GlobeNewswire Inc | Jan 28, 2021 08:00AM EST

January 28, 2021

MUNCIE, Ind., Jan. 28, 2021 (GLOBE NEWSWIRE) -- First Merchants Corporation (NASDAQ - FRME) has reported fourth quarter 2020 net income of $45.1 million compared to $47.8 million during the same period in 2019. Earnings per share for the period totaled $.83 per share compared to fourth quarter 2019 result of $.87 per share. Net income for the year ended December 31, 2020 totaled $148.6 million, compared to $164.5 million during the same period in 2019. Year-to-date earnings per share totaled $2.74 compared to $3.19 in 2019.

Total assets equaled $14.1 billion as of year-end and loans totaled $9.2 billion. The Corporations loan portfolio increased by $789 million, or 9.2 percent, during 2020. Paycheck Protection Program (PPP) loans accounted for $667 million of the years loan growth. Investments increased $551 million, or 21.2 percent, during the year and now total $3.1 billion. Total deposits equaled $11.4 billion as of year-end and increased by $1.5 billion, or 15.5 percent, during 2020.

Mark Hardwick, Chief Executive Officer, stated, We are proud of our 2020 results given the significant headwinds of the past year. The global pandemic quickly turned 2020 into a year filled with economic, political, medical and logistical challenges. However, our employees demonstrated courage and a can-do attitude for the benefit of all stakeholders. We guided over 5,200 customers through the Paycheck Protection Program while maintaining branch and back-office operations with as many as 1,000 employees working remotely. We grew loans by 9.2 percent, deposits by 15.5 percent, processed over 2,700 loan modifications and donated an additional $1 million to COVID relief efforts in our communities. Despite providing $58.7 million to the allowance for loan losses and managing through 40 basis points of margin compression we still delivered $149 million of net income to shareholders. Hardwick also added, Executive management expects 2021 to be a year of increasing momentum as the vaccine helps reopen our lobbies and allows us to repopulate our offices while growing our customer base.

At the beginning of 2020, the Corporation chose to defer the adoption of the current expected credit loss (CECL) model. The passing of the 2021 Consolidated Appropriations Act in December of 2020 prompted the SEC to allow for the adoption of CECL on January 1, 2021 with a Day 1 measurement date of January 1, 2021. As such, the allowance for loan losses was calculated under the incurred loss method in the fourth quarter. The Corporations provision expense totaled $4.5 million for the fourth quarter and $58.7 million for the year ended December 31, 2020. Net charge-offs totaled $0.6 million for the quarter and $8.3 million for the year. The allowance for loan losses totaled $130.6 million at year end, which increased $3.9 million in the fourth quarter. Allowance for loan losses is 1.41 percent of total loans and 1.52 percent excluding PPP loans from total loans. The Corporation also has $23 million in remaining fair value marks.

Net-interest income totaled $382.1 million for the year, an increase of $25.5 million, or 7.1 percent, in the face of a net-interest margin decline of 40 basis points to 3.29 percent. Yield on earning assets declined by 94 basis points totaling 3.84 percent and the cost of supporting liabilities decreased by 54 basis points and totaled 0.55 percent. Fair value accretion contributed one basis point less in margin as it accounted for 12 basis points in 2019 and 11 basis points in 2020. Yield on earning assets for the fourth quarter totaled 3.72 percent with cost of supporting liabilities totaling 0.34 percent resulting in a margin of 3.38 percent. PPP loans contributed 16 basis points to margin during the fourth quarter as unamortized SBA fees were recognized upon loan forgiveness.

Non-interest income totaled $109.9 million for the year, a $23.2 million, or 26.8 percent increase from 2019. Customer specific line items accounted for $15.3 million of increase in total non-interest income. Gains on sales of mortgage loans increased $10.4 million over 2019 and hit a record high of $18.3 million for 2020 which offset the headwinds of lower service charges on deposits and the impact of the Durbin Amendment adoption on card payment fees. Fiduciary and wealth management fees also contributed to the increase with growth of $6.2 million over 2019.

Non-interest expense totaled $263.4 million for the year ended 2020, a $16.6 million increase from 2019. The fourth quarter of 2020 includes charges of $4.5 million related to the announcement of the consolidation of 17 banking centers. Additionally, FDIC expense increased $5.1 million year over year due to the use of FDIC credits in 2019. Merger related expenses of $13.7 million were also included in the 2019 totals.

The Corporations loan to deposit ratio now totals 81 percent and loan to asset ratio totals 66 percent. Additionally, the Corporations total risk-based capital ratio equaled 14.36 percent, common equity tier 1 capital ratio equaled 12.02 percent, and the tangible common equity ratio totaled 9.65 percent. Excluding PPP loans, the tangible common equity ratio totaled 9.99 percent.

CONFERENCE CALL

First Merchants Corporation will conduct a fourth quarter earnings conference call and web cast at 2:30 p.m. (ET) on Thursday, January 28, 2021.

To participate, dial (Toll Free) 877-507-0578 and reference First Merchants Corporation's fourth quarter earnings release. International callers please call +1 412-317-1073. A replay of the call will be available until February 28, 2021. To access a replay of the call, US participants should dial (Toll Free) 877-344-7529, Canada participants should dial 855-669-9658, or for International participants, dial +1 412-317-0088. The replay access code is 10150572.

In order to view the web cast and presentation slides, please go to http://services.choruscall.com/links/frme210128.html during the time of the call. A replay of the web cast will be available until January 28, 2022.

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 First Merchants Private Wealth Advisors (as a division of First Merchants Bank).

First Merchants Corporations 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 companys Internet web page ( http://www.firstmerchants.com).

FIRST MERCHANTS and the Shield Logo are federally registered trademarks of First Merchants Corporation.

Forward-Looking Statements

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.

CONSOLIDATED BALANCE SHEETS (Dollars In Thousands) December 31, 2020 2019ASSETS Cash and cash equivalents $ 192,896 $ 177,201 Interest-bearing deposits 392,305 118,263 Investment securities 3,146,787 2,596,063 Loans held for sale 3,966 9,037 Loans 9,243,174 8,459,310 Less: Allowance for loan losses (130,648 ) (80,284 )Net loans 9,112,526 8,379,026 Premises and equipment 111,062 113,055 Federal Home Loan Bank stock 28,736 28,736 Interest receivable 53,948 48,901 Goodwill and other intangibles 572,893 578,880 Cash surrender value of life insurance 292,745 288,206 Other real estate owned 940 7,527 Tax asset, deferred and receivable 12,340 12,165 Other assets 146,066 100,194 TOTAL ASSETS $ 14,067,210 $ 12,457,254 LIABILITIES Deposits: Noninterest-bearing $ 2,298,138 $ 1,736,396 Interest-bearing 9,063,472 8,103,560 Total Deposits 11,361,610 9,839,956 Borrowings: Federal funds purchased ? 55,000 Securities sold under repurchase agreements 177,102 187,946 Federal Home Loan Bank advances 389,430 351,072 Subordinated debentures and other borrowings 118,380 138,685 Total Borrowings 684,912 732,703 Interest payable 3,287 6,754 Other liabilities 141,756 91,404 Total Liabilities 12,191,565 10,670,817 STOCKHOLDERS' EQUITY 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 -- 100,000,000 shares Issued and outstanding - 53,922,359 and 6,740 6,921 55,368,482 sharesAdditional paid-in capital 1,005,366 1,054,997 Retained earnings 788,578 696,520 Accumulated other comprehensive income 74,836 27,874 Total Stockholders' Equity 1,875,645 1,786,437 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 14,067,210 $ 12,457,254

CONSOLIDATED STATEMENTS OF Three Months Ended Twelve Months EndedINCOME(Dollars In Thousands, Except December 31, December 31,Per Share Amounts) 2020 2019 2020 2019INTEREST INCOME Loans receivable: Taxable $ 90,138 $ 102,617 $ 358,264 $ 382,772Tax-exempt 5,414 4,671 21,483 17,568Investment securities: Taxable 5,263 7,993 24,440 27,815Tax-exempt 12,056 8,995 42,341 31,655Deposits with financial 139 1,203 938 4,225institutionsFederal Home Loan Bank stock 214 342 1,042 1,370Total Interest Income 113,224 125,821 448,508 465,405INTEREST EXPENSE Deposits 7,509 24,074 51,740 91,585Federal funds purchased 2 26 120 251Securities sold under 77 367 604 1,424repurchase agreementsFederal Home Loan Bank 1,656 1,776 6,973 7,176advancesSubordinated debentures and 1,669 1,994 6,944 8,309other borrowingsTotal Interest Expense 10,913 28,237 66,381 108,745NET INTEREST INCOME 102,311 97,584 382,127 356,660Provision for loan losses 4,482 500 58,673 2,800NET INTEREST INCOME AFTER 97,829 97,084 323,454 353,860PROVISION FOR LOAN LOSSESOTHER INCOME Service charges on deposit 5,508 6,312 20,999 22,951accountsFiduciary and wealth 6,251 5,384 23,747 17,562management feesCard payment fees 3,502 5,430 19,502 20,243Net gains and fees on sales of 5,393 2,633 18,271 7,891loansDerivative hedge fees 2,281 1,405 6,977 5,357Other customer fees 394 434 1,497 1,664Earnings on cash surrender 1,283 1,458 5,140 4,537value of life insuranceNet realized gains on sales of 2,398 1,039 11,895 4,415available for sale securitiesOther income 473 150 1,898 2,068Total Other Income 27,483 24,245 109,926 86,688OTHER EXPENSES Salaries and employee benefits 41,809 39,358 155,937 144,037Net occupancy 9,653 5,311 26,756 19,584Equipment 5,555 4,429 19,344 16,218Marketing 1,763 1,492 6,609 6,650Outside data processing fees 3,839 4,428 14,432 16,476Printing and office supplies 307 484 1,304 1,445Intangible asset amortization 1,476 1,590 5,987 5,994FDIC assessments 1,560 ? 5,804 717Other real estate owned and (1,576 ) 66 330 2,428foreclosure expensesProfessional and other outside 2,836 2,899 8,901 15,410servicesOther expenses 5,314 5,144 18,001 17,804Total Other Expenses 72,536 65,201 263,405 246,763INCOME BEFORE INCOME TAX 52,776 56,128 169,975 193,785Income tax expense 7,641 8,298 21,375 29,325NET INCOME AVAILABLE TO COMMON $ 45,135 $ 47,830 $ 148,600 $ 164,460STOCKHOLDERSPer Share Data: Basic Net Income Available to $ 0.83 $ 0.87 $ 2.75 $ 3.20Common StockholdersDiluted Net Income Available $ 0.83 $ 0.87 $ 2.74 $ 3.19to Common StockholdersCash Dividends Paid $ 0.26 $ 0.26 $ 1.04 $ 1.00Average Diluted Shares 54,050 55,520 54,220 51,561Outstanding (in thousands)

FINANCIAL HIGHLIGHTS(Dollars in Three Months Ended Twelve Months Endedthousands) December 31, December 31, 2020 2019 2020 2019NET $ 560 $ 787 $ 8,309 $ 3,068 CHARGE-OFFS AVERAGE BALANCES:Total Assets $ 13,968,047 $ 12,479,039 $ 13,466,269 $ 11,091,320 Total Loans 9,240,304 8,358,683 9,051,155 7,690,190 Total Earning 12,663,803 11,194,954 12,123,317 10,015,771 AssetsTotal 11,283,040 9,926,794 10,728,106 8,782,634 DepositsTotalStockholders' 1,856,896 1,768,848 1,825,135 1,569,615 Equity FINANCIAL RATIOS:Return onAverage 1.29 % 1.53 % 1.10 % 1.48 %AssetsReturn onAverage 9.72 10.82 8.14 10.48 Stockholders'EquityReturn onAverageCommon 9.72 10.82 8.14 10.48 Stockholders'EquityAverageEarningAssets to 90.66 89.71 90.03 90.30 AverageAssetsAllowance forLoan Losses 1.41 0.95 1.41 0.95 as % of TotalLoansNetCharge-offsas % of 0.02 0.04 0.09 0.04 Average Loans(Annualized)AverageStockholders'Equity to 13.29 14.17 13.55 14.15 AverageAssetsTaxEquivalentYield on 3.72 4.63 3.84 4.78 AverageEarningAssetsInterestExpense/Average 0.34 1.01 0.55 1.09 EarningAssetsNet InterestMargin (FTE)on Average 3.38 3.62 3.29 3.69 EarningAssetsEfficiency 55.01 51.07 51.71 52.73 RatioTangibleCommon Book $ 24.27 $ 21.94 $ 24.27 $ 21.94 Value PerShare

NON-PERFORMING ASSETS(Dollars In December 31, September June 30, March 31, DecemberThousands) 30, 31, 2020 2020 2020 2020 2019Non-Accrual $ 61,471 $ 56,739 $ 50,102 $ 15,649 $ 15,949 LoansRenegotiated 3,240 2,677 1,086 665 841 LoansNon-Performing 64,711 59,416 51,188 16,314 16,790 Loans (NPL)Other RealEstate Owned 940 6,984 7,409 8,017 7,527 andRepossessionsNon-Performing 65,651 66,400 58,597 24,331 24,317 Assets (NPA)90+ Days 746 1,330 4,981 312 69 DelinquentNPAs & 90 Day $ 66,397 $ 67,730 $ 63,578 $ 24,643 $ 24,386 Delinquent Allowance for $ 130,648 $ 126,726 $ 121,119 $ 99,454 $ 80,284 Loan LossesQuarterly Net 560 6,937 230 582 787 Charge-offsNPAs / Actual 0.47 % 0.48 % 0.42 % 0.19 % 0.20 %Assets %NPAs & 90 Day/ Actual 0.47 % 0.49 % 0.46 % 0.19 % 0.20 %Assets %NPAs / ActualLoans and OREO 0.71 % 0.72 % 0.63 % 0.28 % 0.29 %%Allowance forLoan Losses / 1.41 % 1.37 % 1.30 % 1.15 % 0.95 %Actual Loans(%)NetCharge-offs as% of Average 0.02 % 0.30 % 0.01 % 0.03 % 0.04 %Loans(Annualized)

CONSOLIDATED BALANCE SHEETS(Dollars In December 31, September 30, June 30, March 31, December 31,Thousands) 2020 2020 2020 2020 2019ASSETS Cash and cash $ 192,896 $ 164,632 $ 229,759 $ 127,731 $ 177,201 equivalentsInterest-bearing 392,305 273,936 380,021 132,944 118,263 depositsInvestment 3,146,787 2,933,286 2,789,379 2,697,954 2,596,063 securitiesLoans held for sale 3,966 3,183 901 5,039 9,037 Loans 9,243,174 9,243,833 9,298,541 8,606,849 8,459,310 Less: Allowance for (130,648 ) (126,726 ) (121,119 ) (99,454 ) (80,284 )loan lossesNet loans 9,112,526 9,117,107 9,177,422 8,507,395 8,379,026 Premises and 111,062 112,959 112,548 114,045 113,055 equipmentFederal Home Loan 28,736 28,736 28,736 28,736 28,736 Bank stockInterest receivable 53,948 52,992 57,063 47,489 48,901 Goodwill and other 572,893 574,369 575,855 577,366 578,880 intangiblesCash surrendervalue of life 292,745 291,543 290,715 289,574 288,206 insuranceOther real estate 940 6,942 7,367 7,972 7,527 ownedTax asset, deferred 12,340 21,762 13,126 9,497 12,165 and receivableOther assets 146,066 155,903 156,486 147,776 100,194 TOTAL ASSETS $ 14,067,210 $ 13,737,350 $ 13,819,378 $ 12,693,518 $ 12,457,254 LIABILITIES Deposits: Noninterest-bearing $ 2,298,138 $ 2,187,607 $ 2,260,351 $ 1,688,205 $ 1,736,396 Interest-bearing 9,063,472 8,718,546 8,705,637 8,182,279 8,103,560 Total Deposits 11,361,610 10,906,153 10,965,988 9,870,484 9,839,956 Borrowings: Federal funds ? 80,000 ? 47,000 55,000 purchasedSecurities soldunder repurchase 177,102 187,732 181,150 183,317 187,946 agreementsFederal Home Loan 389,430 399,522 400,817 480,995 351,072 Bank advancesSubordinateddebentures and 118,380 118,320 285,197 128,741 138,685 other borrowingsTotal Borrowings 684,912 785,574 867,164 840,053 732,703 Interest payable 3,287 5,038 5,587 7,746 6,754 Other liabilities 141,756 206,929 171,544 197,275 91,404 Total Liabilities 12,191,565 11,903,694 12,010,283 10,915,558 10,670,817 STOCKHOLDERS' EQUITYCumulativePreferred Stock,$1,000 par value, $1,000 liquidationvalue:Authorized -- 600 sharesIssued and 125 125 125 125 125 outstandingCommon Stock, $.125 stated value:Authorized -- 100,000,000 sharesIssued and 6,740 6,736 6,724 6,719 6,921 outstandingAdditional paid-in 1,005,366 1,003,777 1,002,962 1,000,942 1,054,997 capitalRetained earnings 788,578 757,550 735,439 716,518 696,520 Accumulated othercomprehensive 74,836 65,468 63,845 53,656 27,874 incomeTotal Stockholders' 1,875,645 1,833,656 1,809,095 1,777,960 1,786,437 EquityTOTAL LIABILITIESAND STOCKHOLDERS' $ 14,067,210 $ 13,737,350 $ 13,819,378 $ 12,693,518 $ 12,457,254 EQUITY

CONSOLIDATEDSTATEMENTS OF INCOME(Dollars InThousands, December September June 30, March 31, DecemberExcept Per 31, 30, 31,Share Amounts) 2020 2020 2020 2020 2019INTEREST INCOME Loans receivable:Taxable $ 90,138 $ 84,162 $ 87,312 $ 96,652 $ 102,617 Tax-exempt 5,414 5,395 5,359 5,315 4,671 Investment securities:Taxable 5,263 5,399 6,147 7,631 7,993 Tax-exempt 12,056 10,931 10,019 9,335 8,995 Deposits withfinancial 139 90 134 575 1,203 institutionsFederal Home 214 248 281 299 342 Loan Bank stockTotal Interest 113,224 106,225 109,252 119,807 125,821 IncomeINTEREST EXPENSEDeposits 7,509 9,776 12,707 21,748 24,074 Federal funds 2 5 2 111 26 purchasedSecurities soldunder 77 83 92 352 367 repurchaseagreementsFederal HomeLoan Bank 1,656 1,749 1,794 1,774 1,776 advancesSubordinateddebentures and 1,669 1,691 1,639 1,945 1,994 otherborrowingsTotal Interest 10,913 13,304 16,234 25,930 28,237 ExpenseNET INTEREST 102,311 92,921 93,018 93,877 97,584 INCOMEProvision for 4,482 12,544 21,895 19,752 500 loan lossesNET INTERESTINCOME AFTER 97,829 80,377 71,123 74,125 97,084 PROVISION FORLOAN LOSSESOTHER INCOME Service chargeson deposit 5,508 5,209 4,312 5,970 6,312 accountsFiduciary andwealth 6,251 5,910 5,601 5,985 5,384 management feesCard payment 3,502 3,996 6,097 5,907 5,430 feesNet gains andfees on sales 5,393 5,841 3,674 3,363 2,633 of loansDerivative 2,281 1,715 1,042 1,939 1,405 hedge feesOther customer 394 372 333 398 434 feesEarnings oncash surrender 1,283 1,171 1,326 1,360 1,458 value of lifeinsuranceNet realizedgains on salesof available 2,398 1,817 3,068 4,612 1,039 for salesecuritiesOther income 473 132 1,028 265 150 Total Other 27,483 26,163 26,481 29,799 24,245 IncomeOTHER EXPENSES Salaries andemployee 41,809 39,187 35,698 39,243 39,358 benefitsNet occupancy 9,653 5,855 5,447 5,801 5,311 Equipment 5,555 4,956 4,489 4,344 4,429 Marketing 1,763 1,311 2,092 1,443 1,492 Outside data 3,839 3,776 2,618 4,199 4,428 processing feesPrinting and 307 331 279 387 484 office suppliesIntangibleasset 1,476 1,486 1,511 1,514 1,590 amortizationFDIC 1,560 1,249 1,472 1,523 ? assessmentsOther realestate owned (1,576 ) 717 684 505 66 and foreclosureexpensesProfessionaland other 2,836 2,254 1,553 2,258 2,899 outsideservicesOther expenses 5,314 3,587 4,146 4,954 5,144 Total Other 72,536 64,709 59,989 66,171 65,201 ExpensesINCOME BEFORE 52,776 41,831 37,615 37,753 56,128 INCOME TAXIncome tax 7,641 5,621 4,623 3,490 8,298 expenseNET INCOMEAVAILABLE TO $ 45,135 $ 36,210 $ 32,992 $ 34,263 $ 47,830 COMMONSTOCKHOLDERS Per Share Data: Basic NetIncomeAvailable to $ 0.83 $ 0.67 $ 0.62 $ 0.63 $ 0.87 CommonStockholdersDiluted NetIncomeAvailable to $ 0.83 $ 0.67 $ 0.62 $ 0.62 $ 0.87 CommonStockholdersCash Dividends $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 PaidAverage DilutedShares 54,050 53,971 53,943 54,918 55,520 Outstanding (inthousands)FINANCIAL RATIOS:Return on 1.29 % 1.06 % 0.97 % 1.09 % 1.53 %Average AssetsReturn onAverage 9.72 7.91 7.35 7.55 10.82 Stockholders'EquityReturn onAverage Common 9.72 7.91 7.35 7.55 10.82 Stockholders'EquityAverage EarningAssets to 90.66 90.34 89.25 89.81 89.71 Average AssetsAllowance forLoan Losses as 1.41 1.37 1.30 1.15 0.95 % of TotalLoansNet Charge-offsas % of Average 0.02 0.30 0.01 0.03 0.04 Loans(Annualized)AverageStockholders' 13.29 13.41 13.15 14.45 14.17 Equity toAverage AssetsTax EquivalentYield on 3.72 3.58 3.72 4.38 4.63 Average EarningAssetsInterestExpense/Average 0.34 0.43 0.53 0.92 1.01 Earning AssetsNet InterestMargin (FTE) on 3.38 3.15 3.19 3.46 3.62 Average EarningAssetsEfficiency 55.01 51.40 47.95 52.17 51.07 RatioTangible CommonBook Value Per $ 24.27 $ 23.48 $ 23.04 $ 22.46 $ 21.94 Share

LOANS (Dollars In December 31, September 30, June 30, March 31, December 31,Thousands) 2020 2020 2020 2020 2019Commercialand $ 2,776,699 $ 2,875,331 $ 2,898,329 $ 2,199,226 $ 2,109,879 industrialloansAgriculturalland,production 281,884 301,192 316,815 315,950 334,172 and otherloans tofarmersReal estate loans:Construction 484,723 622,084 640,560 643,674 787,568 Commercialreal estate, 2,220,949 2,098,589 2,097,767 2,118,148 1,902,692 non-owneroccupiedCommercialreal estate, 958,501 931,815 919,254 921,491 909,695 owneroccupiedResidential 1,234,741 1,146,406 1,145,187 1,121,556 1,143,217 Home equity 508,259 527,458 532,314 570,398 588,984 Individuals'loans forhousehold 129,479 125,411 123,611 129,765 135,989 and otherpersonalexpendituresPublicfinance andother 647,939 615,547 624,704 586,641 547,114 commercialloansLoans 9,243,174 9,243,833 9,298,541 8,606,849 8,459,310 Allowancefor loan (130,648 ) (126,726 ) (121,119 ) (99,454 ) (80,284 )lossesNET LOANS $ 9,112,526 $ 9,117,107 $ 9,177,422 $ 8,507,395 $ 8,379,026

DEPOSITS (Dollars In December 31, September 30, June 30, March 31, December 31,Thousands) 2020 2020 2020 2020 2019Demand $ 6,821,152 $ 6,279,554 $ 6,288,360 $ 5,293,200 $ 5,250,568 depositsSavings 3,661,713 3,518,286 3,278,156 2,962,821 2,896,177 depositsCertificatesand othertime 346,194 467,610 607,474 694,062 736,843 deposits of$100,000 ormoreOthercertificates 459,168 542,919 669,119 717,723 741,759 and timedepositsBrokered 73,383 97,784 122,879 202,678 214,609 depositsTOTAL $ 11,361,610 $ 10,906,153 $ 10,965,988 $ 9,870,484 $ 9,839,956 DEPOSITS

CONSOLIDATED AVERAGE BALANCE SHEET AND NET INTEREST MARGIN ANALYSIS(Dollars in Thousands) For the Three Months Ended December 31, 2020 December 31, 2019 Interest Average Interest Average Average Balance Income / Rate Average Balance Income / Rate Expense ExpenseAssets: Interest-bearing $ 437,766 $ 139 0.13 % $ 291,616 $ 1,203 1.65 %depositsFederal Home Loan 28,736 214 2.98 28,736 342 4.76 Bank stockInvestment Securities: ^(1)Taxable 1,222,916 5,263 1.72 1,339,068 7,993 2.39 Tax-Exempt ^(2) 1,734,081 15,261 3.52 1,176,851 11,386 3.87 Total Investment 2,956,997 20,524 2.78 2,515,919 19,379 3.08 SecuritiesLoans held for sale 19,103 200 4.19 23,712 267 4.50 Loans: ^(3) Commercial 6,925,491 73,530 4.25 6,111,179 81,374 5.33 Real Estate 911,042 9,482 4.16 916,247 11,256 4.91 MortgageInstallment 698,619 6,925 3.96 747,166 9,720 5.20 Tax-Exempt ^(2) 686,049 6,854 4.00 560,379 5,913 4.22 Total Loans 9,240,304 96,991 4.20 8,358,683 108,530 5.19 Total Earning 12,663,803 117,868 3.72 % 11,194,954 129,454 4.63 %AssetsNet unrealized gain(loss) on 62,666 31,979 securitiesavailable for saleAllowance for loan (130,317 ) (80,491 ) lossesCash and cash 169,358 179,582 equivalentsPremises and 114,013 113,333 equipmentOther assets 1,088,524 1,039,682 Total Assets $ 13,968,047 $ 12,479,039 Liabilities: Interest-bearing deposits:Interest-bearing $ 4,393,991 $ 3,888 0.35 % $ 3,513,297 $ 9,077 1.03 %depositsMoney market 2,051,985 1,164 0.23 1,529,156 4,054 1.06 depositsSavingsdeposits 1,613,886 634 0.16 1,406,548 2,149 0.61 Certificates and 961,187 1,823 0.76 1,736,058 8,794 2.03 other time depositsTotalInterest-bearing 9,021,049 7,509 0.33 8,185,059 24,074 1.18 DepositsBorrowings 683,068 3,404 1.99 669,756 4,163 2.49 TotalInterest-bearing 9,704,117 10,913 0.45 8,854,815 28,237 1.28 LiabilitiesNoninterest-bearing 2,261,991 1,741,735 depositsOther liabilities 145,043 113,641 Total Liabilities 12,111,151 10,710,191 Stockholders' 1,856,896 1,768,848 EquityTotal Liabilitiesand Stockholders' $ 13,968,047 10,913 $ 12,479,039 28,237 EquityNet Interest Income $ 106,955 $ 101,217 (FTE)Net Interest Spread 3.27 % 3.35 %(FTE) ^(4) Net Interest Margin (FTE):Interest Income(FTE) / Average 3.72 % 4.63 %Earning AssetsInterest Expense /Average Earning 0.34 % 1.01 %AssetsNet Interest Margin 3.38 % 3.62 %(FTE) ^(5) ^(1) Average balance of securities is computed based on the average of thehistorical amortized cost balances without the effects of the fair valueadjustments. Annualized amounts are computed using a 30/360 day basis.^(2) Tax-exempt securities and loans are presented on a fully taxableequivalent basis, using a marginal tax rate of 21 percent for 2020 and 2019.These totals equal $4,644 and $3,633 for the three months ended December 31,2020 and 2019, respectively.^(3) Non accruing loans have been included in the average balances.^(4) Net Interest Spread (FTE) is interest income expressed as a percentage ofaverage earning assets minus interest expense expressed as a percentage ofaverage interest-bearing liabilities.^(5) Net Interest Margin (FTE) is interest income expressed as a percentage ofaverage earning assets minus interest expense expressed as a percentage ofaverage earning assets.

CONSOLIDATED AVERAGE BALANCE SHEET AND NET INTEREST MARGIN ANALYSIS(Dollars in Thousands) For the Twelve Months Ended December 31, 2020 December 31, 2019 Interest Average Interest Average Average Balance Income / Rate Average Balance Income / Rate Expense ExpenseAssets: Federal Funds Sold Interest-bearing $ 319,686 $ 938 0.29 % $ 211,683 $ 4,225 2.00 %depositsFederal Home Loan 28,736 1,042 3.63 25,645 1,370 5.34 Bank stockInvestment Securities: ^(1)Taxable 1,282,827 24,440 1.91 1,101,247 27,815 2.53 Tax-Exempt ^(2) 1,440,913 53,596 3.72 987,006 40,070 4.06 Total Investment 2,723,740 78,036 2.87 2,088,253 67,885 3.25 SecuritiesLoans held for sale 18,559 781 4.21 18,402 780 4.24 Loans: ^(3) Commercial 6,755,215 286,773 4.25 5,631,146 306,139 5.44 Real Estate 889,083 40,002 4.50 811,188 37,782 4.66 MortgageInstallment 718,815 30,708 4.27 701,459 38,071 5.43 Tax-Exempt ^(2) 669,483 27,194 4.06 527,995 22,238 4.21 Total Loans 9,051,155 385,458 4.26 7,690,190 405,010 5.27 Total Earning 12,123,317 465,474 3.84 % 10,015,771 478,490 4.78 %AssetsNet unrealized gainon securities 59,639 17,676 available for saleAllowance for loan (110,963 ) (81,000 ) lossesCash and cash 200,366 142,857 equivalentsPremises and 113,642 99,343 equipmentOther assets 1,080,268 896,673 Total Assets $ 13,466,269 $ 11,091,320 Liabilities: Interest-bearing deposits:Interest-bearing $ 4,009,566 $ 20,239 0.50 % $ 3,070,861 $ 33,921 1.10 %depositsMoney market 1,769,478 7,810 0.44 1,300,064 14,111 1.09 depositsSavingsdeposits 1,534,069 3,641 0.24 1,242,468 9,464 0.76 Certificates and 1,346,967 20,050 1.49 1,673,292 34,089 2.04 other time depositsTotalInterest-bearing 8,660,080 51,740 0.60 7,286,685 91,585 1.26 DepositsBorrowings 768,238 14,641 1.91 644,729 17,160 2.66 TotalInterest-bearing 9,428,318 66,381 0.70 7,931,414 108,745 1.37 LiabilitiesNoninterest-bearing 2,068,026 1,495,949 depositsOther liabilities 144,790 94,342 Total Liabilities 11,641,134 9,521,705 Stockholders' 1,825,135 1,569,615 EquityTotal Liabilitiesand Stockholders' $ 13,466,269 66,381 $ 11,091,320 108,745 EquityNet Interest Income $ 399,093 $ 369,745 (FTE)Net Interest Spread 3.14 % 3.41 %(FTE) ^(4) Net Interest Margin (FTE):Interest Income(FTE) / Average 3.84 % 4.78 %Earning AssetsInterest Expense /Average Earning 0.55 % 1.09 %AssetsNet Interest Margin 3.29 % 3.69 %(FTE) ^(5) ^(1) Average balance of securities is computed based on the average of thehistorical amortized cost balances without the effects of the fair valueadjustments. Annualized amounts are computed using a 30/360 day basis.^(2) Tax-exempt securities and loans are presented on a fully taxableequivalent basis, using a marginal tax rate of 21 percent for 2020 and 2019.These totals equal $16,966 and $13,085 for the twelve months ended December 31,2020 and 2019, respectively.^(3) Non accruing loans have been included in the average balances.^(4) Net Interest Spread (FTE) is interest income expressed as a percentage ofaverage earning assets minus interest expense expressed as a percentage ofaverage interest-bearing liabilities.^(5) Net Interest Margin (FTE) is interest income expressed as a percentage ofaverage earning assets minus interest expense expressed as a percentage ofaverage earning assets.

For more information, contact:Nicole M. Weaver, Vice President and Director of Corporate Administration765-521-7619 http://www.firstmerchants.com

SOURCE: First Merchants Corporation