For being here this afternoon. We have our last fireside chat of the day. We have Jim Ryan and John Moran from Old National. We were just talking about your schedule today. I think these guys are worn out.
Well, hey, compliments to the whole team, John, and 25 individual companies and 29 investors showed up, so really full day. Thank you for a great schedule.
That's a full day.
Yeah.
I won't ask you anything you haven't been asked already today. Just for the benefit of generalists, we have a lot more generalists here, and we have a lot more people listening online. Give us an overview of Old National.
Yeah. You know, obviously, coming off a really record-setting and transformational year in 2025, you know, record earnings, and coming off our Bremer partnership, which may have been one of the most important partnerships we've done in my tenure at the company, which is now 25 years. Really solidified our position in Minnesota and the Twin Cities, specifically, taking the number 3 market share. Just feel like, you know, obviously a lot of energy and effort goes into any kind of partnership, you know. This one in the Twin Cities was particularly large and had an interesting history and background. That really set us up for some significant success, I think, in 2026.
Despite having record years in 2025, you know, with all of the momentum heading into 2026, I think the street estimates are somewhere around, you know, 15% earnings growth, estimates year-over-year. You know, with high-teens return on average tangible common equity, a sub-50% efficiency ratio, and I'm gonna get these numbers roughly correct, about a 1.4% return on average assets. We feel really good about where we stand. At the same time, you know, it's a lot of work still every single day. You gotta go out there. I just did this, you know, as a part of our annual review for our board of directors. I made 52 market visits last year.
Wow.
I was out a lot. In addition to meeting with investors, in addition to working with the industry trade association that I work with. But it was a super energizing year, and I expect in 2026 to be much the same. I think one of the highlights and advantages that we have is that we're really connected to our team members and markets. When I show up and make that phone call or text that client or stay connected to a team member when something happens in their lives, I think that differentiates ourselves, and that's a really attractive value proposition.
You know, the other thing that happened last year that's significant to us is our President, Mark Sander, retired, and we brought in a new President and COO, Tim Burke, who joined us from a super regional in the Midwest. He is off to a really strong start seven months into the role. Really strong start. The reason why I highlight that is that I really think that he's been focused incredibly on our organic growth opportunities that are in front of us. You know, when you're integrating a large institution like Bremer, you're pretty distracted, right? A lot of those 52 market visits I made were in the Minnesota-North Dakota footprint.
Tim's coming in now and being able to really stay focused in on the organic growth opportunities, both in terms of hiring new people, but also client relationships. I think that's really gonna differentiate ourselves. We have a number of succession that's gonna happen in our commercial business, you know, in the coming years. Our Chief Executive Officer of commercial is retiring April first. Tim is you know, really good about rethinking how do we continue to grow our own people, but also we bring some fresh talent into the organization to be a better bank. I think we're entering 2026 in a really strong position.
I think we're gonna exit 2026 in even better position, particularly, we think, around our commercial growth opportunities, which none of that's contemplated in the outlook that we provided, you know, for 2026. I can't be more excited about where we stand this year and you know, it won't always be a straight line to success.
Right.
You know, you wake up one morning and we've got a you know, a military action that's taken place, and you got oil going one direction. You have these things that happen. You know, I would say that our clients and our company is really resilient and are able to navigate a lot of these different challenges been thrown at us the last handful of years. I'm pretty bullish that we'll figure this one out too. Looks like maybe oil's a little bit better behaved today than it has been, so that's a good sign too.
We'll get to that. I just want.
Yeah.
To make one comment. People say that Cassidy and I tour as much as Taylor Swift, but I'm gonna have to change it to we travel as much as Jim Ryan.
There you go.
That's an amazing. I know you've always been a road warrior. I know that, but-
I think that's what differentiate a bank like Old National where, you know, the senior management is gonna be there to back our team members, but they're also gonna be out there, visiting with clients, and that makes a real difference as you know, at the end of the day. This business is built on relationships.
Yeah.
When banks forget that this is a people business, and those people drive relationships, that's when we mess it up.
Yeah.
That's the most important thing we can do as an organization is focus on the people and those relationships they bring.
Yeah. What do you think of the economy today? How do you feel about the economic activity in your markets? Maybe touch on some of the volatility, if that has an impact at all in terms of your clients.
Yeah. I would just say, heading into the year, we thought it was gonna be a solid year. I think we put loan growth targets out there about 4%-6% for the year. I don't think that's heroic. I think we're on pace, as an industry to hit those type of numbers. We're not in the habit of providing, you know, mid-quarter guidance, but I think as an industry, if you just follow the H.8 data, I think our industry's gonna be in that space. I think the economy's doing well. I mean, it's too early to tell how much of, you know, what happened last Sunday, a week ago Sunday, has on the economy, certainly oil prices, if they stay elevated for a long period of time, will have some impact.
I think our clients are really good at navigating challenges that come ahead of them. I don't think, as I see it today, you know, I'm not expecting a dramatic impact, and certainly, I think our clients are deft at navigating these things. What else would you add to that, John?
I think things are good. Maybe tracking even a little bit better than what we would've thought. Pipelines are good, activity is good. To Jim's point, I mean, probably a little bit too soon to figure out if the last 10 days changes that, but the year's off to a good start.
Yeah. Okay.
How about the competitive environment? You're in a lot of different markets, and I know it's hard to generalize, but just lending competition, and we'll talk about funding in a couple of minutes.
I'll kick that off. You know, we really pride ourselves in having really consistent credit standards. So when times are good, we have the same standards as when times are really difficult. I think that consistency with our clients really matters. That approach really matters with our relationship managers. You know, there were times, and John, I know you can appreciate this one, there were a lot of banks that were on those risk-weighted asset diets.
Yep.
... had sworn off certain asset classes, particularly commercial real estate. We were able to make a lot of inroads with just that consistency of kind of always being in the market. We tend to have a fairly tight box, and if it fits a box, we're gonna continue to do that despite what the environment looks like. I think that allowed us to enjoy some maybe outsized growth during those periods of times. Today, it's clear everybody's back in the market. Everybody's competing for. I think one of the banks mentioned that today and at the conference here, everybody's back competing for that same type of business. It's competitive. We're still winning our fair share.
Nonetheless, I think, you know, it's as consistently competitive market as I've seen probably in the last handful of years.
Mm-hmm.
Any particular categories of loans?
I think it's across the board. I think everybody's fighting for every single relationship. You know, there were discussions today in some of our one-on-one meetings about, you know, is it areas where there's disruption? Is it areas where there's large banks? Is it areas where there's small banks? It's all the above. Like, every single place, we see competitive dynamics just tightening up a little bit. But again, I think a testament to our team and some of the markets, you know, we're continuing to win our fair share.
Mm-hmm. Okay. On Bremer, you touched on it, and we don't have to spend a lot of time on it, but it was a big deal.
Yeah.
Transformational, I would say.
Absolutely.
It makes you a much larger bank. What is left to do, integration, conversion, things like that? Where are you at, and what are you the most positive on as you look forward in terms of the footprint there?
Yeah. I would suggest we're in the late innings. You know, the systems integration went exceptionally well, and lots of proof points around that. I think we're still in the late innings of, you know, anytime you're integrating two teams, you know, two cultures, particularly. It's one thing when you have no existing, you know, team members that are there, and that adds a set of complexity, but it adds a different set of complexity when you have two different teams you're trying to meld together and bring the best of those teams together. In some ways it's easier, in some ways it's maybe more challenging. I'd say we're in the late innings and, you know, it takes a couple years for everybody to feel like they're hitting their strides.
You know, there's an awful lot of change that happens. There's a lot of change for clients you gotta help navigate. There's a lot of change for team members you gotta help navigate. Change is difficult. It doesn't matter whether it's positive change or negative change is difficult for most people. So I think we're doing really well. We're really pleased with how it's all come together. You know, John Moran always, you know, reminds investors that we bought it at the right price, and so that's.
Sure did.
... that's super helpful, and allows for, you know, things not to go exactly perfectly all the time. I guess the other thing I'd mention, the thing that I'm really pleased about is when we look at, you know, some of the areas outside the Twin Cities, and often North Dakota and parts of Wisconsin, we're really pleased with those markets. Not every, I think, potential partner would've had the same view of some of those markets.
Right.
There's a little bit of a joke in our company that I've been to Fargo in February now a few times, and that's a fun trip for me to do. I just got done speaking at the Fargo Economic Summit, and I really enjoy that opportunity. John and I laugh because you could drop yourself off in the middle of Indiana or Fargo, North Dakota, and they'd really look like the same kinda markets. We think those are some of the really surprising parts and the parts that I think we're really gonna be able to take advantage of as an organization.
I think I mentioned my 90-year-old father has this Bremer baseball hat that he wears around periodically.
We gotta give him an Old National hat.
I know. I might have to disclose it. Gift. I'll make sure I do that, if you give me one. John, talk a little bit about deposit competition, how you're thinking about the margin trajectory from here.
Yeah.
The puts and takes in terms of the outlook.
Yeah, look, I think deposits continue to be very, very competitive, but I think rational everywhere that we are. There's not a promo rate out there that I look at and say, "I don't understand what they're thinking." But I think continues to be a competitive environment for funding. I think that that's probably a good sign that people see decent asset growth out there, right? I would characterize it as, you know, sustained competition, highly competitive, but still very rational. In terms of trajectory on margin, look, you know, I've joked around a couple of times today, it was, I think Benjamin Franklin that said, "Death and taxes.
John V. Moran's gonna add a third one, the forward curve will be wrong.
Right
That has not played out the way that we would've hoped in terms of steepness in the belly of the curve. Things are still pretty flat there. I think some help on that, some steepness in the curve would be beneficial for not just Old National Bank, but for the banking industry.
Yeah. Do you have a preference at the short end, what you'd like to see happen?
We're pretty neutral to short in terms of how it goes, but steepness and belly would be good.
You know, while John points out we're relatively neutral on the short end of the curve, I think one of the challenges we see to the extent that there are less Fed cuts than maybe originally anticipated, I think that's keeping those promo rates up there a little higher the longer. If we saw, you know, more rate cut expectations, I think some of the promos would've come down a little bit faster. I think that's creating a little bit of tough competition for the marginal dollar of deposits.
Mm-hmm. Yep. It's interesting. It seems like it's a little more competitive in the Southeast and some of the other markets versus more rational where you're at.
Mm-hmm.
What it seems like.
You know, there are some markets that John points out where we're being, you know, we're leading the market in some of those instances where we have small market share.
Mm.
Don't have to worry about repricing our back book. We can be the thorn in the side.
Yeah.
Of some organizations, too.
Yeah.
Yeah.
Yeah. Okay. Also on the revenue topic, the fee income guidance suggests some decent momentum. Confidence level when achieving those targets and, you know, what are kinda the key drivers of that?
Hey, we feel really good about what's going on on the fee side. You know, I think one thing that we've talked a little bit about is just capital markets in the back half of last year was really strong. I don't think that's gonna run rate forever. Certainly feel good about where we are on the fee side. I think we're seeing good growth in wealth. We're gonna see mortgage continue to be a pretty good business for us, and we're investing a lot in treasury management, which I think can be a longer term upside for us. Feel really good about where we are on fees. Mm-hmm.
Anything you need to do differently as a $70 billion bank on the fee side? Maybe it is treasury and capital markets, but is, how do you think about that?
Yeah, I think building out both those businesses in more robust ways. One of the things that I think is an incremental opportunity for us is we've been slowly building out kinda the mid cap space. That historically, as you know, our footprint was this business banking, small commercial, you know, market, and we don't have any national businesses, as you know. I think with Tim's leadership and thinking about how we can build that out, I think that necessitates us building out more robust treasury management services for the larger, you know, corporate clients. But also some, you know, probably broader capital markets capabilities, too.
Mm-hmm. Are you getting looks at larger clients now with the larger balance sheet?
Absolutely. I think we'll continue to take those opportunities. Obviously wanna be smart. We wanna make sure that we can earn a full relationship. It just doesn't wanna be a credit-only facility. We wanna make sure we have the products and services to earn that full relationship as well. I think it's also incumbent upon us to continue to hire relationship managers and the credit teams to be able to support those types of clients.
Mm-hmm. Okay. Pre-Bremer, we used to talk a lot more about wealth as a driver of the outlook. What's the strategy today, and how important is that to the outlook?
Oh, I think it's much the same. I really do. You know, there was a period of time where, you know, most of our business would be branch-driven type of business and traditional fiduciary type business. Today, increasingly, you know, we have the opportunity regularly to earn the investment management business, the high-net-worth individuals. That's a bigger part of our business than it ever has been, and I think that's really a function of putting the right people in place, putting some extra products and services in that can serve that constituency. I've been really pleased with that. That business is growing. I think, you know, mid- to upper-single digits%.
Yeah
Kinda consistently year in, year out, which I don't think is necessarily the trend for everybody in our business.
Right.
Where some people have maybe given up on that. I really see that as a continued area of growth for us, an important driver. You know, I would just also add, you know, as we're on the fee income line, the mortgage business. I mean, that's a business I'm a big believer in. You know, again, we're in footprint origination. We're not afraid to use our balance sheet where it makes sense, and we can drive private banking type relationships with it. And obviously, you know, each year continues to build. You know, there were periods of time we thought we might give up on the mortgage business, but the reality is it's been a nice fee income source for us. It's growing each year, and hopefully it'll be even better this year.
We can, we'll get to M&A in a minute here, but I wanna go back to some of the opportunities you've had to hire talent across the footprint. What's the strategy? Where are you hiring? How big is this opportunity for you?
You know, there was a period of time, you know, coming off of COVID, that I think we were leading some of our peer set in terms of the numbers of people we were hiring. We had a great story to tell then. We still have that great story to tell today. You know, after a Capstar integration and a Bremer integration, that takes a lot of management time and distraction. You know, having some natural succession that happens. I think we got a little bit, you know, less focused on that in the last year or so. Tim's new energy and you know, my continuous push towards talent. This is a talent business, as we said earlier. Talent will always win the day.
For us to go off and tell our story, and that story is a bank that's entrepreneurial, you know, bank. We've got young leadership. We've got high performance to support you, a really consistent credit policy. All of those things I think are attractive in places where we're trying to hire out of the super regionals and the national banks, who can bring a client set with them. Maybe it's a little bit more sophisticated client set on average for us to go off. We wanna make sure we're there to support them. The difference is that, you know, we're in this place that we're a little bit easier to do business with. We're a little bit more nimble.
We're a lot more consistent, both in terms of leadership at the top, but also just our approach to being in certain assets or being in the pricing mechanisms right. We haven't had some of the issues that some of our peers have faced over the years. I think that's a really great story to go off and tell. Tim does an exceptional job telling it. John and I reinforce that. You know, if we hire 50 new people this year, 40 of them will sit across from me before they come through those doors and we hire them. I am super involved in that process. I think that's a critical part. Not every Chief Executive Officer wants to take that kind of time to do that, but I think that hands-on approach makes sure two things.
A, we make sure we get the right people in the door, and then B, you know, they have the support from the top of the house all the way down. I think that's our value proposition for those individual relationship managers, but also their clients that they're bringing.
Yeah. Okay. John is the CFO that has to say no on things. Talk a little bit about balancing all of this. Remind us of your expense expectations, kinda where you're spending money, where you're finding places to save money.
Yeah. Let me, I'll back up and just kinda say, every year when we walk into a cut budget, positive operating leverage is sort of a guiding philosophical principle, right? I think clearly, you know, 2026 versus 2025 will put up a lot of positive operating leverage. We've got a great efficiency ratio. I think that we can self-fund a portion of what Jim and Tim are looking to do, for sure, by. You know, we've got several higher ticket kinda retirement opportunities in front of us, and then better management and accountability out of kind of folks that might be a little bit less productive or toward the end of their careers, right? I think we've got an opportunity to self-fund a portion of that growth.
Look, frankly, particularly in commercial lending, the right RMs pay for themselves very, very quickly.
Mm-hmm.
As I told everybody, you know, I hope I have to come to you, John, and some of our investors in the back half of the year and say, "Hey, sorry, you know, we missed some of our expense guidance 'cause we're really successful in hiring people.
Mm-hmm.
That's a good story to tell. Everybody I've told that story to, they said, "Absolutely, we'll take that all day long.
Mm-hmm.
Focus on organic growth and you know that is the core strategy for us and I think I will gladly make that ask if we get there.
Yep. Okay. Just last couple things on expenses. Is AI scary? Is it an opportunity? I mean, you play it forward and people think that it's a threat to, like, suburban office, but on the other hand, that would suggest greater operating efficiencies in the bank. How do you think about it broadly?
I think we're all trying to figure that out.
Okay.
The board recently asked me, said, "Well, you know, how do you see AI affecting the bank in 2 years-3 years?" That's a really hard question.
Sure
To have an honest assessment where that's at. I think there are a lot of positive things that are gonna come from that. There are probably some things that we're not gonna like that are gonna come out of that. It's really too hard to tell. I mean, like every other institution, we're deploying AI as fast as possible. I think that, you know, I think we're trying to figure out how to exactly monetize that. How do we take those savings? If I can create 10% or 20% more savings out of your day, are you just a more productive, happy employee, or is there a way for us to monetize that? I think we're still trying to figure out, can we truly drive revenue off of AI investments?
I do think, you know, John says this really well, as we think about the opportunities to be a bigger bank, and being a bigger bank means we have more sophisticated risk management infrastructure. I think AI will lessen the cost for us. Whether that threshold is $100 billion or some other number north of that, nonetheless, we need to continue to make investments in ourselves, and AI will help us do it faster and probably cheaper than maybe some of our peers had it when they had to cross some of those regulatory thresholds.
Mm-hmm.
I think it is both an opportunity and a potential risk to our industry. It's hard to tell how they exactly weigh each other out, but I think I'm more bullish on the long-term opportunities for banks like Old National, because I think it allows us to maybe win or at least get up to speed faster than some of our largest peers had to do in terms of the investments they had to make in technology.
You mentioned $100 billion. I was gonna skip over it, but anything to note on that? I mean, you're not close. It feels like it's gonna get raised, but.
Yeah. I think like everybody else, we're waiting to see, and I feel like that's coming relatively soon.
Yep. Okay. Okay. Credit, any updates on credit quality and how you're feeling about the portfolio?
No, we feel really good about credit. Look, as you know, we've moved $750 million of classified and criticized over the last 18 months. Charge-offs didn't really even blip at all. I think we know where our potential problems are. We don't feel like there's anything that's keeping us up at night.
Okay. Not a big deal for you, but give us an update on NDFI exposure and how you're thinking about that.
De minimis, less than 1%. The handful of credits that we do have been in the bank forever. They're all performing, long-term relationships, to a couple of equipment finance businesses.
Yep.
Yeah, nothing to see here.
The interesting little thing is for our industry is that's been a catchall bucket, and I think everybody
For sure.
has something different in that bucket than each other.
Yep. No, it's hard to categorize, I would say. M&A, I know what the answer is in the near term, but you've obviously, you kinda grew up in it throughout your career, and you've turned this into a pretty incredible company with a lot of momentum, but what's your thinking on M&A today? What's your kind of medium to longer term thinking on M&A for the company?
Yeah, I think today, you know, I've been very clear, the best investment we can make is in ourselves. I think we're trading at something less than, you know, 9x current earnings. I wouldn't even think about M&A until it's something well north of that. But the reality is, we used M&A to solve some challenges for us. We needed more diversity in our markets. We needed higher growth potential. We needed better scalability in the organization. We've been able to achieve that. You know, again, I think if the street is true, you know, we're gonna see high-teens ROTCE , the sub 50% efficiency ratio. We're not trying to solve a succession problem. We're not trying to solve a growth problem.
We're not trying to solve a balance sheet problem. I think the good news is, we don't have to do any M&A to continue to be successful. Quite frankly, I don't think a majority of our shareholders want us to do M&A in this environment, particularly given where we're trading at. What we try to do, and I'm sure this is next on your list, but you know, we try to thread that needle between the capital return story and the M&A story. If M&A is not gonna be used to capital, how do we do that? We can talk about that in a minute. I think long term, I mean, objectively, Old National, to your point, is a better, more profitable company because of M&A.
Yeah.
Having said that, the boxes are really tight today, and I don't see it as. You know, as the Chief Executive Officer, obviously, I try to have a relatively long, you know, horizon. I don't see it in the near term. Quite frankly, I'm not seeing a lot of activity in our marketplace. I'm just not seeing a lot of things. I mean, I think there's things that have been for sale for a long time, and those continue to be for sale, but I'm not seeing a big wave coming, at least in the greater Midwest today, that even want to participate that we had. Again, we're not trying to solve any problems.
I think the organic growth story for Old National will provide, coupled with, again, I'm sure you're gonna get to this topic, the capital return story is the best.
Yeah. Let's talk about that.
Yeah.
Obviously, you have a increased authorization out there, and you've moved the dividend, and, you know, what's philosophically, what are you thinking there, and how aggressive would you like to be?
Yeah. Last year was a year of rebuilding our capital coming off the Bremer, you know, purchase accounting marks and things like that. This year it's about, you know, organic growth. You know, we're trying to thread the needle in terms of growing our capital back to levels that we were really comfortable with, and I think we've achieved those type of levels. John and I discussed about, you know, how do we, how do we make it crystal clear? We got some feedback from some investors about if you're growing your capital base, one could assume that maybe you wanna use that for future M&A. We were trying to say, suggest that we didn't need to do that. We obviously increased our authorization from $200 million to $400 million.
One thing we're also able to accomplish is that, you know, Otto Bremer Trust is a large shareholder of ours. We're able to work with them. We have the right of first refusal, and they do with us as well. We did a small transaction on behalf of them, to solidify the fact that they don't intend to sell, you know, big parts of their position with us. I think that was another part of the important story about a potential overhang from them. We feel really good about our ability to both, you know, grow capital, albeit maybe it's slightly lower than we had been, but also return capital back much quicker pace than we had in the prior years, and then use the rest for organic growth.
Yep. Okay. Okay. Anything else that comes up frequently in investor meetings that we haven't touched on? I think it's been pretty exhaustive, but.
Yeah
Anything else you wanna comment? It's a very positive message, very optimistic message.
You know, one thing we're super excited about is, you know, this, you know, stablecoins have been a big topic.
Mm-hmm.
Old National Bank with four other regional banks, super regional banks are participating. In fact, First Horizon, I'll mention them 'cause they were just on stage ahead of us.
Yeah
is working on this thing called the CariNext , where it's gonna be a tokenized deposit network as an opportunity to compete in the payment innovation space. We're super excited about the potential, what that could bring to us. Just, I think it's great that a bank like Old National, even at $70 billion, can potentially compete in some of this really, you know, higher-end innovation.
Yep. You should pull it all together. That's good.
Yeah.
Smart. Well, thank you for being here.
Great.
Great message. Appreciate you guys being at the end of the day and at the end of a very long day for you.
Yeah. Thanks, John.
Thanks.
Thanks, RBC too.
Appreciate it. Yep.
Yep. Thank you.