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]

Core Insights - First Merchants (FRME) reported quarterly earnings of $1 per share, exceeding the Zacks Consensus Estimate of $0.90 per share, and showing an increase from $0.87 per share a year ago, resulting in an earnings surprise of 11.11% [1] - The company achieved revenues of $177.11 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 9.80% and increasing from $156.51 million year-over-year [2] - First Merchants has outperformed the S&P 500, gaining approximately 3.4% since the beginning of the year compared to the S&P 500's gain of 2.7% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.85 on revenues of $159 million, while the estimate for the current fiscal year is $3.55 on revenues of $652.8 million [7] - The estimate revisions trend for First Merchants is favorable, leading to a Zacks Rank 2 (Buy) for the stock, indicating expected outperformance in the near future [6] Industry Context - The Banks - Midwest industry, to which First Merchants belongs, is currently ranked in the top 6% of over 250 Zacks industries, suggesting a strong performance potential [8] - Another company in the same industry, Heartland Financial (HTLF), is expected to report quarterly earnings of $1.03 per share, reflecting a year-over-year change of -2.8%, with revenues projected at $175.79 million, up 296.5% from the previous year [9]

Financial Performance - Fourth quarter 2024 net income available to common stockholders was $63.9 million, up from $42.0 million in Q4 2023, with diluted earnings per share increasing to $1.10 from $0.71[1][2] - Adjusted net income for Q4 2024 was $58.1 million, or $1.00 per share, compared to $53.4 million, or $0.90 per share in Q4 2023[2] - Net income for Q4 2024 was $64,349,000, up from $42,479,000 in Q4 2023, while net income for the year decreased to $201,402,000 from $223,786,000[20] - The company reported net charge-offs of $771,000 for Q4 2024, significantly lower than $3,148,000 in Q4 2023, with total charge-offs for the year at $49,377,000 compared to $25,643,000[21] - Adjusted Net Income Available to Common Stockholders for the twelve months ended December 31, 2024, was $203,315,000, down from $236,707,000 in 2023, a decrease of approximately 14.1%[29] Asset and Loan Growth - Total loans grew by $185.6 million, or 5.9% annualized, on a linked quarter basis, and by $368.1 million, or 2.9% year-over-year[3] - Total loans as of December 31, 2024, amounted to $12,757.7 million, with a net interest income of $208.9 million, resulting in an interest rate of 6.55%[27] - Commercial and industrial loans increased to $4,114,292,000 in Q4 2024, up from $4,041,217,000 in Q3 2024, a growth of 1.9%[25] - Total Loans increased to $12,634,324,000 for the twelve months ended December 31, 2024, up from $12,297,974,000, representing a growth of about 2.7%[28] Deposit Trends - Total deposits were $14.5 billion, decreasing by $299.8 million, or 2.0%, over the past twelve months, primarily due to the sale of Illinois branches[5] - Total deposits as of December 31, 2024, reached $14,521.6 million, an increase from $14,365.1 million on September 30, 2024, representing a growth of 1.1%[26] - Demand deposits increased to $7,980.1 million from $7,678.5 million, reflecting a growth of 3.9% quarter-over-quarter[26] - The company completed the sale of $267.4 million of deposits associated with the Illinois branch on December 6, 2024[26] Income and Expense Analysis - Noninterest income for the quarter totaled $42.7 million, an increase of $17.9 million compared to Q3 2024 and $16.3 million compared to Q4 2023[8] - Noninterest income for Q4 2024 increased to $42,742,000 from $26,444,000 in Q4 2023, with total noninterest income for the year rising to $125,580,000 from $105,602,000[20] - Total Noninterest Expenses rose to $96,289,000 in Q4 2024, compared to $94,629,000 in Q3 2024, reflecting a 1.8% increase[24] - Adjusted Non Interest Expense (Non-GAAP) for Q4 2024 was $94,291, slightly up from $91,915 in Q3 2024, showing a 2.5% increase[32] Capital and Efficiency Ratios - The Common Equity Tier 1 Capital Ratio stood at 11.43%, reflecting a strong capital position[2][10] - The efficiency ratio improved to 48.48% in Q4 2024 from 63.26% in Q4 2023, reflecting better cost management[21] - Efficiency Ratio (Non-GAAP) decreased to 48.48% in Q4 2024 from 53.76% in Q3 2024, indicating improved operational efficiency[32] - Total Average Stockholders' Equity (GAAP) increased to $2,312,270 in Q4 2024 from $2,251,547 in Q3 2024, a growth of 2.7%[31] Interest Income and Margin - Total interest income for Q4 2024 was $234,642,000, a slight decrease from $236,990,000 in Q4 2023, while total interest income for the year increased to $948,006,000 from $893,886,000[20] - Net interest income after provision for credit losses for Q4 2024 was $130,170,000, compared to $128,563,000 in Q4 2023, with a yearly total of $485,414,000 down from $541,900,000[20] - The net interest margin (FTE) for the three months ended December 31, 2024, was 3.28%, slightly up from 3.16% in the previous year[27] - The Net Interest Margin (FTE) for the twelve months ended December 31, 2024, was 3.19%, compared to 3.35% for the previous year, indicating a decline of 16 basis points[30]

Core Insights - First Merchants Corporation reported a strong fourth quarter for 2024, with significant increases in net income, core earnings, net interest margin (NIM), and return on assets (ROA) [2][3]. Financial Performance - The net income available to common stockholders for Q4 2024 was $63.9 million, up from $42.0 million in Q4 2023, resulting in diluted earnings per share of $1.10 compared to $0.71 in the previous year [3][11]. - Adjusted net income, excluding non-core items, was $58.1 million or $1.00 per share, compared to $53.4 million or $0.90 in Q4 2023 [3][11]. - Net interest income for the quarter was $134.4 million, reflecting a 2.5% increase from the prior quarter and a 3.3% increase from Q4 2023 [9][11]. - Noninterest income totaled $42.7 million, a significant increase of $17.9 million from Q3 2024 and $16.3 million from Q4 2023 [10][11]. Asset and Loan Growth - Total assets at the end of Q4 2024 were $18.3 billion, with total loans amounting to $12.9 billion, representing a year-over-year growth of $368.1 million or 2.9% [5][11]. - Loans grew by $185.6 million or 5.9% annualized on a linked quarter basis, primarily driven by commercial loans [5][11]. Deposit Trends - Total deposits were $14.5 billion, down by $299.8 million or 2.0% year-over-year, largely due to the sale of Illinois branches [7][11]. - Excluding the impact of branch sales, deposits declined by $32.4 million in 2024, but increased by $156.5 million or 4.4% annualized on a linked quarter basis [7][11]. Credit Quality - The allowance for credit losses on loans was $192.8 million, or 1.50% of total loans, with non-performing assets to total assets at 0.43%, an increase from 0.35% in the prior quarter [8][22]. - Net charge-offs for the quarter were $0.8 million, with a provision for loans of $5.7 million recorded [8][11]. Capital Position - The Corporation maintained a strong capital position with a Common Equity Tier 1 Capital Ratio of 11.43% and a Tangible Common Equity to Tangible Assets Ratio of 8.81% [11][12].

Core Viewpoint - First Merchants (FRME) has received an upgrade to a Zacks Rank 2 (Buy), indicating a positive trend in earnings estimates which is a significant factor influencing stock prices [1][3]. Earnings Estimates and Stock Price Impact - The Zacks rating system is based on changes in a company's earnings picture, with the Zacks Consensus Estimate reflecting EPS estimates from sell-side analysts [1][2]. - Changes in future earnings potential, as shown by earnings estimate revisions, are strongly correlated with near-term stock price movements, particularly due to institutional investors adjusting their valuations based on these estimates [4]. Business Outlook - The upgrade suggests an improvement in First Merchants' underlying business, which could lead to increased investor interest and a potential rise in stock price [5]. - For the fiscal year ending December 2024, First Merchants is expected to earn $3.38 per share, representing a decrease of 13.1% from the previous year, although analysts have raised their estimates by 0.1% over the past three months [8]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with a strong historical performance, particularly for Zacks Rank 1 stocks which have averaged a +25% annual return since 1988 [7]. - The upgrade to Zacks Rank 2 places First Merchants in the top 20% of Zacks-covered stocks, indicating a strong potential for market-beating returns in the near term [10].

Core Viewpoint - First Merchants Corporation is set to report its fourth quarter 2024 financial results on January 30, 2025, and will host a conference call and webcast for investors [1]. Group 1: Financial Reporting - The fourth quarter 2024 financial results will be reported on January 30, 2025 [1]. - A conference call and webcast will take place 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 [1]. Group 2: Company Overview - First Merchants Corporation is a financial holding company based in Muncie, Indiana [2]. - The company operates one full-service bank charter, known as First Merchants Bank, which also includes a division for wealth management [2]. Group 3: Stock Information - First Merchants Corporation's common stock is traded on the NASDAQ under the symbol FRME [3]. - Stock quotations are available in daily newspapers and on the company's website [3].

Capital Adequacy - Common Equity Tier 1 Capital Ratio stands at 11.25% and Tangible Common Equity to Tangible Assets Ratio at 8.76%[205] - As of September 30, 2024, the total risk-based capital ratio for First Merchants Corporation is 13.18%, while First Merchants Bank's ratio is 12.66%[267] - First Merchants Corporation's Tier 1 capital to risk-weighted assets ratio stands at 11.41%, and First Merchants Bank's ratio is 11.41% as of September 30, 2024[267] - The common equity tier 1 capital ratio for First Merchants Corporation is 11.35%, and for First Merchants Bank, it is 11.80% as of September 30, 2024[267] - The tangible common equity to tangible assets ratio for First Merchants Corporation improved to 8.76% at September 30, 2024, up from 8.40% at December 31, 2023[269] - The Corporation's total risk-based capital was $1,994,480 thousand as of September 30, 2024, with net risk-weighted assets of $15,132,640 thousand[267] - The Corporation began a five-year phase-out of $13.0 million in tier 2 capital as defined in the Basel III capital rules[263] Financial Performance - Net income available to common stockholders for Q3 2024 was $48.7 million, or $0.84 per diluted share, down from $55.9 million, or $0.94 per diluted share in Q3 2023[207] - Adjusted earnings per diluted share for Q3 2024 totaled $0.95, compared to $0.96 in Q3 2023 and $0.68 in Q2 2024[208] - Noninterest income for the three months ended September 30, 2024, totaled $24.9 million, a decrease of $3.0 million or 10.7% compared to the same period in 2023, primarily due to $9.1 million in losses on sales of available for sale securities[246] - For the nine months ended September 30, 2024, noninterest income increased to $82.8 million, a rise of $3.7 million or 4.6% compared to the same period in 2023, driven by increases in net gains and fees on sales of loans and fiduciary and wealth management fees[247] - Noninterest expense for the nine months ended September 30, 2024, totaled $283.0 million, an increase of $2.8 million or 1.0% compared to the same period in 2023, with FDIC assessments rising by $4.2 million[249] Asset and Loan Quality - Total loans amounted to $12.65 billion, with commercial and industrial loans at $3.43 billion, agricultural loans at $199.83 million, and real estate loans totaling $8.55 billion[274][276] - Non-accrual loans increased to $59.1 million, up $5.5 million from December 31, 2023, primarily due to a $11.4 million rise in non-accrual balances in commercial real estate, non-owner occupied[278] - Loans 90 days or more delinquent and still accruing rose to $14.1 million, an increase of $13.9 million from December 31, 2023, driven mainly by one relationship totaling $13.0 million[279] - Net charge-offs for the three months ended September 30, 2024, totaled $6.7 million, compared to $20.4 million for the same period in 2023[286] - The provision for credit losses for the nine months ended September 30, 2024, was $31.5 million, compared to $2.0 million for the same period in 2023[286] - The total nonperforming assets, including non-accrual loans and loans 90 days or more delinquent, amounted to $78.44 million, up from $58.58 million at December 31, 2023[281][282] Deposits and Borrowings - Total deposits decreased by $456.4 million, or 4.1% annualized, from December 31, 2023, primarily due to $287.7 million of deposits reclassified as held for sale[215] - Average account balance within the deposit portfolio was $34,000 as of September 30, 2024[216] - Total borrowings increased by $52.3 million as of September 30, 2024, primarily due to an increase in federal funds purchased and FHLB advances[217] - Average interest-bearing deposits increased by $674.0 million for the nine months ended September 30, 2024 compared to the same period in 2023[234] - Total available remaining borrowing capacity from the FHLB and Federal Reserve at September 30, 2024, was $762.6 million and $1.1 billion, respectively[291] Interest Income and Margin - Net interest margin for Q3 2024 is 3.23%, compared to 3.16% in Q2 2024 and 3.29% in Q3 2023[205][224] - Net interest income accounted for 82.4% of revenues for the nine months ended September 30, 2024[228] - Interest expense on deposits increased by $86.9 million for the nine months ended September 30, 2024, or 80 basis points compared to the same period in 2023[240] - Average earning assets increased by $42.7 million for the three months ended September 30, 2024, driven by average loan growth of $392.5 million[231] - The Corporation's net interest income simulation modeling indicates a 4.4% increase for a rising 200 basis points scenario compared to a 4.0% increase as of December 31, 2023[302] - For a rising 100 basis points scenario, the estimated net interest income is projected to increase by 3.3% as of September 30, 2024, up from 2.1% as of December 31, 2023[302] - In a falling 100 basis points scenario, the Corporation anticipates a decrease of (1.7)% in net interest income as of September 30, 2024, compared to a decrease of (5.0)% as of December 31, 2023[302] - The projected decrease in net interest income for a falling 200 basis points scenario is (3.5)% as of September 30, 2024, compared to (7.8)% as of December 31, 2023[302] Liquidity Management - The Corporation's liquidity is primarily derived from core deposit growth, loan principal payments, and the sale and maturity of investment securities[289] - The Corporation's liquidity and interest sensitivity position as of September 30, 2024, is deemed adequate to achieve optimum interest margins while mitigating interest rate risk[296] - Management utilizes GAP/Interest Rate Sensitivity Reports and Net Interest Income Simulation Modeling, which are constructed and monitored quarterly[296] - The interest rate scenarios used for analysis do not necessarily reflect management's view of future market movements but measure potential volatility in earnings[297] - The Corporation's asset liability process evaluates simulated net interest income under three interest rate scenarios: base, rising, and falling[297] Taxation - Income tax expense for the three months ended September 30, 2024, was $7.2 million on pre-tax net income of $56.3 million, compared to $9.0 million on pre-tax income of $65.4 million for the same period in 2023[250] - The effective income tax rate for the three months ended September 30, 2024, was 12.7%, down from 13.8% in the same period in 2023, primarily due to a larger portion of tax-exempt interest income[252] Internal Controls - There have been no material changes in the Corporation's internal control over financial reporting during the last fiscal quarter[308]