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~~September 30, 2023


☐			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)


Indiana		35-1539838
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

One Main Street		47708
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

The

NASDAQ

Stock Market LLC

Depositary Shares, each representing a 1/40th interest in a share of Non-Cumulative Perpetual Preferred Stock, Series A

ONBPP

The

NASDAQ

Stock Market LLC

Depositary Shares, each representing a 1/40th interest in a share of Non-Cumulative Perpetual Preferred Stock, Series C

ONBPO

The

NASDAQ

Stock 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 ~~292,589,000~~292,621,000 shares outstanding at ~~July~~October 31, 2023.

OLD NATIONAL BANCORP

FORM 10-Q

TABLE OF CONTENTS


			Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets (unaudited)		4
	Consolidated Statements of Income (unaudited)		5
	Consolidated Statements of Comprehensive Income (Loss) (unaudited)		6
	Consolidated Statements of Changes in Shareholders’ Equity (unaudited)		7
	Consolidated Statements of Cash Flows (unaudited)		89
	Notes to Consolidated Financial Statements (unaudited)		1011
	Note 1.	Basis of Presentation	1011
	Note 2.	Recent Accounting Pronouncements	1011
	Note 3.	Acquisition and Divestiture Activity	1213
	Note 4.	Net Income Per Common Share	1214
	Note 5.	Investment Securities	1315
	Note 6.	Loans and Allowance for Credit Losses	1618
	Note 7.	Leases	2829
	Note 8.	Goodwill and Other Intangible Assets	2930
	Note 9.	Qualified Affordable Housing Projects and Other Tax Credit Investments	3031
	Note 10.	Securities Sold Under Agreements to Repurchase	3233
	Note 11.	Federal Home Loan Bank Advances	3233
	Note 12.	Other Borrowings	3334
	Note 13.	Accumulated Other Comprehensive Income (Loss)	3536
	Note 14.	Income Taxes	3738
	Note 15.	Derivative Financial Instruments	3839
	Note 16.	Commitments, Contingencies, and Financial Guarantees	4142
	Note 17.	Fair Value	4243
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		50
	Forward-Looking Statements		50
	Financial Highlights		51
	Non-GAAP Financial Measures		53
	Executive Summary		56
	Results of Operations		57
	Financial Condition		64
	Risk Management		68
	Critical Accounting Estimates		74
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		74
Item 4.	Controls and Procedures		75
PART II.	OTHER INFORMATION		76
Item 1A.	Risk Factors		76
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		76
Item 5.	Other Information		76
Item 6.	Exhibits		77
SIGNATURE			78

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 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 throughout this report, including the Notes to Consolidated Financial Statements (Unaudited). You may find it helpful to refer to this page as you read this report.

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

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

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

Renewable Energy: investment tax credits for solar projects

SEC: U.S. Securities and Exchange Commission

SOFR: Secured Overnight Financing Rate

TDR: troubled debt restructuring

UMB: UMB Bank, n.a.

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, 2023		December 31, 2022		(dollars and shares in thousands, except per share data)	September 30, 2023		December 31, 2022
		(unaudited)					(unaudited)
Assets	Assets					Assets
Cash and due from banks	Cash and due from banks	$	473,023	$	453,432	Cash and due from banks	$	381,343	$	453,432
Money market and other interest-earning investments	Money market and other interest-earning investments	724,863		274,980		Money market and other interest-earning investments	1,282,087		274,980
Total cash and cash equivalents	Total cash and cash equivalents	1,197,886		728,412		Total cash and cash equivalents	1,663,430		728,412
Equity securities, at fair value	Equity securities, at fair value	71,953		52,507		Equity securities, at fair value	69,880		52,507

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)		3,054,997		3,089,147
Investment securities - available-for-sale, at fair value (amortized cost $7,719,944 and $7,772,603, respectively)						Investment securities - available-for-sale, at fair value (amortized cost $7,719,944 and $7,772,603, respectively)	6,414,761		6,773,712
Investment securities - held-to-maturity, at amortized cost (fair value $2,393,621 and $2,643,682, respectively)						Investment securities - held-to-maturity, at amortized cost (fair value $2,393,621 and $2,643,682, respectively)	3,027,914		3,089,147
Federal Home Loan Bank/Federal Reserve Bank stock, at cost	Federal Home Loan Bank/Federal Reserve Bank stock, at cost	413,326		314,168		Federal Home Loan Bank/Federal Reserve Bank stock, at cost	365,588		314,168
Loans held for sale, at fair value		114,369		11,926
Loans held-for-sale, at fair value						Loans held-for-sale, at fair value	122,033		11,926
Loans:	Loans:					Loans:
Commercial	Commercial	9,698,241		9,508,904		Commercial	9,333,448		9,508,904
Commercial real estate	Commercial real estate	13,450,209		12,457,070		Commercial real estate	13,916,221		12,457,070
Residential real estate	Residential real estate	6,684,480		6,460,441		Residential real estate	6,696,288		6,460,441
Consumer credit, net of unearned income	Consumer credit, net of unearned income	2,599,543		2,697,226		Consumer credit, net of unearned income	2,631,877		2,697,226
Total loans	Total loans	32,432,473		31,123,641		Total loans	32,577,834		31,123,641
Allowance for credit losses on loans	Allowance for credit losses on loans	(300,555)		(303,671)		Allowance for credit losses on loans	(303,982)		(303,671)
Net loans	Net loans	32,131,918		30,819,970		Net loans	32,273,852		30,819,970
Premises and equipment, net	Premises and equipment, net	564,299		557,307		Premises and equipment, net	565,607		557,307
Operating lease right-of-use assets	Operating lease right-of-use assets	184,700		189,714		Operating lease right-of-use assets	179,284		189,714
Accrued interest receivable	Accrued interest receivable	205,198		190,521		Accrued interest receivable	209,503		190,521
Goodwill	Goodwill	1,998,716		1,998,716		Goodwill	1,998,716		1,998,716
Other intangible assets	Other intangible assets	114,159		126,405		Other intangible assets	108,119		126,405
Company-owned life insurance	Company-owned life insurance	771,753		768,552		Company-owned life insurance	774,517		768,552
Other assets	Other assets	1,172,966		1,142,315		Other assets	1,286,244		1,142,315
Total assets	Total assets	$	48,496,755	$	46,763,372	Total assets	$	49,059,448	$	46,763,372
Liabilities	Liabilities					Liabilities
Deposits:	Deposits:					Deposits:
Noninterest-bearing demand	Noninterest-bearing demand	$	10,532,838	$	11,930,798	Noninterest-bearing demand	$	10,091,352	$	11,930,798
Interest-bearing:	Interest-bearing:					Interest-bearing:
Checking and NOW	Checking and NOW	7,654,202		8,340,955		Checking and NOW	7,495,417		8,340,955
Savings	Savings	5,578,323		6,326,158		Savings	5,296,985		6,326,158
Money market	Money market	7,200,288		5,389,139		Money market	8,793,218		5,389,139
Time deposits	Time deposits	5,265,664		3,013,780		Time deposits	5,575,704		3,013,780
Total deposits	Total deposits	36,231,315		35,000,830		Total deposits	37,252,676		35,000,830
Federal funds purchased and interbank borrowings	Federal funds purchased and interbank borrowings	136,060		581,489		Federal funds purchased and interbank borrowings	918		581,489
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	311,447		432,804		Securities sold under agreements to repurchase	279,061		432,804
Federal Home Loan Bank advances	Federal Home Loan Bank advances	4,771,183		3,829,018		Federal Home Loan Bank advances	4,412,576		3,829,018
Other borrowings	Other borrowings	815,318		743,003		Other borrowings	863,455		743,003
Operating lease liabilities	Operating lease liabilities	206,178		211,964		Operating lease liabilities	199,937		211,964
Accrued expenses and other liabilities	Accrued expenses and other liabilities	733,159		835,669		Accrued expenses and other liabilities	811,288		835,669
Total liabilities	Total liabilities	43,204,660		41,634,777		Total liabilities	43,819,911		41,634,777
Shareholders' Equity
Shareholders’ Equity						Shareholders’ Equity
Preferred stock, 2,000 shares authorized, 231 shares issued and outstanding	Preferred stock, 2,000 shares authorized, 231 shares issued and outstanding	230,500		230,500		Preferred stock, 2,000 shares authorized, 231 shares issued and outstanding	230,500		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		292,597		292,903
Common stock, no par value, $1.00 per share stated value, 600,000 shares authorized, 292,586 and 292,903 shares issued and outstanding, respectively						Common stock, no par value, $1.00 per share stated value, 600,000 shares authorized, 292,586 and 292,903 shares issued and outstanding, respectively	292,586		292,903
Capital surplus	Capital surplus	4,149,089		4,174,265		Capital surplus	4,153,977		4,174,265
Retained earnings	Retained earnings	1,428,542		1,217,349		Retained earnings	1,531,289		1,217,349
Accumulated other comprehensive income (loss), net of tax	Accumulated other comprehensive income (loss), net of tax	(808,633)		(786,422)		Accumulated other comprehensive income (loss), net of tax	(968,815)		(786,422)
Total shareholders' equity		5,292,095		5,128,595
Total liabilities and shareholders' equity		$	48,496,755	$	46,763,372
Total shareholders’ equity						Total shareholders’ equity	5,239,537		5,128,595
Total liabilities and shareholders’ equity						Total liabilities and shareholders’ equity	$	49,059,448	$	46,763,372

The accompanying notes to consolidated financial statements are an integral part of these statements.

OLD NATIONAL BANCORP

CONSOLIDATED STATEMENTS OF INCOME (unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(dollars and shares in thousands, except per share data)	(dollars and shares in thousands, except per share data)	2023		2022		2023		2022		(dollars and shares in thousands, except per share data)	2023		2022		2023		2022
Interest Income	Interest Income									Interest Income
Loans including fees:	Loans including fees:									Loans including fees:
Taxable	Taxable	$	449,896	$	285,249	$	860,271	$	469,264	Taxable	$	474,387	$	331,271	$	1,334,658	$	800,535
Nontaxable	Nontaxable	10,925		4,802		21,137		8,309		Nontaxable	11,181		6,461		32,318		14,770
Investment securities:	Investment securities:									Investment securities:
Taxable	Taxable	64,072		51,459		124,873		88,868		Taxable	66,924		56,765		191,797		145,633
Nontaxable	Nontaxable	11,043		11,018		22,206		21,284		Nontaxable	10,833		11,086		33,039		32,370
Money market and other interest-earning investments	Money market and other interest-earning investments	8,966		1,830		12,064		2,138		Money market and other interest-earning investments	13,194		935		25,258		3,073
Total interest income	Total interest income	544,902		354,358		1,040,551		589,863		Total interest income	576,519		406,518		1,617,070		996,381
Interest Expense	Interest Expense									Interest Expense
Deposits	Deposits	100,974		5,187		163,567		8,381		Deposits	147,428		10,820		310,995		19,201
Federal funds purchased and interbank borrowings	Federal funds purchased and interbank borrowings	5,655		2		10,494		2		Federal funds purchased and interbank borrowings	910		720		11,404		722
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	900		85		1,679		181		Securities sold under agreements to repurchase	710		106		2,389		287
Federal Home Loan Bank advances	Federal Home Loan Bank advances	45,088		6,925		83,084		12,888		Federal Home Loan Bank advances	40,382		13,027		123,466		25,915
Other borrowings	Other borrowings	10,114		4,687		18,068		8,154		Other borrowings	12,003		5,256		30,071		13,410
Total interest expense	Total interest expense	162,731		16,886		276,892		29,606		Total interest expense	201,433		29,929		478,325		59,535
Net interest income	Net interest income	382,171		337,472		763,659		560,257		Net interest income	375,086		376,589		1,138,745		936,846
Provision for credit losses	Provision for credit losses	14,787		9,165		28,224		117,901		Provision for credit losses	19,068		15,490		47,292		133,391
Net interest income after provision for credit losses	Net interest income after provision for credit losses	367,384		328,307		735,435		442,356		Net interest income after provision for credit losses	356,018		361,099		1,091,453		803,455
Noninterest Income	Noninterest Income									Noninterest Income
Wealth and investment services fees	Wealth and investment services fees	26,521		27,872		53,441		49,824		Wealth and investment services fees	26,687		25,359		80,128		75,183
Service charges on deposit accounts	Service charges on deposit accounts	17,751		20,324		34,754		34,350		Service charges on deposit accounts	18,524		20,042		53,278		54,392
Debit card and ATM fees	Debit card and ATM fees	10,653		11,222		20,635		18,821		Debit card and ATM fees	10,818		10,608		31,453		29,429
Mortgage banking revenue	Mortgage banking revenue	4,165		6,522		7,565		13,767		Mortgage banking revenue	5,063		5,360		12,628		19,127

Capital markets income	Capital markets income	6,173		7,261		13,112		11,703		Capital markets income	5,891		8,906		19,003		20,609
Company-owned life insurance	Company-owned life insurance	4,698		4,571		7,884		8,095		Company-owned life insurance	3,740		3,361		11,624		11,456
Debt securities gains (losses), net	Debt securities gains (losses), net	17		(85)		(5,199)		257		Debt securities gains (losses), net	(241)		(172)		(5,440)		85
Other income	Other income	11,651		11,430		20,118		17,540		Other income	10,456		6,921		30,574		24,461
Total noninterest income	Total noninterest income	81,629		89,117		152,310		154,357		Total noninterest income	80,938		80,385		233,248		234,742
Noninterest Expense	Noninterest Expense									Noninterest Expense
Salaries and employee benefits	Salaries and employee benefits	135,810		161,817		273,174		285,964		Salaries and employee benefits	131,541		147,203		404,715		433,167
Occupancy	Occupancy	26,085		26,496		54,367		47,515		Occupancy	25,795		26,418		80,162		73,933
Equipment	Equipment	7,721		7,550		15,110		12,718		Equipment	8,284		7,328		23,394		20,046
Marketing	Marketing	9,833		9,119		19,250		13,395		Marketing	9,448		10,361		28,698		23,756
Technology	Technology	20,056		25,883		39,258		44,645		Technology	20,592		20,269		59,850		64,914
Communication	Communication	4,232		5,878		8,693		9,295		Communication	4,075		5,392		12,768		14,687
Professional fees	Professional fees	6,397		6,336		13,129		26,127		Professional fees	5,956		6,559		19,085		32,686
FDIC assessment	FDIC assessment	9,624		4,699		20,028		7,274		FDIC assessment	9,000		6,249		29,028		13,523
Amortization of intangibles	Amortization of intangibles	6,060		7,170		12,246		11,981		Amortization of intangibles	6,040		7,089		18,286		19,070
Amortization of tax credit investments	Amortization of tax credit investments	2,762		1,525		5,523		3,041		Amortization of tax credit investments	2,644		2,662		8,167		5,703
Property optimization	Property optimization	242		—		1,559		—		Property optimization	—		—		1,559		—
Other expense	Other expense	17,762		21,002		34,958		31,109		Other expense	21,401		22,914		56,359		54,023
Total noninterest expense	Total noninterest expense	246,584		277,475		497,295		493,064		Total noninterest expense	244,776		262,444		742,071		755,508
Income before income taxes	Income before income taxes	202,429		139,949		390,450		103,649		Income before income taxes	192,180		179,040		582,630		282,689
Income tax expense	Income tax expense	47,393		24,964		88,814		16,250		Income tax expense	44,304		38,887		133,118		55,137
Net income	Net income	155,036		114,985		301,636		87,399		Net income	147,876		140,153		449,512		227,552
Preferred dividends	Preferred dividends	(4,033)		(4,033)		(8,067)		(6,050)		Preferred dividends	(4,034)		(4,034)		(12,101)		(10,084)
Net income applicable to common shareholders	Net income applicable to common shareholders	$	151,003	$	110,952	$	293,569	$	81,349	Net income applicable to common shareholders	$	143,842	$	136,119	$	437,411	$	217,468
Net income per common share - basic	Net income per common share - basic	$	0.52	$	0.38	$	1.01	$	0.31	Net income per common share - basic	$	0.49	$	0.47	$	1.50	$	0.81
Net income per common share - diluted	Net income per common share - diluted	0.52		0.38		1.01		0.31		Net income per common share - diluted	0.49		0.47		1.50		0.80
Weighted average number of common shares outstanding - basic	Weighted average number of common shares outstanding - basic	290,559		290,862		290,822		259,108		Weighted average number of common shares outstanding - basic	290,648		290,961		290,763		269,843
Weighted average number of common shares outstanding - diluted	Weighted average number of common shares outstanding - diluted	291,266		291,881		291,870		260,253		Weighted average number of common shares outstanding - diluted	291,717		292,483		291,809		271,123
Dividends per common share	Dividends per common share	$	0.14	$	0.14	$	0.28	$	0.28	Dividends per common share	$	0.14	$	0.14	$	0.42	$	0.42

The accompanying notes to consolidated financial statements are an integral part of these statements.

OLD NATIONAL BANCORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2023		2022		2023		2022		(dollars in thousands)	2023		2022		2023		2022
Net income	Net income	$	155,036	$	114,985	$	301,636	$	87,399	Net income	$	147,876	$	140,153	$	449,512	$	227,552

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 period	Unrealized holding gains (losses) for the period	(120,159)		(304,514)		(95,435)		(733,984)		Unrealized holding gains (losses) for the period	(208,626)		(285,798)		(304,061)		(1,019,782)
Reclassification for securities transferred to held-to-maturity	Reclassification for securities transferred to held-to-maturity	—		143,310		—		165,473		Reclassification for securities transferred to held-to-maturity	—		—		—		165,473
Reclassification adjustment for securities (gains) losses realized in income	Reclassification adjustment for securities (gains) losses realized in income	(17)		85		5,199		(257)		Reclassification adjustment for securities (gains) losses realized in income	241		172		5,440		(85)
Income tax effect	Income tax effect	30,043		38,408		31,189		134,643		Income tax effect	51,903		68,356		83,092		202,999
Unrealized gains (losses) on available-for-sale securities	Unrealized gains (losses) on available-for-sale securities	(90,133)		(122,711)		(59,047)		(434,125)		Unrealized gains (losses) on available-for-sale securities	(156,482)		(217,270)		(215,529)		(651,395)

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-sale	Adjustment for securities transferred from available-for-sale	—		(143,310)		—		(165,473)		Adjustment for securities transferred from available-for-sale	—		—		—		(165,473)
Amortization of unrealized losses on securities transferred from available-for-sale	Amortization of unrealized losses on securities transferred from available-for-sale	5,122		3,692		10,951		4,002		Amortization of unrealized losses on securities transferred from available-for-sale	5,623		6,772		16,574		10,774
Income tax effect	Income tax effect	(1,300)		34,146		(1,431)		39,272		Income tax effect	(1,430)		(1,651)		(2,861)		37,621
Changes from securities held-to-maturity	Changes from securities held-to-maturity	3,822		(105,472)		9,520		(122,199)		Changes from securities held-to-maturity	4,193		5,121		13,713		(117,078)

Change in hedges:	Change in hedges:									Change in hedges:
Net unrealized derivative gains (losses) on hedges	Net unrealized derivative gains (losses) on hedges	13,272		(3,418)		61,121		(12,924)		Net unrealized derivative gains (losses) on hedges	(15,574)		(36,755)		45,547		(49,679)
Reclassification adjustment for (gains) losses realized in net income	Reclassification adjustment for (gains) losses realized in net income	(32,112)		(219)		(24,820)		(888)		Reclassification adjustment for (gains) losses realized in net income	4,927		749		(19,893)		(139)
Income tax effect	Income tax effect	4,872		894		(8,848)		3,394		Income tax effect	2,754		8,846		(6,094)		12,240
Changes from hedges	Changes from hedges	(13,968)		(2,743)		27,453		(10,418)		Changes from hedges	(7,893)		(27,160)		19,560		(37,578)

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 income	Amortization of net (gains) losses recognized in income	6		(10)		(182)		(21)		Amortization of net (gains) losses recognized in income	—		(11)		(182)		(32)
Income tax effect	Income tax effect	(2)		2		45		5		Income tax effect	—		3		45		8
Changes from defined benefit pension plans	Changes from defined benefit pension plans	4		(8)		(137)		(16)		Changes from defined benefit pension plans	—		(8)		(137)		(24)
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	(100,275)		(230,934)		(22,211)		(566,758)		Other comprehensive income (loss), net of tax	(160,182)		(239,317)		(182,393)		(806,075)
Comprehensive income (loss)	Comprehensive income (loss)	$	54,761	$	(115,949)	$	279,425	$	(479,359)	Comprehensive income (loss)	$	(12,306)	$	(99,164)	$	267,119	$	(578,523)

The accompanying notes to consolidated financial statements are an integral part of these statements.

OLD NATIONAL BANCORP

CONSOLIDATED STATEMENTS OF CHANGES IN ~~SHAREHOLDERS'~~SHAREHOLDERS’ EQUITY (unaudited)


(dollars in thousands, except per share data)	(dollars in thousands, except per share data)	Preferred Stock		Common Stock		Capital Surplus		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Shareholders' Equity		(dollars in thousands, except per share data)	Preferred Stock		Common Stock		Capital Surplus		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity
Balance, December 31, 2021	Balance, 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 stock	Issuance 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 dividends	Preferred dividends	—		—		—		(2,017)		—		(2,017)		Preferred dividends	—		—		—		(2,017)		—		(2,017)
Common stock issued	Common stock issued	—		10		155		—		—		165		Common stock issued	—		10		155		—		—		165
Common stock repurchased	Common stock repurchased	—		(3,890)		(66,188)		—		—		(70,078)		Common stock repurchased	—		(3,890)		(66,188)		—		—		(70,078)
Share-based compensation expense	Share-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, 2022	Balance, March 31, 2022	230,500		292,959		4,149,594		897,260		(338,199)		5,232,114		Balance, March 31, 2022	230,500		292,959		4,149,594		897,260		(338,199)		5,232,114
Net income	Net 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 dividends	Preferred dividends	—		—		—		(4,033)		—		(4,033)		Preferred dividends	—		—		—		(4,033)		—		(4,033)
Common stock issued	Common stock issued	—		10		152		—		—		162		Common stock issued	—		10		152		—		—		162
Common stock repurchased	Common stock repurchased	—		(21)		(301)		—		—		(322)		Common stock repurchased	—		(21)		(301)		—		—		(322)
Share-based compensation expense	Share-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, 2022	Balance, 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, 2022		$	230,500	$	292,903	$	4,174,265	$	1,217,349	$	(786,422)	$	5,128,595

Net income	Net income	—		—		—		146,600		—		146,600		Net income	—		—		—		140,153		—		140,153
Other comprehensive income (loss)	Other comprehensive income (loss)	—		—		—		—		78,064		78,064		Other comprehensive income (loss)	—		—		—		—		(239,317)		(239,317)
Cash dividends:	Cash dividends:													Cash dividends:
Common ($0.14 per share)	Common ($0.14 per share)	—		—		—		(41,088)		—		(41,088)		Common ($0.14 per share)	—		—		—		(40,907)		—		(40,907)
Preferred dividends	Preferred dividends	—		—		—		(4,034)		—		(4,034)		Preferred dividends	—		—		—		(4,034)		—		(4,034)
Common stock issued	Common stock issued	—		15		247		—		—		262		Common stock issued	—		17		213		—		—		230
Common stock repurchased	Common stock repurchased	—		(2,598)		(41,112)		—		—		(43,710)		Common stock repurchased	—		(34)		(497)		—		—		(531)
Share-based compensation expense	Share-based compensation expense	—		—		12,742		—		—		12,742		Share-based compensation expense	—		—		7,485		—		—		7,485
Stock activity under incentive compensation plans	Stock activity under incentive compensation plans	—		1,602		(1,412)		(195)		—		(5)		Stock activity under incentive compensation plans	—		4		1,839		(322)		—		1,521
Balance, March 31, 2023		230,500		291,922		4,144,730		1,318,632		(708,358)		5,277,426
Net income		—		—		—		155,036		—		155,036
Other comprehensive income (loss)		—		—		—		—		(100,275)		(100,275)
Cash dividends:
Common ($0.14 per share)		—		—		—		(40,932)		—		(40,932)
Preferred dividends		—		—		—		(4,033)		—		(4,033)
Common stock issued		—		20		252		—		—		272
Common stock repurchased		—		(8)		(97)		—		—		(105)
Share-based compensation expense		—		—		5,247		—		—		5,247
Stock activity under incentive compensation plans		—		663		(1,043)		(161)		—		(541)
Balance, June 30, 2023		$	230,500	$	292,597	$	4,149,089	$	1,428,542	$	(808,633)	$	5,292,095
Balance, September 30, 2022														Balance, September 30, 2022	$	230,500	$	292,880	$	4,166,583	$	1,061,870	$	(808,450)	$	4,943,383


OLD NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (unaudited) – (Continued)
(dollars in thousands, except per share data)	Preferred Stock		Common Stock		Capital Surplus		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity

Balance, December 31, 2022	$	230,500	$	292,903	$	4,174,265	$	1,217,349	$	(786,422)	$	5,128,595


Net income	—		—		—		146,600		—		146,600
Other comprehensive income (loss)	—		—		—		—		78,064		78,064
Cash dividends:
Common ($0.14 per share)	—		—		—		(41,088)		—		(41,088)
Preferred dividends	—		—		—		(4,034)		—		(4,034)
Common stock issued	—		15		247		—		—		262
Common stock repurchased	—		(2,598)		(41,112)		—		—		(43,710)
Share-based compensation expense	—		—		12,742		—		—		12,742
Stock activity under incentive compensation plans	—		1,602		(1,412)		(195)		—		(5)
Balance, March 31, 2023	230,500		291,922		4,144,730		1,318,632		(708,358)		5,277,426
Net income	—		—		—		155,036		—		155,036
Other comprehensive income (loss)	—		—		—		—		(100,275)		(100,275)
Cash dividends:
Common ($0.14 per share)	—		—		—		(40,932)		—		(40,932)
Preferred dividends	—		—		—		(4,033)		—		(4,033)
Common stock issued	—		20		252		—		—		272
Common stock repurchased	—		(8)		(97)		—		—		(105)
Share-based compensation expense	—		—		5,247		—		—		5,247
Stock activity under incentive compensation plans	—		663		(1,043)		(161)		—		(541)
Balance, June 30, 2023	230,500		292,597		4,149,089		1,428,542		(808,633)		5,292,095
Net income	—		—		—		147,876		—		147,876
Other comprehensive income (loss)	—		—		—		—		(160,182)		(160,182)
Cash dividends:
Common ($0.14 per share)	—		—		—		(40,933)		—		(40,933)
Preferred dividends	—		—		—		(4,034)		—		(4,034)
Common stock issued	—		20		243		—		—		263
Common stock repurchased	—		(31)		(420)		—		—		(451)
Share-based compensation expense	—		—		4,914		—		—		4,914
Stock activity under incentive compensation plans	—		—		151		(162)		—		(11)
Balance, September 30, 2023	$	230,500	$	292,586	$	4,153,977	$	1,531,289	$	(968,815)	$	5,239,537

The accompanying notes to consolidated financial statements are an integral part of these statements.

OLD NATIONAL BANCORP

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)


		Six Months Ended June 30,					Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2023		2022		(dollars in thousands)	2023		2022
Cash Flows From Operating Activities	Cash Flows From Operating Activities					Cash Flows From Operating Activities
Net income	Net income	$	301,636	$	87,399	Net income	$	449,512	$	227,552
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:
Depreciation	Depreciation	18,386		17,742		Depreciation	28,162		26,893
Amortization of other intangible assets	Amortization of other intangible assets	12,246		11,981		Amortization of other intangible assets	18,286		19,070
Amortization of tax credit investments	Amortization of tax credit investments	5,523		3,041		Amortization of tax credit investments	8,167		5,703
Net premium amortization on investment securities	Net premium amortization on investment securities	7,061		9,413		Net premium amortization on investment securities	8,673		14,625
Accretion income related to acquired loans	Accretion income related to acquired loans	(11,485)		(44,083)		Accretion income related to acquired loans	(17,484)		(63,472)
Share-based compensation expense	Share-based compensation expense	17,989		14,097		Share-based compensation expense	22,903		21,582
Provision for credit losses	Provision for credit losses	28,224		117,901		Provision for credit losses	47,292		133,391
Debt securities (gains) losses, net	Debt securities (gains) losses, net	5,199		(257)		Debt securities (gains) losses, net	5,440		(85)
Net (gains) losses on sales of loans and other assets	Net (gains) losses on sales of loans and other assets	(45)		(4,010)		Net (gains) losses on sales of loans and other assets	(727)		(5,911)
Increase in cash surrender value of company-owned life insurance	Increase in cash surrender value of company-owned life insurance	(7,884)		(8,095)		Increase in cash surrender value of company-owned life insurance	(11,624)		(11,456)
Residential real estate loans originated for sale	Residential real estate loans originated for sale	(225,753)		(364,018)		Residential real estate loans originated for sale	(366,340)		(490,288)
Proceeds from sales of residential real estate loans	Proceeds from sales of residential real estate loans	218,253		395,829		Proceeds from sales of residential real estate loans	366,485		531,121
(Increase) decrease in interest receivable	(Increase) decrease in interest receivable	(14,677)		(19,468)		(Increase) decrease in interest receivable	(18,982)		(29,088)
(Increase) decrease in other assets	(Increase) decrease in other assets	(38,540)		127,991		(Increase) decrease in other assets	(56,116)		36,049
Increase (decrease) in accrued expenses and other liabilities	Increase (decrease) in accrued expenses and other liabilities	(101,417)		93,369		Increase (decrease) in accrued expenses and other liabilities	(40,132)		271,625
Net cash flows provided by (used in) operating activities	Net cash flows provided by (used in) operating activities	214,716		438,832		Net cash flows provided by (used in) operating activities	443,515		687,311
Cash Flows From Investing Activities	Cash Flows From Investing Activities					Cash Flows From Investing Activities
Cash received from merger, net	Cash received from merger, net	—		1,912,629		Cash received from merger, net	—		1,912,629
Purchases of investment securities available-for-sale	Purchases of investment securities available-for-sale	(174,657)		(1,276,205)		Purchases of investment securities available-for-sale	(626,820)		(1,367,896)
Purchases of investment securities held-to-maturity	Purchases of investment securities held-to-maturity	(1,941)		(117,141)		Purchases of investment securities held-to-maturity	(1,941)		(156,378)
Purchases of Federal Home Loan Bank/Federal Reserve Bank stock	Purchases of Federal Home Loan Bank/Federal Reserve Bank stock	(99,159)		(97,359)		Purchases of Federal Home Loan Bank/Federal Reserve Bank stock	(99,158)		(115,488)
Purchases of equity securities	Purchases of equity securities	(20,820)		(1,417)		Purchases of equity securities	(20,862)		(5,843)
Proceeds from maturities, prepayments, and calls of investment securities available-for-sale	Proceeds from maturities, prepayments, and calls of investment securities available-for-sale	333,937		659,922		Proceeds from maturities, prepayments, and calls of investment securities available-for-sale	614,782		1,117,620
Proceeds from sales of investment securities available-for-sale	Proceeds from sales of investment securities available-for-sale	51,654		12,742		Proceeds from sales of investment securities available-for-sale	54,056		13,371
Proceeds from maturities, prepayments, and calls of investment securities held-to-maturity	Proceeds from maturities, prepayments, and calls of investment securities held-to-maturity	45,193		30,744		Proceeds from maturities, prepayments, and calls of investment securities held-to-maturity	76,276		61,172
Proceeds from sales of Federal Home Loan Bank/Federal Reserve Bank stock	Proceeds from sales of Federal Home Loan Bank/Federal Reserve Bank stock	1		83,947		Proceeds from sales of Federal Home Loan Bank/Federal Reserve Bank stock	47,738		108,697
Proceeds from sales of equity securities	Proceeds from sales of equity securities	1,726		49,709		Proceeds from sales of equity securities	2,610		52,034
Loan originations and payments, net	Loan originations and payments, net	(1,708,291)		(1,524,289)		Loan originations and payments, net	(2,269,544)		(2,481,620)
Proceeds from sales of commercial loans	Proceeds from sales of commercial loans	291,368		—		Proceeds from sales of commercial loans	679,952		—
Proceeds from company-owned life insurance death benefits	Proceeds from company-owned life insurance death benefits	4,888		2,849		Proceeds from company-owned life insurance death benefits	5,865		8,716
Proceeds from sales of premises and equipment and other assets	Proceeds from sales of premises and equipment and other assets	2,369		2,751		Proceeds from sales of premises and equipment and other assets	3,513		3,202
Purchases of premises and equipment and other assets	Purchases of premises and equipment and other assets	(17,410)		(17,459)		Purchases of premises and equipment and other assets	(28,074)		(28,739)
Net cash flows provided by (used in) investing activities	Net cash flows provided by (used in) investing activities	(1,291,142)		(278,577)		Net cash flows provided by (used in) investing activities	(1,561,607)		(878,523)
Cash Flows From Financing Activities	Cash Flows From Financing Activities					Cash Flows From Financing Activities
Net increase (decrease) in:	Net increase (decrease) in:					Net increase (decrease) in:
Deposits	Deposits	1,230,485		(279,624)		Deposits	2,251,846		235,064
Federal funds purchased and interbank borrowings	Federal funds purchased and interbank borrowings	(445,429)		1,285		Federal funds purchased and interbank borrowings	(580,571)		300,755
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	(121,357)		(51,296)		Securities sold under agreements to repurchase	(153,743)		(89,416)
Other borrowings	Other borrowings	65,719		53,136		Other borrowings	114,251		152,324
Payments for maturities of Federal Home Loan Bank advances	Payments for maturities of Federal Home Loan Bank advances	(1,650,150)		(1,100,005)		Payments for maturities of Federal Home Loan Bank advances	(1,850,150)		(1,674,875)

Proceeds from Federal Home Loan Bank advances	Proceeds from Federal Home Loan Bank advances	2,600,000		1,350,000		Proceeds from Federal Home Loan Bank advances	2,450,000		1,450,000

Cash dividends paid	Cash dividends paid	(90,087)		(87,733)		Cash dividends paid	(135,054)		(132,674)
Common stock repurchased	Common stock repurchased	(43,815)		(70,400)		Common stock repurchased	(44,266)		(70,931)

Common stock issued	Common stock issued	534		327		Common stock issued	797		557
Net cash flows provided by (used in) financing activities	Net cash flows provided by (used in) financing activities	1,545,900		(184,310)		Net cash flows provided by (used in) financing activities	2,053,110		170,804
Net increase (decrease) in cash and cash equivalents	Net increase (decrease) in cash and cash equivalents	469,474		(24,055)		Net increase (decrease) in cash and cash equivalents	935,018		(20,408)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	728,412		822,019		Cash and cash equivalents at beginning of period	728,412		822,019
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	1,197,886	$	797,964	Cash and cash equivalents at end of period	$	1,663,430	$	801,611

OLD NATIONAL BANCORP

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) – (Continued)


		Six Months Ended June 30,					Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2023		2022		(dollars in thousands)	2023		2022
Supplemental cash flow information:	Supplemental cash flow information:					Supplemental cash flow information:
Total interest paid	Total interest paid	$	253,542	$	30,904	Total interest paid	$	450,939	$	62,207
Total income taxes paid (net of refunds)	Total income taxes paid (net of refunds)	87,668		(183)		Total income taxes paid (net of refunds)	158,478		14,759
Common stock issued for merger, net	Common stock issued for merger, net	—		2,446,312		Common stock issued for merger, net	—		2,446,312
Preferred stock issued for merger, net	Preferred stock issued for merger, net	—		243,870		Preferred stock issued for merger, net	—		243,870

Investment securities purchased but not settled						Investment securities purchased but not settled	—		3,858

Securities transferred from available-for-sale to held-to-maturity	Securities transferred from available-for-sale to held-to-maturity	—		2,986,736		Securities transferred from available-for-sale to held-to-maturity	—		2,986,736
Operating lease right-of-use assets obtained in exchange for lease obligations	Operating lease right-of-use assets obtained in exchange for lease obligations	7,542		3,141		Operating lease right-of-use assets obtained in exchange for lease obligations	7,899		17,376
Finance lease right-of-use assets obtained in exchange for lease obligations	Finance lease right-of-use assets obtained in exchange for lease obligations	9,141		$	209	Finance lease right-of-use assets obtained in exchange for lease obligations	10,019		629

The accompanying notes to consolidated financial statements are an integral part of these statements.

910

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~~September 30, 2023 and December 31, 2022, and the results of its operations for the three and ~~six~~nine months ended ~~June~~September 30, 2023 and 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, 2022.

All 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.

Financial 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, 2022.

NOTE 2 – RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Guidance Adopted in 2023

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. The adoption of this guidance on January 1, 2023 did not 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 rename the last-of-layer method the

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. The adoption of this guidance on January 1, 2023 did not have a material impact 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. Old National adopted the provision in ASU 2022-02 related to the recognition and measurement of TDRs on a prospective basis on January 1, 2023, which 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 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~~September 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.

1112

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. 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.

As of December 31, 2022, Old National finalized its valuation of all assets acquired and liabilities assumed. Transaction costs totaling ~~$16.9~~$23.2 million associated with the merger have been expensed for the ~~six~~nine months ended ~~June~~September 30, 2023, compared to ~~$77.9~~$100.6 million during the ~~six~~nine months ended ~~June~~September 30, 2022. Additional transaction and integration costs will be expensed in future periods as incurred.

Divestiture

On November 18, 2022, Old National completed its previously announced transaction with UMB, pursuant to which UMB acquired Old National’s business of acting as a qualified custodian for, and administering, health savings accounts. Old National served as custodian for health savings accounts comprised of both investment accounts and deposit accounts. At closing, the health savings accounts held in deposit accounts that were transferred totaled approximately $382 million and the transaction resulted in a $90.7 million pre-tax gain.

Pending Acquisition

CapStar Financial Holdings, Inc.

On October 26, 2023, Old National announced that it entered into a definitive merger agreement pursuant to which Old National will acquire CapStar Financial Holdings, Inc. (“CapStar”) and its wholly-owned subsidiary, CapStar Bank, in an all-stock transaction. This partnership transaction will strengthen Old National’s recently formed Nashville presence and add several new high-growth markets. As of September 30, 2023, CapStar had approximately $3.3 billion of total assets, $2.3 billion of total loans, and $2.8 billion of deposits. Under the terms of the merger agreement, each outstanding share of CapStar common stock will be converted into the right to receive 1.155 shares of Old National common stock, valuing the transaction at approximately $344.4 million, or $16.64 per share, based on Old National’s 30-day volume weighted average closing stock price ending October 25, 2023. The transaction value is likely to change until closing due to fluctuations in the price of Old National common stock. The definitive merger agreement has been approved by the Board of Directors of each company. The transaction remains subject to regulatory approval and the approval of CapStar shareholders. The transaction is anticipated to close in the second quarter of 2024.

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 September 30,				Nine Months Ended September 30,
(dollars and shares in thousands, except per share data)	(dollars and shares in thousands, except per share data)	2023		2022		2023		2022		(dollars and shares in thousands, except per share data)	2023		2022		2023		2022
Net income	Net income	$	155,036	$	114,985	$	301,636	$	87,399	Net income	$	147,876	$	140,153	$	449,512	$	227,552
Preferred dividends	Preferred dividends	(4,033)		(4,033)		(8,067)		(6,050)		Preferred dividends	(4,034)		(4,034)		(12,101)		(10,084)

Net income applicable to common shares	Net income applicable to common shares	$	151,003	$	110,952	$	293,569	$	81,349	Net income applicable to common shares	$	143,842	$	136,119	$	437,411	$	217,468

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)	290,559		290,862		290,822		259,108		Weighted average common shares outstanding (basic)	290,648		290,961		290,763		269,843
Effect of dilutive securities:	Effect of dilutive securities:									Effect of dilutive securities:
Restricted stock	Restricted stock	707		1,014		1,047		1,136		Restricted stock	1,069		1,516		1,045		1,273
Stock appreciation rights	Stock appreciation rights	—		5		1		9		Stock appreciation rights	—		6		1		7
Weighted average diluted shares outstanding	Weighted average diluted shares outstanding	291,266		291,881		291,870		260,253		Weighted average diluted shares outstanding	291,717		292,483		291,809		271,123
Basic Net Income Per Common Share	Basic Net Income Per Common Share	$	0.52	$	0.38	$	1.01	$	0.31	Basic Net Income Per Common Share	$	0.49	$	0.47	$	1.50	$	0.81
Diluted Net Income Per Common Share	Diluted Net Income Per Common Share	$	0.52	$	0.38	$	1.01	$	0.31	Diluted Net Income Per Common Share	$	0.49	$	0.47	$	1.50	$	0.80

1214

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 AOCI and gross unrecognized gains and losses.


(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, 2023
September 30, 2023												September 30, 2023
Available-for-Sale	Available-for-Sale											Available-for-Sale
U.S. Treasury	U.S. Treasury	$	364,824	$	—	$	(9,245)	$	(43,167)	$	312,412	U.S. Treasury	$	616,608	$	98	$	(10,258)	$	(58,322)	$	548,126
U.S. government-sponsored entities and agencies	U.S. government-sponsored entities and agencies	1,448,873		—		(201,623)		(72,894)		1,174,356		U.S. government-sponsored entities and agencies	1,475,307		—		(229,113)		(103,294)		1,142,900
Mortgage-backed securities - Agency	Mortgage-backed securities - Agency	4,760,921		123		(663,273)		—		4,097,771		Mortgage-backed securities - Agency	4,686,448		17		(823,760)		—		3,862,705
States and political subdivisions	States and political subdivisions	623,196		844		(25,258)		—		598,782		States and political subdivisions	592,495		7		(47,058)		(500)		544,944
Pooled trust preferred securities	Pooled trust preferred securities	13,791		—		(2,797)		—		10,994		Pooled trust preferred securities	13,794		—		(2,669)		—		11,125
Other securities	Other securities	339,653		117		(33,570)		—		306,200		Other securities	335,292		112		(30,443)		—		304,961
Total available-for-sale securities	Total available-for-sale securities	$	7,551,258	$	1,084	$	(935,766)	$	(116,061)	$	6,500,515	Total available-for-sale securities	$	7,719,944	$	234	$	(1,143,301)	$	(162,116)	$	6,414,761

Held-to-Maturity	Held-to-Maturity											Held-to-Maturity
U.S. government-sponsored entities and agencies	U.S. government-sponsored entities and agencies	$	822,517	$	—	$	(167,071)	$	—	$	655,446	U.S. government-sponsored entities and agencies	$	824,223	$	—	$	(207,213)	$	—	$	617,010
Mortgage-backed securities - Agency	Mortgage-backed securities - Agency	1,070,687		—		(142,191)		—		928,496		Mortgage-backed securities - Agency	1,043,585		—		(195,933)		—		847,652
States and political subdivisions	States and political subdivisions	1,161,943		437		(143,114)		—		1,019,266		States and political subdivisions	1,160,256		—		(231,147)		—		929,109

Allowance for securities held-to-maturity	Allowance for securities held-to-maturity	(150)		—		—		—		(150)		Allowance for securities held-to-maturity	(150)		—		—		—		(150)
Total held-to-maturity securities	Total held-to-maturity securities	$	3,054,997	$	437	$	(452,376)	$	—	$	2,603,058	Total held-to-maturity securities	$	3,027,914	$	—	$	(634,293)	$	—	$	2,393,621

December 31, 2022	December 31, 2022											December 31, 2022
Available-for-Sale	Available-for-Sale											Available-for-Sale
U.S. Treasury	U.S. Treasury	$	253,148	$	5	$	(5,189)	$	(47,037)	$	200,927	U.S. Treasury	$	253,148	$	5	$	(5,189)	$	(47,037)	$	200,927
U.S. government-sponsored entities and agencies	U.S. government-sponsored entities and agencies	1,451,736		—		(169,248)		(107,408)		1,175,080		U.S. government-sponsored entities and agencies	1,451,736		—		(169,248)		(107,408)		1,175,080
Mortgage-backed securities - Agency	Mortgage-backed securities - Agency	4,986,354		976		(617,428)		—		4,369,902		Mortgage-backed securities - Agency	4,986,354		976		(617,428)		—		4,369,902
States and political subdivisions	States and political subdivisions	688,159		1,789		(26,096)		—		663,852		States and political subdivisions	688,159		1,789		(26,096)		—		663,852
Pooled trust preferred securities	Pooled trust preferred securities	13,783		—		(2,972)		—		10,811		Pooled trust preferred securities	13,783		—		(2,972)		—		10,811
Other securities	Other securities	379,423		258		(26,541)		—		353,140		Other securities	379,423		258		(26,541)		—		353,140
Total available-for-sale securities	Total available-for-sale securities	$	7,772,603	$	3,028	$	(847,474)	$	(154,445)	$	6,773,712	Total available-for-sale securities	$	7,772,603	$	3,028	$	(847,474)	$	(154,445)	$	6,773,712

Held-to-Maturity	Held-to-Maturity											Held-to-Maturity
U.S. government-sponsored entities and agencies	U.S. government-sponsored entities and agencies	$	819,168	$	—	$	(162,810)	$	—	$	656,358	U.S. government-sponsored entities and agencies	$	819,168	$	—	$	(162,810)	$	—	$	656,358
Mortgage-backed securities - Agency	Mortgage-backed securities - Agency	1,106,817		—		(123,854)		—		982,963		Mortgage-backed securities - Agency	1,106,817		—		(123,854)		—		982,963
States and political subdivisions	States and political subdivisions	1,163,312		221		(159,022)		—		1,004,511		States and political subdivisions	1,163,312		221		(159,022)		—		1,004,511
Allowance for securities held-to-maturity	Allowance for securities held-to-maturity	(150)		—		—		—		(150)		Allowance for securities held-to-maturity	(150)		—		—		—		(150)
Total held-to-maturity securities	Total held-to-maturity securities	$	3,089,147	$	221	$	(445,686)	$	—	$	2,643,682	Total held-to-maturity securities	$	3,089,147	$	221	$	(445,686)	$	—	$	2,643,682

(1) Basis adjustments represent the cumulative amount of fair value hedging adjustments included in the carrying amounts of fixed-rate investment securities assets designated in fair value hedging ~~arrangements~~.arrangements. See Note 15 to the consolidated financial statements for additional information regarding these derivative financial instruments.

Substantially all of the mortgage-backed securities in the investment portfolio are residential mortgage-backed securities.

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,					Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2023		2022		2023		2022		(dollars in thousands)	2023		2022		2023		2022
Proceeds	Proceeds	$	24,933	$	23,234	$	82,888	$	73,347	Proceeds	$	28,531	$	5,221	$	111,419	$	78,568
Realized gains	Realized gains	39		48		948		511		Realized gains	54		17		1,002		528
Realized losses	Realized losses	(22)		(133)		(6,147)		(254)		Realized losses	(295)		(189)		(6,442)		(443)

1315

~~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 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, 2023								September 30, 2023
(dollars in thousands)	(dollars in thousands)	Amortized Cost		Fair Value			Weighted Average Yield		(dollars in thousands)	Amortized Cost			Fair Value		Weighted Average Yield
Maturity	Maturity					Maturity
Available-for-Sale	Available-for-Sale											Available-for-Sale
Within one year	Within one year	$	242,424	$	238,951		3.93	%	Within one year	$	539,157		$	535,193	4.71	%
One to five years	One to five years	1,621,101		1,478,764			2.77		One to five years	1,567,565			1,395,867		2.80
Five to ten years	Five to ten years	3,926,306		3,374,584			2.35		Five to ten years	3,987,461			3,285,183		2.37
Beyond ten years	Beyond ten years	1,761,427		1,408,216			2.43		Beyond ten years	1,625,761			1,198,518		2.46
Total	Total	$	7,551,258	$	6,500,515		2.51	%	Total	$	7,719,944		$	6,414,761	2.64	%
Held-to-Maturity	Held-to-Maturity								Held-to-Maturity

One to five years	One to five years	162,082		135,763			2.71	%	One to five years	$	161,837		$	127,716	2.68	%
Five to ten years	Five to ten years	888,640		780,437			2.61		Five to ten years	954,756			797,284		2.64
Beyond ten years	Beyond ten years	2,004,275		1,686,858			2.73		Beyond ten years	1,911,321			1,468,621		2.71
Total	Total	$	3,054,997	$	2,603,058		2.69	%	Total	$	3,027,914		$	2,393,621	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 months				12 months or longer				Total					Less than 12 months				12 months or longer				Total
(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, 2023
September 30, 2023														September 30, 2023
Available-for-Sale	Available-for-Sale													Available-for-Sale
U.S. Treasury	U.S. Treasury	$	124,751	$	(258)	$	187,661	$	(8,987)	$	312,412	$	(9,245)	U.S. Treasury	$	37,492	$	(144)	$	178,540	$	(10,114)	$	216,032	$	(10,258)
U.S. government-sponsored entities and agencies	U.S. government-sponsored entities and agencies	14,732		(264)		1,159,624		(201,359)		1,174,356		(201,623)		U.S. government-sponsored entities and agencies	32,821		(58)		1,110,079		(229,055)		1,142,900		(229,113)
Mortgage-backed securities - Agency	Mortgage-backed securities - Agency	402,696		(19,217)		3,677,906		(644,056)		4,080,602		(663,273)		Mortgage-backed securities - Agency	124,895		(5,798)		3,736,306		(817,962)		3,861,201		(823,760)
States and political subdivisions	States and political subdivisions	168,144		(1,406)		264,829		(23,852)		432,973		(25,258)		States and political subdivisions	258,362		(7,749)		260,563		(39,309)		518,925		(47,058)
Pooled trust preferred securities	Pooled trust preferred securities	—		—		10,994		(2,797)		10,994		(2,797)		Pooled trust preferred securities	—		—		11,125		(2,669)		11,125		(2,669)
Other securities	Other securities	25,133		(498)		265,688		(33,072)		290,821		(33,570)		Other securities	11,737		(323)		262,912		(30,120)		274,649		(30,443)
Total available-for-sale	Total available-for-sale	$	735,456	$	(21,643)	$	5,566,702	$	(914,123)	$	6,302,158	$	(935,766)	Total available-for-sale	$	465,307	$	(14,072)	$	5,559,525	$	(1,129,229)	$	6,024,832	$	(1,143,301)

December 31, 2022	December 31, 2022													December 31, 2022
Available-for-Sale	Available-for-Sale													Available-for-Sale
U.S. Treasury	U.S. Treasury	$	130,967	$	(3,264)	$	66,992	$	(1,925)	$	197,959	$	(5,189)	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	454,854		(75,795)		720,226		(93,453)		1,175,080		(169,248)		U.S. government-sponsored entities and agencies	454,854		(75,795)		720,226		(93,453)		1,175,080		(169,248)
Mortgage-backed securities - Agency	Mortgage-backed securities - Agency	3,207,319		(358,507)		1,116,205		(258,921)		4,323,524		(617,428)		Mortgage-backed securities - Agency	3,207,319		(358,507)		1,116,205		(258,921)		4,323,524		(617,428)
States and political subdivisions	States and political subdivisions	414,813		(25,555)		2,703		(541)		417,516		(26,096)		States and political subdivisions	414,813		(25,555)		2,703		(541)		417,516		(26,096)
Pooled trust preferred securities	Pooled trust preferred securities	—		—		10,811		(2,972)		10,811		(2,972)		Pooled trust preferred securities	—		—		10,811		(2,972)		10,811		(2,972)
Other securities	Other securities	257,775		(17,045)		75,309		(9,496)		333,084		(26,541)		Other securities	257,775		(17,045)		75,309		(9,496)		333,084		(26,541)
Total available-for-sale	Total available-for-sale	$	4,465,728	$	(480,166)	$	1,992,246	$	(367,308)	$	6,457,974	$	(847,474)	Total available-for-sale	$	4,465,728	$	(480,166)	$	1,992,246	$	(367,308)	$	6,457,974	$	(847,474)

1416

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 months				12 months or longer				Total					Less than 12 months				12 months or longer				Total
(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, 2023
September 30, 2023														September 30, 2023
Held-to-Maturity	Held-to-Maturity													Held-to-Maturity
U.S. government-sponsored entities and agencies	U.S. government-sponsored entities and agencies	$	81,251	$	(8,138)	$	574,195	$	(158,933)	$	655,446	$	(167,071)	U.S. government-sponsored entities and agencies	$	—	$	—	$	617,010	$	(207,213)	$	617,010	$	(207,213)
Mortgage-backed securities - Agency	Mortgage-backed securities - Agency	244,643		(24,690)		683,853		(117,501)		928,496		(142,191)		Mortgage-backed securities - Agency	—		—		847,652		(195,933)		847,652		(195,933)
States and political subdivisions	States and political subdivisions	38,302		(394)		948,627		(142,720)		986,929		(143,114)		States and political subdivisions	64,441		(4,877)		864,668		(226,270)		929,109		(231,147)
Total held-to-maturity	Total held-to-maturity	$	364,196	$	(33,222)	$	2,206,675	$	(419,154)	$	2,570,871	$	(452,376)	Total held-to-maturity	$	64,441	$	(4,877)	$	2,329,330	$	(629,416)	$	2,393,771	$	(634,293)

December 31, 2022	December 31, 2022													December 31, 2022
Held-to-Maturity	Held-to-Maturity													Held-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)		U.S. government-sponsored entities and agencies	$	354,293	$	(110,523)	$	302,066	$	(52,287)	$	656,359	$	(162,810)
Mortgage-backed securities - Agency	Mortgage-backed securities - Agency	367,849		(42,438)		615,114		(81,416)		982,963		(123,854)		Mortgage-backed securities - Agency	367,849		(42,438)		615,114		(81,416)		982,963		(123,854)
States and political subdivisions	States and political subdivisions	838,689		(127,355)		135,573		(31,667)		974,262		(159,022)		States and political subdivisions	838,689		(127,355)		135,573		(31,667)		974,262		(159,022)

Total held-to-maturity	Total held-to-maturity	$	1,560,831	$	(280,316)	$	1,052,753	$	(165,370)	$	2,613,584	$	(445,686)	Total 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-to-maturity totaling ~~$137.9~~$132.3 million at ~~June~~September 30, 2023 and $148.9 million at December 31, 2022. These unrecognized losses are included as a separate component of shareholders’ equity and are being amortized over the remaining term of the securities.

No allowance for credit losses on available-for-sale debt securities was needed at ~~June~~September 30, 2023 or December 31, 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~~September 30, 2023 and December 31, 2022.

Accrued interest receivable on the securities portfolio is excluded from the estimate of credit losses and totaled ~~$50.6~~$38.0 million at ~~June~~September 30, 2023 and $50.9 million at December 31, 2022.

At ~~June~~September 30, 2023, Old National’s securities portfolio consisted of ~~3,047~~3,007 securities, ~~2,808~~2,917 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~~September 30, 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~~$11.1 million and unrealized losses totaling ~~$2.8~~$2.7 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~~nine months ended ~~June~~September 30, 2023 or 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 ~~$72.0~~$69.9 million at ~~June~~September 30,

2023 and $52.5 million at December 31, 2022. There were ~~gains~~losses on equity securities of ~~$0.1~~$0.8 million during the three

months ended ~~June~~September 30, 2023 and losses of ~~$0.7~~$1.4 million during the ~~six~~nine months ended ~~June~~September 30, 2023, compared to losses of ~~$2.4~~$0.7 million and ~~$4.2~~$4.9 million during the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively.

Alternative Investments

Old National has alternative investments without readily determinable fair values that are included in other assets totaling ~~$401.4~~$418.3 million at ~~June~~September 30, 2023, consisting of ~~$243.1~~$242.3 million of illiquid investments in partnerships, limited liability companies, and other ownership interests that support affordable housing and ~~$158.3~~$176.0 million of economic development and community revitalization initiatives in low-to-moderate income neighborhoods. These alternative investments totaled $396.8 million at December 31, 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~~nine months ended ~~June~~September 30, 2023 and 2022. See Note 9 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, healthcare, wholesale trade, construction, and agriculture, among others. Most of Old National’s lending activity occurs within our principal geographic markets in the Midwest region. Old National manages concentrations of credit exposure by industry, product, geography, client relationship, and loan size.

1618

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 on loans. The allowance for credit losses was calculated by pooling loans of similar credit risk characteristics and credit monitoring procedures. The four loan portfolios used to monitor and analyze interest income and yields – commercial, commercial real estate, residential real estate, and consumer – are reclassified into seven segments of loans – commercial, commercial real estate, BBCC, residential real estate, indirect, direct, and home 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:


		Balance Sheet Line Item		Portfolio Segment Reclassifications				After Reclassifications			Balance Sheet Line Item						Portfolio Segment Reclassifications			After Reclassifications

(dollars in thousands)	(dollars in thousands)					(dollars in thousands)
June 30, 2023
September 30, 2023										September 30, 2023
Loans:	Loans:									Loans:
Commercial	Commercial	$	9,698,241			$	(227,414)					$	9,470,827		Commercial		$	9,333,448		$	(226,353)		$	9,107,095
Commercial real estate	Commercial real estate	13,450,209				(162,841)					13,287,368			Commercial real estate		13,916,221			(165,593)			13,750,628
BBCC	BBCC	N/A		390,255				390,255		BBCC	N/A						391,946			391,946
Residential real estate	Residential real estate	6,684,480		—				6,684,480		Residential real estate	6,696,288						—			6,696,288
Consumer	Consumer	2,599,543		(2,599,543)				N/A		Consumer	2,631,877						(2,631,877)			N/A
Indirect	Indirect	N/A		1,003,287				1,003,287		Indirect	N/A						1,047,224			1,047,224
Direct	Direct	N/A		565,950				565,950		Direct	N/A						542,689			542,689
Home equity	Home equity	N/A		1,030,306				1,030,306		Home equity	N/A						1,041,964			1,041,964
Total	Total	$	32,432,473	$	—			$	32,432,473	Total	$	32,577,834					$	—		$	32,577,834

December 31, 2022	December 31, 2022									December 31, 2022
Loans:	Loans:									Loans:
Commercial	Commercial	$	9,508,904	$	(210,280)			$	9,298,624	Commercial	$	9,508,904					$	(210,280)		$	9,298,624
Commercial real estate	Commercial real estate	12,457,070		(158,322)				12,298,748		Commercial real estate	12,457,070						(158,322)			12,298,748
BBCC	BBCC	N/A		368,602				368,602		BBCC	N/A						368,602			368,602
Residential real estate	Residential real estate	6,460,441		—				6,460,441		Residential real estate	6,460,441						—			6,460,441
Consumer	Consumer	2,697,226		(2,697,226)				N/A		Consumer	2,697,226						(2,697,226)			N/A
Indirect	Indirect	N/A		1,034,257				1,034,257		Indirect	N/A						1,034,257			1,034,257
Direct	Direct	N/A		629,186				629,186		Direct	N/A						629,186			629,186
Home equity	Home equity	N/A		1,033,783				1,033,783		Home equity	N/A						1,033,783			1,033,783
Total	Total	$	31,123,641	$	—			$	31,123,641	Total	$	31,123,641					$	—		$	31,123,641

The composition of loans by portfolio segment follows:


(dollars in thousands)	(dollars in thousands)	June 30, 2023		December 31, 2022		(dollars in thousands)	September 30, 2023		December 31, 2022
Commercial (1)	Commercial (1)	$	9,470,827	$	9,298,624	Commercial (1)	$	9,107,095	$	9,298,624
Commercial real estate	Commercial real estate	13,287,368		12,298,748		Commercial real estate	13,750,628		12,298,748
BBCC	BBCC	390,255		368,602		BBCC	391,946		368,602
Residential real estate	Residential real estate	6,684,480		6,460,441		Residential real estate	6,696,288		6,460,441
Indirect	Indirect	1,003,287		1,034,257		Indirect	1,047,224		1,034,257
Direct	Direct	565,950		629,186		Direct	542,689		629,186
Home equity	Home equity	1,030,306		1,033,783		Home equity	1,041,964		1,033,783
Total loans	Total loans	32,432,473		31,123,641		Total loans	32,577,834		31,123,641
Allowance for credit losses on loans	Allowance for credit losses on loans	(300,555)		(303,671)		Allowance for credit losses on loans	(303,982)		(303,671)
Net loans	Net loans	$	32,131,918	$	30,819,970	Net loans	$	32,273,852	$	30,819,970

(1)Includes direct finance leases of ~~$176.7~~$173.0 million at ~~June~~September 30, 2023 and $188.1 million at December 31, 2022.

1719

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 ~~240%~~245%, Old National Bank’s applicable investor commercial real estate loans as a percentage of its risk-based capital remained below the regulatory guideline limit of 300% at ~~June~~September 30, 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 - 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

1820

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 - 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 on 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 on 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 ~~$149.9~~$162.8 million at ~~June~~September 30, 2023 and $137.7 million at December 31, 2022.

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 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.

1921

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 are 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. Old National’s activity in the allowance for credit losses on loans by portfolio segment was as follows:


(dollars in thousands)	(dollars in thousands)	Balance at Beginning of Period		Allowance Established for Acquired PCD Loans		Charge-offs		Recoveries		Provision for Loan Losses		Balance at End of Period		(dollars in thousands)	Balance at Beginning of Period		Allowance Established for Acquired PCD Loans		Charge-offs		Recoveries		Provision for Loan Losses		Balance at End of Period
Three Months Ended June 30, 2023
Three Months Ended September 30, 2023														Three Months Ended September 30, 2023
Commercial	Commercial	$	125,768	$	—	$	(8,331)	$	1,814	$	8,152	$	127,403	Commercial	$	127,403	$	—	$	(16,705)	$	1,616	$	12,441	$	124,755
Commercial real estate	Commercial real estate	135,348		—		(2,458)		1,029		2,978		136,897		Commercial real estate	136,897		—		(2,291)		102		10,267		144,975
BBCC	BBCC	2,316		—		(94)		31		523		2,776		BBCC	2,776		—		(1,049)		70		912		2,709
Residential real estate	Residential real estate	20,207		—		(218)		53		379		20,421		Residential real estate	20,421		—		(15)		28		346		20,780
Indirect	Indirect	1,434		—		(402)		612		(237)		1,407		Indirect	1,407		—		(490)		325		79		1,321
Direct	Direct	6,766		—		(2,600)		637		(48)		4,755		Direct	4,755		—		(2,180)		580		416		3,571
Home equity	Home equity	6,872		—		(228)		63		189		6,896		Home equity	6,896		—		(20)		341		(1,346)		5,871
Total	Total	$	298,711	$	—	$	(14,331)	$	4,239	$	11,936	$	300,555	Total	$	300,555	$	—	$	(22,750)	$	3,062	$	23,115	$	303,982

Three Months Ended June 30, 2022
Three Months Ended September 30, 2022														Three Months Ended September 30, 2022
Commercial	Commercial	$	99,471	$	—	$	(1,344)	$	781	$	3,911	$	102,819	Commercial	$	102,819	$	3,740	$	(2,696)	$	2,206	$	6,344	$	112,413
Commercial real estate	Commercial real estate	140,490		—		(318)		320		1,310		141,802		Commercial real estate	141,802		6,818		(4,772)		287		(45)		144,090
BBCC	BBCC	2,069		—		(20)		91		(76)		2,064		BBCC	2,064		—		—		108		(4)		2,168
Residential real estate	Residential real estate	17,252		—		(137)		130		2,484		19,729		Residential real estate	19,729		—		(20)		66		1,481		21,256
Indirect	Indirect	1,648		—		(528)		320		201		1,641		Indirect	1,641		—		(624)		379		189		1,585
Direct	Direct	14,450		—		(1,722)		676		1,008		14,412		Direct	14,412		—		(3,299)		442		4,541		16,096
Home equity	Home equity	5,127		—		(27)		20		416		5,536		Home equity	5,536		—		(29)		357		(1,218)		4,646
Total	Total	$	280,507	$	—	$	(4,096)	$	2,338	$	9,254	$	288,003	Total	$	288,003	$	10,558	$	(11,440)	$	3,845	$	11,288	$	302,254

Six Months Ended June 30, 2023
Nine Months Ended September 30, 2023														Nine Months Ended September 30, 2023
Commercial	Commercial	$	120,612	$	—	$	(20,754)	$	2,097	$	25,448	$	127,403	Commercial	$	120,612	$	—	$	(37,459)	$	3,713	$	37,889	$	124,755
Commercial real estate	Commercial real estate	138,244		—		(3,647)		1,292		1,008		136,897		Commercial real estate	138,244		—		(5,938)		1,394		11,275		144,975
BBCC	BBCC	2,431		—		(122)		104		363		2,776		BBCC	2,431		—		(1,171)		174		1,275		2,709
Residential real estate	Residential real estate	21,916		—		(241)		125		(1,379)		20,421		Residential real estate	21,916		—		(256)		153		(1,033)		20,780
Indirect	Indirect	1,532		—		(1,599)		1,024		450		1,407		Indirect	1,532		—		(2,089)		1,349		529		1,321
Direct	Direct	12,116		—		(5,838)		1,218		(2,741)		4,755		Direct	12,116		—		(8,018)		1,798		(2,325)		3,571
Home equity	Home equity	6,820		—		(310)		130		256		6,896		Home equity	6,820		—		(330)		471		(1,090)		5,871
Total	Total	$	303,671	$	—	$	(32,511)	$	5,990	$	23,405	$	300,555	Total	$	303,671	$	—	$	(55,261)	$	9,052	$	46,520	$	303,982

Six Months Ended June 30, 2022
Nine Months Ended September 30, 2022														Nine Months Ended September 30, 2022
Commercial	Commercial	$	27,232	$	35,040	$	(3,223)	$	1,013	$	42,757	$	102,819	Commercial	$	27,232	$	38,780	$	(5,919)	$	3,219	$	49,101	$	112,413
Commercial real estate	Commercial real estate	64,004		42,601		(824)		502		35,519		141,802		Commercial real estate	64,004		49,419		(5,596)		789		35,474		144,090
BBCC	BBCC	2,458		—		(48)		148		(494)		2,064		BBCC	2,458		—		(48)		256		(498)		2,168
Residential real estate	Residential real estate	9,347		136		(324)		570		10,000		19,729		Residential real estate	9,347		136		(344)		636		11,481		21,256
Indirect	Indirect	1,743		—		(1,012)		542		368		1,641		Indirect	1,743		—		(1,636)		921		557		1,585
Direct	Direct	528		31		(3,251)		1,270		15,834		14,412		Direct	528		31		(6,550)		1,712		20,375		16,096
Home equity	Home equity	2,029		723		(78)		183		2,679		5,536		Home equity	2,029		723		(107)		540		1,461		4,646
Total	Total	$	107,341	$	78,531	$	(8,760)	$	4,228	$	106,663	$	288,003	Total	$	107,341	$	89,089	$	(20,200)	$	8,073	$	117,951	$	302,254

2022

Unfunded Loan Commitments

Old National maintains an allowance for credit losses on unfunded loan commitments 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 on 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 unfunded loan commitments is included in the provision for credit 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 September 30,				Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2023		2022		2023		2022		(dollars in thousands)	2023		2022		2023		2022
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 period	Balance at beginning of period	$	34,156	$	22,046	$	32,188	$	10,879	Balance at beginning of period	$	37,007	$	21,966	$	32,188	$	10,879
Provision for credit losses on unfunded commitments acquired during the period		—		—		—		11,013
Provision for unfunded loan commitments		2,851		(80)		4,819		74
Provision for credit losses on unfunded loan commitments acquired during the period										Provision for credit losses on unfunded loan commitments acquired during the period	—		—		—		11,013
(Recapture of) provision for credit losses on unfunded loan commitments										(Recapture of) provision for credit losses on unfunded loan commitments	(4,047)		4,203		772		4,277
Balance at end of period	Balance at end of period	$	37,007	$	21,966	$	37,007	$	21,966	Balance at end of period	$	32,960	$	26,169	$	32,960	$	26,169

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.

2123

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 Year														Revolving to Term
(dollars in thousands)	(dollars in thousands)	2023		2022		2021		2020		2019		Prior		Revolving				Total		(dollars in thousands)		Origination Year																							Revolving to Term
June 30, 2023
(dollars in thousands)																							(dollars in thousands)	2023				2022			2021			2020			2019			Prior			Revolving						Revolving to Term				Total
																								September 30, 2023
Commercial:	Commercial:																						Commercial:
Risk Rating:

Pass	Pass	$	1,108,984	$	1,860,049	$	1,307,700	$	671,792	$	604,875	$	673,184	$	2,185,539			$	465,649					$	8,877,772	Pass	$	1,615,716		$	1,690,168		$	1,095,758		$	553,187		$	479,907		$	501,610			$	2,000,147			$	454,995			$	8,391,488
Criticized	Criticized	28,284		84,240		15,092		23,548		29,772		32,376		74,437		25,524				313,273			Criticized	27,469				110,893			21,107			46,241			22,674			54,738			107,105				32,247				422,474
Classified:	Classified:																						Classified:
Substandard	Substandard	17,252		16,246		36,914		36,303		4,671		22,508		52,794		37,482				224,170			Substandard	19,509				40,694			32,135			38,892			9,970			20,431			66,977				15,417				244,025
Nonaccrual	Nonaccrual	—		349		—		585		824		6,681		1,064		2,210				11,713			Nonaccrual	—				5,748			2,034			284			2,718			—			—				—				10,784
Doubtful	Doubtful	—		24,047		12,536		1,832		583		4,901		—		—				43,899			Doubtful	—				18,838			5,626			1,762			962			11,136			—				—				38,324
Total	Total	$	1,154,520	$	1,984,931	$	1,372,242	$	734,060	$	640,725	$	739,650	$	2,313,834	$	530,865			$	9,470,827		Total	$	1,662,694			$	1,866,341		$	1,156,660		$	640,366		$	516,231		$	587,915		$	2,174,229			$	502,659			$	9,107,095

Commercial real estate:	Commercial real estate:																						Commercial real estate:
Risk Rating:

Pass	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		Pass	$	1,805,852			$	3,432,536		$	2,715,562		$	1,734,359		$	1,117,895		$	1,273,742		$	73,590			$	796,442			$	12,949,978
Criticized	Criticized	28,324		30,372		31,377		32,238		54,738		88,116		3,893		23,353				292,411			Criticized	58,440				62,461			42,128			28,716			27,978			90,549			9,959				21,023				341,254
Classified:	Classified:																						Classified:
Substandard	Substandard	14,685		71,131		17,505		19,748		79,998		44,060		—		49,825				296,952			Substandard	21,214				84,269			23,589			16,822			78,165			41,313			—				50,424				315,796
Nonaccrual	Nonaccrual	—		866		18,463		1,064		456		16,081		—		3,272				40,202			Nonaccrual	—				2,983			11,470			1,428			52			11,385			—				792				28,110
Doubtful	Doubtful	—		3,802		31,341		9,249		39,559		48,766		—		—				132,717			Doubtful	—				1,649			33,564			4,142			38,199			37,936			—				—				115,490
Total	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		Total	$	1,885,506			$	3,583,898		$	2,826,313		$	1,785,467		$	1,262,289		$	1,454,925		$	83,549			$	868,681			$	13,750,628

BBCC:	BBCC:																						BBCC:
Risk Rating:

Pass	Pass	$	52,620	$	77,831	$	53,068	$	44,433	$	32,200	$	28,305	$	69,107	$	16,637			$	374,201		Pass	$	74,658			$	76,281		$	49,463		$	42,980		$	30,085		$	14,488		$	66,281			$	18,582			$	372,818
Criticized	Criticized	987		1,445		1,081		360		1,045		483		1,836		1,626				8,863			Criticized	2,295				2,469			1,114			76			1,110			—			2,470				2,264				11,798
Classified:	Classified:																						Classified:
Substandard	Substandard	10		497		629		49		226		836		484		856				3,587			Substandard	98				733			619			24			401			1,196			100				438				3,609
Nonaccrual	Nonaccrual	37		313		323		128		235		668		—		644				2,348			Nonaccrual	216				451			310			340			—			87			477				278				2,159
Doubtful	Doubtful	—		408		219		—		55		74		500		—				1,256			Doubtful	—				865			492			50			67			88			—				—				1,562
Total	Total	$	53,654	$	80,494	$	55,320	$	44,970	$	33,761	$	30,366	$	71,927	$	19,763			$	390,255		Total	$	77,267			$	80,799		$	51,998		$	43,470		$	31,663		$	15,859		$	69,328			$	21,562			$	391,946


(dollars in thousands)	Origination Year														Revolving to Term
	2022		2021		2020		2019		2018		Prior		Revolving				Total
December 31, 2022
Commercial:

Pass	$	2,388,618	$	1,754,364	$	796,340	$	738,208	$	362,986	$	388,617	$	1,988,763	$	329,119	$	8,747,015
Criticized	40,856		30,661		63,557		33,490		9,195		5,312		61,036		4,327		248,434
Classified:
Substandard	37,223		47,522		16,540		22,925		4,844		21,204		67,402		25,143		242,803
Nonaccrual	3,627		1,453		566		—		—		—		1,634		6,623		13,903
Doubtful	2,821		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:

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
Criticized	75,306		34,422		22,569		82,637		86,504		56,864		—		23,282		381,584
Classified:
Substandard	46,231		16,928		24,319		78,468		57,824		21,591		—		4,108		249,469
Nonaccrual	3,151		9,541		5,014		—		2,312		22,155		—		3,257		45,430
Doubtful	1,934		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:

Pass	$	90,341	$	64,161	$	52,304	$	36,868	$	23,618	$	11,333	$	60,016	$	18,881	$	357,522
Criticized	1,504		525		368		692		353		—		1,006		1,603		6,051
Classified:
Substandard	811		143		—		421		—		—		543		682		2,600
Nonaccrual	42		37		118		—		429		284		—		639		1,549
Doubtful	40		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

Origination Year Revolving to Term
(dollars in thousands) 2022 2021 2020 2019 2018 Prior Revolving Total
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
Criticized 40,856 30,661 63,557 33,490 9,195 5,312 61,036 4,327 248,434
Classified:
Substandard 37,223 47,522 16,540 22,925 4,844 21,204 67,402 25,143 242,803
Nonaccrual 3,627 1,453 566 — — — 1,634 6,623 13,903
Doubtful 2,821 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
Criticized 75,306 34,422 22,569 82,637 86,504 56,864 — 23,282 381,584
Classified:
Substandard 46,231 16,928 24,319 78,468 57,824 21,591 — 4,108 249,469
Nonaccrual 3,151 9,541 5,014 — 2,312 22,155 — 3,257 45,430
Doubtful 1,934 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
Criticized 1,504 525 368 692 353 — 1,006 1,603 6,051
Classified:
Substandard 811 143 — 421 — — 543 682 2,600
Nonaccrual 42 37 118 — 429 284 — 639 1,549
Doubtful 40 107 439 157 64 73 — — 880
Total $ 92,738 $ 64,973 $ 53,229 $ 38,138 $ 24,464 $ 11,690 $ 61,565 $ 21,805 $ 368,602

2324

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 Year														Revolving to Term									Origination Year																												Revolving to Term
(dollars in thousands)	(dollars in thousands)	2023		2022		2021		2020		2019		Prior		Revolving				Total		(dollars in thousands)		2023					2022				2021				2020				2019				Prior				Revolving								Total
June 30, 2023
September 30, 2023																							September 30, 2023
Residential real estate:	Residential real estate:																						Residential real estate:
Risk Rating:	Risk Rating:																						Risk Rating:
Performing	Performing	$	261,285	$	1,480,926	$	1,948,505	$	1,709,893	$	459,251	$	785,089	$	—			$	143				$	6,645,092		Performing	$	362,518			$	1,504,933			$	1,861,729			$	1,732,039			$	444,411			$	750,037			$	—			$	279			$	6,655,946
Nonperforming	Nonperforming	—		1,892		2,727		4,200		3,378		27,191		—		—				39,388			Nonperforming		—				3,529				2,905				4,538				3,343				26,027				—				—				40,342
Total	Total	$	261,285	$	1,482,818	$	1,951,232	$	1,714,093	$	462,629	$	812,280	$	—	$	143			$	6,684,480		Total		$	362,518			$	1,508,462			$	1,864,634			$	1,736,577			$	447,754			$	776,064			$	—			$	279			$	6,696,288

Indirect:	Indirect:																						Indirect:
Risk Rating:	Risk Rating:																						Risk Rating:
Performing	Performing	$	187,644	$	425,822	$	202,230	$	98,742	$	57,413	$	27,397	$	—	$	83			$	999,331		Performing		$	309,220			$	390,012			$	181,235			$	96,148			$	46,877			$	19,666			$	—			$	196			$	1,043,354
Nonperforming	Nonperforming	65		1,107		798		1,082		438		466		—		—				3,956			Nonperforming		120				1,270				1,175				604				361				340				—				—				3,870
Total	Total	$	187,709	$	426,929	$	203,028	$	99,824	$	57,851	$	27,863	$	—	$	83			$	1,003,287		Total		$	309,340			$	391,282			$	182,410			$	96,752			$	47,238			$	20,006			$	—			$	196			$	1,047,224

Direct:	Direct:																						Direct:
Risk Rating:	Risk Rating:																						Risk Rating:
Performing	Performing	$	53,778	$	110,107	$	121,141	$	77,169	$	41,509	$	80,155	$	74,945	$	1,348			$	560,152		Performing		$	84,749			$	99,625			$	107,539			$	54,070			$	35,065			$	87,207			$	63,877			$	4,852			$	536,984
Nonperforming	Nonperforming	21		275		489		562		463		3,970		8		10				5,798			Nonperforming		87				486				522				403				316				3,874				6				11				5,705
Total	Total	$	53,799	$	110,382	$	121,630	$	77,731	$	41,972	$	84,125	$	74,953	$	1,358			$	565,950		Total		$	84,836			$	100,111			$	108,061			$	54,473			$	35,381			$	91,081			$	63,883			$	4,863			$	542,689

Home equity:	Home equity:																						Home equity:
Risk Rating:	Risk Rating:																						Risk Rating:
Performing	Performing	$	—	$	1,328	$	843	$	859	$	943	$	6,573	$	988,669	$	16,859			$	1,016,074		Performing		$	1			$	692			$	387			$	690			$	743			$	5,736			$	994,797			$	23,918			$	1,026,964
Nonperforming	Nonperforming	—		51		130		82		1,057		4,776		1,961		6,175				14,232			Nonperforming		—				24				219				203				758				4,810				1,692				7,294				15,000
Total	Total	$	—	$	1,379	$	973	$	941	$	2,000	$	11,349	$	990,630	$	23,034			$	1,030,306		Total		$	1			$	716			$	606			$	893			$	1,501			$	10,546			$	996,489			$	31,212			$	1,041,964


	Origination Year														Revolving to Term
	2022		2021		2020		2019		2018		Prior		Revolving				Total
December 31, 2022
Residential real estate:
Risk Rating:
Performing	$	1,327,168	$	1,945,792	$	1,825,762	$	478,529	$	136,260	$	712,175	$	7	$	88	$	6,425,781
Nonperforming	59		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	$	7	$	88	$	6,460,441

Indirect:
Risk Rating:
Performing	$	504,410	$	249,407	$	144,265	$	82,304	$	31,484	$	19,095	$	—	$	62	$	1,031,027
Nonperforming	348		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
Nonperforming	115		851		614		205		327		1,526		5		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
Nonperforming	166		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

2425

The following table summarizes the gross charge-offs of loans by loan portfolio segment and origination year:


		Origination Year																			Origination Year
(dollars in thousands)	(dollars in thousands)	2023		2022		2021		2020		2019		Prior		Revolving		Total	(dollars in thousands)		2023				2022			2021			2020			2019			Prior			Revolving			Total
Three Months Ended June 30, 2023
Three Months Ended September 30, 2023																				Three Months Ended September 30, 2023
Commercial	Commercial	$	—	$	2,100	$	5,931	$	120	$	—	$	—	$	180		$	8,331		Commercial	$	—		$	4,154		$	12,271		$	—		$	—		$	63		$	217		$	16,705
Commercial real estate	Commercial real estate	—		—		—		—		—		2,458		—			2,458			Commercial real estate	—			—			—			1,744			—			547			—			2,291
BBCC	BBCC	—		47		—		47		—		—		—			94			BBCC	499			501			49			—			—			—			—			1,049
Residential real estate	Residential real estate	—		—		—		—		—		218		—			218			Residential real estate	—			—			—			—			—			15			—			15
Indirect	Indirect	10		164		124		48		16		40		—			402			Indirect	75			276			86			12			10			31			—			490
Direct	Direct	—		430		588		172		414		195		801			2,600			Direct	19			429			423			112			270			60			867			2,180
Home equity	Home equity	—		—		—		—		—		228		—			228			Home equity	—			—			—			—			—			20			—			20
Total gross charge-offs	Total gross charge-offs	$	10	$	2,741	$	6,643	$	387	$	430	$	3,139	$	981		$	14,331		Total gross charge-offs	$	593		$	5,360		$	12,829		$	1,868		$	280		$	736		$	1,084		$	22,750

Six Months Ended June 30, 2023
Nine Months Ended September 30, 2023																				Nine Months Ended September 30, 2023
Commercial	Commercial	$	—	$	2,100	$	11,161	$	120	$	6,789	$	239	$	345		$	20,754		Commercial	$	—		$	6,254		$	23,432		$	120		$	6,789		$	302		$	562		$	37,459
Commercial real estate	Commercial real estate	—		54		735		400		—		2,458		—			3,647			Commercial real estate	—			54			735			2,144			—			3,005			—			5,938
BBCC	BBCC	—		47		28		47		—		—		—			122			BBCC	499			548			77			47			—			—			—			1,171
Residential real estate	Residential real estate	—		—		—		—		—		241		—			241			Residential real estate	—			—			—			—			—			256			—			256
Indirect	Indirect	10		678		554		141		127		89		—			1,599			Indirect	85			954			640			153			137			120			—			2,089
Direct	Direct	—		901		1,382		458		741		390		1,966			5,838			Direct	19			1,330			1,805			570			1,011			450			2,833			8,018
Home equity	Home equity	—		—		—		—		—		310		—			310			Home equity	—			—			—			—			—			330			—			330
Total gross charge-offs	Total gross charge-offs	$	10	$	3,780	$	13,860	$	1,166	$	7,657	$	3,727	$	2,311		$	32,511		Total gross charge-offs	$	603		$	9,140		$	26,689		$	3,034		$	7,937		$	4,463		$	3,395		$	55,261

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		Current		Total Loans		(dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Past Due 90 Days or More		Total Past Due		Current		Total Loans
June 30, 2023
September 30, 2023														September 30, 2023
Commercial	Commercial	$	4,164	$	3,719	$	15,138	$	23,021	$	9,447,806	$	9,470,827	Commercial	$	2,754	$	4,214	$	12,504	$	19,472	$	9,087,623	$	9,107,095
Commercial real estate	Commercial real estate	7,760		10,441		35,906		54,107		13,233,261		13,287,368		Commercial real estate	15,954		6,295		21,366		43,615		13,707,013		13,750,628
BBCC	BBCC	868		847		74		1,789		388,466		390,255		BBCC	1,273		511		712		2,496		389,450		391,946
Residential	Residential	18,543		4,350		11,131		34,024		6,650,456		6,684,480		Residential	29,762		6,784		12,733		49,279		6,647,009		6,696,288
Indirect	Indirect	4,296		1,162		840		6,298		996,989		1,003,287		Indirect	5,576		1,368		1,156		8,100		1,039,124		1,047,224
Direct	Direct	3,225		775		1,257		5,257		560,693		565,950		Direct	3,626		1,059		1,588		6,273		536,416		542,689
Home equity	Home equity	6,834		1,473		4,420		12,727		1,017,579		1,030,306		Home equity	5,840		1,808		6,077		13,725		1,028,239		1,041,964
Total	Total	$	45,690	$	22,767	$	68,766	$	137,223	$	32,295,250	$	32,432,473	Total	$	64,785	$	22,039	$	56,136	$	142,960	$	32,434,874	$	32,577,834

December 31, 2022	December 31, 2022													December 31, 2022
Commercial	Commercial	$	14,147	$	4,801	$	11,080	$	30,028	$	9,268,596	$	9,298,624	Commercial	$	14,147	$	4,801	$	11,080	$	30,028	$	9,268,596	$	9,298,624
Commercial real estate	Commercial real estate	47,240		1,312		32,892		81,444		12,217,304		12,298,748		Commercial real estate	47,240		1,312		32,892		81,444		12,217,304		12,298,748
BBCC	BBCC	730		365		603		1,698		366,904		368,602		BBCC	730		365		603		1,698		366,904		368,602
Residential	Residential	24,181		5,033		11,753		40,967		6,419,474		6,460,441		Residential	24,181		5,033		11,753		40,967		6,419,474		6,460,441
Indirect	Indirect	6,302		2,118		958		9,378		1,024,879		1,034,257		Indirect	6,302		2,118		958		9,378		1,024,879		1,034,257
Direct	Direct	5,404		2,118		1,928		9,450		619,736		629,186		Direct	5,404		2,118		1,928		9,450		619,736		629,186
Home equity	Home equity	6,585		1,966		4,707		13,258		1,020,525		1,033,783		Home equity	6,585		1,966		4,707		13,258		1,020,525		1,033,783
Total	Total	$	104,589	$	17,713	$	63,921	$	186,223	$	30,937,418	$	31,123,641	Total	$	104,589	$	17,713	$	63,921	$	186,223	$	30,937,418	$	31,123,641

2526

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, 2023						December 31, 2022							September 30, 2023						December 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
Commercial	Commercial	$	55,612	$	12,666	$	92	$	60,372	$	7,873	$	152	Commercial	$	49,108	$	13,432	$	577	$	60,372	$	7,873	$	152
Commercial real estate	Commercial real estate	172,919		44,218		173		122,290		33,445		—		Commercial real estate	143,600		29,721		104		122,290		33,445		—
BBCC	BBCC	3,604		—		—		2,429		—		—		BBCC	3,721		—		—		2,429		—		—
Residential	Residential	39,388		—		—		34,660		—		1,808		Residential	40,342		—		—		34,660		—		1,808
Indirect	Indirect	3,956		—		—		3,230		—		28		Indirect	3,870		—		54		3,230		—		28
Direct	Direct	5,798		—		25		3,997		—		133		Direct	5,705		—		109		3,997		—		133
Home equity	Home equity	14,232		—		13		11,200		—		529		Home equity	15,000		—		348		11,200		—		529
Total	Total	$	295,509	$	56,884	$	303	$	238,178	$	41,318	$	2,650	Total	$	261,346	$	43,153	$	1,192	$	238,178	$	41,318	$	2,650

Interest income recognized on nonaccrual loans was insignificant during the three and ~~six~~nine months ended ~~June~~September 30, 2023 and 2022.

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-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 Collateral											Type of Collateral
(dollars in thousands)	(dollars in thousands)	Real Estate		Blanket Lien		Investment Securities/Cash		Auto		Other		(dollars in thousands)	Real Estate		Blanket Lien		Investment Securities/Cash		Auto		Other
June 30, 2023
September 30, 2023												September 30, 2023
Commercial	Commercial	$	14,450	$	37,285	$	652	$	535	$	366	Commercial	$	13,635	$	31,856	$	466	$	288	$	347
Commercial real estate	Commercial real estate	156,570		3,908		1,246		—		6,259		Commercial real estate	131,826		—		1,205		—		6,184
BBCC	BBCC	2,267		1,301		—		36		—		BBCC	2,131		1,174		—		416		—
Residential	Residential	39,388		—		—		—		—		Residential	40,342		—		—		—		—
Indirect	Indirect	—		—		—		3,956		—		Indirect	—		—		—		3,870		—
Direct	Direct	4,973		6		—		253		32		Direct	4,622		1		3		296		31
Home equity	Home equity	14,232		—		—		—		—		Home equity	15,000		—		—		—		—
Total loans	Total loans	$	231,880	$	42,500	$	1,898	$	4,780	$	6,657	Total loans	$	207,556	$	33,031	$	1,674	$	4,870	$	6,562

December 31, 2022	December 31, 2022											December 31, 2022
Commercial	Commercial	$	8,962	$	42,754	$	2,690	$	1,611	$	980	Commercial	$	8,962	$	42,754	$	2,690	$	1,611	$	980
Commercial real estate	Commercial real estate	108,871		—		1,718		—		6,411		Commercial real estate	108,871		—		1,718		—		6,411
BBCC	BBCC	1,939		478		—		12		—		BBCC	1,939		478		—		12		—
Residential	Residential	34,660		—		—		—		—		Residential	34,660		—		—		—		—
Indirect	Indirect	—		—		—		3,230		—		Indirect	—		—		—		3,230		—
Direct	Direct	2,991		13		—		232		23		Direct	2,991		13		—		232		23
Home equity	Home equity	11,200		—		—		—		—		Home equity	11,200		—		—		—		—
Total loans	Total loans	$	168,623	$	43,245	$	4,408	$	5,085	$	7,414	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~~September 30, 2023, these loans totaled ~~$2.6~~$2.8 billion, of which $1.2 billion had been sold to other financial institutions and ~~$1.4~~$1.6 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.

2627

Financial Difficulty Modifications

Occasionally, Old National modifies loans to borrowers experiencing financial difficulty in the form of principal forgiveness, term extension, an other-than-insignificant payment delay, or interest rate reduction (or a combination thereof). When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses on loans.

The following table presents the amortized cost basis of financial difficulty modifications at ~~June~~September 30, 2023 that were modified during the three and ~~six~~nine months ended ~~June~~September 30, 2023 by class of loans and type of modification:


(dollars in thousands)	(dollars in thousands)	Term Extension		Total Class of Loans		(dollars in thousands)	Term Extension		Total Class of Loans
Three Months Ended June 30, 2023
Three Months Ended September 30, 2023						Three Months Ended September 30, 2023
Commercial	Commercial	$	1,231	0.0	%	Commercial	$	3,502	0.0	%
Commercial real estate	Commercial real estate	12,449		0.1	%	Commercial real estate	93,844		0.7	%

Total	Total	$	13,680	0.0	%	Total	$	97,346	0.3	%

Six Months Ended June 30, 2023
Nine Months Ended September 30, 2023						Nine Months Ended September 30, 2023
Commercial	Commercial	$	18,517	0.2	%	Commercial	$	20,811	0.2	%
Commercial real estate	Commercial real estate	19,280		0.1	%	Commercial real estate	116,580		0.8	%

Total	Total	$	37,797	0.1	%	Total	$	137,391	0.4	%

Old National closely monitors the performance of financial difficulty modifications to understand the effectiveness of its efforts. The following table presents the performance of loans identified as financial difficulty modifications at ~~June~~September 30, 2023:


(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		Current		Total Loans		(dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Past Due 90 Days or More		Total Past Due		Current		Total Loans
June 30, 2023
September 30, 2023														September 30, 2023
Commercial	Commercial	$	—	$	—	$	2,600	$	2,600	$	15,917	$	18,517	Commercial	$	—	$	—	$	2,541	$	2,541	$	18,270	$	20,811
Commercial real estate	Commercial real estate	—		5,537		—		5,537		13,743		19,280		Commercial real estate	1,086		—		—		1,086		115,494		116,580

Total	Total	$	—	$	5,537	$	2,600	$	8,137	$	29,660	$	37,797	Total	$	1,086	$	—	$	2,541	$	3,627	$	133,764	$	137,391

The following table summarizes the nature of the financial difficulty modifications during the three and ~~six~~nine months ended ~~June~~September 30, 2023 by class of loans:

(dollars in thousands)

Weighted-
Average
Term
Extension
(in months)

Three Months Ended ~~June~~September 30, 2023

Commercial

~~7.0~~7.3

Commercial real estate

~~6.0~~9.2

Total

~~6.1~~9.2

~~Six~~Nine Months Ended ~~June~~September 30, 2023

Commercial

~~6.8~~5.7

Commercial real estate

~~5.8~~8.9

Total

~~6.3~~8.4

There were no payment defaults on these loans subsequent to their modifications during the three and ~~six~~nine months ended ~~June~~September 30, 2023. At ~~June~~September 30, 2023, Old National had not committed to lend any material additional funds to the borrowers whose loans were modified due to financial difficulties.

2728

NOTE 7 – 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,					Affected Line Item in the Statement of Income	Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)		2023		2022		2023		2022		(dollars in thousands)		2023		2022		2023		2022
Operating lease cost	Operating lease cost	Occupancy/Equipment expense	$	7,469	$	8,558	$	16,107	$	13,666	Operating lease cost	Occupancy/Equipment expense	$	7,462	$	7,657	$	23,569	$	21,323
Finance lease cost:	Finance lease cost:										Finance lease cost:
Amortization of right-of-use assets	Amortization of right-of-use assets	Occupancy expense	737		648		1,428		1,323		Amortization of right-of-use assets	Occupancy expense	742		680		2,170		2,003
Interest on lease liabilities	Interest on lease liabilities	Interest expense	184		103		353		210		Interest on lease liabilities	Interest expense	183		105		536		315

Sub-lease income	Sub-lease income	Occupancy expense	(102)		(174)		(162)		(302)		Sub-lease income	Occupancy expense	(119)		(87)		(281)		(389)
Total	Total		$	8,288	$	9,135	$	17,726	$	14,897	Total		$	8,268	$	8,355	$	25,994	$	23,252

Supplemental balance sheet information related to leases was as follows:

(dollars in thousands) June 30,
2023 December 31,
2022
Operating Leases
Operating lease right-of-use assets $ 184,700 $ 189,714
Operating lease liabilities 206,178 211,964

Finance Leases
Premises and equipment, net 20,435 10,799
Other borrowings 21,346 13,469

Weighted-Average Remaining Lease Term (in Years)
Operating leases 8.7 9.1
Finance leases 10.5 7.2

Weighted-Average Discount Rate
Operating leases 2.92 % 2.88 %
Finance leases 3.84 % 3.30 %


(dollars in thousands)	September 30, 2023			December 31, 2022
Operating Leases
Operating lease right-of-use assets	$	179,284		$	189,714
Operating lease liabilities	199,937			211,964

Finance Leases
Premises and equipment, net	20,571			10,799
Other borrowings	21,595			13,469

Weighted-Average Remaining Lease Term (in Years)
Operating leases	8.5			9.1
Finance leases	10.6			7.2

Weighted-Average Discount Rate
Operating leases	2.93		%	2.88		%
Finance leases	3.89		%	3.30		%

Supplemental cash flow information related to leases was as follows:


		Six Months Ended June 30,					Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2023		2022		(dollars in thousands)	2023		2022
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 leases	Operating cash flows from operating leases	$	15,752	$	13,705	Operating cash flows from operating leases	$	23,766	$	22,223
Operating cash flows from finance leases	Operating cash flows from finance leases	353		210		Operating cash flows from finance leases	536		315
Financing cash flows from finance leases	Financing cash flows from finance leases	1,265		1,210		Financing cash flows from finance leases	1,893		1,839

The following table presents a maturity analysis of the Company’s lease liability by lease classification at ~~June~~September 30, 2023:


(dollars in thousands)	(dollars in thousands)	Operating Leases		Finance Leases		(dollars in thousands)	Operating Leases		Finance Leases
2023	2023	$	15,993	$	1,611	2023	$	7,959	$	826
2024	2024	31,241		3,278		2024	31,183		3,357
2025	2025	29,621		3,301		2025	29,564		3,380
2026	2026	28,575		2,075		2026	28,622		2,154
2027	2027	27,604		2,079		2027	27,662		2,157
Thereafter	Thereafter	101,741		13,964		Thereafter	102,282		14,809
Total undiscounted lease payments	Total undiscounted lease payments	234,775		26,308		Total undiscounted lease payments	227,272		26,683
Amounts representing interest	Amounts representing interest	(28,597)		(4,962)		Amounts representing interest	(27,335)		(5,088)
Lease liability	Lease liability	$	206,178	$	21,346	Lease liability	$	199,937	$	21,595

NOTE 8 – 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 September 30,				Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2023		2022		2023		2022		(dollars in thousands)	2023		2022		2023		2022
Balance at beginning of period	Balance at beginning of period	$	1,998,716	$	1,997,157	$	1,998,716	$	1,036,994	Balance at beginning of period	$	1,998,716	$	1,991,534	$	1,998,716	$	1,036,994
Acquisitions and adjustments	Acquisitions and adjustments	—		(5,623)		—		954,540		Acquisitions and adjustments	—		11,065		—		965,605
Balance at end of period	Balance at end of period	$	1,998,716	$	1,991,534	$	1,998,716	$	1,991,534	Balance at end of period	$	1,998,716	$	2,002,599	$	1,998,716	$	2,002,599

The decrease in goodwill for the three months ended June 30, 2022 resulted from measurement period adjustments related to the update of fair values of the assets acquired and liabilities assumed in the First Midwest merger. The increase in goodwill for the ~~six~~three and nine months ended ~~June~~September 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, ~~2022~~2023 and concluded that there was no impairment. No events or circumstances since the August 31, ~~2022~~2023 annual impairment test were noted that would indicate it was more likely than not a goodwill impairment exists.

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, 2023
September 30, 2023								September 30, 2023
Core deposit	Core deposit	$	143,511	$	(63,521)	$	79,990	Core deposit	$	143,511	$	(68,312)	$	75,199
Customer trust relationships	Customer trust relationships	52,621		(18,452)		34,169		Customer trust relationships	52,621		(19,701)		32,920
Total other intangible assets	Total other intangible assets	$	196,132	$	(81,973)	$	114,159	Total other intangible assets	$	196,132	$	(88,013)	$	108,119

December 31, 2022	December 31, 2022							December 31, 2022
Core deposit	Core deposit	$	170,642	$	(80,951)	$	89,691	Core deposit	$	170,642	$	(80,951)	$	89,691
Customer trust relationships	Customer trust relationships	56,243		(19,529)		36,714		Customer trust relationships	56,243		(19,529)		36,714
Total other intangible assets	Total other intangible assets	$	226,885	$	(100,480)	$	126,405	Total 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.

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~~nine months ended ~~June~~September 30, 2023 or 2022. Total amortization expense associated with intangible assets was ~~$6.1~~

$6.0 million and ~~$12.2~~$18.3 million for the three and ~~six~~nine months ended ~~June~~September 30, 2023, respectively, compared to ~~$7.2~~$7.1 million and ~~$12.0~~$19.1 million for the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively.

Estimated amortization expense for future years is as follows:


(dollars in thousands)	(dollars in thousands)			(dollars in thousands)
2023 remaining	2023 remaining	$	11,909	2023 remaining	$	5,869
2024	2024	21,239		2024	21,239
2025	2025	18,358		2025	18,358
2026	2026	15,555		2026	15,555
2027	2027	12,867		2027	12,867
Thereafter	Thereafter	34,231		Thereafter	34,231
Total	Total	$	114,159	Total	$	108,119

NOTE 9 – 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~~September 30, 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, 2023				December 31, 2022				(dollars in thousands)		September 30, 2023				December 31, 2022
Investment	Investment	Accounting Method	Investment		Unfunded Commitment (1)		Investment		Unfunded Commitment		Investment	Accounting Method	Investment		Unfunded Commitment (1)		Investment		Unfunded Commitment
LIHTC	LIHTC	Proportional amortization	$	90,164	$	53,327	$	84,428	$	55,754	LIHTC	Proportional amortization	$	93,214	$	54,440	$	84,428	$	55,754
FHTC	FHTC	Equity	19,797		10,016		19,316		9,588		FHTC	Equity	36,715		27,214		19,316		9,588
NMTC	NMTC	Consolidation	47,728		—		51,912		—		NMTC	Consolidation	45,637		—		51,912		—
Renewable Energy	Renewable Energy	Equity	608		—		1,099		—		Renewable Energy	Equity	385		—		1,099		—
Total	Total		$	158,297	$	63,343	$	156,755	$	65,342	Total		$	175,951	$	81,654	$	156,755	$	65,342

(1)All commitments will be paid by Old National by December 31, 2027.

3031

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, 2023
Three Months Ended September 30, 2023						Three Months Ended September 30, 2023
LIHTC	LIHTC	$	1,463	$	(1,908)	LIHTC	$	3,208	$	(3,582)
FHTC	FHTC	424		(512)		FHTC	330		(399)
NMTC	NMTC	2,092		(2,611)		NMTC	2,092		(2,611)
Renewable Energy	Renewable Energy	246		—		Renewable Energy	222		—
Total	Total	$	4,225	$	(5,031)	Total	$	5,852	$	(6,592)

Three Months Ended June 30, 2022
Three Months Ended September 30, 2022						Three Months Ended September 30, 2022
LIHTC	LIHTC	$	1,240	$	(1,650)	LIHTC	$	1,240	$	(1,650)
FHTC	FHTC	215		(263)		FHTC	215		(262)
NMTC	NMTC	1,100		(1,375)		NMTC	2,237		(2,788)
Renewable Energy	Renewable Energy	210		—		Renewable Energy	210		—
Total	Total	$	2,765	$	(3,288)	Total	$	3,902	$	(4,700)

Six Months Ended June 30, 2023
Nine Months Ended September 30, 2023						Nine Months Ended September 30, 2023
LIHTC	LIHTC	$	2,927	$	(3,817)	LIHTC	$	6,135	$	(7,398)
FHTC	FHTC	848		(1,024)		FHTC	1,178		(1,423)
NMTC	NMTC	4,183		(5,222)		NMTC	6,275		(7,833)
Renewable Energy	Renewable Energy	492		—		Renewable Energy	714		—
Total	Total	$	8,450	$	(10,063)	Total	$	14,302	$	(16,654)

Six Months Ended June 30, 2022
Nine Months Ended September 30, 2022						Nine Months Ended September 30, 2022
LIHTC	LIHTC	$	2,493	$	(3,300)	LIHTC	$	3,734	$	(4,950)
FHTC	FHTC	420		(514)		FHTC	635		(776)
NMTC	NMTC	2,201		(2,750)		NMTC	4,439		(5,538)
Renewable Energy	Renewable Energy	420		—		Renewable Energy	629		—
Total	Total	$	5,534	$	(6,564)	Total	$	9,437	$	(11,264)

(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 10 – 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,							At or for the Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2023			2022			(dollars in thousands)	2023			2022
Outstanding at period end	Outstanding at period end	$	311,447		$	476,173		Outstanding at period end	$	279,061		$	438,053
Average amount outstanding during the period	Average amount outstanding during the period	376,298			458,459			Average amount outstanding during the period	351,362			450,966
Maximum amount outstanding at any month-end during the period	Maximum amount outstanding at any month-end during the period	430,537			509,275			Maximum amount outstanding at any month-end during the period	430,537			509,275
Weighted-average interest rate:	Weighted-average interest rate:							Weighted-average interest rate:
During the period	During the period	0.90		%	0.08		%	During the period	0.91		%	0.09		%
At period end	At period end	1.14		%	0.08		%	At period end	1.35		%	0.40		%

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, 2023											At September 30, 2023
		Remaining Contractual Maturity of the Agreements											Remaining Contractual Maturity of the Agreements
(dollars in thousands)	(dollars in thousands)	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater Than 90 days		Total		(dollars in thousands)	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater Than 90 days		Total
Repurchase Agreements:	Repurchase Agreements:											Repurchase Agreements:
U.S. Treasury and agency securities	U.S. Treasury and agency securities	$	311,447	$	—	$	—	$	—	$	311,447	U.S. Treasury and agency securities	$	279,061	$	—	$	—	$	—	$	279,061
Total	Total	$	311,447	$	—	$	—	$	—	$	311,447	Total	$	279,061	$	—	$	—	$	—	$	279,061

The fair value of securities pledged to secure repurchase agreements may decline. Old National has pledged securities valued at ~~125%~~107% of the gross outstanding balance of repurchase agreements at ~~June~~September 30, 2023 to manage this risk.

NOTE 11 – FEDERAL HOME LOAN BANK ADVANCES

The following table summarizes Old National Bank’s FHLB advances:


(dollars in thousands)	(dollars in thousands)	June 30, 2023		December 31, 2022		(dollars in thousands)	September 30, 2023		December 31, 2022
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
FHLB advances (fixed rates 0.00% to 5.61% and variable rates 5.35% to 5.36%) maturing December 2023 to September 2042						FHLB advances (fixed rates 0.00% to 5.61% and variable rates 5.35% to 5.36%) maturing December 2023 to September 2042	$	4,450,528	$	3,850,677
Fair value hedge basis adjustments and unamortized prepayment fees	Fair value hedge basis adjustments and unamortized prepayment fees	(29,345)		(21,659)		Fair value hedge basis adjustments and unamortized prepayment fees	(37,952)		(21,659)
Total	Total	$	4,771,183	$	3,829,018	Total	$	4,412,576	$	3,829,018

FHLB advances had weighted-average rates of ~~3.23%~~3.36% at ~~June~~September 30, 2023 and 3.15% at December 31, 2022. Certain FHLB advances are collateralized with ~~residential real estate~~ loans ~~at 148%~~and investment securities up to 190%.

At ~~June~~September 30, 2023, total unamortized prepayment fees related to debt modifications completed in prior years totaled ~~$17.2~~$15.7 million, compared to $20.2 million at December 31, 2022.

3233

Contractual maturities of FHLB advances at ~~June~~September 30, 2023 were as follows:


(dollars in thousands)
Due in 2023	$	100,000
Due in 2024	25,243
Due in 2025	550,285
Due in 2026	100,000

Thereafter	~~4,025,000~~3,675,000
Fair value hedge basis adjustments and unamortized prepayment fees	~~(29,345)~~(37,952)
Total	$	~~4,771,183~~4,412,576

NOTE 12 – OTHER BORROWINGS

The following table summarizes Old National’s other borrowings:


(dollars in thousands)	(dollars in thousands)	June 30, 2023		December 31, 2022		(dollars in thousands)	September 30, 2023		December 31, 2022
Old National Bancorp:	Old National Bancorp:					Old National Bancorp:
Senior unsecured notes (fixed rate 4.125%) maturing August 2024	Senior 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 notes	Unamortized debt issuance costs related to senior unsecured notes	(169)		(247)		Unamortized debt issuance costs related to senior unsecured notes	(130)		(247)
Subordinated debentures (fixed rate 5.875%) maturing September 2026	Subordinated debentures (fixed rate 5.875%) maturing September 2026	150,000		150,000		Subordinated debentures (fixed rate 5.875%) maturing September 2026	150,000		150,000
Junior subordinated debentures (variable rates of 6.86% to 8.88%) maturing July 2031 to September 2037		136,643		136,643
Junior subordinated debentures (rates of 6.95% to 9.21%) maturing July 2031 to September 2037						Junior subordinated debentures (rates of 6.95% to 9.21%) maturing July 2031 to September 2037	136,643		136,643
Other basis adjustments	Other basis adjustments	20,785		23,363		Other basis adjustments	19,496		23,363
Old National Bank:	Old National Bank:					Old National Bank:
Finance lease liabilities	Finance lease liabilities	21,346		13,469		Finance lease liabilities	21,595		13,469
Subordinated debentures (variable rate 9.66%) maturing October 2025		12,000		12,000
Subordinated debentures (variable rate 9.99%) maturing October 2025						Subordinated debentures (variable rate 9.99%) maturing October 2025	12,000		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		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)	155,968		89,588		Other (1)	205,106		89,588
Total other borrowings	Total other borrowings	$	815,318	$	743,003	Total other borrowings	$	863,455	$	743,003

(1)Includes overnight borrowings to collateralize certain derivative positions totaling ~~$155.1~~$204.5 million at ~~June~~September 30, 2023 and $88.0 million at December 31, 2022.

Contractual maturities of other borrowings at ~~June~~September 30, 2023 were as follows:


(dollars in thousands)
Due in 2023	$	~~156,314~~205,160
Due in 2024	~~177,609~~177,653
Due in 2025	~~14,696~~14,740
Due in 2026	~~151,529~~151,576
Due in 2027	~~1,587~~1,636
Thereafter	~~292,059~~292,738
Unamortized debt issuance costs and other basis adjustments	~~21,524~~19,952
Total	$	~~815,318~~863,455

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 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.

3334

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~~September 30, 2023:

(dollars in thousands)

Rate at

June 30,
2023

(dollars in thousands)

Rate at

September 30,
2023

Name of Trust

Issuance Date

Issuance
Amount

Rate

Maturity Date

Name of Trust

Issuance Date

Issuance
Amount

Rate

Maturity Date

Bridgeview Statutory Trust I

July 2001

15,464

3-month LIBOR plus 3.58%

8.88%

July 31, 2031

Bridgeview Statutory Trust I

July 2001

15,464

3-month SOFR plus 3.58%

9.21%

July 31, 2031

Bridgeview Capital Trust II

December 2002

15,464

3-month LIBOR plus 3.35%

8.61%

January 7, 2033

Bridgeview Capital Trust II

December 2002

15,464

3-month SOFR plus 3.35%

8.92%

January 7, 2033

First Midwest Capital Trust I

November 2003

37,825

6.95% fixed

6.95%

December 1, 2033

First Midwest Capital Trust I

November 2003

37,825

6.95% fixed

6.95%

December 1, 2033

St. Joseph Capital Trust II

March 2005

5,155

3-month LIBOR plus 1.75%

7.26%

March 17, 2035

St. Joseph Capital Trust II

March 2005

5,155

3-month SOFR plus 1.75%

7.42%

March 17, 2035

Northern States Statutory Trust I

September 2005

10,310

3-month LIBOR plus 1.80%

7.35%

September 15, 2035

Northern States Statutory Trust I

September 2005

10,310

3-month SOFR plus 1.80%

7.47%

September 15, 2035

Anchor Capital Trust III

August 2005

5,000

3-month LIBOR plus 1.55%

7.09%

September 30, 2035

Anchor Capital Trust III

August 2005

5,000

3-month SOFR plus 1.55%

7.21%

September 30, 2035

Great Lakes Statutory Trust II

December 2005

6,186

3-month LIBOR plus 1.40%

6.95%

December 15, 2035

Great Lakes Statutory Trust II

December 2005

6,186

3-month SOFR plus 1.40%

7.07%

December 15, 2035

Home Federal Statutory
Trust I

September 2006

15,464

3-month LIBOR plus 1.65%

7.20%

September 15, 2036

Home Federal Statutory
Trust I

September 2006

15,464

3-month SOFR plus 1.65%

7.32%

September 15, 2036

Monroe Bancorp Capital
Trust I

July 2006

3,093

3-month LIBOR plus 1.60%

6.86%

October 7, 2036

Monroe Bancorp Capital
Trust I

July 2006

3,093

3-month SOFR plus 1.60%

7.17%

October 7, 2036

Tower Capital Trust 3

December 2006

9,279

3-month LIBOR plus 1.69%

7.19%

March 1, 2037

Tower Capital Trust 3

December 2006

9,279

3-month SOFR plus 1.69%

7.36%

March 1, 2037

Monroe Bancorp Statutory
Trust II

March 2007

5,155

3-month LIBOR plus 1.60%

7.15%

June 15, 2037

Monroe Bancorp Statutory
Trust II

March 2007

5,155

3-month SOFR plus 1.60%

7.27%

June 15, 2037

Great Lakes Statutory Trust III

June 2007

8,248

3-month LIBOR plus 1.70%

7.25%

September 15, 2037

Great Lakes Statutory Trust III

June 2007

8,248

3-month SOFR plus 1.70%

7.37%

September 15, 2037

Total

136,643

Total

136,643

Subordinated Debentures

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~~currently have a floating rate of interest equal to the three-month ~~LIBOR~~term SOFR rate plus ~~4.356%~~4.618%.

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 NMTC 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 NMTC seven-year compliance period. See Note 9 to the consolidated financial statements for additional information on the Company’s NMTC investments.

Finance Lease Liabilities

Old National has long-term finance lease liabilities for certain banking centers and equipment totaling ~~$21.3~~$21.6 million at ~~June~~September 30, 2023. See Note 7 to the consolidated financial statements for a maturity analysis of the Company’s finance lease liabilities.

3435

NOTE 13 – 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 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, 2023
Three Months Ended September 30, 2023												Three Months Ended September 30, 2023
Balance at beginning of period	Balance at beginning of period	$	(611,260)	$	(106,966)	$	9,872	$	(4)	$	(708,358)	Balance at beginning of period	$	(701,393)	$	(103,144)	$	(4,096)	$	—	$	(808,633)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	(90,121)		—		9,840		—		(80,281)		Other comprehensive income (loss) before reclassifications	(156,660)		—		(11,546)		—		(168,206)
Amounts reclassified from AOCI to income (1)	Amounts reclassified from AOCI to income (1)	(12)		3,822		(23,808)		4		(19,994)		Amounts reclassified from AOCI to income (1)	178		4,193		3,653		—		8,024
Balance at end of period	Balance at end of period	$	(701,393)	$	(103,144)	$	(4,096)	$	—	$	(808,633)	Balance at end of period	$	(857,875)	$	(98,951)	$	(11,989)	$	—	$	(968,815)

Three Months Ended June 30, 2022
Three Months Ended September 30, 2022												Three Months Ended September 30, 2022
Balance at beginning of period	Balance at beginning of period	$	(314,364)	$	(16,727)	$	(7,132)	$	24	$	(338,199)	Balance at beginning of period	$	(437,075)	$	(122,199)	$	(9,875)	$	16	$	(569,133)
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	(217,401)		—		(27,725)		—		(245,126)
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)	131		5,121		565		(8)		5,809
Balance at end of period	Balance at end of period	$	(437,075)	$	(122,199)	$	(9,875)	$	16	$	(569,133)	Balance at end of period	$	(654,345)	$	(117,078)	$	(37,035)	$	8	$	(808,450)

Six Months Ended June 30, 2023
Nine Months Ended September 30, 2023												Nine Months Ended September 30, 2023
Balance at beginning of period	Balance at beginning of period	$	(642,346)	$	(112,664)	$	(31,549)	$	137	$	(786,422)	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	(62,902)		1,325		45,825		—		(15,752)		Other comprehensive income (loss) before reclassifications	(219,562)		1,325		34,279		—		(183,958)
Amounts reclassified from AOCI to income (1)	Amounts reclassified from AOCI to income (1)	3,855		8,195		(18,372)		(137)		(6,459)		Amounts reclassified from AOCI to income (1)	4,033		12,388		(14,719)		(137)		1,565
Balance at end of period	Balance at end of period	$	(701,393)	$	(103,144)	$	(4,096)	$	—	$	(808,633)	Balance at end of period	$	(857,875)	$	(98,951)	$	(11,989)	$	—	$	(968,815)

Six Months Ended June 30, 2022
Nine Months Ended September 30, 2022												Nine Months Ended September 30, 2022
Balance at beginning of period	Balance 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	(651,330)		(125,229)		(37,473)		—		(814,032)
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)	(65)		8,151		(105)		(24)		7,957
Balance at end of period	Balance at end of period	$	(437,075)	$	(122,199)	$	(9,875)	$	16	$	(569,133)	Balance at end of period	$	(654,345)	$	(117,078)	$	(37,035)	$	8	$	(808,450)

(1)See table below for details about reclassifications to income.

3536

The following table summarizes the amounts reclassified out of each component of AOCI for the three months ended ~~June~~September 30, 2023 and 2022:


		Three Months Ended June 30,						Three Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2023		2022			(dollars in thousands)	2023		2022
Details about AOCI Components	Details about AOCI Components	Amount Reclassified from AOCI				Affected Line Item in the Statement of Income	Details about AOCI Components	Amount 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	$	17	$	(85)	Debt securities gains (losses), net	Unrealized gains and losses on available-for-sale securities	$	(241)	$	(172)	Debt securities gains (losses), net
		(5)		20		Income tax (expense) benefit		63		41		Income tax (expense) benefit
		$	12	$	(65)	Net income (loss)		$	(178)	$	(131)	Net income (loss)
Unrealized gains and losses on held-to-maturity securities	Unrealized gains and losses on held-to-maturity securities	$	(5,122)	$	(3,692)	Interest income (expense)	Unrealized gains and losses on held-to-maturity securities	$	(5,623)	$	(6,772)	Interest income (expense)
		1,300		898		Income tax (expense) benefit		1,430		1,651		Income tax (expense) benefit
		$	(3,822)	$	(2,794)	Net income (loss)		$	(4,193)	$	(5,121)	Net income (loss)
Gains and losses on hedges Interest rate contracts	Gains and losses on hedges Interest rate contracts	$	32,112	$	219	Interest income (expense)	Gains and losses on hedges Interest rate contracts	$	(4,927)	$	(749)	Interest income (expense)
		(8,304)		(54)		Income tax (expense) benefit		1,274		184		Income tax (expense) benefit
		$	23,808	$	165	Net income (loss)		$	(3,653)	$	(565)	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)	$	(6)	$	10	Salaries and employee benefits	Actuarial gains (losses)	$	—	$	11	Salaries and employee benefits
		2		(2)		Income tax (expense) benefit		—		(3)		Income tax (expense) benefit
		$	(4)	$	8	Net income (loss)		$	—	$	8	Net income (loss)

Total reclassifications for the period	Total reclassifications for the period	$	19,994	$	(2,686)	Net income (loss)	Total reclassifications for the period	$	(8,024)	$	(5,809)	Net income (loss)

The following table summarizes the amounts reclassified out of each component of AOCI for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022:


		Six Months Ended June 30,						Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2023		2022			(dollars in thousands)	2023		2022
Details about AOCI Components	Details about AOCI Components	Amount Reclassified from AOCI				Affected Line Item in the Statement of Income	Details about AOCI Components	Amount 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	$	(5,199)	$	257	Debt securities gains (losses), net	Unrealized gains and losses on available-for-sale securities	$	(5,440)	$	85	Debt securities gains (losses), net
		1,344		(61)		Income tax (expense) benefit		1,407		(20)		Income tax (expense) benefit
		$	(3,855)	$	196	Net income (loss)		$	(4,033)	$	65	Net income (loss)
Unrealized gains and losses on held-to-maturity securities	Unrealized gains and losses on held-to-maturity securities	$	(10,951)	$	(4,002)	Interest income (expense)	Unrealized gains and losses on held-to-maturity securities	$	(16,574)	$	(10,774)	Interest income (expense)
		2,756		972		Income tax (expense) benefit		4,186		2,623		Income tax (expense) benefit
		$	(8,195)	$	(3,030)	Net income (loss)		$	(12,388)	$	(8,151)	Net income (loss)
Gains and losses on hedges Interest rate contracts	Gains and losses on hedges Interest rate contracts	$	24,820	$	888	Interest income (expense)	Gains and losses on hedges Interest rate contracts	$	19,893	$	139	Interest income (expense)
		(6,448)		(218)		Income tax (expense) benefit		(5,174)		(34)		Income tax (expense) benefit
		$	18,372	$	670	Net income (loss)		$	14,719	$	105	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)	$	182	$	21	Salaries and employee benefits	Actuarial gains (losses)	$	182	$	32	Salaries and employee benefits
		(45)		(5)		Income tax (expense) benefit		(45)		(8)		Income tax (expense) benefit
		$	137	$	16	Net income (loss)		$	137	$	24	Net income (loss)

Total reclassifications for the period	Total reclassifications for the period	$	6,459	$	(2,148)	Net income (loss)	Total reclassifications for the period	$	(1,565)	$	(7,957)	Net income (loss)

3637

NOTE 14 – 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 September 30,						Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2023			2022			2023			2022			(dollars in thousands)	2023			2022			2023			2022
Provision at statutory rate of 21%	Provision at statutory rate of 21%	$	42,510		$	29,389		$	81,995		$	21,766		Provision at statutory rate of 21%	$	40,358		$	37,598		$	122,352		$	59,365
Tax-exempt income:	Tax-exempt income:													Tax-exempt income:
Tax-exempt interest	Tax-exempt interest	(4,605)			(3,413)			(9,091)			(6,406)			Tax-exempt interest	(4,625)			(3,929)			(13,716)			(10,335)
Section 291/265 interest disallowance	Section 291/265 interest disallowance	532			38			918			66			Section 291/265 interest disallowance	675			85			1,593			150
Company-owned life insurance income	Company-owned life insurance income	(945)			(938)			(1,572)			(1,656)			Company-owned life insurance income	(743)			(684)			(2,315)			(2,340)
Tax-exempt income	Tax-exempt income	(5,018)			(4,313)			(9,745)			(7,996)			Tax-exempt income	(4,693)			(4,528)			(14,438)			(12,525)
State income taxes	State income taxes	8,552			4,085			16,693			758			State income taxes	8,163			7,050			24,856			7,808
Interim period effective rate adjustment	Interim period effective rate adjustment	993			(3,967)			(723)			3,073			Interim period effective rate adjustment	116			(31)			(607)			3,042
Tax credit investments - federal	Tax credit investments - federal	(2,526)			(1,292)			(5,051)			(2,561)			Tax credit investments - federal	(2,071)			(2,407)			(7,122)			(4,968)
Officer compensation limitation	Officer compensation limitation	1,040			402			2,080			651			Officer compensation limitation	1,040			401			3,120			1,053
Non-deductible FDIC premiums	Non-deductible FDIC premiums	2,037			885			4,147			1,371			Non-deductible FDIC premiums	1,949			1,178			6,096			2,549
Other, net	Other, net	(195)			(225)			(582)			(812)			Other, net	(558)			(374)			(1,139)			(1,187)
Income tax expense (benefit)	Income tax expense (benefit)	$	47,393		$	24,964		$	88,814		$	16,250		Income tax expense (benefit)	$	44,304		$	38,887		$	133,118		$	55,137
Effective tax rate	Effective tax rate	23.4		%	17.8		%	22.8		%	15.7		%	Effective tax rate	23.1		%	21.7		%	22.9		%	19.5		%

The provision for income taxes was recorded at ~~June~~September 30, 2023 and 2022 based on the current estimate of the effective annual rate.

The higher effective tax rate during the ~~three and six~~nine months ended ~~June~~September 30, 2023 compared to the same ~~periods~~period in 2022 ~~was primarily the result of~~reflected an increase in pre-tax book income combined with smaller increases in tax-exempt income and tax credits. Other contributing factors were increases in non-deductible officer compensation and non-deductible FDIC premiums as well as the 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~~September 30, 2023, net deferred tax assets totaled ~~$431.2~~$480.7 million, compared to $435.8 million at December 31, 2022. No valuation allowance was required on the Company’s deferred tax assets at September 30, 2023 or December 31, 2022.

The Company’s retained earnings at ~~June~~September 30, 2023 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, 2023 or December 31, 2022 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 ~~$72.7~~$68.4 million at ~~June~~September 30, 2023 and $81.5 million at December 31, 2022. This federal net operating loss was acquired from the acquisition of Anchor 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 ~~$118.5~~$115.6 million at ~~June~~September 30, 2023 and $124.4 million at December 31, 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.

3738

NOTE 15 – 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 (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~~$150.0 million notional amount at ~~June~~both September 30, 2023 and ~~$150.0 million notional amount at~~ December 31, 2022. Interest rate collars and floors related to variable-rate commercial loan pools were designated as cash flow hedges totaling ~~$1.4~~$1.5 billion notional amount at ~~June~~September 30, 2023 and $1.9 billion notional amount at December 31, 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 $700.0 million notional amount at ~~June~~September 30, 2023 and $300.0 million notional amount at December 31, 2022. Interest rate swaps of certain available-for-sale investment securities were designated as fair value hedges totaling $998.1 million notional amount at September 30, 2023 and $910.0 million notional amount at ~~both June 30, 2023 and~~ December 31, 2022. The hedges were determined to be effective during all periods presented and we expect them to remain effective during the remaining terms.

3839

The following table summarizes Old National’s derivatives designated as hedges:


		June 30, 2023						December 31, 2022							September 30, 2023						December 31, 2022
				Fair Value						Fair Value							Fair Value						Fair 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 hedges	Cash flow hedges													Cash flow hedges
Interest rate collars and floors on loan pools	Interest rate collars and floors on loan pools	$	1,400,000	$	2,169	$	15,563	$	1,900,000	$	11,764	$	47,859	Interest rate collars and floors on loan pools	$	1,500,000	$	2,214	$	27,749	$	1,900,000	$	11,764	$	47,859
Interest rate swaps on borrowings ~~(4)~~(3)	Interest rate swaps on borrowings ~~(4)~~(3)	250,000		—		—		150,000		—		—		Interest rate swaps on borrowings ~~(4)~~(3)	150,000		—		—		150,000		—		—
Fair value hedges	Fair value hedges													Fair value hedges
Interest rate swaps on investment securities (3)	Interest rate swaps on investment securities (3)	909,957		—		—		909,957		—		—		Interest rate swaps on investment securities (3)	998,107		—		—		909,957		—		—
Interest rate swaps on borrowings (3)	Interest rate swaps on borrowings (3)	700,000		—		—		300,000		—		—		Interest rate swaps on borrowings (3)	700,000		—		—		300,000		—		—
Total	Total			$	2,169	$	15,563			$	11,764	$	47,859	Total			$	2,214	$	27,749			$	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 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 September 30, 2023									Three Months Ended September 30, 2023
Interest rate contracts	Interest rate contracts	Interest income/(expense)	$	(11,101)	Fixed-rate debt	Interest income/(expense)	$	10,956	Interest rate contracts	Interest income/(expense)	$	(9,553)	Fixed-rate debt	Interest income/(expense)	$	9,566
Interest rate contracts	Interest rate contracts	Interest income/(expense)	24,846		Fixed-rate investment securities	Interest income/(expense)	(24,867)		Interest rate contracts	Interest income/(expense)	45,537		Fixed-rate investment securities	Interest income/(expense)	(46,055)
Total	Total		$	13,745			$	(13,911)	Total		$	35,984			$	(36,489)

Three Months Ended June 30, 2022
Three Months Ended September 30, 2022									Three Months Ended September 30, 2022
Interest rate contracts	Interest rate contracts	Interest income/(expense)	$	(2,524)	Fixed-rate debt	Interest income/(expense)	$	2,600	Interest rate contracts	Interest income/(expense)	$	(532)	Fixed-rate debt	Interest income/(expense)	$	638
Interest rate contracts	Interest rate contracts	Interest income/(expense)	53,779		Fixed-rate investment securities	Interest income/(expense)	(53,762)		Interest rate contracts	Interest income/(expense)	47,963		Fixed-rate investment securities	Interest income/(expense)	(47,975)
Total	Total		$	51,255			$	(51,162)	Total		$	47,431			$	(47,337)

Six Months Ended June 30, 2023
Nine Months Ended September 30, 2023									Nine Months Ended September 30, 2023
Interest rate contracts	Interest rate contracts	Interest income/(expense)	$	(8,948)	Fixed-rate debt	Interest income/(expense)	$	8,738	Interest rate contracts	Interest income/(expense)	$	(18,500)	Fixed-rate debt	Interest income/(expense)	$	18,303
Interest rate contracts	Interest rate contracts	Interest income/(expense)	(38,269)		Fixed-rate investment securities	Interest income/(expense)	38,384		Interest rate contracts	Interest income/(expense)	7,268		Fixed-rate investment securities	Interest income/(expense)	(7,671)
Total	Total		$	(47,217)			$	47,122	Total		$	(11,232)			$	10,632

Six Months Ended June 30, 2022
Nine Months Ended September 30, 2022									Nine Months Ended September 30, 2022
Interest rate contracts	Interest rate contracts	Interest income/(expense)	$	(7,357)	Fixed-rate debt	Interest income/(expense)	$	7,555	Interest rate contracts	Interest income/(expense)	$	(7,889)	Fixed-rate debt	Interest income/(expense)	$	8,193
Interest rate contracts	Interest rate contracts	Interest income/(expense)	111,433		Fixed-rate investment securities	Interest income/(expense)	(111,791)		Interest rate contracts	Interest income/(expense)	159,397		Fixed-rate investment securities	Interest income/(expense)	(159,767)
Total	Total		$	104,076			$	(104,236)	Total		$	151,508			$	(151,574)

3940

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 September 30,
(dollars in thousands)	(dollars in thousands)		2023		2022		2023		2022		(dollars in thousands)		2023		2022		2023		2022
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 contracts	Interest rate contracts	Interest income/(expense)	$	13,272	$	(3,418)	$	31,078	$	219	Interest rate contracts	Interest income/(expense)	$	(15,574)	$	(36,755)	$	(5,960)	$	(749)
			Six Months Ended June 30,										Nine Months Ended September 30,
			2023		2022		2023		2022				2023		2022		2023		2022
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 contracts	Interest rate contracts	Interest income/(expense)	$	19,875	$	(12,924)	$	23,441	$	888	Interest rate contracts	Interest income/(expense)	$	4,302	$	(49,679)	$	17,481	$	139

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 ~~$5.6~~$5.8 million will be reclassified to interest income and ~~$8.9~~$26.3 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~~September 30, 2023, the notional amounts of the interest rate lock commitments were ~~$45.2~~$42.5 million and forward commitments were ~~$61.1~~$54.7 million. At December 31, 2022, the notional amounts of the interest rate lock commitments were $21.4 million and forward commitments were $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. ~~At June 30, 2023, the~~The notional amounts of these customer derivative instruments and the offsetting counterparty derivative instruments were ~~$5.6~~$5.8 billion ~~and $8.2 billion, respectively. Derivative instruments as of June~~at September 30, 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 $2.6and $5.2 billion ~~as of June 30, 2023. Remaining derivative instruments referencing LIBOR will mature after June 30, 2023. At~~at December 31, ~~2022, customer derivative instruments and offsetting counterparty derivative instruments were $5.2 billion.~~2022. 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.

4041

The following table summarizes Old National’s derivatives not designated as hedges:


		June 30, 2023						December 31, 2022							September 30, 2023						December 31, 2022
				Fair Value						Fair Value							Fair Value						Fair 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 commitments	Interest rate lock commitments	$	45,216	$	330	$	—	$	21,401	$	93	$	—	Interest rate lock commitments	$	42,492	$	—	$	146	$	21,401	$	93	$	—
Forward mortgage loan contracts	Forward mortgage loan contracts	61,084		164		—		30,330		32		—		Forward mortgage loan contracts	54,730		1,031		—		30,330		32		—
Customer interest rate swaps ~~(4)~~	Customer interest rate swaps ~~(4)~~	5,589,059		5,621		318,890		5,220,363		5,676		326,924		Customer interest rate swaps ~~(4)~~	5,775,638		1,208		379,864		5,220,363		5,676		326,924
Counterparty interest rate swaps ~~(4)~~(3)	Counterparty interest rate swaps ~~(4)~~(3)	8,206,655		175,581		5,662		5,220,363		151,111		5,711		Counterparty interest rate swaps ~~(4)~~(3)	5,775,634		222,907		1,213		5,220,363		151,111		5,711
Customer foreign currency forward contracts		12,851		441		22		8,341		253		42
Counterparty foreign currency forward contracts		12,894		18		262		8,297		72		168
Customer foreign currency contracts														Customer foreign currency contracts	13,234		218		156		8,341		253		42
Counterparty foreign currency contracts														Counterparty foreign currency contracts	12,970		255		141		8,297		72		168
Total	Total			$	182,155	$	324,836			$	157,237	$	332,845	Total			$	225,619	$	381,520			$	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 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 September 30,
(dollars in thousands)	(dollars in thousands)		2023		2022		(dollars in thousands)		2023		2022
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)	$	837	$	449	Interest rate contracts (1)	Other income/(expense)	$	426	$	108
Mortgage contracts	Mortgage contracts	Mortgage banking revenue	262		(1,503)		Mortgage contracts	Mortgage banking revenue	391		638
Foreign currency contracts	Foreign currency contracts	Other income/(expense)	(12)		65		Foreign currency contracts	Other income/(expense)	(3)		75
Total	Total		$	1,087	$	(989)	Total		$	814	$	821

			Six Months Ended June 30,						Nine Months Ended September 30,
			2023		2022				2023		2022
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)	$	699	$	950	Interest rate contracts (1)	Other income/(expense)	$	1,125	$	1,058
Mortgage contracts	Mortgage contracts	Mortgage banking revenue	369		(1,374)		Mortgage contracts	Mortgage banking revenue	760		(735)
Foreign currency contracts	Foreign currency contracts	Other income/(expense)	(13)		38		Foreign currency contracts	Other income/(expense)	(16)		113
Total	Total		$	1,055	$	(386)	Total		$	1,869	$	436

(1)Includes the valuation differences between the customer and offsetting swaps.

NOTE 16 – COMMITMENTS, CONTINGENCIES, AND FINANCIAL GUARANTEES

Litigation

At ~~June~~September 30, 2023, there were certain legal proceedings pending against the Company and its subsidiaries in the ordinary course of business. While the outcome of any legal proceeding is inherently uncertain, based on information currently available, the Company’s management does not expect that any potential liabilities arising from pending legal matters will have a material adverse effect on the Company’s business, financial position, 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

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. These commitments are not recorded in the consolidated financial statements.

The following table summarizes Old National Bank’s unfunded loan commitments and standby letters of credit:


(dollars in thousands)	(dollars in thousands)	June 30, 2023		December 31, 2022		(dollars in thousands)	September 30, 2023		December 31, 2022
Unfunded loan commitments	Unfunded loan commitments	$	9,380,354	$	8,979,334	Unfunded loan commitments	$	9,142,538	$	8,979,334
Standby letters of credit (1)	Standby letters of credit (1)	182,418		174,070		Standby letters of credit (1)	184,027		174,070

(1)Notional amount, which represents the maximum amount of future funding requirements. The carrying value was ~~$0.9~~$1.2 million at ~~June~~September 30, 2023 and $0.8 million at December 31, 2022.

At ~~June~~September 30, 2023, approximately 4% of the unfunded loan commitments had fixed rates, with the remainder having floating rates ranging from 0% to ~~22%~~23%. The allowance for unfunded loan commitments totaled ~~$37.0~~$33.0 million at ~~June~~September 30, 2023 and $32.2 million at December 31, 2022.

Old National is a party in risk participation transactions of interest rate swaps, which had total notional amounts of ~~$441.9~~$522.5 million at ~~June~~September 30, 2023 and $398.9 million at December 31, 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~~September 30, 2023, the conversion ratio was ~~1.5902.~~1.5875. 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~~September 30, 2023 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 17 – 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.

4243

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~~SOFR 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.

Loans ~~held for sale~~held-for-sale: The fair value of loans ~~held for sale~~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~~market quotes developed using ~~market data~~observable inputs as of the valuation date (Level 2).

4344

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, 2023 Using									Fair Value Measurements at September 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)
Financial Assets	Financial Assets									Financial Assets
Equity securities	Equity securities	$	71,953	$	71,953	$	—	$	—	Equity securities	$	69,880	$	69,880	$	—	$	—
Investment securities available-for-sale:	Investment securities available-for-sale:									Investment securities available-for-sale:
U.S. Treasury	U.S. Treasury	312,412		312,412		—		—		U.S. Treasury	548,126		548,126		—		—
U.S. government-sponsored entities and agencies	U.S. government-sponsored entities and agencies	1,174,356		—		1,174,356		—		U.S. government-sponsored entities and agencies	1,142,900		—		1,142,900		—
Mortgage-backed securities - Agency	Mortgage-backed securities - Agency	4,097,771		—		4,097,771		—		Mortgage-backed securities - Agency	3,862,705		—		3,862,705		—
States and political subdivisions	States and political subdivisions	598,782		—		598,782		—		States and political subdivisions	544,944		—		544,944		—
Pooled trust preferred securities	Pooled trust preferred securities	10,994		—		10,994		—		Pooled trust preferred securities	11,125		—		11,125		—
Other securities	Other securities	306,200		—		306,200		—		Other securities	304,961		—		304,961		—
Loans held for sale		114,369		—		114,369		—
Loans held-for-sale										Loans held-for-sale	122,033		—		122,033		—
Derivative assets	Derivative assets	184,324		—		184,324		—		Derivative assets	227,833		—		227,833		—
Financial Liabilities	Financial Liabilities									Financial Liabilities
Derivative liabilities	Derivative liabilities	340,399		—		340,399		—		Derivative liabilities	409,269		—		409,269		—


				Fair Value Measurements at December 31, 2022 Using									Fair Value Measurements at December 31, 2022 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)
Financial Assets	Financial Assets									Financial Assets
Equity securities	Equity securities	$	52,507	$	52,507	$	—	$	—	Equity securities	$	52,507	$	52,507	$	—	$	—
Investment securities available-for-sale:	Investment securities available-for-sale:									Investment securities available-for-sale:
U.S. Treasury	U.S. Treasury	200,927		200,927		—		—		U.S. Treasury	200,927		200,927		—		—
U.S. government-sponsored entities and agencies	U.S. government-sponsored entities and agencies	1,175,080		—		1,175,080		—		U.S. government-sponsored entities and agencies	1,175,080		—		1,175,080		—
Mortgage-backed securities - Agency	Mortgage-backed securities - Agency	4,369,902		—		4,369,902		—		Mortgage-backed securities - Agency	4,369,902		—		4,369,902		—
States and political subdivisions	States and political subdivisions	663,852		—		663,852		—		States and political subdivisions	663,852		—		663,852		—
Pooled trust preferred securities	Pooled trust preferred securities	10,811		—		10,811		—		Pooled trust preferred securities	10,811		—		10,811		—
Other securities	Other securities	353,140		—		353,140		—		Other securities	353,140		—		353,140		—
Loans held for sale		11,926		—		11,926		—
Loans held-for-sale										Loans held-for-sale	11,926		—		11,926		—
Derivative assets	Derivative assets	169,001		—		169,001		—		Derivative assets	169,001		—		169,001		—
Financial Liabilities	Financial Liabilities									Financial Liabilities
Derivative liabilities	Derivative liabilities	380,704		—		380,704		—		Derivative liabilities	380,704		—		380,704		—

Non-Recurring Basis

Assets measured at fair value at ~~June~~September 30, 2023 on a non-recurring basis are summarized below:


				Fair Value Measurements at June 30, 2023 Using									Fair Value Measurements at September 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 loans	Commercial loans	$	12,615	$	—	$	—	$	12,615	Commercial loans	$	10,783	$	—	$	—	$	10,783
Commercial real estate loans	Commercial real estate loans	85,891		—		—		85,891		Commercial real estate loans	75,720		—		—		75,720
Foreclosed Assets:	Foreclosed Assets:									Foreclosed Assets:
Commercial	Commercial	1,560		—		—		1,560		Commercial	1,879		—		—		1,879

4445

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 ~~$127.9~~$117.5 million, with a valuation allowance of ~~$29.4~~$31.0 million at ~~June~~September 30, 2023. Old National recorded provision expense associated with these loans totaling ~~$7.9~~$2.1 million and ~~$19.8~~$21.9 million for the three and ~~six~~nine months ended ~~June~~September 30, 2023, respectively. Old National recorded provision expense associated with commercial and commercial real estate loans that were deemed collateral dependent totaling ~~$12.8~~$7.3 million and ~~$28.6~~$20.1 million for the three and ~~six~~nine months ended ~~June~~September 30, 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 ~~$1.6~~$1.9 million at ~~June~~September 30, 2023. There were ~~$0.1 million~~$26 thousand of write-downs on other real estate owned for the three ~~and six~~ months ended ~~June~~September 30, 2023 and $0.1 million for nine months ended September 30, 2023. There were write-downs totaling ~~$0.1~~$0.2 million and ~~$0.3~~$0.6 million for the three and ~~six~~nine months ended ~~June~~September 30, 2022, 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 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~~September 30, 2023 and no impairments or recoveries recorded during the three or ~~six~~nine months ended ~~June~~September 30, 2023. Old National recorded immaterial recoveries associated with loan servicing rights during the three and ~~six~~nine months ended ~~June~~September 30, 2022.

Assets measured at fair value at December 31, 2022 on a non-recurring basis are summarized below:


			Fair Value Measurements at December 31, 2022 Using
(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:
Commercial loans	$	22,562	$	—	$	—	$	22,562
Commercial real estate loans	48,026		—		—		48,026

At December 31, 2022, commercial and commercial real estate loans that are deemed collateral dependent had a principal amount of $92.0 million, with a valuation allowance of $21.5 million.

4546

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 Value

Valuation Techniques

Unobservable Input

Range (Weighted Average) (1)

~~June~~September 30, 2023

Collateral Dependent Loans

Commercial loans

~~12,615~~10,783

Discounted

Discount for type of property,

9%10% - ~~50% (35%~~40% (33%)

cash flow

age of appraisal, and current status

Commercial real estate loans

~~85,891~~75,720

Discounted

Discount for type of property,

0%1% - ~~45% (13%~~38% (17%)

cash flow

age of appraisal, and current status

Foreclosed Assets

Commercial real estate

~~1,560~~1,879

Fair value of

Discount for type of property,

4% - 17% (6%)

collateral

age of appraisal, and current status

December 31, 2022

Collateral Dependent Loans

Commercial loans

22,562

Discounted

Discount for type of property,

10% - 47% (28%)

cash flow

age of appraisal, and current status

Commercial real estate loans

48,026

Discounted

Discount for type of property,

1% - 26% (11%)

cash flow

age 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-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.

Loans ~~Held For Sale~~Held-For-Sale

Old National has elected the fair value option for loans ~~held for sale.~~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 any on nonaccrual status. Interest income for loans ~~held for sale~~held-for-sale is included in the income statement totaling ~~$0.3~~$0.4 million and ~~$0.5~~$0.9 million for the three and ~~six~~nine months ended ~~June~~September 30, 2023, respectively, compared to ~~$0.7~~$0.4 million and ~~$1.2~~$1.6 million for the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively.

Newly originated conforming fixed-rate and adjustable-rate first mortgage 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 Value Difference 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


(dollars in thousands)	Aggregate Fair Value		Difference		Contractual Principal
September 30, 2023
Loans held-for-sale	$	122,033	$	72	$	121,961
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.

4647

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 Income Interest (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 $ 9 $ — $ 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) $ 9 $ (3) $ (1,059)


(dollars in thousands)	Other Gains and (Losses)		Interest Income		Interest (Expense)		Total Changes in Fair Values Included in Current Period Earnings
Three Months Ended September 30, 2023
Loans held-for-sale	$	(327)	$	12	$	—	$	(315)

Three Months Ended September 30, 2022
Loans held-for-sale	$	(710)	$	1	$	—	$	(709)

Nine Months Ended September 30, 2023
Loans held-for-sale	$	(151)	$	2	$	—	$	(149)

Nine Months Ended September 30, 2022
Loans held-for-sale	$	(1,775)	$	7	$	—	$	(1,768)

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, 2023 Using									Fair Value Measurements at September 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)
Financial Assets	Financial 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	$	1,197,886	$	1,197,886	$	—	$	—	Cash, due from banks, money market, and other interest-earning investments	$	1,663,430	$	1,663,430	$	—	$	—
Investment securities held-to-maturity:	Investment securities held-to-maturity:									Investment securities held-to-maturity:
U.S. government-sponsored entities and agencies	U.S. government-sponsored entities and agencies	822,517		—		655,446		—		U.S. government-sponsored entities and agencies	824,223		—		617,010		—
Mortgage-backed securities - Agency	Mortgage-backed securities - Agency	1,070,687		—		928,496		—		Mortgage-backed securities - Agency	1,043,585		—		847,652		—
State and political subdivisions	State and political subdivisions	1,161,793		—		1,019,116		—		State and political subdivisions	1,160,106		—		928,959		—

Loans, net:	Loans, net:									Loans, net:
Commercial	Commercial	9,569,141		—		—		9,330,160		Commercial	9,207,028		—		—		9,078,129
Commercial real estate	Commercial real estate	13,312,233		—		—		12,907,098		Commercial real estate	13,770,202		—		—		13,302,502
Residential real estate	Residential real estate	6,664,059		—		—		5,831,513		Residential real estate	6,675,508		—		—		5,630,855
Consumer credit	Consumer credit	2,586,485		—		—		2,537,633		Consumer credit	2,621,114		—		—		2,526,277
Accrued interest receivable	Accrued interest receivable	205,198		801		54,449		149,948		Accrued interest receivable	209,503		1,093		45,597		162,813

Financial Liabilities	Financial Liabilities									Financial Liabilities
Deposits:	Deposits:									Deposits:
Noninterest-bearing demand deposits	Noninterest-bearing demand deposits	$	10,532,838	$	10,532,838	$	—	$	—	Noninterest-bearing demand deposits	$	10,091,352	$	10,091,352	$	—	$	—
Checking, NOW, savings, and money market interest-bearing deposits	Checking, NOW, savings, and money market interest-bearing deposits	20,432,813		20,432,813		—		—		Checking, NOW, savings, and money market interest-bearing deposits	21,585,620		21,585,620		—		—
Time deposits	Time deposits	5,265,664		—		5,209,887		—		Time deposits	5,575,704		—		5,527,361		—
Federal funds purchased and interbank borrowings	Federal funds purchased and interbank borrowings	136,060		136,060		—		—		Federal funds purchased and interbank borrowings	918		918		—		—
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	311,447		311,447		—		—		Securities sold under agreements to repurchase	279,061		279,061		—		—
FHLB advances	FHLB advances	4,771,183		—		4,526,920		—		FHLB advances	4,412,576		—		4,167,911		—
Other borrowings	Other borrowings	815,318		—		781,468		—		Other borrowings	863,455		—		843,629		—
Accrued interest payable	Accrued interest payable	42,897		—		42,897		—		Accrued interest payable	46,934		—		46,934		—
Standby letters of credit	Standby letters of credit	949		—		—		949		Standby letters of credit	1,224		—		—		1,224

Off-Balance Sheet Financial Instruments	Off-Balance Sheet Financial Instruments									Off-Balance Sheet Financial Instruments
Commitments to extend credit	Commitments to extend credit	$	—	$	—	$	—	$	3,621	Commitments to extend credit	$	—	$	—	$	—	$	3,582


			Fair Value Measurements at December 31, 2022 Using
(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)
Financial Assets
Cash, due from banks, money market, and other interest-earning investments	$	728,412	$	728,412	$	—	$	—
Investment securities held-to-maturity:
U.S. government-sponsored entities and agencies	819,168		—		656,358		—
Mortgage-backed securities - Agency	1,106,817		—		982,963		—
State and political subdivisions	1,163,162		—		1,004,361		—
Loans, net:
Commercial	9,386,862		—		—		9,066,583
Commercial real estate	12,317,825		—		—		11,867,851
Residential real estate	6,438,525		—		—		5,372,491
Consumer credit	2,676,758		—		—		2,557,115
Accrued interest receivable	190,521		758		52,081		137,682
Financial Liabilities
Deposits:
Noninterest-bearing demand deposits	$	11,930,798	$	11,930,798	$	—	$	—
Checking, NOW, savings, and money market interest-bearing deposits	20,056,252		20,056,252		—		—
Time deposits	3,013,780		—		2,976,389		—
Federal funds purchased and interbank borrowings	581,489		581,489		—		—
Securities sold under agreements to repurchase	432,804		432,804		—		—
FHLB advances	3,829,018		—		3,739,780		—
Other borrowings	743,003		—		703,156		—
Accrued interest payable	19,547		—		19,547		—
Standby letters of credit	755		—		—		755

Off-Balance Sheet Financial Instruments
Commitments to extend credit	$	—	$	—	$	—	$	3,666

The methods utilized to measure the fair value of financial instruments at ~~June~~September 30, 2023 and December 31, 2022 represent an approximation of exit price, however, an actual exit price may differ.

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~~nine months ended ~~June~~September 30, 2023 and 2022, and financial condition as of ~~June~~September 30, 2023, compared to December 31, 2022. This discussion and analysis should be read in conjunction with the consolidated financial statements and related notes, as well as our 2022 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 (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: competition; government legislation, regulations and policies; the ability of Old National to execute its business 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 current and 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; 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 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 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 the factors under the heading “Risk Factors” included in our other filings with the SEC.

FINANCIAL HIGHLIGHTS

The following table sets forth certain financial highlights of Old National for the previous five quarters:


		Three Months Ended																Three Months Ended
(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,			(dollars and shares in thousands, except per share data)	September 30,			June 30,			March 31,			December 31,			September 30,
		2023						2022										2023									2022
Income Statement:	Income Statement:																Income Statement:
Net interest income	Net interest income	$	382,171		$	381,488		$	391,090		$	376,589		$	337,472		Net interest income	$	375,086		$	382,171		$	381,488		$	391,090		$	376,589
Taxable equivalent adjustment (1) (4)	Taxable equivalent adjustment (1) (4)	5,825			5,666			5,378			4,950			4,314			Taxable equivalent adjustment (1) (4)	5,837			5,825			5,666			5,378			4,950
Net interest income - taxable equivalent basis (4)	Net interest income - taxable equivalent basis (4)	387,996			387,154			396,468			381,539			341,786			Net interest income - taxable equivalent basis (4)	380,923			387,996			387,154			396,468			381,539
Provision for credit losses (2)	Provision for credit losses (2)	14,787			13,437			11,408			15,490			9,165			Provision for credit losses (2)	19,068			14,787			13,437			11,408			15,490
Noninterest income	Noninterest income	81,629			70,681			165,037			80,385			89,117			Noninterest income	80,938			81,629			70,681			165,037			80,385
Noninterest expense (2)	Noninterest expense (2)	246,584			250,711			282,675			262,444			277,475			Noninterest expense (2)	244,776			246,584			250,711			282,675			262,444
Net income available to common shareholders	Net income available to common shareholders	$	151,003		$	142,566		$	196,701		$	136,119		$	110,952		Net income available to common shareholders	$	143,842		$	151,003		$	142,566		$	196,701		$	136,119
Per Common Share Data:	Per Common Share Data:																Per Common Share Data:
Weighted average diluted common shares	Weighted average diluted common shares	291,266			292,756			293,131			292,483			291,881			Weighted average diluted common shares	291,717			291,266			292,756			293,131			292,483
Net income (diluted)	Net income (diluted)	$	0.52		$	0.49		$	0.67		$	0.47		$	0.38		Net income (diluted)	$	0.49		$	0.52		$	0.49		$	0.67		$	0.47
Cash dividends	Cash dividends	0.14			0.14			0.14			$	0.14		$	0.14		Cash dividends	0.14			0.14			0.14			0.14			0.14
Common dividend payout ratio (3)	Common dividend payout ratio (3)	27		%	29		%	21		%	30		%	37		%	Common dividend payout ratio (3)	29		%	27		%	29		%	21		%	30		%
Book value	Book value	$	17.25		$	17.24		$	16.68		$	16.05		$	16.51		Book value	$	17.07		$	17.25		$	17.24		$	16.68		$	16.05
Stock price	Stock price	13.94			14.42			17.98			16.47			14.79			Stock price	14.54			13.94			14.42			17.98			16.47
Tangible common book value (4)	Tangible common book value (4)	10.03			9.98			9.42			8.75			9.23			Tangible common book value (4)	9.87			10.03			9.98			9.42			8.75
Performance Ratios:	Performance Ratios:																Performance Ratios:
Return on average assets	Return on average assets	1.29		%	1.25		%	1.74		%	1.22		%	1.01		%	Return on average assets	1.22		%	1.29		%	1.25		%	1.74		%	1.22		%
Return on average common equity	Return on average common equity	12.01			11.58			16.77			11.13			9.08			Return on average common equity	11.39			12.01			11.58			16.77			11.13
Return on tangible common equity (4)	Return on tangible common equity (4)	21.20			20.20			29.25			22.07			17.21			Return on tangible common equity (4)	20.54			21.20			20.20			29.25			22.07
Return on average tangible common equity (4)	Return on average tangible common equity (4)	21.35			21.03			31.53			20.49			16.93			Return on average tangible common equity (4)	20.18			21.35			21.03			31.53			20.49
Net interest margin (4)	Net interest margin (4)	3.60			3.69			3.85			3.71			3.33			Net interest margin (4)	3.49			3.60			3.69			3.85			3.71
Efficiency ratio (4)	Efficiency ratio (4)	51.22			52.81			49.12			55.26			62.72			Efficiency ratio (4)	51.66			51.22			52.81			49.12			55.26
Efficiency ratio (prior presentation) (5)	Efficiency ratio (prior presentation) (5)	N/A			N/A						56.17			62.70			Efficiency ratio (prior presentation) (5)	N/A			N/A						N/A			56.17
Net charge-offs (recoveries) to average loans	Net charge-offs (recoveries) to average loans	0.13			0.21			0.05			0.10			0.02			Net charge-offs (recoveries) to average loans	0.24			0.13			0.21			0.05			0.10
Allowance for credit losses on loans to ending loans	Allowance for credit losses on loans to ending loans	0.93			0.94			0.98			0.99			0.97			Allowance for credit losses on loans to ending loans	0.93			0.93			0.94			0.98			0.99
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			Allowance for credit losses (6) to ending loans	1.03			1.04			1.05			1.08			1.08
Non-performing loans to ending loans	Non-performing loans to ending loans	0.91			0.74			0.81			0.81			0.78			Non-performing loans to ending loans	0.80			0.91			0.74			0.81			0.81
Balance Sheet:	Balance Sheet:																Balance Sheet:
Total loans	Total loans	$	32,432,473		$	31,822,374		$	31,123,641		$	30,528,933		$	29,553,648		Total loans	$	32,577,834		$	32,432,473		$	31,822,374		$	31,123,641		$	30,528,933
Total assets	Total assets	48,496,755			47,842,644			46,763,372			46,215,526			45,748,355			Total assets	49,059,448			48,496,755			47,842,644			46,763,372			46,215,526
Total deposits	Total deposits	36,231,315			34,917,792			35,000,830			36,053,663			35,538,975			Total deposits	37,252,676			36,231,315			34,917,792			35,000,830			36,053,663
Total borrowed funds	Total borrowed funds	6,034,008			6,740,454			5,586,314			4,264,750			4,384,411			Total borrowed funds	5,556,010			6,034,008			6,740,454			5,586,314			4,264,750
Total shareholders' equity		5,292,095			5,277,426			5,128,595			4,943,383			5,078,783
Total shareholders’ equity																	Total shareholders’ equity	5,239,537			5,292,095			5,277,426			5,128,595			4,943,383
Capital Ratios:	Capital Ratios:																Capital Ratios:
Risk-based capital ratios:	Risk-based capital ratios:																Risk-based capital ratios:
Tier 1 common equity	Tier 1 common equity	10.14		%	9.98		%	10.03		%	9.88		%	9.90		%	Tier 1 common equity	10.41		%	10.14		%	9.98		%	10.03		%	9.88		%
Tier 1	Tier 1	10.79			10.64			10.71			10.58			10.63			Tier 1	11.06			10.79			10.64			10.71			10.58
Total	Total	12.14			11.96			12.02			11.84			12.03			Total	12.32			12.14			11.96			12.02			11.84
Leverage ratio (to average assets)	Leverage ratio (to average assets)	8.59			8.53			8.52			8.26			8.19			Leverage ratio (to average assets)	8.70			8.59			8.53			8.52			8.26
Total equity to assets (averages)	Total equity to assets (averages)	10.96			11.00			10.70			11.18			11.22			Total equity to assets (averages)	10.88			10.96			11.00			10.70			11.18
Tangible common equity to tangible assets (4)	Tangible common equity to tangible assets (4)	6.33			6.37			6.18			5.82			6.20			Tangible common equity to tangible assets (4)	6.15			6.33			6.37			6.18			5.82
Nonfinancial Data:	Nonfinancial Data:																Nonfinancial Data:
Full-time equivalent employees	Full-time equivalent employees	4,021			4,023			3,967			4,008			4,196			Full-time equivalent employees	3,981			4,021			4,023			3,967			4,008
Banking centers	Banking centers	256			256			263			263			266			Banking centers	257			256			256			263			263

(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.

The following table sets forth certain financial highlights of Old National for the year-to-date periods:


		Six Months Ended June 30,							Nine Months Ended September 30,
(dollars and shares in thousands, except per share data)	(dollars and shares in thousands, except per share data)	2023			2022			(dollars and shares in thousands, except per share data)	2023			2022
Income Statement:	Income Statement:							Income Statement:
Net interest income	Net interest income	$	763,659		$	560,257		Net interest income	$	1,138,745		$	936,846
Taxable equivalent adjustment (1) (4)	Taxable equivalent adjustment (1) (4)	11,491			8,086			Taxable equivalent adjustment (1) (4)	17,328			13,036
Net interest income - taxable equivalent basis (4)	Net interest income - taxable equivalent basis (4)	775,150			568,343			Net interest income - taxable equivalent basis (4)	1,156,073			949,882
Provision for credit losses (2)	Provision for credit losses (2)	28,224			117,901			Provision for credit losses (2)	47,292			133,391
Noninterest income	Noninterest income	152,310			154,357			Noninterest income	233,248			234,742
Noninterest expense (2)	Noninterest expense (2)	497,295			493,064			Noninterest expense (2)	742,071			755,508
Net income available to common shareholders	Net income available to common shareholders	$	293,569		$	81,349		Net income available to common shareholders	$	437,411		$	217,468
Per Common Share Data:	Per Common Share Data:							Per Common Share Data:
Weighted average diluted common shares	Weighted average diluted common shares	291,870			260,253			Weighted average diluted common shares	291,809			271,123
Net income (diluted)	Net income (diluted)	$	1.01		$	0.31		Net income (diluted)	$	1.50		$	0.80
Cash dividends	Cash dividends	0.28			$	0.28		Cash dividends	0.42			0.42
Common dividend payout ratio (3)	Common dividend payout ratio (3)	28		%	90		%	Common dividend payout ratio (3)	28		%	53		%
Book value	Book value	$	17.25		$	16.51		Book value	$	17.07		$	16.05
Stock price	Stock price	13.94			14.79			Stock price	14.54			16.47
Tangible common book value (4)	Tangible common book value (4)	10.03			9.23			Tangible common book value (4)	9.87			8.75
Performance Ratios:	Performance Ratios:							Performance Ratios:
Return on average assets	Return on average assets	1.27		%	0.43		%	Return on average assets	1.25		%	0.72		%
Return on average common equity	Return on average common equity	11.80			3.62			Return on average common equity	11.66			6.26
Return on tangible common equity (4)	Return on tangible common equity (4)	20.63			6.71			Return on tangible common equity (4)	20.82			12.05
Return on average tangible common equity (4)	Return on average tangible common equity (4)	21.19			6.84			Return on average tangible common equity (4)	20.85			11.50
Net interest margin (4)	Net interest margin (4)	3.65			3.13			Net interest margin (4)	3.59			3.34
Efficiency ratio (4)	Efficiency ratio (4)	52.01			66.59			Efficiency ratio (4)	51.89			62.17
Efficiency ratio (prior presentation) (5)	Efficiency ratio (prior presentation) (5)	N/A			68.13			Efficiency ratio (prior presentation) (5)	N/A			63.46
Net charge-offs (recoveries) to average loans	Net charge-offs (recoveries) to average loans	0.17			0.04			Net charge-offs (recoveries) to average loans	0.19			0.06
Allowance for credit losses on loans to ending loans	Allowance for credit losses on loans to ending loans	0.93			0.97			Allowance for credit losses on loans to ending loans	0.93			0.99
Allowance for credit losses (6) to ending loans	Allowance for credit losses (6) to ending loans	1.04			1.05			Allowance for credit losses (6) to ending loans	1.03			1.08
Non-performing loans to ending loans	Non-performing loans to ending loans	0.91			0.78			Non-performing loans to ending loans	0.80			0.81
Balance Sheet:	Balance Sheet:							Balance Sheet:
Total loans	Total loans	$	32,432,473		$	29,553,648		Total loans	$	32,577,834		$	30,528,933
Total assets	Total assets	48,496,755			45,748,355			Total assets	49,059,448			46,215,526
Total deposits	Total deposits	36,231,315			35,538,975			Total deposits	37,252,676			36,053,663
Total borrowed funds	Total borrowed funds	6,034,008			4,384,411			Total borrowed funds	5,556,010			4,264,750
Total shareholders' equity		5,292,095			5,078,783
Total shareholders’ equity								Total shareholders’ equity	5,239,537			4,943,383
Capital Ratios:	Capital Ratios:							Capital Ratios:
Risk-based capital ratios:	Risk-based capital ratios:							Risk-based capital ratios:
Tier 1 common equity	Tier 1 common equity	10.14		%	9.90		%	Tier 1 common equity	10.41		%	9.88		%
Tier 1	Tier 1	10.79			10.63			Tier 1	11.06			10.58
Total	Total	12.14			12.03			Total	12.32			11.84
Leverage ratio (to average assets)	Leverage ratio (to average assets)	8.59			8.19			Leverage ratio (to average assets)	8.70			8.26
Total equity to assets (averages)	Total equity to assets (averages)	10.98			11.57			Total equity to assets (averages)	10.95			11.43
Tangible common equity to tangible assets (4)	Tangible common equity to tangible assets (4)	6.33			6.20			Tangible common equity to tangible assets (4)	6.15			5.82
Nonfinancial Data:	Nonfinancial Data:							Nonfinancial Data:
Full-time equivalent employees	Full-time equivalent employees	4,021			4,196			Full-time equivalent employees	3,981			4,008
Banking centers	Banking centers	256			266			Banking centers	257			263

(1)Calculated using the federal statutory tax rate in effect of 21% for all periods.

(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.

(6)Includes the allowance for credit losses on loans and unfunded loan commitments.

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 taxable 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 AOCI 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.

The following table presents GAAP to non-GAAP reconciliations for the previous five quarters:


		Three Months Ended																Three Months Ended
(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,			(dollars and shares in thousands, except per share data)	September 30,			June 30,			March 31,			December 31,			September 30,
		2023			2023			2022			2022			2022				2023			2023			2023			2022			2022
Tangible common book value:	Tangible common book value:																Tangible common book value:
Shareholders' common equity		$	5,048,376		$	5,033,707		$	4,884,876		$	4,699,664		$	4,835,064
Shareholders’ common equity																	Shareholders’ common equity	$	4,995,818		$	5,048,376		$	5,033,707		$	4,884,876		$	4,699,664
Deduct: Goodwill and intangible assets	Deduct: Goodwill and intangible assets	2,112,875			2,118,935			2,125,121			2,135,792			2,131,815			Deduct: Goodwill and intangible assets	2,106,835			2,112,875			2,118,935			2,125,121			2,135,792

Tangible shareholders' common equity (1)		$	2,935,501		$	2,914,772		$	2,759,755		$	2,563,872		$	2,703,249
Tangible shareholders’ common equity (1)																	Tangible shareholders’ common equity (1)	$	2,888,983		$	2,935,501		$	2,914,772		$	2,759,755		$	2,563,872
Period end common shares	Period end common shares	292,597			291,922			292,903			292,880			292,893			Period end common shares	292,586			292,597			291,922			292,903			292,880
Tangible common book value (1)	Tangible common book value (1)	10.03			9.98			9.42			8.75			9.23			Tangible common book value (1)	9.87			10.03			9.98			9.42			8.75
Return on tangible common equity:	Return on tangible common equity:																Return on tangible common equity:
Net income applicable to common shares	Net income applicable to common shares	$	151,003		$	142,566		$	196,701		$	136,119		$	110,952		Net income applicable to common shares	$	143,842		$	151,003		$	142,566		$	196,701		$	136,119
Add: Intangible amortization (net of tax) (2)	Add: Intangible amortization (net of tax) (2)	4,545			4,639			5,090			5,317			5,378			Add: Intangible amortization (net of tax) (2)	4,530			4,545			4,639			5,090			5,317
Tangible net income (1)	Tangible net income (1)	$	155,548		$	147,205		$	201,791		$	141,436		$	116,330		Tangible net income (1)	$	148,372		$	155,548		$	147,205		$	201,791		$	141,436
Tangible shareholders' common equity (1) (see above)		$	2,935,501		$	2,914,772		$	2,759,755		$	2,563,872		$	2,703,249
Tangible shareholders’ common equity (1) (see above)																	Tangible shareholders’ common equity (1) (see above)	$	2,888,983		$	2,935,501		$	2,914,772		$	2,759,755		$	2,563,872
Return on tangible common equity (1)	Return on tangible common equity (1)	21.20		%	20.20		%	29.25		%	22.07		%	17.21		%	Return on tangible common equity (1)	20.54		%	21.20		%	20.20		%	29.25		%	22.07		%
Return on average tangible common equity:	Return on average tangible common equity:																Return on average tangible common equity:
Tangible net income (1) (see above)	Tangible net income (1) (see above)	$	155,548		$	147,205		$	201,791		$	141,436		$	116,330		Tangible net income (1) (see above)	$	148,372		$	155,548		$	147,205		$	201,791		$	141,436
Average shareholders' common equity		$	5,030,083		$	4,922,469		$	4,692,863		$	4,890,434		$	4,886,181
Average shareholders’ common equity																	Average shareholders’ common equity	$	5,050,353		$	5,030,083		$	4,922,469		$	4,692,863		$	4,890,434
Deduct: Average goodwill and intangible assets	Deduct: Average goodwill and intangible assets	2,115,894			2,122,157			2,132,480			2,129,858			2,136,964			Deduct: Average goodwill and intangible assets	2,109,944			2,115,894			2,122,157			2,132,480			2,129,858

Average tangible shareholders' common equity (1)		$	2,914,189		$	2,800,312		$	2,560,383		$	2,760,576		$	2,749,217
Average tangible shareholders’ common equity (1)																	Average tangible shareholders’ common equity (1)	$	2,940,409		$	2,914,189		$	2,800,312		$	2,560,383		$	2,760,576
Return on average tangible common equity (1)	Return on average tangible common equity (1)	21.35		%	21.03		%	31.53		%	20.49		%	16.93		%	Return on average tangible common equity (1)	20.18		%	21.35		%	21.03		%	31.53		%	20.49		%
Net interest margin:	Net interest margin:																Net interest margin:
Net interest income	Net interest income	$	382,171		$	381,488		$	391,090		$	376,589		$	337,472		Net interest income	$	375,086		$	382,171		$	381,488		$	391,090		$	376,589
Taxable equivalent adjustment	Taxable equivalent adjustment	5,825			5,666			5,378			4,950			4,314			Taxable equivalent adjustment	5,837			5,825			5,666			5,378			4,950
Net interest income - taxable equivalent basis (1)	Net interest income - taxable equivalent basis (1)	$	387,996		$	387,154		$	396,468		$	381,539		$	341,786		Net interest income - taxable equivalent basis (1)	$	380,923		$	387,996		$	387,154		$	396,468		$	381,539
Average earning assets	Average earning assets	$	43,097,198		$	41,941,913		$	41,206,695		$	41,180,026		$	41,003,338		Average earning assets	$	43,617,456		$	43,097,198		$	41,941,913		$	41,206,695		$	41,180,026
Net interest margin (1)	Net interest margin (1)	3.60		%	3.69		%	3.85		%	3.71		%	3.33		%	Net interest margin (1)	3.49		%	3.60		%	3.69		%	3.85		%	3.71		%
Efficiency ratio:	Efficiency ratio:																Efficiency ratio:
Noninterest expense	Noninterest expense	$	246,584		$	250,711		$	282,675		$	262,444		$	277,475		Noninterest expense	$	244,776		$	246,584		$	250,711		$	282,675		$	262,444
Deduct: Intangible amortization expense	Deduct: Intangible amortization expense	6,060			6,186			6,787			7,089			7,170			Deduct: Intangible amortization expense	6,040			6,060			6,186			6,787			7,089
Adjusted noninterest expense (1)	Adjusted noninterest expense (1)	$	240,524		$	244,525		$	275,888		$	255,355		$	270,305		Adjusted noninterest expense (1)	$	238,736		$	240,524		$	244,525		$	275,888		$	255,355
Net interest income - taxable equivalent basis (1) (see above)	Net interest income - taxable equivalent basis (1) (see above)	$	387,996		$	387,154		$	396,468		$	381,539		$	341,786		Net interest income - taxable equivalent basis (1) (see above)	$	380,923		$	387,996		$	387,154		$	396,468		$	381,539
Noninterest income	Noninterest income	81,629			70,681			165,037			80,385			89,117			Noninterest income	80,938			81,629			70,681			165,037			80,385
Deduct: Debt securities gains (losses), net	Deduct: Debt securities gains (losses), net	17			(5,216)			(173)			(172)			(85)			Deduct: Debt securities gains (losses), net	(241)			17			(5,216)			(173)			(172)
Adjusted total revenue (1)	Adjusted total revenue (1)	$	469,608		$	463,051		$	561,678		$	462,096		$	430,988		Adjusted total revenue (1)	$	462,102		$	469,608		$	463,051		$	561,678		$	462,096
Efficiency ratio (1)	Efficiency ratio (1)	51.22		%	52.81		%	49.12		%	55.26		%	62.72		%	Efficiency ratio (1)	51.66		%	51.22		%	52.81		%	49.12		%	55.26		%
Tangible common equity to tangible assets:	Tangible common equity to tangible assets:																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
Tangible shareholders’ equity (1) (see above)																	Tangible shareholders’ equity (1) (see above)	$	2,888,983		$	2,935,501		$	2,914,772		$	2,759,755		$	2,563,872
Assets	Assets	$	48,496,755		$	47,842,644		$	46,763,372		$	46,215,526		$	45,748,355		Assets	$	49,059,448		$	48,496,755		$	47,842,644		$	46,763,372		$	46,215,526

Deduct: Goodwill and intangible assets	Deduct: Goodwill and intangible assets	2,112,875			2,118,935			2,125,121			2,135,792			2,131,815			Deduct: Goodwill and intangible assets	2,106,835			2,112,875			2,118,935			2,125,121			2,135,792

Tangible assets (1)	Tangible assets (1)	$	46,383,880		$	45,723,709		$	44,638,251		$	44,079,734		$	43,616,540		Tangible assets (1)	$	46,952,613		$	46,383,880		$	45,723,709		$	44,638,251		$	44,079,734
Tangible common equity to tangible assets (1)	Tangible common equity to tangible assets (1)	6.33		%	6.37		%	6.18		%	5.82		%	6.20		%	Tangible common equity to tangible assets (1)	6.15		%	6.33		%	6.37		%	6.18		%	5.82		%

(1)Represents a non-GAAP financial measure.

(2)Calculated using management’s estimate of the annual fully taxable equivalent rates (federal and state).

The following table presents GAAP to non-GAAP reconciliations for the year-to-date periods:


		Six Months Ended June 30,							Nine Months Ended September 30,
(dollars and shares in thousands, except per share data)	(dollars and shares in thousands, except per share data)	2023			2022			(dollars and shares in thousands, except per share data)	2023			2022
Tangible common book value:	Tangible common book value:							Tangible common book value:
Shareholders' common equity		$	5,048,376		$	4,835,064
Shareholders’ common equity								Shareholders’ common equity	$	4,995,818		$	4,699,664
Deduct: Goodwill and intangible assets	Deduct: Goodwill and intangible assets	2,112,875			2,131,815			Deduct: Goodwill and intangible assets	2,106,835			2,135,792

Tangible shareholders' common equity (1)		$	2,935,501		$	2,703,249
Tangible shareholders’ common equity (1)								Tangible shareholders’ common equity (1)	$	2,888,983		$	2,563,872
Period end common shares	Period end common shares	292,597			292,893			Period end common shares	292,586			292,880
Tangible common book value (1)	Tangible common book value (1)	10.03			9.23			Tangible common book value (1)	9.87			8.75
Return on tangible common equity:	Return on tangible common equity:							Return on tangible common equity:
Net income applicable to common shares	Net income applicable to common shares	$	293,569		$	81,349		Net income applicable to common shares	$	437,411		$	217,468
Add: Intangible amortization (net of tax) (2)	Add: Intangible amortization (net of tax) (2)	9,184			9,311			Add: Intangible amortization (net of tax) (2)	13,714			14,302
Tangible net income (1)	Tangible net income (1)	$	302,753		$	90,660		Tangible net income (1)	$	451,125		$	231,770
Tangible shareholders' common equity (1) (see above)		$	2,935,501		$	2,703,249
Tangible shareholders’ common equity (1) (see above)								Tangible shareholders’ common equity (1) (see above)	$	2,888,983		$	2,563,872
Return on tangible common equity (1)	Return on tangible common equity (1)	20.63		%	6.71		%	Return on tangible common equity (1)	20.82		%	12.05		%
Return on average tangible common equity:	Return on average tangible common equity:							Return on average tangible common equity:
Tangible net income (1) (see above)	Tangible net income (1) (see above)	$	302,753		$	90,660		Tangible net income (1) (see above)	$	451,125		$	231,770
Average shareholders' common equity		$	4,976,573		$	4,495,862
Average shareholders’ common equity								Average shareholders’ common equity	$	5,001,437		$	4,628,831
Deduct: Average goodwill and intangible assets	Deduct: Average goodwill and intangible assets	2,119,008			1,845,422			Deduct: Average goodwill and intangible assets	2,115,953			1,941,270

Average tangible shareholders' common equity (1)		$	2,857,565		$	2,650,440
Average tangible shareholders’ common equity (1)								Average tangible shareholders’ common equity (1)	$	2,885,484		$	2,687,561
Return on average tangible common equity (1)	Return on average tangible common equity (1)	21.19		%	6.84		%	Return on average tangible common equity (1)	20.85		%	11.50		%
Net interest margin:	Net interest margin:							Net interest margin:
Net interest income	Net interest income	$	763,659		$	560,257		Net interest income	$	1,138,745		$	936,846
Taxable equivalent adjustment	Taxable equivalent adjustment	11,491			8,086			Taxable equivalent adjustment	17,328			13,036
Net interest income - taxable equivalent basis (1)	Net interest income - taxable equivalent basis (1)	$	775,150		$	568,343		Net interest income - taxable equivalent basis (1)	$	1,156,073		$	949,882
Average earning assets	Average earning assets	$	42,522,747		$	36,269,744		Average earning assets	$	42,891,660		$	37,924,490
Net interest margin (1)	Net interest margin (1)	3.65		%	3.13		%	Net interest margin (1)	3.59		%	3.34		%
Efficiency ratio:	Efficiency ratio:							Efficiency ratio:
Noninterest expense	Noninterest expense	$	497,295		$	493,064		Noninterest expense	$	742,071		$	755,508
Deduct: Intangible amortization expense	Deduct: Intangible amortization expense	12,246			11,981			Deduct: Intangible amortization expense	18,286			19,070
Adjusted noninterest expense (1)	Adjusted noninterest expense (1)	$	485,049		$	481,083		Adjusted noninterest expense (1)	$	723,785		$	736,438
Net interest income - taxable equivalent basis (1) (see above)	Net interest income - taxable equivalent basis (1) (see above)	$	775,150		$	568,343		Net interest income - taxable equivalent basis (1) (see above)	$	1,156,073		$	949,882
Noninterest income	Noninterest income	152,310			154,357			Noninterest income	233,248			234,742
Deduct: Debt securities gains (losses), net	Deduct: Debt securities gains (losses), net	(5,199)			257			Deduct: Debt securities gains (losses), net	(5,440)			85
Adjusted total revenue (1)	Adjusted total revenue (1)	$	932,659		$	722,443		Adjusted total revenue (1)	$	1,394,761		$	1,184,539
Efficiency ratio (1)	Efficiency ratio (1)	52.01		%	66.59		%	Efficiency ratio (1)	51.89		%	62.17		%
Tangible common equity to tangible assets:	Tangible common equity to tangible assets:							Tangible common equity to tangible assets:
Tangible shareholders' equity (1) (see above)		$	2,935,501		$	2,703,249
Tangible shareholders’ equity (1) (see above)								Tangible shareholders’ equity (1) (see above)	$	2,888,983		$	2,563,872
Assets	Assets	$	48,496,755		$	45,748,355		Assets	$	49,059,448		$	46,215,526

Deduct: Goodwill and intangible assets	Deduct: Goodwill and intangible assets	2,112,875			2,131,815			Deduct: Goodwill and intangible assets	2,106,835			2,135,792

Tangible assets (1)	Tangible assets (1)	$	46,383,880		$	43,616,540		Tangible assets (1)	$	46,952,613		$	44,079,734
Tangible common equity to tangible assets (1)	Tangible common equity to tangible assets (1)	6.33		%	6.20		%	Tangible common equity to tangible assets (1)	6.15		%	5.82		%

(1)Represents a non-GAAP financial measure.

(2)Calculated using management’s estimate of the annual fully taxable equivalent rates (federal and state).

EXECUTIVE SUMMARY

Old National is the sixth largest commercial bank headquartered in the Midwest by asset size with consolidated assets of approximately ~~$48~~$49 billion at ~~June~~September 30, 2023. The Company’s corporate headquarters and principal executive office is located in Evansville, Indiana with commercial and consumer banking operations headquartered in Chicago, Illinois. Old National, through Old National Bank, provides a wide range of banking services throughout the Midwest region, including commercial and consumer loan and depository services, as well as other traditional banking services. Old National also provides services to supplement its traditional banking business including fiduciary and wealth management services, investment and brokerage services, investment consulting, and other financial services.

Net income applicable to common shareholders for the ~~second~~third quarter of 2023 was $143.8 million, or $0.49 per diluted common share, compared to $151.0 million, or $0.52 per diluted common share, ~~compared to $142.6 million, or $0.49 per diluted common share,~~ for the ~~first~~second quarter of 2023.

Results for the ~~second~~third quarter of 2023 were impacted by ~~$3.4~~$6.3 million of ~~expenses~~merger-related charges. The second quarter of 2023 was impacted by pre-tax charges of $3.4 million related to the tragic April 10 event at our downtown Louisville location (“Louisville expenses”), merger-related charges of $2.4 million, ~~of merger-related charges,~~ and ~~pre-tax charges of~~ $0.2 million for property optimization. ~~The first quarter of 2023 was impacted by merger-related charges of $14.6 million, $5.2 million of debt securities losses, and $1.3 million of property optimization costs.~~

We achieved strong results during the ~~second~~third quarter of 2023, including growth in total deposits and loans, ~~increased revenue,~~modest compression of net interest income reflective of the rate environment, stable credit quality, and disciplined expense management.

Deposits: Period-end total deposits increased ~~$1.3~~$1.0 billion, or 4%3%, to ~~$36.2~~$37.3 billion, reflecting continued efforts to compete for new client relationships as well as seasonal patterns in public funds compared to ~~March 31,~~June 30, 2023.

Loans: Our loan balances, excluding loans ~~held for sale,~~held-for-sale, increased ~~$610.1~~$145.4 million to ~~$32.4~~$32.6 billion at ~~June~~September 30, 2023 compared to ~~March 31,~~June 30, 2023. This was primarily driven by disciplined commercial real estate loan ~~growth.~~growth, partially offset by $389 million of commercial loan sales during the quarter.

Net Interest Income: Net interest income ~~increased $0.7~~decreased $7.1 million to ~~$382.2~~$375.1 million compared to the ~~first~~second quarter of 2023 driven by ~~loan growth, the~~ higher ~~rate environment, and more days in the quarter, which were~~funding costs, partly offset by loan growth and higher ~~funding costs and lower accretion income~~rates on ~~loans.~~interest-earning assets.

Provision for Credit Losses: Provision for credit losses increased ~~$1.4~~$4.3 million to ~~$14.8~~$19.1 million compared to the ~~first~~second quarter of 2023 reflecting ~~loan~~net charge-offs and ~~unfunded commitment~~loan growth, as well as economic factors.

Noninterest Income: Noninterest income ~~increased $10.9~~decreased $0.7 million to ~~$81.6~~$80.9 million compared to the ~~first~~second quarter of 2023 reflecting $5.2 million of net debt securities losses in the first quarter of 2023. The remaining change was driven by higher service charges on deposit accounts, debit card and ATM fees, mortgage banking revenue,lower company-owned life insurance ~~income,~~ and other ~~income.~~income offset by increases in all fee income categories.

Noninterest Expense: Noninterest expense decreased ~~$4.1~~$1.8 million compared to the ~~first~~second quarter of 2023. Noninterest expense included ~~$2.4~~$6.3 million of merger-related expenses ~~and $0.2~~in the third quarter of 2023 compared to $6.0 million of Louisville expenses, merger-related charges, and charges for property optimization ~~expenses, compared to $14.6 million and $1.3 million, respectively,~~ in ~~the first quarter of 2023. In addition,~~ the second quarter of ~~2023 was impacted by $3.4 million of Louisville expenses.~~2023. Excluding these expenses, noninterest expense ~~increased $5.8~~decreased $2.1 million compared to the ~~first~~second quarter of 2023 primarily due to higher salary and employee benefits in the second quarter of 2023 resulting from performance-driven incentive accruals.

RESULTS OF OPERATIONS

The following table sets forth certain income statement information of Old National:


(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)	Three Months Ended September 30,							% Change		Nine Months Ended September 30,						% Change
		2023			2022				2023		2022						2023				2022						2023		2022
Income Statement Summary:	Income Statement Summary:																	Income Statement Summary:
Net interest income	Net interest income	$	382,171		$	337,472			13.2	%	$	763,659		$	560,257		36.3	%		Net interest income	$	375,086		$	376,589		(0.4)	%	$	1,138,745		$	936,846		21.6	%
Provision for credit losses	Provision for credit losses	14,787			9,165			61.3		28,224			117,901			(76.1)		Provision for credit losses	19,068				15,490			23.1		47,292			133,391			(64.5)
Noninterest income	Noninterest income	81,629			89,117			(8.4)		152,310			154,357			(1.3)		Noninterest income	80,938				80,385			0.7		233,248			234,742			(0.6)
Noninterest expense	Noninterest expense	246,584			277,475			(11.1)		497,295			493,064			0.9		Noninterest expense	244,776				262,444			(6.7)		742,071			755,508			(1.8)
Net income applicable to common shareholders	Net income applicable to common shareholders	151,003			110,952			36.1		293,569			81,349			260.9		Net income applicable to common shareholders	143,842				136,119			5.7		437,411			217,468			101.1
Net income per common share - diluted	Net income per common share - diluted	0.52			0.38			36.8		1.01			0.31			225.8		Net income per common share - diluted	0.49				0.47			4.3		1.50			0.80			87.5
Other Data:	Other Data:																	Other Data:
Return on average common equity	Return on average common equity	12.01		%	9.08		%			11.80	%		3.62	%				Return on average common equity	11.39		%		11.13	%				11.66	%		6.26	%
Return on tangible common equity (1)	Return on tangible common equity (1)	21.20			17.21					20.63			6.71					Return on tangible common equity (1)	20.54				22.07					20.82			12.05
Return on average tangible common equity (1)	Return on average tangible common equity (1)	21.35			16.93					21.19			6.84					Return on average tangible common equity (1)	20.18				20.49					20.85			11.50
Efficiency ratio (1)	Efficiency ratio (1)	51.22			62.72					52.01			66.59					Efficiency ratio (1)	51.66				55.26					51.89			62.17
Efficiency ratio (prior presentation) (2)	Efficiency ratio (prior presentation) (2)	N/A			62.70					N/A			68.13					Efficiency ratio (prior presentation) (2)	N/A				56.17					N/A			63.46
Tier 1 leverage ratio	Tier 1 leverage ratio	8.59			8.19					8.59			8.19					Tier 1 leverage ratio	8.70				8.26					8.70			8.26
Net charge-offs (recoveries) to average loans	Net charge-offs (recoveries) to average loans	0.13			0.02					0.17			0.04					Net charge-offs (recoveries) to average loans	0.24				0.10					0.19			0.06

(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 83% of revenues for the ~~six~~nine months ended ~~June~~September 30, 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 during the ~~second~~third quarter of 2023. The Federal Reserve’s Federal Funds Rate is currently in a target range of ~~5.00%~~5.25% to ~~5.25%~~5.50%, with the Effective Federal Funds Rate increasing 25 basis points from ~~March 31,~~June 30, 2023 to ~~5.08%~~5.33% at ~~June~~September 30, 2023. Management 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 and that it may enhance comparability for peer comparison purposes for both management and investors.

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, 2023						Three Months Ended June 30, 2022						(Tax equivalent basis, dollars in thousands)	Three Months Ended September 30, 2023						Three Months Ended September 30, 2022
Earning Assets	Earning Assets	Average Balance		Income (1)/ Expense		Yield/ Rate		Average Balance		Income (1)/ Expense		Yield/ Rate		Earning Assets	Average 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	$	724,601	$	8,966	4.96	%	$	1,088,005	$	1,830	0.67	%	Money market and other interest-earning investments	$	980,813	$	13,194	5.34	%	$	514,362	$	935	0.72	%
Investment securities:	Investment securities:													Investment securities:
Treasury and government sponsored agencies	Treasury and government sponsored agencies	2,222,269		19,355		3.48	%	2,487,717		11,818		1.90	%	Treasury and government sponsored agencies	2,376,864		23,037		3.88	%	2,326,070		13,212		2.27	%
Mortgage-backed securities	Mortgage-backed securities	5,301,084		34,291		2.59	%	6,008,470		33,534		2.23	%	Mortgage-backed securities	5,079,091		33,237		2.62	%	5,891,283		36,157		2.45	%
States and political subdivisions	States and political subdivisions	1,768,897		14,396		3.26	%	1,834,189		14,571		3.18	%	States and political subdivisions	1,737,037		14,220		3.27	%	1,829,322		14,631		3.20	%
Other securities	Other securities	824,482		9,995		4.85	%	723,279		5,467		3.02	%	Other securities	793,196		10,127		5.11	%	718,735		6,781		3.77	%
Total investment securities	Total investment securities	10,116,732		78,037		3.09	%	11,053,655		65,390		2.37	%	Total investment securities	9,986,188		80,621		3.23	%	10,765,410		70,781		2.63	%
Loans: (2)	Loans: (2)													Loans: (2)
Commercial	Commercial	9,862,728		163,721		6.64	%	8,692,646		95,743		4.36	%	Commercial	9,612,102		163,869		6.82	%	9,045,009		113,491		5.02	%
Commercial real estate	Commercial real estate	13,164,390		199,287		6.06	%	11,547,958		113,545		3.89	%	Commercial real estate	13,711,156		219,575		6.41	%	11,929,892		136,780		4.59	%
Residential real estate loans	Residential real estate loans	6,643,254		60,717		3.66	%	5,905,151		51,686		3.50	%	Residential real estate loans	6,712,269		62,775		3.74	%	6,189,503		56,432		3.65	%
Consumer	Consumer	2,585,493		39,999		6.21	%	2,715,923		30,478		4.50	%	Consumer	2,614,928		42,322		6.42	%	2,735,850		33,049		4.79	%
Total loans	Total loans	32,255,865		463,724		5.75	%	28,861,678		291,452		4.01	%	Total loans	32,650,455		488,541		5.98	%	29,900,254		339,752		4.54	%
Total earning assets	Total earning assets	43,097,198		$	550,727	5.11	%	41,003,338		$	358,672	3.48	%	Total earning assets	43,617,456		$	582,356	5.34	%	41,180,026		$	411,468	3.99	%
Deduct: Allowance for credit losses on loans	Deduct: Allowance for credit losses on loans	(301,311)						(282,943)						Deduct: Allowance for credit losses on loans	(300,071)						(290,215)
Non-Earning Assets	Non-Earning Assets													Non-Earning Assets
Cash and due from banks	Cash and due from banks	418,972						277,283						Cash and due from banks	382,755						503,841
Other assets	Other assets	4,884,694						4,735,701						Other assets	4,960,383						4,522,171
Total assets	Total assets	$	48,099,553					$	45,733,379					Total assets	$	48,660,523					$	45,915,823

Interest-Bearing Liabilities	Interest-Bearing Liabilities													Interest-Bearing Liabilities
Checking and NOW	Checking and NOW	$	7,881,863	$	24,358	1.24	%	$	8,445,683	$	1,786	0.08	%	Checking and NOW	$	7,515,439	$	25,531	1.35	%	$	8,681,392	$	5,751	0.26	%
Savings	Savings	5,785,603		3,247		0.23	%	6,835,675		673		0.04	%	Savings	5,414,775		4,268		0.31	%	6,733,465		547		0.03	%
Money market	Money market	6,084,963		35,357		2.33	%	5,317,300		1,027		0.08	%	Money market	7,979,999		65,549		3.26	%	5,344,567		2,072		0.15	%
Time deposits	Time deposits	4,628,426		38,012		3.29	%	2,499,445		1,701		0.27	%	Time deposits	5,412,920		52,080		3.82	%	2,508,152		2,450		0.39	%
Total interest-bearing deposits	Total interest-bearing deposits	24,380,855		100,974		1.66	%	23,098,103		5,187		0.09	%	Total interest-bearing deposits	26,323,133		147,428		2.22	%	23,267,576		10,820		0.18	%
Federal funds purchased and interbank borrowings	Federal funds purchased and interbank borrowings	441,145		5,655		5.14	%	1,222		2		0.47	%	Federal funds purchased and interbank borrowings	62,921		910		5.74	%	122,311		720		2.34	%
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	340,178		900		1.06	%	466,885		85		0.07	%	Securities sold under agreements to repurchase	302,305		710		0.93	%	436,225		106		0.10	%
FHLB advances	FHLB advances	5,283,728		45,088		3.42	%	3,053,423		6,925		0.91	%	FHLB advances	4,537,250		40,382		3.53	%	3,025,844		13,027		1.71	%
Other borrowings	Other borrowings	796,536		10,114		5.09	%	611,772		4,687		3.06	%	Other borrowings	841,307		12,003		5.66	%	676,874		5,256		3.08	%
Total borrowed funds	Total borrowed funds	6,861,587		61,757		3.61	%	4,133,302		11,699		1.14	%	Total borrowed funds	5,743,783		54,005		3.73	%	4,261,254		19,109		1.78	%
Total interest-bearing liabilities	Total interest-bearing liabilities	$	31,242,442	$	162,731	2.09	%	$	27,231,405	$	16,886	0.25	%	Total interest-bearing liabilities	$	32,066,916	$	201,433	2.49	%	$	27,528,830	$	29,929	0.43	%

Noninterest-Bearing Liabilities and Shareholders' Equity
Noninterest-Bearing Liabilities and Shareholders’ Equity														Noninterest-Bearing Liabilities and Shareholders’ Equity
Demand deposits	Demand deposits	$	10,741,646					$	12,714,946					Demand deposits	$	10,338,267					$	12,575,011
Other liabilities	Other liabilities	841,663						657,128						Other liabilities	961,268						677,829
Shareholders' equity		5,273,802						5,129,900
Total liabilities and shareholders' equity		$	48,099,553					$	45,733,379
Shareholders’ equity														Shareholders’ equity	5,294,072						5,134,153
Total liabilities and shareholders’ equity														Total liabilities and shareholders’ equity	$	48,660,523					$	45,915,823

Net interest income - taxable equivalent basis	Net interest income - taxable equivalent basis			$	387,996	3.60	%			$	341,786	3.33	%	Net interest income - taxable equivalent basis			$	380,923	3.49	%			$	381,539	3.71	%
Taxable equivalent adjustment	Taxable equivalent adjustment			(5,825)						(4,314)				Taxable equivalent adjustment			(5,837)						(4,950)
Net interest income (GAAP)	Net interest income (GAAP)			$	382,171	3.55	%			$	337,472	3.29	%	Net interest income (GAAP)			$	375,086	3.44	%			$	376,589	3.66	%

(1)Interest income is reflected on a fully taxable equivalent basis.

(2)Includes loans ~~held for sale.~~held-for-sale.


(Tax equivalent basis, dollars in thousands)	(Tax equivalent basis, dollars in thousands)	Six Months Ended June 30, 2023						Six Months Ended June 30, 2022						(Tax equivalent basis, dollars in thousands)	Nine Months Ended September 30, 2023						Nine Months Ended September 30, 2022
Earning Assets	Earning Assets	Average Balance		Income (1)/ Expense		Yield/ Rate		Average Balance		Income (1)/ Expense		Yield/ Rate		Earning Assets	Average 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	$	611,903	$	12,064	3.98	%	$	1,211,518	$	2,138	0.36	%	Money market and other interest-earning investments	$	736,225	$	25,258	4.59	%	$	976,579	$	3,073	0.42	%
Investment securities:	Investment securities:													Investment securities:
Treasury and government sponsored agencies	Treasury and government sponsored agencies	2,209,916		35,886		3.25	%	2,342,401		20,038		1.71	%	Treasury and government sponsored agencies	2,266,177		58,923		3.47	%	2,336,897		33,249		1.90	%
Mortgage-backed securities	Mortgage-backed securities	5,364,788		69,381		2.59	%	5,441,902		57,910		2.13	%	Mortgage-backed securities	5,268,509		102,618		2.60	%	5,593,341		94,067		2.24	%
States and political subdivisions	States and political subdivisions	1,788,498		29,086		3.25	%	1,786,684		28,208		3.16	%	States and political subdivisions	1,771,155		43,306		3.26	%	1,801,053		42,839		3.17	%
Other securities	Other securities	781,549		18,599		4.76	%	664,741		9,611		2.89	%	Other securities	785,474		28,726		4.88	%	682,937		16,392		3.20	%
Total investment securities	Total investment securities	10,144,751		152,952		3.02	%	10,235,728		115,767		2.26	%	Total investment securities	10,091,315		233,573		3.09	%	10,414,228		186,547		2.39	%
Loans: (2)	Loans: (2)													Loans: (2)
Commercial	Commercial	9,661,029		311,341		6.45	%	7,301,008		151,026		4.11	%	Commercial	9,644,541		475,210		6.57	%	7,888,730		264,517		4.47	%
Commercial real estate	Commercial real estate	12,910,787		378,762		5.87	%	10,156,292		190,952		3.74	%	Commercial real estate	13,180,509		598,337		6.05	%	10,753,988		327,733		4.06	%
Residential real estate loans	Residential real estate loans	6,582,982		118,817		3.61	%	4,953,222		85,673		3.46	%	Residential real estate loans	6,626,551		181,592		3.65	%	5,369,844		142,105		3.53	%
Consumer	Consumer	2,611,295		78,106		6.03	%	2,411,976		52,393		4.38	%	Consumer	2,612,519		120,428		6.16	%	2,521,121		85,442		4.53	%
Total loans	Total loans	31,766,093		887,026		5.59	%	24,822,498		480,044		3.86	%	Total loans	32,064,120		1,375,567		5.72	%	26,533,683		819,797		4.12	%
Total earning assets	Total earning assets	42,522,747		$	1,052,042	4.95	%	36,269,744		$	597,949	3.29	%	Total earning assets	42,891,660		$	1,634,398	5.08	%	37,924,490		$	1,009,417	3.55	%
Deduct: Allowance for credit losses on loans	Deduct: Allowance for credit losses on loans	(302,844)						(225,876)						Deduct: Allowance for credit losses on loans	(301,909)						(247,558)
Non-Earning Assets	Non-Earning Assets													Non-Earning Assets
Cash and due from banks	Cash and due from banks	428,370						273,083						Cash and due from banks	412,998						350,848
Other assets	Other assets	4,895,843						4,111,637						Other assets	4,917,592						4,249,986
Total assets	Total assets	$	47,544,116					$	40,428,588					Total assets	$	47,920,341					$	42,277,766

Interest-Bearing Liabilities	Interest-Bearing Liabilities													Interest-Bearing Liabilities
Checking and NOW	Checking and NOW	$	7,934,927	$	43,717	1.11	%	$	7,619,757	$	2,381	0.06	%	Checking and NOW	$	7,793,561	$	69,248	1.19	%	$	7,977,524	$	8,133	0.14	%
Savings	Savings	5,983,407		5,477		0.18	%	6,073,081		1,262		0.04	%	Savings	5,791,780		9,745		0.22	%	6,295,628		1,809		0.04	%
Money market	Money market	5,864,351		55,368		1.90	%	4,552,241		1,719		0.08	%	Money market	6,577,317		120,917		2.46	%	4,819,252		3,791		0.11	%
Time deposits	Time deposits	4,096,369		59,005		2.90	%	2,124,382		3,019		0.29	%	Time deposits	4,540,042		111,085		3.27	%	2,253,711		5,468		0.32	%
Total interest-bearing deposits	Total interest-bearing deposits	23,879,054		163,567		1.38	%	20,369,461		8,381		0.08	%	Total interest-bearing deposits	24,702,700		310,995		1.68	%	21,346,115		19,201		0.12	%
Federal funds purchased and interbank borrowings	Federal funds purchased and interbank borrowings	430,278		10,494		4.92	%	1,168		2		0.25	%	Federal funds purchased and interbank borrowings	306,480		11,404		4.97	%	41,993		722		2.30	%
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	376,298		1,679		0.90	%	458,459		181		0.08	%	Securities sold under agreements to repurchase	351,362		2,389		0.91	%	450,966		287		0.09	%
FHLB advances	FHLB advances	4,781,326		83,084		3.50	%	2,822,984		12,888		0.92	%	FHLB advances	4,699,074		123,466		3.51	%	2,891,347		25,915		1.20	%
Other borrowings	Other borrowings	788,921		18,068		4.62	%	522,599		8,154		3.12	%	Other borrowings	806,575		30,071		4.98	%	574,589		13,410		3.12	%
Total borrowed funds	Total borrowed funds	6,376,823		113,325		3.58	%	3,805,210		21,225		1.12	%	Total borrowed funds	6,163,491		167,330		3.63	%	3,958,895		40,334		1.36	%
Total interest-bearing liabilities	Total interest-bearing liabilities	$	30,255,877	$	276,892	1.85	%	$	24,174,671	$	29,606	0.25	%	Total interest-bearing liabilities	$	30,866,191	$	478,325	2.07	%	$	25,305,010	$	59,535	0.31	%

Noninterest-Bearing Liabilities and Shareholders' Equity
Noninterest-Bearing Liabilities and Shareholders’ Equity														Noninterest-Bearing Liabilities and Shareholders’ Equity
Demand deposits	Demand deposits	$	11,131,789					$	11,014,359					Demand deposits	$	10,864,375					$	11,540,293
Other liabilities	Other liabilities	936,158						562,882						Other liabilities	944,619						601,619
Shareholders' equity		5,220,292						4,676,676
Total liabilities and shareholders' equity		$	47,544,116					$	40,428,588
Shareholders’ equity														Shareholders’ equity	5,245,156						4,830,844
Total liabilities and shareholders’ equity														Total liabilities and shareholders’ equity	$	47,920,341					$	42,277,766

Net interest income - taxable equivalent basis	Net interest income - taxable equivalent basis			$	775,150	3.65	%			$	568,343	3.13	%	Net interest income - taxable equivalent basis			$	1,156,073	3.59	%			$	949,882	3.34	%
Taxable equivalent adjustment	Taxable equivalent adjustment			(11,491)						(8,086)				Taxable equivalent adjustment			(17,328)						(13,036)
Net interest income (GAAP)	Net interest income (GAAP)			$	763,659	3.59	%			$	560,257	3.09	%	Net interest income (GAAP)			$	1,138,745	3.54	%			$	936,846	3.29	%

(1)Interest income is reflected on a fully taxable equivalent basis.

(2)Includes loans ~~held for sale.~~held-for-sale.

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, 2022 to Three Months Ended June 30, 2023						From Six Months Ended June 30, 2022 to Six Months Ended June 30, 2023												From Three Months Ended September 30, 2022 to Three Months Ended September 30, 2023												From Nine Months Ended September 30, 2022 to Nine Months Ended September 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)			Volume		Rate				Volume				Rate		(dollars in thousands)						Volume				Rate								Volume				Rate
Interest Income	Interest Income																	Interest Income
Money market and other interest-earning investments	Money market and other interest-earning investments	$	7,136	$	(2,571)	$	9,707			$	9,926			$	(6,535)			$	16,461		Money market and other interest-earning investments	$	12,259			$	3,583			$	8,676			$	22,185			$	(4,544)			$	26,729
Investment securities (2)	Investment securities (2)	12,647		(6,385)		19,032		37,185				(1,201)				38,386		Investment securities (2)		9,840				(5,708)				15,548				47,026				(6,630)				53,656
Loans (3)	Loans (3)	172,272		40,306		131,966		406,982				163,213				243,769		Loans (3)		148,789				36,149				112,640				555,770				203,985				351,785
Total interest income	Total interest income	192,055		31,350		160,705		454,093				155,477				298,616		Total interest income		170,888				34,024				136,864				624,981				192,811				432,170
Interest Expense	Interest Expense																	Interest Expense
Checking and NOW deposits	Checking and NOW deposits	22,572		(1,017)		23,589		41,336				713				40,623		Checking and NOW deposits		19,780				(2,318)				22,098				61,115				(951)				62,066
Savings deposits	Savings deposits	2,574		(351)		2,925		4,215				(97)				4,312		Savings deposits		3,721				(554)				4,275				7,936				(474)				8,410
Money market deposits	Money market deposits	34,330		2,287		32,043		53,649				6,375				47,274		Money market deposits		63,477				11,456				52,021				117,126				16,819				100,307
Time deposits	Time deposits	36,311		9,439		26,872		55,986				15,561				40,425		Time deposits		49,630				15,478				34,152				105,617				30,621				74,996
Federal funds purchased and interbank borrowings	Federal funds purchased and interbank borrowings	5,653		3,078		2,575		10,492				5,496				4,996		Federal funds purchased and interbank borrowings		190				(599)				789				10,682				7,200				3,482
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	815		(181)		996		1,498				(208)				1,706		Securities sold under agreements to repurchase		604				(170)				774				2,102				(375)				2,477
FHLB advances	FHLB advances	38,163		12,026		26,137		70,196				21,373				48,823		FHLB advances		27,355				10,010				17,345				97,551				31,804				65,747
Other borrowings	Other borrowings	5,427		1,866		3,561		9,914				5,070				4,844		Other borrowings		6,747				1,824				4,923				16,661				7,028				9,633
Total interest expense	Total interest expense	145,845		27,147		118,698		247,286				54,283				193,003		Total interest expense		171,504				35,127				136,377				418,790				91,672				327,118
Net interest income	Net interest income	$	46,210	$	4,203	$	42,007	$	206,807			$	101,194			$	105,613	Net interest income		$	(616)			$	(1,103)			$	487			$	206,191			$	101,139			$	105,052

(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 includes taxable equivalent adjustments of $2.9 million and ~~$5.9~~$8.7 million during the three and ~~six~~nine months ended ~~June~~September 30, 2023, respectively, using the federal statutory rate in effect of 21%.

(3)Interest income on loans includes taxable equivalent adjustments of ~~$2.9~~$3.0 million and ~~$5.6~~$8.6 million during the three and ~~six~~nine months ended ~~June~~September 30, 2023, respectively, using the federal statutory rate in effect of 21%.

The decrease in net interest income for the three months ended September 30, 2023 when compared to the same period in 2022 was primarily due to higher balances and costs of average interest-bearing liabilities and lower accretion income, partially offset by higher rates on loans and loan growth. The increase in net interest income for the ~~three and six~~nine months ended ~~June~~September 30, 2023 when compared to the same ~~periods~~period in 2022 was primarily due to higher rates on loans and loan ~~growth. Partially offsetting these increases were~~growth, partially offset by higher balances and costs of ~~average interest-bearing liabilities, higher~~ average interest-bearing liabilities and lower accretion income. Accretion income associated with acquired loans and borrowings totaled ~~$6.6~~$7.5 million and ~~$14.5~~$22.1 million in the three and ~~six~~nine months ended ~~June~~September 30, 2023, respectively, compared to ~~$35.0~~$25.4 million and ~~$50.8~~$76.2 million in the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively.

The decrease in the net interest margin on a fully taxable equivalent basis for the three months ended September 30, 2023 compared to the same period in 2022 was primarily due to higher costs of interest-bearing liabilities, partially offset by higher yields on interest earning assets. The increase in the net interest margin on a fully taxable equivalent basis for the ~~three and six~~nine months ended ~~June~~September 30, 2023 when compared to the same ~~periods~~period in 2022 was primarily due to higher yields on interest earning assets, partially offset by higher costs of interest-bearing liabilities. The yield on interest earning assets increased ~~163~~135 basis points and the cost of interest-bearing liabilities increased ~~184~~206 basis points in the ~~quarterly year-over-year comparison.~~three months ended September 30, 2023 compared to the same quarter a year ago. The yield on interest earning assets increased ~~166~~153 basis points and the cost of interest-bearing liabilities increased ~~160~~176 basis points in the ~~six~~nine months ended ~~June~~September 30, 2023 when compared to the ~~six~~nine months ended ~~June~~September 30, 2022. Accretion income represented ~~6 basis points and~~ 7 basis points of the net interest margin in both of the three and ~~six~~nine months ended ~~June~~September 30, 2023, ~~respectively,~~ compared to 3425 basis points and 2827 basis points in the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively.

Average earning assets were ~~$43.1~~$43.6 billion and ~~$41.0~~$41.2 billion for the three months ended ~~June~~September 30, 2023 and 2022, respectively, an increase of ~~$2.1~~$2.4 billion, or ~~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~~6%, primarily due to strong commercial, commercial real estate, and ~~commercial~~residential real estate loan growth. Average earning assets were ~~$42.5~~$42.9 billion and ~~$36.3~~$37.9 billion for the ~~six~~ nine

months ended ~~June~~September 30, 2023 and 2022, respectively, an increase of ~~$6.3~~$5.0 billion, or ~~17%. The increase in average earning assets for the six months ended June 30, 2023 when compared to the six months ended June 30, 2022 was~~13%, primarily due to the merger with First Midwest and strong loan growth.

Average loans, including loans ~~held for sale~~held-for-sale, increased ~~$3.4~~$2.8 billion and ~~$6.9~~$5.5 billion for the three and ~~six~~nine months ended ~~June~~September 30, 2023, respectively, when compared to the same periods in 2022. The increase ~~in average loans~~ for the three months ended ~~June~~September 30, 2023 ~~when compared to the three months ended June 30, 2022~~ was primarily due to strong commercial, commercial real estate, and ~~commercial~~residential real estate loan growth. The increase ~~in average loans~~ for the ~~six~~nine months ended ~~June~~September 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~~$779.2 million and ~~$91.0~~$322.9 million for the three and ~~six~~nine months ended ~~June~~September 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~~These decreases reflect the utilization of securities cash flows to fund loan growth.

Average noninterest-bearing deposits decreased ~~$2.0~~$2.2 billion while average interest-bearing deposits increased ~~$1.3~~$3.1 billion for the three months ended ~~June~~September 30, 2023 when compared to the same period in 2022 reflecting total deposit growth and a mix shift as a result of the current rate environment. Average noninterest-bearing ~~and~~deposits decreased $675.9 million while interest-bearing deposits increased ~~$117.4 million and $3.5~~$3.4 billion ~~respectively,~~ for the ~~six~~nine months ended ~~June~~September 30, 2023 when compared to the ~~six~~nine months ended ~~June~~September 30, 2022 primarily due to the First Midwest ~~merger.~~merger and a mix shift as a result of the current rate environment.

Average borrowed funds increased ~~$2.7~~$1.5 billion and ~~$2.6~~$2.2 billion for the three and ~~six~~nine months ended ~~June~~September 30, 2023, respectively, when compared to the same periods in 2022.

Provision for Credit Losses

The following table details the components of the provision for credit losses:


		Three Months Ended June 30,				%		Six Months Ended June 30,				%			Three Months Ended September 30,				%		Nine Months Ended September 30,				%
(dollars in thousands)	(dollars in thousands)	2023		2022		Change		2023		2022		Change		(dollars in thousands)	2023		2022		Change		2023		2022		Change
Provision for credit losses on loans	Provision for credit losses on loans	$	11,936	$	9,254	29.0	%	$	23,405	$	106,663	(78.1)	%	Provision for credit losses on loans	$	23,115	$	11,288	104.8	%	$	46,520	$	117,951	(60.6)	%
Provision (release) for credit losses on unfunded loan commitments	Provision (release) for credit losses on unfunded loan commitments	2,851		(80)		N/M		4,819		11,087		(56.5)		Provision (release) for credit losses on unfunded loan commitments	(4,047)		4,203		(196.3)		772		15,290		(95.0)
Provision for credit losses on held-to- maturity securities	Provision for credit losses on held-to- maturity securities	—		(9)		(100.0)		—		151		(100.0)		Provision for credit losses on held-to- maturity securities	—		(1)		(100.0)		—		150		(100.0)
Total provision for credit losses	Total provision for credit losses	$	14,787	$	9,165	61.3	%	$	28,224	$	117,901	(76.1)	%	Total provision for credit losses	$	19,068	$	15,490	23.1	%	$	47,292	$	133,391	(64.5)	%

Net (charge-offs) recoveries on non-PCD loans	Net (charge-offs) recoveries on non-PCD loans	$	(4,689)	$	(111)	N/M	%	$	(8,727)	$	19	N/M	%	Net (charge-offs) recoveries on non-PCD loans	$	(20,143)	$	(1,405)	N/M	%	$	(28,870)	$	(1,386)	N/M	%
Net (charge-offs) recoveries on PCD loans	Net (charge-offs) recoveries on PCD loans	(5,403)		(1,647)		228.1		(17,794)		(4,551)		291.0		Net (charge-offs) recoveries on PCD loans	455		(6,190)		(107.4)		(17,339)		(10,741)		61.4
Total net (charge-offs) recoveries on loans	Total net (charge-offs) recoveries on loans	$	(10,092)	$	(1,758)	474.1	%	$	(26,521)	$	(4,532)	485.2	%	Total net (charge-offs) recoveries on loans	$	(19,688)	$	(7,595)	159.2	%	$	(46,209)	$	(12,127)	281.0	%

The provision for credit losses on loans in the ~~six~~nine months ended ~~June~~September 30, 2022 included $96.3 million 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~~nine months ended ~~June~~September 30, 2022 included $11.0 million for unfunded loan commitments acquired in the First Midwest merger. Net charge-offs on non-PCD loans for the three and nine months ended September 30, 2023 included a $12.2 million charge-off related to a single commercial credit that is not representative of broader credit concerns. 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.

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 September 30,				%		Nine Months Ended September 30,				%
(dollars in thousands)	(dollars in thousands)	2023		2022		Change		2023		2022		Change		(dollars in thousands)	2023		2022		Change		2023		2022		Change
Wealth and investment services fees	Wealth and investment services fees	$	26,521	$	27,872	(4.8)	%	$	53,441	$	49,824	7.3	%	Wealth and investment services fees	$	26,687	$	25,359	5.2	%	$	80,128	$	75,183	6.6	%
Service charges on deposit accounts	Service charges on deposit accounts	17,751		20,324		(12.7)		34,754		34,350		1.2		Service charges on deposit accounts	18,524		20,042		(7.6)		53,278		54,392		(2.0)
Debit card and ATM fees	Debit card and ATM fees	10,653		11,222		(5.1)		20,635		18,821		9.6		Debit card and ATM fees	10,818		10,608		2.0		31,453		29,429		6.9
Mortgage banking revenue	Mortgage banking revenue	4,165		6,522		(36.1)		7,565		13,767		(45.0)		Mortgage banking revenue	5,063		5,360		(5.5)		12,628		19,127		(34.0)

Capital markets income	Capital markets income	6,173		7,261		(15.0)		13,112		11,703		12.0		Capital markets income	5,891		8,906		(33.9)		19,003		20,609		(7.8)
Company-owned life insurance	Company-owned life insurance	4,698		4,571		2.8		7,884		8,095		(2.6)		Company-owned life insurance	3,740		3,361		11.3		11,624		11,456		1.5
Debt securities gains (losses), net	Debt securities gains (losses), net	17		(85)		(120.0)		(5,199)		257		N/M		Debt securities gains (losses), net	(241)		(172)		40.1		(5,440)		85		N/M
Other income	Other income	11,651		11,430		1.9		20,118		17,540		14.7		Other income	10,456		6,921		51.1		30,574		24,461		25.0
Total noninterest income	Total noninterest income	$	81,629	$	89,117	(8.4)	%	$	152,310	$	154,357	(1.3)	%	Total noninterest income	$	80,938	$	80,385	0.7	%	$	233,248	$	234,742	(0.6)	%

Noninterest income ~~decreased $7.5~~increased $0.6 million for the three months ended ~~June~~September 30, 2023 compared to the same period in 2022 primarily due to higher other income and wealth and investment services fees, substantially offset by lower capital markets income and service charges on deposit accounts. Noninterest income decreased $1.5 million for the nine months ended September 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~~and $5.4 million of net losses on sales of debt securities in the ~~six~~nine months ended ~~June~~September 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~~increased $1.3 million and $4.9 million for the three and nine months ended ~~June~~September 30, 2023, respectively, compared to the same periods in 2022 primarily due to higher wealth management fees as a result of continued sales to new and existing customers as well as favorable market conditions. In addition, wealth and investment services fees increased for the nine months ended September 30, 2023 compared to the same period in 2022 primarily due to lower market conditions and product fees. Wealth and investment services fees increased $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~~nine months ended ~~June~~September 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~~nine months ended ~~June~~September 30, 2023 compared to the same period in 2022 was ~~more than~~substantially 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~~$0.3 million and ~~$6.2~~$6.5 million for the three and ~~six~~nine months ended ~~June~~September 30, 2023, respectively, compared to the same periods in 2022 primarily due to the higher rate environment and lower gain on sale margins.

Capital markets income decreased ~~$1.1~~$3.0 million and $1.6 million for the three and nine months ended ~~June~~September 30, 2023, respectively, compared to the same ~~period~~periods in 2022 primarily due to lower levels of commercial client interest rate swap fees and tax credit income, partially offset by higher foreign currency exchange fees. ~~Capital markets income increased $1.4 million~~The decrease for the ~~six~~nine months ended ~~June~~September 30, 2023 compared to the same period in 2022 ~~primarily due to~~was partially offset by the full-period 2023 impact of the First Midwest merger which occurred in February of 2022.

Other income increased $3.5 million and $6.1 million for the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022 primarily due to higher commercial loan fees and net gains on sales of other assets in the three months ended September 30, 2023.

Noninterest Expense

The following table details the components in noninterest expense:


		Three Months Ended June 30,				%		Six Months Ended June 30,				%			Three Months Ended September 30,				%		Nine Months Ended September 30,				%
(dollars in thousands)	(dollars in thousands)	2023		2022		Change		2023		2022		Change		(dollars in thousands)	2023		2022		Change		2023		2022		Change
Salaries and employee benefits	Salaries and employee benefits	$	135,810	$	161,817	(16.1)	%	$	273,174	$	285,964	(4.5)	%	Salaries and employee benefits	$	131,541	$	147,203	(10.6)	%	$	404,715	$	433,167	(6.6)	%
Occupancy	Occupancy	26,085		26,496		(1.6)		54,367		47,515		14.4		Occupancy	25,795		26,418		(2.4)		80,162		73,933		8.4
Equipment	Equipment	7,721		7,550		2.3		15,110		12,718		18.8		Equipment	8,284		7,328		13.0		23,394		20,046		16.7
Marketing	Marketing	9,833		9,119		7.8		19,250		13,395		43.7		Marketing	9,448		10,361		(8.8)		28,698		23,756		20.8
Technology	Technology	20,056		25,883		(22.5)		39,258		44,645		(12.1)		Technology	20,592		20,269		1.6		59,850		64,914		(7.8)
Communication	Communication	4,232		5,878		(28.0)		8,693		9,295		(6.5)		Communication	4,075		5,392		(24.4)		12,768		14,687		(13.1)
Professional fees	Professional fees	6,397		6,336		1.0		13,129		26,127		(49.7)		Professional fees	5,956		6,559		(9.2)		19,085		32,686		(41.6)
FDIC assessment	FDIC assessment	9,624		4,699		104.8		20,028		7,274		175.3		FDIC assessment	9,000		6,249		44.0		29,028		13,523		114.7
Amortization of intangibles	Amortization of intangibles	6,060		7,170		(15.5)		12,246		11,981		2.2		Amortization of intangibles	6,040		7,089		(14.8)		18,286		19,070		(4.1)
Amortization of tax credit investments	Amortization of tax credit investments	2,762		1,525		81.1		5,523		3,041		81.6		Amortization of tax credit investments	2,644		2,662		(0.7)		8,167		5,703		43.2
Property optimization	Property optimization	242		—		N/A		1,559		—		N/A		Property optimization	—		—		N/A		1,559		—		N/A
Other expense	Other expense	17,762		21,002		(15.4)		34,958		31,109		12.4		Other expense	21,401		22,914		(6.6)		56,359		54,023		4.3
Total noninterest expense	Total noninterest expense	$	246,584	$	277,475	(11.1)	%	$	497,295	$	493,064	0.9	%	Total noninterest expense	$	244,776	$	262,444	(6.7)	%	$	742,071	$	755,508	(1.8)	%

Noninterest expense decreased ~~$30.9~~$17.7 million for the three months ended ~~June~~September 30, 2023 compared to the same period in 2022. Noninterest expense included ~~$2.4~~$6.3 million of merger-related expenses for the three months ended ~~June~~September 30, 2023, compared to ~~$36.6~~$22.7 million for the three months ended ~~June~~September 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~~September 30, 2023 was stable compared to the same period in 2022 as fully achieved ~~merger related costs~~merger-related benefits were substantially offset by ~~marketing campaigns and~~ higher FDIC assessment expense.

Noninterest expense ~~increased $4.2~~decreased $13.4 million for the ~~six~~nine months ended ~~June~~September 30, 2023 compared to the same period in 2022. Noninterest expense included merger-related expenses totaled ~~$16.9~~$23.2 million for the ~~six~~nine months ended ~~June~~September 30, 2023, compared to ~~$77.9~~$100.6 million for the ~~six~~nine months ended ~~June~~September 30, 2022. In addition, noninterest expense for the ~~six~~nine months ended ~~June~~September 30, 2023 included $3.4 million of Louisville expenses and $1.6 million for property optimization. Excluding these expenses, noninterest expense for the ~~six~~nine months ended ~~June~~September 30, 2023 increased ~~$60.3~~$59.1 million, reflective of the additional operating costs associated with the full-period 2023 impact of the First Midwest merger which occurred in February of 2022, marketing campaigns, and higher FDIC assessment expense.

FDIC assessment expense increased ~~$4.9~~$2.8 million and ~~$12.8~~$15.5 million for the three and ~~six~~nine months ended ~~June~~September 30, 2023, respectively, when compared to the same periods in 2022 primarily due to higher assessment rates and deposit balances.

Amortization of tax credit investments increased ~~$1.2 million and~~ $2.5 million for the ~~three and six~~nine months ended ~~June~~September 30, 2023 ~~respectively,~~ when compared to the same ~~periods~~period in 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 9 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

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 effective tax rate was ~~23.4%~~23.1% for the three months ended ~~June~~September 30, 2023, compared to ~~17.8%~~21.7% for the same period in 2022. The effective tax rate was ~~22.8%~~22.9% for the ~~six~~nine months ended ~~June~~September 30, 2023, compared to ~~15.7%~~19.5% for the same period in 2022. In accordance with ASC 740-270, Accounting for Interim Reporting, the provision for income taxes was recorded at June 30, 2023 based on the current estimate of the effective annual rate. The higher effective tax rate during the three and six months ended June 30, 2023 compared to the same periods in 2022 ~~was primarily the result of~~reflecting an increase in pre-tax book income combined with smaller increases in tax-exempt income and tax credits. Other contributing factors were increases in non-deductible officer compensation and non-deductible FDIC premiums as well as the First Midwest merger in February 2022. See Note 14 to the consolidated financial statements for additional ~~information.~~information.. In accordance with ASC 740-270, Accounting for Interim Reporting, the provision for income taxes was recorded at September 30, 2023 based on the current estimate of the effective annual rate.

FINANCIAL CONDITION

Overview

At ~~June~~September 30, 2023, our assets were ~~$48.5~~$49.1 billion, a ~~$1.7~~$2.3 billion increase compared to assets of $46.8 billion at December 31, 2022. The increase was driven by disciplined loan growth and higher cash balances funded through higher ~~deposits and borrowings.~~deposits.

Earning Assets

Our earning assets are comprised of investment securities, portfolio loans, loans ~~held for sale,~~held-for-sale, money market investments, ~~interest earning~~interest-earning accounts with the Federal Reserve, and equity securities. Earning assets were ~~$43.3~~$43.9 billion at ~~June~~September 30, 2023, a ~~$1.7~~$2.2 billion increase compared to earning assets of $41.6 billion at December 31, 2022 driven primarily by 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 2022, we transferred $3.0 billion of securities available-for-sale to held-to-maturity due to rising interest rates and related effects on the value of our investment securities.

~~Equity securities are recorded at fair value and totaled $72.0 million at June 30, 2023 compared to $52.5 million at December 31, 2022.~~

The investment securities portfolio, including equity securities, was ~~$10.0~~$9.9 billion at ~~June~~September 30, 2023 compared to $10.2 billion at December 31, 2022. Investment securities represented 23% of earning assets at ~~June~~September 30, 2023, compared to 25% at December 31, 2022. At ~~June~~September 30, 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 ~~$934.7 million~~$1.1 billion at ~~June~~September 30, 2023, compared to net unrealized losses of $844.4 million at December 31, 2022. The investment securities held-to-maturity portfolio had net unrealized losses of ~~$451.9~~$634.3 million at ~~June~~September 30, 2023, compared to net unrealized losses of

~~$445.5~~ $445.5 million at December 31, 2022. Net unrealized losses increased from December 31, 2022 to ~~June~~September 30, 2023 primarily due to higher market interest rates.

The investment securities available-for-sale portfolio including securities hedges had an effective duration of ~~4.43~~4.33 at ~~June~~September 30, 2023, compared to 4.57 at December 31, 2022. The total investment securities portfolio had an

effective duration of ~~5.52~~5.48 at ~~June~~September 30, 2023, compared to 6.45 at December 31, 2022. Effective duration represents the percentage change in the fair value of the portfolio in response to a change in interest 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%~~3.23% and ~~3.02%~~3.09% for the three and ~~six~~nine months ended ~~June~~September 30, 2023, respectively, compared to ~~2.37%~~2.63% and ~~2.26%~~2.39% for the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively.

Loan Portfolio

The following table presents the composition of the loan portfolio:


(dollars in thousands)	(dollars in thousands)	June 30, 2023		December 31, 2022		$ Change		% Change		(dollars in thousands)	September 30, 2023		December 31, 2022		$ Change		% Change
Commercial	Commercial	$	9,698,241	$	9,508,904	$	189,337	2	%	Commercial	$	9,333,448	$	9,508,904	$	(175,456)	(2)	%
Commercial real estate	Commercial real estate	13,450,209		12,457,070		993,139		8		Commercial real estate	13,916,221		12,457,070		1,459,151		12
Residential real estate	Residential real estate	6,684,480		6,460,441		224,039		3		Residential real estate	6,696,288		6,460,441		235,847		4
Consumer	Consumer	2,599,543		2,697,226		(97,683)		(4)		Consumer	2,631,877		2,697,226		(65,349)		(2)
Total loans	Total loans	$	32,432,473	$	31,123,641	$	1,308,832	4	%	Total loans	$	32,577,834	$	31,123,641	$	1,454,193	5	%

Commercial and Commercial Real Estate Loans

Commercial and commercial real estate loans are the largest classifications within earning assets, representing 53% of earning assets at both ~~June~~September 30, 2023 and December 31, 2022. The increase in commercial and commercial real estate loans at ~~June~~September 30, 2023 compared to December 31, 2022 was driven by disciplined loan production that was well balanced across our market footprint and product ~~lines.~~lines, partially offset by commercial loan sales.

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, 2023									December 31, 2022										September 30, 2023									December 31, 2022
(dollars in thousands)	(dollars in thousands)	Outstanding			Exposure(1)			Nonaccrual			Outstanding			Exposure(1)			Nonaccrual			(dollars in thousands)	Outstanding			Exposure(1)			Nonaccrual			Outstanding			Exposure(1)			Nonaccrual
By Industry:	By Industry:																			By Industry:
Manufacturing	Manufacturing	$	1,803,303		$	2,970,373		$	6,901		$	1,757,907		$	2,803,883		$	2,464		Manufacturing	$	1,626,629		$	2,699,161		$	6,154		$	1,757,907		$	2,803,883		$	2,464
Health care and social assistance	Health care and social assistance	1,360,925			1,776,461			7,523			1,588,392			2,043,105			11,806			Health care and social assistance	1,338,875			1,719,741			7,529			1,588,392			2,043,105			11,806
Wholesale trade	Wholesale trade	806,904			1,519,782			4,860			857,400			1,552,985			2,895			Wholesale trade	802,398			1,577,859			4,262			857,400			1,552,985			2,895
Real estate rental and leasing	Real estate rental and leasing	670,100			1,010,194			1,107			642,511			962,549			1,135			Real estate rental and leasing	655,993			1,008,673			1,307			642,511			962,549			1,135
Construction	Construction	630,504			1,441,527			4,386			556,913			1,307,582			1,517			Construction	624,767			1,429,685			1,828			556,913			1,307,582			1,517
Finance and insurance	Finance and insurance	576,081			934,986			8			484,532			858,391			17			Finance and insurance	583,107			953,601			6			484,532			858,391			17
Transportation and warehousing																				Transportation and warehousing	475,731			702,232			2,372			422,643			633,267			3,496
Professional, scientific, and technical services	Professional, scientific, and technical services	538,952			866,853			4,571			507,940			832,407			4,735			Professional, scientific, and technical services	422,730			770,941			4,304			507,940			832,407			4,735
Transportation and warehousing		439,015			681,702			3,831			422,643			633,267			3,496
Accommodation and food services																				Accommodation and food services	363,025			488,254			425			399,915			512,025			596
Retail trade	Retail trade	406,320			699,800			7,394			332,367			538,135			7,386			Retail trade	362,840			660,614			5,948			332,367			538,135			7,386
Accommodation and food services		388,810			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			Administrative and support and waste management and remediation services	310,439			481,089			169			315,785			446,655			13,860
Educational services	Educational services	240,653			406,915			8			210,850			378,955			3,750			Educational services	246,121			425,426			7			210,850			378,955			3,750
Agriculture, forestry, fishing, and hunting																				Agriculture, forestry, fishing, and hunting	223,203			364,732			417			261,355			382,376			996
Other services	Other services	218,305			395,272			13,090			194,998			356,743			2,656			Other services	221,141			394,719			12,429			194,998			356,743			2,656
Public administration	Public administration	208,512			301,200			—			231,453			325,834			846			Public administration	219,090			294,745			—			231,453			325,834			846
Agriculture, forestry, fishing, and hunting		205,740			359,958			418			261,355			382,376			996
Other	Other	896,554			1,197,440			473			743,943			1,122,409			739			Other	857,359			1,141,447			1,618			743,943			1,122,409			739
Total	Total	$	9,698,241		$	15,548,997		$	55,235		$	9,508,904		$	15,057,301		$	58,894		Total	$	9,333,448		$	15,112,919		$	48,775		$	9,508,904		$	15,057,301		$	58,894

By Loan Size:	By Loan Size:																			By Loan Size:
Less than $200,000	Less than $200,000	3		%	3		%	3		%	3		%	3		%	3		%	Less than $200,000	3		%	3		%	4		%	3		%	3		%	3		%
$200,000 to $1,000,000	$200,000 to $1,000,000	11			11			19			11			11			20			$200,000 to $1,000,000	11			11			22			11			11			20
$1,000,000 to $5,000,000	$1,000,000 to $5,000,000	24			25			49			25			26			36			$1,000,000 to $5,000,000	25			26			43			25			26			36
$5,000,000 to $10,000,000	$5,000,000 to $10,000,000	14			15			6			15			15			24			$5,000,000 to $10,000,000	15			15			7			15			15			24
$10,000,000 to $25,000,000	$10,000,000 to $25,000,000	32			28			23			31			27			17			$10,000,000 to $25,000,000	31			28			24			31			27			17
Greater than $25,000,000	Greater than $25,000,000	16			18			—			15			18			—			Greater than $25,000,000	15			17			—			15			18			—
Total	Total	100		%	100		%	100		%	100		%	100		%	100		%	Total	100		%	100		%	100		%	100		%	100		%	100		%

(1) Includes unfunded loan commitments.

The following table provides detail on commercial real estate loans classified by property type.


		June 30, 2023						December 31, 2022							September 30, 2023						December 31, 2022
(dollars in thousands)	(dollars in thousands)	Outstanding		Exposure(1)		Nonaccrual		Outstanding		Exposure(1)		Nonaccrual		(dollars in thousands)	Outstanding		Exposure(1)		Nonaccrual		Outstanding		Exposure(1)		Nonaccrual
By Property Type:	By Property Type:													By Property Type:
Multifamily	Multifamily	$	4,455,077	$	6,420,032	$	11,942	$	4,188,137	$	5,920,414	$	13,749	Multifamily	$	4,584,203	$	6,542,155	$	7,519	$	4,188,137	$	5,920,414	$	13,749
Warehouse / Industrial	Warehouse / Industrial	2,378,739		3,124,270		5,807		1,976,804		2,533,892		9,090		Warehouse / Industrial	2,593,868		3,304,937		5,381		1,976,804		2,533,892		9,090
Retail														Retail	1,903,321		1,978,067		30,804		1,808,041		1,895,345		18,155
Office	Office	1,927,184		2,160,627		29,315		1,813,007		1,979,272		13,728		Office	1,900,752		2,104,761		36,971		1,813,007		1,979,272		13,728
Retail		1,912,285		2,003,162		32,109		1,808,041		1,895,345		18,155

Single family	Single family	425,926		457,895		5,176		515,390		615,216		7,022		Single family	446,134		471,469		3,984		515,390		615,216		7,022

Other (2)	Other (2)	2,350,998		2,663,938		90,388		2,155,691		2,667,780		61,977		Other (2)	2,487,943		2,934,260		60,638		2,155,691		2,667,780		61,977
Total	Total	$	13,450,209	$	16,829,924	$	174,737	$	12,457,070	$	15,611,919	$	123,721	Total	$	13,916,221	$	17,335,649	$	145,297	$	12,457,070	$	15,611,919	$	123,721

(1) Includes unfunded loan commitments.

(2) Other includes agriculture real estate, hotels, self-storage, senior housing, land development, religion, and mixed-use properties.

Residential Real Estate Loans

At ~~June~~September 30, 2023, residential real estate loans held in our loan portfolio were $6.7 billion, an increase of ~~$224.0~~$235.8 million compared to December 31, 2022. Future increases in interest rates could result in a decline in the level of refinancings and new originations of residential real estate loans.

Consumer Loans

Consumer loans, including automobile loans, personal, and home equity loans and lines of credit, decreased ~~$97.7~~$65.3 million to $2.6 billion at ~~June~~September 30, 2023 compared to December 31, 2022 reflecting lower direct loans.

Other Assets

Other assets at September 30, 2023 increased $143.9 million from December 31, 2022 primarily due to higher net deferred tax assets related to the market value adjustments of certain investment securities and higher derivative assets.

Funding

The following table summarizes Old National’s total funding, comprised of deposits and wholesale borrowings:


(dollars in thousands)	(dollars in thousands)	June 30, 2023		December 31, 2022		$ Change		% Change		(dollars in thousands)	September 30, 2023		December 31, 2022		$ Change		% Change
Deposits:	Deposits:									Deposits:
Noninterest-bearing demand	Noninterest-bearing demand	$	10,532,838	$	11,930,798	$	(1,397,960)	(12)	%	Noninterest-bearing demand	$	10,091,352	$	11,930,798	$	(1,839,446)	(15)	%
Interest-bearing:	Interest-bearing:									Interest-bearing:
Checking and NOW	Checking and NOW	7,654,202		8,340,955		(686,753)		(8)	%	Checking and NOW	7,495,417		8,340,955		(845,538)		(10)	%
Savings	Savings	5,578,323		6,326,158		(747,835)		(12)	%	Savings	5,296,985		6,326,158		(1,029,173)		(16)	%
Money market	Money market	7,200,288		5,389,139		1,811,149		34	%	Money market	8,793,218		5,389,139		3,404,079		63	%
Time deposits	Time deposits	5,265,664		3,013,780		2,251,884		75	%	Time deposits	5,575,704		3,013,780		2,561,924		85	%
Total deposits	Total deposits	36,231,315		35,000,830		1,230,485		4	%	Total deposits	37,252,676		35,000,830		2,251,846		6	%
Wholesale borrowings:	Wholesale borrowings:									Wholesale borrowings:
Federal funds purchased and interbank borrowings	Federal funds purchased and interbank borrowings	136,060		581,489		(445,429)		(77)	%	Federal funds purchased and interbank borrowings	918		581,489		(580,571)		(100)	%
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	311,447		432,804		(121,357)		(28)	%	Securities sold under agreements to repurchase	279,061		432,804		(153,743)		(36)	%
Federal Home Loan Bank advances	Federal Home Loan Bank advances	4,771,183		3,829,018		942,165		25	%	Federal Home Loan Bank advances	4,412,576		3,829,018		583,558		15	%
Other borrowings	Other borrowings	815,318		743,003		72,315		10	%	Other borrowings	863,455		743,003		120,452		16	%
Total wholesale borrowings	Total wholesale borrowings	6,034,008		5,586,314		447,694		8	%	Total wholesale borrowings	5,556,010		5,586,314		(30,304)		(1)	%
Total funding	Total funding	$	42,265,323	$	40,587,144	$	1,678,179	4	%	Total funding	$	42,808,686	$	40,587,144	$	2,221,542	5	%

We use wholesale funding to augment deposit funding and to help maintain our desired interest rate risk position. Wholesale funding as a percentage of total funding was ~~14%~~13% at ~~both June~~September 30, 2023 ~~and~~compared to 14% at December 31, 2022.

~~Accrued Expenses and Other Liabilities~~

Accrued expenses and other liabilities at June 30, 2023 decreased $102.5 million from December 31, 2022 primarily due to incentive compensation payments during the six months ended June 30, 2023 and lower derivative liabilities.

Capital

Shareholders’ equity totaled ~~$5.3~~$5.2 billion at ~~June~~September 30, 2023, compared to $5.1 billion at December 31, 2022. This increase was driven by retained earnings along with changes in unrealized gains (losses) on derivatives. These increases were partially offset by dividends, changes in unrealized gains (losses) on available-for-sale investment securities, and the repurchase of 1.8 million shares of Common Stock in the ~~six~~nine months ended ~~June~~September 30, 2023 (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 $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~~September 30, 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.

Old National’s consolidated capital position remains strong as evidenced by the following key industry ratios.


		Regulatory Guidelines Minimum		Prompt Corrective Action "Well Capitalized" Guidelines		June 30, 2023		December 31, 2022			Regulatory Guidelines Minimum		Prompt Corrective Action "Well Capitalized" Guidelines		September 30, 2023		December 31, 2022
Risk-based capital:

Tier 1 capital to total average assets (leverage ratio)	Tier 1 capital to total average assets (leverage ratio)	4.00	%	N/A	%	8.59	%	8.52	%	Tier 1 capital to total average assets (leverage ratio)	4.00	%	N/A	%	8.70	%	8.52	%
Common equity Tier 1 capital to risk-weighted total assets	Common equity Tier 1 capital to risk-weighted total assets	7.00		N/A		10.14		10.03		Common equity Tier 1 capital to risk-weighted total assets	7.00		N/A		10.41		10.03
Tier 1 capital to risk-weighted total assets	Tier 1 capital to risk-weighted total assets	8.50		6.00		10.79		10.71		Tier 1 capital to risk-weighted total assets	8.50		6.00		11.06		10.71
Total capital to risk-weighted total assets	Total capital to risk-weighted total assets	10.50		10.00		12.14		12.02		Total capital to risk-weighted total assets	10.50		10.00		12.32		12.02
Shareholders' equity to assets		N/A		N/A		10.91		10.97
Shareholders’ equity to assets										Shareholders’ equity to assets	N/A		N/A		10.68		10.97

Old National Bank, Old National’s bank subsidiary, maintained a strong capital position as evidenced by the following key industry ratios.


		Regulatory Guidelines Minimum		Prompt Corrective Action "Well Capitalized" Guidelines		June 30, 2023		December 31, 2022			Regulatory Guidelines Minimum		Prompt Corrective Action "Well Capitalized" Guidelines		September 30, 2023		December 31, 2022
Risk-based capital:

Tier 1 capital to total average assets (leverage ratio)	Tier 1 capital to total average assets (leverage ratio)	4.00	%	5.00	%	8.73	%	8.47	%	Tier 1 capital to total average assets (leverage ratio)	4.00	%	5.00	%	8.84	%	8.47	%
Common equity Tier 1 capital to risk-weighted total assets	Common equity Tier 1 capital to risk-weighted total assets	7.00		6.50		10.98		10.66		Common equity Tier 1 capital to risk-weighted total assets	7.00		6.50		11.26		10.66
Tier 1 capital to risk-weighted total assets	Tier 1 capital to risk-weighted total assets	8.50		8.00		10.98		10.66		Tier 1 capital to risk-weighted total assets	8.50		8.00		11.26		10.66
Total capital to risk-weighted total assets	Total capital to risk-weighted total assets	10.50		10.00		11.73		11.35		Total capital to risk-weighted total assets	10.50		10.00		12.00		11.35

During 2020, the OCC, the Board of Governors of the Federal Reserve System, and the FDIC issued final rules to delay the estimated impact on regulatory capital stemming from the implementation of CECL. The final rules 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 adopted 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 our Board of Directors, Executive Leadership Team, and Senior Management to better assess, understand, monitor, and mitigate Old National’s risks. The Risk Appetite Statement addresses the following major risks: strategic, market, liquidity, credit, operational, talent management, compliance and regulatory, legal, and reputational. Our Chief Risk Officer provides quarterly reports to the Board’s Enterprise Risk Committee on various risk topics. The following discussion addresses certain of these major risks including credit, market, and 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 2022 Annual Report on Form 10-K.

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.

Asset Quality

We lend to commercial and commercial real estate clients in many diverse industries including, among others, real estate rental and leasing, manufacturing, healthcare, wholesale trade, construction, and agriculture. Old National manages concentrations of credit exposure by industry, product, geography, client relationship, and loan size. At ~~June~~September 30, 2023, our average commercial loan size was approximately ~~$680,000~~$630,000 and our average commercial real estate loan size was approximately ~~$1,350,000.~~$1,400,000. 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~~September 30, 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 in the Midwest region.

The following table presents a summary of under-performing, criticized, and classified assets:


(dollars in thousands)	(dollars in thousands)	June 30, 2023			December 31, 2022			(dollars in thousands)	September 30, 2023			December 31, 2022
Total nonaccrual loans	Total nonaccrual loans	$	295,509		$	238,178		Total nonaccrual loans	$	261,346		$	238,178
TDRs still accruing (1)	TDRs still accruing (1)	N/A			15,313			TDRs still accruing (1)	N/A			15,313
Loans 90 days or more past due and still accruing	Loans 90 days or more past due and still accruing	303			2,650			Loans 90 days or more past due and still accruing	1,192			2,650
Foreclosed assets	Foreclosed assets	9,824			10,845			Foreclosed assets	9,761			10,845
Total under-performing assets	Total under-performing assets	$	305,636		$	266,986		Total under-performing assets	$	272,299		$	266,986
Classified loans (includes nonaccrual, TDRs still accruing, past due 90 days, and other problem loans) (1)	Classified loans (includes nonaccrual, TDRs still accruing, past due 90 days, and other problem loans) (1)	$	820,521		$	745,485		Classified loans (includes nonaccrual, TDRs still accruing, past due 90 days, and other problem loans) (1)	$	825,965		$	745,485
Other classified assets (2)	Other classified assets (2)	40,942			24,735			Other classified assets (2)	48,998			24,735
Criticized loans	Criticized loans	614,547			636,069			Criticized loans	775,526			636,069
Total criticized and classified assets	Total criticized and classified assets	$	1,476,010		$	1,406,289		Total criticized and classified assets	$	1,650,489		$	1,406,289
Asset Quality Ratios:	Asset Quality Ratios:							Asset Quality Ratios:
Nonaccrual loans/total loans (3)	Nonaccrual loans/total loans (3)	0.91		%	0.77		%	Nonaccrual loans/total loans (3)	0.80		%	0.77		%
Non-performing loans/total loans (3) (4)	Non-performing loans/total loans (3) (4)	0.91			0.81			Non-performing loans/total loans (3) (4)	0.80			0.81
Under-performing assets/total loans (3)	Under-performing assets/total loans (3)	0.94			0.86			Under-performing assets/total loans (3)	0.84			0.86
Under-performing assets/total assets	Under-performing assets/total assets	0.63			0.57			Under-performing assets/total assets	0.56			0.57
Allowance for credit losses on loans/under-performing assets	Allowance for credit losses on loans/under-performing assets	98.34			113.74			Allowance for credit losses on loans/under-performing assets	111.64			113.74
Allowance for credit losses on loans/nonaccrual loans	Allowance for credit losses on loans/nonaccrual loans	101.71			127.50			Allowance for credit losses on loans/nonaccrual loans	116.31			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.

(3)Loans exclude loans ~~held for sale.~~held-for-sale.

(4)Non-performing loans include nonaccrual loans and TDRs still accruing for periods prior to January 1, 2023.

Under-performing assets increased to ~~$305.6~~$272.3 million at ~~June~~September 30, 2023, compared to $267.0 million at December 31, ~~2022 primarily due to an increase in nonaccrual loans.~~2022. Under-performing assets as a percentage of total loans at ~~June~~September 30, 2023 were ~~0.94%~~0.84%, ~~an 8~~a 2 basis point ~~increase~~decrease from 0.86% at December 31, 2022.

Nonaccrual loans increased ~~$57.3~~$23.2 million from December 31, 2022 to ~~June~~September 30, 2023 reflecting PCD loan migration in the commercial real estate portfolio. As a percentage of nonaccrual loans, the allowance for credit losses on loans was ~~101.71%~~116.31% at ~~June~~September 30, 2023, compared to 127.50% at December 31, 2022.

Total criticized and classified assets were ~~$1.5~~$1.7 billion at ~~June~~September 30, 2023, an increase of ~~$69.7~~$244.2 million from December 31, ~~2022.~~2022 primarily due to higher criticized commercial loans. Other classified assets include investment securities that fell below investment grade rating totaling ~~$40.9~~$49.0 million at ~~June~~September 30, 2023, compared to $24.7 million at December 31, 2022.

Allowance for Credit Losses on Loans and Unfunded Commitments

Net charge-offs on loans totaled ~~$10.1~~$19.7 million during the three months ended ~~June~~September 30, 2023, compared to ~~$1.8~~$7.6 million for the same period in 2022. Annualized, net charge-offs to average loans were ~~0.13%~~0.24% for the three months ended ~~June~~September 30, 2023, compared to ~~0.02%~~0.10% for the same period in 2022. The three months ended ~~June~~September 30, 2023 included net recoveries on PCD loans totaling $0.5 million, or (0.01)% on an annualized basis of average loans, compared to net charge-offs on PCD loans totaling ~~$5.4~~$6.2 million, or ~~0.07%~~0.08% on an annualized basis of average ~~loans.~~loans for the three months ended September 30, 2022. Net charge-offs on loans totaled ~~$26.5~~$46.2 million during the ~~six~~nine months ended ~~June~~September 30, 2023, compared to ~~$4.5~~$12.1 million for the same period in 2022. Annualized, net charge-offs to average loans were ~~0.17%~~0.19% for the ~~six~~nine months ended ~~June~~September 30, 2023, compared to ~~0.04%~~0.06% for the same period in 2022. The ~~six~~nine months ended ~~June~~September 30, 2023 included net charge-offs on PCD loans totaling ~~$17.8~~$17.3 million, or ~~0.11%~~0.07% on an annualized basis of average ~~loans.~~loans, compared to net charge-offs on PCD loans totaling $10.7 million, or 0.05% on an annualized basis of average loans for the nine months ended September 30, 2022. In addition, the three and nine months ended September 30, 2023 included a $12.2 million charge-off related to a single commercial credit that is not representative of broader credit concerns. 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 on 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 on 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 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 on loans was ~~$300.6~~$304.0 million at ~~June~~September 30, 2023, compared to $303.7 million at December 31, 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 loan commitments 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 on 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 unfunded loan commitments is included in the provision for credit losses. The allowance for credit losses on unfunded loan commitments totaled ~~$37.0~~$33.0 million at ~~June~~September 30, 2023, compared to $32.2 million at December 31, 2022.

See the section entitled “Risk Factors” in the Company’s 2022 Annual Report on Form 10-K for further discussion of our credit risk.

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 are 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.

The following table illustrates our projected net interest income sensitivity over a two-year cumulative horizon based on the asset/liability model at ~~June~~September 30, 2023 and 2022:


		Immediate Rate Decrease											Immediate Rate Increase										Immediate Rate Decrease											Immediate Rate Increase
(dollars in thousands)	(dollars in thousands)	-300 Basis Points			-200 Basis Points			-100 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, 2023
September 30, 2023																						September 30, 2023
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	$	703,760		$	700,039		$	751,180		$	805,138	$	858,682		$	912,190		$	966,037		Money market, other interest earning investments, and investment securities	$	722,474		$	777,196		$	834,683		$	890,384	$	958,522		$	1,026,439		$	1,094,063
Loans	Loans	2,812,913			3,179,212			3,546,919			3,910,105		4,266,532			4,623,023			4,979,447			Loans	2,966,315			3,323,529			3,684,648			4,040,544		4,393,546			4,747,308			5,100,845
Total interest income	Total interest income	3,516,673			3,879,251			4,298,099			4,715,243		5,125,214			5,535,213			5,945,484			Total interest income	3,688,789			4,100,725			4,519,331			4,930,928		5,352,068			5,773,747			6,194,908
Projected interest expense:	Projected interest expense:																					Projected interest expense:
Deposits	Deposits	358,077			570,196			785,031			1,012,889		1,259,985			1,507,077			1,754,162			Deposits	528,719			785,519			1,047,596			1,279,764		1,547,400			1,826,990			2,100,598
Borrowings	Borrowings	373,267			415,553			513,309			600,910		683,328			765,754			848,179			Borrowings	366,090			432,424			521,008			598,589		676,220			753,909			831,590
Total interest expense	Total interest expense	731,344			985,749			1,298,340			1,613,799		1,943,313			2,272,831			2,602,341			Total interest expense	894,809			1,217,943			1,568,604			1,878,353		2,223,620			2,580,899			2,932,188
Net interest income	Net interest income	$	2,785,329		$	2,893,502		$	2,999,759		$	3,101,444	$	3,181,901		$	3,262,382		$	3,343,143		Net interest income	$	2,793,980		$	2,882,782		$	2,950,727		$	3,052,575	$	3,128,448		$	3,192,848		$	3,262,720
Change from base	Change from base	$	(316,115)		$	(207,942)		$	(101,685)				$	80,457		$	160,938		$	241,699		Change from base	$	(258,595)		$	(169,793)		$	(101,848)				$	75,873		$	140,273		$	210,145
% change from base	% change from base	(10.19)		%	(6.70)		%	(3.28)		%			2.59		%	5.19		%	7.79		%	% change from base	(8.47)		%	(5.56)		%	(3.34)		%			2.49		%	4.60		%	6.88		%

								Immediate Rate Decrease					Immediate Rate Increase																Immediate Rate Decrease					Immediate Rate Increase
								-50 Basis Points			Base		+100 Basis Points			+200 Basis Points			+300 Basis Points										-50 Basis Points			Base		+100 Basis Points			+200 Basis Points			+300 Basis Points
June 30, 2022
September 30, 2022																						September 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							$	660,169		$	680,882	$	721,850		$	762,793		$	803,703
Loans	Loans							2,151,455			2,308,609		2,618,757			2,931,908			3,242,547			Loans							2,715,952			2,885,275		3,225,849			3,560,475			3,894,295
Total interest income	Total interest income							2,769,135			2,948,037		3,302,318			3,658,854			4,012,626			Total interest income							3,376,121			3,566,157		3,947,699			4,323,268			4,697,998
Projected interest expense:	Projected interest expense:																					Projected interest expense:
Deposits	Deposits							44,713			72,114		274,985			484,116			693,243			Deposits							106,667			166,603		372,461			578,311			784,154
Borrowings	Borrowings							210,225			238,638		299,725			360,822			421,923			Borrowings							263,032			286,909		337,834			388,779			439,751
Total interest expense	Total interest expense							254,938			310,752		574,710			844,938			1,115,166			Total interest expense							369,699			453,512		710,295			967,090			1,223,905
Net interest income	Net interest income							$	2,514,197		$	2,637,285	$	2,727,608		$	2,813,916		$	2,897,460		Net interest income							$	3,006,422		$	3,112,645	$	3,237,404		$	3,356,178		$	3,474,093
Change from base	Change from base							$	(123,088)				$	90,323		$	176,631		$	260,175		Change from base							$	(106,223)				$	124,759		$	243,533		$	361,448
% change from base	% change from base							(4.67)		%			3.42		%	6.70		%	9.87		%	% change from base							(3.41)		%			4.01		%	7.82		%	11.61		%

Our projected net interest income increased year over year due to 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.

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 ~~$13.4~~$25.5 million ~~at June 30, 2023, compared to a net liability position with a fair value loss of~~and $36.1 million at September 30, 2023 and December 31, ~~2022.~~2022, respectively. See Note 15 to the consolidated financial statements for further discussion of derivative financial instruments.

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 Asset/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 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~~September 30, 2023.


(dollars in thousands)	(dollars in thousands)					(dollars in thousands)
Maturity Bucket	Maturity Bucket	Amount		Rate		Maturity Bucket	Amount		Rate
2023	2023	$	2,197,384	3.32	%	2023	$	1,474,228	3.62	%
2024	2024	2,819,858		4.17		2024	3,832,949		4.33
2025	2025	135,211		1.47		2025	151,114		1.66
2026	2026	65,092		0.82		2026	66,492		0.91
2027	2027	35,551		0.66		2027	34,479		0.70
2027 and beyond	2027 and beyond	12,568		1.17		2027 and beyond	16,442		1.25
Total	Total	$	5,265,664	3.67	%	Total	$	5,575,704	4.00	%

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. On April 21, 2023, Moody’s Investors Service affirmed the long-term debt, deposit ratings, and assessments of Old National Bancorp (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 and issuer ratings of Old National Bank are “negative.”

The credit ratings of Old National and Old National Bank at ~~June~~September 30, 2023 are shown in the following table.


	~~Moody's~~Moody’s Investors Service
	Long-term	Short-term
Old National	A3Baa1	N/A
Old National Bank	~~Aa3~~A1	P-1

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~~September 30, 2023, Old National and its subsidiaries had the following availability of liquid funds and borrowings:


(dollars in thousands)	(dollars in thousands)	Parent Company		Subsidiaries		(dollars in thousands)	Parent Company		Subsidiaries
Available liquid funds:	Available liquid funds:					Available liquid funds:
Cash and due from banks	Cash and due from banks	$	882,164	$	315,722	Cash and due from banks	$	1,409,813	$	253,617
Unencumbered government-issued debt securities	Unencumbered government-issued debt securities	—		725,107		Unencumbered government-issued debt securities	—		297,043
Unencumbered investment grade municipal securities	Unencumbered investment grade municipal securities	—		53,245		Unencumbered investment grade municipal securities	—		114,908
Unencumbered corporate securities	Unencumbered corporate securities	—		137,754		Unencumbered corporate securities	—		34,618
Availability of borrowings:
Amount available from Federal Reserve discount window*		—		963,723
Availability of borrowings*:						Availability of borrowings*:
Amount available from Federal Reserve discount window						Amount available from Federal Reserve discount window	—		875,670
Amount available from Federal Reserve Bank Term Funding Program	Amount available from Federal Reserve Bank Term Funding Program	—		2,392,528		Amount available from Federal Reserve Bank Term Funding Program	—		2,354,901
Amount available from Federal Home Loan Bank*		—		6,040,931
Amount available from Federal Home Loan Bank						Amount available from Federal Home Loan Bank	—		5,536,299
Total available funds	Total available funds	$	882,164	$	10,629,010	Total available funds	$	1,409,813	$	9,467,056

* 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~~September 30, 2023, Old National Bancorp’s other borrowings outstanding were ~~$482.3~~$481.0 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 Old 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 2022 and is not currently required.

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, 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.

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, 2022. There have been no material changes in the Company’s application of critical accounting estimates since December 31, 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.

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.

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, 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)
04/01/23 - 04/30/23 1,242 $ 14.20 — $ 170,476,849
05/01/23 - 05/31/23 4,922 $ 13.28 — $ 170,476,849
06/01/23 - 06/30/23 1,673 $ 12.72 — $ 170,476,849
Total 7,837 $ 13.31 — $ 170,476,849


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)
07/01/23 - 07/31/23	27,973	$	14.01	—	$	170,476,849
08/01/23 - 08/31/23	303	$	16.76	—	$	170,476,849
09/01/23 - 09/30/23	3,479	$	15.79	—	$	170,476,849
Total	31,755	$	14.24	—	$	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 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 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~~September 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.

ITEM 6. EXHIBITS


Exhibit No.						Description



3.1						Fifth Amended and Restated Articles of Incorporation of Old National, amended April 30, 2020 (incorporated by reference to Exhibit 3.1 of Old National’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 18, 2020).

3.2						Articles of Amendment to the Fifth Amended and Restated Articles of Incorporation of Old National authorizing additional shares of Old National capital stock (incorporated by reference to Exhibit 3.2 of Old National’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 16, 2022).

3.3						Articles of Amendment to the Fifth Amended and Restated Articles of Incorporation of Old National designating the New Old National Series A Preferred Stock (incorporated by reference to Exhibit 3.3 of Old National’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 16, 2022).

3.4						Articles of Amendment to the Fifth Amended and Restated Articles of Incorporation of Old National designating the New Old National Series C Preferred Stock (incorporated by reference to Exhibit 3.4 of Old National’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 16, 2022).

3.5						Amended and Restated By-Laws of Old National, amended April 30, 2020 (incorporated by reference to Exhibit 3.2 of Old National’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 18, 2020).

3.6						Amendment to Amended and Restated By-Laws of Old National (incorporated by reference to Exhibit 3.6 of Old National’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 16, 2022).







31.1						Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2						Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1						Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2						Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101						The following materials from Old National’s Form 10-Q Report for the quarterly period ended ~~June~~September 30, 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~~September 30, 2023, formatted in inline XBRL and contained in Exhibit 101.

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 2,~~November 1, 2023