First Merchants Corporation Announces Fourth Quarter 2023 Earnings Per Share

Bay Street

10 months ago

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 INCOME	Three 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		Average Rate			Average Balance		Interest Income / Expense		Average Rate
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		Average Rate			Average Balance		Interest Income / Expense		Average Rate
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 Administration
765-521-7619
http://www.firstmerchants.com

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