Q1 2026 First Merchants Corp Earnings Call

Speaker #2: Thank you for standing by. And welcome to the first Merchants Corporation first quarter 2026 earnings conference call. Before we begin, management would like to remind you that today's call contains forward-looking statements.

Speaker #2: We respect the future performance and financial condition of First Merchants Corporation that involves risk and uncertainties. For the information, it's contained within the press release, which we encourage you to review.

Speaker #2: Additionally, management may refer to non-GAAP measures, which are intended to supplement but not substitute for the most directly comparable GAAP measures. The press release is available on the website, contains financial and other quantitative information to be discussed today as well as a reconciliation of GAAP to non-GAAP measures.

Speaker #2: As a reminder, today's call is being recorded. I'll now turn the conference over to Mr. Mark Hardwick, CEO. Mr. Hardwick, you may begin.

Mark Hardwick: Good morning, and welcome to First Merchants' Q1 2026 Conference Call. Thanks for the introduction and for covering the forward-looking statement on page 2. We released our earnings yesterday after markets closed, and today's presentation materials are available via the link on page 3 of the earnings release. Turning to slide three, you'll see today's presenters and members of our executive management team. Joining me on the call are Mike Stewart, our President, John Martin, our Chief Credit Officer, and Michele Kawiecki, our Chief Financial Officer. Slide four highlights our footprint and financial scale. We now operate 127 banking centers, reflecting the addition of Southern Indiana following the First Savings acquisition. Total assets stand at $21.1 billion, with $15.3 billion in loans and $16.5 billion in deposits.

Speaker #3: Good Merchants first quarter 2026 conference call. Thanks for the introduction and for covering the forward-looking statement on page two. We released our earnings yesterday after markets closed and today's presentation materials are available via the link on page three of the earnings release.

Speaker #3: Turning to slide three, you'll see today's presenters and members of our executive management team. Joining me on the call are Mike Stewart, our president; John Martin, our chief credit officer; and Michele Kawiecki, our chief financial officer.

Speaker #3: Slide four highlights our footprint and financial scale. We now operate 127 banking centers, reflecting the addition of Southern Indiana following the First Savings acquisition.

Speaker #3: Total assets stand at $21.1 billion. With $15.3 billion in loans and $16.5 billion in deposits. Adjusted performance metrics remain strong, including an adjusted ROA of 1.25% and an adjusted return on tangible common equity exceeding 14%, reflecting the underlying strength of our earnings engine.

Mark Hardwick: Adjusted performance metrics remain strong, including an adjusted ROA of 1.25% and an adjusted return on tangible common equity exceeding 14%, reflecting the underlying strength of our earnings engine. Turning to slide 5, Q1 reported net income was $27.7 million, or $0.45 per diluted share. Reported results included two notable non-core items. First, the legal close of First Savings acquisition on 1 February resulted in $17 million of one-time acquisition-related expenses. Second, during the quarter, we strategically repositioned $357 million of mortgage loans from held for investment to held for sale, and we expect to complete the sale of these loans by the end of Q2.

Speaker #3: Turning to slide five, first quarter reported net income was $27.7 million, or $0.45 per diluted share. Reported results included two notable non-core items.

Speaker #3: First, the legal close of first savings acquisition on February 1st resulted in $17 million of one-time acquisition-related expenses. Second, during the quarter, we strategically repositioned $357 million of mortgage loans from held for investment to held for sale and we expect to complete the sale of these loans by the end of the second quarter.

Speaker #3: These loans carried a weighted average coupon of 3.46%, and the liquidity provided by their sale will be used to immediately pay down higher-cost deposits and, over time, will be deployed into commercial loans at a 6% plus yield.

Mark Hardwick: These loans carry a weighted average coupon of 3.46%, and the liquidity provided by their sale will be used to immediately pay down higher cost deposits and over time will be deployed into commercial loans at a 6%+ yield. This repositioning resulted in a $29.8 million mark-to-market charge in the quarter, with a tangible book value earned back of approximately four years. Excluding these items, adjusted earnings per share totaled $1.03, up from $0.94 a year ago, representing 9.6% growth, driven primarily by net interest margin expansion and solid fee income growth. Our tangible common equity ratio remains strong at 9%, even after completing the acquisition and continuing disciplined share repurchases, including $24.9 million in Q1. Now Mike Stewart will discuss our line of business momentum.

Speaker #3: This repositioning resulted in a $29.8 million mark-to-market charge in the quarter with a tangible book value earned back of approximately four years. Excluding these items, adjusted earnings per share totaled $1.03 up from 94 cents a year ago, representing 9.6% growth.

Speaker #3: Driven primarily by net interest margin expansion and solid fee income growth. Our tangible common equity ratio remains strong at 9%, even after completing the acquisition and continuing disciplined share repurchases including 24.9 million in the first quarter.

Speaker #3: Now, Mike Stewart will discuss our line of business momentum.

Speaker #4: Thank you, Mark, and good morning to all. Our business strategy is summarized on slide six. Building our Midwestern strength by growing organically remains our primary objective as a company.

Michael Stewart: Thank you, Mark, and good morning to all. Our business strategy is summarized on slide 6. Building our Midwestern strength by growing organically remains our primary objective as a company. Our four primary business units work together in delivering financial solutions for businesses and consumers focused primarily on the maps you see on slide 7. As Mark stated earlier, the Q1 was busy with the closing of First Savings Bank and the preparation for the May integration date. The legal close increased our overall loan portfolio size with organic growth relatively flat during the Q1. After the strong Q4 loan growth, declines in our sponsor and investment real estate portfolio outpaced our C&I growth within our region banking markets.

Speaker #4: Our four primary business units work together in delivering financial solutions for businesses and consumers focused primarily on the maps you see on slide seven.

Speaker #4: As Mark stated earlier, the first quarter was busy with the closing of first savings bank and the preparation for the May integration date. The legal close increased our overall loan portfolio size with organic growth relatively flat during the first quarter.

Speaker #4: After the strong fourth quarter loan growth, declines in our sponsor and investment real estate portfolio outpaced our CNI growth within our region banking markets.

Speaker #4: The portfolio declines were normal course payoffs that simply stacked in the quarter. Sponsors selling their portfolio companies that we had financed or real estate projects that achieved secondary market takeouts.

Michael Stewart: The portfolio declines were normal course payoffs that simply stacked in the quarter, sponsors selling their portfolio companies that we had financed or real estate projects that achieved secondary market takeouts. I expect growth in both these portfolios to resume in Q2. Our regional banking teams, inclusive of the new team in Southern Indiana, continue to deliver solid loan growth. It's very pleasing to see our Midwest economy continuing to expand, our clients' businesses continuing to grow, and see our bankers continuing to win new relationships. New loan production during Q1 for our real estate and our asset base teams was at record level and demonstrates the value of our diversified loan origination teams. While this quarter's organic growth was flat, I remain confident in our expected mid-single-digit loan growth through the course of 2026. Let's turn to slide eight, deposits.

Speaker #4: I expect growth in both these portfolios to resume in the second quarter. Our regional banking teams inclusive of the new team in Southern Indiana continue to deliver solid loan growth.

Speaker #4: It is very pleasing to see our Midwest economies continuing to expand our clients' businesses continuing to grow and see our bankers continuing to win new relationships.

Speaker #4: New loan production during the first quarter for our real estate and our asset-based teams was at record level and demonstrates the value of our diversified loan origination teams.

Speaker #4: While this quarter's organic growth was flat, I remain confident in our expected mid-single-digit loan growth through the course of 2026. Let's turn to slide eight, deposits.

Speaker #4: During the first quarter, our core relationship focused deposit franchise continued to show growth through the commercial, consumer, and our Southern Indiana market. The bullet points below the table detail that that total deposit decline came from public funds consumer CDs and repayment of first savings broker deposits.

Michael Stewart: During Q1, our core relationship-focused deposit franchise continued to show growth through the commercial, consumer, and our Southern Indiana market. The bullet points below the table detail that total deposit decline came from public funds, consumer CDs, and repayment of First Savings broker deposits. Each of these deposit categories is a higher cost source of funds as compared to the primary and operating accounts, which generated increases during Q1. Michele will be reviewing net interest margin improvement during the quarter, which was a direct result of the disciplined deposit and loan pricing. Our continued deployment of new and enhanced products during the quarter, our digital platforms wrapped with smart and effective marketing, continue to deliver quality growth within our markets. Our people are a strength in meeting the financial needs within our communities.

Speaker #4: Each of these deposit categories is a higher cost source of funds as compared to the primary and operating accounts which generated increases during the first quarter.

Speaker #4: Michele will be reviewing net interest margin improvement during the quarter which was a direct result of the disciplined deposit and loan pricing. Our continued deployment of new and enhanced products during the quarter our digital platforms wrapped with smart and effective marketing continued to deliver quality growth within our markets.

Speaker #4: Our people are a strength in meeting the financial needs within our communities. During the quarter, we added new teammates within our sponsor investment real estate community banking and private wealth teams to build on our brand and momentum.

Michael Stewart: During the quarter, we added new teammates within our sponsor, investment real estate, community banking, and private wealth teams to build on our brand and momentum. Before turning the call over to Michele, one last comment regarding First Savings Bank. Our integration efforts are on track. The engagement of their team continues to be strong. On-site training and preparation for the main integration are advancing as scheduled. Our model of community banking in Southern Indiana has demonstrated its strength. Turnover of frontline personnel has been minimal, and as the prior pages demonstrated via the growth in loans and core deposits, their clients continued to be patient during the transition. The specialty verticals have continued to show consistent production in new business during the quarter. This production will continue to contribute to the fee income of First Merchants as the bulk of the originations are sold.

Speaker #4: Before turning the call over to Michele, one last comment regarding first savings bank. Our integration efforts are on track. The engagement of their team continues to be strong.

Speaker #4: On-site training and preparation for the May integration are advancing as scheduled. Our model of community banking in Southern Indiana has demonstrated its strength. Turnover of frontline personnel has been minimal and as the prior pages demonstrated via the growth in loans and core deposits, their clients continue to be patient during the transition.

Speaker #4: The specialty verticals have continued to show consistent production in new business during the quarter. This production will continue to contribute to the fee income of first merchants as a bulk of the originations are sold.

Speaker #4: I do want to highlight their SBA business model as a direct enhancement to the rest of first merchants franchise. Having the ability to offer SBA product solutions to our clients is a natural extension of being a community and commercially focused organization.

Michael Stewart: I do want to highlight their SBA business model as a direct enhancement to the rest of First Merchants' franchise. Having the ability to offer SBA product solutions to our clients is a natural extension of being a community and commercially focused organization. The new SBA team will be the fulfillment team for all of our existing consumer, small business, and community bank teams. There are early successes that I expect to build post-integration. I'm going to turn the call over now to Michelle to review in more detail the composition of our balance sheet and the drivers on the income statement. Michelle?

Speaker #4: The new SBA team will be the fulfillment team for all of our existing consumer small business and community bank teams. There are early successes that I expect to build post-integration.

Speaker #4: I'm going to turn the call over now to Michele. To review in more detail the composition of our balance sheet and the drivers on the income statement.

Speaker #4: Michele?

Speaker #5: Thanks, Mike, and good morning, everyone. Slide nine covers our first quarter performance including two months of operating results from first savings following February 1st closing of the acquisition.

Michele Kawiecki: Thanks, Mike, and good morning, everyone. Slide 9 covers our Q1 performance, including 2 months of operating results from First Savings following the 1 February closing of the acquisition. There was meaningful growth in total revenues in Q1. Net interest income grew $12.2 million and non-interest income grew $2.5 million linked quarter. This resulted in a $6.3 million increase in overall pre-tax, pre-provision earnings of $78.7 million. Tangible book value per share declined 2.8% linked quarter, but increased 7.3% over the same period in prior year. The linked quarter decrease was due to the impact of the acquisition and share buybacks. However, dilution from the First Savings acquisition at close was less than what we had estimated at announcement. Actual tangible book value dilution was only 2.4% versus 4.8% that we shared at announcement. The tangible book value earn back is now estimated to be 2.4 years.

Speaker #5: There was meaningful growth in total revenues in Q1. Net interest income grew $12.2 million, and non-interest income grew $2.5 million linked quarter. This resulted in a $6.3 million increase in overall pre-tax, pre-provision earnings of $78.7 million.

Speaker #5: Tangible book value per share declined 2.8% linked quarter but increased 7.3% over the same period in prior year. The linked quarter decrease was due to the impact of the acquisition and share buybacks.

Speaker #5: However, dilution from the first savings acquisition at close was less than what we had estimated at announcement. Actual tangible book value dilution was only 2.4% versus 4.8% that we shared at announcement.

Speaker #5: And the tangible book value earned back is now estimated to be 2.4 years. The difference was primarily driven by a lower interest rate mark which totaled 53.1 million at closing.

Michele Kawiecki: The difference was primarily driven by a lower interest rate mark, which totaled $53.1 million at closing. Slide 10 shows details of our investment portfolio. The bond portfolio declined from $3.4 billion to $3.3 billion due to changes in valuation and principal payments. First Savings had a $252 million bond portfolio that we sold at closing, creating liquidity for future loan growth. Expected cash flows from scheduled principal and interest payments and bond maturities through the remainder of 2026 totals $276.7 million, with a roll-off yield of approximately 3.24%. We plan to continue to use future cash flows generated from the bond portfolio to fund higher-yielding loan growth. Slide 11 covers our loan portfolio.

Speaker #5: Slide 10 shows details of our investment portfolio. The bond portfolio declined from 3.4 billion to 3.3 billion due to changes in valuations and principal payments.

Speaker #5: First Savings had a $252 million bond portfolio that we sold at closing, creating liquidity for future loan growth. Expected cash flows from scheduled principal and interest payments and bond maturities through the remainder of 2026 total $276.7 million, with a roll-off yield of approximately 3.24%.

Speaker #5: We plan to continue to use future cash flows generated from the bond portfolio to fund higher yielding loan growth. Slide 11 covers our loan portfolio.

Speaker #5: The loan portfolio yield declined by 23 basis points from the prior quarter to 6.09% which was impacted by the lower day count in the first quarter and repricing of assets due to the Fed rate cuts in late 2025.

Michele Kawiecki: The loan portfolio yield declined by 23 basis points from the prior quarter to 6.09%, which was impacted by the lower day count in Q1 and repricing of assets due to the Fed rate cuts in late 2025. During the quarter, new and renewed loans were originated at an average yield of 6.18%. The allowance for credit losses is shown on slide 12. This quarter, we had net charge-offs of $10.3 million and recorded a $4.9 million provision. The transfer of $357 million of loans to held for sale reduced the loan balances requiring reserve coverage and contributed to a lower provision than the prior quarter. At closing, we also recorded a $22.3 million increase to the allowance related to the credit discount on the First Savings loan portfolio.

Speaker #5: During the quarter, new and renewed loans were originated at an average yield of 6.18%. The allowance for credit losses is shown on slide 12.

Speaker #5: This quarter, we had net charge-offs of $10.3 million and recorded a $4.9 million provision. The transfer of $357 million of loans to held for sale reduced the loan balances requiring reserve coverage and contributed to a lower provision than the prior quarter.

Speaker #5: At closing, we also recorded a 22.3 million increase to the allowance related to the credit discount on the first savings loan portfolio. As a result, the allowance for credit losses totaled 212.5 million at the end of the quarter representing a coverage ratio of 1.39%.

Michele Kawiecki: As a result, the allowance for credit losses totaled $212.5 million at the end of the quarter, representing a coverage ratio of 1.39%. Slide 13 shows details of our deposit portfolio. The rate paid on deposits declined meaningfully by 23 basis points to 2.09% this quarter. Our team strategically reduced deposit rates following the Fed's rate cuts late last year, resulting in a $4.6 million reduction in deposit interest expense in Q1, even as deposits grew by $1.2 billion with the addition of First Savings. As noted on our slide, our non-interest-bearing deposits increased to 23% this quarter, up from 16% last quarter. This was driven by the redesign of our consumer checking account products. This change more accurately reflects the strength and quality of our deposit franchise.

Speaker #5: Slide 13 shows details of our deposit portfolio. The rate paid on deposits declined meaningfully by 23 basis points to 2.09% this quarter. Our team strategically reduced deposit rates following the Fed's rate cuts late last year, resulting in a $4.6 million reduction in deposit interest expense in the first quarter, even as deposits grew by $1.2 billion with the addition of First Savings.

Speaker #5: As noted on our slide, our non-interest-bearing deposits increased to 23% this quarter, up from 16% last quarter. This was driven by the redesign of our consumer checking account products.

Speaker #5: This change more accurately reflects the strength and quality of our deposit franchise. On slide 14, net interest income on a fully tax equivalent basis of 157.7 million increased 12.4 million linked quarter and was up 21.3 million from the same period in prior year.

Michele Kawiecki: On slide 14, net interest income on a fully taxable equivalent basis of $157.7 million increased $12.4 million linked quarter and was up $21.3 million from the same period in prior year. Net interest income was positively impacted by a $1.2 million recovery from the successful resolution of a non-accrual loan. As a reminder, we had a $3.3 million recovery last quarter. Our quarterly net interest margin of 3.35% increased six basis points from prior quarter, despite the lower day count in the quarter, which reduced margin by five basis points. Our strong core margin reflected our continued pricing discipline. Next, on slide 15, shows the details of non-interest income, which totaled $5.8 million on a reported basis and $35.6 million on a normalized basis. Customer-related fees were strong, with quarter-over-quarter growth in wealth management fees and gains on sales of loans.

Speaker #5: Net interest income was positively impacted by a $1.2 million recovery from the successful resolution of a non-accrual loan. As a reminder, we had a $3.3 million recovery last quarter.

Speaker #5: Our quarterly net interest margin of 3.35% increased 6 basis points from the prior quarter, despite the lower day count in the quarter, which reduced margin by 5 basis points.

Speaker #5: Our strong core margin reflected our continued pricing discipline. Next, on slide 15, shows the details of non-interest income which totaled 5.8 million on a reported basis and 35.6 million on a normalized basis.

Speaker #5: Customer-related fees were strong, with quarter-over-quarter growth in wealth management fees and gains on sales of loans. Moving to slide 16, non-interest expense for the quarter totaled $125.1 million and included $17 million in acquisition-related costs.

Michele Kawiecki: Moving to slide 16, non-interest expense for the quarter totaled $125.1 million and included $17 million in acquisition-related costs. The acquisition costs were primarily incurred in the salaries and benefits, and the professional and other outside services categories. Q1 expenses also included $1.1 million of annual benefit plan expense, as well as a one-time charge of $900,000 for the write-down of the building. The cost synergies we expect to gain from the First Savings acquisition are on track, and Legacy First Merchants expenses are in line with the guidance I provided last quarter. Slide 17 shows our capital ratios. The tangible common equity ratio declined to 9% due to the acquisition and share repurchases. Since the beginning of the year, we have repurchased more than 700,000 shares for $27.6 million year-to-date.

Speaker #5: The acquisition costs were primarily incurred in the salaries and benefits and the professional and other outside services categories. First quarter expenses also included 1.1 million of annual benefit plan expense as well as a one-time charge of $900,000 for the write-down of a building.

Speaker #5: The cost synergies we expect to gain from the First Savings acquisition are on track, and legacy First Merchants expenses are in line with the guidance I provided last quarter.

Speaker #5: Slide 17 shows our capital ratios. The tangible common equity ratio declined to 9% due to the acquisition and share repurchases. Since the beginning of the year, we have repurchased more than 700,000 shares for $27.6 million year-to-date.

Michele Kawiecki: We remain well-capitalized with the common equity Tier One ratio at 11.22% and are well positioned to support continued balance sheet growth. That concludes my remarks, and I will now turn it over to our Chief Credit Officer, John Martin, to discuss asset quality.

Speaker #5: We remain well capitalized with the common equity tier one ratio at 11.22% and are well positioned to support continued balance sheet growth. That concludes my remarks and I will now turn it over to our chief credit officer, John Martin, to discuss asset quality.

John Martin: Thanks, Michele, and good morning. My remarks begin on slide 18. This quarter, we streamlined the credit slides and moved the detailed loan portfolio trend page to the appendix for reference. In today's remarks, I'll focus on portfolio insights, asset quality, and the asset quality roll forward, highlighting both the diversity and overall credit quality of the portfolio. On slide 18, total loans ended the quarter at approximately $15.3 billion with overall credit performance remaining solid. C&I line utilization increased modestly to 51%, which we view as healthy borrower activity rather than stress. Our shared national credit portfolio totals about $1 billion across 90 well-diversified borrowers with no outsized single name exposure. In sponsor finance, outstandings are approximately $832 million, supported by strong credit metrics, conservative leverage, and healthy coverage ratios. We remain disciplined on structure and intentionally underwrite with room for downside.

Speaker #1: Thanks, Michelle. And good morning. My remarks begin on slide 18. This quarter, we streamlined the credit slides and moved the detailed loan portfolio trend page to the appendix for reference.

Speaker #1: In today's remarks, I'll focus on portfolio insights, asset quality, and the asset quality role forward, highlighting both the diversity and overall credit quality of the portfolio.

Speaker #1: On slide 18, total loans ended the quarter at approximately 15.3 billion with overall credit performance remaining solid. CNI line utilization increased modestly to 51%, which we view as healthy borrower activity rather than stress.

Speaker #1: Our shared national credit portfolio totals about a billion dollars across 90 well-diversified borrowers with no outside single name exposure. In sponsor finance, outstandings are approximately $832 million supported by strong credit metrics, conservative leverage, and healthy coverage ratios.

Speaker #1: We remain disciplined on structure and intentionally underwrite with room for downside. Within CRE, retail is our largest exposure at $859 million and is largely credit tenant and triple net leased performing as expected.

John Martin: Within CRE, retail is our largest exposure at $859 million and is largely credit tenant and triple net leased, performing as expected. Construction lending totals about $900 million across commercial and residential projects, with continued emphasis on borrower equity and prudent underwriting. From a concentration standpoint, we remain well within regulatory levels with CRE construction at 40% of capital and total CRE around 181%, providing the flexibility to selectively grow while maintaining a strong risk profile. Overall, we are pleased with portfolio performance and remain focused on balance growth and disciplined credit risk management. On slide 19, let me briefly touch on asset quality. Our overall asset quality remains stable, and our metrics are performing within expectations. As at quarter end, nonaccruals remained manageable with the largest relationship tied to income producing real estate, including a $9.9 million multifamily construction credit and two office-related exposures totaling roughly $12 million.

Speaker #1: Construction lending totals about $900 million across commercial and residential projects, with continued deficits on borrower equity and prudent underwriting. From a concentration standpoint, we remain with well within regulatory levels with CRE construction at 40% of capital and total CRE around $181%, providing the flexibility to selectively grow while maintaining a strong risk profile.

Speaker #1: Overall, we are pleased with portfolio performance and remain focused on balanced growth and disciplined credit risk management. On slide 19, let me briefly touch on asset quality.

Speaker #1: Our overall asset quality remains stable and our metrics are performing within expectations. As at quarter end, non-accruals remain manageable with the largest relationship tied to income-producing real estate, including a 9.9 million multifamily construction credit and two office-related exposures totaling roughly $12 million.

John Martin: These credits are well-known, closely monitored, and reflect areas of CRE we've been proactively managing. Importantly, we are not seeing broad-based deterioration across the portfolio. Credit issues remain idiosyncratic rather than systemic, with no meaningful migration beyond a small number of relationships. Charge-off activity and criticized asset trends remain in line with expectations, and reserve coverage continues to appropriately reflect the portfolio's risk profile. Overall, we are comfortable with asset quality trends and remain focused on early identification, active management, and disciplined resolution where necessary. On slide 20, turning to non-performing asset migration. During the quarter, we added a $12 million non-accrual office relationship, which was largely offset by a payoff of a $12.9 million multifamily construction credit. Overall, NPA levels remain well controlled, with movement driven by a small number of individual credits rather than systemic deterioration.

Speaker #1: These credits are well known, clearly closely monitored, and reflect areas of CRE we've been proactively managing. Importantly, we are not seeing broad-based deterioration across a portfolio.

Speaker #1: Credit issues remain idiosyncratic rather than systemic, with no meaningful migration beyond a small number of relationships. Charge-off activity and criticized asset trends remain in line with expectations, and reserve coverage continues to appropriately reflect the portfolio's risk profile.

Speaker #1: Overall, we are comfortable with asset quality trends and remain focused on early identification, active management, and disciplined resolution where necessary. On slide 20, turning to non-performing asset migration, during the quarter, we added a $12 million non-accrual office relationship, which was largely offset by a payoff of a $12.9 million multifamily construction credit.

Speaker #1: So overall, NPA levels remain well controlled with movement driven by a small number of individual credits, rather than systemic deterioration. Resolution activity continues to progress as expected and we remain focused on early engagement and disciplined management where stress arises.

John Martin: Resolution activity continues to progress as expected, and we remain focused on early engagement and disciplined management where stress arises. Taken together, asset quality and NPA trends reinforce our view that credit risk is contained and easily manageable. I'll turn it back to Mark to discuss our capital position and outlook.

Speaker #1: Taken together, asset quality and NPA trends reinforce our view that credit risk is contained and easily manageable. I'll turn it back to Mark to discuss our capital position and outlook.

Mark Hardwick: Thanks, John. Good report. Turning now to slide 21. Our long-term track record of shareholder value creation remains a key strength. Tangible book value per share has grown at a 7.5% compound annual growth rate over the last 10 years. Given the earnings enhancements created by First Savings acquisition and the modest balance sheet repositioning, I'm particularly pleased with the limited tangible book value dilution from year-end 2025 through 31 March 2026, which Michele highlighted in her comments as well. It's just really pleasing to be at this point with what was a pretty modest tangible book value reduction and such strength in the earnings stream. It's a good place for us to be. Slide 22 highlights our 11.7% total asset CAGR over the past decade, reflecting a consistent strategy of organic growth complemented by disciplined value-accretive acquisitions that expand our demographic and geographic footprint.

Speaker #2: Thanks, John. Good report. Turning now to slide 21, our long-term track record of shareholder value creation remains a key strength. Tangible book value per share has grown at a 7.5% compound annual growth rate.

Speaker #2: Over the last 10 years, given the earnings enhancements, created by first savings acquisition and the modest balance sheet repositioning, I'm particularly pleased with the limited tangible book value dilution from year-end 2025 through March 31 of 2026, which Michelle highlighted in her comments as well.

Speaker #2: It's just a really pleasing to be at this point with what was a pretty modest tangible book value reduction and such strength in the earnings stream.

Speaker #2: It's a good place for us to be. Slide 22 highlights our 11.7% total asset CAGR over the past decade, reflecting a consistent strategy of organic growth complemented by disciplined value accretive acquisitions that expand our demographic and geographic footprint.

Mark Hardwick: The First Savings acquisition is well aligned with this strategy and meaningfully strengthens our presence in a high-growth Indiana market. We look forward to building on our Midwestern strength throughout the rest of 2026 by focusing on our people, our clients, our products, and technology. I hope it's clear that organic growth is our top priority for the year. We're going to get through the integration on mid-May, 15 May. We've got great momentum with the First Savings team, as Mike Stewart highlighted. Thank you for your continued support and investment in First Merchants, and we are happy to take questions at this time.

Speaker #2: The first savings acquisition, as well aligned with the strategy and meaningfully strengthens our presence. Any high growth Indiana market. We'll look forward to building on our Midwestern strength throughout the rest of 2026 by focusing on our people, our clients, our products, and technology and I hope it's clear that organic growth is our top priority for the year.

Speaker #2: We're going to get through the integration on May 5th or mid-May, May 15th, and we've got great momentum with the first savings team as Mike Stewart highlighted.

Speaker #2: Thank you for your continued support and investment in First Merchants, and we are happy to take questions at this time.

Operator: Thank you. At this time, we'll conduct the question and answer session. As a reminder, to ask a question, you need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Daniel Tamayo of Raymond James. Your line is now open.

Speaker #1: Thank you. At this time, we'll conduct the question-and-answer session. As a reminder to ask the question, you'll need to press star 11 on your telephone and wait for your name to be announced.

Speaker #1: To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. In our first question, comes from a line of Daniel Tamayo of Raymond James.

Speaker #1: Your line is not open.

Daniel Tamayo: Thank you. Good morning, everyone. Maybe first just starting on the loan growth side. Seasonally down in Q1, you had the loan sale in there. Mike, you sounded pretty bullish on loan growth prospects going forward. Maybe just give us a little bit more color, if you can, on what's driving that, thoughts on pay downs, the timing of the slowing going forward, and if you're still comfortable with, I think we talked about 6% to 8% growth for the year last quarter, if that number still holds. Thanks.

Speaker #3: Thank you, good morning, everyone. Maybe first just starting on the loan growth side, seasonally down in the first quarter, you had some the loan sale in there.

Speaker #3: Mike, you sounded pretty bullish on loan growth prospects going forward. Maybe just give us a little bit more color, if you can, on what's driving that, thoughts on paydowns, the timing of the slowing going forward, and if you're still comfortable with—I think we talked about 6 to 8 percent growth for the year last quarter—if that number still holds.

Speaker #3: Thanks.

Michael Stewart: Yeah. Good morning, Dan. I'll start with the end. Yes, I do feel confident with that mid-single-digit growth rate and reaffirm that. What kind of demonstrates that in my confidence level is if you really take a look at our commercial pipelines. They're as strong as they have been historically. What I've tried to talk about there is in that Q1, we just had some stacked normal course payoffs that were underneath what we would look at in a normal run rate of production. The payoffs were a little bit higher. Remember, we also had a really strong Q4, and some of those anticipated Q4 payoffs didn't happen until the Q1. It's the investment real estate portfolio that was paying along with the sponsor book, and both of those production levels were really strong during the quarter.

Speaker #4: Yeah, good morning, Dan. Well, let's start with the end. Yes, I do feel confident with that mid-single digit growth rate. And reaffirm that. And what kind of not kind of, what demonstrates that and my confidence level is you really take a look at our commercial pipelines there as strong as they have been historically and what I've tried to talk about there is in that first quarter, we just had some stacked normal course payoffs that were underneath what we would look at in a normal run rate of reductions.

Speaker #4: But the payoffs were a little bit higher. Remember, we also had a really strong fourth quarter, and some of those anticipated fourth quarter payoffs didn't happen until the first quarter.

Speaker #4: But it's the investor real estate portfolio that was paying along with the sponsor book in both of those production levels were really strong during the quarter.

John Martin: We'll see the growth come back into those businesses. That community bank model, which is the core C&I that sits in our franchise, demonstrates a really good growth rate there, which is really fundamental for us. Another point of view that I'd just share is that I know where we stand as of yesterday, and that growth is coming through in a really strong manner.

Speaker #4: And we'll see the growth come back into those business units. That community bank model which is the core CNI that sits in our franchise demonstrates a really good growth rate there which is really fundamental for us.

Speaker #4: And another point of view that I just share is that I know where we stand as of yesterday. And that growth is coming through in a really strong manner.

Michael Stewart: If you look at how we think about normal course or known amortizations and what we think about known course of payoffs, it was just a little bit higher, but nothing unexpected out of the blue or people leaving for undue reasons. The production level that we had, which is on pace for about $2 billion, we got it in Q1, just that we were stacked with some payoffs and feel really good about where the pipelines are, where those two business units are already driving record productions and bringing it into manifesting our balance sheet, and then where I've seen our current April footing through too.

Speaker #4: So if you look at how we think about normal course or known amortizations and what we think about known course of payoffs, it was just a little bit higher, but nothing unexpected out of the blue of people coming people leaving from undue reasons.

Speaker #4: And the production level that we had, which is on pace for about $2 billion, we've got it in the first quarter just that we were stacked with some payoffs and feel really good about what pipelines are.

Speaker #4: Where those two business units are already driving record productions and bringing it into manifesting our balance sheet, and then where I've seen our current April footing through to.

Mark Hardwick: Mike, I'd love to just add, you made this in your actual comments earlier, but the pay downs really came exactly the way we would hope they would come. Maybe not the timing.

Speaker #2: Hey, Mike, I'd love to just add—you made this in your actual comments earlier—but the paydowns really came exactly the way we would hope they would come.

Michael Stewart: Yeah.

Speaker #2: Maybe not the timing. Those investor investment real estate moving into the secondary market, which is what we always expect and anticipate, which is great for credit quality.

Michael Stewart: Because it was investment real estate moving into the secondary market, which is what we always expect and anticipate, which is great for credit quality. The sponsor book, exactly as you would anticipate, that over time those sponsors liquidate those companies, sell them to maybe another sponsor, et cetera. It's anticipated. It was just a little more Q1 heavy than what we had expected.

Speaker #2: And then the sponsor book exactly as you would anticipate that over time those sponsors liquidate those companies, sell them to maybe another sponsor, etc.

Speaker #2: But it's anticipated. It was just a little more first-quarter heavy than what we had expected.

Michael Stewart: That's exactly what I'm trying to say.

Speaker #4: Yeah, that's exactly what I'm trying to say. Some of it we thought might have happened in the fourth quarter that bled over to this and some of it we might have had queued up in the second quarter and happened early because the secondary markets are good with real estate.

Michael Stewart: Yeah.

Michael Stewart: Some of it we thought might have happened in Q4, it bled over to this, and some of what we might have had queued up in Q2 and happened early because the secondary markets are good with real estate.

Mark Hardwick: Yes.

Speaker #2: Yeah.

Daniel Tamayo: Great. Very helpful. Thanks, guys. Maybe for Michelle on the margin, just curious where you see that moving going forward. You'll have the loan sale happening in Q2. I'm curious how you're thinking about the impact from that. I don't know if you gave more specific timing or you're able to yet other than in Q2, but just curious kind of how that impacts the margin, just overall thoughts for the rest of the year.

Speaker #3: Great. Very helpful. Thanks, guys. And maybe for Michele on the margin, just curious where you see that moving going forward. You'll have the loan sale happening in the second quarter.

Speaker #3: I'm curious how you're thinking about the impact from that. I don't know if you gave more specific timing or you're able to yet. Other than in the second quarter, but just curious kind of how that impacts the margin just overall thoughts for the rest of the year.

Michele Kawiecki: Yeah. Well, I'll address the loan sale first. As Mark said in his comments, the loans that we're selling have a weighted average coupon of 3.46%. Immediately once we get that liquidity, we'll pay down some of our higher cost deposits. I would say those are probably averaging about maybe 3.80%. Over time, we will invest that liquidity in loans. Of course, that will happen over the course of the next 18 to 24 months. We'll get some margin pickup over time, but it won't be immediate. It'll be a little more neutral right out of the gate. For margin over the next few quarters, just because the day count in Q1 always depresses our margin by five basis points.

Speaker #5: Yeah, well, I'll address the loan sale first. And so as Mark said in his comments, the loans that we're selling have a weighted average coupon of 3.46%.

Speaker #5: And so immediately once we get that liquidity, we'll pay down some of our higher cost deposits. And I would say those are probably averaging about maybe 3.80.

Speaker #5: Over time, we will invest that liquidity in loans. And so, of course, that will happen over the course of the next 18 to 24 months.

Speaker #5: And so, we'll get some margin pickup over time, but it won't be immediate. So, it'll be a little more neutral right out of the gate.

Speaker #5: For margin over the next few quarters, just because the day count in Q1 always depresses our margin by five basis points. Once we get into Q2, Q3, and Q4, we will see margin pick up a few basis points.

Michele Kawiecki: Once we get into Q2, Q3, Q4, we will see margin tick up a few basis points, if anything, just because of the day count and also just because I think some of the repricing from rate cuts last year, we've already seen some of that. I think rates that we pay on deposits will be relatively steady. I would expect there to be a few basis points of pickup on margin through the year.

Speaker #5: If anything, just because of the day count and also just because I think some of the repricing from rate cuts last year, we've already seen some of that.

Speaker #5: I think deposit rates will be that we pay on rates that we pay on deposits will be relatively steady. And so I would expect there to be a few basis points of pickup on margin through the year.

Daniel Tamayo: Okay. That's inclusive of the five basis points reversal, I guess, from Q1. Just to call it a handful of basis points up from the Q1 level of margin.

Speaker #3: Okay. So that's inclusive of the five basis points reversal, I guess, from the first quarter. So just to call it a handful of basis points up from the first quarter level of margin.

Michele Kawiecki: Yes, that's correct.

Speaker #5: Yes, that's correct.

Daniel Tamayo: Okay. All right, great. Okay. Well, I appreciate that color. I will step back. Thank you.

Speaker #3: Okay. All right. Great. Okay. Well, I appreciate that color. I will step back. Thank you.

Michael Stewart: Thanks, Daniel.

Speaker #2: Thanks, Danny.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Russell Gunther of Stephens. Your line is now open.

Speaker #6: Thank you. One moment for our next question. Our next question comes from the line of Russell Gunther of Stevens Airlines. Now open.

Russell Gunther: Hey, good morning, guys.

Speaker #7: Hey, good morning, guys.

Michael Stewart: Good morning, Russell.

Russell Gunther: Good morning. I wanted to see if you could touch a bit more on the deposit migration into non-interest bearing this quarter. Perhaps how you're thinking about the sustainability of the remix, whether you assume any runoff from the consumer product redesign. As a follow-up, Michelle, you touched on this a bit, but just overall cost of deposits going forward, assuming a Fed on pause, do you think you have the ability to flex that lower from here, or is there kind of a slight upward bias to overall deposit costs going forward?

Speaker #2: Good morning, Russell.

Speaker #7: Wanted morning. I wanted to see if you could touch a bit more on the deposit migration into non-interest-bearing this quarter perhaps how you're thinking about the sustainability of the remix, whether you assume any runoff from the consumer product.

Speaker #7: Redesign. And then as a follow-up, Michele, you touched on this a bit, but just overall cost of deposits going forward. Assuming a Fed on pause, do you think you have the ability to flex that lower from here, or is there kind of a slight upward bias to overall deposit costs going forward?

Michele Kawiecki: Well, I'll start with the deposit account, our checking account redesign. We've migrated those customers to our newly designed checking accounts, and we've been tracking whether there's any runoff, and it's been very stable, and I think pretty well-received. We're not anticipating any runoff. I would expect our non-interest bearing to maintain that 22% to 23% level that we're seeing today. On the deposit rates. Deposit rates are pretty competitive, and I don't anticipate that we'll be lowering deposit rates meaningfully through the year. I would expect it to be overall more steady.

Speaker #5: Well, I'll start with the deposit account check or checking account redesign. So we've migrated those customers to our newly designed checking accounts. And so we've been tracking whether there's any runoff.

Speaker #5: And it's been very stable, and I think pretty well received, so we're not anticipating any runoff. I would expect our non-interest-bearing to maintain that 22 to 23 percent level that we're seeing today.

Speaker #5: On the deposit rates, deposit rates are pretty competitive. And so I don't anticipate that we'll be lowering deposit rates meaningfully through the year. I would expect it to be overall more steady.

Russell Gunther: Got it. Okay. Thank you.

Speaker #2: Got it. Okay. Thank you.

Michael Stewart: Mike, I'm just going to add a little bit more on that. We worked at the end of last year to redesign our consumer core checking account. Now what's happened is we don't have any paying small interest-bearing. It all went to non-interest-bearing. That's where the big shift, if you look from the prior quarter, is. It is what I was trying to point out is our core primary account activity. I didn't talk about it, but both in unit and in dollars continues to grow. That new product set that we call Prosper and Prosper Plus is being well received in the marketplace with the new features and functionalities with some of the new digital platforms. It aligns then with how we want to represent it in non-interest-bearing deposits now.

Speaker #4: I'm just going to add a little bit more on that. So we've worked at the end of last year to redesign our consumer core checking account.

Speaker #4: So now what happens is we don't have any paying small interest bearings so it all went to non-interest bearings. So that's where the big shift if you look from the prior quarter is.

Speaker #4: And what I was trying to point out is our core primary account activity—I didn't talk about it—but both in units and in dollars continues to grow.

Speaker #4: So that new product set that we call Prosper and Prosper Plus is being well received in the marketplace with the new features and functionalities with some of the new digital platforms.

Speaker #4: And it aligns, then, with how we want to represent it in non-interest-bearing deposits now.

Mark Hardwick: Yeah. We're in year two of very strategically remixing the deposit base.

Speaker #2: Yeah. And we're in year two of very strategically remixing the deposit base. To be as core as possible with less dependence on CDs and public funds.

Michael Stewart: That's right.

Michael Stewart: ... to be as core as possible with less dependence on CDs and public funds. It just takes time, but we're really pleased with the progress we're making.

Speaker #2: And it just takes time. But we're really pleased with the progress we're making.

Russell Gunther: Well, I appreciate all the color, and it's nice to see. Maybe switching gears for me from a capital perspective, healthy levels of CET1 with the deal close. Do you have a sense of the potential impact from the Basel III proposal on RWAs and CET1? From an overall kind of capital return perspective, would you guys expect to remain active with the buyback here?

Speaker #7: Well, I appreciate all the color. And it's nice to see. Maybe switching gears for me from a capital perspective, healthy levels of CET1 with the deal close.

Speaker #7: Do you have a sense of the potential impact from the Basel III proposal on RWAs and CET1? And then from an overall kind of capital return perspective, would you guys expect to remain active with the buyback here?

Michele Kawiecki: Well, we have evaluated the capital proposals, and I would say right now our estimate is that it will benefit us probably somewhere between 50 and 80 basis points, somewhere in that range. It's really driven mostly from some of the risk-weighted asset release, particularly on the mortgage product. That's our estimate at this time, and we'll keep an eye on kind of where it gets finalized. From a capital management perspective, yeah, we would, given where our valuation is, we will continue to be active in the buyback space in the coming quarters.

Speaker #5: Well, we have evaluated the capital proposals. And I would say right now our estimate is that it will benefit us probably somewhere between, like, 50 to 80 basis points, somewhere in that range.

Speaker #5: It's really driven mostly from some of the risk-weighted asset release, particularly on the mortgage product. So that's our estimate at this time, and we'll keep an eye on where it gets finalized.

Speaker #5: From just capital management perspective, yeah, we would given where our valuation is, we will continue to be active in the buyback space in the coming quarters.

Russell Gunther: Okay, great. Very helpful. Thank you guys for taking my question.

Speaker #7: Okay. Great. Very helpful. Thank you, guys, for taking my question.

Mark Hardwick: Thank you.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Brendan Nosal of Hovde Group. Your line is now open.

Speaker #2: Thank you.

Speaker #6: Thank you. One moment for our next question. Our next question comes from the line of Brandon Nozel of Hovde Group. Your line is now open.

Brendan Nosal: Hey, good morning, everybody. Hope you're doing well.

Speaker #8: Hey, good morning, everybody. Hope you're doing well. Maybe just good morning. Maybe just sticking with capital for a moment. As we all know, pro forma readings came in stronger than expected even with the repositioning of the mortgage portfolio.

Mark Hardwick: Morning.

Brendan Nosal: Morning. Maybe just sticking with capital for a moment. As we all know, pro forma readings came in stronger than expected, even with the repositioning of the mortgage portfolio. Totally get that you want to remain active in the buyback, and loan growth is going to pick up here. I'm just curious if you see any other need for additional balance sheet optimization over the course of the year.

Speaker #8: Totally get that you want to remain active in the buyback and loan growth is going to pick up here. But I'm just kind of curious if you see any other need for additional balance sheet optimization over the course of the year.

Mark Hardwick: No. If you mean additional loan or bond sales, we're not anticipating anything else. We think this is kind of perfect for 2026. It gives us liquidity so that we can continue to mid to high single digit loan growth number that we talk about. It allows us to stay really diligent with deposit pricing and just remix the loan book, at this point, because we're cognizant of the loan to deposit ratio as well, from lower yielding loans in our portfolio with a little longer duration to higher yielding loans with shorter duration. At least in the coming months, I'm not anticipating anything further. We do evaluate all the time just what our options are. Really, we're pleased with the earn back.

Speaker #2: No. I mean, if you mean additional loan or bond sales, we're not anticipating anything else. We think this is kind of perfect for 2026.

Speaker #2: It gives us liquidity so that we can continue to bid high single-digit loan growth numbers that we talk about. It allows us to stay really diligent with deposit pricing.

Speaker #2: And just remix the loan book at this point because we're cognizant of the loan-to-deposit ratio as well, from lower yielding loans in our portfolio with a little longer duration to higher yielding loans with shorter durations.

Speaker #2: So at least in the coming months, I'm not anticipating anything further. We do evaluate all the time just what our options are. But really, we're pleased with the earnback and especially the modeling of this, the way Michele talked about it, is we just assumed our mid to high single-digit loan growth would continue in a normal course is the way we budgeted for a couple of years.

Mark Hardwick: Especially the modeling of this, the way Michele talked about it is we just assumed our mid- to high-single-digit loan growth would continue in a normal course is the way we budgeted for a couple of years. Then said, if we redeploy this money out of mortgages into commercial, over a 24-month window, what kind of pickup do we have? That's how the 4-year earn back was calculated. I'm pretty confident that we'll be able to accelerate some of that. This year we'll be using that liquidity for current loan growth. You can model it a lot of different ways. We think the 4-year earn back is the most conservative, but I just want to be sure everyone understands how we're thinking about it.

Speaker #2: And instead, if we redeploy this money out of mortgages into commercial, over a 24-month window, what kind of pickup do we have? And that's how the four-year earnback was calculated.

Speaker #2: And so I'm pretty confident that we'll be able to accelerate some of that. And if and this year, we'll be using that liquidity for current loan growth.

Speaker #2: And so you can model with a lot of different ways. We think the four-year earnback is the most conservative. But I just want to be sure everyone understands how we're thinking about it.

Brendan Nosal: Yep. That's helpful color, Mark. Thank you. Maybe pivoting to a question on First Savings. Now with the deal on the books and closed, can you just give us your latest thinking on how you view their three specialty businesses now that you've had time to see them in action? Heard your commentary on SBA, but I guess more curious about First Lien HELOC and the triple net lease product.

Speaker #8: Yep. That's helpful color, Mark. Thank you. Maybe pivoting to a question on first savings. Now with the deal on the books and closed, can you just give us your latest thinking on how you view their three specialty businesses now that you've had time to see them in action?

Speaker #8: And heard your commentary on SBA, but I guess more curious about firstly in HELOC and the triple net lease product.

Mark Hardwick: Yeah. It might be a good point to just reiterate how well the integration process is going. The connectivity of our teams is the best it's ever been in an acquisition. I'm going to let Mike jump into that answer because Mike's never been closer, on the ground to every single action that we're taking, especially in those verticals. I'm really pleased with where we stand today and excited about getting through the integration and then moving forward. Every day that we own the company, the more excited I am about the verticals.

Speaker #2: Yeah. It might be a good point to just reiterate how well the integration process is going. The connectivity of our teams is the best it's ever been in an acquisition.

Speaker #2: And I'm going to let Mike jump into that answer, because Mike's never been closer on the ground to every single action that we're taking, especially in those verticals.

Speaker #2: But I'm really pleased with where we stand today and excited about getting through the integration. And then moving forward and every day that we own the company, the more excited I am about the verticals.

Michael Stewart: Yeah. Look, let's start with the triple net lease. The nice thing about since the end of the year through the close through now, their production has remained very stable, which is a good thing in my opinion. They were originating the triple net lease on, I'll say, somewhat of a national basis, and they would sell that portfolio or put it on the balance sheet. It's an extension of investor real estate. It's an extension of what we understood, but we really didn't focus on. It feels natural for us to be able to continue to support how Tony and team is continuing to generate triple net lease businesses in a originate model. It gives us options to put it on the balance sheet if we so choose, or sell. The First Lien HELOC business is a unique business for us.

Speaker #4: Yeah. Look, so let's start with the triple net lease nice thing about since the end of the year through the close through now. Their production has remained very stable.

Speaker #4: Which is a good thing in my opinion. And they were originating the triple net lease on, I'll say, somewhat of a national basis. And they would sell that portfolio or put it on the balance sheet.

Speaker #4: And it's an extension of investment real estate. It's an extension of what we understood that we really didn't focus on. So it feels natural for us to be able to continue to support how Tony and his team is continuing to generate triple net lease businesses in a originate model that gives us options to put it on the balance sheet if we so choose or sell.

Speaker #4: The first lean HELOC business is a unique business for us. And they built a really nice model that also has continued to have similar production levels as they were through this period of time.

Michael Stewart: They built a really nice model that also has continued to have similar production levels as they were through this period of time. That has been for them a complete originate and sell. We've got secondary buyers on that and then secondary servicers. It's a fee generation business that there is some of that on our balance sheet today. It was on their balance sheet. We've just kind of modeled that we'll keep our balance sheet flat for the first lien HELOC, and as they continue to generate new business, it turns into fee income, much like our current mortgage business does, originate and sell model. Like I referenced with SBA, they built a really nice infrastructure and ability to not only originate, but obviously underwrite, service, and collect, which is just not a model that we had built.

Speaker #4: And that has been for them a complete originate and sell. We've got buyers on that. And the secondary services. So it's a fee generation business that there is some of that on our balance sheet today.

Speaker #4: It was on their balance sheet. So we've just kind of modeled that we'll keep our balance sheet flat for the first lean HELOC. And as they continue to generate new business, it turns into fee income, much like our current mortgage business does, originate and sell model.

Speaker #4: I mean, like I referenced with SBA, they built a really nice infrastructure and ability to not only originate, but obviously underwrite and service and collect, which is just not a model that we had built.

Michael Stewart: They were doing around $100 million of SBA transactions last year. That Q1 production is actually higher than they were, again, during this noise period of time with First Merchants. First Merchants SBA production last year was less than $10 million. Our infrastructure of small business banking and community banking looks to them as a new product set to continue to fulfill community banking and SBA products, in our own backyard, which they really weren't overlapping with us. It's just a natural extension of actually probably bringing them more volume, and not letting them be the fulfillment team and whatnot. That's how I'm viewing those three verticals, and we're watching it through the integration day. Then my team hears regularly what I call it, day two.

Speaker #4: So they were doing around $100 million of SBA transactions last year. That first quarter production is actually higher than they were. Again, during this noise period of time with first merchants, and first merchants SBA production last year was less than $10 million.

Speaker #4: So our infrastructure of small business banking and community banking looks to them as a new product set to continue to fulfill community banking and SBA products in our own backyard, which they really weren't overlapping with this.

Speaker #4: So it's just a natural extension of actually probably bringing them more volume and not letting them be the fulfillment team and whatnot. So that's how I'm viewing those three verticals.

Speaker #4: And we're watching it through the integration day. And then as my team hears regularly, I call it day two, we're going to continue to figure out where do we want to go with growing the businesses or continue to incorporate into our core models.

Michael Stewart: We're going to continue to figure out where do we want to go with growing the businesses or continue to incorporate into our core models.

Mark Hardwick: Mike, I think it's worth just adding. It's part of the reason we're so bullish about loan growth for the remainder of the year. The verticals are a really nice add. We've stayed exactly in the credit kind of profile and size that First Savings operated the business. We do see opportunity to mostly just, in the size of credits, to start to make some adjustments, especially as you think about the triple net lease business. It is a lever that we could use. So far we've said, "Well, hey, let's just maintain the growth profile and the size of each credit exactly the way it is." I would just say it leans on the small side. Excited about how it can continue to help facilitate our growth in the future.

Speaker #2: And Mike, I think it's worth just adding, it's part of the reason we're so bullish about loan growth for the remainder of the year.

Speaker #2: The verticals are a really nice add. We've stayed exactly in the credit kind of profile and size that first savings operated the business. But we do see opportunity to mostly just in the size of credits to start to make some adjustments, especially you think about the triple net lease business.

Speaker #2: It is a lever that we could use. And so far, we've said, "Hey, let's just maintain the growth profile and the size of each credit exactly the way it is." And I would just say it leans on the small side.

Speaker #2: So excited about how it can continue to help facilitate our growth in the future.

Brendan Nosal: All right. Thank you for taking my questions. Appreciate it.

Speaker #8: All right. Thank you for taking my questions. I appreciate it.

Mark Hardwick: Thank you.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Damon DelMonte of KBW. Your line is now open.

Speaker #2: you.

Speaker #1: Thank you. One moment for our next question. Our next question comes from a line of payment volunteer of KVW. Lines not open.

Damon DelMonte: Hey, good morning, everyone. Hope you're all doing well today. First question regarding the margin. Michele, hoping you could give a little color on the expectation for the fair value accretion marks that we could expect going forward.

Speaker #9: Hey, good morning, everyone. Hope you're all doing well today. First question, regarding the margin, Michelle, hoping you could give a little color on the expectation for the fair value accretion marks that we could expect going forward.

Michele Kawiecki: Yeah. For the first two months of us having the First Savings acquisition, I think we've recorded probably maybe $1.5 million of fair value accretion, and so that's on a two-month basis. I would consider the run rate on a go-forward basis to probably be fairly similar.

Speaker #10: Yeah. So for the first two months of us having the first savings acquisition, I think we've recorded probably 1.1 and a half million of fair value accretion.

Speaker #10: And so, that's on a two-month basis. And so, I would consider the run rate on a go-forward basis to probably be fairly similar.

Damon DelMonte: Okay, great. Okay. Could you kind of give us a little guidance on the outlook for the combined expense base here in Q2 as you get a full impact from FSFG?

Speaker #9: Okay. Great. Okay. And then could you kind of give us a little guidance on the outlook for the combined expense base here in the second quarter as you get a full impact from FSFG?

Michele Kawiecki: Sure. I think I'd reiterate the guide that I gave last quarter on Legacy First Merchants. On the Legacy First Merchants space, I had given guidance that we expected a 3% to 5% increase year over year. You add in First Savings, but in the H2, of course, recognizing the cost synergies that we're on track to achieve. When you put all those pieces together, the quarterly expense total, like on a quarterly run rate, will probably be somewhere between $111 to $114 million.

Speaker #10: Sure. I think I'd reiterate the guide that I gave last quarter on legacy first merchants. And so on the legacy first merchant space, I had given guidance that we expected a 3 to 5 percent increase year over year.

Speaker #10: And then you add in first savings—that's in the back half of the year, of course—recognizing the cost synergies that we're on track to achieve.

Speaker #10: And when you put all those pieces together, the quarterly expense total on a quarterly run rate will probably be somewhere between $111 to $114 million.

Damon DelMonte: You think that level is kind of like once the savings hit, so that's kind of almost like an exit rate of $20 in Q4?

Speaker #9: And you think that level is kind of like once the savings hit, so that's kind of like almost like an exit rate of 20 in the fourth quarter?

Michele Kawiecki: Yeah. Yes.

Speaker #10: Yeah. Yes.

Damon DelMonte: Okay. Got it. Okay, great. I guess just lastly, when you think about kind of just market disruption, broadly speaking, and opportunity to maybe pick up commercial lending teams, are there any plans to add to certain areas of the footprint? Or do you feel that the efforts you've put forth in recent years is sufficient and you kind of have a good team at the table right now?

Speaker #9: Okay. Got it. Okay. Great. And then I guess just lastly, when you think about kind of just market disruption, broadly speaking, and opportunity, to maybe pick up commercial lending teams, are there any plans to add to certain areas of the footprint, or do you feel that the efforts you've put forth in recent years is sufficient and you kind of have a good team at the table right now?

Michael Stewart: Dan, it's Michael Stewart. Yes, we look very opportunistically and very active right now, strategically in overlap markets where being able to add quality talent in our markets would just augment our branding and growth. We're very active in that space, especially. I would just say, in the Michigan market in particular. That being also said, I referenced that we've had just continued strategic hires along the way. That's part of our business model of 2026. 6 new bankers through asset-based lending, through investment real estate, through a sponsor, but more importantly, our core community bank, with several more joining soon in treasury management, just continues to build. I feel like the infrastructure that's there. That's not including what we've recently done in our private wealth group, which I think as you saw, that had a really nice fee growth, as we continue to win and expand.

Speaker #9: Damon, it's Mike Stewart. Yes. We've looked very opportunistically and very active right now strategically in overlap markets where being able to add quality talent in our markets would just augment our brand and growth.

Speaker #9: So, we're very active in that space. Especially, I would just say, in the Michigan market in particular. That being also said, I referenced that we've had just continued strategic hires along the way.

Speaker #9: That's part of our business model of 2026. And six new bankers through asset-based lending, through investor real estate, through sponsor, but more importantly, our core community bank, with several more joining soon, and treasury management just continues to build, I feel like, the infrastructure that's there.

Speaker #9: And that's not including what we've recently done in our Private Wealth group, which I think, as you saw, had really nice fee growth as we continue to win in that space.

Damon DelMonte: Great. Appreciate that, Mike. That's all that I had. Thanks a lot, everyone.

Speaker #9: Great. Appreciate that, Mike. That's all that I had. Thanks a lot, everyone.

Michele Kawiecki: Yep.

Operator: Thank you. One moment for our next question. Our next question comes on the line of Nathan Race of Piper Sandler. Your line is now open.

Speaker #1: Thank you. One moment for our next question. Our next question comes from a line of Nathan Race of 5% annually lines not open.

Nathan Race: Hi, everyone. Good morning. Thanks for taking the questions. Michele, I was wondering if you could kind of just frame up fee income expectations for Q2 and just generally you're still thinking mid or high single-digit growth for the full year and just what you're contemplating, perhaps coming from First Savings, if you're thinking maybe that some of the verticals that you discussed earlier, whether it's single tenant lease or first lien HELOC, it could be a driver for some gain-on-sale revenue going forward, just given that I imagine those relationships don't really come with deposits.

Speaker #11: Hi, everyone. Good morning. Thanks for taking the questions. Michele, I was wondering if you could kind of just frame up the income expectations for the second quarter, and just generally, are you still thinking kind of mid or high single-digit growth for the full year? And just what you're contemplating, perhaps coming from first savings—if you're thinking maybe that some of the verticals that you discussed earlier, whether it's single-tenant lease or first lien HELOC, could be a driver for some gain on sale revenue going forward, just given that I imagine those relationships don't really come with deposits.

Michele Kawiecki: Yeah. When you look at our Q1 normalized level of total non-interest income, it was $35.6 million. Where I think about where that goes in the coming quarters, I would expect to get a full quarter, a full three months of First Savings with the expectations that we have on gains on sales of loans coming from those verticals as well as our mortgage business. I would expect Q1 to see a lift of about 3% to 4% in the coming quarters. I think that's how you can think about what kind of lift you'll see Q2, Q3, Q4.

Speaker #10: Yeah. So when you look at our Q1 normalized level of total non-interest income, it was 35.6 million. And so where I think about where that goes in the coming quarters, I would expect to get a full quarter, a full three months of first savings with the expectations that we have on gains on sales of loans coming from those verticals as well as our mortgage business.

Speaker #10: I would expect Q1 to see a lift of about 3 to 4 percent in the coming quarters. And so I think that's how you can think about what kind of lift you'll see in Q2, Q3, and Q4.

Nathan Race: Okay. 3% to 4% lift in Q2 and then.

Speaker #11: Okay, so 3 to 4 percent lift in the second quarter, and then a similar trajectory in the back half of the year?

Michele Kawiecki: Mm-hmm

Nathan Race: similar trajectory in H2?

Michele Kawiecki: Yeah.

Speaker #10: Yeah. Yeah.

Nathan Race: Okay. Got you. I jumped on late, so I apologize, John, if you could kind of touch on the drivers for the charge-offs in the quarter. Were there any kind of marked First Savings loans that came through in some of those charge-offs? Just generally how you're thinking about some resolutions of some of the NPA inflows from First Savings and just the legacy resolutions as well going forward.

Speaker #11: Okay, gotcha. And I jumped on late, so I apologize, John. If you could kind of touch on the drivers for the charge-offs in the quarter.

Speaker #11: Were there any kind of marked First Savings loans that came through in some of those charge-offs? And just generally, how you're thinking about some resolutions of some of the MPA inflows from First Savings, and just kind of the legacy resolutions as well going forward?

John Martin: Yeah. The charge-offs for Q1 were really Legacy First Merchants. There were two names that I mentioned in my comments that came out of the portfolio, more idiosyncratic, normal course kind of charge-offs out of the regional bank and not of Sponsor Finance. It wasn't really driven at all by the charge-offs coming out of First Savings. The asset quality there thus far, and it's early, it's been fine. I look forward to resolution. We run processes every quarter and assess what's in that NPA bucket and just keep our eye on the level, actively working with borrowers to work out credits as well as any other strategic loan sale if we choose to go that direction. For the most part, it's just normal course charge-off that happened in Q1. It was higher.

Speaker #9: Yeah. The charge-offs for first quarter were really legacy first merchants. There were two names that I mentioned in my comments that came out of the portfolio: more idiosyncratic normal course kind of charge-offs.

Speaker #9: I don't know. The regional bank and not a sponsored finance. It wasn't really driven at all by the charge-offs coming out of first savings.

Speaker #9: So the asset quality there thus far—and it's early—it's been fine. What I look forward to: resolution. We run processes every quarter and assess what's in that MPA bucket, and just keep our eye on the level, actively working with farmers to work out credits.

Speaker #9: As well as any other strategic loan sale if we choose to go that direction. But for the most part, it's just normal course charge-off that happened in the first quarter.

John Martin: We had a couple of names that we had been working for some time that just finally came to a head and we moved out.

Speaker #9: It was higher. We had a couple of names that we had been working for some time that just finally came to a head and we moved down.

Nathan Race: Got it. Assuming maybe charge-offs kind of normalize to the levels that we saw during last year, do you guys see a need to provide for that high single-digit loan growth guidance that you reiterated and just kind of grow into your unallocated excess reserves? I know there's a number of inputs involved just given CECL and so forth, but just curious how you guys are thinking about maybe needing to provide for growth this year.

Speaker #11: Got it. And assuming maybe charge-offs kind of normalized to the levels that we saw during last year, do you guys see a need to provide for kind of that high single-digit loan growth guidance that you reiterated and just kind of grow into your unallocated excess reserves?

Speaker #11: I know there's a number of inputs involved just given Cecil and so forth, but just curious how you guys are thinking about maybe needing to provide for growth this year.

Michele Kawiecki: Yeah. Typically, we start with a goal of providing for our loan growth, and then it really just has to get adjusted based on the economic model. Right now, I think we're in a really good place when we look at the different economic scenarios that we run and kind of within that range.

Speaker #10: Yeah, I mean, typically we will start with a goal of providing for our loan growth, and then it really just has to get adjusted based on the economic model.

Speaker #10: And right now, I think we're in a really good place when we look at kind of the different economic scenarios that we run and kind of within that range.

Nathan Race: Okay. Got it. I appreciate all the color. Thank you, everyone.

Speaker #11: Okay. Got it. I appreciate all the color. Thank you, everyone.

Michele Kawiecki: Thanks, Nate.

Speaker #10: Thanks, Nate.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Brian Martin of Stephens Inc. Your line is now open.

Speaker #1: Thank you. One moment for our next question. Our next question comes from Brian Martin of Brin Capital. Your line is now open.

Brian Martin: Hey, good morning, everyone. I'll say just one thought, Michele, you talked about the roll-off rate on the securities. Just on the loans, can you just remind us now with FSFG, what's repricing over the balance of the year and what type of pickup you get on what's coming due?

Speaker #9: Hey, good morning, everyone. I just want to say one thought on the—Michelle, you talked about the rollout rate on the securities. Just on the loans, can you remind us now, with FSSG, what's repricing over the balance of the year and what type of pickup you get on what's coming due?

Michele Kawiecki: Yeah. Well, I know one of the things that generally you're interested in, Brian, is on the fixed-rate loans. Like our fixed-rate loan maturities, we've got about $100 million that matures at a rate of about 4.5% each quarter. There's definitely a tailwind there. As you know, two-thirds of our portfolio reprices pretty much immediately with any rate changes. The rate changes that we had in the H2, I feel like a lot of that asset repricing is already reflected in our overall portfolio yields.

Speaker #10: Yeah. Well, I know one of the things that generally you're interested in, Brian, is on the fixed-rate loans. And so our fixed-rate loan maturities.

Speaker #10: We've got about $100 million that matures at a rate of about 4.5% each quarter, and so there's definitely a tailwind there. And so, as you know, two-thirds of our portfolio reprices pretty much immediately with any rate changes.

Speaker #10: And so the rate changes that we had in the back half of the year, I feel like a lot of that asset repricing has already reflected in our overall portfolio yields.

Brian Martin: Got you. Okay. All right. I think on the, Mike, you talked about the, I was going to ask you about the people you hired, but it sounds like you've maybe hired 5 to 6 people recently. Just want to get a sense if they're already kind of included in the loan pickup or anything that's coming from them is not yet in kind of the run rate.

Speaker #9: Gotcha. Okay. All right. And then I think on the Mike, you talked about the just I was going to ask you about the people you hired, but it sounds like you maybe hired 5 to 6 people recently.

Speaker #9: Just want to get a sense if they're already kind of included in the loan pickup or anything that's coming from them is not yet in kind of the run rate.

Michael Stewart: They're not in the run rate yet. I think it was just smart Q1 additions. Q1 is typically a time when bonuses get paid and people that were actively looking to move make that determination, and we were in tune with that. Yeah.

Speaker #9: They're not in the run rate yet. I think we just smart first quarter addition to know first quarter is typically a time when bonuses get paid and people that were actively looking to move make that dissemination.

Speaker #9: And we were in tune with that, so yeah.

Michele Kawiecki: I would add on top of that, Brian, in the guidance that I gave. I don't know if you recall my remarks when I gave the year-over-year increase on Legacy First Merchants expense base of 3% to 5%. The reason why it's leaning a little bit higher than we normally operate is because we did anticipate hiring and adding to our commercial team and our private wealth team, which is what Mike is talking about. That is built into the guidance that I provided.

Speaker #10: And I would add on top of that, Brian, in the guidance that I gave, if I don't know if you recall my remarks when I gave the year-over-year increase on legacy first merchants expense base of 3 to 5 percent, the reason why it's leaning a little bit higher than we normally operate is because we did anticipate hiring and adding to our commercial team and our private wealth team, which is what Mike is talking about.

Speaker #10: So that is built into the guidance that I provided.

Mark Hardwick: Yeah, I started to mention earlier, I think we added 15 FTEs in that space last year, and we have 10 in the plan this year. We're really pleased with the opportunity, the individuals that are available to us that are interested in First Merchants and their performance once they're on the team. When Mike talks about the new 10 or so that we're hiring, we're not anticipating immediate performance, so.

Speaker #11: Yeah. And I started to mention earlier, I think we added 15 FTEs in that space last year, and we have 10 in the plan this year.

Speaker #11: So we're really pleased with the opportunity, the individuals that are available to us, that are interested in First Merchants and their performance once they're on the team.

Speaker #11: But when Mike talks about the new 10 or so that we're hiring, we're not anticipating immediate performance.

Brian Martin: Yeah. All those were hired in Q1, or some of those hired last year?

Speaker #9: Yeah. And you hired all those were hired in the first quarter or some of those hired last year?

Mark Hardwick: 15 were throughout the year last year, a little more back end. We have 10 planned this year that

Speaker #11: No, 15 were lost throughout the year last year, a little more back in. And then we had 10 planned this year that.

Michael Stewart: I referenced 6 in commercial, and 2 in private wealth. No, those are this quarter. Yeah, so we're off and opening like we wanted to. That reduction should start to see itself by the H2 of this year.

Speaker #9: Yeah. And I referenced six in Commercial and two in Private Wealth, but a couple of them also replaced. No, those are this quarter, so.

Speaker #9: Yeah. So we're often looking like we wanted to. So that production should start to see itself by the back half of this year.

Mark Hardwick: Yeah.

Michael Stewart: Yes.

Speaker #11: Yeah, yeah, gotcha. Okay. And I think, Michele, just kind of on the margin for a minute, given the day count and the change there—I mean, and I know there was the $1 million of benefit.

Brian Martin: Got you. Okay. I think, Michelle, just on the margin for a minute, given the day count and the change there, and I know there was the $1 million of benefit, is the jumping off point maybe a little bit lower than where it ended, but you still maybe see a 4 or 5 basis point pickup just given the day count or 3 to 4, whatever, something off of the current level? That's how to think about going into Q2?

Speaker #11: I mean, it's a jumping-off point. Maybe a little bit lower than where it ended, but you still maybe see a 4 or 5 basis point pickup just given the day count or 3 to 4 or whatever is something off of the current level.

Speaker #11: That's how to think about kind of going into Q2.

Michele Kawiecki: Yeah. No, I think that's right. We will see. I do expect to see that kind of pickup. I would just say, I know we've talked about a lot of the pieces on our earnings. Overall, I feel like consensus is in the right place. I feel like it reflects what we expect to deliver this year. I did want to make sure that I made that point to kind of reiterate consensus.

Speaker #10: Yeah. No, I think that's right. We will see. I do expect to see that kind of pickup. And I would just say I know we've talked about a lot of the pieces on our earnings.

Speaker #10: Overall, I feel like consensus is in the right place. I feel like it reflects what we expect to deliver this year. So I did want to make sure that I made that point to kind of reiterate consensus.

Brian Martin: Got you. Okay. Last two for me, just the tax rate, and then I think there's some commentary recently about commitment to the SBA by the government. I guess maybe you said, and I joined late, so if you already talked about the SBA or any potential impact, is there any thoughts if that changes your outlook on the SBA business?

Speaker #9: Gotcha. Okay. And then, last two for me—just the tax rate, and then I think there have been some comments here recently about commitment to the SBA by the government.

Speaker #9: Just is that any I guess maybe you said, and I joined late, so if you already talked about the SBA or any potential impact?

Speaker #9: Are there any thoughts that change your outlook on the SBA business?

Mark Hardwick: Yeah, on the SBA, not yet. Our Chair, Jean Wojtowicz, is in the SBA business and has her own company. That's what they do. We've had a really good understanding of SBA for a long time. We've now acquired a significant business in that space through First Savings. We feel like we have a good handle on it, and we're excited about the future.

Speaker #11: Yeah. Not on the SBA. Not yet. Our chair, Jean Mattoich, is in the SBA business and has her own company that that's what they do.

Speaker #11: And so we've had a really good understanding of SBA for a long time. We've now acquired a significant business in that space through First Savings.

Speaker #11: But we feel like we have a good handle on it and we're excited about the future.

Brian Martin: Okay.

Michele Kawiecki: Brian, just to respond to your tax rate question, 13% effective tax rate is what we would expect on a normal quarterly basis.

Speaker #9: Okay.

Speaker #10: And Brian, just to respond to your tax rate question, 13% or 13% effective tax rate is what we would expect in normal, on a normal quarterly basis.

Brian Martin: 13%. Okay. I think you said, Michelle, the accretion, is it around $3 million? It was kind of breaking up when you were saying that. I guess what the quarterly accretion you're thinking about with a full quarter in there, is that kind of the range of $3 to 4 million type of number?

Speaker #9: 13%. Okay. And I think you said, Michelle, the accretion is around is it around 3 million? Is that your it was kind of breaking up when you were saying that.

Speaker #9: But I guess the quarterly accretion you're thinking about with a full quarter in there—is that kind of in the range of $3 million to $4 million type of number?

Michele Kawiecki: It won't quite be that high. It was 1.5 over the first 2 months that we had First Savings. I expect it to be a little over $2 million per quarter.

Speaker #10: Well, it might be that high. It was 1.5 over the first two months that we had First Savings. And so I expect it to be a little over 2, 2 million per quarter.

Brian Martin: 2, just from their piece of it, plus the legacy.

Speaker #9: Oh, 2 just from their piece of the plus the legacy?

Michele Kawiecki: Yes.

Brian Martin: Yeah. Got you.

Michele Kawiecki: Correct.

Brian Martin: Okay.

Michele Kawiecki: I mean, the remaining pieces, aside from First Savings, it's typically ran about $1 million or so, sometimes a little less, depending on what we see.

Speaker #10: Yeah. Correct. Yeah. I mean, the remaining pieces aside from First Savings, it's typically around about a million or so, sometimes a little less depending on what we see.

Brian Martin: Yeah. Okay. Perfect. Thank you for taking the questions, and congrats on the quarter and the transaction.

Speaker #9: Yeah. Okay. Perfect. Thank you for taking the questions, and congrats on the quarter and the transaction.

Mark Hardwick: Thanks, Brian.

Michele Kawiecki: Thank you, Brian.

Speaker #11: Thanks, Brian.

Speaker #10: Thank you, Brian.

Operator: Thank you. I'm showing no further questions at this time. I'll now turn it back to Mark Hardwick for closing comments.

Speaker #1: Thank you. I'm showing no further questions at this time. I'll now turn it back to Mark Hardwick for closing comments.

Mark Hardwick: Yes. Thank you. My closing comments really are just to try to stay as high-level as possible is we remain incredibly optimistic about the remainder of the year. Some of it, there's no way that you can see it. It's just what we see and what we feel is just the speed of play just keeps improving. I feel like the culture of our company is so strong. We have incredible teamwork, and I feel like a sense of urgency that I haven't maybe felt in the past, just throughout all the lines of business. People are just getting after it and producing results. That also just includes our ability to handle something like First Savings. For us to continue to run the business, to build great relationships, and ensure an effective integration is an area where I'm incredibly confident.

Speaker #11: Yeah. Thank you. And my closing comments really are just trying to stay as high level as possible as we remain incredibly optimistic about the remainder of the year.

Speaker #11: And some of it, there's no way that you can see it. It's just what we see and what we feel is just the speed of play just keeps improving.

Speaker #11: I feel like the culture of our company is so strong. We have incredible teamwork, and I feel like a sense of urgency that I haven't maybe felt in the past just throughout all the lines of business.

Speaker #11: People are just getting after it. And producing results. And that also just includes our ability to handle something like First Savings. For us to continue to run the business and to build great relationships and ensure an effective integration is an area where I'm incredibly confident.

Mark Hardwick: The drivers of our performance continue to be really good. Our balance sheet growth, as we've talked about. We remain optimistic. Even though the quarter was flat, we feel great about the remainder of the year. Margin management is in probably the best place it's been in a while. It's been challenging since 2023, since Silicon Valley, and I feel like we are in as good a spot as we've been in a while. Fee income has been growing double digits for really an extended period of time. We were just kind of walking through all those categories that we disclosed in the slides, and just the growth rates year-over-year were all in the double-digit range. Our expense control has been something we've been great at for years. We've got adequate capital. It's allowing us to be active in share repurchase space.

Speaker #11: The drivers of our performance continue to be really good. Our balance sheet growth, as we've talked about, we remain optimistic. Even though the quarter was flat, I feel great about the remainder of the year.

Speaker #11: Margin management is in probably the best place it's been in a while. It's been challenging since '23, since Silicon Valley. And I feel like we're we are in as good a spot as we've been in a while.

Speaker #11: Fee income has been growing double digits for really an extended period of time. And we were just kind of walking through all those categories that we disclosed in the slides, and just the growth rate year over year were all in the double-digit range.

Speaker #11: And then our expense control has been something we've been great at for years. So we've got adequate capital. It's allowing us to be active and share with purchase space.

Mark Hardwick: If we're going to trade at these levels, then we're going to be active in buying back our own shares. I think it just sets us up for a really strong 2026 and kind of feeds into 2027. I appreciate your investment in the company and happy to continue to have one-on-one discussions with any interested investors or current investors for that matter. Thanks for your time. We appreciate it, and we'll talk to you next quarter.

Speaker #11: If we're going to trade at these levels, then we're going to be active in buying back our own shares. And I think it just sets us up for a really strong '26 and kind of feeds into 2027.

Speaker #11: So I appreciate your investment in the company and I'm happy to continue to have one-on-one discussions with any interested investors—or current investors, for that matter.

Speaker #11: So thanks for your time. We appreciate it. And we'll talk to you next quarter.

Operator: This concludes today's conference. Thank you for your participation, and have a great day. You may now disconnect.