First Merchants (FRME) 8-K First Merchants Corporation Announces First Quarter 2012 Earnings Per Share

N / E / W / S     R / E / L / E / A / S / E

April 26, 2012

FOR IMMEDIATE RELEASE

For more information, contact:

David L. Ortega, First Vice President/Director of Investor Relations

765-378-8937

http://www.firstmerchants.com/

SOURCE: First Merchants Corporation, Muncie, Indiana

FIRST MERCHANTS CORPORATION ANNOUNCES FIRST QUARTER 2012 EARNINGS PER SHARE

First Merchants Corporation (NASDAQ – FRME) has reported first quarter 2012 core earnings per share of $.25 compared to $.17 during the same period in 2011. The increase of nearly 50 percent reflects the Corporation’s year-over-year improvements in revenue, credit quality and efficiency.  In addition to core earnings of $.25, the Corporation recorded a gain on its FDIC purchase and assumption agreement with SCB Bank in Shelbyville, Indiana of $.21 per share. Actual earnings per share totaled $.46 compared to $.17 during the same period in 2011, an increase of 171 percent.  Total net income available to common shareholders equaled $13.2 million compared to $4.5 million earned in the first quarter of 2011.

Michael C. Rechin, President and Chief Executive Officer, stated, “First quarter 2012 results include numerous positives and jump starts our company’s new year.  Our continued improvement in core earnings, capital levels, credit statistics, loans outstanding and efficiency gains sustain our momentum for the future. The strategic fit of the Shelbyville market into our franchise including the customer mix and community profile is a perfect addition to our community bank model and the immediate financial impact is very satisfying.  Even more importantly, our management team is energized by the ability of First Merchants to once again seize strategic opportunities and to capitalize on our history of successful operational and cultural integrations.”

Total assets equaled $4.2 billion as of year-end and total loans were $2.8 billion.  The Corporation’s liquidity is optimally deployed in the bond portfolio, as investment securities totaled $960 million.  The Corporation’s loan-to-deposit ratio is now 86 percent and the loan-to-asset ratio is 66 percent.  After adjusting for fair value, SCB purchased loans totaled $89.7 million and assumed deposits totaled $98.8 million as of the quarter’s end.

Net-interest income totaled $36.1 million for the quarter and net-interest margin remained strong during the quarter totaling 3.96 percent as yields on earning assets totaled 4.74 percent and the cost of supporting liabilities totaled .78 percent.  Net-interest margin of 3.96 for the quarter is one basis point better than the first quarter of 2011 and 3 basis points less than 4th quarter of 2011.

Non-interest income totaled $22.7 million for the quarter including the $9.1 million gain on the FDIC modified whole bank transaction.  After normalizing for bond gains and losses and the FDIC gain, non-interest income improved by $950,000 over the first quarter of 2011.  Non-interest expense totaled $34 million for the quarter, a slight increase over the prior year as benefits expense increased by $1.2 million.

Provision expense totaled $4.9 million for the first quarter 2012, compared to $5.6 million in 2011.  Net charge-offs totaled $5.4 million for the first quarter, down from $7.6 million in the first quarter of 2011.   The allowance for loan losses totaled $70.4 million, or 2.5 percent of total loans and 94.5 percent of non-accrual loans.  Core non-performing assets declined by $15 million, year-over-year, and now total $91.9 million.  The SCB loan portfolio added $4.9 million to non-performing assets producing a consolidated total of $96.8 million.  The new SCB non-performing assets had a book balance of $10 million adjusted to $4.9 million through fair value accounting.

As of March 31, 2012, the Corporation’s total risk-based capital equaled 16.39 percent, Tier 1 common risk-based capital equaled 9.20 percent, and tangible common equity ratio totaled 7.07 percent.  The one time gain recorded during the quarter effectively self capitalized the FDIC transaction as tangible common equity to tangible assets improved to over 7 percent for the first time since 2001.

CONFERENCE CALL

First Merchants Corporation will conduct a first quarter earnings conference call and web cast at 2:30 p.m. (ET) on Thursday, April 26, 2012.

To participate, dial (Toll Free) 877-317-6789 and reference First Merchants Corporation’s first quarter earnings release. International callers please call +1 412-317-6789. A replay of the call will be available until May 4, 2012. 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 passcode is 10013369.

In order to view the web cast and presentation slides, please go to http://services.choruscall.com/links/frme120426.htmlduring the time of the call.

During the call, Forward-Looking Statements about the relative business outlook may be made. These Forward-Looking Statements and all other statements made during the call that do not concern historical facts, are subject to risks and uncertainties that may materially affect actual results.

Specific Forward-Looking Statements include, but are not limited to, any indications regarding the Financial Services industry, the economy and future growth of the balance sheet or income statement.

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 is comprised of First Merchants Bank, N.A., which also operates as Lafayette Bank & Trust, Commerce National Bank, and First Merchants Trust Company as divisions of First Merchants Bank, N.A.  First Merchants Corporation also operates First Merchants Insurance Group, a full-service property casualty, personal lines, and healthcare insurance agency.

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).

* * * *

CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)	March 31,
	2012			2011
ASSETS
Cash and due from banks	$	60,991		$	44,283
Federal funds sold					6,092
Cash and cash equivalents		60,991			50,375
Interest-bearing time deposits		34,290			61,843
Investment securities		960,032			886,029
Mortgage loans held for sale		22,138			2,111
Loans		2,792,989			2,764,128
Less: Allowance for loan losses		(70,369	)		(80,936	)
Net loans		2,722,620			2,683,192
Premises and equipment		51,541			51,818
Federal Reserve and Federal Home Loan Bank stock		33,026			33,801
Interest receivable		16,730			17,583
Core deposit intangibles and goodwill		150,486			152,918
Cash surrender value of life insurance		123,355			102,309
Other real estate owned		15,628			17,056
Tax asset, deferred and receivable		32,112			38,224
Other assets		13,417			19,916
TOTAL ASSETS	$	4,236,366		$	4,117,175
LIABILITIES
Deposits:
Noninterest-bearing	$	677,643		$	586,973
Interest-bearing		2,601,935			2,565,363
Total Deposits		3,279,578			3,152,336
Borrowings:
Federal funds purchased		10,936
Securities sold under repurchase agreements		139,308			115,684
Federal Home Loan Bank advances		131,496			104,697
Subordinated debentures, revolving credit lines and term loans		115,969			226,400
Total Borrowings		397,709			446,781
Interest payable		2,094			3,117
Other liabilities		29,044			52,419
Total Liabilities		3,708,425			3,654,653
STOCKHOLDERS' EQUITY
Preferred Stock, no-par value:
Authorized -- 500,000 shares
Series A, Issued and outstanding - 0 and 69,600 shares					67,998
Preferred Stock, no-par value, $1,000 liquidation value:
Authorized -- 500,000 shares
Senior Non-Cumulative Perpetual Preferred Stock, Series B
Issued and outstanding - 90,782.94 and 0 shares		90,783
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 -- 50,000,000 shares
Issued and outstanding - 28,622,586 and 25,650,057 shares		3,578			3,206
Additional paid-in capital		255,116			233,032
Retained earnings		181,664			165,075
Accumulated other comprehensive loss		(3,325	)		(6,914	)
Total Stockholders' Equity		527,941			462,522
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	4,236,366		$	4,117,175

CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Amounts)	Three Months Ended
	March 31,
	2012			2011
INTEREST INCOME
Loans receivable:
Taxable	$	35,848		$	38,738
Tax-exempt		117			102
Investment securities:
Taxable		4,574			4,547
Tax-exempt		2,562			2,553
Federal funds sold					2
Deposits with financial institutions		25			83
Federal Reserve and Federal Home Loan Bank stock		343			341
Total Interest Income		43,469			46,366
INTEREST EXPENSE
Deposits		4,110			6,866
Federal funds purchased		12			3
Securities sold under repurchase agreements		295			378
Federal Home Loan Bank advances		994			1,001
Subordinated debentures, revolving credit lines and term loans		1,942			2,641
Total Interest Expense		7,353			10,889
NET INTEREST INCOME		36,116			35,477
Provision for loan losses		4,875			5,594
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		31,241			29,883
OTHER INCOME
Service charges on deposit accounts		2,819			2,779
Fiduciary activities		1,983			2,036
Other customer fees		2,586			2,235
Commission income		1,667			1,888
Earnings on cash surrender value of life insurance		1,378			578
Net gains and fees on sales of loans		1,952			1,873
Net realized gains on sales of available for sale securities		789			463
Other-than-temporary impairment on available for sale securities					(400	)
Gain on FDIC modified whole bank transaction		9,124
Other income		360			406
Total Other Income		22,658			11,858
OTHER EXPENSES
Salaries and employee benefits		19,354			17,176
Net occupancy		2,651			2,745
Equipment		1,805			1,783
Marketing		442			382
Outside data processing fees		1,376			1,445
Printing and office supplies		267			288
Core deposit amortization		469			1,101
FDIC assessments		1,117			2,104
Other real estate owned and credit-related expenses		2,186			3,195
Other expenses		4,361			3,662
Total Other Expenses		34,028			33,881
INCOME BEFORE INCOME TAX		19,871			7,860
Income tax expense		5,500			2,399
NET INCOME		14,371			5,461
Gain on exchange of preferred stock for trust preferred debt
Loss on CPP unamortized discount
Loss on extinguishment of trust preferred securities
Preferred stock dividends and discount accretion		(1,135	)		(988	)
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	13,236		$	4,473
Per Share Data:
Basic Net Income Available to Common Stockholders	$	0.46		$	0.17
Diluted Net Income Available to Common Stockholders	$	0.46		$	0.17
Cash Dividends Paid	$	0.01		$	0.01
Average Diluted Shares Outstanding (in thousands)		28,755			25,763

FINANCIAL HIGHLIGHTS
(Dollars in Thousands)	Three Months Ended
	March 31,
	2012			2011
NET CHARGE OFF'S	$	5,404		$	7,635
AVERAGE BALANCES:
Total Assets	$	4,202,955		$	4,122,390
Total Loans		2,763,887			2,804,303
Total Earning Assets		3,789,437			3,744,196
Total Deposits		3,163,432			3,218,504
Total Stockholders' Equity		517,774			456,189
FINANCIAL RATIOS:
Return on Average Assets		1.26	%		0.43	%
Return on Average Stockholders' Equity		10.23			3.92
Average Earning Assets to Average Assets		90.16			90.83
Allowance for Loan Losses as % of Total Loans		2.50			2.93
Net Charge Off's as % of Average Loans (Annualized)		0.78			1.09
Average Stockholders' Equity to Average Assets		12.32			11.07
Tax Equivalent Yield on Earning Assets		4.74			5.11
Cost of Supporting Liabilities		0.78			1.16
Net Interest Margin (FTE) on Earning Assets		3.96			3.95

NON-PERFORMING ASSETS
(Dollars in Thousands)	March 31,			December 31,			September 30,			June 30,			March 31,
	2012			2011			2011			2011			2011
Non-Accrual Loans	$	74,456		$	69,592		$	78,933		$	87,583		$	87,712
Renegotiated Loans		6,695			14,308			6,701			6,269			2,125
Non-Performing Loans (NPL)		81,151			83,900			85,634			93,852			89,837
Real Estate Owned and Repossessed Assets		15,628			16,289			19,425			15,437			17,056
Non-Performing Assets (NPA)		96,779			100,189			105,059			109,289			106,893
90+ Days Delinquent		253			580			1,595			227			752
NPAS & 90 Day Delinquent	$	97,032		$	100,769		$	106,654		$	109,516		$	107,645
Loan Loss Reserve	$	70,369		$	70,898		$	73,074		$	77,133		$	80,936
YTD Charge-offs	$	5,404		$	34,709		$	26,678		$	17,063		$	7,635
NPAs / Actual Assets %		2.28	%		2.40	%		2.55	%		2.67	%		2.60	%
NPAs & 90 Day / Actual Assets %		2.29	%		2.41	%		2.59	%		2.67	%		2.61	%
NPAs / Actual Loans and REO %		3.42	%		3.65	%		3.83	%		3.98	%		3.84	%
Loan Loss Reserves / Actual Loans %		2.50	%		2.60	%		2.68	%		2.83	%		2.93	%
Net Charge Off's as % of Average Loans (Annualized)		0.78	%		1.18	%		1.41	%		1.37	%		1.09	%

CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)	March 31,			December 31,			September 30,			June 30,			March 31,
	2012			2011			2011			2011			2011
ASSETS
Cash and due from banks	$	60,991		$	73,312		$	60,166		$	50,874		$	44,283
Federal funds sold														6,092
Cash and cash equivalents		60,991			73,312			60,166			50,874			50,375
Interest-bearing time deposits		34,290			52,851			16,115			15,865			61,843
Investment securities		960,032			946,400			937,828			938,366			886,029
Mortgage loans held for sale		22,138			17,864			12,257			4,846			2,111
Loans		2,792,989			2,713,415			2,712,938			2,724,022			2,764,128
Less: Allowance for loan losses		(70,369	)		(70,898	)		(73,074	)		(77,133	)		(80,936	)
Net loans		2,722,620			2,642,517			2,639,864			2,646,889			2,683,192
Premises and equipment		51,541			51,013			51,432			51,851			51,818
Federal Reserve and Federal Home Loan Bank stock		33,026			31,270			31,381			31,384			33,801
Interest receivable		16,730			17,723			17,770			17,001			17,583
Core deposit intangibles and goodwill		150,486			150,471			151,062			151,817			152,918
Cash surrender value of life insurance		123,355			124,329			123,524			102,880			102,309
Other real estate owned		15,628			16,289			19,425			15,437			17,056
Tax asset, deferred and receivable		32,112			36,424			35,804			36,790			38,224
Other assets		13,417			12,613			21,881			30,218			19,916
TOTAL ASSETS	$	4,236,366		$	4,173,076		$	4,118,509		$	4,094,218		$	4,117,175
LIABILITIES
Deposits:
Noninterest-bearing	$	677,643		$	646,508		$	598,139		$	590,199		$	586,973
Interest-bearing		2,601,935			2,488,147			2,466,111			2,552,334			2,565,363
Total Deposits		3,279,578			3,134,655			3,064,250			3,142,533			3,152,336
Borrowings:
Federal funds purchased		10,936						27,946			22,978
Securities sold under repurchase agreements		139,308			156,305			117,097			124,236			115,684
Federal Home Loan Bank advances		131,496			138,095			168,764			74,050			104,697
Subordinated debentures, revolving credit lines and term loans		115,969			194,974			194,961			226,580			226,400
Total Borrowings		397,709			489,374			508,768			447,844			446,781
Interest payable		2,094			2,925			2,186			3,601			3,117
Other liabilities		29,044			31,655			30,760			31,762			52,419
Total Liabilities		3,708,425			3,658,609			3,605,964			3,625,740			3,654,653
STOCKHOLDERS' EQUITY
Preferred Stock, no-par value:
Authorized -- 500,000 shares
Series A, Issued and outstanding											68,118			67,998
Preferred Stock, no-par value, $1,000 liquidation value:
Authorized -- 500,000 shares
Senior Non-Cumulative Perpetual Preferred Stock, Series B
Issued and outstanding		90,783			90,783			90,783
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 -- 50,000,000 shares
Issued and outstanding		3,578			3,570			3,567			3,211			3,206
Additional paid-in capital		255,116			254,874			254,801			233,544			233,032
Retained earnings		181,664			168,717			162,669			169,313			165,075
Accumulated other comprehensive income (loss)		(3,325	)		(3,602	)		600			(5,833	)		(6,914	)
Total Stockholders' Equity		527,941			514,467			512,545			468,478			462,522
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	4,236,366		$	4,173,076		$	4,118,509		$	4,094,218		$	4,117,175

CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Amounts)	March 31,			December 31,			September 30,			June 30,			March 31,
	2012			2011			2011			2011			2011
INTEREST INCOME
Loans receivable:
Taxable	$	35,848		$	36,497		$	37,024		$	37,457		$	38,738
Tax exempt		117			93			86			247			102
Investment securities:
Taxable		4,574			4,565			5,078			5,040			4,547
Tax exempt		2,562			2,550			2,529			2,535			2,553
Federal funds sold											1			2
Deposits with financial institutions		25			54			45			100			83
Federal Reserve and Federal Home Loan Bank stock		343			314			323			341			341
Total Interest Income		43,469			44,073			45,085			45,721			46,366
INTEREST EXPENSE
Deposits		4,110			4,505			5,046			5,864			6,866
Federal funds purchased		12			3			16			3			3
Securities sold under repurchase agreements		295			363			384			386			378
Federal Home Loan Bank advances		994			1,114			1,089			977			1,001
Subordinated debentures, revolving credit lines and term loans		1,942			1,908			2,699			2,644			2,641
Total Interest Expense		7,353			7,893			9,234			9,874			10,889
NET INTEREST INCOME		36,116			36,180			35,851			35,847			35,477
Provision for loan losses		4,875			5,855			5,556			5,625			5,594
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		31,241			30,325			30,295			30,222			29,883
OTHER INCOME
Service charges on deposit accounts		2,819			3,027			3,169			2,997			2,779
Fiduciary activities		1,983			1,804			1,881			1,929			2,036
Other customer fees		2,586			2,572			2,583			2,634			2,235
Commission income		1,667			1,220			1,528			1,024			1,888
Earnings on cash surrender value of life insurance		1,378			803			644			571			578
Net gains and fees on sales of loans		1,952			2,747			1,768			1,030			1,873
Net realized gains on sales of available for sale securities		789			290			861			825			463
Other-than-temporary impairment on available for sale securities														(400	)
Gain on FDIC modified whole bank transaction		9,124
Other income		360			508			796			51			406
Total Other Income		22,658			12,971			13,230			11,061			11,858
OTHER EXPENSES
Salaries and employee benefits		19,354			19,035			19,964			18,560			17,176
Net occupancy		2,651			2,428			2,530			2,415			2,745
Equipment		1,805			1,672			1,662			1,677			1,783
Marketing		442			650			534			436			382
Outside data processing fees		1,376			1,377			1,391			1,458			1,445
Printing and office supplies		267			340			301			313			288
Core deposit amortization		469			591			755			1,101			1,101
FDIC assessments		1,117			775			1,201			1,451			2,104
Other real estate owned and credit-related expenses		2,186			2,569			2,007			2,843			3,195
Other expenses		4,361			3,999			3,877			4,145			3,662
Total Other Expenses		34,028			33,436			34,222			34,399			33,881
INCOME BEFORE INCOME TAX		19,871			9,860			9,303			6,884			7,860
Income tax expense		5,500			2,299			2,561			1,396			2,399
NET INCOME		14,371			7,561			6,742			5,488			5,461
Loss on CPP unamortized discount								(1,401	)
Loss on extinguishment of trust preferred securities								(10,857	)
Preferred stock dividends and discount accretion		(1,135	)		(1,135	)		(868	)		(990	)		(988	)
NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS	$	13,236		$	6,426		$	(6,384	)	$	4,498		$	4,473
PER SHARE:
Basic Net Income (Loss) Available to Common Stockholders	$	0.46		$	0.24		$	(0.25	)	$	0.18		$	0.17
Diluted Net Income (Loss) Available to Common Stockholders	$	0.46		$	0.24		$	(0.25	)	$	0.18		$	0.17
Cash Dividends Paid	$	0.01		$	0.01		$	0.01		$	0.01		$	0.01
Average Diluted Shares Outstanding (in thousands)		28,755			28,700			26,367			25,783			25,763
FINANCIAL RATIOS:
Return on Average Assets		1.26	%		0.61	%		-0.62	%		0.43	%		0.43	%
Return on Average Stockholders' Equity		10.23			5.01			(5.33	)		3.87			3.92
Average Earning Assets to Average Assets		90.16			89.66			90.30			90.64			90.83
Allowance for Loan Losses as % of Total Loans		2.50			2.60			2.68			2.83			2.93
Net Charge Off's as % of Average Loans (Annualized)		0.78			1.18			1.41			1.37			1.09
Average Stockholders' Equity to Average Assets		12.32			12.22			11.64			11.23			11.07
Tax Equivalent Yield on Earning Assets		4.74			4.83			5.01			5.04			5.11
Cost of Supporting Liabilities		0.78			0.84			0.99			1.05			1.16
Net Interest Margin (FTE) on Earning Assets		3.96			3.99			4.02			3.99			3.95

LOANS
(Dollars in Thousands)	March 31,			December 31,			September 30,			June 30,			March 31,
	2012			2011			2011			2011			2011
Commercial and industrial loans	$	546,304		$	532,523		$	518,848		$	529,742		$	529,110
Agricultural production financing and other loans to farmers		97,165			104,526			106,761			99,360			89,032
Real estate loans:
Construction		92,694			81,780			70,044			96,308			103,956
Commercial and farm land		1,229,195			1,194,230			1,196,270			1,171,901			1,199,078
Residential		498,354			481,493			495,954			495,256			504,538
Home Equity		210,564			191,631			196,191			191,839			195,235
Individuals' loans for household and other personal expenditures		78,711			84,172			90,810			94,123			104,701
Lease financing receivables, net of unearned income		3,112			3,555			4,160			4,399			4,706
Other loans		36,890			39,505			33,900			41,094			33,772
Loans		2,792,989			2,713,415			2,712,938			2,724,022			2,764,128
Allowance for loan losses		(70,369	)		(70,898	)		(73,074	)		(77,133	)		(80,936	)
NET LOANS	$	2,722,620		$	2,642,517		$	2,639,864		$	2,646,889		$	2,683,192

DEPOSITS
(Dollars in Thousands)	March 31,		December 31,		September 30,		June 30,		March 31,
	2012		2011		2011		2011		2011
Demand deposits	$	1,470,938	$	1,438,513	$	1,360,174	$	1,363,621	$	1,318,188
Savings deposits		801,935		757,166		712,545		750,337		765,138
Certificates and other time deposits of $100,000 or more		269,796		264,787		278,115		292,613		318,663
Other certificates and time deposits		566,934		551,247		570,380		597,330		624,032
Brokered deposits		169,975		122,942		143,036		138,632		126,315
TOTAL DEPOSITS	$	3,279,578	$	3,134,655	$	3,064,250	$	3,142,533	$	3,152,336