First Merchants misses estimates for Q2 adjusted profit  as credit quality deteriorates

Overview

• U.S. regional bank's Q2 adjusted EPS missed analyst expectations

• Adjusted net income for Q2 also missed analyst expectations

• Results impacted by higher provision expenses from two commercial loans placed on nonaccrual

Outlook

• Company did not provide specific financial guidance for the current or future periods

Result Drivers

• CREDIT QUALITY DETERIORATION - Higher provision expense driven by two commercial lending relationships placed on nonaccrual status, with associated reserves of $29.7 mln recorded

• LOAN AND DEPOSIT GROWTH - Loan growth of $221.7 mln and deposit growth of $267.8 mln on a linked quarter basis supported balance sheet expansion

• NONINTEREST INCOME REBOUND - Noninterest income increased from prior quarter, reflecting the absence of a negative mortgage loan valuation adjustment and higher gains on sales of loans and derivative hedge fees

Company press release: ID:nGNX7R3bJc

Key Details

Analyst Coverage

• The current average analyst rating on the shares is "buy" and the breakdown of recommendations is 4 "strong buy" or "buy", 2 "hold" and no "sell" or "strong sell"

• The average consensus recommendation for the banks peer group is "buy"

• Wall Street's median 12-month price target for First Merchants Corp is $48.00, about 9% above its July 21 closing price of $44.03

• The stock recently traded at 10 times the next 12-month earnings vs. a P/E of 9 three months ago

Reuters Recommended Reads

• July 21 - Webster Financial Q2 revenue beats estimates on loan, deposit growth

• July 21 - First Financial Bancorp Q2 adjusted EPS hits record on loan growth

• July 21 - KeyCorp quarterly profit rises on interest income strength

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(This story was created using Reuters automation and AI based on LSEG and company data. It was checked and edited by a Reuters journalist prior to publication.)