Acquisition and Divestiture Activity

3 Months Ended

Mar. 31, 2025

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.

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. As of March 31, 2025, Old National finalized its valuation of all assets acquired and liabilities assumed. The following table presents a summary of the 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	2,120,627
Premises and equipment	22,481
Goodwill	176,535
Other intangible assets	46,125
Company-owned life insurance	91,475
Other assets	95,922
Total assets	$	3,109,031
Liabilities
Deposits	$	2,560,124

Federal Home Loan Bank advances	75,000
Other borrowings	30,000
Accrued expenses and other liabilities	26,309
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 purchased credit deteriorated (“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 primarily associated with the CapStar merger have been expensed for the three months ended March 31, 2025 and 2024 totaling $0.4 million and $0.7 million, respectively, and additional transaction and integration costs will be expensed in future periods as incurred.

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 (i) $26.22 in cash without interest, (ii) 4.182 shares of Old National common stock and (iii) cash in lieu of fractional shares, 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 approved by the Board of Directors of Old National and the Board of Directors and shareholders of Bremer, and we have received all necessary regulatory approvals. The transaction is anticipated to close on May 1, 2025, subject to customary closing conditions.

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 $0.7 million associated with the Bremer merger have been expensed for the three months ended March 31, 2025 and additional transaction and integration costs will be expensed in future periods as incurred.