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What changed in OLD NATIONAL BANCORP /IN/'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of OLD NATIONAL BANCORP /IN/'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+365 added−345 removedSource: 10-K (2025-02-19) vs 10-K (2024-02-22)

Top changes in OLD NATIONAL BANCORP /IN/'s 2024 10-K

365 paragraphs added · 345 removed · 293 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

77 edited+15 added−15 removed101 unchanged
Biggest changeThe SEC has also announced plans to propose rules to require enhanced disclosure regarding human capital management and board diversity for public issuers. In addition, several states in which the Company operates have enacted or proposed statutes or regulations addressing climate change and other ESG issues. Future Legislation and Regulation.
Biggest changeIn addition, several states in which the Company operates have enacted or proposed statutes or regulations addressing climate change and other ESG issues. For example, California enacted climate-related disclosure laws requiring certain companies doing business in California to make certain climate-related disclosures, including but not limited to greenhouse gas emissions data and climate-related risks.
Bank Secrecy Act and the USA Patriot Act. The U.S. Bank Secrecy Act (“BSA”) and USA PATRIOT Act require financial institutions to develop programs to prevent them from being used for, and to detect and deter, money laundering, terrorist financing, and other illegal activities.
Bank Secrecy Act and the USA Patriot Act. The U.S. Bank Secrecy Act (the “BSA”) and USA PATRIOT Act require financial institutions to develop programs to prevent them from being used for, and to detect and deter, money laundering, terrorist financing, and other illegal activities.
Any transactions between Old National Bank and its subsidiaries and Old National Bancorp or any other subsidiary of Old National Bancorp are regulated under federal banking law.
Any transactions between Old National Bank and its subsidiaries, Old National Bancorp, or any other subsidiary of Old National Bancorp are regulated under federal banking law.
In October 2022, the SEC adopted a final rule directing national securities exchanges and associations, including NASDAQ, to implement listing standards that require all listed companies to adopt policies mandating the recovery or “clawback” of excess incentive-based compensation earned by a current or former executive officer during the three fiscal years preceding a required accounting restatement of financial statements, including to correct an error 14 that would result in a material misstatement if the error were corrected in the current period.
In October 2022, the SEC adopted a final rule directing national securities exchanges and associations, including NASDAQ, to implement listing standards that require all listed companies to adopt policies mandating the recovery or “clawback” of excess incentive-based compensation earned by a current or former executive officer during the three fiscal years preceding a required accounting restatement of financial statements, including to correct an error that would result in a material misstatement if the error were corrected in the current period.
Old National Bank is subject to laws designed to protect consumers and prohibit unfair or deceptive business practices, including the Equal Credit Opportunity Act, the Fair Housing Act, the Home Ownership Protection Act, the Fair Credit Reporting Act, as amended by the Fair and Accurate Credit Transactions 9 Act of 2003 (“FACT Act”), the GLB Act, the Truth in Lending Act, the CRA, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the National Flood Insurance Act and applicable state law counterparts.
Old National Bank is subject to laws designed to protect consumers and prohibit unfair or deceptive business practices, including the Equal Credit Opportunity Act, the Fair Housing Act, the Home Ownership Protection Act, the Fair Credit Reporting Act, as amended by the Fair and Accurate Credit Transactions Act of 2003 (“FACT Act”), the GLB Act, the Truth in Lending Act, the CRA, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the National Flood Insurance Act and applicable state law counterparts.
Under OCC regulations, national banks generally may not declare a dividend in excess of the bank’s undivided profits or, absent OCC approval, if the total amount of dividends declared by the national bank in any calendar year exceeds the total of the national bank’s retained net income year-to-date combined with its retained net income for the preceding two years.
Under OCC regulations, national banks generally may not declare a dividend in excess of the bank’s undivided profits or, absent OCC approval, if the total amount of dividends declared by the national bank in any calendar year exceeds the total 12 of the national bank’s retained net income year-to-date combined with its retained net income for the preceding two years.
As a member of the FHLBI, Old National Bank is required to acquire and hold a minimum amount of shares of capital stock of the FHLBI based on, among other things, the amounts of residential mortgage loans and mortgage-backed securities held by Old National Bank, outstanding borrowings from the FHLBI and the outstanding principal balance of “Acquired Member Assets”, as defined by the FHLBI.
As a member of the FHLBI, Old National Bank is required to acquire and hold a minimum amount of shares of capital stock of the FHLBI based on, among other things, the amounts of 15 residential mortgage loans and mortgage-backed securities held by Old National Bank, outstanding borrowings from the FHLBI and the outstanding principal balance of “Acquired Member Assets”, as defined by the FHLBI.
In addition, competition for quality clients has intensified as a result of changes in regulation, mergers and acquisitions, advances in technology and product delivery systems, and consolidation among financial service providers. SUPERVISION AND REGULATION Old National is subject to extensive and comprehensive regulation under federal and state laws.
In addition, competition for clients has intensified as a result of changes in regulation, mergers and acquisitions, advances in technology and product delivery systems, and consolidation among financial service providers. SUPERVISION AND REGULATION Old National is subject to extensive and comprehensive regulation under federal and state laws.
The CFPB may also institute a civil action against an entity in violation of federal consumer financial laws in order to impose a civil penalty or injunction. Banking regulators take into account compliance with consumer protection laws when considering approval of a proposed acquisition transaction.
The CFPB may also institute a civil action against an entity in violation of federal consumer financial laws in order to impose a civil money penalty or injunction. Banking regulators take into account compliance with consumer protection laws when considering approval of a proposed acquisition transaction.
In addition to providing lending and deposit services, we offer comprehensive wealth management, trust, investment advisory, and foreign currency services. For businesses, we provide treasury management, merchant, and capital markets services as well as community development lending and equity investment solutions intended to produce jobs and revitalize our communities.
In addition to providing lending and deposit services, we offer comprehensive wealth management, trust, investment advisory, brokerage, and foreign currency services. For businesses, we provide treasury management, merchant, and capital markets services as well as community development lending and equity investment solutions intended to produce jobs and revitalize our communities.
These changes to the regulatory framework could result in Old National Bank, among other things, facing higher compliance costs in charging overdraft fees, experiencing a decreased ability to recover amounts extended as overdraft protection, reducing the availability of overdraft protection, and/or charging lower overdraft fees. Interchange Fees.
These changes to the regulatory framework could result in Old National Bank, among other things, facing higher compliance costs in charging overdraft fees, experiencing a decreased ability to recover amounts extended as overdraft protection, reducing the availability of overdraft protection, and/or charging lower overdraft fees.
The merger of equals of Old National and First Midwest partnered two highly compatible organizations with over 270 combined years of service and a shared relationship banking focus, consistent business models and 6 credit cultures, and an unwavering commitment to community.
The merger of equals of Old National and First Midwest partnered two highly compatible organizations with over 270 combined years of service and a shared relationship banking focus, consistent business models and credit cultures, and an unwavering commitment to community.
These rules implement the Basel III framework set forth by the Basel Committee on Banking Supervision (the “Basel Committee”) as well as certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”).
These rules implement the Basel III framework set forth by the Basel Committee on 10 Banking Supervision (the “Basel Committee”) as well as certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”).
Changes in law or regulation, or in the manner in which existing regulations are applied, may change the Company’s and Old National Bank’s operating environment in substantial and unpredictable ways and may increase reporting requirements and compliance costs.
Changes in law or regulation, or in the manner in which existing laws or regulations are applied, may change the Company’s and Old National Bank’s operating environment in substantial and unpredictable ways and may increase reporting requirements and compliance costs.
National banks also are prohibited from declaring or paying any dividend if, after making the dividend, the national bank would be considered “undercapitalized” (as defined by 12 reference to other OCC regulations).
National banks also are prohibited from declaring or paying any dividend if, after making the dividend, the national bank would be considered “undercapitalized” (as defined by reference to other OCC regulations).
In addition, the SEC maintains an internet site at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. 16
In addition, the SEC maintains an internet site at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
As of December 31, 2023, Old National Bank was in compliance with the minimum stock ownership requirement. Enhanced Prudential Standards. The Dodd-Frank Act, as amended by the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 (“EGRRCPA”), directs the Federal Reserve to monitor emerging risks to financial stability and enact enhanced supervision and prudential standards.
As of December 31, 2024, Old National Bank was in compliance with the minimum stock ownership requirement. Enhanced Prudential Standards. The Dodd-Frank Act, as amended by the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 (“EGRRCPA”), directs the Federal Reserve to monitor emerging risks to financial stability and enact enhanced supervision and prudential standards.
We anticipate that, as with previous mergers and acquisitions, the consideration paid by us in future mergers and acquisitions may be in the form of cash, debt, or Old National stock, or a combination thereof and may reflect a premium to the target’s then-market value.
We anticipate that, as with previous mergers and acquisitions, the consideration paid by us in future mergers and acquisitions may be principally in the form of cash and/or Old National stock, or a combination thereof, and may reflect a premium to the target’s then-market value.
Under the BHC Act or the Bank Merger Act, the prior approval of the Federal Reserve or other appropriate bank regulatory authority is required for a bank holding company to acquire control of another bank or for a member bank to merge with another bank or purchase the assets or assume the deposits of another bank.
Under the BHC Act and the Bank Merger Act, the prior approval of the Federal Reserve or other appropriate bank regulatory authority is required for a bank holding company to acquire control of another bank or for a bank to merge with another bank or purchase the assets or assume the deposits of another bank.
The federal banking regulators must take certain mandatory supervisory actions, and are authorized to take other discretionary actions, with respect to institutions that are less than adequately capitalized, with supervisory actions progressively becoming more punitive as the institution’s capital category declines.
The federal banking regulators must take certain mandatory supervisory actions, and are authorized to take other discretionary actions, with respect to institutions that are less than adequately capitalized, with supervisory actions progressively becoming more restrictive as the institution’s capital category declines.
We have continued to expand our footprint through strategic mergers and acquisitions, and we are now the sixth largest bank headquartered in the Midwest by assets. The following table reflects information on the top markets we currently serve.
We have continued to expand our footprint through strategic mergers and acquisitions, and we are now the sixth largest bank headquartered in the Midwest by assets. The following table reflects information on the top areas we currently serve.
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.
On February 15, 2022, Old National completed its 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.
If a financial holding company ceases to meet these capital and management requirements, the BHC Act and the Federal Reserve’s regulations provide that the financial holding company must enter into an agreement with the Federal Reserve to comply with all applicable capital and management requirements.
If a financial holding company ceases to meet these capital and management requirements, the BHC Act and the Federal Reserve’s regulations provide that the financial holding company must enter into a confidential agreement with the Federal Reserve to comply with all applicable capital and management requirements.
In October 2023, the Federal Reserve proposed amendments to its rules on interchange fees. The proposed changes would establish a maximum permissible interchange fee of no more than 14.4 cents per transaction plus four basis points multiplied by the value of the transaction. The fraud prevention adjustment would be increased to 1.3 cents 10 per transaction.
On October 25, 2023, the Federal Reserve proposed amendments to its rules on interchange fees. The proposed changes would establish a maximum permissible interchange fee of no more than 14.4 cents per transaction plus four basis points multiplied by the value of the transaction. The fraud prevention adjustment would be increased to 1.3 cents per transaction.
The liability of the parent holding company under any such guarantee is limited to the lesser of five percent of the bank’s assets at the time it became “undercapitalized” or the amount needed to comply. Dividends Limitation s . A substantial portion of Old National Bancorp’s revenue is derived from dividends paid to it by Old National Bank.
The liability of the parent holding company under any such guarantee is limited to the lesser of five percent of the bank’s assets at the time it became “undercapitalized”, or the amount needed to comply. Dividends Limitations. A substantial portion of Old National Bancorp’s revenue is derived from dividends paid to it by Old National Bank.
Deposit data as of June 30, 2023. STRATEGIC TRANSACTIONS Since forming our holding company in 1982, we have acquired over 50 financial institutions and other financial services businesses.
Deposit data as of June 30, 2024. STRATEGIC TRANSACTIONS Since forming our holding company in 1982, we have acquired over 50 financial institutions and other financial services businesses.
Old National competes with financial service providers such as other commercial banks, savings and loan associations, credit unions, mortgage banking firms, Financial Technology, or “FinTech,” companies, consumer finance companies, securities brokerage firms, insurance companies, money market mutual funds, and other financial services providers.
Old National competes with financial service providers such as other commercial banks, savings and loan associations, credit unions, mortgage banking firms, financial technology, or “FinTech,” companies, consumer finance companies, securities brokerage firms, insurance companies, money market mutual funds, private equity and debt funds, and other financial services providers.
Any such data provider would also have to make such data available to third parties, with the consumer’s express authorization and through an interface that satisfies formatting, performance and security standards, for the purpose of such third parties providing the consumer with financial products or services requested by the consumer.
Any such data provider also has to make such data available to third parties, with the consumer’s express authorization and through an interface that satisfies formatting, performance and security standards, for the purpose of such third parties providing the consumer with financial products or services requested by the consumer.
In addition to the specific legislation and regulations described above, various laws and regulations are being considered by federal and state governments and regulatory agencies.
Future Legislation and Regulation. In addition to the specific legislation and regulations described above, various laws and regulations are being considered by federal and state governments and regulatory agencies.
AVAILABLE INFORMATION All reports filed electronically by Old National with the SEC, including the annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy and information statements, other information and amendments to those reports filed or furnished (as applicable), are accessible at no cost on Old National’s website at www.oldnational.com as soon as reasonably practicable after electronically submitting such materials to the SEC.
AVAILABLE INFORMATION All reports filed electronically by Old National with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy and information statements, other information and amendments to those reports filed or furnished (as applicable), are accessible at no cost on Old National’s website at www.oldnational.com as soon as reasonably practicable after the electronic submission of such materials to the 16 SEC.
In order for a financial holding company to commence any new activity permitted by the BHC Act or to acquire a company engaged in any new activity permitted by the BHC Act, each insured depository institution subsidiary of the financial holding company must have received a rating of at least “satisfactory” in its most recent examination under the CRA.
In order for a financial holding company to commence any new activity permitted by the BHC Act or to acquire a company engaged in any new activity permitted by the BHC Act, each insured depository institution subsidiary of the financial holding company must have received a rating of at least “satisfactory” in its most recent CRA performance evaluation.
However, the revised capital requirements of the proposed rule would not apply to the Company or Old National Bank because they have less than $100 billion in total consolidated assets and trading assets and liabilities below the threshold for market risk requirements. 11 Prompt Corrective Action .
However, the revised capital requirements of the proposed rule would not apply to the Company or Old National Bank because they have less than $100 billion in total consolidated assets and trading assets and liabilities below the threshold for market risk requirements.
Failure to comply with these requirements could have serious financial, legal, and reputational consequences, including the imposition of civil money penalties, cease and desist orders, or causing applicable bank regulatory authorities not to approve merger or acquisition transactions or to prohibit transactions even if approval is not required.
Failure to comply with these requirements could have serious financial, legal, and reputational consequences, including the imposition of civil money penalties, cease and desist orders, or causing applicable bank regulatory authorities not to approve merger or acquisition transactions or to prohibit transactions even if approval is not required. Office of Foreign Assets Control Regulation.
As a bank holding company and financial holding company, Old National Bancorp is subject to supervision, examination and regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”) under the Bank Holding Company Act of 1956, as amended (the “BHC Act”), and is required to file reports with the Federal Reserve and to provide the Federal Reserve any additional information it may require.
As a bank holding company and financial holding company, Old National Bancorp is subject to supervision, examination, and regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”) under the BHC Act, and is required to file reports with the Federal Reserve and to provide the Federal Reserve any additional information it may require.
The proposed rule would also establish an automatic update of the interchange fee cap every other year based on a survey of debit card issuers. Capital Adequacy. Capital Requirements .
The proposed rule would also establish an automatic update of the interchange fee cap every other year based on a survey of debit card issuers.
BUSINESS COMPANY PROFILE Old National Bancorp, the financial holding company of Old National Bank, our wholly-owned banking subsidiary (“Old National Bank”), is incorporated in the state of Indiana, is the sixth largest Midwestern-headquartered bank by asset size with consolidated assets of $49.1 billion at December 31, 2023, and ranks among the top 30 banking companies headquartered in the United States.
BUSINESS COMPANY PROFILE Old National Bancorp, the financial holding company of Old National Bank, our wholly owned banking subsidiary (“Old National Bank”), is incorporated in the state of Indiana, is the sixth largest Midwestern-headquartered bank by asset size with consolidated assets of $53.6 billion at December 31, 2024, and ranks among the top 30 banking companies headquartered in the United States.
If an insured depository institution fails, insured and uninsured depositors, along with the FDIC, will have priority in payment ahead of unsecured, non-deposit creditors, including depositors whose deposits are payable only outside of the United States, and the parent bank holding company with respect to any extensions of credit they have made to such insured depository institution. Anti-Tying Restrictions .
If an insured depository institution fails, insured and uninsured depositors, along with the FDIC, will have priority in payment ahead of unsecured, non-deposit creditors, including depositors whose deposits are payable only outside of the United States, and the parent bank holding company with respect to any extensions of credit it may have made to such insured depository institution.
Our strong, comprehensive benefits package includes health insurance and wellness coverages, a retirement plan with company matching contributions, other welfare plan 5 coverages, paid time off, and paid leave benefits. In addition to our standard benefits, our team members have access to dedicated healthcare clinics and alternative work schedules for maternity, paternity, and foster-care leave.
Our strong, comprehensive benefits package includes health insurance and wellness coverages, a retirement plan with company matching contributions, other welfare plan coverages, paid time off, and paid leave benefits. In addition to our standard benefits, our team members have access to dedicated healthcare clinics and alternative work schedules for parental leave.
In addition, the OCC, as the regulator of national banks, has issued guidelines for national banks with more than $50 billion in assets that establish certain standards for the design and implementation of a risk governance framework. These standards will become applicable to Old National Bank once it has $50 billion in assets. Resolution Planning.
In addition, the OCC, as the regulator of national banks, has issued guidelines for national banks with more than $50 billion in assets, such as Old National Bank, that establish certain standards for the design and implementation of a risk governance framework. Resolution Planning.
Under the Gramm-Leach-Bliley Act of 1999 (“GLB Act”), a financial institution may not disclose non-public personal information about a consumer to unaffiliated third-parties unless the institution satisfies various disclosure requirements and the consumer has not elected to opt out of the information sharing. The financial institution must provide its clients with a notice of its privacy policies and practices.
Under the Gramm-Leach-Bliley Act of 1999 (the “GLB Act”), a financial institution may not disclose non-public personal information about a consumer to unaffiliated third parties unless the institution satisfies various disclosure requirements, and the consumer has not elected to opt out of the information sharing.
THE BANK Old National Bank traces its roots to 1834 and at December 31, 2023, operated 258 banking centers located primarily throughout the Midwestern United States, including Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, and Wisconsin.
THE BANK Old National Bank traces its roots to 1834 and at December 31, 2024, operated 280 banking centers located primarily throughout the Midwestern and Southeastern United States, including Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, North Carolina, Tennessee, and Wisconsin.
Divestitures On November 18, 2022, Old National Bank 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.
The transaction is anticipated to close in the middle of 2025. Divestitures On November 18, 2022, Old National Bank 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.
Team member volunteers are recognized for their efforts on our corporate portal. Team members with 25 hours or more of service each year are recognized annually by executive management. MARKET AREAS SERVED Since our founding, Old National has focused on community and commercial banking by building long-term, highly valued partnerships with clients in our Midwest region.
Team members with 25 hours or more of service each year are recognized annually by executive management. AREAS SERVED Since our founding, Old National has focused on community and commercial banking by building long-term, highly valued partnerships with clients in our Midwest and Southeast regions.
Old National is unable to predict changes in applicable laws or regulations, or in their interpretation and application by regulatory agencies and other governmental authorities, and any such change could have a material effect on our business. Old National Bancorp is registered as a bank holding company and has elected to be a financial holding company.
Old National is unable to predict changes in applicable laws or regulations, or in their interpretation and application by regulatory agencies and other governmental authorities, and any such change could have a material effect on our business.
On October 19, 2023, the CFPB proposed a new rule that would require a provider of payment accounts or products, such as a bank, to make data available to consumers upon request regarding the products or services they obtain from the provider.
On October 22, 2024, the CFPB finalized a new rule that requires a provider of payment accounts or products, such as a bank, to make data available to consumers upon request regarding the products or services they obtain from the provider.
We have a program that allows each team member to be paid up to 24 hours per year, with supervisory approval, to volunteer for activities in their community during normal work hours. Under that program, team members logged over 57,000 volunteer hours during 2023 in support of 2,400 organizations.
We have a program that allows 5 each team member to be paid up to 24 hours per year, with supervisory approval, to volunteer for activities in their community during normal work hours. Under that program, team members logged approximately 67,700 volunteer hours during 2024 in support of more than 2,700 organizations.
The Federal Reserve, the FDIC, and other financial regulatory agencies issued regulations implementing notice requirements and restrictions on a financial institution’s ability to disclose non-public personal information about consumers to unaffiliated third-parties.
The financial institution must provide its clients with a notice of its privacy policies and practices. The Federal Reserve, the FDIC, and other financial regulatory agencies issued regulations implementing notice requirements and restrictions on a financial institution’s ability to disclose non-public personal information about consumers to unaffiliated third parties.
The BHC Act requires the prior approval of the Federal Reserve for the direct or indirect acquisition by a bank holding company of more than 5.0% of the voting shares of a commercial bank or its holding company.
The BHC Act, the Bank Merger Act, and other federal and state statutes regulate acquisitions of commercial banks and their holding companies. The BHC Act requires the prior approval of the Federal Reserve for the direct or indirect acquisition by a bank holding company of more than 5.0% of the voting shares of a commercial bank or its holding company.
As a national bank, Old National Bank is subject to primary regulation, supervision, and examination by the Office of the Comptroller of the Currency (“OCC”). 7 Bank Holding Company Regulation. Generally, the BHC Act governs the acquisition and control of banks and non-banking companies by bank holding companies.
As a national bank, Old National Bank is subject to primary regulation, supervision, and examination by the OCC. 7 Bank Holding Company Regulation. Generally, the BHC Act governs the acquisition and control of banks and non-banking companies by bank holding companies. The BHC Act also regulates the business activities of bank holding companies and their non-bank subsidiaries.
Old National Bancorp and Old National Bank are each required to comply with certain risk-based capital and leverage requirements under capital rules adopted by the Federal Reserve, the OCC, and the FDIC (the “Basel III Capital Rules”).
District Court preliminarily enjoined this law from applying to national banks, including Old National Bank. Capital Adequacy. Capital Requirements . Old National Bancorp and Old National Bank are each required to comply with certain risk-based capital and leverage requirements under capital rules adopted by the Federal Reserve, the OCC, and the FDIC (the “Basel III Capital Rules”).
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.
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. As of September 30, 2024, the FDIC’s total loss estimate was $24.1 billion, of which $18.9 billion will be recovered through the special assessment.
We earn interest income on loans as well as fee income from the origination of loans. Lending activities include loans to individuals, which primarily consist of home equity lines of credit, residential real estate loans, and consumer loans, and loans to commercial clients, which include commercial loans, commercial real estate loans, agricultural loans, letters of credit, and lease financing.
Lending activities include loans to individuals, which primarily consist of home equity lines of credit, residential real estate loans, and consumer loans, and loans to commercial clients, which include commercial loans, commercial real estate loans, agricultural loans, letters of credit, and lease financing.
Metropolitan Statistical Area Deposits as a Percent of Old National Bank Franchise (%) Deposits Per Branch ($M) 2020-2024 Population Change (%) 2024-2029 Projected Population Change (%) 2024 Median Household Income ($) 2024-2029 Projected Household Income Change (%) Chicago-Naperville-Elgin, IL-IN-WI 43.3 177.7 (2.1) 0.1 85,119 8.4 Evansville, IN-KY 10.5 255.3 0.1 1.2 67,796 8.7 Minneapolis-St.
Metropolitan Statistical Area Deposits as a Percent of Old National Bank Franchise (%) Deposits Per Branch ($M) 2020-2025 Population Change (%) 2025-2030 Projected Population Change (%) 2025 Median Household Income ($) 2025-2030 Projected Household Income Change (%) Chicago-Naperville-Elgin, IL-IN-WI 40.4 183.8 (2.4) (0.7) 86,627 6.3 Evansville, IN-KY 10.4 281.5 1.1 2.2 68,976 8.0 Minneapolis-St.
The FDIC has required IDIs with more than $50 billion in total consolidated assets to submit to the FDIC periodic plans for resolution in the event of the institution’s failure. In 2018, the FDIC issued a moratorium on resolution plans for IDIs with more than $50 billion in assets.
The FDIC has required IDIs with more than $50 billion in total consolidated assets to submit to the FDIC periodic plans for resolution in the event of the institution’s failure. On June 20, 2024, the FDIC finalized amendments to the resolution planning requirements for IDIs with $50 billion or more in total assets.
The combined organization has operations in six of the largest Midwestern metropolitan areas, strong commercial banking capabilities, a robust retail footprint, a significant wealth management platform, and an enhanced ability to attract top talent and deliver superior financial performance.
The combined organization has operations in six of the largest Midwestern metropolitan areas, strong commercial banking capabilities, a robust retail footprint, a significant wealth management platform, and an enhanced ability to attract top talent and deliver superior financial performance. 6 On April 1, 2024, Old National completed its acquisition of CapStar and its wholly owned subsidiary, CapStar Bank, in an all-stock transaction.
In addition, the CFPB has a broad mandate to prohibit unfair, deceptive or abusive acts and practices, is specifically empowered to require certain disclosures to consumers and draft model disclosure forms and is responsible for making rules and regulations under the federal consumer protection laws relating to financial products and services.
Failure to comply with consumer protection requirements may also result in failure to obtain any required bank regulatory approval for merger or acquisition transactions or prohibit such transactions even if approval is not required. 9 In addition, the CFPB has a broad mandate to prohibit unfair, deceptive or abusive acts and practices, is specifically empowered to require certain disclosures to consumers and draft model disclosure forms and is responsible for making rules and regulations under the federal consumer protection laws relating to financial products and services.
A bank’s capital category is determined solely for the purpose of applying prompt corrective action regulations, and the capital category may not constitute an accurate representation of the bank’s overall financial condition or prospects for other purposes. As of December 31, 2023, Old National Bank’s capital ratios were all in excess of the minimum requirements for “well-capitalized” status.
A bank’s capital category is determined solely for the purpose of applying prompt corrective action regulations, and the capital category may not constitute an accurate representation of the bank’s overall financial condition or prospects for other purposes.
Each of the banking centers of Old National Bank provides a group of similar community banking services, including such products and services as commercial, real estate, and consumer loans; deposits; and private banking, capital markets, brokerage, wealth management, trust, and investment advisory services. The individual banking centers located throughout our Midwest footprint have similar operating and economic characteristics.
Each of the banking centers of Old National Bank provides a group of similar community banking services, including such products and services as commercial, real estate, and consumer loans; deposits; and private banking, capital markets, brokerage, wealth management, trust, and investment advisory services. We earn interest income on loans as well as fee income from the origination of loans.
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.
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.
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.
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 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.
Old National provides professional development opportunities to team members and seeks to improve retention, development, and job satisfaction of team members from diverse groups by providing career skills training, peer mentoring, and opportunities to interact with senior leaders.
HUMAN CAPITAL RESOURCES At December 31, 2024, we employed 4,066 full-time equivalent team members. Old National provides professional development opportunities to team members and seeks to improve retention, development, and job satisfaction of team members by providing career skills training, peer mentoring, and opportunities to interact with senior leaders.
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 as an expense in the quarter the rule was finalized (the quarter ending December 31, 2023). Depositor Preference .
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 quarter the rule was finalized (the quarter ending 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.
The proposal would also generally require banks to restructure many overdraft fees, overdraft lines of credit, and other overdraft practices as separate consumer credit accounts that would be subject to those requirements.
The rule modifies or eliminates several long-standing exclusions from requirements generally applicable to consumer credit that previously exempted certain overdraft practices. The rule also generally requires banks to restructure many overdraft fees, overdraft lines of credit, and other overdraft practices as separate consumer credit accounts that would be subject to those requirements.
As a bank holding company with less than $100 billion of total consolidated assets, the Dodd Frank Act’s enhanced prudential standards generally are not 15 applicable to the Company. Prior to the passage of EGRRCPA, Federal Reserve rules required publicly traded bank holding companies with $10 billion or more of total consolidated assets to establish risk committees.
As a bank holding company with less than $100 billion of total consolidated assets, the Dodd Frank Act’s enhanced prudential standards generally are not applicable to the Company.
The Federal Deposit Insurance Act (the “FDIA”) requires the federal banking agencies to take “prompt corrective action” for depository institutions that do not meet the minimum capital requirements described above.
The Federal Reserve has indicated that it expects to work with the other federal banking regulators in 2025 on a revised proposal. 11 Prompt Corrective Action . The Federal Deposit Insurance Act (the “FDIA”) requires the federal banking agencies to take “prompt corrective action” for depository institutions that do not meet the minimum capital requirements described above.
The proposed rule is intended to give consumers control over their financial data, including with whom it is shared, and encourage competition in the provision of consumer financial products or services.
Data required to be made available under the rule includes transaction information, account balance, account and routing numbers, terms and conditions, upcoming bill information, and certain account verification data. The rule is intended to give consumers control over their financial data, including with whom it is shared, and encourage competition in the provision of consumer financial products or services.
Insurance of deposits may be terminated by the FDIC upon a finding that the institution engaged or is engaging in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or violated any applicable law, regulation, rule, order, or condition imposed by the FDIC or written agreement entered into with the FDIC. 13 FDIC assessment rates for large institutions that have more than $10 billion of assets, such as Old National Bank, are calculated based on a “scorecard” methodology, based primarily on the difference between the institution’s average of total assets and average tangible equity.
Insurance of deposits may be terminated by the FDIC upon a finding that the institution engaged or is engaging in unsafe and unsound practices, is in an unsafe or 13 unsound condition to continue operations, or violated any applicable law, regulation, rule, order, or condition imposed by the FDIC or written agreement entered into with the FDIC.
During 2016, the federal bank regulatory agencies and the SEC proposed revised rules on incentive-based payment arrangements at specified regulated entities having at least $1 billion of total assets (including the Company and Old National Bank). These proposed rules have not been finalized.
Monitoring methods and processes used by a banking organization should be commensurate with the size and complexity of the organization and its use of incentive compensation. 14 During 2016, the federal bank regulatory agencies and the SEC proposed revised rules on incentive-based payment arrangements at specified regulated entities having at least $1 billion of total assets (including the Company and Old National Bank).
The FDIC has the ability to make discretionary adjustments to the total score, up or down, based upon significant risk factors that are not adequately captured in the scorecard. For large institutions, including Old National Bank, after accounting for potential base-rate adjustments, the total assessment rate could range from 1.5 to 40 basis points on an annualized basis.
For large institutions, including Old National Bank, after accounting for potential base-rate adjustments, the total assessment rate could range from 1.5 to 40 basis points on an annualized basis.
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.
On November 25, 2024, Old National entered into a definitive merger agreement pursuant to which Old National will acquire Bremer and its wholly owned subsidiary, Bremer Bank, National Association. As of December 31, 2024, Bremer had $16.5 billion in total assets, $11.8 billion in total loans, and $13.2 billion in deposits.
The amendments would require IDIs with between $50 billion and $100 billion in assets to submit informational filings on a two-year cycle, with an interim supplement updating key information submitted in the off years. If adopted, these amendments will become applicable to Old National Bank should its assets exceed $50 billion. Volcker Rule.
The amendments require IDIs with between $50 billion and $100 billion in assets to submit informational filings on a three-year cycle, with an interim supplement updating key information submitted in the off years. The final rule became effective October 1, 2024, and Old National Bank’s first submission under the revised rule is due April 1, 2026. Volcker Rule.
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.
Under the terms of the definitive merger agreement, each outstanding share of Bremer common stock will be converted into the right to receive 4.182 shares of Old National common stock plus $26.22 in cash, valuing the transaction at approximately $1.4 billion, or $116.76 per share, based on Old National’s closing stock price on November 22, 2024.
Most provisions of the final rule will become effective on January 1, 2026, and the data reporting requirements will become effective on January 1, 2027. Deposit Insurance . Substantially all of the deposits of Old National Bank are insured up to applicable limits by the Deposit Insurance Fund (“DIF”) which is administered by the FDIC.
A large majority of the deposits of Old National Bank are insured up to applicable limits by the Deposit Insurance Fund (“DIF”) which is administered by the FDIC.
The Company’s corporate headquarters and principal executive office are located in Evansville, Indiana with commercial and consumer banking operations headquartered in Chicago, Illinois.
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 and Southeast regions of the United States.
Paul-Bloomington, MN-WI 9.9 125.2 1.3 2.7 94,405 7.4 Indianapolis-Carmel-Anderson, IN 5.3 91.5 2.8 4.0 76,586 12.5 Milwaukee-Waukesha, WI 3.5 210.2 (1.0) 0.3 74,071 9.7 Madison, WI 2.4 79.6 2.4 3.8 84,987 8.3 Bloomington, IN 2.1 150.2 0.2 1.2 57,755 7.4 National average 1.4 2.4 75,874 10.1 Weighted average total Old National Bank (0.7) 1.0 78,604 8.8 Source: S&P Global Market Intelligence.
Paul-Bloomington, MN-WI 8.8 122.1 1.1 2.0 96,855 8.5 Indianapolis-Carmel-Anderson, IN 5.2 100.9 3.7 4.2 79,724 10.7 Milwaukee-Waukesha, WI 3.5 235.4 (0.9) 0.5 74,222 8.4 Nashville-Davidson-Murfreesboro-Franklin, TN 2.4 137.7 6.9 5.6 85,166 10.8 Madison, WI 2.4 87.3 3.5 4.4 90,224 9.3 Bloomington, IN 2.1 166.7 (0.1) 1.0 67,992 11.5 National average 1.9 2.4 78,770 8.8 Weighted average total Old National Bank (0.2) 1.1 79,941 7.7 Source: S&P Global Market Intelligence.
On January 17, 2024, the CFPB proposed a rule that would significantly reform the regulatory framework governing overdraft practices applicable to banks such as Old National Bank that have more than $10 billion in assets. The proposed rule would modify or eliminate several long-standing exclusions from requirements generally applicable to consumer credit that previously exempted certain overdraft practices.
This legal challenge may delay or halt the final rule’s implementation. On December 12, 2024, the CFPB finalized a rule that significantly reforms the regulatory framework governing overdraft practices applicable to banks such as Old National Bank that have more than $10 billion in assets. The rule will become effective on October 1, 2025.
For banks with at least $50 billion and less than $500 billion in total assets, which could include Old National Bank by the time a final rule is issued, compliance with the proposed rule’s requirements would be required approximately one year after adoption of the final rule.
For banks with at least $10 billion and less than $250 billion in total assets, which currently includes Old National Bank, compliance with the rule’s requirements is required beginning on April 1, 2027. On the same day the final rule was released, certain industry participants filed a complaint against the CFPB challenging the final rule.
Removed
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, private banking, capital markets, brokerage, wealth management, trust, investment advisory, and other traditional banking services.
Added
In addition to providing extensive services in consumer and commercial banking, Old National offers comprehensive wealth management and capital markets services.
Removed
HUMAN CAPITAL RESOURCES At December 31, 2023, we employed 3,940 full-time equivalent team members. Old National respects, values, and welcomes diversity in our team members, clients, suppliers, and marketplace.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

70 edited+17 added−11 removed163 unchanged
Biggest changeChanges in consumer use of banks and changes in consumer spending and savings habits could adversely affect Old National’s financial results. Technology and other changes now allow many clients to complete financial transactions without using banks. For example, consumers can pay bills and transfer funds directly without going through a bank.
Biggest changeTechnology and other changes now allow many clients to complete financial transactions without using banks. For example, consumers can pay bills and transfer funds directly without going through a bank. This process of eliminating banks as intermediaries could result in the loss of fee income, as well as the loss of client deposits and income generated from those deposits.
An economic downturn, sustained high unemployment levels, stock market volatility, and/or high levels of inflation have in the past negatively affected, and in the future may negatively affect, our operating results and have had, or may have, a negative effect on the ability of our borrowers to make timely repayments of their loans, increasing the risk of loan defaults and losses.
An economic downturn, sustained high unemployment levels, stock market volatility, and high levels of inflation have in the past negatively affected, and in the future may negatively affect, our operating results and have had, or may have, a negative effect on the ability of our borrowers to make timely repayments of their loans, increasing the risk of loan defaults and losses.
These dividends are Old National Bancorp’s principal source of funds to pay dividends on common and preferred stock, pay interest and principal on its debt, and fund purchases of its common stock. Various federal and/or state laws and regulations, as well as regulatory expectations, limit the amount of dividends that Old National Bank and certain non-bank subsidiaries may pay.
These dividends are Old National Bancorp’s principal source of funds to pay dividends on its Common and Preferred Stock, pay interest and principal on its debt, and fund purchases of its Common Stock. Various federal and/or state laws and regulations, as well as regulatory expectations, limit the amount of dividends that Old National Bank and certain non-bank subsidiaries may pay.
Accounting policies and processes are fundamental to the Company’s reported financial condition and results of operations. Some of these policies require use of estimates and assumptions that may affect the reported amounts of assets or liabilities and financial results.
Accounting policies and processes are fundamental to the Company’s reported financial condition and results of operations. Some of these policies require the use of estimates and assumptions that may affect the reported amounts of assets or liabilities and financial results.
Pursuant to generally accepted accounting principles, management is required to make certain assumptions and estimates in preparing the Company’s financial statements. If assumptions or estimates underlying the Company’s financial statements are incorrect, the Company may experience material losses.
Pursuant to generally accepted accounting principles, management is required to make certain assumptions and estimates in preparing the Company’s financial statements. If the assumptions or estimates underlying the Company’s financial statements are incorrect, the Company may experience material losses.
These competitive pressures from our peers, as well as any adoption by our regulators of new rules or supervisory guidance or more aggressive examination and enforcement policies in respect of banks’ overdraft protection practices, could cause us to modify our program and practices in ways that may have a negative impact on our revenue and earnings, which, in turn, could have an adverse effect on our financial condition and results of operations.
These competitive pressures from our peers, as well as any further adoption by our regulators of new rules or supervisory guidance or more aggressive examination and enforcement policies in respect of banks’ overdraft protection practices, could cause us to modify our program and practices in ways that may have a negative impact on our revenue and earnings, which, in turn, could have an adverse effect on our financial condition and results of operations.
Old National’s financial performance generally, and in particular the ability of borrowers to pay interest on and repay principal of outstanding loans and the value of collateral securing those loans, as well as demand for loans and other products and services that Old National offers, is highly dependent upon the business environment in the markets where Old National operates and in the United States as a whole.
Old National’s financial performance, and in particular the ability of borrowers to pay interest on and repay principal of outstanding loans and the value of collateral securing those loans, as well as demand for loans and other products and services that Old National offers, is highly dependent upon the business environment in the markets where Old National operates and in the United States as a whole.
The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on the Company's business, financial condition, results of operations, and liquidity. Old National’s reported financial condition and results of operations depend on management’s selection of accounting methods and require management to make estimates about matters that are uncertain.
The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on the Company's business, financial condition, results of operations, and liquidity. 28 Old National’s reported financial condition and results of operations depend on management’s selection of accounting methods and require management to make estimates about matters that are uncertain.
A further downgrade, or a downgrade by other rating agencies, as well as sovereign debt issues facing the governments of other countries, could have a material adverse impact on financial markets and economic conditions in the U.S. and worldwide. Old National’s regional concentrations expose it to adverse economic conditions in the locations in which Old National operates.
A further downgrade, or downgrades by other rating agencies, as well as sovereign debt issues facing the governments of other countries, could have a material adverse impact on financial markets and economic conditions in the U.S. and worldwide. Old National’s regional concentrations expose it to adverse economic conditions in the locations in which Old National operates.
In addition, operational errors, information system failures, or interruptions of vendors’ systems, or difficulty communicating with vendors, could expose us to disruption of operations, loss of service or connectivity to 26 customers, reputational damage, and litigation risk that could have a material adverse effect on our business and, in turn, our financial condition and results of operations.
In addition, operational errors, information system failures, or interruptions of vendors’ systems, or difficulty communicating with vendors, could expose us to disruption of operations, loss of service or connectivity to customers, reputational damage, and litigation risk that could have a material adverse effect on our business and, in turn, our financial condition and results of operations.
Federal budget deficit concerns and the potential for political conflict over legislation to fund U.S. government operations and raise the U.S. government's debt limit may increase the possibility of a default by the U.S. government on its debt obligations, related credit-rating downgrades, or an economic recession in the United States.
Federal budget deficit concerns and the potential for political conflict over legislation to fund U.S. government operations and raise the U.S. government's debt limit may increase the possibility of a default by the U.S. 17 government on its debt obligations, related credit-rating downgrades, or an economic recession in the United States.
Regulatory changes may also make it easier for FinTechs to partner with banks and offer deposit products. Our ability to originate residential mortgage loans has also been adversely affected by the increased competition resulting from the unprecedented involvement of the U.S. government and government-sponsored entities in the residential mortgage market.
Regulatory changes may also make it easier for FinTechs to partner with banks and offer deposit products. Our ability to originate residential mortgage loans has also been 19 adversely affected by the increased competition resulting from the unprecedented involvement of the U.S. government and government-sponsored entities in the residential mortgage market.
As a result of uncertain domestic political conditions, including potential future federal government 17 shutdowns, the possibility of the federal government defaulting on its obligations for a period of time due to debt ceiling limitations or other unresolved political issues, investments in financial instruments issued or guaranteed by the federal government pose liquidity risks.
As a result of uncertain domestic political conditions, including potential future federal government shutdowns, the possibility of the federal government defaulting on its obligations for a period of time due to debt ceiling limitations or other unresolved political issues, investments in financial instruments issued or guaranteed by the federal government pose liquidity risks.
Our financial flexibility could be constrained if we are unable to maintain our access to funding or if adequate financing is not available to accommodate future growth at acceptable interest rates. Finally, if we are required to rely more heavily 24 on more expensive funding sources to support future growth, our revenues may not increase proportionately to cover our costs.
Our financial flexibility could be constrained if we are unable to maintain our access to funding or if adequate financing is not available to accommodate future growth at acceptable interest rates. Finally, if we are required to rely more heavily on more expensive funding sources to support future growth, our revenues may not increase proportionately to cover our costs.
Changes in tax laws, changes in interpretations, guidance or regulations currently in effect or that may be promulgated, or challenges to judgments or actions that the Company may take with respect to tax laws could negatively impact our current and future financial performance. 30 In addition, our determination of our tax liability is subject to review by applicable tax authorities.
Changes in tax laws, changes in interpretations, guidance or regulations currently in effect or that may be promulgated, or challenges to judgments or actions that the Company may take with respect to tax laws could negatively impact our current and future financial performance. In addition, our determination of our tax liability is subject to review by applicable tax authorities.
In addition, as supervisory expectations and industry practices regarding overdraft protection programs change, our continued offering of overdraft protection may result in negative public opinion and increased reputation risk. 29 We may incur fines, penalties and other negative consequences from regulatory violations, possibly even inadvertent or unintentional violations.
In addition, as supervisory expectations and industry practices regarding overdraft protection programs change, our continued offering of overdraft protection may result in negative public opinion and increased reputation risk. We may incur fines, penalties and other negative consequences from regulatory violations, possibly even inadvertent or unintentional violations.
See “Item 7 — Critical Accounting Estimates” for a discussion of the Company’s critical accounting estimates. 28 Legal, Regulatory, and Compliance Risks Old National operates in a highly regulated environment, and changes in laws and regulations to which Old National is subject may adversely affect Old National’s results of operations.
See “Item 7 — Critical Accounting Estimates” for a discussion of the Company’s critical accounting estimates. Legal, Regulatory, and Compliance Risks Old National operates in a highly regulated environment, and changes in laws and regulations to which Old National is subject may adversely affect Old National’s results of operations.
In some cases, Old National could be required to retroactively apply a new or revised standard, resulting in changes to previously reported financial results. If Old National fails to meet regulatory capital requirements, which may require heightened capital levels, we may be forced to raise capital or sell assets.
In some cases, Old National could be required to retroactively apply a new or revised standard, resulting in changes to previously reported financial results. 30 If Old National fails to meet regulatory capital requirements, which may require heightened capital levels, we may be forced to raise capital or sell assets.
Our current or future approach to in-office and work-from-home arrangements may not meet the needs or expectations of our current or prospective employees or may not be perceived as favorable as compared to the arrangements offered by competitors, which could adversely affect our ability to attract 19 and retain employees.
Our current or future approach to in-office and work-from-home arrangements may not meet the needs or expectations of our current or prospective employees or may not be perceived as favorable as compared to the arrangements offered by competitors, which could adversely affect our ability to attract and retain employees.
Old National’s earnings can also be impacted by the spread between short-term and long-term market interest rates. 23 The monetary, tax and other policies of the government and its agencies, including the Federal Reserve, have a significant impact on interest rates and overall financial market performance.
Old National’s earnings can also be impacted by the spread between short-term and long-term market interest rates. The monetary, tax and other policies of the government and its agencies, including the Federal Reserve, have a significant impact on interest rates and overall financial market performance.
As a result, Old National may not be able to effectively mitigate its risk exposures in particular market environments or against particular types of risk. 27 Pandemics, acts of war or terrorism, and other adverse external events could significantly affect Old National’s business.
As a result, Old National may not be able to effectively mitigate its risk exposures in particular market environments or against particular types of risk. Pandemics, acts of war or terrorism, and other adverse external events could significantly affect Old National’s business.
The total amount that the Company pays for funding costs is dependent, in part, on the Company’s ability to maintain or grow its deposits. If the Company is unable to sufficiently maintain or grow its deposits to meet liquidity objectives, it may be subject to paying higher funding costs.
The total amount that the Company pays for funding costs is dependent, in part, on the Company’s ability to maintain or grow its deposits. If the Company is unable to sufficiently maintain or grow its deposits to meet liquidity 24 objectives, it may be subject to paying higher funding costs.
Our inability to execute on or achieve the anticipated outcomes of our strategic priorities may affect how the market perceives us and could impede our growth and profitability. Climate change could have a material negative impact on the Company and clients.
Our inability to execute 20 on or achieve the anticipated outcomes of our strategic priorities may affect how the market perceives us and could impede our growth and profitability. Climate change could have a material negative impact on the Company and clients.
Malicious actors may also attempt to fraudulently induce 25 employees, customers or other users of our systems to disclose sensitive information, including passwords and other identifying information, in order to gain access to data or our systems.
Malicious actors may also attempt to fraudulently induce employees, customers or other users of our systems to disclose sensitive information, including passwords and other identifying information, in order to gain access to data or our systems.
Old National is subject to laws and regulations relating to the privacy of the information of clients, employees or others, and any failure to comply with these laws and regulations could expose the Company to liability and/or reputational damage.
Old National is subject to laws and regulations relating to the privacy of the information of clients, employees or others, and any failure to comply with these laws and regulations could expose the Company to liability and/or 26 reputational damage.
There is also increased competition by out-of-market competitors through online and mobile channels. In addition, the emergence, adoption and evolution of new technologies that do not require intermediation, including distributed ledgers, as well as advances in automation, could significantly affect competition for financial services. Old National’s profitability depends upon our continued ability to compete successfully in our market area.
There is also increased competition from out-of-market competitors through online and mobile channels. In addition, the emergence, adoption and evolution of new technologies that do not require intermediation, including distributed ledgers, as well as advances in automation, could significantly affect competition for financial services. Old National’s profitability depends upon our continued ability to compete successfully in our market area.
The trends and risks affecting borrower credit quality, particularly in the Midwest region, have caused, and in the future may cause, the Company to experience impairment charges, which are reductions in the recoverable value of an asset, increased purchase demands, wherein customers make withdrawals with minimum notice, higher costs (e.g., servicing, foreclosure, property maintenance), additional write-downs and losses and a potential impact to engage in lending transactions based on a reduction of customer deposits, which could have a material adverse effect on the Company’s business, financial condition and results of operations.
The trends and risks affecting borrower credit quality, particularly in the Midwest and Southeast regions, have caused, and in the future may cause, the Company to experience impairment charges, which are reductions in the recoverable value of an asset, increased purchase demands, wherein customers make withdrawals with minimum notice, higher costs (e.g., servicing, foreclosure, property maintenance), additional write-downs and losses and a potential impact to engage in lending transactions based on a reduction of customer deposits, which could have a material adverse effect on the Company’s business, financial condition and results of operations.
See “Business – Supervision and Regulation – Dividend Limitations” and Note 21 to the consolidated financial statements. Old National may not realize the expected benefits of its strategic imperatives. Old National’s ability to compete depends on a number of factors, including, among others, its ability to develop and successfully execute strategic plans and imperatives.
See “Business – Supervision and Regulation – Dividends Limitations” and Note 21 to the consolidated financial statements. Old National may not realize the expected benefits of its strategic imperatives. Old National’s ability to compete depends on a number of factors, including, among others, its ability to develop and successfully execute strategic plans and imperatives.
In addition, we expect that we will remain subject to extensive regulation and supervision, and that the level of regulatory scrutiny may fluctuate over time, based on numerous factors, including the OCC’s heightened standards, when applicable to us, changes in U.S. presidential administrations or one or both houses of Congress and public sentiment regarding financial institutions (which can be influenced by scandals and other incidents that involve participants in the industry).
In addition, we expect that we will remain subject to extensive regulation and supervision, and that the level of regulatory scrutiny may fluctuate over time, based on numerous factors, including the OCC’s heightened standards, which are now applicable to us, changes in U.S. presidential administrations or one or both houses of Congress and public sentiment regarding financial institutions (which can be influenced by scandals and other incidents that involve participants in the industry).
In addition, the effects of climate change could materially enhance the credit risks related to agricultural loans in ways that we may not be able to predict. In addition, as described further in this “Risk Factors” section, the Company’s credit risks may be increased by the impacts of inflation, poor or recessionary economic conditions and financial market volatility.
In addition, the effects of climate change could materially increase the credit risks related to agricultural loans in ways that we may not be able to predict. 22 In addition, as described further in this “Risk Factors” section, the Company’s credit risks may be increased by the impacts of inflation, poor or recessionary economic conditions and financial market volatility.
We are involved in judicial, regulatory, and arbitration proceedings concerning matters arising from our business activities and fiduciary responsibilities. We establish an accrual for legal claims when payments associated with the claims become probable and the costs can be reasonably estimated. We may still incur legal costs for a matter even if we have not established an accrual.
We are involved in legal proceedings concerning matters arising from our business activities and fiduciary responsibilities. We establish an accrual for legal claims when payments associated with the claims become probable and the costs can be reasonably estimated. We may still incur legal costs for a matter even if we have not established an accrual.
Expectations of negative market and economic conditions will be reflected in the allowances for credit losses for loans and debt securities to the estimated extent they will impact the credit losses of loans and debt securities over their remaining lives.
Expectations of negative market and economic conditions are reflected in the allowances for credit losses for loans and debt securities to the estimated extent they will impact the credit losses of loans and debt securities over their remaining lives.
The provision for credit losses will report the entire increased credit loss expectations over the remaining lives of the loans and debt securities in the period in which the change in expectation arises. Further, because of the impact of such increased credit losses on earnings and capital, our ability to make loans and pay dividends may be substantially diminished.
The provision for credit losses reports the entire increased credit loss expectations over the remaining lives of the loans and debt securities in the period in which the change in expectation arises. Further, because of the impact of such increased credit losses on earnings and capital, our ability to make loans and pay dividends may be substantially diminished.
Additionally, instruments, systems, and strategies used to hedge or otherwise manage exposure to various types of market compliance, credit, liquidity, operational, and business risks and enterprise-wide risk could be less effective than anticipated.
Additionally, instruments, systems, models, and strategies used to measure, hedge, or otherwise manage exposure to various types of market compliance, credit, liquidity, operational, and business risks and enterprise-wide risk could be less effective or accurate than anticipated.
Although we devote significant resources to maintain and regularly upgrade our systems and processes that are designed to protect the security of our computer systems, software, networks, and other technology assets and the confidentiality, integrity, and availability of information belonging to us and our clients, there is no assurance that our security measures will provide absolute security.
Although we devote significant resources to maintain and regularly upgrade our systems and processes that are designed to protect the security of our computer systems, software, networks, and other technology assets and the confidentiality, integrity, and availability of information belonging to us and our clients, there is no assurance that our security measures, or those of our external vendors, will provide absolute security.
Replacing a vendor, particularly a large national entity with a dominant market presence, such as a number of our current vendors, could also cause us to incur significant delay and expense. Failure to keep pace with technological change could adversely affect Old National’s results of operations and financial condition.
Replacing a vendor, particularly a large national entity with a dominant market presence, such as a number of our current vendors, could also cause us to incur significant delays and expenses. Failure to keep pace with technological change could adversely affect Old National’s results of operations and financial condition.
We could experience increased expenses resulting from strategic planning, litigation, and technology and market changes, and reputational harm as a result of negative public sentiment, regulatory scrutiny, and reduced investor and stakeholder confidence due to our response to climate change and our climate change strategy, which, in turn, could have a material negative impact on our business, results of operations, and financial condition.
We could experience increased expenses resulting from strategic planning, litigation, and technology and market changes, and reputational harm as a result of negative public sentiment, regulatory scrutiny, and reduced investor and stakeholder confidence due to our actual or perceived action, or inaction, in response to climate change and our climate change strategy, which, in turn, could have a material negative impact on our business, results of operations, and financial condition.
In addition, the transition to increased work-from-home and hybrid work arrangements may exacerbate the challenges of attracting and retaining talented and diverse employees as job markets may be less constrained by physical geography.
In addition, work-from-home and hybrid work arrangements may exacerbate the challenges of attracting and retaining talented and diverse employees as job markets may be less constrained by physical geography.
Although we continue to make efforts to enhance our governance of climate change-related risks and integrate climate considerations into our risk governance framework, the risks associated with climate change are rapidly changing and evolving in an escalating fashion, making them difficult to assess due to limited data and other uncertainties.
Although we continue to make efforts to enhance our governance of climate change-related risks and integrate climate considerations into our risk governance framework, the risks associated with climate change are rapidly changing and evolving, making them difficult to assess due to limited data and other uncertainties.
In connection with prior political disputes over U.S. fiscal and budgetary issues leading to the U.S. government shutdown in 2011, S&P lowered its long-term sovereign credit rating on the U.S. from AAA to AA+.
In connection with prior political disputes over U.S. fiscal and budgetary issues leading to the U.S. government shutdown in 2023, Fitch lowered its long-term sovereign credit rating on the U.S. from AAA to AA+.
In addition, the following factors may cause the market price for shares of Old National’s Common Stock to fluctuate: • announcements of developments related to Old National’s business; • fluctuations in Old National’s results of operations; • sales or purchases of substantial amounts of Old National’s securities in the marketplace; • general conditions in Old National’s banking niche or the global or national economy; • a shortfall or excess in revenues or earnings compared to securities analysts’ expectations; • changes in analysts’ recommendations or projections; • Old National’s announcement of new mergers, acquisitions, or other projects; and • negative news about the Company, the banking industry generally, or the financial services industry generally.
In addition, the following factors may cause the market price for shares of Old National’s Common Stock to fluctuate: • announcements of developments related to Old National’s business; • fluctuations in Old National’s results of operations; • sales or purchases of substantial amounts of Old National’s securities in the marketplace; • general conditions in the regions Old National serves or the global or national economy; • a shortfall or excess in revenues or earnings compared to securities analysts’ expectations; • changes in analysts’ recommendations or projections; • Old National’s announcement of new mergers, acquisitions, or other projects; and • negative news about the Company, the banking industry generally, or the financial services industry generally. 23 Changes in interest rates could adversely affect Old National’s results of operations and financial condition.
The Company competes with banks and other financial services companies for deposits. Recent increases in short-term interest rates have resulted in and are expected to continue to result in more intense competition in deposit pricing.
The Company competes with banks and other financial services companies for deposits. Increases in short-term interest rates over the past few years, with recent decreases, have resulted in and are expected to continue to result in more intense competition in deposit pricing.
The Company’s business, as well as the operations and activities of our clients, could be negatively affected by climate change. Climate change presents both immediate and long-term risks to the Company and its clients, and these risks are expected to increase over time.
The Company’s business, as well as the operations and activities of our clients, could be negatively affected by climate change. Climate change presents both physical risks and transition risks to the Company and its clients, and these risks are expected to increase over time.
When market interest rates decline, Old National has experienced, and could in the future experience, fixed-rate loan prepayments and higher investment portfolio cash flows, resulting in a lower yield on earning assets. Sharp fluctuations in interest rates could exacerbate these risks.
When market interest rates decline, such as during the end of 2024, Old National has experienced, and could in the future experience, fixed-rate loan prepayments and higher investment portfolio cash flows, resulting in a lower yield on earning assets. Sharp fluctuations in interest rates could exacerbate these risks.
Given that climate change could impose systemic risks upon the financial sector, either via disruptions in economic activity resulting from the physical impacts of climate change or changes in policies as the economy transitions to a less carbon-intensive environment, the Company may face regulatory risk of increasing focus on the Company’s resilience to climate-related risks, including in the context of stress testing for various climate stress scenarios.
Although the Company is not subject to the federal banking regulators’ interagency guidance, given that climate change could impose systemic risks upon the financial sector, either via disruptions in economic activity resulting from the physical impacts of climate change or changes in policies as the economy transitions to a less carbon-intensive environment, the Company may face regulatory risk of increasing focus on the Company’s resilience to climate-related risks, including in the context of stress testing for various climate stress scenarios.
At December 31, 2023, commercial real estate loans, including owner-occupied, investor, and real estate construction loans, totaled $14.1 billion, or 43%, of our total loan portfolio. Commercial real estate loans generally involve a greater degree of credit risk than residential mortgage loans because they typically have larger balances and are more affected by adverse conditions in the economy.
At December 31, 2024, commercial real estate loans, including owner-occupied, investor, and real estate construction loans, totaled $16.3 billion, or 45%, of our total loan portfolio. Commercial real estate loans generally involve a greater degree of credit risk than residential mortgage loans because they typically have larger balances and are more affected by adverse conditions in the economy.
Substantially all of Old National’s loans are to individuals and businesses in Old National’s market areas in the Midwest region. Therefore, the Company is, or in the future may be, particularly vulnerable to adverse changes in economic conditions in the Midwest region.
Substantially all of Old National’s loans are to individuals and businesses in Old National’s market areas in the Midwest and Southeast regions of the United States. Therefore, the Company is, or in the future may be, particularly vulnerable to adverse changes in economic conditions in these regions.
Acquisitions and mergers involve a number of other expenses and risks, including: • the time and costs associated with identifying potential new markets, as well as acquisition and merger targets; • the accuracy of the estimates and judgments used to evaluate credit, operations, management, and market risks with respect to the target institution; • the time and costs of evaluating entry into new markets where we lack experience, hiring experienced local management, opening new offices, and the time lags between these activities and the generation of sufficient assets and deposits to support the costs of the expansion; • our ability to finance an acquisition or merger and possible dilution to our existing shareholders; • the diversion of our management’s attention to the negotiation and execution of a transaction, and the integration of the operations and personnel of the combined businesses; • the introduction of new products and services into our business; • the incurrence and possible impairment of goodwill or other intangible assets associated with an acquisition or merger and possible adverse short-term effects on our results of operations; • closing delays and increased expenses related to the resolution of lawsuits filed by shareholders of target institutions; and • the risk of loss of key employees and clients.
Acquisitions and mergers involve a number of other expenses and risks, including: • the time and costs associated with identifying potential new markets, as well as acquisition and merger targets; • the accuracy of the estimates and judgments used to evaluate credit, operations, management, and market risks with respect to the target institution; • the time and costs of evaluating entry into new markets where we lack experience, hiring experienced local management, opening new offices, and the time lags between these activities and the generation of sufficient assets and deposits to support the costs of the expansion; • our ability to finance an acquisition or merger and possible dilution to our existing shareholders; • the diversion of our management’s attention to the negotiation and execution of a transaction, and the integration of the operations and personnel of the combined businesses; • the introduction of new products and services into our business; • the incurrence and possible impairment of goodwill or other intangible assets associated with an acquisition or merger and possible adverse short-term effects on our results of operations; • closing delays and increased expenses related to the resolution of lawsuits filed by shareholders of target institutions; and • the risk of loss of key employees and clients. 18 Furthermore, failure to realize the expected revenue increases, cost savings, increases in geographic or product presence, or other projected benefits from an acquisition or merger could have a material adverse effect on the Company's financial condition and results of operations.
Mergers and acquisitions by financial institutions, including by the Company, are subject to approval by a variety of federal and state regulatory agencies. The process for obtaining these required regulatory approvals is complex and involves a comprehensive application review process.
Mergers and acquisitions may be delayed, impeded, or prohibited due to regulatory issues. Mergers and acquisitions by financial institutions, including by the Company, are subject to approval by a variety of federal and state regulatory agencies. The process for obtaining these required regulatory approvals is complex and involves a comprehensive application review process.
As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our systems or to investigate and remediate vulnerabilities. System enhancements and updates may also create risks associated with implementing and integrating new systems.
As cyber threats continue to evolve, including as a result of the increased use of artificial intelligence, we may be required to expend significant additional resources to continue to modify or enhance our systems or to investigate and remediate vulnerabilities. System enhancements and updates may also create risks associated with implementing and integrating new systems.
Changes in interest rates could adversely affect Old National’s results of operations and financial condition. The monetary, tax and other policies of governmental agencies, including the Federal Reserve, have a significant impact on interest rates and overall financial market performance over which the Company has no control and which the Company may not be able to anticipate adequately.
The monetary, tax and other policies of governmental agencies, including the Federal Reserve, have a significant impact on interest rates and overall financial market performance over which the Company has no control and which the Company may not be able to anticipate adequately.
We could face increased scrutiny or be viewed as higher risk by regulators and/or the investor community, which could have a material adverse effect on our business, financial condition, and results of operations. See “Item 1 — Business — Supervision and Regulation” and Note 21 to the consolidated financial statements.
We could face increased scrutiny or be viewed as higher risk by regulators and/or the investor community, which could have a material adverse effect on our business, financial condition, and results of operations.
In addition, climate change may result in reduced availability of insurance for our borrowers, including insurance that protects property pledged as collateral, which could negatively affect our ability to predict credit losses accurately.
For example, climate change may result in increasing premiums for and reduced availability of insurance for our borrowers, including insurance that protects property pledged as collateral, which could negatively affect our ability to assess the risk of potential credit losses.
For example, emerging and evolving factors such as the shift to work-from-home or hybrid-work arrangements, changing consumer preferences (including for online shopping), changes in occupancy rates as a result of these and other trends have had, and in the future could have, a material effect on our borrowers’ ability to repay their loans. 22 If Old National forecloses on real property collateral, Old National may be subject to the increased costs associated with the ownership of real property, resulting in reduced revenues.
For example, emerging and evolving factors such as work-from-home or hybrid-work arrangements, changing consumer preferences (including for online shopping), changes in occupancy rates as a result of these and other trends have had, and in the future could have, a material effect on our borrowers’ ability to repay their loans.
Environmental laws may require the Company to incur substantial expenses and could materially reduce the affected property's value or limit the Company's ability to sell the affected property or to repay the indebtedness secured by the property.
If hazardous or toxic substances are found, the Company may be liable for certain costs, including remediation and other costs. Environmental laws may require the Company to incur substantial expenses and could materially reduce the affected property's value or limit the Company's ability to sell the affected property or to repay the indebtedness secured by the property.
Events that result in damage to the Company’s reputation may also increase our litigation risk, increase regulatory scrutiny of the Company and its business, affect our ability to attract and retain customers and employees and have other consequences that we may not be able to predict. 21 Credit Risk If Old National’s actual credit losses for loans or debt securities exceed Old National’s allowance for credit losses on loans and debt securities, Old National’s net income will decrease.
Events that result in damage to the Company’s reputation may also increase our litigation risk, increase regulatory scrutiny of the Company and its business, affect our ability to attract and retain customers and employees and have other consequences that we may not be able to predict.
Also, future additions to Old National’s allowance for credit losses will reduce Old National’s future earnings. Old National’s business depends on the creditworthiness of our clients.
Credit Risk If Old National’s actual credit losses for loans or debt securities exceed Old National’s allowance for credit losses on loans and debt securities, Old National’s net income will decrease. Also, future additions to Old National’s allowance for credit losses will reduce Old National’s future earnings. Old National’s business depends on the creditworthiness of our clients.
A negative public opinion of the Company and its business can result from any number of activities, including the Company’s lending practices, corporate governance and regulatory compliance, mergers and acquisitions, and ESG matters such as, among other things, climate risk, hiring practices, the diversity of our work force, and racial and social justice issues involving our personnel, customers, and third parties with whom we otherwise do business, and actions taken by regulators, community organizations, investors, and other stakeholders in response to these activities.
A negative public opinion of the Company and its business can result from any number of activities, including the Company’s lending practices, corporate governance and regulatory compliance, mergers and acquisitions, and ESG matters, and actions taken by regulators, community organizations, investors, and other stakeholders in response to these activities.
Difficulties associated with potential mergers and acquisitions that may result from these factors could have a material adverse effect on our business, financial condition and results of operations. Our accounting estimates and risk management processes rely on analytical and forecasting models.
Difficulties associated with potential mergers and acquisitions that may result from these factors could have a material adverse effect on our business, financial condition and results of operations. Failure to complete the Merger could negatively impact Old National.
Climate change presents multi-faceted risks, including: operational risk from the physical effects of climate events on the Company and its clients’ facilities and other assets, including the possible reduction of the value, or destruction, of collateral for our loans; credit risk from borrowers with significant exposure to climate risk; transition risks associated with the transition to a less carbon-dependent economy; and reputational risk from stakeholder concerns about our practices related to climate change, the Company’s carbon footprint, and the Company’s business relationships with clients who operate in carbon-intensive industries.
Climate change presents multi-faceted risks, including: operational risk from the physical effects of climate events on the Company and its clients’ facilities and other assets, including the possible reduction of the value, or destruction, of collateral for our loans; credit risk from borrowers with significant exposure to climate risk; legal, regulatory and compliance risks arising from the policy, legal and regulatory changes associated with the transition to a less carbon-dependent economy; and reputational risk from negative public opinion, regulatory scrutiny and reduced investor and stakeholder confidence due to the Company’s actual or perceived action, or inaction, regarding climate change.
Ongoing legislative or regulatory uncertainties and changes regarding climate risk management and practices may result in higher regulatory, compliance, credit, and reputational risks and costs.
In addition, ongoing legislative or regulatory uncertainties and changes regarding climate risk management and practices may result in higher regulatory, compliance, credit, and reputational risks and costs, and may subject the Company to different and potentially conflicting requirements in the various jurisdictions in which it operates.
Adverse changes in the economy may also have a negative effect on the ability of Old National’s borrowers to make timely repayments of their loans, which would have an adverse impact on Old National’s earnings. Supply chain constraints, robust demand and labor shortages have led to persistent inflationary pressures throughout the economy.
Adverse changes in the economy may also have a negative effect on the ability of Old National’s borrowers to make timely repayments of their loans, which would have an adverse impact on Old National’s earnings. In recent years, there have been significant changes in inflation and interest rates.
The Federal Reserve raised benchmark interest rates throughout 2022 and 2023 and may continue to raise interest rates, or not reduce rates, in response to economic conditions, particularly inflationary pressures.
The Federal Reserve may further raise or lower interest rates in response to economic conditions, particularly inflationary pressures and unemployment statistics.
Additionally, significant unrealized or realized losses could negatively impact market and/or customer perceptions of our company, which could lead to a loss of depositor confidence and an increase in deposit withdrawals, particularly among those with uninsured deposits.
Additionally, significant unrealized or realized losses could negatively impact market and/or customer perceptions of our company, which could lead to a loss of depositor confidence and an increase in deposit withdrawals, particularly among those with uninsured deposits. 25 Operational Risks A failure or breach, including as a result of a cyber-attack, of our operational or security systems, or the systems of our external vendors, could disrupt our business, result in the disclosure of confidential information, damage our reputation, and create significant financial and legal exposure.
Significant harm to the Company’s reputation could also arise as a result of regulatory or governmental actions, litigation, employee misconduct or the activities of customers, other participants in the financial services industry or the Company’s contractual counterparties, such as service providers and vendors.
Due to divergent stakeholder views on these matters, the Company is at increased risk that any action, or lack thereof, by the Company concerning these matters will be perceived negatively by some stakeholders, which could negatively affect the Company’s business and reputation. 21 Significant harm to the Company’s reputation could also arise as a result of regulatory or governmental actions, litigation, employee misconduct or the activities of customers, other participants in the financial services industry or the Company’s contractual counterparties, such as service providers and vendors.
On January 17, 2024, the CFPB proposed a rule that would significantly reform the regulatory framework governing overdraft practices applicable to banks such as Old National Bank that have more than $10 billion in assets. If adopted as proposed, the proposed rule would likely result in decreased revenue from overdraft transaction fees for Old National Bank.
Members of Congress and the leadership of the OCC and CFPB have expressed a heightened interest in bank overdraft protection programs. On December 12, 2024, the CFPB finalized a rule that significantly reforms the regulatory framework governing overdraft practices applicable to banks such as Old National Bank that have more than $10 billion in assets.
As our reliance on technology systems increases, including as a result of work-from-home arrangements, the potential risks of technology-related interruptions in our operations or the occurrence of cyber incidents also increases. Our technologies, systems, networks and our customers’ devices are periodically the target of cyberattacks and may be the target of future cyberattacks.
As our reliance on technology systems and the connectivity of third parties (including contractors) and electronic devices to our systems increase, the potential risks of technology-related interruptions in our operations or the occurrence of cyber incidents also increase.
Fee revenues from overdraft protection programs may be subject to increased supervisory scrutiny. In 2023, the Company collected $22.3 million in overdraft transaction fees. Members of Congress and the leadership of the OCC and CFPB have expressed a heightened interest in bank overdraft protection programs.
See “Item 1 — Business — Supervision and Regulation” and Note 21 to the consolidated financial statements. 29 Fee revenues from overdraft protection programs may be subject to increased supervisory scrutiny. In 2024, the Company collected $23.3 million in overdraft transaction fees.
Failures related to upgrades and maintenance also increase risks related to unauthorized access and misuse. There can be no assurance that any such disruptions, failures, or delays will not occur or, if they do occur, that they will be adequately addressed.
There can be no assurance that any such disruptions, failures, or delays will not occur or, if they do occur, that they will be adequately addressed. 27 Changes in consumer use of banks and changes in consumer spending and savings habits could adversely affect Old National’s financial results.
Federal and state banking regulators and supervisory authorities, investors, and other stakeholders have increasingly viewed financial institutions as important in helping to address the risks related to climate change both directly and with respect to their clients, which may result in financial institutions coming under increased pressure regarding the disclosure and management of their climate risks and related lending and investment activities.
In addition, laws, regulations, and the expectations of federal and state banking regulators and supervisory authorities, investors, and other stakeholders regarding appropriate climate risk management, practices and disclosures are continuously evolving and may result in financial institutions, including the Company, being subject to new or heightened requirements and expectations regarding the disclosure and management of their climate risks and related lending, investment and advisory activities.
Removed
Furthermore, failure to realize the expected revenue increases, cost savings, increases in geographic or product presence, or other projected benefits from an acquisition or merger could have a material adverse effect on the Company's financial condition and results of operations. 18 Mergers and acquisitions may be delayed, impeded, or prohibited due to regulatory issues.
Added
If the Merger is not completed for any reason, there may be various adverse consequences, and Old National may experience negative reactions from the financial markets and from its clients and employees.
Removed
The leaders of the federal banking agencies, including the Comptroller of the Currency, have emphasized that climate-related risks are faced by banking organizations of all types and sizes, specifically including physical and transition risks, and are in 20 the process of enhancing supervisory expectations regarding banks’ risk management practices.
Added
For example, Old National’s business may have been or may be impacted adversely by the failure to pursue other beneficial opportunities due to the focus of management on the Merger, without realizing any of the anticipated benefits of completing the Merger.
Removed
To that end, in December 2021, the OCC published proposed principles for climate risk management by larger banking organizations.
Added
Additionally, if the merger agreement is terminated, the market price of Old National common stock could decline to the extent that current market prices reflect a market assumption that the Merger will be beneficial and will be completed.
Removed
The OCC also has created an Office of Climate Risk and appointed a Climate Change Risk Officer to oversee that office and has established an internal climate risk implementation committee in order to assist with these initiatives and to support the agency’s efforts to enhance its supervision of climate change risk management.
Added
Old National also could be subject to litigation related to any failure to complete the Merger or to proceedings commenced against Old National to perform its obligations under the merger agreement.
Removed
The OCC stressed in its 2022 Annual Report that climate-related financial risks pose novel challenges that national banks, together with the OCC, are expected to meet; however, the OCC acknowledged that its focus in this area has purposefully been directed at institutions with more than $100 billion in total assets as risks are more complex and material at such institutions.
Added
Additionally, Old National has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the merger agreement, as well as the costs and expenses of preparing, filing, printing, and mailing the proxy statement/prospectus, and all filing and other fees paid in connection with the Merger.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeInternal and third-party contracted technical and procedural controls include, among others, the following types: preventative (including firewalls, end-point detection and response, data loss prevention, access controls, internal/external penetration testing); detective (such as security monitoring and event management); and responsive (including through business continuity plans and an enterprise-wide Cybersecurity Incident Response Program that is integrated into an overall enterprise incident response/crisis management program).
Biggest changeInternal and third-party contracted technical and procedural controls include, among others, the following types: preventative (including firewalls, end-point detection and response, data loss prevention, access controls, internal/external penetration testing); detective (such as security monitoring and event management); and responsive (including through business continuity plans and an enterprise-wide Cybersecurity Incident Response Program, which provides a documented framework for handling high-severity security incidents and facilitates coordination across multiple parts of the Company to manage response efforts.
For further discussion of such risks, see the section entitled “Risk Factors” in Item 1A of this Form 10-K under the heading “Operational Risks.” Our objective is to maintain a robust cybersecurity program designed to protect the confidentiality, integrity and availability of our information systems and critical operational processes, including through identification of material information assets and systems, deployment of controls designed to protect against known cybersecurity threats, prompt detection of any cybersecurity threats that make it past our defenses, maintenance of documented, tested approaches for responding to cybersecurity threats and establishment of recovery techniques and technologies to promote resilience from any cybersecurity incidents.
For further discussion of such risks, see the section entitled “Risk Factors” in Item 1A of this Form 10-K under the heading “Operational Risks.” Our objective is to maintain a robust cybersecurity program designed to protect the confidentiality, integrity and availability of our information systems and critical operational processes, including through identification of material information assets and systems, deployment of controls designed to protect against known cybersecurity threats, prompt detection of any cybersecurity threats that make it past our 31 defenses, maintenance of documented, tested approaches for responding to cybersecurity threats and establishment of recovery techniques and technologies to promote resilience from any cybersecurity incidents.
The Information Security department’s responsibilities generally include cybersecurity risk assessment, identification and implementation of preventive measures, incident response, vulnerability assessment, threat intelligence, identity access governance, and business continuity and resilience. Old National has adopted an enterprise risk strategy, including for cybersecurity risks, premised on three lines of defense.
The 32 Information Security department’s responsibilities generally include cybersecurity risk assessment, identification and implementation of preventive measures, incident response, vulnerability assessment, threat intelligence, identity access governance, and business continuity and resilience. Old National has adopted an enterprise risk strategy, including for cybersecurity risks, premised on three lines of defense.
The team also regularly collects and communicates to management relevant data 31 on cybersecurity threats and risks, including through monthly cybersecurity scorecards on the status of and potential risks to key initiatives and controls, and conducts an enterprise-wide cybersecurity risk assessment at least annually.
The team also regularly collects and communicates to management relevant data on cybersecurity threats and risks, including through monthly cybersecurity scorecards on the status of and potential risks to key initiatives and controls, and conducts an enterprise-wide cybersecurity risk assessment at least annually.
That includes over 13 years of experience in building and managing cybersecurity and technology risk programs for multi-national, Fortune 500 financial services firms, and over 10 years of experience building and managing information security consultancies specializing in cybersecurity program development and cybersecurity control 32 testing.
That includes over 13 years of experience in building and managing cybersecurity and technology risk programs for multi-national, Fortune 500 financial services firms, and over 10 years of experience building and managing information security consultancies specializing in cybersecurity program development and cybersecurity control testing.
It is chaired by the CISO and meets regularly (generally monthly and no less than ten times per year) to review the ISP and related cybersecurity matters as outlined in its charter.
It is chaired by the CISO and meets regularly (generally bi-monthly and no fewer than five times per year) to review the ISP and related cybersecurity matters as outlined in its charter.
We continually review and seek enhancements to our cybersecurity programs and processes. The ISP is periodically reviewed by internal Company stakeholders and modified to respond to changing cybersecurity threats and conditions.
The ISP is periodically reviewed by internal Company stakeholders and modified to respond to changing cybersecurity threats and conditions.
Added
The Company administers phishing tests routinely and publishes articles and alerts on its intranet regarding common attack schemes for the employees’ awareness. Information security training is also conducted annually as continuing education for all employees. We continually review and seek enhancements to our cybersecurity programs and processes.
Added
Notwithstanding the extensive approach we take to cybersecurity, the Company continues to face risks and accompanying threats that could have a material adverse effect on the enterprise. We work to manage these risks and 33 threats on a daily basis. We continue to invest in our cybersecurity program, the resiliency of our networks, and work to enhance our internal controls.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES As of December 31, 2023, Old National and its affiliates operated a total of 258 banking centers located primarily throughout the Midwest region. Of these facilities, 134 were owned and 124 were leased from unaffiliated third parties.
Biggest changeITEM 2. PROPERTIES As of December 31, 2024, Old National and its affiliates operated a total of 280 banking centers located primarily throughout the Midwest and Southeast regions of the United States. Of these facilities, 151 were owned and 129 were leased from unaffiliated third parties.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS See Note 20 Commitments, Contingencies, and Financial Guarantees to the consolidated financial statements included in Item 8 of Part II of this Form 10-K for information regarding certain legal proceedings in which we are involved. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 33 PART II
Biggest changeITEM 3. LEGAL PROCEEDINGS See Note 20 Commitments, Contingencies, and Financial Guarantees to the consolidated financial statements included in Item 8 of Part II of this Form 10-K for information regarding certain legal proceedings in which we are involved. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 34 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe Company repurchased $29.5 million of its common stock under this program through December 31, 2023. 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.
Biggest change(2) On February 19, 2025, the Company’s 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, 2026.
The comparison of shareholder returns (change in December year end stock price plus reinvested dividends) for each of the periods assumes that $100 was invested on December 31, 2018, in each of the common stock of the Company, the S&P 500 Index, the KBW NASDAQ Bank Index, and the KBW NASDAQ Regional Banking Index, with investment weighted on the basis of market capitalization.
The comparison of shareholder returns (change in December year end stock price plus reinvested dividends) for each of the periods assumes that $100 was invested on December 31, 2019, in each of the common stock of the Company, the S&P 500 Index, the KBW NASDAQ Bank Index, and the KBW NASDAQ Regional Banking Index, with investment weighted on the basis of market capitalization.
Under the terms of the Company’s share-based incentive programs, the Company accepts previously owned shares of common stock surrendered to satisfy tax withholding obligations associated with the vesting of restricted stock.
Under the terms of the Company’s share-based incentive programs, the Company accepts previously owned shares of common stock surrendered to satisfy tax withholding obligations associated with the vesting of restricted stock or performance shares earned.
Old National did not sell any equity securities during 2023 that were not registered under the Securities Act of 1933.
Old National did not sell any equity securities during 2024 that were not registered under the Securities Act of 1933.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Old National’s Common Stock is traded on the NASDAQ under the ticker symbol “ONB.” There were 58,178 shareholders of record as of December 31, 2023.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Old National’s Common Stock is traded on the NASDAQ under the ticker symbol “ONB.” There were 62,288 shareholders of record as of December 31, 2024.
Source: S&P Global Market Intelligence ITEM 6. [RESERVED] 35
Source: S&P Global Market Intelligence ITEM 6. [RESERVED] 36
This new stock repurchase program replaces the prior $200 million program. 34 The table below compares five-year cumulative total returns for our Common Stock to cumulative total returns of a broad-based equity market index and published industry indices.
This new stock repurchase program replaces the prior $200 million program that was set to expire on February 28, 2025. 35 STOCK PERFORMANCE GRAPH The table below compares five-year cumulative total returns for our Common Stock to cumulative total returns of a broad-based equity market index and published industry indices.
The following table summarizes the monthly purchases of Common Stock made by Old National during the fourth quarter of 2023: Period Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2) 10/1/23 - 10/31/23 434 $14.47 — $170,476,849 11/1/23 - 11/30/23 1,921 13.94 — 170,476,849 12/1/23 - 12/31/23 581 15.76 — 170,476,849 Total 2,936 $14.38 — $170,476,849 (1) Consists of shares acquired pursuant to the Company’s share-based incentive programs.
The following table summarizes the monthly purchases of Common Stock made by Old National during the fourth quarter of 2024: Period Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2) 10/1/24 - 10/31/24 1,963 $18.06 — $200,000,000 11/1/24 - 11/30/24 1,556 19.12 — 200,000,000 12/1/24 - 12/31/24 3,166 23.14 — 200,000,000 Total 6,685 $20.71 — $200,000,000 (1) Consists of shares acquired pursuant to the Company’s share-based incentive programs.
Removed
(2) On February 22, 2023, the Company issued a press release announcing that its 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.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeSee the previously provided tables and the following reconciliations in the “Non-GAAP Reconciliations” section for details on the calculation of these measures to the extent presented herein. 40 The following table presents GAAP to non-GAAP reconciliations for the previous five quarters: Three Months Ended (dollars and shares in thousands, except per share data) December 31, September 30, June 30, March 31, December 31, 2023 2023 2023 2023 2022 Tangible common book value: Shareholders’ common equity $ 5,319,181 $ 4,995,818 $ 5,048,376 $ 5,033,707 $ 4,884,876 Deduct: Goodwill and intangible assets 2,100,966 2,106,835 2,112,875 2,118,935 2,125,121 Tangible shareholders’ common equity (1) $ 3,218,215 $ 2,888,983 $ 2,935,501 $ 2,914,772 $ 2,759,755 Period end common shares 292,655 292,586 292,597 291,922 292,903 Tangible common book value (1) 11.00 9.87 10.03 9.98 9.42 Return on average tangible common equity: Net income applicable to common shares $ 128,446 $ 143,842 $ 151,003 $ 142,566 $ 196,701 Add: Intangible amortization (net of tax) (2) 4,402 4,530 4,545 4,639 5,090 Tangible net income (1) $ 132,848 $ 148,372 $ 155,548 $ 147,205 $ 201,791 Average shareholders’ common equity $ 5,037,768 $ 5,050,353 $ 5,030,083 $ 4,922,469 $ 4,692,863 Deduct: Average goodwill and intangible assets 2,103,935 2,109,944 2,115,894 2,122,157 2,132,480 Average tangible shareholders’ common equity (1) $ 2,933,833 $ 2,940,409 $ 2,914,189 $ 2,800,312 $ 2,560,383 Return on average tangible common equity (1) 18.11 % 20.18 % 21.35 % 21.03 % 31.53 % Net interest margin: Net interest income $ 364,408 $ 375,086 $ 382,171 $ 381,488 $ 391,090 Taxable equivalent adjustment 6,100 5,837 5,825 5,666 5,378 Net interest income – taxable equivalent basis (1) $ 370,508 $ 380,923 $ 387,996 $ 387,154 $ 396,468 Average earning assets $ 43,701,283 $ 43,617,456 $ 43,097,198 $ 41,941,913 $ 41,206,695 Net interest margin (1) 3.39 % 3.49 % 3.60 % 3.69 % 3.85 % Efficiency ratio: Noninterest expense $ 284,235 $ 244,776 $ 246,584 $ 250,711 $ 282,675 Deduct: Intangible amortization expense 5,869 6,040 6,060 6,186 6,787 Adjusted noninterest expense (1) $ 278,366 $ 238,736 $ 240,524 $ 244,525 $ 275,888 Net interest income – taxable equivalent basis (1) (see above) $ 370,508 $ 380,923 $ 387,996 $ 387,154 $ 396,468 Noninterest income 100,094 80,938 81,629 70,681 165,037 Deduct: Debt securities gains (losses), net (825) (241) 17 (5,216) (173) Adjusted total revenue (1) $ 471,427 $ 462,102 $ 469,608 $ 463,051 $ 561,678 Efficiency ratio 59.05 % 51.66 % 51.22 % 52.81 % 49.12 % Tangible common equity to tangible assets: Tangible shareholders’ equity (1) (see above) $ 3,218,215 $ 2,888,983 $ 2,935,501 $ 2,914,772 $ 2,759,755 Assets $ 49,089,836 $ 49,059,448 $ 48,496,755 $ 47,842,644 $ 46,763,372 Deduct: Goodwill and intangible assets 2,100,966 2,106,835 2,112,875 2,118,935 2,125,121 Tangible assets (1) $ 46,988,870 $ 46,952,613 $ 46,383,880 $ 45,723,709 $ 44,638,251 Tangible common equity to tangible assets (1) 6.85 % 6.15 % 6.33 % 6.37 % 6.18 % (1) Represents a non-GAAP financial measure.
Biggest changeSee the previously provided tables and the following reconciliations in the “Non-GAAP Reconciliations” section for details on the calculation of these measures to the extent presented herein. 41 The following table presents GAAP to non-GAAP reconciliations for the previous five quarters: Three Months Ended (dollars and shares in thousands, except per share data) December 31, September 30, June 30, March 31, December 31, 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 Adjustments: 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 Less: 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: Shareholders’ common equity $ 6,096,631 $ 6,123,579 $ 5,831,353 $ 5,351,689 $ 5,319,181 Deduct: Goodwill and intangible assets 2,296,098 2,305,084 2,306,204 2,095,511 2,100,966 Tangible shareholders’ common equity (1) $ 3,800,533 $ 3,818,495 $ 3,525,149 $ 3,256,178 $ 3,218,215 Period end common shares 318,980 318,955 318,969 293,330 292,655 Tangible common book value (1) 11.91 11.97 11.05 11.10 11.00 Return on average tangible common equity: Net income applicable to common shares $ 149,839 $ 139,768 $ 117,196 $ 116,250 $ 128,446 Add: Intangible amortization (net of tax) (2) 5,428 5,558 5,569 4,091 4,402 Tangible net income (1) $ 155,267 $ 145,326 $ 122,765 $ 120,341 $ 132,848 Average shareholders’ common equity $ 6,095,234 $ 5,946,352 $ 5,735,257 $ 5,321,823 $ 5,037,768 Deduct: Average goodwill and intangible assets 2,301,177 2,304,597 2,245,405 2,098,338 2,103,935 Average tangible shareholders’ common equity (1) $ 3,794,057 $ 3,641,755 $ 3,489,852 $ 3,223,485 $ 2,933,833 Return on average tangible common equity (1) 16.37 % 15.96 % 14.07 % 14.93 % 18.11 % Net interest margin: Net interest income $ 394,180 $ 391,724 $ 388,421 $ 356,458 $ 364,408 Taxable equivalent adjustment 5,777 6,144 6,340 6,253 6,100 Net interest income – taxable equivalent basis (1) $ 399,957 $ 397,868 $ 394,761 $ 362,711 $ 370,508 Average earning assets $ 48,411,803 $ 47,905,463 $ 47,406,849 $ 44,175,079 $ 43,701,283 Net interest margin (1) 3.30 % 3.32 % 3.33 % 3.28 % 3.39 % Efficiency ratio: Noninterest expense $ 276,824 $ 272,283 $ 282,999 $ 262,317 $ 284,235 Deduct: Intangible amortization expense 7,237 7,411 7,425 5,455 5,869 Adjusted noninterest expense (1) $ 269,587 $ 264,872 $ 275,574 $ 256,862 $ 278,366 Net interest income – taxable equivalent basis (1) (see above) $ 399,957 $ 397,868 $ 394,761 $ 362,711 $ 370,508 Noninterest income 95,766 94,138 87,271 77,522 100,094 Deduct: Debt securities gains (losses), net (122) (76) 2 (16) (825) Adjusted total revenue (1) $ 495,845 $ 492,082 $ 482,030 $ 440,249 $ 471,427 Efficiency ratio (1) 54.37 % 53.83 % 57.17 % 58.34 % 59.05 % Tangible common equity to tangible assets: Tangible shareholders’ equity (1) (see above) $ 3,800,533 $ 3,818,495 $ 3,525,149 $ 3,256,178 $ 3,218,215 Assets $ 53,552,272 $ 53,602,293 $ 53,119,645 $ 49,534,918 $ 49,089,836 Deduct: Goodwill and intangible assets 2,296,098 2,305,084 2,306,204 2,095,511 2,100,966 Tangible assets (1) $ 51,256,174 $ 51,297,209 $ 50,813,441 $ 47,439,407 $ 46,988,870 Tangible common equity to tangible assets (1) 7.41 % 7.44 % 6.94 % 6.86 % 6.85 % (1) Represents a non-GAAP financial measure.
The allowance for credit losses on unfunded loan commitments is classified as a liability account on the balance sheet within accrued expenses and other liabilities, while the corresponding provision for unfunded loan commitments is included in the provision for credit losses.
The allowance for credit losses on unfunded loan commitments is classified as a liability account on the balance sheet within accrued expenses and other liabilities, while the corresponding provision for unfunded loan commitments is included in the provision for credit losses.
For additional information about non-performing loans, charge-offs, and additional items impacting the provision, refer to the “Risk Management – Credit Risk” section of Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 46 Noninterest Income We generate revenues in the form of noninterest income through client fees, sales commissions, and gains and losses from our core banking franchise and other related businesses, such as wealth management, investment consulting, and investment products.
For additional information about non-performing loans, charge-offs, and additional items impacting the provision, refer to the “Risk Management – Credit Risk” section of Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Noninterest Income We generate revenues in the form of noninterest income through client fees, sales commissions, and gains and losses from our core banking franchise and other related businesses, such as wealth management, investment consulting, and investment products.
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 • Description.
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, 68 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 • Description.
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.
Since the derivative liabilities recorded on the balance sheet change frequently 67 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.
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 66 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.
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. Variables used for unsystematic risk are borrower specific and help to gauge the risk of default from an individual borrower.
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.
In addition to an evaluation of the applicant’s financial 56 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.
However, if in the future the derivative financial instruments used by us no longer qualify for hedge accounting treatment, all changes in fair value of the derivative would flow through the consolidated statements of income in other noninterest income, resulting in greater volatility in our earnings. 67 Income Taxes • Description.
However, if in the future the derivative financial instruments used by us no longer qualify for hedge accounting treatment, all changes in fair value of the derivative would flow through the consolidated statements of income in other noninterest income, resulting in greater volatility in our earnings. Income Taxes • Description.
It is Old National’s 64 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.
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.
For this reason, we model many different combinations of interest rates and balance sheet assumptions to understand our overall sensitivity to market interest 62 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.
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.
To the extent hedging relationships are found to be effective, changes in fair value of the 69 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.
The methodology for estimating the amount of expected credit losses reported in the allowance for credit losses on loans has two basic components: first, an asset-specific component involving individual loans that do not share risk characteristics with other loans and the measurement of expected credit losses for such individual loans; and second, a pooled component for estimated expected credit losses for pools of loans that share similar risk characteristics. 57 The loan categories used to monitor and analyze interest income and yields are different than the portfolio segments used to determine the allowance for credit losses on loans.
The methodology for estimating the amount of expected credit losses reported in the allowance for credit losses on loans has two basic components: first, an asset-specific component involving individual loans that do not share risk characteristics with other loans and the measurement of expected credit losses for such individual loans; and second, a pooled component for estimated expected credit losses for pools of loans that share similar risk characteristics. 59 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.
(2) Cash dividends per share divided by net income per share (basic). (3) Represents a non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section for reconciliations to GAAP financial measures.
(2) Cash dividends per common share divided by net income per common share (basic). (3) Represents a non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section for reconciliations to GAAP financial measures.
(2) Cash dividends per share divided by net income per share (basic). (3) Represents a non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section for reconciliations to GAAP financial measures.
(2) Cash dividends per common share divided by net income per common share (basic). (3) Represents a non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section for reconciliations to GAAP financial measures.
The Board of Directors expects that we will perform business in a manner compliant with applicable laws, rules, and regulations and expects issues to be identified, analyzed, and remediated in a timely and complete manner. MATERIAL CONTRACTUAL OBLIGATIONS, COMMITMENTS, AND CONTINGENT LIABILITIES The following table presents our material fixed and determinable contractual obligations and significant commitments at December 31, 2023.
The Board of Directors expects that we will perform business in a manner compliant with applicable laws, rules, and regulations and expects issues to be identified, analyzed, and remediated in a timely and complete manner. MATERIAL CONTRACTUAL OBLIGATIONS, COMMITMENTS, AND CONTINGENT LIABILITIES The following table presents our material fixed and determinable contractual obligations and significant commitments at December 31, 2024.
The model shows our projected net interest income sensitivity based on interest rate changes only and does not consider other forecast assumptions. Due to the dynamics of future interest 61 rate expectations, we also measure and monitor interest rate risk using the forward curve, which may be a more probable scenario of our interest rate exposure.
The model shows our projected net interest income sensitivity based on interest rate changes only and does not consider other forecast assumptions. Due to the dynamics of future interest 63 rate expectations, we also measure and monitor interest rate risk using the forward curve, which may be a more probable scenario of our interest rate exposure.
The committee 55 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 57 as recommended by management with the objective of maintaining an appropriate lending policy for the current lending environment.
The Federal Reserve’s Federal Funds range is currently in a target range of 5.25% to 5.50%, with the Effective Federal Funds Rate at 5.33% at December 31, 2023, and 4.33% at December 31, 2022. Management actively takes balance sheet restructuring, derivative, and deposit pricing actions to help mitigate interest rate risk.
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.
Lending Activities Commercial 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 54 equipment.
Lending Activities Commercial 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.
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. 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.
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.
For a discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022.
For a discussion of the year ended December 31, 2023 compared to the year ended December 31, 2022, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023.
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.
The credit ratings of Old National and Old National Bank at December 31, 2023 are shown in the following table. Moody's Investors Service Long-term Short-term Old National Baa1 N/A Old National Bank A1 P-1 63 Old National Bank maintains relationships in capital markets with brokers and dealers to issue certificates of deposit and short-term and medium-term bank notes as well.
The credit ratings of Old National and Old National Bank at December 31, 2024 are shown in the following table. Moody's Investors Service Long-term Short-term Old National Baa1 N/A Old National Bank A1 P-1 Old National Bank maintains relationships in capital markets with brokers and dealers to issue certificates of deposit and short-term and medium-term bank notes as well.
(4) Includes the allowance for credit losses on loans and unfunded loan commitments. 39 NON-GAAP FINANCIAL MEASURES The Company’s accounting and reporting policies conform to GAAP and general practices within the banking industry.
(4) Includes the allowance for credit losses on loans and unfunded loan commitments. 40 NON-GAAP FINANCIAL MEASURES The Company’s accounting and reporting policies conform to GAAP and general practices within the banking industry.
We use wholesale funding to augment deposit funding and to help maintain our desired interest rate risk position. Wholesale funding as a percentage of total funding was 13% at December 31, 2023, compared to 14% at December 31, 2022. See Notes 11, 12, and 13 to the consolidated financial statements for additional details on our financing activities.
We use wholesale funding to augment deposit funding and to help maintain our desired interest rate risk position. Wholesale funding as a percentage of total funding was 12% at December 31, 2024, compared to 13% at December 31, 2023. See Notes 11, 12, and 13 to the consolidated financial statements for additional details on our financing activities.
Old National manages concentrations of credit exposure by industry, product, geography, client relationship, and loan size. 49 The following table presents the composition of the loan portfolio at December 31.
Old National manages concentrations of credit exposure by industry, product, geography, client relationship, and loan size. 50 The following table presents the composition of the loan portfolio at December 31.
We continually monitor marketplace trends to identify patterns that might improve the predictability of the timing of deposit flows or asset prepayments. A maturity schedule for Old National Bank’s time deposits is shown in the following table at December 31, 2023.
We continually monitor marketplace trends to identify patterns that might improve the predictability of the timing of deposit flows or asset prepayments. 65 A maturity schedule for Old National Bank’s time deposits is shown in the following table at December 31, 2024.
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.
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, home price index, and the BBB ratio. The LGD is defined as credit loss incurred when an obligor of the bank defaults.
The primary objective of the stress test is to ensure that Old National has a robust, forward-looking stress testing process and maintains sufficient capital to continue operations throughout times of economic and financial stress.
Old National performs stress testing periodically throughout the year. The primary objective of the stress test is to ensure that Old National has a robust, forward-looking stress testing process and maintains sufficient capital to continue operations throughout times of economic and financial stress.
See the section of this Item 7 titled “Risk Management — Market Risk” for additional information regarding this risk. Loans typically generate more interest income than investment securities with similar maturities. Funding from client deposits generally costs less than wholesale funding sources.
See the section of this Item 7 titled “Market Risk” for additional information regarding this risk. Loans typically generate more interest income than investment securities with similar maturities. Funding from client deposits generally costs less than wholesale funding sources.
The weighted average yields on investment securities, on a taxable equivalent basis, were 3.18% in 2023 and 2.50% in 2022. Loan Portfolio We lend to commercial and commercial real estate clients in many diverse industries including real estate rental and leasing, manufacturing, healthcare, wholesale trade, construction, and agriculture, among others.
The weighted average yields on investment securities, on a taxable equivalent basis, were 3.57% in 2024 and 3.18% in 2023. Loan Portfolio We lend to commercial and commercial real estate clients in many diverse industries including real estate rental and leasing, manufacturing, healthcare, wholesale trade, construction, and agriculture, among others.
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.
If nonaccrual and renegotiated loans outstanding at December 31, 2023 and 2022, respectively, had been accruing interest throughout the year in accordance with their original terms, interest income of approximately $13.4 million in 2023 and $7.9 million in 2022 would have been recorded on these loans.
If nonaccrual and renegotiated loans outstanding at December 31, 2024 and 2023, respectively, had been accruing interest throughout the year in accordance with their original terms, interest income of approximately $20.4 million in 2024 and $13.4 million in 2023 would have been recorded on these loans.
The allowance for credit losses on unfunded loan commitments totaled $31.2 million at December 31, 2023, compared to $32.2 million at December 31, 2022. See the section entitled “Risk Factors” in Item 1A of this Form 10-K for further discussion of our credit risk.
The allowance for credit losses on unfunded loan commitments totaled $21.7 million at December 31, 2024, compared to $31.2 million at December 31, 2023. See the section entitled “Risk Factors” in Item 1A of this Form 10-K for further discussion of our credit risk.
(2) Includes loans held-for-sale. 44 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.
(2) Includes loans held-for-sale. 45 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.
(3) Interest on loans includes the effect of taxable equivalent adjustments of $11.9 million in 2023, $6.9 million in 2022, and $4.0 million, in 2021; using the federal statutory tax rate in effect of 21%.
(3) Interest on loans includes the effect of taxable equivalent adjustments of $13.4 million in 2024, $11.9 million in 2023, and $6.9 million, in 2022; using the federal statutory tax rate in effect of 21%.
At December 31, 2023, our average commercial loan size was approximately $600,000 and our average commercial real estate loan size was approximately $1,400,000. In addition, while loans to lessors of residential and non-residential real estate exceed 10% of total loans, no individual sub-segment category within those broader categories reaches the 10% threshold.
At December 31, 2024, our average commercial loan size was approximately $716,000 and our average commercial real estate loan size was approximately $1,567,000. In addition, while loans to lessors of residential and non-residential real estate exceed 10% of total loans, no individual sub-segment category within those broader categories reaches the 10% threshold.
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. See Note 19 to the consolidated financial statements for further discussion of derivative financial instruments.
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.
(2) Interest on investment securities includes the effect of taxable equivalent adjustments of $11.5 million in 2023, $11.5 million in 2022, and $9.9 million in 2021; using the federal statutory tax rate in effect of 21%.
(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; using the federal statutory tax rate in effect of 21%.
Exposures in excess of the agreed thresholds are collateralized. Total credit exposure is monitored by counterparty and managed within limits that management believes to be prudent. Old National’s net counterparty exposure was an asset of $22.0 million at December 31, 2023.
Exposures in excess of the agreed thresholds are collateralized. Total credit exposure is monitored by counterparty and managed within limits that management believes to be prudent. Old National’s net counterparty exposure was an asset of $28.5 million at December 31, 2024.
(2) Other includes commercial development, agriculture real estate, hotels, self-storage, senior housing, land development, religion, and mixed-use properties. 51 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.
(2) Other includes commercial development, agriculture real estate, hotels, self-storage, land development, religion, and mixed-use properties. 53 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.
The major difference between the effective tax rate applied to our financial statement income and the federal statutory tax rate is caused by a tax benefit from our tax credit investments and interest on tax-exempt securities and loans. The effective tax rate was 22.5% in 2023 compared to 21.4% in 2022.
The major difference between the effective tax rate applied to our financial statement income and the federal statutory tax rate is caused by a tax benefit from our tax credit investments and interest on tax-exempt securities and loans. The effective tax rate was 20.8% in 2024 compared to 22.5% in 2023.
Commercial mortgages and construction loans are offered to real estate investors, developers, and builders primarily domiciled in the geographic Midwest 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%.
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.
Other classified assets include investment securities that fell below investment grade rating totaling $48.9 million at December 31, 2023, compared to $24.7 million at December 31, 2022. 56 Allowance for Credit Losses on Loans and Unfunded Loan Commitments 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.
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. 58 Allowance for Credit Losses on Loans and Unfunded Loan Commitments 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.
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 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.
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.
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.
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 index used in the calculation to which the calculation may be most sensitive is the national unemployment rate.
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.
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.
Other factors include the level of accretion income on purchased loans, prepayment risk on mortgage and investment-related assets, and the composition and maturity of interest-earning assets and interest-bearing liabilities. The Federal Reserve decreased its interest rates during 2024.
Accordingly, such evaluations may result in Old National taking a capital action. For additional information on capital adequacy see Note 21 to the consolidated financial statements. Management views stress testing as an integral part of the Company’s risk management and strategic planning activities. Old National performs stress testing periodically throughout the year.
Management routinely analyzes Old National’s capital to ensure an optimized capital 55 structure. Accordingly, such evaluations may result in Old National taking a capital action. For additional information on capital adequacy see Note 21 to the consolidated financial statements. Management views stress testing as an integral part of the Company’s risk management and strategic planning activities.
The allowance for credit losses on unfunded loan commitments totaled $31.2 million at December 31, 2023, compared to $32.2 million at December 31, 2022.
The allowance for credit losses on unfunded loan commitments totaled $21.7 million at December 31, 2024, compared to $31.2 million at December 31, 2023.
The investment securities available-for-sale portfolio including securities hedges had an effective duration of 4.24 at December 31, 2023, compared to 4.57 at December 31, 2022. The total investment securities portfolio had an effective duration of 5.35 at December 31, 2023, compared to 6.45 at December 31, 2022.
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. The total investment securities portfolio had an effective duration of 5.09 at December 31, 2024, compared to 5.35 at December 31, 2023.
At December 31, 2023, 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.
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 and Southeast regions of the United States.
As a percentage of nonaccrual loans, the allowance for credit losses on loans was 111.93% at December 31, 2023, compared to 127.50% at December 31, 2022.
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.
The difference between consideration and the net fair value of assets acquired is recorded as goodwill. Management uses significant estimates and assumptions to value such items, including projected cash flows, repayment rates, default rates and losses assuming default, discount rates, and realizable collateral values. The allowance for credit losses for PCD loans is recognized within acquisition accounting.
Management uses significant estimates and assumptions to value such items, including projected cash flows, repayment rates, default rates and losses assuming default, discount rates, and realizable collateral values. The allowance for credit losses for PCD loans is recognized within acquisition accounting.
Approximately 25% of the commercial real estate portfolio is owner-occupied as of December 31, 2023.
Approximately 27% of the commercial real estate portfolio is owner-occupied as of December 31, 2024, compared to 25% at December 31, 2023.
(2) Calculated using management’s estimate of the annual fully taxable equivalent rates (federal and state). 42 RESULTS OF OPERATIONS The following table sets forth certain income statement information of Old National: Years Ended December 31, (dollars in thousands, except per share data) 2023 2022 2021 Income Statement Summary: Net interest income $ 1,503,153 $ 1,327,936 $ 596,400 Provision (release) for credit losses 58,887 144,799 (29,622) Noninterest income 333,342 399,779 214,219 Noninterest expense 1,026,306 1,038,183 501,379 Net income applicable to common shareholders 565,857 414,169 277,538 Net income per common share – diluted 1.94 1.50 1.67 Other Data: Return on average common equity 11.29 % 8.92 % 9.26 % Return on average tangible common equity (1) 20.15 % 16.34 % 14.89 % Efficiency ratio (1) 53.70 % 57.97 % 59.75 % Efficiency ratio (prior presentation) (2) N/A N/A 59.65 % Tier 1 leverage ratio 8.83 % 8.52 % 8.59 % Net charge-offs (recoveries) to average loans 0.17 % 0.06 % (0.03) % (1) Represents a non-GAAP financial measure.
(2) Calculated using management’s estimate of the annual fully taxable equivalent rates (federal and state). 43 RESULTS OF OPERATIONS The following table sets forth certain income statement information of Old National: Years Ended December 31, (dollars in thousands, except per share data) 2024 2023 2022 Income Statement Summary: Net interest income $ 1,530,783 $ 1,503,153 $ 1,327,936 Provision for credit losses 110,619 58,887 144,799 Noninterest income 354,697 333,342 399,779 Noninterest expense 1,094,423 1,026,306 1,038,183 Net income applicable to common shareholders 523,053 565,857 414,169 Net income per common share – diluted 1.68 1.94 1.50 Other Data: Return on average common equity 9.06 % 11.29 % 8.92 % Return on average tangible common equity (1) 15.37 % 20.15 % 16.34 % Efficiency ratio (1) 55.85 % 53.70 % 57.97 % Tier 1 leverage ratio 9.21 % 8.83 % 8.52 % Net charge-offs (recoveries) to average loans 0.17 % 0.17 % 0.06 % (1) Represents a non-GAAP financial measure.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Page General Overview 36 Corporate Developments in Fiscal 202 3 36 Business Outlook 37 Financial Highlights 38 Non-GAAP Financial Measures 40 Results of Operations 43 Financial Condition 49 Risk Management 54 Material Contractual Obligations, Commitments, and Contingent Liabilities 65 Critical Accounting Estimates 65 The following is an analysis generally discussing our results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022, and financial condition as of December 31, 2023 and 2022.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Page General Overview 37 Corporate Developments in 202 4 37 Business Outlook 38 Financial Highlights 39 Non-GAAP Financial Measures 41 Results of Operations 44 Financial Condition 50 Risk Management 56 Material Contractual Obligations, Commitments, and Contingent Liabilities 67 Critical Accounting Estimates 68 The following is an analysis generally discussing our results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023, and financial condition as of December 31, 2024 and 2023.
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.
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.
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.
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.
Additionally, provision expense may be volatile due to changes in CECL model assumptions of credit quality, macroeconomic factors and conditions, and loan composition, which drive the allowance for credit losses balance. 60 The following table details the allowance for credit losses on loans by loan category and the percent of loans in each category compared to total loans at December 31. 2023 2022 (dollars in thousands) Allowance Amount % of Loans to Total Loans Allowance Amount % of Loans to Total Loans Commercial $ 118,333 28.1 % $ 120,612 29.9 % Commercial real estate 155,099 42.4 138,244 39.5 BBCC 2,887 1.2 2,431 1.2 Residential real estate 20,837 20.3 21,916 20.8 Indirect 1,236 3.2 1,532 3.3 Direct 3,169 1.6 12,116 2.0 Home equity 6,049 3.2 6,820 3.3 Total $ 307,610 100.0 % $ 303,671 100.0 % We maintain an allowance for credit losses on unfunded loan commitments to provide for the risk of loss inherent in these arrangements.
Additionally, provision expense may be volatile due to changes in CECL model assumptions of credit quality, macroeconomic factors and conditions, and loan composition, which drive the allowance for credit losses balance. 62 The following table details the allowance for credit losses on loans by loan category and the percent of loans in each category compared to total loans at December 31. 2024 2023 (dollars in thousands) Allowance Amount % of Loans to Total Loans Allowance Amount % of Loans to Total Loans Commercial $ 148,722 27.7 % $ 118,333 28.1 % Commercial real estate 200,309 44.5 155,099 42.4 BBCC 2,813 1.1 2,887 1.2 Residential real estate 22,922 18.8 20,837 20.3 Indirect 8,434 3.0 1,236 3.2 Direct 2,304 1.4 3,169 1.6 Home equity 7,018 3.5 6,049 3.2 Total $ 392,522 100.0 % $ 307,610 100.0 % We maintain an allowance for credit losses on unfunded loan commitments to provide for the risk of loss inherent in these arrangements.
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 Our earning assets are comprised of investment securities, portfolio loans, loans held-for-sale, money market investments, interest-earning accounts with the Federal Reserve, and equity securities. Earning assets were $48.0 billion at December 31, 2024, an increase of $4.1 billion compared to earning assets of $43.9 billion at December 31, 2023.
Management believes that it is a standard practice in the banking industry to present net interest margin and net interest income on a fully taxable equivalent basis and that it may enhance comparability for peer comparison purposes for both management and investors. 43 The following table presents a three-year average balance sheet and for each major asset and liability category, its related interest income and yield, or its expense and rate for the years ended December 31. 2023 2022 2021 (Taxable equivalent basis, dollars in thousands) Average Balance Income (1) / Expense Yield/ Rate Average Balance Income (1) / Expense Yield/ Rate Average Balance Income (1) / Expense Yield/ Rate Earning Assets Money market and other interest- earning investments $ 826,453 $ 39,683 4.80 % $ 812,296 $ 2,814 0.35 % $ 450,158 $ 589 0.13 % Investment securities: Treasury and government- sponsored agencies 2,322,792 84,771 3.65 2,290,229 47,932 2.09 1,573,855 24,209 1.54 Mortgage-backed securities 5,178,940 136,827 2.64 5,562,442 129,411 2.33 3,356,950 60,479 1.80 States and political subdivisions 1,749,722 57,847 3.31 1,805,433 57,688 3.20 1,548,939 50,115 3.24 Other securities 776,456 39,166 5.04 687,926 24,133 3.51 443,606 10,680 2.41 Total investment securities 10,027,910 318,611 3.18 10,346,030 259,164 2.50 6,923,350 145,483 2.10 Loans: (2) Commercial 9,570,639 639,131 6.68 8,252,237 397,228 4.81 3,763,099 138,063 3.67 Commercial real estate 13,405,946 825,053 6.15 11,147,967 489,499 4.39 6,168,146 228,568 3.71 Residential real estate loans 6,646,684 243,646 3.67 5,622,901 201,637 3.59 2,269,989 83,578 3.68 Consumer 2,618,098 164,125 6.27 2,570,355 122,274 4.76 1,577,467 56,281 3.57 Total loans 32,241,367 1,871,955 5.81 27,593,460 1,210,638 4.39 13,778,701 506,490 3.68 Total earning assets 43,095,730 $ 2,230,249 5.18 % 38,751,786 $ 1,472,616 3.80 % 21,152,209 $ 652,562 3.09 % Less: Allowance for credit losses on loans (302,486) (261,534) (117,436) Non-Earning Assets Cash and due from banks 413,569 355,391 256,860 Other assets 4,945,394 4,404,057 2,492,054 Total assets $ 48,152,207 $ 43,249,700 $ 23,783,687 Interest-Bearing Liabilities Checking and NOW accounts $ 7,664,183 $ 94,263 1.23 % $ 8,104,844 $ 21,321 0.26 % $ 4,945,435 $ 2,065 0.04 % Savings accounts 5,638,766 14,941 0.26 6,342,697 3,367 0.05 3,648,019 2,003 0.05 Money market accounts 7,249,497 206,634 2.85 4,961,159 11,882 0.24 2,080,332 1,750 0.08 Time deposits, excluding brokered deposits 3,875,984 123,428 3.18 2,312,935 10,801 0.47 1,020,359 5,105 0.50 Brokered deposits 913,349 45,094 4.94 45,796 1,722 3.76 41,371 31 0.08 Total interest-bearing deposits 25,341,779 484,360 1.91 21,767,431 49,093 0.23 11,735,516 10,954 0.09 Federal funds purchased and interbank borrowings 229,386 11,412 4.98 151,243 5,021 3.32 1,113 — — Securities sold under agreements to repurchase 332,853 3,299 0.99 440,619 843 0.19 392,777 397 0.10 FHLB advances 4,568,964 161,860 3.54 2,986,006 51,524 1.73 1,902,407 21,075 1.11 Other borrowings 822,471 42,737 5.20 619,659 19,785 3.19 269,484 9,823 3.65 Total borrowed funds 5,953,674 219,308 3.68 4,197,527 77,173 1.84 2,565,781 31,295 1.22 Total interest-bearing liabilities $ 31,295,453 $ 703,668 2.25 % $ 25,964,958 $ 126,266 0.49 % $ 14,301,297 $ 42,249 0.30 % Noninterest-Bearing Liabilities and Shareholders’ Equity Demand deposits 10,633,806 11,750,306 6,163,937 Other liabilities 968,635 676,940 320,933 Shareholders’ equity 5,254,313 4,857,496 2,997,520 Total liabilities and shareholders’ equity $ 48,152,207 $ 43,249,700 $ 23,783,687 Net interest income - taxable equivalent basis $ 1,526,581 3.54 % $ 1,346,350 3.47 % $ 610,313 2.89 % Taxable equivalent adjustment (23,428) (18,414) (13,913) Net interest income (GAAP) $ 1,503,153 3.49 % $ 1,327,936 3.43 % $ 596,400 2.82 % (1) Interest income is reflected on a fully taxable equivalent basis.
Management believes that it is a standard practice in the banking industry to present net interest margin and net interest income on a fully taxable equivalent basis and that it may enhance comparability for peer comparison purposes for both management and investors. 44 The following table presents a three-year average balance sheet and for each major asset and liability category, its related interest income and yield, or its expense and rate for the years ended December 31. 2024 2023 2022 (Taxable equivalent basis, dollars in thousands) Average Balance Income (1) / Expense Yield/ Rate Average Balance Income (1) / Expense Yield/ Rate Average Balance Income (1) / Expense Yield/ Rate Earning Assets Money market and other interest- earning investments $ 887,771 $ 45,835 5.16 % $ 826,453 $ 39,683 4.80 % $ 812,296 $ 2,814 0.35 % Investment securities: Treasury and government- sponsored agencies 2,288,053 87,489 3.82 2,322,792 84,771 3.65 2,290,229 47,932 2.09 Mortgage-backed securities 5,829,322 185,633 3.18 5,178,940 136,827 2.64 5,562,442 129,411 2.33 States and political subdivisions 1,672,493 56,006 3.35 1,749,722 57,847 3.31 1,805,433 57,688 3.20 Other securities 781,969 47,821 6.12 776,456 39,166 5.04 687,926 24,133 3.51 Total investment securities 10,571,837 376,949 3.57 10,027,910 318,611 3.18 10,346,030 259,164 2.50 Loans: (2) Commercial 10,166,184 711,562 7.00 9,570,639 639,131 6.68 8,252,237 397,228 4.81 Commercial real estate 15,698,854 1,028,387 6.55 13,405,946 825,053 6.15 11,147,967 489,499 4.39 Residential real estate loans 6,823,798 266,116 3.90 6,646,684 243,646 3.67 5,622,901 201,637 3.59 Consumer 2,832,823 197,316 6.97 2,618,098 164,125 6.27 2,570,355 122,274 4.76 Total loans 35,521,659 2,203,381 6.20 32,241,367 1,871,955 5.81 27,593,460 1,210,638 4.39 Total earning assets 46,981,267 $ 2,626,165 5.59 % 43,095,730 $ 2,230,249 5.18 % 38,751,786 $ 1,472,616 3.80 % Less: Allowance for credit losses on loans (348,638) (302,486) (261,534) Non-Earning Assets Cash and due from banks 394,350 413,569 355,391 Other assets 5,275,427 4,945,394 4,404,057 Total assets $ 52,302,406 $ 48,152,207 $ 43,249,700 Interest-Bearing Liabilities Checking and NOW accounts $ 7,554,510 $ 112,741 1.49 % $ 7,664,183 $ 94,263 1.23 % $ 8,104,844 $ 21,321 0.26 % Savings accounts 4,919,559 19,922 0.40 5,638,766 14,941 0.26 6,342,697 3,367 0.05 Money market accounts 10,905,756 406,739 3.73 7,249,497 206,634 2.85 4,961,159 11,882 0.24 Time deposits, excluding brokered deposits 5,492,898 230,132 4.19 3,875,984 123,428 3.18 2,312,935 10,801 0.47 Brokered deposits 1,447,491 76,728 5.30 913,349 45,094 4.94 45,796 1,722 3.76 Total interest-bearing deposits 30,320,214 846,262 2.79 25,341,779 484,360 1.91 21,767,431 49,093 0.23 Federal funds purchased and interbank borrowings 57,950 3,262 5.63 229,386 11,412 4.98 151,243 5,021 3.32 Securities sold under agreements to repurchase 258,630 2,752 1.06 332,853 3,299 0.99 440,619 843 0.19 FHLB advances 4,473,800 177,317 3.96 4,568,964 161,860 3.54 2,986,006 51,524 1.73 Other borrowings 784,994 41,275 5.26 822,471 42,737 5.20 619,659 19,785 3.19 Total borrowed funds 5,575,374 224,606 4.03 5,953,674 219,308 3.68 4,197,527 77,173 1.84 Total interest-bearing liabilities $ 35,895,588 $ 1,070,868 2.98 % $ 31,295,453 $ 703,668 2.25 % $ 25,964,958 $ 126,266 0.49 % Noninterest-Bearing Liabilities and Shareholders’ Equity Demand deposits 9,424,577 10,633,806 11,750,306 Other liabilities 962,511 968,635 676,940 Shareholders’ equity 6,019,730 5,254,313 4,857,496 Total liabilities and shareholders’ equity $ 52,302,406 $ 48,152,207 $ 43,249,700 Net interest income - taxable equivalent basis $ 1,555,297 3.31 % $ 1,526,581 3.54 % $ 1,346,350 3.47 % Taxable equivalent adjustment (24,514) (23,428) (18,414) Net interest income (GAAP) $ 1,530,783 3.26 % $ 1,503,153 3.49 % $ 1,327,936 3.43 % (1) Interest income is reflected on a fully taxable equivalent basis.
(4) Includes the allowance for credit losses on loans and unfunded loan commitments. 38 The following table sets forth certain financial highlights of Old National for the year-to-date periods: Years Ended December 31, (dollars and shares in thousands, except per share data) 2023 2022 Income Statement: Net interest income $ 1,503,153 $ 1,327,936 Taxable equivalent adjustment (1) (3) 23,428 18,414 Net interest income – taxable equivalent basis (3) 1,526,581 1,346,350 Provision (release) for credit losses 58,887 144,799 Noninterest income 333,342 399,779 Noninterest expense 1,026,306 1,038,183 Net income available to common shareholders 565,857 414,169 Per Common Share Data: Weighted average diluted common shares 291,855 276,688 Net income (diluted) $ 1.94 $ 1.50 Cash dividends $ 0.56 $ 0.56 Common dividend payout ratio (2) 29 % 37 % Book value $ 18.18 $ 16.68 Stock price 16.89 17.98 Tangible common book value (3) 11.00 9.42 Performance Ratios: Return on average assets 1.21 % 0.99 % Return on average common equity 11.29 8.92 Return on average tangible common equity (3) 20.15 16.34 Net interest margin (3) 3.54 3.47 Efficiency ratio (3) 53.70 57.97 Net charge-offs to average loans 0.17 0.06 Allowance for credit losses on loans to ending loans 0.93 0.98 Allowance for credit losses (4) to ending loans 1.03 1.08 Non-performing loans to ending loans 0.83 0.81 Balance Sheet: Total loans $ 32,991,927 $ 31,123,641 Total assets 49,089,836 46,763,372 Total deposits 37,235,180 35,000,830 Total borrowed funds 5,331,147 5,586,314 Total shareholders’ equity 5,562,900 5,128,595 Capital Ratios: Risk-based capital ratios: Tier 1 common equity 10.70 % 10.03 % Tier 1 11.35 10.71 Total 12.64 12.02 Leverage ratio (to average assets) 8.83 8.52 Total equity to assets (averages) 10.91 11.23 Tangible common equity to tangible assets (3) 6.85 6.18 Nonfinancial Data: Full-time equivalent employees 3,940 3,967 Banking centers 258 263 (1) Calculated using the federal statutory tax rate in effect of 21% for all periods.
(4) Includes the allowance for credit losses on loans and unfunded loan commitments. 39 The following table sets forth certain financial highlights of Old National for the year-to-date periods: Years Ended December 31, (dollars and shares in thousands, except per share data) 2024 2023 Income Statement: Net interest income $ 1,530,783 $ 1,503,153 Taxable equivalent adjustment (1) (3) 24,514 23,428 Net interest income – taxable equivalent basis (3) 1,555,297 1,526,581 Provision for credit losses 110,619 58,887 Noninterest income 354,697 333,342 Noninterest expense 1,094,423 1,026,306 Net income available to common shareholders 523,053 565,857 Per Common Share Data: Weighted average diluted common shares 311,001 291,855 Net income (diluted) $ 1.68 $ 1.94 Cash dividends $ 0.56 $ 0.56 Common dividend payout ratio (2) 33 % 29 % Book value $ 19.11 $ 18.18 Stock price 21.71 16.89 Tangible common book value (3) 11.91 11.00 Performance Ratios: Return on average assets 1.03 % 1.21 % Return on average common equity 9.06 11.29 Return on average tangible common equity (3) 15.37 20.15 Net interest margin (3) 3.31 3.54 Efficiency ratio (3) 55.85 53.70 Net charge-offs to average loans 0.17 0.17 Allowance for credit losses on loans to ending loans 1.08 0.93 Allowance for credit losses (4) to ending loans 1.14 1.03 Non-performing loans to ending loans 1.23 0.83 Balance Sheet: Total loans $ 36,285,887 $ 32,991,927 Total assets 53,552,272 49,089,836 Total deposits 40,823,560 37,235,180 Total borrowed funds 5,411,537 5,331,147 Total shareholders’ equity 6,340,350 5,562,900 Capital Ratios: Risk-based capital ratios: Tier 1 common equity 11.38 % 10.70 % Tier 1 11.98 11.35 Total 13.37 12.64 Leverage ratio (to average assets) 9.21 8.83 Total equity to assets (averages) 11.51 10.91 Tangible common equity to tangible assets (3) 7.41 6.85 Nonfinancial Data: Full-time equivalent employees 4,066 3,940 Banking centers 280 258 (1) Calculated using the federal statutory tax rate in effect of 21% for all periods.
Highlights experienced in 2023 included: • net income applicable to common shareholders of $565.9 million, or $1.94 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%; • well-managed expenses; and • stable credit metrics, including net charge-offs to average loans of 0.17%.
Highlights experienced in 2024 included: • net income applicable to common shareholders of $523.1 million, or $1.68 per diluted common share; • 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; and • stable credit metrics, including net charge-offs to average loans of 0.17%.
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 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 yield on average earning assets increased 138 basis points from 3.80% in 2022 to 5.18% in 2023 and the cost of interest-bearing liabilities increased 176 basis points from 0.49% in 2022 to 2.25% in 2023. Average earning assets increased by $4.3 billion, or 11%, primarily due to a $4.6 billion increase in 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 $3.9 billion, or 9%, primarily due to a $3.3 billion increase in average loans.
Provision (Release) for Credit Losses The following table details the components of provision (release) for credit losses: Years Ended December 31, % Change From Prior Year (dollars in thousands) 2023 2022 2021 2023 2022 Provision (release) for credit losses on loans $ 59,849 $ 123,340 $ (28,812) (51.5) % (528.1) % Provision (release) for credit losses on unfunded loan commitments (962) 21,309 (810) (104.5) N/M Provision for credit losses on held-to- maturity securities — 150 — (100.0) N/A Total provision (release) for credit losses $ 58,887 $ 144,799 $ (29,622) (59.3) % (588.8) % Net (charge-offs) recoveries on non-PCD loans $ (31,432) $ (4,911) $ 4,765 540.0 % (203.1) % Net (charge-offs) recoveries on PCD loans (24,478) (11,188) — 118.8 N/A Total net (charge-offs) recoveries on loans $ (55,910) $ (16,099) $ 4,765 247.3 % (437.9) % Net charge-offs (recoveries) to average loans 0.17 % 0.06 % (0.03) % 183.3 % (300.0) % Total provision for credit losses decreased $85.9 million in 2023 compared to 2022.
Provision for Credit Losses The following table details the components of provision for credit losses: Years Ended December 31, % Change From Prior Year (dollars in thousands) 2024 2023 2022 2024 2023 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 (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 for credit losses $ 110,619 $ 58,887 $ 144,799 87.8 % (59.3) % Net (charge-offs) recoveries on non-PCD loans $ (44,675) $ (31,432) $ (4,911) 42.1 % 540.0 % Net (charge-offs) recoveries on PCD loans (17,329) (24,478) (11,188) (29.2) 118.8 Total net (charge-offs) recoveries on loans $ (62,004) $ (55,910) $ (16,099) 10.9 % 247.3 % Net charge-offs (recoveries) to average loans 0.17 % 0.17 % 0.06 % — % 183.3 % 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.
Net Interest Income Net interest income is the most significant component of our earnings, comprising 82% of 2023 revenues. Net interest income and net interest margin are influenced by many factors, primarily the volume and mix of earning assets, funding sources, and interest rate fluctuations.
Refer to “Non-GAAP Financial Measures” section for reconciliations to GAAP financial measures. Net Interest Income Net interest income is the most significant component of our earnings, comprising 81% of 2024 revenues. Net interest income and net interest margin are influenced by many factors, primarily the volume and mix of earning assets, funding sources, and interest rate fluctuations.
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.
Investment Securities We classify the majority of our investment securities as available-for-sale to give management the flexibility to sell the securities prior to maturity based on fluctuating interest rates or changes in our funding requirements. The investment securities portfolio, including equity securities, was $10.9 billion at December 31, 2024, compared to $10.2 billion at December 31, 2023.
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. Accretion income associated with acquired loans and borrowings totaled $28.3 million in 2023, compared to $86.4 million in 2022.
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.
These actions resulted in expenses totaling $26.8 million associated with valuation adjustments related to these locations in 2022. 48 Provision for Income Taxes We record a provision for income taxes currently payable and for income taxes payable or benefits to be received in the future, which arise due to timing differences in the recognition of certain items for financial statement and income tax purposes.
Provision for Income Taxes We record a provision for income taxes currently payable and for income taxes payable or benefits to be received in the future, which arise due to timing differences in the recognition of certain items for financial statement and income tax purposes.
In most cases, we require title insurance insuring the priority of our lien, fire and extended coverage casualty insurance, and flood insurance, if appropriate, in order to protect our security interest in the underlying property. In addition, business interruption insurance or other insurance may be required.
In addition, a personal guarantee of the loan or a portion thereof is often required from the principal(s) of the borrower. In most cases, we require title insurance insuring the priority of our lien, fire and extended coverage casualty insurance, and flood insurance, if appropriate, in order to protect our security interest in the underlying property.
The portfolio segment reclassifications follow: Statement Balance Portfolio Segment Reclassifications Portfolio Segment After Reclassifications (dollars in thousands) December 31, 2023 Commercial $ 9,512,230 $ (232,764) $ 9,279,466 Commercial real estate 14,140,629 (169,058) 13,971,571 BBCC N/A 401,822 401,822 Residential real estate 6,699,443 — 6,699,443 Consumer 2,639,625 (2,639,625) N/A Indirect N/A 1,050,982 1,050,982 Direct N/A 523,172 523,172 Home equity N/A 1,065,471 1,065,471 Total $ 32,991,927 $ — $ 32,991,927 December 31, 2022 Commercial $ 9,508,904 $ (210,280) $ 9,298,624 Commercial real estate 12,457,070 (158,322) 12,298,748 BBCC N/A 368,602 368,602 Residential real estate 6,460,441 — 6,460,441 Consumer 2,697,226 (2,697,226) N/A Indirect N/A 1,034,257 1,034,257 Direct N/A 629,186 629,186 Home equity N/A 1,033,783 1,033,783 Total $ 31,123,641 $ — $ 31,123,641 58 The following table details activity in our allowance for credit losses on loans for the years ended December 31: (dollars in thousands) 2023 2022 2021 Beginning allowance for credit losses on loans $ 303,671 $ 107,341 $ 131,388 Allowance established for acquired PCD loans — 89,089 — Loans charged-off: Commercial 41,451 6,885 1,228 Commercial real estate 11,198 6,519 264 BBCC 1,650 85 144 Residential real estate 256 344 346 Indirect 2,948 2,525 1,087 Direct 10,517 10,799 1,159 Home equity 443 124 82 Total charge-offs 68,463 27,281 4,310 Recoveries on charged-off loans: Commercial 4,172 4,610 791 Commercial real estate 2,417 1,095 4,403 BBCC 275 281 105 Residential real estate 1,268 760 339 Indirect 1,559 1,263 1,682 Direct 2,331 2,557 777 Home equity 531 616 978 Total recoveries 12,553 11,182 9,075 Net charge-offs (recoveries) 55,910 16,099 (4,765) Provision (release) for credit losses on loans 59,849 123,340 (28,812) Ending allowance for credit losses on loans $ 307,610 $ 303,671 $ 107,341 Beginning allowance for credit losses on unfunded loan commitments $ 32,188 $ 10,879 $ 11,689 Provision for credit losses on unfunded loan commitments acquired during the period — 11,013 — Provision (release) for provision for credit losses on unfunded loan commitments (962) 10,296 (810) Ending allowance for credit losses on unfunded loan commitments $ 31,226 $ 32,188 $ 10,879 Allowance for credit losses $ 338,836 $ 335,859 $ 118,220 Average loans for the year (1) $ 32,233,020 $ 27,582,530 $ 13,766,590 Asset Quality Ratios: Allowance for credit losses on loans/year-end loans (1) 0.93 % 0.98 % 0.79 % Allowance for credit losses on loans/average loans (1) 0.95 1.10 0.78 Allowance for credit losses/year-end loans (1) 1.03 1.08 0.87 Allowance for credit losses/average loans (1) 1.05 1.22 0.86 (1) Loans exclude loans held-for-sale. 59 The following table details net charge-offs to average loans outstanding by loan category for the years ended December 31: (dollars in thousands) 2023 2022 2021 Commercial: Net charge-offs (recoveries) $ 37,279 $ 2,275 $ 437 Average loans for the year (1) $ 9,338,940 $ 7,755,895 $ 3,553,527 Net charge-offs (recoveries)/average loans 0.40 % 0.03 % 0.01 % Commercial real estate: Net charge-offs (recoveries) $ 8,781 $ 5,424 $ (4,139) Average loans for the year $ 13,248,587 $ 11,292,033 $ 6,022,408 Net charge-offs (recoveries)/average loans 0.07 % 0.05 % (0.07) % BBCC: Net charge-offs (recoveries) $ 1,375 $ (196) $ 39 Average loans for the year $ 385,171 $ 352,276 $ 355,310 Net charge-offs (recoveries)/average loans 0.36 % (0.06) % 0.01 % Residential real estate: Net charge-offs (recoveries) $ (1,012) $ (416) $ 7 Average loans for the year (1) $ 6,642,224 $ 5,618,883 $ 2,257,878 Net charge-offs (recoveries)/average loans (0.02) % (0.01) % — % Indirect: Net charge-offs (recoveries) $ 1,389 $ 1,262 $ (595) Average loans for the year $ 1,013,560 $ 1,089,394 $ 879,525 Net charge-offs (recoveries)/average loans 0.14 % 0.12 % (0.07) % Direct: Net charge-offs (recoveries) $ 8,186 $ 8,242 $ 382 Average loans for the year $ 568,345 $ 559,943 $ 150,620 Net charge-offs (recoveries)/average loans 1.44 % 1.47 % 0.25 % Home equity: Net charge-offs (recoveries) $ (88) $ (492) $ (896) Average loans for the year $ 1,036,193 $ 921,018 $ 547,322 Net charge-offs (recoveries)/average loans (0.01) % (0.05) % (0.16) % Total loans: Net charge-offs (recoveries) $ 55,910 $ 16,099 $ (4,765) Average loans for the year (1) $ 32,233,020 $ 27,589,442 $ 13,766,590 Net charge-offs (recoveries)/average loans 0.17 % 0.06 % (0.03) % (1) Average loans exclude loans held-for-sale.
The portfolio segment reclassifications follow: Statement Balance Portfolio Segment Reclassifications Portfolio Segment After Reclassifications (dollars in thousands) December 31, 2024 Commercial $ 10,288,560 $ (232,301) $ 10,056,259 Commercial real estate 16,307,486 (174,438) 16,133,048 BBCC N/A 406,739 406,739 Residential real estate 6,797,586 — 6,797,586 Consumer 2,892,255 (2,892,255) N/A Indirect N/A 1,096,778 1,096,778 Direct N/A 514,144 514,144 Home equity N/A 1,281,333 1,281,333 Total $ 36,285,887 $ — $ 36,285,887 December 31, 2023 Commercial $ 9,512,230 $ (232,764) $ 9,279,466 Commercial real estate 14,140,629 (169,058) 13,971,571 BBCC N/A 401,822 401,822 Residential real estate 6,699,443 — 6,699,443 Consumer 2,639,625 (2,639,625) N/A Indirect N/A 1,050,982 1,050,982 Direct N/A 523,172 523,172 Home equity N/A 1,065,471 1,065,471 Total $ 32,991,927 $ — $ 32,991,927 60 The following table details activity in our allowance for credit losses on loans for the years ended December 31: (dollars in thousands) 2024 2023 2022 Beginning allowance for credit losses on loans $ 307,610 $ 303,671 $ 107,341 Allowance established for acquired PCD loans 26,725 — 89,089 Loans charged-off: Commercial 36,172 41,451 6,885 Commercial real estate 18,565 11,198 6,519 BBCC 1,801 1,650 85 Residential real estate 14 256 344 Indirect 5,610 2,948 2,525 Direct 8,672 10,517 10,799 Home equity 470 443 124 Total charge-offs 71,304 68,463 27,281 Recoveries on charged-off loans: Commercial 1,623 4,172 4,610 Commercial real estate 2,713 2,417 1,095 BBCC 325 275 281 Residential real estate 883 1,268 760 Indirect 1,274 1,559 1,263 Direct 2,152 2,331 2,557 Home equity 330 531 616 Total recoveries 9,300 12,553 11,182 Net charge-offs (recoveries) 62,004 55,910 16,099 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 Beginning allowance for credit losses on unfunded loan commitments $ 31,226 $ 32,188 $ 10,879 Provision for credit losses on unfunded loan commitments acquired during the period 1,763 — 11,013 Provision (release) for provision for credit losses on unfunded loan commitments (11,335) (962) 10,296 Ending allowance for credit losses on unfunded loan commitments $ 21,654 $ 31,226 $ 32,188 Allowance for credit losses $ 414,176 $ 338,836 $ 335,859 Average loans for the year (1) $ 35,506,298 $ 32,233,020 $ 27,582,530 Asset Quality Ratios: Allowance for credit losses on loans/year-end loans (1) 1.08 % 0.93 % 0.98 % Allowance for credit losses on loans/average loans (1) 1.11 0.95 1.10 Allowance for credit losses/year-end loans (1) 1.14 1.03 1.08 Allowance for credit losses/average loans (1) 1.17 1.05 1.22 (1) Loans exclude loans held-for-sale. 61 The following table details net charge-offs to average loans outstanding by loan category for the years ended December 31: (dollars in thousands) 2024 2023 2022 Commercial: Net charge-offs (recoveries) $ 34,549 $ 37,279 $ 2,275 Average loans for the year (1) $ 9,807,508 $ 9,338,940 $ 7,755,895 Net charge-offs (recoveries)/average loans 0.35 % 0.40 % 0.03 % Commercial real estate: Net charge-offs (recoveries) $ 15,852 $ 8,781 $ 5,424 Average loans for the year $ 15,653,383 $ 13,248,587 $ 11,292,033 Net charge-offs (recoveries)/average loans 0.10 % 0.07 % 0.05 % BBCC: Net charge-offs (recoveries) $ 1,476 $ 1,375 $ (196) Average loans for the year $ 403,929 $ 385,171 $ 352,276 Net charge-offs (recoveries)/average loans 0.37 % 0.36 % (0.06) % Residential real estate: Net charge-offs (recoveries) $ (869) $ (1,012) $ (416) Average loans for the year (1) $ 6,808,655 $ 6,642,224 $ 5,618,883 Net charge-offs (recoveries)/average loans (0.01) % (0.02) % (0.01) % Indirect: Net charge-offs (recoveries) $ 4,336 $ 1,389 $ 1,262 Average loans for the year $ 1,125,139 $ 1,013,560 $ 1,089,394 Net charge-offs (recoveries)/average loans 0.39 % 0.14 % 0.12 % Direct: Net charge-offs (recoveries) $ 6,520 $ 8,186 $ 8,242 Average loans for the year $ 478,450 $ 568,345 $ 559,943 Net charge-offs (recoveries)/average loans 1.36 % 1.44 % 1.47 % Home equity: Net charge-offs (recoveries) $ 140 $ (88) $ (492) Average loans for the year $ 1,229,234 $ 1,036,193 $ 921,018 Net charge-offs (recoveries)/average loans 0.01 % (0.01) % (0.05) % Total loans: Net charge-offs (recoveries) $ 62,004 $ 55,910 $ 16,099 Average loans for the year (1) $ 35,506,298 $ 32,233,020 $ 27,589,442 Net charge-offs (recoveries)/average loans 0.17 % 0.17 % 0.06 % (1) Average loans exclude loans held-for-sale.
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.
These loans are secured by a primary residence and are underwritten using traditional underwriting systems to assess the credit risks of the consumer. 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 may be permitted with mortgage insurance or other mitigating factors.
The following table details the components of noninterest income: Years Ended December 31, % Change From Prior Year (dollars in thousands) 2023 2022 2021 2023 2022 Wealth and investment services fees $ 107,784 $ 100,851 $ 65,048 6.9 % 55.0 % Service charges on deposit accounts 71,945 72,501 31,658 (0.8) 129.0 Debit card and ATM fees 42,153 40,227 23,766 4.8 69.3 Mortgage banking revenue 16,319 23,015 42,558 (29.1) (45.9) Capital markets income 24,419 25,986 21,997 (6.0) 18.1 Company-owned life insurance 15,397 14,564 10,589 5.7 37.5 Debt securities gains (losses), net (6,265) (88) 4,327 N/M (102.0) Gain on sale of Visa Class B restricted shares 21,635 — — N/A N/A Gain on sale of health savings accounts — 90,673 — (100.0) N/A Other income 39,955 32,050 14,276 24.7 124.5 Total noninterest income $ 333,342 $ 399,779 $ 214,219 (16.6) % 86.6 % 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.
This source of revenue as a percentage of total revenue was 19% in 2024 compared to 18% in 2023. 47 The following table details the components of noninterest income: Years Ended December 31, % Change From Prior Year (dollars in thousands) 2024 2023 2022 2024 2023 Wealth and investment services fees $ 116,791 $ 107,784 $ 100,851 8.4 % 6.9 % Service charges on deposit accounts 78,175 71,945 72,501 8.7 (0.8) Debit card and ATM fees 43,400 42,153 40,227 3.0 4.8 Mortgage banking revenue 26,237 16,319 23,015 60.8 (29.1) Capital markets income 20,299 24,419 25,986 (16.9) (6.0) Company-owned life insurance 20,987 15,397 14,564 36.3 5.7 Debt securities gains (losses), net (212) (6,265) (88) (96.6) N/M 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) Other income 49,020 39,955 32,050 22.7 24.7 Total noninterest income $ 354,697 $ 333,342 $ 399,779 6.4 % (16.6) % Noninterest income increased $21.4 million in 2024 compared to 2023.
Continued loan growth in future periods, a decline in our current level of recoveries, or an increase in charge-offs could result in an increase in provision expense. Additionally, provision expense may be volatile due to changes in CECL model assumptions of credit quality, macroeconomic factors and conditions, and loan composition, which drive the allowance for credit losses balance.
Additionally, provision expense may be volatile due to changes in CECL model assumptions of credit quality, macroeconomic factors and conditions, and loan composition, which drive the allowance for credit losses balance.
The amount of interest income actually recorded on nonaccrual and renegotiated loans was $5.0 million in 2023 and $5.1 million in 2022. 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.
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 $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.
At December 31, 2023, the Company held $435.2 million of non-owner-occupied commercial real estate, or 1.3% of total loans, that mature within 18 months with an interest rate below 4%. 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.
At December 31, 2024, the Company held $459.6 million of non-owner-occupied commercial real estate, or 1% of total loans, that mature within 18 months with an interest rate below 4%.
Old National’s Common Stock is traded on the NASDAQ under the symbol “ONB” with 58,178 shareholders of record at December 31, 2023. 53 Capital Adequacy 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.
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. Capital Adequacy Old National and the banking industry are subject to various regulatory capital requirements administered by the federal banking agencies.
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information contained under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Risk” of this Form 10-K is incorporated herein by reference in response to this item. 68
Biggest changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information contained under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Risk” of this Form 10-K is incorporated herein by reference in response to this item. 70

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