Welcome to the Old National Bancorp Fourth Quarter and Full-Year 2024 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 statements 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 containing non-GAAP measures, which management believes will provide more appropriate comparisons. These non-GAAP measures are intended to assist investors understanding of performance trends. Reconciliations for these numbers are contained within the appendix of the presentation. I’d now like to turn the call over to Old Nationals Chairman and CEO, Jim Ryan for opening remarks. Mr. Ryan?

Good morning. Old National reported strong results for the fourth quarter and the full-year this morning. In 2024, we successfully navigated a challenging environment, while maintaining an offensive growth strategy, investing inclined, 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 and able to us to exceed our expectations that we set as we began 2024. Our full-year results can be found on slide four. GAAP earnings 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 our adjusted 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 returned 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 Southeastern markets. Later in the year, we announced our partnership with Bremer Bank, enhancing our presence in the upper Midwest and expanding our footprint across Minnesota, North…

Thanks, Jim. Turning to slide five, we 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 driven by net interest income and margin that were in line with our 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, remained high. On slide six, 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 H.8 industry growth. As Jim mentioned, we grew our tangible book value per share by 8% over the last year. We also accreted nearly 70 basis points of CET1 for the year ending 2024 with a strong CET1 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 seven, we show trends in our earning assets. Total loans decreased 1.6% annualized from last quarter with strong 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% or 4% 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…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Your first question comes from a line of Ben Gerlinger from Citi. Your line is open.

Good morning, Ben.

Good morning. 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 than anything. Are you backing out any CDI or any sort of non-core other than the merger-related expenses for closing?

Yes, Ben, just the merger-related expenses are backed out. Everything else is fully loaded.

Got you. Okay, helpful. And then when you think about the outlook for ‘25 and ‘26, you already have the kind of the table set in front of you here with the [Technical Difficulty] closing and then back half of the year is just the game plan is already laid out? We think about this capital allocation with AOC coming back and the deal price incredibly well. Is there anything that you guys can do in the medium term, either outside of just core growth, either share repurchase, or just 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 expect things to play out. And I think we'll be in a better position probably by mid-year to have better optics into how capital management looks going forward.

Got you. Now if I could sneak one more in, it seems like loan growth across the banking industry is still a little bit muted, but there seems to be some green shoots? Are you guys seeing anything within your book, either geographically or lending, like, I mean, between any sub-sectors of C&I or CRE, per a chance, that could be a little bit more of a leading indicator for improved growth, not just for you guys, just kind of what you're hearing from commentary on your clients you serve?

Hey, Ben, it's Mark. I would say it's cautiously optimistic, you know, is the best thing we would say and we've guided it as such. We think the first quarter coming off of 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 the underlying fundamentals are still really solid out there. And so that's why we have a -- we feel really confident about that 4% to 6% we have for the full-year.

Gotcha. That's helpful. Appreciate it. Thank you.

Your next question comes from a line of Scott Siefers from Piper Sandler. Your line is open.

Good morning, guys. Thanks for taking the questions.

Good morning. Good to hear from you, Scott.

Yes, likewise. 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 standalone margin in coming quarters. I mean, certainly see everything on slide 16 with the broad assumptions. But just when you think about ONB on a standalone basis, I think you said stable to improving this year for the margin. I think you were talking standalone, 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, hey Scott. Yes, you're correct. When I said stable to improving, I am talking about ONB kind of core underlying. I think when we look out into this year, what drives that is our ability to continue to grow assets, right? So loan growth will be important there. And then 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, steepness in the curve and improvement in the belly is certainly something that I think could help us out a little bit, provide a little bit of a tailwind.

Perfect. Okay, great. Thank you very much.

Thanks, Scott.

Your next question comes from the line of Jared Shaw from Barclays. Your line is open.

Thanks, good morning everybody.

Good morning, Jared.

Maybe just going back to Ben's discussion around capital, you know just looking at CET1, it's really strong and continues to grow. You know 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, you know, through the year to have better 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 flexibilities. We think about, you know, the Bremer partnership and the balance sheet optimization. Maybe we can 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 agency's view of that and to the extent that that view, you know, 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, you know, our shareholders and understand that we want to have the right amount of capital, but not too much capital and so that'll be the needle that we'll try to thread as we get just more clarity as the year unfolds here.

Okay thanks and then you know on NII and beta, should we be thinking that deposit beta is sort of a linear move through the year or is there may be 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, that's a good question. I, you know, look, I'd love to say that it's going to be a linear. I don't know that it plays out exactly that way, but I think, you know, point to point over the course of the year, we fully expect that we're going to capture what we gave up on upside beta. We will capture on down beta over the course of the year. We're working hard on doing that. In any given quarter, it could come in a little bit better, 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, you know, with the longer end being up over the year…

Yes, sorry. That was the second part to that question. Sorry about that, Jared. Yes. I think, you know, our real sensitivity is really -- it's barely a curve for the most part. You know, 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 barely a curve. So kind of think three-year, five-year point of the curve.

Okay, thanks. And just finally for me, what's the accretion expectations within that NII guide for 2025?

In total? So, we had [Multiple Speakers] 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 in the first and 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 once that becomes clear. But I think for now, I would just go back to what we announced with the deal announcement in terms of accretion of the back half of ‘25 on the Brammer piece.

Great. Thanks a lot.

Thanks, Jared.

Your next question comes from a line of Brendan Nosal from Hovde Group. Your line is open.

Hey, good morning.

[Multiple Speakers] doing well. Thank you.

Just to circle back to the loan growth guide, I'm just kind of curious if you could unpack that a little bit 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 way Brendan, 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 run.

Yes, okay. Fantastic. Thank you for taking the questions.

Your next question comes from the line of Terry McEvoy from Stephens. Your line is open.

Hi, thanks. Good morning.

Good morning, Terry. Hopefully, you're warmer than we are here in Indiana.

Not much. First off, just congrats to Mark on 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 Minnesota to 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 working with 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 the -- 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 looking into 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 important for 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. So -- but nonetheless, I still think it's going to come down to finding two partners 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, thanks again Jim. And a quick modeling question for John. Can you just remind me what percentage of your securities are floating rate today?

You know, I mean 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%.

Perfect.

13%, yes. Thank you.

13%. Okay, thanks guys. Goodbye.

Thanks, Terry.

Your next question comes from Jon Arfstrom from RBC Capital Markets. Your line is open.

Well, we know we're warmer than the Twin Cities this morning. So we're grateful for that.

Yes, you are. 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, right 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 won a 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 non-performers 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 end 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 at knight 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 of 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 anybody else's 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.

Okay thank you.

Thanks.

Our next question comes from the line of Chris McGratty from KBW. Your line is open.

Great. Good morning.

Good morning, Chris.

First off, Mark, I 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 comment. Can you help us with just the ramp in Q2? Is that entirely -- you had a lot of resets in back book $15 million is a decent jump in the second quarter?

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

Okay. And then coming to just the closing -- the mid-year 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 time zero 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 highlighted. 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 six 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.

And 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 warm 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.