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 [phone].  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 [phone]. 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