Old National Bancorp NASDAQ: ONB reported record third-quarter earnings, supported by deposit growth, commercial lending activity, expense controls and stable credit quality. The company posted GAAP and adjusted earnings per share of $0.66, while Chairman and CEO Jim Ryan said the quarter set records for net income, adjusted diluted EPS and adjusted efficiency.
“These results reflect the strength of our franchise and disciplined execution of our strategy,” Ryan said, citing the company’s focus on profitable relationships, core-deposit funding, underwriting standards and operating efficiency.
The bank reported return on assets of 1.37% and return on tangible common equity of 19.6%. Its adjusted efficiency ratio fell to a record-low 44.9%, while adjusted noninterest expense declined from the preceding quarter to $355 million.
Deposits Rise as Loan Growth Remains Disciplined
Period-end deposits increased at an 11% annualized rate during the quarter, driven primarily by $1 billion of organic growth in business accounts and seasonal public-fund inflows. Noninterest-bearing deposits rose $182 million and represented 22% of total deposits. The loan-to-deposit ratio declined to 89%.
Chief Financial Officer John Moran said deposit costs increased 8 basis points from the second quarter, with about half of that increase tied to newly acquired balances that carried somewhat higher costs. Seasonal public-fund deposits also contributed to the increase.
“We are staying on our front foot,” Moran said of the competitive market for deposits. “We are very interested in continuing to grow deposits in line with our earning-asset growth.”
Total loans grew at a 3% annualized rate from the prior quarter and 7% annualized year over year. Commercial and industrial lending increased 12% year over year, while commercial real estate lending rose 3%. Management said active portfolio management and a focus on pricing, credit and relationship hurdles moderated reported loan growth during the quarter.
President and COO Tim Burke said C&I lending is expected to continue outpacing commercial real estate growth. He said the company’s commercial loan pipeline totaled $4.4 billion, up 6% from a year earlier, and that demand remained resilient despite uncertainty surrounding interest rates.
Management also said line utilization declined slightly in the quarter, which Burke said could represent embedded future demand as commercial borrowers finance inventory and other needs.
Margin Outlook Points to Modest Improvement
Net interest income grew 4% annualized from second-quarter levels. Net interest margin declined modestly during the quarter as higher funding costs offset benefits from rates, loan volume and day count.
Moran said the bank expects fourth-quarter net interest income to rise from the $592 million reported in the third quarter, potentially reaching a figure beginning with $600 million. He also projected that net interest margin could increase by a couple of basis points from the third-quarter average of 3.52%.
“The expectation of a modest improvement in margin is probably the right way to be thinking about 4Q,” Moran said.
Management said new loan production remained predominantly floating rate. Fixed-rate loans are repricing at yields more than 100 basis points above the maturing portfolio, according to Moran. The company also expects $1.8 billion of investment portfolio cash flow over the next 12 months, with new securities purchases yielding about 6%, compared with a 4.2% yield on the existing portfolio.
Adjusted noninterest income was $128 million. Core banking, wealth-management and capital-markets fees remained steady, although mortgage fees softened amid the changing rate environment. The company expects mortgage-fee pressure and typical seasonal effects to continue into the fourth quarter.
Credit Trends and Capital Return
Credit quality remained stable. Net charge-offs totaled 27 basis points, or 24 basis points excluding purchased credit-deteriorated loans. Criticized and classified loans declined 9% from the prior quarter and 16% from a year earlier. Nonaccrual loans were stable sequentially at 92 basis points of total loans and down from 123 basis points a year earlier.
The allowance for credit losses, including reserves for unfunded commitments, was 120 basis points of total loans, down one basis point from the second quarter.
Old National ended the quarter with a common equity Tier 1 ratio above 11% and tangible book value per share up 5% year over year. The company repurchased $100 million, or 3.9 million shares, during the quarter and $327 million over the past year. It had $177 million remaining under its authorized buyback program.
Moran said management expects to use the remaining authorization opportunistically through its February 2027 expiration. The company’s combined dividends and share repurchases represented 62% of net income available to common shareholders during the quarter.
2026 Outlook Remains Unchanged
The company maintained its full-year 2026 guidance, including expectations for more than 15% EPS growth, positive operating leverage, tangible book value growth and normalized credit performance. Management expects full-year loan growth of 6% to 8%, with fourth-quarter growth in the mid-single digits bringing results toward the lower end of that range.
Expense guidance remains unchanged, though Moran said full-year expenses are expected near the lower end of the company’s $1.435 billion to $1.455 billion range. Fourth-quarter expenses are expected to rise from the third quarter due to late-quarter hiring and normal year-end factors.
During the quarter, Old National added 26 relationship managers across commercial banking and wealth management, including 19 net-new bankers. The company added commercial staff in Ohio, including Cleveland and Columbus, and expanded specialty capabilities in fintech, foreign exchange and food and beverage.
Ryan said the company is prioritizing organic growth and talent investments rather than pursuing acquisitions in the near term. “I don’t think this is the time or place for us to be thinking about more M&A,” he said, adding that the company does not need acquisitions to support its current returns or growth targets.
About Old National Bancorp (NASDAQ:ONB)
Old National Bancorp NASDAQ: ONB is a regional financial services company headquartered in Evansville, Indiana. Through its principal subsidiary, Old National Bank, the company provides banking and financial solutions to individuals, families, businesses and institutions.
Its products and services include checking and savings accounts, commercial and consumer lending, residential mortgages, treasury and cash-management services, trust and investment management, wealth management, and other financial advisory services.
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