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Loans and Allowance for Credit Losses (Tables)

6 Months Ended

Jun. 30, 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
June 30, 2022
Loans:
Commercial	$	8,923,983	$	(191,996)	$	8,731,987
Commercial real estate	11,796,503		(154,769)		11,641,734
BBCC	N/A		346,765		346,765
Residential real estate	6,079,057		—		6,079,057
Consumer	2,754,105		(2,754,105)		N/A
Indirect	N/A		981,741		981,741
Direct	N/A		674,512		674,512
Home equity	N/A		1,097,852		1,097,852
Total	$	29,553,648	$	—	$	29,553,648

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)	June 30, 2022		December 31, 2021
Commercial (1) (2)	$	8,731,987	$	3,200,212
Commercial real estate	11,641,734		6,221,484
BBCC	346,765		350,747
Residential real estate	6,079,057		2,255,289
Indirect	981,741		873,139
Direct	674,512		140,385
Home equity	1,097,852		560,590
Total loans	29,553,648		13,601,846
Allowance for credit losses	(288,003)		(107,341)
Net loans	$	29,265,645	$	13,494,505

(1)Includes direct finance leases of $66.5 million at June 30, 2022 and $25.1 million at December 31, 2021.

(2)Includes PPP loans of $81.6 million at June 30, 2022 and $169.0 million at December 31, 2021.

Schedule of Activity in Allowance for Loan Losses

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 June 30, 2022
Commercial	$	99,471	$	—	$	(1,344)	$	781	$	3,911	$	102,819
Commercial real estate	140,490		—		(318)		320		1,310		141,802
BBCC	2,069		—		(20)		91		(76)		2,064
Residential real estate	17,252		—		(137)		130		2,484		19,729
Indirect	1,648		—		(528)		320		201		1,641
Direct	14,450		—		(1,722)		676		1,008		14,412
Home equity	5,127		—		(27)		20		416		5,536
Total	$	280,507	$	—	$	(4,096)	$	2,338	$	9,254	$	288,003

Three Months Ended June 30, 2021
Commercial	$	25,130	$	—	$	(178)	$	204	$	575	$	25,731
Commercial real estate	70,561		—		(178)		111		(5,025)		65,469
BBCC	2,537		—		(100)		15		346		2,798
Residential real estate	10,265		—		(62)		51		165		10,419
Indirect	2,255		—		(206)		565		(571)		2,043
Direct	665		—		(256)		209		22		640
Home equity	2,624		—		—		161		(441)		2,344
Total	$	114,037	$	—	$	(980)	$	1,316	$	(4,929)	$	109,444

Six Months Ended June 30, 2022
Commercial	$	27,232	$	35,040	$	(3,223)	$	1,013	$	42,757	$	102,819
Commercial real estate	64,004		42,601		(824)		502		35,519		141,802
BBCC	2,458		—		(48)		148		(494)		2,064
Residential real estate	9,347		136		(324)		570		10,000		19,729
Indirect	1,743		—		(1,012)		542		368		1,641
Direct	528		31		(3,251)		1,270		15,834		14,412
Home equity	2,029		723		(78)		183		2,679		5,536
Total	$	107,341	$	78,531	$	(8,760)	$	4,228	$	106,663	$	288,003

Six Months Ended June 30, 2021
Commercial	$	30,567	$	—	$	(586)	$	443	$	(4,693)	$	25,731
Commercial real estate	75,810		—		(178)		184		(10,347)		65,469
BBCC	6,120		—		(136)		56		(3,242)		2,798
Residential real estate	12,608		—		(220)		138		(2,107)		10,419
Indirect	3,580		—		(790)		1,101		(1,848)		2,043
Direct	855		—		(558)		469		(126)		640
Home equity	1,848		—		(82)		500		78		2,344
Total	$	131,388	$	—	$	(2,550)	$	2,891	$	(22,285)	$	109,444

The allowance for credit losses increased for the six months ended June 30, 2022 primarily due to $78.5 million of allowance for credit losses on acquired PCD loans established through acquisition accounting adjustments on the merger date and $96.3 million of provision for credit losses to establish an allowance for credit losses on non-PCD

loans acquired in the First Midwest merger. Loan growth and qualitative factors contributed to the increase in the allowance for credit losses in the three months ended June 30, 2022.Old National’s activity in the allowance for credit losses on unfunded loan commitments was as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(dollars in thousands)	2022		2021		2022		2021
Allowance for credit losses on unfunded loan commitments:
Balance at beginning of period	$	22,045	$	10,365	$	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	(79)		64		74		(1,260)
Balance at end of period	$	21,966	$	10,429	$	21,966	$	10,429

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
June 30, 2022
Commercial:
Risk Rating:
Pass	$	1,085,570	$	1,982,733	$	1,016,391	$	888,392	$	426,282	$	467,789	$	2,313,545	$	132,149	$	8,312,851
Criticized	5,285		23,442		17,524		28,488		15,752		10,798		48,442		1,352		151,083
Classified:
Substandard	31,062		33,265		16,647		44,642		25,021		15,349		41,626		18,092		225,704
Nonaccrual	347		3,640		1,164		1,071		1		—		2,402		3,479		12,104
Doubtful	—		299		930		592		4,679		16,004		7,741		—		30,245
Total	$	1,122,264	$	2,043,379	$	1,052,656	$	963,185	$	471,735	$	509,940	$	2,413,756	$	155,072	$	8,731,987

Commercial real estate:
Risk Rating:
Pass	$	1,552,841	$	2,787,599	$	2,234,315	$	1,472,777	$	867,430	$	1,446,189	$	163,533	$	443,935	$	10,968,619
Criticized	43,201		31,765		18,257		51,824		66,566		50,919		—		33,801		296,333
Classified:
Substandard	51,283		36,711		22,940		47,348		55,284		35,047		2,291		4,212		255,116
Nonaccrual	918		12,535		3,545		—		2,666		7,285		303		786		28,038
Doubtful	—		37,124		12,041		669		1,171		42,623		—		—		93,628
Total	$	1,648,243	$	2,905,734	$	2,291,098	$	1,572,618	$	993,117	$	1,582,063	$	166,127	$	482,734	$	11,641,734

BBCC:
Risk Rating:
Pass	$	44,590	$	73,821	$	60,244	$	45,049	$	28,071	$	20,216	$	46,062	$	19,013	$	337,066
Criticized	669		1,083		667		744		270		—		451		1,535		5,419
Classified:
Substandard	72		274		13		576		—		152		923		313		2,323
Nonaccrual	—		—		276		—		45		—		—		737		1,058
Doubtful	—		—		25		387		364		123		—		—		899
Total	$	45,331	$	75,178	$	61,225	$	46,756	$	28,750	$	20,491	$	47,436	$	21,598	$	346,765


	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
June 30, 2022
Residential real estate:
Risk Rating:
Performing	$	1,316,193	$	1,383,143	$	1,895,059	$	507,638	$	147,478	$	786,725	$	10,863	$	96	$	6,047,195
Nonperforming	—		198		666		587		1,239		29,172		—		—		31,862
Total	$	1,316,193	$	1,383,341	$	1,895,725	$	508,225	$	148,717	$	815,897	$	10,863	$	96	$	6,079,057

Indirect:
Risk Rating:
Performing	$	305,501	$	302,525	$	180,812	$	109,194	$	46,379	$	35,067	$	—	$	1	$	979,479
Nonperforming	66		414		519		371		349		543		—		—		2,262
Total	$	305,567	$	302,939	$	181,331	$	109,565	$	46,728	$	35,610	$	—	$	1	$	981,741

Direct:
Risk Rating:
Performing	$	91,675	$	188,063	$	100,504	$	78,199	$	58,343	$	50,906	$	103,998	$	38	$	671,726
Nonperforming	22		447		143		289		157		1,516		84		128		2,786
Total	$	91,697	$	188,510	$	100,647	$	78,488	$	58,500	$	52,422	$	104,082	$	166	$	674,512

Home equity:
Risk Rating:
Performing	$	11,875	$	11,855	$	8,137	$	14,518	$	13,076	$	36,231	$	975,416	$	14,702	$	1,085,810
Nonperforming	—		—		34		16		593		8,224		212		2,963		12,042
Total	$	11,875	$	11,855	$	8,171	$	14,534	$	13,669	$	44,455	$	975,628	$	17,665	$	1,097,852

	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
June 30, 2022
Commercial	$	3,364	$	117	$	15,317	$	18,798	$	8,713,189	$	8,731,987
Commercial real estate	7,061		3,320		59,986		70,367		11,571,367		11,641,734
BBCC	129		167		370		666		346,099		346,765
Residential	37,902		4,304		12,611		54,817		6,024,240		6,079,057
Indirect	4,140		673		362		5,175		976,566		981,741
Direct	6,496		969		2,044		9,509		665,003		674,512
Home equity	4,190		1,030		5,076		10,296		1,087,556		1,097,852
Total	$	63,282	$	10,580	$	95,766	$	169,628	$	29,384,020	$	29,553,648

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:


	June 30, 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	$	42,349	$	13,762	$	474	$	25,740	$	9,574	$	—
Commercial real estate	121,666		9,714		216		52,450		25,139		—
BBCC	1,957		—		—		3,362		—		—
Residential	31,862		—		—		18,360		—		—
Indirect	2,262		—		—		2,581		—		4
Direct	2,786		—		182		950		—		3
Home equity	12,042		—		10		3,248		—		—
Total	$	214,924	$	23,476	$	882	$	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
June 30, 2022
Commercial	$	11,766	$	25,147	$	2,545	$	57	$	1,843
Commercial real estate	108,312		—		917		—		6,563
BBCC	1,364		539		26		28		—
Residential	31,862		—		—		—		—
Indirect	—		—		—		2,262		—
Direct	1,810		—		1		272		21
Home equity	11,377		—		—		—		—
Total loans	$	166,491	$	25,686	$	3,489	$	2,619	$	8,427

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 June 30, 2022
Commercial	$	7,044	$	—	$	(2,846)	$	3,018	$	7,216
Commercial real estate	32,428		—		(8,903)		4,006		27,531
BBCC	87		—		—		—		87
Residential	2,405		—		(27)		—		2,378
Indirect	—		—		—		—		—
Direct	2,679		—		(10)		—		2,669
Home equity	180		—		(49)		—		131
Total	$	44,823	$	—	$	(11,835)	$	7,024	$	40,012

Three Months Ended June 30, 2021
Commercial	$	8,471	$	—	$	(207)	$	—	$	8,264
Commercial real estate	17,385		5		(1,420)		—		15,970
BBCC	105		3		(11)		—		97
Residential	2,603		(4)		(17)		—		2,582
Indirect	—		1		(1)		—		—
Direct	726		1		(62)		—		665
Home equity	276		1		(60)		—		217
Total	$	29,566	$	7	$	(1,778)	$	—	$	27,795

Six Months Ended June 30, 2022
Commercial	$	7,456	$	—	$	(4,743)	$	4,503	$	7,216
Commercial real estate	17,158		4		(9,114)		19,483		27,531
BBCC	87		3		(3)		—		87
Residential	2,435		—		(57)		—		2,378
Indirect	—		1		(1)		—		—
Direct	2,704		—		(35)		—		2,669
Home equity	199		1		(69)		—		131
Total	$	30,039	$	9	$	(14,022)	$	23,986	$	40,012

Six Months Ended June 30, 2021
Commercial	$	11,090	$	—	$	(1,655)	$	(1,171)	$	8,264
Commercial real estate	17,606		15		(1,651)		—		15,970
BBCC	112		5		(20)		—		97
Residential	2,824		(4)		(238)		—		2,582
Indirect	—		3		(3)		—		—
Direct	739		2		(76)		—		665
Home equity	282		1		(66)		—		217
Total	$	32,653	$	22	$	(3,709)	$	(1,171)	$	27,795

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.