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Income Taxes
 9 Months Ended
Sep. 30, 2023
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES
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
September 30,		Nine Months Ended
September 30,
(dollars in thousands)2023202220232022
Provision at statutory rate of 21%
$40,358 $37,598 $122,352 $59,365 
Tax-exempt income:
Tax-exempt interest(4,625)(3,929)(13,716)(10,335)
Section 291/265 interest disallowance675 85 1,593 150 
Company-owned life insurance income(743)(684)(2,315)(2,340)
Tax-exempt income(4,693)(4,528)(14,438)(12,525)
State income taxes8,163 7,050 24,856 7,808 
Interim period effective rate adjustment116 (31)(607)3,042 
Tax credit investments - federal(2,071)(2,407)(7,122)(4,968)
Officer compensation limitation1,040 401 3,120 1,053 
Non-deductible FDIC premiums1,949 1,178 6,096 2,549 
Other, net(558)(374)(1,139)(1,187)
Income tax expense (benefit)$44,304 $38,887 $133,118 $55,137 
Effective tax rate23.1 %21.7 %22.9 %19.5 %
The provision for income taxes was recorded at September 30, 2023 and 2022 based on the current estimate of the effective annual rate.
The higher effective tax rate during the nine months ended September 30, 2023 compared to the same period in 2022 reflected an increase in pre-tax book income combined with smaller increases in tax-exempt income and tax credits. Other contributing factors were increases in non-deductible officer compensation and non-deductible FDIC premiums as well as the First Midwest merger in February 2022.
Net Deferred Tax Assets
Net deferred tax assets are included in other assets on the balance sheet. At September 30, 2023, net deferred tax assets totaled $480.7 million, compared to $435.8 million at December 31, 2022. No valuation allowance was required on the Company’s deferred tax assets at September 30, 2023 or December 31, 2022.
The Company’s retained earnings at September 30, 2023 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 $68.4 million at September 30, 2023 and $81.5 million at December 31, 2022.  This federal net operating loss was acquired from the acquisition of Anchor BanCorp Wisconsin Inc. in 2016 and First Midwest 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 $115.6 million at September 30, 2023 and $124.4 million at December 31, 2022.  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.