First Merchants (US:FRME)2025-10-23 14:02Financial Data and Key Metrics Changes - Year-to-date net income totaled $167.5 million, an increase of $31.9 million or 23.5% from the nine months ended 2024, while earnings per share totaled $2.90, an increase of $0.59 or 25.5% during the same period [6] - Return on assets (ROA) was 1.22%, and the efficiency ratio was 55% [3] - Tangible book value increased 4% linked quarter and 9% compared to the same period in the prior year [13] Business Line Data and Key Metrics Changes - Commercial loan growth for the quarter was $268 million, over 10% annualized, with year-to-date growth of $699 million, over 9% annualized [8] - The consumer segment contributed $21 million of loan growth for the quarter, driven by residential mortgage, HELOC, and private banking relationships [9] - Non-interest income totaled $32.5 million, with customer-related fees of $29.3 million reflecting strong performance across all categories [16] Market Data and Key Metrics Changes - Total deposits declined by $23 million in aggregate, but core relationship or operating account balances grew by 4.9% or $56 million [10] - Non-maturity deposit balances increased by $178 million, while maturity deposit balances decreased by $198 million year to date [9] Company Strategy and Development Direction - The company announced the acquisition of First Savings Financial Group, adding approximately $2.4 billion in assets and expanding its presence into Southern Indiana [3] - The strategy remains commercially focused across all business segments and primary markets of Indiana, Michigan, and Ohio [7] - The company aims to enhance fee income through SBA lending and other loan growth initiatives [4] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining loan growth and increasing market share activities into the fourth quarter [8] - The company anticipates a mid-first quarter closing for the First Savings acquisition and a mid-second quarter integration [5] - Management expects to manage deposit costs effectively in response to potential rate cuts [28] Other Important Information - The allowance for credit losses at quarter end was $194.5 million, with a coverage ratio of 1.43% [15] - The total cost of deposits increased 14 basis points to 2.44% this quarter, reflecting competitive deposit dynamics [15] Q&A Session Summary Question: Expense outlook for Q4 and 2026 - Management expects Q4 core expenses to be relatively in line with Q3, with no meaningful increase anticipated [26] Question: Impact of potential rate cuts on margin - Management predicts a few basis points of margin compression in Q4 if rate cuts occur, with a historical model indicating a decline of about two basis points for each 25 basis point cut [28] Question: Deposit pricing and competition - Management noted that deposit costs increased due to competitive pressures, but they are hopeful for more rational pricing following recent rate cuts [36] Question: Future M&A ambitions - Management indicated that while they are busy with the current acquisition, they are not prioritizing additional M&A at this time [41] Question: Sustainability of loan growth - Management believes the current loan growth is sustainable, driven by normal business activity and a strong economic outlook in the Midwest [48]