Company: ONBPP
Filing Date: 2025-01-14
Form Type: S-4
Source: 0001104659-25-003488
Chunk: 169

Company: OLD NATIONAL BANCORP /IN/
Filing Date: 2025-01-14
Form: S-4
Chunk 169
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 the borrower’s operations, industry characteristics, commodity prices, marketing activity, weather patterns, insurance and government program support, repayment sources, borrower’s debt capacity and financial performance, loan covenants, and value of collateral. The Company considers these characteristics in assigning risk ratings and estimating the allowance.

The residential real estate class includes loans made to consumers, including residential first mortgages, residential construction loans, and home equity first lien loans. These loans are typically fixed-rate loans secured by residential real estate. Key risk characteristics relevant to this class include the borrower’s capacity and willingness to repay, payment history, income and debt levels, value and location of collateral, unemployment rates, and other economic factors. The Company considers these characteristics in assigning, as applicable, risk classifications and estimating the allowance.

The retail class includes consumer loans, including home equity second lien loans, loans secured by automobiles and other installment loans, and unsecured term loans and revolving credit lines. Key risk characteristics relevant to this segment include the borrower’s capacity and willingness to repay, payment history, income and debt levels, value and location of collateral, unemployment rates, and other economic factors. The Company considers these characteristics in assigning, as applicable, risk classifications and estimating the allowance.

Loans that do not exhibit similar risk characteristics are evaluated on an individual basis and are not included in the collective evaluation. If an individually evaluated loan is determined to be collateral dependent or meets the criteria to apply the collateral dependent practical expedient, expected credit losses are estimated based on the fair value of collateral less applicable selling costs. If not, a discounted cash flows methodology is used.

The Company’s methodology for determining the allowance for credit losses also considers the need for adjustments to the estimated allowance amounts described above as a result of limitations inherent in the methodologies used. Using a systematic approach, necessary adjustments are made to consider the potential impact of other qualitative factors not captured in the quantitative model which include, but are not limited to, the following: model imprecision, imprecision in economic scenario assumptions, and emerging risks related to changes in the economic environment that are affecting specific loan segments. The consideration of these qualitative factors is incorporated in the allowance for credit losses for each loan class.

Prior to implementation of Accounting Standard Update 2016-13 on January 1, 2023, the Company was required to use an incurred loss methodology to estimate credit losses. The allowance for credit losses and resulting provision expense levels for comparative periods presented were estimated in accordance with that methodology and applicable accounting guidance.

Allowance for Unfunded Commitments

The allowance