• GAAP Earnings Per Share: $0.44 for Q1 2025.
• Adjusted Earnings Per Share: $0.45, excluding $0.01 per share of merger-related charges.
• Net Interest Income: In line with expectations, with net interest margin down modestly.
• Tangible Book Value Per Share: Increased by 5% from last quarter and 13% year over year.
• CET1 Ratio: 11.62%, up 86 basis points from a year ago.
• Total Loan Growth: 1.5% annualized from last quarter, or 2.3% excluding $70 million of CRE loan sales.
• Total Deposit Growth: 2.1% annualized, with core deposits up nearly 1.7% annualized.
• Noninterest Income: $94 million for the quarter, above guidance.
• Adjusted Noninterest Expenses: $263 million, moderately better than guidance.
• Net Charge-Offs: 24 basis points, or 21 basis points excluding PCD loans.
• Allowance for Credit Losses: 116 basis points, up 2 basis points from the prior quarter.

• Warning! GuruFocus has detected 4 Warning Signs with ONB.

Release Date: April 22, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Old National Bancorp (NASDAQ:ONB) reported better-than-expected first-quarter earnings, demonstrating strong performance in a challenging economic environment.
• The company experienced solid loan growth and a strong deposit franchise, which drove positive results.
• Net interest income and margin performance met expectations, with noninterest income benefiting from gains on loan sales and higher fees from mortgages and service charges.
• The tangible book value increased significantly compared to both the previous quarter and year over year.
• The partnership with Bremer Bank is expected to enhance ONB's footprint, providing greater scale and density in the Upper Midwest, and is anticipated to close earlier than expected, on May 1.

Negative Points

• The macroeconomic environment remains uncertain, which could impact future growth and rate outcomes.
• There is a potential for increased competition in the commercial real estate market, which may affect loan growth.
• The company's guidance assumes three rate cuts, which may not align with actual future Federal Reserve actions.
• Noninterest income has been volatile, with recent quarters showing fluctuations due to discrete items and loan sales.
• The economic uncertainty has led to a cautious approach from clients, potentially impacting future business activities and growth.

Q & A Highlights

Q: How does the better capital position at the start of the Bremer partnership impact the net interest income (NII) outlook? A: James Ryan, CEO: The original M&A assumptions, including $2.4 billion of commercial real estate loans, remain in place. However, the higher capital levels at the start of the partnership suggest that the $2.4 billion figure may be reduced, offsetting the foregone purchase accounting accretion due to rate market changes.

Q: Does the 40% deposit beta guidance include Bremer? A: James Ryan, CEO: No, it does not include Bremer. The 40% beta is for core ONB, and we expect to reach this by the end of the second quarter. There is still room for improvement as we work through our exception price book.

Q: What are the driving factors for potentially selling or not selling the $2.4 billion in commercial real estate loans? A: James Ryan, CEO: The decision will be based on maintaining a double-digit CET1 ratio, total risk-based capital, and the CRE percentage of total risk-based capital. Current conditions suggest we will be in a good position on all three, providing significant flexibility.

Q: How are customers reacting to the current economic environment, and what is the outlook for loan growth? A: Mark Sander, President and COO: Customers are generally doing well, with a pause rather than a change in plans due to recent uncertainties. The pipeline remains strong, supporting the guidance for mid-single-digit loan growth, despite a competitive CRE market.

Q: What is the outlook for capital management, particularly regarding share buybacks? A: James Ryan, CEO: While share buybacks are considered, the focus is on optimizing the balance sheet size and capital levels. The priority is to maintain a larger balance sheet and strong capital levels, with potential buybacks being a consideration for the latter half of the year or into 2026.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.