OLD NATIONAL BANCORP /IN/ONB
OLD NATIONAL BANCORP /IN/ Fair Value Disclosure
FAIR VALUE
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:
•Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
•Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
•Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
Old National used the following methods and significant assumptions to estimate the fair value of each type of financial instrument:
Investment securities and equity securities: The fair values for investment securities and equity securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3). Discounted cash flows are calculated using swap and SOFR curves plus spreads that adjust for loss severities, volatility, credit risk, and optionality. During times when trading is more liquid, broker quotes are used (if available) to validate the model. Rating agency and industry research reports as well as defaults and deferrals on individual securities are reviewed and incorporated into the calculations.
Loans held-for-sale: The fair value of loans held-for-sale is determined using quoted prices for a similar asset, adjusted for specific attributes of that loan (Level 2).
Derivative financial instruments: The fair values of derivative financial instruments are based on market quotes developed using observable inputs as of the valuation date (Level 2).
Recurring Basis
Assets and liabilities measured at fair value on a recurring basis, including financial assets and liabilities for which we have elected the fair value option, are summarized below:
| Fair Value Measurements at December 31, 2025 Using | ||||||||||||||
| (dollars in thousands) | Carrying Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||
| Financial Assets | ||||||||||||||
| Equity securities | $ | 128,857 | $ | 128,857 | $ | — | $ | — | ||||||
| Investment securities available-for-sale: | ||||||||||||||
| U.S. Treasury | 214,544 | 214,544 | — | — | ||||||||||
| U.S. government-sponsored entities and agencies | 1,372,392 | — | 1,372,392 | — | ||||||||||
| Mortgage-backed securities - Agency | 9,168,035 | — | 9,168,035 | — | ||||||||||
| States and political subdivisions | 426,008 | — | 426,008 | — | ||||||||||
| Pooled trust preferred securities | 11,734 | — | 11,734 | — | ||||||||||
| Other securities | 191,737 | — | 191,737 | — | ||||||||||
| Loans held-for-sale | 52,911 | — | 52,911 | — | ||||||||||
| Derivative assets | 170,828 | — | 170,828 | — | ||||||||||
| Financial Liabilities | ||||||||||||||
| Derivative liabilities | 258,968 | — | 258,968 | — | ||||||||||
| Fair Value Measurements at December 31, 2024 Using | ||||||||||||||
| (dollars in thousands) | Carrying Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||
| Financial Assets | ||||||||||||||
| Equity securities | $ | 91,996 | $ | 91,996 | $ | — | $ | — | ||||||
| Investment securities available-for-sale: | ||||||||||||||
| U.S. Treasury | 199,013 | 199,013 | — | — | ||||||||||
| U.S. government-sponsored entities and agencies | 1,257,906 | — | 1,257,906 | — | ||||||||||
| Mortgage-backed securities - Agency | 5,204,891 | — | 5,204,891 | — | ||||||||||
| States and political subdivisions | 485,544 | — | 485,544 | — | ||||||||||
| Pooled trust preferred securities | 11,322 | — | 11,322 | — | ||||||||||
| Other securities | 299,783 | — | 299,783 | — | ||||||||||
| Loans held-for-sale | 34,483 | — | 34,483 | — | ||||||||||
| Derivative assets | 146,478 | — | 146,478 | — | ||||||||||
| Financial Liabilities | ||||||||||||||
| Derivative liabilities | 244,313 | — | 244,313 | — | ||||||||||
Non-Recurring Basis
Assets measured at fair value on a non-recurring basis at December 31, 2025 are summarized below:
| Fair Value Measurements at December 31, 2025 Using | ||||||||||||||
| (dollars in thousands) | Carrying Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||
| Collateral Dependent Loans: | ||||||||||||||
| Commercial loans | $ | 55,471 | $ | — | $ | — | $ | 55,471 | ||||||
| Commercial real estate loans | 109,852 | — | — | 109,852 | ||||||||||
| Foreclosed Assets: | ||||||||||||||
| Commercial real estate | 975 | — | — | 975 | ||||||||||
| Residential | 98 | — | — | 98 | ||||||||||
Commercial and commercial real estate loans that are deemed collateral dependent are valued using the discounted cash flows. The liquidation amounts are based on the fair value of the underlying collateral using the most recently available appraisals with certain adjustments made based on the type of property, age of appraisal, current status of the property, and other related factors to estimate the current value of the collateral. These commercial and commercial real estate loans had a principal amount of $256.3 million, with a valuation allowance of $90.9 million at December 31, 2025. Old National recorded provision expense associated with commercial and commercial real estate loans that were deemed collateral dependent totaling $22.2 million in 2025.
Other real estate owned and other repossessed property is measured at fair value less costs to sell on a non-recurring basis and had a net carrying amount of $1.1 million at December 31, 2025. There were write-downs of other real estate owned of $0.6 million in 2025.
Assets measured at fair value on a non-recurring basis at December 31, 2024 are summarized below:
| Fair Value Measurements at December 31, 2024 Using | ||||||||||||||
| (dollars in thousands) | Carrying Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||
| Collateral Dependent Loans: | ||||||||||||||
| Commercial loans | $ | 33,658 | $ | — | $ | — | $ | 33,658 | ||||||
| Commercial real estate loans | 121,393 | — | — | 121,393 | ||||||||||
| Foreclosed Assets: | ||||||||||||||
| Commercial real estate | 975 | — | — | 975 | ||||||||||
| Residential | 244 | — | — | 244 | ||||||||||
At December 31, 2024, commercial and commercial real estate loans that were deemed collateral dependent had a principal amount of $213.8 million, with a valuation allowance of $58.7 million. Old National recorded provision expense associated with these loans totaling $49.0 million in 2024.
The net carrying amount of other real estate owned and other repossessed property totaled $1.2 million at December 31, 2024. There were write-downs of other real estate owned of $0.5 million in 2024.
The table below provides quantitative information about significant unobservable inputs used in fair value measurements within Level 3 of the fair value hierarchy:
| (dollars in thousands) | Fair Value | Valuation Techniques | Unobservable Input | Range (Weighted Average)(1) | ||||||||||
| December 31, 2025 | ||||||||||||||
| Collateral Dependent Loans | ||||||||||||||
| Commercial loans | $ | 55,471 | Discounted cash flow | Discount for type of property, age of appraisal, and current status | 8% - 50% (35%) | |||||||||
| Commercial real estate loans | 109,852 | Discounted cash flow | Discount for type of property, age of appraisal, and current status | 2% - 61% (17%) | ||||||||||
| Foreclosed Assets | ||||||||||||||
Commercial real estate (2) | 975 | Fair value of collateral | Discount for type of property, age of appraisal, and current status | 30% | ||||||||||
Residential (2) | 98 | Fair value of collateral | Discount for type of property, age of appraisal, and current status | 44% | ||||||||||
| December 31, 2024 | ||||||||||||||
| Collateral Dependent Loans | ||||||||||||||
| Commercial loans | $ | 33,658 | Discounted cash flow | Discount for type of property, age of appraisal, and current status | 9% - 49% (31%) | |||||||||
| Commercial real estate loans | 121,393 | Discounted cash flow | Discount for type of property, age of appraisal, and current status | 3% - 46% (18%) | ||||||||||
| Foreclosed Assets | ||||||||||||||
Commercial real estate (2) | 975 | Fair value of collateral | Discount for type of property, age of appraisal, and current status | 28% | ||||||||||
Residential (2) | 244 | Fair value of collateral | Discount for type of property, age of appraisal, and current status | 24% | ||||||||||
(1)Unobservable inputs were weighted by the relative fair value of the instruments.
(2)There was only one foreclosed commercial real estate property and one foreclosed residential real estate property at December 31, 2025 and December 31, 2024 with write-downs during 2025 and 2024, so no range or weighted average is reported.
Fair Value Option
Old National may elect to report most financial instruments and certain other items at fair value on an instrument-by-instrument basis with changes in fair value reported in net income. After the initial adoption, the election is made at the acquisition of an eligible financial asset, financial liability, or firm commitment or when certain specified reconsideration events occur. The fair value election may not be revoked once an election is made.
Loans Held-For-Sale
Old National has elected the fair value option for loans held-for-sale. For these loans, interest income is recorded in the consolidated statements of income based on the contractual amount of interest income earned on the financial assets (except any that are on nonaccrual status). None of these loans are 90 days or more past due, nor are any on nonaccrual status. Interest income for loans held-for-sale is included in the income statement totaling $3.6 million in 2025, $2.3 million in 2024, and $1.2 million in 2023.
Newly originated conforming fixed-rate and adjustable-rate first mortgage loans are intended for sale and are hedged with derivative instruments. Old National has elected the fair value option to mitigate accounting mismatches in cases where hedge accounting is complex and to achieve operational simplification. The fair value option was not elected for loans held for investment.
The difference between the aggregate fair value and the aggregate remaining principal balance for loans for which the fair value option has been elected was as follows:
| (dollars in thousands) | Aggregate Fair Value | Difference | Contractual Principal | ||||||||
| December 31, 2025 | |||||||||||
| Loans held-for-sale | $ | 52,911 | $ | 1,148 | $ | 51,763 | |||||
| December 31, 2024 | |||||||||||
| Loans held-for-sale | $ | 34,483 | $ | 271 | $ | 34,212 | |||||
Accrued interest at period end is included in the fair value of the instruments.
The following table presents the amount of gains and losses from fair value changes included in income before income taxes for financial assets carried at fair value:
| (dollars in thousands) | Other Gains and (Losses) | Interest Income | Interest (Expense) | Total Changes in Fair Values Included in Current Period Earnings | ||||||||||
| Year Ended December 31, 2025 | ||||||||||||||
| Loans held-for-sale | $ | 874 | $ | 101 | $ | (98) | $ | 877 | ||||||
| Year Ended December 31, 2024 | ||||||||||||||
| Loans held-for-sale | $ | (377) | $ | 32 | $ | (5) | $ | (350) | ||||||
Financial Instruments Not Carried at Fair Value
The carrying amounts and estimated fair values of financial instruments not carried at fair value were as follows:
| Fair Value Measurements at December 31, 2025 Using | ||||||||||||||
| (dollars in thousands) | Carrying Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||
| Financial Assets | ||||||||||||||
| Cash, due from banks, money market, and other interest-earning investments | $ | 1,826,177 | $ | 1,826,177 | $ | — | $ | — | ||||||
| Investment securities held-to-maturity: | ||||||||||||||
| U.S. government-sponsored entities and agencies | 840,435 | — | 710,909 | — | ||||||||||
| Mortgage-backed securities - Agency | 910,323 | — | 782,818 | — | ||||||||||
| State and political subdivisions | 1,144,730 | — | 1,046,511 | — | ||||||||||
| Loans, net: | ||||||||||||||
| Commercial | 14,737,809 | — | — | 14,831,563 | ||||||||||
| Commercial real estate | 21,780,686 | — | — | 21,806,075 | ||||||||||
| Residential real estate | 8,433,102 | — | — | 7,526,511 | ||||||||||
| Consumer | 3,243,045 | — | — | 3,027,561 | ||||||||||
| Accrued interest receivable | 306,812 | 894 | 77,288 | 228,630 | ||||||||||
| Financial Liabilities | ||||||||||||||
| Deposits: | ||||||||||||||
| Noninterest-bearing demand deposits | $ | 13,247,483 | $ | 13,247,483 | $ | — | $ | — | ||||||
| Checking, NOW, savings, and money market interest-bearing deposits | 32,179,688 | 32,179,688 | — | — | ||||||||||
| Time deposits | 9,661,024 | — | 9,540,748 | — | ||||||||||
| Federal funds purchased and interbank borrowings | 100,197 | 100,197 | — | — | ||||||||||
| Securities sold under agreements to repurchase | 261,366 | 261,366 | — | — | ||||||||||
| FHLB advances | 6,237,375 | — | 6,229,752 | — | ||||||||||
| Other borrowings | 852,429 | — | 853,938 | — | ||||||||||
| Accrued interest payable | 65,291 | — | 65,291 | — | ||||||||||
| Standby letters of credit | 1,672 | — | — | 1,672 | ||||||||||
| Off-Balance Sheet Financial Instruments | ||||||||||||||
| Commitments to extend credit | $ | — | $ | — | $ | — | $ | 5,687 | ||||||
| Fair Value Measurements at December 31, 2024 Using | ||||||||||||||
| (dollars in thousands) | Carrying Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||
| Financial Assets | ||||||||||||||
| Cash, due from banks, money market, and other interest-earning investments | $ | 1,227,968 | $ | 1,227,968 | $ | — | $ | — | ||||||
| Investment securities held-to-maturity: | ||||||||||||||
| U.S. government-sponsored entities and agencies | 832,984 | — | 664,331 | — | ||||||||||
| Mortgage-backed securities - Agency | 970,212 | — | 800,666 | — | ||||||||||
| State and political subdivisions | 1,151,685 | — | 1,006,141 | — | ||||||||||
| Loans, net: | ||||||||||||||
| Commercial | 10,138,241 | — | — | 10,158,299 | ||||||||||
| Commercial real estate | 16,105,961 | — | — | 15,961,968 | ||||||||||
| Residential real estate | 6,774,664 | — | — | 6,080,709 | ||||||||||
| Consumer | 2,874,499 | — | — | 2,800,060 | ||||||||||
| Accrued interest receivable | 233,010 | 912 | 60,459 | 171,639 | ||||||||||
| Financial Liabilities | ||||||||||||||
| Deposits: | ||||||||||||||
| Noninterest-bearing demand deposits | $ | 9,399,019 | $ | 9,399,019 | $ | — | $ | — | ||||||
| Checking, NOW, savings, and money market interest-bearing deposits | 24,668,802 | 24,668,802 | — | — | ||||||||||
| Time deposits | 6,755,739 | — | 6,727,453 | — | ||||||||||
| Federal funds purchased and interbank borrowings | 385 | 385 | — | — | ||||||||||
| Securities sold under agreements to repurchase | 268,975 | 268,975 | — | — | ||||||||||
| FHLB advances | 4,452,559 | — | 4,340,188 | — | ||||||||||
| Other borrowings | 689,618 | — | 689,246 | — | ||||||||||
| Accrued interest payable | 65,057 | — | 65,057 | — | ||||||||||
| Standby letters of credit | 1,742 | — | — | 1,742 | ||||||||||
| Off-Balance Sheet Financial Instruments | ||||||||||||||
| Commitments to extend credit | $ | — | $ | — | $ | — | $ | 3,403 | ||||||
The methods utilized to measure the fair value of financial instruments at December 31, 2025 and 2024 represent an approximation of exit price, however, an actual exit price may differ.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 19, 2026 | Showing above |
| 2024 | Feb 19, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 22, 2023 | |
| 2021 | Feb 10, 2022 | |
| 2020 | Feb 10, 2021 | |
| 2019 | Feb 12, 2020 | |
| 2018 | Feb 12, 2019 | |
| 2017 | Feb 15, 2018 | |
| 2016 | Feb 16, 2017 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.