ONB Q1 Deep Dive: Loan Growth, Deposit Discipline, and Bremer Bank Integration Shape Outlook

Midwestern regional bank Old National Bancorp (NASDAQ:ONB) reported revenue ahead of Wall Street’s expectations in Q1 CY2025, with sales up 10.9% year on year to $481.4 million. Its non-GAAP profit of $0.45 per share was 5.6% above analysts’ consensus estimates.

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StockStory’s Take

Old National Bank’s first quarter results drew a positive market response, reflecting management’s focus on disciplined expense control and successful deposit and loan growth during a period of economic uncertainty. CEO James Ryan attributed performance to a strong deposit franchise, solid credit quality, and margin management, noting noninterest income benefited from higher mortgage fees and a gain on the sale of previously acquired loans. Management highlighted that their efficiency ratio and tangible book value improved, partially due to careful deposit pricing and core deposit growth.

Looking ahead, Old National Bank’s forward guidance is anchored by the anticipated closing of its partnership with Bremer Bank, which is expected to provide additional scale and flexibility in the Upper Midwest. Management expects this integration to support stronger earnings growth, while ongoing expense management and stable deposit costs remain priorities. CFO John Moran emphasized that net interest income (NII) and net interest margin are projected to increase, supported by fixed asset repricing and organic loan growth. However, management flagged macroeconomic uncertainty and global trade developments as factors that could influence the range of possible outcomes this year.

Key Insights from Management’s Remarks

Management credited first quarter performance to growth in core deposits and loans, efficient cost controls, and a gain from the sale of commercial real estate loans. The pending Bremer Bank partnership and proactive credit monitoring were also highlighted as material contributors.

• Deposit and loan growth: The bank reported continued organic growth in core deposits and loans, enabling reduced reliance on brokered deposits and supporting stable funding costs. Management pointed to business and community deposit inflows as drivers, while maintaining a loan-to-deposit ratio of 89%.

• Expense discipline: Operating expenses remained well-controlled, with reductions in professional fees and FDIC assessments contributing to a positive efficiency ratio. This operational discipline enabled positive operating leverage and improved tangible book value per share.

• Noninterest income variability: Fee-based businesses, including mortgage and wealth management, showed resilience despite market volatility. A gain from the sale of commercial real estate loans added to noninterest income, though management acknowledged that this line can be lumpy from quarter to quarter.

• Credit quality and provisioning: Net charge-offs and delinquency ratios remained within expected ranges, and the allowance for credit losses was increased to reflect continued economic and global trade uncertainty. Management maintained a conservative stance by incorporating a 100% weighting to a more stressed economic scenario in credit reserves.

• Bremer Bank integration progress: Regulatory approvals for the Bremer Bank partnership were secured earlier than anticipated, with a legal close planned for May 1 and systems conversion targeted for mid-October. Management views the partnership as a source of greater balance sheet flexibility and enhanced regional presence.

Drivers of Future Performance

Management expects that the integration of Bremer Bank, proactive deposit management, and careful credit monitoring will shape results in the coming quarters, with macroeconomic uncertainty and global trade risks remaining key variables.

• Bremer Bank integration benefits: The addition of Bremer Bank is expected to expand Old National Bank’s presence across Minnesota, North Dakota, and Wisconsin, providing greater scale and potential for earnings growth. Management anticipates that stronger capital levels at closing will offer flexibility in managing commercial real estate loan sales, which could affect net interest income.

• Deposit pricing strategy: Management plans to continue reducing deposit costs by repricing higher-rate deposit books and maintaining a stable noninterest-bearing deposit mix. CFO John Moran highlighted that proactive deposit management should help the bank remain competitive and manage funding costs effectively through changing rate environments.

• Credit and loan growth outlook: Management projects mid-single-digit loan growth, supported by a robust pipeline and stable pull-through rates in commercial and industrial lending. However, they cautioned that continued economic and trade uncertainties could impact both loan demand and credit outcomes, prompting ongoing adjustments to loan loss provisioning and portfolio composition.

Catalysts in Upcoming Quarters

In the quarters ahead, the StockStory team will focus on (1) the successful integration and system conversion of Bremer Bank and the resulting impact on market share and scale, (2) execution of deposit repricing strategies and their effect on funding costs, and (3) trends in loan growth and credit quality as economic conditions evolve. The flexibility in managing commercial real estate loan sales and capital deployment will also be important indicators of operational agility.

Old National Bank currently trades at $20.79, up from $19.18 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free).

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