First Merchants Profits Flat

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Muncie-based First Merchants Corp. (Nasdaq: FRME) is reporting net income of $10 million for the third quarter, compared to $10.1 million during the same period in 2012. Chief Executive Officer Michael Rechin says plans to close a merger with Citizens Bank in Munster remain "intact." October 24, 2013

News Release

MUNCIE, Ind. - First Merchants Corporation (NASDAQ: FRME) has reported third quarter 2013 earnings per share of $.35 equaling the same period in 2012 as net income available to common stockholders totaled $10 million. Year-to-date earnings per share totaled $1.07 compared to $.88, a 21.6 percent increase, after excluding a one time gain from the FDIC purchase of SCB Bank of $9.1 million, or $.21 per share, in the first quarter of 2012.

Michael C. Rechin, President and Chief Executive Officer, stated, "An improved net interest margin coupled with loan growth resulted in increased net interest income over the 2nd quarter of this year. Despite the continued difficulty of the interest rate environment and softening mortgage market we completed a very solid quarter. The balance we have achieved in revenue enhancement and expense control is providing shareholder value. Credit-related metrics continue to improve as we prepare to add the Citizens market to our franchise in November." Rechin also added, "Our plans to close on the accretive merger with Citizens in the near term are intact and we look forward to adding our new communities, customers and employees."

Total assets equaled $4.3 billion as of quarter-end and total loans were $2.9 billion, an increase of $89.1 million, or 3.1 percent over the same period in 2012. Growth in the Corporation's commercial and industrial loans and commercial real estate portfolios increased by $59.8 million and $23.1 million, respectively. Construction loans increased by $56.3 million while residential real estate loans declined by $23 million during the same period.

Net-interest income totaled $37 million for the quarter and net-interest margin totaled 3.97 percent as yields on earning assets totaled 4.35 percent and the cost of supporting liabilities totaled .38 percent. Third quarter net-interest income declined by $2.9 million from the prior year; however, it improved over the second quarter of 2013 by $372,000. Year-to-date net-interest income totaled $113.1 million compared to $114.1 million during the first three quarters of 2012.

Provision expense totaled $1.5 million for the third quarter of 2013, compared to $4.6 million in 2012. Net charge-offs totaled $3.5 million for the third quarter, down from $5.3 million in the third quarter of 2012. Year-to-date provision expense totaled $5.6 million versus $8.8 million of net charge-offs. The allowance for loan losses totaled $66.2 million, or 2.26 percent of total loans and 189 percent of non-accrual loans. Additionally, non-performing assets declined by $27.3 million, or 35 percent year-over-year.

Non-interest income totaled $11.8 million for the quarter, a decrease from the third quarter 2012 total of $14.3 million. Of the $2.5 million decline, $1.2 million resulted from fewer net gains and fees on sales of mortgage loans and $843,000 was the result of fewer bond gains. 2013 year-to-date non-interest income totaled $39.7 million compared to $41 million in 2012, after excluding the $9.1 million gain on the FDIC modified whole bank transaction in the first quarter of 2012. Non-interest expense totaled $34.2 million for the quarter, down $185,000 from the third quarter of 2012. Year-to-date non-interest expense totaled $102.7 million, up modestly from the same period in 2012.

Included in the quarter’s results are the operating losses from a low income housing tax credit investment totaling $554,000. The loss is tax deductible and when coupled with the tax credit recognition of $791,000, reduces income tax expense by $985,000 for the quarter. When modified for the loss and the tax credits, our quarterly tax rate was 26.8 percent and in line with prior quarters.

As of September 30, 2013, the Corporation's total risk-based capital equaled 14.96 percent, Tier 1 common risk-based capital equaled 10.42 percent and tangible common equity ratio totaled 7.97 percent.

CONFERENCE CALL

First Merchants Corporation will conduct a third quarter earnings conference call and web cast at 2:30 p.m. (ET) on Thursday, October 24, 2013.

To participate, dial (Toll Free) 888-317-6016 and reference First Merchants Corporation's third quarter earnings release. International callers please call +1 412-317-6016. A replay of the call will be available until October 24, 2014. 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 10034351.

In order to view the web cast and presentation slides, please go to http://services.choruscall.com/links/frme131024.html during the time of the call.

During the call, Forward-Looking Statements about the relative business outlook may be made. These Forward-Looking Statements and all other statements made during the call that do not concern historical facts, are subject to risks and uncertainties that may materially affect actual results.

Specific Forward-Looking Statements include, but are not limited to, any indications regarding the Financial Services industry, the economy and future growth of the balance sheet or income statement.

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 is comprised of First Merchants Bank, N.A., which also operates as Lafayette Bank & Trust, Commerce National Bank, and First Merchants Trust Company as divisions of First Merchants Bank, N.A. First Merchants Corporation also operates First Merchants Insurance Group, a full-service property casualty, personal lines, and healthcare insurance agency.

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).

Source: First Merchants Corp.