FRMEP

• Record financials: Ended the year with record total assets, loans, and deposits; record net income and diluted earnings per share.
• Loan growth: Robust with $939 million of growth for the year (7.3%), driven by various factors like CapEx financing, revolvers, M&A financing, etc.
• Deposit growth: Strong fourth quarter consumer deposit growth, with $155 million total consumer deposit increases and $424.9 million annualized growth.
• Acquisition: Closing of First Savings Group acquisition on February 1, 2026, adding approximately $2.4 billion of assets.
• Asset quality: Strong, with NPAs and 90-day past due loans up but adjusting for a payoff, down year-over-year; reserve at quarter end was $195.6 million with a robust coverage ratio.

• Loan growth: Mid-single digit expected for first quarter, mid- to high expectations for the year, consistent with 2025 results.
• Noninterest income: Expecting double-digit growth in 2026.
• Buybacks: Intend to be aggressive with buybacks as long as the price holds.
• Expenses: Core noninterest expense expected to increase 3%-5% year-over-year; combined with First Savings, expect positive operating leverage.

First Merchants Corporation ended the year with record total assets of $19 billion, record total loans of $13.8 billion, and record total deposits of $15.3 billion. Full-year net income was $224.1 million, a 13.8% increase from the previous year, with diluted earnings per share of $3.88. Fourth quarter net income was $56.6 million or $0.99 per share. Loan growth was robust with $939 million of growth for the year (7.3%). Deposit growth was strong in the fourth quarter with $155 million of total consumer deposit increases and $424.9 million annualized growth. Net interest income in the fourth quarter increased by $5.4 million, and full-year net interest income was $145.3 million, up $5.1 million from the prior year. Noninterest income in the fourth quarter totaled $33.1 million, with customer-related fees at $30 million. Noninterest expense for the quarter was $99.5 million, and full-year noninterest expense increased by $3.2 million (less than 1%).

• Balance sheet optimization: Evaluating selling First Savings bond portfolio, small portion of bond and low-yielding loans, but size is modest.
• M&A disruption: Conversations happening with clients and teams, but opportunities viewed as present.
• Deposit repricing: CD maturities and interest rate changes could impact margin.

Q: Balance sheet optimization, areas being looked at?

A: Evaluating selling First Savings bond portfolio, small portion of bond and low-yielding loans.

Q: Loan growth expectations, 2026?

A: Mid-single digit first quarter, mid- to high for the year, balanced across segments.

Q: Deposits, CD repricing schedule?

A: $800 million CDs maturing in first 2 quarters of 2026 with higher rates, then $400 million maturing in third quarter.

Q: Operating leverage, 2026?

A: Adding talent, expecting positive operating leverage from First Savings integration.

Q: Expenses, core expense base and FSFG impact?

A: Core noninterest expense up 3%-5% year-over-year; first partial quarter with FSFG coming on board.

Q: Fee income growth 2026?

A: Expecting double-digit growth, inclusive of stand-alone and acquisition.

Q: M&A disruption on loan pipeline?

A: Conversations happening, viewed as opportunity, evaluating talent augmentation.

Q: Buybacks, M&A fit?

A: Focused on current acquisition, buybacks preferred over M&A near term.

Q: Margin, core margin ex onetime item and Q1 seasonality?

A: Core margin had 8 basis points from interest recovery; Q1 seasonality dips margin, but overall annualized margin expected to compress a couple of basis points.

Q: FSFG impact on margin?

A: Interest accretion from FSFG deal gives margin lift.

Q: Expenses, efficiency ratio outlook?

A: Efficiency ratio under 55% level, operating leverage expected in Q3, Q4.

Q: Loan repricing in 2026?

A: $350 million fixed rate loans maturing at 4.40%, repricing upside.

Q: Tax rate, 2026?

A: Core 13%, combined with deal likely 12%.

Q: Multifamily construction NPLs and charge-offs?

A: Multifamily portfolio generally decent, charge-offs around $6-7 million run rate.

Q: Commercial deposits ex public funds and loan demand?

A: Correlation with line of credit usage, seasonality from public funds, but related to loan growth.

Q: M&A and buyback focus?

A: Focused on current acquisition, buybacks preferred over M&A near term