First Merchants Corporation

Thank you for standing by, and welcome to First Merchants Corporation's first 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 corporations 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 direct comparable gap measures. The press release available on the website contains financial or other quantitative information to be discussed today as well as a reconciliation of gap to non-gap measures. As a reminder, today's call is being recorded. I would now like to turn the conference over to Mr. Mark Hardwick, Chief Executive Officer. Mr. Hardwick, you may begin.

Good morning and welcome to the First Merchants First Quarter 2024 conference call. Thanks for the introduction and for covering the forward-looking statement on page two. We released our earnings today at approximately 8 a.m. Eastern time. You can access today's slides by following the link on the third page of our earnings release. On page three of our slides, you will see today's presenters and our bios to include President Mike Stewart, Chief Credit Officer John Martin and Chief Financial Officer Michelle Kaviesky. On page four, we have a few financial highlights for the quarter to include total assets of $18.3 billion, $12.5 billion of total loans, $14.9 billion of total deposits, and $8.3 billion of assets under advisement. On slide five, if you look at bullet point one under our first quarter results, you will note that margin is stabilizing and new and renewed loan yields for the quarter totaled 8.15%. You will also notice on bullet point five that we were active during the quarter repurchasing 30 million of shares in first merchants and redeeming $40 million of sub debt, which recently repriced to just over 9%. On bullet point six, we reported first quarter 2024 earnings per share of 80 cents or 85 cents when adjusted for $3.5 million of non-core items incurred during the quarter. On the last bullet point, I would also note that three of our four major technology initiatives were deployed during the first four months of the year to include the rollout of a new in-branch account opening platform called Terafina, our new online and mobile platform for more than 150,000 consumer customers that converted to Q2, and our new private wealth platform converted to SS&C's InnoTrust platform. As you can imagine, these projects require a significant amount of time and resources and require heightened customer focus during implementation. Now, Mike Stewart will discuss our line of business momentum.

Thank you, Mark, and good morning to all. I'm on page six and our business strategy remains unchanged. We are a commercially focused organization across all these business segments and across our primary markets of Indiana, Michigan, and Ohio. And as we entered 2024, we have remained focused on executing our strategic imperatives, organic loan growth, deposit growth, fee growth, attracting, retaining, and engaging our team, investing in the digitization of our delivery channels, and delivering top-tier financial and risk metrics. So if you go to slide seven, the first quarter continues a choppy trend of loan growth from quarter to quarter. I highlighted the 8% annualized loan growth during the fourth quarter of 2023, which followed a relatively flat third quarter of less than one-half of 1%. The first quarter balance decline in the commercial portfolio was attributed to the seasoning of numerous real estate projects that had stabilized and were refinanced into the secondary market. This is normal course for most construction projects, and with the current inverted yield curve, it is advantageous for the client to take advantage of lower long-term fixed interest rates. Commercial balances were also affected by the seasonal nature of our agribusiness clients. John Martin has more detailed information within his portfolio summary, which also highlights the growth within the commercial and industrial portfolio of over 5.5% on an annualized basis during the first quarter. So short-term interest rates have affected the velocity of new investment real estate projects, but we have remained active with well-capitalized projects. The commercial industrial growth is building as existing clients continue to finance normal course capital expenditures, complete strategic acquisition, or as we add market share. Our Michigan commercial banking team has built very good momentum. That's the former level one in Monroe Bank entities and was our strongest region of CNI growth. Our investment in people and our brand are building in Michigan. The third bullet point further emphasizes the future growth potential within our CNI portfolio. The pipeline into the quarter strong and the commercial segment will continue to be the primary driver of our asset growth. The consumer portfolio is comprised of residential mortgage, HELOC, installment, and private banking relationships. And during the first quarter, that portfolio declined 0.8%. And in dollars, that represented less than $6 million. Our private banking portfolio was the primary driver of that decline, as high net worth clients reduced higher cost borrowings with excess liquidity. The overall economic environment in the Midwest, inclusive of the competitive landscape, affirms my expectations of mid-to-single digit growth for the balance of the year with improving loan yields Mark highlighted that our new loan yields exceeded 8% during the quarter, and Michelle has more detail to share on those trends. On the bottom half of that page, the quarter saw total deposits growing by 1.7% on an annualized basis. The consumer portfolio grew over $155 million during the quarter and is inclusive of both the branch network and our private banking team's efforts. The branch network continues to deliver the consistent, granular, low-cost deposit space that we enjoy. The commercial deposit decline during the quarter was primarily from the public funds portfolio as the CNI relationship showed growth. Like we discussed during last earnings call, both our consumer and commercial teams have been actively managing our interest expense. As we now have separation from the Silicon Valley bank event last year, our bank's liquidity remains ample, So our 2024 efforts will be focused on our margin through interest expense management. As Mark stated in the press release, we are pleased to see our net interest margin stabilizing. And again, as we enter 2024, we're positioned for that continued organic growth. Our team is positioned for that growth, and our underwriter remains supportive, consistent, and disciplined. So I'm going to turn the call over to Michelle so she can review in more detail the composition of our balance sheet and the drivers on our income statement. Michelle?