ONB 10-Q Quarterly Report Sept. 30, 2024

OLD NATIONAL BANCORP /IN/

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onb-20240930

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, 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

NASDAQ

Global Select Market

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

ONBPP

NASDAQ

Global Select Market

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

ONBPO

NASDAQ

Global Select Market

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 318,972,000 shares outstanding at October 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)		9
	Notes to Consolidated Financial Statements (unaudited)		11
	Note 1.	Basis of Presentation	11
	Note 2.	Recent Accounting Pronouncements	11
	Note 3.	Acquisition and Divestiture Activity	12
	Note 4.	Net Income Per Common Share	14
	Note 5.	Investment Securities	14
	Note 6.	Loans and Allowance for Credit Losses	17
	Note 7.	Leases	29
	Note 8.	Goodwill and Other Intangible Assets	31
	Note 9.	Qualified Affordable Housing Projects and Other Tax Credit Investments	32
	Note 10.	Securities Sold Under Agreements to Repurchase	34
	Note 11.	Federal Home Loan Bank Advances	34
	Note 12.	Other Borrowings	35
	Note 13.	Accumulated Other Comprehensive Income (Loss)	37
	Note 14.	Income Taxes	39
	Note 15.	Derivative Financial Instruments	39
	Note 16.	Commitments, Contingencies, and Financial Guarantees	43
	Note 17.	Fair Value	44
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		50
	Forward-Looking Statements		50
	Financial Highlights		51
	Non-GAAP Financial Measures		53
	Executive Summary		56
	Results of Operations		57
	Financial Condition		63
	Risk Management		68
	Critical Accounting Estimates		74
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		74
Item 4.	Controls and Procedures		75
PART II.	OTHER INFORMATION		76
Item 1A.	Risk Factors		76
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		76
Item 5.	Other Information		76
Item 6.	Exhibits		77
SIGNATURE			78

GLOSSARY OF ABBREVIATIONS AND ACRONYMS

As used in this report, references to “Old National,” “the Company,” “we,” “our,” “us,” and similar terms refer to the consolidated entity consisting of Old National Bancorp and its wholly-owned subsidiaries. Old National Bancorp refers solely to the parent holding company, and Old National Bank refers to Old National Bancorp’s 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

GAAP: U.S. generally accepted accounting principles

LGD: loss given default

LIBOR: London Interbank Offered Rate

LIHTC: Low Income Housing Tax Credit

N/A: not applicable

N/M: not meaningful

NASDAQ: NASDAQ Global Select Market

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

OLD NATIONAL BANCORP

CONSOLIDATED BALANCE SHEETS


(dollars and shares in thousands, except per share data)	September 30, 2024		December 31, 2023
	(unaudited)
Assets
Cash and due from banks	$	498,120	$	430,866
Money market and other interest-earning investments	693,450		744,192
Total cash and cash equivalents	1,191,570		1,175,058
Equity securities, at fair value	89,249		80,372






Investment securities - available-for-sale, at fair value (amortized cost $ 8,233,232 and $ 7,684,889 , respectively)	7,432,440		6,713,055
Investment securities - held-to-maturity, at amortized cost (fair value $ 2,604,055 and $ 2,601,188 , respectively)	2,969,343		3,013,493
Federal Home Loan Bank/Federal Reserve Bank stock, at cost	378,717		365,588
Loans held-for-sale, at fair value	62,376		32,006
Loans:
Commercial	10,408,095		9,512,230
Commercial real estate	16,356,216		14,140,629
Residential real estate	6,757,896		6,699,443
Consumer	2,878,436		2,639,625
Total loans, net of unearned income	36,400,643		32,991,927
Allowance for credit losses on loans	( 380,840 )		( 307,610 )
Net loans	36,019,803		32,684,317
Premises and equipment, net	599,528		565,396


Goodwill	2,176,999		1,998,716
Other intangible assets	128,085		102,250
Company-owned life insurance	863,723		767,902
Accrued interest receivable and other assets	1,690,460		1,591,683
Total assets	$	53,602,293	$	49,089,836
Liabilities
Deposits:
Noninterest-bearing demand	$	9,429,285	$	9,664,247
Interest-bearing:
Checking and NOW	7,815,463		7,331,487
Savings	4,781,447		5,099,186
Money market	11,663,557		9,561,116
Time deposits	7,155,994		5,579,144
Total deposits	40,845,746		37,235,180
Federal funds purchased and interbank borrowings	135,263		390
Securities sold under agreements to repurchase	244,626		285,206
Federal Home Loan Bank advances	4,471,153		4,280,681
Other borrowings	598,054		764,870

Accrued expenses and other liabilities	940,153		960,609
Total liabilities	47,234,995		43,526,936
Shareholders’ Equity
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, 318,955 and 292,655 shares issued and outstanding, respectively	318,955		292,655
Capital surplus	4,560,576		4,159,924
Retained earnings	1,861,023		1,618,630
Accumulated other comprehensive income (loss), net of tax	( 603,756 )		( 738,809 )
Total shareholders’ equity	6,367,298		5,562,900
Total liabilities and shareholders’ equity	$	53,602,293	$	49,089,836

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,
(dollars and shares in thousands, except per share data)	2024		2023		2024		2023
Interest Income
Loans including fees:
Taxable	$	561,428	$	474,387	$	1,594,411	$	1,334,658
Nontaxable	12,703		11,181		39,048		32,318
Investment securities:
Taxable	83,567		66,924		241,349		191,797
Nontaxable	10,531		10,833		31,769		33,039
Money market and other interest-earning investments	11,696		13,194		32,992		25,258
Total interest income	679,925		576,519		1,939,569		1,617,070
Interest Expense
Deposits	229,727		147,428		630,972		310,995
Federal funds purchased and interbank borrowings	292		910		3,239		11,404
Securities sold under agreements to repurchase	612		710		2,168		2,389
Federal Home Loan Bank advances	47,719		40,382		133,529		123,466
Other borrowings	9,851		12,003		33,058		30,071
Total interest expense	288,201		201,433		802,966		478,325
Net interest income	391,724		375,086		1,136,603		1,138,745
Provision for credit losses	28,497		19,068		83,602		47,292
Net interest income after provision for credit losses	363,227		356,018		1,053,001		1,091,453
Noninterest Income
Wealth and investment services fees	29,117		26,687		86,779		80,128
Service charges on deposit accounts	20,350		18,524		57,598		53,278
Debit card and ATM fees	11,362		10,818		32,409		31,453
Mortgage banking revenue	7,669		5,063		19,211		12,628

Capital markets income	7,426		5,891		15,055		19,003
Company-owned life insurance	5,315		3,740		14,488		11,624
Debt securities gains (losses), net	( 76 )		( 241 )		( 90 )		( 5,440 )
Other income	12,975		10,456		33,481		30,574
Total noninterest income	94,138		80,938		258,931		233,248
Noninterest Expense
Salaries and employee benefits	147,494		131,541		456,490		404,715
Occupancy	27,130		25,795		80,696		80,162
Equipment	9,888		8,284		27,263		23,394
Marketing	11,036		9,448		32,954		28,698
Technology	23,343		20,592		67,368		59,850
Communication	4,681		4,075		13,161		12,768
Professional fees	7,278		5,956		24,236		19,085
FDIC assessment	11,722		9,000		32,711		29,028
Amortization of intangibles	7,411		6,040		20,291		18,286
Amortization of tax credit investments	3,277		2,644		8,773		8,167

Other expense	19,023		21,401		53,656		57,918
Total noninterest expense	272,283		244,776		817,599		742,071
Income before income taxes	185,082		192,180		494,333		582,630
Income tax expense	41,280		44,304		109,018		133,118
Net income	143,802		147,876		385,315		449,512
Preferred dividends	( 4,034 )		( 4,034 )		( 12,101 )		( 12,101 )
Net income applicable to common shareholders	$	139,768	$	143,842	$	373,214	$	437,411
Net income per common share - basic	$	0.44	$	0.49	$	1.21	$	1.50
Net income per common share - diluted	0.44		0.49		1.21		1.50
Weighted average number of common shares outstanding - basic	315,622		290,648		307,426		290,763
Weighted average number of common shares outstanding - diluted	317,331		291,717		308,605		291,809
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,
(dollars in thousands)	2024		2023		2024		2023
Net income	$	143,802	$	147,876	$	385,315	$	449,512

Other comprehensive income (loss):

Change in debt securities available-for-sale:
Unrealized holding gains (losses) for the period	216,995		( 208,626 )		154,498		( 304,061 )

Reclassification adjustment for securities (gains) losses realized in income	76		241		90		5,440
Income tax effect	( 54,153 )		51,903		( 38,470 )		83,092
Unrealized gains (losses) on available-for-sale securities	162,918		( 156,482 )		116,118		( 215,529 )

Change in securities held-to-maturity:

Amortization of unrealized losses on securities transferred from available-for-sale	4,740		5,623		13,434		16,574
Income tax effect	( 1,203 )		( 1,430 )		( 3,411 )		( 2,861 )
Changes from securities held-to-maturity	3,537		4,193		10,023		13,713

Change in hedges:
Net unrealized derivative gains (losses) on hedges	23,654		( 15,574 )		( 2,540 )		45,547
Reclassification adjustment for (gains) losses realized in net income	4,936		4,927		14,560		( 19,893 )
Income tax effect	( 7,393 )		2,754		( 3,108 )		( 6,094 )
Changes from hedges	21,197		( 7,893 )		8,912		19,560

Change in defined benefit pension plans:
Amortization of net (gains) losses recognized in income	—		—		—		( 182 )
Income tax effect	—		—		—		45
Changes from defined benefit pension plans	—		—		—		( 137 )
Other comprehensive income (loss), net of tax	187,652		( 160,182 )		135,053		( 182,393 )
Comprehensive income (loss)	$	331,454	$	( 12,306 )	$	520,368	$	267,119

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


Net income	—		—		—		146,600		—		146,600
Other comprehensive income (loss)	—		—		—		—		78,064		78,064



Cash dividends:
Common ($ 0.14 per share)	—		—		—		( 41,088 )		—		( 41,088 )
Preferred ($ 17.50 per share)	—		—		—		( 4,034 )		—		( 4,034 )
Common stock issued	—		15		247		—		—		262
Common stock repurchased	—		( 2,598 )		( 41,112 )		—		—		( 43,710 )
Share-based compensation expense	—		—		12,742		—		—		12,742
Stock activity under incentive compensation plans	—		1,602		( 1,412 )		( 195 )		—		( 5 )
Balance, March 31, 2023	230,500		291,922		4,144,730		1,318,632		( 708,358 )		5,277,426
Net income	—		—		—		155,036		—		155,036
Other comprehensive income (loss)	—		—		—		—		( 100,275 )		( 100,275 )
Cash dividends:
Common ($ 0.14 per share)	—		—		—		( 40,932 )		—		( 40,932 )
Preferred ($ 17.50 per share)	—		—		—		( 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 ($ 17.50 per share)	—		—		—		( 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


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

December 31, 2023	$	230,500	$	292,655	$	4,159,924	$	1,618,630	$	( 738,809 )	$	5,562,900


Net income	—		—		—		120,284		—		120,284
Other comprehensive income (loss)	—		—		—		—		( 40,819 )		( 40,819 )
Cash dividends:
Common ($ 0.14 per share)	—		—		—		( 41,060 )		—		( 41,060 )
Preferred ($ 17.50 per share)	—		—		—		( 4,034 )		—		( 4,034 )
Common stock issued	—		17		248		—		—		265
Common stock repurchased	—		( 434 )		( 6,748 )		—		—		( 7,182 )
Share-based compensation expense	—		—		5,491		—		—		5,491
Stock activity under incentive compensation plans	—		1,092		( 1,373 )		( 156 )		—		( 437 )
Balance, March 31, 2024	230,500		293,330		4,157,542		1,693,664		( 779,628 )		5,595,408
Net income	—		—		—		121,229		—		121,229
Other comprehensive income (loss)	—		—		—		—		( 11,780 )		( 11,780 )
Acquisition of CapStar Financial Holdings, Inc.	—		24,014		393,584		—		—		417,598
Cash dividends:
Common ($ 0.14 per share)	—		—		—		( 44,656 )		—		( 44,656 )
Preferred ($ 17.50 per share)	—		—		—		( 4,033 )		—		( 4,033 )
Common stock issued	—		16		249		—		—		265
Common stock repurchased	—		( 77 )		( 1,199 )		—		—		( 1,276 )
Share-based compensation expense	—		—		9,062		—		—		9,062
Stock activity under incentive compensation plans	—		1,686		( 8,273 )		( 158 )		—		( 6,745 )
Balance, June 30, 2024	230,500		318,969		4,550,965		1,766,046		( 791,408 )		6,075,072
Net income	—		—		—		143,802		—		143,802
Other comprehensive income (loss)	—		—		—		—		187,652		187,652
Cash dividends:
Common ($ 0.14 per share)	—		—		—		( 44,654 )		—		( 44,654 )
Preferred ($ 17.50 per share)	—		—		—		( 4,034 )		—		( 4,034 )
Common stock issued	—		15		239		—		—		254
Common stock repurchased	—		( 15 )		( 272 )		—		—		( 287 )
Share-based compensation expense	—		—		8,703		—		—		8,703
Stock activity under incentive compensation plans	—		( 14 )		941		( 137 )		—		790
Balance, September 30, 2024	$	230,500	$	318,955	$	4,560,576	$	1,861,023	$	( 603,756 )	$	6,367,298

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,
(dollars in thousands)	2024		2023
Cash Flows From Operating Activities
Net income	$	385,315	$	449,512
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation	28,449		28,162
Amortization of other intangible assets	20,291		18,286
Amortization of tax credit investments	8,773		8,167
Net premium amortization on investment securities	6,650		8,673
Accretion income related to acquired loans	( 26,531 )		( 17,484 )
Share-based compensation expense	23,256		22,903
Provision for credit losses	83,602		47,292
Debt securities (gains) losses, net	90		5,440
Net (gains) losses on sales of loans and other assets	( 7,084 )		( 727 )
Increase in cash surrender value of company-owned life insurance	( 14,488 )		( 11,624 )
Residential real estate loans originated for sale	( 632,726 )		( 366,340 )
Proceeds from sales of residential real estate loans	615,624		366,485
(Increase) decrease in interest receivable	11,447		( 18,982 )
(Increase) decrease in other assets	( 38,458 )		( 56,116 )
Increase (decrease) in accrued expenses and other liabilities	( 77,681 )		( 40,132 )
Net cash flows provided by (used in) operating activities	386,529		443,515
Cash Flows From Investing Activities
Cash received from merger, net	177,791		—
Purchases of investment securities available-for-sale	( 1,263,354 )		( 626,820 )
Purchases of investment securities held-to-maturity	—		( 1,941 )
Purchases of Federal Home Loan Bank/Federal Reserve Bank stock	( 13,129 )		( 99,158 )
Purchases of equity securities	( 5,462 )		( 20,862 )
Proceeds from maturities, prepayments, and calls of investment securities available-for-sale	755,417		614,782
Proceeds from sales of investment securities available-for-sale	297,858		54,056
Proceeds from maturities, prepayments, and calls of investment securities held-to-maturity	55,069		76,276
Proceeds from sales of Federal Home Loan Bank/Federal Reserve Bank stock	14,426		47,738
Proceeds from sales of equity securities	2,755		2,610
Loan originations and payments, net	( 1,327,734 )		( 2,269,544 )
Proceeds from sales of commercial loans	63,434		679,952
Proceeds from company-owned life insurance death benefits	10,212		5,865
Proceeds from sales of premises and equipment and other assets	1,585		3,513
Purchases of premises and equipment and other assets	( 23,513 )		( 28,074 )
Net cash flows provided by (used in) investing activities	( 1,254,645 )		( 1,561,607 )
Cash Flows From Financing Activities
Net increase (decrease) in:
Deposits	1,050,442		2,251,846
Federal funds purchased and interbank borrowings	134,873		( 580,571 )
Securities sold under agreements to repurchase	( 40,580 )		( 153,743 )
Other borrowings	( 209,675 )		114,251
Payments for maturities of Federal Home Loan Bank advances	( 1,300,000 )		( 1,850,150 )

Proceeds from Federal Home Loan Bank advances	1,400,000		2,450,000

Cash dividends paid	( 142,471 )		( 135,054 )
Common stock repurchased	( 8,745 )		( 44,266 )

Common stock issued	784		797
Net cash flows provided by (used in) financing activities	884,628		2,053,110
Net increase (decrease) in cash and cash equivalents	16,512		935,018
Cash and cash equivalents at beginning of period	1,175,058		728,412
Cash and cash equivalents at end of period	$	1,191,570	$	1,663,430

OLD NATIONAL BANCORP

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


	Nine Months Ended September 30,
(dollars in thousands)	2024		2023
Supplemental Cash Flow Information:

Total interest paid	$	797,929	$	450,939
Total income taxes paid (net of refunds)	54,904		158,478
Noncash Investing and Financing Activities:
Common stock issued for merger, net	417,598		—




Operating lease right-of-use assets obtained in exchange for lease obligations	22,367		7,899
Finance lease right-of-use assets obtained in exchange for lease obligations	16,703		10,019

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

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

NOTE 2 – RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Guidance Adopted in 2024

FASB ASC 820 – In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions , to clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments in this update are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The adoption of this guidance on January 1, 2024 did not have a material impact 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. The adoption of this guidance on a modified retrospective basis on January 1, 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 September 30, 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, 2024 will not have a material impact on the consolidated financial statements.

Accounting Guidance Pending Adoption

FASB ASC 280 – In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): 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 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 enable investors to 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 significant segment expense categories identified and disclosed in the period of adoption. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal 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 740 – In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures . Among other things, these amendments require that public business entities on an annual basis disclose additional information in specified categories with respect to the 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 requires 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 annual periods 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.

NOTE 3 – ACQUISITION AND DIVESTITURE ACTIVITY

Acquisition

CapStar Financial Holdings, Inc.

On April 1, 2024, Old National completed its acquisition of CapStar Financial Holdings, Inc. (“CapStar”) and its wholly-owned subsidiary, CapStar Bank, in an all-stock transaction. This partnership strengthens Old National’s Nashville, Tennessee presence and adds several new high-growth markets. Pursuant to the terms of the merger agreement, each outstanding share of CapStar common stock was converted into the right to receive 1.155 shares of Old National common stock plus cash in lieu of fractional shares. All system conversions related to the transaction were completed in early July 2024.

The assets acquired and liabilities assumed, both intangible and tangible, were recorded at their estimated fair values as of the merger date and have been accounted for under the acquisition method of accounting. The following table presents the preliminary valuation of the assets acquired and liabilities assumed and the fair value of consideration as of the merger date:


(dollars and shares in thousands)	April 1, 2024
Assets
Cash and cash equivalents	$	177,791
Investment securities	342,490
FHLB/Federal Reserve Bank stock	14,426
Loans held-for-sale	21,159
Loans, net of allowance for credit losses	2,120,627
Premises and equipment	22,481
Goodwill	178,283
Other intangible assets	46,125
Company-owned life insurance	91,475
Other assets	94,312
Total assets	$	3,109,169
Liabilities
Deposits	$	2,560,124

Federal Home Loan Bank advances	75,000
Other borrowings	30,000
Accrued expenses and other liabilities	26,447
Total liabilities	$	2,691,571
Fair value of consideration

Common stock ( 24,014 shares issued at $ 17.41 per share)	$	417,598

Total consideration	$	417,598

Goodwill related to this merger will not be deductible for tax purposes.

Other intangible assets acquired included core deposit intangibles. The estimated fair value of the core deposit intangible was $ 46.1 million and is being amortized over an estimated useful life of 10 years.

The fair value of PCD assets was $ 610.7 million on the date of merger. The gross contractual amounts receivable relating to the PCD assets was $ 679.3 million. Old National estimates, on the date of the merger, that $ 26.7 million of the contractual cash flows specific to the PCD assets will not be collected.

Transaction and integration costs primarily associated with the CapStar merger have been expensed for the three and nine months ended September 30, 2024 totaling $ 6.9 million and $ 29.2 million, respectively, and additional transaction and integration costs will be expensed in future periods as incurred.

NOTE 4 – NET INCOME PER COMMON SHARE

Basic and diluted net income per common share are calculated using the two-class method. Net income applicable to common shares is divided by the weighted-average number of common shares outstanding during the period. Adjustments to the weighted-average number of common shares outstanding are made only when such adjustments will dilute net income per common share. Net income applicable to common shares is then divided by the weighted-average number of common shares and common share equivalents during the period.

The following table presents the calculation of basic and diluted net income per common share:


	Three Months Ended September 30,				Nine Months Ended September 30,
(dollars and shares in thousands, except per share data)	2024		2023		2024		2023
Net income	$	143,802	$	147,876	$	385,315	$	449,512
Preferred dividends	( 4,034 )		( 4,034 )		( 12,101 )		( 12,101 )

Net income applicable to common shares	$	139,768	$	143,842	$	373,214	$	437,411

Weighted average common shares outstanding:
Weighted average common shares outstanding (basic)	315,622		290,648		307,426		290,763
Effect of dilutive securities:
Restricted stock	1,709		1,069		1,179		1,045
Stock appreciation rights	—		—		—		1
Weighted average diluted shares outstanding	317,331		291,717		308,605		291,809
Basic Net Income Per Common Share	$	0.44	$	0.49	$	1.21	$	1.50
Diluted Net Income Per Common Share	$	0.44	$	0.49	$	1.21	$	1.50

NOTE 5 – INVESTMENT SECURITIES

The following table summarizes the amortized cost and fair value of the available-for-sale portfolio and the corresponding amounts of gross unrealized gains, unrealized losses, and basis adjustments in AOCI.


(dollars in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Basis Adjustments (1)		Fair Value
September 30, 2024
Available-for-Sale
U.S. Treasury	$	260,893	$	157	$	( 13,076 )	$	( 37,696 )	$	210,278
U.S. government-sponsored entities and agencies	1,506,552		227		( 160,832 )		( 51,669 )		1,294,278
Mortgage-backed securities - Agency	5,608,308		20,435		( 527,687 )		—		5,101,056
States and political subdivisions	527,887		1,199		( 21,042 )		3,521		511,565
Pooled trust preferred securities	13,805		—		( 2,648 )		—		11,157
Other securities	315,787		786		( 12,467 )		—		304,106
Total available-for-sale securities	$	8,233,232	$	22,804	$	( 737,752 )	$	( 85,844 )	$	7,432,440

December 31, 2023
Available-for-Sale
U.S. Treasury	$	449,817	$	154	$	( 11,941 )	$	( 41,297 )	$	396,733
U.S. government-sponsored entities and agencies	1,487,879		33		( 192,717 )		( 63,931 )		1,231,264
Mortgage-backed securities - Agency	4,835,319		3,093		( 621,852 )		—		4,216,560
States and political subdivisions	554,509		878		( 23,057 )		2,930		535,260
Pooled trust preferred securities	13,797		—		( 2,460 )		—		11,337
Other securities	343,568		449		( 22,116 )		—		321,901
Total available-for-sale securities	$	7,684,889	$	4,607	$	( 874,143 )	$	( 102,298 )	$	6,713,055

(1) Basis adjustments represent the 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.

The following table summarizes the amortized cost and fair value of the held-to-maturity investment securities portfolio and the corresponding amounts of gross unrecognized gains and losses.


(dollars in thousands)	Amortized Cost		Unrecognized Gains		Unrecognized Losses		Fair Value
September 30, 2024
Held-to-Maturity
U.S. government-sponsored entities and agencies	$	831,160	$	—	$	( 130,687 )	$	700,473
Mortgage-backed securities - Agency	984,770		—		( 130,454 )		854,316
States and political subdivisions	1,153,563		1,680		( 105,827 )		1,049,416

Allowance for securities held-to-maturity	( 150 )		—		—		( 150 )
Total held-to-maturity securities	$	2,969,343	$	1,680	$	( 366,968 )	$	2,604,055

December 31, 2023
Held-to-Maturity
U.S. government-sponsored entities and agencies	$	825,953	$	—	$	( 154,827 )	$	671,126
Mortgage-backed securities - Agency	1,029,131		—		( 147,137 )		881,994
States and political subdivisions	1,158,559		1,800		( 112,141 )		1,048,218
Allowance for securities held-to-maturity	( 150 )		—		—		( 150 )
Total held-to-maturity securities	$	3,013,493	$	1,800	$	( 414,105 )	$	2,601,188

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,
(dollars in thousands)	2024		2023		2024		2023
Proceeds	$	22,545	$	28,531	$	370,870	$	111,419
Realized gains	90		54		98		1,002
Realized losses	( 166 )		( 295 )		( 188 )		( 6,442 )

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, 2024
(dollars in thousands)	Amortized Cost		Fair Value		Weighted Average Yield
Maturity
Available-for-Sale
Within one year	$	408,483	$	409,578	4.31	%
One to five years	2,841,655		2,728,724		3.87
Five to ten years	3,716,071		3,257,518		2.39
Beyond ten years	1,267,023		1,036,620		2.66
Total	$	8,233,232	$	7,432,440	3.04	%
Held-to-Maturity
Within one year	$	153	$	146	2.20	%
One to five years	164,752		139,140		2.56
Five to ten years	1,248,019		1,115,473		2.65
Beyond ten years	1,556,419		1,349,296		2.72
Total	$	2,969,343	$	2,604,055	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
(dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
September 30, 2024
Available-for-Sale
U.S. Treasury	$	1,998	$	( 4 )	$	193,148	$	( 13,072 )	$	195,146	$	( 13,076 )
U.S. government-sponsored entities and agencies	55,754		( 114 )		1,209,200		( 160,718 )		1,264,954		( 160,832 )
Mortgage-backed securities - Agency	93,981		( 786 )		3,633,891		( 526,901 )		3,727,872		( 527,687 )
States and political subdivisions	22,970		( 114 )		306,635		( 20,928 )		329,605		( 21,042 )
Pooled trust preferred securities	—		—		11,157		( 2,648 )		11,157		( 2,648 )
Other securities	47,408		( 157 )		209,600		( 12,310 )		257,008		( 12,467 )
Total available-for-sale	$	222,111	$	( 1,175 )	$	5,563,631	$	( 736,577 )	$	5,785,742	$	( 737,752 )

December 31, 2023
Available-for-Sale
U.S. Treasury	$	8,937	$	( 42 )	$	191,027	$	( 11,899 )	$	199,964	$	( 11,941 )
U.S. government-sponsored entities and agencies	—		—		1,189,314		( 192,717 )		1,189,314		( 192,717 )
Mortgage-backed securities - Agency	90,145		( 710 )		3,835,552		( 621,142 )		3,925,697		( 621,852 )
States and political subdivisions	86,865		( 495 )		259,767		( 22,562 )		346,632		( 23,057 )
Pooled trust preferred securities	—		—		11,337		( 2,460 )		11,337		( 2,460 )
Other securities	39,032		( 229 )		255,888		( 21,887 )		294,920		( 22,116 )
Total available-for-sale	$	224,979	$	( 1,476 )	$	5,742,885	$	( 872,667 )	$	5,967,864	$	( 874,143 )

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
(dollars in thousands)	Fair Value		Unrecognized Losses		Fair Value		Unrecognized Losses		Fair Value		Unrecognized Losses
September 30, 2024
Held-to-Maturity
U.S. government-sponsored entities and agencies	$	—	$	—	$	700,473	$	( 130,687 )	$	700,473	$	( 130,687 )
Mortgage-backed securities - Agency	—		—		854,316		( 130,454 )		854,316		( 130,454 )
States and political subdivisions	671		( 1 )		978,641		( 105,826 )		979,312		( 105,827 )
Total held-to-maturity	$	671	$	( 1 )	$	2,533,430	$	( 366,967 )	$	2,534,101	$	( 366,968 )

December 31, 2023
Held-to-Maturity

U.S. government-sponsored entities and agencies	$	—	$	—	$	671,126	$	( 154,827 )	$	671,126	$	( 154,827 )
Mortgage-backed securities - Agency	—		—		881,994		( 147,137 )		881,994		( 147,137 )
States and political subdivisions	—		—		977,154		( 112,141 )		977,154		( 112,141 )


Total held-to-maturity	$	—	$	—	$	2,530,274	$	( 414,105 )	$	2,530,274	$	( 414,105 )

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 $ 114.2 million at September 30, 2024 and $ 127.6 million at December 31, 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, 2024 or December 31, 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, 2024 and December 31, 2023. Accrued interest receivable on the securities portfolio is excluded from the estimate of credit losses and totaled $ 42.5 million at September 30, 2024 and $ 50.3 million at December 31, 2023.

At September 30, 2024, Old National’s securities portfolio consisted of 3,013 securities, 2,452 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 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, 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 pooled trust preferred securities 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 months ended September 30, 2024 or 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 $ 89.2 million at September 30, 2024 and $ 80.4 million at December 31, 2023. There were gains on equity securities of $ 1.5 million during the three months ended September 30, 2024 and $ 1.4 million during the nine months ended September 30, 2024, compared to losses of $ 0.8 million during the three months ended September 30, 2023 and $ 1.4 million during the nine months ended September 30, 2023.

Alternative Investments

Old National has alternative investments without readily determinable fair values that are included in other assets totaling $ 580.3 million at September 30, 2024 and $ 449.3 million at December 31, 2023. These investments consisted of $ 292.6 million of illiquid investments in partnerships, limited liability companies, and other ownership interests that support affordable housing and $ 287.7 million of economic development and community revitalization initiatives in low-to-moderate income neighborhoods at September 30, 2024, compared to $ 252.2 million and $ 197.1 million for the same investment types, respectively, at December 31, 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 months ended September 30, 2024 and 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 and Southeast regions 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 September 30, 2024, these loans totaled $ 3.4 billion, of which $ 1.5 billion had been sold to other financial institutions and $ 1.9 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		Portfolio Segment After Reclassifications

(dollars in thousands)
September 30, 2024
Commercial (1)	$	10,408,095	$	( 224,732 )	$	10,183,363
Commercial real estate	16,356,216		( 175,628 )		16,180,588
BBCC	N/A		400,360		400,360
Residential real estate	6,757,896		—		6,757,896
Consumer	2,878,436		( 2,878,436 )		N/A
Indirect	N/A		1,096,234		1,096,234
Direct	N/A		419,201		419,201
Home equity	N/A		1,363,001		1,363,001
Total loans (2)	$	36,400,643	$	—	$	36,400,643
Allowance for credit losses on loans	( 380,840 )		—		( 380,840 )
Net loans	$	36,019,803	$	—	$	36,019,803

December 31, 2023
Commercial (1)	$	9,512,230	$	( 232,764 )	$	9,279,466
Commercial real estate	14,140,629		( 169,058 )		13,971,571
BBCC	N/A		401,822		401,822
Residential real estate	6,699,443		—		6,699,443
Consumer	2,639,625		( 2,639,625 )		N/A
Indirect	N/A		1,050,982		1,050,982
Direct	N/A		523,172		523,172
Home equity	N/A		1,065,471		1,065,471
Total loans (2)	$	32,991,927	$	—	$	32,991,927
Allowance for credit losses on loans	( 307,610 )		—		( 307,610 )
Net loans	$	32,684,317	$	—	$	32,684,317

(1) Includes direct finance leases of $ 133.6 million at September 30, 2024 and $ 169.7 million at December 31, 2023.

(2) Includes unearned income of $ 183.4 million at September 30, 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 classified 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 241 %, Old National Bank’s applicable investor commercial real estate loans as a percentage of its 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, 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 such changes as 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 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 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.

Home Equity

Home equity loans are generally secured by 1-4 family residences that are owner-occupied. Old National has established 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 monitoring of updated borrower credit scores.

Allowance for Credit Losses

Loans

Credit loss assumptions used when computing the level of expected credit losses 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. 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, global military conflicts, and global trade issues. Old National’s activity in the allowance for credit losses on loans by portfolio segment was as follows:


(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, 2024
Commercial	$	138,460	$	3,245	$	( 11,512 )	$	308	$	6,341	$	136,842
Commercial real estate	189,911		( 442 )		( 2,799 )		214		18,015		204,899
BBCC	2,897		—		( 676 )		56		415		2,692
Residential real estate	23,135		—		—		64		( 1,711 )		21,488
Indirect	1,233		—		( 1,715 )		290		5,853		5,661
Direct	3,131		—		( 2,137 )		475		958		2,427
Home equity	7,568		—		( 126 )		84		( 695 )		6,831
Total	$	366,335	$	2,803	$	( 18,965 )	$	1,491	$	29,176	$	380,840
Three Months Ended September 30, 2023
Commercial	$	127,403	$	—	$	( 16,705 )	$	1,616	$	12,441	$	124,755
Commercial real estate	136,897		—		( 2,291 )		102		10,267		144,975
BBCC	2,776		—		( 1,049 )		70		912		2,709
Residential real estate	20,421		—		( 15 )		28		346		20,780
Indirect	1,407		—		( 490 )		325		79		1,321
Direct	4,755		—		( 2,180 )		580		416		3,571
Home equity	6,896		—		( 20 )		341		( 1,346 )		5,871
Total	$	300,555	$	—	$	( 22,750 )	$	3,062	$	23,115	$	303,982
Nine Months Ended September 30, 2024
Commercial	$	118,333	$	17,838	$	( 25,098 )	$	1,104	$	24,665	$	136,842
Commercial real estate	155,099		8,041		( 12,541 )		1,791		52,509		204,899
BBCC	2,887		—		( 1,687 )		304		1,188		2,692
Residential real estate	20,837		134		—		845		( 328 )		21,488
Indirect	1,236		—		( 3,937 )		957		7,405		5,661
Direct	3,169		59		( 6,449 )		1,527		4,121		2,427
Home equity	6,049		653		( 314 )		229		214		6,831
Total	$	307,610	$	26,725	$	( 50,026 )	$	6,757	$	89,774	$	380,840
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

The allowance for credit losses on loans at September 30, 2024 included $ 26.7 million of allowance for credit losses on acquired PCD loans established through acquisition accounting adjustments on or after the CapStar acquisition date. In addition, the provision for credit losses on loans in the nine months ended September 30, 2024 included $ 15.3 million to establish an allowance for credit losses on non-PCD loans acquired in the CapStar transaction.

Accrued interest receivable on loans is excluded from the estimate of credit losses and totaled $ 174.8 million at September 30, 2024, compared to $ 169.8 million at December 31, 2023.

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,
(dollars in thousands)	2024		2023		2024		2023
Allowance for credit losses on unfunded loan commitments:
Balance at beginning of period	$	25,733	$	37,007	$	31,226	$	32,188
Provision for credit losses on unfunded loan commitments acquired during the period	—		—		1,763		—
Provision (release) for credit losses on unfunded loan commitments	( 679 )		( 4,047 )		( 7,935 )		772
Balance at end of period	$	25,054	$	32,960	$	25,054	$	32,960

Credit Quality

Old National’s management monitors the credit quality of its loans on an ongoing basis with the AQR for commercial, commercial real estate, and BBCC 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:

Special Mention . Loans categorized as special mention 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 special mention, classified – substandard, classified – nonaccrual, or classified – doubtful.

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)	Origination Year														Revolving to Term
	2024		2023		2022		2021		2020		Prior		Revolving				Total
September 30, 2024
Commercial:

Pass	$	1,555,665	$	1,519,627	$	1,243,415	$	734,457	$	467,036	$	636,137	$	2,560,086	$	657,716	$	9,374,139
Special Mention	34,491		62,344		43,253		14,913		18,003		12,073		120,436		25,235		330,748
Classified:
Substandard	11,204		63,668		97,872		32,674		21,667		26,861		89,643		29,742		373,331
Nonaccrual	352		812		2,723		792		637		2,354		242		4,813		12,725
Doubtful	1,460		11,485		25,610		7,640		5,726		1,226		22,294		16,979		92,420
Total	$	1,603,172	$	1,657,936	$	1,412,873	$	790,476	$	513,069	$	678,651	$	2,792,701	$	734,485	$	10,183,363


Commercial real estate:

Pass	$	1,649,355	$	2,584,786	$	3,882,068	$	2,267,541	$	1,407,050	$	1,877,393	$	143,314	$	929,671	$	14,741,178
Special Mention	47,435		35,196		105,531		126,457		49,338		68,825		4,492		56,651		493,925
Classified:
Substandard	62,087		37,197		244,297		62,366		39,810		172,429		1,018		79,285		698,489
Nonaccrual	421		708		4,267		2,881		2,763		15,942		—		361		27,343
Doubtful	7,335		5,675		4,858		53,679		25,556		75,276		—		47,274		219,653
Total	$	1,766,633	$	2,663,562	$	4,241,021	$	2,512,924	$	1,524,517	$	2,209,865	$	148,824	$	1,113,242	$	16,180,588


BBCC:

Pass	$	60,158	$	83,681	$	58,701	$	36,774	$	31,632	$	30,934	$	61,932	$	16,809	$	380,621
Special Mention	392		2,740		1,034		720		723		369		3,818		3,074		12,870
Classified:
Substandard	105		499		145		200		30		226		694		523		2,422
Nonaccrual	—		262		434		347		67		1,010		—		642		2,762
Doubtful	—		231		642		301		15		1		—		495		1,685
Total	$	60,655	$	87,413	$	60,956	$	38,342	$	32,467	$	32,540	$	66,444	$	21,543	$	400,360


	Origination Year														Revolving to Term
	2023		2022		2021		2020		2019		Prior		Revolving				Total
December 31, 2023
Commercial:

Pass	$	1,826,289	$	1,573,669	$	985,964	$	520,883	$	450,911	$	495,979	$	2,051,985	$	651,953	$	8,557,633
Special Mention	20,038		90,031		19,953		36,906		25,756		47,357		89,765		44,348		374,154
Classified:
Substandard	27,271		41,164		27,990		37,618		10,461		29,981		72,703		56,716		303,904
Nonaccrual	32		7,034		—		—		823		3,411		—		5,461		16,761
Doubtful	—		7,261		5,925		4,875		1,742		7,211		—		—		27,014
Total	$	1,873,630	$	1,719,159	$	1,039,832	$	600,282	$	489,693	$	583,939	$	2,214,453	$	758,478	$	9,279,466

Commercial real estate:

Pass	$	2,177,841	$	3,515,702	$	2,563,638	$	1,576,044	$	1,010,351	$	1,161,119	$	103,332	$	960,386	$	13,068,413
Special Mention	69,648		69,946		68,708		27,059		52,107		95,896		3,893		64,730		451,987
Classified:
Substandard	26,638		56,423		21,401		28,983		61,186		49,558		—		48,760		292,949
Nonaccrual	—		21,919		10,706		1,975		1,634		8,632		—		1,400		46,266
Doubtful	5,360		429		30,897		2,306		37,777		35,187		—		—		111,956
Total	$	2,279,487	$	3,664,419	$	2,695,350	$	1,636,367	$	1,163,055	$	1,350,392	$	107,225	$	1,075,276	$	13,971,571

BBCC:

Pass	$	81,102	$	64,583	$	44,307	$	38,086	$	27,557	$	19,028	$	68,807	$	33,361	$	376,831
Special Mention	—		—		857		700		1,001		349		2,144		12,728		17,779
Classified:
Substandard	436		193		252		—		—		604		15		1,006		2,506
Nonaccrual	—		—		482		—		4		1,105		—		1,402		2,993
Doubtful	302		727		254		286		60		84		—		—		1,713
Total	$	81,840	$	65,503	$	46,152	$	39,072	$	28,622	$	21,170	$	70,966	$	48,497	$	401,822

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)	2024		2023		2022		2021		2020		Prior		Revolving				Total
September 30, 2024
Residential real estate:
Risk Rating:
Performing	$	371,299	$	488,590	$	1,469,840	$	1,696,514	$	1,605,901	$	1,067,863	$	60	$	277	$	6,700,344
Nonperforming	157		4,145		10,655		5,381		4,283		32,931		—		—		57,552
Total	$	371,456	$	492,735	$	1,480,495	$	1,701,895	$	1,610,184	$	1,100,794	$	60	$	277	$	6,757,896


Indirect:
Risk Rating:
Performing	$	348,367	$	309,592	$	257,064	$	107,785	$	47,552	$	20,760	$	—	$	—	$	1,091,120
Nonperforming	302		1,109		1,575		1,387		413		328		—		—		5,114
Total	$	348,669	$	310,701	$	258,639	$	109,172	$	47,965	$	21,088	$	—	$	—	$	1,096,234


Direct:
Risk Rating:
Performing	$	56,302	$	68,103	$	58,794	$	53,593	$	21,871	$	56,853	$	97,352	$	2,509	$	415,377
Nonperforming	66		307		674		390		593		1,706		2		86		3,824
Total	$	56,368	$	68,410	$	59,468	$	53,983	$	22,464	$	58,559	$	97,354	$	2,595	$	419,201


Home equity:
Risk Rating:
Performing	$	—	$	—	$	262	$	203	$	1,135	$	11,759	$	1,300,266	$	28,857	$	1,342,482
Nonperforming	—		—		1,311		146		244		5,383		3,212		10,223		20,519
Total	$	—	$	—	$	1,573	$	349	$	1,379	$	17,142	$	1,303,478	$	39,080	$	1,363,001


	Origination Year														Revolving to Term
	2023		2022		2021		2020		2019		Prior		Revolving				Total
December 31, 2023
Residential real estate:
Risk Rating:
Performing	$	453,743	$	1,508,671	$	1,836,078	$	1,705,131	$	430,783	$	722,987	$	—	$	279	$	6,657,672
Nonperforming	116		4,563		4,004		3,375		4,078		25,635		—		—		41,771
Total	$	453,859	$	1,513,234	$	1,840,082	$	1,708,506	$	434,861	$	748,622	$	—	$	279	$	6,699,443

Indirect:
Risk Rating:
Performing	$	393,369	$	355,822	$	162,735	$	82,871	$	37,967	$	13,815	$	—	$	196	$	1,046,775
Nonperforming	372		1,472		1,207		547		318		291		—		—		4,207
Total	$	393,741	$	357,294	$	163,942	$	83,418	$	38,285	$	14,106	$	—	$	196	$	1,050,982

Direct:
Risk Rating:
Performing	$	109,372	$	90,310	$	92,491	$	48,387	$	29,659	$	67,129	$	75,080	$	4,852	$	517,280
Nonperforming	67		531		517		560		210		3,872		124		11		5,892
Total	$	109,439	$	90,841	$	93,008	$	48,947	$	29,869	$	71,001	$	75,204	$	4,863	$	523,172

Home equity:
Risk Rating:
Performing	$	290	$	164	$	160	$	140	$	679	$	4,483	$	1,019,389	$	23,918	$	1,049,223
Nonperforming	—		310		328		404		741		4,327		2,844		7,294		16,248
Total	$	290	$	474	$	488	$	544	$	1,420	$	8,810	$	1,022,233	$	31,212	$	1,065,471

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


	Origination Year
(dollars in thousands)	2024		2023		2022		2021		2020		Prior		Revolving		Total
Three Months Ended September 30, 2024
Commercial	$	1,234	$	8,031	$	633	$	297	$	840	$	55	$	422		$	11,512
Commercial real estate	—		140		61		44		—		2,554		—			2,799
BBCC	—		481		164		21		—		10		—			676
Residential real estate	—		—		—		—		—		—		—			—
Indirect	199		797		360		110		41		208		—			1,715
Direct	8		97		398		475		224		214		721			2,137
Home equity	—		—		—		—		—		126		—			126
Total gross charge-offs	$	1,441	$	9,546	$	1,616	$	947	$	1,105	$	3,167	$	1,143		$	18,965

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

	Origination Year
	2024		2023		2022		2021		2020		Prior		Revolving		Total
Nine Months Ended September 30, 2024
Commercial	$	1,234	$	10,389	$	10,263	$	719	$	891	$	625	$	977		$	25,098
Commercial real estate	—		140		84		2,688		—		9,629		—			12,541
BBCC	—		1,086		393		56		112		40		—			1,687
Residential real estate	—		—		—		—		—		—		—			—
Indirect	253		1,698		1,209		431		80		266		—			3,937
Direct	83		292		1,368		1,351		510		609		2,236			6,449
Home equity	—		—		—		34		—		280		—			314
Total gross charge-offs	$	1,570	$	13,605	$	13,317	$	5,279	$	1,593	$	11,449	$	3,213		$	50,026

	Origination Year
	2023		2022		2021		2020		2019		Prior		Revolving		Total
Nine Months Ended September 30, 2023
Commercial	$	—	$	6,254	$	23,432	$	120	$	6,789	$	302	$	562		$	37,459
Commercial real estate	—		54		735		2,144		—		3,005		—			5,938
BBCC	499		548		77		47		—		—		—			1,171
Residential real estate	—		—		—		—		—		256		—			256
Indirect	85		954		640		153		137		120		—			2,089
Direct	19		1,330		1,805		570		1,011		450		2,833			8,018
Home equity	—		—		—		—		—		330		—			330
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, 2024
Commercial	$	11,690	$	6,213	$	35,974	$	53,877	$	10,129,486	$	10,183,363
Commercial real estate	20,125		38,395		39,891		98,411		16,082,177		16,180,588
BBCC	1,095		—		1,361		2,456		397,904		400,360
Residential	5,817		740		2,489		9,046		6,748,850		6,757,896
Indirect	7,702		2,088		1,298		11,088		1,085,146		1,096,234
Direct	2,172		1,029		1,460		4,661		414,540		419,201
Home equity	5,339		3,791		7,187		16,317		1,346,684		1,363,001
Total	$	53,940	$	52,256	$	89,660	$	195,856	$	36,204,787	$	36,400,643

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, 2024						December 31, 2023
(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	$	105,145	$	32,436	$	477	$	43,775	$	13,143	$	242
Commercial real estate	246,996		40,356		90		158,222		24,507		585
BBCC	4,447		—		80		4,706		—		95
Residential	57,552		—		—		41,771		—		—
Indirect	5,114		—		160		4,207		—		8
Direct	3,824		—		25		5,892		—		31
Home equity	20,519		—		345		16,248		—		—
Total	$	443,597	$	72,792	$	1,177	$	274,821	$	37,650	$	961

Interest income recognized on nonaccrual loans was insignificant during the three and nine months ended September 30, 2024 and 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, 2024
Commercial	$	18,944	$	64,073	$	4,481	$	8,971	$	4,258
Commercial real estate	240,163		1,552		2,106		—		120
BBCC	3,185		842		97		323		—
Residential	57,552		—		—		—		—
Indirect	—		—		—		5,114		—
Direct	2,891		40		5		383		26
Home equity	20,519		—		—		—		—
Total loans	$	343,254	$	66,507	$	6,689	$	14,791	$	4,404

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 forgiven is charged-off against the allowance for credit losses on loans.

The following table presents the amortized cost basis of financial difficulty modifications that were modified for borrowers experiencing financial difficulty, by class of loans and type of modification:


(dollars in thousands)	Term Extension		Payment Delay		Total Class of Loans
Three Months Ended September 30, 2024
Commercial	$	17,969	$	4,776	0.2	%
Commercial real estate	11,121		2,554		0.1	%





Total	$	29,090	$	7,330	0.1	%

Three Months Ended September 30, 2023
Commercial	$	3,502	$	—	0.0	%
Commercial real estate	93,844		—		0.7	%





Total	$	97,346	$	—	0.3	%

Nine Months Ended September 30, 2024
Commercial	$	27,085	$	4,776	0.3	%
Commercial real estate	56,051		2,554		0.4	%





Total	$	83,136	$	7,330	0.2	%

Nine Months Ended September 30, 2023
Commercial	$	20,811	$	—	0.2	%
Commercial real estate	116,580		$	—	0.8	%





Total	$	137,391	$	—	0.4	%

Old National closely monitors the performance of financial difficulty modifications to understand the effectiveness of its efforts. The following table presents the performance of financial difficulty modifications in the twelve months following modification:


(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, 2024
Commercial	$	—	$	—	$	3,854	$	3,854	$	31,861	$	35,715
Commercial real estate	5,707		3,726		21,463		30,896		67,421		98,317





Total	$	5,707	$	3,726	$	25,317	$	34,750	$	99,282	$	134,032

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





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

The following table summarizes the nature of the financial difficulty modifications by class of loans:


(dollars in thousands)	Weighted- Average Term Extension (in months)	Weighted- Average Payment Delay (in months)
Three Months Ended September 30, 2024
Commercial	4.4	6.0
Commercial real estate	6.5	7.0





Total	5.2	6.4

Three Months Ended September 30, 2023
Commercial	7.3	—
Commercial real estate	9.2	—





Total	9.2	—

Nine Months Ended September 30, 2024
Commercial	6.8	6.0
Commercial real estate	8.8	7.0





Total	8.2	6.4

Nine Months Ended September 30, 2023
Commercial	5.7	—
Commercial real estate	8.9	—





Total	8.4	—

There were payment defaults on $ 3.9 million and $ 25.3 million of loans during the three and nine months ended September 30, 2024, respectively, to borrowers whose loans were modified due to financial difficulties within the previous twelve months. The payment defaults did not materially impact the allowance for credit losses on loans. There were no payment defaults during the three and nine months ended September 30, 2023 on loans that had been modified within the previous twelve months.

Old National had no t committed to lend any material additional funds to the borrowers whose loans were modified due to financial difficulties at September 30, 2024 or December 31, 2023.

Purchased Credit Deteriorated Loans

Old National has purchased loans, for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination. The carrying amount of those loans is as follows:


(dollars in thousands)	CapStar (1)
Purchase price of loans at acquisition	$	610,691
Allowance for credit losses at acquisition	26,725
Non-credit discount/(premium) at acquisition	41,886
Par value of acquired loans at acquisition	$	679,302

(1) Old National acquired CapStar effective April 1, 2024.

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,
(dollars in thousands)		2024		2023		2024		2023
Operating lease cost	Occupancy/Equipment expense	$	8,258	$	7,462	$	24,352	$	23,569
Finance lease cost:
Amortization of right-of-use assets	Occupancy expense	2,188		742		4,427		2,170
Interest on lease liabilities	Interest expense	318		183		752		536

Sub-lease income	Occupancy expense	( 110 )		( 119 )		( 358 )		( 281 )
Total		$	10,654	$	8,268	$	29,173	$	25,994

Supplemental balance sheet information related to leases was as follows:


(dollars in thousands)	September 30, 2024			December 31, 2023
Operating Leases
Operating lease right-of-use assets	$	188,533		$	185,506
Operating lease liabilities	206,863			204,960

Finance Leases
Premises and equipment, net	32,096			19,820
Other borrowings	33,598			20,955

Weighted-Average Remaining Lease Term (in Years)
Operating leases	8.0			8.5
Finance leases	7.0			10.5

Weighted-Average Discount Rate
Operating leases	3.13		%	3.04		%
Finance leases	3.98		%	3.90		%

Supplemental cash flow information related to leases was as follows:


	Nine Months Ended September 30,
(dollars in thousands)	2024		2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	24,849	$	23,766
Operating cash flows from finance leases	752		536
Financing cash flows from finance leases	4,061		1,893

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


(dollars in thousands)	Operating Leases		Finance Leases
2024	$	8,418	$	2,432
2025	34,407		9,215
2026	33,720		6,477
2027	31,985		4,816
2028	28,028		3,210
Thereafter	98,614		12,612
Total undiscounted lease payments	235,172		38,762
Amounts representing interest	( 28,309 )		( 5,164 )
Lease liability	$	206,863	$	33,598

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)	2024		2023		2024		2023
Balance at beginning of period	$	2,170,709	$	1,998,716	$	1,998,716	$	1,998,716
Acquisitions and adjustments	6,290		—		178,283		—
Balance at end of period	$	2,176,999	$	1,998,716	$	2,176,999	$	1,998,716

During the nine months ended September 30, 2024, Old National recorded $ 178.3 million of goodwill associated with the acquisition of CapStar. The increase in goodwill for the three months ended September 30, 2024 resulted from the measurement period adjustments related to updating the fair values of the assets acquired and liabilities assumed in the acquisition of CapStar. See Note 2 to the consolidated financial statements for additional detail regarding this transaction.

Old National performed the required annual goodwill impairment test as of August 31, 2024 and there was no impairment. No events or circumstances since the August 31, 2024 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)	Gross Carrying Amount		Accumulated Amortization and Impairment		Net Carrying Amount
September 30, 2024
Core deposit	$	189,636	$	( 89,825 )	$	99,811
Customer trust relationships	52,621		( 24,347 )		28,274
Total other intangible assets	$	242,257	$	( 114,172 )	$	128,085

December 31, 2023
Core deposit	$	143,511	$	( 72,940 )	$	70,571
Customer trust relationships	52,621		( 20,942 )		31,679
Total other intangible assets	$	196,132	$	( 93,882 )	$	102,250

Other intangible assets consist of core deposit intangibles and customer relationship intangibles and are being amortized primarily on an accelerated basis over their estimated useful lives, generally over a period of 5 to 15 years. During the nine months ended September 30, 2024, Old National recorded $ 46.1 million of core deposit

intangibles associated with the acquisition of CapStar. See Note 2 to the consolidated financial statements for additional detail regarding this transaction.

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 months ended September 30, 2024 or 2023. Total amortization expense associated with intangible assets was $ 7.4 million and $ 20.3 million for the three and nine months ended September 30, 2024, respectively, compared to $ 6.0 million and $ 18.3 million for the three and nine months ended September 30, 2023, respectively.

Estimated amortization expense for future years is as follows:


(dollars in thousands)
2024 remaining	$	7,238
2025	26,116
2026	22,474
2027	18,947
2028	15,598
Thereafter	37,712
Total	$	128,085

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, 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)		September 30, 2024				December 31, 2023
Investment	Accounting Method	Investment		Unfunded Commitment (1)		Investment		Unfunded Commitment
LIHTC	Proportional amortization	$	202,128	$	122,826	$	114,991	$	75,981
FHTC	Proportional amortization (2)	31,459		25,535		34,220		27,421
NMTC	Consolidation	54,063		—		47,727		—
Renewable Energy	Equity	4		—		201		—
Total		$	287,654	$	148,361	$	197,139	$	103,402

(1) All commitments will be paid by Old National by December 31, 2035.

(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)	Amortization Expense (1)		Tax Expense (Benefit) Recognized (2)
Three Months Ended September 30, 2024
LIHTC	$	2,777	$	( 3,739 )
FHTC	738		( 690 )
NMTC	3,076		( 3,825 )
Renewable Energy	—		—
Total	$	6,591	$	( 8,254 )

Three Months Ended September 30, 2023
LIHTC	$	3,208	$	( 3,582 )
FHTC	330		( 399 )
NMTC	2,092		( 2,611 )
Renewable Energy	222		—
Total	$	5,852	$	( 6,592 )

Nine Months Ended September 30, 2024
LIHTC	$	8,042	$	( 10,813 )
FHTC	2,000		( 2,043 )
NMTC	8,168		( 10,175 )
Renewable Energy	197		—
Total	$	18,407	$	( 23,031 )

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 )

(1) The amortization expense for the LIHTC and FHTC investments is included in our income tax expense. Prior to the adoption of ASU 2023-02 on January 1, 2024, 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 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 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).

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,
(dollars in thousands)	2024			2023
Outstanding at period end	$	244,626		$	279,061
Average amount outstanding during the period	261,818			351,362
Maximum amount outstanding at any month-end during the period	319,423			430,537
Weighted-average interest rate:
During the period	1.11		%	0.91		%
At period end	1.09		%	1.35		%

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

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


	At September 30, 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	$	244,626	$	—	$	—	$	—	$	244,626
Total	$	244,626	$	—	$	—	$	—	$	244,626

NOTE 11 – FEDERAL HOME LOAN BANK ADVANCES

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


(dollars in thousands)	September 30, 2024		December 31, 2023
FHLB advances (fixed rates 2.19 % to 5.23 % and variable rates 4.71 % to 5.24 %) maturing October 2024 to March 2044	$	4,475,528	$	4,300,528
Fair value hedge basis adjustments and unamortized prepayment fees	( 4,375 )		( 19,847 )
Total	$	4,471,153	$	4,280,681

FHLB advances had weighted-average rates of 3.64 % at September 30, 2024 and 3.45 % at December 31, 2023. FHLB advances are collateralized by designated assets that may include qualifying commercial real estate loans, residential and multifamily mortgages, home equity loans, and certain investment securities.

At September 30, 2024, total unamortized prepayment fees related to all FHLB advance debt modifications completed in prior years totaled $ 9.7 million, compared to $ 14.2 million at December 31, 2023.

Contractual maturities of FHLB advances at September 30, 2024 were as follows:


(dollars in thousands)
Due in 2024	$	150,243
Due in 2025	550,285
Due in 2026	100,000

Due in 2028	650,000
Thereafter	3,025,000
Fair value hedge basis adjustments and unamortized prepayment fees	( 4,375 )
Total	$	4,471,153

NOTE 12 – OTHER BORROWINGS

The following table summarizes Old National’s other borrowings:


(dollars in thousands)	September 30, 2024		December 31, 2023
Old National Bancorp:
Subordinated debentures (fixed rate 5.88 %) maturing September 2026	$	150,000	$	150,000
Subordinated debentures (fixed rate 5.25 %) maturing June 2030	30,000		—
Junior subordinated debentures (rates of 6.42 % to 9.09 %) maturing July 2031 to September 2037	136,643		136,643
Senior unsecured notes (fixed rate 4.13 %) matured August 2024	—		175,000
Unamortized debt issuance costs related to senior unsecured notes	—		( 91 )
Other basis adjustments	14,338		18,207
Old National Bank:
Finance lease liabilities	33,598		20,955
Subordinated debentures (3-month SOFR plus 4.618 %; variable rate 9.87 %) maturing October 2025	12,000		12,000
Leveraged loans for NMTC (fixed rates of 1.00 % to 1.43 %) maturing December 2046 to June 2060	186,020		154,284
Other (1)	35,455		97,872
Total other borrowings	$	598,054	$	764,870

(1) Includes overnight borrowings to collateralize certain derivative positions totaling $ 35.4 million at September 30, 2024 and $ 97.6 million at December 31, 2023.

Contractual maturities of other borrowings at September 30, 2024 were as follows:


(dollars in thousands)
Due in 2024	$	37,482
Due in 2025	20,165
Due in 2026	155,677
Due in 2027	4,207
Due in 2028	2,730
Thereafter	363,359
Unamortized debt issuance costs and other basis adjustments	14,434
Total	$	598,054

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.

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, 2024:

(dollars in thousands)

Rate at

September 30,
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 %

9.09 %

July 31, 2031

Bridgeview Capital Trust II

December 2002

15,464

3-month SOFR plus 3.35 %

8.91 %

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 %

6.95 %

March 17, 2035

Northern States Statutory Trust I

September 2005

10,310

3-month SOFR plus 1.80 %

7.01 %

September 15, 2035

Anchor Capital Trust III

August 2005

5,000

3-month SOFR plus 1.55 %

6.42 %

September 30, 2035

Great Lakes Statutory Trust II

December 2005

6,186

3-month SOFR plus 1.40 %

6.61 %

December 15, 2035

Home Federal Statutory
Trust I

September 2006

15,464

3-month SOFR plus 1.65 %

6.86 %

September 15, 2036

Monroe Bancorp Capital
Trust I

July 2006

3,093

3-month SOFR plus 1.60 %

7.16 %

October 7, 2036

Tower Capital Trust 3

December 2006

9,279

3-month SOFR plus 1.69 %

6.97 %

March 1, 2037

Monroe Bancorp Statutory
Trust II

March 2007

5,155

3-month SOFR plus 1.60 %

6.81 %

June 15, 2037

Great Lakes Statutory Trust III

June 2007

8,248

3-month SOFR plus 1.70 %

6.91 %

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 $ 33.6 million at September 30, 2024. See Note 7 to the consolidated financial statements for a maturity analysis of the Company’s finance lease liabilities.

NOTE 13 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table summarizes the changes within each classification of AOCI, net of tax:


(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, 2024
Balance at beginning of period	$	( 699,318 )	$	( 88,986 )	$	( 3,104 )	$	—	$	( 791,408 )
Other comprehensive income (loss) before reclassifications	162,861		—		17,537		—		180,398
Amounts reclassified from AOCI to income (1)	57		3,537		3,660		—		7,254
Balance at end of period	$	( 536,400 )	$	( 85,449 )	$	18,093	$	—	$	( 603,756 )

Three Months Ended September 30, 2023
Balance at beginning of period	$	( 701,393 )	$	( 103,144 )	$	( 4,096 )	$	—	$	( 808,633 )
Other comprehensive income (loss) before reclassifications	( 156,660 )		—		( 11,546 )		—		( 168,206 )
Amounts reclassified from AOCI to income (1)	178		4,193		3,653		—		8,024
Balance at end of period	$	( 857,875 )	$	( 98,951 )	$	( 11,989 )	$	—	$	( 968,815 )

Nine Months Ended September 30, 2024
Balance at beginning of period	$	( 652,518 )	$	( 95,472 )	$	9,181	$	—	$	( 738,809 )
Other comprehensive income (loss) before reclassifications	116,051		—		( 1,883 )		—		114,168
Amounts reclassified from AOCI to income (1)	67		10,023		10,795		—		20,885
Balance at end of period	$	( 536,400 )	$	( 85,449 )	$	18,093	$	—	$	( 603,756 )

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 )

(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, 2024 and 2023:


	Three Months Ended September 30,
(dollars in thousands)	2024		2023
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	$	( 76 )	$	( 241 )	Debt securities gains (losses), net
	19		63		Income tax (expense) benefit
	$	( 57 )	$	( 178 )	Net income
Amortization of unrealized losses on held-to-maturity securities transferred from available-for-sale	$	( 4,740 )	$	( 5,623 )	Interest income (expense)
	1,203		1,430		Income tax (expense) benefit
	$	( 3,537 )	$	( 4,193 )	Net income
Gains and losses on hedges Interest rate contracts	$	( 4,936 )	$	( 4,927 )	Interest income (expense)
	1,276		1,274		Income tax (expense) benefit
	$	( 3,660 )	$	( 3,653 )	Net income





Total reclassifications for the period	$	( 7,254 )	$	( 8,024 )	Net income

The following table summarizes the amounts reclassified out of each component of AOCI for the nine months ended September 30, 2024 and 2023:


	Nine Months Ended September 30,
(dollars in thousands)	2024		2023
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	$	( 90 )	$	( 5,440 )	Debt securities gains (losses), net
	23		1,407		Income tax (expense) benefit
	$	( 67 )	$	( 4,033 )	Net income
Amortization of unrealized losses on held-to-maturity securities transferred from available-for-sale	$	( 13,434 )	$	( 16,574 )	Interest income (expense)
	3,411		4,186		Income tax (expense) benefit
	$	( 10,023 )	$	( 12,388 )	Net income
Gains and losses on hedges Interest rate contracts	$	( 14,560 )	$	19,893	Interest income (expense)
	3,765		( 5,174 )		Income tax (expense) benefit
	$	( 10,795 )	$	14,719	Net income
Amortization of defined benefit pension items
Actuarial gains (losses)	$	—	$	182	Salaries and employee benefits
	—		( 45 )		Income tax (expense) benefit
	$	—	$	137	Net income

Total reclassifications for the period	$	( 20,885 )	$	( 1,565 )	Net income

NOTE 14 – INCOME TAXES

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)	2024			2023			2024			2023
Provision at statutory rate of 21%	$	38,867		$	40,358		$	103,810		$	122,352
Tax-exempt income:
Tax-exempt interest	( 4,871 )			( 4,625 )			( 14,856 )			( 13,716 )
Section 291/265 interest disallowance	927			675			2,768			1,593
Company-owned life insurance income	( 1,089 )			( 743 )			( 2,961 )			( 2,315 )
Tax-exempt income	( 5,033 )			( 4,693 )			( 15,049 )			( 14,438 )
State income taxes	7,485			8,163			18,965			24,856
Interim period effective rate adjustment	1,096			116			1,969			( 607 )
Tax credit investments - federal	( 3,619 )			( 2,071 )			( 9,780 )			( 7,122 )
Officer compensation limitation	765			1,040			3,021			3,120
Non-deductible FDIC premiums	2,462			1,949			6,241			6,096
Other, net	( 743 )			( 558 )			( 159 )			( 1,139 )
Income tax expense	$	41,280		$	44,304		$	109,018		$	133,118
Effective tax rate	22.3		%	23.1		%	22.1		%	22.9		%

Net Deferred Tax Assets

Net deferred tax assets are included in other assets on the balance sheet. At September 30, 2024, net deferred tax assets totaled $ 401.8 million, compared to $ 423.3 million at December 31, 2023. No valuation allowance was required on the Company’s deferred tax assets at September 30, 2024 or December 31, 2023.

The Company’s retained earnings at September 30, 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 $ 67.4 million at September 30, 2024 and $ 63.6 million at December 31, 2023. This federal net operating loss was acquired from the acquisition of Anchor BanCorp Wisconsin Inc. in 2016, First Midwest Bancorp, Inc. in 2022, and CapStar Financial Holdings, Inc. in 2024. If not used, the federal net operating loss carryforwards will begin expiring in 2032 and later. Old National has recorded state net operating loss carryforwards totaling $ 108.9 million at September 30, 2024 and $ 116.9 million at December 31, 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, 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, 2024 and December 31, 2023. Interest rate swaps, collars, and floors related to variable-rate commercial loan pools were designated as cash flow hedges totaling $ 1.8 billion notional amount at September 30, 2024 and $ 1.6 billion notional amount at December 31, 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 $ 1.1 billion notional amount at September 30, 2024 and $ 900.0 million notional amount at December 31, 2023. Interest rate swaps of certain available-for-sale investment securities were designated as fair value hedges totaling $ 998.1 million notional amount at both September 30, 2024 and December 31, 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, 2024						December 31, 2023
			Fair Value						Fair Value
(dollars in thousands)	Notional		Assets (1)		Liabilities (2)		Notional		Assets (1)		Liabilities (2)
Cash flow hedges
Interest rate swaps, collars, and floors on loan pools	$	1,800,000	$	18,627	$	3,876	$	1,600,000	$	10,472	$	6,014
Interest rate swaps on borrowings (3)	150,000		—		—		150,000		—		—
Fair value hedges
Interest rate swaps on investment securities (3)	998,107		—		—		998,107		—		—
Interest rate swaps on borrowings (3)	1,100,000		7,690		—		900,000		—		—
Total			$	26,317	$	3,876			$	10,472	$	6,014

(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, 2024
Interest rate contracts	Interest income/(expense)	$	24,495	Fixed-rate debt	Interest income/(expense)	$	( 24,645 )
Interest rate contracts	Interest income/(expense)	( 44,845 )		Fixed-rate investment securities	Interest income/(expense)	45,167
Total		$	( 20,350 )			$	20,522


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 )


Nine Months Ended September 30, 2024
Interest rate contracts	Interest income/(expense)	$	10,207	Fixed-rate debt	Interest income/(expense)	$	( 10,246 )
Interest rate contracts	Interest income/(expense)	( 16,161 )		Fixed-rate investment securities	Interest income/(expense)	16,454
Total		$	( 5,954 )			$	6,208


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

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


		Three Months Ended September 30,				Three Months Ended September 30,
(dollars in thousands)		2024		2023		2024		2023
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)	$	23,654	$	( 15,574 )	$	( 5,970 )	$	( 5,960 )
		Nine Months Ended September 30,				Nine Months Ended September 30,
		2024		2023		2024		2023
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)	$	( 2,540 )	$	4,302	$	( 17,661 )	$	17,481

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 $ 6.1 million will be reclassified to interest income and $ 15.8 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, 2024, the notional amounts of the interest rate lock commitments were $ 110.6 million and forward commitments were $ 154.3 million. At December 31, 2023, the notional amounts of the interest rate lock commitments were $ 25.2 million and forward commitments were $ 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 $ 6.2 billion at September 30, 2024 and $ 6.0 billion at December 31, 2023. These derivative contracts do not qualify for hedge accounting. These instruments include interest rate swaps 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, 2024						December 31, 2023
			Fair Value						Fair Value
(dollars in thousands)	Notional		Assets (1)		Liabilities (2)		Notional		Assets (1)		Liabilities (2)
Interest rate lock commitments	$	110,582	$	483	$	—	$	25,151	$	291	$	—
Forward mortgage loan contracts	154,287		—		19		39,529		—		566
Customer interest rate swaps	6,246,316		60,609		147,190		5,954,216		33,182		228,750
Counterparty interest rate swaps (3)	6,246,316		76,075		60,896		5,954,216		121,969		33,346
Customer foreign currency contracts	7,221		74		24		12,455		320		59
Counterparty foreign currency contracts	7,130		28		37		12,308		68		181
Total			$	137,269	$	208,166			$	155,830	$	262,902

(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 September 30,
(dollars in thousands)		2024		2023
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)	$	( 89 )	$	426
Mortgage contracts	Mortgage banking revenue	114		391
Foreign currency contracts	Other income/(expense)	( 27 )		( 3 )
Total		$	( 2 )	$	814

		Nine Months Ended September 30,
		2024		2023
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)	$	319	$	1,125
Mortgage contracts	Mortgage banking revenue	158		760
Foreign currency contracts	Other income/(expense)	( 108 )		( 16 )
Total		$	369	$	1,869

(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:



	September 30, 2024				December 31, 2023
(dollars in thousands)	Assets		Liabilities		Assets		Liabilities
Gross amounts recognized	$	163,586	$	212,042	$	166,302	$	268,916
Less: amounts offset in the Consolidated Balance Sheet	—		—		—		—
Net amount presented in the Consolidated Balance Sheet	163,586		212,042		166,302		268,916
Gross amounts not offset in the Consolidated Balance Sheet
Offsetting derivative positions	( 64,772 )		( 64,772 )		( 39,360 )		( 39,360 )
Cash collateral pledged	—		( 35,589 )		—		( 97,840 )
Net credit exposure	$	98,814	$	111,681	$	126,942	$	131,716

NOTE 16 – COMMITMENTS, CONTINGENCIES, AND FINANCIAL GUARANTEES

Litigation

At September 30, 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 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, 2024		December 31, 2023
Unfunded loan commitments	$	8,822,027	$	8,912,587
Standby letters of credit (1)	197,379		192,237

(1) Notional amount, which represents the maximum amount of future funding requirements. The carrying value was $ 1.7 million at September 30, 2024 and $ 1.3 million at December 31, 2023.

At September 30, 2024, approximately 4 % of the unfunded loan commitments had fixed rates, with the remainder having floating rates ranging from 0.00 % to 21.99 %. The allowance for unfunded loan commitments totaled $ 25.1 million at September 30, 2024 and $ 31.2 million at December 31, 2023.

Old National is a party in risk participation transactions of interest rate swaps, which had total notional amounts of $ 696.7 million at September 30, 2024 and $ 557.8 million at December 31, 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.

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).

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, 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)
Financial Assets
Equity securities	$	89,249	$	89,249	$	—	$	—
Investment securities available-for-sale:
U.S. Treasury	210,278		210,278		—		—
U.S. government-sponsored entities and agencies	1,294,278		—		1,294,278		—
Mortgage-backed securities - Agency	5,101,056		—		5,101,056		—
States and political subdivisions	511,565		—		511,565		—
Pooled trust preferred securities	11,157		—		11,157		—
Other securities	304,106		—		304,106		—
Loans held-for-sale	62,376		—		62,376		—
Derivative assets	163,586		—		163,586		—
Financial Liabilities
Derivative liabilities	212,042		—		212,042		—


			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)
Financial Assets
Equity securities	$	80,372	$	80,372	$	—	$	—
Investment securities available-for-sale:
U.S. Treasury	396,733		396,733		—		—
U.S. government-sponsored entities and agencies	1,231,264		—		1,231,264		—
Mortgage-backed securities - Agency	4,216,560		—		4,216,560		—
States and political subdivisions	535,260		—		535,260		—
Pooled trust preferred securities	11,337		—		11,337		—
Other securities	321,901		—		321,901		—
Loans held-for-sale	32,006		—		32,006		—
Derivative assets	166,302		—		166,302		—
Financial Liabilities
Derivative liabilities	268,916		—		268,916		—

Non-Recurring Basis

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


			Fair Value Measurements at September 30, 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)
Collateral Dependent Loans:
Commercial loans	$	32,051	$	—	$	—	$	32,051
Commercial real estate loans	147,158		—		—		147,158
Foreclosed Assets:
Commercial	1,075		—		—		1,075
Residential	244		—		—		244

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 $ 228.8 million, with a valuation allowance of $ 49.6 million at September 30, 2024. Old National recorded provision expense associated with these loans totaling $ 19.4 million and $ 33.2 million for the three and nine months ended September 30, 2024, respectively, compared to $ 2.1 million and $ 21.9 million for the three and nine months ended September 30, 2023, respectively.

Other real estate owned and other repossessed property is measured at fair value less costs to sell on a non-recurring basis and had a net carrying amount of $ 1.3 million at September 30, 2024. There were write-downs on other real estate owned totaling $ 0.1 million and $ 0.5 million for the three and nine months ended September 30, 2024, respectively, compared to $ 26 thousand and $ 0.1 million for the three and nine months ended September 30, 2023, respectively.

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


			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)
Collateral Dependent Loans:
Commercial loans	$	11,017	$	—	$	—	$	11,017
Commercial real estate loans	95,457		—		—		95,457
Foreclosed Assets:
Commercial real estate	1,669		—		—		1,669

At December 31, 2023, commercial and commercial real estate loans that are deemed collateral dependent had a principal amount of $ 134.3 million, with a valuation allowance of $ 27.9 million. Net carrying amount of other real estate owned and other repossessed property totaled $ 1.7 million at December 31, 2023.

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, 2024

Collateral Dependent Loans

Commercial loans

32,051

Discounted

Discount for type of property,

9 % - 50 % ( 26 %)

cash flow

age of appraisal, and current status

Commercial real estate loans

147,158

Discounted

Discount for type of property,

0 % - 32 % ( 15 %)

cash flow

age of appraisal, and current status

Foreclosed Assets

Commercial real estate

1,075

Fair value of

Discount for type of property,

28 % - 56 % ( 32 %)

collateral

age of appraisal, and current status

Residential (2)

244

Fair value of

Discount for type of property,

24 %

collateral

age of appraisal, and current status

December 31, 2023

Collateral Dependent Loans

Commercial loans

11,017

Discounted

Discount for type of property,

5 % - 37 % ( 27 %)

cash flow

age of appraisal, and current status

Commercial real estate loans

95,457

Discounted

Discount for type of property,

2 % - 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.

(2) There was only one foreclosed residential real estate property at September 30, 2024 with write-downs during the nine months ended September 30, 2024, so no range or weighted average is reported.

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 $ 0.7 million for three months ended September 30, 2024 and $ 1.5 million for the nine months ended September 30, 2024, compared to $ 0.4 million and $ 0.9 million for the three and nine months ended September 30, 2023, respectively.

Newly originated conforming fixed-rate and adjustable-rate first mortgage loans are intended for sale and are hedged with derivative instruments. Old National has elected the fair value option to mitigate accounting mismatches in cases where hedge accounting is complex and to achieve operational simplification. The fair value option was not elected for loans held for investment.

The difference between the aggregate fair value and the aggregate remaining principal balance for loans for which the fair value option has been elected was as follows:


(dollars in thousands)	Aggregate Fair Value		Difference		Contractual Principal
September 30, 2024
Loans held-for-sale	$	62,376	$	1,343	$	61,033
December 31, 2023
Loans held-for-sale	$	32,006	$	621	$	31,385

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)	Other Gains and (Losses)		Interest Income		Interest (Expense)		Total Changes in Fair Values Included in Current Period Earnings
Three Months Ended September 30, 2024
Loans held-for-sale	$	809	$	7	$	—	$	816

Three Months Ended September 30, 2023
Loans held-for-sale	$	( 327 )	$	12	$	—	$	( 315 )

Nine Months Ended September 30, 2024
Loans held-for-sale	$	712	$	13	$	( 5 )	$	720

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

Financial Instruments Not Carried at Fair Value

The carrying amounts and estimated fair values of financial instruments not carried at fair value were as follows:


			Fair Value Measurements at September 30, 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)
Financial Assets
Cash, due from banks, money market, and other interest-earning investments	$	1,191,570	$	1,191,570	$	—	$	—
Investment securities held-to-maturity:
U.S. government-sponsored entities and agencies	831,160		—		700,473		—
Mortgage-backed securities - Agency	984,770		—		854,316		—
State and political subdivisions	1,153,413		—		1,049,266		—

Loans, net:
Commercial	10,269,767		—		—		10,126,433
Commercial real estate	16,150,111		—		—		15,781,629
Residential real estate	6,736,408		—		—		6,170,208
Consumer credit	2,863,517		—		—		2,888,346
Accrued interest receivable	225,624		1,161		49,628		174,835
Financial Liabilities
Deposits:
Noninterest-bearing demand deposits	$	9,429,285	$	9,429,285	$	—	$	—
Checking, NOW, savings, and money market interest-bearing deposits	24,260,467		24,260,467		—		—
Time deposits	7,155,994		—		7,112,642		—
Federal funds purchased and interbank borrowings	135,263		135,263		—		—
Securities sold under agreements to repurchase	244,626		244,626		—		—
FHLB advances	4,471,153		—		4,502,601		—
Other borrowings	598,054		—		599,539		—
Accrued interest payable	65,836		—		65,836		—
Standby letters of credit	1,727		—		—		1,727

Off-Balance Sheet Financial Instruments
Commitments to extend credit	$	—	$	—	$	—	$	4,105


			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)
Financial Assets
Cash, due from banks, money market, and other interest-earning investments	$	1,175,058	$	1,175,058	$	—	$	—
Investment securities held-to-maturity:
U.S. government-sponsored entities and agencies	825,953		—		671,126		—
Mortgage-backed securities - Agency	1,029,131		—		881,994		—
State and political subdivisions	1,158,409		—		1,048,068		—
Loans, net:
Commercial	9,392,267		—		—		9,258,193
Commercial real estate	13,984,273		—		—		13,640,868
Residential real estate	6,678,606		—		—		5,579,999
Consumer credit	2,629,171		—		—		2,555,121
Accrued interest receivable	225,159		859		54,465		169,835
Financial Liabilities
Deposits:
Noninterest-bearing demand deposits	$	9,664,247	$	9,664,247	$	—	$	—
Checking, NOW, savings, and money market interest-bearing deposits	21,991,789		21,991,789		—		—
Time deposits	5,579,144		—		5,552,538		—
Federal funds purchased and interbank borrowings	390		390		—		—
Securities sold under agreements to repurchase	285,206		285,206		—		—
FHLB advances	4,280,681		—		4,090,954		—
Other borrowings	764,870		—		755,592		—
Accrued interest payable	57,094		—		57,094		—
Standby letters of credit	1,318		—		—		1,318

Off-Balance Sheet Financial Instruments
Commitments to extend credit	$	—	$	—	$	—	$	3,839

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

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

The following is an analysis and discussion of our results of operations for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023, and financial condition as of September 30, 2024 compared to December 31, 2023. This discussion and analysis should be read in conjunction with the consolidated financial statements and related notes, as well as our 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 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 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, including, but 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; the 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 the Merger; the potential impact of future business combinations on our performance and financial condition, including our ability to successfully integrate the businesses and the success of revenue-generating and cost reduction initiatives; failure or circumvention of our internal controls; operational risks or risk management failures by us or critical third parties, including without limitation with respect to data processing, information systems, cybersecurity, technological changes, vendor issues, business interruption, and fraud risks; significant changes in accounting, tax or regulatory practices or requirements; new legal obligations or liabilities; 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. Old National does not undertake an obligation to update these forward-looking statements to reflect events or 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.

FINANCIAL HIGHLIGHTS

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


	Three Months Ended
(dollars and shares in thousands, except per share data)	September 30,			June 30,			March 31,			December 31,			September 30,
	2024			2024			2024			2023			2023
Income Statement:
Net interest income	$	391,724		$	388,421		$	356,458		$	364,408		$	375,086
Taxable equivalent adjustment (1) (3)	6,144			6,340			6,253			6,100			5,837
Net interest income - taxable equivalent basis (3)	397,868			394,761			362,711			370,508			380,923
Provision for credit losses	28,497			36,214			18,891			11,595			19,068
Noninterest income	94,138			87,271			77,522			100,094			80,938
Noninterest expense	272,283			282,999			262,317			284,235			244,776
Net income available to common shareholders	139,768			117,196			116,250			128,446			143,842
Per Common Share Data:
Weighted average diluted common shares	317,331			316,461			292,207			292,029			291,717
Net income (diluted)	$	0.44		$	0.37		$	0.40		$	0.44		$	0.49
Cash dividends	0.14			0.14			0.14			0.14			0.14
Common dividend payout ratio (2)	32		%	38		%	35		%	32		%	29		%
Book value	$	19.20		$	18.28		$	18.24		$	18.18		$	17.07
Stock price	18.66			17.19			17.41			16.89			14.54
Tangible common book value (3)	11.97			11.05			11.10			11.00			9.87
Performance Ratios:
Return on average assets	1.08		%	0.92		%	0.98		%	1.09		%	1.22		%
Return on average common equity	9.40			8.17			8.74			10.20			11.39

Return on average tangible common equity (3)	15.96			14.07			14.93			18.11			20.18
Net interest margin (3)	3.32			3.33			3.28			3.39			3.49
Efficiency ratio (3)	53.83			57.17			58.34			59.05			51.66
Net charge-offs (recoveries) to average loans	0.19			0.16			0.14			0.12			0.24
Allowance for credit losses on loans to ending loans	1.05			1.01			0.95			0.93			0.93
Allowance for credit losses (4) to ending loans	1.12			1.08			1.03			1.03			1.03
Non-performing loans to ending loans	1.22			0.94			0.98			0.83			0.80
Balance Sheet:
Total loans	$	36,400,643		$	36,150,513		$	33,623,319		$	32,991,927		$	32,577,834
Total assets	53,602,293			53,119,645			49,534,918			49,089,836			49,059,448
Total deposits	40,845,746			39,999,228			37,699,418			37,235,180			37,252,676
Total borrowed funds	5,449,096			6,085,204			5,331,161			5,331,147			5,556,010
Total shareholders’ equity	6,367,298			6,075,072			5,595,408			5,562,900			5,239,537
Capital Ratios:
Risk-based capital ratios:
Tier 1 common equity	11.00		%	10.73		%	10.76		%	10.70		%	10.41		%
Tier 1	11.60			11.33			11.40			11.35			11.06
Total	12.94			12.71			12.74			12.64			12.32
Leverage ratio (to average assets)	9.05			8.90			8.96			8.83			8.70
Total equity to assets (averages)	11.60			11.31			11.32			10.81			10.88
Tangible common equity to tangible assets (3)	7.44			6.94			6.86			6.85			6.15
Nonfinancial Data:
Full-time equivalent employees	4,105			4,267			3,955			3,940			3,981
Banking centers	280			280			258			258			257

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

(2) Cash dividends per common share divided by net income per common share (basic).

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

(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)	2024			2023
Income Statement:
Net interest income	$	1,136,603		$	1,138,745
Taxable equivalent adjustment (1) (3)	18,737			17,328
Net interest income - taxable equivalent basis (3)	1,155,340			1,156,073
Provision for credit losses	83,602			47,292
Noninterest income	258,931			233,248
Noninterest expense	817,599			742,071
Net income available to common shareholders	373,214			437,411
Per Common Share Data:
Weighted average diluted common shares	308,605			291,809
Net income (diluted)	$	1.21		$	1.50
Cash dividends	0.42			0.42
Common dividend payout ratio (2)	35		%	28		%
Book value	$	19.20		$	17.07
Stock price	18.66			14.54
Tangible common book value (3)	11.97			9.87
Performance Ratios:
Return on average assets	0.99		%	1.25		%
Return on average common equity	8.78			11.66

Return on average tangible common equity (3)	15.00			20.85
Net interest margin (3)	3.31			3.59
Efficiency ratio (3)	56.37			51.89
Net charge-offs (recoveries) to average loans	0.16			0.19
Allowance for credit losses on loans to ending loans	1.05			0.93
Allowance for credit losses (4) to ending loans	1.12			1.03
Non-performing loans to ending loans	1.22			0.80
Balance Sheet:
Total loans	$	36,400,643		$	32,577,834
Total assets	53,602,293			49,059,448
Total deposits	40,845,746			37,252,676
Total borrowed funds	5,449,096			5,556,010
Total shareholders’ equity	6,367,298			5,239,537
Capital Ratios:
Risk-based capital ratios:
Tier 1 common equity	11.00		%	10.41		%
Tier 1	11.60			11.06
Total	12.94			12.32
Leverage ratio (to average assets)	9.05			8.70
Total equity to assets (averages)	11.41			10.95
Tangible common equity to tangible assets (3)	7.44			6.15
Nonfinancial Data:
Full-time equivalent employees	4,105			3,981
Banking centers	280			257

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

(2) Cash dividends per common share divided by net income per common share (basic).

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

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

NON-GAAP FINANCIAL MEASURES

The Company’s accounting and reporting policies conform to GAAP and general practices within the banking industry. As a supplement to GAAP, the Company provides non-GAAP performance results, which the Company believes are useful because they assist 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 merger-related charges associated with completed and pending acquisitions, separation expense, debt securities gains/losses, CECL Day 1 non-PCD provision expense, distribution of excess pension assets expense, FDIC special assessment expense, gain on sale of Visa Class B restricted shares, contract termination charges, 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 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 understanding of the Company’s business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP. In addition, these non-GAAP financial measures may differ from those used by other financial institutions to assess their business and performance. See the previously provided tables and the following reconciliations in the “Non-GAAP Reconciliations” section for details on the calculation of these measures to the extent presented herein.

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


	Three Months Ended
(dollars and shares in thousands, except per share data)	September 30,			June 30,			March 31,			December 31,			September 30,
	2024			2024			2024			2023			2023
Net income per common share:
Net income applicable to common shares	$	139,768		$	117,196		$	116,250		$	128,446		$	143,842
Adjustments:
Merger-related charges	6,860			19,440			2,908			5,529			6,257
Separation expense	2,646			—			—			—			—
Debt securities (gains) losses	76			(2)			16			825			241
CECL Day 1 non-PCD provision expense	—			15,312			—			—			—
Distribution of excess pension assets expense	—			—			13,318			—			—
FDIC special assessment	—			—			2,994			19,052			—
Gain on sale of Visa Class B restricted shares	—			—			—			(21,635)			—
Contract termination charge	—			—			—			4,413			—


Less: tax effect on net total adjustments (2)	(2,134)			(7,888)			(4,695)			(1,988)			(1,082)
Net income applicable to common shares, adjusted (1)	$	147,216		$	144,058		$	130,791		$	134,642		$	149,258
Weighted average diluted common shares outstanding	317,331			316,461			292,207			292,029			291,717
Net income per common share, diluted	$	0.44		$	0.37		$	0.40		$	0.44		$	0.49
Adjusted net income per common share, diluted (1)	$	0.46		$	0.46		$	0.45		$	0.46		$	0.51
Tangible common book value:
Shareholders’ common equity	$	6,123,579		$	5,831,353		$	5,351,689		$	5,319,181		$	4,995,818
Deduct: Goodwill and intangible assets	2,305,084			2,306,204			2,095,511			2,100,966			2,106,835

Tangible shareholders’ common equity (1)	$	3,818,495		$	3,525,149		$	3,256,178		$	3,218,215		$	2,888,983
Period end common shares	318,955			318,969			293,330			292,655			292,586
Tangible common book value (1)	11.97			11.05			11.10			11.00			9.87
Return on average tangible common equity:
Net income applicable to common shares	$	139,768		$	117,196		$	116,250		$	128,446		$	143,842
Add: Intangible amortization (net of tax) (2)	5,558			5,569			4,091			4,402			4,530
Tangible net income (1)	$	145,326		$	122,765		$	120,341		$	132,848		$	148,372




Average shareholders’ common equity	$	5,946,352		$	5,735,257		$	5,321,823		$	5,037,768		$	5,050,353
Deduct: Average goodwill and intangible assets	2,304,597			2,245,405			2,098,338			2,103,935			2,109,944

Average tangible shareholders’ common equity (1)	$	3,641,755		$	3,489,852		$	3,223,485		$	2,933,833		$	2,940,409
Return on average tangible common equity (1)	15.96		%	14.07		%	14.93		%	18.11		%	20.18		%
Net interest margin:
Net interest income	$	391,724		$	388,421		$	356,458		$	364,408		$	375,086
Taxable equivalent adjustment	6,144			6,340			6,253			6,100			5,837
Net interest income - taxable equivalent basis (1)	$	397,868		$	394,761		$	362,711		$	370,508		$	380,923
Average earning assets	$	47,905,463		$	47,406,849		$	44,175,079		$	43,701,283		$	43,617,456
Net interest margin (1)	3.32		%	3.33		%	3.28		%	3.39		%	3.49		%
Efficiency ratio:
Noninterest expense	$	272,283		$	282,999		$	262,317		$	284,235		$	244,776
Deduct: Intangible amortization expense	7,411			7,425			5,455			5,869			6,040
Adjusted noninterest expense (1)	$	264,872		$	275,574		$	256,862		$	278,366		$	238,736
Net interest income - taxable equivalent basis (1) (see above)	$	397,868		$	394,761		$	362,711		$	370,508		$	380,923
Noninterest income	94,138			87,271			77,522			100,094			80,938
Deduct: Debt securities gains (losses), net	(76)			2			(16)			(825)			(241)
Adjusted total revenue (1)	$	492,082		$	482,030		$	440,249		$	471,427		$	462,102
Efficiency ratio (1)	53.83		%	57.17		%	58.34		%	59.05		%	51.66		%
Tangible common equity to tangible assets:
Tangible shareholders’ equity (1) (see above)	$	3,818,495		$	3,525,149		$	3,256,178		$	3,218,215		$	2,888,983
Assets	$	53,602,293		$	53,119,645		$	49,534,918		$	49,089,836		$	49,059,448

Deduct: Goodwill and intangible assets	2,305,084			2,306,204			2,095,511			2,100,966			2,106,835

Tangible assets (1)	$	51,297,209		$	50,813,441		$	47,439,407		$	46,988,870		$	46,952,613
Tangible common equity to tangible assets (1)	7.44		%	6.94		%	6.86		%	6.85		%	6.15		%

(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)	2024			2023
Net income per common share:
Net income applicable to common shares	$	373,214		$	437,411
Adjustments:
Merger-related charges	29,208			23,187
Separation expense	2,646			—
Debt securities (gains) losses	90			5,440
CECL Day 1 non-PCD provision expense	15,312			—
Distribution of excess pension assets expense	13,318			—
FDIC special assessment	2,994			—


Louisville expenses	—			3,361
Property optimization charges	—			1,559
Less: tax effect on net total adjustments (2)	(14,717)			(6,373)
Net income applicable to common shares, adjusted (1)	$	422,065		$	464,585
Weighted average diluted common shares outstanding	308,605			291,809
Net income per common share, diluted	$	1.21		$	1.50
Adjusted net income per common share, diluted (1)	$	1.37		$	1.59
Tangible common book value:
Shareholders’ common equity	$	6,123,579		$	4,995,818
Deduct: Goodwill and intangible assets	2,305,084			2,106,835

Tangible shareholders’ common equity (1)	$	3,818,495		$	2,888,983
Period end common shares	318,955			292,586
Tangible common book value (1)	11.97			9.87
Return on average tangible common equity:
Net income applicable to common shares	$	373,214		$	437,411
Add: Intangible amortization (net of tax) (2)	15,218			13,714
Tangible net income (1)	$	388,432		$	451,125




Average shareholders’ common equity	$	5,668,827		$	5,001,437
Deduct: Average goodwill and intangible assets	2,216,437			2,115,953

Average tangible shareholders’ common equity (1)	$	3,452,390		$	2,885,484
Return on average tangible common equity (1)	15.00		%	20.85		%
Net interest margin:
Net interest income	$	1,136,603		$	1,138,745
Taxable equivalent adjustment	18,737			17,328
Net interest income - taxable equivalent basis (1)	$	1,155,340		$	1,156,073
Average earning assets	$	46,500,942		$	42,891,660
Net interest margin (1)	3.31		%	3.59		%
Efficiency ratio:
Noninterest expense	$	817,599		$	742,071
Deduct: Intangible amortization expense	20,291			18,286
Adjusted noninterest expense (1)	$	797,308		$	723,785
Net interest income - taxable equivalent basis (1) (see above)	$	1,155,340		$	1,156,073
Noninterest income	258,931			233,248
Deduct: Debt securities gains (losses), net	(90)			(5,440)
Adjusted total revenue (1)	$	1,414,361		$	1,394,761
Efficiency ratio (1)	56.37		%	51.89		%
Tangible common equity to tangible assets:
Tangible shareholders’ equity (1) (see above)	$	3,818,495		$	2,888,983
Assets	$	53,602,293		$	49,059,448

Deduct: Goodwill and intangible assets	2,305,084			2,106,835

Tangible assets (1)	$	51,297,209		$	46,952,613
Tangible common equity to tangible assets (1)	7.44		%	6.15		%

(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).

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 $54 billion at September 30, 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. Through our wholly-owned banking subsidiary and non-bank affiliates, we provide a wide range of services primarily throughout the Midwest and Southeast regions of the United States. In addition to providing extensive services in consumer and commercial banking, Old National offers comprehensive wealth management and capital markets services.

Net income applicable to common shares for the third quarter of 2024 was $139.8 million, or $0.44 per diluted common share, compared to $117.2 million, or $0.37 per diluted common share, for the second quarter of 2024.

Results for the third quarter of 2024 were impacted by $6.9 million in pre-tax merger-related expenses primarily related to the April 1, 2024 acquisition of CapStar and $2.6 million of separation expense associated with a mutual separation agreement with a former executive. Results for the second quarter of 2024 were impacted by $19.4 million of merger-related expenses and $15.3 million of CECL Day 1 non-PCD provision expense related to the allowance for credit losses established on acquired non-PCD loans. Excluding these items, net income applicable to common shares for the third quarter of 2024 was $147.2 million, or $0.46 per diluted common share on an adjusted basis 1 , compared to $144.1 million, or $0.46 per diluted common share on an adjusted basis 1 , for the second quarter of 2024.

Our results for the third quarter of 2024 reflected growth in total loans and deposits, increased net interest income and noninterest income, resilient credit quality, and disciplined expense management.

Deposits : Period-end total deposits increased $846.5 million, or 8.5% annualized, to $40.8 billion at September 30, 2024 compared to June 30, 2024.

Loans : Our loan balances, excluding loans held-for-sale, increased $250.1 million, or 2.8% annualized, to $36.4 billion at September 30, 2024 compared to June 30, 2024.

Net Interest Income : Net interest income increased $3.3 million to $391.7 million compared to the second quarter of 2024 driven by loan growth as well as higher asset yields and accretion, partly offset by higher funding costs.

Provision for Credit Losses : Provision for credit losses was $28.5 million compared to $36.2 million, or $20.9 million excluding $15.3 million of CECL Day 1 non-PCD provision expense related to the allowance for credit losses established on acquired non-PCD loans in the CapStar transaction in the second quarter of 2024.

Noninterest Income : Noninterest income increased $6.9 million to $94.1 million compared to the second quarter of 2024 reflecting higher service charges, mortgage fees, capital markets income, and other income.

Noninterest Expense : Noninterest expense decreased $10.7 million compared to the second quarter of 2024. For the third quarter of 2024, noninterest expense included $6.9 million of pre-tax merger-related expenses and $2.6 million of separation expense associated with a mutual separation agreement with a former executive compared to $19.4 million of merger-related expenses in the second quarter of 2024. Excluding these expenses, noninterest expense was $262.8 million for the third quarter of 2024, consistent with $263.6 million for the second quarter of 2024.

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

CAPSTAR TRANSACTION

On April 1, 2024, Old National completed its acquisition of CapStar, and its wholly-owned subsidiary, CapStar Bank. This partnership strengthens Old National’s Nashville, Tennessee presence and adds several new high-growth markets. At closing, CapStar had approximately $3.1 billion of total assets, $2.1 billion of total loans, and $2.6 billion of deposits. The consideration paid totaled $417.6 million and consisted of 24.0 million shares of Old National common stock. All system conversions related to the transaction were completed in early July 2024.

RESULTS OF OPERATIONS

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


(dollars in thousands, except per share data)	Three Months Ended September 30,						% Change		Nine Months Ended September 30,						% Change
	2024			2023					2024			2023
Income Statement Summary:
Net interest income	$	391,724		$	375,086		4.4	%	$	1,136,603		$	1,138,745		(0.2)	%
Provision for credit losses	28,497			19,068			49.4		83,602			47,292			76.8
Noninterest income	94,138			80,938			16.3		258,931			233,248			11.0
Noninterest expense	272,283			244,776			11.2		817,599			742,071			10.2
Net income applicable to common shareholders	139,768			143,842			(2.8)		373,214			437,411			(14.7)
Net income per common share - diluted	0.44			0.49			(10.2)		1.21			1.50			(19.3)
Other Data:
Return on average common equity	9.40		%	11.39		%			8.78		%	11.66		%

Return on average tangible common equity (1)	15.96			20.18					15.00			20.85
Efficiency ratio (1)	53.83			51.66					56.37			51.89
Tier 1 leverage ratio	9.05			8.70					9.05			8.70
Net charge-offs (recoveries) to average loans	0.19			0.24					0.16			0.19

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

Net Interest Income

Net interest income is the most significant component of our earnings, comprising 81% of revenues for the nine months ended September 30, 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.

The Federal Reserve decreased its interest rates during the third quarter of 2024. The Federal Reserve’s Federal Funds Rate is currently in a target range of 4.75% to 5.00%, with the Effective Federal Funds Rate of 4.83% at September 30, 2024 compared to 5.33% at September 30, 2023. Management actively takes balance sheet restructuring, derivative, and deposit pricing actions to help mitigate interest rate risk. See the section of this Item 7 titled “Market Risk” for additional information regarding this risk.

Loans typically generate more interest income than investment securities with similar maturities. Funding from client deposits generally costs less than wholesale funding sources. Factors such as general economic activity, Federal Reserve monetary policy, and price volatility of competing alternative investments can also exert significant influence on our ability to optimize our mix of assets and funding, net interest income, and net interest margin.

Net interest income is the excess of interest received from interest-earning assets over interest paid on interest-bearing liabilities. For analytical purposes, net interest income is presented in the table that follows, adjusted to a taxable equivalent basis to reflect what our tax-exempt assets would need to yield in order to achieve the same after-tax yield as a taxable asset. We used the current federal statutory tax rate in effect of 21% for all periods. This

analysis portrays the income tax benefits related to tax-exempt assets and helps to facilitate a comparison between taxable and tax-exempt assets. Management believes that it is a standard practice in the banking industry to present net interest margin and net interest income on a fully taxable equivalent basis and that it may enhance comparability for peer comparison purposes for both management and investors.

The following tables present the average balance sheet for each major asset and liability category, its related interest income and yield, or its expense and rate.


(Tax equivalent basis, dollars in thousands)	Three Months Ended September 30, 2024						Three Months Ended September 30, 2023
Earning Assets	Average Balance		Income (1) / Expense		Yield/ Rate		Average Balance		Income (1) / Expense		Yield/ Rate
Money market and other interest-earning investments	$	904,176	$	11,696	5.15	%	$	980,813	$	13,194	5.34	%
Investment securities:
Treasury and government sponsored agencies	2,255,629		21,851		3.87	%	2,376,864		23,037		3.88	%
Mortgage-backed securities	5,977,058		48,425		3.24	%	5,079,091		33,237		2.62	%
States and political subdivisions	1,668,454		14,042		3.37	%	1,737,037		14,220		3.27	%
Other securities	785,107		12,547		6.39	%	793,196		10,127		5.11	%
Total investment securities	10,686,248		96,865		3.63	%	9,986,188		80,621		3.23	%
Loans: (2)
Commercial	10,373,340		183,878		7.09	%	9,612,102		163,869		6.82	%
Commercial real estate	16,216,842		274,832		6.78	%	13,711,156		219,575		6.41	%
Residential real estate loans	6,833,597		67,084		3.93	%	6,712,269		62,775		3.74	%
Consumer	2,891,260		51,714		7.12	%	2,614,928		42,322		6.42	%
Total loans	36,315,039		577,508		6.36	%	32,650,455		488,541		5.98	%
Total earning assets	47,905,463		$	686,069	5.73	%	43,617,456		$	582,356	5.34	%
Deduct: Allowance for credit losses on loans	(366,667)						(300,071)
Non-Earning Assets
Cash and due from banks	413,583						382,755
Other assets	5,394,032						4,960,383
Total assets	$	53,346,411					$	48,660,523

Interest-Bearing Liabilities
Checking and NOW	$	7,551,264	$	29,344	1.55	%	$	7,515,439	$	25,531	1.35	%
Savings	4,860,161		5,184		0.42	%	5,414,775		4,268		0.31	%
Money market	11,064,433		106,148		3.82	%	7,979,999		65,549		3.26	%
Time deposits, excluding brokered deposits	5,928,241		64,435		4.32	%	4,229,692		37,110		3.48	%
Brokered deposits	1,829,218		24,616		5.35	%	1,183,228		14,970		5.02	%
Total interest-bearing deposits	31,233,317		229,727		2.93	%	26,323,133		147,428		2.22	%
Federal funds purchased and interbank borrowings	14,549		292		7.98	%	62,921		910		5.74	%
Securities sold under agreements to repurchase	239,524		612		1.02	%	302,305		710		0.93	%
FHLB advances	4,572,046		47,719		4.15	%	4,537,250		40,382		3.53	%
Other borrowings	754,544		9,851		5.19	%	841,307		12,003		5.66	%
Total borrowed funds	5,580,663		58,474		4.17	%	5,743,783		54,005		3.73	%
Total interest-bearing liabilities	$	36,813,980	$	288,201	3.11	%	$	32,066,916	$	201,433	2.49	%

Noninterest-Bearing Liabilities and Shareholders’ Equity
Demand deposits	$	9,371,698					$	10,338,267
Other liabilities	970,662						961,268
Shareholders’ equity	6,190,071						5,294,072
Total liabilities and shareholders’ equity	$	53,346,411					$	48,660,523

Net interest income - taxable equivalent basis			$	397,868	3.32	%			$	380,923	3.49	%
Taxable equivalent adjustment			(6,144)						(5,837)
Net interest income (GAAP)			$	391,724	3.27	%			$	375,086	3.44	%

(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, 2024						Nine Months Ended September 30, 2023
Earning Assets	Average Balance		Income (1) / Expense		Yield/ Rate		Average Balance		Income (1) / Expense		Yield/ Rate
Money market and other interest-earning investments	$	825,743	$	32,992	5.34	%	$	736,225	$	25,258	4.59	%
Investment securities:
Treasury and government sponsored agencies	2,275,607		66,648		3.91	%	2,266,177		58,923		3.47	%
Mortgage-backed securities	5,721,725		135,217		3.15	%	5,268,509		102,618		2.60	%
States and political subdivisions	1,678,504		42,308		3.36	%	1,771,155		43,306		3.26	%
Other securities	781,385		37,303		6.37	%	785,474		28,726		4.88	%
Total investment securities	10,457,221		281,476		3.59	%	10,091,315		233,573		3.09	%
Loans: (2)
Commercial	10,087,322		534,566		7.07	%	9,644,541		475,210		6.57	%
Commercial real estate	15,488,010		765,325		6.59	%	13,180,509		598,337		6.05	%
Residential real estate loans	6,826,809		197,770		3.86	%	6,626,551		181,592		3.65	%
Consumer	2,815,837		146,177		6.93	%	2,612,519		120,428		6.16	%
Total loans	35,217,978		1,643,838		6.22	%	32,064,120		1,375,567		5.72	%
Total earning assets	46,500,942		$	1,958,306	5.62	%	42,891,660		$	1,634,398	5.08	%
Deduct: Allowance for credit losses on loans	(337,168)						(301,909)
Non-Earning Assets
Cash and due from banks	402,213						412,998
Other assets	5,232,807						4,917,592
Total assets	$	51,798,794					$	47,920,341

Interest-Bearing Liabilities
Checking and NOW	$	7,627,029	$	88,994	1.56	%	$	7,793,561	$	69,248	1.19	%
Savings	4,976,361		15,455		0.41	%	5,791,780		9,745		0.22	%
Money market	10,571,821		302,921		3.83	%	6,577,317		120,917		2.46	%
Time deposits, excluding brokered deposits	5,327,361		168,453		4.22	%	3,660,156		79,032		2.89	%
Brokered deposits	1,375,231		55,149		5.36	%	879,886		32,053		4.87	%
Total interest-bearing deposits	29,877,803		630,972		2.82	%	24,702,700		310,995		1.68	%
Federal funds purchased and interbank borrowings	77,262		3,239		5.60	%	306,480		11,404		4.97	%
Securities sold under agreements to repurchase	261,818		2,168		1.11	%	351,362		2,389		0.91	%
FHLB advances	4,477,851		133,529		3.98	%	4,699,074		123,466		3.51	%
Other borrowings	823,746		33,058		5.36	%	806,575		30,071		4.98	%
Total borrowed funds	5,640,677		171,994		4.07	%	6,163,491		167,330		3.63	%
Total interest-bearing liabilities	$	35,518,480	$	802,966	3.02	%	$	30,866,191	$	478,325	2.07	%

Noninterest-Bearing Liabilities and Shareholders’ Equity
Demand deposits	$	9,396,081					$	10,864,375
Other liabilities	971,687						944,619
Shareholders’ equity	5,912,546						5,245,156
Total liabilities and shareholders’ equity	$	51,798,794					$	47,920,341

Net interest income - taxable equivalent basis			$	1,155,340	3.31	%			$	1,156,073	3.59	%
Taxable equivalent adjustment			(18,737)						(17,328)
Net interest income (GAAP)			$	1,136,603	3.26	%			$	1,138,745	3.54	%

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

(2) Includes loans held-for-sale.

The following table presents the dollar amount of changes in taxable equivalent net interest income attributable to changes in the average balances of assets and liabilities and the yields earned or rates paid.


	From Three Months Ended September 30, 2023 to Three Months Ended September 30, 2024						From Nine Months Ended September 30, 2023 to Nine Months Ended September 30, 2024
	Total Change (1)		Attributed to				Total Change (1)		Attributed to
(dollars in thousands)			Volume		Rate				Volume		Rate
Interest Income
Money market and other interest-earning investments	$	(1,498)	$	(1,027)	$	(471)	$	7,734	$	2,823	$	4,911
Investment securities (2)	16,244		5,999		10,245		47,903		9,160		38,743
Loans (3)	88,967		56,360		32,607		268,271		141,126		127,145
Total interest income	103,713		61,332		42,381		323,908		153,109		170,799
Interest Expense
Checking and NOW deposits	3,813		105		3,708		19,746		(1,702)		21,448
Savings deposits	916		(515)		1,431		5,710		(1,958)		7,668
Money market deposits	40,599		27,302		13,297		182,004		94,041		87,963
Time deposits, excluding brokered deposits	27,325		16,595		10,730		89,421		44,411		45,010
Brokered deposits	9,646		8,382		1,264		23,096		18,991		4,105
Federal funds purchased and interbank borrowings	(618)		(833)		215		(8,165)		(9,078)		913
Securities sold under agreements to repurchase	(98)		(154)		56		(221)		(675)		454
FHLB advances	7,337		299		7,038		10,063		(6,171)		16,234
Other borrowings	(2,152)		(1,199)		(953)		2,987		678		2,309
Total interest expense	86,768		49,982		36,786		324,641		138,537		186,104
Net interest income	$	16,945	$	11,350	$	5,595	$	(733)	$	14,572	$	(15,305)

(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 $2.8 million and $8.4 million during the three and nine months ended September 30, 2024, respectively, using the federal statutory rate in effect of 21%.

(3) Interest income on loans includes taxable equivalent adjustments of $3.4 million and $10.4 million during the three and nine months ended September 30, 2024, respectively, using the federal statutory rate in effect of 21%.

The increase in net interest income for the three months ended September 30, 2024 when compared to the same period in 2023 was driven by the acquisition of CapStar and loan growth as well as higher rates on loans, partially offset by higher balances and costs of average interest-bearing liabilities. The decrease in net interest income for the nine months ended September 30, 2024 when compared to the same period in 2023 was primarily due to higher balances and costs of average interest-bearing liabilities, substantially offset by loan growth as well as higher rates on loans. Accretion income associated with acquired loans and borrowings totaled $15.6 million and $32.3 million for the three and nine months ended September 30, 2024, respectively, compared to $7.5 million and $22.1 million for the same periods in 2023.

The decrease in the net interest margin on a fully taxable equivalent basis for the three and nine months ended September 30, 2024 compared to the same periods in 2023 was primarily due to higher costs of interest-bearing liabilities, partially offset by higher yields on interest earning assets. The yield on interest earning assets increased 39 basis points and the cost of interest-bearing liabilities increased 62 basis points in the three months ended September 30, 2024 compared to the same quarter a year ago. The yield on interest earning assets increased 54 basis points and the cost of interest-bearing liabilities increased 95 basis points in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. Accretion income represented 13 basis points and 9 basis points of the net interest margin in the three and nine months ended September 30, 2024, respectively, compared to 7 basis points in both the three and nine months ended September 30, 2023.

Average earning assets were $47.9 billion and $43.6 billion for the three months ended September 30, 2024 and 2023, respectively, an increase of $4.3 billion, or 10%, primarily due to loans and securities acquired in the CapStar transaction as well as strong loan growth. Average earning assets were $46.5 billion and $42.9 billion for the nine months ended September 30, 2024 and 2023, respectively, an increase of $3.6 billion, or 8%, primarily due to loans and securities acquired in the CapStar transaction as well as strong loan growth.

Average loans, including loans held-for-sale, increased $3.7 billion and $3.2 billion for the three and nine months ended September 30, 2024, respectively, when compared to the same periods in 2023 primarily due to loans acquired in the CapStar transaction as well as strong commercial real estate loan growth. Loans acquired in the CapStar transaction totaled $2.1 billion.

Average noninterest-bearing deposits decreased $1.0 billion while average interest-bearing deposits increased $4.9 billion for the three months ended September 30, 2024 when compared to the same period in 2023 reflecting a mix shift as a result of the current rate environment, deposits assumed in the CapStar transaction, and organic growth. Average noninterest-bearing deposits decreased $1.5 billion while average interest-bearing deposits increased $5.2 billion for the nine months ended September 30, 2024 when compared to the same period in 2023 reflecting a mix shift as a result of the current rate environment, deposits assumed in the CapStar transaction, and organic growth. Deposits assumed in the CapStar transaction totaled $2.6 billion.

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,						%
(dollars in thousands)	2024			2023			Change		2024			2023			Change
Provision for credit losses on loans	$	29,176		$	23,115		26.2	%	$	89,774		$	46,520		93.0	%
Provision (release) for credit losses on unfunded loan commitments	(679)			(4,047)			(83.2)		(6,172)			772			(899.5)

Total provision for credit losses	$	28,497		$	19,068		49.4	%	$	83,602		$	47,292		76.8	%

Net (charge-offs) recoveries on non-PCD loans	$	(13,996)		$	(20,143)		(30.5)	%	$	(29,878)		$	(28,870)		3.5	%
Net (charge-offs) recoveries on PCD loans	(3,478)			455			(864.4)		(13,391)			(17,339)			(22.8)
Total net (charge-offs) recoveries on loans	$	(17,474)		$	(19,688)		(11.2)	%	$	(43,269)		$	(46,209)		(6.4)	%
Net charge-offs (recoveries) to average loans	0.19		%	0.24		%	(20.2)	%	0.16		%	0.19		%	(14.7)

Total provision for credit losses on loans increased in the three and nine months ended September 30, 2024 compared to the same periods in 2023 due to credit migration and allowance for credit losses on individually evaluated loans. In addition, the provision for credit losses on loans in the nine months ended September 30, 2024 included $15.3 million to establish an allowance for credit losses on non-PCD loans acquired in the CapStar transaction. 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,				%
(dollars in thousands)	2024		2023		Change		2024		2023		Change
Wealth and investment services fees	$	29,117	$	26,687	9.1	%	$	86,779	$	80,128	8.3	%
Service charges on deposit accounts	20,350		18,524		9.9		57,598		53,278		8.1
Debit card and ATM fees	11,362		10,818		5.0		32,409		31,453		3.0
Mortgage banking revenue	7,669		5,063		51.5		19,211		12,628		52.1
Capital markets income	7,426		5,891		26.1		15,055		19,003		(20.8)
Company-owned life insurance	5,315		3,740		42.1		14,488		11,624		24.6
Debt securities gains (losses), net	(76)		(241)		(68.5)		(90)		(5,440)		(98.3)
Other income	12,975		10,456		24.1		33,481		30,574		9.5
Total noninterest income	$	94,138	$	80,938	16.3	%	$	258,931	$	233,248	11.0	%

Noninterest income increased $13.2 million and $25.7 million for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023 primarily due to the acquisition of CapStar on April 1, 2024. In addition, noninterest income for the nine months ended September 30, 2023 was impacted by $5.4 million of net losses on sales of debt securities.

Mortgage banking revenue increased $2.6 million and $6.6 million for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023 primarily due to higher mortgage originations and increased loan sales.

Capital markets income increased $1.5 million for the three months ended September 30, 2024 compared to the same period in 2023 primarily due to higher levels of commercial real estate client interest rate swap fees. Capital markets income decreased $3.9 million for the nine months ended September 30, 2024 compared to the same period in 2023 primarily due to lower levels of commercial real estate client interest rate swap fees.

Other income increased $2.5 million and $2.9 million for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023 primarily due to additional other income associated with the acquisition of CapStar, higher commercial loan fees, and higher income on equity securities.

Noninterest Expense

The following table details the components in noninterest expense:


	Three Months Ended September 30,				%		Nine Months Ended September 30,				%
(dollars in thousands)	2024		2023		Change		2024		2023		Change
Salaries and employee benefits	$	147,494	$	131,541	12.1	%	$	456,490	$	404,715	12.8	%
Occupancy	27,130		25,795		5.2		80,696		80,162		0.7
Equipment	9,888		8,284		19.4		27,263		23,394		16.5
Marketing	11,036		9,448		16.8		32,954		28,698		14.8
Technology	23,343		20,592		13.4		67,368		59,850		12.6
Communication	4,681		4,075		14.9		13,161		12,768		3.1
Professional fees	7,278		5,956		22.2		24,236		19,085		27.0
FDIC assessment	11,722		9,000		30.2		32,711		29,028		12.7
Amortization of intangibles	7,411		6,040		22.7		20,291		18,286		11.0
Amortization of tax credit investments	3,277		2,644		23.9		8,773		8,167		7.4

Other expense	19,023		21,401		(11.1)		53,656		57,918		(7.4)
Total noninterest expense	$	272,283	$	244,776	11.2	%	$	817,599	$	742,071	10.2	%

Noninterest expense for the three months ended September 30, 2024 included $6.9 million of merger-related expenses and $2.6 million of separation expense associated with a mutual separation agreement with a former

executive. Noninterest expense for the three months ended September 30, 2023 included $6.3 million of merger-related expenses. Excluding these expenses, noninterest expense increased to $262.8 million for the three months ended September 30, 2024, compared to $238.5 million for the three months ended September 30, 2023. This increase was driven by the additional operating costs associated with the acquisition of CapStar, as well as higher salary and employee benefits reflective of merit increases.

Noninterest expense for the nine months ended September 30, 2024 included $29.2 million of merger-related expenses, 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, $3.0 million for the FDIC special assessment, and $2.6 million of separation expense. Noninterest expense for the nine months ended September 30, 2023 included $23.2 million of merger-related expenses, $3.4 million of expenses related to the Louisville tragedy, and $1.6 million for property optimization charges. Excluding these expenses, noninterest expense increased to $769.4 million for the nine months ended September 30, 2024, compared to $714.0 million for the nine months ended September 30, 2023. This increase was driven by the additional operating costs associated with the acquisition of CapStar, as well as higher salary and employee benefits reflective of merit increases.

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 22.3% and 22.1% for the three and nine months ended September 30, 2024, respectively, compared to 23.1% and 22.9% for the three and nine months ended September 30, 2023, respectively. The decreases in the effective tax rates for the three and nine months ended September 30, 2024 compared to the same periods in 2023 was driven by decreases in pre-tax book income and state income taxes combined with an increase in tax credits. 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, 2024 based on the current estimate of the effective annual rate.

FINANCIAL CONDITION

Overview

At September 30, 2024, our assets were $53.6 billion, a $4.5 billion increase compared to assets of $49.1 billion at December 31, 2023. The increase was driven primarily by the acquisition of CapStar, as well as disciplined loan growth.

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 $48.0 billion at September 30, 2024, a $4.1 billion increase compared to earning assets of $43.9 billion at December 31, 2023.

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 based on fluctuating interest rates or changes in our funding requirements.

The investment securities portfolio, including equity securities, was $10.9 billion at September 30, 2024, compared to $10.2 billion at December 31, 2023. The increase was driven primarily by the acquisition of CapStar. Investment securities represented 23% of earning assets at both September 30, 2024 and December 31, 2023. At September 30, 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 $714.9 million and $869.5 million at September 30, 2024 and December 31, 2023, respectively. The investment securities held-to-maturity portfolio had net unrealized losses of $365.3 million and $412.3 million at September 30, 2024 and December 31, 2023, respectively.

The investment securities available-for-sale portfolio including securities hedges had an effective duration of 3.87 at September 30, 2024, compared to 4.24 at December 31, 2023. The total investment securities portfolio had an effective duration of 4.96 at September 30, 2024, compared to 5.35 at December 31, 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 3.63% and 3.59% for the three and nine months ended September 30, 2024, respectively, compared to 3.23% and 3.09% for the three and nine months ended September 30, 2023, respectively.

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)	September 30, 2024		December 31, 2023		$ Change		% Change
Commercial	$	10,408,095	$	9,512,230	$	895,865	9.4	%
Commercial real estate	16,356,216		14,140,629		2,215,587		15.7
Residential real estate	6,757,896		6,699,443		58,453		0.9
Consumer	2,878,436		2,639,625		238,811		9.0
Total loans	$	36,400,643	$	32,991,927	$	3,408,716	10.3	%

The following table presents the composition of the loan portfolio by state:


(dollars in thousands)	Commercial		Commercial Real Estate		Residential Real Estate		Consumer		Total Loans		Percent of Total
September 30, 2024
Illinois	$	2,910,766	$	3,802,335	$	1,367,764	$	566,494	$	8,647,359	24	%
Indiana	1,619,615		1,803,405		1,043,202		895,024		5,361,246		15	%
Minnesota	977,703		2,233,650		579,926		145,543		3,936,822		11	%
Wisconsin	892,295		2,189,295		478,409		136,959		3,696,958		10	%
Michigan	587,233		1,429,184		650,923		254,036		2,921,376		8	%
Tennessee	396,432		1,244,276		186,155		253,879		2,080,742		6	%
Kentucky	475,163		611,575		256,598		391,794		1,735,130		5	%
Florida	126,819		434,259		384,611		31,556		977,245		3	%
Texas	209,103		238,816		262,180		17,633		727,732		2	%
California	177,996		25,861		427,436		43,451		674,744		2	%
Ohio	264,786		337,452		5,653		16,977		624,868		2	%
Other	1,770,184		2,006,108		1,115,039		125,090		5,016,421		14	%
Total	$	10,408,095	$	16,356,216	$	6,757,896	$	2,878,436	$	36,400,643	100	%

Geographic location in the preceding table is determined by collateral location for real estate loans and borrower location for non-real estate loans.

Commercial and Commercial Real Estate Loans

Commercial and commercial real estate loans are the largest classifications within earning assets, representing 56% of earning assets at September 30, 2024, compared to 54% at December 31, 2023. The increase in commercial and commercial real estate loans at September 30, 2024 from December 31, 2023 was driven primarily by the acquisition of CapStar, as well as disciplined loan production that was well balanced across our market footprint and product lines.

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, 2024									December 31, 2023
(dollars in thousands)	Outstanding			Exposure (1)			Nonaccrual			Outstanding			Exposure (1)			Nonaccrual
By Industry:
Manufacturing	$	1,807,888		$	2,909,339		$	20,446		$	1,589,727		$	2,734,935		$	7,408
Health care and social assistance	1,625,990			1,962,637			280			1,567,286			1,949,250			7,390
Real estate rental and leasing	875,905			1,293,222			10,610			686,008			1,035,073			700
Wholesale trade	806,848			1,572,476			3,693			748,058			1,541,951			3,789
Construction	758,228			1,650,863			12,868			554,312			1,437,025			2,040
Finance and insurance	655,348			1,010,155			144			637,630			966,842			1
Professional, scientific, and technical services	558,928			960,659			5,582			458,133			821,738			3,825
Transportation and warehousing	549,155			709,404			18,282			453,630			703,976			1,746
Accommodation and food services	527,527			614,660			2,412			389,591			503,990			705
Retail trade	383,459			637,205			9,963			345,944			620,308			5,273
Administrative and support and waste management and remediation services	379,177			559,962			1,280			321,018			487,359			347
Educational services	266,385			383,724			5			263,539			406,867			7
Agriculture, forestry, fishing, and hunting	259,764			392,983			2,980			255,811			392,098			415
Other services	245,633			423,221			15,608			208,012			400,195			9,328
Public administration	194,259			256,286			—			216,939			285,963			—
Other	513,601			878,012			3,146			816,592			1,111,030			1,537
Total	$	10,408,095		$	16,214,808		$	107,299		$	9,512,230		$	15,398,600		$	44,511

By Loan Size:
Less than $200,000	3		%	3		%	3		%	3		%	3		%	5		%
$200,000 to $1,000,000	12			11			14			11			10			20
$1,000,000 to $5,000,000	24			25			52			24			25			48
$5,000,000 to $10,000,000	15			15			1			16			16			7
$10,000,000 to $25,000,000	29			27			30			31			28			20
Greater than $25,000,000	17			19			—			15			18			—
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, 2024						December 31, 2023
(dollars in thousands)	Outstanding		Exposure (1)		Nonaccrual		Outstanding		Exposure (1)		Nonaccrual
By Property Type:
Multifamily	$	5,636,684	$	6,864,789	$	72,936	$	4,794,605	$	6,422,311	$	6,050
Warehouse / Industrial	3,010,379		3,354,809		10,248		2,704,656		3,308,273		6,459
Retail	2,317,773		2,400,249		23,348		1,886,233		1,958,254		29,823
Office	2,173,702		2,323,437		59,403		1,948,430		2,112,157		58,111
Senior housing	945,911		976,626		53,943		848,903		947,168		41,632
Single family	538,282		554,764		6,456		450,560		476,946		3,187

Other (2)	1,733,485		2,038,709		22,931		1,507,242		1,824,177		15,530
Total	$	16,356,216	$	18,513,383	$	249,265	$	14,140,629	$	17,049,286	$	160,792

(1) Includes unfunded loan commitments.

(2) Other includes commercial development, agriculture real estate, hotels, self-storage, 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 27% of the commercial real estate portfolio is owner-occupied as of September 30, 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 September 30, 2024, the Company held $384.1 million of non-owner-occupied commercial real estate loans, or 1% of total loans, that mature within 18 months with an interest rate below 4%.

Residential Real Estate Loans

At September 30, 2024, residential real estate loans held in our loan portfolio were $6.8 billion, an increase of $58.5 million compared to December 31, 2023 driven primarily by the acquisition of CapStar. 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 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, increased $238.8 million to $2.9 billion at September 30, 2024 compared to December 31, 2023 driven primarily by the acquisition of CapStar.

Goodwill and Other Intangible Assets

Goodwill and other intangible assets at September 30, 2024 totaled $2.3 billion, an increase of $204.1 million compared to December 31, 2023 as a result of goodwill and other intangible assets recorded with the acquisition of CapStar.

Funding

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


(dollars in thousands)	September 30, 2024		December 31, 2023		$ Change		% Change
Deposits:
Noninterest-bearing demand	$	9,429,285	$	9,664,247	$	(234,962)	(2.4)	%
Interest-bearing:
Checking and NOW	7,815,463		7,331,487		483,976		6.6	%
Savings	4,781,447		5,099,186		(317,739)		(6.2)	%
Money market	11,663,557		9,561,116		2,102,441		22.0	%
Time deposits	7,155,994		5,579,144		1,576,850		28.3	%
Total deposits	40,845,746		37,235,180		3,610,566		9.7	%
Wholesale borrowings:
Federal funds purchased and interbank borrowings	135,263		390		134,873		N/M
Securities sold under agreements to repurchase	244,626		285,206		(40,580)		(14.2)	%
Federal Home Loan Bank advances	4,471,153		4,280,681		190,472		4.4	%
Other borrowings	598,054		764,870		(166,816)		(21.8)	%
Total wholesale borrowings	5,449,096		5,331,147		117,949		2.2	%
Total funding	$	46,294,842	$	42,566,327	$	3,728,515	8.8	%

The increase in total deposits was primarily due to deposits assumed in the CapStar transaction as well as organic growth. 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 12% at September 30, 2024 and 13% at December 31, 2023.

Capital

Shareholders’ equity totaled $6.4 billion at September 30, 2024 and $5.6 billion at December 31, 2023. Old National issued 24.0 million shares of Common Stock in conjunction with the acquisition of CapStar on April 1, 2024 totaling

$417.6 million in shareholders’ equity. Retained earnings and changes in unrealized gains (losses) on available-for-sale investment securities were partially offset by dividends during the nine months ended September 30, 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, 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.

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


	Regulatory Guidelines Minimum		Prompt Corrective Action "Well Capitalized" Guidelines		September 30, 2024		December 31, 2023

Tier 1 capital to total average assets (leverage ratio)	4.00	%	N/A	%	9.05	%	8.83	%
Common equity Tier 1 capital to risk-weighted total assets	7.00		N/A		11.00		10.70
Tier 1 capital to risk-weighted total assets	8.50		6.00		11.60		11.35
Total capital to risk-weighted total assets	10.50		10.00		12.94		12.64
Shareholders’ equity to assets	N/A		N/A		11.88		11.33

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


	Regulatory Guidelines Minimum		Prompt Corrective Action "Well Capitalized" Guidelines		September 30, 2024		December 31, 2023

Tier 1 capital to total average assets (leverage ratio)	4.00	%	5.00	%	8.95	%	8.99	%
Common equity Tier 1 capital to risk-weighted total assets	7.00		6.50		11.48		11.57
Tier 1 capital to risk-weighted total assets	8.50		8.00		11.48		11.57
Total capital to risk-weighted total assets	10.50		10.00		12.35		12.33

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, Enterprise Risk Committee of our Board, 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 2023 Annual Report on Form 10-K.

Credit Risk

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

Asset Quality

We lend to commercial and commercial real estate clients in many diverse industries including, among others, real estate rental and leasing, manufacturing, healthcare, wholesale trade, construction, and agriculture. Old National manages concentrations of credit exposure by industry, product, geography, client relationship, and loan size. At September 30, 2024, our average commercial loan size was approximately $725,000 and our average commercial real estate loan size was approximately $1,550,000. 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, 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 and Southeast regions of the United States.

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


(dollars in thousands)	September 30, 2024			December 31, 2023
Total nonaccrual loans	$	443,597		$	274,821
Total past due loans (90 days or more and still accruing)	1,177			961
Foreclosed assets	4,077			9,434
Total under-performing assets	$	448,851		$	285,216
Classified loans (includes nonaccrual, past due 90 days, and other problem loans)	$	1,519,017		$	875,140
Other classified assets (1)	59,485			48,930
Special mention loans	837,543			843,920
Total criticized and classified assets	$	2,416,045		$	1,767,990
Asset Quality Ratios:
Nonaccrual loans/total loans (2)	1.22		%	0.83		%

Under-performing assets/total loans (2)	1.23			0.86
Under-performing assets/total assets	0.84			0.58
Allowance for credit losses on loans/under-performing assets	84.85			107.85
Allowance for credit losses on loans/nonaccrual loans	85.85			111.93

(1) Includes investment securities that fell below investment grade rating.

(2) Loans exclude loans held-for-sale.

Under-performing assets increased to $448.9 million at September 30, 2024, compared to $285.2 million at December 31, 2023. Under-performing assets as a percentage of total loans at September 30, 2024 were 1.23%, a 37 basis point increase from 0.86% at December 31, 2023.

Nonaccrual loans increased $168.8 million from December 31, 2023 to September 30, 2024 including $33.6 million of nonaccrual loans acquired in the CapStar acquisition. Excluding these loans, nonaccrual loans increased

$135.2 million reflecting the migration of certain borrowers primarily due to asset quality rating policy changes and the impact of the higher interest rate environment. As a percentage of nonaccrual loans, the allowance for credit losses on loans was 85.85% at September 30, 2024, compared to 111.93% at December 31, 2023.

Total criticized and classified assets were $2.4 billion at September 30, 2024, an increase of $648.1 million from December 31, 2023 including $159.8 million of criticized and classified loans related to the CapStar acquisition. Excluding these loans, total criticized and classified assets increased $488.3 million reflecting the migration of certain borrowers primarily due to asset quality rating policy changes and the impact of the higher interest rate environment. Other classified assets include investment securities that fell below investment grade rating totaling $59.5 million at September 30, 2024, compared to $48.9 million at December 31, 2023.

Allowance for Credit Losses on Loans and Unfunded Commitments

Net charge-offs on loans totaled $17.5 million during the three months ended September 30, 2024, compared to $19.7 million for the same period in 2023. Annualized, net charge-offs to average loans were 0.19% and 0.24% for the three months ended September 30, 2024 and 2023, respectively. The three months ended September 30, 2024 included net charge-offs on PCD loans totaling 0.04% on an annualized basis of average loans, compared to net recoveries on PCD loans totaling (0.01)% on an annualized basis of average loans for the three months ended September 30, 2023. Net charge-offs on loans totaled $43.3 million during the nine months ended September 30, 2024, compared to $46.2 million for the same period in 2023. Annualized, net charge-offs to average loans were 0.16% and 0.19% for the nine months ended September 30, 2024 and 2023, respectively. The nine months ended September 30, 2024 and 2023 included net charge-offs on PCD loans totaling 0.05% and 0.07% on an annualized basis of average loans, respectively.

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 $380.8 million at September 30, 2024, compared to $307.6 million at December 31, 2023. The increase reflects $26.7 million of allowance for credit losses on acquired PCD loans established through acquisition accounting adjustments as well as $15.3 million through the provision for credit losses on loans in the nine months ended September 30, 2024 to establish an allowance for credit losses on non-PCD loans, both related to the CapStar acquisition. 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 $25.1 million at September 30, 2024, compared to $31.2 million at December 31, 2023, with the reduction driven primarily by a decrease in unfunded loan commitments that resulted from the funding of loans. We increased the allowance for credit losses on unfunded loans commitments by $1.8 million in the nine months ended September 30, 2024 as a result of the CapStar transaction.

See the section entitled “Risk Factors” in the Company’s 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 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 September 30, 2024.

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, 2024 and 2023:


	Immediate Rate Decrease									September 30, 2024 Forward Curve						Immediate Rate Increase
(dollars in thousands)	-300 Basis Points			-200 Basis Points			-100 Basis Points						Base			+100 Basis Points			+200 Basis Points			+300 Basis Points
September 30, 2024
Projected interest income:
Money market, other interest earning investments, and investment securities	$	737,961		$	807,095		$	865,971		$	866,677		$	918,494		$	973,828		$	1,020,305		$	1,065,415
Loans	3,158,639			3,608,455			4,040,454			4,067,305			4,452,342			4,850,245			5,244,460			5,637,989
Total interest income	3,896,600			4,415,550			4,906,425			4,933,982			5,370,836			5,824,073			6,264,765			6,703,404
Projected interest expense:
Deposits	612,510			926,094			1,239,973			1,103,710			1,569,797			1,906,464			2,227,439			2,548,426
Borrowings	317,486			408,663			506,110			496,282			596,492			687,039			777,281			867,539
Total interest expense	929,996			1,334,757			1,746,083			1,599,992			2,166,289			2,593,503			3,004,720			3,415,965
Net interest income	$	2,966,604		$	3,080,793		$	3,160,342		$	3,333,990		$	3,204,547		$	3,230,570		$	3,260,045		$	3,287,439
Change from base	$	(237,943)		$	(123,754)		$	(44,205)		$	129,443					$	26,023		$	55,498		$	82,892
% change from base	(7.43)		%	(3.86)		%	(1.38)		%	4.04		%				0.81		%	1.73		%	2.59		%

	Immediate Rate Decrease												Immediate Rate Increase
	-300 Basis Points			-200 Basis Points			-100 Basis Points			Base			+100 Basis Points			+200 Basis Points			+300 Basis Points
September 30, 2023
Projected interest income:
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	2,966,315			3,323,529			3,684,648			4,040,544			4,393,546			4,747,308			5,100,845
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:
Deposits	528,719			785,519			1,047,596			1,279,764			1,547,400			1,826,990			2,100,598
Borrowings	366,090			432,424			521,008			598,589			676,220			753,909			831,590
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	$	2,793,980		$	2,882,782		$	2,950,727		$	3,052,575		$	3,128,448		$	3,192,848		$	3,262,720
Change from base	$	(258,595)		$	(169,793)		$	(101,848)					$	75,873		$	140,273		$	210,145
% change from base	(8.47)		%	(5.56)		%	(3.34)		%				2.49		%	4.60		%	6.88		%

The following table illustrates the upper bound, Federal Funds Rate assumed in the simulation above at September 30, 2024 and 2023:


	September 30, 2024				September 30, 2023
Basis Point Change Scenario	Federal Funds Rate (1)		Month 12 (2)			Federal Funds Rate (1)		Month 12 (2)
+300	5.0	%	8.0	%		5.5	%	8.5	%
+200	5.0	%	7.0	%		5.5	%	7.5	%
+100	5.0	%	6.0	%		5.5	%	6.5	%
Base	5.0	%	5.0	%		5.5	%	5.5	%
-100	5.0	%	4.0	%		5.5	%	4.5	%
-200	5.0	%	3.0	%		5.5	%	3.5	%
-300	5.0	%	2.0	%		5.5	%	2.5	%

(1) Represents the upper bound, Federal Funds Rate.

(2) Represents the Federal Funds Rate in month 12 given a gradual, parallel “ramp” relative to the base implied forward scenario.

Our projected net interest income increased year over year driven by loan growth and asset repricing due to current interest rates and economic conditions. Our overall strategy is consistent period over period, as we continue to manage our balance sheet toward a neutral interest rate risk position in a disciplined manner.

A key element in the measurement and modeling of interest rate risk is the re-pricing assumptions of our transaction deposit accounts, which align with our approach to deposit pricing and are consistent period over period. 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 asset position with a fair value gain of $22.4 million at September 30, 2024, compared to a net asset position with a fair value gain of $4.5 million at December 31, 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, 2024.


(dollars in thousands)
Maturity Bucket	Amount		Rate
2024	$	3,015,267	4.76	%
2025	3,860,503		4.43
2026	123,720		2.05
2027	52,401		1.54
2028	16,666		1.49
2027 and beyond	87,437		0.52
Total	$	7,155,994	4.45	%

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, 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

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, 2024, Old National and its subsidiaries had the following availability of liquid funds and borrowings:


(dollars in thousands)	Parent Company		Subsidiaries
Available liquid funds:
Cash and due from banks	$	273,201	$	918,369
Unencumbered government-issued debt securities	—		1,543,928
Unencumbered investment grade municipal securities	—		192,872
Unencumbered corporate securities	—		39,893
Availability of borrowings*:
Amount available from Federal Reserve discount window	—		4,442,859

Amount available from Federal Home Loan Bank	—		7,110,521
Total available funds	$	273,201	$	14,248,442

* 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, 2024, Old National Bancorp’s other borrowings outstanding were $331.0 million. Management believes the Company has the ability to generate and obtain adequate amounts of liquidity to meet its requirements in the short-term and the long-term.

Federal banking laws regulate the amount of dividends that may be paid by Old National Bank to Old National Bancorp on an unconsolidated basis without obtaining prior regulatory approval. Prior regulatory approval is required if dividends to be declared in any year would exceed net earnings of the current year plus retained net profits for the preceding two years. Prior regulatory approval to pay dividends was not required in 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, 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, 2023. There have been no material changes in the Company’s application of critical accounting estimates since December 31, 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.

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 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.

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, 2023.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


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)
07/01/24 - 07/31/24	3,167	$	16.76	—	$	200,000,000
08/01/24 - 08/31/24	946	$	19.20	—	$	200,000,000
09/01/24 - 09/30/24	10,848	$	19.85	—	$	200,000,000
Total	14,961	$	19.15	—	$	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 or performance shares earned.

(2) On February 21, 2024, the Company’s Board of Directors approved a stock repurchase program, under which the Company is authorized to repurchase up to $200 million of its outstanding common stock 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, 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.

ITEM 6. EXHIBITS


Exhibit No .						Description



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

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

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

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

3.5						Amended and Restated By-Laws of Old National, amended February 21, 2024 (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 February 27, 2024).

10.1						Form of 2024 Relative TSR Performance Units Award Agreement between Old National and certain key associates pursuant to the Old National Bancorp Amended and Restated 2008 Incentive Compensation Plan, as further amended.

10.2						Form of 2024 ROATCE Performance Units Award Agreement between Old National and certain key associates pursuant to the Old National Bancorp Amended and Restated 2008 Incentive Compensation Plan, as further amended.

10.3						Form of 2024 Restricted Stock Award Agreement between Old National and certain key associates pursuant to the Old National Bancorp Amended and Restated 2008 Incentive Compensation Plan, as further amended.

10.4						Form of 2024 Restricted Stock Award Agreement between Old National and certain key associates pursuant to the Old National Bancorp Amended and Restated 2008 Incentive Compensation Plan, as further amended.

10.5						Mutual Separation Agreement dated August 28, 2024 by and between the Company and Brendon B. Falconer (incorporated by reference to Exhibit 10.2 of Old National’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 4, 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, 2024, formatted in inline XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (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, 2024, formatted in inline XBRL and contained in Exhibit 101.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


						OLD NATIONAL BANCORP
						(Registrant)

By:						/s/ John V. Moran, IV
						John V. Moran, IV
						Senior Executive Vice President and Chief Financial Officer
						Duly Authorized Officer and Principal Financial Officer

						Date: October 30, 2024

TABLE OF CONTENTS

Note 1 Basis Of Presentation Note 2 Recent Accounting Pronouncements Note 3 Acquisition and Divestiture Activity Note 4 Net Income Per Common Share Note 5 Investment Securities Note 6 Loans and Allowance For Credit Losses Note 7 Leases Note 8 Goodwill and Other Intangible Assets Note 9 Qualified Affordable Housing Projects and Other Tax Credit Investments Note 10 Securities Sold Under Agreements To Repurchase Note 11 Federal Home Loan Bank Advances Note 12 Other Borrowings Note 13 Accumulated Other Comprehensive Income (loss)Note 14 Income Taxes Note 15 Derivative Financial Instruments Note 16 Commitments, Contingencies, and Financial Guarantees Note 17 Fair Value Item 2. Management S Discussion and Analysis Of Financial Condition and Results Of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures Part II Item 1A. Risk Factors Item 2. Unregistered Sales Of Equity Securities and Use Of Proceeds Item 5. Other Information Item 6. Exhibits

Exhibits

ONB 10-Q Quarter ended Sept. 30, 2024

Exhibits