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 deposits | 380,021 | 129,614 | ||||||
| Investment securities | 2,789,379 | 2,092,924 | ||||||
| Loans held for sale | 901 | 5,854 | ||||||
| Loans | 9,298,541 | 7,511,370 | ||||||
| Less: Allowance for loan losses | (121,119 | ) | (81,274 | ) | ||||
| Net loans | 9,177,422 | 7,430,096 | ||||||
| Premises and equipment | 112,548 | 91,767 | ||||||
| Federal Home Loan Bank stock | 28,736 | 24,588 | ||||||
| Interest receivable | 57,063 | 45,150 | ||||||
| Goodwill and other intangibles | 575,855 | 466,736 | ||||||
| Cash surrender value of life insurance | 290,715 | 226,241 | ||||||
| Other real estate owned | 7,367 | 1,131 | ||||||
| Tax asset, deferred and receivable | 13,126 | 12,340 | ||||||
| Other assets | 156,486 | 83,231 | ||||||
| TOTAL ASSETS | $ | 13,819,378 | $ | 10,737,857 | ||||
| LIABILITIES | ||||||||
| Deposits: | ||||||||
| Noninterest-bearing | $ | 2,260,351 | $ | 1,353,165 | ||||
| Interest-bearing | 8,705,637 | 6,966,163 | ||||||
| Total Deposits | 10,965,988 | 8,319,328 | ||||||
| Borrowings: | ||||||||
| Federal funds purchased | — | 75,000 | ||||||
| Securities sold under repurchase agreements | 181,150 | 119,674 | ||||||
| Federal Home Loan Bank advances | 400,817 | 460,042 | ||||||
| Subordinated debentures and other borrowings | 285,197 | 138,574 | ||||||
| Total Borrowings | 867,164 | 793,290 | ||||||
| Interest payable | 5,587 | 6,740 | ||||||
| Other liabilities | 171,544 | 116,863 | ||||||
| Total Liabilities | 12,010,283 | 9,236,221 | ||||||
| STOCKHOLDERS' EQUITY | ||||||||
| Cumulative Preferred Stock, $1,000 par value, $1,000 liquidation value: | ||||||||
| Authorized -- 600 shares | ||||||||
| Issued and outstanding - 125 shares | 125 | 125 | ||||||
| Common Stock, $.125 stated value: | ||||||||
| Authorized -- 100,000,000 shares | ||||||||
| Issued and outstanding - 53,795,500 and 49,456,594 shares | 6,724 | 6,182 | ||||||
| Additional paid-in capital | 1,002,962 | 841,365 | ||||||
| Retained earnings | 735,439 | 639,362 | ||||||
| Accumulated other comprehensive income (loss) | 63,845 | 14,602 | ||||||
| Total Stockholders' Equity | 1,809,095 | 1,501,636 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 13,819,378 | $ | 10,737,857 | ||||
| CONSOLIDATED STATEMENTS OF INCOME | Three 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-exempt | 5,359 | 4,244 | 10,674 | 8,397 | |||||||||||
| Investment securities: | |||||||||||||||
| Taxable | 6,147 | 6,998 | 13,778 | 13,093 | |||||||||||
| Tax-exempt | 10,019 | 7,454 | 19,354 | 14,325 | |||||||||||
| Deposits with financial institutions | 134 | 784 | 709 | 1,659 | |||||||||||
| Federal Home Loan Bank stock | 281 | 335 | 580 | 673 | |||||||||||
| Total Interest Income | 109,252 | 112,639 | 229,059 | 221,452 | |||||||||||
| INTEREST EXPENSE | |||||||||||||||
| Deposits | 12,707 | 23,087 | 34,455 | 42,681 | |||||||||||
| Federal funds purchased | 2 | 117 | 113 | 210 | |||||||||||
| Securities sold under repurchase agreements | 92 | 342 | 444 | 672 | |||||||||||
| Federal Home Loan Bank advances | 1,794 | 1,692 | 3,568 | 3,506 | |||||||||||
| Subordinated debentures and other borrowings | 1,639 | 2,123 | 3,584 | 4,239 | |||||||||||
| Total Interest Expense | 16,234 | 27,361 | 42,164 | 51,308 | |||||||||||
| NET INTEREST INCOME | 93,018 | 85,278 | 186,895 | 170,144 | |||||||||||
| Provision for loan losses | 21,895 | 500 | 41,647 | 1,700 | |||||||||||
| NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 71,123 | 84,778 | 145,248 | 168,444 | |||||||||||
| OTHER INCOME | |||||||||||||||
| Service charges on deposit accounts | 4,312 | 5,437 | 10,282 | 10,532 | |||||||||||
| Fiduciary and wealth management fees | 5,601 | 3,931 | 11,586 | 7,749 | |||||||||||
| Card payment fees | 6,097 | 4,829 | 12,004 | 9,655 | |||||||||||
| Net gains and fees on sales of loans | 3,674 | 1,736 | 7,037 | 3,031 | |||||||||||
| Derivative hedge fees | 1,042 | 1,487 | 2,981 | 2,268 | |||||||||||
| Other customer fees | 333 | 341 | 731 | 780 | |||||||||||
| Earnings on cash surrender value of life insurance | 1,326 | 946 | 2,686 | 1,935 | |||||||||||
| Net realized gains on sales of available for sale securities | 3,068 | 1,843 | 7,680 | 2,983 | |||||||||||
| Other income | 1,028 | 1,064 | 1,293 | 1,394 | |||||||||||
| Total Other Income | 26,481 | 21,614 | 56,280 | 40,327 | |||||||||||
| OTHER EXPENSES | |||||||||||||||
| Salaries and employee benefits | 35,698 | 32,709 | 74,941 | 65,737 | |||||||||||
| Net occupancy | 5,447 | 4,469 | 11,248 | 9,496 | |||||||||||
| Equipment | 4,489 | 4,117 | 8,833 | 7,759 | |||||||||||
| Marketing | 2,092 | 2,752 | 3,535 | 3,826 | |||||||||||
| Outside data processing fees | 2,618 | 3,929 | 6,817 | 7,613 | |||||||||||
| Printing and office supplies | 279 | 334 | 666 | 649 | |||||||||||
| Intangible asset amortization | 1,511 | 1,520 | 3,025 | 3,048 | |||||||||||
| FDIC assessments | 1,472 | 678 | 2,995 | 1,385 | |||||||||||
| Other real estate owned and foreclosure expenses | 684 | 903 | 1,189 | 2,068 | |||||||||||
| Professional and other outside services | 1,553 | 2,376 | 3,811 | 4,260 | |||||||||||
| Other expenses | 4,146 | 3,800 | 9,100 | 8,367 | |||||||||||
| Total Other Expenses | 59,989 | 57,587 | 126,160 | 114,208 | |||||||||||
| INCOME BEFORE INCOME TAX | 37,615 | 48,805 | 75,368 | 94,563 | |||||||||||
| Income tax expense | 4,623 | 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 Loans | 9,180,610 | 7,385,315 | 8,853,591 | 7,308,146 | |||||||||||
| Total Earning Assets | 12,187,442 | 9,518,892 | 11,739,936 | 9,326,579 | |||||||||||
| Total Deposits | 10,789,909 | 8,321,459 | 10,338,091 | 8,130,120 | |||||||||||
| Total Stockholders' Equity | 1,795,509 | 1,479,254 | 1,805,963 | 1,454,633 | |||||||||||
| FINANCIAL RATIOS: | |||||||||||||||
| Return on Average Assets | 0.97 | % | 1.56 | % | 1.03 | % | 1.55 | % | |||||||
| Return on Average Stockholders' Equity | 7.35 | 11.10 | 7.45 | 10.98 | |||||||||||
| Return on Average Common Stockholders' Equity | 7.35 | 11.10 | 7.45 | 10.98 | |||||||||||
| Average Earning Assets to Average Assets | 89.25 | 90.66 | 89.52 | 90.63 | |||||||||||
| Allowance for Loan Losses as % of Total Loans | 1.30 | 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 Assets | 13.15 | 14.09 | 13.77 | 14.13 | |||||||||||
| Tax Equivalent Yield on Average Earning Assets | 3.72 | 4.86 | 4.04 | 4.88 | |||||||||||
| Interest Expense/Average Earning Assets | 0.53 | 1.15 | 0.72 | 1.10 | |||||||||||
| Net Interest Margin (FTE) on Average Earning Assets | 3.19 | 3.71 | 3.32 | 3.78 | |||||||||||
| Efficiency Ratio | 47.95 | 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 Loans | 1,086 | 665 | 841 | 576 | 640 | ||||||||||||||
| Non-Performing Loans (NPL) | 51,188 | 16,314 | 16,790 | 23,304 | 26,275 | ||||||||||||||
| Other Real Estate Owned and Repossessions | 7,409 | 8,017 | 7,527 | 7,156 | 1,131 | ||||||||||||||
| Non-Performing Assets (NPA) | 58,597 | 24,331 | 24,317 | 30,460 | 27,406 | ||||||||||||||
| 90+ Days Delinquent | 4,981 | 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-offs | 230 | 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 deposits | 380,021 | 132,944 | 118,263 | 230,101 | 129,614 | ||||||||||||||||||
| Investment securities | 2,789,379 | 2,697,954 | 2,596,063 | 2,489,420 | 2,092,924 | ||||||||||||||||||
| Loans held for sale | 901 | 5,039 | 9,037 | 7,910 | 5,854 | ||||||||||||||||||
| Loans | 9,298,541 | 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 loans | 9,177,422 | 8,507,395 | 8,379,026 | 8,218,689 | 7,430,096 | ||||||||||||||||||
| Premises and equipment | 112,548 | 114,045 | 113,055 | 113,446 | 91,767 | ||||||||||||||||||
| Federal Home Loan Bank stock | 28,736 | 28,736 | 28,736 | 28,736 | 24,588 | ||||||||||||||||||
| Interest receivable | 57,063 | 47,489 | 48,901 | 45,923 | 45,150 | ||||||||||||||||||
| Goodwill and other intangibles | 575,855 | 577,366 | 578,880 | 579,751 | 466,736 | ||||||||||||||||||
| Cash surrender value of life insurance | 290,715 | 289,574 | 288,206 | 286,747 | 226,241 | ||||||||||||||||||
| Other real estate owned | 7,367 | 7,972 | 7,527 | 7,156 | 1,131 | ||||||||||||||||||
| Tax asset, deferred and receivable | 13,126 | 9,497 | 12,165 | 15,187 | 12,340 | ||||||||||||||||||
| Other assets | 156,486 | 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-bearing | 8,705,637 | 8,182,279 | 8,103,560 | 7,988,086 | 6,966,163 | ||||||||||||||||||
| Total Deposits | 10,965,988 | 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 agreements | 181,150 | 183,317 | 187,946 | 191,603 | 119,674 | ||||||||||||||||||
| Federal Home Loan Bank advances | 400,817 | 480,995 | 351,072 | 354,609 | 460,042 | ||||||||||||||||||
| Subordinated debentures and other borrowings | 285,197 | 128,741 | 138,685 | 138,630 | 138,574 | ||||||||||||||||||
| Total Borrowings | 867,164 | 840,053 | 732,703 | 684,842 | 793,290 | ||||||||||||||||||
| Interest payable | 5,587 | 7,746 | 6,754 | 7,855 | 6,740 | ||||||||||||||||||
| Other liabilities | 171,544 | 197,275 | 91,404 | 117,901 | 116,863 | ||||||||||||||||||
| Total Liabilities | 12,010,283 | 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 outstanding | 125 | 125 | 125 | 125 | 125 | ||||||||||||||||||
| Common Stock, $.125 stated value: | |||||||||||||||||||||||
| Authorized -- 100,000,000 shares | |||||||||||||||||||||||
| Issued and outstanding | 6,724 | 6,719 | 6,921 | 6,918 | 6,182 | ||||||||||||||||||
| Additional paid-in capital | 1,002,962 | 1,000,942 | 1,054,997 | 1,053,148 | 841,365 | ||||||||||||||||||
| Retained earnings | 735,439 | 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' Equity | 1,809,095 | 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-exempt | 5,359 | 5,315 | 4,671 | 4,500 | 4,244 | |||||||||||||||
| Investment securities: | ||||||||||||||||||||
| Taxable | 6,147 | 7,631 | 7,993 | 6,729 | 6,998 | |||||||||||||||
| Tax-exempt | 10,019 | 9,335 | 8,995 | 8,335 | 7,454 | |||||||||||||||
| Deposits with financial institutions | 134 | 575 | 1,203 | 1,363 | 784 | |||||||||||||||
| Federal Home Loan Bank stock | 281 | 299 | 342 | 355 | 335 | |||||||||||||||
| Total Interest Income | 109,252 | 119,807 | 125,821 | 118,132 | 112,639 | |||||||||||||||
| INTEREST EXPENSE | ||||||||||||||||||||
| Deposits | 12,707 | 21,748 | 24,074 | 24,830 | 23,087 | |||||||||||||||
| Federal funds purchased | 2 | 111 | 26 | 15 | 117 | |||||||||||||||
| Securities sold under repurchase agreements | 92 | 352 | 367 | 385 | 342 | |||||||||||||||
| Federal Home Loan Bank advances | 1,794 | 1,774 | 1,776 | 1,894 | 1,692 | |||||||||||||||
| Subordinated debentures and other borrowings | 1,639 | 1,945 | 1,994 | 2,076 | 2,123 | |||||||||||||||
| Total Interest Expense | 16,234 | 25,930 | 28,237 | 29,200 | 27,361 | |||||||||||||||
| NET INTEREST INCOME | 93,018 | 93,877 | 97,584 | 88,932 | 85,278 | |||||||||||||||
| Provision for loan losses | 21,895 | 19,752 | 500 | 600 | 500 | |||||||||||||||
| NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 71,123 | 74,125 | 97,084 | 88,332 | 84,778 | |||||||||||||||
| OTHER INCOME | ||||||||||||||||||||
| Service charges on deposit accounts | 4,312 | 5,970 | 6,312 | 6,107 | 5,437 | |||||||||||||||
| Fiduciary and wealth management fees | 5,601 | 5,985 | 5,384 | 4,429 | 3,931 | |||||||||||||||
| Card payment fees | 6,097 | 5,907 | 5,430 | 5,158 | 4,829 | |||||||||||||||
| Net gains and fees on sales of loans | 3,674 | 3,363 | 2,633 | 2,227 | 1,736 | |||||||||||||||
| Derivative hedge fees | 1,042 | 1,939 | 1,405 | 1,684 | 1,487 | |||||||||||||||
| Other customer fees | 333 | 398 | 434 | 450 | 341 | |||||||||||||||
| Earnings on cash surrender value of life insurance | 1,326 | 1,360 | 1,458 | 1,144 | 946 | |||||||||||||||
| Net realized gains on sales of available for sale securities | 3,068 | 4,612 | 1,039 | 393 | 1,843 | |||||||||||||||
| Other income | 1,028 | 265 | 150 | 524 | 1,064 | |||||||||||||||
| Total Other Income | 26,481 | 29,799 | 24,245 | 22,116 | 21,614 | |||||||||||||||
| OTHER EXPENSES | ||||||||||||||||||||
| Salaries and employee benefits | 35,698 | 39,243 | 39,358 | 38,942 | 32,709 | |||||||||||||||
| Net occupancy | 5,447 | 5,801 | 5,311 | 4,777 | 4,469 | |||||||||||||||
| Equipment | 4,489 | 4,344 | 4,429 | 4,030 | 4,117 | |||||||||||||||
| Marketing | 2,092 | 1,443 | 1,492 | 1,332 | 2,752 | |||||||||||||||
| Outside data processing fees | 2,618 | 4,199 | 4,428 | 4,435 | 3,929 | |||||||||||||||
| Printing and office supplies | 279 | 387 | 484 | 312 | 334 | |||||||||||||||
| Intangible asset amortization | 1,511 | 1,514 | 1,590 | 1,356 | 1,520 | |||||||||||||||
| FDIC assessments | 1,472 | 1,523 | — | (668 | ) | 678 | ||||||||||||||
| Other real estate owned and foreclosure expenses | 684 | 505 | 66 | 294 | 903 | |||||||||||||||
| Professional and other outside services | 1,553 | 2,258 | 2,899 | 8,251 | 2,376 | |||||||||||||||
| Other expenses | 4,146 | 4,954 | 5,144 | 4,293 | 3,800 | |||||||||||||||
| Total Other Expenses | 59,989 | 66,171 | 65,201 | 67,354 | 57,587 | |||||||||||||||
| INCOME BEFORE INCOME TAX | 37,615 | 37,753 | 56,128 | 43,094 | 48,805 | |||||||||||||||
| Income tax expense | 4,623 | 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 Assets | 0.97 | % | 1.09 | % | 1.53 | % | 1.30 | % | 1.56 | % | ||||||||||
| Return on Average Stockholders' Equity | 7.35 | 7.55 | 10.82 | 9.21 | 11.10 | |||||||||||||||
| Return on Average Common Stockholders' Equity | 7.35 | 7.55 | 10.82 | 9.21 | 11.10 | |||||||||||||||
| Average Earning Assets to Average Assets | 89.25 | 89.81 | 89.71 | 90.37 | 90.66 | |||||||||||||||
| Allowance for Loan Losses as % of Total 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 | |||||||||||||||
| Average Stockholders' Equity to Average Assets | 13.15 | 14.45 | 14.17 | 14.16 | 14.09 | |||||||||||||||
| Tax Equivalent Yield on Average Earning Assets | 3.72 | 4.38 | 4.63 | 4.77 | 4.86 | |||||||||||||||
| Interest Expense/Average Earning Assets | 0.53 | 0.92 | 1.01 | 1.15 | 1.15 | |||||||||||||||
| Net Interest Margin (FTE) on Average Earning Assets | 3.19 | 3.46 | 3.62 | 3.62 | 3.71 | |||||||||||||||
| Efficiency Ratio | 47.95 | 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 farmers | 93,838 | 87,421 | 93,861 | 90,462 | 83,452 | ||||||||||||||
| Real estate loans: | |||||||||||||||||||
| Construction | 640,560 | 643,674 | 787,568 | 670,138 | 624,548 | ||||||||||||||
| Commercial and farmland | 3,239,998 | 3,268,168 | 3,052,698 | 3,144,649 | 2,821,689 | ||||||||||||||
| Residential | 1,145,187 | 1,121,556 | 1,143,217 | 1,155,403 | 993,802 | ||||||||||||||
| Home equity | 532,314 | 570,398 | 588,984 | 601,335 | 548,006 | ||||||||||||||
| Individuals' loans for household and other personal expenditures | 123,611 | 129,765 | 135,989 | 131,246 | 98,384 | ||||||||||||||
| Public finance and other commercial loans | 624,704 | 586,641 | 547,114 | 471,716 | 464,447 | ||||||||||||||
| Loans | 9,298,541 | 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 deposits | 3,278,156 | 2,962,821 | 2,896,177 | 2,808,745 | 2,358,720 | ||||||||||||||
| Certificates and other time deposits of $100,000 or more | 607,474 | 694,062 | 736,843 | 731,693 | 720,536 | ||||||||||||||
| Other certificates and time deposits | 669,119 | 717,723 | 741,759 | 811,780 | 729,392 | ||||||||||||||
| Brokered deposits | 122,879 | 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 stock | 28,736 | 281 | 3.91 | 24,588 | 335 | 5.45 | |||||||||||||||
| Investment Securities: (1) | |||||||||||||||||||||
| Taxable | 1,282,080 | 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 Securities | 2,599,607 | 18,829 | 2.90 | 1,964,363 | 16,433 | 3.35 | |||||||||||||||
| Loans held for sale | 12,630 | 131 | 4.15 | 11,430 | 127 | 4.44 | |||||||||||||||
| Loans: (3) | |||||||||||||||||||||
| Commercial | 6,890,010 | 69,463 | 4.03 | 5,419,169 | 74,638 | 5.51 | |||||||||||||||
| Real Estate Mortgage | 887,257 | 10,122 | 4.56 | 766,528 | 8,686 | 4.53 | |||||||||||||||
| Installment | 724,165 | 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 Loans | 9,180,610 | 94,096 | 4.10 | 7,385,315 | 98,196 | 5.32 | |||||||||||||||
| Total Earning Assets | 12,187,442 | 113,340 | 3.72 | % | 9,518,892 | 115,748 | 4.86 | % | |||||||||||||
| Net unrealized gain (loss) on securities available for sale | 56,807 | 12,841 | |||||||||||||||||||
| Allowance for loan losses | (106,858 | ) | (81,691 | ) | |||||||||||||||||
| Cash and cash equivalents | 303,491 | 130,987 | |||||||||||||||||||
| Premises and equipment | 113,528 | 91,563 | |||||||||||||||||||
| Other assets | 1,100,912 | 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 deposits | 1,673,104 | 1,696 | 0.41 | 1,220,020 | 3,509 | 1.15 | |||||||||||||||
| Savings deposits | 1,521,312 | 596 | 0.16 | 1,164,901 | 2,525 | 0.87 | |||||||||||||||
| Certificates and other time deposits | 1,498,002 | 6,229 | 1.66 | 1,652,203 | 8,512 | 2.06 | |||||||||||||||
| Total Interest-bearing Deposits | 8,644,237 | 12,707 | 0.59 | 6,973,049 | 23,087 | 1.32 | |||||||||||||||
| Borrowings | 909,258 | 3,527 | 1.55 | 613,446 | 4,274 | 2.79 | |||||||||||||||
| Total Interest-bearing Liabilities | 9,553,495 | 16,234 | 0.68 | 7,586,495 | 27,361 | 1.44 | |||||||||||||||
| Noninterest-bearing deposits | 2,145,672 | 1,348,410 | |||||||||||||||||||
| Other liabilities | 160,646 | 85,789 | |||||||||||||||||||
| Total Liabilities | 11,859,813 | 9,020,694 | |||||||||||||||||||
| Stockholders' Equity | 1,795,509 | 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 stock | 28,736 | 580 | 4.04 | 24,588 | 673 | 5.47 | |||||||||||||||
| Investment Securities: (1) | |||||||||||||||||||||
| Taxable | 1,325,313 | 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 Securities | 2,588,435 | 38,277 | 2.96 | 1,848,568 | 31,226 | 3.38 | |||||||||||||||
| Loans held for sale | 14,924 | 324 | 4.34 | 10,697 | 239 | 4.47 | |||||||||||||||
| Loans: (3) | |||||||||||||||||||||
| Commercial | 6,562,673 | 146,415 | 4.46 | 5,364,884 | 147,394 | 5.49 | |||||||||||||||
| Real Estate Mortgage | 878,956 | 20,524 | 4.67 | 755,070 | 17,008 | 4.51 | |||||||||||||||
| Installment | 741,889 | 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 Loans | 8,853,591 | 197,475 | 4.46 | 7,308,146 | 193,934 | 5.31 | |||||||||||||||
| Total Earning Assets | 11,739,936 | 237,041 | 4.04 | % | 9,326,579 | 227,492 | 4.88 | % | |||||||||||||
| Net unrealized gain on securities available for sale | 52,732 | 3,963 | |||||||||||||||||||
| Allowance for loan losses | (94,009 | ) | (81,301 | ) | |||||||||||||||||
| Cash and cash equivalents | 231,624 | 124,143 | |||||||||||||||||||
| Premises and equipment | 113,670 | 92,395 | |||||||||||||||||||
| Other assets | 1,070,327 | 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 deposits | 1,604,474 | 5,479 | 0.68 | 1,179,765 | 6,291 | 1.07 | |||||||||||||||
| Savings deposits | 1,473,183 | 2,424 | 0.33 | 1,157,852 | 4,792 | 0.83 | |||||||||||||||
| Certificates and other time deposits | 1,582,322 | 14,091 | 1.78 | 1,609,130 | 16,038 | 1.99 | |||||||||||||||
| Total Interest-bearing Deposits | 8,430,509 | 34,455 | 0.82 | 6,760,288 | 42,681 | 1.26 | |||||||||||||||
| Borrowings | 828,721 | 7,709 | 1.86 | 624,192 | 8,627 | 2.76 | |||||||||||||||
| Total Interest-bearing Liabilities | 9,259,230 | 42,164 | 0.91 | 7,384,480 | 51,308 | 1.39 | |||||||||||||||
| Noninterest-bearing deposits | 1,907,582 | 1,369,832 | |||||||||||||||||||
| Other liabilities | 141,505 | 82,260 | |||||||||||||||||||
| Total Liabilities | 11,308,317 | 8,836,572 | |||||||||||||||||||
| Stockholders' Equity | 1,805,963 | 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 Administration765-521-7619http://www.firstmerchants.com
SOURCE: First Merchants Corporation
