First Merchants Corp. Profit Jumps

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Muncie-based First Merchants Corp. (Nasdaq: FRME) is reporting record net income of $16.1 million for the third quarter, compared to $10 million during the same period in 2013. Chief Executive Officer Michael Rechin says virtually every key metric improved on a quarter-over-quarter basis. October 23, 2014

News Release

MUNCIE, Ind. -- First Merchants Corporation (Nasdaq - FRME) has reported third quarter 2014 earnings per share of $.45, compared to $.35 during the same period in 2013, a 29 percent increase. Net income available to common stockholders totaled a record $16.1 million, during the quarter, compared to $10 million in 2013. Year-to-date earnings per share totaled $1.24 in 2014, compared to $1.07 in 2013, nearly a 16 percent increase. Year-to date 2014 net income totaled $44.9 million, compared to $30.9 million in 2013.

Michael C. Rechin, President and Chief Executive Officer, stated, “Our return on assets improved to 1.16 percent during the quarter and virtually every key metric improved on a quarter-over-quarter basis. Loans increased, asset quality improved and the efficiency ratio improved driven by balance sheet growth, stabilized margins, strong fee income and controlled expenses.” Rechin also added, “Our momentum continues as our teams are executing on 2014 initiatives, and executive management is focused on refining our plans for 2015 and 2016.”

Total assets equaled $5.6 billion as of quarter-end and total loans were $3.8 billion, an increase of $847 million, or 29 percent over the same period in 2013. Our CFS Bancorp acquisition in November 2013 accounted for $597 million of growth and $250 million was the result of organic growth. On a linked basis, loans increased by $50 million, as commercial and industrial loans increased by $43 million.

Net interest income totaled $47.9 million for the quarter and net-interest margin totaled 3.98 percent as yields on earning assets totaled 4.41 percent and the cost of supporting liabilities totaled .43 percent. Fair value accretion of $3.5 million was included in the quarterly results. When normalized for fair value accretion, net interest margin totaled 3.71 percent. Year to- date net interest income totaled $139.9 million, compared to $113.1 million in 2013, as net interest margin totaled 3.95

percent. When adjusted for year-to-date fair market value accretion of $7.4 million, net interest margin totaled 3.75 percent.

Our CFS Bancorp acquisition resulted in significant variances in both non-interest income and non-interest expenses. Noninterest income totaled $18.3 million during the quarter, compared to $11.8 million in 2013. Year-to-date non-interest income totaled $49.4 million, compared to $39.7 million in 2013. Non-interest expense totaled $42.6 million during the quarter, up from $34.2 million in the third quarter of 2013. Year-to-date non-interest expense totaled $126.9 million, compared to $102.7 million in 2013. On a linked basis, non-interest income improved by $2.4 million due to increased cash surrender value of life insurance gains of $871,000, increased derivative income of $656,000 and increased gains from the sale of mortgages totaling $299,000. On a linked basis, non-interest expense increased by $1.3 million due primarily to incentive and benefit accruals of $743,000, fixed asset write downs of $305,000 and increased marketing expense of $281,000.

Non-performing assets declined to $64.8 million, or 1.16 percent of assets. Provision expense totaled $1.6 million for the third quarter of 2014, compared to $1.5 million in 2013. Net charge-offs totaled $4.4 million for the third quarter, up from $3.5 million in the third quarter of 2013. Year-to-date provision expense totaled $1.6 million versus $3.9 million of net chargeoffs.

The allowance for loan losses totaled $65.6 million and our remaining fair value mark totaled $35.5 million.

As of September 30, 2014, the Corporation's total risk-based capital equaled 15.21 percent, Tier 1 common risk-based capital equaled 11.16 percent and tangible common equity ratio totaled 9.05 percent.

Source: First Merchants Corporation