Old National Bancorp (ONB) Q3 2026 earnings call transcript

Good morning. Earlier today, Old National reported another record quarter with 3rd Quarter EPS of 66 cents and new records of net income, adjusted diluted EPS, and adjusted efficiency ratio. These results reflect the strength of our franchise and discipline execution of our strategy. Growing profitable relationships, funding that growth of core deposits, maintaining strong credit standards, and operating efficiently.

Growth remained healthy and balanced with strong deposit growth and continued expansion of both C&I and CRE lending. Active portfolio management moderated reported loan growth during the quarter. Despite the increased competition, we remain disciplined and pursued opportunities that met our pricing, relationship, and credit hurdles. These results reflect our consistent focus on full relationships, sensible pricing, strong underwriting, and core deposit funding.

Revenue trends remain constructive with continued growth and net interest income and broadly stable fee income performance. As John will discuss, we believe the current rate environment is modestly helpful to net interest margin going forward. Operating discipline remained a clear strength. We delivered record efficiency while reducing adjusted expenses from the prior quarter, even as we continued to invest in technology, AI, process improvements, and talent.

This balance supports strong current returns and durable shareholder value. Credit quality remains stable and consistent with our expectations. We continue to manage credit proactively, maintain rigorous underwriting standards, and stay close to our clients. Our diversified portfolio and straightforward banking model continue to serve us well. Our capital position remains strong, supported by continued significant capital generation and tangible book value growth. This strength gives us flexibility to support organic growth, invest in the business, and pursue additional capital returns with discipline.

During the quarter, we added 26 relationship managers across commercial and wealth, expanding client-facing capacity, and supporting continued organic growth. Commercial hires included four proven performers in Ohio, two in Cleveland and two in Columbus, important expansion markets where we believe our brand and go-to-market strategy will resonate. We also added leaders in our FinTechs, FX, and Food and Beverage businesses, broadening capabilities that support key strategic priorities.

We are pleased with the caliber of talent we attracted and developed during the quarter. We will continue to invest selectively in high-quality bankers and specialized expertise where we see attractive opportunities to drive organic growth, deepen client relationships, and expand fee income.

In summary, this was another record quarter with disciplined growth, exceptional efficiency, stable credit, and strong capital. We remain focused on the fundamentals that create durable shareholder value, profitable organic growth, deeper client relationships, disciplined investment, and strong risk management. I want to thank our team members for their continued commitment to our clients and one another.

With that, I'll turn the call over to John to discuss the quarter's financial results in more detail.

As Jim mentioned, we delivered a strong quarter highlighted by record earnings and efficiency, very strong deposit growth, balanced loan growth, disciplined expense management, stable credit performance, and meaningful capital return to shareholders. Beginning on slide five, we reported gap three key earnings per share of 66 cents. Less than $1 million of merger related expenses were offset by a similarly sized valuation gain on the settlement of the legacy Bremmer pension plan.

Excluding these, our adjusted earnings per share were also 66 cents. Results were driven by strong deposit and disciplined loan growth, stable fee income, and well-controlled expenses. Credit remained normalized with 24 basis points of non-PCD chargeoffs. Our profitability profile remained top decile as compared to our peers with return on assets of 1.37 percent and return on tangible common equity of 19.6 percent. Capital finished the quarter with CET1 over 11 percent, and we grew tangible book value per share 5 percent year over year.

But for the impact of higher rates on AOCI, tangible book value would have increased an even stronger 13 percent annualized from the prior quarter. We continued to return capital shareholders through cash dividends and share repurchases in the third quarter with a combined payout ratio of 62 percent of net income to common. On slide six, you can see our quarterly balance sheet trends underscoring continued strength in our liquidity and capital positions.

Driven by strong deposit growth, our loan to deposit ratio declined to 89 percent, and the CET1 ratio remains above 11 percent. Again, we compounded tangible book value per share year over year despite the impact of merger charges and the increased pace of capital return. We repurchased $100 million or 3.9 million shares during the current quarter and $327 million or 13.4 million shares over the last year.

As we've stated in the last several quarters, we continue to believe that the best investment we can make today is in ourselves. On slide seven, we show trends in earning assets. Total loans grew 3 percent annualized from last quarter and 7 percent annualized year over year. This growth was led by our commercial portfolio with CNI up 12 percent and CRE up 3 percent year over year. Production this quarter was balanced across our commercial book and remained predominantly floating rate.

The next few quarters should be supported by a pipeline of $4.4 billion, up 6 percent from a year ago. The investment portfolio declined due to rate-driven market valuation with new purchases coming on at higher yields. We expect $1.8 billion in cash flow over the next 12 months. Today, new money yields are approximately 6 percent, which are well above backbook yields of 4.2 percent.

Loan growth, ongoing re-pricing across both loans and securities, and deposit pricing discipline supports continued growth and spread revenue into the fourth quarter. Moving to slide eight, we show trends in deposits. Period in total deposits increased 11 percent annualized, primarily driven by $1 billion of organic increases in business accounts and seasonal strength in public funds. Non-interest bearing deposits grew $182 million and represent 22 percent of total deposits.

Like our loan pipelines, deposit pipelines remain healthy. Both total deposit costs and interest bearing deposit costs increased eight basis points linked quarter. We remained on offense with respect to client acquisition in a competitive deposit environment. The spot rate on total deposits was 187 basis points at September 30th. Overall, our deposit strategy outperformed our expectations even after adjusting for normal seasonal strength in public funds.

Slide nine shows our quarterly income statement trends. As I mentioned earlier, adjusted earnings for share were a record 66 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. NII grew 4 percent annualized from 2Q levels. Total margin was down modestly in the quarter with rate, volume, and day count benefits offset by increased funding costs. We anticipate fourth quarter growth in NII dollars to be supported by continued earning asset generation, disciplined deposit growth, fixed asset re-pricing, and the slightly higher mix of floating rate loans.

We remain well positioned to the forward curve and based on current spot rates for loans deposits and securities, and assuming a static balance sheet, we would expect a two basis point positive impact to margin all else equal. Slide 11 shows trends in adjusted non-interest income, which was $128 million for the quarter. Core banking, wealth, and capital markets fees continue to perform well while mortgage fees reflect some softness given the rapidly changing rate environment.

Continuing to slide 12, adjusted non-interest expense was $355 million for the quarter. Run rate expenses remain well controlled, driving positive operating leverage, both quarter over quarter and year over year, while delivering a record low 44.9 percent adjusted efficiency ratio. As Jim mentioned up front, we continue to invest in top talent across our footprint in both commercial and wealth.

Third quarter saw strong pull through from the talent pipeline with many of these hires happening late in the quarter. I'll discuss the anticipated expense impact on our outlook slide. On slide 13, we present our credit trends. Total net charge offs were 27 basis points or 24 basis points excluding charge offs on PCD loans. Criticized and classified loans declined 9 percent this quarter and are down 16 percent from a year ago.

Non-acrual loans remain relatively stable linked quarter at 92 basis points of total loans, but are likewise down meetingfully from 123 basis points last year. The third quarter allowance for credit losses to total loans, including the reserve for unfunded commitments, was 120 basis points, down one basis point from the prior quarter, primarily driven by charge offs on PCD loans and improved credit quality. On slide 14, you can see our strong capital position at the end of the quarter. Changeable book value per share was up 5 percent year over year. Overall regulatory capital ratios were up modestly linked quarter with strong earnings absorbed by loan growth and continued share repurchases. As previously mentioned, we repurchased $100 million of common stock during the third quarter and we have $177 million remaining under our program.

Slide 15 includes our outlook for the full year 2026. Our overall expectations remain unchanged from the guidance that we first provided in January of this year. We continue to expect positive operating leverage, growth in tangible book value and EPS growth exceeding 15 percent. We expect to achieve these results even as we have navigated a markedly different operating environment over the course of the year and our 2026 estimates prove to be durable.

As you can see, we believe our year-to-date results and current pipeline continue to support full year loan growth of 6 to 8 percent. You'll recall that we increased this range last quarter given the strong performance of the first half of the year. With three key results and a focus on striking the right balance between growth of full relationships that come with sensible pricing and credit discipline, we now expect mid-single-digit growth for the fourth quarter, which would bring us to the lower end of the annual range.

Our NII guidance has unchanged. Obviously, the exact path of NIM and NII in the fourth quarter will be dependent on balance sheet growth dynamics, the shape of the yield curve, the production mix, and the deposit landscape. However, we believe our balance sheet is well positioned to the forward curve and, as previously mentioned, our spot margin is up slightly from 3Q levels.

That said, given the year-to-date results, mathematically, we expect full year NII to come on the lower end of the stated range, with 4Q NII dollars expected to show continued growth from 3Q levels. Our fee income guidance, which had also been increased earlier in the year, remains unchanged. We expect our core fee businesses to continue to perform well with mortgage fees softness likely to continue in 4Q amid the rising rate environment and seasonal factors.

Our outlook for expenses is likewise unchanged and, given year-to-date results, is now expected to fall near the lower end of the annual range. Robust hiring at the end of the third quarter is expected to run rate into 4Q and next year. The outlook for credit and tax rates are also unchanged.

Finally, we expect to fully utilize the remaining buyback plan opportunistically over the course of the current authorization, which runs through the end of February 2027. In aggregate, we continue to expect 15% plus EPS growth, positive operating leverage, peer leading profitability, normalized credit, and sustained growth and tangible book value per share. Importantly, the durability of that outlook has now been tested across three consecutive quarters of volatility in the operating environment. It is held and it is expected to result in record EPS for 2026.

To close, this was a strong quarter for old national. Record earnings, record efficiency, very robust deposit growth, improving credit trends, and continued capital return. These are not one-time results. They are the direct output of the franchise we have built. A franchise with peer leading profitability, sustainable growth, a diversified and growing fee income platform, and a capital base that gives us the flexibility to invest in talent and technology while returning meaningful capital to shareholders.

We are not just performing well today. We are investing to ensure old national is an even stronger company in 2027 and beyond. With those comments, I'd like to open the call for your questions.

Yeah, for sure. The two basis points spot that we talked about is what it would look like right here right now today, not factoring in anything else for what might come later this year, but based on them, you know, sort of bit on futures and forward curve, probably make it a little bit more help. And that'll be that'll be modestly beneficial, I think, to the quarter. So I think in general for 4Q, we could expect to see NII dollars continue to move up. I think that'll have, you know, as opposed to the 592 level that we were at in 3Q, probably has a 6 in front for 4Q, and then a margin that'll expand a couple of basis points from here.

From the 3Q average level, correct, the 352? Yeah, correct. The 352 today would be 354, and if we get a little bit more help, it would be even better than that. And so, you know, I think the expectation of a modest improvement in margin is probably the right way to be thinking about 4Q.

Got it. Okay. Thank you, John. For a second, was this a little bit more? I mean, you know, the margin was down a bit in the quarter. Was the deposit pricing or the rise in the deposit cost more than you guys expected? And then just looking in, zeroing in on the money market and checking account, look like you had a decent increase there, if you could just kind of give us a little color on what drove that would be helpful.

Yeah. So 8 basis points in the quarter, 4 basis points of that was just the growth that we put on. And that growth is coming on a little bit more expensive than probably what we would have thought earlier this year. But, you know, we've been talking all year about it's a competitive environment for deposits. We're staying on our front foot. We're very interested in continuing to grow deposits in line with our earning asset growth. The other factor in this quarter is a little bit usually 3Q seasonal strength in the public fund side of things. And those can be a touch right here that had a couple of basis points impact on the on the quarters of the cost.

But, but I think overall we're in really good shape continuing to, you know, fight it out in a competitive environment and interested in growing the growing core client deposit. And I think, look, you know, when you look year on year, CNI up 12%, those don't all show up on day one. And Tim and team are really actively getting after terms of getting to Boston in the bank. So the increase in the market and checking was was not so much re-pricing as it was, or maybe some re-pricing, but it was more incremental than what you're saying.

Yeah. I think I think a lot more incremental. The back book, we continue to work hard. Okay. All right. Well, thanks for the color. I appreciate it. And I'll step back.

Your next question is from David Kiaverini with Jeffries. Your line is now open. Please go ahead.

Sure. Good morning, David. Yeah, we talked our clients every day and we continue to be impressed with their ability to navigate the uncertainty in the rate environment. And we don't see a change in demand right now for commercial lending. We continue to be optimistic about the pipelines. We see good growth in the pipelines and feel good about where they're at and where they're trending.

Yes. I think that's a fair way of saying that we've got really strong CNI results. John mentioned we're up 12% year over here. Our pipelines and CNI continue to look good. We're investing in talents and capabilities there that I think have us well positioned in the market. You know, I think when you think about the interest rate environment going forward, you'll see that impact CRE I think as an industry. But we feel like we're very good in the CRE space. We're consistent in that space. The market knows that we consistently execute there. So we'll continue to see growth in CRE. But I think CNI will continue to outpace it.

Yeah. The majority of those bankers that we hired are going to be primarily focused on CNI bankers. We have a great CRE team that we continue to increase and improve. But for the most part, the majority of those 19 bankers are going to be CNI focused in our metro markets.

Very helpful. Thank you. Thank you.

No, not at all Brendan. I think we have plenty of both REDCap and GAPCap. We feel good about where we are, especially against the risk that we take on the balance sheet. I think no change to plans continue to expect to execute the $177 million that's left on the on the repurchase authorization. But maybe a little bit more opportunistically over the balance of this, but we would expect to exhaust that. Okay. Perfect.

Oh, thank you, Lando. Well, just personally speaking, I've spent 30 years in Northeast Ohio personally and professionally, so I feel like I have a good understanding of the market, the talent. And when you think about Cleveland and Columbus, they're very similar to our other large Midwestern cities. Strong CNI, middle market manufacturing, the types of business banking clients that we think we are very well positioned to continue to grow. So their markets, we know well, we know the talent that we hired, we think there's opportunities in those markets to expand and we feel our story resonates very well there. So we're excited about the opportunity. Okay, great. Thanks for taking my questions.

Yeah, we're compared to the back book. Fixed re-pricing, so fixed at fixed is going to be well north of underbases points, but fixed into what we've been putting on is kind of underbases points against the back book. We've got again to remind you 4.6 billion of fixed rate coming out of coming out of the loan portfolio. And then on the securities side, you didn't ask about securities, but I'll give it to you anyway, 1.8 there. And that's 180 basis points are more better in terms of what we're putting on there. In terms of yields themselves up 5 basis points link quarter, that's closer to 10 basis points on a spot on a spot basis. And again, I think if we get the forward curve and fed move in the way that the market expects it to, we would see a lift starting in November on that book, just the flow mix on the balance sheet to shift it a little bit over the last year.

And so we'll get a little bit of a helper there.

Yeah, I think it looks interesting. You showed up pretty good growth this quarter, up 182 million bucks. We're pleased with that. Absolutely. I think the more seen high business that we're doing, the more shots on goal we have with companies for operating accounts. And we intend to grow that bucket. I think in terms of cash sorting, everybody that's gonna sort has sorted. We've been in a cash sorting environment for the last three plus years at this point. So I wouldn't expect too much to change on that. The other thing that's kind of interesting about us, the median balance for our total deposits are $3,800. If you rip out the CDs, it's closer to $3,000.

There's just not a lot to do with sorting. And so I think where we are in terms of mix is probably going to be pretty stable. Sorry.

There's nothing that we see in our book today that changes our expectation. We were 40% up. We were 40% down. I think based on what we see in our back book today, our expectation would be that we would be about in line with what the historical average is. And the interesting thing out of that exception book though is that our turn in the book and our retention there has been way better than what we thought. And so maybe there's a little bit more opportunity to kind of test and learn in that. But again, we want to stay focused on growth at deposits. Got it. Okay. Thanks very much.

Broke was actually down in the quarter. It was a really strong organic quarter for us. I would say a billion was kind of organic.

And then we had a win in the public side. It was a little bit of a larger deposit relationship. And then the normal seasonal strength in public funds added probably 450 million or so to the quarter's balance. Perfect. That was my second question on. Then back to the question about the money market growth. I see on the website, there's a 385 promo. I'm not sure when that started. Any chance you've got a breakdown of how much of the growth was from that promo offer? That one we might have to follow up with you after. I'm not sure that I have that number handy. Got it. And then the last one, just on the legacy Bremmer footprint.

I mean, I've never loved the FDSE market share reports and very cognizant that things like rehousing commercial deposits can move things a lot. But some people pointed to this year printed it, I believe, at a 2.9% share for Old National, at least in the Minneapolis MSA. And last year it was 3.5. Can you kind of walk through how you think about how the Bremmer footprint is doing? Do you think there's been any share erosion or maybe is it things like moving some corporate relationships to the Old National headquarters or something like that?

Yeah, that is exactly what's going on. That summary deposits report is I would describe that thing as directionally correct, but specifically wrong. And how you household municipal deposits, program deposits, large corporate deposits can sort of swing that around in any given year. And yeah, so I think underneath the surface, the core Bremmer franchise, I would describe as very stable. And we've seen a pickup in the height lines from our legacy Bremmer footprint that lead us to believe strongly that the results going forward will continue to be stable, and we'll be able to build and grow those markets as well. Got it. I'm not sure you'll answer this one, but I'll try. Some people have pointed to the margin and consensus reach in 365 or so by second half next year.

Any thoughts on what you think are normalized or achievable margin over time is or well, maybe I'll just leave it like that and let you decide?

I think that the curve should it play out will be helpful for us, uh, modestly helpful. And so I think that we can see improvement in 4Q and then maybe sustain improvement into into 27, but we'll we'll come back in January and refresh you on that set of assumptions.

Thank you for taking my seven part question.

Morning Nathan, thanks for the question. Yeah, we feel very good about where we landed the quarter. You know, when you think about navigating the competitive landscape, having strong pricing discipline, which allowed us as John mentioned to increase loan pricing by five basis points and 10 basis points in our spot rates. You know, that said, we delivered 3% loan growth for the quarter and we feel good about our ability to hit our increased loan growth range for your end.

Speaking on payoffs, we had a couple of payoffs on the CRE side. I think when you have projects and you see rates going up, you know, there's going to be some payoffs and pay downs there. We had a couple of those that happened right near quarter end. But like I said, we feel good about the pipelines, our conversion rates and our ability to continue to grow loans and equipment that, you know, we've provided guidance on. So feel good about where we're at and good about where we're going. Okay, that's helpful.

And John, I appreciate you speaking to kind of the lower end of the NIAI guys for the quarter, but maybe just looking to expenses as maybe an offset relative to maybe more conservative thoughts from a top line perspective there. But, you know, the fair that maybe expenses come in kind of the low end of the expense guy for the year. Obviously, really good cost controls in the quarter, but just curious on kind of how you see the expense run right training to 4Q. Yeah, I think you've got it read correctly there. I think, you know, when you look at that range, 1435 to 1455 on the on the year, our expectation would be it would be at the low end of that range.

I think we do take off as compared to 3Q. And again, a lot of the hiring that we did was kind of back-end loaded in this quarter. So 4Q will run higher than 3Q. But absolutely, we think for the year we're going to end up at the low end of that prior annual guide.

And then one thing I would share back on the loan growth, you know, our line utilization for the quarter was slightly down. So we think there's some embedded, you know, demand that we'll see that pick up is, you know, C&I companies are looking to build inventory and either items. So we think that's also could be a tailwind for us going forward.

Okay, great.

Yeah, I mean, the market is, the market's very aggressive right now for talent. You know, from a timing perspective, as we're sitting here in October, you know, I would expect that to wane, but, you know, for year end, and you want until bonuses are paid out, but it's very competitive. And we feel we're doing a very good job of being proactive to keep our top bankers and, you know, continue to give them a platform to succeed. As far as adding new bankers on a net basis, yes, that that'll continue to be the plan to invest in top talent and continue to grow our banker base. You know, we see an opportunity that for our story to resonate the market very well.

The conversations we're having, you know, are the talent that we're talking to, I think, are excited about the opportunity and we'll continue to have those conversations and look to grow net bankers up as we move forward. Okay, great. I appreciate the color. Thanks, guys.

Morning, Janet.

I would say that that's probably optimistic. I do think, though, that the, you know, muni flowing out could could help deposit costs by a couple of basis points, two basis points, three basis points, something like that. And that's, again, kind of normal seasonal flows. So those are still sitting there in the early part of this quarter, but they flow out.

Got it.

No, it's total total got it.

Well, we haven't really targeted a combined payout ratio. But I think, look, the fact is, we're putting up returns on tangible common equity in the high teams. Those are sort of peer leading, sort of profitability. So we stack capital up very, very quickly.

And we would continue, our plan certainly would be to continue to return that capital to shareholders. So, you know, I think that's been running 60ish plus minus the last couple of quarters. And, you know, we'll re-rack things and come up with a new authorization in February.

Sure.

Yeah. Thanks. Absolutely. We put on some CDs this quarter. And I think that that's going to look really smart in a quarter or two or three or four. I, you know, our thoughts in this quarter was that the funding curve was probably in front of the Fed and leading in was probably a good thing to do in 3Q. So we did.

And I think we'll get benefit from that, you know, 1Q2Q of next year. I think in terms of higher for longer, you know, on balance, it's modestly helpful as we've as we've spelled out. And that's kind of a function of balance she makes and alco. So we've sort of pivoted ever so slightly asset sensitive here over the last couple quarters. You know, the impact on a deposit cost, I think higher for longer suggests that it's going to stay competitive for longer. And again, you know, where our stated objective is grow to deposit in line with earning assets. And so we'll stay competitive.

Okay.

Yeah, I think middle or upper end is very unlikely. I mean, if I were going to, if you were going to force me to kind of take a number, I would say take the 355 in the 3Q and add anish to it for 4Q just on the hiring and then normal kind of year end factors. And that would probably be as good a place as any to kind of land it. Great. Thank you.

Sure. Thanks, John. Yeah, I would say it's certainly competitive out there. I don't think that's going to change any time soon. I feel pipelines are solid. I never feel they're full. They can always get better. But I think what we're hearing from our clients is that demand is going to continue. And I think as I said earlier, I think they're navigating, our clients are navigating uncertainty better than ever. I think people are used now to a high degree of uncertainty and people are continuing to invest through that. As we continue to add new bankers, those bankers, it takes a quarter or two to ramp up pipelines. Very pleased with the pipelines we already have. In fact, we have a couple of signed term sheets already from new hires that we just made this quarter.

So I feel very good about the pipelines where they're at today, but I feel like there is upside going forward to continue to grow those pipelines as we continue to add bankers and grow and build capabilities on corporate banking and specialty banking side.

John, I would just add Tim and the leadership team done a really good job making sure that the pipeline is really clean. And to the extent that we don't believe there's a full relationship available to us or it's going to be harder to come by, we're clean of those out of the pipeline. We're not looking at those opportunities to the extent. We don't think it's going to meet our pricing hurdles and there's just too much competition. We're cleaning those out of our pipeline. So I feel really good about the work that Tim and the entire commercial leadership team have done to have a really even better pipeline going into the year end that's high quality, more so than even the past.

Thanks, John. We appreciate that. We do believe it's worked. And we have a lot of empirical evidence suggests that we've created real shareholder value over the multiple fields we've done in the organization. You know us as good as anybody or better than most. And you can see that. But having said that, I think there's a time and place and I don't think this is the time or place for us to thinking about more M&A. Obviously, the market's a little bit difficult too with rising rates and everybody's really focused in on, you know, day one, tangible value dilution. And quite frankly, you know, we don't need it to support, you know, the kinds of returns we're putting up.

We don't need it for the growth we're putting up. I think growing organically and going out and being very active in the hiring and talent front, I think, is allowing us to stay really front-footed. That's where we're going to spend our time and effort. And there may be a time where M&A might make sense, but I don't see it in the foreseeable future here. I think it's just sticking to our knitting and doing the things we know really well. And honestly, as we talked about, the investment in ourselves, you know, the returns that John's able to put back through the buyback program are really strong. And that makes a lot of sense. And I think investors obviously are supportive of that.

But I also just think taking the time to invest back in ourselves and continuing to build the foundation to be a larger organization will put us in a really good position. And if that makes sense in a couple of years to think about M&A again, but it's not something we spend any time on today. Okay. All right. Thank you. Thank you.

A great morning, Chris.

I would, you know, I don't know that I would say that there's an element of that repeating itself. I think I'll let you close the quarter. The quarter was a great growth quarter for deposits. You know, half of that deposit cost increase was on that growth.

And, you know, it's a competitive environment out there, right? You know, maybe do the extent that we're seeing a deposit cost increase. I don't think we're wildly out of line with what I've seen from other reporters. And I think if people are interested in growing deposits, they're going to be paying for it, right? So. Okay. Worth a shot. Thanks.

It's a, as you know, and again, you know, it's for a long time, right? It's a philosophical approach to every budget that we got. We're trying to drive positive operating leverage. And I think we've got, look, you know, obviously, this quarter's results were a little bit softer on top line. We've got some pressure in the mortgage business. We've got some pressure on, on NII. But I think when you look at the forward curve, we've got, we've got more tailwinds than headwinds there. And so that should set up a better revenue environment and for working hard and expenses. Yeah.

As you know, Chris, I mean, this is a real focus of ours. We've been really disciplined, you know, between John, Tim, and I, we have regular arm-wrestling matches over how much we can afford to invest versus how much we need to let drop to the bottom line. I think we're striking the right balance between investing in the future, which means investing in growth, and also, you know, driving positive operating leverage. We've all, we've said, you know, we can't be whole into this, you know, really low operating efficiency level forever. Like, we're going to have to continue to invest in ourselves, obviously, to the extent that, you know, John's pointed out, to the extent that we get benefits from rates, and that allows us a little bit more flexibility.

But we're striking the right tension to deliver the right strong shareholder returns, but also delivering a really efficient way. But I never want to sacrifice our future for lack of investment. And, you know, especially when we, we have such an awesome opportunity to continue to tell our story, and there is actually nobody better at telling our story to relationship managers with Tim has been. So we need to take advantage of that while we can, and continue to grow the business and make the right long-term decisions.

No target has been set, but super comfortable with where we are, right? Nor the 11% C21 feels like a ton of capital for the risk that we take on the balance sheet. If those changes in in bezel 3 become, you know, go in as written, I think we get, you know, probably a rough top 100 basis points of additional C21, and that may allow us to, you know, reconsider the size of the reverse authorization when we get to that in February.

Okay.

Feel great about where we are in the core banking fees, wealth management, and capital markets. Mortgage, obviously, a little bit of softness, just given the rate environment, and then we've got normal seasonality in 4Q. I don't think mortgage is going to be a big grower for us next year. The good news there is that there's an obvious and easy expense offset because everybody that works in mortgage is variable comp in terms of production, and if it's soft enough, we've got some other levers that we can pull in terms of the fixed cost piece of that business.

Tim, I don't know if you wanted to add some color on some of the initiatives that we've got in other parts of the bank.

Yeah, we continue to invest in our non-interest income, you know, businesses, you know, I think about specialty banking. I think about corporate banking, you know, we've made investments, FX, FinTech, syndications, wealth management, really across the board, either in people and or the platform, and are continuing to do that as we look at 27. So I think you'll continue to see investments in the businesses, and we feel good about where the pipelines are today and where we seem going short of, you know, the rate environment as it relates to mortgage.

We have for a really long time been good about driving expense out of the bank, in the back and middle office, and just kind of how we move things around. And we take those dollars and recycle them into revenue generation and some client facing technology. And so we've this is a path that we've been on for a heck 10 years, maybe more than that.

And I think what you're seeing in the efficiency ratio is really the result of the scale that we tacked on with with Bremmer and realizing, you know, those one time saves or not one time saves. Those expected saves dropping to the bottom line of the run rate, right? So I think that's what's allowed us to sort of drive efficiency ratio of some sub 50. We'll continue to work at it real hard. We work at it every year.

I would like to say we feel really good about what we're at from a profitability perspective. And, you know, to the extent that we get will help, you know, on the revenue side. There's possibility to be higher here. But, you know, I think we're leading most of our peer group with those kinds of numbers. We feel like this is a great spot to be in and run at.

And, you know, we're obviously working every day to continue to improve our overall profitability. But we won't let the, you know, we won't stop investing in our business to continue to have it grow. So that's just, you know, again, the tension we find ourselves in every single day is the ability to invest and maintain that high degree of operating efficiency and have long-term growth in our business. Thank you.

Good morning, Terry.

Welcome back, Terry. Thanks.

Morning. Thank you.

Terry, I could take the earn back question and then Tim will clean this up, you know, to be very quick. And very quick, I mean, like inside a year, year and a half, on the wealth side when we hire new wealth people, that can be a little bit extended because it's harder for them to move relationships. But the right commercial talent we have said for a long time pays for itself very, very quickly.

Yeah, on that 26, 19 of those bankers were met new seven replacements for the total of 26 new just to give you that breakdown. Yeah, you know, as far as expectations, you know, what I will tell you is we are very disciplined in who we are hiring. And we're looking to hire bankers that we know are top performers in markets that we know our story resonates very well. And I think if you've seen the expansion markets in our history and our track record of going into new markets, because we have that approach, we've been very successful. And I think we've been successful quickly. And I expect that to continue. You know, as we look at the pipelines that are already growing and building from the new bankers we've hired, we feel very good about them to be able to pay for themselves.

And then some, and when you think about the business they're bringing on that core C&I business that are coming with primacy and good core operating, not interest bearing deposits, that is sticky business that provides recurring revenues that helps build that talk line. And we feel very good about the trajectory of that growth as well as the bankers that we've hired and their ability to pay for themselves very quickly.

You know, I think we've done a really good job focusing in on quality over quantity. And that that quality though comes at a price. As Tim said, these are top performers in the market places. I think the also interesting fact is many of those folks are going to sit across from Tim and I and John and others right here at headquarters. You know, we're very hands-on in this process, both from a recruiting perspective and telling our story perspective, but making sure these are going to be really great fits for us from a cultural perspective. And I think that's helped us make sure that the people we hire stick around last long and are really productive right out of the gate.

And I'm not sure how other banks approach it, but we want to make sure we get the best of the best that come workforce.

And just building on that point, you know, the discipline we have, we are hiring bankers that for the most part, one of our leaders, usually me or one of my directs, have worked with them directly. So we know not just what they're producing, we know how they're producing it. And we know that types of clients that they're going after with primacy in mind and sustainable recurring revenue from a delivering the entire bank and a collaboration perspective as well. So we feel good about what they'll do, not just in C&I, but driving our wealth business and driving other areas of the bank based on client need.

Well, thank you all for having so much interest. This may be a record duration for a long time. High level of interest and detailed questions. Of course, we're going to be around all day to take any follow up questions. And Joel, thank you for all your hard work to make sure we had a successful call. Have a great day, everyone.