First Financial Bancorp (FFBC) 2018 Q2 法說會逐字稿

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  • Operator

  • Good morning, and welcome to the First Financial Bancorp Second Quarter 2018 Earnings Conference Call and Webcast.

  • (Operator Instructions) Please note, this event is being recorded.

  • I would now like to turn the conference over to Scott Crawley, Corporate Controller.

  • Please go ahead.

  • Scott T. Crawley - First VP, Controller, Principal Accounting Officer & Director

  • Thank you, Drew.

  • Good morning, everyone, and thank you for joining us on today's conference call to discuss First Financial Bancorp's second quarter and year-to-date 2018 financial results.

  • Participating on today's call will be Claude Davis, Executive Chairman; Archie Brown, President and Chief Executive Officer; Jamie Anderson, Chief Financial Officer; and Tony Stollings, Chief Banking Officer.

  • Both the press release, we issued yesterday, and the accompanying slide presentation are available on our website at www.bankatfirst.com under the Investor Relations section.

  • We will make reference to the slides contained in the accompanying presentation during today's call.

  • Additionally, please refer to the forward-looking statement disclosure contained in the second quarter 2018 earnings release as well as our SEC filings for a full discussion of the company's risk factors.

  • The information we will provide today is accurate as of June 30, 2018, and we will not be updating any forward-looking statements to reflect facts or circumstances after this call.

  • I will now turn the call over to Claude Davis.

  • Claude E. Davis - Executive Chairman of the Board

  • Thanks, Scott.

  • Good morning, and thank you all for joining us on today's call.

  • Yesterday afternoon, we announced our financial results for the second quarter.

  • We are pleased to be here with you marking the close of our first quarter for the combined First Financial Bancorp.

  • Today I will provide an update on our successful integration and then turn the call over to Archie and Jamie for comments on our second quarter results.

  • Finally, we will wrap up with Archie discussing the combined bank outlook.

  • On May 29, we opened our doors as a fully integrated bank having successfully completed our system and brand conversions.

  • Building upon prior efforts to integrate management, sales and support teams, we worked diligently during the quarter to integrate the systems and business processes to position us for continued growth.

  • We also successfully completed the divestiture and deconversion of the previously disclosed 5 branch locations in Columbus, Indiana, and Greensburg, Indiana.

  • We made substantial progress on our cost-saving activities during the quarter as we completed the consolidation of 41 banking centers in addition to the 5 that were divested.

  • Additionally, we are approaching our targeted staffing levels.

  • Further cost saves will continue to phase in over the coming quarters and are expected to be fully realized by the end of 2018.

  • These milestones were important steps that enable us to successfully execute our strategy, deliver exceptional service to clients and provide solid returns to shareholders.

  • Our work over the preceding quarters will better positions us to be a high-performing community bank that successfully meets the lending, economic development and financial needs of the communities that we serve.

  • With that, I'll now turn the call over to Archie, to provide further thoughts before Jamie discusses the second quarter financial results.

  • Archie M. Brown - President, CEO & Director

  • Thank you, Claude.

  • As shown on Slide 3 of our earnings presentation, our second quarter results were exceptionally strong and marked our 111th consecutive quarter of profitability.

  • We're extremely pleased with our solid performance and anticipate continued growth and success in the quarters to come as the benefits from the merger are fully realized.

  • Our second quarter results reflect top quartile performance, enabling us to achieve earnings of $0.57 per share, a 1.6% return on assets -- average assets and a nearly 21% return on average tangible common equity and a sub-52% efficiency ratio when adjusted to remove merger-related items.

  • Our strong earnings and profitability demonstrate the emerging potential for the combined company.

  • The second quarter was also highlighted by margin expansion, stable credit quality and strong capital levels.

  • Loan growth fell short of our expectations as a result of lower loan originations, net higher payoff activity.

  • However, we anticipate our loan growth trends will gradually improve in the second half of the year.

  • We believe we are well positioned to capitalize on the earnings momentum generated during the second quarter to close the year on a strong note.

  • At this point, I'll now turn the call over to Jamie, to discuss our second quarter results in more detail, before I provide an update on the combined bank outlook.

  • James Michael Anderson - CFO

  • Thank you, Archie, and good morning, everyone.

  • Slide 3 provides an overview of our second quarter performance, which included net income of $36.4 million or $0.37 per diluted common share.

  • As Claude and Archie mentioned, we are extremely pleased with our second quarter results and the first quarter as a combined company.

  • The quarter was highlighted by strong earnings, margin expansion and improved efficiency in addition to stable credit quality.

  • On Slide 4, we provided a reconciliation of our GAAP earnings to adjusted earnings, highlighting items that we believe are significant to understanding our quarterly performance.

  • As you might expect, with the closing of the merger in the beginning of the second quarter and the system conversion mid-quarter, the period contained a bit of noise.

  • Excluding merger-related items, net income was $55.6 million or $0.57 per share for the second quarter, which equates to a return on assets of 1.6% and return on tangible common equity of 20.9% as shown on Slide 5. Further, our adjusted efficiency ratio of 51.7% for the quarter reflects cost synergies realized from the merger with MainSource and diligent expense management.

  • Turning to Slide 6. Net interest margin for the second quarter increased 31 basis points from the linked quarter to 4.15% on a tax equivalent basis.

  • The increase in our net interest margin was primarily driven by the impact from purchase accounting in addition to higher loan fees and earning asset yields, which were driven by increased interest rates and a restructuring of the investment portfolio.

  • These factors more than offset higher funding costs resulting from rising rates and shift in -- shifts in funding mix as well as the initial margin dilution from acquiring the MainSource balance sheet.

  • As shown on Slide 7, loan and deposit mix were relatively unchanged post merger.

  • Purchase accounting resulted in higher loan yields, while overall deposit costs declined on a combined basis due to the lower MainSource cost of deposits.

  • Slide 8, depicts our end of period loan and average deposit progression from the first quarter.

  • As shown on the left-hand part of the slide, when adjusted for merger and branch divestiture activity, loan balances declined modestly compared to the first quarter as originations were lower than expected and prepayments accelerated.

  • On the deposit side, again, excluding merger and branch divestiture activity, average balances increased due to higher brokered CD balances.

  • Archie will discuss our outlook for loan growth later.

  • Slide 9 details our noninterest income and expenses.

  • Overall, both noninterest income and expense levels approximated our targeted amounts.

  • Second quarter noninterest income was largely in line with expectations although changes in mix are expected other -- over the remainder of the year as certain income streams are subject to seasonal variance.

  • Total noninterest expense of $102.8 million included $24 million related to the merger.

  • We are committed to maximizing synergies between the 2 legacy companies and will continue to identify opportunities for future efficiency.

  • On Slide 10, overall asset quality remains excellent.

  • Absent merger activity, classified and nonperforming asset balances increased slightly but remain low compared to historical norms and were flat or declined as a percent of assets.

  • Net charge-offs increased to 18 basis points as a percentage of loans, primarily driven by a single credit in the ag portfolio.

  • Provision expense approximated net charge-offs resulting in a relatively stable loan-loss reserve balance.

  • The allowance as a percentage of loans predictably declined due to purchase accounting requirements.

  • However, there was approximately $33 million of credit mark associated with acquired loans at the end of the quarter.

  • Finally, with respect to capital ratios, as shown on Slide 11, I'll note that following the merger, all ratios remain in excess of stated targets with further expansion expected in the coming quarters.

  • I'll now turn it back over to Archie for some comments on our outlook for the rest of the year.

  • Archie M. Brown - President, CEO & Director

  • Thank you, Jamie.

  • As can be seen on Slide 12 regarding our outlook, we're well positioned for continued success over the remainder of the year.

  • As I said earlier in the call, we fell short of expectations with regard to loan growth.

  • Originations in the Commercial banking group were lower than we anticipated for the quarter as we work to build the team to the levels we believe we need to drive expected growth.

  • We also experienced higher-than-normal payoff levels, primarily related to our construction lending portfolio.

  • We anticipate that the higher rate of payoffs will slow as we approach the end of the year.

  • We expect the third quarter to have low single-digit growth on an annualized basis with gradual improvement to more normalized levels as we approach the end of 2018.

  • Additionally, we do not expect to see material deposit attrition.

  • We expect the net interest margin to be in the range of 3.95% to 4.05%.

  • This estimate is based upon current interest rates and includes both the impact of purchase accounting adjustments and the impact of tax equivalent adjustments.

  • We're providing a range as the margin could fluctuate depending upon the loan production mix and prepayment activity, deposit pricing pressures and growth trends and market rate movement.

  • Our combined balance sheet projects to be slightly asset sensitive, but realized benefits could be muted if there's any catch-up in deposit pricing driven by market competition.

  • Our near-term credit outlook is stable with no systemic credit issues.

  • However, individual credits can negatively impact results from time to time.

  • On a combined basis, we expect noninterest income will be in the $28 million to $30 million range per quarter, but will fluctuate depending upon seasonality, loan production and wealth management market values.

  • Mortgage, in particular, has seen recent industry headwinds due to market conditions caused by a combination of a modest rise in rates and tight housing supply and continues to be a potential risk as we move forward.

  • Our estimates include known revenue synergies which approximately offsets lost revenue related to divestitures.

  • Through execution of our strategy, we expect to continue to grow the income across all sources.

  • We see our third quarter expense base in the $76 million to $78 million range, excluding one-time and merger-related expenses, before finally settling in in the $75 million to $77 million range once all cost saves are phased in.

  • We project a fully phased efficiency ratio of 50% to 52%.

  • Long term, we remain focused on efficiency, while also continuing to make strategic investments to support the continued success of our business.

  • All capital ratios are anticipated to exceed current internal targets.

  • We continue to maintain our target dividend payout ratio of 35% to 40%.

  • And on taxes, we expect the effective tax rate of approximately 19.5%.

  • With the majority of merger-related activity behind us, our focus is on maximizing remaining synergies and implementing strategic initiatives that produce top quartile returns, while continuing to deliver the value and service that our clients and communities and shareholders have come to expect.

  • We look forward to spending the remainder of the year executing our strategic objectives with a disciplined approach and focusing on the financial needs of our business, consumer and wealth management clients.

  • This concludes the prepared comments for the call.

  • Drew will now open up the call for questions.

  • Operator

  • (Operator Instructions) The first question comes from Scott Siefers of Sandler O'Neill and Partners.

  • Robert Scott Siefers - Principal of Equity Research

  • First question that I wanted to ask was just on the margin guidance.

  • Archie, I think when you were -- in your prepared comments you suggested that the 3.95% to 4.05% gap is -- that's also an FTE margin.

  • Is that correct?

  • Archie M. Brown - President, CEO & Director

  • Yes.

  • I'll -- Scott, I'm going to have Jamie expand here on the margin if you like.

  • James Michael Anderson - CFO

  • Yes.

  • That's correct, Scott.

  • It's on a -- that's on a tax equivalent basis.

  • Yes.

  • Robert Scott Siefers - Principal of Equity Research

  • Okay.

  • So then it -- excluding the 23 basis points of purchase accounting benefits, I guess, it suggests a core in the range of like 3.72% to 3.82%.

  • I guess, I'm just curious since you start with a 3.86% core margin in the 2Q.

  • What would cause, I think, it's about 9 basis points of erosion in the core margin in the 3Q, given the assets on to the balance sheet?

  • James Michael Anderson - CFO

  • Yes.

  • Scott, this is Jamie.

  • A couple of things affecting that, that we are forecasting there in the third quarter compared to the second quarter.

  • So 2 of the big things.

  • One is we're forecasting lower loan fees and that's affecting the margin by 3 basis points.

  • So we had the second quarter, and we just don't forecast those.

  • They could come in -- they're just lumpy.

  • So in the second quarter, we had some higher loan fees, some prepayment fees in the Commercial Finance line of business, and we're just not projecting those going forward.

  • So that's 3 basis points.

  • The day count actually has an effect there in the third quarter compared to the second quarter, adds 2 to 3 basis points.

  • And then we are projecting in just on the core margin still a shift in the funding mix that would bring down the margin slightly as well.

  • Robert Scott Siefers - Principal of Equity Research

  • Okay.

  • All right.

  • And then would you guess it sort of stabilizes after that or would there be reasonably -- that there'd be further erosion as we go forward?

  • James Michael Anderson - CFO

  • No.

  • We would think at that point that the margin would stabilize.

  • Robert Scott Siefers - Principal of Equity Research

  • Okay.

  • Perfect.

  • And then if I can switch gears a bit.

  • So by the fourth quarter, we've got the anticipated expense range of $75 million to $77 million.

  • And I think Archie, you had said that the cost savings should be done by the end of the year.

  • I'm just curious, as you look at the dollars of expenses in the fourth quarter and then the fully phased-in 50% to 52% efficiency ratio, is there room for improvement on both of those as we get into early next year or will fourth quarter of this year be the trough for dollars of expenses and the efficiency ratio?

  • Archie M. Brown - President, CEO & Director

  • Scott, it's Archie.

  • I mean, I think we're saying we'll have -- the expenses related to the merger we'll be through all of the effects of that by the end of the year.

  • So that trough happens sometimes end of the fourth quarter, early first quarter is kind of when we'll see that in that baseline, kind of on a run-rate basis occurring.

  • Robert Scott Siefers - Principal of Equity Research

  • Okay.

  • So maybe some additional leverage as we look into the first quarter of next year.

  • So I guess, ideally have the low for expenses be early next year as opposed to fourth quarter this year?

  • Archie M. Brown - President, CEO & Director

  • Probably early part of first quarter.

  • Yes.

  • Operator

  • The next question comes from Kevin Reevey of D.A. Davidson.

  • Kevin Kennedy Reevey - Senior VP & Senior Research Analyst

  • So my question relates to your ability to continue to reduce your deposit costs.

  • With the addition of MainSource now in the fold, do you see further opportunities as you head into the third quarter and fourth quarter?

  • James Michael Anderson - CFO

  • Yes, Kevin.

  • This is Jamie.

  • Just to be clear, our -- when you look at our deposit costs, on the slide that we -- where we show -- where we're showing our deposit costs from quarter-to-quarter, they're going down from 60 basis points to 57 basis points.

  • That is showing FFBC standalone in the first quarter and then obviously the combined company in the second quarter.

  • So our deposit costs, when you look at it on a combined basis in the first quarter was around 51 basis points, on a combined basis.

  • So our deposit costs went up 6 basis points from quarter-to-quarter when you look at it -- when blending in the MainSource balance sheet.

  • So we still expect that those -- that deposit costs will increase from quarter-to-quarter in a similar fashion, depending on market pressures and whatnot.

  • Kevin Kennedy Reevey - Senior VP & Senior Research Analyst

  • And then related to customer and talent retention post merger.

  • Can you give us some color as to what you've seen there?

  • I know it's only been a few weeks since the transaction's closed.

  • Anthony M. Stollings - Chief Banking Officer & Director

  • Yes, Kevin, this is Tony.

  • I'd say that it's been about what we would expect for the trailing period of the transaction.

  • We have been very intently focused on client retention.

  • The number one driver of client retention is retaining our relationship managers, so I would put both of those as very, very high priorities.

  • So we've had some success.

  • We've had some regrettable turnover, I'd have to admit.

  • But we feel good about where we are, and we continue to build the teams as we work with the larger company and move up market.

  • Kevin Kennedy Reevey - Senior VP & Senior Research Analyst

  • And then as you -- now that you're past the $10 billion asset threshold, how should we think about the impact of Durbin in 2019?

  • James Michael Anderson - CFO

  • Yes.

  • This is Jamie again.

  • So the impact of Durbin will hit us starting in the beginning of the third quarter of '19.

  • And our estimate of the impact is that interchange income will be reduced by $3 million a quarter.

  • Operator

  • The next question comes from Jon Arfstrom of RBC Capital Markets.

  • Jon Glenn Arfstrom - Analyst

  • Question on Slide 8. The decline in loans, good to kind of show us the stack in terms of what happened to loan balances this quarter.

  • But you talked a little bit about some prepayments and some lower origination activity.

  • Is that -- is this kind of merger related do you think?

  • Is it an aberration to see that kind of number, I guess, is the first part of the question?

  • Archie M. Brown - President, CEO & Director

  • Yes, Jon, this is Archie.

  • I don't think it's unusual or an aberration, 2 real pieces of this, the -- on the loan origination side, as you think about the company, the size of company we've created, there's a lot more opportunity in the middle-market space and we just need to build in our staff levels to the -- for that kind of talent.

  • And so we've been doing it methodically, some of our markets we've really built out.

  • A few of our markets, we still have to get some more middle-market bankers.

  • And I think as we do that it will allow us to drive originations higher.

  • On the payoff side, it's really, for us, as I alluded to, it's in the construction lending portfolio and we can look ahead here over the next few quarters and see what's happening and it really looks like it's peaking out through the third quarter.

  • And then as we get into the back half of the fourth quarter it starts to level back off.

  • So we think we're just in a little bit of a high level on some construction projects.

  • And then it'll start to get back to a normal level.

  • Jon Glenn Arfstrom - Analyst

  • Okay.

  • Generally big picture though you feel good about your markets, good about the pipelines.

  • It's just you've got a little bit of work to do as you come together.

  • Is that fair?

  • Archie M. Brown - President, CEO & Director

  • That's correct.

  • And again, it's just building out middle market lending teams fully for the size we are and just getting more of that talent on board.

  • Jon Glenn Arfstrom - Analyst

  • Okay.

  • Okay.

  • Jamie, one for you, just provision thinking.

  • Anything in the provision this quarter that was elevated?

  • And I think you said the mark was $34 million, so you're just a little under 1%.

  • Is that the preference to keep the reserve at that level?

  • James Michael Anderson - CFO

  • Yes.

  • So this -- let me touch on the mark first.

  • The mark -- at the end of June the credit mark had a balance of $33 million related to the MainSource portfolio.

  • And so that's a little higher than what the loan-loss reserve balance was.

  • That was the closing MainSource loan-loss reserve balance.

  • But -- so we have that sitting out there.

  • We did have during the quarter -- when you look at the charge-offs during the quarter, so basically just say charge-offs and loan-loss provision expense were virtually the same, $4 million of net charge-offs and $3.7 million of provision expense.

  • The $4 million, with loan balances essentially flat.

  • So in the $4 million of net charge-offs, we had one single credit that contributed to about 75% of the charge-offs, so about $3 million of the charge-offs.

  • When I think about provisioning going forward, it's essentially approximating covering charge-offs and about -- between 80 and 100 basis points of loan growth.

  • Jon Glenn Arfstrom - Analyst

  • Okay.

  • Okay, good.

  • And then just one more on the balance sheet.

  • Any -- you talked about the shift in mix to higher cost funding.

  • Help us understand that a little bit more.

  • Is that just deposit competition or is it some other type of change in your thinking on funding?

  • James Michael Anderson - CFO

  • Well, it would be 2 things.

  • It would be what you just said on deposit competition.

  • But then it would just also be for us with the -- on the -- on a short-term basis, with the attrition that we did see from a core side.

  • Again, I -- this is a short-term issue with us, with the disruption from the merger, just some shift in the funding mix to more higher-cost funding to CDs and whatnot.

  • But the attrition overall was minimal.

  • But there was -- you're always going to have some in these, and we built that into the projections that we had.

  • Operator

  • The next question comes from Nathan Race of Piper Jaffray.

  • Nathan James Race - VP & Senior Research Analyst

  • A question on loan pricing.

  • Obviously, we've seen the short end come up higher.

  • So just curious if you're seeing any erosion in spreads?

  • More recently, your spreads are holding fairly well thus far.

  • Anthony M. Stollings - Chief Banking Officer & Director

  • Yes.

  • Nathan, this is Tony.

  • I'd say that there's -- they're certainly under pressure, but we've been able to hold the line for the most part.

  • We might exercise a little more flexibility on current clients and making sure that we retain relationships.

  • But overall, I don't think we've seen as much pressure on the pricing side as we have the structure side.

  • Nathan James Race - VP & Senior Research Analyst

  • Understood.

  • And kind of changing gears a little bit and thinking about expenses.

  • In 2019, I know we're, kind of, some ways out but just curious if you guys have any expectations on kind of underlying expense growth as we get into 2019?

  • James Michael Anderson - CFO

  • Yes.

  • This is Jamie.

  • I mean, I would -- when we look at -- if you're building off of the base from the fourth quarter, we're really just talking about what I would consider to be normal expense growth in that 2% to 3% range.

  • Operator

  • The next question comes from Chris McGratty of KBW.

  • Christopher Edward McGratty - MD

  • Jamie, can you remind us what the pro forma deposit base, the network deposits that are still on the balance sheet, the legacy FFBC that were kind of more sensitive to Fed funds?

  • And how you've worked that down over time?

  • James Michael Anderson - CFO

  • I'm sorry, can you repeat the question?

  • Christopher Edward McGratty - MD

  • Sure.

  • The network deposits or the deposits that are more sensitive, the higher beta deposits.

  • I know in the last several quarters, you've been working those balances down.

  • Could you just remind me where those stand kind of pro forma?

  • I guess, what I'm getting at is what's left of the balance sheet restructuring on liabilities?

  • And also the securities book.

  • Claude E. Davis - Executive Chairman of the Board

  • Chris, this is Claude.

  • If you remember last third quarter, we made a pricing change on the -- I think you're probably talking about the money market deposits that were more Fed fund rate sensitive.

  • We actually changed that product set early in the last third quarter and those are now managed rate deposit accounts.

  • So those are ones that we're very happy with from a core.

  • And actually what we did, we actually disclosed this pricing, we moved those to 80 basis points.

  • So if you think about how rates have moved up, those are not that far off market today.

  • So we're actually happy with where we stand with those, and there's no needed additional change from what we did last third quarter.

  • Christopher Edward McGratty - MD

  • Okay.

  • That's where I was going.

  • And then if I could ask a question on credit.

  • The ag commentary and the charge off in the book, can you just remind us the size of the ag portfolio, kind of, the commentary you're having with your borrowers?

  • And kind of the outlook for credit in the ag book.

  • Archie M. Brown - President, CEO & Director

  • Yes.

  • Chris, this is Archie.

  • It's about a $360 million book for the company today.

  • It is under stress.

  • We do some stress testing on it.

  • I think there's probably -- I'm going to look at Jamie here and try to recall, is there about $10 million sitting in our nonperforming category?

  • James Michael Anderson - CFO

  • Yes.

  • $10 million to $15 million.

  • Archie M. Brown - President, CEO & Director

  • Yes.

  • And then just a little bit more than that in our classified bucket.

  • So that's what we're seeing.

  • It's relative to the portfolio.

  • It's a handful of ag clients.

  • The good news about our ag clients is while they may be under a little bit of stress from a liquidity perspective, they've got plenty of assets and so we've got a lot of opportunities to work with them as we continue to work through kind of a lower commodity price cycle.

  • Christopher Edward McGratty - MD

  • Okay, great.

  • And if I can sneak one more in, Jamie, on pricing of the loan book.

  • Can you remind us with the pro forma company, the fixed variable mix of the loan book and also the sensitivity to LIBOR?

  • That's getting a lot of attention today.

  • James Michael Anderson - CFO

  • Yes.

  • We have -- so from a -- on the loan book from a fixed -- we have about 60% of the loan book that would be variable, would reprice virtually within 30 days.

  • And then of that, from a LIBOR perspective, it's been $4.5 billion to $5 billion that is -- I don't have that right in front of me, Chris, but about $4.5 billion to $5 billion that is tied to LIBOR.

  • Operator

  • (Operator Instructions) And we have a follow-up from Scott Siefers from Sandler O'Neill and Partners.

  • Robert Scott Siefers - Principal of Equity Research

  • Jamie, I was hoping you could just sort of walk through the scheduled accretion on the purchase accounting benefits.

  • I know we've got that 23 basis points presumably on average for the remainder of the year.

  • As we look into '19, any sense for sort of a rate of decline in there or how we should -- would think about that factor?

  • James Michael Anderson - CFO

  • Yes.

  • So it essentially goes down about 1 basis point every quarter.

  • So we have 23 and then -- and again this is -- make sure we're saying the same thing, this is scheduled accretion based on the prepayment models that we have in the valuation.

  • So it basically goes down 1 basis point every quarter.

  • So 22 in the fourth quarter and then proceed to still goes down 1 basis point through all of '19.

  • Archie M. Brown - President, CEO & Director

  • Scott, you know you it can vary based on prepayment activity?

  • Robert Scott Siefers - Principal of Equity Research

  • Yes.

  • Of course, but that's sort of the steady state we would anticipate.

  • Okay.

  • I just want to make sure I'm crystal clear on the margin guide.

  • Just because in the release, you referred to the 3 -- pardon me the 2Q GAAP margin as 4.10% but the FTE margin is 4.15%.

  • And then the guidance -- so the 3.95% to 4.05% where you say GAAP basis, that actually, however, is indeed an FTE so that 3.95% to 4.05% compares to the 4.10% in the 3Q?

  • Is that correct?

  • James Michael Anderson - CFO

  • FTE.

  • Yes.

  • That's on an FTE basis.

  • Robert Scott Siefers - Principal of Equity Research

  • Okay.

  • So basically the guide is 3.95% to 4.05% from the 4.15% basis end of 2Q.

  • James Michael Anderson - CFO

  • Correct.

  • Operator

  • This concludes our question-and-answer session.

  • I would like to turn the conference back over to Claude Davis, Executive Chairman, for any closing remarks.

  • Claude E. Davis - Executive Chairman of the Board

  • Thanks, Drew, and thanks everybody for joining our call today.

  • Operator

  • The conference has now concluded.

  • Thank you for attending today's presentation.

  • You may now disconnect.