First Merchants Corporation Announces Third Quarter 2024 Earnings per Share

Rhea-AI Summary

First Merchants (NASDAQ: FRME) reported third quarter 2024 net income of $48.7 million with diluted earnings per share of $0.84, compared to $55.9 million and $0.94 in Q3 2023. Adjusted net income, excluding securities portfolio repositioning loss, was $55.6 million or $0.95 per share. The company announced the sale of five Illinois branches to Old Second National Bank, with $287.7 million in deposits reclassified as held for sale. Total assets reached $18.3 billion with loans at $12.7 billion. Net interest margin improved to 3.23% from 3.16% quarter-over-quarter. The company maintained strong capital position with Common Equity Tier 1 Capital Ratio of 11.25%.

Positive

• Net interest margin improved to 3.23% from 3.16% quarter-over-quarter
• Total loans grew $385.1 million or 3.1% year-over-year
• Deposits grew organically by $83.7 million (2.3% annualized) on linked quarter basis
• Strong efficiency ratio at 53.76%
• Robust capital position with Common Equity Tier 1 Capital Ratio of 11.25%

Negative

• Net income decreased to $48.7 million from $55.9 million in Q3 2023
• EPS declined to $0.84 from $0.94 year-over-year
• $9.1 million pre-tax loss from securities portfolio repositioning
• Net interest income decreased $2.3 million (1.7%) compared to Q3 2023
• Non-interest income decreased $3.0 million (6.7%) from Q3 2023

Insights

Financial Analyst

The Q3 2024 results show mixed performance for First Merchants Net income of $48.7 million represents a 12.9% decline from Q3 2023, though it improved 23.3% from Q2 2024. The adjusted EPS of $0.95 (excluding securities portfolio restructuring) demonstrates underlying strength.

Key positives include margin expansion to 3.23%, organic deposit growth of 2.3% annualized and strong asset quality with NPAs at just 35 basis points. The strategic sale of Illinois branches and securities portfolio repositioning should improve efficiency and profitability going forward.

However, loan growth was modest at 0.5% annualized and the efficiency ratio of 53.76% indicates room for improvement. Capital levels remain robust with CET1 at 11.25%, providing stability amid market uncertainties.

Market Research Analyst

The strategic decisions to exit suburban Chicago markets and restructure the securities portfolio are significant moves that could reshape FRME's market positioning. The sale of five branches with $287.7 million in deposits represents a focused approach to optimize the branch network and concentrate on core markets.

The securities portfolio restructuring, while causing a short-term hit of $9.1 million, should benefit future quarters through improved yields. The completion of four major technology initiatives positions the bank well for enhanced customer acquisition and operational efficiency.

The bank's strong capital position and stable asset quality metrics provide a solid foundation for future growth initiatives. The focus on core markets and technology modernization could drive improved performance in 2025.

MUNCIE, Ind., Oct. 24, 2024 (GLOBE NEWSWIRE) -- First Merchants Corporation (NASDAQ - FRME)

Third Quarter 2024 Highlights:

• Net income available to common stockholders was $48.7 million and diluted earnings per common share totaled $0.84, compared to $55.9 million and $0.94 in the third quarter of 2023, and $39.5 million and $0.68 in the second quarter of 2024.   Excluding the loss from repositioning of the available for sale securities portfolio, adjusted net income was $55.6 million or $0.95 per share for the third quarter of 2024.
• Strong capital position with Common Equity Tier 1 Capital Ratio of 11.25% and Tangible Common Equity to Tangible Assets Ratio of 8.76%.
• Net interest margin was 3.23% compared to 3.16% on a linked quarter basis.
• Total loans grew $15.5 million, or 0.5% annualized, on a linked quarter basis, and $385.1 million, or 3.1% during the last twelve months.
• Total deposits grew by $83.7 million, or 2.3% annualized, on a linked quarter basis after normalizing for $287.7 million of deposits reclassified to held for sale.
• Nonperforming assets to total assets were 35 basis points compared to 36 basis points on a linked quarter basis.
• The efficiency ratio totaled 53.76% for the quarter.
• Announced sale of five Illinois branches and certain loans and deposits to Old Second National Bank on August 27, 2024.

“We are pleased with our third quarter results and the focused momentum that we are building,” said Mark Hardwick, Chief Executive Officer. "The pending sale of five non-core Illinois branches, restructure of the securities portfolio, and successful completion of four major technology initiatives provides us with the opportunity to reprioritize our core markets and introduce innovative customer acquisition strategies.”

Third Quarter Financial Results:

First Merchants Corporation (the “Corporation”) has reported third quarter 2024 net income available to common stockholders of $48.7 million compared to $55.9 million during the same period in 2023. Diluted earnings per common share for the period totaled $0.84 compared to the third quarter of 2023 result of $0.94. Excluding the $9.1 million pre-tax loss from repositioning of the available for sale securities portfolio, adjusted net income was $55.6 million, or $0.95 diluted earnings per common share for the third quarter of 2024.

During the quarter, the Corporation signed a definitive agreement to sell five Illinois branches along with certain loans and deposits, representing an exit from suburban Chicago markets. Loans of $9.2 million, deposits of $287.7 million and fixed assets of $3.4 million have been moved to held for sale categories as of September 30, 2024. The transaction is expected to close in the fourth quarter of this year.

Total assets equaled $18.3 billion as of quarter-end and loans totaled $12.7 billion. During the past twelve months, total loans grew by $385.1 million, or 3.1%. On a linked quarter basis, loans grew $15.5 million, or 0.5%, with growth primarily in commercial & industrial loans.

Investments totaling $3.7 billion decreased $51.6 million, or 1.4%, during the last twelve months and decreased $90.9 million, or 9.7% annualized, on a linked quarter basis. The decline during the quarter was due to $158.9 million in sales of available for sale securities with a weighted average tax-equivalent yield of 2.85%, partially offset by an increase in the securities portfolio valuation.

Total deposits were $14.4 billion as of quarter-end and decreased by $281.5 million, or 1.9%, over the past twelve months. The decline was primarily due to $287.7 million of deposits being reclassified to held for sale. Excluding this impact, deposits increased by $6.2 million. On a linked quarter basis, deposits grew organically by $83.7 million or 2.3%. The loan to deposit ratio increased to 88.0% at period end from 86.8% in the prior quarter, primarily due to the reclassification of deposits to held for sale as previously described.

The Corporation’s Allowance for Credit Losses – Loans (ACL) totaled $187.8 million as of quarter-end, or 1.48% of total loans, a decrease of $1.7 million from prior quarter. Loan charge-offs, net of recoveries totaled $6.7 million and provision for loans of $5.0 million was recorded during the quarter. Reserves for unfunded commitments totaled $19.5 million and remained unchanged from the prior quarter. Non-performing assets to total assets were 35 basis points for the third quarter of 2024, a decrease of one basis point compared to 36 basis points in the prior quarter.

Net interest income totaled $131.1 million for the quarter, an increase of $2.5 million, or 2.0%, compared to prior quarter and a decrease of $2.3 million, or 1.7%, compared to the third quarter of 2023. Fully-tax equivalent net interest margin was 3.23%, an increase of 7 basis points compared to the second quarter of 2024, and a decrease of 6 basis points compared to the third quarter of 2023. The increase in net interest margin compared to the second quarter was due to higher earning asset yields.

Non-interest income totaled $24.9 million for the quarter, a decrease of $6.5 million, or 20.6%, compared to the second quarter of 2024 and a decrease of $3.0 million, or 6.7% from the third quarter of 2023. The decrease from second quarter of 2024 was driven by realized losses on sales of available for sale securities associated with the repositioning of the bond portfolio, partially offset by increases in gains on sales of mortgage loans and earnings on cash surrender value of life insurance.

Non-interest expense totaled $94.6 million for the quarter, an increase of $3.2 million from the second quarter of 2024 and an increase of $0.8 million from the third quarter of 2023. The increase from the linked quarter was from higher salaries and employee benefits primarily driven by higher incentives.

The Corporation’s total risk-based capital ratio equaled 13.18%, common equity tier 1 capital ratio equaled 11.25%, and the tangible common equity ratio totaled 8.76%. These ratios continue to reflect the Corporation’s strong liquidity and capital positions.

CONFERENCE CALL

First Merchants Corporation will conduct a third quarter earnings conference call and web cast at 11:30 a.m. (ET) on Thursday, October 24, 2024.

To access via phone, participants will need to register using the following link where they will be provided a phone number and access code: (https://register.vevent.com/register/BI34430e309ed545808c7c8195f36e86b6)

To view the webcast and presentation slides, please go to (https://edge.media-server.com/mmc/p/6grv3upw) during the time of the call. A replay of the webcast will be available until October 24, 2025.

Detailed financial results are reported on the attached pages.

About First Merchants Corporation

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

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

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

Forward-Looking Statements

This release contains forward-looking statements made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements can often, but not always, be identified by the use of words like “believe”, “continue”, “pattern”, “estimate”, “project”, “intend”, “anticipate”, “expect” and similar expressions or future or conditional verbs such as “will”, “would”, “should”, “could”, “might”, “can”, “may”, or similar expressions. These statements include statements about First Merchants’ goals, intentions and expectations; statements regarding the First Merchants’ business plan and growth strategies; statements regarding the asset quality of First Merchants’ loan and investment portfolios; and estimates of First Merchants’ risks and future costs and benefits. These forward-looking statements are subject to significant risks, assumptions and uncertainties that may cause results to differ materially from those set forth in forward-looking statements, including, among other things: possible changes in monetary and fiscal policies, and laws and regulations; the effects of easing restrictions on participants in the financial services industry; the cost and other effects of legal and administrative cases; possible changes in the credit worthiness of customers and the possible impairment of collectability of loans; fluctuations in market rates of interest; competitive factors in the banking industry; changes in the banking legislation or regulatory requirements of federal and state agencies applicable to bank holding companies and banks like First Merchants’ affiliate bank; continued availability of earnings and excess capital sufficient for the lawful and prudent declaration of dividends; changes in market, economic, operational, liquidity (including the ability to grow and maintain core deposits and retain large, uninsured deposits), credit and interest rate risks associated with the First Merchants’ business; and other risks and factors identified in each of First Merchants’ filings with the Securities and Exchange Commission. First Merchants does not undertake any obligation to update any forward-looking statement, whether written or oral, relating to the matters discussed in this press release. In addition, First Merchants’ past results of operations do not necessarily indicate its anticipated future results.

CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)	September 30,
		2024				2023
ASSETS
Cash and due from banks	$	84,719			$	125,173
Interest-bearing deposits		359,126				348,639
Investment securities, net of allowance for credit losses of $245,000 and $245,000		3,662,145				3,713,724
Loans held for sale		40,652				30,972
Loans		12,646,808				12,271,422
Less: Allowance for credit losses - loans		(187,828	)			(205,782	)
Net loans		12,458,980				12,065,640
Premises and equipment		129,582				132,441
Federal Home Loan Bank stock		41,716				41,797
Interest receivable		92,055				90,011
Goodwill and other intangibles		733,601				741,283
Cash surrender value of life insurance		304,613				306,106
Other real estate owned		5,247				6,480
Tax asset, deferred and receivable		86,732				135,521
Other assets		348,384				340,476
TOTAL ASSETS	$	18,347,552			$	18,078,263
LIABILITIES
Deposits:
Noninterest-bearing	$	2,334,197			$	2,554,984
Interest-bearing		12,030,903				12,091,592
Total Deposits		14,365,100				14,646,576
Borrowings:
Federal funds purchased		30,000				—
Securities sold under repurchase agreements		124,894				152,537
Federal Home Loan Bank advances		832,629				713,384
Subordinated debentures and other borrowings		93,562				158,665
Total Borrowings		1,081,085				1,024,586
Deposits and other liabilities held for sale		288,476				—
Interest payable		18,089				16,473
Other liabilities		292,429				297,984
Total Liabilities		16,045,179				15,985,619
STOCKHOLDERS' EQUITY
Preferred Stock, $1,000 par value, $1,000 liquidation value:
Authorized -- 600 cumulative shares
Issued and outstanding - 125 cumulative shares		125				125
Preferred Stock, Series A, no par value, $2,500 liquidation preference:
Authorized -- 10,000 non-cumulative perpetual shares
Issued and outstanding - 10,000 non-cumulative perpetual shares		25,000				25,000
Common Stock, $.125 stated value:
Authorized -- 100,000,000 shares
Issued and outstanding - 58,117,115 and 59,398,022 shares		7,265				7,425
Additional paid-in capital		1,192,683				1,234,402
Retained earnings		1,229,125				1,132,962
Accumulated other comprehensive loss		(151,825	)			(307,270	)
Total Stockholders' Equity		2,302,373				2,092,644
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	18,347,552			$	18,078,263

CONSOLIDATED STATEMENTS OF INCOME	Three Months Ended								Nine Months Ended
(Dollars In Thousands, Except Per Share Amounts)	September 30,								September 30,
		2024				2023				2024				2023
INTEREST INCOME
Loans receivable:
Taxable	$	206,680			$	191,705			$	606,116			$	550,314
Tax-exempt		8,622				8,288				25,242				23,757
Investment securities:
Taxable		9,263				8,590				27,062				26,563
Tax-exempt		13,509				13,947				40,733				44,296
Deposits with financial institutions		2,154				5,884				11,642				9,685
Federal Home Loan Bank stock		855				719				2,569				2,281
Total Interest Income		241,083				229,133				713,364				656,896
INTEREST EXPENSE
Deposits		98,856				85,551				296,292				209,437
Federal funds purchased		329				—				455				1,420
Securities sold under repurchase agreements		700				797				2,377				2,624
Federal Home Loan Bank advances		8,544				6,896				21,715				20,775
Subordinated debentures and other borrowings		1,544				2,506				5,781				7,303
Total Interest Expense		109,973				95,750				326,620				241,559
NET INTEREST INCOME		131,110				133,383				386,744				415,337
Provision for credit losses		5,000				2,000				31,500				2,000
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		126,110				131,383				355,244				413,337
NONINTEREST INCOME
Service charges on deposit accounts		8,361				7,975				24,482				23,147
Fiduciary and wealth management fees		8,525				7,394				25,550				22,653
Card payment fees		5,121				4,716				14,360				14,425
Net gains and fees on sales of loans		6,764				5,517				15,159				11,548
Derivative hedge fees		736				516				1,488				2,336
Other customer fees		344				384				1,231				1,643
Earnings on cash surrender value of life insurance		2,755				1,761				6,276				5,145
Net realized losses on sales of available for sale securities		(9,114	)			(1,650	)			(9,165	)			(4,613	)
Other income		1,374				1,229				3,457				2,874
Total Noninterest Income		24,866				27,842				82,838				79,158
NONINTEREST EXPENSES
Salaries and employee benefits		55,223				55,566				165,730				167,778
Net occupancy		6,994				6,837				21,052				20,770
Equipment		6,949				5,698				19,774				18,005
Marketing		1,836				2,369				4,807				4,780
Outside data processing fees		7,150				6,573				21,111				19,290
Printing and office supplies		378				333				1,085				1,150
Intangible asset amortization		1,772				2,182				5,500				6,561
FDIC assessments		3,720				2,981				11,285				7,117
Other real estate owned and foreclosure expenses		942				677				1,849				1,575
Professional and other outside services		3,035				3,833				10,809				12,191
Other expenses		6,630				6,805				19,975				20,950
Total Noninterest Expenses		94,629				93,854				282,977				280,167
INCOME BEFORE INCOME TAX		56,347				65,371				155,105				212,328
Income tax expense		7,160				9,005				18,052				31,021
NET INCOME		49,187				56,366				137,053				181,307
Preferred stock dividends		468				468				1,406				1,406
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	48,719			$	55,898			$	135,647			$	179,901
Per Share Data:
Basic Net Income Available to Common Stockholders	$	0.84			$	0.95			$	2.32			$	3.04
Diluted Net Income Available to Common Stockholders	$	0.84			$	0.94			$	2.31			$	3.03
Cash Dividends Paid to Common Stockholders	$	0.35			$	0.34			$	1.04			$	1.00
Average Diluted Common Shares Outstanding (in thousands)		58,289				59,503				58,629				59,465

FINANCIAL HIGHLIGHTS
(Dollars in thousands)	Three Months Ended								Nine Months Ended
	September 30,								September 30,
		2024				2023				2024				2023
NET CHARGE-OFFS	$	6,709			$	20,365			$	48,606			$	22,495
AVERAGE BALANCES:
Total Assets	$	18,360,580			$	18,152,239			$	18,374,370			$	18,115,504
Total Loans		12,680,166				12,287,632				12,592,907				12,264,787
Total Earning Assets		16,990,358				16,947,669				17,042,540				16,913,965
Total Deposits		14,702,454				14,735,592				14,826,056				14,627,448
Total Stockholders' Equity		2,251,547				2,154,232				2,232,419				2,126,005
FINANCIAL RATIOS:
Return on Average Assets		1.07	%			1.24	%			0.99	%			1.33	%
Return on Average Stockholders' Equity		8.66				10.38				8.10				11.28
Return on Tangible Common Stockholders' Equity		13.39				16.54				12.64				18.10
Average Earning Assets to Average Assets		92.54				93.36				92.75				93.37
Allowance for Credit Losses - Loans as % of Total Loans		1.48				1.67				1.48				1.67
Net Charge-offs as % of Average Loans (Annualized)		0.21				0.66				0.51				0.24
Average Stockholders' Equity to Average Assets		12.26				11.87				12.15				11.74
Tax Equivalent Yield on Average Earning Assets		5.82				5.55				5.72				5.32
Interest Expense/Average Earning Assets		2.59				2.26				2.56				1.90
Net Interest Margin (FTE) on Average Earning Assets		3.23				3.29				3.16				3.42
Efficiency Ratio		53.76				53.91				55.54				52.60
Tangible Common Book Value Per Share	$	26.64			$	22.43			$	26.64			$	22.43

NONPERFORMING ASSETS
(Dollars In Thousands)	September 30,				June 30,				March 31,				December 31,				September 30,
		2024				2024				2024				2023				2023
Nonaccrual Loans	$	59,088			$	61,906			$	62,478			$	53,580			$	53,102
Other Real Estate Owned and Repossessions		5,247				4,824				4,886				4,831				6,480
Nonperforming Assets (NPA)		64,335				66,730				67,364				58,411				59,582
90+ Days Delinquent		14,105				1,686				2,838				172				89
NPAs & 90 Day Delinquent	$	78,440			$	68,416			$	70,202			$	58,583			$	59,671
Allowance for Credit Losses - Loans	$	187,828			$	189,537			$	204,681			$	204,934			$	205,782
Quarterly Net Charge-offs		6,709				39,644				2,253				3,148				20,365
NPAs / Actual Assets %		0.35	%			0.36	%			0.37	%			0.32	%			0.33	%
NPAs & 90 Day / Actual Assets %		0.43	%			0.37	%			0.38	%			0.32	%			0.33	%
NPAs / Actual Loans and OREO %		0.51	%			0.53	%			0.54	%			0.47	%			0.48	%
Allowance for Credit Losses - Loans / Actual Loans (%)		1.48	%			1.50	%			1.64	%			1.64	%			1.67	%
Net Charge-offs as % of Average Loans (Annualized)		0.21	%			1.26	%			0.07	%			0.10	%			0.66	%

CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)	September 30,				June 30,				March 31,				December 31,				September 30,
		2024				2024				2024				2023				2023
ASSETS
Cash and due from banks	$	84,719			$	105,372			$	100,514			$	112,649			$	125,173
Interest-bearing deposits		359,126				168,528				410,497				436,080				348,639
Investment securities, net of allowance for credit losses		3,662,145				3,753,088				3,783,574				3,811,364				3,713,724
Loans held for sale		40,652				32,292				15,118				18,934				30,972
Loans		12,646,808				12,639,650				12,465,582				12,486,027				12,271,422
Less: Allowance for credit losses - loans		(187,828	)			(189,537	)			(204,681	)			(204,934	)			(205,782	)
Net loans		12,458,980				12,450,113				12,260,901				12,281,093				12,065,640
Premises and equipment		129,582				133,245				132,706				133,896				132,441
Federal Home Loan Bank stock		41,716				41,738				41,758				41,769				41,797
Interest receivable		92,055				97,546				92,550				97,664				90,011
Goodwill and other intangibles		733,601				735,373				737,144				739,101				741,283
Cash surrender value of life insurance		304,613				306,379				306,028				306,301				306,106
Other real estate owned		5,247				4,824				4,886				4,831				6,480
Tax asset, deferred and receivable		86,732				107,080				101,121				99,883				135,521
Other assets		348,384				367,845				331,006				322,322				340,476
TOTAL ASSETS	$	18,347,552			$	18,303,423			$	18,317,803			$	18,405,887			$	18,078,263
LIABILITIES
Deposits:
Noninterest-bearing	$	2,334,197			$	2,303,313			$	2,338,364			$	2,500,062			$	2,554,984
Interest-bearing		12,030,903				12,265,757				12,546,220				12,321,391				12,091,592
Total Deposits		14,365,100				14,569,070				14,884,584				14,821,453				14,646,576
Borrowings:
Federal funds purchased		30,000				147,229				—				—				—
Securities sold under repurchase agreements		124,894				100,451				130,264				157,280				152,537
Federal Home Loan Bank advances		832,629				832,703				612,778				712,852				713,384
Subordinated debentures and other borrowings		93,562				93,589				118,612				158,644				158,665
Total Borrowings		1,081,085				1,173,972				861,654				1,028,776				1,024,586
Deposits and other liabilities held for sale		288,476				—				—				—				—
Interest payable		18,089				18,554				19,262				18,912				16,473
Other liabilities		292,429				329,302				327,500				289,033				297,984
Total Liabilities		16,045,179				16,090,898				16,093,000				16,158,174				15,985,619
STOCKHOLDERS' EQUITY
Preferred Stock, $1,000 par value, $1,000 liquidation value:
Authorized -- 600 cumulative shares
Issued and outstanding - 125 cumulative shares		125				125				125				125				125
Preferred Stock, Series A, no par value, $2,500 liquidation preference:
Authorized -- 10,000 non-cumulative perpetual shares
Issued and outstanding - 10,000 non-cumulative perpetual shares		25,000				25,000				25,000				25,000				25,000
Common Stock, $.125 stated value:
Authorized -- 100,000,000 shares
Issued and outstanding		7,265				7,256				7,321				7,428				7,425
Additional paid-in capital		1,192,683				1,191,193				1,208,447				1,236,506				1,234,402
Retained earnings		1,229,125				1,200,930				1,181,939				1,154,624				1,132,962
Accumulated other comprehensive loss		(151,825	)			(211,979	)			(198,029	)			(175,970	)			(307,270	)
Total Stockholders' Equity		2,302,373				2,212,525				2,224,803				2,247,713				2,092,644
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	18,347,552			$	18,303,423			$	18,317,803			$	18,405,887			$	18,078,263

CONSOLIDATED STATEMENTS OF INCOME
(Dollars In Thousands, Except Per Share Amounts)	September 30,				June 30,				March 31,				December 31,				September 30,
		2024				2024				2024				2023				2023
INTEREST INCOME
Loans receivable:
Taxable	$	206,680			$	201,413			$	198,023			$	197,523			$	191,705
Tax-exempt		8,622				8,430				8,190				8,197				8,288
Investment securities:
Taxable		9,263				9,051				8,748				8,644				8,590
Tax-exempt		13,509				13,613				13,611				13,821				13,947
Deposits with financial institutions		2,154				2,995				6,493				8,034				5,884
Federal Home Loan Bank stock		855				879				835				771				719
Total Interest Income		241,083				236,381				235,900				236,990				229,133
INTEREST EXPENSE
Deposits		98,856				99,151				98,285				96,655				85,551
Federal funds purchased		329				126				—				1				—
Securities sold under repurchase agreements		700				645				1,032				827				797
Federal Home Loan Bank advances		8,544				6,398				6,773				6,431				6,896
Subordinated debentures and other borrowings		1,544				1,490				2,747				3,013				2,506
Total Interest Expense		109,973				107,810				108,837				106,927				95,750
NET INTEREST INCOME		131,110				128,571				127,063				130,063				133,383
Provision for credit losses		5,000				24,500				2,000				1,500				2,000
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		126,110				104,071				125,063				128,563				131,383
NONINTEREST INCOME
Service charges on deposit accounts		8,361				8,214				7,907				7,690				7,975
Fiduciary and wealth management fees		8,525				8,825				8,200				8,187				7,394
Card payment fees		5,121				4,739				4,500				4,437				4,716
Net gains and fees on sales of loans		6,764				5,141				3,254				4,111				5,517
Derivative hedge fees		736				489				263				1,049				516
Other customer fees		344				460				427				237				384
Earnings on cash surrender value of life insurance		2,755				1,929				1,592				3,202				1,761
Net realized losses on sales of available for sale securities		(9,114	)			(49	)			(2	)			(2,317	)			(1,650	)
Other income (loss)		1,374				1,586				497				(152	)			1,229
Total Noninterest Income		24,866				31,334				26,638				26,444				27,842
NONINTEREST EXPENSES
Salaries and employee benefits		55,223				52,214				58,293				60,967				55,566
Net occupancy		6,994				6,746				7,312				9,089				6,837
Equipment		6,949				6,599				6,226				6,108				5,698
Marketing		1,836				1,773				1,198				2,647				2,369
Outside data processing fees		7,150				7,072				6,889				5,875				6,573
Printing and office supplies		378				354				353				402				333
Intangible asset amortization		1,772				1,771				1,957				2,182				2,182
FDIC assessments		3,720				3,278				4,287				7,557				2,981
Other real estate owned and foreclosure expenses		942				373				534				1,743				677
Professional and other outside services		3,035				3,822				3,952				3,981				3,833
Other expenses		6,630				7,411				5,934				7,552				6,805
Total Noninterest Expenses		94,629				91,413				96,935				108,103				93,854
INCOME BEFORE INCOME TAX		56,347				43,992				54,766				46,904				65,371
Income tax expense		7,160				4,067				6,825				4,425				9,005
NET INCOME		49,187				39,925				47,941				42,479				56,366
Preferred stock dividends		468				469				469				469				468
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	48,719			$	39,456			$	47,472			$	42,010			$	55,898
Per Share Data:
Basic Net Income Available to Common Stockholders	$	0.84			$	0.68			$	0.80			$	0.71			$	0.95
Diluted Net Income Available to Common Stockholders	$	0.84			$	0.68			$	0.80			$	0.71			$	0.94
Cash Dividends Paid to Common Stockholders	$	0.35			$	0.35			$	0.34			$	0.34			$	0.34
Average Diluted Common Shares Outstanding (in thousands)		58,289				58,328				59,273				59,556				59,503
FINANCIAL RATIOS:
Return on Average Assets		1.07	%			0.87	%			1.04	%			0.92	%			1.24	%
Return on Average Stockholders' Equity		8.66				7.16				8.47				7.89				10.38
Return on Tangible Common Stockholders' Equity		13.39				11.29				13.21				12.75				16.54
Average Earning Assets to Average Assets		92.54				92.81				92.91				93.62				93.36
Allowance for Credit Losses - Loans as % of Total Loans		1.48				1.50				1.64				1.64				1.67
Net Charge-offs as % of Average Loans (Annualized)		0.21				1.26				0.07				0.10				0.66
Average Stockholders' Equity to Average Assets		12.26				12.02				12.17				11.58				11.87
Tax Equivalent Yield on Average Earning Assets		5.82				5.69				5.65				5.64				5.55
Interest Expense/Average Earning Assets		2.59				2.53				2.55				2.48				2.26
Net Interest Margin (FTE) on Average Earning Assets		3.23				3.16				3.10				3.16				3.29
Efficiency Ratio		53.76				53.84				59.21				63.26				53.91
Tangible Common Book Value Per Share	$	26.64			$	25.10			$	25.07			$	25.06			$	22.43

LOANS
(Dollars In Thousands)	September 30,				June 30,				March 31,				December 31,				September 30,
		2024				2024				2024				2023				2023
Commercial and industrial loans	$	4,041,217			$	3,949,817			$	3,722,365			$	3,670,948			$	3,490,953
Agricultural land, production and other loans to farmers		238,743				239,926				234,431				263,414				233,838
Real estate loans:
Construction		814,704				823,267				941,726				957,545				1,022,261
Commercial real estate, non-owner occupied		2,251,351				2,323,533				2,368,360				2,400,839				2,360,596
Commercial real estate, owner occupied		1,152,751				1,174,195				1,137,894				1,162,083				1,153,707
Residential		2,366,943				2,370,905				2,316,490				2,288,921				2,257,385
Home equity		641,188				631,104				618,258				617,571				609,352
Individuals' loans for household and other personal expenditures		158,480				162,089				161,459				168,388				176,523
Public finance and other commercial loans		981,431				964,814				964,599				956,318				966,807
Loans		12,646,808				12,639,650				12,465,582				12,486,027				12,271,422
Allowance for credit losses - loans		(187,828	)			(189,537	)			(204,681	)			(204,934	)			(205,782	)
NET LOANS	$	12,458,980			$	12,450,113			$	12,260,901			$	12,281,093			$	12,065,640

DEPOSITS
(Dollars In Thousands)	September 30,			June 30,			March 31,			December 31,			September 30,
		2024			2024			2024			2023			2023
Demand deposits	$	7,678,510		$	7,757,679		$	7,771,976		$	7,965,862		$	7,952,040
Savings deposits		4,302,236			4,339,161			4,679,593			4,516,433			4,572,162
Certificates and other time deposits of $100,000 or more		1,277,833			1,415,131			1,451,443			1,408,985			1,280,607
Other certificates and time deposits		802,949			889,949			901,280			849,906			761,196
Brokered certificates of deposits1		303,572			167,150			80,292			80,267			80,571
TOTAL DEPOSITS2	$	14,365,100		$	14,569,070		$	14,884,584		$	14,821,453		$	14,646,576

^{1 -} Total brokered deposits of $838.3 million, which includes brokered CD's of $303.6 million at September 30, 2024.
² - Total deposits at September 30, 2024 excludes $287.7 million of deposits reclassified to Deposits and other liabilities held for sale related to the pending Illinois branch sale.

CONSOLIDATED AVERAGE BALANCE SHEET AND NET INTEREST MARGIN ANALYSIS
(Dollars in Thousands)
	For the Three Months Ended
	September 30, 2024									September 30, 2023
	Average Balance			Interest  Income / Expense			Average Rate			Average Balance			Interest  Income / Expense			Average Rate
ASSETS
Interest-bearing deposits	$	252,113		$	2,154		3.42	%		$	502,967		$	5,884		4.68	%
Federal Home Loan Bank stock		41,730			855		8.20				41,826			719		6.88
Investment Securities: (1)
Taxable		1,789,526			9,263		2.07				1,817,219			8,590		1.89
Tax-exempt (2)		2,226,823			17,100		3.07				2,298,025			17,655		3.07
Total Investment Securities		4,016,349			26,363		2.63				4,115,244			26,245		2.55
Loans held for sale		31,991			483		6.04				24,227			386		6.37
Loans: (3)
Commercial		8,699,733			164,922		7.58				8,456,527			153,993		7.28
Real estate mortgage		2,183,095			24,333		4.46				2,079,067			21,618		4.16
Installment		832,222			16,942		8.14				827,318			15,708		7.59
Tax-exempt (2)		933,125			10,914		4.68				900,493			10,491		4.66
Total Loans		12,680,166			217,594		6.86				12,287,632			202,196		6.58
Total Earning Assets		16,990,358			246,966		5.82	%			16,947,669			235,044		5.55	%
Total Non-Earning Assets		1,370,222									1,204,570
TOTAL ASSETS	$	18,360,580								$	18,152,239
LIABILITIES
Interest-Bearing Deposits:
Interest-bearing deposits	$	5,455,298		$	40,450		2.97	%		$	5,425,829		$	37,780		2.79	%
Money market deposits		2,974,188			25,950		3.49				2,923,798			23,607		3.23
Savings deposits		1,425,047			4,208		1.18				1,641,338			3,844		0.94
Certificates and other time deposits		2,499,655			28,248		4.52				2,106,910			20,320		3.86
Total Interest-Bearing Deposits		12,354,188			98,856		3.20				12,097,875			85,551		2.83
Borrowings		1,071,440			11,117		4.15				1,032,180			10,199		3.95
Total Interest-Bearing Liabilities		13,425,628			109,973		3.28				13,130,055			95,750		2.92
Noninterest-bearing deposits		2,348,266									2,637,717
Other liabilities		335,139									230,235
Total Liabilities		16,109,033									15,998,007
STOCKHOLDERS' EQUITY		2,251,547									2,154,232
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	18,360,580			109,973					$	18,152,239			95,750
Net Interest Income (FTE)				$	136,993								$	139,294
Net Interest Spread (FTE) (4)							2.54	%								2.63	%
Net Interest Margin (FTE):
Interest Income (FTE) / Average Earning Assets							5.82	%								5.55	%
Interest Expense / Average Earning Assets							2.59	%								2.26	%
Net Interest Margin (FTE) (5)							3.23	%								3.29	%
(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 2024 and 2023. These totals equal $5,883 and $5,911 for the three months ended September 30, 2024 and 2023, 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 Nine Months Ended
	September 30, 2024									September 30, 2023
	Average Balance			Interest  Income / Expense			Average Rate			Average Balance			Interest  Income / Expense			Average Rate
ASSETS
Interest-bearing deposits	$	383,007		$	11,642		4.05	%		$	340,887		$	9,685		3.79	%
Federal Home Loan Bank stock		41,748			2,569		8.20				41,160			2,281		7.39
Investment Securities: (1)
Taxable		1,787,119			27,062		2.02				1,872,267			26,563		1.89
Tax-exempt (2)		2,237,759			51,561		3.07				2,394,864			56,071		3.12
Total Investment Securities		4,024,878			78,623		2.60				4,267,131			82,634		2.58
Loans held for sale		27,735			1,242		5.97				22,398			1,046		6.23
Loans: (3)
Commercial		8,659,088			484,979		7.47				8,515,148			444,422		6.96
Real estate mortgage		2,159,738			70,489		4.35				2,008,852			60,354		4.01
Installment		825,060			49,406		7.98				833,133			44,492		7.12
Tax-exempt (2)		921,286			31,952		4.62				885,256			30,072		4.53
Total Loans		12,592,907			638,068		6.76				12,264,787			580,386		6.31
Total Earning Assets		17,042,540			730,902		5.72	%			16,913,965			674,986		5.32	%
Total Non-Earning Assets		1,331,830									1,201,539
TOTAL ASSETS	$	18,374,370								$	18,115,504
LIABILITIES
Interest-Bearing deposits:
Interest-bearing deposits	$	5,487,106		$	120,935		2.94	%		$	5,412,482		$	97,016		2.39	%
Money market deposits		3,018,526			80,563		3.56				2,812,891			55,868		2.65
Savings deposits		1,497,620			11,485		1.02				1,730,110			10,693		0.82
Certificates and other time deposits		2,447,684			83,309		4.54				1,821,408			45,860		3.36
Total Interest-Bearing Deposits		12,450,936			296,292		3.17				11,776,891			209,437		2.37
Borrowings		990,022			30,328		4.08				1,144,368			32,122		3.74
Total Interest-Bearing Liabilities		13,440,958			326,620		3.24				12,921,259			241,559		2.49
Noninterest-bearing deposits		2,375,120									2,850,557
Other liabilities		325,873									217,683
Total Liabilities		16,141,951									15,989,499
STOCKHOLDERS' EQUITY		2,232,419									2,126,005
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	18,374,370			326,620					$	18,115,504			241,559
Net Interest Income (FTE)				$	404,282								$	433,427
Net Interest Spread (FTE) (4)							2.48	%								2.83	%
Net Interest Margin (FTE):
Interest Income (FTE) / Average Earning Assets							5.72	%								5.32	%
Interest Expense / Average Earning Assets							2.56	%								1.90	%
Net Interest Margin (FTE) (5)							3.16	%								3.42	%
(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 2024 and 2023. These totals equal $17,538 and $18,090 for the nine months ended September 30, 2024 and 2023, respectively.
(3) Non accruing loans have been included in the average balances.
(4) Net Interest Spread (FTE) is interest income expressed as a percentage of average earning assets minus interest expense expressed as a percentage of average interest-bearing liabilities.
(5) Net Interest Margin (FTE) is interest income expressed as a percentage of average earning assets minus interest expense expressed as a percentage of average earning assets.

ADJUSTED NET INCOME AND DILUTED EARNINGS PER COMMON SHARE - NON-GAAP
(Dollars In Thousands, Except Per Share Amounts)	Three Months Ended																				Nine Months Ended
	September 30,				June 30,				March 31,				December 31,				September 30,				September 30,				September 30,
		2024				2024				2024				2023				2023				2024				2023
Net Income Available to Common Stockholders - GAAP	$	48,719			$	39,456			$	47,472			$	42,010			$	55,898			$	135,647			$	179,901
Adjustments:
PPP loan income		—				—				—				(7	)			(8	)			—				(42	)
Net realized losses on sales of available for sale securities		9,114				49				2				2,317				1,650				9,165				4,613
Non-core expenses1,2		—				—				3,481				12,682				—				3,481				—
Tax on adjustments		(2,220	)			(12	)			(848	)			(3,652	)			(403	)			(3,081	)			(1,121	)
Adjusted Net Income Available to Common Stockholders - Non-GAAP	$	55,613			$	39,493			$	50,107			$	53,350			$	57,137			$	145,212			$	183,351
Average Diluted Common Shares Outstanding (in thousands)		58,289				58,328				59,273				59,556				59,503				58,629				59,465
Diluted Earnings Per Common Share - GAAP	$	0.84			$	0.68			$	0.80			$	0.71			$	0.94			$	2.31			$	3.03
Adjustments:
PPP loan income		—				—				—				—				—				—				—
Net realized losses on sales of available for sale securities		0.15				—				—				0.04				0.03				0.16				0.07
Non-core expenses1,2		—				—				0.06				0.21				—				0.06				—
Tax on adjustments		(0.04	)			—				(0.01	)			(0.06	)			(0.01	)			(0.05	)			(0.02	)
Adjusted Diluted Earnings Per Common Share - Non-GAAP	$	0.95			$	0.68			$	0.85			$	0.90			$	0.96			$	2.48			$	3.08

¹ - Non-core expenses in 4Q23 included $6.3 million from early retirement and severance costs, $4.3 million from the FDIC special assessment, and $2.1 million from a lease termination.
² - Non-core expenses in 1Q24 included $2.4 million from duplicative online banking conversion costs and $1.1 million from the FDIC special assessment.

NET INTEREST MARGIN ("NIM"), ADJUSTED
(Dollars in Thousands, Except Per Share Amounts)
	Three Months Ended																				Nine Months Ended
	September 30,				June 30,				March 31,				December 31,				September 30,				September 30,				September 30,
		2024				2024				2024				2023				2023				2024				2023
Net Interest Income (GAAP)	$	131,110			$	128,571			$	127,063			$	130,063			$	133,383			$	386,744			$	415,337
Fully Taxable Equivalent ("FTE") Adjustment		5,883				5,859				5,795				5,853				5,911				17,538				18,090
Net Interest Income (FTE) (non-GAAP)	$	136,993			$	134,430			$	132,858			$	135,916			$	139,294			$	404,282			$	433,427
Average Earning Assets (GAAP)	$	16,990,358			$	17,013,984			$	17,123,851			$	17,222,714			$	16,947,669			$	17,042,540			$	16,913,965
Net Interest Margin (GAAP)		3.09	%			3.02	%			2.97	%			3.02	%			3.15	%			3.03	%			3.27	%
Net Interest Margin (FTE) (non-GAAP)		3.23	%			3.16	%			3.10	%			3.16	%			3.29	%			3.16	%			3.42	%

RETURN ON TANGIBLE COMMON EQUITY - NON-GAAP
(Dollars In Thousands)	Three Months Ended																				Nine Months Ended
	September 30,				June 30,				March 31,				December 31,				September 30,				September 30,				September 30,
		2024				2024				2024				2023				2023				2024				2023
Total Average Stockholders' Equity (GAAP)	$	2,251,547			$	2,203,361			$	2,242,139			$	2,130,993			$	2,154,232			$	2,232,419			$	2,126,005
Less: Average Preferred Stock		(25,125	)			(25,125	)			(25,125	)			(25,125	)			(25,125	)			(25,125	)			(25,125	)
Less: Average Intangible Assets, Net of Tax		(729,581	)			(730,980	)			(732,432	)			(734,007	)			(735,787	)			(730,993	)			(737,476	)
Average Tangible Common Equity, Net of Tax (Non-GAAP)	$	1,496,841			$	1,447,256			$	1,484,582			$	1,371,861			$	1,393,320			$	1,476,301			$	1,363,404
Net Income Available to Common Stockholders (GAAP)	$	48,719			$	39,456			$	47,472			$	42,010			$	55,898			$	135,647			$	179,901
Plus: Intangible Asset Amortization, Net of Tax		1,399				1,399				1,546				1,724				1,724				4,345				5,182
Tangible Net Income (Non-GAAP)	$	50,118			$	40,855			$	49,018			$	43,734			$	57,622			$	139,992			$	185,083
Return on Tangible Common Equity (Non-GAAP)		13.39	%			11.29	%			13.21	%			12.75	%			16.54	%			12.64	%			18.10	%

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 was First Merchants 's (FRME) earnings per share in Q3 2024?

First Merchants reported diluted earnings per share of $0.84 in Q3 2024, with adjusted EPS of $0.95 excluding securities portfolio repositioning loss.

How much did FRME's total loans grow in Q3 2024?

FRME's total loans grew by $15.5 million (0.5% annualized) on a linked quarter basis and $385.1 million (3.1%) over the last twelve months.

What was FRME's net interest margin in Q3 2024?

FRME's net interest margin was 3.23% in Q3 2024, an increase of 7 basis points from the previous quarter.

How many Illinois branches is FRME selling to Old Second National Bank?

FRME announced the sale of five Illinois branches to Old Second National Bank, with the transaction expected to close in Q4 2024.