First Merchants Corporation Announces Fourth Quarter 2023 Earnings Per Share

Published

MUNCIE, Ind., Jan. 25, 2024 (GLOBE NEWSWIRE) -- First Merchants Corporation (NASDAQ - FRME)

Fourth Quarter 2023 Highlights:

  • Net income available to common stockholders was $42.0 million and diluted earnings per common share totaled $0.71 compared to $70.3 million and $1.19 in the fourth quarter of 2022, and $55.9 million and $0.94 in the third quarter of 2023. Net income and diluted earnings per common share, excluding one-time charges of $12.7 million incurred during the quarter, totaled $51.6 million and $0.87, respectively.
  • Strong capital position with Common Equity Tier 1 Capital Ratio of 11.35 percent.
  • Total loans grew $202.6 million, or 6.6 percent annualized on a linked quarter basis, and $608.6 million, or 5.1 percent during the last twelve months when excluding the impact of a non-relationship commercial loan portfolio sale of $116.6 million that occurred during the second quarter.
  • Total deposits increased $174.9 million, or 4.8 percent annualized on a linked quarter basis, and $438.7 million, or 3.1 percent during the last twelve months.
  • Nonaccrual loans totaled $53.6 million compared to $53.1 million on a linked quarter basis.
  • The efficiency ratio totaled 63.26 percent for the quarter and 55.56% excluding $12.7 million of one-time charges incurred during the quarter.

Mark Hardwick, Chief Executive Officer, stated, "During a year where safety and soundness became the highest priority of stakeholders, we are very pleased with the positioning of our balance sheet. The Bank’s liquidity position improved by $585 million as cash increased by $300 million and borrowings declined by $285 million year over year. Our tangible common equity increased by $222 million driving our tangible common equity ratio from 7.37 percent to 8.44 percent and the allowance to loans continues to be top decile totaling 1.64 percent." Hardwick added, "Our team built this resilient balance sheet while also producing core loan growth of just over 5 percent and deposit growth of 3 percent. In a year with large bank failures, our company produced solid results with net income totaling $222 million, a strong ROA of 1.23%, and an efficiency ratio of 55%. These results are without any adjustments for one-time charges totaling $12.7 million which were incurred in the fourth quarter. The actions taken during the quarter to reduce costs will lead to an even more efficient franchise in 2024."

Fourth Quarter Financial Results:

First Merchants Corporation (the “Corporation”) has reported fourth quarter 2023 net income available to common stockholders of $42.0 million compared to $70.3 million during the same period in 2022. Diluted earnings per common share for the period totaled $0.71 per share compared to the fourth quarter of 2022 result of $1.19 per share. The corporation incurred $12.7 million of one-time charges during the quarter including $4.3 million from an FDIC special assessment, $6.3 million from employee early retirement and severance costs, and $2.1 million from a lease termination.

Total assets equaled $18.3 billion as of quarter-end and loans totaled $12.5 billion. During the past twelve months, total loans grew by $608.6 million, or 5.1 percent and were offset by a non-relationship based commercial loan sale of $116.6 million that occurred in the second quarter. On a linked quarter basis, loans grew $202.6 million, or 6.6 percent annualized.

Investments securities, totaling $3.8 billion, decreased $452.4 million, or 10.6 percent, during the last twelve months and increased $97.6 million, or 10.5 percent annualized on a linked quarter basis. The increase during the fourth quarter was due to a $163.1 million increase in value of available for sale securities offset by bond sales of $43.3 million and security paydowns and maturities.

Total deposits equaled $14.8 billion as of quarter-end and increased by $438.7 million, or 3.1 percent, over the past twelve months. Total deposits increased $174.9 million, or 4.8 percent annualized on a linked quarter basis. During the quarter, customer deposits increased $280.0 million which was offset by a reduction in brokered deposits of $105.1 million. The loan to deposit ratio increased slightly to 84.4 percent at period end from 84.0 percent in the prior quarter.

The Corporation’s Allowance for Credit Losses – Loans (ACL) totaled $204.9 million as of quarter-end, or 1.64 percent of total loans, a decrease of $0.8 million from prior quarter. Loan charge-offs, net of recoveries, for the quarter totaled $3.1 million. Net charge-offs were offset with provision expense for loans recorded during the quarter of $2.3 million. Reserves for unfunded commitments totaling $19.5 million declined during the quarter due to reserve release of $0.8 million. Net provision expense for the quarter totaled $1.5 million. Non-performing assets to total assets were 0.32 percent for the fourth quarter of 2023, a decrease of one basis point compared to 0.33 percent in the prior quarter.

Net interest income, totaling $130.1 million for the quarter, declined $3.3 million, or 2.5 percent, compared to prior quarter and decreased $18.9 million, or 12.7 percent, compared to the fourth quarter of 2022. Stated net-interest margin on a tax equivalent basis totaling 3.16 percent, declined by 13 basis points compared to the third quarter of 2023 and decreased 56 basis points compared to the fourth quarter of 2022. During the quarter, increased deposit costs and a continued change in deposit mix offset the increase in earning asset yields reducing net-interest margin.

Noninterest income, totaling $26.4 million for the quarter, decreased $1.4 million, or 5.0 percent, compared to the third quarter of 2023 but increased $2.3 million from the fourth quarter of 2022. The decrease from third quarter of 2023 was driven by lower gains on the sales of loans, higher realized losses on the sales of securities, and a negative valuation adjustment related to CRA investments. These declines were somewhat offset by an increase in fiduciary and wealth management fees and gains on bank-owned life insurance.

Noninterest expense totaled $108.1 million for the quarter, an increase of $14.2 million from the third quarter of 2023. The increase was from higher credit-related expenses and one-time charges totaling $12.7 million as described above.

The Corporation’s total risk-based capital ratio equaled 13.67 percent, common equity tier 1 capital ratio equaled 11.35 percent, and the tangible common equity ratio totaled 8.44 percent, which was an increase of 75 basis points from prior quarter. These ratios continue to demonstrate the Corporation’s strong capital and liquidity position.

CONFERENCE CALL

First Merchants Corporation will conduct a fourth quarter earnings conference call and web cast at 11:30 a.m. (ET) on Thursday, January 25, 2024.

To access via phone, participants will need to register using the following link where they will be provided a phone number and access code: (https://register.vevent.com/register/BIed9b1a3a96754f9abe7b067d12fe2826)

In order to view the webcast and presentation slides, please go to (https://edge.media-server.com/mmc/p/9hsczd2t) during the time of the call. A replay of the webcast will be available until January 25, 2025.

Detailed financial results are reported on the attached pages.

About First Merchants Corporation

First Merchants Corporation is a financial holding company headquartered in Muncie, Indiana. The Corporation has one full-service bank charter, First Merchants Bank. The Bank also operates as First Merchants Private Wealth Advisors (as a division of First Merchants Bank).

First Merchants Corporation’s common stock is traded on the NASDAQ Global Select Market System under the symbol FRME. Quotations are carried in daily newspapers and can be found on the company’s Internet web page (http://www.firstmerchants.com).

FIRST MERCHANTS and the Shield Logo are federally registered trademarks of First Merchants Corporation.

Forward-Looking Statements

This release 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”, “can”, “may”, or similar expressions. These statements include statements of First Merchants’ goals, intentions and expectations; statements regarding the First Merchants’ business plan and growth strategies; statements regarding the asset quality of First Merchants’ loan and investment portfolios; and estimates of First Merchants’ risks and future costs and benefits. These forward-looking statements are subject to significant risks, assumptions and uncertainties that may cause results to differ materially from those set forth in forward-looking statements, including, among other things: possible changes in monetary and fiscal policies, and laws and regulations; the effects of easing restrictions on participants in the financial services industry; the cost and other effects of legal and administrative cases; possible changes in the credit worthiness of customers and the possible impairment of collectability of loans; fluctuations in market rates of interest; competitive factors in the banking industry; changes in the banking legislation or regulatory requirements of federal and state agencies applicable to bank holding companies and banks like First Merchants’ affiliate bank; continued availability of earnings and excess capital sufficient for the lawful and prudent declaration of dividends; changes in market, economic, operational, liquidity (including the ability to grow and maintain core deposits and retain large, uninsured deposits), credit and interest rate risks associated with the First Merchants’ business; and other risks and factors identified in each of First Merchants’ filings with the Securities and Exchange Commission. First Merchants does not undertake any obligation to update any forward-looking statement, whether written or oral, relating to the matters discussed in this press release. In addition, First Merchants’ past results of operations do not necessarily indicate its anticipated future results.

CONSOLIDATED BALANCE SHEETS   
(Dollars In Thousands)December 31,
  2023   2022 
ASSETS   
Cash and due from banks$112,649  $122,594 
Interest-bearing deposits 436,080   126,061 
Investment securities, net of allowance for credit losses of $245,000 and $245,000 3,811,364   4,263,788 
Loans held for sale 18,934   9,094 
Loans 12,486,027   12,003,894 
Less: Allowance for credit losses - loans (204,934)  (223,277)
Net loans 12,281,093   11,780,617 
Premises and equipment 133,896   117,118 
Federal Home Loan Bank stock 41,769   38,525 
Interest receivable 97,664   85,070 
Goodwill and other intangibles 739,101   747,844 
Cash surrender value of life insurance 306,301   308,311 
Other real estate owned 4,831   6,431 
Tax asset, deferred and receivable 99,883   111,222 
Other assets 225,914   221,631 
TOTAL ASSETS$18,309,479  $17,938,306 
LIABILITIES   
Deposits:   
Noninterest-bearing$2,500,062  $3,173,417 
Interest-bearing 12,321,391   11,209,328 
Total Deposits 14,821,453   14,382,745 
Borrowings:   
Federal funds purchased    171,560 
Securities sold under repurchase agreements 157,280   167,413 
Federal Home Loan Bank advances 712,852   823,674 
Subordinated debentures and other borrowings 158,644   151,298 
Total Borrowings 1,028,776   1,313,945 
Interest payable 18,912   7,530 
Other liabilities 192,625   199,316 
Total Liabilities 16,061,766   15,903,536 
STOCKHOLDERS' EQUITY   
Preferred Stock, $1,000 par value, $1,000 liquidation value:   
Authorized -- 600 cumulative shares   
Issued and outstanding - 125 cumulative shares 125   125 
Preferred Stock, Series A, no par value, $2,500 liquidation preference:   
Authorized -- 10,000 non-cumulative perpetual shares   
Issued and outstanding - 10,000 non-cumulative perpetual shares 25,000   25,000 
Common Stock, $.125 stated value:   
Authorized -- 100,000,000 shares   
Issued and outstanding - 59,424,122 and 59,170,583 shares 7,428   7,396 
Additional paid-in capital 1,236,506   1,228,626 
Retained earnings 1,154,624   1,012,774 
Accumulated other comprehensive income (loss) (175,970)  (239,151)
Total Stockholders' Equity 2,247,713   2,034,770 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$18,309,479  $17,938,306 
        

CONSOLIDATED STATEMENTS OF INCOMEThree Months Ended Twelve Months Ended
(Dollars In Thousands, Except Per Share Amounts)December 31. December 31.
  2023   2022   2023   2022 
INTEREST INCOME       
Loans receivable:       
Taxable$197,523  $156,102  $747,837  $470,468 
Tax-exempt 8,197   6,930   31,954   25,124 
Investment securities:       
Taxable 8,644   9,417   35,207   38,354 
Tax-exempt 13,821   17,033   58,117   67,381 
Deposits with financial institutions 8,034   959   17,719   2,503 
Federal Home Loan Bank stock 771   541   3,052   1,176 
Total Interest Income 236,990   190,982   893,886   605,006 
INTEREST EXPENSE       
Deposits 96,655   33,516   306,092   62,939 
Federal funds purchased 1   808   1,421   1,302 
Securities sold under repurchase agreements 827   541   3,451   1,136 
Federal Home Loan Bank advances 6,431   4,932   27,206   11,417 
Subordinated debentures and other borrowings 3,013   2,229   10,316   8,009 
Total Interest Expense 106,927   42,026   348,486   84,803 
NET INTEREST INCOME 130,063   148,956   545,400   520,203 
Provision for credit losses 1,500      3,500   16,755 
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 128,563   148,956   541,900   503,448 
NONINTEREST INCOME       
Service charges on deposit accounts 7,690   7,097   30,837   28,371 
Fiduciary and wealth management fees 8,187   7,501   30,840   29,688 
Card payment fees 4,437   4,533   18,862   20,207 
Net gains and fees on sales of loans 4,111   2,087   15,659   10,055 
Derivative hedge fees 1,049   326   3,385   3,388 
Other customer fees 237   362   1,880   1,935 
Earnings on cash surrender value of life insurance 3,202   1,515   8,347   11,174 
Net realized gains (losses) on sales of available for sale securities (2,317)  57   (6,930)  1,194 
Other income (loss) (152)  672   2,722   1,929 
Total Noninterest Income 26,444   24,150   105,602   107,941 
NONINTEREST EXPENSES       
Salaries and employee benefits 60,967   52,331   228,745   206,893 
Net occupancy 9,089   6,638   29,859   26,211 
Equipment 6,108   6,148   24,113   23,945 
Marketing 2,647   3,157   7,427   7,708 
Outside data processing fees 5,875   5,611   25,165   21,682 
Printing and office supplies 402   390   1,552   1,588 
Intangible asset amortization 2,182   2,303   8,743   8,275 
FDIC assessments 7,557   2,295   14,674   10,235 
Other real estate owned and foreclosure expenses 1,743   197   3,318   823 
Professional and other outside services 3,981   3,961   16,172   21,642 
Other expenses 7,552   6,668   28,502   26,713 
Total Noninterest Expenses 108,103   89,699   388,270   355,715 
INCOME BEFORE INCOME TAX 46,904   83,407   259,232   255,674 
Income tax expense 4,425   12,647   35,446   33,585 
NET INCOME 42,479   70,760   223,786   222,089 
Preferred stock dividends 469   468   1,875   1,406 
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS$42,010  $70,292  $221,911  $220,683 
        
Per Share Data:       
Basic Net Income Available to Common Stockholders$0.71  $1.20  $3.74  $3.83 
Diluted Net Income Available to Common Stockholders$0.71  $1.19  $3.73  $3.81 
Cash Dividends Paid to Common Stockholders$0.34  $0.32  $1.34  $1.25 
Average Diluted Common Shares Outstanding (in thousands) 59,556   59,384   59,489   57,950 
                

FINANCIAL HIGHLIGHTS       
(Dollars in thousands)Three Months Ended Twelve Months Ended
 December 31, December 31,
  2023   2022   2023   2022 
NET CHARGE-OFFS (RECOVERIES)$3,148  $3,425  $25,643  $2,674 
        
AVERAGE BALANCES:       
Total Assets$18,397,200  $17,834,468  $18,186,507  $17,220,002 
Total Loans 12,396,451   11,818,911   12,297,974   10,943,051 
Total Earning Assets 17,222,714   16,702,944   16,991,787   15,985,691 
Total Deposits 15,000,580   14,564,853   14,721,498   14,198,243 
Total Stockholders' Equity 2,130,993   1,958,041   2,127,262   1,972,445 
        
FINANCIAL RATIOS:       
Return on Average Assets 0.92%  1.59%  1.23%  1.29%
Return on Average Stockholders' Equity 7.89   14.36   10.43   11.19 
Return on Tangible Common Stockholders' Equity 12.75   24.21   16.76   18.12 
Average Earning Assets to Average Assets 93.62   93.66   93.43   92.83 
Allowance for Credit Losses - Loans as % of Total Loans 1.64   1.86   1.64   1.86 
Net Charge-offs as % of Average Loans (Annualized) 0.10   0.12   0.21   0.02 
Average Stockholders' Equity to Average Assets 11.58   10.98   11.70   11.45 
Tax Equivalent Yield on Average Earning Assets 5.64   4.73   5.40   3.94 
Interest Expense/Average Earning Assets 2.48   1.01   2.05   0.53 
Net Interest Margin (FTE) on Average Earning Assets 3.16   3.72   3.35   3.41 
Efficiency Ratio 63.26   48.60   55.17   53.20 
Tangible Common Book Value Per Share$25.06  $21.45  $25.06  $21.45 
                

NONPERFORMING ASSETS         
(Dollars In Thousands)December 31, September 30, June 30, March 31, December 31,
  2023   2023   2023   2023   2022 
Nonaccrual Loans$53,580  $53,102  $69,240  $46,576  $42,324 
Troubled Debt Restructures (TDR)             224 
Nonperforming Loans (NPL) 53,580   53,102   69,240   46,576   42,548 
Other Real Estate Owned and Repossessions 4,831   6,480   7,685   7,777   6,431 
Nonperforming Assets (NPA) 58,411   59,582   76,925   54,353   48,979 
90+ Days Delinquent 172   89   428   7,032   1,737 
NPAs & 90 Day Delinquent$58,583  $59,671  $77,353  $61,385  $50,716 
          
Allowance for Credit Losses - Loans$204,934  $205,782  $221,147  $223,052  $223,277 
Quarterly Net Charge-offs 3,148   20,365   1,905   225   2,674 
NPAs / Actual Assets % 0.32%  0.33%  0.43%  0.30%  0.27%
NPAs & 90 Day / Actual Assets % 0.32%  0.33%  0.43%  0.34%  0.28%
NPAs / Actual Loans and OREO % 0.47%  0.48%  0.63%  0.44%  0.41%
Allowance for Credit Losses - Loans / Actual Loans (%) 1.64%  1.67%  1.80%  1.82%  1.86%
Net Charge-offs (Recoveries) as % of Average Loans (Annualized) 0.10%  0.66%  0.06%  0.01%  0.12%
                    

CONSOLIDATED BALANCE SHEETS         
(Dollars In Thousands)December 31, September 30, June 30, March 31, December 31,
  2023   2023   2023   2023   2022 
ASSETS         
Cash and due from banks$112,649  $125,173  $108,975  $125,818  $122,594 
Interest-bearing deposits 436,080   348,639   219,480   352,695   126,061 
Investment securities, net of allowance for credit losses 3,811,364   3,713,724   3,891,491   4,057,389   4,263,788 
Loans held for sale 18,934   30,972   27,297   9,408   9,094 
Loans 12,486,027   12,271,422   12,270,233   12,241,461   12,003,894 
Less: Allowance for credit losses - loans (204,934)  (205,782)  (221,147)  (223,052)  (223,277)
Net loans 12,281,093   12,065,640   12,049,086   12,018,409   11,780,617 
Premises and equipment 133,896   132,441   114,402   115,857   117,118 
Federal Home Loan Bank stock 41,769   41,797   41,842   41,878   38,525 
Interest receivable 97,664   90,011   89,784   85,515   85,070 
Goodwill and other intangibles 739,101   741,283   743,465   745,647   747,844 
Cash surrender value of life insurance 306,301   306,106   307,020   309,090   308,311 
Other real estate owned 4,831   6,480   7,685   7,777   6,431 
Tax asset, deferred and receivable 99,883   135,521   113,724   103,070   111,222 
Other assets 225,914   258,861   254,161   206,355   221,631 
TOTAL ASSETS$18,309,479  $17,996,648  $17,968,412  $18,178,908  $17,938,306 
LIABILITIES         
Deposits:         
Noninterest-bearing$2,500,062  $2,554,984  $2,636,017  $2,964,355  $3,173,417 
Interest-bearing 12,321,391   12,091,592   11,945,138   11,738,932   11,209,328 
Total Deposits 14,821,453   14,646,576   14,581,155   14,703,287   14,382,745 
Borrowings:         
Federal funds purchased          20   171,560 
Securities sold under repurchase agreements 157,280   152,537   152,472   179,067   167,413 
Federal Home Loan Bank advances 712,852   713,384   723,480   823,577   823,674 
Subordinated debentures and other borrowings 158,644   158,665   151,325   151,312   151,298 
Total Borrowings 1,028,776   1,024,586   1,027,277   1,153,976   1,313,945 
Interest payable 18,912   16,473   13,595   11,979   7,530 
Other liabilities 192,625   216,369   200,820   187,218   199,316 
Total Liabilities 16,061,766   15,904,004   15,822,847   16,056,460   15,903,536 
STOCKHOLDERS' EQUITY         
Preferred Stock, $1,000 par value, $1,000 liquidation value:         
Authorized -- 600 cumulative shares         
Issued and outstanding - 125 cumulative shares 125   125   125   125   125 
Preferred Stock, Series A, no par value, $2,500 liquidation preference:         
Authorized -- 10,000 non-cumulative perpetual shares         
Issued and outstanding - 10,000 non-cumulative perpetual shares 25,000   25,000   25,000   25,000   25,000 
Common Stock, $.125 stated value:         
Authorized -- 100,000,000 shares         
Issued and outstanding 7,428   7,425   7,412   7,407   7,396 
Additional paid-in capital 1,236,506   1,234,402   1,233,593   1,231,532   1,228,626 
Retained earnings 1,154,624   1,132,962   1,097,399   1,057,298   1,012,774 
Accumulated other comprehensive loss (175,970)  (307,270)  (217,964)  (198,914)  (239,151)
Total Stockholders' Equity 2,247,713   2,092,644   2,145,565   2,122,448   2,034,770 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$18,309,479  $17,996,648  $17,968,412  $18,178,908  $17,938,306 
          

CONSOLIDATED STATEMENTS OF INCOME         
(Dollars In Thousands, Except Per Share Amounts)December 31, September 30, June 30, March 31, December 31,
  2023   2023   2023   2023   2022 
INTEREST INCOME         
Loans receivable:         
Taxable$197,523  $191,705  $186,256  $172,353  $156,102 
Tax-exempt 8,197   8,288   7,760   7,709   6,930 
Investment securities:         
Taxable 8,644   8,590   8,886   9,087   9,417 
Tax-exempt 13,821   13,947   14,279   16,070   17,033 
Deposits with financial institutions 8,034   5,884   3,164   637   959 
Federal Home Loan Bank stock 771   719   1,020   542   541 
Total Interest Income 236,990   229,133   221,365   206,398   190,982 
INTEREST EXPENSE         
Deposits 96,655   85,551   73,201   50,685   33,516 
Federal funds purchased 1      123   1,297   808 
Securities sold under repurchase agreements 827   797   979   848   541 
Federal Home Loan Bank advances 6,431   6,896   6,815   7,064   4,932 
Subordinated debentures and other borrowings 3,013   2,506   2,412   2,385   2,229 
Total Interest Expense 106,927   95,750   83,530   62,279   42,026 
NET INTEREST INCOME 130,063   133,383   137,835   144,119   148,956 
Provision for credit losses 1,500   2,000          
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 128,563   131,383   137,835   144,119   148,956 
NONINTEREST INCOME         
Service charges on deposit accounts 7,690   7,975   7,813   7,359   7,097 
Fiduciary and wealth management fees 8,187   7,394   7,397   7,862   7,501 
Card payment fees 4,437   4,716   4,537   5,172   4,533 
Net gains and fees on sales of loans 4,111   5,517   3,632   2,399   2,087 
Derivative hedge fees 1,049   516   672   1,148   326 
Other customer fees 237   384   742   517   362 
Earnings on cash surrender value of life insurance 3,202   1,761   2,096   1,288   1,515 
Net realized gains (losses) on sales of available for sale securities (2,317)  (1,650)  (1,392)  (1,571)  57 
Other income (loss) (152)  1,229   822   823   672 
Total Noninterest Income 26,444   27,842   26,319   24,997   24,150 
NONINTEREST EXPENSES         
Salaries and employee benefits 60,967   55,566   54,753   57,459   52,331 
Net occupancy 9,089   6,837   6,674   7,259   6,638 
Equipment 6,108   5,698   6,181   6,126   6,148 
Marketing 2,647   2,369   1,102   1,309   3,157 
Outside data processing fees 5,875   6,573   6,604   6,113   5,611 
Printing and office supplies 402   333   434   383   390 
Intangible asset amortization 2,182   2,182   2,182   2,197   2,303 
FDIC assessments 7,557   2,981   2,740   1,396   2,295 
Other real estate owned and foreclosure expenses 1,743   677   916   (18)  197 
Professional and other outside services 3,981   3,833   4,660   3,698   3,961 
Other expenses 7,552   6,805   6,347   7,798   6,668 
Total Noninterest Expenses 108,103   93,854   92,593   93,720   89,699 
INCOME BEFORE INCOME TAX 46,904   65,371   71,561   75,396   83,407 
Income tax expense 4,425   9,005   10,699   11,317   12,647 
NET INCOME 42,479   56,366   60,862   64,079   70,760 
Preferred stock dividends 469   468   469   469   468 
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS$42,010  $55,898  $60,393  $63,610  $70,292 
Per Share Data:         
Basic Net Income Available to Common Stockholders$0.71  $0.95  $1.02  $1.07  $1.20 
Diluted Net Income Available to Common Stockholders$0.71  $0.94  $1.02  $1.07  $1.19 
Cash Dividends Paid to Common Stockholders$0.34  $0.34  $0.34  $0.32  $0.32 
Average Diluted Common Shares Outstanding (in thousands) 59,556   59,503   59,448   59,441   59,384 
FINANCIAL RATIOS:         
Return on Average Assets 0.92%  1.24%  1.34%  1.42%  1.59%
Return on Average Stockholders' Equity 7.89   10.38   11.29   12.21   14.36 
Return on Tangible Common Stockholders' Equity 12.75   16.54   18.04   19.82   24.21 
Average Earning Assets to Average Assets 93.62   93.36   93.38   93.35   93.66 
Allowance for Credit Losses - Loans as % of Total Loans 1.64   1.67   1.80   1.82   1.86 
Net Charge-offs as % of Average Loans (Annualized) 0.10   0.66   0.06   0.01   0.12 
Average Stockholders' Equity to Average Assets 11.58   11.87   11.78   11.56   10.98 
Tax Equivalent Yield on Average Earning Assets 5.64   5.55   5.36   5.06   4.73 
Interest Expense/Average Earning Assets 2.48   2.26   1.97   1.48   1.01 
Net Interest Margin (FTE) on Average Earning Assets 3.16   3.29   3.39   3.58   3.72 
Efficiency Ratio 63.26   53.91   52.21   51.72   48.60 
Tangible Common Book Value Per Share$25.06  $22.43  $23.34  $22.93  $21.45 
                    

LOANS         
(Dollars In Thousands)December 31, September 30, June 30, March 31, December 31,
  2023   2023   2023   2023   2022 
Commercial and industrial loans$3,670,948  $3,490,953  $3,531,395  $3,502,204  $3,437,126 
Agricultural land, production and other loans to farmers 263,414   233,838   230,003   219,598   241,793 
Real estate loans:         
Construction 957,545   1,022,261   949,918   960,979   835,582 
Commercial real estate, non-owner occupied 2,400,839   2,360,596   2,379,819   2,375,410   2,407,475 
Commercial real estate, owner occupied 1,162,083   1,153,707   1,179,739   1,244,117   1,246,528 
Residential 2,288,921   2,257,385   2,248,473   2,185,943   2,096,655 
Home equity 617,571   609,352   614,366   621,354   630,632 
Individuals' loans for household and other personal expenditures 168,388   176,523   172,896   172,389   175,211 
Public finance and other commercial loans 956,318   966,807   963,624   959,467   932,892 
Loans 12,486,027   12,271,422   12,270,233   12,241,461   12,003,894 
Allowance for credit losses - loans (204,934)  (205,782)  (221,147)  (223,052)  (223,277)
NET LOANS$12,281,093  $12,065,640  $12,049,086  $12,018,409  $11,780,617 
                    

DEPOSITS         
(Dollars In Thousands)December 31, September 30, June 30, March 31, December 31,
  2023   2023   2023   2023   2022 
Demand deposits$7,965,862  $7,952,040  $8,045,455  $8,422,387  $8,448,797 
Savings deposits 4,516,433   4,572,162   4,530,255   4,499,487   4,657,140 
Certificates and other time deposits of $100,000 or more 1,408,985   1,280,607   1,160,303   1,040,379   742,539 
Other certificates and time deposits 849,906   761,196   680,965   574,886   468,712 
Brokered certificates of deposits 80,267   80,571   164,177   166,148   65,557 
TOTAL DEPOSITS$14,821,453  $14,646,576  $14,581,155  $14,703,287  $14,382,745 
                    

CONSOLIDATED AVERAGE BALANCE SHEET AND NET INTEREST MARGIN ANALYSIS      
(Dollars in Thousands)           
 For the Three Months Ended
 December 31, 2023 December 31, 2022
 Average Balance Interest Income /Expense AverageRate Average Balance Interest Income /Expense AverageRate
ASSETS           
Interest-bearing deposits$700,705  $8,034   4.59% $187,204  $959   2.05%
Federal Home Loan Bank stock 41,792   771   7.38   38,066   541   5.68 
Investment Securities: (1)           
Taxable 1,801,533   8,644   1.92   1,987,161   9,417   1.90 
Tax-exempt (2) 2,282,233   17,495   3.07   2,671,602   21,561   3.23 
Total Investment Securities 4,083,766   26,139   2.56   4,658,763   30,978   2.66 
Loans held for sale 16,355   246   6.02   4,732   71   6.00 
Loans: (3)           
Commercial 8,533,233   159,190   7.46   8,309,561   126,850   6.11 
Real estate mortgage 2,118,060   21,829   4.12   1,827,749   16,654   3.64 
Installment 820,728   16,258   7.92   843,562   12,527   5.94 
Tax-exempt (2) 908,075   10,376   4.57   833,307   8,772   4.21 
Total Loans 12,396,451   207,899   6.71   11,818,911   164,874   5.58 
Total Earning Assets 17,222,714   242,843   5.64%  16,702,944   197,352   4.73%
Total Non-Earning Assets 1,174,486       1,131,524     
TOTAL ASSETS$18,397,200      $17,834,468     
LIABILITIES           
Interest-Bearing Deposits:           
Interest-bearing deposits$5,504,725  $40,996   2.98% $5,238,422  $16,810   1.28%
Money market deposits 3,096,085   27,909   3.61   3,018,644   10,778   1.43 
Savings deposits 1,587,758   3,913   0.99   1,895,551   2,125   0.45 
Certificates and other time deposits 2,225,528   23,837   4.28   1,038,502   3,803   1.46 
Total Interest-Bearing Deposits 12,414,096   96,655   3.11   11,191,119   33,516   1.20 
Borrowings 1,013,856   10,272   4.05   1,097,586   8,510   3.10 
Total Interest-Bearing Liabilities 13,427,952   106,927   3.19   12,288,705   42,026   1.37 
Noninterest-bearing deposits 2,586,484       3,373,734     
Other liabilities 251,771       213,988     
Total Liabilities 16,266,207       15,876,427     
STOCKHOLDERS' EQUITY 2,130,993       1,958,041     
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$18,397,200   106,927    $17,834,468   42,026   
Net Interest Income (FTE)  $135,916      $155,326   
Net Interest Spread (FTE) (4)     2.45%      3.36%
            
Net Interest Margin (FTE):           
Interest Income (FTE) / Average Earning Assets     5.64%      4.73%
Interest Expense / Average Earning Assets     2.48%      1.01%
Net Interest Margin (FTE) (5)     3.16%      3.72%
            
(1) Average balance of securities is computed based on the average of the historical amortized cost balances without the effects of the fair value adjustments. Annualized amounts are computed using a 30/360 day basis.
(2) Tax-exempt securities and loans are presented on a fully taxable equivalent basis, using a marginal tax rate of 21 percent for 2023 and 2022. These totals equal $5,853 and $6.370 for the three months ended December 31, 2023 and 2022, respectively.
(3) Non accruing loans have been included in the average balances.
(4) Net Interest Spread (FTE) is interest income expressed as a percentage of average earning assets minus interest expense expressed as a percentage of average interest-bearing liabilities.
(5) Net Interest Margin (FTE) is interest income expressed as a percentage of average earning assets minus interest expense expressed as a percentage of average earning assets.
 

CONSOLIDATED AVERAGE BALANCE SHEET AND NET INTEREST MARGIN ANALYSIS      
(Dollars in Thousands)           
 For the Twelve Months Ended
 December 31, 2023 December 31, 2022
 Average Balance Interest Income /Expense AverageRate Average Balance Interest Income /Expense AverageRate
Assets:           
Interest-bearing deposits$431,581  $17,719   4.11% $296,863  $2,503   0.84%
Federal Home Loan Bank stock 41,319   3,052   7.39   35,580   1,176   3.31 
Investment Securities: (1)           
Taxable 1,854,438   35,207   1.90   2,056,586   38,354   1.86 
Tax-exempt (2) 2,366,475   73,566   3.11   2,653,611   85,292   3.21 
Total Investment Securities 4,220,913   108,773   2.58   4,710,197   123,646   2.63 
Loans held for sale 21,766   1,292   5.94   14,715   692   4.70 
Loans: (3)           
Commercial 8,519,706   603,611   7.08   7,877,271   380,621   4.83 
Real estate mortgage 2,035,488   82,183   4.04   1,471,802   51,853   3.52 
Installment 830,006   60,751   7.32   785,520   37,302   4.75 
Tax-exempt (2) 891,008   40,448   4.54   793,743   31,803   4.01 
Total Loans 12,297,974   788,285   6.41   10,943,051   502,271   4.59 
Total Earning Assets 16,991,787   917,829   5.40%  15,985,691   629,596   3.94%
Total Non-Earning Assets 1,194,720       1,234,311     
Total Assets$18,186,507      $17,220,002     
Liabilities:           
Interest-Bearing deposits:           
Interest-bearing deposits$5,435,733  $138,012   2.54% $5,206,131  $32,511   0.62%
Money market deposits 2,884,271   83,777   2.90   2,915,397   19,170   0.66 
Savings deposits 1,694,230   14,606   0.86   1,927,122   5,019   0.26 
Certificates and other time deposits 1,923,268   69,697   3.62   881,176   6,239   0.71 
Total Interest-Bearing Deposits 11,937,502   306,092   2.56   10,929,826   62,939   0.58 
Borrowings 1,111,472   42,394   3.81   888,392   21,864   2.46 
Total Interest-Bearing Liabilities 13,048,974   348,486   2.67   11,818,218   84,803   0.72 
Noninterest-bearing deposits 2,783,996       3,268,417     
Other liabilities 226,275       160,922     
Total Liabilities 16,059,245       15,247,557     
Stockholders' Equity 2,127,262       1,972,445     
Total Liabilities and Stockholders' Equity$18,186,507   348,486    $17,220,002   84,803   
Net Interest Income (FTE)  $569,343      $544,793   
Net Interest Spread (FTE) (4)     2.73%      3.22%
            
Net Interest Margin (FTE):           
Interest Income (FTE) / Average Earning Assets     5.40%      3.94%
Interest Expense / Average Earning Assets     2.05%      0.53%
Net Interest Margin (FTE) (5)     3.35%      3.41%
            
(1) Average balance of securities is computed based on the average of the historical amortized cost balances without the effects of the fair value adjustments. Annualized amounts are computed using a 30/360 day basis.
(2) Tax-exempt securities and loans are presented on a fully taxable equivalent basis, using a marginal tax rate of 21 percent for 2023 and 2022. These totals equal $23,943 and $24,590 for the years ended December 31, 2023 and 2022, respectively.
(3) Non accruing loans have been included in the average balances.           
(4) Net Interest Spread (FTE) is interest income expressed as a percentage of average earning assets minus interest expense expressed as a percentage of average interest-bearing liabilities.
(5) Net Interest Margin (FTE) is interest income expressed as a percentage of average earning assets minus interest expense expressed as a percentage of average earning assets.
 

ADJUSTED NET INCOME AND DILUTED EARNINGS PER COMMON SHARE - NON-GAAP
(Dollars In Thousands, Except Per Share Amounts)Three Months Ended Twelve Months Ended
 December 31, September 30, June 30, March 31, December 31, December 31, December 31,
  2023   2023   2023   2023   2022   2023   2022 
Net Income Available to Common Stockholders - GAAP$42,010  $55,898  $60,393  $63,610  $70,292  $221,911  $220,683 
Adjustments:             
PPP loan income (7)  (8)  (9)  (25)  (109)  (49)  (3,207)
Acquisition-related expenses             413      16,531 
Acquisition-related provision expense                   16,755 
Non-core expenses1 12,682               12,682    
Tax on adjustments (3,088)  2   2   6   (75)  (3,078)  (7,376)
Adjusted Net Income Available to Common Stockholders - Non-GAAP$51,597  $55,892  $60,386  $63,591  $70,521  $231,466  $243,386 
              
Average Diluted Common Shares Outstanding (in thousands) 59,556   59,503   59,448   59,441   59,384   59,489   57,590 
              
Diluted Earnings Per Common Share - GAAP$0.71  $0.94  $1.02  $1.07  $1.19  $3.73  $3.81 
Adjustments:             
PPP loan income             (0.01)     (0.06)
Acquisition-related expenses             0.01      0.28 
Acquisition-related provision expense                   0.30 
Non-core expenses1 0.21               0.21    
Tax on adjustments (0.05)              (0.05)  (0.13)
Adjusted Diluted Earnings Per Common Share - Non-GAAP$0.87  $0.94  $1.02  $1.07  $1.19  $3.89  $4.20 
                            

1 - Non-core expenses include one-time charges consisting of $6.3 million from early retirement and severance costs, $4.3 million from the FDIC special assessment, and $2.1 million from a lease termination.

RETURN ON TANGIBLE COMMON EQUITY - NON-GAAP
(Dollars In Thousands)Three Months Ended Twelve Months Ended
 December 31, September 30, June 30, March 31, December 31, December 31, December 31,
  2023   2023   2023   2023   2022   2023   2022 
Total Average Stockholders' Equity (GAAP)$2,130,993  $2,154,232  $2,139,877  $2,083,125  $1,958,041  $2,127,262  $1,972,445 
Less: Average Preferred Stock (25,125)  (25,125)  (25,125)  (25,125)  (25,125)  (25,125)  (18,875)
Less: Average Intangible Assets, Net of Tax (734,007)  (735,787)  (737,489)  (739,190)  (741,632)  (736,601)  (699,803)
Average Tangible Common Equity, Net of Tax (Non-GAAP)$1,371,861  $1,393,320  $1,377,263  $1,318,810  $1,191,284  $1,365,536  $1,253,767 
              
Net Income Available to Common Stockholders (GAAP)$42,010  $55,898  $60,393  $63,610  $70,292  $221,911  $220,683 
Plus: Intangible Asset Amortization, Net of Tax 1,724   1,724   1,724   1,734   1,819   6,906   6,537 
Tangible Net Income (Non-GAAP)$43,734  $57,622  $62,117  $65,344  $72,111  $228,817  $227,220 
              
Return on Tangible Common Equity (Non-GAAP) 12.75%  16.54%  18.04%  19.82%  24.21%  16.76%  18.12%
                            

For more information, contact:Nicole M. Weaver, Vice President and Director of Corporate Administration765-521-7619http://www.firstmerchants.com

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Source: First Merchants Corporation

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