Acquisition and Divestiture Activity

12 Months Ended

Dec. 31, 2013

Business Combinations [Abstract]

Acquisition and Divestiture Activity

NOTE 2 – ACQUISITION AND DIVESTITURE ACTIVITY

Acquisitions

Indiana Community Bancorp

On September 15, 2012, Old National acquired 100% of Indiana Community Bancorp (“IBT”) in an all stock transaction. IBT was headquartered in Columbus, Indiana and had 17 full-service banking centers serving the South Central Indiana area. The acquisition enhanced Old National’s position as the third largest branch network in Indiana and allowed Old National to enter into the vibrant, growing region of south central Indiana in a rapid and cost effective manner. We also believed opportunities to enhance income and improve efficiencies existed. Pursuant to the merger agreement, the shareholders of IBT received approximately 6.6 million shares of Old National stock valued at approximately $88.5 million.

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

Cash and cash equivalents	$	78,540
Investment securities - available for sale		147,710
Federal Home Loan Bank stock, at cost		7,092
Loans		497,434
Premises and equipment		13,345
Accrued interest receivable		2,165
Other real estate owned		6,111
Company-owned life insurance		15,833
Other assets		49,655
Deposits		(784,589	)
Other borrowings		(15,464	)
Accrued expenses and other liabilities		(18,564	)
Net tangible assets acquired		(732	)
Definite-lived intangible assets acquired		3,024
Goodwill		86,205
Purchase price	$	88,497

Of the total purchase price, $0.7 million has been allocated to net tangible liabilities acquired and $3.0 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 “Banking” and “Other” segments, as described in Note 24 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 “Banking” and “Other” segments, as described in Note 24 of these consolidated financial statement footnotes.

	Estimated Fair Value (in millions)		Estimated Useful Lives (Years)
Core deposit intangible	$	1.3		7
Trust customer relationship intangible	$	1.7		12

Bank of America

On January 9, 2013, Old National announced that it had entered into a purchase and assumption agreement to acquire 24 bank branches of Bank of America. Four of the branches are located in northern Indiana and 20 branches are located in southwest Michigan. The Company paid a deposit premium of 2.94%. The acquisition has doubled Old National’s presence in the South Bend/Elkhart area and provided a logical market extension into southwest Michigan. The premium paid for our entrance into a new market drove the goodwill recorded in this transaction. The transaction closed on July 12, 2013.

Under the acquisition method of accounting, the total estimated purchase price is allocated to the net tangible and intangible assets based on their current estimated fair values on the date of the acquisition. Based on management’s preliminary valuation of the fair value of tangible and intangible assets acquired and liabilities assumed, which are based on assumptions that are subject to change, the purchase price for the Bank of America branch acquisition is allocated as follows (in thousands):

Cash and cash equivalents	$	562,906
Loans		5,638
Premises and equipment		12,559
Accrued interest receivable		15
Other assets		331
Deposits		(565,106	)
Accrued expenses and other liabilities		(246	)
Net tangible assets acquired		16,097
Definite-lived intangible assets acquired		3,462
Goodwill		13,347
Purchase price	$	32,906

The acquired identifiable intangible asset is core deposit intangible and the estimated fair value is approximately $3.5 million. The core deposit intangible asset will be amortized over an estimated useful life of 7 years and is included in the “Banking” segment, as described in Note 24 of these consolidated financial statement footnotes. The goodwill recorded in the transaction will be deductible for tax purposes and is included in the “Banking” segment.

Pending Acquisitions

On September 10, 2013, Old National announced that it had entered into an agreement to acquire Tower Financial Corporation (“Tower”) through a stock and cash merger. Tower is an Indiana bank holding company with Tower Bank & Trust Company as its wholly-owned subsidiary. Headquartered in Fort Wayne, Indiana, Tower has seven banking centers with approximately $691 million in assets and an additional $743 million in trust assets under management at December 31, 2013. The merger would strengthen Old National’s position as the third largest deposit holder in Indiana. Pursuant to the merger agreement, Tower’s shareholders will receive 1.20 shares of Old National common stock and $6.75 in cash for each share of Tower common stock. As of September 5, 2013, the transaction was valued at approximately $107.7 million. The transaction is subject to approval by federal and state regulatory authorities, as well as the satisfaction of customary closing conditions.

On January 8, 2014, Old National announced that it had entered into an agreement to acquire United Bancorp, Inc. (“United”) through a stock and cash merger. United is a Michigan bank holding company with United Bank & Trust as its wholly-owned subsidiary. Headquartered in Ann Arbor, Michigan, United has eighteen banking centers with approximately $899 million in assets and an additional $670 million in trust assets under management at December 31, 2013. Pursuant to the merger agreement, shareholders of United will receive 0.70 shares of Old National common stock and $2.66 in cash for each share of United common stock. As of January 6, 2014, the transaction was valued at approximately $173.1 million. The transaction is subject to approval by federal and state regulatory authorities and United’s shareholders, as well as the satisfaction of customary closing conditions.

Divestitures

On August 16, 2012, Old National announced plans to sell the deposits of nine banking centers located in southern Illinois and western Kentucky. As such, these deposits were considered held for sale as of December 31, 2012. During the first quarter of 2013 these deposits were sold. Deposits at the time of sale were approximately $150.0 million and the Company received a deposit premium of $2.2 million.

On September 5, 2013, Old National entered into branch purchase and assumption agreements to sell three banking centers in the fourth quarter of 2013. The banking centers were sold during the fourth quarter and deposits at the time of sale were approximately $28.2 million and we received a deposit premium of $650 thousand.

As part of our continuing efforts to provide an efficient and effective branch banking network, Old National has also consolidated 23 banking centers into existing branch locations during the last twelve months.