First Merchants Corporation Announces Second Quarter 2020 Earnings Per Share

MUNCIE, Ind., July 23, 2020 (GLOBE NEWSWIRE) -- First Merchants Corporation (NASDAQ - FRME) has reported second quarter 2020 net income of $33 million compared to $41.1 million during the same period in 2019.  Earnings per share for the period totaled $.62 per share compared to the second quarter of 2019 result of $.83 per share.  Year-to-date net income totaled $67.3 million compared to $79.9 million during the six months ended June 30, 2019.  Year-to-date earnings per share totaled $1.24 compared to $1.61 during the same period in 2019.

Total assets equaled $13.8 billion as of the quarter-ended June 30, 2020 and loans totaled $9.3 billion.  The Corporation’s loan portfolio increased by $1.8 billion, or 23.7 percent, during the past twelve months.  Investments increased $696 million, or 33.3 percent, during the same period and now totals $2.8 billion.  Total deposits equaled $11 billion as of quarter-end and increased by $2.6 billion, or 31.8 percent, from the same period in 2019.  Our acquisition of Monroe Bank & Trust (“MBT”), which closed on September 1, 2019, accounted for $733 million of loan growth and $1.1 billion of deposit growth.  Additionally, Payroll Protection Program (“PPP”) loans accounted for $883 million of the period’s loan growth.  

The loan to deposit ratio now totals 84.8 percent and loan to asset ratio totals 67.3 percent.  As of June 30, 2020, the Corporation’s total risk-based capital ratio equaled 14.2 percent, the common equity tier 1 capital ratio equaled 11.8 percent, and the tangible common equity ratio totaled 9.31 percent.  Excluding PPP loans, our tangible common equity ratio totaled 9.93 percent.

The Corporation’s provision expense totaled $21.9 million and net charge-offs for the quarter totaled just $230,000.  The allowance for loan losses totaled $121.1 million as of June 30, 2020, up from $81.3 million as of June 30, 2019.   The Corporation chose to defer the adoption of the current expected credit loss (“CECL”) model so allowance for loan losses were calculated under the incurred loss method.  Allowance for loan losses is 1.30% of total loans, 1.62% including remaining fair value marks with allowance, and 1.79% excluding PPP loans from total loans. The increased year-to-date provision expense of $41.6 million primarily reflects our view of increased credit risk related to the COVID-19 pandemic. Remaining fair value marks on purchased loans is $29.3 million.

Michael C. Rechin, President and Chief Executive Officer, stated, “Our financial results for the second quarter 2020 combine stressed economic conditions and net interest margin pressure with the opportunity to provide our clients access to the SBA’s Payroll Protection Program.  Our bankers really leaned into the PPP offering on behalf of businesses throughout our markets because it fits our culture and strategy as a largely commercial bank.   Several thousand borrowers looked to the bank to assist their efforts in employee retention in a most challenging time.  In the near-term, the magnitude of our participation grew our balance sheet substantially in loans and deposits.  The funding affords borrowers time to weather the COVID-19 initiated recession.”  Rechin also added, “Despite the reopening of Midwest economies and reducing unemployment, we recorded a $22 million provision reflecting our uncertain economic environment.  With stay at home orders in place through much of the quarter, our technology proved to be a key point of service delivery for our clients.  The results we achieved in pre-tax, pre-provision earnings, capital growth and efficiency remain at top quartile performance levels.”

Net-interest income for the quarter totaled $93 million, down $859,000 from the first quarter of 2020, as linked quarterly net interest margin declined by 27 basis points totaling 3.19 percent.  Yields on earning assets decreased by 66 basis points totaling 3.72 percent and the cost of supporting liabilities decreased by 39 basis points and totaled 53 basis points.  The addition of $883 million of PPP loans negatively impacted margin by 6 basis points, but the major driver was the decline in LIBOR from 99 basis points as of March 31, 2020 to just 16 basis points on June 30, 2020.

Non-interest income totaled $26.5 million for the quarter, a $4.9 million increase over the second quarter of 2019, but a $3.3 million decrease from the first quarter of 2020.  Gains from the sale of mortgage loans remain strong given the rate environment, while service charges on deposit accounts were less than planned due to higher than normal average balances per account.  Non-interest expense totaled $60 million for the quarter compared to $57.6 million in the second quarter of 2019 and $66.2 million in the first quarter of 2020.  The primary drivers of the linked quarterly results were a $2.3 million deferral of salary expense related to PPP loan originations, a $1.1 million reduction in bonus accruals and a $1.6 million decrease in processing fees related to termination of a debit card rewards program.

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 23, 2020.

To participate, dial (Toll Free) 877-507-0578 and reference First Merchants Corporation's second quarter earnings release. International callers please call [phone].  A replay of the call will be available until August 21, 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 [phone]. The replay access code is 10144066.

In order to view the web cast and presentation slides, please go to http://services.choruscall.com/links/frme200723.html during the time of the call.  A replay of the web cast will be available until July 23, 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)	June 30,
	2020					2019
ASSETS
Cash and cash equivalents	$	229,759				$	128,185
Interest-bearing time deposits	380,021					129,614
Investment securities	2,789,379					2,092,924
Loans held for sale	901					5,854
Loans	9,298,541					7,511,370
Less: Allowance for loan losses	(121,119		)			(81,274		)
Net loans	9,177,422					7,430,096
Premises and equipment	112,548					91,767
Federal Home Loan Bank stock	28,736					24,588
Interest receivable	57,063					45,150
Goodwill and other intangibles	575,855					466,736
Cash surrender value of life insurance	290,715					226,241
Other real estate owned	7,367					1,131
Tax asset, deferred and receivable	13,126					12,340
Other assets	156,486					83,231
TOTAL ASSETS	$	13,819,378				$	10,737,857
LIABILITIES
Deposits:
Noninterest-bearing	$	2,260,351				$	1,353,165
Interest-bearing	8,705,637					6,966,163
Total Deposits	10,965,988					8,319,328
Borrowings:
Federal funds purchased	—					75,000
Securities sold under repurchase agreements	181,150					119,674
Federal Home Loan Bank advances	400,817					460,042
Subordinated debentures and other borrowings	285,197					138,574
Total Borrowings	867,164					793,290
Interest payable	5,587					6,740
Other liabilities	171,544					116,863
Total Liabilities	12,010,283					9,236,221
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 - 53,795,500 and 49,456,594 shares	6,724					6,182
Additional paid-in capital	1,002,962					841,365
Retained earnings	735,439					639,362
Accumulated other comprehensive income (loss)	63,845					14,602
Total Stockholders' Equity	1,809,095					1,501,636
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	13,819,378				$	10,737,857

CONSOLIDATED STATEMENTS OF INCOME	Three Months Ended								Six Months Ended
(Dollars In Thousands, Except Per Share Amounts)	June 30,								June 30,
	2020				2019				2020				2019
INTEREST INCOME
Loans receivable:
Taxable	$	87,312			$	92,824			$	183,964			$	183,305
Tax-exempt	5,359				4,244				10,674				8,397
Investment securities:
Taxable	6,147				6,998				13,778				13,093
Tax-exempt	10,019				7,454				19,354				14,325
Deposits with financial institutions	134				784				709				1,659
Federal Home Loan Bank stock	281				335				580				673
Total Interest Income	109,252				112,639				229,059				221,452
INTEREST EXPENSE
Deposits	12,707				23,087				34,455				42,681
Federal funds purchased	2				117				113				210
Securities sold under repurchase agreements	92				342				444				672
Federal Home Loan Bank advances	1,794				1,692				3,568				3,506
Subordinated debentures and other borrowings	1,639				2,123				3,584				4,239
Total Interest Expense	16,234				27,361				42,164				51,308
NET INTEREST INCOME	93,018				85,278				186,895				170,144
Provision for loan losses	21,895				500				41,647				1,700
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	71,123				84,778				145,248				168,444
OTHER INCOME
Service charges on deposit accounts	4,312				5,437				10,282				10,532
Fiduciary and wealth management fees	5,601				3,931				11,586				7,749
Card payment fees	6,097				4,829				12,004				9,655
Net gains and fees on sales of loans	3,674				1,736				7,037				3,031
Derivative hedge fees	1,042				1,487				2,981				2,268
Other customer fees	333				341				731				780
Earnings on cash surrender value of life insurance	1,326				946				2,686				1,935
Net realized gains on sales of available for sale securities	3,068				1,843				7,680				2,983
Other income	1,028				1,064				1,293				1,394
Total Other Income	26,481				21,614				56,280				40,327
OTHER EXPENSES
Salaries and employee benefits	35,698				32,709				74,941				65,737
Net occupancy	5,447				4,469				11,248				9,496
Equipment	4,489				4,117				8,833				7,759
Marketing	2,092				2,752				3,535				3,826
Outside data processing fees	2,618				3,929				6,817				7,613
Printing and office supplies	279				334				666				649
Intangible asset amortization	1,511				1,520				3,025				3,048
FDIC assessments	1,472				678				2,995				1,385
Other real estate owned and foreclosure expenses	684				903				1,189				2,068
Professional and other outside services	1,553				2,376				3,811				4,260
Other expenses	4,146				3,800				9,100				8,367
Total Other Expenses	59,989				57,587				126,160				114,208
INCOME BEFORE INCOME TAX	37,615				48,805				75,368				94,563
Income tax expense	4,623				7,749				8,113				14,690
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	32,992			$	41,056			$	67,255			$	79,873
Per Share Data:
Basic Net Income Available to Common Stockholders	$	0.62			$	0.83			$	1.24			$	1.62
Diluted Net Income Available to Common Stockholders	$	0.62			$	0.83			$	1.24			$	1.61
Cash Dividends Paid	$	0.26			$	0.26			$	0.52			$	0.48
Average Diluted Shares Outstanding (in thousands)	53,943				49,550				54,430				49,545

FINANCIAL HIGHLIGHTS
(Dollars in thousands)	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2020				2019				2020				2019
NET CHARGE-OFFS	$	230			$	128			$	812			$	978
AVERAGE BALANCES:
Total Assets	$	13,655,322			$	10,499,948			$	13,114,280			$	10,291,205
Total Loans	9,180,610				7,385,315				8,853,591				7,308,146
Total Earning Assets	12,187,442				9,518,892				11,739,936				9,326,579
Total Deposits	10,789,909				8,321,459				10,338,091				8,130,120
Total Stockholders' Equity	1,795,509				1,479,254				1,805,963				1,454,633
FINANCIAL RATIOS:
Return on Average Assets	0.97		%		1.56		%		1.03		%		1.55		%
Return on Average Stockholders' Equity	7.35				11.10				7.45				10.98
Return on Average Common Stockholders' Equity	7.35				11.10				7.45				10.98
Average Earning Assets to Average Assets	89.25				90.66				89.52				90.63
Allowance for Loan Losses as % of Total Loans	1.30				1.08				1.30				1.08
Net Charge-offs as % of Average Loans (Annualized)	0.01				0.01				0.02				0.03
Average Stockholders' Equity to Average Assets	13.15				14.09				13.77				14.13
Tax Equivalent Yield on Average Earning Assets	3.72				4.86				4.04				4.88
Interest Expense/Average Earning Assets	0.53				1.15				0.72				1.10
Net Interest Margin (FTE) on Average Earning Assets	3.19				3.71				3.32				3.78
Efficiency Ratio	47.95				51.00				50.09				51.09
Tangible Common Book Value Per Share	$	23.04			$	21.01			$	23.04			$	21.01

NON-PERFORMING ASSETS
(Dollars In Thousands)	June 30,				March 31,				December 31,				September 30,				June 30,
	2020				2020				2019				2019				2019
Non-Accrual Loans	$	50,102			$	15,649			$	15,949			$	22,728			$	25,635
Renegotiated Loans	1,086				665				841				576				640
Non-Performing Loans (NPL)	51,188				16,314				16,790				23,304				26,275
Other Real Estate Owned and Repossessions	7,409				8,017				7,527				7,156				1,131
Non-Performing Assets (NPA)	58,597				24,331				24,317				30,460				27,406
90+ Days Delinquent	4,981				312				69				82				209
NPAs & 90 Day Delinquent	$	63,578			$	24,643			$	24,386			$	30,542			$	27,615
Allowance for Loan Losses	$	121,119			$	99,454			$	80,284			$	80,571			$	81,274
Quarterly Net Charge-offs	230				582				787				1,303				128
NPAs / Actual Assets %	0.42		%		0.19		%		0.20		%		0.25		%		0.26		%
NPAs & 90 Day / Actual Assets %	0.46		%		0.19		%		0.20		%		0.25		%		0.26		%
NPAs / Actual Loans and OREO %	0.63		%		0.28		%		0.29		%		0.37		%		0.36		%
Allowance for Loan Losses / Actual Loans (%)	1.30		%		1.15		%		0.95		%		0.97		%		1.08		%
Net Charge-offs as % of Average Loans (Annualized)	0.01		%		0.03		%		0.04		%		0.07		%		0.01		%

CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)	June 30,					March 31,					December 31,					September 30,					June 30,
	2020					2020					2019					2019					2019
ASSETS
Cash and cash equivalents	$	229,759				$	127,731				$	177,201				$	202,383				$	128,185
Interest-bearing time deposits	380,021					132,944					118,263					230,101					129,614
Investment securities	2,789,379					2,697,954					2,596,063					2,489,420					2,092,924
Loans held for sale	901					5,039					9,037					7,910					5,854
Loans	9,298,541					8,606,849					8,459,310					8,299,260					7,511,370
Less: Allowance for loan losses	(121,119		)			(99,454		)			(80,284		)			(80,571		)			(81,274		)
Net loans	9,177,422					8,507,395					8,379,026					8,218,689					7,430,096
Premises and equipment	112,548					114,045					113,055					113,446					91,767
Federal Home Loan Bank stock	28,736					28,736					28,736					28,736					24,588
Interest receivable	57,063					47,489					48,901					45,923					45,150
Goodwill and other intangibles	575,855					577,366					578,880					579,751					466,736
Cash surrender value of life insurance	290,715					289,574					288,206					286,747					226,241
Other real estate owned	7,367					7,972					7,527					7,156					1,131
Tax asset, deferred and receivable	13,126					9,497					12,165					15,187					12,340
Other assets	156,486					147,776					100,194					99,612					83,231
TOTAL ASSETS	$	13,819,378				$	12,693,518				$	12,457,254				$	12,325,061				$	10,737,857
LIABILITIES
Deposits:
Noninterest-bearing	$	2,260,351				$	1,688,205				$	1,736,396				$	1,777,365				$	1,353,165
Interest-bearing	8,705,637					8,182,279					8,103,560					7,988,086					6,966,163
Total Deposits	10,965,988					9,870,484					9,839,956					9,765,451					8,319,328
Borrowings:
Federal funds purchased	—					47,000					55,000					—					75,000
Securities sold under repurchase agreements	181,150					183,317					187,946					191,603					119,674
Federal Home Loan Bank advances	400,817					480,995					351,072					354,609					460,042
Subordinated debentures and other borrowings	285,197					128,741					138,685					138,630					138,574
Total Borrowings	867,164					840,053					732,703					684,842					793,290
Interest payable	5,587					7,746					6,754					7,855					6,740
Other liabilities	171,544					197,275					91,404					117,901					116,863
Total Liabilities	12,010,283					10,915,558					10,670,817					10,576,049					9,236,221
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	6,724					6,719					6,921					6,918					6,182
Additional paid-in capital	1,002,962					1,000,942					1,054,997					1,053,148					841,365
Retained earnings	735,439					716,518					696,520					663,173					639,362
Accumulated other comprehensive income (loss)	63,845					53,656					27,874					25,648					14,602
Total Stockholders' Equity	1,809,095					1,777,960					1,786,437					1,749,012					1,501,636
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	13,819,378				$	12,693,518				$	12,457,254				$	12,325,061				$	10,737,857

CONSOLIDATED STATEMENTS OF INCOME
(Dollars In Thousands, Except Per Share Amounts)	June 30,				March 31,				December 31,				September 30,					June 30,
	2020				2020				2019				2019					2019
INTEREST INCOME
Loans receivable:
Taxable	$	87,312			$	96,652			$	102,617			$	96,850				$	92,824
Tax-exempt	5,359				5,315				4,671				4,500					4,244
Investment securities:
Taxable	6,147				7,631				7,993				6,729					6,998
Tax-exempt	10,019				9,335				8,995				8,335					7,454
Deposits with financial institutions	134				575				1,203				1,363					784
Federal Home Loan Bank stock	281				299				342				355					335
Total Interest Income	109,252				119,807				125,821				118,132					112,639
INTEREST EXPENSE
Deposits	12,707				21,748				24,074				24,830					23,087
Federal funds purchased	2				111				26				15					117
Securities sold under repurchase agreements	92				352				367				385					342
Federal Home Loan Bank advances	1,794				1,774				1,776				1,894					1,692
Subordinated debentures and other borrowings	1,639				1,945				1,994				2,076					2,123
Total Interest Expense	16,234				25,930				28,237				29,200					27,361
NET INTEREST INCOME	93,018				93,877				97,584				88,932					85,278
Provision for loan losses	21,895				19,752				500				600					500
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	71,123				74,125				97,084				88,332					84,778
OTHER INCOME
Service charges on deposit accounts	4,312				5,970				6,312				6,107					5,437
Fiduciary and wealth management fees	5,601				5,985				5,384				4,429					3,931
Card payment fees	6,097				5,907				5,430				5,158					4,829
Net gains and fees on sales of loans	3,674				3,363				2,633				2,227					1,736
Derivative hedge fees	1,042				1,939				1,405				1,684					1,487
Other customer fees	333				398				434				450					341
Earnings on cash surrender value of life insurance	1,326				1,360				1,458				1,144					946
Net realized gains on sales of available for sale securities	3,068				4,612				1,039				393					1,843
Other income	1,028				265				150				524					1,064
Total Other Income	26,481				29,799				24,245				22,116					21,614
OTHER EXPENSES
Salaries and employee benefits	35,698				39,243				39,358				38,942					32,709
Net occupancy	5,447				5,801				5,311				4,777					4,469
Equipment	4,489				4,344				4,429				4,030					4,117
Marketing	2,092				1,443				1,492				1,332					2,752
Outside data processing fees	2,618				4,199				4,428				4,435					3,929
Printing and office supplies	279				387				484				312					334
Intangible asset amortization	1,511				1,514				1,590				1,356					1,520
FDIC assessments	1,472				1,523				—				(668		)			678
Other real estate owned and foreclosure expenses	684				505				66				294					903
Professional and other outside services	1,553				2,258				2,899				8,251					2,376
Other expenses	4,146				4,954				5,144				4,293					3,800
Total Other Expenses	59,989				66,171				65,201				67,354					57,587
INCOME BEFORE INCOME TAX	37,615				37,753				56,128				43,094					48,805
Income tax expense	4,623				3,490				8,298				6,337					7,749
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	32,992			$	34,263			$	47,830			$	36,757				$	41,056
Per Share Data:
Basic Net Income Available to Common Stockholders	$	0.62			$	0.63			$	0.87			$	0.71				$	0.83
Diluted Net Income Available to Common Stockholders	$	0.62			$	0.62			$	0.87			$	0.71				$	0.83
Cash Dividends Paid	$	0.26			$	0.26			$	0.26			$	0.26				$	0.26
Average Diluted Shares Outstanding (in thousands)	53,943				54,918				55,520				51,570					49,550
FINANCIAL RATIOS:
Return on Average Assets	0.97		%		1.09		%		1.53		%		1.30			%		1.56		%
Return on Average Stockholders' Equity	7.35				7.55				10.82				9.21					11.10
Return on Average Common Stockholders' Equity	7.35				7.55				10.82				9.21					11.10
Average Earning Assets to Average Assets	89.25				89.81				89.71				90.37					90.66
Allowance for Loan Losses as % of Total Loans	1.30				1.15				0.95				0.97					1.08
Net Charge-offs as % of Average Loans (Annualized)	0.01				0.03				0.04				0.07					0.01
Average Stockholders' Equity to Average Assets	13.15				14.45				14.17				14.16					14.09
Tax Equivalent Yield on Average Earning Assets	3.72				4.38				4.63				4.77					4.86
Interest Expense/Average Earning Assets	0.53				0.92				1.01				1.15					1.15
Net Interest Margin (FTE) on Average Earning Assets	3.19				3.46				3.62				3.62					3.71
Efficiency Ratio	47.95				52.17				51.07				57.60					51.00
Tangible Common Book Value Per Share	$	23.04			$	22.46			$	21.94			$	21.26				$	21.01

LOANS
(Dollars In Thousands)	June 30,				March 31,				December 31,				September 30,				June 30,
	2020				2020				2019				2019				2019
Commercial and industrial loans	$	2,898,329			$	2,199,226			$	2,109,879			$	2,034,311			$	1,877,042
Agricultural production financing and other loans to farmers	93,838				87,421				93,861				90,462				83,452
Real estate loans:
Construction	640,560				643,674				787,568				670,138				624,548
Commercial and farmland	3,239,998				3,268,168				3,052,698				3,144,649				2,821,689
Residential	1,145,187				1,121,556				1,143,217				1,155,403				993,802
Home equity	532,314				570,398				588,984				601,335				548,006
Individuals' loans for household and other personal expenditures	123,611				129,765				135,989				131,246				98,384
Public finance and other commercial loans	624,704				586,641				547,114				471,716				464,447
Loans	9,298,541				8,606,849				8,459,310				8,299,260				7,511,370
Allowance for loan losses	(121,119		)		(99,454		)		(80,284		)		(80,571		)		(81,274		)
NET LOANS	$	9,177,422			$	8,507,395			$	8,379,026			$	8,218,689			$	7,430,096

DEPOSITS
(Dollars In Thousands)	June 30,				March 31,				December 31,				September 30,				June 30,
	2020				2020				2019				2019				2019
Demand deposits	$	6,288,360			$	5,293,200			$	5,250,568			$	5,183,971			$	4,309,473
Savings deposits	3,278,156				2,962,821				2,896,177				2,808,745				2,358,720
Certificates and other time deposits of $100,000 or more	607,474				694,062				736,843				731,693				720,536
Other certificates and time deposits	669,119				717,723				741,759				811,780				729,392
Brokered deposits	122,879				202,678				214,609				229,262				201,207
TOTAL DEPOSITS	$	10,965,988			$	9,870,484			$	9,839,956			$	9,765,451			$	8,319,328

CONSOLIDATED AVERAGE BALANCE SHEET AND NET INTEREST MARGIN ANALYSIS
(Dollars in Thousands)
	For the Three Months Ended
	June 30, 2020											June 30, 2019
	Average Balance				Interest  Income / Expense				Average Rate			Average Balance				Interest  Income / Expense				Average Rate
Assets:
Interest-bearing time deposits	$	378,489			$	134			0.14	%		$	144,626			$	784			2.17	%
Federal Home Loan Bank stock	28,736				281				3.91			24,588				335				5.45
Investment Securities: (1)
Taxable	1,282,080				6,147				1.92			1,054,068				6,998				2.66
Tax-Exempt (2)	1,317,527				12,682				3.85			910,295				9,435				4.15
Total Investment Securities	2,599,607				18,829				2.90			1,964,363				16,433				3.35
Loans held for sale	12,630				131				4.15			11,430				127				4.44
Loans: (3)
Commercial	6,890,010				69,463				4.03			5,419,169				74,638				5.51
Real Estate Mortgage	887,257				10,122				4.56			766,528				8,686				4.53
Installment	724,165				7,596				4.20			677,133				9,373				5.54
Tax-Exempt (2)	666,548				6,784				4.07			511,055				5,372				4.20
Total Loans	9,180,610				94,096				4.10			7,385,315				98,196				5.32
Total Earning Assets	12,187,442				113,340				3.72	%		9,518,892				115,748				4.86	%
Net unrealized gain (loss) on securities available for sale	56,807											12,841
Allowance for loan losses	(106,858		)									(81,691		)
Cash and cash equivalents	303,491											130,987
Premises and equipment	113,528											91,563
Other assets	1,100,912											827,356
Total Assets	$	13,655,322										$	10,499,948
Liabilities:
Interest-bearing deposits:
Interest-bearing deposits	$	3,951,819			$	4,186			0.42	%		$	2,935,925			$	8,541			1.16	%
Money market deposits	1,673,104				1,696				0.41			1,220,020				3,509				1.15
Savings deposits	1,521,312				596				0.16			1,164,901				2,525				0.87
Certificates and other time deposits	1,498,002				6,229				1.66			1,652,203				8,512				2.06
Total Interest-bearing Deposits	8,644,237				12,707				0.59			6,973,049				23,087				1.32
Borrowings	909,258				3,527				1.55			613,446				4,274				2.79
Total Interest-bearing Liabilities	9,553,495				16,234				0.68			7,586,495				27,361				1.44
Noninterest-bearing deposits	2,145,672											1,348,410
Other liabilities	160,646											85,789
Total Liabilities	11,859,813											9,020,694
Stockholders' Equity	1,795,509											1,479,254
Total Liabilities and Stockholders' Equity	$	13,655,322			16,234							$	10,499,948			27,361
Net Interest Income (FTE)					$	97,106										$	88,387
Net Interest Spread (FTE) (4)									3.04	%										3.42	%
Net Interest Margin (FTE):
Interest Income (FTE) / Average Earning Assets									3.72	%										4.86	%
Interest Expense / Average Earning Assets									0.53	%										1.15	%
Net Interest Margin (FTE) (5)									3.19	%										3.71	%
(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 $4,088 and $3,109 for the three months ended June 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 Six Months Ended
	June 30, 2020											June 30, 2019
	Average Balance				Interest  Income / Expense				Average Rate			Average Balance				Interest  Income / Expense				Average Rate
Assets:
Federal Funds Sold
Interest-bearing time deposits	$	269,174			$	709			0.53	%		$	145,277			$	1,659			2.28	%
Federal Home Loan Bank stock	28,736				580				4.04			24,588				673				5.47
Investment Securities: (1)
Taxable	1,325,313				13,778				2.08			978,654				13,093				2.68
Tax-Exempt (2)	1,263,122				24,499				3.88			869,914				18,133				4.17
Total Investment Securities	2,588,435				38,277				2.96			1,848,568				31,226				3.38
Loans held for sale	14,924				324				4.34			10,697				239				4.47
Loans: (3)
Commercial	6,562,673				146,415				4.46			5,364,884				147,394				5.49
Real Estate Mortgage	878,956				20,524				4.67			755,070				17,008				4.51
Installment	741,889				16,701				4.50			671,125				18,664				5.56
Tax-Exempt (2)	655,149				13,511				4.12			506,370				10,629				4.20
Total Loans	8,853,591				197,475				4.46			7,308,146				193,934				5.31
Total Earning Assets	11,739,936				237,041				4.04	%		9,326,579				227,492				4.88	%
Net unrealized gain on securities available for sale	52,732											3,963
Allowance for loan losses	(94,009		)									(81,301		)
Cash and cash equivalents	231,624											124,143
Premises and equipment	113,670											92,395
Other assets	1,070,327											825,426
Total Assets	$	13,114,280										$	10,291,205
Liabilities:
Interest-bearing deposits:
Interest-bearing deposits	$	3,770,530			$	12,461			0.66	%		$	2,813,541			$	15,560			1.11	%
Money market deposits	1,604,474				5,479				0.68			1,179,765				6,291				1.07
Savings deposits	1,473,183				2,424				0.33			1,157,852				4,792				0.83
Certificates and other time deposits	1,582,322				14,091				1.78			1,609,130				16,038				1.99
Total Interest-bearing Deposits	8,430,509				34,455				0.82			6,760,288				42,681				1.26
Borrowings	828,721				7,709				1.86			624,192				8,627				2.76
Total Interest-bearing Liabilities	9,259,230				42,164				0.91			7,384,480				51,308				1.39
Noninterest-bearing deposits	1,907,582											1,369,832
Other liabilities	141,505											82,260
Total Liabilities	11,308,317											8,836,572
Stockholders' Equity	1,805,963											1,454,633
Total Liabilities and Stockholders' Equity	$	13,114,280			42,164							$	10,291,205			51,308
Net Interest Income (FTE)					$	194,877										$	176,184
Net Interest Spread (FTE) (4)									3.13	%										3.49	%
Net Interest Margin (FTE):
Interest Income (FTE) / Average Earning Assets									4.04	%										4.88	%
Interest Expense / Average Earning Assets									0.72	%										1.10	%
Net Interest Margin (FTE) (5)									3.32	%										3.78	%
(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 $7,982 and $6,040 for the six months ended June 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