First Merchants Corporation Announces Second Quarter 2022 Earnings per Share

Rhea-AI Summary

First Merchants Corporation (NASDAQ - FRME) reported Q2 2022 net income of $38.5 million, a decrease from $55.6 million in Q2 2021. Diluted earnings per share were $0.63, down from $1.03 YoY. Adjusted net income rose to $60.0 million with adjusted EPS at $1.01. Total loans increased by $2.0 billion, driven largely by the acquisition of Level One Bancorp, while total deposits grew $1.7 billion. Non-interest expenses surged to $97.3 million, largely due to acquisition costs. Net interest income was $128.7 million, marking a 25.8% increase from Q1 2022.

Positive

• Total loans increased by $2.0 billion, with organic growth of $468.3 million (20.1% annualized).
• Net interest income rose by $26.4 million (25.8%) from prior quarter.
• Adjusted net income increased to $60.0 million, with adjusted EPS of $1.01.

Negative

• Net income dropped to $38.5 million from $55.6 million YoY.
• Total non-interest expenses rose by $25.0 million from Q1 2022, driven by acquisition-related costs.
• Diluted earnings per share fell to $0.63, down from $1.03 YoY.

MUNCIE, Ind., July 26, 2022 (GLOBE NEWSWIRE) -- First Merchants Corporation (NASDAQ - FRME)

Second Quarter 2022 Highlights:

• Net income available to common stockholders was $38.5 million and diluted earnings per common share totaled $.63, compared to $55.6 million and $1.03 in the second quarter of 2021, and $48.6 million and $.91 in the first quarter of 2022.
• Completed legal closing on the acquisition of Level One Bancorp, Inc. (“Level One”) on April 1, 2022.
• Adjusted net income¹ was $60.0 million and adjusted diluted earnings per share¹ totaled $1.01, compared to $48.2 million and $.89 in the second quarter of 2021, and $47.3 million and $.88 in the first quarter of 2022.
• Total loans grew $2.0 billion during the second quarter which included $1.6 billion from the acquisition of Level One. Excluding the forgiveness of $59.2 million in Paycheck Protection Program (“PPP”) loans, organic loan growth totaled $468.3 million or 20.1% annualized on a linked quarter basis.
• Total deposits grew $1.7 billion during the second quarter which included $1.9 billion from the acquisition of Level One reflecting a decline in deposit balances of $265.9 million or 8.2% annualized on a linked quarter basis.
• Nonaccrual loans totaled $46.0 million compared to $42.7 million on a linked quarter basis
• Net interest income totaled $128.7 million, an increase of $26.4 million or 25.8% on a linked quarter basis
  

Mark Hardwick, Chief Executive Officer, stated, “First Merchants is encouraged by second quarter annualized organic loan growth of 20 percent combined with core margin expansion of 22 basis points. The legal close of Level One was a key accomplishment of our second quarter improving our prospects for future growth.”

Second Quarter Financial Results

First Merchants Corporation (the “Corporation”) has reported second quarter 2022 net income available to common stockholders of $38.5 million compared to $55.6 million during the same period in 2021. Diluted earnings per common share for the period totaled $.63 per share compared to the second quarter of 2021 result of $1.03 per share. Current quarter results included acquisition costs of $29.3 million resulting in a reduction of $.38 of diluted earnings per common share. The acquisition costs primarily consist of employee retention bonuses and severance, contract termination charges, professional fees, and current expected credit losses (“CECL”) Day 1 provision expense.

Total assets equaled $17.8 billion as of quarter-end and loans totaled $11.4 billion. Total loans increased $2.3 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 $1.1 billion, or 12.1 percent, during the past twelve months. This was offset by the forgiveness of PPP loans of $426.4 million. PPP loans accounted for $32.9 million of the period end loan portfolio balance. Investments increased $481.7 million, or 11.6 percent, during the last twelve months and now total $4.6 billion.

Total deposits equaled $14.6 billion as of quarter-end and increased by $2.4 billion over the past twelve months. The acquisition of Level One contributed $1.9 billion in deposits resulting in $436.7 million or 3.6% in organic deposit growth. The balance sheet growth mix resulted in an increase in the loan to deposit ratio of 3.4% over the past twelve months with the current quarter ratio ending at 78.3 percent.

The Corporation’s Allowance for Credit Losses – Loans (ACL) totaled $226.3 million as of quarter-end, or 1.98 percent of total loans, an increase of $30.3 million over prior quarter due to the acquisition of Level One. The ACL increased $16.6 million for CECL Day 1 purchased credit deteriorated (PCD) loans and provision expense of $14.0 million was recorded for CECL Day 1 non-PCD loans. Additionally, provision expense of $2.8 million was recorded for CECL Day 1 unfunded commitments, which increased other liabilities. Net loan charge-offs for the quarter totaled $0.3 million. No provision expense was recorded during the quarter or during the last twelve months other than CECL Day 1 expense. Non-performing assets to total assets were 0.30% for the second quarter of 2022, a decrease of nine basis points compared to 0.39% in the second quarter of 2021.

Net-interest income totaling $128.7 million for the quarter, continued to grow with an increase of $26.4 million, or 25.8 percent, over prior quarter, and an increase of $24.4 million, or 23.4 percent compared to the second quarter of 2021. Stated net-interest margin on a tax equivalent basis, totaling 3.28 percent, increased by 25 basis points compared to the first quarter of 2022 and six basis points compared to the second quarter of 2021. Net-interest margin excluding the impact of fair value accretion and PPP loans totaled 3.19%, an increase of 22 basis points compared to 2.97% for the first quarter of 2022 and an increase of 19 basis points from the second quarter of 2021. During the quarter, net-interest margin expanded 35 basis points from growth in the loan portfolio and higher loan and investment portfolio yields offset by a 10 basis point increase in funding costs.

Non-interest income, totaling $28.3 million for the quarter, increased $2.4 million or 9.2% compared to the first quarter of 2022. The increase was driven by higher services charges on deposits, gains on the sales of loans and derivative hedge fees. Non-interest income declined $2.6 million from the second quarter of 2021 due primarily to a decline on gains on the sale of loans driven by lower origination volume.

Non-interest expense totaled $97.3 million for the quarter, an increase of $25.0 million from the first quarter of 2022, and an increase of $28.0 million over the second quarter of 2021. Acquisition costs totaling $12.5 million were incurred during the quarter of which $10.0 million were one-time charges, $3.0 million reflected in salaries and benefits and $7.0 million in professional and other outside services.

The Corporation’s total risk-based capital ratio equaled 12.73 percent, common equity tier 1 capital ratio equaled 10.27 percent, and the tangible common equity ratio totaled 7.04 percent. These ratios continue to reflect the Corporation’s strong liquidity and capital positions.

¹ See “Non-GAAP Financial Information” for reconciliation

CONFERENCE CALL

First Merchants Corporation will conduct a second quarter earnings conference call and web cast at 10:30 a.m. (ET) on Tuesday, July 26, 2022.

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/BI36331b98cb7441deb05fe5de007c8125)

In order to view the webcast and presentation slides, please go to (https://edge.media-server.com/mmc/p/944s4zom) during the time of the call. A replay of the webcast will be available until July 26, 2023.

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 and Level One Bank (as divisions 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)	June 30,
		2022				2021
ASSETS
Cash and due from banks	$	212,559			$	167,596
Interest-bearing deposits		136,702				438,863
Investment securities, net of allowance for credit losses of $245,000 and $245,000		4,630,030				4,148,314
Loans held for sale		9,060				18,582
Loans		11,397,417				9,121,250
Less: Allowance for credit losses - loans		(226,275	)			(199,775	)
Net loans		11,171,142				8,921,475
Premises and equipment		117,757				103,822
Federal Home Loan Bank stock		38,111				28,736
Interest receivable		68,728				54,173
Goodwill and other intangibles		753,649				573,786
Cash surrender value of life insurance		323,013				294,462
Other real estate owned		6,521				601
Tax asset, deferred and receivable		114,965				36,924
Other assets		198,255				135,763
TOTAL ASSETS	$	17,780,492			$	14,923,097
LIABILITIES
Deposits:
Noninterest-bearing	$	3,435,331			$	2,479,853
Interest-bearing		11,135,538				9,723,547
Total Deposits		14,570,869				12,203,400
Borrowings:
Federal funds purchased		100,000				—
Securities sold under repurchase agreements		186,468				146,904
Federal Home Loan Bank advances		598,865				334,243
Subordinated debentures and other borrowings		151,299				118,498
Total Borrowings		1,036,632				599,645
Interest payable		2,978				2,929
Other liabilities		192,372				245,323
Total Liabilities		15,802,851				13,051,297
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 - 59,059,866 and 53,972,386 shares		7,383				6,747
Additional paid-in capital		1,226,378				1,009,182
Retained earnings		917,311				795,666
Accumulated other comprehensive income		(198,556	)			60,080
Total Stockholders' Equity		1,977,641				1,871,800
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	17,780,492			$	14,923,097

CONSOLIDATED STATEMENTS OF INCOME	Three Months Ended								Six Months Ended
(Dollars In Thousands, Except Per Share Amounts)	June 30,								June 30,
		2022				2021				2022				2021
INTEREST INCOME
Loans receivable:
Taxable	$	106,787			$	87,002			$	185,862			$	172,107
Tax-exempt		5,990				5,545				11,694				10,884
Investment securities:
Taxable		10,372				7,440				18,882				14,135
Tax-exempt		17,212				13,071				33,087				25,456
Deposits with financial institutions		610				129				840				243
Federal Home Loan Bank stock		175				88				321				266
Total Interest Income		141,146				113,275				250,686				223,091
INTEREST EXPENSE
Deposits		8,485				5,823				12,779				12,023
Federal funds purchased		76				2				76				4
Securities sold under repurchase agreements		134				75				223				162
Federal Home Loan Bank advances		1,774				1,452				2,992				2,894
Subordinated debentures and other borrowings		2,016				1,659				3,675				3,316
Total Interest Expense		12,485				9,011				19,745				18,399
NET INTEREST INCOME		128,661				104,264				230,941				204,692
Provision for credit losses - loans		16,755				—				16,755				—
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		111,906				104,264				214,186				204,692
OTHER INCOME
Service charges on deposit accounts		7,690				5,596				14,109				10,860
Fiduciary and wealth management fees		7,634				7,510				14,966				13,932
Card payment fees		5,175				4,159				10,898				8,526
Net gains and fees on sales of loans		3,226				8,325				5,425				12,311
Derivative hedge fees		1,444				943				2,362				1,260
Other customer fees		662				368				1,072				736
Earnings on cash surrender value of life insurance		1,308				1,205				3,004				2,541
Net realized gains on sales of available for sale securities		90				1,761				656				3,560
Other income		1,048				1,017				1,682				1,249
Total Other Income		28,277				30,884				54,174				54,975
OTHER EXPENSES
Salaries and employee benefits		56,041				42,438				98,560				81,249
Net occupancy		6,648				5,615				12,835				12,106
Equipment		6,720				4,848				11,800				9,878
Marketing		1,414				1,122				2,150				2,246
Outside data processing fees		4,881				4,698				9,244				8,942
Printing and office supplies		381				313				726				596
Intangible asset amortization		2,303				1,464				3,669				2,821
FDIC assessments		2,924				1,461				5,116				2,829
Other real estate owned and foreclosure expenses		(266	)			178				298				912
Professional and other outside services		10,267				2,976				13,220				5,519
Other expenses		6,000				4,182				12,020				8,295
Total Other Expenses		97,313				69,295				169,638				135,393
INCOME BEFORE INCOME TAX		42,870				65,853				98,722				124,274
Income tax expense		3,879				10,294				11,145				19,246
NET INCOME		38,991				55,559				87,577				105,028
Preferred stock dividends		469				—				469				—
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	38,522			$	55,559			$	87,108			$	105,028
Per Share Data:
Basic Net Income Available to Common Stockholders	$	0.64			$	1.03			$	1.55			$	1.95
Diluted Net Income Available to Common Stockholders	$	0.63			$	1.03			$	1.54			$	1.94
Cash Dividends Paid to Common Stockholders	$	0.32			$	0.29			$	0.61			$	0.55
Average Diluted Common Shares Outstanding (in thousands)		59,308				54,184				56,516				54,159

FINANCIAL HIGHLIGHTS
(Dollars in thousands)	Three Months Ended								Six Months Ended
	June 30,								June 30,
		2022				2021				2022				2021
NET CHARGE-OFFS (RECOVERIES)	$	263			$	1,307			$	(324	)		$	4,928
AVERAGE BALANCES:
Total Assets	$	17,778,221			$	14,758,597			$	16,627,804			$	14,503,087
Total Loans		11,175,188				9,282,524				10,220,860				9,259,600
Total Earning Assets		16,435,747				13,558,956				15,355,265				13,292,617
Total Deposits		14,809,528				12,125,153				13,819,111				11,848,075
Total Stockholders' Equity		2,021,123				1,846,037				1,956,532				1,843,250
FINANCIAL RATIOS:
Return on Average Assets		0.88	%			1.51	%			1.05	%			1.45	%
Return on Average Stockholders' Equity		7.62				12.04				8.90				11.40
Return on Average Common Stockholders' Equity		7.72				12.04				8.96				11.40
Average Earning Assets to Average Assets		92.45				91.87				92.35				91.65
Allowance for Credit Losses - Loans as % of Total Loans		1.98				2.19				1.98				2.19
Net Charge-offs as % of Average Loans (Annualized)		0.01				0.06				(0.01	)			0.11
Average Stockholders' Equity to Average Assets		11.37				12.51				11.77				12.71
Tax Equivalent Yield on Average Earning Assets		3.58				3.49				3.42				3.51
Interest Expense/Average Earning Assets		0.30				0.27				0.26				0.28
Net Interest Margin (FTE) on Average Earning Assets		3.28				3.22				3.16				3.23
Efficiency Ratio		58.45				48.91				55.90				49.54
Tangible Common Book Value Per Share	$	20.45			$	24.15			$	20.45			$	24.15

NON-PERFORMING ASSETS
(Dollars In Thousands)	June 30,				March 31,				December 31,				September 30,				June 30,
		2022				2022				2021				2021				2021
Non-Accrual Loans	$	45,970			$	42,698			$	43,062			$	51,502			$	57,556
Renegotiated Loans		233				141				329				439				629
Non-Performing Loans (NPL)		46,203				42,839				43,391				51,941				58,185
Other Real Estate Owned and Repossessions		6,521				6,271				558				698				601
Non-Performing Assets (NPA)		52,724				49,110				43,949				52,639				58,786
90+ Days Delinquent		592				2,085				963				157				183
NPAs & 90 Day Delinquent	$	53,316			$	51,195			$	44,912			$	52,796			$	58,969
Allowance for Credit Losses - Loans	$	226,275			$	195,984			$	195,397			$	199,972			$	199,775
Quarterly Net Charge-offs (Recoveries)		263				(587	)			4,575				(197	)			1,307
NPAs / Actual Assets %		0.30	%			0.32	%			0.28	%			0.35	%			0.39	%
NPAs & 90 Day / Actual Assets %		0.30	%			0.33	%			0.29	%			0.35	%			0.40	%
NPAs / Actual Loans and OREO %		0.46	%			0.52	%			0.47	%			0.58	%			0.64	%
Allowance for Credit Losses - Loans / Actual Loans (%)		1.98	%			2.09	%			2.11	%			2.21	%			2.19	%
Net Charge-offs as % of Average Loans (Annualized)		0.01	%			(0.03	)%			0.20	%			(0.01	)%			0.06	%

CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)	June 30,				March 31,				December 31,				September 30,				June 30,
		2022				2022				2021				2021				2021
ASSETS
Cash and due from banks	$	212,559			$	148,277			$	167,146			$	169,261			$	167,596
Interest-bearing deposits		136,702				395,262				474,154				369,447				438,863
Investment securities, net of allowance for credit losses		4,630,030				4,489,263				4,524,353				4,445,516				4,148,314
Loans held for sale		9,060				3,938				11,187				5,990				18,582
Loans		11,397,417				9,356,241				9,241,861				9,041,576				9,121,250
Less: Allowance for credit losses - loans		(226,275	)			(195,984	)			(195,397	)			(199,972	)			(199,775	)
Net loans		11,171,142				9,160,257				9,046,464				8,841,604				8,921,475
Premises and equipment		117,757				105,883				105,655				104,814				103,822
Federal Home Loan Bank stock		38,111				26,422				28,736				28,736				28,736
Interest receivable		68,728				56,081				57,187				53,079				54,173
Goodwill and other intangibles		753,649				569,494				570,860				572,323				573,786
Cash surrender value of life insurance		323,013				291,881				291,041				291,825				294,462
Other real estate owned		6,521				6,271				558				698				601
Tax asset, deferred and receivable		114,965				73,422				35,641				39,504				36,924
Other assets		198,255				138,807				140,167				137,928				135,763
TOTAL ASSETS	$	17,780,492			$	15,465,258			$	15,453,149			$	15,060,725			$	14,923,097
LIABILITIES
Deposits:
Noninterest-bearing	$	3,435,331			$	2,745,235			$	2,709,646			$	2,554,323			$	2,479,853
Interest-bearing		11,135,538				10,160,718				10,022,931				9,794,366				9,723,547
Total Deposits		14,570,869				12,905,953				12,732,577				12,348,689				12,203,400
Borrowings:
Federal funds purchased		100,000				—				—				—				—
Securities sold under repurchase agreements		186,468				169,697				181,577				183,589				146,904
Federal Home Loan Bank advances		598,865				308,960				334,055				334,149				334,243
Subordinated debentures and other borrowings		151,299				118,677				118,618				118,558				118,498
Total Borrowings		1,036,632				597,334				634,250				636,296				599,645
Interest payable		2,978				3,589				2,762				3,736				2,929
Other liabilities		192,372				150,749				170,989				203,914				245,323
Total Liabilities		15,802,851				13,657,625				13,540,578				13,192,635				13,051,297
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				—				—				—				—
Common Stock, $.125 stated value:
Authorized -- 100,000,000 shares
Issued and outstanding		7,383				6,678				6,676				6,689				6,747
Additional paid-in capital		1,226,378				987,404				985,818				988,659				1,009,182
Retained earnings		917,311				897,818				864,839				832,728				795,666
Accumulated other comprehensive income		(198,556	)			(84,392	)			55,113				39,889				60,080
Total Stockholders' Equity		1,977,641				1,807,633				1,912,571				1,868,090				1,871,800
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	17,780,492			$	15,465,258			$	15,453,149			$	15,060,725			$	14,923,097

CONSOLIDATED STATEMENTS OF INCOME
(Dollars In Thousands, Except Per Share Amounts)	June 30,				March 31,				December 31,				September 30,				June 30,
		2022				2022				2021				2021				2021
INTEREST INCOME
Loans receivable:
Taxable	$	106,787			$	79,075			$	80,583			$	85,319			$	87,002
Tax-exempt		5,990				5,704				5,635				5,591				5,545
Investment securities:
Taxable		10,372				8,510				8,028				7,788				7,440
Tax-exempt		17,212				15,875				15,411				14,464				13,071
Deposits with financial institutions		610				230				173				218				129
Federal Home Loan Bank stock		175				146				163				168				88
Total Interest Income		141,146				109,540				109,993				113,548				113,275
INTEREST EXPENSE
Deposits		8,485				4,294				5,589				5,707				5,823
Federal funds purchased		76				—				1				—				2
Securities sold under repurchase agreements		134				89				75				77				75
Federal Home Loan Bank advances		1,774				1,218				1,389				1,389				1,452
Subordinated debentures and other borrowings		2,016				1,659				1,666				1,660				1,659
Total Interest Expense		12,485				7,260				8,720				8,833				9,011
NET INTEREST INCOME		128,661				102,280				101,273				104,715				104,264
Provision for credit losses - loans		16,755				—				—				—				—
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		111,906				102,280				101,273				104,715				104,264
OTHER INCOME
Service charges on deposit accounts		7,690				6,419				6,462				6,249				5,596
Fiduciary and wealth management fees		7,634				7,332				7,078				7,352				7,510
Card payment fees		5,175				5,723				3,937				4,156				4,159
Net gains and fees on sales of loans		3,226				2,199				3,423				3,955				8,325
Derivative hedge fees		1,444				918				1,562				1,028				943
Other customer fees		662				410				361				393				368
Earnings on cash surrender value of life insurance		1,308				1,696				2,051				2,468				1,205
Net realized gains on sales of available for sale securities		90				566				358				1,756				1,761
Other income		1,048				634				615				1,144				1,017
Total Other Income		28,277				25,897				25,847				28,501				30,884
OTHER EXPENSES
Salaries and employee benefits		56,041				42,519				42,432				43,314				42,438
Net occupancy		6,648				6,187				5,644				5,576				5,615
Equipment		6,720				5,080				4,994				4,529				4,848
Marketing		1,414				736				1,840				1,676				1,122
Outside data processing fees		4,881				4,363				4,581				4,794				4,698
Printing and office supplies		381				345				356				265				313
Intangible asset amortization		2,303				1,366				1,463				1,463				1,464
FDIC assessments		2,924				2,192				1,862				1,552				1,461
Other real estate owned and foreclosure expenses		(266	)			564				171				(91	)			178
Professional and other outside services		10,267				2,953				3,627				2,767				2,976
Other expenses		6,000				6,020				5,466				5,539				4,182
Total Other Expenses		97,313				72,325				72,436				71,384				69,295
INCOME BEFORE INCOME TAX		42,870				55,852				54,684				61,832				65,853
Income tax expense		3,879				7,266				6,951				9,062				10,294
NET INCOME		38,991				48,586				47,733				52,770				55,559
Preferred stock dividends		469				—				—				—				—
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	38,522			$	48,586			$	47,733			$	52,770			$	55,559
Per Share Data:
Basic Net Income Available to Common Stockholders	$	0.64			$	0.91			$	0.89			$	0.98			$	1.03
Diluted Net Income Available to Common Stockholders	$	0.63			$	0.91			$	0.89			$	0.98			$	1.03
Cash Dividends Paid to Common Stockholders	$	0.32			$	0.29			$	0.29			$	0.29			$	0.29
Average Diluted Common Shares Outstanding (in thousands)		59,308				53,616				53,660				53,960				54,184
FINANCIAL RATIOS:
Return on Average Assets		0.88	%			1.26	%			1.25	%			1.41	%			1.51	%
Return on Average Stockholders' Equity		7.62				10.28				10.10				11.17				12.04
Return on Average Common Stockholders' Equity		7.72				10.28				10.10				11.17				12.04
Average Earning Assets to Average Assets		92.45				92.23				91.86				91.57				91.87
Allowance for Credit Losses - Loans as % of Total Loans		1.98				2.09				2.11				2.21				2.19
Net Charge-offs (Recoveries) as % of Average Loans (Annualized)		0.01				(0.03	)			0.20				(0.01	)			0.06
Average Stockholders' Equity to Average Assets		11.37				12.23				12.36				12.59				12.51
Tax Equivalent Yield on Average Earning Assets		3.58				3.23				3.29				3.46				3.49
Interest Expense/Average Earning Assets		0.30				0.20				0.25				0.26				0.27
Net Interest Margin (FTE) on Average Earning Assets		3.28				3.03				3.04				3.20				3.22
Efficiency Ratio		58.45				52.79				53.49				51.18				48.91
Tangible Common Book Value Per Share	$	20.45			$	23.26			$	25.21			$	24.31			$	24.15

LOANS
(Dollars In Thousands)	June 30,				March 31,				December 31,				September 30,				June 30,
		2022				2022				2021				2021				2021
Commercial and industrial loans	$	3,297,477			$	2,826,660			$	2,714,565			$	2,573,615			$	2,671,076
Agricultural land, production and other loans to farmers		214,904				209,077				246,442				240,686				235,020
Real estate loans:
Construction		745,983				552,975				523,066				521,889				491,200
Commercial real estate, non-owner occupied		2,423,185				2,073,197				2,135,459				2,150,387				2,263,497
Commercial real estate, owner occupied		1,264,563				974,521				986,720				952,441				953,501
Residential		1,813,297				1,226,695				1,159,127				1,154,373				1,127,442
Home equity		586,108				512,641				523,754				531,307				489,997
Individuals' loans for household and other personal expenditures		157,264				147,593				146,092				135,093				130,819
Public finance and other commercial loans		894,636				832,882				806,636				781,785				758,698
Loans		11,397,417				9,356,241				9,241,861				9,041,576				9,121,250
Allowance for credit losses - loans		(226,275	)			(195,984	)			(195,397	)			(199,972	)			(199,775	)
NET LOANS	$	11,171,142			$	9,160,257			$	9,046,464			$	8,841,604			$	8,921,475

DEPOSITS
(Dollars In Thousands)	June 30,				March 31,				December 31,				September 30,				June 30,
		2022				2022				2021				2021				2021
Demand deposits	$	8,785,889			$	7,806,033			$	7,704,190			$	7,317,399			$	7,261,603
Savings deposits		4,875,880				4,444,417				4,334,802				4,301,483				4,157,552
Certificates and other time deposits of $100,000 or more		436,942				252,033				273,379				283,396				304,394
Other certificates and time deposits		446,973				380,293				389,752				404,010				423,922
Brokered deposits		25,185				23,177				30,454				42,401				55,929
TOTAL DEPOSITS	$	14,570,869			$	12,905,953			$	12,732,577			$	12,348,689			$	12,203,400

CONSOLIDATED AVERAGE BALANCE SHEET AND NET INTEREST MARGIN ANALYSIS
(Dollars in Thousands)
	For the Three Months Ended
	June 30, 2022									June 30, 2021
	Average Balance			Interest Income / Expense			Average Rate			Average Balance			Interest Income / Expense			Average Rate
Assets:
Interest-bearing deposits	$	329,626		$	610		0.74	%		$	545,752		$	129		0.09	%
Federal Home Loan Bank stock		38,111			175		1.84				28,736			88		1.22
Investment Securities:(1)
Taxable		2,189,193			10,372		1.90				1,732,367			7,440		1.72
Tax-Exempt(2)		2,703,629			21,788		3.22				1,969,577			16,546		3.36
Total Investment Securities		4,892,822			32,160		2.63				3,701,944			23,986		2.59
Loans held for sale		28,491			315		4.42				25,039			237		3.79
Loans:(3)
Commercial		8,134,050			85,867		4.22				6,953,227			70,886		4.08
Real Estate Mortgage		1,458,317			12,657		3.47				912,662			9,488		4.16
Installment		772,610			7,948		4.11				659,515			6,391		3.88
Tax-Exempt(2)		781,720			7,582		3.88				732,081			7,019		3.84
Total Loans		11,175,188			114,369		4.09				9,282,524			94,021		4.05
Total Earning Assets		16,435,747			147,314		3.58	%			13,558,956			118,224		3.49	%
Total Non-Earning Assets		1,342,474									1,199,641
Total Assets	$	17,778,221								$	14,758,597
Liabilities:
Interest-bearing deposits:
Interest-bearing deposits	$	5,372,474		$	4,569		0.34	%		$	4,745,181		$	3,560		0.30	%
Money market deposits		3,024,560			2,130		0.28				2,337,143			796		0.14
Savings deposits		1,966,054			916		0.19				1,740,233			462		0.11
Certificates and other time deposits		948,799			870		0.37				812,370			1,005		0.49
Total Interest-bearing Deposits		11,311,887			8,485		0.30				9,634,927			5,823		0.24
Borrowings		818,851			4,000		1.95				644,702			3,188		1.98
Total Interest-bearing Liabilities		12,130,738			12,485		0.41				10,279,629			9,011		0.35
Noninterest-bearing deposits		3,497,641									2,490,226
Other liabilities		128,719									142,705
Total Liabilities		15,757,098									12,912,560
Stockholders' Equity		2,021,123									1,846,037
Total Liabilities and Stockholders' Equity	$	17,778,221			12,485					$	14,758,597			9,011
Net Interest Income (FTE)				$	134,829								$	109,213
Net Interest Spread (FTE)(4)							3.17	%								3.14	%
Net Interest Margin (FTE):
Interest Income (FTE) / Average Earning Assets							3.58	%								3.49	%
Interest Expense / Average Earning Assets							0.30	%								0.27	%
Net Interest Margin (FTE)(5)							3.28	%								3.22	%
(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 $6,168 and $4,949 for the three months ended June 30, 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 Six Months Ended
	June 30, 2022									June 30, 2021
	Average Balance			Interest Income / Expense			Average Rate			Average Balance			Interest Income / Expense			Average Rate
Assets:
Interest-bearing deposits	$	406,698		$	840		0.41	%		$	493,791		$	243		0.10	%
Federal Home Loan Bank stock		33,040			321		1.94				28,736			266		1.85
Investment Securities:(1)
Taxable		2,074,074			18,882		1.82				1,613,847			14,135		1.75
Tax-Exempt(2)		2,620,593			41,882		3.20				1,896,643			32,223		3.40
Total Investment Securities		4,694,667			60,764		2.59				3,510,490			46,358		2.64
Loans held for sale		18,181			355		3.91				20,572			393		3.82
Loans:(3)
Commercial		7,504,740			150,545		4.01				6,915,234			140,060		4.05
Real Estate Mortgage		1,191,075			20,497		3.44				943,830			18,774		3.98
Installment		741,994			14,465		3.90				666,870			12,880		3.86
Tax-Exempt(2)		764,870			14,803		3.87				713,094			13,777		3.86
Total Loans		10,220,860			200,665		3.93				9,259,600			185,884		4.01
Total Earning Assets		15,355,265			262,590		3.42	%			13,292,617			232,751		3.51	%
Total Non-Earning Assets		1,272,539									1,210,470
Total Assets	$	16,627,804								$	14,503,087
Liabilities:
Interest-bearing deposits:
Interest-bearing deposits	$	5,200,923		$	6,977		0.27	%		$	4,681,439		$	7,269		0.31	%
Money market deposits		2,770,904			3,002		0.22				2,212,425			1,631		0.15
Savings deposits		1,917,005			1,357		0.14				1,700,601			938		0.11
Certificates and other time deposits		813,482			1,443		0.35				835,722			2,185		0.52
Total Interest-bearing Deposits		10,702,314			12,779		0.24				9,430,187			12,023		0.25
Borrowings		718,270			6,966		1.94				659,826			6,376		1.93
Total Interest-bearing Liabilities		11,420,584			19,745		0.35				10,090,013			18,399		0.36
Noninterest-bearing deposits		3,116,797									2,417,888
Other liabilities		133,891									151,936
Total Liabilities		14,671,272									12,659,837
Stockholders' Equity		1,956,532									1,843,250
Total Liabilities and Stockholders' Equity	$	16,627,804			19,745					$	14,503,087			18,399
Net Interest Income (FTE)				$	242,845								$	214,352
Net Interest Spread (FTE)(4)							3.07	%								3.15	%
Net Interest Margin (FTE):
Interest Income (FTE) / Average Earning Assets							3.42	%								3.51	%
Interest Expense / Average Earning Assets							0.26	%								0.28	%
Net Interest Margin (FTE)(5)							3.16	%								3.23	%
(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 $11,904 and $9,660 for the six months ended June 30, 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																				Six Months Ended
	June 30,				March 31,				December 31,				September 30,				June 30,				June 30,				June 30,
		2022				2022				2021				2021				2021				2022				2021
Net Income Available to Common Shareholders - GAAP	$	38,522			$	48,586			$	47,733			$	52,770			$	55,559			$	87,108			$	105,028
Adjustments:
PPP loan income		(891	)			(1,884	)			(3,721	)			(8,211	)			(9,725	)			(2,775	)			(18,968	)
Acquisition-related expenses		12,549				152				—				—				—				12,701				—
Acquisition-related provision expense		16,755				—				—				—				—				16,755				—
Tax on adjustment		(6,967	)			425				912				2,013				2,385				(6,542	)			4,651
Adjusted Net Income Available to Common Stockholders - Non-GAAP	$	59,968			$	47,279			$	44,924			$	46,572			$	48,219			$	107,247			$	90,711
Average Diluted Common Shares Outstanding (in thousands)		59,308				53,616				53,660				53,960				54,184				56,516				54,159
Diluted Earnings Per Common Share - GAAP	$	0.63			$	0.91			$	0.89			$	0.98			$	1.03			$	1.54			$	1.94
Adjustments:
PPP loan income		(0.01	)			(0.04	)			(0.07	)			(0.15	)			(0.18	)			(0.05	)			(0.35	)
Acquisition-related expenses		0.22				—				—				—				—				0.22				—
Acquisition-related provision expense		0.30				—				—				—				—				0.30				—
Tax on adjustment		(0.13	)			0.01				0.02				0.04				0.04				(0.12	)			0.08
Adjusted Diluted Earnings Per Common Share - Non-GAAP	$	1.01			$	0.88			$	0.84			$	0.87			$	0.89			$	1.89			$	1.67

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

 

FAQ

What were First Merchants Corporation's Q2 2022 earnings?

First Merchants Corporation reported Q2 2022 net income of $38.5 million and diluted earnings per share of $0.63.

How did First Merchants' total loans change in Q2 2022?

Total loans increased by $2.0 billion in Q2 2022, primarily due to the acquisition of Level One Bancorp.

What is the adjusted net income for First Merchants in Q2 2022?

The adjusted net income for Q2 2022 was $60.0 million, with adjusted diluted earnings per share at $1.01.

What were the total non-interest expenses for First Merchants in Q2 2022?

Total non-interest expenses for Q2 2022 reached $97.3 million, reflecting significant acquisition costs.

What factors contributed to the decrease in First Merchants' net income?

The decrease in net income was largely attributed to acquisition costs totaling $29.3 million.