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Loans and Allowance for Credit Losses (Tables)

3 Months Ended

Mar. 31, 2022

Schedule of Composition of Loans and Impact of Adoption

The portfolio segment reclassifications follow:


			Segment
	Statement		Portfolio		After
(dollars in thousands)	Balance		Reclassifications		Reclassifications
March 31, 2022
Loans:
Commercial	$	8,624,253	$	(189,580)	$	8,434,673
Commercial real estate	11,337,735		(154,733)		11,183,002
BBCC	N/A		344,313		344,313
Residential real estate	5,706,155		—		5,706,155
Consumer	2,668,101		(2,668,101)		N/A
Indirect	N/A		906,526		906,526
Direct	N/A		680,690		680,690
Home equity	N/A		1,080,885		1,080,885
Total	$	28,336,244	$	—	$	28,336,244

December 31, 2021
Loans:
Commercial	$	3,391,769	$	(191,557)	$	3,200,212
Commercial real estate	6,380,674		(159,190)		6,221,484
BBCC	N/A		350,747		350,747
Residential real estate	2,255,289		—		2,255,289
Consumer	1,574,114		(1,574,114)		N/A
Indirect	N/A		873,139		873,139
Direct	N/A		140,385		140,385
Home equity	N/A		560,590		560,590
Total	$	13,601,846	$	—	$	13,601,846

Schedule of Composition of Loans

The composition of loans by portfolio segment follows:


(dollars in thousands)	March 31, 2022		December 31, 2021
Commercial (1) (2)	$	8,434,673	$	3,200,212
Commercial real estate	11,183,002		6,221,484
BBCC	344,313		350,747
Residential real estate	5,706,155		2,255,289
Indirect	906,526		873,139
Direct	680,690		140,385
Home equity	1,080,885		560,590
Total loans	28,336,244		13,601,846
Allowance for credit losses	(280,507)		(107,341)
Net loans	$	28,055,737	$	13,494,505

(1)Includes direct finance leases of $71.1 million at March 31, 2022 and $25.1 million at December 31, 2021.

(2)Includes PPP loans of $205.3 million at March 31, 2022 and $169.0 million at December 31, 2021.

Schedule of Activity in Allowance for Loan Losses

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


(dollars in thousands)	Balance at Beginning of Period		Allowance Established for Acquired PCD Loans		Charge-offs		Recoveries		Provision for Credit Losses		Balance at End of Period
Three Months Ended March 31, 2022
Commercial	$	27,232	$	35,040	$	(1,880)	$	325	$	38,754	$	99,471
Commercial real estate	64,004		42,601		(507)		182		34,210		140,490
BBCC	2,458		—		(28)		57		(418)		2,069
Residential real estate	9,347		136		(185)		440		7,514		17,252
Indirect	1,743		—		(483)		222		166		1,648
Direct	528		31		(1,530)		582		14,839		14,450
Home equity	2,029		723		(51)		82		2,344		5,127
Total	$	107,341	$	78,531	$	(4,664)	$	1,890	$	97,409	$	280,507

Three Months Ended March 31, 2021
Commercial	$	30,567	$	—	$	(407)	$	238	$	(5,268)	$	25,130
Commercial real estate	75,810		—		(1)		73		(5,321)		70,561
BBCC	6,120		—		(36)		41		(3,588)		2,537
Residential real estate	12,608		—		(158)		87		(2,272)		10,265
Indirect	3,580		—		(584)		537		(1,278)		2,255
Direct	855		—		(302)		260		(148)		665
Home equity	1,848		—		(82)		339		519		2,624
Total	$	131,388	$	—	$	(1,570)	$	1,575	$	(17,356)	$	114,037

Old National’s activity in the allowance for credit losses on unfunded loan commitments was as follows:


	Three Months Ended March 31,
(dollars in thousands)	2022		2021
Allowance for credit losses on unfunded loan commitments:
Balance at beginning of period	$	10,879	$	11,689
Provision for credit losses on unfunded commitments for loans acquired during the period	11,013		—
Expense (reversal of expense) for credit losses	154		(1,324)
Balance at end of period	$	22,046	$	10,365

Schedule of Risk Category of Loans and Amortized Cost

The following table summarizes the amortized cost of term loans by risk category of commercial, commercial real estate, and BBCC loans by loan portfolio segment, class of loan, and origination year:


	Origination Year														Revolving to Term
(dollars in thousands)	2022		2021		2020		2019		2018		Prior		Revolving				Total
March 31, 2022
Commercial:
Risk Rating:
Pass	$	529,094	$	2,006,908	$	1,118,822	$	1,010,657	$	464,275	$	653,504	$	2,047,370	$	140,617	$	7,971,247
Criticized	4,190		26,183		17,198		32,638		18,458		20,190		68,124		1,955		188,936
Classified:
Substandard	25,856		43,839		22,160		48,825		28,063		12,127		28,989		19,315		229,174
Nonaccrual	—		2,416		4,280		3,039		1,244		9,599		3,233		6,375		30,186
Doubtful	—		1,738		2,128		878		2,958		3,765		3,663		—		15,130
Total	$	559,140	$	2,081,084	$	1,164,588	$	1,096,037	$	514,998	$	699,185	$	2,151,379	$	168,262	$	8,434,673

Commercial real estate:
Risk Rating:
Pass	$	650,646	$	2,778,302	$	2,236,175	$	1,553,009	$	958,205	$	1,672,138	$	117,993	$	483,920	$	10,450,388
Criticized	36,934		49,341		35,471		56,892		59,254		40,428		—		34,058		312,378
Classified:
Substandard	6,497		67,687		28,372		50,652		62,504		65,373		2,291		4,258		287,634
Nonaccrual	—		8,197		4,842		(1)		1,393		10,661		309		809		26,210
Doubtful	—		41,379		4,818		1,541		7,794		50,860		—		—		106,392
Total	$	694,077	$	2,944,906	$	2,309,678	$	1,662,093	$	1,089,150	$	1,839,460	$	120,593	$	523,045	$	11,183,002

BBCC:
Risk Rating:
Pass	$	21,151	$	77,808	$	64,413	$	49,309	$	30,895	$	26,428	$	45,160	$	19,025	$	334,189
Criticized	343		1,493		1,315		777		207		—		488		1,752		6,375
Classified:
Substandard	25		280		—		546		16		161		236		270		1,534
Nonaccrual	—		20		203		—		71		—		—		849		1,143
Doubtful	—		—		25		395		364		288		—		—		1,072
Total	$	21,519	$	79,601	$	65,956	$	51,027	$	31,553	$	26,877	$	45,884	$	21,896	$	344,313


	Origination Year														Revolving to Term
(dollars in thousands)	2021		2020		2019		2018		2017		Prior		Revolving				Total
December 31, 2021
Commercial:
Risk Rating:
Pass	$	918,456	$	563,869	$	271,158	$	98,468	$	156,136	$	235,639	$	667,628	$	130,470	$	3,041,824
Criticized	9,998		7,885		6,660		—		7,809		2,658		14,601		10,076		59,687
Classified:
Substandard	14,773		14,468		10,200		9,849		5,521		945		6,883		10,322		72,961
Nonaccrual	1,069		3,507		1,276		3,721		1,448		—		845		7,796		19,662
Doubtful	—		178		—		288		337		5,275		—		—		6,078
Total	$	944,296	$	589,907	$	289,294	$	112,326	$	171,251	$	244,517	$	689,957	$	158,664	$	3,200,212

Commercial real estate:
Risk Rating:
Pass	$	1,555,880	$	1,474,271	$	846,921	$	481,508	$	462,176	$	611,680	$	42,609	$	451,544	$	5,926,589
Criticized	27,622		24,790		39,914		—		21,614		22,157		—		34,387		170,484
Classified:
Substandard	4,706		12,118		9,933		9,058		18,165		11,351		2,291		4,339		71,961
Nonaccrual	1,620		2,997		—		1,627		3,419		8,905		315		871		19,754
Doubtful	6,653		—		1,970		342		11,218		12,513		—		—		32,696
Total	$	1,596,481	$	1,514,176	$	898,738	$	492,535	$	516,592	$	666,606	$	45,215	$	491,141	$	6,221,484

BBCC:
Risk Rating:
Pass	$	81,710	$	69,749	$	54,580	$	34,461	$	25,113	$	8,296	$	47,571	$	18,778	$	340,258
Criticized	1,320		1,170		841		160		—		—		670		1,578		5,739
Classified:
Substandard	284		24		79		7		187		465		103		239		1,388
Nonaccrual	—		88		—		—		66		162		—		1,136		1,452
Doubtful	—		25		284		1,391		—		210		—		—		1,910
Total	$	83,314	$	71,056	$	55,784	$	36,019	$	25,366	$	9,133	$	48,344	$	21,731	$	350,747

The following table presents the amortized cost of term residential real estate and consumer loans based on payment activity and origination year:


	Origination Year														Revolving to Term
(dollars in thousands)	2022		2021		2020		2019		2018		Prior		Revolving				Total
March 31, 2022
Residential real estate:
Risk Rating:
Performing	$	261,002	$	1,923,614	$	1,943,517	$	536,379	$	153,889	$	848,879	$	7,338	$	101	$	5,674,719
Nonperforming	—		276		567		630		1,383		28,580		—		—		31,436
Total	$	261,002	$	1,923,890	$	1,944,084	$	537,009	$	155,272	$	877,459	$	7,338	$	101	$	5,706,155

Indirect:
Risk Rating:
Performing	$	132,303	$	336,662	$	205,006	$	126,786	$	56,493	$	46,887	$	—	$	2	$	904,139
Nonperforming	—		339		521		492		399		636		—		—		2,387
Total	$	132,303	$	337,001	$	205,527	$	127,278	$	56,892	$	47,523	$	—	$	2	$	906,526

Direct:
Risk Rating:
Performing	$	51,785	$	208,885	$	110,180	$	91,848	$	67,637	$	57,716	$	91,394	$	42	$	679,487
Nonperforming	—		189		84		256		197		433		40		4		1,203
Total	$	51,785	$	209,074	$	110,264	$	92,104	$	67,834	$	58,149	$	91,434	$	46	$	680,690

Home equity:
Risk Rating:
Performing	$	4,106	$	12,367	$	8,145	$	17,441	$	14,323	$	47,692	$	947,382	$	16,663	$	1,068,119
Nonperforming	213		341		341		666		1,354		6,483		361		3,007		12,766
Total	$	4,319	$	12,708	$	8,486	$	18,107	$	15,677	$	54,175	$	947,743	$	19,670	$	1,080,885

	Origination Year														Revolving to Term
	2021		2020		2019		2018		2017		Prior		Revolving				Total
December 31, 2021
Residential real estate:
Risk Rating:
Performing	$	625,582	$	632,705	$	272,600	$	72,766	$	103,866	$	529,293	$	12	$	105	$	2,236,929
Nonperforming	96		165		166		350		855		16,728		—		—		18,360
Total	$	625,678	$	632,870	$	272,766	$	73,116	$	104,721	$	546,021	$	12	$	105	$	2,255,289

Indirect:
Risk Rating:
Performing	$	361,485	$	231,156	$	146,978	$	68,513	$	41,598	$	20,819	$	—	$	9	$	870,558
Nonperforming	262		524		614		510		430		241		—		—		2,581
Total	$	361,747	$	231,680	$	147,592	$	69,023	$	42,028	$	21,060	$	—	$	9	$	873,139

Direct:
Risk Rating:
Performing	$	34,058	$	16,135	$	14,396	$	14,579	$	7,432	$	15,831	$	36,812	$	192	$	139,435
Nonperforming	13		53		130		133		35		536		42		8		950
Total	$	34,071	$	16,188	$	14,526	$	14,712	$	7,467	$	16,367	$	36,854	$	200	$	140,385

Home equity:
Risk Rating:
Performing	$	—	$	—	$	633	$	349	$	535	$	—	$	539,057	$	16,768	$	557,342
Nonperforming	—		—		16		9		41		1		258		2,923		3,248
Total	$	—	$	—	$	649	$	358	$	576	$	1	$	539,315	$	19,691	$	560,590

Schedule of Past Due Financing Receivables

The following table presents the aging of the amortized cost basis in past due loans by class of loans:


(dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Past Due 90 Days or More		Total Past Due		Current		Total Loans
March 31, 2022
Commercial	$	27,863	$	6,831	$	6,921	$	41,615	$	8,393,058	$	8,434,673
Commercial real estate	49,697		14,086		72,794		136,577		11,046,425		11,183,002
BBCC	1,044		20		164		1,228		343,085		344,313
Residential	17,624		1,591		10,733		29,948		5,676,207		5,706,155
Indirect	3,277		598		469		4,344		902,182		906,526
Direct	4,778		897		1,519		7,194		673,496		680,690
Home equity	2,079		529		3,678		6,286		1,074,599		1,080,885
Total	$	106,362	$	24,552	$	96,278	$	227,192	$	28,109,052	$	28,336,244

December 31, 2021
Commercial	$	2,723	$	617	$	1,603	$	4,943	$	3,195,269	$	3,200,212
Commercial real estate	1,402		280		7,042		8,724		6,212,760		6,221,484
BBCC	747		162		109		1,018		349,729		350,747
Residential	8,273		2,364		4,554		15,191		2,240,098		2,255,289
Indirect	3,888		867		554		5,309		867,830		873,139
Direct	687		159		162		1,008		139,377		140,385
Home equity	693		199		777		1,669		558,921		560,590
Total	$	18,413	$	4,648	$	14,801	$	37,862	$	13,563,984	$	13,601,846

Schedule of Nonaccrual and Past Due Loans

The following table presents the amortized cost basis of loans on nonaccrual status and loans past due 90 days or more and still accruing by class of loan:


	March 31, 2022						December 31, 2021
(dollars in thousands)	Nonaccrual Amortized Cost		Nonaccrual With No Related Allowance		Past Due 90 Days or More and Accruing		Nonaccrual Amortized Cost		Nonaccrual With No Related Allowance		Past Due 90 Days or More and Accruing
Commercial	$	45,316	$	13,579	$	396	$	25,740	$	9,574	$	—
Commercial real estate	132,602		31,865		985		52,450		25,139		—
BBCC	2,215		—		—		3,362		—		—
Residential	31,436		—		165		18,360		—		—
Indirect	2,387		—		—		2,581		—		4
Direct	1,203		—		100		950		—		3
Home equity	12,766		—		—		3,248		—		—
Total	$	227,925	$	45,444	$	1,646	$	106,691	$	34,713	$	7

The following table presents the amortized cost basis of collateral dependent loans by class of loan:


	Type of Collateral
(dollars in thousands)	Real Estate		Blanket Lien		Investment Securities/Cash		Auto		Other
March 31, 2022
Commercial	$	13,539	$	23,217	$	3,052	$	805	$	3,716
Commercial real estate	119,136		—		939		—		6,638
BBCC	1,509		587		26		93		—
Residential	31,436		—		—		—		—
Indirect	—		—		—		2,387		—
Direct	560		—		—		215		34
Home equity	12,766		—		—		—		—
Total loans	$	178,946	$	23,804	$	4,017	$	3,500	$	10,388

December 31, 2021
Commercial	$	8,100	$	13,816	$	3,394	$	80	$	302
Commercial real estate	38,657		—		961		—		6,653
BBCC	1,895		1,331		43		93		—
Residential	18,360		—		—		—		—
Indirect	—		—		—		2,581		—
Direct	724		—		1		152		20
Home equity	3,248		—		—		—		—
Total loans	$	70,984	$	15,147	$	4,399	$	2,906	$	6,975

Schedule of Activity in Trouble Debt Restructurings

The following table presents activity in TDRs:


(dollars in thousands)	Beginning Balance		(Charge-offs)/ Recoveries		(Payments)/ Disbursements		(Removals)/ Additions		Ending Balance
Three Months Ended March 31, 2022
Commercial	$	7,456	$	—	$	(1,897)	$	1,485	$	7,044
Commercial real estate	17,158		4		(211)		15,477		32,428
BBCC	87		3		(3)		—		87
Residential	2,435		—		(30)		—		2,405
Indirect	—		1		(1)		—		—
Direct	2,704		—		(25)		—		2,679
Home equity	199		1		(20)		—		180
Total	$	30,039	$	9	$	(2,187)	$	16,962	$	44,823

Three Months Ended March 31, 2021
Commercial	$	11,090	$	—	$	(1,448)	$	(1,171)	$	8,471
Commercial real estate	17,606		8		(229)		—		17,385
BBCC	112		3		(10)		—		105
Residential	2,824		—		(221)		—		2,603
Indirect	—		2		(2)		—		—
Direct	739		1		(14)		—		726
Home equity	282		1		(7)		—		276
Total	$	32,653	$	15	$	(1,931)	$	(1,171)	$	29,566

Schedule of Credit Deteriorated Loans

Old National has purchased loans, for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination. The carrying amount of those loans is as follows:


(dollars in thousands)	First Midwest (1)
Purchase price of loans at acquisition	$	1,400,831
Allowance for credit losses at acquisition	78,531
Non-credit discount/(premium) at acquisition	9,003
Par value of acquired loans at acquisition	$	1,488,365

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