Old National Bancorp said its acquisition of Bremer Financial is on target to close by midyear as planned, and the company left the door open for more dealmaking later this year amid expectations for eased regulatory reviews of M&A.
The Evansville, Indiana-based bank in November said it would buy St. Paul, Minnesota-based Bremer Financial for
The $53.6 billion-asset Old National said it would gain $16 billion of assets, $11.5 billion of loans and $13.2 billion of deposits. It would become the third-largest bank in the Minneapolis-St. Paul metropolitan area by market share. It would acquire 70 branches spanning North Dakota, Minnesota and Wisconsin.
"We spent a couple of days there last week, and the executive team and all of the leaders we met are incredibly enthusiastic about this partnership. And I don't say those words lightly. I think they're looking forward to the opportunities to grow and invest in their franchise," Jim Ryan, Old National's chairman and CEO, said on the company's earnings call Tuesday.
"We think there is awesome talent there, both on the client-facing side and the support side, just as we become a larger organization and need more talent," Ryan said. "As we think about opportunities, not only to lead what's happening in Minnesota and North Dakota and Wisconsin, but I really think there's opportunities for folks to lead entire parts of our franchise sitting right there in the Twin Cities. … I think we'll look back on [this] and say that was a pivot point in our transformation."
During the call, Ryan was asked about the new Trump administration and the president's campaign pledges to cut regulations, including scrutiny of M&A. Ryan said it was too soon to make any sweeping assumptions about change in the nation's capital, but said he was hopeful that bank deals would close with more ease this year. Dozens of deals faced delays under former President Biden's watch.
"We still anticipate closing the partnership" with Bremer "by midyear and completing our integration in the latter half of the year," Ryan said. He said Old National filed regulatory applications with the Office of the Comptroller of the Currency and the Federal Reserve.
Old National would consider more deals after closing the Bremer tie-up, though Ryan said the bank would consider all options for capital deployment later this year. Banks often use excess capital to buy back stock, raise dividends and make acquisitions.
"I think it's a bit early for us to make a decision about how capital will be allocated," Ryan said. "Clearly, the first priority is always growth. But I do think we'll have more capital flexibility…and I think we'll be in a position probably by midyear to have better optics into how capital management looks going forward."
Old National has bulked up across the Midwest with several large deals over the past several years, including its nearly
It also has spread its tentacles into the Southeast via deals, including its acquisition last year of the $3 billion-asset
Old National posted total loans of $36.3 billion in the fourth quarter, up from $33 billion a year earlier. It reported net interest income of $394.2 million, an increase from $364.4 million in the final quarter of 2023. The bank projected loan growth of 4% to 6% this year, despite elevated levels of loan payoffs linked to refinancing activity following three Fed interest rate cuts last year.
Paydowns offset lower deposit costs and interest income on new loans to crimp the bank's fourth-quarter net interest margin. Its NIM of 3.3% contracted by 9 basis points from a year earlier.
Given recent upticks in inflation, additional Fed action on interest rates this year remains a wildcard, said Moody's analyst Chris Stanley. "With high rates, tight credit spreads, and persistent market volatility, continued profitability for banks hinges on rapidly resolving [any credit] issues, having a deep playbook for multiple economic scenarios, and properly pricing risk in new loan growth," Stanley said.
Old National recorded net charge-offs of $18.7 million, or 21 basis points of average loans, up from $9.7 million, or 12 basis points. But executives described the increase as a gradual return to normal conditions after an exceptionally pristine credit performance in 2023.
Old National's earnings metrics were generally positive. While noninterest income of $95.8 million was down from $100.1 million in the year-ago period, its noninterest expense of $276.8 million declined from $284.2 million.
Total deposits of $40.8 billion were up from $37.2 billion.
Old National reported fourth-quarter net income of $153.8 million, or 47 cents per share, up from $132.5 million, or 44 cents, a year earlier.
The bank also announced that President and Chief Operating Officer Mark Sander plans to retire on June 30. Prior to the Old National-First Midwest merger, Sander served as president and COO of First Midwest. Ryan said Old National would consider both external and internal candidates to succeed Sander.
