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

Rhea-AI Summary

First Merchants Corporation (NASDAQ: FRME) reported strong Q4 2022 financial results, with net income available to common stockholders rising to $70.3 million, or $1.19 per diluted share, compared to $47.7 million or $0.89 in Q4 2021. Full-year 2022 net income reached $220.7 million, maintaining $3.81 per share. Total loans grew by $344.1 million (11.8% annualized) in Q4, while total deposits declined $52.1 million (1.4%). Net interest income totaled $149.0 million, a 6.2% increase from Q3 2022. The efficiency ratio stood at 48.60% for the quarter. The company emphasizes its focus on organic growth following the integration of Level One Bancorp.

Positive

• Q4 net income increased to $70.3 million, up from $47.7 million in Q4 2021.
• Diluted earnings per share reached $1.19, compared to $0.89 in Q4 2021.
• Total loans rose by $344.1 million, or 11.8% annualized, excluding PPP loans.
• Full-year net income available to common stockholders was $220.7 million, stable at $3.81 per share.
• Net interest income grew to $149.0 million, a 6.2% increase from Q3 2022.

Negative

• Total deposits declined by $52.1 million, or 1.4% annualized, in Q4.
• Non-interest income fell by $5.5 million, or 18.5%, compared to Q3 2022.

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 INCOME	Three 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

FAQ

What were the earnings for First Merchants Corporation in Q4 2022?

First Merchants Corporation reported net income of $70.3 million or $1.19 per diluted share for Q4 2022.

How did First Merchants Corporation perform in terms of loans in Q4 2022?

Total loans increased by $344.1 million, representing an annualized growth rate of 11.8% in Q4 2022.

What was the net interest income for First Merchants Corporation in Q4 2022?

The net interest income was $149.0 million for Q4 2022, a 6.2% increase from the previous quarter.

What was the decline in deposits for First Merchants Corporation in Q4 2022?

Total deposits declined by $52.1 million, or 1.4% annualized, in Q4 2022.

What was the efficiency ratio for First Merchants Corporation in Q4 2022?

The efficiency ratio for Q4 2022 was 48.60%.