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First Merchants Corporation Announces Record 2017 Results

MUNCIE, Ind., Jan. 25, 2018 (GLOBE NEWSWIRE) -- First Merchants Corporation (NASDAQ:FRME) reported record fourth quarter 2017 net income of $24.4 million, compared to $22.3 million during the fourth quarter of 2016. Earnings per share for the period totaled $.49 per share compared to $.55 during the same period in 2016. Our fourth quarter results included the impact of the recently enacted Tax Cuts and Jobs Act (the “TCJA”). Specifically, our federal income tax expense was elevated by $5.1 million, or $.10 per share due to deferred tax asset write-downs. Acquisition expenses related to the completion of our Independent Alliance Banks acquisition totaled $1.4 million, or $.02 per share, for the quarter.

Year-to-date net income totaled a record $96.1 million, compared to $81.1 million during the same period in 2016. Earnings per share for the year ended December 31, 2017 totaled $2.12 per share, an increase of $.14 per share, or 7.1 percent, over 2016. The enactment of the TCJA resulted in a reduction of annual profits by $5.1 million, or $.11 per share. Acquisition expenses related to The Arlington Bank and Independent Alliance Banks totaled $12.2 million, or $.18 per share. Our 2017 franchise expansion impacts balance sheet, income, expense and share growth throughout the financial statements.

Michael C. Rechin, President and Chief Executive Officer, stated, “2017 was a record setting year for First Merchants. Our results were fueled by the growth of our clients and the skill and commitment of our teammates. Annual organic loan growth of 12.8 percent, when combined with the acquisitions of Independent Alliance Banks in the Fort Wayne market and The Arlington Bank in the Columbus, Ohio MSA, allowed our total assets to increase by 30 percent for the year.” Rechin also added, “Profitability enhancements in 2017 are further accelerated by significant tax savings in 2018. These improvements in our core business allowed First Merchants to achieve a record share price in 2017 and our business begins 2018 with optimism.”

Total assets reached a record $9.4 billion as of year-end and loans totaled a record $6.8 billion, compared to $7.2 billion and $5.1 billion, as of December 31, 2016. Organic loan growth totaled an annualized rate of 16.7 percent for the fourth quarter and 12.8 percent for the year. Organic deposits grew at an annualized rate of 15.1 percent in the fourth quarter and 9 percent during the year. Inclusive of acquisition growth, total deposits reached $7.2 billion as of December 31, 2017, representing a 29.1 percent increase. Tangible common equity also increased to record levels for the year totaling $834 million, or $16.96 per share, compared to $649 million, or $15.85 per share, as of December 31, 2016.

Net-interest income totaled $78.8 million for the quarter and net-interest margin increased by 20 basis points over the fourth quarter of 2016, totaling 4.10 percent. Yields on earning assets totaled 4.67 percent and the cost of supporting liabilities totaled .57 percent. Fair value accretion added 20 basis points to net-interest margin this quarter compared to 18 basis points in the fourth quarter of 2016.

Non-interest income totaled $19.1 million for the quarter, up $3.0 million from the fourth quarter of 2016 total of $16.1 million. Non-interest expense totaled $56.4 million for the quarter, an increase from $41.9 million during the fourth quarter of 2016, reflecting the inclusion of $1.4 million of merger related expenses.

Tax expense for the quarter totaled $15.2 million, or 38.4 percent of income before income taxes, compared to $7.9 million, or 26.0 percent in the fourth quarter of 2016. The impact of the deferred tax asset write-downs in 2017 will be more than offset by the savings from the reduced tax rate to be realized in 2018.

The Corporation’s provision expense totaled $1.8 million compared to $2.4 million during the same period in 2016. The provision expense in the quarter provided allowance coverage for the organic loan growth. The allowance for loan losses now totals $75.0 million as of December 31, 2017, an increase from $66.0 million as of December 31, 2016. Non-accrual loans totaled $28.7 million as of year-end and the allowance is 1.11 percent of total loans and 1.36 percent of non-purchased loans.

As of December 31, 2017, the Corporation’s total risk-based capital ratio equaled 13.69 percent, common equity tier 1 capital ratio equaled 11.00 percent, and the tangible common equity ratio totaled 9.30 percent.

CONFERENCE CALL

First Merchants Corporation will conduct a fourth quarter earnings conference call and web cast at 2:30 p.m. (ET) on Thursday, January 25, 2018.

To participate, dial (Toll Free) 877-507-0578 and reference First Merchants Corporation's fourth quarter earnings release. International callers please call +1 412-317-1073. A replay of the call will be available until February 25, 2018. To access a replay of the call, US participants should dial (Toll Free) 877-344-7529, or for International participants, dial +1 412-317-0088. The replay passcode is 10114961.

In order to view the web cast and presentation slides, please go to http://services.choruscall.com/links/frme180125.html during the time of the call. A replay of the web cast will be available until January 25, 2019.

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 Lafayette Bank & Trust and First Merchants Private Wealth Advisors (each 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)December 31
2017 2016
ASSETS
Cash and cash equivalents$154,905 $127,927
Interest-bearing time deposits35,027 24,459
Investment securities1,560,602 1,304,505
Loans held for sale7,216 2,929
Loans6,751,199 5,139,645
Less: Allowance for loan losses(75,032) (66,037)
Net loans6,676,167 5,073,608
Premises and equipment95,852 94,432
Federal Home Loan Bank stock23,825 17,964
Interest receivable37,130 26,194
Goodwill and other intangibles476,503 258,866
Cash surrender value of life insurance223,557 201,671
Other real estate owned10,373 8,966
Tax asset, deferred and receivable23,983 39,384
Other assets42,338 30,706
TOTAL ASSETS$9,367,478 $7,211,611
LIABILITIES
Deposits:
Noninterest-bearing$1,761,553 $1,348,267
Interest-bearing5,410,977 4,208,231
Total Deposits7,172,530 5,556,498
Borrowings:
Federal funds purchased144,038 120,349
Securities sold under repurchase agreements136,623 146,480
Federal Home Loan Bank advances414,377 298,923
Subordinated debentures and term loans139,349 128,445
Total Borrowings834,387 694,197
Interest payable4,390 3,110
Other liabilities52,708 56,149
Total Liabilities8,064,015 6,309,954
STOCKHOLDERS' EQUITY
Cumulative Preferred Stock, $1,000 par value, $1,000 liquidation value:
Authorized -- 600 shares
Issued and outstanding - 125 shares125 125
Common Stock, $.125 stated value:
Authorized -- 100,000,000 and 50,000,000 shares (1)
Issued and outstanding - 49,158,238 and 40,912,697 shares6,145 5,114
Additional paid-in capital834,870 509,018
Retained earnings465,231 400,981
Accumulated other comprehensive income (loss)(2,908) (13,581)
Total Stockholders' Equity1,303,463 901,657
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$9,367,478 $7,211,611

(1) On May 1, 2017, the shareholders of First Merchants Corporation approved an amendment to the Articles of Incorporation to increase the number of shares of common stock authorized to issue from 50,000,000 to 100,000,000 shares.

CONSOLIDATED STATEMENTS OF INCOMEThree Months Ended Twelve Months Ended
(Dollars In Thousands, Except Per Share Amounts)December 31, December 31,
2017 2016 2017 2016
INTEREST INCOME
Loans receivable:
Taxable$76,470 $53,895 $263,704 $210,302
Tax-exempt3,018 2,096 10,694 6,525
Investment securities:
Taxable4,477 3,893 17,489 16,415
Tax-exempt5,830 4,862 21,379 18,622
Deposits with financial institutions294 67 736 350
Federal Reserve and Federal Home Loan Bank stock259 192 894 1,098
Total Interest Income90,348 65,005 314,896 253,312
INTEREST EXPENSE
Deposits7,835 3,886 23,806 15,914
Federal funds purchased55 40 561 102
Securities sold under repurchase agreements146 91 477 374
Federal Home Loan Bank advances1,577 797 5,196 3,264
Subordinated debentures and term loans1,970 1,817 7,572 7,185
Total Interest Expense11,583 6,631 37,612 26,839
NET INTEREST INCOME78,765 58,374 277,284 226,473
Provision for loan losses1,800 2,417 9,143 5,657
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES76,965 55,957 268,141 220,816
OTHER INCOME
Service charges on deposit accounts5,066 4,534 18,722 17,762
Fiduciary activities3,345 2,500 11,589 9,818
Other customer fees5,346 4,784 20,956 19,315
Earnings on cash surrender value of life insurance1,133 886 6,577 4,273
Net gains and fees on sales of loans2,355 1,886 7,564 7,052
Net realized gains on sales of available for sale securities1,134 847 2,631 3,389
Other income682 683 2,970 3,594
Total Other Income19,061 16,120 71,009 65,203
OTHER EXPENSES
Salaries and employee benefits33,760 22,994 119,812 102,552
Net occupancy4,424 4,568 16,976 16,997
Equipment3,898 3,069 13,090 12,497
Marketing1,361 790 3,739 3,008
Outside data processing fees3,378 2,672 12,242 9,148
Printing and office supplies378 301 1,283 1,348
Intangible asset amortization2,055 977 5,647 3,910
FDIC assessments711 550 2,564 3,036
Other real estate owned and foreclosure expenses311 574 1,903 2,877
Professional and other outside services1,914 1,634 12,757 6,516
Other expenses4,243 3,805 15,543 15,470
Total Other Expenses56,433 41,934 205,556 177,359
INCOME BEFORE INCOME TAX39,593 30,143 133,594 108,660
Income tax expense15,210 7,850 37,524 27,609
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS$24,383 $22,293 $96,070 $81,051
Per Share Data:
Basic Net Income Available to Common Stockholders$0.49 $0.55 $2.13 $1.99
Diluted Net Income Available to Common Stockholders$0.49 $0.55 $2.12 $1.98
Cash Dividends Paid$0.18 $0.15 $0.69 $0.54
Average Diluted Shares Outstanding (in thousands)49,379 41,124 45,403 41,013


FINANCIAL HIGHLIGHTS
(Dollars in thousands)Three Months Ended Twelve Months Ended
December 31, December 31,
2017 2016 2017 2016
NET CHARGE-OFFS$122 $(164) $148 $2,073
AVERAGE BALANCES:
Total Assets$9,174,237 $7,086,456 $8,196,229 $6,899,265
Total Loans6,575,055 5,008,066 5,881,284 4,814,005
Total Earning Assets8,139,993 6,367,973 7,335,702 6,180,050
Total Deposits7,142,375 5,585,468 6,368,751 5,438,217
Total Stockholders' Equity1,294,810 903,610 1,110,524 884,664
FINANCIAL RATIOS:
Return on Average Assets1.06% 1.26% 1.17% 1.17%
Return on Average Stockholders' Equity7.53 9.87 8.65 9.16
Return on Average Common Stockholders' Equity7.53 9.87 8.65 9.16
Average Earning Assets to Average Assets88.73 89.86 89.50 89.58
Allowance for Loan Losses as % of Total Loans1.11 1.28 1.11 1.28
Net Charge-offs as % of Average Loans (Annualized)0.01 (0.01) 0.04
Average Stockholders' Equity to Average Assets14.11 12.75 13.55 12.82
Tax Equivalent Yield on Earning Assets4.67 4.32 4.53 4.32
Cost of Supporting Liabilities0.57 0.42 0.51 0.43
Net Interest Margin (FTE) on Earning Assets4.10 3.90 4.02 3.89
Efficiency Ratio53.29 52.18 54.56 56.51
Tangible Common Book Value Per Share$16.96 $15.85 $16.96 $15.85


NON-PERFORMING ASSETS
(Dollars In Thousands)December 31, September 30, June 30, March 31, December 31,
2017 2017 2017 2017 2016
Non-Accrual Loans$28,724 $32,253 $27,347 $27,920 $29,998
Renegotiated Loans1,013 626 384 876 4,747
Non-Performing Loans (NPL)29,737 32,879 27,731 28,796 34,745
Other Real Estate Owned10,373 11,912 11,893 8,293 8,966
Non-Performing Assets (NPA)40,110 44,791 39,624 37,089 43,711
90+ Days Delinquent924 425 634 123 112
NPAs & 90 Day Delinquent$41,034 $45,216 $40,258 $37,212 $43,823
Allowance for Loan Losses$75,032 $73,354 $70,471 $68,225 $66,037
Quarterly Net Charge-offs122 (800) 629 197 (164)
NPAs / Actual Assets %0.43% 0.49% 0.51% 0.51% 0.61%
NPAs & 90 Day / Actual Assets %0.44% 0.50% 0.52% 0.51% 0.61%
NPAs / Actual Loans and OREO %0.59% 0.69% 0.70% 0.70% 0.85%
Allowance for Loan Losses / Actual Loans (%)1.11% 1.13% 1.25% 1.29% 1.28%
Net Charge-offs as % of Average Loans (Annualized)0.01% (0.05)% 0.05% 0.02% (0.01)%


CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)December 31, September 30, June 30, March 31, December 31,
2017 2017 2017 2017 2016
ASSETS
Cash and cash equivalents$154,905 $146,607 $142,650 $104,247 $127,927
Interest-bearing time deposits35,027 72,950 48,305 20,439 24,459
Investment securities1,560,602 1,468,887 1,343,323 1,327,217 1,304,505
Loans held for sale7,216 4,514 4,036 1,262 2,929
Loans6,751,199 6,483,448 5,613,144 5,274,909 5,139,645
Less: Allowance for loan losses(75,032) (73,354) (70,471) (68,225) (66,037)
Net loans6,676,167 6,410,094 5,542,673 5,206,684 5,073,608
Premises and equipment95,852 102,485 92,637 91,311 94,432
Federal Home Loan Bank stock23,825 23,825 19,015 17,964 17,964
Interest receivable37,130 32,366 27,597 25,174 26,194
Goodwill and other intangibles476,503 478,558 309,686 257,963 258,866
Cash surrender value of life insurance223,557 222,437 200,125 202,574 201,671
Other real estate owned10,373 11,912 11,893 8,293 8,966
Tax asset, deferred and receivable23,983 36,024 27,331 32,074 39,384
Other assets42,338 38,744 35,758 30,991 30,706
TOTAL ASSETS$9,367,478 $9,049,403 $7,805,029 $7,326,193 $7,211,611
LIABILITIES
Deposits:
Noninterest-bearing$1,761,553 $1,662,814 $1,398,237 $1,373,778 $1,348,267
Interest-bearing5,410,977 5,248,205 4,618,867 4,261,531 4,208,231
Total Deposits7,172,530 6,911,019 6,017,104 5,635,309 5,556,498
Borrowings:
Federal funds purchased144,038 100,000 134,608 102,000 120,349
Securities sold under repurchase agreements136,623 142,107 127,884 139,007 146,480
Federal Home Loan Bank advances414,377 406,820 312,715 338,919 298,923
Subordinated debentures and term loans139,349 139,686 128,742 128,862 128,445
Total Borrowings834,387 788,613 703,949 708,788 694,197
Interest payable4,390 4,956 3,477 3,875 3,110
Other liabilities52,708 61,695 45,383 48,751 56,149
Total Liabilities8,064,015 7,766,283 6,769,913 6,396,723 6,309,954
STOCKHOLDERS' EQUITY
Cumulative Preferred Stock, $1,000 par value, $1,000 liquidation value:
Authorized -- 600 shares
Issued and outstanding125 125 125 125 125
Common Stock, $.125 stated value:
Authorized -- 100,000,000 and 50,000,000 shares (1)
Issued and outstanding6,145 6,143 5,394 5,131 5,114
Additional paid-in capital834,870 833,451 593,904 509,953 509,018
Retained earnings465,231 449,759 434,309 417,983 400,981
Accumulated other comprehensive income (loss)(2,908) (6,358) 1,384 (3,722) (13,581)
Total Stockholders' Equity1,303,463 1,283,120 1,035,116 929,470 901,657
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$9,367,478 $9,049,403 $7,805,029 $7,326,193 $7,211,611

(1) On May 1, 2017, the shareholders of First Merchants Corporation approved an amendment to the Articles of Incorporation to increase the number of shares of common stock authorized to issue from 50,000,000 to 100,000,000 shares.

CONSOLIDATED STATEMENTS OF INCOME
(Dollars In Thousands, Except Per Share Amounts)December 31, September 30, June 30, March 31, December 31,
2017 2017 2017 2017 2016
INTEREST INCOME
Loans receivable:
Taxable$76,470 $71,491 $59,386 $56,357 $53,895
Tax-exempt3,018 2,851 2,492 2,333 2,096
Investment securities:
Taxable4,477 4,524 4,180 4,308 3,893
Tax-exempt5,830 5,455 5,091 5,003 4,862
Deposits with financial institutions294 284 114 44 67
Federal Reserve and Federal Home Loan Bank stock259 242 204 189 192
Total Interest Income90,348 84,847 71,467 68,234 65,005
INTEREST EXPENSE
Deposits7,835 6,710 5,137 4,124 3,886
Federal funds purchased55 175 103 228 40
Securities sold under repurchase agreements146 133 110 88 91
Federal Home Loan Bank advances1,577 1,464 1,177 978 797
Subordinated debentures and term loans1,970 1,945 1,840 1,817 1,817
Total Interest Expense11,583 10,427 8,367 7,235 6,631
NET INTEREST INCOME78,765 74,420 63,100 60,999 58,374
Provision for loan losses1,800 2,083 2,875 2,385 2,417
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES76,965 72,337 60,225 58,614 55,957
OTHER INCOME
Service charges on deposit accounts5,066 5,044 4,438 4,174 4,534
Fiduciary activities3,345 2,995 2,609 2,640 2,500
Other customer fees5,346 5,341 5,406 4,863 4,784
Earnings on cash surrender value of life insurance1,133 1,575 2,971 898 886
Net gains and fees on sales of loans2,355 2,317 1,617 1,275 1,886
Net realized gains on sales of available for sale securities1,134 332 567 598 847
Other income682 1,064 826 398 683
Total Other Income19,061 18,668 18,434 14,846 16,120
OTHER EXPENSES
Salaries and employee benefits33,760 33,244 27,076 25,732 22,994
Net occupancy4,424 4,371 3,965 4,216 4,568
Equipment3,898 3,478 2,907 2,807 3,069
Marketing1,361 1,021 792 565 790
Outside data processing fees3,378 3,162 3,086 2,616 2,672
Printing and office supplies378 366 275 264 301
Intangible asset amortization2,055 1,698 991 903 977
FDIC assessments711 704 579 570 550
Other real estate owned and foreclosure expenses311 330 731 531 574
Professional and other outside services1,914 5,843 3,266 1,734 1,634
Other expenses4,243 4,491 3,648 3,161 3,805
Total Other Expenses56,433 58,708 47,316 43,099 41,934
INCOME BEFORE INCOME TAX39,593 32,297 31,343 30,361 30,143
Income tax expense15,210 7,939 7,207 7,168 7,850
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS$24,383 $24,358 $24,136 $23,193 $22,293
Per Share Data:
Basic Net Income Available to Common Stockholders$0.49 $0.50 $0.57 $0.57 $0.55
Diluted Net Income Available to Common Stockholders$0.49 $0.50 $0.57 $0.56 $0.55
Cash Dividends Paid$0.18 $0.18 $0.18 $0.15 $0.15
Average Diluted Shares Outstanding (in thousands)49,379 48,644 42,244 41,221 41,124
FINANCIAL RATIOS:
Return on Average Assets1.06% 1.11% 1.28% 1.29% 1.26%
Return on Average Stockholders' Equity7.53 7.83 9.82 10.15 9.87
Return on Average Common Stockholders' Equity7.53 7.83 9.82 10.15 9.87
Average Earning Assets to Average Assets88.73 89.16 89.97 90.43 89.86
Allowance for Loan Losses as % of Total Loans1.11 1.13 1.25 1.29 1.28
Net Charge-offs as % of Average Loans (Annualized)0.01 (0.05) 0.05 0.02 (0.01)
Average Stockholders' Equity to Average Assets14.11 14.15 12.98 12.67 12.75
Tax Equivalent Yield on Earning Assets4.67 4.56 4.44 4.42 4.32
Cost of Supporting Liabilities0.57 0.53 0.49 0.44 0.42
Net Interest Margin (FTE) on Earning Assets4.10 4.03 3.95 3.98 3.90
Efficiency Ratio53.29 58.30 53.61 52.61 52.18
Tangible Common Book Value Per Share$16.96 $16.62 $16.97 $16.49 $15.85


LOANS
(Dollars In Thousands)December 31, September 30, June 30, March 31, December 31,
2017 2017 2017 2017 2016
Commercial and industrial loans$1,493,493 $1,436,092 $1,289,884 $1,258,840 $1,194,646
Agricultural production financing and other loans to farmers121,757 117,751 75,746 77,021 79,689
Real estate loans:
Construction612,219 498,862 442,389 336,931 418,703
Commercial and farmland2,562,691 2,571,253 2,167,729 2,118,431 1,953,062
Residential962,765 938,437 847,580 737,918 739,169
Home equity514,021 502,240 436,038 423,708 418,525
Individuals' loans for household and other personal expenditures86,935 86,406 79,887 77,590 77,479
Lease financing receivables, net of unearned income2,527 3,877 232 261 311
Other commercial loans394,791 328,530 273,659 244,209 258,061
Loans6,751,199 6,483,448 5,613,144 5,274,909 5,139,645
Allowance for loan losses(75,032) (73,354) (70,471) (68,225) (66,037)
NET LOANS$6,676,167 $6,410,094 $5,542,673 $5,206,684 $5,073,608


DEPOSITS
(Dollars In Thousands)December 31, September 30, June 30, March 31, December 31,
2017 2017 2017 2017 2016
Demand deposits$3,746,654 $3,562,718 $3,015,846 $2,861,384 $2,866,853
Savings deposits1,994,366 1,884,705 1,708,478 1,565,174 1,560,752
Certificates and other time deposits of $100,000 or more468,895 503,668 362,589 312,327 276,274
Other certificates and time deposits581,894 585,042 511,935 476,741 471,247
Brokered deposits380,721 374,886 418,256 419,683 381,372
TOTAL DEPOSITS$7,172,530 $6,911,019 $6,017,104 $5,635,309 $5,556,498


NET INTEREST INCOME
(Dollars in Thousands)For the Three Months Ended
December 31, 2017 December 31, 2016
Average Balance Interest
Income /
Expense
Average
Rate
Average Balance Interest
Income /
Expense
Average
Rate
Assets:
Interest-bearing time deposits$87,172 $294 1.35% $49,835 $66 0.53%
Federal Reserve and Federal Home Loan Bank stock23,825 259 4.35 18,041 193 4.28
Investment Securities: (1)
Taxable755,341 4,477 2.37 710,902 3,893 2.19
Tax-Exempt (2)698,600 8,969 5.14 581,129 7,480 5.15
Total Investment Securities1,453,941 13,446 3.70 1,292,031 11,373 3.52
Loans held for sale13,657 216 6.33 1,611 81 20.11
Loans: (3)
Commercial4,806,978 60,015 4.99 3,655,414 41,830 4.58
Real Estate Mortgage737,668 8,320 4.51 557,259 6,125 4.40
Installment617,591 7,919 5.13 519,257 5,859 4.51
Tax-Exempt (2)399,161 4,643 4.65 274,525 3,225 4.70
Total Loans6,575,055 81,113 4.93 5,008,066 57,120 4.56
Total Earning Assets8,139,993 95,112 4.67 6,367,973 68,752 4.32
Net unrealized gain on securities available for sale4,131 7,221
Allowance for loan losses(73,675) (63,999)
Cash and cash equivalents182,970 113,414
Premises and equipment102,605 95,245
Other assets818,213 566,602
Total Assets$9,174,237 $7,086,456
Liabilities:
Interest-bearing deposits:
Interest-bearing NOW deposits$1,970,916 $2,185 0.44% $1,524,324 $730 0.19%
Money market deposits1,071,037 1,101 0.41 795,045 328 0.17
Savings deposits922,052 214 0.09 766,232 164 0.09
Certificates and other time deposits1,458,365 4,335 1.19 1,132,962 2,664 0.94
Total Interest-bearing Deposits5,422,370 7,835 0.58 4,218,563 3,886 0.37
Borrowings678,242 3,748 2.21 531,059 2,745 2.07
Total Interest-bearing Liabilities6,100,612 11,583 0.76 4,749,622 6,631 0.56
Noninterest-bearing deposits1,720,005 1,366,905
Other liabilities58,810 66,319
Total Liabilities7,879,427 6,182,846
Stockholders' Equity1,294,810 903,610
Total Liabilities and Stockholders' Equity$9,174,237 11,583 0.57 $7,086,456 6,631 0.42
Net Interest Income $83,529 $62,121
Net Interest Margin 4.10% 3.90%
(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.
(2) Tax-exempt securities and loans are presented on a fully taxable equivalent basis, using a marginal tax rate of 35 percent for 2017 and 2016. These totals equal $4,764 and $3,747 for the three months ended December 31, 2017 and 2016, respectively.
(3) Non accruing loans have been included in the average balances.


NET INTEREST INCOME
(Dollars in Thousands)For the Twelve Months Ended
December 31, 2017 December 31, 2016
Average Balance Interest
Income /
Expense
Average
Rate
Average Balance Interest
Income /
Expense
Average
Rate
Assets:
Interest-bearing time deposits$75,417 $736 0.98% $69,753 $350 0.50%
Federal Reserve and Federal Home Loan Bank stock20,921 894 4.27 24,268 1,098 4.52
Investment Securities: (1)
Taxable726,004 17,489 2.41 721,689 16,415 2.27
Tax-Exempt (2)632,076 32,891 5.20 550,335 28,649 5.21
Total Investment Securities1,358,080 50,380 3.71 1,272,024 45,064 3.54
Loans held for sale7,707 462 5.99 4,050 372 9.19
Loans: (3)
Commercial4,267,651 204,771 4.80 3,541,098 162,848 4.60
Real Estate Mortgage679,284 30,267 4.46 566,050 25,156 4.44
Installment573,100 28,204 4.92 485,111 21,926 4.52
Tax-Exempt (2)353,542 16,452 4.65 217,696 10,039 4.61
Total Loans5,881,284 280,156 4.76 4,814,005 220,341 4.58
Total Earning Assets7,335,702 332,166 4.53% 6,180,050 266,853 4.32%
Net unrealized gain on securities available for sale4,360 9,969
Allowance for loan losses(70,380) (62,976)
Cash and cash equivalents142,503 105,443
Premises and equipment97,446 96,023
Other assets686,598 570,756
Total Assets$8,196,229 $6,899,265
Liabilities:
Interest-bearing deposits:
Interest-bearing NOW deposits$1,730,272 $5,817 0.34% $1,427,535 $2,579 0.18%
Money market deposits938,959 2,788 0.30 825,681 1,705 0.21
Savings deposits844,825 734 0.09 731,902 618 0.08
Certificates and other time deposits1,339,866 14,467 1.08 1,151,700 11,012 0.96
Total Interest-bearing Deposits4,853,922 23,806 0.49 4,136,818 15,914 0.38
Borrowings664,045 13,806 2.08 512,356 10,925 2.13
Total Interest-bearing Liabilities5,517,967 37,612 0.68 4,649,174 26,839 0.58
Noninterest-bearing deposits1,514,829 1,301,399
Other liabilities52,909 64,028
Total Liabilities7,085,705 6,014,601
Stockholders' Equity1,110,524 884,664
Total Liabilities and Stockholders' Equity$8,196,229 37,612 0.51 $6,899,265 26,839 0.43
Net Interest Income $294,554 $240,014
Net Interest Margin 4.02% 3.89%
(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.
(2) Tax-exempt securities and loans are presented on a fully taxable equivalent basis, using a marginal tax rate of 35 percent for 2017 and 2016. These totals equal $17,270 and $13,541 for the years ended December 31, 2017 and 2016, respectively.
(3) Non accruing loans have been included in the average balances.

For more information, contact:
Nicole M. Weaver, Director of Corporate Administration and Vice President
765-521-7619
http://www.firstmerchants.com


Source:First Merchants Corporation