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Item 7. Management’s Discussion and Analysis

2025-02-19 compared with 2024-02-22 · 245 added, 166 removed, 1062 unchanged (28% of the section changed)

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General Overview

Corporate Developments in Fiscal 202 3

Corporate Developments in 202 4

Business Outlook

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GENERAL OVERVIEW

Old National is incorporated in the state of Indiana and is the sixth largest commercial bank headquartered in the Midwest by asset size and ranks among the top 30 banking companies headquartered in the United States.

Old National is the sixth largest commercial bank headquartered in the Midwest by asset size and ranks among the top 30 banking companies headquartered in the United States.

The Company’s corporate headquarters and principal executive office are located in Evansville, Indiana with commercial and consumer banking operations headquartered in Chicago, Illinois.

Through our wholly-owned banking subsidiary and non-bank affiliates, we provide a wide range of services primarily throughout the Midwest region and elsewhere, including commercial and consumer loan and depository services, as well as other traditional banking services, private banking, capital markets, brokerage, wealth management, trust, investment advisory, and other traditional banking services.

CORPORATE DEVELOPMENTS IN FISCAL 2023

During 2023, Old National successfully navigated a challenging interest rate environment, as well as industry-wide liquidity pressures to end the year with record full-year results.

Our peer-leading deposit franchise, disciplined loan growth, strong credit quality, well-managed expenses, and dedicated team members who are committed to our clients and communities drove these outstanding results.

Through our wholly owned banking subsidiary and non-bank affiliates, we provide a wide range of services primarily throughout the Midwest and Southeast regions of the United States.

In addition to providing extensive services in consumer and commercial banking, Old National offers comprehensive wealth management and capital markets services.

CORPORATE DEVELOPMENTS IN 2024

In 2024, Old National successfully navigated a challenging interest rate environment while remaining on offense with our growth strategy, investing in client-facing and key support talent, and remaining opportunistic for new acquisitions.

Highlights experienced in 2024 included:

• net income applicable to common shareholders of $523.1 million, or $1.68 per diluted common share;

• growth in deposits of 6%;

• net interest income increase of $175.2 million, reflective of the higher rate environment and loan growth;

• disciplined loan growth of 6%;

• granular, low-cost deposit franchise;

loan to deposit ratio of 89%;

• growth in total deposits of 10%;

• disciplined loan growth of 10%;

• well-managed expenses;

• stable credit metrics, including net charge-offs to average loans of 0.17%.

Our net interest income increased to $1.5 billion during 2023, compared to $1.3 billion in 2022 driven by the higher interest rate environment and loan growth.

Provision for credit losses decreased compared to 2022, reflective of provision expense associated with the First Midwest merger in 2022.

In addition, provision for credit losses for 2023 was impacted by higher net charge-offs, loan growth and macroeconomic factors.

Noninterest income decreased

from $399.8 million in 2022 to $333.3 million in 2023 primarily due to a $90.7 gain on the sale of health savings accounts in the fourth quarter of 2022, partially offset by a gain on sale of Visa Class B restricted shares totaling $21.6 million in the fourth quarter of 2023 and the full-period 2023 impact of the First Midwest merger which occurred in February of 2022.

Noninterest expense decreased $11.9 million in 2023 compared to 2022.

Noninterest expense in 2023 included $28.7 million of merger-related expenses, a $19.1 million FDIC special assessment, $4.4 million of contract termination charges, $3.4 million of expenses related to the Louisville tragedy, and $1.6 million for property optimization.

Noninterest expense in 2022 included $120.9 million of merger-related expenses and $26.8 million for property optimization.

Excluding these expenses, noninterest expense in 2023 increased $78.8 million, reflective of the additional operating costs associated with the full-period 2023 impact of the First Midwest merger, higher FDIC assessment expense, and marketing campaigns.

On October 26, 2023, Old National announced that it entered into a definitive merger agreement pursuant to which Old National will acquire CapStar and its wholly-owned subsidiary, CapStar Bank, in an all-stock transaction.

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.

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.

Results for 2024 were impacted by $37.3 million of merger-related expenses, $15.3 million of CECL Day 1 non-PCD provision expense related to the allowance for credit losses established on acquired non-PCD loans, a $13.3 million non-cash, pre-tax expense associated with the distribution of excess pension assets with the resolution of the legacy First Midwest plan, $3.0 million for the FDIC special assessment, $2.6 million of separation expense, and $0.2 million of net securities losses.

Excluding these items, net income applicable to common shares for 2024

was $578.1 million, or $1.86 per diluted common share on an adjusted basis.

Refer to the “Non-GAAP Financial Measures” section for reconciliations to GAAP financial measures.

Our net interest income increased 2% to $1.5 billion during 2024, driven by loans and securities acquired in the CapStar transaction as well as strong loan growth and the interest rate environment.

Provision for credit losses increased compared to 2023, reflective of provision expense associated with the CapStar merger as well as loan growth, credit migration, net charge-offs, and macroeconomic factors.

Noninterest income increased from $333.3 million in 2023 to $354.7 million in 2024 primarily due to the impact of the CapStar merger, higher wealth and investment services fees, mortgage banking revenues, and other income, partially offset by a gain on sale of Visa Class B restricted shares totaling $21.6 million in 2023.

Noninterest expense increased $68.1 million in 2024 compared to 2023.

Noninterest expense in 2024 included $37.3 million of merger-related expenses, a $13.3 million non-cash, pre-tax expense associated with the distribution of excess pension assets with the resolution of the legacy First Midwest plan, $3.0 million for the FDIC special assessment, and $2.6 million of separation expense.

Noninterest expense in 2023 included $28.7 million of merger-related expenses, a $19.1 million FDIC special assessment, $4.4 million of a contract termination charge, $3.4 million of expenses related to the Louisville tragedy, and $1.6 million for property optimization.

Excluding these expenses, noninterest expense in 2024 increased $68.9 million, reflective of the additional operating costs associated with the impact of the CapStar merger, as well as higher salary and employee benefits reflective of merit increases.

On April 1, 2024, Old National completed its acquisition of CapStar, strengthening our presence in Nashville and other high-growth Southeastern markets.

All system conversions related to the CapStar transaction were completed in early July 2024.

Later in 2024, we announced our pending partnership with Bremer Bank;

the definitive merger agreement has been unanimously approved by the Boards of Directors of Bremer and Old National.

The transaction is subject to customary closing conditions and regulatory approvals, including the approval of Bremer shareholders.

The transaction is anticipated to close in the middle of 2025.

BUSINESS OUTLOOK

We enter 2024 cautiously optimistic as we believe we have positioned the balance sheet well approaching the end of this rate cycle with most of the work to achieve a neutral rate risk position behind us.

Old National’s peer-leading deposit franchise adds value in any economic cycle, and we anticipate continued success in the execution of our deposit strategy, which allows us to compete for clients in the markets we serve.

Deposit and organic loan growth remain top priorities for the Company as we continue to focus on full client relationships that align with our risk-adjusted return requirements.

Old National’s credit quality remains strong as we continue to adhere to our disciplined underwriting process.

Our pending merger with CapStar is expected to expand our business to the highly dynamic markets of Nashville and broader Tennessee, as well as Asheville, North Carolina.

This partnership will expand on our opportunities to acquire new clients and build on existing relationships associated within this footprint.

As we opportunistically execute on this partnership in 2024, we continue to focus on the fundamentals of basic banking, including loan and deposit growth, expansion of revenue-generating businesses, prudent capital deployment, and expense management to produce positive operating leverage and allow us to continue to create value for our shareholders and communities.

We enter 2025 building on the strong foundation we established in 2024 as we successfully navigated a challenging interest rate environment while remaining on offense with our growth strategy, investing in key talent, and remaining opportunistic for new partnerships.

Our basic banking strategy continues to serve us well, with a focus on low-cost core deposits, which grew by approximately 10% in 2024, funding a corresponding 10% growth in loans.

We continue to focus on full client relationships that align with our risk-adjusted return requirements, and our credit quality remains strong as we continue to adhere to our disciplined underwriting process.

During the fourth quarter of 2024, we announced our partnership with Bremer Bank, which is headquartered in St.

Paul, Minnesota and which will enhance our presence in the upper Midwest across Minnesota, North Dakota, and Wisconsin, expand our opportunities to acquire new clients and build on existing relationships within this footprint.

We are confident in our ability to navigate changes in short-term interest rates, shifts in the yield curve, and overall economic conditions as we have for the past 190 years.

We will remain on offense and continue to demonstrate our ability to execute on our strategic priorities.

We remain focused on the fundamentals of basic banking, including loan and deposit growth, expansion of revenue-generating businesses, strong credit quality, prudent capital deployment, and disciplined expense management within a sound risk management framework to produce positive operating leverage, which allows us to continue to create value for our shareholders and communities.

FINANCIAL HIGHLIGHTS

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399,957 397,868 394,761 362,711 370,508

Provision (release) for credit losses 11,595 19,068 14,787 13,437 11,408

Provision for credit losses 27,017 28,497 36,214 18,891 11,595

Noninterest income 95,766 94,138 87,271 77,522 100,094

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

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

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

(3) Represents a non-GAAP financial measure.

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1,555,297 1,526,581

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

Provision for credit losses 110,619 58,887

Noninterest income 354,697 333,342

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

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

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

(3) Represents a non-GAAP financial measure.

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The Company’s accounting and reporting policies conform to GAAP and general practices within the banking industry.

As a supplement to GAAP, the Company provides non-GAAP performance results, which the Company believes are useful because they assist users of the financial statements in assessing the Company’s operating performance.

As a supplement to GAAP, the Company provides non-GAAP performance results, which the Company believes are useful because they assist users of the financial information in assessing the Company’s operating performance.

Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in the following table.

The Company presents net income per common share and net income applicable to common shares, adjusted for certain notable items.

These items include merger-related charges associated with completed and pending acquisitions, debt securities gains/losses, separation expense, CECL Day 1 non-PCD provision expense, distribution of excess pension assets expense, FDIC special assessment expense, gain on sale of Visa Class B restricted shares, expenses related to the tragic April 10, 2023 event at our downtown Louisville location (“Louisville expenses”), contract termination charge, and property optimization charges.

Management believes excluding these items from net income per common share and net income applicable to common shares may be useful in assessing the Company's underlying operational performance since these items do not pertain to its core business operations and their exclusion may facilitate better comparability between periods.

Management believes that excluding merger-related charges from these metrics may be useful to the Company, as well as analysts and investors, since these expenses can vary significantly based on the size, type, and structure of each acquisition.

Additionally, management believes excluding these items from these metrics may enhance comparability for peer comparison purposes.

The taxable equivalent adjustment to net interest income and net interest margin recognizes the income tax savings when comparing taxable and tax-exempt assets.

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Management believes that it is standard practice in the banking industry to present net interest income and net interest margin on a fully tax-equivalent basis and that it may enhance comparability for peer comparison purposes.

In management’s view, tangible common equity measures are capital adequacy metrics that may be meaningful to the Company, as well as users of the financial statements, in assessing the Company’s use of equity and in facilitating comparisons with peers.

In management’s view, tangible common equity measures are capital adequacy metrics that may be meaningful to the Company, as well as users of the financial information, in assessing the Company’s use of equity and in facilitating comparisons with peers.

These non-GAAP measures are valuable indicators of a financial institution’s capital strength since they eliminate intangible assets from shareholders’ equity and retain the effect of AOCI in shareholders’ equity.

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2024 2024 2024 2024 2023

Net income per common share:

Net income applicable to common shares $ 149,839 $ 139,768 $ 117,196 $ 116,250 $ 128,446

Merger-related charges 8,117 6,860 19,440 2,908 5,529

Debt securities (gains) losses 122 76 (2) 16 825

Separation expense — 2,646 — — —

CECL Day 1 non-PCD provision expense — — 15,312 — —

Distribution of excess pension assets expense — — — 13,318 —

FDIC special assessment — — — 2,994 19,052

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

Contract termination charge — — — — 4,413

tax effect on net total adjustments (2)

(2,089) (2,134) (7,888) (4,695) (1,988)

Net income applicable to common shares, adjusted (1)

$ 155,989 $ 147,216 $ 144,058 $ 130,791 $ 134,642

Weighted average diluted common shares outstanding 318,803 317,331 316,461 292,207 292,029

Net income per common share, diluted $ 0.47 $ 0.44 $ 0.37 $ 0.40 $ 0.44

Adjusted net income per common share, diluted (1)

$ 0.49 $ 0.46 $ 0.46 $ 0.45 $ 0.46

Tangible common book value:

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Efficiency ratio (1)

54.37 % 53.83 % 57.17 % 58.34 % 59.05 %

Tangible common equity to tangible assets:

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(dollars and shares in thousands, except per share data) 2024 2023

Net income per common share:

Net income applicable to common shares $ 523,053 $ 565,857

Merger-related charges 37,325 28,716

CECL Day 1 non-PCD provision expense 15,312 —

Distribution of excess pension assets expense 13,318 —

FDIC special assessment 2,994 19,052

Separation expense 2,646 —

Debt securities (gains) losses 212 6,265

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

Contract termination charge — 4,413

Louisville expenses — 3,361

Property optimization charges — 1,559

tax effect on net total adjustments (2)

(16,806) (8,361)

Net income applicable to common shares, adjusted (1)

$ 578,054 $ 599,227

Weighted average diluted common shares outstanding 311,001 291,855

Net income per common share, diluted $ 1.68 $ 1.94

Adjusted net income per common share, diluted (1)

$ 1.86 $ 2.05

Tangible common book value:

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Efficiency ratio (1)

55.85 % 53.70 %

Tangible common equity to tangible assets:

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Net interest income $ 1,530,783 $ 1,503,153 $ 1,327,936

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

Provision for credit losses 110,619 58,887 144,799

Noninterest income 354,697 333,342 399,779

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55.85 % 53.70 % 57.97 %

Efficiency ratio (prior presentation) (2)

N/A N/A 59.65 %

Tier 1 leverage ratio 9.21 % 8.83 % 8.52 %

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Refer to “Non-GAAP Financial Measures” section for reconciliations to GAAP financial measures.

(2) Presented as calculated prior to December 31, 2022, which included the provision for unfunded loan commitments in noninterest expense.

Management believes that removing the provision for unfunded loan commitments from this metric enhances comparability for peer comparison purposes.

Net Interest Income

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Other factors include the level of accretion income on purchased loans, prepayment risk on mortgage and investment-related assets, and the composition and maturity of interest-earning assets and interest-bearing liabilities.

Interest rates increased during 2023.

The Federal Reserve decreased its interest rates during 2024.

The Federal Reserve’s Federal Funds range is currently in a target range of 4.25% to 4.50%, with the Effective Federal Funds Rate at 4.33% at December 31, 2024, and 5.33% at December 31, 2023.

Management actively takes balance sheet restructuring, derivative, and deposit pricing actions to help mitigate interest rate risk.

See the section of this Item 7 titled “Risk Management — Market Risk” for additional information regarding this risk.

See the section of this Item 7 titled “Market Risk” for additional information regarding this risk.

Loans typically generate more interest income than investment securities with similar maturities.

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(2) Includes loans held-for-sale.

The following table presents fluctuations in taxable equivalent net interest income attributable to changes in the average balances of assets and liabilities and the yields earned or rates paid for the years ended December 31.

The following table presents the dollar amount of changes in taxable equivalent net interest income attributable to changes in the average balances of assets and liabilities and the yields earned or rates paid for the years ended December 31.

From 2023 to 2024 From 2022 to 2023

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Total interest expense 367,200 187,968 179,232 577,402 150,212 427,190

Net interest income $ 180,231 $ 78,027 $ 102,204 $ 736,037 $ 595,054 $ 140,983

(1) The variance not solely due to rate or volume is allocated equally between the rate and volume variance.

Net interest income - taxable equivalent

basis $ 28,716 $ 30,395 $ (1,679) $ 180,231 $ 78,027 $ 102,204

(1) The variance not solely due to rate or volume is allocated equally between the rate and volume variances.

(2) Interest on investment securities includes the effect of taxable equivalent adjustments of $11.1 million in 2024, $11.5 million in 2023, and $11.5 million in 2022;

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using the federal statutory tax rate in effect of 21%.

Net interest income in 2023 increased compared to 2022 primarily due to higher rates on loans and investment securities, as well as loan growth, partially offset by higher balances and costs of average interest-bearing liabilities and lower accretion income.

Net interest income in 2024 increased compared to 2023 primarily due to loans and securities acquired in the CapStar transaction as well as strong loan growth, higher rates on loans and investment securities, and higher accretion income, partially offset by higher balances and costs of average interest-bearing liabilities.

Accretion income associated with acquired loans and borrowings totaled $50.8 million in 2024, compared to $28.3 million in 2023.

The increase in the net interest margin on a fully taxable equivalent basis in 2023 when compared to 2022 was primarily due to higher yields on interest earning assets, substantially offset by higher costs of interest-bearing liabilities.

The decrease in the net interest margin on a fully taxable equivalent basis in 2024 when compared to 2023 was primarily due to higher balances and costs of average interest-bearing liabilities, partially offset by loan growth as well as higher yields on loans.

The yield on average earning assets increased 41 basis points from 5.18% in 2023 to 5.59% in 2024 and the cost of interest-bearing liabilities increased 73 basis points from 2.25% in 2023 to 2.98% in 2024.

Average earning assets increased by $4.3 billion, or 11%, primarily due to a $4.6 billion increase in loans.

Average interest-bearing liabilities increased $5.3 billion, or 21%, primarily due to a $3.6 billion increase in interest-bearing deposits and a $1.6 billion increase in FHLB advances.

Average earning assets increased by $3.9 billion, or 9%, primarily due to a $3.3 billion increase in average loans.

Average interest-bearing liabilities increased $4.6 billion, or 15%, reflecting a $5.0 billion increase in average interest-bearing deposits, partially offset by a reduction in average borrowed funds.

Average noninterest-bearing deposits decreased by $1.2 billion.

The increase in average earning assets in 2023 compared to 2022 was primarily due to the full-year impact of the merger with First Midwest and strong loan growth.

The increase in average earning assets in 2024 compared to 2023 was primarily due to loans and securities acquired in the CapStar transaction as well as strong loan growth.

The loan portfolio, including loans held-for-sale, which generally has an average yield higher than the investment portfolio, was 76% of average interest earning assets in 2024, compared to 75% in 2023.

Average loans, including loans held-for-sale, increased $4.6 billion in 2023 compared to 2022 primarily due to the full-year impact of the First Midwest merger and strong organic loan growth.

Average investments decreased $318.1 million in 2023 compared to 2022 reflecting the utilization of cash flows from securities to fund loan growth.

Average non-interest-bearing deposits decreased $1.1 billion in 2023 compared to 2022 while average interest-bearing deposits increased $3.6 billion primarily due to the full-year impact of the First Midwest merger, a mix shift as a result of the current rate environment, and organic growth.

Average borrowed funds increased $1.8 billion in 2023 compared to 2022 primarily due to a $1.6 billion increase in FHLB advances.

Provision (Release) for Credit Losses

The following table details the components of provision (release) for credit losses:

Average loans, including loans held-for-sale, increased $3.3 billion in 2024 compared to 2023 primarily due to loans acquired in the CapStar transaction as well as strong commercial real estate loan growth.

Loans acquired in the CapStar transaction totaled $2.1 billion at transaction close.

Average non-interest-bearing deposits decreased $1.2 billion in 2024 compared to 2023 while average interest-bearing deposits increased $5.0 billion reflecting a mix shift as a result of the current rate environment, deposits assumed in the CapStar transaction, and organic growth.

Total deposit growth in 2024 has allowed us to organically fund loan growth.

Deposits assumed in the CapStar transaction totaled $2.6 billion at the close of the transaction.

Provision for Credit Losses

The following table details the components of provision for credit losses:

Years Ended December 31, % Change From

(dollars in thousands) 2024 2023 2022 2024 2023

Provision (release) for credit losses on loans $ 59,849 $ 123,340 $ (28,812) (51.5) % (528.1) %

Provision for credit losses on loans $ 120,191 $ 59,849 $ 123,340 100.8 % (51.5) %

Provision (release) for credit losses on

unfunded loan commitments (962) 21,309 (810) (104.5) N/M

unfunded loan commitments (9,572) (962) 21,309 895.0 (104.5)

Provision for credit losses on held-to-

maturity securities — — 150 N/A (100.0)

Total provision (release) for credit losses $ 58,887 $ 144,799 $ (29,622) (59.3) % (588.8) %

Total provision for credit losses $ 110,619 $ 58,887 $ 144,799 87.8 % (59.3) %

Net (charge-offs) recoveries on non-PCD

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Net (charge-offs) recoveries on PCD

loans (24,478) (11,188) — 118.8 N/A

loans (17,329) (24,478) (11,188) (29.2) 118.8

Total net (charge-offs) recoveries on

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Net charge-offs (recoveries) to average loans 0.17 % 0.17 % 0.06 % — % 183.3 %

Total provision for credit losses decreased $85.9 million in 2023 compared to 2022.

The decrease was primarily due to $96.3 million to establish an allowance for credit losses on non-PCD loans acquired as well as $11.0 million for unfunded loan commitments acquired in the First Midwest merger in 2022.

The decrease was partially offset by higher net charge-offs, loan growth, and macroeconomic factors.

Total provision for credit losses increased $51.7 million in 2024 compared to 2023 primarily due to loan growth, credit migration, net charge-offs, and macroeconomic factors.

In addition, the provision for credit losses on loans in 2024 included $15.3 million to establish an allowance for credit losses on non-PCD loans acquired in the CapStar transaction.

Continued loan growth in future periods, a decline in our current level of recoveries, or an increase in charge-offs could result in an increase in provision expense.

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Debt securities gains (losses), net (212) (6,265) (88) (96.6) N/M

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

Gain on sale of Visa Class B restricted shares — 21,635 — (100.0) N/A

Gain on sale of health savings accounts — — 90,673 N/A (100.0)

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Total noninterest income $ 354,697 $ 333,342 $ 399,779 6.4 % (16.6) %

The decrease in noninterest income in 2023 compared to 2022 was primarily due to a $90.7 gain on the sale of health savings accounts in the fourth quarter of 2022, partially offset by a gain on sale of Visa Class B restricted shares totaling $21.6 million in the fourth quarter of 2023 and the full-period 2023 impact of the First Midwest merger which occurred in February of 2022.

Wealth and investment services fees increased $6.9 million in 2023 compared to 2022 primarily due to higher wealth management fees as a result of continued sales to new and existing customers as well as favorable market conditions.

In addition, wealth and investment services fees increased due to the full-period 2023 impact of the First Midwest merger.

Service charges on deposit accounts decreased modestly in 2023 as a result of several enhancements to overdraft protection programs implemented in late 2022 to provide clients with more flexibility.

The changes included the elimination of the non-sufficient fund (“NSF”) fee when an item is returned, among other modifications that benefit consumers.

The impact of these enhancements was substantially offset by increased service charges on deposit accounts due to the full-period 2023 impact of the First Midwest merger.

Mortgage banking revenue decreased $6.7 million in 2023 compared to 2022 primarily due to the higher rate environment and lower gain on sale margins.

Noninterest income increased $21.4 million in 2024 compared to 2023.

Noninterest income in 2023 was impacted by a gain on sale of Visa Class B restricted shares totaling $21.6 million as well as $6.3 million of net losses on sales of debt securities.

Excluding these items, noninterest income grew $36.9 million primarily due to the acquisition of CapStar, higher wealth and investment services fees, mortgage banking revenue, and other income.

Wealth and investment services fees increased $9.0 million in 2024 compared to 2023 primarily due to higher wealth management fees as a result of continued sales to new and existing customers as well as favorable market conditions and the impact of the acquisition of CapStar.

Mortgage banking revenue increased $9.9 million in 2024 compared to 2023 primarily due to higher mortgage originations and increased loan sales.

During the fourth quarter of 2023, the Company recognized a $21.6 million pre-tax gain on sale of Visa Class B restricted shares in noninterest income.

Prior to the sale, the shares were carried at 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.

After the sale, the Company did not hold any remaining Visa Class B restricted shares.

See Note 20 to the consolidated financial statements for additional details on the Visa Class B restricted shares.

On November 18, 2022, Old National completed the sale of Old National’s business of acting as a qualified custodian for, and administering, health savings accounts.

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

At closing, the health savings accounts held in deposit accounts that were transferred totaled approximately $382 million and the transaction resulted in a $90.7 million pre-tax gain in 2022.

Other income increased $7.9 million in 2023 compared to 2022 primarily due to lower losses on equity securities reflecting improved market conditions, higher commercial loan fees, and higher card incentives.

Other income increased $9.1 million in 2024 compared to 2023 primarily due to additional other income associated with the acquisition of CapStar, discrete items in 2024, and higher commercial loan fees.

Noninterest Expense

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Amortization of tax credit investments 13,329 15,367 10,961 (13.3) 40.2

Property optimization 1,559 26,818 — (94.2) N/A

Property optimization — 1,559 26,818 (100.0) (94.2)

Other expense 71,741 79,123 76,510 (9.3) 3.4

Total noninterest expense $ 1,094,423 $ 1,026,306 $ 1,038,183 6.6 % (1.1) %

Noninterest expense decreased $11.9 million in 2023 compared to 2022.

Noninterest expense in 2022 included $120.9 million of merger-related expenses and $26.8 million for property optimization.

Excluding these expenses, noninterest expense in 2023 increased $78.8 million, reflective of the additional operating costs associated with the full-period 2023 impact of the First Midwest merger which occurred in February of 2022, higher FDIC assessment expense, and marketing campaigns.

FDIC assessment expense increased $37.4 million in 2023 compared to 2022 due to a $19.1 million FDIC special assessment, as well as higher assessment rates and deposit balances.

Noninterest expense increased $68.1 million in 2024 compared to 2023.

Excluding these expenses, noninterest expense in 2024 increased $68.9 million, reflective of the additional operating costs associated with the acquisition of CapStar, as well as higher salary and employee benefits reflective of merit increases.

FDIC assessment expense decreased $12.0 million in 2024 compared to 2023 primarily due to FDIC special assessments totaling $3.0 million and $19.1 million in 2024 and 2023, respectively, partially offset by higher assessment rates and deposit balances.

On November 16, 2023, the FDIC finalized a rule that imposes special assessments to recover the losses to the 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.

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

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

Amortization of tax credit investments increased $4.4 million in 2023 compared to 2022.

The recognition of tax credit amortization expense is contingent upon the successful completion of the rehabilitation of a historic building or completion of a solar project within the reporting period.

Many factors including weather, labor availability, building regulations, inspections, and other unexpected construction delays related to a rehabilitation project can cause a project to exceed its estimated completion date.

See Note 9 to the consolidated financial statements for additional information on our tax credit investments.

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 expenses totaling $26.8 million associated with valuation adjustments related to these locations in 2022.

The total of the special assessments for Old National Bank was estimated at $19.1 million, and such amount was recorded as an expense in the year ended December 31, 2023.

Old National recorded an additional $3.0 million within FDIC assessment expense for this special assessment in the year ended December 31, 2024.

Provision for Income Taxes

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The effective tax rate was 20.8% in 2024 compared to 22.5% in 2023.

The higher effective tax rate in 2023 compared to 2022 reflected increases in pre-tax book income and non-deductible FDIC premiums combined with smaller increases in tax credits and tax-exempt income.

effective tax rate in 2024 compared to 2023 reflected decreases in pre-tax book income and state income taxes combined with increases in tax credits and tax-exempt income.

The decrease in state income taxes reflected the recognition of previously unrecognized tax benefits due to the expiration of the statute of limitations.

See Note 15 to the consolidated financial statements for additional details on Old National’s income tax provision.

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At December 31, 2024, our assets were $53.6 billion, a $4.5 billion increase compared to $49.1 billion at December 31, 2023.

The increase was driven by disciplined loan growth and higher cash balances funded through higher deposits.

The increase was driven primarily by the acquisition of CapStar, as well as disciplined loan growth.

Earning Assets

Our earning assets are comprised of investment securities, portfolio loans, loans held-for-sale, money market investments, interest-earning accounts with the Federal Reserve, and equity securities.

Earning assets were $43.9 billion at December 31, 2023, an increase of $2.3 billion compared to earning assets of $41.6 billion at December 31, 2022 driven primarily by loan growth.

Earning assets were $48.0 billion at December 31, 2024, an increase of $4.1 billion compared to earning assets of $43.9 billion at December 31, 2023.

Investment Securities

We classify the majority of our investment securities as available-for-sale to give management the flexibility to sell the securities prior to maturity based on fluctuating interest rates or changes in our funding requirements.

During 2022, we transferred $3.0 billion of securities available-for-sale to held-to-maturity due to rising interest rates and related effects on the value of our investment securities.

The investment securities portfolio, including equity securities, was $10.2 billion at both December 31, 2023 and December 31, 2022.

Investment securities represented 23% of earning assets at December 31, 2023, compared to 25% at December 31, 2022.

As of December 31, 2023, we had no intent to sell any securities that were in an unrealized loss position nor is it expected that we would be required to sell the securities prior to their anticipated recovery.

The investment securities available-for-sale portfolio had net unrealized losses of $869.5 million at December 31, 2023, compared to net unrealized losses of $844.4 million at December 31, 2022.

The investment securities held-to-maturity portfolio had net unrealized losses of $412.3 million at December 31, 2023, compared to net unrealized losses of $445.5 million at December 31, 2022.

The investment securities portfolio, including equity securities, was $10.9 billion at December 31, 2024, compared to $10.2 billion at December 31, 2023.

The increase was driven primarily by the acquisition of CapStar.

Investment securities represented 23% of earning assets at both December 31, 2024 and December 31, 2023.

At December 31, 2024, we had no intent to sell any securities that were in an unrealized loss position nor is it expected that we would be required to sell the securities prior to their anticipated recovery.

The investment securities available-for-sale portfolio had net unrealized losses of $890.5 million and $869.5 million at December 31, 2024 and December 31, 2023, respectively.

The investment securities held-to-maturity portfolio had net unrealized losses of $483.7 million and $412.3 million at December 31, 2024 and December 31, 2023, respectively.

The investment securities available-for-sale portfolio including securities hedges had an effective duration of 4.11 at December 31, 2024, compared to 4.24 at December 31, 2023.

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The following table presents the composition of the loan portfolio at December 31.

(dollars in thousands) 2023 2022

(dollars in thousands) 2024 2023 $ Change % Change

Commercial $ 10,288,560 $ 9,512,230 $ 776,330 8.2 %

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Total $ 389,088 $ 1,221,974 $ 318,058 $ 963,135 $ 2,892,255 100 %

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

(dollars in thousands) Commercial Commercial

Real Estate Residential

Real Estate Consumer Total

Loans Percent of

December 31, 2024

Illinois $ 2,806,900 $ 3,729,569 $ 1,373,409 $ 578,009 $ 8,487,887 23 %

Indiana 1,572,681 1,829,208 1,064,843 904,224 5,370,956 15

Minnesota 945,820 2,188,040 594,585 144,577 3,873,022 11

Wisconsin 857,801 2,128,859 477,489 143,734 3,607,883 10

Michigan 588,542 1,437,963 654,828 257,585 2,938,918 8

Tennessee 391,033 1,247,478 204,366 251,273 2,094,150 6

Kentucky 399,139 592,848 264,513 390,503 1,647,003 5

Florida 158,941 389,681 380,214 32,173 961,009 3

Texas 225,202 272,004 260,126 16,088 773,420 2

California 174,993 26,733 417,028 37,807 656,561 2

Ohio 300,899 322,350 5,990 16,719 645,958 2

Other 1,866,609 2,142,753 1,100,195 119,563 5,229,120 13

Total $ 10,288,560 $ 16,307,486 $ 6,797,586 $ 2,892,255 $ 36,285,887 100 %

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

Commercial and Commercial Real Estate Loans

Commercial and commercial real estate loans are the largest classifications within earning assets, representing 55% at December 31, 2024, compared to 54% at December 31, 2023.

At December 31, 2023, commercial and commercial real estate loans were $23.7 billion, an increase of $1.7 billion compared to December 31, 2022 driven by disciplined loan production that was well balanced across our market footprint and product lines, partially offset by commercial loan sales.

At December 31, 2024, commercial and commercial real estate loans were $26.6 billion, an increase of $2.9 billion compared to December 31, 2023 driven primarily by the acquisition of CapStar, as well as disciplined loan production that was well balanced across our market footprint and product lines.

The following table provides detail on commercial loans by industry classification (as defined by the North American Industry Classification System) and by loan size at December 31.

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Health care and social assistance 1,657,229 1,982,352 1,636 1,567,286 1,949,250 7,390

Wholesale trade 748,058 1,541,951 3,789 857,400 1,552,985 2,895

Real estate rental and leasing 1,024,315 1,500,570 7,915 686,008 1,035,073 700

Finance and insurance 637,630 966,842 1 484,532 858,391 17

Wholesale trade 780,643 1,480,859 2,192 748,058 1,541,951 3,789

Construction 740,093 1,680,577 11,690 554,312 1,437,025 2,040

Finance and insurance 617,151 1,018,320 141 637,630 966,842 1

Accommodation and food services 579,424 679,087 7,146 389,591 503,990 705

Professional, scientific, and

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Transportation and warehousing 459,988 597,413 21,771 453,630 703,976 1,746

Accommodation and food services 389,591 503,990 705 399,915 512,025 596

Retail trade 345,944 620,308 5,273 332,367 538,135 7,386

Administrative and support and

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remediation services 392,955 573,061 3,363 321,018 487,359 347

Educational services 263,539 406,867 7 210,850 378,955 3,750

Retail trade 305,245 554,620 12,781 345,944 620,308 5,273

Agriculture, forestry, fishing,

and hunting 278,554 391,072 2,822 255,811 392,098 415

Public administration 216,939 285,963 — 231,453 325,834 846

Educational services 243,843 372,777 5 263,539 406,867 7

Other services 236,870 366,265 8,995 208,012 400,195 9,328

Public administration 167,410 191,005 — 216,939 285,963 —

Other 522,143 852,984 5,975 816,592 1,111,030 1,537

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Warehouse / Industrial 3,034,854 3,331,289 8,401 2,704,656 3,308,273 6,459

Office 1,948,430 2,112,157 58,111 1,813,007 1,979,272 13,728

Retail 2,295,808 2,372,912 8,435 1,886,233 1,958,254 29,823

Office 2,126,618 2,256,299 46,078 1,948,430 2,112,157 58,111

Senior housing 852,376 872,162 50,443 848,903 947,168 41,632

Single family 531,679 545,717 6,278 450,560 476,946 3,187

2,356,145 2,771,345 57,162 2,155,691 2,667,780 61,977

Other (2) 1,845,811 2,118,461 28,660 1,507,242 1,824,177 15,530

Total $ 16,307,486 $ 18,249,659 $ 234,232 $ 14,140,629 $ 17,049,286 $ 160,792

(1) Includes unfunded loan commitments.

(2) Other includes commercial development, agriculture real estate, hotels, self-storage, senior housing, land development, religion, and mixed-use properties.

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

Approximately 25% of the commercial real estate portfolio is owner-occupied as of December 31, 2023.

(2) Other includes commercial development, agriculture real estate, hotels, self-storage, land development, religion, and mixed-use properties.

The mix of properties securing the loans in our commercial real estate portfolio is comprised of owner-occupied and non-owner-occupied categories and is diverse in terms of type and geographic location, generally within the Company’s primary market area.

Approximately 27% of the commercial real estate portfolio is owner-occupied as of December 31, 2024, compared to 25% at December 31, 2023.

The Company actively reviews its broader loan portfolio in the normal course of business and has performed a targeted review of contractual maturities in its non-owner-occupied commercial real estate portfolio as part of its response to current market conditions to identify exposure to credit risk associated with renewals.

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Residential Real Estate Loans

Residential real estate loans held in our portfolio increased $239.0 million to $6.7 billion at December 31, 2023, compared to December 31, 2022.

Future increases in interest rates could result in a decline in the level of refinancings and new originations of residential real estate loans.

Residential real estate loans held in our portfolio increased $98.1 million to $6.8 billion at December 31, 2024, compared to December 31, 2023 driven primarily by the acquisition of CapStar, as well as organic growth.

Changes in interest rates may impact the number of refinancings and new originations of residential real estate loans.

If interest rates decrease in the future, there may be an increase in refinancings and new originations of residential real estate loans.

Conversely, future increases in interest rates may result in a decline in the level of refinancings and new originations of residential real estate loans.

Consumer Loans

Consumer loans, including automobile loans, personal, and home equity loans and lines of credit, decreased $57.6 million to $2.6 billion at December 31, 2023 compared to December 31, 2022.

This decrease reflected lower direct loans, partially offset by higher home equity and indirect consumer loans.

Consumer loans, including automobile loans, personal, and home equity loans and lines of credit, increased $252.6 million to $2.9 billion at December 31, 2024 compared to December 31, 2023 driven primarily by the acquisition of CapStar, as well as organic growth.

Allowance for Credit Losses on Loans and Unfunded Loan Commitments

At December 31, 2024, the allowance for credit losses on loans was $392.5 million, compared to $307.6 million at December 31, 2023.

The increase was driven primarily by the acquisition of CapStar, as well as organic loan growth and other factors.

Continued loan growth in future periods, a decline in our current level of recoveries, or an increase in charge-offs could result in an increase in provision expense.

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Additional information about our Allowance for Credit Losses is included in the “Risk Management – Credit Risk” section of Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Notes 1 and 4 to the consolidated financial statements.

Goodwill and Other Intangible Assets

Goodwill and other intangible assets at December 31, 2024 totaled $2.3 billion, an increase of $195.1 million compared to December 31, 2023 as a result of goodwill and other intangible assets recorded with the acquisition of CapStar.

Other assets at December 31, 2024 increased $175.8 million compared to December 31, 2023 primarily due to higher alternative investments.

The following table summarizes Old National’s total funding, comprised of deposits and wholesale borrowings at December 31:

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Total funding $ 46,235,097 $ 42,566,327 $ 3,668,770 8.6 %

Noninterest-bearing demand deposits decreased $2.3 billion at December 31, 2023 compared to December 31, 2022 while interest-bearing deposits increased $4.5 billion reflecting a mix shift as a result of the rising rate environment during 2023 and organic growth.

The increase in total deposits was primarily due to deposits assumed in the CapStar transaction as well as organic growth.

We use wholesale funding to augment deposit funding and to help maintain our desired interest rate risk position.

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Shareholders’ equity totaled $6.3 billion, or 12% of total assets, at December 31, 2024 and $5.6 billion, or 11% of total assets, at December 31, 2023.

This increase was driven by retained earnings along with changes in unrealized gains (losses) on derivatives.

These increases were partially offset by dividends and the repurchase of 1.8 million shares of Common Stock in 2023 under a stock repurchase plan that was approved by the Company’s Board of Directors, which reduced equity by $29.5 million.

Old National issued 24.0 million shares of Common Stock in conjunction with the acquisition of CapStar on April 1, 2024 adding $417.6 million in shareholders’ equity.

Retained earnings were partially offset by dividends during 2024.

Old National’s Common Stock is traded on the NASDAQ under the symbol “ONB” with 62,288 shareholders of record at December 31, 2024.

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Old National and the banking industry are subject to various regulatory capital requirements administered by the federal banking agencies.

Management routinely analyzes Old National’s capital to ensure an optimized capital structure.

Management routinely analyzes Old National’s capital to ensure an optimized capital

Accordingly, such evaluations may result in Old National taking a capital action.

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RISK MANAGEMENT

Old National has adopted a Risk Appetite Statement to enable our Board of Directors, Executive Leadership Team, and Senior Management to better assess, understand, monitor, and mitigate Old National’s risks.

Old National has adopted a Risk Appetite Statement to enable our Board of Directors, Enterprise Risk Committee of our Board, Executive Leadership Team, and Senior Management to better assess, understand, monitor, and mitigate Old National’s risks.

The Risk Appetite Statement addresses the following major risks:

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Lending Activities

Commercial and industrial loans are made primarily for the purpose of financing equipment acquisition, expansion, working capital, and other general business purposes.

Lease financing consists of direct financing leases and is used by commercial clients to finance capital purchases ranging from computer equipment to transportation

Commercial and industrial loans are made primarily for the purpose of financing equipment acquisition, borrower expansion, working capital, and other general business purposes.

Lease financing consists of direct financing leases and is used by commercial clients to finance capital purchases ranging from computer equipment to transportation equipment.

The credit decisions for these transactions are based upon an assessment of the overall financial capacity of the applicant.

A determination is made as to the applicant’s ability to repay in accordance with the proposed terms as well as an overall assessment of the risks involved.

In addition to an evaluation of the applicant’s financial condition, a determination is made of the probable adequacy of the primary and secondary sources of repayment, such as additional collateral or personal guarantees, to be relied upon in the transaction.

In addition to an evaluation of the applicant’s financial

condition, a determination is made of the probable adequacy of the primary and secondary sources of repayment, such as additional collateral or personal guarantees, to be relied upon in the transaction.

Credit agency reports of the applicant’s credit history supplement the analysis of the applicant’s creditworthiness.

Commercial mortgages and construction loans are offered to real estate investors, developers, and builders primarily domiciled in the geographic Midwest market areas we serve.

Commercial mortgages and construction loans are offered to real estate investors, developers, and builders primarily domiciled in the geographic Midwest and Southeast market areas we serve.

These loans are secured by first mortgages on real estate at LTV margins deemed appropriate for the property type, quality, location, and sponsorship.

Generally, these LTV ratios do not exceed 80%.

Generally, these LTV ratios do not exceed 80%, although higher levels may be permitted with additional non-real estate collateral, increased guaranties, accelerated amortization, or other mitigating factors.

The commercial properties are predominantly multi-family and non-residential properties such as retail centers, industrial properties as well as, to a lesser extent, more specialized properties.

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Decisions are primarily based on LTV ratios, DTI ratios, liquidity, and credit scores.

A maximum LTV ratio of 90% is generally required, although higher levels are permitted with mortgage insurance or other mitigating factors.

A maximum LTV ratio of 90% is generally required, although higher levels may be permitted with mortgage insurance or other mitigating factors.

We offer fixed rate mortgages and variable rate mortgages with interest rates that are subject to change every year after the first, third, fifth, or seventh year, depending on the product and are based on indexed rates such as prime.

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This committee, which meets quarterly, is made up of independent outside directors.

The committee

monitors credit quality through its general review of information such as delinquencies, credit exposures, peer comparisons, problem loans, and charge-offs.

In addition, the committee provides oversight of loan policy changes as recommended by management with the objective of maintaining an appropriate lending policy for the current lending environment.

The committee monitors credit quality through its general review of information such as delinquencies, credit exposures, peer comparisons, problem loans, and charge-offs.

In addition, the committee provides oversight of loan policy changes

as recommended by management with the objective of maintaining an appropriate lending policy for the current lending environment.

We lend to commercial and commercial real estate clients in many diverse industries including, among others, real estate rental and leasing, manufacturing, healthcare, wholesale trade, construction, and agriculture.

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At December 31, 2024, we had minimal exposure to foreign borrowers and no sovereign debt.

Our policy is to concentrate our lending activity in the geographic market areas we serve, primarily in the Midwest region.

The following table presents a summary of under-performing, criticized, and classified assets at December 31:

Our policy is to concentrate our lending activity in the geographic market areas we serve, primarily in the Midwest and Southeast regions of the United States.

The following table presents a summary of under-performing assets as well as criticized and classified assets at December 31:

(dollars in thousands) 2024 2023

Total nonaccrual loans $ 274,821 $ 238,178

TDRs still accruing (1)

Total past due loans (90 days or more and still accruing) 961 2,650

Nonaccrual loans $ 447,979 $ 274,821

Past due loans (90 days or more and still accruing) 4,060 961

Foreclosed assets 4,294 9,434

Total under-performing assets $ 456,333 $ 285,216

Classified loans (includes nonaccrual, TDRs still accruing,

past due 90 days, and other problem loans) $ 875,140 $ 745,485

Classified loans (includes nonaccrual, past due 90 days

or more, and other problem loans) $ 1,525,452 $ 875,140

Other classified assets (1)

58,954 48,930

Criticized loans 843,920 636,069

Special mention loans 908,630 843,920

Total criticized and classified assets $ 2,493,036 $ 1,767,990

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1.23 % 0.83 %

Non-performing loans/total loans (3) (4)

Under-performing assets/total loans (2)

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Allowance for credit losses on loans/nonaccrual loans 87.62 111.93

(1) As a result of the adoption of ASU 2022-02 on January 1, 2023, the TDR classification is no longer applicable.

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

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

(4) Non-performing loans include nonaccrual loans and TDRs still accruing for periods prior to January 1, 2023.

Under-performing assets increased to $456.3 million at December 31, 2024, compared to $285.2 million at December 31, 2023.

Under-performing assets as a percentage of total loans were 0.86% at both December 31, 2023 and December 31, 2022.

Nonaccrual loans increased $36.6 million from December 31, 2022 to December 31, 2023 reflecting PCD loan migration in the commercial real estate portfolio.

Under-performing assets as a percentage of total loans were 1.26% at December 31, 2024, compared to 0.86% at December 31, 2023.

Nonaccrual loans increased $173.2 million from December 31, 2023 to December 31, 2024 including $71.7 million of nonaccrual loans acquired in the CapStar acquisition.

Excluding these loans, nonaccrual loans increased $101.5 million reflecting the migration of certain borrowers primarily due to asset quality rating policy changes and the impact of the higher interest rate environment.

As a percentage of nonaccrual loans, the allowance for credit losses on loans was 87.62% at December 31, 2024, compared to 111.93% at December 31, 2023.

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The amount of interest income actually recorded on nonaccrual and renegotiated loans was $12.1 million in 2024 and $5.0 million in 2023.

Total criticized and classified assets were $1.8 billion at December 31, 2023, an increase of $361.7 million from December 31, 2022 primarily due to higher criticized commercial and commercial real estate loans.

Total criticized and classified assets were $2.5 billion at December 31, 2024, an increase of $725.0 million from December 31, 2023 including $222.1 million of criticized and classified loans related to the CapStar acquisition.

Excluding these loans, total criticized and classified assets increased $503.0 million reflecting the migration of certain borrowers primarily due to asset quality rating policy changes and the impact of the higher interest rate environment.

Other classified assets include investment securities that fell below investment grade rating totaling $59.0 million at December 31, 2024, compared to $48.9 million at December 31, 2023.

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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.

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

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

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Net charge-offs (recoveries) 62,004 55,910 16,099

Provision (release) for credit losses on loans 59,849 123,340 (28,812)

Provision for credit losses on loans 120,191 59,849 123,340

Ending allowance for credit losses on loans $ 392,522 $ 307,610 $ 303,671

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The allowance for credit losses on loans was $392.5 million at December 31, 2024, compared to $307.6 million at December 31, 2023.

The increase was driven primarily by the acquisition of CapStar, as well as organic loan growth and other factors.

Continued loan growth in future periods, a decline in our current level of recoveries, or an increase in charge-offs could result in an increase in provision expense.

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rate expectations, we also measure and monitor interest rate risk using the forward curve, which may be a more probable scenario of our interest rate exposure.

Presentation of the forward curve model is also included as of December 31, 2023.

The forward curve represents the relationship between the price of forward contracts and the time to maturity of the forward contracts at a point in time.

The following table illustrates our projected net interest income sensitivity over a two-year cumulative horizon based on the asset/liability model as of December 31, 2024 and 2023:

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% change from base (7.34) % (3.57) % (0.83) % 0.83 % (0.11) % 0.44 % 0.95 %

Rate Decrease Immediate Rate Increase

Immediate Rate Decrease Immediate Rate Increase

Basis Points -200

Basis Points Base +100

Basis Points -100

Basis Points 12/31/2023

Curve Base +100

Basis Points +200

Basis Points +300

December 31, 2023

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% change from base (6.10) % (4.16) % (2.53) % 0.06 % 1.29 % 3.76 % 5.61 %

Our projected net interest income increased year over year due to loan growth and rising interest rates.

A key element in the measurement and modeling of interest rate risk is the re-pricing assumptions of our transaction deposit accounts, which have no contractual maturity dates.

The following table illustrates the upper bound, Federal Funds Rate assumed in the simulation above at December 31, 2024 and 2023:

December 31, 2024 December 31, 2023

Basis Point Change Scenario Federal Funds

Federal Funds

+300 4.5 % 7.5 % 5.5 % 8.5 %

+200 4.5 % 6.5 % 5.5 % 7.5 %

+100 4.5 % 5.5 % 5.5 % 6.5 %

Base 4.5 % 4.5 % 5.5 % 5.5 %

-100 4.5 % 3.5 % 5.5 % 4.5 %

-200 4.5 % 2.5 % 5.5 % 3.5 %

-300 4.5 % 1.5 % 5.5 % 2.5 %

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

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

Our projected net interest income increased year over year driven by loan growth and asset repricing due to current interest rates and economic conditions.

Our overall strategy is consistent period over period, as we continue to manage our balance sheet toward a neutral interest rate risk position in a disciplined manner.

A key element in the measurement and modeling of interest rate risk is the re-pricing assumptions of our transaction deposit accounts, which align with our approach to deposit pricing and are consistent period over period.

Because the models are driven by expected behavior in various interest rate scenarios and many factors besides market interest rates affect our net interest income, we recognize that model outputs are not guarantees of actual results.

For this reason, we model many different combinations of interest rates and balance sheet assumptions to understand our overall sensitivity to market interest

rate changes, including shocks, ramps, yield curve flattening, yield curve steepening, as well as forecasts of likely interest rate scenarios tested.

For this reason, we model many different combinations of interest rates and balance sheet assumptions to understand our overall sensitivity to market interest rate changes, including shocks, ramps, yield curve flattening, yield curve steepening, as well as forecasts of likely interest rate scenarios tested.

We use cash flow and fair value hedges, primarily interest rate swaps, collars, and floors, to mitigate interest rate risk.

Derivatives designated as hedging instruments were in a net asset position with a fair value gain of $4.5 million at December 31, 2023, compared to a net liability position with a fair value loss of $36.1 million at December 31, 2022.

Derivatives designated as hedging instruments were in a net liability position with a fair value loss of $7.0 million at December 31, 2024, compared to a net asset position with a fair value gain of $4.5 million at December 31, 2023.

See Note 19 to the consolidated financial statements for further discussion of derivative financial instruments.

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Amount available from Federal Reserve discount window — 4,249,949

Amount available from Federal Reserve Bank Term Funding Program (2)

Amount available from Federal Home Loan Bank — 6,917,389

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(1) Based on collateral pledged.

(2) The Federal Reserve Bank will cease making new loans under this program as scheduled on March 11, 2024.

Old National Bancorp has routine funding requirements consisting primarily of operating expenses, dividends to shareholders, debt service, net derivative cash flows, and funds used for acquisitions.

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Prior regulatory approval to pay dividends was not required in 2023 or 2024 and is not currently required.

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 minimum and well-capitalized guidelines.

At December 31, 2024, Old National Bank could pay dividends of $889.2 million without

prior regulatory approval and while maintaining capital levels above regulatory minimum and well-capitalized guidelines.

Operational Risk

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Adherence to this belief is the responsibility of every employee, every day, in everything we do.

It is Old National’s

policy to comply with the letter and intent of all applicable regulatory requirements.

It is Old National’s policy to comply with the letter and intent of all applicable regulatory requirements.

Management, the first line of defense, is responsible for ensuring this expectation is met, with oversight from the second and third lines of defense, the risk and internal audit functions, respectively.

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Deposits without stated maturity $ 34,067,821 $ — $ 34,067,821

IRAs, consumer deposits, and brokered certificates of deposit 10 5,081,013 498,131 5,579,144

Time deposits 10 6,393,304 362,435 6,755,739

Securities sold under agreements to repurchase 11 268,975 — 268,975

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We are party to various derivative contracts as a means to manage the balance sheet and our related exposure to changes in interest rates, to manage our residential real estate loan origination and sale activity, and to provide derivative contracts to our clients.

Since the derivative liabilities recorded on the balance sheet change frequently and do not represent the amounts that may ultimately be paid under these contracts, these liabilities are not included in the table of contractual obligations presented above.

Since the derivative liabilities recorded on the balance sheet change frequently

and do not represent the amounts that may ultimately be paid under these contracts, these liabilities are not included in the table of contractual obligations presented above.

Further discussion of derivative instruments is included in Note 19 to the consolidated financial statements.

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• Effect if Actual Results Differ From Assumptions.

Changes in these factors, as well as downturns in economic or business conditions, could have a significant adverse impact on the carrying value of assets, including goodwill and liabilities, which could result in impairment losses affecting our financial statements as a whole and our banking subsidiary in which the goodwill resides.

Changes in these factors, as well as downturns in economic or business conditions, could have a significant adverse impact on the carrying value of assets,

including goodwill and liabilities, which could result in impairment losses affecting our financial statements as a whole and our banking subsidiary in which the goodwill resides.

Allowance for Credit Losses on Loans

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For residential and consumer loans, the PD is forecasted using a regression model to determine the likelihood of a loan being charged-off within the time horizon.

The regression models use combinations of variables to

assess systematic and unsystematic risk.

The 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 and include variables such as unemployment rate, gross domestic product, and house price index.

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

5 unchanged sentences

One of the most significant judgments used in determining the allowance for credit losses is the macroeconomic forecast provided by a third party.

The economic indices sourced from the macroeconomic forecast and used in projecting loss rates include the national unemployment rate, changes in commercial real estate prices, changes in home values, and changes in the United States gross domestic product.

The economic indices sourced from the macroeconomic forecast and used in projecting loss rates include the national unemployment rate, changes in home price index, changes in the United States gross domestic product, and changes in the BBB ratio.

The economic index used in the calculation to which the calculation may be most sensitive is the national unemployment rate.

8 unchanged sentences

The application of the hedge accounting policy requires judgment in the assessment of hedge effectiveness, identification of similar hedged item groupings and measurement of changes in the fair value of derivative financial instruments and hedged items.

To the extent hedging relationships are found to be effective, changes in fair value of the derivatives are offset by changes in the fair value of the related hedged item or recorded to other comprehensive income (loss).

To the extent hedging relationships are found to be effective, changes in fair value of the

derivatives are offset by changes in the fair value of the related hedged item or recorded to other comprehensive income (loss).

Management believes hedge effectiveness is evaluated properly in preparation of the financial statements.

31 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis