First Merchants Corporation Announces Third Quarter 2020 Earnings per Share

Wednesday, October 28, 2020

First Merchants Corporation Announces Third Quarter 2020 Earnings per Share

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

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First Merchants Corporation Announces Third Quarter 2020 Earnings per Share