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 ~~September 30, 2023~~March 31, 2024


☐			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

~~NASDAQ~~

~~Stock~~Global Select Market ~~LLC~~

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

ONBPP

~~The~~NASDAQ

~~NASDAQ~~

~~Stock~~Global Select Market ~~LLC~~

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

ONBPO

~~The~~NASDAQ

~~NASDAQ~~

~~Stock~~Global Select 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 ~~292,621,000~~318,971,000 shares outstanding at ~~October 31, 2023.~~April 30, 2024.

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)		98
	Notes to Consolidated Financial Statements (unaudited)		1110
	Note 1.	Basis of Presentation	1110
	Note 2.	Recent Accounting Pronouncements	1110
	Note 3.	Acquisition and Divestiture Activity	1311
	Note 4.	Net Income Per Common Share	1412
	Note 5.	Investment Securities	1513
	Note 6.	Loans and Allowance for Credit Losses	1816
	Note 7.	Leases	2926
	Note 8.	Goodwill and Other Intangible Assets	3028
	Note 9.	Qualified Affordable Housing Projects and Other Tax Credit Investments	3129
	Note 10.	Securities Sold Under Agreements to Repurchase	3330
	Note 11.	Federal Home Loan Bank Advances	3330
	Note 12.	Other Borrowings	3431
	Note 13.	Accumulated Other Comprehensive Income (Loss)	3633
	Note 14.	Income Taxes	3834
	Note 15.	Derivative Financial Instruments	3934
	Note 16.	Commitments, Contingencies, and Financial Guarantees	4238
	Note 17.	Fair Value	4338
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		5045
	Forward-Looking Statements		5045
	Financial Highlights		5146
	Non-GAAP Financial Measures		5347
	Executive Summary		5649
	Results of Operations		5750
	Financial Condition		6454
	Risk Management		6858
	Critical Accounting Estimates		7464
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		7464
Item 4.	Controls and Procedures		7565
PART II.	OTHER INFORMATION		7666
Item 1A.	Risk Factors		7666
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		7666
Item 5.	Other Information		7666
Item 6.	Exhibits		7767
SIGNATURE			7868

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 wholly-owned 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)

CapStar: CapStar Financial Holdings, Inc.

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~~Global Select 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)	September 30, 2023		December 31, 2022		(dollars and shares in thousands, except per share data)	March 31, 2024	December 31, 2023
		(unaudited)					(unaudited)
Assets	Assets					Assets
Cash and due from banks	Cash and due from banks	$	381,343	$	453,432
Money market and other interest-earning investments	Money market and other interest-earning investments	1,282,087		274,980
Total cash and cash equivalents	Total cash and cash equivalents	1,663,430		728,412
Equity securities, at fair value	Equity securities, at fair value	69,880		52,507

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)		3,027,914		3,089,147
Investment securities - available-for-sale, at fair value (amortized cost $7,834,082 and $7,684,889, respectively)

Investment securities - available-for-sale, at fair value (amortized cost $7,834,082 and $7,684,889, respectively)

Investment securities - available-for-sale, at fair value (amortized cost $7,834,082 and $7,684,889, respectively)
Investment securities - held-to-maturity, at amortized cost (fair value $2,547,576 and $2,601,188, respectively)
Federal Home Loan Bank/Federal Reserve Bank stock, at cost	Federal Home Loan Bank/Federal Reserve Bank stock, at cost	365,588		314,168
Loans held-for-sale, at fair value	Loans held-for-sale, at fair value	122,033		11,926
Loans:	Loans:
Commercial	Commercial	9,333,448		9,508,904
Commercial
Commercial
Commercial real estate	Commercial real estate	13,916,221		12,457,070
Residential real estate	Residential real estate	6,696,288		6,460,441
Consumer credit, net of unearned income		2,631,877		2,697,226
Total loans		32,577,834		31,123,641
Consumer
Total loans, net of unearned income
Allowance for credit losses on loans	Allowance for credit losses on loans	(303,982)		(303,671)
Net loans	Net loans	32,273,852		30,819,970
Premises and equipment, net	Premises and equipment, net	565,607		557,307
Operating lease right-of-use assets		179,284		189,714
Accrued interest receivable		209,503		190,521

Goodwill

Goodwill

Goodwill	Goodwill	1,998,716		1,998,716
Other intangible assets	Other intangible assets	108,119		126,405
Company-owned life insurance	Company-owned life insurance	774,517		768,552
Other assets		1,286,244		1,142,315
Accrued interest receivable and other assets
Total assets	Total assets	$	49,059,448	$	46,763,372
Liabilities	Liabilities
Deposits:	Deposits:
Deposits:
Deposits:
Noninterest-bearing demand
Noninterest-bearing demand
Noninterest-bearing demand	Noninterest-bearing demand	$	10,091,352	$	11,930,798
Interest-bearing:	Interest-bearing:
Checking and NOW
Checking and NOW
Checking and NOW	Checking and NOW	7,495,417		8,340,955
Savings	Savings	5,296,985		6,326,158
Money market	Money market	8,793,218		5,389,139
Time deposits	Time deposits	5,575,704		3,013,780
Total deposits	Total deposits	37,252,676		35,000,830
Federal funds purchased and interbank borrowings	Federal funds purchased and interbank borrowings	918		581,489
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	279,061		432,804
Federal Home Loan Bank advances	Federal Home Loan Bank advances	4,412,576		3,829,018
Other borrowings	Other borrowings	863,455		743,003
Operating lease liabilities		199,937		211,964

Accrued expenses and other liabilities
Accrued expenses and other liabilities
Accrued expenses and other liabilities	Accrued expenses and other liabilities	811,288		835,669
Total liabilities	Total liabilities	43,819,911		41,634,777
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
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
Preferred stock, 2,000 shares authorized, 231 shares issued and outstanding
Preferred stock, 2,000 shares authorized, 231 shares issued and outstanding
Common stock, no par value, $1.00 per share stated value, 600,000 shares authorized, 293,330 and 292,655 shares issued and outstanding, respectively
Capital surplus	Capital surplus	4,153,977		4,174,265
Retained earnings	Retained earnings	1,531,289		1,217,349
Accumulated other comprehensive income (loss), net of tax	Accumulated other comprehensive income (loss), net of tax	(968,815)		(786,422)
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 September 30,				Nine Months Ended September 30,
				Three Months Ended March 31,
				Three Months Ended March 31,
				Three Months Ended March 31,
(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)	2024	2023
Interest Income	Interest Income									Interest Income
Loans including fees:	Loans including fees:									Loans including fees:
Taxable	Taxable	$	474,387	$	331,271	$	1,334,658	$	800,535
Nontaxable	Nontaxable	11,181		6,461		32,318		14,770
Investment securities:	Investment securities:
Taxable	Taxable	66,924		56,765		191,797		145,633
Taxable
Taxable
Nontaxable	Nontaxable	10,833		11,086		33,039		32,370
Money market and other interest-earning investments	Money market and other interest-earning investments	13,194		935		25,258		3,073
Total interest income	Total interest income	576,519		406,518		1,617,070		996,381
Interest Expense	Interest Expense
Deposits
Deposits
Deposits	Deposits	147,428		10,820		310,995		19,201
Federal funds purchased and interbank borrowings	Federal funds purchased and interbank borrowings	910		720		11,404		722
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	710		106		2,389		287
Federal Home Loan Bank advances	Federal Home Loan Bank advances	40,382		13,027		123,466		25,915
Other borrowings	Other borrowings	12,003		5,256		30,071		13,410
Total interest expense	Total interest expense	201,433		29,929		478,325		59,535
Net interest income	Net interest income	375,086		376,589		1,138,745		936,846
Provision for credit losses	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	356,018		361,099		1,091,453		803,455
Noninterest Income	Noninterest Income
Wealth and investment services fees	Wealth and investment services fees	26,687		25,359		80,128		75,183
Wealth and investment services fees
Wealth and investment services fees
Service charges on deposit accounts	Service charges on deposit accounts	18,524		20,042		53,278		54,392
Debit card and ATM fees	Debit card and ATM fees	10,818		10,608		31,453		29,429
Mortgage banking revenue	Mortgage banking revenue	5,063		5,360		12,628		19,127

Capital markets income
Capital markets income
Capital markets income	Capital markets income	5,891		8,906		19,003		20,609
Company-owned life insurance	Company-owned life insurance	3,740		3,361		11,624		11,456
Debt securities gains (losses), net	Debt securities gains (losses), net	(241)		(172)		(5,440)		85
Other income	Other income	10,456		6,921		30,574		24,461
Total noninterest income	Total noninterest income	80,938		80,385		233,248		234,742
Noninterest Expense	Noninterest Expense
Salaries and employee benefits
Salaries and employee benefits
Salaries and employee benefits	Salaries and employee benefits	131,541		147,203		404,715		433,167
Occupancy	Occupancy	25,795		26,418		80,162		73,933
Equipment	Equipment	8,284		7,328		23,394		20,046
Marketing	Marketing	9,448		10,361		28,698		23,756
Technology	Technology	20,592		20,269		59,850		64,914
Communication	Communication	4,075		5,392		12,768		14,687
Professional fees	Professional fees	5,956		6,559		19,085		32,686
FDIC assessment	FDIC assessment	9,000		6,249		29,028		13,523
Amortization of intangibles	Amortization of intangibles	6,040		7,089		18,286		19,070
Amortization of tax credit investments	Amortization of tax credit investments	2,644		2,662		8,167		5,703
Property optimization		—		—		1,559		—

Other expense
Other expense
Other expense	Other expense	21,401		22,914		56,359		54,023
Total noninterest expense	Total noninterest expense	244,776		262,444		742,071		755,508
Income before income taxes	Income before income taxes	192,180		179,040		582,630		282,689
Income tax expense	Income tax expense	44,304		38,887		133,118		55,137
Net income	Net income	147,876		140,153		449,512		227,552
Preferred dividends	Preferred dividends	(4,034)		(4,034)		(12,101)		(10,084)
Net income applicable to common shareholders	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	$	0.49	$	0.47	$	1.50	$	0.81
Net income per common share - diluted	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	290,648		290,961		290,763		269,843
Weighted average number of common shares outstanding - diluted	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	$	0.42	$	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 September 30,					Nine Months Ended September 30,
				Three Months Ended March 31,
				Three Months Ended March 31,
				Three Months Ended March 31,
(dollars in thousands)	(dollars in thousands)	2023			2022		2023		2022		(dollars in thousands)	2024	2023
Net income	Net income	$	147,876		$	140,153	$	449,512	$	227,552

Other comprehensive income (loss):	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:	Change in debt securities available-for-sale:
Unrealized holding gains (losses) for the period	Unrealized holding gains (losses) for the period	(208,626)			(285,798)		(304,061)		(1,019,782)
Reclassification for securities transferred to held-to-maturity		—			—		—		165,473
Unrealized holding gains (losses) for the period
Unrealized holding gains (losses) for the period

Reclassification adjustment for securities (gains) losses realized in income
Reclassification adjustment for securities (gains) losses realized in income
Reclassification adjustment for securities (gains) losses realized in income	Reclassification adjustment for securities (gains) losses realized in income	241			172		5,440		(85)
Income tax effect	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	(156,482)			(217,270)		(215,529)		(651,395)

Change in securities held-to-maturity:	Change in securities held-to-maturity:
Adjustment for securities transferred from available-for-sale		—			—		—		(165,473)
Change in securities held-to-maturity:
Change in securities held-to-maturity:

Amortization of unrealized losses on securities transferred from available-for-sale

Amortization of unrealized losses on securities transferred from available-for-sale

Amortization of unrealized losses on securities transferred from available-for-sale	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	(1,430)			(1,651)		(2,861)		37,621
Changes from securities held-to-maturity	Changes from securities held-to-maturity	4,193			5,121		13,713		(117,078)

Change in hedges:	Change in hedges:
Change in hedges:
Change in hedges:
Net unrealized derivative gains (losses) on hedges
Net unrealized derivative gains (losses) on hedges
Net unrealized derivative gains (losses) on hedges	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	4,927			749		(19,893)		(139)
Income tax effect	Income tax effect	2,754			8,846		(6,094)		12,240
Changes from hedges	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:
Change in defined benefit pension plans:
Amortization of net (gains) losses recognized in income
Amortization of net (gains) losses recognized in income
Amortization of net (gains) losses recognized in income	Amortization of net (gains) losses recognized in income	—			(11)		(182)		(32)
Income tax effect	Income tax effect	—			3		45		8
Changes from defined benefit pension plans	Changes from defined benefit pension plans	—			(8)		(137)		(24)
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	(160,182)			(239,317)		(182,393)		(806,075)
Comprehensive income (loss)	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’ EQUITY (unaudited)
(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 $ — $ 165,838 $ 1,880,545 $ 968,010 $ (2,375) $ 3,012,018
Net income (loss) — — — (27,586) — (27,586)
Other comprehensive income (loss) — — — — (335,824) (335,824)
First Midwest Bancorp, Inc. merger:
Issuance of common stock — 129,365 2,316,947 — — 2,446,312
Issuance of preferred stock, net of
   issuance costs 230,500 — 13,219 — — 243,719
Cash dividends:
Common ($0.14 per share) — — — (40,782) — (40,782)
Preferred dividends — — — (2,017) — (2,017)
Common stock issued — 10 155 — — 165
Common stock repurchased — (3,890) (66,188) — — (70,078)
Share-based compensation expense — — 6,284 — — 6,284
Stock activity under incentive
   compensation plans — 1,636 (1,368) (365) — (97)
Balance, March 31, 2022 230,500 292,959 4,149,594 897,260 (338,199) 5,232,114
Net income — — — 114,985 — 114,985
Other comprehensive income (loss) — — — — (230,934) (230,934)
Cash dividends:
Common ($0.14 per share) — — — (40,901) — (40,901)
Preferred dividends — — — (4,033) — (4,033)
Common stock issued — 10 152 — — 162
Common stock repurchased — (21) (301) — — (322)
Share-based compensation expense — — 7,813 — — 7,813
Stock activity under incentive
   compensation plans — (55) 285 (331) — (101)
Balance, June 30, 2022 230,500 292,893 4,157,543 966,980 (569,133) 5,078,783
Net income — — — 140,153 — 140,153
Other comprehensive income (loss) — — — — (239,317) (239,317)
Cash dividends:
Common ($0.14 per share) — — — (40,907) — (40,907)
Preferred dividends — — — (4,034) — (4,034)
Common stock issued — 17 213 — — 230
Common stock repurchased — (34) (497) — — (531)
Share-based compensation expense — — 7,485 — — 7,485
Stock activity under incentive
   compensation plans — 4 1,839 (322) — 1,521
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)	(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, 2022	Balance, December 31, 2022	$	230,500	$	292,903	$	4,174,265	$	1,217,349	$	(786,422)	$	5,128,595

Net income

Net income

Net income
Other comprehensive income (loss)

Cash dividends:

Cash dividends:

Cash dividends:
Common ($0.14 per share)
Common ($0.14 per share)
Common ($0.14 per share)
Preferred ($17.50 per share)
Common stock issued
Common stock repurchased
Share-based compensation expense
Stock activity under incentive compensation plans
Balance, March 31, 2023

December 31, 2023

December 31, 2023

December 31, 2023

Net income

Net income

Net income	Net income	—		—		—		146,600		—		146,600
Other comprehensive income (loss)	Other comprehensive income (loss)	—		—		—		—		78,064		78,064
Cash dividends:	Cash dividends:
Common ($0.14 per share)	Common ($0.14 per share)	—		—		—		(41,088)		—		(41,088)
Preferred dividends		—		—		—		(4,034)		—		(4,034)
Common ($0.14 per share)
Common ($0.14 per share)
Preferred ($17.50 per share)
Common stock issued	Common stock issued	—		15		247		—		—		262
Common stock repurchased	Common stock repurchased	—		(2,598)		(41,112)		—		—		(43,710)
Share-based compensation expense	Share-based compensation expense	—		—		12,742		—		—		12,742
Stock activity under incentive compensation plans	Stock activity under incentive compensation plans	—		1,602		(1,412)		(195)		—		(5)
Balance, March 31, 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
Balance, March 31, 2024

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

OLD NATIONAL BANCORP

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)


		Nine Months Ended September 30,
	Three Months Ended March 31,								Three Months Ended March 31,
(dollars in thousands)	(dollars in thousands)	2023		2022		(dollars in thousands)	2024	2023
Cash Flows From Operating Activities	Cash Flows From Operating Activities					Cash Flows From Operating Activities
Net income	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:
Depreciation
Depreciation
Depreciation	Depreciation	28,162		26,893
Amortization of other intangible assets	Amortization of other intangible assets	18,286		19,070
Amortization of tax credit investments	Amortization of tax credit investments	8,167		5,703
Net premium amortization on investment securities	Net premium amortization on investment securities	8,673		14,625
Accretion income related to acquired loans	Accretion income related to acquired loans	(17,484)		(63,472)
Share-based compensation expense	Share-based compensation expense	22,903		21,582
Provision for credit losses	Provision for credit losses	47,292		133,391
Debt securities (gains) losses, net	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	(727)		(5,911)
Increase in cash surrender value of company-owned life insurance	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	(366,340)		(490,288)
Proceeds from sales of residential real estate loans	Proceeds from sales of residential real estate loans	366,485		531,121
(Increase) decrease in interest receivable	(Increase) decrease in interest receivable	(18,982)		(29,088)
(Increase) decrease in other assets	(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	(40,132)		271,625
Net cash flows provided by (used in) operating activities	Net cash flows provided by (used in) operating activities	443,515		687,311
Cash Flows From Investing Activities	Cash Flows From Investing Activities
Cash received from merger, net		—		1,912,629

Purchases of investment securities available-for-sale

Purchases of investment securities available-for-sale

Purchases of investment securities available-for-sale	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)		(156,378)
Purchases of Federal Home Loan Bank/Federal Reserve Bank stock	Purchases of Federal Home Loan Bank/Federal Reserve Bank stock	(99,158)		(115,488)
Purchases of equity securities	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	614,782		1,117,620
Proceeds from sales of investment securities available-for-sale	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	76,276		61,172
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
Proceeds from sales of equity securities	Proceeds from sales of equity securities	2,610		52,034
Loan originations and payments, net	Loan originations and payments, net	(2,269,544)		(2,481,620)
Proceeds from sales of commercial loans	Proceeds from sales of commercial loans	679,952		—
Proceeds from company-owned life insurance death benefits	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	3,513		3,202
Purchases of premises and equipment and other assets	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	(1,561,607)		(878,523)
Cash Flows From Financing Activities	Cash Flows From Financing Activities
Net increase (decrease) in:	Net increase (decrease) in:
Net increase (decrease) in:
Net increase (decrease) in:
Deposits
Deposits
Deposits	Deposits	2,251,846		235,064
Federal funds purchased and interbank borrowings	Federal funds purchased and interbank borrowings	(580,571)		300,755
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	(153,743)		(89,416)
Other borrowings	Other borrowings	114,251		152,324
Payments for maturities of Federal Home Loan Bank advances	Payments for maturities of Federal Home Loan Bank advances	(1,850,150)		(1,674,875)

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

Cash dividends paid
Cash dividends paid
Cash dividends paid	Cash dividends paid	(135,054)		(132,674)
Common stock repurchased	Common stock repurchased	(44,266)		(70,931)

Common stock issued
Common stock issued
Common stock issued	Common stock issued	797		557
Net cash flows provided by (used in) financing activities	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	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 end of period	Cash and cash equivalents at end of period	$	1,663,430	$	801,611

OLD NATIONAL BANCORP

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


		Nine Months Ended September 30,
	Three Months Ended March 31,								Three Months Ended March 31,
(dollars in thousands)	(dollars in thousands)	2023		2022		(dollars in thousands)	2024	2023
Supplemental cash flow information:	Supplemental cash flow information:
Total interest paid	Total interest paid	$	450,939	$	62,207
Total interest paid
Total interest paid
Total income taxes paid (net of refunds)	Total income taxes paid (net of refunds)	158,478		14,759
Common stock issued for merger, net		—		2,446,312
Preferred stock issued for merger, net		—		243,870
Investment securities purchased but not settled		—		3,858

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

Operating lease right-of-use assets obtained in exchange for lease obligations	Operating lease right-of-use assets obtained in exchange for lease obligations	7,899		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	10,019		629

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

109

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 ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, and the results of its operations for the three ~~and nine~~ months ended ~~September 30, 2023~~March 31, 2024 and ~~2022.~~2023. 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.~~2023.

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~~2024

FASB ASC ~~805~~820 – In ~~October 2021,~~June 2022, the FASB issued ASU ~~2021-08,~~2022-03, ~~Business Combinations~~Fair Value Measurement (Topic ~~805)~~820): ~~Accounting for Contract Assets and Contract Liabilities From Contracts With Customers~~Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, to ~~address diversity~~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 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.~~fair value. 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~~2024 did not have a material impact on the consolidated financial statements.

FASB ASC ~~326~~323 – In March ~~2022,~~2023, the FASB issued ASU ~~2022-02,~~2023-02, ~~Financial Instruments—~~Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit ~~Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures~~Structures Using the Proportional Amortization Method, which allows reporting entities to ~~eliminate~~elect to account for qualifying tax equity investments using the ~~TDR recognition and measurement guidance and, instead, require that an entity evaluate (consistent with~~proportional amortization method, regardless of the ~~accounting for other loan modifications) whether~~program giving rise to 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 areincome tax credits. This ASU is effective for fiscal years beginning after December 15, ~~2022,~~2023, including interim periods within those fiscal years. ~~Old National adopted the provision in ASU 2022-02 related to the recognition and measurement~~The adoption of ~~TDRs~~this guidance on a ~~prospective~~modified retrospective basis on January 1, ~~2023, which~~2024 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. As of March 31, 2024, substantially all of the Company’s LIBOR exposure was addressed and remaining LIBOR-based contracts are expected to transition to alternate reference rates at their next index reset dates. Old National believes the adoption of this guidance on activities subsequent to ~~September 30, 2023~~March 31, 2024 will not have a material impact on the consolidated financial statements.

Accounting Guidance Pending Adoption

FASB ASC ~~820~~280 – In ~~June 2022,~~November 2023, the FASB issued ASU ~~2022-03,~~2023-07, ~~Fair Value Measurement~~Segment Reporting (Topic ~~820)~~280): ~~Fair Value Measurement~~Improvements to Reportable Segment Disclosures. The amendments are intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of ~~Equity Securities Subject~~profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The purpose of the amendments is to ~~Contractual Sale Restrictions~~,enable investors to ~~clarify that a contractual restriction~~better understand an entity’s overall performance and assess potential future cash flows. A public entity should apply the amendments retrospectively to all prior periods presented in the financial statements. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the ~~sale~~significant segment expense categories identified and disclosed in the period of ~~an equity security~~adoption. This ASU 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.~~years beginning after December 15, 2024. Early adoption is permitted. Old National is currently evaluating the impact of adopting the new guidance on the consolidated financial statements.

FASB ASC ~~842~~740 – In ~~March~~December 2023, the FASB issued ASU ~~2023-01,~~2023-09, ~~Leases~~Income Taxes (Topic ~~842)~~740): ~~Common Control Arrangements~~Improvements to Income Tax Disclosures~~, which requires all~~. Among other things, these amendments require that public business entities ~~to amortize leasehold improvements associated~~on an annual basis disclose additional information in specified categories with ~~common control leases over the useful life~~respect to the ~~common control group. This~~reconciliation of the effective tax rate to the statutory rate for federal, state, and foreign income taxes. It also requires greater detail about individual reconciling items in the rate reconciliation to the extent the impact of those items exceeds a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income (loss) by the applicable statutory income tax rate). In addition, the ASU isrequires information pertaining to taxes paid (net of refunds received) to be disaggregated for federal, state, and foreign taxes and further disaggregated for specific jurisdictions to the extent the related amounts are equal to or greater than 5 percent of total income taxes paid (net of refunds received). The amendments in this ASU are effective for ~~fiscal years~~annual periods beginning after December 15, ~~2023, including interim periods within those fiscal years.~~2024. 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.permitted. 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.

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 $23.2 million associated with the merger have been expensed for the nine months ended September 30, 2023, compared to $100.6 million during the nine months ended 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 had 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. On April 1, 2024, Old National completed its acquisition of CapStar. This partnership ~~transaction will strengthen~~strengthens Old National’s ~~recently formed~~ Nashville, Tennessee presence and ~~add~~adds several new high-growth markets. ~~As of September 30, 2023,~~At closing, CapStar had approximately ~~$3.3~~$3.0 billion of total assets, $2.3 billion of total loans, and ~~$2.8~~$2.6 billion of deposits. Under the terms of the merger agreement, each outstanding share of CapStar common stock ~~will be~~was converted into the right to receive 1.155 shares of Old National common stock ~~valuing the transaction at approximately $344.4~~plus cash in lieu of fractional shares, resulting in consideration paid of $418 million ~~or $16.64 per share,~~ based on Old National’s ~~30-day volume weighted average closing~~ stock price ~~ending October 25, 2023. The~~of $17.41 per share at close. Old National expects systems conversions related to the transaction ~~value is likely~~ to ~~change until closing due to fluctuations~~be completed 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 secondthird quarter of 2024.

1311

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~~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 September 30,				Nine Months Ended September 30,
				Three Months Ended March 31,
				Three Months Ended March 31,
				Three Months Ended March 31,
(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)	2024	2023
Net income	Net income	$	147,876	$	140,153	$	449,512	$	227,552
Preferred dividends	Preferred dividends	(4,034)		(4,034)		(12,101)		(10,084)

Net income applicable to common shares	Net income applicable to common shares	$	143,842	$	136,119	$	437,411	$	217,468
Net income applicable to common shares
Net income applicable to common shares

Weighted average common shares outstanding:	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)
Weighted average common shares outstanding (basic)	Weighted average common shares outstanding (basic)	290,648		290,961		290,763		269,843
Effect of dilutive securities:	Effect of dilutive securities:
Restricted stock
Restricted stock
Restricted stock	Restricted stock	1,069		1,516		1,045		1,273
Stock appreciation rights	Stock appreciation rights	—		6		1		7
Weighted average diluted shares outstanding	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	$	0.49	$	0.47	$	1.50	$	0.81
Diluted Net Income Per Common Share	Diluted Net Income Per Common Share	$	0.49	$	0.47	$	1.50	$	0.80

1412

NOTE 5 – INVESTMENT SECURITIES

The following table summarizes the amortized cost and fair value of the available-for-sale and held-to-maturity investment securities portfolios and the corresponding amounts of gross unrealized gains, unrealized losses, and basis adjustments in 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
September 30, 2023
March 31, 2024
Available-for-Sale	Available-for-Sale
Available-for-Sale
Available-for-Sale
U.S. Treasury
U.S. Treasury
U.S. Treasury	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	1,475,307		—		(229,113)		(103,294)		1,142,900
Mortgage-backed securities - Agency	Mortgage-backed securities - Agency	4,686,448		17		(823,760)		—		3,862,705
States and political subdivisions	States and political subdivisions	592,495		7		(47,058)		(500)		544,944
Pooled trust preferred securities	Pooled trust preferred securities	13,794		—		(2,669)		—		11,125
Other securities	Other securities	335,292		112		(30,443)		—		304,961
Total available-for-sale securities	Total available-for-sale securities	$	7,719,944	$	234	$	(1,143,301)	$	(162,116)	$	6,414,761
Held-to-Maturity	Held-to-Maturity
U.S. government-sponsored entities and agencies	U.S. government-sponsored entities and agencies	$	824,223	$	—	$	(207,213)	$	—	$	617,010
U.S. government-sponsored entities and agencies
U.S. government-sponsored entities and agencies
Mortgage-backed securities - Agency	Mortgage-backed securities - Agency	1,043,585		—		(195,933)		—		847,652
States and political subdivisions	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
Allowance for securities held-to-maturity
Total held-to-maturity securities	Total held-to-maturity securities	$	3,027,914	$	—	$	(634,293)	$	—	$	2,393,621

December 31, 2022
December 31, 2023
December 31, 2023
December 31, 2023
Available-for-Sale	Available-for-Sale
Available-for-Sale
Available-for-Sale
U.S. Treasury
U.S. Treasury
U.S. Treasury	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
Mortgage-backed securities - Agency	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
Pooled trust preferred securities	Pooled trust preferred securities	13,783		—		(2,972)		—		10,811
Other securities	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
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
U.S. government-sponsored entities and agencies
Mortgage-backed securities - Agency	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
Allowance for securities held-to-maturity	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

(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. 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 September 30,				Nine Months Ended September 30,
				Three Months Ended March 31,
				Three Months Ended March 31,
				Three Months Ended March 31,
(dollars in thousands)	(dollars in thousands)	2023		2022		2023		2022		(dollars in thousands)	2024	2023
Proceeds	Proceeds	$	28,531	$	5,221	$	111,419	$	78,568
Realized gains	Realized gains	54		17		1,002		528
Realized losses	Realized losses	(295)		(189)		(6,442)		(443)

1513

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.


		September 30, 2023							March 31, 2024
(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
Available-for-Sale
Available-for-Sale
Available-for-Sale	Available-for-Sale
Within one year	Within one year	$	539,157	$	535,193	4.71	%	Within one year	$	177,458	$	$	174,950	3.39		3.39		%
One to five years	One to five years	1,567,565		1,395,867		2.80
Five to ten years	Five to ten years	3,987,461		3,285,183		2.37
Beyond ten years	Beyond ten years	1,625,761		1,198,518		2.46
Total	Total	$	7,719,944	$	6,414,761	2.64	%	Total	$	7,834,082	$	$	6,791,652	2.81		2.81		%
Held-to-Maturity	Held-to-Maturity

Within one year
Within one year
Within one year									$	157		$	147		2.23		%
One to five years	One to five years	$	161,837	$	127,716	2.68	%
Five to ten years	Five to ten years	954,756		797,284		2.64
Beyond ten years	Beyond ten years	1,911,321		1,468,621		2.71
Total	Total	$	3,027,914	$	2,393,621	2.69	%	Total	$	3,001,349	$	$	2,547,576	2.68		2.68		%

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
September 30, 2023
March 31, 2024
Available-for-Sale	Available-for-Sale
Available-for-Sale
Available-for-Sale
U.S. Treasury
U.S. Treasury
U.S. Treasury	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	32,821		(58)		1,110,079		(229,055)		1,142,900		(229,113)
Mortgage-backed securities - Agency	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	258,362		(7,749)		260,563		(39,309)		518,925		(47,058)
Pooled trust preferred securities	Pooled trust preferred securities	—		—		11,125		(2,669)		11,125		(2,669)
Other securities	Other securities	11,737		(323)		262,912		(30,120)		274,649		(30,443)
Total available-for-sale	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, 2023
December 31, 2023
December 31, 2023
Available-for-Sale	Available-for-Sale
Available-for-Sale
Available-for-Sale
U.S. Treasury
U.S. Treasury
U.S. Treasury	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)
Mortgage-backed securities - Agency	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)
Pooled trust preferred securities	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)
Total available-for-sale	Total available-for-sale	$	4,465,728	$	(480,166)	$	1,992,246	$	(367,308)	$	6,457,974	$	(847,474)

1614

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
September 30, 2023
March 31, 2024
Held-to-Maturity	Held-to-Maturity
Held-to-Maturity
Held-to-Maturity
U.S. government-sponsored entities and agencies
U.S. government-sponsored entities and agencies
U.S. government-sponsored entities and agencies	U.S. government-sponsored entities and agencies	$	—	$	—	$	617,010	$	(207,213)	$	617,010	$	(207,213)
Mortgage-backed securities - Agency	Mortgage-backed securities - Agency	—		—		847,652		(195,933)		847,652		(195,933)
States and political subdivisions	States and political subdivisions	64,441		(4,877)		864,668		(226,270)		929,109		(231,147)
Total held-to-maturity	Total held-to-maturity	$	64,441	$	(4,877)	$	2,329,330	$	(629,416)	$	2,393,771	$	(634,293)

December 31, 2022
December 31, 2023
December 31, 2023
December 31, 2023
Held-to-Maturity	Held-to-Maturity
Held-to-Maturity
Held-to-Maturity

U.S. government-sponsored entities and agencies

U.S. government-sponsored entities and agencies

U.S. government-sponsored entities and agencies	U.S. government-sponsored entities and agencies	$	354,293	$	(110,523)	$	302,066	$	(52,287)	$	656,359	$	(162,810)
Mortgage-backed securities - Agency	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)

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

Total held-to-maturity

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 ~~$132.3~~$123.3 million at ~~September 30, 2023~~March 31, 2024 and ~~$148.9~~$127.6 million at December 31, ~~2022.~~2023. 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 ~~September 30, 2023~~March 31, 2024 or December 31, ~~2022.~~2023.

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 ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022.~~

2023. Accrued interest receivable on the securities portfolio is excluded from the estimate of credit losses and totaled ~~$38.0~~$40.3 million at ~~September 30, 2023~~March 31, 2024 and ~~$50.9~~$50.3 million at December 31, ~~2022.~~2023.

At ~~September 30, 2023,~~March 31, 2024, Old National’s securities portfolio consisted of ~~3,007~~2,941 securities, ~~2,917~~2,702 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 ~~September 30, 2023,~~March 31, 2024, 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 $11.1 million and unrealized losses totaling $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 ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 or ~~2022.~~2023.

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 ~~$69.9~~$85.0 million at ~~September 30,~~

~~2023~~March 31, 2024 and ~~$52.5~~$80.4 million at December 31, ~~2022.~~2023. There were ~~losses~~gains on equity securities of $0.3 million during the three months ended March 31, 2024, compared to losses of $0.8 million during the three months ended September 30, 2023 and losses of $1.4 million during the nine months ended September 30, 2023, compared to losses of $0.7 million and $4.9 million during the three and nine months ended September 30, 2022, respectively.March 31, 2023.

Alternative Investments

Old National has alternative investments without readily determinable fair values that are included in other assets totaling ~~$418.3~~$474.7 million at ~~September 30, 2023,~~March 31, 2024, consisting of ~~$242.3~~$270.6 million of illiquid investments in partnerships, limited liability companies, and other ownership interests that support affordable housing and ~~$176.0~~$204.1 million of economic development and community revitalization initiatives in low-to-moderate income neighborhoods. These alternative investments totaled ~~$396.8~~$449.3 million at December 31, ~~2022.~~2023. There have been no impairments or adjustments on equity securities without readily determinable fair values, except for amortization of tax credit investments in the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 and ~~2022.~~2023. 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.~~region of the United States. Old National manages concentrations of credit exposure by industry, product, geography, client relationship, and loan size.

Old National has loan participations, which qualify as participating interests, with other financial institutions. At March 31, 2024, these loans totaled $3.0 billion, of which $1.3 billion had been sold to other financial institutions and $1.7 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.

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
(dollars in thousands)
September 30, 2023
Loans:
Commercial $ 9,333,448 $ (226,353) $ 9,107,095
Commercial real estate 13,916,221 (165,593) 13,750,628
BBCC N/A 391,946 391,946
Residential real estate 6,696,288 — 6,696,288
Consumer 2,631,877 (2,631,877) N/A
Indirect N/A 1,047,224 1,047,224
Direct N/A 542,689 542,689
Home equity N/A 1,041,964 1,041,964
Total $ 32,577,834 $ — $ 32,577,834
December 31, 2022
Loans:
Commercial $ 9,508,904 $ (210,280) $ 9,298,624
Commercial real estate 12,457,070 (158,322) 12,298,748
BBCC N/A 368,602 368,602
Residential real estate 6,460,441 — 6,460,441
Consumer 2,697,226 (2,697,226) N/A
Indirect N/A 1,034,257 1,034,257
Direct N/A 629,186 629,186
Home equity N/A 1,033,783 1,033,783
Total $ 31,123,641 $ — $ 31,123,641

~~The composition of loans by portfolio segment follows:~~

Balance Sheet
Line Item

Portfolio
Segment
Reclassifications

Portfolio
Segment After
Reclassifications

(dollars in thousands)

September 30,
2023

December 31,
2022

(dollars in thousands)

March 31, 2024

Commercial (1)

9,107,095

9,298,624

Commercial real estate

13,750,628

12,298,748

BBCC

391,946

368,602

Residential real estate

6,696,288

6,460,441

Consumer

2,659,713

(2,659,713)

N/A

Indirect

1,047,224

1,034,257

Direct

542,689

629,186

Home equity

1,041,964

1,033,783

Total loans

32,577,834

31,123,641

Total loans (2)

Allowance for credit losses on loans

(303,982)

(303,671)

Net loans

32,273,852

30,819,970

December 31, 2023

Commercial (1)

Commercial real estate

BBCC

Residential real estate

Consumer

2,639,625

(2,639,625)

N/A

Indirect

Direct

Home equity

Total loans (2)

Allowance for credit losses on loans

Net loans

(1)Includes direct finance leases of ~~$173.0~~$161.7 million at ~~September 30, 2023~~March 31, 2024 and ~~$188.1~~$169.7 million at December 31, ~~2022.~~2023.

(2) Includes unearned income of $88.9 million at March 31, 2024 and $93.7 million at December 31, 2023.

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~~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 ~~245%~~242%, Old National Bank’s applicable investor commercial real estate loans as a percentage of its ~~risk-based~~Tier 1 capital plus the allowance for credit losses attributable to loans and leases remained below the regulatory guideline limit of 300% at ~~September 30, 2023.~~March 31, 2024.

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

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.~~borrowers.

Home Equity

Home equity loans are generally secured by ~~1 - 4~~1-4 family residences that are ~~owner occupied.~~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 $162.8 million at 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. Whenassumptions used 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.

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,~~global military conflicts, 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
Three Months Ended September 30, 2023
(dollars in thousands)
(dollars in thousands)														Balance at Beginning of Period	Charge-offs	Recoveries	Provision for Loan Losses	Balance at End of Period

Three Months Ended March 31, 2024

Three Months Ended March 31, 2024

Three Months Ended March 31, 2024
Commercial
Commercial
Commercial	Commercial	$	127,403	$	—	$	(16,705)	$	1,616	$	12,441	$	124,755
Commercial real estate	Commercial real estate	136,897		—		(2,291)		102		10,267		144,975
BBCC	BBCC	2,776		—		(1,049)		70		912		2,709
Residential real estate	Residential real estate	20,421		—		(15)		28		346		20,780
Indirect	Indirect	1,407		—		(490)		325		79		1,321
Direct	Direct	4,755		—		(2,180)		580		416		3,571
Home equity	Home equity	6,896		—		(20)		341		(1,346)		5,871
Total	Total	$	300,555	$	—	$	(22,750)	$	3,062	$	23,115	$	303,982

Three Months Ended September 30, 2022
Three Months Ended March 31, 2023
Three Months Ended March 31, 2023
Three Months Ended March 31, 2023
Commercial
Commercial
Commercial	Commercial	$	102,819	$	3,740	$	(2,696)	$	2,206	$	6,344	$	112,413
Commercial real estate	Commercial real estate	141,802		6,818		(4,772)		287		(45)		144,090
BBCC	BBCC	2,064		—		—		108		(4)		2,168
Residential real estate	Residential real estate	19,729		—		(20)		66		1,481		21,256
Indirect	Indirect	1,641		—		(624)		379		189		1,585
Direct	Direct	14,412		—		(3,299)		442		4,541		16,096
Home equity	Home equity	5,536		—		(29)		357		(1,218)		4,646
Total	Total	$	288,003	$	10,558	$	(11,440)	$	3,845	$	11,288	$	302,254

Nine Months Ended September 30, 2023
Commercial		$	120,612	$	—	$	(37,459)	$	3,713	$	37,889	$	124,755
Commercial real estate		138,244		—		(5,938)		1,394		11,275		144,975
BBCC		2,431		—		(1,171)		174		1,275		2,709
Residential real estate		21,916		—		(256)		153		(1,033)		20,780
Indirect		1,532		—		(2,089)		1,349		529		1,321
Direct		12,116		—		(8,018)		1,798		(2,325)		3,571
Home equity		6,820		—		(330)		471		(1,090)		5,871
Total		$	303,671	$	—	$	(55,261)	$	9,052	$	46,520	$	303,982

Nine Months Ended September 30, 2022
Commercial		$	27,232	$	38,780	$	(5,919)	$	3,219	$	49,101	$	112,413
Commercial real estate		64,004		49,419		(5,596)		789		35,474		144,090
BBCC		2,458		—		(48)		256		(498)		2,168
Residential real estate		9,347		136		(344)		636		11,481		21,256
Indirect		1,743		—		(1,636)		921		557		1,585
Direct		528		31		(6,550)		1,712		20,375		16,096
Home equity		2,029		723		(107)		540		1,461		4,646
Total		$	107,341	$	89,089	$	(20,200)	$	8,073	$	117,951	$	302,254

Accrued interest receivable on loans is excluded from the estimate of credit losses and totaled $171.6 million at March 31, 2024, compared to $169.8 million at December 31, 2023.

2219

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 September 30,				Nine Months Ended September 30,
				Three Months Ended March 31,
				Three Months Ended March 31,
				Three Months Ended March 31,
(dollars in thousands)	(dollars in thousands)	2023		2022		2023		2022		(dollars in thousands)	2024	2023
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	$	37,007	$	21,966	$	32,188	$	10,879
Provision for credit losses on unfunded loan commitments acquired during the period		—		—		—		11,013
(Recapture of) provision for credit losses on unfunded loan commitments		(4,047)		4,203		772		4,277
Balance at beginning of period
Balance at beginning of period

Provision (release) for credit losses on unfunded loan commitments
Provision (release) for credit losses on unfunded loan commitments
Provision (release) for credit losses on unfunded loan commitments
Balance at end of period	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.

2320

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:


(dollars in thousands)	(dollars in thousands)	Origination Year														Revolving to Term
		2023		2022		2021		2020		2019		Prior		Revolving				Total
September 30, 2023
2024
2024																								2023	2022	2021	2020	Prior	Revolving	Total
March 31, 2024
Commercial:	Commercial:
Commercial:
Commercial:

Pass

Pass

Pass	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	27,469		110,893		21,107		46,241		22,674		54,738		107,105		32,247				422,474
Classified:	Classified:
Substandard
Substandard
Substandard	Substandard	19,509		40,694		32,135		38,892		9,970		20,431		66,977		15,417				244,025
Nonaccrual	Nonaccrual	—		5,748		2,034		284		2,718		—		—		—				10,784
Doubtful	Doubtful	—		18,838		5,626		1,762		962		11,136		—		—				38,324
Total	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:

Commercial real estate:

Pass

Pass

Pass	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	58,440		62,461		42,128		28,716		27,978		90,549		9,959		21,023				341,254
Classified:	Classified:
Substandard
Substandard
Substandard	Substandard	21,214		84,269		23,589		16,822		78,165		41,313		—		50,424				315,796
Nonaccrual	Nonaccrual	—		2,983		11,470		1,428		52		11,385		—		792				28,110
Doubtful	Doubtful	—		1,649		33,564		4,142		38,199		37,936		—		—				115,490
Total	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:

BBCC:

Pass

Pass

Pass	Pass	$	74,658	$	76,281	$	49,463	$	42,980	$	30,085	$	14,488	$	66,281	$	18,582			$	372,818
Criticized	Criticized	2,295		2,469		1,114		76		1,110		—		2,470		2,264				11,798
Classified:	Classified:
Substandard
Substandard
Substandard	Substandard	98		733		619		24		401		1,196		100		438				3,609
Nonaccrual	Nonaccrual	216		451		310		340		—		87		477		278				2,159
Doubtful	Doubtful	—		865		492		50		67		88		—		—				1,562
Total	Total	$	77,267	$	80,799	$	51,998	$	43,470	$	31,663	$	15,859	$	69,328	$	21,562			$	391,946


(dollars in thousands)	(dollars in thousands)	Origination Year														Revolving to Term
		2022		2021		2020		2019		2018		Prior		Revolving				Total
December 31, 2022
2023
2023																								2022	2021	2020	2019	Prior	Revolving	Total
December 31, 2023
Commercial:	Commercial:
Commercial:
Commercial:

Pass

Pass

Pass	Pass	$	2,388,618	$	1,754,364	$	796,340	$	738,208	$	362,986	$	388,617	$	1,988,763			$	329,119			$	8,747,015
Criticized	Criticized	40,856		30,661		63,557		33,490		9,195		5,312		61,036		4,327				248,434
Classified:	Classified:
Substandard
Substandard
Substandard	Substandard	37,223		47,522		16,540		22,925		4,844		21,204		67,402		25,143				242,803
Nonaccrual	Nonaccrual	3,627		1,453		566		—		—		—		1,634		6,623				13,903
Doubtful	Doubtful	2,821		17,604		3,720		8,005		5,968		8,351		—		—				46,469
Total	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:	Commercial real estate:
Commercial real estate:
Commercial real estate:

Pass

Pass

Pass	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	Criticized	75,306		34,422		22,569		82,637		86,504		56,864		—		23,282				381,584
Classified:	Classified:
Substandard
Substandard
Substandard	Substandard	46,231		16,928		24,319		78,468		57,824		21,591		—		4,108				249,469
Nonaccrual	Nonaccrual	3,151		9,541		5,014		—		2,312		22,155		—		3,257				45,430
Doubtful	Doubtful	1,934		38,386		10,011		4,605		1,523		20,401		—		—				76,860
Total	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:	BBCC:
BBCC:
BBCC:

Pass

Pass

Pass	Pass	$	90,341	$	64,161	$	52,304	$	36,868	$	23,618	$	11,333	$	60,016	$	18,881			$	357,522
Criticized	Criticized	1,504		525		368		692		353		—		1,006		1,603				6,051
Classified:	Classified:
Substandard	Substandard	811		143		—		421		—		—		543		682				2,600
Substandard
Substandard
Nonaccrual	Nonaccrual	42		37		118		—		429		284		—		639				1,549
Doubtful	Doubtful	40		107		439		157		64		73		—		—				880
Total	Total	$	92,738	$	64,973	$	53,229	$	38,138	$	24,464	$	11,690	$	61,565	$	21,805			$	368,602

2421

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
(dollars in thousands)	(dollars in thousands)	2023		2022		2021		2020		2019		Prior		Revolving				Revolving to Term			Total
September 30, 2023
(dollars in thousands)
(dollars in thousands)																							2024	2023	2022	2021	2020	Prior	Revolving	Total
March 31, 2024
Residential real estate:
Residential real estate:
Residential real estate:	Residential real estate:
Risk Rating:	Risk Rating:
Risk Rating:
Risk Rating:
Performing
Performing
Performing	Performing	$	362,518	$	1,504,933	$	1,861,729	$	1,732,039	$	444,411	$	750,037	$	—	$	279				$	6,655,946
Nonperforming	Nonperforming	—		3,529		2,905		4,538		3,343		26,027		—		—			40,342
Total	Total	$	362,518	$	1,508,462	$	1,864,634	$	1,736,577	$	447,754	$	776,064	$	—	$	279		$	6,696,288

Indirect:	Indirect:

Indirect:

Indirect:
Risk Rating:	Risk Rating:
Risk Rating:
Risk Rating:
Performing
Performing
Performing	Performing	$	309,220	$	390,012	$	181,235	$	96,148	$	46,877	$	19,666	$	—	$	196		$	1,043,354
Nonperforming	Nonperforming	120		1,270		1,175		604		361		340		—		—			3,870
Total	Total	$	309,340	$	391,282	$	182,410	$	96,752	$	47,238	$	20,006	$	—	$	196		$	1,047,224

Direct:	Direct:

Direct:

Direct:
Risk Rating:	Risk Rating:
Risk Rating:
Risk Rating:
Performing
Performing
Performing	Performing	$	84,749	$	99,625	$	107,539	$	54,070	$	35,065	$	87,207	$	63,877	$	4,852		$	536,984
Nonperforming	Nonperforming	87		486		522		403		316		3,874		6		11			5,705
Total	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:

Home equity:
Risk Rating:	Risk Rating:
Risk Rating:
Risk Rating:
Performing
Performing
Performing	Performing	$	1	$	692	$	387	$	690	$	743	$	5,736	$	994,797	$	23,918		$	1,026,964
Nonperforming	Nonperforming	—		24		219		203		758		4,810		1,692		7,294			15,000
Total	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
	Origination Year
		2023
		2023
		2023																						2022	2021	2020	2019	Prior	Revolving	Total
December 31, 2023
Residential real estate:
Residential real estate:
Residential real estate:	Residential real estate:
Risk Rating:	Risk Rating:
Risk Rating:
Risk Rating:
Performing
Performing
Performing	Performing	$	1,327,168	$	1,945,792	$	1,825,762	$	478,529	$	136,260	$	712,175	$	7			$	88			$	6,425,781
Nonperforming	Nonperforming	59		529		861		873		1,826		30,512		—		—				34,660
Total	Total	$	1,327,227	$	1,946,321	$	1,826,623	$	479,402	$	138,086	$	742,687	$	7	$	88			$	6,460,441

Indirect:	Indirect:
Indirect:
Indirect:
Risk Rating:	Risk Rating:
Risk Rating:
Risk Rating:
Performing
Performing
Performing	Performing	$	504,410	$	249,407	$	144,265	$	82,304	$	31,484	$	19,095	$	—	$	62			$	1,031,027
Nonperforming	Nonperforming	348		1,074		645		531		304		328		—		—				3,230
Total	Total	$	504,758	$	250,481	$	144,910	$	82,835	$	31,788	$	19,423	$	—	$	62			$	1,034,257

Direct:	Direct:
Direct:
Direct:
Risk Rating:	Risk Rating:
Risk Rating:
Risk Rating:
Performing
Performing
Performing	Performing	$	132,934	$	164,126	$	77,406	$	57,919	$	45,299	$	59,212	$	87,622	$	671			$	625,189
Nonperforming	Nonperforming	115		851		614		205		327		1,526		5		354				3,997
Total	Total	$	133,049	$	164,977	$	78,020	$	58,124	$	45,626	$	60,738	$	87,627	$	1,025			$	629,186

Home equity:	Home equity:
Home equity:
Home equity:
Risk Rating:	Risk Rating:
Risk Rating:
Risk Rating:
Performing
Performing
Performing	Performing	$	919	$	896	$	1,849	$	1,497	$	983	$	11,646	$	990,001	$	14,792			$	1,022,583
Nonperforming	Nonperforming	166		160		166		446		794		4,308		1,698		3,462				11,200
Total	Total	$	1,085	$	1,056	$	2,015	$	1,943	$	1,777	$	15,954	$	991,699	$	18,254			$	1,033,783

2522

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


		Origination Year
		Origination Year
		Origination Year
		Origination Year
(dollars in thousands)	(dollars in thousands)	2023		2022		2021		2020		2019		Prior		Revolving		Total
Three Months Ended September 30, 2023
(dollars in thousands)
(dollars in thousands)																			2024	2023	2022	2021	2020	Prior	Revolving	Total
Three Months Ended March 31, 2024
Commercial
Commercial
Commercial	Commercial	$	—	$	4,154	$	12,271	$	—	$	—	$	63	$	217		$	16,705
Commercial real estate	Commercial real estate	—		—		—		1,744		—		547		—			2,291
BBCC	BBCC	499		501		49		—		—		—		—			1,049
Residential real estate	Residential real estate	—		—		—		—		—		15		—			15
Indirect	Indirect	75		276		86		12		10		31		—			490
Direct	Direct	19		429		423		112		270		60		867			2,180
Home equity	Home equity	—		—		—		—		—		20		—			20
Total gross charge-offs	Total gross charge-offs	$	593	$	5,360	$	12,829	$	1,868	$	280	$	736	$	1,084		$	22,750

Nine Months Ended September 30, 2023
		Origination Year
		Origination Year
		Origination Year
		2023
		2023
		2023																		2022	2021	2020	2019	Prior	Revolving	Total
Three Months Ended March 31, 2023
Commercial
Commercial
Commercial	Commercial	$	—	$	6,254	$	23,432	$	120	$	6,789	$	302	$	562		$	37,459
Commercial real estate	Commercial real estate	—		54		735		2,144		—		3,005		—			5,938
BBCC	BBCC	499		548		77		47		—		—		—			1,171
Residential real estate	Residential real estate	—		—		—		—		—		256		—			256
Indirect	Indirect	85		954		640		153		137		120		—			2,089
Direct	Direct	19		1,330		1,805		570		1,011		450		2,833			8,018
Home equity	Home equity	—		—		—		—		—		330		—			330
Total gross charge-offs	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) 30-59 Days
Past Due 60-89 Days
Past Due Past Due
90 Days or
More Total
Past Due Current Total
Loans
September 30, 2023
Commercial $ 2,754 $ 4,214 $ 12,504 $ 19,472 $ 9,087,623 $ 9,107,095
Commercial real estate 15,954 6,295 21,366 43,615 13,707,013 13,750,628
BBCC 1,273 511 712 2,496 389,450 391,946
Residential 29,762 6,784 12,733 49,279 6,647,009 6,696,288
Indirect 5,576 1,368 1,156 8,100 1,039,124 1,047,224
Direct 3,626 1,059 1,588 6,273 536,416 542,689
Home equity 5,840 1,808 6,077 13,725 1,028,239 1,041,964
Total $ 64,785 $ 22,039 $ 56,136 $ 142,960 $ 32,434,874 $ 32,577,834
December 31, 2022
Commercial $ 14,147 $ 4,801 $ 11,080 $ 30,028 $ 9,268,596 $ 9,298,624
Commercial real estate 47,240 1,312 32,892 81,444 12,217,304 12,298,748
BBCC 730 365 603 1,698 366,904 368,602
Residential 24,181 5,033 11,753 40,967 6,419,474 6,460,441
Indirect 6,302 2,118 958 9,378 1,024,879 1,034,257
Direct 5,404 2,118 1,928 9,450 619,736 629,186
Home equity 6,585 1,966 4,707 13,258 1,020,525 1,033,783
Total $ 104,589 $ 17,713 $ 63,921 $ 186,223 $ 30,937,418 $ 31,123,641


(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
March 31, 2024
Commercial	$	10,099	$	1,620	$	10,023	$	21,742	$	9,394,482	$	9,416,224
Commercial real estate	8,838		27,844		32,539		69,221		14,412,078		14,481,299
BBCC	1,268		1,111		1,240		3,619		401,085		404,704
Residential	31,319		5,030		14,216		50,565		6,610,814		6,661,379
Indirect	5,488		1,351		1,205		8,044		1,083,954		1,091,998
Direct	4,751		1,115		3,454		9,320		496,985		506,305
Home equity	4,948		1,045		7,921		13,914		1,047,496		1,061,410
Total	$	66,711	$	39,116	$	70,598	$	176,425	$	33,446,894	$	33,623,319

December 31, 2023
Commercial	$	16,128	$	1,332	$	4,861	$	22,321	$	9,257,145	$	9,279,466
Commercial real estate	9,081		5,254		30,660		44,995		13,926,576		13,971,571
BBCC	1,368		134		977		2,479		399,343		401,822
Residential	12,358		367		15,249		27,974		6,671,469		6,699,443
Indirect	7,025		1,854		1,342		10,221		1,040,761		1,050,982
Direct	5,436		1,455		1,787		8,678		514,494		523,172
Home equity	7,791		2,347		6,659		16,797		1,048,674		1,065,471
Total	$	59,187	$	12,743	$	61,535	$	133,465	$	32,858,462	$	32,991,927

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:


		September 30, 2023						December 31, 2022
		March 31, 2024
		March 31, 2024
		March 31, 2024
(dollars in thousands)
(dollars in thousands)
(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
Commercial	Commercial	$	49,108	$	13,432	$	577	$	60,372	$	7,873	$	152
Commercial
Commercial
Commercial real estate
Commercial real estate
Commercial real estate	Commercial real estate	143,600		29,721		104		122,290		33,445		—
BBCC	BBCC	3,721		—		—		2,429		—		—
BBCC
BBCC
Residential
Residential
Residential	Residential	40,342		—		—		34,660		—		1,808
Indirect	Indirect	3,870		—		54		3,230		—		28
Indirect
Indirect
Direct
Direct
Direct	Direct	5,705		—		109		3,997		—		133
Home equity	Home equity	15,000		—		348		11,200		—		529
Home equity
Home equity
Total
Total
Total	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 nine~~ months ended ~~September 30, 2023~~March 31, 2024 and ~~2022.~~2023.

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
(dollars in thousands) Real
Estate Blanket
Lien Investment
Securities/Cash Auto Other
September 30, 2023
Commercial $ 13,635 $ 31,856 $ 466 $ 288 $ 347
Commercial real estate 131,826 — 1,205 — 6,184
BBCC 2,131 1,174 — 416 —
Residential 40,342 — — — —
Indirect — — — 3,870 —
Direct 4,622 1 3 296 31
Home equity 15,000 — — — —
Total loans $ 207,556 $ 33,031 $ 1,674 $ 4,870 $ 6,562
December 31, 2022
Commercial $ 8,962 $ 42,754 $ 2,690 $ 1,611 $ 980
Commercial real estate 108,871 — 1,718 — 6,411
BBCC 1,939 478 — 12 —
Residential 34,660 — — — —
Indirect — — — 3,230 —
Direct 2,991 13 — 232 23
Home equity 11,200 — — — —
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 September 30, 2023, these loans totaled $2.8 billion, of which $1.2 billion had been sold to other financial institutions and $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.


	Type of Collateral
(dollars in thousands)	Real Estate		Blanket Lien		Investment Securities/Cash		Auto		Other
March 31, 2024
Commercial	$	11,284	$	39,258	$	5,728	$	11,582	$	319
Commercial real estate	163,753		—		1,133		—		6,031
BBCC	3,793		1,701		—		278		—
Residential	47,022		—		—		—		—
Indirect	—		—		—		4,408		—
Direct	4,559		—		7		386		48
Home equity	17,958		—		—		—		—
Total loans	$	248,369	$	40,959	$	6,868	$	16,654	$	6,398

December 31, 2023
Commercial	$	14,303	$	24,729	$	2,577	$	280	$	328
Commercial real estate	146,425		—		1,167		—		6,107
BBCC	3,522		794		—		390		—
Residential	41,771		—		—		—		—
Indirect	—		—		—		4,207		—
Direct	4,727		1		3		366		29
Home equity	16,248		—		—		—		—
Total loans	$	226,996	$	25,524	$	3,747	$	5,243	$	6,464

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 September 30, 2023~~ that were modified ~~during the three and nine months ended September 30, 2023~~for borrowers experiencing financial difficulty, by class of loans and type of modification:


(dollars in thousands)	(dollars in thousands)	Term Extension		Total Class of Loans
Three Months Ended September 30, 2023
(dollars in thousands)
(dollars in thousands)									Term Extension				Total Class of Loans
Three Months Ended March 31, 2024
Commercial
Commercial
Commercial	Commercial	$	3,502	0.0	%		$	29,426			0.3				0.3	%
Commercial real estate	Commercial real estate	93,844		0.7	%	Commercial real estate			120,891			0.8				0.8	%

Total	Total	$	97,346	0.3	%

Nine Months Ended September 30, 2023

Total

Total									$	150,317			0.4	%

Three Months Ended March 31, 2023
Three Months Ended March 31, 2023
Three Months Ended March 31, 2023
Commercial
Commercial
Commercial	Commercial	$	20,811	0.2	%		$	17,342			0.2				0.2	%
Commercial real estate	Commercial real estate	116,580		0.8	%	Commercial real estate			9,926			0.1				0.1	%

Total	Total	$	137,391	0.4	%

Total

Total									$	27,268			0.1	%

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 September 30, 2023:~~modifications:


(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
September 30, 2023
March 31, 2024
Commercial
Commercial
Commercial	Commercial	$	—	$	—	$	2,541	$	2,541	$	18,270	$	20,811
Commercial real estate	Commercial real estate	1,086		—		—		1,086		115,494		116,580

Total	Total	$	1,086	$	—	$	2,541	$	3,627	$	133,764	$	137,391

Total

Total

December 31, 2023
December 31, 2023
December 31, 2023
Commercial
Commercial
Commercial
Commercial real estate

Total

Total

Total

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

(dollars in thousands)

Weighted-
Average
Term
Extension
(in months)

Three Months Ended ~~September 30, 2023~~March 31, 2024

Commercial

~~7.3~~9.1

Commercial real estate

~~9.2~~8.1

Total

~~9.2~~8.6

~~Nine~~Three Months Ended ~~September 30,~~March 31, 2023

Commercial

~~5.7~~6.8

Commercial real estate

~~8.9~~4.1

Total

~~8.4~~5.6

There were no payment defaults on these loans subsequent to their modifications during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 or 2023. ~~At 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.~~difficulties at March 31, 2024 or December 31, 2023.

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 September 30,						Nine Months Ended September 30,
			Affected Line Item in the Statement of Income
		Affected Line Item in the Statement of Income
			Affected Line Item in the Statement of Income														Three Months Ended March 31,
(dollars in thousands)	(dollars in thousands)	Affected Line Item in the Statement of Income				2023			2022			2023			2022	(dollars in thousands)		2024	2023
Operating lease cost	Operating lease cost			$	7,462		$	7,657		$	23,569		$	21,323
Finance lease cost:	Finance lease cost:
Amortization of right-of-use assets	Amortization of right-of-use assets	Occupancy expense		742			680			2,170			2,003
Amortization of right-of-use assets
Amortization of right-of-use assets
Interest on lease liabilities	Interest on lease liabilities	Interest expense		183			105			536			315

Sub-lease income	Sub-lease income	Occupancy expense		(119)			(87)			(281)			(389)
Sub-lease income
Sub-lease income
Total	Total			$	8,268		$	8,355		$	25,994		$	23,252

Supplemental balance sheet information related to leases was as follows:


(dollars in thousands)	(dollars in thousands)	September 30, 2023			December 31, 2022			(dollars in thousands)	March 31, 2024			December 31, 2023
Operating Leases	Operating Leases
Operating lease right-of-use assets	Operating lease right-of-use assets	$	179,284		$	189,714
Operating lease right-of-use assets
Operating lease right-of-use assets
Operating lease liabilities	Operating lease liabilities	199,937			211,964

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

Weighted-Average Remaining Lease Term (in Years)	Weighted-Average Remaining Lease Term (in Years)
Weighted-Average Remaining Lease Term (in Years)
Weighted-Average Remaining Lease Term (in Years)
Operating leases
Operating leases
Operating leases	Operating leases	8.5			9.1			8.4			8.5
Finance leases	Finance leases	10.6			7.2			Finance leases	10.3			10.5

Weighted-Average Discount Rate	Weighted-Average Discount Rate
Weighted-Average Discount Rate
Weighted-Average Discount Rate
Operating leases
Operating leases
Operating leases	Operating leases	2.93		%	2.88		%	3.05	%		3.04	%
Finance leases	Finance leases	3.89		%	3.30		%	Finance leases	3.91	%		3.90	%

Supplemental cash flow information related to leases was as follows:

Nine Months Ended
September 30,
(dollars in thousands) 2023 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 23,766 $ 22,223
Operating cash flows from finance leases 536 315
Financing cash flows from finance leases 1,893 1,839


	Three Months Ended March 31,
(dollars in thousands)	2024		2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	8,005	$	7,932
Operating cash flows from finance leases	181		169
Financing cash flows from finance leases	655		628

The following table presents a maturity analysis of the Company’s lease liability by lease classification at ~~September 30, 2023:~~March 31, 2024:


(dollars in thousands)	(dollars in thousands)	Operating Leases		Finance Leases		(dollars in thousands)	Operating Leases	Finance Leases
2023		$	7,959	$	826
2024	2024	31,183		3,357
2025	2025	29,564		3,380
2026	2026	28,622		2,154
2027	2027	27,662		2,157
2028
Thereafter	Thereafter	102,282		14,809
Total undiscounted lease payments	Total undiscounted lease payments	227,272		26,683
Amounts representing interest	Amounts representing interest	(27,335)		(5,088)
Lease liability	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
September 30, Nine Months Ended
September 30,
(dollars in thousands) 2023 2022 2023 2022
Balance at beginning of period $ 1,998,716 $ 1,991,534 $ 1,998,716 $ 1,036,994
Acquisitions and adjustments — 11,065 — 965,605
Balance at end of period $ 1,998,716 $ 2,002,599 $ 1,998,716 $ 2,002,599

The increase in goodwill for the three and nine months ended September 30, 2022 was due to the First Midwest merger. See Note 3 to the consolidated financial statements for additional detail regarding this transaction.


	Three Months Ended March 31,
(dollars in thousands)		2024		2023
Balance at beginning of period		$	1,998,716	$	1,998,716
Acquisitions and adjustments		—		—
Balance at end of period		$	1,998,716	$	1,998,716

Old National performed the required annual goodwill impairment test as of August 31, 2023 and ~~concluded that~~ there was no impairment. No events or circumstances since the August 31, 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
September 30, 2023
March 31, 2024								March 31, 2024
Core deposit	Core deposit	$	143,511	$	(68,312)	$	75,199
Customer trust relationships	Customer trust relationships	52,621		(19,701)		32,920
Total other intangible assets	Total other intangible assets	$	196,132	$	(88,013)	$	108,119

December 31, 2022
December 31, 2023
December 31, 2023
December 31, 2023
Core deposit
Core deposit
Core deposit	Core deposit	$	170,642	$	(80,951)	$	89,691
Customer trust relationships	Customer trust relationships	56,243		(19,529)		36,714
Total other intangible assets	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 ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 or ~~2022.~~2023. Total amortization expense associated with intangible assets was

~~$6.0 million and $18.3~~ $5.5 million for the three ~~and nine~~ months ended ~~September 30, 2023, respectively,~~March 31, 2024, compared to ~~$7.1 million and $19.1~~$6.2 million for the three ~~and nine~~ months ended ~~September 30, 2022, respectively.~~March 31, 2023.

Estimated amortization expense for future years is as follows:


(dollars in thousands)	(dollars in thousands)			(dollars in thousands)
2023 remaining		$	5,869
2024		21,239
2024 remaining
2025	2025	18,358
2026	2026	15,555
2027	2027	12,867
2028
Thereafter	Thereafter	34,231
Total	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 ~~September 30, 2023,~~March 31, 2024, 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)		September 30, 2023				December 31, 2022				(dollars in thousands)		March 31, 2024		December 31, 2023
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	$	93,214	$	54,440	$	84,428	$	55,754
FHTC	FHTC	Equity	36,715		27,214		19,316		9,588
NMTC	NMTC	Consolidation	45,637		—		51,912		—
Renewable Energy	Renewable Energy	Equity	385		—		1,099		—
Total	Total		$	175,951	$	81,654	$	156,755	$	65,342

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

(2)

Old National’s FHTC investments were previously accounted for under the Equity method of accounting prior to the adoption of ASU 2023-02 on January 1, 2024.

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 September 30, 2023

Three Months Ended March 31, 2024

Three Months Ended March 31, 2024

Three Months Ended March 31, 2024
LIHTC
LIHTC
LIHTC	LIHTC	$	3,208	$	(3,582)
FHTC	FHTC	330		(399)
NMTC	NMTC	2,092		(2,611)
Renewable Energy	Renewable Energy	222		—
Total	Total	$	5,852	$	(6,592)

Three Months Ended September 30, 2022
Three Months Ended March 31, 2023
Three Months Ended March 31, 2023
Three Months Ended March 31, 2023
LIHTC
LIHTC
LIHTC	LIHTC	$	1,240	$	(1,650)
FHTC	FHTC	215		(262)
NMTC	NMTC	2,237		(2,788)
Renewable Energy	Renewable Energy	210		—
Total	Total	$	3,902	$	(4,700)

Nine Months Ended September 30, 2023
LIHTC		$	6,135	$	(7,398)
FHTC		1,178		(1,423)
NMTC		6,275		(7,833)
Renewable Energy		714		—
Total		$	14,302	$	(16,654)

Nine Months Ended September 30, 2022
LIHTC		$	3,734	$	(4,950)
FHTC		635		(776)
NMTC		4,439		(5,538)
Renewable Energy		629		—
Total		$	9,437	$	(11,264)

(1)The amortization expense for the LIHTC and FHTC investments is included in our income tax expense. ~~The~~Prior to the adoption of ASU 2023-02, FHTC amortization expense was included in noninterest expense. NMTC amortization is recognized in noninterest expense in correlation to the recognition of tax credits on our tax return. 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).

3229

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 Nine Months Ended September 30,
	At or for the Three Months Ended March 31,											At or for the Three Months Ended March 31,
(dollars in thousands)	(dollars in thousands)	2023			2022			(dollars in thousands)	2024		2023
Outstanding at period end	Outstanding at period end	$	279,061		$	438,053
Average amount outstanding during the period	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
Weighted-average interest rate:	Weighted-average interest rate:
During the period	During the period	0.91		%	0.09		%
During the period
During the period									1.25	%	0.77	%
At period end	At period end	1.35		%	0.40		%	At period end	3.61	%	0.88	%

At December 31, ~~2022,~~2023, securities sold under agreements to repurchase totaled ~~$432.8~~$285.2 million with a weighted-average interest rate of ~~1.31%~~3.64%.

The following table presents the contractual maturity of our secured borrowings and class of collateral pledged:

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

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


	At March 31, 2024
	Remaining Contractual Maturity of the Agreements
(dollars in thousands)	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater Than 90 days		Total
Repurchase Agreements:
U.S. Treasury and agency securities	$	274,493	$	—	$	—	$	—	$	274,493
Total	$	274,493	$	—	$	—	$	—	$	274,493

NOTE 11 – FEDERAL HOME LOAN BANK ADVANCES

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


(dollars in thousands)	(dollars in thousands)	September 30, 2023		December 31, 2022		(dollars in thousands)	March 31, 2024	December 31, 2023
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
FHLB advances (fixed rates 2.19% to 5.53% and variable rates 5.33% to 5.36%) maturing June 2024 to March 2044
Fair value hedge basis adjustments and unamortized prepayment fees	Fair value hedge basis adjustments and unamortized prepayment fees	(37,952)		(21,659)
Total	Total	$	4,412,576	$	3,829,018

FHLB advances had weighted-average rates of ~~3.36%~~3.58% at ~~September 30, 2023~~March 31, 2024 and ~~3.15%~~3.45% at December 31, ~~2022. Certain~~2023. FHLB advances are collateralized ~~with~~by designated assets that may include qualifying commercial real estate loans, residential and multifamily mortgages, home equity loans, and certain investment ~~securities up to 190%.~~securities.

At ~~September 30, 2023,~~March 31, 2024, total unamortized prepayment fees related to all FHLB advance debt modifications completed in prior years totaled ~~$15.7~~$12.7 million, compared to ~~$20.2~~$14.2 million at December 31, ~~2022.~~2023.

3330

Contractual maturities of FHLB advances at ~~September 30, 2023~~March 31, 2024 were as follows:


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

Due in 2028	850,000
Thereafter	~~3,675,000~~2,625,000
Fair value hedge basis adjustments and unamortized prepayment fees	~~(37,952)~~(32,489)
Total	$	~~4,412,576~~4,193,039

NOTE 12 – OTHER BORROWINGS

The following table summarizes Old National’s other borrowings:


(dollars in thousands)	(dollars in thousands)	September 30, 2023		December 31, 2022		(dollars in thousands)	March 31, 2024	December 31, 2023
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
Unamortized debt issuance costs related to senior unsecured notes	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
Junior subordinated debentures (rates of 6.95% to 9.21%) maturing July 2031 to September 2037		136,643		136,643
Junior subordinated debentures (rates of 6.95% to 9.15%) maturing July 2031 to September 2037
Other basis adjustments	Other basis adjustments	19,496		23,363
Old National Bank:	Old National Bank:
Finance lease liabilities	Finance lease liabilities	21,595		13,469
Subordinated debentures (variable rate 9.99%) maturing October 2025		12,000		12,000
Finance lease liabilities
Finance lease liabilities
Subordinated debentures (3-month SOFR plus 4.618%; variable rate 9.94%) maturing October 2025
Leveraged loans for NMTC (fixed rates of 1.00% to 1.43%) maturing December 2046 to June 2060	Leveraged loans for NMTC (fixed rates of 1.00% to 1.43%) maturing December 2046 to June 2060	143,745		143,187
Other (1)	Other (1)	205,106		89,588
Total other borrowings	Total other borrowings	$	863,455	$	743,003

(1)Includes overnight borrowings to collateralize certain derivative positions totaling ~~$204.5~~$134.2 million at ~~September 30, 2023~~March 31, 2024 and ~~$88.0~~$97.6 million at December 31, ~~2022.~~2023.

Contractual maturities of other borrowings at ~~September 30, 2023~~March 31, 2024 were as follows:


(dollars in thousands)
Due in ~~2023~~2024	$	~~205,160~~311,233
~~Due in 2024~~	~~177,653~~
Due in 2025	~~14,740~~14,747
Due in 2026	~~151,576~~151,582
Due in 2027	~~1,636~~1,641
Due in 2028	1,598
Thereafter	~~292,738~~315,407
Unamortized debt issuance costs and other basis adjustments	~~19,952~~17,005
Total	$	~~863,455~~813,213

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.

3431

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 ~~September 30, 2023:~~March 31, 2024:

(dollars in thousands)
Rate at
September 30,
2023

Name of Trust Issuance Date Issuance
Amount Rate Maturity Date
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 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
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 SOFR plus 1.80% 7.47% September 15, 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 SOFR plus 1.40% 7.07% December 15, 2035
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 SOFR plus 1.60% 7.17% October 7, 2036
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 SOFR plus 1.60% 7.27% June 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

~~Subordinated Debentures~~

Old National assumed $12.0 million of subordinated fixed-to-floating notes related to the acquisition of Anchor Bancorp, Inc. (MN). The debentures currently have a floating rate of interest equal to the three-month term SOFR rate plus 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.

(dollars in thousands)

Rate at

March 31,
2024

Name of Trust

Issuance Date

Issuance
Amount

Rate

Maturity Date

Bridgeview Statutory Trust I

July 2001

15,464

3-month SOFR plus 3.58%

9.15%

July 31, 2031

Bridgeview Capital Trust II

December 2002

15,464

3-month SOFR plus 3.35%

8.93%

January 7, 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 SOFR plus 1.75%

7.34%

March 17, 2035

Northern States Statutory Trust I

September 2005

10,310

3-month SOFR plus 1.80%

7.39%

September 15, 2035

Anchor Capital Trust III

August 2005

5,000

3-month SOFR plus 1.55%

7.11%

September 30, 2035

Great Lakes Statutory Trust II

December 2005

6,186

3-month SOFR plus 1.40%

6.99%

December 15, 2035

Home Federal Statutory
Trust I

September 2006

15,464

3-month SOFR plus 1.65%

7.24%

September 15, 2036

Monroe Bancorp Capital
Trust I

July 2006

3,093

3-month SOFR plus 1.60%

7.18%

October 7, 2036

Tower Capital Trust 3

December 2006

9,279

3-month SOFR plus 1.69%

7.29%

March 1, 2037

Monroe Bancorp Statutory
Trust II

March 2007

5,155

3-month SOFR plus 1.60%

7.19%

June 15, 2037

Great Lakes Statutory Trust III

June 2007

8,248

3-month SOFR plus 1.70%

7.29%

September 15, 2037

Total

136,643

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 ~~$21.6~~$20.1 million at ~~September 30, 2023.~~March 31, 2024. See Note 7 to the consolidated financial statements for a maturity analysis of the Company’s finance lease liabilities.

3532

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 September 30, 2023

Three Months Ended March 31, 2024

Three Months Ended March 31, 2024

Three Months Ended March 31, 2024
Balance at beginning of period
Balance at beginning of period
Balance at beginning of period	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	(156,660)		—		(11,546)		—		(168,206)
Amounts reclassified from AOCI to income (1)	Amounts reclassified from AOCI to income (1)	178		4,193		3,653		—		8,024
Balance at end of period	Balance at end of period	$	(857,875)	$	(98,951)	$	(11,989)	$	—	$	(968,815)

Three Months Ended September 30, 2022
Three Months Ended March 31, 2023
Three Months Ended March 31, 2023
Three Months Ended March 31, 2023
Balance at beginning of period
Balance at beginning of period
Balance at beginning of period	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	(217,401)		—		(27,725)		—		(245,126)
Amounts reclassified from AOCI to income (1)	Amounts reclassified from AOCI to income (1)	131		5,121		565		(8)		5,809
Balance at end of period	Balance at end of period	$	(654,345)	$	(117,078)	$	(37,035)	$	8	$	(808,450)

Nine Months Ended September 30, 2023
Balance at beginning of period		$	(642,346)	$	(112,664)	$	(31,549)	$	137	$	(786,422)
Other comprehensive income (loss) before reclassifications		(219,562)		1,325		34,279		—		(183,958)
Amounts reclassified from AOCI to income (1)		4,033		12,388		(14,719)		(137)		1,565
Balance at end of period		$	(857,875)	$	(98,951)	$	(11,989)	$	—	$	(968,815)

Nine Months Ended September 30, 2022
Balance at beginning of period		$	(2,950)	$	—	$	543	$	32	$	(2,375)
Other comprehensive income (loss) before reclassifications		(651,330)		(125,229)		(37,473)		—		(814,032)
Amounts reclassified from AOCI to income (1)		(65)		8,151		(105)		(24)		7,957
Balance at end of period		$	(654,345)	$	(117,078)	$	(37,035)	$	8	$	(808,450)

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

The following table summarizes the amounts reclassified out of each component of AOCI for the three months ended ~~September 30, 2023~~March 31, 2024 and ~~2022:~~2023:

Three Months Ended
September 30,
(dollars in thousands) 2023 2022
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 $ (241) $ (172) Debt securities gains (losses), net
63 41 Income tax (expense) benefit
$ (178) $ (131) Net income (loss)
Unrealized gains and losses on
   held-to-maturity securities $ (5,623) $ (6,772) Interest income (expense)
1,430 1,651 Income tax (expense) benefit
$ (4,193) $ (5,121) Net income (loss)
Gains and losses on hedges
   Interest rate contracts $ (4,927) $ (749) Interest income (expense)
1,274 184 Income tax (expense) benefit
$ (3,653) $ (565) Net income (loss)
Amortization of defined benefit
   pension items
Actuarial gains (losses) $ — $ 11 Salaries and employee benefits
— (3) Income tax (expense) benefit
$ — $ 8 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 nine months ended September 30, 2023 and 2022:~~


		Nine Months Ended September 30,						Three Months Ended March 31,
(dollars in thousands)	(dollars in thousands)	2023		2022			(dollars in thousands)	2024			2023
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	$	(5,440)	$	85	Debt securities gains (losses), net	Unrealized gains and losses on available-for-sale securities	$	(16)	$	$	(5,216)	Debt securities gains (losses), net				Debt securities gains (losses), net
		1,407		(20)		Income tax (expense) benefit		4		1,349		1,349		Income tax (expense) benefit				Income tax (expense) benefit
		$	(4,033)	$	65	Net income (loss)		$	(12)	$	$	(3,867)	Net income				Net income
Unrealized gains and losses on held-to-maturity securities		$	(16,574)	$	(10,774)	Interest income (expense)
Amortization of unrealized losses on held-to-maturity securities transferred from available-for-sale							Amortization of unrealized losses on held-to-maturity securities transferred from available-for-sale	$	(4,318)		$	(5,829)				Interest income (expense)
		4,186		2,623		Income tax (expense) benefit		1,097		1,456		1,456		Income tax (expense) benefit				Income tax (expense) benefit
		$	(12,388)	$	(8,151)	Net income (loss)		$	(3,221)	$	$	(4,373)	Net income				Net income
Gains and losses on hedges Interest rate contracts	Gains and losses on hedges Interest rate contracts	$	19,893	$	139	Interest income (expense)	Gains and losses on hedges Interest rate contracts	$	(4,877)	$	$	(7,292)	Interest income (expense)				Interest income (expense)
		(5,174)		(34)		Income tax (expense) benefit		1,261		1,856		1,856		Income tax (expense) benefit				Income tax (expense) benefit
		$	14,719	$	105	Net income (loss)		$	(3,616)	$	$	(5,436)	Net income				Net income
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	$	32	Salaries and employee benefits	Actuarial gains (losses)	$	—	$	$	188	Salaries and employee benefits				Salaries and employee benefits
		(45)		(8)		Income tax (expense) benefit		—		(47)		(47)		Income tax (expense) benefit				Income tax (expense) benefit
		$	137	$	24	Net income (loss)		$	—	$	$	141	Net income				Net income

Total reclassifications for the period	Total reclassifications for the period	$	(1,565)	$	(7,957)	Net income (loss)
Total reclassifications for the period
Total reclassifications for the period								$	(6,849)		$	(13,535)				Net income

3733

NOTE 14 – INCOME TAXES

~~Following~~The 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
September 30, Nine Months Ended
September 30,
(dollars in thousands) 2023 2022 2023 2022
Provision at statutory rate of 21% $ 40,358 $ 37,598 $ 122,352 $ 59,365
Tax-exempt income:
Tax-exempt interest (4,625) (3,929) (13,716) (10,335)
Section 291/265 interest disallowance 675 85 1,593 150
Company-owned life insurance income (743) (684) (2,315) (2,340)
Tax-exempt income (4,693) (4,528) (14,438) (12,525)
State income taxes 8,163 7,050 24,856 7,808
Interim period effective rate adjustment 116 (31) (607) 3,042
Tax credit investments - federal (2,071) (2,407) (7,122) (4,968)
Officer compensation limitation 1,040 401 3,120 1,053
Non-deductible FDIC premiums 1,949 1,178 6,096 2,549
Other, net (558) (374) (1,139) (1,187)
Income tax expense (benefit) $ 44,304 $ 38,887 $ 133,118 $ 55,137
Effective tax rate 23.1 % 21.7 % 22.9 % 19.5 %

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

The higher effective tax rate during the nine months ended September 30, 2023 compared to the same period in 2022 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.


	Three Months Ended March 31,
(dollars in thousands)		2024			2023
Provision at statutory rate of 21%		$	32,082		$	39,484
Tax-exempt income:
Tax-exempt interest		(4,958)			(4,486)
Section 291/265 interest disallowance		885			386
Company-owned life insurance income		(694)			(627)
Tax-exempt income		(4,767)			(4,727)
State income taxes		5,147			8,142
Interim period effective rate adjustment		944			(1,717)
Tax credit investments - federal		(3,055)			(2,526)
Officer compensation limitation		765			1,040
Non-deductible FDIC premiums		1,747			2,110
Other, net		(375)			(385)
Income tax expense		$	32,488		$	41,421
Effective tax rate		21.3		%	22.0		%

Net Deferred Tax Assets

Net deferred tax assets are included in other assets on the balance sheet. At ~~September 30, 2023,~~March 31, 2024, net deferred tax assets totaled ~~$480.7~~$418.3 million, compared to ~~$435.8~~$423.3 million at December 31, ~~2022.~~2023. No valuation allowance was required on the Company’s deferred tax assets at ~~September 30, 2023~~March 31, 2024 or December 31, ~~2022.~~2023.

The Company’s retained earnings at ~~September 30, 2023~~March 31, 2024 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.

Old National has federal net operating loss carryforwards totaling ~~$68.4~~$60.1 million at ~~September 30, 2023~~March 31, 2024 and ~~$81.5~~$63.6 million at December 31, ~~2022.~~2023. This federal net operating loss was acquired from the acquisition of Anchor BanCorp Wisconsin Inc. in 2016 and First Midwest Bancorp, Inc. 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 ~~$115.6~~$114.2 million at ~~September 30, 2023~~March 31, 2024 and ~~$124.4~~$116.9 million at December 31, ~~2022.~~2023. 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.

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 $150.0 million notional amount at both ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022.~~2023. Interest rate swaps, collars, and floors related to variable-rate commercial loan pools were designated as cash flow hedges totaling ~~$1.5~~$1.8 billion notional amount at ~~September 30, 2023~~March 31, 2024 and ~~$1.9~~$1.6 billion notional amount at December 31, ~~2022.~~2023. 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~~$900.0 million notional amount at ~~September 30, 2023~~both March 31, 2024 and ~~$300.0 million notional amount at~~ December 31, ~~2022.~~2023. 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~~both March 31, 2024 and ~~$910.0 million notional amount at~~ December 31, ~~2022.~~2023. The hedges were determined to be effective during all periods presented and we expect them to remain effective during the remaining terms.

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


		September 30, 2023							December 31, 2022
					Fair Value						Fair Value
	March 31, 2024																	March 31, 2024				December 31, 2023
				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
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, collars, and floors on loan pools
Interest rate swaps, collars, and floors on loan pools
Interest rate swaps, collars, and floors on loan pools
Interest rate swaps on borrowings (3)	Interest rate swaps on borrowings (3)	150,000			—		—		150,000		—		—
Fair value hedges	Fair value hedges
Interest rate swaps on investment securities (3)
Interest rate swaps on investment securities (3)
Interest rate swaps on investment securities (3)	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		—		—
Total	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.

The effect of derivative instruments in fair value hedging relationships on the consolidated statements of income were as follows:

(dollars in thousands) Gain (Loss)
Recognized
in Income on
Related
Hedged
Items
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
September 30, 2023
Interest rate contracts Interest income/(expense) $ (9,553) Fixed-rate debt Interest income/(expense) $ 9,566
Interest rate contracts Interest income/(expense) 45,537 Fixed-rate
investment
securities Interest income/(expense) (46,055)
Total $ 35,984 $ (36,489)
Three Months Ended
September 30, 2022
Interest rate contracts Interest income/(expense) $ (532) Fixed-rate debt Interest income/(expense) $ 638
Interest rate contracts Interest income/(expense) 47,963 Fixed-rate
investment
securities Interest income/(expense) (47,975)
Total $ 47,431 $ (47,337)
Nine Months Ended
September 30, 2023
Interest rate contracts Interest income/(expense) $ (18,500) Fixed-rate debt Interest income/(expense) $ 18,303
Interest rate contracts Interest income/(expense) 7,268 Fixed-rate
investment
securities Interest income/(expense) (7,671)
Total $ (11,232) $ 10,632
Nine Months Ended
September 30, 2022
Interest rate contracts Interest income/(expense) $ (7,889) Fixed-rate debt Interest income/(expense) $ 8,193
Interest rate contracts Interest income/(expense) 159,397 Fixed-rate
investment
securities Interest income/(expense) (159,767)
Total $ 151,508 $ (151,574)


(dollars in thousands)						Gain (Loss) Recognized in Income on Related Hedged Items
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 March 31, 2024
Interest rate contracts	Interest income/(expense)	$	(13,970)	Fixed-rate debt	Interest income/(expense)	$	14,127
Interest rate contracts	Interest income/(expense)	25,848		Fixed-rate investment securities	Interest income/(expense)	(25,903)
Total		$	11,878			$	(11,776)


Three Months Ended March 31, 2023
Interest rate contracts	Interest income/(expense)	$	2,153	Fixed-rate debt	Interest income/(expense)	$	(2,218)
Interest rate contracts	Interest income/(expense)	(63,115)		Fixed-rate investment securities	Interest income/(expense)	63,251
Total		$	(60,962)			$	61,033

The effect of derivative instruments in cash flow hedging relationships on the consolidated statements of income were as follows:


			Three Months Ended March 31,															Three Months Ended March 31,		Three Months Ended March 31,
(dollars in thousands)												(dollars in thousands)		2024		2023	2024		2023

				Three Months Ended September 30,
(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
Interest rate contracts		Interest income/(expense)		$	(15,574)	$	(36,755)	$	(5,960)	$	(749)

Derivatives in Cash Flow Hedging Relationships

				Nine Months Ended September 30,
				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				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)		$	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 ~~$5.8~~$23.3 million will be reclassified to interest income and ~~$26.3~~$4.5 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 ~~September 30,~~March 31, 2024, the notional amounts of the interest rate lock commitments were $68.0 million and forward commitments were $77.6 million. At December 31, 2023, the notional amounts of the interest rate lock commitments were ~~$42.5~~$25.2 million and forward commitments were ~~$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~~$39.5 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. The notional amounts of these customer derivative instruments and the offsetting counterparty derivative instruments were ~~$5.8~~$5.9 billion at ~~September 30, 2023~~March 31, 2024 and ~~$5.2~~$6.0 billion at December 31, ~~2022.~~2023. 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.

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


		September 30, 2023							December 31, 2022
					Fair Value						Fair Value
	March 31, 2024																	March 31, 2024				December 31, 2023
				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	$	42,492		$	—	$	146	$	21,401	$	93	$	—
Forward mortgage loan contracts	Forward mortgage loan contracts	54,730			1,031		—		30,330		32		—
Customer interest rate swaps	Customer interest rate swaps	5,775,638			1,208		379,864		5,220,363		5,676		326,924
Counterparty interest rate swaps (3)	Counterparty interest rate swaps (3)	5,775,634			222,907		1,213		5,220,363		151,111		5,711
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				$	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.

The effect of derivatives not designated as hedging instruments on the consolidated statements of income were as follows:


			Three Months Ended March 31,								Three Months Ended March 31,
(dollars in thousands)								(dollars in thousands)	2024	2023

				Three Months Ended September 30,
(dollars in thousands)				2023		2022
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)

Interest rate contracts (1)	Interest rate contracts (1)	Other income/(expense)		$	426	$	108
Mortgage contracts	Mortgage contracts	Mortgage banking revenue		391		638
Foreign currency contracts	Foreign currency contracts	Other income/(expense)		(3)		75
Total	Total			$	814	$	821

				Nine Months Ended September 30,
				2023		2022
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)		Other income/(expense)		$	1,125	$	1,058
Mortgage contracts		Mortgage banking revenue		760		(735)
Foreign currency contracts		Other income/(expense)		(16)		113
Total				$	1,869	$	436

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

Fair Value of Offsetting Derivatives

Certain derivative instruments are subject to master netting agreements with counterparties that provide rights of setoff. The Company records these transactions at their gross fair values and does not offset derivative assets and liabilities in the Consolidated Balance Sheet. The following table presents the fair value of the Company’s derivatives and offsetting positions:



	March 31, 2024				December 31, 2023
(dollars in thousands)	Assets		Liabilities		Assets		Liabilities
Gross amounts recognized	$	167,479	$	297,403	$	166,302	$	268,916
Less: amounts offset in the Consolidated Balance Sheet	—		—		—		—
Net amount presented in the Consolidated Balance Sheet	167,479		297,403		166,302		268,916
Gross amounts not offset in the Consolidated Balance Sheet
Offsetting derivative positions	(26,443)		(26,443)		(39,360)		(39,360)
Cash collateral pledged	—		(134,459)		—		(97,840)
Net credit exposure	$	141,036	$	136,501	$	126,942	$	131,716

NOTE 16 – COMMITMENTS, CONTINGENCIES, AND FINANCIAL GUARANTEES

Litigation

At ~~September 30, 2023,~~March 31, 2024, 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~~litigation 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)

September 30,
2023

December 31,
2022

(dollars in thousands)

March 31,
2024

December 31,
2023

Unfunded loan commitments

9,142,538

8,979,334

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 ~~$1.2~~$1.4 million at ~~September 30, 2023~~March 31, 2024 and ~~$0.8~~$1.3 million at December 31, ~~2022.~~2023.

At ~~September 30, 2023,~~March 31, 2024, approximately 4% of the unfunded loan commitments had fixed rates, with the remainder having floating rates ranging from 0%2.10% to ~~23%~~22.49%. The allowance for unfunded loan commitments totaled ~~$33.0~~$26.3 million at ~~September 30, 2023~~March 31, 2024 and ~~$32.2~~$31.2 million at December 31, ~~2022.~~2023.

Old National is a party in risk participation transactions of interest rate swaps, which had total notional amounts of ~~$522.5~~$589.2 million at ~~September 30, 2023~~March 31, 2024 and ~~$398.9~~$557.8 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 September 30, 2023, the conversion ratio was 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 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.2023.

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.

4338

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 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: The fair value of loans held-for-sale is determined using quoted prices for a similar asset, adjusted for specific attributes of that loan (Level 2).

Derivative financial instruments: The fair values of derivative financial instruments are based on market quotes developed using observable inputs as of the valuation date (Level 2).

4439

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 September 30, 2023 Using
				Fair Value Measurements at March 31, 2024 Using												Fair Value Measurements at March 31, 2024 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	$	69,880		$	69,880	$	—	$	—
Investment securities available-for-sale:	Investment securities available-for-sale:
U.S. Treasury
U.S. Treasury
U.S. Treasury	U.S. Treasury	548,126			548,126		—		—
U.S. government-sponsored entities and agencies	U.S. government-sponsored entities and agencies	1,142,900			—		1,142,900		—
Mortgage-backed securities - Agency	Mortgage-backed securities - Agency	3,862,705			—		3,862,705		—
States and political subdivisions	States and political subdivisions	544,944			—		544,944		—
Pooled trust preferred securities	Pooled trust preferred securities	11,125			—		11,125		—
Other securities	Other securities	304,961			—		304,961		—
Loans held-for-sale	Loans held-for-sale	122,033			—		122,033		—
Derivative assets	Derivative assets	227,833			—		227,833		—
Financial Liabilities	Financial Liabilities
Derivative liabilities	Derivative liabilities	409,269			—		409,269		—
Derivative liabilities
Derivative liabilities


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

Non-Recurring Basis

Assets measured at fair value at ~~September 30, 2023~~March 31, 2024 on a non-recurring basis are summarized below:

Fair Value Measurements at September 30, 2023 Using

Fair Value Measurements at March 31, 2024 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)

(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

10,783

—

10,783

Commercial real estate loans

75,720

—

75,720

Foreclosed Assets:

Commercial

1,879

—

1,879

Commercial

4540

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 ~~$117.5~~$142.2 million, with a valuation allowance of ~~$31.0~~$32.7 million at ~~September 30, 2023.~~March 31, 2024. Old National recorded provision expense associated with these loans totaling ~~$2.1 million and $21.9~~$9.6 million for the three ~~and nine~~ months ended September 30, 2023, respectively. Old National recorded provision expense associated with commercial and commercial real estate loans that were deemed collateral dependent totaling $7.3 million and $20.1March 31, 2024, compared to $11.9 million for the three ~~and nine~~ months ended ~~September 30, 2022, respectively.~~March 31, 2023.

Other real estate owned and other repossessed property is measured at fair value less costs to sell on a non-recurring basis. Old National did not have any other real estate owned or other repossessed property measured at fair value on a non-recurring basis ~~and had a net carrying amount of $1.9 million~~ at ~~September 30, 2023.~~March 31, 2024. There were ~~$26 thousand of~~no write-downs on other real estate owned for the three months ended ~~September 30, 2023 and $0.1 million for nine months ended September 30, 2023. There were write-downs totaling $0.2 million and $0.6 million~~March 31, 2024, compared to $27 thousand for the three ~~and nine~~ months ended ~~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 September 30, 2023 and no impairments or recoveries recorded during the three or nine months ended September 30,March 31, 2023. ~~Old National recorded immaterial recoveries associated with loan servicing rights during the three and nine months ended September 30, 2022.~~

Assets measured at fair value at December 31, ~~2022~~2023 on a non-recurring basis are summarized below:

Fair Value Measurements at December 31, 2022 Using

Fair Value Measurements at December 31, 2023 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)

(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

Foreclosed Assets:

Commercial real estate

At December 31, ~~2022,~~2023, commercial and commercial real estate loans that are deemed collateral dependent had a principal amount of ~~$92.0~~$134.3 million, with a valuation allowance of ~~$21.5~~$27.9 million.

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)

~~September 30, 2023~~March 31, 2024

Collateral Dependent Loans

Commercial loans

~~10,783~~26,057

Discounted

Discount for type of property,

~~10%~~2% - ~~40% (33%~~38% (29%)

cash flow

age of appraisal, and current status

Commercial real estate loans

~~75,720~~83,492

Discounted

Discount for type of property,

1% - ~~38% (17%~~34% (13%)

cash flow

age of appraisal, and current status

Foreclosed Assets

Commercial real estate

~~1,879~~1,669

Fair value of

Discount for type of property,

4% - ~~17% (6%~~8% (4%)

collateral

age of appraisal, and current status

December 31, ~~2022~~2023

Collateral Dependent Loans

Commercial loans

~~22,562~~11,017

Discounted

Discount for type of property,

~~10%~~5% - ~~47% (28%~~37% (27%)

cash flow

age of appraisal, and current status

Commercial real estate loans

~~48,026~~95,457

Discounted

Discount for type of property,

1%2% - ~~26% (11%~~38% (16%)

cash flow

age of appraisal, and current status

Foreclosed Assets

Commercial real estate

1,669

Fair value of

Discount for type of property,

4% - 8% (4%)

collateral

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

Old National has elected the fair value option for loans held-for-sale. For these loans, interest income is recorded in the consolidated statements of income based on the contractual amount of interest income earned on the financial assets (except any that are on nonaccrual status). None of these loans are 90 days or more past due, nor are any on nonaccrual status. Interest income for loans held-for-sale is included in the income statement totaling ~~$0.4 million and $0.9~~$0.3 million for the three ~~and nine~~ months ended ~~September 30, 2023, respectively,~~March 31, 2024, compared to ~~$0.4 million and $1.6~~$0.2 million for the three ~~and nine~~ months ended ~~September 30, 2022, respectively.~~March 31, 2023.

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

(dollars in thousands)

Aggregate
Fair Value

Difference

Contractual Principal

September 30, 2023

March 31, 2024

Loans held-for-sale

122,033

121,961

December 31, 2022

December 31, 2023

Loans held-for-sale

11,926

221

11,705

Loans held-for-sale

Accrued interest at period end is included in the fair value of the instruments.

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)	(dollars in thousands)	Other Gains and (Losses)		Interest Income		Interest (Expense)		Total Changes in Fair Values Included in Current Period Earnings		(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

Three Months Ended March 31, 2024

Three Months Ended March 31, 2024

Three Months Ended March 31, 2024
Loans held-for-sale
Loans held-for-sale
Loans held-for-sale	Loans held-for-sale	$	(327)	$	12	$	—	$	(315)

Three Months Ended September 30, 2022
Three Months Ended March 31, 2023
Three Months Ended March 31, 2023
Three Months Ended March 31, 2023
Loans held-for-sale	Loans held-for-sale	$	(710)	$	1	$	—	$	(709)

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

Nine Months Ended September 30, 2022
Loans held-for-sale	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 September 30, 2023 Using								Fair Value Measurements at March 31, 2024 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	$	1,663,430	$	1,663,430	$	—	$	—
Investment securities held-to-maturity:	Investment securities held-to-maturity:
U.S. government-sponsored entities and agencies	U.S. government-sponsored entities and agencies	824,223		—		617,010		—
U.S. government-sponsored entities and agencies
U.S. government-sponsored entities and agencies
Mortgage-backed securities - Agency	Mortgage-backed securities - Agency	1,043,585		—		847,652		—
State and political subdivisions	State and political subdivisions	1,160,106		—		928,959		—

Loans, net:	Loans, net:
Loans, net:
Loans, net:
Commercial
Commercial
Commercial	Commercial	9,207,028		—		—		9,078,129
Commercial real estate	Commercial real estate	13,770,202		—		—		13,302,502
Residential real estate	Residential real estate	6,675,508		—		—		5,630,855
Consumer credit	Consumer credit	2,621,114		—		—		2,526,277
Accrued interest receivable	Accrued interest receivable	209,503		1,093		45,597		162,813
Financial Liabilities	Financial Liabilities
Deposits:	Deposits:
Deposits:
Deposits:
Noninterest-bearing demand deposits
Noninterest-bearing demand deposits
Noninterest-bearing demand deposits	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	21,585,620		21,585,620		—		—
Time deposits	Time deposits	5,575,704		—		5,527,361		—
Federal funds purchased and interbank borrowings	Federal funds purchased and interbank borrowings	918		918		—		—
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	279,061		279,061		—		—
FHLB advances	FHLB advances	4,412,576		—		4,167,911		—
Other borrowings	Other borrowings	863,455		—		843,629		—
Accrued interest payable	Accrued interest payable	46,934		—		46,934		—
Standby letters of credit	Standby letters of credit	1,224		—		—		1,224

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

4843


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

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

The methods utilized to measure the fair value of financial instruments at ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022~~2023 represent an approximation of exit price, however, an actual exit price may differ.

4944

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following ~~discussion~~ is an analysis and discussion of our results of operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 compared to the three months ended March 31, 2023, ~~and 2022,~~ and financial condition as of ~~September 30, 2023,~~March 31, 2024 compared to December 31, ~~2022.~~2023. This discussion and analysis should be read in conjunction with the consolidated financial statements and related notes, as well as our ~~2022~~2023 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 such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “outlook,” “plan,” “potential,” “predict,” “should,” “would,” 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,~~statements, including, 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~~expected cost savings, synergies, and other financial benefits from the merger (the “Merger”) between Old National and CapStar not being realized within the expected time frames and costs or difficulties relating to integration matters being greater than expected; potential adverse reactions or changes to business or employee relationships, including those resulting from the completion of ~~LIBOR and~~ the ~~transition to an alternative rate;~~Merger; 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. WeOld National does not undertake noan obligation to ~~publicly~~ update ~~any~~these forward-looking statements ~~whether as a result of new information, future~~to reflect events or ~~otherwise~~conditions 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.

5045

FINANCIAL HIGHLIGHTS

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


		Three Months Ended
	Three Months Ended																															Three Months Ended
(dollars and shares in thousands, except per share data)	(dollars and shares in thousands, except per share data)	September 30,			June 30,			March 31,			December 31,			September 30,			(dollars and shares in thousands, except per share data)	March 31,			December 31,			September 30,			June 30,			March 31,
		2023									2022							2024			2023
Income Statement:	Income Statement:
Net interest income	Net interest income	$	375,086		$	382,171		$	381,488		$	391,090		$	376,589
Taxable equivalent adjustment (1) (4)		5,837			5,825			5,666			5,378			4,950
Net interest income - taxable equivalent basis (4)		380,923			387,996			387,154			396,468			381,539
Provision for credit losses (2)		19,068			14,787			13,437			11,408			15,490
Net interest income
Net interest income
Taxable equivalent adjustment (1) (3)
Net interest income - taxable equivalent basis (3)
Provision for credit losses
Noninterest income	Noninterest income	80,938			81,629			70,681			165,037			80,385
Noninterest expense (2)		244,776			246,584			250,711			282,675			262,444
Noninterest expense
Net income available to common shareholders	Net income available to common shareholders	$	143,842		$	151,003		$	142,566		$	196,701		$	136,119
Per Common Share Data:	Per Common Share Data:
Weighted average diluted common shares	Weighted average diluted common shares	291,717			291,266			292,756			293,131			292,483
Weighted average diluted common shares
Weighted average diluted common shares
Net income (diluted)	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
Common dividend payout ratio (3)		29		%	27		%	29		%	21		%	30		%
Common dividend payout ratio (2)																	Common dividend payout ratio (2)	35		%	32		%	29		%	27		%	29	%
Book value	Book value	$	17.07		$	17.25		$	17.24		$	16.68		$	16.05
Stock price	Stock price	14.54			13.94			14.42			17.98			16.47
Tangible common book value (4)		9.87			10.03			9.98			9.42			8.75
Tangible common book value (3)
Performance Ratios:	Performance Ratios:
Return on average assets	Return on average assets	1.22		%	1.29		%	1.25		%	1.74		%	1.22		%
Return on average assets
Return on average assets																		0.98		%	1.09		%	1.22		%	1.29		%	1.25	%
Return on average common equity	Return on average common equity	11.39			12.01			11.58			16.77			11.13
Return on tangible common equity (4)		20.54			21.20			20.20			29.25			22.07
Return on average tangible common equity (4)		20.18			21.35			21.03			31.53			20.49
Net interest margin (4)		3.49			3.60			3.69			3.85			3.71
Efficiency ratio (4)		51.66			51.22			52.81			49.12			55.26
Efficiency ratio (prior presentation) (5)		N/A			N/A						N/A			56.17

Return on average tangible common equity (3)
Return on average tangible common equity (3)
Return on average tangible common equity (3)
Net interest margin (3)
Efficiency ratio (3)
Net charge-offs (recoveries) to average loans	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			0.93			0.94			0.98			0.99
Allowance for credit losses (6) to ending loans		1.03			1.04			1.05			1.08			1.08
Allowance for credit losses (4) to ending loans
Non-performing loans to ending loans	Non-performing loans to ending loans	0.80			0.91			0.74			0.81			0.81
Balance Sheet:	Balance Sheet:
Total loans
Total loans
Total loans	Total loans	$	32,577,834		$	32,432,473		$	31,822,374		$	31,123,641		$	30,528,933
Total assets	Total assets	49,059,448			48,496,755			47,842,644			46,763,372			46,215,526
Total deposits	Total deposits	37,252,676			36,231,315			34,917,792			35,000,830			36,053,663
Total borrowed funds	Total borrowed funds	5,556,010			6,034,008			6,740,454			5,586,314			4,264,750
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:
Risk-based capital ratios:	Risk-based capital ratios:
Risk-based capital ratios:
Risk-based capital ratios:
Tier 1 common equity
Tier 1 common equity
Tier 1 common equity	Tier 1 common equity	10.41		%	10.14		%	9.98		%	10.03		%	9.88		%	10.76	%	10.70		%	10.41		%	10.14		%	9.98		%
Tier 1	Tier 1	11.06			10.79			10.64			10.71			10.58
Total	Total	12.32			12.14			11.96			12.02			11.84
Leverage ratio (to average assets)	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)	10.88			10.96			11.00			10.70			11.18
Tangible common equity to tangible assets (4)		6.15			6.33			6.37			6.18			5.82
Tangible common equity to tangible assets (3)
Nonfinancial Data:	Nonfinancial Data:
Full-time equivalent employees	Full-time equivalent employees	3,981			4,021			4,023			3,967			4,008
Full-time equivalent employees
Full-time equivalent employees
Banking centers	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)~~(3)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)~~(4)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:~~

Nine Months Ended September 30,
(dollars and shares in thousands, except per share data) 2023 2022
Income Statement:
Net interest income $ 1,138,745 $ 936,846
Taxable equivalent adjustment (1) (4)
17,328 13,036
Net interest income - taxable equivalent basis (4)
1,156,073 949,882
Provision for credit losses (2)
47,292 133,391
Noninterest income 233,248 234,742
Noninterest expense (2)
742,071 755,508
Net income available to common shareholders $ 437,411 $ 217,468
Per Common Share Data:
Weighted average diluted common shares 291,809 271,123
Net income (diluted) $ 1.50 $ 0.80
Cash dividends 0.42 0.42
Common dividend payout ratio (3)
28 % 53 %
Book value $ 17.07 $ 16.05
Stock price 14.54 16.47
Tangible common book value (4)
9.87 8.75
Performance Ratios:
Return on average assets 1.25 % 0.72 %
Return on average common equity 11.66 6.26
Return on tangible common equity (4)
20.82 12.05
Return on average tangible common equity (4)
20.85 11.50
Net interest margin (4)
3.59 3.34
Efficiency ratio (4)
51.89 62.17
Efficiency ratio (prior presentation) (5)
N/A 63.46
Net charge-offs (recoveries) to average loans 0.19 0.06
Allowance for credit losses on loans to ending loans 0.93 0.99
Allowance for credit losses (6) to ending loans
1.03 1.08
Non-performing loans to ending loans 0.80 0.81
Balance Sheet:
Total loans $ 32,577,834 $ 30,528,933
Total assets 49,059,448 46,215,526
Total deposits 37,252,676 36,053,663
Total borrowed funds 5,556,010 4,264,750
Total shareholders’ equity 5,239,537 4,943,383
Capital Ratios:
Risk-based capital ratios:
Tier 1 common equity 10.41 % 9.88 %
Tier 1 11.06 10.58
Total 12.32 11.84
Leverage ratio (to average assets) 8.70 8.26
Total equity to assets (averages) 10.95 11.43
Tangible common equity to tangible assets (4)
6.15 5.82
Nonfinancial Data:
Full-time equivalent employees 3,981 4,008
Banking centers 257 263

~~(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.~~

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

5246

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~~users of the financial information 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 Company presents net income per common share and net income applicable to common shares, adjusted for certain notable items. These items include gain on sale of Visa Class B restricted shares, the expense associated with the distribution of excess pension assets, FDIC special assessment expense, contract termination charges, merger-related charges associated with completed and pending acquisitions, debt securities gains/losses, expenses related to the tragic April 10, 2023 event at our downtown Louisville location (“Louisville expenses”), and property optimization charges. Management believes excluding these items from net income per common share and net income applicable to common shares may be useful in assessing the Company's underlying operational performance since these items do not pertain to its core business operations and their exclusion may facilitate better comparability between periods. Management believes that excluding merger-related charges from these metrics may be useful to the Company, as well as analysts and investors, since these expenses can vary significantly based on the size, type, and structure of each acquisition. Additionally, management believes excluding these items from these metrics may enhance comparability for peer comparison purposes.

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,~~users of the financial information, 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.

5347

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


			Three Months Ended
		Three Months Ended																									Three Months Ended
(dollars and shares in thousands, except per share data)	(dollars and shares in thousands, except per share data)		September 30,			June 30,			March 31,			December 31,			September 30,			(dollars and shares in thousands, except per share data)	March 31,		December 31,		September 30,		June 30,			March 31,
			2023			2023			2023			2022			2022				2024						2023
Net income per common share:
Net income applicable to common shares
Net income applicable to common shares
Net income applicable to common shares
Adjustments:
Distribution of excess pension assets expense
Distribution of excess pension assets expense
Distribution of excess pension assets expense
FDIC special assessment
Merger-related charges
Debt securities (gains) losses
Gain on sale of Visa Class B restricted shares
Contract termination charge
Louisville expenses
Property optimization charges
Less: tax effect on net total adjustments (2)
Net income applicable to common shares, adjusted (1)
Weighted average diluted common shares outstanding
Net income per common share, diluted
Adjusted net income per common share, diluted (1)
Tangible common book value:	Tangible common book value:
Shareholders’ common equity
Shareholders’ common equity
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		2,106,835			2,112,875			2,118,935			2,125,121			2,135,792

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
Tangible shareholders’ common equity (1)
Tangible shareholders’ common equity (1)
Period end common shares	Period end common shares		292,586			292,597			291,922			292,903			292,880
Tangible common book value (1)	Tangible common book value (1)		9.87			10.03			9.98			9.42			8.75
Return on tangible common equity:
Return on average tangible common equity:
Net income applicable to common shares
Net income applicable to common shares
Net income applicable to common shares	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)		4,530			4,545			4,639			5,090			5,317
Tangible net income (1)	Tangible net income (1)		$	148,372		$	155,548		$	147,205		$	201,791		$	141,436
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)			20.54		%	21.20		%	20.20		%	29.25		%	22.07		%
Return on average tangible common equity:
Tangible net income (1) (see above)			$	148,372		$	155,548		$	147,205		$	201,791		$	141,436

Average shareholders’ common equity

Average shareholders’ common equity

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		2,109,944			2,115,894			2,122,157			2,132,480			2,129,858

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
Average tangible shareholders’ common equity (1)
Average tangible shareholders’ common equity (1)
Return on average tangible common equity (1)	Return on average tangible common equity (1)		20.18		%	21.35		%	21.03		%	31.53		%	20.49		%	Return on average tangible common equity (1)	14.93	%	18.11	%	20.18	%	21.35	%		21.03	%
Net interest margin:	Net interest margin:
Net interest income
Net interest income
Net interest income	Net interest income		$	375,086		$	382,171		$	381,488		$	391,090		$	376,589
Taxable equivalent adjustment	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)		$	380,923		$	387,996		$	387,154		$	396,468		$	381,539
Average earning assets	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)		3.49		%	3.60		%	3.69		%	3.85		%	3.71		%	Net interest margin (1)	3.28	%	3.39	%	3.49	%	3.60	%		3.69	%
Efficiency ratio:	Efficiency ratio:
Noninterest expense
Noninterest expense
Noninterest expense	Noninterest expense		$	244,776		$	246,584		$	250,711		$	282,675		$	262,444
Deduct: Intangible amortization expense	Deduct: Intangible amortization expense		6,040			6,060			6,186			6,787			7,089
Adjusted noninterest expense (1)	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)		$	380,923		$	387,996		$	387,154		$	396,468		$	381,539
Noninterest income	Noninterest income		80,938			81,629			70,681			165,037			80,385
Deduct: Debt securities gains (losses), net	Deduct: Debt securities gains (losses), net		(241)			17			(5,216)			(173)			(172)
Adjusted total revenue (1)	Adjusted total revenue (1)		$	462,102		$	469,608		$	463,051		$	561,678		$	462,096
Efficiency ratio (1)	Efficiency ratio (1)		51.66		%	51.22		%	52.81		%	49.12		%	55.26		%	Efficiency ratio (1)	58.34	%	59.05	%	51.66	%	51.22	%		52.81	%
Tangible common equity to tangible assets:	Tangible common equity to tangible assets:
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
Tangible shareholders’ equity (1) (see above)
Tangible shareholders’ equity (1) (see above)
Assets	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		2,106,835			2,112,875			2,118,935			2,125,121			2,135,792
Deduct: Goodwill and intangible assets
Deduct: Goodwill and intangible assets

Tangible assets (1)	Tangible assets (1)		$	46,952,613		$	46,383,880		$	45,723,709		$	44,638,251		$	44,079,734
Tangible assets (1)
Tangible assets (1)
Tangible common equity to tangible assets (1)	Tangible common equity to tangible assets (1)		6.15		%	6.33		%	6.37		%	6.18		%	5.82		%	Tangible common equity to tangible assets (1)	6.86	%	6.85	%	6.15	%	6.33	%		6.37	%

(1)Represents a non-GAAP financial measure.

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

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

Nine Months Ended September 30,
(dollars and shares in thousands, except per share data) 2023 2022
Tangible common book value:
Shareholders’ common equity $ 4,995,818 $ 4,699,664
Deduct: Goodwill and intangible assets 2,106,835 2,135,792
Tangible shareholders’ common equity (1)
$ 2,888,983 $ 2,563,872
Period end common shares 292,586 292,880
Tangible common book value (1)
9.87 8.75
Return on tangible common equity:
Net income applicable to common shares $ 437,411 $ 217,468
Add:  Intangible amortization (net of tax) (2)
13,714 14,302
Tangible net income (1)
$ 451,125 $ 231,770
Tangible shareholders’ common equity (1) (see above)
$ 2,888,983 $ 2,563,872
Return on tangible common equity (1)
20.82 % 12.05 %
Return on average tangible common equity:
Tangible net income (1) (see above)
$ 451,125 $ 231,770
Average shareholders’ common equity $ 5,001,437 $ 4,628,831
Deduct: Average goodwill and intangible assets 2,115,953 1,941,270
Average tangible shareholders’ common equity (1)
$ 2,885,484 $ 2,687,561
Return on average tangible common equity (1)
20.85 % 11.50 %
Net interest margin:
Net interest income $ 1,138,745 $ 936,846
Taxable equivalent adjustment 17,328 13,036
Net interest income - taxable equivalent basis (1)
$ 1,156,073 $ 949,882
Average earning assets $ 42,891,660 $ 37,924,490
Net interest margin (1)
3.59 % 3.34 %
Efficiency ratio:
Noninterest expense $ 742,071 $ 755,508
Deduct:  Intangible amortization expense 18,286 19,070
Adjusted noninterest expense (1)
$ 723,785 $ 736,438
Net interest income - taxable equivalent basis (1) (see above)
$ 1,156,073 $ 949,882
Noninterest income 233,248 234,742
Deduct:  Debt securities gains (losses), net (5,440) 85
Adjusted total revenue (1)
$ 1,394,761 $ 1,184,539
Efficiency ratio (1)
51.89 % 62.17 %
Tangible common equity to tangible assets:
Tangible shareholders’ equity (1) (see above)
$ 2,888,983 $ 2,563,872
Assets $ 49,059,448 $ 46,215,526
Deduct: Goodwill and intangible assets 2,106,835 2,135,792
Tangible assets (1)
$ 46,952,613 $ 44,079,734
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).~~

5548

EXECUTIVE SUMMARY

Old National is the sixth largest commercial bank headquartered in the Midwest by asset size and ranks among the top 30 banking companies headquartered in the United States with consolidated assets of approximately ~~$49~~$50 billion at ~~September 30, 2023.~~ March 31, 2024. 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~~Through our wholly-owned banking subsidiary and non-bank affiliates, we provide a wide range of ~~banking~~ services primarily throughout the Midwest region of the United States and elsewhere, including commercial and consumer loan and depository services, as well as private banking, capital markets, brokerage, wealth management, trust, investment advisory, and 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~~shares for the ~~third~~first quarter of ~~2023~~2024 was ~~$143.8~~$116.3 million, or ~~$0.49~~$0.40 per diluted common share, compared to ~~$151.0~~$128.4 million, or ~~$0.52~~$0.44 per diluted common share, for the ~~second~~fourth quarter of 2023.

Results for the ~~third~~first quarter of 2024 were impacted by a $13.3 million non-cash, pre-tax expense associated with the distribution of excess pension plan assets with the resolution of the legacy First Midwest defined benefit pension plan, as well as pre-tax charges of $3.0 million for an FDIC special assessment and $2.9 million of merger-related charges. Results for the fourth quarter of 2023 were impacted by ~~$6.3~~the $21.6 million pre-tax gain on sale of Visa Class B restricted shares, $19.1 million for an FDIC special assessment, and $9.9 million of merger-related ~~charges. The second~~and other expenses. Excluding these items, net income applicable to common shares for the first quarter of ~~2023~~2024 was ~~impacted by pre-tax charges~~$130.8 million, or $0.45 per diluted common share on an adjusted basis1, compared to $134.6 million, or $0.46 per diluted common share on an adjusted basis1, for the fourth quarter 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, and $0.2 million for property optimization.~~2023.

We achieved strong results during the ~~third~~first quarter of ~~2023,~~2024, including growth in total ~~deposits~~loans and ~~loans,~~deposits, modest compression of net interest income reflective of the rate environment, ~~stable~~strong credit quality, and disciplined expense management.

Deposits: Period-end total deposits increased ~~$1.0 billion, or 3%,~~$464.2 million to ~~$37.3~~$37.7 billion, reflecting continued efforts to compete for new client relationships as well as ~~seasonal~~normal seasonally lower patterns in business checking and public funds compared to ~~June 30,~~December 31, 2023.

Loans: Our loan balances, excluding loans held-for-sale, increased ~~$145.4~~$631.4 million to ~~$32.6~~$33.6 billion at ~~September 30, 2023~~March 31, 2024 compared to ~~June 30,~~December 31, 2023. This was primarily driven by broad-based, disciplined commercial and commercial real estate loan ~~growth, partially offset by $389 million of commercial loan sales during the quarter.~~growth.

Net Interest Income: Net interest income decreased ~~$7.1~~$8.0 million to ~~$375.1~~$356.5 million compared to the ~~second~~fourth quarter of 2023 driven by higher funding costs and fewer days in the quarter, partly offset by loan ~~growth and higher rates on interest-earning assets.~~growth.

Provision for Credit Losses: Provision for credit losses increased ~~$4.3~~$7.3 million to ~~$19.1~~$18.9 million compared to the ~~second~~fourth quarter of 2023 reflecting net charge-offs and loan growth, as well as economic factors.

Noninterest Income: Noninterest income decreased ~~$0.7~~$22.6 million to ~~$80.9~~$77.5 million compared to the ~~second~~fourth quarter of 2023 reflecting the $21.6 million pre-tax gain on sale of Visa Class B restricted shares in the fourth quarter of 2023. Excluding this gain, noninterest income decreased slightly driven by lower ~~company-owned life insurance and other~~capital markets income, partially offset by increases in ~~all fee income categories.~~mortgage fees, wealth fees, and other income.

Noninterest Expense: Noninterest expense decreased ~~$1.8~~$21.9 million compared to the ~~second~~fourth quarter of 2023. ~~Noninterest~~For the first quarter of 2024, noninterest expense included ~~$6.3~~a $13.3 million non-cash, pre-tax expense associated with the distribution of excess pension assets with the resolution of the legacy First Midwest plan, as well as pre-tax charges of $3.0 million for the FDIC special assessment, and $2.9 million of merger-related expenses compared to pre-tax charges of $19.1 million for the FDIC special assessment and $9.9 million of merger-related and other expenses in the ~~third quarter of 2023 compared to $6.0 million of Louisville expenses, merger-related charges, and charges for property optimization in the second~~fourth quarter of 2023. Excluding these expenses, noninterest expense decreased ~~$2.1~~$12.1 million compared to the ~~second~~fourth quarter of 2023 primarily due to elevated performance-driven incentive accruals and higher ~~salary and employee benefits in~~amortization of tax credit investments for the ~~second~~fourth quarter of 2023, ~~resulting from performance-driven incentive accruals.~~as well as lower professional fees and other expense for the first quarter of 2024, partially offset by higher payroll taxes due to timing.

(1)Represents a non-GAAP financial measure. Refer to “Non-GAAP Financial Measures” section for reconciliations to GAAP financial measures.

5649

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 September 30,						% Change		Nine Months Ended September 30,						% Change
		2023			2022				2023			2022
(dollars in thousands, except per share data)

									2024
								2024
Income Statement Summary:	Income Statement Summary:
Income Statement Summary:
Income Statement Summary:
Net interest income
Net interest income
Net interest income	Net interest income	$	375,086		$	376,589		(0.4)	%	$	1,138,745		$	936,846		21.6	%	$	356,458	$	$	381,488	(6.6)	(6.6)	%	%
Provision for credit losses	Provision for credit losses	19,068			15,490			23.1		47,292			133,391			(64.5)
Noninterest income	Noninterest income	80,938			80,385			0.7		233,248			234,742			(0.6)
Noninterest income
Noninterest income
Noninterest expense
Noninterest expense
Noninterest expense	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	143,842			136,119			5.7		437,411			217,468			101.1
Net income applicable to common shareholders
Net income applicable to common shareholders
Net income per common share - diluted
Net income per common share - diluted
Net income per common share - diluted	Net income per common share - diluted	0.49			0.47			4.3		1.50			0.80			87.5
Other Data:	Other Data:
Other Data:
Other Data:
Return on average common equity	Return on average common equity	11.39		%	11.13		%			11.66		%	6.26		%
Return on tangible common equity (1)		20.54			22.07					20.82			12.05
Return on average common equity
Return on average common equity

Return on average tangible common equity (1)

Return on average tangible common equity (1)

Return on average tangible common equity (1)	Return on average tangible common equity (1)	20.18			20.49					20.85			11.50
Efficiency ratio (1)	Efficiency ratio (1)	51.66			55.26					51.89			62.17
Efficiency ratio (prior presentation) (2)		N/A			56.17					N/A			63.46
Efficiency ratio (1)
Efficiency ratio (1)
Tier 1 leverage ratio
Tier 1 leverage ratio
Tier 1 leverage ratio	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	0.24			0.10					0.19			0.06
Net charge-offs (recoveries) to average loans
Net charge-offs (recoveries) to average loans

(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%~~82% of revenues for the ~~nine~~three months ended ~~September 30, 2023.~~March 31, 2024. 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~~The Federal Reserve held its interest rates ~~increased~~steady during the ~~third~~first quarter of 2024 and increased interest rates compared to March 31, 2023. The Federal Reserve’s Federal Funds Rate is currently in a target range of 5.25% to 5.50%, with the Effective Federal Funds Rate ~~increasing 25 basis points from June 30, 2023 to~~of 5.33% at ~~September 30, 2023.~~March 31, 2024. 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.

5750

The following ~~tables present~~table presents 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 September 30, 2023						Three Months Ended September 30, 2022						(Tax equivalent basis, dollars in thousands)		Three Months Ended March 31, 2024																Three Months Ended March 31, 2023
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	$	980,813	$	13,194	5.34	%	$	514,362	$	935	0.72	%	Money market and other interest-earning investments		$	757,244		$			$	9,985			5.30				5.30		%					$	497,953			$				$	3,098		2.52				2.52	%
Investment securities:	Investment securities:
Treasury and government sponsored agencies	Treasury and government sponsored agencies	2,376,864		23,037		3.88	%	2,326,070		13,212		2.27	%
Treasury and government sponsored agencies
Treasury and government sponsored agencies																2,362,477						23,266							3.94		%					2,197,426								16,531							3.01	%
Mortgage-backed securities	Mortgage-backed securities	5,079,091		33,237		2.62	%	5,891,283		36,157		2.45	%	Mortgage-backed securities		5,357,085			38,888				38,888				2.90				2.90		%					5,429,200				35,090					35,090			2.59			2.59	%
States and political subdivisions	States and political subdivisions	1,737,037		14,220		3.27	%	1,829,322		14,631		3.20	%	States and political subdivisions		1,680,175			13,976				13,976				3.33				3.33		%					1,808,316				14,690					14,690			3.25			3.25	%
Other securities	Other securities	793,196		10,127		5.11	%	718,735		6,781		3.77	%	Other securities		770,438			12,173				12,173				6.32				6.32		%					738,139				8,604					8,604			4.66			4.66	%
Total investment securities	Total investment securities	9,986,188		80,621		3.23	%	10,765,410		70,781		2.63	%	Total investment securities		10,170,175			88,303				88,303				3.47				3.47		%					10,173,081				74,915					74,915			2.95			2.95	%
Loans: (2)	Loans: (2)
Commercial
Commercial
Commercial	Commercial	9,612,102		163,869		6.82	%	9,045,009		113,491		5.02	%	9,540,385				167,263			167,263				7.01				7.01		%					9,457,089				147,620					147,620			6.24				6.24	%
Commercial real estate	Commercial real estate	13,711,156		219,575		6.41	%	11,929,892		136,780		4.59	%	Commercial real estate		14,368,370			230,086				230,086				6.41				6.41		%					12,654,366				179,475					179,475			5.67			5.67	%
Residential real estate loans	Residential real estate loans	6,712,269		62,775		3.74	%	6,189,503		56,432		3.65	%	Residential real estate loans		6,693,814			63,003				63,003				3.76				3.76		%					6,523,074				58,099					58,099			3.56			3.56	%
Consumer	Consumer	2,614,928		42,322		6.42	%	2,735,850		33,049		4.79	%	Consumer		2,645,091			43,594				43,594				6.63				6.63		%					2,636,350				38,108					38,108			5.86			5.86	%
Total loans	Total loans	32,650,455		488,541		5.98	%	29,900,254		339,752		4.54	%	Total loans		33,247,660			503,946				503,946				6.07				6.07		%					31,270,879				423,302					423,302			5.42			5.42	%
Total earning assets	Total earning assets	43,617,456		$	582,356	5.34	%	41,180,026		$	411,468	3.99	%	Total earning assets		44,175,079			$			$	602,234			5.46				5.46		%					41,941,913				$				$	501,315		4.79				4.79	%
Deduct: Allowance for credit losses on loans	Deduct: Allowance for credit losses on loans	(300,071)						(290,215)
Non-Earning Assets	Non-Earning Assets
Non-Earning Assets
Non-Earning Assets
Cash and due from banks
Cash and due from banks
Cash and due from banks	Cash and due from banks	382,755						503,841
Other assets	Other assets	4,960,383						4,522,171
Other assets
Other assets
Total assets
Total assets
Total assets	Total assets	$	48,660,523					$	45,915,823

Interest-Bearing Liabilities	Interest-Bearing Liabilities

Interest-Bearing Liabilities

Interest-Bearing Liabilities
Checking and NOW
Checking and NOW
Checking and NOW	Checking and NOW	$	7,515,439	$	25,531	1.35	%	$	8,681,392	$	5,751	0.26	%	$	7,141,201			$		$	25,252			1.42				1.42		%					$	7,988,579			$				$	19,359			0.98				0.98	%
Savings	Savings	5,414,775		4,268		0.31	%	6,733,465		547		0.03	%	Savings		5,025,400			5,017				5,017				0.40				0.40		%					6,183,409				2,230					2,230			0.15			0.15	%
Money market	Money market	7,979,999		65,549		3.26	%	5,344,567		2,072		0.15	%	Money market		9,917,572			94,213				94,213				3.82				3.82		%					5,641,288				20,010					20,010			1.44			1.44	%
Time deposits		5,412,920		52,080		3.82	%	2,508,152		2,450		0.39	%
Time deposits, excluding brokered deposits														Time deposits, excluding brokered deposits		4,689,136						47,432							4.07		%					3,057,870								15,289							2.03	%
Brokered deposits														Brokered deposits		1,047,140						13,525							5.19		%					500,530								5,705							4.62	%
Total interest-bearing deposits	Total interest-bearing deposits	26,323,133		147,428		2.22	%	23,267,576		10,820		0.18	%	Total interest-bearing deposits		27,820,449			185,439				185,439				2.68				2.68		%					23,371,676				62,593					62,593			1.09			1.09	%
Federal funds purchased and interbank borrowings	Federal funds purchased and interbank borrowings	62,921		910		5.74	%	122,311		720		2.34	%	Federal funds purchased and interbank borrowings		69,090			961				961				5.59				5.59		%					419,291				4,839					4,839			4.68			4.68	%
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	302,305		710		0.93	%	436,225		106		0.10	%	Securities sold under agreements to repurchase		296,236			917				917				1.25				1.25		%					412,819				779					779			0.77			0.77	%
FHLB advances	FHLB advances	4,537,250		40,382		3.53	%	3,025,844		13,027		1.71	%	FHLB advances		4,386,492			41,167				41,167				3.77				3.77		%					4,273,343				37,996					37,996			3.61			3.61	%
Other borrowings	Other borrowings	841,307		12,003		5.66	%	676,874		5,256		3.08	%	Other borrowings		825,846			11,039				11,039				5.38				5.38		%					781,221				7,954					7,954			4.13			4.13	%
Total borrowed funds	Total borrowed funds	5,743,783		54,005		3.73	%	4,261,254		19,109		1.78	%	Total borrowed funds		5,577,664			54,084				54,084				3.90				3.90		%					5,886,674				51,568					51,568			3.55			3.55	%
Total interest-bearing liabilities	Total interest-bearing liabilities	$	32,066,916	$	201,433	2.49	%	$	27,528,830	$	29,929	0.43	%	Total interest-bearing liabilities		$	33,398,113		$			$	239,523			2.88				2.88		%					$	29,258,350			$				$	114,161		1.58				1.58	%

Noninterest-Bearing Liabilities and Shareholders’ Equity	Noninterest-Bearing Liabilities and Shareholders’ Equity
Noninterest-Bearing Liabilities and Shareholders’ Equity
Noninterest-Bearing Liabilities and Shareholders’ Equity
Demand deposits
Demand deposits
Demand deposits	Demand deposits	$	10,338,267					$	12,575,011
Other liabilities	Other liabilities	961,268						677,829
Other liabilities
Other liabilities
Shareholders’ equity
Shareholders’ equity
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
Total liabilities and shareholders’ equity
Total liabilities and shareholders’ equity

Net interest income - taxable equivalent basis

Net interest income - taxable equivalent basis

Net interest income - taxable equivalent basis	Net interest income - taxable equivalent basis			$	380,923	3.49	%			$	381,539	3.71	%										$	362,711			3.28				3.28		%															$	387,154		3.69			3.69	%
Taxable equivalent adjustment	Taxable equivalent adjustment			(5,837)						(4,950)
Net interest income (GAAP)	Net interest income (GAAP)			$	375,086	3.44	%			$	376,589	3.66	%
Net interest income (GAAP)
Net interest income (GAAP)																									$	356,458						3.23		%															$	381,488				3.64	%

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

(2)Includes loans held-for-sale.

(Tax equivalent basis,
dollars in thousands) Nine Months Ended
September 30, 2023 Nine Months Ended
September 30, 2022
Earning Assets Average
Balance
Income (1)/
Expense
Yield/
Rate Average
Balance
Income (1)/
Expense
Yield/
Rate
Money market and other interest-earning
   investments $ 736,225 $ 25,258 4.59 % $ 976,579 $ 3,073 0.42 %
Investment securities:
Treasury and government sponsored agencies 2,266,177 58,923 3.47 % 2,336,897 33,249 1.90 %
Mortgage-backed securities 5,268,509 102,618 2.60 % 5,593,341 94,067 2.24 %
States and political subdivisions 1,771,155 43,306 3.26 % 1,801,053 42,839 3.17 %
Other securities 785,474 28,726 4.88 % 682,937 16,392 3.20 %
Total investment securities 10,091,315 233,573 3.09 % 10,414,228 186,547 2.39 %
Loans: (2)
Commercial 9,644,541 475,210 6.57 % 7,888,730 264,517 4.47 %
Commercial real estate 13,180,509 598,337 6.05 % 10,753,988 327,733 4.06 %
Residential real estate loans 6,626,551 181,592 3.65 % 5,369,844 142,105 3.53 %
Consumer 2,612,519 120,428 6.16 % 2,521,121 85,442 4.53 %
Total loans 32,064,120 1,375,567 5.72 % 26,533,683 819,797 4.12 %
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 (301,909) (247,558)
Non-Earning Assets
Cash and due from banks 412,998 350,848
Other assets 4,917,592 4,249,986
Total assets $ 47,920,341 $ 42,277,766
Interest-Bearing Liabilities
Checking and NOW $ 7,793,561 $ 69,248 1.19 % $ 7,977,524 $ 8,133 0.14 %
Savings 5,791,780 9,745 0.22 % 6,295,628 1,809 0.04 %
Money market 6,577,317 120,917 2.46 % 4,819,252 3,791 0.11 %
Time deposits 4,540,042 111,085 3.27 % 2,253,711 5,468 0.32 %
Total interest-bearing deposits 24,702,700 310,995 1.68 % 21,346,115 19,201 0.12 %
Federal funds purchased and interbank
   borrowings 306,480 11,404 4.97 % 41,993 722 2.30 %
Securities sold under agreements to repurchase 351,362 2,389 0.91 % 450,966 287 0.09 %
FHLB advances 4,699,074 123,466 3.51 % 2,891,347 25,915 1.20 %
Other borrowings 806,575 30,071 4.98 % 574,589 13,410 3.12 %
Total borrowed funds 6,163,491 167,330 3.63 % 3,958,895 40,334 1.36 %
Total interest-bearing liabilities $ 30,866,191 $ 478,325 2.07 % $ 25,305,010 $ 59,535 0.31 %
Noninterest-Bearing Liabilities and
   Shareholders’ Equity
Demand deposits $ 10,864,375 $ 11,540,293
Other liabilities 944,619 601,619
Shareholders’ equity 5,245,156 4,830,844
Total liabilities and shareholders’ equity $ 47,920,341 $ 42,277,766
Net interest income - taxable equivalent basis $ 1,156,073 3.59 % $ 949,882 3.34 %
Taxable equivalent adjustment (17,328) (13,036)
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.~~

5951

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 March 31, 2023 to Three Months Ended March 31, 2024
		From Three Months Ended March 31, 2023 to Three Months Ended March 31, 2024
		From Three Months Ended March 31, 2023 to Three Months Ended March 31, 2024

		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
(dollars in thousands)	(dollars in thousands)			Volume		Rate				Volume				Rate
(dollars in thousands)
(dollars in thousands)
Interest Income
Interest Income
Interest Income	Interest Income
Money market and other interest-earning investments	Money market and other interest-earning investments	$	12,259	$	3,583	$	8,676			$	22,185			$	(4,544)			$	26,729
Money market and other interest-earning investments
Money market and other interest-earning investments
Investment securities (2)
Investment securities (2)
Investment securities (2)	Investment securities (2)	9,840		(5,708)		15,548		47,026				(6,630)				53,656
Loans (3)	Loans (3)	148,789		36,149		112,640		555,770				203,985				351,785
Loans (3)
Loans (3)
Total interest income
Total interest income
Total interest income	Total interest income	170,888		34,024		136,864		624,981				192,811				432,170
Interest Expense	Interest Expense
Interest Expense
Interest Expense
Checking and NOW deposits
Checking and NOW deposits
Checking and NOW deposits	Checking and NOW deposits	19,780		(2,318)		22,098		61,115				(951)				62,066
Savings deposits	Savings deposits	3,721		(554)		4,275		7,936				(474)				8,410
Savings deposits
Savings deposits
Money market deposits	Money market deposits	63,477		11,456		52,021		117,126				16,819				100,307
Time deposits		49,630		15,478		34,152		105,617				30,621				74,996
Money market deposits
Money market deposits
Time deposits, excluding brokered deposits
Time deposits, excluding brokered deposits
Time deposits, excluding brokered deposits
Brokered deposits
Brokered deposits
Brokered deposits
Federal funds purchased and interbank borrowings
Federal funds purchased and interbank borrowings
Federal funds purchased and interbank borrowings	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	604		(170)		774		2,102				(375)				2,477
Securities sold under agreements to repurchase
Securities sold under agreements to repurchase
FHLB advances
FHLB advances
FHLB advances	FHLB advances	27,355		10,010		17,345		97,551				31,804				65,747
Other borrowings	Other borrowings	6,747		1,824		4,923		16,661				7,028				9,633
Other borrowings
Other borrowings
Total interest expense
Total interest expense
Total interest expense	Total interest expense	171,504		35,127		136,377		418,790				91,672				327,118
Net interest income	Net interest income	$	(616)	$	(1,103)	$	487	$	206,191			$	101,139			$	105,052
Net interest income
Net interest income

(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 $8.7~~$2.8 million during the three ~~and nine~~ months ended ~~September 30, 2023, respectively,~~March 31, 2024 using the federal statutory rate in effect of 21%.

(3)Interest income on loans includes taxable equivalent adjustments of ~~$3.0 million and $8.6~~$3.5 million during the three ~~and nine~~ months ended ~~September 30, 2023, respectively,~~March 31, 2024 using the federal statutory rate in effect of 21%.

The decrease in net interest income for the three months ended ~~September 30, 2023~~March 31, 2024 when compared to the same period in ~~2022~~2023 was primarily due to higher ~~balances~~costs and ~~costs~~balances of average interest-bearing liabilities, ~~and lower accretion income,~~ partially offset by higher rates on loans ~~and~~as well as loan growth. The increase in net interest income for the nine months ended September 30, 2023 when compared to the same period in 2022 was primarily due to higher rates on loans and loan growth, partially offset by higher balances and costs of average interest-bearing liabilities and lower accretion income. Accretion income associated with acquired loans and borrowings totaled ~~$7.5 million and $22.1~~$5.1 million in the three ~~and nine~~ months ended ~~September 30, 2023, respectively,~~March 31, 2024 compared to ~~$25.4 million and $76.2~~$7.9 million in the three ~~and nine~~ months ended ~~September 30, 2022, respectively.~~March 31, 2023.

The decrease in the net interest margin on a fully taxable equivalent basis for the three months ended ~~September 30, 2023~~March 31, 2024 compared to the same period in ~~2022~~2023 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 nine months ended September 30, 2023 when compared to the same 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 ~~135~~67 basis points and the cost of interest-bearing liabilities increased ~~206~~130 basis points in the three months ended ~~September 30, 2023~~March 31, 2024 compared to the same quarter a year ago. The yield on interest earning assets increased 153 basis points and the cost of interest-bearing liabilities increased 176 basis points in the nine months ended September 30, 2023 when compared to the nine months ended September 30, 2022. Accretion income represented 75 basis points of the net interest margin in ~~both of the~~ three ~~and nine~~ months ended ~~September 30, 2023,~~March 31, 2024, compared to ~~25 basis points and 27~~8 basis points in the three ~~and nine~~ months ended ~~September 30, 2022, respectively.~~March 31, 2023.

Average earning assets were ~~$43.6~~$44.2 billion and ~~$41.2~~$41.9 billion for the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ respectively, an increase of ~~$2.4~~$2.2 billion, or 6%5%, primarily due to ~~strong commercial, commercial real estate, and residential real estate loan growth. Average earning assets were $42.9 billion and $37.9 billion for the nine~~

~~months ended September 30, 2023 and 2022, respectively, an increase of $5.0 billion, or 13%, primarily due to the merger with First Midwest and~~ strong loan growth.

Average loans, including loans held-for-sale, increased ~~$2.8 billion and $5.5~~$2.0 billion for the three ~~and nine~~ months ended ~~September 30, 2023, respectively,~~March 31, 2024 when compared to the same ~~periods~~period in ~~2022. The increase for the three months ended September 30,~~ 2023 ~~was~~ primarily due to strong commercial ~~commercial~~ real estate ~~and residential real estate loan growth. The increase for the nine months ended September 30, 2023 was primarily due to the merger with First Midwest and strong loan growth.~~

Average investments decreased $779.2 million and $322.9 million for the three and nine months ended September 30, 2023, respectively, when compared to the same periods in 2022. These decreases reflect the utilization of securities cash flows to fund loan growth.

Average noninterest-bearing deposits decreased ~~$2.2~~$2.3 billion while average interest-bearing deposits increased ~~$3.1~~$4.4 billion for the three months ended ~~September 30, 2023~~March 31, 2024 when compared to the same period in ~~2022~~2023 reflecting ~~total deposit growth and~~ a mix shift as a result of the current rate environment. Average noninterest-bearing deposits decreased $675.9 million while interest-bearing deposits increased $3.4 billion for the nine months ended September 30, 2023 when compared to the nine months ended September 30, 2022 primarily due to the First Midwest mergerenvironment and ~~a mix shift as a result of the current rate environment.~~organic growth.

~~Average borrowed funds increased $1.5 billion and $2.2 billion for the three and nine months ended 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 September 30,				%		Nine Months Ended September 30,				%
		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,
(dollars in thousands)
(dollars in thousands)
(dollars in thousands)	(dollars in thousands)	2023		2022		Change		2023		2022		Change
Provision for credit losses on loans	Provision for credit losses on loans	$	23,115	$	11,288	104.8	%	$	46,520	$	117,951	(60.6)	%
Provision for credit losses on loans
Provision for credit losses on loans
Provision (release) for credit losses on unfunded loan commitments	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		—		(1)		(100.0)		—		150		(100.0)
Provision (release) for credit losses on unfunded loan commitments
Provision (release) for credit losses on unfunded loan commitments

Total provision for credit losses

Total provision for credit losses

Total provision for credit losses	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	$	(20,143)	$	(1,405)	N/M	%	$	(28,870)	$	(1,386)	N/M	%

Net (charge-offs) recoveries on non-PCD loans

Net (charge-offs) recoveries on non-PCD loans
Net (charge-offs) recoveries on PCD loans
Net (charge-offs) recoveries on PCD loans
Net (charge-offs) recoveries on PCD loans	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	$	(19,688)	$	(7,595)	159.2	%	$	(46,209)	$	(12,127)	281.0	%
Total net (charge-offs) recoveries on loans
Total net (charge-offs) recoveries on loans
Net charge-offs (recoveries) to average loans
Net charge-offs (recoveries) to average loans
Net charge-offs (recoveries) to average loans

~~The~~Total provision for credit losses on loans increased in the ~~nine~~three months ended ~~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~~March 31, 2024 reflecting loan ~~commitments in the nine months ended 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~~growth 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.~~macroeconomic factors. 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 September 30,				%		Nine Months Ended September 30,				%
						Three Months Ended March 31,
						Three Months Ended March 31,
						Three Months Ended March 31,
(dollars in thousands)	(dollars in thousands)	2023		2022		Change		2023		2022		Change
(dollars in thousands)
(dollars in thousands)
Wealth and investment services fees
Wealth and investment services fees
Wealth and investment services fees	Wealth and investment services fees	$	26,687	$	25,359	5.2	%	$	80,128	$	75,183	6.6	%	$	28,304			$	$	26,920			5.1	5.1		%	%
Service charges on deposit accounts	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	10,818		10,608		2.0		31,453		29,429		6.9
Debit card and ATM fees
Debit card and ATM fees
Mortgage banking revenue	Mortgage banking revenue	5,063		5,360		(5.5)		12,628		19,127		(34.0)

Mortgage banking revenue
Mortgage banking revenue
Capital markets income
Capital markets income
Capital markets income	Capital markets income	5,891		8,906		(33.9)		19,003		20,609		(7.8)
Company-owned life insurance	Company-owned life insurance	3,740		3,361		11.3		11,624		11,456		1.5
Company-owned life insurance
Company-owned life insurance
Debt securities gains (losses), net
Debt securities gains (losses), net
Debt securities gains (losses), net	Debt securities gains (losses), net	(241)		(172)		40.1		(5,440)		85		N/M
Other income	Other income	10,456		6,921		51.1		30,574		24,461		25.0
Other income
Other income
Total noninterest income	Total noninterest income	$	80,938	$	80,385	0.7	%	$	233,248	$	234,742	(0.6)	%
Total noninterest income
Total noninterest income																$	77,522				$	70,681			9.7		%

Noninterest income increased ~~$0.6~~$6.8 million for the three months ended ~~September 30, 2023~~March 31, 2024 compared to the same period in ~~2022~~2023 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 mortgage banking revenue, capital markets income, and $5.4$5.2 million of net losses on sales of debt securities in the ~~nine~~three months ended ~~September 30, 2023, partially offset by the full-period 2023 impact of the First Midwest merger which occurred in February of 2022.~~March 31, 2023.

~~Wealth and investment services fees~~Mortgage banking revenue increased ~~$1.3 million and $4.9~~$1.1 million for the three ~~and nine~~ months ended 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, 2023March 31, 2024 compared to the same period in ~~2022~~2023 primarily due to ~~the full-period 2023 impact of the First Midwest merger which occurred in February of 2022.~~higher mortgage originations and increased loan sales.

~~Service charges on deposit accounts~~Capital markets income decreased $4.0 million for the three ~~and nine~~ months ended 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 nine months ended September 30, 2023March 31, 2024 compared to the same period in ~~2022 was 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 $0.3 million and $6.5 million for the three and nine months ended 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 $3.0 million and $1.6 million for the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022~~ primarily due to lower levels of commercial real estate client interest rate swap ~~fees and tax credit~~fees.

Other income ~~partially offset by higher foreign currency exchange fees. The decrease~~increased $2.0 million for the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 compared to the same period in ~~2022 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.~~fees.

6253

Noninterest Expense

The following table details the components in noninterest expense:


		Three Months Ended September 30,				%		Nine Months Ended September 30,				%
						Three Months Ended March 31,
						Three Months Ended March 31,
						Three Months Ended March 31,
(dollars in thousands)	(dollars in thousands)	2023		2022		Change		2023		2022		Change
(dollars in thousands)
(dollars in thousands)
Salaries and employee benefits
Salaries and employee benefits
Salaries and employee benefits	Salaries and employee benefits	$	131,541	$	147,203	(10.6)	%	$	404,715	$	433,167	(6.6)	%	$	149,803			$	$	137,364			9.1	9.1		%	%
Occupancy	Occupancy	25,795		26,418		(2.4)		80,162		73,933		8.4
Equipment	Equipment	8,284		7,328		13.0		23,394		20,046		16.7
Equipment
Equipment
Marketing
Marketing
Marketing	Marketing	9,448		10,361		(8.8)		28,698		23,756		20.8
Technology	Technology	20,592		20,269		1.6		59,850		64,914		(7.8)
Technology
Technology
Communication
Communication
Communication	Communication	4,075		5,392		(24.4)		12,768		14,687		(13.1)
Professional fees	Professional fees	5,956		6,559		(9.2)		19,085		32,686		(41.6)
Professional fees
Professional fees
FDIC assessment
FDIC assessment
FDIC assessment	FDIC assessment	9,000		6,249		44.0		29,028		13,523		114.7
Amortization of intangibles	Amortization of intangibles	6,040		7,089		(14.8)		18,286		19,070		(4.1)
Amortization of intangibles
Amortization of intangibles
Amortization of tax credit investments	Amortization of tax credit investments	2,644		2,662		(0.7)		8,167		5,703		43.2
Property optimization		—		—		N/A		1,559		—		N/A
Amortization of tax credit investments
Amortization of tax credit investments

Other expense

Other expense

Other expense	Other expense	21,401		22,914		(6.6)		56,359		54,023		4.3
Total noninterest expense	Total noninterest expense	$	244,776	$	262,444	(6.7)	%	$	742,071	$	755,508	(1.8)	%
Total noninterest expense
Total noninterest expense																$	262,317				$	250,711			4.6		%

Noninterest expense ~~decreased $17.7~~increased $11.6 million for the three months ended ~~September 30, 2023~~March 31, 2024 compared to the same period in ~~2022. Noninterest~~2023 primarily due to a $13.3 million non-cash, pre-tax expense ~~included $6.3 million~~associated with the distribution of ~~merger-related expenses for~~excess pension assets with the resolution of the legacy First Midwest plan in the three months ended ~~September 30, 2023,~~March 31, 2024. Merger-related expenses totaled $2.9 million in the three months ended March 31, 2024, compared to ~~$22.7~~$14.6 million in the three months ended March 31, 2023. In addition, the three months ended March 31, 2024 were impacted by $3.0 million for the FDIC special assessment and the three months ended March 31, 2023 were impacted by $1.3 million of property optimization charges. Excluding these items, total noninterest expense was $243.1 million and $234.8 million for the three months ended ~~September 30, 2022. Excluding these expenses,~~March 31, 2024 and 2023, respectively. The resulting $8.3 million increase in noninterest expense ~~for the three months ended September 30, 2023~~ was ~~stable compared to the same period in 2022 as fully achieved merger-related benefits were substantially offset~~driven by higher ~~FDIC assessment expense.~~

Noninterest expense decreased $13.4 million for the nine months ended September 30, 2023 compared to the same period in 2022. Noninterest expense included merger-related expenses totaled $23.2 million for the nine months ended September 30, 2023, compared to $100.6 million for the nine months ended September 30, 2022. In addition, noninterest expense for the nine months ended September 30, 2023 included $3.4 million of Louisville expensessalary and $1.6 million for property optimization. Excluding these expenses, noninterest expense for the nine months ended September 30, 2023 increased $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,employee benefits reflecting merit and ~~higher FDIC assessment expense.~~

FDIC assessment expense increased $2.8 million and $15.5 million for the three and nine months ended 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 $2.5 million for the nine months ended September 30, 2023 when compared to the same 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.performance-driven incentive accruals.

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 ~~23.1%~~21.3% for the three months ended ~~September 30, 2023,~~March 31, 2024, compared to ~~21.7%~~22.0% for the same period in ~~2022. The effective tax rate was 22.9% for the nine months ended September 30,~~ 2023 ~~compared to 19.5% for the same period in 2022~~ reflecting ~~an increase~~decreases in pre-tax book income and state income taxes combined with ~~smaller increases~~an increase 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.. In accordance with ASC 740-270, Accounting for Interim Reporting, the provision for income taxes was recorded at ~~September 30, 2023~~March 31, 2024 based on the current estimate of the effective annual rate.

FINANCIAL CONDITION

Overview

At ~~September 30, 2023,~~March 31, 2024, our assets were ~~$49.1~~$49.5 billion, a ~~$2.3 billion~~$445.1 million increase compared to assets of ~~$46.8~~$49.1 billion at December 31, ~~2022.~~2023. The increase was driven by disciplined loan growth, ~~and higher~~partially offset by lower cash ~~balances funded through higher deposits.~~balances.

Earning Assets

Our earning assets are comprised of investment securities, portfolio loans, loans held-for-sale, money market investments, interest-earning accounts with the Federal Reserve, and equity securities. Earning assets were ~~$43.9~~$44.5 billion at ~~September 30, 2023,~~March 31, 2024, a ~~$2.2 billion~~$534.2 million increase compared to earning assets of ~~$41.6~~$43.9 billion at December 31, ~~2022~~2023 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.~~

The investment securities portfolio, including equity securities, was ~~$9.9 billion at September 30, 2023 compared to~~ $10.2 billion ~~at December 31, 2022. Investment securities~~and represented 23% of earning assets at ~~September 30, 2023, compared to 25% at~~both March 31, 2024 and December 31, ~~2022.~~2023. At ~~September 30, 2023,~~March 31, 2024, 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 ~~$1.1 billion at September 30, 2023, compared to net unrealized losses of $844.4~~$914.2 million and $869.5 million at March 31, 2024 and December 31, ~~2022.~~2023, respectively. The investment securities held-to-maturity portfolio had net unrealized losses of ~~$634.3~~$453.8 million and $412.3 million at ~~September 30, 2023, compared to net unrealized losses of $445.5 million at~~March 31, 2024 and December 31, ~~2022. Net unrealized losses increased from December 31, 2022 to September 30,~~ 2023, ~~primarily due to higher market interest rates.~~respectively.

The investment securities available-for-sale portfolio including securities hedges had an effective duration of ~~4.33~~4.35 at ~~September 30, 2023,~~March 31, 2024, compared to ~~4.57~~4.24 at December 31, ~~2022.~~2023. The total investment securities portfolio had an

effective duration of ~~5.48~~5.42 at ~~September 30, 2023,~~March 31, 2024, compared to ~~6.45~~5.35 at December 31, ~~2022.~~2023. 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 ~~3.23% and 3.09%~~3.47% for the three ~~and nine~~ months ended ~~September 30, 2023, respectively,~~March 31, 2024, compared to ~~2.63% and 2.39%~~2.95% for the three ~~and nine~~ months ended ~~September 30, 2022, respectively.~~March 31, 2023.

Loan Portfolio

We lend to commercial and commercial real estate clients in many diverse industries including real estate rental and leasing, manufacturing, healthcare, wholesale trade, construction, and agriculture, among others. Old National manages concentrations of credit exposure by industry, product, geography, client relationship, and loan size. The following table presents the composition of the loan portfolio:


(dollars in thousands)	(dollars in thousands)	September 30, 2023		December 31, 2022		$ Change		% Change		(dollars in thousands)	March 31, 2024			December 31, 2023			$ Change		% Change
Commercial	Commercial	$	9,333,448	$	9,508,904	$	(175,456)	(2)	%	Commercial	$	9,648,269	$	$	9,512,230	$	$	136,039	1.4	1.4	%
Commercial real estate	Commercial real estate	13,916,221		12,457,070		1,459,151		12
Residential real estate	Residential real estate	6,696,288		6,460,441		235,847		4
Consumer	Consumer	2,631,877		2,697,226		(65,349)		(2)
Total loans	Total loans	$	32,577,834	$	31,123,641	$	1,454,193	5	%	Total loans	$	33,623,319	$	$	32,991,927	$	$	631,392	1.9	1.9	%

Commercial and Commercial Real Estate Loans

Commercial and commercial real estate loans are the largest classifications within earning assets, representing ~~53%~~55% of earning assets at both ~~September 30, 2023 and~~March 31, 2024, compared to 54% at December 31, ~~2022.~~2023. The increase in commercial and commercial real estate loans at ~~September 30, 2023 compared to~~March 31, 2024 from December 31, ~~2022~~2023 was driven by disciplined loan production that was well balanced across our market footprint and product ~~lines, partially offset by commercial loan sales.~~lines.

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The following table provides detail on commercial loans by industry classification (as defined by the North American Industry Classification System) and by loan size.


		September 30, 2023									December 31, 2022
	March 31, 2024																												March 31, 2024										December 31, 2023
(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:
Manufacturing
Manufacturing
Manufacturing	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	1,338,875			1,719,741			7,529			1,588,392			2,043,105			11,806
Wholesale trade	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	655,993			1,008,673			1,307			642,511			962,549			1,135
Finance and insurance
Construction	Construction	624,767			1,429,685			1,828			556,913			1,307,582			1,517
Finance and insurance		583,107			953,601			6			484,532			858,391			17
Professional, scientific, and technical services
Transportation and warehousing	Transportation and warehousing	475,731			702,232			2,372			422,643			633,267			3,496
Professional, scientific, and technical services		422,730			770,941			4,304			507,940			832,407			4,735
Accommodation and food services	Accommodation and food services	363,025			488,254			425			399,915			512,025			596
Retail trade	Retail trade	362,840			660,614			5,948			332,367			538,135			7,386
Administrative and support and waste management and remediation services	Administrative and support and waste management and remediation services	310,439			481,089			169			315,785			446,655			13,860
Educational services	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	221,141			394,719			12,429			194,998			356,743			2,656
Public administration	Public administration	219,090			294,745			—			231,453			325,834			846
Other	Other	857,359			1,141,447			1,618			743,943			1,122,409			739
Total	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:
By Loan Size:
Less than $200,000
Less than $200,000
Less than $200,000	Less than $200,000	3		%	3		%	4		%	3		%	3		%	3		%	3	%	3		%	3		%			3	%	3		%	5		%
$200,000 to $1,000,000	$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	25			26			43			25			26			36
$5,000,000 to $10,000,000	$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	31			28			24			31			27			17
Greater than $25,000,000	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.


		September 30, 2023						December 31, 2022
	March 31, 2024																	March 31, 2024				December 31, 2023
(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:
Multifamily
Multifamily
Multifamily	Multifamily	$	4,584,203	$	6,542,155	$	7,519	$	4,188,137	$	5,920,414	$	13,749
Warehouse / Industrial	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	1,900,752		2,104,761		36,971		1,813,007		1,979,272		13,728

Senior housing
Single family	Single family	446,134		471,469		3,984		515,390		615,216		7,022

Other (2)	Other (2)	2,487,943		2,934,260		60,638		2,155,691		2,667,780		61,977
Other (2)
Other (2)
Total	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 commercial development, agriculture real estate, hotels, self-storage, ~~senior housing,~~ land development, religion, and mixed-use properties.

The mix of properties securing the loans in our commercial real estate portfolio is balanced between owner-occupied and non-owner-occupied categories and is diverse in terms of type and geographic location, generally within the

Company’s primary market area. Approximately 28% of the commercial real estate portfolio is owner-occupied as of March 31, 2024, compared to 25% at December 31, 2023.

The Company actively reviews its broader loan portfolio in the normal course of business and has performed a targeted review of contractual maturities in its non-owner-occupied commercial real estate portfolio as part of its response to current market conditions to identify exposure to credit risk associated with renewals. At March 31, 2024, the Company held $430.2 million of non-owner-occupied commercial real estate loans, or 1.3% of total loans, that mature within 18 months with an interest rate below 4%.

Residential Real Estate Loans

At ~~September 30, 2023,~~March 31, 2024, residential real estate loans held in our loan portfolio were $6.7 billion, ~~an increase~~a decrease of ~~$235.8~~$38.1 million compared to December 31, ~~2022. Future~~2023. Changes in interest rates may impact the number of refinancings and new originations of residential real estate loans. If interest rates decrease in the future, there may be an increase in refinancings and new originations of residential real estate loans. Conversely, future increases in interest rates ~~could~~may 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 $65.3~~increased $20.1 million to ~~$2.6~~$2.7 billion at ~~September 30, 2023~~March 31, 2024 compared to December 31, ~~2022~~2023 reflecting ~~lower direct~~higher indirect 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)	September 30, 2023		December 31, 2022		$ Change		% Change		(dollars in thousands)	March 31, 2024					December 31, 2023					$ Change			% Change
Deposits:	Deposits:
Noninterest-bearing demand	Noninterest-bearing demand	$	10,091,352	$	11,930,798	$	(1,839,446)	(15)	%
Noninterest-bearing demand
Noninterest-bearing demand											$	9,257,709				$	9,664,247				$	(406,538)		(4.2)		%
Interest-bearing:	Interest-bearing:
Checking and NOW
Checking and NOW
Checking and NOW	Checking and NOW	7,495,417		8,340,955		(845,538)		(10)	%	7,236,667			7,331,487		7,331,487			(94,820)			(94,820)			(1.3)	(1.3)	%
Savings	Savings	5,296,985		6,326,158		(1,029,173)		(16)	%	Savings	5,020,095			5,099,186			5,099,186			(79,091)			(79,091)			(1.6)	(1.6)	%
Money market	Money market	8,793,218		5,389,139		3,404,079		63	%	Money market	10,234,113			9,561,116			9,561,116			672,997			672,997			7.0	7.0	%
Time deposits	Time deposits	5,575,704		3,013,780		2,561,924		85	%	Time deposits	5,950,834			5,579,144			5,579,144			371,690			371,690			6.7	6.7	%
Total deposits	Total deposits	37,252,676		35,000,830		2,251,846		6	%	Total deposits	37,699,418			37,235,180			37,235,180			464,238			464,238			1.2	1.2	%
Wholesale borrowings:	Wholesale borrowings:
Federal funds purchased and interbank borrowings	Federal funds purchased and interbank borrowings	918		581,489		(580,571)		(100)	%
Federal funds purchased and interbank borrowings
Federal funds purchased and interbank borrowings											50,416					390					50,026			N/M
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	279,061		432,804		(153,743)		(36)	%	Securities sold under agreements to repurchase	274,493			285,206			285,206			(10,713)			(10,713)			(3.8)	(3.8)	%
Federal Home Loan Bank advances	Federal Home Loan Bank advances	4,412,576		3,829,018		583,558		15	%	Federal Home Loan Bank advances	4,193,039			4,280,681			4,280,681			(87,642)			(87,642)			(2.0)	(2.0)	%
Other borrowings	Other borrowings	863,455		743,003		120,452		16	%	Other borrowings	813,213			764,870			764,870			48,343			48,343			6.3	6.3	%
Total wholesale borrowings	Total wholesale borrowings	5,556,010		5,586,314		(30,304)		(1)	%	Total wholesale borrowings	5,331,161			5,331,147			5,331,147			14			14			—	—	%
Total funding	Total funding	$	42,808,686	$	40,587,144	$	2,221,542	5	%	Total funding	$	43,030,579		$		$	42,566,327		$		$	464,252		1.1	1.1	%

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 ~~13%~~12% at ~~September 30, 2023~~March 31, 2024, compared to ~~14%~~13% at December 31, ~~2022.~~2023.

Capital

Shareholders’ equity totaled ~~$5.2~~$5.6 billion at ~~September 30, 2023, compared to $5.1 billion at~~both March 31, 2024 and December 31, ~~2022. This increase was driven by retained~~2023. Retained earnings ~~along with changes in unrealized gains (losses) on derivatives. These increases~~ were ~~partially~~ offset by dividends and changes in unrealized gains (losses) on available-for-sale investment securities and derivatives during the ~~repurchase of 1.8 million shares of Common Stock in the nine~~three months ended 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.March 31, 2024.

Capital Adequacy

Old National and the banking industry are subject to various regulatory capital requirements administered by the federal banking agencies. At ~~September 30, 2023,~~March 31, 2024, Old National and its bank subsidiary exceeded the regulatory minimums and Old National Bank met the regulatory definition of “well-capitalized” based on the most recent regulatory definition.

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


	Regulatory Guidelines Minimum
		Regulatory Guidelines Minimum		Prompt Corrective Action "Well Capitalized" Guidelines		September 30, 2023		December 31, 2022
Tier 1 capital to total average assets (leverage ratio)

Tier 1 capital to total average assets (leverage ratio)

Tier 1 capital to total average assets (leverage ratio)	Tier 1 capital to total average assets (leverage ratio)	4.00	%	N/A	%	8.70	%	8.52	%	4.00	%	%	N/A	%	8.96	%	%	8.83	%	%
Common equity Tier 1 capital to risk-weighted total assets	Common equity Tier 1 capital to risk-weighted total assets	7.00		N/A		10.41		10.03
Tier 1 capital to risk-weighted total assets	Tier 1 capital to risk-weighted total assets	8.50		6.00		11.06		10.71
Tier 1 capital to risk-weighted total assets
Tier 1 capital to risk-weighted total assets
Total capital to risk-weighted total assets
Total capital to risk-weighted total assets
Total capital to risk-weighted total assets	Total capital to risk-weighted total assets	10.50		10.00		12.32		12.02
Shareholders’ equity to assets	Shareholders’ equity to assets	N/A		N/A		10.68		10.97
Shareholders’ equity to assets
Shareholders’ equity to assets

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


	Regulatory Guidelines Minimum
		Regulatory Guidelines Minimum		Prompt Corrective Action "Well Capitalized" Guidelines		September 30, 2023		December 31, 2022
Tier 1 capital to total average assets (leverage ratio)

Tier 1 capital to total average assets (leverage ratio)

Tier 1 capital to total average assets (leverage ratio)	Tier 1 capital to total average assets (leverage ratio)	4.00	%	5.00	%	8.84	%	8.47	%	4.00	%	%	5.00	%	%	9.04	%	%	8.99	%	%
Common equity Tier 1 capital to risk-weighted total assets	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		11.26		10.66
Tier 1 capital to risk-weighted total assets
Tier 1 capital to risk-weighted total assets
Total capital to risk-weighted total assets	Total capital to risk-weighted total assets	10.50		10.00		12.00		11.35
Total capital to risk-weighted total assets
Total capital to risk-weighted total assets

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~~2023 Annual Report on Form 10-K.

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Credit Risk

Credit risk represents the risk of loss arising from an obligor’s inability or failure to meet contractual payment or performance terms. Our primary credit risks result from our investment and lending activities.

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 ~~September 30, 2023,~~March 31, 2024, our average commercial loan size was approximately ~~$630,000~~$720,000 and our average commercial real estate loan size was approximately ~~$1,400,000.~~$1,530,000. 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 ~~September 30, 2023,~~March 31, 2024, 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.~~region of the United States.

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


(dollars in thousands)	(dollars in thousands)	September 30, 2023			December 31, 2022
Total nonaccrual loans	Total nonaccrual loans	$	261,346		$	238,178
TDRs still accruing (1)		N/A			15,313
Loans 90 days or more past due and still accruing		1,192			2,650
Total nonaccrual loans
Total nonaccrual loans
Total past due loans (90 days or more and still accruing)
Total past due loans (90 days or more and still accruing)
Total past due loans (90 days or more and still accruing)
Foreclosed assets
Foreclosed assets
Foreclosed assets	Foreclosed assets	9,761			10,845
Total under-performing assets	Total under-performing assets	$	272,299		$	266,986
Classified loans (includes nonaccrual, TDRs still accruing, past due 90 days, and other problem loans) (1)		$	825,965		$	745,485
Other classified assets (2)		48,998			24,735
Total under-performing assets
Total under-performing assets
Classified loans (includes nonaccrual, past due 90 days, and other problem loans)
Classified loans (includes nonaccrual, past due 90 days, and other problem loans)
Classified loans (includes nonaccrual, past due 90 days, and other problem loans)
Other classified assets (1)
Other classified assets (1)
Other classified assets (1)
Criticized loans
Criticized loans
Criticized loans	Criticized loans	775,526			636,069
Total criticized and classified assets	Total criticized and classified assets	$	1,650,489		$	1,406,289
Total criticized and classified assets
Total criticized and classified assets
Asset Quality Ratios:	Asset Quality Ratios:
Nonaccrual loans/total loans (3)		0.80		%	0.77		%
Non-performing loans/total loans (3) (4)		0.80			0.81
Under-performing assets/total loans (3)		0.84			0.86
Asset Quality Ratios:
Asset Quality Ratios:
Nonaccrual loans/total loans (2)
Nonaccrual loans/total loans (2)
Nonaccrual loans/total loans (2)								0.98	%	0.83	%

Under-performing assets/total loans (2)
Under-performing assets/total loans (2)
Under-performing assets/total loans (2)
Under-performing assets/total assets
Under-performing assets/total assets
Under-performing assets/total assets	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	111.64			113.74
Allowance for credit losses on loans/under-performing assets
Allowance for credit losses on loans/under-performing assets
Allowance for credit losses on loans/nonaccrual loans	Allowance for credit losses on loans/nonaccrual loans	116.31			127.50
Allowance for credit losses on loans/nonaccrual loans
Allowance for credit losses on loans/nonaccrual loans

(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)~~(2)Loans exclude loans 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 ~~$272.3~~$340.2 million at ~~September 30, 2023,~~March 31, 2024, compared to ~~$267.0~~$285.2 million at December 31, ~~2022.~~2023. Under-performing assets as a percentage of total loans at ~~September 30, 2023~~March 31, 2024 were ~~0.84%~~1.01%, a 215 basis point ~~decrease~~increase from 0.86% at December 31, ~~2022.~~2023.

Nonaccrual loans increased ~~$23.2~~$53.8 million from December 31, ~~2022~~2023 to ~~September 30, 2023~~March 31, 2024 reflecting ~~PCD loan~~the migration ~~in the~~of certain commercial ~~real estate portfolio.~~credits as they progress to resolution. As a percentage of nonaccrual loans, the allowance for credit losses on loans was ~~116.31%~~97.28% at ~~September 30, 2023,~~March 31, 2024, compared to ~~127.50%~~111.93% at December 31, ~~2022.~~2023.

Total criticized and classified assets were ~~$1.7~~$1.8 billion at ~~September 30, 2023,~~March 31, 2024, an increase of ~~$244.2~~$70.8 million from December 31, ~~2022~~2023 primarily due to higher criticized and classified commercial real estate loans. Other classified assets include investment securities that fell below investment grade rating totaling ~~$49.0~~$54.4 million at ~~September 30, 2023,~~March 31, 2024, compared to ~~$24.7~~$48.9 million at December 31, ~~2022.~~

2023.

Allowance for Credit Losses on Loans and Unfunded Commitments

Net charge-offs on loans totaled ~~$19.7~~$11.8 million during the three months ended ~~September 30, 2023,~~March 31, 2024, compared to ~~$7.6~~$16.4 million for the same period in ~~2022.~~2023. Annualized, net charge-offs to average loans were ~~0.24%~~0.14% for the three months ended ~~September 30, 2023,~~March 31, 2024, compared to ~~0.10%~~0.21% for the same period in ~~2022.~~2023. The three months ended ~~September 30, 2023~~March 31, 2024 included net ~~recoveries~~charge-offs on PCD loans totaling ~~$0.5~~$5.7 million, or ~~(0.01)%~~0.07% on an annualized basis of average loans,

compared to net charge-offs on PCD loans totaling ~~$6.2~~$12.4 million, or ~~0.08%~~0.16% on an annualized basis of average loans for the ~~three months ended September 30, 2022. Net charge-offs on loans totaled $46.2 million during the nine months ended September 30, 2023, compared to $12.1 million for the~~ same period in 2022. Annualized, net charge-offs to average loans were 0.19% for the nine months ended September 30, 2023, compared to 0.06% for the same period in 2022. The nine months ended September 30, 2023 included net charge-offs on PCD loans totaling $17.3 million, or 0.07% on an annualized basis of average 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.2023.

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 ~~$304.0~~$319.7 million at ~~September 30, 2023,~~March 31, 2024, compared to ~~$303.7~~$307.6 million at December 31, ~~2022.~~2023. 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 ~~$33.0~~$26.3 million at ~~September 30, 2023,~~March 31, 2024, compared to ~~$32.2~~$31.2 million at December 31, ~~2022.~~

2023.

See the section entitled “Risk Factors” in the Company’s ~~2022~~2023 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.~~scenario over a two-year cumulative horizon resulting from an immediate change in interest rates using multiple rate scenarios. 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. Due to the dynamics of future interest rate expectations, we also measure and monitor interest rate risk using the forward curve, which may be a more probable scenario of our interest rate exposure. The forward curve represents the relationship between the price of forward contracts and the time to maturity of the forward contracts at a point in time. Presentation of the forward curve model is included in the following table as of March 31, 2024.

7161

The following table illustrates our projected net interest income sensitivity over a two-year cumulative horizon based on the asset/liability model at ~~September 30, 2023~~March 31, 2024 and ~~2022:~~2023:


		Immediate Rate Decrease											Immediate Rate Increase
	Immediate Rate Decrease																													Immediate Rate Decrease				March 31, 2024 Forward Curve					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
September 30, 2023
March 31, 2024
Projected interest income:	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
Money market, other interest earning investments, and investment securities	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	2,966,315			3,323,529			3,684,648			4,040,544		4,393,546			4,747,308			5,100,845
Total interest income	Total interest income	3,688,789			4,100,725			4,519,331			4,930,928		5,352,068			5,773,747			6,194,908
Projected interest expense:	Projected interest expense:
Deposits
Deposits
Deposits	Deposits	528,719			785,519			1,047,596			1,279,764		1,547,400			1,826,990			2,100,598
Borrowings	Borrowings	366,090			432,424			521,008			598,589		676,220			753,909			831,590
Total interest expense	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	$	2,793,980		$	2,882,782		$	2,950,727		$	3,052,575	$	3,128,448		$	3,192,848		$	3,262,720
Change from base	Change from base	$	(258,595)		$	(169,793)		$	(101,848)				$	75,873		$	140,273		$	210,145
% change from base	% change from base	(8.47)		%	(5.56)		%	(3.34)		%			2.49		%	4.60		%	6.88		%	% change from base	(4.47)	%	(3.12)	%	(1.61)	%	0.28	%			1.07	%	1.66	%	2.37	%

								Immediate Rate Decrease					Immediate Rate Increase
								-50 Basis Points			Base		+100 Basis Points			+200 Basis Points			+300 Basis Points
September 30, 2022
		Immediate Rate Decrease
		Immediate Rate Decrease
		Immediate Rate Decrease
		-300 Basis Points
		-300 Basis Points
		-300 Basis Points
March 31, 2023
March 31, 2023
March 31, 2023
Projected interest income:
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							$	660,169		$	680,882	$	721,850		$	762,793		$	803,703
Money market, other interest earning investments, and investment securities
Money market, other interest earning investments, and investment securities
Loans
Loans
Loans	Loans							2,715,952			2,885,275		3,225,849			3,560,475			3,894,295
Total interest income	Total interest income							3,376,121			3,566,157		3,947,699			4,323,268			4,697,998
Total interest income
Total interest income
Projected interest expense:
Projected interest expense:
Projected interest expense:	Projected interest expense:
Deposits	Deposits							106,667			166,603		372,461			578,311			784,154
Deposits
Deposits
Borrowings
Borrowings
Borrowings	Borrowings							263,032			286,909		337,834			388,779			439,751
Total interest expense	Total interest expense							369,699			453,512		710,295			967,090			1,223,905
Total interest expense
Total interest expense
Net interest income
Net interest income
Net interest income	Net interest income							$	3,006,422		$	3,112,645	$	3,237,404		$	3,356,178		$	3,474,093
Change from base	Change from base							$	(106,223)				$	124,759		$	243,533		$	361,448
Change from base
Change from base
% change from base	% change from base							(3.41)		%			4.01		%	7.82		%	11.61		%
% change from base
% change from base

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 ~~$25.5 million and $36.1~~$12.4 million at ~~September 30, 2023 and~~ March 31, 2024, compared to a net asset position with a fair value gain of $4.5 million at

December 31, ~~2022, respectively.~~2023. 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, to 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, events at other banking organizations, 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 ~~September 30, 2023.~~March 31, 2024.


(dollars in thousands)	(dollars in thousands)
Maturity Bucket	Maturity Bucket	Amount		Rate
2023		$	1,474,228	3.62	%
Maturity Bucket
Maturity Bucket
2024
2024
2024	2024	3,832,949		4.33		$	4,898,915			4.54	4.54		%	%
2025	2025	151,114		1.66
2026	2026	66,492		0.91
2026
2026
2027	2027	34,479		0.70
2027
2027
2028
2028
2028
2027 and beyond
2027 and beyond
2027 and beyond	2027 and beyond	16,442		1.25
Total	Total	$	5,575,704	4.00	%
Total
Total								$	5,950,834			4.35		%

Our ability to acquire funding at competitive prices is influenced by rating agencies’ views of our credit quality, liquidity, capital, and earnings.

The credit ratings of Old National and Old National Bank at ~~September 30, 2023~~March 31, 2024 are shown in the following table.


	Moody’s Investors Service
	Long-term	Short-term
Old National	Baa1	N/A
Old National Bank	A1	P-1

7363

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 ~~September 30, 2023,~~March 31, 2024, Old National and its subsidiaries had the following availability of liquid funds and borrowings:

(dollars in thousands)

Parent Company

Subsidiaries

(dollars in thousands)

Parent Company

Subsidiaries

Available liquid funds:

Cash and due from banks

1,409,813

253,617

Unencumbered government-issued debt securities

—

297,043

Unencumbered investment grade municipal securities

—

114,908

Unencumbered corporate securities

—

34,618

Availability of borrowings*:

Amount available from Federal Reserve discount window

—

875,670

Amount available from Federal Reserve Bank Term Funding Program

—

2,354,901

Amount available from Federal Reserve discount window

Amount available from Federal Home Loan Bank

—

5,536,299

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 ~~September 30, 2023,~~March 31, 2024, Old National Bancorp’s other borrowings outstanding were ~~$481.0~~$478.5 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~~2023 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.~~2023. 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.~~2023. There have been no material changes in the Company’s application of critical accounting estimates since December 31, ~~2022.~~2023.

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.

7464

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~~the 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.

7565

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.~~2023.

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)
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


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)
01/01/24 - 01/31/24	1,208	$	16.91	—	$	170,476,849
02/01/24 - 02/29/24	229,379	$	16.53	—	$	200,000,000
03/01/24 - 03/31/24	203,382	$	16.56	—	$	200,000,000
Total	433,969	$	16.55	—	$	200,000,000

(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.~~stock or performance shares earned.

(2)On February ~~22, 2023,~~21, 2024, the ~~Company issued a press release announcing that its~~Company’s Board of Directors approved a stock repurchase program, ~~that authorizes~~under which the Company is authorized to repurchase up to $200 million of ~~the Company’s~~its outstanding ~~shares of~~ common stock ~~as conditions warrant,~~ through February 28, 2025. This stock repurchase program replaced the prior $200 million program that expired on 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 ~~September 30, 2023,~~March 31, 2024, 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.

7666

ITEM 6. EXHIBITS


Exhibit No.						Description



2.1						Agreement and Plan of Merger dated as of October 26, 2023 by and between Old National and CapStar Financial Holdings, Inc. (the schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K) (incorporated by reference to Exhibit 2.1 of Old National’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 31, 2023).


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~~February 21, 2024 (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~~3.1 of Old National’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February ~~16, 2022)~~27, 2024).







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 ~~September 30, 2023,~~March 31, 2024, 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 ~~September 30, 2023,~~March 31, 2024, formatted in inline XBRL and contained in Exhibit 101.

7767

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~~John V. Moran, IV
						~~Brendon B. Falconer~~John V. Moran, IV
						~~Senior~~ Executive Vice President, Interim Chief Financial Officer, and Chief ~~Financial~~Strategy Officer
						Duly Authorized Officer and Principal Financial Officer

						Date: ~~November~~May 1, ~~2023~~2024

7868


	Balance Sheet Line Item		Portfolio Segment Reclassifications		After Reclassifications

(dollars in thousands)
September 30, 2023
Loans:
Commercial	$	9,333,448	$	(226,353)	$	9,107,095
Commercial real estate	13,916,221		(165,593)		13,750,628
BBCC	N/A		391,946		391,946
Residential real estate	6,696,288		—		6,696,288
Consumer	2,631,877		(2,631,877)		N/A
Indirect	N/A		1,047,224		1,047,224
Direct	N/A		542,689		542,689
Home equity	N/A		1,041,964		1,041,964
Total	$	32,577,834	$	—	$	32,577,834

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


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


	Nine Months Ended September 30,
(dollars and shares in thousands, except per share data)	2023			2022
Income Statement:
Net interest income	$	1,138,745		$	936,846
Taxable equivalent adjustment (1) (4)	17,328			13,036
Net interest income - taxable equivalent basis (4)	1,156,073			949,882
Provision for credit losses (2)	47,292			133,391
Noninterest income	233,248			234,742
Noninterest expense (2)	742,071			755,508
Net income available to common shareholders	$	437,411		$	217,468
Per Common Share Data:
Weighted average diluted common shares	291,809			271,123
Net income (diluted)	$	1.50		$	0.80
Cash dividends	0.42			0.42
Common dividend payout ratio (3)	28		%	53		%
Book value	$	17.07		$	16.05
Stock price	14.54			16.47
Tangible common book value (4)	9.87			8.75
Performance Ratios:
Return on average assets	1.25		%	0.72		%
Return on average common equity	11.66			6.26
Return on tangible common equity (4)	20.82			12.05
Return on average tangible common equity (4)	20.85			11.50
Net interest margin (4)	3.59			3.34
Efficiency ratio (4)	51.89			62.17
Efficiency ratio (prior presentation) (5)	N/A			63.46
Net charge-offs (recoveries) to average loans	0.19			0.06
Allowance for credit losses on loans to ending loans	0.93			0.99
Allowance for credit losses (6) to ending loans	1.03			1.08
Non-performing loans to ending loans	0.80			0.81
Balance Sheet:
Total loans	$	32,577,834		$	30,528,933
Total assets	49,059,448			46,215,526
Total deposits	37,252,676			36,053,663
Total borrowed funds	5,556,010			4,264,750
Total shareholders’ equity	5,239,537			4,943,383
Capital Ratios:
Risk-based capital ratios:
Tier 1 common equity	10.41		%	9.88		%
Tier 1	11.06			10.58
Total	12.32			11.84
Leverage ratio (to average assets)	8.70			8.26
Total equity to assets (averages)	10.95			11.43
Tangible common equity to tangible assets (4)	6.15			5.82
Nonfinancial Data:
Full-time equivalent employees	3,981			4,008
Banking centers	257			263