OLD NATIONAL BANCORP /IN/ SEC 10-K Report

Old National Bancorp, the sixth largest Midwestern-headquartered bank by asset size, has released its 2024 10-K report, showcasing a year of robust financial performance and strategic growth. The company, which operates primarily in the Midwest and Southeast regions of the United States, has made significant strides in expanding its market presence and enhancing its service offerings through strategic acquisitions and operational improvements.

Financial Highlights

• Net Interest Income: $1,530.8 million, an increase compared to 2023, driven by loans and securities acquired in the CapStar transaction, strong loan growth, and higher rates on loans and investment securities.
• Provision for Credit Losses: $110.6 million, up from 2023 due to loan growth, credit migration, net charge-offs, and macroeconomic factors.
• Noninterest Income: $354.7 million, up from $333.3 million in 2023, primarily due to the CapStar merger, higher wealth and investment services fees, mortgage banking revenues, and other income.
• Noninterest Expense: $1,094.4 million, an increase of $68.1 million compared to 2023, reflecting additional operating costs from the CapStar merger and higher salary and employee benefits.
• Net Income Available to Common Shareholders: $523.1 million, impacted by merger-related expenses and other notable items.
• Net Income Per Common Share, Diluted: $1.68, reflecting the impact of merger-related expenses and other adjustments.
• Adjusted Net Income Per Common Share, Diluted: $1.86, excluding notable items such as merger-related charges and other adjustments.

Business Highlights

• Company Profile: Old National Bancorp operates 280 banking centers across the Midwestern and Southeastern United States, with consolidated assets of $53.6 billion as of December 31, 2024. The company offers a wide range of services including consumer and commercial banking, wealth management, and capital markets services.
• Geographical Performance: Key markets include Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, North Carolina, Tennessee, and Wisconsin. The Chicago-Naperville-Elgin area accounts for 40.4% of the bank's deposits, while the Evansville area contributes 10.4%.
• Human Capital Resources: As of December 31, 2024, Old National employed 4,066 full-time equivalent team members, emphasizing professional development through programs like Structured Leadership Development and ONUniversity, and offering a competitive total rewards package.
• Strategic Transactions: In 2024, Old National completed the acquisition of CapStar, enhancing its presence in Nashville and other high-growth Southeastern markets. The company also announced a pending merger with Bremer Bank, expected to close in mid-2025, which will expand its footprint in the upper Midwest.
• Community Engagement: Old National team members logged approximately 67,700 volunteer hours in 2024, supporting over 2,700 organizations. The company encourages community involvement by allowing employees to volunteer during work hours with supervisory approval.
• Business Outlook: For 2025, Old National plans to focus on low-cost core deposits, disciplined loan growth, and maintaining strong credit quality. The company aims to expand its client relationships and enhance its presence in the upper Midwest through the Bremer Bank partnership.
• Operational Performance: In 2024, Old National achieved a 10% growth in both total deposits and loans, maintaining a loan-to-deposit ratio of 89%. The company reported stable credit metrics with net charge-offs to average loans at 0.17%.

Strategic Initiatives

• Growth Strategy: In 2024, Old National successfully navigated a challenging interest rate environment while remaining on offense with its growth strategy, investing in client-facing and key support talent, and remaining opportunistic for new acquisitions.
• Acquisitions: The acquisition of CapStar was completed, strengthening the company's presence in Nashville and other high-growth Southeastern markets. Additionally, a pending partnership with Bremer Bank was announced, expected to enhance the company's presence in the upper Midwest.
• Capital Management: Old National issued 24.0 million shares of Common Stock in conjunction with the acquisition of CapStar, adding $417.6 million in shareholders’ equity. The company maintained a strong capital position with a total shareholders’ equity of $6.3 billion, representing 12% of total assets. The company also focused on maintaining a robust capital structure, with a Tier 1 leverage ratio of 9.21% and a total risk-based capital ratio of 13.37%.
• Future Outlook: Old National plans to continue building on the strong foundation established in 2024 by focusing on low-cost core deposits and disciplined loan growth. The company remains confident in its ability to navigate changes in short-term interest rates and overall economic conditions. The pending partnership with Bremer Bank is anticipated to close in the middle of 2025, which will expand opportunities to acquire new clients and build on existing relationships within the upper Midwest.

Challenges and Risks

• Competitive Market: Old National operates in a highly competitive market, facing significant competition from larger financial institutions and non-financial entities like FinTech companies. The company’s ability to attract and retain skilled personnel is crucial, especially with the rise of remote work options that broaden the competitive landscape for talent.
• Economic Conditions: Economic conditions, including inflation and interest rate volatility, pose significant risks to Old National’s financial performance. The company is particularly vulnerable to adverse changes in the Midwest and Southeast regions, where it has substantial loan concentrations. Geopolitical uncertainties, global conflicts, and pandemics could further exacerbate these economic risks.
• Mergers and Acquisitions: Mergers and acquisitions present integration challenges and potential dilution of shareholder value. Regulatory scrutiny and delays in obtaining necessary approvals could impede strategic transactions. The failure to complete mergers could negatively impact market perception and financial performance.
• Climate Change: Climate change introduces both physical and transition risks, affecting the company’s operations and those of its clients. Regulatory expectations around climate risk management are evolving, potentially increasing compliance costs and operational risks.
• Cybersecurity Threats: Cybersecurity threats remain a critical concern, with potential breaches posing risks to operational integrity and customer trust. The company’s reliance on third-party vendors adds another layer of vulnerability to cyber threats and operational disruptions.
• Regulatory Risks: Regulatory risks are heightened by potential changes in laws and increased scrutiny on practices like overdraft protection programs. Compliance failures could result in significant fines and reputational damage.
• Management Strategies: Management acknowledges the challenges posed by economic volatility and competitive pressures. Strategic initiatives include enhancing risk management frameworks and pursuing disciplined growth through mergers and acquisitions. The company is also focused on technological advancements to improve operational efficiency and customer service.
• Market Risk Management: Interest rate fluctuations significantly impact Old National’s net interest income and overall financial condition. The company’s exposure to market risks is managed through various hedging strategies and by maintaining a diversified portfolio. However, sharp interest rate changes could still adversely affect earnings and capital levels.

SEC Filing: OLD NATIONAL BANCORP /IN/ [ ONB ] - 10-K - Feb. 19, 2025