v3.26.1
DERIVATIVE FINANCIAL INSTRUMENTS
 6 Months Ended
Jun. 30, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE FINANCIAL INSTRUMENTS DERIVATIVE FINANCIAL INSTRUMENTS
As part of our overall interest rate risk management, Old National uses derivative instruments, including interest rate contracts such as swaps, collars, and floors. The notional amount does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual agreements. Derivative instruments are recognized on the balance sheet at their fair value and are not reported on a net basis.
Credit risk arises from the possible inability of counterparties to meet the terms of their contracts. Old National’s exposure is limited to the termination value of the contracts rather than the notional, principal, or contract amounts. There are provisions in our agreements with the counterparties that allow for certain unsecured credit exposure up to an agreed threshold. Exposures in excess of the agreed thresholds are collateralized. In addition, we minimize credit risk through credit approvals, limits, and monitoring procedures.
Derivatives Designated as Hedges
Subsequent changes in fair value for a hedging instrument that has been designated and qualifies as part of a hedging relationship are accounted for in the following manner:
Cash flow hedges: changes in fair value are recognized as a component in other comprehensive income (loss).
Fair value hedges: changes in fair value are recognized concurrently in earnings.
As long as a hedging instrument is designated, and the results of the effectiveness testing support that the instrument qualifies for hedge accounting treatment, 100% of the periodic changes in fair value of the hedging instrument are accounted for as outlined above. This is the case whether or not economic mismatches exist in the hedging
relationship. As a result, there is no periodic measurement or recognition of ineffectiveness. Rather, the full impact of hedge gains and losses is recognized in the period in which the hedged transactions impact earnings.
The change in fair value of the hedging instrument that is included in the assessment of hedge effectiveness is presented in the same income statement line item that is used to present the earnings effect of the hedged item.
Cash Flow Hedges
Interest rate swaps of certain borrowings were designated as cash flow hedges totaling $50.0 million notional amount at both June 30, 2026 and December 31, 2025. Interest rate swaps, collars, and floors related to variable-rate commercial loan pools were designated as cash flow hedges totaling $3.2 billion notional amount at June 30, 2026 and $2.3 billion notional amount at December 31, 2025. The hedges were determined to be effective during all periods presented and we expect them to remain effective during the remaining terms.
Old National has designated its interest rate collars as cash flow hedges. The structure of these instruments is such that Old National pays the counterparty an incremental amount if the collar index exceeds the cap rate. Conversely, Old National receives an incremental amount if the index falls below the floor rate. No payments are required if the collar index falls between the cap and floor rates. 
Old National has designated its interest rate floor transactions as cash flow hedges. The structure of these instruments is such that Old National receives an incremental amount if the index falls below the floor strike rate. No payments are required if the index remains above the floor strike rate.
Fair Value Hedges
Interest rate swaps of certain borrowings were designated as fair value hedges totaling $800.0 million notional amount at June 30, 2026 and $1.1 billion notional amount at December 31, 2025. Interest rate swaps of certain available-for-sale investment securities were designated as fair value hedges totaling $874.4 million notional amount at June 30, 2026 and $927.4 million notional amount at December 31, 2025. The hedges were determined to be effective during all periods presented and we expect them to remain effective during the remaining terms.
The following table summarizes Old National’s derivatives designated as hedges:
June 30, 2026December 31, 2025
Fair ValueFair Value
(dollars in thousands)Notional
Assets (1)
Liabilities (2)
Notional
Assets (1)
Liabilities (2)
Cash flow hedges:
Interest rate swaps, collars, and floors on loan
   pools		$3,200,000 $2,717 $14,770 $2,300,000 $11,627 $1,667 
Interest rate swaps on borrowings (3)
50,000 — — 50,000 — — 
Fair value hedges:
Interest rate swaps on investment securities (3)
874,407 — — 927,407 — — 
Interest rate swaps on borrowings (3)
800,000 1,013 — 1,100,000 4,836 — 
Total$3,730 $14,770 $16,463 $1,667 
(1)Derivative assets are included in other assets on the balance sheet.
(2)Derivative liabilities are included in other liabilities on the balance sheet.
(3)The fair values of certain counterparty interest rate swaps are zero due to the settlement of centrally cleared variation margin rules.
The effect of derivative instruments in fair value hedging relationships on the consolidated statements of income were as follows:
(dollars in thousands)Gain (Loss)
Recognized
in Income on
Related
Hedged
Items
Derivatives in
Fair Value Hedging
Relationships		Location of Gain or
(Loss) Recognized in
Income on Derivative		Gain (Loss)
Recognized
in Income on
Derivative		Hedged Items
in Fair Value
Hedging
Relationships		Location of Gain or
(Loss) Recognized in
in Income on Related
Hedged Item
Three Months Ended
June 30, 2026
Interest rate contractsInterest income/(expense)$(5,982)Fixed-rate debtInterest income/(expense)$5,982 
Interest rate contractsInterest income/(expense)6,421 Fixed-rate
investment
securities		Interest income/(expense)(6,351)
Total$439 $(369)
Three Months Ended
June 30, 2025
Interest rate contractsInterest income/(expense)$6,088 Fixed-rate debtInterest income/(expense)$(6,075)
Interest rate contractsInterest income/(expense)(8,579)Fixed-rate
investment
securities		Interest income/(expense)8,564 
Total$(2,491)$2,489 
Six Months Ended
June 30, 2026
Interest rate contractsInterest income/(expense)$(11,038)Fixed-rate debtInterest income/(expense)$11,032 
Interest rate contractsInterest income/(expense)7,185 Fixed-rate
investment
securities		Interest income/(expense)(7,101)
Total$(3,853)$3,931 
Six Months Ended
June 30, 2025
Interest rate contractsInterest income/(expense)$15,064 Fixed-rate debtInterest income/(expense)$(15,007)
Interest rate contractsInterest income/(expense)(27,746)Fixed-rate
investment
securities		Interest income/(expense)27,711 
Total$(12,682)$12,704 
The effect of derivative instruments in cash flow hedging relationships on the consolidated statements of income were as follows:
Three Months Ended
June 30,		Three Months Ended
June 30,
(dollars in thousands) 2026202520262025
Derivatives in
Cash Flow Hedging
Relationships		Location of Gain or
(Loss) Reclassified
from AOCI into Income		Gain (Loss)
Recognized in Other
Comprehensive
Income on Derivative		Gain (Loss)
Reclassified from
AOCI into
Income
Interest rate contractsInterest income/(expense)$(14,937)$4,538 $(3,036)$(3,632)
  Six Months Ended
June 30,		Six Months Ended
June 30,
 2026202520262025
Derivatives in
Cash Flow Hedging
Relationships		Location of Gain or
(Loss) Reclassified
from AOCI into Income		Gain (Loss)
Recognized in Other
Comprehensive
Income on Derivative		Gain (Loss)
Reclassified from
AOCI into
Income
Interest rate contractsInterest income/(expense)$(23,244)$15,925 $(5,976)$(5,927)
Amounts reported in AOCI related to cash flow hedges will be reclassified to interest income or interest expense as interest payments are received or paid on Old National’s derivative instruments. During the next 12 months, we
estimate that $1.7 million will be reclassified to interest income and $11.7 million will be reclassified to interest expense.
Derivatives Not Designated as Hedges
Commitments to fund certain mortgage loans (“interest rate lock commitments”) and forward commitments for the future delivery of mortgage loans to third party investors (“forward mortgage loan contracts”) are considered derivatives. These derivative contracts do not qualify for hedge accounting. At June 30, 2026, the notional amounts of the interest rate lock commitments totaled $117.7 million and forward mortgage loan contracts totaled $134.7 million. At December 31, 2025, the notional amounts of the interest rate lock commitments totaled $81.7 million and forward commitments totaled $120.6 million. It is our practice to enter into forward mortgage loan contracts for the future delivery of residential mortgage loans to third-party investors when interest rate lock commitments are entered into in order to economically hedge the effect of changes in interest rates resulting from our commitment to fund the loans.
Old National also enters into derivative instruments for the benefit of its clients. The notional amounts of these customer derivative instruments and the offsetting counterparty derivative instruments totaled $10.6 billion at June 30, 2026 and $9.9 billion at December 31, 2025. These derivative contracts do not qualify for hedge accounting. These instruments include interest rate swaps, caps, and collars. Commonly, Old National will economically hedge significant exposures related to these derivative contracts entered into for the benefit of clients by entering into offsetting contracts with approved, reputable, independent counterparties with substantially matching terms.
Old National enters into derivative financial instruments as part of its foreign currency risk management strategies. These derivative instruments consist of foreign currency forward contracts to accommodate the business needs of its clients. Old National does not designate these foreign currency forward contracts for hedge accounting treatment.
The following table summarizes Old National’s derivatives not designated as hedges:
June 30, 2026December 31, 2025
Fair ValueFair Value
(dollars in thousands)Notional
Assets (1)
Liabilities (2)
Notional
Assets (1)
Liabilities (2)
Interest rate lock commitments$117,675 $493 $— $81,698 $583 $— 
Forward mortgage loan contracts134,702 — 223 120,584 — 402 
Customer interest rate contracts10,605,993 26,627 223,791 9,939,577 76,026 180,367 
Counterparty interest rate contracts (3)
10,605,993 116,780 26,798 9,939,577 77,597 76,442 
Customer foreign currency contracts20,791 119 66 12,086 106 27 
Counterparty foreign currency contracts20,645 103 30 11,656 53 63 
Total$144,122 $250,908 $154,365 $257,301 
(1)Derivative assets are included in other assets on the balance sheet.
(2)Derivative liabilities are included in other liabilities on the balance sheet.
(3)The fair values of certain counterparty interest rate swaps are zero due to the settlement of centrally cleared variation margin rules.
The effect of derivatives not designated as hedging instruments on the consolidated statements of income were as follows:
Three Months Ended
June 30,
(dollars in thousands) 20262025
Derivatives Not Designated as
Hedging Instruments		Location of Gain or (Loss)
Recognized in Income on
Derivative		Gain (Loss)
Recognized in Income on
Derivative
Interest rate contracts (1)
Other income/(expense)$290 $123 
Mortgage contractsMortgage banking revenue(1,236)(122)
Foreign currency contractsOther income/(expense)(53)(66)
Total $(999)$(65)
  Six Months Ended
June 30,
 20262025
Derivatives Not Designated as
Hedging Instruments		Location of Gain or (Loss)
Recognized in Income on
Derivative		Gain (Loss)
Recognized in Income on
Derivative
Interest rate contracts (1)
Other income/(expense)$456 $147 
Mortgage contractsMortgage banking revenue89 (503)
Foreign currency contractsOther income/(expense)17 13 
Total $562 $(343)
(1)Includes the valuation differences between the customer and offsetting swaps.
Fair Value of Offsetting Derivatives
Certain derivative instruments are subject to master netting agreements with counterparties that provide rights of setoff. The Company records these transactions at their gross fair values and does not offset derivative assets and liabilities in the Consolidated Balance Sheet. The following table presents the fair value of the Company’s derivatives and offsetting positions:
June 30, 2026December 31, 2025
(dollars in thousands)AssetsLiabilitiesAssetsLiabilities
Gross amounts recognized$147,852 $265,678 $170,828 $258,968 
Less: amounts offset in the Consolidated Balance Sheet— — — — 
Net amount presented in the Consolidated Balance Sheet147,852 265,678 170,828 258,968 
Gross amounts not offset in the Consolidated Balance Sheet
Offsetting derivative positions(41,598)(41,598)(78,172)(78,172)
Cash collateral pledged(2,720)(75,539)(17,670)(28,689)
Net credit exposure$103,534 $148,541 $74,986 $152,107