There are a number of risks and uncertainties that could adversely affect Old National’s business, financial condition, results of operations or cash flows, and access to liquidity, thereby affecting an investment in our Common Stock.
−Removed: As a result of Old National entering into the merger agreement with First Midwest, certain risk factors have been identified:
−Removed: Old National has incurred and expects to incur substantial costs related to the merger with First Midwest (the “merger”) and integration.
−Removed: Old National has incurred and expects to incur a number of non-recurring costs associated with the merger.
−Removed: These costs include legal, financial advisory, accounting, consulting and other advisory fees, retention, severance and employee benefit-related costs, public company filing fees and other regulatory fees, financial printing and other printing costs, closing, integration and other related costs.
−Removed: Some of these costs are payable by Old National regardless of whether or not the merger is completed.
−Removed: Combining Old National and First Midwest may be more difficult, costly or time-consuming than expected, and Old National may fail to realize the anticipated benefits of the merger.
−Removed: The success of the merger will depend, in part, on the ability to realize the anticipated cost savings from combining the businesses of Old National and First Midwest.
−Removed: To realize the anticipated benefits and cost savings from the merger, Old National and First Midwest must successfully integrate and combine their businesses in a manner that permits those cost savings to be realized without adversely affecting current revenues and future growth.
−Removed: If Old National and First Midwest are not able to successfully achieve these objectives, the anticipated benefits of the merger may not be realized fully or at all or may take longer to realize than expected.
−Removed: In addition, the actual cost savings of the merger could be less than anticipated, and integration may result in additional and unforeseen expenses.
−Removed: An inability to realize the full extent of the anticipated benefits of the merger and the other transactions contemplated by the merger agreement, as well as any delays encountered in the integration process, could have an adverse effect upon the revenues, levels of expenses and operating results of the combined company following the completion of the merger, which may adversely affect the value of the common stock of the combined company following the completion of the merger.
−Removed: Old National and First Midwest have operated and, until the completion of the merger, must continue to operate, independently.
−Removed: It is possible that the integration process could result in the loss of key employees, the disruption of each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the companies’ ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits and cost savings of the merger.
−Removed: Integration efforts between the companies may also divert management attention and resources.
−Removed: These integration matters could have an adverse effect on Old National during this transition period and on the combined company for an undetermined period after completion of the merger.
−Removed: Furthermore, the board of directors and executive leadership of the combined company will consist of former directors and executive officers from each of Old National and First Midwest.
−Removed: Combining the boards of directors and management teams of each company into a single board and a single management team could require the reconciliation of differing priorities and philosophies.
−Removed: With the increase in size of Old National’s business following the merger, Old National’s future success depends, in part, upon the ability of such management team to handle
−Removed: potential challenges related to the management and monitoring of new operations and associated increased costs and complexity.
−Removed: The combined company may be unable to retain Old National and/or First Midwest personnel successfully after the merger is completed.
−Removed: The success of the merger will depend in part on the combined company’s ability to retain the talent and dedication of key employees currently employed by Old National and First Midwest.
−Removed: It is possible that these employees may decide not to remain with Old National or First Midwest, as applicable, while the merger is pending or with the combined company after the merger is consummated.
−Removed: If Old National and First Midwest are unable to retain key employees, including management, who are critical to the successful integration and future operations of the companies, Old National and First Midwest could face disruptions in their operations, loss of existing clients, loss of key information, expertise or know-how and unanticipated additional recruitment costs.
−Removed: In addition, following the merger, if key employees terminate their employment, the combined company’s business activities may be adversely affected, and management’s attention may be diverted from successfully hiring suitable replacements, all of which may cause the combined company’s business to suffer.
−Removed: Old National and First Midwest also may not be able to locate or retain suitable replacements for any key employees who leave either company.
−Removed: The COVID-19 pandemic may delay and adversely affect the completion of the merger and the integration of the businesses of Old National and First Midwest.
−Removed: The COVID-19 pandemic has created economic and financial disruptions that adversely affected, and are likely to continue to adversely affect, the business, financial condition, liquidity, capital, and results of operations of Old National.
−Removed: If the effects of the COVID-19 pandemic cause a continued or extended decline in the economic environment and the financial results of Old National, or the business operations of Old National are further disrupted as a result of the COVID-19 pandemic, efforts to complete the merger and integrate the businesses of Old National and First Midwest may also be delayed and adversely affected.
−Removed: Failure to complete the merger could negatively impact Old National.
−Removed: If the merger is not completed for any reason, there may be various adverse consequences and Old National may experience negative reactions from the financial markets and from its clients and employees.
−Removed: For example, Old National’s business may have been impacted adversely by the failure to pursue other beneficial opportunities due to the focus of management on the merger, without realizing any of the anticipated benefits of completing the merger.
−Removed: Additionally, if the merger agreement is terminated, the market price of Old National common stock could decline to the extent that current market prices reflect a market assumption that the merger will be beneficial and will be completed.
−Removed: Old National also could be subject to litigation related to any failure to complete the merger or to proceedings commenced against Old National to perform its obligations under the merger agreement.
−Removed: If the merger agreement is terminated under certain circumstances, Old National may be required to pay a termination fee of $97 million to First Midwest.
−Removed: Additionally, Old National has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the merger agreement, as well as the costs and expenses of preparing, filing, printing, and mailing the joint proxy statement/prospectus, and all filing and other fees paid in connection with the merger.
−Removed: If the merger is not completed, Old National would have to pay these expenses without realizing the expected benefits of the merger.
−Removed: Old National is subject to business uncertainties and contractual restrictions while the merger is pending.
−Removed: Uncertainty about the effect of the merger on employees and clients may have an adverse effect on Old National.
−Removed: These uncertainties may impair Old National’s ability to attract, retain and motivate key personnel until the merger is completed, and could cause clients and others that deal with Old National to seek to change existing business relationships with Old National.
−Removed: In addition, subject to certain exceptions, Old National has agreed to operate its business in the ordinary course in all material respects and to refrain from taking certain actions that may adversely affect its ability to consummate the transactions contemplated by the merger agreement on a timely basis without the consent of First Midwest.
−Removed: These restrictions may prevent Old National from pursuing attractive business opportunities that may arise prior to the completion of the merger.
−Removed: Shareholder litigation related to the merger could prevent or delay the completion of the merger, result in the payment of damages or otherwise negatively impact the business and operations of Old National.
−Removed: Two lawsuits and four demand letters relating to the disclosures contained in the joint proxy statement/prospectus distributed to Old National shareholders in connection with the merger have been filed or delivered by alleged stockholders of First Midwest.
−Removed: Among other remedies, these lawsuits and demand letters, and additional litigation or demand letters related to the merger in the future, may seek information, damages and/or to enjoin the merger.
−Removed: While Old National believes that the claims asserted in the civil litigation are without merit, if any plaintiff were successful in obtaining an injunction prohibiting First Midwest or Old National from completing the merger or any other transactions contemplated by the merger agreement, then such injunction may delay or prevent the effectiveness of the merger and could result in costs to Old National, including costs in connection with the defense or settlement of any shareholder lawsuits filed in connection with the merger.
−Removed: Further, such lawsuits and demand letters and the defense or settlement of claims contained in any such lawsuits or arising out of any demand letters may have an adverse effect on the financial condition and results of operations of Old National.
−Removed: The merger agreement may be terminated in accordance with its terms and the merger may not be completed.
−Removed: The merger agreement is subject to a number of conditions which must be fulfilled in order to complete the merger.
−Removed: Those conditions include:
−Removed: (i) approval by First Midwest stockholders of the First Midwest merger proposal and the approval by Old National shareholders of the Old National merger proposal at each company’s respective special meeting held on September 15, 2021, which approvals were obtained;
−Removed: (ii) authorization for listing on NASDAQ of the shares of Old National common stock and new Old National preferred stock to be issued in the merger, subject to official notice of issuance;
−Removed: (iii) the receipt of required regulatory approvals, including the approval of the OCC and the Federal Reserve, both of which have been obtained;
−Removed: and (iv) the absence of any order, injunction, decree or other legal restraint preventing the completion of the merger, the subsequent merger of First Midwest Bank and Old National Bank (the “bank merger”) or any of the other transactions contemplated by the merger agreement or making the completion of the merger, the bank merger or any of the other transactions contemplated by the merger agreement illegal.
−Removed: Each party’s obligation to complete the merger is also subject to certain additional customary conditions, including (a) subject to applicable materiality standards, the accuracy of the representations and warranties of the other party, (b) the performance in all material respects by the other party of its obligations under the merger agreement, (c) the receipt by each party of an opinion from its counsel to the effect that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986 and (d) the execution and delivery of the bank merger agreement.
−Removed: These conditions to the closing may not be fulfilled in a timely manner or at all, and, accordingly, the merger may not be completed.
−Removed: In addition, the parties can mutually decide to terminate the merger agreement at any time, before or after the requisite shareholder and stockholder approvals, or Old National or First Midwest may elect to terminate the merger agreement in certain other circumstances.
−Removed: The merger agreement limits Old National’s abilities to pursue alternatives to the merger and may discourage other companies from trying to acquire Old National.
−Removed: The merger agreement contains “no shop” covenants that restrict Old National’s ability to, directly or indirectly, among other things, initiate, solicit, knowingly encourage or knowingly facilitate, inquiries or proposals with respect to, or, subject to certain exceptions generally related to the exercise of fiduciary duties by Old National’s board of directors, engage in any negotiations concerning, or provide any confidential or non-public information or data relating to, any alternative acquisition proposals.
−Removed: These provisions, which include a $97 million termination fee payable under certain circumstances, may discourage a potential third-party acquirer that might have an interest in acquiring all or a significant part of Old National from considering or proposing that acquisition.
−Removed: Old National’s Enterprise Risk Management program is an enterprise-wide framework for identifying, managing, mitigating, monitoring, aggregating, and reporting risks.
−Removed: The following major risks identified by Old National’s Enterprise Risk Management Program are described below:
−Removed: strategic, financial, and reputational;
−Removed: market, interest rate, and liquidity;
−Removed: and legal, regulatory, and compliance.
Strategic, Financial, and Reputational Risks
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high unemployment;
−Removed: natural disasters;
+Added: natural disasters, the severity and frequency of which are increasing as a result of climate change;
terrorist acts;
or a combination of these or other factors.
−Removed: An economic downturn, sustained high unemployment levels, or stock market volatility may negatively impact our operating results and have a negative effect on the ability of our borrowers to make timely repayments of their loans, increasing the risk of loan defaults and losses.
+Added: An economic downturn, sustained high unemployment levels, stock market volatility, and/or high levels of inflation (such as the market volatility and inflation the United States economy experienced during 2022) has in the past negatively affected, and in the future may negatively affect, our operating results and have had, or may have, a negative effect on the ability of our borrowers to make timely repayments of their loans, increasing the risk of loan defaults and losses.
If the forecasts of economic conditions and other economic predictions are not accurate, we may face challenges in accurately estimating the ability of our borrowers to repay their loans.
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Further, because of the impact of such increased credit losses on earnings and capital, our ability to make loans and pay dividends may be substantially diminished.
−Removed: Changes in economic or political conditions could adversely affect Old National’s earnings, if the ability of Old National’s borrowers to repay loans, or the value of the collateral securing such loans, declines.
+Added: Changes in economic or political conditions have adversely affected, and may continue to adversely affect, Old National’s earnings, if the ability of Old National’s borrowers to repay loans, or the value of the collateral securing such loans, declines.
Old National’s success depends, to a certain extent, upon economic or political conditions, local and national, as well as governmental monetary policies.
−Removed: Conditions such as recession, unemployment, changes in interest rates, inflation, money supply, and other factors beyond Old National’s control may adversely affect its asset quality, deposit levels, and loan demand and, therefore, Old National’s earnings.
+Added: Conditions such as recession, unemployment, changes in interest rates, inflation, money supply, and other factors beyond Old National’s control have in the past adversely affected, and may continue to adversely affect, Old National’s asset quality, deposit levels, and loan demand and, therefore, Old National’s earnings.
Because Old National has a significant amount of commercial real estate loans, decreases in real estate values could adversely affect the value of property used as collateral.
Adverse changes in the economy may also have a negative effect on the ability of Old National’s borrowers to make timely repayments of their loans, which would have an adverse impact on Old National’s earnings.
−Removed: In addition, substantially all of Old National’s loans are to individuals and businesses in Old National’s market area.
−Removed: Consequently, any economic decline in Old National’s primary market areas, which include Indiana, Kentucky, Michigan, Minnesota, and Wisconsin, could have an adverse impact on Old National’s earnings.
−Removed: Old National’s business, financial condition, liquidity, capital, and results of operations have been, and may continue to be, adversely affected by the COVID-19 pandemic .
−Removed: The COVID-19 pandemic has created economic and financial disruptions that have adversely affected, and are likely to continue to adversely affect, the Company’s business, financial condition, liquidity, loans, asset quality, capital, and results of operations.
−Removed: The extent to which the COVID-19 pandemic will continue to negatively affect the Company will depend on future developments that are highly uncertain and cannot be predicted and many of which are outside of the Company’s control.
−Removed: These future developments may include the scope and duration of the COVID-19 pandemic, the emergence of new variants of COVID-19, the possibility of future resurgences of the COVID-19 pandemic, the continued effectiveness of the Company’s business continuity plan including work-from-home arrangements and staffing at branches and certain other facilities, the direct and indirect impact of the COVID-19 pandemic on the Company’s employees, clients, counterparties and service providers, as well as on other market participants, actions taken, or that may yet be taken, by governmental authorities and other third parties in response to the COVID-19 pandemic, and the effectiveness and public acceptance of vaccines for COVID-19.
−Removed: Although financial markets have largely rebounded from the significant declines that occurred earlier in the pandemic and global economic conditions showed signs of improvement during the second half of 2020 and throughout 2021, many of the circumstances that arose or became more pronounced after the onset of the COVID-19 pandemic persist, including:
−Removed: • supply chain issues remain unresolved for longer than anticipated and decreased consumer and business confidence and economic activity, leading to certain lower loan demand and an increased risk of loan delinquencies, defaults, and foreclosures;
−Removed: • ratings downgrades, credit deterioration and defaults in many industries, including, but not limited to, recreation and entertainment, hotels, and restaurants, as well as across consumer unsecured installment loans;
−Removed: • a decrease in the rates and yields on U.S.
−Removed: Treasury securities, which may lead to further decreased net interest income;
−Removed: • volatility in financial and capital markets, interest rates, and exchange rates;
−Removed: • declines in collateral values;
−Removed: • increased demands on capital and liquidity;
−Removed: • a reduction in the value of the assets that the Company manages or otherwise administers or services for others, affecting related fee income and demand for the Company’s services;
−Removed: • heightened cybersecurity, information security, and operational risks as cybercriminals attempt to profit from the disruption resulting from the pandemic given increased online and remote activity, including as a result of work-from-home arrangements;
−Removed: • disruptions to business operations experienced by counterparties and service providers;
−Removed: • increased risk of business disruption if our employees are unable to work effectively because of illness, quarantines, government actions, failures in systems or technology that disrupt work-from-home arrangements, or other effects of the COVID-19 pandemic;
−Removed: • decreased demands for our products and services.
−Removed: As a result, our credit, operational, and certain other risks are generally expected to remain elevated until the COVID-19 pandemic subsides.
−Removed: Depending on the duration and severity of the COVID-19 pandemic going forward, the conditions noted above could continue for an extended period and these or other adverse developments may occur or reoccur.
−Removed: Governmental authorities have taken unprecedented measures both to contain the spread of the COVID-19 pandemic and to provide economic assistance to individuals and businesses, stabilize the markets, and support economic growth.
−Removed: The Company also faces an increased risk of litigation and governmental and regulatory scrutiny as a result of the effects of the COVID-19 pandemic and actions governmental authorities take in response to the COVID-19 pandemic.
−Removed: Furthermore, various government programs such as the U.S.
−Removed: Small Business Administration’s PPP are complex and our participation may lead to litigation and governmental, regulatory and third party scrutiny, negative publicity, and damage to our reputation.
−Removed: The length of the COVID-19 pandemic and the efficacy of the extraordinary measures being put in place to address it are unknown.
−Removed: There are no comparable recent events that provide guidance as to the economic recovery from the effects of the COVID-19 pandemic or the effect the spread of COVID-19 as a global pandemic may have.
−Removed: As a result of the COVID-19 pandemic, the Company has experienced and may continue to experience draws on lines of credit, reduced net interest income and net interest margin, reduced revenues in its fee-based businesses, and increased client defaults, including defaults on unsecured loans, resulting in overall declines in credit quality and higher credit loss expense.
−Removed: Even after the COVID-19 pandemic subsides, the U.S.
−Removed: economy may continue to experience a recession, and the Company anticipates that its businesses could be materially and adversely affected by a prolonged recession.
−Removed: To the extent the pandemic adversely affects the Company’s business, financial condition, liquidity, capital, loans, asset quality, or results of operations, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section of the Form 10-K.
−Removed: Acquisitions may not produce revenue enhancements or cost savings at levels or within timeframes originally anticipated and may result in unforeseen integration difficulties and dilution to existing shareholder value.
−Removed: We have acquired, and expect to continue to acquire, other financial institutions or parts of those institutions in the future, and we may engage in de novo banking center expansion.
+Added: Supply chain constraints, robust demand and labor shortages have led to persistent inflationary pressures throughout the economy.
+Added: Volatility and uncertainty related to inflation and its effects, which could potentially contribute to poor economic conditions, may enhance some of the risks described in this section.
+Added: For example, higher inflation could reduce demand for our products, adversely affect the creditworthiness of our borrowers or result in lower values for our interest-earning assets and investment securities.
+Added: Any of these effects, or others that we are not able to predict, could adversely affect our financial condition or results of operations.
+Added: Economic conditions, financial markets and inflationary pressures may be adversely affected by the impact of current or anticipated geopolitical uncertainties, military conflicts, including Russia’s invasion of Ukraine, pandemics, including the COVID-19 pandemic, and global, national and local responses to such events by governmental authorities and other third parties.
+Added: These unpredictable events could create, increase or prolong economic and financial disruptions and volatility that adversely affect the Company’s business, financial condition, capital and results of operations.
+Added: Old National’s regional concentrations expose it to adverse economic conditions in the locations in which Old National operates.
+Added: Substantially all of Old National’s loans are to individuals and businesses in Old National’s market areas in the Midwest region.
+Added: Therefore, the Company is, or in the future may be, particularly vulnerable to adverse changes in economic conditions in the Midwest region.
+Added: The credit quality of the Company’s borrowers may deteriorate for a number of reasons that are outside the Company’s control, including as a result of prevailing economic and market conditions and asset valuations.
+Added: The trends and risks affecting borrower credit quality, particularly in the Midwest region, have caused, and in the future may cause, the Company to experience impairment charges, which are reductions in the recoverable value of an asset, increased purchase demands, wherein customers make withdrawals with minimum notice, higher costs (e.g., servicing, foreclosure, property maintenance), additional write-downs and losses and a potential impact to engage in lending transactions based on a reduction of customer deposits, which could have a material adverse effect on the Company’s business, financial condition and results of operations.
+Added: Mergers and acquisitions may not produce revenue enhancements or cost savings at levels or within timeframes originally anticipated and may result in unforeseen integration difficulties and dilution to existing shareholder value.
+Added: We have acquired, and expect to continue to acquire, other financial institutions or parts of those institutions and other businesses related to banking in the future, and we may engage in de novo banking center expansion.
We may also consider and enter into new lines of business or offer new products or services.
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There can be no assurance that integration efforts for any mergers or acquisitions will be successful or that, after giving effect to the merger or acquisition, we will achieve profits comparable to, or better than, our historical experience.
−Removed: Also, we may issue equity securities in connection with acquisitions, which could cause ownership and economic dilution to our current shareholders.
−Removed: Acquisitions and mergers involve a number of expenses and risks, including:
+Added: We have issued, and may in the future issue, equity securities in connection with mergers and acquisitions, which have caused, and could in the future cause additional, ownership and economic dilution to our current shareholders.
+Added: In addition, mergers and acquisitions may involve the payment of a premium over book and market values and, therefore, some dilution of the Company's tangible book value and net income per common share may occur in connection with any future transaction.
+Added: Acquisitions and mergers involve a number of other expenses and risks, including:
• the time and costs associated with identifying potential new markets, as well as acquisition and merger targets;
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• the time and costs of evaluating new markets, hiring experienced local management, and opening new offices, and the time lags between these activities and the generation of sufficient assets and deposits to support the costs of the expansion;
−Removed: • our ability to finance an acquisition and possible dilution to our existing shareholders;
+Added: • our ability to finance an acquisition or merger and possible dilution to our existing shareholders;
• the diversion of our management’s attention to the negotiation and execution of a transaction, and the integration of the operations and personnel of the combined businesses;
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• the introduction of new products and services into our business;
−Removed: • the incurrence and possible impairment of goodwill associated with an acquisition and possible adverse short-term effects on our results of operations;
+Added: • the incurrence and possible impairment of goodwill or other intangible assets associated with an acquisition or merger and possible adverse short-term effects on our results of operations;
• closing delays and increased expenses related to the resolution of lawsuits filed by shareholders of target institutions;
• the risk of loss of key employees and clients.
−Removed: Old National must generally receive federal regulatory approval before it can acquire a bank or bank holding company.
−Removed: Old National cannot be certain when or if, or on what terms and conditions, any required regulatory
−Removed: approvals will be granted.
−Removed: Old National may be required to sell banks or banking centers as a condition to receiving regulatory approval.
−Removed: Future acquisitions could be material to Old National and it may issue additional shares of stock to pay for those acquisitions, which would dilute current shareholders’ ownership interests.
+Added: Furthermore, failure to realize the expected revenue increases, cost savings, increases in geographic or product presence, or other projected benefits from an acquisition or merger could have a material adverse effect on the Company's financial condition and results of operations.
+Added: Mergers and acquisitions may be delayed, impeded, or prohibited due to regulatory issues.
+Added: Mergers and acquisitions by financial institutions, including by the Company, are subject to approval by a variety of federal and state regulatory agencies.
+Added: The process for obtaining these required regulatory approvals is complex and involves a comprehensive application review process.
+Added: Regulatory approvals could be delayed, impeded, restrictively conditioned or denied due to existing or new regulatory issues the Company may have with regulatory agencies, including, without limitation, issues related to BSA compliance, CRA issues, fair lending laws, fair housing laws, consumer protection laws, unfair, deceptive, or abusive acts or practices regulations and other laws and regulations.
+Added: Over the past several years, mergers of banking organizations have encountered greater regulatory, governmental and community scrutiny and have taken substantially longer to receive the necessary regulatory approvals and other required governmental clearances than in the past.
+Added: The Company may fail to pursue, evaluate, or complete strategic and competitively significant merger and acquisition opportunities as a result of its inability, or perceived or anticipated inability, to obtain regulatory approvals in a timely manner, under reasonable conditions, or at all.
+Added: Difficulties associated with potential mergers and acquisitions that may result from these factors could have a material adverse effect on our business, financial condition and results of operations.
Our accounting estimates and risk management processes rely on analytical and forecasting models.
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Our competitors may have substantially greater resources and lending limits than Old National does and may offer services that Old National does not or cannot provide.
−Removed: Some of our nonfinancial institution competitors may have fewer regulatory constraints, broader geographic service areas, and, in some cases, lower cost structures.
+Added: Some of our nonfinancial institution competitors may have fewer regulatory constraints, broader geographic service areas, and, in some cases, lower cost structures and, as a result, may be able to compete more effectively for business.
+Added: In particular, the activity of marketplace lenders and
+Added: other FinTechs has grown significantly over recent years and is expected to continue to grow.
+Added: FinTechs have and may continue to offer bank or bank-like products.
+Added: For example, a number of FinTechs have applied for, and in some cases received, bank or industrial loan charters.
+Added: In addition, other FinTechs have partnered with existing banks to allow them to offer deposit products to their customers.
+Added: Regulatory changes may also make it easier for FinTechs to partner with banks and offer deposit products.
+Added: Other recent regulation has reduced the regulatory burden of large bank holding companies, and raised the asset thresholds at which more onerous requirements apply, which could cause certain large bank holding companies with less than $250 billion in total consolidated assets, which were previously subject to more stringent enhanced prudential standards, to become more competitive or to pursue expansion more aggressively.
+Added: There is also increased competition by out-of-market competitors through online and mobile channels.
+Added: In addition, the emergence, adoption and evolution of new technologies that do not require intermediation, including distributed ledgers, as well as advances in automation, could significantly affect competition for financial services.
Old National’s profitability depends upon our continued ability to compete successfully in our market area.
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Competition for the best employees in most of the activities we engage in can be intense.
−Removed: We may not be able to hire the best people for key
−Removed: roles or retain them.
−Removed: In addition, the transition to increased work-from-home arrangements, which is likely to survive the COVID-19 pandemic for many companies, may exacerbate the challenges of attracting and retaining talented and diverse employees as job markets may be less constrained by physical geography.
+Added: We may not be able to hire the best people for key roles or retain them.
+Added: In addition, the transition to increased work-from-home and hybrid work arrangements, which are likely to survive the COVID-19 pandemic for many companies, may exacerbate the challenges of attracting and retaining talented and diverse employees as job markets may be less constrained by physical geography.
Our current or future approach to in-office and work-from-home arrangements may not meet the needs or expectations of our current or prospective employees or may not be perceived as favorable as compared to the arrangements offered by competitors, which could adversely affect our ability to attract and retain employees.
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Old National has traditionally paid a quarterly dividend to its common shareholders.
−Removed: The payment of dividends is subject to legal and regulatory restrictions.
+Added: The payment of dividends is subject to legal and regulatory restrictions and safety and soundness considerations.
Any payment of dividends in the future will depend, in large part, on Old National’s earnings, capital requirements, financial condition, and other factors considered relevant by our Board of Directors.
−Removed: Old National is an entity separate and distinct from Old National Bank.
−Removed: Old National Bank conducts most of our operations and Old National depends upon dividends from Old National Bank to service its debt and to pay dividends to Old National’s shareholders.
+Added: Old National Bancorp is an entity separate and distinct from Old National Bank.
+Added: Old National Bank conducts most of our operations and Old National Bancorp depends upon dividends from Old National Bank to service its debt and to pay dividends to Old National’s shareholders.
The availability of dividends from Old National Bank is limited by various statutes and regulations.
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In addition, the payment of dividends by our other subsidiaries is also subject to the laws of the subsidiary’s state of incorporation, and regulatory capital and liquidity requirements applicable to such subsidiaries.
−Removed: At December 31, 2021, Old National Bank could pay dividends of $268.1 million without prior regulatory approval.
+Added: Under the terms of the junior subordinated deferrable interest debentures that Old National has issued to various trust preferred securities trusts, Old National has the right at any time during the term of the debentures to defer the payment of interest at any time or from time to time for an extension period not exceeding 20 consecutive quarterly periods with respect to each extension period.
+Added: In the event that Old National elects to defer interest on the debentures, Old National may not, with certain exceptions, declare or pay any dividends or distributions on its capital stock or purchase or acquire any of its capital stock.
+Added: Under the terms of the Old National Preferred Stock, in the event that we do not declare and pay dividends on such Old National Preferred Stock for the most recent dividend period, we may not, with certain exceptions, declare or pay dividends on, or purchase, redeem or otherwise acquire, shares of Common Stock or any other securities that rank junior to such Old National Preferred Stock.
In the event that Old National Bank was unable to pay dividends to us, we in turn would likely have to reduce or stop paying dividends on our Common Stock.
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Old National’s ability to compete depends on a number of factors, including, among others, its ability to develop and successfully execute strategic plans and imperatives.
−Removed: Our strategic priorities include consistent quality earnings, enhanced management discipline, and strong risk management;
−Removed: greater confidence in decision making and appropriate levels of risk taking;
+Added: Our strategic priorities include consistent quality earnings;
+Added: continued management discipline;
+Added: strong risk management and appropriate levels of risk taking;
fewer operational surprises, disruptions, and losses;
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Climate change could have a material negative impact on the Company and clients.
−Removed: The Company’s business, as well as the operations and activities of our clients, could be negatively impacted by climate change.
+Added: The Company’s business, as well as the operations and activities of our clients, could be negatively affected by climate change.
Climate change presents both immediate and long-term risks to the Company and its clients, and these risks are expected to increase over time.
Climate change presents multi-faceted risks, including:
−Removed: operational risk from the physical effects of climate events on the Company and its clients’ facilities and other assets;
+Added: operational risk from the physical effects of climate events on the Company and its clients’ facilities and other assets, including the possible reduction of the value, or destruction, of collateral for our loans;
credit risk from borrowers with significant exposure to climate risk;
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Given that climate change could impose systemic risks upon the financial sector, either via disruptions in economic activity resulting from the physical impacts of climate change or changes in policies as the economy transitions to a less carbon-intensive environment, the Company may face regulatory risk of increasing focus on the Company’s resilience to climate-related risks, including in the context of stress testing for various climate stress scenarios.
−Removed: legislative or regulatory uncertainties and changes regarding climate risk management and practices may result in higher regulatory, compliance, credit, and reputational risks and costs.
−Removed: With the increased importance and focus on climate change, we are making efforts to enhance our governance of climate change-related risks and integrate climate considerations into our risk governance framework.
−Removed: Nonetheless, the risks associated with climate change are rapidly changing and evolving in an escalating fashion, making them difficult to assess due to limited data and other uncertainties.
+Added: Ongoing legislative or regulatory uncertainties and changes regarding climate risk management and practices may result in higher regulatory, compliance, credit, and reputational risks and costs.
+Added: Although we continue to make efforts to enhance our governance of climate change-related risks and integrate climate considerations into our risk governance framework, the risks associated with climate change are rapidly changing and evolving in an escalating fashion, making them difficult to assess due to limited data and other uncertainties.
+Added: For example, long-term shifts in the climate, including altered distribution and intensity of rainfall, rising sea levels and a rising heat index, negatively affect our ability to predict the effects of natural disasters accurately.
+Added: In addition, climate change may result in reduced availability of insurance for our borrowers, including insurance that protects property pledged as collateral, which could negatively affect our ability to predict credit losses accurately.
We could experience increased expenses resulting from strategic planning, litigation, and technology and market changes, and reputational harm as a result of negative public sentiment, regulatory scrutiny, and reduced investor and stakeholder confidence due to our response to climate change and our climate change strategy, which, in turn, could have a material negative impact on our business, results of operations, and financial condition.
−Removed: If Old National’s actual credit losses for loans or debt securities exceed Old National’s allowance for credit losses for loans and debt securities, Old National’s net income will decrease.
+Added: Old National is exposed to reputational risk.
+Added: Old National’s reputation is a key asset to its business.
+Added: A negative public opinion of the Company and its business can result from any number of activities, including the Company’s lending practices, corporate governance and regulatory compliance, mergers and acquisitions, and actions taken by regulators or by community organizations in response to these activities.
+Added: Significant harm to the Company’s reputation could also arise as a result of regulatory or governmental actions, litigation, employee misconduct or the activities of customers, other participants in the financial services industry or the Company’s contractual counterparties, such as service providers and vendors.
+Added: A service disruption of the Company’s technology platforms or an impact to the Company’s branches could have a negative impact on a customer’s access to banking services, and harm the Company’s reputation with customers.
+Added: In particular, a cybersecurity event impacting the Company’s or its customers’ data could have a negative impact on the Company’s reputation and customer confidence in the Company and its cybersecurity.
+Added: Damage to the Company’s reputation could also adversely affect its credit ratings and access to the capital markets.
+Added: In addition, whereas negative public opinion once was primarily driven by adverse news coverage in traditional media, the increased use of social media platforms facilitates the rapid dissemination of information or misinformation, which magnifies the potential harm to the Company’s reputation.
+Added: Events that result in damage to the Company’s reputation may also increase our litigation risk, increase regulatory scrutiny of the Company and its business, affect our ability to attract and retain customers and employees and have other consequences that we may not be able to predict.
+Added: If Old National’s actual credit losses for loans or debt securities exceed Old National’s allowance for credit losses on loans and debt securities, Old National’s net income will decrease.
Also, future additions to Old National’s allowance for credit losses will reduce Old National’s future earnings.
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The determination of the appropriate levels of the allowances for loan and debt security credit losses inherently involves a high degree of subjectivity and judgment and requires us to make estimates of current credit risks and future trends, all of which may undergo material changes.
−Removed: Generally, our nonperforming loans and other real estate owned reflect operating difficulties of individual borrowers and weaknesses in the economies of the markets we serve.
+Added: Generally, our nonperforming loans, other real estate owned, and other repossessed property reflect operating difficulties of individual borrowers and weaknesses in the economies of the markets we serve.
The allowances may not be adequate to cover actual losses, and future allowance for credit losses could materially and adversely affect our financial condition, results of operations, and cash flows.
+Added: Also as described further in the risk factors above and as set forth below, the COVID-19 pandemic and Russia’s invasion of Ukraine have created economic and financial disruptions that have adversely affected, and may continue to adversely affect, customers.
Old National’s loan portfolio includes loans with a higher risk of loss.
−Removed: Old National Bank originates commercial real estate loans, commercial loans, agricultural real estate loans, agricultural loans, consumer loans, and residential real estate loans primarily within Old National’s market areas.
−Removed: Commercial real estate, commercial, consumer, and agricultural real estate and operating loans may expose a lender to greater credit risk than loans secured by residential real estate because the collateral securing these loans may not be sold as easily as residential real estate.
+Added: Old National Bank originates commercial real estate loans, commercial loans, agricultural loans, consumer loans, and residential real estate loans primarily within Old National’s market areas.
+Added: Commercial real estate, commercial, consumer, and agricultural loans may expose a lender to greater credit risk than loans secured by residential real estate because the collateral securing these loans may not be sold as easily as residential real estate.
These loans also have greater credit risk than residential real estate for the following reasons:
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These factors include weather, input costs, commodity and land prices, and interest rates.
−Removed: If Old National forecloses on collateral real property, Old National may be subject to the increased costs associated with the ownership of real property, resulting in reduced revenues.
+Added: In addition, the effects of climate change could materially enhance the credit risks related to agricultural loans in ways that we may not be able to predict.
+Added: In addition, as described further in this “Risk Factors” section, the Company’s credit risks may be increased by the impacts of inflation, poor or recessionary economic conditions and financial market volatility.
+Added: Growth in our commercial real estate loan portfolio over the past several years, and potential future growth, has resulted in, and may result in further, significant expense to implement risk management procedures and controls to effectively evaluate and monitor the portfolio.
+Added: At December 31, 2022, commercial real estate loans, including owner occupied, investor, and real estate construction loans, totaled $12.5 billion, or 40%, of our total loan portfolio.
+Added: Commercial real estate loans generally involve a greater degree of credit risk than residential mortgage loans because they typically have larger balances and are more affected by adverse conditions in the economy.
+Added: payments on loans secured by commercial real estate often depend upon the successful operation and management of the properties and the businesses which operate from within them, repayment of such loans may be affected by factors outside the borrower’s control.
+Added: For example, emerging and evolving factors such as the shift to work-from-home or hybrid-work arrangements, changing consumer preferences (including for online shopping), COVID-19-related restrictions and resulting changes in occupancy rates as a result of these and other trends have had, and in the future could have, a material effect on our borrowers’ ability to repay their loans.
+Added: If Old National forecloses on real property collateral, Old National may be subject to the increased costs associated with the ownership of real property, resulting in reduced revenues.
Old National may have to foreclose on collateral real property to protect Old National’s investment and may thereafter own and operate such property, in which case Old National will be exposed to the risks inherent in the ownership of real estate.
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(ii) neighborhood values;
−Removed: (iii) interest rates;
−Removed: (iv) real estate tax rates;
−Removed: (v) operating expenses of the mortgaged properties;
−Removed: (vi) environmental remediation liabilities;
−Removed: (vii) ability to obtain and maintain adequate occupancy of the properties;
−Removed: (viii) zoning laws;
−Removed: (ix) governmental rules, regulations and fiscal policies;
+Added: (iii) size, use, and location of the properties;
+Added: (iv) interest rates;
+Added: (v) real estate tax rates;
+Added: (vi) operating expenses of the mortgaged properties;
+Added: (vii) environmental remediation liabilities;
+Added: (viii) ability to obtain and maintain adequate occupancy of the properties;
+Added: (ix) zoning laws;
+Added: (x) governmental rules, regulations and fiscal policies;
+Added: and (xi) acts of God.
Certain expenditures associated with the ownership of real estate, principally real estate taxes, insurance, and maintenance costs, may adversely affect the income from the real estate.
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• changes in analysts’ recommendations or projections;
−Removed: • Old National’s announcement of new acquisitions or other projects.
+Added: • Old National’s announcement of new mergers, acquisitions, or other projects;
+Added: • negative news about the Company or the financial services industry generally.
Changes in interest rates could adversely affect Old National’s results of operations and financial condition.
−Removed: Old National’s earnings depend substantially on Old National’s interest rate spread, which is the difference between (i) the rates Old National earns on loans, securities, and other earning assets and (ii) the interest rates Old National pays on deposits and other borrowings.
+Added: The monetary, tax and other policies of governmental agencies, including the Federal Reserve, have a significant impact on interest rates and overall financial market performance over which the Company has no control and which the Company may not be able to anticipate adequately.
+Added: The Federal Reserve raised benchmark interest rates throughout 2022 and may continue to raise interest rates in response to economic conditions, particularly inflationary pressures.
+Added: Old National’s earnings depend substantially on Old National’s interest rate spread, which is the difference between (i) the rates Old National earns on loans,
+Added: securities, and other earning assets and (ii) the interest rates Old National pays on deposits and other borrowings.
These rates are highly sensitive to many factors beyond Old National’s control, including general economic conditions and the policies of various governmental and regulatory authorities.
−Removed: If market interest rates rise, Old National will have competitive pressure to increase the rates that Old National pays on deposits, which could result in a decrease of Old National’s net interest income.
−Removed: If market interest rates decline, Old National could experience fixed-rate loan prepayments and higher investment portfolio cash flows, resulting in a lower yield on earning assets.
+Added: When market interest rates rise, such as during 2022, Old National faces competitive pressure to increase the rates that Old National pays on deposits, which could result in a decrease of Old National’s net interest income.
+Added: When market interest rates decline, Old National has experienced, and could in the future experience, fixed-rate loan prepayments and higher investment portfolio cash flows, resulting in a lower yield on earning assets.
+Added: Sharp fluctuations in interest rates, such as the significant increases experienced during 2022, could enhance these risks.
Old National’s earnings can also be impacted by the spread between short-term and long-term market interest rates.
+Added: The monetary, tax and other policies of the government and its agencies, including the Federal Reserve, have a significant impact on interest rates and overall financial market performance.
+Added: These governmental policies can thus affect the activities and results of operations of banking organizations such as the Company.
+Added: An important function of the Federal Reserve is to regulate the national supply of bank credit and certain interest rates.
+Added: The actions of the Federal Reserve influence the rates of interest that the Company charges on loans and that the Company pays on borrowings and interest-bearing deposits and can also affect the value of the Company’s on-balance sheet and off-balance sheet financial instruments.
+Added: Also, due to the impact on rates for short-term funding, the Federal Reserve’s policies influence, to a significant extent, the Company’s cost of such funding, and increases in short-term interest rates have in the past increased, and may in the future increase, the Company’s cost of short-term funding.
Changes in the method pursuant to which the LIBOR and other benchmark rates are determined could adversely impact our business and results of operations.
Our floating-rate funding, certain hedging transactions and certain of the products that we offer, such as floating-rate loans and mortgages, determine the applicable interest rate or payment amount by reference to a benchmark rate, such as LIBOR, or to an index, currency, basket, or other financial metric.
−Removed: LIBOR and certain other benchmark rates are the subject of recent national, international, and other regulatory guidance and proposals for reform.
−Removed: In July 2017, the Chief Executive of the Financial Conduct Authority (“FCA”) announced that the FCA intends to stop persuading or compelling banks to submit rates for the calculation of LIBOR after 2021.
−Removed: However, the administrator of LIBOR has proposed to extend publication of the most commonly used U.S.
−Removed: Dollar LIBOR settings until June 30, 2023 and will cease publishing other LIBOR settings on December 31, 2021.
−Removed: federal banking agencies have issued guidance strongly encouraging banking organizations to cease using the U.S.
−Removed: Dollar LIBOR as a reference rate in “new” contracts as soon as practicable and in any event by December 31, 2021.
−Removed: It is not possible to predict whether LIBOR will continue to be viewed as an acceptable market benchmark, which rate or rates may
−Removed: become accepted alternatives to LIBOR, or what the effect of any such changes in views or alternatives may be on the markets for LIBOR-linked financial instruments.
+Added: The administrator of LIBOR has announced that the publication of the most commonly used U.S.
+Added: Dollar LIBOR settings will cease to be provided or will cease to be representative after June 30, 2023.
+Added: The publication of all other LIBOR settings ceased to be provided or ceased to be representative as of December 31, 2021.
+Added: federal banking agencies had also issued guidance strongly encouraging banking organizations to cease using the U.S.
+Added: Dollar LIBOR as a reference rate in “new” contracts by December 31, 2021 at the latest.
+Added: In March 2022, the LIBOR Act was signed into law.
+Added: The LIBOR Act and its implementing regulations provide a uniform approach for replacing LIBOR as a reference interest rate in certain contracts as a matter of law.
+Added: See “Business – Supervision and Regulation – LIBOR Act.”
Regulators, industry groups, and certain committees (e.g., the Alternative Reference Rates Committee) have, among other things, published recommended fallback language for LIBOR-linked financial instruments, identified recommended alternatives for certain LIBOR rates (e.g., the Secured Overnight Financing Rate as the recommended alternative to U.S.
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In addition, such uncertainty could result in pricing volatility and increased capital requirements, loss of market share in certain products, adverse tax or accounting impacts, and compliance, legal and operational costs and risks associated with client disclosures, discretionary actions taken or negotiation of fallback provisions, systems disruption, business continuity, and model disruption.
+Added: The Company must maintain adequate sources of funding and liquidity.
+Added: The Company’s liquidity and ability to fund and operate its business could be materially adversely affected by a variety of conditions and factors, including financial and credit market disruptions and volatility or a lack of market or customer confidence in financial markets in general, which may result in a loss of customer deposits or outflows of cash or collateral and/or ability to access capital markets on favorable terms.
+Added: Negative news about the Company or the financial services industry generally may reduce market or customer confidence in the Company, which could in turn materially adversely affect the Company’s liquidity and funding.
+Added: Such reputational damage may result in the loss of customer deposits, the inability to sell or securitize loans or other assets, and downgrades in one or more of
+Added: the Company’s credit ratings, and may also negatively affect the Company’s ability to access the capital markets.
+Added: A downgrade in the Company’s credit ratings, which could result from general industry-wide or regulatory factors not solely related to the Company, could adversely affect the Company’s ability to borrow funds, including by raising the cost of borrowings substantially, and could cause creditors and business counterparties to raise collateral requirements or take other actions that could adversely affect Old National’s ability to raise capital.
+Added: Many of the above conditions and factors may be caused by events over which Old National has little or no control.
+Added: There can be no assurance that significant disruption and volatility in the financial markets will not occur in the future.
+Added: If the Company is unable to continue to fund assets through customer bank deposits or access funding sources on favorable terms or if the Company suffers an increase in borrowing costs or otherwise fails to manage liquidity effectively, the Company’s liquidity, operating margins, financial condition and results of operations may be materially adversely affected.
+Added: The Company may also need to raise additional capital and liquidity through the issuance of stock, which could dilute the ownership of existing stockholders, or reduce or even eliminate common stock dividends or share repurchases to preserve capital and liquidity.
+Added: If the Company is unable to maintain or grow its deposits, it may be subject to paying higher funding costs.
+Added: The total amount that the Company pays for funding costs is dependent, in part, on the Company’s ability to maintain or grow its deposits.
+Added: If the Company is unable to sufficiently maintain or grow its deposits to meet liquidity objectives, it may be subject to paying higher funding costs.
+Added: The Company competes with banks and other financial services companies for deposits.
+Added: Recent increases in short-term interest rates have resulted in and are expected to continue to result in more intense competition in deposit pricing.
+Added: If competitors raise the rates they pay on deposits, the Company’s funding costs may increase, either because the Company raises rates to avoid losing deposits or because the Company loses deposits to competitors and must rely on more expensive sources of funding.
+Added: Customers may also move noninterest-bearing deposits to interest bearing accounts, increasing the cost of those deposits.
+Added: Checking and savings account balances and other forms of customer deposits may decrease when customers perceive alternative investments, such as the stock market, as providing a better risk/return tradeoff.
+Added: The Company’s bank customers could withdraw their money and put it in alternative investments, causing the Company to lose a lower cost source of funding.
+Added: Higher funding costs could reduce the Company’s net interest margin and net interest income.
Our wholesale funding sources may prove insufficient to replace deposits or support our future growth.
As a part of our liquidity management, we use a number of funding sources in addition to core deposit growth and repayments and maturities of loans and investments.
−Removed: These sources include brokered deposits, repurchase agreements, and federal funds purchased.
+Added: These sources include brokered deposits, repurchase agreements, federal funds purchased, and Federal Home Loan Bank advances.
Negative operating results or changes in industry conditions could lead to an inability to replace these additional funding sources at maturity.
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In this case, our results of operations and financial condition would be negatively affected.
+Added: Old National relies on dividends from Old National Bank for its liquidity.
+Added: Old National Bancorp is a separate and distinct legal entity from its subsidiaries.
+Added: Old National Bancorp typically receives substantially all of its revenue from subsidiary dividends.
+Added: These dividends are Old National Bancorp’s principal source of funds to pay dividends on common and preferred stock, pay interest and principal on its debt, and fund purchases of its common stock.
+Added: Various federal and/or state laws and regulations, as well as regulatory expectations, limit the amount of dividends that Old National Bank and certain non-bank subsidiaries may pay.
+Added: See “Item 1 — Business — Supervision and Regulation — Dividends Limitations” for a discussion of restrictions on dividends.
+Added: Limitations on the Company’s ability to receive dividends from its subsidiaries could have a material adverse effect on its liquidity and ability to pay dividends on its stock or interest and principal on its debt, and ability to fund purchases of its common stock.
A reduction in our credit rating could adversely affect our business and/or the holders of our securities.
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Credit ratings are based on a number of factors, including our financial strength and ability to generate earnings, as well as factors not entirely within our control, including conditions affecting the financial services industry generally and the economy and changes in rating methodologies.
−Removed: There can be no assurance that we will maintain our current credit ratings.
+Added: There can be no assurance that we will maintain our current
+Added: credit ratings.
A downgrade of the credit ratings of Old National or Old National Bank could adversely affect our access to liquidity and capital, significantly increase our cost of funds, and decrease the number of investors and counterparties willing to lend to us or purchase our securities.
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Further, to access our products and services our clients may use computers and mobile devices that are beyond our security control systems.
−Removed: In fact, many other financial services institutions and companies engaged in data processing have reported breaches in the security of their websites or other systems, some of which have involved sophisticated and targeted attacks intended to obtain unauthorized access to confidential information, destroy data, disable or degrade service, or sabotage systems, often through the introduction of computer viruses or malware, cyberattacks, and other means.
−Removed: Certain financial institutions in the United States have also experienced attacks from technically sophisticated and well-resourced third parties that were intended to disrupt normal business activities by making internet banking systems
−Removed: inaccessible to clients for extended periods.
+Added: In fact, many other financial services institutions and companies engaged in data processing have reported breaches in the security of their websites or other systems, some of which have involved sophisticated and targeted attacks intended to obtain unauthorized access to confidential information, destroy data, disable or degrade service, or sabotage systems, often through the introduction of computer viruses or malware, cyberattacks, and/or malicious code, or by means of phishing attacks, social engineering and other means.
+Added: As our reliance on technology systems increases, including as a result of work-from-home arrangements, the potential risks of technology-related interruptions in our operations or the occurrence of cyber incidents also increases.
+Added: Our technologies, systems, networks and our customers’ devices are periodically the target of cyberattacks, and may be the target of future cyberattacks.
+Added: Malicious actors may also attempt to fraudulently induce employees, customers or other users of our systems to disclose sensitive information, including passwords and other identifying information, in order to gain access to data or our systems.
+Added: Certain financial institutions in the United States have also experienced attacks from technically sophisticated and well-resourced third parties that were intended to disrupt normal business activities by making internet banking systems inaccessible to clients for extended periods.
These “denial-of-service” attacks typically do not breach data security systems, but require substantial resources to defend, and may affect client satisfaction and behavior.
+Added: There have been several well-publicized attacks on various companies, including in the financial services industry, and personal, proprietary, and public e-mail systems in which the perpetrators gained unauthorized access to confidential information and customer data, often through the introduction of computer viruses or malware, cyberattacks, phishing, or other means.
+Added: Even if not directed at the Company or its subsidiaries specifically, attacks on other entities with whom we do business or on whom we otherwise rely or attacks on financial or other institutions important to the overall functioning of the financial system could adversely affect, directly or indirectly, aspects of our business.
Despite our efforts to ensure the integrity of our systems, it is possible that we may not be able to anticipate or to implement effective preventive measures against all security breaches, especially because the techniques used change frequently or are not recognized until launched, and because security attacks can originate from a wide variety of sources, including persons who are involved with organized crime or associated with external service providers or who may be linked to terrorist organizations or hostile foreign governments.
−Removed: Those parties may also attempt to fraudulently induce employees, clients, or other users of our systems to disclose sensitive information in order to gain access to our data or that of our customers or clients.
−Removed: We have implemented employee and client awareness training around phishing, malware, and other cybersecurity risks.
−Removed: These risks may increase in the future as we continue to increase our mobile payments and other internet-based product offerings and expand our internal usage of web-based products and applications.
−Removed: If our security systems were penetrated or circumvented, it could cause serious negative consequences for us, including significant disruption of our operations, misappropriation of our confidential information or that of our clients, or damage our computers or systems and those of our clients and counterparties, and could result in violations of applicable privacy and other laws, financial loss to us or to our clients, loss of confidence in our security measures, client dissatisfaction, significant litigation exposure, and harm to our reputation, all of which could have a material adverse effect on us.
−Removed: The Company is also subject to laws and regulations relating to the protection and privacy of the information of clients, employees and others, and any failure to comply with these laws and regulations could expose the Company to liability and/or reputational damage.
−Removed: We rely on third party vendors, which could expose Old National to additional cybersecurity risks.
+Added: As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our systems or to investigate and remediate vulnerabilities.
+Added: System enhancements and updates may also create risks associated with implementing and integrating new systems.
+Added: Due to the complexity and interconnectedness of information technology systems, the process of enhancing our systems can itself create a risk of systems disruptions and security issues.
+Added: If our security systems were penetrated or circumvented, it could cause serious negative consequences for us, including significant disruption of our operations, misappropriation of our confidential information or that of our clients, or damage our computers or systems and those of our clients and counterparties, and could result in violations of applicable privacy and other laws, financial loss to us or to our clients, loss of confidence in our security measures, client dissatisfaction, significant litigation exposure, regulatory action, and harm to our reputation, all of which could have a material adverse effect on us.
+Added: Old National is subject to laws and regulations relating to the privacy of the information of clients, employees or others, and any failure to comply with these laws and regulations could expose the Company to liability and/or reputational damage.
+Added: Old National is subject to laws and regulations relating to the privacy of the information of clients, employees or others, and any failure to comply with these laws and regulations could expose the Company to liability and/or reputational damage.
+Added: Changes to customer data privacy laws and regulations may impose additional operational burdens on the Company, may limit the Company’s ability to pursue desirable business initiatives and increase the risks associated with any future use of customer data.
+Added: Compliance with these laws and regulations may require changes to policies, procedures and technology for information security and segregation of data, which could, among other things, make the Company more vulnerable to operational failures, and to monetary penalties, litigation or regulatory enforcement actions for breach of such laws and regulations.
+Added: As privacy-related laws and regulations are implemented, they may also limit how companies like Old National can use customer data and impose obligations on companies in their management of such data.
+Added: The time and resources needed for the Company to comply with such laws and regulations, as well as its potential liability for non-compliance and reporting obligations in the case of data breaches, may significantly increase.
+Added: We rely on third party vendors, which could expose Old National to additional cybersecurity and operational risks.
Third party vendors provide key components of our business infrastructure, including certain data processing and information services.
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While we may contractually limit our liability in connection with attacks against third party providers, Old National remains exposed to the risk of loss associated with such vendors.
−Removed: In addition, a number of our vendors are large national entities with dominant market presence in their respective fields.
−Removed: Their services could prove difficult to replace in a timely manner if a failure or other service interruption were to occur.
−Removed: Failures of certain vendors to provide contracted services could adversely affect our ability to deliver products and services to our clients and cause us to incur significant expense.
+Added: In addition, operational errors, information system failures, or interruptions of vendors’ systems, or difficulty communicating with vendors, could expose us to disruption of operations, loss of service or connectivity to customers, reputational damage, and litigation risk that could have a material adverse effect on our business and, in turn, our financial condition and results of operations.
+Added: In addition, our operations are exposed to risk that vendors will not perform in accordance with the contracted arrangements under service level agreements.
+Added: Although we have selected external vendors carefully, we do not control their actions.
+Added: The failure of an external vendor to perform in accordance with the contracted arrangements under service level agreements, because of changes in the vendor’s organizational structure, financial condition, support for existing products and services, or strategic focus or for any other reason, could be disruptive to our operations, which could have a material adverse effect on our business and, in turn, our financial condition and results of operations.
+Added: Replacing a vendor, particularly a large national entity with a dominant market presence, such as a number of our current vendors, could also cause us to incur significant delay and expense.
Failure to keep pace with technological change could adversely affect Old National’s results of operations and financial condition.
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Failure to successfully keep pace with technological change affecting the financial services industry could negatively affect Old National’s growth, revenue, and profit.
+Added: Failure to successfully implement and integrate future system enhancements could adversely affect the Company’s ability to provide timely and accurate financial information in compliance with legal and regulatory requirements, which could result in sanctions from regulatory authorities.
+Added: Future system enhancements could have higher than expected costs and/or result in operating inefficiencies, which could increase the costs associated with the implementation as well as ongoing operations.
Upgrading the Company’s computer systems, software, and networks subjects the Company to the risk of disruptions, failures, or delays due to the complexity and interconnectedness of the Company’s computer systems, software, and networks.
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As a result, Old National may not be able to effectively mitigate its risk exposures in particular market environments or against particular types of risk.
+Added: Pandemics, acts of war or terrorism and other adverse external events could significantly affect Old National’s business.
+Added: Pandemics, including the COVID-19 pandemic, acts of war, military conflicts, including Russia’s invasion of Ukraine, or terrorism and other adverse external events, including severe weather and other natural disasters, could have a significant impact on the Company’s ability to conduct business.
+Added: Such events could affect the stability of the Company’s deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue and/or cause the Company to incur additional expenses.
+Added: Although the Company has established disaster recovery plans and procedures, and monitors for significant environmental effects on its properties or its investments, the occurrence of any such event could have a material adverse effect on the Company.
+Added: For example, the COVID-19 pandemic has created economic and financial disruptions that have adversely affected, and may continue to adversely affect, the Company’s business, financial condition, liquidity, loans, asset quality, capital, and results of operations.
+Added: The extent to which the COVID-19 pandemic will continue to negatively affect the Company will depend on future developments that are highly uncertain and cannot be predicted and many of which are outside of the Company’s control.
+Added: These future developments may include the scope and duration of any surges in the COVID-19 pandemic, the emergence of new variants of COVID-19 and the continued effectiveness of vaccines against such variants, the continued effectiveness of the Company’s business continuity plan including work-from-home arrangements and staffing at branches and certain other facilities, the direct and indirect impact of the COVID-19 pandemic on the Company’s employees, clients, counterparties and service providers, as well as on other market participants, actions taken, or that may yet be taken, by governmental authorities and other third parties in response to the COVID-19 pandemic, and the effectiveness and public acceptance of vaccines for COVID-19.
+Added: Depending on the impact of the pandemic and Russia’s invasion of Ukraine on general economic and market conditions, consumer and corporate spending and investment and borrowing patterns, there is a risk that adverse conditions could occur, including supply chain disruptions;
+Added: higher inflation;
+Added: decreased demand for the Company’s products and services or those of its borrowers, which could increase credit risk;
+Added: challenges related to maintaining
+Added: sufficient qualified personnel due to labor shortages, talent attrition, employee illness, willingness to return to work;
+Added: disruptions to business operations at the Company and at counterparties, vendors and other service providers.
+Added: The war between Russia and Ukraine has negatively affected the global economy.
+Added: In addition, governments around the world have responded to Russia’s invasion by imposing economic sanctions and export controls on certain industry sectors and parties in Russia.
+Added: Russia has responded with its own restrictions against investors and countries outside Russia and has proposed additional measures aimed at non-Russia owned businesses.
+Added: Businesses in the U.S.
+Added: and globally have experienced shortages in materials and increased costs for transportation, energy, and raw materials due in part to the negative effects of the war on the global economy.
+Added: The escalation or continuation of the war between Russia and Ukraine or other hostilities could result in, among other things, further increased risk of cyberattacks, supply chain disruptions, higher inflation, lower consumer demand and increased volatility in commodity, currency, and other financial markets.
+Added: To the extent that pandemics, including the COVID-19 pandemic, acts of war, including Russia’s invasion of Ukraine, or terrorism and other external events adversely affect Old National’s business, financial, liquidity, capital, or results of operations, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.
+Added: Old National is subject to environmental liability risk associated with lending activities.
+Added: A significant portion of the Company's loan portfolio is secured by real property.
+Added: During the ordinary course of business, the Company may foreclose on and take title to properties securing certain loans.
+Added: There is a risk that hazardous or toxic substances could be found on these properties.
+Added: If hazardous or toxic substances are found, the Company may be liable for remediation costs, as well as for personal injury and property damage.
+Added: Environmental laws may require the Company to incur substantial expenses and could materially reduce the affected property's value or limit the Company's ability to sell the affected property or to repay the indebtedness secured by the property.
+Added: In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase the Company's exposure to environmental liability.
+Added: Although the Company has policies and procedures to perform an environmental review before initiating any foreclosure action on real property, these reviews may not be sufficient to detect all potential environmental hazards.
+Added: The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on the Company's business, financial condition, results of operations, and liquidity.
+Added: Old National’s reported financial condition and results of operations depend on management’s selection of accounting methods and require management to make estimates about matters that are uncertain.
+Added: Accounting policies and processes are fundamental to the Company’s reported financial condition and results of operations.
+Added: Some of these policies require use of estimates and assumptions that may affect the reported amounts of assets or liabilities and financial results.
+Added: Several of Old National’s accounting policies are critical because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions.
+Added: Pursuant to generally accepted accounting principles, management is required to make certain assumptions and estimates in preparing the Company’s financial statements.
+Added: If assumptions or estimates underlying the Company’s financial statements are incorrect, the Company may experience material losses.
+Added: Management has identified certain accounting policies as being critical because they require management’s judgment to ascertain the valuations of assets, liabilities, commitments and contingencies.
+Added: A variety of factors could affect the ultimate value that is obtained either when earning income, recognizing an expense, recovering an asset, valuing an asset or liability, or recognizing or reducing a liability.
+Added: Old National has established detailed policies and control procedures with respect to these critical accounting estimates.
+Added: However, because of the uncertainty surrounding judgments and the estimates pertaining to these matters, Old National could be required to adjust accounting policies or restate prior period financial statements if those judgments and estimates prove to be incorrect.
Legal, Regulatory, and Compliance Risks
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We are involved in judicial, regulatory, and arbitration proceedings concerning matters arising from our business activities and fiduciary responsibilities.
−Removed: We establish reserves for legal claims when payments associated with the claims become probable and the costs can be reasonably estimated.
+Added: We establish reserves for legal claims when payments associated with the
+Added: claims become probable and the costs can be reasonably estimated.
We may still incur legal costs for a matter even if we have not established a reserve.
In addition, the actual cost of resolving a legal claim may be substantially higher than any amounts reserved for that matter.
−Removed: The ultimate resolution of a pending or future legal proceeding, depending on the remedy sought and granted, could materially adversely affect our results of operations and financial condition.
+Added: The ultimate resolution of a pending or future proceeding, depending on the remedy sought and granted, could materially adversely affect our results of operations and financial condition.
Old National operates in a highly regulated environment, and changes in laws and regulations to which Old National is subject may adversely affect Old National’s results of operations.
−Removed: Old National operates in a highly regulated environment and is subject to extensive regulation, supervision, and examination by, among others, the OCC, the FDIC, the CFPB, the Federal Reserve, and the State of Indiana.
+Added: Old National operates in a highly regulated environment and is subject to extensive regulation, supervision, and examination by, among others, the OCC, the FDIC, the CFPB, and the Federal Reserve, and applicable state laws.
Such regulation and supervision is primarily intended for the protection of the depositors and federal deposit insurance funds.
3 unchanged sentences
See “Business – Supervision and Regulation” herein.
−Removed: Applicable laws and regulations may change, and such changes may adversely affect Old National’s business.
−Removed: The Dodd-Frank Act, enacted in July 2010, mandated the most wide-ranging overhaul of financial industry regulation in decades.
−Removed: This legislation, among other things, weakened federal preemption of state consumer protection laws and established the CFPB with broad authority to administer and enforce a new federal regulatory framework of consumer financial regulation, including consumer mortgage banking.
−Removed: The scope and impact of many of the Dodd-Frank Act provisions were determined and issued over time.
−Removed: The impact of the Dodd-Frank Act on Old National has been substantial.
−Removed: Provisions in the legislation that affect the payment of interest on demand deposits and collection of interchange fees increased the costs associated with certain deposits and placed limitations on certain revenues those deposits generate.
−Removed: In addition, the Dodd-Frank Act required Old National to change certain of its business practices, intensified the regulatory supervision of Old National and the financial services industry generally, increased Old National’s capital requirements, and imposed additional assessments and costs on Old National.
−Removed: Requirements to maintain higher levels of capital or liquidity to address potential adverse stress scenarios could adversely impact the Company’s net income.
−Removed: Regulatory authorities also have extensive discretion in connection with their supervisory and enforcement activities, including but not limited to the imposition of restrictions on the operation of an institution, the classification of assets by the institution, the adequacy of an institution’s Bank Secrecy Act/Anti-Money Laundering program management, and the adequacy of an institution’s allowance for credit losses for loans.
−Removed: Any change in such regulation and oversight, whether in the form of restrictions on activities, regulatory policy, regulations, or legislation, including but not limited to changes in the regulations governing institutions, could have a material impact on Old National and its operations.
+Added: Our business is highly regulated and the laws, rules, regulations, and supervisory guidance and policies applicable to us are subject to regular modification and change, and there have been significant revisions to the laws and regulations applicable to banks and bank holding companies that have been enacted or proposed in recent years.
+Added: In addition, we expect that we will remain subject to extensive regulation and supervision, and that the level of regulatory scrutiny may fluctuate over time, based on numerous factors, including the OCC’s heightened standards, when applicable to us, changes in the U.S.
+Added: presidential administration or one or both houses of Congress and public sentiment regarding financial institutions (which can be influenced by scandals and other incidents that involve participants in the industry).
+Added: We are unable to predict the form or nature of any future changes to statutes or regulation, including the interpretation or implementation thereof.
+Added: Changes to statutes, regulations, or regulatory policies, including changes in interpretation or implementation of statutes, regulations, or policies, have and could in the future subject us to additional costs, limit the types of financial services and products we may offer, and/or increase the ability of non-banks to offer competing financial services and products, among other things.
+Added: Failure to comply with laws, regulations, policies or supervisory guidance could result in enforcement and other legal actions by federal or state authorities, including criminal and civil penalties, the loss of FDIC insurance, revocation of a banking charter, other sanctions by regulatory agencies, civil money penalties, and/or reputational damage, which could have a material adverse effect on our business, financial condition, and results of operations.
+Added: We may incur fines, penalties and other negative consequences from regulatory violations, possibly even inadvertent or unintentional violations.
+Added: The financial services industry is subject to significant regulation and scrutiny from bank supervisors in the examination process and aggressive enforcement of federal and state regulations, particularly with respect to mortgage-related practices and other consumer compliance matters, and compliance with anti-money laundering, BSA and OFAC regulations, and economic sanctions against certain foreign countries and nationals.
+Added: Enforcement actions may be initiated for violations of laws and regulations and unsafe or unsound practices.
+Added: In addition, some legal/regulatory frameworks provide for the imposition of fines or penalties for noncompliance even though the noncompliance was inadvertent or unintentional and even though there were systems and procedures designed to ensure compliance in place at the time.
+Added: There have been a number of significant enforcement actions in recent years by regulators, state attorneys general and the Department of Justice against banks and other non-bank financial institutions with respect to anti-money laundering and sanctions laws, and some have resulted in substantial penalties including criminal pleas.
+Added: Although the Company has adopted policies and procedures designed to comply with these laws, any failure to comply with these laws and other regulations, or to maintain an adequate compliance program, could result in significant fines, penalties, lawsuits, regulatory sanctions, reputational damage, or restrictions on our business.
Changes in accounting policies, standards, and interpretations could materially affect how Old National reports its financial condition and results of operations.
5 unchanged sentences
Old National is subject to regulations that require us to satisfy certain capital ratios, such as the ratio of our Tier 1 capital to our risk-based assets.
−Removed: Both the Dodd-Frank Act, which reformed the regulation of financial institutions in a comprehensive manner, and the Basel III regulatory capital reforms, which increased both the amount and quality of capital that financial institutions must hold, impact our capital requirements.
−Removed: If we are unable to satisfy these heightened regulatory capital requirements, due to a decline in the value of our loan portfolio or otherwise, we will be required to improve such capital ratios by either raising additional capital or by disposing of assets.
+Added: Regulators have implemented and may, from time to time, implement changes to these regulatory capital adequacy requirements.
+Added: If we are unable to satisfy these regulatory capital requirements, due to a decline in the value of our loan portfolio or otherwise, we will be required to improve such capital ratios by either raising additional capital or by disposing of assets.
If we choose to dispose of assets, we cannot be certain that we will be able to do so at prices that we believe to be appropriate, and our future operating results could be negatively affected.
−Removed: If we choose to raise additional capital, we may accomplish this by selling additional shares of Common Stock, or securities convertible into or exchangeable for Common Stock, which could significantly dilute the ownership percentage of holders of our Common Stock and cause the market price of our Common Stock to decline.
+Added: If we choose to raise additional capital, we may accomplish this by selling additional shares of Common Stock, or securities convertible into or exchangeable for Common Stock, which could dilute the ownership percentage of holders of our Common Stock and cause the market price of our Common Stock to decline.
Additionally, events or circumstances in the capital markets generally may increase our capital costs and impair our ability to raise capital at any given time.
−Removed: See “Business – Supervision and Regulation” herein for further discussion on the Basel III regulatory capital reforms.
+Added: See “Business – Supervision and Regulation – Capital Adequacy” herein for further discussion on regulatory capital requirements applicable to the Company and Old National Bank.
+Added: Old National could be subject to adverse changes or interpretations of tax laws, tax audits, or challenges to our tax positions.
+Added: Old National is subject to federal and applicable state income tax laws and regulations.
+Added: Income tax laws and regulations are often complex and require significant judgment in determining the Company’s effective tax rate and in evaluating the Company’s tax positions.
+Added: Changes in tax laws, changes in interpretations, guidance or regulations that may be promulgated, or challenges to judgments or actions that the Company may take with respect to tax laws could negatively impact our current and future financial performance.
+Added: In addition, our determination of our tax liability is subject to review by applicable tax authorities.
+Added: In the normal course of business, we are routinely subject to examinations and challenges from federal and applicable state and local taxing authorities regarding the amount of taxes due in connection with investments we have made and the businesses in which we have engaged.
+Added: Recently, federal and state and local taxing authorities have been increasingly aggressive in challenging tax positions taken by financial institutions.
+Added: The challenges made by taxing authorities may result in adjustments to the timing or amount of taxable income or deductions, or the allocation of income among tax jurisdictions.
+Added: Any such challenges that are not resolved in our favor may adversely affect our effective tax rate, tax payments or financial condition.
Our earnings could be adversely impacted by incidences of fraud and compliance failure.
Financial institutions are inherently exposed to fraud risk.
−Removed: A fraud can be perpetrated by a client of Old National, an employee, a vendor, or members of the general public.
+Added: A fraud can be perpetrated by an employee, a vendor, or members of the general public, or by or at a client of Old National.
We are most subject to fraud and compliance risk in connection with the origination of loans, ACH transactions, wire transactions, ATM transactions, and checking transactions.
5 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.