FRME First Merchants Corporation

Mark Hardwick, Chief Executive Officer, stated, “We are pleased to report our second quarter 2023 results. Performance remains healthy and strong and our teams continue to meet the demands of our communities and client base.”

Second Quarter Financial Results:

First Merchants Corporation (the “Corporation) has reported second quarter 2023 net income available to common stockholders of $60.4 million compared to $38.5 million during the same period in 2022. Diluted earnings per common share for the period totaled $1.02 per share compared to the second quarter of 2022 result of $.63 per share. Prior year results included acquisition costs related to the acquisition of Level One of $29.3 million resulting in a reduction of $.38 of diluted earnings per common share.

Total assets equaled $18.0 billion as of quarter-end and loans totaled $12.3 billion. During the past twelve months, total loans grew by $1.0 billion, or 9.2 percent and were offset by the non-relationship based commercial loan sale of $116.6 million and PPP loan forgiveness of $29.6 million. On a linked quarter basis, loans grew $163.2 million, or 5.4 percent, when excluding the loan sale that occurred during the quarter of $116.6 million.

Investments, totaling $3.9 billion, decreased $738.5 million, or 16.0 percent, during the last twelve months and decreased $165.9 million, or 16.4 percent annualized on a linked quarter basis. The decline during the quarter was primarily due to $101.0 million of bond sales.

Total deposits equaled $14.6 billion as of quarter-end and increased by $10.3 million over the past twelve months. Total deposits declined $122.1 million, or 3.3 percent annualized on a linked quarter basis. The loan to deposit ratio for the current quarter ended at 84.3 percent.

The Corporation’s Allowance for Credit Losses – Loans (ACL) totaled $221.1 million as of quarter-end, or 1.80 percent of total loans, a decrease of $5.1 million from prior year. Loan charge-offs, net of recoveries, for the quarter totaled $1.9 million. No provision expense was recorded during the quarter or during the last twelve months. Non-performing assets to total assets were 0.43 percent for the second quarter of 2023, an increase of 13 basis points compared to 0.30 percent in the second quarter of 2022.

Net-interest income, totaling $137.8 million for the quarter, declined $6.3 million, or 4.4 percent, compared to prior quarter and increased $9.2 million, or 7.1 percent compared to the second quarter of 2022. Stated net-interest margin on a tax equivalent basis, totaling 3.39 percent, declined by 19 basis points compared to the first quarter of 2023 but increased 11 basis points compared to the second quarter of 2022. Net-interest margin, excluding the impact of fair value accretion and PPP loans, totaled 3.34 percent, a decrease of 18 basis points compared to 3.52 percent for the first quarter of 2023 but an increase of 15 basis points from the second quarter of 2022. During the quarter, increased deposit costs and mix offset the increase in earning asset yields reducing net-interest margin.

Non-interest income, totaling $26.3 million for the quarter, increased $1.3 million or 5.3 percent compared to the first quarter of 2023 but decreased $2.0 million from the second quarter of 2022. The increase over first quarter of 2023 was driven primarily by higher gains on the sales of loans and BOLI death benefit gains.

Non-interest expense totaled $92.6 million for the quarter, a decline of $1.1 million from the first quarter of 2023. The decrease was from lower salaries and employee benefits, partially offset by increases in FDIC assessments and other real estate owned and foreclosure expense.

The Corporation’s total risk-based capital ratio equaled 13.48 percent, common equity tier 1 capital ratio equaled 11.07 percent, and the tangible common equity ratio totaled 7.99 percent. These ratios continue to reflect the Corporation’s strong liquidity and capital positions.

1 See “Non-GAAP Financial Information” for reconciliation

CONFERENCE CALL

First Merchants Corporation will conduct a second quarter earnings conference call and web cast at 11:30 a.m. (ET) on Tuesday, July 25, 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/BIc7becea7282048a2b5559e10b25ca4af)

In order to view the webcast and presentation slides, please go to (https://edge.media-server.com/mmc/p/athyqu7i) during the time of the call. A replay of the webcast will be available until July 25, 2024.

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 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 (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)	June 30,
		2023				2022
ASSETS
Cash and due from banks	$	108,975			$	212,559
Interest-bearing deposits		219,480				136,702
Investment securities, net of allowance for credit losses of $245,000 and $245,000		3,891,491				4,630,030
Loans held for sale		27,297				9,060
Loans		12,270,233				11,397,417
Less: Allowance for credit losses - loans		(221,147	)			(226,275	)
Net loans		12,049,086				11,171,142
Premises and equipment		114,402				117,757
Federal Home Loan Bank stock		41,842				38,111
Interest receivable		89,784				68,728
Goodwill and other intangibles		743,465				753,649
Cash surrender value of life insurance		307,020				323,013
Other real estate owned		7,685				6,521
Tax asset, deferred and receivable		113,724				114,965
Other assets		254,161				198,255
TOTAL ASSETS	$	17,968,412			$	17,780,492
LIABILITIES
Deposits:
Noninterest-bearing	$	2,636,017			$	3,435,331
Interest-bearing		11,945,138				11,135,538
Total Deposits		14,581,155				14,570,869
Borrowings:
Federal funds purchased		—				100,000
Securities sold under repurchase agreements		152,472				186,468
Federal Home Loan Bank advances		723,480				598,865
Subordinated debentures and other borrowings		151,325				151,299
Total Borrowings		1,027,277				1,036,632
Interest payable		13,595				2,978
Other liabilities		200,820				192,372
Total Liabilities		15,822,847				15,802,851
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 - 59,297,148 and 59,059,866 shares		7,412				7,383
Additional paid-in capital		1,233,593				1,226,378
Retained earnings		1,097,399				917,311
Accumulated other comprehensive loss		(217,964	)			(198,556	)
Total Stockholders' Equity		2,145,565				1,977,641
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	17,968,412			$	17,780,492

CONSOLIDATED STATEMENTS OF INCOME	Three Months Ended								Six Months Ended
(Dollars In Thousands, Except Per Share Amounts)	June 30,								June 30,
		2023				2022				2023				2022
INTEREST INCOME
Loans receivable:
Taxable	$	186,256			$	106,787			$	358,609			$	185,862
Tax-exempt		7,760				5,990				15,469				11,694
Investment securities:
Taxable		8,886				10,372				17,973				18,882
Tax-exempt		14,279				17,212				30,349				33,087
Deposits with financial institutions		3,164				610				3,801				840
Federal Home Loan Bank stock		1,020				175				1,562				321
Total Interest Income		221,365				141,146				427,763				250,686
INTEREST EXPENSE
Deposits		73,201				8,485				123,886				12,779
Federal funds purchased		123				76				1,420				76
Securities sold under repurchase agreements		979				134				1,827				223
Federal Home Loan Bank advances		6,815				1,774				13,879				2,992
Subordinated debentures and other borrowings		2,412				2,016				4,797				3,675
Total Interest Expense		83,530				12,485				145,809				19,745
NET INTEREST INCOME		137,835				128,661				281,954				230,941
Provision for credit losses - loans		—				16,755				—				16,755
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		137,835				111,906				281,954				214,186
NON-INTEREST INCOME
Service charges on deposit accounts		7,813				7,690				15,172				14,109
Fiduciary and wealth management fees		7,397				7,634				15,259				14,966
Card payment fees		4,537				5,175				9,709				10,898
Net gains and fees on sales of loans		3,632				3,226				6,031				5,425
Derivative hedge fees		672				1,444				1,820				2,362
Other customer fees		742				662				1,259				1,072
Earnings on cash surrender value of life insurance		2,096				1,308				3,384				3,004
Net realized gains (losses) on sales of available for sale securities		(1,392	)			90				(2,963	)			656
Other income		822				1,048				1,645				1,682
Total Non-Interest Income		26,319				28,277				51,316				54,174
NON-INTEREST EXPENSES
Salaries and employee benefits		54,753				56,041				112,212				98,560
Net occupancy		6,674				6,648				13,933				12,835
Equipment		6,181				6,720				12,307				11,800
Marketing		1,102				1,414				2,411				2,150
Outside data processing fees		6,604				4,881				12,717				9,244
Printing and office supplies		434				381				817				726
Intangible asset amortization		2,182				2,303				4,379				3,669
FDIC assessments		2,740				2,924				4,136				5,116
Other real estate owned and foreclosure expenses		916				(266	)			898				298
Professional and other outside services		4,660				10,267				8,358				13,220
Other expenses		6,347				6,000				14,145				12,020
Total Non-Interest Expenses		92,593				97,313				186,313				169,638
INCOME BEFORE INCOME TAX		71,561				42,870				146,957				98,722
Income tax expense		10,699				3,879				22,016				11,145
NET INCOME		60,862				38,991				124,941				87,577
Preferred stock dividends		469				469				938				469
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	60,393			$	38,522			$	124,003			$	87,108
Per Share Data:
Basic Net Income Available to Common Stockholders	$	1.02			$	0.64			$	2.09			$	1.55
Diluted Net Income Available to Common Stockholders	$	1.02			$	0.63			$	2.09			$	1.54
Cash Dividends Paid to Common Stockholders	$	0.34			$	0.32			$	0.66			$	0.61
Average Diluted Common Shares Outstanding (in thousands)		59,448				59,308				59,446				56,516

FINANCIAL HIGHLIGHTS
(Dollars in thousands)	Three Months Ended								Six Months Ended
	June 30,								June 30,
		2023				2022				2023				2022
NET CHARGE-OFFS (RECOVERIES)	$	1,905			$	263			$	2,130			$	(324	)
AVERAGE BALANCES:
Total Assets	$	18,170,649			$	17,778,221			$	18,096,832			$	16,627,804
Total Loans		12,369,673				11,175,188				12,253,176				10,220,860
Total Earning Assets		16,968,465				16,435,747				16,896,834				15,355,265
Total Deposits		14,719,913				14,809,528				14,572,480				13,819,111
Total Stockholders' Equity		2,139,877				2,021,123				2,111,658				1,956,532
FINANCIAL RATIOS:
Return on Average Assets		1.34	%			0.88	%			1.38	%			1.05	%
Return on Average Stockholders' Equity		11.29				7.62				11.74				8.90
Return on Tangible Common Stockholders' Equity		18.04				12.91				18.91				13.98
Average Earning Assets to Average Assets		93.38				92.45				93.37				92.35
Allowance for Credit Losses - Loans as % of Total Loans		1.80				1.98				1.80				1.98
Net Charge-offs as % of Average Loans (Annualized)		0.06				0.01				0.03				(0.01	)
Average Stockholders' Equity to Average Assets		11.78				11.37				11.67				11.77
Tax Equivalent Yield on Average Earning Assets		5.36				3.58				5.21				3.42
Interest Expense/Average Earning Assets		1.97				0.30				1.73				0.26
Net Interest Margin (FTE) on Average Earning Assets		3.39				3.28				3.48				3.16
Efficiency Ratio		52.21				58.45				51.96				55.90
Tangible Common Book Value Per Share	$	23.34			$	20.45			$	23.34			$	20.45

NON-PERFORMING ASSETS
(Dollars In Thousands)	June 30,				March 31,				December 31,				September 30,				June 30,
		2023				2023				2022				2022				2022
Non-Accrual Loans	$	69,240			$	46,576			$	42,324			$	43,508			$	45,970
Troubled Debt Restructures (TDR)		—				—				224				195				233
Non-Performing Loans (NPL)		69,240				46,576				42,548				43,703				46,203
Other Real Estate Owned and Repossessions		7,685				7,777				6,431				6,454				6,521
Non-Performing Assets (NPA)		76,925				54,353				48,979				50,157				52,724
90+ Days Delinquent		428				7,032				1,737				764				592
NPAs & 90 Day Delinquent	$	77,353			$	61,385			$	50,716			$	50,921			$	53,316
Allowance for Credit Losses - Loans	$	221,147			$	223,052			$	223,277			$	226,702			$	226,275
Quarterly Net Charge-offs (Recoveries)		1,905				225				2,674				(427	)			263
NPAs / Actual Assets %		0.43	%			0.30	%			0.27	%			0.28	%			0.30	%
NPAs & 90 Day / Actual Assets %		0.43	%			0.34	%			0.28	%			0.29	%			0.30	%
NPAs / Actual Loans and OREO %		0.63	%			0.44	%			0.41	%			0.43	%			0.46	%
Allowance for Credit Losses - Loans / Actual Loans (%)		1.80	%			1.82	%			1.86	%			1.94	%			1.98	%
Net Charge-offs (Recoveries) as % of Average Loans (Annualized)		0.06	%			0.01	%			0.12	%		(0.01)        %					0.01	%

CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)	June 30,				March 31,				December 31,				September 30,				June 30,
		2023				2023				2022				2022				2022
ASSETS
Cash and due from banks	$	108,975			$	125,818			$	122,594			$	119,532			$	212,559
Interest-bearing deposits		219,480				352,695				126,061				179,593				136,702
Investment securities, net of allowance for credit losses		3,891,491				4,057,389				4,263,788				4,294,768				4,630,030
Loans held for sale		27,297				9,408				9,094				25,394				9,060
Loans		12,270,233				12,241,461				12,003,894				11,650,002				11,397,417
Less: Allowance for credit losses - loans		(221,147	)			(223,052	)			(223,277	)			(226,702	)			(226,275	)
Net loans		12,049,086				12,018,409				11,780,617				11,423,300				11,171,142
Premises and equipment		114,402				115,857				117,118				116,306				117,757
Federal Home Loan Bank stock		41,842				41,878				38,525				38,056				38,111
Interest receivable		89,784				85,515				85,070				71,605				68,728
Goodwill and other intangibles		743,465				745,647				747,844				750,713				753,649
Cash surrender value of life insurance		307,020				309,090				308,311				306,932				323,013
Other real estate owned		7,685				7,777				6,431				6,454				6,521
Tax asset, deferred and receivable		113,724				103,070				111,222				142,110				114,965
Other assets		254,161				206,355				221,631				244,222				198,255
TOTAL ASSETS	$	17,968,412			$	18,178,908			$	17,938,306			$	17,718,985			$	17,780,492
LIABILITIES
Deposits:
Noninterest-bearing	$	2,636,017			$	2,964,355			$	3,173,417			$	3,356,651			$	3,435,331
Interest-bearing		11,945,138				11,738,932				11,209,328				11,078,174				11,135,538
Total Deposits		14,581,155				14,703,287				14,382,745				14,434,825				14,570,869
Borrowings:
Federal funds purchased		—				20				171,560				185,000				100,000
Securities sold under repurchase agreements		152,472				179,067				167,413				194,482				186,468
Federal Home Loan Bank advances		723,480				823,577				823,674				643,769				598,865
Subordinated debentures and other borrowings		151,325				151,312				151,298				151,301				151,299
Total Borrowings		1,027,277				1,153,976				1,313,945				1,174,552				1,036,632
Interest payable		13,595				11,979				7,530				4,971				2,978
Other liabilities		200,820				187,218				199,316				197,971				192,372
Total Liabilities		15,822,847				16,056,460				15,903,536				15,812,319				15,802,851
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		7,412				7,407				7,396				7,393				7,383
Additional paid-in capital		1,233,593				1,231,532				1,228,626				1,226,695				1,226,378
Retained earnings		1,097,399				1,057,298				1,012,774				961,542				917,311
Accumulated other comprehensive loss		(217,964	)			(198,914	)			(239,151	)			(314,089	)			(198,556	)
Total Stockholders' Equity		2,145,565				2,122,448				2,034,770				1,906,666				1,977,641
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	17,968,412			$	18,178,908			$	17,938,306			$	17,718,985			$	17,780,492

CONSOLIDATED STATEMENTS OF INCOME
(Dollars In Thousands, Except Per Share Amounts)	June 30,				March 31,				December 31,				September 30,				June 30,
		2023				2023				2022				2022				2022
INTEREST INCOME
Loans receivable:
Taxable	$	186,256			$	172,353			$	156,102			$	128,504			$	106,787
Tax-exempt		7,760				7,709				6,930				6,500				5,990
Investment securities:
Taxable		8,886				9,087				9,417				10,055				10,372
Tax-exempt		14,279				16,070				17,033				17,261				17,212
Deposits with financial institutions		3,164				637				959				704				610
Federal Home Loan Bank stock		1,020				542				541				314				175
Total Interest Income		221,365				206,398				190,982				163,338				141,146
INTEREST EXPENSE
Deposits		73,201				50,685				33,516				16,644				8,485
Federal funds purchased		123				1,297				808				418				76
Securities sold under repurchase agreements		979				848				541				372				134
Federal Home Loan Bank advances		6,815				7,064				4,932				3,493				1,774
Subordinated debentures and other borrowings		2,412				2,385				2,229				2,105				2,016
Total Interest Expense		83,530				62,279				42,026				23,032				12,485
NET INTEREST INCOME		137,835				144,119				148,956				140,306				128,661
Provision for credit losses - loans		—				—				—				—				16,755
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		137,835				144,119				148,956				140,306				111,906
NON-INTEREST INCOME
Service charges on deposit accounts		7,813				7,359				7,097				7,165				7,690
Fiduciary and wealth management fees		7,397				7,862				7,501				7,221				7,634
Card payment fees		4,537				5,172				4,533				4,776				5,175
Net gains and fees on sales of loans		3,632				2,399				2,087				2,543				3,226
Derivative hedge fees		672				1,148				326				700				1,444
Other customer fees		742				517				362				501				662
Earnings on cash surrender value of life insurance		2,096				1,288				1,515				6,655				1,308
Net realized gains (losses) on sales of available for sale securities		(1,392	)			(1,571	)			57				481				90
Other income (loss)		822				823				672				(425	)			1,048
Total Non-Interest Income		26,319				24,997				24,150				29,617				28,277
NON-INTEREST EXPENSES
Salaries and employee benefits		54,753				57,459				52,331				56,002				56,041
Net occupancy		6,674				7,259				6,638				6,738				6,648
Equipment		6,181				6,126				6,148				5,997				6,720
Marketing		1,102				1,309				3,157				2,401				1,414
Outside data processing fees		6,604				6,113				5,611				6,827				4,881
Printing and office supplies		434				383				390				472				381
Intangible asset amortization		2,182				2,197				2,303				2,303				2,303
FDIC assessments		2,740				1,396				2,295				2,824				2,924
Other real estate owned and foreclosure expenses		916				(18	)			197				328				(266	)
Professional and other outside services		4,660				3,698				3,961				4,461				10,267
Other expenses		6,347				7,798				6,668				8,025				6,000
Total Non-Interest Expenses		92,593				93,720				89,699				96,378				97,313
INCOME BEFORE INCOME TAX		71,561				75,396				83,407				73,545				42,870
Income tax expense		10,699				11,317				12,647				9,793				3,879
NET INCOME		60,862				64,079				70,760				63,752				38,991
Preferred stock dividends		469				469				468				469				469
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	60,393			$	63,610			$	70,292			$	63,283			$	38,522
Per Share Data:
Basic Net Income Available to Common Stockholders	$	1.02			$	1.07			$	1.20			$	1.08			$	0.64
Diluted Net Income Available to Common Stockholders	$	1.02			$	1.07			$	1.19			$	1.08			$	0.63
Cash Dividends Paid to Common Stockholders	$	0.34			$	0.32			$	0.32			$	0.32			$	0.32
Average Diluted Common Shares Outstanding (in thousands)		59,448				59,441				59,384				59,339				59,308
FINANCIAL RATIOS:
Return on Average Assets		1.34	%			1.42	%			1.59	%			1.43	%			0.88	%
Return on Average Stockholders' Equity		11.29				12.21				14.36				12.54				7.62
Return on Tangible Common Stockholders' Equity		18.04				19.82				24.21				20.85				12.91
Average Earning Assets to Average Assets		93.38				93.35				93.66				92.90				92.45
Allowance for Credit Losses - Loans as % of Total Loans		1.80				1.82				1.86				1.94				1.98
Net Charge-offs (Recoveries) as % of Average Loans (Annualized)		0.06				0.01				0.12				(0.01	)			0.01
Average Stockholders' Equity to Average Assets		11.78				11.56				10.98				11.36				11.37
Tax Equivalent Yield on Average Earning Assets		5.36				5.06				4.73				4.11				3.58
Interest Expense/Average Earning Assets		1.97				1.48				1.01				0.56				0.30
Net Interest Margin (FTE) on Average Earning Assets		3.39				3.58				3.72				3.55				3.28
Efficiency Ratio		52.21				51.72				48.60				53.34				58.45
Tangible Common Book Value Per Share	$	23.34			$	22.93			$	21.45			$	19.26			$	20.45

LOANS
(Dollars In Thousands)	June 30,				March 31,				December 31,				September 30,				June 30,
		2023				2023				2022				2022				2022
Commercial and industrial loans	$	3,531,395			$	3,502,204			$	3,437,126			$	3,330,529			$	3,297,477
Agricultural land, production and other loans to farmers		230,003				219,598				241,793				221,954				214,904
Real estate loans:
Construction		949,918				960,979				835,582				828,923				745,983
Commercial real estate, non-owner occupied		2,379,819				2,375,410				2,407,475				2,299,272				2,423,185
Commercial real estate, owner occupied		1,179,739				1,244,117				1,246,528				1,268,567				1,264,563
Residential		2,248,473				2,185,943				2,096,655				1,990,668				1,813,297
Home equity		614,366				621,354				630,632				621,619				586,108
Individuals' loans for household and other personal expenditures		172,896				172,389				175,211				173,225				157,264
Public finance and other commercial loans		963,624				959,467				932,892				915,245				894,636
Loans		12,270,233				12,241,461				12,003,894				11,650,002				11,397,417
Allowance for credit losses - loans		(221,147	)			(223,052	)			(223,277	)			(226,702	)			(226,275	)
NET LOANS	$	12,049,086			$	12,018,409			$	11,780,617			$	11,423,300			$	11,171,142

DEPOSITS
(Dollars In Thousands)	June 30,			March 31,			December 31,			September 30,			June 30,
		2023			2023			2022			2022			2022
Demand deposits	$	8,045,455		$	8,422,387		$	8,448,797		$	8,534,950		$	8,785,889
Savings deposits		4,530,255			4,499,487			4,657,140			5,054,490			4,875,880
Certificates and other time deposits of $100,000 or more		1,160,303			1,040,379			742,539			443,588			436,942
Other certificates and time deposits		680,965			574,886			468,712			381,365			446,973
Brokered certificates of deposits		164,177			166,148			65,557			20,432			25,185
TOTAL DEPOSITS	$	14,581,155		$	14,703,287		$	14,382,745		$	14,434,825		$	14,570,869

CONSOLIDATED AVERAGE BALANCE SHEET AND NET INTEREST MARGIN ANALYSIS
(Dollars in Thousands)
	For the Three Months Ended
	June 30, 2023									June 30, 2022
	Average Balance			InterestIncome /Expense			AverageRate			Average Balance			InterestIncome /Expense			AverageRate
ASSETS
Interest-bearing deposits	$	343,253		$	3,164		3.69	%		$	329,626		$	610		0.74	%
Federal Home Loan Bank stock		41,873			1,020		9.74				38,111			175		1.84
Investment Securities:(1)
Taxable		1,876,676			8,886		1.89				2,189,193			10,372		1.90
Tax-exempt(2)		2,336,990			18,075		3.09				2,703,629			21,788		3.22
Total Investment Securities		4,213,666			26,961		2.56				4,892,822			32,160		2.63
Loans held for sale		19,328			300		6.21				28,491			315		4.42
Loans:(3)
Commercial		8,605,339			150,766		7.01				8,134,050			85,867		4.22
Real estate mortgage		2,031,136			20,345		4.01				1,458,317			12,657		3.47
Installment		831,775			14,844		7.14				772,610			7,948		4.11
Tax-exempt(2)		882,095			9,823		4.45				781,720			7,582		3.88
Total Loans		12,369,673			196,078		6.34				11,175,188			114,369		4.09
Total Earning Assets		16,968,465			227,223		5.36	%			16,435,747			147,314		3.58	%
Total Non-Earning Assets		1,202,184									1,342,474
TOTAL ASSETS	$	18,170,649								$	17,778,221
LIABILITIES
Interest-Bearing Deposits:
Interest-bearing deposits	$	5,546,232		$	34,574		2.49	%		$	5,372,474		$	4,569		0.34	%
Money market deposits		2,766,876			18,684		2.70				3,024,560			2,130		0.28
Savings deposits		1,724,816			3,884		0.90				1,966,054			916		0.19
Certificates and other time deposits		1,883,998			16,059		3.41				948,799			870		0.37
Total Interest-Bearing Deposits		11,921,922			73,201		2.46				11,311,887			8,485		0.30
Borrowings		1,110,486			10,329		3.72				818,851			4,000		1.95
Total Interest-Bearing Liabilities		13,032,408			83,530		2.56				12,130,738			12,485		0.41
Noninterest-bearing deposits		2,797,991									3,497,641
Other liabilities		200,373									128,719
Total Liabilities		16,030,772									15,757,098
STOCKHOLDERS' EQUITY		2,139,877									2,021,123
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	18,170,649			83,530					$	17,778,221			12,485
Net Interest Income (FTE)				$	143,693								$	134,829
Net Interest Spread (FTE)(4)							2.80	%								3.17	%
Net Interest Margin (FTE):
Interest Income (FTE) / Average Earning Assets							5.36	%								3.58	%
Interest Expense / Average Earning Assets							1.97	%								0.30	%
Net Interest Margin (FTE)(5)							3.39	%								3.28	%
(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 2023 and 2022. These totals equal $5,858 and $6,168 for the three months ended June 30, 2023 and 2022, respectively.
(3)Non accruing loans have been included in the average balances.
(4)Net Interest Spread (FTE) is interest income expressed as a percentage of average earning assets minus interest expense expressed as a percentage of average interest-bearing liabilities.
(5)Net Interest Margin (FTE) is interest income expressed as a percentage of average earning assets minus interest expense expressed as a percentage of average earning assets.

CONSOLIDATED AVERAGE BALANCE SHEET AND NET INTEREST MARGIN ANALYSIS
(Dollars in Thousands)
	For the Six Months Ended
	June 30, 2023									June 30, 2022
	Average Balance			InterestIncome /Expense			AverageRate			Average Balance			InterestIncome /Expense			AverageRate
Assets:
Interest-bearing deposits	$	258,504		$	3,801		2.94	%		$	406,698		$	840		0.41	%
Federal Home Loan Bank stock		40,821			1,562		7.65				33,040			321		1.94
Investment Securities:(1)
Taxable		1,900,247			17,973		1.89				2,074,074			18,882		1.82
Tax-exempt(2)		2,444,086			38,416		3.14				2,620,593			41,882		3.20
Total Investment Securities		4,344,333			56,389		2.60				4,694,667			60,764		2.59
Loans held for sale		21,952			660		6.01				18,181			355		3.91
Loans:(3)
Commercial		8,544,945			290,428		6.80				7,504,740			150,545		4.01
Real estate mortgage		1,972,680			38,736		3.93				1,191,075			20,497		3.44
Installment		836,088			28,785		6.89				741,994			14,465		3.90
Tax-exempt(2)		877,511			19,581		4.46				764,870			14,803		3.87
Total Loans		12,253,176			378,190		6.17				10,220,860			200,665		3.93
Total Earning Assets		16,896,834			439,942		5.21	%			15,355,265			262,590		3.42	%
Total Non-Earning Assets		1,199,998									1,272,539
Total Assets	$	18,096,832								$	16,627,804
Liabilities:
Interest-Bearing deposits:
Interest-bearing deposits	$	5,405,696		$	59,237		2.19	%		$	5,200,923		$	6,977		0.27	%
Money market deposits		2,756,519			32,261		2.34				2,770,904			3,002		0.22
Savings deposits		1,775,233			6,849		0.77				1,917,005			1,357		0.14
Certificates and other time deposits		1,676,291			25,539		3.05				813,482			1,443		0.35
Total Interest-Bearing Deposits		11,613,739			123,886		2.13				10,702,314			12,779		0.24
Borrowings		1,201,392			21,923		3.65				718,270			6,966		1.94
Total Interest-Bearing Liabilities		12,815,131			145,809		2.28				11,420,584			19,745		0.35
Noninterest-bearing deposits		2,958,741									3,116,797
Other liabilities		211,302									133,891
Total Liabilities		15,985,174									14,671,272
Stockholders' Equity		2,111,658									1,956,532
Total Liabilities and Stockholders' Equity	$	18,096,832			145,809					$	16,627,804			19,745
Net Interest Income (FTE)				$	294,133								$	242,845
Net Interest Spread (FTE)(4)							2.93	%								3.07	%
Net Interest Margin (FTE):
Interest Income (FTE) / Average Earning Assets							5.21	%								3.42	%
Interest Expense / Average Earning Assets							1.73	%								0.26	%
Net Interest Margin (FTE)(5)							3.48	%								3.16	%
(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 2023 and 2022. These totals equal $12,179 and $11,904 for the six months ended June 30, 2023 and 2022, respectively.
(3)Non accruing loans have been included in the average balances.
(4)Net Interest Spread (FTE) is interest income expressed as a percentage of average earning assets minus interest expense expressed as a percentage of average interest-bearing liabilities.
(5)Net Interest Margin (FTE) is interest income expressed as a percentage of average earning assets minus interest expense expressed as a percentage of average earning assets.

ADJUSTED EPS EXCLUDING PAYCHECK PROTECTION PROGRAM ("PPP") AND ACQUISITION-RELATED EXPENSES - NON-GAAP
(Dollars In Thousands, Except Per Share Amounts)	Three Months Ended																				Six Months Ended
	June 30,				March 31,				December 31,				September 30,				June 30,				June 30,				June 30,
		2023				2023				2022				2022				2022				2023				2022
Net Income Available to Common Stockholders - GAAP	$	60,393			$	63,610			$	70,292			$	63,283			$	38,522			$	124,003			$	87,108
Adjustments:
PPP loan income		(9	)			(25	)			(109	)			(323	)			(891	)			(34	)			(2,775	)
Acquisition-related expenses		—				—				413				3,417				12,549				—				12,701
Acquisition-related provision expense		—				—				—				—				16,755				—				16,755
Tax on adjustment		2				6				(75	)			(759	)			(6,967	)			8				(6,542	)
Adjusted Net Income Available to Common Stockholders - Non-GAAP	$	60,386			$	63,591			$	70,521			$	65,618			$	59,968			$	123,977			$	107,247
Average Diluted Common Shares Outstanding (in thousands)		59,448				59,441				59,384				59,339				59,308				59,446				56,516
Diluted Earnings Per Common Share - GAAP	$	1.02			$	1.07			$	1.19			$	1.08			$	0.63			$	2.09			$	1.54
Adjustments:
PPP loan income		—				—				(0.01	)			—				(0.01	)			—				(0.05	)
Acquisition-related expenses		—				—				0.01				0.05				0.22				—				0.22
Acquisition-related provision expense		—				—				—				—				0.30				—				0.30
Tax on adjustment		—				—				—				(0.01	)			(0.13	)			—				(0.12	)
Adjusted Diluted Earnings Per Common Share - Non-GAAP	$	1.02			$	1.07			$	1.19			$	1.12			$	1.01			$	2.09			$	1.89

RETURN ON TANGIBLE COMMON EQUITY - NON-GAAP
(Dollars In Thousands)	Three Months Ended																				Six Months Ended
	June 30,				March 31,				December 31,				September 30,				June 30,				June 30,				June 30,
		2023				2023				2022				2022				2022				2023				2022
Total Average Stockholders' Equity (GAAP)	$	2,139,877			$	2,083,125			$	1,958,041			$	2,018,156			$	2,021,123			$	2,111,658			$	1,956,532
Less: Average Preferred Stock		(25,125	)			(25,125	)			(25,125	)			(25,125	)			(25,125	)			(25,125	)			(12,625	)
Less: Average Intangible Assets, Net of Tax		(737,489	)			(739,190	)			(741,632	)			(744,069	)			(745,614	)			(738,334	)			(656,042	)
Average Tangible Common Equity, Net of Tax (Non-GAAP)	$	1,377,263			$	1,318,810			$	1,191,284			$	1,248,962			$	1,250,384			$	1,348,199			$	1,287,865
Net Income Available to Common Stockholders (GAAP)	$	60,393			$	63,610			$	70,292			$	63,283			$	38,521			$	124,003			$	87,108
Plus: Intangible Asset Amortization, Net of Tax		1,724				1,734				1,819				1,819				1,820				3,458				2,898
Tangible Net Income (Non-GAAP)	$	62,117			$	65,344			$	72,111			$	65,102			$	40,341			$	127,461			$	90,006
Return on Tangible Common Equity (Non-GAAP)		18.04	%			19.82	%			24.21	%			20.85	%			12.91	%			18.91	%			13.98	%

For more information, contact:Nicole M. Weaver, Vice President and Director of Corporate Administration765-521-7619http://www.firstmerchants.com