FRME - Earnings call transcript Q2 2019 | First Merchants Corporation

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Operator

Good afternoon and welcome to the First Merchants Second Quarter 2019 Earnings Conference Call. [Operator Instructions].

This presentation contains forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act. Such forward-looking statements can often be identified by the use of words like believe, expect or may and include statements relating to First Merchants’ goals, business plan, growth strategies, loan and investment portfolio, asset quality, risks and future costs and benefits.

These statements are subject to significant uncertainties that may cause results to differ materially from those set forth in such statements, including changes in economic and business conditions, the ability of First Merchants to integrate recent acquisitions and attract new customers, changes in laws, regulations and requirements of the Company’s regulators, the costs and other effects of legal and administrative cases, changes in the credit worthiness of customers and the impairment of collectability of loans, fluctuations in market rates of interest and other risks and factors identified in First Merchants’ filings with the Securities and Exchange Commission.

obligation relating any in to or release. no written statement this undertakes press oral or the Merchants to forward-looking update whether presentation First matters discussed

necessarily past this note is being operations In results. event results the anticipated future Company’s do addition, not indicate recorded. its Please of

to Please would go I over like and President turn to Rechin, now ahead. Chief conference the Michael Executive Officer.

Michael Rechin

call and ending and everyone earnings XXXX. webcast June the Gary, to welcome you, conference Thank quarter for second XX, our

most our Chief Officer, calls, in our as Financial Officer Operating Hardwick, today Chief Chief John me Joining of Credit Mark and our Martin, Officer.

released from Time press release and that release, Merchants afternoon cover this Eastern we’re earnings contained second to back highlights. presentation this are going o’clock to directions the the the the going and X First in the with X, also Page our quarter material morning, to titled a you on approximately were webcast a my in release, point slide XXXX to comments of end that begin speaks

key million for The assets of grew the quarter XXXX; $XX.X over XXXX. included second of a of after quarter over quarter XX.X% second X.X% total second increase $XX.X over the Our per net XXXX. a the $X.XX, X.X% earnings of tax, us increase which income with of strong growth in share of highlights billion quarter

of growth respectively. Our deposit organic XX.X% and XX.X% annualized and loan quarterly

return average measures, high the release in efficiency asset Mark XX% In average addition as that John equity quality in well. positive results on strong with to that that, told, strong on on a and XX.XX% return with X.XX% remain portfolio metrics, covered the hear soon Bank and cover you’ll growth assets, a performance and continues here produced will Martin’s thoughts ratio. trends All shortly, our fee

up pick you from here? would Mark,

Mark Hardwick

on total My year. increased XXXX. on an growth on $XXX annualized X% year-end and basis assets Thanks, million $XXX X this annualized Yes. X comments Organic Line equaled XX.X% Line by Slide or or will loans begin an Total on since X. million on basis Mike.

X The yields composition of $XXX on loan left or of produce to quarter. on strong X.XX% investments loan the by continues the an for Line side million it While totaling increased Slide our billion shown X portfolio, $X.X annualized XX%.

right the loans of graph the rates asset continue As in anticipated. will on in the created Bank. future XX% by as variable, short-term of if demonstrating loan prove our The rate our the decline our variable illustrate, yields are sensitivity challenging growth base to index

is our variable a X, rate our Slide portfolio. On longer good normal investment portfolio offset duration loan to than

portfolio year, against $X.X to the we have During increased the $X.X protection rates. from billion billion falling as

in our is growth As that of I’ll loss talk XXXX investment moment. have the million XX, million fall, as flipped and to of $XX.X in deposit really started most about of in of an rates outcome the unrealized unrealized [December of gain a to $X portfolio the XXXX] this growth

and an money the accounts X, CD deposits first of from Slide the market months by during million and XX.X%, of $XXX on Now much cost higher came the by year growth increased total annualized six specials. institutional

while variable XX to half the approximately of the rate is growth period is XX funding, Approximately a for months. half of fixed other

for from rate imperative deposit of quarter will for remainder Controlling the the quarter year costs interest the and of be XXXX. remainder actually X.XX%, XXXX of up and first totaled reducing expense the second growth an interest XX, Slide into from XXXX future deposits of On X.XX%. the from

back write-ups demand investor we a couple on in we noticed trends on us to it focusing a Now seemed and tactic for deposit deploying Slide appropriate of share XX, XXXX. started

of to different variety reasons. and were which migrate time we of made the free-checking free not and We each operational we have frozen and/or acquired maintained decision into a acquisitions, accounts, strategic for our integration. at set current Through product XX do grandfathered of the that accounts these sell multiple grandfathered

as expected, with the the any risk or set. in is pleased review dating chart, is and migration of to shown migration The deposit product materially and outcome the of we’re going inflows The reduced of XXXX. the and current impacts back simplicity demand outflows

the to capital XX, are XX.X% plus on into regulatory our our Slide ratio the Now flexibility and common will future. targets, our the regulatory of we XX% total and capital ratios internal ratio well tangible provide capital definition above optimal equity capitalized continue of believe risk-based strength

The to outpace We our allow by of next. earning asset this on Corporation’s net compression in enough financial for can balance income, growing X. remainder see continue overcome base net net the Line XX margin Slide is margin in you our growth sheet on as for to the interest do interest and year biggest challenge interest to or

section for However, points of basis XX and the XXXX, Fair Slide portfolio value again for institutional in core accounted funding accounted accretion prior has just run our base investment the quarter. the X as cost behind X basis of funding points periods in continues driven of exceeded forecast internal as discussed our it to compression. growth by all this

rate interest ahead, that go-forward to basis. lose or we primary X our simulations will X basis each decline the for basis suggests in Looking Fed on point XX points rate funds a

have every move. gained up, XX On basis about for we X basis point points Fed the way

points, even a we up that though way X or one FOMC think on did that in on we’re expecting July. we reduction way the probably amount simulation similar believe basis down each for says the we X that the and we lose So

margin that experiencing currently, or Given the anticipating that XX next basis on upward pressure by continued least under deposits, points. X at quarter’s pressure may be we’re we’re

of $XX.X to income way in that non-interest these non-interest our financials cyclical win counter memory. a income is find we’ll is headwinds. Slide recent usual, Total million, One despite quarter XX. strongest As on our area reached

of of pick-up on as valuation. first $X.X million XXXX additionally recent of quarter securities sale increase over harvested result customer from categories the and the some of $XXX,XXX came of in a specific the improvements we of is gains the

performed related lending Line fair the and million an for X settlement. planned million $XXX,XXX Line Slide X was $X.X $XX.X under totaled million expense Included our XX in as Non-interest expense, expensed marketing the professional under to in was in quarter. recorded of services. while was quarter extraordinary $X.X on expense

the efficiency On $X.XX Slide XX%. for ratio totaled and XX, EPS the quarter totaled

Now second on our XX, it Slide highlights share positive of a XXXX. including value of per trend-lines end, $XX over book quarter tangible as quarter-end

double-digit composition loan ‘XX related and dating and of will Martin your On dividend now Slide trends. per growth highlight per back attention May to Thanks increase rate quarter quality we our our tangible annual for and book share John asset share XX, value XXXX. $X.XX to compound portfolio discuss our second

John Martin

quality good summary on Mark the roll the my right. Slide and begin with the remarks portfolio, of the Thanks, changes through All I’ll cover forward, walk allowance review quality with portfolio. afternoon. provisioning in asset the loan XX and some and close asset and deck then in

then. The or portfolio industrial Slide on the second XX XX% X, quarter, mentioned, to quarter. linked Lines with just X% commercial Turning X commercial combined loan and in and real-estate and as in Mark or owner-occupied increasing grew million $XXX the a annualized X% in

real-estate $XX $XX public Line the down area in see loan credit to were million continue up Construction sponsor demand We the million investment finance. with on on X. portfolio structured finance and X Line balances both robust with

the where that real-estate on includes are lending I market they with the mentioned move expectation frequently to likely this construction financing calls, construction to favorable. permanent more will earlier investment our projects terms approach

a This leads as fluctuation real-estate stabilize to with non-owner the in to market build and loans in occupied construction move projects secondary

commercial and grew X loans Lines million X environment be or with the challenging lending remaining public continues to in on unchanged portfolio agricultural X.X%. The and while the other quarter finance mostly $XX

residential Then C&I quarter. $XX XX into that a primarily finishing roughly million million while private in the moved both portfolio representing lending and banking That’s change resulting out X% from consumer loans other and the the of loan mortgage consumer on X slide, reclassification Lines the a there. declined $X.X increased

grow portfolio to X/Xrd a and in are balanced the the way. is C&I, continue commercial and real-estate, consumer. roughly The construction portfolio X/Xrd investment X/Xrd We

risk-based concentrations risk-based capital. XX% real-estate XXX% to hover at concentration construction around of around with the continue Our hovering investment of capital

us gives arise, by for these Now as room growth and C&I real-estate levels concentration consumer lending. balanced opportunities

on Slide Turning asset XX. quality to summary the

loans X for non-accrual quarter. owned at and respectively the remains on million Asset quality real-estate $XXX,XXX X, decreased stable $X.X point, Lines this and healthy other and and

There are X XX%. a $X greater increase leaving and unchanged past loans XX fairly renegotiated four $X.X with days or portfolio, than Line due, roughly plus million, million non-accrual $XXX,XXX and days currently due loan XX granular relationships were down on NPAs remaining in non-performing the past

delinquencies. migration to titled column right with quarter and Slide the We $XX in NPAs in the XX, the million started which of nonperforming reconciles Turning far QX-’XX XX-day assets.

other Line on the gross Line of We million X resolved Line million of netted X $X.X $X.X with non-accrual quarter, only This million $X.X million new the charge-offs loans down $XXX,XXX ORE in decrease on to no decrease ORE added we in same on of and a and on X. of in of non-accrual to ORE new $X.X write Line X had real-estate $XXX,XXX ORE which $XXX,XXX. dropping through which X, in downs, sold of in of a owned loans Line resulted X, changes

plus in slide, which NPAs days XX XX the days loans at plus delinquent $X.X out $XX.X an the quarter $XXX,XXX, overall and million. to of ending Finishing total million, led decrease delinquent to increased

offset or in loans the fair of Slide We XX, in summary. increase an of by million. on Lines ending charge-offs $XX.X Moving to allowance expense in began quarter an highlights and the allowance allowance the ALLL, value X $XXX,XXX to with the X million and provision which quarter $XX.X X.X% resulting

times allowance X non-accrual modestly portfolio basis a on decline The reflects in quality the with point loan for dollar additions X.XX credit change growing or X increase allowance stable of to coverage Line of excess point Line coverage and in the X on basis and X XXX%. from loans improving times X.XX and

non-accrual consumer, can had commercial at the good basis to credit the stable guess with across Slide loans. including NPAs we quality asset Mark mentioned, loan we most Then on ending had demand mortgage a I’d XX, growth remains due, past measures loans and Bank of from I points and improving, ORE see, and quarter say you just and days of as quarter overall XX XX and summarizing strong

were $XXX,XXX Rechin. results. Mike the charge-offs over provision loan back expense Net growth. to with Overall, your solid in increases only call for I’ll attention. supporting turn Thanks

Michael Rechin

across all there Good of terms really loan First productive balance coverage Merchants of markets First of in we’re in the quarter demonstrating John. Thanks, in regards. origination, several I Merchants’ types. a terms like for of

what might have really four five balance a little achieving more We’re we or years bit than ago. had

forward, for look job So we as growth one protocol organic is us.

a core So the and part, we’re presence, Mark his interest fee on business our and banking about the of margin. continue to look spent net margin market to manage remarks going our lot fee to generation talking

obviously, and, a to to and going environment with vis-a-vis be. commercial bullet we’re forces to strategy, the awareness direction compete smart our a look rates So changing retail market we Fed’s as rate clear what our whom optimize and deposit of margin appears the with offers, really managing the point

So with terrifically ample for we condition flexibility eventual have relates and into just to balance should a minutes that strong some John describing sheet that as slow capital, spent go it with and credit we down. an a liquidity reserve – and

ago an fourth we opportunity. excited regulators schedule with be working We’re the to closing We targeting quarter. plan are back and the revised to end we’re the marketing integration our of for to work continues and offered few great in the as for weeks that before a integration release, continue towards a think third on quarter a a press of half Michigan and now

with working and his up Chaffin We’re there. team Doug

to on the an entirety telling to look of better around at here, of trying point better executing that. company kind That volunteerism, the being the an a our We playbook company. more opportunity under-banked. story forward – be to corporate Last we would on see around and by philanthropy even we’re responsibility include social banking consistently

it’s much is consistent but First well. GMP employment strong feeling strong kind kind told, like doing commercial throughout a sales slowing it’s the country, or of a I with the national earlier activity nice of talking to some was strong. are bit, tariff are don’t some good growth It’s Midwest, our the growth like our economy colleagues, for if constraint, to commercial tiny consumers an just not. All in related you that’s a they a Merchants, customers, level, might may measure so Retail almost be know of of low the are

really a Merchants that quality First told, environment results. high all for post to But continue good

for ready I’m got So at you’ve point, in this people Gary, queue. questions, if the

Operator

first question comes go Instructions] [Operator Hovde Curtiss Group. Will from Our ahead. with Please

Will Curtiss

to about some want outlook? you the point basis make part X comment. of I sure of the think I of suggests rest XX if through understand, basis cut, I don’t Mark, you to go the model I mind, just can missed your but back X your each kind points I got margin for

So if back you that be those, through would can great. go

Mark Hardwick

more just in was is really think or risk just optimistic a and our and quarter. run guess, it when what it’s it’s Yes, happen the see guess simulation the the rate than in interest published maybe little I coming could I model static what conservative more you’ll XX-Qs we we and

communicating – time closely next that XX-day going move to down XXX X that’s we’ll I suggest if least That’s rates we every And When basis were to basis X this and on delivering expansion we and have looking a it decline think point spent was at Fed X of saying that and starting just were point are at basis that week, points XX. going move. every have the the pretty consistently for rates points go period. up, for next we

that we of published And and or up kind fight in upward continuing is the is negative to peak of we quarter those that we the expectation quarter hopefully, move income a pressure numbers. this next of and, some anticipate Fed interest the being the to our end deposit kind just are base that

points guidance And QX. so we’re quarter, of XX compression around for to clearly we the in expect maybe more basis is that to X compared QX next giving

Will Curtiss

have couple will Okay. know kind where an curious as of accretion the just expect. then addition any to And with early of what and sense been if quarters, of I you to for a the pretty stable – but sense levels last they’ve MBTF. go

Michael Rechin

ends model average And models on it at. But acceleration, M&A life portfolio. less our the see based over then bit up little pull terms in of what in is out than a years. and historically, early we out could we it accelerating and I in what looked the of the pay-offs have typically our they just the being up do

and you I so that minute. right to fingertips. just a get can up here And have I’ll pull back it in my it And at

Will Curtiss

maybe one then you And is, problem. for from Mark, No the right. Maybe All last this me. again.

the it that excluding flattish I kind guided you curious hold expense in think, of the the the to the the with in base, if you’ve then remind get past terms you the is out the you if holds now? fourth Thanks. I’m excluding still expect don’t of, if do quarter, just you mind – majority of to as guess, can MBTF, expenses, And I think saves end year? MBTF, true us to sales of cost integration in by we of where kind the

Mark Hardwick

Yes.

$X.X million by good feel their and been with all of and should watching We’ve completed communicating team about closely be into have really cost at And management their closely built the they Monroe. savings those the still We end we levels. year. financials

start statement. should So Monroe we really XXXX with financial a clean

that million about really our continue But of quarter. terms of the maintain non-interest in and low numbers, $X.X of like or feel growth this basis. And our extraordinary rate to in had back a expenses, out streamline we we the really on felt to be core go-forward should franchise good ability numbers X%. good Obviously, single-digit we X% to about a able

Will Curtiss

Thanks for Okay. help. the

Michael Rechin

more Any questions?

Operator

Excuse Piper Jaffray. me. Race ahead. The with comes question Please from next Nathan go

Nathan Race

expenses of is undertaking out, wake in recurrent should going to just settlement? in the run will XQ question, here. that just in terms that you the come guess, million activities back anticipate of ongoing with that that $X.X to that after we it going called you Just associated that’s be that terms I of of last expenses the rate assumed what out

Mark Hardwick

majority hard really the of in it’s the We a Nate, kind good of quarter. costs current recognize the Yes, question.

there you those million, a in quarter. three-year read slightly lump on one get had $X.X going if And more. sum we’re maybe in that the payment see so the you settlement, and took would there couple away was items started that obligation was we to right of And

they And would do for you are handful going area. job I so committed that we’ve marketing we County to, Marion a directed really activities around, market, toward basis, think saw on but if opportunities ongoing are the what the nice the traditional they call, of to an

the the to in be to So question, recognized current your majority answer quarter. it’s going of

Nathan Race

Okay, rates look gears change little and understood. to perhaps guys income that close the I the from to expect a here. I I’m appreciate run guess at non-interest And bit color. the And you when curious MBTF?

MBTF of And this year? second in with quarter. we then we how just half income this strength fold here back obviously, the think and, the given levels of that saw kind the about in Non-interest should

Michael Rechin

you I the Yes. second think of on question, about about margin. when the rightfully without We’ve half year the gotten so and But of with lot a good Monroe. conversation feel your

to be Monroe what quarter Mark part and model XXXX. we alluded rate the for in with of company to fourth a was our myself have briefly, really to would we in longer So of their plan, being as the the run which be and, in anticipate part that to consistent seems

it to am on more offsets that As pressure there familiar margin. to Merchants the First some relates alone, I numbers are with,

balance earnings second actually activity. chance like which income a hedge And is saw credit have with sheet activity to activity, the with higher the have client It fee our to rates hedge a be number. instance, do For reduced, per doesn’t marginally the quarter in you se. First drives Merchants’

us and asking customers managing as fee It’s commercial their a generator obligations. for

second rate the based to we current stronger for it category well. within not we the well as be interest quarter, expect lower see in itself show did period hedge quarter the the only income non-interest so And would fourth in environment the for what on

Nathan Race

Okay, hear. that’s to great

an thinking early XQ are to And clarify, guys close? so just you

Michael Rechin

end integration the We’re of in with quarter. fourth by an actually the hoping QX to close

Nathan Race

the appreciate taking guys I Okay, questions. you understood.

Michael Rechin

You’re welcome.

Operator

go Stephens. ahead. from comes Terry question next McEvoy The Please with

Terry McEvoy

you with direct can Mark. you do in points guess Hi. third or a grow quarter to I can margin interest of compression? net for X XX A quarter-over-quarter basis income you grow question, think the question

Mark Hardwick

of a do so the way that of our growth feel adding and is in quarter came margin. would this assets those a about anticipated good part we it and we lot in outpace late Well, fact that the reduction earning

Terry McEvoy

do they that that you pressure kind higher And year $XXX I third $XXX. costs? thoughts and continued XX on within obviously? deposit points, you the are from basis acquisition, in the excluding stabilizing guess Would of quarter in QX? repricing to what Or expect think to the X your throughout continues then went

Mark Hardwick

and to multiple the some The Well, categories. interest where is reducing we’ve we we rate institutional have category run strategies ways that our money some models most variable of we’re n have. going be expense variable the

money interest this So reduced there as plays like third cost attractive lower of have we and more through migrating is in out specials accounts we depends it of a the chance specials because of all some front. and how remainder rates still are kind the retail market expensive categories retail expense that the out CD categories into quarter,

sure, the our interest being we’re crux to So like but be going [Ph] other, I’m way this on really I’m think the not go-forward expect. we really expense of we of or down close rates it’s basis, if to one kind move close a

Michael Rechin

between is It be. high for assess how marketplace, liquidity deposits to needs our at to look this discussions frequent trying to to the worked the that Terry, ALCO so hard we gather, balance calls more really Mike Rechin. all we’re just the retaining and

the sheet, now. As you can steep balance pretty it’s from see right

we’d as for interesting a deposit an smart base topic So managing great kind really of and rather markets question start go. a it’s position a we with banking, of and ample having

Terry McEvoy

in to assumes cut basis basis X last NIM XX one – compression, is question. that third points Just XXX the quarter? of rate point The

Mark Hardwick

the wouldn’t do given with because anticipate some cut does deposits we It time I and same for rate think normalize. answer the will second –

Terry McEvoy

much. Thanks understood. Okay, very

Michael Rechin

Thank you.

Operator

Instructions] The from question Please with DelMonte Damon [Operator KBW. next comes go ahead.

Damon DelMonte

on well. question the the outlook a trends just provision. credit Obviously, to perform very for So continue

range think a a Just wondering, perspective quarterly for provision? some to if what as you can give reasonable you is

Michael Rechin

see. the $X the, today, But that with and closer dependent $X what something looked in up asset we’ve where really obviously it’s lower probably million. we million of is of $X maybe, end and at range we but upon is, past to what it at in is think quality I range, it million, the budget between the just for

Damon DelMonte

or in loan pipelines, this right. the remainder kind Mike, given a if seeing you’re And the Okay. range you comments, this comfortable so year? your of are in then in on for growth I apologize, trends All if from Mike, your your comments, in that just touched on apologize, but you I single-digit mid-ish you the but feeling perspective, touched of

Michael Rechin

Yes, I really am.

XX% I to your is to a of stay so And referenced basis. point the of first the going to second We annualized XX% think about in still in little in If that slow range and talk a the seems on your X% and the to loans the we’re deposits. X% When that there. through we you to on think and right which we’re annualization like that an pretty be on your number. we at had think loan spirit quarter, basis I question, quarters question, looked combined first two side, – I quarter a high. me I

to But pipeline our more is be strong. specific,

now. think a than last might right at higher I commercial referenced of that $XXX pipeline. a million $XXX It’s have call, I million So kind quarterly the

the gives quarter continue. some of half of that us could we that so reason second believe to in strength the And the second saw

is from All payouts. apart in construction of projects terms of that that leave

on includes commitments, closing The which full the of fully front pipeline aren’t the end. drawn obviously

a the to you true the draw loan, as get completely pipeline that large so. fact holds correlation appropriate the that hardline translation So of a not to But closed between pipeline. of the into it’s out

ought strong. So the we half be back think the of year to

Damon DelMonte

Okay.

Michael Rechin

Not second quite as strong the as quarter.

Damon DelMonte

deposits behind bearing percentages. on visual outflow the quarter-over-quarter. non-interest the the on touched you and Mark, then And great. Okay, reasoning

about do run-off to? you’re going non-interest that in far down million bearing. $X,XXX So How see down you

Mark Hardwick

account Well, migration the complete. is

deposits, instead baseline really This that growth like to of was to great feel kind of, type we the we treasury structure build accounts have here to moved where They with continue it’s management a free. free of them in So accounts commercial automatically just will account primarily retail. from cetera. from not but have retail ability an into and have or transactions, still migration free balances a a had et come account, we

Damon DelMonte

it, Got I Thank all very That’s had. you okay. that much.

Michael Rechin

Thank you. Damon. Sure,

Operator

question Montgomery go Janney with comes ahead. next Scott. from The Brian Please Martin

Brian Martin

Hey, guys.

Michael Rechin

are Hey, you? Brian. How

Brian Martin

bad. too Thanks asking. Not for

So guess you about from profitability of where Can just the kind – manage expect talk – the how I post – you a you a acquisition? talked just capital kind are the it’s couple me, the doing here just evaluating Mike, how that that taking. and from just post about of at to you thinking about MB

Michael Rechin

Yes.

I it’s have at delayed we and might yet for opportunity even spoken of the enact So that. been that the able ripe last the haven’t environment given a close buyback the think call we to

our with of right now. not are on that table It’s it’s just discussions So that. supportive the Board

Brian. to an when that for tool normalize any buyback have greatest we’re of to a doubt is the on other us a to dividend be tool you’ve gap you going hand above that followed kind like those clearly cash can consideration. a continue Monroe, have couple our while, would targeted I year. But to variables, have significant the of of for to we it’s clearly in – way see we’re because levels. flexibility activity And have available evaluate, purchase quickest That’s this post we M&A But obviously,

Brian Martin

come place? into I buyback, the as far the the is it as And could post okay. – can occur that transaction, that the of close soonest guess what Right,

Michael Rechin

Correct.

Brian Martin

in And would to close I consider are you how Monroe. all just position MBTF, mean, perspective, from something to willing M&A once guess, an you I today, right. you quickly a guess be I Okay, integrate you work as I guess

Michael Rechin

integration sign you’ve Well, because the integrate closing most we is the like the companies. merged really than appropriate that feel term is the

XXXX closed. Monroe for purposes, And so is priority singular clearly getting our

Brian Martin

Understood. Okay.

And last I just have are assume – given healthy this quarter, kind just today, they’re half, you the – talked it of the going I they pipeline bit from a the – in yes, the you second strong still are down pipeline, down, growth so quarter. Okay. pretty about jotting was Mike,

Michael Rechin

pipeline. the higher million than – $XXX $XXX with quarter. about the actually We a entered they’re last actually million $XXX quarter No, a second million

entirety that I it’s We’re $XXX a and we which lines the that capture, million but it’s actually dominated mortgage higher business might commercial, was as consumer and than well, that commercial. by include said ago that, the moment have of would

Brian Martin

Got you.

just two then for And last me. the Okay.

kind Just of, of remarks expect off you accretion the it as been. still comfortable being of you to you tail right next think a to than are you or your do continue about about I Mark, that has quarters? couple I lower where talked at guess in kind bit now guess it’s the

Mark Hardwick

Yes, where haven’t levels, effectively just had it it’s that. quarters two We’ve where with any I’m still amortization comfortable is we the had extraordinary.

that Although rate at of back like to million it marks $X we clearly a anticipating of of the some but and that point, marks has have runs had question when we’re reevaluate. million, interest we’ll looks been ran it Monroe, to of million this credit $XX $XX.X off. And then around while, kind we’re we the models,

pay credit anticipate or unless a with you a those four-year a period you typically, over seeing you challenge portfolio. end down But the up real in come in have

So time. amortizing just it we as model in over typically

Brian Martin

to offset kind you challenged pressures by? every that today, you the managing in if magnitude, And mean, sit margin your one’s guess Okay. offsets, biggest where do I rank today biggest rate All – I you offsets the where environment I the on are mind guys the guess right. in of

Michael Rechin

the think – net just you’re overall question within or I margin Well, – interest saying

Brian Martin

Just think – overall. of I I kind mean,

Mark Hardwick

shorter think positive, like the portfolio taken rate of helps cyclical less we’ve fixed deposits, new are than to most $XXX Yes, measures of fixed, investments in and it’s bond we a growing much by we put than are portfolio that the term fall. these some counter the funding those as a well, year million of year. are on, rates begin if most duration And is they five even they

sale Mike income little sources, our And tends in available activity low mentioned, customers as have hedge rate. little fixed perform fund rate a income better, the we fee to lock funding And mortgage in then of always bit a some as to tends us. a to do of to longer-term better try

Mike better, are also just on credit less. charges earnings service mentioned rates the performing because deposits

categories some credit So being obviously, great. and, those as up I we are think our the hold that cyclical continues to think quality of of counter

Brian Martin

appreciate – cost still kind I got basis kind in guess there of you lines the your color. is the Mark, was second what way okay. I it Yes, while cut, back rate of thinking this more they you deposit up, go along quarter the And to if the about X comment of earlier, versus points the one, would the impact.

Mark Hardwick

the Obviously, one one. fast before to of is stabilization bit of That see we’d little how like matters. how next we timing cut about comes think But next the the one it. a

Michael Rechin

Yes, this Mark I And some agree Mike, the market. with rates what we is said, our proactivity clearly managing independent have Brian. deposit of around would

And once. there so know down benefit making steps rates more tangible that are than a should go we we have some

Brian Martin

to you kind are variable some Yes. that or deposits variable guess, And of did rate? Mike, are guys the quantify rate loans amount what point, do, your indexed or, you of I on versus have flexibility

Mark Hardwick

we of thing real a the our have those $X.X roll a and not institutional of handful down. meaningful dollar accounts, portfolio it’s then only amount CD all fixed of The in are deposits really that a have. kind that’s billion And but

Brian Martin

I got you.

questions, guys. for the Okay. taking Thanks

Michael Rechin

of is million are before bank, total I I $XXX some referenced those that that commercial when $XXX and only. is just you was those offering Brian, you the million from than that higher current Hey, quarter go, I figures noticed as last quarter pipeline

Brian Martin

I got you.

Mike. for Okay. the Thanks clarification,

Michael Rechin

You’re welcome.

Operator

over This Rechin like to the for turn Michael any to remarks. would back question-and-answer closing session. I conference concludes our

Michael Rechin

the you forward will Thank These appreciation Gary. brief, you. for results. third our one quarter questions listeners and any be Thanks, on to look call. other to the for it’s We following talking of

Operator

now is conference attending concluded. you The presentation. today’s Thank for

disconnect. You may now

First Merchants (FRME) 26 Jul 192019 Q2 Earnings call transcript