8-K: Old National Bancorp Announces Q4 2024 Results and Strategic Outlook, Including Bremer Financial Merger

Old National Bancorp (ONB) reports its Q4 2024 financial results, highlighting key metrics and providing an outlook that includes the pending merger with Bremer Financial Corporation.

Summary

• Old National Bancorp's primary strategic objective is to be a top quartile performing basic bank.
• The company reported a market capitalization of $7,754 million as of February 7, 2025.
• The dividend yield is 2.3%.
• The last twelve months average daily volume was 2,303,716.
• Total assets were $53,552 million, and wealth assets under management were $30,420 million.
• The cost of total deposits was 208 bps, and the loan-to-deposit ratio was 89%.
• The efficiency ratio was 54.4% as reported and 51.8% adjusted.
• Net charge-offs to average loans, excluding purchased credit deteriorated (PCD) loans, were 0.17%.
• 30-89 day delinquent loans were 0.26%, and non-performing loans to total loans were 1.23%.
• Tangible common equity to tangible assets was 7.4%.
• Return on average tangible common equity (ROATCE) was 16.4% as reported and 17.0% adjusted.
• The loan portfolio consists of CRE non-owner occupied (33%), CRE owner occupied (12%), C&I (28%), residential real estate (19%), and consumer (8%).
• The company's tangible book value (TBV) per share has grown from $7.62 in 2015 to $11.91 in 2024.
• The company anticipates two Fed rate cuts in 2025, each of 25 bps in May and October.
• The company expects a full-year 2025 net interest income between $1,960 million and $1,990 million, assuming the Bremer merger closes on July 1, 2025.
• The company expects a full-year 2025 noninterest income between $415 million and $435 million.
• The company expects a full-year 2025 noninterest expense between $1,260 million and $1,280 million.
• The company expects a full-year 2025 net charge-off ratio between 0.20% and 0.30%.
• The company expects a full-year 2025 provision for credit losses between $115 million and $125 million, excluding the Bremer day 1 non-PCD double count.
• The company expects a GAAP income tax rate of approximately 22% and an adjusted FTE income tax rate of approximately 24-25% for 2025.
• The company reported earnings per share (EPS) of $0.47 and adjusted EPS of $0.49 for Q4 2024.
• The company's total deposit growth was (0.2)% annualized, and the total cost of deposits was 208 bps.
• The company's total loan growth was (1.6)% annualized.
• The company's CET1 capital to RWA was 11.38%.

Sentiment

Score: 7

Explanation: The document presents a generally positive outlook, highlighting strong financial metrics and strategic initiatives. However, it also acknowledges potential risks and uncertainties, leading to a balanced sentiment score.

Positives

• The company has a strong capital position, validated by internal stress testing.
• The company's TBV is up 8% year-over-year.
• The company has a granular, long-tenured deposit base with insured deposits greater than 70% of total deposits.
• The company has a low-cost deposit franchise.
• The company's top 20 deposit clients represent approximately 7% of total deposits, with a weighted average tenure greater than 28 years and approximately 70% collateralized or insured.
• The company has a diversified loan portfolio.
• The company has a strong credit culture.
• The company has a strong retained earnings drive capital.
• The company has a strong retained earnings drive capital.
• The company has a strong retained earnings drive capital.

Negatives

• Total loan growth was (1.6)% annualized in Q4 2024.
• The company's NIM decreased modestly by 2 bps compared to 3Q24.
• The company's NIM decreased modestly by 2 bps compared to 3Q24.

Risks

• The company's forward-looking statements are subject to risks and uncertainties, including competition, government legislation, and economic conditions.
• The company's ability to execute its business plan is subject to risks and uncertainties.
• The company's liquidity position is subject to unanticipated changes.
• The company's credit quality trends and ability to generate loans and gather deposits are subject to economic conditions and uncertainty.
• The company's business is subject to market, economic, operational, liquidity, credit, and interest rate risks.
• The company's ability to successfully manage its credit risk and the sufficiency of its allowance for credit losses are subject to risks and uncertainties.
• The company's merger with Bremer is subject to regulatory approvals and other conditions, and the merger may not close when expected or at all.
• The company's expected cost savings, synergies, and other financial benefits from the merger may not be realized within the expected time frames.
• The company's business and employee relationships may be adversely affected by the merger.
• The company's performance and financial condition may be affected by future business combinations.
• The company's internal controls are subject to failure or circumvention.
• The company's business is subject to operational risks and risk management failures by the company or critical third parties.
• The company's business is subject to significant changes in accounting, tax, or regulatory practices or requirements.
• The company's business is subject to new legal obligations or liabilities.
• The company's business is subject to disruptive technologies in payment systems and other services traditionally provided by banks.
• The company's information systems are subject to failure or disruption.
• The company's business is subject to computer hacking and other cybersecurity threats.
• The company's business is subject to the effects of climate change.
• The company's business is subject to political and economic uncertainty and instability.
• The company's business is subject to the impacts of pandemics, epidemics, and other infectious disease outbreaks.

Future Outlook

Old National Bancorp anticipates continued growth and stability, projecting net interest income between $1,960 million and $1,990 million for full-year 2025, assuming the Bremer merger closes on July 1, 2025. The company also provides guidance for noninterest income, noninterest expense, net charge-off ratio, provision for credit losses, and income tax rates.

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 Bancorp is the 6th largest commercial bank headquartered in the Midwest and a top 30 banking company based in the U.S. by assets. The pending partnership with Bremer Financial Corporation will bolster ONB to #3 Mkt Share in Minneapolis.

Comparison to Industry Standards

• Old National Bancorp compares its performance to a peer group of like-size, publicly-traded financial services companies serving comparable demographics with comparable services.
• The peer group includes companies such as Associated Banc-Corp, BOK Financial Corporation, Cadence Bancorporation, and others.
• ONB's 3 and 15-year cumulative NCOs / Avg. Loans are compared to the peer average.
• ONB's Risk-Weighted Assets / Total Assets are compared to the peer average.
• ONB's ROA, ROATCE, and E estimated FY2024 Payout Ratio are compared to the peer average.
• ONB's 30+ Day Delinquency, Net Charge-Offs, and Non-Performing Loans are compared to the peer average.
• ONB's Brokered Deposits/ Total Deposits are compared to the peer average.

Corporate Governance

Stakeholder Impact

• Shareholders: The company's strong financial performance and strategic initiatives are expected to drive long-term shareholder value.
• Employees: The company is committed to being a highly respected, highly valued employer that continually empowers its team members to grow, develop, and succeed.
• Customers: The company is committed to being a primary, trusted partner to its clients in the communities it serves.
• Communities: The company is committed to strengthening its communities through corporate social responsibility initiatives.

Next Steps

• The company expects the Bremer merger to close on July 1, 2025.
• The company will continue to execute its business plan and manage its credit risk.
• The company will continue to monitor economic conditions and regulatory developments.

Key Dates