Old National Bancorp: Net Income Surges as Net Interest Income Grows

Old National Bancorp (NASDAQ: ONB) reported a strong fourth quarter of 2024, with net income applicable to common shares rising 16% year-over-year to $153.9 million, or $0.47 per diluted common share. Adjusted earnings of $0.49 per share topped analyst estimates of $0.46. The bank's robust performance was driven by a 8.2% increase in net interest income (NII) to $394.2 million and a 4.3% increase in noninterest income to $95.8 million.



Old National's strategic focus on specific segments and geographic locations has contributed significantly to its recent performance. The company's granular, low-cost deposit franchise resulted in a total deposit cost of 208 basis points, down 17 basis points from the previous quarter. This low-cost funding base, combined with a loan-to-deposit ratio of 89%, provides strong liquidity for the bank.



The bank's strong commercial loan production, totaling $1.5 billion in the fourth quarter, was offset by approximately $600 million in outsized payoff activity and lower line utilization. Despite this, period-end total loans stood at $36.3 billion, down 1.6% annualized. Old National's focus on commercial lending has contributed to its strong loan portfolio, with average total loans in the fourth quarter increasing by $111.1 million, or 1.2% annualized.

Old National's resilient credit quality continues to be a hallmark of the bank. The provision for credit losses was $27.0 million, down from $28.5 million in the third quarter. Net charge-offs were $18.7 million, or 21 basis points of average loans, up from 19 basis points in the third quarter. Excluding purchased credit deteriorated (PCD) loans that had an allowance at acquisition, net charge-offs to average loans were 17 basis points, compared to 16 basis points in the third quarter. 30+ day delinquencies as a percentage of loans were 0.27%, compared to 0.26% in the third quarter.



Old National's return on average tangible common equity (ROATCE) was 16.4%, up from 15.8% in the third quarter. The bank's preliminary regulatory Tier 1 common equity to risk-weighted assets ratio was 11.38%, up 38 basis points from the previous quarter. Old National's strong financial performance and capital position have enabled it to maintain a healthy dividend payout, with a quarterly dividend of $0.28 per share.



In conclusion, Old National Bancorp's strong fourth-quarter results reflect the bank's strategic focus on specific segments and geographic locations, as well as its operational execution in areas like analytics, marketing, and technology. The bank's robust net income growth, driven by increases in net interest income and noninterest income, demonstrates its ability to navigate a challenging macroeconomic environment. As Old National continues to execute on its strategic plan, investors can expect the bank to maintain its strong financial performance and capital position.

Rating: Maintain Buy.