Welcome to the Old National Bancorp Fourth Quarter 2019 Earnings Conference Call. This call is being recorded and has been made accessible to the public in accordance with the SEC’s Regulation FD. Corresponding presentation slides can be found on the Investor Relations page at oldnational.com and will be archived there for 12 months.

Before turning the call over, management would like to remind everyone that as noted on slide two, certain statements on today's call may be forward-looking in nature and are subject to certain risks, uncertainties and other factors that could cause actual results to differ from those discussed.

The company’s risk factors are fully disclosed and discussed within SEC filings. In addition, certain slides contain non-GAAP measures, which management believes provides more appropriate comparisons. These non-GAAP measures are intended to assist investors understanding performance trends.

Reconciliation for these numbers are contained within the appendix of the presentation. I’d now like to turn the call over to Jim Ryan, for opening remarks, Mr.

Ryan?.

Thank you, Dorothy. Good morning everyone. Old National announced several strategic actions today including a new strategic plan, the consolidation of 31 or 16% of our branches across our footprint and two capital actions, including raising our dividend and authorizing a new share repurchase program.

And as I mentioned on prior calls, we spent the last year totally focused and I challenged our executive team to think about ways we can better serve our clients, our team members, our communities and importantly our shareholders. This new strategic plan is called the ONB Way.

I'll share more details later in my remarks, but some of the initial charges related to implementation are included in our fourth quarter earnings. Starting with Slide 3, our fourth quarter net income is $49.2 million including $8.4 million in charges from the ONB Way as well as merger charges. Adjusted net income was higher at $55.2 million.

As you review our results, you will see that our core margin is stable despite the Fed fund rate cut in September and October and a challenging yield curve. Credit quality remained strong. We recorded $1.3 million of provision, our net charge-offs were $3.6 million.

The higher net charge-offs were primarily a result of a single credit that was previously reserved for in prior quarters. Non-accrual loans declined nicely in the quarter and year-over-year. As I've said in prior quarters, while our credit quality is strong, we are not immune from losses.

We're still watching a small number of credits, but I'm not losing sleep over credit today. We saw record commercial production for the quarter and strong core deposit growth.

Importantly, we also effectively manage our cost of total deposits lower by 9 basis points to 43 basis points and reported strong year-over-year operating leverage and efficiency ratio improvements. Next, on Slide 4, full year net income was $238 million including $17.4 million in charges for the ONB Way and merger charges.

Adjusted net income was almost 24% higher year-over-year. Like the quarter we saw record commercial production for the year and our pipeline was a record setting $2.2 billion at year end. We also produced a record $1.4 billion of mortgage loans of which approximately 60% was sold in the secondary market.

We posted strong year-over-year adjusted operating leverage improvements of 636 basis points and adjusted efficiency ratio improvements of 369 basis points. Adjusted return on average assets is 1.25% and adjusted return on tangible common equity was 15.7%.

On the capital front we repurchased 6 million shares during the year at an average price of $16.58. Moving to Slide 5, despite the repurchases tangible book value per share grew by 15% year-over-year and tangible common equity to assets stood at a strong 9.09% at year end.

As I said then in the beginning of the call we announced two capital actions including 7.7% increase to our quarterly dividend to $0.14 per share, which represents an approximately 3% dividend yield. We also announced a new share repurchase program of 7 million shares which we expect to be opportunistic about over the next year. A quick update on M&A.

Our strategy has not changed. We remain an active broker [ph] and a selective buyer. We are patient and continue to wait for the perfect pitch while remaining focused on execution. Given the importance of the ONB Way, the hurdle will be even higher as we work on achieving our milestones and completing our initiatives.

Next, Brendon is going to walk you through this quarter's details..

Thank you, Jim. Turning to the quarter on Slide 6, our GAAP earnings per share was $0.29 and adjusted earnings per share was $0.32. Adjusted earnings per share excludes $8.2 million in ONB Way related charges, $250,000 in merger related charges, as well as $400,000 in debt securities gains.

Moving to Slide 7, our quarterly adjusted pretax pre-provision net revenue was 10% higher and up a notable 23% for the full year. This result was driven by increased scale from our recent Minnesota partnership, our strong low cost deposit base, and a continued focus on expense management.

We also improved operating leverage by strong 636 basis points year-over-year. Slide 8, shows the trend in outstanding loans. As Jim referenced, our commercial loan production of 681 million was the largest in our company's history. We ended the quarter with a record $2.2 billion pipeline and good momentum heading into 2020.

Persistently high levels of prepayments has helped commercial outstandings flat despite our third consecutive quarter of record production. As expected, September and October rate cuts loan portfolio yields excluding accretion is down 14 basis points in the fourth quarter.

Production yields in the fourth quarter were 3.76% which reflects the lower long term rate environment and we expect will continue to put pressure on asset yields. Moving to Slide 9, both period-end and average deposits increased during the quarter. Our total cost to deposits declined 9 basis points quarter-over-quarter to a very low 43 basis points.

We are pleased with the results of our deposit pricing strategy that has resulted in a meaningful reduction in deposit costs while simultaneously growing our core deposit base.

With a little over $1 billion in deposits indexed to fed funds and proactive management of exception price book we are confident in our ability to manage deposit costs lower in response to any future Fed action. Slide 10 shows our fourth quarter earning asset mix and quarter-over-quarter change in loan mix.

Although our efforts have been impacted somewhat by prepayments, we remain focused on remixing the loan portfolio towards more productive commercial and commercial real estate loans and out of indirect and other loans.

The investment portfolio yield was down 8 basis points quarter-over-quarter to 2.74% which was equal to the fourth quarter yields on new purchases. Next on Slide 11, you'll see the detailed changes in our fourth quarter net interest income and corresponding margin.

We are pleased with the performance of our margin given the challenges of the interest rate environment. Net interest margin excluding accretion was better than expected at 3.25% compared to 3.26% last quarter. The anticipated decline in earning asset yields which were down 14 basis points was nearly offset by reductions in our funding costs.

Active repricing of our deposit book and strong noninterest bearing deposit growth helped mitigate the negative impact on asset yield that resulted from the recent Fed rate cuts.

Our ongoing work to reposition the balance sheet for a more neutral interest rate risk position along with continued thoughtful and disciplined approach to the product pricing should allow us to defend our margin well against this stubbornly flat yield curve. Slide 12 shows strength in adjusted noninterest income.

Our fourth quarter noninterest income decreased $6 million following a strong third quarter performance that included record capital markets revenue and $1.7 million in annual vendor incentives. The quarter-over-quarter change was the result of a seasonal decline in mortgage banking revenue and to return to trendline of our capital markets revenue.

Also included on the slide is a summary of our mortgage activity for the quarter, which included a record $468 million in production. Low interest rates continued to support strong refi activity which accounted for 54% of our production.

Next Slide 13, shows the trend in adjusted noninterest expenses which reflects our ongoing focus on expense management. We did experience an uptake in adjusted expenses in Q4 driven by additional incentive compensation growth related to record loan production and our full year earnings performance.

Our adjusted efficiency ratio for the full year is a record low 57.87% and represents a 369 basis point improvement over 2018. Expense discipline is an important part of our culture and despite the revenue headwinds impacting the industry we remain committed to generating positive operating leverage. Slide 14, has our credit metrics.

Credit conditions remain benign as we experienced deposit migrations during the quarter and both nonperforming and underperforming loans fell to new cycle lows. We recorded $1.3 million in provision expense during the fourth quarter while closing net charge-offs of $3.6 million.

The increase in net charge off was driven by a single credit what had been fully reserved for in prior quarters. Our higher level of nonperforming loans relative to peers reflects our practice of identifying credit challenges early.

We believe early recognition of underperforming credits and active engagement with borrowers ultimately leads to lower credit losses as demonstrated by our below average charge-offs.

Slide 15, demonstrates our strong reserve coverage and low risk balance sheet, with 56 basis points of reserves against organic loans and 322 basis points in loan marked against the acquired loans, we believe that we have adequate reserve coverage. Before we turn away from credit, we want to provide you with an update on our transition to CECL.

Our estimated increase of the allowance remained unchanged at $35 million to $45 million. A large portion of the increase is related to the establishment of an allowance for $2.3 billion of acquired loans with relatively modest increases in reserves on the remaining legacy book.

The relatively wide range reflects the uncertainty of future macroeconomic forecasts, but assuming economic conditions remain stable, we would expect to be in the bottom half of this range. Slide 16 provides some key takeaways from our fourth quarter performance.

We are pleased with our results driven by good execution against our strategic objectives. We successfully defended our core margin which showed only a 1 basis point decline from prior quarter. Commercial loan activity remained strong with three consecutive quarters of record production and a record pipeline heading into 2020.

The 636 basis point year-over-year improvement in adjusted operating leverage and the 369 basis point improvement in our adjusted efficiency ratio demonstrates the benefits of our increased scale and continued focus on expense management. Slide 17 includes thoughts on fourth quarter starting points and our outlook for 2020.

We expect commercial loan production to remain strong based on both the size and quality of our pipeline. We expect core net interest margin to be under some pressure from the shape of the yield curve.

As the slide suggests, fees and expenses should follow normal seasonal patterns and we remain very focused on continuing to drive positive operating leverage. Our full year 2020 tax rate is expected to be approximately 18.5% on an FTE basis and 14.5% on a GAAP basis.

The effective tax rate includes an estimated $15 million in tax credits primarily related to historic tax credit products expected to be completed this year. These projects are anticipated to generate an estimated $13 million in tax credit amortization which will flow through the operating expenses.

Please include the $13 million in operating expenses in your model along with the reduced effective tax rate. The after tax benefit of these projects is estimated to be approximately $2 million in 2020.

As a reminder, the tax credit amortization is recognized through expenses in the quarter that corresponds with the placement service date while the tax benefit is spread over the full year though the tax line. I will now turn the call back over to Jim Ryan to share some additional details on our ONB Way strategic plan..

Thanks Brendon. Turning to Slide 18, I want to share some details on the ONB Way. In May we started with the performance improvement diagnostic to define our go-forward strategy and identify revenue and efficiency opportunities across the bank. In August of 2019 we set out to build a Bankable Plan that would deliver three key objectives.

First, transform Old National into a leading commercially-oriented regional bank with a distinctive client-centric value proposition delivered through a segment-focused organization.

Secondly, lay the foundation to be a top performing independent bank by streamlining our operating model and strengthening their risk and credit processes to provide a seamless client experience.

Thirdly, improve our operating leverage, invest in our operational IT infrastructure to meet our clients where they are and ensure they were keeping pace with technologies and client digital expectation through a balanced portfolio of revenue and cost initiatives, to help us deliver top-quartile performance.

We have now entered the implementation phase to capture the value identified in the design phase. We have over 800 milestones with 60 total initiatives. We anticipate the execution lasting one to two years. We have communicated the impacts for the ONB Way changes to our team members last week including the 31 branch consolidations.

We plan to also hold an Investor Day on May 13 in Indianapolis to provide more details and share updates on our progress. Moving to Slide 19, let me share our vision for the ONB Way.

We will be a leading commercially-oriented regional bank with a distinctive client-centric value proposition based on strong relationships, streamlined operating model, and an exceptional work environment that empowers our team members to deliver their best. Moving to Slide 20, let me share some key organizational structure changes for the ONB Way.

Historically, Old National has been organized by geography. That model served us well for 185 years, but as we've grown through partnerships and our clients have become more diverse, we saw the need to move from a generalist to more specialist relationship management approach to better serve our client needs.

As a result, we're moving to three main client segmentations. The first is the commercial segment, which includes segments based on clients revenue size and improved treasury management offering and some dedicated units for specialized lending and select industry verticals.

This segment is being leg by one of our most successful commercial leaders Dennis Heishman, who started our Louisville, Kentucky office more than 10 years ago. Dennis will lead this segment from Louisville. A key new hire reporting to Dennis is Malinda Anthony, who recently joined us from Wells Fargo to lead our treasury management team.

She leads the TM team from Indianapolis. The second segment is community banking that will provide products and services tailored to each market serving personal small business clients through a full range of distribution channels to meet clients where they are.

This segment is being led by Todd Clark, who was the president of United Bank and Trust and was most recently our CIO. Todd will lead this segment from Michigan.

We are creating a new wealth group for the third segment that combines our existing wealth management trust businesses, our investment group and our private banking teams for a simplified private banker led approach with an emphasis on financial planning.

This new wealth segment will be led by Shtayyeh Omar, who will join Old National later this month from U.S. Bank. He will be leading this segment from Minneapolis. I also want to note that Daryl Moore will continue to lead our credit risk functions and continue to partner with our new segment leaders.

Our main support areas including risk management, operations, financial and IT functions will align with these client segments. This approach will align complexity with the amount of risk taken in each of our segments leading to an overall better client experience, improved cycle times and enhance efficiencies.

We announced today the hiring of Paul Kilroy to be our new CIO joining us from Huntington National Bank and Scott Fecteau will our operations who most recently worked at Accenture. Please refer to our press release for more information about these key hires. On Slide 21, we provided some insights into the major initiative of the ONB Way.

The expense savings will generate near term benefits, but I'm more excited about the potential for the longer term revenue enhancements. It will take most of 2020 to implement the revenue initiatives so we will not see any benefits this year. We have initiatives in all three client segments.

We expect required investments in technology and talents to generate the anticipated revenue enhancements and will provide more details as the initiative more fully materialize. Moving to Slide 22, we outlined the timing of real estate, severance and professional one time charges related to the expense savings initiatives.

The expense savings represent net of any ongoing investments required to implement. We expect total charges of $53 million which we've already taken $11 million in 2019 mostly related to professional fees. The remaining $42 million we expect to take this year with the bulk coming in the first quarter.

Not including any benefits from the revenue initiatives, the charges are earned back in approximately one and a half years.

By the end of 2020 we should be at a run rate of $36 million annually while we expect the 2021 impact to be $40 million plus as we implement additional longer-term opportunities in 2021 that are dependent on technology deployments.

Thank you for allowing us extra time this quarter to provide the ONB Way strategy update and the whole team is available to take some questions. Thank you..

[Operator Instructions] Your first question comes from the line of Scott Siefers with Piper Sandler..

Good morning, Mr. Siefers..

Good morning, guys, how is everything going?.

Fantastic..

Good, good. Just want to make sure I understand the expense opportunities on Slide 22 and gentlemen I think you said this, so I just want to make sure I am crystal clear.

All the, you know, if we look the walk, the $5 million, $7 million, $9 million throughout 2020 and then the $40 million in full year 2021 benefits, those are all expenses which are net of revenue opportunities right? So that's all in other words anticipated to drop to the bottom line, is that the right way of looking at it?.

Yes, they are all expense savings opportunities, which include any required investment to achieve those expense saving opportunities. We haven’t included any revenue synergies this year, primarily because those will be de minimis this year, but we expect the impact to really start achieving that in 2021..

Okay, all right, perfect. So, that's good news. And then may be just a separate question on sort of run rate stuff. So the margin on a core basis came in better than I would have thought this quarter. I know you mentioned in your prepared remarks or Brendon did, the shape of the yield curve being the factor that would cause further compression.

But I guess I'm just thinking given that the compression wasn’t as bad as feared in the fourth quarter, what the main puts and takes would really be as you look out going forward?.

Yes, I'll may be give you a high level, I'll let Brendon come in where I don’t get it exactly right. You know, I mean given the shape of the yield curve loan yields are continuing to be under a little bit of pressure here.

We will continue to look for ways to offset that through deposit side, but as our deposit costs have come so low, it just, it is going to be hard to keep up with the changes in the yield curve and those are really the puts and takes is just how much the yield curve continues to change and evolve and how much pressure that puts on continuing loan yields..

Okay..

And Jim, I mean Scott the only thing I might add to that just a reminder, we still have a number of CDs that will be maturing over the next year, almost 75% of our CDs mature in one year about a third of those mature in Q1. So there is some leverage there. We still have an exception, the fixed exception price book that we can push on.

So we have some leverage on the funding side that we'll continue to go after, but it is really around new production yields relative to our portfolio yields that will continue to put pressure..

All right, perfect. Thank you guys very much..

Thanks, Scott..

Your next question comes from the line of Chris McGratty with KBW..

Good morning, Chris..

Hey, good morning, everybody. Thanks for the question. Jim, I want to come back to the efficiency program, just to make sure I understand it. I think in your remarks you multiple times talked about operating leverage and you talked about the efficiency improvement the bank made over the last couple of years.

If I'm thinking kind of in terms of efficiency ratio, you've been in the high 50s - if you are – somewhat 58 to 60.

Assuming that Fed doesn’t move and just kind of rate is kind of the equalizer here, how do we think about this program in the context of efficiency? Is this a program to try to maintain efficiency at these levels or drive the efficiency ratio lower?.

Yes, you know, I think it is all about the context right, in which how much revenue pressure we have from lower margins, from additional Fed rate actions. Right? I mean regardless of what the economic environment or interest rate environment was going to be this year, we want to accomplish this program for so many reasons.

Right? It is the right program to do. It is the right evolution of our company at this time.

On top of that this happens to be a more challenging interest rate environment for the industry, and so for us I hope ultimately will lead to operating improvement and efficiency ratio improvements, but I really cannot predict what's going to happen with interest rates this year and the shape of the yield curve continues to be frustrating.

All those things I think will help offset any impacts from a challenging rate environment. But long term the whole idea is to drive further operating improvements and efficiency ratio improvements..

Okay. And may be actually [Indiscernible].

I'm sorry, that's before the revenue impact. Again, I am more excited about what those potential revenue impacts look like for us starting in 2021..

Great, if I could just add one more Jim?.

Yes..

You guys had historically kept expense growth at or below inflation, I'm just trying to attack it from a different angle.

The $40 million that you are talking about for 2021, is – I'm just trying have a kind of ballpark for a run rate of dollars, because of I think the big wildcard, is the expectation that your core expenses would be down in 2021 relative to 2020 as you kind of hit full steam or is this a way to come back to some of the inflationary technology investments or stuff like that? I'm just trying to get a ballpark of what the expense growth rate may be?.

Yes, maybe we've done a pretty good job of wanting to keep these expenses below inflation and we'll continue to do that. Obviously it will benefit in 2021 versus 2020 in terms of additional expense saving dollars.

You know, we don’t think you guys have the expenses too far off in the model when you adjust for the ONB Way, you adjust for the tax credit amortization that Brendon talked about and I feel like the expenses, you guys have a consensus makes sense to us.

But again, I would also point out that and we'll provide further updates in May, but these revenue initiatives do require new people, some additional technology, and so there'll be some expenses related to that. But on a net basis, it should all improve the bottom line and improve the operating leverage of the company..

Okay, and so that expense that you're referring to a consensus, so if I look at consensus, 2020, 2021 expenses, you're saying, what's this announcement? You feel good about that or with this announcement you should do better than the consensus number?.

I'm saying in 2020 the expense number seemed to be on the right trajectory of where we think minus those adjustments we just talked about. And our goal is to again further drive improved operating leverage, and so we'll continue to watch expenses and year-over-year from 2021 to 2020 our expenses should be better..

Got it. That's helpful. Thanks..

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

Good morning, Terry..

Hi, good morning. Sorry to have to start with the CECL question, but I'm going to. As you transition the $2.3 billion of acquired loans from call it a PCI world to a PCD world, there should be an impact to net interest income and I'm just not sure if you've yet quantified what that impact would be.

And if so, kind of discuss maybe your high level thoughts on CECL and thanks for the reserve disclosure, but more so on the NII impact?.

Yes, Terry it’s Brendon. We don't have a lot of accretive impact related to that movement. It's a relatively small bucket. The march on those shouldn't have a huge material impact you are going run right around it, around accretion. We've calculated that and it's relatively, relatively small.

I think other institutions might have a slightly larger impact than us or on that number..

Okay and then the reserves on acquired loans, that percentage, I'm guessing is higher than the core portfolio.

So my question is, as we move forward and the acquired loans continue to come down, should the reserve ratio to total loans, should that come down as well?.

So if you take the $2.3 billion, which you're right, Terry does have a higher mix of commercial. So the general impact of CECL might be a slightly higher reserve, but that is embedded in that $35 million to $45 million range that we provided.

Should you take that and add it to our current reserve, that should give you a pretty good idea of what the reserve level will be going forward. And then it'll all depend, provision will all depend on through the mix of our production heading in Terry, production will be a little higher, mortgage will be a little lower..

And then a question for Jim, if I think about what Bob did at Old National moved from a community bank to a super community bank. Today, we're talking about moving from that super community bank to a regional bank.

I guess what were some of the risks that you discussed internally as it relates to what this could mean to the commercial bank and the community bank as well, given that the very strong deposit base that comes through the community bank?.

Yes, let me first start with, at our heart, we are a community bank. We continue to be involved in our communities. We think we're better at it than most banks are in terms of how we continue to support our communities and how we continue to serve our clients. So that really doesn't change, regardless of the ONB Way.

Having said that, as we get bigger, and our clients are more diverse, and we're more spread farther apart, we recognize the need that our platform maybe wasn't as scalable as it was under that more geography centric structure.

It was hard for Jim to tack on another region with another CEO, some more presence on top of that, that became more challenging for us.

And so we think this new structure, we've broken the company up into three primary segments that takes off with clients, and then support that with our operations in IT and finance functions, all makes a lot of sense to us.

And we think this is pretty typical of banks of our size when they get to this point where they have to think about the evolution of its structure. I'm also really excited about some of the talent we're able to bring to the organization.

When we're out telling our story, whether it's the individual relationship managers and markets, or whether it's to senior leaders in our company, people are pretty excited about the story here at Old National and they see this as a place of them being successful. And I think this organizational structure helps us support that.

And then we're also obviously able to generate a savings that we're reinvesting back in ourselves and better technology to make the organization more efficient, but also improve our client offering.

So I think this is just a natural evolution for where Old National has been over 185 years, but I also think that it makes the platform more scalable for us going forward..

That's great. Thanks, everyone..

Good question, Terry..

You have a follow-up question from the line of Scott Siefers with Piper Sandler..

Mr.

Siefers?.

Hey, thanks for taking the follow-up. Just want to drill down into the expense base in the fourth quarter of 2019 for a bit.

It came in a little higher than I had anticipated and you guys called out the incentive comp for example, how much of that ends up indeed being transitory, in other words comes kind of immediately back down and how much is this sort of a start, if at all is higher sort of structural level for a bank [ph] ?.

Sure, Brendon will walk you through the changes..

Yes Scott. Most of that $4 million would walk right back down in the first quarter. What you'll see though, is then we'll be adding in payroll taxes and then merit in the second quarter. As Jim mentioned earlier, we feel pretty good around the consensus estimates, excluding the ONB Way initiatives that are out there for the full-year 2020.

If you back off the $22 million we expect in 2020 related to ONB Way and then adjust for the $13 million in tax credit amortization, that gets you to a pretty good view of how we’re looking at expenses next year..

Okay, perfect. And then just on the tax credit amortization, I could be mistaken, right? I thought we were sort of stepping back from that business and the next year it will be much bigger.

What are sort of the dynamics around that?.

Yes we had, we're not stepping back from that business. But there is a certain type of federal historic tax credit. That's a one-year deal that creates this kind of volatility that we're talking about today. We have a handful of credits that originated sometime ago that will be running through this year.

This is the last of these tax credits, they're no longer available to be done going forward. So this is the last of that..

Okay..

Scott, these are projects that we're working on for, there's a long runway for these projects. And these projects were the last of those projects and quite frankly, the last of the one-year that were even eligible to be done. So we hope through this fund structure we talked about before will create less volatility, that fund continues to get bigger.

But these are the last of those kind of one-year deals that unfortunately, we just have to push through with this accounting..

Yes, okay, that makes sense. Thank you.

And then just in terms of how the impacts will flow throughout 2020, is that going to be kind of evenly through the year or will there be lumpiness?.

Good question. A bulk of it actually comes in the first half of the year, again but again, these are historic deals. So you have to get certificates of occupancy and things like that. And so those things could, there could be some timing push from 2Q to 3Q. But I think a bulk of that stuff to happen in the first half of the year.

But again those tax, the tax rate effect is a full-year tax rate effect, but a bulk of the expenses actually come through when they get this place in the surface and we think that's going to be in the first half of the year with a little bit tailing in the third and fourth quarter..

Okay, perfect. Thank you guys very much..

Good questions Scott, thanks..

[Operator Instructions] Your next question comes from the line of Kevin Swanson with Hovde Group..

Hi Kevin, good morning..

Good morning. I appreciate the comments on M&A.

But just curious on your thoughts around some of the larger community bank and regionals teaming up through MOEs and kind of the transactions being generally more accepted?.

Yes, I think there's a little bit of a mixed track record here on some of those transactions and we continue to look at all forms of M&A as you would expect us to do.

And for us, Plan A is to continue to do the types of deals we've done which is to continue to expand our footprint, build scale in existing footprint, try and drive efficiencies out of that scale. That would be Plan A.

But as you would imagine, our Board looks at all types of transactions and we'll continue to look at those opportunities as they evolve. But as I said earlier, I mean those transact - any transaction has a higher hurdle today, given our focus on needing to achieve the initiatives and milestones embedded within the ONB Way..

Most of my other questions are answered, but maybe just one more. It looked like in a period basis, indirect increased a little bit this quarter.

Is that just a timing issue or is there a change in the thought on that portfolio?.

Yes, no change in thought. It’s just that portfolio ebbs and flows and sometimes you have more rundown than others, it just happened to be a little bit higher production on a net basis..

Got it, thanks guys..

Thanks..

You have a follow-up question from the line of Chris McGratty with KBW..

Yes sir?.

Yes, thanks Jim. Just to make sure I’m clear on the expenses.

Slide 22 where you give the one-time charges for 2020 and also the benefit, the recurring benefit, Brendon was your comment that you're comfortable with 2020 consensus? I think you said excluding the M and implementation charges or is it including the, what it looks like $20 million or a little over $20 million of benefit?.

We're comfortable with the consensus kind of on a standalone basis and then you can add in the impact on Slide 22 plus the tax credit amortization.

Is that clear?.

Okay. So comfortable with consensus, but then if you hit the $15.79 million per quarter, we would need to reduce the expenses by that amount.

Is that what you're saying?.

Yes, you take that expense line and then you can subtract the consensus estimates and then you can subtract the full-year $22 million benefit from ONB Way..

Okay, so you're comfortable with where it was prior to the announcement and the announcement helps that?.

Yes..

That’s great. All right, thank you..

Thanks Chris..

There are no further questions at this time.

Are there any closing remarks?.

Thanks everybody for the support. We appreciate the extra time you spent with us this morning. As usual, Lynell, and Brendon, and Jim, and Daryl, everybody is here for follow-up questions. Thank you so much..

This concludes Old National’s call. Once again, a replay along with the presentation slides will be available for 12 months on the Investor Relations page of Old National’s website oldnational.com. A replay of the call will also be available by dialing 1855-859-2056, conference ID code 5278346. This replay will be available through February 4.

If anyone has additional questions, please contact Lynell Walton at 812-464-1366. Thank you for your participation in today's conference call..