First Merchants Corporation Announces First Quarter 2015 Earnings Per Share Increase of 13 Percent

04/23/2015

MUNCIE, Ind.--(BUSINESS WIRE)-- First Merchants Corporation (NASDAQ: FRME) has reported first quarter 2015 net income of $16.2 million, compared to $13.6 million during the same period in 2014. Earnings per share for the period totaled $.43 per share, an increase of $.05 per share, or 13.2 percent over the first quarter of 2014.

Total assets equaled $5.9 billion as of quarter-end and loans were $4.0 billion. The Corporation’s loan portfolio increased $349 million during the past twelve months. Of the increase, $204 million, or 5.6 percent, was the result of organic growth and $145 million resulted from the acquisition of Community Bank of Noblesville in November 2014.

Michael C. Rechin, President and Chief Executive Officer, stated, “First quarter 2015 results continue to represent effective execution of our core banking strategy. We are focused on growing organically while maintaining an emphasis on efficiency and expense control in this low interest rate environment.” Rechin also added, “Management was pleased to close our acquisition of Cooper State Bank on April 17^th and confident about completing our integration of Community Bank of Noblesville this coming weekend.”

Net-interest income totaled $47 million for the quarter, and net-interest margin remained strong during the quarter totaling 3.78 percent, as yields on earning assets totaled 4.24 percent and the cost of supporting liabilities totaled .46 percent. When adjusted down for fair value accretion, net-interest margin totaled 3.61 percent for the quarter, 22 basis points less than the first quarter of 2014 total of 3.83 percent.

Non-interest income totaled $16.2 million for the quarter, an increase from first quarter of 2014 total of $15.4 million. Gains on sale of mortgage loans increased during the quarter by $766,000 reflecting lower rates. Non-interest expense totaled $41.2 million for the quarter, a decline of $1.9 million from the prior year. Of the decline in non-interest expense, salary and benefit expense accounted for $760,000 and other real estate owned and foreclosure expense accounted for $528,000.

The Corporation did not expense a provision for loan losses during the quarter despite net charge-offs of $1.2 million due to improvements in non-performing loans of $5.1 million, which now total $45.6 million. The allowance for loan losses totaled $62.8 million, or 1.58 percent of total loans and 1.87 percent of non-purchased loans. Non-performing assets declined by $5.4 million from year-end and now total $64.7 million.

As of March 31, 2015, the Corporation’s total risk-based capital ratio equaled 15.12 percent, common equity tier 1 capital ratio equaled 11.37 percent, and tangible common equity ratio totaled 9.31 percent.

CONFERENCE CALL

First Merchants Corporation will conduct a 1st quarter earnings conference call and web cast at 2:30 p.m. (ET) on Thursday, April 23, 2015.

To participate, dial (Toll Free) 877-507-0578 and reference First Merchants Corporation's first quarter earnings release. International callers please call +1 412-317-1073. A replay of the call will be available until May 24, 2015. 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 passcode is 10062979.

In order to view the web cast and presentation slides, please go to http://services.choruscall.com/links/frme150423.html during the time of the call. A replay of the web cast will be available until April 23, 2016.

During the call, Forward-Looking Statements about the relative business outlook may be made. These Forward-Looking Statements and all other statements made during the call that do not concern historical facts, are subject to risks and uncertainties that may materially affect actual results.

Specific Forward-Looking Statements include, but are not limited to, any indications regarding the Financial Services industry, the economy and future growth of the balance sheet or income statement.

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 is comprised of First Merchants Bank, N.A., which also operates as Lafayette Bank & Trust, Commerce National Bank, and First Merchants Trust Company as divisions of First Merchants Bank, N.A.First Merchants Corporation also operates First Merchants Insurance Group, a full-service property casualty, personal lines, and healthcare insurance agency.

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.


CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)	March 31,
	2015			2014
ASSETS
Cash and cash equivalents	$	89,243		$	112,920
Interest-bearing time deposits	83,228			37,078
Investment securities	1,189,473			1,149,977
Loans held for sale	6,392			6,586
Loans	3,965,532			3,616,627
Less: Allowance for loan losses	(62,801		)	(69,583		)
Net loans	3,902,731			3,547,044
Premises and equipment	77,468			74,847
Federal Reserve and Federal Home Loan Bank stock	41,273			38,990
Interest receivable	19,557			18,001
Core deposit intangibles and goodwill	218,034			202,175
Cash surrender value of life insurance	170,172			165,320
Other real estate owned	19,073			21,077
Tax asset, deferred and receivable	38,695			50,684
Other assets	22,182			28,237
TOTAL ASSETS	$	5,877,521		$	5,452,936
LIABILITIES
Deposits:
Noninterest-bearing	$	1,100,397		$	936,741
Interest-bearing	3,547,678			3,346,438
Total Deposits	4,648,075			4,283,179
Borrowings:
Federal funds purchased				48,357
Securities sold under repurchase agreements	134,023			137,381
Federal Home Loan Bank advances	166,326			170,887
Subordinated debentures and term loans	126,875			127,172
Total Borrowings	427,224			483,797
Interest payable	3,685			3,192
Other liabilities	58,879			30,657
Total Liabilities	5,137,863			4,800,825
STOCKHOLDERS' EQUITY
Cumulative Preferred Stock, $1,000 par value, $1,000 liquidation value:
Authorized -- 600 shares
Issued and outstanding - 125 shares	125			125
Common Stock, $.125 stated value:
Authorized -- 50,000,000 shares
Issued and outstanding - 37,781,488 and 36,014,083 shares	4,723			4,502
Additional paid-in capital	431,199			393,765
Retained earnings	305,526			254,735
Accumulated other comprehensive loss	(1,915		)	(1,016		)
Total Stockholders' Equity	739,658			652,111
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	5,877,521		$	5,452,936


CONSOLIDATED STATEMENTS OF INCOME	Three Months Ended
(Dollars In Thousands, Except Per Share Amounts)	March 31,
	2015		2014
INTEREST INCOME
Loans receivable:
Taxable	$	43,551	$	42,025
Tax-exempt	248		61
Investment securities:
Taxable	4,723		4,810
Tax-exempt	3,835		3,438
Deposits with financial institutions	37		23
Federal Reserve and Federal Home Loan Bank stock	550		652
Total Interest Income	52,944		51,009
INTEREST EXPENSE
Deposits	3,516		2,549
Federal funds purchased	23		49
Securities sold under repurchase agreements	78		196
Federal Home Loan Bank advances	691		682
Subordinated debentures and term loans	1,660		1,641
Total Interest Expense	5,968		5,117
NET INTEREST INCOME	46,976		45,892
Provision for loan losses
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	46,976		45,892
OTHER INCOME
Service charges on deposit accounts	3,548		3,551
Fiduciary activities	2,507		2,212
Other customer fees	3,667		3,733
Commission income	2,328		2,268
Earnings on cash surrender value of life insurance	747		748
Net gains and fees on sales of loans	1,489		723
Net realized gains on sales of available for sale securities	1,025		581
Other income	921		1,618
Total Other Income	16,232		15,434
OTHER EXPENSES
Salaries and employee benefits	24,541		25,301
Net occupancy	3,790		3,938
Equipment	2,566		2,739
Marketing	780		769
Outside data processing fees	1,717		1,831
Printing and office supplies	364		458
Core deposit amortization	721		592
FDIC assessments	863		1,060
Other real estate owned and foreclosure expenses	1,229		1,757
Professional and other outside services	1,491		1,379
Other expenses	3,140		3,265
Total Other Expenses	41,202		43,089
INCOME BEFORE INCOME TAX	22,006		18,237
Income tax expense	5,834		4,617
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	16,172	$	13,620
Per Share Data:
Basic Net Income Available to Common Stockholders	$	0.43	$	0.38
Diluted Net Income Available to Common Stockholders	$	0.43	$	0.38
Cash Dividends Paid	$	0.08	$	0.05
Average Diluted Shares Outstanding (in thousands)	38,000		36,261


FINANCIAL HIGHLIGHTS
(Dollars in thousands)	Three Months Ended
	March 31,
	2015			2014
NET CHARGE OFF'S	$	1,163		$	(1,713	)

AVERAGE BALANCES:
Total Assets	$	5,821,074		$	5,399,688
Total Loans	3,936,814			3,616,084
Total Earning Assets	5,204,981			4,805,665
Total Deposits	4,605,138			4,215,681
Total Stockholders' Equity	734,511			644,899

FINANCIAL RATIOS:
Return on Average Assets	1.11		%	1.01		%
Return on Average Stockholders' Equity	8.81			8.45
Return on Average Common Stockholders' Equity	8.81			8.45
Average Earning Assets to Average Assets	89.42			89.00
Allowance for Loan Losses as % of Total Loans	1.58			1.92
Net Charge Off's as % of Average Loans (Annualized)	0.12			(0.19		)
Average Stockholders' Equity to Average Assets	12.62			11.94
Tax Equivalent Yield on Earning Assets	4.24			4.40
Cost of Supporting Liabilities	0.46			0.43
Net Interest Margin (FTE) on Earning Assets	3.78			3.97
Tangible Book Value Per Share	$	13.96		$	12.63


NON-PERFORMING ASSETS
(Dollars In Thousands)	March 31,			December 31,				September 30,				June 30,				March 31,
	2015			2014				2014				2014				2014
Non-Accrual Loans	$	44,321		$	48,789			$	49,104			$	51,289			$	55,686
Renegotiated Loans	1,326			1,992				1,171				1,359				378
Non-Performing Loans (NPL)	45,647			50,781				50,275				52,648				56,064
Other Real Estate Owned	19,073			19,293				14,540				18,621				21,077
Non-Performing Assets (NPA)	64,720			70,074				64,815				71,269				77,141
90+ Days Delinquent	1,655			4,663				831				1,135				1,709
NPAs & 90 Day Delinquent	$	66,375		$	74,737			$	65,646			$	72,404			$	78,850

Loan Loss Reserve	$	62,801		$	63,964			$	65,596			$	68,367			$	69,583
Quarterly Net Charge-off's	1,163			2,592				4,371				1,216				(1,713		)
NPAs / Actual Assets %	1.10		%	1.20		%		1.16		%		1.27		%		1.41		%
NPAs & 90 Day / Actual Assets %	1.13		%	1.28		%		1.17		%		1.29		%		1.45		%
NPAs / Actual Loans and OREO %	1.62		%	1.77		%		1.71		%		1.90		%		2.12		%
Loan Loss Reserves / Actual Loans (%)	1.58		%	1.63		%		1.74		%		1.83		%		1.92		%
Net Charge Off's as % of Average Loans (Annualized)	0.12		%	0.27		%		0.47		%		0.13		%		(0.19		)%

CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)	March 31,			December 31,				September 30,				June 30,				March 31,
	2015			2014				2014				2014				2014
ASSETS
Cash and cash equivalents	$	89,243		$	118,616			$	74,237			$	115,891			$	112,920
Interest-bearing time deposits	83,228			47,520				24,171				27,856				37,078
Investment securities	1,189,473			1,180,631				1,189,814				1,214,087				1,149,977
Loans held for sale	6,392			7,235				6,423				7,370				6,586
Loans	3,965,532			3,924,865				3,772,467				3,722,733				3,616,627
Less: Allowance for loan losses	(62,801		)	(63,964			)	(65,596			)	(68,367			)	(69,583			)
Net loans	3,902,731			3,860,901				3,706,871				3,654,366				3,547,044
Premises and equipment	77,468			77,691				74,105				74,856				74,847
Federal Reserve and Federal Home Loan Bank stock	41,273			41,353				43,127				43,127				38,990
Interest receivable	19,557			19,984				19,455				18,341				18,001
Core deposit intangibles and goodwill	218,034			218,755				200,991				201,583				202,175
Cash surrender value of life insurance	170,172			169,424				165,423				165,974				165,320
Other real estate owned	19,073			19,293				14,540				18,621				21,077
Tax asset, deferred and receivable	38,695			41,960				41,131				44,622				50,684
Other assets	22,182			20,764				31,095				28,426				28,237
TOTAL ASSETS	$	5,877,521		$	5,824,127			$	5,591,383			$	5,615,120			$	5,452,936
LIABILITIES
Deposits:
Noninterest-bearing	1,100,397			1,070,859				939,540				917,825				936,741
Interest-bearing	3,547,678			3,569,835				3,370,583				3,411,785				3,346,438
Total Deposits	4,648,075			4,640,694				4,310,123				4,329,610				4,283,179
Borrowings:
Federal funds purchased				15,381				61,428				100,000				48,357
Securities sold under repurchase agreements	134,023			124,539				117,892				133,137				137,381
Federal Home Loan Bank advances	166,326			145,264				255,423				220,765				170,887
Subordinated debentures and term loans	126,875			126,810				126,874				126,874				127,172
Total Borrowings	427,224			411,994				561,617				580,776				483,797
Interest payable	3,685			3,201				3,819				2,489				3,192
Other liabilities	58,879			41,411				31,271				31,649				30,657
Total Liabilities	5,137,863			5,097,300				4,906,830				4,944,524				4,800,825
STOCKHOLDERS' EQUITY
Cumulative Preferred Stock, $1,000 par value, $1,000 liquidation value:
Authorized -- 600 shares
Issued and outstanding	125			125				125				125				125
Common Stock, $.125 stated value:
Authorized -- 50,000,000 shares
Issued and outstanding	4,723			4,709				4,509				4,507				4,502
Additional paid-in capital	431,199			431,220				395,582				394,774				393,765
Retained earnings	305,526			292,403				280,187				266,980				254,735
Accumulated other comprehensive income (loss)	(1,915		)	(1,630			)	4,150				4,210				(1,016			)
Total Stockholders' Equity	739,658			726,827				684,553				670,596				652,111
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	5,877,521		$	5,824,127			$	5,591,383			$	5,615,120			$	5,452,936

CONSOLIDATED STATEMENTS OF INCOME
(Dollars In Thousands, Except Per Share Amounts)	March 31,			December 31,				September 30,				June 30,				March 31,
	2015			2014				2014				2014				2014
INTEREST INCOME
Loans receivable:
Taxable	$	43,551		$	43,710			$	43,981			$	42,323			$	42,025
Tax-exempt	248			147				61				58				61
Investment securities:
Taxable	4,723			4,980				5,046				5,046				4,810
Tax-exempt	3,835			3,692				3,683				3,570				3,438
Deposits with financial institutions	37			48				18				35				23
Federal Reserve and Federal Home Loan Bank stock	550			476				501				495				652
Total Interest Income	52,944			53,053				53,290				51,527				51,009
INTEREST EXPENSE
Deposits	3,516			3,402				2,853				2,874				2,549
Federal funds purchased	23			3				102				23				49
Securities sold under repurchase agreements	78			72				74				187				196
Federal Home Loan Bank advances	691			750				734				676				682
Subordinated debentures and term loans	1,660			1,666				1,661				1,648				1,641
Total Interest Expense	5,968			5,893				5,424				5,408				5,117
NET INTEREST INCOME	46,976			47,160				47,866				46,119				45,892
Provision for loan losses				960				1,600
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	46,976			46,200				46,266				46,119				45,892
OTHER INCOME
Service charges on deposit accounts	3,548			3,979				4,119				4,098				3,551
Fiduciary activities	2,507			2,242				2,152				2,360				2,212
Other customer fees	3,667			3,926				3,991				4,049				3,733
Commission income	2,328			1,534				1,723				1,886				2,268
Earnings on cash surrender value of life insurance	747			734				1,524				653				748
Net gains and fees on sales of loans	1,489			1,559				1,458				1,159				723
Net realized gains on sales of available for sale securities	1,025			1,246				910				844				581
Other income	921			1,155				2,535				1,130				1,618
Total Other Income	16,232			16,375				18,412				16,179				15,434
OTHER EXPENSES
Salaries and employee benefits	24,541			23,595				24,173				23,430				25,301
Net occupancy	3,790			3,288				3,401				3,204				3,938
Equipment	2,566			2,315				2,187				2,096				2,739
Marketing	780			836				1,070				789				769
Outside data processing fees	1,717			1,592				1,853				2,039				1,831
Printing and office supplies	364			364				350				393				458
Core deposit amortization	721			669				592				592				592
FDIC assessments	863			895				920				863				1,060
Other real estate owned and foreclosure expenses	1,229			1,055				2,618				2,613				1,757
Professional and other outside services	1,491			3,633				1,573				1,531				1,379
Other expenses	3,140			3,435				3,839				3,700				3,265
Total Other Expenses	41,202			41,677				42,576				41,250				43,089
INCOME BEFORE INCOME TAX	22,006			20,898				22,102				21,048				18,237
Income tax expense	5,834			5,638				5,980				5,888				4,617
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	16,172		$	15,260			$	16,122			$	15,160			$	13,620

Per Share Data:
Basic Net Income Available to Common Stockholders	$	0.43		$	0.41			$	0.45			$	0.42			$	0.38
Diluted Net Income Available to Common Stockholders	$	0.43		$	0.41			$	0.45			$	0.41			$	0.38
Cash Dividends Paid	$	0.08		$	0.08			$	0.08			$	0.08			$	0.05
Average Diluted Shares Outstanding (in thousands)	38,000			37,323				36,329				36,294				36,261
FINANCIAL RATIOS:
Return on Average Assets	1.11		%	1.06		%		1.16		%		1.10		%		1.01		%
Return on Average Stockholders' Equity	8.81			8.55				9.49				9.15				8.45
Return on Average Common Stockholders' Equity	8.81			8.56				9.50				9.15				8.45
Average Earning Assets to Average Assets	89.42			89.51				89.82				89.57				89.00
Allowance for Loan Losses as % of Total Loans	1.58			1.63				1.74				1.83				1.92
Net Charge Off's as % of Average Loans (Annualized)	0.12			0.27				0.47				0.13				(0.19		)
Average Stockholders' Equity to Average Assets	12.62			12.34				12.18				12.00				11.94
Tax Equivalent Yield on Earning Assets	4.24			4.26				4.41				4.33				4.40
Cost of Supporting Liabilities	0.46			0.46				0.43				0.44				0.43
Net Interest Margin (FTE) on Earning Assets	3.78			3.80				3.98				3.89				3.97
Tangible Book Value Per Share	$	13.96		$	13.65			$	13.53			$	13.14			$	12.63

LOANS
(Dollars In Thousands)	March 31,			December 31,				September 30,				June 30,				March 31,
	2015			2014				2014				2014				2014
Commercial and industrial loans	$	938,937		$	896,688			$	900,970			$	857,844			$	787,390
Agricultural production financing and other loans to farmers	95,652			104,927				99,649				102,270				99,226
Real estate loans:
Construction	237,036			207,221				178,213				165,388				155,117
Commercial and farmland	1,646,418			1,672,661				1,603,698				1,621,436				1,606,735
Residential	640,451			647,315				625,609				629,162				626,202
Home Equity	286,914			286,529				269,952				261,811				256,790
Individuals' loans for household and other personal expenditures	70,223			73,400				66,832				61,533				61,742
Lease financing receivables, net of unearned income	853			1,106				1,208				1,231				1,378
Other loans	49,048			35,018				26,336				22,058				22,047
Loans	3,965,532			3,924,865				3,772,467				3,722,733				3,616,627
Allowance for loan losses	(62,801		)	(63,964			)	(65,596			)	(68,367			)	(69,583			)
NET LOANS	$	3,902,731		$	3,860,901			$	3,706,871			$	3,654,366			$	3,547,044

DEPOSITS
(Dollars In Thousands)	March 31,			December 31,				September 30,				June 30,				March 31,
	2015			2014				2014				2014				2014
Demand deposits	$	2,116,135		$	2,146,492			$	1,947,040			$	2,041,183			$	1,966,895
Savings deposits	1,402,421			1,376,707				1,281,994				1,251,277				1,282,702
Certificates and other time deposits of $100,000 or more	283,313			260,685				241,163				251,585				265,683
Other certificates and time deposits	516,500			523,010				502,965				534,344				568,160
Brokered deposits	329,706			333,800				336,961				251,221				199,739
TOTAL DEPOSITS	$	4,648,075		$	4,640,694			$	4,310,123			$	4,329,610			$	4,283,179

NET INTEREST INCOME
(Dollars in Thousands)	For the Three Months Ended
	March 31, 2015							March 31, 2014
				Interest							Interest
	Average			Income /		Average		Average			Income /		Average
	Balance			Expense		Rate		Balance			Expense		Rate
Assets:
Interest-bearing time deposits	$	56,907		$	36	0.25	%	$	44,312		$	23	0.21	%
Federal Reserve and Federal Home Loan Bank stock	41,351			550		5.32		38,990			652		6.69
Investment Securities: ⁽¹⁾
Taxable	736,378			4,723		2.57		736,682			4,810		2.61
Tax-Exempt ⁽²⁾	433,531			5,899		5.44		369,597			5,289		5.72
Total Investment Securities	1,169,909			10,622		3.63		1,106,279			10,099		3.65
Loans held for sale	4,927			110		8.93		5,060			71		5.61
Loans: ⁽³⁾
Commercial	3,041,242			34,169		4.49		2,925,997			33,611		4.59
Real Estate Mortgage	459,794			4,849		4.22		346,318			3,989		4.61
Installment	394,063			4,424		4.49		326,357			4,353		5.34
Tax-Exempt ⁽²⁾	36,788			382		4.15		12,352			94		3.04
Total Loans	3,936,814			43,934		4.46		3,616,084			42,118		4.66
Total Earning Assets	5,204,981			55,142		4.24		4,805,665			52,892		4.40
Net unrealized gain on securities available for sale	14,480							3,636
Allowance for loan losses	(63,429		)					(68,806		)
Cash and cash equivalents	98,791							95,255
Premises and equipment	77,707							74,632
Other assets	488,544							489,306
Total Assets	$	5,821,074						$	5,399,688
Liabilities:
Interest-bearing deposits:
Interest-bearing NOW deposits	$	1,030,433		$	252	0.10	%	$	1,044,251		$	268	0.10	%
Money market deposits	823,761			412		0.20		752,738			367		0.20
Savings deposits	571,751			159		0.11		524,383			152		0.12
Certificates and other time deposits	1,126,098			2,693		0.96		978,673			1,762		0.72
Total Interest-bearing Deposits	3,552,043			3,516		0.40		3,300,045			2,549		0.31
Borrowings	437,864			2,452		2.24		493,578			2,568		2.08
Total Interest-bearing Liabilities	3,989,907			5,968		0.60		3,793,623			5,117		0.54
Noninterest-bearing deposits	1,053,095							915,636
Other liabilities	43,561							45,530
Total Liabilities	5,086,563							4,754,789
Stockholders' Equity	734,511							644,899
Total Liabilities and Stockholders' Equity	$	5,821,074		5,968		0.46		$	5,399,688		5,117		0.43
Net Interest Income				$	49,174						$	47,775
Net Interest Margin						3.78	%						3.97	%

⁽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 35 percent for 2015 and 2014. These totals equal $2,198 and $1,884 for the three months ended March 31, 2015 and 2014, respectively.

⁽³⁾ Non accruing loans have been included in the average balances.

First Merchants Corporation
David L. Ortega, 765-378-8937
First Vice President/Director of Investor Relations
http://www.firstmerchants.com

Source: First Merchants Corporation

News Release Details

First Merchants Corporation Announces First Quarter 2015 Earnings Per Share Increase of 13 Percent

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