Commitments, Contingencies, and Financial Guarantees

6 Months Ended

Jun. 30, 2023

Commitments and Contingencies Disclosure [Abstract]

Commitments, Contingencies, and Financial Guarantees

COMMITMENTS, CONTINGENCIES, AND FINANCIAL GUARANTEES

Litigation

At June 30, 2023, there were certain legal proceedings pending against the Company and its subsidiaries in the ordinary course of business. While the outcome of any legal proceeding is inherently uncertain, based on information currently available, the Company’s management does not expect that any potential liabilities arising from pending legal matters will have a material adverse effect on the Company’s business, financial position, or results of operations.

Credit-Related Financial Instruments

Old National holds instruments, in the normal course of business with clients, that are considered financial guarantees and are recorded at fair value.  Standby letters of credit guarantees are issued in connection with

agreements made by clients to counterparties.  Standby letters of credit are contingent upon failure of the client to perform the terms of the underlying contract.  Credit risk associated with standby letters of credit is essentially the same as that associated with extending loans to clients and is subject to normal credit policies.  The term of these standby letters of credit is typically one year or less.  These commitments are not recorded in the consolidated financial statements.  

The following table summarizes Old National Bank’s unfunded loan commitments and standby letters of credit:

(dollars in thousands)	June 30, 2023		December 31, 2022
Unfunded loan commitments	$	9,380,354	$	8,979,334
Standby letters of credit (1)	182,418		174,070

(1)Notional amount, which represents the maximum amount of future funding requirements. The carrying value was $0.9 million at June 30, 2023 and $0.8 million at December 31, 2022.

At June 30, 2023, approximately 4% of the unfunded loan commitments had fixed rates, with the remainder having floating rates ranging from 0% to 22%.  The allowance for unfunded loan commitments totaled $37.0 million at June 30, 2023 and $32.2 million at December 31, 2022.

Old National is a party in risk participation transactions of interest rate swaps, which had total notional amounts of $441.9 million at June 30, 2023 and $398.9 million at December 31, 2022.

Visa Class B Restricted Shares

In 2008, Old National received Visa Class B restricted shares as part of Visa’s initial public offering.  These shares are transferable only under limited circumstances until they can be converted into the publicly traded Class A common shares.  This conversion will not occur until the final settlement of certain litigation for which Visa is indemnified by the holders of Visa’s Class B shares, including Old National.  Visa funded an escrow account from its initial public offering to settle these litigation claims.  Increases in litigation claims requiring Visa to fund the escrow account due to insufficient funds will result in a reduction of the conversion ratio of each Visa Class B share to unrestricted Class A shares.  As of June 30, 2023, the conversion ratio was 1.5902.  Based on the existing transfer restriction and the uncertainty of the outcome of the Visa litigation, the 65,466 Class B shares that Old National owns at June 30, 2023 are carried at a zero cost basis and are included in other assets with our equity securities that have no readily determinable fair value.