First Merchants Corporation Announces Record Fourth Quarter and Full Year 2022 Results

| Source: First Merchants Corporation First Merchants Corporation

MUNCIE, Ind., Jan. 26, 2023 (GLOBE NEWSWIRE) --

First Merchants Corporation (NASDAQ - FRME)

Fourth Quarter 2022 Highlights:

  • Net income available to common stockholders was $70.3 million and diluted earnings per common share totaled $1.19, compared to $47.7 million and $.89 in the fourth quarter of 2021, and $63.3 million and $1.08 in the third quarter of 2022.
  • Adjusted net income available to common stockholders1 for the fourth quarter was $70.5 million and adjusted diluted earnings per common share1 totaled $1.19, compared to $44.9 million and $.84 in the fourth quarter of 2021, and $65.6 million and $1.12 in the third quarter of 2022.
  • Total loans grew $344.1 million, or 11.8% annualized on a linked quarter basis, excluding the forgiveness of $6.5 million in Paycheck Protection Program (“PPP”) loans.
  • Total deposits declined $52.1 million, or 1.4% annualized on a linked quarter basis.
  • Nonaccrual loans totaled $42.3 million compared to $43.5 million on a linked quarter basis.
  • Net interest income totaled $149.0 million, an increase of $8.7 million, or 6.2% on a linked quarter basis.
  • The efficiency ratio totaled 48.60% for the quarter.

Full Year 2022 Highlights:

  • Net income available to common stockholders was $220.7 million and diluted earnings per common share totaled $3.81, compared to $205.5 million and $3.81 in 2021.
  • Adjusted net income available to common stockholders1 for 2022 was $243.4 million and adjusted diluted earnings per common share1 totaled $4.20, compared to $182.2 million and $3.38 in 2021.
  • Total loans grew $2.8 billion during 2022, which included $1.6 billion from the acquisition of Level One Bancorp Inc. (“Level One”). Excluding the forgiveness of $145.3 million in Paycheck Protection Program (“PPP”) loans, organic loan growth totaled $1.3 billion or 13.9% during the year.
  • Net interest income totaled $520.2 million, an increase of $109.5 million, or 26.7% over prior year.
  • The efficiency ratio totaled 53.20% for 2022, but was 50.66% after excluding $16.5 million in acquisition-related expenses that were incurred during the year.

Mark Hardwick, Chief Executive Officer, stated, “First Merchants completed 2022 with a strong quarter and closed the books on another successful year. We are pleased to have the acquisition and integration of Level One behind us so that we can focus on the organic opportunities ahead. First Merchants’ earnings power is pretty easy to digest when assessing our quarterly results. We look forward to continued growth and high levels of performance in 2023”

Fourth Quarter Financial Results

First Merchants Corporation (the “Corporation) has reported fourth quarter 2022 net income available to common stockholders of $70.3 million compared to $47.7 million during the same period in 2021. Diluted earnings per common share for the period totaled $1.19 per share compared to the fourth quarter of 2021 result of $.89 per share.

Total assets equaled $17.9 billion as of quarter-end and loans totaled $12.0 billion. Total loans increased $2.8 billion during the past twelve months. The acquisition of Level One contributed $1.6 billion of loans. Excluding acquired loans, the Corporation experienced organic loan growth of $1.3 billion, or 13.9 percent, during the past twelve months. This was offset by the forgiveness of PPP loans of $145.3 million. Investments decreased $260.6 million, or 5.8 percent, during the last twelve months and now total $4.3 billion.

Total deposits equaled $14.4 billion as of quarter-end and increased by $1.7 billion over the past twelve months. The acquisition of Level One contributed $1.9 billion in deposits resulting in an organic deposit decline of $280.6 million or 2.2%. The balance sheet growth mix resulted in an increase in the loan to deposit ratio of 10.9% over the past twelve months with the current quarter ratio ending at 83.5 percent.

The Corporation’s Allowance for Credit Losses – Loans (ACL) totaled $223.3 million as of quarter-end, or 1.86 percent of total loans, an increase of $27.9 million over prior year due to the acquisition of Level One. Loan charge offs, net of recoveries, for the quarter totaled $3.4 million. No provision expense was recorded during the quarter or during the last twelve months other than CECL Day 1 expense of $16.8 million due to the acquisition of Level One. Non-performing assets to total assets were 0.27% for the fourth quarter of 2022, a decrease of one basis point compared to 0.28% in the fourth quarter of 2021.

Net-interest income totaling $149.0 million for the quarter, continued to grow with an increase of $8.7 million, or 6.2 percent, over prior quarter, and an increase of $47.7 million, or 47 percent compared to the fourth quarter of 2021. Stated net-interest margin on a tax equivalent basis, totaling 3.72 percent, increased by 17 basis points compared to the third quarter of 2022 and 68 basis points compared to the fourth quarter of 2021. Net-interest margin excluding the impact of fair value accretion and PPP loans totaled 3.65% for the quarter, an increase of 18 basis points compared to 3.47% for the third quarter of 2022 and an increase of 73 basis points from the fourth quarter of 2021. During the quarter, the yield on earning assets expanded 62 basis points from higher loan and investment portfolio yields as well as organic loan growth, offset by a 45 basis point increase in funding costs.

Non-interest income, totaling $24.2 million for the quarter, decreased $5.5 million or 18.5% compared to the third quarter of 2022. The decrease was primarily driven by lower earnings on cash surrender value of life insurance which was elevated in the third quarter due to a large $5.2 million BOLI death benefit. Non-interest income decreased $1.7 million from the fourth quarter of 2021 due primarily to lower gains on the sale of mortgage loans and lower derivative hedge fees.

Non-interest expense totaled $89.7 million for the quarter, a decrease of $6.7 million from the third quarter of 2022. The third quarter included $3.4 million of acquisition-related expenses. The quarter over quarter decline also reflected lower salaries and benefits expense as well as some one-time gains on sales of properties recorded in the fourth quarter.

The Corporation’s total risk-based capital ratio equaled 13.08 percent, common equity tier 1 capital ratio equaled 10.65 percent, and the tangible common equity ratio totaled 7.34 percent. These ratios continue to reflect the Corporation’s strong capital position.

1 See “Non-GAAP Financial Information” for reconciliation

CONFERENCE CALL

First Merchants Corporation will conduct a fourth quarter earnings conference call and web cast at 10:30 a.m. (ET) on Thursday, January 26, 2023.

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/BI6fcecfffac4e446dae35bea4a13966ee)

In order to view the webcast and presentation slides, please go to (https://edge.media-server.com/mmc/p/7rxb6jtk) during the time of the call. A replay of the webcast will be available until January 26, 2023.

Detailed financial results are reported below.

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, 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,
  2022   2021 
ASSETS   
Cash and due from banks$122,594  $167,146 
Interest-bearing deposits 126,061   474,154 
Investment securities, net of allowance for credit losses of $245,000 and $245,000 4,263,788   4,524,353 
Loans held for sale 9,094   11,187 
Loans 12,003,894   9,241,861 
Less: Allowance for credit losses - loans (223,277)  (195,397)
Net loans 11,780,617   9,046,464 
Premises and equipment 117,118   105,655 
Federal Home Loan Bank stock 38,525   28,736 
Interest receivable 85,070   57,187 
Goodwill and other intangibles 747,844   570,860 
Cash surrender value of life insurance 308,311   291,041 
Other real estate owned 6,431   558 
Tax asset, deferred and receivable 111,222   35,641 
Other assets 221,631   140,167 
TOTAL ASSETS$17,938,306  $15,453,149 
LIABILITIES   
Deposits:   
Noninterest-bearing$3,173,417  $2,709,646 
Interest-bearing 11,209,328   10,022,931 
Total Deposits 14,382,745   12,732,577 
Borrowings:   
Federal funds purchased 171,560   — 
Securities sold under repurchase agreements 167,413   181,577 
Federal Home Loan Bank advances 823,674   334,055 
Subordinated debentures and other borrowings 151,298   118,618 
Total Borrowings 1,313,945   634,250 
Interest payable 7,530   2,762 
Other liabilities 199,316   170,989 
Total Liabilities 15,903,536   13,540,578 
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   — 
Common Stock, $.125 stated value:   
Authorized -- 100,000,000 shares   
Issued and outstanding - 59,170,583 and 53,410,411 shares 7,396   6,676 
Additional paid-in capital 1,228,626   985,818 
Retained earnings 1,012,774   864,839 
Accumulated other comprehensive income (loss) (239,151)  55,113 
Total Stockholders' Equity 2,034,770   1,912,571 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$17,938,306  $15,453,149 


CONSOLIDATED STATEMENTS OF INCOMEThree Months Ended Twelve Months Ended
(Dollars In Thousands, Except Per Share Amounts)December 31, December 31,
  2022  2021  2022  2021
INTEREST INCOME       
Loans receivable:       
Taxable$156,102 $80,583 $470,468 $338,009
Tax-exempt 6,930  5,635  25,124  22,110
Investment securities:       
Taxable 9,417  8,028  38,354  29,951
Tax-exempt 17,033  15,411  67,381  55,331
Deposits with financial institutions 959  173  2,503  634
Federal Home Loan Bank stock 541  163  1,176  597
Total Interest Income 190,982  109,993  605,006  446,632
INTEREST EXPENSE       
Deposits 33,516  5,589  62,939  23,319
Federal funds purchased 808  1  1,302  5
Securities sold under repurchase agreements 541  75  1,136  314
Federal Home Loan Bank advances 4,932  1,389  11,417  5,672
Subordinated debentures and other borrowings 2,229  1,666  8,009  6,642
Total Interest Expense 42,026  8,720  84,803  35,952
NET INTEREST INCOME 148,956  101,273  520,203  410,680
Provision for credit losses - loans —  —  16,755  —
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 148,956  101,273  503,448  410,680
NON-INTEREST INCOME       
Service charges on deposit accounts 7,097  6,462  28,371  23,571
Fiduciary and wealth management fees 7,501  7,078  29,688  28,362
Card payment fees 4,533  3,937  20,207  16,619
Net gains and fees on sales of loans 2,087  3,423  10,055  19,689
Derivative hedge fees 326  1,562  3,388  3,850
Other customer fees 362  361  1,935  1,490
Earnings on cash surrender value of life insurance 1,515  2,051  11,174  7,060
Net realized gains on sales of available for sale securities 57  358  1,194  5,674
Other income 672  615  1,929  3,008
Total Non-Interest Income 24,150  25,847  107,941  109,323
NON-INTEREST EXPENSES       
Salaries and employee benefits 52,331  42,432  206,893  166,995
Net occupancy 6,638  5,644  26,211  23,326
Equipment 6,148  4,994  23,945  19,401
Marketing 3,157  1,840  7,708  5,762
Outside data processing fees 5,611  4,581  21,682  18,317
Printing and office supplies 390  356  1,588  1,217
Intangible asset amortization 2,303  1,463  8,275  5,747
FDIC assessments 2,295  1,862  10,235  6,243
Other real estate owned and foreclosure expenses 197  171  823  992
Professional and other outside services 3,961  3,627  21,642  11,913
Other expenses 6,668  5,466  26,713  19,300
Total Non-Interest Expenses 89,699  72,436  355,715  279,213
INCOME BEFORE INCOME TAX 83,407  54,684  255,674  240,790
Income tax expense 12,647  6,951  33,585  35,259
NET INCOME 70,760  47,733  222,089  205,531
Preferred stock dividends 468  —  1,406  —
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS$70,292 $47,733 $220,683 $205,531
Per Share Data:       
Basic Net Income Available to Common Stockholders$1.20 $0.89 $3.83 $3.82
Diluted Net Income Available to Common Stockholders$1.19 $0.89 $3.81 $3.81
Cash Dividends Paid to Common Stockholders$0.32 $0.29 $1.25 $1.13
Average Diluted Common Shares Outstanding (in thousands) 59,384  53,660  57,950  53,984


FINANCIAL HIGHLIGHTS       
(Dollars in thousands)Three Months Ended Twelve Months Ended
 December 31, December 31,
  2022   2021   2022   2021 
NET CHARGE-OFFS (RECOVERIES)$3,425  $4,575  $2,674  $9,306 
        
AVERAGE BALANCES:       
Total Assets$17,834,468  $15,298,655  $17,220,002  $14,830,397 
Total Loans 11,818,911   9,076,652   10,943,051   9,170,650 
Total Earning Assets 16,702,944   14,053,310   15,985,691   13,579,113 
Total Deposits 14,564,853   12,647,737   14,198,243   12,176,231 
Total Stockholders' Equity 1,958,041   1,890,229   1,972,445   1,866,632 
        
FINANCIAL RATIOS:       
Return on Average Assets 1.59 %  1.25 %  1.29 %  1.39 %
Return on Average Stockholders' Equity 14.36   10.10   11.19   11.01 
Return on Average Common Stockholders' Equity 14.55   10.10   11.30   11.01 
Average Earning Assets to Average Assets 93.66   91.86   92.83   91.56 
Allowance for Credit Losses - Loans as % of Total Loans 1.86   2.11   1.86   2.11 
Net Charge-offs as % of Average Loans (Annualized) 0.12   0.20   0.02   0.10 
Average Stockholders' Equity to Average Assets 10.98   12.36   11.45   12.59 
Tax Equivalent Yield on Average Earning Assets 4.73   3.29   3.94   3.44 
Interest Expense/Average Earning Assets 1.01   0.25   0.53   0.26 
Net Interest Margin (FTE) on Average Earning Assets 3.72   3.04   3.41   3.18 
Efficiency Ratio 48.60   53.49   53.20   50.94 
Tangible Common Book Value Per Share$21.45  $25.21  $21.45  $25.21 


NON-PERFORMING ASSETS         
(Dollars In Thousands)December 31, September 30, June 30, March 31, December 31,
  2022   2022   2022   2022   2021 
Non-Accrual Loans$42,324  $43,508  $45,970  $42,698  $43,062 
Renegotiated Loans 224   195   233   141   329 
Non-Performing Loans (NPL) 42,548   43,703   46,203   42,839   43,391 
Other Real Estate Owned and Repossessions 6,431   6,454   6,521   6,271   558 
Non-Performing Assets (NPA) 48,979   50,157   52,724   49,110   43,949 
90+ Days Delinquent 1,737   764   592   2,085   963 
NPAs & 90 Day Delinquent$50,716  $50,921  $53,316  $51,195  $44,912 
          
Allowance for Credit Losses - Loans$223,277  $226,702  $226,275  $195,984  $195,397 
Quarterly Net Charge-offs (Recoveries) 2,674   (427)  263   (587)  4,575 
NPAs / Actual Assets % 0.27 %  0.28 %  0.30 %  0.32 %  0.28 %
NPAs & 90 Day / Actual Assets % 0.28 %  0.29 %  0.30 %  0.33 %  0.29 %
NPAs / Actual Loans and OREO % 0.41 %  0.43 %  0.46 %  0.52 %  0.47 %
Allowance for Credit Losses - Loans / Actual Loans (%) 1.86 %  1.94 %  1.98 %  2.09 %  2.11 %
Net Charge-offs (Recoveries) as % of Average Loans (Annualized) 0.12 %  (0.01)%  0.01 %  (0.03)%  0.20 %


CONSOLIDATED BALANCE SHEETS         
(Dollars In Thousands)December 31, September 30, June 30, March 31, December 31,
  2022   2022   2022   2022   2021 
ASSETS         
Cash and due from banks$122,594  $119,532  $212,559  $148,277  $167,146 
Interest-bearing deposits 126,061   179,593   136,702   395,262   474,154 
Investment securities, net of allowance for credit losses 4,263,788   4,294,768   4,630,030   4,489,263   4,524,353 
Loans held for sale 9,094   25,394   9,060   3,938   11,187 
Loans 12,003,894   11,650,002   11,397,417   9,356,241   9,241,861 
Less: Allowance for credit losses - loans (223,277)  (226,702)  (226,275)  (195,984)  (195,397)
Net loans 11,780,617   11,423,300   11,171,142   9,160,257   9,046,464 
Premises and equipment 117,118   116,306   117,757   105,883   105,655 
Federal Home Loan Bank stock 38,525   38,056   38,111   26,422   28,736 
Interest receivable 85,070   71,605   68,728   56,081   57,187 
Goodwill and other intangibles 747,844   750,713   753,649   569,494   570,860 
Cash surrender value of life insurance 308,311   306,932   323,013   291,881   291,041 
Other real estate owned 6,431   6,454   6,521   6,271   558 
Tax asset, deferred and receivable 111,222   142,110   114,965   73,422   35,641 
Other assets 221,631   244,222   198,255   138,807   140,167 
TOTAL ASSETS$17,938,306  $17,718,985  $17,780,492  $15,465,258  $15,453,149 
LIABILITIES         
Deposits:         
Noninterest-bearing$3,173,417  $3,356,651  $3,435,331  $2,745,235  $2,709,646 
Interest-bearing 11,209,328   11,078,174   11,135,538   10,160,718   10,022,931 
Total Deposits 14,382,745   14,434,825   14,570,869   12,905,953   12,732,577 
Borrowings:         
Federal funds purchased 171,560   185,000   100,000   —   — 
Securities sold under repurchase agreements 167,413   194,482   186,468   169,697   181,577 
Federal Home Loan Bank advances 823,674   643,769   598,865   308,960   334,055 
Subordinated debentures and other borrowings 151,298   151,301   151,299   118,677   118,618 
Total Borrowings 1,313,945   1,174,552   1,036,632   597,334   634,250 
Interest payable 7,530   4,971   2,978   3,589   2,762 
Other liabilities 199,316   197,971   192,372   150,749   170,989 
Total Liabilities 15,903,536   15,812,319   15,802,851   13,657,625   13,540,578 
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   —   — 
Common Stock, $.125 stated value:         
Authorized -- 100,000,000 shares         
Issued and outstanding 7,396   7,393   7,383   6,678   6,676 
Additional paid-in capital 1,228,626   1,226,695   1,226,378   987,404   985,818 
Retained earnings 1,012,774   961,542   917,311   897,818   864,839 
Accumulated other comprehensive income (loss) (239,151)  (314,089)  (198,556)  (84,392)  55,113 
Total Stockholders' Equity 2,034,770   1,906,666   1,977,641   1,807,633   1,912,571 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$17,938,306  $17,718,985  $17,780,492  $15,465,258  $15,453,149 
          


CONSOLIDATED STATEMENTS OF INCOME         
(Dollars In Thousands, Except Per Share Amounts)December 31, September 30, June 30, March 31, December 31,
  2022   2022   2022   2022   2021 
INTEREST INCOME         
Loans receivable:         
Taxable$156,102  $128,504  $106,787  $79,075  $80,583 
Tax-exempt 6,930   6,500   5,990   5,704   5,635 
Investment securities:         
Taxable 9,417   10,055   10,372   8,510   8,028 
Tax-exempt 17,033   17,261   17,212   15,875   15,411 
Deposits with financial institutions 959   704   610   230   173 
Federal Home Loan Bank stock 541   314   175   146   163 
Total Interest Income 190,982   163,338   141,146   109,540   109,993 
INTEREST EXPENSE         
Deposits 33,516   16,644   8,485   4,294   5,589 
Federal funds purchased 808   418   76   —   1 
Securities sold under repurchase agreements 541   372   134   89   75 
Federal Home Loan Bank advances 4,932   3,493   1,774   1,218   1,389 
Subordinated debentures and other borrowings 2,229   2,105   2,016   1,659   1,666 
Total Interest Expense 42,026   23,032   12,485   7,260   8,720 
NET INTEREST INCOME 148,956   140,306   128,661   102,280   101,273 
Provision for credit losses - loans —   —   16,755   —   — 
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 148,956   140,306   111,906   102,280   101,273 
NON-INTEREST INCOME         
Service charges on deposit accounts 7,097   7,165   7,690   6,419   6,462 
Fiduciary and wealth management fees 7,501   7,221   7,634   7,332   7,078 
Card payment fees 4,533   4,776   5,175   5,723   3,937 
Net gains and fees on sales of loans 2,087   2,543   3,226   2,199   3,423 
Derivative hedge fees 326   700   1,444   918   1,562 
Other customer fees 362   501   662   410   361 
Earnings on cash surrender value of life insurance 1,515   6,655   1,308   1,696   2,051 
Net realized gains on sales of available for sale securities 57   481   90   566   358 
Other income (loss) 672   (425)  1,048   634   615 
Total Non-Interest Income 24,150   29,617   28,277   25,897   25,847 
NON-INTEREST EXPENSES         
Salaries and employee benefits 52,331   56,002   56,041   42,519   42,432 
Net occupancy 6,638   6,738   6,648   6,187   5,644 
Equipment 6,148   5,997   6,720   5,080   4,994 
Marketing 3,157   2,401   1,414   736   1,840 
Outside data processing fees 5,611   6,827   4,881   4,363   4,581 
Printing and office supplies 390   472   381   345   356 
Intangible asset amortization 2,303   2,303   2,303   1,366   1,463 
FDIC assessments 2,295   2,824   2,924   2,192   1,862 
Other real estate owned and foreclosure expenses 197   328   (266)  564   171 
Professional and other outside services 3,961   4,461   10,267   2,953   3,627 
Other expenses 6,668   8,025   6,000   6,020   5,466 
Total Non-Interest Expenses 89,699   96,378   97,313   72,325   72,436 
INCOME BEFORE INCOME TAX 83,407   73,545   42,870   55,852   54,684 
Income tax expense 12,647   9,793   3,879   7,266   6,951 
NET INCOME 70,760   63,752   38,991   48,586   47,733 
Preferred stock dividends 468   469   469   —   — 
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS$70,292  $63,283  $38,522  $48,586  $47,733 
Per Share Data:         
Basic Net Income Available to Common Stockholders$1.20  $1.08  $0.64  $0.91  $0.89 
Diluted Net Income Available to Common Stockholders$1.19  $1.08  $0.63  $0.91  $0.89 
Cash Dividends Paid to Common Stockholders$0.32  $0.32  $0.32  $0.29  $0.29 
Average Diluted Common Shares Outstanding (in thousands) 59,384   59,339   59,308   53,616   53,660 
FINANCIAL RATIOS:         
Return on Average Assets 1.59 %  1.43 %  0.88 %  1.26 %  1.25 %
Return on Average Stockholders' Equity 14.36   12.54   7.62   10.28   10.10 
Return on Average Common Stockholders' Equity 14.55   12.70   7.72   10.28   10.10 
Average Earning Assets to Average Assets 93.66   92.90   92.45   92.23   91.86 
Allowance for Credit Losses - Loans as % of Total Loans 1.86   1.94   1.98   2.09   2.11 
Net Charge-offs (Recoveries) as % of Average Loans (Annualized) 0.12   (0.01)  0.01   (0.03)  0.20 
Average Stockholders' Equity to Average Assets 10.98   11.36   11.37   12.23   12.36 
Tax Equivalent Yield on Average Earning Assets 4.73   4.11   3.58   3.23   3.29 
Interest Expense/Average Earning Assets 1.01   0.56   0.30   0.20   0.25 
Net Interest Margin (FTE) on Average Earning Assets 3.72   3.55   3.28   3.03   3.04 
Efficiency Ratio 48.60   53.34   58.45   52.79   53.49 
Tangible Common Book Value Per Share$21.45  $19.26  $20.45  $23.26  $25.21 


LOANS         
(Dollars In Thousands)December 31, September 30, June 30, March 31, December 31,
  2022   2022   2022   2022   2021 
Commercial and industrial loans$3,437,126  $3,330,529  $3,297,477  $2,826,660  $2,714,565 
Agricultural land, production and other loans to farmers 241,793   221,954   214,904   209,077   246,442 
Real estate loans:         
Construction 835,582   828,923   745,983   552,975   523,066 
Commercial real estate, non-owner occupied 2,407,475   2,299,272   2,423,185   2,073,197   2,135,459 
Commercial real estate, owner occupied 1,246,528   1,268,567   1,264,563   974,521   986,720 
Residential 2,096,655   1,990,668   1,813,297   1,226,695   1,159,127 
Home equity 630,632   621,619   586,108   512,641   523,754 
Individuals' loans for household and other personal expenditures 175,211   173,225   157,264   147,593   146,092 
Public finance and other commercial loans 932,892   915,245   894,636   832,882   806,636 
Loans 12,003,894   11,650,002   11,397,417   9,356,241   9,241,861 
Allowance for credit losses - loans (223,277)  (226,702)  (226,275)  (195,984)  (195,397)
NET LOANS$11,780,617  $11,423,300  $11,171,142  $9,160,257  $9,046,464 


DEPOSITS         
(Dollars In Thousands)December 31, September 30, June 30, March 31, December 31,
  2022  2022  2022  2022  2021
Demand deposits$8,448,797 $8,534,950 $8,785,889 $7,806,033 $7,704,190
Savings deposits 4,657,140  5,054,490  4,875,880  4,444,417  4,334,802
Certificates and other time deposits of $100,000 or more 742,539  443,588  436,942  252,033  273,379
Other certificates and time deposits 468,712  381,365  446,973  380,293  389,752
Brokered deposits 65,557  20,432  25,185  23,177  30,454
TOTAL DEPOSITS$14,382,745 $14,434,825 $14,570,869 $12,905,953 $12,732,577


CONSOLIDATED AVERAGE BALANCE SHEET AND NET INTEREST MARGIN ANALYSIS      
(Dollars in Thousands)           
 For the Three Months Ended
 December 31, 2022 December 31, 2021
 Average
Balance		 Interest
 Income /
Expense		 Average
Rate		 Average
Balance		 Interest
 Income /
Expense		 Average
Rate
Assets:           
Interest-bearing deposits$187,204 $959 2.05 % $558,677 $173 0.12 %
Federal Home Loan Bank stock 38,066  541 5.68   28,736  163 2.27 
Investment Securities: (1)           
Taxable 1,987,161  9,417 1.90   1,936,519  8,028 1.66 
Tax-Exempt (2) 2,671,602  21,561 3.23   2,452,726  19,508 3.18 
Total Investment Securities 4,658,763  30,978 2.66   4,389,245  27,536 2.51 
Loans held for sale 4,732  71 6.00   20,688  196 3.79 
Loans: (3)           
Commercial 8,309,561  126,850 6.11   6,703,241  65,867 3.93 
Real Estate Mortgage 1,827,749  16,654 3.64   889,571  7,866 3.54 
Installment 843,562  12,527 5.94   711,309  6,654 3.74 
Tax-Exempt (2) 833,307  8,772 4.21   751,843  7,133 3.79 
Total Loans 11,818,911  164,874 5.58   9,076,652  87,716 3.87 
Total Earning Assets 16,702,944  197,352 4.73 %  14,053,310  115,588 3.29 %
Total Non-Earning Assets 1,131,524      1,245,345    
Total Assets$17,834,468     $15,298,655    
Liabilities:           
Interest-bearing deposits:           
Interest-bearing deposits$5,238,422 $16,810 1.28 % $4,912,556 $3,637 0.30 %
Money market deposits 3,018,644  10,778 1.43   2,518,612  809 0.13 
Savings deposits 1,895,551  2,125 0.45   1,828,631  461 0.10 
Certificates and other time deposits 1,038,502  3,803 1.46   706,617  682 0.39 
Total Interest-bearing Deposits 11,191,119  33,516 1.20   9,966,416  5,589 0.22 
Borrowings 1,097,586  8,510 3.10   620,398  3,131 2.02 
Total Interest-bearing Liabilities 12,288,705  42,026 1.37   10,586,814  8,720 0.33 
Noninterest-bearing deposits 3,373,734      2,681,321    
Other liabilities 213,988      140,291    
Total Liabilities 15,876,427      13,408,426    
Stockholders' Equity 1,958,041      1,890,229    
Total Liabilities and Stockholders' Equity$17,834,468  42,026   $15,298,655  8,720  
Net Interest Income (FTE)  $155,326     $106,868  
Net Interest Spread (FTE) (4)    3.36 %     2.96 %
            
Net Interest Margin (FTE):           
Interest Income (FTE) / Average Earning Assets    4.73 %     3.29 %
Interest Expense / Average Earning Assets    1.01 %     0.25 %
Net Interest Margin (FTE) (5)    3.72 %     3.04 %
            
(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 2022 and 2021. These totals equal $6,370 and $5,595 for the three months ended December 31, 2022 and 2021, 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, 2022 December 31, 2021
 Average
Balance		 Interest
 Income /
Expense		 Average
Rate		 Average
Balance		 Interest
 Income /
Expense		 Average
Rate
Assets:           
Interest-bearing deposits$296,863 $2,503 0.84 % $521,637 $634 0.12 %
Federal Home Loan Bank stock 35,580  1,176 3.31   28,736  597 2.08 
Investment Securities: (1)           
Taxable 2,056,586  38,354 1.86   1,751,910  29,951 1.71 
Tax-Exempt (2) 2,653,611  85,292 3.21   2,106,180  70,039 3.33 
Total Investment Securities 4,710,197  123,646 2.63   3,858,090  99,990 2.59 
Loans held for sale 14,715  692 4.70   19,190  747 3.89 
Loans: (3)           
Commercial 7,877,271  380,621 4.83   6,818,968  276,368 4.05 
Real Estate Mortgage 1,471,802  51,853 3.52   916,314  34,783 3.80 
Installment 785,520  37,302 4.75   683,925  26,111 3.82 
Tax-Exempt (2) 793,743  31,803 4.01   732,253  27,987 3.82 
Total Loans 10,943,051  502,271 4.59   9,170,650  365,996 3.99 
Total Earning Assets 15,985,691  629,596 3.94 %  13,579,113  467,217 3.44 %
Total Non-Earning Assets 1,234,311      1,251,284    
Total Assets$17,220,002     $14,830,397    
Liabilities:           
Interest-bearing deposits:           
Interest-bearing deposits$5,206,131 $32,511 0.62 % $4,769,482 $14,512 0.30 %
Money market deposits 2,915,397  19,170 0.66   2,351,803  3,203 0.14 
Savings deposits 1,927,122  5,019 0.26   1,754,972  1,886 0.11 
Certificates and other time deposits 881,176  6,239 0.71   783,733  3,718 0.47 
Total Interest-bearing Deposits 10,929,826  62,939 0.58   9,659,990  23,319 0.24 
Borrowings 888,392  21,864 2.46   639,791  12,633 1.97 
Total Interest-bearing Liabilities 11,818,218  84,803 0.72   10,299,781  35,952 0.35 
Noninterest-bearing deposits 3,268,417      2,516,241    
Other liabilities 160,922      147,743    
Total Liabilities 15,247,557      12,963,765    
Stockholders' Equity 1,972,445      1,866,632    
Total Liabilities and Stockholders' Equity$17,220,002  84,803   $14,830,397  35,952  
Net Interest Income (FTE)  $544,793     $431,265  
Net Interest Spread (FTE) (4)    3.22 %     3.09 %
            
Net Interest Margin (FTE):           
Interest Income (FTE) / Average Earning Assets    3.94 %     3.44 %
Interest Expense / Average Earning Assets    0.53 %     0.26 %
Net Interest Margin (FTE) (5)    3.41 %     3.18 %
            
(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 2022 and 2021. These totals equal $24,590 and $20,585 for the twelve months ended December 31, 2022 and 2021, 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 EPS EXCLUDING PAYCHECK PROTECTION PROGRAM ("PPP") AND ACQUISITION-RELATED EXPENSES - 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,
  2022   2022   2022   2022   2021   2022   2021 
Net Income Available to Common Stockholders - GAAP$70,292  $63,283  $38,522  $48,586  $47,733  $220,683  $205,531 
Adjustments:             
PPP loan income (109)  (323)  (891)  (1,884)  (3,721)  (3,207)  (30,900)
Acquisition-related expenses 413   3,417   12,549   152   —   16,531   — 
Acquisition-related provision expense —   —   16,755   —   —   16,755   — 
Tax on adjustment (75)  (759)  (6,967)  425   912   (7,376)  7,577 
Adjusted Net Income Available to Common Stockholders - Non-GAAP$70,521  $65,618  $59,968  $47,279  $44,924  $243,386  $182,208 
              
Average Diluted Common Shares Outstanding (in thousands) 59,384   59,339   59,308   53,616   53,660   57,950   53,984 
              
Diluted Earnings Per Common Share - GAAP$1.19  $1.08  $0.63  $0.91  $0.89  $3.81  $3.81 
Adjustments:             
PPP loan income (0.01)  —   (0.01)  (0.04)  (0.07)  (0.06)  (0.57)
Acquisition-related expenses 0.01   0.05   0.22   —   —   0.28   — 
Acquisition-related provision expense —   —   0.30   —   —   0.30   — 
Tax on adjustment —   (0.01)  (0.13)  0.01   0.02   (0.13)  0.14 
Adjusted Diluted Earnings Per Common Share - Non-GAAP$1.19  $1.12  $1.01  $0.88  $0.84  $4.20  $3.38 
              

For more information, contact:
Nicole M. Weaver, Vice President and Director of Corporate Administration
765-521-7619
http://www.firstmerchants.com

SOURCE: First Merchants Corporation, Muncie, Indiana