Leases

12 Months Ended

Dec. 31, 2023

Lessee Disclosure [Abstract]

Leases

LEASES

Old National determines if an arrangement is or contains a lease at contract inception. Operating leases are included in other assets and other liabilities in our consolidated balance sheets. Finance leases are included in premises and equipment and other borrowings in our consolidated balance sheets.

Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. In determining the present value of lease payments, we use the implicit lease rate when readily determinable. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date. The incremental borrowing rate is the rate of interest that we would have to pay to borrow on a collateralized basis over a similar term in an amount equal to the lease payments in a similar economic environment.

Old National has operating and finance leases for land, office space, banking centers, and equipment. These leases are generally for periods of 5 to 20 years with various renewal options. We include certain renewal options in the measurement of our right-of-use assets and lease liabilities if they are reasonably certain to be exercised. Variable lease payments that are dependent on an index or a rate are initially measured using the index or rate at the commencement date and are included in the measurement of the lease liability. Variable lease payments that are not dependent on an index or a rate are excluded from the measurement of the lease liability and are recognized in profit and loss when incurred. Variable lease payments are defined as payments made for the right to use an asset that vary because of changes in facts or circumstances occurring after the commencement date, other than the passage of time.

Old National has lease agreements with lease and non-lease components, which are generally accounted for separately. For real estate leases, non-lease components and other non-components, such as common area maintenance charges, real estate taxes, and insurance are not included in the measurement of the lease liability since they are generally able to be segregated. For certain equipment leases, Old National accounts for the lease and non-lease components as a single lease component using the practical expedient available for that class of assets. Old National does not have any material sub-lease agreements.

The components of lease expense were as follows:

	Affected Line Item in the Statement of Income	Years Ended December 31,
(dollars in thousands)		2023		2022		2021
Operating lease cost	Occupancy/Equipment expense	$	31,175	$	29,368	$	12,336
Finance lease cost:
Amortization of right-of-use assets	Occupancy expense	2,921		2,672		2,356
Interest on lease liabilities	Interest expense	722		415		431
Sub-lease income	Occupancy expense	(387)		(448)		(438)
Total		$	34,431	$	32,007	$	14,685

Supplemental balance sheet information related to leases was as follows:

	December 31,
(dollars in thousands)	2023			2022
Operating Leases
Operating lease right-of-use assets	$	185,506		$	189,714
Operating lease liabilities	204,960			211,964
Finance Leases
Premises and equipment, net	19,820			10,799
Other borrowings	20,955			13,469
Weighted-Average Remaining Lease Term (in Years)
Operating leases	8.5			9.1
Finance leases	10.5			7.2
Weighted-Average Discount Rate
Operating leases	3.04		%	2.88		%
Finance leases	3.90		%	3.30		%

Supplemental cash flow information related to leases was as follows:

	Years Ended December 31,
(dollars in thousands)	2023		2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	31,720	$	30,340	$	13,823
Operating cash flows from finance leases	722		415		431
Financing cash flows from finance leases	2,533		2,475		2,057

The following table presents a maturity analysis of the Company’s lease liability by lease classification at December 31, 2023:

(dollars in thousands)	Operating Leases		Finance Leases
2024	$	31,199	$	3,357
2025	30,703		3,380
2026	29,972		2,154
2027	29,038		2,158
2028	25,392		2,056
Thereafter	87,940		12,752
Total undiscounted lease payments	234,244		25,857
Amounts representing interest	(29,284)		(4,902)
Lease liability	$	204,960	$	20,955

Leases

LEASES

Old National determines if an arrangement is or contains a lease at contract inception. Operating leases are included in other assets and other liabilities in our consolidated balance sheets. Finance leases are included in premises and equipment and other borrowings in our consolidated balance sheets.

Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. In determining the present value of lease payments, we use the implicit lease rate when readily determinable. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date. The incremental borrowing rate is the rate of interest that we would have to pay to borrow on a collateralized basis over a similar term in an amount equal to the lease payments in a similar economic environment.

Old National has operating and finance leases for land, office space, banking centers, and equipment. These leases are generally for periods of 5 to 20 years with various renewal options. We include certain renewal options in the measurement of our right-of-use assets and lease liabilities if they are reasonably certain to be exercised. Variable lease payments that are dependent on an index or a rate are initially measured using the index or rate at the commencement date and are included in the measurement of the lease liability. Variable lease payments that are not dependent on an index or a rate are excluded from the measurement of the lease liability and are recognized in profit and loss when incurred. Variable lease payments are defined as payments made for the right to use an asset that vary because of changes in facts or circumstances occurring after the commencement date, other than the passage of time.

Old National has lease agreements with lease and non-lease components, which are generally accounted for separately. For real estate leases, non-lease components and other non-components, such as common area maintenance charges, real estate taxes, and insurance are not included in the measurement of the lease liability since they are generally able to be segregated. For certain equipment leases, Old National accounts for the lease and non-lease components as a single lease component using the practical expedient available for that class of assets. Old National does not have any material sub-lease agreements.

The components of lease expense were as follows:

	Affected Line Item in the Statement of Income	Years Ended December 31,
(dollars in thousands)		2023		2022		2021
Operating lease cost	Occupancy/Equipment expense	$	31,175	$	29,368	$	12,336
Finance lease cost:
Amortization of right-of-use assets	Occupancy expense	2,921		2,672		2,356
Interest on lease liabilities	Interest expense	722		415		431
Sub-lease income	Occupancy expense	(387)		(448)		(438)
Total		$	34,431	$	32,007	$	14,685

Supplemental balance sheet information related to leases was as follows:

	December 31,
(dollars in thousands)	2023			2022
Operating Leases
Operating lease right-of-use assets	$	185,506		$	189,714
Operating lease liabilities	204,960			211,964
Finance Leases
Premises and equipment, net	19,820			10,799
Other borrowings	20,955			13,469
Weighted-Average Remaining Lease Term (in Years)
Operating leases	8.5			9.1
Finance leases	10.5			7.2
Weighted-Average Discount Rate
Operating leases	3.04		%	2.88		%
Finance leases	3.90		%	3.30		%

Supplemental cash flow information related to leases was as follows:

	Years Ended December 31,
(dollars in thousands)	2023		2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	31,720	$	30,340	$	13,823
Operating cash flows from finance leases	722		415		431
Financing cash flows from finance leases	2,533		2,475		2,057

The following table presents a maturity analysis of the Company’s lease liability by lease classification at December 31, 2023:

(dollars in thousands)	Operating Leases		Finance Leases
2024	$	31,199	$	3,357
2025	30,703		3,380
2026	29,972		2,154
2027	29,038		2,158
2028	25,392		2,056
Thereafter	87,940		12,752
Total undiscounted lease payments	234,244		25,857
Amounts representing interest	(29,284)		(4,902)
Lease liability	$	204,960	$	20,955