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spk00: Welcome to the Old National Bancorp second quarter 2022 earnings conference call. This call is being recorded and has been made accessible to the public in accordance with the SEC's regulation SD. Corresponding presentation slides can be found on the investor relations page at oldnational.com and will be archived there for 12 months. Management would like to remind everyone that certain statements on today's call may be forward-looking in nature and are subject to certain risks, uncertainties, and other factors that could cause actual results or outcomes to differ from those discussed. The company refers you to its forward-looking statement legend in the earnings release and presentation slides. The company's risk factors are fully disclosed and discussed within its SEC filings. In addition, certain slides contain non-GAAP measures, which management believes provide more appropriate comparisons. These non-GAAP measures are intended to assist investors' understanding of performance trends. Reconciliations for these numbers are contained within the appendix of the presentation. I'd now like to turn the call over to Jim Ryan for opening remarks. Mr. Ryan, please proceed.
spk10: Good morning. We're pleased to discuss our outstanding second quarter results and update you on our systems and branding changes from our transformational merger. Let's start on slide four. We recently completed our systems and brand conversion. It's been a busy couple of weeks. The data and systems conversion went very well overall, and our commercial clients have quickly and successfully adapted to the new systems. As expected, our branches and contact centers have experienced elevated activity levels but have started to normalize. I want to thank all of our team members for their hard work and dedication to serving our clients and communities. Completing the data and systems convergence should accelerate our ability to achieve our model synergies. Brendan will fill you in on our progress later in the presentation. I'm gratified to share that despite the merger activities, our teams achieved outstanding loan growth results and continue to build robust pipelines. I can't imagine better results, especially given the distractions. Lastly, we started branding campaigns in Chicagoland and some of our metropolitan markets and are receiving good feedback from those efforts. Moving to slide five, we reported gap earnings for the second quarter of $0.38 per share. The second quarter included pre-tax charges of $36.6 million in merger expenses. Excluding these charges from the current quarter, adjusted EPS was $0.46 per common share, or $135 million. Our adjusted average tangible common equity in assets was a strong 20% and 1.21% respectively. Our adjusted efficiency ratio was approximately 54%. Our focused execution on our merger and growing our commercial business drove these robust results and leading returns. We saw higher balances in nearly every portfolio and market across our commercial and community banking business. Total loan growth was 19%, and the commercial business grew 18% on an annualized basis. The higher loan growth paired with the benefit of higher interest rates primarily contributed to a 45 basis point margin expansion. Credit quality remains excellent, but we remain diligent with new credit requests. Our pipeline ended at a record $5.9 billion. Overall, clients in our markets have strong balance sheets and continue to grow and expand as evidenced by our record pipeline. We were pleased to hold deposits quarter over quarter while maintaining our deposit pricing discipline. Much of the government and municipal clients' stimulus funds are yet to be invested. Therefore, balances remained high and grew during the quarter. A quick update on hiring. We successfully welcomed 17 new client-facing commercial and wealth management relationship managers during the quarter. Our talent pipeline remains robust, and we will continue to make more new investments throughout the year. While 2022 continues to bring its own set of unique challenges, our businesses are performing very well. Business and consumer sentiment are worsening slightly, but we remain optimistic that our balance sheet will continue to grow. We are well-positioned to withstand any new challenges. Thank you. I will now turn the call over to Brendan for further details.
spk05: Thanks, Jim. Turning to the quarter's results on slide six, we reported GAAP net income applicable to common shares of $111 million, or 38 cents per share. Reported earnings were impacted by $37 million in merger-related charges. Excluding these charges, as well as debt securities gains, our adjusted earnings per share was 46 cents. Slide seven shows the trend in total loan growth on a historical combined basis, excluding PPP loans. Q2 represents our eighth consecutive quarter of organic loan growth, with total loans increasing 19% on an annualized basis, driven by robust commercial growth of 18%, and consumer growth of 22%. Growth within consumer loans was driven by residential mortgage, which reflects lower saleable production, and is net of the transactional book runoff of $58 million. The balance of the transactional book at quarter end was approximately $1.7 billion. The investment portfolio decreased modestly by approximately $200 million quarter over quarter, with the overall mix remaining largely unchanged. And I note we have deployed a significant portion of the cash outstanding at the end of last quarter in support of loan growth. Investment portfolio yields improved significantly to 2.37%, with new money yields of 3.68%. Effective duration was stable despite the dramatic shift in the yield curve, with new money purchases focused on the shorter end. In addition, we transferred another $1 billion of securities into our HDM portfolio to help mitigate future OCI impacts. Slide 8 provides further details of our commercial loans and pipeline. The strong second quarter growth was well distributed with 20% annualized growth in T&I and 16% annualized growth in CRE. We were also pleased that despite the strong second quarter production, our pipeline ended the quarter at a record $5.9 billion, which is a 9% increase over Q1. Turning briefly to pricing, new money yields on T&I increased 80 basis points from Q1 to 4.2%. with new CRE production yields up 53 basis points to 3.67%. Slide 9 shows details of our Q2 commercial production by product and market. The $2.2 billion of production was well balanced across all product lines and major markets. The Chicago market continued its strong momentum with nearly $1 billion of production, but all of our legacy and expansion markets had strong quarters as well. In addition, all of our product lines posted quarter-over-quarter loan growth, a clear reflection of the strong loan demand throughout our footprint. Moving to slide 10, end of period deposits were stable quarter of a quarter, although we did see some deployment of deposits in our commercial and retail clients that was largely offset by seasonal increases in municipal and government funds. Total cost of deposits continues to be low at six basis points, up just one basis point from the prior quarter. We are prepared to defend deposits through rate actions if necessary, but we have ample funding sources and asset liquidity to support future commercial loan growth. Next, on slide 11, you will see details of our net interest income and margin. Both improved meaningfully due to strong loan growth, improved earning asset mix, and higher interest rates. NIM expanded 45 basis points quarter over quarter to 3.33%. Core margin, excluding accretion and PPP income, increased 34 basis points to 2.98%. Slide 12 provides additional details on our asset liability position and projected margin range. Margin is expected to continue to expand meaningfully over the next two quarters, albeit at a slower pace. The assumptions in our outlook include a Fed funds target rate of 3.5% at year-end, a static balance sheet, and deposit betas that increase from 3% today to a December recycled-to-date beta in the range of 20% to 25%. We believe we have opportunities to outperform this outlook through continued strong loan growth, remixing of earning assets, and a longer deposit pricing lag. Also, while we remain well positioned for rising rates, we have been proactively hedging the balance sheet over the last several quarters to protect our margin from the possibility of a hard economic landing and quick reversal in Fed policy. We currently have over $1 billion of down rate protection, including floors and collars, which we will continue to build over the remainder of the year. Slide 13 shows trends in adjusted non-interest income, which was $89 million for the quarter, slightly better than expected due to $4 million of discrete items related to equity investment returns and the recovery from fully charged off acquired loans that we don't expect to recur. Mortgage production was higher than anticipated. However, normalizing gain on sale margins and a higher percentage of portfolio production did negatively impact VREV. Next, slide 14 shows the trend in adjusted non-interest expenses. Adjusting for merger charges and tax credit amortization, non-interest expense was $239 million, and our adjusted efficiency ratio was 53.9%. Expenses were slightly higher than anticipated due to a year-to-date screw-up with incentive accruals to reflect better than planned performance. We continue to run slightly ahead of our planned cost synergies, but expect the bulk of the savings to begin late third quarter. Merger charges are also tracking in line with our diligence estimates, with approximately $65 million remaining. Slide 15 provides further details on our path to achieving the cost savings of $109 million. With the systems conversion now behind us, we have completed the last major milestone required, prior to realizing the remaining cost dates. Expectations on timing are unchanged with 85% of the cost synergies on an annualized basis realized in the fourth quarter and the remainder to come early in 2023. Note our four-Q run rate was updated to include higher incentive related expenses resulting from better than planned performance. Slide 16 shows our credit trends of both historical Old National and First Midwest. Credit conditions continue to be benign and our commercial and consumer portfolios continue to perform exceptionally well. We ended Q2 with positive trends and better than fear results in all key credit metrics. Net charge-offs were a modest two basis points. On slide 17, you will see the details of our first quarter allowance, which stands at $288 million, up from $281 million at the end of Q1. Reserve build was driven by strong loan growth and a more pessimistic economic forecast, partly offset by lower specific reserves and improved asset quality in our commercial book. The financial health of our clients remains strong, and while we are not seeing any signs of credit deterioration in our portfolios today, we believe it is prudent to maintain elevated levels of qualitative reserves until the cloud of economic uncertainty lifts. In addition to the $288 million in total reserves, we also carry $131 million in credit marks. Slide 18 provides details on our capital position at quarter end. As you can see, it remains strong with a CET1 ratio of 9.9%. The modest 14 basis point quarterly decrease reflects robust loan growth, which more than offset our strong retained earnings. We continue to monitor our balance sheet for economic stress and feel very comfortable with our capital levels. As I wrap up my comments, here are some key takeaways. We couldn't have scripted a better result in the first full quarter following the closing of our partnership. Client and RM retention has been exceptional, leading to another quarter of broad-based quality loan growth led by our Chicago market, Rating increases brought welcome margin expansion that was meaningfully higher than our peers. We recently completed the major systems conversion on schedule, credit conditions remain benign, and we are tracking ahead of our planned cost synergies. Slide 19 includes thoughts on our outlook for the remainder of 2022. We ended the quarter with a record commercial pipeline, which supports our favorable outlook on loan growth, albeit at a potentially slower pace than Q2, given waning consumer and business sentiment. Net interest income and margin should benefit from continued loan growth and Fed rate increases, consistent with the margin guidance we outlined earlier. We expect our fee businesses to continue to perform well despite headwinds. We expect solid organic growth in our wealth business, but AUM will continue to be under pressure for market fluctuations in both equities and fixed income. Mortgage is following industry patterns with fee revenue under pressure from normalizing gain on sale margins, as well as a higher percentage of portfolio production. Commercial activities should support continued strong capital markets revenues. And lastly, we anticipate pressure on deposit service charges consistent with industry trends. We are targeting adjusted Q4 expenses of $227 million.
spk00: Ladies and gentlemen, please remain holding. We have lost connection with the speaker line and we are reconnecting. Again, please remain holding. Thank you. Ladies and gentlemen, we do have the speaker line back on. Please proceed with the presentation.
spk05: Thank you. We are targeting adjusted Q4 expenses of $227 million and expect to realize the majority of cost energies by year end. Credit conditions are benign, but we will continue to take a conservative approach to reserving in the near term. Lastly, a brief update on taxes. We are expecting approximately $7 million in tax credit amortization for the remainder of the year. with a corresponding full-year effective tax rate of approximately 23% on a core FTE basis and 19% on a GAAP basis. In closing, we believe we have strong earnings catalysts that should differentiate us from our peers as we finish the year and head into 2023. While the equity markets have us discounted relative to our peers, we believe this delta should narrow as we continue to deliver commercial loan growth, execute on the promised cost synergies, maintain our customary credit discipline, and leverage our best-in-class deposit franchise for better than pure margin expansion. With those comments, I'd like to open the call for your questions, and we do have a full team available, including Mark Sander, Jim Sangren, and John Moran.
spk00: Certainly. If you would like to ask a question, please press star followed by 1 on your telephone keypad. If, for any reason, you would like to remove that question, please press star followed by 2. Again, to ask a question, press star 1. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. Our first question comes from the line of Scott Seifert of Piper Sandler. Scott, your line is now open.
spk01: Good morning, guys. Thanks for coming.
spk10: Yeah, absolutely. Good to hear from you. Sorry about the challenge with the line this morning.
spk01: Likewise. No problems. I have to say, Brendan picked it back up without missing a beat. That was very impressive.
spk10: Well, there was a lot of frantic movement in the room, as you can imagine, but glad we're able to complete the call. And I appreciate you coming back to your rightful spot as number one on the question list. So good job.
spk01: Thank you for that. No, I appreciate that. I wanted to ask just a couple questions. So when you talked about the loan growth outlook potentially slowing, I guess I sort of meant that to mean just because the two-key was just so extraordinarily strong. You noted in the written comments in the Outlook client sentiment in there. I was just hoping you could expand on that comment and what your customers are seeing and saying to you guys.
spk10: Yeah, I'll give you a high-level view and let maybe Mark or Jim jump in here. You know, just like everybody else, I think we're cautiously optimistic that we will continue to close the pipeline, you know, but we can't take into account, you know, the declining sentiment somewhat, you know, higher interest rates. All those things are kind of weighing on our mind, but we still feel really good about our pipeline. The fact that it, you know, grew to record levels you know, still feel very good. And our clients are innovative, and they find ways to still get their deals done. But we are also, you know, just cautious like everybody else.
spk11: Right, I would add, you know, as you alluded to, we had a really strong second quarter, so expecting $900 million every quarter perhaps might be a bit much. But the pipeline would indicate, and our clients, our commercial clients' revenues and profitability would indicate that things are still quite strong out there. And we grew the pipeline even as we had a great second quarter. So in the near term, I would say we feel good about our outlook for loan growth. But again, perhaps not at that $900 million level. This quarter, we also got boosted a little bit by line draws. Line draws picked up a couple hundred million dollars of that.
spk01: Okay, wonderful. Thank you. And then if I can switch over to the funding side for a second. Virtually no increase in deposit costs, which is great and appreciate the beta commentary in the deck. Just curious what you guys are, thinking for deposit betas once the Fed stops raising rates. In other words, sort of the full through the cycle beta versus the year end that you cite there. And then would be curious if there's any difference in price and pressure that you guys are seeing in the old or sort of the legacy old national footprint versus the newer Chicago portion of the footprint.
spk05: Scott, I think pricing pressure is picking up a little bit, but not Not unexpectedly. We're starting to see it for the first time, so we're getting the typical calls from the more price-sensitive customers, and we're responding accordingly. In terms of what the total beta is at the end of the cycle, hard to tell at this point. We believe we have a competitive advantage with our deposit franchise and our expectations that we'll be better than the average bank at the end of this. Right now, our models are showing it through the cycle around 25%, but we'll see where it ends up.
spk01: Perfect. All right. Good. Thank you guys very much. I appreciate it.
spk10: Thanks, Scott.
spk00: Thank you for your question, Scott. Our next question comes from the line of Ben Gerlinger with Hobby Group. Ben, your line is now open.
spk10: Hey, good morning. Good morning, Ben. Yeah, good morning.
spk12: Looks like I got a dial in two minutes earlier. Anyway. Let me put the slide back together. Let me put the slide back together. deserves a round of applause. This thing is very, very helpful, especially with a couple of new slides in there. So kind of just answering or following up on Scott's question about deposits, when you guys think about the funding relative to the pricing, is there any kind of pressure points that you guys are seeing? I guess that you have to balance both sides of the balance sheet here, but is loan pricing still more of the headache, or are you starting to see a little bit more pressure on kind of the more sensitive clients that are calling a bit more frequently on the funding side?
spk11: I would say spreads on the loan side have held up quite well. So we're not seeing pressure there. And the deposit side, I guess we're anticipating it coming more than seeing it right now. And we're going to stay competitive in our marketplaces. And so we won't be the first, but we won't be the last kind of thing.
spk12: Gotcha. Okay, that's helpful. And then I get that in your guidance you're assuming the Fed moves 75 on Wednesday, but on Friday we get the first Q2 look on GDP and I have a sneaky suspicion of being a technical recession. Does that change the way you guys are approaching overall growth across lending categories? Are there any areas that you might be kind of pressing the gas or tapping the brakes to some degree on just, broadly speaking, loans?
spk10: Again, I'll jump in here and ask the team to follow up where I maybe don't get it right, but I don't believe so. Again, it's a client-by-client situation. There are some clients and some industries that maybe you think are more vulnerable that we'll continue to lend to, and then there's some industries that We may be cautious about, but it really hasn't changed in our outlook at all, regardless of what the GDP numbers report. Our clients overall are very healthy, whether it's the personal side or the business side. We're overall very healthy and continue to come into this very well prepared. As I've talked to other banks in our marketplace and across the country, I don't think our approach is that much different than what I'm hearing from others. I think we're all optimistic that we'll continue to have growth opportunities. And I think there's still very healthy demand out there to continue to want to do business.
spk12: Gotcha. No, that's very fair. You guys have never really had much of a credit issue, so it seems like you have the good clients, which is a big positive going into any kind of economic slowdown. The last one for me, not only do you have a much bigger balance sheet, do you have any kind of new updated thoughts on, because I don't know, guide rails or anything like that for the loan to deposit ratio? I have a feeling we're nowhere near the high end, but is there a high end and where your comfort level would be?
spk10: Well, certainly, we talk about that internally here, but we've got no published stated targets out there. I do think we could withstand a better remix of the balance sheet. That's been a goal of ours for quite some time is to remix our balance sheet, and I think you're seeing the fruits of that labor with the strong commercial growth. I don't think we're anywhere near any limits. You know, we do forecast, multi-year forecast, and look at these items on capital and liquidity and feel very comfortable with where we're positioned at today and kind of the trend line of growth.
spk07: Gotcha. That's it. Grabs, heck of a quarter. I'll sit back.
spk10: Thanks, Ben. Appreciate your support.
spk00: Thank you for your question, Ben. Our next question comes from the line of Chris McGrady with KBW. Chris, your line is now open.
spk08: Hey, good morning, everybody.
spk10: Good morning, Chris. Good to hear from you.
spk08: Yeah, thanks, Brendan. Maybe, Brendan, start with you on slide 12. Great detail on the components and the outlook. The one thing that sticks out is the static balance sheet assumption. Can you walk through, given you guys redeployed all the cash in the quarter, how the core margin is? Would, you know, the sensitivity of those metrics, if you do get a dynamic balance sheet, maybe not the same level of growth, but a little bit of growth?
spk05: Yeah, Chris, I think maybe the shorthand would be we'd be near the higher end of that range with some normalized solid loan growth over the remainder of the year. And then better performance in deposit betas. that's, that's probably the shorthand.
spk08: Okay. Um, and then maybe on, on costs, you know, the, the two 27 that you lay out, um, in the, in the fourth quarter, uh, that'll assume all the cost saves or like by the end of the quarter, I'm just trying to get a liftoff point. It seems like a, you know, a 900 plus range exit in the year. I'm just trying to get a sense for next year, what level of cost inflation we should be
spk05: Yes, that's 85% of the cost saved, so you'd have another rough-and-tough $17 million to come on an annualized basis in 2023. Okay.
spk08: And then maybe if I could sneak one in. You talked about the, I think, 17 new commercial and wealth relationship managers. any attrition, given how competitive the markets are for talent today? Anything unexpected to date that you would call out?
spk10: I don't think so. We look at those attrition reports very regularly, and our attrition has been running at a really close to our three-year kind of average, just more broadly speaking across the entire company. And certainly, we'll have pockets here and there, but honestly, we've had really strong attrition numbers. But I do think we will continue to recruit talent. And we're not always replacing positions. We are adding talent to markets where we think we have the opportunity to continue to grow. And we also have opportunities with our bigger balance sheet, right, and certainly some of the specialty businesses that First Midwest brought to us to continue to grow and invest in those businesses, particularly as we think about our more broader footprint. So we'll just continue to do that. But I don't see anything in the attrition numbers that gives me any kind of pause. And in fact, you know, as we talked about historically, our, you know, relationship managers in Chicago have been excellent. We've had very little, if any, attrition in that market. So we feel really good about our ability. And, you know, having success helps, right? And I think we're showing a great deal of success, particularly in the legacy first Midwest footprint.
spk08: Great, great. Thanks. Thanks, Jim. And then maybe last one on the buyback. You talk about just rebuild near term. What are the, I guess, the medium term thoughts on resuming that? You know, obviously, I know loan growth is one consideration.
spk05: No, Chris. Yeah, we had no plans in the near or medium term to turn that back on. We'd like to see capital build back before we start. Okay, thanks.
spk08: Thanks, Chris.
spk00: Thank you for your question, Chris. Our next question comes from the line of Terry McEvoy with Stevens. Terry, your line is now open.
spk07: Thank you. Good morning, everyone.
spk10: Good morning, Terry.
spk07: You ran through some of the puts and takes to deposits in the second quarter, but it was nice to see balances flat quarter over quarter given some of what your competitors have reported. Could you maybe talk about your expectations for deposits in the second half of this year? And then given the conversion that occurred this month, any noticeable change in deposit balances over the last month?
spk05: First, I'll start. No noticeable change in deposit balances over the past month. Our expectations all along in this year is that deposits probably come under pressure as people deploy liquidity. That said, you know, we are out there and working on things to start growing deposits as we head into this liquidity cycle. And so, you know, we're prepared to defend what we have and proactively get on offense and start gathering deposits.
spk07: Another question for you, Brandon. Your outlook for fees, you kind of started your discussion with you feel good about the momentum, but then as I look at some of the items, wealth, mortgage, service charges, it implied some pressure. So if you kind of normalize that other line and then think about the trends that are on slide 19, could you be a little more precise in your fee outlook? Operator, did we lose the connection again?
spk00: It looks like the connection has once again been lost. Please stand by as we reconnect them. Our speaker team is back on the call, and Terry, your line is still open.
spk10: Sorry about that, Terry. Brendan will answer your question now.
spk00: Yes.
spk07: Okay, thank you.
spk05: Yes, Terry, I think I got the gist of it, please, but let me know if I missed something. Yes, it seems clearly under pressure. I think we've had really strong organic growth in AUM and the wealth and brokerage, but equity markets and fixed income markets obviously put pressure the mortgage story is the same as everybody else's in the industry. But yeah, so those B lines will be under pressure, but we feel really good about the organic growth in that space.
spk07: Okay. Thanks for that. And then one last question. You added on slide nine here, new loan production markets. There was a new color versus last quarter. Could you just talk about where you've opened up some new LPO's and what was behind the, was it $73 million of production?
spk09: Yeah, hey Terry, this is Jim Sandren. So as we talked about, we've been in St. Louis now since 2019 and have built out a nice team there. We've got a market president and two corporate RMs that are doing a great job. We have a treasury management representative and a credit person there in St. Louis and they've continued to grow both on the corporate and commercial real estate sides. We just recently got into Kansas City. earlier this year, really in January, and hired two great middle market RMs, big bank background, and they're off to a really good start. So a combination of kind of middle market and CRE opportunities that have helped spur the growth in those two markets.
spk07: Thanks, Jim. Nice to hear your voice. And thanks, everyone, for the time.
spk10: Thanks to your page, R. Terry.
spk00: Thanks for your question, Terry. Our next question comes from the line of John Armstrong with RBC. John, your line is now open.
spk02: Hey, thanks. Good morning, everyone. Good morning, John. I was going to say, Jim, you're supposed to have the call drop on bad quarters, not good quarters.
spk10: This is the first that I've ever been here where we had three drops in a row. I don't know what's going on. It's raining like cats and dogs out right now, so I don't know if the The bad weather is causing us some technical issues here, but we apologize.
spk02: It's all right. Slide 12, just a couple of follow-ups. Brendan, can you go into a little more detail about overall goals of the hedging strategy? And are you giving anything up on the upside in pursuing this or not?
spk05: No. We're trying to structure the hedging to allow us to take advantage are in place. And the objective is to not be 5% asset sensitive when the Fed's launch hits the top, right? To slowly manage this thing back to a neutral position as we reach the peak without making any big bets. So same thing we did in the last great cycle. We're trying to do the same thing here.
spk02: Okay. Chris McGrady asked about under your assumptions of static balance sheet. I just wanted to go one more further down. The 20% to 25% cumulative deposit beta by year end seems a little bit high since we're almost already in August and you've barely seen anything budge. Just opportunity to outperform that type of assumption of 20% to 25% cumulative by the end of the year?
spk05: Yeah, I think there's an opportunity. We're starting to see some pressure. That assumption was built off of looking at the last rate cycle and where the Fed funds rate was when it was at 250, where our deposit costs were. But this is happening much faster. It's different. So we may have an opportunity to lag pricing a little longer. It's definitely an opportunity to outperform.
spk02: Okay. A couple more here. Slide 17. Also appreciate all of the information here. But it's a pretty draconian question. model input for your reserve levels, and I guess I applaud you for that. But what's your thinking on provisioning and reserves as a percentage of loans going forward from here? Because it already seems like you have some pretty challenging economic scenarios built in.
spk05: Yeah, we're going to continue to watch the economic forecast and see where this might play out. We are putting through a fairly pessimistic forecast, but we expect to continue to grow long, so we'll continue to provision for that. I don't believe in the near term we're going to be pulling back.
spk10: economic environment. There's just so much uncertainty out there. We're just going to continue to do the right thing and make sure we have plenty of reserves and obviously provide for the great growth we expect to see for the rest of the year.
spk02: Yeah, OK. You kind of provided a segue into my last question, Jim. But obviously, there's a difference between what we all read about and what we're seeing in your numbers and other bank numbers as well. So maybe the segue is to the integration. You know, there's been some public stuff that the integration maybe didn't go as well as planned, but it's pretty easy to cherry pick a challenging scenario and amplify it. So how do you think you did? And it sounded like, you know, in your earlier comments, you said it's starting to normalize again. So just give us an update on that. Thanks.
spk10: Yeah, sure. You know, we feel like, first of all, the data systems conversion went incredibly well. You know, I was in here on, you know, a couple Sundays ago, and we bounced out very early on Sunday morning. You know, our commercial clients adapted to our new systems very well. There's just a lot of retail. We had 300,000 clients, and there's just a lot of clients, you know, getting them to register their debit cards and getting them through their online and mobile channels. So we feel really good about it overall. And certainly, again, it's easy to pick the handful of clients that maybe have said something, but we continue to believe overall we feel really pleased with where we're at And more importantly, it's largely behind us in a rear view mirror going forward. So, I don't know, Mark, what else would you add to that? I think we're in a good spot with our clients in all of our business segments.
spk11: As you said earlier, Jim, we had a busy couple weeks that we're on the back half of now. And so, you know, I spent a lot of time the last couple weeks visiting with commercial clients and outing banking centers. And so you see the connection that our teams have with their clients. I think we're in a really good spot in total.
spk02: Okay, thank you. Appreciate it. Thanks, John.
spk00: Thank you for your question, John. Our next question comes from the line of David Long with Raymond James. David, your line is now open.
spk10: Good morning, everyone. Good morning, David.
spk06: I wanted to ask about the a little bit longer term on the net interest margin, looking up to maybe 2023. And I appreciate the guidance that you gave for the next couple of quarters. But as you look to 2023, do you see some pressure on the reported at all as deposit betas pick up and maybe some of the purchase accounting accretion wanes a bit?
spk05: Yeah, we'll start to burn off accretion as we get into 2023. But right now, we've got Fed funds rate increases that are moving out beyond. So we'll continue to benefit from that. And we're also repricing a big chunk of our loan book at much higher kind of medium term yield. So I think we still have some room to grow that and expand that margin into 23. Got it.
spk06: Thanks, Brendan. And then on the M&A side of things, it sounds like across the industry, talks are down right now. But just Curious how you guys are thinking about maybe in the next year, do you have an appetite to bolt something on or make another larger acquisition? Is there any appetite for that? Or how are you thinking about sort of the next step in the M&A cycle for you guys?
spk10: Well, I would start with never say never, but we are incredibly focused in on you know, continuing to integrate, you know, this partnership. This was a transformational partnership. And we feel really good about where we're at with the integration of the clients and the team members. But, you know, there's still work to do. And so we will continue to do that as a team. And if opportunities come along, we'll definitely take a look at them. But we really need to be focused on the current integration and growing organically first. And I do think things are very quiet out there. As you can imagine, I still spend very close to what's going on in the world, and I think things are very quiet out there. But our first job is to take care of our existing clients and grow organically. And if the timing is right and the opportunity is good enough and the pricing is right, we'll definitely take a look.
spk06: Guys, thanks for the color. Thanks for taking my questions.
spk10: Thanks, David. Good to hear from you.
spk00: Thank you for your question, David. There are no further questions at this time. I'd like to turn the call back to Jim Ryan for closing remarks.
spk10: Well, great to be with everybody this quarter. Linnell and Brennan and John, the whole team is ready for any follow-up questions. We appreciate your patience as we had to dial in a couple times here. Hope everybody has a great day, and I look forward to talking with you soon. Thank you.
spk00: 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 866-813-9403, access code 946843. This replay will be available through August 9th. If anyone has additional questions, please contact Lynelle Walton at 812-464-1366. Thank you for your participation in today's conference call.
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