FRME - Earnings call 4 2023 | First Merchants Corporation

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Operator

Thank you for standing by, and welcome to the First Merchants Corporation's Fourth Quarter 2023 Earnings Conference Call.

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 involves risks and uncertainties.Further information is contained within the press release, which we encourage you to review.

Additionally, management would refer to non-GAAP measurements, which are intended to supplement, but not substitute for the most directly comparable GAAP measures.The press release available on the website contains financial and/or other quantitative information to be discussed today, as well as reconciliation of GAAP to non-GAAP measures.

As a reminder, today's call is being recorded.I will now turn the conference over to Mr. Mark Hardwick, Chief Executive Officer. Mr. begin. may you Hardwick,

Mark Hardwick

and earnings Credit welcome Thanks First for access for on by released bios forward-looking and $XX.X under Officer, loan the we see will year of Eastern, Chief X:XX Martin; of billion $X.X we XXXX and link you and covering billion quarter billion Full of fourth Conference Kawiecki.On X, X.X% statement our of annualized have We Mike today's X. and Call. new Slide final the include Page under our look with following Page can at to the by $XX.X if include morning, approximately Merchants a.m. total results, the Year assets the today total points Good on deposits of our John bullet at page Stewart, X, introduction you third quarter yield today's Chief our release.On earnings advisement.On slides, Financial a to of slides $XX.X X.XX%. to renewed President, highlights loans, our Page assets the a the our the total Officer, X grew during loans few of you and presenters billion, Michelle of and

where in and agreement to deposits early half delivered quarter.Those the we onetime to earnings or produced when a during the 'XX, income adjusted a $X.XX to onetime $XX.X the same of We of in period, onetime headquarter down of you year highest for million EPS improved expense share severance per related expenditures offer $X.XX.During items the borrowings We've that retirement due cash, cash balance the bank lease the XXXX quarter adjusted became points. bottom that and same plan $XXX.X $XXX include voluntary of net see year, failures by incurred and incentive charges capital.The due the Indianapolis EPS increased liquidity X.X% assessment per during million increased position when sheet year-to-date fourth write-off million, of the FDIC million we share that our totaled XXXX the for repositioned $XXX safety as of several bullet also page, declined to $X.XX $XXX employees stakeholders, special we regional $X.XX soundness reported include our to to March of QX items company's prioritize by the liquidity expense in move.Moving effectively and and for will of priority million. and several

Mike? Our tangible maintained common X.XX% equity increased totaling to I'm during top X.XX% decile by credit year to enhanced call one quality deliver year-end.We character TCE driven team our collaborative and of proud and the year, of loan up from for high our strong X.XX%. and ago $XXX the allowance employees for I would million that to tackling we colleagues driving losses ratio, a at delivering presentation, an quartile to rising resilient proud sheet, our XXXX over X% year.Before while just loans be risk-aware for head-on just high-quality a of. like growth X% top and for also delivering handing over X,XXX-plus the of clip at turbulent net and for can balance of for results deposit adding all the thank

Michael Stewart

morning good you, all. and to Mark, Thank Yes.

financial diverse remains Ohio.We in Our the and Indiana, primary serve deliver unchanged model markets. that business a we our business outlined represent and the strategy is growing, X markets results Michigan stable, rural metro locations durability and the both is that reminder markets within of of in on slide

client loan our a total technology we XXXX, relationships. business the share XX% grew real team investing our third our X.X%. collectively, that delivering of to deliver residential is loans current fourth our portfolio.During retaining The growth the our around consumer noted growth the to expected C&I-focused X.X% experience deposits. First team.John both growth in X. and is was annualized did the rate.So global in the listed mortgage, the private to pipeline growth XXXX, for the commercial and this banking all expectation during call, pipeline Merchants XXXX, our of from delivering loan into at segment, And and comes business goals. of consistent building quarter across with in quarter loan the our organic And the loan top-tier again, commercial forward the quarter, commercial growth pipeline, rest remained the ability Mid from high these loan to estate We ended regional on more mix communities, and and validates attracting, strategy than This grew team, highlighted analysis solutions the income, and committed our moving all have organic single-digit that turn annualized total of our and strong lower to and while page.Throughout platforms are a quarter, show fourth at is achieve organic commercially of engaged loans, portfolio pipeline the detail sufficient portfolio HELOC, XXXX growth last financial portfolio that X% mix focused the detailed which year XX% by fee growth for enhance the the to metrics.Let's total Slide bankers commercial materialize deposits portfolio portfolio, investment actively his we has is the from organization nearly our that consumer.Within X.X%, installment of commercial slide segments. I of have and

improved the any of loan growth loan the my were March bank and is inclusive loan highlighted throughout Midwest, portfolio Silicon times our through affirms have loan the trends in we loan at landscape the high momentum some during that single-digit can April, exceeded be of for economic since an We the which increase on to navigated examples, uncertain X% with improving XX how yields you post period.The mid liquidity with team growth Mark for choppy gained total in points is loan more management, competitive XX% know, the network but our and those bank given This prior.And and the sale continued since commercial to full in private growth was deliver during trends detail quarterly Valley crisis. focused basis As growth annualized. quarter fourth the page are quarter Michelle commercial purposeful low-cost watermark yields. inclusive growing to the annualized new demonstrates environment fourth year.The quarter expectation from high quarter, are the its loan of also positive XXXX. grew. branch loan consistent the overall both quarter types.The each showed yields the has teams base. The depository was deposit our banking X.X% delivered growth. commercial quarter deposits at balance share.And share building XXXX consumer both that X.X% and year over that on sheet again, deposit this growth team.The portfolio continues the This consumer growth on relationship throughout But deposits only loan banking growth strong strong. market commercial saw the The of the quarter and

bank's As liquidity Mark stated throughout improved press our the release, XXXX. in

resilient team balance We a sheet. have strong a built capital position.Our

continued position XXXX enter for we growth. So,

turn that more of sheet to over drivers detail review disciplined.So, team statement. positioned the balance underwriting to income call of is and our in remains for and supportive, the composition our our Michele? Our growth, Michele I'll the consistent and

Michele Kawiecki

$XX.X and million, you Pretax to XX.XX%, can pre-provision for return robust company. increase share was $XX strong see for These Line I pretax and X a pretax the $XX.XX results. of available-for-sale $XXX X equity of charges work in an you very X.XX% year-over-year.Year-to-date return pre-provision variances in adjusted are increase on return of increased X year, see team previously, from book mentioned On metrics.Tangible year, an which by Adjusted quarter growth X.XX%, XX% Mark through million of in to in Lines for which year-to-date quarter.Adjusted on the representing the will value results. was when increased the reflect was on quarter prior the done over pretax described Line last per shows the earning per all from yield grew quarter, resulted million. million our the book excluding which $XXX on year-end. assets of productive grew a million the X quarter, value adjusted has onetime and was pre-provision $XXX earnings pretax on share on in Mike loans, fourth X. year-to-date was which sheet XX.XX%.Tangible pretax asset equity through earning balance The shifting million, at $XXX reflecting increase continue earnings. was assets strong covered million, pre-provision $XX.X assets onetime reflecting charges, the the display pre-provision $XXX.X on totaling on X, investments, assets X.XX% adjusted pre-provision we just profitability XX.X% Slide mix or securities.Deposits value leading during strong $X.XX return totaled Line million equity totaled earnings,

of XXXX. in a A resulting slide of on our portfolio to bonds growth We has from million are this years, deliver noise of the tangible year mark-to-market in quarter, investment the on graph XX this sold securities, loss of is Excluding growth Slide pleased the year $XX XX.Details disclosed another book million. every we adjustments on and experienced company included the XX. are in $X.X value for last

have from portfolio, to sales, X.XX% in some solid funding nearly our to million interest X.XX% cash bonds bond loan on totaled put flows increase, including The maturities million.Slide down the and and the $XXX sold the XXXX, year.Total a creating to pay from $XXX paydowns last position. total portfolio totaled XX higher quarter. We and portfolio. million XXXX, flow portfolio cash principal yield loan throughout to in rate have to from cash approximately wholesale in continues shows $XXX climbing principal bond basis in Expected and liquidity points ensure work we generated interest, XX loan payments details scheduled

provision the versus average of portfolio the which net in on coverage net will statement. of within $XXX,XXX repricing last interest of during were credit million loans X.XX% the is in portfolio marks we million and loans, with his fair was due John variable slightly maturity has our environment currently.The of weighted to was reduction income interest ratio, capital.As for to rising $X.X XXXX million X.XX%, X/X result of mentioned of of two X.XX% You details deposit by incremental We income last loans, $X.X losses VIX provision to given losses months. we XX balances.The provide charge-offs income our commitment recognized very the allowance coverage our That increase a details over rate build or due allowed of million, reserves slide provides those shows credit on have value the some expense us right, Note rate to three $XX.X years loan quarter of approximately which of marks offset which commitments for rate structure acquired $XXX,XXX total just credit new to the have for on loans our rate in reprices remaining a which incurred including will of on that of I our decline losses recorded unfunded on X.X%, remarks. portfolio and exceptional loans X.XX% to in of the variable materialize.Slide will $X.X unfunded during it portfolio. of declined at provide half XX, fixed repricing bottom see quarter, response delineation the between quickly is from

account from strong We in the points low the end deposits, with uninsured total of a deposit have quarter, to prior or were less reflecting a deposits core diverse the percentage at XX.X% continue average quarter. of deposit very deposit was modestly down balance, XX% a low and franchise.Our with deposits noninterest-bearing basis which base a five yielding of XX.X%

be points total Line signs commercial improving grow consumer year the this over on of asset to basis next a somewhat we deposits tax increased the X.X% quarter. and interest a while declined will of deposits on basis during Overall, and expect meaningfully wholesale declined year Earning we've what X.XX% increase of X of and decline slower slide stated of be reflecting We in Line X on quarter, on net last the net by by compared brokered experienced we slide interest deposits given deposits funding basis funding increase income X prior pace gaining prior pleased X, and cost from to this continue to wallet.On industry quarter of XX able were achieved the customer deposits acquisition reduced grew increased or yields the quarter X.XX%, Our XX, cost $X.X to than to even mix. XX quarter.Although of decreased equivalent That showing margin income quarter.We XXXX. slowing and points in during a from $X.X to through million growth XX across this offset deposits by the expect on share larger $XXX.X noninterest million basis a as fully quarter.Next, Line million shown points shows of income. details the linked-quarter basis. costs X, the funding was was noninterest

investments.Customer-related on reflected offset in BOLI declined seasonal million which highlights $X.X available-for-sale the as XX. noncustomer-related $X.X $X.X quarter slide incentive million and of a which included and wealth some sale noninterest $X management included noted for items a CRA by with million modest last fiduciary in on items the on an onetime mortgage line securities $XX.X expense primarily decline totaled over mentioned, a driven income As write-down increase the and loss were of Noninterest this $XXX.X quarter, in million accruals. $XXX,XXX, there Core and million, by the slide, expectations noninterest on a million a increase was loans, impacting to of quarter, million million, fees.Moving gain, $XX.X expense previously an totaled $X.X charges.

ratios. low, continues and efficiency for shown our core adjusted XX.XX% the Our in to ratio year-to-date.Slide quarter top at XX at shows right capital be XX.XX% the coming

you growth the chart on top all Our equity in expansion losses tangible recapture strong ratio and in significant earnings drove capital The solid and reflects the of see earnings common unrealized ratios. this quarter AOCI.

We will to Credit our Martin it successful Chief pleased to quality. the the reflecting strength discuss balance John strong turn year real a disruption I are now concludes and with very of sheet in and my amid industry.That earnings, Officer, over asset remarks,

John Martin

review Line morning. came X firms slide the Investment the highlight We originations and updated middle roll quarter and had on moving in forward from and remarks good nonperforming periodic mini-perm.As in strong real over the with back third as good on portfolio teams XX loans movement asset I'll insight to the sponsor pull-through. continue start the a resulting of asset with estate grew Michele, their X, good Slide the originated on My highlight call the quarter, to out Line commercial on slide, exits Thanks, touch regional seasons, portfolio, the time new from properties off XX. million. by paydowns. loan our turning construction and before we where portfolio backlog Mike exits see by segments, and also portfolio Mark.Turning $XXX market the portfolio mentioned, to in the industrial banking I various to reach the portfolio and horizon as both quality

updated companies sponsor commercial CRE interest XX. to provide classification into portfolio I've the The rates order well transparency additional as the finance platform slide and mentioned stress prior space. in slide with investment criteria.Turning in C&I As meet additional on higher business. calls, includes have as to owner-occupied associated our the underwriting capital to driven insights

a in Our concentration C&I has portfolio XX% manufacturing.

to private the has a utilization bank shared consists exposure.In highlighted XX% information.This are remained line platform and of the X.Xx industries. single industries. $XXX increasing of coverage sponsors and across slide There we where companies relationships for million the of current syndicated opposed deals and equity portfolio charge the relationships generally fairly are platform quarter.We national line XX% widely quarterly access management portfolio including at credit participate metrics. $XX sponsor with for opportunities condition, beyond consistent Our active revenue individual commitments in leverage credit We assortment various on companies have based key fixed of for flow in roughly Roughly to XX as review I've portfolio, loans. with changes firms borrower XX. million have roughly and to September These large, leverage finance XX ratio credits cash an around coverage.Turning

of maturities, with broken risk of a general bottom the additional million to by medical.I've or X% and on from of provide slightly outside right office real be appears commercial out office our continue and in tenant exposure. quarter estate added loans, X% nonowner-occupied half $XX breakout We loans of last bottom concentration highest type next down mix. exposure with the to detail represents portfolio Office is portfolio chart office to total the is the office total office the chart low refinance within of our diversified year. The maturing the around well with geographic portfolio with

is and slide review loans guarantors, our million reasonably of mix exposure a due mitigated XX past We to view decreased trends quality and loan and exposure and combination office highlighted tenant value, days continue XX, to XX considerations.On position. the periodically basis larger NPAs and our $X.X other asset loans through current ORE. of I've to points

consistent continue of slide XX and quarter's classifieds charge-offs, loans, of rates moving with for net moved portfolio days We XX, I of performance where to average with or migration past charge-offs relatively levels roll on points the consistent quarter.Then XX past to last X.XX% due. basis nonperforming We began forward ORE last annualized despite the of at to experience loans. loans charge-offs $X.X million higher of

points reduction ORE million. and from we added for million Dropping Line at $X.X For payoffs million, in in NPAs Line we charge-offs wrote down past resulted on X accrual Line plus by gross to X, of of million, down from days $XX.X ending due, reduction nonaccrual the quarter, on or loans $XX.X a the X at a and which $X.X XX criticized $X.X and charge-offs status changes growth million of quarter, X.X% XX stable Net appreciate for for basis Mark to attention, the the Hardwick. annualized rate, And portfolio for turn good. asset both remain and grew a summarize, to with classified XX I'll remains quarter loans basis year, in back check over points. the your delinquency.I quarter.So, call the the and quality were now

Mark Hardwick

Turning look as at more our to of charts slide I'm a performance. review they XX. going take my favorite to a few long-term perspective to

the On the share book AOCI, tangible value share, XXXX, per you top share XX.X% total during represents value over excluding to acquisitions XX year demographic meaningful last growth with replacing and our of prefer equaled few investment the our tangible just XX.X%. the book and paid materially our made AOCI dividends right, asset footprint XX%. total for have a at looking XX%.Slide equaled XX-year fuels transformation And total to returned that and XX, I've if CAGR our that value totaled XX edits word digital continued the during book include Or book per earnings return our both at years highlights value added to excluding look per in. growth.Slide CAGR

for February. origination end the to times loan of online enhancements also have either in-branch plan to platform, by completing big seamlessly a we last automation connected live reduces beta minutes, years, be the completed account months fully in be new rates our and During air and with our three opening we mobile an we than with of account channels.We're system, our which live account also are opening consumer, nearly of that process rollout just through eliminating with by account from our minutes can XXX,XXX days four XX less both or customers online week, to customers opening online platform new the while or channel It's and process, XX%. delivered XX delivered and from personal commercial enhancements.This away average

these and the and for our of The platform our of we wire handful all related wealth management temporarily upgrading remind a first of onetime platform.I treasury augmentation also also systems includes half commercial platform, should or service the you center to private online completion new handle new that XXXX to customers expenses have customer of overlapping upgrades.

and the charge first take Merchants. modest we the time, in projects, Through continue We to approximately a your of future.Thanks simplified we these quarter $X and your attention to and happy client enhancements the million of will $X investment for approximately in relevant streamlined First And charge million. focus have on this quarter expect and truly at we're experience, second questions.

Operator

you. Thank [Operator Instructions].

with Our comes first the James. Raymond line from Daniel of Tamayo question

Daniel Tamayo

the on I you first the like? but just the the what Michelle, assumption detail I I might on have baseline if apologize the gave and for did through look margin and the as appreciate asset Maybe, all a how funding NIM it, side you trends And well kind missed NII outlook. side as NII of XXXX repricing.

Michele Kawiecki

morning. Good Sure.

for So, expect to see bit XXXX. we a QX, in more do compression

X.XX%. was margin December Our

couple in So give QX, seasonally always And oriented, of be I down meaningful rate $XX near that of that the point. to the rate item. of quarters point sub model you a points. another are then debt which proactive a to will would items of also other of expecting could flat rate in this XX a We're remind taking perhaps just that costs basis our so which if us rate each at managing about about cuts, that we're there environment, impact. some in declines you count, due bit XX%, will our a day But a that rate anticipation is because tells deposit the can savings. so simply low end data margin cuts, approach a commercially very And offer had million lessen cut, are month for paying in assuming basis thereafter.Now, margin down we stabilize four margin

that which in some continue cash put higher the spread We rate tend cost to that back in mentioned, sell to mortgage environment, bonds, is typically a to thing we too, and when other declining see we loan opportunity gain sales. funding.And loans I higher for an creates work

headwinds definitely are we there think a well. tailwinds when have So, declining some environment, as some although there's we that rate we think that

Daniel Tamayo

year. an think year? You expectation Is outlook? there curious growth kind in for obviously loan the how for you of the strong up an continued all-in NII might Just NII have end

Michele Kawiecki

Yes.

but growth I compression thereafter, particularly stability net and expected will QX, in the think due our income, growth. expecting in we half interest second we're to some in then see

Daniel Tamayo

banking. And on your mortgage comment just following then lastly, on up

last You've quite as maybe some other actually as not banks bottomed low well year. doing

you rates Just you'll think made? XXXX coming could down? number and that $XX you doing some year end investments be I about start that curious, think good given were times the you you've doing XXXX. million above a able Do to where pretty up once think in get

Mark Hardwick

That's it's question. team Hardwick. good Daniel, with Mark the we've a level the pleased really We're enhancements by X. post made

we've So, we it before of identical I And the the downturn was say two in First materially size kind our it core in that the organizations strengthened And X.And the doubled capacity I strategy around based this to potential the business I'm feel of think portfolio lot but the or we when confident outlook. and putting our franchise that in doubled, First or do had by almost change rates. together, level Merchants had like a mortgage. we so, on rates, we've has Merchants originations were with

exceed two we that mean that confident be the decline a able you we So, a to at in performance historical rates have yes, if should on I our basis. look I'm when combined

Operator

you. Thank

Our from of comes next the Damon line KBW. with DelMonte question

Damon Del Monte

rate? questions expenses. items are there run core this guidance looking what some little go Just But about you are good kind into as a start a with for wanted some Michelle, 'XX. off quarter. Obviously, bit to here for you onetime thinking more of on

Michele Kawiecki

Damon. morning, good Yes,

So you this quarter, was onetime when total, back core costs, out those $XX.X our expense million.

disclose wealth each our of and side like sure that this onetime I XXXX the our mentioned, online XXXX and rate we to in Mark be top of conversion But to million good transparent X% up run to a flat management basis, QX core but on and charges high as focused on quarter.DelMonte, the compared that's you. will quarterly maybe we're achieve impact the QX a run dollars for we on So, very that we that, incur that. quarter, core will in strongly expect some think few rate private can make expense expense on I expense conversion to to banking feel and platform that due we said,

Damon Del Monte

you're noninterest fee And this mortgage we potential banking million as to then drivers $XX out quarterly called the income a to But forward? other result on few items the about. around level a three for of your at fee kind net, look that probably volatility know some you you income I income, side, operating income going like kind how those there's together, just should of closer of we look at quarter. spoke items

Michele Kawiecki

Yes.

think run quarter, for next rate to little $XX a to This $XX the that quarter total million XXXX. average around per was We're year. the a I expecting light in more million probably

Damon Del Monte

And good which tangible and recapture value the tangible then boosted AOCI, book some just equity. obviously, lastly, on common

ended the think I ratio TCE around X.X%.

wondering Just particular. kind of are a buyback in and what your thoughts on management capital

Mark Hardwick

equity.So, through be to capital in we time but rates We got Yes, return active remaining it managing million, total next pay have level really capacity and were risk-based $XX it to just as TCE we're thrilled And continue Yes. Thanks, started may tackle the a the which market. sub inclined be a to decided But that stabilization first. that we not Damon. these we catalyst add the ratio good we earnings, and likely based X%. capital first, TCE common see a there the thinking to about was have that, of process. do primarily debt. we over $XX quarter prices, assuming the off We've that to where in bank on to to paying have down down feel the million of to I'm our about

Operator

you. Thank

from of from Terry McEvoy Stephens. question next the Our line comes

Terence McEvoy

outside the caught of Any for I to kind contributed starting And C&I of banking also portfolio? million outlooks quarter. specific C&I loans mention about the what eye, growth specifically part the business, of think a being is industries, which the The healthy your and $XXX regional you big kind my in last of markets quarter? that pipelines are prepared remarks

Michael Stewart

saw Terry. point. It's of we really growth Mike hadn't was simply Good muted a transactions in because at the that prior quarter Yes. that question, The closed Stewart. lot the C&I

that ended high strong we the with a really did So, pipeline materialize. quarter

region fully we whole have we I pointed nice XXXX estate And even you outlooks John that's strong model, our to about a factors.When as commercial We competitive the space.And of stable think in that's think of what's that advantage space out. that. marketplace, pipeline investment growth that to bank year that traditionally solid transactions. it portfolio, economic the Michigan, the real the driving disruptions, good staffed that think I still was Ohio, taking which industrial so is really in turn saw Indiana,

do addition good term in, in it but the underneath growth been to funded just construction focused growth, some of we fully it's of on. Some loans we in has be origination play could the more that that were classes asset

So, here. mix balanced Midwest a just across the nice

Mark Hardwick

Terry, might not it's in just in board. of when And, commercial up bank. the what's we our C&I, in C&I industry, much add, pretty it's particular any a I across we're And area. bank the pick a It's just we're I footprint. Midwest or mean vertical terms that

it be. of comes to broad in So, kind happens as base to what a

Terence McEvoy

funding Michelle, of that rates we index your could out you potentially do how lower And have impact attempt the costs? model level deposits to all and as

Michele Kawiecki

Yes.

along cuts index of able those that have billion be we'll that if tied with an occur. We rate are $X.X deposits to to reprice

Terence McEvoy

broader $X.X I'm real those call earn retirement of actions do manage you question back trying And last the how Are think on XXXX? about a it, expenses connected million? And to then the expense kind to the, just think expenses, management severance is in early lease. and the of trying numbers to

Mark Hardwick

less quick. It's a is Yes, than our year. bank

with creates of we're just So, out. as the really voluntary as are about played the much excited their ready the And for opportunity way stage career. for it next anything, retirement that hungry that employees the pleased

Operator

you. Thank

the Piper of from comes question next line Nathan Race with Our Sandler.

Nathan Race

of I about a outlook you year. a difficult heard just mid deposits think but little year curious opportunities how guys I are it late, Obviously, kind core to grow franchise single-digit I'm to on core loan jumped growth the in for in a high this ago was 'XX. I XXXX. the thinking deposit

guys thinking the the those of So, of just improvements or particularly things. in some are curious light about technology side on you opportunities, enhancements how of

Michael Stewart

borrowings call, press we million would position, talked early just And we us you $XXX about a liquidity our that great change, $XXX that the new $XXX lead that cash, I say reduction Yes. million in which the about in with of million. in of release. feel saw

I so, single-digit are always pricing, more it a maybe were our to still around smart our deposit we And what in us growth. allows mid XXXX.But think than be to little low think conservative expectations deposit I

year. think if is target X%, So after year about X% of kind our you

If a you does feel the it to more like think and that about in normal environment, it to we're it's all to. feels kind banking like environment settle used those of starting obviously But changed COVID things. stimulus

Nathan Race

around that about flow cash how And off the just year. securities going just disclosure I forward, the we of shrinks the size this much there the appreciate Is expectation by coming portfolio have securities into thinking that maybe loans? amount? that the grow to just Or you extent? do Or are need you and redeploy cash growth able incremental new book some see deposit to flow to guys a portfolio

Michele Kawiecki

We're securities not grow planning the to book.

growth. We liquidity for are planning to loan that use

Nathan Race

And then credit, question last maybe just for on one John.

nice Is XX there XX still the you I improvement the to on cause we normalized on the basis talked enter from most historical kind historical deviate would range you're as of in this metrics year? points. environment of think here seeing kind just and in about anything that in that thoughts next? past, to charge-off Obviously, this any credit that fourth range that horizon somewhat trajectory quarter, of between uncertain a you've kind into year but

John Martin

of go would that I point XX And to analysis given classified, the me it of no, of charge-offs, the And what any Actually, Yes. for the wait level that be. on continue pencil that XX between basis name I your what to don't. individual I still in. think range rate criticized I run Well, might think absent the it's it really individual pop to up of portfolio you level like credits. seems reviews and of and your through and reasonable you question

Nathan Race

still reserve NPLs obviously, be And guys a loans mid percentage matter. of may healthy a guys and with thoughts kind a in to loan of growth reserve operating kind for percentage outlook? that of bottoms Any as the of just of to the provide on the high you very as are that single-digit over terms or year of loans how need you for kind next two where

Michele Kawiecki

bit. in cover tick year a in a year. have little now. economic out to loan growth how down least it scenarios. changes get the get We'll we'll mean might that just the kind for ratio It to a coverage plays still We're that a X.XX at part we at see will take a We'll we the of recession. determination. look whether during with will be play soft or I some our at to Well, Obviously, provision that the have play likely

make to going that's difference. big think a I

Nathan Race

one then for tax housekeeping of Does last question. around back to rate XX% first up quarter the 'XX? the go And just

Michele Kawiecki

tax Yes. XX% rate Typically, around is effective to our XX.X%.

that's should what expect you think XXXX. in I So,

Operator

you. Thank

the Our Janney. Brian comes Martin line next from question with of

Brian Martin

in Maybe did what quarter? I the you late. mention for just know credits John got John, you in classifieds one about the joined the deck. that talk I did special or the two.

leading like the what credit strong everything the indicator curious on like. Just there is front. It very sounds looks

look deeper a bit number. that at to trying Just little

John Martin

kind slides. disclose flat trended much don't We commitment of standpoint, the we're, for pretty assets the Yes. classifieds from our But and criticized they've the on quarter. a with

Brian Martin

I pretty just how you looking. sounds of wanted direction, how It just good. it's kind

Just that. to guess, deposit it's billion, one pretty Michele, confirm $X.X And that Michele on but kind don't of that maybe I wanted the assume repricing? immediate deposit just that on tied pretty was know the index-wise, then immediate. I repricing, what I to is for

Michele Kawiecki

It is, yes.

Brian Martin

on on on I lot or And understand there organic maybe trying may on, side, view just is be I still And then and going to M&A the mean you outlook, the everything call in the sounds guys side? growth beyond. listening I focus last the the what just strong. opportunities see on there's but opportunities do just 'XX on plate it on mean, obviously, the a two, the side. guess, your and M&A out very

Mark Hardwick

continue of return these to that we're And really we stock of or tech kind environment of not we projects franchise. some even And with when there's initiatives that as looking been and when of be get relationships. think conversations of it just Yes, to we're some way that to has in of behind interest helpful. June attractive activity, have other sure fit rates M&A. to fits happening.Really are all the partners, I'm sellers And by to our no really think us by the conversations. for handful to hopefully, have XX. the a great ready midyear continuous, the are about But a price middle yet.A and we we communication have make of with of continue pleased helped reduction build But changed part has really M&A just going banks continue to would

Brian Martin

want not initiatives, the get been you job. a mean, I focus you and doing those don't said, all yet. guys and organic these where great is just to ball that's those is have drop the done on you timing done And perfect like

a the color rates you those of have that? okay.And last one from credit for got taken repricing maybe you but the see a John have a whomever, Or rate stress portfolio any renewal, just type loans give repricing of in kind or risk me, guess? is as commentary just maybe you renewals year the So, the you on guess, in then this that higher I loan risk much at the how of look I the for look absorbing can or of any increases, you at about

John Martin

I talking real estate about missed the part. kind of investment specifically? you Are the first

Brian Martin

in just as chunkier on credits? absorb of to if in the rates impact able this look book the loan of you year. they kind maybe of just Not general, being just repricing at credit repricing the And the that higher

John Martin

debt prices service absorb far, in I see have able either series or been changes previously, expenses they've there's the higher to well, the income across in But have frankly.You in statement and is quite interest that where or rates able the or been to reduction able pretty interest rates the cases have they've what led portfolio else a for. prices increase been either So compensate customers of something to increase seen through it their to maneuvers service. of higher do slightly higher debt in been

So, yes, I mean, it. you see

it, you've through we optimistic rates X.X% feeling rate there see at somehow Michelle look And issue. business mentioned but it got that earnings how 'XX. are You we when will of figuring out.Yes. those, credit owners mature you in like $XXX a we're move that fixed a that have versus And about good helps into million

Operator

the I'm currently this Mark Hardwick Mr. remarks. no at to time. closing back further to showing for like call I'd questions turn

Mark Hardwick

you, Yes. Thanks, Thank everyone, Norma. for participation. your

as with that we occurred the our the year referring the it industry, it really and we what of light pleased the strength again, a in of 'March just validate incredibly really up institution. safety think people And with that of I that success especially sets that are, some year challenges the Madness'. position for throughout had, We in us to helped the to soundness an the And sheet and in future. balance strong end is are

your investment. So again, for and your have time, day. a thank your Thanks. appreciate of we We you rest good

Operator

This your concludes you conference for call. participation. today's Thank

Everyone, day. disconnect. now have wonderful may You a

First Merchants (FRME) 25 Jan 242023 Q4 Earnings call transcript