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Income Taxes
 12 Months Ended
Dec. 31, 2024
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 statement of income:
Years Ended December 31,
(dollars in thousands)202420232022
Provision at statutory rate of 21%
$142,892 $157,774 $114,394 
Tax-exempt income:
Tax-exempt interest(19,439)(18,582)(14,588)
Section 291/265 interest disallowance3,620 2,392 363 
Company-owned life insurance income(4,428)(3,125)(2,891)
Tax-exempt income(20,247)(19,315)(17,116)
State income taxes19,619 31,164 20,837 
Tax credit investments - federal(14,829)(12,190)(9,140)
Officer compensation limitation4,154 4,685 5,903 
Non-deductible FDIC premiums8,754 7,912 3,805 
Other, net907 (720)(2,237)
Income tax expense$141,250 $169,310 $116,446 
Effective tax rate20.8 %22.5 %21.4 %
The provision for income taxes consisted of the following components:
Years Ended December 31,
(dollars in thousands)202420232022
Current expense:
Federal$99,532 $121,428 $106,918 
State21,317 37,331 32,898 
Deferred expense:
Federal14,956 7,941 (16,216)
State5,445 2,610 (7,154)
Deferred income tax expense20,401 10,551 (23,370)
Income tax expense$141,250 $169,310 $116,446 
Net Deferred Tax Assets
Net deferred tax assets are included in other assets on the balance sheet. Significant components of net deferred tax assets (liabilities) were as follows:
December 31,
(dollars in thousands)20242023
Deferred Tax Assets  
Unrealized losses on available-for-sale investment securities$222,467 $217,018 
Allowance for credit losses on loans, net of recapture105,475 86,224 
Operating lease liabilities57,495 57,996 
Acquired loans49,093 32,011 
Benefit plan accruals40,089 31,679 
Unrealized losses on held-to-maturity investment securities27,664 32,150 
Net operating loss carryforwards19,601 21,004 
Purchase accounting10,062 22,473 
FDIC deductible premiums3,766 4,891 
Other, net6,658 4,860 
Total deferred tax assets542,370 510,306 
Deferred Tax Liabilities
Operating lease right-of-use assets(52,441)(52,710)
Premises and equipment(13,358)(12,141)
Loan servicing rights(10,012)(9,188)
Prepaid expenses(3,982)(3,856)
Tax credit investments and other partnerships(2,310)(785)
Unrealized gains on hedges(1,505)(3,202)
Deferred loan origination fees— (2,361)
Other, net(2,315)(2,803)
Total deferred tax liabilities(85,923)(87,046)
Net deferred tax assets$456,447 $423,260 
The Company’s retained earnings at December 31, 2024 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.
No valuation allowance was required on the Company’s deferred tax assets at December 31, 2024 or 2023. Old National has federal net operating loss carryforwards totaling $60.2 million at December 31, 2024 and $63.6 million at December 31, 2023. This federal net operating loss was acquired from the acquisition of Anchor BanCorp Wisconsin Inc. in 2016, First Midwest in 2022, and CapStar in 2024. If not used, the federal net operating loss carryforwards will begin expiring in 2032 and later. Old National has recorded state net operating loss carryforwards totaling $106.0 million at December 31, 2024 and $116.9 million at December 31, 2023. If not used, the state net operating loss carryforwards will expire from 2028 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.
Unrecognized Tax Benefits
Old National has unrecognized tax benefits due to the merger with First Midwest. The following table presents the changes in the carrying amount of unrecognized tax benefits:
Years Ended December 31,
(dollars in thousands)202420232022
Balance at beginning of period$9,955 $11,007 $— 
Additions for acquired uncertain tax positions— — 14,897 
Additions based on tax positions related to prior years— 60 — 
Reductions for tax positions relating to prior years— — (2,751)
Reductions due to statute of limitations expiring(2,961)(1,112)(1,139)
Balance at end of period$6,994 $9,955 $11,007 
If recognized, approximately $5.6 million of unrecognized tax benefits, net of interest, would favorably affect the effective income tax rate in future periods. Old National expects the $5.6 million of unrecognized tax benefits to be reduced to $5.0 million in the next twelve months.
It is our policy to recognize interest and penalties accrued relative to unrecognized tax benefits in their respective federal or state income tax accounts. Interest and penalties recorded and accrued in 2024 and 2023 were immaterial.
Old National and its subsidiaries file a consolidated U.S. federal income tax return, as well as filing various state returns. The 2021 through 2024 tax years are open and subject to examination.