Old National Bancorp delivered a record-breaking fourth quarter and full year 2025, reporting adjusted EPS of $0.62, a 27% increase year-over-year and 5% quarter-over-quarter. The company achieved peer-leading profitability metrics, including an adjusted ROTCE of nearly 20%, an adjusted ROA of 1.37%, and a record-low adjusted efficiency ratio of 46%. Credit quality improved significantly, with criticized and classified loans decreasing by 8% and net charge-offs remaining low at 27 basis points. Tangible book value per share grew 15% year-over-year, supported by strong capital generation and the successful integration of Bremer Bank. Looking ahead to 2026, management provided confident guidance for 4-6% loan growth, stable to improving net interest margins, and a more active share repurchase program, signaling a strategic shift toward organic growth and aggressive capital return.
| Metric | Value | Change |
|---|---|---|
| Adjusted EPS (Q4 2025) | $0.62 | +27% YoY / +5% QoQ |
| Adjusted ROTCE | ~20% | Peer-leading |
| Adjusted ROA | 1.37% | Stable/High |
| Efficiency Ratio | 46% | Record Low |
| Tangible Book Value Growth | 15% | YoY |
| Net Charge-offs | 27 bps | Low |
| Criticized/Classified Loans | N/A | -8% QoQ |
| Loan Growth (Q4 Annualized) | 6.4% | Strong |
Management signaled a decisive pivot from acquisition-led expansion to aggressive organic growth and internal investment. Jim Ryan explicitly stated that 'the best investment we can make is in ourselves,' indicating that M&A is not a current focus despite the successful Bremer integration. The company plans to heavily invest in talent, technology, and client-facing capabilities to drive C&I and CRE loan growth, targeting 4-6% expansion in 2026. This 'invest in ourselves' strategy suggests a focus on compounding shareholder value through core operations rather than risky external deals.
A significant shift in capital allocation strategy was announced, with management planning to be 'more active' in share repurchases in 2026 compared to 2025. With CET1 over 11% and tangible book value growing 15% year-over-year, the bank views growing capital and returning capital as non-mutually exclusive. This commitment to buybacks, alongside a peer-leading 20% ROTCE, provides a clear pathway to EPS accretion and highlights management's confidence in their excess capital generation.
The bank demonstrated sophisticated liability management, achieving an approximate 87% beta on rates in their exception price book during the quarter. Management guided for a 40% total down-rate deposit beta in 2026, aligning with their terminal up-rate betas. This proactive management of deposit costs, combined with $2.9 billion in investment portfolio cash flow yielding 94 basis points above back book yields, positions ONB to defend or expand NIM even in a falling rate environment.
Credit normalization is a key strategic theme, with management asserting they are 'through the worst of it' regarding criticized assets. The 8% reduction in criticized and classified loans and a 2:1 ratio of upgrades to payoffs in CRE suggest active portfolio management is succeeding. This improvement allows for a potential reduction in reserve coverage ratios, freeing up capital for growth and buybacks, signaling that the credit overhang from the economic cycle is abating.
Management warned that Q1 2026 results will be negatively impacted by 'two fewer days,' which could artificially suppress quarterly growth comparisons and create headline noise. While a technicality, this may lead to temporary investor confusion regarding the momentum of loan growth and net interest income.
The guidance for net interest margin stability relies heavily on specific macro assumptions, including 'two additional rate cuts of 25 basis points each in 2026' and a specific yield curve shape. If the Federal Reserve pauses cuts or the yield curve flattens differently than anticipated, the 'stable to improving' NIM guidance could be at risk, particularly given the sensitivity of their deposit beta assumptions.
While core deposits grew, 'core deposits ex brokered decreased about 3% annualized primarily driven by seasonally lower public funds balances.' This highlights a reliance on potentially volatile public funds and the use of brokered deposits (6.7% of total) to manage liquidity, which can be higher cost and stickier than core retail deposits.
The implied reduction in the reserve coverage ratio in 2026 guidance, while mathematically driven by improved credit metrics, represents a future earnings headwind once the release cycle normalizes. Management noted that the reserve model 'spits out what it spits out,' but investors should be wary of earnings tailwinds from reserve releases disappearing in future quarters.
Overall: Management exhibited a highly confident and celebratory tone throughout the call, frequently emphasizing 'record' results and 'peer-leading' metrics. There was a distinct sense of pride regarding the successful Bremer integration and the bank's operational discipline. The demeanor shifted from reflective satisfaction on past achievements to assertive forward-looking statements regarding organic growth and capital deployment.
Confidence: HIGH - Management provided specific, data-driven guidance and used definitive language regarding future performance (e.g., 'plan to be more active,' 'through the worst of it'). The specificity of the deposit beta discussion and the commitment to buybacks underscore their assurance in the balance sheet strength.
4% to 6%
3% to 5%
Two cuts of 25 bps each
More active than 2025
Stable to improving
Hedging & Uncertainty: Management generally used direct and confident language, though some hedging appeared around macroeconomic factors. Phrases like 'knock on wood, the forwards actually come true' regarding rate cuts and 'path of NIM... will depend on growth dynamics' acknowledge external variables outside their control. However, regarding internal execution, hedging was minimal; they firmly stated they are 'through the worst of it' on credit and 'plan to be more active' on buybacks, reducing uncertainty about their strategic priorities.
The best investment we can make is in ourselves. - Jim Ryan, Chairman and CEO
We don't view growing capital and returning capital as mutually exclusive in 2026. - John Moran, CFO
We're through the worst of it. - John Moran, CFO
I think the best return we can provide for our shareholders today is continue to work on ourselves. - Jim Ryan, Chairman and CEO
We remain committed to strengthening tangible book value per share while continuing to drive peer-leading profitability. - Jim Ryan, Chairman and CEO
Analyst Sentiment: Analysts were inquisitive and focused on the sustainability of the strong margin and the mechanics of the capital return plan. Questions were largely constructive, probing for details on deposit betas, loan growth drivers, and the specific timing of buybacks.
Management Responses: Management responses were detailed and open, providing specific math on deposit betas (87%) and portfolio repricing (94 bps). They pushed back gently on the idea of targeting a lower CET1 ratio, preferring to keep it 'strong' while returning excess capital, indicating a balanced but shareholder-friendly approach.
Discussion on the trajectory of Net Interest Margin (NIM) and the impact of day count in Q1.
Clarification on the pace of share repurchases and CET1 targets.
Credit quality improvements and the implication for reserve coverage ratios.
Drivers of loan growth, specifically regarding C&I and CRE demand.
Deposit pricing rationality and the strategy for the exception price book.
Old National Bancorp is firing on all cylinders, delivering record profitability with a 20% ROTCE and a 46% efficiency ratio. The successful integration of Bremer is in the rearview mirror, removing execution risk and allowing management to focus on high-ROE organic growth. The shift to a more aggressive share repurchase program, combined with a 15% increase in tangible book value, signals strong capital generation and a shareholder-friendly disposition. With credit quality improving markedly and a disciplined approach to deposit beta protecting the margin, ONB offers a compelling combination of growth, yield, and capital return. The 'invest in ourselves' strategy reduces M&A risk and focuses on compounding intrinsic value.
Management expects two 25bp rate cuts in 2026, aligning with the forward curve. They view the current environment as supportive for fee income (mortgage and capital markets) and anticipate a 'constructive' rate backdrop.
Customer sentiment is described as 'more optimistic about 2026 than the prior few years,' driven by lower rates, clarity on tariffs, and heating up M&A activity. This is fueling demand in the C&I middle market and CRE sectors.
Competition is described as 'very, very rational' across the majority of their footprint, with only a handful of 'spicier' markets. This rationality supports their ability to manage deposit costs down effectively.