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Fair Value (Tables)

12 Months Ended

Dec. 31, 2020

Fair Value Disclosures [Abstract]

Schedule of Fair Value Assets and Liabilities Measured on Recurring Basis

Assets and liabilities measured at fair value on a recurring basis, including financial assets and liabilities for which we have elected the fair value option, are summarized below:

						Fair Value Measurements at December 31, 2020 Using
(dollars in thousands)			Carrying Value			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Financial Assets
Equity securities			$	2,547		$	2,547		$	—		$	—
Investment securities available-for-sale:
U.S. Treasury			10,208			10,208			—			—
U.S. government-sponsored entities and agencies			841,988			—			841,988			—
Mortgage-backed securities - Agency			3,339,098			—			3,339,098			—
States and political subdivisions			1,492,162			—			1,492,162			—
Pooled trust preferred securities			7,913			—			—			7,913
Other securities			278,746			—			278,746			—
Residential loans held for sale			63,250			—			63,250			—
Derivative assets			140,201			—			140,201			—
Financial Liabilities
Derivative liabilities			18,187			—			18,187			—
						Fair Value Measurements at December 31, 2019 Using
(dollars in thousands)			Carrying Value			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Financial Assets
Equity securities			$	6,842		$	6,842		$	—		$	—
Investment securities available-for-sale:
U.S. Treasury			17,682			17,682			—			—
U.S. government-sponsored entities and agencies			592,984			—			592,984			—
Mortgage-backed securities - Agency			3,183,861			—			3,183,861			—
States and political subdivisions			1,275,643			—			1,275,603			40
Pooled trust preferred securities			8,222			—			—			8,222
Other securities			306,699			31,169			275,530			—
Residential loans held for sale			46,898			—			46,898			—
Derivative assets			51,301			—			51,301			—
Financial Liabilities
Derivative liabilities			12,393			—			12,393			—

Reconciliation of All Assets Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

(dollars in thousands)			Pooled Trust Preferred Securities			State and Political Subdivisions
Year Ended December 31, 2020
Balance at beginning of period			$	8,222		$	40
Accretion (amortization) of discount			15			—
Sales/payments received			(64)			(40)
Increase (decrease) in fair value of securities			(260)			—
Balance at end of period			$	7,913		$	—
Year Ended December 31, 2019
Balance at beginning of period			$	8,495		$	4,108
Accretion (amortization) of discount			12			—
Sales/payments received			(62)			(35)
Increase (decrease) in fair value of securities			(223)			—
Transfers out of Level 3			—			(4,033)
Balance at end of period			$	8,222		$	40
Year Ended December 31, 2018
Balance at beginning of period			$	8,448		$	—
Accretion (amortization) of discount			17			(56)
Sales/payments received			(338)			—
Increase (decrease) in fair value of securities			368			28
Transfers into Level 3			—			4,136
Balance at end of period			$	8,495		$	4,108

Quantitative Information about Significant Unobservable Inputs Used in Fair Value Measurements

The table below provides quantitative information about significant unobservable inputs used in fair value measurements within Level 3 of the fair value hierarchy:

(dollars in thousands)

Fair Value

Valuation Techniques

Unobservable Input

Range (Weighted Average) (4)

December 31, 2020

Pooled trust preferred securities

$

7,913

Discounted cash flow

Constant prepayment rate (1)

0.0%

Additional asset defaults (2)

6.0% - 8.7% (6.8%)

Expected asset recoveries (3)

0.0% - 23.2% (7.3%)

December 31, 2019

Pooled trust preferred securities

$

8,222

Discounted cash flow

Constant prepayment rate (1)

0.0%

Additional asset defaults (2)

6.2% - 8.0% (6.8%)

Expected asset recoveries (3)

0.0% - 19.1% (6.0%)

State and political subdivisions

40

Discounted cash flow

No observable inputs

N/A

Local municipality issuances

Old National owns 100%

Carried at par

(1)Assuming no prepayments.

(2)Each currently performing pool asset is assigned a default probability based on the banking environment, which is adjusted for specific issuer evaluation, of 0%, 50%, or 100%.

(3)Each currently defaulted pool asset is assigned a recovery probability based on specific issuer evaluation of 0%, 25%, or 100%.

(4)Unobservable inputs are weighted by the estimated number of defaults and current performing collateral of the instruments.

The table below provides quantitative information about significant unobservable inputs used in fair value measurements within Level 3 of the fair value hierarchy:

(dollars in thousands)

Fair Value

Valuation Techniques

Unobservable Input

Range (Weighted Average)(2)

December 31, 2020

Collateral Dependent Loans

Commercial loans

$

10,747

Discounted cash flow

Discount for type of property, age of appraisal, and current status

0% - 33% (12%)

Commercial real estate loans

40,653

Discounted cash flow

Discount for type of property, age of appraisal, and current status

0% -18% (7%)

December 31, 2019

Collateral Dependent Loans

Commercial loans

$

10,361

Fair value of collateral

Discount for type of property, age of appraisal, and current status

0% - 50% (13%)

Commercial real estate loans (1)

11,610

Fair value of collateral

Discount for type of property, age of appraisal, and current status

45%

Foreclosed Assets

Commercial real estate (1)

21

Fair value of collateral

Discount for type of property, age of appraisal, and current status

43%

Residential (1)

22

Fair value of collateral

Discount for type of property, age of appraisal, and current status

21%

(1)There was only one collateral dependent commercial real estate loan, one foreclosed commercial real estate asset, and one foreclosed residential asset at December 31, 2019, so no range or weighted average is reported.

(2)Unobservable inputs were weighted by the relative fair value of the instruments.

Assets Measured at Fair Value on a Non-Recurring Basis

Assets measured at fair value on a non-recurring basis are summarized below:

						Fair Value Measurements at December 31, 2020 Using
(dollars in thousands)			Carrying Value			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Collateral Dependent Loans:
Commercial loans			$	10,747		$	—		$	—		$	10,747
Commercial real estate loans			40,653			—			—			40,653
Loan servicing rights			26,717			—			26,717			—

Assets measured at fair value on a non-recurring basis at December 31, 2019 are summarized below:

						Fair Value Measurements at December 31, 2019 Using
(dollars in thousands)			Carrying Value			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Collateral Dependent Loans:
Commercial loans			$	10,361		$	—		$	—		$	10,361
Commercial real estate loans			11,610			—			—			11,610
Foreclosed Assets:
Commercial real estate			21			—			—			21
Residential			22			—			—			22
Loan servicing rights			4,662			—			4,662			—

Schedule of Difference Between the Aggregate Fair Value and the Aggregate Remaining Principal Balance

The difference between the aggregate fair value and the aggregate remaining principal balance for loans for which the fair value option has been elected was as follows:

(dollars in thousands)			Aggregate Fair Value			Difference			Contractual Principal
December 31, 2020
Residential loans held for sale			$	63,250		$	3,485		$	59,765
December 31, 2019
Residential loans held for sale			$	46,898		$	1,529		$	45,369

The following table presents the amount of gains and losses from fair value changes included in income before income taxes for financial assets carried at fair value:

(dollars in thousands)			Other Gains and (Losses)			Interest Income			Interest (Expense)			Total Changes in Fair Values Included in Current Period Earnings
Year Ended December 31, 2020
Residential loans held for sale			$	1,962		$	18		$	(24)		$	1,956
Year Ended December 31, 2019
Residential loans held for sale			$	1,036		$	18		$	—		$	1,054

Carrying Amounts and Estimated Fair Values of Financial Instruments, Not Carried at Fair Value

The carrying amounts and estimated fair values of financial instruments not carried at fair value were as follows:

						Fair Value Measurements at December 31, 2020 Using
(dollars in thousands)			Carrying Value			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Financial Assets
Cash, due from banks, money market,    and other interest-earning investments			$	589,712		$	589,712		$	—		$	—
Loans, net:
Commercial			3,922,642			—			—			3,912,948
Commercial real estate			5,867,795			—			—			5,797,447
Residential real estate			2,235,814			—			—			2,264,274
Consumer credit			1,628,840			—			—			1,618,365
Accrued interest receivable			85,306			21			27,977			57,308
Financial Liabilities
Deposits:
Noninterest-bearing demand deposits			$	5,633,672		$	5,633,672		$	—		$	—
Checking, NOW, savings, and money market    interest-bearing deposits			10,180,911			10,180,911			—			—
Other time deposits			1,103,313			—			1,121,365			—
Brokered deposits			119,557			—			119,514			—
Federal funds purchased and interbank borrowings			1,166			1,166			—			—
Securities sold under agreements to repurchase			431,166			431,166			—			—
FHLB advances			1,991,435			—			2,092,033			—
Other borrowings			252,787			—			254,612			—
Accrued interest payable			5,443			—			5,443			—
Standby letters of credit			462			—			—			462
Off-Balance Sheet Financial Instruments
Commitments to extend credit			$	—		$	—		$	—		$	11,822

						Fair Value Measurements at December 31, 2019 Using
(dollars in thousands)			Carrying Value			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Financial Assets
Cash, due from banks, money market,    and other interest-earning investments			$	276,337		$	276,337		$	—		$	—
Loans, net:
Commercial			2,867,711			—			—			2,831,298
Commercial real estate			5,145,204			—			—			5,130,848
Residential real estate			2,331,990			—			—			2,357,341
Consumer credit			1,718,000			—			—			1,676,253
Accrued interest receivable			85,123			15			28,185			56,923
Financial Liabilities
Deposits:
Noninterest-bearing demand deposits			$	4,042,286		$	4,042,286		$	—		$	—
Checking, NOW, savings, and money market    interest-bearing deposits			8,828,881			8,828,881			—			—
Other time deposits			1,589,988			—			1,600,214			—
Brokered deposits			92,242			—			92,355			—
Federal funds purchased and interbank borrowings			350,414			350,414			—			—
Securities sold under agreements to repurchase			327,782			327,782			—			—
FHLB advances			1,822,847			—			1,875,089			—
Other borrowings			243,685			—			254,519			—
Accrued interest payable			8,272			—			8,272			—
Standby letters of credit			573			—			—			573
Off-Balance Sheet Financial Instruments
Commitments to extend credit			$	—		$	—		$	—		$	4,302

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- Definition

Tabular disclosure of input and valuation technique used to measure fair value and change in valuation approach and technique for each separate class of asset and liability measured on recurring and nonrecurring basis.

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Tabular disclosure of assets and liabilities by class, including financial instruments measured at fair value that are classified in shareholders' equity, if any, that are measured at fair value on a nonrecurring basis in periods after initial recognition (for example, impaired assets). Disclosures may include, but are not limited to: (a) the fair value measurements recorded and the reasons for the measurements and (b) the level within the fair value hierarchy in which the fair value measurements are categorized in their entirety (levels 1, 2, 3).

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Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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Tabular disclosure of information about asset and liability measured at fair value under fair value option.

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