OLD NATIONAL BANCORP /IN/ONB
OLD NATIONAL BANCORP /IN/ Income Taxes Disclosure
INCOME TAXES
Following is a summary of the major items comprising the differences in taxes from continuing operations computed at the federal statutory rate and as recorded in the consolidated statement of income:
| Years Ended December 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||
| (dollars in thousands) | Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||
| Provision at statutory rate | $ | 176,693 | 21.0 | % | $ | 142,892 | 21.0 | % | $ | 157,774 | 21.0 | % | ||||||||||||||
| State income taxes | 32,948 | 3.9 | 19,619 | 2.9 | 31,164 | 4.1 | ||||||||||||||||||||
| Tax credit investments - federal: | ||||||||||||||||||||||||||
| New market tax credits | (24,881) | (3.0) | (12,476) | (1.8) | (7,545) | (1.0) | ||||||||||||||||||||
| Other tax credit investments | (3,439) | (0.4) | (2,353) | (0.3) | (4,645) | (0.6) | ||||||||||||||||||||
| Nontaxable or nondeductible items: | ||||||||||||||||||||||||||
| Tax-exempt interest | (22,518) | (2.7) | (19,439) | (2.9) | (18,582) | (2.5) | ||||||||||||||||||||
| FDIC premiums | 10,792 | 1.3 | 8,754 | 1.3 | 7,912 | 1.1 | ||||||||||||||||||||
| Other nontaxable or nondeductible items | 1,762 | 0.2 | 2,772 | 0.4 | 2,816 | 0.4 | ||||||||||||||||||||
| Change in uncertain tax positions | 374 | — | (2,811) | (0.4) | (832) | (0.1) | ||||||||||||||||||||
| Other, net | 405 | — | 4,292 | 0.6 | 1,248 | 0.2 | ||||||||||||||||||||
| Income tax expense | $ | 172,136 | 20.5 | % | $ | 141,250 | 20.8 | % | $ | 169,310 | 22.5 | % | ||||||||||||||
The provision for income taxes consisted of the following components:
| Years Ended December 31, | |||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Income taxes currently payable: | |||||||||||||||||
| Federal | $ | 62,964 | $ | 99,532 | $ | 121,428 | |||||||||||
| State | 27,146 | 21,317 | 37,331 | ||||||||||||||
| Deferred income taxes related to: | |||||||||||||||||
| Federal | 66,601 | 14,956 | 7,941 | ||||||||||||||
| State | 15,425 | 5,445 | 2,610 | ||||||||||||||
| Deferred income tax expense | 82,026 | 20,401 | 10,551 | ||||||||||||||
| Income tax expense | $ | 172,136 | $ | 141,250 | $ | 169,310 | |||||||||||
Illinois and Minnesota collectively represented more than 50% of the Company’s state income tax expense for the year ended December 31, 2025 presented in the table above, which reflects the Company’s operations and taxable income generated within these jurisdictions.
Net Deferred Tax Assets
Net deferred tax assets are included in other assets on the balance sheet. Significant components of net deferred tax assets (liabilities) were as follows:
| December 31, | |||||||||||
| (dollars in thousands) | 2025 | 2024 | |||||||||
| Deferred Tax Assets | |||||||||||
| Allowance for credit losses on loans, net of recapture | $ | 157,121 | $ | 105,475 | |||||||
| Acquired loans | 152,407 | 49,093 | |||||||||
| Unrealized losses on available-for-sale investment securities | 141,993 | 222,467 | |||||||||
| Operating lease liabilities | 65,656 | 57,495 | |||||||||
| Benefit plan accruals | 43,871 | 40,089 | |||||||||
| Net operating loss carryforwards | 28,327 | 19,601 | |||||||||
| Unrealized losses on held-to-maturity investment securities | 23,640 | 27,664 | |||||||||
| FDIC deductible premiums | 790 | 3,766 | |||||||||
| Purchase accounting assets | — | 10,062 | |||||||||
| Other, net | 4,550 | 6,658 | |||||||||
| Total deferred tax assets | 618,355 | 542,370 | |||||||||
| Deferred Tax Liabilities | |||||||||||
| Operating lease right-of-use assets | (60,676) | (52,441) | |||||||||
| Purchase accounting liabilities | (31,694) | — | |||||||||
| Loan servicing rights | (17,453) | (10,012) | |||||||||
| Premises and equipment | (16,388) | (13,358) | |||||||||
| Unrealized gains on hedges | (7,343) | (1,505) | |||||||||
| Prepaid expenses | (5,685) | (3,982) | |||||||||
| Tax credit investments and other partnerships | (1,809) | (2,310) | |||||||||
| Other, net | (4,138) | (2,315) | |||||||||
| Total deferred tax liabilities | (145,186) | (85,923) | |||||||||
| Net deferred tax assets | $ | 473,169 | $ | 456,447 | |||||||
The Company’s retained earnings at December 31, 2025 included an appropriation for acquired thrifts’ tax bad debt allowances totaling $58.6 million for which no provision for federal or state income taxes has been made. If in the future, this portion of retained earnings were distributed as a result of the liquidation of the Company or its subsidiaries, federal and state income taxes would be imposed at the then applicable rates.
No valuation allowance was required on the Company’s deferred tax assets at December 31, 2025 or 2024. Old National has federal net operating loss carryforwards totaling $87.8 million at December 31, 2025 and $60.2 million at December 31, 2024. This federal net operating loss was acquired from the acquisition of Anchor BanCorp Wisconsin Inc. in 2016, First Midwest in 2022, and CapStar in 2024. If not used, the federal net operating loss carryforwards will begin expiring in 2032 and later. Old National has recorded state net operating loss carryforwards totaling $140.3 million at December 31, 2025 and $106.0 million at December 31, 2024. If not used, the state net operating loss carryforwards will expire from 2028 to 2039.
The federal and recorded state net operating loss carryforwards are subject to an annual limitation under Internal Revenue Code section 382. Old National believes that all of the federal and recorded state net operating loss carryforwards will be used prior to expiration.
Unrecognized Tax Benefits
The following table presents the changes in the carrying amount of unrecognized tax benefits:
| Years Ended December 31, | |||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Balance at beginning of period | $ | 6,994 | $ | 9,955 | $ | 11,007 | |||||||||||
| Additions for acquired uncertain tax positions | 8,178 | — | — | ||||||||||||||
| Additions based on tax positions related to prior years | 2,152 | — | 60 | ||||||||||||||
| Reductions due to statute of limitations expiring | (1,579) | (2,961) | (1,112) | ||||||||||||||
| Balance at end of period | $ | 15,745 | $ | 6,994 | $ | 9,955 | |||||||||||
If recognized, approximately $13.4 million of unrecognized tax benefits, net of interest, would favorably affect the effective income tax rate in future periods.
It is our policy to recognize interest and penalties accrued relative to unrecognized tax benefits in their respective federal or state income tax accounts. Interest and penalties recorded and accrued totaled $1.2 million at December 31, 2025.
Old National and its subsidiaries file a consolidated U.S. federal income tax return, as well as filing various state returns. The 2021 through 2024 tax years are open and subject to examination.
Income Taxes Paid
The following table presents the amount of income taxes paid (net of refunds received) disaggregated by federal and state taxes:
| Years Ended December 31, | ||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | 2023 | |||||||||||||||||
| Jurisdiction Type | Jurisdiction | Income Taxes Paid (Net of Refunds) | ||||||||||||||||||
| Federal | Federal | $ | 116,600 | $ | 78,639 | $ | 137,386 | |||||||||||||
| State | Minnesota | 15,090 | 5,225 | 8,600 | ||||||||||||||||
| State | Illinois | 13,500 | 2,500 | 28,200 | ||||||||||||||||
| State | All others | 9,103 | 14,212 | 16,117 | ||||||||||||||||
| Total | $ | 154,293 | $ | 100,576 | $ | 190,303 | ||||||||||||||
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 Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.