First Merchants Corporation (NASDAQ - FRME) has reported third quarter 2018 net income of $41.1 million, an increase of 69 percent, compared to $24.4 million during the same period in 2017. Earnings per share for the period totaled $.83, an increase of 66 percent, compared to the third quarter of 2017 result of $.50 per share. Net income for the nine months ended September 30, 2018 totaled $117.4 million, compared to $71.7 million during the same period in 2017. Year-to-date earnings per share totaled $2.37, an increase of $.74 per share, or 45 percent, over the same period in 2017. The increase in net income was driven by several key factors including the two fully integrated acquisitions in 2017, strong organic growth throughout 2017 and 2018, and the impact of tax reform.
Michael C. Rechin, President and Chief Executive Officer, stated, “Deposit betas, deposit growth and flattening yield curves seem to be a primary focus of investors this quarter. First Merchants continues to perform well delivering strong net interest income and net interest margin coupled with high, single-digit organic balance sheet growth. Our highly efficient business model continues to drive performance and returns at levels produced by the best banks in the industry.”
Rechin continued, “On October 10th we announced the signing of a definitive agreement to merge Monroe Bank and Trust (MBT) into First Merchants. Currently we are working closely with the MBT executives to sustain their performance momentum and the community leadership they enjoy throughout their marketplace.”
The combination would assure First Merchants will cross the $10 billion asset threshold early in 2019. The opportunity is accretive to earnings in the first full year of the merger through the revenue added and resultant scale benefits achieved through the anticipated mid-2019 integration. Management has been planning and investing to meet the required regulatory expectations of crossing the threshold and are excited with the Monroe acquisition as a means to build value in our franchise.
First Merchants’ total assets equaled $9.8 billion as of quarter-end and loans totaled $7.1 billion. The loan portfolio increased by $605 million, or 9.3 percent, during the past twelve months. Total deposits equaled $7.6 billion as of quarter-end and increased by $722 million, or 10.4 percent, compared to the same period in 2017.
Net-interest income totaled $86.5 million for the quarter, an increase of $12.1 million, or 16.2 percent. Net-interest margin totaling 4.05 percent on a fully tax-equivalent basis, increased by 2 basis points and included a reduction of 13 basis points related to tax reform. Yields on earning assets totaled 4.88 percent and the cost of supporting liabilities totaled .83 percent.
Non-interest income totaled $19.5 million for the quarter, an $859,000 increase over the third quarter of 2017. Gains from the sale of securities, growth in service charges, interchange income and improved fiduciary and wealth management fees off-set declines in earnings on cash surrender value and gains on the sales of loans. Non-interest expense totaled $55 million, down from the 2017 total of $58.7 million due to the completion of all integration activities in 2017.
Tax expense for the third quarter of 2018 totaled $8.5 million, or 17.1 percent of pre-tax net income. Tax expense in the prior year totaled $7.9 million, or 24.6 percent. The improvement in tax expense was due to a decline in the federal statutory tax rate from 35 percent to 21 percent. Our effective rate is 3.9 percentage points lower than the statutory rate primarily due to approximately $11.2 million of tax free loan, securities and life insurance income in the quarter.
The allowance for loan losses totaled $78.4 million as of September 30, 2018, up from $73.4 million during the same period in 2017. Non-accrual loans totaled $20.4 million as of quarter-end and the allowance is 1.11 percent of total loans and 1.28 percent of non-purchased loans. The Corporation’s total risk-based capital ratio equaled 14.25 percent, common equity tier 1 capital ratio equaled 11.64 percent, and the tangible common equity ratio totaled 9.55 percent.
First Merchants Corporation will conduct a third quarter earnings conference call and web cast at 2:30 p.m. (ET) on Wednesday, October 24, 2018.
To participate, dial (Toll Free) 877-507-0578 and reference First Merchants Corporation's third quarter earnings release. International callers please call +1 412-317-1073. A replay of the call will be available until November 24, 2018. To access a replay of the call, US participants should dial (Toll Free) 877-344-7529, or for International participants, dial +1 412-317-0088. The replay access code is 10124461.
In order to view the web cast and presentation slides, please go to http://services.choruscall.com/links/frme181024.html during the time of the call. A replay of the web cast will be available until October 24, 2019.
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 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).
FIRST MERCHANTS and the Shield Logo are federally registered trademarks of First Merchants Corporation.
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.
For more information, contact:
Nicole M. Weaver, Vice President and Director of Corporate Administration
SOURCE: First Merchants Corporation, Muncie, Indiana