Company: FRME
Filing Date: 2025-02-24
Form Type: 10-K
Source: 0000712534-25-000058
Chunk: 210

Company: FIRST MERCHANTS CORP
Filing Date: 2025-02-24
Form: 10-K
Item: Item 7
Chunk 210
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 to invest in customer-facing digital solutions that contributed to increases in outside data processing expenses of $3.5 million.  FDIC assessments increased $4.4 million in 2023 from 2022 due to an FDIC special assessment of $4.3 million.  The increase in other real estate and foreclosure expenses of $2.5 million, when compared to the year ended December 31, 2022, was the result of higher property value write-downs, higher forced-placed insurance expenses, and less credit-related expense recoveries.  The increase in other expenses is primarily due to higher customer-related contingent losses during the year ended December 31, 2023 as compared to the year ended December 31, 2022.  These increases were offset by a $5.5 million decrease in professional and other outside services due primarily to $7.1 million of transaction costs related to the Level One acquisition that were recorded in 2022.  

INCOME TAXES

The Corporation’s federal statutory income tax rate for 2024 is 21 percent and its state tax rate varies from 0 to 9.5 percent depending on the state in which the subsidiary company operates.  The Corporation’s effective tax rate, which was 13.1 percent in 2024 and 13.7 percent in 2023, is lower than the blended effective statutory federal and state rates primarily due to the Corporation’s income on tax-exempt securities and loans, income generated by the subsidiaries operating in a state with no state or local income tax, income tax credits generated from investments in affordable housing projects, and tax-exempt earnings from bank-owned life insurance contracts. 

Income tax expense in 2024 was $30.3 million on pre-tax income of $231.7 million, or 13.1 percent.  For 2023, income tax expense was $35.4 million on pre-tax income of $259.2 million, or 13.7 percent.  The lower effective income tax rate in 2024 compared to 2023 was primarily driven by an increase in income tax credits generated from investments in affordable housing projects.  The detailed reconciliation of federal statutory to actual tax expense is shown in NOTE 19. INCOME TAX of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

The Corporation’s tax asset, deferred and receivable decreased from $99.9 million at December 31, 2023 to $92