Welcome to the Old National Bancorp's fourth quarter 2007 Earnings Call. This call is being recorded and has been made accessible to the public in accordance with the SEC's Regulation FD. The call, along with corresponding presentation slides, will be archived for 12 months on the Shareholder Relations page at www.oldnational.com. A replay of the call will also be available beginning at 1.00 pm Central today through February 11th. To access the replay, dial 1-800-642-1687 and enter conference ID code, 30750165. Those participating today will be analysts and members of the financial community. At this time, all participants are in a listen-only mode. Then we will hold a question-and-answer session and instructions will follow at that time. At this time the call will be turned over to Lynell Walton, Vice President of Investor Relations, for opening remarks. Ms. Walton?

Thank you, Heather, and good morning to all of you on the call. We appreciate you joining us for Old National Bancorp's fourth quarter 2007 earnings conference call. With me today are our President and Chief Executive Officer, Bob Jones; our Chief Financial Officer, Chris Wolking, Chief Credit Officer, Daryl Moore, our Chief Banking Officer, Barbara Murphy and our Corporate Controller, Joan Kissel. Before we begin, I would like to refer you to slide 3, and point out that the presentation today contains forward-looking statements that are subject to certain risks and uncertainties that could cause the company's actual future results to materially differ from those discussed. These risks and uncertainties include, but are not limited to those which are contained in these slides and in the company's filings with the SEC. Slide 4 contains our non-GAAP financial measures information. Various numbers in this presentation have been adjusted for certain items to provide more comparable data between periods and as an aid to you in establishing more realistic trends going forward. Included in the appendix to this presentation are the reconciliations for such non-GAAP data. We feel that these adjusted metrics provide a meaningful look at our fourth-quarter performance as well as ongoing financial trends. Turning to slide 5, you will see our agendas for the call today. First, Bob Jones will comment on our strong fourth-quarter earnings results, given the difficult economic and credit environment banks are facing today. Results which demonstrate a continuation of many of the positive trends from the second and third quarters resulting from consistent execution against the sound strategy. Daryl Moore will then lead the discussion of our improving credit quality metrics and how we are prepared to manage this risk in the year to come, in light of the current environment. Next, Chris Wolking will detail our expanding net interest margin and the major components affecting our interest income and expenses during the quarter. Chris will also discuss the anticipated cumulative impact of our completed sale leaseback transactions. Bob will then conclude with our expectations for 2008 and then as always, we will open the call for questions. With that, I will turn the call over to our President and CEO, Bob Jones.

Thank you, Lynell, and good morning to all of you on the phone. We were pleased this morning to announce earnings for the fourth quarter of $0.34 per share. These earnings are equal to the third quarter of 2007 and they did represent an increase of just over or just under 26% for the fourth quarter of 2006. Full year earnings for Old National were $1.14, which is consistent with the full year guidance that we issued in the first quarter of 2007 and we were able to affirm on each quarterly cal in the past year. Highlights for the quarter are consistent with each of the prior quarters of 2007. we were very pleased with our expanded net interest margin which saw an increase of 19 basis points over the last quarter, but more importantly as Chris will point out in his presentation, our margin in December was 369, and we did see our margin expand each month in the fourth quarter. Clearly, we are seeing the benefits of our disciplined pricing practices, and the strategic decisions we made to reduce wholesale funding. These actions coupled with the sale leaseback transaction have provided us with the tools to have a significant positive impact on Old National's margin in 2007. And we believe they provide the platform for maintaining this margin in 2008. We are also very pleased with our continued improvement in non-performing assets and overall credit quality. As we continue to benefit from our enhanced platform and the conservative stance we take. But as we said at last quarter's call, we continue to maintain a very cautious approach towards credit in 2008 and our guidance for the full year will reflect that caution. We do believe that the credit markets will continue to be challenged in 2008, and…

Great. Thank you, Bob. I'd like begin my part of this quarter's presentation reviewing the trends in our non-accrual, classified and criticized loans. As you can see on slide 13, during the quarter we made good progress with our non-accruals, reducing loans in that category through a combination of pay-downs, loan sales and upgrades term loan [write-downs] $8.5 million to roughly $41 million at quarter's end. Commercial non-accruals were down by $8.5 million to roughly $41 million at quarter’s end. Commercial non-accruals were down by $9.1 million, which represents $0.20 decline in total commercial non-accruals since the end of the third quarter. Conversely, however, residential and consumer non-accruals were up roughly $600,000 in a quarter, which represents a 6% increase in that category from third quarter levels. With respect to our largest non-accruals at the end of the past quarter, we had only three loans with exposures of $2 million or greater. As Slide 14 shows, we are pleased to report the classified loans which do include non-accruals loans, fell during the quarter, showing a decline of slightly more than $15 million in a period and outstanding at approximately $115 million, eliminating what now appears to be a temporary bump-up in the fourth quarter of 2006, an increase in classified loans associated with the acquisition of St. Joseph Capital Bank at the end of the first quarter. This quarter continues our general trend of decreasing classified loans over the last 15 quarter. In 2007, we reduced classified loans, with $38 million, representing a 25% reduction in outstanding in this category. Slide 15 shows our criticized loans trends over the last 15 quarters. As we have discussed in prior calls, our trend line showed good progress resulting from our efforts to reduce criticized loans, up until the third quarter and fourth…

Thank you, Daryl. I'll begin my presentation on slide 20. We are very pleased with the fourth quarter increase in our net interest margin. At 356 our net interest margin is 19 basis points higher than our third quarter margin and a, full 56 basis points higher than our first quarter 2007 margin. More importantly net interest income increased $2.7 million in the fourth quarter from third quarter 2007. You may recall that our third quarter net interest income included $1.6 million recovered from a collected commercial real estate loan. Without this onetime event in the third quarter the improvement in net interest income over the third quarter would have been greater. Slide 21, shows the trend in our fully taxable equivalent net interest margin during 2007. In the second quarter the margin was helped by the balance sheet restructuring we executed late in the first quarter. Recall that in the first quarter, we terminated approximately $160 million of wholesale funding, sold low yielding securities, and terminated several received fixed pay LIBOR interest rate swaps. In May, we recovered $1 million from the collection of a commercial real estate loan, which lifted our margin approximately 17 basis points in May. Our margin improvement in June, July and August and September was due largely to the effort of our banking managers to reduce the deposit costs. The cost of our interest paying deposits not including brokerage fees, declined 14 basis points during the third quarter of 2007. As I noted earlier, our August net interest margin was lifted approximately 27 basis points by the collection of $1.6 million in interest from a second commercial loan. In the fourth quarter our margin continued to benefit from our focus on managing deposit costs, the decline in short-term interest rates, and our sale leaseback…

Great. Thank you, Chris. Thank you, Daryl. I'm going to close my presentation on slide 30, by providing you with our guidance 2008, and before I do, let me start the discussion by saying we do believe, we've built a sound platform and we also believe we are very well positioned for the challenges that appear to be facing us this year and facing the industry in total. We continue to believe very strongly and what we've termed our three yards and a cloud of dust strategy. To sum up that strategy, we will be conservative, we will be consistent and we won't overreach in our capabilities. We believe that the game plan that we have put in place is working and we really see no reason for it to change. We may be borrowing, but we also believe that borrowing is good, particularly during these times. Though as we said on last quarter's call, despite this strategy, we are neither arrogant enough nor naïve enough, to think that we can totally escape the challenges that face the industry. Saying that, we were very pleased that our Board of Directors chose to affirm this strategy last month when they voted to increase our cash dividend. Let me start with giving you some guidance for 2008 as you build your models. We do expect our credit cost to increase in 2008, which is reflected in a provision. They will be in the range of $10 million to $16 million that compares with the $4.1 million that we provided for in 2007. This does get us back to a more normalized provision, and one that is consistent with our forecast to charge offs for the year, which we anticipate right now to be in the range of 25 to 35 basis points.…

(Operator Instructions). Your first question comes from the line of Scott Siefers with Sandler O'Neill.

Scott, you are on a trend here. I think you have the first question this quarter, the last three quarters.

Good morning. That's a quick trigger finger, I guess.

Good morning.

Let's see, Daryl, I guess, this one is for you. I need a [revise] of the fourth quarter charge-off number, which was elevated by a few different items. I would just like to, I guess, we would back out of the loan sales. The charge-off number was substantially higher than what you have been doing, and also above what you guys are anticipating for the full year '08. So I guess I am curious to hear what metrics allow the '08 number to be so much better than the fourth quarter's core number?

Well, you hit it on the head. We have had some loan sales that were included in there. We also took a pretty aggressive approach in the fourth quarter and looking at some of the loans that we had on our books that we needed to be written down. As with many banks, we've leaned towards the conservative side to get those to more realistic values at the end of the year. If you go back and look at the first three quarters, I really do believe that 2008, barring some significant economic downturns, is going to give us something a little closer to that, as Bob talked about the 25 to 35 basis points. Scott, it is so difficult to really convince you now that that is going to be the case, because you have specific loans that come up during the quarter. That’s what happened in the fourth quarter of 2007 and we really do feel like we can get back down to that 30, 35 basis-point range.

Scott, I just might add, as you look at the granularity of the portfolio, as we look at it today, and as Daryl said, they are non accruals. The size of those credits has come down. We also don’t see the loan sale market being very active in 2008, which again, it contributed to some of those. But I think it really goes down to all of the hard work in understanding what Daryl and his team have of the portfolio. We can go through by credit. We understand what do, and what we think the future losses would be. We feel comfortable at this stage, and with that range, depending on how the economy goes. That number could go higher, and it could go lower. But at this stage, just based on our overall understanding, the granularity of Daryl and what his team brings to it, is the range that we have built.

Okay, perfect. Then I guess there is one more question for you. If you could chat a little bit more about CRE trends. Broadly speaking, I imagine at this point any weakness you are seeing is probably confined to the residential side. Could you maybe just give us your thoughts, broadly on the other areas of that segment i.e., office, retail, et cetera?

Yeah, that's interesting. When we look at the residential side, obviously we've sold most of our 1-4 family production, so that is not really of a concern to us on our balance sheet today. As it spills over into the acquisition development of the residential segment, it's interesting, that in our organization the only area of concern we have is in Indianapolis. In the other markets we've done a couple of things. One, we were not very aggressive in our acquisition development. Financing outside of Indianapolis and really not even in Indianapolis, but the downturn in Indianapolis seems to have been a little bit more severe than in some of our other markets. With regard to the other commercials segments, we don't do a lot of retail, commercial, financing. When we do, it's with pretty high levels of pre-leases in hand, and I think that's where we are seeing a lot of weakness in our markets. So we have shied away from that type of production over the past couple of years. We've got some in our portfolios, but not very heavy concentrations. So I think we've set ourselves up pretty well for that. We don't do a lot of office, we do have some. Again, there is a little bit of weakness there, but we’re not seeing considerable levels of exposure. We do some apartment financing and right now apartment results in our areas have been pretty strong. So I think that we’re looking at 1-4 family as an area of concern for 2008. We’re looking at retail, although, we don’t have a lot. It is something we’re keeping our eye on. And then we have done some condo financing in Indianapolis, and that’s really weak and we’re watching those projects.

Okay, thank you. And then I guess just one last question, Bob, it’s for you or Chris. Given away our capital levels are out and sort of the outlook for 2008, how are you prioritizing things, whether it's just going to keep some cushion on the books? Obviously we saw what happened to the dividend, or maybe share repurchase, M&A, et cetera?

Cushion's not a word that Jones let me use, Scott. But we do believe that ’08 is a good time top hoard capital. We think capital is [keen], particularly as we venture into what can be un-chartered matters. So, at this time our goal would be to retain as much capital as possible. Saying that I think it’s obviously the M&A market is probably going to heat up, and we’d like to be in a position that if the right opportunity comes about, given our strategy, that we’re able to participate. I think it’s a good time to keep as much capital on the balance sheet as we possibly can.

Okay, perfect. Thank you very much.

Thanks Scott.

Your next question comes from the line of Charles Ernst with Sandler O'Neill.

Hey, Charlie.

Good morning guys. My first question is, and I think you said that your balance sheet still says that you’re a little bit liability sensitive. Is that right?

That’s correct.

That’s correct.

Okay. So, looking at the data that you provided on the monthly margin for us, 369 for the month of December, you're guiding the 355 to 365. Based on the fact that your balance sheet is still little liability sensitive, why is their guidance so low? It has surprised me a little bit.

This is Chris, Charlie I'll talk a little bit about that. First, in December there was probably a 4 basis points in that December number. On a monthly basis that was the result of some recovery. So we are kind of looking at the 365 as being a reasonably good rate on a core basis for December. And we are liability sensitive. I think looking out our larger investment portfolio, cash flows really haven't accelerated much in the mortgage portfolio, and we'd expect that to happen. Obviously with our fixed rate loan portfolio, that's going to take a lot of work, on the part of the bankers, to maintain those assets. So, we feel like it's just a good conservative outlook given the improvement that we've had, particularly over the last half of 2007. There could be some good things, and there could be negative impacts, going forward.

Charlie, I'll just pick up on what Chris said. Again, to our overall strategy, we are going to see a conservative approach to take. We think the investment portfolio is yet to be what the impact is there, and the repetitive with which the Fed has cut rates over the last period of time. Depending on what they do this week, that may have a more positive impact, but this time we are comfortable with that guidance.

Okay. And then, just in regards to your bond portfolio. What is the thought process there? Is it going to continue to shrink or do you take advantage that we are probably getting some steepness again in the curve and start adding bonds again?

No. We won't be in a position where we've got the large bond portfolio that we had back in early 2001 and 2002, funded by wholesale funding. Part of that, obviously, is driven by what kind of deposit growth we get, as well as what the outlook is for loan growth. We have been reinvesting a little, primarily on the municipal side. You'll see the money numbers going up a little bit. We had capacity there. But I don’t expect the portfolio to change dramatically, and as we get cash-flows from the portfolio, we’ll continue to make those decisions on a month-by-month basis, given what kind of opportunities we see out there and what kind of risks that we want to take.

Okay. Then lastly, can you say again on the dividend, why you guys decided to accelerate on the declaration?

John, it's really a Board decision. I think they looked at the environment in banking. The Board felt really positive towards the progress we’ve made as a company, and I think they felt that it was an appropriate time to take and to send a message to our shareholders and investors that the Board affirms the strategy and has confidence in the company.

Charlie, this is Chris. I might point out that, given the accounting there, you won’t see a dividend in that first quarter. You won’t see it declare, the accounting would be, it really happened in 2007, so obviously the dividends were paid at their normal date of March 17. So, I think the accounting is a little bit unusual there, but it's all consistent with the pay-out ratios that we've talked about in the past and it is consistent with our earnings outlook for 2008.

Okay, great. Thanks a lot guys.

Thanks Charlie

Your next question comes from the line of Erika Penala with Merrill Lynch Erika Penala – Merrill Lynch: Good morning.

Good morning, Erika, how are you doing? Erika Penala – Merrill Lynch: I am doing great. I just wanted to clarify what you’re assuming for the economy for ’08. Does you earnings guidance assume a slowdown or a recession?

If you think I am going to answer that question, no. I am personally a little early for the clarity session. We do see slowing, as Daryl said. Most notably, Indianapolis appears to be somewhat affected, but the balance of our markets are still doing fairly well. Here in Evansville, we have seen unemployment stay stable. We are seeing job creation in a number of varieties. So I don’t think we are ready to declare a recession. We are probably not as bearish as you all are, but we do see that the markets have slowed, and I think we want to be transparent in this forthright, and say that that our guidance does look at some slowing in the economy. Erika Penala – Merrill Lynch: And I just wanted to pick your brain about your thoughts on Indianapolis, because in the past that has been seen as an area that could drive loan growth, balance sheet growth, going forward. But it seems like your statements now are cautious. What's the strategy there for '08?

I would say they are cautious to the economy and probably Indianapolis in total. We are very bullish on the Indianapolis for us. Barbara is here and can maybe talk to some of the things we are seeing, but we are seeing a growing pipeline. We are seeing very good activity in the retail side, beginning to see the benefits of being an Indiana based bank, and seeing the benefits of the infrastructure that we have build in Indianapolis. So, while we are bearish towards some of the economic sectors in Indianapolis, most notably in the commercial real estate side, as Daryl said, we are not a big participant in those areas, and that is a cautious approach. But on the retail side, small business and C&I, we are very bullish as to what we see right now, and Barbara, if there's anything you want to add?

Yeah. Erika this is Barbara Murphy, I think that we have an advantage right now in Indianapolis. There are tones of market disruptions, with all of the acquisition activity that is going on there. That activity is coming from out of state, and we are really taking advantage of the fact that we are a bank in Indiana, which is helping us with our marketing efforts in Indianapolis. So, we are very strong in both the management and infrastructure that we have in place there, and we are taking advantage of the disruption activity.

Okay. Thank you for taking my call.

Great. Thanks Erika.

Your next question comes from the line of David Konrad with KBW.

Good morning.

Good morning David, how are you doing?

I am doing alright. I have a few questions. First is a follow-up on the margin. I know we have discussed that they are moderately liability sensitive, but given how fast the side Fed has lowered rates here recently, and maybe again here this week, I just wondered about the dynamics. Is that positive or are you able to re-price liabilities down as quickly as the Fed moves here?

David, this is Chris. It's very much a positive for us, given the nature of our loan portfolio. As I mentioned, it's that continued pace of decline that helps us the most. So, yeah, we are optimistic, but again, I had to hedge that a little bit, that we just haven't seen the kind of prepayments we'd expect on the mortgage portfolio, obviously, given the credit issues that are out there. So, I believe we really have to see how this materializes through the remainder of the first quarter.

You know Dave, we have to put a stake in the ground at some stage, and I think the Fed's reaction in the last week, and then what they made here this week. It just shows how that impacts us. But as Chris said, given the fixed-rate nature of our assets, and given the liability sensitivity, it should provide us with some positive momentum.

Okay. Second question is on the tax rate, it looked a little bit elevated to me, unless if there is something to do with the sale leaseback, I just wondered if that’s a decent core tax-rate which we should be using?

For the fourth quarter?

Yes.

Yes, specifically. We had a recovery in the third quarter from our previously accrued FIN 48 number, and that actually brought our third quarter number down a little bit. I think David, going forward our projections keep us in that 20% effective tax-rate. Obviously, the sale leaseback has helped us in some of our deferred tax asset items. But it’s really that large percentage of nontaxable income that we have from our municipal portfolio, and others that keep me pretty confident about the effective tax-rate going forward.

I’m sorry, I missed- effective with the currently level are you think….

Yeah, we are on 20%, I think we finish the quarter at 20% maybe 23%.

Okay.

But it tends to bounce around a little bit quarter-to-quarter, we like 20%.

Okay, all right. And last question, I was busy writing during the presentation. Chris, when you were going over the expenses, did I hear it correctly, that there was a reverse of unfunded committed reserve or...?

There was about $1.7 million directly related to our unfunded home equity lines. So, that was a reversal, obviously right inline with what our models were telling us about the funding of those lines.

Okay. So we should think about adding that kind of back for a run-rate, going forward on the expense side?

I think, as I said, if you look at expenses, I think you can use the fourth quarter in total as a good model for your run rate.

Yeah. Because it…

So, that would include the reversal as well.

Okay.

There are so many other offsets, David, as we said with the slide that we showed with the foundation funding etcetera on slide 27.

Yeah, correct. Okay. It was pretty good.

We tried not to have as much of a kitchen sink as everybody else, but we did some small portions.

Alright. Okay, thank you.

Thanks, David.

(Operator Instructions).

Are there no more questions operator?

Yes, sir. There are no further questions at this time.

Well, perfect. As always, if you have follow-up questions, which I am sure maybe you will. Lynell is available to take any and all calls. As always, we appreciate your support and look forward to talking to you at the end of the first quarter. Thank you.

This concludes Old National's call. Once again a replay along with the presentation slides will be available for 12 months on the Shareholder Relations page of Old National's website at www.oldnational.com. A replay of the call will also be available by dialing 1-800-642-1687, entering conference ID code, 30750165. This replay will be available through February 11th. If anyone has additional questions please contact Lynell Walton at 812-464-1366. Thank you for your participation in today's conference call.