Old National Bancorp (ONB) Q4 2025: Tangible Book Value Jumps 15% as Bremer Integration Drives Capital Return Flexibility

January 21, 2026 | By EarningsIQ Research

Old National Bancorp capped 2025 with record profitability and a 15% rise in tangible book value per share, propelled by disciplined integration of the Bremer Bank acquisition and robust core deposit and loan growth. Strategic focus on organic expansion, capital return, and active cost control positions ONB for continued peer-leading returns in 2026, with management signaling increased share repurchase activity and ongoing investment in technology and talent. The bank’s outlook is anchored by stable credit quality, a neutral rate risk profile, and a deliberate shift to self-funded innovation and scalable growth.

Summary

• Capital Generation Surges: ONB’s tangible book value per share rose sharply, supporting both growth and buybacks.
• Bremer Integration Unlocks Efficiency: Seamless conversion accelerates cost saves and expands Midwest footprint.
• 2026 Focuses on Organic Growth and Shareholder Returns: Management prioritizes talent, technology, and more active repurchases.

Performance Analysis

Old National Bancorp delivered a record quarter and year, underpinned by strong core earnings, robust fee income, and disciplined expense control. Adjusted earnings per share rose sequentially and year-over-year, with adjusted return on tangible common equity approaching 20%, signaling a profitability profile at the top of the peer set. The bank’s efficiency ratio improved to a new low, reflecting the full benefit of cost saves from the Bremer Bank integration, which also reinforced ONB’s position in key Midwest markets.

Core deposit growth kept pace with loan expansion, maintaining a loan-to-deposit ratio of 89% and supporting healthy liquidity. Non-interest bearing deposits climbed as a share of the deposit base, while the cost of total deposits fell, aided by proactive repricing and a shift in funding mix. Credit quality further strengthened, with criticized and classified loans down 8% and non-accrual loans falling by 12%, supporting a modest reduction in reserve coverage. Capital levels rebuilt rapidly, allowing for accelerated share repurchases and flexibility for further capital return in 2026.

• Margin Expansion Supported by Repricing: Net interest margin and income both improved, driven by higher new loan and securities yields and effective deposit cost management.
• Fee Businesses Outperform: Mortgage and capital markets income exceeded guidance, aided by a favorable rate backdrop.
• Operating Leverage Remains Positive: Expenses stayed well-controlled, with run-rate benefits from Bremer cost saves to be fully realized in Q1 2026.

ONB’s performance reflects a disciplined balance of growth, risk management, and capital allocation, setting a high bar for regional peers heading into a potentially more volatile rate environment.

Executive Commentary

Strategic Positioning

1. Organic Growth and Talent Investment

ONB’s 2026 strategy centers on organic expansion, with a deliberate emphasis on hiring front-line talent and deepening client relationships in both legacy and new markets. Commercial lending growth is broad-based, with management citing enhanced middle market activity and targeted banker additions, particularly in expansion markets and wealth management. This talent-first approach is expected to drive both loan and fee income growth, leveraging ONB’s community bank model and client-centric positioning.

2. Capital Return and Share Repurchases

With a rebuilt CET1 ratio above 11% and tangible book value per share up 15% year-over-year, ONB is poised for more active share buybacks in 2026. Management does not see capital growth and capital return as mutually exclusive, and intends to balance organic growth funding with increased repurchases, supported by robust earnings generation. This dual-track approach is a clear signal that ONB will not allow excess capital to accumulate unchecked, prioritizing shareholder value creation.

3. Integration Excellence and Cost Discipline

The Bremer Bank integration is a case study in disciplined M&A execution, with systems conversion described as one of ONB’s smoothest ever. Cost saves are tracking ahead of plan, and the full run-rate benefit will be realized in early 2026. The bank’s efficiency ratio, now at a record low, reflects a culture of self-funding innovation—technology and client-facing investments are made without sacrificing expense control, underpinning scalable growth.

4. Credit and Portfolio Management

Active portfolio management and conservative credit selection continue to distinguish ONB’s risk profile. The bank’s criticized and classified loan metrics have improved for several quarters, with non-accrual and net charge-off rates below peers. Management’s approach to reserving remains cautious, but ongoing credit improvement has enabled a modest reduction in reserve coverage without compromising risk appetite.

5. Rate and Margin Management

ONB maintains a neutral rate risk position, with net interest income and margin guided to improve through a combination of asset repricing and deposit beta management. The bank expects meaningful incremental yield from both loan and securities books, with deposit costs set to decline further as exception-priced deposits are repriced downward. The balance sheet is positioned to benefit from a stable or moderately declining rate environment, with the main drivers being growth, curve steepness, and continued discipline on deposit pricing.

Key Considerations

ONB’s fourth quarter marks a strategic inflection, as record capital generation and successful integration of Bremer Bank enable a shift toward organic growth and more dynamic capital return in 2026. The management team’s narrative is consistent: invest in scalable capabilities, maintain peer-leading returns, and avoid complacency on capital deployment. Investors should focus on:

Key Considerations:

• Deposit Franchise Strength: Non-interest bearing deposits rose to 26% of core deposits, supporting margin and providing rate flexibility.
• Expense Control Enables Self-Funded Innovation: Technology and client-facing investments are prioritized without expanding the overall cost base, keeping efficiency at record lows.
• Balanced Capital Allocation: Management is committed to funding organic growth while increasing share buybacks, signaling confidence in sustainable earnings power.
• Credit Resilience: Continued improvement in loan quality metrics supports stable provision needs and underpins the growth outlook.
• Fee Income Upside: Mortgage and capital markets businesses outperformed, and management sees potential for further upside if the rate backdrop remains favorable.

Risks

ONB’s outlook is not without risk. A more volatile or rapidly declining rate environment could pressure net interest income if deposit repricing lags. Competition for commercial loans and talent remains intense, especially in high-growth Midwest markets. Credit normalization, while currently benign, could accelerate if macro conditions deteriorate. Regulatory scrutiny and evolving capital requirements may also constrain capital return flexibility.

Forward Outlook

For Q1 2026, ONB guided to:

• Loan growth of 3% to 5%, supported by a strong pipeline
• Full realization of Bremer cost saves, with efficiency ratio benefits

For full-year 2026, management maintained guidance for:

• Loan growth of 4% to 6%
• Fee income to remain strong, especially in mortgage and capital markets
• Positive operating leverage and peer-leading returns

Management highlighted several factors that will shape results:

• Active deposit beta management and asset repricing as key margin levers
• Continued investment in talent and technology to drive organic growth and scale

Takeaways

ONB’s disciplined execution in 2025 sets a strong foundation for 2026, as capital strength and integration success enable a shift toward organic growth and more dynamic capital return.

• Capital and Efficiency Lead Peer Set: Tangible book value per share and the efficiency ratio both reached new highs, reflecting ONB’s ability to self-fund investment and return capital.
• Organic Growth and Talent at the Forefront: Management’s focus on hiring and client-facing capabilities is expected to drive loan and fee income growth, particularly in underpenetrated markets.
• Margin Levers and Credit Quality Remain Central: Asset repricing and disciplined deposit management underpin the margin outlook, while improving credit metrics provide a cushion against normalization risks.

Conclusion

Old National Bancorp exits 2025 with record profitability, robust capital, and a clear strategic focus on organic growth and capital return. The bank’s operational discipline, integration track record, and proactive investment in talent and technology position it as a regional peer leader heading into 2026.

Industry Read-Through

ONB’s results reinforce a broader theme among regional banks: disciplined integration, cost control, and capital return are now table stakes for peer-leading performance. The success of the Bremer integration and the focus on self-funded innovation highlight the importance of scalable platforms and talent investment for sustainable growth. As competition intensifies for both commercial clients and bankers, banks with strong deposit franchises and flexible capital allocation models will be best positioned to weather rate volatility and regulatory change. The Midwest banking landscape, in particular, is seeing rational pricing and stable deposit dynamics, but the bar for operational excellence and shareholder returns continues to rise.

ONB Financials Regional banks Capital return Efficiency Organic growth Integration