Employee Benefit Plans

12 Months Ended

Dec. 31, 2012

Employee Benefit Plans [Abstract]

Employee Benefit Plans

NOTE 13 - EMPLOYEE BENEFIT PLANS

RETIREMENT PLAN AND RESTORATION PLAN

Old National maintains a funded noncontributory defined benefit plan (the "Retirement Plan") that was frozen as of December 31, 2005. Retirement benefits are based on years of service and compensation during the highest paid five consecutive years of employment. The freezing of the plan provides that future salary increases will not be considered. Old National's policy is to contribute at least the minimum funding requirement determined by the plan's actuary.

Old National also maintains an unfunded pension restoration plan (the "Restoration Plan") which provides benefits for eligible employees that are in excess of the limits under Section 415 of the Internal Revenue Code of 1986, as amended, that apply to the Retirement Plan. The Restoration Plan is designed to comply with the requirements of ERISA. The entire cost of the plan, which was also frozen as of December 31, 2005, is supported by contributions from the Corporation.

Old National uses a December 31 measurement date for its defined benefit pension plans. The following table presents the combined activity of the Company's defined benefit plans:

(dollars in thousands)		2012			2011
Change in Projected Benefit Obligation
Balance at January 1	$	46,553		$	42,162
Interest cost		1,971			2,099
Benefits paid		(893	)		(937	)
Actuarial loss		3,697			6,262
Settlement		(2,600	)		(3,033	)
Projected Benefit Obligation at December 31		48,728			46,553
Change in Plan Assets
Fair value at January 1		36,339			40,101
Actual return on plan assets		4,140			(206	)
Employer contributions		564			414
Benefits paid		(893	)		(937	)
Settlement		(2,600	)		(3,033	)
Fair value of Plan Assets at December 31		37,550			36,339
Funded status at December 31		(11,178	)		(10,214	)
Amounts recognized in the statement of financial position
at December 31:
Accrued benefit liability	$	(11,178	)	$	(10,214	)
Net amount recognized	$	(11,178	)	$	(10,214	)
Amounts recognized in accumulated
other comprehensive income at December 31:
Net actuarial loss	$	20,868		$	24,162
Total	$	20,868		$	24,162

The estimated net loss for the defined benefit pension plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is $2.3 million.

The accumulated benefit obligation and the projected benefit obligation were equivalent for the defined benefit pension plans and were $48.7 million and $46.6 million at December 31, 2012 and 2011, respectively.

The net periodic benefit cost and its components were as follows for the years ended December 31:

(dollars in thousands)		2012			2011			2010
Net Periodic Benefit Cost
Interest cost	$	1,971		$	2,099		$	1,990
Expected return on plan assets		(2,345	)		(2,704	)		(1,960	)
Recognized actuarial loss		4,027			2,755			1,603
Net periodic benefit cost	$	3,653		$	2,150		$	1,633
Settlement cost		1,170			1,539			883
Total net periodic benefit cost	$	4,823		$	3,689		$	2,516
Other Changes in Plan Assets and
Benefit Obligations Recognized in Other
Comprehensive Income
Net actuarial (gain)/loss	$	1,903		$	9,172		($	983	)
Amortization of net actuarial loss		(4,027	)		(2,755	)		(1,603	)
Settlement cost		(1,170	)		(1,539	)		(883	)
Total recognized in Other Comprehensive Income	$	(3,294	)	$	4,878		$	(3,469	)
Total recognized in net periodic benefit cost and
other comprehensive income	$	1,529		$	8,567		$	(953	)

The weighted-average assumptions used to determine the benefit obligations as of the end of the years indicated and the net periodic benefit cost for the years indicated are presented in the table below. Because the plans are frozen, increases in compensation are not considered.

	2012		2011		2010
Benefit obligations:
Discount rate at the end of the period	4.00	%	4.55	%	5.50	%
Net periodic benefit cost:
Discount rate at the beginning of the period	4.55	%	5.50	%	5.25	%
Expected return on plan assets	7.50		8.00		8.00
Rate of compensation increase	N/A		N/A		N/A

The expected long-term rate of return for each asset class was developed by combining a long-term inflation component, the risk-free real rate of return and the associated risk premium. A weighted average rate was developed based on those overall rates and the target asset allocation of the plan. The discount rate used reflects the expected future cash flow based on Old National's funding valuation assumptions and participant data as of the beginning of the plan year. The expected future cash flow is discounted by the Principal Pension Discount yield curve as of December 31, 2012.

Old National's asset allocation of the Retirement Plan as of year-end is presented in the following table. Old National's Restoration Plan is unfunded.

	Expected
	Long-Term	2012 Target
Asset Category	Rate of Return	Allocation		2012		2011		2010
Equity securities	9.00% - 9.50%	40- 70	%	61	%	61	%	68	%
Debt securities	4.00% - 5.85%	30- 60	%	38		34		27
Cash equivalents	0	0- 15	%	1		5		5
Total				100	%	100	%	100	%

The Company's overall investment strategy is to achieve a mix of approximately 40% to 70% of equity securities, 30% to 60% of debt securities and 0% to 15% of cash equivalents. Fixed income securities and cash equivalents must meet minimum rating standards. Exposure to any particular company or industry is also limited. The

investment policy is reviewed annually. There was no Old National stock in the plan as of December 31, 2012, 2011 and 2010, respectively.

The fair value of the Company's plan assets are determined based on observable level 1 or 2 pricing inputs, including quoted prices for similar assets in active or non-active markets. As of December 31, 2012, the fair value of plan assets, by asset category, is as follows:

				Fair Value Measurements at December 31, 2012 Using
						Significant
				Quoted Prices in		Other	Significant
				Active Markets for		Observable	Unobservable
		Carrying		Identical Assets		Inputs	Inputs
(dollars in thousands)		Value		(Level 1)		(Level 2)	(Level 3)
Plan Assets
Large U.S. Equity	$	14,979	$	0	$	14,979		$	0
International Equity		7,979		0		7,979			0
Short-Term Fixed Income		461		0		461			0
Fixed Income		14,131		0		14,131			0
Total Plan Assets	$	37,550	$	0	$	37,550		$	0

As of December 31, 2011, the fair value of plan assets, by asset category, was as follows:

				Fair Value Measurements at December 31, 2011 Using
						Significant
				Quoted Prices in		Other	Significant
				Active Markets for		Observable	Unobservable
		Carrying		Identical Assets		Inputs	Inputs
(dollars in thousands)		Value		(Level 1)		(Level 2)	(Level 3)
Plan Assets
Large U.S. Equity	$	15,390	$	0	$	15,390		$	0
International Equity		6,846		0		6,846			0
Short-Term Fixed Income		1,870		0		1,870			0
Fixed Income		12,233		0		12,233			0
Total Plan Assets	$	36,339	$	0	$	36,339		$	0

As of December 31, 2012, expected future benefit payments related to Old National's defined benefit plans were as follows:

(dollars in thousands)
2013	$	10,440
2014		4,080
2015		3,810
2016		3,730
2017		4,590
Years 2018 - 2021		15,250

Old National expects to contribute cash of $0.5 million to the pension plans in 2013.

On September 15, 2012, Old National assumed Indiana Bank and Trust's Pentegra Defined Benefit Plan for Financial Institutions. This defined benefit pension plan has been frozen since April 1, 2008. The trustees of the Financial Institutions Retirement Fund administer the Pentegra Plan, employer identification number 13-5645888 and plan number 333. The Pentegra Plan operates as a multi-employer plan for accounting purposes and as a multiple-employer plan under the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code.

The Pentegra Plan is a single plan under Internal Revenue Code Section 413(c) and, as a result, all of the assets stand behind all of the liabilities. Accordingly, under the Pentegra Plan contributions made by a contributing employer may be used to provide benefits to participants of other participating employers. There is no separate valuation of the Pentegra Plan benefits or segregation of the Pentegra Plan assets specifically for a company, because the Pentegra Plan is a multi-employer plan and separate actuarial valuations are not made with respect to each employer. The funded status of the Pentegra Plan, or the market value of plan assets divided by funding target, as of July 1, 2012 and 2011 was 101.2% and 84.4%, respectively.

Old National has given notice to withdraw from the plan, effective December 31, 2012, and has recorded an estimated $13.4 million termination liability in Accrued Expenses and Other Liabilities. This purchase accounting entry increased goodwill by $8.2 million after tax.

EMPLOYEE STOCK OWNERSHIP PLAN

The Employee Stock Ownership and Savings Plan (401k) permits employees to participate the first month following one month of service. Effective as of April 1, 2010, the Company suspended safe harbor matching contributions to the Plan. However, the Company may make discretionary matching contributions to the Plan. For 2011 and 2012, the Company matched 50% of employee compensation deferral contributions, up to six percent of compensation. In addition to matching contributions, Old National may contribute to the Plan an amount designated as a profit sharing contribution in the form of Old National Bancorp stock or cash. Old National's Board of Directors designated no discretionary profit sharing contributions in 2012, 2011 or 2010. All contributions vest immediately and plan participants may elect to redirect funds among any of the investment options provided under the plan. During the years ended December 31, 2012, 2011 and 2010, the number of Old National shares allocated to the plan were 1.4 million, 1.6 million and 1.5 million, respectively. All shares owned through the plan are included in the calculation of weighted-average shares outstanding for purposes of calculating diluted and basic earnings per share. Contribution expense under the plan was $3.4 million in 2012, $3.2 million in 2011 and $4.3 million in 2010.