10-Q: Old National Bancorp Reports Strong Q3 Growth, Bremer Integration Boosts Assets

Old National Bancorp reported a significant increase in net income and assets for the third quarter of 2025, driven by the acquisition of Bremer Financial Corporation and organic growth.

Summary

• Net income applicable to common shareholders for Q3 2025 was $178.5 million, or $0.46 per diluted common share, an increase from $139.8 million, or $0.44 per diluted common share, in Q3 2024.
• Adjusted net income applicable to common shareholders for Q3 2025 was $231.3 million, or $0.59 per diluted common share, excluding merger-related charges.
• Total assets reached $71.2 billion at September 30, 2025, a $17.7 billion increase from $53.6 billion at December 31, 2024, primarily due to the Bremer acquisition.
• Total deposits increased by $14.2 billion to $55.0 billion at September 30, 2025, compared to $40.8 billion at December 31, 2024, reflecting Bremer deposits and organic growth.
• Total loans, excluding loans held-for-sale, grew by $11.7 billion to $48.0 billion at September 30, 2025, from $36.3 billion at December 31, 2024, largely due to the Bremer acquisition and commercial loan production.
• Net interest income increased by 46.7% to $574.6 million in Q3 2025 from $391.7 million in Q3 2024, driven by the full quarter impact of Bremer and higher asset yields.
• Noninterest expense rose by 63.7% to $445.7 million in Q3 2025, including $69.3 million in merger-related expenses.
• The allowance for credit losses on loans increased to $572.2 million at September 30, 2025, from $392.5 million at December 31, 2024, partly due to $103.5 million for acquired PCD loans and $69.1 million for non-PCD Bremer loans.
• Nonaccrual loans increased to $590.8 million at September 30, 2025, from $448.0 million at December 31, 2024, with $136.1 million acquired from Bremer.
• The company's capital ratios remain strong, exceeding regulatory minimums, with a Tier 1 common equity ratio of 11.02% and a leverage ratio of 8.72% at September 30, 2025.

Sentiment

Score: 8

Explanation: The filing indicates strong financial performance with significant growth in net interest income, assets, loans, and deposits, largely driven by a successful strategic acquisition. While noninterest expenses increased due to merger costs and asset quality metrics show some deterioration, the adjusted earnings and robust capital position suggest a positive outlook and effective integration efforts.

Positives

• Net income applicable to common shareholders increased by 27.7% to $178.5 million in Q3 2025 compared to Q3 2024.
• Adjusted diluted EPS for Q3 2025 was $0.59, up from $0.53 in Q2 2025, indicating strong operational performance excluding one-time items.
• Net interest income surged by 46.7% in Q3 2025 year-over-year, primarily due to the Bremer acquisition and higher asset yields.
• Total assets grew by 32.8% to $71.2 billion, significantly expanding the company's scale and market presence.
• Total deposits increased by 34.7% to $55.0 billion, reflecting successful integration of Bremer and organic growth in funding.
• Total loans increased by 32.2% to $48.0 billion, with strong commercial and commercial real estate loan growth.
• Net interest margin (taxable equivalent) improved to 3.64% in Q3 2025 from 3.32% in Q3 2024.
• The provision for credit losses decreased by 6.2% in Q3 2025 compared to Q3 2024, indicating improved credit loss expectations for the quarter.
• Capital ratios remain strong, with Tier 1 common equity at 11.02% and total capital at 12.78%, both above regulatory minimums, and Old National Bank is well-capitalized.
• Accumulated other comprehensive income (loss) improved from $(746.0) million at December 31, 2024, to $(524.4) million at September 30, 2025, reflecting a reduction in unrealized losses.

Negatives

• Noninterest expense increased significantly by 63.7% in Q3 2025 year-over-year, largely due to merger-related and integration costs.
• The efficiency ratio deteriorated to 58.84% in Q3 2025 from 53.83% in Q3 2024, indicating higher costs relative to revenue.
• Return on average assets slightly decreased to 1.03% in Q3 2025 from 1.08% in Q3 2024.
• Return on average common equity slightly decreased to 9.01% in Q3 2025 from 9.40% in Q3 2024.
• Net charge-offs to average loans increased to 0.25% in Q3 2025 from 0.19% in Q3 2024.
• Total criticized and classified assets increased by $909.1 million to $3.4 billion at September 30, 2025, primarily due to the Bremer acquisition.
• Nonaccrual loans increased by $142.8 million to $590.8 million at September 30, 2025, with $136.1 million acquired from Bremer.

Risks

• Competition within the banking industry.
• Impact of government legislation, regulations, and policies, including trade and tariff policies.
• Unanticipated changes in liquidity position, including access to funding sources.
• Changes in economic conditions and economic/business uncertainty, potentially impacting credit quality, loan generation, and deposit gathering.
• Inflation and governmental responses to inflation, such as increasing interest rates.
• Market, economic, operational, liquidity, credit, and interest rate risks inherent in the business.
• Ability to successfully manage credit risk and the sufficiency of the allowance for credit losses.
• Failure to realize expected cost savings, synergies, and other financial benefits from the Bremer merger within expected timeframes, or higher-than-expected integration costs.
• Potential adverse reactions or changes to business or employee relationships resulting from the merger.
• Impact of purchase accounting with respect to the merger, or changes in assumptions for fair value and credit marks of acquired assets and liabilities.
• Potential impact of future business combinations on performance and financial condition, including integration challenges and diversion of management attention.
• Failure or circumvention of internal controls.
• Operational risks or risk management failures by the company or third parties, including data processing, information systems, cybersecurity, technological changes, vendor issues, business interruption, and fraud.
• Significant changes in accounting, tax, or regulatory practices or requirements.
• New legal obligations or liabilities.
• Disruptive technologies in payment systems and other traditional banking services.
• Failure or disruption of information systems, computer hacking, and other cybersecurity threats.
• Effects of climate change on the company and its customers, borrowers, or service providers.
• Impacts of pandemics, epidemics, and other infectious disease outbreaks.

Future Outlook

The company's Q3 2025 results reflect organic growth in total loans, deposits, and net interest income, the full quarter impact of Bremer operations, disciplined expense management, and strong credit quality and capital. Management actively takes balance sheet restructuring, derivative, and deposit pricing actions to help mitigate interest rate risk. The company does not undertake an obligation to update forward-looking statements to reflect events or conditions after the report date.

Management Comments

• Our results for the third quarter of 2025 reflect organic growth in total loans, deposits, and net interest income, the full quarter impact of Bremer operations, disciplined expense management, and strong credit quality and capital.
• Management actively takes balance sheet restructuring, derivative, and deposit pricing actions to help mitigate interest rate risk.
• Management believes the Company has the ability to generate and obtain adequate amounts of liquidity to meet its requirements in the short-term and the long-term.

Industry Context

Old National Bancorp is the sixth largest commercial bank headquartered in the Midwest by asset size and ranks among the top 25 banking companies headquartered in the United States. The company's performance, particularly its growth in assets, loans, and deposits, reflects a strategic expansion through the Bremer acquisition, positioning it for increased scale. The banking industry continues to navigate fluctuating interest rates, with the Federal Reserve's target range at 4.00%-4.25% at September 30, 2025, down from 4.83% a year prior, influencing net interest margins and funding costs across the sector.

Comparison to Industry Standards

• Old National Bank's investor commercial real estate loans as a percentage of its Tier 1 capital plus the allowance for credit losses attributable to loans and leases remained below the regulatory guideline limit of 300% at 253% as of September 30, 2025, indicating prudent risk management compared to regulatory benchmarks.
• The company's capital ratios (Tier 1 common equity 11.02%, Tier 1 11.49%, Total 12.78%, Leverage 8.72%) all exceeded the regulatory minimums, and Old National Bank met the regulatory definition of 'well-capitalized,' demonstrating strong capital adequacy relative to industry standards.

Corporate Governance

Legal Proceedings

• Certain legal proceedings are pending against the Company and its subsidiaries in the ordinary course of business. Management does not expect any potential liabilities from these proceedings to have a material adverse effect on the Company's business, financial position, or results of operations.

Stakeholder Impact

• Shareholders: Benefited from increased net income and diluted EPS, as well as a stable cash dividend of $0.14 per common share. The stock repurchase program also indicates management's commitment to returning value.
• Employees: Salaries and employee benefits increased, reflecting merit and performance-driven incentive accruals. The freezing of benefits for the Bremer pension plan impacts former Bremer employees.
• Customers: Expanded service offerings and geographic reach due to the Bremer acquisition, particularly in the Midwest and Southeast regions, providing a wider range of commercial and consumer banking services.
• Creditors: The company's strong capital position and ability to generate adequate liquidity ensure its capacity to meet debt obligations.
• Acquired Entities (Bremer, CapStar): Integration efforts are ongoing, with associated merger-related costs and system conversions impacting operations.

Next Steps

• Additional merger-related and integration costs for the Bremer and CapStar acquisitions will be expensed in future periods as incurred.
• The company will continue to evaluate the longer-term impact of the One Big Beautiful Bill Act (OBBBA) signed into law on July 4, 2025.
• Management will continue to monitor interest rate risk using various models and techniques, including adjusting balance sheet mix, altering interest rate characteristics of assets and liabilities, changing product pricing strategies, modifying investment securities portfolio characteristics, and using derivative financial instruments.
• The company has remaining authorization to repurchase up to $175.0 million of its outstanding Common Stock through February 28, 2026, under its Board-approved stock repurchase program.

Key Dates

Recommendation

Old National Bancorp's Q3 2025 results demonstrate robust growth driven by the successful integration of Bremer Financial Corporation, significantly expanding its asset base, loan portfolio, and deposit funding. Despite increased merger-related expenses, adjusted earnings per share show strong underlying operational performance. The company maintains solid capital ratios, exceeding regulatory minimums, and has a clear strategy for managing interest rate risk. The strategic expansion, coupled with organic growth in key financial metrics and a commitment to shareholder returns through dividends and share repurchases, positions ONB favorably for continued value creation in the banking sector. The positive outlook on liquidity and effective risk management further supports a strong buy recommendation for long-term investors.

Keywords

Banking, Financial Services, SEC Filing, 10-Q, Old National Bancorp, ONB, Bremer Financial Corporation, Acquisition, Merger, Net Interest Income, Deposits, Loans, Credit Quality, Capital Ratios, Earnings, Financial Performance, Regional Bank, Midwest Banking, Southeast Banking