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Old National Bancorp Grows Q2 Earnings
The Motley Fool· 2025-07-22 18:57
Core Insights - Old National Bancorp (ONB) reported second quarter 2025 earnings with adjusted EPS of $0.53, reflecting an 18% increase over the prior quarter and a 15% year-over-year growth [1] - The company successfully closed the Bremer Bank partnership ahead of schedule, contributing positively to its financial metrics [1][8] Financial Performance - Tangible book value per share increased by 14% year-over-year, and the Common Equity Tier 1 (CET1) ratio finished at 10.74%, which is 50 basis points above expectations [1][3] - Period-end loans rose by $11.5 billion, with a 3.7% annualized organic loan growth excluding Bremer, while core deposits (excluding brokered) increased just under 1% annualized [3] Capital Management - The unexpected strong capital generation allowed ONB to retain all commercial real estate (CRE) loans initially planned for sale, enhancing its risk absorption capacity [4] - The company maintains a disciplined credit risk oversight, with second quarter net charge-offs totaling 24 basis points, and the allowance for credit losses improved by 8 basis points to 1.24% [5] Credit Risk Oversight - Non-accrual loans as a percentage of total loans decreased by five basis points quarter-over-quarter, indicating effective risk mitigation despite the integration of Bremer's loan book [5] - Approximately 60% of non-accruals are from acquired books with appropriate reserves, supporting best-in-class charge-off ratios [6] Future Guidance - ONB expects full-year 2025 loan growth (excluding Bremer) to be toward the lower end of the 4%-6% range, influenced by intensified CRE competition [7] - The company has increased its net interest income and fee income guidance for the full year, anticipating improvements in accumulated other comprehensive income (AOCI) by year-end [9] Strategic Outlook - The earlier-than-expected closing of the Bremer partnership has added to ONB's 2025 earnings momentum, with financial metrics tracking to exceed initial expectations [8] - No formal share repurchase has been announced, but excess capital could lead to buybacks once the Bremer systems conversion is finalized in mid-October [10]