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

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

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