Company: ONBPP
Filing Date: 2025-04-30
Form Type: 10-Q
Source: 0000707179-25-000009
Chunk: 120

Company: OLD NATIONAL BANCORP /IN/
Filing Date: 2025-04-30
Form: 10-Q
Item: Item 8
Chunk 120
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 loan commitments 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 on 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 unfunded loan commitments is included in the provision for credit losses. Old National’s activity in the allowance for credit losses on unfunded loan commitments was as follows:Three Months EndedMarch 31,(dollars in thousands)20252024Allowance for credit losses on unfunded loan commitments:Balance at beginning of period$21,654 $31,226 Provision (release) for credit losses on unfunded loan   commitments377 (4,962)Balance at end of period$22,031 $26,264 Credit QualityOld National’s management monitors the credit quality of its loans on an ongoing basis with the asset quality rating (“AQR”) for commercial, commercial real estate, and BBCC loans reviewed annually or at renewal and the performance of its residential and consumer loans based upon the accrual status refreshed at least quarterly. Internally, management assigns an AQR to each non-homogeneous commercial, commercial real estate, and BBCC loan in the portfolio. The primary determinants of the AQR are the reliability of the primary source of repayment and the past, present, and projected financial condition of the borrower. The AQR will also consider current industry conditions. Major factors used in determining the AQR can vary based on the nature of the loan, but commonly include factors such as debt service coverage, internal cash flow, liquidity, leverage, operating performance, debt burden, FICO scores, occupancy, interest rate sensitivity, and expense burden. Old National uses the following definitions for risk ratings:Special Mention. Loans categorized as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of Old National’s credit position at some future date.Classified – Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized