First Merchants Corp (FRMEP) 2016 Q3 法說會逐字稿

Good day and welcome to the First Merchants Corporation third-quarter 2016 earnings conference call.

(Operator Instructions)

We will be using user-controlled slides for our webcast today. Slides may be viewed following the URL instructions noted in the First Merchants' news release dated Tuesday, October 25, 2016, or by visiting the First Merchants Corporation shareholder relations website and clicking on the webcast URL hyperlink.

The Corporation may make forward-looking statements about its relative business outlook. These forward-looking statements and all other statements made during this meeting that do not concern historical facts, are subject to risks and uncertainties that may materially affect actual results. Specific forward-looking statements include, but are not limited to, any indications regarding the financial services industry, the economy and future growth of the balance sheet or income statement.

Please refer to our press releases, Form 10-Qs and 10-Ks concerning factors that could cause actual results to differ materially from any forward-looking statements. Please note, this conference is being recorded. I would now like to turn the conference over to Mr. Michael C. Rechin, President and CEO. Please go ahead.

Thank you very much, Andrew. Welcome, everyone, to our earnings conference call and webcast for the third quarter ending September 30, 2016. Joining me today are Mark Hardwick, Chief Financial Officer and Chief Operating Officer; and John Martin, our Chief Credit Officer.

First Merchants released our earnings in a press release at approximately 11:00 AM Eastern Daylight Savings Time and our upcoming presentation speaks to material from that release. The directions that point to the webcast are also contained at the back end of that release and my comments begin on page 3, titled First Merchants third-quarter 2016 highlights.

Well, we are happy to join you to talk about what we feel like is a really strong quarter. We earned a record net income of $21.1 million, a 23.4% increase over the third quarter of 2015. Posted earnings per share of $0.51, a 13.3% increase over the third quarter of 2015, again the highest in our Company's long history.

Our balance sheet grew through an important milestone, with total assets crossing the $7 billion level and have grown 13.5% over the third quarter of 2015. Several items to highlight for you, the next of which is $280 million of organic loan growth since the beginning of the year, reflecting an 8% annualized growth rate. And the third quarter, the strongest of the three quarters year to date, nearly 4% stronger third quarter. Similar to the pattern of our last couple years with some seasonal strength in the middle of the year, as you've seen now for a couple of years with our business.

Net interest margin stayed really strong, expanding to $394 million and a core level of $370 million. I know Mark Hardwick has some commentary on that. And when you combine the volume increase with a stronger margin, we have a 3% increase in our net interest income, up from the second quarter, really evidencing the strength of our performance.

A 1.22% return on average assets and an accompanying efficiency ratio of 55.12%, the lowest for us and quite some time. Really adding the expense management to the earlier revenue comments I have made. So at this point, to get into some of the details, I think Mark is going to take us through the next several pages.

Thanks, Mike. My comments will begin on slide 5 where total assets on line 8 reached $7 billion as of September 30, 2016, for the first time in the Corporation's history. And growth in the balance sheet was led by loans on line 3 which increased over year end by $280 million, an annualized 8%, as Mike mentioned in the highlights. Our 2016 growth in the loan portfolio is consistent with our mid to high single-digit growth forecast and should continue throughout 2017.

Provisions for loan losses totaled $1.9 million during the quarter and $3.2 million year to date, as net charge-offs totaled $630,000 during the third quarter of 2016 and $2.2 million year to date. As a result, the allowance on line 4 in total dollars increased since year end, by $1 million, now totaling 1.28% of total loans provision exceeded charge-offs to cover strong loan growth.

The composition of our now $5 billion loan portfolio on slide 6 continues to be reflective of a commercial bank and it continues to produce strong yields. The portfolio yield for the third quarter of 2016 totaled 4.64%, which was aided by fair-value accretion in both prime and LIBOR rate increases throughout the year.

On slide 7 our $1.3 billion bond portfolio continues to perform well, producing higher-than-average yields and moderately longer duration than our peer group. Our 3.69% yield compares favorably to peer averages of approximately 2.5%, while our modified duration totaled in four years.

The net unrealized gain in the portfolio now totals $53 million and maturities are manageable into the near future. Remaining 2016 maturities or cash flows total $75 million with a yield of 3.15%. 2017 maturities total $192 million with a yield of 2.92%. And 2018 maturities total $140 million with a yield of 3.33%.

Now on slide 8, total deposits on lines 1, 2 and 3 combined grew by $154 million or an annualized 3.9% since year end. And on line 7 common equity increased since year end 2015 by $50 million, reflecting growth in earnings and other [conference] of income, offset by dividends paid to shareholders.

On slide 9, total deposits are now $5.4 billion and demand deposits, our lowest cost category, is 50% of total deposits with savings at nearly equaling 30%. Our funding costs remain low, totaling just 38 basis points for the quarter, and 39 basis points for year end, or for the year to date.

On slide 10 total risk-based capital equaled 14.18% as at September 30, 2016 and remains above our target of 3.5%, while tangible capital totals 9.48% versus our internal target of 8.5%. Strong capital levels protect tangible book value while allowing for both organic and M&A growth.

Now on slide 11, line 1, the Corporation's fully taxable equivalent net interest income is the driver of our operating income and totaled $61.1 million for the third quarter, which led to a net interest margin of 3.94%. When adjusted for fair-value accretion of $3.8 million during the quarter, our net interest margin totaled 3.7%.

The variable nature of our loan portfolio has helped 2016 performance as both the primary increase of 25 basis points in December of 2015 impacted $1 billion in loans and LIBOR increases throughout the year have been applied to another $1.3 billion of variable-rate loans. We're pleased with the trend line of our net interest margin before and after fair-value adjustments.

Total non-interest income on slide 12 has increased in each quarter of 2016, led by service charges on deposits, gains on the sales of mortgage loans and hedging income from the sale of back-to-back swaps which appears in the other category on line 10. In this rate environment, our goal is to provide the customers of fixed-rate loans that they are requesting while ensuring it remains variable on our books.

Non-interest expense on slide 13 declined in each quarter of 2016 and now totals $44.1 million. The result was better than our guidance provided in last quarter's call, as FDIC assessment charges were adjusted by $468,000 to reflect recent improvements in FDIC insurance premium rates. Contingent losses, or debit card losses, also declined by $439,000 from the second quarter of 2016 to the third quarter of 2016.

Now on slide 14, net income on line 8 totaled $21.1 million, a new record high, and EPS on line 9 totaled a record $0.51 per share. As we prove our progress we are becoming a highly efficient banking Company, as reflected on line 10, with a 55.12% efficiency ratio and strong, organic growth. We believe these operating metrics and results command higher trading multiples, which produce a stronger currency.

Now on slide 15, you will notice our per-share run rates from 2015 and 2016, including dividend levels and tangible book value per share.

On slide 16, these increasing trends reflect a 9.5% annual compound growth rate of tangible book value per share over the past five and three-quarters years with forward dividend yields of over 2%. Thanks for your attention and now John Martin will discuss our loan portfolio composition and related asset quality trends.

All right, thanks, Mark, and good afternoon. I'll be updating trends in the loan portfolio starting on slide 18 and I'll review the asset quality summary and reconciliation, discuss fair value and allowance coverage and then close with a few thoughts on the portfolio.

So please turn to slide 18. For the quarter, we had strong, organic loan growth, led by investment real estate on line 3, of $85 million or 7.2%. In addition, commercial and industrial loans on line 1, home equity loans on line 8 and other commercial loans or public finance loans on line 9 all saw gains in excess of 5% for the quarter.

Loan demand was evenly spread across the portfolio, while the owner-occupied CRE and residential mortgage portfolios were modestly down for the quarter. On the bottom of the slide we've added the CRE and construction concentration levels to highlight our position, relative to the regulatory concentration guidelines. We have concentrations of 47% and 210% of construction in IRE loan balances, respectively. We continue to have capacity for portfolio growth or acquisition relative to the 100% and 300% regulatory guidelines.

So, turning to asset quality on slide 19, asset quality improved for the quarter with total NPAs and 90-day delinquent loans declining on line 5 by $1.6 million, or roughly 3%. This was driven by a decline of $3 million on line 2 in other real estate owned. We continue to see strong demand for lots and residential real estate, which comprises roughly 25% to, say, 30% of the remaining ORE portfolio.

on line 4, at the end of the quarter, 90 days past due were up $1.2 million as we attempted to negotiate a $1.2 million owner-occupied commercial real estate loan that has subsequently moved to non-accrual. Dropping down to line 7 and 8, classified assets were up $200,000 for the quarter, while criticized assets increased to $8.2 million. I've mentioned, as mentioned on previous calls, these levels really are being impacted by a grading of the ag portfolio.

Turning to slide 20, this slide reconciles the quarterly migration of asset quality and provides detailed transparency behind the movement in the portfolio. Starting in the far right column, which is Q3 2016 and moving from the top to the bottom, on line 2 we had $6 million in new non-accrual loans. The largest new non-accrual loan was $1.7 million. And just to give a flavor, we had six loans over $250,000; those mostly related to commercial real estate, small commercial real estate transactions. We moved $3.2 million out of non-accruals on line 3, and transferred $400,000 to OREO with $1.9 million of gross charge-offs.

Then moving down to ORE starting on line 7 from above, we took in $400,000, sold $3.1 million and wrote down only $300,000 on line 9, which resulted in a decrease in ORE for the quarter of $3 million. So, with the changes in non-accrual loans and ORE and the $1.2 million increase in 90 days past due, total NPAs and 90-plus days delinquent declined $1.6 million for the quarter.

So now turning to slide 21, I'd turn your attention to the allowance and credit marks on our required portfolio. Highlighted in the far right column is the most recent quarter's allowance and fair-value position. The allowance on line 1 continues to be flat, ending the quarter at around $63.5 million. During the quarter we had $630,000 in net charge-offs, in line with last quarter. As Mark mentioned, $1.9 million in provision expense, associated mostly with growth in the loan portfolio.

With stable and improving asset quality we would expect provision expense to closely follow net charge-offs. As I said before, and in the near term, and requisite provision could be expected with the associated growth for the loan portfolio. So, for the quarter we had under 2 basis points of net charge-offs which continues to run at historical lows.

Dropping down to line 6, the allowance coverage to non-accrual loans remained modestly unchanged at 186%, with the allowance plus fair-value adjustments to loans and fair-value adjustments declining 13 basis points to 2.02%. So really, all in all, the portfolio continues to perform well.

Then, turning to slide 22, just to summarize, loans grew for the quarter $183 million with room to grow in both construction and investment real estate, as well as other categories for that matter. Asset quality is relatively stable with continued reductions in total NPAs and 90 days. Provision expense of $1.9 million, cover charge-offs and growth in the loan portfolio. This results in a stable percentage of allowance to non-purchased loans of 1.5% and allowance and fair-value adjustments to total loans of 2.02%. And that's what I have. So, Mike, I will turn it back over to you.

Thanks, John. I am going to share the balance of my comments on page 24, called looking forward. And that's in fact what we are doing. With approximately two months remaining in this year, we're going to try and finish hard. We've got a bunch of projects and revenue activities that we feel like position us well and help us create momentum for 2017, which is what we are really lasered in on.

And that includes some of the bullet points on this page. Job one, continuing to work in our marketplace in our geographic community-based banking model. It's the vast majority of our revenue streams, has really served us well and I feel like the economic health of our marketplace is really holding up pretty well.

Going to keep our focus on our treasury management investment, which is at this point, about five quarters old. And then what does that mean to our clients in terms of usage? And with the bank gaining a deposit and fee generation, I know that our third-quarter numbers were up $100,000, or about 10%, over the like amount of cash management fees in the third quarter of 2015. So we think we've got some momentum there.

I feel like we need to continue to look at our processes and exploit what remaining back-office infrastructure improvements we can make. Take advantage of additional operating leverage from improved processes in a culture that strives to get better.

Merger and acquisition, a core competency, we've been quiet on that front throughout the year. And it's allowed for some of the focus that Mark specifically spoke to earlier. And then look for opportunities, whether it be whole bank acquisitions or building or acquiring niche businesses, as on the next bullet point.

We've had some success in internally building lines of business that complement our community banking model in areas like municipal finance and sponsor that John has referenced in prior calls. Nice add-ons where we can be competitive in primarily our two- or three-state market area.

We're going to continue to look at our retail optimization. We recognize that with loan growth higher than our annualized deposit growth, that we understand the value of deposits and banking centers and yet we still feel like in an effort to maximize our efficiency, we are going to continue to look at the alignment with all of the digital channel increase usage that we're seeing.

And then, as Mark touched on briefly, optimizing our capital structure on a go-forward basis as our profit continues to build and our capital level is built on our radar screen as well. So at this point, Andrew, I'm going to turn the discussion back to you for any questions that might come from the listeners.

(Operator Instructions)

Scott Siefers, Sandler O'Neill.

Good afternoon, everybody.

Good afternoon, Scott.

Mark, first question probably for you. Margin held in, obviously expanded a little in the core on a reported basis but held in much more strongly than I had anticipated. So curious to hear your thoughts on the Company's ability to defend both the core and reported levels, if you've got a core right around the 370 level here?

Yes, we really feel good about the core, especially if you look at the last couple quarters together between 365 and 370. And it is definitely the result of improved loan yields from those LIBOR- and prime-based credits that continue to improve nicely. The prime rate increase happened in December but LIBOR has gradually improved throughout the year.

And then we were able to actually get about a basis point out of deposits throughout the year. And we feel like the core level is strong. The overall level, we're not anticipating maintaining the $3 million-plus fair-value accretion levels each quarter, going forward. We believe that when all the SOP loans normalize out, that we're more in the $2 million range. But obviously it's been an active year with some pay-downs of previously marked credits through acquisitions.

Again, I would say somewhere between 365 and 370 for the core. And you get into the 383 to 385 range overall are the kind of levels that we're at least modeling out as we look at 2017.

Perfect. All right, that's good color and I appreciate it. Switching gears for just a second, similarly on the cost side, I was pleased to see core costs actually come down a little bit. I'd been anticipating somewhere closer to $45 million or so, so not a huge delta but still about $1 million better than I had anticipated.

So does this, Mark or Mike, in your mind represent a new run rate? Or would you expect to revert up to the $45 million per quarter run rate? What are your thoughts there?

We're anticipating that we move back towards the $45 million as we move into 2017. As part of the strategic planning and budgeting, we have been assessing additional investment in our business and we don't think that we would maintain a level as low as $44.1 million. But we also don't see it moving really above $45 million in 2017.

I'd agree there's a pretty tight range above that number that we would all consider to be normal. There's a couple of specific line items in there that might have been at annual-, seasonal-type lows. But I wouldn't look for dramatic growth in any of those line items.

Okay, perfect. That's great. Thank you, guys, very much.

Sure, thank you.

Kevin Reevey, D.A. Davidson.

Good afternoon, guys.

Hi, Kevin, good afternoon.

So first question related to your recent announcement of your 12.1% stake in Independent Alliance Bank. Can you give us an update as to where that transaction stands? And is it on track to close in the fourth quarter?

Yes, the transaction, we expect it to close in the fourth quarter, late November. We have put our application in with the Fed and we are going through that process. And all signs at this point are positive and continue to move forward.

And then moving along the CRE, we've been hearing and seeing that given the regulatory scrutiny, especially as it relates to some of the smaller banks and the banks that are bumping up against regulatory thresholds, can you talk about some of the opportunities out there to take share and to grow that portfolio?

Sure. We're trying to, John I think, ended his comments after his quantitative sharing which was on one of his slides about capacity. We are trying to be prudent with the capacity. We've got a bunch of great developers throughout our Company east to west, north to south, whose needs we want to serve.

We are also mindful, Kevin, that while we've had no acquisitions in the current year, the typical bank acquisition in our sweet spot is often heavy in real estate, so we're trying to looking forward at that. Having said that, if we see pullback in the marketplace, based on a stronger regulatory environment around other institutions' levels, we would clearly look at it opportunistically. But we really, at this point, have a cadre of clients who continue to be strong, perform well and who look to us to serve them.

Great, thank you.

Thank you, Kevin.

Erik Zwick, Stephens Inc.

Good afternoon, guys.

Hi, Erik.

Looking at the period-end loan growth was quite a bit stronger than the average loan growth. Can you talk about what you saw in the back half of the quarter, if there was a pick-up in demand and what that might potentially mean going into the fourth quarter?

Well, we're bullish about both the quarter, third quarter as a whole. The fourth quarter, as we look forward, I have some pipeline comments I'll offer here in a second. I'm really pleased that the whole year is predictable for us in terms of what has been a slow start to each of the calendar years, the first quarter of each of the last couple years 2014, 2015, 2016. Which, in our case not only have some seasonality economically in my mind, but also the fact that we've typically had, in the last couple years, brand-new acquisitions which tend to take up a lot of our time and energy.

But the demand has been strong in the second, third and as we look at October, really strong. So you're right, the second half of the third quarter, really great. We had a bunch of closings that took place, a little more C&I oriented than the real estate. Because we are beginning to see some of the real estate projects that we financed get towards their maturity that allows them to flip out of the portfolio. So things are working as we evaluate the marketplace.

I referenced comments on our pipeline. It's strong. We had closings in the quarter, this is not pipeline, Erik, but closings, and we had a strong year across the board. Not only commercial loans, which dominate our comments, but our mortgage business was strong in the third quarter, we expect it to be strong in the fourth.

Our pipeline for mortgages, up $30 million. It's over $100 million, slightly. The strongest pipeline, the manager of that area talks about the low rate environment with a rising rate mentality on the behalf of some of the marketplace. So we look for a strong October there which augurs well for the full year.

Retail, same thing. Strong pipeline compared to last year. And those are not our dominant asset growth categories, but it would directionally tell you that we feel good about what we should expect out of retail in terms of loan growth.

And then commercial, same story. A pipeline of just over $450 million, somewhat equally dispersed around the whole Company. I know our Chief Banking Officer spends a lot of time in the field and absent Lafayette, which is the market that would have most of our agricultural exposure, which doesn't have a high demand level at this point, the rest of the Company really having some pull-through on client activity, primarily existing clients whose businesses are thriving.

And so we feel -- a long-winded answer, I apologize, but hope that explains where the strong third quarter came from and why we feel like the high end of that band we've articulated on this call in the past, that would get you in the 7%, 8% annualized level, feels good to us.

That's helpful. And a point that you touched on quickly there, as I look at slide 18, your agriculture production and land loans are down year to date. You mentioned potentially some lower demand there. Is there any also conscious effort on your part to be more selective there, given the industry pressure that we've seen from the low to moderately-priced environment?

I think I'd field this one, Erik. And what I would say is that as we look at the portfolio and as I mentioned on slide 19, with the criticized levels going up, we've selectively stuck with some borrowers who are going to be fine and fare well and others have exited. So you're seeing some migration and transition out of the bank on some names that might have been weaker as well. We're not actively trying to grow that portfolio, but more I should say, manage the relationships that are there.

Appreciate the color. Thanks, guys.

You're welcome.

Damon DelMonte, KBW.

Good afternoon, guys, how's it going today?

Great, Damon, how are you?

Good, Mike, thanks. Most of my questions have been answered but to the last bullet point you had on your looking-forward slide, slide number 24, with capital optimization, could you talk a little bit more about that? What are some of the channels or tools that you guys might look to employ in order to get to what you feel is an appropriate level of capital for the bank?

The one that we made up some ground actually this quarter is in the total risk-based capital number. And our hybrid equity was probably outsized in terms of our overall balance sheet and capital levels. As we are growing loans, growing investments and becoming a larger institution, we're keeping our hybrid equity at a constant level. So that total risk-based capital number is coming in.

In terms of tangible capital that we're not quite a full point above our target, and that's really -- those are dollars that we're holding onto with, obviously, intending to use it for growth in the loan portfolio But we're also holding onto it to have cash available in our next acquisition.

So we'll -- next on our normal cycle, we would look at a dividend increase. And the buy-back program that we've announced is really in a more defensive posture. And so it's really about loan growth and M&A activity and a right-sizing of our hybrid equity levels.

Okay. And as far as the target for the TCE ratio, is around 8% or 8.5% what you would look for over the longer term?

We think that's where we've probably optimized return on tangible capital. So yes, but I think the strategies that we're deploying, we do intend to build those levels up and use capital for cash and acquisitions, see it come back down and build back again over time.

Okay, all right. That's helpful, thanks. Just one last question on non-interest income. If you exclude the securities gains, you're at around $16 million for the quarter. How do we think about that as we head into the back quarter, the last quarter of the year, and into 2017? Do you see mid single-digit growth across all the categories there?

If you think about the lines of business, line 1, service charge on deposits, is about our retail business. Line 2 is our wealth management business. The mortgage activity on line 6 and then really another part of retail are all of the fee income from debit card activity. And we feel like we're probably not high single-digit growth in those categories, but at least mid single-digit growth. On a go-forward basis is the way we tend to look at it when we model it over time.

And actually acting from a mathematical modeling standpoint, Mark's answer is spot on. I think the largest line item in there, across that, is overdrafts which have been coming down for all the right reasons. Smarter customers, better processes, all of that. So every other component of that, which are lesser in dollar amount, are growing at a high single digit.

I'm really pleased with the way we're operating in the wealth business. I referenced the cash management business specifically in my earlier remarks. The merchant processing business is growing at double-digit rates. So it's a good family of value services, I think, for our clients. But I think at the end, that high single-digit growth rate mid to high single digit is the right way to model.

Okay, that's helpful. Thank you very much, guys.

You're welcome.

Brian Martin, FIG Partners.

Hey, guys.

Hey, Brian, good afternoon.

Just a couple things for me, maybe one for Mark on the accretable yield, Mark, how much of the accretable yield is left remaining to flow through, thinking about that annually in 2017? I think you mentioned a $2 million number, but if you could give a little color on that?

If you look back, it was in John's slides on 21. You can still see that we have $38 million remaining in fair value accretion. And we think that it is likely to come in over time at a $2-million-a-quarter pace. What we can't control is what happens with loan payoffs where that accelerates the level of amortization.

And obviously some of that could be there if you have a decline in the economy at some level then you have to use it. But at this point we think the economy is stable and are anticipating seeing that type of pace, of about $2 million a quarter, plus whatever extraordinary may happen quarter to quarter. I wish it were more predictable, it's just not.

I understand. Thanks. And one for John on the -- we've heard from some bankers there's been somewhat of a slowdown in C&I demand. Curious your take on what you're seeing there. Doesn't sound as though it's really impacting you, based on Mike's comments on the economy being pretty healthy and stable. So any comment on demand for C&I at this point?

I think the -- Mike made reference to the portfolio and the strength headed into the fourth quarter. No, I don't really see a slowdown I just see it being pretty consistent coming in with opportunities in specialty finance just general middle-market C&I. It's been reasonably strong, continues to be.

This is Mike, Brian, we effectively are efforted to grow share because our fastest-growing geography, Central Ohio, Central Indiana, we don't dominate those markets. So if you look at it, if you split share into loans and deposits, we feel like we have some upside there. Our Company is nimble and allows us to compete well to not only protect our existing clients, but to look for other folks that we feel would be great clients.

Got you, okay. That's helpful. And two last things, maybe one for you, Mike or John. But you talk about how the credit costs have been very low. Is there anything that's concerning you out there that moves that number up a bit, going into 2017? I know you guys have talked about ag, but I feel like that was a manageable number in totality in the portfolio. But anything that causes you pause, there's trends out there to be cognizant of?

Brian, when I think about the portfolio and costs, if you are talking about provision specifically, is going to be providing for loan growth. I think that's going to be the change here. If we continue on the pace that we have been this quarter into the fourth quarter, and in order to hold the allowance at a level, there is going to need to be additional providing there. But our loss factors in our allowance continue to moderate as the recession starts to become in the distant past.

I think what we're seeing in ag and the other portfolio is really improvement outside of what we're seeing in the criticized level in the, again, the ag portfolio. So, not really. It's just providing for loan growth would be the thing that I think would be the credit cost.

Okay. And John, on a normalized level of charge-offs, now that you're through, like you said, the cycle has run its course, the current level seems unsustainably low where it's at. Are you thinking that jumps higher in 2017? Or do you think it stays where it's at based on your comments that trends appear pretty stable?

In recent quarters we've had recoveries that have offset the gross charge-off number. If you look back at the migration slide, they've been around $2 million a quarter, gross. And so that number and in the provision, it's going to really depend on how the recoveries come back. But that's probably between $1 million and $2 million, a realistic number.

Yes, okay, perfect. And then the last thing for me is maybe more for Mike, you mentioned or you noted that you been quiet on the M&A front. Any update on what the conversations are like today? Are they more or less or what you're hearing from opportunities out there?

I would think they are very steady from a flow standpoint, Brian. I'd say over the last six or eight quarters, pretty steady. And our approach has been pretty consistent, which is a great willingness on our part to pay for value if it complements what we're already doing.

And so while we have not been successful with anything to announce in 2016, our posture really hasn't changed. Our views of the marketplaces surrounding us hasn't changed, as well as places that we're already in.

So I feel like timing will work in our benefit. And something that really fits us, we will aggressively go after and add to the Company. But if you look at what's going on -- when I look at what's going on in our business organically, it only convinces me more that patience and sticking to our growth plan works for us.

Okay. I appreciate all the color, guys, thanks and nice quarter.

Thank you very much.

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

Andrew, I have none other than appreciation for the folks that chose to listen in today. Look forward, as I referenced in my last set of comments, about finishing the year strong and talking to you after the completion of the fourth quarter. Have a great day.

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