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Thank you for standing by, and welcome to the First Merchants Corporation Second Quarter 2025 Earnings Conference Call. Before we begin, management would like to remind you that today's call contains forward-looking statements with respect to future performance and financial condition of First Merchants Corporation that involve risks and uncertainties. Further information is contained within the press release, which we encourage you to review. Additionally, management may refer to non-GAAP measures, which are intended to supplement but not substitute for the most directly comparable GAAP measures. The press release available on the website contains financial and other quantitative information to be discussed today as well as reconciliation of GAAP to non-GAAP measures. As a reminder, today's call is being recorded. I will now turn the conference over to Mr. Mark Hardwick, CEO. Mr. Hardwick, you may begin.
Good morning, and welcome to First Merchants' Second Quarter 2025 Conference Call. Thanks for the introduction and for covering the forward-looking statement on Page 2. We released our earnings yesterday after the close of the market, and you can access today's slides by following the link on the third page of our earnings release. On Page 3 of our slides, you will see today's presenters and our bios, including President, Mike Stewart; Chief Credit Officer, John Martin; and Chief Financial Officer, Michele Kawiecki. On Slide 4, we have a map of all 111 of our banking centers and some second quarter financial highlights with a few of the awards that we've received recently. On Slide 5, our strong balance sheet and earnings results reflect the type of performance First Merchants shareholders have come to expect. We delivered 9.1% annualized loan growth and $0.98 of earnings per share. Return on assets totaled 1.23% and our efficiency ratio was 54%, which is consistent with the high-performance company we strive to be.
Second quarter net income was $56.4 million, an increase of $17 million or 43% from a year ago as credit quality returned to our normal healthy levels. This improvement supported a significantly lower provision for credit losses of $5.6 million compared to $24.5 million in the second quarter of 2024. Year-to-date net income totaled $111.2 million, an increase of $24.3 million or 28% from the first half of 2024, while earnings per share totaling $1.92 or $1.92 increased $0.44 or 30% during the same period. We also repurchased an additional $22.1 million worth of shares this quarter. And year-to-date, we've repurchased $31.7 million with an average price of $38.68. Our tangible common equity of 8.92% is above our target level and provides optimal capital flexibility given the minimal reliance on hybrid equity that's available to us if needed. Now Mike Stewart will discuss our line of business momentum.
Thank you, Mark, and good morning to all. Our business strategy summarized on Slide 6 remains unchanged. We are a commercially focused organization across all these business segments and our primary markets of Indiana, Michigan and Ohio. So, let's turn to Page 7. And as Mark stated earlier, this was a great quarter of loan growth across all those segments and across all the markets. It's very pleasing to see our Midwest economies continue to expand. Our clients' businesses continue to grow and see our bankers continuing to win new relationships. $262 million of commercial loan growth for the quarter, that's over 10% annualized. $430 million of loan growth year-to-date, that's 9% annualized. CapEx financing, increased usage of revolvers, M&A financings and new business conversion are the primary drivers of all this growth. Another pleasing bullet point on this page is the quarter-ending pipeline, which is consistent with prior quarter end and gives me optimism that we will be able to maintain loan growth and increasing market share activities through the third quarter.
The consumer segment also shared in the balance sheet growth with residential mortgage, HELOC and private banking relationships driving the $36 million of loan growth for the quarter. Pipelines for these segments also ended consistent levels to the end of March. So, we can turn to Slide 8 and review some deposit activity. The commercial segment was the driver of our deposit growth during the quarter, $347 million in total. Commercial businesses have been using their cash to support their working capital needs, which reduced the core or operating account balances noted under the second bullet point. Increasing revolver usage is the corollary of lower operating account balances. Tax receipt collections were the primary driver of the public fund balance increases noted under the third bullet point. For the quarter, our Consumer segment experienced declines in both the non-maturity and maturity categories.
We have continued our pricing discipline within our consumer segment, specifically maturity deposits and remain hyper-focused on relationships versus single product users. Households continue to grow both during the quarter and year-to-date and as the next to the last bullet point on the page says, non-maturity deposit balances have increased $108 million year-to-date. This is our lowest cost deposit category. The mix of deposit categories has been the focus of our teams for the past year. It is a focus on primary core accounts and the focus of deposit costs in general. So overall, I'm really pleased with the active engagement our teams are having with their clients as we manage the mix and deposit costs. So, I'll turn the call over to Michele, and she can review in much more detail the composition of our balance sheet and the drivers on our income statement.
Thanks, Mike, and good morning, everyone. Slide 9 covers our second quarter performance. Total revenues in Q2 were strong with meaningful growth in both net interest income of $2.7 million and noninterest income of $1.3 million. We continue to demonstrate exceptional discipline in expense management, which added to the performance this quarter with an overall result of pretax pre-provision earnings of $70.7 million. Slide 10 shows our year-to-date results. Lines 1 through 3 at the top of the page show that we continue to grow the balance sheet towards a more favorable earning asset mix, reducing the lower-yielding bond portfolio by $372 million during the last 12 months and growing higher-yielding loans by $654 million. Looking at lines 11 through 14, total revenue grew nearly 4% when comparing year-to-date 2025 to the same period in 2024, while expenses declined, creating meaningful operating leverage.
Pretax pre-provision earnings totaled $138.1 million, reflecting growth of 7.3%. Those earnings fueled a $2.80 increase in tangible book value to $27.90, which is an increase of 11.2% when compared to the same quarter last year. Slide 11 showed details of our investment portfolio. Expected cash flows from scheduled principal and interest payments and bond maturities through the remainder of 2025 totaled $141 million and $282 million for the next 12 months with a roll-off yield of approximately 2.17%. We plan to continue to use this cash flow to fund loan growth rather than reinvest in bonds given the loan pipeline is strong, as Mike mentioned in his remarks. Slide 12 covers our loan portfolio. The total loan portfolio yield increased by 11 basis points to 6.32%. This increase was primarily driven by loan originations and refinancings this quarter at an average yield of 7.04%, which was up 8 basis points from last quarter.
The allowance for credit losses is shown on Slide 13. This quarter, we had net charge-offs of $2.3 million and recorded a $5.6 million provision. The reserve at quarter end was $195.3 million and the coverage ratio was 1.47%, consistent with last quarter. In addition to the ACL, we have $15.4 million of remaining fair value marks on acquired loans. When including those marks, our coverage ratio is 1.58%. The level of provision was driven by improvement in nonperforming loans, changes in the macroeconomic forecast and robust loan growth. Slide 14 shows details of our deposit portfolio. The total cost of deposits increased 7 basis points to 2.3% this quarter, reflecting increasing competitive deposit dynamics that we experienced in our markets. On Slide 15, net interest income on a fully tax equivalent basis of $139.2 million increased $2.8 million from prior quarter. Net interest margin on Line 6 totaled 3.25%, an increase of 3 basis points this quarter.
The yield on earning assets increased meaningfully by 11 basis points and was partially offset by the increase in funding costs. Next, Slide 16 shows the details of noninterest income. Noninterest income totaled $31.3 million with customer-related fees of $29.4 million. Customer-related fees increased on a linked-quarter basis in all categories with the largest increase from gains on the sale of mortgages, followed by treasury management fees. These fee categories were also $1.6 million higher than the second quarter of last year, reflecting great momentum from our fee-based businesses. Moving to Slide 17. Noninterest expense for the quarter totaled $93.6 million, a very modest increase over prior quarter of only $700,000, primarily from higher marketing spend and higher data processing costs, which was driven by increased loan origination expense. Our expense discipline has allowed us to maintain our low efficiency ratio, which was 53.99% for the quarter.
Slide 18 shows our capital ratios. Over the last 12 months, the tangible common equity ratio has grown 65 basis points to 8.92%, while returning capital to shareholders through $36.2 million in share repurchases and dividends paid of $82.3 million. We remain well capitalized with the common equity Tier 1 ratio at 11.35%. These capital levels, along with our robust allowance for credit losses coverage continue to reflect the safety and soundness of our financial position. That concludes my remarks, and I will now turn it over to our Chief Credit Officer, John Martin, to discuss asset quality.
Thanks, Michele, and good morning, everyone. I'll begin with an overview of our loan portfolio performance for the second quarter on Slide 19. In Q2, we saw balanced loan growth across the portfolio with a $298 million increase quarter-over-quarter or 9.2% annualized and $654 million year-over-year or 5.2%. C&I lending grew by $147 million this quarter, continuing its strong momentum. Commercial real estate added $36 million, reflecting steady demand and disciplined execution. Our Midwest footprint remains core with 82.7% of borrowers located in our 4-state region, and we continue to manage CRE exposure well within regulatory limits, preserving capacity for selective high-quality opportunities. Turning to Slide 20, our sponsor finance portfolio continues to perform well with $867 million in outstandings across 95 companies in diverse industries. Credit metrics remain solid. Nearly 80% of borrowers have senior leverage under 3x and 70% maintain fixed charge coverage ratios above 1.5x.
Losses remain minimal with just $15.3 million over a 10-year history on $1.9 billion in funded loans through Q2. We also continue to manage our shared national credit exposure prudently with $1.1 billion across 88 borrowers, primarily in wholesale trade, agriculture and manufacturing. On the consumer side, underwriting and credit quality remains solid. Over 95% of our $710 million in consumer loans had credit scores above 669 at origination. Similarly, 91% of our $1.9 billion residential mortgage portfolio met that same threshold. Turning to Slide 21, our investment real estate portfolio now stands at roughly $3 billion. Within the non-owner-occupied office, we continue to monitor our exposures closely. The top 10 loans represent 53% of total office exposure with a weighted average loan-to-value of 63.6% at origination. The largest office loan is $25 million secured by a single-tenant mixed-use property at 67.2% loan-to-value with the second largest being $24.4 million in a medical office facility.
Turning to Slide 22, asset quality remains stable. Our net charge-offs were just 0.07% of average loans annualized. The largest nonaccruals this quarter include a $12.9 million multifamily construction loan, a $6.8 million brewery and a $6 million nursing home. These are isolated cases, and we are actively working through resolution strategies. Then finally, turning to Slide 23 on nonperforming assets. We saw a $22 million payoff of our previously nonaccrual construction loan. The largest new nonaccrual was the $12.9 million multifamily construction loan mentioned earlier. ORE declined by $4.8 million, reflecting continued progress in nonperforming asset resolution. And then overall, our credit portfolio continues to perform well with strong underwriting discipline and proactive risk management. I appreciate your attention. I'll now turn the call over to Mark Hardwick.
Thanks, John. Turning to Slide 24. The compound annual growth rate of tangible book value per share on the bottom left continues to grow at a healthy 7% level post dividends, post buyback and post acquisitions. Tangible book value per share also increased by 8.5% when adjusting for the impact of unrealized gains and losses of the available-for-sale securities portfolio. Slide 25 represents our total asset CAGR of 11.7% during the last 10 years and highlights how acquisitions have improved our footprint and fuel growth. We believe in accretive M&A, but it's important to note that we focus on organic growth first. We are very selective when it comes to mergers and acquisitions, and April 1 marked the 3-year anniversary of our last acquisition. As we look forward to the remainder of 2025, we expect more of the same strong performance. Thanks for your attention and investment in First Merchants, and we are happy to take questions at this time.
分析師問答
Our first question comes from Daniel Tamayo with Raymond James.
I guess maybe we can start on the margin, if you don't mind. Maybe for you, Michele, I think you talked about it a little bit, but the funding cost pressure seemed like it was pretty steep in the quarter, driving some increase in funding costs. Wondering if you could talk a little bit about that, what you're seeing going forward there in terms of competition and expectation on the funding costs? And then any color or guidance you might have on margin overall?
As Mike mentioned in his remarks, we saw our customers utilizing their cash this quarter, and we had really strong loan growth to fund. So we did see deposit costs rise a little bit. And I do think that, that will put some modest compression in margin in the back half of the year compared to this quarter.
Okay. All right. And then you talked a lot about the strong loan growth and the expectations for that to continue. I guess I'm just curious, is that in your opinion, is a lot of that just kind of core? We're back in the environment where these businesses are investing. It sounds like that's the case, but I just want to kind of make sure that, that's not pull-through from earlier in the year where some of the borrowers were on hold.
That's a good question. I see it as essential, focusing on direct client growth in their plans and meeting their expectations. Regarding your inquiry about pull-through, we discussed how potential tariffs might influence how clients choose to move forward. There might be a slight pull-through effect there. However, when I observe the overall activity, it appears to be very typical.
Yes. I think, Daniel, the only other area where I see pull-through is that we noticed slightly higher line utilization, where individuals may have been using revolvers or credit facilities to preemptively manage expected tariffs, which has contributed a bit to outstanding amounts in the quarter.
Our next question comes from Terry McEvoy with Stephens.
Maybe just a question on fees. One, I noticed just wealth management fees kind of flat year-over-year and S&P is up, call it, what, 15%, 16%. And I wonder what the outlook was for Wealth Management. And overall, Michele, what are your thoughts on total fee income in the back half of the year?
Well, I'll address our expectations on total fee income and maybe let Mike jump in and talk more specifically on wealth management. But I would expect to see noninterest income grow into the mid-single digits in the back half of the year. At the beginning of the year, we thought that we might have a bit more of a favorable rate environment for mortgage borrowers. But frankly, the decline in mortgage rates has been so modest so far this year, and so it hasn't spurred as much activity as we had expected. But that being said, we do expect to see growth in fees through the remainder of the year. And Mike, do you want to…
To your point, there are four primary categories that are private, which our private wealth team works through. When considering investment management and wealth management, there was growth in that area. However, for some other categories, like retirement plan services and private banking, the fees remained relatively flat. This has muted some of the correlations with the market. Nevertheless, as Michele mentioned, we still view this as a primary driver of our fee income growth in that category moving forward.
And then maybe just taking a step back, Mark, I think last year, you completed five technology upgrades. Are there any examples or data points you could point to in the first half of the year where the bank benefited from those actions? And just kind of remind us longer term, what are the benefits of those tech initiatives?
We had an impressive year last year with significant achievements, including a voluntary early retirement program, advancements in technology projects, and a restructuring of our commercial bank. This year, our focus has shifted more toward internal technology deployment, moving away from customer-facing projects. For example, we've improved our ability to offer a comprehensive customer view and provided our bankers with useful dashboards. The investments made have enabled us to open accounts much quicker in our branches, reducing the time from 45 minutes to around 5 or 10 minutes. We've also made a substantial upgrade to our treasury management platform, enhancing our commercial efforts in that area with a stronger product. Additionally, we've introduced a new private wealth platform, which has significantly improved the offerings for that team. Overall, we're seeing success as we promote these products, while also making modest enhancements. We're assessing what additional features we can enable to further improve our offerings. Our teams now have access to customer platforms that are well-received by clients, allowing our bankers to sell highly competitive products. There’s nothing lacking in our lineup as we go to market; we are confidently selling products that are at least equal to our competitors'. This strategic approach is why we remain optimistic across all segments.
Appreciate that, Mark. And just one for John. The decline in classified sponsored finance loans was noted on my end. Just wanted to make that observation and thanks for providing those details.
Our next question comes from Brendan Nosal with Hovde Group.
Maybe just starting off here on capital. You folks have been really active on the capital front over the past two years between almost $100 million of sub debt redemptions and very active use of the buyback. Just to the extent that you continue to generate excess capital even after supporting loan growth, what are your latest thoughts on deployment?
Yes. We still kind of have the same mindset. We use one-third of our earnings to support balance sheet growth, about one-third for dividends and the other one-third are for kind of other capital activities, and it might be redemption of sub debt, repurchase of shares, cash and acquisitions, et cetera. And so yes, you're right, we've redeemed all the sub debt that we really have available to us at this point. And given where the stock was trading early this year, we've been pretty active in buybacks. And we're not opposed to accumulating some additional capital to put to use in an acquisition at a later date. But at least so far, we feel like there have been great uses for that capital. And as our stock price works its way further north, I think we'll be less aggressive with buybacks.
Okay. All right. Maybe just turning to the funding base and just looking specifically at brokered funding. I think the total is up to $1.2 billion now or like 8% of the base. Just kind of curious how high you're comfortable taking use of that funding source? And is there any point at which that starts to become a bit of a constraint on the balance sheet?
Yes. Typically, we have an internal threshold of about 10%, and we usually won't exceed that on brokered funding. So, there is likely some room for growth. However, when looking at brokered funding quarter-over-quarter, we didn't observe much growth, and we expect our teams to ensure they secure the core funding that Mike referred to in his comments.
Okay. Perfect. I'm going to sneak one more in there. Just maybe going back to capital. I know you get the M&A question all the time, but I think it's worth asking again just given the pickup in deal activity we've seen over the past few weeks. So, Mark, I would just love your read on the environment and how much price discovery you think there is between buyer and seller and whether you think the banks of the target size you desire are any closer to raising their hands?
There has definitely been activity and speculation within the industry regarding mergers and acquisitions. Discussions have been active for a while, and it's becoming a bit easier now as some of the modeling results in significant gains or premiums for sellers. Therefore, the environment for M&A looks favorable, and we are maintaining close ties with the targets that interest us most. As I mentioned earlier, our primary focus remains on organic growth. In terms of potential acquisitions, we are spending considerable time engaging with the executive teams of the banks we are interested in, working to understand if they are ready and if there's a pricing agreement that would be acceptable to both sides.
Our next question comes from Nathan Race with Piper Sandler.
Michele, going back to your margin commentary, I think you mentioned that you expect some pressure in the back half of this year, just given some further expected increases in deposit costs. I guess I was a little surprised just given how much cash flow is coming off the bond book to redeploy into loans. It sounds like you're still growing loans at a pretty good clip and it seems like those loans are coming on 70 basis points above your portfolio yield. So, we're just curious if you can maybe elaborate a little bit more on that margin commentary and just how you see the sensitivity of the balance sheet to any Fed cuts in the back half of this year?
Yes. Assuming we have a flat rate environment, I don't anticipate significant margin compression; it should be fairly modest. The extent of compression really depends on our deposit competition, which has intensified lately. Special offers are increasing, and we need to respond, particularly if we experience 9% loan growth like we did this quarter, as we will need to fund that growth. Thus, the market dynamics will influence the degree of compression based solely on growth. If the Fed decides to cut rates, we still have a somewhat asset-sensitive balance sheet. I would expect approximately 2 basis points of compression for each 25 basis point rate cut on an annualized basis. So, if the Fed implements a couple of rate cuts in the latter half of the year, we can expect some compression due to asset repricing occurring at a faster rate than our deposits.
Okay. Got it. I apologize, I jumped on a little late, but just curious to get some updated thoughts on just where the pipeline stands and kind of just overall production levels. And I know it's difficult to predict payoffs, but just any thoughts or visibility in terms of how you're thinking about payoffs relative to production levels in the back half of this year?
We mentioned earlier that the pipeline results in the commercial book of business are consistent with previous quarters. I believe we will continue to grow with our clients as their needs evolve or if we gain market share. Breaking it down further, core commercial and industrial has been a strong driver recently. Our real estate production is also strong, but it's being offset by normal course payoffs. While the portfolio isn't necessarily increasing in investment real estate like it is in C&I, the production levels are solid there. The pipelines in consumer mortgage and private wealth are strong, but they are not significant drivers for balance sheet growth; they mainly contribute to fee income, and we expect to see good activity in those areas as well.
Yes, I would like to add something. I am very pleased with the progress of our balance sheet. We are experiencing significant growth and I believe we should maintain our current margins. I was excited to see that loan yields were even higher this quarter compared to the last. We are facing real pressure on deposits, but our priority is to ensure we expand our most cost-effective categories, which is challenging but remains a key objective for our teams. Looking ahead, I believe any changes in margins will be modest compared to where we are this quarter. The growth in loans and deposits will enable us to continue increasing net interest income. This is our perspective internally and is reflected in our plans, which I hope resonates with our investors.
Got it. That's very helpful. And I appreciate that, Mark and John. Maybe one last one for me. I think you touched on kind of fee income growth outlook going forward. But just curious within that, how we should think about that other line? I know there was some CRA investment impacts this quarter, but just any thoughts on kind of that other fee income line, just given how much it's fluctuated over the last several quarters?
I mean if you're referring to the nonclient-related fees, is that what you're looking at, Nate?
Yes. Just when I look at the income statement, it was pretty much 0 for other fee income this quarter. So just any thoughts on that revenue line in particular?
Yes. I mean I would probably back out the valuation adjustment that we had, which was about $900,000. That's fairly unusual for us to have something like that on a CRA investment. And then on a go-forward basis, I feel like this quarter with the absence of that would be a decent run rate to use.
Our next question comes from Damon DelMonte with KBW.
First question on the outlook for expenses. Good job of keeping them in check here in the second quarter compared to the first quarter. Michele, just kind of wondering what your thoughts are here on the back half of the year as far as kind of a quarterly run rate?
Yes. Our expense levels have been really well managed this year, and I think we'll continue to manage them well through the back half of the year. There may be a very modest increase in expenses in Q3 and Q4, I would say, maybe 1% to 2% as we refine our incentive accruals and carry out some of our marketing initiatives, things like that. But the levels of expense management are going to continue.
We've become quite optimistic about the future growth of our loan book, largely due to the addition of new bankers. We've recently recruited four individuals from JPMorgan's asset-based lending group, with three of them starting this quarter and another hire expected in the second half of the year. We're currently at the offer stage with someone in Ohio. We're continuously adding talent, including those we've enlisted for private wealth in Fort Wayne and the leader for our small business lending efforts across the franchise. Most of these expenses are already accounted for, though some might increase. As Michele noted regarding the expense run rate, these are the only areas that may exert some pressure on us. However, the return on this investment will materialize as loan growth kicks in after they complete their non-compete agreements. This investment reinforces our confidence in maintaining growth rates in the mid- to high single digits, not just for the latter half of this year but into the future as well.
I'm glad you brought that up, Mark. Some really smart key people additions across many different which is normal for us, but this year has been kind of exceptionally positive in some key areas. And the small business one you referenced is really as much a deposit play as anything. So we're retooling some of our approach on the low end. So it's a wonderful mix across the way of fee income and balance sheet.
Yes. We moved the small business into the consumer bank, which has around $875 million in deposits and about $30 million in loans. I believe that number is accurate. We're optimistic about the future potential. To truly optimize this segment, we decided to bring in someone from one of the larger regional banks, and we're very pleased with the progress we’re making. This situation reflects what's happening across all the areas I mentioned. I might have been too specific in naming JPMorgan, but acquiring those four bankers was a significant success for us, and we are enthusiastic about the future possibilities.
Got it. I appreciate all that color. And then I guess just a second question here on kind of the credit and provision outlook. With the expected growth that you're anticipating here in the back half of the year, do you feel like this quarter's provision level is kind of a good bogey for the next couple of quarters? Or do you think this quarter was a little bit higher?
I don't think this quarter is a bit higher. We are certainly planning for growth, as we have always stated, and we will keep doing that, likely at the coverage ratio we have now. It really depends on whether we need to adjust for the macroeconomic outlook. In Q2, the forecast for unemployment required a larger provision, but that was balanced out by some improvements in asset quality we observed. Looking ahead, if we assume the macroeconomic forecasts remain stable, we will continue to provide for the growth we anticipate in our balance sheet.
Our next question comes from Brian Martin with Janney.
Michele, you covered much of the margin discussion. Regarding the cost of deposits, do you expect the trend to increase from here? I understand this may be gradual, especially considering your earlier point about the current stability from the Fed and the expectation of a stable rate environment. Given the loan growth and competitive factors, should we anticipate a slight increase in the latter part of the year?
It could. It really depends on the deposit competition and how we compete in our markets. It's difficult for us to provide a clear prediction on that.
Yes. And I thought this was some of our commercial balances decline and our line of credit usage went up, which meant we had to go find some funding that was a little more expensive than what our commercial customers just carrying balances were paying.
Got you. Okay. And then maybe how about just on the fixed rate loan repricing, Michele, can you remind us what that is, whether, I guess, the back half of the year or next 12 months, what you may have on that front?
Yes. Sorry, I'm just trying to.
I have another question regarding the recent tax legislation. John, do you feel more optimistic about loan growth in the commercial and industrial sector due to this legislation? Are you getting feedback from your customers that supports this optimism? Also, concerning the recent hires, could you provide an update on when they will be onboarded? It seems they haven't made an impact yet, so I want to clarify that.
I'm going to hold off on some of the responses, Brian. That was Mike Stewart addressing the questions regarding the new hires. I believe there's a sense of optimism throughout the portfolio. With the added benefits to customers from the bill, it should help cushion some of the impacts from other policy changes related to tariffs and other proposals made in the first half of the year. This situation creates quite a bit of uncertainty regarding what will happen next. However, it's clear that the bill itself is expected to support and instill optimism among our customers.
We're operating in the Midwest, and the Midwest right now has really good economic growth, and we're taking advantage of that. Our businesses, clients' business models are growing, and they're doing all the right things. We get to review their income statements and their balance sheets and their margins, and they seem to be holding up well and they're investing in their business. We take market share. So that helps the growth. And to your last point on people, you're right. Strategic hires have been happening through the course of this year and the expected inputs or the expected gains on what they can bring to our bank have yet to materialize. So that helps us with mix and balance and keeping connected in the whole spectrum of what we think is opportunities for First Merchants.
Yes. And this isn't perfect, but we probably had 5 meaningful hires on the sales side in the first half, and we have 5 more in the second half.
Brian, I now have my notes regarding the fixed rate loans. In the latter half of 2025, we expect around $200 million of fixed rate loans to reprice, which are currently at approximately 5%.
Okay. And probably a similar level as you look out over the 12 months, I mean just kind of double that is kind of what you'd be thinking?
Yes, yes.
Okay. Got you. And then just the last one for me was just on the tax rate, just housekeeping, if the kind of current level is a good level to think about?
It might increase slightly. I would expect it to reach around 13% in the second half of the year.
And I'm not showing any further questions at this time. I'd like to turn the call back over to Mark Hardwick for any further remarks.
Yes, Kevin, thank you for hosting today. We just appreciate all the participation by our analysts and investors and look forward to the second half of the year and talking to you in another 90 days.
Thank you. This concludes today's conference. Thank you for your participation, and have a great day. You may now disconnect.