First Merchants downgraded to Equal Weight from Overweight at Stephens

Stephens downgraded First Merchants to Equal Weight from Overweight with a price target of $38, down from $45. Following last quarter’s unexpected weakening of credit quality trends, net charge-offs increased to 1.26% of average loans and a fraud-related incident contributed to an uptick in NCOs in Q3, notes the analyst, who additionally says the company’s asset-sensitive balance sheet may challenge net interest income growth as the first Fed Funds rate cut nears. First Merchants will trade more in line with peers until the company reports improving credit trends for several consecutive quarters, the analyst argues.