Lynell Walton - SVP of IR Jim Sandgren - President & COO Jim Ryan - Senior EVP & CFO Daryl Moore - Senior EVP & Chief Credit Executive Bob Jones - Chairman & CEO.

Scott Siefers - Sandler O'Neill & Partners Chris McGratty – KBW Jon Afrstom - RBC Capital Markets Terry McEvoy - Stephens Inc Andy Stapp - Hilliard Lyons Peyton Green - Piper Jaffray.

3913117. 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, Christine. Good morning everyone. Welcome to Old National Bancorp's conference call to discuss our first quarter 2017 earnings. Joining me today are Bob Jones, Jim Sandgren, Jim Ryan, Daryl Moore and Joan Kissel. And I would like to give a special welcome to our newest attendee, our corporate controller Mike Woods.

I would like to remind you that some comments today may contain 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.

Please refer to the forward-looking statement disclosure contained on Slide 3, as well as our SEC filings, for a full discussion of the company's risk factors. In addition, certain non-GAAP financial measures will be discussed on this call, as referenced on Slide 4.

Non-GAAP measures are 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. Reconciliations for such non-GAAP measures are appropriately referenced and included within the presentation.

Please turn to Slide 5 where we'll begin the review of our first quarter performance. Our first quarter net income of $36 million or $0.27 per share represents 33.4% and 12.5% increases respectively over the first quarter of 2016.

Contributing significantly to this year-over-year increase was the successful redeployment of the proceeds from the sale of our insurance subsidiary into the more profitable banking business with our Anchor Bank partnership.

During the quarter our portfolio of commercial and commercial real estate loans grew 6.8% on an annualized basis, and as Jim Sandgren will discuss, our pipeline remains strong.

Our focus on improving efficiencies was evident with our 6.9% decline in operational expenses from the fourth quarter, and we are pleased with our continued upward trend in our tangible book value which increased 9.5% from a year ago. To provide more detail, I’ll now turn the call over to Jim Sandgren. .

Milwaukee, Louisville, Lexington, Evansville and Grand Rapids. I think these positive results again validate our transformational growth strategy. Turning to Slide 8, I will begin by focusing on the new production graph on the left.

As you can see, commercial production was basically flat compared to fourth quarter 2016, but was up nearly 45% year over year. Of the $455.5 million produced in the quarter, 63% was CRE and 37% was C&I.

While C&I as a percentage of total production fell, by comparison it represented 46% of our total commercial production in fourth quarter 2016, we're seeing accelerated C&I growth in our current commercial pipeline, we believe that bodes well for future quarters.

The middle graph depicts a 65 basis point increase in our production yield compared to fourth quarter 2016. In addition to the upward movement of the LIBOR prime rates, this increase could be attributed to the fact that our fourth quarter 2016 yield was negatively impacted by a couple of large tax-exempt loans.

Also noteworthy is that 74% of our Q1 commercial production were variable rate loans, which puts us in a nice position should rates continue to rise during the year as anticipated. The final graph of Slide 8 reflects another record quarter for our commercial loan pipeline.

As of March 31, our pipeline is up $1.6 billion, with $362 million of that total in the accepted category and another $401 million in the proposed category. As you can see from the graph, we have virtually doubled our first quarter 2016 pipeline numbers and grown $213 million compared to fourth quarter 2016.

Of the other $213 million in pipeline growth over the last quarter, over $170 million is in the C&I category as optimism continues to grow among our small business and middle market customers. Clearly this gives us great optimism for C&I growth for the remainder of 2017.

Before we move to our fee-based businesses on Slide 9, I’d like to provide some color on our overall non-interest income in Q1.

Our non-interest income was negatively impacted by a combination of lower than anticipated service charges due in large part to lower overdraft presentments, a lower level of anchor recoveries as compared to fourth quarter 2016, plus we experienced some seasonality in our mortgage business.

That being said, I'm happy to report that all three of our fee-based businesses saw increases compared to first quarter 2016. Focusing first on wealth management, revenue of $9 million for the first quarter represented a 5% increase over fourth quarter 2016.

While we received a slight boost from equity market gains during the quarter, much of the quarter-over-quarter increase in revenue relates to a fee connected to a large trust settlement along with success in our retirement plan services group.

While our investments division experienced a slight decline compared to fourth quarter 2016, we were up 28% on a year-over-year basis. Our investments team finished the quarter strong with a good March and we anticipate that positive momentum continuing in future quarters.

Our investment advisors continue to focus on financial planning and insurance sales and always doing what's in the best interest of our clients. Turning to mortgage, you can see that revenue was down slightly for the quarter on lower production due primarily to seasonality and higher rates.

Production picked up in March and again in April and our pipeline has grown to $130 million as of March 31, up over $40 million from our December 31 pipeline of just over $90 million. As anticipated, refinances have slowed and our mix of new production has flipped from 60:40 refi to purchase, now to 60:40 purchase to refi as we experienced in March.

We continue to make extensive investments in our mortgage business with a new origination system in 2016 and a new servicing platform anticipated later in 2017. We also continue to add quality producers in our larger growth markets. Overall I believe the best word that describes our first quarter from a bank perspective is consistent.

We continue to demonstrate that we are a franchise ideally positioned to consistently produce organic loan growth, fee based revenue throughout our footprint.

Given the growing optimism of our customers, increasing pipelines and positive momentum in our fee based businesses, we fully expect that we can continue to execute our growth plan in the coming quarters. With that, I'll turn the call over to Jim Ryan. .

Thank you, Jim. Starting on Slide 11, adjusted pretax pre-provision income grew by more than 24% year over year. The growth in net interest income reflects the contribution from our newly acquired markets in Wisconsin and strong underlying fundamentals in our banking business.

Just as a reminder, the decline in our fee income year over year is a result of the reduction in revenue from the sale of our insurance business that occurred in the second quarter of 2016. We are pleased with our pretax pre-provision income growth as we remain focused on improving the operating leverage of the company.

Moving to Slide 12, you will see the trend of our reported net interest margin in our core net interest margin. Our reported first quarter net interest margin was down 13 basis points to 3.50% as a result of lower accretion income quarter over quarter, which was consistent with our accretion forecast.

Our core margin was stable at 3.10% and was in the range of the guidance we gave in our fourth quarter call. Our core margin did benefit from higher prime and LIBOR resets and loans and higher reinvestment rates in our securities portfolio during the quarter.

However those benefits were offset by two fewer days in the first quarter when compared with the fourth quarter, the higher repricing of our wholesale funding and the intentional lengthening of the repricing of our wholesale funding to improve our net interest margin sensitivity to future rate increases.

We expect that our core margin will be stable to slightly increasing in the second quarter depending on our mix of loans and reinvested rates for loans and securities. Shifting to Slide 13, non-interest expenses on 13 -- operational expenses as defined on the slide totaled $100.5 million in the first quarter.

Operational expenses benefitted quarter to quarter from intentional actions taken in 2016 to improve our operating leverage like the branch rationalization project completed in 2017 and the repurchases of certain bank properties out of sale leaseback transactions.

While we are pleased with improving our first quarter expenses, we remain focused on further improvements during the quarter. Slide 14 shows the changes in our tangible common equity ratio and tangible value per share. Our focus on consistent growth of tangible book value per led to a 9.5% increase year over year of this important metric.

Moving to my final slide on Page 17, I will review the anticipated impact from our historic tax credit business. As a reminder, we entered this business more than one and a half years ago and have originated tax credit projects over that period. The first of those tax credit projects we expect will go to service in 2017.

As a result of the tax credits that are included in our effective tax rate over the course of the year, we now expect our full year 2017 effective tax rate to be 31% on a fully taxable equipment basis and our GAAP tax rate to be 23%.

As a part of the accounting for these projects, we also anticipate recording impairment charges of $4.4 million and $5.5 million in the third and fourth quarters of this year, respectively. The impairment charges are recorded in full when a project is placed in service. These charges were booked in the other expense line item on our income statement.

The tax benefits of these charges are already factored into our projected tax rates. Netting the tax benefit with the impairment charges, we anticipate a net benefit to full year 2017 net income to be approximately $2 million. Additionally, these community projects provide CRE credit, loan, deposit and investment opportunities to the bank.

Given our strong first quarter expense number and including the impact of the impairment charges I just mentioned, we anticipate our full year 2017 non-interest expenses to be in the range of $405 million to $410 dollars. Future originations can affect the 2017 tax benefit expense and expense projections. I will now turn the call over Daryl. .

Thank you, Jim. As we move to Slide 17, we’ve laid out for you next charge-off and provision results comparing the current quarter's net charge-offs and provision expense to both the prior quarter as well as to the first quarter of 2016.

For the current quarter we recognized provision expense of $300,000 compared to provision recapture of $1.8 million last quarter and provision expense of $100,000 for the first quarter of 2016.

With respect to net charge-offs, we posted net losses of $300,000 representing one basis point of average loans in the current quarter compared to no net losses last quarter and net charge offs at $1.6 million or nine basis points of average loans in the first quarter of 2016.

As you remember full year 2016 provision was $1 million with net charge-offs of $3.4 million or four basis points of average loans. Our gross charge offs in the quarter were relatively controlled, we benefited greatly from recoveries of $2.9 million which were 91% of the gross charge off amount of $3.2 million.

Because the ending allowance for loan losses was equal to the period beginning balance, the allowance to total end of period loan ratio remained at 55 basis points, however the allowance to non-performing loans improve from 34% to 38% in the period due to a decrease in non-performing loans which I will review shortly.

As I remind you each quarter it is important remember that we also have marks on acquired loans which at the end of the current quarter totaled $117.1 million. Total allowance in loan marks to total pre-marked end of period loans stood at 180 basis points at quarter’s end.

As we move to Slide 18, you can see the special mention loans showed very little change in the quarter remaining at roughly $96 million. Substandard accruing loans increased $15.5 million in the quarter.

Growth in this category can be attributed to the addition of two large credits, one in assisted living commercial real estate relationship of approximately $17.7 million from our Wisconsin portfolio and the other an agricultural loan relationship in the amount of $7.9 million.

While the agricultural credit is believed to be stable at this time we are watching the assisted living relationship very closely as we are concerned additional deterioration may occur over time. Non-accrual loans showed improvement in the quarter falling $16 million or 12%.

The improvement in this classification came mainly from payoffs and paydown on a number of loans with very little dollar inflow in the period. Overall credit results in the quarter continued at acceptable levels much as it has over the most recent reporting periods.

I mentioned last quarter that we were beginning to watch our consumer delinquencies and we continue to do so. While we've seen some slight improvement in the delinquency levels in many of our consumer product types, March 2017 delinquencies continued to remain somewhat higher in March 2016 levels in many areas.

This movement has not manifested itself in higher losses at this point but we will continue our review and make any changes we feel necessary if credit tolerance is a breach. With those comments, I'll turn the call over to Bob for concluding remarks. .

Thank you, Daryl and good morning to everyone on the line. My comments will begin on Slide 20. With a slight peek inside our boardroom as we think about the first quarter.

Approximately a week to ten days before every board meeting I send a letter to our board that summarizes our financial performance for the quarter, reviews any issues that we are having and highlight significant client opportunities et cetera.

The letter is intended to provide a platform to provoke additional discussion and interaction at the board meeting versus just an exercise in management presentations. This quarter in that letter I used the analogy of eating oatmeal as the headline for our financial performance. Oatmeal is not the most exciting breakfast I eat.

In fact, it is rather boring. But I know it is good for me and eating it more often allows me to eat a more substantial and exciting breakfast on occasion like eggs benedict. Like that oatmeal breakfast our first quarter was for the most part boring.

Absent the pre-announced chargers associated with our branch closures, there were no unusual items and we delivered on the commitments that we made you last quarter. Overall unlike eating boring oatmeal, we were very pleased with our results.

We had good loan growth, we maintained our strong credit performance and our expenses were well maintained and fee income was steady.

Most importantly, the platform for optimism remains in place for the future quarters driven by the continued growth in our loan pipeline, the excellent performance in our new markets and the sales opportunities in our fee based businesses and our continued focus on improving our expense base.

In honesty, there were some areas that could have been better which if they would have occurred this quarter it would have made for eggs benedict. While we were pleased with our overall growth of commercial loans, our C&I loan performance was not where we would like to be, even when you factor in the normal seasonality of the first quarter.

I believe that this should rectify itself in future quarters given the positive momentum that we've already seen in the second quarter. Direct lending should also pick up with spring and summer borrowing and as Jim mentioned we've already seen good improvement on mortgage loan pipeline.

Our fee based businesses performed as expected for the quarter and our sales activity remains good.

One area of concern for us would be service charge continue, we continue see to see less resentments and decreasing return check fees some of which we can be attributed to the improving economy as well as tax refund checks but also by our more client focused approach I would expect this line item to be under pressure for the balance of the year but offset by improved mortgage and capital market revenue as well as other areas of fee based business.

Even with our adjusted to efficiency ratio 63.8 million, expenses will remain a strong focus for us. Our college football coach had a saying, you make hay when the sun shines; for an overweight kid from Cleveland I truly had no idea what he was talking about. But after four years of hearing that statement I finally got it.

You need to work even harder when times are good and not become complacent, that sums up our approach to expenses. Well, it’d be very easy to jump on the revenue train with rising rates and lose sight of efficiencies, we will not take that approach.

In fact, we have doubled down on our expense focus and we will continue to look for ways to reduce costs within our back rooms through contract renegotiations, process improvements, and quite frankly in all areas of the company.

Our mantra has not changed; our cost reductions must be sustainable not temporary and for the most part they must be driven with the goal of improving the customer experience. The bottom line for our financial performance this quarter is that we remain optimistic about our ability to meet or exceed the estimates in place for the balance of the year.

A couple of closing thoughts. Last quarter I said we did not feel any compulsion to do another partnership and that remains true today, but if the right deal at the right price in the right market comes along we are fully prepared to move forward. Wisconsin is fully integrated and our ability to execute is strong.

We continue to see several blocks and none of them have hit our right criteria. As you all know pricing has seen upward movement and median deals done today would have been on the upper end of pricing in prior years.

Finally, last quarter we discussed the potential for regulatory reform and I commented that while there was a great deal of discussion, ultimate success depended upon the ability to get bipartisan cooperation in DC and not continuing the rancor we've seen in the past. Fast forward to today, and the tenor has not changed much.

There’s still a great deal of discussion about regulatory relief. The House Financial Services Committee is beginning to discuss the CHOICE Act and the members of the comparable Senate committee are asking for input as to what changes we would like to see.

This is good but I remain cautious given the priority seems to be health care followed by tax reform and then potential infrastructure investments and then finally regulatory relief. I hope you will see some new movement in near term given the magnitude of others we are not counting on it.

In other words, much like the Bennett Persones [ph], pop up, just goods, what a relief it is, there may not be any relief anytime soon.

As a reminder, we have been very public with the saying that while we support -- absolutely support regulatory relief we do not see it as an immediate reduction in cost but these changes to the regulatory structure allows us to serve our clients better and improve our ability to drive economic growth in our communities and over time reduce costs but the political statement Christine we're now open for questions..

[Operator Instructions] Our first question comes from Scott Siefers with Sandler O'Neill. .

So you're like oatmeal, Scott, you’re just consistent every quarter –.

But perhaps not the most exciting, man. Morning guys. Few quick questions; first, the other fee line item came down kind of substantially from the fourth quarter which I think is just the delta in the anchor related recoveries.

I wonder if that’s correct and then two, what would be the outlook? I know it can be extraordinarily volatile and tough to talk to –.

Scott, that’s a great question. Thank you for asking. It is the volatility of the anchor recoveries. Let me just clarify in the preceding quarter we've talked about a number somewhere in the mid forty's range for fee income, that will be what normalized recoveries and with our fee based businesses are.

Our total fee base business would be in the mid-40s range on an ongoing basis, then you get the volatility the recoveries. So and first quarter is always a little soft for us..

I think you answered the question. It's just hard to predict you know what recoveries we're going to see in any given quarter but we still feel good about the year. .

So mid-40s is still here -- you know where we're starting with the softer 1Q, presumably some sort of. rebound overall so that mid forty's still kind of the number..

Yes..

And then, Jim Ryan that is, would you mind going so a little more detail on the tax credit related impairments that you would expect in the fourth quarter.

So I imagine the updated expense guidance that's inclusive of those impairments; is that correct? And then I guess, the other question is will those continue – will those simply be an ongoing part of the expense base, it's just that they sort of start in a material material fashion in the second half of the year.

And they continue since that part of the ongoing business I guess?.

It's definitely part of our ongoing business, we've got a group that specializes in the sense of importance. A lot of business for us, these are great community projects as we talked about gives a CRA credit and brings other loan and deposit opportunities.

So I would expect this to be a continuing part of our business going forward, accounting is a little bit unique especially for these historic tax credits where they have to realize the tax benefit over the full year of the project goes into service but you don't impair right after the investments until the core of the project actually goes into service so there's a timing mismatch which is a little bit unusual versus other kinds of tax credit projects and the fact that that the expense for the investment is actually in the operating expenses where the benefits are all in the tax provisions.

So it's a little bit unique, we want to highlight, this is the first year we're actually seeing any of this type of business actually projected to go into service. We want to spend a little bit of time just highlight the impact for your models. .

Hey Scott, if I might just add -- the tail on these projects is extremely long, just to put in perspective the one that we're getting the benefit for now, Chris Walking and I actually called on that project when we were opening a number for our Investor Day.

It is a long window to get one tax credits approved and they get projects completed because these tend not to be the most beautiful buildings in the communities that we're serving.

So while we're deeply committed to the business we think it makes great sense to our markets is a long track, so that's going to be lumpy; our commitment is to let you know one of the lumpiness is going to occur. .

So with the 31% FTE tax rate expectation great expectation for the the full year, with the way the accounting works so well after tax rate then step down in that three Q. At the same time that the impairments come into the income statement. .

No, that's kind of the average of the full year Scott. I mean you'll see a little bit of movement through out But that's really kind of the long term or – the full 20017 year impact, there will be a little bit of impact in two quarter. .

Our next question comes from Chris McGratty with KBW..

Good morning everyone. Thanks for taking the question. Maybe a question for Darryl, on the assisting living credit, wondering -- seems like a little bit of a larger credit for you guys. A couple questions; number one, I assume this is a self originated loan.

And I am curious if there's any reserve against it currently and your outlook sound a little bit cautious which is kind of customary for your body language. .

Yes, so Chris, this did come out of the anchor portfolio which typically had larger exposures than we would see. And so as we continue to originate up there you'll see larger exposure but this came out of that portfolio. It does carry today the full reserve in for our substandard loans, we're in the process of evaluating what we think the value is.

If it deteriorates further we would look at specific impairment but it carries that pool allocation today -- and yeah, I may be a little pessimistic about this but t’s probably warranted. .

So if I understand the accounting, you’ve got a general on it, would it just be like kind of moving it from one pocket to the other or would you actually set a time additional provision against it?.

I would think we don't have the numbers yet but I would think the reserve that will keep against this, if it moves non-accrual will be higher than what we have N the foods today. So that makes sense to my answer your question. .

May be, Bob, one for you; I on the efficiency goals, you talked about the 638, adjust for the quarter. Can you remind us where the board reset this for the year and kind of the moving pieces and how you hope to achieve them? Thanks. .

21% is our ROTCE, 20% efficiency, then 60% our EPS targets. Chris, we've historically not been public with other than the efficiency goal tied to those incentives. And what I can assure you is that the board is deeply committed to high performance as much as we are and their goals would be at or beyond what you would expect based on your estimates.

But we just -- we've never been public with those goals. .

Just a point of kind of clarification given the movement in the tax credits to the expense line, I know you adjust for the amortization, would that be fair to assume that you would adjust for that as well?.

Yes..

And then maybe the last question, Jim, for you. If we assume, you gave a color on the tax rate for the balance of the year which is helpful.

For next year, how do we assume this plays out? Do we assume kind of a 31% effective and then also some impairments to the expense line or should we assume that we go back to where we were historically?.

We continue to originate this business, we're going to have businesses – we’re going to originate for all of 2017 and I would expect really just kind of a similar year over year change. I would not go back to the historical numbers just because we intend to be in this business and we're currently originating new product as we speak. .

So just so I am clear, 31% effective and roughly 10 million of amortization or impairment I should say spread out or is it kind of you incurred in two quarters, I am just trying to make sure to get them all right..

Yes, so if for example a project was to go into service in the first quarter, you’d really see that benefit of taxes and the benefit of – or the expense of impairment in the same quarter, it's just these projects are spread out later in the year – in the third and fourth quarters.

So that impairment expense could be a little bit volatile just as those products go into service. .

Our next question comes from Jon Afrstom with RBC Capital Markets..

Production yields, the 383 number, I know, Jim Sandgren, you talked a little bit about there was some pressure on the last quarter.

But does that feel like it's sustainable-type numbers? Is there anything unusual in there?.

No, nothing unusual in the quarter, I think that's probably a more normalized run rate. Obviously if we have any kind of large tax-exempt opportunities going forward, that will have maybe a similar impact. But I feel like that's a pretty good sustainable run rate. .

Jim Ryan, it looks like -- just maybe talk to us a little bit about your asset sensitivity. I know that in the back of its presentation, it looks like you're more asset sensitive as time goes on.

You maybe talk a little bit about the repricing timeline on some of your assets?.

Yes, good question. We do benefit in the second year of our models more than we do in the first year, just as we have an opportunity to reprice investment portfolio and other fixed rate loans. So you hit the nail on the head when you understand that pretty well.

In terms of sensitivity, the other thing that I'm watching very closely is obviously our reinvestment rates.

During the first quarter we had higher yields and in the second quarter came to -- first quarter came to a big end – and the second quarter began, we saw yields come in a little bit and that will also drive any benefits we're going to derive from higher interest rates.

So clearly we are more asset sensitive than we were from 12/31 and that was pretty intentional as we saw an opportunity as rates pull back a little bit to lengthen some liabilities at our wholesale funding book trying to take advantage of the forward expectation for interest rates. .

Have you guys seen anything on deposit pricing pressures that doesn't look like it but I'm just wondering if there's any concerns or reactions from clients yet?.

No, Jon, really not much -- we're keeping a kind of a close ear to the ground with our regions and having conversations all the time but really haven't seen much change. So we've been able to keep deposit rates as they are. .

Jon, our model still reflects that when rates continue to rise we will have to reprice those deposits even though we've been able to hold off on these first couple of rate increases here. So our models still reflect the full expectation that deposit rates will reprice at some point in time..

Our next question comes from Terry McEvoy with Stephens. .

Good morning everyone.

First question, could you talk about the group in Madison that’s focusing on CRE and moving up market and whether any of the deals of success that they could be having showed up particularly last quarter within the annualized CRE growth that you show on page seven?.

Yes, this has just really been a continuation, Terry, since we announced the partnership last January. They've had growth every quarter since the announcement, so we continue to see strong growth in Wisconsin but we've had some other growth in markets like Louisville, Lexington and now into Grand Rapids.

So we continue to leverage that experience and expertise throughout our footprint and keeping a close eye on commercial real estate, we're still at 189% of total capital, so we still have room to move and there are pockets of our markets where the competition is kept out, and we're seeing opportunities to be a little bit more selective around pricing and fees.

So just kind of continuation I'd say certainly from the Wisconsin perspective. .

Terry, just to remind everybody, you probably know this but our first last year in 2016 from date of closing to the end of the year we grew our loan portfolio in Wisconsin 7% which is pretty remarkable given the turmoil you go through with your clients.

And it's a great reflection on the quality of the folks we have out there and the acceptance of our model in those markets. .

And then as a follow up, the 15 branches recently in the consolidation five, I believe last year; could you just talk about deposit outflows versus expectations within those fifteen or twenty branches?.

Terry, really continue to be lower than we have modelled. I think with the strong investment in our mobile and online platforms and the fact that we still have branches that are fairly close and proximity to some of those branches that have been consolidated, we continue to see a lower level of attrition in those deposits.

So it's really an opportunity to reduce some cost and then reinvest some of that in technology to make sure we continue to serve our customers. So you know, 3% growth in the quarter from a deposit standpoint. It's supportive of that.

I think now we're up to the metric we continue to look at is deposits per branch, I think we’re now $56 million; three or four years ago that number was closer to 25 million, 30 million. So we've made great progress and if we are selectively making the right call on these branches. .

And then just last question, if you just help me out the total auto portfolio, how much did that come down in the first quarter and what's the expected run off over the next three quarters?.

Actually that portfolio grew slightly in the first quarter. Chris has done a great job of improving pricing and reducing costs, but as you well know the demand is still there. So we're getting a better yielding product -- the portfolio actually grew; our expectation for the balance of this year is probably would be.

stay stagnant, maybe slightly growth. Again just based on the volume seen just remind you we don't do forward planning and over time we want to wind through this portfolio but we did prove the profitability over the last quarter or two under Chris’s leadership. .

Our next question comes from Andy Stapp with Hilliard Lyons. .

Good morning. The results impacted by the new stock based accounting standard. .

No, they are immaterial..

How much was the large trust settlement mentioned in your prepared remarks?.

Yeah, we prefer not to disclose that, Andy. As Jim said, it was significant enough to really change but obviously you can understand the confidential nature of that. .

And a minor question, but do you have a breakout of the $1.4 million in branch consolidation expenses by line item. .

We can get that to you. How about -- back up, we've got a five branch over the fifty branches we can get to you in -- an e-mail and we'll get it you..

Our next question comes from Peyton Green with Piper Jaffray. .

Good morning, Bob; question for you. In terms of loan production and the loan production yield, if we think -- I mean if we look at the first quarter versus the fourth or the year ago number, the production yield was substantially higher, 383, and the new production balance was roughly stable linked quarter.

And I guess, my question would be, are you expecting to work a mix change with the securities book going forward such that overall ROA might improve more than balance sheet growth? And then also, the second question would be with the loan pipeline, the proposed and accepted, does that support mid single digits loan growth going forward?.

I can answer the second half question which is absolutely, the pipeline, as Jim said, is at a record level, even at a pull-through rate of 35% we still get to that mid level growth that you just referenced. As to your first question, I am going to let Jim Ryan address that. .

It's actually in the other category, at the other loss category it shows up in our income statement the other expense category is a big bulk of expenses, which were a lot of lease terminations charges, the rest of it's pretty small in the other categories. .

Different question. .

Oh I am sorry..

You are answering Andy Stapp’s question. So Peyton, you want to repeat the question, I apologize..

Sure, no problem. The production yield of 383 was up versus 336 a year ago and 318 in the linked quarter, and yet the production volume was around 455, roughly flat with 459 in the fourth quarter.

So my question was, if you generate the 5% loan growth, would you expect earning assets to grow by a similar amount or will you work mix change?.

Yes, I would expect it to grow by a similar amount. That production yield is highly dependent on that mix, tax versus tax exempt and also the fixed versus floating and so you're going to see a little bit of volatility to the extent that we have more tax exempt loans in a particular period over another.

But the fact of the matter is that prime and LIBOR being higher all those are going to lead to higher production yields versus year ago numbers. .

And then at the margin you're less likely to add indirect which is low –.

Absolutely. End of Q&A.

[Operator Instructions] And at this time there are no further questions. .

Well, Chris and Gabriel [ph] had enough time for breakfast, so with that we will conclude our call. If you have any follow up questions, please reach us, and thank you for your time. .

3913117. This replay will be available through May 9. If anyone has additional questions please contact Lynell Walton at 812-646-1366. Thank you for your participation in today's conference..