Release Date: July 22, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Old National Bancorp (ONB, Financial) reported impressive second-quarter earnings, meeting or exceeding all previous guidance.
- The appointment of Tim Burke as the new President and COO is expected to bring experience and optimism to the company.
- The partnership with Bremer Bank closed ahead of schedule, contributing positively to the balance sheet and capital position.
- Net charge-offs fell within the expected range, and there was a 9% reduction in legacy criticized and classified assets.
- The CET1 ratio was better than expected at 10.74%, and tangible book value increased by 14% year over year.
Negative Points
- Increased competition in the commercial real estate market is causing ONB to be more cautious about loan growth estimates.
- The uncertain geopolitical environment and active portfolio management may lead to loan growth being at the lower end of the expected range.
- The deregulatory environment remains uncertain, with potential changes in regulatory thresholds still unclear.
- The integration of Bremer Bank may present challenges, with a focus on conversion and execution in the coming months.
- Despite strong earnings, the decision to hold CRE loans has not led to an increase in net interest income outlook for the second half of 2025.
Q & A Highlights
Q: Can you provide insights on client sentiment and the cautious loan growth outlook for the year?
A: James Ryan, CEO, noted that while the first half of the year was strong, competition, especially in commercial real estate, is intensifying. This has led to a conservative stance on loan growth estimates. The company is not willing to compete aggressively on price or structure, maintaining focus on fundamentals. James Sandgren, CEO of Commercial Banking, added that client sentiment is cautiously optimistic, with economic optimism rising despite uncertainties.
Q: Could you explain the linked quarter increase in non-performing assets (NPAs)?
A: John Moran, CFO, explained that the increase in NPAs is primarily due to the integration of Bremer Bank. On a percentage basis against the entire balance sheet, NPAs have actually decreased slightly, and the company feels confident about its current position.
Q: What is the strategy for capital deployment given the current capital position and growth outlook?
A: James Ryan, CEO, indicated that the company is focused on building capital and successfully completing the Bremer integration. While a share buyback is on the horizon due to better-than-expected capital levels, the immediate focus is on the integration and preparing for a strong start next year.
Q: How does the deregulatory environment impact Old National Bancorp?
A: James Ryan, CEO, described the regulatory environment as constructive, with positive relationships with regulators. While specific changes to regulatory thresholds are still pending, the overall tone is favorable, allowing the industry and Old National to potentially grow in desired areas.
Q: Can you elaborate on the fee income outlook and any areas of strength?
A: John Moran, CFO, highlighted that mortgage and wealth management performed well, contributing to strong fee income. Capital markets also showed positive results. The outlook for the remainder of the year remains stable, with no significant changes expected beyond the current quarter's performance.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
