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

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

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 deposits 129,614     36,599  
Investment securities 2,092,924     1,619,683  
Loans held for sale 5,854     2,046  
Loans 7,511,370     7,081,059  
Less: Allowance for loan losses (81,274 )   (77,543 )
Net loans 7,430,096     7,003,516  
Premises and equipment 91,767     94,397  
Federal Home Loan Bank stock 24,588     24,588  
Interest receivable 45,150     38,530  
Goodwill and other intangibles 466,736     473,059  
Cash surrender value of life insurance 226,241     222,905  
Other real estate owned 1,131     9,071  
Tax asset, deferred and receivable 12,340     24,619  
Other assets 83,231     51,809  
TOTAL ASSETS $ 10,737,857     $ 9,734,715  
LIABILITIES      
Deposits:      
Noninterest-bearing $ 1,353,165     $ 1,571,194  
Interest-bearing 6,966,163     5,932,621  
Total Deposits 8,319,328     7,503,815  
Borrowings:      
Federal funds purchased 75,000     109,000  
Securities sold under repurchase agreements 119,674     122,513  
Federal Home Loan Bank advances 460,042     469,261  
Subordinated debentures and term loans 138,574     138,352  
Total Borrowings 793,290     839,126  
Interest payable 6,740     4,807  
Other liabilities 116,863     46,639  
Total Liabilities 9,236,221     8,394,387  
STOCKHOLDERS' EQUITY      
Cumulative Preferred Stock, $1,000 par value, $1,000 liquidation value:      
Authorized -- 600 shares      
Issued and outstanding - 125 shares 125     125  
Common Stock, $.125 stated value:      
Authorized -- 100,000,000 shares      
Issued and outstanding - 49,456,594 and 49,280,188 shares 6,182     6,160  
Additional paid-in capital 841,365     836,549  
Retained earnings 639,362     522,362  
Accumulated other comprehensive income (loss) 14,602     (24,868 )
Total Stockholders' Equity 1,501,636     1,340,328  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 10,737,857     $ 9,734,715  


CONSOLIDATED STATEMENTS OF INCOME Three 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-exempt 4,244     3,632     8,397     7,228  
Investment securities:              
Taxable 6,998     5,434     13,093     10,530  
Tax-exempt 7,454     6,246     14,325     12,372  
Deposits with financial institutions 784     633     1,659     764  
Federal Home Loan Bank stock 335     263     673     667  
Total Interest Income 112,639     100,871     221,452     194,491  
INTEREST EXPENSE              
Deposits 23,087     12,165     42,681     21,167  
Federal funds purchased 117     61     210     441  
Securities sold under repurchase agreements 342     172     672     345  
Federal Home Loan Bank advances 1,692     1,845     3,506     4,004  
Subordinated debentures and term loans 2,123     2,057     4,239     4,047  
Total Interest Expense 27,361     16,300     51,308     30,004  
NET INTEREST INCOME 85,278     84,571     170,144     164,487  
Provision for loan losses 500     1,663     1,700     4,163  
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 84,778     82,908     168,444     160,324  
OTHER INCOME              
Service charges on deposit accounts 5,437     5,038     10,532     9,815  
Fiduciary and wealth management fees 3,931     3,595     7,749     7,391  
Card payment fees 4,829     4,462     9,655     9,056  
Net gains and fees on sales of loans 1,736     1,600     3,031     3,421  
Derivative hedge fees 1,487     231     2,268     1,073  
Other customer fees 341     455     780     897  
Earnings on cash surrender value of life insurance 946     1,007     1,935     2,183  
Net realized gains on sales of available for sale securities 1,843     1,122     2,983     2,731  
Other income 1,064     681     1,394     1,185  
Total Other Income 21,614     18,191     40,327     37,752  
OTHER EXPENSES              
Salaries and employee benefits 32,709     32,192     65,737     64,418  
Net occupancy 4,469     4,348     9,496     9,018  
Equipment 4,117     3,556     7,759     7,224  
Marketing 2,752     1,474     3,826     2,358  
Outside data processing fees 3,929     3,462     7,613     6,426  
Printing and office supplies 334     324     649     658  
Intangible asset amortization 1,520     1,718     3,048     3,444  
FDIC assessments 678     711     1,385     1,430  
Other real estate owned and foreclosure expenses 903     362     2,068     764  
Professional and other outside services 2,376     1,789     4,260     3,330  
Other expenses 3,800     3,568     8,367     8,121  
Total Other Expenses 57,587     53,504     114,208     107,191  
INCOME BEFORE INCOME TAX 48,805     47,595     94,563     90,885  
Income tax expense 7,749     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 Loans 7,385,315     6,975,737     7,308,146     6,893,867  
Total Earning Assets 9,518,892     8,741,173     9,326,579     8,579,076  
Total Deposits 8,321,459     7,636,821     8,130,120     7,396,328  
Total Stockholders' Equity 1,479,254     1,327,341     1,454,633     1,318,124  
               
FINANCIAL RATIOS:              
Return on Average Assets 1.56 %   1.63 %   1.55 %   1.60 %
Return on Average Stockholders' Equity 11.10     11.94     10.98     11.58  
Return on Average Common Stockholders' Equity 11.10     11.95     10.98     11.58  
Average Earning Assets to Average Assets 90.66     90.14     90.63     89.97  
Allowance for Loan Losses as % of Total Loans 1.08     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 Assets 14.09     13.69     14.13     13.82  
Tax Equivalent Yield on Average Earning Assets 4.86     4.74     4.88     4.66  
Interest Expense/Average Earning Assets 1.15     0.75     1.10     0.70  
Net Interest Margin (FTE) on Average Earning Assets 3.71     3.99     3.78     3.96  
Efficiency Ratio 51.00     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 Loans 640     709     1,103     968     544  
Non-Performing Loans (NPL) 26,275     28,658     27,251     21,389     20,687  
Other Real Estate Owned 1,131     1,877     2,179     8,859     9,071  
Non-Performing Assets (NPA) 27,406     30,535     29,430     30,248     29,758  
90+ Days Delinquent 209     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-offs 128     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 deposits 129,614     70,672     36,963     66,763     36,599  
Investment securities 2,092,924     1,862,659     1,632,582     1,625,251     1,619,683  
Loans held for sale 5,854     3,330     4,778     3,022     2,046  
Loans 7,511,370     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 loans 7,430,096     7,218,418     7,143,915     7,009,665     7,003,516  
Premises and equipment 91,767     91,863     93,420     93,728     94,397  
Federal Home Loan Bank stock 24,588     24,588     24,588     24,588     24,588  
Interest receivable 45,150     40,931     40,881     38,531     38,530  
Goodwill and other intangibles 466,736     468,256     469,784     471,409     473,059  
Cash surrender value of life insurance 226,241     225,928     224,939     223,865     222,905  
Other real estate owned 1,131     1,877     2,179     8,859     9,071  
Tax asset, deferred and receivable 12,340     16,094     23,668     25,933     24,619  
Other assets 83,231     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-bearing 6,966,163     6,666,615     6,306,686     6,168,962     5,932,621  
Total Deposits 8,319,328     8,047,798     7,754,593     7,633,152     7,503,815  
Borrowings:                  
Federal funds purchased 75,000     20,000     104,000     90,000     109,000  
Securities sold under repurchase agreements 119,674     111,783     113,512     118,824     122,513  
Federal Home Loan Bank advances 460,042     345,013     314,986     385,458     469,261  
Subordinated debentures and term loans 138,574     138,519     138,463     138,408     138,352  
Total Borrowings 793,290     615,315     670,961     732,690     839,126  
Interest payable 6,740     7,313     5,607     5,920     4,807  
Other liabilities 116,863     84,651     45,295     54,094     46,639  
Total Liabilities 9,236,221     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 outstanding 125     125     125     125     125  
Common Stock, $.125 stated value:                  
Authorized -- 100,000,000 shares                  
Issued and outstanding 6,182     6,179     6,169     6,163     6,160  
Additional paid-in capital 841,365     839,919     840,052     837,996     836,549  
Retained earnings 639,362     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' Equity 1,501,636     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  
                   


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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-exempt 4,244     4,153     3,873     3,761     3,632  
Investment securities:                  
Taxable 6,998     6,095     5,553     5,514     5,434  
Tax-exempt 7,454     6,871     6,644     6,493     6,246  
Deposits with financial institutions 784     875     1,207     270     633  
Federal Home Loan Bank stock 335     338     284     283     263  
Total Interest Income 112,639     108,813     108,653     104,800     100,871  
INTEREST EXPENSE                  
Deposits 23,087     19,594     16,690     13,685     12,165  
Federal funds purchased 117     93     48     229     61  
Securities sold under repurchase agreements 342     330     243     174     172  
Federal Home Loan Bank advances 1,692     1,814     1,691     2,137     1,845  
Subordinated debentures and term loans 2,123     2,116     2,097     2,089     2,057  
Total Interest Expense 27,361     23,947     20,769     18,314     16,300  
NET INTEREST INCOME 85,278     84,866     87,884     86,486     84,571  
Provision for loan losses 500     1,200     1,664     1,400     1,663  
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 84,778     83,666     86,220     85,086