Old National Bancorp (ONB) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call indicates stable or improving financial metrics, a proactive share repurchase strategy, and strong loan growth, supported by strategic partnerships. The Q&A reveals a positive outlook on net interest margin, disciplined pricing, and broad-based growth. While management was vague on some specifics, the overall sentiment is optimistic, with strong financial health and shareholder return plans. Despite the lack of market cap data, the positive factors suggest a stock price increase of 2% to 8% over the next two weeks.
Key Financial Performance
Adjusted Earnings Per Share (EPS) $0.62 for Q4 2025, a 27% increase year-over-year. Driven by stable margin, better-than-expected growth in fee income, and well-controlled expenses.
Tangible Book Value Per Share Grew by 15% year-over-year despite the impact of closing the Bremer partnership, associated one-time charges, and repurchasing 2.2 million shares.
Adjusted Return on Average Tangible Common Equity Nearly 20% for Q4 2025. Highlighted as peer-leading profitability.
Adjusted Return on Assets (ROA) 1.37% for Q4 2025. Highlighted as peer-leading profitability.
Adjusted Efficiency Ratio 46% for Q4 2025, a record low. Achieved through well-controlled expenses and positive operating leverage.
Total Loans Grew 6.4% annualized from the prior quarter. Driven by a 25% increase in production and a 15% increase in the pipeline from the prior quarter.
Total Deposits Increased 0.6% annualized year-over-year. Core deposits (excluding brokered) decreased about 3% annualized due to seasonally lower public funds balances.
Noninterest Income $126 million for Q4 2025, exceeding guidance. Driven by better-than-expected performance in mortgage and capital markets due to a favorable rate backdrop.
Noninterest Expenses $365 million for Q4 2025. Achieved positive operating leverage year-over-year with a record low adjusted efficiency ratio of 46%.
Criticized and Classified Loans Decreased by 8% in Q4 2025. Reflects active portfolio management and upgrades/payoffs exceeding downgrades in commercial real estate portfolios.
Nonaccrual Loans Decreased by 12% in Q4 2025. Reflects active portfolio management.
Allowance for Credit Losses to Total Loans 124 basis points, down 2 basis points from the prior quarter. Driven by a decrease in criticized and classified loans.
Tangible Common Equity (TCE) Increased by 20 basis points linked quarter. Tangible book value per share grew 4% linked quarter and 15% year-over-year.
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Operating Highlights
Bremer Bank partnership systems conversion and integration: Successfully completed the systems conversion and integration related to the Bremer Bank partnership, marking it as one of the smoothest and most successful integrations.
Market expansion in Minnesota and North Dakota: The Bremer partnership solidified Old National's position in Minnesota and added attractive funding in North Dakota, creating a leading bank franchise in these regions.
Efficiency ratio: Achieved a record low adjusted efficiency ratio of 46%.
Credit management: Improved credit metrics with an 8% reduction in criticized and classified loans and low levels of non-PCD charge-offs.
Deposit growth: Total deposits increased 0.6% annualized, with noninterest-bearing deposits growing to 26% of core deposits.
Loan growth: Total loans grew 6.4% annualized from the prior quarter, with strong production and a 15% increase in the pipeline.
Capital management: Grew tangible book value per share by 15% in 2025 despite merger-related charges and share repurchases. Continued focus on organic growth and disciplined capital returns.
Investment in talent and technology: Plans to invest in talent, technology, and client-facing capabilities to ensure scalability and long-term success.
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Risk or Challenges
Regulatory and Compliance Risks: The company acknowledges that forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results to differ from expectations. This includes compliance with SEC regulations and other regulatory requirements.
Merger and Integration Challenges: The integration of Bremer Bank was highlighted as a major effort, though it was executed successfully. However, such integrations inherently carry risks, including potential disruptions to operations and unforeseen costs.
Economic and Market Risks: The company incorporates a 100% weighting on the Moody's S2 scenario with additional qualitative factors to capture global economic uncertainty. This reflects concerns about economic conditions that could impact credit quality and financial performance.
Credit Risks: Although credit metrics improved, there is an ongoing focus on active portfolio management to mitigate risks associated with criticized and classified loans, as well as nonaccrual loans.
Interest Rate Risks: The company’s financial performance is sensitive to changes in interest rates, including assumptions about rate cuts and the shape of the yield curve, which could impact net interest income and margin.
Deposit and Liquidity Risks: The company’s deposit strategy includes reliance on brokered deposits, which increased due to seasonality. While levels remain below peers, changes in deposit trends or liquidity needs could pose risks.
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Guidance & Outlook
Capital Management: Looking ahead to 2026, the company plans to maintain a balance between building capital organically and returning capital through share repurchases, supported by a peer-leading return on average tangible common equity.
Organic Growth and Investments: The company will focus on organic growth and disciplined capital returns to maximize shareholder value. Investments will be made in talent, technology, and client-facing capabilities to ensure scalability and long-term success.
Loan Growth: Loan growth is expected to be 3% to 5% in Q1 2026 and 4% to 6% for the full year, supported by a strong pipeline and strategic portfolio management.
Deposit Strategy: The company anticipates continued success in deposit strategy execution, expecting deposit growth to meet or exceed industry growth in 2026, generally in line with asset growth.
Net Interest Income (NII) and Margin: Net interest income is expected to increase in 2026, supported by fixed asset repricing, loan growth, and deposit beta management. The company assumes two additional rate cuts of 25 basis points each in 2026.
Fee Income: Fee income is expected to remain strong in 2026, driven by a supportive rate backdrop for mortgage and capital markets, as well as progress in wealth management and brokerage.
Expense Management: Expense guidance for 2026 incorporates full realization of Bremer cost savings and typical seasonal factors in Q1. The company expects controlled expenses and positive operating leverage for the year.
Credit Metrics: The company expects normalized credit metrics in 2026, with continued focus on active portfolio management and maintaining resilient credit quality.
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Shareholder Return Plan
Share Repurchase: In 2025, Old National Bancorp repurchased 2.2 million shares, with 1.1 million shares repurchased in the fourth quarter alone. The share repurchase program was restarted in the third quarter of 2025. The company emphasized its commitment to returning capital to shareholders through share repurchases while maintaining a balance with organic capital building. The repurchase activity was highlighted as part of the company's strategy to strengthen tangible book value per share, which grew by 15% over the year.
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Key Q&A
Q:How do you see the margin trajecting through the year, especially with the bigger step-up in NII in the second half?
A:The bigger factor is day count, with fewer days in the first two quarters. The trajectory of margin in 2026 depends on four factors: growth (guided at 4%-6%), steepness of the curve, belly of curve on fixed asset repricing, and ability to manage beta on the downside.
Q:What are your thoughts on the pace of share repurchase throughout the year?
A:The company plans to be more active in share repurchases in 2026 compared to last year, while ensuring enough capital to support growth and return capital to shareholders.
Q:Is it fair to say that a day count adjusted margin is stable or slightly higher as the year progresses?
A:Yes, it is fair to say that a day count adjusted margin is stable or slightly higher.
Q:What factors are leading to a reduction in reserve coverage ratio versus loans?
A:The reduction is due to migration in the criticized and classified book, with significant improvement over the past quarters, including a $70 million reduction in NPLs this quarter.
Q:What is your target CET1 ratio for 2026?
A:The company is comfortable with the current CET1 ratio and does not plan to target back down to 10.5%. They aim to balance organic growth and capital return.
Q:How should we think about deposit seasonality and stability in 2026?
A:Deposits are expected to remain stable as a percentage, with some seasonality in the public funds book but no significant changes otherwise.
Q:Where is the growth coming from, and is it from existing or new areas?
A:Growth is broad-based, including C&I middle market and CRE demand drivers. The company is also focusing on hiring and deepening relationships with new customers.
Q:What is your approach to pricing within loan categories or geographies?
A:The company maintains a disciplined pricing model, being opportunistic in high-growth markets while ensuring a disciplined approach across the board.
Q:Is there conservatism in your 2026 fee outlook, particularly for mortgage and cap markets?
A:Yes, there is some conservatism. Mortgage and cap markets have been strong in the back half of 2025, and there is cautious optimism for 2026.
Q:What is the incremental repricing benefit for loans and securities?
A:On loans, there is a 70 basis point spread to new yields against the portfolio, with $5 billion repricing over the next 12 months. On securities, $2.9 billion of cash flow will reprice at 94 basis points above the back book yield.
Q:What are the drivers behind the securities yields, and will the securities portfolio remain stable?
A:The securities portfolio is expected to remain stable as a percentage of earning assets. The yields are driven by plain vanilla investments targeting a specific duration.
Q:Will deposit costs decrease further, and what is driving the NIM stability or increase in 2026?
A:Deposit costs may decrease further, especially in the exception price book, which is 36% of total deposits. NIM stability or increase is driven by both deposit cost management and fixed rate asset repricing.
Q:How is deposit repricing in your markets, particularly in the Midwest?
A:Deposit repricing has been rational across most markets, with only a few being more competitive.
Q:What portion of expenses is allocated to technology investments?
A:The company is investing heavily in technology, focusing on innovation in payments and client-facing capabilities, while self-funding these investments through efficiency improvements.
Q:What could lead to the high end of the 4%-6% loan growth guide, and what is the borrower sentiment?
A:Borrower sentiment is optimistic due to factors like lower rates and clarity on taxes. High-end growth could be driven by middle market C&I, strategic hiring, and expansion in high-growth markets.
Q:What is your appetite for M&A going forward?
A:The focus is on organic growth and improving the company internally, with no significant focus on M&A.
Q:What is the outlook for the wealth strategy?
A:The company is focusing on talent acquisition and collaboration with the commercial bank to drive growth in the wealth segment.
Q:How much strategic portfolio management is left to do?
A:Strategic portfolio management is ongoing, with significant progress already made in managing classified buckets.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the exact CET1 target ratio, stating only that they are comfortable with the current level and do not plan to target back down to 10.5%. Additionally, they did not provide a precise breakdown of technology investment as a percentage of expenses or revenues, only offering a general overview of their approach.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Bancorp Full
Bank effort
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College Football
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Indiana Hoosiers
Mr Indiana
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balance capital
capability effort
client capability
commitment client
community peer
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conversion strength
core fundamental
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focus capital
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framework Old
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income efficiency
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return equity
ONB Transcript
Old National Bancorp (ONB) Q4 2025 Earnings Call Transcript
Positive1-21
The earnings call indicates stable or improving financial metrics, a proactive share repurchase strategy, and strong loan growth, supported by strategic partnerships. The Q&A reveals a positive outlook on net interest margin, disciplined pricing, and broad-based growth. While management was vague on some specifics, the overall sentiment is optimistic, with strong financial health and shareholder return plans. Despite the lack of market cap data, the positive factors suggest a stock price increase of 2% to 8% over the next two weeks.
Old National Bancorp (ONB) Q3 2025 Earnings Call Transcript
Unknown10-22
The earnings call summary presents a mixed sentiment. The financial performance and product updates are positive, with strong loan growth and successful systems conversion. However, uncertainties in fee income sustainability and lack of specific guidance details temper the positivity. The Q&A section reveals stable credit quality and capital strategies, but also highlights management's vagueness on share repurchase plans. Without clear guidance or strong positive catalysts, the overall sentiment remains neutral, suggesting a limited stock price movement in the near term.
Old National Bancorp (ONB) Presents At Barclays 23rd Annual Global Financial Services Conference Transcript
Neutral9-8
Old National Bancorp (NASDAQ:ONB) Q1 2025 Earnings Call Transcript
Positive4-23
The earnings call reflects strong financial performance with EPS growth, increased tangible book value, and a solid CET1 ratio. Despite a decrease in net interest income, the company exceeded noninterest income guidance and maintained controlled expenses. The Q&A session highlighted strong loan growth potential and balance sheet flexibility post-Bremer partnership. While management avoided specifics on buybacks and NII impact, the overall sentiment is positive, supported by robust loan pipelines and strategic growth plans. The absence of a market cap suggests a mid-to-large cap, moderating the stock price reaction.
ONB Slides
ONB Report
Frequently Asked Questions
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