Ladies and gentlemen, welcome to the Old National Bank Corp. First 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. 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 containing 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. Earlier today, Old National reported first quarter 2026 earnings that exceeded our internal expectations and analyst estimates. We carried strong momentum of the year, and our performance in the first quarter reinforces our confidence in the full year plan. This quarter demonstrates disciplined execution as we have reliably delivered quarter after quarter. We delivered robust loan growth, powered by continued strength in our core deposit franchise, and disciplined funding management in a highly competitive market. We controlled expenses and generated strong fee income, which helped offset net interest income pressure from typical seasonality and the recent sub-debt issuance. Credit performance remains solid, supported by healthy liquidity and capital levels. We also acted decisively on capital returns, repurchasing shares during the quarter, including reducing Otto Bremer's trust position in Old National, and we intend to deploy the remaining authorization over the course of the program. Bottom line, we are executing and we expect to keep building from here. Our priorities remain clear, drive organic growth, and return capital shareholders. Organic growth starts with talent, and we are investing accordingly. We recently announced a strengthened commercial leadership team, promoting proven internal leaders and adding experienced bankers from several super regional institutions. Our team is focused every day on winning new clients and deepening existing relationships and building the next generation of bankers. Our commercial pipelines are at record levels, and our talent pipeline is as strong as it has ever been. We are also accelerating efficiency and scalability through technology and AI investments supporting positive operating leverage. As a result, we delivered a record-adjusted efficiency ratio that remains in the top decile of our industry. On the operating environment, the quarter brought higher-for-longer rate outlook and continued industry uncertainty. Old National is built for this backdrop. Our balance sheet remains neutral to the short end of the curve, our granular low-cost deposit base helps contain funding costs, and our strong underwriting and straightforward community banking model positions us to perform through volatility. Importantly, nothing we are seeing changes our outlook. Loan pipelines are at record levels, momentum is building, and we remain confident in our full-year expectations. To close, we're off to a great start in 2026, and we're executing against our commitments. Our focus remains on organic growth and disciplined capital return. This is not a time where we need acquisitions to achieve our objectives. I want to thank our team for delivering a strong quarter and for staying relentlessly focused on our clients. With that, I'll turn the call over to John to walk through the quarter's financial results in more detail.

Thanks. As Jim mentioned and as summarized on slide four, we delivered another strong quarter and a solid start to the year, reflecting continued momentum in organic growth, disciplined expense management, stable credit performance, and increased capital return with robust capital levels. Beginning on slide five, we reported gap 1Q earnings per share of $0.59, excluding $0.02 of merger-related expenses and a non-cash expense associated with the final distribution of a legacy First Midwest pension plan, adjusted earnings per share were $0.61. Results were driven by better-than-expected loan growth and fee income, along with well-controlled expenses. Credit remains stable with less than 20 basis points of non-PCD charge-offs. Our profitability profile, as measured by return on assets and on tangible common equity, remained top decile versus our peers. Capital finished the quarter with CET1 over 11%, and we grew tangible book value per share 6% annualized and 11% year-over-year, despite absorbing the majority of Bremer one-time charges, better-than-expected balance sheet growth, and returning capital to shareholders in dividends and share repurchases. Specifically, during the first quarter, we returned $151 million to shareholders. On slide six, you can see our quarterly balance sheet trends, underscoring strength in our liquidity and capital positions. Our loan-to-deposit ratio remained 89%, and the CET1 ratio is comfortably north of 11%. Again, we compounded tangible book value per share year over year despite the impact of the Bremer close, merger charges over the past year, and the increased pace of capital return. We repurchased 3.9 million shares during the current quarter and 6.1 million shares over the last year. With dividends and repurchases, our combined payout ratio was 64% of 1Q-adjusted net income to common. As we've stated in the last several quarters, the best investment we can make today is ourselves. On slide seven, we show trends in earning assets. Total loans grew 8% annualized from the last quarter, led by 16.9% annualized growth in C&I. Production was diversified across our commercial book, and the next few quarters should be supported by record-high pipelines of $5.5 billion, up nearly 14% from year-end levels. The investment portfolio was essentially unchanged from the prior quarter, with portfolio purchases offset by changes in fair values. We expect approximately $2.4 billion in cash flow over the next 12 months. Today, new money yields are running about 83 basis points above back-book yields on securities. Strong loan growth, ongoing repricing across both loans and securities, and continued deposit pricing discipline supports stable to improving net interest income and net interest margin over the course of 2026. I would point out that the first quarter was impacted by two fewer days, our sub-debt issuance in late January, and the spread dynamics inherent in this quarter's loan production, which was skewed decidedly toward near-investment-grade floating rate C&I. Moving to slide eight, we show trends in deposits. Total deposits increased 4.2% annualized, primarily driven by commercial and retail growth, and partially offset by seasonally lower public funds balances. As a reminder, 1Q is the low point for our public funds deposits, with those balances typically rebuilding over the second and third quarters. Non-interest-bearing deposits declined slightly to 23% of total deposits from 24% in the prior quarter, partly reflecting the seasonal factors I just mentioned. Despite remaining on offense with respect to client acquisition in a competitive deposit environment, we were able to decrease total deposit costs by eight basis points and lowered interest-bearing deposits and even better 14 basis points linked quarter. We achieved an approximate 93% beta in our exception price book in conjunction with the Fed cuts in the fourth quarter. These actions resulted in a spot rate of 170 basis points on total deposits at March 31st. Overall, our deposit strategy performed as we expected, and we successfully achieved the down rate beta that we had targeted for this rate cycle. Slide nine shows our quarterly income statement trends. As I mentioned earlier, adjusted earnings per share were 61 cents for the quarter, and our profitability remains peer leading. Moving on to slide 10, we present details of our net interest income and margin, both of which reflect my prior comments around day count, the nature of this quarter's loan production, and the impact of our sub-debt issuance. You'll note that we remain neutral to short-term interest rates, and we have a total of nearly $8 billion in fixed-rate loans and securities expected to reprice over the next 12 months. Slide 11 shows trends in adjusted non-interest income, which was $122 million for the quarter, exceeding our guidance. While most of our fee businesses performed in line with our expectations, we again saw a better-than-expected performance within mortgage, despite typical seasonal patterns in that business, and within capital markets. In both cases, this was driven by the mid-quarter dip in rates. Continuing to slide 12, adjusted non-interest expense was $354 million for the quarter. Run rate expenses remained well controlled, and we generated positive operating leverage both quarter over quarter and year over year. We reported a record low 46% adjusted efficiency ratio, and we have now realized 100% of the $111 million of annual run rate cost saves that were anticipated with Primer. On slide 13, we present our credit trends. Total net charge-offs were 26 basis points, or 19 basis points excluding charge-offs on PCD loans. Criticized and classified loans increased $113 million this quarter as Bremer loans transitioned to Old National's asset quality framework, consistent with our due diligence expectations. Legacy Old National upgrades partly offset this increase. Non-accrual loans to total loans decreased modestly, the fourth consecutive quarter of improving performance trends due to active portfolio management. The first quarter allowance for credit losses to total loans, including the Reserve for Unfunded commitments was 122 basis points, down two basis points from the prior quarter, primarily driven by charge-offs on PCD loans and loan growth in lower-risk portfolios. Consistent with the fourth quarter, our qualitative reserves incorporate a 100% weighting on the Moody's S-2 scenario with additional qualitative factors to capture global economic uncertainty. Lastly, given the continued focus on loans to non-depository financial institutions, we'd again like to emphasize that our exposure is de minimis. All said, NDFIs are approximately 1% of total loans. All are performing, and like other businesses that we bank, most are longstanding client relationships. Slide 14 presents key credit metrics relative to peers. As discussed in past calls, we have historically experienced a lower conversion rate of NPLs to NCOs as compared to our peers, driven by our approach to credit and client selection. That continues to be the case, and we remain comfortable around the credit outlook. On slide 15, you can see our capital position at the end of the quarter. Regulatory ratios in TCE were stable linked quarter, as strong retained earnings were offset by the robust quarterly loan growth, share repurchases, and merger-related charges. Still, tangible book value per share was up 6% linked quarter annualized and 11% year over year. Our peer-leading profitability profile continues to generate significant capital, which opened the door for capital return late last year. As previously mentioned, we repurchased 3.9 million shares of common stock during the first quarter and have $383 million remaining under our program. Lastly of note, while not yet finalized, we would clearly expect a capital benefit under the proposed capital rule changes. This would mainly come from reductions in RWA treatment within our mortgage book and changes to the treatment of unfunded commitments over one year. Obviously, these changes, if finalized, could present meaningful capital optionality. In any case, we feel confident in our plans to continue to execute on our buyback plan, which runs through the end of February. Slide 16 includes our outlook for the full year 2026, which is unchanged from our prior guidance. We believe our current pipeline supports full year loan growth of 4% to 6%, and based on the results of the first quarter, we suspect we may trend to the higher end of this range. We anticipate continued success in the execution of our deposit strategy and expect to meet or exceed industry growth in 2026, generally in line with our asset growth. Our NII guidance remains unchanged and our balance sheet remains neutrally positioned to short-term interest rates. Obviously, the exact path of NIM and NII in 2026 will depend on growth dynamics, the shape of the yield curve, the absolute level of rates in the belly of the curve, and the competitive landscape. but our base case outlook assumes the Fed is done for the balance of this year and that the five-year, which has been volatile year-to-date, stabilizes at about current levels. We expect our fee businesses to perform well, supported by a robust loan pipeline that is driving capital markets activity, along with continued momentum in our wealth management and brokerage businesses. To that end, we believe we would trend toward the higher end of our full-year fee income guide. Expense guidance is unchanged despite a lower-than-expected outcome in the first quarter, but this is due to a robust talent pipeline and our expectation of continued investment in operational excellence. As a reminder, second quarter includes normal seasonal factors, such as merit increases. Our expectations for credit and income tax rates are unchanged. In aggregate, you'll note that we expect full-year results that yield 15% plus growth in earnings per share and again feature positive operating leverage with peer-leading profitability, good growth in fees, controlled expenses, and normalized credit. To close, the first quarter sets the tone for the rest of 2026, and we are on the front foot. We intend to stay there. Organic loan growth was strong, and pipelines are healthy. We maintain a granular low-cost deposit franchise, and our credit book remains stable. That gives us the flexibility to invest in ourselves, in talent, and in capabilities, while continuing to return capital to shareholders. As Jim said at the top of the call, Old National enters the balance of 2026 with good momentum and added conviction in our ability to execute. With those comments, I'd like to open the call for your questions.

And thank you. We'll now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you're called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. To be able to take as many questions as possible, we ask that you please limit yourself to one question and one follow-up. Again, it is star one to join the queue. And our first question comes from the line of Scott Seifers with Piper Sandler. Your line is open.

Morning, guys. Thanks for taking the question. Good morning, Scott.

Hey, John, I was hoping you could please walk through sort of major drivers of NII momentum going forward. I know you touched on the seasonality in the first quarter and the impact of the sub-debt issuance, but just ask because, you know, I think the year started a little weaker than at least the market had expected, those idiosyncratic factors notwithstanding. But, you know, you kept the guide. I think the quarterly NII will need to average about 5% higher through the remainder of the year to get to the midpoint. So just, you know, sort of what gives you confidence in the guide and what are the major puts and takes you see?

Yeah, so obviously, I think first and foremost, we've got a more cooperative yield curve today than what we had on average for the first quarter. So that'll be a helper. And then we've got, you know, five and a half billion dollars sitting in the pipeline up 14% year over year. and we feel really good about the growth outlook and what's driving that is a little bit more balanced in terms of TRE versus CNI than what we saw in the first quarter. So I think the spread implications of that are favorable to us as we look forward into 2Q3Q.

Okay, perfect. And then so that sort of touches on the second one, which was sort of the margin specifically. So presumably that that beneficial mix shift in the loan portfolio should be helpful. But, you know, just when we think about this sort of launching point of the 355 margin, you know, any other factors that would would cause it to sort of jump up from here? I think in your prep remarks, you sort of suggested stable to improving for for both NII and the margin.

Yeah, I think I think stable to improving is the right way to think about it. Recall, you know, we will get four basis points back on dates uh and yeah and so that'll help kind of the launch point there uh and uh yeah i think i think stable to improving is the name of the game for this year okay perfect thank you very much thanks and our next question comes from the line of ben gerlinger with city your line is open hey good morning good morning ben uh i just want to double check you guys I'm going to run through the numbers a little quick, and it's a busy morning.

You said NII higher in the range, fees higher in the range. You're building out a bigger team and hiring. Did you guys say the higher in the range on expenses, or is it still within that despite the lower core on 1Q?

I'm just going to walk you back on one thing that you said. So we said loans high end of range, NII guidance is unchanged, fees high end of range, and expenses is unchanged changed despite a better than expected outcome in the first quarter and and that piece of the guide been on on the operating expense side is really a nod to the talent the talent pipeline that that tim and jim are building um you know i think we're having more conversations today than at any other time that i can remember uh uh since i've been at old national uh and we're really excited about that pipeline got you yeah i apologize it was one entire night um but you reiterate so it's still good um I just wanted to kind of, I don't know, push you a little bit here.

So, like, if things are looking good and you're hiring and you're setting up – hires today are obviously not impacting much for growth. On 26, probably more of a 27, a 28 story. Ross, you look good. Why not be more aggressive on the shareholder buyback or return?

Well, I think – look, I think we feel really good about where capital is. We fully intend – we've got $383 million left on this existing authorization. we would fully intend to use that through the end of that authorization in February. And, you know, look, a combined payout ratio that's close to two-thirds of what we generated in the first quarter and still being able to support 8% loan growth, I think is a pretty good place to be. And so we feel comfortable with where we are. And, you know, obviously we'll, if those capital rules become final, we'll have some additional optionality and clearly think about what we're going to do with that. And that would be, you know. Incremental to everything we're doing today.

Appreciate the time, guys.

And our next question comes from the line of Brendan Nozel with Hofty Group. Your line is open.

Hey, good morning, everybody. Thanks for taking the question. Well, just, you know, starting off on loan growth here, I know you've been kind of working towards these numbers for years and years in terms of the bank's growth capacity, but it really feels like something clicked this quarter and will continue to click for you through the balance of the year. Has anything changed environmentally in your favor, or is this just kind of the culmination of a lot of effort?

Yeah, good morning. Thanks for the question. It's certainly, you know, we're leaning in to go-to-market strategies, really focusing on sales excellence and just being tighter in who we're targeting, how we're targeting, and leveraging the full plethora of products and our platform that we have to offer. And we've seen that really come together nicely this quarter, and we like the trends that we see in the record pipelines that we have. We think that'll continue to come to fruition.

And as we add more bankers and more talent, we like the opportunity to continue to drive that growth going forward. okay great thanks um maybe pivoting to um to capital you know heard the commentary on the proposed capital rules uh and the benefits that that would drive for for you and for others and you know i think you mentioned that opens up the option set down the road i mean can you walk through that i get the near term buy-by commentary and lack of interest in m&a at present but like you know longer term if if you and others are sitting with with more capital um what does that allow you to do longer term?

Yeah, for us, I think you'd see reduction in RWA roughly in line with what others have sort of estimated for midsize banks. Again, on our balance sheet, the two biggest drivers of that are the LTVs in our wonderful family book and the line utilizations greater than one year. There were some banks that played a lot of games in the risk-weighted asset diet years of kind of shrinking the commitments down to one year minus a day. Old National never did that. So the capital treatment on that piece of our book will be favorable. You know, I think in total could be up to 100 basis points, give or take, on CET1. And that is not a level that we're going to run the bank at. And so I think it would be, you know, first and foremost, supporting continued organic growth. And then secondly, return to capital.

I think it's also just getting comfortable with where the industry settles at. Where is the right CET1 ratio? Where are the right TCE ratios to run the organization long term? I think the industry is still trying to find that target level. Clearly, we believe we have a lower risk model and should be at the pure average or lower, but there's a lot of work to kind of get there to define what those normalized levels should be. Great.

Thank you taking my questions thanks and our next question comes from the line of chris mcgratty with kbw your line is open good morning chris good morning hey jim um on the basel discussion the 100 basis points that john referenced ballpark um we've heard a lot of banks kind of in our follow-up calls talk about the importance of balancing ceg1 and tce um one going as far as saying eight might be the right number for tce how do you um i know that rating agencies care how do you view the the interplay between the two yeah look i think those are the those are the two um and and we

have long been sensitive to those as uh as you know um right so um i i would say that we feel really good about where we are in tce uh as evidenced by the fact that uh you know we're returning a pretty significant chunk of capital in the quarter and 64 combined payout ratio on the quarter's kind of core net income while still supporting organic growth. So, you know, as Jim said, I think we still got to kind of figure out what the right long-term numbers are as an industry and then what's appropriate for Old National Bank, but we feel really good about where we are.

You know, the challenge, Chris, becomes, you know, from a stress testing perspective, we feel really good about our capital levels and know we could push it harder, but there becomes a point in time when under periods of stress, our industry goes back to, you know, the higher Our capital levels are the ones that maybe feel a little less pain. So I think we're just trying to figure out what's the right long-term view and not get caught up in today's whatever short-term window might be, and how do we balance all the other stakeholders like you suggested?

Yeah, you want to stay off the screens when things get hard. On deposit pricing, if we stay – if before it curves right and there's no more cuts, are we at that 170 spot? Are we flatlined basically until the Fed moves again?

Look, I think we've still got some opportunity in the back book. We've definitely got some opportunity as brokered roles, you know, but I think the material decreases in spot rate are probably behind us if the Fed's done for the year, which is our base case expectation. And I would tell you, you know, the deposit competition, it's intense but rational, and the environment around specials has stayed a little bit frothy longer than what we would have probably hoped for as an industry.

Okay, great. Thanks, John.

And our next question comes from the line of Janet Lee with TD Cowan. Your line is open.

Hi, Janet.

Good morning. Hello.

So, when I look at the slide 10 on the impact of net interest margin, that 19 basis point negative impact from rate and volume mix, is relative to 5.88% total loan yields for the quarter, should we expect that loan yields to increase in the second quarter as, you You know, obviously the rate impact is decreasing or basically gone, and then maybe the first quarter had an overly high concentration of higher quality CNI loans, which carry lower spreads. I guess that's not a bad thing at all, but just want to get a sense of what a good loan yield is to start off as we head into the second quarter.

Yeah, I think you've got the moving parts of that, right, Janet? It's the, you know, on loan yields like margin overall, 10 basis points of that was day count for us. The balance of it was sort of SOFR down, and most of that was offset by funding costs. And then there was a de minimis amount just on churn in the book. So sort of I call it five basis points on four or five basis points on on on loan yields just from regular churn. You know, and I think going forward, much like margin, I think it's kind of stable to improving and will depend a little bit on business mix of production.

Yes, you know, when I look in the pipeline, just a couple of factors on the loan side. One, you know, a greater portion of our pipeline is being driven in community markets where we see a little less competition, and we see that segments in some of our strong community markets where we have great market share and good brand picking up. And then secondly, a larger part of our pipeline for the second quarter is in kind of core middle market, which, you know, third, fourth generational companies where you can tend to get a little more spread on that as well. It also can get good core operating deposits with those loans as well. So as we look at the mixed second quarter compared to first, first quarter from a timing standpoint just had some of the higher quality loans that have slightly lower interest rates. In the second quarter, we see that mixed shifting.

Got it. That's very helpful. And I would also love to hear a little bit more about what you're doing on the AI front that you mentioned earlier that's helping on the efficiency and expense enterprise-wise.

Yeah, so like others, we are, you know, investing in AI. We've got an AI center of excellence stood up within our technology and data teams. I would describe our progress to date as a lot of – it's a lot of singles and doubles. And a really good example of that that we shared with people is we had some like old Power BI legacy code that we lifted and shifted into a new data environment. It was kind of clunky. We threw AI at it and had what would have taken some of our best programmers months to clean up was done in a week. And so that would be a real life example of sort of I would describe that as a single. And, you know, I think we've got some really interesting use cases that we're looking at. Probably the first one for us that we're going to dive deeper into is in risk management. If you think about everything that needs to be built to embed risk into the first line, almost all of those jobs, which the big banks just threw bodies at, are checkers of checkers of checkers. And that is a perfect AI use case. And I think something that, you know, look, 100, that threshold is probably moving anyways, but it doesn't mean that we're not at work on thinking about things that we need to do as a bigger bank. And I think that the cost of that is going to be a fraction of what it would have been even just three years ago because of some of the advancements in AI. So we're excited about it. And there's a lot of stuff afoot at the bank that we think help drive, you know, freeze up dollars for us to go and invest in the in the in the more exciting stuff, which is the revenue facing talent pipeline that Tim is building.

Helpful. Thank you. And our next question comes from the line of Brian Foran with Truist Securities. Your line is open.

Hey, good morning. Hey, so the loan growth momentum, I mean, if we think about scenarios where it continues to be at the high end or above the guide, do you think earning assets will be growing at the same level? Or is there some point where, you know, if loan growth, if we start to pencil in 7% or 8% loan growth, we should moderate securities and cash a little bit?

Yeah, I think it's probably fair to think about everything sort of growing about lockstep. You know, so I think as long growth goes, the liquidity book would grow with it.

Got it. And then on the Basel discussion, I know it's very early. The proposals could change, so maybe it's too early for this question. But, you know, you referenced how some specific areas get much better treatment. Do you think this is big enough where, you know, from a strategic standpoint, you might do more hiring or focus in certain types of lending or you might de-emphasize others? Is this a big enough move that you'll actually start remixing the business a little bit to optimize around it?

It's probably a little early to say for sure on that. But the one place where I think, you know, when you think about RWA treatment and one-to-four family, it seems clear that the regulators are trying to encourage banks to be back in that business in a somewhat more meaningful way. And so there's interesting implications to that that we would think through, I think, if it became a permanent role.

Got it. Thanks so much. Thank you.

And our next question comes from the line of Brandon Rudd with Stevens. Your line is open.

Hi. Good morning. My first question, if I could drill in on loan yields a bit. I know it's primarily rate mark related now, but do you have the purchase accounting accretion for the quarter?

Not handy. It was roughly unchanged, though. I think the net net of sort of purchase accounting accretion and interest collected on non-accrual was a wash, like no impact on overall margin.

Gotcha. Okay. Thank you. And then for the other side of the balance sheet, I heard your earlier comments about deposit cost competition. A super regional bank last week said the Midwest is a bit more competitive than other regions around the nation. Since your footprint kind of stretches across the Midwest, are there markets in particular that you're seeing more competition and less than others?

In the Midwest, no, not really. I would say that our most competitive market is probably Nashville. And we don't really have a back book in Nashville to worry about, or certainly not the size back book that we have in other markets. But yeah, I think most of our markets are competitive but rational.

Yeah, I think the other interesting thing is that some of the large national players are hanging some pretty steamy rates out there. Uh, so, um, you know, that's primarily competing with our wealth and private client businesses, uh, which can be a little bit challenging at times.

Okay.

Got it.

Uh, thanks for taking my questions.

And our next question comes from the line of David Chiaverini with Jeffries. The line is open.

Hi, thanks for taking the questions. How's it going? Um, on expenses, can you talk about areas of investment and how we should think about positive operating leverage, the extent to which it should come through based on the guide. We're modeling, you know, pretty decent operating leverage, but can you talk about those two things?

We are likewise modeling pretty decent positive operating leverage on the year, David. I think, in fact, when we stacked it up against our executive peers, we were either number one or number two on that metric for this year. And look, our expectation is that we'll continue to drive quarter over quarter and year over year positive of operating leverage. And we walk into every single budget cycle with that as a guiding sort of principle. So, you know, we know that that's a metric that's important. It's something that we're focused on, you know, and it's something that I think we'll deliver in 26 for sure.

Great. And then shifting over to your comment about pipelines on the loan side being up 14%, great to hear. Any particular industries that are driving that?

David, they're pretty balanced. No real industry concentration. And I would say we've seen a really nice pickup in CRE pipelines. So across the board, C&I remains strong. CRE is building. And we've seen markets like Minnesota where, you know, our momentum there is building. Pipelines there are higher than they've been the last 18 months. So I feel very good overall about the pipelines. And it's a good mix of CRE and C&I, but with no concentration from an industry standpoint. one.

Very helpful. Thank you.

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

Morning, Jared. Hi, this is... Hi, morning. This is John Rau. I'm Jared. Just looking at some of the components of deposit pricing, it seems like the exception book has been driving most of the downward pressure on deposit costs, and the non-exception book might be even going up a little bit in terms of average cost? Can you just talk about the dynamics there and if there's any emphasis being placed on moving to more weighting towards exception pricing? Yeah.

So the exception book is where we saw all of our uprate data, and that's kind of how we've always managed deposit costs at Old National. So it is where we experienced all of the downrate data as well. And we're really pleased with how that's performed. I would say if you're looking at quarterly sort of puts and takes on deposits, don't forget that there's some seasonal factors in our first quarter. Our public funds balances are at a low point in 1Q. Those rebuild in 2Q and 3Q. And there's some seasonality in our non-interest bearing on both the commercial and the public side of things as well in the first quarter.

So that might explain what you're kind scratching out there on the quarter's deposit costs okay sure that's good color um and then maybe just a little more on the leadership changes in commercial banking uh bring in chris i guess is there any specific areas of expertise in terms of the lending verticals or anywhere else that he brings that would kind of alter the the pace or areas that you're hiring in Yeah, Chris's background is diverse, and we're very excited about what he can bring.

But primarily on the C&I side, when you think about asset-based lending and core C&I, middle market banking, the old-school banking that we're very known for and very proud of, I think Chris will do an exceptional job at helping to drive that growth. At the same time, John Thurston on the corporate banking side as our leader and president of that, we're looking at different ways to grow there, and we're excited about the depth he brings of a 30-plus year career across business banking, commercial banking, and corporate banking. So excited about what each of them can bring to our growth going forward.

Okay, great. Thank you for the call.

And our next question comes from the line of John Arfstrom with RBC Capital Markets. Your line is open.

Good morning, John. Hey, good morning. We were just in Minneapolis yesterday. I didn't see you in the Skyway.

Oh, no, I had a seatbelt on my office chair. Can't leave my desk. A few follow-ups.

John, you said the yield curve maybe is a little bit more cooperative now. um what what changed what makes it more cooperative and what's more ideal for you guys well the five year came back to 390 ish which which is definitely helpful and there's some uh there's better there's a little bit better steveness finally um now it may have gotten there for the for the wrong reasons but we'll take it right so a little bit of steveness and a better belly is uh is certainly helpful for us yep okay um and then just following up on the positive operating leverage question.

You flagged a record adjusted efficiency ratio this quarter of 45.7, which is great for your company. Are you saying that could go lower, John? Is that the message?

I think we're going to try to keep it where it is or maybe grind it lower.

I think the tension, John, from my perspective is that we don't want that to be an inhibitor, uh, to, to investing in our future, investing in growth, investing in talent. I think that's just the dynamics. We inherently know like, Hey, if we're able to successfully convert this talent pipeline, um, you know, that's a 18 month, you know, kind of break even scenario. Um, and, and, and inevitably the people that we're looking at hiring are, are kind of top decile performers. So they just come at a much higher cost on average. And so I don't want that number of 45 percent to be a number that stops us from investing in our future or the growth of the organization. So that'll be the tension that we'll just have. And as I've said publicly a few times, like, hey, nothing would make me happier if I have to come and apologize to you all that our expense guide is going up because we just had that much success in recruiting and attracting great talent to join the organization.

Yeah, fair. I don't want to say it's good enough. You know, we want to keep pushing, but that's pretty good for you guys.

Yeah, I agree. I mean, you know our history. That's remarkable if you go back and look at our history.

Yep.

Yep.

Okay. And then the last one on the buyback, you flagged that you took a piece of the buyback from you bought from the Bremer Trust. um how how much is left there um are those negotiated transactions and kind of what's what's the plan is it more of a guess it's more maybe more of a bremer question but what do you think the plan is and how much did you get from the trust let me just you know we actually flagged that transaction we did it it's around 50 million dollars uh of stock and so we just wanted to to re-point that out.

We did put a filing out on that. And the whole point is, honestly, they see great value in long-term ownership. We expect them to have long-term ownership. We're obviously sensitive to the concentration that they bring. So no material change to their current ownership other than the $50 million we reduced. And I just don't see them wanting to do anything different in the near future. Obviously, they're in control. The lockup expires really quickly here. But after the lockup expires, I don't see them doing any changes based on our conversations. But anything after that, they have to decide. The good news is we have the right of first refusal. So to the extent that they want to come to the market, you know, we'll be there to support that. But I don't anticipate that based on, you know, our most recent conversations. Okay. All right.

Thank you. I appreciate it.

Thanks, John.

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

We appreciate everybody's support, and as usual, we'll be here all day to answer any follow-up questions. Thanks so much.

And ladies and gentlemen, 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 9394-540. This replay will be available through May 6th. If anyone has additional questions, please contact Lanell Durkholz at 812-464-1366. Thank you for your participation in today's conference call. and you may now disconnect.