FRME - Earnings call transcript Q2 2024 | First Merchants Corporation

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Operator

Thank you for standing by, and welcome to the First Merchants Corporation Second Quarter 2024 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 involve risks and uncertainties. Further information is contained within the press release which we encourage you to review.

Additionally, management may refer to non-GAAP measures, 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 other quantitative information to be discussed today, as well as a reconciliation of GAAP to non-GAAP measures.

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

Mark Hardwick

covering the Good morning, XXXX and Page for Quarter a.m. released approximately our time. Merchants First statement earnings for X. introduction today We and welcome Conference to Call. the the on forward-looking X:XX at Second Eastern Thanks

of and assets $XX.X X and billion on a of and include: our for $X.X Officer, see of Net $XX.X our net page You today's interest can increased Slide to of third X assets will total President, increased quarter, include: slides increased under $X.X access quarter. to the Officer, we points the income net highlights interest net John of interest deposits; you release. On bios by margin Kawiecki. On of Page million. Mike and the today's total by Credit have by slides, interest following advisement. On X, during financial Page margin presenters Chief and $XX.X the billion; billion link X, Chief billion Michele our total earnings few Stewart; income loans; Financial Martin; basis

of of to growth coupled totaled technology and our below for note, financed value performance, his quarter X.X% improvements, on contracts, its substantially for owner the one expense quarter's of sale has and the renegotiation -- our of ultimately million second significant quarter. Loan totaled substantial consistent which May heightened noninterest meaningful to all experienced X expense that, XX-Q performance business this on major noninterest indicator the competition second-in-command provision subsequent when capital year. from key initiatives this expense We earnings and long the growth $XX.X the our share. had On power in also push and and for in footnote our We XX.XX% we his previously business now less produced Due provision EBITDA. have totaling with the deterioration the quarter, the X tangible quarter. and a charge-off. Despite of during our a positive improvements material completed based margin per and book a interest resulted time ratio net our income helped level efficiency of to event took XX%,

per million Our allowed and months the $XX QX, capital X an repurchase of $X.XX sub-debt. in $X.XX through share another redemption totaled $XX of position of per Earnings and the share. for expensive share million per totaled EPS stock

line Now, business Stewart will our of momentum. discuss Mike

Michael Stewart

and you, good to Thank morning all. Mark,

on summarized strategy business Our Slide unchanged. X remains

a commercially-focused are and organization our segments We Michigan Ohio. business these Indiana, primary across across markets of and all

and specifically we the imperatives, deposits As in remain focus our rewarding on: for the we the through of focused digitization entered remained retaining organic fees; executing XXXX, investing engaging, of strategic growth of loans, and XXXX. delivery and teammates; our clients our These balance channels.

So to let's Slide X. turn

the and XXXX. The during quarter growth second loan growth We followed annualized trend the growth basis X% quarter-to-quarter. experienced choppy fourth experienced over we in This the X% flat of continues on from quarter QX. quarter the an first

high the this experienced Ohio; portfolio XX%. than in sponsor the across the regions growth, joining During quarter, growth was year-to-date single-digits. The with the very driving strong Michigan commercial C&I to growth shared more Indiana, and teams

growing and commercial. of acquisition working and of owners commercial total balance portfolio First the is equipment our of plans the Our growth sector comprises XX% been our X/X capital largest has always their driver Merchants' industrial and our markets operating Business portfolio. to needs. commercial within sheet focus and continue the loan C&I execute the primary with

has was chosen stabilization attractive either taking growth and our of muted projects The with share rates. of C&I clients the rates; continued and are to Real not cap we market continue growth projects growth contraction through by with also of our the taking Those long-term strong but projects, drivers continued conversions. to refinance growth, the advantage Estate attributes, solutions. sell treasury with continue bankers low only to the prospect those clients companies primary X C&I. The solutions, share within their the have their into advantage gain commercial Our and Overall, construction permanent of market, interest support our economic Investment of capital or market client, portfolio.

asset of while XXXX, is achieving the in are projects primarily All year The post stabilization We XXXX a course rents. projects normal higher timing, pandemic projects absorb a for these have one reflecting construction higher started activity. experienced needed multifamily to higher the that with preponderance of backlog class. with payoffs higher-than-normal this runoff the simply reaching rates of interest

New projects. levels. future for project our With consistent and efforts, syndication team volumes underwriting has are strong healthy Estate Real Investment earned mandates at

the new this our This classes. set Our the and appreciate are begin Real multifamily, growth with clients for within through and asset year, consistent the underwriting volume on projects into warehouse approach primarily cycles, newly-awarded of the balance to floor expected industrial construction footings Investment to Estate will XXXX.

the income point The at of Several within referenced. fee the Management portfolio. end driving June to that wanted client the new Treasury grew the the new of future emphasizes over potential growth Mark Both treasury and within the conversion year. fees. businesses platform the prior XX% of growth, the and March of Treasury pipelines XQ quarter income at more C&I than factors fee and rollout line, levels the our in than specifically are the just successful IRE during commercial that commercial higher XXXX. I further second quarter end ended the reference at and bullet

and mortgage, banking remains for balance high at The the of we've the platform enhanced at phased the enhanced private we'll product of installment consumer quarter. year comprised platform outlook and got third the products with rate income loan complete fee and HELOC, growing level. The set, moving the a single-digit a is fee the So structures through rollout the of in this relationships. periphery double-digit portfolio residential

the was of driver second a small more well. quarter, private the consumer the growth portfolio the increase, million grew joining In primary and $XX banking The dollars the business than increase. consumer that as mortgage XX%. During represented portfolio

As a into decline comments noted, the quarter second the largest that XXXX, loan continues through of level I remains liquidity that of than the in year-over-year organic the stated interest deposit expectations few during maturities, balances also lowest the month expense first remain quarter rate balances of With CDs. a to interest the mix deposit being our the half category. greater we also was on book had to the heading while reducing sync units third flat. driver. continue. growth deposit a I quarter. of Historically, we we quarter. A note year. have The CD X%. time balance a Total year July the to specials in strong have key grow are deposit we with through Bank's ample, tenor on consumer end to of the now the that rate and normal the began with strong deposit growth pipeline reduce margin management. -- balances build seasonality money back rate and on reprice decline is from build that sub-bullet as Fed within with seasonal the market the higher consumer shown continue as the of Valley on in prior point, will event the occurs separation deposit the that we've new last Fed Total Silicon of our focus can time was continue deposit balance want deposits and from shortened reduction. Noted basis, with Further, any and cut

So turn of sheet review income and the the the drivers in to our statement. call I'm of detail our composition to going over Michele Michele? now to and balance more

Michele Kawiecki

X on pretax $XX.X Pretax second pre-provision covers XX.XX%, quarter results. Slide return pre-provision Mike. metrics. strong was equity earnings and Pretax all profitability assets of Thanks, on reflect return was our pre-provision which million. totaled X.XX%

of grow share from by the We to investment bond year. maintain totaled $XXX income a is remainder those pretax variable June The pre-provision Expected shows portfolio a in loan next year-to-date X.XX% last increased top show total lower-yielding continue on prior page loans although X on months basis we the of loans the on off. yield X of increased bond that yield and and totaling loan last good to million Tangible some to $XXX same that we to interest portfolio. XX.XX% new year. The shows XX our loans renewed disclosed with at of shows yield maturities return have some our run securities the XX of X.XX%. Slide Slide continuing tangible since X/X are for X.X% sheet throughout as at compared per payments and increased return losses been yield $XXX X.XX%. able book $X.XX our of allowance loans That cash XX. up, to balance shown principal securities on to yield new X.XX%. loan yield portfolio to remix XX. Slide on lower-yielding X assets points our per increased reprice to loan June pretax at results The the continue million and roll-off X flows interest Lines priced to credit X.X% and high Slide points was near share, of details grow with the The We've by or the X currently, million, at XX creating XX. rate, continue is reducing portfolio value incremental or by quarter. the X.XX% through pre-provision on of are growing the million. Details bottom portfolio of assets, basis approximately still higher-yielding and earning scheduled year right $XX.XX $XXX.X year-to-date. value pretax pre-provision earnings period book equity which at

at loans charge-offs $XX.X by million. recorded of for resulting in quarter, losses quarter This million, was which million, credit provision net reserve on $XXX.X of a $XX.X a of we end offset

value acquired of In addition that, marks loans. to fair $XX.X have on million we remaining

from loan including marks. X.XX% this to in X.XX% quarter prior declined is ratio coverage and X.XX% Our when quarter, those

coverage ratio still allowance adequately Although portfolio. XX declined above levels. Slide of we our deposit our than peer are well more shows reserved the remains as some, details

X.XX%, and pricing franchise deposit Notably percentage. prior on quarter earlier. to points Mike this have We low the quarter, basis we total cost the X.XX% deposit to the diversified X X actions in Stewart uninsured deposits compared at a took flat this our quarter, only that core was interest-bearing of last deposits continue increased reflecting with months a yield to mentioned

Additionally, balances noninterest-bearing stable quarter-over-quarter. and mix deposit were deposit

prior an is wholesale of declined income reduce million Funding of X Slide XX, company. On interest earning the on of interest quarter, interest $XXX.X the was income equivalent and some margin X the of basis tax high-cost stated overall decline basis borrowing, increase leverage result a the assets the growth net sub-debt X costs we X on another of Line which cost paid on the points. X average in April, which at basis of interest Yield increased in points, end fully of did expansion points. net basis down resulting million we of in $XX Although $X.X helped expense. from million funding Line on

increased wealth on Next, income $X.X fees fees. sales $X.X loans noninterest mortgage XX reflecting details higher the basis. Slide increased and Customer-related linked-quarter on shows private gains million, million of a income. Overall, noninterest by of

valuation mortgage for The quarter quarter production first as and guidance the rebounded Included a last seasonally low quarter. CRA our will always is income. was were million throughout noninterest expected. continue year each we adjustment, production income Even second in business excluding the mortgage investments that income the were other the levels We quarter the increase core the results believe recorded in in valuation of coming that of provided slightly above quarters. second in noninterest $X.X when our

accrual and program the for XX Workforce XX. million, [ to savings was accruals. quarter leverage. costs which FDIC in million, the the early voluntary fourth inclusion quarter. Slide declined retirement ] Slide quarter assessments also (sic) quarter year special shows the expectations generated Moving to $XX.X $X.X incentive of that due in Slide assessment this the we as totaled to from prior Noninterest ratios. driven the operating by beating booked of as expense improving an well XX lower our FDIC capital lower increase were last announced

good The the which at slight prudent to over We year. actions and dividend of have ratio of redemption I reflects included for of with our capital common return turn discuss each strong XX%. Chief Tier asset position the payout equity management continue in demonstrate a provided quality. remarks, sub-debt beginning X declared Officer, a of and shareholders to will Credit XX.XX%, stock since to since a to ratios quarter dividend in increase capital and and have John it $XX year-end our second capital Martin, $XX now million buyback a decline the of my shareholders. That million the These concludes over

John Martin

Thanks, updated to insight remarks Slide on Michele, and My Mark. good begin slide, the asset touch morning. by XX. asset on call quality loan the turning nonperforming portfolio roll-forward, over start before highlighting and back I'll growth, the review

Turning Slide strong quarter in nonowner-occupied Real Estate had X of offset CRE in lines X, and to Investment X loans, the on more commercial XX. X. growth and X or that We owner-occupied a including CRE decline than on industrial Construction and lines and

by as was C&I Our new as requests aided loan growth utilization. well line higher

many stabilization as strategy, financing mentioned prior real where calls, on with investment through provide Our is options. one we finance construction firm estate

the new below levels regulatory concentration remain well active continue We originations. remain CRE in and to

saw insights into our nonowner-occupied in Bridge X is the into the or our agency on loan this XX. products, and on X. from categories movement the to underwriting. Then quarter, resulted portfolio into intended The slide XX% we Slide transparency the of for demand and favorably to Line speaks of moving This continued Line provide construction to out refinances portfolio portfolio. Roughly greater construction decline and I market think

As Finance with CRE the Owner-occupied Sponsor the prior as as mentioned classification calls, well associated business. includes on C&I

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

and of million opposed roughly XX% Our quarter shared the in line higher in national participate utilization XX.X% portfolio of assortment This private firms loans QX large, million for various $XXX of new current with roughly credits including greater ratio condition, We X.Xx million. $XXX $XXX roughly borrower money equity of across a line private or There platform XX% by for leverage commitments We increased by exposure. In companies industries. industries. bank generally syndicated balances in from leverage to based are metrics. cash the firms. sponsors generally access opportunities credit where XX widely trading and charge that portfolio, revenue are go desk. have an consists deals C&I for owned are borrower relationships as coverage single Finance with we or management on These in bank than I've highlighted individual quarterly the to relationships center Sponsor equity beyond credit fixed companies have information. These platform merely active the from review flow. to XX portfolio customers key changes

Turning to commercial break where real the we nonowner-occupied out estate Slide investment or portfolio. XX,

quarter total Our concentration is XX.X% geographic the office The office the office detailed the down of slide medical tenant slightly on year and maturing $XX.X space. exposure on general bottom X% outside well by half the and details represents loans the a highest chart or million. loans, diversified last office less The portfolio in bottom-right portfolio X.X% of from type office with in wheel represents of mix. maturities, than is portfolio of

million a tenant asset mix combination trends We quarter's other mitigated through in quality from review other primarily days for quarter all XX million. from from for in loans were represented million X $XX.X resulting due the past down to decreased significant a quarter, total the considerations. On continue Nonaccrual owned Slide the exposure estate the and position. real LTV, and relationships. borrowers of charge-offs. quarter, and larger reasonably to $XX.X as charge-offs decline are office Net resulting XX This periodically and view loans, the our guarantees, $XX.X

We over to event. with of was the The X-bank renegotiate a government. loan last The several freight of finance quarter's the deal, where was First management to first the contracts monitoring buyout as borrowers various club subsequently larger the quarters the renew bank and related lead part had last U.S. hauling Merchants been progress disclosed business. a

As cancellations, renewal and by event the to unexpectedly and of principal our contract borrower lower discontinue after and plan informed were they rates a of result quarter's we that interest. contract last the loss. disclosure triggered call This analysis of repayment

cash based loss -- underwriting on was historically flow the enterprise consistent collateral the While organization. value and of loan some had the the

resulting the in contracts, was sudden $XX.X resulting renegotiation change cancellation the revenue charge. the company's in impacted, the from value of million With the negatively

$X.X decor struggling took operations. manufacturing the plans a home pandemic We borrower, cease its for company potential the again had reserved to situation. Then loss second XX, I've the quarter borrower to the migration charge-off of notified and had ORE of moving nonperforming Slide loans, million XX this and of C&I and been rolled the notified where previously when forward charge-offs, due. The past the since days

and by X plus dropping NPAs in changes on Line at loans million, $XX.X million added I manufacturing a XX, XX-day by we $X.X from of nonaccrual $XX.X the decreased company. loans driven charge-offs Then delinquent of or payoffs X transportation of just in a from million. X resulted $XX.X to accrual For there quarter, Line mentioned, Line was -- delinquent status $XX.X ending the reduction down which reduction loans or gross million. XX-day million, on

permanent experienced appear call turn I'll quarter, C&I rates, summarize, quarter for the positively over trend. I interest in continues to market. portfolio that growth to effect and So cycle the we to although finally, good underwriting to loan the Commercial to don't idiosyncratic your construction was back part our Mark estate of appreciate some higher be is Hardwick. a the from attention, feeling charge-offs net real the And larger loans and

Mark Hardwick

Thanks, John.

Turning Slide to XX.

we as strategic asset highlights our are our CAGR our imperatives. and added years Slide edits acquisitions per the vision are other last share, bottom XX per comprehensive book represents both top fueled share that of On And totals XX can left, compound materially meaningful accumulated right, the now to footprint continue demographic total growth. There that $XX.XX. Slide to XX.X%. you loss, our our live rate XX other our value XX.X% tangible see during our totals annual and excluding earnings XX-year growth -- on to the no

your third First to in stronger led looking balance questions. happy and now, And expense. Thank by we're provision your quarter for net are a interest Merchants. levels income growth sheet and you and normalized forward We attention of take to investment

Operator

Our from [Operator first James. question Instructions] Tamayo Daniel from the Raymond comes of line

Daniel Tamayo

margin, I'm relatively of credit for But leave looking loan Maybe starting couple the actually, Michele, others. over quarters. the last we'll on being question the the stable just at commercial yields

the in then curious one, book loan increase may then, versus of cuts? And rate And where as whole, if new opportunity that are any you Just incremental increase time? curious potential loan yields, kind be yields like that see over a rate on absent going follow-on for forward yields, new the the a fixed what to book? just

Michele Kawiecki

you, good It's from to hear Yes. Danny.

So for renewed our yields was quarter X.XX%. loan yields, loan and new our this

between So we've We've have, rate nice do kind they're in bit. book X%. high-yielding to for $XXX stabilization about I million of would at and got really I opportunity of fixed yet that somewhere loans, We up in place, reached think, just some X% probably some think. a and a averaging the XXXX, reprice reprice

still bit. the that And so, opportunity think I and potentially yield a on interest there's some overall to income repricing gain some portfolio up push

Daniel Tamayo

then, other the Great. on of And balance I side the guess Okay. sheet.

guess, margin the be? kind and And money cuts of for going through I reductions where further? to guess, book, then would stabilized that basically in if of the can how but forward? your and had in funding from what market you're which you borrowings rate have about rate costs deposit And cuts reduce -- a overall, great. is the opportunity thoughts -- independent the then talked impact -- I curious then on So curious you if thinking the move, any just quarter, And costs you you the

Michele Kawiecki

the like customers. looking of has what of now year. on that deposit that just the the work competition costs seeing results been down, is that a the with it's said, kind been result you doing costs done. I pleased of interest until rate does deposit Yes. some we've We like the of really management of this here which our feel I like were even feel done matter we've go quarter, just at from end deposit with

be costs stable. And so, think I should our deposit

stable well. still the through of that expect some assuming rate margin margin just have rate slightly or the at see as expansion repricing, actually minimum, would bit even -- Looking flat a promos we perhaps expansion. at that at are We year, repricing the is either would It a CDs today. see but similar our end I will some be the environment, but which do higher than those they're

a a not we there, or but we have book. headwind have it's that really -- headwind certainly And but a there, so, tailwind on don't that

And so, news. that's good

environment margin to ought And so stable I up. to -- think, assuming flat rate be a

Daniel Tamayo

us, rate that just you if on impact think will, Great. forecast? And cuts remind you would how

Michele Kawiecki

Yes.

basis rate cut, tell our with each points have So margin. about a decline us we XX of that point X models basis would in

Operator

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

Damon Del Monte

hope all well. doing you're I

off start wanted Just to on expenses, Michele.

decline you this kind some is the item retirement and voluntary noted line million up low to in of of sustainable? you see creep items. other the of back and the expect that You $X Or think Do maybe benefits kind there salary range? reflected would range that the normalization $XX million impact some

Michele Kawiecki

where No, so we be year. somewhere somewhere we between to And expenses I discipline to quarter, and through to maybe quarter this up great that X%, think had would the the continue range. we'll expense do I of this remainder the landed in expect

Damon Del Monte

the and benefits total Okay. expenses, salary for not line? And that's just

Michele Kawiecki

Correct.

Damon Del Monte

regards range fee out realized that kind million CRA half you to in of with adjustments the gain back to -- And $XX you can think then of or kind year? million in there, income the low income, the fee back if you you Great. $XX Okay. in keep do the had of that the

Michele Kawiecki

run do good rate. Yes, I think that's a

Damon Del Monte

that some couple think Okay. the you pretty kind on in of the to go Great. X.XX% half provisioning credit. quarter? overall provision lastly, drift just this what ex last -- more you to year feel the reserve? see then just healthy. Do the is you're of the versus that over And Do comfortable of kind Obviously, quarters, with the back and seen we've on the back there of natural going would

Michele Kawiecki

growth any to what make coverage providing But we've model. see we just sure then, And have for good provision to loan that how normalize got our have. Yes, the obviously, I growth to this -- unique. definitely quarter, forecast with expecting we'll very the was forecast think we'll impact be that we're

Damon Del Monte

That's that had. I all Okay.

Operator

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

Terence McEvoy

know largest was word is your about the transportation talk and the third last John, used nonaccrual to the I behind credit though you charge-offs. idiosyncratic events quarter,

could you about forward review about a think going So And transportation of thoughts the in it's maybe or of what talk the of recent portfolio? terms underlying C&I risk? loans X% I your are warehouse.

John Martin

We've Yes. -- I pulled out the transportation concentration.

general say a with was borrower's idiosyncratic past. -- was, think, -- somewhat rates of was stress that had this of the contracts the recent the was hauler because buyout over as the definitely out, unique trucking from in As I contracts say particular, transportation specific X%. it's don't lending this related within most freight unexpected industry. of have classifieds you of But it's pointed to why secured book. The renewal The or or operations. The in more one large the government general, within portfolio PTOs in is the perspective. criticized nature is balances I general, well, it hauling are it this some the had that finance. this the leveraged with particular our would generally freight absent lower industry hauler general I space is it trailers that that remaining rather And has book experienced is nontransactional But I -- customer and what and credit, -- hauling in versus freight the that,

my this be the segment compared evaluation So portfolio. our within being general what of idiosyncratic transportation to would

Terence McEvoy

kind XX, versus a that's decline higher conditions of CRE, a development And land portfolios. decision those nonowner-occupied strategic to just some then, clear, did balances Mike, you'd Slide to so expect Line in And in move X construction -- I'm say back the X, more on XXXX? the half market growth of and reduce of reflection just you of to and

Michael Stewart

for and portfolio. was correct. way managing There in process the us -- with the real strategic It all normal no where how investment was inside the You're concentrations maturities that went estate or book. just we're the an change were were

the Our IRE very, saying. of just activity, first what that's footings for spaces. yet. I quite strong projects months seeing And sound year good been through not you're was with those very come frankly, has And that the in X

-- I And what probably think that at we're that's was I saying.

that I next in year not underwriting. -- sector. that that But in it's then at we're consistent in a footings putting probably will strategic think that growth into put change, IRE floor on

clients come continue and like well, with underwriting. the to and key us Our projects to their we them capitalize

Terence McEvoy

better service how of one I strategically, Maybe Mark. maybe for that the the was initiative major how real talk Could and organically overlook quarter. last question last last you customers? in and et through in marketplace completed employees, year technology want cetera? to I of was don't about estate does First much that position self-funded And Merchants reduction guess, the to grow

Mark Hardwick

been of has mobile was our commercial and item last -- conversion is conversion, online the the platform The or for customers. Yes.

core area decided to gave kind us excited a on and that vendor, FIS kind have really an it's to hire system so, We more And an were to of third-party we're waited and upgrade ultimately, space. up their had using that finally And help where in of continuously work. QX, technology. go state-of-the-art with of

had much as a so, product. of inferior are, commercial as bank And of a we we treasury bit an management

virtually increased Mike really well feel the funded our fees, an There just was have And as back And never difference we've out excited for But QX, conversion our elimination that using the and us. this with enhanced is which provider called online way on quarter. really really were was exciting and modest from experienced, we've we've end so, to it core of to moving like really that a the no the initiatives. have from and I thought win level was it a I really space enhanced in of had the product said where spending in remarks, his mindset. It opportunity some FIS. expense as we And one-time of which of platform, was the was at expense, quarter, then the fees, we think did core cost it We've around bank-in-the-box platform in put. was major mobile a and FIS. to we really worth which didn't old covering. with technology X amount is just our kind last in itself, be the

has more well. Mike little think I as to add a

Michael Stewart

I'm which you a side, we good Mark question. talked glad talked commercial asked. the about That's about.

these the we our our technology where has as enhancements side, needs, continue built platform to us consolidate utilizing monitor there to enabled bringing the that this do clients private centers, continue physical to place serve and the were that and in. On to some people And continue consumer and us and accounts wealth the into center infrastructures, the are locations. along new infrastructure. And new banking some way. -- And side, synergies a technology technology open eliminations investments allow on to platform banking new analyze our then we we their

to with of on point, had true were of of them, reductions back and some of backside them we're on expense So also or revenue turned and half they associated them the Mark's view, technology a some point the of self-funded that into generation, that.

Operator

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

Nathan Race

Yes.

Michele's comments on cut. to around following Fed each want clarify the Just margin

growth? of as curious portfolio X basis just contemplate if a said cash just improvement into in redeploy was loan I think, under I scenario? kind points, flow securities that static Or you does that's some mix, but you

Michele Kawiecki

a static Yes, assuming that's sheet. balance actually

Nathan Race

Great. Okay.

from points than the like? X should So what basis pressure it sounds less theoretically, that be

Michele Kawiecki

we that expect. be be Yes. what That would our would -- would

Mark Hardwick

that the couple competition remix do. like how industry, living rate reductions. a could talked we I'd to also inverted deposit curve if of just Yes. for been reduction have does we've in rate environment or We've an yield happen we're Internally, across making about think that a years. what

Nathan Race

$XX.X anything just Got can about. nonaccruals you of you. just the like that clarify worth we million the And the terms of new in that C&I Is quarter. It else loan the from John, that increase? there out drove in sounds calling came that [ transportation ] in talked bulk

John Martin

combination No, drivers the $XX.X of of that the mentioned. million, are the biggest X that yes, I it manufacturer and number. that a Those other was

Nathan Race

repurchases you and capital organic going in additional or half forward? growth nicely of guys the on the curious that in in thinking thinking Okay. the you, just quarter, with opportunity still year. but nice about here strong Got activity sitting how up front guys maybe stepped about it. are levels have then you just And second back for and the a appetite just runway lastly, really of appetite Obviously, are

John Martin

Yes, we this were active quarter. early in

be we'll of but quarter -- we think out, -- were don't quarter. the the to now, how just guess, best guess way we I we'll And probably won't maybe wait aren't first the intend active early active stabilizes. is plays second market quarter, see put kind late We I it. right to but we I how see to

Nathan Race

Okay. Got Michigan There on increased today. earlier in last some just M&A it. recently. announced And the chatter a front been one one. then there's Obviously, actually, was deal

of interest kind curious going just is appetite what so And and the forward? in acquisitions

Mark Hardwick

in. caused more and to if see leveraging clearly is company organic conversations now on the anything maybe be very a interested up. with seller -- a our of going are would Yes, near you a Otherwise, conversations. But X banks to this the X. I a we growth, or continue a those that be of that that in franchise We'll we're looked I X in just I say I handful, given at say they capital. the are meaningful rates and stock see in few may morning, handful There coming in term. little we're slightly, those appetite. more -- everything. has just down And And increases not to prices continuing the -- focused put a When view is up or has I that's when optimizing -- together have terms more happens banks think created interest efficient timing And Michigan. we're little running

Operator

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

Brian Martin

That was Mark. well said,

on Just one the M&A. last one

where if -- geographies about would front, out what opportunities Just anything of footprint, that of Merchants high understanding First imminent not are by to footprint, but today? important where kind just I'm consider you just you think in saying level, is

Mark Hardwick

institutions, have it, They're in incredibly always Yes. the Kentucky. potential And communicating kind market markets think is especially We've We're in -- of extent the actively number Indiana, are kind -- the on of had the where Ohio we're to limited. some with of honest. profile, very Those just be and focused that interest are partners. the that Michigan. I of Louisville

Ohio prioritization states of communication and in Indiana, Michigan. the are majority our So the and of

Brian Martin

I Got -- -- new entering a into or matter? more more new just mean, is it more scale you. Mark does And preference-wise market or either one it

Mark Hardwick

both takeout, that's a a future And interesting expense well. could mean where scale create have or us. depends. to could it really our growth meaningful cost as they if or we market cost expense accelerate If it's there rate, were help I important Well, we have and --

it's that real as guess just to at I the balance right market much X. we anything, that culture. the So And And the we day, make shareholder sure anything with believe of create as as end right the to trying the can value. much

Brian Martin

-- said. is you And guess, everything, Yes. it's timing like I

what's So it you be versus available. what could want

anything -- So anything But maybe like or any it didn't mention, just upward stable classified on downward special number, I quarter? John credit. pretty much. sound got then for there terms in in trends of one John, gave in you. And was or the you the terms know, but

John Martin

point, It It's from those standpoint. feels balance it a a us, actually was at down bit. Or stable pretty is stable, standpoint, little a obviously pretty X like I mean, commitment this absent been for names. it from

Brian Martin

Yes.

the for then last And X Michele. Okay. is, just X maybe or

that size? cash portfolio like far down as the Where you in where on bond where Michele, of do do to Just on book, lands using see in to growth, loan book bond sounds the moving as want flows kind you as far as it that to? that to expect trend that settle -- fund

Michele Kawiecki

somewhere between typically, been investments assets has Well, XX%. XX% historical to our to ratio

that an be so landing earning still And in I us, spot more mix. terms for having asset think a of a appropriate earning go-forward would -- asset

let well. And drift. looked to continue for bonds. that so, we We'll do Last opportunities continue year, it sell as we'll to to

Brian Martin

Got you.

that that points. it that basis ability on ask cuts, X And to as well I mean, of after like out you've cuts, the couple get potential first the more Okay. got was in that the little the lessen a terms to view. there X to have way are That's that to beta -- seems did basis going ones If I bit. you -- say I get up guess, deposit work points? you when later of on of successive maybe kind are impactful cuts, less the and

Michele Kawiecki

deposit do Yes. deposits that $X.X think are we Well, I our have base, billion of indexed. about in

And opportunity cuts. costs with so some couple first of certainly, those to there's reduce

Brian Martin

you. got I Yes.

already Okay. if can gave back maybe, I just have was And the and relisten but this, one Mike, I then joined go you I last see late.

listen go cover the coming quarter? So of they would pipelines covered great. didn't, that, out and you be it already, were where I'll loan the could you or of at kind if back If that if you

Michael Stewart

the high that ended our the I and maturity the momentum. that again, that on ended don't is consumer market And portfolio, build our just No, mortgage trends includes inside watermark is pipeline, commercial over at us. and consumer the the pipelines March C&I I good it's slide, both But than mortgage, levels mortgage. it particular. And for that seasonal most on so like higher emphasize then too at the our feel which side, IRE Michigan mind years, too. and of of that noted in I June prior the the good consumer on And quarter a

Brian Martin

Got you.

again, Thank perfect. it. for That's covering Okay. I appreciate you that

Operator

a Thank you. participation, today's conference. This your great day. concludes have and Thank you for

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First Merchants (FRME) 25 Jul 242024 Q2 Earnings call transcript