 9394540. This replay will be available through August fifth. If anyone has additional questions, please contact Lynell Walton at 812-464-1366. Thank you for your participation in today's conference call.