Old National Bancorp (ONB) reported second quarter 2025 earnings on July 22, delivering adjusted EPS of $0.53, up 18% over the prior quarter and 15% year over year. Additionally, it closed the Bremer Bank partnership ahead of schedule.
Tangible book value per share increased 14% year over year, Common Equity Tier 1 (CET1) ratio finished at 10.74% (50 bps above expectations), and full-year 2025 guidance -- including net interest income (NII) and fee income -- remains aligned with analyst consensus.
The analysis below explores balance sheet expansion, disciplined capital management, and updated merger outcomes directly impacting ONB’s long-term profile.
ONB expands balance sheet and capital with Bremer
Period-end loans increased $11.5 billion, including 3.7% annualized organic loan growth excluding Bremer, while core deposits excluding brokered rose just under 1% annualized. The CET1 ratio, a key regulatory capital measure, was 10.74% -- 50 basis points above the merger model, due to strong retained earnings at Bremer and securities portfolio restructuring that generated new money yields approximately 110 basis points above back book yields on securities.
"Given our capital levels are higher than we modeled at the time we announced Bremer last November, we have significant flexibility around our balance sheet, leaving us in a position to retain all CRE loans that we had originally contemplated selling."
— John Moran, CFO
Unexpectedly strong capital generation enabled ONB to forgo previously planned commercial real estate (CRE) loan sales post-merger, preserving forward earnings power and demonstrating enhanced risk absorption capacity versus prior assumptions.
ONB maintains disciplined credit risk oversight
Second quarter net charge-offs totaled 24 basis points (or 21 basis points excluding purchased credit deteriorated loans), and the allowance for credit losses improved by 8 basis points, to 1.24%. Non-accrual loans as a percentage of total loans decreased five basis points quarter-over-quarter, while a 9% reduction in legacy criticized and classified assets indicates ongoing risk mitigation despite integrating Bremer’s loan book.
"Our proactive approach to credit monitoring has led to above-peer levels of non-accruals, but below-peer averages in delinquency and charge-off ratios over time. Roughly 60% of our non-accruals are from acquired books with appropriate reserves and/or marks."
— John Moran, CFO
Strategic focus on credit discipline allows ONB to manage higher headline non-accruals from acquired portfolios without netting elevated loss content, supporting best-in-class charge-off ratios.
Post-merger guidance confirms earnings leverage
ONB now expects full-year 2025 loan growth (excluding Bremer) toward the lower end of the 4%-6% range, citing intensified CRE competition and portfolio management driving elevated paydowns and refis. Holding $2.4 billion in previously slated-for-sale CRE balances will offset reduced purchase accounting marks as the company looks to 2026.
"Overall, we closed two months earlier than expected, adding to our 2025 earnings momentum, with financial metrics tracking to exceed the expectations we set at announcement. Higher capital and lower purchase accounting marks shortened the TBV earnback by approximately half a year."
— John Moran, CFO
Earlier-than-modeled Bremer closing and favorable mark-to-market dynamics accelerated tangible book value (TBV) recovery.
Looking ahead
ONB guides to third quarter and full-year 2025 results in line with current consensus, featuring positive operating leverage, stable noninterest-bearing deposit mix, and 4%-6% full-year loan growth (excluding Bremer), likely toward the lower bound.
Management increased net interest income and fee income guidance for the full year, and expects accumulated other comprehensive income (AOCI) improvement by year-end.
No formal share repurchase has been announced, though excess capital could make buybacks a consideration once the Bremer systems conversion finalizes in mid-October.
