Acquisition Activity

12 Months Ended

Dec. 31, 2011

Acquisition Activity [Abstract]

Acquisition Activity

NOTE 2 – ACQUISITION ACTIVITY

Integra Bank N.A.

On July 29, 2011, Old National acquired the banking operations of Integra Bank N.A.in an FDIC assisted transaction. As part of the purchase and assumption agreement, the Company and the FDIC entered into loss sharing agreements whereby the FDIC will cover a substantial portion of any future losses on loans (and related unfunded commitments), other real estate owned and up to 90 days of certain accrued interest on loans. The acquired loans and OREO subject to the loss sharing agreements are referred to collectively as "covered assets." Under the terms of the loss sharing agreements, the FDIC will reimburse Old National for 80% of losses up to $275.0 million, losses in excess of $275.0 million up to $467.2 million at 0% reimbursement, and 80% of losses in excess of $467.2 million. Old National will reimburse the FDIC for its share of recoveries with respect to losses for

which the FDIC has reimbursed the Bank under the loss sharing agreements. The loss sharing provisions of the agreements for commercial and single family residential mortgage loans are in effect for five and ten years, respectively, from the July 29, 2011 acquisition date and the loss recovery provisions for such loans are in effect for eight years and ten years, respectively, from the acquisition date.

Integra was a full service community bank headquartered in Evansville, Indiana that operated 52 branch locations. We entered into this transaction due to the attractiveness in the pricing of the acquired loan portfolio, including the indemnification assets, and the attractiveness of immediate low cost core deposits. We also believed there were opportunities to enhance income and improve efficiencies. We believe participating with the FDIC in this assisted transaction was advantageous to the Company.

The assets acquired and liabilities assumed have been accounted for under the acquisition method of accounting (formerly the purchase method). The assets and liabilities, both tangible and intangible, were recorded at their estimated fair values as of the July 29, 2011 acquisition date. The application of the acquisition method of accounting resulted in the recognition of $16.9 million of goodwill and $4.3 million of core deposit intangible, after tax. The goodwill represents the excess of the estimated fair value of the liabilities assumed over the estimated fair value of the assets acquired and is influenced significantly by the FDIC-assisted transaction process. Goodwill of $29.0 million is deductible for income tax purposes.

Due primarily to the significant amount of fair value adjustments and the FDIC loss sharing agreements put in place, historical results for Integra are not meaningful to the Company's results and thus no pro forma information is presented.

Under the acquisition method of accounting, the total estimated purchase price is allocated to Integra's net tangible and intangible assets based on their current estimated fair values on the date of acquisition. The purchase price of $170.8 million was allocated as follows:

(dollars in thousands)
Assets Acquired
Cash and cash equivalents	$	314,954
Investment securities - available for sale		453,700
Federal Home Loan Bank stock, at cost		15,226
Residential loans held for sale		1,690
Loans - covered		727,330
Loans - non-covered		56,828
Premises and equipment		19,713
Other real estate owned		34,055
Accrued interest receivable		4,751
Goodwill (1)		16,864
Other intangible assets		4,291
FDIC indemnification asset		167,949
Other assets		9,999
Assets acquired	$	1,827,350
Liabilities Assumed
Deposits	$	1,443,209
Short-term borrowings		7,654
Other borrowings		192,895
FDIC settlement payable		170,759
Other liabilities		12,833
Liabilities assumed	$	1,827,350

(1) Within the measurement period, goodwill was reduced by $12.8 million due to final measurement of the liabilities associated with the acquisition.

Divestiture

On December 2, 2011, Old National sold $106.9 million of deposits from four of the former Integra Bank branches located in the Chicago area to First Midwest Bank. Old National recorded a net gain of $0.5 million after recording the $0.4 million deposit premium plus $0.8 million related to the time deposit mark less $0.7 million of accelerated amortization associated with the core deposit intangible. Old National retained all of the loans.

Trust Business of Integra Bank

On June 1, 2011, Old National Bancorp's wholly owned trust subsidiary, American National Trust and Investment Management Company d/b/a Old National Trust Company ("ONTC"), acquired the trust business of Integra Bank, N.A. in a transaction unrelated to the previously noted FDIC transaction. As of the closing, the trust business had approximately $328 million in assets under management. This transaction brings the total assets under management by Old National's Wealth Management division to approximately $4.4 billion. Old National paid Integra $1.3 million in an all cash transaction and recorded acquisition-related costs of $126 thousand. Old National recorded $1.3 million of customer relationship intangible assets which will be amortized on an accelerated basis over 12 years and is included in the "Other" segment, as described in Note 23 of the consolidated financial statement footnotes.

Monroe Bancorp

On January 1, 2011, Old National acquired 100 % of Monroe Bancorp ("Monroe") in an all stock transaction. Monroe was headquartered in Bloomington, Indiana and had 15 banking centers. The acquisition increases Old National's market position to number 1 in Bloomington and strengthens its position as the third largest branch network in Indiana. Pursuant to the merger agreement, the shareholders of Monroe received approximately 7.6 million shares of Old National Bancorp stock valued at approximately $90.1 million.

Under the acquisition method of accounting, the total estimated purchase price is allocated to Monroe's net tangible and intangible assets based on their current estimated fair values on the date of the acquisition. The purchase price for the Monroe acquisition is allocated as follows (in thousands):

Cash and cash equivalents	$	83,604
Trading securities		3,877
Investment securities - available for sale		140,422
Investment securities - held to maturity		6,972
Federal Home Loan Bank stock, at cost		2,323
Loans held for sale		6,328
Loans		447,038
Premises and equipment		19,738
Accrued interest receivable		1,804
Company-owned life insurance		17,206
Other assets		41,538
Deposits		(653,813	)
Short-term borrowings		(62,529	)
Other borrowings		(37,352	)
Accrued expenses and other liabilities		(6,000	)
Net tangible assets acquired		11,156
Definite-lived intangible assets acquired		10,485
Goodwill		68,429
Purchase price	$	90,070

Of the total estimated purchase price, $11.2 million has been allocated to net tangible assets acquired and $10.5 million has been allocated to definite-lived intangible assets acquired. The remaining purchase price has been allocated to goodwill. The goodwill will not be deductible for tax purposes and is included in the "Community Banking" and "Other" segments, as described in Note 23 of these consolidated financial statement footnotes.

The components of the estimated fair value of the acquired identifiable intangible assets are in the table below. These intangible assets will be amortized on an accelerated basis over their estimated lives and are included in the "Community Banking" and "Other" segments, as described in Note 23 of these consolidated financial statement footnotes.

		Estimated
		Fair Value	Estimated
		(in millions)	Useful Lives (Years)
Core deposit intangible	$	8.2	10
Trust customer relationship intangible	$	2.3	12

Subsequent Event

On January 25, 2012, Old National announced its agreement to acquire Indiana Community Bancorp in an all stock transaction. Indiana community Bancorp is an Indiana bank holding company with Indiana Bank and Trust Company ("IBTC") as its wholly owned subsidiary. Headquartered in Columbus, Indiana, IBTC has 17 full-service banking centers serving the South Central Indiana area and approximately $985 million in assets. The acquisition increases Old National's position as the third largest branch network in Indiana. Pursuant to the merger agreement, the shareholders of Indiana Community Bancorp will receive 1.90 shares of Old National Bancorp common stock for each share of Indiana Community Bancorp common stock, subject to certain adjustments. The transaction is valued at approximately $79.2 million and is expected to close in the second quarter of 2012 subject to approval by federal and state regulatory authorities.