First Merchants Net Income Falls Year-Over-Year Amid Loan Reserves
The bank reported net income available to common stockholders of $43.5 million for the second quarter.
First Merchants (FRME) reported a decline in year-over-year net income for the second quarter, as increased credit loss reserves offset gains in interest income.
The regional bank saw net income available to common stockholders fall to $43.5 million. While this figure rose from $27.7 million in the first quarter, it represented a decrease from the $56.4 million reported in the second quarter of 2024. Adjusted net income also trended lower, falling to $46.4 million from $63.1 million in the prior quarter.
Growth in interest-bearing assets supported the top line. Net interest income rose 5.0% sequentially to $158.9 million, a 19.5% increase compared to the second quarter of 2024. The company's net interest margin expanded 3 basis points from the prior quarter to 3.38%, and rose 13 basis points from the same period last year.
Loan and deposit volumes continued to climb. Organic loan growth reached $221.7 million on a linked quarter basis, contributing to a total loan increase of $2.2 billion over the last twelve months. Deposits grew by $267.8 million sequentially, aided by the acquisition of First Savings, which added $1.7 billion in deposits over the past year.
Credit quality metrics weakened during the period. Nonperforming assets to total assets rose to 56 basis points from 43 basis points in the first quarter. The company increased its allowance for credit losses by $29.1 million to $241.6 million. This adjustment followed the placement of two commercial lending relationships totaling $41.8 million into nonaccrual status, requiring reserves of $29.7 million.
Operational performance remained steady, with an adjusted efficiency ratio of 53.22%. Adjusted pre-tax, pre-provision income rose to $84.6 million, up from $78.7 million in the first quarter and $70.7 million in the second quarter of 2024. During the quarter, the company sold $271.1 million of mortgage loans with a weighted average rate of 3.43%.
First Merchants repurchased 336,145 shares for $13.4 million during the second quarter. This brought the year-to-date total of share buybacks to 976,631 shares for a total cost of $38.3 million.