News Release Details

First Merchants Corporation Announces First Quarter Earnings Per Share Increase of 17%

04/19/2006

MUNCIE, Ind.--(BUSINESS WIRE)--April 19, 2006--First Merchants Corporation (NASDAQ:FRME) has reported first quarter diluted earnings per share totaling $.41, a 17.1 percent increase over $.35 recorded in the first quarter of 2005. Net income during the period totaled $7.5 million compared to $6.6 million in 2005.

Quarterly net interest income improved $647,000 and the provision for loan losses decreased $941,000 improving net interest income after the provision for loan losses by $1,588,000 or 6.5 percent. Total other income declined by $449,000 and total other expenses declined by $443,000.

As of March 31, 2006, non-performing loans totaled 80 basis points of average total loans and the allowance for loan losses as a percent of total loans equaled 1.03 percent.

Total assets equaled $3.3 billion as of quarter-end, an increase of $82 million from March 31, 2005. Loans, investments and bank owned life insurance, the Corporation's three primary earning assets, totaled $3.0 billion, an increase of $113 million over the prior year.

In order to resolve overlapping market issues and solidify sales efforts, the Corporation merged First United Bank, Middletown into First Merchants Bank, Muncie on January 1, 2006.

Michael L. Cox, President and Chief Executive Officer, stated that, "Management is pleased with the Corporation's improved quarterly earnings per share of 17 percent." Cox also stated that, "Given the inversion of the yield curve and resulting margin compression, continued focus on sales and expense management will be required to attain our Corporate financial goals for the year."

CONFERENCE CALL

First Merchants Corporation will conduct a conference call at 2:30 p.m. Eastern Daylight Time on Wednesday, April 19, 2006. To participate dial (Toll Free) 877-407-9210 and reference First Merchants Corporation's first quarter earnings release. A replay will be available until April 26, 2006. To access, US/Canada participants should dial (Toll Free) 877-660-6853 or for International participants, dial 201-612-7415. The replay will require the Account # 286 and Conference ID # 197638.

During the call we may make Forward Looking statements about our relative business outlook. 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.

First Merchants Corporation is a financial holding company headquartered in Muncie, Indiana. Subsidiaries of the Corporation include First Merchants Bank, NA, Madison Community Bank, United Communities National Bank, First National Bank, Decatur Bank & Trust Company, Frances Slocum Bank, Lafayette Bank & Trust Company, Commerce National Bank and Merchants Trust Company. The Corporation also operates First Merchants Insurance Services, a full-service property casualty, personal lines, and healthcare insurance agency, headquartered in Muncie, Indiana, and is a majority member of Indiana Title Insurance Company, LLC, a title insurance agency.

First Merchants Corporation's common stock is traded over-the-counter on the NASDAQ National 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).

CONSOLIDATED BALANCE SHEETS

(in thousands)                                        March 31,
                                                  2006        2005
Assets
   Cash and due from banks                        $59,176     $67,904
   Federal funds sold                                          22,075
                                               ----------- -----------
   Cash and cash equivalents                       59,176      89,979
   Interest-bearing time deposits                   9,104      10,737
   Investment securities                          441,651     409,820
   Mortgage loans held for sale                     5,170       3,084
   Loans                                        2,491,488   2,414,099
      Less: Allowance for loan losses             (25,623)    (24,488)
                                               ----------- -----------
        Net loans                               2,465,865   2,389,611
   Premises and equipment                          39,029      37,525
   Federal Reserve and Federal Home Loan Bank
    stock                                          23,421      22,883
   Interest receivable                             19,035      16,606
   Core deposit intangibles and goodwill          138,174     140,578
   Cash surrender value of life insurance          43,964      42,426
   Other assets                                    25,346      24,337
                                               ----------- -----------
           Total assets                        $3,269,935  $3,187,586
                                               =========== ===========
Liabilities
   Deposits
     Noninterest-bearing                         $325,548    $333,614
     Interest-bearing                           2,120,524   2,118,605
                                               ----------- -----------
           Total deposits                       2,446,072   2,452,219
   Borrowings                                     469,002     391,193
   Interest payable                                 6,412       6,562
   Other liabilities                               31,711      27,014
                                               ----------- -----------
           Total liabilities                    2,953,197   2,876,988
Stockholders' equity
   Preferred stock, no-par value
      Authorized and unissued -- 500,000
       shares
   Common stock, $.125 stated value
      Authorized -- 50,000,000 shares
      Issued and outstanding -- 18,440,316 and
       18,497,462 shares                            2,305       2,312
   Additional paid-in capital                     146,374     148,347
   Retained earnings                              177,975     163,761
   Accumulated other comprehensive loss            (9,916)     (3,822)
                                               ----------- -----------
        Total stockholders' equity                316,738     310,598
                                               ----------- -----------
        Total liabilities and stockholders'
         equity                                $3,269,935  $3,187,586
                                               =========== ===========


FINANCIAL HIGHLIGHTS

                                                 Three Months Ended
(In thousands)                                        March 31,
                                                  2006        2005

NET CHARGE OFF'S                                   $1,291        $727

AVERAGE BALANCES
  Total Assets                                 $3,235,933  $3,163,548
  Total Loans                                   2,474,759   2,414,050
  Total Deposits                                2,407,646   2,418,910
  Total Stockholders' Equity                      316,629     315,326

FINANCIAL RATIOS
  Return on Average Assets                            .93%        .83%
  Return on Avg. Stockholders' Equity                9.49        8.33
  Avg. Earning Assets to Avg. Assets                91.27       90.61
  Allowance for Loan Losses as %
  Of Total Loans                                     1.03        1.01
  Net Charge Off's as % Of Avg. Loans
  (Annualized)                                        .21         .12
  Dividend Payout Ratio                             56.10       65.71
  Avg. Stockholders' Equity to Avg. Assets           9.78        9.97
  Tax Equivalent Yield on Earning Assets             6.64        5.90
  Cost of Supporting Liabilities                     2.77        2.01
  Net Int. Margin (FTE) on Earning Assets            3.87        3.89


CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share data)                   Three Months Ended
                                                        March 31,
                                                      2006     2005
Interest income
   Loans receivable
     Taxable                                         $43,079  $36,822
     Tax exempt                                          168      134
   Investment securities
     Taxable                                           2,726    2,329
     Tax exempt                                        1,647    1,553
   Federal funds sold                                     17       27
   Deposits with financial institutions                  114      142
   Federal Reserve and Federal Home Loan Bank stock      311      308
                                                    --------- --------
        Total interest income                         48,062   41,315
                                                    --------- --------
Interest expense
   Deposits                                           14,419    9,806
   Federal funds purchased                               489
   Securities sold under repurchase agreements           835      249
   Federal Home Loan Bank advances                     2,656    2,375
   Subordinated debentures, revolving credit lines
     and term loans                                    1,991    1,789
   Other borrowings                                       83      154
                                                    --------- --------
        Total interest expense                        20,473   14,373
                                                    --------- --------
Net interest income                                   27,589   26,942
   Provision for loan losses                           1,726    2,667
                                                    --------- --------

Net interest income
   after provision for loan losses                    25,863   24,275
                                                    --------- --------
Other income
   Fiduciary activities                                1,951    1,962
   Service charges on deposit accounts                 2,426    2,723
   Other customer fees                                 1,355    1,085
   Net realized gains on
     sales of available-for-sale securities                9
   Commission income                                   1,504    1,504
   Earnings on cash surrender value
     of life insurance                                   423      401
   Net gains and fees on sales of loans                  554      677
   Other income                                          375      694
                                                    --------- --------
        Total other income                             8,597    9,046
                                                    --------- --------

Other expenses
   Salaries and employee benefits                     14,392   14,821
   Net occupancy expenses                              1,434    1,376
   Equipment expenses                                  1,949    1,857
   Marketing expense                                     400      415
   Outside data processing fees                          883    1,009
   Printing and office supplies                          304      337
   Core deposit amortization                             762      787
   Other expenses                                      3,664    3,629
                                                    --------- --------
        Total other expenses                          23,788   24,231
                                                    --------- --------

Income before income tax                              10,672    9,090
   Income tax expense                                  3,163    2,523
                                                    --------- --------
Net income                                            $7,509   $6,567
                                                    ========= ========

Per Share Data

   Basic Net Income                                      .41      .35
   Diluted Net Income                                    .41      .35
   Cash Dividends Paid                                   .23      .23
   Average Diluted Shares
     Outstanding (in thousands)                       18,526   18,697


CONSOLIDATED BALANCE SHEETS

(in           March 31,   Dec. 31,   Sept. 30,    June 30,   March 31,
 thousands)     2006       2005        2005         2005       2005
Assets
 Cash and
  due from
  banks       $59,176     $70,417     $81,310     $71,498     $67,904
 Federal
  funds
  sold                                                         22,075
           ----------- ----------- ----------- ----------- -----------
 Cash
  and cash
  equivalents  59,176      70,417      81,310      71,498      89,979
 Interest-
  bearing time
  deposits      9,104       8,748      10,708       9,255      10,737
 Investment
  securities  441,651     434,266     436,794     420,685     409,820
 Mortgage
  loans held
  for sale      5,170       4,910       5,026       1,356       3,084
 Loans      2,491,488   2,457,427   2,443,931   2,440,906   2,414,099
  Less:
   Allowance
   for loan
   losses     (25,623)    (25,188)    (25,149)    (25,091)    (24,488)
           ----------- ----------- ----------- ----------- -----------
    Net
     loans  2,465,865   2,432,239   2,418,782   2,415,815   2,389,611
 Premises
  and
  equipment    39,029      39,417      38,473      37,240      37,525
 Federal
  Reserve
  and Federal
  Home Loan
  Bank stock   23,421      23,200      23,165      23,054      22,883
 Interest
  receivable   19,035      19,690      19,561      16,950      16,606
 Core
  deposit
  intangibles
  and
  goodwill    138,174     138,833     139,597     139,799     140,578
 Cash
  surrender
  value
  of life
  insurance    43,964      43,579      43,230      42,827      42,426
 Other
  assets       25,346      21,780      21,792      22,819      24,337
           ----------- ----------- ----------- ----------- -----------
   Total
    assets $3,269,935$3,237,079$3,238,438$3,201,298$3,187,586
           =========== =========== =========== =========== ===========
Liabilities
 Deposits
   Non-
    interest-
    bearing  $325,548    $314,335    $346,318    $363,654    $333,614
   Interest-
    bearing  2,120,524   2,068,241   2,118,975   2,040,624   2,118,605
           ----------- ----------- ----------- ----------- -----------
    Total
     depos-
     its    2,446,072   2,382,576   2,465,293   2,404,278   2,452,219
 Borrowings   469,002     508,236     423,959     454,400     391,193
 Interest
  payable       6,412       5,874       5,643       5,068       6,562
 Other
  liabil-
  ities        31,711      26,997      25,153      24,194      27,014
           ----------- ----------- ----------- ----------- -----------
    Total
     liabil-
     ities  2,953,197   2,923,683   2,920,048   2,887,940   2,876,988
Stock-
 holders'
 equity
 Preferred
  stock,
  no-par
  value
  Authorized
  and
  unissued
  -- 500,000
  shares
 Common stock,
  $.125 stated
  value
  Authorized
  --
  50,000,000
  shares
  Issued
  and
  outstanding   2,305       2,302       2,313       2,302       2,312
 Additional
  paid-in
  capital     146,374     145,682     148,004     146,057     148,347
 Retained
  earnings    177,975     174,717     171,419     167,452     163,761
 Accumulated
  other
  compre-
  hensive
  loss         (9,916)     (9,305)     (3,346)     (2,453)     (3,822)
           ----------- ----------- ----------- ----------- -----------
   Total
    stock-
    holders'
    equity    316,738     313,396     318,390     313,358     310,598
           ----------- ----------- ----------- ----------- -----------
   Total
    liabil-
    ities
    and
    stock-
    holders'
    equity $3,269,935$3,237,079$3,238,438$3,201,298$3,187,586
           =========== =========== =========== =========== ===========


NON-PERFORMING ASSETS

(in thousands)   March 31,  Dec. 31,  Sept. 30,   June 30,  March 31,
                   2006       2005       2005       2005       2005

   90 days past
    due             $5,188     $3,965     $3,560     $3,696     $1,948
   Non-accrual
    loans           11,424     10,030     11,757     11,626     13,272
   Other real
    estate           3,209      2,835      3,023      1,804      2,003
                ---------- ---------- ---------- ---------- ----------
      Total
       non-
       performing
       assets      $19,821    $16,830    $18,340    $17,126    $17,223
                ========== ========== ========== ========== ==========

   Average
    total loans
    for the
    quarter     $2,474,759 $2,447,794 $2,444,131 $2,430,081 $2,414,050


   Total non-
    performing
    assets as a
    percent of
    average
    total loans       .80%       .69%       .75%       .70%       .71%

   Restructured
    loans             $114       $310       $454       $531       $337


CONSOLIDATED STATEMENTS OF INCOME

                                     Three Months Ended
(in thousands, except
 share data)           March 31, Dec. 31, Sept. 30, June 30, March 31,
                         2006     2005      2005     2005      2005
Interest Income
   Loans receivable
     Taxable            $43,079  $41,930   $40,853  $38,831   $36,822
     Tax exempt             168      160       160      189       134
   Investment
    securities
     Taxable              2,726    2,480     2,427    2,376     2,329
     Tax exempt           1,647    1,672     1,595    1,554     1,553
   Federal funds sold        17       74        51      112        27
   Deposits with
    financial
    institutions            114      202       185      166       142
   Federal Reserve and
    Federal Home Loan
    Bank stock              311      296       296      285       308
                       --------- -------- --------- -------- ---------
       Total interest
        income           48,062   46,814    45,567   43,513    41,315
                       --------- -------- --------- -------- ---------
Interest expense
   Deposits              14,419   13,414    12,172   10,729     9,806
   Federal funds
    purchased               489
   Securities sold
    under repurchase
    agreements              835      647       523      193       249
   Federal Home Loan
    Bank advances         2,656    2,410     2,549    2,443     2,375
   Subordinated
    debentures,
    revolving credit
    lines and term
    loans                 1,991    1,910     1,894    1,839     1,789
   Other borrowings          83      307       289      388       154
                       --------- -------- --------- -------- ---------
        Total interest
         expense         20,473   18,688    17,427   15,592    14,373
                       --------- -------- --------- -------- ---------
Net interest income      27,589   28,126    28,140   27,921    26,942
   Provision for loan
    losses                1,726    1,945     1,794    1,948     2,667
                       --------- -------- --------- -------- ---------

Net interest income
 after provision for
 loan losses             25,863   26,181    26,346   25,973    24,275
                       --------- -------- --------- -------- ---------
Other income
   Fiduciary
    activities            1,951    1,762     1,794    1,963     1,962
   Service charges on
    deposit accounts      2,426    2,691     2,836    3,048     2,723
   Other customer fees    1,355    1,432     1,389    1,188     1,085
   Net realized gains
    (losses) on sales
    of available-for-
    sale securities           9      (24)       16        6
   Commission income      1,504      690       870      757     1,504
   Earnings on cash
    surrender value
    of life insurance       423      386       441      439       401
   Net gains and fees
    on sales of loans       554      676       770      779       677
   Other income             375      516       664      582       694
                       --------- -------- --------- -------- ---------
        Total other
         income           8,597    8,129     8,780    8,762     9,046
                       --------- -------- --------- -------- ---------

Other expenses
   Salaries and
    employee benefits    14,392   12,596    13,384   13,258    14,821
   Net occupancy
    expenses              1,434    1,428     1,570    1,422     1,376
   Equipment expenses     1,949    1,952     1,901    1,852     1,857
   Marketing expense        400      625       446      526       415
   Outside data
    processing fees         883      989       979    1,033     1,009
   Printing and office
    supplies                304      400       328      304       337
   Core deposit
    amortization            762      767       770      778       787
   Other expenses         3,664    4,469     3,923    4,026     3,629
                       --------- -------- --------- -------- ---------
        Total other
         expenses        23,788   23,226    23,301   23,199    24,231
                       --------- -------- --------- -------- ---------

Income before income
 tax                     10,672   11,084    11,825   11,536     9,090
   Income tax expense     3,163    3,553     3,605    3,615     2,523
                       --------- -------- --------- -------- ---------
Net income               $7,509   $7,531    $8,220   $7,921    $6,567
                       ========= ======== ========= ======== =========

Per Share Data

   Basic Net Income        $.41     $.41      $.45     $.43      $.35
   Diluted Net Income       .41      .41       .44      .43       .35
   Cash Dividends Paid      .23      .23       .23      .23       .23
   Average Diluted
    Shares Outstanding
    (in thousands)       18,526   18,558    18,590   18,536    18,697

FINANCIAL RATIOS
  Return on Average
   Assets                   .93%     .95%     1.03%     .99%      .83%
  Return on Avg.
   Stockholders'
   Equity                  9.49     9.49     10.38    10.13      8.33
  Avg. Earning Assets
   to Avg. Assets         91.27    91.47     90.83    90.81     90.61
  Allowance for Loan
   Losses as % Of
   Total Loans             1.03     1.02      1.03     1.03      1.01
  Net Charge Off's as
   % Of Avg. Loans
   (Annualized)             .21      .31       .28      .22       .12
  Dividend Payout
   Ratio                  56.10    56.10     52.27    53.49     65.71
  Avg. Stockholders'
   Equity to Avg.
   Assets                  9.78    10.05      9.89     9.80      9.97
  Tax Equivalent Yield
   on Earning Assets       6.64     6.62      6.40     6.14      5.90
  Cost of Supporting
   Liabilities             2.77     2.59      2.40     2.15      2.01
  Net Int. Margin
   (FTE) on Earning
   Assets                  3.87     4.03      4.00     3.99      3.89


LOANS

(in          March 31,   Dec. 31,    Sept. 30,    June 30,   March 31,
 thousands)    2006        2005        2005        2005        2005

Commercial
 and
 industrial
 loans        $486,411    $461,102    $476,010    $463,002    $447,552

Agricultural
 production
 financing
 and other
 loans to
 farmers        87,433      95,130      94,262      93,274      83,800
Real estate
 loans:
  Construction 175,784     174,783     171,667     166,367     170,498
  Commercial
   and farm-
   land        743,905     734,865     719,154     723,099     726,345
  Residential  746,410     751,217     746,777     759,003     760,560

Individuals'
 loans for
 household
 and other
 personal
 expenditures  202,478     200,139     186,792     182,362     187,552
Tax exempt
 loans          13,656       8,263      12,439      14,135      10,592
Lease
 financing
 receivables,
 net of
 unearned
 income         8,193       8,713       9,538      10,533      10,704
Other loans    27,218      23,215      27,292      29,131      16,496
           ----------- ----------- ----------- ----------- -----------
            2,491,488   2,457,427   2,443,931   2,440,906   2,414,099
Allowance
 for loan
 losses       (25,623)    (25,188)    (25,149)    (25,091)    (24,488)
           ----------- ----------- ----------- ----------- -----------
    Total
     loans $2,465,865$2,432,239$2,418,782$2,415,815$2,389,611
           =========== =========== =========== =========== ===========

DEPOSITS

(in
thousands)     March 31,    Dec. 31,   Sept. 30,   June 30,  March 31,
                 2006         2005       2005        2005      2005

Demand
 deposits      $671,027    $690,923    $697,597   $720,263   $686,695
Savings
 deposits       526,554     566,212     568,366    593,770    655,643
Certificates
 and other
 time deposits
 of $100,000
 or more        320,213     264,665     320,640    234,988    285,878
Other
 certificates
 and time
 deposits       928,278     860,776     878,690    855,257    824,003
             ----------- ----------- ---------- ---------- -----------
             $2,446,072  $2,382,576  $2,465,293 $2,404,278 $2,452,219
             =========== =========== ========== ========== ===========
    CONTACT: First Merchants Corporation, Muncie
             Mark K. Hardwick, 765-751-1857
             http://firstmerchants.com

    SOURCE: First Merchants Corporation
  • First Merchants Corporation

    200 East Jackson Street
    P.O. Box 792
    Muncie, IN 47305-2814

    (765) 747-1500

  • Investor Relations Contact

    Nicole M. Weaver
    765.521.7619 or
    800.262.4261, Ext. 47619

    nweaver@firstmerchants.com

  • Shareholder Relations Contact

    Cindy Holaday
    765.741.7278 or
    800.262.4261, Ext. 27278

    shareholderrelations
    @firstmerchants.com

  • Transfer Agent

    Broadridge
    PO Box 1342
    Brentwood, NY 11717-0718
    (888) 401-4448