First Merchants Corporation

Good day and welcome to the First Merchants Corporation Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. If anyone should require assistance during the conference, please press star then zero on your touchtone telephone. As a reminder, this conference call is being recorded. And 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 can be 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. I would now like to turn the conference over to Mark Hardwick, CEO. Sir, please go ahead.

Thank you, Chris, and thanks for the introduction and for covering the forward-looking statements. Hey, good morning, everyone, or good afternoon, everyone, to our fourth quarter 2021 conference call. We released our earnings earlier today at approximately 8 a.m. Eastern time. Hopefully you have all found your way to our slide presentation, but if you haven't, you can access the slides by following the link on the second page of our earnings release. On page three, you will see today's presenters and bios to include President Mike Stewart, Chief Credit Officer John Martin, and Chief Financial Officer Michelle Kaviesky. Page four is a one-page snapshot of the first merchant's geographic footprint and a few relevant financial highlights for your review. Year-to-date return on assets of 1.39%. return on tangible equity of 16.17%, and our Moody's investment grade A3 baseline credit rating are reflective of our high-performing and sustainable business model. Now if you turn to slide five, as my quote in the press release states, we delivered a record year on many fronts. We reached record levels for loans, deposits, total assets, and we produced record net income by earning more than $200 million for the first time in First Merchant's history. EPS totaled a record $3.81 per share while investing in the future of our business both culturally and digitally at record levels. Mike Stewart will now provide some color on our lines of business before Michelle and John review the financials and credit data. Thank you, Mark, and good afternoon to all.

As you look at the next two slides, I want to provide an update on our line of business results and their contributions within the quarter. Since nothing's changed within our strategy and key lines of business, which is page six, I'd ask us to turn to page seven, and we can focus on the region and line of business highlights. The top of the page offers a breakdown of the core loan growth by our business units. During the fourth quarter, we grew our total loan portfolio by an annualized rate in excess of 13% with each business group contributing to that growth. For the full year, we grew our loan balances at our expected mid-single-digit growth rate of nearly 7%. The private wealth, consumer, and mortgage groups all grew in the quarter at low single-digit annualized percentages And the first merchant's consumer portfolio growth has steadily increased throughout the year from both in-branch and online originations. Our HELOC product, along with the increased utilization rates on existing home equity loans, are the drivers of the fourth quarter increases. Our consumer clients have strong credit profiles, good liquidity, and have put strong home values to work by using their home equity. Ending the quarter, the consumer loan pipeline is up over 30% from the prior year end. For our mortgage portfolio, we continue to experience increases in construction and purchase volumes, which drove the fourth quarter balance sheet of more than 5%. For the second consecutive year, our mortgage team worked with over 3,000 clients and assisted with first-time home buyers, new home purchases, or refinancing that in total reached $750 million for the full year of 2021. The pipeline for mortgage originations ended the quarter strong, up over 20% from the end of 2020. Our total non-PPP commercial loan portfolio growth was the highlight within the quarter. growing more than 16% on an annualized rate. For the full year, the commercial growth approached 10%. Within the commercial line of business, we have several segments, one of which is commercial real estate. We spoke last quarter about the decline in the commercial real estate balances in Q3 and the strong new origination volumes. During the fourth quarter, the commercial real estate footings grew at an annualized rate of more than 2% with continued strong originations through the end of the year. The end of quarter pipeline for the investment real estate group continue to grow and is at a two-year high. The commercial and industrial segment remains the key leader in both the fourth quarter and four-year commercial growth. The primary drivers continue to be our team and our markets. Our team is active and engaged in winning new clients' market share, along with providing additional senior debt and treasury services to our existing clients. This team has been augmented with 11 new relationship managers that have joined the First Merchants commercial team. The new teammates have an expertise in middle market, asset base, investment real estate, or sponsor finance, and have contributed to the stated growth. Within the markets we serve, businesses are expanding plant and equipment to meet growing demand. We have continued to see financing plans for new equipment and expanded manufacturing sites to meet their growth or to onshore more of their production capabilities. Increases to the working capital cycle is driving larger lines of credit commitments and increases in utilization of these lines. Succession planning events within the ownership of middle market companies continue to be a driver for our sponsor finance team or through dividend recaps and ESOP transactions. We have expertise within any of these strategic capital events. The economic and business climate across all our markets is very good. We see the resiliency in the management teams of the companies. They have solid business plans and solid balance sheets. They are positioned for growth, and they continue to effectively navigate supply chain and labor issues. Our commercial team remains active and engaged with and prepared for their capital needs, and the commercial pipeline remains strong at the end of the year. The map you see on the top left portion of page seven represents the demographics of a growing economic environment, the heart of the Midwest, that drives our growth and a stable source of talent to lead our business efforts across all of our lines of business. I want to offer a few comments about Level 1. I've been able to spend much time in their market and with their teams. They have a strong culture and a demonstrated track record of delivering growth. The mortgage team is building early synergies with the FMV team that will drive or double the size of our mortgage originations. The consumer team is eager to gain access to the enhanced product sets First Merchants currently offers. And I have witnessed their commercial bankers in action. meeting with their clients and prospective clients. Their commercial team, like First Merchants, is active and engaged within their communities and ready to leverage the larger balance sheet offered post-close. We have much work to do between now and the integration, but we are poised for continued winning in the Southeast Michigan marketplace. I will now turn the call over to Michelle. who will provide more complete review of the quarter results and operating metrics before John shares the soundness of our portfolio.