How NSA Acquisition Influences Public Storage's Q1 2026 Earnings Outlook

Summary: How Q1 2026 earnings exceeded expectations

Old National Bancorp reported first-quarter 2026 results that exceeded its “internal expectations and analyst estimates” and described the quarter as an example of “disciplined execution” supporting confidence in the full-year plan. ¹

The outperformance was driven primarily by:

1. Stronger-than-expected loan growth and fee income, ²³
2. Well-controlled expenses / strong operating leverage, including a record low 46% adjusted efficiency ratio, ²³
3. Stable credit performance, with less than 20 bps of non–PCD charge-offs and improving nonaccrual trends, ²⁴
4. Balance-sheet and capital actions that complemented earnings quality (share repurchases/dividends) while maintaining strong capital/liquidity. ²⁵⁶

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What the company reported (earnings “beat” specifics)

• GAAP EPS for Q1 2026: $0.59. ²
• Adjusted EPS for Q1 2026: $0.61, after excluding $0.02 of merger-related expenses and a noncash pension-related item. ²
• Management explicitly stated that adjusted earnings exceeded guidance expectations in key line items, particularly loan growth, fee income, and expense control. ²³

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Key drivers of the beat

1) Loan growth and fee income came in better than expected

Management said results were “driven by better-than-expected loan growth and fee income” along with “well-controlled expenses.” ²

Additional detail on why revenue improved:

• Adjusted noninterest income was $122 million, exceeding guidance. ³
• Within noninterest income, management pointed to better-than-expected mortgage and capital markets performance, driven by a mid-quarter dip in rates despite typical seasonality. ³

On the loan side:

• The quarter showed stronger momentum, with total loans growing at an 8% annualized rate and C&I loans up 16.9% annualized from the last quarter. ²
• Management also highlighted loan pipelines at record levels (including $5.5 billion, up nearly 14% from year-end), supporting the revenue outlook behind the beat. ⁷¹

2) Expenses were contained and efficiency improved sharply

Management attributed outperformance to expense control and positive operating leverage. ²³

Quantitatively:

• Adjusted noninterest expense was $354 million in Q1. ³
• They reported a record low 46% adjusted efficiency ratio. ³
• They also emphasized realization of cost savings: 100% of $111 million of annual run-rate cost saves expected with Bremer. ³

3) Credit quality stayed solid (limiting earnings drag)

Management characterized credit performance as stable/solid:

• “Less than 20 basis points of non-PCD charge-offs.” ²
• They reported total net charge-offs of 26 bps (or 19 bps excluding PCD loans). ⁴
• Credit trends improved on nonaccrual: nonaccrual loans to total loans decreased modestly for the fourth consecutive quarter due to active portfolio management. ⁴

They also quantified reserves:

• The Q1 allowance for credit losses to total loans was 122 bps, down 2 bps from the prior quarter, primarily driven by charge-offs on PCD loans and loan growth in lower risk portfolios. ⁴
• Management noted qualitative reserve methodology including a 100% weighting on the Moody’s S2 scenario plus other factors. ⁴

4) Net interest income pressures were managed despite seasonality and issuance effects

While the beat was not described as being driven by NII alone, management acknowledged that earnings faced net interest income pressure from typical seasonality and recent sub-debt issuance, yet overall results still beat expectations. ¹

They provided more context on NII:

• They said Q1 NII/margin reflected factors like day count, sub debt issuance in late January, and spread dynamics tied to loan production mix. ⁷
• They were neutral to short-term interest rates and discussed deposit repricing performance as supportive to margins. ³⁷

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Capital and shareholder returns supported the “quality” of the beat

Although these actions don’t directly create EPS in the quarter the way revenue/expense do, management framed the quarter as strong enough to support both capital strength and returns:

• CET1 finished the quarter over 11%. ²
• Tangible book value per share grew 6% annualized and 11% year-over-year, even after absorbing Bremer onetime charges and returning capital. ²
• Returned $151 million to shareholders in Q1 via dividends and share repurchases. ²
• Repurchased 3.9 million shares in the quarter and 6.1 million shares over the last year. ²
• The combined payout ratio was 64% of Q1 adjusted net income to common (with dividends and repurchases). ²

On the balance sheet:

• Loan-to-deposit ratio was 89% and liquidity/capital strength were emphasized. ²

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Bottom line: what “drove” performance vs expectations

Old National’s Q1 2026 earnings exceeded expectations primarily because operating results were stronger than forecast in the core income drivers—loan growth and fee income—while expenses were tightly controlled, producing record efficiency and positive operating leverage. ²³ Credit results remained stable, limiting downside risk and supporting earnings durability. ²⁴ Management also highlighted that NII dynamics faced typical quarter-specific pressures (seasonality and sub-debt issuance), but the mix of better revenue, controlled costs, and steady credit outweighed those headwinds. ¹²⁷