| Loans and Allowance for Credit Losses | LOANS AND ALLOWANCE FOR CREDIT LOSSES Loans Old National’s loans consist primarily of loans made to consumers and commercial clients in many diverse industries, including real estate rental and leasing, manufacturing, healthcare, wholesale trade, construction, and agriculture, among others. Most of Old National’s lending activity occurs within our principal geographic markets in the Midwest region. Old National manages concentrations of credit exposure by industry, product, geography, client relationship, and loan size. 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 Portfolio After (dollars in thousands) March 31, 2023 Loans: Commercial $ 9,751,875 $ (213,187) $ 9,538,688 Commercial real estate 12,908,380 (160,041) 12,748,339 BBCC N/A 373,228 373,228 Residential real estate 6,568,666 — 6,568,666 Consumer 2,593,453 (2,593,453) N/A Indirect N/A 1,003,287 1,003,287 Direct N/A 580,726 580,726 Home equity N/A 1,009,440 1,009,440 Total $ 31,822,374 $ — $ 31,822,374 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: (dollars in thousands) March 31, December 31, Commercial (1) $ 9,538,688 $ 9,298,624 Commercial real estate 12,748,339 12,298,748 BBCC 373,228 368,602 Residential real estate 6,568,666 6,460,441 Indirect 1,003,287 1,034,257 Direct 580,726 629,186 Home equity 1,009,440 1,033,783 Total loans 31,822,374 31,123,641 Allowance for credit losses on loans (298,711) (303,671) Net loans $ 31,523,663 $ 30,819,970 (1) Includes direct finance leases of $178.7 million at March 31, 2023 and $188.1 million at December 31, 2022. The risk characteristics of each loan portfolio segment are as follows: Commercial Commercial loans are classified primarily on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee; however, some loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its clients. Commercial Real Estate Commercial real estate loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts, and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be adversely affected by conditions in the real estate markets or in the general economy. The properties securing Old National’s commercial real estate portfolio are diverse in terms of type and geographic location. Management monitors and evaluates commercial real estate loans based on collateral, geography, and risk grade criteria. In addition, management tracks the level of owner-occupied commercial real estate loans versus non-owner occupied loans. Included with commercial real estate are construction loans, which are underwritten utilizing independent appraisal reviews, sensitivity analysis of absorption and lease rates, financial analysis of the developers and property owners, and feasibility studies, if available. Construction loans are generally based on estimates of costs and value associated with the complete project. These estimates may be inaccurate. Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders (including Old National), sales of developed property, or an interim loan commitment from Old National until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions, and the availability of long-term financing. At 234%, Old National Bank’s commercial real estate loans as a percentage of its risk-based capital remained below the regulatory guideline limit of 300% at March 31, 2023. BBCC BBCC loans are typically granted to small businesses with gross revenues of less than $5 million and aggregate debt of less than $1 million. Old National has established minimum debt service coverage ratios, minimum FICO scores for owners and guarantors, and the ability to show relatively stable earnings as criteria to help mitigate risk. Repayment of these loans depends on the personal income of the borrowers and the cash flows of the business. These factors can be affected by factors such as changes in economic conditions and unemployment levels. Residential With respect to residential loans that are secured by 1 - 4 family residences and are generally owner occupied, Old National typically establishes a maximum loan-to-value ratio and generally requires private mortgage insurance if that ratio is exceeded. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Repayment can also be impacted by changes in residential property values. Portfolio risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers. Indirect Indirect loans are secured by automobile collateral, generally new and used cars and trucks from auto dealers that operate within our footprint. Old National typically mitigates the risk of indirect loans by establishing minimum FICO scores, maximum loan-to-value ratios, and maximum debt-to-income ratios. Repayment of these loans depends largely on the personal income of the borrowers, which can be affected by changes in economic conditions such as unemployment levels. Portfolio risk is mitigated by the fact that the loans are of smaller amounts spread over many borrowers, conservative credit policies, and ongoing reviews of dealer relationships. Direct Direct loans are typically secured by collateral such as auto or real estate or are unsecured. Old National has established conservative underwriting standards such as minimum FICO scores, maximum loan-to-value ratios, and maximum debt-to-income ratios. Repayment of these loans depends largely on the personal income of the borrowers, which can be affected by changes in economic conditions such as unemployment levels. Portfolio risk is mitigated by the fact that the loans are of smaller amounts spread over many borrowers along with conservative credit policies. Home Equity Home equity loans are generally secured by 1 - 4 family residences that are owner occupied. Old National has established conservative underwriting standards such as minimum FICO scores, maximum loan-to-value ratios, and maximum debt-to-income ratios. Repayment of these loans depends largely on the personal income of the borrowers, which can be affected by changes in economic conditions such as unemployment levels. Portfolio risk is mitigated by the fact that the loans are of smaller amounts spread over many borrowers, along with conservative credit policies as well as monitoring of updated borrower credit scores. Allowance for Credit Losses Loans Credit quality within the loans held for investment portfolio is continuously monitored by management and is reflected within the allowance for credit losses on loans. The allowance for credit losses is an estimate of expected losses inherent within the Company’s loans held for investment portfolio. Credit quality is assessed and monitored by evaluating various attributes and the results of those evaluations are utilized in underwriting new loans and in our process for estimating expected credit losses. Expected credit loss inherent in non-cancelable off-balance-sheet credit exposures is accounted for as a separate liability included in other liabilities on the balance sheet. The allowance for credit losses on loans held for investment is adjusted by a credit loss expense, which is reported in earnings, and reduced by the charge-off of loan amounts, net of recoveries. Old National has made a policy election to report accrued interest receivable as a separate line item on the balance sheet. Accrued interest receivable on loans is excluded from the estimate of credit losses and totaled $144.1 million at March 31, 2023 and $137.7 million at December 31, 2022. The allowance for credit loss estimation process involves procedures to appropriately consider the unique characteristics of our loan portfolio segments. These segments are further disaggregated into loan classes based on the level at which credit risk is monitored. When computing the level of expected credit losses, credit loss assumptions are estimated using a model that categorizes loan pools based on loss history, delinquency status, and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future. Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. In future periods, evaluations of the overall loan portfolio, in light of the factors and forecasts then prevailing, may result in significant changes in the allowance and credit loss expense in those future periods. The allowance level is influenced by loan volumes, loan AQR migration or delinquency status, changes in historical loss experience, and other conditions influencing loss expectations, such as reasonable and supportable forecasts of economic conditions. The methodology for estimating the amount of expected credit losses reported in the allowance for credit losses has two basic components: first, an asset-specific component involving individual loans that do not share risk characteristics with other loans and the measurement of expected credit losses for such individual loans; and second, a pooled component for estimated expected credit losses for pools of loans that share similar risk characteristics. The base forecast scenario considers unemployment, gross domestic product, and the BBB ratio (BBB spread to the 10-year U.S. Treasury rate). In addition to the quantitative inputs, several qualitative factors are considered. These factors include the risk that unemployment, gross domestic product, housing product index, and the BBB ratio prove to be more severe and/or prolonged than our baseline forecast due to a variety of factors including monetary actions to control inflation, recent instability in the banking sector, conflict in Ukraine, and global supply chain issues. Old National’s activity in the allowance for credit losses on loans by portfolio segment was as follows: (dollars in thousands) Balance at Allowance Charge-offs Recoveries Provision Balance at Three Months Ended Commercial $ 120,612 $ — $ (12,423) $ 283 $ 17,296 $ 125,768 Commercial real estate 138,244 — (1,189) 263 (1,970) 135,348 BBCC 2,431 — (28) 73 (160) 2,316 Residential real estate 21,916 — (23) 72 (1,758) 20,207 Indirect 1,532 — (1,197) 412 687 1,434 Direct 12,116 — (3,238) 581 (2,693) 6,766 Home equity 6,820 — (82) 67 67 6,872 Total $ 303,671 $ — $ (18,180) $ 1,751 $ 11,469 $ 298,711 Three Months Ended Commercial $ 27,232 $ 35,040 $ (1,880) $ 325 $ 38,754 $ 99,471 Commercial real estate 64,004 42,601 (507) 182 34,210 140,490 BBCC 2,458 — (28) 57 (418) 2,069 Residential real estate 9,347 136 (185) 440 7,514 17,252 Indirect 1,743 — (483) 222 166 1,648 Direct 528 31 (1,530) 582 14,839 14,450 Home equity 2,029 723 (51) 82 2,344 5,127 Total $ 107,341 $ 78,531 $ (4,664) $ 1,890 $ 97,409 $ 280,507 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 (dollars in thousands) 2023 2022 Allowance for credit losses on unfunded loan commitments: Balance at beginning of period $ 32,188 $ 10,879 Provision for credit losses on unfunded commitments — 11,013 Provision for unfunded loan commitments 1,968 154 Balance at end of period $ 34,156 $ 22,046 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. The following table summarizes the amortized cost of term loans by risk category and gross charge-offs of commercial, commercial real estate, and BBCC loans by loan portfolio segment, class of loan, and origination year: Origination Year Revolving to Term (dollars in thousands) 2023 2022 2021 2020 2019 Prior Revolving Total March 31, 2023 Commercial: Risk Rating: Pass $ 673,613 $ 2,299,378 $ 1,517,883 $ 712,011 $ 629,196 $ 694,970 $ 2,041,109 $ 433,838 $ 9,001,998 Criticized 24,476 38,369 26,289 52,907 31,378 6,538 56,784 10,792 247,533 Classified: Substandard 5,879 16,596 75,646 15,505 21,896 3,401 40,883 47,187 226,993 Nonaccrual — — 1,462 2,049 1,468 — 6,436 5,172 16,587 Doubtful — 20,828 11,687 3,633 73 9,356 — — 45,577 Total $ 703,968 $ 2,375,171 $ 1,632,967 $ 786,105 $ 684,011 $ 714,265 $ 2,145,212 $ 496,989 $ 9,538,688 Gross charge-offs $ — $ — $ 5,230 $ — $ 6,789 $ 239 $ 165 $ — $ 12,423 Commercial real estate: Risk Rating: Pass $ 600,890 $ 3,129,239 $ 2,833,471 $ 1,942,417 $ 1,171,555 $ 1,560,183 $ 74,982 $ 643,987 $ 11,956,724 Criticized 217 56,997 40,407 22,202 70,931 105,130 — 42,466 338,350 Classified: Substandard 8,653 89,716 22,101 20,207 98,147 82,928 — 18,138 339,890 Nonaccrual — 648 9,785 4,879 — 21,708 — 3,151 40,171 Doubtful — 2,627 35,723 9,919 4,507 20,428 — — 73,204 Total $ 609,760 $ 3,279,227 $ 2,941,487 $ 1,999,624 $ 1,345,140 $ 1,790,377 $ 74,982 $ 707,742 $ 12,748,339 Gross charge-offs $ — $ 54 $ 735 $ 400 $ — $ — $ — $ — $ 1,189 BBCC: Risk Rating: Pass $ 25,194 $ 86,881 $ 59,220 $ 48,866 $ 35,291 $ 27,217 $ 59,846 $ 17,644 $ 360,159 Criticized 50 1,843 479 265 1,023 57 2,047 1,660 7,424 Classified: Substandard 10 986 641 33 415 — 603 658 3,346 Nonaccrual — 39 36 130 — 626 — 836 1,667 Doubtful — 39 73 276 108 136 — — 632 Total $ 25,254 $ 89,788 $ 60,449 $ 49,570 $ 36,837 $ 28,036 $ 62,496 $ 20,798 $ 373,228 Gross charge-offs $ — $ — $ 28 $ — $ — $ — $ — $ — $ 28 Origination Year Revolving to Term (dollars in thousands) 2022 2021 2020 2019 2018 Prior Revolving Total December 31, 2022 Commercial: Risk Rating: Pass $ 2,388,618 $ 1,754,364 $ 796,340 $ 738,208 $ 362,986 $ 388,617 $ 1,988,763 $ 329,119 $ 8,747,015 Criticized 40,856 30,661 63,557 33,490 9,195 5,312 61,036 4,327 248,434 Classified: Substandard 37,223 47,522 16,540 22,925 4,844 21,204 67,402 25,143 242,803 Nonaccrual 3,627 1,453 566 — — — 1,634 6,623 13,903 Doubtful 2,821 17,604 3,720 8,005 5,968 8,351 — — 46,469 Total $ 2,473,145 $ 1,851,604 $ 880,723 $ 802,628 $ 382,993 $ 423,484 $ 2,118,835 $ 365,212 $ 9,298,624 Commercial real estate: Risk Rating: Pass $ 3,066,960 $ 2,828,758 $ 1,989,000 $ 1,219,025 $ 675,572 $ 1,018,719 $ 57,818 $ 689,553 $ 11,545,405 Criticized 75,306 34,422 22,569 82,637 86,504 56,864 — 23,282 381,584 Classified: Substandard 46,231 16,928 24,319 78,468 57,824 21,591 — 4,108 249,469 Nonaccrual 3,151 9,541 5,014 — 2,312 22,155 — 3,257 45,430 Doubtful 1,934 38,386 10,011 4,605 1,523 20,401 — — 76,860 Total $ 3,193,582 $ 2,928,035 $ 2,050,913 $ 1,384,735 $ 823,735 $ 1,139,730 $ 57,818 $ 720,200 $ 12,298,748 BBCC: Risk Rating: Pass $ 90,341 $ 64,161 $ 52,304 $ 36,868 $ 23,618 $ 11,333 $ 60,016 $ 18,881 $ 357,522 Criticized 1,504 525 368 692 353 — 1,006 1,603 6,051 Classified: Substandard 811 143 — 421 — — 543 682 2,600 Nonaccrual 42 37 118 — 429 284 — 639 1,549 Doubtful 40 107 439 157 64 73 — — 880 Total $ 92,738 $ 64,973 $ 53,229 $ 38,138 $ 24,464 $ 11,690 $ 61,565 $ 21,805 $ 368,602 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 (dollars in thousands) 2023 2022 2021 2020 2019 Prior Revolving Total March 31, 2023 Residential real estate: Risk Rating: Performing $ 92,032 $ 1,419,736 $ 1,975,809 $ 1,749,348 $ 472,547 $ 823,622 $ — $ 84 $ 6,533,178 Nonperforming — 1,272 2,373 2,421 2,796 26,620 — 6 35,488 Total $ 92,032 $ 1,421,008 $ 1,978,182 $ 1,751,769 $ 475,343 $ 850,242 $ — $ 90 $ 6,568,666 Gross charge-offs $ — $ — $ — $ — $ — $ 23 $ — $ — $ 23 Indirect: Risk Rating: Performing $ 74,980 $ 465,805 $ 225,377 $ 126,788 $ 69,147 $ 37,704 $ — $ 58 $ 999,859 Nonperforming — 505 1,286 627 467 543 — — 3,428 Total $ 74,980 $ 466,310 $ 226,663 $ 127,415 $ 69,614 $ 38,247 $ — $ 58 $ 1,003,287 Gross charge-offs $ — $ 514 $ 430 $ 93 $ 111 $ 49 $ — $ — $ 1,197 Direct: Risk Rating: Performing $ 27,097 $ 121,525 $ 141,746 $ 68,407 $ 48,981 $ 92,285 $ 74,520 $ 2,118 $ 576,679 Nonperforming — 401 554 580 636 1,863 7 6 4,047 Total $ 27,097 $ 121,926 $ 142,300 $ 68,987 $ 49,617 $ 94,148 $ 74,527 $ 2,124 $ 580,726 Gross charge-offs $ — $ 471 $ 794 $ 286 $ 327 $ 195 $ 1,165 $ — $ 3,238 Home equity: Risk Rating: Performing $ — $ 1,273 $ 876 $ 1,382 $ 1,068 $ 7,938 $ 962,911 $ 20,456 $ 995,904 Nonperforming — 162 133 161 930 5,470 1,924 4,756 13,536 Total $ — $ 1,435 $ 1,009 $ 1,543 $ 1,998 $ 13,408 $ 964,835 $ 25,212 $ 1,009,440 Gross charge-offs $ — $ — $ — $ — $ — $ 82 $ — $ — $ 82 Origination Year Revolving to Term 2022 2021 2020 2019 2018 Prior Revolving Total December 31, 2022 Residential real estate: Risk Rating: Performing $ 1,327,168 $ 1,945,792 $ 1,825,762 $ 478,529 $ 136,260 $ 712,175 $ 7 $ 88 $ 6,425,781 Nonperforming 59 529 861 873 1,826 30,512 — — 34,660 Total $ 1,327,227 $ 1,946,321 $ 1,826,623 $ 479,402 $ 138,086 $ 742,687 $ 7 $ 88 $ 6,460,441 Indirect: Risk Rating: Performing $ 504,410 $ 249,407 $ 144,265 $ 82,304 $ 31,484 $ 19,095 $ — $ 62 $ 1,031,027 Nonperforming 348 1,074 645 531 304 328 — — 3,230 Total $ 504,758 $ 250,481 $ 144,910 $ 82,835 $ 31,788 $ 19,423 $ — $ 62 $ 1,034,257 Direct: Risk Rating: Performing $ 132,934 $ 164,126 $ 77,406 $ 57,919 $ 45,299 $ 59,212 $ 87,622 $ 671 $ 625,189 Nonperforming 115 851 614 205 327 1,526 5 354 3,997 Total $ 133,049 $ 164,977 $ 78,020 $ 58,124 $ 45,626 $ 60,738 $ 87,627 $ 1,025 $ 629,186 Home equity: Risk Rating: Performing $ 919 $ 896 $ 1,849 $ 1,497 $ 983 $ 11,646 $ 990,001 $ 14,792 $ 1,022,583 Nonperforming 166 160 166 446 794 4,308 1,698 3,462 11,200 Total $ 1,085 $ 1,056 $ 2,015 $ 1,943 $ 1,777 $ 15,954 $ 991,699 $ 18,254 $ 1,033,783 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 60-89 Days Past Due Total Current Total March 31, 2023 Commercial $ 8,463 $ 3,397 $ 9,333 $ 21,193 $ 9,517,495 $ 9,538,688 Commercial real estate 14,648 256 26,659 41,563 12,706,776 12,748,339 BBCC 1,618 552 430 2,600 370,628 373,228 Residential 19,495 310 9,725 29,530 6,539,136 6,568,666 Indirect 4,229 1,141 511 5,881 997,406 1,003,287 Direct 3,759 955 1,511 6,225 574,501 580,726 Home equity 6,279 1,923 4,802 13,004 996,436 1,009,440 Total $ 58,491 $ 8,534 $ 52,971 $ 119,996 $ 31,702,378 $ 31,822,374 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 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: March 31, 2023 December 31, 2022 (dollars in thousands) Nonaccrual Nonaccrual Past Due Nonaccrual Nonaccrual Past Due Commercial $ 62,164 $ 14,695 $ — $ 60,372 $ 7,873 $ 152 Commercial real estate 113,375 36,495 — 122,290 33,445 — BBCC 2,299 — — 2,429 — — Residential 35,488 — 1,070 34,660 — 1,808 Indirect 3,428 — — 3,230 — 28 Direct 4,047 — 119 3,997 — 133 Home equity 13,536 — 42 11,200 — 529 Total $ 234,337 $ 51,190 $ 1,231 $ 238,178 $ 41,318 $ 2,650 Interest income recognized on nonaccrual loans was insignificant during the three months ended March 31, 2023 and 2022. When management determines that foreclosure is probable, expected credit losses for collateral dependent loans are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. A loan is considered collateral dependent when the borrower is experiencing financial difficulty and the loan is expected to be repaid substantially through the operation or sale of the collateral. The class of loan represents the primary collateral type associated with the loan. Significant quarter-over-quarter changes are reflective of changes in nonaccrual status and not necessarily associated with credit quality indicators like appraisal value. The following table presents the amortized cost basis of collateral dependent loans by class of loan: Type of Collateral (dollars in thousands) Real Blanket Investment Auto Other March 31, 2023 Commercial $ 13,899 $ 41,674 $ 2,219 $ 1,103 $ 124 Commercial real estate 100,490 — 1,661 — 6,334 BBCC 1,823 464 — 12 — Residential 35,488 — — — — Indirect — — — 3,428 — Direct 2,961 2 — 253 34 Home equity 13,536 — — — Total loans $ 168,197 $ 42,140 $ 3,880 $ 4,796 $ 6,492 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 March 31, 2023, these loans totaled $2.6 billion, of which $1.2 billion had been sold to other financial institutions and $1.4 billion was retained by Old National. The loan participations convey proportionate ownership rights with equal priority to each participating interest holder; involve no recourse (other than ordinary representations and warranties) to, or subordination by, any participating interest holder; all cash flows are divided among the participating interest holders in proportion to each holder’s share of ownership; and no holder has the right to pledge the entire financial asset unless all participating interest holders agree. 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 loans with modifications to borrowers experiencing financial difficulty during the three months ended March 31, 2023 by class of loans and type of modification: (dollars in thousands) Term Total Commercial $ 17,342 0.2 % Commercial real estate 9,926 0.1 % Total $ 27,268 0.1 % Old National closely monitors the performance of loan modifications to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance of loans that have been modified during the three months ended March 31, 2023: (dollars in thousands) 30-59 Days 60-89 Days Past Due Total Current Total March 31, 2023 Commercial $ — $ 2,637 $ — $ 2,637 $ 14,705 $ 17,342 Commercial real estate — — — — 9,926 9,926 Total $ — $ 2,637 $ — $ 2,637 $ 24,631 $ 27,268 The following table summarizes the nature of the loan modifications to borrowers experiencing financial difficulty during the three months ended March 31, 2023 by class of loans: (dollars in thousands) Weighted- Commercial 6.8 Commercial real estate 4.1 Total 5.6 There were no payment defaults on these loans subsequent to their modifications during the three months ended March 31, 2023. At March 31, 2023, Old National had not committed to lend any material additional funds to the borrowers whose loans were modified due to financial difficulties. |
