FRME - Earnings call transcript Q2 2022 | First Merchants Corporation

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, ladies and gentlemen and thank you for standing by. Welcome to the First Merchants Corporation Second Quarter Earnings Conference Call. [Operator Instructions] Before we begin, management would like to remind you that today's call contains forward-looking statements. With respect to the future performance and financial condition of First Merchants Corporation that involve risks and uncertainties.

For further information -- I'm sorry, further information is contained within the press release, which we encourage you to review.

to substitute which comparable for refer supplement, intended GAAP may not but the management non-GAAP are measures, to measures. Additionally, most directly and be release quantitative GAAP as to press available the of contains The measures. on a reconciliation information today discussed financial to non-GAAP as well website other to I over the to Mr. this time, turn At would like conference Mark Hardwick, CEO. Thank you. Sir, please begin.

Mark Hardwick

you Page President, snapshot Merchants' the today's Good can to First following the Officer, morning by will our footprint forward-looking X. bios you conference for the Chief introduction Stewart; call. today X:XX Martin; for X Mike review. and XXXX is see released a at of highlights statement and for earnings on don't, link slide page slides welcome X, of presenters include you second Credit AM Kawiecki. your Page We on But second Financial to earnings our our Eastern. and you Howard, and financial quarter if the those Officer, you Chief the Michele have the some and First John relevant presentation. geographic Page covering release. approximately Merchants access thank On the Hopefully,

One our Level included updated of April close start asset on totals off new our the Given banking center to billion. $XX second X, have we and quarter, Bancorp the map of nearly

we've and at and customer the for you performance We of comparable like a those awards Newsweek, to service, leadership slide. and also S&P meaningful bottom receive continue from publications few the Forbes, for updated of

$X.XX. QX totaled PPP, quarter-over-quarter share and QX earnings totaled few our QX of basis or per expenses, quarter points, X. that Level you basis and PPP linked per would for earnings adjusted over in $X.XX increase most XXXX EPS When for when $X.XX improvements which $X.XX, XXXX account the also our adjusted of for Michele income of loans for to moments. if of $X.XX. acquisition to in fair points and compared XX% will is share linked Slide linked Growth One XX% adjusted per of improvements the an Reported total cover Now and XXXX's turn total of margin XX share XX value a

integration scheduled quarter the teams is for ensure of Level to system working successful Our diligently One third conversion. and the are a

color ratios adjusted on and and before like ratio business our lines will materials. One, provide one-time impact are on One. that Page financial credit our and on the they the Stewart, for based the that ratios and additional not in expenses, we similar than better to We results also XXXX QX story with three of continue year-to-date see share, to two our required as $X.XX and of The and year. performance. adjusted, per $X.XX. planned by of consolidations quarter our XXXX our another XXXX When the adjustments share related results network for to a efficiency Michele Mike earnings adjusted they earnings quarterly now XX% negative of review core rules the M&A that's Level year-to-date PPP per totaled evidenced earnings pre-tax, streamline branch a consolidations to The our apply -- third data announced but had are this similar of few in Level will highlight and statistics. later Michele to X, pre-provision obviously have consolidation John

Mike Stewart

all. Thank morning to good you, Mark and

business growth One. exceeding it remains growth $X.X by within our was the Level of as the engagements billion and quarter business prospects annualized an clients this more two unchanged, delivered quarter. commercial excluding year. want core for nearly units, with the strategy and page business our at growth X Since provide the balances look bank's growth highlights. million sheet, you loans of rate the engine one Merchants the months of segment. that segment $X.X billion loans our Page I now with XX% contributions and Level of their balance of the the our loan I'll day added growth generated an of the update than The slides, $XXX within PPP As XX% to breakdown was remains top this line First focus solid offers and XXXX. another business We commercial X for of on team April a loan rate X, active next results the of organic One loans of titled The on The of first

treasury increases of map. have stable. strong, those Line capital, and of expense profile. line leverage while These largest Their line growth. commercial growing year-to-date quarter John the $XXX pressures ratios credit all later management the meet million segment; statements when the Industrial balances utilization continue Martin have second new review senior on total the Commercial will I've and winning coverage you remain the component income have services of roughly along balance with clients, Within demand. our exceeding and engaged kept and the he market mentioned highlights businesses clients, along before, remained to has the represented metrics, quarter, their and customers sheets inflationary the looking first remained has commercial growth and geographies, geographic also from during constant Within second providing the business, additional quarter. across managed of and XX%. effectively at Like to the our C&I, team share, equipment see plant practices markets C&I are debt availability credit working present, to and their is that margin with taking expand price rates

for ESOP our issues ownership sponsor driver through have a constrained. of finance time, to Succession are prior planning capital middle Our within team increased to during slower have supply as not inflationary up been pressure cycles values further this of than continue or period companies events pushing periods, due commitments necessarily assets. revolver be chain market the working Working capital not the transactions. of

a quarter. to geographic secondary clients was through extended for the advantage have X% grew new and been secondary reach We segment. have liquidity That real market. growth the The from approach investment historically and XXXX. attributed primarily of asset and current on Based within this production added multifamily monetizing to of the rates towards but to loan product, construction the our in the maintained taking projects underwriting liquidity take comes current advances, real market, in estate continue new choppy and class. projects footings and from bankers low cap quarters, four the investment the in past disciplined estate we growth the within consistent The in relationships the

expect remain We balance of choppy, real the estate investment in the balances year. to the

classes depository PPP loan has primary IRE commercial the the the we the At from with softened. multifamily end balances Our of underwriting changed, have not reduce deployed liquidity, which Level on to industrial has deposit chart. Post pipeline their reduced C&I housing strengthened acquisition, An prior One structure pricing X%. ours. and align student have remains aggregate pipeline pipeline the is and reduction of The June, that consistent the did on, commercial focus consistent remained as quarter. close the bottom therefore, businesses we noted approach their self-storage. warehouse, with asset Overall, annualized of

the to new experienced remains The can the adjusting and growth the the on the a within was network was attributed the line increases for rest prior and from Moving that post-tax nearly One HELOC fluctuations, in declined after the decline. One to We accounts loan segments both closing. Level decline segment The remain of the pipeline the At nice activities. experienced the June, the application with depository X% X% quarters of depository XX% pricing quarter rest rates a underwriting reversal the Both the consumer First to quarterly The and as our to end our bottom increasing utilization about page. Small for has consumer most continue the bring products. annualized balances Level shown did in the consumer volumes, loan Business team regular, seasonal from quarter be from growth, year over the strong, gain digital Deposit season, approach of and attributed of consistent strategic therefore of remained consumer a segment, ago. unchanged. branch up decision. Merchants on in online consumer

year XX% of digital over month, investment account consumer Our new in point high a opening has opened with last last process through been hit digital DDA a channel. new the

to on move the Let's in growth mortgage portfolio. the

options. organically clients With $XXX strength on-balance this the variable choosing Level rate exceeded billion mortgages driver the million. volumes, the grew our from in continued our quarter by and of of with more pricing comes in have increase Close sheet purchase $X.X sheet our on-balance The One,

return. risk investment Given portfolio, alternative asset mortgage class better in within the the offers returns

year fixed underwriting prime have the with XX were XX as on to Our have and sales rates, non-interest standards clients mortgage review mortgage tell, unchanged increase will variable-rate team chosen mortgage economic XX% team. the are slowdown and Overall, business when ended the flat, refinancing stable. and reinforcing markets quarter rehab XX% the a in across our Purchase pipeline, for for from pipeline -- low short-term remain muted historical or current levels. ago, volumes of stayed at gain macro up One nearly climate the are the our The income is adjusting solutions. levels our borrowers, refinancing volumes Level remain in the Michele volumes. year

last teams of they supply labor the resiliency well we the to solid quarter, they Like chain solid and business see issues. to stated have positioned have and inflationary continue balance management companies We navigate plans, I effectively and are they sheets pressures, serve.

and economic teammates should few objectives there they markets of continue third support time markets remains serve in quarter. strong One current our responsive the And continue. ready I with that about and new our our to their comments loan continue spend with their record Michigan coupled Grand team their and to single-digit and we and remain will and A culture South-East demonstrated optimistic to teams track environment, Rapids. impressed winning the into with across Level client's Our the achieve needs, growth growth high clients. is I

earlier. region geography reminder has his now referenced the our President Level led Wernette, Terri. of lead Level One synergies The One's to that and work commercial Terri who role and last Mark call, from banking between Cable integration build Monroe. As on with Michigan August Hills directly team effort, Greg moved as will date existing franchise the continue to a leadership Farmington Michigan's that in preparing for commercial Region is and

get that was banking integrated who review will now Deborah operating provide made July a to and mortgage now platform. will Dan organizations, project X, the XX been lot The But is between mortgage portfolio. the has on Wise, along the did of consumer progress and our who be results. the can Martin, of job in Brad and Nielsen, will will integrations. As steady Wright common quarter business, Tim over Michele Kirsten business fully of of a the terrific within Molino, and we turn with who for Evans, into Michele? mortgage of support have Mackay, the a of named market team work President I preparation up soundness complete under centers. collective our over the line said, consumer banking regimens Michele, and to integration. of The the banner. continue a Her the green. will XX centers Merchants of Merchants call And of support leading the August deep First under as in we team the team John is First share status site banking the of two professionals, training the weeks them. the Rene have of effort integration now operates now change their do of leader to

Michele Kawiecki

begin comments X, on My will results. Mike. covering second Slide Thanks, quarter

five. costs. has in was on contributing quarter. million through which his quarter $XXX from billion quarter, loan were normalized included the was million acquisition of liquidity has million. balance XX, compared acquisition. increased quarter, the by This due on able in this for which through Investments reflected a One ratio, XX.X% in on our to balances three, loan $X.X decline loan Level one which with to we you Liquidity Day acquisition on share the billion the the coupled reflecting to use million. detail of One per fund growth which with two, growth earnings remarks, CECL provision, Mike covered by growth management sheet the of non-interest to year. increased $X You Level in quarter Mark XX $XX was to $X.X see line and million Deposits to $XX.X billion PPP our $XXX on acquisition, XX.X% which and elevated reduced of billion organic see $XXX can line in level increased Total of over This lines was forgiveness which line the can line loans covered of loan one during deposit this offset expense Level $XX.X excess the prior One included million. deposit during $X.X

value were Level on our year-to-date shows also in $XX.X acquisition the and to with excluding Mark income, On $XX tangible Our on XX $XX PPP Pretax the investment million results. loss see leverage. prior decline stated which XX%, you line year-to-date six. per low was merger over million year. excluded common XX.XX% due of earnings equity totaled PPP increase Return on assets cash X efficiency the of also by an cost, gain equity Slide we mentioned. our and which the of of Like It metrics for X.XX% year-to-date, share an experienced operating many million return -- share increase our PPP return the million ratio of financial just results. the XXXX totaled XXXX Along $X.X $XXX.X operating was on excluded acquisition was in of the a reflecting was on XX.XX%, in further sale $X.X per XX, with fee in was changes portfolio. year-to-date strong pre-provision line available used that earnings peers, million which impacted -- of XX.XX%. total ratio, shows cost which the highlights securities. Slide results unrealized in tangible covered These book but consideration I One. million

we $XXX.X million. securities million you loss sale quarter's $XXX.X the of On to had mark-to-market unrealized loss available portfolio can compared bottom see right, net the of a for last on of the

in recovered basis points graph temporary portfolio years. X.X million yield today, right during yield. reflecting shows the the The and X quarter Effective portfolio top As this in portfolio its trend is loss by of at duration is on $XX contributed million $XX.X the The the nature. the increased income. currently

portfolio. you As in our from of our to much last to peers, stated because a investment Slide see quarter loan quarter's take highlights portfolio yield loan is basis the loan reminder, In tend XX increased bit we duration second of portfolio yield X.XX%. X.XX% the variable. corner, more will than our XX a points bottom-left

from Yield points. loan loans on accretion, impact the loans renewed Excluding this to last quarter PPP of value an of X.XX% and fair new and yield was X.XX% significantly increase increased X.XX%. quarter, basis XX

were Slide On most months. of losses this you will the shows are a XX billion of all portfolio in XX% the May, of so quarter portfolio loans. income our loan allowance in sensitivity variable and point our right, credit the sheet XX% meaningful balance the out increase loans our portfolio and on month basis related to curve. with given of in in for with continue We net of full one our interest do of XX% details to Fed's XX bottom rate repricing three so repricing the asset created our floors see we'll $X.X of increase of grew the

bottom of a the On balance. slide our forward the of is allowance roll

recoveries the $XXX.X graph one recorded With loans allowance the allowance of the reserve One for Also bringing credit acquisition, a is credit which for for The $XX.X through in well had quarter that of XXX,XXX, expense $XX.X the provision allowance of of during trend credit as of Level was recorded provision million. year, total robust million, Day CECL One's deteriorated quarter closing recorded this the in of we we Also the a the through unfunded amount half a of top first deteriorated the commitments, net the loans losses expense the ending Bank Day to ratio brought shown million. purchased as on one the on $X.X Level loans CECL $XX for amount million non-purchased coverage expense was for provision million. left. in

prior fair with the coupled head is reserve as of Our at due coverage of X.XX% an strong protection million growth. remaining down This provides into the environment. we from to QX $XX.X loan ratio economic quarter, from excellent X.XX% accretion end value mainly uncertain the

municipal move XX to left the chart quarter points shows in bottom cost up to Now deposit this deposits Slide The will on XX increase basis deposit cost increased I that pricing XX. total of total This of by points. a present the reflected deposit basis was space. pressure

remain deposits deposits of it's PPP the XX, from the X.XX%, line could an markets. pre-pandemic interest balance our NIM we from fair us net and third reflecting shown of quarter's consumer portfolios net $XXX.X which make continues the average on in of our Adjusting to see for levels, for totaled the consumer to possible core core elevated pricing although a of quarter we accretion on XX million. contributed of such begin margin Slide shows decline Compared did May. sensitivity million low, continues -- on see million, net interest although net basis brings value loans in out the increase Stated $XX.X shows The to trending core and income consumer in DDA competition and $XXX.X a of points income When line net from the quarter value some fully be on shown margin two balance interest X.XX% four. last shown increase loans, of cost for totaled the the was prior fair impact in which of total margin. increase some of to Our line quarter. items, non-core interest back our as impact $XX.X PPP tax our was on Level basis net accretion the Line loan income seven, one XX interest of equivalent the on to income interest of million, line three, of $XXX.X it asset is line of and is One. deposit million, sheet. which interest X.XX%, you

see $X.X as Non-interest On Slide-XX. management quarter in related XXX,XXX Level the an total Bank customer on fees increase reflecting for charges continues of million, with the of income $XX.X with of offset expect service mortgage quarter state One the are meaningful loans. addition due rates. forward, primarily We fees of going prep increases seasonal gain was $XX.X asset this values, a Fed each to in increase to which increased decline to million fees, pressure management totaled million by investment on the along the settlement. deposits of are and sale while under and Wealth fees, tax fees fees collection the from

bonuses, Slide to million was incurred for $X the severance those quarter acquisition due outside and on totaled of recorded were the of mostly which Total and of XX. retention was benefits the to Moving quarter and reflected expenses category services during line in charges salaries elevated million, for contract other and and million, advisory remainder $XX.X was one-time other in in fees, acquisition this professional the termination in chart. income the and the $XX.X reflected $XX are charges, statement costs which which million costs

to well the capital with Level ratios. Slide Excluding One. increase mentioned, expenses decline in $XX core million. expenses costs, ratio One. an in million due reflecting quarter $X.X changes Level AOCI and the these of XX I our our previously acquisition tangible the were the common of additional approximately equity acquisition shows of of incentives seen managed salaries, this Core

forward. strong ratio meaningful capital, increasing this will income our interest and Although was net create going strengthening decline, this a earnings

current my for and the and our reflect adds losses, we for concludes turn our I to safety pleased with the Martin remarks the $XXX capital to fundamentals discuss position. credit Overall, are Credit strong results. we soundness, balance we with will and results given Officer, comfortable now Chief John quality. it asset feel over financial quarter That our allowance have million sheet Additionally, our in which to

John Martin

forward remarks XX, about growth ending before the Slide asset, segmentation portfolio Thanks, with review few quality roll current the on the good industry highlight including afternoon. non-performing asset My start concentration, environment. Michele comments where a and high-level and loan I'll and

XX. Slide to turning So

and underwriting. sheet portfolio rates, portfolio have adjustable and added it As commercially $XX rate million diversified the sponsor geographies. to $XXX key loan previously, concentrations, businesses, process growth products and found and book the consistent Industrial existing resulted or including In in this the through is quarter, economy in benefit prior the regional -- understanding customers highlighted on continue balance a ex-quarter public C&I did we portfolio mortgage and paydowns, With on lower commercially We've as excluding in respect mentioned attracted reviews, we with credit the I've Merchants First growth, we the is XX% portfolio due annualized. million subsequent this were loan also the experienced deeper oriented to both while calls, grew segments on with additional construction of our diligence broad relationships as rising gain loans initial gain to robust Level loan interest of of The had well Commercial a the have quarter growth. the our finance finance. credit meaningful and -- in oriented mortgage sales Also the PPP One to loan residential portfolio footings. with of similar

portfolio We regular have our continue and the rating. asset our to into quarterly commercial refine credit review folded quality process

slide Slide asset highlights to our position. So turning trends quality XX. and This

Level quarter loans the ended dropping X.XX% million addition and line $XX.X -- or classified loans to loans with classified loans. at $X.X asset in $X.X of XX-days quarter. acquired of $X.X seven continue of of adding last down from down well-defined a with with ended by loans. loans of a This in million due million estate one, we even the loans a loans have We Other due, $XXX,XXX profile ORE quality past increased NPA's We and million as million to up after resulted and past non-accrual $X.X and of Level percentage the non-accrual of X.XX%, real were favorable up in XX-days One classified One line weakness loans. $XXX,XXX

and historic quarter or While represent million a lows. $XXX continues to remain increase, Starting Level the and on And recovery roll Rounding One. modest million at a this point roughly reconciles slide, million changes net in of million portfolio. adding strong charge-offs started in XX. a basis in XX-days $XXX,XXX. million with finishing past the and decline due Slide does net quality $XX resulted I and new asset the In gross which were $XXX.X our one as column, to summary, out changes and for position in due, million $X.X year-to-date $X.X level resolved -- as due an in forward, well with far up on provided added before ORE, quarter the declined We and million asset eight, additional non-accruals stable. the from the a the in non-accruals right existing quarter. on in in $XX.X excludes non-accruals. ORE $XXX,XXX non-performing XX-days which past loans $X.X million NPA's. $XXX,XXX With decrease NPA's past moving and million XX-day $XXX lines line -- remained NPA the $X.X nine, along One of XX. in Level charge-offs and $X.X These write-downs is sales

the portfolio supply I've work the there prices. higher for or us effects We allowance, and we issues your monitoring to you Thank believe existing of to quality continue customers our process. borrowers current previously, call have attention, turn arise. as and asset and might through individual back its I of team quality well who First quality rates, begun continue positions to interest into asset to to concerns Merchants mentioned over Mark. on-board system-wide None the I'll And navigating asset as commodity unique position or with are chain higher work issues finally, and challenges our are these One Level

Mark Hardwick

Well. Thanks, team.

Slide XX our always impacts, we and number tell, M&A it you to of quarter lot sure Slide a the -- really can that including track just it see include in same of the and quarter we does this One, performance in where organic But can we're enjoy you sharing and sharing our over where activities detailed thing years we some M&A the time to have some a necessary. our April every detail. PPP asset a high-level mentioned of see obviously and closed sharing that It activity day. Level highlights the of we performance which take slowdown it positive record in growth, make there's of transparency, hope XX was X. slides, which you story As through [technical a as difficulty] does was

you Slide that organic of mission, So our XX, mission, to over like time, stakeholder imperatives attention model hear M&A I'm our produces investment of -- brand results a as this Howard competency. look And at believe and our and the when our feel strategic happy you and -- it our with they Slide business is our decision-making. of we your First the the this true reminder statements. in our I Thanks better transformation, we Merchants the guide, our digital questions. confident our take centric our team vision, is reminder time your statements team returns. that performance a a for are XX, aligned story, when you focus, a leveraging transformation, are top our at quartile activities, performance our hope and and cultural core -- financial vision, growth, is

Operator

[Operator the Group. from first or Instructions] from Our question [Geringer] Brian line of comes comment [indiscernible]

is open. line Your

Unidentified Analyst

them at you're that growth, the Michigan Are looking now using differently think you areas any healthy Level loan I'm pretty area. curious, landscape, runway One when that broader there lot of portfolio? of in loan in you're like loan of gives within mean you a about the terms we be potentially that overall growth that you into recessionary more assumption pulling other in the back environment under areas could on a might the categories or be I leaning

Mark Hardwick

at haven't I effectively Stewart be may is to finding going to really and a underwriting underwriting inflated as essentially far, for I, there trying of John our just executing the changes to areas guess issue prices. with address the to we're and that try Mike, as on core same, where clearly we're we -- been what we've being standards I feel working looking can and that are It's we number that any our strategy standards. between to identify make but years is cautious in real like so possible,

John Martin

add, Am this is John. to I just

While rates, may Mark, rising sound underwriting to approach business based our lending. I'd the of sound with and it I individual business standards may mean, with make attractive. on be projects agree are underwriting less

any change So result impending a I see, policies as necessarily any recession. been of don't our there hasn't in

Unidentified Analyst

there managers longer And probably testily strategically, you over you to more could year, guys for think invest corporate top line. -- term? but not be in where cost only the you think fetch you're through Mark, where strategically the bottom term, kind flowing think of the deployed more of that potentially in potential in of next so could on with that you more and integration specifically decade of up, the Do next the the pending would thinking anything you terms stewards hopefully growth the one capital. When longer savings, of

Mark Hardwick

I'm focused our well expertise investment user trying day advice team. I from focus Both that The to are matter to digitize continues me, office. the And sure valuable the is would our matter to much as a most to physical -- make we and think human on our matter have locations capital And asset, activities on all focused on transactional strategic platforms to assets, and talent our our and just in human that business, the are as of the we're and are that people that truly the into just mentioned employees value our to trying customer. say a business the they activities customer add the really day and as of back transforming imperatives as capital, I we even to where experience that possible. to are flow our our And digital consultation.

that some be digital So we're we -- have extensively even more focus, to to do able has continue assessing been going may process we of kind focus a our find roadmap we're additional and our and be where it's automation. a to

Unidentified Analyst

latter Great, of the first of straight Congrats pro -- kind quarter and I appreciate on [technical that. difficulty] moving the forward, of QX year. half full forma.

Operator

you. Thank

Tamayo from Daniel of line Raymond the from comes James. comment or question next Our

Daniel Tamayo

second. a Just

Operator

Mr. Tamayo.

open. Your line is

Daniel Tamayo

Good for morning everyone, thanks my taking question.

puts on the acquisition repricing just start first, you've there. lot the the A of like in margin. expansion the especially quarter, deposits with think I the to of takes, and and got

just of think year the half on the could I'm that Michele we in your So on, you thoughts see? expansion back big the curious how

Michele Kawiecki

lift Daniel. morning, we end see think the basis increases. point from rate good Yes, through another XX could We from of the margin year

we a that other growth no is more which mean a assumptions growth. of so are that in sheet, using And couple deposit that add have the Now is, that I static obviously portfolio we're thing need is lower -- are important margin. that that that the betas in balance probably will probably suggestion estimate will estimate, the feel are beta some might be pick which really that we're end conservative but competition to than what still XX%, when will that, But deposit with I modeling deposit expecting up. we the is up currently.

Daniel Tamayo

thoughts in or to fourth curious or about your terrific. this, on peak a of know in year? this But margin, of quarter to of rates first high I I'm you ways be assuming seems happens level diverging just think And towards next that year see in not Okay, whether stabilization what of the It the continued kind in get do on of end scenario? little a a margin terms the expansion we quarter we away. is bit opinions the kind

Michele Kawiecki

of lag pricing our some even the and just new expansion after will and we still think will I also that. in see it even pricing on maybe 'XX, the deposit then then stabilize loan of first in based on book just quarter probably the

Daniel Tamayo

I Okay, on one last capital. And maybe just that. one appreciate

way and X%, being comfortable down you with mentioned and you at consider look the does ratios. can just those think that TCE you're the the -- at capital understand capital very the mean, do regulatory you that want M&A? ACL repurchases to I over you impact do you with But I given and X% you before get same or to time? both back do So

John Martin

a it's question. Yes, great

matures of higher And use little doing need of -- on next little be early late a right somewhere maybe some to stock, definitely pressure we're see. lot put which If like hybrids, in is because looking just of target, stated year. that at high, now, were a probably share analysis this I've an debt additional we're 'XX capital at as we repurchase, X% have what but terms of the sub think sidelines I analysis would ballpark, to acquisition with point. find the we it a EPS that that to the in on more accretion 'XX, we does optimal

and tell balance the results delivering finishing geography and So based new on acquisition now that our on XXXX all with right delivering we're of current excited we the about and going really sheet is have. you 'XX focus, to about the new now I'm

a to over place you in -- months to great up. not M&A want next a so question, priority XX priority the and so that sharing of the just our I I'm going thoughts. where asked -- perform the But is. we're to So or we're or it's some don't mess at make That's

Operator

Thank you.

Terry comment or line McEvoy Stephens. Mr. your the is question line next Our open. McEvoy, from of comes from

Terry McEvoy

make client on to relates comment, Maybe expect full level. now to run then where you of the you transaction, terms that right do as employee and hit in achieving are the the rate? it a cost couple cost questions retention? some and of and you Could when if savings And savings possible from

Mike Stewart

bit and Stewart. system about a the are First Mike very base change event. Very level, to the client and retention. Level across talk winning they macro I'll with on employee has is a very spectrum at little This forward patient their capabilities strong very the additional good willing been and adding consistent, employee that us deliver One belief got that, to looking work They've can the tradition. Merchants through to

the good not Moreover, low to of feel positions I in been really, turnover. utilize bank. that might stayed really otherwise we've the about have able people, fill our to some the company open staff So

Michigan transition or that's made part Detroit the utilizing comments I for marketplace, it's First see fact when the loans, been around products additional that those how Merchants services. get from good idea side that really a So I comes about I optimistic and I already of marketplace, client stable. the very also the it Greater larger -- their existing client

are a even integration. clients us those mode we the actually buying with now and haven't So through gone in

the level question. let Michele I'll sheet very of been balance whole, the client units one and answer have a stable. the on the other so volumes And part

Michele Kawiecki

morning, good Yes, Terry.

the on our So we ability cost we're actually had pleased deal estimated and that with really to out. XX% take cost savings

currently, away, team to like that we said, probably come will are have get in cost cost carrying once QX. cost core we savings. about think go expense But integration So feel QX, we I processing $X.X their to we members, million our that we goes the of per away like will target achieved relative quarter XX%

Mark Hardwick

a change environment Thank changed is work Mark. has M&A you, perspective, Terry. all from an interesting And This the dramatic Stewart I think seen mentioned. banks. for remote operating really it's pretty do like we've

Because be I needed XX, to cost have positions it's with else would and the think not And XX the work in to least have we geography. at left normally those headquarters. in have we XX taken they savings company that open or work First centralized positions that Merchants, to remote. ability somewhere the have people our because going reasons for

that extra the exciting bankers our to remotely. of can work the team its that join attributes how feels It's of able has So one work to talented, environment are XX-plus seasoned, retain mostly administrative nice and people an be changed.

Terry McEvoy

the for sponsor are portfolio appreciate doing question quarter. are what portfolio today? you last Maybe was I that there. up guess one what you Mark, Thank you. I the in finance the John, seeing it color in and

John Martin

Yeah.

we portfolio itself otherwise or quarter. fund of they and/or up and the out individual refinanced closes. kind the as liquidate, out companies likewise that wind to names reducing as sponsors have balances in do get in that pay portfolio And ebbs the flows, to start So the

well saw -- out. see to strong sponsors as strong adding we as continue We growth from sponsors

to add sales perspective. marketing a from comment Steve that and Let

Mike Stewart

view, companies in ending of value Well, credit are book The track a that portfolio been better. XX enterprise profile, strong the credit the as charge portfolio metrics we in from and been from from leverage the quarters. ratio, fixed from X and as metrics Yeah. past point has various coverage never they've

Operator

you. Thank

DelMonte, from Our is line KBW. your or next of Damon comment DelMonte comes line the open. question from Mr.

Damon DelMonte

Good doing today. is Thanks. morning, everyone Hope everyone. well

turning Michele. question So morning, one is -- good that

identified alluded to outlook, expense kind back of circle the on merger XX of to wanted you $XX.X being guys nature. have and million you one-time in it Just had of charges

Is in the X.X With of still kind of books mentioned like for quarters? the are about was? the that million, integration what difference what on that just members you that other couple costs next

Michele Kawiecki

correct. Yes, that's

Damon DelMonte

Fantastic.

John Martin

one Next quarter, really.

Damon DelMonte

come integration as over little go how expenses quarters give will kind of a you in insight maybe cadence complete out as down and a roll the few quarter you of Next next costs think and third one of quarter, can us the any in would off? so if then direction bit or the fourth those kind you great? you bottom little to Do be the quarter the

Michele Kawiecki

fourth $XX And million $XX -- integration, quarter. in Also quarter you do Sure. that other we average bring where one-time will you when know charges will $X.X obviously away the come then the down of next it to million and our million. an that will

from that we that about but so end So up see kind the do that growth you may could through bit I us of through that some really you of wage where of be the gives think you level. million kind of a of that, little $XX looking end rate at a run rest and color would we just normalized the trending the static the of year. see year year of hopefully the this

Damon DelMonte

it. Got

on then, fee that's the additional of Are good Do Okay, how And from that of sources? you. this think side helpful. is rate? quarter's any run any fee you income a seeing Thank pressures about core the things. you level

Michele Kawiecki

this quarter is run think rate. a I good

activity significantly. of slow retaining a like gains, portfolio sale I and feel at I Looking buyer that kind loan that's feel quite the low be We're like assuming like of stable a doesn't bit point. mortgage pretty so should

use rate to Merchants. think Level I One, for so a run is combined And good First this quarter

Damon DelMonte

million Okay, fair in great. books? booked this about in you over $X.X loans And those quarter. off in until few some that the next then guys the just million quarters expect lastly, that to of burn value range you accretion something I $X think Do

Michele Kawiecki

do. Yes, I

Operator

Thank you.

Gonzalez, Mr. Piper line Sandler. Ignacio your is comment the from Our comes open. line question Gonzalez of from next or

Ignacio Gonzalez

My asked, the color. Hi, good morning, but were for thanks everyone. questions

Operator

Thank you.

Company. Mr. Our next comes Martin or open. of the Martin, question Brian line your comment line from is Janney from

Brian Martin

Thanks guys. morning the good taking for Hi, question.

of Michele. sense, wanted a kind get Just to

just us outlook with Just and the forward, the just can I appreciate the now of as But of on with just remind you Level expectations beta. the margin One. you consolidation kind color go

in these think how kind that couple today you that in? of what's just assumption move is just moving betas, kind are right said is -- I And deposit but next of the assumptions? now we with the next XX% then variable and or it does between year-end away kind to start is floors, deposit that stuff on it plays the up think other as they rate that repricing? get you about that burnt as is is XX% the Just the in of hike what's of increases through of your most -- the rate beta kind of your level

Michele Kawiecki

and reprices XX% billion are and months. course over primarily, loans reprices the billion rate Okay. so And rest of billion one Yes, really start reprices the $X.X of let XX so three variable the $X me that of our with months. of in loans that month, $X are in

And very high -- great loans variable-rate that lift. some of and gives so a us so percentage a variable

off the end On the and we first the the is do through of in year quarter the deposit it more bit start will a towards slower betas, 'XX. then of pick-up the through XX% and cycle and little that think

Brian Martin

Got you.

-- how then just as just as Okay, And not one credit just you guess it are that's helpful. but I maybe sounds what the monitoring about this then -- especially and acquisition far in worthy and very, very how about for quality guys John, like that the how and sounds do we guess today things given here the health it the strong? ACL near-term, think are is I over mean, of following still I that portfolio. the like

John Martin

Yes.

continuing the reserves specific the answer for perspective is us on the of are that, review amount ACL book and from the modest to individual the total think and I that we're way works specific relatively question loans is those putting -- the So reserves allowance. Damon, I'd allowance, the I'm way

to perform to to the see at, stable And we'll So we're think where to down. I'm relieve, I are at we're going so, -- they assuming right the allowance levels trend conditions probably remain continue now. and market start and continue to

Sorry call there. continue I'm you Damon to Brian,

Brian Martin

what appreciate for of you maybe the quarter. okay, got there forward? third some then, some the it. just And think I closing, guess some just I guys is -- John. the And handful, one a this I about me in That's as to or come of as further for next next guys that, you you're bulk I is the branch quarter, last quarter. No you this this only more okay, was thinking mentioned But not of on quarter, this just far worries. the branch is are to kind said closure expecting two do that going or three how --

John Martin

evaluate last XX fewer of lot lower Merchants to highest-performing the a We performance quite bit on continuing year did consolidations end of the left spectrum. locations that this are at year. for and our those Yes.

In just transaction probably monitoring and balances terms of importantly more levels. even

we of see the lesser where in kind customers moving locations branch requiring or a level, platforms to opportunities. we're assessing locations digital So physical our and

number did to channels efficient we capital to going opportunities digital ago. year the anywhere into like have people. near we are for a don't redeploy But be and to we and So XX into continue look just

Brian Martin

Yes, it Mark. makes sense. it, I appreciate

going. on the and quarter you are nice for thank closed how okay, getting deal and you So, questions taking the guys, things and congrats

John Martin

Brian. Thanks,

Mike Stewart

Thanks, Brian.

Operator

any this I'd to you. Mr. remarks. at like management additional Hardwick the for conference in time, queue Thank closing turn showing to no questions back and the I'm over

Mark Hardwick

and everyone the remainder enthusiastic. about I'm you, XXXX, for Thanks quarter today. I think Howard. When of time Thank the our

we've a streamlining have continue comes produce the and those of for we it cetera, One success. is had and more south we're organically long-term operating us now that serve north in through about organization, always results. those a allow single that great have out Obviously, even growth ability and acquisitions organic think relative grow an We're our mid to we way ratio the et way I and high Detroit and and quarter though proud efficient and a city in that we really I technology in location, long-term the kind by just operation, MSA I'm think strengthened our to that we efficiency talk also strong Level story, in investing of to a and on always strategy the to robust story branch I'm both peer company have as digits. -- exceeded west in that the of to think we leverage the and the with I The the people to us allows city of, sides. addition of this a

we Our that the earnings there multiple confidence level to is right incredibly where high upside. given now and is price is great think

some the uncertainty banks end So back incredibly Merchants us as but it's well United facing to at think an world the it, and to First positioned of I States. whatever weather has the interesting time, the that, comes come out is on one of strongest in

So we're keep working delivering all hard of you. and to going keep for Thank you.

Operator

you participating in conference. gentlemen, today's program. concludes for This Ladies and thank the

You may day. now disconnect. Everyone wonderful have a

First Merchants (FRME) 26 Jul 222022 Q2 Earnings call transcript