FRME - Earnings call transcript Q3 2019 | First Merchants Corporation

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Operator

Good day, and welcome to the First Merchants Corporation Third Quarter Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that this event is being recorded.

I would now like to turn the conference over to Michael Rechin, President and CEO. sir. ahead, go Please

Michael Rechin

and the our XX, third Chuck, and XXXX. conference webcast for quarter welcome you, earnings to call Thank ending September

and Joining Chief John Mark are our Chief Officer Martin, Officer. me and Operating Credit Hardwick, Chief Officer; today Financial our

the in earnings were back our at that and page press release speaks point and The also directions to the material release, to their approximately released Highlights. this of titled, will Eastern webcast X:XX contained comments Merchants at begin end a a X, First release. Third the Time, presentation XXXX morning my Quarter from that on slide

of by the including So the per signature several I'll cover quarter John quarter's MBT Corporation. of & results results and legal closing and Trust, end capture Merchants financial well in include First Mark their end the billion, The XXXX.So the acquisition The income share. company the or assets million $X.XX XXXX. Total the Financial the $XX.X of the of grew earned Corporation, totaled per our acquisition-related the front quarter completed one of third was Monroe million then results or within was month Bank contains event and that of company share. which totaling $X.XX having XX.X% of $XX.X over as the net of details expense, X, of $XX.X results, third release September

per the call annualized $XX.XX look bottom of annualized an of balance speak XX% page our annualized end. deposit Our more for quarter growth I the XXXX. book is increase our quarter tangible of activities and organic loan to The near since value X, sheet organic X.X%, fourth share the growth XX.X%. was our about

financial the results going walk the greater us through quarter. for to detail Mark's in

Mark Hardwick

X. on Mike, and will the everyone. Slide good My afternoon, of begin portion presentation Thanks,

an year total annualized and of Our X, or this XX.X% growth total totaled an X.X%. annualized loans billion now growth increased nearly annualized increased $XX.X $XXX due million XX.X% X, loans, by million, X, or basis. on Line totaled $X.X XX% acquired on Line billion. billion and Acquired deposit strong liquidity. on Investments, basis to have assets, Line or this $XXX increased since on on Total year by as $X.X year-end organic

Additionally, Slide on Line produce to other due increased loan strong Monroe or the net the Bank of to amortization yields billion $X.X intangibles fair on X, & composition purchase X of goodwill September continues on excluding $XXX by portfolio and Trust XXXX. shown side of of of X.XX% The our left value. X million, X.XX%,

concentration on estate the larger fixed-rate graph asset bias. loans illustrates owner-occupied is slightly the our loan very bank. similar portfolio our in portfolio slightly core and with demonstrating XX% variable, a As are mortgage loans Monroe's of mix our of sensitivity right to real a the in more

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

the to year, billion XXXX, bank deploy and against billion to liquidity $X.X the the protect year-end interest at increased excess portfolio to we've During falling rates. $X.X from

As the unrealized million. of XX, portfolio our in $X XXXX, loss December was

Over loss unrealized unrealized million. XXXX, the an have gain the three become of rates first of as has fallen, $XX.X quarters

Trust of program million in XX.X%. we totaled earnings, beyond fluctuation, the by year-to-date, X, increased announced million repurchased Bank $XX stock all as Line an $X $XXX On Bank billion repurchase through & equity normal accounted increased growth, $XXX the million annualized deposits of $X.X X, of Monroe for $XXX the or and September. OCI Trust dividend stock purchase Common share total billion organic by million on while equity, Slide increased year-to-date. Monroe growth & deposit has

on XXXX with point looking low basis deposit full XX, and of costs quarter quarter quarter second We to peaked, rate given forward cost that of feel cost from we're X.XX%. totaled X.XX%, X Slide up Monroe the their a interest-bearing have of On deposit second finally funds.

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

The points, quarter's last corporation's with X XX, net basis declined guidance line interest margin, by from on Slide call. in our

We and to income and M&A. compression continue both grow organically interest despite that net growth, through balance we through we also can margin suggested have sheet

Looking will reductions which we lose many feel margin simulation suggests If for net basis Fed X interest basis we X our no are fourth the that XX have stabilize assuming ahead, given rate we the mineral more interest to point predicting, in additional points cut. do per quarter cuts. the will in rate, the funds rate

and from million Noninterest in million X increased line totaled lines X, $XX.X third QX total $XX.X XX, fees, quarter income, on on in Slide again to Noninterest quarter the $XX.X the $X.X now in XX, through by in quarter. 'XX on million. of The this in increasing during you if trend XXXX. a Slide very trend QX expense, million customer-related increased nice and is

assessment accounted expense expenses the FDIC's reserve of credits minimum of ratio. issued the increase, reduction million for offset net FDIC quarter-over-quarter of $XX.X million due target for $X.X Merger-related by to meeting

for $X.XX third On quarter. Slide XX, the EPS totaled

sub-XX% per As share, our pleased $X.XX and also cost. merger-related when totaled our by we're previously ratio efficiency quarterly for expenses merger-related stated, adjusted

that annual trend On share share share, our dating per time tangible book including of that our period and Slide over XX positive book also trends back is book proud we during per value tangible of value frame. highlights XX, $XX double-digit our tangible dividend merger. per it during rate per includes X time Slide post highlights lines, as have acquisitions value compound in this growth growth to share our XXXX. We're of

John Thanks for quality discuss Martin composition now related loan asset trends. our will and your attention,

John Martin

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

So X.X% was mentioned the at annualized, than third rate. saw quarter quarter, a an annualized XX. a second Loan that grow Mike XX% quarter, little the little production turning to Slide less this coming lighter grew loan portfolio loan portfolio as $XX strong or In the of off million earlier.

With which posted the the for early estate loans secondary of real CRE strong exception nonowner-occupied areas payoffs and demand X, on We've lending, and and resulted the other ag has refinancing all seen the CRE book. in investment respectively, in market, has non-owner-occupied X portfolio in lines of increases.

similar Private as bottom concentration hovering end of see real contributed line commercial, themselves. to the $XX Despite And sheet our risk-based and slide, These present finally, the where opportunities concentrations demand the to XXX% this, around our existing good commercial well capital. including on mortgages of for credit, the composition on ample capital our around room the us billion. grew levels total Banking, $X.X The portfolio $XXX million with MBT for as as industrial growth with results loan loan estate continue risk-based the real loans construction estate in to hover -- investment of concentration, continue quarter X. owner-occupied of concentration XX% of million to balance real we portfolio estate at the a portfolio give

asset quality Turning XX. on to Slide the

and stable remains quality Asset healthy.

$X.X other owned XX the the by quarter $X.X loans estate basis $XX.X NPAs down than portfolio X, loans in million quarter, and $X million. $XXX,XXX, or both or million With at XX-day with of the $X.X nonaccrual the On million line non-performing loans, million non-accrual loans down renegotiated remaining of points end granular real XX%. Therefore, line delinquent due for on decreased past pre-MBT our for relationships increasing and makes which loans, to loan were greater roughly the portfolio. X, XX-day

non-performing and including XX-day the portfolio. with the changes, Skipping nonaccrual other in where real the We X loans. closure QX writedowns, the we $XX an the which of the estate Line ORE. the from in same $X.X column estate-owned change XX, of This $XXX,XXX ORE migration over $X.X the MBT, loans of $X.X OREO And facility. of $X.X delinquent had we and line of of where resulted X right, which Summarizing, leaves it's sold Turning which an NPAs living million MBT from had in lines of include We and started nonaccrual quarter, and MBT through down assets, X the added in to million. X, resolved million of a million of us excludes senior total other loans XX-day ORE from acquired third real to a million pre-MBT. the nonaccrual on of 'XX, increase with from $XXX,XXX column the Slide on million $XXX,XXX reconciles of $X.X and on quarter in impact loans titled we with column, full of the we million NPAs sliding the new $XX.X loans participation $X million delinquencies. new the

then of and provision X Slide quarter began loans. quarter on We or the value XX, end fair an of allowance highlights decrease with $XX.X in $XXX,XXX, in allowance expense, the charge-offs summary. NPAs million moving is assets of basis total roughly to basis which ALLL Then roughly which of points We XX total, XX the $XX.X and XX-day combined points at expenses, with loans. the million quarter $X.X the and million. the resulting lines exceeded X, quarter, of In a in or ending X.XX% delinquent

allowance at and from X.XX% to from is line to allowance and is the improvement the with correlates the on nonaccrual highlighted $XXX on addition XXX%, in XXX% quarter. X decline up X both last continued MBT the portfolio quality. percentage loans million loans X.XX% The credit of line in to covering continue, and loan This now reflected

down adjustments. $XX.X in X, value million the value for We quarter started Finally, adjustments to fair MBT. $XX.X million dropping booked line in with we fair

further national communicating from, with value low credit Slide ending that a quarter what a eye and with low or our Interest is unemployment, on XX, borrowers. with continue we'll global stable see Then credit million There the quarter number million for being, made fair happening rates which a while have for metrics level. while know, adjustments. threats watching of keeping the of inflation Accreted the and economy time $XXX,XXX we $X.X million to we to on keep improvement in the offset experienced for and an $XX.X summarizing low quality But regional, $X.X you environment. are charge-offs, on

and view quarter are bring. and might teams prior to to the working mesh. and loan continue well and of quarter the with at a credit I consumer integrate feel economy on coming existing are as a sales mix underwriting X.X% XX% of the is in annualized teams and off see the credit place we and MBT. respect annualized, commercial for sales monitoring portfolio well And culture with finally, and servicing nice early whatever together most organizational to loan Third positioned growth growth we

Thank attention, your you call Rechin. to turn the and Mike for I'll over

Michael Rechin

Since our We stock legal you, material on completed year, last XXth, Xst, Thank call had July buyback as we we mentioned. seasonal made announced we advances John. in of program. our a September on closing results. for and modeling quarter financial implementation next the a We

depicted we several from. spoke Mark stronger net interest And MBT. income net So second rebate that vendor results we very were quarter, the as totals are positive of quarter and outrun down and we that even had had kind to third the X-figure interest that fee in John margin on the were the covered, a independent bond we in gains in pressure of -- feel We the page we strength categories, in about XX. to maybe just normalize had And that grow Mark able to. to

And our like the customer our Our look sales our other business stronger and client-centric derivative are of the forward, mortgage to Service grew the really they're forecast probably strength while derivative easy on sales fees, wealth third through charges, in mentioned, of categories sales the fees to client-facing were in wealth gain up. technology, stay continued going service nicely. charges all here and in I mortgages our going quarter use business, least term. near clearly management

to us in appear the was there, It strong. realized Monroe integration spoke highlighted current back the to well release And their opportunity some that end in I great work the savings of the asset the of saw Mark's the actively will activities. and I with which be of Our overall to a the of asset feel do have to of still new stable and think joins relative I expense both which quality, a mix in we the said, that quality, portfolio And expense think, as and John of comments. also many was managed. have come on who ours, portfolio, really quarter's it all like us. on been on managers and he company, of based both in we the understanding the Monroe management,

of the bit like Monroe year as to points moving tail page first Trust several on last out for a reasons, every of bullet it. Bank So We couple about XX. other end talked when much we & the as loud

expansion raw The couple and franchise opportunity for us the little east. For a of instance, bit times. funding, think we company a the on touched is to a bit a little we've north move great

them market have They shows pricing compatible. us. costs, really their which itself that share really are The attractive and funding gives power is in it management additions for

cultural that Now on. we're below about the business that way fit explicit in more they strength to a like that into some somewhat just that First said, speaks Merchants, ran early got flow we going that and there's are explicitly excited and

activities off and good cultural a of get lot heavy month to themselves it's to a integration really next than more right going we're sharing technology, a now. of start training to that's The more there. So and data

that's pay to think I going off.

historical a year nice and and balance have the calendar XXXX. through the through in clients in next and We period, capability and clearly for the the that's doing playbook month job our integration with of a

would bullet the cost we if requires we to pricing crested net The discipline. which for we and in XXXX on, down. but We're and the page points loan -- somewhat like calls of a to because flexible deposit touched can that have interest on going enter came pricing. quarter ought can, to But annualized come obviously a trying to assets, the not, then stabilize, plan, in year nice capital on the or it's surprised I've was quarter going line Have obviously. at that somewhat balance, continue be pipeline asset in remaining whether see and with potentially at of lot I if to lot targets. to I I earning enter fact, net X% of growth liquidity, We're a terrifically continued with closed our we quality, to for annualized need execution feel number growth our pipeline. suggest of some grow the sharpen We're look that income the in we crisp, a with loans. third lot margin think, with, really deposit operating a a of

one. We continue to have

$X.X utilization you on. portfolio, billion tell would I we that actually our less had $X X% billion, C&I

same offset So utilization went fundings when mentioned. think as lines, I our number the down, clients I of and committed loans having on about the new that level of in, the by their it not high X% was

forward look next we year really to So optimistically.

we page company formalize bullet against we point to needs to last the serve. desire on all the what our The the do the communities across of speaks

there that into to we've in So economies ideas great way some take out the got tangible participate improve brand in. marketplace we our a to actively the

the on there So take folks are happy them. for thoughts, this and my at Chuck, those line we're if to point, are questions,

Operator

of Scott O'Neill. come And Instructions] first from will our Sandler Siefers question [Operator

Scott Siefers

are how Guys, you?

Mark Hardwick

are you? Good how Scott,

Scott Siefers

you. good. I'm Thank

I Maybe with you. think question. Mark, just couple of start out a

my now? now. think tougher you you're had through If margin in the what versus got us the but environment interim the said walk rate could stands perspective, where July. consistent lot I a than And sensitivity rate anything, with if in declined you from

worse. expected I anything So would've if

rate the in any maybe sensitivity? So changes just

points was have like And basis same ago. hit you you realistic. basis point then that suggested at X last X the as moment quarter, from your articulated seemed the X cut, thought more had XX it a sort points something time, to of might But basis each

feels more are in deposit confident to How X be might now. still dynamics was thinking those a that think X It bit pricing predicated like about well? the little you as I you pressures. on

Mark Hardwick

value. will We call out XX were reported anticipating, down fair X we back it I and down that last and know thought we the you on margin said our XX basis, on quarter basis if around third points be a

feel we been feel that. really the we've peaked, like have we This the is first time first in quarter. So that time had confident about guidance good the that it's in or we deposit costs third the finally

As increases going kind quarters XX, we've in X, had XX, XX, prior backwards. of of just

deposits basis interest good just X And interest stabilize they going so see for up was interest-earning of And point. X expense our only on month with our it's the X. And to Monroe helped expense that deposits more even on forward.

X know much We as prime quarters down, asset-sensitive, the rate that still were X we're or comes as we as not ago.

bond from portfolio just a And rest little balance steps our than the we taken primarily extend that more term. As the in the some are of acquired sheet. the fixed we asset, Monroe to loans rate have

instead So versus in environment or I basis better a we'll basis be declining interest like, like of and the the like success keep more on feel deposit net have X points being points. compression more, that margin to X side do rate able X

Scott Siefers

Okay. a Perfect. as this accounting would points forward. subsequent guess going what to benefits the take be About margin more basis we expectation a quarter, your help the That's helpful. And the on tack purchase into X maybe one quarters? look best

Mark Hardwick

we the basis the a it modeling. kind to the right basis rate, ramp And we've think X experienced where of is. points, to current X is had points. run and it past model it immediately little. I at The way up way guidance or acquisition, But seems have an right still after think, our I in -- XX the to XX

Scott Siefers

that so outlook what I the your in in then some The allowed them maybe But a there. slip base some your with stay if And better going there's one quite bit happened I on -- noise forward? in extended can low I stuff. thought. exactly than know FDIC Perfect. expense final came one what to thoughts would've

Mark Hardwick

Yes.

Monroe and level, to $X.X like think is you more quarter Monroe $XX quarter, excluding back if expense that basis, million 'XX, we million. for close we an And were normalized of include a go FDIC a second expense. when you our to just on go-forward think I entire Monroe, of

look think And still will run we those the rate you a So the X that what on quarter, go-forward should basis. some be recognize. benefit at together, yet, to gets if to have FDIC fourth we closer that be in

quarter. of had income this So we $XXX,XXX an

quarter, zero. Next be the should number

it $X.X expenses. then that third the run to had million a quarter already. because quarter, will later a we more for closed partially and of bit acquisition only And we us kind is month. we've plus Monroe and rate strong happened of expense to traditionally back get the fourth have was of in what mergers. most able X so quarter, our help And And the quite little again we been a take Monroe that out than a This particular announced in quarter

of So the that November, has in recognize don't a merger, for is -- have quarter, been of we this done. integration even in benefit already the lot fourth much to scheduled though as post

Scott Siefers

Perfect. Okay.

So $XX all-in it sounds of low quarter million sort like going the basis forward per expense is an then. on

Mark Hardwick

We of low the level. kind Yes. is go-forward think mid-XXs to

Michael Rechin

the FDIC. of Because

Mark Hardwick

be part will FDIC the next fourth in the of quarter year as the as and acquisition it again increases biggest And then cost. variable large bank

Scott Siefers

got Thank you much. very Yeah, Appreciate the color. it.

Mark Hardwick

Thanks.

Operator

McEvoy ahead. question Terry next from go of will come The Please Stephens.

Terry McEvoy

afternoon, everyone. Good

Mark Hardwick

Terry. Hi,

Terry McEvoy

XX of or acquisition. XX ratio just The Maybe a the went liquidity. closing question the to on loan-to-deposit excess liquidity after the from

level Just XX, the what at? thoughts operator you'd closer to on ratio over loan-to-deposit liquidity, are targeted your to time that managing like is

Mark Hardwick

at. acquisition record that sheet. an have the optimal acquisition operate the acquisition is that up that each XX think the the think ultimately balance to comes the we is uses to track ramping I of that liquidity market of growth a We or -- on nice level And momentum acquire, out Yes. we

always but great and feel growth, over our today, basis, an especially loan the time. deposit we where growth exceeds we about organic on position So stand

Terry McEvoy

mentioned repurchased the And just follow-up, stock release. $XX count. didn't in then period-end just you the as share Do a I that million of in September. you have you see

then, on activity repurchase Just are in the quarter additional helpful your thoughts what for model? the be kind And fourth from our shares here? of

Mark Hardwick

We million. announced $XX

remaining price to Yes, million, the period-end last mean we We is in a uptick which just get just it's of press we're $XX in the that moment. as million. for going be our I And the amount in have or opportunistic good seen share $XX obviously I'll shareholders. week an the release. count, use for so, you

XX,XXX,XXX. On the balance XX,XXX,XXX, sheet,

Operator

Piper Our next come Nathan question of Race from Jaffray. will

Nathan Race

of softer kind curious Mike, loan your of get would If where at to in talked you I'm XQ. perhaps, runoff kind hires anticipate just growth of? MB&T? the been think the to if Curious seasonally, I here production any And date there's any some to speak so you, pipeline just last on of some from thoughts outlook you in of Little curious kind quarter, about stands? if your, of here. disruption

Michael Rechin

Yes.

the Let dollar your the end first volumes of me at front to speak question.

terms have growth, So a trended loan period-end to higher. bit yes, might little thought in of period-end I it

in higher end Our the that had about quarter, a closings. pipeline, The we would've commercial a that. loan last the of pipeline the supported in quarter of had we number closings lot at million, $XXX

to those commercial and and in lending business finance our that lines traditional like balance group our Predominantly structured stick banking. sheet, consumer

know We mortgage is down closings lot entities like don't loan a I if residential I my that on also a in percent of had had $XX that $X we mortgage. about strong in tariff-related. in that's couple remarks most million. utilization mentioned a earlier of billion are business loan

understanding fairly number. in than tends it a good the a of have don't borrower, really I to borrower other by tight move

and going Indianapolis. pipeline $XXX broad-based. commercial group. million, quarter in is we forward in It's higher. had even structured It's stronger the in $XXX it's a million million about $XXX actually pipeline our than Our Ohio. the It's It's ago.

more and into so for ads It about really might start. that to we to the share third lesser little And in October ideas. while us have term fast expected, manifest think I market it plays we're because a team when quarter disruption, bit a really people been the have. opportunity, I off more itself And just I of that like didn't chances sheets than

joined of continue market We know about that place in independent Monroe. X% do like that in that to takes the that we feel of to what the any used, don't numbers we bankers X% annualized us. place So good range

So the they're integration to have used be obviously to but make hopefully, going calm taking us, growth a we period plans happen. leading their through their get them to the efforts, a, horsepower to let clearly

we feedback their level, we're that also joining about us, And plans talent again, bankers And feel the about we XXXX getting good are like it. upbeat. is client the the so

So we're ending that year confident.

Nathan Race

it. That's Got great color.

doesn't it on side you’re perhaps, like the So sound MBTF things? of runoff, expecting any intentional

Michael Rechin

No. specific We really modest. really numbers, John which those don't. of identified some nonaccrual quite are

But to them think of behind $X I point, that they're your that there have million. list suggests -- we serving that there shouldn't is quality not asset profile names anymore. a an be

no, they're -- activities with integration So get at of kind once light. yellow really not to they're out going the completed. we green, starting all It's the

Nathan Race

Got it. tax The light this XX% you expect it And question. one hear. to more just rate, ask Mark, could quarter. go little I That's back if close great to forward? housekeeping where going

Mark Hardwick

more We XX% Yes. a think bit quarters, XX% in the is little normal. X

Nathan Race

guys. all color appreciate the I Great,

Mark Hardwick

you. Thank

Operator

Davidson. come D.A. ahead. Reevey will Please Kevin of question go next from The

Kevin Reevey

How afternoon. Good are you?

Michael Rechin

Kevin. How Great, you? are

Kevin Reevey

Thanks. Good.

how given your the is, you question prepared remain able curious mentioned earlier to going environment margin you more pricing than I'm remarks, loans compression, So you'd feel with offset respect still first to and pricing. competitive just in while grow and disciplined that that discipline? paydowns, can comfortable be maintaining to you're

Michael Rechin

price to we put last higher the a our deposit is part, sure how for capital that's mentioned what's When just what we deployed a pipeline, don't First and of because look stage And that get Merchants' bit little coming XXXX think months of ideas acquisition out it's win there, ago organic loan a as trying customers, were without we we at our has to on through be an we obviously, it we might make early our we those. moment and to historically, our fortified advantage Mark most think all -- than call inside that funding. through The growth, true. Kevin. than I been taking growth fair. where share that think we our gets Well, we different XX

we deposits so expensive go institutional some funding did relative core And were to into that our cost.

resultant knowledge the funding XX%, loan-to-deposit the funding. market answer credit on with to incremental Did your Now us of incremental at question? best apply really addition it Mark that cited the allows Monroe, just cost, our that ratio and

Kevin Reevey

deposit No, are you end or terms the I'm curious you lower you Are perfect. at end where of in mid-market? pricing the market. that's in just Are your higher currently?

Michael Rechin

you, differs company. Ohio, it side a from mature market. to cost got it large I is market of because our markets little to been a bit than our we've is the In our on tell through most there Well, And aggressive funding newer presence parts where to in headquarters market about the Monroe, attraction have definitely that's our We're market trying Muncie, pricing newest whether greatest the to in power, keep categories, we away in but trying the our be we're market pricing. CD-led money moving else. from points smart everything

We're where down we or trying the If you're low, we're declines the based to markets say pricing power. the middle. high, have lead asking would in middle are we me, I on

Kevin Reevey

lastly, costs should And provisioning then credit how credit, about going forward? and we think

John Martin

historically that Kevin, about run would what been $X I of $XXX,XXX this been of rate. to million has we've And say John. is doing our kind kind that

historically said several but million, we've to about we've been running less think quarters that. million the last $X.X I $X than

would what So I to expense, million. use, our provision say that's $XXX,XXX $X

is CECL The other next are thing, too, with change. going things into year, to

may what on So an you model. that have impact

Operator

come next KBW. Our from question DelMonte Damon of will

Damon DelMonte

last regarding reserve? that kind Have Just for of you your the loan-loss the increase question follow-up guys to expectations CECL. a on finalized

Michael Rechin

third-party models. built with conducting model. at acquiring this And exercise the The to our software. we've thus we've We've the really gone validate point third, is of into Damon, our we're an through far, done runs. the We're working parallel what fourth quarter,

are the going be of really to of valuators result as year. into to clarity any next So you the fourth more adjustments able happen really give quarter the a models January and in to

there's to purchase that I point, Monroe, of have the billion in know this going don't to be with number a $X.X At really other than a acquisition loan.

So the That loss not that today. in me, is in incurred are included excuse method the incurred, allowance included under calculation CECL.

think, I obviously I It's the So you allowance that under give we CECL know at about will point. this clarity, increase. much that as can

Damon DelMonte

last borrowers your utilization was slowdown down, that? provide hearing question, war anecdotally think impacts trade quarter. were your about that Are from I the And on concerns loans from Any reason then C&I concerns for X% any other you about on that? on the there mentioned like, in Anything rates you're that what could maybe this prolonged you Mike, economy? trends or in the manufacturing? Any color

Michael Rechin

$X.X all about nearly it's billion gets me. And when billion in to $X.X lines, C&I I'm of anecdotal right Damon, it $X.X between talking aggregation and billion.

get X%, clarity that really I so there's anything is need goes it. don't And that I it around If great employees. down when people hear

they probably of so flows for would growing be to strong. lines And if more access. them talent Cash our had we top clients are are

they've so bit little us for less And been working relying a on capital. a just

Damon DelMonte

Okay.

So kind have the manufacturing I the, in been been past? in sector. the some that from know data they there's points impacts of haven't as as no strong

Michael Rechin

No. between if that's in trailer logistics transportation-related Indiana, I commitment, denominator a you That have mentioned we here a the the tractor in industries. we're of billion bit, growing. and state read, softened mean, the $X.X has, lot billion, but a out crossroads I and utilization the for $X.X have the in sales America center little of so when

grew million $XXX is C&I quarter. down. actually overall So the through utilization The commitments our

Damon DelMonte

Yeah.

I you. that Thank I Okay, was answered. asked that's saw helpful. else everything had and

Michael Rechin

Thank you.

Operator

The next Montgomery. Janney of go ahead. Martin from question Please will Brian come

Brian Martin

good Hey, afternoon, guys.

Mark Hardwick

doing? you How Brian. Hello,

Brian Martin

Thanks. Good.

for me, just couple a guys. So

that use you're said minute. to guess, to can intend know Just you to back I is to subject you of you Or full optimistic for do do the authorization? that as mentioned? buyback pricing, you Mark, the kind continue some. a I go

Mark Hardwick

the we're low been advantage to of the use points. price full take There's that some $XX just We enough volatility of intend to trying million.

Brian Martin

Got you.

Okay. helped perspective. modeling It from

just your on And comment Okay. FDIC then your assessment.

guess, does guess, XQ that I -- And in you back the and -- go large can then, higher X I to kind shapes So level of any of a just up? give with kind that on clarity where it how organization?

Mark Hardwick

there in these anticipating 'XX from rates for 'XX. obviously, volatility. -- XXXX. been And makes is lot It's a to We change a Yes. dramatic with pretty credits, assessment higher were now of it

expense. annualized It of next in -- the and increases to a of fourth it So were the quarter. an $X.X in -- the us in in $X.X million the We because be we quarter credits, quarter should at flat to third benefit $XXX,XXX year of rate billion the quarter becomes million. $X.X second second then

have pricing. then the increased go and away So credits we

And big swing year-over-year. so a it's

Brian Martin

Yes.

Okay.

make to full that to on begins think run I'm And that. that? is rate in sure annualized want XQ, Just clear that how about

Mark Hardwick

should It -- XQ. begin really mostly

Brian Martin

is just Okay. of I M&A. it. do with you're whomever, the maybe I of X was last the out Are kind outlook just there if M&A, getting are -- they guys integrating that and short-term kind I helpful, progress you one and for just on realized guess, know Monroe know what getting And Monroe or the Perfect. focused Mark. But on stand Are active? discussions? your benefits at you there comes you that something Mike on integrated closed on else That's before in least on more of still just up?

Mark Hardwick

great a No. ready I take place. engage, think opportunity we be to would would should

anything. of middle the in not we're So

the on focused are integration. We

great We are start. getting focused to a on off

conversation very pay you having protracted X X attention period where and the say, each a of always it's I other's in We're of There's XXXX, feeling like dialogues good a they're the would kind a it's stable. well something closing constantly close As know, or kind we're is area state so always or use in taking frequency time. -- of the to. kind ready. a of we that place intended we're X been

when to will continue scale So help believe the be it's franchise power we and of in for appropriate. looking

Brian Martin

preference today, say Mike, just... $XX point, billion you outlook or would is this deals your no the over larger smaller And at versus getting

Michael Rechin

have a little that your goes into up it. the effort of I the for targeting magnitude move bit think to you

First last this if of we companies companies us at Monroe for smallish the certainly, and of you like that fits about size couple handful have for as we've had a great or more ones, Merchants, have I joined so $X.X those don't think beneath being see And that. well clearly feel billion. of executing we capability capital to the the But sizable, point. the

answer more appetite little probably So simply, your bit. probably, moving a to up question our

Brian Martin

was Mark, I commentary, just on appreciate commentary the margin. one, last the your And on

impacting three know is in Just to there, fair get you being as about cut, rate if you there to if go we assume X you no stable cuts with forward just initially the cuts and be you at it but were see about think talked than is, equal maybe I you'd where call the amounts to assume margins it, maybe today they core points meetings, basis XX, to three looking wouldn't the do next the lower be on decline if XX X it sits side?

Mark Hardwick

Yes.

given see that to compression be that We has probably asset-sensitive position. our the think has, I would case.

XX basis we, if X so to points. so And

Brian Martin

you, And small have you me, do do portfolio? it is the on a portion? Or guys loan floors remind

Mark Hardwick

Not, not really.

Michael Rechin

We really zero. Pretty don't. to No. close

Operator

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

Michael Rechin

following you I follow-up if the our is appreciate year, but talking to end Thanks, the appreciate of and only you get that attention, the, then. look at questions, us, results. the end to Chuck. the will you of people's remark them to forward there My can attention talk be Hope to to

Operator

Thank concluded. you for now presentation. has conference The attending today's

disconnect. now may You

First Merchants (FRME) 26 Oct 192019 Q3 Earnings call transcript