Lynell Walton - IR Bob Jones - Chairman & CEO Jim Sandgren - President & COO Jim Ryan - Senior EVP & CFO Daryl Moore - Senior EVP & Chief Credit Executive John Moran - Director of Corporate Development & Strategy Mike Woods - Principal Accounting Officer.

Chris McGratty - KBW Jon Arfstrom - RBC Capital Markets Terry McEvoy - Stephens David Long - Raymond James Nathan Race - Piper Jaffray John Rodis - Partners.

93364517. Those participating today will be analysts and members of the financial community. At this time, all participants are in a listen only mode. Following management’s prepared remarks, we will hold a question-and-answer session. At this time, the call will be turned over to Lynell Walton for opening remarks. Ms.

Walton?.

Thank you, Dorothy, and good morning everyone. Welcome to Old National Bancorp's conference call to discuss our third quarter 2017 earnings. Joining me are Bob Jones; Jim Sandgren; Jim Ryan, Daryl Moore; John Moran and Mike Woods.

Before I begin the discussion of our third quarter results, I would like to remind you that some comments today may contain forward looking statements that are subject to certain risks, uncertainties and other factors that could cause the Company’s actual future results to differ materially from those discussed.

Please refer to the forward looking statements disclosure contained on Slide 4 of this presentation as well as Old National's SEC filings for a full discussion of our risk factors. As referenced on Slide 5, certain non-GAAP financial measures will be discussed on this call.

Non-GAAP measures are only provided to assist you in understanding Old National's results and performance trends and should not be relied upon as a financial measure of actual results. Reconciliation for these non-GAAP measures to the most directly comparable GAAP financial measure are appropriately referenced and included within the presentation.

I'll begin the review of our strong third quarter performance on Slide 6. This morning, we reported third quarter net income of $39.4 million or $0.29 per share. This net income represents a 13.5% increase over the third quarter of 2016.

Our investment in the higher growth markets continues to yield positive results as our portfolio of commercial loans grew 12% on an annualized basis during the third quarter. While our total loan portfolio grew over 7% on an annualized basis, the third quarter also saw the continuation of low credit cost and well controlled non-interest expenses.

We're also pleased with our continued upward trend in our tangible book value, which grew 7% from a year ago. Another note, I'm sure all of you saw our 8-K file last week in which we announced the regulatory approval of our most recent partnership with Anchor Bancorp in Minnesota.

Pending shareholder approval and other customary closing conditions, we should be set to close on this deal on November 1st. To provide additional detail, I'll now turn the call over to Jim Sandgren..

Thank you, Lynell, and good morning everyone. I'll begin my remarks last quarter by stating that our strong results demonstrated our growth market strategy at work. I'm pleased to say the same premise holds true for the third quarter.

Fueled by strong commercial loan growth, our Q3 results are an excellent illustration of our franchise very well positioned in the right markets for growth. The catalyst for our quarterly success is $157.7 million in commercial loan growth, as illustrated on the right side of Slide 8.

Of this 12% annualized growth, a $110.2 million was in the CRE category and the remaining $47.5 million was in C&I. While the majority of our third quarter growth was centered in CRE, reminder CRE balance is currently standard to modest 188% of capital. We're still pleased to see our annualized growth on our C&I portfolio of 9.3%.

Also of note is that our year-to-date annualized commercial loan growth was nearly 10%. We also continue to see some nice growth in HELOC balances nearly 8% annualized, while our indirect portfolio continue to decline consistent with our stated balance sheet remix strategy.

While we enjoyed excellent commercial balance sheet growth in a number of our markets, a few I’d like to draw attention to our Indianapolis, Louisville, Central Michigan and Wisconsin. The common denominator among these markets is a vibrant economy that is fueling business growth.

Clearly, the Old National name and brand are resonating exceptionally well in these communities. Turning to Slide 9, the graph on the left illustrates another very good quarter for new commercial production.

The $574.9 million that we generated, 62% of which was CRE and 38% of which was C&I, represent a 40.2% year-over-year increase and a modest increase compared to the second quarter. The middle graph depicts our production yield, which contracted slightly as a result of a large tax exempt loan that was booked and funded in the quarter.

It’s also notable that 76% of our third quarter commercial loans were variable rate loans, up from 68% in the third quarter. As in prior quarter, this positioned us well to take full advanced of rising rate environments.

The final graph on Slide 9 shows our quarterly loan pipeline results, which are consistent with our third quarter 2016 pipeline numbers and down compared to our record breaking second quarter of this year.

With a total balance exceeding $1.3 billion on September 30th, we remained well positioned to generate loan growth in Q4 as our producers are hard at work rebuilding our pipeline at the two quarters of substantial growth.

Additionally, we have over $500 million in future advances on commercial construction projects that should help boost growth in the coming quarters. Slide 10 takes an even deeper diver into our production yield trends for the quarter.

Beginning with a top graph, you can see the residential mortgage production increased 21.2% from Q2 to $287.6 million while the yield declined slightly. The consumer direct slide on the bottom left illustrates continued solid production in this category, driven primarily by recent HELOC promotions as outlined in last quarter's call.

The graph on the bottom right illustrates our ongoing balance sheet realignment strategy. I spoke with you on recent calls about our desire to reduce indirect volume taking advantage of more profitable lending opportunities.

As you can see from this graph, our indirect production was down 11.2% year-over-year, while our yield compared to Q3 2016 has improved substantially. While we've already made good product -- progress, decreasing the size and increase the yields and margin of his portfolio, we believe there is room for additional improvement moving forward.

Turning to Slide 11, which focuses on fee-based business revenue on a quarter-over-quarter and year-over-year basis, I'll begin at the far left with a look at wealth management. The different revenue from the second quarter can be attributed to tax preparation work and filings that occurred during the second quarter of each year.

These filings accounted for approximately $900,000 in Q2 revenue. Our year-over-year increase from $8.6 million to $8.8 million is primarily due to improvements in the equity market and the increase in our assets under management.

Moving to our investments division, you can see that third quarter revenue was up slightly, both quarter-over-quarter and year-over-year. We continue to transition from a transaction-based brokerage model to a more fee-based advisory model, which has helped drive revenues and strengthen relationships.

We've also seen higher life insurance sales, which have emerged as a result of our more targeted efforts around financial planning for our clients. We will continue to emphasize this financial planning and advisory model as we go forward in into 2018.

I referenced our quarter-over-quarter production gain to the residential mortgage category on the previous slide and the mortgage appeared on Slide 11 further illustrates our quarterly results specifically on revenue.

While production was up for the quarter, we saw the mixed shift and more balance sheet versus secondary market production and that had an impact on third quarter revenues, which were essentially flat compared to Q2. We continue to see high purchase volume compared to refinances, a 75% of new production in September was for home purchases.

Based on our pipeline which stood at nearly $110 million on September 30, we anticipated lower seasonal production in the fourth quarter. The final graph on Slide 11 is a snapshot of revenue growth in capital markets.

While third quarter production was not as strong as our record second quarter, you can see that we have more than doubled our year-over-year production. The primary driver of this growth continues to be solid sales production and customer interest rate derivatives or swaps, boosted by the higher levels of commercial loan production.

We also continue to see growth in our foreign exchange revenue as Chris Wolking and his team are doing an outstanding job of positioning Old National as a trusted adviser in this area throughout our franchise.

Overall, this was another quarter where we executed our growth market and balance sheet realignment strategy exceptionally well, resulting in significant commercial loan growth and steady fee-based business revenue. With that, I will now turn the call over to Jim Ryan..

Thank you, Jim. Starting on Slide 13, you can see that we made some changes to our previous formats to help better compare our core trends and specifically identify the impact of future anticipated tax credit amortization.

I'm pleased to report that adjusted pre-tax, pre-provision income was $61.1 million and grew by 5.7% quarter-over-quarter and 3% year-over-year respectively. The growth in adjusted pre-tax, pre-provision income was primarily a result of strong underlying fundamentals in our banking business and our focus on expense reductions.

We remain focused on a growing adjusted pre-tax, pre-provision income as well as improving the operating leverage of the Company. As demonstrated on slide, our adjusted efficiency ratio improved to 179 basis points quarter-over-quarter and 141 basis points year-over-year.

We also saw improvement in our operating leverage, which improved over 200 basis points quarter-over-quarter and year-over-year. Moving to Slide 14, you will see the trend of our reported net interest margin as well as a graph depicting the portion of the margin attributable to accretion income.

Our reported net interest margin benefited 4 basis points from the increase in accretion income, 3 basis points from higher than anticipated interest collected on non-accrual loans and an additional 3 basis points for a full quarter's impact from the previous Fed fund rate increase.

We do not anticipate the higher than normal benefit from interest on non-accrual loans next quarter. Interest-bearing core deposit cost increased just 2 basis points during the quarter to 25 basis points. Further margin improvement could come with the steepening of the yield curve.

Shifting to non-interest expenses on Slide 15, adjusted non-interest expenses as defined on the slide totaled $96.4 million in the third quarter and were lower on both a linked-quarter basis and year-over-year basis.

As you look forward in the fourth quarter, we anticipate pretax charges of $16 million related to our Anchor Bank partnership, $2.9 million related to the 14 branch consolidation that will occur in November and an additional $800,000 related to our client experience improvement initiative.

Turning to Slide 16, as Lynell referenced in her opening comments, we are pleased with continued improvement in our tangible common equity ratio and tangible common book value per share. Our tangible common equity book value per share grew 1.9% quarter-over-quarter and 7% year-over-year.

Our final slide, Page 17 is an update on the anticipated impact from our tax credits. The first column displays the year-to-date benefit of $6.1 million we have received from these credits, all of which has occurred in the income tax volume.

The second and third columns display our fourth quarter and full year 2017 forecast, which are dependent on the timing of the completion of these projects. Our initial guidance earlier in the year was that we anticipated tax credit amortization of third quarter. We are now expecting that amortization record in the fourth quarter.

We are also expecting net income from this business will be approximately $2 million. Currently, we are projecting the full year net benefit to be slightly better at $2.2 million to $2.9 million after tax. EPS impact will be approximately $0.015 to $0.02 for the year.

This impact does not fully reflect all the benefits from this business including other loans and deposits, investment relationships and importantly CRE credit.

We expect the tax credit business to have a similar net benefit in 2018 and the tax credit amortization in 2018 to be comparable to the expected fourth quarter, but the amortization should be more evenly distributed next year. During the fourth quarter, we will update our 2018 projections.

Going forward, we are also cautiously sure we will still benefit under lower marginal tax rates. Additionally, we will pay close attention to any tax reform that could limit the benefits of these types of credits going forward. I will now turn the call over to Daryl..

Thank you, Jim. We’ll start the credit quality segment of this morning’s call with review charge-offs and provision expense for the quarter. Moving to Slide 19, while third quarter 2017 gross and net charge-offs were lower than those in the same period last year. Net charge-offs in the current quarter were higher than those posted in last quarter.

These higher net charge-offs resulted entirely from lower recoveries in the third quarter compared to second quarter levels. As gross charge-offs in the period were actually lowered than gross charge-offs in the second quarter.

For the current quarter, we recognized the provision expense of $300,000 compared to provision expense of $1.4 million last quarter and $1.3 million for the third quarter 2016.

The $300,000 provision in the current quarter was roughly equal to the charge-offs in our non-marked portfolio giving a 100% matching of our losses in the marked portfolio were covered on a combined basis by loan marks in those portfolios.

The reduction in provision expense in the quarter was mainly driven by a lower loss rates in the non-acquired portfolio, which more than offset the need for provision associated with strong loan growth in the period.

For the nine months end of September 30th, net charge-offs as percent of average loans stood at 2 basis points compared to 6 basis points for the same period last year.

Current year-to-date provision expense has been $2 million, which represents 125% of net charge-offs a stronger coverage and even in 2016 where we covered 79% of net charge-offs for that comparable year-to-date period.

While the ending allowance for loan losses as a percent of end of period loans fell 2 basis points to 53 basis points, I would remind you that we also have marks on the acquired loans, which at the end of the current quarter totaled $96.5 million.

As we move to Slide 20, you can see the special mention loans increased in the quarter, up $30.7 million or 31%. Material portion of the increase came in two relationships, the first being a $14.9 million commercial real estate project, where our borrower and the project contractor are having disputes.

The sponsor of our project is using this liquidity to continue to move the project along and we are working with parties involved to come to resolution on a longer term plan to remedy the issues.

The second relationship is an $8.3 million relationship where the borrower distributed cash from the operating entity to its owner, who has also provided limited guarantee, which resulted in a single year debt service coverage ratio less than one to one.

Typically, we might not place a credit like business pressure on mention category, except for the fact that 2017 interim financial results are little weaker than those historically posted by the borrower, we want to see positive year end operating results prior than any upgrade.

We also added a number of other relationships in the $1 million to $3.5 million range this category in the quarter.

On a more positive note, substandard accruing loans decreased $22.9 million in the quarter, of $6 million of this improvement came as a result of the downgrade of our relationships to non-accrual, the bulk of new improvement in this category came from either upgrades or pay downs.

Non-accrual loans fell $6.2 million in the quarter despite the addition of that $6 million credit downgrade in the category I just mentioned. Most of the improvement in this category came as a result of either pay offs or upgrade of credits.

Overall, credit results in the quarter were relatively good, the increase in special mention loans notwithstanding. Just a couple of last comments about what we are seeing in our portfolios.

In our retail portfolio, we have inquired of our underwriting managers whether we are seeing a change in the characteristics of our applicants either in terms of debt burdens or overall leverage.

To-date, we've not seen any change of note, but we'll continue to be inquisitive in this regard, given some talk about retail portfolios and where they might be headed in the longer term. In our C&I book, the common theme we're hearing from our clients is the difficulty in finding quality labor.

This is you can manifest itself, not only in labor cost going forward, but as importantly in operational efficiency and the ability to deliver product on a timely basis. My personal belief is that this issue was not unique to Old National’s markets and will be with us for more than a short period of time.

With those comments, I’ll turn the call over to Bob for concluding remarks..

Great. Thank you, Daryl. Frankly, I thought I would be starting my comments with a shout out to my Cleveland Indians, but unfortunately, that’s clearly not appropriate. I will begin my comments on a more positive note by highlighting the overall themes for our quarter and adding some additional color about our Minnesota partnership.

As you look at the bullet points on my slide, you will see the positive themes for most of the key element. This is a good indicator of my overall perception of the quarter. Well, I will not repeat the same information that the others have communicated this morning.

I do think it’s worth reintegrating that the fundamentals of the quarter are reflective of our overall basic bank strategy and the quality of the franchise that we have built over the last few years. Strong loan growth, loan growth within our existing markets and not generated through syndications or purchase loans.

In other words, old fashioned lending at its best. This loan growth is supported by low cost core deposits, which are also generated within our markets with limited pressure on our rates. When you add in our good credit quality, you truly see what a basic bank franchise looks like. To be totally transparent, there are clearly areas of opportunities.

Our fee-based businesses have upsides as we continue to enhance the sales culture and reduced the inefficiencies in these areas. While we have made substantial progress on expenses, I am confident that opportunities still exist and I have elevated expectations for the work that Jim Ryan and the team are doing on our client experience program.

We look forward to reporting the results of that work in 2018 and beyond. As we think about the fourth quarter in 2018, we continue to have positive dialogue with our clients as they discuss their perspective and business opportunities for the next year.

While our pipeline is down today, a good portion of that is related towards closing and we should expect to see it built over the next few months and into the 2018. While the expectation of our rate increase in December is positive, future rate increases are somewhat myopic at the stage based on the potential for changes in Fed leadership.

A greater important will be the shape of the yield curve and its impact. This lack of clarity in the interest rate environment only enhances our focus on expense management. As I turn to our discussion about Minnesota, I will start by apologizing for what we know will be a very noisy fourth quarter for us.

The combination of the accelerated close of Minnesota, potential charges associated with our client experience project, the branch termination charges and the amortization of our tax credit expense will somewhat mask our operational earnings. I am confident that now we will do an excellent job of making those earnings very clear to you.

We were very pleased that we will be able to close our Minnesota on November 1st, which is just 85 days post announcement. This reflects our Board’s commitment to our risk profile and the excellent track record my associates have had with prior partnerships.

While our conversion is still scheduled for the second quarter of 2018, we have already made considerable progress on the culture integration. The leadership in Minnesota led by Jeff Hawkins has been nothing short of incredible.

While change is never easy, morale amongst our associates in the Twin Cities in Mankato is strong and their focus on serving their clients has been excellent. Our retention of key individual has also been outstanding with no key departures, again our true complement to Jeff and his team.

Their earnings have been consistent with what we have modeled and we do not expect any changes to what we told you back in August with 2018 accretion prior to one-time charges of approximately $0.08 per share.

For the balance of 2017, we have expected contribution to be approximately $3 million, and just as reminder, we will be issuing approximately 16.5 million shares in conjunction of the close. Loan growth for Minnesota through the end of the third quarter has been 8% as compared to last year, and we have seen similar growth with their core deposits.

We still expect 36% or pretax $20 million in cost savings with the partnership with about 75% of those savings coming in the third and fourth quarters 2018 and then fully realized in 2019. I am sure that the question on your mind is what is next for us. Our mantra has not changed. It has to be the right market at the right price.

In other words, we will be a selective acquirer. Books continue to be circulated and we've seen several of them, but our focus remains on finding the right partner for ONB and its shareholders and we do not feel any compulsion to have to do another deal. With those brief comments, we’ll be happy to answer your call.

Dorothy, could open up the line?.

[Operator Instructions] Your first question comes from the line of Chris McGratty with KBW..

Just a question on the balance sheet. You've commented about what you’re doing previously in the indirect book, but as you put in two companies together in the quarter.

How should we be thinking about any repositioning of either your or their investment portfolio, the size of the balance sheet, any kind of adjustments that typically come in kind into the noisy quarter?.

Yes. I don’t know you’ll see much adjustment in the balance sheet, Chris. As we -- obviously, we're not going to do the conversions of the second quarter, we're going to have to run that on a separate entity, and we'll continue to do the balance remix on what we call the legacy portfolio for the go forward basis.

So, I don't know you'll see much different than what we bring in for Minnesota..

Okay. And then if I heard you on the -- maybe be for Jim. On the margin, you stripped out the accretion. It was up about -- looks like 6 basis points and you called out the non-interest recovery.

How should we be thinking about the near-term dynamics in your margin? Your betas at really low, which is helping to offset the flat curve, but I guess, can you maintain the margin like this? Or should we see -- could we see some incremental expansion?.

Yes, the 3 basis points we benefited in the quarter related to the last Fed Fund rate increase, we anticipate maintaining that. With respect to deposit pricing, we're going to continue to price like we've always priced and don't see any changes to that.

So, we benefitted from our franchise as we talked about previously being in markets that we can effectively control the price..

Okay. So if I'm hearing, you're working of essentially like a 315 base and then kind of factoring in those dynamics.

Is that all right?.

Perfect. Yes..

Okay. And then maybe last one on the taxes.

I appreciate the color and the timing, but if we boil down to the fourth quarter, what's the effective tax rate? I think there is some confusion on the fourth quarter, but what's the effective we should be using for Q4?.

I think it's going to come at the lower end of the full rate -- the full year tax rates that you see listed there. Really, all of the expense that could be tax credit amortization occurs in the fourth quarter. So that will effectively lower the rate towards the lower end, I think it’s a good rate..

To the 26 FD of that?.

Yes..

Your next question comes from the line of Jon Arfstrom with RBC Capital Markets..

Hey, good morning. Bob, I said, you’re going to give a shout out to the Browns instead of the Indians..

Same for but -- I got to talk. They are just -- I just covered in my season tickets last year seeing Tom after the [indiscernible]..

Right. Couple of questions just on the pipeline.

I know you had a very strong pipeline last quarter and you've touched on it a bit, but just -- is the activity consistent? Or has things changed, would you say that's slowed down a bit? I mean it looks it like from the numbers, but I think your commentary suggest otherwise could you maybe just go in a little more detail on that?.

Yes, absolutely, Jon. I would say the activity is still there with sentiment amongst our customers and prospects are still very, very positive. I just think we spent the quarter closing a lot of loans and that’s great, but I will say the number one priority among our commercial RMs is rebuilding that pipeline.

Already in the quarter, our accepted pipeline is moved in the right direction, and so now just a matter of just getting more volume into that pipeline. But, no, I don’t think there is any systematic issues in any of the markets that throughout our franchise so..

I might add Jon just a little bit of color on our Minnesota folks. They report the pipeline is probably amongst the highest it's been in the history of their company, as they began to talk to clients that want the value of our expanded balance sheet and some of the other opportunities.

So, we continue to be encouraged by activity in Minnesota as well..

Okay, that helps. Follow-up on Chris’s question, the margin. Just give an idea what you are saying on deposit cost? It looks like it was just a very modest increase and also your non-interest bearing deposits were pretty healthy.

But just what’s going on there the non-interest bearing growth and also any pressures?.

Well, I think the non-interest growth is really testament to Jim Sandgren and his team with the focus they put on sales and retention of our DDA product. So, I think it has just been in these better markets having better sales focus and better products to offer.

In times like this when you see right start to move in deposit competition as when you get the value of franchise like ours where you have dominant market share and you can keep deposit costs flat to slightly up, and that if you have to run a few specials and more vibrant market, you can do that without impeding the overall total cost.

And I don’t think that strategy changes anytime soon because again we got -- we're growing in some of these markets where we can generate deposits and quite frankly we're not feeling a lot of pressure right now..

Okay.

And expect any surprises or any slippage from the branch closures? I know you've closed the few so far, so curious how that’s going? And what your expectations are on deposits?.

Jim's track record -- I should let Jim speak, but Jim's track record is excellent. We've communicated. I always judge it by the number of calls they get to me and I had one call so far in the 14 branches that were closing. So, I’m pretty confident we’re going to continue to see retention rates consistent what we've done in the past..

Your next question comes from the line of Terry McEvoy with Stephens..

First question on the tax credit just so I'm clear, if I look back three months ago, you were expecting about 9.9 million of the investment impairment charges that run to the expense line. None of that occurred in the third quarter and now you expect the $13 million to $22 million to happen in the fourth quarter.

One, am I just correcting -- connecting these thoughts? And two, why the increase from three months ago in terms of the expense line?.

Yes. So, you are correcting your assumption. The challenge with we're having a historic building is that the construction timelines can move around a little bit. It's all you're seeing is just construction forecasting. And when projects are going to be complete, we get certificate of occupancy of these projects.

In terms of why the amount is actually higher, so we've actually been hard at work and growing that business and have projects that, as we update and look out into the future, feel like we’ll close more projects than we originally anticipated. So that’s the difference in the higher tax credit amortization and higher after tax benefit..

That's fair.

I might just add to Jim's comments, but as we think about that business, what's you don't see and Jim alluded to in his comments is, we probably got an excess of $60 million in lending relationships in this business as well that you generate net interest income, and we've got a pretty substantial amount of core deposits to cover that business as well.

So, the overall profitability is even better than what you see on that page..

Thank you.

And then the production yields were down quarter-over-quarter, and I think you mentioned there was one specific loan, if you back that loan out, any feel for production yields 3Q relative to 2Q 2017?.

Yes, Terry. We did look at that and basically it'd be flat from the second quarter. So, that 388 number I think is where we were playing, yes..

And then just last question. As I look at my model for 2018, what could really offset the success you're having on the cost sales and the accretion from the deals, simply the provision line.

And so I’m just wondering, will there be any reserve build for Anchor loans as they just go from marked and then they’re re-underwritten and then moved into the kind of the non-acquired portfolio? What type of reserves and provisions have you had to take on past deals? And do you think that creates any headwind as it relates to the provision line in 2018?.

Terry, this is Daryl. We're not anticipating any provision build associated with this. We think we've got it marked appropriately and has been managing going forward. Historically, we have not seen that as an issue, and just given the culture and the credit up in Minnesota I don't see any change there at all..

Your next question comes from the line of David Long with Raymond James..

Question related to the branch consolidations and when you think about opportunities going forward excluding the Anchor transaction.

Any more thoughts as to where we see more closings or rationalization in the back half of 2018 after the integration was completed there with Anchor?.

It's safe to say that we will continue to look at our branch franchise whether there'd be any in Minnesota I think to be determined. Right now, we think they've got a terrific franchise. But as we continue to look at the balance of our franchise, Jim does a great job looking at bottom 10%.

I publicly said, we disappointed if we didn’t have more closures in 2018..

Okay, got it. And then secondly in related to deposit beta where you guys have had -- been able to keep that quite low.

Any color on any particular geography that you may have had better or worse deposit betas as relative to the rest?.

No, we’ve run a couple specials in some of our higher growth markets, but really we’re not getting any pressure. And again, it's nice to be the leader in some of those markets where you actually create the issue, and right now we're not creating anything.

Operator [Operator Instructions] Your next question comes from the line of Andy Stapp with Hilliard Lyons..

Capital market fees were down quite a bit linked quarter.

Is there any color you can provide to help us in moving this line item going forward?.

Great question, Andy. That’s a fairly immature business for us..

Right..

And you're going to have erratic earnings as you build up the ability and some of that still length of the larger deal. So I am not even sure I can give you a run rate for the 18 other than to say Chris is doing an excellent job, and we would hope to get to that second quarter number and build from there.

But might be I'll give you a little more color in the fourth quarter -- after the fourth quarter, and we’re really optimistic about our opportunities up in Minnesota because they tend to have clients that use that type of product more so than where you haven't throughout our franchise.

So, we apologize for the little bit of lumpiness, but again it’s a fairly immature business one by….

Yes, completely..

And Andy, I would just add we had a couple of very large, large transactions in that quarter in the second quarter that probably won't happen. So, we really felt like the third quarter was a pretty good quarter, but when you compare to a record quarter in the second.

So again, hard to give guidance, but given the rate environment and continued commercial production should continue to be fairly strong..

Okay.

And just a couple of housekeeping questions on the non-core expense items that presume correctly the pretty much all the branch consolidation charges were in occupancy?.

For the quarter, yes. There was a little bit of severance as well. Most of those will be in the occupancy expense line and then obviously a little bit the severance side..

Okay.

And then with regard to the client experience initiation -- initiative costs, where they at? I guess some are in professional fees?.

Our professional fees at this stage, Andy..

What’s that?.

It’s all professional fees at this stage..

Okay, that’s the right figure. Alright, that’s it from me..

Your next question comes from the line of Nathan Race with Piper Jaffray..

Bob, just a question on the client experience improving program.

As it seems we're kind of nearing the tailwind of that investment, just curious how you would kind of characterize the successful investment on this program?.

Yes, so as I always said, I come from a culture that you still overpromise and under deliver. And our desire is to under promise and over deliver, saying that we say that the investment we have made in that project is going to help I think us considerably in 2018 from how we serve our clients and also allow us to reduce some overall cost.

And as we get those runs on the Board, we'll be glad to share with you. At this stage, we have a lot of theories and a lot of actions.

And I feel very, very comfortable with where we are that I would much prefer not to put a tight little bow around in the cute name and show you the results, as we get them on the scoreboard, unlike my Browns, who can’t score..

Fair enough.

And just to confirm the conversion with Anchor still scheduled for 2Q despite the earlier closing?.

Yes, as we said in our August call, we've got two major technology projects, one involving our mortgage system and the other one is the EMV card conversion. So, our desire is to not put our new clients up in Minnesota to painful process as we'll just put it through 1..

Your next question comes from the line of John Rodis with FIG Partners.

Quick question on I guess expenses for this year. I guess on last quarter’s call you talked about you still felt good about full year expenses of $405 million to $410 million, but that included the tax credit expense.

So I guess, is it fair to assume if the tax credit expense comes in towards the higher end of the range? You could come in higher than that $410 million, is that the right way to think about it?.

Yes, we tend to think about those tax credit amortization really separately from our operating expenses. And so, that’s why we try to part plenty of disclosure around that. So I think for purposes of your question think about that incremental higher amount and that gets you back to a total for the full year.

But, we tend to think about those separately as we think about how we run the business..

So, Jim, just to make sure I'm hearing you, right. So, you still feel good about the $405 million to $410 million, excluding that going from basically $9 million to $10 million in tax credits to $12 million to $22 million.

Is that the right way you’ve said it?.

Yes, I would look at that higher amortization. That differences and added to those numbers that you just quote in. So the fact is that we're going to have higher amortization we originally expected in 3Q and 4Q that we previously reported just add those to your total numbers and you’re going to get back to this apples-to-apples comparison..

But I think it's also important to realize, we're going to have higher contribution from those businesses as well..

There are no further questions at this time..

Great, thank you all for your attendance. And as always, Lynell will be glad to provide you any clarity, and I look forward to how she talks about our fourth quarter. Thank you..

93364517. This replay will be available through November 7th. If anyone has additional questions, please contact Lynell Walton at 812-464-1366. Thank you for your participation in today's conference call..