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Merger, Acquisition, and Divestiture Activity
 12 Months Ended
Dec. 31, 2024
Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]  
Merger, Acquisition, and Divestiture Activity MERGER, ACQUISITION, AND DIVESTITURE ACTIVITY
Mergers
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.
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 securities342,490 
FHLB/Federal Reserve Bank stock14,426 
Loans held-for-sale21,159 
Loans, net of allowance for credit losses2,120,627 
Premises and equipment22,481 
Goodwill176,535 
Other intangible assets46,125 
Company-owned life insurance91,475 
Other assets95,922 
Total assets$3,109,031 
Liabilities
Deposits$2,560,124 
FHLB advances75,000 
Other borrowings30,000 
Accrued expenses and other liabilities26,309 
Total liabilities$2,691,433 
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 $610.7 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 $26.7 million of the contractual cash flows specific to the PCD assets will not be collected.
Transaction and integration costs associated with the CapStar merger have been expensed in 2024 totaling $26.3 million and additional transaction and integration costs will be expensed in future periods as incurred.
First Midwest Bancorp, Inc.
On February 15, 2022, Old National completed its merger of equals transaction with First Midwest Bancorp, Inc. (“First Midwest”) pursuant to an agreement and plan of merger, dated as of May 30, 2021, to combine in an all-stock transaction. The combined organization has a presence in additional Midwestern markets, strong commercial banking capabilities, a robust retail footprint, a significant wealth management platform, and an enhanced ability to attract talent. The combined organization also creates the scale and profitability to accelerate digital and technology capabilities to drive future investments in consumer and commercial banking, as well as wealth management services.
As of December 31, 2022, Old National finalized its valuation of all assets acquired and liabilities assumed. The following table presents a summary of the assets acquired and liabilities assumed, net of the fair value adjustments and the fair value of consideration as of the merger date:
(dollars and shares in thousands)February 15,
2022
Assets
Cash and cash equivalents$1,912,629 
Investment securities3,526,278 
FHLB/Federal Reserve Bank stock106,097 
Loans held-for-sale13,809 
Loans, net of allowance for credit losses14,298,873 
Premises and equipment111,867 
Operating lease right-of-use assets129,698 
Accrued interest receivable53,502 
Goodwill961,722 
Other intangible assets117,584 
Company-owned life insurance301,025 
Other assets317,258 
Total assets$21,850,342 
Liabilities
Deposits$17,249,404 
Securities sold under agreements to repurchase135,194 
FHLB advances1,158,623 
Other borrowings274,569 
Accrued expenses and other liabilities342,369 
Total liabilities$19,160,159 
Fair value of consideration
Preferred stock$243,870 
Common stock (129,365 shares issued at $18.92 per share)
2,446,312 
Total consideration$2,690,182 
Transaction and integrations costs totaling $8.5 million primarily associated with the merger have been expensed in 2024, compared to $28.7 million in 2023, and $120.9 million in 2022.
As a result of the merger, Old National assumed sponsorship of First Midwest’s defined benefit pension plan (the “Pension Plan”) under which both plan participation and benefit accruals had been previously frozen. The Pension Plan was terminated in November 2022, which included the settlement of benefit obligations associated with the Pension Plan. At December 31, 2024 and December 31, 2023, there were no remaining Pension Plan assets. Pension costs were not material in 2024 or 2023.
Pending Acquisition
Bremer Financial Corporation
On November 25, 2024, Old National entered into a definitive agreement and plan of merger pursuant to which Old National will acquire Bremer Financial Corporation (“Bremer”) and its wholly owned subsidiary, Bremer Bank, National Association. As of December 31, 2024, Bremer had $16.5 billion in total assets, $11.8 billion in total loans, and $13.2 billion in deposits. Under the terms of the definitive merger agreement, each outstanding share of Bremer common stock will be converted into the right to receive 4.182 shares of Old National common stock plus $26.22 in cash, valuing the transaction at approximately $1.4 billion, or $116.76 per share, based on Old National’s closing stock price on November 22, 2024. The transaction value is likely to change until closing due to fluctuations in the price of Old National common stock. The definitive merger agreement has been unanimously approved by the Boards of Directors of Bremer and Old National. The transaction is subject to customary closing conditions and regulatory approvals, including the approval of Bremer shareholders. The transaction is anticipated to close in the middle of 2025.
In addition, on November 25, 2024, Old National announced that it entered into a forward sale agreement with Citibank, N.A. (the “Forward Purchaser”) to issue 19,047,619 shares of Old National common stock for an aggregate offering amount of $400.0 million and entered into an underwriting agreement with Citigroup Global Markets Inc., as representative for the underwriters named therein (collectively, the “Underwriters”), the Forward Purchaser, and Citigroup Global Markets Inc., as forward seller (the “Forward Seller”). The Underwriters were also granted a 30-day option to purchase up to an additional 2,857,143 shares of Old National common stock. On November 25, 2024, the Underwriters exercised this option in full, upon which Old National entered into an additional forward sale agreement to issue 2,857,143 shares of Old National common stock. The Company did not initially receive any proceeds from the sale of the Company’s common stock sold by the Forward Seller to the Underwriters. Old National expects to physically settle the forward sale agreements (by the delivery of shares of Old National common stock) and receive proceeds from the sale of those shares of Old National common stock upon one or more forward settlement dates within approximately 12 months from the date of the forward sale agreements at the then applicable forward sale price. The forward sale agreements are classified as equity instruments under ASC 815-40 Contracts in Entity’s Own Equity.
Transaction costs totaling $2.5 million associated with the merger have been expensed in 2024 and additional transaction and integration costs will be expensed in future periods as incurred.
Divestitures
On November 18, 2022, Old National sold its business of acting as a qualified custodian for, and administering, health savings accounts. Old National served as custodian for health savings accounts comprised of both investment accounts and deposit accounts. At closing, the health savings accounts held in deposit accounts that were transferred totaled approximately $382 million and resulted in a $90.7 million pre-tax gain.
During the fourth quarter of 2022, Old National initiated certain property optimization actions that included the closure and consolidation of certain branches as well as other real estate repositioning across our footprint. These actions resulted in pre-tax charges associated with valuation adjustments related to these locations totaling $26.8 million and $1.6 million for the years ended December 31, 2022 and 2023, respectively, and were recorded in noninterest expense.