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First Merchants Corporation Announces Third Quarter 2020 Earnings per Share

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MUNCIE, Ind., Oct. 28, 2020 (GLOBE NEWSWIRE) -- First Merchants Corporation (NASDAQ - FRME) has reported third quarter 2020 net income of $36.2 million compared to $36.8 million during the same period in 2019. Earnings per share for the period totaled $.67 per share compared to the third quarter of 2019 result of $.71 per share. Year-to-date net income totaled $103.5 million compared to $116.6 million during the nine months ended September 30, 2019. Year-to-date earnings per share totaled $1.91 compared to $2.32 during the same period in 2019.

Total assets equaled $13.7 billion as of September 30, 2020 and loans totaled $9.2 billion. The Corporation’s loan portfolio increased by $940 million, or 11.3 percent, during the past twelve months. Payroll Protection Program (PPP) loans accounted for $901 million of the period’s loan growth. Investments increased $444 million, or 17.8 percent, during the same period and now total $2.9 billion. Total deposits equaled $10.9 billion as of quarter-end and increased by $1.1 billion, or 11.7 percent.

The loan to deposit ratio now totals 84.8 percent and the loan to asset ratio totals 67.3 percent. As of September 30, 2020, the Corporation’s total risk-based capital ratio equaled 14.38 percent, the common equity tier 1 capital ratio equaled 12.02 percent, and the tangible common equity ratio totaled 9.57 percent. Excluding PPP loans, our tangible common equity ratio totaled 10.19 percent.

The Corporation’s provision expense totaled $12.5 million and net charge-offs for the quarter totaled $6.9 million. The allowance for loan losses totaled $126.7 million as of September 30, 2020, up from $80.6 million as of September 30, 2019. The Corporation chose to defer the adoption of the current expected credit loss (“CECL”) model; therefore, the allowance for loan losses was calculated under the incurred loss method. Allowance for loan losses was 1.37% of total loans, 1.65% including remaining fair value marks with allowance, and 1.83% excluding PPP loans from total loans. The $51.9 million increase in year-to-date provision expense primarily reflects our view of increased credit risk related to the COVID-19 pandemic.

Michael C. Rechin, President and Chief Executive Officer, stated, “Our third quarter results highlight increased earnings power as our net interest margin stabilizes while our fee levels reflect increasing activity in customer spending and treasury technology use. Our clients and businesses remain healthy and resilient. Their determination and results mirror the First Merchants’ employee base and the Bank’s performance. Our earnings also increased due to a reduced provision level. The provision level and resultant loan loss reserve reflect a loan portfolio which is granular, diversified and actively reviewed. First Merchants’ exposure to higher risk industries is modest in any peer comparison and is borne out by the low level of customers (2%) utilizing the deferrals and modifications provided through the CARES Act. Capital preservation and capital composition are strengths that will serve us well as we assess the recessionary climate that likely remains through 2021.”

“My confidence regarding 2021 and our longer term future also reflects the executive succession plan announced September 29, 2020. Our Board of Directors’ decision to choose internal candidates to lead First Merchants augers well for high performance and cultural continuity. Mark Hardwick, who will become CEO on January 1, 2021, in tandem with Mike Stewart as President and Michele Kawiecki as Chief Financial Officer, form a trio who are experienced, skilled, and trusted. I am excited about First Merchants’ future and the opportunity to expertly serve our communities, shareholders and teammates.”

Net-interest income for the quarter totaled $92.9 million, up nearly $4 million from the third quarter of 2019 despite margin compression year-over-year of 47 basis points. Linked quarter net-interest margin stabilized as the decline totaled just 4 basis points, two basis points due to fair value accretion and one basis point due to the impact of PPP loans. Yields on earning assets totaled 3.58 percent and the cost of supporting liabilities totaled 43 basis points resulting in quarterly net interest margin of 3.15 percent.

Non-interest income totaled $26.2 million for the quarter, a $4 million increase over the third quarter of 2019. Gains from the sale of mortgage loans reached record levels totaling $5.8 million for the quarter. Non-interest expense totaled $64.7 million for the quarter compared to $67.4 million in the third quarter of 2019, which included $11.2 million of acquisition related expense.

CONFERENCE CALL

First Merchants Corporation will conduct a third quarter earnings conference call and web cast at 2:30 p.m. (ET) on Wednesday, October 28, 2020.

To participate, dial (Toll Free) 877-507-0578 and reference First Merchants Corporation's third quarter earnings release. International callers please call +1 412-317-1073. A replay of the call will be available until November 26, 2020. 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 10147757.

In order to view the web cast and presentation slides, please go to http://services.choruscall.com/links/frme201026.html during the time of the call. A replay of the web cast will be available until October 28, 2021.

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)

September 30,

2020

2019

ASSETS

Cash and cash equivalents

$

164,632

$

202,383

Interest-bearing deposits

273,936

230,101

Investment securities

2,933,286

2,489,420

Loans held for sale

3,183

7,910

Loans

9,243,833

8,299,260

Less: Allowance for loan losses

(126,726

)

(80,571

)

Net loans

9,117,107

8,218,689

Premises and equipment

112,959

113,446

Federal Home Loan Bank stock

28,736

28,736

Interest receivable

52,992

45,923

Goodwill and other intangibles

574,369

579,751

Cash surrender value of life insurance

291,543

286,747

Other real estate owned

6,942

7,156

Tax asset, deferred and receivable

21,762

15,187

Other assets

155,903

99,612

TOTAL ASSETS

$

13,737,350

$

12,325,061

LIABILITIES

Deposits:

Noninterest-bearing

$

2,187,607

$

1,777,365

Interest-bearing

8,718,546

7,988,086

Total Deposits

10,906,153

9,765,451

Borrowings:

Federal funds purchased

80,000

Securities sold under repurchase agreements

187,732

191,603

Federal Home Loan Bank advances

399,522

354,609

Subordinated debentures and other borrowings

118,320

138,630

Total Borrowings

785,574

684,842

Interest payable

5,038

7,855

Other liabilities

206,929

117,901

Total Liabilities

11,903,694

10,576,049

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 - 53,891,733 and 55,345,672 shares

6,736

6,918

Additional paid-in capital

1,003,777

1,053,148

Retained earnings

757,550

663,173

Accumulated other comprehensive income (loss)

65,468

25,648

Total Stockholders' Equity

1,833,656

1,749,012

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

13,737,350

$

12,325,061


CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended

Nine Months Ended

(Dollars In Thousands, Except Per Share Amounts)

September 30,

September 30,

2020

2019

2020

2019

INTEREST INCOME

Loans receivable:

Taxable

$

84,162

$

96,850

$

268,126

$

280,155

Tax-exempt

5,395

4,500

16,069

12,897

Investment securities:

Taxable

5,399

6,729

19,177

19,822

Tax-exempt

10,931

8,335

30,285

22,660

Deposits with financial institutions

90

1,363

799

3,022

Federal Home Loan Bank stock

248

355

828

1,028

Total Interest Income

106,225

118,132

335,284

339,584

INTEREST EXPENSE

Deposits

9,776

24,830

44,231

67,511

Federal funds purchased

5

15

118

225

Securities sold under repurchase agreements

83

385

527

1,057

Federal Home Loan Bank advances

1,749

1,894

5,317

5,400

Subordinated debentures and other borrowings

1,691

2,076

5,275

6,315

Total Interest Expense

13,304

29,200

55,468

80,508

NET INTEREST INCOME

92,921

88,932

279,816

259,076

Provision for loan losses

12,544

600

54,191

2,300

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

80,377

88,332

225,625

256,776

OTHER INCOME

Service charges on deposit accounts

5,209

6,107

15,491

16,639

Fiduciary and wealth management fees

5,910

4,429

17,496

12,178

Card payment fees

3,996

5,158

16,000

14,813

Net gains and fees on sales of loans

5,841

2,227

12,878

5,258

Derivative hedge fees

1,715

1,684

4,696

3,952

Other customer fees

372

450

1,103

1,230

Earnings on cash surrender value of life insurance

1,171

1,144

3,857

3,079

Net realized gains on sales of available for sale securities

1,817

393

9,497

3,376

Other income

132

524

1,425

1,918

Total Other Income

26,163

22,116

82,443

62,443

OTHER EXPENSES

Salaries and employee benefits

39,187

38,942

114,128

104,679

Net occupancy

5,855

4,777

17,103

14,273

Equipment

4,956

4,030

13,789

11,789

Marketing

1,311

1,332

4,846

5,158

Outside data processing fees

3,776

4,435

10,593

12,048

Printing and office supplies

331

312

997

961

Intangible asset amortization

1,486

1,356

4,511

4,404

FDIC assessments

1,249

(668

)

4,244

717

Other real estate owned and foreclosure expenses

717

294

1,906

2,362

Professional and other outside services

2,254

8,251

6,065

12,511

Other expenses

3,587

4,293

12,687

12,660

Total Other Expenses

64,709

67,354

190,869

181,562

INCOME BEFORE INCOME TAX

41,831

43,094

117,199

137,657

Income tax expense

5,621

6,337

13,734

21,027

NET INCOME AVAILABLE TO COMMON STOCKHOLDERS

$

36,210

$

36,757

$

103,465

$

116,630

Per Share Data:

Basic Net Income Available to Common Stockholders

$

0.67

$

0.71

$

1.91

$

2.33

Diluted Net Income Available to Common Stockholders

$

0.67

$

0.71

$

1.91

$

2.32

Cash Dividends Paid

$

0.26

$

0.26

$

0.78

$

0.74

Average Diluted Shares Outstanding (in thousands)

53,971

51,570

54,278

50,227


FINANCIAL HIGHLIGHTS

(Dollars in thousands)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

NET CHARGE-OFFS

$

6,937

$

1,303

$

7,749

$

2,281

AVERAGE BALANCES:

Total Assets

$

13,660,818

$

11,277,742

$

13,297,789

$

10,623,664

Total Loans

9,252,839

7,773,328

8,987,645

7,464,910

Total Earning Assets

12,341,257

10,192,183

11,941,839

9,618,285

Total Deposits

10,944,721

8,922,222

10,541,777

8,397,056

Total Stockholders' Equity

1,831,300

1,596,595

1,814,471

1,502,474

FINANCIAL RATIOS:

Return on Average Assets

1.06

%

1.30

%

1.04

%

1.46

%

Return on Average Stockholders' Equity

7.91

9.21

7.60

10.35

Return on Average Common Stockholders' Equity

7.91

9.21

7.60

10.35

Average Earning Assets to Average Assets

90.34

90.37

89.80

90.54

Allowance for Loan Losses as % of Total Loans

1.37

0.97

1.37

0.97

Net Charge-offs as % of Average Loans (Annualized)

0.30

0.07

0.11

0.04

Average Stockholders' Equity to Average Assets

13.41

14.16

13.64

14.14

Tax Equivalent Yield on Average Earning Assets

3.58

4.77

3.88

4.84

Interest Expense/Average Earning Assets

0.43

1.15

0.62

1.12

Net Interest Margin (FTE) on Average Earning Assets

3.15

3.62

3.26

3.72

Efficiency Ratio

51.40

57.60

50.52

53.36

Tangible Common Book Value Per Share

$

23.48

$

21.26

$

23.48

$

21.26


NON-PERFORMING ASSETS

(Dollars In Thousands)

September 30,

June 30,

March 31,

December 31,

September 30,

2020

2020

2020

2019

2019

Non-Accrual Loans

$

56,739

$

50,102

$

15,649

$

15,949

$

22,728

Renegotiated Loans

2,677

1,086

665

841

576

Non-Performing Loans (NPL)

59,416

51,188

16,314

16,790

23,304

Other Real Estate Owned and Repossessions

6,984

7,409

8,017

7,527

7,156

Non-Performing Assets (NPA)

66,400

58,597

24,331

24,317

30,460

90+ Days Delinquent

1,330

4,981

312

69

82

NPAs & 90 Day Delinquent

$

67,730

$

63,578

$

24,643

$

24,386

$

30,542

Allowance for Loan Losses

$

126,726

$

121,119

$

99,454

$

80,284

$

80,571

Quarterly Net Charge-offs

6,937

230

582

787

1,303

NPAs / Actual Assets %

0.48

%

0.42

%

0.19

%

0.20

%

0.25

%

NPAs & 90 Day / Actual Assets %

0.49

%

0.46

%

0.19

%

0.20

%

0.25

%

NPAs / Actual Loans and OREO %

0.72

%

0.63

%

0.28

%

0.29

%

0.37

%

Allowance for Loan Losses / Actual Loans (%)

1.37

%

1.30

%

1.15

%

0.95

%

0.97

%

Net Charge-offs as % of Average Loans (Annualized)

0.30

%

0.01

%

0.03

%

0.04

%

0.07

%


CONSOLIDATED BALANCE SHEETS

(Dollars In Thousands)

September 30,

June 30,

March 31,

December 31,

September 30,

2020

2020

2020

2019

2019

ASSETS

Cash and cash equivalents

$

164,632

$

229,759

$

127,731

$

177,201

$

202,383

Interest-bearing deposits

273,936

380,021

132,944

118,263

230,101

Investment securities

2,933,286

2,789,379

2,697,954

2,596,063

2,489,420

Loans held for sale

3,183

901

5,039

9,037

7,910

Loans

9,243,833

9,298,541

8,606,849

8,459,310

8,299,260

Less: Allowance for loan losses

(126,726

)

(121,119

)

(99,454

)

(80,284

)

(80,571

)

Net loans

9,117,107

9,177,422

8,507,395

8,379,026

8,218,689

Premises and equipment

112,959

112,548

114,045

113,055

113,446

Federal Home Loan Bank stock

28,736

28,736

28,736

28,736

28,736

Interest receivable

52,992

57,063

47,489

48,901

45,923

Goodwill and other intangibles

574,369

575,855

577,366

578,880

579,751

Cash surrender value of life insurance

291,543

290,715

289,574

288,206

286,747

Other real estate owned

6,942

7,367

7,972

7,527

7,156

Tax asset, deferred and receivable

21,762

13,126

9,497

12,165

15,187

Other assets

155,903

156,486

147,776

100,194

99,612

TOTAL ASSETS

$

13,737,350

$

13,819,378

$

12,693,518

$

12,457,254

$

12,325,061

LIABILITIES

Deposits:

Noninterest-bearing

$

2,187,607

$

2,260,351

$

1,688,205

$

1,736,396

$

1,777,365

Interest-bearing

8,718,546

8,705,637

8,182,279

8,103,560

7,988,086

Total Deposits

10,906,153

10,965,988

9,870,484

9,839,956

9,765,451

Borrowings:

Federal funds purchased

80,000

47,000

55,000

Securities sold under repurchase agreements

187,732

181,150

183,317

187,946

191,603

Federal Home Loan Bank advances

399,522

400,817

480,995

351,072

354,609

Subordinated debentures and other borrowings

118,320

285,197

128,741

138,685

138,630

Total Borrowings

785,574

867,164

840,053

732,703

684,842

Interest payable

5,038

5,587

7,746

6,754

7,855

Other liabilities

206,929

171,544

197,275

91,404

117,901

Total Liabilities

11,903,694

12,010,283

10,915,558

10,670,817

10,576,049

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

6,736

6,724

6,719

6,921

6,918

Additional paid-in capital

1,003,777

1,002,962

1,000,942

1,054,997

1,053,148

Retained earnings

757,550

735,439

716,518

696,520

663,173

Accumulated other comprehensive income (loss)

65,468

63,845

53,656

27,874

25,648

Total Stockholders' Equity

1,833,656

1,809,095

1,777,960

1,786,437

1,749,012

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

13,737,350

$

13,819,378

$

12,693,518

$

12,457,254

$

12,325,061


CONSOLIDATED STATEMENTS OF INCOME

(Dollars In Thousands, Except Per Share Amounts)

September 30,

June 30,

March 31,

December 31,

September 30,

2020

2020

2020

2019

2019

INTEREST INCOME

Loans receivable:

Taxable

$

84,162

$

87,312

$

96,652

$

102,617

$

96,850

Tax-exempt

5,395

5,359

5,315

4,671

4,500

Investment securities:

Taxable

5,399

6,147

7,631

7,993

6,729

Tax-exempt

10,931

10,019

9,335

8,995

8,335

Deposits with financial institutions

90

134

575

1,203

1,363

Federal Home Loan Bank stock

248

281

299

342

355

Total Interest Income

106,225

109,252

119,807

125,821

118,132

INTEREST EXPENSE

Deposits

9,776

12,707

21,748

24,074

24,830

Federal funds purchased

5

2

111

26

15

Securities sold under repurchase agreements

83

92

352

367

385

Federal Home Loan Bank advances

1,749

1,794

1,774

1,776

1,894

Subordinated debentures and other borrowings

1,691

1,639

1,945

1,994

2,076

Total Interest Expense

13,304

16,234

25,930

28,237

29,200

NET INTEREST INCOME

92,921

93,018

93,877

97,584

88,932

Provision for loan losses

12,544

21,895

19,752

500

600

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

80,377

71,123

74,125

97,084

88,332

OTHER INCOME

Service charges on deposit accounts

5,209

4,312

5,970

6,312

6,107

Fiduciary and wealth management fees

5,910

5,601

5,985

5,384

4,429

Card payment fees

3,996

6,097

5,907

5,430

5,158

Net gains and fees on sales of loans

5,841

3,674

3,363

2,633

2,227

Derivative hedge fees

1,715

1,042

1,939

1,405

1,684

Other customer fees

372

333

398

434

450

Earnings on cash surrender value of life insurance

1,171

1,326

1,360

1,458

1,144

Net realized gains on sales of available for sale securities

1,817

3,068

4,612

1,039

393

Other income

132

1,028

265

150

524

Total Other Income

26,163

26,481

29,799

24,245

22,116

OTHER EXPENSES

Salaries and employee benefits

39,187

35,698

39,243

39,358

38,942

Net occupancy

5,855

5,447

5,801

5,311

4,777

Equipment

4,956

4,489

4,344

4,429

4,030

Marketing

1,311

2,092

1,443

1,492

1,332

Outside data processing fees

3,776

2,618

4,199

4,428

4,435

Printing and office supplies

331

279

387

484

312

Intangible asset amortization

1,486

1,511

1,514

1,590

1,356

FDIC assessments

1,249

1,472

1,523

(668

)

Other real estate owned and foreclosure expenses

717

684

505

66

294

Professional and other outside services

2,254

1,553

2,258

2,899

8,251

Other expenses

3,587

4,146

4,954

5,144

4,293

Total Other Expenses

64,709

59,989

66,171

65,201

67,354

INCOME BEFORE INCOME TAX

41,831

37,615

37,753

56,128

43,094

Income tax expense

5,621

4,623

3,490

8,298

6,337

NET INCOME AVAILABLE TO COMMON STOCKHOLDERS

$

36,210

$

32,992

$

34,263

$

47,830

$

36,757

Per Share Data:

Basic Net Income Available to Common Stockholders

$

0.67

$

0.62

$

0.63

$

0.87

$

0.71

Diluted Net Income Available to Common Stockholders

$

0.67

$

0.62

$

0.62

$

0.87

$

0.71

Cash Dividends Paid

$

0.26

$

0.26

$

0.26

$

0.26

$

0.26

Average Diluted Shares Outstanding (in thousands)

53,971

53,943

54,918

55,520

51,570

FINANCIAL RATIOS:

Return on Average Assets

1.06

%

0.97

%

1.09

%

1.53

%

1.30

%

Return on Average Stockholders' Equity

7.91

7.35

7.55

10.82

9.21

Return on Average Common Stockholders' Equity

7.91

7.35

7.55

10.82

9.21

Average Earning Assets to Average Assets

90.34

89.25

89.81

89.71

90.37

Allowance for Loan Losses as % of Total Loans

1.37

1.30

1.15

0.95

0.97

Net Charge-offs as % of Average Loans (Annualized)

0.30

0.01

0.03

0.04

0.07

Average Stockholders' Equity to Average Assets

13.41

13.15

14.45

14.17

14.16

Tax Equivalent Yield on Average Earning Assets

3.58

3.72

4.38

4.63

4.77

Interest Expense/Average Earning Assets

0.43

0.53

0.92

1.01

1.15

Net Interest Margin (FTE) on Average Earning Assets

3.15

3.19

3.46

3.62

3.62

Efficiency Ratio

51.40

47.95

52.17

51.07

57.60

Tangible Common Book Value Per Share

$

23.48

$

23.04

$

22.46

$

21.94

$

21.26


LOANS

(Dollars In Thousands)

September 30,

June 30,

March 31,

December 31,

September 30,

2020

2020

2020

2019

2019

Commercial and industrial loans

$

2,875,331

$

2,898,329

$

2,199,226

$

2,109,879

$

2,034,311

Agricultural production financing and other loans to farmers

83,090

93,838

87,421

93,861

90,462

Real estate loans:

Construction

622,084

640,560

643,674

787,568

670,138

Commercial and farmland

3,248,506

3,239,998

3,268,168

3,052,698

3,144,649

Residential

1,146,406

1,145,187

1,121,556

1,143,217

1,155,403

Home equity

527,458

532,314

570,398

588,984

601,335

Individuals' loans for household and other personal expenditures

125,411

123,611

129,765

135,989

131,246

Public finance and other commercial loans

615,547

624,704

586,641

547,114

471,716

Loans

9,243,833

9,298,541

8,606,849

8,459,310

8,299,260

Allowance for loan losses

(126,726

)

(121,119

)

(99,454

)

(80,284

)

(80,571

)

NET LOANS

$

9,117,107

$

9,177,422

$

8,507,395

$

8,379,026

$

8,218,689


DEPOSITS

(Dollars In Thousands)

September 30,

June 30,

March 31,

December 31,

September 30,

2020

2020

2020

2019

2019

Demand deposits

$

6,279,554

$

6,288,360

$

5,293,200

$

5,250,568

$

5,183,971

Savings deposits

3,518,286

3,278,156

2,962,821

2,896,177

2,808,745

Certificates and other time deposits of $100,000 or more

467,610

607,474

694,062

736,843

731,693

Other certificates and time deposits

542,919

669,119

717,723

741,759

811,780

Brokered deposits

97,784

122,879

202,678

214,609

229,262

TOTAL DEPOSITS

$

10,906,153

$

10,965,988

$

9,870,484

$

9,839,956

$

9,765,451


CONSOLIDATED AVERAGE BALANCE SHEET AND NET INTEREST MARGIN ANALYSIS

(Dollars in Thousands)

For the Three Months Ended

September 30, 2020

September 30, 2019

Average Balance

Interest
Income /
Expense

Average
Rate

Average Balance

Interest
Income /
Expense

Average
Rate

Assets:

Interest-bearing deposits

$

301,529

$

90

0.12

%

$

262,082

$

1,363

2.06

%

Federal Home Loan Bank stock

28,736

248

3.45

24,633

355

5.76

Investment Securities: (1)

Taxable

1,258,690

5,399

1.72

1,104,612

6,729

2.44

Tax-Exempt (2)

1,499,463

13,837

3.69

1,027,528

10,551

4.11

Total Investment Securities

2,758,153

19,236

2.79

2,132,140

17,280

3.24

Loans held for sale

24,705

257

4.16

21,913

274

5.00

Loans: (3)

Commercial

6,965,837

66,826

3.84

5,674,956

77,370

5.45

Real Estate Mortgage

887,661

9,996

4.50

822,874

9,518

4.63

Installment

693,363

7,083

4.09

715,428

9,688

5.42

Tax-Exempt (2)

681,273

6,829

4.01

538,157

5,696

4.23

Total Loans

9,252,839

90,991

3.93

7,773,328

102,546

5.28

Total Earning Assets

12,341,257

110,565

3.58

%

10,192,183

121,544

4.77

%

Net unrealized gain (loss) on securities available for sale

70,277

30,353

Allowance for loan losses

(125,150

)

(80,918

)

Cash and cash equivalents

169,539

143,266

Premises and equipment

113,216

99,021

Other assets

1,091,679

893,837

Total Assets

$

13,660,818

$

11,277,742

Liabilities:

Interest-bearing deposits:

Interest-bearing deposits

$

4,098,017

$

3,890

0.38

%

$

3,134,675

$

9,285

1.18

%

Money market deposits

1,813,392

1,167

0.26

1,307,647

3,766

1.14

Savings deposits

1,574,700

583

0.15

1,244,859

2,523

0.80

Certificates and other time deposits

1,267,152

4,136

1.31

1,736,759

9,256

2.11

Total Interest-bearing Deposits

8,753,261

9,776

0.45

7,423,940

24,830

1.33

Borrowings

733,757

3,528

1.92

660,107

4,370

2.59

Total Interest-bearing Liabilities

9,487,018

13,304

0.56

8,084,047

29,200

1.43

Noninterest-bearing deposits

2,191,460

1,498,282

Other liabilities

151,040

98,818

Total Liabilities

11,829,518

9,681,147

Stockholders' Equity

1,831,300

1,596,595

Total Liabilities and Stockholders' Equity

$

13,660,818

13,304

$

11,277,742

29,200

Net Interest Income (FTE)

$

97,261

$

92,344

Net Interest Spread (FTE) (4)

3.02

%

3.34

%

Net Interest Margin (FTE):

Interest Income (FTE) / Average Earning Assets

3.58

%

4.77

%

Interest Expense / Average Earning Assets

0.43

%

1.15

%

Net Interest Margin (FTE) (5)

3.15

%

3.62

%

(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. Annualized amounts are computed using a 30/360 day basis.

(2) Tax-exempt securities and loans are presented on a fully taxable equivalent basis, using a marginal tax rate of 21 percent for 2020 and 2019. These totals equal $4,340 and $3,412 for the three months ended September 30, 2020 and 2019, 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 Nine Months Ended

September 30, 2020

September 30, 2019

Average Balance

Interest
Income /
Expense

Average
Rate

Average Balance

Interest
Income /
Expense

Average
Rate

Assets:

Federal Funds Sold

Interest-bearing deposits

$

280,038

$

799

0.38

%

$

184,640

$

3,022

2.18

%

Federal Home Loan Bank stock

28,736

828

3.84

24,603

1,028

5.57

Investment Securities: (1)

Taxable

1,302,943

19,177

1.96

1,021,102

19,822

2.59

Tax-Exempt (2)

1,342,477

38,335

3.81

923,030

28,684

4.14

Total Investment Securities

2,645,420

57,512

2.90

1,944,132

48,506

3.33

Loans held for sale

17,175

581

4.51

13,618

512

5.01

Loans: (3)

Commercial

6,698,042

213,241

4.24

5,469,377

224,766

5.48

Real Estate Mortgage

882,911

30,520

4.61

778,778

26,526

4.54

Installment

725,596

23,784

4.37

686,055

28,351

5.51

Tax-Exempt (2)

663,921

20,341

4.09

517,082

16,325

4.21

Total Loans

8,987,645

288,467

4.28

7,464,910

296,480

5.30

Total Earning Assets

11,941,839

347,606

3.88

%

9,618,285

349,036

4.84

%

Net unrealized gain on securities available for sale

58,623

12,856

Allowance for loan losses

(104,465

)

(81,172

)

Cash and cash equivalents

210,778

130,587

Premises and equipment

113,517

94,628

Other assets

1,077,497

848,480

Total Assets

$

13,297,789

$

10,623,664

Liabilities:

Interest-bearing deposits:

Interest-bearing deposits

$

3,880,489

$

16,351

0.56

%

$

2,921,762

$

24,844

1.13

%

Money market deposits

1,674,622

6,647

0.53

1,222,860

10,057

1.10

Savings deposits

1,507,269

3,007

0.27

1,187,173

7,315

0.82

Certificates and other time deposits

1,476,499

18,226

1.65

1,652,141

25,295

2.04

Total Interest-bearing Deposits

8,538,879

44,231

0.69

6,983,936

67,511

1.29

Borrowings

796,836

11,237

1.88

636,295

12,997

2.72

Total Interest-bearing Liabilities

9,335,715

55,468

0.79

7,620,231

80,508

1.41

Noninterest-bearing deposits

2,002,898

1,413,120

Other liabilities

144,705

87,839

Total Liabilities

11,483,318

9,121,190

Stockholders' Equity

1,814,471

1,502,474

Total Liabilities and Stockholders' Equity

$

13,297,789

55,468

$

10,623,664

80,508

Net Interest Income (FTE)

$

292,138

$

268,528

Net Interest Spread (FTE) (4)

3.09

%

3.43

%

Net Interest Margin (FTE):

Interest Income (FTE) / Average Earning Assets

3.88

%

4.84

%

Interest Expense / Average Earning Assets

0.62

%

1.12

%

Net Interest Margin (FTE) (5)

3.26

%

3.72

%

(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. Annualized amounts are computed using a 30/360 day basis.

(2) Tax-exempt securities and loans are presented on a fully taxable equivalent basis, using a marginal tax rate of 21 percent for 2020 and 2019. These totals equal $12,322 and $9,452 for the nine months ended September 30, 2020 and 2019, 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, Muncie, Indiana