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    ONB
    Earnings call· Jun 2026(Q2 FY26)

    OLD NATIONAL BANCORP /IN/ ONB

    Jul 22, 2026 Source

    Executive summary

    Old National Bancorp Q2 FY26 — Record Performance Driven by Strong Organic Growth and Efficiency

    Old National Bancorp delivered a record-breaking second quarter, marked by strong organic loan growth, broad-based fee income, and exceptional operational efficiency. The company achieved record adjusted EPS and an efficiency ratio of 45.2%, while significantly increasing tangible book value per share and returning capital to shareholders. Management expressed confidence in continued NII growth in the back half of the year, driven by asset generation and stable funding costs, and remains focused on organic expansion and disciplined expense management.

    Highlights

    5

    • Achieved record adjusted EPS of $0.65.

    • Delivered a record adjusted efficiency ratio of 45.2%.

    • End-of-period loans increased by $1 billion, representing an 8% annualized growth.

    • Commercial production reached $3.5 billion, with a record commercial pipeline of $5.6 billion.

    • Tangible book value per share increased 14% year-over-year, and $163 million of capital was returned to shareholders.

    Concerns

    2

    • Net interest margin (NIM) was impacted by 2 basis points due to the full quarter effect of sub debt issuance and lower SOFR rates.

    • Other income was elevated by approximately $10 million in the quarter due to market value adjustments, higher BOLI income, and an asset recovery, with expectations to normalize closer to Q1 levels for the remainder of the year.

    Guidance & targets

    9
    CategoryTargetConfidence
    Full-year 2026 Loan Growth
    6% to 8%
    high materiality
    High
    Full-year 2026 Net Interest Income (NII)
    Unchanged
    high materiality
    Medium
    Full-year 2026 Noninterest Income
    Increased
    medium materiality
    High
    Full-year 2026 Expenses, Credit, Tax Rates
    Unchanged
    medium materiality
    High
    Full-year 2026 EPS Growth
    15%+
    high materiality
    High
    Full-year 2026 Operating Leverage
    Positive
    medium materiality
    High
    Buyback Authorization Utilization
    Fully utilize remaining authorization
    high materiality
    High
    NIM and NII Trajectory
    Improving
    high materiality
    High
    Fed Rate Actions and 5-Year Treasury
    No Fed rate actions this year, stable 5-year treasury
    medium materiality
    Medium

    Operational metrics

    29
    Adjusted Return on Average Tangible Common Equity
    20%
    Q2 FY26

    Record performance.

    Adjusted Return on Assets
    1.39%
    Q2 FY26

    Top decile versus peers.

    Adjusted Earnings Per Share
    $0.65
    Q2 FY26

    Record adjusted EPS, excluding $12.1 million in merger-related expenses and a $13.2 million valuation gain on Bremer pension plan settlement.

    Merger-Related Expenses
    $12.1M
    Q2 FY26

    Excluded from adjusted earnings per share.

    Valuation Gain on Bremer Pension Plan Settlement
    $13.2M
    Q2 FY26

    Excluded from adjusted earnings per share.

    Non-PCD Charge-Offs
    22 bps
    Q2 FY26

    Excluding charge-offs on PCD loans.

    Tangible Book Value Per Share Growth
    11%Annualized linked quarter
    Q2 FY26

    Also 14% year-over-year.

    Capital Returned to Shareholders
    $163M
    Q2 FY26

    Through dividends and buybacks.

    Shares Repurchased
    $107M4.4 million shares
    Q2 FY26

    During the current quarter.

    Total Shares Repurchased
    10.5M
    Last year

    Over the last year.

    Combined Payout Ratio
    65%
    Q2 FY26

    Of Q2 net income to common.

    Loan-to-Deposit Ratio
    91%Increased modestly
    Q2 FY26

    Underscoring continued strength in liquidity and capital positions.

    Commercial Production
    $3.5B
    Q2 FY26

    Driven by robust, high-quality commercial production.

    Period-End Commercial Pipeline
    $5.6BUp 17% from a year ago
    Q2 FY26

    Hit a new record.

    Investment Portfolio Cash Flow
    $2.3B
    Next 12 months

    Expected cash flow.

    New Money Yields vs Back Book Securities Yields
    100 bpsAbove back book yields
    Current

    New money yields are running about 100 basis points above back book yields on securities.

    NIM Impact from Sub Debt and Lower SOFR
    -2 bps
    Q2 FY26

    Impacted by the full quarter effect of sub debt issuance in late January and lower SOFR rates during the quarter.

    Total Deposits Growth
    3.4%Annualized
    Q2 FY26

    Primarily driven by commercial and public fund growth, partly offset by seasonal tax outflows in retail deposits.

    Noninterest-Bearing Deposits as % of Total Deposits
    23%Consistent with prior quarter
    Q2 FY26

    Remains stable.

    Total Deposit Costs Change
    -1 bpsLinked quarter
    Q2 FY26

    Able to decrease total deposit costs.

    Interest-Bearing Deposits Cost Change
    -1 bpsLinked quarter
    Q2 FY26

    Lowered interest-bearing deposits cost.

    Adjusted Noninterest Income
    $140M
    Q2 FY26

    Exceeded guidance, with better-than-expected performance within all fee businesses.

    Other Income Elevation
    $10M
    Q2 FY26

    Due to market value adjustments, higher BOLI income, and an asset recovery; expected to run rate closer to Q1 levels for the balance of the year.

    Criticized and Classified Loans Decline
    $109M
    Q2 FY26

    Declined this quarter.

    Nonaccrual Loans as % of Total Loans
    91 bps
    Q2 FY26

    Marking several quarters of improving performance driven by active portfolio management.

    Qualitative Reserves Scenario Weighting
    100%
    Q2 FY26

    With additional qualitative factors to capture global economic uncertainty.

    Basel III Capital Rule Changes Benefit
    100 bps
    Future

    Management believes approximately 100 basis points of capital benefit under the proposed Basel III capital rule changes, if finalized.

    Remaining Buyback Authorization
    $277M
    Q2 FY26

    To be fully utilized opportunistically through the end of February 2027.

    Average C&I Loan Size
    Under $1M
    Q2 FY26

    Indicates a mix of small tickets and larger opportunities.

    Industry KPIs

    13
    MetricValueDetails
    Loans$1BUSD
    Deposits—
    Rotce ROE20%%
    Cet1 ratio11.09%%
    Capital returns$163MUSD
    Fee income lines$140MUSD
    Allowance reserves121 bps%
    Net interest incomeUnchanged
    Net interest margin—
    Net charge offs npls26 bps%
    Total operating expenses$360MUSD
    Provision for credit losses—
    Efficiency ratio operating leverage45.2%%

    Risks & headwinds

    4
    Net interest margin compression from sub debt issuance and lower SOFR ratesQ2 FY26

    2 bps impact in Q2 FY26

    Mitigation: Anticipate NII growth in H2 2026 from strong asset generation, stable funding costs, fixed asset repricing, and earning asset remix opportunities; SOFR headwind not likely to repeat and could become a tailwind.

    Other income normalizationBalance of 2026

    Elevated by ~$10 million in Q2 FY26

    Mitigation: Other income expected to run closer to Q1 levels for the balance of the year, but core fee businesses are expected to continue performing well.

    Competitive deposit environmentOngoing

    Ongoing competition

    Mitigation: Deposit pricing strategy continues to perform as expected, able to decrease total deposit costs by 1 bp linked quarter while remaining on offense with client acquisition.

    Uncertainty regarding Basel III capital rule changesPending finalization

    Proposed changes could provide ~100 bps of capital benefit

    Mitigation: Management believes the changes, if finalized, would increase capital flexibility.

    What to watch in Q3 FY26

    5

    NII and NIM trajectory

    Back half of 2026 (Q3, Q4)
    CurrentQ2 NIM impacted by 2 bps from sub debt and lower SOFR.
    TargetImprovement in NIM and NII dollars.

    Why it matters

    NII and NIM are primary drivers of bank profitability; improvement indicates successful balance sheet management and rate environment adaptation.

    So when you add all that up, we think NIM and NII should be improving in the back half of this year is equal.

    Q&A highlights

    6

    Is the overarching message on capital that ONB likes current levels and wants to tread water, given strong loan growth and buyback plans?

    Management confirmed this interpretation, stating they are comfortable with current capital levels, supporting organic growth, and continuing capital returns to shareholders. They also noted it allows for tangible book value per share growth.

    “Yes, I think you've got that right. We feel really comfortable with where we are. Obviously, we've got strong capital ratios capital to support organic growth and continue to lean into a return of capital to shareholders.”

    asked by Brendan Nosal · answered by John Moran

    2 min read6 chapters

    Detailed Narrative

    01

    Strong Organic Growth and Commercial Momentum

    Old National reported an 8% annualized increase in end-of-period loans, driven by $3.5 billion in commercial production and a record $5.6 billion commercial pipeline. The company emphasizes a focus on high-quality relationships and diversified commercial portfolios, with an average C&I loan under $1 million, indicating a mix of granular and larger opportunities in growth markets. Management noted that new loan production is predominantly floating rate, and the commercial pipeline is up 17% year-over-year, supporting future growth.

    02

    Record Efficiency and Operational Discipline

    The company achieved a record adjusted efficiency ratio of 45.2%, marking its seventh consecutive quarter of positive year-over-year operating leverage. Management highlighted ongoing investments in technology, AI, and process improvements to enhance scalability while maintaining disciplined expense management. Adjusted noninterest expense was $360 million for the quarter, with run-rate expenses well controlled, contributing to the record efficiency.

    03

    Diversified Fee Income Strength

    Fee income was a significant positive, with broad-based strength across all businesses, including wealth management, investments, mortgage, and capital markets. Adjusted noninterest income reached $140 million, exceeding guidance. This diversification is intentional to build a more balanced earnings engine less reliant on net interest income, with expectations for continued strong performance in core fee businesses, particularly in wealth management and capital markets.

    04

    Stable Credit Quality

    Credit metrics remained strong, with nonaccruals decreasing by $50 million or 10% from the prior quarter, and net charge-offs consistent with expectations at 26 basis points (22 bps excluding PCD loans). Criticized and classified loans declined by $109 million. The allowance for credit losses to total loans was 121 basis points, down 1 basis point quarter-over-quarter, with qualitative reserves incorporating a 100% weighting on the Moody's S2 scenario.

    05

    Robust Capital Position and Shareholder Returns

    Tangible book value per share increased 14% year-over-year and 11% annualized linked quarter. The CET1 ratio stood at 11.09%. The company returned $163 million to shareholders through dividends and buybacks, repurchasing $107 million (4.4 million shares) in Q2, with $277 million remaining under authorization. Management believes Basel III changes, if finalized, could provide approximately 100 basis points of capital benefit, enhancing future flexibility.

    06

    NII and NIM Outlook

    While Q2 NIM was impacted by 2 basis points from sub debt issuance and lower SOFR rates, management anticipates NII dollars to grow in the back half of 2026. This growth is expected to be supported by strong asset generation, stable funding costs, ongoing fixed asset repricing (100 bps above back book yields on securities, 60 bps on loans), and earning asset remix opportunities. The base case assumes no Fed rate actions and a stable 5-year treasury for the remainder of the year.

    AI-generated summary of the company’s earnings call. Not investment advice.