FRME - Earnings call transcript Q1 2020 | First Merchants Corporation

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Operator

Good afternoon, and welcome to the First Merchants First Quarter 2020 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 today's event is being recorded.

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

materially company's including litigation, First These differ risks in and of changes acquisitions, conditions, Merchants' changes ability to the of in to results subject forth integrate identified creditworthiness changes of set customers, fluctuations rates the the Exchange First requirements are uncertainties market of interest that and economic regulations Securities regulators, filings those statements with in cause in Merchants and recent in may significant to Commission. in from such statements, the other and factors

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

operations future necessarily company's addition not indicate results do anticipated of its In past the results.

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

Mike Rechin

Andrea, afternoon, and ending everyone. call our conference first earnings the for webcast XX, good you, XXXX. March and Welcome to Thank quarter

thoughts Chief add Officer also can with is of Joining Finance, me the questions who'll Mike Officer well Chief that Credit actually Director be and Financial John our today the Hardwick, as presenting presentation. he material Michele Chief me Banking Officer; and Officer. Senior Mark Stewart, Martin, our us joining today Vice President Chief later as in Also later Operating the our presentation; is, event in and in our are Kawiecki, to

eye release thorough balance Highlights. directions and back coupled review release. this morning were X our positioning a.m. goal that environment from quarter to on begin to release year towards earnings press page end at of also my an slide contained the into a of and and We the First to first XXXX's the titled The Eastern XXXX. released our Merchants' in Time webcast rapidly a at speaks point Quarter of provide X that for a with the changing XXXX that our Given presentation material approximately comments the First is

earnings of return earnings net and First first with and the share last net million. per million, assets net on earned per quarter income of of a X.XX%, income $XX.X $XX.X share of income Merchants compared $X.XX, year's of $X.XX

third to billion, quarter $XX.X grew & Monroe of was over deposit growth Bank of year's on the acquisition the assets X.X% first line growth coupled growth the Trust from Total down our loan of of XXXX first organic the quarter XX.X% a next function last X.X% quarter. and XXXX of with respectively growth

provision composition and Mark we John loan net our coupled reserve the of growth through comments will discussions, the presentations. period. forward as unusual on demand bit first you'll with time we of their and of see move and little our course of Martin's the first XX% about in pipeline quarter year-end, the million an same Michele have quarter as increased in the X/XX from it rate less recorded is than which We hear in in $XX.X from charge-offs XXXX. the further reserve a level provision and Through about of $XXX,XXX

at and Our marks value back second allowance X.XX% fair XX. common to totaled totaling assets equity X.XX%, March the a plus tangible loans allowance to for the of

increase value an With to XXXX. increased tangible XX.X% over $XX.XX, book our the quarter's earnings,

XX over the results, Before on last our detail Mark days. our few speaks to on in like a actions summarize greater perspectives I'd

be from to with of enabled home, the points teammates, them page to X,XXX to And financial bullet over and so page both a X, effective. over speak and fact the of have we've technology on employees' And available top that describes First Merchants work I health our supporting couple have stability. the X,XXX

We care, just our dependent points as for both the sick at flexibility full-time hours an a communication culture for changes and needed associates XX of speak time provided and to high-touch COVID-related purposes needs. bottom notice. paid changing the really The flexibility with of a of for entire occurred individuals off set additional company on short rapidly

points of couple move to balance the then on most to the program We and sheet page in ourselves it of relates speak month top Going to is our Congress-approved two boarded wave onto between of speak. of is of we business find bullet community X, our up as here the the to last a support comments of as in business And highlight kind just process clients. fundings. the the that getting

so for benefiting more evidenced than program XXX,XXX and our oriented middle greater to organization the is than demand applications great than funded we and market lending as business greater $XXX Desirable businesses banking in X,XXX top had million commercial point and employees.

the discussions all the going up later on speed you gone In it X% can business. our of John more new product loan had as later parenthesis, on announcements. SBA to March into commercial a that to was it experience as modification have time cover period to is the $XXX bring company of XXst, you we the the with approximately clients to and see portfolio modifications, lines going over current where programs but in with the across million brought is on. of John

that Right of attractiveness our have support Main CARES delivery. due to guidance clients ahead know the We we to lending is Street of evaluating to that team the bankers of and preparing other the ready our measure businesses. be larger specifically program a soon. We'll us, rollout relative the of Act of aspects to

general from first the Had point capital growth. bottom and just funding the working second quarter bullet talks strong about a

that didn't comment may and material draws think point. large run-ups I have that make we John line exhibit to a on have some he'll

devices modules by remote and of the wider client routines clients used use offered capture in bullet our maintain are and heavier of commercial our clients. deposit We've bottom wire commercial in to seeing with all of operating technology use field the point of being

through seven, bullet going the page commitment most $X to response. Merchants a Top back organizations. We're move serve. to markets Merchants that markets impacted local in contribution the not-for-profit who to a basic needs First critical addressing additional be organizations are in action point First we Board-approved of frontline Going giving to to million

basis points still -- couple around and consumer modified of delivery A appointment. of alternative lobby an the and really service drive-thru available so individual with bullet clients have lobby transactions to well quite drive-thru delivery adapted on meeting by banking sorry

to banking steering their our our to questions. best center working avenue use sync increased in towards and calls call the over our last And years thousands multiple our answer have of clients of needs to and met, a the great needs opportunity and seen digital as so highlight technology have their investments satisfy couple channels taking

talk a to deferrals at loan without all any case-by-case of to request. up granted going quantify is incurring page the length kind or basis modification payment of But on reporting. on and XX John and mortgage consumer fees this days credit any

early clients. Hardship even It's throughout bridge to customers loans just useful had First an Act and the us our consumer recognize for banking evidence. on hardship consumer been we Merchants CARES program centers began that that before what needs to was the had

lastly, and sharing knowledge then caution. And encouraging

there's and we're and been that clients COVID-related we've this protect our higher difficult period. to so fraud trying a scams think through seen I incidence nationwide of attempts

into later, little With bit Mark's wants I'll to first get but our you a that having deeper results. been said, quarter join

Mark Hardwick

the nineX quarter on during $X.X to $XXX by to or comments on $X.X while billion or of assets Thank million XX% XX.X% by accounted first strong or million nearly and Line since due will for by of you, X begin growth. billion for XX.X%. increased loan Mike. total the XXXX. Investments loans increased My growth organic leaving liquidity, slide $XXX X.X% same increased on where $X.X growth our or Line the of X loans Acquired deposit growth Line X $XXX billion million account in acquired on period

or loan for first allowance over COVID-related increased the the primarily losses quarter XXXX, XX.X% first million X the Line XXXX. on provisions to by of due during quarter of $XX Additionally

of on the are the well. and loan Slide trailing produced given prime it's under Loan billion basis shown portfolio had as of for lending X.XX%. yields the right on impact the that our in of XXX the upper during decrease quarter XX pressure quarter rate a LIBOR composition point yield $X.X the The

the right with XX% half illustrates pricing our of are on variable daily. loans graph for the As

yield of down is from peak Our last X.XX% loan year's of X.XX%.

increase than of On duration slide our longer our million peer since a XX time unrealized million is $XX.X year. this good XX, $XXX.X last totaled March variable has as offset to which our And gain a portfolio investment loan a portfolio. XXXX, rate

and You will also strategic investment advantage meaningful of cover I our on slide within improved securities of XX of when the sectors take portfolio gains realized both to gains yields. due to movements sale see

first or the annualized XXXX. XX, total quarter accounted deposits growth, or billion from $X.X for while Monroe increased quarter & XXXX. X first of the $XXX by an Common over deposits Trust first quarter Bank Line $X.X by to grew of On of XX.X% XXXX $XXX increased the on million million the by equity of billion organic X.X%. slide

$XXX the of comprehensive Monroe equity closed and million. of completion that The Bank over by by the XXX% our of of other earnings we XXXX & and decreased the normal repurchased million. company shares And equity purchase X,XXX,XXX Beyond dividends the just program share duration changes, income buyback over increased announced Trust back stock September $XX in program.

fortress liquidity. our future positioned sheet, ratio provides management and of pleased are and we bank balance recessionary the levels of We XX% enter the the Capital of as XX% environment. with our to and of believe liquidity is well loan this structure our for sheet ratio loan-to-deposit that asset balance with

on to XX cost and mix slide The deposits liquidity is key low our funding. strength of the both

non-interest-bearing XXX regulatory levels When interest above on from -- our totaled of demand of our slide interest-bearing and quarter the fortress-like XX the ensure of All internal deposit cost we capital targets, include ratios down quarter are deposits for bank XX the totaled regulatory last basis points year's well-capitalized points. which peak maintains capital. basis deposits, expense cost XXX. definition First

Now of back XX. highlights the value of net to sheet. XXXX. slide corporation's let's quarter the basis asset-sensitive turn XXXX fair the of by first quarter XXXX of the quarter to from bank's additional margin chart XX points interest net balance first an The declined the going This of to nature fourth

XXXX, of funds points, basis near then basis decrease the XXX end Fed to journey rates X.XX during to points deposit in XXXX basis just anticipate first two-year point. XXXX and Despite started additional maturities additional net point the and decisive of at action this margin again XXX XXX last remainder next CD we rate basis the and points by quick peak the quarter. the margins of increased As the of during XXXX, around in this interest XXXX including declined the our some first compression upcoming and quarter of quarter XXX

first the just In with line two-year moment. Staying XX%. of loan-to-deposit the time XXXX, XX% and our was it's quarter now a for ratio

liquidity of this liquid Our recession. healthy of X.XX% but essentially environment, up earning traded bond $XXX yields is the leading to in on X.XX% over recessionary for two-year yields assets this margin. million illiquid loan period approximately of current We've challenges

XX, income an XXXX, $XX.X XX, Monroe March acquisition or totaled to Trust. $XX.X of & Non-interest primarily million on as the due of slide of million XX%, Bank increase

interest provide Additionally, the when category natural to net rise. and growing income by decline several rates in hedge a when rates items the declining bank's

items Customer-specific $X.X mortgage accounted line fees growth fees $XXX,XXX million; $X.X payment and sale million include wealth service and million; of card $X.X fees the charges by each; in fiduciary gains increased the increase by hedge $X.X on increased of here and of quarter. for line the to derivative million items by two for separate increased loans management

increase, slide which first XX, with to first the Monroe merger in in quarter Bank were change. that our of cost quarter targets. Trust nearly of of compared XXXX, million on November I part our the million expense announced achieved accounted all XXXX. post-integration, we totaled just $XX.X in that the have of also Of for original of all $XX.X XXXX, Non-interest we & of add our completed this should savings

Now on slide XX.

on Line net and in Line the As EPS result were Mike provision X opening both the decline X. on on remarks, X Line income his expense of in mentioned primarily

efficiency XX%. on remained ratio Additionally, pressure, despite Line margin impressive at an the XX

compound can totaling and XX, dividends rate EPS, total you dividend still yield equity our trends see X%. growth over Slide is XX, common per annual will share. And is On XX%, on tangible nearly and our tangible book of XX.XX% of Slide value you notice

and Vice President to Kawiecki, couple financial cover will CARES key of Senior Act items Michele our on a of our related Now impact Finance the their statement.

Michele Kawiecki

for quarter the allowance Slide On qualitative this is Mark. loss XX, item CECL conditions and X. economic our want used of million. calculating and our I first the XXXX We to go. method validation at work to We our of in Thanks, provision adopt our discuss was ready increased models we're arrive factor deferral incurred to to as The current January were a performed on prepared CECL of adoption. of $XX.X

our $XX.X approximately and million In of the our adjustment was $XX January unfunded XX% XX-K, to we other XX% from day X for to allowance disclosed of million. that adoption an a at of and one reserve the commitments December liabilities XX increase cover

We had selected our models develop CECL and a acceptable used different Moody's forecast allowance in range. to scenarios scenarios few an

Our models our unemployment significant. by is the primarily the rate rate. equations other unemployment most economic are in too are driven but There indicators

of forecast In adopting, reliability created was the led with scenarios, to incurred Moody's new of a more a and view was COVID forward. March, to with and forecast. established decided method presented two the the scenarios bit loss last lower was risk clear the When of stay weeks under we the reforecasting certainty question until choice rapidly which the us there

that FASB such April for With period X and as would SEC the interim hope allow July the X. implementation, or

than the Now anticipated to of by decided But indicated issued and yet quarter. SEC to analysis haven't the they the for that less to teams our written desirable us review we results on course we subsequent stay making moving turned guidance. the the keep our transition conditions out and be still decision,

of I the we the a the own in the benefit implement waiting is better region which this stimulus serve impact government of on and view the initiatives to of we will volatility should our think have minimize communities programs impact pandemic, and of earnings. that our

CARES than Tax different the by allowed of QX effective us operating lowered a in a the million. Act rate net other with Jobs in rate which tax the That differential carry that result to tax income a current to rate put $X.X is The onetime X.X%. period our thing to provision adjustment, play it of back as losses Cuts with Act. rate resulted expense Taking that and advantage the tax large along a tax lowered prior

summary a our shows of XX Slide allowance.

is loans top On to million, the adding of X.XX%. in right for allowance ratio come to $XX.X charge-offs of an which roll-forward, an of the corner showing the provision allowance ending total is coverage $XXX,XXX quarter, a to

Line I X.XX%. have in nine plus adding ratio allowance in $XX.X remaining marks million results the marks fair of adjusted the because an value boxed value coverage of fair on

X% loans after-tax plus impact a do you the as charge-offs is charge-off total of on If equal burndown X/XX, analysis the a of rate using to allowance marks. fair value

our levels in this apparent consider covered you it's coverage, strong we balance to capital Mark, great credit addition strength. have When by sheet

like than have reserves second credit quarter. adequate I So feel into going more we the

items it Credit That Officer, Chief now discuss. Martin. to John concludes will the turn our wanted to I I over

John Martin

the discuss quarter with quarter activities. and my then from first All up comments utilization, specific and some of right. wrap review lending. good I'll I'm line Thanks, in and comments my begin quality quickly going XX observations presentation Michele Slide portfolio, portfolios on a recent the overlay afternoon. with to modifications, detailed mortgage review end asset

Turning Slide is annualized. grew reporting, presents have portfolio slide the collateral-based million. This quarter loan the more X.X% collateral. In grew perspective tied on been loans million to to grouped and a XX. first FDIC closely based $XXX the loans Commercial which portfolio $XXX or from

the as to projects Basically, million were of categories. in upper to more note quarter $XXX a portfolio and a first Of single-digits. construction CRE, non-owner-occupied to multifamily move with the stable growth was from five Line mid- same four from was Line roughly steady of moved growing the

the North which Industry I've American Slide XX, segments of this by -- show the Classification the to primary portfolio grouped loan segmentation composition new primary is by detailed the the -- new assets industry. by commercial is or System NAICS quarter. which Turning to quarter borrower --

help clear restaurant your from exposure attention to was real segment lessors NAICS and the below services draw I concentration. provide the roughly restaurant to to from estate of a million $XX of moved food that illustration of the

we've our diversified base, and administration is built manufacturing commercial across call earnings has a by that statements finance prior exposure that industries. robust largest First from state on supports manufacturing Merchants followed public And our This well has a public a business made in portfolio agriculture.

we and the million lines shutdown. the restaurant impacts are food participation highlighted Other production in million $XXX service, we note actively which little with are little energy or borrowers bridge those and Along in exposure. portfolios of $XXX as and no industries gas in have another same program to include help oil engaging the for PPP our modifications well loan of as hotels

segments I using quarter as is of modifications, can the early request in as slide to quarter, modification food same as the services before. using concentration dental. overlay well it's of the of an the presented XX end and restaurant And the you as see industry segmentation, This cycle end Turning XX. but

they that have increase. to were but fast not note as an I’d Hotels, request modifications, since showed

that ask you note I'd these So of take numbers.

taking notes is first end where home If slide are what the of just rather at here, than which are the to-date we quarter, the these you're was.

been end since $XX Overall, XX% and these has have just XX% updating million requested dental of the So services the deferrals. portfolios in million requested of portfolio portfolio of the requests and of modification restaurant food hotel over over the have the commercial quarter, just portfolio, $XXX consumer there requests. modifications, and modification of roughly XX%

as managed a credit instances would while lines XX. slide Line accumulate supported utilization been has across has regularly to situations draws, that borrowing by line to defensive order on there the wholesale stable in lines have bases of commercial draw there I frequently Moving to add change. monitored that move are down been been isolated portfolio. of And and not cash. are

into finance structured finance business, clarify and what is, it four The included kind sponsor a finance, finance debt spotlight included business. finance, slide dive to the Turning lending. the contains business lines; XX. help of structured markets, and then umbrella asset-based here, what's slide the to sponsor primary capital public to I've

business XXXX municipalities. a started and depository and gathering to taxing loan XX% authority, in activities cities supported to supported has and portfolio of the by partnerships cash The finance collateral. was XX% by flows it Approximately and public project towns the lending consolidated is public-private is while

XXXX as was in business equity transactions sheet Midwest private to and serves approach The sell-side to bank a this in the business in not minute. capital I'll sponsor to the started Southeast. management firms and does XXXX markets our a debt the The formalized and finance markets talk serves more facilitate about of in and syndicator. business where have balance First relationships. Merchant and This participating agent started

finally, controls, asset-based more tight And back with businesses lending are All credit of years in experience. secured is than started managing supported operations. office by XXXX a draws seasoned and XX with department executives by four led

Then XX and to I'm highlights deeper the into business. to finance turn portfolio the I've slide elaborating, diving of business. going included sponsor

the is which portfolio private GE Risk mentioned, former companies, million marketing Southeast Midwest frequent region oversight. to Officer in less firms detailed acquire led Midwest with just Chief As EBITDA in a by and I to for and team have equity $XX the than

revolving and firm opportunities debt credit XX% and with senior opportunity less target multi-bank with underwrite than and New facilities the and leverage private single both structured both the equity term opportunities. lower structures. are senior We profiles senior in secured amortizing loans loan-to-value

includes tenants Michigan. out which which has around concentrated estate to an Indiana, Moving include require or included XX. The strategy for projects would portfolio total our of I've of estimate retail as to contact. are been the expect, you retail and face-to-face which one-third loans. real concentrated originate X.X% a which The real our is related where the modifications. estate geographically and multi-family exposure estate has real the footprint does slide Ohio, Amazon-resistant portfolio broken of related breakout investment I've portfolio Illinois

Slide recent mortgage where turning with environment now Turning which the rate lending robust down business been a This XX mortgage I -- pipeline. in me a activity. With highlight -- the is bright strong a I has low -- spot highlight to interest quarter. excuse real

to including to securities note include well balance as balance sheet items a comparable the an XX-year achieve fixed -- pricing-based to ability use on as place of of a a premium able mortgages being when market, modest yield Some strategy sheet mortgage-backed to to exists.

closing we current result of as In continued And the finally strong, extended strong pricing, despite additional the to utilized remain expand loans capacity. market out to have environment. the locks home add purchase pipeline has the for having the processing pandemic without a jumbo slide

Slide thus consumer portfolio to on modest side. mortgage loan been consumer the XX, I've to far the composition of Moving and have and by portfolio comparison mortgage the Modifications spotlighted overall the modifications. loan

Turning is impact pandemic was strength quarter's I a to quality Slides the asset this from. that This of and does XX would to briefly, start economic good continuation reflect add and shutdown. place just XX; and not the subsequent of yet quarter's the prior for company a

structured the their accruing recent start plans to which our XX, our of and a while pushback a deferral, a engaging working a while principal, borrower understanding excuse borrower to do moving modified forward. to loans or and a is schedule. XX-day how Then with Slide liquidity with when customers returns me be initial We path most will repaid P&I with We interest Well access amortization and the being weeks normal where XX-day from? by deferrals in we affected. -- their surveyed and

processes. enhanced a cycle with the We are stronger monitoring credit and profile beginning

We the for planning are forgiveness the -- additional while to process anticipation access PPP program get originating our of loans forward while and in guidance. helping receiving forward customers

share this our The might on. Main in been has Merchants opportunities details that focused a We and exist team of around entire rollout have on I the First Street results program think for process who borrowers Mike Stewart that program the anticipation to now program deliver worked and under which can build amazing. has team lending

and borrowers. from assist an staff ready assets in special And the we recession program last and experienced place workout established have to

our underwriting pandemic good maintain understanding and the how by continue standards focus a we on finally credit judgment supplemented And will borrowers. impact to our

Mike to Rechin. call turn over I'll now the

Mike Rechin

clients bullet path last chart you, the proactively really engaging customers John. I Thank top it: and in slide forward. the of your to point like

this schedule their for performing. is be Zoom to share listening calls here balance concerns the and of the teamwork company solve company can clients, I talking front record to a of seem the to we in how I them. John's webinars, for their out appreciation is that on While, and

Page for and are being well eyes the about get challenge comments. strength I'm positioned I where stability from But XX. to and this that So some My don't lines on that. for skip the talks to future to tempted bottom and want cheat summarizing earlier it under

go to lot midway going implementation; through with April loans; CECL a a equity part second quarter better allowance into a of foundation and strong loan-to-deposit nearly an XX%; We're an the X.XX% liquidity marks of a ratio. of from tangible value protection pretax earnings fair common pre-provision million; $XX of of XX% of deferral

What portfolio it high-performance return and and covered really produces underwriting and John is assets management diversified results profitability efficiency well just with portfolio a ratios. on a sharp execution

book we XX% know it's maintain of While, a historical valuation above our value, that tangible average. we also

of recessionary We're positioned. optimistic. material our goal think was to our today's well our with mindfulness today do we're environment. And evidence I So

think know this evaluating and we're clients ahead. we our We're variables against in navigating about and company our I optimistic virtually business. all for what what's we're up

point, are for at this So open questions. we Andrea,

Operator

Piper Instructions] from Scott comes ahead. Siefers question go Sandler. Please our [Operator first of And

Scott Siefers

guys. afternoon for question. Thanks the Good taking

Mike Rechin

afternoon. Good Scott. Thanks,

Scott Siefers

Hi.

CECL, I the took which of definitely a method. the question of first did you sort provision appreciate qualitative advantage big delay I'm and factors wondering, take incurred to guess, is rationale. and not despite So adopting just CECL under just the decision not being on -- the

What would it's CECL like CECL? I the what large you similar and guess this provision a sense a the quarter. seen they ones did your in provisioning have levels sense under to would we've this So have so far the been in difference been quarter between that

Michele Kawiecki

CECL on materially even have help would can't provision going CECL provision provision to the ignore what's between we We think versus that I incurred incurred model the the that different. economy, loss difference mean, I the qualitative inform so models you forecast been use don't for on the the Moody's under the adjustment loss in our I booked. think

Scott Siefers

and Okay. needed that clarity substantially flexibility In reserve other the And given to forward? eventual goes words could it the you will really forecast? qualitative way be the if build under going that prep the continue on enough

Michele Kawiecki

Yes.

for room that. there's think I

Scott Siefers

your and you that a CECL then transition when to interim able of how mentioned And perfect. you mentioned you more might an some in then of hopes do the but detail do favorable. just to be Can Okay, not adoption interim as stuff about comments go bit an adoption? the was on into

Michele Kawiecki

did haven't to still make X, January to that. restate and said from Cares is passed but in when But said that provision December statement the adoption that that guidance we know have although emergency either or of SEC be this issued if that allowed was and was or the Act for guidance to act the that going Cares written still that still Well, was and on not to would the on in waiting back the accountant it that interim XXst didn't we the we're play adopt was a They waiting hear the SEC year their so end canceled at we're at around when Act. in the CECL it, initially guidance. official we

Scott Siefers

Okay, right. very you much. Thank all Perfect.

Operator

Our Daniel Please Raymond from question James. ahead. go Tamayo comes next of

Daniel Tamayo

Good afternoon, guys. Thanks question. for taking my

Mike Rechin

Hi, are Daniel. How you?

Daniel Tamayo

you. Thank well. doing I’m

guess given get here. first So -- question meaty I into I'll right a

On the I you heard forward comment. expect going in something usage or tax I think it the the rate given that time again is the the of used in quarter, that is could be first one that -- NOLs that

going forward So any be be the what rate might great? around would tax comment

Mark Hardwick

gets a rate we anticipate math that go would all, didn't to and item the we it would tax have we rate if XX.X%. through at that if provision provision of of one-time you to a levels similar just That's And if have about a run tax XX.X%.

pretty the pushed rate fact and the large provision had even significant was lower. this the So we a tax that quarter NOL

Daniel Tamayo

going for on rate margin, type I stepping expectation you stability similar might think beyond, an it. sense. quarter. third second guess that scenarios of then there do that the you Got And contract forward? quarter to you That and in the then And given the makes mentioned just out into see

Mark Hardwick

I Yes, anticipated the quarter on second similar first margin a and stabilization. the kind that to was do. quarter I of then pressure

So And because they'll then in happened second and quarter quarter. rate that's by reductions -- the then cuts and just completed. we'll deposit the be the fully majority late our of the recognized in have

billion in in that amortized XX -- we about to next they're second quarter do repriced by which CDs remaining we four a We still $X.X But a million similar the about XX percentage however, the and point, way next down challenged that's of were some months I it should the $XXX priced think months off. over least at have the pressure over and say the at we're takes be first. to of going

Daniel Tamayo

That’s my for questions. right. Thanks terrific. All answering

Mark Hardwick

Thank you.

Mike Rechin

Thanks, Daniel.

Operator

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

Damon DelMonte

hope everyone. good okay these doing Hey, is challenging afternoon, during I times. everybody

First just do have… originations think participation, you average around pretty I active $XXX was PPP you million. Like said What the regarding the rate those? question, on

Mike Rechin

average size? Like

Damon DelMonte

other fee? No

Mark Hardwick

X%.

John Martin

X%?

Mike Rechin

They're about X%.

Damon DelMonte

X%? And we begin for is some these for can Okay. part what the can probably forgiveness were mostly April? paid expect these March when loans process? you'll off? first of expectation when or your of in Like be booked What

John Martin

after has Damon, John. The eight is this a Yes. PPP it weeks. forgiveness program,

see a the to before forgiven. So to begin it after -- ends even will those start or have loans they actually should quarter be they

Michael Rechin

forgiveness think Mike, I process been fully yet. this is for -- Damon. The really it not has offered

to John's provided point, with of and metrics speak the funding now so some that so, were And that. we're actively

to payroll, if And even of through appropriate towards eight forgiveness initial So for of funding demonstrate close the of forgiveness end wave. pretty really you back usage use quarter started. could gets think the process the before about we're it the weeks to end the get actually

be will it to interesting So see.

John Martin

wave. the on And funding here, of I'd second putting be another too, we'll add round with

So then we're round have we going able round. be, the clock through the And forgiveness of customers actively for that weeks up to eight tick. it's first any and obviously, eight-week starts then that be will queued second weren't get that to the start to and the will

Damon DelMonte

Got it.

the you Okay. that the the does was $X.X look then question just another noted I accretion basis year? XX schedule million the margin. for How And the quarter. Mark, this on remaining quarters value to think, points of fair

Mark Hardwick

year. the amount for like a expect of remainder We'd the

Damon DelMonte

Okay.

I Thank much. you all for now. have That’s very Okay.

Mark Hardwick

Thanks, Damon.

Operator

comes ahead. next Stephens. Our Please McEvoy question go from of Terry

Terry McEvoy

taking my questions. Hi. Thanks for

Michael Rechin

Terry. Sure,

Terry McEvoy

and Or modifications, and few John, start was level questions. there When you customer were the a was all out. yes the you you getting I'll reviewed request a data broken selectivity through modification and was really were thanks of all way of situation? it each your I for for guess, the with -- where borrower there to went it kind customers? presented the

John Martin

look how is I'd series checking they might all questionnaire ask their a to we What we assessment plan try to where they what complete access a situation say about cetera, borrowers financial them navigate business business forward questions their savings, relief of business get to current on that, liquidity, and situation of accounts, and our be the et had a facing. investments

all were days, backwards prior financial The had that first periods. looking statements they looked obviously, and XX from those strong

relief. as so I questionnaire to really, trying an and fairly the looking on to it they the And make But assessment. request we're would accommodating customers their balance was say, at

Terry McEvoy

it to borrower XX have changed say days fast work forward Do haven't continue and the let's outlook. was And that for of we request you economic flexibility XX to terms with the days? another in XX-day a and

John Martin

into actually Yes. six XX-day two Terry, The running months a classification. came as that without guidance basically or out, up provided periods TDR to

to of it be delinquent the at couldn't the TDR. in order a You year end for be not

for granted was a borrower So you delinquent. an couldn't extension who have

strategy plans. plan, But questions about to days after the more XX reassess is ask are what even the and their idea,

have understanding better the be borrowers the will what that six-month So forward. closer and get of a we bank's as end we of the strategy that to period going

Terry McEvoy

question for then maybe quick Mark. a And

looking out about to Just quarter, to model best second about what is think happened are certain March. the more. Maybe for it way to the income, us down as in areas think we fee try at

any there card the situation a So in decline could is that you cetera. fee you sense and areas I'm service way level the give us the first that saw thinking of quarter? late et of payments charges, because are down those for

Mark Hardwick

sale is derivative have often. else at the a with decline look another quarter have activity on this, great expect is out less the will in gains another going management hedge strong. in not I Card as income. in I When than Everything market quarter Yes. wealth home normal an of really great fees everyone as through mortgages, would the and staying to is impact.

gains mortgage-backed first the the of don't had I advantage probably securities opportunity, much. but young. We've kind quarter market won't vis-à-vis the anticipate take opportunities And of to municipal the same in market be as some the still great and is the quarter

right if charge we the the So little bit see EIC, term of is them related take we'll that to a payments? definitely There's the service advantage.

John Martin

waivers release or we're in some The of that fee still omission will fee itself. business integration

Mark Hardwick

is stimulus payments the they consumers then then slight use that not sure not the as a we all be it look And offset benefit that tax payments that to to sure be that fully the and to payments at And -- and the cover we trying recognize all positive. to make and Yes. well accommodative -- overdrafts. tax there's

any a So, of you bit little do there, but other there may be have thoughts? pressure Mike

Mike Rechin

that premised is to little both It lucrative in bit a noninterest of slow and heard. five what commercial for you I've month be the Line this Terry Two other loan great. business demand Mark's you've and that the hedge closings, on thoughts is for is -- a customer April already hedge early a might volume yes. has Mike Rechin. The know which on bank seen clients. for as Well slide that's already high Item that but on going that down income the of top been is and on its business

Mark closings particularly mortgage spoke the volume, of in had the it's million but strong. first We to quarter. And already $XXX

We have $XXX second million the a quarter. pipeline in of

as XX% to or more high is relatively sale So stay ought which sale an that on business well. predominantly gain

Terry McEvoy

Appreciate today's Thank for the that. thanks Great. you presentation. for slides all it. extra in And

Mark Hardwick

You’re welcome.

Operator

a of Daniel Our go follow-up Raymond James. next question is Tamayo from Please ahead.

Daniel Tamayo

This follow-up taking on just a for Thanks follow-up. of guidance. kind my is the CECL

impact So, now will CECL how the reserves and provision it? you that me first be in larger, Day preserve -- you've part when the do implement quarter does taken impact what one to excuse the that are this reserve

Michele Kawiecki

is Well one the in that adjustment. January be assuming our disclosed our implementation would date that XX-K we what

Daniel Tamayo

of will I point? -- XX% of is the that would the previous basis off -- be mean as end the percentage are So whatever it still reserves same that

Michele Kawiecki

as it would that But and of one still verbally, to of instance, number. has at said would guidance as implementation they the back the the if if right have date fresh the now, -- have will CECL be X that of a so think at for with like implement remains in date we've take we're a year, sounds allowed the day restate one SEC and I to provided us different look January what January to play. the least we

Daniel Tamayo

I see.

Okay. question. a And separate then, is this

or of first Just come bit the management a revenues, little an revenue on average in the expect those of like came that off wealth in kind value would it down like value that you based quarter. up the Are number they quarter? some looks second intra-quarter to market

Mike Rechin

asking Well, I -- a think dominant the billing you're question.

the think of terms magnitude fees is the larger I year-over-year of comparison of those impact the in Monroe.

derivation I question -- of Monroe You answer you off head. had size our bank the private business for outsized the asked the can't of my an actually might specific billion of and about percentage recall the of a fee wealth $X.X structure, good top a our kind

his it's an question of end think off time is or think a that, know over I month but time? I of of date quarter -- off period it what is should I period average end of or I don't.

Mark Hardwick

offline. We That's can follow fine. up

Mike Rechin

question. I the appreciate

Daniel Tamayo

my taking follow-ups. for Thanks

Mike Rechin

Sure.

Operator

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

Mike Rechin

enjoyed. thankfulness. no Andrea, than fortunate good have that good the you de associates I have listening hope allowed esprit call. luck other same hope everyone health corps the for in thank soon. We've you goes has Talk has our that level I to which us everyone stayed comments and had. our for had the shape other have the particularly on has with to service have same company the I been we had hosting. that we've

Operator

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

First Merchants (FRME) 23 Apr 202020 Q1 Earnings call transcript