Welcome to the Old National Bancorp Fourth Quarter and Full Year 2013 Earnings Conference Call. This call is being recorded and has been made accessible to the public in accordance with the SEC's Regulation FD. The call, along with corresponding presentation slides, will be archived for 12 months on the Investor Relations page at oldnational.com. A replay of the call will also be made available beginning at 8:00 a.m. Central Time on February 4 through February 17. To access the replay, dial 1 (855) 859-2056, conference ID code 34095437. Those participating today will be analysts and members of the financial community. (Operator Instructions) At this time, the call will be turned over to Lynell Walton for opening remarks. Ms. Walton?

Thank you, Holly. And good morning, everyone. Joining me today on Old National Bancorp's fourth quarter and full year 2013 earnings conference call are Bob Jones, Chris Wolking, Daryl Moore, Jim Ryan and Joan Kissel. 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 5, as well as our SEC filings, for a full discussion of the company's risk factors. Additionally, as you review Slide 6, certain non-GAAP financial measures will be discussed on this conference call. References to 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. Reconciliations for such non-GAAP measures are appropriately referenced and included within the presentation. Turning to Slide 7, we’ve laid out highlights of our fourth quarter as our continued focus on our three strategic comparatives again produced another strong quarter for Old National. We reported net income for the quarter of $24.5 million or $0.25 per share, which represents a 6.7% increase over net income from the fourth quarter of 2012. Our balance sheet and capital positions remain strong as we not only repurchased 890,000 shares of ONB stock in the quarter but we again increased our quarterly cash dividend and ended the year with a strong 8.5% tangible common equity to tangible assets ratio. We reported a net interest margin of 4.11% for the fourth quarter aided by strong accretion income and a continued decline in interest-bearing deposit costs. Our transformation in the higher growth markets continued as we consolidated or sold a total of seven branches in the quarter and saw an improved efficiency ratio of 66.6%. And just a few weeks ago, we announced our intent to partner with United Bancorp and enter the vibrant market of Ann Arbor Michigan. Moving to Slide 8, many of the thing highlights apply when you look at our full-year 2013 results of $100.9 million in net income or $1 per share, a 10.1% increase over 2012 earnings and the highest net income since 2002. Indeed, Old National 2013 financial performance was record-breaking in many ways. We reported our best return on assets since 2002, best return on equity since 2008, and our lowest efficiency ratio since 2006. In addition, two of our fee-based businesses: wealth management and investments, had their best year in over a decade. And thanks to our credit and production team, we’re reporting our lowest level of net charge-offs in almost 30 years. 2013 also saw Old National’s entry into Southern Michigan with a branch purchase and of course, we have two pending partnerships, Tower Financial in Fort Wayne, Indiana and United Bancorp in Ann Arbor Michigan. With that introduction, I’ll turn the call over to Chris.

Thank you, Lynell. I will start my presentation with Slide 10. Without securities gains and merger and integration expenses, pretax, pre-provision income was $39.7 million for the fourth quarter 2013. Fourth-quarter 2013 pretax, pre-provision income was $8.5 million higher than third quarter and $5.7 million higher than fourth quarter of 2012. Fourth-quarter net interest income was up compared to Q3 largely due to higher accretion income. Noninterest income was lower in the quarter due to higher indemnification asset expense and lower deposit service charge revenue. Operating expenses declined across most categories in Q4 as we saw the benefits of our third and fourth quarter branch consolidations and sales and the implementation of productivity improvement and expense savings projects. Annual pretax pre-provision income was up 11.7% in 2013 over 2012. Accretion of purchase accounting discount contributed $59 million in 2013 compared to $57.3 million 2012. The $1.7 million increase in accretion income contributed to total net interest income that was $8.7 million higher in 2013 compared to 2012. Noninterest income was also higher in 2013 as insurance, brokerage and wealth management all had better revenue in 2013 compared to 2012. Although we incurred significantly lower other real estate owned expense in 2013 compared with 2012, generally operating expenses were higher in 2013 as we expanded into the Columbus, Indiana and Southern Michigan markets with our acquisitions. While Daryl will talk further about credit performance for the quarter, I will note that we incurred $2.3 million in provision expense in the fourth quarter, which came close to matching our $2.4 million fourth-quarter net charge-offs. For the full year of 2013, we recaptured $2.3 million of previously expensed loan-loss provision. Slide 11 shows loan production data for 2012 and 2013. This is data we use internally to track performance among our regions and…

Thank you, Chris. On Slide 28, we show the trailing five quarter summary of net charge-offs for both the bank’s FDIC loss share covered portfolio, which is depicted by the yellow bar as well as for our non-covered portfolio which includes our legacy portfolio along with all of the non-covered acquired portfolios which have come to us in our partnership transaction. In the most recent quarter, we posted consolidated net losses of roughly $2.4 million representing an annualized net charge-off rate for the period of 19 basis points. Consolidated net charge-offs for the year totaled $5.3 million, which represented 10 basis points of average loans. This 10 basis point rate is the lowest rate posted by the bank in almost 30 years. 2013 net charge-offs for the covered portfolio were 63 basis points while net charge-offs for the non-covered portfolio were very respectable 7 basis points for the year. Interestingly, we posted the strong net charge-off results with lower gross losses and not by extraordinarily high recoveries in 2013. In fact, at $11.7 million, consolidated portfolio recoveries for the year were $2.3 million lower than 2012 recovery levels and the lowest of any year over the past four years. On Slide 29, we show trends in our noncovered special mention, substandard and doubtful loans. The bottom two graphs on the slide show that we continued our most recent downward trends in both substandard accruing and substandard non-accruing and doubtful loans in the quarter with loans in those categories falling $7.4 million and $11 million respectively. During the full year 2013, we made good progress in lowering the risk in our portfolios as we reduced non-covered substandard accruing loans by 24% and substandard non-accruing and doubtful loans by 36%. Special mention loans, on the other hand, increased by $5.9 million in…

Thank you, Daryl. And good morning to each of you on the phone. I will begin my remarks on Slide 34 with a quick overview of the general economic outlook for 2014 and our markets and then follow that with a more specific view on Old National’s plan for 2014. In general, the overall tenor of our clients is more positive than it has been in some time. Sales volumes across most sectors appear to be increasing and there is a general sense of business as usual amongst our clients. Consumer spending appears to have been strong in the fourth quarter as evidenced by our indirect auto volume and commentary we've received from other retail clients. There also appears to be a sign that capital spending and business investment are picking up. For those of you that were with us for our investor day, Berry Plastics announced an additional 336 jobs in Indiana and they also purchased a controlling interest in a Chinese plastics company. The unemployment rate for Indiana dropped to 6.8%, which is the lowest amongst Midwestern states and Indiana added 42,600 new jobs in 2013. Overall I would suggest that there is a growing optimism amongst business and consumers as we head into 2014. But given the false starts that we have seen in the past, I’ll be interested to see if the first quarter data and sentiment reflects the continued momentum. For Old National, like the wise sage Yogi Berra said it is déjà vu all over again. Our strategy will remain consistent with what we've been executing for some time now with three primary focuses: continuing to grow our core revenue; continuing to focus on expenses; and continue our ongoing efforts to transform our delivery system by improving its growth dynamics. Let me briefly touch…

(Operator Instructions) And your first question will come from the line of Scott Siefers with Sandler O'Neill.

Bob, maybe first question is for you. You provided some good color there at the end just on the overall kind of top-level tenor and commentary from your customer base. I was hoping you maybe can get a little more specific with your thoughts on what that will mean for your guys' core loan growth in particular. I'm really just hoping you can help with sort of square the lower utilization, which I understand had some noise, the lower pipeline, with what seems to be a better -- I guess better outlook for your customer base broadly?

I think, Scott, I think as you look at the fourth-quarter pipeline, it is up over the fourth quarter of ‘12 and I would say that the trend -- those percentages are probably going to be fairly consistent in ’14. We don’t see robust growth, we see good solid growth much as we saw through ’13, may be slightly better. The pipeline is a good point to look at as well as those proposed are actually loans that we've approved and are moving forward that number was up in a nice way. So I think the bodes potentially well for the first quarter and beyond. The line utilization – it’s an anomaly. We had three large credits that we hope will come back in, very very good clients. One is a educational institution. One sells sweets, I’ll leave at that. Then the other one is in the software technology business. So there's no consistency to the area, it’s just – they are seasonal in nature and we generally see a little bit of decrease in the fourth quarter. But our guys are active, the approval process is working very well and I think we are optimistic for growth in ’14.

And then Daryl had made a comment towards the end of his remarks about taking more measure risk, kind of more I guess -- I read it as more deliberately more intentionally. And kind of any change in the risk appetite or how you guys are thinking about things?

I mean we are who we are. Our clients know it, our folks know it. I think what we’ve really developed over the last few years is a wonderful spirit of cooperation between our origination group and our credit group. And I think what we are seeing as looking at presenting better options to our clients rather than just yes or no. Daryl and his team are working very hard to give us better options. And I think as Daryl and his approval folks are able to get out in the market more now, they are able to help us on joint calls and help us with structure issues that, with all the workouts we’ve had in the past, we probably haven't had so. But Daryl and I aren’t going to change our stripes overnight and getting Daryl to even say measured risk was a bit of a push for us but – guys, we are who we are and we are proud of our track record and we’re not going to change our stripes.

And then maybe just one final one on the service charge pressure you guys had noted. Of course, that's kind of an industry issue, but I just was curious for any more color you might have on what you guys are seeing, how you're responding, et cetera.

Well the responses, as you know we did increase our fees here a couple quarters ago. And I think you saw the benefit of that. We’re seeing presentments down on the overdraft side which is really a reflection of the economy and I think the education that the industry and banks have done in helping people understand the charges that they incur. So I actually -- while it is a negative to us in terms of earnings, I think it’s another reflection of the positive trends in the economy where you are seeing people not having overdrawn, people getting better educated. So and that’s really where the big pressure is coming right now.

Your next question will come from the line of Emlen Harmon with Jefferies.

A question on the expense outflow kind of the efficiency ratio target that you're giving. How much of reaching that target is a function of just improving the revenue in the Southwest Michigan and Northern Indiana acquired branches and how much is just kind of more general expense stuff across the landscape if you will?

It’s a great question. I think a couple points. What the incentive target is -- may not necessarily reflect what we might have in our budget, and I’ll just leave at that. But for us it is really all about expenses. As we talk to our board we do not go in and say we’re going to grow revenue at X or many of you heard I call that if, it comes it’s great; if it didn’t come, I don’t want to – so it is really about reducing our costs and as I said we’ve got over 20 projects. We will continue to benefit from those projects and there is an ongoing commitment. It goes all back, Emlen, to this culture we are trying to create, which is – it’s not a one-time event, it is for us an ongoing way to look at the way we spend our money.

Emlen, this is Chris. I might just add to that -- that 64.5 does an awful lot for my ability to keep our business line managers and staff people focused on just what Bob said productivity improvements, rationalizing every expense, thinking about the benefits and costs associated with each increase in FTE. So it’s a very important element of our monthly scorecard discussion. So we saw a real impact from that I think in 2013 and it was our decision that that was important point to continue to reinforce in 2014.So I think just like Bob said, everybody takes it in the spirit that it’s delivered. It’s just important way for us to keep focused on, on expense improvements.

I mean is there anything -- when you guys think about, again, the Southwest Michigan and the Northern Indiana branches, anything within those that would make you think you couldn't get to a kind of efficiency ratio that the rest of the bank has reached over time?

No, no at all. In fact, I would tell you just the opposite. I would tell you that economy up there – if you didn’t see there was a great article about Grand Rapids in over the weekend in the New York Times. And the economy is strong. We’ve got very very good people. It’s just to build that loan portfolio and match those deposit is going to take some time. Obviously they are going to benefit from the UBMI acquisition as we get more name recognition in those markets. But I couldn’t be more happy with the team we’ve got up in there and then the receptivity in the market. But to do it in our measured credit manner it’s going to take us little bit of time but it will be profitable for time and for a long time versus just short time.

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

Bob, on the utilization comments, you cited one specific market that was softer, but you didn't -- maybe I missed it. You didn't specify which market it was. Could you provide that?

It’s our Evansville market, Southwest Indiana and all three of the large folks we talked about are all based here in Evansville and it’s just -- nothing reflective of the economy, it’s just – we’ve got an education facility, a candy manufacturer and a software company and it is what it is.

Now for 2014, on an organic basis, should we expect the loan growth to be driven by the consumer and the residential book, or can the commercial grow at similar rates?

I think the commercial can. I would tell you that I think I believe that consumer – again you are seeing a little more optimism, you are seeing a little more indirect. You are going to see less in the mortgage side clearly but we feel relatively optimistic on the commercial side with the team we’ve got in place and the markets we see and the activity we’re seeing.

Just a quick one on the buyback. You bought more stock in the fourth quarter. Was that a function of just two pending deals or how should we think about your actual ability to buy stock in 2014?

No. In fact, Chris, I think we had that kind of in place obviously with the $2 million share buyback. We look at that really independently of our acquisition outlook although it has a bearing of course. But when you're only paying out 40 percentages of earnings and organic growth was measured, we just had that opportunity and we felt like it was an important opportunity to materialize. And as we talked about in other calls we’ve got cash components too for our pending acquisition. It’s just a way to get our common equity about where we think it should be. So nothing special, just kind of part of the overall day-in and day-out discussion about capital utilization.

I would just add to that. Chris, I think it reflects our board's commitment to returning to the shareholder because obviously they are very engaged in the process and as we saw the opportunity we felt it made a lot of sense to return some value back to the shareholders.

So we should -- you would direct the sell side to potentially put the buyback in our 2014 estimates?

Hard to say. We still got the closings for the transactions. It’s going to be tough. Probably not at this juncture, I wouldn’t model it as opportunistic, it would be nice surprise if we do but I think at this stage with two pending acquisitions and what we see in the pipeline in terms of other opportunities and the fact we increased the dividend, I think are all points our board will look at – and if the economy comes back even quicker than we expect, then earnings are a little better, then that might change.

Last one. I just want to make sure I heard you. Chris, on your 64.5%, I think you said something about a 64.5% efficiency ratio. Did I miss a target for 2014, or is that kind of where the incentives will be?

That is for 2014 target for incentive purposes for the fourth quarter.

So 64.5% by Q4 2014 and then what adjustments besides merger-related costs should I be -- will you guys be making?

None.

And your next question will come from the line of Taylor Brodarick with Guggenheim Securities.

I guess just one question on the technology investment. Any kind of quantitative targets on what that would reduce on the expense side? And do you think that would lead to any revenue synergies, any type of I guess gathering more revenue through a more dynamic tech platform?

I don’t see it on the revenue side as much as I really see the opportunity to reduce cost because our current teller system may have been designed in the late 1800s. In all honesty, it is a very old system, it is cumbersome to use and the early returns were actually just last week at our first pilot branch that is up and running and it’s gone so well that we are going to accelerate the rollout. Where we will get benefit will be in those areas in the cost – really too early to give you any indication on what that will impact. But as we get further rollout and we get a better sense of where we can eliminate work steps in that, we will let you know.

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

Just maybe a question for Daryl or Chris on the provision. What are you guys thinking on the provision for 2014? When I look at the quarter, it looks like maybe it was driven more by charge-offs than anything else, and overall credit continues to get better. So my assumption is just maybe provision that matches growth and that's about it? Is it a fair way to look at it?

Jon, I would say provision that matches growth and net losses, I think you can generally target in that area for 2014.

And then just a smaller question maybe for you, Bob, on your antiquated teller system comment, did you hit your goal of rolling out mobile banking in January? And if so, how has it gone so far?

I like smaller questions associated with me, Jon, small anything with me is good. We actually did hit our mobile banking goal. It works very well. My wife actually deposited two checks. My wife still uses a pocket calendar that is handwritten so that tells you that if my wife can do it anybody can do it. It’s been very well received and I think again there is an opportunity for us to improve the efficiencies in the backroom.

For what it's worth, Bob, my parents still use the drive-through for the dog biscuits.

We like that. It’s okay – if you come through Jon, we will give you a soccer.

Your next question comes from the line of Peyton Green with Sterne Agee.

Just a question on the efficiency outlook. I mean certainly progress has been made over the last four or five years. I was just wondering maybe, Bob, if you could give some color as to -- are we at a point where it shifts from being so expense focused to one where really it's thinking about it in the context of $2 of revenue for every $1 of expense, or what’s your thought there? Maybe just give us some kind of context.

It’s a great question, Peyton. I would tell you I don't think we are there yet. I think we still believe we've got areas of redundancy that if we can eliminate will improve the client experience as well as our associate experience. And that really is around cost. So I don't think we’re at a point where we can do hi5s in the end zone but we’re going to continue to focus on costs and I think eventually you will get to a point in normalcy if that’s the right word where – but we've always said we’re not a sub-60 but we would like to be closer to 60 and I think we are getting there. And I think the way we get there is to continue to focus on cost, and anything that comes on the top line is just pure gravy.

And then second question would be, I mean, the charge-off rate certainly is extraordinary and has been quite strong for an extended period of time. How should we think of just a general reserve or provision expense per unit of loan growth going forward? I mean any measure of potential charge-offs would still seem to be a lower reserve than where you ended the year. Is that a fair way to think about it?

Yes, I think so but I think even Daryl would acknowledge that 10 basis points is just not something that either we’re going to target or that we can potentially see year-over-year at that level. There is – we’ve acquired portfolios and if those loans move into core, there -- I would go back over history, we’ve traditionally been somewhere in that 20 to 35 basis points charge-offs, maybe somewhere in there for your modelling. But I just don't believe the 10 basis points is -- we can get there but I am not sure that’s what we want.

It’s interesting because we talked to our credit management the other day and we all agreed that long term 10 basis point is probably not the right thing for this company. And we have to tweak and – that’s to my point, my comments earlier we are going to have to tweak what we’re doing to take on a bit of incremental well-planned risk to drive additional revenue that makes sense and that will of course have incremental increases in the charge-off rates. But I don’t think there is anybody sitting around this table that has aspirations to be 10 basis points for the balance of the history for this company.

I believe we will still be under peer numbers but I think that’s just our credit culture.

And then maybe Chris addressed this and I missed it. But of the BSA/AML costs, I guess it was $5 million, almost $6 million over the term.

Right.

How much would you expect to see the ‘14 expense rate drop versus the ‘13 just on a marginal basis?

The ‘13 number feels like something we are going to see here for the next couple years as we work through the depreciation of the investments. So I think the $2 million we talked about in 2013 is a fair number for 2014 as well.

So just all assuming they drop year over year --

Given the increased pressure and the focus on the regulators on BSA/AML, I think if I dropped my cost there, my EIC would be in my office fairly quickly. It continues to be a very very big focus for the regulators.

At this time there are no further questions.

Great. I think everybody knows the spiel at the end. If you have any further questions, let Lynell know. As always, we appreciate everybody’s interest and we look forward to seeing everybody as we get and hit the conference and NDR circuit. So thank you very much .i

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 1-855-859-2056, conference ID code 34095437. This replay will be available through February 17. If anyone has any additional questions, please contact Lynell Walton at 812-464-1366. Thank you for your participation in today’s conference call.