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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 20222023
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number 001-15817
 
Old National Bancorp
(Exact name of registrant as specified in its charter)
 
Indiana35-1539838
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
 
One Main Street47708
Evansville,Indiana(Zip Code)
(Address of principal executive offices)
(800) 731-2265
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading
Symbol(s)
 Name of each exchange on which registered
Common stock, no par value ONB TheNASDAQStock Market LLC
Depositary Shares, each representing a 1/40th interest in a share of Non-Cumulative Perpetual Preferred Stock, Series AONBPPTheNASDAQStock Market LLC
Depositary Shares, each representing a 1/40th interest in a share of Non-Cumulative Perpetual Preferred Stock, Series CONBPOTheNASDAQStock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer   Accelerated filer 
Non-accelerated filer   Smaller reporting company 
Emerging growth company     
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
The registrant has one class of common stock (no par value) with 292,893,000292,589,000 shares outstanding at June 30, 2022.July 31, 2023.



OLD NATIONAL BANCORP
FORM 10-Q
TABLE OF CONTENTS
  Page
PART I. 
Item 1. 
 
 
 
 
 
 
 Note 1.
 Note 2.
Note 3.
 Note 4.
 Note 5.
 Note 6.
 Note 7.
 Note 8.
Note 9.
 Note 10.
Note 11.9.
 Note 12.10.
Note 11.
Note 12.
 Note 13.
Note 14.
 Note 14.15.
 Note 15.16.
Note 16.
 Note 17.
Note 18.
Note 19.
Note 20.
Note 21.
Item 2.
 
 
 
 
 
 
 
 
Item 3.
Item 4.
PART II.
Item 1A.
Item 2.
Item 5.
Item 6.
2


GLOSSARY OF ABBREVIATIONS AND ACRONYMS
As used in this report, references to “Old National,” “the Company,” “we,” “our,” “us,” and similar terms refer to the consolidated entity consisting of Old National Bancorp and its wholly-owned affiliates.subsidiaries. Old National Bancorp refers solely to the parent holding company, and Old National Bank refers to Old National Bancorp’s bank subsidiary.
The acronyms and abbreviations identified below are used inthroughout this report, including the Notes to Consolidated Financial Statements (Unaudited) as well as in the Management’s Discussion and Analysis of Financial Condition and Results of Operations.. You may find it helpful to refer to this page as you read this report.
Anchor (MN):  Anchor Bancorp, Inc.
Anchor (WI):  Anchor BanCorp Wisconsin Inc.
AOCI:  accumulated other comprehensive income (loss)
AQR:  asset quality rating
ASC:  Accounting Standards Codification
ASU:  Accounting Standards Update
ATM:  automated teller machine
BBCC: business banking credit center (small business)
CECL: current expected credit loss
Common Stock:  Old National Bancorp common stock, no par value
COVID-19: coronavirus disease 2019
DTI:  debt-to-income
FASB:  Financial Accounting Standards Board
FDIC:  Federal Deposit Insurance Corporation
FHLB:  Federal Home Loan Bank
FHTC:  Federal Historic Tax Credit
FICO:  Fair Isaac Corporation
First Midwest: First Midwest Bancorp, Inc.
GAAP:  U.S. generally accepted accounting principles
LGD:  loss given default
LIBOR:  London Interbank Offered Rate
LIHTC:  Low Income Housing Tax Credit
LTV:  loan-to-value
N/A:  not applicable
N/M:  not meaningful
NASDAQ: The NASDAQ Stock Market LLC
N/M:  not meaningful
NMTC: New Markets Tax Credit
NOW:  negotiable order of withdrawal
OCC:  Office of the Comptroller of the Currency
PCD: purchased credit deteriorated
PD:  probability of default
PPP: Paycheck Protection Program
Renewable Energy:  investment tax credits for solar projects
SBA:  Small Business Administration
SEC:  U.S. Securities and Exchange Commission
TBA:  to be announced
TDR:  troubled debt restructuring
UMB: UMB Bank, n.a.


3


OLD NATIONAL BANCORP
CONSOLIDATED BALANCE SHEETS
(dollars and shares in thousands, except per share data)(dollars and shares in thousands, except per share data)June 30,
2022
December 31,
2021
(dollars and shares in thousands, except per share data)June 30,
2023
December 31,
2022
(unaudited)  (unaudited) 
AssetsAssets  Assets  
Cash and due from banksCash and due from banks$455,620 $172,663 Cash and due from banks$473,023 $453,432 
Money market and other interest-earning investmentsMoney market and other interest-earning investments342,344 649,356 Money market and other interest-earning investments724,863 274,980 
Total cash and cash equivalentsTotal cash and cash equivalents797,964 822,019 Total cash and cash equivalents1,197,886 728,412 
Equity securities, at fair valueEquity securities, at fair value55,879 13,211 Equity securities, at fair value71,953 52,507 
Investment securities - available-for-sale, at fair value:
U.S. Treasury402,783 235,584 
U.S. government-sponsored entities and agencies1,242,557 1,542,773 
Mortgage-backed securities4,827,708 3,698,831 
States and political subdivisions720,041 1,654,986 
Other securities374,612 249,892 
Total investment securities - available-for-sale7,567,701 7,382,066 
Investment securities - held-to-maturity, at amortized cost (fair value
$2,779,290 and $0, respectively)
3,084,186 — 
Investment securities - available-for-sale, at fair value (amortized cost
$7,551,258 and $7,772,603, respectively)
Investment securities - available-for-sale, at fair value (amortized cost
$7,551,258 and $7,772,603, respectively)
6,500,515 6,773,712 
Investment securities - held-to-maturity, at amortized cost (fair value
$2,603,058 and $2,643,682, respectively)
Investment securities - held-to-maturity, at amortized cost (fair value
$2,603,058 and $2,643,682, respectively)
3,054,997 3,089,147 
Federal Home Loan Bank/Federal Reserve Bank stock, at costFederal Home Loan Bank/Federal Reserve Bank stock, at cost288,884 169,375 Federal Home Loan Bank/Federal Reserve Bank stock, at cost413,326 314,168 
Loans held for sale, at fair valueLoans held for sale, at fair value26,217 35,458 Loans held for sale, at fair value114,369 11,926 
Loans:Loans:Loans:
CommercialCommercial8,923,983 3,391,769 Commercial9,698,241 9,508,904 
Commercial real estateCommercial real estate11,796,503 6,380,674 Commercial real estate13,450,209 12,457,070 
Residential real estateResidential real estate6,079,057 2,255,289 Residential real estate6,684,480 6,460,441 
Consumer credit, net of unearned incomeConsumer credit, net of unearned income2,754,105 1,574,114 Consumer credit, net of unearned income2,599,543 2,697,226 
Total loansTotal loans29,553,648 13,601,846 Total loans32,432,473 31,123,641 
Allowance for credit losses(288,003)(107,341)
Allowance for credit losses on loansAllowance for credit losses on loans(300,555)(303,671)
Net loansNet loans29,265,645 13,494,505 Net loans32,131,918 30,819,970 
Premises and equipment, netPremises and equipment, net586,031 476,186 Premises and equipment, net564,299 557,307 
Operating lease right-of-use assetsOperating lease right-of-use assets192,196 69,560 Operating lease right-of-use assets184,700 189,714 
Accrued interest receivableAccrued interest receivable157,079 84,109 Accrued interest receivable205,198 190,521 
GoodwillGoodwill1,991,534 1,036,994 Goodwill1,998,716 1,998,716 
Other intangible assetsOther intangible assets140,281 34,678 Other intangible assets114,159 126,405 
Company-owned life insuranceCompany-owned life insurance769,595 463,324 Company-owned life insurance771,753 768,552 
Other assetsOther assets825,163 372,079 Other assets1,172,966 1,142,315 
Total assetsTotal assets$45,748,355 $24,453,564 Total assets$48,496,755 $46,763,372 
LiabilitiesLiabilitiesLiabilities
Deposits:Deposits:Deposits:
Noninterest-bearing demandNoninterest-bearing demand$12,388,379 $6,303,106 Noninterest-bearing demand$10,532,838 $11,930,798 
Interest-bearing:Interest-bearing:Interest-bearing:
Checking and NOWChecking and NOW8,473,510 5,338,022 Checking and NOW7,654,202 8,340,955 
SavingsSavings6,796,152 3,798,494 Savings5,578,323 6,326,158 
Money marketMoney market5,373,318 2,169,160 Money market7,200,288 5,389,139 
Time depositsTime deposits2,507,616 960,413 Time deposits5,265,664 3,013,780 
Total depositsTotal deposits35,538,975 18,569,195 Total deposits36,231,315 35,000,830 
Federal funds purchased and interbank borrowingsFederal funds purchased and interbank borrowings1,561 276 Federal funds purchased and interbank borrowings136,060 581,489 
Securities sold under agreements to repurchaseSecurities sold under agreements to repurchase476,173 392,275 Securities sold under agreements to repurchase311,447 432,804 
Federal Home Loan Bank advancesFederal Home Loan Bank advances3,283,963 1,886,019 Federal Home Loan Bank advances4,771,183 3,829,018 
Other borrowingsOther borrowings622,714 296,670 Other borrowings815,318 743,003 
Operating lease liabilitiesOperating lease liabilities215,188 76,236 Operating lease liabilities206,178 211,964 
Accrued expenses and other liabilitiesAccrued expenses and other liabilities530,998 220,875 Accrued expenses and other liabilities733,159 835,669 
Total liabilitiesTotal liabilities40,669,572 21,441,546 Total liabilities43,204,660 41,634,777 
Shareholders' EquityShareholders' EquityShareholders' Equity
Preferred stock, 2,000 shares authorized, 231 and 0 shares issued and outstanding, respectively230,500 — 
Common stock, $1.00 per share stated value, 600,000 shares authorized,
292,893 and 165,838 shares issued and outstanding, respectively
292,893 165,838 
Preferred stock, 2,000 shares authorized, 231 shares issued and outstandingPreferred stock, 2,000 shares authorized, 231 shares issued and outstanding230,500 230,500 
Common stock, no par value, $1.00 per share stated value, 600,000 shares authorized,
292,597 and 292,903 shares issued and outstanding, respectively
Common stock, no par value, $1.00 per share stated value, 600,000 shares authorized,
292,597 and 292,903 shares issued and outstanding, respectively
292,597 292,903 
Capital surplusCapital surplus4,157,543 1,880,545 Capital surplus4,149,089 4,174,265 
Retained earningsRetained earnings966,980 968,010 Retained earnings1,428,542 1,217,349 
Accumulated other comprehensive income (loss), net of taxAccumulated other comprehensive income (loss), net of tax(569,133)(2,375)Accumulated other comprehensive income (loss), net of tax(808,633)(786,422)
Total shareholders' equityTotal shareholders' equity5,078,783 3,012,018 Total shareholders' equity5,292,095 5,128,595 
Total liabilities and shareholders' equityTotal liabilities and shareholders' equity$45,748,355 $24,453,564 Total liabilities and shareholders' equity$48,496,755 $46,763,372 
The accompanying notes to consolidated financial statements are an integral part of these statements.
4


OLD NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
Three Months Ended
June 30,
Six Months Ended
June 30,
(dollars and shares in thousands, except per share data)(dollars and shares in thousands, except per share data)2022202120222021(dollars and shares in thousands, except per share data)2023202220232022
Interest IncomeInterest Income    Interest Income    
Loans including fees:Loans including fees:    Loans including fees:    
TaxableTaxable$285,249 $123,577 $469,264 $246,106 Taxable$449,896 $285,249 $860,271 $469,264 
NontaxableNontaxable4,802 3,171 8,309 6,528 Nontaxable10,925 4,802 21,137 8,309 
Investment securities:Investment securities:Investment securities:
TaxableTaxable51,459 24,401 88,868 48,532 Taxable64,072 51,459 124,873 88,868 
NontaxableNontaxable11,018 9,261 21,284 18,393 Nontaxable11,043 11,018 22,206 21,284 
Money market and other interest-earning investmentsMoney market and other interest-earning investments1,830 48 2,138 136 Money market and other interest-earning investments8,966 1,830 12,064 2,138 
Total interest incomeTotal interest income354,358 160,458 589,863 319,695 Total interest income544,902 354,358 1,040,551 589,863 
Interest ExpenseInterest ExpenseInterest Expense
DepositsDeposits5,187 2,732 8,381 5,891 Deposits100,974 5,187 163,567 8,381 
Federal funds purchased and interbank borrowingsFederal funds purchased and interbank borrowings2 — 2 — Federal funds purchased and interbank borrowings5,655 10,494 
Securities sold under agreements to repurchaseSecurities sold under agreements to repurchase85 95 181 215 Securities sold under agreements to repurchase900 85 1,679 181 
Federal Home Loan Bank advancesFederal Home Loan Bank advances6,925 5,218 12,888 10,627 Federal Home Loan Bank advances45,088 6,925 83,084 12,888 
Other borrowingsOther borrowings4,687 2,486 8,154 4,915 Other borrowings10,114 4,687 18,068 8,154 
Total interest expenseTotal interest expense16,886 10,531 29,606 21,648 Total interest expense162,731 16,886 276,892 29,606 
Net interest incomeNet interest income337,472 149,927 560,257 298,047 Net interest income382,171 337,472 763,659 560,257 
Provision for credit lossesProvision for credit losses9,245 (4,929)106,814 (22,285)Provision for credit losses14,787 9,165 28,224 117,901 
Net interest income after provision for credit lossesNet interest income after provision for credit losses328,227 154,856 453,443 320,332 Net interest income after provision for credit losses367,384 328,307 735,435 442,356 
Noninterest IncomeNoninterest IncomeNoninterest Income
Wealth management fees19,304 10,734 33,934 20,442 
Wealth and investment services feesWealth and investment services fees26,521 27,872 53,441 49,824 
Service charges on deposit accountsService charges on deposit accounts21,144 8,514 35,870 16,638 Service charges on deposit accounts17,751 20,324 34,754 34,350 
Debit card and ATM feesDebit card and ATM fees10,402 5,583 17,301 10,726 Debit card and ATM fees10,653 11,222 20,635 18,821 
Mortgage banking revenueMortgage banking revenue6,522 7,827 13,767 24,352 Mortgage banking revenue4,165 6,522 7,565 13,767 
Investment product fees8,568 6,042 15,890 11,906 
Capital markets incomeCapital markets income7,261 5,871 11,703 9,586 Capital markets income6,173 7,261 13,112 11,703 
Company-owned life insuranceCompany-owned life insurance4,571 2,783 8,095 5,497 Company-owned life insurance4,698 4,571 7,884 8,095 
Debt securities gains (losses), netDebt securities gains (losses), net(85)692 257 2,685 Debt securities gains (losses), net17 (85)(5,199)257 
Other incomeOther income11,430 3,462 17,540 6,388 Other income11,651 11,430 20,118 17,540 
Total noninterest incomeTotal noninterest income89,117 51,508 154,357 108,220 Total noninterest income81,629 89,117 152,310 154,357 
Noninterest ExpenseNoninterest ExpenseNoninterest Expense
Salaries and employee benefitsSalaries and employee benefits161,817 72,640 285,964 140,757 Salaries and employee benefits135,810 161,817 273,174 285,964 
OccupancyOccupancy26,496 14,054 47,515 28,926 Occupancy26,085 26,496 54,367 47,515 
EquipmentEquipment7,550 4,506 12,718 8,475 Equipment7,721 7,550 15,110 12,718 
MarketingMarketing9,119 2,632 13,395 4,694 Marketing9,833 9,119 19,250 13,395 
Data processing25,883 11,697 44,645 24,050 
TechnologyTechnology20,056 25,883 39,258 44,645 
CommunicationCommunication5,878 2,411 9,295 5,289 Communication4,232 5,878 8,693 9,295 
Professional feesProfessional fees6,336 8,528 26,127 11,252 Professional fees6,397 6,336 13,129 26,127 
FDIC assessmentFDIC assessment4,699 1,226 7,274 2,833 FDIC assessment9,624 4,699 20,028 7,274 
Amortization of intangiblesAmortization of intangibles7,170 2,909 11,981 5,984 Amortization of intangibles6,060 7,170 12,246 11,981 
Amortization of tax credit investmentsAmortization of tax credit investments1,525 1,813 3,041 3,015 Amortization of tax credit investments2,762 1,525 5,523 3,041 
Property optimizationProperty optimization242 — 1,559 — 
Other expenseOther expense20,922 7,202 42,196 12,083 Other expense17,762 21,002 34,958 31,109 
Total noninterest expenseTotal noninterest expense277,395 129,618 504,151 247,358 Total noninterest expense246,584 277,475 497,295 493,064 
Income before income taxesIncome before income taxes139,949 76,746 103,649 181,194 Income before income taxes202,429 139,949 390,450 103,649 
Income tax expenseIncome tax expense24,964 13,960 16,250 31,590 Income tax expense47,393 24,964 88,814 16,250 
Net incomeNet income114,985 62,786 87,399 149,604 Net income155,036 114,985 301,636 87,399 
Preferred dividendsPreferred dividends(4,033)— (6,050)— Preferred dividends(4,033)(4,033)(8,067)(6,050)
Net income applicable to common shareholdersNet income applicable to common shareholders$110,952 $62,786 $81,349 $149,604 Net income applicable to common shareholders$151,003 $110,952 $293,569 $81,349 
Net income per common share - basicNet income per common share - basic$0.38 $0.38 $0.31 $0.91 Net income per common share - basic$0.52 $0.38 $1.01 $0.31 
Net income per common share - dilutedNet income per common share - diluted0.38 0.38 0.31 0.90 Net income per common share - diluted0.52 0.38 1.01 0.31 
Weighted average number of common shares outstanding - basicWeighted average number of common shares outstanding - basic290,862 165,175 259,108 165,086 Weighted average number of common shares outstanding - basic290,559 290,862 290,822 259,108 
Weighted average number of common shares outstanding - dilutedWeighted average number of common shares outstanding - diluted291,881 165,934 260,253 165,821 Weighted average number of common shares outstanding - diluted291,266 291,881 291,870 260,253 
Dividends per common shareDividends per common share$0.14 $0.14 $0.28 $0.28 Dividends per common share$0.14 $0.14 $0.28 $0.28 
The accompanying notes to consolidated financial statements are an integral part of these statements.
5


OLD NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
Three Months Ended
June 30,
Six Months Ended
June 30,
(dollars in thousands)(dollars in thousands)2022202120222021(dollars in thousands)2023202220232022
Net incomeNet income$114,985 $62,786 $87,399 $149,604 Net income$155,036 $114,985 $301,636 $87,399 
Other comprehensive income (loss):Other comprehensive income (loss):Other comprehensive income (loss):
Change in debt securities available-for-sale:Change in debt securities available-for-sale:Change in debt securities available-for-sale:
Unrealized holding gains (losses) for the periodUnrealized holding gains (losses) for the period(304,514)(35,818)(733,984)(109,332)Unrealized holding gains (losses) for the period(120,159)(304,514)(95,435)(733,984)
Reclassification for securities transferred to held-to-maturityReclassification for securities transferred to held-to-maturity143,310 — 165,473 — Reclassification for securities transferred to held-to-maturity 143,310  165,473 
Reclassification adjustment for securities (gains) losses
realized in income
Reclassification adjustment for securities (gains) losses
realized in income
85 (692)(257)(2,685)Reclassification adjustment for securities (gains) losses
realized in income
(17)85 5,199 (257)
Income tax effectIncome tax effect38,408 9,110 134,643 25,777 Income tax effect30,043 38,408 31,189 134,643 
Unrealized gains (losses) on available-for-sale securitiesUnrealized gains (losses) on available-for-sale securities(122,711)(27,400)(434,125)(86,240)Unrealized gains (losses) on available-for-sale securities(90,133)(122,711)(59,047)(434,125)
Change in securities held-to-maturity:Change in securities held-to-maturity:Change in securities held-to-maturity:
Adjustment for securities transferred from available-for-saleAdjustment for securities transferred from available-for-sale(143,310)— (165,473)— Adjustment for securities transferred from available-for-sale (143,310) (165,473)
Amortization of unrealized losses on securities transferred
from available-for-sale
Amortization of unrealized losses on securities transferred
from available-for-sale
3,692 — 4,002 — Amortization of unrealized losses on securities transferred
from available-for-sale
5,122 3,692 10,951 4,002 
Income tax effectIncome tax effect34,146 — 39,272 — Income tax effect(1,300)34,146 (1,431)39,272 
Changes from securities held-to-maturityChanges from securities held-to-maturity(105,472)— (122,199)— Changes from securities held-to-maturity3,822 (105,472)9,520 (122,199)
Change in cash flow hedges:
Net unrealized derivative gains (losses) on cash flow hedges(3,418)(1,272)(12,924)2,776 
Change in hedges:Change in hedges:
Net unrealized derivative gains (losses) on hedgesNet unrealized derivative gains (losses) on hedges13,272 (3,418)61,121 (12,924)
Reclassification adjustment for (gains) losses realized in net
income
Reclassification adjustment for (gains) losses realized in net
income
(219)(1,756)(888)(1,905)Reclassification adjustment for (gains) losses realized in net
income
(32,112)(219)(24,820)(888)
Income tax effectIncome tax effect894 744 3,394 (214)Income tax effect4,872 894 (8,848)3,394 
Changes from cash flow hedges(2,743)(2,284)(10,418)657 
Changes from hedgesChanges from hedges(13,968)(2,743)27,453 (10,418)
Change in defined benefit pension plans:Change in defined benefit pension plans:Change in defined benefit pension plans:
Amortization of net (gains) losses recognized in incomeAmortization of net (gains) losses recognized in income(10)49 (21)98 Amortization of net (gains) losses recognized in income6 (10)(182)(21)
Income tax effectIncome tax effect2 (12)5 (24)Income tax effect(2)45 
Changes from defined benefit pension plansChanges from defined benefit pension plans(8)37 (16)74 Changes from defined benefit pension plans4 (8)(137)(16)
Other comprehensive income (loss), net of taxOther comprehensive income (loss), net of tax(230,934)(29,647)(566,758)(85,509)Other comprehensive income (loss), net of tax(100,275)(230,934)(22,211)(566,758)
Comprehensive income (loss)Comprehensive income (loss)$(115,949)$33,139 $(479,359)$64,095 Comprehensive income (loss)$54,761 $(115,949)$279,425 $(479,359)
The accompanying notes to consolidated financial statements are an integral part of these statements.
6


OLD NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)
(dollars in thousands, except per
share data)
(dollars in thousands, except per
share data)
Preferred StockCommon StockCapital SurplusRetained EarningsAccumulated
Other
Comprehensive Income (Loss)
Total
Shareholders' Equity
(dollars in thousands, except per
share data)
Preferred StockCommon StockCapital SurplusRetained EarningsAccumulated
Other
Comprehensive Income (Loss)
Total
Shareholders' Equity
Balance, December 31, 2020$— $165,367 $1,875,626 $783,892 $147,771 $2,972,656 
Net income   86,818  86,818 
Other comprehensive income (loss)    (55,862)(55,862)
Dividends - common stock
($0.14 per share)
   (23,195) (23,195)
Common stock issued— 130   139 
Common stock repurchased— (160)(2,696)  (2,856)
Share-based compensation expense  1,747   1,747 
Stock activity under incentive
compensation plans
— 460 (235)(225) — 
Balance, March 31, 2021— 165,676 1,874,572 847,290 91,909 2,979,447 
Net income   62,786  62,786 
Other comprehensive income (loss)    (29,647)(29,647)
Dividends - common stock
($0.14 per share)
   (23,202) (23,202)
Common stock issued— 136   143 
Common stock repurchased— (24)(425)  (449)
Share-based compensation expense  1,816   1,816 
Stock activity under incentive
compensation plans
— 73 273 (122) 224 
Balance, June 30, 2021$— $165,732 $1,876,372 $886,752 $62,262 $2,991,118 
Balance, December 31, 2021Balance, December 31, 2021$ $165,838 $1,880,545 $968,010 $(2,375)$3,012,018 Balance, December 31, 2021$— $165,838 $1,880,545 $968,010 $(2,375)$3,012,018 
Net income (loss)Net income (loss)   (27,586) (27,586)Net income (loss)   (27,586) (27,586)
Other comprehensive income (loss)Other comprehensive income (loss)    (335,824)(335,824)Other comprehensive income (loss)    (335,824)(335,824)
First Midwest Bancorp, Inc. merger:First Midwest Bancorp, Inc. merger:First Midwest Bancorp, Inc. merger:
Issuance of common stockIssuance of common stock 129,365 2,316,947   2,446,312 Issuance of common stock— 129,365 2,316,947 — — 2,446,312 
Issuance of preferred stock, net of
issuance costs
Issuance of preferred stock, net of
issuance costs
230,500  13,219   243,719 Issuance of preferred stock, net of
issuance costs
230,500 — 13,219 — — 243,719 
Cash dividends:Cash dividends:Cash dividends:
Common ($0.14 per share)Common ($0.14 per share)   (40,782) (40,782)Common ($0.14 per share)   (40,782) (40,782)
Preferred dividendsPreferred dividends   (2,017) (2,017)Preferred dividends   (2,017) (2,017)
Common stock issuedCommon stock issued 10 155   165 Common stock issued— 10 155 —  165 
Common stock repurchasedCommon stock repurchased (3,890)(66,188)  (70,078)Common stock repurchased— (3,890)(66,188)  (70,078)
Share-based compensation expenseShare-based compensation expense  6,284   6,284 Share-based compensation expense  6,284   6,284 
Stock activity under incentive
compensation plans
Stock activity under incentive
compensation plans
 1,636 (1,368)(365) (97)Stock activity under incentive
compensation plans
— 1,636 (1,368)(365) (97)
Balance, March 31, 2022Balance, March 31, 2022230,500 292,959 4,149,594 897,260 (338,199)5,232,114 Balance, March 31, 2022230,500 292,959 4,149,594 897,260 (338,199)5,232,114 
Net incomeNet income   114,985  114,985 Net income   114,985  114,985 
Other comprehensive income (loss)Other comprehensive income (loss)    (230,934)(230,934)Other comprehensive income (loss)    (230,934)(230,934)
Cash dividends:Cash dividends:Cash dividends:
Common ($0.14 per share)Common ($0.14 per share)   (40,901) (40,901)Common ($0.14 per share)   (40,901) (40,901)
Preferred dividendsPreferred dividends   (4,033) (4,033)Preferred dividends   (4,033) (4,033)
Common stock issuedCommon stock issued 10 152   162 Common stock issued— 10 152   162 
Common stock repurchasedCommon stock repurchased (21)(301)  (322)Common stock repurchased— (21)(301)  (322)
Share-based compensation expenseShare-based compensation expense  7,813   7,813 Share-based compensation expense  7,813   7,813 
Stock activity under incentive
compensation plans
Stock activity under incentive
compensation plans
 (55)285 (331) (101)Stock activity under incentive
compensation plans
— (55)285 (331) (101)
Balance, June 30, 2022Balance, June 30, 2022$230,500 $292,893 $4,157,543 $966,980 $(569,133)$5,078,783 Balance, June 30, 2022$230,500 $292,893 $4,157,543 $966,980 $(569,133)$5,078,783 
Balance, December 31, 2022Balance, December 31, 2022$230,500 $292,903 $4,174,265 $1,217,349 $(786,422)$5,128,595 
Net incomeNet income   146,600  146,600 
Other comprehensive income (loss)Other comprehensive income (loss)    78,064 78,064 
Cash dividends:Cash dividends:
Common ($0.14 per share)Common ($0.14 per share)   (41,088) (41,088)
Preferred dividendsPreferred dividends   (4,034) (4,034)
Common stock issuedCommon stock issued 15 247   262 
Common stock repurchasedCommon stock repurchased (2,598)(41,112)  (43,710)
Share-based compensation expenseShare-based compensation expense  12,742   12,742 
Stock activity under incentive
compensation plans
Stock activity under incentive
compensation plans
 1,602 (1,412)(195) (5)
Balance, March 31, 2023Balance, March 31, 2023230,500 291,922 4,144,730 1,318,632 (708,358)5,277,426 
Net incomeNet income   155,036  155,036 
Other comprehensive income (loss)Other comprehensive income (loss)    (100,275)(100,275)
Cash dividends:Cash dividends:
Common ($0.14 per share)Common ($0.14 per share)   (40,932) (40,932)
Preferred dividendsPreferred dividends   (4,033) (4,033)
Common stock issuedCommon stock issued 20 252   272 
Common stock repurchasedCommon stock repurchased (8)(97)  (105)
Share-based compensation expenseShare-based compensation expense  5,247   5,247 
Stock activity under incentive
compensation plans
Stock activity under incentive
compensation plans
 663 (1,043)(161) (541)
Balance, June 30, 2023Balance, June 30, 2023$230,500 $292,597 $4,149,089 $1,428,542 $(808,633)$5,292,095 
The accompanying notes to consolidated financial statements are an integral part of these statements.
7


OLD NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Six Months Ended
June 30,
Six Months Ended
June 30,
(dollars in thousands)(dollars in thousands)20222021(dollars in thousands)20232022
Cash Flows From Operating ActivitiesCash Flows From Operating Activities  Cash Flows From Operating Activities  
Net incomeNet income$87,399 $149,604 Net income$301,636 $87,399 
Adjustments to reconcile net income to cash provided by operating activities:Adjustments to reconcile net income to cash provided by operating activities:Adjustments to reconcile net income to cash provided by operating activities:
DepreciationDepreciation17,742 14,068 Depreciation18,386 17,742 
Amortization of other intangible assetsAmortization of other intangible assets11,981 5,984 Amortization of other intangible assets12,246 11,981 
Amortization of tax credit investmentsAmortization of tax credit investments3,041 3,015 Amortization of tax credit investments5,523 3,041 
Net premium amortization on investment securitiesNet premium amortization on investment securities9,413 7,526 Net premium amortization on investment securities7,061 9,413 
Accretion income related to acquired loansAccretion income related to acquired loans(44,083)(9,781)Accretion income related to acquired loans(11,485)(44,083)
Share-based compensation expenseShare-based compensation expense14,097 3,563 Share-based compensation expense17,989 14,097 
Provision for credit lossesProvision for credit losses106,814 (22,285)Provision for credit losses28,224 117,901 
Debt securities (gains) losses, netDebt securities (gains) losses, net(257)(2,685)Debt securities (gains) losses, net5,199 (257)
Net (gains) losses on sales of loans and other assetsNet (gains) losses on sales of loans and other assets(4,010)(18,202)Net (gains) losses on sales of loans and other assets(45)(4,010)
Increase in cash surrender value of company-owned life insuranceIncrease in cash surrender value of company-owned life insurance(8,095)(5,497)Increase in cash surrender value of company-owned life insurance(7,884)(8,095)
Residential real estate loans originated for saleResidential real estate loans originated for sale(364,018)(645,624)Residential real estate loans originated for sale(225,753)(364,018)
Proceeds from sales of residential real estate loansProceeds from sales of residential real estate loans395,829 677,888 Proceeds from sales of residential real estate loans218,253 395,829 
(Increase) decrease in interest receivable(Increase) decrease in interest receivable(19,468)(288)(Increase) decrease in interest receivable(14,677)(19,468)
(Increase) decrease in other assets(Increase) decrease in other assets127,991 40,951 (Increase) decrease in other assets(38,540)127,991 
Increase (decrease) in accrued expenses and other liabilitiesIncrease (decrease) in accrued expenses and other liabilities104,456 (33,062)Increase (decrease) in accrued expenses and other liabilities(101,417)93,369 
Net cash flows provided by (used in) operating activitiesNet cash flows provided by (used in) operating activities438,832 165,175 Net cash flows provided by (used in) operating activities214,716 438,832 
Cash Flows From Investing ActivitiesCash Flows From Investing ActivitiesCash Flows From Investing Activities
Cash received (paid) from merger, net1,912,629 — 
Cash received from merger, netCash received from merger, net 1,912,629 
Purchases of investment securities available-for-salePurchases of investment securities available-for-sale(1,276,205)(1,801,957)Purchases of investment securities available-for-sale(174,657)(1,276,205)
Purchases of investment securities held-to-maturityPurchases of investment securities held-to-maturity(117,141)— Purchases of investment securities held-to-maturity(1,941)(117,141)
Purchases of Federal Home Loan Bank/Federal Reserve Bank stockPurchases of Federal Home Loan Bank/Federal Reserve Bank stock(97,359)— Purchases of Federal Home Loan Bank/Federal Reserve Bank stock(99,159)(97,359)
Purchases of equity securitiesPurchases of equity securities(1,417)— Purchases of equity securities(20,820)(1,417)
Proceeds from maturities, prepayments, and calls of investment securities available-for-saleProceeds from maturities, prepayments, and calls of investment securities available-for-sale659,922 820,305 Proceeds from maturities, prepayments, and calls of investment securities available-for-sale333,937 659,922 
Proceeds from sales of investment securities available-for-saleProceeds from sales of investment securities available-for-sale12,742 67,715 Proceeds from sales of investment securities available-for-sale51,654 12,742 
Proceeds from maturities, prepayments, and calls of investment securities held-to-maturityProceeds from maturities, prepayments, and calls of investment securities held-to-maturity30,744 — Proceeds from maturities, prepayments, and calls of investment securities held-to-maturity45,193 30,744 
Proceeds from sales of Federal Home Loan Bank/Federal Reserve Bank stockProceeds from sales of Federal Home Loan Bank/Federal Reserve Bank stock83,947 44 Proceeds from sales of Federal Home Loan Bank/Federal Reserve Bank stock1 83,947 
Proceeds from sales of equity securitiesProceeds from sales of equity securities49,709 325 Proceeds from sales of equity securities1,726 49,709 
Loan originations and payments, netLoan originations and payments, net(1,524,289)11,924 Loan originations and payments, net(1,708,291)(1,524,289)
Proceeds from sales of commercial loansProceeds from sales of commercial loans291,368 — 
Proceeds from company-owned life insurance death benefitsProceeds from company-owned life insurance death benefits2,849 2,042 Proceeds from company-owned life insurance death benefits4,888 2,849 
Proceeds from sales of premises and equipment and other assetsProceeds from sales of premises and equipment and other assets2,751 7,632 Proceeds from sales of premises and equipment and other assets2,369 2,751 
Purchases of premises and equipment and other assetsPurchases of premises and equipment and other assets(17,459)(34,411)Purchases of premises and equipment and other assets(17,410)(17,459)
Net cash flows provided by (used in) investing activitiesNet cash flows provided by (used in) investing activities(278,577)(926,381)Net cash flows provided by (used in) investing activities(1,291,142)(278,577)
Cash Flows From Financing ActivitiesCash Flows From Financing ActivitiesCash Flows From Financing Activities
Net increase (decrease) in:Net increase (decrease) in:Net increase (decrease) in:
DepositsDeposits(279,624)831,458 Deposits1,230,485 (279,624)
Federal funds purchased and interbank borrowingsFederal funds purchased and interbank borrowings1,285 357 Federal funds purchased and interbank borrowings(445,429)1,285 
Securities sold under agreements to repurchaseSecurities sold under agreements to repurchase(51,296)(35,037)Securities sold under agreements to repurchase(121,357)(51,296)
Other borrowingsOther borrowings53,136 12,428 Other borrowings65,719 53,136 
Payments for maturities of Federal Home Loan Bank advancesPayments for maturities of Federal Home Loan Bank advances(1,100,005)(145,005)Payments for maturities of Federal Home Loan Bank advances(1,650,150)(1,100,005)
Payments for modification of Federal Home Loan Bank advances (2,156)
Proceeds from Federal Home Loan Bank advancesProceeds from Federal Home Loan Bank advances1,350,000 50,000 Proceeds from Federal Home Loan Bank advances2,600,000 1,350,000 
Cash dividends paidCash dividends paid(87,733)(46,397)Cash dividends paid(90,087)(87,733)
Common stock repurchasedCommon stock repurchased(70,400)(3,305)Common stock repurchased(43,815)(70,400)
Common stock issuedCommon stock issued327 282 Common stock issued534 327 
Net cash flows provided by (used in) financing activitiesNet cash flows provided by (used in) financing activities(184,310)662,625 Net cash flows provided by (used in) financing activities1,545,900 (184,310)
Net increase (decrease) in cash and cash equivalentsNet increase (decrease) in cash and cash equivalents(24,055)(98,581)Net increase (decrease) in cash and cash equivalents469,474 (24,055)
Cash and cash equivalents at beginning of periodCash and cash equivalents at beginning of period822,019 589,712 Cash and cash equivalents at beginning of period728,412 822,019 
Cash and cash equivalents at end of periodCash and cash equivalents at end of period$797,964 $491,131 Cash and cash equivalents at end of period$1,197,886 $797,964 

8


OLD NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (Continued)
Six Months Ended
June 30,
Six Months Ended
June 30,
(dollars in thousands)(dollars in thousands)20222021(dollars in thousands)20232022
Supplemental cash flow information:Supplemental cash flow information:Supplemental cash flow information:
Total interest paidTotal interest paid$30,904 $22,368 Total interest paid$253,542 $30,904 
Total income taxes paid (net of refunds)Total income taxes paid (net of refunds)(183)3,526 Total income taxes paid (net of refunds)87,668 (183)
Common stock issued for merger, netCommon stock issued for merger, net2,446,312 — Common stock issued for merger, net 2,446,312 
Preferred stock issued for merger, netPreferred stock issued for merger, net243,870 — Preferred stock issued for merger, net 243,870 
Investment securities purchased but not settled 8,046 
Securities transferred from available-for-sale to held-to-maturitySecurities transferred from available-for-sale to held-to-maturity2,986,736 — Securities transferred from available-for-sale to held-to-maturity 2,986,736 
Operating lease right-of-use assets obtained in exchange for lease obligationsOperating lease right-of-use assets obtained in exchange for lease obligations3,141 499 Operating lease right-of-use assets obtained in exchange for lease obligations7,542 3,141 
Finance lease right-of-use assets obtained in exchange for lease obligationsFinance lease right-of-use assets obtained in exchange for lease obligations209 $4,994 Finance lease right-of-use assets obtained in exchange for lease obligations9,141 $209 
The accompanying notes to consolidated financial statements are an integral part of these statements.
9


OLD NATIONAL BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 1 – BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the accounts of Old National Bancorp and its wholly-owned subsidiaries (hereinafter collectively referred to as “Old National”) and have been prepared in conformity with accounting principles generally accepted in the United States of America and prevailing practices within the banking industry.  Such principles require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and the disclosures of contingent assets and liabilities at the date of the financial statements and amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.  In the opinion of management, the consolidated financial statements contain all the normal and recurring adjustments necessary for a fair statement of the financial position of Old National as of June 30, 20222023 and December 31, 2021,2022, and the results of its operations for the three and six months ended June 30, 20222023 and 2021.2022.   Interim results do not necessarily represent annual results. Certain information and disclosures normally included in notes to consolidated annual financial statements prepared in accordance with GAAP have been condensed or omitted in this Quarterly Report on Form 10-Q pursuant to SEC rules and regulations. These financial statements should be read in conjunction with Old National’s Annual Report on Form 10-K for the year ended December 31, 2021.2022.
All significant intercompany transactions and balances have been eliminated.  Certain prior year amounts have been reclassified to conform to the current presentation.  Such reclassifications had no effect on prior period net income or shareholders’ equity and were insignificant amounts.
ThereFinancial Difficulty Modifications
Any loans that are modified are reviewed by Old National to identify if a financial difficulty modification has occurred, which is when Old National Bank modifies a loan related to a borrower experiencing financial difficulties. Terms may be modified to fit the ability of the borrower to repay in line with its current financial status. The modification of the terms of such loans includes one or a combination of the following: a reduction of the stated interest rate of the loan, an extension of the maturity date, a permanent reduction of the recorded investment of the loan, or an other-than-insignificant payment delay. The adoption of ASU 2022-02 on January 1, 2023 eliminated the recognition and measurement of TDRs and enhanced disclosures for modifications to loans related to borrowers experiencing financial difficulties. See Note 2 to the consolidated financial statements for additional detail regarding the adoption of ASU 2022-02.
Other than the changes for financial difficulty modifications, there have been no material changes from the significant accounting policies disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.2022.
NOTE 2 – RECENT ACCOUNTING PRONOUNCEMENTS
Accounting Guidance Adopted in 2022
FASB ASC 470 and 815 – In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, to clarify the accounting for certain financial instruments with characteristics of liabilities and equity. The amendments in this update reduce the number of accounting models for convertible debt instruments and convertible preferred stock by removing the cash conversion model and the beneficial conversion feature model. In addition, this ASU improves disclosure requirements for convertible instruments and earnings-per-share guidance. The amendments in this update are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. The adoption of this guidance on January 1, 2022 did not have a material impact on the consolidated financial statements.
FASB ASC 842 – In July 2021, the FASB issued ASU 2021-05, Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments, to amend the lease classification requirements for lessors to align them with practice under ASC Topic 840. The amendments in this update are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. The adoption of this guidance on January 1, 2022 did not have a material impact on the consolidated financial statements.
FASB ASC 848 – In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary, optional guidance to ease the potential burden in accounting for, or recognizing the effects of, the transition away from the LIBOR or other interbank offered rate on financial reporting. The guidance is applicable only to contracts or hedge accounting relationships that reference LIBOR or another reference rate expected to be discontinued. Because the guidance is meant to help entities through the transition period, it will be in effect for a limited time and will not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, for which an entity has elected certain optional expedients that are retained through the end of the hedging relationship. The amendments in this ASU are effective March 12, 2020 through December 31, 2022. Old National believes the adoption of this guidance on activities subsequent to June 30, 2022 through December 31, 2022 will not have a material impact on the consolidated financial statements.
10


Accounting Guidance Pending Adoption2023
FASB ASC 805 – In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities From Contracts With Customers, to address diversity in practice and inconsistency related to the accounting for revenue contracts with customers acquired in a business combination. The amendments require that the acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. The ASU also provides certain practical expedients for acquirers when recognizing and measuring acquired contract assets and liabilities. The amendments in this update are effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Entities should apply the amendments prospectively to business combinations that occur after the effective date. EarlyThe adoption is permitted, including in any interim period. The newof this guidance ison January 1, 2023 did not expected to have a material impact on the consolidated financial statements.
FASB ASC 815 – In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method, to expand the current single-layer method of electing hedge accounting to allow multiple hedged layers of a single closed portfolio under the method and renamesrename the last-of-layer method the
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portfolio layer method. The amendments in this update are effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. EarlyThe adoption is permitted for any entity that has adopted the amendments in ASU No. 2017-12 for the corresponding period. If an entity adopts the amendments in an interim period, the effect of adopting the amendments related to basis adjustments should be reflected as of the beginning of the fiscal year of adoption (i.e., the initial application date). Old National is currently evaluating thethis guidance on January 1, 2023 did not have a material impact of adopting the new guidance on the consolidated financial statements.
FASB ASC 326 – In March 2022, the FASB issued ASU 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, to eliminate the TDR recognition and measurement guidance and, instead, require that an entity evaluate (consistent with the accounting for other loan modifications) whether the modification represents a new loan or a continuation of an existing loan. The amendments also enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. The amendments require that an entity disclose current-period gross charge-offs by year of origination for financing receivables and net investment in leases within the vintage disclosures required by ASC 326. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. These amendments should be applied prospectively, except forOld National adopted the transition methodprovision in ASU 2022-02 related to the recognition and measurement of TDRs on a prospective basis on January 1, 2023, which an entity has the option to applydid not have a modified retrospective transition method resulting in a cumulative-effect adjustment to retained earnings in the period of adoption. Early adoption is permitted if an entity has adopted ASU No. 2016-13, including adoption in an interim period. If an entity elects to early adopt ASU No. 2022-02 in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes the interim period. An entity may elect to early adopt the amendments about TDRs and related disclosure enhancements separately from the amendments related to vintage disclosures. Old National is currently evaluating thematerial impact of adopting the new guidance on the consolidated financial statements.
FASB ASC 848 – In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary, optional guidance to ease the potential burden in accounting for, or recognizing the effects of, the transition away from LIBOR or other interbank offered rate on financial reporting. The guidance is applicable only to contracts or hedge accounting relationships that reference LIBOR or another reference rate expected to be discontinued.
In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which defers the sunset date of relief provisions within Topic 848 from December 31, 2022 to December 31, 2024. The objective of the guidance in Topic 848 is to provide relief during the transition period.
The amendments in this ASU are effective March 12, 2020 through December 31, 2024. Old National believes the adoption of this guidance on activities subsequent to June 30, 2023 will not have a material impact on the consolidated financial statements.
Accounting Guidance Pending Adoption
FASB ASC 820 – In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, to clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted. Old National is currently evaluating the impact of adopting the new guidance on the consolidated financial statements.
FASB ASC 842 – In March 2023, the FASB issued ASU 2023-01, Leases (Topic 842): Common Control Arrangements, which requires all entities to amortize leasehold improvements associated with common control leases over the useful life to the common control group. This ASU is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been made available for issuance. If an entity adopts the amendments in an interim period, it must adopt them as of the beginning of the fiscal year that includes that interim period. Transition can be done either retrospectively or prospectively. Old National is currently evaluating the impact of adopting the new guidance on the consolidated financial statements.
FASB ASC 323 – In March 2023, the FASB issued ASU 2023-02, Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method, which allows reporting entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits. This ASU is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted for all entities in any interim period. Old National is currently evaluating the impact of adopting the new guidance on the consolidated financial statements.
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NOTE 3 – ACQUISITION AND DIVESTITURE ACTIVITY
Merger
First Midwest Bancorp, Inc.
On February 15, 2022, Old National completed its previously announced merger of equals transaction with First Midwest pursuant to an agreement and plan of merger, dated as of May 30, 2021, to combine in an all-stock transaction. Following the merger, the new organization is operating under the Old National Bancorp and Old National Bank names, with the corporate headquarters and principal office located in Evansville, Indiana and commercial and consumer banking operations headquartered in Chicago, Illinois. Old National believes that it will
11


be able to achieve synergies and cost savings by integrating the operations of the companies. The combined organization has a presence in additional Midwestern markets, strong commercial banking capabilities, a robust retail footprint, a significant wealth management platform, and an enhanced ability to attract talent. The combined organization also creates the scale and profitability to accelerate digital and technology capabilities to drive future investments in consumer and commercial banking, as well as wealth management services.
Pursuant to the termsAs of the merger agreement, each First Midwest common stockholder received 1.1336 shares of Old National common stock for each share of First Midwest common stock such stockholder owned, plus, if applicable, cash in lieu of fractional shares of Old National common stock resulting from the exchange ratio. Each outstanding share of 7.000% fixed-rate non-cumulative perpetual preferred stock, Series A, no par value, and each outstanding share of 7.000% fixed-rate non-cumulative perpetual preferred stock, Series C, no par value, of First Midwest was converted into the right to receive 1 share of an applicable newly created series of Old National preferred stock, no par value, having terms that are not materially less favorable than the applicable series of outstanding First Midwest preferred stock (respectively, “Old National Series A Preferred Stock” and “Old National Series C Preferred Stock,” and collectively, the “Old National Preferred Stock”). In this regard, Old National issued 108,000 shares of Old National Series A Preferred Stock and 122,500 shares of Old National Series C Preferred Stock. Old National entered into 2 deposit agreements, each dated as of February 15, 2022, by and among Old National, Continental Stock Transfer & Trust Company, as depository, and the holders from time to time of the depositary receipts in connection with the issuance of the Old National Preferred Stock. Pursuant to the deposit agreements, Old National issued 4,320,000 depositary shares, each representing a 1/40th interest in a share of Old National Series A Preferred Stock, and 4,900,000 depositary shares, each representing a 1/40th interest in a share of Old National Series C Preferred Stock.
12


The assets acquired and liabilities assumed, both intangible and tangible, in the merger were recorded at their estimated fair values as of the merger date and have been accounted for under the acquisition method of accounting. During the three months ended June 30,December 31, 2022, Old National decreased goodwill totaling $5.6 million to update the provisionalfinalized its valuation of the fair values ofall assets acquired and liabilities assumed. These adjustments affected goodwill, loans, premises and equipment, operating lease right-of-use assets, other assets, and accrued expenses and other liabilities. The following table presents the preliminary valuation of the assets acquired and liabilities assumed, net of the fair value adjustments and the fair value of consideration as of the merger date:
(dollars and shares in thousands)February 15,
2022
Assets
Cash and cash equivalents$1,912,629 
Investment securities3,526,278 
FHLB/Federal Reserve Bank stock106,097 
Loans held for sale13,809 
Loans, net of allowance for credit losses14,309,431 
Premises and equipment112,426 
Operating lease right-of-use assets129,698 
Accrued interest receivable53,502 
Goodwill954,540 
Other intangible assets117,584 
Company-owned life insurance301,025 
Other assets314,459 
Total assets$21,851,478 
Liabilities
Deposits$17,249,404 
Securities sold under agreements to repurchase135,194 
Federal Home Loan Bank advances1,158,623 
Other borrowings274,569 
Accrued expenses and other liabilities343,506 
Total liabilities$19,161,296 
Fair value of consideration
Preferred stock$243,870 
Common stock (129,365 shares issued at $18.92 per share)2,446,312 
Total consideration$2,690,182 
Goodwill related to this merger will not be deductible for tax purposes.
Other intangible assets acquired included core deposit intangibles and customer trust relationships. The estimated fair value of the core deposit intangible was $77.9 million and is being amortized over an estimated useful life of 10 years. The estimated fair value of customer trust relationships was $39.7 million and is being amortized over an estimated useful life of 13 years.
The fair value of purchased financial assets with credit deterioration was $1.4 billion on the date of the merger. The gross contractual amounts receivable relating to the purchased financial assets with credit deterioration was $1.5 billion. Old National estimates, on the date of the merger, that $78.5 million of the contractual cash flows specific to the purchased financial assets with credit deterioration will not be collected.
Transaction costs totaling $77.9$16.9 million associated with the merger have been expensed for the six months ended June 30, 2022 and additional2023, compared to $77.9 million during the six months ended June 30, 2022. Additional transaction and integration costs will be expensed in future periods as incurred.
As a result of the merger, Old National assumed sponsorship of First Midwest’s defined benefit pension plan (the “Pension Plan”) under which both plan participation and benefit accruals had been previously frozen. Subsequent to the close of the merger, Old National began taking the steps required to terminate the Pension Plan. At June 30, 2022, the accumulated benefit obligation was $55.9 million and the fair value of Pension Plan assets was $72.4 million. Pension costs were not material for the six months ended June 30, 2022.
13


Summary of Unaudited Pro-Forma Financial Information
The following table presents supplemental unaudited pro-forma financial information as if the First Midwest merger had occurred on January 1, 2021. The pro-forma financial information is not necessarily indicative of the results of operations that would have occurred had the transaction been effective as of this assumed date.
Three Months Ended
June 30,
Six Months Ended
June 30,
(dollars in thousands)2022202120222021
Total revenues (1)
$426,589 $391,993 $798,935 $786,304 
Income before income taxes176,549 109,285 264,868 127,879 
(1)    Includes net interest income and total noninterest income.
Supplemental pro-forma earnings for the three months ended June 30, 2022 were adjusted to exclude $36.6 million of merger-related costs. Supplemental pro-forma earnings for the three months ended June 30, 2021 were adjusted to include these costs. Supplemental pro-forma earnings for the six months ended June 30, 2022 were adjusted to exclude $77.9 million of merger-related costs, $11.0 million of provision for credit losses on unfunded loan commitments, and $96.3 million of provision for credit losses to establish an allowance for credit losses on non-PCD loans acquired in the transaction. Supplemental pro-forma earnings for the six months ended June 30, 2021 were adjusted to include these costs.
Divestiture
On June 27,November 18, 2022, Old National entered into a Custodial Transfer and Asset Purchase Agreementcompleted its previously announced transaction with UMB, Bank, n.a. (“UMB”), pursuant to which UMB will acquireacquired Old National’s business of acting as a qualified custodian for, and administering, health savings accounts. Old National servesserved as custodian for health savings accounts comprised of both investment accounts and deposit accounts. Upon completion ofAt closing, the sale, UMB will pay Old Nationalhealth savings accounts held in deposit accounts that were transferred totaled approximately $382 million and the transaction resulted in a premium on deposit account balances transferred at closing, or approximately $95$90.7 million based on June 30, 2022 balances. Subject to customary closing conditions and regulatory approval, the parties anticipate completing the sale in the fourth quarter of 2022.pre-tax gain.
NOTE 4 – NET INCOME PER COMMON SHARE
Basic and diluted net income per common share are calculated using the two-class method.  Net income applicable to common shares is divided by the weighted-average number of common shares outstanding during the period.  Adjustments to the weighted average number of common shares outstanding are made only when such adjustments will dilute net income per common share.  Net income applicable to common shares is then divided by the weighted-average number of common shares and common share equivalents during the period.
The following table presents the calculation of basic and diluted net income per common share:
Three Months Ended
June 30,
Six Months Ended
June 30,
Three Months Ended
June 30,
Six Months Ended
June 30,
(dollars and shares in thousands, except per share data)(dollars and shares in thousands, except per share data)2022202120222021(dollars and shares in thousands, except per share data)2023202220232022
Net incomeNet income$114,985 $62,786 $87,399 $149,604 Net income$155,036 $114,985 $301,636 $87,399 
Preferred dividendsPreferred dividends(4,033)— (6,050)— Preferred dividends(4,033)(4,033)(8,067)(6,050)
Net income applicable to common sharesNet income applicable to common shares$110,952 $62,786 $81,349 $149,604 Net income applicable to common shares$151,003 $110,952 $293,569 $81,349 
Weighted average common shares outstanding:Weighted average common shares outstanding:Weighted average common shares outstanding:
Weighted average common shares outstanding (basic)Weighted average common shares outstanding (basic)290,862 165,175 259,108 165,086 Weighted average common shares outstanding (basic)290,559 290,862 290,822 259,108 
Effect of dilutive securities:Effect of dilutive securities:Effect of dilutive securities:
Restricted stockRestricted stock1,014 737 1,136 713 Restricted stock707 1,014 1,047 1,136 
Stock appreciation rightsStock appreciation rights5 22 9 22 Stock appreciation rights 1 
Weighted average diluted shares outstandingWeighted average diluted shares outstanding291,881 165,934 260,253 165,821 Weighted average diluted shares outstanding291,266 291,881 291,870 260,253 
Basic Net Income Per Common ShareBasic Net Income Per Common Share$0.38 $0.38 $0.31 $0.91 Basic Net Income Per Common Share$0.52 $0.38 $1.01 $0.31 
Diluted Net Income Per Common ShareDiluted Net Income Per Common Share$0.38 $0.38 $0.31 $0.90 Diluted Net Income Per Common Share$0.52 $0.38 $1.01 $0.31 

1412


NOTE 5 – INVESTMENT SECURITIES
The following table summarizes the amortized cost and fair value of the available-for-sale and held-to-maturity investment securities portfolios and the corresponding amounts of gross unrealized gains, unrealized losses, and basis adjustments in accumulated other comprehensive income (loss)AOCI and gross unrecognized gains and losses. The Company held no securities classified as held-to-maturity as of December 31, 2021.
(dollars in thousands)(dollars in thousands)Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Basis
Adjustments (1)
Fair
Value
(dollars in thousands)Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Basis
Adjustments (1)
Fair
Value
June 30, 2022    
June 30, 2023June 30, 2023    
Available-for-SaleAvailable-for-Sale    Available-for-Sale    
U.S. TreasuryU.S. Treasury$441,846 $9 $(7,739)$(31,333)$402,783 U.S. Treasury$364,824 $ $(9,245)$(43,167)$312,412 
U.S. government-sponsored entities and agenciesU.S. government-sponsored entities and agencies1,442,261 1 (123,234)(76,471)1,242,557 U.S. government-sponsored entities and agencies1,448,873  (201,623)(72,894)1,174,356 
Mortgage-backed securities - AgencyMortgage-backed securities - Agency5,227,908 794 (400,994) 4,827,708 Mortgage-backed securities - Agency4,760,921 123 (663,273) 4,097,771 
States and political subdivisionsStates and political subdivisions740,026 4,132 (24,117) 720,041 States and political subdivisions623,196 844 (25,258) 598,782 
Pooled trust preferred securitiesPooled trust preferred securities13,768  (2,667) 11,101 Pooled trust preferred securities13,791  (2,797) 10,994 
Other securitiesOther securities384,417 176 (21,082) 363,511 Other securities339,653 117 (33,570) 306,200 
Total available-for-sale securitiesTotal available-for-sale securities$8,250,226 $5,112 $(579,833)$(107,804)$7,567,701 Total available-for-sale securities$7,551,258 $1,084 $(935,766)$(116,061)$6,500,515 
Held-to-MaturityHeld-to-MaturityHeld-to-Maturity
U.S. government-sponsored entities and agenciesU.S. government-sponsored entities and agencies$815,833 $ $(95,398)$ $720,435 U.S. government-sponsored entities and agencies$822,517 $ $(167,071)$ $655,446 
Mortgage-backed securities - AgencyMortgage-backed securities - Agency1,149,212 170 (59,940) 1,089,442 Mortgage-backed securities - Agency1,070,687  (142,191) 928,496 
States and political subdivisionsStates and political subdivisions1,119,292 69 (149,797) 969,564 States and political subdivisions1,161,943 437 (143,114) 1,019,266 
Allowance for securities held-to-maturityAllowance for securities held-to-maturity(151)   (151)Allowance for securities held-to-maturity(150)   (150)
Total held-to-maturity securitiesTotal held-to-maturity securities$3,084,186 $239 $(305,135)$ $2,779,290 Total held-to-maturity securities$3,054,997 $437 $(452,376)$ $2,603,058 
December 31, 2021
December 31, 2022December 31, 2022
Available-for-SaleAvailable-for-SaleAvailable-for-Sale
U.S. TreasuryU.S. Treasury$234,555 $1,233 $(7,751)$7,547 $235,584 U.S. Treasury$253,148 $$(5,189)$(47,037)$200,927 
U.S. government-sponsored entities and agenciesU.S. government-sponsored entities and agencies1,575,994 7,354 (37,014)(3,561)1,542,773 U.S. government-sponsored entities and agencies1,451,736 — (169,248)(107,408)1,175,080 
Mortgage-backed securities - AgencyMortgage-backed securities - Agency3,737,484 27,421 (66,074)— 3,698,831 Mortgage-backed securities - Agency4,986,354 976 (617,428)— 4,369,902 
States and political subdivisionsStates and political subdivisions1,587,172 69,696 (1,882)— 1,654,986 States and political subdivisions688,159 1,789 (26,096)— 663,852 
Pooled trust preferred securitiesPooled trust preferred securities13,756 — (4,260)— 9,496 Pooled trust preferred securities13,783 — (2,972)— 10,811 
Other securitiesOther securities235,072 6,578 (1,254)— 240,396 Other securities379,423 258 (26,541)— 353,140 
Total available-for-sale securitiesTotal available-for-sale securities$7,384,033 $112,282 $(118,235)$3,986 $7,382,066 Total available-for-sale securities$7,772,603 $3,028 $(847,474)$(154,445)$6,773,712 
Held-to-MaturityHeld-to-Maturity
U.S. government-sponsored entities and agenciesU.S. government-sponsored entities and agencies$819,168 $— $(162,810)$— $656,358 
Mortgage-backed securities - AgencyMortgage-backed securities - Agency1,106,817 — (123,854)— 982,963 
States and political subdivisionsStates and political subdivisions1,163,312 221 (159,022)— 1,004,511 
Allowance for securities held-to-maturityAllowance for securities held-to-maturity(150)— — — (150)
Total held-to-maturity securitiesTotal held-to-maturity securities$3,089,147 $221 $(445,686)$— $2,643,682 
(1)    Basis adjustments represent the cumulative fair value adjustments included in the carrying amounts of fixed-rate investment securities assets in fair value hedging arrangements.
During the six months ended June 30, 2022, U.S government-sponsored entities and agencies, agency mortgage-backed securities, and state and political subdivision securities with a fair value of $3.0 billion were transferred from the available-for-sale portfolio to the held-to-maturity portfolio. The $125.2 million unrealized holding loss, net of tax, at the date of transfer will continue to be reported as a separate component of shareholders’ equity and is being amortized over the remaining term of the securities as an adjustment to yield. The corresponding discount on these securities will offset this adjustment to yield as it is amortized.
15


Proceeds from sales or calls of available-for-sale investment securities and the resulting realized gains and realized losses were as follows:
Three Months Ended
June 30,
Six Months Ended
June 30,
(dollars in thousands)2022202120222021
Proceeds from sales of available-for-sale securities$1,903 $15,247 $12,742 $67,715 
Proceeds from calls of available-for-sale securities21,331 46,750 60,605 56,995 
Total$23,234 $61,997 $73,347 $124,710 
Realized gains on sales of available-for-sale securities$5 $736 $344 $2,736 
Realized gains on calls of available-for-sale securities43 48 167 61 
Realized losses on sales of available-for-sale securities(52)(85)(147)(85)
Realized losses on calls of available-for-sale securities(81)(7)(107)(27)
Debt securities gains (losses), net$(85)$692 $257 $2,685 
Three Months Ended
June 30,
Six Months Ended
June 30,
(dollars in thousands)2023202220232022
Proceeds$24,933 $23,234 $82,888 $73,347 
Realized gains39 48 948 511 
Realized losses(22)(133)(6,147)(254)
13


Substantially all of the mortgage-backed securities in the investment portfolio are residential mortgage-backed securities.  The table below shows the amortized cost and fair value of the investment securities portfolio are shown by contractual maturity.  Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.  Weighted average yield is based on amortized cost.
 June 30, 2022
(dollars in thousands)Amortized
Cost
Fair
Value
Weighted
Average
Yield
Maturity
Available-for-Sale   
Within one year$315,154 $314,532 1.11 %
One to five years1,731,888 1,662,131 2.56 
Five to ten years4,076,303 3,738,698 2.30 
Beyond ten years2,126,881 1,852,340 2.43 
Total$8,250,226 $7,567,701 2.34 %
Held-to-Maturity
Within one year$100 $100 2.47 %
One to five years70,765 68,860 3.72 
Five to ten years987,729 934,946 2.75 
Beyond ten years2,025,592 1,775,384 2.76 
Total$3,084,186 $2,779,290 2.78 %
16


 June 30, 2023
(dollars in thousands)Amortized
Cost
Fair
Value
Weighted
Average
Yield
Maturity
Available-for-Sale   
Within one year$242,424 $238,951 3.93 %
One to five years1,621,101 1,478,764 2.77 
Five to ten years3,926,306 3,374,584 2.35 
Beyond ten years1,761,427 1,408,216 2.43 
Total$7,551,258 $6,500,515 2.51 %
Held-to-Maturity
One to five years162,082 135,763 2.71 %
Five to ten years888,640 780,437 2.61 
Beyond ten years2,004,275 1,686,858 2.73 
Total$3,054,997 $2,603,058 2.69 %
The following table summarizes the available-for-sale investment securities with unrealized losses for which an allowance for credit losses has not been recorded by aggregated major security type and length of time in a continuous unrealized loss position:
Less than 12 months12 months or longerTotal Less than 12 months12 months or longerTotal
(dollars in thousands)(dollars in thousands)Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized Losses(dollars in thousands)Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized Losses
June 30, 2022
June 30, 2023June 30, 2023
Available-for-SaleAvailable-for-SaleAvailable-for-Sale
U.S. TreasuryU.S. Treasury$400,802 $(7,739)$ $ $400,802 $(7,739)U.S. Treasury$124,751 $(258)$187,661 $(8,987)$312,412 $(9,245)
U.S. government-sponsored entities
and agencies
U.S. government-sponsored entities
and agencies
803,249 (27,407)437,307 (95,827)1,240,556 (123,234)U.S. government-sponsored entities
and agencies
14,732 (264)1,159,624 (201,359)1,174,356 (201,623)
Mortgage-backed securities - AgencyMortgage-backed securities - Agency4,149,631 (311,841)509,634 (89,153)4,659,265 (400,994)Mortgage-backed securities - Agency402,696 (19,217)3,677,906 (644,056)4,080,602 (663,273)
States and political subdivisionsStates and political subdivisions372,074 (24,117)  372,074 (24,117)States and political subdivisions168,144 (1,406)264,829 (23,852)432,973 (25,258)
Pooled trust preferred securitiesPooled trust preferred securities  11,102 (2,667)11,102 (2,667)Pooled trust preferred securities  10,994 (2,797)10,994 (2,797)
Other securitiesOther securities301,443 (18,960)32,799 (2,122)334,242 (21,082)Other securities25,133 (498)265,688 (33,072)290,821 (33,570)
Total available-for-saleTotal available-for-sale$6,027,199 $(390,064)$990,842 $(189,769)$7,018,041 $(579,833)Total available-for-sale$735,456 $(21,643)$5,566,702 $(914,123)$6,302,158 $(935,766)
December 31, 2021
December 31, 2022December 31, 2022
Available-for-SaleAvailable-for-SaleAvailable-for-Sale
U.S. TreasuryU.S. Treasury$91,063 $(7,751)$— $— $91,063 $(7,751)U.S. Treasury$130,967 $(3,264)$66,992 $(1,925)$197,959 $(5,189)
U.S. government-sponsored entities
and agencies
U.S. government-sponsored entities
and agencies
1,032,566 (21,167)312,949 (15,847)1,345,515 (37,014)U.S. government-sponsored entities
and agencies
454,854 (75,795)720,226 (93,453)1,175,080 (169,248)
Mortgage-backed securities - AgencyMortgage-backed securities - Agency2,415,923 (59,277)163,685 (6,797)2,579,608 (66,074)Mortgage-backed securities - Agency3,207,319 (358,507)1,116,205 (258,921)4,323,524 (617,428)
States and political subdivisionsStates and political subdivisions178,570 (1,849)2,729 (33)181,299 (1,882)States and political subdivisions414,813 (25,555)2,703 (541)417,516 (26,096)
Pooled trust preferred securitiesPooled trust preferred securities— — 9,496 (4,260)9,496 (4,260)Pooled trust preferred securities— — 10,811 (2,972)10,811 (2,972)
Other securitiesOther securities56,976 (943)21,133 (311)78,109 (1,254)Other securities257,775 (17,045)75,309 (9,496)333,084 (26,541)
Total available-for-saleTotal available-for-sale$3,775,098 $(90,987)$509,992 $(27,248)$4,285,090 $(118,235)Total available-for-sale$4,465,728 $(480,166)$1,992,246 $(367,308)$6,457,974 $(847,474)
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The following table summarizes the held-to-maturity investment securities with unrecognized losses aggregated by major security type and length of time in a continuous loss position:
Less than 12 months12 months or longerTotal Less than 12 months12 months or longerTotal
(dollars in thousands)(dollars in thousands)Fair
Value
Unrecognized
Losses
Fair
Value
Unrecognized
Losses
Fair
Value
Unrecognized
Losses
(dollars in thousands)Fair
Value
Unrecognized
Losses
Fair
Value
Unrecognized
Losses
Fair
Value
Unrecognized
Losses
June 30, 2022
June 30, 2023June 30, 2023
Held-to-MaturityHeld-to-MaturityHeld-to-Maturity
U.S. government-sponsored entities
and agencies
U.S. government-sponsored entities
and agencies
$529,507 $(69,932)$190,927 $(25,466)$720,434 $(95,398)U.S. government-sponsored entities
and agencies
$81,251 $(8,138)$574,195 $(158,933)$655,446 $(167,071)
Mortgage-backed securities - AgencyMortgage-backed securities - Agency649,804 (47,157)419,930 (12,783)1,069,734 (59,940)Mortgage-backed securities - Agency244,643 (24,690)683,853 (117,501)928,496 (142,191)
States and political subdivisionsStates and political subdivisions929,474 (143,443)31,684 (6,354)961,158 (149,797)States and political subdivisions38,302 (394)948,627 (142,720)986,929 (143,114)
Total held-to-maturityTotal held-to-maturity$2,108,785 $(260,532)$642,541 $(44,603)$2,751,326 $(305,135)Total held-to-maturity$364,196 $(33,222)$2,206,675 $(419,154)$2,570,871 $(452,376)
December 31, 2022December 31, 2022
Held-to-MaturityHeld-to-Maturity
U.S. government-sponsored entities
and agencies
U.S. government-sponsored entities
and agencies
354,293 (110,523)302,066 (52,287)656,359 (162,810)
Mortgage-backed securities - AgencyMortgage-backed securities - Agency367,849 (42,438)615,114 (81,416)982,963 (123,854)
States and political subdivisionsStates and political subdivisions838,689 (127,355)135,573 (31,667)974,262 (159,022)
Total held-to-maturityTotal held-to-maturity$1,560,831 $(280,316)$1,052,753 $(165,370)$2,613,584 $(445,686)
The unrecognized losses on held-to-maturity investment securities presented in the table above do not include unrecognized losses on securities that were transferred from available-for-sale to held-for-maturityheld-to-maturity totaling $161.5$137.9 million at June 30, 2023 and $148.9 million at December 31, 2022.
Available-for-sale securities in unrealized loss positions These unrecognized losses are evaluated at least quarterly to determine ifincluded as a decline in fair value should be recorded through income or other comprehensive income. For available-for sale securities in an unrealized loss position, we first assess whether we intend to sell, or it is more likely than not that we will be required to sellseparate component of shareholders’ equity and are being amortized over the security, before recovery of its amortized cost basis. If eitherremaining term of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For available-for sale securities that do not meet the criteria, we evaluate whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security and the issuer, among other factors. If this assessment indicates that a credit loss exists, we compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis for the security, a credit loss exists and an allowance for credit losses is recorded, limited to the amount that the fairsecurities.
17


value of the security is less than its amortized cost basis. Any decline in fair value that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of applicable taxes. No allowance for credit losses foron available-for-sale debt securities was needed at June 30, 20222023 or December 31, 2021.2022.
An allowance on held-to-maturity debt securities is maintained for certain municipal bonds to account for expected lifetime credit losses. Substantially all of the U.S. government-sponsored entities and agencies and agency mortgage-backed securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major credit rating agencies, and have a long history of no credit losses. Therefore, for those securities, we do not record expected credit losses. The allowance for credit losses on held-to-maturity debt securities was $0.2 million at June 30, 2023 and December 31, 2022.
Accrued interest receivable on the securities portfolio is excluded from the estimate of credit losses and totaled $50.9$50.6 million at June 30, 20222023 and $35.5$50.9 million at December 31, 2021.2022.
At June 30, 2022,2023, Old National’s securities portfolio consisted of 3,2323,047 securities, 2,6792,808 of which were in an unrealized loss position.  The unrealized losses attributable to our U.S. Treasury, U.S. government-sponsored entities and agencies, agency mortgage-backed securities, states and political subdivisions, and other securities are the result of fluctuations in interest rates and temporary market movements.  Old National’s pooled trust preferred securities are evaluated using collateral-specific assumptions to estimate the expected future interest and principal cash flows.  At June 30, 2022,2023, we had no intent to sell any securities that were in an unrealized loss position nor is it expected that we would be required to sell the securities prior to their anticipated recovery.
Old National’s two pooled trust preferred securities with fair values totaling $11.0 million and unrealized losses totaling $2.8 million have experienced credit defaults.  However, we believe that the value of the instruments lies in the full and timely interest payments that will be received through maturity, the steady amortization that will be experienced until maturity, and the full return of principal by the final maturity of the collateralized debt obligations. Old National did not recognize any losses on these securities for the six months ended June 30, 20222023 or 2021.2022.
Equity Securities
Equity securities consist of mutual funds for Community Reinvestment Act qualified investments and diversified investment securities held in a grantor trust for participants in the Company’s nonqualified deferred compensation plan. Old National’s equity securities with readily determinable fair values totaled $55.9$72.0 million at June 30, 20222023 and $13.2$52.5 million at December 31, 2021.2022.  There were lossesgains on equity securities of $2.4$0.1 million during the three
15


months ended June 30, 20222023 and losses of $4.2 million during the six months ended June 30, 2022, compared to gains of $0.2 million during the three months ended June 30, 2021 and gains of $0.7 million during the six months ended June 30, 2021. 2023, compared to losses of $2.4 million and $4.2 million during the three and six months ended June 30, 2022, respectively.
Alternative Investments
Old National has alternative investments without readily determinable fair values that are included in other assets totaling $265.7$401.4 million at June 30, 2022,2023, consisting of $143.0$243.1 million of illiquid investments ofin partnerships, limited liability companies, and other ownership interests that support affordable housing and $122.7$158.3 million of economic development and community revitalization initiatives in low-to-moderate income neighborhoods. These alternative investments totaled $186.0$396.8 million at December 31, 2021.2022.  There have been no impairments or adjustments on equity securities without readily determinable fair values, except for amortization of tax credit investments in the six months ended June 30, 20222023 and 2021.2022. See Note 119 to the consolidated financial statements for detail regarding these investments.
NOTE 6 – LOANS AND ALLOWANCE FOR CREDIT LOSSES
Loans
Old National’s loans consist primarily of loans made to consumers and commercial clients in many diverse industries, including real estate rental and leasing, manufacturing, agribusiness, transportation, mining, wholesaling,healthcare, wholesale trade, construction, and retailing,agriculture, among others.  Most of Old National’s lending activity occurs within our principal geographic markets of Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, Wisconsin, and Missouri.in the Midwest region.  Old National manages concentrations of credit exposure by industry, product, geography, client relationship, and loan size.
1816


The loan categories used to monitor and analyze interest income and yields are different than the portfolio segments used to determine the allowance for credit losses foron loans. The allowance for credit losses was calculated by pooling loans of similar credit risk characteristics and credit monitoring procedures. The 4four loan portfolios used to monitor and analyze interest income and yields – commercial, commercial real estate, residential real estate, and consumer – are classifiedreclassified into 7seven segments of loans – commercial, commercial real estate, BBCC, residential real estate, indirect, direct, and home equity.equity for purposes of determining the allowance for credit losses on loans. The commercial and commercial real estate loan categories shown on the balance sheet include the same pool of loans as the commercial, commercial real estate, and BBCC portfolio segments. The consumer loan category shown on the balance sheet is comprised of the same loans in the indirect, direct, and home equity portfolio segments. The portfolio segment reclassifications follow:
SegmentBalance Sheet
Line Item
Portfolio
Segment
Reclassifications
After
Reclassifications
StatementPortfolioAfter
(dollars in thousands)(dollars in thousands)BalanceReclassificationsReclassifications(dollars in thousands)
June 30, 2022
June 30, 2023June 30, 2023
Loans:Loans:Loans:
CommercialCommercial$8,923,983 $(191,996)$8,731,987 Commercial$9,698,241 $(227,414)$9,470,827 
Commercial real estateCommercial real estate11,796,503 (154,769)11,641,734 Commercial real estate13,450,209 (162,841)13,287,368 
BBCCBBCCN/A346,765 346,765 BBCCN/A390,255 390,255 
Residential real estateResidential real estate6,079,057  6,079,057 Residential real estate6,684,480  6,684,480 
ConsumerConsumer2,754,105 (2,754,105)N/AConsumer2,599,543 (2,599,543)N/A
IndirectIndirectN/A981,741 981,741 IndirectN/A1,003,287 1,003,287 
DirectDirectN/A674,512 674,512 DirectN/A565,950 565,950 
Home equityHome equityN/A1,097,852 1,097,852 Home equityN/A1,030,306 1,030,306 
TotalTotal$29,553,648 $ $29,553,648 Total$32,432,473 $ $32,432,473 
December 31, 2021
December 31, 2022December 31, 2022
Loans:Loans:Loans:
CommercialCommercial$3,391,769 $(191,557)$3,200,212 Commercial$9,508,904 $(210,280)$9,298,624 
Commercial real estateCommercial real estate6,380,674 (159,190)6,221,484 Commercial real estate12,457,070 (158,322)12,298,748 
BBCCBBCCN/A350,747 350,747 BBCCN/A368,602 368,602 
Residential real estateResidential real estate2,255,289 — 2,255,289 Residential real estate6,460,441 — 6,460,441 
ConsumerConsumer1,574,114 (1,574,114)N/AConsumer2,697,226 (2,697,226)N/A
IndirectIndirectN/A873,139 873,139 IndirectN/A1,034,257 1,034,257 
DirectDirectN/A140,385 140,385 DirectN/A629,186 629,186 
Home equityHome equityN/A560,590 560,590 Home equityN/A1,033,783 1,033,783 
TotalTotal$13,601,846 $— $13,601,846 Total$31,123,641 $— $31,123,641 
The composition of loans by portfolio segment follows:
(dollars in thousands)(dollars in thousands)June 30,
2022
December 31,
2021
(dollars in thousands)June 30,
2023
December 31,
2022
Commercial (1) (2)
$8,731,987 $3,200,212 
Commercial (1)
Commercial (1)
$9,470,827 $9,298,624 
Commercial real estateCommercial real estate11,641,734 6,221,484 Commercial real estate13,287,368 12,298,748 
BBCCBBCC346,765 350,747 BBCC390,255 368,602 
Residential real estateResidential real estate6,079,057 2,255,289 Residential real estate6,684,480 6,460,441 
IndirectIndirect981,741 873,139 Indirect1,003,287 1,034,257 
DirectDirect674,512 140,385 Direct565,950 629,186 
Home equityHome equity1,097,852 560,590 Home equity1,030,306 1,033,783 
Total loansTotal loans29,553,648 13,601,846 Total loans32,432,473 31,123,641 
Allowance for credit losses(288,003)(107,341)
Allowance for credit losses on loansAllowance for credit losses on loans(300,555)(303,671)
Net loansNet loans$29,265,645 $13,494,505 Net loans$32,131,918 $30,819,970 
(1)Includes direct finance leases of $66.5$176.7 million at June 30, 20222023 and $25.1$188.1 million at December 31, 2021.
(2)Includes PPP loans of $81.6 million at June 30, 2022 and $169.0 million at December 31, 2021.2022.
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The risk characteristics of each loan portfolio segment are as follows:
Commercial
Commercial loans are classified primarily on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower.  The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value.  Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee; however, some loans may be made on an unsecured basis.  In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its clients.
Commercial Real Estate
Commercial real estate loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate.  Commercial real estate lending typically involves higher loan principal amounts, and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan.  Commercial real estate loans may be adversely affected by conditions in the real estate markets or in the general economy.  The properties securing Old National’s commercial real estate portfolio are diverse in terms of type and geographic location.  Management monitors and evaluates commercial real estate loans based on collateral, geography, and risk grade criteria. In addition, management tracks the level of owner-occupied commercial real estate loans versus non-owner occupied loans.
Included with commercial real estate are construction loans, which are underwritten utilizing independent appraisal reviews, sensitivity analysis of absorption and lease rates, financial analysis of the developers and property owners, and feasibility studies, if available.  Construction loans are generally based on estimates of costs and value associated with the complete project.  These estimates may be inaccurate.  Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project.  Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders (including Old National), sales of developed property, or an interim loan commitment from Old National until permanent financing is obtained.  These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions, and the availability of long-term financing.
At 224%240%, Old National Bank’s commercial real estate loans as a percentage of its risk-based capital remained well below the regulatory guideline limit of 300% at June 30, 2022.2023.
BBCC
BBCC loans are typically granted to small businesses with gross revenues of less than $5 million and aggregate debt of less than $1 million. Old National has established minimum debt service coverage ratios, minimum FICO scores for owners and guarantors, and the ability to show relatively stable earnings as criteria to help mitigate risk. Repayment of these loans depends on the personal income of the borrowers and the cash flows of the business. These factors can be affected by factors such as changes in economic conditions and unemployment levels.
Residential
With respect to residential loans that are secured by 1-41 - 4 family residences and are generally owner occupied, Old National typically establishes a maximum loan-to-value ratio and generally requires private mortgage insurance if that ratio is exceeded.  Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels.  Repayment can also be impacted by changes in residential property values.  Portfolio risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.
Indirect
Indirect loans are secured by automobile collateral, generally new and used cars and trucks from auto dealers that operate within our footprint. Old National typically mitigates the risk of indirect loans by establishing minimum FICO scores, maximum loan-to-value ratios, and maximum debt-to-income ratios. Repayment of these loans depends largely on the personal income of the borrowers, which can be affected by changes in economic conditions
2018


such as unemployment levels. Portfolio risk is mitigated by the fact that the loans are of smaller amounts spread over many borrowers, conservative credit policies, and ongoing reviews of dealer relationships.
Direct
Direct loans are typically secured by collateral such as auto or real estate or are unsecured. Old National has established conservative underwriting standards such as minimum FICO scores, maximum loan-to-value ratios, and maximum debt-to-income ratios. Repayment of these loans depends largely on the personal income of the borrowers, which can be affected by changes in economic conditions such as unemployment levels. Portfolio risk is mitigated by the fact that the loans are of smaller amounts spread over many borrowers along with conservative credit policies.
Home Equity
Home equity loans are generally secured by 1-41 - 4 family residences that are owner occupied. Old National has established conservative underwriting standards such as minimum FICO scores, maximum loan-to-value ratios, and maximum debt-to-income ratios. Repayment of these loans depends largely on the personal income of the borrowers, which can be affected by changes in economic conditions such as unemployment levels. Portfolio risk is mitigated by the fact that the loans are of smaller amounts spread over many borrowers, along with conservative credit policies as well as monitoring of updated borrower credit scores.
Allowance for Credit Losses
Loans
Credit quality within the loans held for investment portfolio is continuously monitored by management and is reflected within the allowance for credit losses foron loans. The allowance for credit losses is an estimate of expected losses inherent within the Company’s loans held for investment portfolio. Credit quality is assessed and monitored by evaluating various attributes and the results of those evaluations are utilized in underwriting new loans and in our process for estimating expected credit losses. Expected credit loss inherent in non-cancelable off-balance-sheet credit exposures is accounted for as a separate liability included in other liabilities on the balance sheet. The allowance for credit losses foron loans held for investment is adjusted by a credit loss expense, which is reported in earnings, and reduced by the charge-off of loan amounts, net of recoveries. Old National has made a policy election to report accrued interest receivable as a separate line item on the balance sheet. Accrued interest receivable on loans is excluded from the estimate of credit losses and totaled $104.6$149.9 million at June 30, 20222023 and $47.6$137.7 million at December 31, 2021.2022.
The allowance for credit loss estimation process involves procedures to appropriately consider the unique characteristics of itsour loan portfolio segments. These segments are further disaggregated into loan classes based on the level at which credit risk is monitored. When computing the level of expected credit losses, credit loss assumptions are estimated using a model that categorizes loan pools based on loss history, delinquency status, and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future. Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. In future periods, evaluations of the overall loan portfolio, in light of the factors and forecasts then prevailing, may result in significant changes in the allowance and credit loss expense in those future periods.
The allowance level is influenced by loan volumes, loan AQR migration or delinquency status, changes in historical loss experience, and other conditions influencing loss expectations, such as reasonable and supportable forecasts of economic conditions. The methodology for estimating the amount of expected credit losses reported in the allowance for credit losses has two basic components: first, an asset-specific component involving individual loans that do not share risk characteristics with other loans and the measurement of expected credit losses for such individual loans; and second, a pooled component for estimated expected credit losses for pools of loans that share similar risk characteristics.
2119


The base forecast scenario considers unemployment, gross domestic product, and the BBB ratio (BBB spread to the 10-year U.S. Treasury rate). In addition to the quantitative inputs, several qualitative factors wereare considered. These factors include the risk that unemployment, gross domestic product, housing product index, and the BBB ratio prove to be more severe and/or prolonged than our baseline forecast due to a variety of factors including monetary actions to control inflation, recent instability in the banking sector, conflict in Ukraine, and global supply chain issues, inflation, and the ongoing impact of the COVID-19 pandemic. Activityissues. Old National’s activity in the allowance for credit losses foron loans by portfolio segment was as follows:
(dollars in thousands)Balance at
Beginning of
Period
Allowance
Established
for Acquired
PCD Loans
Charge-offsRecoveriesProvision
for Credit
Losses
Balance at
End of
Period
Three Months Ended
June 30, 2022
   
Commercial$99,471 $ $(1,344)$781 $3,911 $102,819 
Commercial real estate140,490  (318)320 1,310 141,802 
BBCC2,069  (20)91 (76)2,064 
Residential real estate17,252  (137)130 2,484 19,729 
Indirect1,648  (528)320 201 1,641 
Direct14,450  (1,722)676 1,008 14,412 
Home equity5,127  (27)20 416 5,536 
Total$280,507 $ $(4,096)$2,338 $9,254 $288,003 
Three Months Ended
June 30, 2021
Commercial$25,130 $— $(178)$204 $575 $25,731 
Commercial real estate70,561 — (178)111 (5,025)65,469 
BBCC2,537 — (100)15 346 2,798 
Residential real estate10,265 — (62)51 165 10,419 
Indirect2,255 — (206)565 (571)2,043 
Direct665 — (256)209 22 640 
Home equity2,624 — — 161 (441)2,344 
Total$114,037 $— $(980)$1,316 $(4,929)$109,444 
Six Months Ended
June 30, 2022
Commercial$27,232 $35,040 $(3,223)$1,013 $42,757 $102,819 
Commercial real estate64,004 42,601 (824)502 35,519 141,802 
BBCC2,458  (48)148 (494)2,064 
Residential real estate9,347 136 (324)570 10,000 19,729 
Indirect1,743  (1,012)542 368 1,641 
Direct528 31 (3,251)1,270 15,834 14,412 
Home equity2,029 723 (78)183 2,679 5,536 
Total$107,341 $78,531 $(8,760)$4,228 $106,663 $288,003 
Six Months Ended
June 30, 2021
Commercial$30,567 $— $(586)$443 $(4,693)$25,731 
Commercial real estate75,810 — (178)184 (10,347)65,469 
BBCC6,120 — (136)56 (3,242)2,798 
Residential real estate12,608 — (220)138 (2,107)10,419 
Indirect3,580 — (790)1,101 (1,848)2,043 
Direct855 — (558)469 (126)640 
Home equity1,848 — (82)500 78 2,344 
Total$131,388 $— $(2,550)$2,891 $(22,285)$109,444 
The allowance for credit losses increased for the six months ended June 30, 2022 primarily due to $78.5 million of allowance for credit losses on acquired PCD loans established through acquisition accounting adjustments on the merger date and $96.3 million of provision for credit losses to establish an allowance for credit losses on non-PCD
(dollars in thousands)Balance at
Beginning of
Period
Allowance
Established
for Acquired
PCD Loans
Charge-offsRecoveriesProvision
for Loan
Losses
Balance at
End of
Period
Three Months Ended
June 30, 2023
   
Commercial$125,768 $ $(8,331)$1,814 $8,152 $127,403 
Commercial real estate135,348  (2,458)1,029 2,978 136,897 
BBCC2,316  (94)31 523 2,776 
Residential real estate20,207  (218)53 379 20,421 
Indirect1,434  (402)612 (237)1,407 
Direct6,766  (2,600)637 (48)4,755 
Home equity6,872  (228)63 189 6,896 
Total$298,711 $ $(14,331)$4,239 $11,936 $300,555 
Three Months Ended
June 30, 2022
Commercial$99,471 $— $(1,344)$781 $3,911 $102,819 
Commercial real estate140,490 — (318)320 1,310 141,802 
BBCC2,069 — (20)91 (76)2,064 
Residential real estate17,252 — (137)130 2,484 19,729 
Indirect1,648 — (528)320 201 1,641 
Direct14,450 — (1,722)676 1,008 14,412 
Home equity5,127 — (27)20 416 5,536 
Total$280,507 $— $(4,096)$2,338 $9,254 $288,003 
Six Months Ended
June 30, 2023
Commercial$120,612 $ $(20,754)$2,097 $25,448 $127,403 
Commercial real estate138,244  (3,647)1,292 1,008 136,897 
BBCC2,431  (122)104 363 2,776 
Residential real estate21,916  (241)125 (1,379)20,421 
Indirect1,532  (1,599)1,024 450 1,407 
Direct12,116  (5,838)1,218 (2,741)4,755 
Home equity6,820  (310)130 256 6,896 
Total$303,671 $ $(32,511)$5,990 $23,405 $300,555 
Six Months Ended
June 30, 2022
Commercial$27,232 $35,040 $(3,223)$1,013 $42,757 $102,819 
Commercial real estate64,004 42,601 (824)502 35,519 141,802 
BBCC2,458 — (48)148 (494)2,064 
Residential real estate9,347 136 (324)570 10,000 19,729 
Indirect1,743 — (1,012)542 368 1,641 
Direct528 31 (3,251)1,270 15,834 14,412 
Home equity2,029 723 (78)183 2,679 5,536 
Total$107,341 $78,531 $(8,760)$4,228 $106,663 $288,003 
2220


loans acquired in the First Midwest merger. Loan growth and qualitative factors contributed to the increase in the allowance for credit losses in the three months ended June 30, 2022.
Unfunded Loan Commitments
Old National maintains an allowance for credit losses on unfunded commercial lendingloan commitments and letters of credit to provide for the risk of loss inherent in these arrangements. The allowance is computed using a methodology similar to that used to determine the allowance for credit losses foron loans, modified to take into account the probability of a drawdown on the commitment. The allowance for credit losses on unfunded loan commitments is classified as a liability account on the balance sheet within accrued expenses and other liabilities, while the corresponding provision for theseunfunded loan commitments is included in the provision for credit losses is recorded as a component of other expense.losses. Old National’s activity in the allowance for credit losses on unfunded loan commitments was as follows:
Three Months Ended
June 30,
Six Months Ended
June 30,
Three Months Ended
June 30,
Six Months Ended
June 30,
(dollars in thousands)(dollars in thousands)2022202120222021(dollars in thousands)2023202220232022
Allowance for credit losses on unfunded loan commitments:Allowance for credit losses on unfunded loan commitments: Allowance for credit losses on unfunded loan commitments: 
Balance at beginning of periodBalance at beginning of period$22,045 $10,365 $10,879 $11,689 Balance at beginning of period$34,156 $22,046 $32,188 $10,879 
Provision for credit losses on unfunded commitments
for loans acquired during the period
 — 11,013 — 
Expense (reversal of expense) for credit losses(79)64 74 (1,260)
Provision for credit losses on unfunded commitments
acquired during the period
Provision for credit losses on unfunded commitments
acquired during the period
 —  11,013 
Provision for unfunded loan commitmentsProvision for unfunded loan commitments2,851 (80)4,819 74 
Balance at end of periodBalance at end of period$21,966 $10,429 $21,966 $10,429 Balance at end of period$37,007 $21,966 $37,007 $21,966 
Credit Quality
Old National’s management monitors the credit quality of its loans on an ongoing basis with the AQR for commercial loans reviewed annually or at renewal and the performance of its residential and consumer loans based upon the accrual status refreshed at least quarterly.  Internally, management assigns an AQR to each non-homogeneous commercial, commercial real estate, and BBCC loan in the portfolio.  The primary determinants of the AQR are the reliability of the primary source of repayment and the past, present, and projected financial condition of the borrower.  The AQR will also consider current industry conditions.  Major factors used in determining the AQR can vary based on the nature of the loan, but commonly include factors such as debt service coverage, internal cash flow, liquidity, leverage, operating performance, debt burden, FICO scores, occupancy, interest rate sensitivity, and expense burden.  Old National uses the following definitions for risk ratings:
Criticized.  Special mention loans that have a potential weakness that deserves management’s close attention.  If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.
Classified – Substandard.  Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any.  Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.  They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
Classified – Nonaccrual.  Loans classified as nonaccrual have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection in full, on the basis of currently existing facts, conditions, and values, in doubt.
Classified – Doubtful.  Loans classified as doubtful have all the weaknesses inherent in those classified as nonaccrual, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
Pass rated loans are those loans that are other than criticized, classified – substandard, classified – nonaccrual, or classified – doubtful.
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The following table summarizes the amortized cost of term loans by risk category of commercial, commercial real estate, and BBCC loans by loan portfolio segment, class of loan, and origination year:
Origination YearRevolving to TermOrigination YearRevolving to Term
(dollars in thousands)(dollars in thousands)20222021202020192018PriorRevolvingTotal(dollars in thousands)20232022202120202019PriorRevolvingTotal
June 30, 2022
June 30, 2023June 30, 2023
Commercial:Commercial:Commercial:
Risk Rating:Risk Rating:Risk Rating:
PassPass$1,085,570 $1,982,733 $1,016,391 $888,392 $426,282 $467,789 $2,313,545 $132,149 $8,312,851 Pass$1,108,984 $1,860,049 $1,307,700 $671,792 $604,875 $673,184 $2,185,539 $465,649 $8,877,772 
CriticizedCriticized5,285 23,442 17,524 28,488 15,752 10,798 48,442 1,352 151,083 Criticized28,284 84,240 15,092 23,548 29,772 32,376 74,437 25,524 313,273 
Classified:Classified:Classified:
SubstandardSubstandard31,062 33,265 16,647 44,642 25,021 15,349 41,626 18,092 225,704 Substandard17,252 16,246 36,914 36,303 4,671 22,508 52,794 37,482 224,170 
NonaccrualNonaccrual347 3,640 1,164 1,071 1  2,402 3,479 12,104 Nonaccrual 349  585 824 6,681 1,064 2,210 11,713 
DoubtfulDoubtful 299 930 592 4,679 16,004 7,741  30,245 Doubtful 24,047 12,536 1,832 583 4,901   43,899 
TotalTotal$1,122,264 $2,043,379 $1,052,656 $963,185 $471,735 $509,940 $2,413,756 $155,072 $8,731,987 Total$1,154,520 $1,984,931 $1,372,242 $734,060 $640,725 $739,650 $2,313,834 $530,865 $9,470,827 
Commercial real estate:Commercial real estate:Commercial real estate:
Risk Rating:Risk Rating:Risk Rating:
PassPass$1,552,841 $2,787,599 $2,234,315 $1,472,777 $867,430 $1,446,189 $163,533 $443,935 $10,968,619 Pass$1,188,882 $3,335,715 $2,791,366 $1,852,690 $1,083,211 $1,511,576 $84,574 $677,072 $12,525,086 
CriticizedCriticized43,201 31,765 18,257 51,824 66,566 50,919  33,801 296,333 Criticized28,324 30,372 31,377 32,238 54,738 88,116 3,893 23,353 292,411 
Classified:Classified:Classified:
SubstandardSubstandard51,283 36,711 22,940 47,348 55,284 35,047 2,291 4,212 255,116 Substandard14,685 71,131 17,505 19,748 79,998 44,060  49,825 296,952 
NonaccrualNonaccrual918 12,535 3,545  2,666 7,285 303 786 28,038 Nonaccrual 866 18,463 1,064 456 16,081  3,272 40,202 
DoubtfulDoubtful 37,124 12,041 669 1,171 42,623   93,628 Doubtful 3,802 31,341 9,249 39,559 48,766   132,717 
TotalTotal$1,648,243 $2,905,734 $2,291,098 $1,572,618 $993,117 $1,582,063 $166,127 $482,734 $11,641,734 Total$1,231,891 $3,441,886 $2,890,052 $1,914,989 $1,257,962 $1,708,599 $88,467 $753,522 $13,287,368 
BBCC:BBCC:BBCC:
Risk Rating:Risk Rating:Risk Rating:
PassPass$44,590 $73,821 $60,244 $45,049 $28,071 $20,216 $46,062 $19,013 $337,066 Pass$52,620 $77,831 $53,068 $44,433 $32,200 $28,305 $69,107 $16,637 $374,201 
CriticizedCriticized669 1,083 667 744 270  451 1,535 5,419 Criticized987 1,445 1,081 360 1,045 483 1,836 1,626 8,863 
Classified:Classified:Classified:
SubstandardSubstandard72 274 13 576  152 923 313 2,323 Substandard10 497 629 49 226 836 484 856 3,587 
NonaccrualNonaccrual  276  45   737 1,058 Nonaccrual37 313 323 128 235 668  644 2,348 
DoubtfulDoubtful  25 387 364 123   899 Doubtful 408 219  55 74 500  1,256 
TotalTotal$45,331 $75,178 $61,225 $46,756 $28,750 $20,491 $47,436 $21,598 $346,765 Total$53,654 $80,494 $55,320 $44,970 $33,761 $30,366 $71,927 $19,763 $390,255 
2422


Origination YearRevolving to Term
(dollars in thousands)20212020201920182017PriorRevolvingTotal
December 31, 2021
Commercial:
Risk Rating:
Pass$918,456 $563,869 $271,158 $98,468 $156,136 $235,639 $667,628 $130,470 $3,041,824 
Criticized9,998 7,885 6,660 — 7,809 2,658 14,601 10,076 59,687 
Classified:
Substandard14,773 14,468 10,200 9,849 5,521 945 6,883 10,322 72,961 
Nonaccrual1,069 3,507 1,276 3,721 1,448 — 845 7,796 19,662 
Doubtful— 178 — 288 337 5,275 — — 6,078 
Total$944,296 $589,907 $289,294 $112,326 $171,251 $244,517 $689,957 $158,664 $3,200,212 
Commercial real estate:
Risk Rating:
Pass$1,555,880 $1,474,271 $846,921 $481,508 $462,176 $611,680 $42,609 $451,544 $5,926,589 
Criticized27,622 24,790 39,914 — 21,614 22,157 — 34,387 170,484 
Classified:
Substandard4,706 12,118 9,933 9,058 18,165 11,351 2,291 4,339 71,961 
Nonaccrual1,620 2,997 — 1,627 3,419 8,905 315 871 19,754 
Doubtful6,653 — 1,970 342 11,218 12,513 — — 32,696 
Total$1,596,481 $1,514,176 $898,738 $492,535 $516,592 $666,606 $45,215 $491,141 $6,221,484 
BBCC:
Risk Rating:
Pass$81,710 $69,749 $54,580 $34,461 $25,113 $8,296 $47,571 $18,778 $340,258 
Criticized1,320 1,170 841 160 — — 670 1,578 5,739 
Classified:
Substandard284 24 79 187 465 103 239 1,388 
Nonaccrual— 88 — — 66 162 — 1,136 1,452 
Doubtful— 25 284 1,391 — 210 — — 1,910 
Total$83,314 $71,056 $55,784 $36,019 $25,366 $9,133 $48,344 $21,731 $350,747 

Origination YearRevolving to Term
(dollars in thousands)20222021202020192018PriorRevolvingTotal
December 31, 2022
Commercial:
Risk Rating:
Pass$2,388,618 $1,754,364 $796,340 $738,208 $362,986 $388,617 $1,988,763 $329,119 $8,747,015 
Criticized40,856 30,661 63,557 33,490 9,195 5,312 61,036 4,327 248,434 
Classified:
Substandard37,223 47,522 16,540 22,925 4,844 21,204 67,402 25,143 242,803 
Nonaccrual3,627 1,453 566 — — — 1,634 6,623 13,903 
Doubtful2,821 17,604 3,720 8,005 5,968 8,351 — — 46,469 
Total$2,473,145 $1,851,604 $880,723 $802,628 $382,993 $423,484 $2,118,835 $365,212 $9,298,624 
Commercial real estate:
Risk Rating:
Pass$3,066,960 $2,828,758 $1,989,000 $1,219,025 $675,572 $1,018,719 $57,818 $689,553 $11,545,405 
Criticized75,306 34,422 22,569 82,637 86,504 56,864 — 23,282 381,584 
Classified:
Substandard46,231 16,928 24,319 78,468 57,824 21,591 — 4,108 249,469 
Nonaccrual3,151 9,541 5,014 — 2,312 22,155 — 3,257 45,430 
Doubtful1,934 38,386 10,011 4,605 1,523 20,401 — — 76,860 
Total$3,193,582 $2,928,035 $2,050,913 $1,384,735 $823,735 $1,139,730 $57,818 $720,200 $12,298,748 
BBCC:
Risk Rating:
Pass$90,341 $64,161 $52,304 $36,868 $23,618 $11,333 $60,016 $18,881 $357,522 
Criticized1,504 525 368 692 353 — 1,006 1,603 6,051 
Classified:
Substandard811 143 — 421 — — 543 682 2,600 
Nonaccrual42 37 118 — 429 284 — 639 1,549 
Doubtful40 107 439 157 64 73 — — 880 
Total$92,738 $64,973 $53,229 $38,138 $24,464 $11,690 $61,565 $21,805 $368,602 
2523


For residential real estate and consumer loan classes, Old National evaluates credit quality based on the aging status of the loan and by payment activity.  The performing or nonperforming status is updated on an on-going basis dependent upon improvement and deterioration in credit quality. The following table presents the amortized cost of term residential real estate and consumer loans based on payment activity and origination year:
Origination YearRevolving to TermOrigination YearRevolving to Term
(dollars in thousands)(dollars in thousands)20222021202020192018PriorRevolvingTotal(dollars in thousands)20232022202120202019PriorRevolvingTotal
June 30, 2022
June 30, 2023June 30, 2023
Residential real estate:Residential real estate:Residential real estate:
Risk Rating:Risk Rating:Risk Rating:
PerformingPerforming$1,316,193 $1,383,143 $1,895,059 $507,638 $147,478 $786,725 $10,863 $96 $6,047,195 Performing$261,285 $1,480,926 $1,948,505 $1,709,893 $459,251 $785,089 $ $143 $6,645,092 
NonperformingNonperforming 198 666 587 1,239 29,172   31,862 Nonperforming 1,892 2,727 4,200 3,378 27,191   39,388 
TotalTotal$1,316,193 $1,383,341 $1,895,725 $508,225 $148,717 $815,897 $10,863 $96 $6,079,057 Total$261,285 $1,482,818 $1,951,232 $1,714,093 $462,629 $812,280 $ $143 $6,684,480 
Indirect:Indirect:Indirect:
Risk Rating:Risk Rating:Risk Rating:
PerformingPerforming$305,501 $302,525 $180,812 $109,194 $46,379 $35,067 $ $1 $979,479 Performing$187,644 $425,822 $202,230 $98,742 $57,413 $27,397 $ $83 $999,331 
NonperformingNonperforming66 414 519 371 349 543   2,262 Nonperforming65 1,107 798 1,082 438 466   3,956 
TotalTotal$305,567 $302,939 $181,331 $109,565 $46,728 $35,610 $ $1 $981,741 Total$187,709 $426,929 $203,028 $99,824 $57,851 $27,863 $ $83 $1,003,287 
Direct:Direct:Direct:
Risk Rating:Risk Rating:Risk Rating:
PerformingPerforming$91,675 $188,063 $100,504 $78,199 $58,343 $50,906 $103,998 $38 $671,726 Performing$53,778 $110,107 $121,141 $77,169 $41,509 $80,155 $74,945 $1,348 $560,152 
NonperformingNonperforming22 447 143 289 157 1,516 84 128 2,786 Nonperforming21 275 489 562 463 3,970 8 10 5,798 
TotalTotal$91,697 $188,510 $100,647 $78,488 $58,500 $52,422 $104,082 $166 $674,512 Total$53,799 $110,382 $121,630 $77,731 $41,972 $84,125 $74,953 $1,358 $565,950 
Home equity:Home equity:Home equity:
Risk Rating:Risk Rating:Risk Rating:
PerformingPerforming$11,875 $11,855 $8,137 $14,518 $13,076 $36,231 $975,416 $14,702 $1,085,810 Performing$ $1,328 $843 $859 $943 $6,573 $988,669 $16,859 $1,016,074 
NonperformingNonperforming  34 16 593 8,224 212 2,963 12,042 Nonperforming 51 130 82 1,057 4,776 1,961 6,175 14,232 
TotalTotal$11,875 $11,855 $8,171 $14,534 $13,669 $44,455 $975,628 $17,665 $1,097,852 Total$ $1,379 $973 $941 $2,000 $11,349 $990,630 $23,034 $1,030,306 
Origination YearRevolving to Term
20212020201920182017PriorRevolvingTotal
December 31, 2021
Residential real estate:
Risk Rating:
Performing$625,582 $632,705 $272,600 $72,766 $103,866 $529,293 $12 $105 $2,236,929 
Nonperforming96 165 166 350 855 16,728 — — 18,360 
Total$625,678 $632,870 $272,766 $73,116 $104,721 $546,021 $12 $105 $2,255,289 
Indirect:
Risk Rating:
Performing$361,485 $231,156 $146,978 $68,513 $41,598 $20,819 $— $$870,558 
Nonperforming262 524 614 510 430 241 — — 2,581 
Total$361,747 $231,680 $147,592 $69,023 $42,028 $21,060 $— $$873,139 
Direct:
Risk Rating:
Performing$34,058 $16,135 $14,396 $14,579 $7,432 $15,831 $36,812 $192 $139,435 
Nonperforming13 53 130 133 35 536 42 950 
Total$34,071 $16,188 $14,526 $14,712 $7,467 $16,367 $36,854 $200 $140,385 
Home equity:
Risk Rating:
Performing$— $— $633 $349 $535 $— $539,057 $16,768 $557,342 
Nonperforming— — 16 41 258 2,923 3,248 
Total$— $— $649 $358 $576 $$539,315 $19,691 $560,590 
Origination YearRevolving to Term
20222021202020192018PriorRevolvingTotal
December 31, 2022
Residential real estate:
Risk Rating:
Performing$1,327,168 $1,945,792 $1,825,762 $478,529 $136,260 $712,175 $$88 $6,425,781 
Nonperforming59 529 861 873 1,826 30,512 — — 34,660 
Total$1,327,227 $1,946,321 $1,826,623 $479,402 $138,086 $742,687 $$88 $6,460,441 
Indirect:
Risk Rating:
Performing$504,410 $249,407 $144,265 $82,304 $31,484 $19,095 $— $62 $1,031,027 
Nonperforming348 1,074 645 531 304 328 — — 3,230 
Total$504,758 $250,481 $144,910 $82,835 $31,788 $19,423 $— $62 $1,034,257 
Direct:
Risk Rating:
Performing$132,934 $164,126 $77,406 $57,919 $45,299 $59,212 $87,622 $671 $625,189 
Nonperforming115 851 614 205 327 1,526 354 3,997 
Total$133,049 $164,977 $78,020 $58,124 $45,626 $60,738 $87,627 $1,025 $629,186 
Home equity:
Risk Rating:
Performing$919 $896 $1,849 $1,497 $983 $11,646 $990,001 $14,792 $1,022,583 
Nonperforming166 160 166 446 794 4,308 1,698 3,462 11,200 
Total$1,085 $1,056 $2,015 $1,943 $1,777 $15,954 $991,699 $18,254 $1,033,783 
2624


The following table summarizes the gross charge-offs of loans by loan portfolio segment and origination year:
Origination Year
(dollars in thousands)20232022202120202019PriorRevolvingTotal
Three Months Ended June 30, 2023
Commercial$ $2,100 $5,931 $120 $ $ $180 $8,331 
Commercial real estate     2,458  2,458 
BBCC 47  47    94 
Residential real estate     218  218 
Indirect10 164 124 48 16 40  402 
Direct 430 588 172 414 195 801 2,600 
Home equity     228  228 
Total gross charge-offs$10 $2,741 $6,643 $387 $430 $3,139 $981 $14,331 
Six Months Ended June 30, 2023
Commercial$ $2,100 $11,161 $120 $6,789 $239 $345 $20,754 
Commercial real estate 54 735 400  2,458  3,647 
BBCC 47 28 47    122 
Residential real estate     241  241 
Indirect10 678 554 141 127 89  1,599 
Direct 901 1,382 458 741 390 1,966 5,838 
Home equity     310  310 
Total gross charge-offs$10 $3,780 $13,860 $1,166 $7,657 $3,727 $2,311 $32,511 
Nonaccrual and Past Due Loans
Old National does not record interest on nonaccrual loans until principal is recovered. For all loan classes, a loan is generally placed on nonaccrual status when principal or interest becomes 90 days past due unless it is well secured and in the process of collection, or earlier when concern exists as to the ultimate collectability of principal or interest. Interest accrued but not received is reversed against earnings. Cash interest received on these loans is applied to the principal balance until the principal is recovered or until the loan returns to accrual status. Loans may be returned to accrual status when all the principal and interest amounts contractually due are brought current, remain current for a prescribed period, and future payments are reasonably assured.
The following table presents the aging of the amortized cost basis in past due loans by class of loans:
(dollars in thousands)(dollars in thousands)30-59 Days
Past Due
60-89 Days
Past Due
Past Due
90 Days or
More
Total
Past Due
CurrentTotal
Loans
(dollars in thousands)30-59 Days
Past Due
60-89 Days
Past Due
Past Due
90 Days or
More
Total
Past Due
CurrentTotal
Loans
June 30, 2022
June 30, 2023June 30, 2023
CommercialCommercial$3,364 $117 $15,317 $18,798 $8,713,189 $8,731,987 Commercial$4,164 $3,719 $15,138 $23,021 $9,447,806 $9,470,827 
Commercial real estateCommercial real estate7,061 3,320 59,986 70,367 11,571,367 11,641,734 Commercial real estate7,760 10,441 35,906 54,107 13,233,261 13,287,368 
BBCCBBCC129 167 370 666 346,099 346,765 BBCC868 847 74 1,789 388,466 390,255 
ResidentialResidential37,902 4,304 12,611 54,817 6,024,240 6,079,057 Residential18,543 4,350 11,131 34,024 6,650,456 6,684,480 
IndirectIndirect4,140 673 362 5,175 976,566 981,741 Indirect4,296 1,162 840 6,298 996,989 1,003,287 
DirectDirect6,496 969 2,044 9,509 665,003 674,512 Direct3,225 775 1,257 5,257 560,693 565,950 
Home equityHome equity4,190 1,030 5,076 10,296 1,087,556 1,097,852 Home equity6,834 1,473 4,420 12,727 1,017,579 1,030,306 
TotalTotal$63,282 $10,580 $95,766 $169,628 $29,384,020 $29,553,648 Total$45,690 $22,767 $68,766 $137,223 $32,295,250 $32,432,473 
December 31, 2021
December 31, 2022December 31, 2022
CommercialCommercial$2,723 $617 $1,603 $4,943 $3,195,269 $3,200,212 Commercial$14,147 $4,801 $11,080 $30,028 $9,268,596 $9,298,624 
Commercial real estateCommercial real estate1,402 280 7,042 8,724 6,212,760 6,221,484 Commercial real estate47,240 1,312 32,892 81,444 12,217,304 12,298,748 
BBCCBBCC747 162 109 1,018 349,729 350,747 BBCC730 365 603 1,698 366,904 368,602 
ResidentialResidential8,273 2,364 4,554 15,191 2,240,098 2,255,289 Residential24,181 5,033 11,753 40,967 6,419,474 6,460,441 
IndirectIndirect3,888 867 554 5,309 867,830 873,139 Indirect6,302 2,118 958 9,378 1,024,879 1,034,257 
DirectDirect687 159 162 1,008 139,377 140,385 Direct5,404 2,118 1,928 9,450 619,736 629,186 
Home equityHome equity693 199 777 1,669 558,921 560,590 Home equity6,585 1,966 4,707 13,258 1,020,525 1,033,783 
TotalTotal$18,413 $4,648 $14,801 $37,862 $13,563,984 $13,601,846 Total$104,589 $17,713 $63,921 $186,223 $30,937,418 $31,123,641 
25


The following table presents the amortized cost basis of loans on nonaccrual status and loans past due 90 days or more and still accruing by class of loan:
June 30, 2022December 31, 2021June 30, 2023December 31, 2022
(dollars in thousands)(dollars in thousands)Nonaccrual
Amortized
Cost
Nonaccrual
With No
Related
Allowance
Past Due
90 Days or
More and
Accruing
Nonaccrual
Amortized
Cost
Nonaccrual
With No
Related
Allowance
Past Due
90 Days or
More and
Accruing
(dollars in thousands)Nonaccrual
Amortized
Cost
Nonaccrual
With No
Related
Allowance
Past Due
90 Days or
More and
Accruing
Nonaccrual
Amortized
Cost
Nonaccrual
With No
Related
Allowance
Past Due
90 Days or
More and
Accruing
CommercialCommercial$42,349 $13,762 $474 $25,740 $9,574 $— Commercial$55,612 $12,666 $92 $60,372 $7,873 $152 
Commercial real estateCommercial real estate121,666 9,714 216 52,450 25,139 — Commercial real estate172,919 44,218 173 122,290 33,445 — 
BBCCBBCC1,957   3,362 — — BBCC3,604   2,429 — — 
ResidentialResidential31,862   18,360 — — Residential39,388   34,660 — 1,808 
IndirectIndirect2,262   2,581 — Indirect3,956   3,230 — 28 
DirectDirect2,786  182 950 — Direct5,798  25 3,997 — 133 
Home equityHome equity12,042  10 3,248 — — Home equity14,232  13 11,200 — 529 
TotalTotal$214,924 $23,476 $882 $106,691 $34,713 $Total$295,509 $56,884 $303 $238,178 $41,318 $2,650 
Interest income recognized on nonaccrual loans was insignificant during the three and six months ended June 30, 20222023 and 2021.2022.
27


When management determines that foreclosure is probable, expected credit losses for collateral dependent loans are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. A loan is considered collateral dependent when the borrower is experiencing financial difficulty and the loan is expected to be repaid substantially through the operation or sale of the collateral. The class of loan represents the primary collateral type associated with the loan. Significant quarter over quarterquarter-over-quarter changes are reflective of changes in nonaccrual status and not necessarily associated with credit quality indicators like appraisal value. The following table presents the amortized cost basis of collateral dependent loans by class of loan:
Type of CollateralType of Collateral
(dollars in thousands)(dollars in thousands)Real
Estate
Blanket
Lien
Investment
Securities/Cash
AutoOther(dollars in thousands)Real
Estate
Blanket
Lien
Investment
Securities/Cash
AutoOther
June 30, 2022
June 30, 2023June 30, 2023
CommercialCommercial$11,766 $25,147 $2,545 $57 $1,843 Commercial$14,450 $37,285 $652 $535 $366 
Commercial real estateCommercial real estate108,312  917  6,563 Commercial real estate156,570 3,908 1,246  6,259 
BBCCBBCC1,364 539 26 28  BBCC2,267 1,301  36  
ResidentialResidential31,862     Residential39,388     
IndirectIndirect   2,262  Indirect   3,956  
DirectDirect1,810  1 272 21 Direct4,973 6  253 32 
Home equityHome equity11,377     Home equity14,232     
Total loansTotal loans$166,491 $25,686 $3,489 $2,619 $8,427 Total loans$231,880 $42,500 $1,898 $4,780 $6,657 
December 31, 2021
December 31, 2022December 31, 2022
CommercialCommercial$8,100 $13,816 $3,394 $80 $302 Commercial$8,962 $42,754 $2,690 $1,611 $980 
Commercial real estateCommercial real estate38,657 — 961 — 6,653 Commercial real estate108,871 — 1,718 — 6,411 
BBCCBBCC1,895 1,331 43 93 — BBCC1,939 478 — 12 — 
ResidentialResidential18,360 — — — — Residential34,660 — — — — 
IndirectIndirect— — — 2,581 — Indirect— — — 3,230 — 
DirectDirect724 — 152 20 Direct2,991 13 — 232 23 
Home equityHome equity3,248 — — — — Home equity11,200 — — — — 
Total loansTotal loans$70,984 $15,147 $4,399 $2,906 $6,975 Total loans$168,623 $43,245 $4,408 $5,085 $7,414 
Loan Participations
Old National has loan participations, which qualify as participating interests, with other financial institutions.  At June 30, 2022,2023, these loans totaled $2.4$2.6 billion, of which $1.2 billion had been sold to other financial institutions and $1.2$1.4 billion was retained by Old National.  The loan participations convey proportionate ownership rights with equal priority to each participating interest holder; involve no recourse (other than ordinary representations and warranties) to, or subordination by, any participating interest holder; all cash flows are divided among the participating interest holders in proportion to each holder’s share of ownership; and no holder has the right to pledge the entire financial asset unless all participating interest holders agree.
Troubled Debt Restructurings
Old National may choose to restructure the contractual terms of certain loans.  The decision to restructure a loan, versus aggressively enforcing the collection of the loan, may benefit Old National by increasing the ultimate probability of collection.
Any loans that are modified are reviewed by Old National to identify if a TDR has occurred, which is when for economic or legal reasons related to a borrower’s financial difficulties, Old National Bank grants a concession to the borrower that it would not otherwise consider. Terms may be modified to fit the ability of the borrower to repay in line with its current financial status.  The modification of the terms of such loans includes one or a combination of the following:  a reduction of the stated interest rate of the loan, an extension of the maturity date at a stated rate of interest lower than the current market rate of new debt with similar risk, or a permanent reduction of the recorded investment of the loan.
Loans modified in a TDR are typically placed on nonaccrual status until we determine the future collection of principal and interest is reasonably assured, which generally requires that the borrower demonstrate a period of performance according to the restructured terms for six months.
2826


If we are unableFinancial Difficulty Modifications
Occasionally, Old National modifies loans to resolveborrowers experiencing financial difficulty in the form of principal forgiveness, term extension, an other-than-insignificant payment delay, or interest rate reduction (or a nonperforming loan issue,combination thereof). When principal forgiveness is provided, the credit will be charged off when itamount of forgiveness is apparent there will be a loss.  For large commercial type loans, each relationship is individually analyzed for evidence of apparent loss based on quantitative benchmarks or subjectively based upon certain events or particular circumstances.  For residential and consumer loans, a charge off is recorded at the time foreclosure is initiated or when the loan becomes 120 to 180 days past due, whichever is earlier.
For commercial TDRs, an allocation is established withincharged-off against the allowance for credit losses for the difference between the carrying value of the loan and its computed value.  To determine the computed value of the loan, one of the following methods is selected: (1) the present value of expected cash flows discounted at the loan’s original effective interest rate, (2) the loan’s observable market price, or (3) the fair value of the collateral, if the loan is collateral dependent.  The allocation is established as the difference between the carrying value of the loan and the collectable value.  If there are significant changes in the amount or timing of the loan’s expected future cash flows, the allowance allocation is recalculated and adjusted accordingly.
When a residential or consumer loan is identified as a TDR, the loan is typically written down to its collateral value less selling costs.
29


on loans.
The following table presents activity in TDRs:
(dollars in thousands)Beginning
Balance
(Charge-offs)/
Recoveries
(Payments)/
Disbursements
(Removals)/
Additions
Ending
Balance
Three Months Ended June 30, 2022
Commercial$7,044 $ $(2,846)$3,018 $7,216 
Commercial real estate32,428  (8,903)4,006 27,531 
BBCC87    87 
Residential2,405  (27) 2,378 
Indirect     
Direct2,679  (10) 2,669 
Home equity180  (49) 131 
Total$44,823 $ $(11,835)$7,024 $40,012 
Three Months Ended June 30, 2021
Commercial$8,471 $— $(207)$— $8,264 
Commercial real estate17,385 (1,420)— 15,970 
BBCC105 (11)— 97 
Residential2,603 (4)(17)— 2,582 
Indirect— (1)— — 
Direct726 (62)— 665 
Home equity276 (60)— 217 
Total$29,566 $$(1,778)$— $27,795 
Six Months Ended June 30, 2022
Commercial$7,456 $ $(4,743)$4,503 $7,216 
Commercial real estate17,158 4 (9,114)19,483 27,531 
BBCC87 3 (3) 87 
Residential2,435  (57) 2,378 
Indirect 1 (1)  
Direct2,704  (35) 2,669 
Home equity199 1 (69) 131 
Total$30,039 $9 $(14,022)$23,986 $40,012 
Six Months Ended June 30, 2021
Commercial$11,090 $— $(1,655)$(1,171)$8,264 
Commercial real estate17,606 15 (1,651)— 15,970 
BBCC112 (20)— 97 
Residential2,824 (4)(238)— 2,582 
Indirect— (3)— — 
Direct739 (76)— 665 
Home equity282 (66)— 217 
Total$32,653 $22 $(3,709)$(1,171)$27,795 
TDRs included within nonaccrual loans totaled $24.3 millionthe amortized cost basis of financial difficulty modifications at June 30, 2022 and $11.7 million at December 31, 2021.  Old National has established specific allowances for credit losses for clients whose loan terms have been modified as TDRs totaling $5.8 million at June 30, 2022 and $0.7 million at December 31, 2021.  Old National had not committed to lend any additional funds to clients with outstanding loans2023 that were classified as TDRs at June 30, 2022 or December 31, 2021.
The pre-modification and post-modification outstanding recorded investments of loans modified as TDRs during the three and six months ended June 30, 20222023 by class of loans and 2021 aretype of modification:
(dollars in thousands)Term
Extension
Total
Class of
Loans
Three Months Ended June 30, 2023
Commercial$1,231 0.0 %
Commercial real estate12,449 0.1 %
Total$13,680 0.0 %
Six Months Ended June 30, 2023
Commercial$18,517 0.2 %
Commercial real estate19,280 0.1 %
Total$37,797 0.1 %
Old National closely monitors the same except for whenperformance of financial difficulty modifications to understand the loaneffectiveness of its efforts. The following table presents the performance of loans identified as financial difficulty modifications involveat June 30, 2023:
(dollars in thousands)30-59 Days
Past Due
60-89 Days
Past Due
Past Due
90 Days or
More
Total
Past Due
CurrentTotal
Loans
June 30, 2023
Commercial$ $ $2,600 $2,600 $15,917 $18,517 
Commercial real estate 5,537  5,537 13,743 19,280 
Total$ $5,537 $2,600 $8,137 $29,660 $37,797 
The following table summarizes the forgivenessnature of principal.  NaN loan met the qualifications to be removed from TDR status forfinancial difficulty modifications during the three and six months ended June 30, 2021.
The TDRs that occurred during the six months ended June 30, 2022 increased the allowance for credit losses2023 by $5.5 million and resulted in no charge-offs. The TDRs that occurred during the six months ended June 30, 2021 did not have a material impact on the allowance for credit losses and resulted in no charge-offs.
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A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.
TDRs for which there was a payment default within twelve months following the modification were insignificant during the six months ended June 30, 2022 and 2021.
The termsclass of certain other loans were modified during 2022 and 2021 that did not meet the definition of a TDR.  It is our process to review all classified and criticized loans that, during the period, have been renewed, have entered into a forbearance agreement, have gone from principal and interest to interest only, or have extended the maturity date.  In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on its debt in the foreseeable future without the modification.  The evaluation is performed under our internal underwriting policy.  We also evaluate whether a concession has been granted or if we were adequately compensated through a market interest rate, additional collateral, or a bona fide guarantee.  We also consider whether the modification was insignificant relative to the other terms of the agreement or the delay in a payment.
In general, once a modified loan is considered a TDR, the loan will always be considered a TDR until it is paid in full, otherwise settled, sold, or charged off.  However, guidance also permits for loans to be removed from TDR status when subsequently restructured under these circumstances: (1) at the time of the subsequent restructuring, the borrower is not experiencing financial difficulties, and this is documented by a current credit evaluation at the time of the restructuring, (2) under the terms of the subsequent restructuring agreement, the institution has granted no concession to the borrower; and (3) the subsequent restructuring agreement includes market terms that are no less favorable than those that would be offered for a comparable new loan.  For loans subsequently restructured that have cumulative principal forgiveness, the loan should continue to be measured in accordance with ASC 310-10, Receivables – Overall. However, consistent with ASC 310-40-50-2, Troubled Debt Restructurings by Creditors, Creditor Disclosure of Troubled Debt Restructurings, the loan would not be required to be reported in the years following the restructuring if the subsequent restructuring meets both of these criteria: (1) has an interest rate at the time of the subsequent restructuring that is not less than a market interest rate; and (2) is performing in compliance with its modified terms after the subsequent restructuring.
Purchased Credit Deteriorated Loans
Old National has purchased loans, for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination. The carrying amount of those loans is as follows:loans:
(dollars in thousands)
First Midwest (1)
Purchase price of loans at acquisitionWeighted-
Average
Term
Extension
(in months)
$1,400,831
Allowance for credit losses at acquisitionThree Months Ended June 30, 202378,531
Non-credit discount/(premium) at acquisitionCommercial9,0037.0
Par value of acquired loans at acquisitionCommercial real estate$6.0
1,488,365Total6.1
Six Months Ended June 30, 2023
Commercial6.8
Commercial real estate5.8
Total6.3
(1)There were no payment defaults on these loans subsequent to their modifications during the three and six months ended June 30, 2023. At June 30, 2023, Old National merged with First Midwest effective February 15, 2022.
NOTE 7 – PREMISES AND EQUIPMENT
The composition of premises and equipment was as follows:
(dollars in thousands)June 30,
2022
December 31,
2021
Land$97,194 $71,014 
Buildings450,537 394,400 
Furniture, fixtures, and equipment143,975 118,124 
Leasehold improvements62,400 46,330 
Total754,106 629,868 
Accumulated depreciation(168,075)(153,682)
Premises and equipment, net$586,031 $476,186 
The increase in premises and equipment at June 30, 2022 when comparedhad not committed to December 31, 2021 was primarilylend any material additional funds to the borrowers whose loans were modified due to assets acquired in the merger with First Midwest totaling $112.4 million.financial difficulties.
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Depreciation expense was $10.0 million for the three months ended June 30, 2022 and $17.7 million for the six months ended June 30, 2022, compared to $7.0 million for the three months ended June 30, 2021 and $14.1 million for the six months ended June 30, 2021.
Finance Leases
Old National leases certain banking center buildings and equipment under finance leases that are included in premises and equipment.  See Notes 8 and 14 to the consolidated financial statements for detail regarding these leases.
NOTE 87 – LEASES
Old National has operating and finance leases for land, office space, banking centers, and equipment.  These leases are generally for periods of 5 to 20 years with various renewal options.  We include certain renewal options in the measurement of our right-of-use assets and lease liabilities if they are reasonably certain to be exercised.  Variable lease payments that are dependent on an index or a rate are initially measured using the index or rate at the commencement date and are included in the measurement of the lease liability. Variable lease payments that are not dependent on an index or a rate are excluded from the measurement of the lease liability and are recognized in profit and loss when incurred.  Variable lease payments are defined as payments made for the right to use an asset that vary because of changes in facts or circumstances occurring after the commencement date, other than the passage of time.
Old National has lease agreements with lease and non-lease components, which are generally accounted for separately.  For real estate leases, non-lease components and other non-components, such as common area maintenance charges, real estate taxes, and insurance are not included in the measurement of the lease liability since they are generally able to be segregated.  For certain equipment leases, Old National accounts for the lease and non-lease components as a single lease component using the practical expedient available for that class of assets.
Old National does not have any material sub-lease agreements.
The components of lease expense were as follows:
Affected Line
Item in the
Statement of Income
Three Months Ended
June 30,
Six Months Ended
June 30,
(dollars in thousands)2022202120222021
Operating lease costOccupancy/Equipment expense$8,558 $3,092 $13,666 $6,393 
Finance lease cost: 
Amortization of right-of-use assetsOccupancy expense648 810 1,323 1,121 
Interest on lease liabilitiesInterest expense103 120 210 215 
Sub-lease incomeOccupancy expense(174)(135)(302)(278)
Total $9,135 $3,887 $14,897 $7,451 
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Affected Line
Item in the
Statement of Income
Three Months Ended
June 30,
Six Months Ended
June 30,
(dollars in thousands)2023202220232022
Operating lease costOccupancy/Equipment expense$7,469 $8,558 $16,107 $13,666 
Finance lease cost: 
Amortization of right-of-use assetsOccupancy expense737 648 1,428 1,323 
Interest on lease liabilitiesInterest expense184 103 353 210 
Sub-lease incomeOccupancy expense(102)(174)(162)(302)
Total $8,288 $9,135 $17,726 $14,897 
Supplemental balance sheet information related to leases was as follows:
(dollars in thousands)(dollars in thousands)June 30,
2022
December 31,
2021
(dollars in thousands)June 30,
2023
December 31,
2022
Operating LeasesOperating Leases Operating Leases 
Operating lease right-of-use assetsOperating lease right-of-use assets$192,196 $69,560 Operating lease right-of-use assets$184,700 $189,714 
Operating lease liabilitiesOperating lease liabilities215,188 76,236 Operating lease liabilities206,178 211,964 
Finance LeasesFinance LeasesFinance Leases
Premises and equipment, netPremises and equipment, net15,017 16,451 Premises and equipment, net20,435 10,799 
Other borrowingsOther borrowings15,910 17,233 Other borrowings21,346 13,469 
Weighted-Average Remaining Lease Term (in Years)Weighted-Average Remaining Lease Term (in Years)Weighted-Average Remaining Lease Term (in Years)
Operating leasesOperating leases9.210.4Operating leases8.79.1
Finance leasesFinance leases7.37.6Finance leases10.57.2
Weighted-Average Discount RateWeighted-Average Discount RateWeighted-Average Discount Rate
Operating leasesOperating leases2.89 %3.34 %Operating leases2.92 %2.88 %
Finance leasesFinance leases3.10 %3.02 %Finance leases3.84 %3.30 %
28


Supplemental cash flow information related to leases was as follows:
Six Months Ended
June 30,
Six Months Ended
June 30,
(dollars in thousands)(dollars in thousands)20222021(dollars in thousands)20232022
Cash paid for amounts included in the measurement of lease liabilities:Cash paid for amounts included in the measurement of lease liabilities: Cash paid for amounts included in the measurement of lease liabilities: 
Operating cash flows from operating leasesOperating cash flows from operating leases$13,705 $7,166 Operating cash flows from operating leases$15,752 $13,705 
Operating cash flows from finance leasesOperating cash flows from finance leases210 215 Operating cash flows from finance leases353 210 
Financing cash flows from finance leasesFinancing cash flows from finance leases1,210 993 Financing cash flows from finance leases1,265 1,210 
The following table presents a maturity analysis of the Company’s lease liability by lease classification at June 30, 2022:2023:
(dollars in thousands)(dollars in thousands)Operating
Leases
Finance
Leases
(dollars in thousands)Operating
Leases
Finance
Leases
2022$16,553 $1,432 
2023202330,296 2,892 2023$15,993 $1,611 
2024202428,888 2,942 202431,241 3,278 
2025202527,581 2,952 202529,621 3,301 
2026202626,582 1,712 202628,575 2,075 
2027202727,604 2,079 
ThereafterThereafter116,859 5,914 Thereafter101,741 13,964 
Total undiscounted lease paymentsTotal undiscounted lease payments246,759 17,844 Total undiscounted lease payments234,775 26,308 
Amounts representing interestAmounts representing interest(31,571)(1,934)Amounts representing interest(28,597)(4,962)
Lease liabilityLease liability$215,188 $15,910 Lease liability$206,178 $21,346 

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NOTE 98 – GOODWILL AND OTHER INTANGIBLE ASSETS
The following table presents the changes in the carrying amount of goodwill:
Three Months Ended
June 30,
Six Months Ended
June 30,
Three Months Ended
June 30,
Six Months Ended
June 30,
(dollars in thousands)(dollars in thousands)2022202120222021(dollars in thousands)2023202220232022
Balance at beginning of periodBalance at beginning of period$1,997,157 $1,036,994 $1,036,994 $1,036,994 Balance at beginning of period$1,998,716 $1,997,157 $1,998,716 $1,036,994 
Acquisitions and adjustmentsAcquisitions and adjustments(5,623)— 954,540 — Acquisitions and adjustments (5,623) 954,540 
Balance at end of periodBalance at end of period$1,991,534 $1,036,994 $1,991,534 $1,036,994 Balance at end of period$1,998,716 $1,991,534 $1,998,716 $1,991,534 
During the six months ended June 30, 2022, Old National recorded $954.5 million of goodwill associated with the First Midwest merger. The decrease in goodwill for the three months ended June 30, 2022 resulted from the measurement period adjustments related to updating the update of fair values of the assets acquired and liabilities assumed in the First Midwest merger. The increase in goodwill for the six months ended June 30, 2022 was due to the First Midwest merger. See Note 3 to the consolidated financial statements for additional detail regarding this transaction.
Old National performed the required annual goodwill impairment test as of August 31, 20212022 and there was no impairment.  No events or circumstances since the August 31, 20212022 annual impairment test were noted that would indicate it was more likely than not a goodwill impairment exists.
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The gross carrying amounts and accumulated amortization of other intangible assets were as follows: 
(dollars in thousands)(dollars in thousands)Gross
Carrying
Amount
Accumulated
Amortization
and Impairment
Net
Carrying
Amount
(dollars in thousands)Gross
Carrying
Amount
Accumulated
Amortization
and Impairment
Net
Carrying
Amount
June 30, 2022   
June 30, 2023June 30, 2023   
Core depositCore deposit$170,642 $(69,819)$100,823 Core deposit$143,511 $(63,521)$79,990 
Customer trust relationshipsCustomer trust relationships56,243 (16,785)39,458 Customer trust relationships52,621 (18,452)34,169 
Total intangible assets$226,885 $(86,604)$140,281 
Total other intangible assetsTotal other intangible assets$196,132 $(81,973)$114,159 
December 31, 2021
December 31, 2022December 31, 2022
Core depositCore deposit$92,754 $(60,036)$32,718 Core deposit$170,642 $(80,951)$89,691 
Customer trust relationshipsCustomer trust relationships16,547 (14,587)1,960 Customer trust relationships56,243 (19,529)36,714 
Total intangible assets$109,301 $(74,623)$34,678 
Total other intangible assetsTotal other intangible assets$226,885 $(100,480)$126,405 
Other intangible assets consist of core deposit intangibles and customer relationship intangibles and are being amortized primarily on an accelerated basis over their estimated useful lives, generally over a period of 5 to 15 years. During the six months ended June 30, 2022, Old National recorded $77.9 million of core deposit intangibles and $39.7 million of customer trust relationships intangible associated with the First Midwest merger.
Old National reviews other intangible assets for possible impairment whenever events or changes in circumstances indicate that carrying amounts may not be recoverable. No impairment charges were recorded during the six months ended June 30, 20222023 or 2021.2022.  Total amortization expense associated with intangible assets was $7.2$6.1 million and $12.2 million for the three and six months ended June 30, 20222023, respectively, compared to $7.2 million and $12.0 million for the three and six months ended June 30, 2022, compared to $2.9 million for the three months ended June 30, 2021 and $6.0 million for the six months ended June 30, 2021.respectively.
Estimated amortization expense for future years is as follows:
(dollars in thousands) 
2022 remaining$13,748 
202324,342 
202421,298 
202518,417 
202615,614 
Thereafter46,862 
Total$140,281 
34
(dollars in thousands) 
2023 remaining$11,909 
202421,239 
202518,358 
202615,555 
202712,867 
Thereafter34,231 
Total$114,159 


NOTE 10 – LOAN SERVICING RIGHTS
Loan servicing rights are included in other assets on the balance sheet. At June 30, 2022, loan servicing rights derived from mortgage loans sold with servicing retained totaled $38.1 million, compared to $30.0 million at December 31, 2021.  Loans serviced for others are not reported as assets.  The principal balance of mortgage loans serviced for others was $4.4 billion at June 30, 2022, compared to $3.7 billion at December 31, 2021.  Custodial escrow balances maintained in connection with serviced loans were $58.1 million at June 30, 2022 and $18.2 million at December 31, 2021.
The following table summarizes the carrying values and activity related to loan servicing rights and the related valuation allowance: 
Three Months Ended
June 30,
Six Months Ended
June 30,
(dollars in thousands)2022202120222021
Balance at beginning of period$38,246 $28,262 $30,085 $28,124 
Additions (1)
1,347 3,058 11,013 6,171 
Amortization(1,472)(2,434)(2,977)(5,409)
Balance before valuation allowance at end of period38,121 28,886 38,121 28,886 
Valuation allowance:
Balance at beginning of period(1)(146)(46)(1,407)
(Additions)/recoveries1 41 46 1,302 
Balance at end of period (105) (105)
Loan servicing rights, net$38,121 $28,781 $38,121 $28,781 
(1)Additions in the six months ended June 30, 2022 include loan servicing rights of $7.7 million acquired in the First Midwest merger on February 15, 2022.
At June 30, 2022, the fair value of servicing rights was $46.8 million, which was determined using a discount rate of 9% and a conditional prepayment rate of 9%.  At December 31, 2021, the fair value of servicing rights was $33.8 million, which was determined using a discount rate of 9% and a conditional prepayment rate of 10%.
NOTE 119 – QUALIFIED AFFORDABLE HOUSING PROJECTS AND OTHER TAX CREDIT INVESTMENTS
Old National is a limited partner in several tax-advantaged limited partnerships whose purpose is to invest in approved qualified affordable housing, renewable energy, or other renovation or community revitalization projects.  These investments are included in other assets on the balance sheet, with any unfunded commitments included with other liabilities. As of June 30, 2022,2023, Old National expects to recover its remaining investments through the use of the tax credits that are generated by the investments.
The following table summarizes Old National’s investments in qualified affordable housing projects and other tax credit investments:
(dollars in thousands)(dollars in thousands) June 30, 2022December 31, 2021(dollars in thousands) June 30, 2023December 31, 2022
InvestmentInvestmentAccounting MethodInvestment
Unfunded
Commitment (1)
InvestmentUnfunded
Commitment
InvestmentAccounting MethodInvestment
Unfunded
Commitment (1)
InvestmentUnfunded
Commitment
LIHTCLIHTCProportional amortization$71,973 $44,163 $68,989 $41,355 LIHTCProportional amortization$90,164 $53,327 $84,428 $55,754 
FHTCFHTCEquity20,821 11,186 21,241 15,252 FHTCEquity19,797 10,016 19,316 9,588 
NMTCNMTCConsolidation28,355  18,727 — NMTCConsolidation47,728  51,912 — 
Renewable EnergyRenewable EnergyEquity1,519  1,985 — Renewable EnergyEquity608  1,099 — 
TotalTotal $122,668 $55,349 $110,942 $56,607 Total $158,297 $63,343 $156,755 $65,342 
(1)All commitments will be paid by Old National by December 31, 2027.
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The following table summarizes the amortization expense and tax benefit recognized for Old National’s qualified affordable housing projects and other tax credit investments:
(dollars in thousands)(dollars in thousands)
Amortization
Expense (1)
Tax Expense
(Benefit)
Recognized (2)
(dollars in thousands)
Amortization
Expense (1)
Tax Expense
(Benefit)
Recognized (2)
Three Months Ended June 30, 2023Three Months Ended June 30, 2023  
LIHTCLIHTC$1,463 $(1,908)
FHTCFHTC424 (512)
NMTCNMTC2,092 (2,611)
Renewable EnergyRenewable Energy246  
TotalTotal$4,225 $(5,031)
Three Months Ended June 30, 2022Three Months Ended June 30, 2022  Three Months Ended June 30, 2022
LIHTCLIHTC$1,240 $(1,650)LIHTC$1,240 $(1,650)
FHTCFHTC215 (263)FHTC215 (263)
NMTCNMTC1,100 (1,375)NMTC1,100 (1,375)
Renewable EnergyRenewable Energy210  Renewable Energy210 — 
TotalTotal$2,765 $(3,288)Total$2,765 $(3,288)
Three Months Ended June 30, 2021
Six Months Ended June 30, 2023Six Months Ended June 30, 2023
LIHTCLIHTC$863 $(1,136)LIHTC$2,927 $(3,817)
FHTCFHTC1,228 (574)FHTC848 (1,024)
NMTCNMTC375 (462)NMTC4,183 (5,222)
Renewable EnergyRenewable Energy210 — Renewable Energy492  
TotalTotal$2,676 $(2,172)Total$8,450 $(10,063)
Six Months Ended June 30, 2022Six Months Ended June 30, 2022Six Months Ended June 30, 2022
LIHTCLIHTC$2,493 $(3,300)LIHTC$2,493 $(3,300)
FHTCFHTC420 (514)FHTC420 (514)
NMTCNMTC2,201 (2,750)NMTC2,201 (2,750)
Renewable EnergyRenewable Energy420  Renewable Energy420 — 
TotalTotal$5,534 $(6,564)Total$5,534 $(6,564)
Six Months Ended June 30, 2021
LIHTC$1,725 $(2,272)
FHTC1,359 (1,256)
NMTC750 (925)
Renewable Energy906 (562)
Total$4,740 $(5,015)
(1)The amortization expense for the LIHTC investments is included in our income tax expense. The amortization expense for the FHTC, NMTC, and Renewable Energy tax credits is included in noninterest expense.
(2)All of the tax benefits recognized are included in our income tax expense.  The tax benefit recognized for the FHTC, NMTC, and Renewable Energy investments primarily reflects the tax credits generated from the investments and excludes the net tax expense (benefit) and deferred tax liability of the investments’ income (loss).
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NOTE 1210 – SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Securities sold under agreements to repurchase are secured borrowings.  Old National pledges investment securities to secure these borrowings. The following table presents securities sold under agreements to repurchase and related weighted-average interest rates:
At or for the
Six Months
Ended
June 30,
2022
At
December 31,
2021
At or for the
Six Months
Ended
June 30,
2021
At or for the Six Months
Ended June 30,
(dollars in thousands)(dollars in thousands)(dollars in thousands)20232022
Outstanding at period endOutstanding at period end$476,173 $392,275 $396,129 Outstanding at period end$311,447 $476,173 
Average amount outstanding during the periodAverage amount outstanding during the period458,459 N/A402,478 Average amount outstanding during the period376,298 458,459 
Maximum amount outstanding at any month-end during the periodMaximum amount outstanding at any month-end during the period509,275 N/A405,278 Maximum amount outstanding at any month-end during the period430,537 509,275 
Weighted-average interest rate:Weighted-average interest rate:Weighted-average interest rate:
During the periodDuring the period0.08 %N/A0.11 %During the period0.90 %0.08 %
At period endAt period end0.08 %0.10 %0.09 %At period end1.14 %0.08 %
At December 31, 2022, securities sold under agreements to repurchase totaled $432.8 million with a weighted-average interest rate of 1.31%.
The following table presents the contractual maturity of our secured borrowings and class of collateral pledged:
At June 30, 2022 At June 30, 2023
Remaining Contractual Maturity of the Agreements Remaining Contractual Maturity of the Agreements
(dollars in thousands)(dollars in thousands)Overnight and ContinuousUp to
30 Days
 30-90 DaysGreater Than 90 daysTotal(dollars in thousands)Overnight and ContinuousUp to
30 Days
 30-90 DaysGreater Than 90 daysTotal
Repurchase Agreements:Repurchase Agreements:     Repurchase Agreements:     
U.S. Treasury and agency securitiesU.S. Treasury and agency securities$475,992 $ $181 $ $476,173 U.S. Treasury and agency securities$311,447 $ $ $ $311,447 
TotalTotal$475,992 $ $181 $ $476,173 Total$311,447 $ $ $ $311,447 
The fair value of securities pledged to secure repurchase agreements may decline.  Old National has pledged securities valued at 115%125% of the gross outstanding balance of repurchase agreements at June 30, 20222023 to manage this risk.
NOTE 1311 – FEDERAL HOME LOAN BANK ADVANCES
The following table summarizes Old National Bank’s FHLB advances:
(dollars in thousands)(dollars in thousands)June 30,
2022
December 31,
2021
(dollars in thousands)June 30,
2023
December 31,
2022
FHLB advances (fixed rates 0.00% to 4.96%
and variable rates 0.91% to 1.60%) maturing
July 2022 to January 2041
$3,303,178 $1,902,655 
FHLB advances (fixed rates 0.00% to 5.49%
and variable rates 5.09% to 5.18%) maturing
September 2023 to September 2042
FHLB advances (fixed rates 0.00% to 5.49%
and variable rates 5.09% to 5.18%) maturing
September 2023 to September 2042
$4,800,528 $3,850,677 
Fair value hedge basis adjustments and unamortized
prepayment fees
Fair value hedge basis adjustments and unamortized
prepayment fees
(19,215)(16,636)Fair value hedge basis adjustments and unamortized
prepayment fees
(29,345)(21,659)
TotalTotal$3,283,963 $1,886,019 Total$4,771,183 $3,829,018 
FHLB advances had weighted-average rates of 1.68%3.23% at June 30, 20222023 and 1.30%3.15% at December 31, 2021. Investment securities and2022. Certain FHLB advances are collateralized with residential real estate loans collateralize these borrowings up to 140% of outstanding debt.at 148%.
At June 30, 2022,2023, total unamortized prepayment fees related to debt modifications completed in prior years totaled $23.2$17.2 million, compared to $26.2$20.2 million at December 31, 2021.2022.
3732


Contractual maturities of FHLB advances at June 30, 20222023 were as follows:
(dollars in thousands) 
Due in 20222023$227,500 
Due in 2023100,150100,000 
Due in 2024225,24325,243 
Due in 2025550,285 
Due in 2026100,000 
Thereafter2,100,0004,025,000 
Fair value hedge basis adjustments and unamortized prepayment fees(19,215)(29,345)
Total$3,283,9634,771,183 

NOTE 1412 – OTHER BORROWINGS
The following table summarizes Old National’s other borrowings:
(dollars in thousands)(dollars in thousands)June 30,
2022
December 31,
2021
(dollars in thousands)June 30,
2023
December 31,
2022
Old National Bancorp:Old National Bancorp:  Old National Bancorp:  
Senior unsecured notes (fixed rate 4.125%) maturing August 2024Senior unsecured notes (fixed rate 4.125%) maturing August 2024$175,000 $175,000 Senior unsecured notes (fixed rate 4.125%) maturing August 2024$175,000 $175,000 
Unamortized debt issuance costs related to senior unsecured notesUnamortized debt issuance costs related to senior unsecured notes(325)(403)Unamortized debt issuance costs related to senior unsecured notes(169)(247)
Subordinated debentures (fixed rate 5.875%) maturing September 2026Subordinated debentures (fixed rate 5.875%) maturing September 2026150,000 — Subordinated debentures (fixed rate 5.875%) maturing September 2026150,000 150,000 
Junior subordinated debentures (variable rates of
2.64% to 6.95%) maturing July 2031 to September 2037
136,643 42,000 
Junior subordinated debentures (variable rates of
6.86% to 8.88%) maturing July 2031 to September 2037
Junior subordinated debentures (variable rates of
6.86% to 8.88%) maturing July 2031 to September 2037
136,643 136,643 
Other basis adjustmentsOther basis adjustments25,942 (3,044)Other basis adjustments20,785 23,363 
Old National Bank:Old National Bank:Old National Bank:
Finance lease liabilitiesFinance lease liabilities15,910 17,233 Finance lease liabilities21,346 13,469 
Subordinated debentures (variable rate 5.64%) maturing October 202512,000 12,000 
Leveraged loans for NMTC (fixed rates of 1.00% to 1.43%)
maturing December 2046 to December 2052
77,550 51,045 
Subordinated debentures (variable rate 9.66%) maturing October 2025Subordinated debentures (variable rate 9.66%) maturing October 202512,000 12,000 
Leveraged loans for NMTC (fixed rates of 1.00% to 1.43%)
maturing December 2046 to June 2060
Leveraged loans for NMTC (fixed rates of 1.00% to 1.43%)
maturing December 2046 to June 2060
143,745 143,187 
Other(1)Other(1)29,994 2,839 Other(1)155,968 89,588 
Total other borrowingsTotal other borrowings$622,714 $296,670 Total other borrowings$815,318 $743,003 
(1)Includes overnight borrowings to collateralize certain derivative positions totaling $155.1 million at June 30, 2023 and $88.0 million at December 31, 2022.
Contractual maturities of other borrowings at June 30, 20222023 were as follows:
(dollars in thousands) 
Due in 20222023$1,232 
Due in 20232,529156,314 
Due in 2024177,631177,609 
Due in 202514,69314,696 
Due in 2026151,501151,529 
Due in 20271,587 
Thereafter219,517292,059 
Unamortized debt issuance costs and other basis adjustments55,61121,524 
Total$622,714815,318 
Senior Notes
In August 2014, Old National issued $175.0 million of senior unsecured notes with a 4.125% interest rate.  These notes pay interest on February 15 and August 15 and mature on August 15, 2024.
Junior Subordinated Debentures
Junior subordinated debentures related to trust preferred securities are classified in “other borrowings.”  Junior subordinated debentures qualify as Tier 2 capital for regulatory purposes, subject to certain limitations.
Through various mergers and acquisitions, Old National assumed junior subordinated debenture obligations related to various trusts that issued trust preferred securities.  Old National guarantees the payment of distributions on the trust
38


preferred securities issued by the trusts.  Proceeds from the issuance of each of these securities were used to purchase junior subordinated debentures with the same financial terms as the securities issued by the trusts.
33


Old National, at any time, may redeem the junior subordinated debentures at par and, thereby cause a redemption of the trust preferred securities in whole or in part.
The following table summarizes the terms of our outstanding junior subordinated debentures at June 30, 2022:2023:
(dollars in thousands)(dollars in thousands)   
Rate at
June 30,
2022
 (dollars in thousands)   
Rate at
June 30,
2023
 
Name of TrustName of TrustIssuance DateIssuance
Amount
RateMaturity DateName of TrustIssuance DateIssuance
Amount
RateMaturity Date
Bridgeview Statutory Trust IBridgeview Statutory Trust IJuly 2001$15,464 3-month LIBOR plus 3.58%8.88%July 31, 2031
Bridgeview Capital Trust IIBridgeview Capital Trust IIDecember 200215,464 3-month LIBOR plus 3.35%8.61%January 7, 2033
First Midwest Capital Trust IFirst Midwest Capital Trust INovember 200337,825 6.95% fixed6.95%December 1, 2033
St. Joseph Capital Trust IISt. Joseph Capital Trust IIMarch 2005$5,155 3-month LIBOR plus 1.75%3.78%March 17, 2035St. Joseph Capital Trust IIMarch 20055,155 3-month LIBOR plus 1.75%7.26%March 17, 2035
Northern States Statutory Trust INorthern States Statutory Trust ISeptember 200510,310 3-month LIBOR plus 1.80%7.35%September 15, 2035
Anchor Capital Trust IIIAnchor Capital Trust IIIAugust 20055,000 3-month LIBOR plus 1.55%3.80%September 30, 2035Anchor Capital Trust IIIAugust 20055,000 3-month LIBOR plus 1.55%7.09%September 30, 2035
Great Lakes Statutory Trust IIGreat Lakes Statutory Trust IIDecember 20056,186 3-month LIBOR plus 1.40%6.95%December 15, 2035
Home Federal Statutory
Trust I
Home Federal Statutory
Trust I
September 200615,464 3-month LIBOR plus 1.65%3.48%September 15, 2036Home Federal Statutory
Trust I
September 200615,464 3-month LIBOR plus 1.65%7.20%September 15, 2036
Monroe Bancorp Capital
Trust I
Monroe Bancorp Capital
Trust I
July 20063,093 3-month LIBOR plus 1.60%2.64%October 7, 2036Monroe Bancorp Capital
Trust I
July 20063,093 3-month LIBOR plus 1.60%6.86%October 7, 2036
Tower Capital Trust 3Tower Capital Trust 3December 20069,279 3-month LIBOR plus 1.69%3.29%March 1, 2037Tower Capital Trust 3December 20069,279 3-month LIBOR plus 1.69%7.19%March 1, 2037
Monroe Bancorp Statutory
Trust II
Monroe Bancorp Statutory
Trust II
March 20075,155 3-month LIBOR plus 1.60%3.43%June 15, 2037Monroe Bancorp Statutory
Trust II
March 20075,155 3-month LIBOR plus 1.60%7.15%June 15, 2037
First Midwest Capital Trust INovember 200337,825 6.95% fixed6.95%December 1, 2033
Great Lakes Statutory Trust IIDecember 20056,186 3-month LIBOR plus 1.40%3.23%December 15, 2035
Great Lakes Statutory Trust IIIGreat Lakes Statutory Trust IIIJune 20078,248 3-month LIBOR plus 1.70%3.53%September 15, 2037Great Lakes Statutory Trust IIIJune 20078,248 3-month LIBOR plus 1.70%7.25%September 15, 2037
Northern States Statutory Trust ISeptember 200510,310 3-month LIBOR plus 1.80%3.63%September 15, 2035
Bridgeview Statutory Trust IJuly 200115,464 3-month LIBOR plus 3.58%4.87%July 31, 2031
Bridgeview Capital Trust IIDecember 200215,464 3-month LIBOR plus 3.35%4.39%January 7, 2033
TotalTotal$136,643 Total$136,643 
Subordinated Debentures
On November 1, 2017, Old National assumed $12.0 million of subordinated fixed-to-floating notes related to the acquisition of Anchor Bancorp, Inc. (MN).  The subordinated debentures had a 5.75% fixed rate of interest through October 29, 2020.  From October 30, 2020 to the October 30, 2025 maturity date, the debentures have a floating rate of interest equal to the three-month LIBOR rate plus 4.356%.
On February 15, 2022, Old National assumed $150.0 million of subordinated fixed rate notes related to the First Midwest merger. The subordinated debentures have a 5.875% fixed rate of interest through the September 29, 2026 maturity date.
Leveraged Loans
The leveraged loans are directly related to the New Markets Tax CreditNMTC structure. As part of the transaction structure, Old National has the right to sell its interest in the entity that received the leveraged loans at an agreed upon price to the leveraged lender at the end of the New Markets Tax Credit seven yearNMTC seven-year compliance period. See Note 119 to the consolidated financial statements for additional information on the Company’s New Markets Tax CreditNMTC investments.
Finance Lease Liabilities
Old National has long-term finance lease liabilities for certain banking centers and equipment totaling $15.9$21.3 million at June 30, 2022.2023.  See Note 87 to the consolidated financial statements for a maturity analysis of the Company’s finance lease liabilities.
3934


NOTE 1513 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following table summarizes the changes within each classification of AOCI, net of tax:
(dollars in thousands)(dollars in thousands)Unrealized
Gains and
Losses on
Available-
for-Sale
Debt
Securities
Unrealized
Gains and
Losses on
Held-to-
Maturity
Securities
Gains and
Losses on
Cash Flow
Hedges
Defined
Benefit
Pension
Plans
Total(dollars in thousands)Unrealized
Gains and
Losses on
Available-
for-Sale
Debt
Securities
Unrealized
Gains and
Losses on
Held-to-
Maturity
Securities
Gains and
Losses on
Hedges
Defined
Benefit
Pension
Plans
Total
Three Months Ended June 30, 2023Three Months Ended June 30, 2023     
Balance at beginning of periodBalance at beginning of period$(611,260)$(106,966)$9,872 $(4)$(708,358)
Other comprehensive income (loss) before
reclassifications
Other comprehensive income (loss) before
reclassifications
(90,121) 9,840  (80,281)
Amounts reclassified from AOCI to income (1)
Amounts reclassified from AOCI to income (1)
(12)3,822 (23,808)4 (19,994)
Balance at end of periodBalance at end of period$(701,393)$(103,144)$(4,096)$ $(808,633)
Three Months Ended June 30, 2022Three Months Ended June 30, 2022     Three Months Ended June 30, 2022
Balance at beginning of periodBalance at beginning of period$(314,364)$(16,727)$(7,132)$24 $(338,199)Balance at beginning of period$(314,364)$(16,727)$(7,132)$24 $(338,199)
Other comprehensive income (loss) before
reclassifications
Other comprehensive income (loss) before
reclassifications
(122,776)(108,266)(2,578) (233,620)Other comprehensive income (loss) before
reclassifications
(122,776)(108,266)(2,578)— (233,620)
Amounts reclassified from AOCI to income (1)
Amounts reclassified from AOCI to income (1)
65 2,794 (165)(8)2,686 
Amounts reclassified from AOCI to income (1)
65 2,794 (165)(8)2,686 
Balance at end of periodBalance at end of period$(437,075)$(122,199)$(9,875)$16 $(569,133)Balance at end of period$(437,075)$(122,199)$(9,875)$16 $(569,133)
Three Months Ended June 30, 2021
Six Months Ended June 30, 2023Six Months Ended June 30, 2023
Balance at beginning of periodBalance at beginning of period$86,495 $— $5,525 $(111)$91,909 Balance at beginning of period$(642,346)$(112,664)$(31,549)$137 $(786,422)
Other comprehensive income (loss) before
reclassifications
Other comprehensive income (loss) before
reclassifications
(26,886)— (959)— (27,845)Other comprehensive income (loss) before
reclassifications
(62,902)1,325 45,825  (15,752)
Amounts reclassified from AOCI to income (1)
Amounts reclassified from AOCI to income (1)
(514)— (1,325)37 (1,802)
Amounts reclassified from AOCI to income (1)
3,855 8,195 (18,372)(137)(6,459)
Balance at end of periodBalance at end of period$59,095 $— $3,241 $(74)$62,262 Balance at end of period$(701,393)$(103,144)$(4,096)$ $(808,633)
Six Months Ended June 30, 2022Six Months Ended June 30, 2022Six Months Ended June 30, 2022
Balance at beginning of periodBalance at beginning of period$(2,950)$ $543 $32 $(2,375)Balance at beginning of period$(2,950)$— $543 $32 $(2,375)
Other comprehensive income (loss) before
reclassifications
Other comprehensive income (loss) before
reclassifications
(433,929)(125,229)(9,748) (568,906)Other comprehensive income (loss) before
reclassifications
(433,929)(125,229)(9,748)— (568,906)
Amounts reclassified from AOCI to income (1)
Amounts reclassified from AOCI to income (1)
(196)3,030 (670)(16)2,148 
Amounts reclassified from AOCI to income (1)
(196)3,030 (670)(16)2,148 
Balance at end of periodBalance at end of period$(437,075)$(122,199)$(9,875)$16 $(569,133)Balance at end of period$(437,075)$(122,199)$(9,875)$16 $(569,133)
Six Months Ended June 30, 2021
Balance at beginning of period$145,335 $— $2,584 $(148)$147,771 
Other comprehensive income (loss) before
reclassifications
(84,173)— 2,094 — (82,079)
Amounts reclassified from AOCI to income (1)
(2,067)— (1,437)74 (3,430)
Balance at end of period$59,095 $— $3,241 $(74)$62,262 
(1)See tablestable below for details about reclassifications to income.
4035


The following table summarizes the significant amounts reclassified out of each component of AOCI for the three months ended June 30, 20222023 and 2021:2022:
Three Months Ended
June 30,
  Three Months Ended
June 30,
 
(dollars in thousands)(dollars in thousands)20222021 (dollars in thousands)20232022 
Details about AOCI ComponentsDetails about AOCI ComponentsAmount Reclassified
from AOCI
Affected Line Item in the
Statement of Income
Details about AOCI ComponentsAmount Reclassified
from AOCI
Affected Line Item in the
Statement of Income
Unrealized gains and losses on
available-for-sale securities
Unrealized gains and losses on
available-for-sale securities
$(85)$692 Debt securities gains (losses), netUnrealized gains and losses on
available-for-sale securities
$17 $(85)Debt securities gains (losses), net
20 (178)Income tax (expense) benefit (5)20 Income tax (expense) benefit
$(65)$514 Net income $12 $(65)Net income (loss)
Unrealized gains and losses on
held-to-maturity securities
Unrealized gains and losses on
held-to-maturity securities
$(3,692)$— Interest income (expense)Unrealized gains and losses on
held-to-maturity securities
$(5,122)$(3,692)Interest income (expense)
898 — Income tax (expense) benefit 1,300 898 Income tax (expense) benefit
$(2,794)$— Net income $(3,822)$(2,794)Net income (loss)
Gains and losses on cash flow hedges
Interest rate contracts
$219 $1,756 Interest income (expense)
Gains and losses on hedges
Interest rate contracts
Gains and losses on hedges
Interest rate contracts
$32,112 $219 Interest income (expense)
(54)(431)Income tax (expense) benefit (8,304)(54)Income tax (expense) benefit
$165 $1,325 Net income $23,808 $165 Net income (loss)
Amortization of defined benefit
pension items
Amortization of defined benefit
pension items
 Amortization of defined benefit
pension items
 
Actuarial gains (losses)Actuarial gains (losses)$10 $(49)Salaries and employee benefitsActuarial gains (losses)$(6)$10 Salaries and employee benefits
(2)12 Income tax (expense) benefit 2 (2)Income tax (expense) benefit
$8 $(37)Net income $(4)$Net income (loss)
Total reclassifications for the periodTotal reclassifications for the period$(2,686)$1,802 Net incomeTotal reclassifications for the period$19,994 $(2,686)Net income (loss)
The following table summarizes the significant amounts reclassified out of each component of AOCI for the six months ended June 30, 20222023 and 2021:2022:
Six Months Ended
June 30,
  Six Months Ended
June 30,
 
(dollars in thousands)(dollars in thousands)20222021 (dollars in thousands)20232022 
Details about AOCI ComponentsDetails about AOCI ComponentsAmount Reclassified
from AOCI
Affected Line Item in the
Statement of Income
Details about AOCI ComponentsAmount Reclassified
from AOCI
Affected Line Item in the
Statement of Income
Unrealized gains and losses on
available-for-sale securities
Unrealized gains and losses on
available-for-sale securities
$257 $2,685 Debt securities gains (losses), netUnrealized gains and losses on
available-for-sale securities
$(5,199)$257 Debt securities gains (losses), net
(61)(618)Income tax (expense) benefit 1,344 (61)Income tax (expense) benefit
$196 $2,067 Net income $(3,855)$196 Net income (loss)
Unrealized gains and losses on
held-to-maturity securities
Unrealized gains and losses on
held-to-maturity securities
$(4,002)$— Interest income (expense)Unrealized gains and losses on
held-to-maturity securities
$(10,951)$(4,002)Interest income (expense)
972 — Income tax (expense) benefit 2,756 972 Income tax (expense) benefit
$(3,030)$— Net income $(8,195)$(3,030)Net income (loss)
Gains and losses on cash flow hedges
Interest rate contracts
$888 $1,905 Interest income (expense)
Gains and losses on hedges
Interest rate contracts
Gains and losses on hedges
Interest rate contracts
$24,820 $888 Interest income (expense)
(218)(468)Income tax (expense) benefit (6,448)(218)Income tax (expense) benefit
$670 $1,437 Net income $18,372 $670 Net income (loss)
Amortization of defined benefit
pension items
Amortization of defined benefit
pension items
 Amortization of defined benefit
pension items
 
Actuarial gains (losses)Actuarial gains (losses)$21 $(98)Salaries and employee benefitsActuarial gains (losses)$182 $21 Salaries and employee benefits
(5)24 Income tax (expense) benefit (45)(5)Income tax (expense) benefit
$16 $(74)Net income $137 $16 Net income (loss)
Total reclassifications for the periodTotal reclassifications for the period$(2,148)$3,430 Net incomeTotal reclassifications for the period$6,459 $(2,148)Net income (loss)
4136


NOTE 16 – SHARE-BASED COMPENSATION
At June 30, 2022, Old National had 9.1 million shares remaining available for issuance under the Company’s Amended and Restated 2008 Incentive Compensation Plan (the “ICP”).  An amendment to increase the number of shares authorized for issuance under the ICP by 9.0 million was approved on May 18, 2022. The granting of awards to key employees is typically in the form of restricted stock awards or units.
Restricted Stock Awards
Old National granted 0.9 million time-based restricted stock awards to certain key employees during the six months ended June 30, 2022. Additionally, in connection with the First Midwest merger, each restricted stock award of First Midwest common stock that was outstanding, unvested, and unsettled at the merger date was assumed and equitably converted into a restricted stock award of Old National common stock subject to the same vested terms and conditions, resulting in an issuance of an aggregate 0.9 million restricted stock awards of Old National common stock. Shares generally vest annually over a three year period, cliff vest in three years from the grant date, or vest 50% on the second anniversary of the grant date and 50% on the third anniversary of the grant date.  At June 30, 2022, unvested shares totaled 2.0 million. Compensation expense is measured as the fair value of the award at grant date recognized over the service period of the award. Shares are subject to certain restrictions and risk of forfeiture by the participants.  At June 30, 2022, unrecognized compensation expense for unvested restricted stock awards was $23.6 million.  
Old National recorded share-based compensation expense, net of tax, related to restricted stock awards of $2.9 million during the three months ended June 30, 2022 and $5.4 million for the six months ended June 30, 2022, compared to $0.7 million for the three months ended June 30, 2021 and $1.4 million for the six months ended June 30, 2021.
Restricted Stock Units
Old National granted 1.2 million shares of performance based restricted stock units to certain key officers during the six months ended June 30, 2022. Additionally, in connection with the First Midwest merger, each time-based or performance-based restricted stock unit award of First Midwest common stock that was outstanding, unvested, and unsettled at the merger date was assumed and equitably converted into a time-based restricted stock unit award of Old National common stock subject to the same vested terms and conditions (other than performance conditions), resulting in an issuance of an aggregate 0.7 million restricted stock units of Old National common stock. Shares vest at the end of a 24 or 36 month period based on the achievement of certain targets. If targets are achieved prior to the end of the 24 month performance period, vesting can be accelerated. At June 30, 2022, unvested shares totaled 2.1 million. Compensation expense is recognized on a straight line basis over the performance period of the award. For certain awards, the level of performance could increase or decrease the number of shares earned.  Shares are subject to certain restrictions and risk of forfeiture by the participants.  As of June 30, 2022, there was $21.9 million of unrecognized compensation cost related to unvested restricted stock units.
Old National recorded share-based compensation expense, net of tax, related to restricted stock units of $3.0 million during the three months ended June 30, 2022 and $5.4 million for the six months ended June 30, 2022, compared to $0.7 million during the three months ended June 30, 2021 and $1.3 million for the six months ended June 30, 2021.
Stock Options and Appreciation Rights
Old National has not granted stock options since 2009. However, Old National did acquire stock options and stock appreciation rights through its prior acquisitions. Old National recorded no incremental expense associated with the conversion of these options and stock appreciation rights. At June 30, 2022, 8 thousand stock appreciation rights remained outstanding.
42


NOTE 1714 – INCOME TAXES
Following is a summary of the major items comprising the differences in taxes from continuing operations computed at the federal statutory rate and as recorded in the consolidated statements of income:
Three Months Ended
June 30,
Six Months Ended
June 30,
Three Months Ended
June 30,
Six Months Ended
June 30,
(dollars in thousands)(dollars in thousands)2022202120222021(dollars in thousands)2023202220232022
Provision at statutory rate of 21%Provision at statutory rate of 21%$29,389 $16,117 $21,766 $38,051 Provision at statutory rate of 21%$42,510 $29,389 $81,995 $21,766 
Tax-exempt income:Tax-exempt income:Tax-exempt income:
Tax-exempt interestTax-exempt interest(3,413)(2,762)(6,406)(5,541)Tax-exempt interest(4,605)(3,413)(9,091)(6,406)
Section 291/265 interest disallowanceSection 291/265 interest disallowance38 30 66 63 Section 291/265 interest disallowance532 38 918 66 
Company-owned life insurance incomeCompany-owned life insurance income(938)(556)(1,656)(1,099)Company-owned life insurance income(945)(938)(1,572)(1,656)
Tax-exempt incomeTax-exempt income(4,313)(3,288)(7,996)(6,577)Tax-exempt income(5,018)(4,313)(9,745)(7,996)
State income taxesState income taxes4,085 2,200 758 5,173 State income taxes8,552 4,085 16,693 758 
Interim period effective rate adjustmentInterim period effective rate adjustment(3,967)(662)3,073 (2,437)Interim period effective rate adjustment993 (3,967)(723)3,073 
Tax credit investments - federalTax credit investments - federal(1,292)(1,430)(2,561)(2,523)Tax credit investments - federal(2,526)(1,292)(5,051)(2,561)
Officer compensation limitationOfficer compensation limitation1,040 402 2,080 651 
Non-deductible FDIC premiumsNon-deductible FDIC premiums2,037 885 4,147 1,371 
Other, netOther, net1,062 1,023 1,210 (97)Other, net(195)(225)(582)(812)
Income tax expense (benefit)Income tax expense (benefit)$24,964 $13,960 $16,250 $31,590 Income tax expense (benefit)$47,393 $24,964 $88,814 $16,250 
Effective tax rateEffective tax rate17.8 %18.2 %15.7 %17.4 %Effective tax rate23.4 %17.8 %22.8 %15.7 %
The provision for income taxes was recorded at June 30, 20222023 and 20212022 based on the current estimate of the effective annual rate.
The lowerhigher effective tax rate during the three and six months ended June 30, 20222023 compared to the same periods in 2021 reflected2022 was primarily the recognitionresult of $1.7 million of previously unrealizedan increase in pre-tax book income combined with smaller increases in tax-exempt income and tax benefitscredits. Other contributing factors were increases in non-deductible officer compensation and non-deductible FDIC premiums as well as the three months ended June 30, 2022, partially offset by higher post-merger estimated state effective tax rates. The six months ended June 30, 2022 also reflected additional one-time benefits of $1.2 million related to share-based payments and $0.9 million related to the remeasurement of the Company’s deferred taxes post-merger.First Midwest merger in February 2022.
Net Deferred Tax Assets
Net deferred tax assets are included in other assets on the balance sheet. At June 30, 2022,2023, net deferred tax assets totaled $337.5$431.2 million, compared to $32.9$435.8 million at December 31, 2021. The increase in net deferred tax assets was driven by $180.1 million of deferred tax assets related to the market value adjustments of certain investments and $126.6 million related to the merger with First Midwest.2022.
The Company’s retained earnings at June 30, 20222023 included an appropriation for acquired thrifts’ tax bad debt allowances totaling $58.6 million for which no provision for federal or state income taxes has been made.  If in the future, this portion of retained earnings were distributed as a result of the liquidation of the Company or its subsidiaries, federal and state income taxes would be imposed at the then applicable rates.
No valuation allowance was recorded at June 30, 20222023 or December 31, 20212022 because, based on current expectations, Old National believes it will generate sufficient income in future years to realize deferred tax assets.  Old National has federal net operating loss carryforwards totaling $90.4$72.7 million at June 30, 20222023 and $36.7$81.5 million at December 31, 2021.2022.  This federal net operating loss was acquired from the acquisition of Anchor (WI)BanCorp Wisconsin Inc. in 2016 and First Midwest in 2022.  If not used, the federal net operating loss carryforwards will begin expiring in 2030 and later.  Old National has recorded state net operating loss carryforwards totaling $133.9$118.5 million at June 30, 20222023 and $116.1$124.4 million at December 31, 2021.2022.  If not used, the state net operating loss carryforwards will expire from 2027 to 2036.
The federal and recorded state net operating loss carryforwards are subject to an annual limitation under Internal Revenue Code section 382.  Old National believes that all of the federal and recorded state net operating loss carryforwards will be used prior to expiration.
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NOTE 1815 – DERIVATIVE FINANCIAL INSTRUMENTS
As part of our overall interest rate risk management, Old National uses derivative instruments, including interest rate swaps, collars, caps, and floors.  The notional amount does not represent amounts exchanged by the parties.  The amount exchanged is determined by reference to the notional amount and the other terms of the individual agreements. Derivative instruments are recognized on the balance sheet at their fair value and are not reported on a net basis.
Credit risk arises from the possible inability of counterparties to meet the terms of their contracts.  Old National’s exposure is limited to the termination value of the contracts rather than the notional, principal, or contract amounts.  There are provisions in our agreements with the counterparties that allow for certain unsecured credit exposure up to an agreed threshold.  Exposures in excess of the agreed thresholds are collateralized.  In addition, we minimize credit risk through credit approvals, limits, and monitoring procedures.
Derivatives Designated as Hedges
Subsequent changes in fair value for a hedging instrument that has been designated and qualifies as part of a hedging relationship are accounted for in the following manner:
Cash flow hedges: changes in fair value are recognized as a component in other comprehensive income.income (loss).
Fair value hedges: changes in fair value are recognized concurrently in earnings.
As long as a hedging instrument is designated and the results of the effectiveness testing support that the instrument qualifies for hedge accounting treatment, 100% of the periodic changes in fair value of the hedging instrument are accounted for as outlined above. This is the case whether or not economic mismatches exist in the hedging relationship. As a result, there is no periodic measurement or recognition of ineffectiveness. Rather, the full impact of hedge gains and losses is recognized in the period in which the hedged transactions impact earnings.
The change in fair value of the hedging instrument that is included in the assessment of hedge effectiveness is presented in the same income statement line item that is used to present the earnings effect of the hedged item.
Cash Flow Hedges
Interest rate swaps of certain borrowings were designated as cash flow hedges totaling $250.0 million notional amount at June 30, 2023 and $150.0 million notional amount at both June 30, 2022 and December 31, 2021.2022. Interest rate collars and floors related to variable-rate commercial loan pools were designated as cash flow hedges totaling $900.0 million$1.4 billion notional amount at June 30, 20222023 and $600.0 million$1.9 billion notional amount at December 31, 2021.2022. The hedges were determined to be effective during all periods presented and we expect them to remain effective during the remaining terms.
Old National has designated its interest rate collars as cash flow hedges.  The structure of these instruments is such that Old National pays the counterparty an incremental amount if the collar index exceeds the cap rate.  Conversely, Old National receives an incremental amount if the index falls below the floor rate.  No payments are required if the collar index falls between the cap and floor rates. 
Old National has designated its interest rate floor transactions as cash flow hedges.  The structure of these instruments is such that Old National receives an incremental amount if the index falls below the floor strike rate. No payments are required if the index remains above the floor strike rate.
Fair Value Hedges
Interest rate swaps of certain borrowings were designated as fair value hedges totaling $352.5$700.0 million notional amount at June 30, 20222023 and $377.5$300.0 million notional amount at December 31, 2021.2022. Interest rate swaps of certain available-for-sale investment securities were designated as fair value hedges totaling $910.0 million notional amount at both June 30, 20222023 and December 31, 2021.2022. The hedges were determined to be effective during all periods presented and we expect them to remain effective during the remaining terms.
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The following table summarizes Old National’s derivatives designated as hedges:
June 30, 2022December 31, 2021June 30, 2023December 31, 2022
Fair ValueFair ValueFair ValueFair Value
(dollars in thousands)(dollars in thousands)Notional
Assets (1)
Liabilities (2)
Notional
Assets (1)
Liabilities (2)
(dollars in thousands)Notional
Assets (1)
Liabilities (2)
Notional
Assets (1)
Liabilities (2)
Cash flow hedgesCash flow hedgesCash flow hedges
Interest rate collars and floors on loan poolsInterest rate collars and floors on loan pools$900,000 $5,493 $24,005 $600,000 $459 $2,173 Interest rate collars and floors on loan pools$1,400,000 $2,169 $15,563 $1,900,000 $11,764 $47,859 
Interest rate swaps on borrowings (3)(4)
Interest rate swaps on borrowings (3)(4)
150,000   150,000 4,316 — 
Interest rate swaps on borrowings (3)(4)
250,000   150,000 — — 
Fair value hedgesFair value hedgesFair value hedges
Interest rate swaps on investment securities (3)
Interest rate swaps on investment securities (3)
909,957   909,957 10,961 14,643 
Interest rate swaps on investment securities (3)
909,957   909,957 — — 
Interest rate swaps on borrowings (3)
Interest rate swaps on borrowings (3)
352,500 66  377,500 2,475 96 
Interest rate swaps on borrowings (3)
700,000   300,000 — — 
TotalTotal$5,559 $24,005 $18,211 $16,912 Total$2,169 $15,563 $11,764 $47,859 
(1)Derivative assets are included in other assets on the balance sheet.
(2)Derivative liabilities are included in other liabilities on the balance sheet.
(3)The fair values of certain counterparty interest rate swaps are zero due to the settlement of centrally-clearedcentrally cleared variation margin rules.
(4)Gross totals include maturing LIBOR and replacement SOFR interest rate swaps executed as part of reference rate reform.
The effect of derivative instruments in fair value hedging relationships on the consolidated statements of income were as follows:
(dollars in thousands)(dollars in thousands)Gain (Loss)
Recognized
in Income on
Related
Hedged
Items
(dollars in thousands)Gain (Loss)
Recognized
in Income on
Related
Hedged
Items
Derivatives in
Fair Value Hedging
Relationships
Derivatives in
Fair Value Hedging
Relationships
Location of Gain or
(Loss) Recognized in
Income on Derivative
Gain (Loss)
Recognized
in Income on
Derivative
Hedged Items
in Fair Value
Hedging
Relationships
Location of Gain or
(Loss) Recognized in
in Income on Related
Hedged Item
Derivatives in
Fair Value Hedging
Relationships
Location of Gain or
(Loss) Recognized in
Income on Derivative
Gain (Loss)
Recognized
in Income on
Derivative
Hedged Items
in Fair Value
Hedging
Relationships
Location of Gain or
(Loss) Recognized in
in Income on Related
Hedged Item
Three Months Ended
June 30, 2023
Three Months Ended
June 30, 2023
Interest rate contractsInterest rate contractsInterest income/(expense)$(11,101)Fixed-rate debtInterest income/(expense)$10,956 
Interest rate contractsInterest rate contractsInterest income/(expense)24,846 Fixed-rate
investment
securities
Interest income/(expense)(24,867)
TotalTotal$13,745 $(13,911)
Three Months Ended
June 30, 2022
Three Months Ended
June 30, 2022
Three Months Ended
June 30, 2022
Interest rate contractsInterest rate contractsInterest income/(expense)$(2,524)Fixed-rate debtInterest income/(expense)$2,600 Interest rate contractsInterest income/(expense)$(2,524)Fixed-rate debtInterest income/(expense)$2,600 
Interest rate contractsInterest rate contractsInterest income/(expense)53,779 Fixed-rate
investment
securities
Interest income/(expense)(53,762)Interest rate contractsInterest income/(expense)53,779 Fixed-rate
investment
securities
Interest income/(expense)(53,762)
TotalTotal$51,255 $(51,162)Total$51,255 $(51,162)
Three Months Ended
June 30, 2021
Six Months Ended
June 30, 2023
Six Months Ended
June 30, 2023
Interest rate contractsInterest rate contractsInterest income/(expense)$(1,251)Fixed-rate debtInterest income/(expense)$1,251 Interest rate contractsInterest income/(expense)$(8,948)Fixed-rate debtInterest income/(expense)$8,738 
Interest rate contractsInterest rate contractsInterest income/(expense)(45,829)Fixed-rate
investment
securities
Interest income/(expense)45,481 Interest rate contractsInterest income/(expense)(38,269)Fixed-rate
investment
securities
Interest income/(expense)38,384 
TotalTotal$(47,080)$46,732 Total$(47,217)$47,122 
Six Months Ended
June 30, 2022
Six Months Ended
June 30, 2022
Six Months Ended
June 30, 2022
Interest rate contractsInterest rate contractsInterest income/(expense)$(7,357)Fixed-rate debtInterest income/(expense)$7,555 Interest rate contractsInterest income/(expense)$(7,357)Fixed-rate debtInterest income/(expense)$7,555 
Interest rate contractsInterest rate contractsInterest income/(expense)111,433 Fixed-rate
investment
securities
Interest income/(expense)(111,791)Interest rate contractsInterest income/(expense)111,433 Fixed-rate
investment
securities
Interest income/(expense)(111,791)
TotalTotal$104,076 $(104,236)Total$104,076 $(104,236)
Six Months Ended
June 30, 2021
Interest rate contractsInterest income/(expense)$(2,826)Fixed-rate debtInterest income/(expense)$2,829 
Interest rate contractsInterest income/(expense)Fixed-rate
investment
securities
Interest income/(expense)(64)
Total$(2,817)$2,765 
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The effect of derivative instruments in cash flow hedging relationships on the consolidated statements of income were as follows:
Three Months Ended
June 30,
Three Months Ended
June 30,
(dollars in thousands)(dollars in thousands) 2022202120222021(dollars in thousands) 2023202220232022
Derivatives in
Cash Flow Hedging
Relationships
Derivatives in
Cash Flow Hedging
Relationships
Location of Gain or
(Loss) Reclassified
from AOCI into Income
Gain (Loss)
Recognized in Other
Comprehensive
Income on Derivative
Gain (Loss)
Reclassified from
AOCI into
Income
Derivatives in
Cash Flow Hedging
Relationships
Location of Gain or
(Loss) Reclassified
from AOCI into Income
Gain (Loss)
Recognized in Other
Comprehensive
Income on Derivative
Gain (Loss)
Reclassified from
AOCI into
Income
Interest rate contractsInterest rate contractsInterest income/(expense)$(3,418)$(1,272)$219 $1,756 Interest rate contractsInterest income/(expense)$13,272 $(3,418)$31,078 $219 
 Six Months Ended
June 30,
 Six Months Ended
June 30,
 2022202120222021 2023202220232022
Derivatives in
Cash Flow Hedging
Relationships
Derivatives in
Cash Flow Hedging
Relationships
Location of Gain or
(Loss) Reclassified
from AOCI into Income
Gain (Loss)
Recognized in Other
Comprehensive
Income on Derivative
Gain (Loss)
Reclassified from
AOCI into
Income
Derivatives in
Cash Flow Hedging
Relationships
Location of Gain or
(Loss) Reclassified
from AOCI into Income
Gain (Loss)
Recognized in Other
Comprehensive
Income on Derivative
Gain (Loss)
Reclassified from
AOCI into
Income
Interest rate contractsInterest rate contractsInterest income/(expense)$(12,924)$2,776 $888 $1,905 Interest rate contractsInterest income/(expense)$19,875 $(12,924)$23,441 $888 
Amounts reported in AOCI related to cash flow hedges will be reclassified to interest income or interest expense as interest payments are received or paid on Old National’s derivative instruments.  During the next 12 months, we estimate that $2.4$5.6 million will be reclassified to interest income and $7.2$8.9 million will be reclassified to interest expense.
Derivatives Not Designated as Hedges
Commitments to fund certain mortgage loans (interest rate lock commitments) and forward commitments for the future delivery of mortgage loans to third party investors are considered derivatives.  These derivative contracts do not qualify for hedge accounting.  At June 30, 2023, the notional amounts of the interest rate lock commitments were $45.2 million and forward commitments were $61.1 million.  At December 31, 2022, the notional amounts of the interest rate lock commitments were $94.7$21.4 million and forward commitments were $100.1 million.  At December 31, 2021, the notional amounts of the interest rate lock commitments were $90.7 million and forward commitments were $126.1$30.3 million.  It is our practice to enter into forward commitments for the future delivery of residential mortgage loans to third party investors when interest rate lock commitments are entered into in order to economically hedge the effect of changes in interest rates resulting from our commitment to fund the loans.
Old National also enters into derivative instruments for the benefit of its clients.  TheAt June 30, 2023, the notional amounts of these customer derivative instruments and the offsetting counterparty derivative instruments were $4.9$5.6 billion atand $8.2 billion, respectively. Derivative instruments as of June 30, 2022.2023 include maturing LIBOR derivative instruments as well as replacement derivative instruments tied to SOFR executed as part of the reference rate reform. The total notional amounts of these replacement derivative instruments were $2.6 billion as of June 30, 2023. Remaining derivative instruments referencing LIBOR will mature after June 30, 2023. At December 31, 2022, customer derivative instruments and the offsetting counterparty derivative instruments were $2.4 billion at December 31, 2021.$5.2 billion. These derivative contracts do not qualify for hedge accounting.  These instruments include interest rate swaps, caps, and collars.  Commonly, Old National will economically hedge significant exposures related to these derivative contracts entered into for the benefit of clients by entering into offsetting contracts with approved, reputable, independent counterparties with substantially matching terms.
Old National enters into derivative financial instruments as part of its foreign currency risk management strategies.  These derivative instruments consist of foreign currency forward contracts to accommodate the business needs of its clients.  Old National does not designate these foreign currency forward contracts for hedge accounting treatment.
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The following table summarizes Old National’s derivatives not designated as hedges:
June 30, 2022December 31, 2021June 30, 2023December 31, 2022
Fair ValueFair ValueFair ValueFair Value
(dollars in thousands)(dollars in thousands)Notional
Assets (1)
Liabilities (2)
Notional
Assets (1)
Liabilities (2)
(dollars in thousands)Notional
Assets (1)
Liabilities (2)
Notional
Assets (1)
Liabilities (2)
Interest rate lock commitmentsInterest rate lock commitments$94,678 $300 $ $90,731 $2,352 $— Interest rate lock commitments$45,216 $330 $ $21,401 $93 $— 
Forward mortgage loan contractsForward mortgage loan contracts100,089 920  126,107 242 — Forward mortgage loan contracts61,084 164  30,330 32 — 
Customer interest rate swaps(4)Customer interest rate swaps(4)4,931,862 8,821 194,038 2,433,177 52,439 11,658 Customer interest rate swaps(4)5,589,059 5,621 318,890 5,220,363 5,676 326,924 
Counterparty interest rate swaps (3)(4)
Counterparty interest rate swaps (3)(4)
4,931,862 60,108 7,220 2,433,177 583 12,956 
Counterparty interest rate swaps (3)(4)
8,206,655 175,581 5,662 5,220,363 151,111 5,711 
Customer foreign currency forward contractsCustomer foreign currency forward contracts15,406 568  10,292 399 — Customer foreign currency forward contracts12,851 441 22 8,341 253 42 
Counterparty foreign currency forward contractsCounterparty foreign currency forward contracts15,328  514 10,205 — 346 Counterparty foreign currency forward contracts12,894 18 262 8,297 72 168 
TotalTotal$70,717 $201,772 $56,015 $24,960 Total$182,155 $324,836 $157,237 $332,845 
(1)Derivative assets are included in other assets on the balance sheet.
(2)Derivative liabilities are included in other liabilities on the balance sheet.
(3)The fair values of certain counterparty interest rate swaps are zero due to the settlement of centrally-clearedcentrally cleared variation margin rules.
(4)Gross totals include maturing LIBOR and replacement SOFR interest rate swaps executed as part of reference rate reform.
The effect of derivatives not designated as hedging instruments on the consolidated statements of income were as follows:
Three Months Ended
June 30,
Three Months Ended
June 30,
(dollars in thousands)(dollars in thousands) 20222021(dollars in thousands) 20232022
Derivatives Not Designated as
Hedging Instruments
Derivatives Not Designated as
Hedging Instruments
Location of Gain or (Loss)
Recognized in Income on
Derivative
Gain (Loss)
Recognized in Income on
Derivative
Derivatives Not Designated as
Hedging Instruments
Location of Gain or (Loss)
Recognized in Income on
Derivative
Gain (Loss)
Recognized in Income on
Derivative
Interest rate contracts (1)
Interest rate contracts (1)
Other income/(expense)$449 $(75)
Interest rate contracts (1)
Other income/(expense)$837 $449 
Mortgage contractsMortgage contractsMortgage banking revenue(1,503)(5,578)Mortgage contractsMortgage banking revenue262 (1,503)
Foreign currency contractsForeign currency contractsOther income/(expense)65 (85)Foreign currency contractsOther income/(expense)(12)65 
TotalTotal $(989)$(5,738)Total $1,087 $(989)
 Six Months Ended
June 30,
 Six Months Ended
June 30,
 20222021 20232022
Derivatives Not Designated as
Hedging Instruments
Derivatives Not Designated as
Hedging Instruments
Location of Gain or (Loss)
Recognized in Income on
Derivative
Gain (Loss)
Recognized in Income on
Derivative
Derivatives Not Designated as
Hedging Instruments
Location of Gain or (Loss)
Recognized in Income on
Derivative
Gain (Loss)
Recognized in Income on
Derivative
Interest rate contracts (1)
Interest rate contracts (1)
Other income/(expense)$950 $310 
Interest rate contracts (1)
Other income/(expense)$699 $950 
Mortgage contractsMortgage contractsMortgage banking revenue(1,374)(2,317)Mortgage contractsMortgage banking revenue369 (1,374)
Foreign currency contractsForeign currency contractsOther income/(expense)38 (49)Foreign currency contractsOther income/(expense)(13)38 
TotalTotal $(386)$(2,056)Total $1,055 $(386)
(1)Includes the valuation differences between the customer and offsetting swaps.
NOTE 1916 – COMMITMENTS, CONTINGENCIES, AND CONTINGENCIESFINANCIAL GUARANTEES
Litigation
InAt June 30, 2023, there were certain legal proceedings pending against the normal course of business, Old National BancorpCompany and its subsidiaries have been named, from time to time, as defendants in various legal actions.  Certainthe ordinary course of the actual or threatened legal actions may include claims for compensatory and/or punitive damages or claims for indeterminate amounts of damages.
Old National contests liability and/or the amount of damages as appropriate in each pending matter.  In view of the inherent difficulty of predictingbusiness. While the outcome of such matters, particularly in cases where claimants seek indeterminate damages or where investigations and proceedings are in the early stages, Old National cannot predict with certainty the loss or range of loss, if any related to such matters, how or if such matters will be resolved, when they will ultimately be resolved, or what the eventual settlement, or other relief, if any, might be. Subject to the foregoing, Old National believes,legal proceeding is inherently uncertain, based on current knowledge and after consultation with counsel,information currently available, the Company’s management does not expect that the outcome of suchany potential liabilities arising from pending legal matters will not have a material adverse effect on the consolidatedCompany’s business, financial conditionposition, or results of operations.
Credit-Related Financial Instruments
Old National holds instruments, in the normal course of business with clients, that are considered financial guarantees and are recorded at fair value.  Standby letters of credit guarantees are issued in connection with
4741


National, althoughagreements made by clients to counterparties.  Standby letters of credit are contingent upon failure of the outcomeclient to perform the terms of such matters could be materialthe underlying contract.  Credit risk associated with standby letters of credit is essentially the same as that associated with extending loans to Old National’s operating resultsclients and cash flows for a particular future period, depending on, among other things,is subject to normal credit policies.  The term of these standby letters of credit is typically one year or less.  These commitments are not recorded in the level of Old National’s revenues or income for such period.consolidated financial statements.  
The following table summarizes Old National will accrue for a loss contingency if (1) it is probable that a future event will occur and confirm the loss and (2) the amount of the loss can be reasonably estimated.
Old National is not currently involved in any material litigation.
Credit-Related Financial Instruments
In the normal course of business, Old National’s banking affiliates have entered into various agreements to extend credit, includingBank’s unfunded loan commitments of $8.2 billion and standby letters of creditcredit:
(dollars in thousands)June 30,
2023
December 31,
2022
Unfunded loan commitments$9,380,354 $8,979,334 
Standby letters of credit (1)
182,418 174,070 
(1)Notional amount, which represents the maximum amount of $223.0future funding requirements. The carrying value was $0.9 million at June 30, 2023 and $0.8 million at December 31, 2022.
At June 30, 2022,2023, approximately 10%4% of the unfunded loan commitments had fixed rates, with the remainder having floating rates ranging from 0% to 21%22%.  At December 31, 2021, loan commitments totaled $4.5 billion and standby letters of credit totaled $75.7 million.  These commitments are not reflected in the consolidated financial statements.  The allowance for unfunded loan commitments totaled $22.0$37.0 million at June 30, 20222023 and $10.9$32.2 million at December 31, 2021. The increase in the allowance for credit losses on unfunded loan commitments was driven by the merger with First Midwest.2022.
Old National is a party in risk participation transactions of interest rate swaps, which had credit extensions with various unaffiliated banks related to lettertotal notional amounts of credit commitments issued on behalf of Old National’s clients totaling $6.7$441.9 million at June 30, 20222023 and $21.8$398.9 million at December 31, 2021.  Old National provided collateral to the unaffiliated banks to secure credit extensions totaling $6.5 million at June 30, 2022 and December 31, 2021.  Old National did not provide collateral for the remaining credit extensions.2022.
Visa Class B Restricted Shares
In 2008, Old National received Visa Class B restricted shares as part of Visa’s initial public offering.  These shares are transferable only under limited circumstances until they can be converted into the publicly traded Class A common shares.  This conversion will not occur until the final settlement of certain litigation for which Visa is indemnified by the holders of Visa’s Class B shares, including Old National.  Visa funded an escrow account from its initial public offering to settle these litigation claims.  Increases in litigation claims requiring Visa to fund the escrow account due to insufficient funds will result in a reduction of the conversion ratio of each Visa Class B share to unrestricted Class A shares.  As of June 30, 2022,2023, the conversion ratio was 1.6059.1.5902.  Based on the existing transfer restriction and the uncertainty of the outcome of the Visa litigation, the 65,466 Class B shares that Old National owns at June 30, 20222023 are carried at a zero cost basis and are included in other assets with our equity securities that have no readily determinable fair value.
NOTE 20 – FINANCIAL GUARANTEES
Old National holds instruments, in the normal course of business with clients, that are considered financial guarantees in accordance with FASB ASC 460-10 (FIN 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others), which requires Old National to record the instruments at fair value.  Standby letters of credit guarantees are issued in connection with agreements made by clients to counterparties.  Standby letters of credit are contingent upon failure of the client to perform the terms of the underlying contract.  Credit risk associated with standby letters of credit is essentially the same as that associated with extending loans to clients and is subject to normal credit policies.  The term of these standby letters of credit is typically one year or less.  At June 30, 2022, the notional amount of standby letters of credit was $223.0 million, which represented the maximum amount of future funding requirements, and the carrying value was $0.5 million.  At December 31, 2021, the notional amount of standby letters of credit was $75.7 million, which represented the maximum amount of future funding requirements, and the carrying value was $0.5 million.
Old National is a party in risk participation transactions of interest rate swaps, which had total notional amount of $230.5 million at June 30, 2022.
48


NOTE 2117 – FAIR VALUE
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  There are three levels of inputs that may be used to measure fair values:
Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
42


Old National used the following methods and significant assumptions to estimate the fair value of each type of financial instrument:
Investment securities and equity securities: The fair values for investment securities and equity securities are determined by quoted market prices, if available (Level 1).  For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2).  For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3).  Discounted cash flows are calculated using swap and LIBOR curves plus spreads that adjust for loss severities, volatility, credit risk, and optionality.  During times when trading is more liquid, broker quotes are used (if available) to validate the model.  Rating agency and industry research reports as well as defaults and deferrals on individual securities are reviewed and incorporated into the calculations.
Residential loansLoans held for sale: The fair value of loans held for sale is determined using quoted prices for a similar asset, adjusted for specific attributes of that loan (Level 2).
Derivative financial instruments: The fair values of derivative financial instruments are based on derivative valuation models using market data inputs as of the valuation date (Level 2).
4943


Recurring Basis
Assets and liabilities measured at fair value on a recurring basis, including financial assets and liabilities for which we have elected the fair value option, are summarized below: 
Fair Value Measurements at June 30, 2022 UsingFair Value Measurements at June 30, 2023 Using
(dollars in thousands)(dollars in thousands)Carrying ValueQuoted Prices in
Active Markets for
Identical Assets (Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
(dollars in thousands)Carrying ValueQuoted Prices in
Active Markets for
Identical Assets (Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Financial AssetsFinancial Assets    Financial Assets    
Equity securitiesEquity securities$55,879 $55,879 $ $ Equity securities$71,953 $71,953 $ $ 
Investment securities available-for-sale:Investment securities available-for-sale:Investment securities available-for-sale:
U.S. TreasuryU.S. Treasury402,783 402,783   U.S. Treasury312,412 312,412   
U.S. government-sponsored entities and agenciesU.S. government-sponsored entities and agencies1,242,557  1,242,557  U.S. government-sponsored entities and agencies1,174,356  1,174,356  
Mortgage-backed securities - AgencyMortgage-backed securities - Agency4,827,708  4,827,708  Mortgage-backed securities - Agency4,097,771  4,097,771  
States and political subdivisionsStates and political subdivisions720,041  720,041  States and political subdivisions598,782  598,782  
Pooled trust preferred securitiesPooled trust preferred securities11,101  11,101  Pooled trust preferred securities10,994  10,994  
Other securitiesOther securities363,511  363,511  Other securities306,200  306,200  
Residential loans held for sale26,217  26,217  
Loans held for saleLoans held for sale114,369  114,369  
Derivative assetsDerivative assets76,276  76,276  Derivative assets184,324  184,324  
Financial LiabilitiesFinancial LiabilitiesFinancial Liabilities
Derivative liabilitiesDerivative liabilities225,777  225,777  Derivative liabilities340,399  340,399  
  Fair Value Measurements at December 31, 2021 Using
(dollars in thousands)Carrying ValueQuoted Prices in
Active Markets for
Identical Assets (Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Financial Assets    
Equity securities$13,211 $13,211 $— $— 
Investment securities available-for-sale:
U.S. Treasury235,584 235,584 — — 
U.S. government-sponsored entities and agencies1,542,773 — 1,542,773 — 
Mortgage-backed securities - Agency3,698,831 — 3,698,831 — 
States and political subdivisions1,654,986 — 1,654,986 — 
Pooled trust preferred securities9,496 — — 9,496 
Other securities240,396 — 240,396 — 
Residential loans held for sale35,458 — 35,458 — 
Derivative assets74,226 — 74,226 — 
Financial Liabilities
Derivative liabilities41,872 — 41,872 — 
50


The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3):
(dollars in thousands)Pooled Trust
Preferred Securities
Three Months Ended June 30, 2022
Balance at beginning of period$9,665
Accretion of discount7
Increase in fair value of securities1,429
Transfers out of Level 3(11,101)
Balance at end of period$
Three Months Ended June 30, 2021
Balance at beginning of period$8,210 
Accretion of discount
Sales/payments received(12)
Increase in fair value of securities1,185 
Balance at end of period$9,388 
Six Months Ended June 30, 2022
Balance at beginning of period$9,496
Accretion of discount12
Increase in fair value of securities1,593
Transfers out of Level 3(11,101)
Balance at end of period$
Six Months Ended June 30, 2021
Balance at beginning of period$7,913 
Accretion of discount10 
Sales/payments received(27)
Increase in fair value of securities1,492 
Balance at end of period$9,388 
The accretion of discounts on securities in the table above is included in interest income.  The increase or decrease in the fair value of securities in the table above is included in the unrealized holding gains (losses) for the period in the statement of other comprehensive income. An increase in fair value is reflected in the balance sheet as an increase in the fair value of investment securities available-for-sale, an increase in accumulated other comprehensive income, which is included in shareholders’ equity, and a decrease in other assets related to the tax impact. A decrease in fair value is reflected in the balance sheet as a decrease in the fair value of investment securities available-for-sale, a decrease in accumulated other comprehensive income, which is included in shareholders’ equity, and an increase in other assets related to the tax impact. Old National’s pooled trust preferred securities with a fair value of $11.1 million were transferred out of Level 3 and into Level 2 in the three and six months ended June 30, 2022 because of available observable market data for these investments.
51


The table below provides quantitative information about significant unobservable inputs used in fair value measurements within Level 3 of the fair value hierarchy:
(dollars in thousands)Fair ValueValuation TechniquesUnobservable Input
Range (Weighted Average) (4)
December 31, 2021   
Pooled trust preferred securities$9,496 Discounted cash flow
Constant prepayment rate (1)
0.00%
  
Additional asset defaults (2)
5.7% - 8.5% (6.5%)
  
Expected asset recoveries (3)
0.0% - 46.0% (14.1%)
(1)Assuming no prepayments.
(2)Each currently performing pool asset is assigned a default probability based on the banking environment, which is adjusted for specific issuer evaluation, of 0%, 50%, or 100%.
(3)Each currently defaulted pool asset is assigned a recovery probability based on specific issuer evaluation of 0%, 25%, or 100%.
(4)Unobservable inputs are weighted by the estimated number of defaults and current performing collateral of the instruments.
Significant changes in any of the unobservable inputs used in the fair value measurement in isolation would have resulted in a significant change to the fair value measurement.  The pooled trust preferred securities Old National owns are subordinate note classes that rely on an ongoing cash flow stream to support their values.  The senior note classes receive the benefit of prepayments to the detriment of subordinate note classes since the ongoing interest cash flow stream is reduced by the early redemption.  Generally, a change in prepayment rates or additional pool asset defaults would have an impact that is directionally opposite from a change in the expected recovery of a defaulted pool asset.
  Fair Value Measurements at December 31, 2022 Using
(dollars in thousands)Carrying ValueQuoted Prices in
Active Markets for
Identical Assets (Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Financial Assets    
Equity securities$52,507 $52,507 $— $— 
Investment securities available-for-sale:
U.S. Treasury200,927 200,927 — — 
U.S. government-sponsored entities and agencies1,175,080 — 1,175,080 — 
Mortgage-backed securities - Agency4,369,902 — 4,369,902 — 
States and political subdivisions663,852 — 663,852 — 
Pooled trust preferred securities10,811 — 10,811 — 
Other securities353,140 — 353,140 — 
Loans held for sale11,926 — 11,926 — 
Derivative assets169,001 — 169,001 — 
Financial Liabilities
Derivative liabilities380,704 — 380,704 — 
Non-Recurring Basis
Assets measured at fair value at June 30, 20222023 on a non-recurring basis are summarized below:
 Fair Value Measurements at June 30, 2022 Using  Fair Value Measurements at June 30, 2023 Using
(dollars in thousands)(dollars in thousands)Carrying
Value
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
(dollars in thousands)Carrying
Value
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Collateral Dependent Loans:Collateral Dependent Loans:    Collateral Dependent Loans:    
Commercial loansCommercial loans$15,443 $ $ $15,443 Commercial loans$12,615 $ $ $12,615 
Commercial real estate loansCommercial real estate loans54,248   54,248 Commercial real estate loans85,891   85,891 
Foreclosed Assets:Foreclosed Assets:Foreclosed Assets:
CommercialCommercial520   520 Commercial1,560   1,560 
44


Commercial and commercial real estate loans that are deemed collateral dependent are valued using the discounted cash flows.  The liquidation amounts are based on the fair value of the underlying collateral using the most recently available appraisals with certain adjustments made based on the type of property, age of appraisal, current status of the property, and other related factors to estimate the current value of the collateral.  These commercial and commercial real estate loans had a principal amount of $84.5$127.9 million, with a valuation allowance of $14.8$29.4 million at June 30, 2022.2023.  Old National recorded provision expense associated with these loans totaling $12.8$7.9 million and $19.8 million for the three months ended June 30, 2022 and $28.6 million for the six months ended June 30, 2022.2023, respectively.  Old National recorded provision expense associated with commercial and commercial real estate loans that were deemed collateral dependent totaling $0.2$12.8 million and $28.6 million for the three months ended June 30, 2021 and provision recoveries totaling $38 thousand for the six months ended June 30, 2021.2022, respectively.
Other real estate owned and other repossessed property is measured at fair value less costs to sell on a non-recurring basis and had a net carrying amount of $0.5$1.6 million at June 30, 2022.2023. There were $0.1 million of write-downs ofon other real estate owned for the three and six months ended June 30, 2023. There were write-downs totaling $0.1 million and $0.3 million for the three and six months ended June 30, 2022, and $0.3 million for the six months ended June 30, 2022. There were no writedowns of other real estate owned for the three months ended June 30, 2021 and $23 thousand for the six months ended June 30, 2021.respectively.
Loan servicing rights are evaluated for impairment based upon the fair value of the rights as compared to the carrying amount.  If the carrying amount of an individual tranche exceeds fair value, impairment is recorded on that tranche so that the servicing asset is carried at fair value.  Fair value is determined at a tranche level, based on market prices for comparable mortgage servicing contracts when available, or alternatively based on a valuation
52


model that calculates the present value of estimated future net servicing income.  The valuation model utilizes a discount rate, weighted average prepayment speed, and other economic factors that market participants would use in estimating future net servicing income and that can be validated against available market data (Level 2).  There was no valuation allowance for loan servicing rights with impairments at June 30, 2022.2023 and no impairments or recoveries recorded during the three or six months ended June 30, 2023. Old National recorded immaterial recoveries associated with these loan servicing rights during the three months ended June 30, 2022. Old National recorded recoveries associated with these loan servicing rights totaling $46 thousand for theand six months ended June 30, 2022. There were recoveries of $41 thousand for the three months ended June 30, 2021 and $1.3 million for the six months ended June 30, 2021.
Assets measured at fair value at December 31, 20212022 on a non-recurring basis are summarized below:
 Fair Value Measurements at December 31, 2021 Using  Fair Value Measurements at December 31, 2022 Using
(dollars in thousands)(dollars in thousands)Carrying ValueQuoted Prices in
Active Markets for
Identical Assets (Level 1)
Significant
Other
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs (Level 3)
(dollars in thousands)Carrying ValueQuoted Prices in
Active Markets for
Identical Assets (Level 1)
Significant
Other
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs (Level 3)
Collateral Dependent Loans:Collateral Dependent Loans:    Collateral Dependent Loans:    
Commercial loansCommercial loans$2,634 $— $— $2,634 Commercial loans$22,562 $— $— $22,562 
Commercial real estate loansCommercial real estate loans16,308 — — 16,308 Commercial real estate loans48,026 — — 48,026 
Loan servicing rights140 — 140 — 
At December 31, 2021,2022, commercial and commercial real estate loans that are deemed collateral dependent had a principal amount of $21.0$92.0 million, with a valuation allowance of $2.1$21.5 million.
The valuation allowance for loan servicing rights with impairments at December 31, 2021 totaled $46 thousand.
45


The table below provides quantitative information about significant unobservable inputs used in fair value measurements within Level 3 of the fair value hierarchy:
(dollars in thousands)Fair ValueValuation TechniquesUnobservable Input
Range (Weighted Average) (1)
June 30, 2022    
Collateral Dependent Loans    
Commercial loans$15,443 DiscountedDiscount for type of property,3% - 30% (12%)
 cash flowage of appraisal, and current status
Commercial real estate loans54,248 DiscountedDiscount for type of property,2% - 37% (16%)
cash flowage of appraisal, and current status
Foreclosed Assets
Commercial real estate (1)
520 Fair value ofDiscount for type of property,19%
collateralage of appraisal, and current status
December 31, 2021  
Collateral Dependent Loans  
Commercial loans$2,634 DiscountedDiscount for type of property,14% - 15% (14%)
 cash flowage of appraisal, and current status
Commercial real estate loans16,308 DiscountedDiscount for type of property,6% - 10% (8%)
 cash flowage of appraisal, and current status
(dollars in thousands)Fair ValueValuation TechniquesUnobservable Input
Range (Weighted Average) (1)
June 30, 2023
Collateral Dependent Loans
Commercial loans$12,615DiscountedDiscount for type of property,9% - 50% (35%)
cash flowage of appraisal, and current status
Commercial real estate loans85,891DiscountedDiscount for type of property,0% - 45% (13%)
cash flowage of appraisal, and current status
Foreclosed Assets
Commercial real estate1,560Fair value ofDiscount for type of property,4% - 17% (6%)
collateralage of appraisal, and current status
December 31, 2022
Collateral Dependent Loans
Commercial loans$22,562 DiscountedDiscount for type of property,10% - 47% (28%)
cash flowage of appraisal, and current status
Commercial real estate loans48,026 DiscountedDiscount for type of property,1% - 26% (11%)
cash flowage of appraisal, and current status
(1)Unobservable inputs were weighted by the relative fair value of the instruments.
Fair Value Option
Old National may elect to report most financial instruments and certain other items at fair value on an instrument-by instrumentinstrument-by-instrument basis with changes in fair value reported in net income.  After the initial adoption, the election is made at the acquisition of an eligible financial asset, financial liability, or firm commitment or when certain specified reconsideration events occur.  The fair value election may not be revoked once an election is made.
Residential Loans Held For Sale
Old National has elected the fair value option for residential loans held for sale.  For these loans, interest income is recorded in the consolidated statements of income based on the contractual amount of interest income earned on the financial assets (except any that are on nonaccrual status).  None of these loans are 90 days or more past due, nor are
53


any on nonaccrual status.  Included in the income statement is interestInterest income for loans held for sale is included in the income statement totaling $0.7$0.3 million and $0.5 million for the three and six months ended June 30, 20222023, respectively, compared to $0.7 million and $1.2 million for the three and six months ended June 30, 2022, compared to $0.4 million for the three months ended June 30, 2021 and $0.8 million for the six months ended June 30, 2021.respectively.
Old National has elected the fair value option for newlyNewly originated conforming fixed-rate and adjustable-rate first mortgage loans held for sale.  These loans are intended for sale and are hedged with derivative instruments.  Old National has elected the fair value option to mitigate accounting mismatches in cases where hedge accounting is complex and to achieve operational simplification.  The fair value option was not elected for loans held for investment.
The difference between the aggregate fair value and the aggregate remaining principal balance for loans for which the fair value option has been elected was as follows: 
(dollars in thousands)Aggregate Fair ValueDifference Contractual Principal
June 30, 2022   
Residential loans held for sale$26,217 $283 $25,934 
December 31, 2021
Residential loans held for sale$35,458 $1,342 $34,116 
(dollars in thousands)Aggregate Fair ValueDifference Contractual Principal
June 30, 2023   
Loans held for sale$114,369 $387 $113,982 
December 31, 2022
Loans held for sale$11,926 $221 $11,705 
Accrued interest at period end is included in the fair value of the instruments.
46


The following table presents the amount of gains and losses from fair value changes included in income before income taxes for financial assets carried at fair value:
(dollars in thousands)Other
Gains and (Losses)
Interest IncomeInterest (Expense)Total Changes
in Fair Values
Included in
Current Period Earnings
Three Months Ended June 30, 2022    
Residential loans held for sale$278 $9 $ $287 
Three Months Ended June 30, 2021
Residential loans held for sale$790 $— $(1)$789 
Six Months Ended June 30, 2022
Residential loans held for sale$(1,065)$9 $(3)$(1,059)
Six Months Ended June 30, 2021
Residential loans held for sale$(1,590)$$(1)$(1,589)
(dollars in thousands)Other
Gains and (Losses)
Interest IncomeInterest (Expense)Total Changes
in Fair Values
Included in
Current Period Earnings
Three Months Ended June 30, 2023    
Loans held for sale$229 $ $(7)$222 
Three Months Ended June 30, 2022
Loans held for sale$278 $$— $287 
Six Months Ended June 30, 2023
Loans held for sale$176 $ $(10)$166 
Six Months Ended June 30, 2022
Loans held for sale$(1,065)$$(3)$(1,059)
5447


Financial Instruments Not Carried at Fair Value
The carrying amounts and estimated exit price fair values of financial instruments not carried at fair value were as follows: 
 Fair Value Measurements at June 30, 2022 Using  Fair Value Measurements at June 30, 2023 Using
(dollars in thousands)(dollars in thousands)Carrying ValueQuoted Prices in
Active Markets
for Identical
Assets (Level 1)
Significant
Other
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs (Level 3)
(dollars in thousands)Carrying ValueQuoted Prices in
Active Markets
for Identical
Assets (Level 1)
Significant
Other
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs (Level 3)
Financial AssetsFinancial Assets    Financial Assets    
Cash, due from banks, money market,
and other interest-earning investments
Cash, due from banks, money market,
and other interest-earning investments
$797,964 $797,964 $ $ Cash, due from banks, money market,
and other interest-earning investments
$1,197,886 $1,197,886 $ $ 
Investment securities held-to-maturity:Investment securities held-to-maturity:Investment securities held-to-maturity:
U.S. government-sponsored entities and agenciesU.S. government-sponsored entities and agencies815,833  720,435  U.S. government-sponsored entities and agencies822,517  655,446  
Mortgage-backed securities - AgencyMortgage-backed securities - Agency1,149,212  1,089,442  Mortgage-backed securities - Agency1,070,687  928,496  
State and political subdivisionsState and political subdivisions1,119,141  969,413  State and political subdivisions1,161,793  1,019,116  
Loans, net:Loans, net:Loans, net:
CommercialCommercial8,819,983   8,837,714 Commercial9,569,141   9,330,160 
Commercial real estateCommercial real estate11,653,818   11,711,358 Commercial real estate13,312,233   12,907,098 
Residential real estateResidential real estate6,059,328   5,740,944 Residential real estate6,664,059   5,831,513 
Consumer creditConsumer credit2,732,516   2,880,432 Consumer credit2,586,485   2,537,633 
Accrued interest receivableAccrued interest receivable157,079 699 51,770 104,610 Accrued interest receivable205,198 801 54,449 149,948 
Financial LiabilitiesFinancial LiabilitiesFinancial Liabilities
Deposits:Deposits:Deposits:
Noninterest-bearing demand depositsNoninterest-bearing demand deposits$12,388,379 $12,388,379 $ $ Noninterest-bearing demand deposits$10,532,838 $10,532,838 $ $ 
Checking, NOW, savings, and money market
interest-bearing deposits
Checking, NOW, savings, and money market
interest-bearing deposits
20,642,980 20,642,980   Checking, NOW, savings, and money market
interest-bearing deposits
20,432,813 20,432,813   
Time depositsTime deposits2,507,616  2,476,746  Time deposits5,265,664  5,209,887  
Federal funds purchased and interbank borrowingsFederal funds purchased and interbank borrowings1,561 1,561   Federal funds purchased and interbank borrowings136,060 136,060   
Securities sold under agreements to repurchaseSecurities sold under agreements to repurchase476,173 476,173   Securities sold under agreements to repurchase311,447 311,447   
FHLB advancesFHLB advances3,283,963  3,257,920  FHLB advances4,771,183  4,526,920  
Other borrowingsOther borrowings622,714  573,849  Other borrowings815,318  781,468  
Accrued interest payableAccrued interest payable10,148  10,148  Accrued interest payable42,897  42,897  
Standby letters of creditStandby letters of credit450   450 Standby letters of credit949   949 
Off-Balance Sheet Financial InstrumentsOff-Balance Sheet Financial InstrumentsOff-Balance Sheet Financial Instruments
Commitments to extend creditCommitments to extend credit$ $ $ $2,610 Commitments to extend credit$ $ $ $3,621 
5548


 Fair Value Measurements at December 31, 2021 Using  Fair Value Measurements at December 31, 2022 Using
(dollars in thousands)(dollars in thousands)Carrying ValueQuoted Prices in
Active Markets
for Identical
Assets (Level 1)
Significant
Other
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs (Level 3)
(dollars in thousands)Carrying ValueQuoted Prices in
Active Markets
for Identical
Assets (Level 1)
Significant
Other
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs (Level 3)
Financial AssetsFinancial Assets    Financial Assets    
Cash, due from banks, money market,
and other interest-earning investments
Cash, due from banks, money market,
and other interest-earning investments
$822,019 $822,019 $— $— Cash, due from banks, money market,
and other interest-earning investments
$728,412 $728,412 $— $— 
Investment securities held-to-maturity:Investment securities held-to-maturity:
U.S. government-sponsored entities and agenciesU.S. government-sponsored entities and agencies819,168 — 656,358 — 
Mortgage-backed securities - AgencyMortgage-backed securities - Agency1,106,817 — 982,963 — 
State and political subdivisionsState and political subdivisions1,163,162 — 1,004,361 — 
Loans, net:Loans, net:Loans, net:
CommercialCommercial3,363,175 — — 3,335,009 Commercial9,386,862 — — 9,066,583 
Commercial real estateCommercial real estate6,315,574 — — 6,211,854 Commercial real estate12,317,825 — — 11,867,851 
Residential real estateResidential real estate2,245,942 — — 2,216,900 Residential real estate6,438,525 — — 5,372,491 
Consumer creditConsumer credit1,569,814 — — 1,582,600 Consumer credit2,676,758 — — 2,557,115 
Accrued interest receivableAccrued interest receivable84,109 688 35,790 47,631 Accrued interest receivable190,521 758 52,081 137,682 
Financial LiabilitiesFinancial LiabilitiesFinancial Liabilities
Deposits:Deposits:Deposits:
Noninterest-bearing demand depositsNoninterest-bearing demand deposits$6,303,106 $6,303,106 $— $— Noninterest-bearing demand deposits$11,930,798 $11,930,798 $— $— 
Checking, NOW, savings, and money market
interest-bearing deposits
Checking, NOW, savings, and money market
interest-bearing deposits
11,305,676 11,305,676 — — Checking, NOW, savings, and money market
interest-bearing deposits
20,056,252 20,056,252 — — 
Time depositsTime deposits960,413 — 968,658 — Time deposits3,013,780 — 2,976,389 — 
Federal funds purchased and interbank borrowingsFederal funds purchased and interbank borrowings276 276 — — Federal funds purchased and interbank borrowings581,489 581,489 — — 
Securities sold under agreements to repurchaseSecurities sold under agreements to repurchase392,275 392,275 — — Securities sold under agreements to repurchase432,804 432,804 — — 
FHLB advancesFHLB advances1,886,019 — 1,935,140 — FHLB advances3,829,018 — 3,739,780 — 
Other borrowingsOther borrowings296,670 — 311,532 — Other borrowings743,003 — 703,156 — 
Accrued interest payableAccrued interest payable5,496 — 5,496 — Accrued interest payable19,547 — 19,547 — 
Standby letters of creditStandby letters of credit454 — — 454 Standby letters of credit755 — — 755 
Off-Balance Sheet Financial InstrumentsOff-Balance Sheet Financial InstrumentsOff-Balance Sheet Financial Instruments
Commitments to extend creditCommitments to extend credit$— $— $— $4,678 Commitments to extend credit$— $— $— $3,666 
The methods utilized to measure the fair value of financial instruments at June 30, 20222023 and December 31, 20212022 represent an approximation of exit price, however, an actual exit price may differ.
5649


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion is an analysis of our results of operations for the three and six months ended June 30, 20222023 and 2021,2022, and financial condition as of June 30, 2022,2023, compared to December 31, 2021.2022.  This discussion and analysis should be read in conjunction with the consolidated financial statements and related notes, as well as our 20212022 Annual Report on Form 10-K.
FORWARD-LOOKING STATEMENTS
This report contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.1995 (the “Act”), notwithstanding that such statements are not specifically identified as such. In addition, certain statements may be contained in our future filings with the SEC, in press releases, and in oral and written statements made by us or with our approval that are not statements of historical fact and constitute forward‐looking statements within the meaning of the Act. These statements include, but are not limited to, descriptions of Old National’s financial condition, results of operations, asset and credit quality trends, profitability and business plans or opportunities. Forward-looking statements can be identified by the use of the words “anticipate,” “believe,” “contemplate,” “could,” “estimate,” “expect,” “intend,” “may,” “outlook,” “plan,” “should,” and “will,” and other words of similar meaning. These forward-looking statements express management’s current expectations or forecasts of future events and, by their nature, are subject to risks and uncertainties. There are a number of factors that could cause actual results or outcomes to differ materially from those in such statements. Factors that might cause such a difference include, but are not limited to: the duration, extent, and severity of the COVID-19 pandemic and related variants and mutations, including the continued effects on our business, operations, and employees as well as the business of our customers; competition; government legislation, regulations and policies; the ability of Old National to execute its business plan, including the completion of the integration related to the merger between Old National and First Midwest, and the achievement of the synergies and other benefits from the merger;plan; unanticipated changes in our liquidity position, including but not limited to changes in our access to sources of liquidity and capital to address our liquidity needs; changes in economic conditions and economic and business uncertainty which could materially impact credit quality trends and the ability to generate loans and gather deposits; inflation and governmental responses to inflation, including increasing interest rates; market, economic, operational, liquidity, credit, and interest rate risks associated with our business; our ability to successfully manage our credit risk and the sufficiency of our allowance for credit losses; uncertainty about the discontinued use of LIBOR and the transition to an alternative rate; the potential impact of future business combinations on our performance and financial condition, including our ability to successfully integrate the businesses and the success of revenue-generating and cost reduction initiatives; failure or circumvention of our internal controls; operational risks or risk management failures by us or critical third parties, including without limitation with respect to data processing, information systems, cybersecurity, technological changes, vendor issues, business interruption, and fraud risks; significant changes in accounting, tax or regulatory practices or requirements; new legal obligations or liabilities or unfavorable resolutions of litigation;liabilities; disruptive technologies in payment systems and other services traditionally provided by banks; failure or disruption of our information systems; computer hacking and other cybersecurity threats; the effects of climate change on Old National and its customers, borrowers, or service providers; political and economic uncertainty and instability; the impacts of pandemics, epidemics, and other infectious disease outbreaks; other matters discussed in this report; and other factors identified in our Annual Report on Form 10-K for the year ended December 31, 2021 and other filings with the SEC. These forward-looking statements are made only as of the date of this report and are not guarantees of future results, performance, or performance.outcomes.
Such forward-looking statements are based on assumptions and estimates, which although believed to be reasonable, may turn out to be incorrect.  Therefore, undue reliance should not be placed upon these estimates and statements. We cannot assure that any of these statements, estimates, or beliefs will be realized and actual results or outcomes may differ from those contemplated in these forward-looking statements.  We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise after the date of this report.  You are advised to consult further disclosures we may make on related subjects in our filings with the SEC.
Investors should consider these risks, uncertainties, and other factors in addition to riskthe factors under the heading “Risk Factors” included in this filing and our other filings with the SEC.
5750


FINANCIAL HIGHLIGHTS
The following table sets forth certain financial highlights of Old National:National for the previous five quarters:
Three Months EndedSix Months EndedThree Months Ended
(dollars and shares in thousands,June 30,March 31,June 30,June 30,
except per share data)20222022202120222021
(dollars and shares in thousands,
except per share data)
(dollars and shares in thousands,
except per share data)
June 30,March 31,December 31,September 30,June 30,
20232022
Income Statement:Income Statement:Income Statement:
Net interest incomeNet interest income$337,472 $222,785 $149,927 $560,257 $298,047 Net interest income$382,171 $381,488 $391,090 $376,589 $337,472 
Taxable equivalent adjustment (1)
4,314 3,772 3,470 8,086 6,970 
Net interest income - tax equivalent basis341,786 226,557 153,397 568,343 305,017 
Taxable equivalent adjustment (1) (4)
Taxable equivalent adjustment (1) (4)
5,825 5,666 5,378 4,950 4,314 
Net interest income - taxable equivalent basis (4)
Net interest income - taxable equivalent basis (4)
387,996 387,154 396,468 381,539 341,786 
Provision for credit losses(2)Provision for credit losses(2)9,245 97,569 (4,929)106,814 (22,285)Provision for credit losses(2)14,787 13,437 11,408 15,490 9,165 
Noninterest incomeNoninterest income89,117 65,240 51,508 154,357 108,220 Noninterest income81,629 70,681 165,037 80,385 89,117 
Noninterest expense(2)Noninterest expense(2)277,395 226,756 129,618 504,151 247,358 Noninterest expense(2)246,584 250,711 282,675 262,444 277,475 
Net income (loss) available to common
shareholders
110,952 (29,603)62,786 81,349 149,604 
Net income available to common shareholdersNet income available to common shareholders$151,003 $142,566 $196,701 $136,119 $110,952 
Per Common Share Data:Per Common Share Data:Per Common Share Data:
Weighted average diluted shares291,881 227,002 165,934 260,253 165,821 
Net income (loss) (diluted)$0.38 $(0.13)$0.38 $0.31 $0.90 
Weighted average diluted common sharesWeighted average diluted common shares291,266 292,756 293,131 292,483 291,881 
Net income (diluted)Net income (diluted)$0.52 $0.49 $0.67 $0.47 $0.38 
Cash dividendsCash dividends0.14 0.14 0.14 0.28 0.28 Cash dividends0.14 0.14 0.14 $0.14 $0.14 
Common dividend payout ratio (2)(3)
Common dividend payout ratio (2)(3)
37 %(108)%37 %90 %31 %
Common dividend payout ratio (2)(3)
27 %29 %21 %30 %37 %
Book valueBook value$16.51 $17.03 $18.05 $16.51 $18.05 Book value$17.25 $17.24 $16.68 $16.05 $16.51 
Stock priceStock price14.79 16.38 17.61 14.79 17.61 Stock price13.94 14.42 17.98 16.47 14.79 
Tangible common book value (3)(4)
Tangible common book value (3)(4)
9.23 9.71 11.55 9.23 11.55 
Tangible common book value (3)(4)
10.03 9.98 9.42 8.75 9.23 
Performance Ratios:Performance Ratios:Performance Ratios:
Return on average assetsReturn on average assets1.01 %(0.31)%1.06 %0.43 %1.27 %Return on average assets1.29 %1.25 %1.74 %1.22 %1.01 %
Return on average common equityReturn on average common equity9.08 (2.89)8.39 3.62 10.04 Return on average common equity12.01 11.58 16.77 11.13 9.08 
Return on tangible common equity (3)(4)
Return on tangible common equity (3)(4)
17.21 (3.61)13.58 6.71 16.10 
Return on tangible common equity (3)(4)
21.20 20.20 29.25 22.07 17.21 
Return on average tangible common equity (3)(4)
Return on average tangible common equity (3)(4)
16.93 (4.03)13.58 6.84 16.21 
Return on average tangible common equity (3)(4)
21.35 21.03 31.53 20.49 16.93 
Net interest margin (3)(4)
Net interest margin (3)(4)
3.33 2.88 2.91 3.13 2.93 
Net interest margin (3)(4)
3.60 3.69 3.85 3.71 3.33 
Efficiency ratio (3)(4)
Efficiency ratio (3)(4)
62.70 76.15 62.05 68.13 58.79 
Efficiency ratio (3)(4)
51.22 52.81 49.12 55.26 62.72 
Efficiency ratio (prior presentation) (5)
Efficiency ratio (prior presentation) (5)
N/A     N/A     56.17 62.70 
Net charge-offs (recoveries) to average loansNet charge-offs (recoveries) to average loans0.02 0.05 (0.01)0.04 — Net charge-offs (recoveries) to average loans0.13 0.21 0.05 0.10 0.02 
Allowance for credit losses to ending loans0.97 0.99 0.79 0.97 0.79 
Allowance for credit losses on loans to ending loansAllowance for credit losses on loans to ending loans0.93 0.94 0.98 0.99 0.97 
Allowance for credit losses (6) to ending loans
Allowance for credit losses (6) to ending loans
1.04 1.05 1.08 1.08 1.05 
Non-performing loans to ending loansNon-performing loans to ending loans0.78 0.88 1.03 0.78 1.03 Non-performing loans to ending loans0.91 0.74 0.81 0.81 0.78 
Balance Sheet:Balance Sheet:Balance Sheet:
Total loansTotal loans$29,553,648 $28,336,244 $13,784,677 $29,553,648 $13,784,677 Total loans$32,432,473 $31,822,374 $31,123,641 $30,528,933 $29,553,648 
Total assetsTotal assets45,748,355 45,834,648 23,675,666 45,748,355 23,675,666 Total assets48,496,755 47,842,644 46,763,372 46,215,526 45,748,355 
Total depositsTotal deposits35,538,975 35,607,390 17,868,911 35,538,975 17,868,911 Total deposits36,231,315 34,917,792 35,000,830 36,053,663 35,538,975 
Total borrowed fundsTotal borrowed funds4,384,411 4,347,560 2,559,113 4,384,411 2,559,113 Total borrowed funds6,034,008 6,740,454 5,586,314 4,264,750 4,384,411 
Total shareholders' equityTotal shareholders' equity5,078,783 5,232,114 2,991,118 5,078,783 2,991,118 Total shareholders' equity5,292,095 5,277,426 5,128,595 4,943,383 5,078,783 
Capital Ratios:Capital Ratios:Capital Ratios:
Risk-based capital ratios:Risk-based capital ratios:Risk-based capital ratios:
Tier 1 common equityTier 1 common equity9.90 %10.04 %11.95 %9.90 %11.95 %Tier 1 common equity10.14 %9.98 %10.03 %9.88 %9.90 %
Tier 1Tier 110.63 10.79 11.95 10.63 11.95 Tier 110.79 10.64 10.71 10.58 10.63 
TotalTotal12.03 12.19 12.73 12.03 12.73 Total12.14 11.96 12.02 11.84 12.03 
Leverage ratio (to average assets)Leverage ratio (to average assets)8.19 10.58 8.38 8.19 8.38 Leverage ratio (to average assets)8.59 8.53 8.52 8.26 8.19 
Total equity to assets (averages)Total equity to assets (averages)11.22 12.03 12.61 11.57 12.69 Total equity to assets (averages)10.96 11.00 10.70 11.18 11.22 
Tangible common equity to tangible assets (3)
6.20 6.51 8.47 6.20 8.47 
Tangible common equity to tangible assets (4)
Tangible common equity to tangible assets (4)
6.33 6.37 6.18 5.82 6.20 
Nonfinancial Data:Nonfinancial Data:Nonfinancial Data:
Full-time equivalent employeesFull-time equivalent employees4,196 4,333 2,465 4,196 2,465 Full-time equivalent employees4,021 4,023 3,967 4,008 4,196 
Banking centersBanking centers266 267 162 266 162 Banking centers256 256 263 263 266 
(1)Calculated using the federal statutory tax rate in effect of 21% for all periods.
(2)Provision for unfunded loan commitments is included in the provision for credit losses. The reclassification of the provision for unfunded loan commitments out of other expense as a component of noninterest expense was made to amounts prior to December 31, 2022 to conform to the current period presentation.
(3)Cash dividends per common share divided by net income (loss) per common share (basic).
(3)(4)Represents a non-GAAP financial measure.  Refer to the “Non-GAAP Financial Measures” section for reconciliations to GAAP financial measures.
(5)Presented as calculated prior to December 31, 2022, which included the provision for unfunded loan commitments in noninterest expense. Management believes that removing the provision for unfunded loan commitments from this metric enhances comparability for peer comparison purposes.
(6)Includes the allowance for credit losses on loans and unfunded loan commitments.
58
51


The following table sets forth certain financial highlights of Old National for the year-to-date periods:
Six Months Ended June 30,
(dollars and shares in thousands, except per share data)20232022
Income Statement:
Net interest income$763,659 $560,257 
Taxable equivalent adjustment (1) (4)
11,491 8,086 
Net interest income - taxable equivalent basis (4)
775,150 568,343 
Provision for credit losses (2)
28,224 117,901 
Noninterest income152,310 154,357 
Noninterest expense (2)
497,295 493,064 
Net income available to common shareholders$293,569 $81,349 
Per Common Share Data:
Weighted average diluted common shares291,870 260,253 
Net income (diluted)$1.01 $0.31 
Cash dividends0.28 $0.28 
Common dividend payout ratio (3)
28 %90 %
Book value$17.25 $16.51 
Stock price13.94 14.79 
Tangible common book value (4)
10.03 9.23 
Performance Ratios:
Return on average assets1.27 %0.43 %
Return on average common equity11.80 3.62 
Return on tangible common equity (4)
20.63 6.71 
Return on average tangible common equity (4)
21.19 6.84 
Net interest margin (4)
3.65 3.13 
Efficiency ratio (4)
52.01 66.59 
Efficiency ratio (prior presentation) (5)
N/A     68.13 
Net charge-offs (recoveries) to average loans0.17 0.04 
Allowance for credit losses on loans to ending loans0.93 0.97 
Allowance for credit losses (6) to ending loans
1.04 1.05 
Non-performing loans to ending loans0.91 0.78 
Balance Sheet:
Total loans$32,432,473 $29,553,648 
Total assets48,496,755 45,748,355 
Total deposits36,231,315 35,538,975 
Total borrowed funds6,034,008 4,384,411 
Total shareholders' equity5,292,095 5,078,783 
Capital Ratios:
Risk-based capital ratios:
Tier 1 common equity10.14 %9.90 %
Tier 110.79 10.63 
Total12.14 12.03 
Leverage ratio (to average assets)8.59 8.19 
Total equity to assets (averages)10.98 11.57 
Tangible common equity to tangible assets (4)
6.33 6.20 
Nonfinancial Data:
Full-time equivalent employees4,021 4,196 
Banking centers256 266 
(1)Calculated using the federal statutory tax rate in effect of 21% for all periods.
(2)Provision for unfunded loan commitments is included in the provision for credit losses. The reclassification of the provision for unfunded loan commitments out of other expense as a component of noninterest expense was made to amounts prior to December 31, 2022 to conform to the current period presentation.
(3)Cash dividends per common share divided by net income per common share (basic).
(4)Represents a non-GAAP financial measure.  Refer to the “Non-GAAP Financial Measures” section for reconciliations to GAAP financial measures.
(5)Presented as calculated prior to December 31, 2022, which included the provision for unfunded loan commitments in noninterest expense. Management believes that removing the provision for unfunded loan commitments from this metric enhances comparability for peer comparison purposes.
(6)Includes the allowance for credit losses on loans and unfunded loan commitments.
52


NON-GAAP FINANCIAL MEASURES
The Company’s accounting and reporting policies conform to GAAP and general practices within the banking industry. As a supplement to GAAP, the Company provides non-GAAP performance results, which the Company believes are useful because they assist investors in assessing the Company’s operating performance. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in the following table.
The tax-equivalenttaxable equivalent adjustment to net interest income and net interest margin recognizes the income tax savings when comparing taxable and tax-exempt assets. Interest income and yields on tax-exempt securities and loans are presented using the current federal income tax rate of 21%. Management believes that it is standard practice in the banking industry to present net interest income and net interest margin on a fully tax-equivalent basis and that it may enhance comparability for peer comparison purposes.
In management’s view, tangible common equity measures are capital adequacy metrics that may be meaningful to the Company, as well as analysts and investors, in assessing the Company’s use of equity and in facilitating comparisons with peers. These non-GAAP measures are valuable indicators of a financial institution’s capital strength since they eliminate intangible assets from shareholders’ equity and retain the effect of accumulated other comprehensive lossAOCI in shareholders’ equity.
Although intended to enhance investors’ understanding of the Company’s business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP. In addition, these non-GAAP financial measures may differ from those used by other financial institutions to assess their business and performance. See the previously provided tables and the following reconciliations in the “Non-GAAP Reconciliations” section for details on the calculation of these measures to the extent presented herein.
5953


The following table presents GAAP to non-GAAP reconciliations.reconciliations for the previous five quarters:
Three Months Ended
June 30,
Six Months Ended
June 30,
(dollars and shares in thousands, except per share data)2022202120222021
Tangible common book value:
Shareholders' common equity (GAAP)$4,835,064 $2,991,118 $4,835,064 $2,991,118 
Deduct:Goodwill1,991,534 1,036,994 1,991,534 1,036,994 
Intangible assets140,281 40,030 140,281 40,030 
Tangible shareholders' common equity (non-GAAP)$2,703,249 $1,914,094 $2,703,249 $1,914,094 
Period end common shares292,893 165,732 292,893 165,732 
Tangible common book value (non-GAAP)9.23 11.55 9.23 11.55 
Return on tangible common equity:
Net income applicable to common shares (GAAP)$110,952 $62,786 $81,349 $149,604 
Add: Intangible amortization (net of tax) (1)
5,378 2,182 9,312 4,488 
Tangible net income (non-GAAP)$116,330 $64,968 $90,661 $154,092 
Tangible shareholders' common equity (non-GAAP) (see above)$2,703,249 $1,914,094 $2,703,249 $1,914,094 
Return on tangible common equity (non-GAAP)17.21 %13.58 %6.71 %16.10 %
Return on average tangible common equity:
Tangible net income (non-GAAP) (see above)$116,330 $64,968 $90,661 $154,092 
Average shareholders' common equity (GAAP)$4,886,181 $2,992,693 $4,495,862 $2,981,398 
Deduct:Average goodwill1,992,860 1,036,994 1,736,227 1,036,994 
Average intangible assets144,104 41,410 109,195 42,901 
Average tangible shareholders' common equity (non-GAAP)$2,749,217 $1,914,289 $2,650,440 $1,901,503 
Return on average tangible common equity (non-GAAP)16.93 %13.58 %6.84 %16.21 %
Net interest margin:
Net interest income (GAAP)$337,472 $149,927 $560,257 $298,047 
Taxable equivalent adjustment4,314 3,470 8,086 6,970 
Net interest income - taxable equivalent basis (non-GAAP)$341,786 $153,397 $568,343 $305,017 
Average earning assets$41,003,338 $21,095,280 $36,269,744 $20,849,829 
Net interest margin (non-GAAP)3.33 %2.91 %3.13 %2.93 %
Efficiency ratio:
Noninterest expense (GAAP)$277,395 $129,618 $504,151 $247,358 
Deduct: Intangible amortization expense7,170 2,909 11,981 5,984 
Adjusted noninterest expense (non-GAAP)$270,225 $126,709 $492,170 $241,374 
Net interest income - taxable equivalent basis (non-GAAP) (see
    above)
$341,786 $153,397 $568,343 $305,017 
Noninterest income89,117 51,508 154,357 108,220 
Deduct: Debt securities gains (losses), net(85)692 257 2,685 
Adjusted total revenue (non-GAAP)$430,988 $204,213 $722,443 $410,552 
Efficiency ratio (non-GAAP)62.70 %62.05 %68.13 %58.79 %
Tangible common equity to tangible assets:
Tangible shareholders' common equity (non-GAAP) (see above)$2,703,249 $1,914,094 $2,703,249 $1,914,094 
Assets (GAAP)$45,748,355 $23,675,666 $45,748,355 $23,675,666 
Add:Trust overdrafts 24  24 
Deduct:Goodwill1,991,534 1,036,994 1,991,534 1,036,994 
Intangible assets140,281 40,030 140,281 40,030 
Tangible assets (non-GAAP)$43,616,540 $22,598,666 $43,616,540 $22,598,666 
Tangible common equity to tangible assets (non-GAAP)6.20 %8.47 %6.20 %8.47 %
Three Months Ended
(dollars and shares in thousands,
except per share data)
June 30,March 31,December 31,September 30,June 30,
20232023202220222022
Tangible common book value:
Shareholders' common equity$5,048,376 $5,033,707 $4,884,876 $4,699,664 $4,835,064 
Deduct: Goodwill and intangible assets2,112,875 2,118,935 2,125,121 2,135,792 2,131,815 
Tangible shareholders' common equity (1)
$2,935,501 $2,914,772 $2,759,755 $2,563,872 $2,703,249 
Period end common shares292,597 291,922 292,903 292,880 292,893 
Tangible common book value (1)
10.03 9.98 9.42 8.75 9.23 
Return on tangible common equity:
Net income applicable to common shares$151,003 $142,566 $196,701 $136,119 $110,952 
Add:  Intangible amortization (net of tax) (2)
4,545 4,639 5,090 5,317 5,378 
Tangible net income (1)
$155,548 $147,205 $201,791 $141,436 $116,330 
Tangible shareholders' common equity (1)
   (see above)
$2,935,501 $2,914,772 $2,759,755 $2,563,872 $2,703,249 
Return on tangible common equity (1)
21.20 %20.20 %29.25 %22.07 %17.21 %
Return on average tangible common equity:
Tangible net income (1) (see above)
$155,548 $147,205 $201,791 $141,436 $116,330 
Average shareholders' common equity$5,030,083 $4,922,469 $4,692,863 $4,890,434 $4,886,181 
Deduct: Average goodwill and intangible assets2,115,894 2,122,157 2,132,480 2,129,858 2,136,964 
Average tangible shareholders' common equity (1)
$2,914,189 $2,800,312 $2,560,383 $2,760,576 $2,749,217 
Return on average tangible common equity (1)
21.35 %21.03 %31.53 %20.49 %16.93 %
Net interest margin:
Net interest income$382,171 $381,488 $391,090 $376,589 $337,472 
Taxable equivalent adjustment5,825 5,666 5,378 4,950 4,314 
Net interest income - taxable equivalent basis (1)
$387,996 $387,154 $396,468 $381,539 $341,786 
Average earning assets$43,097,198 $41,941,913 $41,206,695 $41,180,026 $41,003,338 
Net interest margin (1)
3.60 %3.69 %3.85 %3.71 %3.33 %
Efficiency ratio:
Noninterest expense$246,584 $250,711 $282,675 $262,444 $277,475 
Deduct:  Intangible amortization expense6,060 6,186 6,787 7,089 7,170 
Adjusted noninterest expense (1)
$240,524 $244,525 $275,888 $255,355 $270,305 
Net interest income - taxable equivalent basis (1)
   (see above)
$387,996 $387,154 $396,468 $381,539 $341,786 
Noninterest income81,629 70,681 165,037 80,385 89,117 
Deduct:  Debt securities gains (losses), net17 (5,216)(173)(172)(85)
Adjusted total revenue (1)
$469,608 $463,051 $561,678 $462,096 $430,988 
Efficiency ratio (1)
51.22 %52.81 %49.12 %55.26 %62.72 %
Tangible common equity to tangible assets:
Tangible shareholders' equity (1) (see above)
$2,935,501 $2,914,772 $2,759,755 $2,563,872 $2,703,249 
Assets$48,496,755 $47,842,644 $46,763,372 $46,215,526 $45,748,355 
Deduct: Goodwill and intangible assets2,112,875 2,118,935 2,125,121 2,135,792 2,131,815 
Tangible assets (1)
$46,383,880 $45,723,709 $44,638,251 $44,079,734 $43,616,540 
Tangible common equity to tangible assets (1)
6.33 %6.37 %6.18 %5.82 %6.20 %
(1)Represents a non-GAAP financial measure.
(2)Calculated using management’s estimate of the annual fully taxable equivalent rates (federal and state).
6054


The following table presents GAAP to non-GAAP reconciliations for the year-to-date periods:
Six Months Ended June 30,
(dollars and shares in thousands, except per share data)20232022
Tangible common book value:
Shareholders' common equity$5,048,376 $4,835,064 
Deduct: Goodwill and intangible assets2,112,875 2,131,815 
Tangible shareholders' common equity (1)
$2,935,501 $2,703,249 
Period end common shares292,597 292,893 
Tangible common book value (1)
10.03 9.23 
Return on tangible common equity:
Net income applicable to common shares$293,569 $81,349 
Add:  Intangible amortization (net of tax) (2)
9,184 9,311 
Tangible net income (1)
$302,753 $90,660 
Tangible shareholders' common equity (1) (see above)
$2,935,501 $2,703,249 
Return on tangible common equity (1)
20.63 %6.71 %
Return on average tangible common equity:
Tangible net income (1) (see above)
$302,753 $90,660 
Average shareholders' common equity$4,976,573 $4,495,862 
Deduct: Average goodwill and intangible assets2,119,008 1,845,422 
Average tangible shareholders' common equity (1)
$2,857,565 $2,650,440 
Return on average tangible common equity (1)
21.19 %6.84 %
Net interest margin:
Net interest income$763,659 $560,257 
Taxable equivalent adjustment11,491 8,086 
Net interest income - taxable equivalent basis (1)
$775,150 $568,343 
Average earning assets$42,522,747 $36,269,744 
Net interest margin (1)
3.65 %3.13 %
Efficiency ratio:
Noninterest expense$497,295 $493,064 
Deduct:  Intangible amortization expense12,246 11,981 
Adjusted noninterest expense (1)
$485,049 $481,083 
Net interest income - taxable equivalent basis (1) (see above)
$775,150 $568,343 
Noninterest income152,310 154,357 
Deduct:  Debt securities gains (losses), net(5,199)257 
Adjusted total revenue (1)
$932,659 $722,443 
Efficiency ratio (1)
52.01 %66.59 %
Tangible common equity to tangible assets:
Tangible shareholders' equity (1) (see above)
$2,935,501 $2,703,249 
Assets$48,496,755 $45,748,355 
Deduct: Goodwill and intangible assets2,112,875 2,131,815 
Tangible assets (1)
$46,383,880 $43,616,540 
Tangible common equity to tangible assets (1)
6.33 %6.20 %
(1)Represents a non-GAAP financial measure.
(2)Calculated using management’s estimate of the annual fully taxable equivalent rates (federal and state).
55


EXECUTIVE SUMMARY
Old National is the sixth largest commercial bank headquartered in the Midwest. WithMidwest by asset size with consolidated assets of approximately $46$48 billion of assetsat June 30, 2023. The Company’s corporate headquarters and $28 billion of assets under management,principal executive office is located in Evansville, Indiana with commercial and consumer banking operations headquartered in Chicago, Illinois. Old National, ranks among the top 35 banking companies based in the U.S. and has been recognized as a World’s Most Ethical Company by the Ethisphere Institute for eleven consecutive years. Since its founding in 1834,through Old National Bank, has focused on communityprovides a wide range of banking by building long-term, highly valued partnerships with clientsservices throughout the Midwest region, including commercial and in the communities it serves. In addition to providing extensiveconsumer loan and depository services, in retail and commercialas well as other traditional banking services.  Old National offers comprehensivealso provides services to supplement its traditional banking business including fiduciary and wealth management services, investment and capital marketbrokerage services, investment consulting, and other financial services.

On February 15, 2022, Old National completed its previously announced merger of equals transaction with First Midwest. At closing, Old National acquired $21.9 billion of assets, including $14.3 billion of loans, and assumed $17.2 billion of deposits. Old National completed branding and the majority of core banking systems conversions in early July of 2022.

On June 27, 2022, Old National entered into a Custodial Transfer and Asset Purchase Agreement with UMB, pursuant to which UMB will acquire Old National’s business of acting as a qualified custodian for, and administering, health savings accounts. Old National serves as custodian for health savings accounts comprised of both investment accounts and deposit accounts. Upon completion of the sale, UMB will pay Old National a premium on deposit account balances transferred at closing, or approximately $95 million based on June 30, 2022 balances. Subject to customary closing conditions and regulatory approval, the parties anticipate completing the sale in the fourth quarter of 2022.

Net income (loss) applicable to common shareholders for the second quarter of 20222023 was $111.0$151.0 million, or $0.38$0.52 per diluted common share, compared to $(29.6)$142.6 million, or $(0.13)$0.49 per diluted common share, for the first quarter of 2022 and $62.8 million, or $0.38 per diluted common share,2023.
Results for the second quarter of 2021.

Results for the first and second quarters of 20222023 were impacted by $52.3$3.4 million and $36.6of expenses related to the tragic April 10 event at our downtown Louisville location (“Louisville expenses”), $2.4 million respectively, of merger-related expenses, which included $11.0charges, and pre-tax charges of $0.2 million in thefor property optimization. The first quarter of 2022 attributable to the provision for credit losses on unfunded loan commitments. In addition, the first quarter2023 was impacted by merger-related charges of 2022 provision expense of $97.6$14.6 million, included $96.3$5.2 million of provision for creditdebt securities losses, to establish an allowance for credit losses on non-PCD loans acquired in the First Midwest merger.

and $1.3 million of property optimization costs.
We achieved strong fundamental results during the second quarter of 2022.2023, including growth in total deposits and loans, increased revenue, stable credit quality, and disciplined expense management.
Deposits:  Period-end total deposits increased $1.3 billion, or 4%, to $36.2 billion, reflecting continued efforts to compete for new client relationships as well as seasonal patterns in public funds compared to March 31, 2023.
Loans:  Our loan balances, excluding loans held for sale, increased $1.2 billion$610.1 million to $29.6$32.4 billion at June 30, 20222023 compared to March 31, 2022.2023.  This was primarily driven by strongdisciplined commercial and consumerreal estate loan production.growth.
Net Interest Income: Net interest income increased $114.7$0.7 million to $382.2 million compared to the first quarter of 20222023 driven by the full quarter impact of the merger, loan growth, the higher rate environment, higher accretion, and an additional daymore days in the quarter.quarter, which were partly offset by higher funding costs and lower accretion income on loans.
Provision for Credit Losses:  Provision for credit losses increased $1.4 million to $14.8 million compared to the first quarter of 2023 reflecting loan and unfunded commitment growth, as well as economic factors.
Noninterest Income:  Noninterest income increased $23.9$10.9 million to $81.6 million compared to the first quarter of 20222023 reflecting $5.2 million of net debt securities losses in the first quarter of 2023. The remaining change was driven by the full quarter impact of the merger. Mortgagehigher service charges on deposit accounts, debit card and ATM fees, mortgage banking revenue, was impacted by the higher rate environment, lower gain on sale margins,company-owned life insurance income, and a higher mix of portfolio production.other income.
Noninterest ExpensesExpense:  Noninterest expenses increased $50.6expense decreased $4.1 million compared to the first quarter of 2022 primarily due to the full quarter impact of operating costs associated with the merger, as well as higher incentive accruals reflective of strong performance.2023. Noninterest expensesexpense included $36.6$2.4 million of merger-related expenses and $0.2 million of property optimization expenses, compared to $52.3$14.6 million and $1.3 million, respectively, in the first quarter of 2022.
Pandemic Update
As previously disclosed,2023. In addition, the COVID-19 pandemic has created economic and financial disruptions that continue to adversely affect our operations during the six months ended June 30, 2022. Our historically careful underwriting practices, diverse and granular portfolios, and Midwest-based footprint have helped minimize the adverse impact to Old National. The pandemic has become less disruptivesecond quarter of 2023 was impacted by $3.4 million of Louisville expenses. Excluding these expenses, noninterest expense increased $5.8 million compared to the Company’s business, financial condition, resultsfirst quarter of operations,2023 primarily due to higher salary and its clients as of June 30, 2022.employee benefits resulting from performance-driven incentive accruals.
6156


RESULTS OF OPERATIONS
The following table sets forth certain income statement information of Old National:
Three Months Ended
June 30,
Six Months Ended
June 30,
(dollars in thousands, except
per share data)
(dollars in thousands, except
per share data)
Three Months Ended
June 30,
%
Change
Six Months Ended
June 30,
%
Change
(dollars in thousands, except per share data)20222021%
Change
20222021%
Change
2023202220232022
Income Statement Summary:Income Statement Summary:Income Statement Summary:
Net interest incomeNet interest income$337,472 $149,927 125.1 %$560,257 $298,047 88.0 %Net interest income$382,171 $337,472 13.2 %$763,659 $560,257 36.3 %
Provision for credit lossesProvision for credit losses9,245 (4,929)(287.6)106,814 (22,285)(579.3)Provision for credit losses14,787 9,165 61.3 28,224 117,901 (76.1)
Noninterest incomeNoninterest income89,117 51,508 73.0 154,357 108,220 42.6 Noninterest income81,629 89,117 (8.4)152,310 154,357 (1.3)
Noninterest expenseNoninterest expense277,395 129,618 114.0 504,151 247,358 103.8 Noninterest expense246,584 277,475 (11.1)497,295 493,064 0.9 
Net income applicable to common
shareholders
Net income applicable to common
shareholders
110,952 62,786 76.7 81,349 149,604 (45.6)Net income applicable to common
shareholders
151,003 110,952 36.1 293,569 81,349 260.9 
Net income per common share -
diluted
Net income per common share -
diluted
0.38 0.38 — 0.31 0.90 (65.6)Net income per common share -
diluted
0.52 0.38 36.8 1.01 0.31 225.8 
Other Data:Other Data:Other Data:
Return on average common equityReturn on average common equity9.08 %8.39 %3.62 %10.04 %Return on average common equity12.01 %9.08 %11.80 %3.62 %
Return on tangible common equity (1)
Return on tangible common equity (1)
17.21 13.58 6.71 16.10 
Return on tangible common equity (1)
21.20 17.21 20.63 6.71 
Return on average tangible common
equity (1)
Return on average tangible common
equity (1)
16.93 13.58 6.84 16.21 
Return on average tangible common
equity (1)
21.35 16.93 21.19 6.84 
Efficiency ratio (1)
Efficiency ratio (1)
62.70 62.05 68.13 58.79 
Efficiency ratio (1)
51.22 62.72 52.01 66.59 
Efficiency ratio (prior presentation) (2)
Efficiency ratio (prior presentation) (2)
N/A   62.70 N/A   68.13 
Tier 1 leverage ratioTier 1 leverage ratio8.19 8.38 8.19 8.38 Tier 1 leverage ratio8.59 8.19 8.59 8.19 
Net charge-offs (recoveries) to
average loans
Net charge-offs (recoveries) to
average loans
0.02 (0.01)0.04 — Net charge-offs (recoveries) to
average loans
0.13 0.02 0.17 0.04 
(1)Represents a non-GAAP financial measure.  Refer to “Non-GAAP Financial Measures” section for reconciliations to GAAP financial measures.
(2)Presented as calculated prior to December 31, 2022, which included the provision for unfunded loan commitments in noninterest expense. Management believes that removing the provision for unfunded loan commitments from this metric enhances comparability for peer comparison purposes.
Net Interest Income
Net interest income is the most significant component of our earnings, comprising 78%83% of revenues for the six months ended June 30, 2022.2023.  Net interest income and net interest margin are influenced by many factors, primarily the volume and mix of earning assets, funding sources, and interest rate fluctuations.  Other factors include the level of accretion income on purchased loans, prepayment risk on mortgage and investment-related assets, and the composition and maturity of interest-earning assets and interest-bearing liabilities.

Interest rates increased significantly during the second quarter of 2022 with the rate on the 2-Year U.S. Treasury increasing from 2.34% to 2.95%.2023. The Federal Reserve’s Federal Funds Rate increased 125 basis points tois currently in a target range of 1.50%5.00% to 1.75%5.25%, with the Effective Federal Funds Rate at 1.58%increasing 25 basis points from March 31, 2023 to 5.08% at June 30, 2022. The Federal Reserve is expected to continue to increase the Federal Funds Rate throughout 2022 and into 2023. If interest rates increase, our interest rate spread may improve, which may result in an increase in our net interest income. If interest rates decline, our interest rate spread could decline, which may result in a decrease in our net interest income. However, management has takenManagement actively takes balance sheet restructuring, derivative, and deposit pricing actions to help mitigate interest rate risk. See the section of this Item 7 titled “Market Risk” for additional information regarding this risk.
Loans typically generate more interest income than investment securities with similar maturities.  Funding from client deposits generally costs less than wholesale funding sources.  Factors such as general economic activity, Federal Reserve monetary policy, and price volatility of competing alternative investments, can also exert significant influence on our ability to optimize our mix of assets and funding, net interest income, and net interest margin.
Net interest income is the excess of interest received from interest-earning assets over interest paid on interest-bearing liabilities.  For analytical purposes, net interest income is presented in the table that follows, adjusted to a taxable equivalent basis to reflect what our tax-exempt assets would need to yield in order to achieve the same after-tax yield as a taxable asset.  We used the current federal statutory tax rate in effect of 21% for all periods.  This analysis portrays the income tax benefits related to tax-exempt assets and helps to facilitate a comparison between taxable and tax-exempt assets.  Management believes that it is a standard practice in the banking industry to present net interest margin and net interest income on a fully taxable equivalent basis.  Therefore, management believes these measures provide useful informationbasis and that it may enhance comparability for peer comparison purposes for both management and investors by allowing them to make better peer comparisons.investors.
6257


The following tables present the average balance sheet for each major asset and liability category, its related interest income and yield, or its expense and rate.
(Tax equivalent basis,
dollars in thousands)
(Tax equivalent basis,
dollars in thousands)
Three Months Ended
June 30, 2022
Three Months Ended
June 30, 2021
(Tax equivalent basis,
dollars in thousands)
Three Months Ended
June 30, 2023
Three Months Ended
June 30, 2022
Earning AssetsEarning AssetsAverage
Balance
Income (1)/
Expense
Yield/
Rate
Average
Balance
Income (1)/
Expense
Yield/
Rate
Earning AssetsAverage
Balance
Income (1)/
Expense
Yield/
Rate
Average
Balance
Income (1)/
Expense
Yield/
Rate
Money market and other interest-earning
investments
Money market and other interest-earning
investments
$1,088,005 $1,830 0.67 %$232,723 $48 0.08 %Money market and other interest-earning
investments
$724,601 $8,966 4.96 %$1,088,005 $1,830 0.67 %
Investment securities:Investment securities:Investment securities:
Treasury and government sponsored agenciesTreasury and government sponsored agencies2,487,717 11,818 1.90 %1,637,396 5,967 1.46 %Treasury and government sponsored agencies2,222,269 19,355 3.48 %2,487,717 11,818 1.90 %
Mortgage-backed securitiesMortgage-backed securities6,008,470 33,534 2.23 %3,287,254 15,067 1.83 %Mortgage-backed securities5,301,084 34,291 2.59 %6,008,470 33,534 2.23 %
States and political subdivisionsStates and political subdivisions1,834,189 14,571 3.18 %1,503,447 12,364 3.29 %States and political subdivisions1,768,897 14,396 3.26 %1,834,189 14,571 3.18 %
Other securitiesOther securities723,279 5,467 3.02 %439,197 2,690 2.45 %Other securities824,482 9,995 4.85 %723,279 5,467 3.02 %
Total investment securitiesTotal investment securities11,053,655 65,390 2.37 %6,867,294 36,088 2.10 %Total investment securities10,116,732 78,037 3.09 %11,053,655 65,390 2.37 %
Loans: (2)
Loans: (2)
Loans: (2)
CommercialCommercial8,692,646 95,743 4.36 %4,019,553 34,715 3.42 %Commercial9,862,728 163,721 6.64 %8,692,646 95,743 4.36 %
Commercial real estateCommercial real estate11,547,958 113,545 3.89 %6,146,057 57,655 3.71 %Commercial real estate13,164,390 199,287 6.06 %11,547,958 113,545 3.89 %
Residential real estate loansResidential real estate loans5,905,151 51,686 3.50 %2,256,215 21,474 3.81 %Residential real estate loans6,643,254 60,717 3.66 %5,905,151 51,686 3.50 %
ConsumerConsumer2,715,923 30,478 4.50 %1,573,438 13,948 3.56 %Consumer2,585,493 39,999 6.21 %2,715,923 30,478 4.50 %
Total loansTotal loans28,861,678 291,452 4.01 %13,995,263 127,792 3.62 %Total loans32,255,865 463,724 5.75 %28,861,678 291,452 4.01 %
Total earning assetsTotal earning assets41,003,338 $358,672 3.48 %21,095,280 $163,928 3.09 %Total earning assets43,097,198 $550,727 5.11 %41,003,338 $358,672 3.48 %
Less: Allowance for credit losses(282,943)(117,020)
Deduct: Allowance for credit losses on loansDeduct: Allowance for credit losses on loans(301,311)(282,943)
Non-Earning AssetsNon-Earning AssetsNon-Earning Assets
Cash and due from banksCash and due from banks277,283 238,326 Cash and due from banks418,972 277,283 
Other assetsOther assets4,735,701 2,520,937 Other assets4,884,694 4,735,701 
Total assetsTotal assets$45,733,379 $23,737,523 Total assets$48,099,553 $45,733,379 
Interest-Bearing LiabilitiesInterest-Bearing LiabilitiesInterest-Bearing Liabilities
Checking and NOW accounts$8,445,683 $1,786 0.08 %$4,954,817 $514 0.04 %
Savings accounts6,835,675 673 0.04 %3,647,952 492 0.05 %
Money market accounts5,317,300 1,027 0.08 %2,085,132 433 0.08 %
Checking and NOWChecking and NOW$7,881,863 $24,358 1.24 %$8,445,683 $1,786 0.08 %
SavingsSavings5,785,603 3,247 0.23 %6,835,675 673 0.04 %
Money marketMoney market6,084,963 35,357 2.33 %5,317,300 1,027 0.08 %
Time depositsTime deposits2,499,445 1,701 0.27 %1,024,777 1,293 0.51 %Time deposits4,628,426 38,012 3.29 %2,499,445 1,701 0.27 %
Total interest-bearing depositsTotal interest-bearing deposits23,098,103 5,187 0.09 %11,712,678 2,732 0.09 %Total interest-bearing deposits24,380,855 100,974 1.66 %23,098,103 5,187 0.09 %
Federal funds purchased and interbank
borrowings
Federal funds purchased and interbank
borrowings
1,222 2 0.47 %1,460 — 0.02 %Federal funds purchased and interbank
borrowings
441,145 5,655 5.14 %1,222 0.47 %
Securities sold under agreements to repurchaseSecurities sold under agreements to repurchase466,885 85 0.07 %406,251 95 0.09 %Securities sold under agreements to repurchase340,178 900 1.06 %466,885 85 0.07 %
FHLB advancesFHLB advances3,053,423 6,925 0.91 %1,906,078 5,218 1.10 %FHLB advances5,283,728 45,088 3.42 %3,053,423 6,925 0.91 %
Other borrowingsOther borrowings611,772 4,687 3.06 %269,259 2,486 3.69 %Other borrowings796,536 10,114 5.09 %611,772 4,687 3.06 %
Total borrowed fundsTotal borrowed funds4,133,302 11,699 1.14 %2,583,048 7,799 1.21 %Total borrowed funds6,861,587 61,757 3.61 %4,133,302 11,699 1.14 %
Total interest-bearing liabilitiesTotal interest-bearing liabilities$27,231,405 $16,886 0.25 %$14,295,726 $10,531 0.30 %Total interest-bearing liabilities$31,242,442 $162,731 2.09 %$27,231,405 $16,886 0.25 %
Noninterest-Bearing Liabilities and
Shareholders' Equity
Noninterest-Bearing Liabilities and
Shareholders' Equity
Noninterest-Bearing Liabilities and
Shareholders' Equity
Demand depositsDemand deposits$12,714,946 $6,140,424 Demand deposits$10,741,646 $12,714,946 
Other liabilitiesOther liabilities657,128 308,680 Other liabilities841,663 657,128 
Shareholders' equityShareholders' equity5,129,900 2,992,693 Shareholders' equity5,273,802 5,129,900 
Total liabilities and shareholders' equityTotal liabilities and shareholders' equity$45,733,379 $23,737,523 Total liabilities and shareholders' equity$48,099,553 $45,733,379 
Net interest income - taxable equivalent basisNet interest income - taxable equivalent basis$341,786 3.33 %$153,397 2.91 %Net interest income - taxable equivalent basis$387,996 3.60 %$341,786 3.33 %
Taxable equivalent adjustmentTaxable equivalent adjustment(4,314)(3,470)Taxable equivalent adjustment(5,825)(4,314)
Net interest income (GAAP)Net interest income (GAAP)$337,472 3.29 %$149,927 2.84 %Net interest income (GAAP)$382,171 3.55 %$337,472 3.29 %
(1)Interest income is reflected on a fully taxable equivalent basis.
(2)Includes loans held for sale.
6358


(Tax equivalent basis,
dollars in thousands)
(Tax equivalent basis,
dollars in thousands)
Six Months Ended
June 30, 2022
Six Months Ended
June 30, 2021
(Tax equivalent basis,
dollars in thousands)
Six Months Ended
June 30, 2023
Six Months Ended
June 30, 2022
Earning AssetsEarning AssetsAverage
Balance
Income (1)/
Expense
Yield/
Rate
Average
Balance
Income (1)/
Expense
Yield/
Rate
Earning AssetsAverage
Balance
Income (1)/
Expense
Yield/
Rate
Average
Balance
Income (1)/
Expense
Yield/
Rate
Money market and other interest-earning
investments
Money market and other interest-earning
investments
$1,211,518 $2,138 0.36 %$301,025 $136 0.09 %Money market and other interest-earning
investments
$611,903 $12,064 3.98 %$1,211,518 $2,138 0.36 %
Investment securities:Investment securities:Investment securities:
Treasury and government sponsored agenciesTreasury and government sponsored agencies2,342,401 20,038 1.71 %1,397,791 10,852 1.55 %Treasury and government sponsored agencies2,209,916 35,886 3.25 %2,342,401 20,038 1.71 %
Mortgage-backed securitiesMortgage-backed securities5,441,902 57,910 2.13 %3,299,713 30,900 1.87 %Mortgage-backed securities5,364,788 69,381 2.59 %5,441,902 57,910 2.13 %
States and political subdivisionsStates and political subdivisions1,786,684 28,208 3.16 %1,490,865 24,564 3.30 %States and political subdivisions1,788,498 29,086 3.25 %1,786,684 28,208 3.16 %
Other securitiesOther securities664,741 9,611 2.89 %446,266 5,433 2.44 %Other securities781,549 18,599 4.76 %664,741 9,611 2.89 %
Total investment securitiesTotal investment securities10,235,728 115,767 2.26 %6,634,635 71,749 2.16 %Total investment securities10,144,751 152,952 3.02 %10,235,728 115,767 2.26 %
Loans: (2)
Loans: (2)
Loans: (2)
CommercialCommercial7,301,008 151,026 4.11 %3,997,281 70,282 3.50 %Commercial9,661,029 311,341 6.45 %7,301,008 151,026 4.11 %
Commercial real estateCommercial real estate10,156,292 190,952 3.74 %6,063,872 113,401 3.72 %Commercial real estate12,910,787 378,762 5.87 %10,156,292 190,952 3.74 %
Residential real estate loansResidential real estate loans4,953,222 85,673 3.46 %2,264,988 42,821 3.78 %Residential real estate loans6,582,982 118,817 3.61 %4,953,222 85,673 3.46 %
ConsumerConsumer2,411,976 52,393 4.38 %1,588,028 28,276 3.59 %Consumer2,611,295 78,106 6.03 %2,411,976 52,393 4.38 %
Total loansTotal loans24,822,498 480,044 3.86 %13,914,169 254,780 3.65 %Total loans31,766,093 887,026 5.59 %24,822,498 480,044 3.86 %
Total earning assetsTotal earning assets36,269,744 $597,949 3.29 %20,849,829 $326,665 3.13 %Total earning assets42,522,747 $1,052,042 4.95 %36,269,744 $597,949 3.29 %
Less: Allowance for credit losses(225,876)(125,398)
Deduct: Allowance for credit losses on loansDeduct: Allowance for credit losses on loans(302,844)(225,876)
Non-Earning AssetsNon-Earning AssetsNon-Earning Assets
Cash and due from banksCash and due from banks273,083 263,336 Cash and due from banks428,370 273,083 
Other assetsOther assets4,111,637 2,503,865 Other assets4,895,843 4,111,637 
Total assetsTotal assets$40,428,588 $23,491,632 Total assets$47,544,116 $40,428,588 
Interest-Bearing LiabilitiesInterest-Bearing LiabilitiesInterest-Bearing Liabilities
Checking and NOW accounts$7,619,757 $2,381 0.06 %$4,965,095 $1,139 0.05 %
Savings accounts6,073,081 1,262 0.04 %3,572,057 979 0.06 %
Money market accounts4,552,241 1,719 0.08 %2,059,439 861 0.08 %
Checking and NOWChecking and NOW$7,934,927 $43,717 1.11 %$7,619,757 $2,381 0.06 %
SavingsSavings5,983,407 5,477 0.18 %6,073,081 1,262 0.04 %
Money marketMoney market5,864,351 55,368 1.90 %4,552,241 1,719 0.08 %
Time depositsTime deposits2,124,382 3,019 0.29 %1,052,856 2,912 0.56 %Time deposits4,096,369 59,005 2.90 %2,124,382 3,019 0.29 %
Total interest-bearing depositsTotal interest-bearing deposits20,369,461 8,381 0.08 %11,649,447 5,891 0.10 %Total interest-bearing deposits23,879,054 163,567 1.38 %20,369,461 8,381 0.08 %
Federal funds purchased and interbank
borrowings
Federal funds purchased and interbank
borrowings
1,168 2 0.25 %1,303 — — %Federal funds purchased and interbank
borrowings
430,278 10,494 4.92 %1,168 0.25 %
Securities sold under agreements to repurchaseSecurities sold under agreements to repurchase458,459 181 0.08 %402,478 215 0.11 %Securities sold under agreements to repurchase376,298 1,679 0.90 %458,459 181 0.08 %
FHLB advancesFHLB advances2,822,984 12,888 0.92 %1,915,661 10,627 1.12 %FHLB advances4,781,326 83,084 3.50 %2,822,984 12,888 0.92 %
Other borrowingsOther borrowings522,599 8,154 3.12 %266,152 4,915 3.69 %Other borrowings788,921 18,068 4.62 %522,599 8,154 3.12 %
Total borrowed fundsTotal borrowed funds3,805,210 21,225 1.12 %2,585,594 15,757 1.23 %Total borrowed funds6,376,823 113,325 3.58 %3,805,210 21,225 1.12 %
Total interest-bearing liabilitiesTotal interest-bearing liabilities$24,174,671 $29,606 0.25 %$14,235,041 $21,648 0.31 %Total interest-bearing liabilities$30,255,877 $276,892 1.85 %$24,174,671 $29,606 0.25 %
Noninterest-Bearing Liabilities and
Shareholders' Equity
Noninterest-Bearing Liabilities and
Shareholders' Equity
Noninterest-Bearing Liabilities and
Shareholders' Equity
Demand depositsDemand deposits$11,014,359 $5,949,412 Demand deposits$11,131,789 $11,014,359 
Other liabilitiesOther liabilities562,882 325,781 Other liabilities936,158 562,882 
Shareholders' equityShareholders' equity4,676,676 2,981,398 Shareholders' equity5,220,292 4,676,676 
Total liabilities and shareholders' equityTotal liabilities and shareholders' equity$40,428,588 $23,491,632 Total liabilities and shareholders' equity$47,544,116 $40,428,588 
Net interest income - taxable equivalent basisNet interest income - taxable equivalent basis$568,343 3.13 %$305,017 2.93 %Net interest income - taxable equivalent basis$775,150 3.65 %$568,343 3.13 %
Taxable equivalent adjustmentTaxable equivalent adjustment(8,086)(6,970)Taxable equivalent adjustment(11,491)(8,086)
Net interest income (GAAP)Net interest income (GAAP)$560,257 3.09 %$298,047 2.86 %Net interest income (GAAP)$763,659 3.59 %$560,257 3.09 %
(1)Interest income is reflected on a fully taxable equivalent basis.
(2)Includes loans held for sale.

64
59


The following table presents the dollar amount of changes in taxable equivalent net interest income attributable to changes in the average balances of assets and liabilities and the yields earned or rates paid.
From Three Months Ended
June 30, 2021 to Three
Months Ended June 30, 2022
From Six Months Ended
June 30, 2021 to Six
Months Ended June 30, 2022
From Three Months Ended
June 30, 2022 to Three
Months Ended June 30, 2023
From Six Months Ended
June 30, 2022 to Six
Months Ended June 30, 2023
Total
Change (1)
Attributed to
Total
Change (1)
Attributed to
Total
Change (1)
Attributed to
Total
Change (1)
Attributed to
(dollars in thousands)(dollars in thousands)VolumeRateVolumeRate(dollars in thousands)VolumeRateVolumeRate
Interest IncomeInterest IncomeInterest Income
Money market and other interest-earning
investments
Money market and other interest-earning
investments
$1,782 $805 $977 $2,002 $1,003 $999 Money market and other interest-earning
investments
$7,136 $(2,571)$9,707 $9,926 $(6,535)$16,461 
Investment securities (2)
Investment securities (2)
29,302 23,383 5,919 44,018 39,797 4,221 
Investment securities (2)
12,647 (6,385)19,032 37,185 (1,201)38,386 
Loans (2)(3)
Loans (2)(3)
163,660 142,491 21,169 225,264 204,866 20,398 
Loans (2)(3)
172,272 40,306 131,966 406,982 163,213 243,769 
Total interest incomeTotal interest income194,744 166,679 28,065 271,284 245,666 25,618 Total interest income192,055 31,350 160,705 454,093 155,477 298,616 
Interest ExpenseInterest ExpenseInterest Expense
Checking and NOW depositsChecking and NOW deposits1,272 563 709 1,242 829 413 Checking and NOW deposits22,572 (1,017)23,589 41,336 713 40,623 
Savings depositsSavings deposits181 335 (154)283 695 (412)Savings deposits2,574 (351)2,925 4,215 (97)4,312 
Money market depositsMoney market deposits594 620 (26)858 927 (69)Money market deposits34,330 2,287 32,043 53,649 6,375 47,274 
Time depositsTime deposits408 1,451 (1,043)107 2,264 (2,157)Time deposits36,311 9,439 26,872 55,986 15,561 40,425 
Federal funds purchased and interbank
borrowings
Federal funds purchased and interbank
borrowings
— — Federal funds purchased and interbank
borrowings
5,653 3,078 2,575 10,492 5,496 4,996 
Securities sold under agreements to
repurchase
Securities sold under agreements to
repurchase
(10)12 (22)(34)28 (62)Securities sold under agreements to
repurchase
815 (181)996 1,498 (208)1,706 
FHLB advancesFHLB advances1,707 2,883 (1,176)2,261 4,629 (2,368)FHLB advances38,163 12,026 26,137 70,196 21,373 48,823 
Other borrowingsOther borrowings2,201 2,892 (691)3,239 4,363 (1,124)Other borrowings5,427 1,866 3,561 9,914 5,070 4,844 
Total interest expenseTotal interest expense6,355 8,756 (2,401)7,958 13,735 (5,777)Total interest expense145,845 27,147 118,698 247,286 54,283 193,003 
Net interest incomeNet interest income$188,389 $157,923 $30,466 $263,326 $231,931 $31,395 Net interest income$46,210 $4,203 $42,007 $206,807 $101,194 $105,613 
(1)The variance not solely due to rate or volume is allocated equally between the rate and volume variances.
(2)Interest income on investment securities and loans includes the effect of taxable equivalent adjustments of $2.9 million and $1.4$5.9 million respectively, during the three months ended June 30, 2022; and $5.6 million and $2.5 million, respectively, during the six months ended June 30, 20222023, respectively, using the federal statutory rate in effect of 21%.
(3)Interest income on loans includes taxable equivalent adjustments of $2.9 million and $5.6 million during the three and six months ended June 30, 2023, respectively, using the federal statutory rate in effect of 21%.
The increase in net interest income for the three and six months ended June 30, 20222023 when compared to the same periods in 20212022 was primarily due to higher average earning assets as a result of the merger,rates and loan growth, higher rates, higher accretion income, and lower costs of average interest-bearing liabilities.growth. Partially offsetting these increases were lower interest and fees related to PPP loans andhigher costs of average interest-bearing liabilities, higher average interest-bearing liabilities, as a result of the merger.and lower accretion income. Accretion income associated with acquired loans and borrowings totaled $6.6 million and $14.5 million in the three and six months ended June 30, 2023, respectively, compared to $35.0 million and $50.8 million in the three and six months ended June 30, 2022, respectively, compared to $5.1 million and $9.8 million in the three and six months ended June 30, 2021, respectively. Net interest income included interest and net fees on PPP loans totaling $1.7 million and $5.4 million in the three and six months ended June 30, 2022, respectively, compared to $11.9 million and $24.5 million in the three and six months ended June 30, 2021, respectively. Unamortized fees on remaining PPP loans totaled $1.4 million at June 30, 2022.
The increase in the net interest margin on a fully taxable equivalent basis for the three and six months ended June 30, 20222023 when compared to the three and six months ended June 30, 2021same periods in 2022 was primarily due to higher yields on interest earning assets, and lowerpartially offset by higher costs of interest-bearing liabilities. The yield on interest earning assets increased 39163 basis points and the cost of interest-bearing liabilities decreased 5increased 184 basis points in the quarterly year-over-year comparison.  The yield on interest earning assets increased 16166 basis points and the cost of interest-bearing liabilities decreased 6increased 160 basis points in the six months ended June 30, 20222023 when compared to the six months ended June 30, 2021.2022.  Accretion income represented 346 basis points and 287 basis points of the net interest margin in the three and six months ended June 30, 2022,2023, respectively, compared to 1034 basis points for bothand 28 basis points in the three and six months ended June 30, 2021.2022, respectively.
Average earning assets were $41.0$43.1 billion and $21.1$41.0 billion for the three months ended June 30, 20222023 and 2021,2022, respectively, an increase of $19.9$2.1 billion, or 94%5%. The increase in average earning assets for the three months ended June 30, 2023 when compared to the three months ended June 30, 2022 was primarily due to strong commercial and commercial real estate loan growth. Average earning assets were $36.3$42.5 billion and $20.8$36.3 billion for the six months ended June 30, 20222023 and 2021,2022, respectively, an increase of $15.4$6.3 billion, or 74%17%. The increasesincrease in average earning assets werefor the six months ended June 30, 2023 when compared to the six months ended June 30, 2022 was primarily due to the merger with First Midwest and strong loan growth.
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Average loans including loans held for sale increased $14.9$3.4 billion and $10.9$6.9 billion for the three and six months ended June 30, 2022,2023, respectively, when compared to the same periods in 20212022. The increase in average loans for the three months ended June 30, 2023 when compared to the three months ended June 30, 2022 was primarily due to strong commercial and commercial real estate loan growth. The increase in average loans for the six months ended June 30, 2023 when compared to the six months ended June 30, 2022 was primarily due to the merger with First Midwest and strong loan growth.
Average investments decreased $936.9 million and $91.0 million for the three and six months ended June 30, 2023, respectively, when compared to the same periods in 2022. The decrease in average investments for the three months ended June 30, 2023 when compared to the three months ended June 30, 2022 reflected the utilization of securities cash flows to fund loan growth.
Average noninterest-bearing deposits decreased $2.0 billion while average interest-bearing deposits increased $1.3 billion for the three months ended June 30, 2023 when compared to the same period in 2022 reflecting growth and a mix shift as a result of the current rate environment. Average noninterest-bearing and interest-bearing deposits increased $117.4 million and $3.5 billion, respectively, for the six months ended June 30, 2023 when compared to the six months ended June 30, 2022 primarily due to the First Midwest merger and strong loan growth.merger.
Average investmentsborrowed funds increased $4.2$2.7 billion and $3.6$2.6 billion for the three and six months ended June 30, 2022,2023, respectively, when compared to the same periods in 2021 reflecting the First Midwest merger.
Average noninterest-bearing and interest bearing deposits increased $6.6 billion and $11.4 billion, respectively, for the three months ended June 30, 2022 when compared to the same period in 2021. Average noninterest-bearing and interest bearing deposits increased $5.1 billion and $8.7 billion, respectively, for the six months ended June 30, 2022 when compared to the same period in 2021. This growth was primarily driven by the First Midwest merger.
Average borrowed funds increased $1.6 billion and $1.2 billion for the three and six months ended June 30, 2022 when compared to the same periods in 2021, driven by the First Midwest merger.2022.
Provision for Credit Losses
Old National recordedThe following table details the components of the provision for credit losses of $9.2 million for the three months ended June 30, 2022, compared to $4.9 million provision for credit losses recapture for the three months ended June 30, 2021. Net charge-offs on loans totaled $1.8 million during the three months ended June 30, 2022, compared to net recoveries of $0.3 million for the three months ended June 30, 2021.  losses:
Three Months Ended
June 30,
%Six Months Ended
June 30,
%
(dollars in thousands)20232022Change20232022Change
Provision for credit losses on loans$11,936 $9,254 29.0 %$23,405 $106,663 (78.1)%
Provision (release) for credit losses on
   unfunded loan commitments
2,851 (80)N/M4,819 11,087 (56.5)
Provision for credit losses on held-to-
   maturity securities
 (9)(100.0) 151 (100.0)
Total provision for credit losses$14,787 $9,165 61.3 %$28,224 $117,901 (76.1)%
Net (charge-offs) recoveries on non-PCD
   loans
$(4,689)$(111)N/M%$(8,727)$19 N/M%
Net (charge-offs) recoveries on PCD
   loans
(5,403)(1,647)228.1 (17,794)(4,551)291.0 
Total net (charge-offs) recoveries on
   loans
$(10,092)$(1,758)474.1 %$(26,521)$(4,532)485.2 %
The provision for credit losses totaled $106.8 million for the six months ended June 30, 2022, compared to $22.3 million provision for credit losses recapture for the six months ended June 30, 2021. Net charge-offs on loans totaled $4.5 million during the six months ended June 30, 2022, compared to net recoveries of $0.3 million during the six months ended June 30, 2021. The provision for credit losses expense in the six months ended June 30, 2022 included $96.3 million of provision for credit losses to establish an allowance for credit losses on non-PCD loans acquired in the First Midwest merger. The provision for credit losses on unfunded loan commitments in the six months ended June 30, 2022 included $11.0 million for unfunded loan commitments acquired in the First Midwest merger. Continued loan growth in future periods, a decline in our current level of recoveries, or an increase in charge-offs could result in an increase in provision expense. Additionally, provision expense may be volatile due to changes in CECL model assumptions of credit quality, macroeconomic factors and conditions, and loan composition, which drive the allowance for credit losses balance.
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Noninterest Income
We generate revenues in the form of noninterest income through client fees, sales commissions, and gains and losses from our core banking franchise and other related businesses, such as wealth management, investment consulting, and investment products.  The following table details the components in noninterest income:
Three Months Ended
June 30,
%Six Months Ended
June 30,
%Three Months Ended
June 30,
%Six Months Ended
June 30,
%
(dollars in thousands)(dollars in thousands)20222021Change20222021Change(dollars in thousands)20232022Change20232022Change
Wealth management fees$19,304 $10,734 79.8 %$33,934 $20,442 66.0 %
Wealth and investment services feesWealth and investment services fees$26,521 $27,872 (4.8)%$53,441 $49,824 7.3 %
Service charges on deposit accountsService charges on deposit accounts21,144 8,514 148.3 35,870 16,638 115.6 Service charges on deposit accounts17,751 20,324 (12.7)34,754 34,350 1.2 
Debit card and ATM feesDebit card and ATM fees10,402 5,583 86.3 17,301 10,726 61.3 Debit card and ATM fees10,653 11,222 (5.1)20,635 18,821 9.6 
Mortgage banking revenueMortgage banking revenue6,522 7,827 (16.7)13,767 24,352 (43.5)Mortgage banking revenue4,165 6,522 (36.1)7,565 13,767 (45.0)
Investment product fees8,568 6,042 41.8 15,890 11,906 33.5 
Capital markets incomeCapital markets income7,261 5,871 23.7 11,703 9,586 22.1 Capital markets income6,173 7,261 (15.0)13,112 11,703 12.0 
Company-owned life insuranceCompany-owned life insurance4,571 2,783 64.2 8,095 5,497 47.3 Company-owned life insurance4,698 4,571 2.8 7,884 8,095 (2.6)
Debt securities gains (losses), netDebt securities gains (losses), net(85)692 (112.3)257 2,685 (90.4)Debt securities gains (losses), net17 (85)(120.0)(5,199)257 N/M
Other incomeOther income11,430 3,462 230.2 17,540 6,388 174.6 Other income11,651 11,430 1.9 20,118 17,540 14.7 
Total noninterest incomeTotal noninterest income$89,117 $51,508 73.0 %$154,357 $108,220 42.6 %Total noninterest income$81,629 $89,117 (8.4)%$152,310 $154,357 (1.3)%
Noninterest income decreased $7.5 million for the three months ended June 30, 2023 compared to the same period in 2022 primarily due to lower service charges on deposit accounts, mortgage banking revenue, wealth and investment services fees, and capital markets income. Noninterest income decreased $2.0 million for the six months ended June 30, 2023 compared to the same period in 2022 primarily due to $5.2 million of net losses on sales of debt securities in the six months ended June 30, 2023 and lower mortgage banking revenue, partially offset by the full-period 2023 impact of the First Midwest merger which occurred in February of 2022.
Wealth and investment services fees decreased $1.4 million for the three months ended June 30, 2023 compared to the same period in 2022 primarily due to lower market conditions and product fees. Wealth and investment services fees increased $37.6$3.6 million for the six months ended June 30, 2023 compared to the same period in 2022 primarily due to the full-period 2023 impact of the First Midwest merger which occurred in February of 2022.
Service charges on deposit accounts for the three and six months ended June 30, 2023 were impacted by several enhancements to overdraft protection programs implemented in late 2022 to provide clients with more flexibility. The changes included the elimination of the non-sufficient fund (“NSF”) fee when an item is returned, among other modifications that benefit consumers. The impact of these enhancements for the six months ended June 30, 2023 compared to the same period in 2022 was more than offset by increased service charges on deposit accounts due to the full-period 2023 impact of the First Midwest merger which occurred in February of 2022.
Mortgage banking revenue decreased $2.4 million and $46.1$6.2 million for the three and six months ended June 30, 2022 when2023, respectively, compared to the same periods in 20212022 primarily due to the higher rate environment and lower gain on sale margins.
Capital markets income decreased $1.1 million for the three months ended June 30, 2023 compared to the same period in 2022 primarily due to lower levels of commercial client interest rate swap fees, partially offset by higher foreign currency exchange fees. Capital markets income increased $1.4 million for the six months ended June 30, 2023 compared to the same period in 2022 primarily due to the full-period 2023 impact of the First Midwest merger which occurred in February of 2022. The increases in noninterest income were partially offset by lower mortgage banking revenue, which was impacted by the higher rate environment, normalizing gain on sale margins, and a higher mix of portfolio production.
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Noninterest Expense
The following table details the components in noninterest expense:
Three Months Ended
June 30,
%Six Months Ended
June 30,
%Three Months Ended
June 30,
%Six Months Ended
June 30,
%
(dollars in thousands)(dollars in thousands)20222021Change20222021Change(dollars in thousands)20232022Change20232022Change
Salaries and employee benefitsSalaries and employee benefits$161,817 $72,640 122.8 %$285,964 $140,757 103.2 %Salaries and employee benefits$135,810 $161,817 (16.1)%$273,174 $285,964 (4.5)%
OccupancyOccupancy26,496 14,054 88.5 47,515 28,926 64.3 Occupancy26,085 26,496 (1.6)54,367 47,515 14.4 
EquipmentEquipment7,550 4,506 67.6 12,718 8,475 50.1 Equipment7,721 7,550 2.3 15,110 12,718 18.8 
MarketingMarketing9,119 2,632 246.5 13,395 4,694 185.4 Marketing9,833 9,119 7.8 19,250 13,395 43.7 
Data processing25,883 11,697 121.3 44,645 24,050 85.6 
TechnologyTechnology20,056 25,883 (22.5)39,258 44,645 (12.1)
CommunicationCommunication5,878 2,411 143.8 9,295 5,289 75.7 Communication4,232 5,878 (28.0)8,693 9,295 (6.5)
Professional feesProfessional fees6,336 8,528 (25.7)26,127 11,252 132.2 Professional fees6,397 6,336 1.0 13,129 26,127 (49.7)
FDIC assessmentFDIC assessment4,699 1,226 283.3 7,274 2,833 156.8 FDIC assessment9,624 4,699 104.8 20,028 7,274 175.3 
Amortization of intangiblesAmortization of intangibles7,170 2,909 146.5 11,981 5,984 100.2 Amortization of intangibles6,060 7,170 (15.5)12,246 11,981 2.2 
Amortization of tax credit investmentsAmortization of tax credit investments1,525 1,813 (15.9)3,041 3,015 0.9 Amortization of tax credit investments2,762 1,525 81.1 5,523 3,041 81.6 
Property optimizationProperty optimization242 — N/A  1,559 — N/A
Other expenseOther expense20,922 7,202 190.5 42,196 12,083 249.2 Other expense17,762 21,002 (15.4)34,958 31,109 12.4 
Total noninterest expenseTotal noninterest expense$277,395 $129,618 114.0 %$504,151 $247,358 103.8 %Total noninterest expense$246,584 $277,475 (11.1)%$497,295 $493,064 0.9 %
Noninterest expense increased $147.8decreased $30.9 million for the three months ended June 30, 2022 when2023 compared to the same period in 20212022. Noninterest expense included $2.4 million of merger-related expenses for the three months ended June 30, 2023, compared to $36.6 million for the three months ended June 30, 2022. In addition, noninterest expense for the three months ended June 30, 2023 included $3.4 million of Louisville expenses and $0.2 million for property optimization. Excluding these expenses, noninterest expense for the three months ended June 30, 2023 was stable compared to the same period in 2022 as fully achieved merger related costs were substantially offset by marketing campaigns and higher FDIC assessment expense.
Noninterest expense increased $4.2 million for the six months ended June 30, 2023 compared to the same period in 2022. Noninterest expense included merger-related expenses totaled $16.9 million for the six months ended June 30, 2023, compared to $77.9 million for the six months ended June 30, 2022. In addition, noninterest expense for the six months ended June 30, 2023 included $3.4 million of Louisville expenses and $1.6 million for property optimization. Excluding these expenses, noninterest expense for the six months ended June 30, 2023 increased $60.3 million, reflective of the additional operating costs associated with the full-period 2023 impact of the First Midwest merger as well as $36.6which occurred in February of 2022, marketing campaigns, and higher FDIC assessment expense.
FDIC assessment expense increased $4.9 million of merger-related expenses. In addition, higher incentive accruals resulting from strong performance contributed to the increase. Noninterest expenseand $12.8 million for the three months ended June 30, 2021 included $6.5 million of merger-related expenses.
Noninterest expense increased $256.8 million for theand six months ended June 30, 20222023, respectively, when compared to the same periodperiods in 2021 reflective of the additional operating costs associated with the First Midwest merger, as well as $88.9 million of merger-related expenses, including $11.0 million of other expenses attributable2022 primarily due to the provision for credit losses on unfunded loan commitments. In addition, higher incentive accruals resulting from strong performance contributed to the increase. Noninterest expense for the six months ended June 30, 2021 included $6.5 million of merger-related expenses.assessment rates and deposit balances.
Amortization of tax credit investments decreased $0.3increased $1.2 million and $2.5 million for the three and six months ended June 30, 20222023, respectively, when compared to the same periodperiods in 2021. Amortization of tax credit investments for the six months ended June 30, 2022 were consistent with the same period in 2021.2022. The recognition of tax credit amortization expense is contingent upon the successful completion of the rehabilitation of a historic building or completion of a solar project within the reporting period. Many factors including weather, labor availability, building regulations, inspections, and other unexpected construction delays related to a rehabilitation project can cause a project to exceed its estimated completion date.  See Note 119 to the consolidated financial statements for additional information on our tax credit investments.
FDIC Special Assessment Proposed Rule
On May 11, 2023, the Federal Deposit Insurance Corporation (“FDIC”) released a proposed rule that would impose special assessments to recover the losses to the deposit insurance fund (“DIF”) resulting from the FDIC’s use, in March 2023, of the systemic risk exception to the least-cost resolution test under the Federal Deposit Insurance Act in connection with the receiverships of Silicon Valley Bank and Signature Bank. The FDIC stated that it currently estimates those assessed losses to total $15.8 billion and that the amount of the special assessments would be adjusted as the loss estimate changes. Under the proposed rule, the assessment base would be an insured depository institution’s (“IDI”) estimated uninsured deposits, as reported in the IDI’s December 31, 2022 Call Report, excluding the first $5 billion in estimated uninsured deposits. The special assessments would be collected at an
63


annual rate of approximately 12.5 basis points per year (3.13 basis points per quarter) over eight quarters in 2024 and 2025, with the first assessment period beginning January 1, 2024 (with the first assessment payment due by June 28, 2024). Under the proposed rule, the estimated loss pursuant to the systemic risk determination would be periodically adjusted, and the FDIC would retain the ability to cease collection early, extend the special assessment collection period and impose a final shortfall special assessment on a one-time basis. In its December 31, 2022 Call Report, Old National Bank reported estimated uninsured deposits of approximately $12.0 billion. Old National expects the special assessments would be tax deductible. Although the proposal could be changed and the timing of accounting recognition is still under consideration, if the assessments, as proposed, were recorded as an expense in a single quarter, the estimated $17 million expense would significantly affect noninterest expense and results of operations for that quarter.
Provision for Income Taxes
We record a provision for income taxes currently payable and for income taxes payable or benefits to be received in the future, which arise due to timing differences in the recognition of certain items for financial statement and income tax purposes.  The major difference between the effective tax rate applied to our financial statement income and the federal statutory tax rate is caused by a tax benefit from our tax credit investments and interest on tax-exempt securities and loans.  The provision for income taxes, as a percentage of pre-tax income (loss),effective tax rate was 17.8%23.4% for the three months ended June 30, 2022,2023, compared to 18.2%17.8% for the same period in 2021.2022.  The provision for income taxes, as a percentage of pre-tax income (loss),effective tax rate was 15.7%22.8% for the six months ended June 30, 2022,2023, compared to 17.4%15.7% for the same period in 2021.2022.  In accordance with ASC 740-270, Accounting for Interim Reporting,, the provision for income taxes was recorded at June 30, 20222023 based on the current estimate of the effective annual rate.  The lowerhigher effective tax rate during the three and six months ended June 30, 20222023 compared to the same periods in 2021 reflected2022 was primarily the recognitionresult of $1.7 million of previously unrealizedan increase in pre-tax book income combined with smaller increases in tax-exempt income and tax benefitscredits. Other contributing factors were increases in non-deductible officer compensation and non-deductible FDIC premiums as well as the three months ended June 30, 2022, partially offset by higher post-merger estimated state effective tax rates. The six months ended June 30, 2022 also reflected additional one-time benefits of $1.2 million related to share-based payments and $0.9 million related to the remeasurement of the Company’s deferred taxes post-merger.First Midwest merger in February 2022. See Note 1714 to the consolidated financial statements for additional information.
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FINANCIAL CONDITION
Overview
At June 30, 2022,2023, our assets were $45.7$48.5 billion, a $21.3$1.7 billion increase compared to assets of $24.5$46.8 billion at December 31, 2021.2022.  The increase was driven primarily by the merger with First Midwest in February of 2022.
We have observed signs of an economic recovery in the United States, with jobs, consumer spending, manufacturing,disciplined loan growth and other indicators rebounding from their weakest levels. Our historically careful underwriting practices, diversehigher cash balances funded through higher deposits and granular portfolios, and Midwest-based footprint have helped minimize the adverse impact to Old National. The pandemic has become less disruptive to the Company’s business, financial condition, results of operations, and its clients as of June 30, 2022.borrowings.
Earning Assets
Our earning assets are comprised of investment securities, portfolio loans, loans held for sale, money market investments, interest earning accounts with the Federal Reserve, and equity securities.  Earning assets were $40.9$43.3 billion at June 30, 2022,2023, a $19.1$1.7 billion increase compared to earning assets of $21.9$41.6 billion at December 31, 20212022 driven primarily by the merger with First Midwest.loan growth.
Investment Securities
We classify the majority of our investment securities as available-for-sale to give management the flexibility to sell the securities prior to maturity if needed, based on fluctuating interest rates or changes in our funding requirements. During the six months ended June 30, 2022, we transferred $3.0 billion of securities available-for-sale to held-to-maturity in lightdue to rising interest rates and related effects on the value of the rate environment.our investment securities.
Equity securities are recorded at fair value and totaled $55.9$72.0 million at June 30, 20222023 compared to $13.2$52.5 million at December 31, 2021. The increase in equity securities was driven by the merger with First Midwest.2022.
At June 30, 2022, theThe investment securities portfolio, including equity securities, was $11.0$10.0 billion at June 30, 2023 compared to $7.6$10.2 billion at December 31, 2021, an increase of $3.4 billion.2022.  Investment securities represented 27%23% of earning assets at June 30, 2022,2023, compared to 35%25% at December 31, 2021.  Stronger loan demand in the future could result in management’s decision to reduce the securities portfolio.2022.  At June 30, 2022,2023, we had no intent to sell any securities that were in an unrealized loss position nor is it expected that we would be required to sell the securities prior to their anticipated recovery.
The investment securities available-for-sale portfolio had net unrealized losses of $574.7$934.7 million at June 30, 2022,2023, compared to net unrealized losses of $6.0$844.4 million at December 31, 2021.2022.  The investment securities held-to-maturity portfolio had net unrealized losses of $451.9 million at June 30, 2023, compared to net unrealized losses of
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$445.5 million at December 31, 2022. Net unrealized losses increased from December 31, 20212022 to June 30, 20222023 primarily due to an increase in rates impactinghigher market values for mortgage-backed, U.S. government-sponsored entities and agencies, and tax exempt municipal securities.interest rates.
The investment securities available-for-sale portfolio including securities hedges had an effective duration of 4.414.43 at June 30, 2022,2023, compared to 4.264.57 at December 31, 2021.2022.  The total investment securities portfolio had an effective duration of 5.52 at June 30, 2023, compared to 6.45 at December 31, 2022. Effective duration measuresrepresents the percentage change in the fair value of the portfolio in response to a change in interest rates.rates and is used to evaluate the portfolio’s price volatility at a single point in time.  Generally, there is more uncertainty in interest rates over a longer average maturity, resulting in a higher duration percentage.  The annualized average yields on investment securities, on a taxable equivalent basis, were 3.09% and 3.02% for the three and six months ended June 30, 2023, respectively, compared to 2.37% and 2.26% for the three and six months ended June 30, 2022, respectively, compared to 2.10% and 2.16% forrespectively.
Loan Portfolio
The following table presents the three and six months ended June 30, 2021, respectively.composition of the loan portfolio:
Loans Held for Sale
Mortgage loans held for immediate sale in the secondary market were $26.2 million at June 30, 2022, compared to $35.5 million at December 31, 2021.  Certain mortgage loans are committed for sale at or prior to origination at a contracted price to an outside investor.  Other mortgage loans held for immediate sale are hedged with TBA forward agreements and committed for sale when they are ready for delivery and remain on the Company’s balance sheet for a short period of time (typically 30 to 60 days).  These loans are sold without recourse, beyond customary representations and warranties, and Old National has not experienced material losses arising from these sales.  Mortgage originations are subject to volatility due to interest rates and home sales, among other factors. 
We have elected the fair value option prospectively for residential loans held for sale.  The aggregate fair value of residential loans held for sale exceeded the unpaid principal balance by $0.3 million at June 30, 2022. The
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aggregate fair value of residential loans held for sale exceeded the unpaid principal balance by $1.3 million at December 31, 2021.
(dollars in thousands)June 30,
2023
December 31,
2022
$ Change% Change
Commercial$9,698,241 $9,508,904 $189,337 %
Commercial real estate13,450,209 12,457,070 993,139 
Residential real estate6,684,480 6,460,441 224,039 
Consumer2,599,543 2,697,226 (97,683)(4)
Total loans$32,432,473 $31,123,641 $1,308,832 %
Commercial and Commercial Real Estate Loans
Commercial and commercial real estate loans are the largest classifications within earning assets, representing 51%53% of earning assets at both June 30, 2022, compared to 45% at2023 and December 31, 2021.  At June 30, 2022,2022.  The increase in commercial and commercial real estate loans were $20.7 billion, an increase of $10.9 billionat June 30, 2023 compared to December 31, 20212022 was driven by the merger with First Midwest and strongdisciplined loan production in the first half of 2022.that was well balanced across our market footprint and product lines.
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The following table provides detail on commercial loans by industry classification (as defined by the North American Industry Classification System) and by loan size.
June 30, 2022December 31, 2021June 30, 2023December 31, 2022
(dollars in thousands)(dollars in thousands)OutstandingExposureNonaccrualOutstandingExposureNonaccrual(dollars in thousands)Outstanding
Exposure(1)
NonaccrualOutstanding
Exposure(1)
Nonaccrual
By Industry:By Industry:By Industry:
ManufacturingManufacturing$1,810,117 $2,748,807 $5,223 $612,873 $1,152,774 $6,689 Manufacturing$1,803,303 $2,970,373 $6,901 $1,757,907 $2,803,883 $2,464 
Health care and social assistanceHealth care and social assistance1,360,925 1,776,461 7,523 1,588,392 2,043,105 11,806 
Wholesale tradeWholesale trade806,904 1,519,782 4,860 857,400 1,552,985 2,895 
Real estate rental and leasingReal estate rental and leasing670,100 1,010,194 1,107 642,511 962,549 1,135 
ConstructionConstruction681,550 1,378,937 1,627 310,649 744,610 1,429 Construction630,504 1,441,527 4,386 556,913 1,307,582 1,517 
Health care and social assistance1,402,311 1,783,160 4,791 376,664 550,400 444 
Public administration235,481 369,807 921 247,770 357,310 — 
Wholesale trade912,714 1,387,295 2,677 240,618 438,357 1,598 
Finance and insuranceFinance and insurance576,081 934,986 8 484,532 858,391 17 
Professional, scientific, and
technical services
Professional, scientific, and
technical services
538,952 866,853 4,571 507,940 832,407 4,735 
Transportation and warehousingTransportation and warehousing439,015 681,702 3,831 422,643 633,267 3,496 
Retail tradeRetail trade406,320 699,800 7,394 332,367 538,135 7,386 
Accommodation and food servicesAccommodation and food services388,810 510,089 479 399,915 512,025 596 
Administrative and support and
waste management and
remediation services
Administrative and support and
waste management and
remediation services
307,563 476,445 186 315,785 446,655 13,860 
Educational servicesEducational services231,914 388,165 5,283 216,384 295,065 — Educational services240,653 406,915 8 210,850 378,955 3,750 
Other servicesOther services175,026 366,555 2,343 121,577 260,413 2,542 Other services218,305 395,272 13,090 194,998 356,743 2,656 
Professional, scientific, and
technical services
475,971 788,843 4,004 141,364 279,185 937 
Finance and insurance351,466 613,321 30 162,920 232,847 44 
Retail trade271,126 462,229 1,246 131,303 289,478 945 
Real estate rental and leasing628,454 978,331 1,647 204,612 347,991 504 
Transportation and warehousing334,706 491,703 2,380 134,072 243,086 1,594 
Administrative and support and
waste management and
remediation services
330,737 502,056 5,434 86,307 149,417 — 
Public administrationPublic administration208,512 301,200  231,453 325,834 846 
Agriculture, forestry, fishing,
and hunting
Agriculture, forestry, fishing,
and hunting
219,171 374,560 1,017 114,699 164,364 1,521 Agriculture, forestry, fishing,
and hunting
205,740 359,958 418 261,355 382,376 996 
Accommodation and food services441,217 542,930 1,059 78,689 108,724 2,399 
Utilities35,875 94,858  26,322 75,439 — 
Arts, entertainment, and recreation142,966 199,291 314 71,055 110,574 2,189 
Information132,197 175,395 1,943 43,713 78,877 1,809 
Mining37,446 53,281  30,161 62,231 
Management of companies and
enterprises
30,198 56,388  15,124 36,046 — 
OtherOther43,340 142,912  24,893 24,943 — Other896,554 1,197,440 473 743,943 1,122,409 739 
TotalTotal$8,923,983 $13,898,824 $41,939 $3,391,769 $6,002,131 $24,649 Total$9,698,241 $15,548,997 $55,235 $9,508,904 $15,057,301 $58,894 
By Loan Size:By Loan Size:By Loan Size:
Less than $200,000Less than $200,0006 %5 %5 %%%%Less than $200,0003 %3 %3 %%%%
$200,000 to $1,000,000$200,000 to $1,000,00014 14 36 18 16 42 $200,000 to $1,000,00011 11 19 11 11 20 
$1,000,000 to $5,000,000$1,000,000 to $5,000,00027 28 46 31 29 51 $1,000,000 to $5,000,00024 25 49 25 26 36 
$5,000,000 to $10,000,000$5,000,000 to $10,000,00016 17 13 15 16 — $5,000,000 to $10,000,00014 15 6 15 15 24 
$10,000,000 to $25,000,000$10,000,000 to $25,000,00030 26  18 18 — $10,000,000 to $25,000,00032 28 23 31 27 17 
Greater than $25,000,000Greater than $25,000,0007 10  10 15 — Greater than $25,000,00016 18  15 18 — 
TotalTotal100 %100 %100 %100 %100 %100 %Total100 %100 %100 %100 %100 %100 %
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(1)    Includes unfunded loan commitments.
The following table provides detail on commercial real estate loans classified by property type.
June 30, 2022December 31, 2021June 30, 2023December 31, 2022
(dollars in thousands)(dollars in thousands)Outstanding%Outstanding%(dollars in thousands)Outstanding
Exposure(1)
NonaccrualOutstanding
Exposure(1)
Nonaccrual
By Property Type:By Property Type:By Property Type:
MultifamilyMultifamily$3,596,449 30 %$1,995,803 31 %Multifamily$4,455,077 $6,420,032 $11,942 $4,188,137 $5,920,414 $13,749 
Warehouse / IndustrialWarehouse / Industrial2,378,739 3,124,270 5,807 1,976,804 2,533,892 9,090 
OfficeOffice1,927,184 2,160,627 29,315 1,813,007 1,979,272 13,728 
RetailRetail1,848,075 16 1,037,034 16 Retail1,912,285 2,003,162 32,109 1,808,041 1,895,345 18,155 
Office1,738,934 15 1,018,973 16 
Warehouse / Industrial1,718,735 15 851,956 14 
Single familySingle family411,811 3 333,221 Single family425,926 457,895 5,176 515,390 615,216 7,022 
Other (1)
2,482,499 21 1,143,687 18 
Other (2)
Other (2)
2,350,998 2,663,938 90,388 2,155,691 2,667,780 61,977 
TotalTotal$11,796,503 100 %$6,380,674 100 %Total$13,450,209 $16,829,924 $174,737 $12,457,070 $15,611,919 $123,721 
(1)    Includes unfunded loan commitments.
(2)    Other includes construction andagriculture real estate, hotels, self-storage, senior housing, land development, senior housing, religion, and mixed usemixed-use properties.
Residential Real Estate Loans
At June 30, 2022,2023, residential real estate loans held in our loan portfolio were $6.1$6.7 billion, an increase of $3.8 billion$224.0 million compared to December 31, 2021 driven by the merger with First Midwest and loan growth.2022.  Future increases in interest rates could result in a decline in the level of refinancings and new originations of residential real estate loans.
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Consumer Loans
Consumer loans, including automobile loans, and personal, and home equity loans and lines of credit, increased $1.2 billiondecreased $97.7 million to $2.8$2.6 billion at June 30, 20222023 compared to December 31, 2021 driven by the merger with First Midwest and loan growth.
Goodwill and Other Intangible Assets
Goodwill and other intangible assets at June 30, 2022 totaled $2.1 billion, an increase of $1.1 billion from December 31, 2021 as a result of goodwill and other intangible assets recorded with the First Midwest merger.
Other Assets
Other assets at June 30, 2022 increased $453.1 million from December 31, 2021 primarily due to higher net deferred tax assets related to net unrealized losses on investment securities and allowance for credit losses on loans and higher miscellaneous investments associated with the First Midwest merger.reflecting lower direct loans.
Funding
TotalThe following table summarizes Old National’s total funding, comprised of deposits and wholesale borrowings, was $39.9 billion at June 30, 2022, an increase of $18.8 billion from $21.1 billion at December 31, 2021 driven by the merger with First Midwest.  Included in total funding were deposits of $35.5 billion at June 30, 2022, an increase of $17.0 billion from $18.6 billion at December 31, 2021. Compared to December 31, 2021, noninterest-bearing deposits increased $6.1 billion, interest-bearing checking and NOW deposits increased $3.1 billion, savings deposits increased $3.0 billion, money market deposits increased $3.2 billion, and time deposits increased $1.5 billion.borrowings:
(dollars in thousands)June 30,
2023
December 31,
2022
$ Change% Change
Deposits:
Noninterest-bearing demand$10,532,838 $11,930,798 $(1,397,960)(12)%
Interest-bearing:
Checking and NOW7,654,202 8,340,955 (686,753)(8)%
Savings5,578,323 6,326,158 (747,835)(12)%
Money market7,200,288 5,389,139 1,811,149 34 %
Time deposits5,265,664 3,013,780 2,251,884 75 %
Total deposits36,231,315 35,000,830 1,230,485 %
Wholesale borrowings:
Federal funds purchased and interbank borrowings136,060 581,489 (445,429)(77)%
Securities sold under agreements to repurchase311,447 432,804 (121,357)(28)%
Federal Home Loan Bank advances4,771,183 3,829,018 942,165 25 %
Other borrowings815,318 743,003 72,315 10 %
Total wholesale borrowings6,034,008 5,586,314 447,694 %
Total funding$42,265,323 $40,587,144 $1,678,179 %
We use wholesale funding to augment deposit funding and to help maintain our desired interest rate risk position.  At June 30, 2022, wholesale borrowings, including federal funds purchased and interbank borrowings, securities sold under agreements to repurchase, FHLB advances, and other borrowings, totaled $4.4 billion, an increase of $1.8 billion from December 31, 2021 driven by the merger with First Midwest.  Wholesale funding as a percentage of total funding was 11%14% at both June 30, 20222023 and 12% at December 31, 2021.2022.
Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities at June 30, 2022 increased $310.12023 decreased $102.5 million from December 31, 20212022 primarily due to higherincentive compensation payments during the six months ended June 30, 2023 and lower derivative liabilities and accrued expenses and other liabilities associated with the First Midwest merger.
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liabilities.
Capital 
Shareholders’ equity totaled $5.1$5.3 billion at June 30, 2022,2023, compared to $3.0$5.1 billion at December 31, 2021.  In relation to the merger of equals transaction, Old National issued 108,000 shares of Old National Series A Preferred Stock and 122,500 shares of Old National Series C Preferred Stock.Old National entered into two deposit agreements, each dated as of February 15, 2022,2022.  This increase was driven by and among Old National, Continental Stock Transfer & Trust Company, as depository, and the holders from time to time of the depositary receiptsretained earnings along with changes in connection with the issuance of the Old National Preferred Stock. Pursuant to the deposit agreements, Old National issued 4,320,000 depositary shares, each representing a 1/40th interest in a share of Old National Series A Preferred Stock, and 4,900,000 depositary shares, each representing a 1/40th interest in a share of Old National Series C Preferred Stock.
Shareholders’ equity at June 30, 2022 included $2.4 billion from the 129.4 million shares of Common Stock thatunrealized gains (losses) on derivatives. These increases were issued in conjunction with the merger with First Midwest. The changepartially offset by dividends, changes in unrealized gains (losses) on available-for-sale investment securities, decreased equity by $434.1 million duringand the six months ended June 30, 2022. In addition, available-for-sale investment securities with a fair valuerepurchase of $3.0 billion were transferred from the available-for-sale portfolio to the held-to-maturity portfolio during the six months ended June 30, 2022. The unrealized holding loss, net of tax, is included in shareholders’ equity and totals $122.2 million at June 30, 2022. Old National repurchased 3.51.8 million shares of Common Stock in the six months ended June 30, 20222023 (all of which were repurchased in the first quarter of 2023) under a stock repurchase plan that was approved by the Company’s Board of Directors, which reduced equity by $63.8 million. Old National also paid cash dividends of $0.28 per common share in the six months ended June 30, 2022, which reduced equity by $81.7$29.5 million.
Capital Adequacy
Old National and the banking industry are subject to various regulatory capital requirements administered by the federal banking agencies. At June 30, 2022,2023, Old National and its bank subsidiary exceeded the regulatory minimums and Old National Bank met the regulatory definition of “well-capitalized” based on the most recent regulatory definition.
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Old National’s consolidated capital position remains strong as evidenced by the following comparisons of key industry ratios. 
Regulatory
Guidelines
Minimum
June 30,December 31,
202220212021
Risk-based capital:
Tier 1 capital to total average assets (leverage ratio)4.00 %8.19 %8.38 %8.59 %
Common equity Tier 1 capital to risk-adjusted
   total assets
7.00 9.90 11.95 12.04 
Tier 1 capital to risk-adjusted total assets8.50 10.63 11.95 12.04 
Total capital to risk-adjusted total assets10.50 12.03 12.73 12.77 
Shareholders' equity to assetsN/A11.10 12.63 12.32 
Regulatory
Guidelines
Minimum
Prompt
Corrective
Action "Well
Capitalized"
Guidelines
June 30,
2023
December 31,
2022
Risk-based capital:
Tier 1 capital to total average assets (leverage
   ratio)
4.00 %N/A%8.59 %8.52 %
Common equity Tier 1 capital to risk-weighted
   total assets
7.00 N/A10.14 10.03 
Tier 1 capital to risk-weighted total assets8.50 6.00 10.79 10.71 
Total capital to risk-weighted total assets10.50 10.00 12.14 12.02 
Shareholders' equity to assetsN/AN/A10.91 10.97 
Old National Bank, Old National’s bank subsidiary, maintained a strong capital position as evidenced by the following comparisons of key industry ratios.
Regulatory
Guidelines
Minimum
Prompt
Corrective
Action "Well
Capitalized"
Guidelines
June 30,December 31,
202220212021
Risk-based capital:
Tier 1 capital to total average assets (leverage
   ratio)
4.00 %5.00 %7.81 %8.65 %8.81 %
Common equity Tier 1 capital to risk-adjusted
   total assets
7.00 6.50 10.28 12.27 12.34 
Tier 1 capital to risk-adjusted total assets8.50 8.00 10.28 12.27 12.34 
Total capital to risk-adjusted total assets10.50 10.00 10.92 12.79 12.82 
Regulatory
Guidelines
Minimum
Prompt
Corrective
Action "Well
Capitalized"
Guidelines
June 30,
2023
December 31,
2022
Risk-based capital:
Tier 1 capital to total average assets (leverage
   ratio)
4.00 %5.00 %8.73 %8.47 %
Common equity Tier 1 capital to risk-weighted
   total assets
7.00 6.50 10.98 10.66 
Tier 1 capital to risk-weighted total assets8.50 8.00 10.98 10.66 
Total capital to risk-weighted total assets10.50 10.00 11.73 11.35 
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In December 2018, the OCC, the Board of Governors of the Federal Reserve System, and the FDIC approved a final rule to address changes to credit loss accounting under GAAP, including banking organizations’ implementation of CECL. The final rule provides banking organizations the option to phase in over a three-year period the day-one adverse effects on regulatory capital that may result from the adoption of the new accounting standard. In MarchDuring 2020, the OCC, the Board of Governors of the Federal Reserve System, and the FDIC published an interimissued final rulerules to delay the estimated impact on regulatory capital stemming from the implementation of CECL. The interim final rule maintains the three-year transition option in the previous rule and provides banksrules provide banking organizations the option to delay for two years an estimate of CECL’s effect on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period (five-year transition option). Old National is adoptingadopted the capital transition relief over the permissible five-year period.
Management views stress testing as an integral part of the Company’s risk management and strategic planning activities. Old National performs stress testing periodically throughout the year. The primary objective of the stress test is to ensure that Old National has a robust, forward-looking stress testing process and maintains sufficient capital to continue operations throughout times of economic and financial stress. Management also uses the stress testing framework to evaluate decisions relating to pricing, loan concentrations, capital deployment, and mergers and acquisitions to ensure that strategic decisions align with Old National’s risk appetite statement. Old National’s stress testing process incorporates key risks that include strategic, market, liquidity, credit, operational, regulatory, compliance, legal, and reputational risks. Old National’s stress testing policy outlines steps that will be taken if stress test results do not meet internal thresholds under severely adverse economic scenarios.
RISK MANAGEMENT
Overview
Old National has adopted a Risk Appetite Statement to enable theour Board of Directors, Executive Leadership Team, and Senior Management to better assess, understand, monitor, and mitigate the risks of Old National.National’s risks.  The Risk Appetite Statement addresses the following major risks:  strategic, market, liquidity, credit, operational/technology/cybersecurity,operational, talent management, regulatory/compliance and regulatory, legal, and reputational.  Our Chief Risk Officer is independent of management, reports directly to our Chief Executive Officer, and provides quarterly reports to the Board’s Enterprise Risk Committee.Committee on various risk topics.  The following discussion addresses certain of these major risks including credit, market, liquidity, operational/technology/cybersecurity, and regulatory/compliance/legal.liquidity. Discussion of operational, compliance and regulatory, legal, strategic, talent management, and reputational risks is provided in the section entitled “Risk Factors” in the Company’s 20212022 Annual Report on Form 10-K.
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Credit Risk
Credit risk represents the risk of loss arising from an obligor’s inability or failure to meet contractual payment or performance terms.  Our primary credit risks result from our investment and lending activities.
Investment Activities
We carry a higher exposure to loss in our pooled trust preferred securities, which are collateralized debt obligations, due to illiquidity in that market and the performance of the underlying collateral.  At June 30, 2022, we had pooled trust preferred securities with a fair value of $11.1 million, or less than 1% of the available-for-sale securities portfolio.  These securities remained classified as available-for-sale and the unrealized loss on our pooled trust preferred securities was $2.7 million at June 30, 2022. The fair value of these securities is expected to improve as we get closer to maturity, but may be adversely impacted by credit deterioration.
All of our mortgage-backed securities are backed by U.S. government-sponsored or federal agencies.  Municipal bonds, corporate bonds, and other debt securities are evaluated by reviewing the credit-worthiness of the issuer and general market conditions.  See Note 5 to the consolidated financial statements for additional details about our investment security portfolio.
Counterparty Exposure
Counterparty exposure is the risk that the other party in a financial transaction will not fulfill its obligation.  We define counterparty exposure as nonperformance risk in transactions involving federal funds sold and purchased, repurchase agreements, correspondent bank relationships, and derivative contracts with companies in the financial services industry.  Old National manages exposure to counterparty risk in connection with its derivatives transactions by generally engaging in transactions with counterparties having ratings of at least “A” by Standard &
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Poor’s Rating Service or “A2” by Moody’s Investors Service.  Total credit exposure is monitored by counterparty and managed within limits that management believes to be prudent. Old National’s net counterparty exposure was an asset of $449.9 million at June 30, 2022.
Lending Activities
Commercial
Commercial and industrial loans are made primarily for the purpose of financing equipment acquisition, expansion, working capital, and other general business purposes.  Lease financing consists of direct financing leases and is used by commercial clients to finance capital purchases ranging from computer equipment to transportation equipment.  The credit decisions for these transactions are based upon an assessment of the overall financial capacity of the applicant.  A determination is made as to the applicant’s ability to repay in accordance with the proposed terms as well as an overall assessment of the risks involved.  In addition to an evaluation of the applicant’s financial condition, a determination is made of the probable adequacy of the primary and secondary sources of repayment, such as additional collateral or personal guarantees, to be relied upon in the transaction.  Credit agency reports of the applicant’s credit history supplement the analysis of the applicant’s creditworthiness.
Commercial mortgages and construction loans are offered to real estate investors, developers, and builders primarily domiciled in the geographic market areas we serve:  Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, Wisconsin, and Missouri.  These loans are secured by first mortgages on real estate at LTV margins deemed appropriate for the property type, quality, location, and sponsorship.  Generally, these LTV ratios do not exceed 80%.  The commercial properties are predominantly non-residential properties such as retail centers, industrial properties and, to a lesser extent, more specialized properties.  Substantially all of our commercial real estate loans are secured by properties located in our primary market area.
In the underwriting of our commercial real estate loans, we obtain appraisals for the underlying properties. Decisions to lend are based on the economic viability of the property and the creditworthiness of the borrower.  In evaluating a proposed commercial real estate loan, we primarily emphasize the ratio of the property’s projected net cash flows to the loan’s debt service requirement.  The debt service coverage ratio normally is not less than 120% and it is computed after deduction for a vacancy factor and property expenses as appropriate.  In addition, a personal guarantee of the loan or a portion thereof is often required from the principal(s) of the borrower.  In most cases, we require title insurance insuring the priority of our lien, fire and extended coverage casualty insurance, and flood insurance, if appropriate, in order to protect our security interest in the underlying property.  In addition, business interruption insurance or other insurance may be required.
Construction loans are underwritten against projected cash flows derived from rental income, business income from an owner-occupant, or the sale of the property to an end-user.  We may mitigate the risks associated with these types of loans by requiring fixed-price construction contracts, performance and payment bonding, controlled disbursements, and pre-sale contracts or pre-lease agreements.
Consumer

We offer a variety of first mortgage and junior lien loans to consumers within our markets, with residential home mortgages comprising our largest consumer loan category.  These loans are secured by a primary residence and are underwritten using traditional underwriting systems to assess the credit risks of the consumer.  Decisions are primarily based on LTV ratios, DTI ratios, liquidity, and credit scores.  A maximum LTV ratio of 80% is generally required, although higher levels are permitted with mortgage insurance or other mitigating factors.  We offer fixed rate mortgages and variable rate mortgages with interest rates that are subject to change every year after the first, third, fifth, or seventh year, depending on the product and are based on indexed rates such as prime.  We do not offer payment-option facilities, sub-prime loans, or any product with negative amortization.
Home equity loans are secured primarily by second mortgages on residential property of the borrower.  The underwriting terms for the home equity product generally permit borrowing availability, in the aggregate, up to 90% of the appraised value of the collateral property at the time of origination.  We offer fixed and variable rate home equity loans, with variable rate loans underwritten at fully-indexed rates.  Decisions are primarily based on LTV ratios, DTI ratios, and credit scores.  We do not offer home equity loan products with reduced documentation.
Automobile loans include loans and leases secured by new or used automobiles.  We originate automobile loans and leases primarily on an indirect basis through selected dealerships.  We require borrowers to maintain collision
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insurance on automobiles securing consumer loans, with us listed as loss payee.  Our procedures for underwriting automobile loans include an assessment of an applicant’s overall financial capacity, including credit history and the ability to meet existing obligations and payments on the proposed loan.  Although an applicant’s creditworthiness is the primary consideration, the underwriting process also includes a comparison of the value of the collateral security to the proposed loan amount.
Asset Quality
Community-based lending personnel, along with region-based independent underwriting and analytic support staff, extend credit under guidelines established and administered by management and overseen by our Enterprise Risk Committee.  This committee, which meets quarterly, is made up of independent outside directors.  The committee monitors credit quality through its review of information such as delinquencies, credit exposures, peer comparisons, problem loans, and charge-offs.  In addition, the committee provides oversight of loan policy changes as recommended by management to assure our policy remains appropriate for the current lending environment.
We lend to commercial and commercial real estate clients in many diverse industries including, among others, real estate rental and leasing, manufacturing, agribusiness, transportation, mining, wholesaling,healthcare, wholesale trade, construction, and retailing.agriculture.  Old National manages concentrations of credit exposure by industry, product, geography, client relationship, and loan size.  At June 30, 2022,2023, our average commercial loan size was approximately $560,000$680,000 and our average commercial real estate loan size was approximately $1,200,000.$1,350,000. In addition, while loans to lessors of residential and non-residential real estate exceed 10% of total loans, no individual sub-segment category within those broader categories reaches the 10% threshold.  At June 30, 2022,2023, we had minimal exposure to foreign borrowers and no sovereign debt.  Our policy is to concentrate our lending activity in the geographic market areas we serve, primarily Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, Wisconsin, and Missouri.
On February 15, 2022, Old National closed on its merger with First Midwest. As ofin the closing date of the transaction, First Midwest loans totaled $14.3 billion. Old National reviewed the acquired loans and determined that as of June 30, 2022, $200.3 million met the definition of criticized and $459.5 million were considered classified (of which $122.4 million are reported with nonaccrual loans). These loans are included in our summary of under-performing, criticized, and classified assets table below.region.
The following table presents a summary of under-performing, criticized, and classified assets:
June 30,December 31,
(dollars in thousands)202220212021
Total nonaccrual loans$214,924 $128,268 $106,691 
TDRs still accruing15,665 14,222 18,378 
Total past due loans (90 days or more and still accruing)882 
Foreclosed assets12,618 520 2,030 
Total under-performing assets$244,089 $143,019 $127,106 
Classified loans (includes nonaccrual, TDRs still accruing,
   past due 90 days, and other problem loans)
$706,372 $289,272 $269,270 
Other classified assets (1)
25,004 4,305 4,338 
Criticized loans452,835 228,264 235,910 
Total criticized and classified assets$1,184,211 $521,841 $509,518 
Asset Quality Ratios:
Nonaccrual loans/total loans (2)
0.73 %0.93 %0.78 %
Non-performing loans/total loans (2) (3)
0.78 1.03 0.92 
Under-performing assets/total loans and
    other real estate owned
0.83 1.04 0.93 
Under-performing assets/total assets0.53 0.60 0.52 
Allowance/under-performing assets117.99 76.52 84.45 
Allowance/nonaccrual loans134.00 85.32 100.61 
(dollars in thousands)June 30,
2023
December 31,
2022
Total nonaccrual loans$295,509 $238,178 
TDRs still accruing (1)
N/A     15,313 
Loans 90 days or more past due and still accruing303 2,650 
Foreclosed assets9,824 10,845 
Total under-performing assets$305,636 $266,986 
Classified loans (includes nonaccrual, TDRs still accruing,
   past due 90 days, and other problem loans) (1)
$820,521 $745,485 
Other classified assets (2)
40,942 24,735 
Criticized loans614,547 636,069 
Total criticized and classified assets$1,476,010 $1,406,289 
Asset Quality Ratios:
Nonaccrual loans/total loans (3)
0.91 %0.77 %
Non-performing loans/total loans (3) (4)
0.91 0.81 
Under-performing assets/total loans (3)
0.94 0.86 
Under-performing assets/total assets0.63 0.57 
Allowance for credit losses on loans/under-performing assets98.34 113.74 
Allowance for credit losses on loans/nonaccrual loans101.71 127.50 
(1)As a result of the adoption of ASU 2022-02 on January 1, 2023, the TDR classification is no longer applicable.
(2)Includes investment securities that fell below investment grade rating.
(2)(3)Loans exclude loans held for sale.
(3)(4)Non-performing loans include nonaccrual loans and TDRs still accruing.accruing for periods prior to January 1, 2023.
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Under-performing assets increased to $244.1$305.6 million at June 30, 2022,2023, compared to $143.0 million at June 30, 2021 and $127.1$267.0 million at December 31, 20212022 primarily due to the First Midwest merger.an increase in nonaccrual loans.  Under-performing assets as a percentage of total loans and other real estate owned at June 30, 20222023 were 0.83%0.94%, a 21an 8 basis point decreaseincrease from 1.04% at June 30, 2021 and a 10 basis point decrease from 0.93%0.86% at December 31, 2021.2022.
Nonaccrual loans increased $57.3 million from December 31, 20212022 to June 30, 2022 primarily due to nonaccrual loans related to2023 reflecting PCD loan migration in the First Midwest merger totaling $122.4 million.commercial real estate portfolio. As a percentage of nonaccrual loans, the allowance for credit losses on loans was 134.00%101.71% at June 30, 2022,2023, compared to 85.32% at June 30, 2021 and 100.61%127.50% at December 31, 2021.2022.
Total criticized and classified assets were $1.2$1.5 billion at June 30, 2022,2023, an increase of $662.4 million and $674.7$69.7 million from June 30, 2021 and December 31, 2021, respectively. Criticized and classified assets related to the First Midwest merger totaled $659.8 million at June 30, 2022. Other classified assets include investment securities that fell below investment grade rating totaling $25.0$40.9 million at June 30, 2022,2023, compared to $4.3 million at June 30, 2021 and $4.3$24.7 million at December 31, 2021.
Old National may choose to restructure the contractual terms of certain loans.  The decision to restructure a loan, versus aggressively enforcing the collection of the loan, may benefit Old National by increasing the ultimate probability of collection.
Any loans that are modified are reviewed by Old National to identify if a TDR has occurred, which is when, for economic or legal reasons related to a borrower’s financial difficulties, Old National Bank grants a concession to the borrower that it would not otherwise consider. Terms may be modified to fit the ability of the borrower to repay in line with its current financial status.  The modification of the terms of such loans includes one or a combination of the following:  a reduction of the stated interest rate of the loan, an extension of the maturity date at a stated rate of interest lower than the current market rate of new debt with similar risk, or a permanent reduction of the recorded investment of the loan.
Loans modified in a TDR are typically placed on nonaccrual status until we determine that the future collection of principal and interest is reasonably assured, which generally requires that the borrower demonstrate a period of performance according to the restructured terms for six months.
If we are unable to resolve a nonperforming loan issue, the credit will be charged off when it is apparent there will be a loss.  For large commercial type loans, each relationship is individually analyzed for evidence of apparent loss based on quantitative benchmarks or subjectively based upon certain events or particular circumstances.  For residential and consumer loans, a charge off is recorded at the time foreclosure is initiated or when the loan becomes 120 to 180 days past due, whichever is earlier.
For commercial TDRs, an allocation is established within the allowance for credit losses for the difference between the carrying value of the loan and its computed value.  To determine the computed value of the loan, one of the following methods is selected: (1) the present value of expected cash flows discounted at the loan’s original effective interest rate, (2) the loan’s observable market price, or (3) the fair value of the collateral, if the loan is collateral dependent.  The allocation is established as the difference between the carrying value of the loan and the collectable value.  If there are significant changes in the amount or timing of the loan’s expected future cash flows, the allowance allocation is recalculated and adjusted accordingly.
When a residential or consumer loan is identified as a TDR, the loan is typically written down to its collateral value less selling costs.
At June 30, 2022, TDRs totaled $40.0 million, $24.3 million of which were included within nonaccrual loans. At December 31, 2021, TDRs totaled $30.0 million, $11.7 million of which were included within nonaccrual loans.
Old National has established specific allowances for credit losses for clients whose loan terms have been modified as TDRs totaling $5.8 million at June 30, 2022 and $0.7 million of December 31, 2021.  Old National had not committed to lend any additional funds to clients with outstanding loans that were classified as TDRs at June 30, 2022 or December 31, 2021.
The terms of certain other loans were modified during 2022 and 2021 that did not meet the definition of a TDR.  It is our process to review all classified and criticized loans that, during the period, have been renewed, have entered into a forbearance agreement, have gone from principal and interest to interest only, or have extended the maturity date.  In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on its debt in the foreseeable future without the2022.
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modification.  The evaluation is performed under our internal underwriting policy.  We also evaluate whether a concession has been granted or if we were adequately compensated through a market interest rate, additional collateral, or a bona fide guarantee.  We also consider whether the modification was insignificant relative to the other terms of the agreement or the delay in a payment.
In general, once a modified loan is considered a TDR, the loan will always be considered a TDR until it is paid in full, otherwise settled, sold, or charged off.  However, guidance also permits for loans to be removed from TDR status when subsequently restructured under these circumstances: (1) at the time of the subsequent restructuring, the borrower is not experiencing financial difficulties, and this is documented by a current credit evaluation at the time of the restructuring, (2) under the terms of the subsequent restructuring agreement, the institution has granted no concession to the borrower; and (3) the subsequent restructuring agreement includes market terms that are no less favorable than those that would be offered for a comparable new loan.  For loans subsequently restructured that have cumulative principal forgiveness, the loan should continue to be measured in accordance with ASC 310-10, Receivables – Overall.  However, consistent with ASC 310-40-50-2, Troubled Debt Restructurings by Creditors, Creditor Disclosure of Troubled Debt Restructurings, the loan would not be required to be reported in the years following the restructuring if the subsequent restructuring meets both of these criteria: (1) has an interest rate at the time of the subsequent restructuring that is not less than a market interest rate; and (2) is performing in compliance with its modified terms after the subsequent restructuring.
Allowance for Credit Losses on Loans and Unfunded Commitments
Net charge-offs on loans totaled $1.8$10.1 million during the three months ended June 30, 2022,2023, compared to net recoveries of $0.3$1.8 million for the same period in 2021.2022. Annualized, net charge-offs (recoveries) to average loans were 0.02%0.13% for the three months ended June 30, 2022,2023, compared to (0.01)%0.02% for the same period in 2021.2022. The three months ended June 30, 2023 included net charge-offs on PCD loans totaling $5.4 million, or 0.07% on an annualized basis of average loans. Net charge-offs on loans totaled $4.5$26.5 million during the six months ended June 30, 2022,2023, compared to net recoveries of $0.3$4.5 million duringfor the same period in 2021.2022. Annualized, net charge-offs (recoveries) to average loans were 0.04%0.17% for the six months ended June 30, 2022,2023, compared to 0.00%0.04% for the same period in 2021.2022. The six months ended June 30, 2023 included net charge-offs on PCD loans totaling $17.8 million, or 0.11% on an annualized basis of average loans. Management will continue its efforts to reduce the level of non-performing loans and may consider the possibility of sales of troubled and non-performing loans, which could result in additional charge-offs to the allowance for credit losses on loans.
Credit quality within the loans held for investment portfolio is continuously monitored by management and is reflected within the allowance for credit losses foron loans. The allowance for credit losses is an estimate of expected losses inherent within the Company’s loans held for investment portfolio. Credit quality is assessed and monitored by evaluating various attributes and the results of those evaluations are utilized in underwriting new loans and in our process for estimating expected credit losses. Expected credit loss inherent in non-cancelable off-balance-sheet credit exposures is accounted for as a separate liability included in other liabilities on the balance sheet. The allowance for credit losses foron loans held for investment and unfunded loan commitments is adjusted by a credit loss expense, which is reported in earnings, and reduced by the charge-off of loan amounts, net of recoveries. Accrued interest receivable is excluded from the estimate of credit losses.
The allowance for credit loss estimation process involves procedures to appropriately consider the unique characteristics of our loan portfolio segments. These segments are further disaggregated into loan classes based on the level at which credit risk of the loan is monitored. When computing the level of expected credit losses, credit loss assumptions are estimated using a model that categorizes loan pools based on loss history, delinquency status, and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future. Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. In future periods, evaluations of the overall loan portfolio, in light of the factors and forecasts then prevailing, may result in significant changes in the allowance and credit loss expense in those future periods.
The allowance level is influenced by loan volumes, loan AQR migration or delinquency status, changes in historical loss experience, and other conditions influencing loss expectations, such as reasonable and supportable forecasts of economic conditions. The methodology for estimating the amount of expected credit losses reported in the allowance for credit losses on loans has two basic components: first, an asset-specific component involving individual loans that do not share risk characteristics with other loans and the measurement of expected credit losses for such individual loans; and second, a pooled component for estimated expected credit losses for pools of loans that share similar risk characteristics.
The allowance for credit losses foron loans was $288.0$300.6 million at June 30, 2022,2023, compared to $107.3$303.7 million at December 31, 2021. The increase reflects the initial allowance for credit losses established for acquired PCD loans
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totaling $78.5 million related to the First Midwest merger. In addition, the provision for credit losses expense in the six months ended June 30, 2022 included $96.3 million of provision for credit losses to establish an allowance for credit losses on non-PCD loans acquired in the First Midwest merger.2022. Continued loan growth in future periods, a decline in our current level of recoveries, or an increase in charge-offs could result in an increase in provision expense. Additionally, provision expense may be volatile due to changes in CECL model assumptions of credit quality, macroeconomic factors and conditions, and loan composition, which drive the allowance for credit losses balance.
We maintain an allowance for credit losses on unfunded commercial lendingloan commitments and letters of credit to provide for the risk of loss inherent in these arrangements. The allowance is computed using a methodology similar to that used to determine the allowance for credit losses foron loans, modified to take into account the probability of a drawdown on the commitment.  The allowance for credit losses on unfunded loan commitments is classified as a liability account on the balance sheet within accrued expenses and other liabilities, while the corresponding provision for theseunfunded loan commitments is included in the provision for credit losses is recorded as a component of other expense.losses. The allowance for credit losses on unfunded loan commitments totaled $22.0$37.0 million at June 30, 2022,2023, compared to $10.9$32.2 million at December 31, 2021. The increase2022.
See the section entitled “Risk Factors” in the allowanceCompany’s 2022 Annual Report on Form 10-K for further discussion of our credit losses on unfunded loan commitments was primarily driven by the merger with First Midwest.risk.
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Market Risk
Market risk is the risk that the estimated fair value of our assets, liabilities, and derivative financial instruments will decline as a result of changes in interest rates or financial market volatility, or that our net income will be significantly reduced by interest rate changes.
The objective of our interest rate management process is to maximize net interest income while operating within acceptable limits established for interest rate risk and maintaining adequate levels of funding and liquidity.
Potential cash flows, sales, or replacement value of many of our assets and liabilities, especially those that earn or pay interest, are sensitive to changes in the general level of interest rates. This interest rate risk arises primarily from our normal business activities of gathering deposits and extending loans. Many factors affect our exposure to changes in interest rates, such as general economic and financial conditions, client preferences, historical pricing relationships, and re-pricing characteristics of financial instruments. Our earnings can also be affected by the monetary and fiscal policies of the U.S. Government and its agencies, particularly the Federal Reserve.
In managing interest rate risk, we establish guidelines for asset and liability management, including measurement of short and long-term sensitivities to changes in interest rates, which isare reviewed with the Enterprise Risk Committee of our Board of Directors. Based on the results of our analysis, we may use different techniques to manage changing trends in interest rates including:
adjusting balance sheet mix or altering interest rate characteristics of assets and liabilities;
changing product pricing strategies;
modifying characteristics of the investment securities portfolio; or
using derivative financial instruments, to a limited degree.

A key element in our ongoing process is to measure and monitor interest rate risk using a model to quantify the likely impact of changing interest rates on Old National’s results of operations. The model quantifies the effects of various possible interest rate scenarios on projected net interest income. The model measures the impact on net interest income relative to a base case scenario. The base case scenario assumes that the balance sheet and interest rates are held at current levels. The model shows our projected net interest income sensitivity based on interest rate changes only and does not consider other forecast assumptions.
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The following table illustrates our projected net interest income sensitivity over a two yeartwo-year cumulative horizon based on the asset/liability model at June 30, 20222023 and 2021:2022:
Immediate
Rate Decrease
Immediate Rate IncreaseImmediate Rate DecreaseImmediate Rate Increase
(dollars in thousands)(dollars in thousands)-50
Basis Points
Base+100
Basis Points
+200
Basis Points
+300
Basis Points
(dollars in thousands)-300
Basis Points
-200
Basis Points
-100
Basis Points
Base+100
Basis Points
+200
Basis Points
+300
Basis Points
June 30, 2023June 30, 2023
Projected interest income:Projected interest income:
Money market, other interest
earning investments, and
investment securities
Money market, other interest
earning investments, and
investment securities
$703,760 $700,039 $751,180 $805,138 $858,682 $912,190 $966,037 
LoansLoans2,812,913 3,179,212 3,546,919 3,910,105 4,266,532 4,623,023 4,979,447 
Total interest incomeTotal interest income3,516,673 3,879,251 4,298,099 4,715,243 5,125,214 5,535,213 5,945,484 
Projected interest expense:Projected interest expense:
DepositsDeposits358,077 570,196 785,031 1,012,889 1,259,985 1,507,077 1,754,162 
BorrowingsBorrowings373,267 415,553 513,309 600,910 683,328 765,754 848,179 
Total interest expenseTotal interest expense731,344 985,749 1,298,340 1,613,799 1,943,313 2,272,831 2,602,341 
Net interest incomeNet interest income$2,785,329 $2,893,502 $2,999,759 $3,101,444 $3,181,901 $3,262,382 $3,343,143 
Change from baseChange from base$(316,115)$(207,942)$(101,685)$80,457 $160,938 $241,699 
% change from base% change from base(10.19)%(6.70)%(3.28)%2.59 %5.19 %7.79 %
Immediate
Rate
Decrease
Immediate Rate Increase
-50
Basis Points
Base+100
Basis Points
+200
Basis Points
+300
Basis Points
June 30, 2022June 30, 2022June 30, 2022
Projected interest income:Projected interest income:Projected interest income:
Money market, other interest earning
investments, and investment
securities
Money market, other interest earning
investments, and investment
securities
$617,680 $639,428 $683,561 $726,946 $770,079 Money market, other interest
earning investments, and
investment securities
$617,680 $639,428 $683,561 $726,946 $770,079 
LoansLoans2,151,455 2,308,609 2,618,757 2,931,908 3,242,547 Loans2,151,455 2,308,609 2,618,757 2,931,908 3,242,547 
Total interest incomeTotal interest income2,769,135 2,948,037 3,302,318 3,658,854 4,012,626 Total interest income2,769,135 2,948,037 3,302,318 3,658,854 4,012,626 
Projected interest expense:Projected interest expense:Projected interest expense:
DepositsDeposits44,713 72,114 274,985 484,116 693,243 Deposits44,713 72,114 274,985 484,116 693,243 
BorrowingsBorrowings210,225 238,638 299,725 360,822 421,923 Borrowings210,225 238,638 299,725 360,822 421,923 
Total interest expenseTotal interest expense254,938 310,752 574,710 844,938 1,115,166 Total interest expense254,938 310,752 574,710 844,938 1,115,166 
Net interest incomeNet interest income$2,514,197 $2,637,285 $2,727,608 $2,813,916 $2,897,460 Net interest income$2,514,197 $2,637,285 $2,727,608 $2,813,916 $2,897,460 
Change from baseChange from base$(123,088)$90,323 $176,631 $260,175 Change from base$(123,088)$90,323 $176,631 $260,175 
% change from base% change from base(4.67)%3.42 %6.70 %9.87 %% change from base(4.67)%3.42 %6.70 %9.87 %
June 30, 2021
Projected interest income:
Money market, other interest earning
investments, and investment
securities
$266,770 $283,033 $314,772 $339,937 $362,929 
Loans838,058 870,225 1,009,602 1,149,951 1,288,437 
Total interest income1,104,828 1,153,258 1,324,374 1,489,888 1,651,366 
Projected interest expense:
Deposits15,289 24,627 105,133 185,790 266,444 
Borrowings60,615 68,546 100,943 134,207 170,592 
Total interest expense75,904 93,173 206,076 319,997 437,036 
Net interest income$1,028,924 $1,060,085 $1,118,298 $1,169,891 $1,214,330 
Change from base$(31,161)$58,213 $109,806 $154,245 
% change from base(2.94)%5.49 %10.36 %14.55 %
Our projected net interest income increased year over year due to the First Midwest merger, loan growth and rising interest rates.
A key element in the measurement and modeling of interest rate risk is the re-pricing assumptions of our transaction deposit accounts, which have no contractual maturity dates. Because the models are driven by expected behavior in various interest rate scenarios and many factors besides market interest rates affect our net interest income, we recognize that model outputs are not guarantees of actual results. For this reason, we model many different combinations of interest rates and balance sheet assumptions to understand our overall sensitivity to market interest rate changes, including shocks, ramps, yield curve flattening, yield curve steepening, as well as forecasts of likely interest rate scenarios tested. At June 30, 2022, our projected net interest income sensitivity based on the asset/liability models we utilize was within the limits of our interest rate risk policy for the scenarios tested.
We use cash flow and fair value hedges, primarily interest rate swaps, collars, and floors, to mitigate interest rate risk. Derivatives designated as hedging instruments were in a net liability position with a fair value loss of $18.4$13.4 million at June 30, 2022,2023, compared to a net assetliability position with a fair value gainloss of $1.3$36.1 million at December 31, 2021.2022.  See Note 1815 to the consolidated financial statements for further discussion of derivative financial instruments.
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Liquidity Risk
Liquidity risk arises from the possibility that we may not be able to satisfy current or future financial commitments or may become unduly reliant on alternative funding sources.  We establish liquidity risk guidelines that we review with the Enterprise Risk Committee of our Board of Directors and monitor through our Balance SheetAsset/Liability Executive Management Committee.  The objective of liquidity management is to ensure we have the ability to fund balance sheet growth and meet deposit and debt obligations in a timely and cost-effective manner.  Management monitors liquidity through a regular review of asset and liability maturities, funding sources, and loan and deposit forecasts.  We maintain strategic and contingency liquidity plans to ensure sufficient available funding to satisfy requirements for balance sheet growth, properly manage capital markets’ funding sources and to address unexpected liquidity requirements. On June 5, 2020,May 31, 2023, we filed an automatic shelf registration statement with the SEC that permits us to issue an unspecified amount of debt or equity securities.
Loan repayments and maturing investment securities are a relatively predictable source of funds.  However, deposit flows, calls of investment securities, and prepayments of loans and mortgage-related securities are not as predictable as they are strongly influenced by interest rates, the housing market, general and local economic conditions, and competition in the marketplace.  We continually monitor marketplace trends to identify patterns that might improve the predictability of the timing of deposit flows or asset prepayments.
A maturity schedule for Old National Bank’s time deposits is shown in the following table at June 30, 2022.2023.
(dollars in thousands)(dollars in thousands)(dollars in thousands)
Maturity BucketMaturity BucketAmountRateMaturity BucketAmountRate
2022$1,397,092 0.29 %
20232023715,540 0.51 2023$2,197,384 3.32 %
20242024189,250 0.69 20242,819,858 4.17 
2025202595,089 0.65 2025135,211 1.47 
2026202670,085 0.49 202665,092 0.82 
2027202735,551 0.66 
2027 and beyond2027 and beyond40,560 0.57 2027 and beyond12,568 1.17 
TotalTotal$2,507,616 0.41 %Total$5,265,664 3.67 %
Our ability to acquire funding at competitive prices is influenced by rating agencies’ views of our credit quality, liquidity, capital, and earnings.  Moody’s Investors Service places us in an investment grade that indicates a low risk of default.  For both Old National and Old National Bank:
On April 21, 2023, Moody’s Investors Service affirmed the Long-Term Ratinglong-term debt, deposit ratings, and assessments of “A3” for Old National’s senior unsecured/issuer rating on February 16, 2022.
Moody’s Investors Service affirmed Old National Bank’sBancorp (Old National, long-term senior unsecured debt “A3”) and its subsidiaries, including the Baseline Credit Assessment (“BCA”) of its banking subsidiary, Old National Bank (long-term deposits “Aa3 negative,” BCA “a2”). The outlooks on the senior unsecured debt rating and long-term issuer ratings of Old National and on the long-term deposit rating of “Aa3” on February 16, 2022.  The bank’s short-term deposit rating was affirmed at “P-1” and the bank’s issuer rating was affirmed at “A3.”
Moody’s Investors Service concluded a rating reviewratings of Old National Bank on February 16, 2022.are “negative.”
The credit ratings of Old National and Old National Bank at June 30, 20222023 are shown in the following table.
 Moody's Investors Service
 Long-termShort-term
Old NationalA3N/A
Old National BankAa3P-1
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Old National Bank maintains relationships in capital markets with brokers and dealers to issue certificates of deposit and short-term and medium-term bank notes as well.  At June 30, 2022,2023, Old National and its subsidiaries had the following availability of liquid funds and borrowings:
(dollars in thousands)(dollars in thousands)Parent CompanySubsidiaries(dollars in thousands)Parent CompanySubsidiaries
Available liquid funds:Available liquid funds:Available liquid funds:
Cash and due from banksCash and due from banks$271,788 $526,176 Cash and due from banks$882,164 $315,722 
Unencumbered government-issued debt securitiesUnencumbered government-issued debt securities— 2,232,603 Unencumbered government-issued debt securities— 725,107 
Unencumbered investment grade municipal securitiesUnencumbered investment grade municipal securities— 776,659 Unencumbered investment grade municipal securities— 53,245 
Unencumbered corporate securitiesUnencumbered corporate securities— 313,602 Unencumbered corporate securities— 137,754 
Availability of borrowings:Availability of borrowings:Availability of borrowings:
Amount available from Federal Reserve discount window*Amount available from Federal Reserve discount window*— 614,215 Amount available from Federal Reserve discount window*— 963,723 
Amount available from Federal Reserve Bank Term Funding ProgramAmount available from Federal Reserve Bank Term Funding Program— 2,392,528 
Amount available from Federal Home Loan Bank*Amount available from Federal Home Loan Bank*— 1,113,553 Amount available from Federal Home Loan Bank*— 6,040,931 
Total available fundsTotal available funds$271,788 $5,576,808 Total available funds$882,164 $10,629,010 
* Based on collateral pledged
Old National Bancorp has routine funding requirements consisting primarily of operating expenses, dividends to shareholders, debt service, net derivative cash flows, and funds used for acquisitions.  Old National Bancorp can obtain funding to meet its obligations from dividends and management fees collected from its subsidiaries, operating line of credit, and through the issuance of debt securities.  Additionally, Old National Bancorp has a shelf registration in place with the SEC permitting ready access to the public debt and equity markets.  At June 30, 2022,2023, Old National Bancorp’s other borrowings outstanding were $487.3$482.3 million. Management believes the Company has the ability to generate and obtain adequate amounts of liquidity to meet its requirements in the short-term and the long-term.
Federal banking laws regulate the amount of dividends that may be paid by banking subsidiariesOld National Bank to Old National Bancorp on an unconsolidated basis without obtaining prior regulatory approval.  Prior regulatory approval is required if dividends to be declared in any year would exceed net earnings of the current year plus retained net profits for the preceding two years.  Prior regulatory approval to pay dividends was not required in 20212022 and is not currently required.
Operational/Technology/Cybersecurity Risk
Operational/technology/cybersecurity risk is the danger that inadequate information systems, operational issues, breaches in internal controls, information security breaches, fraud, or unforeseen catastrophes will result in unexpected losses and other adverse impacts to Old National, such as reputational harm.  We maintain frameworks, programs, and internal controls to prevent or minimize financial loss from failure of systems, people, or processes.  This includes specific programs and frameworks intended to prevent or limit the effects of cybersecurity risk including, but not limited to, cyber-attacks or other information security breaches that might allow unauthorized transactions or unauthorized access to client, team member, or company sensitive information.  Metrics and measurements are used by our management team in the management of day-to-day operations to ensure effective client service, minimization of service disruptions, and oversight of cybersecurity risk.  We continually monitor and internally report on operational, technology, and cybersecurity risks related to business disruptions and systems failures; cyber-attacks, information security or data breaches; clients, products, and business practices; damage to physical assets; employee and workplace safety; execution, delivery, and process management; and external and internal fraud.
Management reports on cybersecurity risk to our Enterprise Risk Committee of the Board of Directors.
Regulatory/Compliance and Legal Risk
Regulatory/compliance/legal risk is the risk that the Company violated or was not in compliance with applicable laws, regulations or practices, industry standards, or ethical standards.  The legal portion assesses the risk that unenforceable contracts, lawsuits, or adverse judgments can disrupt or otherwise negatively impact the Company, as well as assesses the issues and risks associated with being a public company. The Board of Directors expects that we will perform business in a manner compliant with applicable laws and/or regulations and expects issues to be identified, analyzed, and remediated in a timely and complete manner.
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CRITICAL ACCOUNTING ESTIMATES
Our most significant accounting policies are described in Note 1 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021.2022.  Certain of these accounting policies require management to use significant judgment and estimates, which can have a material impact on the carrying value of certain assets and liabilities.  We consider these policies to be our critical accounting estimates.  The judgment and assumptions made are based upon historical experience, future forecasts, or other factors that management believes to be reasonable under the circumstances.  Because of the nature of the judgment and assumptions, actual results could differ from estimates, which could have a material effect on our financial condition and results of operations.
Business Combinations and Goodwill
Description.  For acquisitions, we are required to record the assets acquired, including identified intangible assets such as core deposit and customer trust relationship intangibles, and the liabilities assumed at their fair value. The difference between consideration and the net fair value of assets acquired is recorded as goodwill. Management uses significant estimates and assumptions to value such items, including projected cash flows, repayment rates, default rates and losses assuming default, discount rates, and realizable collateral values. The allowance for credit losses for PCD loans is recognized within acquisition accounting. The allowance for credit losses for non-PCD assets is recognized as provision for credit losses in the same reporting period as the acquisition. Fair value adjustments are amortized or accreted into the income statement over the estimated life of the acquired assets or assumed liabilities. The purchase date valuations and any subsequent adjustments determine the amount of goodwill recognized in connection with the acquisition. The use of different assumptions could produce significantly different valuation results, which could have material positive or negative effects on our results of operations. The carrying value of goodwill recorded must be reviewed for impairment on an annual basis, as well as on an interim basis if events or changes indicate that the asset might be impaired. An impairment loss must be recognized for any excess of carrying value over fair value of the goodwill.
Judgments and Uncertainties.  The determination of fair values is based on valuations using management’s assumptions of future growth rates, future attrition, discount rates, multiples of earnings or other relevant factors. In addition, we engage third party specialists to assist in the development of fair values. Preliminary estimates of fair values may be adjusted for a period of time subsequent to the acquisition date if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. Adjustments recorded during this period are recognized in the current reporting period. Management uses various valuation methodologies to estimate the fair value of these assets and liabilities, and often involves a significant degree of judgment, particularly when liquid markets do not exist for the particular item being valued. Examples of such items include loans, deposits, identifiable intangible assets, and certain other assets and liabilities.
Effect if Actual Results Differ From Assumptions.  Changes in these factors, as well as downturns in economic or business conditions, could have a significant adverse impact on the carrying value of assets, including goodwill and liabilities, which could result in impairment losses affecting our financial statements as a whole and our banking subsidiary in which the goodwill resides.
Pandemic. A prolonged COVID-19 pandemic, or any other epidemic that harms the global economy, U.S. economy, or the economies in which we operate could adversely affect our operations. Goodwill is especially susceptible to risk of impairment during prolonged periods of economic downturn.
For additional information regarding critical accounting estimates, see the section titled “Critical Accounting Estimates” included in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021.2022. There have been no material changes in the Company’s application of critical accounting estimates related to allowance for credit losses for loans, derivative financial instruments, or income taxes since December 31, 2021.2022.
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Risk and Liquidity Risk.
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ITEM 4.  CONTROLS AND PROCEDURES
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Evaluation of Disclosure Controls and Procedures.  Old National’s principal executive officer and principal financial officer have concluded that Old National’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended), based on their evaluation of these controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q, are effective at the reasonable assurance level as discussed below to ensure that information required to be disclosed by Old National in the reports it files under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to Old National’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Limitations on the Effectiveness of Controls.  Management, including our principal executive officer and principal financial officer, does not expect that Old National’s disclosure controls and internal controls will prevent all error and all fraud.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.  These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake.  Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls.
The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be only reasonable assurance that any design will succeed in achieving its stated goals under all potential future conditions.  Over time, the system of controls may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate.  Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Changes in Internal Control over Financial Reporting.  There were no changes in Old National’s internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, Old National’s internal control over financial reporting.
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PART II
OTHER INFORMATION
ITEM 1A.  RISK FACTORS
There have been no material changes from the risk factors disclosed in the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.2022.
ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(c)ISSUER PURCHASES OF EQUITY SECURITIES
Period
Total
Number
of Shares
Purchased (1)
Average
Price
Paid Per
Share
Total Number
of Shares
Purchased as
Part of Publicly
Announced Plans
or Programs (2)
Maximum
Dollar Value of
Shares that
May Yet
Be Purchased
Under the Plans
or Programs (2)
04/01/22 - 04/30/221,568 $16.00 — $136,093,633 
05/01/22 - 05/31/2217,656 $15.18 — $136,093,633 
06/01/22 - 06/30/221,888 $15.49 — $136,093,633 
Total21,112 $15.27 — $136,093,633 
Period
Total
Number
of Shares
Purchased (1)
Average
Price
Paid Per
Share
Total Number
of Shares
Purchased as
Part of Publicly
Announced Plans
or Programs (2)
Maximum
Dollar Value of
Shares that
May Yet
Be Purchased
Under the Plans
or Programs (2)
04/01/23 - 04/30/231,242 $14.20 — $170,476,849 
05/01/23 - 05/31/234,922 $13.28 — $170,476,849 
06/01/23 - 06/30/231,673 $12.72 — $170,476,849 
Total7,837 $13.31 — $170,476,849 
(1)Consists of shares acquired pursuant to the Company’s share-based incentive programs. Under the terms of the Company’s share-based incentive programs, the Company accepts previously owned shares of common stock surrendered to satisfy tax withholding obligations associated with the vesting of restricted stock.
(2)On February 17, 2022,22, 2023, the Company issued a press release announcing that its Board of Directors approved a stock repurchase program that authorizes the Company to repurchase up to $200 million of the Company’s outstanding shares of common stock, as conditions warrant, through January 31, 2023. No shares were repurchased during the quarter under the Company’s Board-approved stock repurchase program.February 29, 2024.
ITEM 5.  OTHER INFORMATION
(a)None
(b)There have been no material changes in the procedure by which security holders recommend nominees to the Company’s board of directors.
(c)During the three months ended June 30, 2023, no director or Section 16 officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.
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ITEM 6.  EXHIBITS
Exhibit No.
 Description
3.1 
3.2 
3.3 
3.4 
3.5  
3.6 
31.1  
31.2  
32.1  
32.2  
101  The following materials from Old National’s Form 10-Q Report for the quarterly period ended June 30, 2022,2023, formatted in inline XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income (Loss), (iii) the Consolidated Statements of Comprehensive Income (Loss), (iv) the Consolidated Statements of Changes in Shareholders’ Equity, (v) the Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements.
104  The cover page from Old National’s Form 10-Q Report for the quarterly period ended June 30, 2022,2023, formatted in inline XBRL and contained in Exhibit 101.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
  OLD NATIONAL BANCORP
  (Registrant)
   
By: /s/  Brendon B. Falconer
  Brendon B. Falconer
  Senior Executive Vice President and Chief Financial Officer
  Duly Authorized Officer and Principal Financial Officer
   
  Date:  August 3, 20222, 2023

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