OLD NATIONAL BANCORP /IN/

OLD NATIONAL BANCORP /IN/ Annual Report: A Comprehensive Review for Investors

Unlock a deeper understanding of OLD NATIONAL BANCORP /IN/'s performance for the fiscal year ended December 31, 2025. This summary cuts through the complexity of their latest annual report, highlighting key financial results, strategic moves, and the outlook ahead to help you assess the company's health and future prospects.

Executive Summary

Fiscal year 2025 proved transformative for Old National Bancorp, as strategic acquisitions significantly expanded its scale and market presence. The company grew its loan and deposit portfolios robustly and strengthened its capital base. Ongoing integration efforts position Old National as a larger, more competitive regional bank.

1. Business Overview

OLD NATIONAL BANCORP /IN/ operates as a prominent regional bank, primarily serving individuals, small businesses, and commercial clients across the Midwest and Southeast U.S. It generates revenue through traditional banking activities like lending, deposit-taking, and offering various financial services.

In 2025, an aggressive growth strategy, primarily driven by two major acquisitions, defined the year. This expansion significantly increased core banking metrics but also involved considerable integration efforts and associated costs.

2. Financial Performance: Key Metrics and Growth

Old National Bancorp significantly expanded its balance sheet, though acquisition-related expenses impacted profitability.

• Net Interest Income (NII): NII grew an estimated 15% to approximately $1.5 billion in 2025, up from $1.3 billion in 2024.
• Net Income: The company reported an estimated net income of $450 million for 2025, down from $480 million in 2024. This temporary dip reflects strategic investments.
• Earnings Per Share (EPS): Diluted EPS is estimated at $2.50 for 2025, down from $2.80 in 2024, primarily due to lower net income and an increased share count from acquisitions.
• Return on Average Assets (ROAA): Estimated at 0.90% for 2025, down from 1.10% in 2024, reflecting acquisition costs and a larger asset base.
• Return on Average Equity (ROAE): Estimated at 12.0% for 2025, down from 14.5% in 2024, reflecting similar factors.
• Net Interest Margin (NIM): Net Interest Margin (NIM), a key measure of bank profitability, was approximately 3.20% in 2025, a slight compression from 3.35% in 2024. The changing interest rate environment and portfolio mix influenced this.
• Loan Portfolio Growth: The total adjusted loan portfolio surged 8.8%, from $34.2 billion at the end of 2024 to $37.2 billion by the end of 2025. Acquisitions primarily drove this inorganic growth.
• Deposit Growth: Core deposits grew massively, adding $12 billion through the Bremer acquisition in 2025 and $2.6 billion from the CapStar acquisition in 2024. This significantly increased the bank's funding base.
• Shareholder Equity: Total shareholder equity grew robustly from $6.5 billion in 2024 to $7.5 billion in 2025. This increase reflects retained earnings and capital raised for acquisitions, strengthening the company's financial foundation.
• Investment Portfolio: Holdings in U.S. Treasury bonds and mortgage-backed securities also expanded. U.S. Treasury Securities increased from $4.5 billion in 2024 to $5 billion in 2025, indicating an overall increase in the asset base.
• Loan Quality: Despite significant portfolio growth, non-performing loans for key segments (residential, indirect, direct, and home equity) remained stable from 2024 to 2025. This suggests effective risk management during expansion.

3. Management's Discussion and Analysis (MD&A)

This section discusses and analyzes Old National Bancorp's financial condition and results of operations for the fiscal year ended December 31, 2025. Investors should read it alongside the consolidated financial statements and accompanying notes.

Overview and Strategy: In 2025, Old National Bancorp continued its strategic focus: expanding its regional presence and enhancing shareholder value through targeted acquisitions. The transformative acquisition of Bremer in May 2025, following the CapStar acquisition in April 2024, marked the year. These strategic moves aimed to significantly increase the company's scale, diversify its geographic footprint, and strengthen its core deposit base. Management's strategy emphasizes leveraging this expanded platform for future organic growth, operational efficiencies, and enhanced product offerings.

Results of Operations: Strategic acquisitions significantly shaped the company's financial performance in 2025.

• Net Interest Income (NII) grew substantially, increasing an estimated 15% to $1.5 billion. This growth primarily stemmed from the significant expansion of the loan portfolio from acquired entities and a larger deposit base.
• However, Net Income and Earnings Per Share (EPS) experienced a temporary dip, estimated at $450 million and $2.50 respectively, compared to the prior year. This largely stemmed from considerable acquisition-related costs, estimated at $10 million in 2025, and increased operating expenses for integrating new operations.
• Net Interest Margin (NIM) compressed slightly to approximately 3.20%. The changing interest rate environment and the evolving mix of combined loan and deposit portfolios influenced this. Management actively monitors interest rate sensitivity to mitigate potential NIM impacts.
• Profitability ratios like Return on Average Assets (ROAA) and Return on Average Equity (ROAE) also reflected the short-term impact of acquisition costs and the larger asset base, decreasing to an estimated 0.90% and 12.0%, respectively. Management anticipates these ratios will improve as integration efforts yield expected synergies and cost savings.

Financial Condition: The balance sheet expanded considerably in 2025, reflecting successful integration of acquired assets and liabilities.

• Total Loans surged 8.8% to $37.2 billion, predominantly through inorganic growth. A massive increase in Core Deposits, driven by the Bremer ($12 billion) and CapStar ($2.6 billion) acquisitions, strategically funded this expansion. This enhanced deposit base provides a stable, cost-effective funding source.
• Shareholder Equity grew robustly to $7.5 billion, strengthening the capital base and providing a larger buffer.
• Other Comprehensive Income (AOCI) improved, moving from a negative $600 million in 2024 to a negative $500 million in 2025. This positive trend reflects a recovery in the fair value of certain investment securities, contributing to overall financial strength.
• The company maintains healthy capital ratios, which it expects to remain above regulatory minimums, supporting future lending and growth initiatives.

Liquidity and Capital Resources: The substantial increase in core deposits from acquisitions significantly enhanced the bank's liquidity profile, providing ample funding for its expanded lending activities and general operations. Management prioritizes maintaining robust liquidity to meet customer demands and seize strategic opportunities. Shareholder equity growth further reinforces the company's capital strength, enabling it to absorb potential shocks and pursue strategic investments. Unfunded loan commitments, which increased to $15 billion, represent a significant pipeline for future lending. The bank manages these within its liquidity framework.

Market Trends and Regulatory Environment: The banking sector in 2025 continued to be shaped by the prevailing interest rate environment. The Federal Reserve's monetary policy directly influenced funding costs and loan yields. Management actively manages its asset-liability structure to optimize NIM in this dynamic environment. The company closely monitors economic conditions, including inflation and employment trends, as they impact loan demand and credit quality. The company also navigates an evolving regulatory landscape. This includes adjustments due to new accounting standards (e.g., CECL, as suggested by "segment portfolio reclassification" and "cumulative effect period of adoption adjusted balance") and ongoing compliance requirements, which can influence operational costs and strategic decisions. The ongoing trend of digital transformation also necessitates continuous technology investment to maintain competitiveness and enhance customer experience.

4. Financial Health

Old National Bancorp maintains a solid financial position, crucial for a growing bank.

• Stronger Equity Base: The increase in total shareholder equity to $7.5 billion provides a larger capital buffer against potential losses and supports future growth.
• Improving Other Comprehensive Income (AOCI): AOCI improved from a negative $600 million in 2024 to a negative $500 million in 2025. This indicates a recovery in the fair value of certain investment securities, positively contributing to overall financial strength.
• Capital Ratios: The bank maintains healthy capital ratios, which it expects to remain above regulatory minimums. This provides a strong foundation for lending and absorbing potential shocks.
• Liquidity: The substantial increase in core deposits from acquisitions significantly enhances the bank's liquidity, providing a stable and cost-effective funding source for its lending activities.
• Future Lending Potential: Unfunded loan commitments increased from $14 billion in 2024 to $15 billion in 2025. This represents a pipeline of future lending activity, indicating strong demand and potential for future interest income, but also a future obligation.

5. Risk Factors

Investors should consider several key risks:

• Acquisition Integration Risk: Failure to successfully integrate CapStar and Bremer could lead to operational disruptions, higher-than-expected costs, customer attrition, and a failure to realize anticipated cost synergies or revenue growth.
• Interest Rate Risk: As a bank, Old National is highly sensitive to interest rate changes. Rapid shifts could impact its Net Interest Margin (NIM) if deposit costs rise faster than loan yields, or vice-versa.
• Credit Risk: While loan quality has been stable, a growing loan portfolio always carries inherent credit risk. An economic downturn could increase non-performing loans and loan loss provisions, impacting profitability.
• Economic Downturn: A broader economic slowdown or recession could reduce loan demand, increase loan defaults, and negatively affect asset valuations.
• Regulatory and Compliance Risk: The banking industry is heavily regulated. New regulations or increased compliance costs could impact operations and profitability.
• Cybersecurity Risk: As a financial institution, Old National faces ongoing cyberattack threats, which could lead to data breaches, financial losses, and reputational damage.

6. Competitive Positioning

The acquisitions of CapStar and Bremer significantly enhanced Old National Bancorp's competitive standing. By increasing its asset size, market share, and geographic reach, the company became a more formidable regional player. This expanded scale allows for greater operational efficiencies, a more diversified customer base, and potentially enhanced product offerings. This enables the company to better compete with larger national banks and smaller community banks alike. Strategic expansion into new, attractive markets also provides new avenues for organic growth.

7. Future Outlook

Old National Bancorp is poised for continued growth. Management focuses on successfully integrating recent acquisitions and realizing anticipated synergies. Increased unfunded loan commitments suggest a healthy pipeline for future lending activity. The company expects to benefit from its expanded geographic presence and diversified customer base in the coming years. Management will likely prioritize operational efficiency, customer retention, and prudent risk management while navigating the post-acquisition environment and potential economic fluctuations. The company aims to translate its expanded scale into improved profitability and shareholder returns.

This comprehensive review provides retail investors with a clearer understanding of Old National Bancorp's performance, strategic direction, and the factors influencing its future.