Old National earnings reached a record $0.66 per diluted share in the third quarter of 2026, while deposits grew 11% on an annualized basis. The bank paired record profitability and operating efficiency with higher deposit costs, and expects full-year net interest income near the lower end of its guidance range.
Key Takeaways
- GAAP and adjusted diluted earnings both reached $0.66 per share, while the adjusted efficiency ratio improved to a record-low 44.9%.
- Deposits rose 11% annualized, supported by organic business-account growth and public funds, but deposit costs increased eight basis points.
- Management expects full-year loan growth and net interest income near the lower ends of their respective guidance ranges.
Table of Contents
- Old National earnings combine efficiency gains with margin pressure
- Organic deposits expand at a higher cost
- Commercial lending leads as credit indicators improve
- Buybacks continue while management favors organic growth
- Conclusion
Old National earnings combine efficiency gains with margin pressure
Old National Bancorp reported record quarterly net income, a return on assets of 1.37% and a return on tangible common equity of 19.6%. Management expects full-year 2026 earnings-per-share growth to exceed 15%.
Adjusted noninterest expense declined from the previous quarter to $355 million, helping the adjusted efficiency ratio reach 44.9%. Adjusted noninterest income totaled $128 million, with strength in core banking, wealth and capital markets fees offset by softness in mortgage fees.
Net interest income increased 4% on an annualized basis from the second quarter, although net interest margin declined modestly as funding costs rose. CFO John Moran expects fourth-quarter net interest income dollars to increase and projected a margin of approximately 3.54%, compared with the third-quarter average of 3.52%.
Organic deposits expand at a higher cost
The deposit increase included approximately $1 billion in organic business-account growth and seasonal strength in public funds. Moran said brokered deposits declined during the quarter, while seasonal public funds contributed roughly $450 million.
Non-interest-bearing deposits increased by $182 million and represented 22% of total deposits. The loan-to-deposit ratio fell to 89%.
Both total and interest-bearing deposit costs rose eight basis points from the preceding quarter. Moran attributed four basis points of the increase to new deposits arriving at higher rates, rather than repricing of existing balances, underscoring the cost of competing for growth.
Commercial lending leads as credit indicators improve
Total loans increased 3% on an annualized basis from the previous quarter. Commercial and industrial lending rose 12% year over year, outpacing 3% growth in commercial real estate. The loan pipeline reached $4.4 billion, up 6% from a year earlier.
Management expects fourth-quarter loan growth in the mid-single digits, leaving full-year growth near the lower end of its 6%–8% guidance range. The bank added 26 relationship managers across commercial banking and wealth, including 19 net new commercial bankers.
Credit measures generally improved. Criticized and classified loans fell 9% quarter over quarter and 16% year over year. Non-accrual loans were stable at 92 basis points of loans, down from 123 basis points a year earlier. Net charge-offs were 27 basis points, or 24 basis points excluding purchased credit-deteriorated loans.
Buybacks continue while management favors organic growth
Old National repurchased $100 million of stock, or 3.9 million shares, during the quarter. It had $177 million remaining under its authorization, and its common equity Tier 1 capital ratio exceeded 11%. Dividends and buybacks together represented 62% of net income available to common shareholders.
Moran said proposed Basel III changes, if adopted as written, could lift the capital ratio by roughly 100 basis points and potentially prompt a review of the repurchase authorization in February. That remains conditional on the regulatory changes.
CEO Jim Ryan indicated that further acquisitions were not a current priority, favoring organic growth and talent investment. Management expects full-year expenses near the lower end of guidance, although fourth-quarter spending is expected to rise from the third-quarter level following late-quarter hiring and normal year-end factors.
Conclusion
Old National’s record quarter combined disciplined spending, organic deposit growth and improving credit indicators. Its fourth-quarter outlook nevertheless reflects higher funding costs, softer mortgage fees and loan growth tracking toward the lower end of guidance.
Read More News
Disclaimer
This FinanceVelix article provides general information, not personalized financial, investment, legal, or tax advice. Market prices, interest rates and economic conditions can change; investments carry a risk of loss. Facts reflect the material available when published and may change. Check important information independently and consult a qualified professional when needed. Mentioning an asset, company, or service is not an endorsement.
