Good afternoon everyone, and welcome to Associated Banc-Corp's Third Quarter 2016 Earnings Conference Call. My name is Matt and I will be your operator today. At this time all participants are in a listen-only mode. We will be conducting a question-and-answer session at the end of this conference. This live presentation and accompanying press release, financial tables that will be referenced today's call are available on the company's website at investor.associatedbank.com. As a reminder this conference call is being recorded. During the course of the discussion today management may make statements that constitute projections, expectations, beliefs with similar forward-looking statements. Associated's actual results could differ materially from the results anticipated or projected in any such forward-looking statements. Additional detailed information concerning the important factors that could cause Associated’s actual results to differ materially from the information discussed today is readily available on the SEC website in the risk factors section of Associated's most recent Form 10-K and subsequent SEC filings. These factors are incorporated herein by reference. For reconciliation of the non-GAAP financial measures to the GAAP financial measures mentioned in this conference call please see page 10 of the press release financial tables. Following today's presentation, instructions will be given for the question-and-answer session. At this time, I would like to turn the conference over to Phil Flynn, President and CEO for opening remarks. Please go ahead, sir.

Thanks and welcome to our third quarter earnings calls. Joining me today are Chris Niles, Chief Financial Officer, Scott Hickey, our Chief Credit Officer and Jim Simons, our Deputy Chief Credit Officer. Our third quarter results reflect our growing and diverse franchise. We reached record deposit levels and reported one of our highest revenue quarters in a while driven by mortgage banking and capital markets activity. We delivered solid performance across our businesses with measured loan growth, strong deposit and revenue trends and stable expenses. Our progress against our 2016 priorities is summarized on slide two. We are committed to delivering solutions that benefit our customers. During the quarter we completed the rollout of Wi-Fi across our branch network to increase customer adoption of digital solutions. We are pleased to report our active mobile base is growing. In September, we had 33% more mobile customer site on than a year ago. In addition we rolled out instant issue EMV chip card capability allowing bankers to give our customers an activated permanent card upon account opening and before they leave our branch. We also opened two new branches in Chicago. Average loans grew $411 million in the third quarter net of portfolio loan sales. Average loans have grown by 9% year-over-year. Year-to-date growth has been balanced across our major loan categories and remains on track to meet our 2016 guidance. Average deposits grew $1.1 billion in the third quarter to a record $21.4 billion fueled by seasonal inflows and organic year-over-year growth. Non-interest income was up significantly in the third quarter in large part due to strong mortgage banking volumes and gains. We also reported higher revenues in several other fee categories. Expenses came in at $175 million and we remain on pace for our fifth straight year of improved efficiency.…

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

Good afternoon guys. Just looking for little bit more color on the oil and gas portfolio. So I guess pretty heavy charge-offs ever since limited basically just a single credit, I guess I am just curious you talked about sort of the refill of the non-accrual bucket and then I was little surprised the non-performers, the non-accrual not go down more by sizeable charge-offs. So I guess, just what are your thoughts on those dynamics?

Sure Scott. This is Scott Hickey. So I mean despite the fact that we have moved through and seen a number of charge-offs in the portfolio, we are still seeing a number of customers under stress and going into bankruptcy. So that in itself is not abated so some of these customers move into the bankruptcy role although we still feel we are well secured we nevertheless do move those into non-accrual.

Okay. And I guess what is it then if they are moving into non-accrual, I think you guys suggested in the prepared remarks that you wouldn't expect to see credit for similar loss [indiscernible] cause charge-offs or charges. What is it that give you confidence that despite these things moving, still moving into the non-accrual bucket they won’t have the similar type of loss?

Yes, this is Phil Scott. The two loans where we have taken the most significant charges add unique characteristics, I don't want to get too technical but there was a heavy reliance on non-operated working interest collateral. In both of those cases we had relatively weak operators that went bankrupt and both of those loans and the collateral backing them went to a liquidation process at very low prices that generated a lot of losses. Needless to say, we have gone through the rest of the book, we don't have loans that have those exact same characteristics nor of course, are we making loans like that anymore.

Okay. Alright, I appreciate that. Thank you guys very much.

Our next question comes from Jon Arfstrom from RBC Capital Markets, please go ahead.

Good afternoon.

Good afternoon Jon.

First of all go back to the pack tonight.

They’re going to need it.

Just curious if you’re going to run the earnings call from Lambo if you’re still in the office, but sounds like you’re in the office.

Lambo is too far away.

Just you touched a little bit on the commercial real estate drivers maybe give us a little bit more detail in terms of what you’re seeing and where that’s occurring and maybe what the pipeline looks like there?

Sure. The pipeline for our commercial real estate has been quite robust for literally years if you look at our year-to-date production it's pretty well balanced across our various offices around the Mid West so our Illinois teams have generated probably about 45% of the loan production followed by Minnesota Wisconsin, and then high single digits from Ohio, Missouri, Texas, etcetera. Actually multifamily has not dominated our new production this year. It's the second category, retail has actually led but we had good balance from retail multifamily industrial office, etcetera. So it's been well balanced as a number of banks are starting to bump up or get concerned about the OCC guidance on real estate concentrations, competition is starting to lessen little bit pricing continues to firm. Structures are pretty attractive. We happen to have plenty of room as we sit here today to take advantage of those dynamics.

Okay. Good and then I guess the foots at the general commercial being down maybe touch on what’s happening there, is that a few isolated things or is there something deeper there?

No. We had good growth in the first half of the year and from what I can tell from reading industry information and seeing what some other banks are reporting, number of banks are reporting slower general commercial loan activity in the third quarter. I don't know exactly what to attribute that to but there is nothing that we know of that’s a big concern.

Okay, got it. Alright that's all I have. Thank you.

Our next question comes from Chris McGratty from KBW. Please go ahead.

Thanks for taking my question. Chris one for you, how should we be thinking about the investment portfolio, obviously [indiscernible] pressure and yield can you help me on what your buying changed any material delta in pre-payment speeds and kind of the overall size would be great? Thanks.

Yes we did see following -- or at the end of June we started to see an increase in the pre-payments going through July stepping up dramatically in August and further into September and obviously that trend we know it because we were to see prepayment, but what we are going to hit in October will continue to be an increasing prepayment. That combined with the fact that yields were lower during the quarter contributed to our lower net interest margin for the quarter and what we have been buying as you are well aware has been the Ginnie Mae, Plain Vanilla via securities and the yields on that despite the fact there is zero risk-weighted dynamics have also been attractive to others and actually yields not only fall in because the markets also fell the entire market seems to be buying that products and so we have seen the attractiveness of that investment portfolio options fall precipitously over the course of the quarter and so while that remains sort of our -- we haven't placed we are sitting here frankly looking forward and saying does that still makes sense as platform and we are reevaluating alternatives. I don't think that means we are going to do any of the stuff that we haven't done per say into the investment portfolio but it means we are thinking the allocation of the investment portfolio going forward.

Okay. With that temporarily given the mismatch in yield would that temporarily keep you out of the market so you thinking might lower investment balances in the next couple of quarters or is it kind of stability?

Look we got an ongoing process. We are evaluating the market as we go. Obviously it breaks back up again or as the result of that hike in December we start to take up again we probably would jump in with both feet but as we said here today, it's tough as these yields to put into portfolio stuff that we know is going to be both dilutive to the margin and dilutive for the ability to earn have positive earnings overtime.

Got it, great. Thanks for taking the question.

Our next question comes from Terry McEvoy from Stephens, please go ahead.

Hi, thanks. Good afternoon. Maybe Phil you mentioned the 60 plus increase in the number of employees was risking compliance related. The number did kind of catch my eye, anything specific in the quarter to - behind the increase in those employees?

No they weren't all in risk and compliance by any means. I think we just call those out as maybe there was I am guessing maybe there was a dozen of them or something. There was other people picked up here and there. We didn't have 60 people - we have plenty.

Okay. Good. And then I guess sticking with the expenses of the efficiency ratio 63% but it benefited from the gain in the mortgage area. As you think about 2017 and Phil you talked about just the rate environment remaining low, what else are you looking at to improve the efficiency ratio particularly on the expense side or is it really just a waiting game for the revenue picture to start to look better?

It's as we sit here today, it's the same grind that we have been on. So we have been slowly increasing revenues. And we have been keeping expenses flat and so we are slowly grinding the efficiency ratio to a better number. I like the 63 this quarter too, but don't follow them up with it.

And maybe just quick one last question, the capital market was up 5 million quarter-over-quarter I think it was around $7 million. How is the pipeline for capital markets look as we get into the fourth quarter here?

Yes. So there is a couple of drivers to that. It’s the indication business which in our case is largely commercial real estate driven and we have built a very good commercial real estate business and we are very active underwriters and then sellers of commercial real estate loan. So that pipeline continues to look good. The other piece is to grow this business that is more dependent upon what our customers; rate outlook is and how much they want to lock in their interest rate exposures. So that one is little harder to predict.

And Terry, just for clarity it was 3 million quarter-over-quarter, from the second quarter 5 million year-over-year, 4.8 million year-over-year.

Thanks Chris and thanks Phil as well.

The next question comes from Jared Shaw from Wells Fargo. Please go ahead.

Hi, good morning or good afternoon.

Good afternoon.

Looking at the $9 million gain on sales portfolio loans were those all residential mortgage and what drove the decision to sell those versus continue to hold them?

Sure. The answer is yes. They were all residential and essentially two factors I think as Phil talked through the portfolio mix is generally where we wanted to be. It hasn't changed much. Had we not we would have changed the mix a little bit. But also we looked at [indiscernible] we were cognitive and expected pre-payments to be a factor moving forward and we looked at our overall portfolio and as you are aware most of our portfolios and arm product principally the arm so look at that mix and thought how much fixed rate exposure we want potential in environment where -- might accelerate and take some chip off the table.

Okay and just to confirm those came out of loan held for investment versus held for sale?

Correct.

And then, when we look at the loans held for sale is that - what’s the mix there between the commercial real estate loans you are originating for syndication versus residential?

There is very small amount that usually might be there at quarter end. By and large the trade gets done within the quarter and they close out at quarter end on the commercial side. So that pipeline essentially is all residential.

Okay. And then looking at the slide where you talked about the energy exposure you talk about the new loans funded since third quarter 2015. What was the amount funded this quarter?

I am sorry Jared, I just don't have that in front of me. I mean, it would be a few loans I am guessing maybe $15 million bucks that's -- those are probably approximately right.

Okay. And then finally, on the change in the margin guidance or outlook being weaker. Is that really altered from the securities portfolio or is there something else that’s impacting the weaker?

Cost of funding looks pretty stable. Yields on loans was stable probably stablish maybe little down on pressure probably securities.

Obviously we think competition for loans but securities were the key drivers of the margin compression and again I think as was asked earlier if we continued our current investment strategy there will be more downward pressure because rate are absolutely lower and pre-payments are accelerating.

Right, I think as Chris intimated we are taking a hard look at that right now.

Okay. Thanks and finally is this a good tax rate to use going forward we have been down 30.5% range for a while now is this still -- is this a new base or it should be still assume little bit higher for the future?

This is probably decent assumption.

Okay. Thank you.

Our next question comes from Scott Siefers from Sandler O'Neill. Please go ahead.

Hey guys just wanted to sort of a follow-up on margin. Chris when you were going through the margin you said in the fourth quarter we get a -- probably won’t do anything in the fourth quarter margin just wanted to know how you are thinking about things that we got one in December what that would do in the first quarter, first quarter this year following last December's rate. I think it really wasn't much impact with the real -- being those network deposits which [indiscernible] immediately. Is there any change to what the phenomena would be this time around or what happened last year pretty much same this time around?

I would like to believe that we learned something from what we did last year. And so the outcome might be slightly more positive but just keep in mind that really has no impact at all in the fourth quarter and the carry over into the first quarter we saw some list on the gross yield on margin but we also do a lot of renewals in our book in the first quarter and it appears that essentially the competitive dynamic traded away some of the lift we saw with new lower rates on the renewals. And what we yet ended up with most compression from the cost of funds. What I will tell you is I think there are cost of funds positions as you finish the year here is looking relatively strong and I think we have learned something about managing that little better but that will remain to be seen in the first quarter and how the renewal affects weigh against any yield uptick in the one month LIBOR rate. At this point in time we don't expect any impact for Q4. It might be a modest positive going to Q1.

Okay. Alright. I appreciate it. Thank you very much though. I appreciate it.

And if there are no further questions I would like to turn the floor back over to management for any closing comments.

Thanks. So just in closing our loan deposits fees and expense trends were all steady deposit for the quarter and our credit metrics outside of energy remained very strong. So we look forward to talking with you again next quarter and if you have any questions in the meantime give us call and thanks again for your interest in Associated.

This concludes today's teleconference. Thank you for your participation. You may disconnect your lines at this time.