8-K: Old National Bancorp Reports Strong Q4 2025 Performance

Old National Bancorp announced robust fourth-quarter 2025 results, showcasing significant loan growth, improved profitability, and strong capital and liquidity positions.

Summary

• Reported Q4 2025 adjusted earnings per share (EPS) of $0.62 and adjusted net income of $241 million.
• Achieved an adjusted return on average assets (ROAA) of 1.37% and an adjusted return on average tangible common equity (ROATCE) of 19.9%.
• Recorded a record adjusted efficiency ratio of 46.0% for the quarter.
• Total loans grew by $768.8 million, representing a 6.4% annualized increase.
• Total deposits increased by 0.6% annualized, with total deposit costs decreasing by 17 basis points to 180 bps.
• Net interest margin (NIM) on a fully taxable equivalent (FTE) basis was 3.65%, up 1 basis point from the prior quarter.
• Tangible common book value (TBV) per share rose to $13.71, an annualized increase of 17% compared to Q3 2025.
• Common Equity Tier 1 (CET1) capital ratio stood at 11.1%, exceeding expectations set at the Bremer announcement.
• Criticized and classified loans declined by 8%, and net charge-offs (NCOs) were 16 bps excluding purchased credit deteriorated (PCD) loans.
• Maintained an allowance for credit losses (ACL) of $605 million, or 1.24% of total loans, with a 100% weighting to Moody's S-2 scenario.
• Repurchased 2.2 million shares of common stock for the full year 2025.

Sentiment

Score: 8

Explanation: The filing presents strong financial performance across key metrics, including profitability, loan growth, deposit cost management, and capital ratios. The company exceeded guidance on several fronts and demonstrated robust credit quality. While there are unrealized losses in the investment portfolio and a negative credit rating outlook, the overall picture is very positive, indicating effective management and a solid strategic direction.

Positives

• Strong Q4 2025 adjusted profitability metrics: 1.37% Adj. ROAA, 19.9% Adj. ROATCE, and a record 46.0% Adj. Efficiency Ratio.
• Significant total loan growth of $768.8 million, or 6.4% annualized.
• Total deposit costs decreased by 17 bps to 180 bps, indicating effective cost management.
• Net interest margin (FTE) increased by 1 bp to 3.65% compared to the prior quarter.
• Robust capital position with CET1 of 11.1%, exceeding prior expectations.
• Tangible common book value (TBV) per share increased by 17% annualized from Q3 2025 to $13.71.
• Improved credit quality with an 8% decline in criticized and classified loans and low net charge-offs of 16 bps (excluding PCD loans).
• High-quality, low-cost deposit franchise with 26% noninterest-bearing (NIB) deposits and 75% of core deposits having tenure over 5 years.
• Ample liquidity with over $20 billion in available liquid funds and borrowing capacity, and no outstanding Federal Reserve discount window borrowings.
• Diversified loan portfolio with strong commercial production and pipeline growth.
• Conservative lending limits relative to legal limits.
• Share repurchase program: 2.2 million shares repurchased in 2025.

Negatives

• Investment portfolio has pre-tax unrealized losses: $676 million for available-for-sale (AFS) securities and $355 million for held-to-maturity (HTM) securities.
• Moody's credit rating outlook is Negative as of August 4, 2025.
• Net interest income sensitivity analysis shows potential for negative impact in a -200 bps and -100 bps rate environment (-3.4% and -0.9% respectively).

Risks

• Competition in the financial services industry.
• Government legislation, regulations, and policies, including trade and tariff policies.
• Ability to execute its business plan.
• Unanticipated changes in liquidity position, including access to sources of liquidity and capital.
• Changes in economic conditions and economic and business uncertainty, potentially impacting credit quality trends, loan generation, and deposit gathering.
• Inflation and governmental responses to inflation, including increasing interest rates.
• Market, economic, operational, liquidity, credit, and interest rate risks associated with the business.
• 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 (Bremer) not being realized within expected timeframes, or integration costs/difficulties being greater than expected.
• Potential adverse reactions or changes to business or employee relationships resulting from the Bremer merger.
• Impact of purchase accounting with respect to the Bremer merger, or changes in assumptions for fair value and credit marks of acquired assets and assumed liabilities.
• Potential impact of future business combinations on performance and financial condition, including integration challenges, success of revenue-generating/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 (e.g., data processing, information systems, cybersecurity, technological changes, vendor issues, business interruption, fraud).
• 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.
• 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 primary strategic objective is to be a top-quartile performing basic bank, a primary and trusted partner to clients, and a highly respected employer. Management is prioritizing organic growth and capital growth over mergers and acquisitions. The company's net interest income sensitivity analysis indicates a slight positive impact in a rising rate environment (+0.5% at forward base, +0.6% at +200 bps) and a negative impact in a falling rate environment (-3.4% at -200 bps, -0.9% at -100 bps) over a two-year cumulative horizon based on the December 31, 2025 forward curve.

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."
• Management performed in-line or better on all major line items relative to guidance for Q4 2025.
• Management believes that excluding certain notable items from financial metrics is useful in assessing underlying operational performance and enhances comparability.
• Management is prioritizing organic growth and capital growth over mergers and acquisitions.

Industry Context

Old National Bancorp operates in a competitive Midwest banking market, positioning itself as the 6th largest commercial bank headquartered in the region. Its focus on a granular and diversified loan portfolio, strong credit culture, and quality, low-cost deposit base aligns with strategies for regional banks aiming for stability and consistent performance. The company's strong profitability and capital generation metrics, such as adjusted ROAA (1.37%) and ROATCE (19.9%), appear competitive within its peer group, which includes other publicly-traded financial services companies of similar size and demographics. The emphasis on organic growth and capital management, rather than M&A, suggests a focus on internal strength and market penetration in its key operating areas like Chicago, Minneapolis, and Indianapolis, where it holds significant market share. The negative outlook from Moody's, however, indicates potential industry-wide or specific concerns that could impact its standing.

Comparison to Industry Standards

• Risk-Weighted Assets / Total Assets: Old National Bancorp's ratio of 74% is in the lower quartile compared to its peer group, which ranges from 76% to 94%, indicating a less risky asset composition.
• 3-Year Cumulative NCOs / Avg. Loans: Old National Bancorp's 0.25% is significantly lower than the peer average of 0.45%, suggesting superior credit quality management.
• 15-Year Cumulative NCOs / Avg. Loans: Old National Bancorp's 1.89% is substantially lower than the peer average of 5.69%, demonstrating a long-term track record of strong credit performance.
• Q3 ROAA: Old National Bancorp's Q4 adjusted ROAA of 1.37% is at the higher end of its peer group, which ranges from 0.9% to 1.5%.
• Q3 ROATCE: Old National Bancorp's Q4 adjusted ROATCE of 19.9% is at the very top end of its peer group, which ranges from 11.4% to 20.5%, indicating excellent efficiency in generating returns from tangible common equity.
• Q3 Equity Retention Rate: Old National Bancorp's Q4 equity retention rate of 15% is also at the higher end of its peer group, which ranges from 5% to 18%, suggesting strong capital retention for future growth.
• Bank CRE Concentration Ratio: Old National Bancorp's 259% is within the typical range for regional banks but warrants monitoring given regulatory scrutiny on CRE exposure.
• Bank C&D Concentration Ratio: Old National Bancorp's 43% is also within typical ranges.

Stakeholder Impact

• Shareholders: Positive impact due to strong profitability (Adj. ROAA 1.37%, Adj. ROATCE 19.9%), increased TBV per share (up 17% annualized), and share repurchases (2.2 million shares in 2025).
• Employees: Positive impact from the company being a "highly respected, highly valued employer that continually empowers our team members to grow, develop and succeed," as stated in the corporate strategy.
• Customers: Positive impact from the company's objective to be a "primary, trusted partner to our clients in the communities we serve," supported by a quality, low-cost deposit franchise and diversified loan offerings.
• Creditors: Mixed impact; strong capital ratios (CET1 11.1%, Total RBC 12.9%) and robust credit quality (low NCOs, well-reserved ACL) are positive, but the negative outlook from Moody's (as of Aug 2025) could be a concern.
• Suppliers: No direct impact mentioned, but a financially healthy company generally implies stable business relationships.

Next Steps

• Continue to execute the primary strategic objective of being a top quartile performing basic bank.
• Focus on organic growth and capital growth.
• Monitor and manage the $4.8 billion of CRE non-owner occupied loans maturing in the next 18 months, particularly the $0.8 billion currently at sub-4% interest rates.
• Consult further disclosures in SEC filings for related subjects.

Key Dates

Recommendation

The filing demonstrates exceptional financial health and operational efficiency. Key metrics like adjusted ROAA (1.37%), ROATCE (19.9%), and a record adjusted efficiency ratio (46.0%) are top-tier, especially when compared to industry peers. The company achieved significant loan growth (6.4% annualized) while simultaneously reducing deposit costs and maintaining robust capital levels (CET1 11.1%). Credit quality remains strong with declining criticized and classified loans and low net charge-offs. The increase in tangible common book value per share by 17% annualized, coupled with share repurchases, signals strong shareholder value creation. While the negative Moody's outlook is a consideration, the underlying operational performance and strategic focus on organic growth and capital management present a compelling investment case.

Keywords

Banking, Financial Services, Regional Bank, Commercial Banking, Deposits, Loans, Credit Quality, Capital Ratios, Net Interest Margin, Efficiency Ratio, Wealth Management, SEC Filing, Investor Presentation, Q4 Earnings, Old National Bancorp