Fitch Affirms Old National Bancorp at 'BBB'; Outlook to Negative.

CHICAGO -- Fitch Ratings has revised the Rating Outlook for Old National Bancorp (ONB) and its principal subsidiary to Negative from Stable. Fitch has also affirmed all current ratings for ONB and its banking subsidiary, (Long-term Issuer Default Rating 'BBB'/Short-term rating 'F2'). A complete list of ratings follows at the end of this release. E[acute accent]Fitch recognizes that ONB has made notable progress in streamlining operations, improving its risk profile and refocusing business in its core markets. However, the current level of key financial metrics and Fitch's expectation for modest improvement in key measures going forward, leads to an unfavorable comparison with ONB's ratings peer group. The Negative Rating Outlook covers the 12-24 month time horizon. During this time Fitch will closely monitor the degree of improvement in ONB's credit profile. A ratings downgrade would likely result from the absence of material improvement in core earnings and asset quality. Deterioration in these areas at any time that is other than temporary or is not directly related to a restructuring aimed at significantly improving future performance will also likely result in a downgrade. While not currently a primary rating concern, a material decline in core capital levels absent improvement in other areas may also result in a negative rating action. Fitch anticipates that any downgrade would be limited to one-notch for both the long-term and short-term ratings assigned to ONB and its subsidiaries. E[acute accent]ONB has demonstrated improvement in financial metrics in recent reporting periods. Most important has been the improvement in ONB's asset quality as evidenced by substantial reductions in classified assets, nonaccruals, and loan losses. Positively, reported earnings in 2006 have also become more stable and more reflective of core performance. Recognizing the competitive environment and need for growth, Fitch takes comfort in ONB's commitment to maintaining its credit discipline and not sacrifice credit standards for short-term gains. Management has also been able to sustain the net interest margin (NIM) in a challenging interest rate environment. Improvements in ONB's profile, and initiatives to continue progress support the ratings affirmation. E[acute accent]Despite these advancements, current performance metrics remain less favorable than the 'BBB' rated peer group. While management has done a good job at managing interest rate risk, the NIM is lean at 3.18%. ONB has developed a foundation for earnings diversity in the form of insurance and wealth management services, but without significant increases in these areas, low margins have and will continue to challenge ONB's ability to grow earnings. E[acute accent]Furthermore, despite the improvement in asset quality, ONB's credit risk profile remains less favorable than most others in its rating peer group, with nonaccrual loans and net charge-offs still at above average levels. With compressed and slow earnings momentum, performance on a risk-adjusted basis needs to improve for ONB to possess a comparable level of financial flexibility relative to similarly rated peers. This makes ONB's ratings more vulnerable to a rating change and supports the Negative Outlook.

E[acute accent]The following ratings are affirmed:

E[acute accent]Old National Bancorp

E[acute accent]--Issuer Default Rating (IDR) 'BBB';

E[acute accent]--Senior unsecured 'BBB';

E[acute accent]--Short-term rating 'F2';

E[acute accent]--Individual 'B/C';

E[acute accent]--Support '5'.

E[acute accent]Old National Bank

E[acute accent]--Long-term deposits 'BBB+';

E[acute accent]--IDR 'BBB';

E[acute accent]--Senior unsecured 'BBB';

E[acute accent]--Short-term rating 'F2';

E[acute accent]--Short-term deposits 'F2'

E[acute accent]--Subordinated debt 'BBB-';

E[acute accent]--Individual 'B/C';

E[acute accent]--Support '5'.

E[acute accent]The Rating Outlook is Negative.

E[acute accent]ONB Capital Trust II

E[acute accent]--Preferred Stock 'BB+'.

E[acute accent]ONB Capital Trust III-VI (Shelf Filing)

E[acute accent]--Preferred Stock 'BB+'.

E[acute accent]Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.