GlobeNewswire Inc | Oct 28, 2020 08:00AM EDT

October 28, 2020

MUNCIE, Ind., Oct. 28, 2020 (GLOBE NEWSWIRE) -- First Merchants Corporation (NASDAQ - FRME) has reported third quarter 2020 net income of $36.2 million compared to $36.8 million during the same period in 2019. Earnings per share for the period totaled $.67 per share compared to the third quarter of 2019 result of $.71 per share. Year-to-date net income totaled $103.5 million compared to $116.6 million during the nine months ended September 30, 2019. Year-to-date earnings per share totaled $1.91 compared to $2.32 during the same period in 2019.

Total assets equaled $13.7 billion as of September 30, 2020 and loans totaled $9.2 billion. The Corporations loan portfolio increased by $940 million, or 11.3 percent, during the past twelve months. Payroll Protection Program (PPP) loans accounted for $901 million of the periods loan growth. Investments increased $444 million, or 17.8 percent, during the same period and now total $2.9 billion. Total deposits equaled $10.9 billion as of quarter-end and increased by $1.1 billion, or 11.7 percent.

The loan to deposit ratio now totals 84.8 percent and the loan to asset ratio totals 67.3 percent. As of September 30, 2020, the Corporations total risk-based capital ratio equaled 14.38 percent, the common equity tier 1 capital ratio equaled 12.02 percent, and the tangible common equity ratio totaled 9.57 percent. Excluding PPP loans, our tangible common equity ratio totaled 10.19 percent.

The Corporations provision expense totaled $12.5 million and net charge-offs for the quarter totaled $6.9 million. The allowance for loan losses totaled $126.7 million as of September 30, 2020, up from $80.6 million as of September 30, 2019. The Corporation chose to defer the adoption of the current expected credit loss (CECL) model; therefore, the allowance for loan losses was calculated under the incurred loss method. Allowance for loan losses was 1.37% of total loans, 1.65% including remaining fair value marks with allowance, and 1.83% excluding PPP loans from total loans. The $51.9 million increase in year-to-date provision expense primarily reflects our view of increased credit risk related to the COVID-19 pandemic.

Michael C. Rechin, President and Chief Executive Officer, stated, Our third quarter results highlight increased earnings power as our net interest margin stabilizes while our fee levels reflect increasing activity in customer spending and treasury technology use. Our clients and businesses remain healthy and resilient. Their determination and results mirror the First Merchants employee base and the Banks performance. Our earnings also increased due to a reduced provision level. The provision level and resultant loan loss reserve reflect a loan portfolio which is granular, diversified and actively reviewed. First Merchants exposure to higher risk industries is modest in any peer comparison and is borne out by the low level of customers (2%) utilizing the deferrals and modifications provided through the CARES Act. Capital preservation and capital composition are strengths that will serve us well as we assess the recessionary climate that likely remains through 2021.

My confidence regarding 2021 and our longer term future also reflects the executive succession plan announced September 29, 2020. Our Board of Directors decision to choose internal candidates to lead First Merchants augers well for high performance and cultural continuity. Mark Hardwick, who will become CEO on January 1, 2021, in tandem with Mike Stewart as President and Michele Kawiecki as Chief Financial Officer, form a trio who are experienced, skilled, and trusted. I am excited about First Merchants future and the opportunity to expertly serve our communities, shareholders and teammates.

Net-interest income for the quarter totaled $92.9 million, up nearly $4 million from the third quarter of 2019 despite margin compression year-over-year of 47 basis points. Linked quarter net-interest margin stabilized as the decline totaled just 4 basis points, two basis points due to fair value accretion and one basis point due to the impact of PPP loans. Yields on earning assets totaled 3.58 percent and the cost of supporting liabilities totaled 43 basis points resulting in quarterly net interest margin of 3.15 percent.

Non-interest income totaled $26.2 million for the quarter, a $4 million increase over the third quarter of 2019. Gains from the sale of mortgage loans reached record levels totaling $5.8 million for the quarter. Non-interest expense totaled $64.7 million for the quarter compared to $67.4 million in the third quarter of 2019, which included $11.2 million of acquisition related expense.

CONFERENCE CALL

First Merchants Corporation will conduct a third quarter earnings conference call and web cast at 2:30 p.m. (ET) on Wednesday, October 28, 2020.

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 26, 2020. 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 10147757.

In order to view the web cast and presentation slides, please go to http://services.choruscall.com/links/frme201026.html during the time of the call. A replay of the web cast will be available until October 28, 2021.

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) September 30, 2020 2019ASSETS Cash and cash equivalents $ 164,632 $ 202,383 Interest-bearing deposits 273,936 230,101 Investment securities 2,933,286 2,489,420 Loans held for sale 3,183 7,910 Loans 9,243,833 8,299,260 Less: Allowance for loan losses (126,726 ) (80,571 ) Net loans 9,117,107 8,218,689 Premises and equipment 112,959 113,446 Federal Home Loan Bank stock 28,736 28,736 Interest receivable 52,992 45,923 Goodwill and other intangibles 574,369 579,751 Cash surrender value of life insurance 291,543 286,747 Other real estate owned 6,942 7,156 Tax asset, deferred and receivable 21,762 15,187 Other assets 155,903 99,612 TOTAL ASSETS $ 13,737,350 $ 12,325,061 LIABILITIES Deposits: Noninterest-bearing $ 2,187,607 $ 1,777,365 Interest-bearing 8,718,546 7,988,086 Total Deposits 10,906,153 9,765,451 Borrowings: Federal funds purchased 80,000 ?Securities sold under repurchase 187,732 191,603 agreementsFederal Home Loan Bank advances 399,522 354,609 Subordinated debentures and other 118,320 138,630 borrowingsTotal Borrowings 785,574 684,842 Interest payable 5,038 7,855 Other liabilities 206,929 117,901 Total Liabilities 11,903,694 10,576,049 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 - 53,891,733 and 6,736 6,918 55,345,672 sharesAdditional paid-in capital 1,003,777 1,053,148 Retained earnings 757,550 663,173 Accumulated other comprehensive income 65,468 25,648 (loss)Total Stockholders' Equity 1,833,656 1,749,012 TOTAL LIABILITIES AND STOCKHOLDERS' $ 13,737,350 $ 12,325,061 EQUITY

CONSOLIDATEDSTATEMENTS Three Months Ended Nine Months EndedOF INCOME(Dollars InThousands,Except Per September 30, September 30,ShareAmounts) 2020 2019 2020 2019INTEREST INCOMELoans receivable:Taxable $ 84,162 $ 96,850 $ 268,126 $ 280,155 Tax-exempt 5,395 4,500 16,069 12,897 Investment securities:Taxable 5,399 6,729 19,177 19,822 Tax-exempt 10,931 8,335 30,285 22,660 Depositswith 90 1,363 799 3,022 financialinstitutionsFederal HomeLoan Bank 248 355 828 1,028 stockTotalInterest 106,225 118,132 335,284 339,584 IncomeINTEREST EXPENSEDeposits 9,776 24,830 44,231 67,511 Federalfunds 5 15 118 225 purchasedSecuritiessold under 83 385 527 1,057 repurchaseagreementsFederal HomeLoan Bank 1,749 1,894 5,317 5,400 advancesSubordinateddebentures 1,691 2,076 5,275 6,315 and otherborrowingsTotalInterest 13,304 29,200 55,468 80,508 ExpenseNET INTEREST 92,921 88,932 279,816 259,076 INCOMEProvisionfor loan 12,544 600 54,191 2,300 lossesNET INTERESTINCOME AFTERPROVISION 80,377 88,332 225,625 256,776 FOR LOANLOSSESOTHER INCOME Servicecharges on 5,209 6,107 15,491 16,639 depositaccountsFiduciaryand wealth 5,910 4,429 17,496 12,178 managementfeesCard payment 3,996 5,158 16,000 14,813 feesNet gainsand fees on 5,841 2,227 12,878 5,258 sales ofloansDerivative 1,715 1,684 4,696 3,952 hedge feesOthercustomer 372 450 1,103 1,230 feesEarnings oncashsurrender 1,171 1,144 3,857 3,079 value oflifeinsuranceNet realizedgains onsales of 1,817 393 9,497 3,376 availablefor salesecuritiesOther income 132 524 1,425 1,918 Total Other 26,163 22,116 82,443 62,443 IncomeOTHER EXPENSESSalaries andemployee 39,187 38,942 114,128 104,679 benefitsNet 5,855 4,777 17,103 14,273 occupancyEquipment 4,956 4,030 13,789 11,789 Marketing 1,311 1,332 4,846 5,158 Outside dataprocessing 3,776 4,435 10,593 12,048 feesPrinting andoffice 331 312 997 961 suppliesIntangibleasset 1,486 1,356 4,511 4,404 amortizationFDIC 1,249 (668 ) 4,244 717 assessmentsOther realestate ownedand 717 294 1,906 2,362 foreclosureexpensesProfessionaland other 2,254 8,251 6,065 12,511 outsideservicesOther 3,587 4,293 12,687 12,660 expensesTotal Other 64,709 67,354 190,869 181,562 ExpensesINCOMEBEFORE 41,831 43,094 117,199 137,657 INCOME TAXIncome tax 5,621 6,337 13,734 21,027 expenseNET INCOMEAVAILABLE TO $ 36,210 $ 36,757 $ 103,465 $ 116,630 COMMONSTOCKHOLDERSPer Share Data:Basic NetIncomeAvailable to $ 0.67 $ 0.71 $ 1.91 $ 2.33 CommonStockholdersDiluted NetIncomeAvailable to $ 0.67 $ 0.71 $ 1.91 $ 2.32 CommonStockholdersCashDividends $ 0.26 $ 0.26 $ 0.78 $ 0.74 PaidAverageDilutedShares 53,971 51,570 54,278 50,227 Outstanding(inthousands)

FINANCIAL HIGHLIGHTS(Dollars in Three Months Ended Nine Months Endedthousands) September 30, September 30, 2020 2019 2020 2019NET $ 6,937 $ 1,303 $ 7,749 $ 2,281 CHARGE-OFFS AVERAGE BALANCES:Total Assets $ 13,660,818 $ 11,277,742 $ 13,297,789 $ 10,623,664 Total Loans 9,252,839 7,773,328 8,987,645 7,464,910 Total Earning 12,341,257 10,192,183 11,941,839 9,618,285 AssetsTotal 10,944,721 8,922,222 10,541,777 8,397,056 DepositsTotalStockholders' 1,831,300 1,596,595 1,814,471 1,502,474 Equity FINANCIAL RATIOS:Return onAverage 1.06 % 1.30 % 1.04 % 1.46 %AssetsReturn onAverage 7.91 9.21 7.60 10.35 Stockholders'EquityReturn onAverageCommon 7.91 9.21 7.60 10.35 Stockholders'EquityAverageEarningAssets to 90.34 90.37 89.80 90.54 AverageAssetsAllowance forLoan Losses 1.37 0.97 1.37 0.97 as % of TotalLoansNetCharge-offsas % of 0.30 0.07 0.11 0.04 Average Loans(Annualized)AverageStockholders'Equity to 13.41 14.16 13.64 14.14 AverageAssetsTaxEquivalentYield on 3.58 4.77 3.88 4.84 AverageEarningAssetsInterestExpense/Average 0.43 1.15 0.62 1.12 EarningAssetsNet InterestMargin (FTE)on Average 3.15 3.62 3.26 3.72 EarningAssetsEfficiency 51.40 57.60 50.52 53.36 RatioTangibleCommon Book $ 23.48 $ 21.26 $ 23.48 $ 21.26 Value PerShare

NON-PERFORMING ASSETS(Dollars In September 30, June 30, March 31, December 31, September 30,Thousands) 2020 2020 2020 2019 2019Non-Accrual $ 56,739 $ 50,102 $ 15,649 $ 15,949 $ 22,728 LoansRenegotiated 2,677 1,086 665 841 576 LoansNon-Performing 59,416 51,188 16,314 16,790 23,304 Loans (NPL)Other RealEstate Owned 6,984 7,409 8,017 7,527 7,156 andRepossessionsNon-Performing 66,400 58,597 24,331 24,317 30,460 Assets (NPA)90+ Days 1,330 4,981 312 69 82 DelinquentNPAs & 90 Day $ 67,730 $ 63,578 $ 24,643 $ 24,386 $ 30,542 Delinquent Allowance for $ 126,726 $ 121,119 $ 99,454 $ 80,284 $ 80,571 Loan LossesQuarterly Net 6,937 230 582 787 1,303 Charge-offsNPAs / Actual 0.48 % 0.42 % 0.19 % 0.20 % 0.25 %Assets %NPAs & 90 Day/ Actual 0.49 % 0.46 % 0.19 % 0.20 % 0.25 %Assets %NPAs / ActualLoans and OREO 0.72 % 0.63 % 0.28 % 0.29 % 0.37 %%Allowance forLoan Losses / 1.37 % 1.30 % 1.15 % 0.95 % 0.97 %Actual Loans(%)NetCharge-offs as% of Average 0.30 % 0.01 % 0.03 % 0.04 % 0.07 %Loans(Annualized)

CONSOLIDATED BALANCE SHEETS(Dollars In September 30, June 30, March 31, December 31, September 30,Thousands) 2020 2020 2020 2019 2019ASSETS Cash and cash $ 164,632 $ 229,759 $ 127,731 $ 177,201 $ 202,383 equivalentsInterest-bearing 273,936 380,021 132,944 118,263 230,101 depositsInvestment 2,933,286 2,789,379 2,697,954 2,596,063 2,489,420 securitiesLoans held for sale 3,183 901 5,039 9,037 7,910 Loans 9,243,833 9,298,541 8,606,849 8,459,310 8,299,260 Less: Allowance for (126,726 ) (121,119 ) (99,454 ) (80,284 ) (80,571 ) loan lossesNet loans 9,117,107 9,177,422 8,507,395 8,379,026 8,218,689 Premises and 112,959 112,548 114,045 113,055 113,446 equipmentFederal Home Loan 28,736 28,736 28,736 28,736 28,736 Bank stockInterest receivable 52,992 57,063 47,489 48,901 45,923 Goodwill and other 574,369 575,855 577,366 578,880 579,751 intangiblesCash surrendervalue of life 291,543 290,715 289,574 288,206 286,747 insuranceOther real estate 6,942 7,367 7,972 7,527 7,156 ownedTax asset, deferred 21,762 13,126 9,497 12,165 15,187 and receivableOther assets 155,903 156,486 147,776 100,194 99,612 TOTAL ASSETS $ 13,737,350 $ 13,819,378 $ 12,693,518 $ 12,457,254 $ 12,325,061 LIABILITIES Deposits: Noninterest-bearing $ 2,187,607 $ 2,260,351 $ 1,688,205 $ 1,736,396 $ 1,777,365 Interest-bearing 8,718,546 8,705,637 8,182,279 8,103,560 7,988,086 Total Deposits 10,906,153 10,965,988 9,870,484 9,839,956 9,765,451 Borrowings: Federal funds 80,000 ? 47,000 55,000 ? purchasedSecurities soldunder repurchase 187,732 181,150 183,317 187,946 191,603 agreementsFederal Home Loan 399,522 400,817 480,995 351,072 354,609 Bank advancesSubordinateddebentures and 118,320 285,197 128,741 138,685 138,630 other borrowingsTotal Borrowings 785,574 867,164 840,053 732,703 684,842 Interest payable 5,038 5,587 7,746 6,754 7,855 Other liabilities 206,929 171,544 197,275 91,404 117,901 Total Liabilities 11,903,694 12,010,283 10,915,558 10,670,817 10,576,049 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 6,736 6,724 6,719 6,921 6,918 outstandingAdditional paid-in 1,003,777 1,002,962 1,000,942 1,054,997 1,053,148 capitalRetained earnings 757,550 735,439 716,518 696,520 663,173 Accumulated othercomprehensive 65,468 63,845 53,656 27,874 25,648 income (loss)Total Stockholders' 1,833,656 1,809,095 1,777,960 1,786,437 1,749,012 EquityTOTAL LIABILITIESAND STOCKHOLDERS' $ 13,737,350 $ 13,819,378 $ 12,693,518 $ 12,457,254 $ 12,325,061 EQUITY

CONSOLIDATEDSTATEMENTS OF INCOME(Dollars InThousands, SeptemberExcept Per 30, June 30, March 31, December 31, September 30,ShareAmounts) 2020 2020 2020 2019 2019INTEREST INCOMELoans receivable:Taxable $ 84,162 $ 87,312 $ 96,652 $ 102,617 $ 96,850 Tax-exempt 5,395 5,359 5,315 4,671 4,500 Investment securities:Taxable 5,399 6,147 7,631 7,993 6,729 Tax-exempt 10,931 10,019 9,335 8,995 8,335 Deposits withfinancial 90 134 575 1,203 1,363 institutionsFederal HomeLoan Bank 248 281 299 342 355 stockTotalInterest 106,225 109,252 119,807 125,821 118,132 IncomeINTEREST EXPENSEDeposits 9,776 12,707 21,748 24,074 24,830 Federal funds 5 2 111 26 15 purchasedSecuritiessold under 83 92 352 367 385 repurchaseagreementsFederal HomeLoan Bank 1,749 1,794 1,774 1,776 1,894 advancesSubordinateddebentures 1,691 1,639 1,945 1,994 2,076 and otherborrowingsTotalInterest 13,304 16,234 25,930 28,237 29,200 ExpenseNET INTEREST 92,921 93,018 93,877 97,584 88,932 INCOMEProvision for 12,544 21,895 19,752 500 600 loan lossesNET INTERESTINCOME AFTER 80,377 71,123 74,125 97,084 88,332 PROVISION FORLOAN LOSSESOTHER INCOME Servicecharges on 5,209 4,312 5,970 6,312 6,107 depositaccountsFiduciary andwealth 5,910 5,601 5,985 5,384 4,429 managementfeesCard payment 3,996 6,097 5,907 5,430 5,158 feesNet gains andfees on sales 5,841 3,674 3,363 2,633 2,227 of loansDerivative 1,715 1,042 1,939 1,405 1,684 hedge feesOther 372 333 398 434 450 customer feesEarnings oncashsurrender 1,171 1,326 1,360 1,458 1,144 value of lifeinsuranceNet realizedgains onsales of 1,817 3,068 4,612 1,039 393 available forsalesecuritiesOther income 132 1,028 265 150 524 Total Other 26,163 26,481 29,799 24,245 22,116 IncomeOTHER EXPENSESSalaries andemployee 39,187 35,698 39,243 39,358 38,942 benefitsNet occupancy 5,855 5,447 5,801 5,311 4,777 Equipment 4,956 4,489 4,344 4,429 4,030 Marketing 1,311 2,092 1,443 1,492 1,332 Outside dataprocessing 3,776 2,618 4,199 4,428 4,435 feesPrinting andoffice 331 279 387 484 312 suppliesIntangibleasset 1,486 1,511 1,514 1,590 1,356 amortizationFDIC 1,249 1,472 1,523 ? (668 ) assessmentsOther realestate ownedand 717 684 505 66 294 foreclosureexpensesProfessionaland other 2,254 1,553 2,258 2,899 8,251 outsideservicesOther 3,587 4,146 4,954 5,144 4,293 expensesTotal Other 64,709 59,989 66,171 65,201 67,354 ExpensesINCOME BEFORE 41,831 37,615 37,753 56,128 43,094 INCOME TAXIncome tax 5,621 4,623 3,490 8,298 6,337 expenseNET INCOMEAVAILABLE TO $ 36,210 $ 32,992 $ 34,263 $ 47,830 $ 36,757 COMMONSTOCKHOLDERS Per Share Data:Basic NetIncomeAvailable to $ 0.67 $ 0.62 $ 0.63 $ 0.87 $ 0.71 CommonStockholdersDiluted NetIncomeAvailable to $ 0.67 $ 0.62 $ 0.62 $ 0.87 $ 0.71 CommonStockholdersCashDividends $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 PaidAverageDilutedShares 53,971 53,943 54,918 55,520 51,570 Outstanding(inthousands)FINANCIAL RATIOS:Return onAverage 1.06 % 0.97 % 1.09 % 1.53 % 1.30 %AssetsReturn onAverage 7.91 7.35 7.55 10.82 9.21 Stockholders'EquityReturn onAverageCommon 7.91 7.35 7.55 10.82 9.21 Stockholders'EquityAverageEarningAssets to 90.34 89.25 89.81 89.71 90.37 AverageAssetsAllowance forLoan Losses 1.37 1.30 1.15 0.95 0.97 as % of TotalLoansNetCharge-offsas % of 0.30 0.01 0.03 0.04 0.07 Average Loans(Annualized)AverageStockholders'Equity to 13.41 13.15 14.45 14.17 14.16 AverageAssetsTaxEquivalentYield on 3.58 3.72 4.38 4.63 4.77 AverageEarningAssetsInterestExpense/Average 0.43 0.53 0.92 1.01 1.15 EarningAssetsNet InterestMargin (FTE)on Average 3.15 3.19 3.46 3.62 3.62 EarningAssetsEfficiency 51.40 47.95 52.17 51.07 57.60 RatioTangibleCommon Book $ 23.48 $ 23.04 $ 22.46 $ 21.94 $ 21.26 Value PerShare

LOANS (Dollars In September 30, June 30, March 31, December 31, September 30,Thousands) 2020 2020 2020 2019 2019Commercialand $ 2,875,331 $ 2,898,329 $ 2,199,226 $ 2,109,879 $ 2,034,311 industrialloansAgriculturalproductionfinancing 83,090 93,838 87,421 93,861 90,462 and otherloans tofarmersReal estate loans:Construction 622,084 640,560 643,674 787,568 670,138 Commercial 3,248,506 3,239,998 3,268,168 3,052,698 3,144,649 and farmlandResidential 1,146,406 1,145,187 1,121,556 1,143,217 1,155,403 Home equity 527,458 532,314 570,398 588,984 601,335 Individuals'loans forhousehold 125,411 123,611 129,765 135,989 131,246 and otherpersonalexpendituresPublicfinance andother 615,547 624,704 586,641 547,114 471,716 commercialloansLoans 9,243,833 9,298,541 8,606,849 8,459,310 8,299,260 Allowancefor loan (126,726 ) (121,119 ) (99,454 ) (80,284 ) (80,571 ) lossesNET LOANS $ 9,117,107 $ 9,177,422 $ 8,507,395 $ 8,379,026 $ 8,218,689

DEPOSITS (Dollars In September 30, June 30, March 31, December 31, September 30,Thousands) 2020 2020 2020 2019 2019Demand $ 6,279,554 $ 6,288,360 $ 5,293,200 $ 5,250,568 $ 5,183,971 depositsSavings 3,518,286 3,278,156 2,962,821 2,896,177 2,808,745 depositsCertificatesand othertime 467,610 607,474 694,062 736,843 731,693 deposits of$100,000 ormoreOthercertificates 542,919 669,119 717,723 741,759 811,780 and timedepositsBrokered 97,784 122,879 202,678 214,609 229,262 depositsTOTAL $ 10,906,153 $ 10,965,988 $ 9,870,484 $ 9,839,956 $ 9,765,451 DEPOSITS

CONSOLIDATED AVERAGE BALANCE SHEET AND NET INTEREST MARGIN ANALYSIS (Dollars in Thousands) For the Three Months Ended September 30, 2020 September 30, 2019 Interest Average Interest Average Average Balance Income / Rate Average Balance Income / Rate Expense ExpenseAssets: Interest-bearing $ 301,529 $ 90 0.12 % $ 262,082 $ 1,363 2.06 %depositsFederal Home Loan 28,736 248 3.45 24,633 355 5.76 Bank stockInvestment Securities: ^(1)Taxable 1,258,690 5,399 1.72 1,104,612 6,729 2.44 Tax-Exempt ^(2) 1,499,463 13,837 3.69 1,027,528 10,551 4.11 Total Investment 2,758,153 19,236 2.79 2,132,140 17,280 3.24 SecuritiesLoans held for sale 24,705 257 4.16 21,913 274 5.00 Loans: ^(3) Commercial 6,965,837 66,826 3.84 5,674,956 77,370 5.45 Real Estate 887,661 9,996 4.50 822,874 9,518 4.63 MortgageInstallment 693,363 7,083 4.09 715,428 9,688 5.42 Tax-Exempt ^(2) 681,273 6,829 4.01 538,157 5,696 4.23 Total Loans 9,252,839 90,991 3.93 7,773,328 102,546 5.28 Total Earning 12,341,257 110,565 3.58 % 10,192,183 121,544 4.77 %AssetsNet unrealized gain(loss) on 70,277 30,353 securitiesavailable for saleAllowance for loan (125,150 ) (80,918 ) lossesCash and cash 169,539 143,266 equivalentsPremises and 113,216 99,021 equipmentOther assets 1,091,679 893,837 Total Assets $ 13,660,818 $ 11,277,742 Liabilities: Interest-bearing deposits:Interest-bearing $ 4,098,017 $ 3,890 0.38 % $ 3,134,675 $ 9,285 1.18 %depositsMoney market 1,813,392 1,167 0.26 1,307,647 3,766 1.14 depositsSavingsdeposits 1,574,700 583 0.15 1,244,859 2,523 0.80 Certificates and 1,267,152 4,136 1.31 1,736,759 9,256 2.11 other time depositsTotalInterest-bearing 8,753,261 9,776 0.45 7,423,940 24,830 1.33 DepositsBorrowings 733,757 3,528 1.92 660,107 4,370 2.59 TotalInterest-bearing 9,487,018 13,304 0.56 8,084,047 29,200 1.43 LiabilitiesNoninterest-bearing 2,191,460 1,498,282 depositsOther liabilities 151,040 98,818 Total Liabilities 11,829,518 9,681,147 Stockholders' 1,831,300 1,596,595 EquityTotal Liabilitiesand Stockholders' $ 13,660,818 13,304 $ 11,277,742 29,200 EquityNet Interest Income $ 97,261 $ 92,344 (FTE)Net Interest Spread 3.02 % 3.34 %(FTE) ^(4) Net Interest Margin (FTE):Interest Income(FTE) / Average 3.58 % 4.77 %Earning AssetsInterest Expense /Average Earning 0.43 % 1.15 %AssetsNet Interest Margin 3.15 % 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 $4,340 and $3,412 for the three months ended September 30,2020 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 percentageof average earning assets minus interest expense expressed as a percentage ofaverage interest-bearing liabilities.^(5) Net Interest Margin (FTE) is interest income expressed as a percentageof average 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 Nine Months Ended September 30, 2020 September 30, 2019 Interest Average Interest Average Average Balance Income / Rate Average Balance Income / Rate Expense ExpenseAssets: Federal Funds Sold Interest-bearing $ 280,038 $ 799 0.38 % $ 184,640 $ 3,022 2.18 %depositsFederal Home Loan 28,736 828 3.84 24,603 1,028 5.57 Bank stockInvestment Securities: ^(1)Taxable 1,302,943 19,177 1.96 1,021,102 19,822 2.59 Tax-Exempt ^(2) 1,342,477 38,335 3.81 923,030 28,684 4.14 Total Investment 2,645,420 57,512 2.90 1,944,132 48,506 3.33 SecuritiesLoans held for sale 17,175 581 4.51 13,618 512 5.01 Loans: ^(3) Commercial 6,698,042 213,241 4.24 5,469,377 224,766 5.48 Real Estate 882,911 30,520 4.61 778,778 26,526 4.54 MortgageInstallment 725,596 23,784 4.37 686,055 28,351 5.51 Tax-Exempt ^(2) 663,921 20,341 4.09 517,082 16,325 4.21 Total Loans 8,987,645 288,467 4.28 7,464,910 296,480 5.30 Total Earning 11,941,839 347,606 3.88 % 9,618,285 349,036 4.84 %AssetsNet unrealized gainon securities 58,623 12,856 available for saleAllowance for loan (104,465 ) (81,172 ) lossesCash and cash 210,778 130,587 equivalentsPremises and 113,517 94,628 equipmentOther assets 1,077,497 848,480 Total Assets $ 13,297,789 $ 10,623,664 Liabilities: Interest-bearing deposits:Interest-bearing $ 3,880,489 $ 16,351 0.56 % $ 2,921,762 $ 24,844 1.13 %depositsMoney market 1,674,622 6,647 0.53 1,222,860 10,057 1.10 depositsSavingsdeposits 1,507,269 3,007 0.27 1,187,173 7,315 0.82 Certificates and 1,476,499 18,226 1.65 1,652,141 25,295 2.04 other time depositsTotalInterest-bearing 8,538,879 44,231 0.69 6,983,936 67,511 1.29 DepositsBorrowings 796,836 11,237 1.88 636,295 12,997 2.72 TotalInterest-bearing 9,335,715 55,468 0.79 7,620,231 80,508 1.41 LiabilitiesNoninterest-bearing 2,002,898 1,413,120 depositsOther liabilities 144,705 87,839 Total Liabilities 11,483,318 9,121,190 Stockholders' 1,814,471 1,502,474 EquityTotal Liabilitiesand Stockholders' $ 13,297,789 55,468 $ 10,623,664 80,508 EquityNet Interest Income $ 292,138 $ 268,528 (FTE)Net Interest Spread 3.09 % 3.43 %(FTE) ^(4) Net Interest Margin (FTE):Interest Income(FTE) / Average 3.88 % 4.84 %Earning AssetsInterest Expense /Average Earning 0.62 % 1.12 %AssetsNet Interest Margin 3.26 % 3.72 %(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 $12,322 and $9,452 for the nine months ended September 30,2020 and 2019, respectively.^(3) Non accruingloans have been included in theaverage balances.^(4) Net Interest Spread (FTE) is interest income expressed as a percentageof average earning assets minus interest expense expressed as a percentage ofaverage interest-bearing liabilities.^(5) Net Interest Margin (FTE) is interest income expressed as a percentageof average 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, Muncie, Indiana