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Press Release

First Merchants Corporation Announces 3.8 Percent Increase in Second Quarter 2019 Earnings per Share

Company Release - 7/25/2019 8:00 AM ET

MUNCIE, Ind., July 25, 2019 (GLOBE NEWSWIRE) -- First Merchants Corporation (NASDAQ - FRME) has reported second quarter 2019 net income of $41.1 million, an increase of 3.6 percent, compared to $39.6 million during the same period in 2018.  Earnings per share for the period totaled $.83 per share, an increase of 3.8 percent, compared to the second quarter of 2018 result of $.80 per share.

Total assets equaled $10.7 billion as of quarter-end and loans totaled $7.5 billion.  The Corporation’s loan portfolio increased, by $434 million, or 6.1 percent, during the past twelve months.  Investments increased $473 million, or 29.2 percent, during the same period and now total $2.1 billion.  Total deposits equaled $8.3 billion as of quarter-end and increased by $816 million, or 10.9 percent, while borrowings, totaling $793 million, declined during the period by $46 million, or 5.5 percent.  As a result, the loan-to-deposit ratio now totals 90.4 percent and loan-to-asset ratio totals 70 percent.  Additionally, the Corporation’s total risk-based capital ratio equaled 14.56 percent, common equity tier 1 capital ratio equaled 12.05 percent, and the tangible common equity ratio totaled 10.07 percent.

Michael C. Rechin, President and Chief Executive Officer, stated, “Our second quarter of 2019 results continued to reflect effective market coverage by our bankers coupled with healthy levels of activity from our commercial and consumer clients throughout our franchise.  We are pleased with our execution producing second quarter organic loan growth of 11.8% and deposit growth of 13.5% on an annualized basis.  Net Income and earnings per share improved during the quarter despite margin pressure and legal and settlement expenses of $1.3 million reflected in our marketing line item.  We continue to anticipate closing our acquisition with Monroe Bank & Trust during the third quarter of 2019 and completing the integration in the fourth quarter of 2019.”

Net interest income for the quarter totaled $85.3 million, an increase of $707,000, even as net interest margin totaling 3.71 percent declined from the same period in 2018 by 28 basis points.  Yields on earning assets increased by 12 basis points totaling 4.86 percent and the cost of supporting liabilities increased by 40 basis points and totaled 1.15 percent.  Fair value accretion negatively impacted yields as it declined from 18 basis points in second quarter of 2018 to 9 basis points in 2019.  Additionally, strong growth in institutional deposits and deployment into the bond portfolio produced earnings per share of $.01 for the quarter but negatively impacted net interest margin by 10 basis points.

Non-interest income totaled $21.6 million for the quarter, a $3.4 million, or 18.8 percent increase from the second quarter of 2018. Customer-specific line items accounted for $2.4 million of the increase while being fueled by derivative hedge income growth of $1.3 million.  Non-interest expense totaled $57.6 million up from the 2018 total of $53.5 million.  Of the $4.1 million increase, $1.3 million was related to the fair lending legal and settlement expenses, with the remaining in professional services - $587,000, equipment - $561,000, other real estate expense - $541,000, and salary and benefits - $517,000.

The Corporation’s provision expense totaled $500,000 and net charge-offs were just $128,000.  The allowance for loan losses reached $81.3 million as of June 30, 2019, up from $77.5 million as of June 30, 2018.  Non-accrual loans declined to $25.6 million as of quarter-end and the allowance was 1.08 percent of total loans and 1.19 percent of non-purchased loans.

CONFERENCE CALL

First Merchants Corporation will conduct a second quarter earnings conference call and web cast at 2:30 p.m. (ET) on Thursday, July 25, 2019.

To participate, dial (Toll Free) 877-507-0578 and reference First Merchants Corporation's second quarter earnings release. International callers please call +1 412-317-1073.  A replay of the call will be available until August 25, 2019. To access a replay of the call, US participants should dial (Toll Free) 877-344-7529, Canada participants should dial 855-669-9658, or for International participants, dial +1 412-317-0088. The replay access code is 10132272.

In order to view the web cast and presentation slides, please go to http://services.choruscall.com/links/frme190725.html during the time of the call.  A replay of the web cast will be available until July 25, 2020.

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, 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,
 2019 2018
ASSETS   
Cash and cash equivalents$128,185  $133,893 
Interest-bearing time deposits129,614  36,599 
Investment securities2,092,924  1,619,683 
Loans held for sale5,854  2,046 
Loans7,511,370  7,081,059 
Less: Allowance for loan losses(81,274) (77,543)
Net loans7,430,096  7,003,516 
Premises and equipment91,767  94,397 
Federal Home Loan Bank stock24,588  24,588 
Interest receivable45,150  38,530 
Goodwill and other intangibles466,736  473,059 
Cash surrender value of life insurance226,241  222,905 
Other real estate owned1,131  9,071 
Tax asset, deferred and receivable12,340  24,619 
Other assets83,231  51,809 
TOTAL ASSETS$10,737,857  $9,734,715 
LIABILITIES   
Deposits:   
Noninterest-bearing$1,353,165  $1,571,194 
Interest-bearing6,966,163  5,932,621 
Total Deposits8,319,328  7,503,815 
Borrowings:   
Federal funds purchased75,000  109,000 
Securities sold under repurchase agreements119,674  122,513 
Federal Home Loan Bank advances460,042  469,261 
Subordinated debentures and term loans138,574  138,352 
Total Borrowings793,290  839,126 
Interest payable6,740  4,807 
Other liabilities116,863  46,639 
Total Liabilities9,236,221  8,394,387 
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 - 49,456,594 and 49,280,188 shares6,182  6,160 
Additional paid-in capital841,365  836,549 
Retained earnings639,362  522,362 
Accumulated other comprehensive income (loss)14,602  (24,868)
Total Stockholders' Equity1,501,636  1,340,328 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$10,737,857  $9,734,715 


CONSOLIDATED STATEMENTS OF INCOMEThree Months Ended Six Months Ended
(Dollars In Thousands, Except Per Share Amounts)June 30, June 30,
 2019 2018 2019 2018
INTEREST INCOME       
Loans receivable:       
Taxable$92,824  $84,663  $183,305  $162,930 
Tax-exempt4,244  3,632  8,397  7,228 
Investment securities:       
Taxable6,998  5,434  13,093  10,530 
Tax-exempt7,454  6,246  14,325  12,372 
Deposits with financial institutions784  633  1,659  764 
Federal Home Loan Bank stock335  263  673  667 
Total Interest Income112,639  100,871  221,452  194,491 
INTEREST EXPENSE       
Deposits23,087  12,165  42,681  21,167 
Federal funds purchased117  61  210  441 
Securities sold under repurchase agreements342  172  672  345 
Federal Home Loan Bank advances1,692  1,845  3,506  4,004 
Subordinated debentures and term loans2,123  2,057  4,239  4,047 
Total Interest Expense27,361  16,300  51,308  30,004 
NET INTEREST INCOME85,278  84,571  170,144  164,487 
Provision for loan losses500  1,663  1,700  4,163 
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES84,778  82,908  168,444  160,324 
OTHER INCOME       
Service charges on deposit accounts5,437  5,038  10,532  9,815 
Fiduciary and wealth management fees3,931  3,595  7,749  7,391 
Card payment fees4,829  4,462  9,655  9,056 
Net gains and fees on sales of loans1,736  1,600  3,031  3,421 
Derivative hedge fees1,487  231  2,268  1,073 
Other customer fees341  455  780  897 
Earnings on cash surrender value of life insurance946  1,007  1,935  2,183 
Net realized gains on sales of available for sale securities1,843  1,122  2,983  2,731 
Other income1,064  681  1,394  1,185 
Total Other Income21,614  18,191  40,327  37,752 
OTHER EXPENSES       
Salaries and employee benefits32,709  32,192  65,737  64,418 
Net occupancy4,469  4,348  9,496  9,018 
Equipment4,117  3,556  7,759  7,224 
Marketing2,752  1,474  3,826  2,358 
Outside data processing fees3,929  3,462  7,613  6,426 
Printing and office supplies334  324  649  658 
Intangible asset amortization1,520  1,718  3,048  3,444 
FDIC assessments678  711  1,385  1,430 
Other real estate owned and foreclosure expenses903  362  2,068  764 
Professional and other outside services2,376  1,789  4,260  3,330 
Other expenses3,800  3,568  8,367  8,121 
Total Other Expenses57,587  53,504  114,208  107,191 
INCOME BEFORE INCOME TAX48,805  47,595  94,563  90,885 
Income tax expense7,749  7,961  14,690  14,572 
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS$41,056  $39,634  $79,873  $76,313 
Per Share Data:       
Basic Net Income Available to Common Stockholders$0.83  $0.80  $1.62  $1.55 
Diluted Net Income Available to Common Stockholders$0.83  $0.80  $1.61  $1.54 
Cash Dividends Paid$0.26  $0.22  $0.48  $0.40 
Average Diluted Shares Outstanding (in thousands)49,550  49,451  49,545  49,440 


FINANCIAL HIGHLIGHTS       
(Dollars in thousands)Three Months Ended Six Months Ended
 June 30, June 30,
 2019 2018 2019 2018
NET CHARGE-OFFS$128  $540  $978  $1,652 
        
AVERAGE BALANCES:       
Total Assets$10,499,948  $9,697,020  $10,291,205  $9,535,774 
Total Loans7,385,315  6,975,737  7,308,146  6,893,867 
Total Earning Assets9,518,892  8,741,173  9,326,579  8,579,076 
Total Deposits8,321,459  7,636,821  8,130,120  7,396,328 
Total Stockholders' Equity1,479,254  1,327,341  1,454,633  1,318,124 
        
FINANCIAL RATIOS:       
Return on Average Assets1.56% 1.63% 1.55% 1.60%
Return on Average Stockholders' Equity11.10  11.94  10.98  11.58 
Return on Average Common Stockholders' Equity11.10  11.95  10.98  11.58 
Average Earning Assets to Average Assets90.66  90.14  90.63  89.97 
Allowance for Loan Losses as % of Total Loans1.08  1.09  1.08  1.09 
Net Charge-offs as % of Average Loans (Annualized)0.01  0.03  0.03  0.05 
Average Stockholders' Equity to Average Assets14.09  13.69  14.13  13.82 
Tax Equivalent Yield on Average Earning Assets4.86  4.74  4.88  4.66 
Interest Expense/Average Earning Assets1.15  0.75  1.10  0.70 
Net Interest Margin (FTE) on Average Earning Assets3.71  3.99  3.78  3.96 
Efficiency Ratio51.00  49.32  51.09  50.30 
Tangible Common Book Value Per Share$21.01  $17.71  $21.01  $17.71 


NON-PERFORMING ASSETS         
(Dollars In Thousands)June 30, March 31, December 31, September 30, June 30,
 2019 2019 2018 2018 2018
Non-Accrual Loans$25,635  $27,949  $26,148  $20,421  $20,143 
Renegotiated Loans640  709  1,103  968  544 
Non-Performing Loans (NPL)26,275  28,658  27,251  21,389  20,687 
Other Real Estate Owned1,131  1,877  2,179  8,859  9,071 
Non-Performing Assets (NPA)27,406  30,535  29,430  30,248  29,758 
90+ Days Delinquent209  134  1,855  50  184 
NPAs & 90 Day Delinquent$27,615  $30,669  $31,285  $30,298  $29,942 
          
Allowance for Loan Losses$81,274  $80,902  $80,552  $78,406  $77,543 
Quarterly Net Charge-offs128  850  (482) 537  540 
NPAs / Actual Assets %0.26% 0.30% 0.30% 0.31% 0.31%
NPAs & 90 Day / Actual Assets %0.26% 0.30% 0.32% 0.31% 0.31%
NPAs / Actual Loans and OREO %0.36% 0.42% 0.41% 0.43% 0.42%
Allowance for Loan Losses / Actual Loans (%)1.08% 1.11% 1.11% 1.11% 1.09%
Net Charge-offs as % of Average Loans (Annualized)0.01% 0.05% (0.03)% 0.03% 0.03%


CONSOLIDATED BALANCE SHEETS         
(Dollars In Thousands)June 30, March 31, December 31, September 30, June 30,
 2019 2019 2018 2018 2018
ASSETS         
Cash and cash equivalents$128,185  $115,878  $139,247  $142,501  $133,893 
Interest-bearing time deposits129,614  70,672  36,963  66,763  36,599 
Investment securities2,092,924  1,862,659  1,632,582  1,625,251  1,619,683 
Loans held for sale5,854  3,330  4,778  3,022  2,046 
Loans7,511,370  7,299,320  7,224,467  7,088,071  7,081,059 
Less: Allowance for loan losses(81,274) (80,902) (80,552) (78,406) (77,543)
Net loans7,430,096  7,218,418  7,143,915  7,009,665  7,003,516 
Premises and equipment91,767  91,863  93,420  93,728  94,397 
Federal Home Loan Bank stock24,588  24,588  24,588  24,588  24,588 
Interest receivable45,150  40,931  40,881  38,531  38,530 
Goodwill and other intangibles466,736  468,256  469,784  471,409  473,059 
Cash surrender value of life insurance226,241  225,928  224,939  223,865  222,905 
Other real estate owned1,131  1,877  2,179  8,859  9,071 
Tax asset, deferred and receivable12,340  16,094  23,668  25,933  24,619 
Other assets83,231  70,431  47,772  53,167  51,809 
TOTAL ASSETS$10,737,857  $10,210,925  $9,884,716  $9,787,282  $9,734,715 
LIABILITIES         
Deposits:         
Noninterest-bearing$1,353,165  $1,381,183  $1,447,907  $1,464,190  $1,571,194 
Interest-bearing6,966,163  6,666,615  6,306,686  6,168,962  5,932,621 
Total Deposits8,319,328  8,047,798  7,754,593  7,633,152  7,503,815 
Borrowings:         
Federal funds purchased75,000  20,000  104,000  90,000  109,000 
Securities sold under repurchase agreements119,674  111,783  113,512  118,824  122,513 
Federal Home Loan Bank advances460,042  345,013  314,986  385,458  469,261 
Subordinated debentures and term loans138,574  138,519  138,463  138,408  138,352 
Total Borrowings793,290  615,315  670,961  732,690  839,126 
Interest payable6,740  7,313  5,607  5,920  4,807 
Other liabilities116,863  84,651  45,295  54,094  46,639 
Total Liabilities9,236,221  8,755,077  8,476,456  8,425,856  8,394,387 
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 outstanding6,182  6,179  6,169  6,163  6,160 
Additional paid-in capital841,365  839,919  840,052  837,996  836,549 
Retained earnings639,362  611,220  583,336  552,551  522,362 
Accumulated other comprehensive income (loss)14,602  (1,595) (21,422) (35,409) (24,868)
Total Stockholders' Equity1,501,636  1,455,848  1,408,260  1,361,426  1,340,328 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$10,737,857  $10,210,925  $9,884,716  $9,787,282  $9,734,715 
          


CONSOLIDATED STATEMENTS OF INCOME         
(Dollars In Thousands, Except Per Share Amounts)June 30, March 31, December 31, September 30, June 30,
 2019 2019 2018 2018 2018
INTEREST INCOME         
Loans receivable:         
Taxable$92,824  $90,481  $91,092  $88,479  $84,663 
Tax-exempt4,244  4,153  3,873  3,761  3,632 
Investment securities:         
Taxable6,998  6,095  5,553  5,514  5,434 
Tax-exempt7,454  6,871  6,644  6,493  6,246 
Deposits with financial institutions784  875  1,207  270  633 
Federal Home Loan Bank stock335  338  284  283  263 
Total Interest Income112,639  108,813  108,653  104,800  100,871 
INTEREST EXPENSE         
Deposits23,087  19,594  16,690  13,685  12,165 
Federal funds purchased117  93  48  229  61 
Securities sold under repurchase agreements342  330  243  174  172 
Federal Home Loan Bank advances1,692  1,814  1,691  2,137  1,845 
Subordinated debentures and term loans2,123  2,116  2,097  2,089  2,057 
Total Interest Expense27,361  23,947  20,769  18,314  16,300 
NET INTEREST INCOME85,278  84,866  87,884  86,486  84,571 
Provision for loan losses500  1,200  1,664  1,400  1,663 
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES84,778  83,666  86,220  85,086  82,908 
OTHER INCOME         
Service charges on deposit accounts5,437  5,095  5,516  5,619  5,038 
Fiduciary and wealth management fees3,931  3,818  3,842  3,673  3,595 
Card payment fees4,829  4,826  4,393  4,586  4,462 
Net gains and fees on sales of loans1,736  1,295  1,767  1,841  1,600 
Derivative hedge fees1,487  781  645  775  231 
Other customer fees341  439  511  452  455 
Earnings on cash surrender value of life insurance946  989  1,074  961  1,007 
Net realized gains on sales of available for sale securities1,843  1,140  253  1,285  1,122 
Other income1,064  330  1,179  335  681 
Total Other Income21,614  18,713  19,180  19,527  18,191 
OTHER EXPENSES         
Salaries and employee benefits32,709  33,028  34,350  32,936  32,192 
Net occupancy4,469  5,027  4,737  4,586  4,348 
Equipment4,117  3,642  3,627  3,483  3,556 
Marketing2,752  1,074  1,107  1,216  1,474 
Outside data processing fees3,929  3,684  3,367  3,422  3,462 
Printing and office supplies334  315  433  334  324 
Intangible asset amortization1,520  1,528  1,625  1,650  1,718 
FDIC assessments678  707  634  856  711 
Other real estate owned and foreclosure expenses903  1,165  251  455  362 
Professional and other outside services2,376  1,884  3,002  1,844  1,789 
Other expenses3,800  4,567  4,605  4,240  3,568 
Total Other Expenses57,587  56,621  57,738  55,022  53,504 
INCOME BEFORE INCOME TAX48,805  45,758  47,662  49,591  47,595 
Income tax expense7,749  6,941  5,949  8,478  7,961 
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS$41,056  $38,817  $41,713  $41,113  $39,634 
          
Per Share Data:         
Basic Net Income Available to Common Stockholders$0.83  $0.79  $0.85  $0.83  $0.80 
Diluted Net Income Available to Common Stockholders$0.83  $0.78  $0.85  $0.83  $0.80 
Cash Dividends Paid$0.26  $0.22  $0.22  $0.22  $0.22 
Average Diluted Shares Outstanding (in thousands)49,550  49,541  49,511  49,492  49,451 
FINANCIAL RATIOS:         
Return on Average Assets1.56% 1.54% 1.68% 1.69% 1.63%
Return on Average Stockholders' Equity11.10  10.86  12.10  12.10  11.94 
Return on Average Common Stockholders' Equity11.10  10.86  12.10  12.10  11.95 
Average Earning Assets to Average Assets90.66  90.60  90.41  90.30  90.14 
Allowance for Loan Losses as % of Total Loans1.08  1.11  1.11  1.11  1.09 
Net Charge-offs as % of Average Loans (Annualized)0.01  0.05  (0.03) 0.03  0.03 
Average Stockholders' Equity to Average Assets14.09  14.18  13.90  13.93  13.69 
Tax Equivalent Yield on Average Earning Assets4.86  4.89  4.97  4.88  4.74 
Interest Expense/Average Earning Assets1.15  1.05  0.93  0.83  0.75 
Net Interest Margin (FTE) on Average Earning Assets3.71  3.84  4.04  4.05  3.99 
Efficiency Ratio51.00  51.18  50.97  49.25  49.32 
Tangible Common Book Value Per Share$21.01  $20.07  $19.12  $18.16  $17.71 


LOANS         
(Dollars In Thousands)June 30, March 31, December 31, September 30, June 30,
 2019 2019 2018 2018 2018
Commercial and industrial loans$1,877,042  $1,788,628  $1,726,664  $1,655,569  $1,657,591 
Agricultural production financing and other loans to farmers83,452  80,357  92,404  88,504  89,093 
Real estate loans:         
Construction624,548  542,501  545,729  668,608  714,866 
Commercial and farmland2,821,689  2,838,798  2,832,102  2,699,629  2,652,782 
Residential993,802  976,668  966,421  965,893  965,720 
Home equity548,006  536,208  528,157  517,303  518,699 
Individuals' loans for household and other personal expenditures98,384  108,216  99,788  98,709  92,809 
Public finance and other commercial loans464,447  427,944  433,202  393,856  389,499 
Loans7,511,370  7,299,320  7,224,467  7,088,071  7,081,059 
Allowance for loan losses(81,274) (80,902) (80,552) (78,406) (77,543)
NET LOANS$7,430,096  $7,218,418  $7,143,915  $7,009,665  $7,003,516 


DEPOSITS         
(Dollars In Thousands)June 30, March 31, December 31, September 30, June 30,
 2019 2019 2018 2018 2018
Demand deposits$4,309,473  $4,101,156  $3,985,178  $3,870,816  $3,933,233 
Savings deposits2,358,720  2,338,266  2,282,701  2,212,675  2,099,771 
Certificates and other time deposits of $100,000 or more720,536  670,199  593,592  602,002  555,910 
Other certificates and time deposits729,392  704,527  646,682  625,341  602,239 
Brokered deposits201,207  233,650  246,440  322,318  312,662 
TOTAL DEPOSITS$8,319,328  $8,047,798  $7,754,593  $7,633,152  $7,503,815 


CONSOLIDATED AVERAGE BALANCE SHEET AND NET INTEREST MARGIN ANALYSIS       
(Dollars in Thousands)           
 For the Three Months Ended
 June 30, 2019 June 30, 2018
 Average Balance Interest
 Income /
Expense
 Average
Rate
 Average Balance Interest
 Income /
Expense
 Average
Rate
Assets:           
Interest-bearing time deposits$144,626  $784  2.17% $142,385  $633  1.78%
Federal Home Loan Bank stock24,588  335  5.45  24,588  263  4.28 
Investment Securities: (1)           
Taxable1,054,068  6,998  2.66  852,865  5,434  2.55 
Tax-Exempt (2)910,295  9,435  4.15  745,598  7,906  4.24 
Total Investment Securities1,964,363  16,433  3.35  1,598,463  13,340  3.34 
Loans held for sale11,430  127  4.44  6,408  83  5.18 
Loans: (3)           
Commercial5,419,169  74,638  5.51  5,142,093  67,510  5.25 
Real Estate Mortgage766,528  8,686  4.53  729,681  8,792  4.82 
Installment677,133  9,373  5.54  631,897  8,278  5.24 
Tax-Exempt (2)511,055  5,372  4.20  465,658  4,597  3.95 
Total Loans7,385,315  98,196  5.32  6,975,737  89,260  5.12 
Total Earning Assets9,518,892  115,748  4.86% 8,741,173  103,496  4.74%
Net unrealized gain (loss) on securities available for sale12,841      (13,068)    
Allowance for loan losses(81,691)     (77,197)    
Cash and cash equivalents130,987      132,481     
Premises and equipment91,563      94,757     
Other assets827,356      818,874     
Total Assets$10,499,948      $9,697,020     
Liabilities:           
Interest-bearing deposits:           
Interest-bearing deposits$2,935,925  $8,541  1.16% $2,325,705  $4,276  0.74%
Money market deposits1,220,020  3,509  1.15  1,081,830  1,583  0.59 
Savings deposits1,164,901  2,525  0.87  1,096,003  1,332  0.49 
Certificates and other time deposits1,652,203  8,512  2.06  1,491,207  4,974  1.33 
Total Interest-bearing Deposits6,973,049  23,087  1.32  5,994,745  12,165  0.81 
Borrowings613,446  4,274  2.79  674,040  4,135  2.45 
Total Interest-bearing Liabilities7,586,495  27,361  1.44  6,668,785  16,300  0.98 
Noninterest-bearing deposits1,348,410      1,642,076     
Other liabilities85,789      58,818     
Total Liabilities9,020,694      8,369,679     
Stockholders' Equity1,479,254      1,327,341     
Total Liabilities and Stockholders' Equity$10,499,948  27,361    $9,697,020  16,300   
Net Interest Income (FTE)  $88,387      $87,196   
Net Interest Spread (FTE) (4)    3.42%     3.76%
            
Net Interest Margin (FTE):           
Interest Income (FTE) / Average Earning Assets    4.86%     4.74%
Interest Expense / Average Earning Assets    1.15%     0.75%
Net Interest Margin (FTE) (5)    3.71%     3.99%
            
(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 for 2019 and 2018.  These totals equal $3,109 and $2,625 for the three months ended June 30, 2019 and 2018, 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, 2019 June 30, 2018
 Average Balance Interest
 Income /
Expense
 Average
Rate
 Average Balance Interest
 Income /
Expense
 Average
Rate
Assets:           
Interest-bearing time deposits$145,277  $1,659  2.28% $87,883  $764  1.74%
Federal Home Loan Bank stock24,588  673  5.47  24,487  667  5.45 
Investment Securities: (1)           
Taxable978,654  13,093  2.68  831,743  10,530  2.53 
Tax-Exempt (2)869,914  18,133  4.17  741,096  15,661  4.23 
Total Investment Securities1,848,568  31,226  3.38  1,572,839  26,191  3.33 
Loans held for sale10,697  239  4.47  8,515  221  5.19 
Loans: (3)           
Commercial5,364,884  147,394  5.49  5,061,717  129,663  5.12 
Real Estate Mortgage755,070  17,008  4.51  729,202  16,791  4.61 
Installment671,125  18,664  5.56  627,686  16,255  5.18 
Tax-Exempt (2)506,370  10,629  4.20  466,747  9,149  3.92 
Total Loans7,308,146  193,934  5.31  6,893,867  172,079  4.99 
Total Earning Assets9,326,579  227,492  4.88% 8,579,076  199,701  4.66%
Net unrealized gain on securities available for sale3,963      (9,772)    
Allowance for loan losses(81,301)     (76,528)    
Cash and cash equivalents124,143      129,499     
Premises and equipment92,395      95,139     
Other assets825,426      818,360     
Total Assets$10,291,205      $9,535,774     
Liabilities:           
Interest-bearing deposits:           
Interest-bearing deposits$2,813,541  $15,560  1.11% $2,153,878  $6,965  0.65%
Money market deposits1,179,765  6,291  1.07  1,085,740  2,858  0.53 
Savings deposits1,157,852  4,792  0.83  1,021,386  1,714  0.34 
Certificates and other time deposits1,609,130  16,038  1.99  1,488,664  9,630  1.29 
Total Interest-bearing Deposits6,760,288  42,681  1.26  5,749,668  21,167  0.74 
Borrowings624,192  8,627  2.76  760,643  8,837  2.32 
Total Interest-bearing Liabilities7,384,480  51,308  1.39  6,510,311  30,004  0.92 
Noninterest-bearing deposits1,369,832      1,646,660     
Other liabilities82,260      60,679     
Total Liabilities8,836,572      8,217,650     
Stockholders' Equity1,454,633      1,318,124     
Total Liabilities and Stockholders' Equity$10,291,205  51,308    $9,535,774  30,004   
Net Interest Income (FTE)  $176,184      $169,697   
Net Interest Spread (FTE) (4)    3.49%     3.74%
            
Net Interest Margin (FTE):           
Interest Income (FTE) / Average Earning Assets    4.88%     4.66%
Interest Expense / Average Earning Assets    1.10%     0.70%
Net Interest Margin (FTE) (5)    3.78%     3.96%
            
(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 for 2019 and 2018.  These totals equal $6,040 and $5,210 for the six months ended June 30, 2019 and 2018, 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.

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

SOURCE: First Merchants Corporation

FMC Logo with trademark.jpg

Source: First Merchants Corporation

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