Old National Bank (ONB)

Midwestern regional bank Old National Bancorp (NASDAQ:ONB) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 46.8% year on year to $713 million. Its non-GAAP profit of $0.59 per share was 5.1% above analysts’ consensus estimates.

Company Overview

Tracing its roots back to 1834 when Andrew Jackson was president, Old National Bancorp (NASDAQ:ONB) is a bank holding company that provides commercial and consumer loans, deposit services, wealth management, and treasury solutions primarily throughout the Midwest region.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

Old National Bancorp competes with other regional banks operating in the Midwest including Fifth Third Bancorp (NASDAQ: FITB), Huntington Bancshares (NASDAQ: HBAN), KeyCorp (NYSE: KEY), and First Merchants Corporation (NASDAQ: FRME).

Two primary revenue streams drive bank earnings. While net interest income, which is earned by charging higher rates on loans than paid on deposits, forms the foundation, fee-based services across banking, credit, wealth management, and trading operations provide additional income. Luckily, Old National Bank’s revenue grew at an incredible 23.5% compounded annual growth rate over the last five years. Its growth surpassed the average banking company and shows its offerings resonate with customers, a great starting point for our analysis.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Old National Bank’s annualized revenue growth of 10% over the last two years is below its five-year trend, but we still think the results suggest healthy demand. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Old National Bank reported magnificent year-on-year revenue growth of 46.8%, and its $713 million of revenue beat Wall Street’s estimates by 3.2%.

Net interest income made up 78.5% of the company’s total revenue during the last five years, meaning lending operations are Old National Bank’s largest source of revenue.

While banks generate revenue from multiple sources, investors view net interest income as the cornerstone - its predictable, recurring characteristics stand in sharp contrast to the volatility of non-interest income.

The underlying profitability of top-line growth determines the actual bottom-line impact. Banking institutions measure this dynamic using the efficiency ratio, which is calculated by dividing non-interest expenses like personnel, facilities, technology, and marketing by total revenue.

Investors place greater emphasis on efficiency ratio movements than absolute values, understanding that expense structures reflect revenue mix variations. Lower ratios represent better operational performance since they show banks generating more revenue per dollar of expense.

Over the last five years, Old National Bank’s efficiency ratio has swelled by 7.2 percentage points, going from 58.2% to 56.1%. Said differently, the company’s expenses have grown at a slower rate than revenue, which typically signals prudent management.

Old National Bank’s efficiency ratio came in at 58.8% this quarter, falling short of analysts’ expectations by 718.6 basis points (100 basis points = 1 percentage point). This result was 5 percentage points worse than the same quarter last year.

For the next 12 months, Wall Street expects Old National Bank to rein in some of its expenses as it anticipates an efficiency ratio of 48.1%.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Old National Bank’s EPS grew at a spectacular 8.7% compounded annual growth rate over the last five years. However, this performance was lower than its 23.5% annualized revenue growth, telling us the company became less profitable on a per-share basis as it expanded.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Old National Bank, its two-year annual EPS declines of 2.1% mark a reversal from its (seemingly) healthy five-year trend. These shorter-term results weren’t ideal, but given it was successful in other measures of financial health, we’re hopeful Old National Bank can return to earnings growth in the future.

In Q3, Old National Bank reported adjusted EPS of $0.59, up from $0.46 in the same quarter last year. This print beat analysts’ estimates by 5.1%. Over the next 12 months, Wall Street expects Old National Bank’s full-year EPS of $2.06 to grow 22.8%.

Banks profit by intermediating between depositors and borrowers, making them fundamentally balance sheet-driven enterprises. Market participants emphasize balance sheet quality and sustained book value growth when evaluating these institutions.

When analyzing banks, tangible book value per share (TBVPS) takes precedence over many other metrics. This measure isolates genuine per-share value by removing intangible assets of debatable liquidation worth. Other (and more commonly known) per-share metrics like EPS can sometimes be murky due to M&A or accounting rules allowing for loan losses to be spread out.

Old National Bank’s TBVPS grew at a tepid 3.5% annual clip over the last five years. However, TBVPS growth has accelerated recently, growing by 15.1% annually over the last two years from $9.92 to $13.15 per share.

Over the next 12 months, Consensus estimates call for Old National Bank’s TBVPS to grow by 14.4% to $15.04, top-notch growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, Old National Bank has averaged a Tier 1 capital ratio of 11%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity, or ROE, tells us how much profit a company generates for each dollar of shareholder equity, a key funding source for banks. Over a long period, banks with high ROE tend to compound shareholder wealth faster through retained earnings, buybacks, and dividends.

Over the last five years, Old National Bank has averaged an ROE of 9.3%, healthy for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired. This shows Old National Bank has a decent competitive moat.

We enjoyed seeing Old National Bank beat analysts’ revenue expectations this quarter. We were also happy its tangible book value per share narrowly outperformed Wall Street’s estimates. On the other hand, its net interest income was in line. Overall, this print had some key positives. The stock remained flat at $20.86 immediately after reporting.

Updated: December 3, 2025 at 11:29 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

Old National Bank isn’t a bad business, but we’re not clamoring to buy it here and now. To begin with, the its revenue growth was exceptional over the last five years, and analysts believe it can continue growing at these levels. And while Old National Bank’s TBVPS growth was uninspiring over the last five years, its net interest income growth was exceptional over the last five years.

Old National Bank’s P/B ratio based on the next 12 months is 1x. This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $25.75 on the company (compared to the current share price of $22.17).