First Merchants Corporation Announces Record 2017 Results

First Merchants CorporationFirst Merchants Corporation. Photo by: Mike Rhodes

By: Nicole M. Weaver—

Muncie, IN—First Merchants Corporation (NASDAQ – FRME) reported record fourth quarter 2017 net income of $24.4 million, compared to $22.3 million during the fourth quarter of 2016. Earnings per share for the period totaled $.49 per share compared to $.55 during the same period in 2016. Our fourth quarter results included the impact of the recently enacted Tax Cuts and Jobs Act (the “TCJA”). Specifically, our federal income tax expense was elevated by $5.1 million, or $.10 per share due to deferred tax asset write-downs. Acquisition expenses related to the completion of our Independent Alliance Banks acquisition totaled $1.4 million, or $.02 per share, for the quarter.

Year-to-date net income totaled a record $96.1 million, compared to $81.1 million during the same period in 2016. Earnings per share for the year ended December 31, 2017 totaled $2.12 per share, an increase of $.14 per share, or 7.1 percent, over 2016. The enactment of the TCJA resulted in a reduction of annual profits by $5.1 million, or $.11 per share. Acquisition expenses related to The Arlington Bank and Independent Alliance Banks totaled $12.2 million, or $.18 per share. Our 2017 franchise expansion impacts balance sheet, income, expense and share growth throughout the financial statements.

Michael C. Rechin, President and Chief Executive Officer, stated, “2017 was a record setting year for First Merchants. Our results were fueled by the growth of our clients and the skill and commitment of our teammates. Annual organic loan growth of 12.8 percent, when combined with the acquisitions of Independent Alliance Banks in the Fort Wayne market and The Arlington Bank in the Columbus, Ohio MSA, allowed our total assets to increase by 30 percent for the year.” Rechin also added, “Profitability enhancements in 2017 are further accelerated by significant tax savings in 2018. These improvements in our core business allowed First Merchants to achieve a record share price in 2017 and our business begins 2018 with optimism.”

Total assets reached a record $9.4 billion as of year-end and loans totaled a record $6.8 billion, compared to $7.2 billion and $5.1 billion, as of December 31, 2016. Organic loan growth totaled an annualized rate of 16.7 percent for the fourth quarter and 12.8 percent for the year. Organic deposits grew at an annualized rate of 15.1 percent in the fourth quarter and 9 percent during the year. Inclusive of acquisition growth, total deposits reached $7.2 billion as of December 31, 2017, representing a 29.1 percent increase. Tangible common equity also increased to record levels for the year totaling $834 million, or $16.96 per share, compared to $649 million, or $15.85 per share, as of December 31, 2016.

Net-interest income totaled $78.8 million for the quarter and net-interest margin increased by 20 basis points over the fourth quarter of 2016, totaling 4.10 percent. Yields on earning assets totaled 4.67 percent and the cost of supporting liabilities totaled .57 percent. Fair value accretion added 20 basis points to net-interest margin this quarter compared to 18 basis points in the fourth quarter of 2016.

Non-interest income totaled $19.1 million for the quarter, up $3.0 million from the fourth quarter of 2016 total of $16.1 million. Non-interest expense totaled $56.4 million for the quarter, an increase from $41.9 million during the fourth quarter of 2016, reflecting the inclusion of $1.4 million of merger related expenses.

Tax expense for the quarter totaled $15.2 million, or 38.4 percent of income before income taxes, compared to $7.9 million, or 26.0 percent in the fourth quarter of 2016. The impact of the deferred tax asset write-downs in 2017 will be more than offset by the savings from the reduced tax rate to be realized in 2018.

The Corporation’s provision expense totaled $1.8 million compared to $2.4 million during the same period in 2016. The provision expense in the quarter provided allowance coverage for the organic loan growth. The allowance for loan losses now totals $75.0 million as of December 31, 2017, an increase from $66.0 million as of December 31, 2016. Non-accrual loans totaled $28.7 million as of year-end and the allowance is 1.11 percent of total loans and 1.36 percent of non-purchased loans.

As of December 31, 2017, the Corporation’s total risk-based capital ratio equaled 13.69 percent, common equity tier 1 capital ratio equaled 11.00 percent, and the tangible common equity ratio totaled 9.30 percent.

 

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 Lafayette Bank & Trust and First Merchants Private Wealth Advisors (each as a division of First Merchants Bank). First Merchants Bank has 26 locations in the Muncie area.

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