Executive Summary / Key Takeaways

• Strategic Expansion Driving Robust Performance: Old National Bancorp's "old fashioned basic banking" strategy, significantly bolstered by the early and successful integration of Bremer Financial Corporation, is yielding strong financial results, including substantial increases in net interest income and adjusted earnings per share.
• Disciplined Growth and Capital Generation: The company demonstrates consistent organic loan and deposit growth, coupled with disciplined expense management, leading to a peer-leading profitability profile and rapid capital accumulation, evidenced by a CET1 ratio over 11% and strong tangible book value per share growth.
• Resilient Credit Quality: Despite industry discussions of potential credit weaknesses, Old National maintains a "stable to improving" credit outlook, characterized by declining criticized and classified loans, high allowance for credit losses coverage, and a conservative underwriting approach.
• Technology as an Efficiency and Growth Enabler: Strategic investments in technology, including data infrastructure and AI exploration, are enhancing operational efficiency and client experience, supporting the company's competitive positioning and long-term growth objectives.
• Shareholder-Focused Capital Deployment: With better-than-expected capital levels post-acquisition, Old National is balancing continued capital build with opportunistic share repurchases, signaling a commitment to maximizing shareholder returns while maintaining financial strength.

A Foundation of "Basic Banking" and Strategic Expansion

Old National Bancorp, established in 1834 and headquartered in Evansville, Indiana, has cultivated a legacy rooted in "old fashioned basic banking." This enduring philosophy, centered on low-cost core deposits and rigorous underwriting, has been the bedrock of its consistent growth across the Midwest and Southeast regions of the United States. The company's disciplined approach to expense management and unwavering commitment to client and community service underscore its operational ethos.

The company's recent history is marked by a series of strategic acquisitions designed to enhance its scale and market density. The 2024 integration of CapStar Bank fortified its presence in Nashville, Tennessee, and other high-growth Southeastern markets. This strategic trajectory culminated in the acquisition of Bremer Financial Corporation, which legally closed ahead of schedule on May 1, 2025. This partnership significantly expands Old National's footprint across Minnesota, North Dakota, and Wisconsin, providing a substantial boost to its balance sheet and earnings capabilities. The successful systems conversion and branding for Bremer Bank, completed in mid-October 2025, represent a critical operational milestone, reflecting Old National's proficiency in integrating new entities.

Technological Edge: Enhancing Efficiency and Client Engagement

Old National's strategic investments in technology are not about chasing fads but about reinforcing its core banking model. The company is actively building a "stronger ecosystem" to meet the evolving needs of its clients and enhance operational efficiency. This includes ongoing investments in its data infrastructure and an intense exploration of artificial intelligence (AI) to "help shape all of our technology." Furthermore, Old National is committed to improving its treasury management offerings, particularly for "upper middle market" clients, aiming to "connect more deeply within their systems."

While specific quantifiable metrics for technological differentiation are not publicly detailed, the strategic intent is clear: these investments are designed to innovate, deliver client-focused solutions, increase efficiencies, drive growth, and enhance both client and team member experiences. The seamless execution of the Bremer systems conversion, described by management as their "best systems conversion to date," serves as a tangible testament to the company's robust operational technology capabilities. For investors, these technological advancements are crucial. They contribute directly to Old National's competitive moat by improving service delivery, bolstering operational efficiency (a factor in achieving its sub-50% efficiency ratio), and deepening client engagement, thereby supporting long-term growth and profitability. The proactive stance on data and AI also positions the company to adapt to future industry demands.

Competitive Landscape and Market Positioning

Old National Bancorp operates within a competitive regional banking landscape, contending with both larger national players and other regional institutions. Its "old fashioned basic banking" approach, emphasizing community-focused relationships and personalized service, provides a distinct competitive advantage, particularly in relationship-driven segments like commercial lending and small business support. This strategy fosters strong customer loyalty and allows for localized decision-making, differentiating it from larger, more technologically aggressive rivals.

Compared to competitors like Fifth Third Bancorp (FITB) and PNC Financial Services Group (PNC), Old National's strengths lie in its deep community roots and customer-centric service. While FITB and PNC often demonstrate greater efficiency in digital adoption and possess broader geographic footprints, Old National leverages trust and regional expertise. Against Huntington Bancshares (HBAN) and Regions Financial (RF), Old National's tailored approach to wealth management and community development lending can foster greater loyalty. However, Old National acknowledges potential vulnerabilities in its smaller scale and the speed of digital innovation compared to some rivals, which could impact market share capture in evolving digital banking spaces. The company's proactive approach to credit monitoring, leading to above-peer levels of non-performing loans but below-peer averages in delinquency and charge-off ratios, underscores its conservative credit discipline, a key differentiator in a volatile market. Management explicitly states they are "not going to compete on price" or "structure" in the commercial real estate market, prioritizing fundamental underwriting practices over aggressive growth.

Financial Performance: A Story of Growth and Discipline

Old National Bancorp's third-quarter 2025 results underscore its strong financial trajectory. The company reported net income applicable to common shares of $178.5 million, or $0.46 per diluted common share. On an adjusted basis, earnings per share reached $0.59, marking an 11% increase quarter-over-quarter and a robust 28% year-over-year growth. This performance was largely attributed to the full quarter impact of Bremer operations, margin expansion, better-than-expected fee income, and stringent expense control.

Net interest income (NII) saw significant growth, increasing by 46.7% for the three months and 30% for the nine months ended September 30, 2025, compared to the prior year. This expansion was primarily fueled by the Bremer acquisition, strong loan growth, and a reduction in the cost of average interest-bearing liabilities. The net interest margin (NIM) also improved, driven by these factors. The yield on interest-earning assets rose by 5 basis points, while the cost of interest-bearing liabilities decreased by 34 basis points in the third quarter of 2025 year-over-year. Average earning assets expanded by $16.10 billion for the quarter, largely due to the acquired Bremer assets and organic loan growth. Excluding Bremer, total loans grew 3.1% annualized, with the legacy Old National pipeline showing a nearly 40% year-over-year increase. The investment portfolio also increased by approximately $430 million, with new money yields on securities running about 70 basis points above back book yields due to the repositioning of the Bremer book.

Noninterest income increased by $36.30 million for the third quarter of 2025, driven by the Bremer acquisition and organic growth in fee-based businesses. Capital markets income, in particular, surged by $5.20 million for the quarter, benefiting from higher commercial real estate client interest rate swap fees, though some normalization is anticipated. Noninterest expense increased, reflecting $69.30 million in merger-related costs for the quarter. However, excluding these expenses, noninterest expense remained well-controlled, contributing to an efficiency ratio that is "below 50% and improving."

Capital Strength and Liquidity Management

Old National's capital position has rebuilt rapidly post-acquisition. Common Equity Tier 1 (CET1) ratio stood at over 11% at September 30, 2025, a 28 basis point increase linked quarter. Tangible book value per share grew over 17% annualized. Shareholders' equity totaled $8.30 billion, significantly up from $6.30 billion at December 31, 2024, benefiting from the Bremer acquisition ($1 billion) and the settlement of forward sale agreements ($443.20 million). The company also demonstrated its commitment to shareholder returns by repurchasing 1.10 million shares of common stock for $25 million during the nine months ended September 30, 2025, with authorization remaining for up to $175 million through February 28, 2026.

Liquidity remains robust, with period-end total deposits increasing by $648.50 million, or 5% annualized, to $55 billion. Core deposits, excluding brokered deposits, grew an even stronger 5.8% annualized, primarily from commercial clients. Non-interest-bearing deposits constitute 24% of core deposits, and brokered deposits remain below peer levels at 5.8% of total deposits. The company's loan-to-deposit ratio is 87%. Management actively monitors and manages liquidity, with approximately $2.8 billion in cash flow expected from the investment portfolio over the next twelve months. The spot rate on total deposits at September 30, 2025, was 1.86%, reflecting a disciplined approach to deposit pricing.

Outlook and Risk Assessment

Old National Bancorp's outlook for 2025 and beyond remains optimistic, with management guiding for full-year adjusted earnings per share in line with current analyst consensus estimates, featuring positive operating leverage and a peer-leading return profile. The company anticipates NII and NIM to be "stable to improving" in 2025, with NII expected to "absolutely grow" in 2026, driven by fixed asset repricing, continued loan growth, and the full impact of the Bremer partnership. Key assumptions include two additional 25 basis point rate cuts in 2025, a five-year treasury rate stabilizing at 3.55%, and a total down-rate deposit beta of approximately 40%. Full-year 2025 loan growth, excluding Bremer, is projected at 4% to 5%, supported by a strong legacy Old National pipeline, up nearly 40% year-over-year. The full run-rate cost savings from Bremer, exceeding $115 million annually, are expected to be fully realized in the first quarter of 2026.

Despite this positive outlook, Old National acknowledges inherent risks. Credit risk remains a primary concern, though management views the current environment as "stable to improving," citing a meaningful decline in 30-plus day delinquencies and criticized and classified loans. The allowance for credit losses on loans stood at 96.84% of nonaccrual loans, reflecting a conservative provisioning strategy that incorporates a 100% weighting on the Moody's S-2 scenario and additional qualitative factors for global economic uncertainty. Market risk from interest rate fluctuations is mitigated by a neutrally positioned balance sheet and the use of derivative instruments. Liquidity risk is managed through diverse funding sources and strategic contingency plans. Macroeconomic uncertainties and competitive pressures in loan growth, particularly in commercial real estate, are continuously monitored.

Conclusion

Old National Bancorp's narrative is one of consistent execution and strategic foresight. By adhering to its "old fashioned basic banking" principles, the company has built a resilient franchise capable of delivering strong financial performance even amidst macroeconomic uncertainties. The successful integration of Bremer Financial Corporation marks a significant chapter, expanding its geographic reach and enhancing its earnings power. This strategic expansion, coupled with disciplined organic growth in loans and deposits, robust capital generation, and a conservative credit culture, forms the core of its investment thesis.

The company's ongoing investments in technology, while not always yielding immediately quantifiable returns, are strategically vital for long-term efficiency and client engagement, strengthening its competitive moat against larger, more technologically advanced rivals. With a clear outlook for continued NII growth, improving efficiency, and a commitment to shareholder returns through opportunistic buybacks, Old National Bancorp is well-positioned for sustained success. Its ability to leverage strategic acquisitions, maintain credit quality, and adapt to evolving market dynamics underscores its potential for continued value creation for discerning investors.