First Merchants (NasdaqGS:FRME) Q4 2025 Earnings call January 27, 2026 09:00 AM ET Company ParticipantsBrendan Nosal - Director of the Research DepartmentDamon DelMonte - Managing DirectorJohn Martin - Chief Credit OfficerMark Hardwick - CEOMichael Stewart - PresidentMichele Kawiecki - CFOConference Call ParticipantsBrian Martin - AnalystDaniel Tamayo - AnalystNathan Race - Managing Director and Senior Research AnalystTerry McEvoy - Managing Director and Research AnalystOperatorThank you for standing by, an ...

Financial Data and Key Metrics Changes - The company reported record net income of $224.1 million for the full year, with diluted earnings per share of $3.88, reflecting a 13.8% increase from the previous year [3] - Fourth quarter net income was $56.6 million, or $0.99 per share, with an annual return on assets of 1.21% and a return on tangible common equity of 14.08% [3] - The efficiency ratio for the year was 54.5%, indicating significant operating leverage with revenues growing almost five times faster than expenses [3] Business Line Data and Key Metrics Changes - Commercial loan growth was robust, with $153 million in growth for the quarter (6% annualized) and $852 million year-to-date (nearly 7% growth for 2025) [7] - The consumer segment also contributed to growth, with $44 million in loan growth for the quarter and $87 million for the year [7] - Total revenues in Q4 showed strong growth, with net interest income increasing by $5.4 million and non-interest income by $0.6 million [11] Market Data and Key Metrics Changes - The company operates 111 banking centers across Indiana, Ohio, and Michigan, with a focus on growing within these markets [2] - The fourth quarter was the strongest for deposit growth, driven by the consumer segment, which saw a $155 million increase in total consumer deposits [8] - The company has seen a stable pipeline for loans, indicating optimism for maintaining loan growth into the first quarter of 2026 [7] Company Strategy and Development Direction - The company aims to build on its Midwestern strength and grow organically through deeper relationships and smarter use of technology [6] - The acquisition of First Savings Group, adding approximately $2.4 billion in assets, is expected to enhance the company's presence in Southern Indiana and the Louisville MSA [3][4] - The integration of First Savings Bank is on track, with a focus on community banking and specialty verticals as priorities [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strategic and financial benefits of the merger, expecting to close the acquisition on February 1, 2026 [4] - The Midwest economy continues to expand, with clients' businesses growing and bankers winning new relationships [7] - The company anticipates mid-single-digit loan growth for the first quarter of 2026, with expectations of 6% to 8% growth for the year [32][34] Other Important Information - The company plans to sell the entire First Savings bond portfolio, approximately $250 million, to optimize the balance sheet [28] - The tangible book value per share ended the year at $30.18, a 12.7% increase from the prior year [11] - The company repurchased 272,000 shares for $10.4 million in the fourth quarter, totaling over 1.2 million shares for $46.9 million in 2025 [16] Q&A Session Summary Question: Update on balance sheet optimization - Management is evaluating balance sheet repositioning but expects any actions to be modest, focusing on selling the First Savings bond portfolio [27][29] Question: Expectations for loan growth in 2026 - Management expects mid-single-digit loan growth for the first quarter, with potential for 6% to 8% growth for the year [32][34] Question: Guidance on core expenses - Non-interest expenses are expected to increase by 3%-5% due to talent additions and the integration of First Savings [44] Question: Impact of FSFG on margin - The acquisition is expected to provide a lift to the margin due to interest accretion [72] Question: Outlook on buybacks versus M&A - Management is focused on the current acquisition and believes buybacks are the best short-term strategy given current valuations [92]

Financial Data and Key Metrics Changes - The company reported record total assets of $19 billion, total loans of $13.8 billion, and total deposits of $15.3 billion [2] - Record net income of $224.1 million and diluted earnings per share of $3.88, an increase of 13.8% from the previous year [3] - Fourth quarter net income totaled $56.6 million or $0.99 per share, with an annual return on assets of 1.21% and return on tangible common equity of 14.08% [3] - Efficiency ratio for the year was 54.5%, with revenues growing almost five times faster than expenses [3] Business Line Data and Key Metrics Changes - Commercial loan growth for the quarter was $153 million or 6% annualized, with year-to-date growth of $852 million, nearly 7% for all of 2025 [6] - Consumer segment contributed $44 million in loan growth for the quarter and $87 million for the year, driven by residential mortgage, HELOC, and private banking relationships [7] - Total revenues in Q4 included a $5.4 million increase in net interest income and a $0.6 million increase in non-interest income [11] Market Data and Key Metrics Changes - The fourth quarter was the strongest for deposit growth, with consumer segment driving increases in new households and balances [8] - Deposits increased by $155 million in the fourth quarter, with over $250 million in non-maturity balance growth [8] - The primary driver of deposit growth was through public fund depository relationships, which are higher cost but involve local government and public relationships [9] Company Strategy and Development Direction - The company aims to build on its Midwestern strength and grow organically through deeper relationships and smarter use of technology [5] - The acquisition of First Savings Group, adding approximately $2.4 billion in assets, is expected to enhance the company's presence in Southern Indiana and the Louisville MSA [3][4] - Integration efforts for First Savings Bank are on track, with a focus on community bank model and specialty verticals [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strategic and financial benefits of the merger, expecting to close on February 1, 2026 [4] - The outlook for loan growth in 2026 is projected to be in the mid-single-digit range, with expectations of 6% to 8% growth [32] - Management noted that asset quality remains strong, with stable non-performing assets and a robust coverage ratio [19] Other Important Information - The company plans to sell the entire First Savings bond portfolio, approximately $250 million, to optimize the balance sheet [25] - Non-interest expense for the year increased only 3.2%, demonstrating significant operating leverage [15] - The tangible common equity ratio increased to 9.38%, with share repurchases totaling over 1.2 million shares for $46.9 million in 2025 [15] Q&A Session Summary Question: Update on balance sheet optimization - Management is evaluating modest balance sheet repositioning, including selling the First Savings bond portfolio [25][26] Question: Expectations for loan growth in 2026 - Loan growth is expected to be in the mid-single-digit range, with strong pipelines across various segments [30][32] Question: Guidance on deposit repricing schedule - Approximately $800 million of CDs maturing in the first two quarters of 2026, with weighted average rates higher than current specials [34] Question: Outlook on operating leverage - Core operating leverage is expected to be less impressive due to talent additions, but overall growth in net interest income and fee income is anticipated [39] Question: Guidance on core expense base - Non-interest expense is budgeted to increase by 3%-5% due to talent additions and First Savings operating expenses [43] Question: Charge-off expectations - Charge-offs are expected to be in the range of $6 million to $7 million over the near term [81] Question: Impact of M&A on loan pipeline - Management sees M&A-related disruptions as opportunities for new client conversations and potential talent acquisition [58][60] Question: Buyback strategy - The company intends to be aggressive with buybacks if the stock price remains low, viewing it as a better use of capital than pursuing new M&A [88]

Financial Data and Key Metrics Changes - The company generated net income of $3.3 million, or $0.34 per diluted share in the fourth quarter, which was higher than the prior quarter [6] - Gross revenue increased by 1.5% from the prior quarter and 12.2% from the fourth quarter of 2024 [10] - Net interest income increased by 5.6% from the prior quarter and 21.7% from the fourth quarter of 2024, with a net interest margin (NIM) of 2.71%, up 17 basis points from the prior quarter [10][11] Business Line Data and Key Metrics Changes - Loans held for investment increased by $59 million from the end of the prior quarter, with new loan production of $146 million in the fourth quarter [7] - Total deposits increased by $102 million from the end of the prior quarter, with average deposits up 10% compared to the fourth quarter of 2024 [8][9] - Assets under management decreased by $155 million, primarily due to net withdrawals in low-fee product categories [9] Market Data and Key Metrics Changes - The company experienced a solid level of loan production diversified across markets, industries, and loan types, with a focus on maintaining conservative underwriting standards [6][8] - The market remains competitive in terms of pricing on loans and deposits, but the company continues to generate new loans and deposits through superior service [4] Company Strategy and Development Direction - The company is focused on organic growth and leveraging market disruption to recruit talent and new clients, particularly in the Colorado banking market [14][33] - A new market presence in Arizona is expected to provide growth opportunities, with strong loan and deposit pipelines anticipated for 2026 [14][33] - The company aims to maintain a disciplined approach to expense management while investing in business growth [38][39] Management's Comments on Operating Environment and Future Outlook - Management noted generally healthy economic conditions in their markets and expressed optimism about continued growth in loans and deposits in 2026 [14][33] - The company expects positive trends in net interest margin and fee income, with a goal of achieving a 1% return on assets (ROA) [14][43][94] - Management highlighted the importance of maintaining a stable local team of experts to attract clients amid ongoing market disruptions [14][33] Other Important Information - The company reported a one-time $1.4 million write-down on an OREO property, which impacted non-interest expenses [12] - The allowance coverage remained unchanged at 81 basis points of total loans, with stable trends in loan portfolio quality [13] Q&A Session Summary Question: Margin outlook and loan repricing - Management expects further NIM expansion through 2026, with about $250 million in fixed-rate loans maturing over the next year, providing opportunities for repricing [22][23] Question: Asset management and fee income growth - Management noted a decline in AUM due to net withdrawals in lower-yielding categories but sees positive trends in higher-yielding categories [25][26] Question: Expense growth rate in 2026 - The company aims to keep expenses below $20 million per quarter while remaining open to strategic investments that could enhance revenue growth [38][39] Question: Profitability improvement potential in 2026 - Management indicated a target of achieving a 1% ROA, with expectations for continued improvement in NIM and operating growth [43][94] Question: Deposit competition and loan pipeline - Management reported strong feedback on both loan and deposit pipelines, indicating confidence in their ability to attract deposits as needed [47][49] Question: Mortgage market expectations - The company is building its mortgage production capability and expects pent-up demand to create opportunities in the future [81][82]

Financial Data and Key Metrics Changes - The company generated net income of $3.3 million, or $0.34 per diluted share in Q4 2025, which was higher than the prior quarter [5] - Tangible book value per share increased by 1.6% this quarter [5] - Gross revenue increased by 1.5% from the prior quarter and 12.2% from Q4 2024 [10] - Net interest income increased by 5.6% from the prior quarter and 21.7% from Q4 2024 [10] - Non-interest income decreased by approximately $800,000 from the prior quarter [11] Business Line Data and Key Metrics Changes - Loans held for investment increased by $59 million from the end of the prior quarter, with new loan production of $146 million in Q4 [6][7] - Total deposits increased by $102 million from the end of the prior quarter, with average deposits up 10% compared to Q4 2024 [8][9] - Assets under management decreased by $155 million in Q4, primarily due to net withdrawals in low-fee and fixed-fee product categories [9] Market Data and Key Metrics Changes - The market remains competitive in terms of pricing on loans and deposits, but the company continues to generate new loans and deposits through superior service [4] - The company has seen good opportunities to add new clients and talent due to ongoing disruption from M&A activity in the Colorado banking market [13] Company Strategy and Development Direction - The company maintains a conservative approach to new loan production with disciplined underwriting and pricing criteria [4] - The focus is on organic growth, leveraging market disruption to recruit talent and acquire new clients [82] - The company is investing in technology infrastructure, product teams, and internal processes for efficiency [86] Management's Comments on Operating Environment and Future Outlook - Management sees healthy economic conditions in their markets and expects loan and deposit growth in 2026 to be similar to 2025 [13] - Positive trends in net interest margin and fee income are anticipated, with a focus on disciplined expense control [14] - Management does not foresee any meaningful deterioration in asset quality [15] Other Important Information - The company had a one-time $1.4 million write-down on an OREO property, which impacted non-interest expenses [11] - The allowance coverage remained unchanged at 81 basis points of total loans [12] Q&A Session Summary Question: Margin outlook and loan repricing - Management expects further net interest margin expansion through 2026, with about $250 million in fixed-rate loans maturing over the next year [21][22] Question: Asset management and wealth management business trends - The decline in assets under management was due to net withdrawals in lower-yielding categories, but higher-yielding categories are showing improvements [24][25] Question: Expense outlook for 2026 - The company aims to keep expenses below $20 million per quarter while investing in growth opportunities [36] Question: Profitability improvement potential in 2026 - The near-term objective is to achieve a 1% return on assets, with a current operating run rate of about $2 per share [41] Question: Matching loan pipeline with core deposits - Both loan and deposit pipelines are reported as strong, with a focus on bringing in deposits as needed [42][45] Question: Tax rate outlook - The effective tax rate is expected to stabilize around 23%-24% going forward [72] Question: Mortgage market expectations for 2026 - The company is building production capability in the mortgage sector and expects pent-up demand to create opportunities [77][78]

Core Themes - Wintrust demonstrated disciplined growth above most peers, achieving third position in deposit market share in the Chicago area during 2025, with strong gains in Wisconsin and West Michigan [1] - The company reported record net income of $223 million for Q4 2025, a 3% increase sequentially, attributed to solid loan and deposit growth, improved margins, stable credit quality, and controlled non-interest expenses [2] - Full-year 2025 net income reached $824 million, up 19% from $695 million in 2024, with earnings per diluted share increasing to $11.40 from $10.31, and tangible book value rising to nearly $89 [3][4] Financial Performance - Wintrust's total assets ended 2025 at just over $71 billion, with Q4 net income being a record at $223 million [3][4] - The company achieved an 11.2% growth in net revenue, outpacing non-interest expense growth by 340 basis points, while investing in technology and personnel [7] - Non-interest income for Q4 totaled $130.4 million, remaining flat compared to the prior quarter, impacted by lower securities gains and softness in mortgage revenue [10][11] Loan and Deposit Growth - Loans and deposits increased by approximately 11% and 10% for the year, respectively, with both categories rising about $1.0 billion in Q4 [6][8] - The net interest margin remained stable around 3.5%, supporting record net interest income, with a fourth-quarter margin of 3.54% [9][6] Credit Quality - Credit performance remained solid, with non-performing loans slightly increasing to $185.8 million, but still manageable, and net charge-offs decreasing to 17 basis points [14] - The company closely monitors commercial real estate, which constitutes about one-quarter of its total loan portfolio, with signs of stabilization in non-performing loans [14] 2026 Outlook - Management targets mid- to high-single-digit loan and deposit growth for 2026, with a stable net interest margin around 3.5% [5][15] - The company expects positive operating leverage, with expenses growing more slowly than revenues, and anticipates improvements in wealth management and service-based fee income [16][15] - An existing share repurchase authorization of over $200 million is in place, with a focus on organic growth as the main priority [17]

Fifth Third Bancorp (NASDAQ:FITB) reported better-than-expected earnings for the fourth quarter on Tuesday.The company posted quarterly earnings of $1.08 per share which beat the analyst consensus estimate of 99 cents per share. The company reported quarterly sales of $2.344 billion which missed the analyst consensus estimate of $2.392 billion.Tim Spence, Fifth Third Chairman, CEO and President said, "Fifth Third delivered strong operating results in the fourth quarter and for the full year. In 2025, we pro ...

Financial Data and Key Metrics Changes - Earnings for the fourth quarter were $262 million, up 19% from the prior quarter and 31% year-over-year, driven by stronger revenues and lower provision for credit losses [5] - Net interest margin expanded for the eighth consecutive quarter to 3.31%, benefiting from an improved funding mix [5][9] - Annualized average loans were flat compared to the last quarter, but period-end balances increased by $615 million [5][16] - Tangible book value per share increased by 21% year-over-year, marking the third consecutive year of growth over 20% [7][22] Business Line Data and Key Metrics Changes - Adjusted PPNR for the quarter was $331 million, down 6% sequentially but up 6% year-over-year [7] - Customer-related noninterest income reached $177 million, a record for the company, up from $163 million in the prior period [12] - Capital markets fees, excluding net CVA, increased by 25% compared to the full year 2024, driven by higher customer swaps and investment banking revenues [13] Market Data and Key Metrics Changes - Average deposits increased by 2.3% compared to the prior quarter, with average non-interest-bearing deposits growing by $1.7 billion or 6% [16][17] - Period-end deposit balances grew by $766 million versus the prior quarter, allowing for a reduction in higher-cost short-term borrowings [18] Company Strategy and Development Direction - The company aims to increase capital distributions while continuing to strengthen capital [6][22] - Focus on small business lending is central to growth strategy, with a near doubling of SBA 7(a) loans and a 53% increase in dollars produced [44] - Increased marketing and business development expenses are part of a strategy to revamp products and drive growth [31][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of performance despite industry disruptions, particularly in credit quality [6][22] - The outlook for net interest income for 2026 is moderately increasing, supported by favorable earning asset and interest-bearing liability remix [10] - Management is cautious about potential rate cuts and their impact on asset sensitivity, indicating a balanced approach to growth and risk management [39][102] Other Important Information - The company made a $15 million donation to its charitable foundation, which will be spent over the next three years [6] - The allowance for credit losses as a percentage of loans declined to 1%, with net charge-offs at 5 basis points [20] Q&A Session Summary Question: Clarification on expense guidance - The base for the moderately increasing guide should exclude the charitable contribution for the quarter [25][26] Question: Increased competition in markets - Management acknowledged ongoing competition but emphasized that increased marketing spend is driven by internal product revamps rather than new entrants [29][31] Question: NII outlook for 2026 - Management indicated potential for remixing on both sides of the balance sheet contributing to NII outcomes, with a focus on granular deposit growth [34][36] Question: Loan growth dynamics - Management highlighted strong growth in small business lending and a focus on C&I and owner-occupied loans, with expectations for continued growth in these areas [43][46] Question: Capital return timing - Management indicated that they are nearing a position to consider capital returns, with expectations for acceleration in the second half of the year [51][52] Question: Non-interest-bearing deposits growth - Management reported growth in new customer acquisitions and emphasized the importance of building a solid base of granular accounts [61][63]

Financial Data and Key Metrics Changes - Earnings for Q4 2025 were $262 million, up 19% from the prior quarter and 31% year-over-year, driven by stronger revenues and lower provision for credit losses [4] - Net interest margin expanded for the eighth consecutive quarter to 3.31%, benefiting from an improved funding mix [4] - Tangible book value per share increased by 21% year-over-year, marking the third consecutive year of growth greater than 20% [6][22] - Diluted earnings per share rose to $1.76, up from $1.48 in the previous quarter and $1.34 a year ago [6] Business Line Data and Key Metrics Changes - Net interest income increased by $56 million or 9% compared to Q4 2024 and by $11 million from the prior quarter [10] - Customer-related noninterest income was $177 million for the quarter, up from $163 million in the prior period and $176 million year-over-year [12] - Adjusted noninterest expense was $548 million, up 5% from the prior quarter and 8% year-over-year, including a $15 million charitable donation [15] Market Data and Key Metrics Changes - Average loans were flat compared to the previous quarter but increased by 2.5% year-over-year, with period-end loans rising by $615 million sequentially [11][16] - Average non-interest-bearing deposits grew by $1.7 billion or 6% compared to the prior quarter [17] - The cost of total deposits declined by 11 basis points sequentially to 1.56% [18] Company Strategy and Development Direction - The company aims to increase capital distributions while continuing to strengthen capital [6][22] - Focus on small business lending is central to growth strategy, with a near doubling of SBA 7 loans and a 53% increase in dollars produced [54] - Increased marketing and business development expenses are part of a strategy to revamp products and drive growth [33][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of performance despite past industry disruptions, highlighting stability in credit outcomes [5] - The outlook for net interest income for 2026 is moderately increasing relative to 2025, supported by favorable asset and liability remix [10] - Management anticipates continued growth in commercial loans, particularly in C&I and owner-occupied subcategories [17] Other Important Information - The company reported a $6 million provision for credit losses, which, combined with net charge-offs, reduced the allowance for credit losses by $1 million [20] - The allowance for credit losses as a percentage of loans declined to 1% [21] - The Common Equity Tier 1 ratio for the quarter was 11.5%, indicating a strong capital position [22] Q&A Session Summary Question: Clarification on expense guidance - Management clarified that the base for expense guidance should exclude the charitable contribution for the quarter [25][26] Question: Increased competition in markets - Management acknowledged ongoing competition but emphasized that increased marketing spend is driven by internal product revamps rather than new entrants [29][33] Question: NII outlook for 2026 - Management indicated that funding for loan growth will come from deposit growth and potential remixing from securities [39][44] Question: Loan growth dynamics - Management highlighted a focus on small business lending and noted strong growth in SBA loans, with expectations for continued growth in this area [54][56] Question: Timing of share buybacks - Management suggested that they are nearing a position to consider capital returns, potentially in the second half of the year [65][66] Question: Non-interest-bearing deposits growth - Management reported growth in new customer acquisitions and emphasized the importance of building a solid base of granular accounts [84][89]

Core Viewpoint - U.S. Bancorp reported strong fourth-quarter earnings, surpassing expectations due to record net revenue and improved operational efficiency, resulting in a more than 1% increase in share price intra-day on Tuesday Financial Performance - Adjusted earnings per share were $1.26, exceeding analyst estimates of $1.19 [1] - Net revenue reached a record $7.37 billion, reflecting a 5.1% year-over-year increase, while fee revenue rose by 7.6% [1] - Net income increased by 23% year over year to $2.05 billion [1] Operational Efficiency - Net interest margin improved to 2.77%, up 6 basis points from the previous year and 2 basis points sequentially [2] - The bank achieved positive adjusted operating leverage of 440 basis points, with an efficiency ratio improving to 57.4% from 61.5% in the prior-year quarter [2] Loan Growth and Credit Quality - Total loans increased by 2.3% year over year to $384.3 billion, driven by a 10.1% rise in commercial lending and a 5.7% increase in credit card balances [3] - Credit quality improved, with the net charge-off ratio declining to 0.54% from 0.60% in the fourth quarter of 2024 [3]