Core Viewpoint - Old National Bancorp (ONB) is performing adequately, but there are signs of softening metrics indicating potential challenges ahead [1] Group 1: Company Performance - Old National Bancorp is considered an average operator in the banking sector [1] - The bank's operational metrics are showing some signs of weakness, which may affect future performance [1] Group 2: Investment Insights - The analysis is part of a broader coverage of regional bank Q4 earnings, indicating a focus on the financial health of banks in the current economic environment [1] - The investment group, BAD BEAT Investing, emphasizes a strategy of both long and short trades, aiming to educate investors on market dynamics and trading strategies [1]

Core Insights - The company successfully completed the systems conversion and integration related to its Bremer Bank partnership, marking it as one of its smoothest integrations ever [1] - Fourth-quarter GAAP earnings per share (EPS) were reported at $0.55, with adjusted EPS at $0.62, reflecting a 5% increase from the prior quarter and a 27% increase year over year [2] - The company achieved record profitability metrics in 2025, including adjusted EPS, net income, and efficiency ratio, driven by core deposit growth and disciplined credit management [3][4] Financial Performance - Adjusted EPS for Q4 was $0.62, up 27% year over year, with an adjusted return on average tangible common equity (ROTCE) of nearly 20% and an adjusted return on assets (ROA) of 1.37% [3][7] - The company reported total loan growth of 6.4% annualized from the prior quarter, with loan production up 25% [8] - Deposits increased by 0.6% annualized in the quarter, with non-interest-bearing deposits growing to 26% of core deposits [9] Outlook for 2026 - The company anticipates full-year loan growth of 4%–6% and a stable-to-improving net interest margin supported by repricing and securities cash flows [5][17] - Management plans to be more active in share buybacks while maintaining strong capital levels, with a CET1 ratio above 11% [6][16] - The company expects net interest income to increase, supported by fixed-asset repricing and continued growth [17] Cost Management and Efficiency - Adjusted non-interest expenses were reported at $365 million in Q4, with a record-low adjusted efficiency ratio of 46% [13] - The company realized about 28% of anticipated cost savings from the Bremer integration in Q4, with full realization expected in Q1 2026 [13] Credit Quality - Credit metrics improved, with net charge-offs at 27 basis points and criticized and classified loans declining by $278 million [15] - The allowance for credit losses was reported at 124 basis points of total loans, down two basis points from the prior quarter [15]

Financial Data and Key Metrics Changes - The company reported GAAP Q4 earnings per share of $0.55, with adjusted earnings per share of $0.62, reflecting a 5% increase quarter-over-quarter and a 27% increase year-over-year [8][10] - Adjusted return on average tangible common equity was nearly 20%, and adjusted return on assets was 1.37%, with an adjusted efficiency ratio of 46% [4][9] - Tangible book value per share grew by 15% year-over-year, despite the impact of merger-related charges and share repurchases [5][10] Business Line Data and Key Metrics Changes - Total loans grew 6.4% annualized from the previous quarter, with production up 25% across the commercial book [10] - Adjusted non-interest income was $126 million for the quarter, exceeding guidance, driven by strong performance in mortgage and capital markets [12][14] - Adjusted non-interest expenses were $365 million for the quarter, with a record low adjusted efficiency ratio of 46% [14] Market Data and Key Metrics Changes - Total deposits increased 0.6% annualized, with core deposits ex-brokered decreasing about 3% annualized due to seasonally lower public funds [11][12] - Non-interest-bearing deposits grew to 26% of core deposits from 24% in the prior quarter [11] - The cost of total deposits decreased by 17 basis points linked quarter, resulting in a spot rate of 1.68% on total deposits at December 31 [12] Company Strategy and Development Direction - The company aims to maintain a balance between organic capital growth and returning capital through share repurchases, focusing on maximizing shareholder value [7][21] - Investment in talent, technology, and client-facing capabilities is prioritized to ensure long-term success and scalability [7][21] - The company is not currently focused on M&A but is committed to organic growth and improving its existing operations [83] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the execution of their deposit strategy and anticipates meeting or exceeding industry growth in 2026 [20] - The outlook for loan growth is projected at 4%-6% for the full year 2026, supported by positive borrower sentiment and strategic hiring [18][81] - The company expects continued strong performance in fee income, particularly in mortgage and capital markets, due to a favorable rate backdrop [20][59] Other Important Information - The company completed the systems conversion and integration related to the Bremer Bank partnership, which is expected to yield cost savings fully realized in the first quarter of 2026 [5][15] - The capital position remains strong, with CET1 over 11% and tangible book value per share increasing [9][17] Q&A Session Summary Question: Margin projection for the year - Management indicated that the margin trajectory will be influenced by growth, the steepness of the yield curve, fixed asset repricing, and deposit beta management [24][26] Question: Share repurchase pace - The company plans to be more active in share repurchases in 2026 compared to the previous year, balancing capital needs for growth and returning capital to shareholders [27][28] Question: Credit and reserve coverage - Management noted improvements in criticized and classified loans, allowing for a slight reduction in reserve coverage ratio [36] Question: Deposit growth expectations - Management expects deposit growth to be stable as a percentage, with some seasonality in public funds [45] Question: Loan growth sources - Growth is expected from broad-based demand in C&I middle markets and commercial real estate, supported by strategic hiring [51][82] Question: Technology spending - The company is investing significantly in technology and innovation, ensuring that it is not underfunding new opportunities [77][78]

Financial Data and Key Metrics Changes - The company reported GAAP Q4 earnings per share of $0.55, with adjusted earnings per share of $0.62, reflecting a 5% increase quarter-over-quarter and a 27% increase year-over-year [8][9] - Adjusted return on average tangible common equity was nearly 20%, and adjusted return on assets was 1.37%, with an adjusted efficiency ratio of 46% [4][9] - Tangible book value per share grew by 15% year-over-year, despite one-time charges related to the Bremer partnership and share repurchases [5][10] Business Line Data and Key Metrics Changes - Total loans grew 6.4% annualized from the previous quarter, with production up 25% across the commercial book [10] - Non-interest income for the quarter was $126 million, exceeding guidance, driven by strong performance in mortgage and capital markets [13][56] - Adjusted non-interest expenses were $365 million for the quarter, with a record low adjusted efficiency ratio of 46% [14] Market Data and Key Metrics Changes - Total deposits increased 0.6% annualized, with core deposits (excluding brokered) decreasing about 3% annualized due to seasonally lower public funds [11][12] - Non-interest-bearing deposits grew to 26% of core deposits from 24% in the prior quarter [12] - The cost of total deposits decreased by 17 basis points quarter-over-quarter, resulting in a spot rate of 1.68% on total deposits as of December 31 [12][66] Company Strategy and Development Direction - The company aims to maintain a balance between organic capital growth and returning capital through share repurchases, focusing on maximizing shareholder value [7][21] - Investment in talent, technology, and client-facing capabilities is prioritized to ensure long-term success and scalability [7][21] - The company is not currently focused on M&A but is committed to organic growth and improving its existing operations [79] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the execution of their deposit strategy and anticipates meeting or exceeding industry growth in 2026 [19] - The outlook for loan growth is projected at 4%-6% for the full year, with positive sentiment from borrowers contributing to demand [19][78] - The company expects continued strong performance in fee income, particularly in mortgage and capital markets, supported by a favorable rate backdrop [19][56] Other Important Information - The company completed the systems conversion and integration related to the Bremer Bank partnership, which is expected to yield cost savings fully realized in the first quarter of 2026 [5][15] - The capital position remains strong, with CET1 over 11% and tangible book value per share growth despite merger-related charges [9][17] Q&A Session Summary Question: Margin projection for the year - Management indicated that the margin trajectory will be influenced by growth, steepness of the yield curve, fixed asset repricing, and deposit beta management [24][25] Question: Share repurchase pace - The company plans to be more active in share repurchases in 2026 compared to the previous year, balancing capital needs for growth and returning capital to shareholders [27][28] Question: Credit side and reserve coverage - Management noted improvements in criticized and classified loans, allowing for a slight reduction in reserve coverage ratio [35] Question: Loan growth drivers - The company sees broad-based growth from C&I middle markets and is focused on adding talent to drive further growth [48][78] Question: Technology spending - Management is confident in their technology investments and believes they are adequately funded to support innovation and growth [73][75]

Financial Data and Key Metrics Changes - Old National Bancorp reported GAAP Q4 earnings per share of $0.55, with adjusted earnings per share of $0.62, reflecting a 5% increase over the prior quarter and a 27% increase year over year [7][8] - The adjusted return on average tangible common equity was nearly 20%, and the adjusted efficiency ratio was 46% [4][8] - Tangible book value per share grew by 15% year over year, despite the impact of the Bremer partnership closing and associated one-time charges [5][9] Business Line Data and Key Metrics Changes - Total loans grew 6.4% annualized from the previous quarter, with production up 25% across the commercial book [9][10] - Adjusted non-interest income was $126 million for the quarter, exceeding guidance, driven by strong performance in mortgage and capital markets [12] - Adjusted non-interest expenses were $365 million for the quarter, with a record low adjusted efficiency ratio of 46% [13] Market Data and Key Metrics Changes - Total deposits increased 0.6% annualized, with core deposits excluding brokered deposits decreasing about 3% annualized [10][11] - Non-interest-bearing deposits grew to 26% of core deposits from 24% in the prior quarter [11] - The loan-to-deposit ratio is now 89%, indicating strong liquidity and capital [8][9] Company Strategy and Development Direction - The company aims to maintain a balance between organic capital growth and returning capital through share repurchases, focusing on maximizing shareholder value [6][19] - Investment in talent, technology, and client-facing capabilities is prioritized to ensure long-term success [6][20] - The company is focused on organic growth and enhancing its core fundamentals while being opportunistic in talent acquisition [20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the execution of their deposit strategy and anticipates meeting or exceeding industry growth in 2026 [18][19] - The outlook for loan growth is projected at 4%-6% for the full year 2026, supported by positive borrower sentiment and strategic talent acquisition [18][34] - Management remains cautious yet optimistic about the mortgage line of business, expecting a constructive rate backdrop [26] Other Important Information - The company successfully completed the systems conversion and integration related to the Bremer Bank partnership, which is expected to yield cost savings [5][19] - The capital position has been strengthened, with CET1 over 11% and tangible book value per share increasing [8][16] Q&A Session Summary Question: Margin projection for the year - Management indicated that the margin trajectory will be influenced by growth, the steepness of the yield curve, fixed asset repricing, and deposit beta management [21][22] Question: Share repurchase pace - The company plans to be more active in share repurchases in 2026 compared to the previous year, balancing capital for growth and returning capital to shareholders [22] Question: Loan growth and credit outlook - Management noted significant improvement in criticized and classified loans, allowing for a slight reduction in reserve coverage ratio [24][34] Question: Deposit growth expectations - The company expects stable deposit levels as a percentage, with some seasonality in public funds [30] Question: Wealth strategy and outlook - Management sees opportunities for growth in the wealth management sector, emphasizing the importance of talent acquisition [37]

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4th Quarter 2025 Financial Review The tax-equivalent adjustment to net interest income and net interest margin recognizes the income tax savings when comparing taxable and tax-exempt assets. Interest income and yields on tax-exempt securities and loans are presented using the current federal income tax rate of 21%. Management believes that it is standard practice in the banking industry to present net interest income and net interest margin on a fully tax-equivalent basis and that it may enhance comparabili ...

Financial Performance - Fourth quarter 2025 net income applicable to common shares was $212.6 million, with adjusted net income of $241.0 million, resulting in diluted EPS of $0.55 and adjusted EPS of $0.62[1][2][3] - Full-year 2025 net income applicable to common shares reached $653.1 million, with diluted EPS of $1.79 and adjusted EPS of $2.21[1] - Net income available to common shareholders for Q4 2025 was $212.589 million, compared to $178.533 million in Q3 2025 and $121.375 million in Q2 2025[27] - Net income for the three months ended December 31, 2025, was $216,623,000, up from $182,567,000 in the previous quarter, representing a 18.3% increase[29] - Net income applicable to common shares for the quarter was $212,589, an increase from $178,533, reflecting a growth of approximately 19%[42] - The company reported a net income of $653,122 for the twelve months ended December 31, 2025, compared to $523,053 for the previous year, representing a growth of about 24.8%[42] Loan and Deposit Growth - Total loans at period-end increased to $48.8 billion, reflecting a growth of $768.8 million or 6.4% annualized, driven by strong commercial loan production[2][9] - Total loans at the end of Q4 2025 reached $48.764 billion, up from $47.968 billion at the end of Q3 2025[27] - Total deposits at period-end were $55.1 billion, up 0.6% annualized, while core deposits decreased by 3.2% annualized[2][9] - Total deposits were $55.088 billion at the end of Q4 2025, slightly up from $55.006 billion in Q3 2025[27] - Demand deposits rose to $13,318,459 million, indicating strong customer confidence and liquidity[34] Interest Income and Margin - Net interest income on a fully taxable equivalent basis was $588.8 million, with a net interest margin of 3.65%, up 1 basis point[2][9] - Net interest income for Q4 2025 was $580.832 million, up from $574.609 million in Q3 2025, and significantly higher than $514.790 million in Q2 2025[27] - The company reported a net interest margin (NIM) of 3.60% for the latest quarter, slightly up from 3.59% in the previous quarter, and 3.49% for the twelve months, compared to 3.26% last year[43] Efficiency and Profitability Ratios - The efficiency ratio was reported at 51.6%, while the adjusted efficiency ratio improved to 46.0%[2][14] - Return on average tangible common equity (ROATCE) was 17.8%, with an adjusted ROATCE of 19.9%[2] - The efficiency ratio improved to 51.6% for the latest quarter, down from 58.8% in the previous quarter, and 55.1% for the twelve months, compared to 55.9% last year[45] - The company reported a return on average equity (ROAE) of 9.0% for the three months ended September 30, 2025, compared to 6.7% in the same period last year[46] Credit Quality and Loss Provisions - Provision for credit losses was $32.7 million, with net charge-offs of $32.1 million, representing 27 basis points of average loans[2][9] - The provision for credit losses in Q4 2025 was $32.745 million, compared to $26.738 million in Q3 2025 and $106.835 million in Q2 2025[27] - The allowance for credit losses on loans was $569,520 thousand, showing a slight decrease from $572,178 thousand in the previous quarter[30] - Nonaccrual loans amounted to $521,245 thousand, a decrease from $590,820 thousand in the prior quarter, showing a reduction of 11.7%[39] - The ratio of allowance for credit losses on loans to ending loans was 1.17%, down from 1.19% in the previous quarter[39] Operational Metrics - Total assets increased to $72.152 billion in Q4 2025 from $71.210 billion in Q3 2025[27] - The Tier 1 common equity ratio at the end of the period was 11.08%, slightly up from 11.02% in the previous quarter[28] - Full-time equivalent employees decreased to 4,971 from 5,243 in the previous quarter[28] - The company reported 346 banking centers, a decrease from 351 in the previous quarter[28] Adjustments and Charges - The company incurred notable pre-tax charges of $24.5 million related to merger expenses and a $15.9 million loss from the termination of a pension plan[4][14] - Adjustments for merger-related charges totaled $18,651, down from $52,780, indicating a reduction of about 64.7%[42] - The total adjustments for the quarter amounted to $28,385, compared to $52,775 in the previous quarter, a decrease of approximately 46.3%[42] Future Outlook - The company plans to continue focusing on market expansion and new product development to drive future growth[46]

Core Insights - Old National Bancorp reported strong fourth quarter earnings with net income applicable to common shares of $212.6 million and diluted EPS of $0.55, while adjusted net income was $241.0 million with adjusted EPS of $0.62 [1][4] Financial Performance - Full-year net income applicable to common shares reached $653.1 million, with diluted EPS of $1.79 and adjusted net income of $808.6 million, resulting in adjusted EPS of $2.21 [1][4] - The fourth quarter net interest income on a fully taxable equivalent basis was $588.8 million, with a net interest margin (NIM) of 3.65%, an increase of 1 basis point [2][11] - Pre-provision net revenue (PPNR) was reported at $312.3 million, with adjusted PPNR at $349.6 million, reflecting a 4% increase [2][11] Operational Highlights - Total deposits at the end of the period were $55.1 billion, up 0.6% annualized, while core deposits decreased by 3.2% annualized [2][11] - Total loans reached $48.8 billion, an increase of $768.8 million or 6.4% annualized, driven by strong commercial loan production [2][11] - The provision for credit losses was $32.7 million, with net charge-offs of $32.1 million, representing 27 basis points of average loans [2][11] Efficiency and Cost Management - Noninterest expense was $386.3 million, including $24.5 million in merger-related charges, while adjusted noninterest expense was $364.8 million [2][10] - The efficiency ratio was reported at 51.6%, with an adjusted efficiency ratio of 46.0%, indicating improved cost management [2][10] Credit Quality - The allowance for credit losses stood at $605.2 million, or 1.24% of total loans, with 30+ day delinquencies at 0.22% and nonaccrual loans at 1.07% of total loans [2][11] Capital Position - Preliminary regulatory Tier 1 common equity to risk-weighted assets was 11.08%, up 6 basis points, indicating a strong capital position [2][11]

Core Viewpoint - Old National Bancorp (ONB) is a well-established financial institution with a strong regional presence and a stable performance outlook, despite holding a "Hold" rating due to fair valuation and concerns regarding credit quality metrics [1][3]. Group 1: Company Overview - ONB has a history dating back to 1834 and operates 162 banking centers across five Midwestern states [1]. - The company provides a range of banking and financial services to individual and commercial clients [1]. Group 2: Stock Performance and Valuation - The consensus price target for ONB's stock has remained stable over the past year, with the current average target at $25, slightly down from $25.5 in the previous quarter and year [2]. - ONB holds a "Hold" rating due to its fair valuation, despite strong revenue and profit growth from recent acquisitions [3]. Group 3: Earnings and Growth - In its recent quarterly report, ONB reported a profit of $0.59 per share, surpassing the Zacks Consensus Estimate of $0.56 per share, indicating a positive outlook for future earnings growth [4]. - The company has a strong track record of exceeding earnings expectations, suggesting potential for continued growth [6]. Group 4: Comparative Analysis - Comparative analyses with other financial institutions show ONB's strengths in dividends, institutional ownership, and profitability, with 83.7% insider and institutional ownership reflecting stakeholder confidence [5].