Core Points - First Merchants Corporation will report its first quarter 2025 financial results on April 24, 2025 [1] - A conference call and webcast will be held at 11:30 a.m. (ET) on the same day [1] - Participants can register for the call to receive a phone number and access code [2] Company Overview - First Merchants Corporation is a financial holding company based in Muncie, Indiana [3] - The company operates one full-service bank charter, First Merchants Bank, and also has a division called First Merchants Private Wealth Advisors [3] - The common stock of First Merchants Corporation is traded on the NASDAQ under the symbol FRME [4]

Core Viewpoint - First Merchants (FRME) has been upgraded to a Zacks Rank 1 (Strong Buy), indicating a positive outlook on its earnings estimates, which is a significant factor influencing stock prices [1][3]. Earnings Estimates and Stock Price Movement - The Zacks rating system is based on changes in earnings estimates, which are closely correlated with stock price movements, particularly due to institutional investors adjusting their valuations based on these estimates [4][6]. - An increase in earnings estimates typically leads to higher fair value for a stock, prompting institutional investors to buy or sell, thus affecting stock prices [4]. Company Performance Indicators - First Merchants is projected to earn $3.85 per share for the fiscal year ending December 2025, reflecting an 11% year-over-year increase [8]. - Over the past three months, the Zacks Consensus Estimate for First Merchants has risen by 9.4%, indicating a positive trend in earnings expectations [8]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988 [7]. - The upgrade of First Merchants to Zacks Rank 1 places it in the top 5% of Zacks-covered stocks, suggesting potential for market-beating returns in the near term [10].

Core Insights - Three stocks with strong momentum and buy rank are highlighted for investors: Zions Bancorporation, First Merchants Corporation, and Hancock Whitney Corporation [1][2][3]. Company Summaries - **Zions Bancorporation, National Association (ZION)**: - Zacks Rank 1 - Current year earnings estimate increased by 8.2% over the last 60 days - Shares gained 2.0% over the last six months, outperforming the S&P 500, which declined by 2.1% - Momentum Score: A [1][2] - **First Merchants Corporation (FRME)**: - Zacks Rank 1 - Current year earnings estimate increased by 8.5% over the last 60 days - Shares gained 7.6% over the last six months, also outperforming the S&P 500 - Momentum Score: B [2][3] - **Hancock Whitney Corporation (HWC)**: - Zacks Rank 1 - Current year earnings estimate increased by 6.2% over the last 60 days - Shares gained 0.6% over the last six months, again outperforming the S&P 500 - Momentum Score: B [3][4]

Company Overview - First Merchants (FRME) is headquartered in Muncie and operates in the Finance sector, with a stock price change of 6.54% since the beginning of the year [3] - The current dividend payout is $0.35 per share, resulting in a dividend yield of 3.29%, which is higher than the Banks - Midwest industry's yield of 2.99% and the S&P 500's yield of 1.57% [3] Dividend Analysis - The annualized dividend of First Merchants is currently $1.40, reflecting a 0.7% increase from the previous year [4] - Over the past five years, the company has increased its dividend four times, achieving an average annual increase of 7.79% [4] - The current payout ratio stands at 40%, indicating that the company distributes 40% of its trailing 12-month earnings per share as dividends [4] Earnings Growth Expectations - For the fiscal year, First Merchants anticipates solid earnings growth, with the Zacks Consensus Estimate for 2025 projected at $3.79 per share, representing a year-over-year growth rate of 9.22% [5] Investment Appeal - First Merchants is viewed as an attractive dividend investment, supported by a Zacks Rank of 1 (Strong Buy), indicating a compelling investment opportunity [7]

Credit Losses and Provisions - The allowance for credit losses on loans decreased by $12.2 million during the year ended December 31, 2024, primarily due to $49.4 million in net charge-offs[129]. - The provision for credit losses on loans recorded in 2024 was $37.2 million, resulting in a net provision expense of $35.7 million after a reserve release of $1.5 million[129]. - Net charge-offs for 2024 amounted to $49.4 million, with two commercial relationships accounting for $42.7 million of these charge-offs[129]. - The ratio of net charge-offs to average loans outstanding for 2024 was 0.39%, compared to 0.21% in 2023[124]. - As of December 31, 2024, the total allowance for credit losses on loans was $192.8 million, down from $204.9 million in 2023[129]. - The allowance for credit losses on loans was reported at $192.8 million as of December 31, 2024, reflecting management's estimates of expected future losses[334]. - The total allowance for credit losses (ACL) on loans is adjusted quarterly, reflecting the expected credit losses based on historical data and economic forecasts[465]. - The net provision expense for credit losses on loans for the year ended December 31, 2024, was $35.7 million, after recording a provision of $37.2 million offset by a release in reserve of $1.5 million[476]. - The total ACL - Loans balance as of December 31, 2024, was $192.757 million, down from $204.934 million as of December 31, 2023[477]. - The Corporation's loan commitments to extend credit amounted to $5,006.085 million as of December 31, 2024, compared to $5,025.790 million in 2023[481]. Financial Performance - Total Interest Income for 2024 reached $948,006, an increase of 6.4% from $893,886 in 2023[340]. - Net Interest Income after Provision for Credit Losses decreased to $485,414 in 2024, down from $541,900 in 2023, reflecting a decline of 10.4%[340]. - Noninterest Income increased to $125,580 in 2024, up 18.9% from $105,602 in 2023[340]. - Total Noninterest Expenses decreased to $379,266 in 2024, a reduction of 2.3% compared to $388,270 in 2023[340]. - Net Income available to Common Stockholders for 2024 was $199,527, down 10.1% from $221,911 in 2023[340]. - Basic Net Income per Share for 2024 was $3.42, a decrease of 8.6% from $3.74 in 2023[340]. - Comprehensive Income for 2024 was $188,687, a decline of 34.3% from $286,967 in 2023[341]. - The net income for the year ended December 31, 2024, is $201,402,000, a decrease from $223,786,000 in 2023[343]. - The total comprehensive income for the year ended December 31, 2024, is $188,685,000, compared to a comprehensive income of $239,151,000 in 2023[343]. Loans and Loan Portfolio - The company's net loans increased to $12,661,602,000 in 2024 from $12,281,093,000 in 2023, showing growth in the loan portfolio[338]. - The loan portfolio reached $12,854,359 million as of December 31, 2024, up from $12,486,027 million in 2023, indicating an increase of about 2.9%[443]. - Commercial and industrial loans increased to $4,114,292 million in 2024 from $3,670,948 million in 2023, marking a growth of approximately 12.1%[443]. - Total loans across all categories reached $12,854,359, an increase from $1,733,843, representing a growth of about 641%[447]. - Total commercial and industrial loans reached $1,693,245, an increase from $539,311 in the previous year, representing a growth of approximately 213%[447]. - Total residential loans amounted to $2,374,729, compared to $417,417 in the previous year, reflecting a growth of about 469%[447]. - Home equity loans increased to $659,811 from $4,354, marking a growth of approximately 15,116%[447]. - The total current period gross charge-offs were $54,243, a decrease from $40,529 in the previous period[447]. Deposits and Borrowings - The total short-term borrowings as of December 31, 2024, were $338.3 million, an increase from $218.5 million in 2023[137]. - Total deposits decreased to $14,521,626,000 in 2024 from $14,821,453,000 in 2023, indicating a decline in customer deposits[338]. - The Corporation's total deposits decreased by $299.8 million from December 31, 2023, primarily due to the sale of Illinois branch deposits amounting to $267.4 million, resulting in total deposits of $14.5 billion as of December 31, 2024[498]. - Total borrowings increased from $1.03 billion in 2023 to $1.16 billion in 2024, with Federal Home Loan Bank advances rising from $712.9 million to $822.6 million[500]. Asset Management and Investments - The fair value of assets acquired in previous acquisitions was $2,510,576, with liabilities assumed totaling $2,168,863[347]. - The amortized cost of investment securities available for sale was $1.624 billion as of December 31, 2024, with a fair value of $1.386 billion[423]. - The total held-to-maturity investment securities amounted to $2.074 billion, with a fair value of $1.723 billion as of December 31, 2024[424]. - The total investment securities available for sale reported at less than historical cost was $1,353.744 million as of December 31, 2024, with gross unrealized losses of $238.853 million, representing 97.6% of the Corporation's investments available for sale in an unrealized loss position[435]. - The fair value of investment securities available for sale at December 31, 2024 was $1,353.744 million, down from a historical cost of $1,592.597 million[435]. Shareholder and Equity Information - The total stockholders' equity rose to $2,304,983,000 in 2024, compared to $2,247,713,000 in 2023, reflecting an increase in retained earnings[338]. - Cash Dividends Paid to Common Stockholders increased to $1.39 in 2024, up from $1.34 in 2023[340]. - The company repurchased 1,648,466 shares of common stock in 2024, resulting in a total cost of $56,168,000[343]. - The total number of common shares outstanding as of December 31, 2024, is 57,974,535, a decrease from 59,424,122 shares in 2023[343]. - The accumulated other comprehensive income (loss) as of December 31, 2024, is $(188,685,000), compared to $(175,970,000) in 2023[343]. Risk Management and Credit Quality - Nonperforming loans and credit quality indicators are actively monitored, with management tracking trends in criticized commercial loans and net charge-offs[444]. - The corporation's risk grading system includes categories from Pass to Loss, with all large commercial credit grades reviewed at least annually[445]. - The Corporation maintained a strong focus on credit quality, with no allowance for credit losses recorded on investment securities available for sale due to unrealized losses being attributed to interest rate changes[358]. - The Corporation's investment securities portfolio is monitored quarterly for credit quality through the use of credit ratings[429]. Accounting and Regulatory Compliance - The Corporation adopted new accounting standards in 2024, including ASU No. 2023-02 for tax credit structures, which did not significantly impact financial statements[395]. - The Corporation is assessing the impact of new accounting pronouncements, including ASU No. 2023-09 on income tax disclosures, expected to be effective after December 15, 2024[400]. - The Corporation's income tax expense includes current year tax due and changes in deferred tax assets and liabilities, with no uncertain tax positions identified[390].

Company Overview - First Merchants (FRME) is headquartered in Muncie and operates in the Finance sector, with a stock price change of 11.83% since the beginning of the year [3] - The company currently pays a dividend of $0.35 per share, resulting in a dividend yield of 3.14%, which is higher than the Banks - Midwest industry's yield of 2.9% and the S&P 500's yield of 1.53% [3] Dividend Analysis - The current annualized dividend of First Merchants is $1.40, reflecting a 0.7% increase from the previous year [4] - Over the past five years, First Merchants has increased its dividend four times, achieving an average annual increase of 7.79% [4] - The company's current payout ratio is 40%, indicating that it pays out 40% of its trailing 12-month earnings per share as dividends [4] Earnings Growth - Earnings growth for First Merchants appears solid, with the Zacks Consensus Estimate for 2025 projected at $3.79 per share, representing a year-over-year growth rate of 9.22% [5] Investment Opportunity - First Merchants is considered a compelling investment opportunity due to its attractive dividend yield and strong Zacks Rank of 1 (Strong Buy) [7]

Core Viewpoint - Momentum investing focuses on following a stock's recent price trends, aiming to buy high and sell even higher, with the expectation that established trends will continue [1][2]. Company Overview: First Merchants (FRME) - First Merchants currently holds a Momentum Style Score of A, indicating strong potential for momentum investing [3]. - The company has a Zacks Rank of 1 (Strong Buy), which historically outperforms the market when combined with a Style Score of A or B [4]. Performance Metrics - Over the past week, FRME shares increased by 10.14%, significantly outperforming the Zacks Banks - Midwest industry, which rose by 1.21% [6]. - In a longer timeframe, FRME's shares have risen by 16.86% over the past month, compared to the industry's 7.1% [6]. - Over the last quarter, FRME shares increased by 4.14%, and over the past year, they gained 34.79%, while the S&P 500 only moved 2.97% and 24.31%, respectively [7]. Trading Volume - The average 20-day trading volume for FRME is 246,404 shares, which serves as a bullish indicator when combined with rising stock prices [8]. Earnings Outlook - In the past two months, three earnings estimates for FRME have been revised upwards, raising the consensus estimate from $3.52 to $3.71 [10]. - For the next fiscal year, two estimates have also moved higher, with no downward revisions noted [10]. Conclusion - Given the strong performance metrics and positive earnings outlook, FRME is positioned as a solid momentum pick and is recommended for investors seeking potential growth [12].

Financial Data and Key Metrics Changes - The earnings per share for Q4 totaled $1.10, or $1.00 per share after adjusting for a $20 million gain on the sale of branches and an $11.6 million bond loss [7][8] - Net income for the full year 2024 was $200 million, with earnings per share totaling $3.41 [9] - The tangible common equity ratio increased to 8.81%, and tangible book value per share rose to $26.78, a 25% increase over the last two years [8][9] Business Line Data and Key Metrics Changes - Loan growth for Q4 was 6%, with commercial loans being the primary driver, increasing by $148 million during the quarter [12] - The commercial segment grew over $250 million for the full year, with the C&I portfolio growing over $300 million [12][17] - The consumer loan portfolio saw year-to-date growth of $125 million, with the residential portfolio contributing over 50% of that increase [18] Market Data and Key Metrics Changes - Total deposits grew at a 4.4% annualized rate for Q4, although total deposit balances for the full year were essentially flat [20][21] - Public fund balances declined by 6% throughout 2024, while non-public fund account balances grew by 1% [21][22] - The cost of deposits decreased by 26 basis points to 2.43% in Q4 [35] Company Strategy and Development Direction - The company aims to deliver top quartile financial results in 2025, focusing on core markets in Indiana, Ohio, and Michigan [7][8] - The strategy includes organic loan, deposit, and fee income growth, along with enhancing client experience through new technology platforms [10][11] - The company is focused on maintaining a low efficiency ratio and managing deposit costs effectively [20][69] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about returning to pre-Silicon Valley performance metrics and highlighted strong momentum in Q3 and Q4 [9][58] - The company anticipates minimal expense growth in 2025, projecting a range of 1% to 3% [69] - The outlook for loan growth remains positive, with expectations of mid to high-single-digit growth [92][93] Other Important Information - The company completed several upgrades to its technology platforms and sold five non-core branches, which contributed to its restructuring efforts [6][8] - The allowance for credit losses was reported at $192.8 million, with a coverage ratio of 1.5% [34] Q&A Session Summary Question: What is the repricing dynamics for the loan book? - Management indicated that fixed rate securities of about $250 million will be repricing in the next 12 months, with a yield of approximately 4.5% [63] Question: What are the expectations for deposit costs? - December deposit costs were reported at 2.33%, with expectations to continue reducing costs [77] Question: What is the outlook for C&I loan growth? - Management noted strong growth in the manufacturing segment and positive momentum in Michigan, indicating a favorable outlook for C&I loans [81][82] Question: What is the margin outlook for 2025? - The company plans to use cash flows from securities to fund loan growth, expecting margin growth despite some repricing down [90][91] Question: What are the capital management priorities? - The focus remains on organic growth, with potential M&A opportunities in core markets if they make sense [98][99] Question: What is the expected growth rate for non-interest income? - Non-interest income is expected to grow in the mid to high-single digits, driven by wealth management and mortgage fees [105][106]

INVESTOR UPDATE Fourth Quarter 2024 Forward Looking Statement This presentation contains forward-looking statements made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements can often, but not always, be identified by the use of words like "believe", "continue", "pattern", "estimate", "project", "intend", "anticipate", "expect" and similar expressions or future or conditional verbs such as "will", "would", "should", "could", "might", ...

Core Insights - First Merchants (FRME) reported a revenue of $177.11 million for Q4 2024, marking a year-over-year increase of 13.2% and exceeding the Zacks Consensus Estimate by 9.80% [1] - The earnings per share (EPS) for the same quarter was $1.00, up from $0.87 a year ago, representing an EPS surprise of 11.11% over the consensus estimate of $0.90 [1] Financial Performance Metrics - Efficiency Ratio stood at 48.5%, significantly better than the three-analyst average estimate of 56% [4] - Net Interest Margin (FTE) was reported at 3.3%, slightly above the three-analyst average estimate of 3.2% [4] - Net Charge-offs as a percentage of Average Loans (Annualized) were 0%, outperforming the average estimate of 0.2% [4] - Average Balance of Total Earning Assets was $17.09 billion, exceeding the two-analyst average estimate of $16.96 billion [4] - Total Non-Interest Income reached $42.74 million, significantly higher than the three-analyst average estimate of $31.14 million [4] - Net Interest Income was reported at $134.37 million, above the two-analyst average estimate of $130.61 million [4] - Fiduciary and wealth management fees were $8.67 million, slightly above the average estimate of $8.66 million [4] Stock Performance - Shares of First Merchants have returned +3.4% over the past month, outperforming the Zacks S&P 500 composite's +1.2% change [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [3]