Old National Bancorp Signals Confident Growth After Earnings

Old National Bancorp ((ONB)) has held its Q1 earnings call. Read on for the main highlights of the call.

Old National Bancorp’s latest earnings call struck an upbeat tone, with management leaning into a message of strong growth, tight cost control, and robust capital returns despite some near-term pressure on net interest income and margin. Executives framed headwinds from funding costs, competition, and rate dynamics as manageable against record pipelines, top-tier profitability, and stable credit.

Earnings and Profitability

Old National reported GAAP EPS of $0.59 and adjusted EPS of $0.61, excluding merger and pension items, underscoring resilient earnings power. Management highlighted top-decile returns on assets and tangible common equity, and reaffirmed a full-year goal of more than 15% EPS growth supported by positive operating leverage.

Strong Loan Growth and Robust Pipeline

Loans grew at an 8% annualized pace in the quarter, with commercial and industrial balances jumping nearly 17% annualized, signaling strong client demand. The bank now carries a record $5.5 billion loan pipeline, about 14% above year-end, and expects full-year loan growth to land toward the high end of its 4%–6% range.

Deposit and Funding Strength

Total deposits grew at a 4.2% annualized rate and the loan-to-deposit ratio held around 89%, indicating balanced funding. Notably, management drove deposit costs lower, cutting overall deposit rates by about 8 basis points and interest-bearing costs by roughly 14 basis points, with noninterest-bearing balances still near 23% of total.

Capital Position and Shareholder Returns

The company’s common equity Tier 1 ratio remained comfortably above 11%, giving ample room to support growth and buybacks. In the first quarter, Old National returned $151 million to shareholders, repurchasing 3.9 million shares and leaving $383 million of remaining authorization while eyeing potential capital relief from proposed regulatory rule changes.

Expense Control and Efficiency

Old National’s cost discipline stood out, with adjusted noninterest expense at $354 million and all $111 million of targeted Bremer cost saves fully realized. The bank posted a record adjusted efficiency ratio around 46%, delivering positive operating leverage versus both last quarter and last year and reinforcing its reputation as a lean operator.

Fee Income and Business Revenue

Adjusted noninterest income reached $122 million, topping guidance as mortgage banking and capital markets businesses benefited from a mid-quarter rate dip. Management now expects fee income to trend toward the upper end of the full-year range, signaling a more balanced revenue mix beyond spread income.

Stable Credit Metrics

Credit quality remained solid, with total net charge-offs at 26 basis points, or 19 basis points excluding purchase credit deteriorated loans. Nonaccrual loans declined for the fourth straight quarter, reserves stayed healthy at 122 basis points of loans, and exposure to specialty finance niches such as MDFIs was minimal and performing.

Net Interest Income and Margin Headwinds

Net interest income was softer than some investors anticipated, pressured by typical first-quarter seasonality, fewer business days, and a subordinated debt issuance late in January. Management cited roughly 19 basis points of negative impact from rate and volume mix, though it framed these as timing issues rather than structural problems with the margin.

Deposit Competition and Seasonality

Executives acknowledged an intense battle for deposits, calling out certain markets like Nashville where promotional “specials” remain frothy. Public fund balances were seasonally lower and noninterest-bearing deposits slipped from 24% to 23%, highlighting ongoing pricing pressure even as the bank worked to manage its overall funding costs.

Transition-Related Asset Quality Increase

Criticized and classified loans rose by $113 million as Bremer loans were regraded under Old National’s stricter risk framework, creating a one-time bump in criticized balances. Management stressed that Bremer-related charges have now been absorbed in reported results and framed the increase as a classification change rather than a new deterioration trend.

Possible Expense Upside from Hiring and Investments

While first-quarter expenses came in better than expected, leaders chose not to lower full-year guidance in order to preserve flexibility for growth investments. The bank is accelerating hiring in key businesses and committing capital to technology and AI, which may push costs modestly higher but is intended to sustain long-run revenue and efficiency gains.

Reserves and PCD Charge-offs

The allowance for credit losses dipped by 2 basis points to 122 basis points of loans, driven mainly by charge-offs on purchase credit deteriorated loans and growth in lower-risk portfolios. Management flagged PCD charge-offs and purchase accounting dynamics as items to monitor, but emphasized that overall reserve coverage remains solid for the current environment.

Outlook Sensitivities and Rate Dependence

The earnings and margin outlook assumes policy rates are essentially stable for the rest of the year and that intermediate yields, such as the five-year, hold near current levels. Executives cautioned that changes in the yield curve or competitive landscape could alter the net interest margin and NII trajectory, although they see current trends as supportive.

Forward-Looking Guidance and 2026 Targets

Management reaffirmed its medium-term plan and said first-quarter performance supports tracking toward the high end of its targets, including 4%–6% loan growth, stable-to-improving margin, and more than 15% EPS growth. With roughly $8 billion of fixed-rate assets set to reprice within a year, $2.4 billion of portfolio cash flows, solid credit metrics, and ample capital, the team expressed confidence in delivering sustained positive operating leverage.

Old National’s call painted a picture of a bank balancing disciplined execution with targeted investments, using strong capital and efficiency to offset rate and funding headwinds. For investors, the message was one of durable profitability, improving growth momentum, and continued capital returns, albeit with the usual caveats around interest rates and competitive pressures that could sway near-term results.