Old National Bancorp (ONB) Q3 2026 earnings review
Old National's loan pipeline shrinks, but profit sets a record
Old National earned a record profit, but its loan growth slowed. The Indiana lender made $0.66 a share, 43% more than a year ago, when merger costs weighed on results. Chairman and chief executive Jim Ryan cited growth in deposits and loans, but the commercial loan pipeline shrank by a fifth.
| Profit per share | $0.66 +43% from a year ago; +12% excluding one-offs |
|---|---|
| Loan growth, annual pace from last quarter | 2.9% 8.3% in the spring quarter |
| Commercial loan pipeline | $4.4 billion down 20% from June's record; up 6% from a year ago |
| Full-year outlook | Not restated July targets: loans up 6–8%, interest income about $2.4 billion |
⚖️ Verdict: 🔴 Bearish
The story got worse because new commercial lending, the main source of growth, slowed. Loans grew at a 2.9% annual pace, against about 8% in the two previous quarters. So the fourth quarter must now carry the plan for the whole second half. The good news: deposits rose much faster than loans, and the share count keeps shrinking.
The question now is whether June's record pipeline was a peak or a pause. Either spring's deals emptied it and it will refill from a level 6% above a year ago. Or demand has cooled, and the full-year loan target slips. January's pipeline and loan figures will tell.
🐂 Bull Case
Deposits Grew Four Times Faster Than Loans
Old National funds its loans mainly with customer deposits. The question for a year was whether it could keep gathering them without paying more. This quarter the money arrived: deposits rose $1.5 billion, a 10.6% annual pace, from "business and public funds", the release said.
The bank used the inflow to repay $1.0 billion of advances from the Federal Home Loan Bank, its main wholesale lender. Loans now stand at 89% of deposits, down from 91% in June, so the balance sheet needs less borrowed money.
- Money market accounts: up $1.0 billion from June
- Time deposits: up $361 million from June and 18% from a year ago
- Noninterest-bearing accounts: up $182 million, the first rise this year
- Cost of total deposits: 1.79%, up 0.08 percentage points from the spring
The other side is the standing worry about competition for deposits. Their cost rose for the first time in five quarters, because the new money went mostly into money market and time accounts, which pay the most. That is why the interest margin slipped even as funding grew.
What to watch: the cost of total deposits next quarter. A figure at or below 1.79% would mean the bank can keep attracting deposits without giving the gain back through the margin.
Costs Keep Falling While Revenue Holds Steady
Old National spent 44.9 cents of each revenue dollar running the bank this quarter, excluding one-offs, the lowest in its history. The release credits "Disciplined expense management", and costs have fallen in three of the four quarters since the purchase of Bremer, the Minnesota bank, closed.
- Salaries and benefits: 25.0% of revenue, down 4.7 percentage points from a year ago
- Staff: 4,894 full-time equivalents, down 6.7% from a year ago
- Efficiency ratio excluding one-offs: 44.9%, from 48.1% a year ago
This matters because revenue hardly grew, up 1% from a year ago excluding one-off gains, so lower costs are the only reason profit rose. At some point profit growth must come from revenue, and that is the limit of this story.
What to watch: fourth-quarter expenses against the July plan. By our math it leaves $366–386 million for the quarter, above this quarter's $354.7 million; a similar figure would mean the plan was cautious.
Buybacks Shrink the Share Count 2.5% a Year
Old National paused buybacks in early 2025 to save capital for Bremer, the Minnesota bank it bought in May that year, and has bought shares every quarter since the autumn. It kept its core capital ratio at 11.11% while doing so, because retained earnings covered both the buyback and loan growth.
- Shares repurchased: 3.9 million, for $100 million
- Profit returned to shareholders, with $55 million of dividends: 62%
- Diluted shares: 380.9 million, down 2.5% from a year ago
- Authorisation left, by our math: $177 million, to use by February 2027
The buybacks matter because they turn modest profit growth into faster growth per share: profit excluding one-offs rose 8% from a year ago, while per share it climbed 12%, and the smaller share count accounts for the gap.
What to watch: the fourth-quarter repurchase. Another $100 million would use most of what remains before the authorisation ends in February 2027, and would mean the bank still sees no better use for the capital.
Wealth Fees Reach a Record as Windfalls Fade
Old National earns about a fifth of its revenue from fees rather than interest: managing clients' investments, service charges, card fees, mortgages and capital markets work for companies. Fee income fell 9% from the spring, but the spring carried about $10 million of unusual other income, the release said.
- Wealth and investment fees: $42.2 million, a record, up 6.5% from a year ago
- Service charges on deposit accounts: $29.2 million, up 4.8%
- Other income: $15.0 million, from $38.4 million in the spring
Strip out pension and securities gains and fees were $127.5 million, 2% below a year ago. The steady lines, wealth and service charges, grew, while capital markets and mortgages shrank, so the fee base is holding rather than expanding now that Bremer's clients sit in both years' figures.
What to watch: wealth fees next quarter. Growth above this quarter's 6.5% would mean the largest fee line is winning new clients, not just following markets.
🐻 Bear Case
The Commercial Loan Pipeline Shrank by a Fifth
Chairman and chief executive Jim Ryan pointed to "growth in both deposits and loans" and said the bank is "very well positioned to build on this momentum". The loan figures tell a different story. Loans grew $362 million in the quarter, a 2.9% annual pace. In each of the two previous quarters they had grown at about 8%.
The pipeline of commercial loans in progress gives the clearest forward view, and it fell to $4.4 billion. The release calls that "down 20% from record levels at the end of the second quarter and up 6% from a year ago".
This matters because the full-year loan target Old National set in July, growth of 6% to 8%, now rests on the fourth quarter. By our math, the bottom of that range needs fourth-quarter growth at a 4.4% annual pace. The middle needs 8.3%, nearly three times this quarter's pace. A smaller pipeline makes that harder, because next quarter's loans come from deals already in it.
What to watch: the fourth-quarter pipeline and loan growth, due in January. A pipeline rebuilding toward June's record would mean the summer drop was a pause after record closings, not a loss of demand.
Fourth-Quarter Interest Income Must Jump 8%
Net interest income is the gap between what Old National earns on loans and securities and what it pays for funding. It makes up about four fifths of revenue and has barely moved for five quarters: $592.0 million this time, up 0.9% from the spring.
The margin keeps slipping because "core deposit pricing and funding mix" offset part of the gain from loan growth, the release said. That is the standing worry about deposit competition, and it got fresh evidence this quarter.
- Net interest margin: 3.52%, down from 3.54% in the spring
- A year ago: 3.64%
- Cost of interest-bearing deposits: 2.31%, up 0.08 percentage points
In July the bank trimmed its full-year target to about $2,400 million, give or take 2%. By our math the fourth quarter must deliver at least $593 million to reach the bottom of that range. The middle needs $641 million, an 8% jump; that would take the margin turning after three quarters of decline.
What to watch: fourth-quarter net interest income against the $593 million floor. A figure below it would mean the July plan was wrong about the margin, not the loan book.
Risks this quarter didn't answer
The press release answers the headline questions but leaves several standing concerns untested. Credit held steady on the measures the release gives, yet the detail that would settle five of them waits for the quarterly filing or the call.
- Larger commercial loans: the filing's size table will show whether loans above $25 million kept rising as a share of the commercial book.
- Commercial real estate: the property-type tables will show whether office and multifamily nonaccruals kept falling and how loans maturing at sub-4% rates refinance.
- Rate cuts: the bank's own model showed interest income falling about 3% over two years if rates drop 2 percentage points; the year-end release will update it.
- Modified loans: payment defaults on loans restructured for struggling borrowers rose in the spring; the filing's modification table will show whether that continued.
- Bremer Trust's stake: the lock-up on the shares the seller received has expired; any sale would appear in a regulatory filing, not here.
👓 Other Themes
Merger Costs Have Almost Stopped
Merger-related charges fell to $0.7 million, from $12.1 million in the spring, seventeen months after the Bremer purchase closed. The quarter also carried a $0.9 million gain from settling Bremer's pension plan. The two nearly cancel, so profit excluding one-offs, $249.7 million, is almost the reported figure. If the charges stay near zero next quarter, reported and adjusted results will finally match.
Rates Took $391 Million Off Tangible Equity
Old National holds $14.8 billion of bonds, mostly mortgage-backed securities, whose value moves with long-term interest rates. Rates moved against them in the quarter, so the unrealised loss widened by $391 million, the release said. Tangible common equity fell to 7.28% of tangible assets, from 7.68% in June. The loss is on paper and unwinds as bonds mature, but tangible book value per share dropped 3.8% from June.
💲 Other KPIs
Down 8.8% from June and 17% from a year ago, the lowest since Bremer joined. These are loans the bank rates below standard or on watch, so they lead charge-offs. Nonaccrual loans held at 0.92% of the total and net charge-offs at 0.27% of average loans, both inside the full-year range the bank set in July.
Up 12.1% from a year ago, the fastest-growing part of the loan book; commercial real estate rose 2.8%. Home loans grew 7.1%. But the quarterly pace slowed to $148 million added, from $495 million in the spring. The winter quarter had added $634 million, so this is the smallest gain this year, consistent with the shrinking pipeline.
❓ Key Questions
Do the full-year loan and interest income targets still stand?
The release restates none of the July targets. By our math the fourth quarter must grow loans at a 4.4% annual pace just to reach the bottom of the loan range, and interest income must rise to at least $593 million.
Why did the commercial pipeline fall 20% in one quarter?
Record spring closings explain part of the drop, but it also coincides with a shift toward larger loans. Which markets and which loan sizes left the pipeline, and how much has it refilled since September?
What drove the first rise in deposit costs in five quarters?
Total deposit costs rose 0.08 percentage points while balances grew $1.5 billion. Was it pricing for public funds, promotional rates in newer markets, or simply the shift into time and money market accounts?
How large are commercial loans above $25 million now?
They rose from 18% to 26% of the commercial book in the first half of the year. The filing will show whether that continued and how concentrated the largest relationships have become.
When do merger charges stop being excluded from adjusted results?
They fell to $0.7 million this quarter, seventeen months after the Bremer close. A clean fourth quarter would make reported and adjusted profit the same figure for the first time since the deal.