Derivative Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Summary of Interest Rate Derivatives

The following table summarizes Old National’s derivatives designated as hedges:

	June 30, 2021						December 31, 2020
			Fair Value						Fair Value
(dollars in thousands)	Notional		Assets (1)		Liabilities (2)		Notional		Assets (1)		Liabilities (2)
Cash flow hedges
Interest rate collars and floors on loan pools	$	400,000	$	3,110	$	—	$	400,000	$	6,636	$	—
Interest rate swaps on borrowings	150,000		3,247		—		325,000		628		1,816
Fair value hedges
Interest rate swaps on investment securities	909,957		14,164		13,181		347,516		1,145		172
Interest rate swaps on borrowings	379,000		5,967		—		379,000		8,793		—
Total			$	26,488	$	13,181			$	17,202	$	1,988

(1)Derivative assets are included in other assets on the balance sheet.

(2)Derivative liabilities are included in other liabilities on the balance sheet.

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)						Gain (Loss) Recognized in Income on Related Hedged Items
Derivatives in Fair Value Hedging Relationships	Location of Gain or (Loss) Recognized 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
Three Months Ended June 30, 2021
Interest rate contracts	Interest income/(expense)	$	(1,251)	Fixed-rate debt	Interest income/(expense)	$	1,251
Interest rate contracts	Interest income/(expense)	(45,829)		Fixed-rate investment securities	Interest income/(expense)	45,481
Total		$	(47,080)			$	46,732
Three Months Ended June 30, 2020
Interest rate contracts	Interest income/(expense)	$	730	Fixed-rate debt	Interest income/(expense)	$	(789)
Six Months Ended June 30, 2021
Interest rate contracts	Interest income/(expense)	$	(2,826)	Fixed-rate debt	Interest income/(expense)	$	2,829
Interest rate contracts	Interest income/(expense)	9		Fixed-rate investment securities	Interest income/(expense)	(64)
Total		$	(2,817)			$	2,765
Six Months Ended June 30, 2020
Interest rate contracts	Interest income/(expense)	$	9,972	Fixed-rate debt	Interest income/(expense)	$	(10,016)

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

		Three Months Ended June 30,				Three Months Ended June 30,
(dollars in thousands)		2021		2020		2021		2020
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)	$	(1,272)	$	(246)	$	1,756	$	1,670
		Six Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020
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)	$	2,776	$	7,557	$	1,905	$	2,101

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

		Three Months Ended June 30,
(dollars in thousands)		2021		2020
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)	$	(75)	$	(122)
Mortgage contracts	Mortgage banking revenue	(5,578)		7,236
Foreign currency contracts	Other income/(expense)	(85)		(5)
Total		$	(5,738)	$	7,109
		Six Months Ended June 30,
		2021		2020
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)	$	310	$	(588)
Mortgage contracts	Mortgage banking revenue	(2,317)		12,055
Foreign currency contracts	Other income/(expense)	(49)		(24)
Total		$	(2,056)	$	11,443

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

Summary of Derivatives Not Designated as Hedging Instruments

The following table summarizes Old National’s derivatives not designated as hedges:

	June 30, 2021						December 31, 2020
			Fair Value						Fair Value
(dollars in thousands)	Notional		Assets (1)		Liabilities (2)		Notional		Assets (1)		Liabilities (2)
Interest rate lock commitments	$	157,600	$	4,668	$	—	$	224,719	$	9,375	$	—
Forward mortgage loan contracts	184,139		55		—		261,027		—		2,335
Customer interest rate swaps	2,274,193		73,114		4,977		2,008,149		113,300		133
Counterparty interest rate swaps (3)	2,274,193		367		9,367		2,008,149		—		13,543
Customer foreign currency forward contracts	16,764		408		—		9,990		324		—
Counterparty foreign currency forward contracts	16,688		—		321		9,854		—		188
Total			$	78,612	$	14,665			$	122,999	$	16,199

(1)Derivative assets are included in other assets on the balance sheet.

(2)Derivative liabilities are included in other liabilities on the balance sheet.

(3)The fair values of certain counterparty interest rate swaps are zero due to the settlement of centrally-cleared variation margin rules.  The net adjustment was $59.6 million as of June 30, 2021 and $100.4 million as of December 31, 2020.