Acquisition and Divestiture Activity

6 Months Ended

Jun. 30, 2024

Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]

ACQUISITION AND DIVESTITURE ACTIVITY

Acquisition

CapStar Financial Holdings, Inc.

On April 1, 2024, Old National completed its acquisition of CapStar Financial Holdings, Inc. (“CapStar”) and its wholly-owned subsidiary, CapStar Bank, in an all-stock transaction. This partnership strengthens Old National’s Nashville, Tennessee presence and adds several new high-growth markets. Pursuant to the terms of the merger agreement, each outstanding share of CapStar common stock was converted into the right to receive 1.155 shares of Old National common stock plus cash in lieu of fractional shares. All system conversions related to the transaction were completed in early July of 2024.

The assets acquired and liabilities assumed, both intangible and tangible, were recorded at their estimated fair values as of the merger date and have been accounted for under the acquisition method of accounting. The following table presents the preliminary valuation of the assets acquired and liabilities assumed and the fair value of consideration as of the merger date:


(dollars and shares in thousands)	April 1, 2024
Assets
Cash and cash equivalents	$	177,791
Investment securities	342,490
FHLB/Federal Reserve Bank stock	14,426
Loans held-for-sale	21,159
Loans, net of allowance for credit losses	2,124,695
Premises and equipment	22,481
Goodwill	171,993
Other intangible assets	46,125
Company-owned life insurance	91,475
Other assets	95,530
Total assets	$	3,108,165
Liabilities
Deposits	$	2,560,464

Federal Home Loan Bank advances	75,000
Other borrowings	30,000
Accrued expenses and other liabilities	25,103
Total liabilities	$	2,690,567
Fair value of consideration

Common stock (24,014 shares issued at $17.41 per share)	$	417,598

Total consideration	$	417,598

Goodwill related to this merger will not be deductible for tax purposes.

Other intangible assets acquired included core deposit intangibles. The estimated fair value of the core deposit intangible was $46.1 million and is being amortized over an estimated useful life of 10 years.

The fair value of PCD assets was $613.5 million on the date of merger. The gross contractual amounts receivable relating to the PCD assets was $679.3 million. Old National estimates, on the date of the merger, that $23.9 million of the contractual cash flows specific to the PCD assets will not be collected.

Transaction costs primarily associated with the CapStar merger have been expensed for the three and six months ended June 30, 2024 totaling $19.4 million and $22.3 million, respectively, and additional transaction and integration costs will be expensed in future periods as incurred.