First Merchants (US:FRME)2024-01-26 16:46Financial Data and Key Metrics Changes - Total assets reached $18.3 billion, total loans at $12.5 billion, and total deposits at $14.8 billion [4] - Q4 2023 EPS reported at $0.71 per share, adjusted EPS at $0.87 after accounting for one-time expenses [5][6] - Year-to-date net income totaled $221.9 million, with adjusted EPS of $3.89 [7] - Liquidity position improved by $585 million, with cash increasing by $300 million and borrowings decreasing by $285 million [7] Business Line Data and Key Metrics Changes - Loans grew by 6.6% annualized in Q4, with a new loan yield of 8.01% [5][10] - Total loan portfolio grew by 5.1% for the year, with expectations of mid to high-single digit growth in 2024 [11][13] - Total deposits increased by 4.8% annualized in Q4 and 3.1% for the full year [14][30] Market Data and Key Metrics Changes - Consumer deposit portfolio grew over 11% annualized, while commercial deposits saw growth only in Q4 [14][15] - The overall economic environment in the Midwest supports expectations of continued loan growth [13] Company Strategy and Development Direction - The company remains focused on organic growth in loans, deposits, and fee income, while investing in technology to enhance client experience [9][48] - The strategy includes maintaining a strong balance sheet and prioritizing cash, liquidity, and capital [7][8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to navigate the current economic environment and achieve growth targets [11][12] - The company anticipates continued strong loan growth and stable deposit growth in 2024 [92] Other Important Information - The company incurred $12.7 million in one-time charges related to various expenses [6][25] - Tangible book value per share increased by 11.7% from the previous quarter, totaling $25.06 at year-end [18][26] Q&A Session Summary Question: NII outlook and margin trends for 2024 - Management expects some compression in NII in Q1 2024, with stabilization and growth anticipated in subsequent quarters [54][58] Question: Fee income expectations - Fee income is expected to average around $30 million to $31 million per quarter in 2024 [65] Question: Core expense guidance for 2024 - Core expenses are expected to remain flat or increase by up to 2% in 2024 compared to Q4 2023 [68] Question: Capital management and buyback plans - The company is focused on managing capital levels and may consider buybacks if conditions stabilize [72][112] Question: C&I loan growth specifics - C&I loan growth was broad-based across various industries, with a strong pipeline expected to continue into 2024 [80][81] Question: Credit quality outlook - Management maintains a normalized charge-off range of 10 to 20 basis points, with no significant concerns on the horizon [94][97]