First Merchants Q2 2025 slides: EPS jumps 44%, loan growth accelerates

Introduction & Market Context

First Merchants Corporation (NASDAQ:FRME), the largest financial services holding company headquartered in Central Indiana, presented its second quarter 2025 results on July 24, showing significant improvement across key performance metrics. The company reported strong earnings growth, accelerating loan volumes, and improved margins despite a challenging banking environment.

With total assets of $18.6 billion, First Merchants continues to demonstrate its regional strength across its Midwest footprint. The company’s stock closed at $41.50 on July 23, 2025, down slightly by 0.6% ahead of the earnings presentation, according to available market data.

As shown in the following overview of the company’s position and recent achievements:

Quarterly Performance Highlights

First Merchants reported second quarter net income of $56.4 million, translating to earnings per share of $0.98, a substantial 44.1% increase compared to $0.68 per share in Q2 2024. This performance represents continued momentum from Q1 2025, when the company reported EPS of $0.94.

The company achieved an annualized return on assets (ROA) of 1.23% and a pre-tax pre-provision (PTPP) ROA of 1.53%. Return on tangible common equity (ROTCE) reached 14.49% for the quarter, demonstrating strong profitability metrics.

Loan growth was particularly strong, with the portfolio expanding by $297.6 million or 9.1% on an annualized basis. This exceeded the company’s previous guidance of mid to high single-digit loan growth mentioned in their Q1 earnings call.

The following slide summarizes the key financial highlights for both the second quarter and year-to-date performance:

Detailed Financial Analysis

First Merchants’ net interest income increased by $2.7 million from the previous quarter, driven by growth in earning asset income that outpaced rising funding costs. The net interest margin improved to 3.25%, an increase of three basis points from the linked quarter.

Noninterest income rose by $1.3 million due to higher customer-related fees, while the efficiency ratio improved to 53.99%, reflecting effective cost management. Tangible book value per share reached $27.90, representing an increase of $0.56 from the previous quarter.

The detailed quarterly financial results show the company’s continued progress in improving profitability metrics:

Year-to-date, First Merchants has generated net income of $111.2 million with earnings per share of $1.92, a 25.5% increase compared to the adjusted EPS of $1.53 in the prior year period. The company’s net interest margin for the first half of 2025 stands at 3.23%, ten basis points higher than the prior year’s 3.13%.

The following slide provides a comprehensive view of the year-to-date financial performance:

Strategic Initiatives & Business Segments

First Merchants maintains a diversified business strategy across four key segments: Commercial Banking, Consumer Banking, Mortgage Banking, and Private Wealth Advisors. The company’s loan portfolio remains predominantly commercially oriented at approximately 75% of total loans.

Commercial loan growth was particularly strong in the second quarter, increasing by approximately $262 million or 10.7%. This was driven by C&I growth of $147 million, public finance growth of $58 million, and investment real estate growth of $36 million. Consumer loans also showed positive momentum, growing by $36 million or 4.4%.

The following chart illustrates the composition of the company’s loan portfolio, which totals $13.3 billion:

On the deposit side, First Merchants reported total deposit growth of 9.3% for the quarter and 3.8% year-to-date. The company maintains a strong core deposit base with 91% core deposits, including 15% noninterest-bearing accounts. Approximately 34% of total deposits yield between 0 and 5 basis points, providing a stable and cost-effective funding source.

The deposit portfolio breakdown is illustrated in the following slide:

Noninterest income remains an important component of First Merchants’ revenue stream, with wealth management (28%), service charges (27%), and gain on sale of loans (19%) being the largest contributors. Customer-related fees totaled $29.4 million for Q2 2025, an increase of $2.3 million from the previous quarter.

The following chart shows the breakdown of noninterest income sources:

Capital Management & Shareholder Value

First Merchants maintains strong capital ratios, with a tangible common equity ratio of 8.92%, exceeding the company’s target of 8.00%. The Common Equity Tier 1 ratio stands at 11.35% against a target of 10.00%, while the Total (EPA:TTEF) Risk-Based Capital ratio is 13.06% compared to a target of 12.50%.

During the second quarter, the company repurchased 582,486 shares totaling $22.1 million, bringing the year-to-date total to 818,480 shares worth $31.7 million. Additionally, First Merchants redeemed $30 million of subordinated debt in March, optimizing its capital structure.

The following slide illustrates the company’s capital ratio trends relative to their targets:

First Merchants has demonstrated a strong track record of creating shareholder value over time. The company’s 10-year total return from 2014 to 2024 was 230.1%, outperforming the KBW NASDAQ Regional Banking Index’s return of 200.3% during the same period.

The company has grown significantly through both organic expansion and strategic acquisitions, achieving an asset CAGR of 11.7% from 2014 to Q2 2025. This growth trajectory has been supported by acquisitions including Community Bank (2014), Coopers State Bank and Ameriana Bank (2015), Arlington Bank and iAB Financial Bank (2017), Monroe Bank & Trust (2019), and Level One (2022).

Forward-Looking Statements

Looking ahead, First Merchants remains focused on its vision to enhance the financial wellness of the diverse communities it serves. The company’s strategic imperatives include driving engagement through inclusivity and teamwork, producing organic growth across all business lines, and continuing to invest in digital delivery channels to simplify the client experience.

Management expects to maintain the positive momentum in loan growth and profitability metrics while continuing to optimize the balance sheet. The company’s strong capital position provides flexibility for continued share repurchases, potential dividend increases, and strategic growth opportunities.

With a solid foundation of core deposits, diversified loan portfolio, and multiple revenue streams, First Merchants appears well-positioned to navigate the evolving banking landscape while delivering value to shareholders, clients, and communities.

Full presentation:

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