First Merchants Corporation

Thank you for standing by, and welcome to the First Merchants Corporation first quarter 2025 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 risk 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 gap measures. The press release available on the website contains financial and 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 will now turn the conference over to Mr. Mark Hardwick, CEO. Mr. Hardwick, you may begin.

Good morning and welcome to First Merchant's first quarter 2025 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, including President Mike Stewart, Chief Credit Officer John Martin, and Chief Financial Officer Michelle Kaviaski. Slide four has a map with all 111 banking centers, some Q1 financial highlights, and a number of the awards we've received recently. The first quarter was a strong start for the year as we delivered 4.8% annualized loan growth and a 23 basis point increase in our return on assets. First quarter total assets were $18.4 billion with $13 billion in total loans 14.5 billion in total deposits, and 5.8 billion of assets under advisement. First quarter net income, which you can see on slide five, was 54.9 million, an increase of 7.4 million, or 15.6% from one year ago. Gap earnings per share increased to 94 cents from 80 cents a year ago, or a 17.5% increase due to balance sheet growth, margin improvement, fee income growth, expense reductions, and share repurchase activity. Core earnings per share grew by 10.6% from one year ago after adjusting for last year's technology integration expenses, which temporarily elevated those levels. While we are very pleased with the progress we've made Increasing earnings and profitability over last year, the volatility in the market has clearly had an impact on our share price. While it's frustrating, it's not something that we can directly control. But we can take advantage of it by buying back our shares. Our board recently approved a new $100 million share repurchase program, and we've already repurchased $10 million in shares. We also redeemed through additional capital activities another $30 million of sub-debt. Our tangible common equity of 8.9% is above our target levels and provides optimal capital flexibility given the minimal reliance that we have on hybrid equities that are always available to us if we would happen to need them. Now, Mike Stewart will discuss our line of business momentum.

Thank you, Mark, and good morning to all. Our business strategy summarized on slide six remains unchanged. We are a commercially focused organization across all these business segments and our primary markets of Indiana, Michigan, and Ohio. So let's turn to slide seven. I like this slide. As Mark stated earlier, loans grew nearly $155 million or at a 4.8% annualized rate, which follows the strong 6% loan growth we saw last quarter. The $9.8 billion commercial segment was the primary driver of the growth increase in $169 million or a 7% annualized growth rate. Within the commercial segment, CNI grew by $248 million, which offset the $96 million decline in our investment real estate portfolio. We saw the CNI loan growth in all of our markets as the M&A and CapEx pipelines we discussed last quarter were funded and closed. Our commercial bankers continue to win new client relationships across our footprints, and revolver usage increased during the quarter due to reduction in client cash balances, which we'll talk about on the next page, and inflationary effects on inventory and receivables, which might be early impacts of tariffs. Another pleasing bullet point on this page is the quarter ending pipeline. which is consistent from prior quarter end and gives us optimism that we will be able to maintain our loan growth. A few comments on the consumer portfolio. We have a very strong team of mortgage bankers that are driving the growth of both non-interest income and the $24 million of balance sheet growth referenced on this slide. We utilize our balance sheet for variable rate, short-term, fixed rates, or construction loans. on a quarter over prior year quarter basis, our mortgage unit volume is up over 15% and our dollar volume is up over 30%. And as you can see on the bottom of the page, our mortgage pipeline remains strong. So let's turn to slide eight, talk about deposits. The story of this slide continues to be the mix of our product set and our goal of managing deposit costs. Michelle will be reviewing our net interest margin, but this slide represents the great work our teams have done in managing and building core deposit relationships while reducing deposit costs on the public funds and maturity deposit categories in particular. For the quarter, total deposits declined 1.6% on an annualized basis. The commercial deposit balance decline is almost solely the result of the activities within the public funds portfolio, or $208 million of the $228 million total decline. Public funds are an important segment, yet one of our highest cost depository categories. What I have labeled core relationship balances decline by $20 million, which is primarily attributed to companies managing their working capital levels. We also continued our pricing discipline within our consumer segment, specifically maturity deposits. Consumer deposit balance declined during the quarter by $9 million, but core consumer relationship balances grew by $188 million, but was offset by the decline of maturity deposits of $197 million. The mix of deposit core categories has been the focus of our teams for the past year, It has been a focus on primary focused accounts and deposit costs. And overall, I am pleased with the active management our teams are having with their clients to manage mix and deposit costs. So let me turn the call over to Michelle to review in more detail the composition of our balance sheet and the drivers of our income statement. Michelle.