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Press Release

First Merchants Corporation Announces 66 Percent Increase in Third Quarter 2018 Earnings Per Share

Company Release - 10/24/2018 8:00 AM ET

MUNCIE, Ind., Oct. 24, 2018 (GLOBE NEWSWIRE) -- First Merchants Corporation (NASDAQ - FRME) has reported third quarter 2018 net income of $41.1 million, an increase of 69 percent, compared to $24.4 million during the same period in 2017.  Earnings per share for the period totaled $.83, an increase of 66 percent, compared to the third quarter of 2017 result of $.50 per share.  Net income for the nine months ended September 30, 2018 totaled $117.4 million, compared to $71.7 million during the same period in 2017.  Year-to-date earnings per share totaled $2.37, an increase of $.74 per share, or 45 percent, over the same period in 2017. The increase in net income was driven by several key factors including the two fully integrated acquisitions in 2017, strong organic growth throughout 2017 and 2018, and the impact of tax reform.

Michael C. Rechin, President and Chief Executive Officer, stated, “Deposit betas, deposit growth and flattening yield curves seem to be a primary focus of investors this quarter.  First Merchants continues to perform well delivering strong net interest income and net interest margin coupled with high, single-digit organic balance sheet growth.  Our highly efficient business model continues to drive performance and returns at levels produced by the best banks in the industry.”

Rechin continued, “On October 10th we announced the signing of a definitive agreement to merge Monroe Bank and Trust (MBT) into First Merchants.  Currently we are working closely with the MBT executives to sustain their performance momentum and the community leadership they enjoy throughout their marketplace.”

The combination would assure First Merchants will cross the $10 billion asset threshold early in 2019.  The opportunity is accretive to earnings in the first full year of the merger through the revenue added and resultant scale benefits achieved through the anticipated mid-2019 integration.  Management has been planning and investing to meet the required regulatory expectations of crossing the threshold and are excited with the Monroe acquisition as a means to build value in our franchise.

First Merchants’ total assets equaled $9.8 billion as of quarter-end and loans totaled $7.1 billion. The loan portfolio increased by $605 million, or 9.3 percent, during the past twelve months. Total deposits equaled $7.6 billion as of quarter-end and increased by $722 million, or 10.4 percent, compared to the same period in 2017.

Net-interest income totaled $86.5 million for the quarter, an increase of $12.1 million, or 16.2 percent.  Net-interest margin totaling 4.05 percent on a fully tax-equivalent basis, increased by 2 basis points and included a reduction of 13 basis points related to tax reform.  Yields on earning assets totaled 4.88 percent and the cost of supporting liabilities totaled .83 percent.

Non-interest income totaled $19.5 million for the quarter, an $859,000 increase over the third quarter of 2017.  Gains from the sale of securities, growth in service charges, interchange income and improved fiduciary and wealth management fees off-set declines in earnings on cash surrender value and gains on the sales of loans.  Non-interest expense totaled $55 million, down from the 2017 total of $58.7 million due to the completion of all integration activities in 2017.

Tax expense for the third quarter of 2018 totaled $8.5 million, or 17.1 percent of pre-tax net income.  Tax expense in the prior year totaled $7.9 million, or 24.6 percent.  The improvement in tax expense was due to a decline in the federal statutory tax rate from 35 percent to 21 percent.  Our effective rate is 3.9 percentage points lower than the statutory rate primarily due to approximately $11.2 million of tax free loan, securities and life insurance income in the quarter.

The allowance for loan losses totaled $78.4 million as of September 30, 2018, up from $73.4 million during the same period in 2017.  Non-accrual loans totaled $20.4 million as of quarter-end and the allowance is 1.11 percent of total loans and 1.28 percent of non-purchased loans.  The Corporation’s total risk-based capital ratio equaled 14.25 percent, common equity tier 1 capital ratio equaled 11.64 percent, and the tangible common equity ratio totaled 9.55 percent.

CONFERENCE CALL

First Merchants Corporation will conduct a third quarter earnings conference call and web cast at 2:30 p.m. (ET) on Wednesday, October 24, 2018.

To participate, dial (Toll Free) 877-507-0578 and reference First Merchants Corporation's third quarter earnings release. International callers please call +1 412-317-1073.  A replay of the call will be available until November 24, 2018. To access a replay of the call, US participants should dial (Toll Free) 877-344-7529, or for International participants, dial +1 412-317-0088. The replay access code is 10124461.

In order to view the web cast and presentation slides, please go to http://services.choruscall.com/links/frme181024.html during the time of the call.  A replay of the web cast will be available until October 24, 2019.

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 Lafayette Bank & Trust  and First Merchants Private Wealth Advisors (each 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, 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.

For more information, contact:
Nicole M. Weaver, Vice President and Director of Corporate Administration
765-521-7619
http://www.firstmerchants.com

CONSOLIDATED BALANCE SHEETS   
(Dollars In Thousands)September 30,
 2018 2017
ASSETS   
Cash and cash equivalents$142,501  $146,607 
Interest-bearing time deposits66,763  72,950 
Investment securities1,625,251  1,468,887 
Loans held for sale3,022  4,514 
Loans7,088,071  6,483,448 
    Less: Allowance for loan losses(78,406) (73,354)
        Net loans7,009,665  6,410,094 
Premises and equipment93,728  102,485 
Federal Home Loan Bank stock24,588  23,825 
Interest receivable38,531  32,366 
Goodwill and other intangibles471,409  478,558 
Cash surrender value of life insurance223,865  222,437 
Other real estate owned8,859  11,912 
Tax asset, deferred and receivable25,933  36,024 
Other assets53,167  38,744 
    TOTAL ASSETS$9,787,282  $9,049,403 
LIABILITIES   
Deposits:   
Noninterest-bearing$1,464,190  $1,662,814 
Interest-bearing6,168,962  5,248,205 
    Total Deposits7,633,152  6,911,019 
Borrowings:   
Federal funds purchased90,000  100,000 
Securities sold under repurchase agreements118,824  142,107 
Federal Home Loan Bank advances385,458  406,820 
Subordinated debentures and term loans138,408  139,686 
    Total Borrowings732,690  788,613 
Interest payable5,920  4,956 
Other liabilities54,094  61,695 
    Total Liabilities8,425,856  7,766,283 
STOCKHOLDERS' EQUITY   
Cumulative Preferred Stock, $1,000 par value, $1,000 liquidation value:   
    Authorized -- 600 shares   
    Issued and outstanding - 125 shares125  125 
Common Stock, $.125 stated value:   
    Authorized -- 100,000,000 shares   
    Issued and outstanding - 49,304,542 and 43,140,594 shares6,163  6,143 
Additional paid-in capital837,996  833,451 
Retained earnings552,551  449,759 
Accumulated other comprehensive loss(35,409) (6,358)
    Total Stockholders' Equity1,361,426  1,283,120 
    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$9,787,282  $9,049,403 


CONSOLIDATED STATEMENTS OF INCOMEThree Months EndedNine Months Ended
(Dollars In Thousands, Except Per Share Amounts)September 30,September 30,
 2018 20172018 2017
INTEREST INCOME      
Loans receivable:      
    Taxable$88,479  $71,491 $251,409  $187,234 
    Tax-exempt3,761  2,851 10,989  7,676 
Investment securities:      
    Taxable5,514  4,524 16,044  13,012 
    Tax-exempt6,493  5,455 18,865  15,549 
Deposits with financial institutions270  284 1,034  442 
Federal Home Loan Bank stock283  242 950  635 
        Total Interest Income104,800  84,847 299,291  224,548 
INTEREST EXPENSE      
Deposits13,685  6,710 34,852  15,971 
Federal funds purchased229  175 670  506 
Securities sold under repurchase agreements174  133 519  331 
Federal Home Loan Bank advances2,137  1,464 6,141  3,619 
Subordinated debentures and term loans2,089  1,945 6,136  5,602 
        Total Interest Expense18,314  10,427 48,318  26,029 
NET INTEREST INCOME86,486  74,420 250,973  198,519 
Provision for loan losses1,400  2,083 5,563  7,343 
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES85,086  72,337 245,410  191,176 
OTHER INCOME      
Service charges on deposit accounts5,619  5,044 15,434  13,656 
Fiduciary and wealth management fees3,673  3,783 11,064  10,556 
Other customer fees5,038  4,553 14,991  13,298 
Earnings on cash surrender value of life insurance961  1,575 3,144  5,444 
Net gains and fees on sales of loans1,841  2,317 5,262  5,209 
Net realized gains on sales of available for sale securities1,285  332 4,016  1,497 
Other income1,110  1,064 3,368  2,288 
        Total Other Income19,527  18,668 57,279  51,948 
OTHER EXPENSES      
Salaries and employee benefits32,936  33,244 97,354  86,052 
Net occupancy4,586  4,371 13,604  12,552 
Equipment3,483  3,478 10,707  9,192 
Marketing1,216  1,021 3,574  2,378 
Outside data processing fees3,422  3,162 9,848  8,864 
Printing and office supplies334  366 992  905 
Intangible asset amortization1,650  1,698 5,094  3,592 
FDIC assessments856  704 2,286  1,853 
Other real estate owned and foreclosure expenses455  330 1,219  1,592 
Professional and other outside services1,844  5,843 5,174  10,843 
Other expenses4,240  4,491 12,361  11,300 
        Total Other Expenses55,022  58,708 162,213  149,123 
INCOME BEFORE INCOME TAX49,591  32,297 140,476  94,001 
Income tax expense8,478  7,939 23,050  22,314 
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS$41,113  $24,358 $117,426  $71,687 
Per Share Data:      
Basic Net Income Available to Common Stockholders$0.83  $0.50 $2.38  $1.64 
Diluted Net Income Available to Common Stockholders$0.83  $0.50 $2.37  $1.63 
Cash Dividends Paid$0.22  $0.18 $0.62  $0.51 
Average Diluted Shares Outstanding (in thousands)49,492  48,644 49,458  44,063 


FINANCIAL HIGHLIGHTS       
(Dollars in thousands)Three Months Ended Nine Months Ended
 September 30, September 30,
 2018 2017 2018 2017
NET CHARGE-OFFS$537  $(800) $2,189  $26 
        
AVERAGE BALANCES:       
Total Assets$9,756,680  $8,793,666  $9,610,219  $7,866,643 
Total Loans7,099,694  6,312,810  6,962,460  5,647,486 
Total Earning Assets8,810,758  7,840,403  8,657,152  7,064,659 
Total Deposits7,603,625  6,790,053  7,466,187  6,108,042 
Total Stockholders' Equity1,358,904  1,244,472  1,331,867  1,048,420 
        
FINANCIAL RATIOS:       
Return on Average Assets1.69% 1.11% 1.63% 1.22%
Return on Average Stockholders' Equity12.10  7.83  11.76  9.12 
Return on Average Common Stockholders' Equity12.10  7.83  11.76  9.12 
Average Earning Assets to Average Assets90.30  89.16  90.08  89.81 
Allowance for Loan Losses as % of Total Loans1.11  1.13  1.11  1.13 
Net Charge-offs as % of Average Loans (Annualized)0.03  (0.05) 0.04   
Average Stockholders' Equity to Average Assets13.93  14.15  13.86  13.33 
Tax Equivalent Yield on Average Earning Assets4.88  4.56  4.73  4.47 
Interest Expense/Average Earning Assets0.83  0.53  0.74  0.49 
Net Interest Margin (FTE) on Average Earning Assets4.05  4.03  3.99  3.98 
Efficiency Ratio49.25  58.30  49.94  55.05 
Tangible Common Book Value Per Share$18.16  $16.62  $18.16  $16.62 


NON-PERFORMING ASSETS         
(Dollars In Thousands)September 30, June 30, March  31, December 31, September 30,
 2018 2018 2018 2017 2017
Non-Accrual Loans$20,421  $20,143  $27,497  $28,724  $32,253 
Renegotiated Loans968  544  579  1,013  626 
Non-Performing Loans (NPL)21,389  20,687  28,076  29,737  32,879 
Other Real Estate Owned8,859  9,071  9,698  10,373  11,912 
Non-Performing Assets (NPA)30,248  29,758  37,774  40,110  44,791 
90+ Days Delinquent50  184  738  924  425 
NPAs & 90 Day Delinquent$30,298  $29,942  $38,512  $41,034  $45,216 
          
Allowance for Loan Losses$78,406  $77,543  $76,420  $75,032  $73,354 
Quarterly Net Charge-offs537  540  1,112  122  (800)
NPAs / Actual Assets %0.31% 0.31% 0.40% 0.43% 0.49%
NPAs & 90 Day / Actual Assets %0.31% 0.31% 0.41% 0.44% 0.50%
NPAs / Actual Loans and OREO %0.43% 0.42% 0.55% 0.59% 0.69%
Allowance for Loan Losses / Actual Loans (%)1.11% 1.09% 1.11% 1.11% 1.13%
Net Charge-offs as % of Average Loans (Annualized)0.03% 0.03% 0.07% 0.01% (0.05)%


CONSOLIDATED BALANCE SHEETS         
(Dollars In Thousands)September 30, June 30, March 31, December 31, September 30,
 2018 2018 2018 2017 2017
ASSETS         
Cash and cash equivalents$142,501  $133,893  $128,828  $154,905  $146,607 
Interest-bearing time deposits66,763  36,599  24,233  35,027  72,950 
Investment securities1,625,251  1,619,683  1,543,820  1,560,602  1,468,887 
Loans held for sale3,022  2,046  4,469  7,216  4,514 
Loans7,088,071  7,081,059  6,901,696  6,751,199  6,483,448 
    Less: Allowance for loan losses(78,406) (77,543) (76,420) (75,032) (73,354)
        Net loans7,009,665  7,003,516  6,825,276  6,676,167  6,410,094 
Premises and equipment93,728  94,397  94,741  95,852  102,485 
Federal Home Loan Bank stock24,588  24,588  24,588  23,825  23,825 
Interest receivable38,531  38,530  35,223  37,130  32,366 
Goodwill and other intangibles471,409  473,059  474,777  476,503  478,558 
Cash surrender value of life insurance223,865  222,905  221,949  223,557  222,437 
Other real estate owned8,859  9,071  9,698  10,373  11,912 
Tax asset, deferred and receivable25,933  24,619  24,177  23,983  36,024 
Other assets53,167  51,809  61,017  42,338  38,744 
    TOTAL ASSETS$9,787,282  $9,734,715  $9,472,796  $9,367,478  $9,049,403 
LIABILITIES         
Deposits:         
Noninterest-bearing$1,464,190  $1,571,194  $1,698,958  $1,761,553  $1,662,814 
Interest-bearing6,168,962  5,932,621  5,628,677  5,410,977  5,248,205 
    Total Deposits7,633,152  7,503,815  7,327,635  7,172,530  6,911,019 
Borrowings:         
Federal funds purchased90,000  109,000  50,000  144,038  100,000 
Securities sold under repurchase agreements118,824  122,513  138,910  136,623  142,107 
Federal Home Loan Bank advances385,458  469,261  449,419  414,377  406,820 
Subordinated debentures and term loans138,408  138,352  138,297  139,349  139,686 
    Total Borrowings732,690  839,126  776,626  834,387  788,613 
Interest payable5,920  4,807  5,376  4,390  4,956 
Other liabilities54,094  46,639  50,086  52,708  61,695 
    Total Liabilities8,425,856  8,394,387  8,159,723  8,064,015  7,766,283 
STOCKHOLDERS' EQUITY         
Cumulative Preferred Stock, $1,000 par value, $1,000 liquidation value:         
    Authorized -- 600 shares         
    Issued and outstanding125  125  125  125  125 
Common Stock, $.125 stated value:         
    Authorized -- 100,000,000 shares         
    Issued and outstanding6,163  6,160  6,155  6,145  6,143 
Additional paid-in capital837,996  836,549  834,894  834,870  833,451 
Retained earnings552,551  522,362  493,624  465,231  449,759 
Accumulated other comprehensive loss(35,409) (24,868) (21,725) (2,908) (6,358)
    Total Stockholders' Equity1,361,426  1,340,328  1,313,073  1,303,463  1,283,120 
    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$9,787,282  $9,734,715  $9,472,796  $9,367,478  $9,049,403 
          


CONSOLIDATED STATEMENTS OF INCOME         
(Dollars In Thousands, Except Per Share Amounts)September 30, June 30, March 31, December 31, September 30,
 2018 2018 2018 2017 2017
INTEREST INCOME         
Loans receivable:         
    Taxable$88,479  $84,663  $78,267  $76,470  $71,491 
    Tax-exempt3,761  3,632  3,596  3,018  2,851 
Investment securities:         
    Taxable5,514  5,434  5,096  4,477  4,524 
    Tax-exempt6,493  6,246  6,126  5,830  5,455 
Deposits with financial institutions270  633  131  294  284 
Federal Home Loan Bank stock283  263  404  259  242 
        Total Interest Income104,800  100,871  93,620  90,348  84,847 
INTEREST EXPENSE         
Deposits13,685  12,165  9,002  7,835  6,710 
Federal funds purchased229  61  380  55  175 
Securities sold under repurchase agreements174  172  173  146  133 
Federal Home Loan Bank advances2,137  1,845  2,159  1,577  1,464 
Subordinated debentures and term loans2,089  2,057  1,990  1,970  1,945 
        Total Interest Expense18,314  16,300  13,704  11,583  10,427 
NET INTEREST INCOME86,486  84,571  79,916  78,765  74,420 
Provision for loan losses1,400  1,663  2,500  1,800  2,083 
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES85,086  82,908  77,416  76,965  72,337 
OTHER INCOME         
Service charges on deposit accounts5,619  5,038  4,777  5,066  5,044 
Fiduciary and wealth management fees3,673  3,595  3,796  4,126  3,783 
Other customer fees5,038  4,917  5,036  4,565  4,553 
Earnings on cash surrender value of life insurance961  1,007  1,176  1,133  1,575 
Net gains and fees on sales of loans1,841  1,600  1,821  2,355  2,317 
Net realized gains on sales of available for sale securities1,285  1,122  1,609  1,134  332 
Other income1,110  912  1,346  682  1,064 
        Total Other Income19,527  18,191  19,561  19,061  18,668 
OTHER EXPENSES         
Salaries and employee benefits32,936  32,192  32,226  33,760  33,244 
Net occupancy4,586  4,348  4,670  4,424  4,371 
Equipment3,483  3,556  3,668  3,898  3,478 
Marketing1,216  1,474  884  1,361  1,021 
Outside data processing fees3,422  3,462  2,964  3,378  3,162 
Printing and office supplies334  324  334  378  366 
Intangible asset amortization1,650  1,718  1,726  2,055  1,698 
FDIC assessments856  711  719  711  704 
Other real estate owned and foreclosure expenses455  362  402  311  330 
Professional and other outside services1,844  1,789  1,541  1,914  5,843 
Other expenses4,240  3,568  4,553  4,243  4,491 
        Total Other Expenses55,022  53,504  53,687  56,433  58,708 
INCOME BEFORE INCOME TAX49,591  47,595  43,290  39,593  32,297 
Income tax expense8,478  7,961  6,611  15,210  7,939 
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS$41,113  $39,634  $36,679  $24,383  $24,358 
          
Per Share Data:         
Basic Net Income Available to Common Stockholders$0.83  $0.80  $0.75  $0.49  $0.50 
Diluted Net Income Available to Common Stockholders$0.83  $0.80  $0.74  $0.49  $0.50 
Cash Dividends Paid$0.22  $0.22  $0.18  $0.18  $0.18 
Average Diluted Shares Outstanding (in thousands)49,492  49,451  49,428  49,379  48,644 
FINANCIAL RATIOS:         
Return on Average Assets1.69% 1.63% 1.57% 1.06% 1.11%
Return on Average Stockholders' Equity12.10  11.94  11.21  7.53  7.83 
Return on Average Common Stockholders' Equity12.10  11.95  11.21  7.53  7.83 
Average Earning Assets to Average Assets90.30  90.14  89.78  88.73  89.16 
Allowance for Loan Losses as % of Total Loans1.11  1.09  1.11  1.11  1.13 
Net Charge-offs as % of Average Loans (Annualized)0.03  0.03  0.07  0.01  (0.05)
Average Stockholders' Equity to Average Assets13.93  13.69  13.96  14.11  14.15 
Tax Equivalent Yield on Average Earning Assets4.88  4.74  4.57  4.67  4.56 
Interest Expense/Average Earning Assets0.83  0.75  0.65  0.57  0.53 
Net Interest Margin (FTE) on Average Earning Assets4.05  3.99  3.92  4.10  4.03 
Efficiency Ratio49.25  49.32  51.33  53.29  58.30 
Tangible Common Book Value Per Share$18.16  $17.71  $17.14  $16.96  $16.62 


LOANS         
(Dollars In Thousands)Septenber 30, June 30, March 31, December 31, September 30,
 2018 2018 2018 2017 2017
Commercial and industrial loans$1,655,569  $1,657,591  $1,554,169  $1,493,493  $1,436,092 
Agricultural production financing and other loans to farmers88,504  89,093  98,315  121,757  117,751 
Real estate loans:         
Construction668,608  714,866  590,093  612,219  498,862 
Commercial and farmland2,699,629  2,652,782  2,713,994  2,562,691  2,571,253 
Residential965,893  965,720  948,644  962,765  938,437 
Home equity517,303  518,699  510,545  514,021  502,240 
Individuals' loans for household and other personal expenditures98,709  92,809  88,235  86,935  86,406 
Lease financing receivables, net of unearned income1,830  1,945  2,193  2,527  3,877 
Other commercial loans392,026  387,554  395,508  394,791  328,530 
Loans7,088,071  7,081,059  6,901,696  6,751,199  6,483,448 
Allowance for loan losses(78,406) (77,543) (76,420) (75,032) (73,354)
    NET LOANS$7,009,665  $7,003,516  $6,825,276  $6,676,167  $6,410,094 


DEPOSITS         
(Dollars In Thousands)September 30, June 30, March 31, December 31, September 30,
 2018 2018 2018 2017 2017
Demand deposits$3,870,816  $3,933,233  $3,740,395  $3,746,654  $3,562,718 
Savings deposits2,212,675  2,099,771  2,109,071  1,994,366  1,884,705 
Certificates and other time deposits of $100,000 or more602,002  555,910  552,643  468,895  503,668 
Other certificates and time deposits625,341  602,239  584,377  581,894  585,042 
Brokered deposits322,318  312,662  341,149  380,721  374,886 
TOTAL DEPOSITS$7,633,152  $7,503,815  $7,327,635  $7,172,530  $6,911,019 


CONSOLIDATED AVERAGE BALANCE SHEET AND NET INTEREST MARGIN ANALYSIS       
(Dollars in Thousands)           
 For the Three Months Ended
 September 30, 2018 September 30, 2017
 Average Balance Interest
 Income /
Expense
 Average
Rate
 Average Balance Interest
 Income /
Expense
 Average
Rate
Assets:           
Interest-bearing time deposits$52,027  $270  2.08% $139,905  $284  0.81%
Federal Home Loan Bank stock24,588  283  4.60  23,146  242  4.18 
Investment Securities: (1)           
Taxable857,507  5,514  2.57  718,965  4,524  2.52 
Tax-Exempt (2)776,942  8,219  4.23  645,577  8,392  5.20 
    Total Investment Securities1,634,449  13,733  3.36  1,364,542  12,916  3.79 
Loans held for sale11,038  142  5.15  8,117  136  6.70 
Loans: (3)           
Commercial5,226,284  71,223  5.45  4,556,653  55,266  4.85 
Real Estate Mortgage739,356  8,383  4.54  785,317  8,596  4.38 
Installment655,738  8,731  5.33  595,164  7,494  5.04 
Tax-Exempt (2)467,278  4,761  4.08  367,559  4,385  4.77 
    Total Loans7,099,694  93,240  5.25  6,312,810  75,877  4.81 
    Total Earning Assets8,810,758  107,526  4.88  7,840,403  89,319  4.56 
Net unrealized gain (loss) on securities available for sale(15,245)     7,733     
Allowance for loan losses(77,763)     (71,753)    
Cash and cash equivalents128,557      129,058     
Premises and equipment94,422      101,979     
Other assets815,951      786,246     
    Total Assets$9,756,680      $8,793,666     
Liabilities:           
Interest-bearing deposits:           
Interest-bearing NOW deposits$2,399,477  $4,909  0.82% $1,834,965  $1,706  0.37%
Money market deposits1,062,154  1,551  0.58  990,682  747  0.30 
Savings deposits1,081,369  1,500  0.55  887,201  203  0.09 
Certificates and other time deposits1,536,697  5,725  1.49  1,450,448  4,054  1.12 
    Total Interest-bearing Deposits6,079,697  13,685  0.90  5,163,296  6,710  0.52 
Borrowings741,092  4,629  2.50  694,203  3,717  2.14 
    Total Interest-bearing Liabilities6,820,789  18,314  1.07  5,857,499  10,427  0.71 
Noninterest-bearing deposits1,523,928      1,626,757     
Other liabilities53,059      64,938     
    Total Liabilities8,397,776      7,549,194     
Stockholders' Equity1,358,904      1,244,472     
    Total Liabilities and Stockholders' Equity$9,756,680  18,314    $8,793,666  10,427   
        Net Interest Income (FTE)  $89,212      $78,892   
        Net Interest Spread (FTE)    3.81%     3.85%
            
    Net Interest Margin (FTE):           
    Interest Income (FTE) / Average Earning Assets    4.88%     4.56%
    Interest Expense / Average Earning Assets    0.83%     0.53%
        Net Interest Margin (FTE)    4.05%     4.03%
            
(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.
(2)  Tax-exempt securities and loans are presented on a fully taxable equivalent basis, using a marginal tax rate of 21 percent and 35 percent for 2018 and 2017, respectively.  These totals equal $2,726 and $4,472 for the three months ended September 30, 2018 and 2017, respectively.
(3)  Non accruing loans have been included in the average balances.


CONSOLIDATED AVERAGE BALANCE SHEET AND NET INTEREST MARGIN ANALYSIS      
(Dollars in Thousands)           
 For the Nine Months Ended
 September 30, 2018 September 30, 2017
 Average Balance Interest
 Income /
Expense
 Average
Rate
 Average Balance Interest
 Income /
Expense
 Average
Rate
Assets:           
Interest-bearing time deposits$76,570  $1,034  1.80% $71,456  $442  0.82%
Federal Reserve and Federal Home Loan Bank stock24,521  950  5.17  19,941  635  4.25 
Investment Securities: (1)           
Taxable840,425  16,044  2.55  716,118  13,012  2.42 
Tax-Exempt (2)753,176  23,880  4.23  609,658  23,922  5.23 
    Total Investment Securities1,593,601  39,924  3.34  1,325,776  36,934  3.71 
Loans held for sale9,520  363  5.08  4,875  245  6.70 
Loans: (3)           
Commercial5,116,405  200,886  5.24  4,085,901  144,759  4.72 
Real Estate Mortgage732,469  25,174  4.58  660,435  21,946  4.43 
Installment637,140  24,986  5.23  558,106  20,284  4.85 
Tax-Exempt (2)466,926  13,910  3.97  338,169  11,809  4.66 
    Total Loans6,962,460  265,319  5.08  5,647,486  199,043  4.70 
    Total Earning Assets8,657,152  307,227  4.73  7,064,659  237,054  4.47 
Net unrealized gain on securities available for sale(11,616)     4,437     
Allowance for loan losses(76,944)     (69,269)    
Cash and cash equivalents129,181      128,866     
Premises and equipment94,897      95,707     
Other assets817,549      642,243     
    Total Assets$9,610,219      $7,866,643     
Liabilities:           
Interest-bearing deposits:           
Interest-bearing NOW deposits$2,236,644  $12,013  0.72% $1,649,175  $3,632  0.29%
Money market deposits1,077,792  4,270  0.53  894,450  1,688  0.25 
Savings deposits1,041,600  3,214  0.41  818,800  520  0.08 
Certificates and other time deposits1,504,851  15,355  1.36  1,299,932  10,131  1.04 
    Total Interest-bearing Deposits5,860,887  34,852  0.79  4,662,357  15,971  0.46 
Borrowings754,054  13,466  2.38  659,260  10,058  2.03 
    Total Interest-bearing Liabilities6,614,941  48,318  0.97  5,321,617  26,029  0.65 
Noninterest-bearing deposits1,605,300      1,445,685     
Other liabilities58,111      50,921     
    Total Liabilities8,278,352      6,818,223     
Stockholders' Equity1,331,867      1,048,420     
    Total Liabilities and Stockholders' Equity$9,610,219  48,318    $7,866,643  26,029   
        Net Interest Income (FTE)  $258,909      $211,025   
        Net Interest Spread (FTE)    3.76%     3.82%
            
    Net Interest Margin (FTE):           
    Interest Income (FTE) / Average Earning Assets    4.73%     4.47%
    Interest Expense / Average Earning Assets    0.74%     0.49%
        Net Interest Margin (FTE)    3.99%     3.98%
            
(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.
(2)  Tax-exempt securities and loans are presented on a fully taxable equivalent basis, using a marginal tax rate of 21 percent and 35 percent for 2018 and 2017, respectively.  These totals equal $7,936 and $12,506 for the nine months ended September 30, 2018 and 2017, respectively.
(3)  Non accruing loans have been included in the average balances.           

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Source: First Merchants Corporation

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