Banking on Contradictions: Analyzing Diverging Loan Growth, Deposit Costs, and Mortgage Income Expectations in 2025 Q1

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Financial Performance and Earnings Growth:
- First Merchants Corporation reported net income of $54.9 million for Q1 2025, an increase of 15.6% from the previous year.
- GAAP earnings per share increased to $0.94 from $0.80, representing a 17.5% rise.
- Growth was driven by balance sheet expansion, margin improvement, fee income growth, expense reductions, and share repurchase activities.

Loan Growth and Deposit Management:
- First Merchants achieved a 4.8% annualized loan growth, with total loans reaching $13 billion.
- Deposit costs declined significantly by 20 basis points to 2.23%.
- The decline in deposit costs was attributed to effective management of core deposit relationships and reductions in public funds and maturity deposit categories.

Capital Management and Share Repurchase:
- The company's tangible common equity is at 8.9%, providing optimal capital flexibility.
- A new $100 million share repurchase program has been approved, with $10 million already repurchased.
- The capital management strategy aims to leverage the current market environment to buy back shares at attractive prices, given the volatility in the share price.

Asset Quality and Loan Portfolio:
- Nonaccrual loans rose by $8.1 million, but net charge-offs were at a stable level of $4.9 million.
- The allowance for credit losses was $192 million, with a coverage ratio of 1.47%.
- The stable asset quality is attributed to proactive risk management, with a focus on maintaining adequate loan loss reserves and closely monitoring new nonaccruals.