Old National Bancorp's Russell 2500 Growth Inclusion: A Strategic Boost for Mid-Cap Banking

Old National Bancorp (ONB) has quietly emerged as a beneficiary of its recent reclassification into the Russell 2500 Growth Index, a move that underscores its growing prominence in the mid-sized banking sector. With a market cap of $7.91 billion as of June 2025—up 55% from a year ago—ONB's inclusion in this influential index signals a strategic shift that could amplify its appeal to growth-oriented investors. But does this move mark a turning point for the bank's valuation and growth trajectory? Let's dive into the data.

The Strategic Reclassification Play

The Russell 2500 Growth Index is designed to capture mid-cap companies with strong growth profiles, and ONB's inclusion hinges on its market cap and financial metrics. To qualify, companies must meet thresholds like total market cap (between $1.5 billion and $15 billion for the Russell 2500) and growth-style criteria such as price-to-book ratio, earnings growth rates, and forward-looking growth expectations.

ONB's market cap of $6.58 billion as of May 2025—later rising to $7.91 billion by June—easily places it within the Russell 2500's mid-cap bracket. Crucially, its trailing P/E of 14.4x and P/B of 1.3x align with the index's growth tilt, even as its earnings growth forecast of 30.8% annually outpaces its five-year average of 23%. This reclassification wasn't just a paperwork exercise; it reflects ONB's evolving financial profile.

The benefits are immediate. Index inclusions often trigger inflows from passive funds tracking the Russell 2500, which could boost ONB's liquidity and stock price. Historically, such reclassifications have spurred short-term gains, though long-term success depends on fundamentals.

Growth Potential: Acquisitions, Scale, and a Strong Balance Sheet

ONB's recent growth isn't accidental. The bank has executed two major acquisitions in 2025: Bremer Financial Corporation (completed May 1) and CapStar Financial Holdings (April 2). These moves expanded its footprint in key markets like Minnesota and Texas, boosting assets to $49.5 billion as of 2024 and revenue to $2.6 billion.

The shows a clear upward trajectory, with earnings surging to $555.7 million in 2024. The acquisitions are expected to drive further efficiencies, particularly in net interest margins, which have already begun to stabilize after recent dips.

Valuation: A Mid-Cap Bargain?

ONB's valuation metrics look compelling relative to peers. While competitors like Cullen/Frost Bankers (CFR, $8.3B market cap) and Western Alliance Bancorporation (WAL, $8.5B) trade at similar sizes, ONB's P/E of 14.4x is lower than the sector average of 15.8x. Its dividend yield of 2.62% and payout ratio of 32% also suggest financial health and shareholder-friendly policies.

The highlights ONB's undervaluation. Meanwhile, its Snowflake Score—55% below fair value—hints at further upside. This isn't just about being cheaper; ONB's debt/equity ratio of 86.1% remains manageable, and its $200 million buyback program signals confidence in its valuation.

The Bearish Technicals vs. Fundamentals

Despite the positives, technical indicators paint a cautious picture. As of June 13, ONB's weekly MACD and moving averages signaled a “mildly bearish” trend, though its RSI remains bullish. The stock's beta of 0.85 suggests lower volatility than the market, but its 52-week range ($16.50–$24.49) reflects recent volatility.

Investors should weigh this against the fundamentals: ONB's earnings growth and scale-expanding acquisitions are tangible positives. The bearish signals may reflect broader sector jitters, such as rising interest rate risks, but ONB's community-banking focus and geographic diversification provide resilience.

Investment Takeaway

Old National Bancorp's inclusion in the Russell 2500 Growth Index is more than a technicality—it's a vote of confidence in its growth trajectory and valuation. With acquisitions fueling scale, a robust balance sheet, and a dividend yield above the sector average, ONB offers a compelling entry point for investors seeking mid-cap banking exposure.

The technical bearishness is a headwind, but it's likely a short-term issue. For a long-term investor, ONB's fundamentals justify a buy rating, especially if the stock dips below $20. However, traders might wait for a clearer technical rebound. Either way, this reclassification marks ONB as a name to watch in an increasingly competitive mid-sized bank space.

Final Note: Always consider risk factors like insider selling and macroeconomic shifts. ONB's story hinges on its ability to convert scale into sustained profitability—a challenge many mid-caps face. Stay tuned.