FIRST MERCHANTS CORP [FRME] Filings

10-Q 1 frme-20240630.htm 10-Q frme-20240630

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

___________________

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from _______ to _______

FIRST MERCHANTS CORPORATION

(Exact name of registrant as specified in its charter)


Indiana
(State or other jurisdiction of incorporation)
001-41342			35-1544218
(Commission File Number)			(IRS Employer Identification No.)

200 East Jackson Street, Muncie, IN 47305-2814

(Address of principal executive offices) (Zip code)

(Registrant’s telephone number, including area code): (765) 747-1500

Not Applicable

(Former name, former address and former fiscal year,

if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.125 stated value per share	FRME	The Nasdaq Stock Market LLC
Depositary Shares, each representing a 1/100th interest in a share of Non-Cumulative Perpetual Preferred Stock, Series A	FRMEP	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every interactive data file required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated Filer

☐

Non-Accelerated Filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 26, 2024, there were 58,506,917 outstanding common shares of the registrant.

TABLE OF CONTENTS

FIRST MERCHANTS CORPORATION


		Page No.
Glossary of Defined Terms		3

Part I. Financial Information
Item 1.	Financial Statements:
	Consolidated Condensed Balance Sheets	4
	Consolidated Condensed Statements of Income	5
	Consolidated Condensed Statements of Comprehensive Income (Loss)	6
	Consolidated Condensed Statements of Stockholders' Equity	7
	Consolidated Condensed Statements of Cash Flows	9
	Notes to Consolidated Condensed Financial Statements	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	42
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	59
Item 4.	Controls and Procedures	60

Part II. Other Information
Item 1.	Legal Proceedings	61
Item 1A.	Risk Factors	61
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	61
Item 3.	Defaults Upon Senior Securities	61
Item 4.	Mine Safety Disclosures	61
Item 5.	Other Information	61
Item 6.	Exhibits	62

Signatures		63

GLOSSARY OF DEFINED TERMS

FIRST MERCHANTS CORPORATION





ACL			Allowance for Credit Losses
ASC			Accounting Standards Codification
ASU			Accounting Standards Update
Bank			First Merchants Bank, a wholly-owned subsidiary of the Corporation

BTFP			Bank Term Funding Program created by the Federal Reserve in March 2023
CECL			FASB Accounting Standards Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, adopted by the Corporation on January 1, 2021.
CET1			Common Equity Tier 1




CODM			Chief operating decision maker
Corporation			First Merchants Corporation

CRE			Commercial Real Estate
EITF			FASB's Emerging Issues Task Force
ESPP			Employee Stock Purchase Plan
FASB			Financial Accounting Standards Board
FDIC			Federal Deposit Insurance Corporation
Federal Reserve			Board of Governors of the Federal Reserve System
FHLB			Federal Home Loan Bank
FOMC			Federal Open Market Committee, the monetary policymaking body of the Federal Reserve System.
FTE			Fully taxable equivalent
GAAP			U.S. Generally Accepted Accounting Principles




IRA			Inflation Reduction Act of 2022
Level One			Level One Bancorp, Inc., which was acquired by the Corporation on April 1, 2022.
OREO			Other real estate owned
PPP			Paycheck Protection Program, which was established by the Coronavirus Aid, Relief and Economic Security Act, or CARES Act, and implemented by the U.S. Small Business Administration to provide small business loans.


RSA			Restricted Stock Awards

SOFR			Secured Overnight Financing Rate

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

CONSOLIDATED CONDENSED BALANCE SHEETS


	June 30, 2024		December 31, 2023
	(Unaudited)
ASSETS
Cash and due from banks	$	105,372	$	112,649
Interest-bearing deposits	168,528		436,080
Investment securities available for sale	1,618,893		1,627,112
Investment securities held to maturity, net of allowance for credit losses of $245 and $245 (fair value of $1,779,216 and $1,870,374)	2,134,195		2,184,252
Loans held for sale	32,292		18,934
Loans	12,639,650		12,486,027
Less: Allowance for credit losses - loans	(189,537)		(204,934)
Net loans	12,450,113		12,281,093
Premises and equipment	133,245		133,896
Federal Home Loan Bank stock	41,738		41,769
Interest receivable	97,546		97,664
Goodwill	712,002		712,002
Other intangibles	23,371		27,099
Cash surrender value of life insurance	306,379		306,301
Other real estate owned	4,824		4,831
Tax asset, deferred and receivable	107,080		99,883
Other assets	367,845		322,322
TOTAL ASSETS	$	18,303,423	$	18,405,887
LIABILITIES
Deposits:
Noninterest-bearing	$	2,303,313	$	2,500,062
Interest-bearing	12,265,757		12,321,391
Total Deposits	14,569,070		14,821,453
Borrowings:
Federal funds purchased	147,229		—
Securities sold under repurchase agreements	100,451		157,280
Federal Home Loan Bank advances	832,703		712,852
Subordinated debentures and other borrowings	93,589		158,644
Total Borrowings	1,173,972		1,028,776
Interest payable	18,554		18,912
Other liabilities	329,302		289,033
Total Liabilities	16,090,898		16,158,174
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY




Cumulative 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, $0.125 stated value:
Authorized - 100,000,000 shares
Issued and outstanding - 58,045,653 and 59,424,122 shares	7,256		7,428
Additional paid-in capital	1,191,193		1,236,506
Retained earnings	1,200,930		1,154,624
Accumulated other comprehensive loss	(211,979)		(175,970)
Total Stockholders' Equity	2,212,525		2,247,713
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	18,303,423	$	18,405,887

See NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
INTEREST INCOME
Loans receivable:
Taxable	$	201,413	$	186,256	$	399,436	$	358,609
Tax exempt	8,430		7,760		16,620		15,469
Investment securities:
Taxable	9,051		8,886		17,799		17,973
Tax exempt	13,613		14,279		27,224		30,349

Deposits with financial institutions	2,995		3,164		9,488		3,801
Federal Home Loan Bank stock	879		1,020		1,714		1,562
Total Interest Income	236,381		221,365		472,281		427,763
INTEREST EXPENSE
Deposits	99,151		73,201		197,436		123,886
Federal funds purchased	126		123		126		1,420
Securities sold under repurchase agreements	645		979		1,677		1,827
Federal Home Loan Bank advances	6,398		6,815		13,171		13,879
Subordinated debentures and other borrowings	1,490		2,412		4,237		4,797
Total Interest Expense	107,810		83,530		216,647		145,809
NET INTEREST INCOME	128,571		137,835		255,634		281,954
Provision for credit losses	24,500		—		26,500		—
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES	104,071		137,835		229,134		281,954
NONINTEREST INCOME
Service charges on deposit accounts	8,214		7,813		16,121		15,172
Fiduciary and wealth management fees	8,825		7,397		17,025		15,259
Card payment fees	4,739		4,537		9,239		9,709
Net gains and fees on sales of loans	5,141		3,632		8,395		6,031
Derivative hedge fees	489		672		752		1,820
Other customer fees	460		742		887		1,259
Increase in cash surrender value of life insurance	1,414		1,316		2,863		2,603
Gains on life insurance benefits	515		780		658		781
Net realized losses on sales of available for sale securities	(49)		(1,392)		(51)		(2,963)
Other income	1,586		822		2,083		1,645
Total Noninterest Income	31,334		26,319		57,972		51,316
NONINTEREST EXPENSES
Salaries and employee benefits	52,214		54,753		110,507		112,212
Net occupancy	6,746		6,674		14,058		13,933
Equipment	6,599		6,181		12,825		12,307
Marketing	1,773		1,102		2,971		2,411
Outside data processing fees	7,072		6,604		13,961		12,717
Printing and office supplies	354		434		707		817
Intangible asset amortization	1,771		2,182		3,728		4,379
FDIC assessments	3,278		2,740		7,565		4,136
Other real estate owned and foreclosure expenses	373		916		907		898
Professional and other outside services	3,822		4,660		7,774		8,358
Other expenses	7,411		6,347		13,345		14,145
Total Noninterest Expenses	91,413		92,593		188,348		186,313
INCOME BEFORE INCOME TAX	43,992		71,561		98,758		146,957
Income tax expense	4,067		10,699		10,892		22,016
NET INCOME	39,925		60,862		87,866		124,941
Preferred stock dividends	469		469		938		938
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	39,456	$	60,393	$	86,928	$	124,003
Per Share Data:
Basic Net Income Available to Common Stockholders	$	0.68	$	1.02	$	1.48	$	2.09
Diluted Net Income Available to Common Stockholders	$	0.68	$	1.02	$	1.48	$	2.09
Cash Dividends Paid	$	0.35	$	0.34	$	0.69	$	0.66
Average Diluted Common Shares Outstanding (in thousands)	58,328		59,448		58,800		59,446

See NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net income	$	39,925	$	60,862	$	87,866	$	124,941
Other comprehensive income (loss):
Unrealized gains (losses) on securities available-for-sale:
Unrealized holding gain (loss) arising during the period	(17,708)		(25,461)		(45,632)		23,954
Reclassification adjustment for losses (gains) included in net income	49		1,392		51		2,963
Tax effect	3,709		5,055		9,572		(5,652)
Net of tax	(13,950)		(19,014)		(36,009)		21,265

Unrealized gain (loss) on cash flow hedges:
Unrealized holding gain (loss) arising during the period	—		(62)		—		(113)
Reclassification adjustment for losses (gains) included in net income	—		16		—		15
Tax effect	—		10		—		20
Net of tax	—		(36)		—		(78)






Total other comprehensive income (loss), net of tax	(13,950)		(19,050)		(36,009)		21,187
Comprehensive income	$	25,975	$	41,812	$	51,857	$	146,128

See NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


	Three Months Ended June 30, 2024
	Cumulative Preferred Stock			Non-Cumulative Preferred Stock			Common Stock			Additional				Accumulated Other
	Shares	Amount		Shares	Amount		Shares	Amount		Paid in Capital		Retained Earnings		Comprehensive Loss		Total
Balances, March 31, 2024	125	$	125	10,000	$	25,000	58,564,819	$	7,321	$	1,208,447	$	1,181,939	$	(198,029)	$	2,224,803
Comprehensive income:
Net income	—	—		—	—		—	—		—		39,925		—		39,925
Other comprehensive loss, net of tax	—	—		—	—		—	—		—		—		(13,950)		(13,950)
Cash dividends on preferred stock ($46.88 per share)	—	—		—	—		—	—		—		(469)		—		(469)
Cash dividends on common stock ($0.35 per share)	—	—		—	—		—	—		—		(20,465)		—		(20,465)

Repurchases of common stock	—	—		—	—		(593,123)	(74)		(19,907)		—		—		(19,981)
Excise tax on common stock repurchases	—	—		—	—		—	—		(185)		—		—		(185)
Share-based compensation	—	—		—	—		8,803	—		1,351		—		—		1,351
Stock issued under employee benefit plans	—	—		—	—		5,510	1		156		—		—		157
Stock issued under dividend reinvestment and stock purchase plan	—	—		—	—		17,675	2		557		—		—		559
Stock options exercised	—	—		—	—		42,893	6		807		—		—		813
Restricted shares withheld for taxes	—	—		—	—		(924)	—		(33)		—		—		(33)
Balances, June 30, 2024	125	$	125	10,000	$	25,000	58,045,653	$	7,256	$	1,191,193	$	1,200,930	$	(211,979)	$	2,212,525


	Three Months Ended June 30, 2023
	Cumulative Preferred Stock			Non-Cumulative Preferred Stock			Common Stock			Additional				Accumulated Other
	Shares	Amount		Shares	Amount		Shares	Amount		Paid in Capital		Retained Earnings		Comprehensive Loss		Total
Balances, March 31, 2023	125	$	125	10,000	$	25,000	59,257,051	$	7,407	$	1,231,532	$	1,057,298	$	(198,914)	$	2,122,448
Comprehensive income:
Net income	—	—		—	—		—	—		—		60,862		—		60,862
Other comprehensive loss net of tax	—	—		—	—		—	—		—		—		(19,050)		(19,050)
Cash dividends on preferred stock ($46.88 per share)	—	—		—	—		—	—		—		(469)		—		(469)
Cash dividends on common stock ($0.34 per share)	—	—		—	—		—	—		—		(20,292)		—		(20,292)



Share-based compensation	—	—		—	—		7,084	1		1,234		—		—		1,235
Stock issued under employee benefit plans	—	—		—	—		7,535	1		180		—		—		181
Stock issued under dividend reinvestment and stock purchase plan	—	—		—	—		19,073	2		548		—		—		550
Stock options exercised	—	—		—	—		6,405	1		99		—		—		100

Balances, June 30, 2023	125	$	125	10,000	$	25,000	59,297,148	$	7,412	$	1,233,593	$	1,097,399	$	(217,964)	$	2,145,565

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)


	Six Months Ended June 30, 2024
	Cumulative Preferred Stock			Non-Cumulative Preferred Stock			Common Stock			Additional				Accumulated Other
	Shares	Amount		Shares	Amount		Shares	Amount		Paid in Capital		Retained Earnings		Comprehensive Loss		Total
Balances, December 31, 2023	125	$	125	10,000	$	25,000	59,424,122	$	7,428	$	1,236,506	$	1,154,624	$	(175,970)	$	2,247,713
Comprehensive income:
Net income	—	—		—	—		—	—		—		87,866		—		87,866
Other comprehensive loss, net of tax	—	—		—	—		—	—		—		—		(36,009)		(36,009)
Cash dividends on preferred stock ($93.76 per share)	—	—		—	—		—	—		—		(938)		—		(938)
Cash dividends on common stock ($0.69 per share)	—	—		—	—		—	—		—		(40,622)		—		(40,622)

Repurchases of common stock	—	—		—	—		(1,481,565)	(185)		(49,770)		—		—		(49,955)
Excise tax on stock repurchase	—	—		—	—		—	—		(482)		—		—		(482)
Share-based compensation	—	—		—	—		16,216	2		2,752		—		—		2,754
Stock issued under employee benefit plans	—	—		—	—		11,769	2		341		—		—		343
Stock issued under dividend reinvestment and stock purchase plan	—	—		—	—		33,890	4		1,097		—		—		1,101
Stock options exercised	—	—		—	—		42,893	5		807		—		—		812
Restricted shares withheld for taxes	—	—		—	—		(1,672)	—		(58)		—		—		(58)
Balances, June 30, 2024	125	$	125	10,000	$	25,000	58,045,653	$	7,256	$	1,191,193	$	1,200,930	$	(211,979)	$	2,212,525


	Six Months Ended June 30, 2023
	Cumulative Preferred Stock			Non-Cumulative Preferred Stock			Common Stock			Additional				Accumulated Other
	Shares	Amount		Shares	Amount		Shares	Amount		Paid in Capital		Retained Earnings		Comprehensive Loss		Total
Balances, December 31, 2022	125	$	125	10,000	$	25,000	59,170,583	$	7,396	$	1,228,626	$	1,012,774	$	(239,151)	$	2,034,770
Comprehensive income:
Net income	—	—		—	—		—	—		—		124,941		—		124,941
Other comprehensive income, net of tax	—	—		—	—		—	—		—		—		21,187		21,187
Cash dividends on preferred stock ($93.76 per share)	—	—		—	—		—	—		—		(938)		—		(938)
Cash dividends on common stock ($0.66 per share)	—	—		—	—		—	—		—		(39,378)		—		(39,378)



Share-based compensation	—	—		—	—		14,657

FIRST MERCHANTS CORP [FRME] Filings
FIRST MERCHANTS CORP [FRMEP] Filings
10-Q	[2024-08-01]
10-Q	[2024-05-01]
10-K	[2024-02-29]
10-Q	[2023-11-01]
10-Q	[2023-08-02]
10-Q	[2023-05-03]
10-K	[2023-03-01]
10-Q	[2022-11-09]
10-Q	[2022-08-09]
10-Q	[2022-05-10]
10-K	[2022-03-01]
10-Q	[2021-11-03]
10-Q	[2021-08-09]
10-Q	[2021-05-10]
10-K	[2021-03-01]
10-Q	[2020-11-09]
10-Q	[2020-08-07]
10-Q	[2020-05-08]
10-K	[2020-02-28]
10-Q	[2019-11-08]
10-Q	[2019-08-07]
10-Q	[2019-05-10]
10-K	[2019-02-27]
10-Q	[2018-11-09]
10-Q	[2018-08-09]
10-Q	[2018-05-10]
10-K	[2018-03-01]
10-Q	[2017-11-09]
10-Q	[2017-08-09]
10-Q	[2017-05-10]
10-K	[2017-03-01]
10-Q	[2016-11-09]
10-Q	[2016-08-09]
10-Q	[2016-05-09]
10-K	[2016-02-29]
10-Q	[2015-11-06]
10-Q	[2015-08-07]
10-Q	[2015-05-06]
10-K	[2015-02-27]
10-Q	[2014-11-06]
10-Q	[2014-08-08]
10-Q	[2014-05-09]
10-K	[2014-03-14]
10-Q	[2013-11-08]
10-Q	[2013-08-09]
10-Q	[2013-05-10]
10-K	[2013-03-15]
10-Q	[2012-11-09]
10-Q	[2012-08-09]
10-Q	[2012-05-10]
10-K	[2012-03-15]

FIRST MERCHANTS CORP [FRME] Filings

FIRST MERCHANTS CORP [FRMEP] Filings