First Merchants Corp Announces 32 Percent Increase in 1st Quarter Earnings

First Merchants CorporationFirst Merchants Corporation. Photo by: Mike Rhodes

By: Clare Leonard—

Muncie, IN—First Merchants Corporation (NASDAQ – FRME) has reported first quarter 2018 net income of $36.7 million, an increase of 58 percent, compared to $23.2 million during the same period in 2017. Earnings per share for the period totaled $.74 per share, an increase of 32 percent, compared to the first quarter of 2017 result of $.56 per share. The increase in net income was driven by several factors including strong core banking performance, two acquisitions that were fully integrated during the second half of 2017 and the impact of tax reform.

Total assets equaled $9.5 billion as of quarter-end and loans totaled $6.9 billion. The Corporation’s loan portfolio increased by $1.6 billion, or 31 percent, during the past twelve months. The acquisition of Independent Alliance Banks, Inc. in Fort Wayne, Indiana and the acquisition of The Arlington Bank in Upper Arlington, Ohio accounted for $950 million, or 18 percent, of loan growth. Additionally, organic loan growth totaled $677 million, or 13 percent. Total deposits equaled $7.3 billion as of quarter-end, an increase of $1.7 billion, or 30 percent. Our acquisition activity accounted for deposit growth of $1.1 billion, or 20 percent, while organic deposit growth totaled $577 million, or 10 percent.

Michael C. Rechin, President and Chief Executive Officer, stated, “Our first quarter of 2018 results reflect the strength of First Merchants’ earning power and the health of our franchise marketplaces. 2017 was a busy M&A year for the company and it makes First Merchants an even stronger, more impactful player in the Midwest banking industry. Our management team is also pleased that organic balance sheet growth maintained momentum throughout the integration process. We are off to a productive start in 2018 posting a return on assets of 1.57 percent, fueled by a 51.3 percent efficiency ratio. Our organic loan and deposit growth of nearly 9 percent, should produce continued earnings improvement and stock price appreciation.”

Net-interest income totaled $80 million for the quarter, an increase of $19 million, or 31 percent. Net-interest margin totaling 3.92 percent, declined by 6 basis points and included a reduction of 13 basis points related to tax reform. Yields on earning assets totaled 4.57 percent and the cost of supporting liabilities totaled .65 percent.

Non-interest income totaled $19.6 million for the quarter, a $4.7 million increase over the first quarter of 2017. Non-interest expense totaled $53.7 million, up from the 2017 total of $43.1 million. Increases in both non-interest income and non-interest expense are reflective of a significantly larger franchise as a result of the acquisition activity in 2017, which drove higher net income and improved efficiency in the quarter.

Tax expense for the first quarter of 2018 totaled $6.6 million, or 15.3 percent of pre-tax net income. Tax expense in the prior year totaled $7.2 million, or 23.6 percent. The improvement in tax expense was due to a decline in the federal tax rate from 35 percent to 21 percent. Our effective rate is 5.7 percentage points lower than the federal tax rate of 21 percent, primary due to approximately $10.9 million of tax-free loan, securities and life insurance income in the quarter.

The Corporation’s provision expense totaled $2.5 million due to loan growth and net charge-offs totaling $1.1 million during the quarter. The allowance for loan losses totaled $76.4 million as of March 31, 2018, up from $68.2 million as of March 31, 2017. Non-accrual loans totaled $27.5 million as of quarter-end and the allowance is 1.11 percent of total loans and 1.32 percent of non-purchased loans.

As of March 31, 2018, the Corporation’s total risk-based capital ratio equaled 13.69 percent, common equity tier 1 capital ratio equaled 11.04 percent, and the tangible common equity ratio totaled 9.32 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 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).