Income Taxes

3 Months Ended

Mar. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

The following is a summary of the major items comprising the differences in taxes from continuing operations computed at the federal statutory rate and as recorded in the consolidated statements of income:

	Three Months Ended March 31,
(dollars in thousands)	2024			2023
Provision at statutory rate of 21%	$	32,082		$	39,484
Tax-exempt income:
Tax-exempt interest	(4,958)			(4,486)
Section 291/265 interest disallowance	885			386
Company-owned life insurance income	(694)			(627)
Tax-exempt income	(4,767)			(4,727)
State income taxes	5,147			8,142
Interim period effective rate adjustment	944			(1,717)
Tax credit investments - federal	(3,055)			(2,526)
Officer compensation limitation	765			1,040
Non-deductible FDIC premiums	1,747			2,110
Other, net	(375)			(385)
Income tax expense	$	32,488		$	41,421
Effective tax rate	21.3		%	22.0		%

Net Deferred Tax Assets

Net deferred tax assets are included in other assets on the balance sheet. At March 31, 2024, net deferred tax assets totaled $418.3 million, compared to $423.3 million at December 31, 2023. No valuation allowance was required on the Company’s deferred tax assets at March 31, 2024 or December 31, 2023.

The Company’s retained earnings at March 31, 2024 included an appropriation for acquired thrifts’ tax bad debt allowances totaling $58.6 million for which no provision for federal or state income taxes has been made. If in the future, this portion of retained earnings were distributed as a result of the liquidation of the Company or its subsidiaries, federal and state income taxes would be imposed at the then applicable rates.

Old National has federal net operating loss carryforwards totaling $60.1 million at March 31, 2024 and $63.6 million at December 31, 2023. This federal net operating loss was acquired from the acquisition of Anchor BanCorp Wisconsin Inc. in 2016 and First Midwest Bancorp, Inc. in 2022. If not used, the federal net operating loss carryforwards will begin expiring in 2030 and later. Old National has recorded state net operating loss carryforwards totaling $114.2 million at March 31, 2024 and $116.9 million at December 31, 2023. If not used, the state net operating loss carryforwards will expire from 2027 to 2036.

The federal and recorded state net operating loss carryforwards are subject to an annual limitation under Internal Revenue Code section 382. Old National believes that all of the federal and recorded state net operating loss carryforwards will be used prior to expiration.