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Fair Value
 9 Months Ended
Sep. 30, 2023
Fair Value Disclosures [Abstract]  
Fair Value FAIR VALUE
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  There are three levels of inputs that may be used to measure fair values:
•Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
•Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
•Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
Old National used the following methods and significant assumptions to estimate the fair value of each type of financial instrument:
Investment securities and equity securities: The fair values for investment securities and equity securities are determined by quoted market prices, if available (Level 1).  For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2).  For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3).  Discounted cash flows are calculated using swap and SOFR curves plus spreads that adjust for loss severities, volatility, credit risk, and optionality.  During times when trading is more liquid, broker quotes are used (if available) to validate the model.  Rating agency and industry research reports as well as defaults and deferrals on individual securities are reviewed and incorporated into the calculations.
Loans held-for-sale: The fair value of loans held-for-sale is determined using quoted prices for a similar asset, adjusted for specific attributes of that loan (Level 2).
Derivative financial instruments: The fair values of derivative financial instruments are based on market quotes developed using observable inputs as of the valuation date (Level 2).
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 September 30, 2023 Using
(dollars in thousands)Carrying ValueQuoted Prices in
Active Markets for
Identical Assets (Level 1)		Significant
Other
Observable
Inputs (Level 2)		Significant
Unobservable
Inputs
(Level 3)
Financial Assets    
Equity securities$69,880 $69,880 $— $— 
Investment securities available-for-sale:
U.S. Treasury548,126 548,126 — — 
U.S. government-sponsored entities and agencies1,142,900 — 1,142,900 — 
Mortgage-backed securities - Agency3,862,705 — 3,862,705 — 
States and political subdivisions544,944 — 544,944 — 
Pooled trust preferred securities11,125 — 11,125 — 
Other securities304,961 — 304,961 — 
Loans held-for-sale122,033 — 122,033 — 
Derivative assets227,833 — 227,833 — 
Financial Liabilities
Derivative liabilities409,269 — 409,269 — 
  Fair Value Measurements at December 31, 2022 Using
(dollars in thousands)Carrying ValueQuoted Prices in
Active Markets for
Identical Assets (Level 1)		Significant
Other
Observable
Inputs (Level 2)		Significant
Unobservable
Inputs
(Level 3)
Financial Assets    
Equity securities$52,507 $52,507 $— $— 
Investment securities available-for-sale:
U.S. Treasury200,927 200,927 — — 
U.S. government-sponsored entities and agencies1,175,080 — 1,175,080 — 
Mortgage-backed securities - Agency4,369,902 — 4,369,902 — 
States and political subdivisions663,852 — 663,852 — 
Pooled trust preferred securities10,811 — 10,811 — 
Other securities353,140 — 353,140 — 
Loans held-for-sale11,926 — 11,926 — 
Derivative assets169,001 — 169,001 — 
Financial Liabilities
Derivative liabilities380,704 — 380,704 — 
Non-Recurring Basis
Assets measured at fair value at September 30, 2023 on a non-recurring basis are summarized below:
  Fair Value Measurements at September 30, 2023 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$10,783 $— $— $10,783 
Commercial real estate loans75,720 — — 75,720 
Foreclosed Assets:
Commercial1,879 — — 1,879 
Commercial and commercial real estate loans that are deemed collateral dependent are valued using the discounted cash flows.  The liquidation amounts are based on the fair value of the underlying collateral using the most recently available appraisals with certain adjustments made based on the type of property, age of appraisal, current status of the property, and other related factors to estimate the current value of the collateral.  These commercial and commercial real estate loans had a principal amount of $117.5 million, with a valuation allowance of $31.0 million at September 30, 2023.  Old National recorded provision expense associated with these loans totaling $2.1 million and $21.9 million for the three and nine months ended September 30, 2023, respectively.  Old National recorded provision expense associated with commercial and commercial real estate loans that were deemed collateral dependent totaling $7.3 million and $20.1 million for the three and nine months ended September 30, 2022, respectively.
Other real estate owned and other repossessed property is measured at fair value less costs to sell on a non-recurring basis and had a net carrying amount of $1.9 million at September 30, 2023. There were $26 thousand of write-downs on other real estate owned for the three months ended September 30, 2023 and $0.1 million for nine months ended September 30, 2023. There were write-downs totaling $0.2 million and $0.6 million for the three and nine months ended September 30, 2022, respectively.
Loan servicing rights are evaluated for impairment based upon the fair value of the rights as compared to the carrying amount.  If the carrying amount of an individual tranche exceeds fair value, impairment is recorded on that tranche so that the servicing asset is carried at fair value.  Fair value is determined at a tranche level, based on market prices for comparable mortgage servicing contracts when available, or alternatively based on a valuation model that calculates the present value of estimated future net servicing income.  The valuation model utilizes a discount rate, weighted average prepayment speed, and other economic factors that market participants would use in estimating future net servicing income and that can be validated against available market data (Level 2).  There was no valuation allowance for loan servicing rights with impairments at September 30, 2023 and no impairments or recoveries recorded during the three or nine months ended September 30, 2023. Old National recorded immaterial recoveries associated with loan servicing rights during the three and nine months ended September 30, 2022.
Assets measured at fair value at December 31, 2022 on a non-recurring basis are summarized below:
  Fair Value Measurements at December 31, 2022 Using
(dollars in thousands)Carrying ValueQuoted 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$22,562 $— $— $22,562 
Commercial real estate loans48,026 — — 48,026 
At December 31, 2022, commercial and commercial real estate loans that are deemed collateral dependent had a principal amount of $92.0 million, with a valuation allowance of $21.5 million.
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 ValueValuation TechniquesUnobservable Input
Range (Weighted Average) (1)
September 30, 2023    
Collateral Dependent Loans    
Commercial loans$10,783 DiscountedDiscount for type of property,
10% - 40% (33%)
 cash flowage of appraisal, and current status
Commercial real estate loans75,720 DiscountedDiscount for type of property,
1% - 38% (17%)
cash flowage of appraisal, and current status
Foreclosed Assets
Commercial real estate1,879 Fair value ofDiscount for type of property,
4% - 17% (6%)
collateralage of appraisal, and current status
December 31, 2022  
Collateral Dependent Loans  
Commercial loans$22,562 DiscountedDiscount for type of property,
10% - 47% (28%)
 cash flowage of appraisal, and current status
Commercial real estate loans48,026 DiscountedDiscount for type of property,
1% - 26% (11%)
 cash flowage of appraisal, and current status
(1)Unobservable inputs were weighted by the relative fair value of the instruments.
Fair Value Option
Old National may elect to report most financial instruments and certain other items at fair value on an instrument-by-instrument basis with changes in fair value reported in net income.  After the initial adoption, the election is made at the acquisition of an eligible financial asset, financial liability, or firm commitment or when certain specified reconsideration events occur.  The fair value election may not be revoked once an election is made.
Loans Held-For-Sale
Old National has elected the fair value option for loans held-for-sale.  For these loans, interest income is recorded in the consolidated statements of income based on the contractual amount of interest income earned on the financial assets (except any that are on nonaccrual status).  None of these loans are 90 days or more past due, nor are any on nonaccrual status.  Interest income for loans held-for-sale is included in the income statement totaling $0.4 million and $0.9 million for the three and nine months ended September 30, 2023, respectively, compared to $0.4 million and $1.6 million for the three and nine months ended September 30, 2022, respectively.
Newly originated conforming fixed-rate and adjustable-rate first mortgage loans are intended for sale and are hedged with derivative instruments.  Old National has elected the fair value option to mitigate accounting mismatches in cases where hedge accounting is complex and to achieve operational simplification.  The fair value option was not elected for loans held for investment.
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 ValueDifference Contractual Principal
September 30, 2023   
Loans held-for-sale$122,033 $72 $121,961 
December 31, 2022
Loans held-for-sale$11,926 $221 $11,705 
Accrued interest at period end is included in the fair value of the instruments.
The following table presents the amount of gains and losses from fair value changes included in income before income taxes for financial assets carried at fair value:
(dollars in thousands)Other
Gains and (Losses)		Interest IncomeInterest (Expense)Total Changes
in Fair Values
Included in
Current Period Earnings
Three Months Ended September 30, 2023    
Loans held-for-sale$(327)$12 $— $(315)
Three Months Ended September 30, 2022
Loans held-for-sale$(710)$1 $— $(709)
Nine Months Ended September 30, 2023
Loans held-for-sale$(151)$2 $— $(149)
Nine Months Ended September 30, 2022
Loans held-for-sale$(1,775)$7 $— $(1,768)
Financial Instruments Not Carried at Fair Value
The carrying amounts and estimated exit price fair values of financial instruments not carried at fair value were as follows: 
  Fair Value Measurements at September 30, 2023 Using
(dollars in thousands)Carrying ValueQuoted 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		$1,663,430 $1,663,430 $— $— 
Investment securities held-to-maturity:
U.S. government-sponsored entities and agencies824,223 — 617,010 — 
Mortgage-backed securities - Agency1,043,585 — 847,652 — 
State and political subdivisions1,160,106 — 928,959 — 
Loans, net:
Commercial9,207,028 — — 9,078,129 
Commercial real estate13,770,202 — — 13,302,502 
Residential real estate6,675,508 — — 5,630,855 
Consumer credit2,621,114 — — 2,526,277 
Accrued interest receivable209,503 1,093 45,597 162,813 
Financial Liabilities
Deposits:
Noninterest-bearing demand deposits$10,091,352 $10,091,352 $— $— 
Checking, NOW, savings, and money market
   interest-bearing deposits		21,585,620 21,585,620 — — 
Time deposits5,575,704 — 5,527,361 — 
Federal funds purchased and interbank borrowings918 918 — — 
Securities sold under agreements to repurchase279,061 279,061 — — 
FHLB advances4,412,576 — 4,167,911 — 
Other borrowings863,455 — 843,629 — 
Accrued interest payable46,934 — 46,934 — 
Standby letters of credit1,224 — — 1,224 
Off-Balance Sheet Financial Instruments
Commitments to extend credit$— $— $— $3,582 
  Fair Value Measurements at December 31, 2022 Using
(dollars in thousands)Carrying ValueQuoted 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		$728,412 $728,412 $— $— 
Investment securities held-to-maturity:
U.S. government-sponsored entities and agencies819,168 — 656,358 — 
Mortgage-backed securities - Agency1,106,817 — 982,963 — 
State and political subdivisions1,163,162 — 1,004,361 — 
Loans, net:
Commercial9,386,862 — — 9,066,583 
Commercial real estate12,317,825 — — 11,867,851 
Residential real estate6,438,525 — — 5,372,491 
Consumer credit2,676,758 — — 2,557,115 
Accrued interest receivable190,521 758 52,081 137,682 
Financial Liabilities
Deposits:
Noninterest-bearing demand deposits$11,930,798 $11,930,798 $— $— 
Checking, NOW, savings, and money market
   interest-bearing deposits		20,056,252 20,056,252 — — 
Time deposits3,013,780 — 2,976,389 — 
Federal funds purchased and interbank borrowings581,489 581,489 — — 
Securities sold under agreements to repurchase432,804 432,804 — — 
FHLB advances3,829,018 — 3,739,780 — 
Other borrowings743,003 — 703,156 — 
Accrued interest payable19,547 — 19,547 — 
Standby letters of credit755 — — 755 
Off-Balance Sheet Financial Instruments
Commitments to extend credit$— $— $— $3,666 
The methods utilized to measure the fair value of financial instruments at September 30, 2023 and December 31, 2022 represent an approximation of exit price, however, an actual exit price may differ.