Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Summary of Fair Value of Derivative Financial Instruments

The following table summarizes the fair value of derivative financial instruments utilized by Old National:

(dollars in thousands)	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
September 30, 2020
Derivatives designated as hedging instruments
Interest rate contracts	Other assets	$	18,758	Other liabilities	$	2,367
Total derivatives designated as hedging instruments		$	18,758		$	2,367
Derivatives not designated as hedging instruments
Interest rate contracts (1)	Other assets	$	124,712	Other liabilities	$	16,282
Mortgage contracts	Other assets	10,592		Other liabilities	—
Foreign currency contracts	Other assets	256		Other liabilities	127
Total derivatives not designated as hedging instruments		$	135,560		$	16,409
Total		$	154,318		$	18,776
December 31, 2019
Derivatives designated as hedging instruments
Interest rate contracts	Other assets	$	7,157	Other liabilities	$	1,046
Total derivatives designated as hedging instruments		$	7,157		$	1,046
Derivatives not designated as hedging instruments
Interest rate contracts (1)	Other assets	$	42,224	Other liabilities	$	10,883
Mortgage contracts	Other assets	1,702		Other liabilities	354
Foreign currency contracts	Other assets	218		Other liabilities	110
Total derivatives not designated as hedging instruments		$	44,144		$	11,347
Total		$	51,301		$	12,393

(1)The fair values of counterparty interest rate swaps are zero due to the settlement of centrally-cleared variation margin rules.  The net adjustment was $109.2 million as of September 30, 2020 and $31.6 million as of December 31, 2019.

Summary of Interest Rate Derivatives

Summary information about the interest rate swaps designated as fair value hedges is as follows:

(dollars in thousands)	September 30, 2020			December 31, 2019
Notional amounts	$	380,500		$	130,500
Weighted average pay rates	0.20		%	1.82		%
Weighted average receive rates	1.33		%	2.20		%
Weighted average maturity (in years)	2.4			2.8
Fair value of swaps	$	10,233		$	1,555

Summary information about the interest rate swaps designated as cash flow hedges is as follows: 

(dollars in thousands)	September 30, 2020			December 31, 2019
Notional amounts	$	325,000		$	25,000
Weighted average pay rates	0.74		%	3.52		%
Weighted average receive rates	0.34		%	1.93		%
Weighted average maturity (in years)	3.8			2.1
Unrealized gains (losses)	$	(2,222)		$	(954)

Summary information about the collars designated as cash flow hedges is as follows:

(dollars in thousands)	September 30, 2020			December 31, 2019
Notional amounts	$	300,000		$	300,000
Weighted average cap rates	3.21		%	3.21		%
Weighted average floor rates	2.21		%	2.21		%
Weighted average rates	0.16		%	1.70		%
Weighted average maturity (in years)	1.1			1.9
Unrealized gains (losses)	$	6,790		$	3,691

Summary information about the interest rate floor transactions designated as cash flow hedges is as follows:

(dollars in thousands)	September 30, 2020
Notional amounts	$	100,000
Weighted average floor strike rate	0.75		%
Weighted average rates	0.16		%
Weighted average maturity (in years)	2.5
Unrealized gains (losses)	$	1,590

Schedule of Derivative Instruments Effect on Consolidated Statement of Income

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

(dollars in thousands)	Location of Gain or (Loss) Recognized in in Income on Derivative	Gain (Loss) Recognized in Income on Derivative		Hedged Items in Fair Value Hedging Relationships	Location of Gain or (Loss) Recognized in in Income on Related Hedged Item	Gain (Loss) Recognized in Income on Related Hedged Items
Derivatives in Fair Value Hedging Relationships
Three Months Ended September 30, 2020
Interest rate contracts	Interest income/(expense)	$	(1,294)	Fixed-rate debt	Interest income/(expense)	$	1,290
Three Months Ended September 30, 2019
Interest rate contracts	Interest income/(expense)	$	12	Fixed-rate debt	Interest income/(expense)	$	(14)
Nine Months Ended September 30, 2020
Interest rate contracts	Interest income/(expense)	$	8,678	Fixed-rate debt	Interest income/(expense)	$	(8,726)
Nine Months Ended September 30, 2019
Interest rate contracts	Interest income/(expense)	$	12,925	Fixed-rate debt	Interest income/(expense)	$	(12,914)

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

		Three Months Ended September 30,				Three Months Ended September 30,
(dollars in thousands)		2020		2019		2020		2019
Derivatives in Cash Flow Hedging Relationships	Location of Gain or (Loss) Reclassified from AOCI into Income	Gain (Loss) Recognized in Other Comprehensive Income on Derivative				Gain (Loss) Reclassified from AOCI into Income
Interest rate contracts	Interest income/(expense)	$	(11)	$	(73)	$	1,550	$	21
		Nine Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019
Derivatives in Cash Flow Hedging Relationships	Location of Gain or (Loss) Reclassified from AOCI into Income	Gain (Loss) Recognized in Other Comprehensive Income on Derivative				Gain (Loss) Reclassified from AOCI into Income
Interest rate contracts	Interest income/(expense)	$	7,546	$	479	$	3,651	$	412

The effect of derivatives not designated as hedging instruments on the consolidated statements of income were as follows:

		Three Months Ended September 30,
(dollars in thousands)		2020		2019
Derivatives Not Designated as Hedging Instruments	Location of Gain or (Loss) Recognized in Income on Derivative	Gain (Loss) Recognized in Income on Derivative
Interest rate contracts (1)	Other income/(expense)	$	5	$	(116)
Mortgage contracts	Mortgage banking revenue	(2,811)		1,110
Foreign currency contracts	Other income/(expense)	49		—
Total		$	(2,757)	$	994
		Nine Months Ended September 30,
		2020		2019
Derivatives Not Designated as Hedging Instruments	Location of Gain or (Loss) Recognized in Income on Derivative	Gain (Loss) Recognized in Income on Derivative
Interest rate contracts (1)	Other income/(expense)	$	(582)	$	(247)
Mortgage contracts	Mortgage banking revenue	9,244		2,951
Foreign currency contracts	Other income/(expense)	25		(11)
Total		$	8,687	$	2,693

(1)Includes the valuation differences between the customer and offsetting swaps.

Schedule of Floor Spread Transactions Designated as Cash Flow Hedges

Summary information about the floor spread transactions designated as cash flow hedges at December 31, 2019 was as follows:

(dollars in thousands)	December 31, 2019
Notional amounts	$	210,000
Weighted average purchased floor strike rate	2.00		%
Weighted average sold floor rate	1.00		%
Weighted average rate	1.70		%
Weighted average maturity (in years)	2.1
Unrealized gains (losses)	$	1,820