Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Summary of Interest Rate Derivatives

The following table summarizes Old National’s derivatives designated as hedges:

	September 30, 2022						December 31, 2021
			Fair Value						Fair Value
(dollars in thousands)	Notional		Assets (1)		Liabilities (2)		Notional		Assets (1)		Liabilities (2)
Cash flow hedges
Interest rate collars and floors on loan pools	$	1,500,000	$	3,446	$	52,171	$	600,000	$	459	$	2,173
Interest rate swaps on borrowings (3)	150,000		—		—		150,000		4,316		—
Fair value hedges
Interest rate swaps on investment securities (3)	909,957		—		—		909,957		10,961		14,643
Interest rate swaps on borrowings (3)	327,500		—		—		377,500		2,475		96
Total			$	3,446	$	52,171			$	18,211	$	16,912

(1)Derivative assets are included in other assets on the balance sheet.

(2)Derivative liabilities are included in other liabilities on the balance sheet.

(3)The fair values of certain counterparty interest rate swaps are zero due to the settlement of centrally cleared variation margin rules.

Schedule of Derivative Instruments Effect on Consolidated Statement of Income

The effect of derivative instruments in fair value hedging relationships on the consolidated statements of income were as follows:

(dollars in thousands)						Gain (Loss) Recognized in Income on Related Hedged Items
Derivatives in Fair Value Hedging Relationships	Location of Gain or (Loss) Recognized in Income on Derivative	Gain (Loss) Recognized in Income on Derivative		Hedged Items in Fair Value Hedging Relationships	Location of Gain or (Loss) Recognized in in Income on Related Hedged Item
Three Months Ended September 30, 2022
Interest rate contracts	Interest income/(expense)	$	(532)	Fixed-rate debt	Interest income/(expense)	$	638
Interest rate contracts	Interest income/(expense)	47,963		Fixed-rate investment securities	Interest income/(expense)	(47,975)
Total		$	47,431			$	(47,337)
Three Months Ended September 30, 2021
Interest rate contracts	Interest income/(expense)	$	(991)	Fixed-rate debt	Interest income/(expense)	$	943
Interest rate contracts	Interest income/(expense)	5,650		Fixed-rate investment securities	Interest income/(expense)	(5,096)
Total		$	4,659			$	(4,153)
Nine Months Ended September 30, 2022
Interest rate contracts	Interest income/(expense)	$	(7,889)	Fixed-rate debt	Interest income/(expense)	$	8,193
Interest rate contracts	Interest income/(expense)	159,397		Fixed-rate investment securities	Interest income/(expense)	(159,767)
Total		$	151,508			$	(151,574)
Nine Months Ended September 30, 2021
Interest rate contracts	Interest income/(expense)	$	(3,817)	Fixed-rate debt	Interest income/(expense)	$	3,772
Interest rate contracts	Interest income/(expense)	5,659		Fixed-rate investment securities	Interest income/(expense)	(5,158)
Total		$	1,842			$	(1,386)

The effect of derivative instruments in cash flow hedging relationships on the consolidated statements of income were as follows:

		Three Months Ended September 30,				Three Months Ended September 30,
(dollars in thousands)		2022		2021		2022		2021
Derivatives in Cash Flow Hedging Relationships	Location of Gain or (Loss) Reclassified from AOCI into Income	Gain (Loss) Recognized in Other Comprehensive Income on Derivative				Gain (Loss) Reclassified from AOCI into Income
Interest rate contracts	Interest income/(expense)	$	(36,755)	$	(164)	$	(749)	$	1,578
		Nine Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021
Derivatives in Cash Flow Hedging Relationships	Location of Gain or (Loss) Reclassified from AOCI into Income	Gain (Loss) Recognized in Other Comprehensive Income on Derivative				Gain (Loss) Reclassified from AOCI into Income
Interest rate contracts	Interest income/(expense)	$	(49,679)	$	2,612	$	139	$	3,483

The effect of derivatives not designated as hedging instruments on the consolidated statements of income were as follows:

		Three Months Ended September 30,
(dollars in thousands)		2022		2021
Derivatives Not Designated as Hedging Instruments	Location of Gain or (Loss) Recognized in Income on Derivative	Gain (Loss) Recognized in Income on Derivative
Interest rate contracts (1)	Other income/(expense)	$	108	$	46
Mortgage contracts	Mortgage banking revenue	638		1,054
Foreign currency contracts	Other income/(expense)	75		3
Total		$	821	$	1,103
		Nine Months Ended September 30,
		2022		2021
Derivatives Not Designated as Hedging Instruments	Location of Gain or (Loss) Recognized in Income on Derivative	Gain (Loss) Recognized in Income on Derivative
Interest rate contracts (1)	Other income/(expense)	$	1,058	$	356
Mortgage contracts	Mortgage banking revenue	(735)		(1,262)
Foreign currency contracts	Other income/(expense)	113		(46)
Total		$	436	$	(952)

(1)Includes the valuation differences between the customer and offsetting swaps.

Summary of Derivatives Not Designated as Hedging Instruments

The following table summarizes Old National’s derivatives not designated as hedges:

	September 30, 2022						December 31, 2021
			Fair Value						Fair Value
(dollars in thousands)	Notional		Assets (1)		Liabilities (2)		Notional		Assets (1)		Liabilities (2)
Interest rate lock commitments	$	51,177	$	—	$	512	$	90,731	$	2,352	$	—
Forward mortgage loan contracts	71,000		2,370		—		126,107		242		—
Customer interest rate swaps	5,062,757		1,506		344,676		2,433,177		52,439		11,658
Counterparty interest rate swaps (3)	5,062,757		140,440		1,513		2,433,177		583		12,956
Customer foreign currency forward contracts	12,533		107		677		10,292		399		—
Counterparty foreign currency forward contracts	13,281		709		9		10,205		—		346
Total			$	145,132	$	347,387			$	56,015	$	24,960

(1)Derivative assets are included in other assets on the balance sheet.

(2)Derivative liabilities are included in other liabilities on the balance sheet.

(3)The fair values of certain counterparty interest rate swaps are zero due to the settlement of centrally cleared variation margin rules.