First Merchants Corporation Announces Third Quarter 2017 Results

First Merchants CorporationFirst Merchants Corporation. Photo by: Mike Rhodes

Muncie, INFirst Merchants Corporation (NASDAQ – FRME) reported record third quarter 2017 net income of $24.4 million, compared to $21.1 million during the third quarter of 2016. Earnings per share for the period totaled $.50 per share, which included
$.11 per share of acquisition expenses, compared to $.51 during the same period in 2016. The acquisition expenses in the quarter totaled $7.9 million and were primarily related to the July 14, 2017 acquisition of Independent Alliance Banks, Inc.

Year-to-date net income totaled a record $71.7 million, compared to $58.8 million during the same period in 2016. Earnings per share for the nine months ended September 30, 2017 totaled $1.63 per share, an increase of $.20 per share, or 14 percent, over the same period in 2016. In the first nine months of 2017, acquisition expenses related to the completion of The Arlington Bank and Independent Alliance Bank acquisitions, totaled $10.8 million, or $.16 per share.

Michael C. Rechin, President and Chief Executive Officer, stated, “First Merchants achieved outstanding financial results in a special quarter for our clients, teammates and shareholders. We had several accomplishments to include building the First Merchants franchise, adding capital strength and growing earnings power. The addition of Independent Alliance Bank into First Merchants establishes a significant presence in the Fort Wayne market driven by strong local management. Our organic balance sheet growth throughout the company demonstrates our commitment to our vibrant and growing communities. When coupled with a wider net interest margin, the company produced record net interest income.”

Total assets reached a record $9.0 billion as of quarter-end and loans totaled a record $6.5 billion, compared to $7.0 billion and $5.0 billion, as of September 30, 2016 representing increases of 28.9 and 30.4 percent, respectively. Total deposits reached record levels as well, totaling $6.9 billion as of September 30, 2017, representing a 26.9 percent increase. Of the increase in total loans and total deposits, the acquisitions represent 19.3 percent and 20.5 percent, respectively. Tangible common equity also increased to record levels for the quarter totaling $817 million, or $16.62 per share, compared to $647 million, or $15.86 per share, as of September 30, 2016.

Net-interest income totaled a record $74.4 million for the quarter and net-interest margin increased by 9 basis points over the third quarter of 2016, totaling 4.03 percent. Yields on earning assets totaled 4.56 percent and the cost of supporting liabilities totaled .53 percent. Fair value accretion added 17 basis points to net-interest margin this quarter, compared to 24 basis points in the third quarter of 2016.

Non-interest income totaled $18.7 million for the quarter, up $1.8 million from the third quarter 2016 total of $16.9 million. Non-interest expense totaled $58.7 million for the quarter, up from $44.1 million during the third quarter of 2016. Of the increase, $7.9 million was the result of acquisition-related expenses.

The Corporation’s provision expense totaled $2.1 million compared to $1.9 million during the same period in 2016. The increase in provision expense, along with net recoveries of $800,000, provided allowance coverage for organic loan growth of 9.2 percent annualized. The allowance for loan losses totals $73.4 million as of September 30, 2017, up from $63.5 million as of September 30, 2016. Non-accrual loans totaled $32.3 million as of quarter-end and the allowance is 1.13 percent of total loans and 1.44 percent of non-purchased loans.

As of September 30, 2017, the Corporation’s total risk-based capital ratio equaled 13.76 percent, common equity tier 1 capital ratio equaled 11.03 percent, and the tangible common equity ratio totaled 9.39 percent.