MUNCIE, Ind., Jan. 31, 2019 (GLOBE NEWSWIRE) — First Merchants Corporation (NASDAQ – FRME) has reported fourth quarter 2018 net income of $41.7 million, an increase of 71 percent, compared to $24.4 million during the same period in 2017. Earnings per share for the period totaled a record $.85 per share, an increase of 73 percent, compared to the fourth quarter of 2017 result of $.49 per share. Net income for the year ended December 31, 2018 totaled $159.1 million, compared to $96.1 million during the same period in 2017. Year-to-date earnings per share was $3.22, a record level as we celebrated the Corporation’s 125th anniversary. The result was an increase of $1.10 per share, or 52 percent, over the same period in 2017.

Total assets equaled $9.9 billion as of year-end and loans totaled $7.2 billion. The Corporation’s loan portfolio increased by $471 million, or 7 percent, during the past twelve months. Total deposits equaled $7.8 billion as of year-end and increased by $582 million, or 8 percent.

Michael C. Rechin, President and Chief Executive Officer, stated, “I am proud of our team for running through the tape in 2018 by posting a strong and balanced organic growth quarter. Quality low cost funding, loan growth and sound asset quality all contributed prominently in our record quarter capping off our record year. Our teammates connect with the needs of the marketplace and our communities while our execution produces results and efficiency.” Rechin also added, “We look forward to 2019 and extending our franchise into Michigan through our merger with Monroe Bank & Trust. We look to continue their tradition of superior service to Monroe’s communities through the combination of their skilled bankers and First Merchants’ delivery capabilities.”

Net-interest income totaled $338.9 million for the year, an increase of $61.6 million, or 22 percent. Net-interest margin for the year totaled 4.00 percent, down 2 basis points and includes a reduction of 13 basis points related to tax reform. Yield on earning assets totaled 4.79 percent and the cost of supporting liabilities totaled .79 percent.

Non-interest income totaled $76.5 million for the year, a $5.5 million increase over 2017. Non-interest expense totaled $220 million up from the 2017 total of $205.6 million.

Tax expense for 2018 totaled $29 million, or just 15.4 percent of pre-tax net income. In addition to the lower statutory tax rate as a result of tax reform, tax expense for the fourth quarter and year were less than normal by $1.8 million due to an increase in the Bank’s Indiana state tax liability offset by the release of a valuation allowance on state deferred tax assets.

The Corporation’s 2018 provision expense totaled $7.2 million due to loan growth. Net charge-offs totaled $1.7 million for the year. The allowance for loan losses totaled $80.6 million as of December 31, 2018, up from $75 million at the end of 2017. Non-performing assets totaled $29.4 million as of year-end and the allowance is 1.11 percent of total loans.

As of December 31, 2018, the Corporation’s total risk-based capital ratio equaled 14.61 percent, common equity tier 1 capital ratio equaled 11.98 percent, and the tangible common equity ratio totaled 9.97 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 31, 2019.

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 March 2, 2019. 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 10127190.

In order to view the web cast and presentation slides, please go to http://services.choruscall.com/links/frme190131.html during the time of the call. A replay of the web cast will be available until January 31, 2020.

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)	December 31,
	2018				2017
ASSETS
Cash and cash equivalents	$	139,247			$	154,905
Interest-bearing time deposits	36,963				35,027
Investment securities	1,632,582				1,560,602
Loans held for sale	4,778				7,216
Loans	7,224,467				6,751,199
Less: Allowance for loan losses	(80,552		)		(75,032		)
Net loans	7,143,915				6,676,167
Premises and equipment	93,420				95,852
Federal Home Loan Bank stock	24,588				23,825
Interest receivable	40,881				37,130
Goodwill and other intangibles	469,784				476,503
Cash surrender value of life insurance	224,939				223,557
Other real estate owned	2,179				10,373
Tax asset, deferred and receivable	23,668				23,983
Other assets	47,772				42,338
TOTAL ASSETS	$	9,884,716			$	9,367,478
LIABILITIES
Deposits:
Noninterest-bearing	$	1,447,907			$	1,761,553
Interest-bearing	6,306,686				5,410,977
Total Deposits	7,754,593				7,172,530
Borrowings:
Federal funds purchased	104,000				144,038
Securities sold under repurchase agreements	113,512				136,623
Federal Home Loan Bank advances	314,986				414,377
Subordinated debentures and term loans	138,463				139,349
Total Borrowings	670,961				834,387
Interest payable	5,607				4,390
Other liabilities	45,295				52,708
Total Liabilities	8,476,456				8,064,015
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 – 49,349,800 and 49,158,238 shares	6,169				6,145
Additional paid-in capital	840,052				834,870
Retained earnings	583,336				465,231
Accumulated other comprehensive loss	(21,422		)		(2,908		)
Total Stockholders’ Equity	1,408,260				1,303,463
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	9,884,716			$	9,367,478

CONSOLIDATED STATEMENTS OF INCOME	Three Months Ended								Twelve Months Ended
(Dollars In Thousands, Except Per Share Amounts)	December 31,								December 31,
	2018				2017				2018				2017
INTEREST INCOME
Loans receivable:
Taxable	$	91,092			$	76,470			$	342,501			$	263,704
Tax-exempt	3,873				3,018				14,862				10,694
Investment securities:
Taxable	5,553				4,477				21,597				17,489
Tax-exempt	6,644				5,830				25,509				21,379
Deposits with financial institutions	1,207				294				2,241				736
Federal Home Loan Bank stock	284				259				1,234				894
Total Interest Income	108,653				90,348				407,944				314,896
INTEREST EXPENSE
Deposits	16,690				7,835				51,542				23,806
Federal funds purchased	48				55				718				561
Securities sold under repurchase agreements	243				146				762				477
Federal Home Loan Bank advances	1,691				1,577				7,832				5,196
Subordinated debentures and term loans	2,097				1,970				8,233				7,572
Total Interest Expense	20,769				11,583				69,087				37,612
NET INTEREST INCOME	87,884				78,765				338,857				277,284
Provision for loan losses	1,664				1,800				7,227				9,143
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	86,220				76,965				331,630				268,141
OTHER INCOME
Service charges on deposit accounts	5,516				5,066				20,950				18,722
Fiduciary and wealth management fees	3,842				4,126				14,906				14,682
Other customer fees	4,904				4,565				19,895				17,863
Earnings on cash surrender value of life insurance	1,074				1,133				4,218				6,577
Net gains and fees on sales of loans	1,767				2,355				7,029				7,564
Net realized gains on sales of available for sale securities	253				1,134				4,269				2,631
Other income	1,824				682				5,192				2,970
Total Other Income	19,180				19,061				76,459				71,009
OTHER EXPENSES
Salaries and employee benefits	34,350				33,760				131,704				119,812
Net occupancy	4,737				4,424				18,341				16,976
Equipment	3,627				3,898				14,334				13,090
Marketing	1,107				1,361				4,681				3,739
Outside data processing fees	3,367				3,378				13,215				12,242
Printing and office supplies	433				378				1,425				1,283
Intangible asset amortization	1,625				2,055				6,719				5,647
FDIC assessments	634				711				2,920				2,564
Other real estate owned and foreclosure expenses	251				311				1,470				1,903
Professional and other outside services	3,002				1,914				8,176				12,757
Other expenses	4,605				4,243				16,966				15,543
Total Other Expenses	57,738				56,433				219,951				205,556
INCOME BEFORE INCOME TAX	47,662				39,593				188,138				133,594
Income tax expense	5,949				15,210				28,999				37,524
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	41,713			$	24,383			$	159,139			$	96,070
Per Share Data:
Basic Net Income Available to Common Stockholders	$	0.85			$	0.49			$	3.23			$	2.13
Diluted Net Income Available to Common Stockholders	$	0.85			$	0.49			$	3.22			$	2.12
Cash Dividends Paid	$	0.22			$	0.18			$	0.84			$	0.69
Average Diluted Shares Outstanding (in thousands)	49,511				49,379				49,471				45,403

FINANCIAL HIGHLIGHTS
(Dollars in thousands)	Three Months Ended								Twelve Months Ended
	December 31,								December 31,
	2018				2017				2018				2017
NET CHARGE-OFFS	$	(482	)		$	122			$	1,707			$	148
AVERAGE BALANCES:
Total Assets	$	9,923,001			$	9,174,237			$	9,689,057			$	8,196,229
Total Loans	7,102,552				6,575,055				6,997,771				5,881,284
Total Earning Assets	8,971,432				8,139,993				8,736,367				7,335,702
Total Deposits	7,875,998				7,142,375				7,569,482				6,368,751
Total Stockholders’ Equity	1,379,453				1,294,810				1,343,861				1,110,524
FINANCIAL RATIOS:
Return on Average Assets	1.68		%		1.06		%		1.64		%		1.17		%
Return on Average Stockholders’ Equity	12.10				7.53				11.84				8.65
Return on Average Common Stockholders’ Equity	12.10				7.53				11.84				8.65
Average Earning Assets to Average Assets	90.41				88.73				90.17				89.50
Allowance for Loan Losses as % of Total Loans	1.11				1.11				1.11				1.11
Net Charge-offs as % of Average Loans (Annualized)	(0.03		)		0.01				0.02				—
Average Stockholders’ Equity to Average Assets	13.90				14.11				13.87				13.55
Tax Equivalent Yield on Average Earning Assets	4.97				4.67				4.79				4.53
Interest Expense/Average Earning Assets	0.93				0.57				0.79				0.51
Net Interest Margin (FTE) on Average Earning Assets	4.04				4.10				4.00				4.02
Efficiency Ratio	50.97				53.29				50.21				54.56
Tangible Common Book Value Per Share	$	19.12			$	16.96			$	19.12			$	16.96

NON-PERFORMING ASSETS
(Dollars In Thousands)	December 31,				September 30,				June 30,				March 31,				December 31,
	2018				2018				2018				2018				2017
Non-Accrual Loans	$	26,148			$	20,421			$	20,143			$	27,497			$	28,724
Renegotiated Loans	1,103				968				544				579				1,013
Non-Performing Loans (NPL)	27,251				21,389				20,687				28,076				29,737
Other Real Estate Owned	2,179				8,859				9,071				9,698				10,373
Non-Performing Assets (NPA)	29,430				30,248				29,758				37,774				40,110
90+ Days Delinquent	1,855				50				184				738				924
NPAs & 90 Day Delinquent	$	31,285			$	30,298			$	29,942			$	38,512			$	41,034
Allowance for Loan Losses	$	80,552			$	78,406			$	77,543			$	76,420			$	75,032
Quarterly Net Charge-offs	(482		)		537				540				1,112				122
NPAs / Actual Assets %	0.30		%		0.31		%		0.31		%		0.40		%		0.43		%
NPAs & 90 Day / Actual Assets %	0.32		%		0.31		%		0.31		%		0.41		%		0.44		%
NPAs / Actual Loans and OREO %	0.41		%		0.43		%		0.42		%		0.55		%		0.59		%
Allowance for Loan Losses / Actual Loans (%)	1.11		%		1.11		%		1.09		%		1.11		%		1.11		%
Net Charge-offs as % of Average Loans (Annualized)	(0.03		)%		0.03		%		0.03		%		0.07		%		0.01		%

CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)	December 31,				September 30,				June 30,				March 31,				December 31,
	2018				2018				2018				2018				2017
ASSETS
Cash and cash equivalents	$	139,247			$	142,501			$	133,893			$	128,828			$	154,905
Interest-bearing time deposits	36,963				66,763				36,599				24,233				35,027
Investment securities	1,632,582				1,625,251				1,619,683				1,543,820				1,560,602
Loans held for sale	4,778				3,022				2,046				4,469				7,216
Loans	7,224,467				7,088,071				7,081,059				6,901,696				6,751,199
Less: Allowance for loan losses	(80,552		)		(78,406		)		(77,543		)		(76,420		)		(75,032		)
Net loans	7,143,915				7,009,665				7,003,516				6,825,276				6,676,167
Premises and equipment	93,420				93,728				94,397				94,741				95,852
Federal Home Loan Bank stock	24,588				24,588				24,588				24,588				23,825
Interest receivable	40,881				38,531				38,530				35,223				37,130
Goodwill and other intangibles	469,784				471,409				473,059				474,777				476,503
Cash surrender value of life insurance	224,939				223,865				222,905				221,949				223,557
Other real estate owned	2,179				8,859				9,071				9,698				10,373
Tax asset, deferred and receivable	23,668				25,933				24,619				24,177				23,983
Other assets	47,772				53,167				51,809				61,017				42,338
TOTAL ASSETS	$	9,884,716			$	9,787,282			$	9,734,715			$	9,472,796			$	9,367,478
LIABILITIES
Deposits:
Noninterest-bearing	$	1,447,907			$	1,464,190			$	1,571,194			$	1,698,958			$	1,761,553
Interest-bearing	6,306,686				6,168,962				5,932,621				5,628,677				5,410,977
Total Deposits	7,754,593				7,633,152				7,503,815				7,327,635				7,172,530
Borrowings:
Federal funds purchased	104,000				90,000				109,000				50,000				144,038
Securities sold under repurchase agreements	113,512				118,824				122,513				138,910				136,623
Federal Home Loan Bank advances	314,986				385,458				469,261				449,419				414,377
Subordinated debentures and term loans	138,463				138,408				138,352				138,297				139,349
Total Borrowings	670,961				732,690				839,126				776,626				834,387
Interest payable	5,607				5,920				4,807				5,376				4,390
Other liabilities	45,295				54,094				46,639				50,086				52,708
Total Liabilities	8,476,456				8,425,856				8,394,387				8,159,723				8,064,015
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	6,169				6,163				6,160				6,155				6,145
Additional paid-in capital	840,052				837,996				836,549				834,894				834,870
Retained earnings	583,336				552,551				522,362				493,624				465,231
Accumulated other comprehensive loss	(21,422		)		(35,409		)		(24,868		)		(21,725		)		(2,908		)
Total Stockholders’ Equity	1,408,260				1,361,426				1,340,328				1,313,073				1,303,463
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	9,884,716			$	9,787,282			$	9,734,715			$	9,472,796			$	9,367,478

CONSOLIDATED STATEMENTS OF INCOME
(Dollars In Thousands, Except Per Share Amounts)	December 31,				September 30,				June 30,				March 31,				December 31,
	2018				2018				2018				2018				2017
INTEREST INCOME
Loans receivable:
Taxable	$	91,092			$	88,479			$	84,663			$	78,267			$	76,470
Tax-exempt	3,873				3,761				3,632				3,596				3,018
Investment securities:
Taxable	5,553				5,514				5,434				5,096				4,477
Tax-exempt	6,644				6,493				6,246				6,126				5,830
Deposits with financial institutions	1,207				270				633				131				294
Federal Home Loan Bank stock	284				283				263				404				259
Total Interest Income	108,653				104,800				100,871				93,620				90,348
INTEREST EXPENSE
Deposits	16,690				13,685				12,165				9,002				7,835
Federal funds purchased	48				229				61				380				55
Securities sold under repurchase agreements	243				174				172				173				146
Federal Home Loan Bank advances	1,691				2,137				1,845				2,159				1,577
Subordinated debentures and term loans	2,097				2,089				2,057				1,990				1,970
Total Interest Expense	20,769				18,314				16,300				13,704				11,583
NET INTEREST INCOME	87,884				86,486				84,571				79,916				78,765
Provision for loan losses	1,664				1,400				1,663				2,500				1,800
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	86,220				85,086				82,908				77,416				76,965
OTHER INCOME
Service charges on deposit accounts	5,516				5,619				5,038				4,777				5,066
Fiduciary and wealth management fees	3,842				3,673				3,595				3,796				4,126
Other customer fees	4,904				5,038				4,917				5,036				4,565
Earnings on cash surrender value of life insurance	1,074				961				1,007				1,176				1,133
Net gains and fees on sales of loans	1,767				1,841				1,600				1,821				2,355
Net realized gains on sales of available for sale securities	253				1,285				1,122				1,609				1,134
Other income	1,824				1,110				912				1,346				682
Total Other Income	19,180				19,527				18,191				19,561				19,061
OTHER EXPENSES
Salaries and employee benefits	34,350				32,936				32,192				32,226				33,760
Net occupancy	4,737				4,586				4,348				4,670				4,424
Equipment	3,627				3,483				3,556				3,668				3,898
Marketing	1,107				1,216				1,474				884				1,361
Outside data processing fees	3,367				3,422				3,462				2,964				3,378
Printing and office supplies	433				334				324				334				378
Intangible asset amortization	1,625				1,650				1,718				1,726				2,055
FDIC assessments	634				856				711				719				711
Other real estate owned and foreclosure expenses	251				455				362				402				311
Professional and other outside services	3,002				1,844				1,789				1,541				1,914
Other expenses	4,605				4,240				3,568				4,553				4,243
Total Other Expenses	57,738				55,022				53,504				53,687				56,433
INCOME BEFORE INCOME TAX	47,662				49,591				47,595				43,290				39,593
Income tax expense	5,949				8,478				7,961				6,611				15,210
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	41,713			$	41,113			$	39,634			$	36,679			$	24,383
Per Share Data:
Basic Net Income Available to Common Stockholders	$	0.85			$	0.83			$	0.80			$	0.75			$	0.49
Diluted Net Income Available to Common Stockholders	$	0.85			$	0.83			$	0.80			$	0.74			$	0.49
Cash Dividends Paid	$	0.22			$	0.22			$	0.22			$	0.18			$	0.18
Average Diluted Shares Outstanding (in thousands)	49,511				49,492				49,451				49,428				49,379
FINANCIAL RATIOS:
Return on Average Assets	1.68		%		1.69		%		1.63		%		1.57		%		1.06		%
Return on Average Stockholders’ Equity	12.10				12.10				11.94				11.21				7.53
Return on Average Common Stockholders’ Equity	12.10				12.10				11.95				11.21				7.53
Average Earning Assets to Average Assets	90.41				90.30				90.14				89.78				88.73
Allowance for Loan Losses as % of Total Loans	1.11				1.11				1.09				1.11				1.11
Net Charge-offs as % of Average Loans (Annualized)	(0.03		)		0.03				0.03				0.07				0.01
Average Stockholders’ Equity to Average Assets	13.90				13.93				13.69				13.96				14.11
Tax Equivalent Yield on Average Earning Assets	4.97				4.88				4.74				4.57				4.67
Interest Expense/Average Earning Assets	0.93				0.83				0.75				0.65				0.57
Net Interest Margin (FTE) on Average Earning Assets	4.04				4.05				3.99				3.92				4.10
Efficiency Ratio	50.97				49.25				49.32				51.33				53.29
Tangible Common Book Value Per Share	$	19.12			$	18.16			$	17.71			$	17.14			$	16.96

LOANS
(Dollars In Thousands)	December 31,				September 30,				June 30,				March 31,				December 31,
	2018				2018				2018				2018				2017
Commercial and industrial loans	$	1,726,664			$	1,655,569			$	1,657,591			$	1,554,169			$	1,493,493
Agricultural production financing and other loans to farmers	92,404				88,504				89,093				98,315				121,757
Real estate loans:
Construction	545,729				668,608				714,866				590,093				612,219
Commercial and farmland	2,832,102				2,699,629				2,652,782				2,713,994				2,562,691
Residential	966,421				965,893				965,720				948,644				962,765
Home equity	528,157				517,303				518,699				510,545				514,021
Individuals’ loans for household and other personal expenditures	99,788				98,709				92,809				88,235				86,935
Lease financing receivables, net of unearned income	1,600				1,830				1,945				2,193				2,527
Other commercial loans	431,602				392,026				387,554				395,508				394,791
Loans	7,224,467				7,088,071				7,081,059				6,901,696				6,751,199
Allowance for loan losses	(80,552		)		(78,406		)		(77,543		)		(76,420		)		(75,032		)
NET LOANS	$	7,143,915			$	7,009,665			$	7,003,516			$	6,825,276			$	6,676,167

DEPOSITS
(Dollars In Thousands)	December 31,				September 30,				June 30,				March 31,				December 31,
	2018				2018				2018				2018				2017
Demand deposits	$	3,985,178			$	3,870,816			$	3,933,233			$	3,740,395			$	3,746,654
Savings deposits	2,282,701				2,212,675				2,099,771				2,109,071				1,994,366
Certificates and other time deposits of $100,000 or more	593,592				602,002				555,910				552,643				468,895
Other certificates and time deposits	646,682				625,341				602,239				584,377				581,894
Brokered deposits	246,440				322,318				312,662				341,149				380,721
TOTAL DEPOSITS	$	7,754,593			$	7,633,152			$	7,503,815			$	7,327,635			$	7,172,530

CONSOLIDATED AVERAGE BALANCE SHEET AND NET INTEREST MARGIN ANALYSIS
(Dollars in Thousands)
	For the Three Months Ended
	December 31, 2018											December 31, 2017
	Average Balance				Interest Income / Expense				Average Rate			Average Balance				Interest Income / Expense				Average Rate
Assets:
Interest-bearing time deposits	$	210,121			$	1,207			2.30	%		$	87,172			$	294			1.35	%
Federal Home Loan Bank stock	24,588				284				4.62			23,825				259				4.35
Investment Securities: (1)
Taxable	843,514				5,553				2.63			755,341				4,477				2.37
Tax-Exempt (2)	790,657				8,410				4.25			698,600				8,969				5.14
Total Investment Securities	1,634,171				13,963				3.42			1,453,941				13,446				3.70
Loans held for sale	15,142				177				4.68			13,657				216				6.33
Loans: (3)
Commercial	5,224,202				73,416				5.62			4,806,978				60,015				4.99
Real Estate Mortgage	739,325				8,375				4.53			737,668				8,320				4.51
Installment	649,717				9,124				5.62			617,591				7,919				5.13
Tax-Exempt (2)	474,166				4,903				4.14			399,161				4,643				4.65
Total Loans	7,102,552				95,995				5.41			6,575,055				81,113				4.93
Total Earning Assets	8,971,432				111,449				4.97			8,139,993				95,112				4.67
Net unrealized gain (loss) on securities available for sale	(24,206		)									4,131
Allowance for loan losses	(78,926		)									(73,675		)
Cash and cash equivalents	140,065											182,970
Premises and equipment	93,589											102,605
Other assets	821,047											818,213
Total Assets	$	9,923,001										$	9,174,237
Liabilities:
Interest-bearing deposits:
Interest-bearing deposits	$	2,563,703			$	5,565			0.87	%		$	1,970,916			$	2,185			0.44	%
Money market deposits	1,157,022				2,450				0.85			1,071,037				1,101				0.41
Savings deposits	1,134,559				2,016				0.71			922,052				214				0.09
Certificates and other time deposits	1,542,222				6,659				1.73			1,458,365				4,335				1.19
Total Interest-bearing Deposits	6,397,506				16,690				1.04			5,422,370				7,835				0.58
Borrowings	611,255				4,079				2.67			678,242				3,748				2.21
Total Interest-bearing Liabilities	7,008,761				20,769				1.19			6,100,612				11,583				0.76
Noninterest-bearing deposits	1,478,492											1,720,005
Other liabilities	56,295											58,810
Total Liabilities	8,543,548											7,879,427
Stockholders’ Equity	1,379,453											1,294,810
Total Liabilities and Stockholders’ Equity	$	9,923,001			20,769							$	9,174,237			11,583
Net Interest Income (FTE)					$	90,680										$	83,529
Net Interest Spread (FTE) (4)									3.78	%										3.91	%
Net Interest Margin (FTE):
Interest Income (FTE) / Average Earning Assets									4.97	%										4.67	%
Interest Expense / Average Earning Assets									0.93	%										0.57	%
Net Interest Margin (FTE) (5)									4.04	%										4.10	%
(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 21 percent and 35 percent for 2018 and 2017, respectively. These totals equal $2,796 and $4,764 for the three months ended December 31, 2018 and 2017, 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 Twelve Months Ended
	December 31, 2018											December 31, 2017
	Average Balance				Interest Income / Expense				Average Rate			Average Balance				Interest Income / Expense				Average Rate
Assets:
Interest-bearing time deposits	$	110,232			$	2,241			2.03	%		$	75,417			$	736			0.98	%
Federal Home Loan Bank stock	24,538				1,234				5.03			20,921				894				4.27
Investment Securities: (1)
Taxable	841,203				21,597				2.57			726,004				17,489				2.41
Tax-Exempt (2)	762,623				32,290				4.23			632,076				32,891				5.20
Total Investment Securities	1,603,826				53,887				3.36			1,358,080				50,380				3.71
Loans held for sale	11,425				540				4.73			7,707				462				5.99
Loans: (3)
Commercial	5,143,576				274,302				5.33			4,267,651				204,771				4.80
Real Estate Mortgage	733,709				33,549				4.57			679,284				30,267				4.46
Installment	640,310				34,110				5.33			573,100				28,204				4.92
Tax-Exempt (2)	468,751				18,813				4.01			353,542				16,452				4.65
Total Loans	6,997,771				361,314				5.16			5,881,284				280,156				4.76
Total Earning Assets	8,736,367				418,676				4.79			7,335,702				332,166				4.53
Net unrealized gain on securities available for sale	(14,790		)									4,360
Allowance for loan losses	(77,444		)									(70,380		)
Cash and cash equivalents	131,925											142,503
Premises and equipment	94,567											97,446
Other assets	818,432											686,598
Total Assets	$	9,689,057										$	8,196,229
Liabilities:
Interest-bearing deposits:
Interest-bearing deposits	$	2,319,081			$	17,577			0.76	%		$	1,730,272			$	5,817			0.34	%
Money market deposits	1,097,762				6,721				0.61			938,959				2,788				0.30
Savings deposits	1,065,031				5,230				0.49			844,825				734				0.09
Certificates and other time deposits	1,514,271				22,014				1.45			1,339,866				14,467				1.08
Total Interest-bearing Deposits	5,996,145				51,542				0.86			4,853,922				23,806				0.49
Borrowings	718,061				17,545				2.44			664,045				13,806				2.08
Total Interest-bearing Liabilities	6,714,206				69,087				1.03			5,517,967				37,612				0.68
Noninterest-bearing deposits	1,573,337											1,514,829
Other liabilities	57,653											52,909
Total Liabilities	8,345,196											7,085,705
Stockholders’ Equity	1,343,861											1,110,524
Total Liabilities and Stockholders’ Equity	$	9,689,057			69,087							$	8,196,229			37,612
Net Interest Income (FTE)					$	349,589										$	294,554
Net Interest Spread (FTE) (4)									3.76	%										3.85	%
Net Interest Margin (FTE):
Interest Income (FTE) / Average Earning Assets									4.79	%										4.53	%
Interest Expense / Average Earning Assets									0.79	%										0.51	%
Net Interest Margin (FTE) (5)									4.00	%										4.02	%
(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 21 percent and 35 percent for 2018 and 2017, respectively. These totals equal $10,732 and $17,270 for the twelve months ended December 31, 2018 and 2017, 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