What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-22 compared with 2023-02-22 · 415 added, 562 removed, 1913 unchanged (34% of the section changed)

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Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets

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Derivative Financial Instruments

Commitments , Contingencies , and Finan cial Guarantees

Commitments, Contingencies, and Financial Guarantees

Regulatory Restrictions

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Old National has also appointed a Chief Ethics Officer and had a third party perform an independent validation of our ethics program.

All systems of internal accounting controls are based on management’s judgment that the cost of controls should not exceed the benefits to be achieved and that no system can provide absolute assurance that control objectives are achieved.

Management believes Old National’s system provides the appropriate balance between cost of controls and the related benefits.

In order to monitor compliance with this system of controls, Old National maintains an extensive internal audit program.

Internal audit reports are issued to appropriate officers and significant audit exceptions, if any, are reviewed with management and the Audit Committee.

The Board of Directors, through an Audit Committee comprised solely of independent outside directors, oversees management’s discharge of its financial reporting responsibilities.

The Audit Committee meets regularly with Old National’s independent registered public accounting firm, Crowe LLP, and the managers of financial reporting, internal audit, and risk.

The Board of Directors, through an Audit Committee comprised solely of independent directors, oversees management’s discharge of its financial reporting responsibilities.

The Audit Committee meets regularly with Old National’s independent registered public accounting firm, Deloitte & Touche LLP, and the managers of financial reporting, internal audit, and risk.

During these meetings, the committee meets privately with the independent registered public accounting firm as well as with financial reporting and internal audit personnel to review accounting, auditing, and financial reporting matters.

The appointment of the independent registered public accounting firm is made by the Audit Committee.

The consolidated financial statements in this annual report on Form 10-K have been audited by Crowe LLP, for the purpose of determining that the consolidated financial statements are presented fairly, in all material respects in conformity with accounting principles generally accepted in the United States.

Crowe LLP’s report on the financial statements follows.

Our consolidated financial statements as of December 31, 2023 and for the year then ended have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, whose report appears in this annual report on Form 10-K.

Our consolidated financial statements as of December 31, 2022 and for the years ended December 31, 2022 and 2021 have been audited by Crowe LLP, an independent registered public accounting firm, whose report also appears in this annual report on Form 10-K.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

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Based on that assessment, Old National has concluded that, as of December 31, 2023, Old National’s internal control over financial reporting is effective.

Old National’s independent registered public accounting firm has audited the effectiveness of Old National’s internal control over financial reporting as of December 31, 2022 as stated in their report, which follows.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Old National Bancorp

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Old National Bancorp and subsidiaries (“Old National") as of December 31, 2023, the related consolidated statements of income, comprehensive income (loss), shareholders' equity, and cash flows for the year ended December 31, 2023, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of Old National as of December 31, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), Old National's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 22, 2024, expressed an unqualified opinion on Old National's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of Old National's management.

Our responsibility is to express an opinion on Old National's financial statements based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to Old National in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses on Loans (“ACL”) — Qualitative Factors — Refer to Note 1 and Note 4 of the Notes to Consolidated Financial Statements

Critical Audit Matter Description

Old National maintains the ACL as an estimate of expected credit losses over the expected contractual life of their loan portfolio.

The methodology for estimating the amount of expected credit losses reported in the allowance for credit losses has two basic components:

first, an asset-specific component involving individual loans that do not share risk characteristics with other loans and the measurement of expected credit losses for such individual loans;

and second, a pooled component for estimated expected credit losses for pools of loans that share similar risk characteristics.

Old National utilizes a discounted cash flow (“DCF”) approach with probability of default (“PD”) methodology for pools of loans with similar risk characteristics.

The PD regression models use combinations of variables to assess systematic and unsystematic risk.

Variables used for unsystematic risk are borrower specific and help to gauge the

risk of default from an individual borrower.

Variables for systematic risk, risk inherent to all borrowers, come from the use of forward-looking economic forecasts.

The LGD is defined as credit loss incurred when an obligor of the bank defaults.

Expected cash flows are created for each loan using reasonable and supportable forecasts and discounted using the loan’s effective yield.

The discounted sum of expected cash flows is then compared to the amortized cost and any shortfall is recorded as a component of the ACL.

The quantitative allowance is adjusted by qualitative factors.

Qualitative factors include items such as changes in lending policies or procedures and economic uncertainty in forward-looking forecasts.

At December 31, 2023, the key qualitative factors included adjustments to the expected credit losses associated with risks in the current economic environment.

These factors include the risk that certain macroeconomic forecasts such as unemployment, gross domestic product, housing product index, and the BBB ratio (BBB spread to the 10-year U.S.

Treasury rate) prove to be more severe and/or prolonged than the baseline forecast due to a variety of factors including monetary actions to control inflation, global military conflicts, and global supply chain issues.

Considering the estimation and judgment in determining adjustments for such qualitative factors, our audit of the ACL and the related disclosures involved subjective judgments about the qualitative adjustments to the ACL.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the qualitative adjustments to the ACL included the following, among others:

• We tested the effectiveness of Old National’s controls over the qualitative adjustments to the ACL

• We assessed the reasonableness of, and evaluated support for, key qualitative adjustments based on external market data and loan portfolio performance metrics

• We tested the completeness and accuracy and evaluated the relevance of the key data used as inputs to the qualitative adjustment estimation process, including:

◦ Portfolio segment loan balances and other borrower-specific data

◦ Relevant macroeconomic indicators and data

• With the assistance of our credit specialists, we tested the mathematical accuracy of the ACL models used as the method for developing the qualitative adjustments

/s/ Deloitte & Touche LLP

Chicago, Illinois

February 22, 2024

We have served as Old National’s auditor since 2023.

Independent Member Crowe Global

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Evansville, Indiana

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Old National Bancorp (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements").

We also have audited the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework:

(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework:

(2013) issued by COSO.

Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Assessment of Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Old National Bancorp (the “Company") as of December 31, 2022, the related consolidated statements of income, comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

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We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Allowance and Provision for Credit Losses on Loans – Forecasting and Qualitative Factors, and Model Design for Acquired Loans

The allowance for credit losses (the “ACL”) is an accounting estimate of expected credit losses over the contractual life of financial assets carried at amortized cost and off-balance-sheet credit exposures as described in Notes 1 and 4 of the consolidated financial statements.

A financial asset (or a group of financial assets), including the Company's loan portfolio, is required to be measured at amortized cost to be presented at the net amount expected to be collected.

Estimates of expected credit losses for loans are based on historical experience, current conditions, and reasonable and supportable forecasts over the expected life of the loans.

At December 31, 2022, the ACL on the overall loan portfolio was $303.7 million.

As part of the Company’s merger with First Midwest Bancorp, Inc.

(“FMB”), the Company recorded $96.3 million of provision for credit losses to establish an ACL on acquired non-purchased credit deteriorated (PCD) loans and $89.1 million to establish an ACL for acquired PCD loans.

The Company utilizes a discounted cash flow (“DCF”) approach with probability of default (“PD”) methodology.

The PD regression models use combinations of variables to assess risk including unsystematic risk to help gauge the risk of default from an individual borrower and variables for systematic risk applicable to all borrowers.

Other assumptions used to determine the quantitative allowance include the loss given default (“LGD”), which is defined as credit loss incurred when an obligor of the bank defaults, and prepayment assumptions.

Expected cash flows are created for each loan using reasonable and supportable forecasts and discounted using the loan’s effective yield.

The discounted sum of expected cash flows is then compared to the amortized cost and any shortfall is recorded as a component of the ACL.

The quantitative allowance is adjusted by qualitative factors, including items such as changes in lending policies or procedures and economic uncertainty in forward-looking forecasts.

The same methods and assumptions used to determine the quantitative and qualitative allowance were applied to the FMB acquired loans since the merger date.

A significant amount of management judgment is required to determine the reasonable and supportable forecasts and the qualitative factors for the ACL, and the model design for FMB acquired loans at the merger date.

We identified auditing the reasonable and supportable forecasts and the qualitative factors for the ACL, and the model design for FMB acquired loans used in developing the ACL at the merger date, as a critical audit matter because of the extent of auditor judgment applied and significant audit effort required to evaluate the especially subjective and complex judgments made by management, including the need for specialized skills.

The principal considerations resulting in our determination included the following:

• Significant auditor judgment and audit effort required to evaluate the determination of the reasonable and supportable forecast and qualitative factors.

• Significant auditor judgment and audit effort required to evaluate the model design for FMB acquired loans, including the evaluation of the method, significant assumptions, and data used in the model design.

The primary procedures performed to address the critical audit matter included:

• Testing the effectiveness of management’s internal controls over the determination of the reasonable and supportable forecast, the qualitative factors, and model design for FMB acquired loans, including controls addressing:

◦ Management’s review of the appropriateness of the reasonable and supportable forecasts and qualitative factors applied in the estimate of ACL, including the review of relevance and reliability of data used in the estimate

◦ Management’s review of the appropriateness of the models and reasonableness of the significant assumptions used to establish the ACL for FMB acquired loans, including the review of relevance and reliability of data used in the estimate

◦ Management’s review of the results of the model validation related to the ACL for FMB acquired loans

• Substantively testing management’s process for the determination of reasonable and supportable forecast, the qualitative factors, and model design for FMB acquired loans, including:

◦ Evaluating management’s judgments in the selection and application of reasonable and supportable forecasts and qualitative factors, including the relevance and reliability of data used in the estimate.

◦ Evaluating the relevance and reliability of data used in the models for the FMB acquired loans

◦ Evaluating, with the assistance of internal valuation specialists, the reasonableness of the conceptual design of the models and the significant assumptions applied in the ACL for FMB acquired loans

Merger - Fair Value of Loans Acquired

As described in Note 2 to the consolidated financial statements, the Company completed the merger transaction with FMB on February 15, 2022.

The merger transaction was accounted for as a business combination and accordingly, the assets acquired and liabilities assumed from FMB were recorded at fair value as of the merger date.

The merger date fair value of loans acquired from FMB was approximately $14.6 billion.

Accounting for the merger date fair value of loans acquired requires management to make significant judgments about the selection and application of assumptions.

We identified auditing the merger date fair value of loans acquired as a critical audit matter because it required especially subjective auditor judgment.

The principal considerations resulting in our determination included the significant auditor judgment and effort required to evaluate the reasonableness of management’s assumptions used, including the need for specialized skills.

The primary procedures performed to address the critical audit matter included:

• Testing the effectiveness of management’s internal controls over the determination of merger date fair value of loans acquired, including controls addressing:

◦ Evaluation of the reasonableness of methods and significant assumptions applied in the estimate of merger date fair value of loans acquired

◦ Evaluation of the relevance and reliability of data used in the valuation of merger date fair value of loans acquired

• Substantively testing management’s process for developing the merger date fair value of loans acquired, which included:

◦ Testing the relevance and reliability of data used as a basis for the valuation

◦ Evaluating, with the assistance of our internal valuation specialists, the reasonableness of the methods and significant assumptions applied in the estimate of the fair value of loans acquired, including the application of the significant assumptions used in the valuation

We have served as the Company's auditor since 2005, which is the year the engagement letter was signed for the audit of the 2006 financial statements.

We believe that our audits provide a reasonable basis for our opinion.

/s/ Crowe LLP

We served as the Company's auditor from 2005, which is the year the engagement letter was signed for the audit of the 2006 financial statements, through the filing of the 2022 Form 10-K, which was filed in February 2023.

Louisville, Kentucky

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$ 2,601,188 and $ 2,643,682 , respectively)

3,013,493 3,089,147

Federal Home Loan Bank/Federal Reserve Bank stock, at cost 365,588 314,168

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Residential real estate 6,699,443 6,460,441

Consumer credit, net of unearned income 2,697,226 1,574,114

Consumer 2,639,625 2,697,226

Total loans, net of unearned income 32,991,927 31,123,641

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Premises and equipment, net 565,396 557,307

Operating lease right-of-use assets 189,714 69,560

Accrued interest receivable 190,521 84,109

Goodwill 1,998,716 1,998,716

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Company-owned life insurance 767,902 768,552

Other assets 1,142,315 372,079

Accrued interest receivable and other assets 1,591,683 1,522,550

Total assets $ 49,089,836 $ 46,763,372

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Other borrowings 764,870 743,003

Operating lease liabilities 211,964 76,236

Accrued expenses and other liabilities 960,609 1,047,633

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Shareholders’ Equity

Preferred stock, 2,000 shares authorized, 231 and 0 shares issued and outstanding, respectively

Common stock, $ 1.00 per share stated value, 600,000 shares authorized, 292,903

Preferred stock, 2,000 shares authorized, 231 shares issued and outstanding

230,500 230,500

Common stock, no par value, $ 1.00 per share stated value, 600,000 shares authorized,

292,655 and 292,903 shares issued and outstanding, respectively

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Net interest income 1,503,153 1,327,936 596,400

Provision for credit losses 144,799 ( 29,622 ) 42,879

Net interest income after provision for credit losses 1,183,137 626,022 553,215

Provision (release) for credit losses 58,887 144,799 ( 29,622 )

Net interest income after provision (release) for credit losses 1,444,266 1,183,137 626,022

Noninterest Income

Wealth management fees 69,102 40,409 36,806

Wealth and investment services fees 107,784 100,851 65,048

Service charges on deposit accounts 71,945 72,501 31,658

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Mortgage banking revenue 16,319 23,015 42,558

Investment product fees 31,749 24,639 21,614

Capital markets income 24,419 25,986 21,997

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Debt securities gains (losses), net ( 6,265 ) ( 88 ) 4,327

Gain on sale of Visa Class B restricted shares 21,635 — —

Gain on sale of health savings accounts — 90,673 —

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Marketing 39,511 32,264 12,684

Data processing 84,865 47,047 41,086

Technology 80,343 84,865 47,047

Communication 16,980 18,846 10,073

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Changes from securities held-to-maturity 17,192 ( 112,664 ) —

Change in cash flow hedges:

Net unrealized derivative gains (losses) on cash flow hedges ( 45,132 ) 1,898 8,261

Change in hedges:

Net unrealized derivative gains (losses) on hedges 69,276 ( 45,132 ) 1,898

Reclassification adjustment for (gains) losses realized in net income ( 15,067 ) 2,587 ( 4,605 )

Income tax effect ( 13,479 ) 10,453 666

Changes from cash flow hedges ( 32,092 ) ( 2,041 ) 2,344

Changes from hedges 40,730 ( 32,092 ) ( 2,041 )

Change in defined benefit pension plans:

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Income (Loss) Total

Shareholders'

Shareholders’ Equity

Balance, December 31, 2020 $ — $ 165,367 $ 1,875,626 $ 783,892 $ 147,771 $ 2,972,656

Cumulative effect of change in accounting principles — — — ( 31,150 ) — ( 31,150 )

Balance, January 1, 2020 — 169,616 1,944,445 651,035 56,207 2,821,303

Net income — — — 277,538 — 277,538

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Other comprehensive income (loss) — — — — ( 784,047 ) ( 784,047 )

Dividends - common stock

($ 0.56 per share)

First Midwest Bancorp, Inc.

Issuance of common stock — 129,365 2,316,947 — — 2,446,312

Issuance of preferred stock, net of

issuance costs 230,500 — 13,219 — — 243,719

Cash dividends:

Common ($ 0.56 per share)

— — — ( 163,505 ) — ( 163,505 )

Preferred ($ 61.25 per share)

— — — ( 14,118 ) — ( 14,118 )

Common stock issued — 52 757 — — 809

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Other comprehensive income (loss) — — — — 47,613 47,613

First Midwest Bancorp, Inc.

Issuance of common stock — 129,365 2,316,947 — — 2,446,312

Issuance of preferred stock, net of

issuance costs 230,500 — 13,219 — — 243,719

Cash dividends:

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— — — ( 163,895 ) — ( 163,895 )

Preferred dividends — — — ( 14,118 ) — ( 14,118 )

Preferred ($ 70.00 per share)

— — — ( 16,135 ) — ( 16,135 )

Common stock issued — 75 1,001 — — 1,076

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Share-based compensation expense 27,910 28,656 7,497

Provision for credit losses 144,799 ( 29,622 ) 42,879

Provision (release) for credit losses 58,887 144,799 ( 29,622 )

Debt securities (gains) losses, net 6,265 88 ( 4,327 )

Gain on sale of health savings accounts business ( 90,673 ) — —

Gain on sale of Visa Class B restricted shares ( 21,635 ) — —

Gain on sale of health savings accounts — ( 90,673 ) —

Net (gains) losses on sales of loans and other assets ( 3,074 ) 13,114 ( 36,677 )

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Cash Flows From Investing Activities

Cash received (paid) from merger, net 1,912,629 — —

Cash received from merger, net — 1,912,629 —

Sale of health savings accounts — ( 290,857 ) —

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Loan originations and payments, net ( 2,673,593 ) ( 3,071,765 ) 206,145

Proceeds from sales of commercial loans 757,593 — —

Proceeds from company-owned life insurance death benefits 16,252 10,361 3,375

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NATURE OF OPERATIONS

Old National Bancorp, a financial holding company headquartered in Evansville, Indiana with commercial and consumer banking operations headquartered in Chicago, Illinois.

Its principal subsidiary is Old National Bank.

Through its bank and non-bank affiliates, Old National Bancorp provides to its clients a wide range of services throughout the Midwest region, including commercial and consumer loan and depository services, private banking, brokerage, trust, investment advisory, and other traditional banking services.

Old National Bancorp, the financial holding company of Old National Bank, our wholly-owned banking subsidiary, is headquartered in Evansville, Indiana with commercial and consumer banking operations headquartered in Chicago, Illinois.

Through Old National Bank and non-bank affiliates, Old National Bancorp provides a wide range of services to its clients throughout the Midwest region and elsewhere, including commercial and consumer loan and depository services, private banking, capital markets, brokerage, wealth management, trust, investment advisory, and other traditional banking services.

NOTE 1 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

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Actual results could differ from those estimates.

All significant intercompany transactions and balances have been eliminated.

All intercompany transactions and balances have been eliminated.

Certain prior year amounts have been reclassified to conform to the current presentation.

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If the present value of cash flows expected to be collected is less than the amortized cost basis for the security, a credit loss exists and an allowance for credit losses is recorded, limited to the amount that the fair value of the security is less than its amortized cost basis.

Any decline in fair value that has not been recorded through an allowance for credit losses is recognized in other comprehensive income (loss), net of

applicable taxes.

Any decline in fair value that has not been recorded

through an allowance for credit losses is recognized in other comprehensive income (loss), net of applicable taxes.

Accrued interest receivable on the securities portfolio is excluded from the estimate of credit losses.

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Subsequent changes to the allowance for credit losses are recorded through provision for credit losses.

Any loans that are modified are reviewed by Old National to identify if a financial difficulty modification has occurred, which is when Old National modifies a loan related to a borrower experiencing financial difficulties.

Terms may be modified to fit the ability of the borrower to repay in line with its current financial status.

The modification of the terms of such loans includes one or a combination of the following:

a reduction of the stated interest rate of the loan, an extension of the maturity date, a permanent reduction of the recorded investment of the loan, or an other-than-insignificant payment delay.

The adoption of Accounting Standards Update (“ASU”) 2022-02 on January 1, 2023 eliminated the recognition and measurement of troubled debt restructurings (“TDRs”) and enhanced disclosures for modifications to loans related to borrowers experiencing financial difficulties.

Allowance for Credit Losses on Loans

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Credit quality is assessed and monitored by evaluating various attributes and the results of those evaluations are utilized in underwriting new loans and in our process for estimating expected credit losses.

Expected credit loss inherent in non-cancelable off-balance-sheet credit exposures is accounted for as a separate liability included in other liabilities on the balance sheet.

The allowance for credit losses on loans held for investment is adjusted by a credit loss expense, which is reported in provision for credit losses, and reduced by the charge-off of loan amounts, net of recoveries within the provision for credit losses.

Old National has made a policy election to report accrued interest receivable as a separate line item on the balance sheet.

The allowance for credit loss estimation process involves procedures to consider the unique characteristics of our loan portfolio segments.

Accrued interest receivable is excluded from the estimate of credit losses.

Old National has made a policy election to present accrued interest receivable separately on the balance sheet.

The allowance for credit loss estimation process involves procedures to appropriately consider the unique characteristics of our loan portfolio segments.

These segments are further disaggregated into loan classes based on the level at which credit risk is monitored.

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Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain.

Evaluations of the overall loan portfolio in future periods, in light of the factors and

forecasts then prevailing, may result in significant changes in the allowance and credit loss expense in those future periods.

In future periods, evaluations of the overall loan portfolio, in light of the factors and forecasts then prevailing, may result in significant changes in the allowance and credit loss expense in those future periods.

The allowance level is influenced by loan volumes, loan AQR migration or delinquency status, changes in historical loss experience, and other conditions influencing loss expectations, such as reasonable and supportable forecasts of economic conditions.

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Derivative Financial Instruments

As part of Old National’s overall interest rate risk management, Old National uses derivative instruments, including agreements that are commonly referred to as TBA (to be announced) forward agreements and interest rate swaps, collars, caps, and floors.

As part of Old National’s overall interest rate risk management, Old National uses derivative instruments, including interest rate swaps, collars, caps, and floors.

All derivative instruments are recognized on the balance sheet at their fair value.

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Net cash settlements on derivatives that do not qualify for hedge accounting are reported in noninterest income.

Cash flows on hedges are classified in the cash flow statement the same as the cash flows of the items being hedged.

Old National formally documents all relationships between derivatives and hedged items, as well as the risk-management objective and strategy for undertaking various hedge transactions.

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A Black-Scholes model is utilized to estimate the fair value of stock options and appreciation rights, while the market price of our Common Stock at the date of grant is used for restricted stock awards.

The market price of our Common Stock at the date of grant less the present value of dividends expected to be paid during the performance period is used for restricted stock units where the performance measure is based on an internal performance measure.

The market price of our Common Stock at the date of grant less the

present value of dividends expected to be paid during the performance period is used for restricted stock units where the performance measure is based on an internal performance measure.

A third-party provider is used to value certain restricted stock units where the performance measure is based on total shareholder return.

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Forfeitures are recognized as they occur.

FDIC Special Assessment

On November 16, 2023, the FDIC finalized a rule that imposes special assessments to recover the losses to the Deposit Insurance Fund (“DIF”) resulting from the FDIC’s use, in March 2023, of the systemic risk exception to the least-cost resolution test under the Federal Deposit Insurance Act in connection with the receiverships of Silicon Valley Bank and Signature Bank.

The FDIC estimated in approving the rule that those assessed losses total approximately $16.3 billion.

The rule provides that this loss estimate will be periodically adjusted, which will affect the amount of the special assessment.

Under the rule, the assessment base is the estimated uninsured deposits that an insured depository institution (“IDI”) reported in its December 31, 2022 Call Report, excluding the first $5 billion in estimated uninsured deposits.

The special assessments will be collected at an annual rate of approximately 13.4 basis points per year (3.36 basis points per quarter) over eight quarters in 2024 and 2025, with the first assessment period beginning January 1, 2024.

Because the estimated loss pursuant to the systemic risk determination will be periodically adjusted, the FDIC retains the ability to cease collection early, extend the special assessment collection period and impose a final shortfall special assessment on a one-time basis.

In its December 31, 2022 Call Report, Old National Bank reported estimated uninsured deposits of approximately $12.0 billion.

The Company expects the special assessments to be tax deductible.

The total of the special assessments for Old National Bank is estimated at $19.1 million, and such amount was recorded within FDIC assessment expense in the year ending December 31, 2023.

Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities.

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A description of the Company’s significant revenue streams accounted for under ASC 606 follows:

Wealth management fees :

Wealth and investment services fees :

Old National earns wealth management fees based upon asset custody and investment management services provided to individual and institutional customers.

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Fees that are transaction based are recognized at the point in time that the transaction is executed.

Investment product fees are the commissions and fees received from third-party registered broker/dealers and investment advisers that provide those services to Old National customers.

Old National acts as an agent in arranging the relationship between the customer and the third-party service provider.

These fees are recognized monthly from the third-party broker based upon services already performed, net of the processing fees charged to Old National by the broker.

Service charges on deposit accounts :

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Old National earns interchange fees from cardholder transactions processed through card association networks.

Interchange rates are generally set by the card associations based upon purchase volumes and other factors.

Interchange rates are generally set by the card associations based upon purchase

volumes and other factors.

Interchange fees represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder.

Investment product fees :

Investment product fees are the commissions and fees received from a registered broker/dealer and investment adviser that provide those services to Old National customers.

Old National acts as an agent in arranging the relationship between the customer and the third-party service provider.

These fees are recognized monthly from the third-party broker based upon services already performed, net of the processing fees charged to Old National by the broker.

Impact of Accounting Changes

Accounting Guidance Adopted in 2023

FASB ASC 470 and 815 – In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity , to clarify the accounting for certain financial instruments with characteristics of liabilities and equity.

The amendments in this update reduce the number of accounting models for convertible debt instruments and convertible preferred stock by removing the cash conversion model and the beneficial conversion feature model.

In addition, this ASU improves disclosure requirements for convertible instruments and earnings-per-share guidance.

The amendments in this update are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years.

The adoption of this guidance on January 1, 2022 did not have a material impact on the consolidated financial statements.

FASB ASC 842 – In July 2021, the FASB issued ASU 2021-05, Leases (Topic 842):

Lessors—Certain Leases with Variable Lease Payments , to amend the lease classification requirements for lessors to align them with practice under ASC Topic 840.

The amendments in this update are effective for fiscal years beginning after December 15,

2021, and interim periods within those fiscal years.

The adoption of this guidance on January 1, 2022 did not have a material impact on the consolidated financial statements.

FASB ASC 848 – In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides temporary, optional guidance to ease the potential burden in accounting for, or recognizing the effects of, the transition away from the LIBOR or other interbank offered rate on financial reporting.

The guidance is applicable only to contracts or hedge accounting relationships that reference LIBOR or another reference rate expected to be discontinued.

In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848 , which defers the sunset date of relief provisions within Topic 848 from December 31, 2022 to December 31, 2024.

The objective of the guidance in Topic 848 is to provide relief during the transition period.

The amendments in this ASU are effective March 12, 2020 through December 31, 2024.

Old National believes the adoption of this guidance on activities subsequent to December 31, 2022 will not have a material impact on the consolidated financial statements.

Accounting Guidance Pending Adoption

FASB ASC 805 – In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

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Entities should apply the amendments prospectively to business combinations that occur after the effective date.

Early adoption is permitted, including in any interim period.

The new guidance is not expected to have a material impact on the consolidated financial statements.

The adoption of this guidance on January 1, 2023 did not have a material impact on the consolidated financial statements.

FASB ASC 815 – In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (Topic 815):

Fair Value Hedging—Portfolio Layer Method , to expand the current single-layer method of electing hedge accounting to allow multiple hedged layers of a single closed portfolio under the method and renames the last-of-layer method the portfolio layer method.

Fair Value Hedging—Portfolio Layer Method , to expand the current single-layer method of electing hedge accounting to allow multiple hedged layers of a single closed portfolio under the method and rename the last-of-layer method the portfolio layer method.

The amendments in this update are effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years.

Early adoption is permitted for any entity that has adopted the amendments in ASU No.

2017-12 for the corresponding period.

If an entity adopts the amendments in an interim period, the effect of adopting the amendments related to basis adjustments should be reflected as of the beginning of the fiscal year of adoption (i.e., the initial application date).

Old National is currently evaluating the impact of adopting the new guidance on the consolidated financial statements.

The adoption of this guidance on January 1, 2023 did not have a material impact on the consolidated financial statements.

FASB ASC 326 – In March 2022, the FASB issued ASU 2022-02, Financial Instruments—Credit Losses (Topic 326):

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The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

These amendments should be applied prospectively, except for the transition method related to the recognition and measurement of TDRs, which an entity has the option to apply a modified retrospective transition method resulting in a cumulative-effect adjustment to retained earnings in the period of adoption.

Early adoption is permitted if an entity has adopted ASU No.

2016-13, including adoption in an interim period.

If an entity elects to early adopt ASU No.

2022-02 in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes the interim period.

An entity may elect to early adopt the amendments about TDRs and related disclosure enhancements separately from the amendments related to vintage disclosures.

Old National is currently evaluating the impact of adopting the new guidance on the consolidated financial statements.

The adoption of the provision in ASU 2022-02 related to the recognition and measurement of TDRs on a prospective basis on January 1, 2023 did not have a material impact on the consolidated financial statements.

FASB ASC 848 – In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides temporary, optional guidance to ease the potential burden in accounting for, or recognizing the effects of, the transition away from LIBOR or other interbank offered rate on financial reporting.

The guidance is applicable only to contracts or hedge accounting relationships that reference LIBOR or another reference rate expected to be discontinued.

In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848 , which defers the sunset date of relief provisions within Topic 848 from December 31, 2022 to December 31, 2024.

The objective of the guidance in Topic 848 is to provide relief during the transition period.

The amendments in this ASU are effective March 12, 2020 through December 31, 2024.

As of December 31, 2023, substantially all of the Company’s LIBOR exposure was remediated and remaining LIBOR-based contracts are expected to transition to alternate reference rates at their next index reset dates.

Old National believes the adoption of this guidance on activities subsequent to December 31, 2023 will not have a material impact on the consolidated financial statements.

Accounting Guidance Pending Adoption

FASB ASC 820 – In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions , to clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value.

The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years.

The amendments in this update are effective for fiscal years beginning after

December 15, 2023, and interim periods within those fiscal years.

Early adoption is permitted.

Old National does not expect the adoption of this guidance will have a material impact on the consolidated financial statements.

FASB ASC 323 – In March 2023, the FASB issued ASU 2023-02, Investments—Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method , which allows reporting entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits.

This ASU is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

Early adoption is permitted for all entities in any interim period.

Old National does not expect the adoption of this guidance will have a material impact on the consolidated financial statements.

FASB ASC 280 – In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

The amendments are intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements.

The purpose of the amendments is to enable investors to better understand an entity’s overall performance and assess potential future cash flows.

A public entity should apply the amendments retrospectively to all prior periods presented in the financial statements.

Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption.

This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

Old National is currently evaluating the impact of adopting the new guidance on the consolidated financial statements.

FASB ASC 740 – In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

Among other things, these amendments require that public business entities on an annual basis disclose additional information in specified categories with respect to the reconciliation of the effective tax rate to the statutory rate for federal, state, and foreign income taxes.

It also requires greater detail about individual reconciling items in the rate reconciliation to the extent the impact of those items exceeds a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income (loss) by the applicable statutory income tax rate).

In addition, the ASU requires information pertaining to taxes paid (net of refunds received) to be disaggregated for federal, state, and foreign taxes and further disaggregated for specific jurisdictions to the extent the related amounts are equal to or greater than 5 percent of total income taxes paid (net of refunds received).

The amendments in this ASU are effective for annual periods beginning after December 15, 2024.

Early adoption is permitted.

Old National is currently evaluating the impact of adopting the new guidance on the consolidated financial statements.

NOTE 2 – MERGER, ACQUISITION, AND DIVESTITURE ACTIVITY

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On February 15, 2022, Old National completed its previously announced merger of equals transaction with First Midwest pursuant to an agreement and plan of merger, dated as of May 30, 2021, to combine in an all-stock transaction.

Following the merger, the new organization is operating under the Old National Bancorp and Old National Bank names, with the corporate headquarters and principal office located in Evansville, Indiana and commercial and consumer banking operations headquartered in Chicago, Illinois.

Old National believes that it will be able to achieve synergies and cost savings by integrating the operations of the two companies.

The combined organization has a presence in additional Midwestern markets, strong commercial banking capabilities, a robust retail footprint, a significant wealth platform, and an enhanced ability to attract talent.

The combined organization also creates the scale and profitability to accelerate digital and technological capabilities to drive future investments in consumer and commercial banking, as well as wealth management services.

Pursuant to the terms of the merger agreement, each First Midwest common stockholder received 1.1336 shares of Old National common stock for each share of First Midwest common stock such stockholder owned, plus, if applicable, cash in lieu of fractional shares of Old National common stock resulting from the exchange ratio.

Each outstanding share of 7.000 % fixed-rate non-cumulative perpetual preferred stock, Series A, no par value, and each outstanding share of 7.000 % fixed-rate non-cumulative perpetual preferred stock, Series C, no par value, of First Midwest was converted into the right to receive one share of an applicable newly created series of Old National preferred stock, no par value “Old National Series A Preferred Stock” and “Old National Series C Preferred Stock,” and collectively, the “Old National Preferred Stock”.

In this regard, Old National issued 108,000 shares of Old National Series A Preferred Stock and 122,500 shares of Old National Series C Preferred Stock.

Old National entered into two deposit agreements, each dated as of February 15, 2022, by and among Old National, Continental Stock Transfer & Trust Company, as depository, and the holders from time to time of the depositary receipts in connection with the issuance of the Old National Preferred Stock.

Pursuant to the deposit agreements, Old National issued 4,320,000 depositary shares, each representing a 1/40th interest in a share of Old National Series A Preferred Stock, and 4,900,000 depositary shares, each representing a 1/40th interest in a share of Old National Series C Preferred Stock.

The assets acquired and liabilities assumed, both intangible and tangible, in the merger were recorded at their estimated fair values as of the merger date and have been accounted for under the acquisition method of accounting.

Subsequent to the initial valuation, Old National increased goodwill by $ 1.6 million to update the provisional valuation of the fair values of assets acquired and liabilities assumed.

These adjustments affected goodwill, loans, premises and equipment, operating lease right-of-use assets, other assets, and accrued expenses and other liabilities.

The combined organization has a presence in additional Midwestern markets, strong commercial banking capabilities, a robust retail footprint, a significant wealth management platform, and an enhanced ability to attract talent.

The combined organization also creates the scale and profitability to accelerate digital and technology capabilities to drive future investments in consumer and commercial banking, as well as wealth management services.

As of December 31, 2022, Old National finalized its valuation of all assets acquired and liabilities assumed.

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Total consideration $ 2,690,182

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

Other intangible assets acquired included core deposit intangibles and customer trust relationships.

The estimated fair value of the core deposit intangible was $ 77.9 million and is being amortized over an estimated useful life of 10 years.

The estimated fair value of customer trust relationships was $ 39.7 million and is being amortized over an estimated useful life of 13 years.

The fair value of purchased financial assets with credit deterioration was $ 1.4 billion on the date of the merger.

The gross contractual amounts receivable relating to the purchased financial assets with credit deterioration was $ 1.5 billion.

Old National estimates, on the date of the merger, that $ 89.1 million of the contractual cash flows specific to the purchased financial assets with credit deterioration will not be collected.

Transaction costs totaling $ 120.9 million associated with the merger have been expensed in 2022 and additional transaction and integration costs will be expensed in future periods as incurred.

Transaction and integrations costs totaling $ 28.7 million associated with the merger have been expensed in 2023, compared to $ 120.9 million of merger-related costs, $ 11.0 million of provision for credit losses on unfunded commitments, and $ 96.3 million of provision for credit losses on non-PCD loans acquired in the transaction in 2022.

Additional transaction and integration costs will be expensed in future periods as incurred.

As a result of the merger, Old National assumed sponsorship of First Midwest’s defined benefit pension plan (the “Pension Plan”) under which both plan participation and benefit accruals had been previously frozen.

The Pension Plan was terminated in November 2022, which included the settlement of benefit obligations associated with the Pension Plan.

At December 31, 2022, the fair value of Pension Plan assets was $ 16.6 million.

Pension costs were not material in 2022.

Summary of Unaudited Pro-Forma Financial Information

The following table presents supplemental unaudited pro-forma financial information as if the First Midwest merger had occurred on January 1, 2021.

The pro-forma financial information is not necessarily indicative of the results of operations that would have occurred had the transaction been effective as of this assumed date.

Years Ended December 31,

(dollars in thousands) 2022 2021

Total revenues (1)

$ 1,812,333 $ 1,564,287

Income before income taxes 749,009 382,102

(1) Includes net interest income and total noninterest income .

Supplemental pro-forma earnings for the year ended December 31, 2022 were adjusted to exclude $ 120.9 million of merger-related costs, $ 11.0 million of provision for credit losses on unfunded loan commitments, and $ 96.3 million of provision for credit losses to establish an allowance for credit losses on non-PCD loans acquired in the transaction.

Supplemental pro-forma earnings for the year ended December 31, 2021 were adjusted to include these costs.

On November 18, 2022, Old National completed its previously announced transaction with UMB, pursuant to which UMB acquired Old National’s business of acting as a qualified custodian for, and administering, health savings accounts.

At December 31, 2023, there were no remaining Pension Plan assets.

The fair value of Pension Plan assets was $ 16.6 million at December 31, 2022.

Pension costs were not material in 2023 or 2022.

Pending Acquisition

CapStar Financial Holdings, Inc.

On October 26, 2023, Old National announced that it entered into a definitive merger agreement pursuant to which Old National will acquire CapStar Financial Holdings, Inc.

(“CapStar”) and its wholly-owned subsidiary, CapStar Bank, in an all-stock transaction.

This partnership transaction will strengthen Old National’s recently formed Nashville presence and add several new high-growth markets.

As of September 30, 2023, CapStar had approximately $ 3.3 billion of total assets, $ 2.3 billion of total loans, and $ 2.8 billion of deposits.

Under the terms of the merger agreement, each outstanding share of CapStar common stock will be converted into the right to receive 1.155 shares of Old National common stock, valuing the transaction at approximately $ 344.4 million, or $ 16.64 per share, based on Old National’s 30-day volume weighted average closing stock price ending October 25, 2023, the day prior to execution of the merger agreement.

The transaction value is likely to change until closing due to fluctuations in the price of Old National common stock.

The definitive merger agreement has been approved by the

Board of Directors of each company.

The transaction is anticipated to close in the second quarter of 2024 subject to the approval of CapStar shareholders.

On November 18, 2022, Old National sold its business of acting as a qualified custodian for, and administering, health savings accounts.

Old National served as custodian for health savings accounts comprised of both investment accounts and deposit accounts.

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During the fourth quarter of 2022, Old National initiated certain property optimization actions that included the closure and consolidation of certain branches as well as other real estate repositioning across our footprint.

These actions resulted in pre-tax charges of $ 26.8 million that are associated with valuation adjustments related to these locations and are recorded in noninterest expense.

During 2020, we consolidated 31 banking centers located throughout our footprint, reflecting an ongoing shift among our clients toward digital banking solutions.

Many of the facilities consolidated were in smaller markets, several of which were added in recent years through acquisition and partnership activity.

These actions resulted in pre-tax charges of $ 27.1 million associated with valuation adjustments related to these locations and were recorded in noninterest expense.

These actions resulted in pre-tax charges of $ 26.8 million that are associated with valuation adjustments related to these locations and were recorded in noninterest expense.

NOTE 3 – INVESTMENT SECURITIES

The following table summarizes the amortized cost and fair value of the available-for-sale and held-to-maturity investment securities portfolios and the corresponding amounts of gross unrealized gains, unrealized losses, and basis adjustments in AOCI and gross unrecognized gains and losses.

The Company held no securities classified as held-to-maturity as of December 31, 2021.

(dollars in thousands) Amortized

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Total available-for-sale securities $ 7,772,603 $ 3,028 $ ( 847,474 ) $ ( 154,445 ) $ 6,773,712

(1) Basis adjustments represent the cumulative fair value adjustments included in the carrying amounts of fixed-rate investment securities assets in fair value hedging arrangements .

During 2022, U.S government-sponsored entity and agency securities, agency mortgage-backed securities, and state and political subdivision securities with a fair value of $ 3.0 billion were transferred from the available-for-sale portfolio to the held-to-maturity portfolio.

The $ 125.2 million unrealized holding loss, net of tax, at the date of transfer will continue to be reported as a separate component of shareholders’ equity and is being amortized over the remaining term of the securities as an adjustment to yield.

The corresponding discount on these securities will offset this adjustment to yield as it is amortized.

Held-to-Maturity

government-sponsored entities and agencies $ 819,168 $ — $ ( 162,810 ) $ — $ 656,358

Mortgage-backed securities - Agency 1,106,817 — ( 123,854 ) — 982,963

States and political subdivisions 1,163,312 221 ( 159,022 ) — 1,004,511

Allowance for securities held-to-maturity ( 150 ) — — — ( 150 )

Total held-to-maturity securities $ 3,089,147 $ 221 $ ( 445,686 ) $ — $ 2,643,682

(1) Basis adjustments represent the amount of fair value hedging adjustments included in the carrying amounts of fixed-rate investment securities assets designated in fair value hedging arrangements.

See Note 19 to the consolidated financial statements for additional information regarding these derivative financial instruments.

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

Proceeds from sales or calls of available-for-sale investment securities and the resulting realized gains and realized losses were as follows:

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(dollars in thousands) 2023 2022 2021

Proceeds from sales of available-for-sale debt securities $ 20,032 $ 198,886 $ 299,885

Proceeds from calls of available-for-sale debt securities 70,808 158,818 465,179

Total $ 90,840 $ 357,704 $ 765,064

Realized gains on sales of available-for-sale debt securities $ 344 $ 4,188 $ 11,172

Realized gains on calls of available-for-sale debt securities 187 317 121

Realized losses on sales of available-for-sale debt securities ( 377 ) ( 145 ) ( 500 )

Realized losses on calls of available-for-sale debt securities ( 242 ) ( 33 ) ( 26 )

Debt securities gains (losses), net $ ( 88 ) $ 4,327 $ 10,767

Proceeds $ 154,339 $ 90,840 $ 357,704

Realized gains 1,006 531 4,505

Realized losses ( 7,271 ) ( 619 ) ( 178 )

Investment securities pledged to secure public and other funds had a carrying value of $ 8.4 billion at December 31, 2023 and $ 6.1 billion at December 31, 2022.

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Of the bonds issued by Indiana, 99.6 % are rated “BBB+” or better, and the remaining 0.4 % generally represent pre-refunded positions.

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

The table below shows the amortized cost and fair value of the investment securities portfolio by contractual maturity.

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

The unrecognized losses on held-to-maturity investment securities presented in the table above do not include unrecognized losses on securities that were transferred from available-for-sale to held-for-maturity totaling $ 148.9 million at December 31, 2022 that are included as a separate component of shareholders’ equity and are being amortized over the remaining term of the securities.

December 31, 2022

Held-to-Maturity

government-sponsored entities

and agencies $ 354,293 $ ( 110,523 ) $ 302,066 $ ( 52,287 ) $ 656,359 $ ( 162,810 )

Mortgage-backed securities - Agency 367,849 ( 42,438 ) 615,114 ( 81,416 ) 982,963 ( 123,854 )

States and political subdivisions 838,689 ( 127,355 ) 135,573 ( 31,667 ) 974,262 ( 159,022 )

Total held-to-maturity $ 1,560,831 $ ( 280,316 ) $ 1,052,753 $ ( 165,370 ) $ 2,613,584 $ ( 445,686 )

The unrecognized losses on held-to-maturity investment securities presented in the table above do not include unrecognized losses on securities that were transferred from available-for-sale to held-for-maturity totaling $ 127.6 million at December 31, 2023 and $ 148.9 million at December 31, 2022.

These unrecognized losses are included as a separate component of shareholders’ equity and are being amortized over the remaining term of the securities.

No allowance for credit losses for available-for-sale debt securities was needed at December 31, 2023 or December 31, 2022.

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Therefore, for those securities, we do not record expected credit losses.

The allowance for credit losses on held-to-maturity debt securities was $ 0.2 million at December 31, 2022.

The allowance for credit losses on held-to-maturity debt securities was $ 0.2 million at December 31, 2023 and December 31, 2022.

Accrued interest receivable on securities portfolio is excluded from the estimate of credit losses and totaled $ 50.3 million at December 31, 2023 and $ 50.9 million at December 31, 2022.

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Treasury, U.S.

government-sponsored entities and agencies, agency mortgage-backed securities, states and political subdivisions, and other securities are the result of fluctuations in interest rates and temporary market movements.

Old National’s pooled trust preferred securities are evaluated using collateral-specific assumptions to estimate the expected future interest and principal cash flows.

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Equity Securities

Equity securities consist of mutual funds for Community Reinvestment Act qualified investments and diversified investment securities held in a grantor trust for participants in the Company’s nonqualified deferred compensation plan.

Old National’s equity securities with readily determinable fair values totaled $ 80.4 million at December 31, 2023 and $ 52.5 million at December 31, 2022.

There were losses on equity securities of $ 4.9 million during 2022, gains on equity securities of $ 0.2 million during 2021, and gains on equity securities of $ 1.4 million during 2020.

There were gains on equity securities of $ 21.5 million during 2023, losses on equity securities of $ 4.9 million during 2022, and gains on equity securities of $ 0.2 million during 2021.

Alternative Investments

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There were no impairments or adjustments on equity securities without readily determinable fair values, except for amortization of tax credit investments during 2023, 2022, and 2021.

There were impairments on these securities totaling $ 0.1 million in 2020.

NOTE 4 – LOANS AND ALLOWANCE FOR CREDIT LOSSES

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Old National manages concentrations of credit exposure by industry, product, geography, client relationship, and loan size.

In the ordinary course of business, Old National grants loans to certain executive officers and directors (collectively referred to as “related parties”).

The aggregate amount of loans to related parties was not greater than 5 % of the Company’s shareholders’ equity at December 31, 2023 or 2022.

Old National has loan participations, which qualify as participating interests, with other financial institutions.

At December 31, 2023, these loans totaled $ 2.8 billion, of which $ 1.2 billion had been sold to other financial institutions and $ 1.6 billion was retained by Old National.

The loan participations convey proportionate ownership rights with equal priority to each participating interest holder;

involve no recourse (other than ordinary representations and warranties) to, or subordination by, any participating interest holder;

all cash flows are divided

among the participating interest holders in proportion to each holder’s share of ownership;

and no holder has the right to pledge the entire financial asset unless all participating interest holders agree.

The loan categories used to monitor and analyze interest income and yields are different than the portfolio segments used to determine the allowance for credit losses on loans.

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The portfolio segment reclassifications follow:

Balance Portfolio

Reclassifications After

Balance Sheet

Line Item Portfolio

Reclassifications Portfolio

Segment After

Reclassifications

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Commercial (1)

$ 9,512,230 $ ( 232,764 ) $ 9,279,466

Commercial real estate 14,140,629 ( 169,058 ) 13,971,571

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Home equity N/A 1,065,471 1,065,471

Total $ 31,123,641 $ — $ 31,123,641

Total loans (2)

32,991,927 — 32,991,927

Allowance for credit losses on loans ( 307,610 ) — ( 307,610 )

Net loans $ 32,684,317 $ — $ 32,684,317

December 31, 2022

Commercial (1)

$ 9,508,904 $ ( 210,280 ) $ 9,298,624

Commercial real estate 12,457,070 ( 158,322 ) 12,298,748

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Home equity N/A 1,033,783 1,033,783

Total $ 13,601,846 $ — $ 13,601,846

The composition of loans by portfolio segment follows:

(dollars in thousands) 2022 2021

Commercial (1) (2)

$ 9,298,624 $ 3,200,212

Commercial real estate 12,298,748 6,221,484

BBCC 368,602 350,747

Residential real estate 6,460,441 2,255,289

Indirect 1,034,257 873,139

Direct 629,186 140,385

Home equity 1,033,783 560,590

Total loans (2)

31,123,641 — 31,123,641

Allowance for credit losses on loans ( 303,671 ) — ( 303,671 )

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(1) Includes direct finance leases of $ 169.7 million at December 31, 2023 and $ 188.1 million at December 31, 2022.

(2) Includes remaining PPP loans of $ 32.5 million at December 31, 2022 and $ 169.0 million December 31, 2021.

(2) Includes unearned income of $ 93.7 million at December 31, 2023 and $ 126.7 million at December 31, 2022.

The risk characteristics of each loan portfolio segment are as follows:

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These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions, and the availability of long-term financing.

At 227 %, Old National Bank’s commercial real estate loans as a percentage of its risk-based capital remained well below the regulatory guideline limit of 300 % at December 31, 2022.

At 244 %, Old National Bank’s applicable investor commercial real estate loans as a percentage of its risk-based capital remained below the regulatory guideline limit of 300 % at December 31, 2023.

BBCC loans are typically granted to small businesses with gross revenues of less than $5 million and aggregate debt of less than $1 million.

8 unchanged sentences

Old National typically mitigates the risk of indirect loans by establishing minimum FICO scores, maximum loan-to-value ratios, and maximum debt-to-income ratios.

Repayment of these loans depends largely on the personal income of the borrowers, which can be affected by changes in economic conditions

such as unemployment levels.

Portfolio risk is mitigated by the fact that the loans are of smaller amounts spread over many borrowers, conservative credit policies, and ongoing reviews of dealer relationships.

Repayment of these loans depends largely on the personal income of the borrowers, which can be affected by changes in economic conditions such as unemployment levels.

Portfolio risk is mitigated by the fact that the loans are of smaller amounts spread over many borrowers and ongoing reviews of dealer relationships.

Direct loans are typically secured by collateral such as auto or real estate or are unsecured.

Old National has established conservative underwriting standards such as minimum FICO scores, maximum loan-to-value ratios, and maximum debt-to-income ratios.

Old National has established underwriting standards such as minimum FICO scores, maximum loan-to-value ratios, and maximum debt-to-income ratios.

Repayment of these loans depends largely on the personal income of the borrowers, which can be affected by changes in economic conditions such as unemployment levels.

Portfolio risk is mitigated by the fact that the loans are of smaller amounts spread over many borrowers along with conservative credit policies.

Portfolio risk is mitigated by the fact that the loans are of smaller amounts spread over many borrowers.

Home equity loans are generally secured by 1-4 family residences that are owner-occupied.

Old National has established conservative underwriting standards such as minimum FICO scores, maximum loan-to-value ratios, and maximum debt-to-income ratios.

Old National has established underwriting standards such as minimum FICO scores, maximum loan-to-value ratios, and maximum debt-to-income ratios.

Repayment of these loans depends largely on the personal income of the borrowers, which can be affected by changes in economic conditions such as unemployment levels.

Portfolio risk is mitigated by the fact that the loans are of smaller amounts spread over many borrowers, along with conservative credit policies as well as monitoring of updated borrower credit scores.

Related Party Loans

In the ordinary course of business, Old National grants loans to certain executive officers, directors, and significant subsidiaries (collectively referred to as “related parties”).

The aggregate amount of loans to related parties was not greater than 5 % of the Company’s shareholders’ equity at December 31, 2022 or 2021.

Portfolio risk is mitigated by the fact that the loans are of smaller amounts spread over many borrowers, along with monitoring of updated borrower credit scores.

Allowance for Credit Losses

Credit quality within the loans held for investment portfolio is continuously monitored by management and is reflected within the allowance for credit losses on loans.

The allowance for credit losses is an estimate of expected losses inherent within the Company’s loans held for investment portfolio.

Expected credit loss inherent in non-cancelable off-balance-sheet credit exposures is accounted for as a separate liability included in other liabilities on the balance sheet.

The allowance for credit losses on loans held for investment is adjusted by a credit loss expense, which is reported in earnings, and reduced by the charge-off of loan amounts, net of recoveries.

Old National has made a policy election to report accrued interest receivable as a separate line item on the balance sheet.

Accrued interest receivable on loans is excluded from the estimate of credit losses and totaled $ 137.7 million at December 31, 2022 and $ 47.6 million at December 31, 2021.

The allowance for credit loss estimation process involves procedures to appropriately consider the unique characteristics of our loan portfolio segments.

These segments are further disaggregated into loan classes based on the level at which credit risk is monitored.

When computing the level of expected credit losses, credit loss assumptions are estimated using a model that categorizes loan pools based on loss history, delinquency status, and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future.

Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain.

In future periods evaluations of the overall loan portfolio, in light of the factors and forecasts then prevailing, may result in significant changes in the allowance and credit loss expense in those future periods.

The methodology for estimating the amount of expected credit losses reported in the allowance for credit losses has two basic components:

first, an asset-specific component involving individual loans that do not share risk characteristics with other loans and the measurement of expected credit losses for such individual loans;

and second, a pooled component for estimated expected credit losses for pools of loans that share similar risk characteristics.

Credit loss assumptions used when computing the level of expected credit losses are estimated using a model that categorizes loan pools based on loss history, delinquency status, and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future.

The base forecast scenario considers unemployment, gross domestic product, and the BBB ratio (BBB spread to the 10-year U.S.

1 unchanged sentence

In addition to the quantitative inputs, several qualitative factors are considered.

These factors include the risk that unemployment, gross domestic product, housing product index, and the BBB ratio prove to be more severe and/or prolonged than our baseline forecast due to a variety of factors including monetary actions to control inflation, conflict in Ukraine, and global supply chain issues.

These factors include the risk that unemployment, gross domestic product, housing product index, and the BBB ratio prove to be more severe and/or prolonged than our baseline forecast due to a variety of factors including monetary actions to control inflation, recent instability in the banking sector, global military conflicts, and global supply chain issues.

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

1 unchanged sentence

Period Allowance

PCD Loans Impact of

ASC 326 Charge-offs Recoveries Provision

PCD Loans Charge-offs Recoveries Provision

Losses Balance at

26 unchanged sentences

Total $ 131,388 $ — $ ( 4,310 ) $ 9,075 $ ( 28,812 ) $ 107,341

The allowance for credit losses on loans increased for the year ended December 31, 2022 primarily due to $ 89.1 million of allowance for credit losses on acquired PCD loans established through acquisition accounting adjustments on or after the merger date with First Midwest and $ 96.3 million of provision for credit losses to establish an allowance for credit losses on non-PCD loans acquired in the First Midwest merger.

Accrued interest receivable on loans is excluded from the estimate of credit losses and totaled $ 169.8 million at December 31, 2023 and $ 137.7 million at December 31, 2022.

Unfunded Loan Commitments

8 unchanged sentences

acquired during the period — 11,013 —

Impact of adopting ASC 326 — — 4,549

Provision for unfunded loan commitments 10,296 ( 810 ) 4,484

Provision (release) for credit losses on unfunded loan

commitments ( 962 ) 10,296 ( 810 )

Balance at end of period $ 31,226 $ 32,188 $ 10,879

19 unchanged sentences

Origination Year Revolving to Term

(dollars in thousands) 2022 2021 2020 2019 2018 Prior Revolving Total

thousands) 2023 2022 2021 2020 2019 Prior Revolving Total

December 31, 2023

75 unchanged sentences

Total $ 1,085 $ 1,056 $ 2,015 $ 1,943 $ 1,777 $ 15,954 $ 991,699 $ 18,254 $ 1,033,783

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

Origination Year

(dollars in thousands) 2023 2022 2021 2020 2019 Prior Revolving Total

Year Ended December 31, 2023

Commercial $ — $ 6,475 $ 24,022 $ 120 $ 7,245 $ 2,880 $ 709 $ 41,451

Commercial real estate — 54 2,808 2,144 — 6,192 — 11,198

BBCC 670 548 362 70 — — — 1,650

Residential real estate — — — — — 256 — 256

Indirect 271 1,447 787 159 152 132 — 2,948

Direct 173 1,899 2,367 746 1,207 543 3,582 10,517

Home equity — — — 35 — 408 — 443

Total gross charge-offs $ 1,114 $ 10,423 $ 30,346 $ 3,274 $ 8,604 $ 10,411 $ 4,291 $ 68,463

Nonaccrual and Past Due Loans

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Total $ 168,623 $ 43,245 $ 4,408 $ 5,085 $ 7,414

Loan Participations

Old National has loan participations, which qualify as participating interests, with other financial institutions.

At December 31, 2022, these loans totaled $ 2.3 billion, of which $ 1.1 billion had been sold to other financial institutions and $ 1.2 billion was retained by Old National.

The loan participations convey proportionate ownership rights with equal priority to each participating interest holder;

involve no recourse (other than ordinary representations and warranties) to, or subordination by, any participating interest holder;

all cash flows are divided among the participating interest holders in proportion to each holder’s share of ownership;

and no holder has the right to pledge the entire financial asset unless all participating interest holders agree.

Troubled Debt Restructurings

Old National may choose to restructure the contractual terms of certain loans.

The decision to restructure a loan, versus aggressively enforcing the collection of the loan, may benefit Old National by increasing the ultimate probability of collection.

Any loans that are modified are reviewed by Old National to identify if a TDR has occurred, which is when for economic or legal reasons related to a borrower’s financial difficulties, Old National Bank grants a concession to the borrower that it would not otherwise consider.

Terms may be modified to fit the ability of the borrower to repay in line with its current financial status.

The modification of the terms of such loans includes one or a combination of the following:

a reduction of the stated interest rate of the loan, an extension of the maturity date at a stated rate of interest lower than the current market rate of new debt with similar risk, or a permanent reduction of the recorded investment of the loan.

Loans modified in a TDR are typically placed on nonaccrual status until we determine the future collection of principal and interest is reasonably assured, which generally requires that the borrower demonstrate a period of performance according to the restructured terms for six months .

If we are unable to resolve a nonperforming loan issue, the credit will be charged off when it is apparent there will be a loss.

For large commercial type loans, each relationship is individually analyzed for evidence of apparent loss based on quantitative benchmarks or subjectively based upon certain events or particular circumstances.

For residential and consumer loans, a charge off is recorded at the time foreclosure is initiated or when the loan becomes 120 to 180 days past due, whichever is earlier.

For commercial TDRs, an allocation is established within the allowance for credit losses on loans for the difference between the carrying value of the loan and its computed value.

To determine the computed value of the loan, one of the following methods is selected:

(1) the present value of expected cash flows discounted at the loan’s original effective interest rate, (2) the loan’s observable market price, or (3) the fair value of the collateral, if the loan is collateral dependent.

The allocation is established as the difference between the carrying value of the loan and the collectable value.

If there are significant changes in the amount or timing of the loan’s expected future cash flows, the allowance allocation is recalculated and adjusted accordingly.

When a residential or consumer loan is identified as a TDR, the loan is typically written down to its collateral value less selling costs.

The following table presents activity in TDRs:

(dollars in thousands) Beginning Balance (Charge-offs)/ Recoveries (Payments)/ Disbursements Additions Ending Balance

Financial Difficulty Modifications

Occasionally, Old National modifies loans to borrowers experiencing financial difficulty in the form of principal forgiveness, term extension, an other-than-insignificant payment delay, or interest rate reduction (or a combination thereof).

When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses on loans.

The following table presents the amortized cost basis of financial difficulty modifications at December 31, 2023 that were modified during the year ended December 31, 2023 by class of loans and type of modification:

(dollars in thousands) Term

Extension Total

Year Ended December 31, 2023

1 unchanged sentence

Commercial real estate 121,529 0.9 %

BBCC 87 3 ( 16 ) — 74

Residential 2,435 — ( 169 ) — 2,266

Indirect — 1 ( 1 ) — —

Direct 2,704 — ( 58 ) 194 2,840

Home equity 199 1 ( 84 ) — 116

Total $ 143,160 0.4 %

Year Ended December 31, 2021

Old National monitors the performance of financial difficulty modifications to understand the effectiveness of its efforts.

The following table presents the performance of loans identified as financial difficulty modifications at December 31, 2023:

(dollars in thousands) 30-59 Days

Past Due 60-89 Days

Past Due Past Due

Past Due Current Total

December 31, 2023

Commercial $ — $ — $ — $ — $ 21,631 $ 21,631

Commercial real estate 5,287 — — 5,287 116,242 121,529

BBCC 112 8 ( 33 ) — 87

Residential 2,824 ( 4 ) ( 385 ) — 2,435

Indirect — 3 ( 3 ) — —

Direct 739 2 ( 101 ) 2,064 2,704

Home equity 282 3 ( 86 ) — 199

Total $ 5,287 $ — $ — $ 5,287 $ 137,873 $ 143,160

The following table summarizes the nature of the financial difficulty modifications during the year ended December 31, 2023 by class of loans:

(dollars in thousands) Weighted-

Term Extension

Year Ended December 31, 2023

1 unchanged sentence

Commercial real estate 8.6

BBCC 578 ( 19 ) ( 447 ) — 112

Residential 3,107 — ( 283 ) — 2,824

Indirect — 9 ( 9 ) — —

Direct 983 23 ( 267 ) — 739

Home equity 381 3 ( 102 ) — 282

Total $ 31,738 $ 5,450 $ ( 14,167 ) $ 9,632 $ 32,653

TDRs included within nonaccrual loans totaled $ 24.0 million at December 31, 2022 and $ 11.7 million at December 31, 2021.

Old National has established specific allowances for credit losses for clients whose loan terms have been modified as TDRs totaling $ 4.5 million at December 31, 2022 and $ 0.7 million at December 31, 2021.

Old National had no t committed to lend any additional funds to clients with outstanding loans that were classified as TDRs at December 31, 2022 or December 31, 2021.

The pre-modification and post-modification outstanding recorded investments of loans modified as TDRs during the years ended December 31, 2022, 2021, and 2020 are the same except for when the loan modifications involve the forgiveness of principal.

The following table presents loans modified as TDRs that occurred during the years ended December 31, 2022, 2021, and 2020:

(dollars in thousands) Total

Year Ended December 31, 2022

Number of loans 8

Pre-modification outstanding recorded investment $ 27,370

Post-modification outstanding recorded investment 27,370

Year Ended December 31, 2021

Number of loans 3

Pre-modification outstanding recorded investment $ 4,659

Post-modification outstanding recorded investment 4,659

Year Ended December 31, 2020

Number of loans 4

Pre-modification outstanding recorded investment $ 9,632

Post-modification outstanding recorded investment 9,632

The TDRs that occurred during 2022 increased the allowance for credit losses on loans by $ 3.8 million and resulted in nominal charge-offs during 2022.

The TDRs that occurred during 2021 decreased the allowance for credit losses on loans by $ 0.9 million and resulted in no charge-offs during 2021.

The TDRs that occurred during 2020 increased the allowance for loan losses by $ 0.3 million and resulted in no charge-offs during 2020.

A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.

TDRs for which there was a payment default within twelve months following the modification during the year were insignificant in 2022, 2021, and 2020.

The terms of certain other loans were modified during 2022 and 2021 that did not meet the definition of a TDR.

It is our process to review all classified and criticized loans that, during the period, have been renewed, have entered into a forbearance agreement, have gone from principal and interest to interest only, or have extended the maturity date.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on its debt in the foreseeable future without the modification.

The evaluation is performed under our internal underwriting policy.

We also evaluate whether a concession has been granted or if we were adequately compensated through a market interest rate, additional collateral, or a bona fide guarantee.

We also consider whether the modification was insignificant relative to the other terms of the agreement or the delay in a payment.

In general, once a modified loan is considered a TDR, the loan will always be considered a TDR until it is paid in full, otherwise settled, sold, or charged off.

However, guidance also permits for loans to be removed from TDR status when subsequently restructured under these circumstances:

(1) at the time of the subsequent restructuring, the borrower is not experiencing financial difficulties, and this is documented by a current credit evaluation at the time of the restructuring, (2) under the terms of the subsequent restructuring agreement, the institution has granted no concession to the borrower;

and (3) the subsequent restructuring agreement includes market terms that are no less favorable than those that would be offered for a comparable new loan.

For loans subsequently restructured that have cumulative principal forgiveness, the loan should continue to be measured in accordance with ASC 310-10, Receivables – Overall .

However, consistent with ASC 310-40-50-2, Troubled Debt Restructurings by Creditors, Creditor Disclosure of Troubled Debt Restructurings , the loan would not be required to be reported in the years following the restructuring if the subsequent restructuring meets both of these criteria:

(1) has an interest rate at the time of the subsequent restructuring that is not less than a market interest rate;

and (2) is performing in compliance with its modified terms after the subsequent restructuring.

Purchased Credit Deteriorated Loans

Old National has purchased loans, for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination.

The carrying amount of those loans is as follows:

(dollars in thousands) First Midwest (1)

Purchase price of loans at acquisition $ 1,390,273

Allowance for credit losses at acquisition 89,089

Non-credit discount/(premium) at acquisition 9,003

Par value of acquired loans at acquisition $ 1,488,365

(1) Old National merged with First Midwest effective February 15, 2022.

There were no material payment defaults on these loans subsequent to their modifications during the year ended December 31, 2023.

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

NOTE 5 – PREMISES AND EQUIPMENT

8 unchanged sentences

Premises and equipment, net $ 565,396 $ 557,307

During 2022, Old National recorded $ 111.9 million of premises and equipment associated with the merger with First Midwest.

See Note 2 to the consolidated financial statements for additional detail regarding this transaction.

Depreciation expense was $ 38.2 million in 2023, $ 36.4 million in 2022, and $ 27.3 million in 2021.

4 unchanged sentences

Old National determines if an arrangement is or contains a lease at contract inception.

Operating leases are included in operating lease right-of-use assets and operating lease liabilities in our consolidated balance sheets.

Operating leases are included in other assets and other liabilities in our consolidated balance sheets.

Finance leases are included in premises and equipment and other borrowings in our consolidated balance sheets.

8 unchanged sentences

Variable lease payments that are dependent on an index or a rate are initially measured using the index or rate at the commencement date and are included in the measurement of the lease liability.

Variable lease payments that are not dependent on an index or a rate are excluded from the measurement of the lease liability and are recognized in profit

and loss when incurred.

Variable lease payments that are not dependent on an index or a rate are excluded from the measurement of the lease liability and are recognized in profit and loss when incurred.

Variable lease payments are defined as payments made for the right to use an asset that vary because of changes in facts or circumstances occurring after the commencement date, other than the passage of time.

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Loans serviced for others are not reported as assets.

The principal balance of mortgage loans serviced for others was $ 4.3 billion at December 31, 2022, compared to $ 3.7 billion at December 31, 2021.

Custodial escrow balances maintained in connection with serviced loans were $ 27.0 million at December 31, 2022 and $ 18.2 million at December 31, 2021.

The principal balance of mortgage loans serviced for others totaled $ 4.3 billion at both December 31, 2023 and December 31, 2022.

Custodial escrow balances maintained in connection with serviced loans totaled $ 27.0 million at both December 31, 2023 and December 31, 2022.

The following table summarizes the carrying values and activity related to loan servicing rights and the related valuation allowance:

11 unchanged sentences

Loan servicing rights, net $ 35,789 $ 37,267 $ 30,039

(1) Additions in 2022 include loan servicing rights of $ 7.7 million acquired in the First Midwest merger on February 15, 2022.

(1) Additions in 2022 included loan servicing rights of $ 7.7 million acquired in the First Midwest merger on February 15, 2022.

At December 31, 2023, the fair value of servicing rights was $ 47.1 million, which was determined using a discount rate of 9 % and a conditional prepayment rate of 10 %.

43 unchanged sentences

Total $ 5,579,144

The aggregate amount of time deposits in denominations that met or exceeded the FDIC insurance limit of $250,000 totaled $ 793.4 million at December 31, 2022 and $ 252.8 million at December 31, 2021.

The aggregate amount of time deposits in denominations that met or exceeded the FDIC insurance limit of $250,000 totaled $ 1.5 billion at December 31, 2023 and $ 793.4 million at December 31, 2022.

NOTE 11 – SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

26 unchanged sentences

variable rates 5.34 % to 5.36 %) maturing

January 2023 to September 2042

January 2024 to December 2043

$ 4,300,528 $ 3,850,677

3 unchanged sentences

FHLB advances had weighted-average rates of 3.45 % at December 31, 2023 and 3.15 % at December 31, 2022.

Certain FHLB advances are collateralized with residential real estate loans at 140 %.

At December 31, 2022, total unamortized prepayment fees related to all debt modifications completed in prior years totaled $ 20.2 million, compared to $ 26.2 million at December 31, 2021.

FHLB advances are collateralized by designated assets that may include qualifying commercial real estate loans, residential and multifamily mortgages, home equity loans, and certain investment securities.

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

Contractual maturities of FHLB advances at December 31, 2023 were as follows:

11 unchanged sentences

Subordinated debentures (fixed rate 5.875 %) maturing September 2026

Junior subordinated debentures (variable rates of

5.68 % to 7.99 %) maturing July 2031 to September 2037

150,000 150,000

Junior subordinated debentures (rates of 6.95 % to 9.22 %) maturing

July 2031 to September 2037

136,643 136,643

Other basis adjustments 18,207 23,363

1 unchanged sentence

Finance lease liabilities 20,955 13,469

Subordinated debentures (variable rate 8.77 %) maturing October 2025

Subordinated debentures (3-month SOFR plus 4.618 %;

variable rate 10.01 %)

maturing October 2025

12,000 12,000

2 unchanged sentences

154,284 143,187

97,872 89,588

Total other borrowings $ 764,870 $ 743,003

(1) Includes overnight borrowings to collateralize certain derivative positions totaling $ 88.0 million at December 31, 2022.

(1) Includes overnight borrowings to collateralize certain derivative positions totaling $ 97.6 million at December 31, 2023 and $ 88.0 million at December 31, 2022.

Contractual maturities of other borrowings at December 31, 2023 were as follows:

3 unchanged sentences

Total $ 764,870

In August 2014, Old National issued $ 175.0 million of senior unsecured notes with a 4.125 % interest rate.

These notes pay interest on February 15 and August 15.

The notes mature on August 15, 2024.

Junior Subordinated Debentures

1 unchanged sentence

Through various mergers and acquisitions, Old National assumed junior subordinated debenture obligations related to various trusts that issued trust preferred securities.

Old National guarantees the payment of distributions on the trust preferred securities issued by the trusts.

Old National guarantees the payment of distributions on the

trust preferred securities issued by the trusts.

Proceeds from the issuance of each of these securities were used to purchase junior subordinated debentures with the same financial terms as the securities issued by the trusts.

6 unchanged sentences

Maturity Date

Bridgeview Statutory Trust I July 2001 $ 15,464 3-month LIBOR plus 3.58 %

Bridgeview Statutory Trust I July 2001 $ 15,464 3-month SOFR plus 3.58 %

9.22 % July 31, 2031

Bridgeview Capital Trust II December 2002 15,464 3-month LIBOR plus 3.35 %

Bridgeview Capital Trust II December 2002 15,464 3-month SOFR plus 3.35 %

9.01 % January 7, 2033

1 unchanged sentence

6.95 % December 1, 2033

Joseph Capital Trust II March 2005 5,155 3-month LIBOR plus 1.75 %

Joseph Capital Trust II March 2005 5,155 3-month SOFR plus 1.75 %

7.39 % March 17, 2035

Northern States Statutory Trust I September 2005 10,310 3-month LIBOR plus 1.80 %

Northern States Statutory Trust I September 2005 10,310 3-month SOFR plus 1.80 %

7.45 % September 15, 2035

Anchor Capital Trust III August 2005 5,000 3-month LIBOR plus 1.55 %

Anchor Capital Trust III August 2005 5,000 3-month SOFR plus 1.55 %

7.14 % September 30, 2035

Great Lakes Statutory Trust II December 2005 6,186 3-month LIBOR plus 1.40 %

Great Lakes Statutory Trust II December 2005 6,186 3-month SOFR plus 1.40 %

7.05 % December 15, 2035

Home Federal Statutory

Trust I September 2006 15,464 3-month LIBOR plus 1.65 %

Trust I September 2006 15,464 3-month SOFR plus 1.65 %

7.30 % September 15, 2036

Monroe Bancorp Capital

Trust I July 2006 3,093 3-month LIBOR plus 1.60 %

Trust I July 2006 3,093 3-month SOFR plus 1.60 %

7.26 % October 7, 2036

Tower Capital Trust 3 December 2006 9,279 3-month LIBOR plus 1.69 %

Tower Capital Trust 3 December 2006 9,279 3-month SOFR plus 1.69 %

7.33 % March 1, 2037

Monroe Bancorp Statutory

Trust II March 2007 5,155 3-month LIBOR plus 1.60 %

Trust II March 2007 5,155 3-month SOFR plus 1.60 %

7.25 % June 15, 2037

Great Lakes Statutory Trust III June 2007 8,248 3-month LIBOR plus 1.70 %

Great Lakes Statutory Trust III June 2007 8,248 3-month SOFR plus 1.70 %

7.35 % September 15, 2037

Total $ 136,643

Subordinated Debentures

On November 1, 2017, Old National assumed $ 12.0 million of subordinated fixed-to-floating notes related to the acquisition of Anchor Bancorp, Inc.

The subordinated debentures had a 5.75 % fixed rate of interest through October 29, 2020.

From October 30, 2020 to the October 30, 2025 maturity date, the debentures have a floating rate of interest equal to the three-month LIBOR rate plus 4.356 %.

On February 15, 2022, Old National assumed $ 150.0 million of subordinated fixed rate notes related to the First Midwest merger.

The subordinated debentures have a 5.875 % fixed rate of interest through the September 29, 2026 maturity date.

Leveraged Loans

15 unchanged sentences

reclassifications ( 14,817 ) 1,325 51,871 — 38,379

( 639,463 ) ( 125,229 ) ( 34,043 ) — ( 798,735 )

Amounts reclassified from AOCI to income (1)

5 unchanged sentences

reclassifications ( 639,463 ) ( 125,229 ) ( 34,043 ) — ( 798,735 )

( 144,948 ) — 1,433 — ( 143,515 )

Amounts reclassified from AOCI to income (1)

5 unchanged sentences

reclassifications ( 144,948 ) — 1,433 — ( 143,515 )

97,596 — 6,230 — 103,826

Amounts reclassified from AOCI to income (1)

12 unchanged sentences

$ ( 4,645 ) $ ( 67 ) $ 3,337 Net income

Unrealized gains and losses on

held-to-maturity securities $ ( 16,612 ) $ — $ — Interest income (expense)

Amortization of unrealized losses on

held-to-maturity securities transferred

from available-for-sale $ ( 21,239 ) $ ( 16,612 ) $ — Interest income (expense)

5,372 4,047 — Income tax (expense) benefit

$ ( 15,867 ) $ ( 12,565 ) $ — Net income

Gains and losses on cash flow hedges

Gains and losses on hedges

Interest rate contracts $ 15,067 $ ( 2,587 ) $ 4,605 Interest income (expense)

21 unchanged sentences

Officer compensation limitation 4,685 5,903 564

Non-deductible FDIC premiums 7,912 3,805 438

Other, net ( 720 ) ( 2,237 ) ( 1,845 )

1 unchanged sentence

Effective tax rate 22.5 % 21.4 % 18.1 %

The higher effective tax rate in 2022 when compared to 2021 reflected the increase in pre-tax book income and higher post-merger estimated state effective tax rates.

An increase in non-deductible officer compensation also contributed to the higher tax rate, the majority of which was merger related.

The higher effective tax rate in 2021 when compared to 2020 was primarily the result of an increase in pre-tax book income and lower tax credits.

The provision for income taxes consisted of the following components:

14 unchanged sentences

Deferred Tax Assets

Unrealized losses on available-for-sale investment securities $ 217,018 $ 202,101

Allowance for credit losses on loans, net of recapture 86,224 85,619

Benefit plan accruals 38,038 18,348

Net operating loss carryforwards 25,135 14,823

Acquired loans 40,723 8,039

Operating lease liabilities 57,996 58,288

Unrealized losses on available-for-sale investment securities 202,101 3,003

Unrealized losses on held-to-maturity investment securities 32,150 36,197

Unrealized losses on hedges 10,277 —

Acquired loans 32,011 40,723

Benefit plan accruals 31,679 38,038

Purchase accounting 22,473 20,063

Net operating loss carryforwards 21,004 25,135

FDIC deductible premiums 4,891 —

Unrealized losses on hedges — 10,277

Other, net 4,860 4,962

1 unchanged sentence

Deferred Tax Liabilities

Deferred loan origination fees ( 3,566 ) —

Purchase accounting — ( 18,524 )

Loan servicing rights ( 9,636 ) ( 7,379 )

Operating lease right-of-use assets ( 52,710 ) ( 51,845 )

Premises and equipment ( 12,141 ) ( 14,844 )

Loan servicing rights ( 9,188 ) ( 9,636 )

Prepaid expenses ( 3,856 ) ( 2,774 )

Operating lease right-of-use assets ( 51,845 ) ( 21,129 )

Unrealized gains on hedges ( 3,202 ) —

Deferred loan origination fees ( 2,361 ) ( 3,566 )

Other, net ( 3,588 ) ( 2,983 )

1 unchanged sentence

Net deferred tax assets $ 423,260 $ 435,755

The increase in net deferred tax assets was driven by $ 238.3 million of deferred tax assets related to the market value adjustments of certain investments and $ 133.9 million related to the merger with First Midwest.

The Company’s retained earnings at December 31, 2023 included an appropriation for acquired thrifts’ tax bad debt allowances totaling $ 58.6 million for which no provision for federal or state income taxes has been made.

If in the future, this portion of retained earnings were distributed as a result of the liquidation of the Company or its subsidiaries, federal and state income taxes would be imposed at the then applicable rates.

No valuation allowance was recorded at December 31, 2022 or 2021 because, based on current expectations, Old National believes it will generate sufficient income in future years to realize deferred tax assets.

No valuation allowance was required on the Company’s deferred tax assets at December 31, 2023 or 2022.

Old National has federal net operating loss carryforwards totaling $ 63.6 million at December 31, 2023 and $ 81.5 million at December 31, 2022.

7 unchanged sentences

Unrecognized Tax Benefits

Old National has unrecognized tax benefits at December 31, 2022 due to the merger with First Midwest.

Old National has unrecognized tax benefits due to the merger with First Midwest.

The following table presents the changes in the carrying amount of unrecognized tax benefits:

3 unchanged sentences

Additions for acquired uncertain tax positions — 14,897 —

Additions based on tax positions related to prior years 60 — —

Reductions for tax positions relating to prior years — ( 2,751 ) —

4 unchanged sentences

It is our policy to recognize interest and penalties accrued relative to unrecognized tax benefits in their respective federal or state income tax accounts.

Interest and penalties recorded and accrued in 2022 were immaterial.

Old National reversed $ 3.9 million in 2022 related to uncertain tax positions accounted for under FASB ASC 740-10 (FASB Interpretation No.

48, Accounting for Uncertainty in Income Taxes).

The income tax reversal related to the 2018 statute of limitations expiring in the third quarter of 2022 totaled $ 1.1 million.

The income tax reversal related to reductions for tax positions in prior years totaled $ 2.8 million.

Interest and penalties recorded and accrued in 2023 and 2022 were immaterial.

Old National and its subsidiaries file a consolidated U.S.

2 unchanged sentences

NOTE 16 – SHARE-BASED COMPENSATION AND OTHER EMPLOYEE BENEFIT PLANS

Our Amended and Restated 2008 Incentive Compensation Plan (the “ICP”), which was shareholder-approved, permits the grant of share-based awards to its employees.

An amendment to increase the number of shares authorized for issuance under the ICP by 9.0 million was approved by our Board of Directors and then by our shareholders on May 18, 2022.

Our Amended and Restated 2008 Incentive Compensation Plan (the “ICP”), which was approved by shareholders, permits the grant of share-based awards to our employees.

At December 31, 2023, 7.6 million shares were available for issuance.

1 unchanged sentence

We believe that such awards better align the interests of our employees with those of our shareholders.

Total compensation cost that has been charged against income for the ICP was $ 28.7 million in 2022, $ 7.5 million in 2021, and $ 7.7 million in 2020.

Total compensation cost included in salaries and employee benefits for the ICP was $ 27.9 million in 2023, $ 28.7 million in 2022, and $ 7.5 million in 2021.

The total income tax benefit was $ 6.9 million in 2023, $ 7.1 million in 2022, and $ 1.8 million in 2021.

3 unchanged sentences

Shares are subject to certain restrictions and risk of forfeiture by the participants.

A summary of changes in our nonvested shares for the year follows:

A summary of changes in our unvested shares follows:

Years Ended December 31,

(shares in thousands) Shares Weighted

Year Ended December 31, 2022

Fair Value Shares Weighted

Unvested balance at beginning of period 1,869 $ 17.76 554 $ 16.16

3 unchanged sentences

Unvested balance at end of period 1,932 $ 16.51 1,869 $ 17.76

(1) In connection with the First Midwest merger, each restricted stock award of First Midwest common stock that was outstanding, unvested, and unsettled at the merger date was assumed and converted into a number of Old National restricted stock relating to a number of shares of Old National common stock equal to the number of First Midwest restricted stock multiplied by the exchange ratio (rounded up to the nearest whole number) subject to the same vesting terms and conditions, resulting in an issuance of an aggregate 0.9 million restricted stock awards of Old National common stock.

As of December 31, 2023, there was $ 18.1 million of total unrecognized compensation cost related to unvested restricted stock awards.

2 unchanged sentences

Performance-Based Restricted Stock Units

Restricted stock units require certain performance requirements and shares vest at the end of a 24 or 36 month period based on the achievement of certain targets.

If targets are achieved prior to the end of the 24 month performance period, vesting can be accelerated.

Restricted stock units require certain performance goals to be achieved and shares vest at the end of a 36 month period based on the achievement of certain targets.

Compensation expense is recognized on a straight-line basis over the performance period of the award.

1 unchanged sentence

Shares are subject to certain restrictions and risk of forfeiture by the participants.

A summary of changes in our unvested shares for the year follows:

A summary of changes in our unvested shares follows:

Years Ended December 31,

(shares in thousands) Shares Weighted

Year Ended December 31, 2022

Fair Value Shares Weighted

Unvested balance at beginning of period 2,081 $ 17.23 886 $ 14.80

4 unchanged sentences

Unvested balance at end of period 1,177 $ 17.50 2,081 $ 17.23

(1) In connection with the First Midwest merger, each performance-based restricted stock unit award of First Midwest that was outstanding, unvested, and unsettled at the merger date was assumed and converted into a time-based restricted stock unit award of Old National common stock subject to the same vesting terms and conditions (other than performance conditions), resulting in an issuance of an aggregate 0.7 million restricted stock units of Old National common stock.

The performance components of the First Midwest equity awards were deemed earned at target.

As of December 31, 2023, there was $ 6.2 million of total unrecognized compensation cost related to unvested restricted stock units.

1 unchanged sentence

Stock Options and Appreciation Rights

Option awards are generally granted with an exercise price equal to the market price of our Common Stock at the date of grant;

these option awards have vesting periods ranging from 3 to 5 years and have 10 -year contractual terms.

Old National has not granted stock options since 2009.

2 unchanged sentences

As of December 31, 2023, all options were fully vested, and all compensation costs had been expensed.

At December 31, 2022, the outstanding shares consisted of stock appreciation rights acquired through prior acquisitions.

A summary of the activity in stock appreciation rights in 2022 follows:

(shares in thousands) Shares Weighted

Price Weighted

Term in Years Aggregate

(in thousands)

Year Ended December 31, 2022

Outstanding at beginning of period 28 $ 4.30

Exercised ( 22 ) 3.95

Outstanding at end of period 6 $ 5.67 0.18 $ 71.2

Options exercisable at end of year 6 $ 5.67 0.18 $ 71.2

At December 31, 2023, no stock appreciation rights were outstanding as the remaining awards were exercised during 2023.

Information related to stock option and appreciation rights follows:

9 unchanged sentences

Employee Stock Ownership Plan

The Employee Stock Ownership and Savings Plan (the “401(k) Plan”) permits employees to participate the first month following one month of service.

Old National matches 100 % of employee compensation deferral contributions of the first 5 % of compensation.

The Employee Stock Ownership and Savings Plan (the “401(k) Plan”) allows employees to make pre-tax and Roth 401(k) contributions.

Subject to the conditions and limitations of the 401(k) Plan, new employees are automatically enrolled in the 401(k) Plan with an automatic deferral of 5 % of eligible compensation, unless participation is changed or declined.

All active participants receive a Company match of 100 % of the first 5 % contributed into the 401(k) Plan.

In addition to matching contributions, Old National may make discretionary contributions to the 401(k) Plan in the form of Old National stock or cash.

2 unchanged sentences

The number of Old National shares in the 401(k) Plan were 1.1 million at December 31, 2023 and 1.2 million at December 31, 2022.

All shares owned through the 401(k) Plan are included in the calculation of weighted-average shares outstanding for purposes of calculating diluted and basic earnings per share.

All shares owned through the 401(k)

Plan are included in the calculation of weighted-average shares outstanding for purposes of calculating diluted and basic earnings per share.

Contribution expense under the 401(k) Plan was $ 20.3 million in 2023, $ 17.9 million in 2022, and $ 9.8 million in 2021.

5 unchanged sentences

Employee Stock Purchase Plan

Old National has an employee stock purchase plan under which eligible employees can purchase common shares at a price not less than 95 % of the fair market value of the common shares on the purchase date.

The amount of common shares purchased cannot exceed 10 % of the employee’s compensation.

In 2022, 52,000 shares were issued related to this plan with proceeds of approximately $ 809,000 .

In 2021, 35,000 shares were issued related to this plan with proceeds of approximately $ 583,000 .

Share Repurchase Plan

In the first quarter of 2022, the Board of Directors approved a stock repurchase program that authorized the Company to repurchase up to $ 200 million of the Company’s outstanding shares of Common Stock, as conditions warrant, through January 31, 2023.

During 2022 and through January 31, 2023, 3.5 million common shares were repurchased under the plan, which reduced equity by $ 63.8 million.

Old National has an employee stock purchase plan under which eligible employees can purchase common shares at a discount to the market price.

Currently, the discount under the plan is set at 5 % of the fair value of the common shares on the purchase date (i.e., at a purchase price of 95 %).

No participant may purchase common shares with a fair value in excess of $ 25,000 in any calendar year.

In 2023, 75,000 shares were issued related to this plan with proceeds of approximately $ 1.1 million.

In 2022, 52,000 shares were issued related to this plan with proceeds of approximately $ 0.8 million.

Share Repurchase Program

In the first quarter of 2023, the Board of Directors approved a stock repurchase program that authorized the Company to repurchase up to $ 200 million of the Company’s outstanding shares of Common Stock, as conditions warrant, through February 29, 2024.

During 2023, 1.8 million common shares were repurchased under the plan, which reduced equity by $ 29.5 million.

On February 21, 2024, the Board of Directors approved a new stock repurchase program, under which the Company is authorized to repurchase up to $ 200 million of its outstanding common stock through February 28, 2025.

This new stock repurchase program replaces the prior $ 200 million program, which was scheduled to expire February 29, 2024.

Net Income per Common Share

31 unchanged sentences

For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3).

Discounted cash flows are calculated using swap and LIBOR curves plus spreads that adjust for loss severities, volatility, credit risk, and optionality.

Discounted cash flows are calculated using swap and SOFR curves plus spreads that adjust for loss severities, volatility, credit risk, and optionality.

During times when trading is more liquid, broker quotes are used (if available) to validate the model.

Rating agency and industry research reports as well as defaults and deferrals on individual securities are reviewed and incorporated into the calculations.

Residential loans held for sale :

Loans held-for-sale :

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

Derivative financial instruments :

The fair values of derivative financial instruments are based on derivative valuation models using market data inputs as of the valuation date (Level 2).

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

Recurring Basis

15 unchanged sentences

Other securities 321,901 — 321,901 —

Residential loans held for sale 11,926 — 11,926 —

Loans held-for-sale 32,006 — 32,006 —

Derivative assets 166,302 — 166,302 —

17 unchanged sentences

Other securities 353,140 — 353,140 —

Residential loans held for sale 35,458 — 35,458 —

Loans held-for-sale 11,926 — 11,926 —

Derivative assets 169,001 — 169,001 —

1 unchanged sentence

Derivative liabilities 380,704 — 380,704 —

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

(dollars in thousands) Pooled Trust

Securities States and

Year Ended December 31, 2022

Balance at beginning of period $ 9,496 $ —

Accretion (amortization) of discount or premium 12 —

Increase (decrease) in fair value of securities 1,593 —

Transfers out of Level 3 ( 11,101 ) —

Balance at end of period $ — $ —

Year Ended December 31, 2021

Balance at beginning of period $ 7,913 $ —

Accretion (amortization) of discount or premium 20 —

Sales/payments received ( 27 ) —

Increase (decrease) in fair value of securities 1,590 —

Balance at end of period $ 9,496 $ —

Year Ended December 31, 2020

Balance at beginning of period $ 8,222 $ 40

Accretion (amortization) of discount or premium 15 —

Sales/payments received ( 64 ) ( 40 )

Increase (decrease) in fair value of securities ( 260 ) —

Balance at end of period $ 7,913 $ —

The accretion of discounts or amortization of premiums on securities in the table above is included in interest income.

The increase or decrease in the fair value of securities in the table above is included in the unrealized holding gains (losses) for the period in the statement of other comprehensive income (loss).

An increase in fair value is reflected in the balance sheet as an increase in the fair value of investment securities available-for-sale, an increase in AOCI, which is included in shareholders’ equity, and a decrease in other assets related to the tax impact.

A decrease in fair value is reflected in the balance sheet as a decrease in the fair value of investment securities available-for-sale, a decrease in AOCI, which is included in shareholders’ equity, and an increase in other assets related to the tax impact.

During 2022, Old National’s pooled trust preferred securities with a fair value of $ 11.1 million were transferred out of Level 3 and into Level 2 because of available observable market data for these investments.

The table below provides quantitative information about significant unobservable inputs used in fair value measurements within Level 3 of the fair value hierarchy:

(dollars in thousands) Fair Value Valuation

Techniques Unobservable Input Range (Weighted

December 31, 2021

Pooled trust preferred securities $ 9,496 Discounted cash flow Constant prepayment rate (1)

Additional asset defaults (2)

5.7 % - 8.5 % ( 6.5 %)

Expected asset recoveries (3)

0.0 % - 46.0 % ( 14.1 %)

(1) Assuming no prepayments.

(2) Each currently performing pool asset is assigned a default probability based on the banking environment, which is adjusted for specific issuer evaluation, of 0 %, 50 %, or 100 %.

(3) Each currently defaulted pool asset is assigned a recovery probability based on specific issuer evaluation of 0 %, 25 %, or 100 %.

(4) Unobservable inputs are weighted by the estimated number of defaults and current performing collateral of the instruments.

Significant changes in any of the unobservable inputs used in the fair value measurement in isolation would have resulted in a significant change to the fair value measurement.

The pooled trust preferred securities Old National owns are subordinate note classes that rely on an ongoing cash flow stream to support their values.

The senior note classes receive the benefit of prepayments to the detriment of subordinate note classes since the ongoing interest

cash flow stream is reduced by the early redemption.

Generally, a change in prepayment rates or additional pool asset defaults would have an impact that is directionally opposite from a change in the expected recovery of a defaulted pool asset.

Non-Recurring Basis

Assets measured at fair value on a non-recurring basis are summarized below:

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

Fair Value Measurements at December 31, 2023 Using

5 unchanged sentences

Commercial real estate loans 95,457 — — 95,457

Foreclosed Assets:

Commercial real estate 1,669 — — 1,669

Commercial and commercial real estate loans that are deemed collateral dependent are valued using the discounted cash flows.

5 unchanged sentences

There were write-downs of other real estate owned of $ 0.1 million in 2023.

Loan servicing rights are evaluated for impairment based upon the fair value of the rights as compared to the carrying amount.

If the carrying amount of an individual tranche exceeds fair value, impairment is recorded on that tranche so that the servicing asset is carried at fair value.

Fair value is determined at a tranche level, based on market prices for comparable mortgage servicing contracts when available, or alternatively based on a valuation model that calculates the present value of estimated future net servicing income.

The valuation model utilizes a discount rate, weighted average prepayment speed, and other economic factors that market participants would use in estimating future net servicing income and that can be validated against available market data (Level 2).

There was no valuation allowance for loan servicing rights with impairments at December 31, 2022.

Old National recorded recoveries associated with these loan servicing rights totaling $ 46 thousand in 2022.

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

9 unchanged sentences

Commercial real estate loans 48,026 — — 48,026

Loan servicing rights 140 — 140 —

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

Old National recorded provision recapture associated with these loans totaling $ 0.1 million in 2021.

The valuation allowance for loan servicing rights with impairments at December 31, 2021 totaled $ 46 thousand.

Old National recorded recoveries associated with these loan servicing rights totaling $ 1.4 million in 2021.

Old National recorded provision expense associated with these loans totaling $ 20.3 million in 2022.

Old National did not have any other real estate owned or repossessed property measured at fair value on a non-recurring basis at December 31, 2022.

There were write-downs of other real estate owned of $ 0.6 million in 2022.

The table below provides quantitative information about significant unobservable inputs used in fair value measurements within Level 3 of the fair value hierarchy:

11 unchanged sentences

age of appraisal, and current status 2 % - 38 % ( 16 %)

Foreclosed Assets

Commercial real estate (1) 1,669 Fair value of collateral Discount for type of property,

age of appraisal, and current status 4 % - 8 % ( 4 %)

December 31, 2022

11 unchanged sentences

The fair value election may not be revoked once an election is made.

Residential Loans Held For Sale

Old National has elected the fair value option for residential loans held for sale.

Loans Held-For-Sale

Old National has elected the fair value option for loans held-for-sale.

For these loans, interest income is recorded in the consolidated statements of income based on the contractual amount of interest income earned on the financial assets (except any that are on nonaccrual status).

8 unchanged sentences

December 31, 2023

Residential loans held for sale $ 11,926 $ 221 $ 11,705

Loans held-for-sale $ 32,006 $ 621 $ 31,385

December 31, 2022

Residential loans held for sale $ 35,458 $ 1,342 $ 34,116

Loans held-for-sale $ 11,926 $ 221 $ 11,705

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

7 unchanged sentences

Year Ended December 31, 2023

Residential loans held for sale $ ( 1,127 ) $ 10 $ ( 4 ) $ ( 1,121 )

Loans held-for-sale $ 402 $ 12 $ ( 14 ) $ 400

Year Ended December 31, 2022

Residential loans held for sale $ ( 2,139 ) $ 2 $ ( 6 ) $ ( 2,143 )

Loans held-for-sale $ ( 1,127 ) $ 10 $ ( 4 ) $ ( 1,121 )

Financial Instruments Not Carried at Fair Value

17 unchanged sentences

Residential real estate 6,678,606 — — 5,579,999

Consumer credit 2,676,758 — — 2,557,115

Consumer 2,629,171 — — 2,555,121

Accrued interest receivable 225,159 859 54,465 169,835

3 unchanged sentences

interest-bearing deposits 21,991,789 21,991,789 — —

20,056,252 20,056,252 — —

Time deposits 5,579,144 — 5,552,538 —

17 unchanged sentences

and other interest-earning investments $ 728,412 $ 728,412 $ — $ —

Investment securities held-to-maturity:

government-sponsored entities and agencies 819,168 — 656,358 —

Mortgage-backed securities - Agency 1,106,817 — 982,963 —

State and political subdivisions 1,163,162 — 1,004,361 —

Commercial 9,386,862 — — 9,066,583

1 unchanged sentence

Residential real estate 6,438,525 — — 5,372,491

Consumer credit 1,569,814 — — 1,582,600

Consumer 2,676,758 — — 2,557,115

Accrued interest receivable 190,521 758 52,081 137,682

3 unchanged sentences

interest-bearing deposits 20,056,252 20,056,252 — —

11,305,676 11,305,676 — —

Time deposits 3,013,780 — 2,976,389 —

24 unchanged sentences

changes in fair value are recognized concurrently in earnings.

As long as a hedging instrument is designated and the results of the effectiveness testing support that the instrument qualifies for hedge accounting treatment, 100 % of the periodic changes in fair value of the hedging instrument are accounted for as outlined above.

accounted for as outlined above.

This is the case whether or not economic mismatches exist in the hedging relationship.

4 unchanged sentences

Interest rate swaps of certain borrowings were designated as cash flow hedges totaling $ 150.0 million notional amount at both December 31, 2023 and December 31, 2022.

Interest rate collars and floors related to variable-rate commercial loan pools were designated as cash flow hedges totaling $ 1.9 billion notional amount at December 31, 2022 and $ 600.0 million notional amount at December 31, 2021.

Interest rate collars and floors related to variable-rate commercial loan pools were designated as cash flow hedges totaling $ 1.6 billion notional amount at December 31, 2023 and $ 1.9 billion notional amount at December 31, 2022.

The hedges were determined to be effective during all periods presented and we expect them to remain effective during the remaining terms.

8 unchanged sentences

Interest rate swaps of certain borrowings were designated as fair value hedges totaling $ 900.0 million notional amount at December 31, 2023 and $ 300.0 million notional amount at December 31, 2022.

Interest rate swaps of certain available-for-sale investment securities were designated as fair value hedges totaling $ 910.0 million notional amount at both December 31, 2022 and December 31, 2021.

Interest rate swaps of certain available-for-sale investment securities were designated as fair value hedges totaling $ 998.1 million notional amount at December 31, 2023 and $ 910.0 million notional amount at December 31, 2022.

The hedges were determined to be effective during all periods presented and we expect them to remain effective during the remaining terms.

68 unchanged sentences

Old National also enters into derivative instruments for the benefit of its clients.

The notional amounts of these customer derivative instruments and the offsetting counterparty derivative instruments were $ 5.2 billion at December 31, 2022.

The notional amounts of these customer derivative instruments and the offsetting counterparty derivative instruments were $ 2.4 billion at December 31, 2021.

These derivative contracts do not qualify for hedge

The notional amounts of these customer derivative instruments and the offsetting counterparty derivative instruments were $ 6.0 billion at December 31, 2023 and $ 5.2 billion at December 31, 2022.

These derivative contracts do not qualify for hedge accounting.

These instruments include interest rate swaps, caps, and collars.

Commonly, Old National will economically hedge significant exposures related to these derivative contracts entered into for the benefit of clients by entering into offsetting contracts with approved, reputable, independent counterparties with substantially matching terms.

Commonly, Old National will

economically hedge significant exposures related to these derivative contracts entered into for the benefit of clients by entering into offsetting contracts with approved, reputable, independent counterparties with substantially matching terms.

Old National enters into derivative financial instruments as part of its foreign currency risk management strategies.

33 unchanged sentences

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

Fair Value of Offsetting Derivatives

Certain derivative instruments are subject to master netting agreements with counterparties that provide rights of setoff.

The Company records these transactions at their gross fair values and does not offset derivative assets and liabilities in the Consolidated Balance Sheet.

The following table presents the fair value of the Company’s derivatives and offsetting positions:

(dollars in thousands) Assets Liabilities Assets Liabilities

Gross amounts recognized $ 166,302 $ 268,916 $ 169,001 $ 380,704

amounts offset in the Consolidated Balance Sheet — — — —

Net amount presented in the Consolidated Balance Sheet 166,302 268,916 169,001 380,704

Gross amounts not offset in the Consolidated Balance Sheet

Offsetting derivative positions ( 39,360 ) ( 39,360 ) ( 54,054 ) ( 54,054 )

Cash collateral pledged — ( 97,840 ) ( 418 ) ( 88,860 )

Net credit exposure $ 126,942 $ 131,716 $ 114,529 $ 237,790

NOTE 20 – COMMITMENTS, CONTINGENCIES, AND FINANCIAL GUARANTEES

In the normal course of business, Old National Bancorp and its subsidiaries are subject to pending and threatened litigation, claims, investigations, and legal and administrative cases and proceedings.

Certain of the actual or threatened legal actions may include claims for compensatory damages or claims for indeterminate amounts of damages.

Old National contests liability and/or the amount of damages as appropriate in each pending matter.

In view of the inherent difficulty of predicting the outcome of such matters, particularly in cases where claimants seek indeterminate damages or where investigations and proceedings are in the early stages, Old National cannot predict with certainty the loss or range of loss, if any, related to such matters, how or if such matters will be resolved, when they will ultimately be resolved, or what the eventual settlement, or other relief, if any, might be.

Subject to the foregoing, Old National believes, based on current knowledge and after consultation with counsel, that the outcome of such pending matters are not expected to have a material adverse effect on the consolidated financial condition of Old National, although the outcome of such matters could be material to Old National’s operating results and cash

flows for a particular future period, depending on, among other things, the level of Old National’s revenues or income for such period.

Old National will accrue for a loss contingency if (1) it is probable that a future event will occur and confirm the loss and (2) the amount of the loss can be reasonably estimated.

Old National is not currently involved in any material litigation.

At December 31, 2023, there were certain legal proceedings pending against the Company and its subsidiaries in the ordinary course of business.

While the outcome of any legal proceeding is inherently uncertain, based on information currently available, the Company’s management does not expect that any potential liabilities arising from pending legal matters will have a material adverse effect on the Company’s business, financial position, or results of operations.

Credit-Related Financial Instruments

14 unchanged sentences

The allowance for unfunded loan commitments totaled $ 31.2 million at December 31, 2023 and $ 32.2 million at December 31, 2022.

The increase in the allowance for credit losses on unfunded loan commitments was driven by the merger with First Midwest as well as organic loan growth.

Old National is a party in risk participation transactions of interest rate swaps, which had total notional amounts of $ 557.8 million at December 31, 2023 and $ 398.9 million at December 31, 2022.

1 unchanged sentence

In 2008, Old National received Visa Class B restricted shares as part of Visa’s initial public offering.

These shares are transferable only under limited circumstances until they can be converted into the publicly traded Class A common shares.

This conversion will not occur until the final settlement of certain litigation for which Visa is indemnified by the holders of Visa’s Class B shares, including Old National.

Visa funded an escrow account from its initial public offering to settle these litigation claims.

Increases in litigation claims requiring Visa to fund the escrow account due to insufficient funds will result in a reduction of the conversion ratio of each Visa Class B share to unrestricted Class A shares.

As of December 31, 2022, the conversion ratio was 1.5991 .

Based on the existing transfer restriction and the uncertainty of the outcome of the Visa litigation, the 65,466 Class B shares that Old National owns at December 31, 2022 are carried at a zero cost basis and are included in other assets with our equity securities that have no readily determinable fair value.

During the fourth quarter of 2023, Old National sold the 65,466 Class B shares and recognized a $ 21.6 million pre-tax gain.

Prior to the sale, the shares were carried at a zero cost basis due to uncertainty surrounding the ability of the Company to transfer or otherwise liquidate the shares.

At December 31, 2023, the Company does not hold any remaining Visa Class B restricted shares.

NOTE 21 – REGULATORY RESTRICTIONS

Restrictions on Cash and Due from Banks

Prior to March 2020, Old National’s subsidiary bank was required to maintain reserve balances on hand and with the Federal Reserve Bank that are interest-bearing and unavailable for investment purposes.

The Federal Reserve Board reduced reserve requirement ratios to 0% effective March 26, 2020.

This action effectively eliminated reserve requirements for all depository institutions.

Old National had no cash and due from banks which was held as collateral for collateralized swap positions at December 31, 2022 and $ 14.6 million at December 31, 2021.

Old National had cash and due from banks which was held as collateral for collateralized swap positions totaling $ 0.3 million at December 31, 2023 and $ 0.1 million at December 31, 2022.

Restrictions on Transfers from Bank Subsidiary

Regulations limit the amount of dividends a bank subsidiary can declare in any calendar year without obtaining prior regulatory approval.

Prior regulatory approval is required if dividends to be declared in any calendar year would

exceed the total of net income of the current year combined with retained net income for the preceding two years .

Prior regulatory approval is required if dividends to be declared in any calendar year would exceed the total of net income of the current year combined with retained net income for the preceding two years .

Prior regulatory approval to pay dividends was not required in 2021, 2022, or 2023 and is not currently required.

A bank subsidiary is prohibited from paying a dividend, if, after making the dividend, the bank would be considered “undercapitalized” (as defined by reference to the OCC’s capital regulations).

At December 31, 2023, Old National

Bank could pay dividends of $ 670.4 million without prior regulatory approval and while maintaining capital levels above regulatory minima and well-capitalized guidelines.

Restrictions on the Payment of Dividends

Old National has traditionally paid a quarterly dividend to common shareholders.

The payment of dividends is subject to legal and regulatory restrictions.

The payment of dividends is subject to legal and regulatory restrictions, as well as approval by our Board of Directors.

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.

103 unchanged sentences

Proceeds from sales of equity securities — 44,038 540

Purchase of equity securities ( 17,773 ) — —

Purchases of investment securities — ( 9,000 ) ( 15 )

Proceeds from sales of premises and equipment — — 354

Purchases of premises and equipment ( 8 ) — ( 3 )

1 unchanged sentence

Cash Flows From Financing Activities

Payments for maturities/redemptions of other borrowings — — ( 10,310 )

Cash dividends paid ( 180,030 ) ( 177,623 ) ( 92,829 )

7 unchanged sentences

Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.

Old National Bank, Old National’s bank subsidiary, is the only significant subsidiary upon which management makes decisions regarding how to allocate resources and assess performance.

Each of the banking centers of Old National Bank provide a group of similar community banking services, including such products and services as commercial, real estate and consumer loans;

time deposits;

checking and savings accounts;

cash management;

and brokerage, trust, and investment advisory services.

The individual banking centers located throughout our Midwest region footprint have similar operating and economic characteristics.

While the chief decision maker monitors the revenue streams of the various products, services, and regional locations, operations are managed, and financial performance is evaluated on a Company-wide basis.

Accordingly, all of the community banking services and banking center locations are considered by management to be aggregated into one reportable operating segment, community banking.

The chief operating decision maker managed operations and evaluated financial performance on a Company-wide basis.

As a result, the Company has determined that it has only one reportable segment.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

1 unchanged sentence

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.

What changed 10-K

Item 8. Financial Statements and Supplementary Data