8-K: Old National Bancorp Reports Strong Q3 2025 Performance

Old National Bancorp announces robust third-quarter 2025 results, highlighted by strong profitability, capital generation, and successful integration of Bremer Bank.

Summary

• Successfully completed the core systems conversion for Bremer Bank, with teams integrated and performing well.
• Reported strong 3Q25 performance with an Adjusted ROATCE of 20.1%, Adjusted ROAA of 1.32%, and an Adjusted Efficiency Ratio of 48.1%.
• Demonstrated resilient credit quality with a 6% decline in criticized and classified loans and quarter-over-quarter reductions in non-accrual, 30+ day delinquency loans, and provision expense.
• The high return profile is driving significant capital generation, enabling additional capital returns, including the repurchase of 1.1 million shares of common stock.
• Prioritizing organic growth and capital growth over mergers and acquisitions (M&A).
• Common Equity Tier 1 (CET1) capital increased by 28 basis points, reaching 11.02%.
• Total loan growth, excluding Bremer, was 3.1% annualized, while core deposits grew 5.8% annualized and total deposits grew 4.8% annualized.
• Maintained low total deposit costs of 197 basis points.
• Tangible Book Value (TBV) per share increased 17% annualized quarter-over-quarter and 10% year-over-year to $13.15.

Sentiment

Score: 8

Explanation: The filing presents strong financial performance across key metrics, including profitability, capital adequacy, and credit quality. The successful integration of Bremer Bank and strategic focus on organic growth and capital returns are significant positives. While merger-related charges increased, the overall outlook and peer comparisons are highly favorable, indicating robust health and strategic execution.

Positives

• Adjusted Return on Average Tangible Common Equity (ROATCE) of 20.1% in 3Q25, indicating strong profitability.
• Adjusted Return on Average Assets (ROAA) of 1.32% in 3Q25, reflecting efficient asset utilization.
• Adjusted Efficiency Ratio of 48.1% in 3Q25, demonstrating operational efficiency and cost management.
• Common Equity Tier 1 (CET1) capital to Risk-Weighted Assets (RWA) increased to 11.02%, exceeding expectations and providing ample capital.
• Tangible Book Value (TBV) per share grew 17% annualized quarter-over-quarter and 10% year-over-year to $13.15, enhancing shareholder value.
• Successful completion of the core systems conversion for Bremer Bank, indicating smooth and effective integration.
• Strong core deposit growth of 5.8% annualized and total deposit growth of 4.8% annualized, highlighting a robust funding base.
• Low total deposit costs of 197 bps, with 75% of core deposits having tenure greater than 5 years, indicating deposit stability.
• Significant reduction in criticized and classified loans by $223 million (6%), improving asset quality.
• Quarter-over-quarter reduction in non-accrual loans, 30+ day delinquency loans, and provision expense, signaling improving credit trends.
• Repurchased 1.1 million shares of common stock, demonstrating confidence in valuation and returning capital to shareholders.
• Granular and diversified loan portfolio with low net charge-offs of 17 bps (excluding PCD loans), reflecting strong credit culture.
• Maintaining a neutral rate risk position provides Net Interest Income (NII) stability amidst interest rate fluctuations.
• Peer-leading profitability and efficiency metrics compared to the defined peer group, showcasing competitive strength.
• Strong client satisfaction scores (NPS = 50) and brand trust, indicating strong customer relationships.

Negatives

• Merger-related and other charges increased significantly to $69 million in 3Q25 from $41 million in 2Q25 and $10 million in 3Q24, impacting reported net income.
• Net charge-offs (NCOs) were 25 bps, although lower at 17 bps excluding purchased credit deteriorated (PCD) loans.
• Mortgage production decreased to $537 million in 3Q25 compared to $594 million for 2Q25.
• Total cost of deposits increased to 197 bps in 3Q25 from 193 bps in 2Q25 and 191 bps in 1Q25.

Risks

• Competition within the banking industry.
• Government legislation, regulations, and policies, including trade and tariff policies.
• The ability of Old National to execute its business plan effectively.
• Unanticipated changes in liquidity position, including access to sources of liquidity and capital.
• Changes in economic conditions and economic and business uncertainty, which could materially impact credit quality trends and the ability to generate loans and gather deposits.
• Inflation and governmental responses to inflation, including increasing interest rates.
• Market, economic, operational, liquidity, credit, and interest rate risks associated with the business.
• The ability to successfully manage credit risk and the sufficiency of the allowance for credit losses.
• Expected cost savings, synergies, and other financial benefits from the merger with Bremer Financial Corporation not being realized within expected time frames, or costs/difficulties relating to integration being greater than expected.
• Potential adverse reactions or changes to business or employee relationships, including those resulting from the merger.
• The impact of purchase accounting with respect to the merger, or any change in the assumptions used regarding the assets acquired and liabilities assumed to determine their fair value and credit marks.
• The potential impact of future business combinations on performance and financial condition, including integration challenges, success of revenue-generating and cost reduction initiatives, and diversion of management's attention.
• Failure or circumvention of internal controls.
• Operational risks or risk management failures by the company or critical third parties, including data processing, information systems, cybersecurity, technological changes, vendor issues, business interruption, and fraud risks.
• Significant changes in accounting, tax, or regulatory practices or requirements.
• New legal obligations or liabilities.
• Disruptive technologies in payment systems and other services traditionally provided by banks.
• Failure or disruption of information systems.
• Computer hacking and other cybersecurity threats.
• The effects of climate change on Old National and its customers, borrowers, or service providers.
• The impacts of pandemics, epidemics, and other infectious disease outbreaks.
• Prolonged uncertainty surrounding global economic and trade activity may impact the outlook.

Future Outlook

For 4Q25, the company expects end-of-period loans (including held-for-sale) to be up 3%-5% annualized, net interest income (FTE basis) around $585 million, noninterest income around $120 million, noninterest expense around $370 million, net charge-off ratio between 0.25%-0.29%, and provision for credit losses between $28-$33 million. For Full-Year 2025, net interest income (FTE basis) is expected to be $2,080-$2,090 million, noninterest income $450-$460 million, noninterest expense $1,345-$1,355 million, and provision for credit losses $115-$125 million (excluding Bremer day 1 non-PCD double count). The company maintains a neutral rate risk position for NII stability and anticipates two more Fed rate cuts in 2025 (October, December 25bps each).

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.
• Successfully completed the core systems conversion for Bremer Bank. Teams are integrated and performing well together in new and existing markets.
• High return profile should drive significant capital generation and opened the door for additional capital returns.
• Prioritizing organic growth and capital growth over M&A.
• Maintaining neutral rate risk position provides NII stability if more or fewer rate cuts occur.

Industry Context

Old National Bancorp positions itself as the 6th largest commercial bank headquartered in the Midwest and a top 25 banking company in the U.S. by assets. It emphasizes its granular and diversified loan portfolio, strong credit culture, quality low-cost deposit base, and proven acquisition strategy. The company highlights its ability to build capital faster than peers and achieve peer-leading profitability and efficiency, suggesting a strong competitive standing within the regional banking sector. The successful integration of Bremer Bank further solidifies its market position and operational scale.

Comparison to Industry Standards

• Old National's 3Q25 Adjusted ROAA of 1.32% and Adjusted ROATCE of 20.1% are described as 'top quartile' and 'peer leading' compared to its defined peer group (e.g., Associated Banc-Corp, Comerica, F.N.B. Corporation).
• Its Adjusted Efficiency Ratio of 48.1% is presented as peer-leading, outperforming many peers in 2022, 2023, and 2024.
• The company's 3-year cumulative net charge-offs to average loans (0.25%) and 15-year (1.89%) are significantly lower than the peer average (0.45% and 5.69% respectively), indicating superior credit quality.
• Risk-Weighted Assets / Total Assets at 74% is lower than the peer average of 87%, suggesting a less risky balance sheet composition.
• Old National's equity retention rate (2026E ROATCE x (12026E dividend payout ratio)) of 16.6% is higher than most peers, indicating faster capital building.
• Core deposit tenure shows ~75% of deposits have tenure >5 years, indicating a stable funding base compared to general industry trends.
• Brokered Deposits/Total Deposits at 5.8% is lower than the peer average of 8.5%, indicating less reliance on potentially more volatile funding sources.
• Average core account balance of $16k is significantly lower than the peer average of $1.1mm for accounts >$250k, suggesting a more granular and stable deposit base.

Management Changes

Corporate Governance

Stakeholder Impact

• Shareholders: Positive impact due to strong financial performance, increased capital returns (share repurchases), TBV per share growth, and peer-leading profitability.
• Employees: Teams are integrated and performing well together after the Bremer acquisition, suggesting stability and successful integration.
• Customers: Commitment to being a primary, trusted partner to clients and strong client satisfaction scores (NPS = 50).
• Communities: Commitment to strengthening communities, as highlighted in the 2024 Community Action Report.

Next Steps

• Continue prioritizing organic growth and capital growth over M&A.
• Expect Accumulated Other Comprehensive Income (AOCI) to recover ~20% by year-end 2026.
• Anticipate two more Fed rate cuts in 2025 (October, December 25bps each).

Key Dates

Recommendation

The filing demonstrates exceptional financial health and strategic execution. Old National Bancorp reported top-quartile profitability (20.1% adjusted ROATCE, 1.32% adjusted ROAA), strong capital generation (11.02% CET1), and superior credit quality with significantly lower net charge-offs compared to peers. The successful integration of Bremer Bank and the commitment to organic growth and capital returns (share repurchases) further bolster its investment appeal. The company's low-risk balance sheet, granular deposit base, and peer-leading efficiency metrics position it for continued outperformance in the regional banking sector. The positive outlook and proactive capital management make it a compelling 'strong buy' for long-term investors.

Keywords

Banking, Financial Services, Regional Bank, SEC Filing, 8-K, Investor Presentation, Old National Bancorp, ONB, Earnings, Financial Results, Q3 2025, Credit Quality, Deposits, Loans, Capital, Merger Integration, Share Repurchase, Corporate Governance