OLD NATIONAL BANCORP /IN/ MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q) | #computerhacking | #hacking


The following discussion is an analysis of our results of operations for the
three and six months ended June 30, 2022 and 2021, and financial condition as of
June 30, 2022, compared to December 31, 2021. This discussion and analysis
should be read in conjunction with the consolidated financial statements and
related notes, as well as our 2021 Annual Report on Form 10-K.

FORWARD-LOOKING STATEMENTS


This report contains certain "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. These statements include,
but are not limited to, descriptions of Old National's financial condition,
results of operations, asset and credit quality trends, profitability and
business plans or opportunities. Forward-looking statements can be identified by
the use of the words "anticipate," "believe," "contemplate," "could,"
"estimate," "expect," "intend," "may," "outlook," "plan," "should," and "will,"
and other words of similar meaning. These forward-looking statements express
management's current expectations or forecasts of future events and, by their
nature, are subject to risks and uncertainties. There are a number of factors
that could cause actual results or outcomes to differ materially from those in
such statements. Factors that might cause such a difference include, but are not
limited to: the duration, extent, and severity of the COVID-19 pandemic and
related variants and mutations, including the continued effects on our business,
operations, and employees as well as the business of our customers; competition;
government legislation, regulations and policies; ability of Old National to
execute its business plan, including the completion of the integration related
to the merger between Old National and First Midwest, and the achievement of the
synergies and other benefits from the merger; unanticipated changes in our
liquidity position, including but not limited to changes in our access to
sources of liquidity and capital to address our liquidity needs; changes in
economic conditions which could materially impact credit quality trends and the
ability to generate loans and gather deposits; market, economic, operational,
liquidity, credit, and interest rate risks associated with our business; our
ability to successfully manage our credit risk and the sufficiency of our
allowance for credit losses; uncertainty about the discontinued use of LIBOR and
the transition to an alternative rate; failure or circumvention of our internal
controls; operational risks or risk management failures by us or critical third
parties, including without limitation with respect to data processing,
information systems, cybersecurity, technological changes, vendor issues,
business interruption, and fraud risks; significant changes in accounting, tax
or regulatory practices or requirements; new legal obligations or liabilities or
unfavorable resolutions of litigation; disruptive technologies in payment
systems and other services traditionally provided by banks; failure or
disruption of our information systems; computer hacking and other cybersecurity
threats; other matters discussed in this report; and other factors identified in
our Annual Report on Form 10-K for the year ended December 31, 2021 and other
filings with the SEC. These forward-looking statements are made only as of the
date of this report and are not guarantees of future results or performance.

Such forward-looking statements are based on assumptions and estimates, which
although believed to be reasonable, may turn out to be incorrect. Therefore,
undue reliance should not be placed upon these estimates and statements. We
cannot assure that any of these statements, estimates, or beliefs will be
realized and actual results or outcomes may differ from those contemplated in
these forward-looking statements. We undertake no obligation to publicly update
any forward-looking statements, whether as a result of new information, future
events, or otherwise after the date of this report. You are advised to consult
further disclosures we may make on related subjects in our filings with the SEC.

Investors should consider these risks, uncertainties, and other factors in
addition to risk factors included in this filing and our other filings with the
SEC.

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FINANCIAL HIGHLIGHTS

The following table sets forth certain financial highlights of Old National:


                                                       Three Months Ended                                      Six Months Ended
(dollars and shares in thousands,     June 30,              March 31,             June 30,                         June 30,
except per share data)                  2022                  2022                  2021                  2022                  2021
Income Statement:
Net interest income                $    337,472$    222,785

$ 149,927$ 560,257$ 298,047
Taxable equivalent adjustment (1) 4,314

                 3,772                 3,470                 8,086                 6,970
Net interest income - tax
equivalent basis                        341,786               226,557               153,397               568,343               305,017
Provision for credit losses               9,245                97,569                (4,929)              106,814               (22,285)
Noninterest income                       89,117                65,240                51,508               154,357               108,220
Noninterest expense                     277,395               226,756               129,618               504,151               247,358
Net income (loss) available to
common
  shareholders                          110,952               (29,603)               62,786                81,349               149,604
Per Common Share Data:
Weighted average diluted shares         291,881               227,002               165,934               260,253               165,821

Net income (loss) (diluted) $ 0.38$ (0.13)

$ 0.38$ 0.31$ 0.90
Cash dividends

                             0.14                  0.14                  0.14                  0.28                  0.28
Common dividend payout ratio (2)             37  %               (108) %                 37  %                 90  %                 31  %
Book value                         $      16.51$      17.03$      18.05$      16.51$      18.05
Stock price                               14.79                 16.38                 17.61                 14.79                 17.61
Tangible common book value (3)             9.23                  9.71                 11.55                  9.23                 11.55
Performance Ratios:
Return on average assets                   1.01  %              (0.31) %               1.06  %               0.43  %               1.27  %
Return on average common equity            9.08                 (2.89)                 8.39                  3.62                 10.04
Return on tangible common equity
(3)                                       17.21                 (3.61)                13.58                  6.71                 16.10
Return on average tangible common
equity (3)                                16.93                 (4.03)                13.58                  6.84                 16.21
Net interest margin (3)                    3.33                  2.88                  2.91                  3.13                  2.93
Efficiency ratio (3)                      62.70                 76.15                 62.05                 68.13                 58.79
Net charge-offs (recoveries) to
average loans                              0.02                  0.05                 (0.01)                 0.04                     -
Allowance for credit losses to
ending loans                               0.97                  0.99                  0.79                  0.97                  0.79
Non-performing loans to ending
loans                                      0.78                  0.88                  1.03                  0.78                  1.03
Balance Sheet:
Total loans                        $ 29,553,648$ 28,336,244$ 13,784,677$ 29,553,648$ 13,784,677
Total assets                         45,748,355            45,834,648            23,675,666            45,748,355            23,675,666
Total deposits                       35,538,975            35,607,390            17,868,911            35,538,975            17,868,911
Total borrowed funds                  4,384,411             4,347,560             2,559,113             4,384,411             2,559,113
Total shareholders' equity            5,078,783             5,232,114             2,991,118             5,078,783             2,991,118
Capital Ratios:
Risk-based capital ratios:
Tier 1 common equity                       9.90  %              10.04  %              11.95  %               9.90  %              11.95  %
Tier 1                                    10.63                 10.79                 11.95                 10.63                 11.95
Total                                     12.03                 12.19                 12.73                 12.03                 12.73
Leverage ratio (to average assets)         8.19                 10.58                  8.38                  8.19                  8.38
Total equity to assets (averages)         11.22                 12.03                 12.61                 11.57                 12.69
Tangible common equity to tangible
assets (3)                                 6.20                  6.51                  8.47                  6.20                  8.47
Nonfinancial Data:
Full-time equivalent employees            4,196                 4,333                 2,465                 4,196                 2,465
Banking centers                             266                   267                   162                   266                   162


(1)Calculated using the federal statutory tax rate in effect of 21% for all
periods.
(2)Cash dividends per common share divided by net income (loss) per common share
(basic).
(3)Represents a non-GAAP financial measure. Refer to the "Non-GAAP Financial
Measures" section for reconciliations to GAAP financial measures.
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NON-GAAP FINANCIAL MEASURES


The Company's accounting and reporting policies conform to GAAP and general
practices within the banking industry. As a supplement to GAAP, the Company
provides non-GAAP performance results, which the Company believes are useful
because they assist investors in assessing the Company's operating performance.
Where non-GAAP financial measures are used, the comparable GAAP financial
measure, as well as the reconciliation to the comparable GAAP financial measure,
can be found in the following table.

The tax-equivalent adjustment to net interest income and net interest margin
recognizes the income tax savings when comparing taxable and tax-exempt assets.
Interest income and yields on tax-exempt securities and loans are presented
using the current federal income tax rate of 21%. Management believes that it is
standard practice in the banking industry to present net interest income and net
interest margin on a fully tax-equivalent basis and that it may enhance
comparability for peer comparison purposes.

In management's view, tangible common equity measures are capital adequacy
metrics that may be meaningful to the Company, as well as analysts and
investors, in assessing the Company's use of equity and in facilitating
comparisons with peers. These non-GAAP measures are valuable indicators of a
financial institution's capital strength since they eliminate intangible assets
from shareholders' equity and retain the effect of accumulated other
comprehensive loss in shareholders' equity.

Although intended to enhance investors' understanding of the Company's business
and performance, these non-GAAP financial measures should not be considered an
alternative to GAAP. In addition, these non-GAAP financial measures may differ
from those used by other financial institutions to assess their business and
performance. See the previously provided tables and the following
reconciliations in the "Non-GAAP Reconciliations" section for details on the
calculation of these measures to the extent presented herein.

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The following table presents GAAP to non-GAAP reconciliations.

            Three Months Ended                     Six Months Ended
                                                                                             June 30,                              June 30,
(dollars and shares in thousands, except per share data)                               2022            2021                  2022            2021
Tangible common book value:
Shareholders' common equity (GAAP)                                                $  4,835,064$  2,991,118$  4,835,064$  2,991,118
Deduct:                                   Goodwill                                   1,991,534       1,036,994             1,991,534       1,036,994
                                          Intangible assets                            140,281          40,030               140,281          40,030
Tangible shareholders' common equity (non-GAAP)                             

$ 2,703,249$ 1,914,094$ 2,703,249$ 1,914,094
Period end common shares

                                                               292,893         165,732               292,893         165,732
Tangible common book value (non-GAAP)                                                     9.23           11.55                  9.23           11.55
Return on tangible common equity:
Net income applicable to common shares (GAAP)                               

$ 110,952$ 62,786$ 81,349$ 149,604
Add: Intangible amortization (net of tax) (1)

                                            5,378           2,182                 9,312           4,488
Tangible net income (non-GAAP)                                              

$ 116,330$ 64,968$ 90,661$ 154,092
Tangible shareholders’ common equity (non-GAAP) (see above)

$ 2,703,249$ 1,914,094$ 2,703,249$ 1,914,094
Return on tangible common equity (non-GAAP)

                                              17.21  %        13.58  %               6.71  %        16.10  %
Return on average tangible common equity:
Tangible net income (non-GAAP) (see above)                                  

$ 116,330$ 64,968$ 90,661$ 154,092
Average shareholders’ common equity (GAAP)

      $  4,886,181$  2,992,693$  4,495,862$  2,981,398
Deduct:                                   Average goodwill                           1,992,860       1,036,994             1,736,227       1,036,994
                                          Average intangible assets                    144,104          41,410               109,195          42,901
Average tangible shareholders' common equity (non-GAAP)                     

$ 2,749,217$ 1,914,289$ 2,650,440$ 1,901,503
Return on average tangible common equity (non-GAAP)

                                      16.93  %        13.58  %               6.84  %        16.21  %
Net interest margin:
Net interest income (GAAP)                                                  

$ 337,472$ 149,927$ 560,257$ 298,047
Taxable equivalent adjustment

                                                            4,314           3,470                 8,086           6,970
Net interest income - taxable equivalent basis (non-GAAP)                   

$ 341,786$ 153,397$ 568,343$ 305,017
Average earning assets

$ 41,003,338$ 21,095,280$ 36,269,744$ 20,849,829
Net interest margin (non-GAAP)

                                                            3.33  %         2.91  %               3.13  %         2.93  %
Efficiency ratio:
Noninterest expense (GAAP)                                                  

$ 277,395$ 129,618$ 504,151$ 247,358
Deduct: Intangible amortization expense

                                                  7,170           2,909                11,981           5,984
Adjusted noninterest expense (non-GAAP)                                     

$ 270,225$ 126,709$ 492,170$ 241,374
Net interest income – taxable equivalent basis (non-GAAP) (see

  above)                                                                    

$ 341,786$ 153,397$ 568,343$ 305,017
Noninterest income

                                                                      89,117          51,508               154,357         108,220
Deduct: Debt securities gains (losses), net                                                (85)            692                   257           2,685
Adjusted total revenue (non-GAAP)                                           

$ 430,988$ 204,213$ 722,443$ 410,552
Efficiency ratio (non-GAAP)

                                                              62.70  %        62.05  %              68.13  %        58.79  %
Tangible common equity to tangible assets:
Tangible shareholders' common equity (non-GAAP) (see above)                       $  2,703,249$  1,914,094$  2,703,249$  1,914,094
Assets (GAAP)                                                                     $ 45,748,355$ 23,675,666$ 45,748,355$ 23,675,666
Add:                                      Trust overdrafts                                   -              24                     -              24
Deduct:                                   Goodwill                                   1,991,534       1,036,994             1,991,534       1,036,994
                                          Intangible assets                            140,281          40,030               140,281          40,030
Tangible assets (non-GAAP)                                                  

$ 43,616,540$ 22,598,666$ 43,616,540$ 22,598,666
Tangible common equity to tangible assets (non-GAAP)

                                      6.20  %         8.47  %               6.20  %         8.47  %


(1)Calculated using management’s estimate of the annual fully taxable equivalent
rates (federal and state).

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EXECUTIVE SUMMARY


Old National is the sixth largest commercial bank headquartered in the Midwest.
With approximately $46 billion of assets and $28 billion of assets under
management, Old National ranks among the top 35 banking companies based in the
U.S. and has been recognized as a World's Most Ethical Company by the Ethisphere
Institute for eleven consecutive years. Since its founding in 1834, Old National
Bank has focused on community banking by building long-term, highly valued
partnerships with clients and in the communities it serves. In addition to
providing extensive services in retail and commercial banking, Old National
offers comprehensive wealth management, investment, and capital market services.

On February 15, 2022, Old National completed its previously announced merger of
equals transaction with First Midwest. At closing, Old National acquired
$21.9 billion of assets, including $14.3 billion of loans, and assumed
$17.2 billion of deposits. Old National completed branding and the majority of
core banking systems conversions in early July of 2022.

On June 27, 2022, Old National entered into a Custodial Transfer and Asset
Purchase Agreement with UMB, pursuant to which UMB will acquire Old National's
business of acting as a qualified custodian for, and administering, health
savings accounts. Old National serves as custodian for health savings accounts
comprised of both investment accounts and deposit accounts. Upon completion of
the sale, UMB will pay Old National a premium on deposit account balances
transferred at closing, or approximately $95 million based on June 30, 2022
balances. Subject to customary closing conditions and regulatory approval, the
parties anticipate completing the sale in the fourth quarter of 2022.

Net income (loss) applicable to common shareholders for the second quarter of
2022 was $111.0 million, or $0.38 per diluted common share, compared to $(29.6)
million, or $(0.13) per diluted common share, for the first quarter of 2022 and
$62.8 million, or $0.38 per diluted common share, for the second quarter of
2021.

Results for the first and second quarters of 2022 were impacted by $52.3 million
and $36.6 million, respectively, of merger-related expenses, which included
$11.0 million in the first quarter of 2022 attributable to the provision for
credit losses on unfunded loan commitments. In addition, the first quarter of
2022 provision expense of $97.6 million included $96.3 million of provision for
credit losses to establish an allowance for credit losses on non-PCD loans
acquired in the First Midwest merger.

We achieved strong fundamental results during the second quarter of 2022.


Loans: Our loan balances, excluding loans held for sale, increased $1.2 billion
to $29.6 billion at June 30, 2022 compared to March 31, 2022. This was primarily
driven by strong commercial and consumer loan production.

Net Interest Income: Net interest income increased $114.7 million compared to
the first quarter of 2022 driven by the full quarter impact of the merger, loan
growth, the higher rate environment, higher accretion, and an additional day in
the quarter.

Noninterest Income: Noninterest income increased $23.9 million compared to the
first quarter of 2022 driven by the full quarter impact of the merger. Mortgage
banking revenue was impacted by the higher rate environment, lower gain on sale
margins, and a higher mix of portfolio production.

Noninterest Expenses: Noninterest expenses increased $50.6 million compared to
the first quarter of 2022 primarily due to the full quarter impact of operating
costs associated with the merger, as well as higher incentive accruals
reflective of strong performance. Noninterest expenses included $36.6 million of
merger-related expenses, compared to $52.3 million in the first quarter of 2022.

Pandemic Update


As previously disclosed, the COVID-19 pandemic has created economic and
financial disruptions that continue to adversely affect our operations during
the six months ended June 30, 2022. Our historically careful underwriting
practices, diverse and granular portfolios, and Midwest-based footprint have
helped minimize the adverse impact to Old National. The pandemic has become less
disruptive to the Company's business, financial condition, results of
operations, and its clients as of June 30, 2022.

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RESULTS OF OPERATIONS


The following table sets forth certain income statement information of Old
National:

                                       Three Months Ended                                        Six Months Ended
                                            June 30,                                                 June 30,
(dollars in thousands, except                                               %                                                         %
per share data)                      2022               2021              Change              2022               2021              Change
Income Statement Summary:
Net interest income              $ 337,472$ 149,927             125.1     %     $ 560,257$ 298,047               88.0         %
Provision for credit losses          9,245             (4,929)           (287.6)            106,814            (22,285)            (579.3)
Noninterest income                  89,117             51,508              73.0             154,357            108,220               42.6
Noninterest expense                277,395            129,618             114.0             504,151            247,358              103.8

Net income applicable to common

  shareholders                     110,952             62,786              76.7              81,349            149,604              (45.6)
Net income per common share -
  diluted                             0.38               0.38                 -                0.31               0.90              (65.6)
Other Data:
Return on average common equity       9.08        %      8.39        %                         3.62        %     10.04        %
Return on tangible common equity
(1)                                  17.21              13.58                                  6.71              16.10
Return on average tangible
common
  equity (1)                         16.93              13.58                                  6.84              16.21
Efficiency ratio (1)                 62.70              62.05                                 68.13              58.79
Tier 1 leverage ratio                 8.19               8.38                                  8.19               8.38

Net charge-offs (recoveries) to

  average loans                       0.02              (0.01)                                 0.04                  -


(1)Represents a non-GAAP financial measure. Refer to “Non-GAAP Financial
Measures” section for reconciliations to GAAP financial measures.

Net Interest Income


Net interest income is the most significant component of our earnings,
comprising 78% of revenues for the six months ended June 30, 2022. Net interest
income and net interest margin are influenced by many factors, primarily the
volume and mix of earning assets, funding sources, and interest rate
fluctuations. Other factors include the level of accretion income on purchased
loans, prepayment risk on mortgage and investment-related assets, and the
composition and maturity of interest-earning assets and interest-bearing
liabilities.

Interest rates increased significantly during the second quarter of 2022 with
the rate on the 2-Year U.S.Treasury increasing from 2.34% to 2.95%. The Federal
Reserve's Federal Funds Rate increased 125 basis points to a target range of
1.50% to 1.75%, with the Effective Federal Funds Rate at 1.58% at June 30, 2022.
The Federal Reserve is expected to continue to increase the Federal Funds Rate
throughout 2022 and into 2023. If interest rates increase, our interest rate
spread may improve, which may result in an increase in our net interest income.
If interest rates decline, our interest rate spread could decline, which may
result in a decrease in our net interest income. However, management has taken
balance sheet restructuring, derivative, and deposit pricing actions to help
mitigate this risk.

Loans typically generate more interest income than investment securities with
similar maturities. Funding from client deposits generally costs less than
wholesale funding sources. Factors such as general economic activity, Federal
Reserve monetary policy, and price volatility of competing alternative
investments, can also exert significant influence on our ability to optimize our
mix of assets and funding, net interest income, and net interest margin.

Net interest income is the excess of interest received from interest-earning
assets over interest paid on interest-bearing liabilities. For analytical
purposes, net interest income is presented in the table that follows, adjusted
to a taxable equivalent basis to reflect what our tax-exempt assets would need
to yield in order to achieve the same after-tax yield as a taxable asset. We
used the federal statutory tax rate in effect of 21% for all periods. This
analysis portrays the income tax benefits related to tax-exempt assets and helps
to facilitate a comparison between taxable and tax-exempt assets. Management
believes that it is a standard practice in the banking industry to present net
interest margin and net interest income on a fully taxable equivalent
basis. Therefore, management believes these measures provide useful information
for both management and investors by allowing them to make better peer
comparisons.

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The following tables present the average balance sheet for each major asset and
liability category, its related interest income and yield, or its expense and
rate.

(Tax equivalent basis,                                    Three Months Ended                                            Three Months Ended
dollars in thousands)                                        June 30, 2022                                                 June 30, 2021
                                            Average             Income (1)/           Yield/              Average             Income (1)/           Yield/
Earning Assets                              Balance               Expense              Rate               Balance               Expense              Rate

Money market and other interest-earning

  investments                           $  1,088,005$      1,830              0.67  %       $    232,723          $         48              0.08  %
Investment securities:
Treasury and government sponsored
agencies                                   2,487,717                11,818              1.90  %          1,637,396                 5,967              1.46  %
Mortgage-backed securities                 6,008,470                33,534              2.23  %          3,287,254                15,067              1.83  %
States and political subdivisions          1,834,189                14,571              3.18  %          1,503,447                12,364              3.29  %
Other securities                             723,279                 5,467              3.02  %            439,197                 2,690              2.45  %
Total investment securities               11,053,655                65,390              2.37  %          6,867,294                36,088              2.10  %
Loans: (2)
Commercial                                 8,692,646                95,743              4.36  %          4,019,553                34,715              3.42  %
Commercial real estate                    11,547,958               113,545              3.89  %          6,146,057                57,655              3.71  %
Residential real estate loans              5,905,151                51,686              3.50  %          2,256,215                21,474              3.81  %
Consumer                                   2,715,923                30,478              4.50  %          1,573,438                13,948              3.56  %
Total loans                               28,861,678               291,452              4.01  %         13,995,263               127,792              3.62  %
Total earning assets                      41,003,338          $    358,672              3.48  %         21,095,280          $    163,928              3.09  %
Less: Allowance for credit losses           (282,943)                                                     (117,020)
Non-Earning Assets
Cash and due from banks                      277,283                                                       238,326
Other assets                               4,735,701                                                     2,520,937
Total assets                            $ 45,733,379$ 23,737,523

Interest-Bearing Liabilities
Checking and NOW accounts               $  8,445,683$      1,786              0.08  %       $  4,954,817$        514              0.04  %
Savings accounts                           6,835,675                   673              0.04  %          3,647,952                   492              0.05  %
Money market accounts                      5,317,300                 1,027              0.08  %          2,085,132                   433              0.08  %
Time deposits                              2,499,445                 1,701              0.27  %          1,024,777                 1,293              0.51  %
Total interest-bearing deposits           23,098,103                 5,187              0.09  %         11,712,678                 2,732              0.09  %
Federal funds purchased and interbank
  borrowings                                   1,222                     2              0.47  %              1,460                     -              0.02  %
Securities sold under agreements to
repurchase                                   466,885                    85              0.07  %            406,251                    95              0.09  %
FHLB advances                              3,053,423                 6,925              0.91  %          1,906,078                 5,218              1.10  %
Other borrowings                             611,772                 4,687              3.06  %            269,259                 2,486              3.69  %
Total borrowed funds                       4,133,302                11,699              1.14  %          2,583,048                 7,799              1.21  %
Total interest-bearing liabilities      $ 27,231,405$     16,886              0.25  %       $ 14,295,726$     10,531

0.30 %

Noninterest-Bearing Liabilities and

  Shareholders' Equity
Demand deposits                         $ 12,714,946$  6,140,424
Other liabilities                            657,128                                                       308,680
Shareholders' equity                       5,129,900                                                     2,992,693
Total liabilities and shareholders'
equity                                  $ 45,733,379$ 23,737,523

Net interest income - taxable
equivalent basis                                              $    341,786              3.33  %                             $    153,397              2.91  %
Taxable equivalent adjustment                                       (4,314)                                                       (3,470)
Net interest income (GAAP)                                    $    337,472              3.29  %                             $    149,927              2.84  %

(1)Interest income is reflected on a fully taxable equivalent basis.
(2)Includes loans held for sale.

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(Tax equivalent basis,                                     Six Months Ended                                              Six Months Ended
dollars in thousands)                                        June 30, 2022                                                 June 30, 2021
                                            Average             Income (1)/           Yield/              Average             Income (1)/           Yield/
Earning Assets                              Balance               Expense              Rate               Balance               Expense              Rate

Money market and other interest-earning

  investments                           $  1,211,518$      2,138              0.36  %       $    301,025$        136              0.09  %
Investment securities:
Treasury and government sponsored
agencies                                   2,342,401                20,038              1.71  %          1,397,791                10,852              1.55  %
Mortgage-backed securities                 5,441,902                57,910              2.13  %          3,299,713                30,900              1.87  %
States and political subdivisions          1,786,684                28,208              3.16  %          1,490,865                24,564              3.30  %
Other securities                             664,741                 9,611              2.89  %            446,266                 5,433              2.44  %
Total investment securities               10,235,728               115,767              2.26  %          6,634,635                71,749              2.16  %
Loans: (2)
Commercial                                 7,301,008               151,026              4.11  %          3,997,281                70,282              3.50  %
Commercial real estate                    10,156,292               190,952              3.74  %          6,063,872               113,401              3.72  %
Residential real estate loans              4,953,222                85,673              3.46  %          2,264,988                42,821              3.78  %
Consumer                                   2,411,976                52,393              4.38  %          1,588,028                28,276              3.59  %
Total loans                               24,822,498               480,044              3.86  %         13,914,169               254,780              3.65  %
Total earning assets                      36,269,744          $    597,949              3.29  %         20,849,829          $    326,665              3.13  %
Less: Allowance for credit losses           (225,876)                                                     (125,398)
Non-Earning Assets
Cash and due from banks                      273,083                                                       263,336
Other assets                               4,111,637                                                     2,503,865
Total assets                            $ 40,428,588$ 23,491,632

Interest-Bearing Liabilities
Checking and NOW accounts               $  7,619,757$      2,381              0.06  %       $  4,965,095$      1,139              0.05  %
Savings accounts                           6,073,081                 1,262              0.04  %          3,572,057                   979              0.06  %
Money market accounts                      4,552,241                 1,719              0.08  %          2,059,439                   861              0.08  %
Time deposits                              2,124,382                 3,019              0.29  %          1,052,856                 2,912              0.56  %
Total interest-bearing deposits           20,369,461                 8,381              0.08  %         11,649,447                 5,891              0.10  %
Federal funds purchased and interbank
  borrowings                                   1,168                     2              0.25  %              1,303                     -                 -  %
Securities sold under agreements to
repurchase                                   458,459                   181              0.08  %            402,478                   215              0.11  %
FHLB advances                              2,822,984                12,888              0.92  %          1,915,661                10,627              1.12  %
Other borrowings                             522,599                 8,154              3.12  %            266,152                 4,915              3.69  %
Total borrowed funds                       3,805,210                21,225              1.12  %          2,585,594                15,757              1.23  %
Total interest-bearing liabilities      $ 24,174,671$     29,606              0.25  %       $ 14,235,041$     21,648

0.31 %

Noninterest-Bearing Liabilities and

  Shareholders' Equity
Demand deposits                         $ 11,014,359$  5,949,412
Other liabilities                            562,882                                                       325,781
Shareholders' equity                       4,676,676                                                     2,981,398
Total liabilities and shareholders'
equity                                  $ 40,428,588$ 23,491,632

Net interest income - taxable
equivalent basis                                              $    568,343              3.13  %                             $    305,017              2.93  %
Taxable equivalent adjustment                                       (8,086)                                                       (6,970)
Net interest income (GAAP)                                    $    560,257              3.09  %                             $    298,047              2.86  %

(1)Interest income is reflected on a fully taxable equivalent basis.
(2)Includes loans held for sale.

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The following table presents the dollar amount of changes in taxable equivalent
net interest income attributable to changes in the average balances of assets
and liabilities and the yields earned or rates paid.

                                                      From Three Months Ended                                   From Six Months Ended
                                                       June 30, 2021 to Three                                    June 30, 2021 to Six
                                                     Months Ended June 30, 2022                               Months Ended June 30, 2022
                                             Total                   Attributed to                    Total                   Attributed to
(dollars in thousands)                    Change (1)            Volume             Rate            Change (1)            Volume             Rate
Interest Income
Money market and other interest-earning
  investments                            $    1,782$     805

$ 977$ 2,002$ 1,003$ 999
Investment securities (2)

                    29,302             23,383             5,919              44,018             39,797             4,221
Loans (2)                                   163,660            142,491            21,169             225,264            204,866            20,398
Total interest income                       194,744            166,679            28,065             271,284            245,666            25,618
Interest Expense
Checking and NOW deposits                     1,272                563               709               1,242                829               413
Savings deposits                                181                335              (154)                283                695              (412)
Money market deposits                           594                620               (26)                858                927               (69)
Time deposits                                   408              1,451            (1,043)                107              2,264            (2,157)

Federal funds purchased and interbank

  borrowings                                      2                  -                 2                   2                  -                 2

Securities sold under agreements to

  repurchase                                    (10)                12               (22)                (34)                28               (62)
FHLB advances                                 1,707              2,883            (1,176)              2,261              4,629            (2,368)
Other borrowings                              2,201              2,892              (691)              3,239              4,363            (1,124)
Total interest expense                        6,355              8,756            (2,401)              7,958             13,735            (5,777)
Net interest income                      $  188,389$ 157,923$ 30,466$  263,326$ 231,931$ 31,395


(1)The variance not solely due to rate or volume is allocated equally between
the rate and volume variances.
(2)Interest on investment securities and loans includes the effect of taxable
equivalent adjustments of $2.9 million and $1.4 million, respectively, during
the three months ended June 30, 2022; and $5.6 million and $2.5 million,
respectively, during the six months ended June 30, 2022 using the federal
statutory rate in effect of 21%.

The increase in net interest income for the three and six months ended June 30,
2022 when compared to the same periods in 2021 was primarily due to higher
average earning assets as a result of the merger, loan growth, higher rates,
higher accretion income, and lower costs of average interest-bearing
liabilities. Partially offsetting these increases were lower interest and fees
related to PPP loans and higher average interest-bearing liabilities as a result
of the merger. Accretion income associated with acquired loans and borrowings
totaled $35.0 million and $50.8 million in the three and six months ended June
30, 2022, respectively, compared to $5.1 million and $9.8 million in the three
and six months ended June 30, 2021, respectively. Net interest income included
interest and net fees on PPP loans totaling $1.7 million and $5.4 million in the
three and six months ended June 30, 2022, respectively, compared to $11.9
million and $24.5 million in the three and six months ended June 30, 2021,
respectively. Unamortized fees on remaining PPP loans totaled $1.4 million at
June 30, 2022.

The increase in the net interest margin on a fully taxable equivalent basis for
the three and six months ended June 30, 2022 when compared to the three and six
months ended June 30, 2021 was primarily due to higher yields on interest
earning assets and lower costs of interest-bearing liabilities. The yield on
interest earning assets increased 39 basis points and the cost of
interest-bearing liabilities decreased 5 basis points in the quarterly
year-over-year comparison. The yield on interest earning assets increased 16
basis points and the cost of interest-bearing liabilities decreased 6 basis
points in the six months ended June 30, 2022 when compared to the six months
ended June 30, 2021. Accretion income represented 34 basis points and 28 basis
points of the net interest margin in the three and six months ended June 30,
2022, respectively, compared to 10 basis points for both the three and six
months ended June 30, 2021.

Average earning assets were $41.0 billion and $21.1 billion for the three months
ended June 30, 2022 and 2021, respectively, an increase of $19.9 billion, or
94%. Average earning assets were $36.3 billion and $20.8 billion for the six
months ended June 30, 2022 and 2021, respectively, an increase of $15.4 billion,
or 74%. The increases in average earning assets were primarily due to the merger
with First Midwest and strong loan growth.

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Average loans including loans held for sale increased $14.9 billion and $10.9
billion for the three and six months ended June 30, 2022, respectively, when
compared to the same periods in 2021 primarily due to the First Midwest merger
and strong loan growth.

Average investments increased $4.2 billion and $3.6 billion for the three and
six months ended June 30, 2022, respectively, when compared to the same periods
in 2021 reflecting the First Midwest merger.

Average noninterest-bearing and interest bearing deposits increased $6.6 billion
and $11.4 billion, respectively, for the three months ended June 30, 2022 when
compared to the same period in 2021. Average noninterest-bearing and interest
bearing deposits increased $5.1 billion and $8.7 billion, respectively, for the
six months ended June 30, 2022 when compared to the same period in 2021. This
growth was primarily driven by the First Midwest merger.

Average borrowed funds increased $1.6 billion and $1.2 billion for the three and
six months ended June 30, 2022 when compared to the same periods in 2021, driven
by the First Midwest merger.

Provision for Credit Losses

Old National recorded provision for credit losses of $9.2 million for the three
months ended June 30, 2022, compared to $4.9 million provision for credit losses
recapture for the three months ended June 30, 2021. Net charge-offs on loans
totaled $1.8 million during the three months ended June 30, 2022, compared to
net recoveries of $0.3 million for the three months ended June 30, 2021. The
provision for credit losses totaled $106.8 million for the six months ended June
30, 2022, compared to $22.3 million provision for credit losses recapture for
the six months ended June 30, 2021. Net charge-offs on loans totaled $4.5
million during the six months ended June 30, 2022, compared to net recoveries of
$0.3 million during the six months ended June 30, 2021. The provision for credit
losses expense in the six months ended June 30, 2022 included $96.3 million of
provision for credit losses to establish an allowance for credit losses on
non-PCD loans acquired in the First Midwest merger. Continued loan growth in
future periods, a decline in our current level of recoveries, or an increase in
charge-offs could result in an increase in provision expense. Additionally,
provision expense may be volatile due to changes in CECL model assumptions of
credit quality, macroeconomic factors and conditions, and loan composition,
which drive the allowance for credit losses balance.

Noninterest Income


We generate revenues in the form of noninterest income through client fees,
sales commissions, and gains and losses from our core banking franchise and
other related businesses, such as wealth management, investment consulting, and
investment products. The following table details the components in noninterest
income:

                                       Three Months Ended                                           Six Months Ended
                                            June 30,                         %                          June 30,                         %
(dollars in thousands)               2022               2021               Change                2022               2021              Change
Wealth management fees           $   19,304$ 10,734                 79.8    %      $  33,934$  20,442                66.0    %
Service charges on deposit
accounts                             21,144             8,514                148.3              35,870             16,638               115.6
Debit card and ATM fees              10,402             5,583                 86.3              17,301             10,726                61.3
Mortgage banking revenue              6,522             7,827                (16.7)             13,767             24,352               (43.5)
Investment product fees               8,568             6,042                 41.8              15,890             11,906                33.5
Capital markets income                7,261             5,871                 23.7              11,703              9,586                22.1
Company-owned life insurance          4,571             2,783                 64.2               8,095              5,497                47.3
Debt securities gains (losses),
net                                     (85)              692               (112.3)                257              2,685               (90.4)
Other income                         11,430             3,462                230.2              17,540              6,388               174.6
Total noninterest income         $   89,117$ 51,508                 73.0    %      $ 154,357$ 108,220                42.6    %


Noninterest income increased $37.6 million and $46.1 million for the three and
six months ended June 30, 2022 when compared to the same periods in 2021
primarily due to the First Midwest merger in February of 2022. The increases in
noninterest income were partially offset by lower mortgage banking revenue,
which was impacted by the higher rate environment, normalizing gain on sale
margins, and a higher mix of portfolio production.

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Noninterest Expense

The following table details the components in noninterest expense:


                                       Three Months Ended                                         Six Months Ended
                                            June 30,                         %                        June 30,                         %
(dollars in thousands)               2022               2021              Change               2022               2021              Change
Salaries and employee benefits   $ 161,817$  72,640               122.8    %     $ 285,964$ 140,757               103.2    %
Occupancy                           26,496             14,054                88.5             47,515             28,926                64.3
Equipment                            7,550              4,506                67.6             12,718              8,475                50.1
Marketing                            9,119              2,632               246.5             13,395              4,694               185.4
Data processing                     25,883             11,697               121.3             44,645             24,050                85.6
Communication                        5,878              2,411               143.8              9,295              5,289                75.7
Professional fees                    6,336              8,528               (25.7)            26,127             11,252               132.2
FDIC assessment                      4,699              1,226               283.3              7,274              2,833               156.8
Amortization of intangibles          7,170              2,909               146.5             11,981              5,984               100.2
Amortization of tax credit
investments                          1,525              1,813               (15.9)             3,041              3,015                 0.9
Other expense                       20,922              7,202               190.5             42,196             12,083               249.2
Total noninterest expense        $ 277,395$ 129,618               114.0    %     $ 504,151$ 247,358               103.8    %

Noninterest expense increased $147.8 million for the three months ended June 30,
2022
when compared to the same period in 2021 reflective of the additional
operating costs associated with the First Midwest merger, as well as $36.6
million
of merger-related expenses. In addition, higher incentive accruals
resulting from strong performance contributed to the increase. Noninterest
expense for the three months ended June 30, 2021 included $6.5 million of
merger-related expenses.


Noninterest expense increased $256.8 million for the six months ended June 30,
2022 when compared to the same period in 2021 reflective of the additional
operating costs associated with the First Midwest merger, as well as $88.9
million of merger-related expenses, including $11.0 million of other expenses
attributable to the provision for credit losses on unfunded loan commitments. In
addition, higher incentive accruals resulting from strong performance
contributed to the increase. Noninterest expense for the six months ended June
30, 2021 included $6.5 million of merger-related expenses.

Amortization of tax credit investments decreased $0.3 million for the three
months ended June 30, 2022 when compared to the same period in 2021.
Amortization of tax credit investments for the six months ended June 30, 2022
were consistent with the same period in 2021. The recognition of tax credit
amortization expense is contingent upon the successful completion of the
rehabilitation of a historic building or completion of a solar project within
the reporting period. Many factors including weather, labor availability,
building regulations, inspections, and other unexpected construction delays
related to a rehabilitation project can cause a project to exceed its estimated
completion date. See Note 11 to the consolidated financial statements for
additional information on our tax credit investments.

Provision for Income Taxes


We record a provision for income taxes currently payable and for income taxes
payable or benefits to be received in the future, which arise due to timing
differences in the recognition of certain items for financial statement and
income tax purposes. The major difference between the effective tax rate applied
to our financial statement income and the federal statutory tax rate is caused
by a tax benefit from our tax credit investments and interest on tax-exempt
securities and loans. The provision for income taxes, as a percentage of pre-tax
income (loss), was 17.8% for the three months ended June 30, 2022, compared to
18.2% for the same period in 2021. The provision for income taxes, as a
percentage of pre-tax income (loss), was 15.7% for the six months ended June 30,
2022, compared to 17.4% for the same period in 2021. In accordance with ASC
740-270, Accounting for Interim Reporting, the provision for income taxes was
recorded at June 30, 2022 based on the current estimate of the effective annual
rate. The lower effective tax rate during the three and six months ended June
30, 2022 compared to the same periods in 2021 reflected the recognition of $1.7
million of previously unrealized tax benefits in the three months ended June 30,
2022, partially offset by higher post-merger estimated state effective tax
rates. The six months ended June 30, 2022 also reflected additional one-time
benefits of $1.2 million related to share-based payments and $0.9 million
related to the remeasurement of the Company's deferred taxes post-merger. See
Note 17 to the consolidated financial statements for additional information.
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FINANCIAL CONDITION

Overview

At June 30, 2022, our assets were $45.7 billion, a $21.3 billion increase
compared to assets of $24.5 billion at December 31, 2021. The increase was
driven primarily by the merger with First Midwest in February of 2022.


We have observed signs of an economic recovery in the United States, with jobs,
consumer spending, manufacturing, and other indicators rebounding from their
weakest levels. Our historically careful underwriting practices, diverse and
granular portfolios, and Midwest-based footprint have helped minimize the
adverse impact to Old National. The pandemic has become less disruptive to the
Company's business, financial condition, results of operations, and its clients
as of June 30, 2022.

Earning Assets

Our earning assets are comprised of investment securities, portfolio loans,
loans held for sale, money market investments, interest earning accounts with
the Federal Reserve, and equity securities. Earning assets were $40.9 billion at
June 30, 2022, a $19.1 billion increase compared to earning assets of $21.9
billion at December 31, 2021 driven primarily by the merger with First Midwest.

Investment Securities


We classify the majority of our investment securities as available-for-sale to
give management the flexibility to sell the securities prior to maturity if
needed, based on fluctuating interest rates or changes in our funding
requirements. During the six months ended June 30, 2022, we transferred $3.0
billion of securities available-for-sale to held-to-maturity in light of the
rate environment.

Equity securities are recorded at fair value and totaled $55.9 million at
June 30, 2022 compared to $13.2 million at December 31, 2021. The increase in
equity securities was driven by the merger with First Midwest.


At June 30, 2022, the investment securities portfolio, including equity
securities, was $11.0 billion compared to $7.6 billion at December 31, 2021, an
increase of $3.4 billion. Investment securities represented 27% of earning
assets at June 30, 2022, compared to 35% at December 31, 2021. Stronger loan
demand in the future could result in management's decision to reduce the
securities portfolio. At June 30, 2022, we had no intent to sell any securities
that were in an unrealized loss position nor is it expected that we would be
required to sell the securities prior to their anticipated recovery.

The investment securities available-for-sale portfolio had net unrealized losses
of $574.7 million at June 30, 2022, compared to net unrealized losses of $6.0
million at December 31, 2021. Net unrealized losses increased from December 31,
2021 to June 30, 2022 primarily due to an increase in rates impacting market
values for mortgage-backed, U.S. government-sponsored entities and agencies, and
tax exempt municipal securities.

The investment securities available-for-sale portfolio including securities
hedges had an effective duration of 4.41 at June 30, 2022, compared to 4.26 at
December 31, 2021. Effective duration measures the percentage change in value of
the portfolio in response to a change in interest rates. Generally, there is
more uncertainty in interest rates over a longer average maturity, resulting in
a higher duration percentage. The annualized average yields on investment
securities, on a taxable equivalent basis, were 2.37% and 2.26% for the three
and six months ended June 30, 2022, respectively, compared to 2.10% and 2.16%
for the three and six months ended June 30, 2021, respectively.

Loans Held for Sale


Mortgage loans held for immediate sale in the secondary market were $26.2
million at June 30, 2022, compared to $35.5 million at December 31,
2021. Certain mortgage loans are committed for sale at or prior to origination
at a contracted price to an outside investor. Other mortgage loans held for
immediate sale are hedged with TBA forward agreements and committed for sale
when they are ready for delivery and remain on the Company's balance sheet for a
short period of time (typically 30 to 60 days). These loans are sold without
recourse, beyond customary representations and warranties, and Old National has
not experienced material losses arising from these sales. Mortgage originations
are subject to volatility due to interest rates and home sales, among other
factors.

We have elected the fair value option prospectively for residential loans held
for sale. The aggregate fair value of residential loans held for sale exceeded
the unpaid principal balance by $0.3 million at June 30, 2022. The

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aggregate fair value of residential loans held for sale exceeded the unpaid
principal balance by $1.3 million at December 31, 2021.

Commercial and Commercial Real Estate Loans


Commercial and commercial real estate loans are the largest classifications
within earning assets, representing 51% of earning assets at June 30, 2022,
compared to 45% at December 31, 2021. At June 30, 2022, commercial and
commercial real estate loans were $20.7 billion, an increase of $10.9 billion
compared to December 31, 2021 driven by the merger with First Midwest and strong
loan production in the first half of 2022.

The following table provides detail on commercial loans by industry
classification (as defined by the North American Industry Classification System)
and by loan size.


                                                  June 30, 2022                              December 31, 2021
(dollars in thousands)              Outstanding      Exposure      Nonaccrual    Outstanding      Exposure     Nonaccrual
By Industry:
Manufacturing                      $ 1,810,117$  2,748,807$    5,223$   612,873$ 1,152,774$    6,689
Construction                           681,550       1,378,937         1,627        310,649        744,610         1,429
Health care and social assistance    1,402,311       1,783,160         4,791        376,664        550,400           444
Public administration                  235,481         369,807           921        247,770        357,310             -
Wholesale trade                        912,714       1,387,295         2,677        240,618        438,357         1,598
Educational services                   231,914         388,165         5,283        216,384        295,065             -
Other services                         175,026         366,555         2,343        121,577        260,413         2,542
Professional, scientific, and
 technical services                    475,971         788,843         4,004        141,364        279,185           937
Finance and insurance                  351,466         613,321            30        162,920        232,847            44
Retail trade                           271,126         462,229         1,246        131,303        289,478           945

Real estate rental and leasing 628,454 978,331 1,647 204,612 347,991

           504

Transportation and warehousing 334,706 491,703 2,380 134,072 243,086 1,594
Administrative and support and

waste management and

 remediation services                  330,737         502,056         5,434         86,307        149,417             -

Agriculture, forestry, fishing,

 and hunting                           219,171         374,560         1,017        114,699        164,364         1,521
Accommodation and food services        441,217         542,930         1,059         78,689        108,724         2,399
Utilities                               35,875          94,858             -         26,322         75,439             -
Arts, entertainment, and
recreation                             142,966         199,291           314         71,055        110,574         2,189
Information                            132,197         175,395         1,943         43,713         78,877         1,809
Mining                                  37,446          53,281             -         30,161         62,231             5

Management of companies and

 enterprises                            30,198          56,388             -         15,124         36,046             -
Other                                   43,340         142,912             -         24,893         24,943             -
Total                              $ 8,923,983$ 13,898,824$   41,939$ 3,391,769$ 6,002,131$   24,649

By Loan Size:
Less than $200,000                           6  %            5  %          5  %           8  %           6  %          7  %
$200,000 to $1,000,000                      14              14            36             18             16            42
$1,000,000 to $5,000,000                    27              28            46             31             29            51
$5,000,000 to $10,000,000                   16              17            13             15             16             -
$10,000,000 to $25,000,000                  30              26             -             18             18             -
Greater than $25,000,000                     7              10             -             10             15             -
Total                                      100  %          100  %        100  %         100  %         100  %        100  %


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The following table provides detail on commercial real estate loans classified
by property type.

                                 June 30, 2022                December 31, 2021
(dollars in thousands)      Outstanding         %           Outstanding           %
By Property Type:
Multifamily                $  3,596,449        30  %    $       1,995,803        31  %
Retail                        1,848,075        16               1,037,034        16
Office                        1,738,934        15               1,018,973        16
Warehouse / Industrial        1,718,735        15                 851,956        14
Single family                   411,811         3                 333,221         5
Other (1)                     2,482,499        21               1,143,687        18
Total                      $ 11,796,503       100  %    $       6,380,674       100  %

(1) Other includes construction and land development, senior housing, religion,
and mixed use properties.

Residential Real Estate Loans


At June 30, 2022, residential real estate loans held in our loan portfolio were
$6.1 billion, an increase of $3.8 billion compared to December 31, 2021 driven
by the merger with First Midwest and loan growth. Future increases in interest
rates could result in a decline in the level of refinancings and new
originations of residential real estate loans.

Consumer Loans


Consumer loans, including automobile loans and personal and home equity loans
and lines of credit, increased $1.2 billion to $2.8 billion at June 30, 2022
compared to December 31, 2021 driven by the merger with First Midwest and loan
growth.

Goodwill and Other Intangible Assets

Goodwill and other intangible assets at June 30, 2022 totaled $2.1 billion, an
increase of $1.1 billion from December 31, 2021 as a result of goodwill and
other intangible assets recorded with the First Midwest merger.

Other Assets


Other assets at June 30, 2022 increased $453.1 million from December 31, 2021
primarily due to higher net deferred tax assets related to net unrealized losses
on investment securities and allowance for credit losses on loans and higher
miscellaneous investments associated with the First Midwest merger.

Funding


Total funding, comprised of deposits and wholesale borrowings, was $39.9 billion
at June 30, 2022, an increase of $18.8 billion from $21.1 billion at
December 31, 2021 driven by the merger with First Midwest. Included in total
funding were deposits of $35.5 billion at June 30, 2022, an increase of $17.0
billion from $18.6 billion at December 31, 2021. Compared to December 31, 2021,
noninterest-bearing deposits increased $6.1 billion, interest-bearing checking
and NOW deposits increased $3.1 billion, savings deposits increased $3.0
billion, money market deposits increased $3.2 billion, and time deposits
increased $1.5 billion.

We use wholesale funding to augment deposit funding and to help maintain our
desired interest rate risk position. At June 30, 2022, wholesale borrowings,
including federal funds purchased and interbank borrowings, securities sold
under agreements to repurchase, FHLB advances, and other borrowings, totaled
$4.4 billion, an increase of $1.8 billion from December 31, 2021 driven by the
merger with First Midwest. Wholesale funding as a percentage of total funding
was 11% at June 30, 2022 and 12% at December 31, 2021.

Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities at June 30, 2022 increased $310.1 million
from December 31, 2021 primarily due to higher derivative liabilities and
accrued expenses and other liabilities associated with the First Midwest merger.

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Capital


Shareholders' equity totaled $5.1 billion at June 30, 2022, compared to $3.0
billion at December 31, 2021. In relation to the merger of equals transaction,
Old National issued 108,000 shares of Old National Series A Preferred Stock and
122,500 shares of Old National Series C Preferred Stock. Old National entered
into two deposit agreements, each dated as of February 15, 2022, by and among
Old National, Continental Stock Transfer & Trust Company, as depository, and the
holders from time to time of the depositary receipts in connection with the
issuance of the Old National Preferred Stock. Pursuant to the deposit
agreements, Old National issued 4,320,000 depositary shares, each representing a
1/40th interest in a share of Old National Series A Preferred Stock, and
4,900,000 depositary shares, each representing a 1/40th interest in a share of
Old National Series C Preferred Stock.

Shareholders' equity at June 30, 2022 included $2.4 billion from the 129.4
million shares of Common Stock that were issued in conjunction with the merger
with First Midwest. The change in unrealized gains (losses) on
available-for-sale investment securities decreased equity by $434.1 million
during the six months ended June 30, 2022. In addition, available-for-sale
investment securities with a fair value of $3.0 billion were transferred from
the available-for-sale portfolio to the held-to-maturity portfolio during the
six months ended June 30, 2022. The unrealized holding loss, net of tax, is
included in shareholders' equity and totals $122.2 million at June 30, 2022. Old
National repurchased 3.5 million shares of Common Stock in the six months ended
June 30, 2022 under a stock repurchase plan that was approved by the Company's
Board of Directors, which reduced equity by $63.8 million. Old National also
paid cash dividends of $0.28 per common share in the six months ended June 30,
2022, which reduced equity by $81.7 million.

Capital Adequacy


Old National and the banking industry are subject to various regulatory capital
requirements administered by the federal banking agencies. At June 30, 2022, Old
National and its bank subsidiary exceeded the regulatory minimums and Old
National Bank met the regulatory definition of "well-capitalized" based on the
most recent regulatory definition.

Old National’s consolidated capital position remains strong as evidenced by the
following comparisons of key industry ratios.


                                                Regulatory                       June 30,                       December 31,
                                                Guidelines
                                                 Minimum                 2022                2021                   2021
Risk-based capital:
Tier 1 capital to total average assets
(leverage ratio)                                    4.00           %       8.19        %      8.38         %         8.59           %
Common equity Tier 1 capital to
risk-adjusted
  total assets                                      7.00                   9.90              11.95                  12.04
Tier 1 capital to risk-adjusted total
assets                                              8.50                  10.63              11.95                  12.04
Total capital to risk-adjusted total assets        10.50                  12.03              12.73                  12.77
Shareholders' equity to assets                             N/A            11.10              12.63                  12.32


Old National Bank, Old National’s bank subsidiary, maintained a strong capital
position as evidenced by the following comparisons of key industry ratios.


                                                                  Prompt
                                                                Corrective                      June 30,                     December 31,
                                         Regulatory            Action "Well
                                         Guidelines            Capitalized"
                                          Minimum               Guidelines               2022              2021                  2021
Risk-based capital:
Tier 1 capital to total average
assets (leverage
  ratio)                                    4.00           %        5.00           %      7.81        %     8.65        %         8.81           %
Common equity Tier 1 capital to
risk-adjusted
  total assets                              7.00                    6.50                 10.28             12.27                 12.34
Tier 1 capital to risk-adjusted total
assets                                      8.50                    8.00                 10.28             12.27                 12.34
Total capital to risk-adjusted total
assets                                     10.50                   10.00                 10.92             12.79                 12.82


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In December 2018, the OCC, the Board of Governors of the Federal Reserve System,
and the FDIC approved a final rule to address changes to credit loss accounting
under GAAP, including banking organizations' implementation of CECL. The final
rule provides banking organizations the option to phase in over a three-year
period the day-one adverse effects on regulatory capital that may result from
the adoption of the new accounting standard. In March 2020, the OCC, the Board
of Governors of the Federal Reserve System, and the FDIC published an interim
final rule to delay the estimated impact on regulatory capital stemming from the
implementation of CECL. The interim final rule maintains the three-year
transition option in the previous rule and provides banks the option to delay
for two years an estimate of CECL's effect on regulatory capital, relative to
the incurred loss methodology's effect on regulatory capital, followed by a
three-year transition period (five-year transition option). Old National is
adopting the capital transition relief over the permissible five-year period.

Management views stress testing as an integral part of the Company's risk
management and strategic planning activities. Old National performs stress
testing periodically throughout the year. The primary objective of the stress
test is to ensure that Old National has a robust, forward-looking stress testing
process and maintains sufficient capital to continue operations throughout times
of economic and financial stress. Management also uses the stress testing
framework to evaluate decisions relating to pricing, loan concentrations,
capital deployment, and mergers and acquisitions to ensure that strategic
decisions align with Old National's risk appetite statement. Old National's
stress testing process incorporates key risks that include strategic, market,
liquidity, credit, operational, regulatory, compliance, legal, and reputational
risks. Old National's stress testing policy outlines steps that will be taken if
stress test results do not meet internal thresholds under severely adverse
economic scenarios.

RISK MANAGEMENT

Overview

Old National has adopted a Risk Appetite Statement to enable the Board of
Directors, Executive Leadership Team, and Senior Management to better assess,
understand, monitor, and mitigate the risks of Old National. The Risk Appetite
Statement addresses the following major risks: strategic, market, liquidity,
credit, operational/technology/cybersecurity, talent management,
regulatory/compliance, legal, and reputational. Our Chief Risk Officer is
independent of management, reports directly to our Chief Executive Officer, and
provides quarterly reports to the Board's Enterprise Risk Committee. The
following discussion addresses certain of these major risks including credit,
market, liquidity, operational/technology/cybersecurity, and
regulatory/compliance/legal. Discussion of strategic, talent management, and
reputational risks is provided in the section entitled "Risk Factors" in the
Company's 2021 Annual Report on Form 10-K.

Credit Risk


Credit risk represents the risk of loss arising from an obligor's inability or
failure to meet contractual payment or performance terms. Our primary credit
risks result from our investment and lending activities.

Investment Activities


We carry a higher exposure to loss in our pooled trust preferred securities,
which are collateralized debt obligations, due to illiquidity in that market and
the performance of the underlying collateral. At June 30, 2022, we had pooled
trust preferred securities with a fair value of $11.1 million, or less than 1%
of the available-for-sale securities portfolio. These securities remained
classified as available-for-sale and the unrealized loss on our pooled trust
preferred securities was $2.7 million at June 30, 2022. The fair value of these
securities is expected to improve as we get closer to maturity, but may be
adversely impacted by credit deterioration.

All of our mortgage-backed securities are backed by U.S. government-sponsored or
federal agencies. Municipal bonds, corporate bonds, and other debt securities
are evaluated by reviewing the credit-worthiness of the issuer and general
market conditions. See Note 5 to the consolidated financial statements for
additional details about our investment security portfolio.

Counterparty Exposure


Counterparty exposure is the risk that the other party in a financial
transaction will not fulfill its obligation. We define counterparty exposure as
nonperformance risk in transactions involving federal funds sold and purchased,
repurchase agreements, correspondent bank relationships, and derivative
contracts with companies in the financial services industry. Old National
manages exposure to counterparty risk in connection with its derivatives
transactions by generally engaging in transactions with counterparties having
ratings of at least "A" by Standard &

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Poor's Rating Service or "A2" by Moody's Investors Service. Total credit
exposure is monitored by counterparty and managed within limits that management
believes to be prudent. Old National's net counterparty exposure was an asset of
$449.9 million at June 30, 2022.

Lending Activities

Commercial


Commercial and industrial loans are made primarily for the purpose of financing
equipment acquisition, expansion, working capital, and other general business
purposes. Lease financing consists of direct financing leases and is used by
commercial clients to finance capital purchases ranging from computer equipment
to transportation equipment. The credit decisions for these transactions are
based upon an assessment of the overall financial capacity of the applicant. A
determination is made as to the applicant's ability to repay in accordance with
the proposed terms as well as an overall assessment of the risks involved. In
addition to an evaluation of the applicant's financial condition, a
determination is made of the probable adequacy of the primary and secondary
sources of repayment, such as additional collateral or personal guarantees, to
be relied upon in the transaction. Credit agency reports of the applicant's
credit history supplement the analysis of the applicant's creditworthiness.

Commercial mortgages and construction loans are offered to real estate
investors, developers, and builders primarily domiciled in the geographic market
areas we serve: Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota,
Wisconsin, and Missouri. These loans are secured by first mortgages on real
estate at LTV margins deemed appropriate for the property type, quality,
location, and sponsorship. Generally, these LTV ratios do not exceed 80%. The
commercial properties are predominantly non-residential properties such as
retail centers, industrial properties and, to a lesser extent, more specialized
properties. Substantially all of our commercial real estate loans are secured by
properties located in our primary market area.

In the underwriting of our commercial real estate loans, we obtain appraisals
for the underlying properties. Decisions to lend are based on the economic
viability of the property and the creditworthiness of the borrower. In
evaluating a proposed commercial real estate loan, we primarily emphasize the
ratio of the property's projected net cash flows to the loan's debt service
requirement. The debt service coverage ratio normally is not less than 120% and
it is computed after deduction for a vacancy factor and property expenses as
appropriate. In addition, a personal guarantee of the loan or a portion thereof
is often required from the principal(s) of the borrower. In most cases, we
require title insurance insuring the priority of our lien, fire and extended
coverage casualty insurance, and flood insurance, if appropriate, in order to
protect our security interest in the underlying property. In addition, business
interruption insurance or other insurance may be required.

Construction loans are underwritten against projected cash flows derived from
rental income, business income from an owner-occupant, or the sale of the
property to an end-user. We may mitigate the risks associated with these types
of loans by requiring fixed-price construction contracts, performance and
payment bonding, controlled disbursements, and pre-sale contracts or pre-lease
agreements.

Consumer

We offer a variety of first mortgage and junior lien loans to consumers within
our markets, with residential home mortgages comprising our largest consumer
loan category. These loans are secured by a primary residence and are
underwritten using traditional underwriting systems to assess the credit risks
of the consumer. Decisions are primarily based on LTV ratios, DTI ratios,
liquidity, and credit scores. A maximum LTV ratio of 80% is generally required,
although higher levels are permitted with mortgage insurance or other mitigating
factors. We offer fixed rate mortgages and variable rate mortgages with interest
rates that are subject to change every year after the first, third, fifth, or
seventh year, depending on the product and are based on indexed rates such as
prime. We do not offer payment-option facilities, sub-prime loans, or any
product with negative amortization.

Home equity loans are secured primarily by second mortgages on residential
property of the borrower. The underwriting terms for the home equity product
generally permit borrowing availability, in the aggregate, up to 90% of the
appraised value of the collateral property at the time of origination. We offer
fixed and variable rate home equity loans, with variable rate loans underwritten
at fully-indexed rates. Decisions are primarily based on LTV ratios, DTI ratios,
and credit scores. We do not offer home equity loan products with reduced
documentation.

Automobile loans include loans and leases secured by new or used automobiles. We
originate automobile loans and leases primarily on an indirect basis through
selected dealerships. We require borrowers to maintain collision
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insurance on automobiles securing consumer loans, with us listed as loss
payee. Our procedures for underwriting automobile loans include an assessment of
an applicant's overall financial capacity, including credit history and the
ability to meet existing obligations and payments on the proposed loan. Although
an applicant's creditworthiness is the primary consideration, the underwriting
process also includes a comparison of the value of the collateral security to
the proposed loan amount.

Asset Quality

Community-based lending personnel, along with region-based independent
underwriting and analytic support staff, extend credit under guidelines
established and administered by management and overseen by our Enterprise Risk
Committee. This committee, which meets quarterly, is made up of independent
outside directors. The committee monitors credit quality through its review of
information such as delinquencies, credit exposures, peer comparisons, problem
loans, and charge-offs. In addition, the committee provides oversight of loan
policy changes as recommended by management to assure our policy remains
appropriate for the current lending environment.

We lend to commercial and commercial real estate clients in many diverse
industries including, among others, manufacturing, agribusiness, transportation,
mining, wholesaling, and retailing. Old National manages concentrations of
credit exposure by industry, product, geography, client relationship, and loan
size. At June 30, 2022, our average commercial loan size was approximately
$560,000 and our average commercial real estate loan size was approximately
$1,200,000. In addition, while loans to lessors of residential and
non-residential real estate exceed 10% of total loans, no individual sub-segment
category within those broader categories reaches the 10% threshold. At June 30,
2022, we had minimal exposure to foreign borrowers and no sovereign debt. Our
policy is to concentrate our lending activity in the geographic market areas we
serve, primarily Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota,
Wisconsin, and Missouri.

On February 15, 2022, Old National closed on its merger with First Midwest. As
of the closing date of the transaction, First Midwest loans totaled $14.3
billion. Old National reviewed the acquired loans and determined that as of
June 30, 2022, $200.3 million met the definition of criticized and $459.5
million were considered classified (of which $122.4 million are reported with
nonaccrual loans). These loans are included in our summary of under-performing,
criticized, and classified assets table below.

The following table presents a summary of under-performing, criticized, and
classified assets:


                                                                       June 30,                      December 31,
(dollars in thousands)                                          2022                2021                 2021
Total nonaccrual loans                                     $   214,924$ 128,268$     106,691
TDRs still accruing                                             15,665             14,222                 18,378

Total past due loans (90 days or more and still accruing) 882

             9                      7
Foreclosed assets                                               12,618                520                  2,030
Total under-performing assets                              $   244,089$ 143,019$     127,106
Classified loans (includes nonaccrual, TDRs still
accruing,
  past due 90 days, and other problem loans)               $   706,372$ 289,272$     269,270
Other classified assets (1)                                     25,004              4,305                  4,338
Criticized loans                                               452,835            228,264                235,910
Total criticized and classified assets                     $ 1,184,211$ 521,841$     509,518
Asset Quality Ratios:
Nonaccrual loans/total loans (2)                                  0.73    %          0.93    %              0.78    %
Non-performing loans/total loans (2) (3)                          0.78               1.03                   0.92

Under-performing assets/total loans and

  other real estate owned                                         0.83               1.04                   0.93
Under-performing assets/total assets                              0.53               0.60                   0.52
Allowance/under-performing assets                               117.99              76.52                  84.45
Allowance/nonaccrual loans                                      134.00              85.32                 100.61

(1)Includes investment securities that fell below investment grade rating.
(2)Loans exclude loans held for sale.
(3)Non-performing loans include nonaccrual loans and TDRs still accruing.

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Under-performing assets increased to $244.1 million at June 30, 2022, compared
to $143.0 million at June 30, 2021 and $127.1 million at December 31, 2021 due
to the First Midwest merger. Under-performing assets as a percentage of total
loans and other real estate owned at June 30, 2022 were 0.83%, a 21 basis point
decrease from 1.04% at June 30, 2021 and a 10 basis point decrease from 0.93% at
December 31, 2021.

Nonaccrual loans increased from December 31, 2021 to June 30, 2022 primarily due
to nonaccrual loans related to the First Midwest merger totaling $122.4 million.
As a percentage of nonaccrual loans, the allowance was 134.00% at June 30, 2022,
compared to 85.32% at June 30, 2021 and 100.61% at December 31, 2021.

Total criticized and classified assets were $1.2 billion at June 30, 2022, an
increase of $662.4 million and $674.7 million from June 30, 2021 and
December 31, 2021, respectively. Criticized and classified assets related to the
First Midwest merger totaled $659.8 million at June 30, 2022. Other classified
assets include investment securities that fell below investment grade rating
totaling $25.0 million at June 30, 2022, compared to $4.3 million at June 30,
2021 and $4.3 million at December 31, 2021.

Old National may choose to restructure the contractual terms of certain
loans. The decision to restructure a loan, versus aggressively enforcing the
collection of the loan, may benefit Old National by increasing the ultimate
probability of collection.


Any loans that are modified are reviewed by Old National to identify if a TDR
has occurred, which is when, for economic or legal reasons related to a
borrower's financial difficulties, Old National Bank grants a concession to the
borrower that it would not otherwise consider. Terms may be modified to fit the
ability of the borrower to repay in line with its current financial status. The
modification of the terms of such loans includes one or a combination of the
following: a reduction of the stated interest rate of the loan, an extension of
the maturity date at a stated rate of interest lower than the current market
rate of new debt with similar risk, or a permanent reduction of the recorded
investment of the loan.

Loans modified in a TDR are typically placed on nonaccrual status until we
determine that the future collection of principal and interest is reasonably
assured, which generally requires that the borrower demonstrate a period of
performance according to the restructured terms for six months.


If we are unable to resolve a nonperforming loan issue, the credit will be
charged off when it is apparent there will be a loss. For large commercial type
loans, each relationship is individually analyzed for evidence of apparent loss
based on quantitative benchmarks or subjectively based upon certain events or
particular circumstances. For residential and consumer loans, a charge off is
recorded at the time foreclosure is initiated or when the loan becomes 120 to
180 days past due, whichever is earlier.

For commercial TDRs, an allocation is established within the allowance for
credit losses for the difference between the carrying value of the loan and its
computed value. To determine the computed value of the loan, one of the
following methods is selected: (1) the present value of expected cash flows
discounted at the loan's original effective interest rate, (2) the loan's
observable market price, or (3) the fair value of the collateral, if the loan is
collateral dependent. The allocation is established as the difference between
the carrying value of the loan and the collectable value. If there are
significant changes in the amount or timing of the loan's expected future cash
flows, the allowance allocation is recalculated and adjusted accordingly.

When a residential or consumer loan is identified as a TDR, the loan is
typically written down to its collateral value less selling costs.

At June 30, 2022, TDRs totaled $40.0 million, $24.3 million of which were
included within nonaccrual loans. At December 31, 2021, TDRs totaled
$30.0 million, $11.7 million of which were included within nonaccrual loans.


Old National has established specific allowances for credit losses for clients
whose loan terms have been modified as TDRs totaling $5.8 million at June 30,
2022 and $0.7 million of December 31, 2021. Old National had not committed to
lend any additional funds to clients with outstanding loans that were classified
as TDRs at June 30, 2022 or December 31, 2021.

The terms of certain other loans were modified during 2022 and 2021 that did not
meet the definition of a TDR. It is our process to review all classified and
criticized loans that, during the period, have been renewed, have entered into a
forbearance agreement, have gone from principal and interest to interest only,
or have extended the maturity date. In order to determine whether a borrower is
experiencing financial difficulty, an evaluation is performed of the probability
that the borrower will be in payment default on its debt in the foreseeable
future without the

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modification. The evaluation is performed under our internal underwriting
policy. We also evaluate whether a concession has been granted or if we were
adequately compensated through a market interest rate, additional collateral, or
a bona fide guarantee. We also consider whether the modification was
insignificant relative to the other terms of the agreement or the delay in a
payment.

In general, once a modified loan is considered a TDR, the loan will always be
considered a TDR until it is paid in full, otherwise settled, sold, or charged
off. However, guidance also permits for loans to be removed from TDR status when
subsequently restructured under these circumstances: (1) at the time of the
subsequent restructuring, the borrower is not experiencing financial
difficulties, and this is documented by a current credit evaluation at the time
of the restructuring, (2) under the terms of the subsequent restructuring
agreement, the institution has granted no concession to the borrower; and (3)
the subsequent restructuring agreement includes market terms that are no less
favorable than those that would be offered for a comparable new loan. For loans
subsequently restructured that have cumulative principal forgiveness, the loan
should continue to be measured in accordance with ASC 310-10, Receivables -
Overall. However, consistent with ASC 310-40-50-2, Troubled Debt Restructurings
by Creditors, Creditor Disclosure of Troubled Debt Restructurings, the loan
would not be required to be reported in the years following the restructuring if
the subsequent restructuring meets both of these criteria: (1) has an interest
rate at the time of the subsequent restructuring that is not less than a market
interest rate; and (2) is performing in compliance with its modified terms after
the subsequent restructuring.

Allowance for Credit Losses on Loans and Unfunded Commitments


Net charge-offs on loans totaled $1.8 million during the three months ended June
30, 2022, compared to net recoveries of $0.3 million for the same period in
2021. Annualized, net charge-offs (recoveries) to average loans were 0.02% for
the three months ended June 30, 2022, compared to (0.01)% for the same period in
2021. Net charge-offs on loans totaled $4.5 million during the six months ended
June 30, 2022, compared to net recoveries of $0.3 million during the same period
in 2021. Annualized, net charge-offs (recoveries) to average loans were 0.04%
for the six months ended June 30, 2022, compared to 0.00% for the same period in
2021. Management will continue its efforts to reduce the level of non-performing
loans and may consider the possibility of sales of troubled and non-performing
loans, which could result in additional charge-offs to the allowance for credit
losses on loans.

Credit quality within the loans held for investment portfolio is continuously
monitored by management and is reflected within the allowance for credit losses
for loans. The allowance for credit losses is an estimate of expected losses
inherent within the Company's loans held for investment portfolio. Credit
quality is assessed and monitored by evaluating various attributes and the
results of those evaluations are utilized in underwriting new loans and in our
process for estimating expected credit losses. Expected credit loss inherent in
non-cancelable off-balance-sheet credit exposures is accounted for as a separate
liability included in other liabilities on the balance sheet. The allowance for
credit losses for loans held for investment is adjusted by a credit loss
expense, which is reported in earnings, and reduced by the charge-off of loan
amounts, net of recoveries. Accrued interest receivable is excluded from the
estimate of credit losses.

The allowance for credit loss estimation process involves procedures to
appropriately consider the unique characteristics of our loan portfolio
segments. These segments are further disaggregated into loan classes based on
the level at which credit risk of the loan is monitored. When computing the
level of expected credit losses, credit loss assumptions are estimated using a
model that categorizes loan pools based on loss history, delinquency status, and
other credit trends and risk characteristics, including current conditions and
reasonable and supportable forecasts about the future. Determining the
appropriateness of the allowance is complex and requires judgment by management
about the effect of matters that are inherently uncertain. In future periods,
evaluations of the overall loan portfolio, in light of the factors and forecasts
then prevailing, may result in significant changes in the allowance and credit
loss expense in those future periods.

The allowance level is influenced by loan volumes, loan AQR migration or
delinquency status, changes in historical loss experience, and other conditions
influencing loss expectations, such as reasonable and supportable forecasts of
economic conditions. The methodology for estimating the amount of expected
credit losses reported in the allowance for credit losses has two basic
components: first, an asset-specific component involving individual loans that
do not share risk characteristics with other loans and the measurement of
expected credit losses for such individual loans; and second, a pooled component
for estimated expected credit losses for pools of loans that share similar risk
characteristics.

The allowance for credit losses for loans was $288.0 million at June 30, 2022,
compared to $107.3 million at December 31, 2021. The increase reflects the
initial allowance for credit losses established for acquired PCD loans

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totaling $78.5 million related to the First Midwest merger. In addition, the
provision for credit losses expense in the six months ended June 30, 2022
included $96.3 million of provision for credit losses to establish an allowance
for credit losses on non-PCD loans acquired in the First Midwest merger.
Continued loan growth in future periods, a decline in our current level of
recoveries, or an increase in charge-offs could result in an increase in
provision expense. Additionally, provision expense may be volatile due to
changes in CECL model assumptions of credit quality, macroeconomic factors and
conditions, and loan composition, which drive the allowance for credit losses
balance.

We maintain an allowance for credit losses on unfunded commercial lending
commitments and letters of credit to provide for the risk of loss inherent in
these arrangements. The allowance is computed using a methodology similar to
that used to determine the allowance for credit losses for loans, modified to
take into account the probability of a drawdown on the commitment. The allowance
for credit losses on unfunded loan commitments is classified as a liability
account on the balance sheet within accrued expenses and other liabilities,
while the corresponding provision for these credit losses is recorded as a
component of other expense. The allowance for credit losses on unfunded loan
commitments totaled $22.0 million at June 30, 2022, compared to $10.9 million at
December 31, 2021. The increase in the allowance for credit losses on unfunded
loan commitments was primarily driven by the merger with First Midwest.

Market Risk


Market risk is the risk that the estimated fair value of our assets,
liabilities, and derivative financial instruments will decline as a result of
changes in interest rates or financial market volatility, or that our net income
will be significantly reduced by interest rate changes.

The objective of our interest rate management process is to maximize net
interest income while operating within acceptable limits established for
interest rate risk and maintaining adequate levels of funding and liquidity.


Potential cash flows, sales, or replacement value of many of our assets and
liabilities, especially those that earn or pay interest, are sensitive to
changes in the general level of interest rates. This interest rate risk arises
primarily from our normal business activities of gathering deposits and
extending loans. Many factors affect our exposure to changes in interest rates,
such as general economic and financial conditions, client preferences,
historical pricing relationships, and re-pricing characteristics of financial
instruments. Our earnings can also be affected by the monetary and fiscal
policies of the U.S. Government and its agencies, particularly the Federal
Reserve.

In managing interest rate risk, we establish guidelines for asset and liability
management, including measurement of short and long-term sensitivities to
changes in interest rates, which is reviewed with the Enterprise Risk Committee
of our Board of Directors. Based on the results of our analysis, we may use
different techniques to manage changing trends in interest rates including:

•adjusting balance sheet mix or altering interest rate characteristics of assets
and liabilities;
•changing product pricing strategies;
•modifying characteristics of the investment securities portfolio; or
•using derivative financial instruments, to a limited degree.

A key element in our ongoing process is to measure and monitor interest rate
risk using a model to quantify the likely impact of changing interest rates on
Old National's results of operations. The model quantifies the effects of
various possible interest rate scenarios on projected net interest income. The
model measures the impact on net interest income relative to a base case
scenario. The base case scenario assumes that the balance sheet and interest
rates are held at current levels. The model shows our projected net interest
income sensitivity based on interest rate changes only and does not consider
other forecast assumptions.
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The following table illustrates our projected net interest income sensitivity
over a two year cumulative horizon based on the asset/liability model at
June 30, 2022 and 2021:

                                    Immediate
                                  Rate Decrease                                             Immediate Rate Increase
                                       -50                                       +100                 +200                 +300
(dollars in thousands)            Basis Points              Base             Basis Points         Basis Points         Basis Points
June 30, 2022
Projected interest income:
Money market, other interest
earning
  investments, and investment
  securities                     $    617,680$   639,428

$ 683,561$ 726,946$ 770,079
Loans

                               2,151,455            2,308,609            2,618,757            2,931,908            3,242,547
Total interest income               2,769,135            2,948,037            3,302,318            3,658,854            4,012,626
Projected interest expense:
Deposits                               44,713               72,114              274,985              484,116              693,243
Borrowings                            210,225              238,638              299,725              360,822              421,923
Total interest expense                254,938              310,752              574,710              844,938            1,115,166
Net interest income              $  2,514,197$ 2,637,285$ 2,727,608$ 2,813,916$ 2,897,460
Change from base                 $   (123,088)$    90,323$   176,631$   260,175
% change from base                      (4.67) %                                   3.42  %              6.70  %              9.87  %

June 30, 2021
Projected interest income:
Money market, other interest
earning
  investments, and investment
  securities                     $    266,770$   283,033

$ 314,772$ 339,937$ 362,929
Loans

                                 838,058              870,225            1,009,602            1,149,951            1,288,437
Total interest income               1,104,828            1,153,258            1,324,374            1,489,888            1,651,366
Projected interest expense:
Deposits                               15,289               24,627              105,133              185,790              266,444
Borrowings                             60,615               68,546              100,943              134,207              170,592
Total interest expense                 75,904               93,173              206,076              319,997              437,036
Net interest income              $  1,028,924$ 1,060,085$ 1,118,298$ 1,169,891$ 1,214,330
Change from base                 $    (31,161)$    58,213$   109,806$   154,245
% change from base                      (2.94) %                                   5.49  %             10.36  %             14.55  %

Our projected net interest income increased year over year due to the First
Midwest merger, loan growth, and rising interest rates.


A key element in the measurement and modeling of interest rate risk is the
re-pricing assumptions of our transaction deposit accounts, which have no
contractual maturity dates. Because the models are driven by expected behavior
in various interest rate scenarios and many factors besides market interest
rates affect our net interest income, we recognize that model outputs are not
guarantees of actual results. For this reason, we model many different
combinations of interest rates and balance sheet assumptions to understand our
overall sensitivity to market interest rate changes, including shocks, ramps,
yield curve flattening, yield curve steepening, as well as forecasts of likely
interest rate scenarios tested. At June 30, 2022, our projected net interest
income sensitivity based on the asset/liability models we utilize was within the
limits of our interest rate risk policy for the scenarios tested.

We use cash flow and fair value hedges, primarily interest rate swaps, collars,
and floors, to mitigate interest rate risk. Derivatives designated as hedging
instruments were in a net liability position with a fair value loss of $18.4
million at June 30, 2022, compared to a net asset position with a fair value
gain of $1.3 million at December 31, 2021.  See Note 18 to the consolidated
financial statements for further discussion of derivative financial instruments.
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Liquidity Risk


Liquidity risk arises from the possibility that we may not be able to satisfy
current or future financial commitments, or may become unduly reliant on
alternative funding sources. We establish liquidity risk guidelines that we
review with the Enterprise Risk Committee of our Board of Directors and monitor
through our Balance Sheet Management Committee. The objective of liquidity
management is to ensure we have the ability to fund balance sheet growth and
meet deposit and debt obligations in a timely and cost-effective
manner. Management monitors liquidity through a regular review of asset and
liability maturities, funding sources, and loan and deposit forecasts. We
maintain strategic and contingency liquidity plans to ensure sufficient
available funding to satisfy requirements for balance sheet growth, properly
manage capital markets' funding sources and to address unexpected liquidity
requirements. On June 5, 2020, we filed an automatic shelf registration
statement with the SEC that permits us to issue an unspecified amount of debt or
equity securities.

Loan repayments and maturing investment securities are a relatively predictable
source of funds. However, deposit flows, calls of investment securities and
prepayments of loans and mortgage-related securities are strongly influenced by
interest rates, the housing market, general and local economic conditions, and
competition in the marketplace. We continually monitor marketplace trends to
identify patterns that might improve the predictability of the timing of deposit
flows or asset prepayments.

A maturity schedule for Old National Bank’s time deposits is shown in the
following table at June 30, 2022.

(dollars in thousands)
Maturity Bucket               Amount         Rate
2022                       $ 1,397,092       0.29     %
2023                           715,540       0.51
2024                           189,250       0.69
2025                            95,089       0.65
2026                            70,085       0.49
2027 and beyond                 40,560       0.57
Total                      $ 2,507,616       0.41     %


Our ability to acquire funding at competitive prices is influenced by rating
agencies' views of our credit quality, liquidity, capital, and earnings. Moody's
Investors Service places us in an investment grade that indicates a low risk of
default. For both Old National and Old National Bank:

•Moody's Investors Service affirmed the Long-Term Rating of "A3" for Old
National's senior unsecured/issuer rating on February 16, 2022.
•Moody's Investors Service affirmed Old National Bank's long-term deposit rating
of "Aa3" on February 16, 2022. The bank's short-term deposit rating was affirmed
at "P-1" and the bank's issuer rating was affirmed at "A3."

Moody’s Investors Service concluded a rating review of Old National Bank on
February 16, 2022.

The credit ratings of Old National and Old National Bank at June 30, 2022 are
shown in the following table.

                      Moody's Investors Service
                        Long-term      Short-term
Old National               A3             N/A
Old National Bank          Aa3            P-1


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Old National Bank maintains relationships in capital markets with brokers and
dealers to issue certificates of deposit and short-term and medium-term bank
notes as well. At June 30, 2022, Old National and its subsidiaries had the
following availability of liquid funds and borrowings:

(dollars in thousands)                                                Parent Company          Subsidiaries
Available liquid funds:
Cash and due from banks                                             $       271,788$    526,176
Unencumbered government-issued debt securities                                    -             2,232,603
Unencumbered investment grade municipal securities                                -               776,659
Unencumbered corporate securities                                                 -               313,602
Availability of borrowings:
Amount available from Federal Reserve discount window*                            -               614,215
Amount available from Federal Home Loan Bank*                                     -             1,113,553
Total available funds                                               $       

271,788 $ 5,576,808

* Based on collateral pledged


Old National Bancorp has routine funding requirements consisting primarily of
operating expenses, dividends to shareholders, debt service, net derivative cash
flows, and funds used for acquisitions. Old National Bancorp can obtain funding
to meet its obligations from dividends and management fees collected from its
subsidiaries, operating line of credit, and through the issuance of debt
securities. Additionally, Old National Bancorp has a shelf registration in place
with the SEC permitting ready access to the public debt and equity markets. At
June 30, 2022, Old National Bancorp's other borrowings outstanding were $487.3
million. Management believes the Company has the ability to generate and obtain
adequate amounts of liquidity to meet its requirements in the short-term and the
long-term.

Federal banking laws regulate the amount of dividends that may be paid by
banking subsidiaries without prior approval. Prior regulatory approval is
required if dividends to be declared in any year would exceed net earnings of
the current year plus retained net profits for the preceding two years. Prior
regulatory approval to pay dividends was not required in 2021 and is not
currently required.

Operational/Technology/Cybersecurity Risk


Operational/technology/cybersecurity risk is the danger that inadequate
information systems, operational issues, breaches in internal controls,
information security breaches, fraud, or unforeseen catastrophes will result in
unexpected losses and other adverse impacts to Old National, such as
reputational harm. We maintain frameworks, programs, and internal controls to
prevent or minimize financial loss from failure of systems, people, or
processes. This includes specific programs and frameworks intended to prevent or
limit the effects of cybersecurity risk including, but not limited to,
cyber-attacks or other information security breaches that might allow
unauthorized transactions or unauthorized access to client, team member, or
company sensitive information. Metrics and measurements are used by our
management team in the management of day-to-day operations to ensure effective
client service, minimization of service disruptions, and oversight of
cybersecurity risk. We continually monitor and internally report on operational,
technology, and cybersecurity risks related to business disruptions and systems
failures; cyber-attacks, information security or data breaches; clients,
products, and business practices; damage to physical assets; employee and
workplace safety; execution, delivery, and process management; and external and
internal fraud.

Management reports on cybersecurity risk to our Enterprise Risk Committee of the
Board of Directors.

Regulatory/Compliance and Legal Risk


Regulatory/compliance/legal risk is the risk that the Company violated or was
not in compliance with applicable laws, regulations or practices, industry
standards, or ethical standards. The legal portion assesses the risk that
unenforceable contracts, lawsuits, or adverse judgments can disrupt or otherwise
negatively impact the Company, as well as assesses the issues and risks
associated with being a public company. The Board of Directors expects that we
will perform business in a manner compliant with applicable laws and/or
regulations and expects issues to be identified, analyzed, and remediated in a
timely and complete manner.

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CRITICAL ACCOUNTING ESTIMATES


Our most significant accounting policies are described in Note 1 to the
consolidated financial statements included in our Annual Report on Form 10-K for
the year ended December 31, 2021. Certain of these accounting policies require
management to use significant judgment and estimates, which can have a material
impact on the carrying value of certain assets and liabilities. We consider
these policies to be our critical accounting estimates. The judgment and
assumptions made are based upon historical experience, future forecasts, or
other factors that management believes to be reasonable under the
circumstances. Because of the nature of the judgment and assumptions, actual
results could differ from estimates, which could have a material effect on our
financial condition and results of operations.

Business Combinations and Goodwill


•Description. For acquisitions, we are required to record the assets acquired,
including identified intangible assets such as core deposit and customer trust
relationship intangibles, and the liabilities assumed at their fair value. The
difference between consideration and the net fair value of assets acquired is
recorded as goodwill. Management uses significant estimates and assumptions to
value such items, including projected cash flows, repayment rates, default rates
and losses assuming default, discount rates, and realizable collateral values.
The allowance for credit losses for PCD loans is recognized within acquisition
accounting. The allowance for credit losses for non-PCD assets is recognized as
provision for credit losses in the same reporting period as the acquisition.
Fair value adjustments are amortized or accreted into the income statement over
the estimated life of the acquired assets or assumed liabilities. The purchase
date valuations and any subsequent adjustments determine the amount of goodwill
recognized in connection with the acquisition. The use of different assumptions
could produce significantly different valuation results, which could have
material positive or negative effects on our results of operations. The carrying
value of goodwill recorded must be reviewed for impairment on an annual basis,
as well as on an interim basis if events or changes indicate that the asset
might be impaired. An impairment loss must be recognized for any excess of
carrying value over fair value of the goodwill.

•Judgments and Uncertainties. The determination of fair values is based on
valuations using management's assumptions of future growth rates, future
attrition, discount rates, multiples of earnings or other relevant factors. In
addition, we engage third party specialists to assist in the development of fair
values. Preliminary estimates of fair values may be adjusted for a period of
time subsequent to the acquisition date if new information is obtained about
facts and circumstances that existed as of the acquisition date that, if known,
would have affected the measurement of the amounts recognized as of that date.
Adjustments recorded during this period are recognized in the current reporting
period. Management uses various valuation methodologies to estimate the fair
value of these assets and liabilities, and often involves a significant degree
of judgment, particularly when liquid markets do not exist for the particular
item being valued. Examples of such items include loans, deposits, identifiable
intangible assets, and certain other assets and liabilities.

•Effect if Actual Results Differ From Assumptions. Changes in these factors, as
well as downturns in economic or business conditions, could have a significant
adverse impact on the carrying value of assets, including goodwill and
liabilities, which could result in impairment losses affecting our financial
statements as a whole and our banking subsidiary in which the goodwill resides.

•Pandemic. A prolonged COVID-19 pandemic, or any other epidemic that harms the
global economy, U.S. economy, or the economies in which we operate could
adversely affect our operations. Goodwill is especially susceptible to risk of
impairment during prolonged periods of economic downturn.

For additional information regarding critical accounting estimates, see the
section titled "Critical Accounting Estimates" included in Item 7 of our Annual
Report on Form 10-K for the year ended December 31, 2021. There have been no
material changes in the Company's application of critical accounting estimates
related to allowance for credit losses for loans, derivative financial
instruments, or income taxes since December 31, 2021.

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