Old National Bancorp (NASDAQ:ONB) reported what management described as a record second quarter for 2026, citing strong loan growth, fee income gains, expense control and continued capital returns to shareholders.
Chairman and CEO Jim Ryan said the quarter reflected “an exceptional” performance for the company, including record adjusted earnings per share, record net income and a record efficiency ratio. He said Old National generated an adjusted return on average tangible common equity of about 20% and an adjusted return on assets of 1.39%.
Loan Growth and Pipeline Strength Drive Quarter
Old National said end-of-period loans increased by $1 billion, or 8% annualized, during the quarter. Ryan said the increase was driven by “robust, high-quality commercial production.” Commercial production reached $3.5 billion, while the company’s period-end commercial pipeline rose to a record $5.6 billion.
John, who reviewed the company’s financial results on the call, said total loans grew 8.3% annualized from the prior quarter, with balanced growth across commercial real estate and commercial and industrial portfolios. He said production was diversified across the commercial book and was predominantly floating rate.
During the question-and-answer session, Tim said the company is beginning to see larger loan opportunities in its middle-market C&I business, particularly in growth markets. However, Ryan added that the average C&I loan in the bank remains below $1 million, underscoring that Old National still handles a large number of smaller commercial loans.
Management said loan growth expectations have improved, and the company now expects full-year loan growth of 6% to 8%, supported by year-to-date results and the current pipeline.
Fee Businesses Outperform Expectations
Fee income was another area of strength. Ryan said the company saw broad-based gains across all fee businesses and described the diversification as intentional, saying Old National is seeking to build “a stronger, more balanced earnings engine” that is less dependent on net interest income.
Adjusted non-interest income was $140 million for the quarter, exceeding management’s guidance. John said all fee businesses performed better than expected. He noted that the “other income” line was elevated by approximately $10 million due to market value adjustments, higher bank-owned life insurance income and an asset recovery. While those items were described as core, John said the line should run closer to first-quarter levels for the rest of the year.
In response to an analyst question, John said wealth management has been “terrific,” investments have been good, mortgage performed solidly and capital markets remained strong. He said Old National is “reasonably bullish” on capital markets revenue because of the company’s commercial pipelines and production levels.
Looking longer term, John said aggregate fee income growth is likely a mid- to high-single-digit growth item, with some businesses, including wealth and capital markets, having potential to grow at double-digit rates.
Expenses Controlled as Efficiency Ratio Hits Record
Old National reported GAAP second-quarter earnings per share of $0.65. Excluding $12.1 million in merger-related expenses and a $13.2 million valuation gain tied to the settlement of the Bremer pension plan, adjusted earnings per share were also $0.65.
Adjusted non-interest expense totaled $360 million. John said expenses remained well controlled and drove positive operating leverage both sequentially and year over year. Ryan said the company’s adjusted efficiency ratio was 45.2%, marking the seventh straight quarter of positive year-over-year operating leverage.
Ryan said Old National is investing in technology, artificial intelligence and process improvements to make the company more scalable while maintaining expense discipline.
Net Interest Income Outlook Holds Steady
Management left net interest income guidance unchanged, while noting it had been updated for the impact of a subordinated debt issuance. John said second-quarter net interest margin was affected by two basis points from the full-quarter impact of subordinated debt issued in late January and lower SOFR rates. Without those factors, he said the margin would have been up slightly.
John said net interest income growth should be supported by strong asset generation, stable funding costs, fixed-asset repricing and earning-asset remix opportunities. He said new money yields on securities are running about 100 basis points above back-book yields, while fixed-to-fixed loan repricing offers about 60 basis points of opportunity.
During the Q&A, John said management sees “more opportunities than challenges” in the second half of the year, citing higher average earning assets, repricing opportunities, the potential for SOFR to become a tailwind, remix opportunities and additional calendar days in both the third and fourth quarters.
Old National said total deposits increased 3.4% annualized, led by commercial and public fund growth, partly offset by seasonal retail tax outflows. Non-interest-bearing deposits remained 23% of total deposits. John said total deposit costs decreased by one basis point during the quarter, even as the company continued to pursue new client acquisition in a competitive deposit environment.
Credit and Capital Remain Management Priorities
Credit quality improved in several areas. Ryan said non-accrual loans declined by $50 million, or 10%, from the prior quarter. John said non-accrual loans fell to 91 basis points of total loans, while criticized and classified loans decreased by $109 million during the quarter.
Net charge-offs were 26 basis points, or 22 basis points excluding charge-offs on purchased credit deteriorated loans. John said the allowance for credit losses to total loans, including the reserve for unfunded commitments, was 121 basis points, down one basis point from the prior quarter, primarily due to charge-offs on PCD loans and improved credit quality.
Old National’s capital position remained strong. The company’s CET1 ratio was 11.09%, and tangible book value per share increased 14% year over year. John said tangible book value per share grew 11% annualized from the prior quarter, even as the company absorbed Bremer-related charges, supported better-than-expected balance sheet growth and returned capital.
The company returned $163 million to shareholders in the quarter through dividends and share repurchases. That included $107 million of common stock repurchases, representing 4.4 million shares. John said Old National has $277 million remaining under its buyback program and expects to use the remaining authorization opportunistically through the plan period ending in February 2027.
Asked about capital levels, John said the company is comfortable with its position and has enough capital to support organic growth while continuing capital returns. Ryan said the company is balancing organic investment, tangible book value growth, strong capital ratios and shareholder returns.
Ryan closed by saying Old National does not need to rely on acquisitions to meet its goals and remains focused on organic growth, client relationships, investments in people and platforms, risk management and long-term shareholder value.
About Old National Bancorp (NASDAQ:ONB)
Old National Bancorp (NASDAQ: ONB) is the bank holding company for Old National Bank, a regional financial services firm headquartered in Evansville, Indiana. Through its network of community banking offices, the company provides a full range of commercial and consumer banking services. Its offerings include checking and savings accounts, personal and business loans, and deposit products designed to meet the needs of individuals, small businesses, and larger corporate customers.
In addition to traditional banking, Old National Bancorp delivers specialty financial services such as treasury management, wealth management, mortgage loan production, and insurance solutions.
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