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 +1 412-317-1073.  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 +1 412-317-0088. 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 deposits380,021   129,614 
Investment securities2,789,379   2,092,924 
Loans held for sale901   5,854 
Loans9,298,541   7,511,370 
Less: Allowance for loan losses(121,119)  (81,274)
Net loans9,177,422   7,430,096 
Premises and equipment112,548   91,767 
Federal Home Loan Bank stock28,736   24,588 
Interest receivable57,063   45,150 
Goodwill and other intangibles575,855   466,736 
Cash surrender value of life insurance290,715   226,241 
Other real estate owned7,367   1,131 
Tax asset, deferred and receivable13,126   12,340 
Other assets156,486   83,231 
TOTAL ASSETS$13,819,378   $10,737,857 
LIABILITIES   
Deposits:   
Noninterest-bearing$2,260,351   $1,353,165 
Interest-bearing8,705,637   6,966,163 
Total Deposits10,965,988   8,319,328 
Borrowings:   
Federal funds purchased   75,000 
Securities sold under repurchase agreements181,150   119,674 
Federal Home Loan Bank advances400,817   460,042 
Subordinated debentures and other borrowings285,197   138,574 
Total Borrowings867,164   793,290 
Interest payable5,587   6,740 
Other liabilities171,544   116,863 
Total Liabilities12,010,283   9,236,221 
STOCKHOLDERS' EQUITY   
Cumulative Preferred Stock, $1,000 par value, $1,000 liquidation value:   
Authorized -- 600 shares   
Issued and outstanding - 125 shares125   125 
Common Stock, $.125 stated value:   
Authorized -- 100,000,000 shares   
Issued and outstanding - 53,795,500 and 49,456,594 shares6,724   6,182 
Additional paid-in capital1,002,962   841,365 
Retained earnings735,439   639,362 
Accumulated other comprehensive income (loss)63,845   14,602 
Total Stockholders' Equity1,809,095   1,501,636 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$13,819,378   $10,737,857 


CONSOLIDATED STATEMENTS OF INCOMEThree 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-exempt5,359  4,244  10,674  8,397 
Investment securities:       
Taxable6,147  6,998  13,778  13,093 
Tax-exempt10,019  7,454  19,354  14,325 
Deposits with financial institutions134  784  709  1,659 
Federal Home Loan Bank stock281  335  580  673 
Total Interest Income109,252  112,639  229,059  221,452 
INTEREST EXPENSE       
Deposits12,707  23,087  34,455  42,681 
Federal funds purchased2  117  113  210 
Securities sold under repurchase agreements92  342  444  672 
Federal Home Loan Bank advances1,794  1,692  3,568  3,506 
Subordinated debentures and other borrowings1,639  2,123  3,584  4,239 
Total Interest Expense16,234  27,361  42,164  51,308 
NET INTEREST INCOME93,018  85,278  186,895  170,144 
Provision for loan losses21,895  500  41,647  1,700 
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES71,123  84,778  145,248  168,444 
OTHER INCOME       
Service charges on deposit accounts4,312  5,437  10,282  10,532 
Fiduciary and wealth management fees5,601  3,931  11,586  7,749 
Card payment fees6,097  4,829  12,004  9,655 
Net gains and fees on sales of loans3,674  1,736  7,037  3,031 
Derivative hedge fees1,042  1,487  2,981  2,268 
Other customer fees333  341  731  780 
Earnings on cash surrender value of life insurance1,326  946  2,686  1,935 
Net realized gains on sales of available for sale securities3,068  1,843  7,680  2,983 
Other income1,028  1,064  1,293  1,394 
Total Other Income26,481  21,614  56,280  40,327 
OTHER EXPENSES       
Salaries and employee benefits35,698  32,709  74,941  65,737 
Net occupancy5,447  4,469  11,248  9,496 
Equipment4,489  4,117  8,833  7,759 
Marketing2,092  2,752  3,535  3,826 
Outside data processing fees2,618  3,929  6,817  7,613 
Printing and office supplies279  334  666  649 
Intangible asset amortization1,511  1,520  3,025  3,048 
FDIC assessments1,472  678  2,995  1,385 
Other real estate owned and foreclosure expenses684  903  1,189  2,068 
Professional and other outside services1,553  2,376  3,811  4,260 
Other expenses4,146  3,800  9,100  8,367 
Total Other Expenses59,989  57,587  126,160  114,208 
INCOME BEFORE INCOME TAX37,615  48,805  75,368  94,563 
Income tax expense4,623  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 Loans9,180,610  7,385,315  8,853,591  7,308,146 
Total Earning Assets12,187,442  9,518,892  11,739,936  9,326,579 
Total Deposits10,789,909  8,321,459  10,338,091  8,130,120 
Total Stockholders' Equity1,795,509  1,479,254  1,805,963  1,454,633 
        
FINANCIAL RATIOS:       
Return on Average Assets0.97% 1.56% 1.03% 1.55%
Return on Average Stockholders' Equity7.35  11.10  7.45  10.98 
Return on Average Common Stockholders' Equity7.35  11.10  7.45  10.98 
Average Earning Assets to Average Assets89.25  90.66  89.52  90.63 
Allowance for Loan Losses as % of Total Loans1.30  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 Assets13.15  14.09  13.77  14.13 
Tax Equivalent Yield on Average Earning Assets3.72  4.86  4.04  4.88 
Interest Expense/Average Earning Assets0.53  1.15  0.72  1.10 
Net Interest Margin (FTE) on Average Earning Assets3.19  3.71  3.32  3.78 
Efficiency Ratio47.95  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 Loans1,086  665  841  576  640 
Non-Performing Loans (NPL)51,188  16,314  16,790  23,304  26,275 
Other Real Estate Owned and Repossessions7,409  8,017  7,527  7,156  1,131 
Non-Performing Assets (NPA)58,597  24,331  24,317  30,460  27,406 
90+ Days Delinquent4,981  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-offs230  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 deposits380,021   132,944   118,263   230,101   129,614 
Investment securities2,789,379   2,697,954   2,596,063   2,489,420   2,092,924 
Loans held for sale901   5,039   9,037   7,910   5,854 
Loans9,298,541   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 loans9,177,422   8,507,395   8,379,026   8,218,689   7,430,096 
Premises and equipment112,548   114,045   113,055   113,446   91,767 
Federal Home Loan Bank stock28,736   28,736   28,736   28,736   24,588 
Interest receivable57,063   47,489   48,901   45,923   45,150 
Goodwill and other intangibles575,855   577,366   578,880   579,751   466,736 
Cash surrender value of life insurance290,715   289,574   288,206   286,747   226,241 
Other real estate owned7,367   7,972   7,527   7,156   1,131 
Tax asset, deferred and receivable13,126   9,497   12,165   15,187   12,340 
Other assets156,486   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-bearing8,705,637   8,182,279   8,103,560   7,988,086   6,966,163 
Total Deposits10,965,988   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 agreements181,150   183,317   187,946   191,603   119,674 
Federal Home Loan Bank advances400,817   480,995   351,072   354,609   460,042 
Subordinated debentures and other borrowings285,197   128,741   138,685   138,630   138,574 
Total Borrowings867,164   840,053   732,703   684,842   793,290 
Interest payable5,587   7,746   6,754   7,855   6,740 
Other liabilities171,544   197,275   91,404   117,901   116,863 
Total Liabilities12,010,283   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 outstanding125   125   125   125   125 
Common Stock, $.125 stated value:         
Authorized -- 100,000,000 shares         
Issued and outstanding6,724   6,719   6,921   6,918   6,182 
Additional paid-in capital1,002,962   1,000,942   1,054,997   1,053,148   841,365 
Retained earnings735,439   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' Equity1,809,095   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-exempt5,359  5,315  4,671  4,500   4,244 
Investment securities:         
Taxable6,147  7,631  7,993  6,729   6,998 
Tax-exempt10,019  9,335  8,995  8,335   7,454 
Deposits with financial institutions134  575  1,203  1,363   784 
Federal Home Loan Bank stock281  299  342  355   335 
Total Interest Income109,252  119,807  125,821  118,132   112,639 
INTEREST EXPENSE         
Deposits12,707  21,748  24,074  24,830   23,087 
Federal funds purchased2  111  26  15   117 
Securities sold under repurchase agreements92  352  367  385   342 
Federal Home Loan Bank advances1,794  1,774  1,776  1,894   1,692 
Subordinated debentures and other borrowings1,639  1,945  1,994  2,076   2,123 
Total Interest Expense16,234  25,930  28,237  29,200   27,361 
NET INTEREST INCOME93,018  93,877  97,584  88,932   85,278 
Provision for loan losses21,895  19,752  500  600   500 
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES71,123  74,125  97,084  88,332   84,778 
OTHER INCOME         
Service charges on deposit accounts4,312  5,970  6,312  6,107   5,437 
Fiduciary and wealth management fees5,601  5,985  5,384  4,429   3,931 
Card payment fees6,097  5,907  5,430  5,158   4,829 
Net gains and fees on sales of loans3,674  3,363  2,633  2,227   1,736 
Derivative hedge fees1,042  1,939  1,405  1,684   1,487 
Other customer fees333  398  434  450   341 
Earnings on cash surrender value of life insurance1,326  1,360  1,458  1,144   946 
Net realized gains on sales of available for sale securities3,068  4,612  1,039  393   1,843 
Other income1,028  265  150  524   1,064 
Total Other Income26,481  29,799  24,245  22,116   21,614 
OTHER EXPENSES         
Salaries and employee benefits35,698  39,243  39,358  38,942   32,709 
Net occupancy5,447  5,801  5,311  4,777   4,469 
Equipment4,489  4,344  4,429  4,030   4,117 
Marketing2,092  1,443  1,492  1,332   2,752 
Outside data processing fees2,618  4,199  4,428  4,435   3,929 
Printing and office supplies279  387  484  312   334 
Intangible asset amortization1,511  1,514  1,590  1,356   1,520 
FDIC assessments1,472  1,523    (668)  678 
Other real estate owned and foreclosure expenses684  505  66  294   903 
Professional and other outside services1,553  2,258  2,899  8,251   2,376 
Other expenses4,146  4,954  5,144  4,293   3,800 
Total Other Expenses59,989  66,171  65,201  67,354   57,587 
INCOME BEFORE INCOME TAX37,615  37,753  56,128  43,094   48,805 
Income tax expense4,623  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 Assets0.97% 1.09% 1.53% 1.30 % 1.56%
Return on Average Stockholders' Equity7.35  7.55  10.82  9.21   11.10 
Return on Average Common Stockholders' Equity7.35  7.55  10.82  9.21   11.10 
Average Earning Assets to Average Assets89.25  89.81  89.71  90.37   90.66 
Allowance for Loan Losses as % of Total Loans1.30  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 Assets13.15  14.45  14.17  14.16   14.09 
Tax Equivalent Yield on Average Earning Assets3.72  4.38  4.63  4.77   4.86 
Interest Expense/Average Earning Assets0.53  0.92  1.01  1.15   1.15 
Net Interest Margin (FTE) on Average Earning Assets3.19  3.46  3.62  3.62   3.71 
Efficiency Ratio47.95  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 farmers93,838  87,421  93,861  90,462  83,452 
Real estate loans:         
Construction640,560  643,674  787,568  670,138  624,548 
Commercial and farmland3,239,998  3,268,168  3,052,698  3,144,649  2,821,689 
Residential1,145,187  1,121,556  1,143,217  1,155,403  993,802 
Home equity532,314  570,398  588,984  601,335  548,006 
Individuals' loans for household and other personal expenditures123,611  129,765  135,989  131,246  98,384 
Public finance and other commercial loans624,704  586,641  547,114  471,716  464,447 
Loans9,298,541  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 deposits3,278,156  2,962,821  2,896,177  2,808,745  2,358,720 
Certificates and other time deposits of $100,000 or more607,474  694,062  736,843  731,693  720,536 
Other certificates and time deposits669,119  717,723  741,759  811,780  729,392 
Brokered deposits122,879  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 stock28,736  281  3.91  24,588  335  5.45 
Investment Securities: (1)           
Taxable1,282,080  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 Securities2,599,607  18,829  2.90  1,964,363  16,433  3.35 
Loans held for sale12,630  131  4.15  11,430  127  4.44 
Loans: (3)           
Commercial6,890,010  69,463  4.03  5,419,169  74,638  5.51 
Real Estate Mortgage887,257  10,122  4.56  766,528  8,686  4.53 
Installment724,165  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 Loans9,180,610  94,096  4.10  7,385,315  98,196  5.32 
Total Earning Assets12,187,442  113,340  3.72% 9,518,892  115,748  4.86%
Net unrealized gain (loss) on securities available for sale56,807      12,841     
Allowance for loan losses(106,858)     (81,691)    
Cash and cash equivalents303,491      130,987     
Premises and equipment113,528      91,563     
Other assets1,100,912      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 deposits1,673,104  1,696  0.41  1,220,020  3,509  1.15 
Savings deposits1,521,312  596  0.16  1,164,901  2,525  0.87 
Certificates and other time deposits1,498,002  6,229  1.66  1,652,203  8,512  2.06 
Total Interest-bearing Deposits8,644,237  12,707  0.59  6,973,049  23,087  1.32 
Borrowings909,258  3,527  1.55  613,446  4,274  2.79 
Total Interest-bearing Liabilities9,553,495  16,234  0.68  7,586,495  27,361  1.44 
Noninterest-bearing deposits2,145,672      1,348,410     
Other liabilities160,646      85,789     
Total Liabilities11,859,813      9,020,694     
Stockholders' Equity1,795,509      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 stock28,736  580  4.04  24,588  673  5.47 
Investment Securities: (1)           
Taxable1,325,313  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 Securities2,588,435  38,277  2.96  1,848,568  31,226  3.38 
Loans held for sale14,924  324  4.34  10,697  239  4.47 
Loans: (3)           
Commercial6,562,673  146,415  4.46  5,364,884  147,394  5.49 
Real Estate Mortgage878,956  20,524  4.67  755,070  17,008  4.51 
Installment741,889  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 Loans8,853,591  197,475  4.46  7,308,146  193,934  5.31 
Total Earning Assets11,739,936  237,041  4.04% 9,326,579  227,492  4.88%
Net unrealized gain on securities available for sale52,732      3,963     
Allowance for loan losses(94,009)     (81,301)    
Cash and cash equivalents231,624      124,143     
Premises and equipment113,670      92,395     
Other assets1,070,327      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 deposits1,604,474  5,479  0.68  1,179,765  6,291  1.07 
Savings deposits1,473,183  2,424  0.33  1,157,852  4,792  0.83 
Certificates and other time deposits1,582,322  14,091  1.78  1,609,130  16,038  1.99 
Total Interest-bearing Deposits8,430,509  34,455  0.82  6,760,288  42,681  1.26 
Borrowings828,721  7,709  1.86  624,192  8,627  2.76 
Total Interest-bearing Liabilities9,259,230  42,164  0.91  7,384,480  51,308  1.39 
Noninterest-bearing deposits1,907,582      1,369,832     
Other liabilities141,505      82,260     
Total Liabilities11,308,317      8,836,572     
Stockholders' Equity1,805,963      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