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First Merchants Corporation Announces Third Quarter 2019 Results With the Addition of Monroe Bank and Trust

First Merchants Corporation Announces Third Quarter 2019 Results With the Addition of Monroe Bank and Trust

MUNCIE, Ind., Oct. 24, 2019 (GLOBE NEWSWIRE) -- First Merchants Corporation (NASDAQ - FRME) has reported third quarter 2019 net income of $36.8 million compared to $41.1 million during the same period in 2018. Earnings per share for the period totaled $.71 per share compared to third quarter 2018 results of $.83 per share. Included in the third quarter results are $11.2 million, or $.17 per share, of one-time charges related to the closing of our acquisition of Monroe Bank & Trust on September 1, 2019.

Total assets equaled $12.3 billion as of quarter-end and loans totaled $8.3 billion. The Corporation’s loan portfolio increased by $1.2 billion, or 17.1 percent, during the past twelve months. Investments increased $864 million, or 53.2 percent, during the same period and now total $2.5 billion. The acquisition of Monroe Bank & Trust accounted for $731 million of the increase in loans. Total deposits equaled $9.8 billion as of quarter-end and increased by $2.1 billion, or 27.9 percent, since September 30, 2018. Of the increase, Monroe Bank & Trust accounted for $1.1 billion.

The Corporation’s loan to deposit ratio now totals 85.1 percent and loan to asset ratio totals 67.4 percent. Additionally, the Corporation’s total risk-based capital ratio equaled 14.37 percent, common equity tier 1 capital ratio equaled 12.14 percent, and the tangible common equity ratio totaled 9.95 percent.

Michael C. Rechin, President and Chief Executive Officer, stated, “First Merchants posted strong financial results as our local economies continue to flourish and our clients look to our bank for growth solutions. The signature event for the quarter was the legal closing of the Monroe Bank & Trust transaction. The merger extends our franchise with a community bank that enjoys a dominant market share position. Our plan to operationally integrate Monroe Bank & Trust into First Merchants next month will accelerate our marketplace momentum into 2020 to include a reduction in our overall funding costs.”

Net-interest income for the quarter totaled $88.9 million, an increase of $2.4 million from third quarter 2018, even as net-interest margin declined by 43 basis points totaling 3.62 percent. Yields on earning assets totaled 4.77 percent, a decline of 11 basis points of which nearly half was due to lower fair value accretion. The cost of supporting liabilities increased by 32 basis points and totaled 1.15 percent.

Non-interest income totaled $22.1 million for the quarter, a $2.6 million, or 13.3 percent increase from the third quarter of 2018. Customer specific line items accounted for $3.1 million of the increase, with derivative hedge income accounting for $909,000 of the growth. Non-interest expense totaled $67.4 million up from the 2018 total of $55 million. Of the $12.4 million increase from the third quarter of 2018, merger related expenses accounted for $11.2 million.

The Corporation’s provision expense for the quarter totaled $600,000 and net charge-offs were $1.3 million. The allowance for loan losses reached $80.6 million as of September 30, 2019, up from $78.4 million as of September 30, 2018. Non-accrual loans declined to $22.7 million as of quarter-end and the allowance is .97 percent of total loans and 1.16 percent of non-purchased loans.

CONFERENCE CALL

First Merchants Corporation will conduct a third quarter earnings conference call and web cast at 2:30 p.m. (ET) on Thursday, October 24, 2019.

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 24, 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 10134821.

In order to view the web cast and presentation slides, please go to http://services.choruscall.com/links/frme191024.html during the time of the call. A replay of the web cast will be available until October 24, 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)

September 30,

2019

2018

ASSETS

Cash and cash equivalents

$

202,383

$

142,501

Interest-bearing time deposits

230,101

66,763

Investment securities

2,489,420

1,625,251

Loans held for sale

7,910

3,022

Loans

8,299,260

7,088,071

Less: Allowance for loan losses

(80,571

)

(78,406

)

Net loans

8,218,689

7,009,665

Premises and equipment

113,446

93,728

Federal Home Loan Bank stock

28,736

24,588

Interest receivable

45,923

38,531

Goodwill and other intangibles

579,751

471,409

Cash surrender value of life insurance

286,747

223,865

Other real estate owned

7,156

8,859

Tax asset, deferred and receivable

15,187

25,933

Other assets

99,612

53,167

TOTAL ASSETS

$

12,325,061

$

9,787,282

LIABILITIES

Deposits:

Noninterest-bearing

$

1,777,365

$

1,464,190

Interest-bearing

7,988,086

6,168,962

Total Deposits

9,765,451

7,633,152

Borrowings:

Federal funds purchased

90,000

Securities sold under repurchase agreements

191,603

118,824

Federal Home Loan Bank advances

354,609

385,458

Subordinated debentures and term loans

138,630

138,408

Total Borrowings

684,842

732,690

Interest payable

7,855

5,920

Other liabilities

117,901

54,094

Total Liabilities

10,576,049

8,425,856

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 - 55,345,672 and 49,304,542 shares

6,918

6,163

Additional paid-in capital

1,053,148

837,996

Retained earnings

663,173

552,551

Accumulated other comprehensive income (loss)

25,648

(35,409

)

Total Stockholders' Equity

1,749,012

1,361,426

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

12,325,061

$

9,787,282


CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended

Nine Months Ended

(Dollars In Thousands, Except Per Share Amounts)

September 30,

September 30,

2019

2018

2019

2018

INTEREST INCOME

Loans receivable:

Taxable

$

96,850

$

88,479

$

280,155

$

251,409

Tax-exempt

4,500

3,761

12,897

10,989

Investment securities:

Taxable

6,729

5,514

19,822

16,044

Tax-exempt

8,335

6,493

22,660

18,865

Deposits with financial institutions

1,363

270

3,022

1,034

Federal Home Loan Bank stock

355

283

1,028

950

Total Interest Income

118,132

104,800

339,584

299,291

INTEREST EXPENSE

Deposits

24,830

13,685

67,511

34,852

Federal funds purchased

15

229

225

670

Securities sold under repurchase agreements

385

174

1,057

519

Federal Home Loan Bank advances

1,894

2,137

5,400

6,141

Subordinated debentures and term loans

2,076

2,089

6,315

6,136

Total Interest Expense

29,200

18,314

80,508

48,318

NET INTEREST INCOME

88,932

86,486

259,076

250,973

Provision for loan losses

600

1,400

2,300

5,563

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

88,332

85,086

256,776

245,410

OTHER INCOME

Service charges on deposit accounts

6,107

5,619

16,639

15,434

Fiduciary and wealth management fees

4,429

3,673

12,178

11,064

Card payment fees

5,158

4,586

14,813

13,642

Net gains and fees on sales of loans

2,227

1,841

5,258

5,262

Derivative hedge fees

1,684

775

3,952

1,848

Other customer fees

450

452

1,230

1,349

Earnings on cash surrender value of life insurance

1,144

961

3,079

3,144

Net realized gains on sales of available for sale securities

393

1,285

3,376

4,016

Other income

524

335

1,918

1,520

Total Other Income

22,116

19,527

62,443

57,279

OTHER EXPENSES

Salaries and employee benefits

38,942

32,936

104,679

97,354

Net occupancy

4,777

4,586

14,273

13,604

Equipment

4,030

3,483

11,789

10,707

Marketing

1,332

1,216

5,158

3,574

Outside data processing fees

4,435

3,422

12,048

9,848

Printing and office supplies

312

334

961

992

Intangible asset amortization

1,356

1,650

4,404

5,094

FDIC assessments

(668

)

856

717

2,286

Other real estate owned and foreclosure expenses

294

455

2,362

1,219

Professional and other outside services

8,251

1,844

12,511

5,174

Other expenses

4,293

4,240

12,660

12,361

Total Other Expenses

67,354

55,022

181,562

162,213

INCOME BEFORE INCOME TAX

43,094

49,591

137,657

140,476

Income tax expense

6,337

8,478

21,027

23,050

NET INCOME AVAILABLE TO COMMON STOCKHOLDERS

$

36,757

$

41,113

$

116,630

$

117,426

Per Share Data:

Basic Net Income Available to Common Stockholders

$

0.71

$

0.83

$

2.33

$

2.38

Diluted Net Income Available to Common Stockholders

$

0.71

$

0.83

$

2.32

$

2.37

Cash Dividends Paid

$

0.26

$

0.22

$

0.74

$

0.62

Average Diluted Shares Outstanding (in thousands)

51,570

49,492

50,227

49,458


FINANCIAL HIGHLIGHTS

(Dollars in thousands)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

NET CHARGE-OFFS

$

1,303

$

537

$

2,281

$

2,189

AVERAGE BALANCES:

Total Assets

$

11,277,742

$

9,756,680

$

10,623,664

$

9,610,219

Total Loans

7,773,328

7,099,694

7,464,910

6,962,460

Total Earning Assets

10,192,183

8,810,758

9,618,285

8,657,152

Total Deposits

8,922,222

7,603,625

8,397,056

7,466,187

Total Stockholders' Equity

1,596,595

1,358,904

1,502,474

1,331,867

FINANCIAL RATIOS:

Return on Average Assets

1.30

%

1.69

%

1.46

%

1.63

%

Return on Average Stockholders' Equity

9.21

12.10

10.35

11.76

Return on Average Common Stockholders' Equity

9.21

12.10

10.35

11.76

Average Earning Assets to Average Assets

90.37

90.30

90.54

90.08

Allowance for Loan Losses as % of Total Loans

0.97

1.11

0.97

1.11

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

0.07

0.03

0.04

0.04

Average Stockholders' Equity to Average Assets

14.16

13.93

14.14

13.86

Tax Equivalent Yield on Average Earning Assets

4.77

4.88

4.84

4.73

Interest Expense/Average Earning Assets

1.15

0.83

1.12

0.74

Net Interest Margin (FTE) on Average Earning Assets

3.62

4.05

3.72

3.99

Efficiency Ratio

57.60

49.25

53.36

49.94

Tangible Common Book Value Per Share

$

21.26

$

18.16

$

21.26

$

18.16


NON-PERFORMING ASSETS

(Dollars In Thousands)

September 30,

June 30,

March 31,

December 31,

September 30,

2019

2019

2019

2018

2018

Non-Accrual Loans

$

22,728

$

25,635

$

27,949

$

26,148

$

20,421

Renegotiated Loans

576

640

709

1,103

968

Non-Performing Loans (NPL)

23,304

26,275

28,658

27,251

21,389

Other Real Estate Owned

7,156

1,131

1,877

2,179

8,859

Non-Performing Assets (NPA)

30,460

27,406

30,535

29,430

30,248

90+ Days Delinquent

82

209

134

1,855

50

NPAs & 90 Day Delinquent

$

30,542

$

27,615

$

30,669

$

31,285

$

30,298

Allowance for Loan Losses

$

80,571

$

81,274

$

80,902

$

80,552

$

78,406

Quarterly Net Charge-offs

1,303

128

850

(482

)

537

NPAs / Actual Assets %

0.25

%

0.26

%

0.30

%

0.30

%

0.31

%

NPAs & 90 Day / Actual Assets %

0.25

%

0.26

%

0.30

%

0.32

%

0.31

%

NPAs / Actual Loans and OREO %

0.37

%

0.36

%

0.42

%

0.41

%

0.43

%

Allowance for Loan Losses / Actual Loans (%)

0.97

%

1.08

%

1.11

%

1.11

%

1.11

%

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

0.07

%

0.01

%

0.05

%

(0.03

)%

0.03

%


CONSOLIDATED BALANCE SHEETS

(Dollars In Thousands)

September 30,

June 30,

March 31,

December 31,

September 30,

2019

2019

2019

2018

2018

ASSETS

Cash and cash equivalents

$

202,383

$

128,185

$

115,878

$

139,247

$

142,501

Interest-bearing time deposits

230,101

129,614

70,672

36,963

66,763

Investment securities

2,489,420

2,092,924

1,862,659

1,632,582

1,625,251

Loans held for sale

7,910

5,854

3,330

4,778

3,022

Loans

8,299,260

7,511,370

7,299,320

7,224,467

7,088,071

Less: Allowance for loan losses

(80,571

)

(81,274

)

(80,902

)

(80,552

)

(78,406

)

Net loans

8,218,689

7,430,096

7,218,418

7,143,915

7,009,665

Premises and equipment

113,446

91,767

91,863

93,420

93,728

Federal Home Loan Bank stock

28,736

24,588

24,588

24,588

24,588

Interest receivable

45,923

45,150

40,931

40,881

38,531

Goodwill and other intangibles

579,751

466,736

468,256

469,784

471,409

Cash surrender value of life insurance

286,747

226,241

225,928

224,939

223,865

Other real estate owned

7,156

1,131

1,877

2,179

8,859

Tax asset, deferred and receivable

15,187

12,340

16,094

23,668

25,933

Other assets

99,612

83,231

70,431

47,772

53,167

TOTAL ASSETS

$

12,325,061

$

10,737,857

$

10,210,925

$

9,884,716

$

9,787,282

LIABILITIES

Deposits:

Noninterest-bearing

$

1,777,365

$

1,353,165

$

1,381,183

$

1,447,907

$

1,464,190

Interest-bearing

7,988,086

6,966,163

6,666,615

6,306,686

6,168,962

Total Deposits

9,765,451

8,319,328

8,047,798

7,754,593

7,633,152

Borrowings:

Federal funds purchased

75,000

20,000

104,000

90,000

Securities sold under repurchase agreements

191,603

119,674

111,783

113,512

118,824

Federal Home Loan Bank advances

354,609

460,042

345,013

314,986

385,458

Subordinated debentures and term loans

138,630

138,574

138,519

138,463

138,408

Total Borrowings

684,842

793,290

615,315

670,961

732,690

Interest payable

7,855

6,740

7,313

5,607

5,920

Other liabilities

117,901

116,863

84,651

45,295

54,094

Total Liabilities

10,576,049

9,236,221

8,755,077

8,476,456

8,425,856

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

6,918

6,182

6,179

6,169

6,163

Additional paid-in capital

1,053,148

841,365

839,919

840,052

837,996

Retained earnings

663,173

639,362

611,220

583,336

552,551

Accumulated other comprehensive income (loss)

25,648

14,602

(1,595

)

(21,422

)

(35,409

)

Total Stockholders' Equity

1,749,012

1,501,636

1,455,848

1,408,260

1,361,426

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

12,325,061

$

10,737,857

$

10,210,925

$

9,884,716

$

9,787,282


CONSOLIDATED STATEMENTS OF INCOME

(Dollars In Thousands, Except Per Share Amounts)

September 30,

June 30,

March 31,

December 31,

September 30,

2019

2019

2019

2018

2018

INTEREST INCOME

Loans receivable:

Taxable

$

96,850

$

92,824

$

90,481

$

91,092

$

88,479

Tax-exempt

4,500

4,244

4,153

3,873

3,761

Investment securities:

Taxable

6,729

6,998

6,095

5,553

5,514

Tax-exempt

8,335

7,454

6,871

6,644

6,493

Deposits with financial institutions

1,363

784

875

1,207

270

Federal Home Loan Bank stock

355

335

338

284

283

Total Interest Income

118,132

112,639

108,813

108,653

104,800

INTEREST EXPENSE

Deposits

24,830

23,087

19,594

16,690

13,685

Federal funds purchased

15

117

93

48

229

Securities sold under repurchase agreements

385

342

330

243

174

Federal Home Loan Bank advances

1,894

1,692

1,814

1,691

2,137

Subordinated debentures and term loans

2,076

2,123

2,116

2,097

2,089

Total Interest Expense

29,200

27,361

23,947

20,769

18,314

NET INTEREST INCOME

88,932

85,278

84,866

87,884

86,486

Provision for loan losses

600

500

1,200

1,664

1,400

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

88,332

84,778

83,666

86,220