8-K: Old National Bancorp Announces First Quarter 2025 Results and Strategic Updates

Old National Bancorp reports solid first-quarter 2025 results, highlighting deposit growth, disciplined expense management, and a strong capital position, while also providing updates on the Bremer Financial Corporation merger and future outlook.

Summary

• Old National Bancorp (ONB) reported its first-quarter 2025 financial results on May 15, 2025.
• The company achieved annualized total deposit growth of 2.1% and core deposit growth of 1.7%.
• ONB's efficiency ratio was reported at 53.7%, with an adjusted efficiency ratio of 51.8%.
• The net charge-offs (NCOs) were 0.24%, or 0.21% excluding purchased credit deteriorated (PCD) loans.
• Tangible common book value (TBV) increased by 5% compared to the previous quarter and 13% year-over-year, reaching $12.54.
• The company's return on average tangible common equity (ROATCE) was 15.0%, with an adjusted ROATCE of 15.5%.
• The merger with Bremer Financial Corporation closed on May 1, 2025, and is expected to contribute to future earnings growth.
• ONB anticipates net interest income (NII) of approximately $517 million for the second quarter of 2025 and between $2.055 billion and $2.090 billion for the full year.
• Noninterest income is projected to be around $105 million for the second quarter and between $430 million and $450 million for the full year.
• Noninterest expense is expected to be about $345 million for the second quarter and between $1.340 billion and $1.360 billion for the full year.
• The net charge-off ratio is projected to be between 0.23% and 0.27% for the second quarter and between 0.20% and 0.30% for the full year.
• The provision for credit losses is estimated to be between $27 million and $32 million for the second quarter and between $115 million and $125 million for the full year, excluding the Bremer day 1 non-PCD double count.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results, successful merger completion, and strategic initiatives for future growth. While acknowledging potential risks, the overall tone is optimistic and confident.

Positives

• Strong deposit growth with a granular, peer-leading deposit franchise.
• Disciplined expense management, reflected in an efficiency ratio of 53.7% (51.8% adjusted).
• Solid credit quality metrics, with low net charge-offs.
• Robust capital position, validated by internal stress testing.
• Successful closure of the Bremer Financial Corporation merger, expected to drive earnings growth.
• High percentage of insured deposits (>70% of total deposits).
• Long-tenured deposit base, indicating customer loyalty.

Negatives

• Net interest income decreased slightly due to lower accretion, fewer days in the quarter, and earning asset mix.
• Net interest margin decreased modestly by 3 bps compared to the previous quarter.
• Mortgage activity decreased compared to the previous quarter, with production at $325 million versus $415 million.

Risks

• Uncertainty surrounding global economic and trade activity may impact the outlook.
• Variability in interest rates may affect net interest income, including acquisition accounting adjustments.
• Loan growth for the full year 2025 may be more subdued if uncertainty persists.
• The company acknowledges risks related to the integration of Bremer's operations, including potential disruptions and adverse reactions from customers or employees.
• The company's forward-looking statements are subject to various risks and uncertainties, including competition, government regulations, and operational risks.

Future Outlook

Old National expects continued growth and stability, projecting net interest income between $2.055 billion and $2.090 billion for full-year 2025, and anticipates the Bremer merger will contribute to earnings growth. The company is positioned to navigate uncertainty with a strong capital base and larger balance sheet.

Management Comments

• Old National's primary strategic objective is to be a top quartile performing basic bank that is a primary, trusted partner to our clients in the communities we serve, and a highly respected, highly valued employer that continually empowers our team members to grow, develop and succeed.

Industry Context

Old National is the 6th largest commercial bank headquartered in the Midwest and a top 30 banking company in the U.S. by assets. The merger with Bremer Financial Corporation bolsters ONB to #3 Market Share in Minneapolis. The company operates in a competitive landscape, facing challenges from both traditional banks and emerging fintech companies. The company's focus on maintaining a neutral rate risk position is a common strategy among banks to mitigate the impact of interest rate fluctuations.

Comparison to Industry Standards

• Old National's performance is benchmarked against a peer group of publicly-traded financial services companies with comparable demographics and services.
• The company's ROATCE of 15.5% places it in the top quartile compared to its peers.
• ONB's efficiency ratio of 51.8% is also competitive within the industry.
• The company's net charge-offs are low compared to its peers, indicating a strong credit culture.
• ONB's capital ratios are strong compared to its peers, providing a buffer against potential losses.
• The company's deposit costs are lower than the peer average, reflecting a valuable deposit franchise.
• Compared to the KRX (KBW Nasdaq Regional Bank Index), Old National has shown strong TBV per share growth.

Stakeholder Impact

• Shareholders can expect continued focus on long-term shareholder value through earnings growth and capital management.
• Employees will benefit from a highly respected and valued employer that empowers team members to grow and develop.
• Customers will experience a primary, trusted partnership with a top-performing bank.
• Communities will benefit from Old National's commitment to strengthening the areas it serves.

Next Steps

• Continue integrating Bremer Financial Corporation into Old National's operations.
• Focus on maintaining a neutral rate risk position to navigate potential Fed rate actions.
• Scale CRE loan sale to balance sheet needs post close.
• Monitor and manage credit quality to maintain low net charge-offs.
• Continue to invest in team members and strengthen communities.

Key Dates

Keywords

Old National Bancorp, financial results, investment thesis, Bremer Financial Corporation, merger, deposits, loans, net interest income, efficiency ratio, capital, ROATCE