UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2006~~March 31, 2007


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-15817

OLD NATIONAL BANCORP

(Exact name of Registrant as specified in its charter)


	INDIANA	35-1539838
	(State or other jurisdiction of	~~(I.R.S. Employer~~
incorporation or organization)	(I.R.S. Employer Identification No.)

	1 Main Street Evansville, Indiana	47708
~~Evansville, Indiana~~	(Zip Code)
	(Address of principal executive offices)

(812) 464-1294
(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to the filing requirements for at least the past 90 days. Yesþ Noo

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Act.

Large accelerated filerþ Accelerated filero Non-accelerated filero

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).Yeso Noþ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock. The Registrant has one class of common stock (no par value) with ~~66,406,000~~66,423,000 shares outstanding at ~~October 31, 2006.~~April 30, 2007.

OLD NATIONAL BANCORP

CONSOLIDATED BALANCE SHEET


	September 30,			December 31,			September 30,			March 31,			December 31,			March 31,
(dollars and shares in thousands, except per share data)	2006			2005			2005			2007			2006			2006
	(unaudited)						(unaudited)			(unaudited)						(unaudited)
Assets
Cash and due from banks	$	176,632		$	245,364		$	199,210		$	177,585		$	210,303		$	164,993
Federal funds sold		78,800			123,943			2,464
Federal funds sold and resell agreements											330,000			283,524			3,146
Money market investments		7,525			33,109			18,245			30,105			4,078			27,189

Total cash and cash equivalents		262,957			402,416			219,919			537,690			497,905			195,328
Investment securities — available-for-sale, at fair value
Investment securities – available-for-sale, at fair value
U.S. Government-sponsored agencies		546,692			509,744			435,130			582,901			680,149			581,504
Mortgage-backed securities		1,060,914			1,105,257			1,175,112			1,029,772			1,020,178			1,100,752
States and political subdivisions		297,171			488,369			485,165			267,030			273,325			486,588
Other securities		184,844			196,696			204,627			196,458			201,511			195,670

Investment securities — available-for-sale		2,089,621			2,300,066			2,300,034
Investment securities — held-to-maturity, at amortized cost (fair value $138,691, $161,252 and $172,616 respectively)		144,016			166,799			176,021
Investment securities – available-for-sale											2,076,161			2,175,163			2,364,514
Investment securities – held-to-maturity, at amortized cost (fair value $149,184, $157,720 and $153,102 respectively)											153,232			162,138			159,522
Federal Home Loan Bank stock, at cost		42,266			49,608			49,589			41,170			38,809			49,628
Residential loans held for sale		15,856			43,804			49,523			18,976			16,634			21,965
Loans:
Commercial		1,598,071			1,553,742			1,650,628			1,667,194			1,629,885			1,549,950
Commercial real estate		1,406,883			1,534,385			1,612,956			1,454,150			1,386,367			1,500,134
Residential real estate		492,099			543,903			547,703			560,780			484,896			512,342
Consumer credit, net of unearned income		1,219,268			1,261,797			1,297,660			1,199,108			1,198,855			1,247,077

Total loans		4,716,321			4,893,827			5,108,947			4,881,232			4,700,003			4,809,503
Allowance for loan losses		(71,632	)		(78,847	)		(81,356	)		(71,330	)		(67,790	)		(76,809	)

Net loans		4,644,689			4,814,980			5,027,591			4,809,902			4,632,213			4,732,694

Premises and equipment, net		123,062			199,878			211,951			54,123			122,865			195,148
Accrued interest receivable		54,260			55,658			57,169			49,908			53,344			55,787
Goodwill		113,350			113,275			113,275			159,850			113,350			113,350
Other intangible assets		21,372			23,060			23,694			34,533			20,813			22,449
Assets held for sale		69,895			—			—			70,322			—			—
Other assets		338,544			322,478			306,525			325,777			316,281			334,536

Total assets	$	7,919,888		$	8,492,022		$	8,535,291		$	8,331,644		$	8,149,515		$	8,244,921

Liabilities
Deposits:
Noninterest-bearing demand	$	844,913		$	891,541		$	872,499		$	859,402		$	877,870		$	820,107
Interest-bearing:
NOW		1,328,923			1,640,750			1,614,526			1,635,796			1,449,202			1,458,384
Savings		411,412			480,358			483,928			581,675			437,702			486,527
Money market		868,794			869,039			809,568			851,049			925,296			901,639
Time		2,629,834			2,583,948			2,592,859			2,681,814			2,631,424			2,551,431

Total deposits		6,083,876			6,465,636			6,373,380			6,609,736			6,321,494			6,218,088
Short-term borrowings		301,535			302,765			350,999			380,966			312,911			359,331
Other borrowings		772,215			954,925			1,033,963			592,473			747,545			895,776
Accrued expenses and other liabilities		119,499			118,798			107,884			107,798			125,196			129,353

Total liabilities		7,277,125			7,842,124			7,866,226			7,690,973			7,507,146			7,602,548

Shareholders’ Equity
Preferred stock, 2,000 shares authorized, no shares issued or outstanding		—			—			—			—			—			—
Common stock, $1 stated value, 150,000 shares authorized, 66,406, 67,649 and 68,010 shares issued and outstanding, respectively		66,406			67,649			68,010
Common stock, $1 stated value, 150,000 shares authorized, 66,416, 66,503 and 67,409 shares issued and outstanding, respectively											66,416			66,503			67,409
Capital surplus		564,691			591,930			600,294			565,827			565,106			583,938
Retained earnings		32,187			12,074			5,399			28,699			35,873			18,674
Accumulated other comprehensive loss, net of tax		(20,521	)		(21,755	)		(4,638	)		(20,271	)		(25,113	)		(27,648	)

Total shareholders’ equity		642,763			649,898			669,065			640,671			642,369			642,373

Total liabilities and shareholders’ equity	$	7,919,888		$	8,492,022		$	8,535,291		$	8,331,644		$	8,149,515		$	8,244,921

OLD NATIONAL BANCORP

CONSOLIDATED STATEMENT OF INCOME (unaudited)


	Three Months Ended						Nine Months Ended					Three Months Ended
	September 30,						September 30,					March 31,
(dollars in thousands, except per share data)	2006			2005			2006		2005			2007			2006

Interest Income
Loans including fees:
Taxable	$	80,578		$	75,770		$	234,627	$	215,995		$	79,663		$	75,603
Nontaxable		5,065			4,476			14,510		12,846			5,252			4,593
Investment securities, available-for-sale:
Taxable		22,230			19,753			66,468		61,850			23,122			21,249
Nontaxable		4,349			5,699			15,195		18,776			3,103			5,461
Investment securities, held-to-maturity, taxable		1,618			1,953			5,107		5,576			1,831			1,787
Money market investments		161			260			1,404		642			3,341			906

Total interest income		114,001			107,911			337,311		315,685			116,312			109,599

Interest Expense
Deposits		44,406			35,848			125,460		99,944			50,321			39,950
Short-term borrowings		4,953			2,657			12,878		7,340			3,796			2,393
Other borrowings		12,334			13,740			37,928		42,857			10,393			12,917

Total interest expense		61,693			52,245			176,266		150,141			64,510			55,260

Net interest income		52,308			55,666			161,045		165,544			51,802			54,339
Provision for loan losses		—			6,000			7,000		17,100			2,445			3,500

Net interest income after provision for loan losses		52,308			49,666			154,045		148,444			49,357			50,839

Noninterest Income
Wealth management fees		4,710			5,041			14,859		15,551			4,892			5,179
Service charges on deposit accounts		10,596			12,529			31,188		35,692			10,233			9,903
ATM fees		3,043			2,872			8,906		8,329			3,176			2,846
Mortgage banking revenue		1,045			1,756			2,835		4,400			956			1,208
Insurance premiums and commissions		8,761			8,466			29,205		26,611			10,639			10,964
Investment product fees		2,041			2,246			6,323		7,145			2,856			2,257
Bank-owned life insurance		2,161			1,922			6,397		5,417			2,221			2,101
Net securities gains		789			652			697		1,175
Gain (loss) on derivatives		(67	)		(4,632	)		1,953		645
Net securities losses													(2,667	)		(147	)
Gain on derivatives													14			1,615
Gain on branch divestiture		—			—			3,036		—			—			3,036
Loss on extinguishment of debt													(1,234	)		—
Other income		3,484			3,608			10,840		9,271			2,437			3,907

Total noninterest income		36,563			34,460			116,239		114,236			33,523			42,869

Noninterest Expense
Salaries and employee benefits		36,789			35,866			115,817		113,637			41,348			41,322
Occupancy		5,059			4,591			15,171		14,746			6,360			5,214
Equipment		3,052			3,587			9,676		10,981			3,056			3,378
Marketing		2,738			1,912			7,572		6,050			2,349			2,297
Data processing		4,404			5,107			13,520		15,844			5,054			4,605
Communication		2,151			2,336			6,850		7,399			2,383			2,317
Professional fees		1,845			2,291			5,681		6,440			1,956			1,967
Loan expense		1,454			1,570			4,338		3,889			1,187			1,350
Supplies		852			908			2,550		2,854			1,027			842
Other losses													2,420			613
Other expense		4,528			3,834			13,874		10,419			4,659			4,582

Total noninterest expense		62,872			62,002			195,049		192,259			71,799			68,487

Income before income taxes and discontinued operations		25,999			22,124			75,235		70,421
Income before income taxes													11,081			25,221
Income tax expense		4,985			3,248			13,365		11,292			291			4,552

Income from continuing operations		21,014			18,876			61,870		59,129
Loss from discontinued operations, net of tax expense of $6,302 and $6,603, respectively		—			(14,383	)		—		(14,825	)

Net income	$	21,014		$	4,493		$	61,870	$	44,304		$	10,790		$	20,669

Basic net income per share from continuing operations	$	0.32		$	0.28		$	0.93	$	0.87
Basic net loss per share from discontinued operations		—			(0.21	)		—		(0.22	)
Net income per common share
Basic net income per share		0.32			0.07			0.93		0.65		$	0.16		$	0.31

Diluted net income per share from continuing operations	$	0.32		$	0.28		$	0.93	$	0.87
Diluted net loss per share from discontinued operations		—			(0.21	)		—		(0.22	)
Diluted net income per share		0.32			0.07			0.93		0.65			0.16			0.31

Weighted average number of common shares outstanding
Basic													65,806			67,016
Diluted													65,863			67,317

Dividends per common share	$	0.21		$	0.19		$	0.63	$	0.57		$	0.22		$	0.21

OLD NATIONAL BANCORP

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (unaudited)

Accumulated
Other Total
(dollars and shares Common Stock Capital Retained Comprehensive Shareholders’ Comprehensive
in thousands) Shares Amount Surplus Earnings Income (Loss) Equity Income

Balance, December 31, 2004
69,287 $ 69,287 $ 630,461 $ — $ 4,344 $ 704,092
Net income — — — 44,304 — 44,304 $ 44,304
Unrealized net securities losses, net of $(5,882) tax — — — — (8,761 ) (8,761 ) (8,761 )
Reclassification adjustment for securities gains included in net income, net of $(472) tax — — — — (703 ) (703 ) (703 )
Net unrealized derivative gains on cash flow hedges, net of $331 tax — — — — 512 512 512
Reclassification adjustment on cash flow hedges, net of $(19) tax — — — — (30 ) (30 ) (30 )
Stock issued for acquisition 971 971 17,569 — — 18,540
Cash dividends — — — (38,905 ) — (38,905 )
Stock repurchased (2,571 ) (2,571 ) (52,284 ) — — (54,855 )
Stock issued under stock option, restricted stock and stock purchase plans 323 323 4,548 — — 4,871

Balance, September 30, 2005
68,010 $ 68,010 $ 600,294 $ 5,399 $ (4,638 ) $ 669,065 $ 35,322

Balance, December 31, 2005
67,649 $ 67,649 $ 591,930 $ 12,074 $ (21,755 ) $ 649,898
Net income — — — 61,870 — 61,870 $ 61,870
Unrealized net securities gains, net of $1,482 tax — — — — 1,344 1,344 1,344
Reclassification adjustment for securities gains included in net income, net of $(284) tax — — — — (413 ) (413 ) (413 )
Reclassification adjustment on cash flow hedges, net of $196 tax — — — — 303 303 303
Adjustment to stock issued for prior acquisitions (1 ) (1 ) (15 ) — — (16 )
Cash dividends — — — (41,757 ) — (41,757 )
Stock repurchased (1,445 ) (1,445 ) (27,982 ) — — (29,427 )
Stock issued under stock option, restricted stock and stock purchase plans 203 203 758 — — 961

Balance, September 30, 2006
66,406 $ 66,406 $ 564,691 $ 32,187 $ (20,521 ) $ 642,763 $ 63,104

~~Comprehensive income for the three months ended September 30, 2006 and 2005 was $45.3 million and $0.3 million, respectively.~~


													Accumulated
													Other			Total
(dollars and shares	Common Stock						Capital			Retained			Comprehensive			Shareholders’			Comprehensive
in thousands)	Shares			Amount			Surplus			Earnings			Income (Loss)			Equity			Income
Balance, December 31, 2005		67,649		$	67,649		$	591,930		$	12,074		$	(21,755	)	$	649,898
Net income		—			—			—			20,669			—			20,669		$	20,669
Unrealized net securities losses, net of $(4,420) tax		—			—			—			—			(6,075	)		(6,075	)		(6,075	)
Reclassification adjustment for securities losses included in net income, net of $62 tax		—			—			—			—			85			85			85
Reclassification adjustment on cash flow hedges, net of $63 tax		—			—			—			—			97			97			97
Cash dividends		—			—			—			(14,069	)		—			(14,069	)
Stock repurchased		(449	)		(449	)		(9,044	)		—			—			(9,493	)
Stock issued under stock option, restricted stock and stock purchase plans		209			209			1,052			—			—			1,261

Balance, March 31, 2006		67,409		$	67,409		$	583,938		$	18,674		$	(27,648	)	$	642,373		$	14,776


Balance, December 31, 2006		66,503		$	66,503		$	565,106		$	35,873		$	(25,113	)	$	642,369
Net income		—			—			—			10,790			—			10,790		$	10,790
Unrealized net securities gains, net of $2,124 tax		—			—			—			—			3,144			3,144			3,144
Reclassification adjustment for securities losses included in net income, net of $1,076 tax		—			—			—			—			1,591			1,591			1,591
Reclassification adjustment on cash flow hedges, net of $69 tax		—			—			—			—			107			107			107
Adjustment to initially apply FASB interpretation No. 48		—			—			—			(3,368	)		—			(3,368	)
Adjustment for adoption of EITF No. 06-5		—			—			—			(118	)		—			(118	)
Cash dividends		—			—			—			(14,478	)		—			(14,478	)
Stock issued (forfeited) under stock option, restricted stock and stock purchase plans		(87	)		(87	)		169			—			—			82
Adjustment for St. Joseph Capital Corp. stock options		—			—			552			—			—			552

Balance, March 31, 2007		66,416		$	66,416		$	565,827		$	28,699		$	(20,271	)	$	640,671		$	15,632

The accompanying notes to consolidated financial statements are an integral part of ~~this statement.~~these statements.

OLD NATIONAL BANCORP

CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)


	Nine Months Ended						Three Months Ended
	September 30,						March 31,
(dollars in thousands)	2006			2005			2007			2006

Cash Flows From Operating Activities
Net income	$	61,870		$	44,304		$	10,790		$	20,669

Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		10,173			11,352			2,687			3,483
Amortization of other intangible assets and goodwill impairment		1,831			5,378			743			611
Net premium (discount) amortization on investment securities		(1,605	)		2,449
Restricted stock expense (benefit)		(437	)		2,228
Net discount accretion on investment securities								(597	)		(305	)
Restricted stock expense								165			616
Stock option expense		688			—			66			21
Provision for loan losses		7,000			17,100			2,445			3,500
Net securities gains		(697	)		(1,175	)
Net securities losses								2,667			147
Gain on branch divestiture		(3,036	)		—			—			(3,036	)
Gain on derivatives		(1,953	)		(645	)		(14	)		(1,615	)
Net (gains) losses on sales and write-downs of loans and other assets		(1,453	)		8,346			711			(124	)
Loss on retirement of debt								1,234			—
FHLB stock dividend								—			(19	)
Earnings on company owned life insurance								(2,221	)		(2,101	)
Residential real estate loans originated for sale		(186,012	)		(300,309	)		(70,885	)		(45,911	)
Proceeds from sale of residential real estate loans		216,436			257,921			69,374			68,554
Increase in accrued interest and other assets		(16,224	)		(8,501	)
(Increase) decrease in interest receivable								5,659			(218	)
(Increase) decrease in other assets								8,510			(21,435	)
Increase (decrease) in accrued expenses and other liabilities		(470	)		10,456			(27,506	)		15,210

Total adjustments		24,241			4,600			(6,962	)		17,378

Net cash flows provided by operating activities		86,111			48,904			3,828			38,047

Cash Flows From Investing Activities
Cash and cash equivalents of subsidiaries acquired, net		—			2,699
Cash and cash equivalents of acquired subsidiaries								17,429			—
Purchase of subsidiaries								(78,109	)		—
Purchases of investment securities available-for-sale		(471,047	)		(417,964	)		(268,730	)		(148,652	)
Purchases of investment securities held-to-maturity		—			(25,000	)
Proceeds from maturities, prepayments and calls of investment securities available-for-sale		394,832			277,372			306,612			70,154
Proceeds from sales of investment securities available-for-sale		298,715			609,466			145,470			3,960
Proceeds from maturities, prepayments and calls of investment securities held-to-maturity		22,212			26,264			8,645			7,056
Proceeds from redemption of FHLB stock								758			—
Proceeds from branch divestiture		10,511			—			—			10,511
Proceeds from sale of loans		26,062			21,355			3,876			—
Net principal collected from (loans made to) customers		109,318			(170,490	)
Net principal collected from loan customers								139,290			50,875
Proceeds from sale of premises and equipment and other assets		1,932			1,169			328			515
Purchase of premises and equipment		(7,882	)		(11,296	)		(2,568	)		(1,787	)
Proceeds from sale of other assets		—			40,805

Net cash flows provided by investing activities		384,653			354,380
Net cash flows provided by (used in) investing activities								273,001			(7,368	)

Cash Flows From Financing Activities
Net increase (decrease) in deposits and short-term borrowings:
Noninterest-bearing demand deposits		(46,026	)		21,281			(57,767	)		(70,831	)
Savings, NOW and money market deposits		(366,334	)		(66,205	)		(4,042	)		(128,913	)
Time deposits		53,473			(405	)		(11,936	)		(20,414	)
Short-term borrowings		(1,230	)		3,646			54,736			56,566
Payments for maturities on other borrowings		(179,632	)		(317,563	)		(16,072	)		(51,237	)
Proceeds from issuance of other borrowings		—			50,000
Payments related to retirement of debt								(187,485	)		—
Cash dividends paid		(41,757	)		(38,905	)		(14,478	)		(14,069	)
Common stock repurchased		(29,427	)		(54,855	)		—			(9,493	)
Common stock issued under stock option, restricted stock and stock purchase plans		710			2,643			—			624

Net cash flows used in financing activities		(610,223	)		(400,363	)		(237,044	)		(237,767	)

Net increase (decrease) in cash and cash equivalents		(139,459	)		2,921			39,785			(207,088	)
Cash and cash equivalents at beginning of period		402,416			216,998			497,905			402,416

Cash and cash equivalents at end of period	$	262,957		$	219,919		$	537,690		$	195,328


Total interest paid	$	171,424		$	138,906		$	62,153		$	52,247
Total taxes paid	$	8,243		$	7,756
Total taxes paid (net of refunds)							$	5,633		$	(359	)

OLD NATIONAL BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 1 — BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements include the accounts of Old National Bancorp and its wholly-owned affiliates (“Old National”) and have been prepared in conformity with accounting principles generally accepted in the United States of America and prevailing practices within the banking industry. Such principles require management to make estimates and assumptions that affect the reported amounts of assets, liabilities and the disclosures of contingent assets and liabilities at the date of the financial statements and amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. ~~All significant intercompany transactions~~The allowance for loan losses, goodwill and ~~balances have been eliminated. Certain prior year amounts have been reclassified~~intangibles, derivative financial instruments and unrecognized tax positions are particularly subject to ~~conform with the 2006 presentation. Such reclassifications had no effect on net income.~~change. In the opinion of management, the consolidated financial statements contain all the normal and recurring adjustments necessary for a fair statement of the financial position of Old National as of ~~September 30,~~March 31, 2007 and 2006, ~~and 2005,~~ and December 31, ~~2005,~~2006, and the results of its operations for the three ~~and nine~~ months ended ~~September 30, 2006~~March 31, 2007 and ~~2005.~~2006. Interim results do not necessarily represent annual results. These financial statements should be read in conjunction with Old National’s Annual Report for the year ended December 31, ~~2005.~~2006.

All significant intercompany transactions and balances have been eliminated. Certain prior year amounts have been reclassified to conform with the 2007 presentation. Such reclassifications had no effect on net income.

NOTE 2 – RECENT ACCOUNTING PRONOUNCEMENTS

FASB Interpretation No. 48– In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48,Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109(“FIN 48”), which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 isbecame effective for ~~fiscal years beginning after December 15, 2006.~~the Company on January 1, 2007. The ~~Company is currently evaluating the~~ impact of adopting FIN 48 onis discussed in Note 14 to the consolidated financial statements.

SFAS No. ~~157~~159– In ~~September 2006,~~February 2007, the FASB issued Statement No. ~~157,~~159 –The Fair Value ~~Measurements~~~~. This Statement defines fair value, establishes a framework~~Option for ~~measuring~~Financial Assets and Financial Liabilities.The standard provides companies with an option to report selected financial assets and liabilities at fair value and ~~expands disclosures about fair value measurements. This Statement~~ establishes ~~a fair value hierarchy about the assumptions used~~presentation and disclosure requirements designed to ~~measure fair value~~facilitate comparisons between companies that choose different measurement attributes for similar types of assets and ~~clarifies assumptions about risk and the effect of a restriction on the sale or use of an asset.~~liabilities. The new standard is effective for ~~fiscal years beginning after November 15, 2007.~~the Company on January 1, 2008. The Company is currently evaluating the impact of adopting SFAS No. ~~157~~159 on the consolidated financial statements.

~~SFAS No. 158~~EITF 06-5– In September 2006, the FASB ~~issued Statement~~Emerging Issues Task Force finalized Issue No. ~~158 –~~06-5,~~Employers’~~ Accounting for ~~Defined Benefit Pension and Other Postretirement Plans~~Purchases of Life Insurance – ~~an amendment~~Determining the Amount That Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4 (Accounting for Purchases of ~~FASB Statements No. 87, 88, 106 and 132(R)~~Life Insurance). This ~~Statement~~Issue requires ~~an employer to recognize the overfunded or underfunded status~~that a policyholder consider contractual terms of a ~~defined benefit postretirement plan as~~life insurance policy in determining the amount that could be realized under the insurance contract. It also requires that if the contract provides for a greater surrender value if all individual policies in a group are surrendered at the same time, that the surrender value be determined based on the assumption that policies will be surrendered on an ~~asset or liability, with any unrecognized prior service costs, transition obligations or actuarial gains/losses reported as component of other comprehensive~~individual basis. Lastly, the Issue discusses whether the cash surrender value should be discounted when the policyholder is contractually limited in ~~shareholders’ equity. The new standard is~~its ability to surrender a policy. EITF 06-5 became effective for ~~fiscal years ending after December 15, 2006.~~

~~Based~~the Company on ~~the Company’s funded status of plan obligations disclosed~~January 1, 2007 and resulted in ~~Note 14 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, the estimated impact of adopting SFAS 158 would have been~~ a $0.1 million reduction to December 31, 2005 comprehensive income of approximately $9.6 million, with no impact to the Company’s consolidated statements of income or cash flows. As the actual impact of adopting SFAS 158 will be dependent upon the fair value of plan assets and the amount of projected benefit obligations measured as of December 31, 2006, the above estimated amount may not be reflective of the actual impact of the adoption at December 31, 2006.

~~SAB 108 –~~In September 2006, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 108 (SAB 108). SAB 108 provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a potential current year misstatement. Prior to SAB 108, companies might evaluate the materiality of financial statement misstatements using either the income statement or balance sheet approach, with the income statement approach focusing on new misstatements added in the current year, and the balance sheet approach focusing on the cumulative amount of misstatement present in a company’s balance sheet. Misstatements that would be material under one approach could be viewed as immaterial under another approach, and not be corrected. SAB 108 now requires that companies view financial statement

misstatements as material if they are material according to either the income statement or balance sheet approach. This statement is effective as of the end of the fiscal year ending after December 15, 2006. The Company is currently evaluating the impact of adopting SAB 108 on the consolidated financial statements.retained earnings.

NOTE 3 – ACQUISITION

On ~~May~~February 1, ~~2005,~~2007, Old National acquired ~~J. W. F. Insurance Companies, an Indianapolis, Indiana-based insurance agency that did business as J.W. Flynn Company and J.W.F. Specialty Company, Inc.~~St. Joseph Capital Corporation (''St. Joseph’’), a banking franchise headquartered in Mishawaka, Indiana, for ~~$19.0~~$78.1 million, including acquisition costs. ~~Common shares~~Pursuant to the merger agreement, the shareholders of ~~970,912 were issued as part~~St. Joseph received $40.00 in cash for each share of St. Joseph stock in an all-cash transaction. The purchase price was funded with the ~~transaction with~~proceeds of a ~~stock value~~dividend of ~~$18.5 million.~~$76.0 million paid by Old National Bank to the parent company in January 2007. Goodwill of ~~$12.0~~$46.5 million was recorded, of which ~~$3.5 million~~none is ~~expected to be~~ deductible for tax purposes. In addition, intangible assets totaling ~~$8.4~~$14.5 million related to core deposits and customer ~~business~~ relationships were recorded and are being amortized over 1210 to 2211 years. ~~These acquisitions are included in the “other” column of~~See Note 19 – Segment Information. In accordance with the purchase agreement, future contingent payments may be paid in relation to this acquisition. These payments, which are not expected to be material, would result in a change9 to the ~~purchase price and goodwill when paid.~~consolidated financial statements for additional information. On the date of acquisition, unaudited financial statements of ~~the companies~~St. Joseph showed assets of ~~$5.0~~$452.9 million, ~~with~~which included $336.6 million of loans and $78.6 million of securities, $357.3 million of deposits and year-to-date ~~revenues~~net interest income and other income of ~~$4.7~~$0.8 million and net loss of ~~$0.2~~$3.3 million.

NOTE 4 — DIVESTITURES

During the first quarter of 2006, Old National sold its financial center located in O’Fallon, Illinois, selling approximately $27.9 million in loans and assigning $22.2 million in deposits. The financial center was in a market no longer considered consistent with the Company’s strategy. The sale resulted in a pre-tax gain of $3.0 million which was included in income from continuing operations during the first quarter.

In February, 2005, Old National committed to a plan to sell J.W. Terrill Insurance Agency (“Terrill”) in St. Louis, Missouri, and the Fund Evaluation Group (“FEG”) in Cincinnati, Ohio, to better align its operations with its market and product focus. The operating activities of these companies were reclassified to discontinued operations for all periods in the consolidated statement of income. During the quarter ended June 30, 2005, Old National recorded an impairment charge of $1.1 million, net of tax, related to J.W. Terrill Insurance Agency. This impairment charge was included in income (loss) from discontinued operations. During the third quarter of 2005, Old National completed the sale of both Terrill and FEG. Old National sold Terrill for $22.2 million of cash. Terrill had been acquired in a tax-free reorganization under Internal Revenue Code section 368, and as a result of the taxable sale, Old National recorded a loss of $8.7 million, including $8.6 million of tax expense. Old National completed the sale of FEG for $15.1 million of cash and a $0.5 million note receivable. The sale resulted in an after tax loss of $5.9 million.

NOTE 5 — NET INCOME PER SHARE

Basic net income per share is computed by dividing net income by the weighted-average number of common shares outstanding during each period, adjusted to reflect all stock dividends. Diluted net income per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued. Restricted stock shares were excluded from the denominator in the computation of diluted net income per share for the nine months ended September 30, 2005 because their inclusion would have been anti-dilutive.

The following table reconciles basic and diluted net income per share for the three ~~and nine~~ months ended ~~September 30:~~March 31:

(dollars and shares Three Months Ended Three Months Ended
in thousands, September 30, 2006 September 30, 2005
except per share data) Income Shares Amount Income Shares Amount

Basic Net Income Per Share

Income from continuing operations $ 21,014 65,823 $ 0.32 $ 18,876 68,011 $ 0.28
Income from discontinued operations — 65,823 — (14,383 ) 68,011 (0.21 )

Net income $ 21,014 $ 0.32 $ 4,493 $ 0.07

Effect of dilutive securities:

Restricted stock 6 10
Stock options 5 310

Diluted Net Income Per Share

Income from continuing operations and assumed conversions $ 21,014 65,834 $ 0.32 $ 18,876 68,331 $ 0.28
Loss from discontinued operations — 65,834 — (14,383 ) 68,331 (0.21 )

Net income and assumed conversions $ 21,014 $ 0.32 $ 4,493 $ 0.07


(dollars and shares	Nine Months Ended						Nine Months Ended								Three Months Ended						Three Months Ended
in thousands,	September 30, 2006						September 30, 2005								March 31, 2007						March 31, 2006
except per share data)	Income		Shares		Amount		Income			Shares		Amount			Income		Shares		Amount		Income		Shares		Amount

Basic Net Income Per Share
Income from continuing operations	$	61,870		66,370	$	0.93	$	59,129			68,355	$	0.87
Loss from discontinued operations		—		66,370		—		(14,825	)		68,355		(0.22	)

Net income	$	61,870			$	0.93	$	44,304				$	0.65

Income from operations															$	10,790		65,806	$	0.16	$	20,669		67,016	$	0.31

Effect of dilutive securities:
Restricted stock				2							—							27						172
Stock options				7							127							30						129


Diluted Net Income Per Share
Income from continuing operations and assumed conversions	$	61,870		66,379	$	0.93	$	59,129			68,482	$	0.87
Loss from discontinued operations		—		66,379		—		(14,825	)		68,482		(0.22	)
Income from operations and assumed conversions															$	10,790		65,863	$	0.16	$	20,669		67,317	$	0.31

Net income and assumed conversions	$	61,870			$	0.93	$	44,304				$	0.65

NOTE 6 — INVESTMENT SECURITIES

The following table summarizes the amortized cost and fair value of the available-for-sale and held-to-maturity investment securities portfolio at ~~September 30, 2006~~March 31, 2007 and December 31, ~~2005~~2006 and the corresponding amounts of unrealized gains and losses therein:


	Amortized		Unrealized		Unrealized			Fair		Amortized		Unrealized		Unrealized			Fair
(dollars in thousands)	Cost		Gains		Losses			Value		Cost		Gains		Losses			Value

September 30, 2006
March 31, 2007
Available-for-sale
U.S. Government-sponsored agencies	$	554,356	$	1,309	$	(8,973	)	$	546,692	$	584,635	$	2,274	$	(4,008	)	$	582,901
Mortgage-backed securities		1,094,204		1,711		(35,001	)		1,060,914		1,054,809		2,222		(27,258	)		1,029,773
States and political subdivisions		287,486		9,874		(189	)		297,171		258,823		8,316		(110	)		267,029
Other securities		186,453		1,734		(3,343	)		184,844		197,605		1,150		(2,297	)		196,458

Total available-for-sale securities	$	2,122,499	$	14,628	$	(47,506	)	$	2,089,621	$	2,095,872	$	13,962	$	(33,673	)	$	2,076,161

Held-to-maturity
Mortgage-backed securities	$	131,661	$	—	$	(5,111	)	$	126,550	$	122,310	$	—	$	(3,793	)	$	118,517
Other securities		12,355		—		(214	)		12,141		30,922		—		(255	)		30,667

Total held-to-maturity securities	$	144,016	$	—	$	(5,325	)	$	138,691	$	153,232	$	—	$	(4,048	)	$	149,184

December 31, 2005
December 31, 2006
Available-for-sale
U.S. Government-sponsored agencies	$	522,351	$	122	$	(12,729	)	$	509,744	$	685,809	$	1,881	$	(7,541	)	$	680,149
Mortgage-backed securities		1,141,581		1,898		(38,222	)		1,105,257		1,049,712		1,733		(31,267	)		1,020,178
States and political subdivisions		473,231		15,685		(547	)		488,369		264,343		9,095		(113	)		273,325
Other securities		197,910		2,420		(3,634	)		196,696		202,945		1,384		(2,818	)		201,511

Total available-for-sale securities	$	2,335,073	$	20,125	$	(55,132	)	$	2,300,066	$	2,202,809	$	14,093	$	(41,739	)	$	2,175,163

Held-to-maturity
Mortgage-backed securities	$	148,035	$	—	$	(5,274	)	$	142,761	$	126,800	$	—	$	(4,312	)	$	122,488
Other securities		18,764		—		(273	)		18,491		35,338		—		(106	)		35,232

Total held-to-maturity securities	$	166,799	$	—	$	(5,547	)	$	161,252	$	162,138	$	—	$	(4,418	)	$	157,720

The ~~changes in the~~gross carrying amount and accumulated amortization of ~~goodwill by segment for the nine months ended September 30,~~other intangible assets at March 31, 2007 and December 31, 2006 ~~and 2005, were~~was as follows:

Community
(dollars in thousands) Banking Other Total

Balance, January 1, 2006 $ 73,477 $ 39,798 $ 113,275
Adjustments to goodwill acquired in prior year — 75 75

Balance, September 30, 2006 $ 73,477 $ 39,873 $ 113,350

Balance, January 1, 2005 $ 70,944 $ 59,003 $ 129,947
Goodwill acquired during the year — 12,038 12,038
Adjustments to goodwill acquired in prior year — 272 272
Goodwill transferred to held for sale — (26,082 ) (26,082 )
Goodwill impairment — (2,900 ) (2,900 )

Balance, September 30, 2005 $ 70,944 $ 42,331 $ 113,275


	Gross Carrying		Accumulated			Net Carrying
(dollars in thousands)	Amount		Amortization			Amount
March 31, 2007
Amortized intangible assets:
Core deposit	$	15,623	$	(4,831	)	$	10,792
Customer business relationships		25,553		(6,161	)		19,392
Customer loan relationships		4,416		(67	)		4,349

Total intangible assets	$	45,592	$	(11,059	)	$	34,533

December 31, 2006
Amortized intangible assets:
Core deposit	$	5,574	$	(4,615	)	$	959
Customer business relationships		25,553		(5,699	)		19,854

Total intangible assets	$	31,127	$	(10,314	)	$	20,813

~~Intangibles, including~~Other intangible assets consist primarily of core ~~deposits~~deposit intangibles and customer ~~business relationships,~~relationship intangibles and are being amortized on a straight-line or accelerated basis over their estimated useful lives, generally over a period of 10 to 25 years. Old National reviews intangible assets for possible impairment whenever events or changes in circumstances indicate that carrying amounts may not be recoverable.

~~The following table shows~~ Old National recorded $14.5 million of other intangibles associated with the ~~gross carrying amounts and accumulated amortization for other intangible assets as~~acquisition of ~~September 30, 2006 and December 31, 2005:~~

Gross Carrying Accumulated Net Carrying
(dollars in thousands) Amount Amortization Amount

September 30, 2006

Amortized intangible assets:
Core deposit $ 5,574 $ (4,545 ) $ 1,029
Customer business relationships 25,553 (5,210 ) 20,343

Total intangible assets $ 31,127 $ (9,755 ) $ 21,372

December 31, 2005

Amortized intangible assets:
Core deposit $ 5,574 $ (4,175 ) $ 1,399
Customer business relationships 25,411 (3,750 ) 21,661

Total intangible assets $ 30,985 $ (7,925 ) $ 23,060

St. Joseph Capital Corporation during the first quarter of 2007. Total amortization expense associated with other intangible assets for the three months ended ~~September 30~~March 31 was ~~$0.6~~$0.7 million in ~~2006~~2007 and $0.6 million in ~~2005. Amortization expense for the nine months ended September 30, 2006 and 2005, was $1.8 million and $1.9 million, respectively.~~2006.

Estimated amortization expense for the future years is as follows:


(dollars in thousands)

2006 remaining	$	559
2007		2,023
2007 remaining			$	2,568
2008		1,892		3,298
2009		1,767		3,174
2010		1,620		3,026
2011				2,919
Thereafter		13,511		19,548

Total	$	21,372	$	34,533

~~NOTE 10 — MORTGAGE SERVICING RIGHTS~~

During the third quarter of 2005, Old National sold its mortgage servicing rights relating to $1.917 billion of mortgage loans serviced for other investors for a total sales price of $17.7 million. The sale resulted in a pre-tax net gain of $0.4 million which was included in Other Income during the third quarter of 2005.

~~The activity for mortgage servicing rights and the related valuation allowance for the period ended September 30, 2005 is summarized below:~~

(dollars in thousands) 2005

Balance before valuation allowance, January 1 $ 15,829
Rights capitalized 2,505
Amortization (4,126 )
Sale of mortgage servicing rights (14,208 )

Balance before valuation allowance, September 30 —

Valuation allowance:
Balance, January 1 —
Additions to valuation allowance —
Reductions to valuation allowance —

Balance, September 30 —

Mortgage servicing rights, net $ —

NOTE ~~11 –ASSETS~~10 – ASSETS HELD FOR SALE

In ~~September, 2006,~~March, 2007, Old National committed to a plan to sell eighty-four bank branch properties to an unrelated party for $198.7 million and to lease them back ~~its three main buildings in downtown Evansville, Indiana. A~~pursuant to individual ten, fifteen, and twenty-three year triple-net leases. The letter of intent ~~was~~will be executed in ~~September~~May 2007, and the transaction is expected to close during the ~~fourth quarter of 2006.~~third quarter. These assets are reported as held for sale at historical cost asof $68.0 million. The $130.7 million gain will be deferred and amortized over the ~~sales price less costs to sell is expected to exceed~~terms of the ~~carrying value. These~~individual leases.

Also included in assets ~~are reported in~~held for sale were four branch buildings associated with locations that were closed and consolidated into more profitable financial centers during the ~~“other” column for segment reporting.~~quarter.

NOTE 1211 — FINANCING ACTIVITIES

The following table summarizes Old National’s other borrowings at ~~September 30, 2006,~~March 31, 2007, and December 31, ~~2005:~~2006:


	September 30,			December 31,			March 31,			December 31,
(dollars in thousands)	2006			2005			2007			2006

Old National Bancorp:
Medium-term notes, Series 1997 (fixed rates 3.50% to 7.03%) maturing August 2007 to June 2008	$	110,000		$	110,000		$	110,000		$	110,000
Senior unsecured bank note (fixed rate 5.00%) maturing May 2010		50,000			50,000			50,000			50,000
Junior subordinated debenture (fixed rate 8.00%) maturing April 2032		100,000			100,000
Junior subordinated debenture (fixed rates 6.27% to 8.00% and variable rate 8.40%) maturing April 2032 to March 2035								108,000			100,000
SFAS 133 fair value hedge and other basis adjustments		(6,297	)		(5,125	)		(3,902	)		(4,549	)
Old National Bank:
Securities sold under agreements to repurchase (fixed rates 2.75% to 5.17% and variable rate 5.64%) maturing May 2008 to November 2009		98,000			148,000
Federal Home Loan Bank advances (fixed rates 4.84% to 8.34%) maturing February 2008 to January 2023		222,094			301,703
Securities sold under agreements to repurchase								—			74,000
Federal Home Loan Bank advances (fixed rates 4.84% to 8.34%) maturing May 2008 to January 2023								129,430			219,493
Senior unsecured bank notes (fixed rate 3.95%) maturing February 2008		50,000			100,000			50,000			50,000
Subordinated bank note (fixed rate 6.75%) maturing October 2011		150,000			150,000
Subordinated bank notes (fixed rate 6.75%) maturing October 2011								150,000			150,000
Capital lease obligation		4,470			4,493			4,453			4,461
SFAS 133 fair value hedge and other basis adjustments		(6,052	)		(4,146	)		(5,508	)		(5,860	)

Total other borrowings	$	772,215		$	954,925		$	592,473		$	747,545

JUNIOR SUBORDINATED DEBENTURES

Junior subordinated debentures related to trust preferred securities are classified in “other borrowings”. These securities qualify as Tier 1 capital for regulatory purposes, subject to certain limitations.

Old National guarantees the payment of distributions on the trust preferred securities issued by ONB Capital Trust II. ONB Capital Trust II issued $100 million in preferred securities in April 2002. The preferred securities have a liquidation amount of $25 per share with a cumulative annual distribution rate of 8.0% or $2.00 per share payable quarterly and maturing on April 15, 2032. Proceeds from the issuance of these securities were used to purchase junior subordinated debentures with the same financial terms as the securities issued by ONB Capital Trust II. Old National may redeem the junior subordinated debentures and thereby cause a redemption of the trust preferred securities in whole (or in part from time to time) on or after April 12, 2007, and in whole (but not in part) following the occurrence and continuance of certain adverse federal income tax or capital treatment events. Costs associated with the issuance of these trust preferred securities totaling $3.3 million in 2002 were capitalized and are being amortized through the maturity dates of the securities. The unamortized balance is included in other assets in the consolidated balance sheet.

During February 2007, Old National acquired St. Joseph Capital Trust I and St. Joseph Capital Trust II in conjunction with its acquisition of St. Joseph Capital Corporation. Old National guarantees the payment of distributions on the trust preferred securities issued by St. Joseph Capital Trust I and St. Joseph Capital Trust II. St. Joseph Capital Trust I issued $3.0 million in preferred securities in July 2003. The preferred securities carry a variable rate of interest priced at the three-month LIBOR plus 305 basis points, payable quarterly and maturing on July 11, 2033. Proceeds from the issuance of these securities were used to purchase junior subordinated debentures with the same financial terms as the securities issued by St. Joseph Capital Trust I. St. Joseph Capital Trust II issued $5.0 million in preferred securities in March 2005. The preferred securities have a cumulative annual distribution rate of 6.27% until March 2010 when it will carry a variable rate of interest priced at the three-month LIBOR plus 175 basis points, payable quarterly and maturing on March 17, 2035. Proceeds from the issuance of these securities were used to purchase junior subordinated debentures with the same financial terms as the securities issued by St. Joseph Capital Trust II. Old National may redeem the junior subordinated debentures and thereby cause a redemption of the trust preferred securities in whole (or in part from time to time) on or after September 30, 2008 (for debentures owned by St. Joseph Capital Trust I) and on or after March 31, 2010 (for debentures owned by St. Joseph Capital Trust II), and in whole (but not in part) following the occurrence and continuance of certain adverse federal income tax or capital treatment events.

CAPITAL LEASE OBLIGATION

On January 1, 2004, Old National entered into a long-term capital lease obligation for a new branch office building in Owensboro, Kentucky, which extends for 25 years with one renewal option for 10 years. The economic substance of this lease is that Old National is financing the acquisition of the building through the lease and accordingly, the building is recorded as an asset and the lease is recorded as a liability. The fair value of the capital lease obligation was estimated using a discounted cash flow analysis based on Old National’s current incremental borrowing rate for similar types of borrowing arrangements.

Old National has qualified and nonqualified noncontributory defined benefit pension plans. During 2001, Old National amended the plans freezing the benefits accrued for all participants except active participants who had completed at least 20 years of service or who had attained age 50 with at least five years of vesting service. In addition, the amendment discontinued new enrollments under the plans after December 31, 2001. During 2005, Old National amended the plan by redefining the pay definition, resulting in a reduction to the Projected Benefit Obligation of $2.8 million. During the third quarter of 2005, Old National further amended the plan to grant two years additional benefits to plan participants age 55 or older with 15 years of benefit service resulting in an increase in the Projected Benefit Obligation of $0.8 million and to freeze benefit accruals for all remaining participants effective December 31, 2005. The curtailment resulted in a $10.1 million reduction in Projected Benefit Obligation and a one-time curtailment gain of $1.5 million. Lump sum cash payments of $5.2 million paid to participants during 2005 reduced the Projected Benefit Obligation by the same amount. The Company presently anticipates contributing an additional $0.6 million to fund its pension plans in 2006.


	Three Months Ended
	March 31,
(dollars in thousands)	2007			2006
Service cost	$	—		$	—
Interest cost		593			708
Expected return on plan assets		(822	)		(860	)
Amortization of prior service cost		—			—
Recognized actuarial loss		219			299
Settlement		300			360

Net periodic benefit cost	$	290		$	507

NOTE 1413 — STOCK-BASED COMPENSATION

Under the 1999 Equity Incentive Plan, Old National is authorized to grant up to 7.6 million shares of common stock. At ~~September 30, 2006, 6.4~~March 31, 2007, 6.5 million shares were outstanding under the plan, including ~~5.8~~5.9 million stock options and 0.6 million shares of restricted stock, 0.5 million shares have been exercised or released, and ~~0.7~~0.6 million shares were available for issuance. In addition, Old National assumed 0.1 million stock options outstanding through various mergers. ~~Effective January 1, 2006, the Company began recording compensation expense associated with the stock options in accordance with SFAS No. 123-R,~~~~Share-Based Payment.~~Prior to January 1, 2006, the Company accounted for its stock-based compensation plans in accordance with APB Opinion No. 25 and related Interpretations, under which no compensation cost had been recognized, except with respect to the restricted stock plans. Old National adopted the fair value recognition provisions of SFAS No. 123-R using the modified prospective transition method, and, consequently, has not retroactively adjusted results from prior periods.

The Company granted ~~141,700~~218,100 stock options during ~~2006.~~2007 and substituted 47,604 St. Joseph stock options for Old National stock options in connection with its acquisition of St. Joseph. Using the Black-Scholes option pricing model, the Company estimated the fair value of the stock options granted during ~~2006~~2007 to be $0.5 million. The Company will expense this amount ratably over the three-year vesting period. The assumptions used in the option pricing model and the determination of stock option expense were an expected volatility of ~~19.5%~~15.3%; a risk free interest rate of ~~4.7%~~4.85%; an expected option term of six years; a ~~3.6%~~4.23% dividend yield; and a forfeiture rate of 0%7%. These options expire in ten years. ~~No options were granted in 2005.~~

Restricted Stock

Old National recorded ~~income~~expense of ~~$0.3~~$0.1 million, net of tax benefit, during the first ~~nine~~three months of 2007, compared to expense of $0.4 million during the first three months of 2006 related to the vesting of restricted share awards. Included in the first three months of 2007 is the reversal of $0.7 million of expense associated with certain performance-based restricted stock grants. ~~This reversal of expense was partially offset by the pro-rata vesting of restricted stock awards during the year.~~

The Company granted ~~132~~122 thousand shares of performance based restricted stock awards to certain key officers during ~~2006,~~2007, with shares vesting at the end of a thirty-six month period based on the achievement of certain targets. In addition, the Company granted 6050 thousand time-based restricted stock awards to certain key officers during 2006, with vesting periods ranging from 12 to 36 months. On January 27, 2005, Old National’s Board of Directors approved a restricted stock award to grant 0.2 million shares to certain key officers2007, with shares vesting at the end of a ~~thirty-eight~~thirty-six month ~~period based on the achievement of certain targets.~~period. Compensation expense is recognized on a straight-line basis over the ~~performance~~vesting period. Shares are subject to certain restrictions and risk of forfeiture by the participants. As of ~~September 30, 2006, unrecorded~~March 31, 2007, unrecognized compensation expense was estimated to be ~~$3.9~~$7.1 million for unvested restricted ~~stock~~share awards.

NOTE 1514 — INCOME TAXES

The Company adopted FASB Interpretation No. 48,Accounting for Uncertainty in Income Taxes(“FIN 48”),on January 1, 2007 and, as the cumulative effect of applying its provisions, recognized a $3.4 million reduction to the balance of retained earnings on that date with a corresponding decrease in deferred tax assets which are reported as other assets on the balance sheet. The amount of unrecognized tax benefits as of January 1, 2007 totaled $10.3 million, all of which, if recognized, would affect the effective tax rate. Unrecognized state income tax benefits are reported net of their related deferred federal income tax benefit.

It is the Company’s policy to recognize interest and penalties accrued relative to unrecognized tax benefits in their respective federal or state income tax accounts. As of January 1, 2007, $2.7 million in interest, and no penalties, had been accrued on the Company’s balance sheet .

The Company and its subsidiaries file a consolidated U.S. federal income tax return, as well as filing various state returns. The company is currently under audit by the Internal Revenue Service for the years 2003 and 2004. The federal statute of limitations has been extended on 2002 as a part of this audit and remains open currently. It is likely that the examination phase of this audit will conclude in 2007. It is possible that a reduction in unrecognized tax benefits will occur upon completion of the audit, however, the amount of any possible reduction can not be estimated at this time.

The following is a summary of the major items comprising the differences in taxes from continuing operations computed at the federal statutory rate and as recorded in the consolidated statement of income for the three ~~and nine~~ months ended ~~September 30:~~March 31:


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30,						September 30,						March 31,
(dollars in thousands)	2006			2005			2006			2005			2007			2006

Provision at statutory rate of 35%	$	9,100		$	7,743		$	26,332		$	24,647		$	3,878		$	8,827
Tax-exempt income		(3,870	)		(4,132	)		(12,150	)		(12,804	)		(3,516	)		(4,129	)
Other, net		(245	)		(363	)		(817	)		(551	)		(71	)		(146	)

Income tax expense	$	4,985		$	3,248		$	13,365		$	11,292		$	291		$	4,552

Effective tax rate		19.2	%		14.7	%		17.8	%		16.0	%		2.6	%		18.0	%

The following table summarizes the derivative financial instruments utilized by Old National:


	September 30, 2006							December 31, 2005							March 31, 2007							December 31, 2006
	Notional		Estimated Fair Value					Notional		Estimated Fair Value					Notional		Estimated Fair Value					Notional		Estimated Fair Value
(dollars in thousands)	Amount		Gain		Loss			Amount		Gain		Loss			Amount		Gain		Loss			Amount		Gain		Loss

Fair Value Hedges
Receive fixed interest rate swaps	$	824,609	$	—	$	(22,822	)		717,346	$	—	$	(21,487	)	$	384,888	$	—	$	(7,271	)	$	724,609	$	—	$	(20,430	)
Pay fixed interest rate swaps		—		—		—			20,000		245		—
Forward mortgage loan contracts		14,977		—		(71	)		42,650		—		(357	)		18,800		—		(6	)		16,266		43		—
Stand Alone Derivatives
Receive fixed interest rate swaps		—		—		—			445,071		678		(10,774	)		16,620		—		(55	)		—		—		—
Interest rate lock commitments		31,259		222		—			26,012		47		—			21,826		40		—			17,750		7		—
Forward mortgage loan contracts		31,093		—		(172	)		10,833		326		—			20,365		7		—			17,682		22		—
Matched Customer Hedges
Customer interest rate swaps		421,934		4,550		(1,890	)		251,383		1,018		(1,766	)		434,798		4,992		(1,284	)		417,132		4,269		(1,866	)
Customer interest rate swaps with counterparty		421,934		1,890		(4,550	)		251,383		1,766		(1,018	)
Counterparty interest rate swaps																434,798		1,284		(4,992	)		417,132		1,866		(4,269	)
Customer interest rate cap & collars		5,459		24		(13	)		11,089		83		(15	)		4,164		18		(7	)		5,459		20		(11	)
Customer interest rate cap & collars with counterparty		5,459		13		(24	)		11,089		15		(83	)
Customer commodity swaps (72,000 barrels)		5,224		309		—			—		—		—
Customer commodity swaps with counterparty (72,000 barrels)		5,224		—		(309	)		—		—		—
Option for customer commodity swap (120,000 barrels)		8,202		29		—			—		—		—
Option for customer commodity swap with counterparty (120,000 barrels)		8,202		—		(29	)		—		—		—
Customer foreign exchange forward contract		38		—		—			—		—		—
Customer foreign exchange forward contract with counterparty		38		—		—			—		—		—
Counterparty interest rate cap & collars																4,164		7		(18	)		5,459		11		(20	)
Customer commodity swaps																13,426		176		(106	)		13,426		587		—
Counterparty commodity swaps																13,426		106		(176	)		13,426		—		(587	)

Total	$	1,783,652	$	7,037	$	(29,880	)	$	1,786,856	$	4,178	$	(35,500	)	$	1,367,275	$	6,630	$	(13,915	)	$	1,648,341	$	6,825	$	(27,183	)

At ~~September 30, 2006~~March 31, 2007 and December 31, ~~2005,~~2006, Old National had credit extensions of ~~$77.7~~$69.4 million and ~~$88.1~~$75.4 million, respectively, with various unaffiliated banks related to letter of credit commitments issued on behalf of Old National’s clients. At ~~September 30, 2006~~March 31, 2007 and December 31, ~~2005,~~2006, Old National provided collateral to the unaffiliated banks to secure credit extensions totaling ~~$54.5~~$51.1 million and ~~$55.2~~$54.5 million, respectively. Old National did not provide collateral for the remaining credit extensions.

NOTE 1817 — FINANCIAL GUARANTEES

Old National holds instruments, in the normal course of business with clients, that are considered financial guarantees in accordance with FIN 45,Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,which requires the Company to record the instruments at fair value. Standby letters of credit guarantees are issued in connection with agreements made by clients to counterparties. Standby letters of credit are contingent upon failure of the client to perform the terms of the underlying contract. Credit risk associated with standby letters of credit is essentially the same as that associated with extending loans to clients and is subject to normal credit policies. The term of these standby letters of credit is typically one year or less. At ~~September 30, 2006,~~March 31, 2007, the notional amount of standby letters of credit was ~~$130.7~~$122.9 million, which represents the maximum amount of future funding requirements, and the carrying value was ~~$0.5~~$0.4 million.

NOTE 1918 — SEGMENT INFORMATION

Old National operates in two operating segments: community banking and treasury. The community banking segment serves customers in both urban and rural markets providing a wide range of financial services including commercial, real estate and consumer loans; lease financing; checking, savings, time deposits and other depository accounts; cash management services; and debit cards and other electronically accessed banking services and Internet banking. Treasury manages investments, wholesale funding, interest rate risk, liquidity and leverage for Old National. Additionally, treasury provides other miscellaneous capital markets products for its corporate banking clients. Beginning January 1, 2005, Old National disaggregated internal reporting for its non-bank operations, including wealth management, investment consulting, insurance, brokerage and investment and annuity sales. These lines of business are now included in the “Other” column for all periods reported.

In order to measure performance for each segment, Old National allocates capital, corporate overhead and income tax provision to each segment. Capital and corporate overhead are allocated to each segment using various methodologies, which are subject to periodic changes by management. Income taxes are allocated using the effective tax rate. ~~Tax-exempt income is primarily within the treasury segment, creating a tax benefit for this segment.~~ Intersegment sales and transfers are not significant.

Old National uses a funds transfer pricing (“FTP”) system to eliminate the effect of interest rate risk from net interest income in the community banking segment and from companies included in the “other” column. The FTP system is used to credit or charge each segment for the funds the segments create or use. The net FTP credit or charge is reflected in segment net interest income.

The financial information for each operating segment is reported on the basis used internally by Old National’s management to evaluate performance and is not necessarily comparable with similar information for any other financial institution. Summarized financial information concerning segments is shown in the following table for the three ~~and nine~~ months ended ~~September 30:~~March 31:


	Community											Community
(dollars in thousands)	Banking		Treasury			Other			Total			Banking		Treasury			Other			Total

Three months ended September 30, 2006
Three months ended March 31, 2007
Net interest income	$	57,166	$	(3,481	)	$	(1,377	)	$	52,308		$	55,066	$	(2,637	)	$	(627	)	$	51,802
Provision for loan losses		13		(13	)		—			—			1,979		466			—			2,445
Noninterest income		25,051		2,612			8,900			36,563			17,417		(1,953	)		18,059			33,523
Noninterest expense		53,856		907			8,109			62,872			54,101		342			17,356			71,799
Income (loss) before income taxes		28,348		(1,763	)		(586	)		25,999			16,403		(5,398	)		76			11,081
Income tax expense (benefit)		7,269		(2,105	)		(179	)		4,985			3,000		(2,731	)		22			291
Segment profit (loss)		21,079		342			(407	)		21,014			13,403		(2,667	)		54			10,790
Total assets		4,921,550		2,794,930			203,408			7,919,888			5,152,032		3,052,898			126,714			8,331,644

Three months ended September 30, 2005
Net interest income	$	65,167	$	(6,021	)	$	(3,480	)	$	55,666
Provision for loan losses		6,115		(115	)		—			6,000
Noninterest income		19,865		(2,079	)		16,674			34,460
Noninterest expense		49,683		702			11,617			62,002
Income (loss) before income taxes and discontinued operations		29,234		(8,687	)		1,577			22,124
Income tax expense (benefit)		7,898		(5,159	)		509			3,248
Income (loss) from discontinued operations, net of income tax		—		1,124			(15,507	)		(14,383	)
Segment profit (loss)		21,336		(2,404	)		(14,439	)		4,493
Total assets		5,371,185		2,948,865			215,241			8,535,291

Nine months ended September 30, 2006
Three months ended March 31, 2006
Net interest income	$	177,748	$	(12,098	)	$	(4,605	)	$	161,045		$	61,923	$	(4,713	)	$	(2,871	)	$	54,339
Provision for loan losses		7,580		(580	)		—			7,000			3,298		202			—			3,500
Noninterest income		74,693		8,260			33,286			116,239			17,446		3,483			21,940			42,869
Noninterest expense		165,856		2,550			26,643			195,049			50,559		607			17,321			68,487
Income (loss) before income taxes		79,005		(5,808	)		2,038			75,235			25,512		(2,039	)		1,748			25,221
Income tax expense (benefit)		19,966		(7,244	)		643			13,365			6,579		(2,585	)		558			4,552
Segment profit		59,039		1,436			1,395			61,870
Total assets		4,921,550		2,794,930			203,408			7,919,888

Nine months ended September 30, 2005
Net interest income	$	194,998	$	(18,878	)	$	(10,576	)	$	165,544
Provision for loan losses		17,091		9			—			17,100
Noninterest income		56,275		6,668			51,293			114,236
Noninterest expense		155,616		2,447			34,196			192,259
Income (loss) before income taxes and discontinued operations		78,566		(14,666	)		6,521			70,421
Income tax expense (benefit)		20,882		(11,692	)		2,102			11,292
Loss from discontinued operations, net of income tax expense		—		—			(14,825	)		(14,825	)
Segment profit (loss)		57,684		(2,974	)		(10,406	)		44,304			18,933		546			1,190			20,669
Total assets		5,371,185		2,948,865			215,241			8,535,291			5,005,827		3,031,667			207,427			8,244,921

~~NOTE 20 — SUBSEQUENT EVENT~~

On October 21, 2006, the Company entered into an agreement and plan of merger with St. Joseph Capital Corporation (“St. Joseph”), a banking franchise headquartered in Mishawaka, Indiana, with approximately $500 million in assets. Pursuant to the merger agreement, the shareholders of St. Joseph will be entitled to receive $40.00 in cash for every share of St. Joseph stock in an all-cash transaction valued at approximately $75.6 million. The merger is subject to customary closing conditions, including regulatory approval and the approval of St. Joseph’s shareholders, and is expected to close in the first quarter of 2007. The Company believes the purchase of St. Joseph is a natural extension of its Indiana franchise and is consistent with Old National’s growth market expansion strategy. This acquisition will serve as a platform for future expansion into northern Indiana.

PART I. FINANCIAL INFORMATION

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion is an analysis of Old National’s results of operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2007 and 2006, ~~and 2005,~~ and financial condition as of ~~September 30, 2006,~~March 31, 2007, compared to ~~September 30, 2005,~~March 31, 2006, and December 31, ~~2005.~~2006. This discussion and analysis should be read in conjunction with Old National’s consolidated financial statements and related notes. This discussion contains forward-looking statements concerning Old National’s business that are based on estimates and involves certain risks and uncertainties. Therefore, future results could differ significantly from management’s current expectations and the related forward-looking statements.

EXECUTIVE SUMMARY

~~Management continues to look for ways to optimize~~On February 1, 2007, Old ~~National’s return~~National closed on ~~assets. Several initiatives were implemented subsequent to quarter-end. Consistent with management’s growth market expansion strategy, management announced the agreement and plan~~its purchase of ~~merger with~~ St. Joseph Capital ~~Corporation. Management believes this~~Corporation (“St. Joseph”), a banking franchise headquartered in Mishawaka, Indiana. This is Old National’s first bank acquisition ~~will serve as a platform for future expansion~~ in ~~northern~~seven years and leads the Company’s entry into the higher growth markets of Northern Indiana. ~~Also, consistent~~

In conjunction with the ~~growth market expansion strategy, management identified seven~~acquisition, the Company focused on balance sheet restructuring and reducing operating expenses during the quarter. This restructuring included a reduction of the investment portfolio, the early extinguishment of certain debt, and the consolidation of select branches with low growth ~~potential. The Company plans to consolidate these branches during the first quarter of 2007, transferring their assets to~~potential into other Old National ~~branches~~financial centers within close proximity.

In ~~management’s on-going efforts~~addition, there were personnel reductions in select areas related to ~~improve~~productivity improvement projects which are currently under way. These actions are designed to address the Company’s operating challenges which are to successfully integrate St. Joseph, to mitigate the margin pressure resulting from the competitive Midwest environment in which the Company operates, and to contain expense.

Subsequent to quarter-end, management executed a letter of intent ~~was executed during the quarter~~ to sell and leaseback ~~three office buildings in downtown Evansville.~~substantially all of the bank’s financial center locations. Reducing these non-earning assets will allow ~~Old National~~the Company to ~~pay down long-term funding as it comes due. Management believes that margin and earnings should improve~~deploy the cash proceeds into interest earning assets or to pay-down higher cost borrowings. Occupancy expense will increase as a result of the ~~transaction.~~transaction, however, management believes that margin and overall earnings should improve.

~~Credit~~Old National continues to focus on its key strategic initiatives: (1) strengthen the risk profile; (2) enhance management discipline; and (3) achieve consistent quality earnings.

Fundamental credit quality remains ~~solid.~~stable to improved. Nonperforming loans totaled ~~0.95%~~1.23% of total loans at ~~September 30, 2006, down~~March 31, 2007, up from ~~1.13%~~0.88% at December 31, ~~2005.~~2006. The increase is primarily due to the acquisition of St. Joseph Capital Corporation. The allowance for loan losses equaled ~~1.51%~~1.46% of total loans at ~~September 30, 2006,~~March 31, 2007, compared to ~~1.60%~~1.44% at December 31, ~~2005.~~2006 and 1.59% at March 31, 2006. Net charge-offs were ~~0.39%~~0.38% of average loans in the ~~third~~first quarter of ~~2006~~2007 compared to ~~0.33%~~0.46% in the ~~second~~first quarter of 2006. ~~This increase is attributable to the bulk loan sale in the third quarter which accelerated write-downs into the current quarter.~~

Loan and deposit growth remains challenging. ~~Net~~Total loans at ~~September 30, 2006 decreased 3.5%~~March 31, 2007 increased 3.9% compared to December 31, ~~2005.~~2006. The ~~September 30, 2006~~March 31, 2007 loan balance ~~reflects a $27.9~~includes $342.9 million ~~decrease~~ related to the ~~sale~~acquisition of ~~the O’Fallon, Illinois financial center~~St. Joseph during the first quarter of ~~2006~~2007. Commercial loans increased 7.6% year-over-year, but were offset by declines in commercial real estate loans due to the challenging Midwest market environment and the ~~bulk sale of $28.8 million of loans during~~Company’s stated desire to lower future potential credit risk by being cautious towards the third quarter. The Company continues to expand in Indianapolis and Louisville, markets which have stronger economic growth than other markets in which Old National operates. A new branch was opened in Louisville during the second quarter, and the Company opened two new branches in Indianapolis during the third quarter.real estate market. Year-over-year, deposits have increased ~~$27.7~~$391.6 million. Included in the increase was $323.6 million in Louisville and $32.2 million in Indianapolis. However, company-wide, deposits at September 30, 2006 remained lower than December 31, 2005 levels. The September 30, 2006 balance reflects a $22.2 million decrease inof deposits associated with the divestiture of the O’Fallon, Illinois financial center in the first quarter of 2006. The Company continues to focus on its initiatives to grow low cost deposits which include (1) a heightened focus on small business and corporate cash management, (2) properly

aligning incentive plans, (3) the creation of a referral program, and (4) a new direct mail program. In addition, Old National has changed its pricing policy on money market accounts and remains committed to disciplined pricing of commercial loansSt. Joseph acquisition.

Net income ~~of $21.0~~was $10.8 million for the three months ended ~~September 30, 2006, increased 367.7%,~~March 31, 2007, a decrease of $9.9 million from the ~~$4.5~~$20.7 million recorded for the three months ended ~~September 30, 2005.~~March 31, 2006. On a diluted per share basis, net income was ~~$0.32~~$0.16 for the three months ended ~~September 30, 2006,~~March 31, 2007, compared to ~~$0.07~~$0.31 for the three months ended ~~September 30, 2005.~~March 31, 2006. Included in net income for the ~~third~~first quarter of ~~2005~~2007 is ~~$ 4.2~~approximately $5.0 million of expense, net of tax, associated with the restatement of financial statements due to an error in the Company’s interpretation of SFAS No. 133 resulting in the disallowance of hedge accounting treatment for certain derivatives, and a loss from discontinued operations of $14.4 million, net of tax. Old National reported net income of $61.9 million for the nine months ended September 30, 2006, an increase of $17.6 million, or ~~39.6%, from the $44.3 million recorded for the nine months ended September 30, 2005. On~~$0.08 on a diluted per share basis, net income was $0.93 for the nine months ended September 30, 2006, compared to $0.65 for the nine months ended September 30, 2005. Included in net income for the nine months ended September 30, 2006 is a $1.9 million gain, net of tax, on the sale of the O’Fallon financial center. Included in net income during the nine months of 2005 is $4.6 million of expense, net of tax, associated with the ~~restatement of financial statements due to an error in the Company’s interpretation of SFAS No. 133 resulting in the disallowance of hedge accounting treatment for certain derivatives~~restructuring and ~~a loss from discontinued operations of $14.8 million, net of tax. See Old National’s Form 8-K filed January 31, 2006, for additional information related to the restatement.~~productivity improvement projects discussed above.

Net interest income and net interest margin in the following discussion are presented on a fully taxable equivalent basis, which adjusts tax-exempt or nontaxable interest income to an amount that would be comparable to interest subject to income taxes using the federal statutory tax rate of 35% in effect for all periods. Net income is unaffected by these taxable equivalent adjustments as the offsetting increase of the same amount is made to income tax expense. Net interest income includes taxable equivalent adjustments of ~~$4.8~~$4.2 million and ~~$5.2~~$5.1 million for the three months ended ~~September 30,~~March 31, 2007 and 2006, ~~and 2005, respectively. Taxable equivalent adjustments for the nine months ended September 30, 2006 and 2005, were $15.2 million and $16.3 million,~~ respectively.

Taxable equivalent net interest income was ~~$57.1 million and $176.2~~$56.0 million for the three ~~and nine~~ months ended ~~September 30, 2006, respectively,~~March 31, 2007, down from the ~~$60.9 million and $181.9~~$59.5 million reported for the three ~~and nine~~ months ended ~~September 30, 2005. The reduction in net interest income is primarily a result of the lower average earning assets.~~March 31, 2006. The net interest margin was ~~3.15% and 3.17%~~3.00% for the three ~~and nine~~ months ended ~~September 30, 2006,~~March 31, 2007, compared to ~~3.16% and 3.09%~~3.18% reported for the three ~~and nine~~ months ended ~~September 30, 2005.~~March 31, 2006. The ~~increase~~decrease in both net interest income and net interest margin ~~for the nine months ended September 30, 2006~~ is primarily due to the ~~disallowance~~increase in the cost of ~~hedge accounting treatment for certain derivatives during 2005~~funding being greater than the increase in earning asset yields, combined with ~~the~~a change in the mix of interest earning assets and interest-bearing liabilities. The yield on average earning assets increased 33 basis points from 6.18% to 6.51%. The cost of interest-bearing liabilities increased 59 basis points from 3.34% to 3.93%.

Average earning assets were ~~$7.262~~$7.463 billion for the three months ended ~~September 30, 2006,~~March 31, 2007, compared to ~~$7.714~~$7.488 billion for the three months ended ~~September 30, 2005,~~March 31, 2006, a decrease of ~~5.9%~~0.3%, or $452.0 million. Average earning assets were $7.413 billion for the nine months ended September 30, 2006, compared to $7.838 billion for the nine months ended September 30, 2005, a decrease of 5.4%, or $425.1$25.4 million. Significantly affecting average earning assets at ~~September 30, 2006~~March 31, 2007 compared to ~~September 30, 2005,~~March 31, 2006, was ~~Management’s~~management’s decision to ~~reduce~~restructure the investment portfolio and the ~~sale~~acquisition of ~~$142.1 million of~~St. Joseph. In addition, commercial and commercial real estate loans ~~associated with the divestitures of the Clarksville, Tennessee~~have been affected by continued weak loan demand in Old National’s markets and ~~O’Fallon, Illinois financial centers.~~more stringent loan underwriting standards. During the third quarter of 2006, the Company sold investment securities of $273.1 million and $28.8 million of commercial and commercial real estate loans. ~~In addition, Old National experienced a large amount of line pay-downs in~~During the ~~fourth~~first quarter of ~~2005.~~2007, the Company sold $148.2 million of investment securities and $3.8 million of commercial real estate loans. Year over year, commercial ~~and consumer~~ loans, which have an average yield higher than the investment portfolio, have increased as a percent of interest earning assets.

Also affecting margin were decreases in borrowed funding due to the early termination of a high cost, $50 million Federal Home Loan Bank advance in December of 2005, the exercise of a call option on $20 million of high cost brokered certificates of deposit and the maturity of a $25 million Federal Home Loan Bank advance in the first quarter of 2006, and the maturity of $50 million of senior unsecured bank notes in the second quarter of ~~2006.~~2006 and the retirement of $89 million of Federal Home Loan Bank advances and $74 million of repurchase agreements in the first quarter of 2007. Old National also retired $23 million of Federal Home Loan Bank advances which were acquired from St. Joseph and a $15 million Federal Home Loan Bank advance acquired from St. Joseph also matured in the first quarter of 2007. Year over year, deposits, which have an average interest rate lower than borrowed funds, have increased as a percent of interest-bearing liabilities as long-term borrowings have decreased as a percent of interest-bearing liabilities.

Provision for Loan Losses

~~There was no~~
The provision for loan losses ~~during~~was $2.4 million for the three months ended ~~September 30, 2006, with a $7.0 million provision for loan losses year-to-date. The 2006 provision compares~~March 31, 2007, compared to ~~$6.0 million and $17.1~~$3.5 million for the three ~~and nine~~ months ended ~~September 30, 2005, respectively.~~March 31, 2006. The lower provision in ~~2006~~2007 is attributable to a decrease in net charge-offs combined with a decrease in ~~nonaccrual~~criticized loans ~~an improvement in total criticized and classified loans over the past twelve months~~ and enhanced credit administration and underwriting functions that began in 2004. Also considered were the changes in migration loss rates during the quarter and the loan sales and their effect on reducing outstanding loan balances across several lower quality asset rating categories.functions.

Noninterest Income

Old National generates revenues in the form of noninterest income through client fees and sales commissions from its core banking franchise and other related businesses, such as wealth management, investment consulting, investment products and insurance. Noninterest income for the three months ended ~~September 30, 2006,~~March 31, 2007, was ~~$36.6~~$33.5 million, ~~an increase~~a decrease of ~~$2.1~~$9.3 million, or ~~6.1%~~21.8%, from the ~~$34.5~~$42.9 million reported for the three months ended ~~September 30, 2005. For~~March 31, 2006.

Net securities losses were $2.7 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2007, compared to $0.1 million for the three months ended March 31, 2006, ~~noninterest income was $116.2 million,~~ an increase of ~~$2.0 million, or 1.8%, from the $114.2 million reported~~$2.6 million. The primary reason for the ~~nine months ended September 30, 2005. The~~ increase in net securities losses was management’s decision to reduce the ~~three-month comparison is primarily due to a $4.6~~size of the investment portfolio.

Gains on derivatives decreased by $1.6 million ~~fluctuation~~ in the ~~market value~~first quarter of 2007 as compared to the first quarter of 2006, primarily as a result of a change in the mix of derivatives ~~which was partially offset by a $1.9 million decrease~~used in ~~service charges on deposit accounts.~~ hedging relationships.

During the ~~three-months ended September 30, 2005, the restatement required that net cash settlements and fair value adjustments related to derivative instruments associated with certain brokered certificates~~first quarter of ~~deposit and junior subordinated debt be reported as~~

~~noninterest income. See~~2006, Old ~~National’s Form 8-K filed January 31, 2006, for additional information related to the restatement. The increase in the nine-month comparison is primarily due to~~National recorded a $3.0 million gain from the sale of the O’Fallon, Illinois financial ~~center~~center. There was no corresponding sale in the first quarter of 2007.

During the first quarter of 2007, Old National recorded a $1.2 million loss on the extinguishment of debt. The loss was related to the early retirement of Federal Home Loan Bank advances and ~~the $2.6 million increase~~repurchase agreements.

Decreases in ~~insurance premiums~~letter of credit fees and ~~commissions, which~~customer derivative fees were ~~partially offset by a $4.5 million decrease in service charges on deposit accounts.~~

Service charges on deposit accounts were $10.6 million and $31.2 million for the three and nine months ended September 30, 2006, compared to $12.5 million and $35.7 million for the three and nine months ended September 30, 2005. The decrease in 2006 is primarily the result of a decrease in the volume of overdraft service charges and the sale of the Clarksville, Tennessee and O’Fallon, Illinois financial centers.

Mortgage banking revenue was $1.0 million and $2.8 million for the three and nine months ended September 30, 2006, compared to $1.8 million and $4.4 million for the three and nine months ended September 30, 2005. A decrease in loan production was the primary reason for the ~~decrease.~~

Primarily as a result of the acquisition of J.W.F. Insurance Companies in the second quarter of 2005, insurance premiums and commissions increased to $8.8 million and $29.2 million for the three and nine months ended September 30, 2006, compared to $8.5 million and $26.6 million for the three and nine months ended September 30, 2005, a 3.5% and 9.7% increase, respectively.

~~Included~~decrease in other income in ~~2006 is a $1.0 million increase in fees for other risk management services from~~ the ~~J.W.F. Insurance Companies. Other income as~~first quarter of ~~September 30, 2005 included five months~~2007 compared to the first quarter of ~~revenue from J.W.F. Insurance Companies, which was acquired on May 1, 2005.~~2006.

Noninterest Expense

Noninterest expense for the three months ended ~~September 30, 2006,~~March 31, 2007, totaled ~~$62.9~~$71.8 million, an increase of ~~$0.9~~$3.3 million, or ~~1.4%~~4.8%, from the ~~$62.0~~$68.5 million recorded for the three months ended September 30, 2005. For the nine months ended September 30, 2006, noninterest expense was $195.0 million, an increase of $2.8 million, or 1.5%, from the $192.3 million recorded for the nine months ended September 30, 2005.March 31, 2006.

Salaries and benefits is the largest component of noninterest expense. For the three months ended ~~September 30, 2006,~~March 31, 2007, salaries and benefits were $36.8 million compared to $35.9 million for the three months ended September 30, 2005. For the nine months ended September 30, 2006, salaries and benefits amounted to $115.8 million compared to $113.6 million for the nine months ended September 30, 2005. The $0.9 million increase in the three-month comparison is primarily the result of an increase in incentive-based compensation during 2006 compared to 2005. The $2.2 million increase$41.3 million. Included in salaries and benefits expense for ~~the nine months ended September 30, 2006,~~2007 is ~~primarily a result~~approximately $0.6 million of ~~the $2.9 million increase in~~ personnel expense associated with the acquisition of ~~J.W.F. Insurance Companies, partially~~St. Joseph Capital Corporation, which was offset by the reversal of $0.7 million of expense associated with certain performance-based restricted stock ~~units.~~grants. Severance costs were relatively constant compared to the first quarter of 2006.

~~Marketing~~Occupancy expense ~~totaled $2.7~~increased $1.1 million to $6.4 million for the three months ended ~~September 30, 2006,~~March 31, 2007, compared to ~~$1.9~~$5.2 million for the three months ended ~~September 30, 2005. For~~March 31, 2006. The increase is primarily related to the ~~nine months ended September 30,~~sale of the Company’s corporate office buildings in Evansville, Indiana in December, 2006 ~~marketing expense totaled $7.6~~and the lease of those buildings back to the Company. Old National Bank is obligated to pay annual rent of $6.6 million ~~compared~~ to ~~$6.1 million~~lease those buildings from the landlords through December 31, 2029; no rent is payable for the ~~nine months ended September 30, 2005. The increase in marketing expense was primarily attributable to costs associated with~~final two years of the ~~Company’s “Unbeatable Checking” advertising campaign and public relations.~~initial 25-year term. For financial reporting purposes, the rent will be expensed ratably over the 25-year term at an annual rate of $6.0 million.

~~All other components of noninterest expense~~Other losses totaled ~~$23.3~~$2.4 million for the three months ended ~~September 30, 2006,~~March 31, 2007, an increase of $1.8 million compared to ~~$24.2~~$0.6 million for the three months ended ~~September 30, 2005. For~~March 31, 2006. The increase in other losses was primarily attributable to impairment charges on buildings that the ~~nine months ended September 30, 2006~~Company identified for consolidation and ~~2005, all other components of noninterest expense totaled $71.7 million and $72.6 million, respectively. Included in~~charges to terminate leases on buildings that the ~~totals for 2005 is a $4.6 million reduction in expense associated with lowering the reserve for unfunded commitments.~~Company no longer occupies.

The provision for income taxes on continuing operations, as a percentage of pre-tax income, was ~~19.2%~~2.6% for the three months ended ~~September 30, 2006,~~March 31, 2007, compared to ~~14.7% in~~18.0% for the three months ended ~~September 30, 2005.~~March 31, 2006. The provision for income taxes on continuing operations, as a percentage of pre-tax income, was 17.8% for the nine months ended September 30, 2006, compared to 16.0% in the nine months ended September 30, 2005. The increaseddecreased effective tax rate in ~~2006~~2007 resulted from a ~~lower~~higher percentage of tax-exempt income to ~~total~~ income before income taxes than in ~~2005.~~2006.

FINANCIAL CONDITION

Overview

Old National’s assets at ~~September 30, 2006,~~March 31, 2007, were ~~$7.920~~$8.332 billion, a ~~7.2% decrease~~1.1% increase compared to ~~September 30, 2005~~March 31, 2006 assets of ~~$8.535~~$8.245 billion, and ~~a decrease~~an annualized increase of ~~6.7%~~8.9% compared to December 31, ~~2005~~2006 assets of ~~$8.492~~$8.150 billion. The ~~lower~~higher level of ~~earning~~ assets ~~and planned~~is primarily due the acquisition of St. Joseph, which was partially offset by the reduction of the investment ~~portfolio has reduced the Company’s~~portfolio. The Company continues to reduce its reliance on wholesale funding. Year over year, deposits, which have an average interest rate lower than borrowed funds, have increased as a percent of interest-bearing liabilities as long-term borrowings have decreased as a percent of interest-bearing liabilities.

Earning Assets

Old National’s earning assets are comprised of investment securities, loans and loans held for sale, and money market investments. Earning assets were ~~$7.094~~$7.531 billion at ~~September 30,~~March 31, 2007, an increase of 1.3% from March 31, 2006, ~~a decrease of 7.9% from September 30, 2005,~~ and an annualized ~~decrease~~increase of ~~9.1%~~8.2% since December 31, ~~2005.~~2006. Investment securities have decreased over the past twelve months as Old National has reduced its investment ~~portfolio in response to the flattening of the yield curve and the desire to reduce its sensitivity to rising interest rates.~~portfolio. In the third quarter of 2006, Old National sold $273.1 million of investment securities. In the first quarter of 2007, Old National sold $148.2 million of investment securities. At ~~September 30, 2006,~~March 31, 2007, total loans, including loans held for sale, ~~decreased $426.3~~increased $68.7 million compared to ~~September 30, 2005,~~March 31, 2006, and ~~decreased $205.5~~increased $183.6 million compared to December 31, ~~2005. In the fourth quarter of 2005, the Clarksville, Tennessee financial centers were sold, which included $114.3~~2006. Included in total loans at March 31, 2007 is $342.9 million of ~~loans. In the first quarter of 2006, the O’Fallon, Illinois financial center was sold, which included $27.9 million of loans.~~loans acquired from St. Joseph. In the third quarter of 2006, $28.8 million of loans were sold. In the first quarter of 2007, $3.8 million of loans were sold.

Investment Securities

Old National classifies investment securities primarily as available-for-sale to give management the flexibility to sell the securities prior to maturity if needed, based on fluctuating interest rates or changes in the Company’s funding requirements. At ~~September 30, 2006,~~March 31, 2007, Old National does not believe any individual unrealized loss on available-for-sale securities represents other-than-temporary impairment. The unrealized losses are primarily attributable to changes in interest rates. As of ~~September 30, 2006,~~March 31, 2007, Old National had both the intent and ability to hold the securities for a time necessary to recover the amortized cost.

At ~~September 30, 2006,~~March 31, 2007, the investment securities portfolio was ~~$2.276~~$2.271 billion compared to ~~$2.526~~$2.573 billion at ~~September 30, 2005,~~March 31, 2006, a decrease of ~~$249.7~~$303.1 million or ~~9.9%~~11.8%. Investment securities decreased ~~$240.6~~$105.5 million at ~~September 30, 2006,~~March 31, 2007, compared to December 31, ~~2005,~~2006, an annualized decrease of ~~12.7%~~17.8%. Investment securities represented ~~32.1%~~30.2% of earning assets at ~~September 30, 2006,~~March 31, 2007, compared to ~~32.8%~~34.6% at ~~September 30, 2005,~~March 31, 2006, and ~~33.1%~~32.2% at December 31, ~~2005.~~2006. In the third quarter of 2006, Old National sold $273.1 million of investment securities. In the first quarter of 2007, Old National sold $148.2 million of investment securities. Included in investment securities at March 31, 2007, is $3.1 million from St. Joseph. Old National has reduced the size of the investment portfolio during the past twelve months and used the cash flows generated by the declining investment portfolio to reduce ~~its sensitivity to rising interest rates.~~borrowed funds. Stronger commercial loan demand in the future could result in increased investments in loans and a continued reduction in the investment securities portfolio.

The investment securities available-for-sale portfolio had net unrealized losses of ~~$32.9~~$19.7 million at ~~September 30, 2006, an increase~~March 31, 2007, a decrease of ~~$26.3~~$25.6 million compared to net unrealized losses of ~~$6.5~~$45.4 million at ~~September 30, 2005,~~March 31, 2006, and a decrease of ~~$2.1~~$7.9 million compared to net unrealized losses of ~~$35.0~~$27.6 million at December 31, ~~2005. These changes were~~2006. The decrease over the past twelve months was primarily the result of ~~higher market interest rates and~~ the ~~change in the~~smaller portfolio of securities available-for-sale, the shorter duration and the lower level of interest rates at ~~September 30,~~March 31, 2007, compared to March 31, 2006.

annualized average yields on investment securities, on a taxable equivalent basis, were 5.01%, 4.57% and 4.62% for the nine months ended September 30, 2006 and 2005, and for the year ended December 31, 2005, respectively. Federal Home Loan Bank stock decreased ~~$7.3~~$8.5 million from the ~~December~~March 31, ~~2005~~2006 balance of $49.6 million to ~~$42.3~~$41.2 million at ~~September 30, 2006.~~March 31, 2007. This decrease is primarily the result of the Federal Home Loan Banks’ decision to repurchase excess stock during the third quarter of 2006.

Residential Loans Held for Sale

Residential loans held for sale were ~~$15.9~~$19.0 million at ~~September 30, 2006,~~March 31, 2007, compared to ~~$49.5~~$22.0 million at ~~September 30, 2005,~~March 31, 2006, and compared to ~~$43.8~~$16.6 million at December 31, ~~2005.~~2006. Residential loans held for sale are loans that are closed, but not yet purchased by investors. The amount of residential loans held for sale on the balance sheet ~~can vary~~varies depending on the ~~timing~~amount of originations and timing of loan sales to the secondary market. The decrease in residential loans held for sale from ~~December~~March 31, ~~2005,~~2006, is primarily attributable to ~~the bulk sale of approximately $12.1 million of loans during the first quarter of 2006,~~ lower loan production ~~in 2006,~~ and the timing of loan sales to the secondary market. Prior to September 30, 2005, these loans were sold with loan servicing retained. In the fourth quarter of 2005, in an effort to reduce the overall volatility in the Company’s earnings stream, Old National started selling loans with servicing released.

Commercial and ~~Consumer~~Commercial Real Estate Loans

Commercial and ~~consumer~~commercial real estate loans are the largest classification within the earning assets of Old National, representing ~~59.5%~~41.5% of earning assets at ~~September 30, 2006,~~March 31, 2007, an increase from ~~59.2%~~41.0% at ~~September 30, 2005,~~March 31, 2006, and an increase from ~~57.2%~~40.9% at December 31, ~~2005.~~2006. At ~~September 30, 2006,~~March 31, 2007, commercial and commercial real estate loans were ~~$3.005~~$3.121 billion, ~~a decrease~~an increase of ~~$258.6~~$71.3 million since ~~September 30, 2005,~~March 31, 2006, and ~~a decrease~~an increase of ~~$83.2~~$105.1 million since December 31, ~~2005. In~~2006. Included in the ~~fourth quarter of 2005, the Clarksville, Tennessee financial centers~~increase were ~~sold, which included $105.7~~$96.4 million of commercial loans and ~~consumer loans. In the first quarter of 2006, the O’Fallon, Illinois financial center was sold, which included $27.7~~$124.0 million of commercial ~~and consumer loans.~~real estate loans associated with the St. Joseph acquisition. Commercial loans have increased $117.2 million since March 31, 2006 while commercial real estate loans have decreased $46.0 million since March 31, 2006. In the third quarter of 2006, $28.8 million of commercial and commercial real estate loans were sold. In the first quarter of 2007, the Company sold $3.8 million of commercial real estate loans. Weak loan demand in Old National’s markets continues to affect loan growth. Old National also has continued to tighten its underwriting standards, which has slowed potential loan growth.

Consumer Loans
At ~~September 30, 2006,~~March 31, 2007, consumer loans, including automobile loans, personal and home equity loans and lines of credit, and student loans, decreased ~~$78.4~~$48.0 million or ~~6.0%~~3.8% compared to ~~September 30, 2005,~~March 31, 2006, and ~~decreased $42.5~~increased $0.3 million or, annualized, ~~4.5%~~0.1% since December 31, ~~2005.~~2006. Included in consumer loans at March 31, 2007 is $28.7 million of consumer loans from the St. Joseph acquisition.

Residential Real Estate Loans

Residential real estate loans, primarily 1-4 family properties, have decreased in significance to the loan portfolio over the past five years due to higher levels of loan sales into the secondary market, primarily to private investors. Old National sells the majority of residential real estate loans originated as a strategy to better manage interest rate risk and liquidity. ~~Old National sells almost all residential real estate loans without recourse.~~

At ~~September 30, 2006,~~March 31, 2007, residential real estate loans were ~~$492.1~~$560.8 million, ~~a decrease~~an increase of ~~$55.6~~$48.4 million, or ~~10.2%~~9.5%, from ~~September 30, 2005.~~March 31, 2006. The ~~sale~~acquisition of St. Joseph was the ~~Clarksville, Tennessee financial centers~~primary reason for the increase in ~~the fourth quarter of 2005 included $8.5 million of~~ residential real estate ~~loans while~~loans.

Goodwill and Other Intangible Assets
Goodwill and other intangible assets at March 31, 2007, totaled $194.4 million, an increase of $58.6 million compared to $135.8 million at March 31, 2006, and an increase of $60.2 million compared to $134.2 million at December 31, 2006. The increase is primarily the ~~sale~~result of $61.0 million in goodwill and intangible assets related to the ~~O’Fallon, Illinois financial center during the first quarter~~February 1, 2007 acquisition of ~~2006 included $0.2 million of residential real estate loans. In addition, $14.3 million loans were transferred to residential loans held for sale during the fourth quarter of 2005.~~St. Joseph Capital Corporation.

Funding

Total funding, comprised of deposits and wholesale borrowings, was ~~$7.158~~$7.583 billion at ~~September 30, 2006, a decrease~~March 31, 2007, an increase of ~~7.7%~~1.5% from ~~$7.758~~$7.473 billion at ~~September 30, 2005,~~March 31, 2006, and an annualized ~~decrease~~increase of ~~9.8%~~10.9% from ~~$7.723~~$7.382 billion at December 31, ~~2005.~~2006. Included in total funding were deposits of ~~$6.084~~$6.610 billion at ~~September 30, 2006, a decrease~~March 31, 2007, an increase of ~~$289.5~~$391.6 million, or ~~4.5%~~6.3%, compared to ~~September 30, 2005,~~March 31, 2006, and an annualized ~~decrease~~increase of ~~7.9%~~18.2% compared to December 31, ~~2005. The decrease~~2006. Included in total deposits at March 31, 2007 is ~~primarily~~$323.6 million from the ~~result of~~St. Joseph acquisition, which was the ~~assignment of $172.7~~primary reason for the increase in deposits. Demand deposits increased 4.8% or $39.3 million ofcompared to March 31, 2006. NOW deposits ~~associated with the divestiture of the Clarksville, Tennessee financial centers in the fourth quarter of 2005~~increased 12.2 % or $177.4 million and ~~$22.2~~time deposits increased 5.1% or $130.4 million ofcompared to March 31, 2006. Year over year, Old National experienced a shift from money market deposits ~~associated with the divestiture of the O’Fallon, Illinois financial center in the first quarter of 2006.~~into time deposits.

Old National uses wholesale funding to augment deposit funding and to help maintain its desired interest rate risk position. At ~~September 30, 2006,~~March 31, 2007, wholesale borrowings, including short-term borrowings and other borrowings, decreased ~~22.5%~~$281.7 million, or 22.4%, from ~~September 30, 2005~~March 31, 2006 and decreased ~~19.5%~~$87.0 million, or 32.8%, annualized, from December 31, ~~2005,~~

2006, respectively. Wholesale ~~borrowings~~funding as a percentage of total funding was ~~15.0%~~12.8% at ~~September 30, 2006,~~March 31, 2007, compared to ~~17.9%~~16.8% at ~~September 30, 2005,~~March 31, 2006, and ~~16.3%~~14.4% at December 31, ~~2005.~~2006. The ~~lower level~~primary causes for the reduction in wholesale funding were the retirement of ~~earning assets~~$89 million of Federal Home Loan Bank advances and $74 million of repurchase agreements in the first quarter of 2007. Old National also retired $23 million of Federal Home Loan Bank advances which were acquired from St. Joseph and a ~~planned~~$15 million Federal Home Loan Bank advance acquired from St. Joseph matured in the first quarter of 2007. The reduction of the investment portfolio during ~~2005~~2006 and ~~2006~~2007 has reduced the Company’s reliance on wholesale ~~funding since 2005.~~funding.

Capital

Shareholders’ equity totaled ~~$642.8~~$640.7 million at ~~September 30, 2006,~~March 31, 2007, compared to ~~$669.1~~$642.4 million at ~~September 30, 2005,~~March 31, 2006, and ~~$649.9~~$642.4 million at December 31, ~~2005.~~2006.

Old National paid cash dividends of ~~$0.21 and $0.63~~$0.22 per share for the three ~~and nine~~ months ended ~~September 30, 2006,~~March 31, 2007, which decreased equity by ~~$41.8~~$14.5 million, compared to cash dividends of ~~$0.19 and $0.57~~$0.21 per share for the three ~~and nine~~ months ended ~~September 30, 2005,~~March 31, 2006, which decreased equity by ~~$38.9~~$14.1 million. Old National purchased shares of its stock in the open market under an ongoing repurchase program, reducing shareholders’ equity by ~~$29.4~~$9.5 million during the ~~nine~~three months ended ~~September 30, 2006, compared to $54.9 million~~March 31, 2006. Although approved, Old National did not repurchase shares during the ~~nine months ended September 30, 2005.~~first quarter of 2007. The change in unrealized losses on investment securities increased equity by ~~$1.3~~$3.1 million during the ~~nine~~three months ended ~~September 30, 2006,~~March 31, 2007, and decreased equity by ~~$8.8~~$6.1 million during the ~~nine~~three months ended ~~September 30, 2005.~~March 31, 2006. Shares issued for stock options, restricted stock and stock purchase plans increased shareholders’ equity by ~~$1.0~~$0.6 million during the ~~nine~~three months ended ~~September 30, 2006,~~March 31, 2007, compared to ~~$4.9~~$1.3 million during the ~~nine~~three months ended ~~September 30, 2005. Additionally, stock issued~~March 31, 2006. The adoption of FASB Interpretation No. 48,Accounting for ~~acquisitions increased shareholders’ equity by $18.5~~Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109, resulted in a $3.4 million reduction in ~~the nine months ended September 30, 2005.~~equity. The adoption of EITF 06-5 resulted in a $0.1 million reduction in equity.

In accordance with generally accepted accounting principles, the ~~amount of the allowance~~$5.2 million reserve for unfunded loan commitments is classified as a liability account on the balance sheet. The ~~allowance~~reserve for unfunded loan commitments ~~was unchanged~~increased $0.4 million during the first ~~nine~~three months of ~~2006.~~2007 from $4.8 million at December 31, 2006, primarily as a result of the St. Joseph acquisition.

Market Risk

~~Inherent~~
Market risk is the risk of loss arising from adverse changes in ~~Old National’s balance sheet is market risk, defined as~~ the ~~sensitivity~~fair value of ~~income, fair market values and capital~~financial instruments due to changes in interest rates, ~~foreign~~ currency exchange rates, ~~commodity prices~~ and other relevant market rates or prices. ~~The~~Interest rate risk is Old National’s primary market risk ~~to which Old National has exposure is interest rate risk. Interest rate risk arises because~~and results from timing differences in the re-pricing of assets and liabilities, ~~may reprice, mature or prepay at different times or based upon different market instruments as market interest rates change. Changes~~changes in the slope of the yield curve, and the ~~pace~~potential exercise of ~~interest rate changes may also impact net interest income and the fair value of the balance sheet.~~explicit or embedded options.

Old National manages interest rate risk within an overall asset and liability management framework that includes attention to credit risk, liquidity risk and capitalization. A principal objective of asset/liability management is to manage the sensitivity of net interest income to changing interest rates. Asset and liability management activity is governed by a policy reviewed and approved annually by the Board of Directors. The Board of Directors has delegated the administration of this policy to the Funds Management Committee, a committee of the Board of Directors, and the Executive Balance Sheet Management Committee, a committee comprised of senior executive management. The Funds Management Committee meets quarterly and oversees adherence to policy and recommends policy changes to the Board. The Executive Balance Sheet Management Committee meets quarterly. This committee determines balance sheet management strategies and initiatives for the Company. A group comprised of corporate and line management meets monthly to implement strategies and initiatives determined by the Executive Balance Sheet Management Committee.

Old National uses two modeling techniques to quantify the impact of changing interest rates on the Company, Net Interest Income at Risk and Economic Value of Equity. Net Interest Income at Risk is used by management and the Board of Directors to evaluate the impact of changing rates over a two-year horizon. Economic Value of Equity is used to evaluate long-term interest rate risk. These models simulate the likely behavior of the Company’s net interest income and the likely change in the Company’s economic value due to changes in interest rates under various possible interest rate scenarios. Because the models are driven by expected behavior in various interest rate scenarios and many factors besides market interest rates affect the Company’s net interest income and value, Old National recognizes that model outputs are not guarantees of actual results. For this reason, Old National models many different combinations of interest rates and balance sheet assumptions to ~~best~~ understand its overall sensitivity to market interest rate changes.

Liquidity Risk

Liquidity risk arises from the possibility the Company may not be able to satisfy current or future financial commitments, or may become unduly reliant on alternative funding sources. The Funds Management Committee of the Board of Directors establishes liquidity risk guidelines and, along with the Balance Sheet Management Committee, monitors liquidity risk. The objective of liquidity management is to ensure Old National has the ability to fund balance sheet growth and meet deposit and debt obligations in a timely and cost-effective manner. Management monitors liquidity through a regular review of asset and liability maturities, funding sources, and loan and deposit forecasts. The Company maintains strategic and contingency liquidity plans to ensure sufficient available funding to satisfy requirements for balance sheet growth, properly manage capital markets’ funding sources and to address unexpected liquidity requirements.

Old National’s ability to raise funding at competitive prices is influenced by rating agencies’ views of the Company’s credit quality, liquidity, capital and earnings. Standard and Poor’s, Moody’s Investor Services and Dominion Bond Rating Services have each issued a stable outlook in conjunction with their ratings as of ~~September 30, 2006.~~March 31, 2007. Fitch Rating Services issued a negative outlook in conjunction with their ratings as of ~~September 30,~~December 31, 2006. The senior debt ratings of Old National Bancorp and Old National Bank at ~~September 30, 2006,~~March 31, 2007, are shown in the following table:

SENIOR DEBT RATINGS

Standard and Poor’s

Moody’s Investor Services

Fitch, Inc.

Dominion Bond Rating Svc.

Long

Short

Long

Short

Long

Short

Long

Short

term

Old National Bancorp

BBB

~~Baa1~~

N/A

BBB

BBB (high)

R-2 (high)

Old National Bank

BBB+

A3A1

~~P-2~~

P-1

BBB+

A (low)

R-1 (low)


N/A = not applicable

Old National Bancorp, the parent company, has routine funding requirements consisting primarily of operating expenses, dividends to shareholders, debt service, net derivative cash flows and funds used for acquisitions. Old National Bancorp obtains funding to meet its obligations from dividends and management fees collected from its subsidiaries and the issuance of debt securities. In addition, at September 30, 2006, Old National Bancorp has $700 million available under a $750.0 million global shelf registration for the issuance of a variety of securities including debt, common and preferred stock, depository shares, units and warrants of Old National. At ~~September 30, 2006,~~March 31, 2007, the parent company’s other borrowings outstanding was ~~$253.7~~$264.1 million, compared with ~~$255.0~~$252.0 million at ~~September 30, 2005.~~March 31, 2006. The ~~$1.3~~$12.1 million ~~decrease~~increase in other borrowings from ~~September 30, 2005~~March 31, 2006 to ~~September 30, 2006~~March 31, 2007 was ~~primarily~~ attributable to junior subordinated debentures from the ~~restatement~~St. Joseph Capital Corporation purchase during the first quarter of 2007 and an increase in ~~2005 resulting in the elimination~~value of SFAS 133 fair value ~~adjustments on the junior subordinated debt and a decline in derivative market values.~~hedges. Old National Bancorp, the parent company, has ~~$5.0~~$10.0 million of debt scheduled to mature within the next 12 months.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Old National’s ~~critical~~ accounting policies ~~involving the more significant judgments, estimates and assumptions used~~are described in ~~the preparation of~~Note 1 to the consolidated financial statements as of September 30, 2006 remain unchanged from December 31, 2005. These policies relate to the accounting for the allowance for loan losses, goodwill and other intangible assets, and derivative financial instruments. Disclosure on these critical accounting policies is incorporated by reference under Item 7-“Management’s Discussion and Analysis of Financial Condition and Results of Operations”included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2005.~~2006. Certain accounting policies require management to use significant judgment and estimates, which can have a material impact on the carrying value of certain assets and liabilities. We consider these policies to be critical accounting policies. The judgment and assumptions made are based upon historical experience or other factors that management believes to be reasonable under the circumstances. Because of the nature of the judgement and assumptions, actual results could differ from these judgments and estimates which could have a material affect on our financial condition and results of operations.

The following accounting policies materially affect our reported earnings and financial condition and require significant judgments and estimates.

Allowance for Loan Losses.The allowance for loan losses is maintained at a level believed adequate by management to absorb probable losses in the consolidated loan portfolio. Management’s evaluation of the adequacy of the allowance is an estimate based on reviews of individual loans, pools of homogeneous loans, assessments of the impact of current and anticipated economic conditions on the portfolio and historical loss experience. The allowance represents management’s best estimate, but significant downturns in circumstances relating to loan quality and economic conditions could result in a requirement for additional allowance in the near future. Likewise, an upturn in loan quality and improved economic conditions may allow a reduction in the required allowance. In either instance, unanticipated changes could have a significant impact on results of operations.

The allowance is increased through a provision charged to operating expense. Uncollectible loans are charged-off through the allowance. Recoveries of loans previously charged-off are added to the allowance. A loan is considered impaired when it is probable that contractual interest and principal payments will not be collected either for the amounts or by the dates as scheduled in the loan agreement. Old National’s policy for recognizing income on impaired loans is to accrue interest unless a loan is placed on nonaccrual status. A loan is generally placed on nonaccrual status when principal or interest becomes 90 days past due unless it is well secured and in the process of collection, or earlier when concern exists as to the ultimate collectibility of principal or interest. Old National monitors the quality of its loan portfolio on an on-going basis and uses a combination of detailed credit assessments by relationship managers and credit officers, historic loss trends, and economic and business environment factors in determining its allowance for loan losses. Old National records provisions for loan losses based on current loans outstanding, grade changes, mix of loans and expected losses. A detailed loan loss evaluation on an individual loan basis for the Company’s highest risk loans is performed quarterly. Management follows the progress of the economy and how it might affect Old National’s borrowers in both the near and the intermediate term. Old National has a formalized and disciplined independent loan review program to evaluate loan administration, credit quality and compliance with corporate loan standards. This program includes periodic reviews and regular reviews of problem loan reports, delinquencies and charge-offs.

Old National uses migration analysis as a tool to determine the adequacy of the allowance for loan losses for non-retail loans that are not impaired. Migration analysis is a statistical technique that attempts to estimate probable losses for existing pools of loans by matching actual losses incurred on loans back to their origination. The migration-derived historical commercial loan loss rates are applied to the current commercial loan pools to arrive at an estimate of probable losses for the loans existing at the time of analysis.

Old National calculates migration analysis using several different scenarios based on varying assumptions to evaluate the widest range of possible outcomes. The amounts determined by migration analysis are adjusted for management’s best estimate of the effects of current economic conditions, loan quality trends, results from internal and external review examinations, loan volume trends, credit concentrations and various other factors. Historic loss ratios adjusted for expectations of future economic conditions are used in determining the appropriate level of allowance for consumer and residential real estate loans.

Management’s analysis of probable losses in the portfolio at March 31, 2007, resulted in a range for allowance for loan losses of $9.8 million with the potential effect to net income ranging from a decrease of $2.2 million to an increase of $4.1 million. These sensitivities are hypothetical and are not intended to represent actual results.

•		Goodwill and Intangibles.For acquisitions, Old National is required to record the assets acquired, including identified intangible assets, and the liabilities assumed at their fair value. These often involve estimates based on third-party valuations, such as appraisals, or internal valuations based on discounted cash flow analyses or other valuation techniques that may include estimates of attrition, inflation, asset growth rates or other relevant factors. In addition, the determination of the useful lives for which an intangible asset will be amortized is subjective. Under Statement of Financial Accounting Standards (“SFAS”) No. 142Goodwill and Other Intangible Assets, goodwill and indefinite-lived assets recorded must be reviewed for impairment on an annual basis, as well as on an interim basis if events or changes indicate that the asset might be impaired. An impairment loss must be recognized for any excess of carrying value over fair value of the goodwill or the indefinite-lived intangible asset with subsequent reversal of the impairment loss being prohibited.

		The determination of fair values is based on internal valuations using management’s assumptions of future growth rates, future attrition, discount rates, multiples of earnings or other relevant factors. Changes in these factors, as well as downturns in economic or business conditions, could have a significant adverse impact on the carrying values of goodwill or intangible assets and could result in impairment losses affecting the financials of the Company as a whole and the individual lines of business in which the goodwill or intangibles reside.

•		Derivative Financial Instruments.As part of the Company’s overall interest rate risk management, Old National uses derivative instruments to reduce exposure to changes in interest rates and market prices for financial instruments. The application of the hedge accounting policy requires judgment in the assessment of hedge effectiveness, identification of similar hedged item groupings and measurement of changes in the fair value of derivative financial instruments and hedged items. To the extent hedging relationships are found to be effective, as determined by SFAS No. 133Accounting for Derivative Instruments and Hedging Activities, changes in fair value of the derivatives are significantly offset by changes in the fair value of the related hedged item or recorded to other comprehensive income. However, if in the future the derivative financial instruments used by the Company no longer qualify for hedge accounting treatment, all changes in fair value of the derivative would flow through the consolidated statements of income in other noninterest income, resulting in greater volatility in our earnings. Management believes hedge effectiveness is evaluated properly in preparation of the financial statements. All of the derivative financial instruments used by the Company have active markets and indications of fair value can be readily obtained.

•		Income Taxes.The Company is subject to the income tax laws of the U.S, its states and the municipalities in which the Company operates. These tax laws are complex and subject to different interpretations by the taxpayer and the relevant government taxing authorities. In establishing a provision for income tax expense, the Company must make judgments and interpretations about the application of these inherently complex tax laws. The Company must also make estimates about when in the future certain items will affect taxable income in the various tax jurisdictions. Disputes over interpretations of the tax laws may be subject to review/adjudication by the court systems of the various tax jurisdictions or may be settled with the taxing authority upon examination or audit. The Company reviews income tax expense and the carrying value of deferred tax assets quarterly and as new information becomes available, the balances are adjusted, as appropriate.

		On January 1, 2007, the Company adopted FIN 48 to account for uncertain tax positions. FIN 48 prescribes a recognition threshold of more-likely-than-not, and a measurement attribute for all tax positions taken or expected to be taken on a tax return, in order for those tax positions to be recognized in the financial statements. See Note 14 to the Consolidated Financial Statements for a further description of the Company’s provision and related income tax assets and liabilities.

Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of the Board of Directors and the Audit Committee has reviewed the Company’s disclosure relating to it in this “Management’s Discussion and Analysis”.

FORWARD-LOOKING STATEMENTS

The following is a cautionary note about forward-looking statements. In its oral and written communications, Old National from time to time includes forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements can include statements about estimated cost savings, plans and objectives for future operations, and expectations about performance as well as economic and market conditions and trends. These statements often can be identified by the use of words like “expect,” “may,” “could,” “intend,” “project,” “estimate,” “believe” or “anticipate.” Old National may include forward-looking statements in filings with the Securities and Exchange Commission, such as this Form 10-Q, in other written materials and in oral statements made by senior management to analysts, investors, representatives of the media and others. It is intended that these forward-looking statements speak only as of the date they are made, and Old National undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the forward-looking statement is made or to reflect the occurrence of unanticipated events. By their nature, forward-looking statements are based on assumptions and are subject to risks, uncertainties and other factors. Actual results may differ materially from those contained in ~~the~~any forward-looking statement. Uncertainties which could affect Old National’s future performance include, but are not limited to: (1) economic, market, operational, liquidity, credit and interest rate risks associated with Old National’s business; (2) economic conditions generally and in the financial services industry; (3) increased competition in the financial services industry either nationally or regionally, resulting in, among other things, credit quality deterioration; (4) the ability of Old National to achieve loan and deposit growth; (5) volatility and direction of market interest rates; (6) governmental legislation and regulation, including changes in accounting regulation or standards; (7) the ability of Old National to execute its business plan; (8) a weakening of the economy which could materially impact credit quality trends and the ability to generate loans; (9) changes in the securities markets; and (10) changes in fiscal, monetary and tax policies. Investors should consider these risks, uncertainties and other factors in addition to those mentioned by Old National in this and its other filings from time to time when considering any forward-looking statement.

ITEM 3. QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See Management’s Discussion and Analysis of Financial Condition and Results of Operations-Market Risk and Liquidity Risk.

ITEM 4. CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

~~Evaluation of disclosure controls and procedures~~

Evaluation of disclosure controls and procedures.. Old National’s principal executive officer and principal financial officer have concluded that Old National’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended), based on their evaluation of these controls and procedures as of the end of the period covered by this Form 10-Q, are effective at the reasonable assurance level as discussed below to ensure that information required to be disclosed by Old National in the reports it files under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to Old National’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Limitations on the Effectiveness of Controls. Management, including the principal executive officer and principal financial officer, does not expect that Old National’s disclosure controls and internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgements in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls.

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be only reasonable assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

~~Limitations on the Effectiveness of Controls~~. Management, including the principal executive officer and principal financial officer, does not expect that Old National’s disclosure controls and internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all

control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgements in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls.

~~Changes in Internal Control over Financial Reporting~~

Changes in Internal Control over Financial Reporting.. There were no changes in Old National’s internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, Old National’s internal control over financial reporting.

PART II

OTHER INFORMATION

~~ITEM 1. LEGAL PROCEEDINGS~~

~~NONE.~~

ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors previously disclosed in the “Risk Factors” section of the Company’s annual report on Form 10-K for the year ended December 31, ~~2005.~~2006.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~(c)~~ ~~ISSUER PURCHASES OF EQUITY SECURITIES~~

(c)

ISSUER PURCHASES OF EQUITY SECURITIES

Total Number
of Shares
Total Average Purchased as Maximum Number of
Number Price Part of Publically Shares that May Yet
of Shares Paid Per Announced Plans Be Purchased Under
Period Purchased Share or Programs the Plans or Programs
07/01/06 - 07/31/06 93,500 $ 19.21 93,500 4,588,421
08/01/06 - 08/31/06 33,600 19.05 33,600 4,554,821
09/01/06 - 09/30/06 — — — 4,554,821

Quarter-to-date 09/30/06 127,100 $ 19.17 127,100 4,554,821


					Total Number
					of Shares
	Total		Average		Purchased as		Maximum Number of
	Number		Price		Part of Publically		Shares that May Yet
	of Shares		Paid Per		Announced Plans		Be Purchased Under
Period	Purchased		Share		or Programs		the Plans or Programs
01/01/07 - 01/31/07		—		—		—		4,554,821
02/01/07 - 02/28/07		—		—		—		4,554,821
03/01/07 - 03/31/07		—		—		—		4,554,821

Quarter-to-date 03/31/07		—		—		—		4,554,821

~~ITEM 3. DEFAULTS UPON SENIOR SECURITIES~~

~~NONE~~

~~ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS~~

~~NONE~~

ITEM 5. OTHER INFORMATION

(a)		NONE

(b)		There have been no material changes in the procedure by which security holders recommend nominees to the Company’s board of directors.

ITEM 6. EXHIBITS


Exhibit No.		Description

~~2.1~~		Agreement and Plan of Merger dated as of October 21, 2006 by and among Old National Bancorp, St. Joseph Capital Corporation and SMS Subsidiary, Inc. (incorporated by reference to Exhibit 2.1 of Old National’s Current Report on Form 8-K filed with the Securities Exchange Commission on October 23, 2006).

~~2.2~~		Voting Agreement dated as of October 21, 2006, between Old National Bancorp and certain directors of St. Joseph Capital Corporation identified therein. (incorporated by reference to Exhibit 2.2 of Old National’s Current Report on Form 8-K filed with the Securities Exchange Commission on October 23, 2006).

3.1		Articles of Incorporation of Old National (incorporated by reference to Exhibit 3(i) of Old National’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002).

3.2		By-Laws of Old National, amended ~~and restated effective July 27, 2006~~April 26, 2007 (incorporated by reference to Exhibit 3.1 of Old National’s Current Report on Form 8-K filed with the Securities Exchange Commission on ~~July 31, 2006)~~April 30, 2007).

4.1		Senior Indenture between Old National and J.P. Morgan Trust Company, National Association (as successor to Bank One, NA), as trustee (incorporated by reference to Exhibit 4.3 to Old National’s Registration Statement on Form S-3, Registration No. 333-118374, filed with the Securities and Exchange Commission on December 2, 2004).

4.2		Form of Indenture between Old National and J.P. Morgan Trust Company, National Association (as successor to Bank One, NA), as trustee (incorporated by reference to Exhibit 4.1 to Old National’s Registration Statement on Form S-3, Registration No. 333-87573, filed with the Securities and Exchange Commission on September 22, 1999).

4.3		Rights Agreement, dated March 1, 1990, as amended on February 29, 2000, between Old National Bancorp and Old National Bank, as trustee (incorporated by reference to Old National’s Form 8-A, dated March 1, 2000).


Exhibit No.		Description
4.4		First Indenture Supplement dated as of May 20, 2005, between Old National and J.P. Morgan Trust Company, as trustee, providing for the issuance of its 5.00% Senior Notes due 2010 (incorporated by reference to Exhibit 4.1 of Old National’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 20, 2005).

4.5		Form of 5.00% Senior Notes due 2010 (incorporated by reference to Exhibit 4.2 of Old National’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 20, 2005).

10.1		Deferred Compensation Plan for Directors of Old National Bancorp and Subsidiaries (As Amended and Restated Effective as of January 1, 2003) (incorporated by reference to Exhibit 10(a) of Old National’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 15, 2004).*

10.2		Second Amendment to the Deferred Compensation Plan for Directors of Old National Bancorp and Subsidiaries (As Amended and Restated Effective as of January 1, 2003) (incorporated by reference to Exhibit 10(b) of Old National’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 15, 2004).*

10.3		2005 Directors Deferred Compensation Plan (Effective as of January 1, 2005) (incorporated by reference to Exhibit 10(c) of Old National’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 15, 2004).*


~~Exhibit No~~.		~~Description~~

10.4		Supplemental Deferred Compensation Plan for Select Executive Employees of Old National Bancorp and Subsidiaries (As Amended and Restated Effective as of January 1, 2003) (incorporated by reference to Exhibit 10(d) of Old National’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 15, 2004).*

10.5		Second Amendment to the Supplemental Deferred Compensation Plan for Select Executive Employees of Old National Bancorp and Subsidiaries (As Amended and Restated Effective as of January 1, 2003) (incorporated by reference to Exhibit 10(e) of Old National’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 15, 2004).*

10.6		Third Amendment to the Supplemental Deferred Compensation Plan for Select Executive Employees of Old National Bancorp and Subsidiaries (As Amended and Restated Effective as of January 1, 2003) (incorporated by reference to Exhibit 10(f) of Old National’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 15, 2004).*

10.7		2005 Executive Deferred Compensation Plan (Effective as of January 1, 2005) (incorporated by reference to Exhibit 10(g) of Old National’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 15, 2004).*

10.8		Summary of Old National Bancorp’s Outside Director Compensation Program (incorporated by reference to Old National’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003).*

10.9		Old National Bancorp Short-Term Incentive Compensation Plan (incorporated by reference to Appendix II of Old National’s Definitive Proxy Statement filed with the Securities and Exchange Commission on March 16, 2005).*

10.10		Severance Agreement, between Old National and Robert G. Jones (incorporated by reference to Exhibit 10(a) of Old National’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 4, 2005).*


Exhibit No.		Description
10.11		Form of Severance Agreement for Michael R. Hinton, Annette W. Hudgions, Daryl D. Moore and Christopher A. Wolking, as amended (incorporated by reference to Exhibit 10(b) of Old National’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 4, 2005).*

10.12		Release and Separation Agreement between Old National and Michael R. Hinton (incorporated by reference to Exhibit 10.12 of Old National’s ~~Quarterly~~ Report on Form 10-Q for the quarter ended June 30, 2006).*

10.13		Form of Change of Control Agreement for Robert G. Jones, Annette W. Hudgions, Daryl D. Moore and Christopher A. Wolking, as amended (incorporated by reference to Exhibit 10(c) of Old National’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 4, 2005).*

10.14		Old National Bancorp 1999 Equity Incentive Plan (incorporated by reference to Old National’s Form S-8 filed on July 20, 2001).*

10.15		First Amendment to the Old National Bancorp 1999 Equity Incentive Plan (incorporated by reference to Exhibit 10(f) of Old National’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004).*

10.16		Form of 2004 “Performance-Based” Restricted Stock Award Agreement between Old National and certain key associates (incorporated by reference to Exhibit 10(g) of Old National’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004).*

10.17		Form of 2005 “Performance-Based” Restricted Stock Award Agreement between Old National and certain key associates, (incorporated by reference to Exhibit 10(r) of Old National’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005). *

10.18		Form of Executive Stock Option Award Agreement between Old National and certain key associates


~~Exhibit No~~.		~~Description~~

		~~(incorporated~~ (incorporated by reference to Exhibit 10(h) of Old National’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004).*

10.19		Stock Purchase and Dividend Reinvestment Plan (incorporated by reference to Old National’s Registration Statement on Form S-3, Registration No. 333-120545 filed with the Securities and Exchange Commission on November 16, 2004).

10.20		Form of 2006 “Performance-Based” Restricted Stock Award Agreement between Old National and certain key associates (incorporated by reference to Exhibit 99.1 of Old National’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 2, 2006).*

10.21		Form of 2006 “Service-Based” Restricted Stock Award Agreement between Old National and certain key associates (incorporated by reference to Exhibit 99.2 of Old National’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 2, 2006).*

10.22		Form of 2006 Non-qualified Stock Option Agreement (incorporated by reference to Exhibit 99.3 of Old National’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 2, 2006).*

10.23		Form of 2007 “Performance-Based” Restricted Stock Award Agreement between Old National and certain key associates (incorporated by reference to Exhibit 10(w) of Old National’s Annual Report on Form 10-K for the year ended December 31, 2006).*

10.24		Form of 2007 “Service-Based” Restricted Stock Award Agreement between Old National and certain key associates (incorporated by reference to Exhibit 10(x) of Old National’s Annual Report on Form 10-K for the year ended December 31, 2006).*


Exhibit No.		Description
10.25		Form of 2007 Non-qualified Stock Option Agreement between Old National and certain key associates (incorporated by reference to Exhibit 10(y) of Old National’s Annual Report on Form 10-K for the year ended December 31, 2006).*

10.26		Purchase and Sale Agreement dated December 20, 2006, between Old National Bancorp, Old National Bank, Old National Realty Company, Inc., ONB One Main Landlord, LLC, ONB 123 Main Landlord, LLC, and ONB 4^th Street Landlord, LLC (incorporated by reference to Exhibit 10(z) of Old National’s Annual Report on Form 10-K for the year ended December 31, 2006).*

10.27		Lease Agreement, dated December 20, 2006 between ONB One Main Landlord, LLC and Old National Bank (incorporated by reference to Exhibit 10(aa) of Old National’s Annual Report on Form 10-K for the year ended December 31, 2006).*

10.28		Lease Agreement, dated December 20, 2006 between ONB 123 Main Landlord, LLC and Old National Bank (incorporated by reference to Exhibit 10(ab) of Old National’s Annual Report on Form 10-K for the year ended December 31, 2006).*

10.29		Lease Agreement, dated December 20, 2006 between ONB 4^th Street Landlord, LLC and Old National Bank (incorporated by reference to Exhibit 10(ac) of Old National’s Annual Report on Form 10-K for the year ended December 31, 2006).*

10.30		Agreement and Plan of Merger dated as of October 21, 2006 by and among Old National Bancorp, St. Joseph Capital Corporation and SMS Subsidiary, Inc. (the schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K) (incorporated by reference to Exhibit 2.1 of Old National’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 23, 2006).

31.1		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


*		Management contract or compensatory plan or arrangement


		Page No.
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheet ~~September 30, 2006~~
	March 31, 2007 (unaudited), December 31, ~~2005~~2006 and ~~September 30, 2005~~March 31, 2006 (unaudited)		3

	Consolidated Statement of Income
	Three ~~and nine~~ months ended ~~September 30,~~March 31, 2007 and 2006 ~~and 2005~~ (unaudited)		4

	Consolidated Statement of Changes in Shareholders’ Equity ~~Nine~~
	Three months ended ~~September 30,~~March 31, 2007 and 2006 ~~and 2005~~ (unaudited)		5

	Consolidated Statement of Cash Flows ~~Nine~~
	Three months ended ~~September 30,~~March 31, 2007 and 2006 ~~and 2005~~ (unaudited)		6

	Notes to Consolidated Financial Statements (unaudited)		7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		2119

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		32

Item 4.	Controls and Procedures		32

PART II	OTHER INFORMATION		33

SIGNATURES			37
~~Certification of Principal Executive Officer~~Exhibit 31.1
~~Certification of Principal Financial Officer~~Exhibit 31.2
~~Certification of Principal Executive Officer~~Exhibit 32.1
~~Certification of Principal Financial Officer~~Exhibit 32.2


	September 30,		December 31,		March 31,		December 31,
(dollars in thousands)	2006		2005		2007		2006

Impaired loans without a valuation allowance	$	11,801	$	13,780	$	13,705	$	11,833
Impaired loans with a valuation allowance		24,516		25,681		38,237		20,476

Total impaired loans	$	36,317	$	39,461	$	51,942	$	32,309


Valuation allowance related to impaired loans	$	10,936	$	12,472
Allowance for loan losses related to impaired loans					$	15,760	$	7,080


(dollars in thousands)

Assets held for sale:
Land	$	5,591		$	21,637
Building and improvements		73,424			101,284

Total		79,015			122,921
Accumulated depreciation		(9,120	)		(52,599	)

Assets held for sale — net	$	69,895		$	70,322


(dollars in thousands)

Due in 2006	$	8
Due in 2007		10,034		$	10,026
Due in 2008		317,037			153,037
Due in 2009		26,040			2,040
Due in 2010		75,043			75,043
Due in 2011					150,046
Thereafter		356,402			211,691
SFAS 133 fair value hedge and other basis adjustments		(12,349	)		(9,410	)

Total	$	772,215		$	592,473


	Three Months Ended			Nine Months Ended
(dollars in thousands, except per share data)	September 30, 2005			September 30, 2005
Net income as reported	$	4,493		$	44,304
Restricted Stock:
Add: restricted stock compensation expense included in reported net income, net of related tax effects		511			1,448
Deduct: restricted stock compensation expense determined under fair value based method for all awards, net of related tax effects		(551	)		(1,621	)
Stock Options:
Deduct: stock option compensation expense determined under fair value based method for all awards, net of related tax effects		(506	)		(2,377	)

Proforma net income	$	3,947		$	41,754


Basic net income per share:
As reported	$	0.07		$	0.65
Proforma		0.06			0.61
Diluted net income per share:
As reported	$	0.07		$	0.65
Proforma		0.06			0.61


(dollars in thousands)	2005

Balance before valuation allowance, January 1	$	15,829
Rights capitalized		2,505
Amortization		(4,126	)
Sale of mortgage servicing rights		(14,208	)

Balance before valuation allowance, September 30		—

Valuation allowance:
Balance, January 1		—
Additions to valuation allowance		—
Reductions to valuation allowance		—

Balance, September 30		—

Mortgage servicing rights, net	$	—


	Regulatory
	Guidelines			September 30,						December 31,			Regulatory
	Minimum			2006			2005			2005			Guidelines			March 31,						December 31,
													Minimum			2007			2006			2006
Risk-based capital:
Tier 1 capital to total avg assets (leverage ratio)		4.00	%		7.92	%		7.57	%		7.67	%		4.00	%		7.14	%		7.78	%		8.01	%
Tier 1 capital to risk-adjusted total assets		4.00			11.01			10.36			10.64			4.00			9.70			10.75			11.12
Total capital to risk-adjusted total assets		8.00			14.89			14.05			14.40			8.00			12.97			14.54			14.47
Shareholders’ equity to assets		N/A			8.12			7.84			7.65			N/A			7.69			7.79			7.88


(1)		Loans include residential loans held for sale.

(2)		Non-performing loans include nonaccrual and renegotiated loans.


Interest Rate Change in Basis Points (bp)
													Interest Rate Change in Basis Points (bp)
	Down 300		Down 200		Down 100		Up 100		Up 200		Up 300		Down 300	Down 200	Down 100	Up 100	Up 200	Up 300
Green Zone		12.00%		6.50%		3.00%		3.00%		6.50%		12.00%	12.00%	6.50%	3.00%	3.00%	6.50%	12.00%
Yellow Zone		12.00% — 15.00%		6.50% — 8.50%		3.00% — 4.00%		3.00% — 4.00%		6.50% — 8.50%		12.00% — 15.00%	12.00% - 15.00%	6.50% - 8.50%	3.00% - 4.00%	3.00% - 4.00%	6.50% - 8.50%	12.00% - 15.00%
Red Zone		15.00%		8.50%		4.00%		4.00%		8.50%		15.00%	15.00%	8.50%	4.00%	4.00%	8.50%	15.00%

9/30/2006		-3.09%		-0.25%		0.59%		-1.50%		-3.33%		-5.48%
9/30/2005		n/a		1.45%		1.55%		-2.70%		-6.41%		-10.28%
3/31/2007													-1.38%	0.87%	1.30%	-0.90%	-1.69%	-2.79%
3/31/2006													n/a	2.87%	2.24%	-3.34%	-7.33%	-11.56%


		~~OLD NATIONAL BANCORP~~
		~~(Registrant)~~

By:		/s/ Christopher A. Wolking

		Christopher A. Wolking
		Senior Executive Vice President and Chief Financial Officer
		Duly Authorized Officer and Principal Financial Officer

		Date: ~~November 8, 2006~~May 10, 2007


	September 30,						December 31,			March 31,						December 31,
(dollars in thousands)	2006			2005			2005			2007			2006			2006

Nonaccrual loans	$	44,868		$	58,820		$	55,589		$	60,440		$	51,351		$	41,518
Renegotiated loans		74			—			—			30			—			52
Past due loans (90 days or more and still accruing)		3,081			1,919			1,835			539			1,353			2,141
Foreclosed properties		4,042			3,406			3,605			3,551			2,346			3,313

Total under-performing assets	$	52,065		$	64,145		$	61,029		$	64,560		$	55,050		$	47,024

Classified loans (includes nonaccrual, renegotiated, past due 90 days and other problem loans)	$	127,795		$	145,884		$	136,597		$	166,428		$	139,764		$	153,215
Criticized loans		119,186			102,855			83,213			97,808			81,588			119,757

Total criticized and classified loans	$	246,981		$	248,739		$	219,810		$	264,236		$	221,352		$	272,972

Asset Quality Ratios: (1)
Non-performing loans/total loans (1) (2)		0.95	%		1.14	%		1.13	%
Non-performing loans/total loans (1)(2)											1.23	%		1.06	%		0.88	%
Under-performing assets/total loans and foreclosed properties (1)		1.10			1.24			1.24			1.32			1.14			1.00
Under-performing assets/total assets		0.66			0.75			0.72			0.77			0.67			0.58
Allowance for loan losses/under-performing assets		137.58			126.83			129.20			110.49			139.53			144.16


Interest Rate Change in Basis Points (bp)
													Interest Rate Change in Basis Points (bp)
	Down 300		Down 200		Down 100		Up 100		Up 200		Up 300		Down 300	Down 200	Down 100	Up 100	Up 200	Up 300
Green Zone		10.00%		5.00%		2.25%		2.25%		5.00%		10.00%	10.00%	5.00%	2.25%	2.25%	5.00%	10.00%
Yellow Zone		10.00% — 12.50%		5.00% — 7.00%		2.25% — 3.25%		2.25% — 3.25%		5.00% — 7.00%		10.00% — 12.50%	10.00% - 12.50%	5.00% - 7.00%	2.25% - 3.25%	2.25% - 3.25%	5.00% - 7.00%	10.00% - 12.50%
Red Zone		12.50%		7.00%		3.25%		3.25%		7.00%		12.50%	12.50%	7.00%	3.25%	3.25%	7.00%	12.50%

9/30/2006		-5.69%		-1.72%		0.08%		-1.21%		-3.01%		-5.14%
9/30/2005		n/a		-0.79%		0.76%		-2.21%		-5.75%		-9.66%
3/31/2007													-2.85%	-0.33%	0.81%	-1.10%	-2.38%	-4.06%
3/31/2006													n/a	0.76%	1.42%	-2.87%	-6.58%	-10.59%