First Merchants Profit Rises

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Muncie-based First Merchants Corp. (Nasdaq: FRME) is reporting first quarter net income of $13.6 million, up from $11 million during the same period in 2013. The company says the increase is due in part to new customers from its acquisition of Munster-based CFS Bancorp.

April 24, 2014

News Release

Muncie, Ind. -- First Merchants Corporation (NASDAQ: FRME) has reported first quarter 2014 net income of $13.6 million, compared to $11 million during the same period in 2013. Earnings per share for the period totaled $.38 per share equaling the first quarter of 2013.

Total assets equaled $5.5 billion as of quarter-end and loans were $3.6 billion. The Corporation's loan portfolio increased, by $737 million, over the past twelve months. Of the increase, $140 million was the result of organic growth and $597 million resulted from the acquisition of CFS Bancorp in November of 2013. The Corporation's loan-to-deposit ratio is 84 percent and the loan-to-asset ratio is 66 percent.

Michael C. Rechin, President and Chief Executive Officer, stated, "First quarter 2014 results were in line with our expectations and include the successful integration of more than 30,000 new customers onto our core platforms as of February 24th." Rechin also added, "Management was pleased by our results in the month of March, as cost savings identified from our acquisition were fully recognized. The board's decision to increase the common dividend is reflective of our team's confidence in the company's earnings prospects."

Net-interest income totaled $45.9 million for the quarter, and net-interest margin remained strong during the quarter totaling 3.97 percent, as yields on earning assets totaled 4.40 percent and the cost of supporting liabilities totaled .43 percent.

Non-interest income totaled $15.2 million for the quarter, an increase from the first quarter of 2013 total of $13.9 million. Gains on sale of mortgage loans declined during the quarter by $1.7 million reflecting higher rates and the challenges of selling a home in sub-zero temperatures. Non-interest expense totaled $43.1 million for the quarter, an increase of $8.4 million over the prior year. Of the increase in non-interest expense, $1.4 million was non-recurring related to the acquisition, $682,000 from our initial seeding of employee HSA accounts and $669,000 resulting from unusually high levels of snow removal.

The Corporation did not expense any provision during the quarter due to net recoveries of $1.7 million. The allowance for loan losses totaled $69.6 million, or 1.92 percent of total loans and 125 percent of non-accrual loans. Non-performing assets declined by $4.6 million from year-end and now total $77.1 million.

As of March 31, 2014, the Corporation's total risk-based capital equaled 15.04 percent, Tier 1 common risk-based capital equaled 10.86 percent, and tangible common equity ratio totaled 8.65 percent. The Corporation also increased its dividend through an 8-K filling on April 18, 2014. The quarterly dividend now totals $.08 per share, an increase of sixty percent, due to strong earnings and capital levels.

Mark K. Hardwick, Executive Vice President and Chief Financial Officer stated, “The optimization of our capital levels in the fourth quarter of last year combined with the strength of earnings allowed for the desired flexibility in our dividend level.” Hardwick also added, “Utilizing cash as a component of future acquisitions is also an option that we intend to consider.”

CONFERENCE CALL

First Merchants Corporation will conduct a first quarter earnings conference call and web cast at 2:30 p.m. (ET) on Thursday, April 24, 2014.

To participate, dial (Toll Free) 888-317-6016 and reference First Merchants Corporation's first quarter earnings release. International callers please call +1 412-317-6016. A replay of the call will be available until July 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 10044122.

In order to view the web cast and presentation slides, please go to http://services.choruscall.com/links/frme140424.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.