Good day everyone and welcome to the First Merchants Corporation Third Quarter 2015 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] We will be using user-controlled slides for our webcast today. Slides may be viewed by following the URL instructions noted in the First Merchants news release dated Thursday, October 22, 2015 or by visiting the First Merchants Corporation shareholder relations website and clicking on the webcast URL hyperlink. This presentation contains forward looking statements based on our current expectations reflecting various estimates and assumptions. These forward-looking statements include, but are not limited to statements relating to our business outlook and the expected timing and benefits of the propose merger between First Merchants Corporation, Americana Bancorp. These forward-looking statements are subject to significant risk and uncertainties that may cause results to differ materially from the set forth in this presentation examples of which are included in the return presentation materials filed with the Securities and Exchange Commission in connection with this call. Please refer to those materials for more detailed discussion of the applicable risks. Please also note that today's event is being recorded. I’d now like to turn the conference call over to Mr. Michael C. Rechin, President and CEO. Sir, please go ahead.

Thank you, Jamie. And welcome to all of those that have chose to join us today. Welcome to our earnings conference call and webcast for the third quarter ending September 30, 2015. Joining me are Mark Hardwick, our Chief Financial Officer; and John Martin, our Chief Credit Officer. The company released our earnings in a press release at approximately 10 o'clock this morning Eastern time and remarks and presentations as they speaks to material included in that release. The directions that point to the webcast were also contained at the back end and my comments will start on Page 5 on a Slide Titled Third Quarter 2015 highlights. First Merchants' reported earnings of $17.1 million of net income a 5.9% increase over the third quarter of 2014's $16.1 million. The current period earnings equate to $0.45 a share. And on an annualized -- on a year-to-date basis a $1.35, which is 9% over the year-to-date 2014 level of $1.24 per share. Some of the other performance characteristics are listed at the top of the page are referenced to the $4.26 billion and net loans are just under 15% increase over 9/30 of '14 would be inclusive of the Community Bank acquisition closed in November of last year and that Cooper Bank acquisition closed earlier this year. Mark and John are going to discuss with you several aspects of the result, but they would include the loan volume cited above in combination with a strong margin that are combined to provide a 3% net interest income growth and as referenced, John will cover the asset quality, which continues to work favorably in conjunction with our expectations. The bottom of the page covers a couple of what we’ve shared in prior calls as important opportunities for us and in July of this…

Thanks Mike. I’m starting my comments on Slide 7 where our total assets reached $6.2 billion an increase of 10.7% over the third quarter of last year and 6.3% over year end 2014. The growth over the third quarter of last year includes organic growth of $187 million and the addition of Community Bank totaling $281 million in November of '14 and Cooper State Bank, totaling $142 million in April of '15 offset by the sale of insurance of First Merchants insurance group in June of 2015. Total loans on Line 3 increased 10.1%, since yearend and year-over-year by 14.6% or $549 million. Since September 30, 2014, organic loan growth totaled $293 million or 7.8%. Community Bank accounted for $145 million and Cooper State Bank accounted for $111 million. The allowance on Line 4 in total dollars has remain very steady declining as a percentage of non-performing loans to 1.7%, I’m sorry -- non purchased loans to 1.7% from 2.04% at September 30, 2014. However, our decline in total non-performing loans and especially non-covered, non-performers provide sound justification for all AOL levels and actually if you go all the way back to 12/31 of 2012, our allowance was just $69 million. So we feel like it's at a very healthy level given the state of the economy. The composition of our $4.3 billion loan portfolio on Slide 8 continues to be reflective of commercial bank and it continues to produce strong loan yields. The portfolio yield for the third quarter totaled 4.41% compared to a third quarter '14 total of 4.62%. On Slide 9, our $1.2 billion bond portfolio continues to perform well producing higher than average yields with a moderately longer duration than our peer group. Our 3.97% yield is actually 10 basis points better than one year ago…

All right. Thanks, Mark, and good afternoon. I’ll be updating the trends in the loan portfolio starting on Slide 12, review the asset quality summary and reconciliation discuss their value and allowance will further and then close with few thought on the portfolio. So turning to Slide 20 for the third quarter, the loan portfolio grew by roughly $84 million or 2% for the linked quarter, 8% annualized on the link quarter and 10% year-to-date annualized. The growth in the portfolio was driven by increases in construction development lending on Line 2, public finance on Line 9, home equity loans on line 8 and commercial industrial lending on Line 1 and we saw construction lines continued to drawn again this quarter and commitments level out while on public finance base we adjusted our return targets, which somewhat slowed the growth in municipal and non-profit lending from a prior quarter but nonetheless resulted in solid growth with a more attractive risk adjusted return. So turning to asset quality on Slide 21, we had another positive quarter of asset quality improvement. Total NPAs and 90 day pass due declined $5.3 million or roughly 9%. Non accrual loans came down $5.1 million shown on Line 1 and other real estate on line 2, came down $4.4 million after several quarters of holding our $19 million and we continued to make progress working through some of the more challenged portfolios associated with recent acquisitions while continuing to broaden the overall mix of assets in the portfolio. Dropping down to Line 7 and 8 classified assets on Line 7 were down 8% in the linked quarter with overall criticized assets on Line 8 declining $10 million or 4.3%. The economy continues to help this number as some borrower see better results in addition to strategic…

Thanks John. We’re going to take questions here in a few movements. I want to cover some of the material on Page 26 and couple of these topics I highlighted right at the front end of the call. Specifically our third quarter completion of extending our relationship with our core processor we had been using a really dependable deposit and loan platform. We extended our work with that vendor to add their capabilities to our mobile and online banking. Product offerings and we've been pleased with it. It's roughly 90 days old. I think our clients are adjusting to the new technology very well. We're adjusting to servicing that transition for our clients. We're really pleased with the decision we made. We like our near term ROI. We like our loan term ROI and following a path that our clients have clearly led for the way they would like to use our company. Referenced on the last call and I'll repeat it again, our primary focus is on building share in our existing franchise through our existing lines of business and what is a very comparative environment and so the bullet point beneath there talking about organic growth reflects exactly that energized team effort out of our company. We’re pleased. We talk about loans a lot and I'll reference deposits and fees, but in the third quarter we had 2% raw loan growth all of which would have been organic absent any acquisition closings in that time period. So we feel good about it. I would affirm for you that kind 6% to 8% organic ability to grow in our marketplace and while the last couple quarters have been on the high end of that, we still see the market place as competitive, but would push to exceed, I am…

[Operator Instructions].And our first question comes from Scott Siefers from Sandler O’Neill. Please go ahead with your question.

Good afternoon, everybody.

Good afternoon, Scott.

Mike you gave a lot of good color around your thoughts on loan growth, which I appreciate. Wonder if you could spend just a moment or so talking about the competitive dynamic as you see things are getting -- are things getting more or less intense or are they kind of level? And then John I think you in your prepared remarks had noted at one point you guys did make some adjustments to your return targets. I wonder if you could expand upon -- I just want to make sure I heard that correctly and then two, just to begin expand upon the rational and back on to that decision.

Yes Scott. Its Mike, I’ll cover my portion of the question and let John speak to the second half. As it relates to the marketplace and our expected levels, the markets -- I don’t think any more comparative here in the fourth quarter of the year than it was earlier in the year. If anything the number of opportunities that go in the pipeline might not slow through as concretely as they have in times past, but we really haven’t had to compromise much or will not compromise much on either structure of price and I think the net interest margin reflects that. But it's an actively -- that’s a great time to be a customer evaluating bank idea, that’s why I'll characterize it and so we're trying to match that expectation on the part of business owning decision makers and consumers with answers and solutions that meet their expectations but it's difficult out there.

Okay, thanks.

Scott, this is John.

Hi, John.

Hi, how are you? The target or the risk target that I was referring to, excuse me, return target that I was referring to was a model that we use for any of the municipal financing opportunities that we look at. We set that based on some expected target and adjust that upwards and downwards depending on how opportunistic we wish to be on any bad situation, but that’s just a model that we use.

Okay, Good, I think I miss heard, just I appreciate that clarification. All right, thanks guys.

Thanks Scott.

Our next question comes from Damon DelMonte from KBW. Please go ahead with your question.

Hi, good afternoon guys. How are you doing?

Good Damon, how are you?

Great, Mike thanks. My first question relates to the margin, could you talk a little bit about the dynamic of quarter-over-quarter as to what led to the higher result this quarter?

Yeah, Damon its Mark Hardwick.

Hi Mark.

Thanks for being on the call. What I say the last quarter should say the second quarter was just kind of a returned to a normalized, average days where in the first quarter we had a decline primarily based on February being a short month and the fact we had between $400,000 and $500,000 a day in commercial income. This quarter it was actually really driven more off an improvement in our fee income and we've through that in detail. I am just trying to make sure that there wasn’t a real significant increase in fee income based on a prepayment of some sort. And the largest dollar amount that we could identify we had about an $80,000 increase in fee income in the months from one large pay down. So it looks relatively stable and improving and as a company we've been focused on making sure that we’re getting fees where appropriate and it seems to be finding its way into the income statement. On a go forward basis, in this rate environment until the Fed decides to make some kind of move, I think we still feel like, it's appropriate to assume that we’re going to have a basis point or two reduction in the core numbers moving forward, but the result show that we’re doing everything we possibly can to sustain strong and improving margin despite the environment that we’re in.

Okay. So the four basis point increase from last quarter to this quarter just I understand that in part had to do with some commercial loan prepayment income, did it also has to do anything with the accretable yield possibly?

No the accretable yield is taken out of the core. So I guess what I am saying we were -- our core number was 3.71% a year ago. We saw a decline and then we rebounded back to 3.71% this quarter. And if you look it's on Slide 13, we were on 3.71% in the third quarter a year ago, 3.69%, 3.61% and then it came back up to 3.65% and that were 3.71% and the only other really item of note, we get a little bit of interest savings from the $5 million pay down of the trust preferred debt and we also have restructured some of our federal home loan bank advances where if we're just finding opportunities to reduce expense.

Got it. Okay and then with regards to fee income and specifically the gain on sales loans could you talk little bit about the mortgage banking activity I’m assuming that to a is driving those numbers just talk a little bit about what you’re seeing this quarter. I think with most other banks we’re seeing decline quarter-over-quarter and gain on sale income so I just wondering what you guys are seeing and what’s driving up for your guys.

Yeah, I don’t think we’ve had much shift in the spread on the sales. It's really just an our flow through has been good I referenced the closed loans and then the quarter we closed 431 loans as a down a little bit from 500 in the prior quarter and we take a nice backlog in dollars into the fourth but it hasn’t really been a gain on sale expansion.

Okay. The lines remained strong so we should see something similar to this quarter, next quarter.

Yes, it is. Fourth quarter is typically slows down for us a fair amount, but at least here at the front end of the quarter it kind of shows the strength that we saw in the second and third quarters for the time being.

And some of the improvement if you just you look year-over-year does have to do with the addition of the acquisitions then making sure that we're maximizing Indianapolis to the community acquisition maximizing Columbus through our Cooper State acquisitions.

We’re planning for '16 in all lines of business, but relative to that one, Cooper is relatively underpenetrated from a talent standpoint on mortgage origination. I would probably say the same thing about Ameriana. And so I think we’ll probably have better per store coverage of our retail configuration through mortgage origination to take advantage of whatever the condition of the market proves to be.

Okay. Great and then just my last question on the tax rate, good effective tax rate used to be something in the 27%, 28% range. Is that correct.

Yeah, it would be.

Okay, was there anything unique to this quarter’s tax rate that was little bit different than what we are looking for and I didn’t know if there was something that may have missed.

Not really.

No. Okay.

No, maybe we can talk afterwards, but now -- last quarter was definitely unique but this quarter should represent a return back to normalized levels.

Okay, perfect. That’s all I had guys. Thanks a lot.

Thanks Damon.

Our next question comes from Eric [Swick] [ph] from Stephens. Please go ahead with your question.

Good afternoon, guys.

Good afternoon Eric.

One more quick question on a margin if I could, it sounds like the guidance for the modest declines and the net interest margin is the core margin, is the safe to assume that the reported margin continue to be little bit more variable especially as you bring on Ameriana and kind of refill the accretion bucket to some extent.

Yeah, if you look at Page 13, its been fairly steady the last three quarters, $2.2 million, $2.2 million and 2 million, but yeah we shouldn’t have any spike in those numbers in the fourth quarter from Ameriana as we expect to close that towards the end of the quarter, but as we look -- as you forecast and as we forecast into 2016 we should have some additional accretive yield coming off of that acquisition.

And then moving to the loan growth I appreciate the comments on the, the segments of the portfolio that drove the growth in the third quarter could you talk a little bit about which markets were the strongest and also kind where you expect the best growth opportunities going forward.

Sure, we really have kind of two set of expectation for our core growth markets which are Columbus and Central Ohio, Indianapolis and Northwest Indiana that really high single digit if not close to 10% on an annualized basis and then the remainder of the company our half year business and our monthly business slightly beneath that which reflects the economic dynamics of marketplace and so when you look at the actual results which speak to your question that Indianpolis has been and continues to be year-to-date to include the third quarter where we had the most activity. Most activity most growth.

Thanks. I appreciate the color.

You’re welcome.

[Operator Instructions] Our next question comes from Brian Martin from FIG Partners. Please go ahead with your question.

Hey, guys.

Good afternoon, Brian.

In the same market which one you see if you give a little color on the core level of the income in the quarter. I just assume it’s the two kind of non-recurring gains if you will, the securities gains in the gain on the redemption on the hybrid, so $14.5 million maybe is a decent run rate and just the expectations to layer into the deals and half of that.

Yeah, I do think that’s the best way to look at it. The only kind of the extraordinary can be really around hit some of our hedging activities I and that shows up and down and other income so that’s variable depends we will do anywhere from one hedge in a quarter to as many as four, five and the income of those is somewhere between may be 50,000 to a quarter of million so just depends how much activity we have on that front.

Okay. Perfect and then just as far as the accretable yield benefit from Ameriana, can you give any color on just how we should think about that may be just on an annual basis what you think the ad could be on that piece.

Yeah I think we announced that were, that we are going to have marks of around $11 million and then I think if you look at out slides and especially in John Martin section where you just, where we identify those marks Slide 23 and you can see that we still have almost $38 million remaining of our prior marks from prior transactions and then we’ve had other 49% either find its way into the income statement or offsetting losses and about two thirds of ad you can save the 33% is the coming through in terms of income. I don’t feel like we’re aggressive in those marks that were, we feel like we are taking a current conservative stance that has not -- we're not putting overloading the fair value marks to produce future income. And so in this case we will have $11 million. It will come in overtime and if you assume that over a three year period we’re going to use maybe half of it and two thirds get used for income and third to offset losses, I mean that is a reasonable way to model it but beyond that I can’t give you a great answer to what to expect for next year.

Okay. All right that's helpful and then maybe just back to John for a minute just on the I think you mentioned the some potential weakness if you will in the Ag portfolio just kind of what you are seeing there obviously you guys have little more exposure but just kind of what you are seeing with regard to the Ag would be helpful?

Yes hey Brian. Really what I’m seeing is kind of hit or miss depending on the farmer but in Indiana right now, we are right in the middle of harvest and we are getting kind of mixed results back. Some of the farmers depending on how they hedged are fine and doing their production is fine, others because of our earlier wetter spring are seeing somewhat weaker results and depending on their crop insurance how that is going to actually play out. So it’s that component of it and some of those are getting criticized depending on their current year results and how liquid they are, that is the reference I am making back to the criticizing classified numbers and why there might be a little bit of impact from that. Again there is roughly $91 million in Ag production loans, we have $150 million, $160 million in land loans and that -- that is being impacted by commodity prices as well as the prices come down, the economic value of the land has the tendency to be impacted. So more than anything we’re just kind of looking at that portfolio and continue to evaluate it through the fall and look to the future. The lot of the farmers are in great shape through years of really strong crop prices recent years of strong crop prices and are well positioned. So not a large concern there but is just something that I have – we are watching as we head into the fall and into the Spring.

Okay. I appreciate the color. Thanks guys.

Thank you very much Brian.

And ladies and gentlemen, at this time I am showing no additional questions. I would like to turn the conference call back over to Mr. Rechin for any closing remarks.

Thanks Jamie. I appreciate the participation, I appreciate the interest in the questions. I thought we had a pretty solid quarter. We’re pleased with the momentum we take into the end of the year and as we are really pretty far through our 2016 planning. I hope our plan is easy to digest. We look forward to talking about our fourth quarter results towards the end of January. We will talk you then. Thank you.

Ladies and gentlemen, that does conclude today’s conference call. We do thank you for attending. You may now disconnect your telephone lines.