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Loans and Allowance for Credit Losses (Tables)

3 Months Ended

Mar. 31, 2023

Schedule of Composition of Loans and Impact of Adoption

The portfolio segment reclassifications follow:


	Balance Sheet Line Item		Portfolio Segment Reclassifications		After Reclassifications

(dollars in thousands)
March 31, 2023
Loans:
Commercial	$	9,751,875	$	(213,187)	$	9,538,688
Commercial real estate	12,908,380		(160,041)		12,748,339
BBCC	N/A		373,228		373,228
Residential real estate	6,568,666		—		6,568,666
Consumer	2,593,453		(2,593,453)		N/A
Indirect	N/A		1,003,287		1,003,287
Direct	N/A		580,726		580,726
Home equity	N/A		1,009,440		1,009,440
Total	$	31,822,374	$	—	$	31,822,374

December 31, 2022
Loans:
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

Schedule of Composition of Loans

The composition of loans by portfolio segment follows:


(dollars in thousands)	March 31, 2023		December 31, 2022
Commercial (1)	$	9,538,688	$	9,298,624
Commercial real estate	12,748,339		12,298,748
BBCC	373,228		368,602
Residential real estate	6,568,666		6,460,441
Indirect	1,003,287		1,034,257
Direct	580,726		629,186
Home equity	1,009,440		1,033,783
Total loans	31,822,374		31,123,641
Allowance for credit losses on loans	(298,711)		(303,671)
Net loans	$	31,523,663	$	30,819,970

(1)Includes direct finance leases of $178.7 million at March 31, 2023 and $188.1 million at December 31, 2022.

Schedule of Activity in Allowance for Loan Losses

Old National’s activity in the allowance for credit losses on 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 Loan Losses		Balance at End of Period
Three Months Ended March 31, 2023
Commercial	$	120,612	$	—	$	(12,423)	$	283	$	17,296	$	125,768
Commercial real estate	138,244		—		(1,189)		263		(1,970)		135,348
BBCC	2,431		—		(28)		73		(160)		2,316
Residential real estate	21,916		—		(23)		72		(1,758)		20,207
Indirect	1,532		—		(1,197)		412		687		1,434
Direct	12,116		—		(3,238)		581		(2,693)		6,766
Home equity	6,820		—		(82)		67		67		6,872
Total	$	303,671	$	—	$	(18,180)	$	1,751	$	11,469	$	298,711

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

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)	2023		2022
Allowance for credit losses on unfunded loan commitments:
Balance at beginning of period	$	32,188	$	10,879
Provision for credit losses on unfunded commitments acquired during the period	—		11,013
Provision for unfunded loan commitments	1,968		154
Balance at end of period	$	34,156	$	22,046

Schedule of Risk Category of Loans and Amortized Cost

The following table summarizes the amortized cost of term loans by risk category and gross charge-offs 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)	2023		2022		2021		2020		2019		Prior		Revolving				Total
March 31, 2023
Commercial:
Risk Rating:
Pass	$	673,613	$	2,299,378	$	1,517,883	$	712,011	$	629,196	$	694,970	$	2,041,109	$	433,838	$	9,001,998
Criticized	24,476		38,369		26,289		52,907		31,378		6,538		56,784		10,792		247,533
Classified:
Substandard	5,879		16,596		75,646		15,505		21,896		3,401		40,883		47,187		226,993
Nonaccrual	—		—		1,462		2,049		1,468		—		6,436		5,172		16,587
Doubtful	—		20,828		11,687		3,633		73		9,356		—		—		45,577
Total	$	703,968	$	2,375,171	$	1,632,967	$	786,105	$	684,011	$	714,265	$	2,145,212	$	496,989	$	9,538,688
Gross charge-offs	$	—	$	—	$	5,230	$	—	$	6,789	$	239	$	165	$	—	$	12,423

Commercial real estate:
Risk Rating:
Pass	$	600,890	$	3,129,239	$	2,833,471	$	1,942,417	$	1,171,555	$	1,560,183	$	74,982	$	643,987	$	11,956,724
Criticized	217		56,997		40,407		22,202		70,931		105,130		—		42,466		338,350
Classified:
Substandard	8,653		89,716		22,101		20,207		98,147		82,928		—		18,138		339,890
Nonaccrual	—		648		9,785		4,879		—		21,708		—		3,151		40,171
Doubtful	—		2,627		35,723		9,919		4,507		20,428		—		—		73,204
Total	$	609,760	$	3,279,227	$	2,941,487	$	1,999,624	$	1,345,140	$	1,790,377	$	74,982	$	707,742	$	12,748,339
Gross charge-offs	$	—	$	54	$	735	$	400	$	—	$	—	$	—	$	—	$	1,189

BBCC:
Risk Rating:
Pass	$	25,194	$	86,881	$	59,220	$	48,866	$	35,291	$	27,217	$	59,846	$	17,644	$	360,159
Criticized	50		1,843		479		265		1,023		57		2,047		1,660		7,424
Classified:
Substandard	10		986		641		33		415		—		603		658		3,346
Nonaccrual	—		39		36		130		—		626		—		836		1,667
Doubtful	—		39		73		276		108		136		—		—		632
Total	$	25,254	$	89,788	$	60,449	$	49,570	$	36,837	$	28,036	$	62,496	$	20,798	$	373,228
Gross charge-offs	$	—	$	—	$	28	$	—	$	—	$	—	$	—	$	—	$	28


	Origination Year														Revolving to Term
(dollars in thousands)	2022		2021		2020		2019		2018		Prior		Revolving				Total
December 31, 2022
Commercial:
Risk Rating:
Pass	$	2,388,618	$	1,754,364	$	796,340	$	738,208	$	362,986	$	388,617	$	1,988,763	$	329,119	$	8,747,015
Criticized	40,856		30,661		63,557		33,490		9,195		5,312		61,036		4,327		248,434
Classified:
Substandard	37,223		47,522		16,540		22,925		4,844		21,204		67,402		25,143		242,803
Nonaccrual	3,627		1,453		566		—		—		—		1,634		6,623		13,903
Doubtful	2,821		17,604		3,720		8,005		5,968		8,351		—		—		46,469
Total	$	2,473,145	$	1,851,604	$	880,723	$	802,628	$	382,993	$	423,484	$	2,118,835	$	365,212	$	9,298,624

Commercial real estate:
Risk Rating:
Pass	$	3,066,960	$	2,828,758	$	1,989,000	$	1,219,025	$	675,572	$	1,018,719	$	57,818	$	689,553	$	11,545,405
Criticized	75,306		34,422		22,569		82,637		86,504		56,864		—		23,282		381,584
Classified:
Substandard	46,231		16,928		24,319		78,468		57,824		21,591		—		4,108		249,469
Nonaccrual	3,151		9,541		5,014		—		2,312		22,155		—		3,257		45,430
Doubtful	1,934		38,386		10,011		4,605		1,523		20,401		—		—		76,860
Total	$	3,193,582	$	2,928,035	$	2,050,913	$	1,384,735	$	823,735	$	1,139,730	$	57,818	$	720,200	$	12,298,748

BBCC:
Risk Rating:
Pass	$	90,341	$	64,161	$	52,304	$	36,868	$	23,618	$	11,333	$	60,016	$	18,881	$	357,522
Criticized	1,504		525		368		692		353		—		1,006		1,603		6,051
Classified:
Substandard	811		143		—		421		—		—		543		682		2,600
Nonaccrual	42		37		118		—		429		284		—		639		1,549
Doubtful	40		107		439		157		64		73		—		—		880
Total	$	92,738	$	64,973	$	53,229	$	38,138	$	24,464	$	11,690	$	61,565	$	21,805	$	368,602

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)	2023		2022		2021		2020		2019		Prior		Revolving				Total
March 31, 2023
Residential real estate:
Risk Rating:
Performing	$	92,032	$	1,419,736	$	1,975,809	$	1,749,348	$	472,547	$	823,622	$	—	$	84	$	6,533,178
Nonperforming	—		1,272		2,373		2,421		2,796		26,620		—		6		35,488
Total	$	92,032	$	1,421,008	$	1,978,182	$	1,751,769	$	475,343	$	850,242	$	—	$	90	$	6,568,666
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	23	$	—	$	—	$	23

Indirect:
Risk Rating:
Performing	$	74,980	$	465,805	$	225,377	$	126,788	$	69,147	$	37,704	$	—	$	58	$	999,859
Nonperforming	—		505		1,286		627		467		543		—		—		3,428
Total	$	74,980	$	466,310	$	226,663	$	127,415	$	69,614	$	38,247	$	—	$	58	$	1,003,287
Gross charge-offs	$	—	$	514	$	430	$	93	$	111	$	49	$	—	$	—	$	1,197

Direct:
Risk Rating:
Performing	$	27,097	$	121,525	$	141,746	$	68,407	$	48,981	$	92,285	$	74,520	$	2,118	$	576,679
Nonperforming	—		401		554		580		636		1,863		7		6		4,047
Total	$	27,097	$	121,926	$	142,300	$	68,987	$	49,617	$	94,148	$	74,527	$	2,124	$	580,726
Gross charge-offs	$	—	$	471	$	794	$	286	$	327	$	195	$	1,165	$	—	$	3,238

Home equity:
Risk Rating:
Performing	$	—	$	1,273	$	876	$	1,382	$	1,068	$	7,938	$	962,911	$	20,456	$	995,904
Nonperforming	—		162		133		161		930		5,470		1,924		4,756		13,536
Total	$	—	$	1,435	$	1,009	$	1,543	$	1,998	$	13,408	$	964,835	$	25,212	$	1,009,440
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	82	$	—	$	—	$	82


	Origination Year														Revolving to Term
	2022		2021		2020		2019		2018		Prior		Revolving				Total
December 31, 2022
Residential real estate:
Risk Rating:
Performing	$	1,327,168	$	1,945,792	$	1,825,762	$	478,529	$	136,260	$	712,175	$	7	$	88	$	6,425,781
Nonperforming	59		529		861		873		1,826		30,512		—		—		34,660
Total	$	1,327,227	$	1,946,321	$	1,826,623	$	479,402	$	138,086	$	742,687	$	7	$	88	$	6,460,441

Indirect:
Risk Rating:
Performing	$	504,410	$	249,407	$	144,265	$	82,304	$	31,484	$	19,095	$	—	$	62	$	1,031,027
Nonperforming	348		1,074		645		531		304		328		—		—		3,230
Total	$	504,758	$	250,481	$	144,910	$	82,835	$	31,788	$	19,423	$	—	$	62	$	1,034,257

Direct:
Risk Rating:
Performing	$	132,934	$	164,126	$	77,406	$	57,919	$	45,299	$	59,212	$	87,622	$	671	$	625,189
Nonperforming	115		851		614		205		327		1,526		5		354		3,997
Total	$	133,049	$	164,977	$	78,020	$	58,124	$	45,626	$	60,738	$	87,627	$	1,025	$	629,186

Home equity:
Risk Rating:
Performing	$	919	$	896	$	1,849	$	1,497	$	983	$	11,646	$	990,001	$	14,792	$	1,022,583
Nonperforming	166		160		166		446		794		4,308		1,698		3,462		11,200
Total	$	1,085	$	1,056	$	2,015	$	1,943	$	1,777	$	15,954	$	991,699	$	18,254	$	1,033,783

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, 2023
Commercial	$	8,463	$	3,397	$	9,333	$	21,193	$	9,517,495	$	9,538,688
Commercial real estate	14,648		256		26,659		41,563		12,706,776		12,748,339
BBCC	1,618		552		430		2,600		370,628		373,228
Residential	19,495		310		9,725		29,530		6,539,136		6,568,666
Indirect	4,229		1,141		511		5,881		997,406		1,003,287
Direct	3,759		955		1,511		6,225		574,501		580,726
Home equity	6,279		1,923		4,802		13,004		996,436		1,009,440
Total	$	58,491	$	8,534	$	52,971	$	119,996	$	31,702,378	$	31,822,374

December 31, 2022
Commercial	$	14,147	$	4,801	$	11,080	$	30,028	$	9,268,596	$	9,298,624
Commercial real estate	47,240		1,312		32,892		81,444		12,217,304		12,298,748
BBCC	730		365		603		1,698		366,904		368,602
Residential	24,181		5,033		11,753		40,967		6,419,474		6,460,441
Indirect	6,302		2,118		958		9,378		1,024,879		1,034,257
Direct	5,404		2,118		1,928		9,450		619,736		629,186
Home equity	6,585		1,966		4,707		13,258		1,020,525		1,033,783
Total	$	104,589	$	17,713	$	63,921	$	186,223	$	30,937,418	$	31,123,641

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, 2023						December 31, 2022
(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	$	62,164	$	14,695	$	—	$	60,372	$	7,873	$	152
Commercial real estate	113,375		36,495		—		122,290		33,445		—
BBCC	2,299		—		—		2,429		—		—
Residential	35,488		—		1,070		34,660		—		1,808
Indirect	3,428		—		—		3,230		—		28
Direct	4,047		—		119		3,997		—		133
Home equity	13,536		—		42		11,200		—		529
Total	$	234,337	$	51,190	$	1,231	$	238,178	$	41,318	$	2,650

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, 2023
Commercial	$	13,899	$	41,674	$	2,219	$	1,103	$	124
Commercial real estate	100,490		—		1,661		—		6,334
BBCC	1,823		464		—		12		—
Residential	35,488		—		—		—		—
Indirect	—		—		—		3,428		—
Direct	2,961		2		—		253		34
Home equity	13,536		—		—				—
Total loans	$	168,197	$	42,140	$	3,880	$	4,796	$	6,492

December 31, 2022
Commercial	$	8,962	$	42,754	$	2,690	$	1,611	$	980
Commercial real estate	108,871		—		1,718		—		6,411
BBCC	1,939		478		—		12		—
Residential	34,660		—		—		—		—
Indirect	—		—		—		3,230		—
Direct	2,991		13		—		232		23
Home equity	11,200		—		—		—		—
Total loans	$	168,623	$	43,245	$	4,408	$	5,085	$	7,414

Schedule of Activity in Trouble Debt Restructurings

The following table presents the amortized cost basis of loans with modifications to borrowers experiencing financial difficulty during the three months ended March 31, 2023 by class of loans and type of modification:


(dollars in thousands)	Term Extension		Total Class of Loans
Commercial	$	17,342	0.2	%
Commercial real estate	9,926		0.1	%





Total	$	27,268	0.1	%

Old National closely monitors the performance of loan modifications to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance of loans that have been modified during the three months ended March 31, 2023:


(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, 2023
Commercial	$	—	$	2,637	$	—	$	2,637	$	14,705	$	17,342
Commercial real estate	—		—		—		—		9,926		9,926





Total	$	—	$	2,637	$	—	$	2,637	$	24,631	$	27,268

The following table summarizes the nature of the loan modifications to borrowers experiencing financial difficulty during the three months ended March 31, 2023 by class of loans:

(dollars in thousands)

Weighted-
Average
Term
Extension
(in months)

Commercial

6.8

Commercial real estate

4.1

Total

5.6