FRME First Merchants Corporation

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.

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.

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.