Thank you for standing by and welcome to the First Merchants Corporation’s Fourth Quarter 2024 Earnings Conference Call. Before we begin, management would like to remind you that today's call contains forward-looking statements with respect to the future performance of 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 a reconciliation of GAAP to non-GAAP measures. As a reminder, today's call is being recorded. And now I’d like to hand the program over to Mr. Mark Hardwick, CEO. Mr. Hardwick, you may begin.

Good morning, and welcome to the First Merchants fourth quarter 2024 conference call. Thanks for the introduction and for covering the forward-looking statement on Page 2. We released our earnings today at approximately 8 AM Eastern Time. You can access today’s slides by following the link on the third page of our earnings release. On page three 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. Please turn to Page 4. We're quite pleased with our fourth quarter results and the focused momentum that we're building. 2024 in many respects was a great year for the bank. We certainly had our challenges, but the team was resilient and stayed focused on the many tasks on hand. During 2024 and in order, we completed our voluntary early retirement program, the upgrade to our in-branch account origination platform to Terafina, the upgrade of our online and mobile platform for both consumer and then commercial clients. We upgraded our private wealth platform to SS&C InnoTrust and Black Diamond. We completed the sale of five non-core Illinois branches and the corresponding restructure of a portion of our securities portfolio and even though the work slipped into the first quarter of 2025, we just upgraded our wire platform to a real-time system powered by Finastra. You will notice on the branch map that we are now down to 110 locations and we're highly focused on delivering top quartile financial results in 2025 with minimal or no distractions. The tiger focus on our core markets, Indiana, Ohio and Michigan will drive new and innovative customer acquisition strategies which are proving to be rewarding and fun. On Slide 5 you can see our earnings per share for the quarter totaled $1.10 or $1 even per share after adjusting for a $20 million gain on the sale of the Chicago branches offset by an $11.6 million bond loss related to security sales. Loan growth totaled 6% for the quarter, consistent with our 2025 expectations. Net Interest margin also improved by five basis points Q4 over Q3 and helped drive our growth of 4% on a linked basis and again supported a sub 54% efficiency ratio for the quarter. Our tangible common equity ratio has continued to build and is now 8.81%. Fourth quarter tangible book value per share, which is reported on Slide 10 was $26.78 per share and it has increased by $5.33 per share or 25% over the last two years. Net income totaled $200 million for the full year of 2024 and earnings per share totaled $3.41. Our Q3 and Q4 momentum is very satisfying and we feel like we are now back to pre-Silicon Valley performance metric levels. Now Mike Stewart will discuss our line of business momentum.

Yeah, thank you Mark. And good morning to all. Our business strategy which is summarized on Slide 6 remains unchanged. We're a commercially focused organization across all these business segments and our primary markets of Indiana, Michigan and Ohio. And throughout 2024, we remained focused on building earnings momentum by executing our strategic imperatives of organic loan, deposit, fee income growth and taking market share by engaging and rewarding and retaining our teammates and by implementing the new technology platforms that Mark talked about that have enhanced our client experience. So you heard Mark summarize on Slide 4, we delivered on this earnings momentum throughout the year. Let's turn to slide 7. Loan growth was strong for the fourth quarter across both the commercial and consumer segments reaching nearly 6% on an annualized basis and bringing the full year growth to 3%. The $9.7 billion Commercial segment was the primary driver of the growth by increasing $148 million during the quarter with the C&I portfolio growing $66 million or 3% and the Investment Real Estate portfolio growing over $80 million. For the full year, our Commercial segment grew over $250 million or 3% with the C&I portfolio growing over $300 million offsetting the decline that we've talked about throughout the year in the Investment Real Estate portfolio. Another pleasing bullet point on this page is the year-end pipeline. It's at a consistent level from the prior quarter, after such a strong balance sheet growth. The growth has been shared across all the regions with Indiana, Michigan, and the sponsor teams driving the bulk of the increase. Some of the consistent trends across the C&I spectrum are generally evident like the M&A and CapEx spending, which was slow during the first three quarters of 2024, but has begun to thaw particularly as it relates to acquisition, and/or ownership transitions. That activity drove quite a bit of commercial lending during the last two months of the year and carried into the pipelines. Fed rate reductions have had a positive impact on loan demand, specifically with investment real estate projects. New production for our Investment Real Estate team has been strong and the end of the year pipeline demonstrates some of that as well. All of these are positive indicators for future balance sheet growth. What about the benefits of easing inflationary pressures are also benefiting our clients. In particular the stability of auto trends and orders along with solid demand for workers in construction and infrastructure industries. So far the response to proposed tariffs hasn't had a significant impact on inventory or margins. Having said that, revolver usage is up across most industries along with the use of cash reserves. The Agri business segment remains a little challenged, while commodity prices have reverted to more historic levels over the past four years, input costs have not declined as much and equipment purchase remained soft. FMB carries almost no exposure to the impacts of the bird flu as the bulk of our focus has been on crop production. Our commercial focus has always been the primary driver of our balance sheet growth. And the Commercial and Industrial segments is the largest part of our portfolio. C&I comprises 50% of the total First Merchants loan portfolio and two-thirds of the Commercial. A few comments on the Consumer portfolio - loan portfolio. Year-to-date growth reached $125 million with the on-balance-sheet residential portfolio driving over 50% of that increase or $65 million. We utilized our balance sheet for variable rate short-term fixed-rate or construction loans. As the 10-year treasury has continued to climb during the quarter, our mortgage production has remained strong throughout. Michele will review the year-over-year growth. Our mortgage team delivered through the gain on sale activities. We have a really strong team of mortgage bankers throughout our footprint helping us continue that growth. Let's turn to Slide 8, deposits. The story of this slide is mix. Mix of our product set and our goal of managing deposit cost. Michele will be reviewing the improvement of our net interest margin, and this slide represents the work our teams have accomplished in managing and building core deposit relationships, while reducing deposit cost on public funds and maturity deposit categories. So for the quarter, total deposits grew at a 4.4% annualized rate and for the full year, our total deposit balances were essentially flat, excuse me. The Commercial segment grew deposits during the quarter by $50 million with non-public fund balances, what we would call operating accounts growing $27 million. Year-to-date commercial deposit balances declined 1%, but the non-public fund account balances or operating accounts grew by 1% or $87 million. Public Fund balances declined 6% throughout 2024. Public Funds are an important segment, yet one of our highest costs of depository categories. The overall story is, we improved our mix of commercial deposits throughout the year by growing operating accounts. We also continued our pricing discipline within our Consumer segment. Specifically, maturity deposits or CDs. The chart at the top states that consumer deposit balances declined during the quarter 22% on an annualized basis which they did. But the maturity deposit balance decline was essentially the entirety of it at $346 million. So core were our primary consumer account deposit balances were flat during the quarter but grew $127 million in 2024 or roughly 2%. Maturity deposits, CD balances declined over $430 million through 2024. The mix of deposit categories has been a focus of our teams, a focus on primary accounts and a focus on deposit cost. So overall, I'm pleased with the active engagement our teams are having with their clients as we manage the mix and deposit cost. So I'm going to turn the call over to Michele, so she can review in more detail the composition of our balance sheet and the drivers of our income statement.

Thanks, Mike. Slide 9 covers our fourth quarter performance. Line one shows a small decline in total assets. Below that, you can see it was derived from the decline in investments reflecting the sale of bonds as we continue to reposition the portfolio that was offset by the loan growth of $185 million that Mike discussed in his remarks. Moving down to the income statement in the middle of the page, net interest income on line 11 continued its growth trajectory with an increase of $3.3 million sequentially. Non-interest income on line 13 increased by $17.9 million, which reflected the gain on the sale of our Illinois branches of $20 million, offset by an increase in realized losses on the sale of bonds over the prior quarter of $2.5 million. When normalized for those non-core items, non-interest income remained strong totaling $34.4 million. As a result, pre-tax pre-provision earnings grew linked quarter by nearly $2.7 million and totaled $73.2 million reflecting strong core franchise performance. That performance fueled tangible book value growth during the quarter despite higher interest rates negatively impacting AOCI. Slide 10 shows our annual results. You can see at the top the balance sheet lines, show the favorable change in earning asset mix reflecting a decrease of $350 million in the lower yield in investment portfolio and an increase of $368 million and higher yield in loans. The decline in deposits on line 4 was due to the sale of the five Illinois branches that closed in early December. Operating earnings for the year were strong with pre-tax pre-provision earnings totaling $272.4 million. Tangible book value per share benefited from the strong earnings increasing a $1.72 or 7% to $26.78 at year end. We achieved strong tangible book value growth, while returning value to shareholders through dividend payments and share buybacks totaling $138 million during the year. Slide 11 shows details of our investment portfolio. The securities sold during the fourth quarter had a book value of $109.6 million and were sold for a loss of $11.6 million. The bonds had a weighted average yield of 2.31% and an average life of 6.88 years. The total bond portfolio repositioning including the bonds sold in the third quarter resulted in a year-to-date total of $268.5 million sold for a loss of $20.8 million. Expected cash flows from scheduled principal and interest payments and bond maturities in the next 12 months totaled $270 million with a roll-off yield of approximately 2.22%, which will have a positive impact on the overall portfolio yield through next year. Slide 12 shows some details on our loan portfolio. The total loan portfolio yield decreased by 31 basis points to 6.55% as our variable rate portfolio repriced in response to lower short-term rates. New and renewed loans were priced with a 7.12% yield; the strong new loan yields along with the benefit of fixed rate loan repricing help to offset the variable rate loan rate pricing and will continue to do so going forward in 2025. The allowance for credit losses is shown on Slide 13. This quarter, we had net charge-offs of only $800,000. We recorded $5.7 million of provision for credit losses on loans, which was offset by a reduction of reserves for unfunded commitment balances of $1.5 million. The result was net provision expense of $4.2 million recorded in the income statement. The reserve at quarter end was $192.8 million and the coverage ratio was 1.5%. In addition to the ACL, we have $17.4 million of remaining fair value marks on acquired loans. When including those marks, our coverage ratio is 1.64%. Overall, we are still more than adequately reserved as our allowance remains well above peer levels. Slide 14 shows details of our deposit portfolio. The total cost of deposits declined meaningfully by 26 basis points to 2.43% this quarter. Our interest-bearing deposit cost declined 31 basis points reflecting a downward deposit beta of 46%. As a reminder, deposits included in the sale of the Illinois branches of $267.4 million were reclassified to held-for-sale in the third quarter and were not reflected in the total deposit balance at the end of the third quarter. Therefore, deposits grew $156.5 million or 4.4% annualized linked quarter. On Slide 15, net interest income on a fully tax-equivalent basis of $140.2 million increased $3.2 million from the prior quarter. Although yield on earning assets declined 19 basis points linked quarter it was outpaced by the decline in funding cost of 24 basis points shown on line 5. The result was a meaningful expansion of stated net interest margin of five basis points and an increase of 18 basis points from the first quarter of the year. Next, Slide 16 shows the details of non-interest income. Non-interest income totaled $42.7 million and when normalized for the gain on the sale of the Illinois branches and realized loss on securities was $34.4 million, an increase of $0.4 million over the prior quarter. Customer-related fees remained robust at $29.4 million, reflecting strong wealth management fees and gains on sales of mortgage loans, along with higher customer loan level hedge fees. Moving to Slide 17, non-interest expense for the quarter totaled $96.3 million, an increase of $1.7 million over the prior quarter due to higher marketing costs and other one-time operating expenses. We maintained our expense discipline and achieved positive operating leverage again this quarter and adjusting for non-core items, we delivered a 53.6% core efficiency ratio. Slide 18 shows our capital ratios. We continue to grow capital this quarter with common equity tier 1 climbing to 11.43%. The tangible common equity ratio ended the year at 8.81%. These strong capital ratios provide us with strategic flexibility going into 2025.

Thanks, Michele, and good morning. My remarks start on Slide 19. I'll begin by highlighting loan portfolio growth, touch on the updated insight slides, review asset quality and the non-performing asset roll forward before turning the call back over to Mark. Turning to Slide 19, we had continued strong mid-single-digit Commercial and Industrial loan growth shown on line 4, which includes owner occupied commercial real estate and sponsor finance. Regional C&I, which you can see on line 1 grew the most, while the sponsor finance portfolio on line 2 declined. As the sponsor finance portfolio matures we would expect to see periodic payoffs as portfolio companies are sold and sponsors funds mature. Total investment real estate or CRE non-owner occupied on line 7 includes both stabilized or stabilizing properties and construction, land and land development, which was mostly unchanged. We continue to have ample room to grow this portfolio and view this as an opportunity for future growth depending on market conditions. Moving down to line 9, there was strong quarter-over-quarter growth in public finance, which was up $77 million. Part of this growth was due to our willingness and ability to move quickly in the fourth quarter, which resulted in some very attractive and less competitive lending opportunities. The originations were all high-quality municipal transactions geographically concentrated in Indiana. The loan portfolio insight slides on Pages 20 and 21 are intended to provide transparency into the portfolio. As mentioned on prior calls, the C&I classification shown on Slide 20 includes sponsor finance as well as owner occupied CRE. 21% of our C&I loans support manufacturing businesses. Our current line utilization increased again for the quarter, line utilization rose by 1% to 46% contributing roughly $90 million to C&I growth, with total C&I commitments rising roughly $91 million this quarter. We participate in roughly $890 million of shared national credits across various industries. These are generally relationships where we have access to management and revenue opportunities that go beyond the credit exposure. In the sponsor financial portfolio I've highlighted key credit portfolio metrics. There are 85 platform companies with active sponsors in an assortment of industries. 66% have a fixed charge coverage ratio of greater than 1.5 times based on Q3 borrower information. This portfolio generally consists of single bank deals for platform companies or private equity firms as opposed to large widely syndicated leverage loans from money center bank trading desks. We review the individual relationships quarterly for changes in borrower condition including leverage and cash flow coverage. On Slide 21, we break out the investment or non-owner occupied commercial real estate portfolio. Our office portfolio, our office loans are detailed on the bottom half of this slide and represent 1.9% of total loans with the highest concentration outside of general office in the medical office space. The wheel chart on the bottom right details office portfolio maturities, loans maturing in less than a year represent 25% of the portfolio or $60.7 million, up from 15% last quarter. The office portfolio is well diversified by tenant type and geographic mix. We continue to periodically review our larger office borrowers and view the exposure as reasonably mitigated through a combination of loan to value, guarantees, tenant mix and other consideration. Our largest less than a year maturing office loan is roughly $25 million has a credit tenant and is under a long-term lease. We expect this loan to be renewed in due course later this year. On Slide 22, we highlight this quarter's asset quality trends by position. Our non-accrual loans were up $14.7 million or 90-day past due loans declined to $5.9 million after the renewal of the $13 million matured relationship discussed during last quarter's call. The increase in non-accruals resulted largely from a $22 million multi-family housing loan to a developer that is involved in a dispute unrelated to our project. Our project is headed to a sale and we expect to be paid out later in the first quarter or early in the second quarter with no anticipated loss. Finishing out, classified loans leveled for the quarter while net charge-offs were roughly $800,000. Then moving to Slide 23. We begin roll forward the migration of non-performing loans, charge-offs ORE and 90 days past due. In the column 4Q of ’24, we had more movement than in recent quarters with inflows of non-accrual loans on line 2 of $42.9 million, the largest of which was the $22 million multi-family project I just mentioned. We had a reduction from payoffs or changes and accrual status on line 3 of $25.5 million with the largest outflow from the exit of a $13 million hospitality credit taking to non-accrual in Q1 2024 and a reduction in gross charge-offs of $2.6 million. Dropping down to line 11, 90-day delinquent loans decreased by $8.2 million with the renewal of the relationship from last quarter resulting in NPAs, plus 90-day delinquent loans ending the quarter at $84.6 million. So to summarize, asset quality remains stable, classified loan balances have leveled with nominal charge-offs. We had a solid quarter of C&I loan growth combined with robust public finance activity and with refinance and sale activity in commercial real estate abating, we hope to see traction in growth in the construction loan portfolio. I appreciate your attention and now we'll turn the call back over to Mark Hardwick.

Thanks, John. Turning to Slide 24, the 10-year compound annual growth rate of earnings per share at 7.5% has helped support the 7% growth rate we’ve seen in tangible book value per share. As you know, those numbers are post-dividends, post-M&A activity or the dilution from those acquisitions and it also includes the AOCI impact that is in our total equity calculation. Slide 25 shows our total asset CAGR of 12% during the last 10 years and highlights meaningful acquisitions that have materially added to our footprint and helped fuel our growth. There are no changes to Slide 27 as we continue to live both our vision and strategic imperatives. So in summary, I'm proud of this team. Now I'm proud of all 2,000 plus employees that we have. And I'm really proud of the accomplishments that we delivered in 2024. And yet, I'm very happy to turn the page on a year of repositioning. Our teams worked very hard last year to put the bank in a position to grow and we have never been positioned better to meet the financial needs of the clients that we serve. Thanks for your attention and your investment. And I hope you share the same optimism that all of us around this table share. So at this point, we're happy to take questions.

Certainly. And our first question for today comes from the line of Brendan Nosal from Hovde Group. Your question please.

Hey good morning everybody. Hope you're doing well.

Good morning, Brendan.

Maybe starting off here on, actually replacing dynamics as we move through the year. I think 60% in your books floats on a SOFR price, but for the other 40% of the loan book, can you remind us how much back to cash repricing you have across the year and how much yield pickup you're looking to achieve on the paper? Thanks.

I think our fixed rate securities probably have about $250 million and fixed rate securities are going to be repricing in the next 12 months. And I believe there is like maybe about a 4.5% yield. So we’ve got some good pickup there. I think that'll be a nice tailwind for us.

And then, what about the loan side? I think you said that was securities.

Oh, I'm sorry. That was the loan book. I apologize.

Okay. Okay. That makes a great deal. Perhaps one more from me. This is kind of on the pace of investments and expenses overall. You did a ton of work in 2024 investment spend on your four major initiatives. Any early thoughts on the projects laid for 2025 where dollars need to be allocated or whether any kind of pulled that forward into ‘24 and then tie that commentary into overall thoughts on the cost base for this year. Thanks.

Yeah, I’ll let Michele speak to the overall cost base, but the pull-forward of those projects, it's amazing we were able to upgrade the quality of our technology really without any increased expense. Where it really showed up in our income statement were the actual conversion charges—the one-time kind of expense related to changing platforms and even carrying technology over where we were, maybe duplicating expenses for a short amount of time. But the 2025 numbers related to all those technology projects really is not an increase. So, it comes back to just what the core increase in our investment really and people as we move forward.

Yeah, Brendan, I’ll kind of answer the second part of that. When you look at just our total expenses for 2024, looking to 2025, we think we can see expense growth pretty minimal, really I would say somewhere in the 1% to 3%, probably leaning more towards the low end of that range. Our efficiency ratio continues to be low and we have no doubt that we’ll continue to maintain that expense discipline and deliver an efficiency ratio in 2025 as well.

All right. Fantastic. That’s helpful color. Thanks for taking the questions.

Thank you.

Thank you. And our next question comes from the line of Terry McEvoy from Stephens Inc. Your question please.

All right. Thanks. Good morning, everybody.

Hey Terry.

Maybe the cost of total deposits in Q4, 2.43%. I'm just wondering where was that at the end of December or if you don't have that handy where do you see those deposit cost heading over the next couple quarters?

Our December deposit costs were 2.33%. So we'd actually made quite a bit of progress in the fourth quarter through the end of the fourth quarter, really cutting those deposit costs. And overall, we believe that we can continue that momentum. As I said in my remarks, we have the down deposit beta of 46%. So our commitment is to continue to move forward if the FED cuts rates in 2025, we're going to grab more of our share. It'll all be dependent on competition as it always is and so we’ll make adjustments needed.

Thanks, Michele. And then, Mike, it sounds like the momentum in the C&I area will continue in the first half of the year just based on the conversations and some of your comments. Are there certain sectors or industries you think are better positioned to support that growth? And then as a follow-up, just in terms of asking the loan portfolio yield, you highlight the ample opportunities for ample real estate capacity. What's your desire to build out commercial real estate given that comment and your low relative exposure?

On the C&I outlook, it's a couple things inside the manufacturing segment. We are sitting here, as you know in these three states manufacturing is a big part of what we are doing. And that outlook inside the business plans of those companies is what gives me the— in addition to what we see in the pipeline today gives me that— to the next quarter maybe even two. Also I would just remind you we are really gaining our momentum in our Michigan market. I can't say we're new there anymore, but when we think about what we've done in the last few years to build our personal brand up there and our approach that team is making and really great strides in growth. So we are trying to get our fair share of that marketplace. So that in and of itself is taking market share offense from that additional runway of growth. I would point out and what I found out was that the real estate portfolio is just really, it's just a balanced portfolio and we have really strong core developers that we work with. They're doing a lot inside the projects that new asset classes that we like to still be in the multi-family segment, the industrial warehouse we’ve been talking about. Things we might be doing with student housing, even though that includes much of what is really stated that we capacity to continue to grow and we are just trying to differentiate ourselves from other banks that might already be more forward with real estate assets. And as we build out—as we continue to earn our reputation with syndication, we've got the ability to continue to do more in that space with developers that like our underwriting, our approach and our consistency into the quote process. So we just have the ability to take advantage of that if the project pencils out and if we like the underwriting attributes.

Perfect. Appreciate all the color. Thank you.

Thank you. And our next question comes from the line of Damon DelMonte from KBW. Your question please.

Hey, good morning everyone. Hope you're all doing well today. Just wanted to get a little bit more color on the margin outlook. Michele, I think you guys noted about $270 million of cash flows coming off the securities portfolio. Is the intent to reinvest that at the higher rates? Or are you going to maybe kind of split that with some reinvestment and some funding of loan growth?

Our intention is to use it to fund the loan growth for our 2025 plan. And so we'll see where the growth goes. But just looking for margin for 2025, our plan is to grow margin. We do have two break tests that are in our plan both in the early half of the year. I should say one in March and one in June so it’s when we happen to open. And so although we do have—we are asset sensitive and we’ll have loans to reprice down. We've been very proactive in managing our deposit cost in ’24. We think we can do it in ‘25 and also we've got really strong loan yields. Our new loan yields. And so that coupled with the fixed rate loans that Brendan asked about, we feel so we’ll be able to achieve the margin growth at a very minimal stability, but we believe we can grow it.

Great. Okay, appreciate that color. And then just to circle back on the loan commentary. So, Mike do you still kind of see a low mid-single-digit net growth as doable? Or do you think you could actually get to a more solid middle-single-digit growth footing?

Yeah, I am seeing middle single-digit, if you could talk about high-single-digit, it might not be in the high. But I am on the bullish side of that.

I made a comment just in my opening that 6% this quarter is a really good number to think about to quantify.

Got it. Okay, great. And then, just lastly, any updated thoughts on capital management? Your capital levels are obviously very strong. There has been a sign in the M&A market and there's been some activities across your footprint. I am just kind of wondering what your priorities are for deploying capital. Is it just to support organic growth? Do you think there are M&A opportunities? And if so kind of geographically do you feel the needs of expand out of your core markets or do you see opportunities to maybe enhance your positions in your core markets?

Thanks, Damon. Yeah, we love our capital base. Like I am really happy with the levels where we are today. It provides a lot of flexibility. The power of our earnings stream into 2025. I'd love to use as much of it as possible to grow the balance sheet. As I mentioned, I kind of gave a mid to high-single-digit numbers kind of where I think we’ll command those loans. So, arguably we need about a third of our capital base this quarter for the balance sheet growth. We use about a third for dividends and the rest we will continue to accumulate. Our M&A focus is just in the—like it has been for a long time. It’s in the three states where we currently do business, Indiana, Ohio, and Michigan. And if something makes sense, we'll—we are certainly in communication with banks. I don’t know what their real appetite is going to be. But they are coming to make sense where we feel like you have—wire an institution or two on that footprint over time. Then it would give us a nice new organic market where we might be able to grow into the future. But it’s not a priority. Our focus is the prioritization that’s performing organically.

Got it. Great. Appreciate that color. That's all that I had. Thank you very much.

Thank you. And our next question comes from the line of Nathan Race from Piper Sandler. Your question please.

Yes. Hi everyone. Thanks for taking the questions. Just going back to the last line of questioning on capital, it looks like you guys are active on share repurchases in the quarter. So just curious if that appetite remains into this year just given some of the M&A commentary.

Yeah, I'm interested in share repurchase where we're trading below historical averages. And why I say that, I just think about what our earnings apply a multiple and if we are trading below the historical averages that are—12.5 or 13. Then I have the finance being active where we are trading at our historical averages and we believe that if we—that the estimate sets are appropriate, then we are likely to stay out of share repurchase and just accumulate the capital for future years.

Okay. Great. That’s really helpful. And then, Michele, I think last question talking about a run rate for fee income around 30 or 32 going forward. You guys obviously exceeded that here in the fourth quarter, but just kind of any thoughts on kind of the fee income growth run rate or trajectory into 2025?

Yeah, I mean, we expect 2025 non-interest income to grow year-over-year, probably in the mid to high-single digits. The drivers of that growth we're expecting to come from our wealth management and mortgage fees. They delivered exceptional performance in ‘24 and we think we can grow at a double-digit pace in ’25. And so, when you kind of couple that with the other components of fee income growth, we think that will bring our overall non-interest income growth for that mid to high-single-digit when we look at it year-over-year.

Yeah and even for every management it should be in the similar range. But the use of Q2 when we think about our plan struck well commercial RTM fees, the mortgage business, they're really strong drivers of performance and I love the historical performance and we think it can continue.

Okay. That's really helpful. And then, any thoughts on the cash going forward?

And I would expect it to be maybe 13% to 14% for the year in ‘25.

Okay. Great. And then, maybe one last one for John. Obviously, it sounds like with some of the non-performing increases in the quarter that's going to be transitory, just giving what's going on with the specific clients. In the past you’ve talked about kind of the normalized charge-off range south of 20 basis points. But it just seems like given some pretty benign credit trends in the fourth quarter that maybe where you can kind of trend below that level here in 2025.

Yeah, I still think that the—between 15 and 20 basis points is a good number with flat pricing where they are and not some of it’s we are seeing where they are and it is sort of transitory, but I still see that as being a reasonable range of expectations for charge-offs.

Okay. Great, I appreciate all the color. Congrats on a great quarter. Thank you.

Thanks, Nate.

Thank you. And our next question comes from the line of Daniel Tamayo from Raymond James. Your question please.

Thank you. Good afternoon everyone. Maybe first just for Michele on the details of the restructuring in the fourth quarter. I’m just curious if those funds were reinvested in the securities. I know you talked about reinvesting cash flows into the loan growth, but just as it relates to those in particular and then if you expect any further benefit depending on timing of when that transaction happened on the margin in the first quarter?

Yeah, we did not reinvest those cash flows. We actually used the cash flows from the bonds to see how the bonds to replace the deposits that we sold with those Illinois branches. And so, we look at the yield on the bonds that we sold versus the yield on the deposits to actually give us the margin pickup in 2025. And I expect that to be maybe it's to the tune of two to three basis points of benefit.

Okay. So you'll see 2 to 3 basis points here in the first quarter related to that restructuring something. Okay. Appreciate that. And then, maybe one for Mark here bigger picture. You talked a lot about the investments you made last year. You guys talked about minimal expense growth here and it sounds pretty excited about 2025 and going forward. I’m curious kind of how you think about what would be a good type of ROA for the bank going forward pretty strong in the fourth quarter on an operating basis by ’25? Is that an achievable number longer term or just curious how you are thinking about now profitability given the investments you’ve made as we get into a more normalized environment?

Yes, I think it's a great question, Danny and we have a whole series of key performance indicators that we use. And we target around 130. I don't know whether we'll reach that in 2025, but the 125 number. You just mentioned is a great place for us to be. You think about growth in mid to high-single digits across the balance sheet, fee income growth, that's kind of 10% is sort of our goal, maintaining our expense level in really low to low-single-digit range. We are really happy with the margin numbers. The rebound that we've seen kind of—we are kind of finally back to pre-Silicon Valley levels. And you have that efficiency ratio is going to stay under 55 and we think with the ROA numbers as just mentioned that’s a strong place for us to perform that we believe first to look like top quartile performance. And then, as far as stock trades at top quartile levels this gives us flexibility as we think about what’s next.

Okay. Terrific. Well, thanks for all the color. That's it for me. Appreciated.

Thank you. This does conclude the question and answer session of today’s program. I’d like to hand the program back to Mark Hardwick for any further remarks.

I know we have a broad audience here. We have employees, shareholders, customers that listen at times and I just want to say thank you to all of our stakeholders. We appreciate your interest in First Merchants. Your partnership with First Merchants and the commitment going forward. So, again, pleased with the year and clearly from the call you can tell there is a sense of optimism around where 2025 ramps. So thank you for your time and have a great day. Thank you.

Thank you, ladies and gentlemen for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.