GlobeNewswire Inc | Jul 23, 2020 08:00AM EDT

July 23, 2020

MUNCIE, Ind., July 23, 2020 (GLOBE NEWSWIRE) -- First Merchants Corporation (NASDAQ - FRME) has reported second quarter 2020 net income of $33 million compared to $41.1 million during the same period in 2019. Earnings per share for the period totaled $.62 per share compared to the second quarter of 2019 result of $.83 per share. Year-to-date net income totaled $67.3 million compared to $79.9 million during the six months ended June 30, 2019. Year-to-date earnings per share totaled $1.24 compared to $1.61 during the same period in 2019.

Total assets equaled $13.8 billion as of the quarter-ended June 30, 2020 and loans totaled $9.3 billion. The Corporations loan portfolio increased by $1.8 billion, or 23.7 percent, during the past twelve months. Investments increased $696 million, or 33.3 percent, during the same period and now totals $2.8 billion. Total deposits equaled $11 billion as of quarter-end and increased by $2.6 billion, or 31.8 percent, from the same period in 2019. Our acquisition of Monroe Bank & Trust (MBT), which closed on September 1, 2019, accounted for $733 million of loan growth and $1.1 billion of deposit growth. Additionally, Payroll Protection Program (PPP) loans accounted for $883 million of the periods loan growth.

The loan to deposit ratio now totals 84.8 percent and loan to asset ratio totals 67.3 percent. As of June 30, 2020, the Corporations total risk-based capital ratio equaled 14.2 percent, the common equity tier 1 capital ratio equaled 11.8 percent, and the tangible common equity ratio totaled 9.31 percent. Excluding PPP loans, our tangible common equity ratio totaled 9.93 percent.

The Corporations provision expense totaled $21.9 million and net charge-offs for the quarter totaled just $230,000. The allowance for loan losses totaled $121.1 million as of June 30, 2020, up from $81.3 million as of June 30, 2019. The Corporation chose to defer the adoption of the current expected credit loss (CECL) model so allowance for loan losses were calculated under the incurred loss method. Allowance for loan losses is 1.30% of total loans, 1.62% including remaining fair value marks with allowance, and 1.79% excluding PPP loans from total loans. The increased year-to-date provision expense of $41.6 million primarily reflects our view of increased credit risk related to the COVID-19 pandemic. Remaining fair value marks on purchased loans is $29.3 million.

Michael C. Rechin, President and Chief Executive Officer, stated, Our financial results for the second quarter 2020 combine stressed economic conditions and net interest margin pressure with the opportunity to provide our clients access to the SBAs Payroll Protection Program. Our bankers really leaned into the PPP offering on behalf of businesses throughout our markets because it fits our culture and strategy as a largely commercial bank. Several thousand borrowers looked to the bank to assist their efforts in employee retention in a most challenging time. In the near-term, the magnitude of our participation grew our balance sheet substantially in loans and deposits. The funding affords borrowers time to weather the COVID-19 initiated recession. Rechin also added, Despite the reopening of Midwest economies and reducing unemployment, we recorded a $22 million provision reflecting our uncertain economic environment. With stay at home orders in place through much of the quarter, our technology proved to be a key point of service delivery for our clients. The results we achieved in pre-tax, pre-provision earnings, capital growth and efficiency remain at top quartile performance levels.

Net-interest income for the quarter totaled $93 million, down $859,000 from the first quarter of 2020, as linked quarterly net interest margin declined by 27 basis points totaling 3.19 percent. Yields on earning assets decreased by 66 basis points totaling 3.72 percent and the cost of supporting liabilities decreased by 39 basis points and totaled 53 basis points. The addition of $883 million of PPP loans negatively impacted margin by 6 basis points, but the major driver was the decline in LIBOR from 99 basis points as of March 31, 2020 to just 16 basis points on June 30, 2020.

Non-interest income totaled $26.5 million for the quarter, a $4.9 million increase over the second quarter of 2019, but a $3.3 million decrease from the first quarter of 2020. Gains from the sale of mortgage loans remain strong given the rate environment, while service charges on deposit accounts were less than planned due to higher than normal average balances per account. Non-interest expense totaled $60 million for the quarter compared to $57.6 million in the second quarter of 2019 and $66.2 million in the first quarter of 2020. The primary drivers of the linked quarterly results were a $2.3 million deferral of salary expense related to PPP loan originations, a $1.1 million reduction in bonus accruals and a $1.6 million decrease in processing fees related to termination of a debit card rewards program.

CONFERENCE CALL

First Merchants Corporation will conduct a second quarter earnings conference call and web cast at 2:30 p.m. (ET) on Thursday, July 23, 2020.

To participate, dial (Toll Free) 877-507-0578 and reference First Merchants Corporation's second quarter earnings release. International callers please call +1 412-317-1073. A replay of the call will be available until August 21, 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 10144066.

In order to view the web cast and presentation slides, please go to http://services.choruscall.com/links/frme200723.html during the time of the call. A replay of the web cast will be available until July 23, 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) June 30, 2020 2019ASSETS Cash and cash equivalents $ 229,759 $ 128,185 Interest-bearing time deposits 380,021 129,614 Investment securities 2,789,379 2,092,924 Loans held for sale 901 5,854 Loans 9,298,541 7,511,370 Less: Allowance for loan losses (121,119 ) (81,274 )Net loans 9,177,422 7,430,096 Premises and equipment 112,548 91,767 Federal Home Loan Bank stock 28,736 24,588 Interest receivable 57,063 45,150 Goodwill and other intangibles 575,855 466,736 Cash surrender value of life insurance 290,715 226,241 Other real estate owned 7,367 1,131 Tax asset, deferred and receivable 13,126 12,340 Other assets 156,486 83,231 TOTAL ASSETS $ 13,819,378 $ 10,737,857 LIABILITIES Deposits: Noninterest-bearing $ 2,260,351 $ 1,353,165 Interest-bearing 8,705,637 6,966,163 Total Deposits 10,965,988 8,319,328 Borrowings: Federal funds purchased ? 75,000 Securities sold under repurchase agreements 181,150 119,674 Federal Home Loan Bank advances 400,817 460,042 Subordinated debentures and other borrowings 285,197 138,574 Total Borrowings 867,164 793,290 Interest payable 5,587 6,740 Other liabilities 171,544 116,863 Total Liabilities 12,010,283 9,236,221 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 - 53,795,500 and 6,724 6,182 49,456,594 sharesAdditional paid-in capital 1,002,962 841,365 Retained earnings 735,439 639,362 Accumulated other comprehensive income (loss) 63,845 14,602 Total Stockholders' Equity 1,809,095 1,501,636 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 13,819,378 $ 10,737,857

CONSOLIDATED Three Months Ended Six Months EndedSTATEMENTS OF INCOME(Dollars InThousands, Except June 30, June 30,Per Share Amounts) 2020 2019 2020 2019INTEREST INCOME Loans receivable: Taxable $ 87,312 $ 92,824 $ 183,964 $ 183,305 Tax-exempt 5,359 4,244 10,674 8,397 Investment securities:Taxable 6,147 6,998 13,778 13,093 Tax-exempt 10,019 7,454 19,354 14,325 Deposits withfinancial 134 784 709 1,659 institutionsFederal Home Loan 281 335 580 673 Bank stockTotal Interest 109,252 112,639 229,059 221,452 IncomeINTEREST EXPENSE Deposits 12,707 23,087 34,455 42,681 Federal funds 2 117 113 210 purchasedSecurities soldunder repurchase 92 342 444 672 agreementsFederal Home Loan 1,794 1,692 3,568 3,506 Bank advancesSubordinateddebentures and other 1,639 2,123 3,584 4,239 borrowingsTotal Interest 16,234 27,361 42,164 51,308 ExpenseNET INTEREST INCOME 93,018 85,278 186,895 170,144 Provision for loan 21,895 500 41,647 1,700 lossesNET INTEREST INCOMEAFTER PROVISION FOR 71,123 84,778 145,248 168,444 LOAN LOSSESOTHER INCOME Service charges on 4,312 5,437 10,282 10,532 deposit accountsFiduciary and wealth 5,601 3,931 11,586 7,749 management feesCard payment fees 6,097 4,829 12,004 9,655 Net gains and fees 3,674 1,736 7,037 3,031 on sales of loansDerivative hedge 1,042 1,487 2,981 2,268 feesOther customer fees 333 341 731 780 Earnings on cashsurrender value of 1,326 946 2,686 1,935 life insuranceNet realized gainson sales of 3,068 1,843 7,680 2,983 available for salesecuritiesOther income 1,028 1,064 1,293 1,394 Total Other Income 26,481 21,614 56,280 40,327 OTHER EXPENSES Salaries and 35,698 32,709 74,941 65,737 employee benefitsNet occupancy 5,447 4,469 11,248 9,496 Equipment 4,489 4,117 8,833 7,759 Marketing 2,092 2,752 3,535 3,826 Outside data 2,618 3,929 6,817 7,613 processing feesPrinting and office 279 334 666 649 suppliesIntangible asset 1,511 1,520 3,025 3,048 amortizationFDIC assessments 1,472 678 2,995 1,385 Other real estateowned and 684 903 1,189 2,068 foreclosure expensesProfessional andother outside 1,553 2,376 3,811 4,260 servicesOther expenses 4,146 3,800 9,100 8,367 Total Other Expenses 59,989 57,587 126,160 114,208 INCOME BEFORE INCOME 37,615 48,805 75,368 94,563 TAXIncome tax expense 4,623 7,749 8,113 14,690 NET INCOME AVAILABLETO COMMON $ 32,992 $ 41,056 $ 67,255 $ 79,873 STOCKHOLDERS Per Share Data: Basic Net IncomeAvailable to Common $ 0.62 $ 0.83 $ 1.24 $ 1.62 StockholdersDiluted Net IncomeAvailable to Common $ 0.62 $ 0.83 $ 1.24 $ 1.61 StockholdersCash Dividends Paid $ 0.26 $ 0.26 $ 0.52 $ 0.48 Average DilutedShares Outstanding 53,943 49,550 54,430 49,545 (in thousands)

FINANCIAL HIGHLIGHTS(Dollars in Three Months Ended Six Months Endedthousands) June 30, June 30, 2020 2019 2020 2019NET $ 230 $ 128 $ 812 $ 978 CHARGE-OFFS AVERAGE BALANCES:Total Assets $ 13,655,322 $ 10,499,948 $ 13,114,280 $ 10,291,205 Total Loans 9,180,610 7,385,315 8,853,591 7,308,146 Total Earning 12,187,442 9,518,892 11,739,936 9,326,579 AssetsTotal 10,789,909 8,321,459 10,338,091 8,130,120 DepositsTotalStockholders' 1,795,509 1,479,254 1,805,963 1,454,633 Equity FINANCIAL RATIOS:Return onAverage 0.97 % 1.56 % 1.03 % 1.55 %AssetsReturn onAverage 7.35 11.10 7.45 10.98 Stockholders'EquityReturn onAverageCommon 7.35 11.10 7.45 10.98 Stockholders'EquityAverageEarningAssets to 89.25 90.66 89.52 90.63 AverageAssetsAllowance forLoan Losses 1.30 1.08 1.30 1.08 as % of TotalLoansNetCharge-offsas % of 0.01 0.01 0.02 0.03 Average Loans(Annualized)AverageStockholders'Equity to 13.15 14.09 13.77 14.13 AverageAssetsTaxEquivalentYield on 3.72 4.86 4.04 4.88 AverageEarningAssetsInterestExpense/Average 0.53 1.15 0.72 1.10 EarningAssetsNet InterestMargin (FTE)on Average 3.19 3.71 3.32 3.78 EarningAssetsEfficiency 47.95 51.00 50.09 51.09 RatioTangibleCommon Book $ 23.04 $ 21.01 $ 23.04 $ 21.01 Value PerShare

NON-PERFORMING ASSETS(Dollars In June 30, March 31, December September June 30,Thousands) 31, 30, 2020 2020 2019 2019 2019Non-Accrual $ 50,102 $ 15,649 $ 15,949 $ 22,728 $ 25,635 LoansRenegotiated 1,086 665 841 576 640 LoansNon-Performing 51,188 16,314 16,790 23,304 26,275 Loans (NPL)Other RealEstate Owned 7,409 8,017 7,527 7,156 1,131 andRepossessionsNon-Performing 58,597 24,331 24,317 30,460 27,406 Assets (NPA)90+ Days 4,981 312 69 82 209 DelinquentNPAs & 90 Day $ 63,578 $ 24,643 $ 24,386 $ 30,542 $ 27,615 Delinquent Allowance for $ 121,119 $ 99,454 $ 80,284 $ 80,571 $ 81,274 Loan LossesQuarterly Net 230 582 787 1,303 128 Charge-offsNPAs / Actual 0.42 % 0.19 % 0.20 % 0.25 % 0.26 %Assets %NPAs & 90 Day/ Actual 0.46 % 0.19 % 0.20 % 0.25 % 0.26 %Assets %NPAs / ActualLoans and OREO 0.63 % 0.28 % 0.29 % 0.37 % 0.36 %%Allowance forLoan Losses / 1.30 % 1.15 % 0.95 % 0.97 % 1.08 %Actual Loans(%)NetCharge-offs as% of Average 0.01 % 0.03 % 0.04 % 0.07 % 0.01 %Loans(Annualized)

CONSOLIDATED BALANCE SHEETS(Dollars In June 30, March 31, December 31, September 30, June 30,Thousands) 2020 2020 2019 2019 2019ASSETS Cash and cash $ 229,759 $ 127,731 $ 177,201 $ 202,383 $ 128,185 equivalentsInterest-bearing 380,021 132,944 118,263 230,101 129,614 time depositsInvestment 2,789,379 2,697,954 2,596,063 2,489,420 2,092,924 securitiesLoans held for sale 901 5,039 9,037 7,910 5,854 Loans 9,298,541 8,606,849 8,459,310 8,299,260 7,511,370 Less: Allowance for (121,119 ) (99,454 ) (80,284 ) (80,571 ) (81,274 )loan lossesNet loans 9,177,422 8,507,395 8,379,026 8,218,689 7,430,096 Premises and 112,548 114,045 113,055 113,446 91,767 equipmentFederal Home Loan 28,736 28,736 28,736 28,736 24,588 Bank stockInterest receivable 57,063 47,489 48,901 45,923 45,150 Goodwill and other 575,855 577,366 578,880 579,751 466,736 intangiblesCash surrendervalue of life 290,715 289,574 288,206 286,747 226,241 insuranceOther real estate 7,367 7,972 7,527 7,156 1,131 ownedTax asset, deferred 13,126 9,497 12,165 15,187 12,340 and receivableOther assets 156,486 147,776 100,194 99,612 83,231 TOTAL ASSETS $ 13,819,378 $ 12,693,518 $ 12,457,254 $ 12,325,061 $ 10,737,857 LIABILITIES Deposits: Noninterest-bearing $ 2,260,351 $ 1,688,205 $ 1,736,396 $ 1,777,365 $ 1,353,165 Interest-bearing 8,705,637 8,182,279 8,103,560 7,988,086 6,966,163 Total Deposits 10,965,988 9,870,484 9,839,956 9,765,451 8,319,328 Borrowings: Federal funds ? 47,000 55,000 ? 75,000 purchasedSecurities soldunder repurchase 181,150 183,317 187,946 191,603 119,674 agreementsFederal Home Loan 400,817 480,995 351,072 354,609 460,042 Bank advancesSubordinateddebentures and 285,197 128,741 138,685 138,630 138,574 other borrowingsTotal Borrowings 867,164 840,053 732,703 684,842 793,290 Interest payable 5,587 7,746 6,754 7,855 6,740 Other liabilities 171,544 197,275 91,404 117,901 116,863 Total Liabilities 12,010,283 10,915,558 10,670,817 10,576,049 9,236,221 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 6,724 6,719 6,921 6,918 6,182 outstandingAdditional paid-in 1,002,962 1,000,942 1,054,997 1,053,148 841,365 capitalRetained earnings 735,439 716,518 696,520 663,173 639,362 Accumulated othercomprehensive 63,845 53,656 27,874 25,648 14,602 income (loss)Total Stockholders' 1,809,095 1,777,960 1,786,437 1,749,012 1,501,636 EquityTOTAL LIABILITIESAND STOCKHOLDERS' $ 13,819,378 $ 12,693,518 $ 12,457,254 $ 12,325,061 $ 10,737,857 EQUITY

CONSOLIDATEDSTATEMENTS OF INCOME(Dollars InThousands, December SeptemberExcept Per June 30, March 31, 31, 30, June 30,ShareAmounts) 2020 2020 2019 2019 2019INTEREST INCOMELoans receivable:Taxable $ 87,312 $ 96,652 $ 102,617 $ 96,850 $ 92,824 Tax-exempt 5,359 5,315 4,671 4,500 4,244 Investment securities:Taxable 6,147 7,631 7,993 6,729 6,998 Tax-exempt 10,019 9,335 8,995 8,335 7,454 Deposits withfinancial 134 575 1,203 1,363 784 institutionsFederal HomeLoan Bank 281 299 342 355 335 stockTotalInterest 109,252 119,807 125,821 118,132 112,639 IncomeINTEREST EXPENSEDeposits 12,707 21,748 24,074 24,830 23,087 Federal funds 2 111 26 15 117 purchasedSecuritiessold under 92 352 367 385 342 repurchaseagreementsFederal HomeLoan Bank 1,794 1,774 1,776 1,894 1,692 advancesSubordinateddebentures 1,639 1,945 1,994 2,076 2,123 and otherborrowingsTotalInterest 16,234 25,930 28,237 29,200 27,361 ExpenseNET INTEREST 93,018 93,877 97,584 88,932 85,278 INCOMEProvision for 21,895 19,752 500 600 500 loan lossesNET INTERESTINCOME AFTER 71,123 74,125 97,084 88,332 84,778 PROVISION FORLOAN LOSSESOTHER INCOME Servicecharges on 4,312 5,970 6,312 6,107 5,437 depositaccountsFiduciary andwealth 5,601 5,985 5,384 4,429 3,931 managementfeesCard payment 6,097 5,907 5,430 5,158 4,829 feesNet gains andfees on sales 3,674 3,363 2,633 2,227 1,736 of loansDerivative 1,042 1,939 1,405 1,684 1,487 hedge feesOther 333 398 434 450 341 customer feesEarnings oncashsurrender 1,326 1,360 1,458 1,144 946 value of lifeinsuranceNet realizedgains onsales of 3,068 4,612 1,039 393 1,843 available forsalesecuritiesOther income 1,028 265 150 524 1,064 Total Other 26,481 29,799 24,245 22,116 21,614 IncomeOTHER EXPENSESSalaries andemployee 35,698 39,243 39,358 38,942 32,709 benefitsNet occupancy 5,447 5,801 5,311 4,777 4,469 Equipment 4,489 4,344 4,429 4,030 4,117 Marketing 2,092 1,443 1,492 1,332 2,752 Outside dataprocessing 2,618 4,199 4,428 4,435 3,929 feesPrinting andoffice 279 387 484 312 334 suppliesIntangibleasset 1,511 1,514 1,590 1,356 1,520 amortizationFDIC 1,472 1,523 ? (668 ) 678 assessmentsOther realestate ownedand 684 505 66 294 903 foreclosureexpensesProfessionaland other 1,553 2,258 2,899 8,251 2,376 outsideservicesOther 4,146 4,954 5,144 4,293 3,800 expensesTotal Other 59,989 66,171 65,201 67,354 57,587 ExpensesINCOME BEFORE 37,615 37,753 56,128 43,094 48,805 INCOME TAXIncome tax 4,623 3,490 8,298 6,337 7,749 expenseNET INCOMEAVAILABLE TO $ 32,992 $ 34,263 $ 47,830 $ 36,757 $ 41,056 COMMONSTOCKHOLDERS Per Share Data:Basic NetIncomeAvailable to $ 0.62 $ 0.63 $ 0.87 $ 0.71 $ 0.83 CommonStockholdersDiluted NetIncomeAvailable to $ 0.62 $ 0.62 $ 0.87 $ 0.71 $ 0.83 CommonStockholdersCashDividends $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 PaidAverageDilutedShares 53,943 54,918 55,520 51,570 49,550 Outstanding(inthousands)FINANCIAL RATIOS:Return onAverage 0.97 % 1.09 % 1.53 % 1.30 % 1.56 %AssetsReturn onAverage 7.35 7.55 10.82 9.21 11.10 Stockholders'EquityReturn onAverageCommon 7.35 7.55 10.82 9.21 11.10 Stockholders'EquityAverageEarningAssets to 89.25 89.81 89.71 90.37 90.66 AverageAssetsAllowance forLoan Losses 1.30 1.15 0.95 0.97 1.08 as % of TotalLoansNetCharge-offsas % of 0.01 0.03 0.04 0.07 0.01 Average Loans(Annualized)AverageStockholders'Equity to 13.15 14.45 14.17 14.16 14.09 AverageAssetsTaxEquivalentYield on 3.72 4.38 4.63 4.77 4.86 AverageEarningAssetsInterestExpense/Average 0.53 0.92 1.01 1.15 1.15 EarningAssetsNet InterestMargin (FTE)on Average 3.19 3.46 3.62 3.62 3.71 EarningAssetsEfficiency 47.95 52.17 51.07 57.60 51.00 RatioTangibleCommon Book $ 23.04 $ 22.46 $ 21.94 $ 21.26 $ 21.01 Value PerShare

LOANS (Dollars In June 30, March 31, December 31, September 30, June 30,Thousands) 2020 2020 2019 2019 2019Commercialand $ 2,898,329 $ 2,199,226 $ 2,109,879 $ 2,034,311 $ 1,877,042 industrialloansAgriculturalproductionfinancing 93,838 87,421 93,861 90,462 83,452 and otherloans tofarmersReal estate loans:Construction 640,560 643,674 787,568 670,138 624,548 Commercial 3,239,998 3,268,168 3,052,698 3,144,649 2,821,689 and farmlandResidential 1,145,187 1,121,556 1,143,217 1,155,403 993,802 Home equity 532,314 570,398 588,984 601,335 548,006 Individuals'loans forhousehold 123,611 129,765 135,989 131,246 98,384 and otherpersonalexpendituresPublicfinance andother 624,704 586,641 547,114 471,716 464,447 commercialloansLoans 9,298,541 8,606,849 8,459,310 8,299,260 7,511,370 Allowancefor loan (121,119 ) (99,454 ) (80,284 ) (80,571 ) (81,274 )lossesNET LOANS $ 9,177,422 $ 8,507,395 $ 8,379,026 $ 8,218,689 $ 7,430,096

DEPOSITS (Dollars In June 30, March 31, December 31, September 30, June 30,Thousands) 2020 2020 2019 2019 2019Demand $ 6,288,360 $ 5,293,200 $ 5,250,568 $ 5,183,971 $ 4,309,473 depositsSavings 3,278,156 2,962,821 2,896,177 2,808,745 2,358,720 depositsCertificatesand othertime 607,474 694,062 736,843 731,693 720,536 deposits of$100,000 ormoreOthercertificates 669,119 717,723 741,759 811,780 729,392 and timedepositsBrokered 122,879 202,678 214,609 229,262 201,207 depositsTOTAL $ 10,965,988 $ 9,870,484 $ 9,839,956 $ 9,765,451 $ 8,319,328 DEPOSITS

CONSOLIDATED AVERAGE BALANCE SHEET AND NET INTEREST MARGIN ANALYSIS(Dollars in Thousands) For the Three Months Ended June 30, 2020 June 30, 2019 Interest Average Interest Average Average Balance Income / Rate Average Balance Income / Rate Expense ExpenseAssets: Interest-bearing $ 378,489 $ 134 0.14 % $ 144,626 $ 784 2.17 %time depositsFederal Home Loan 28,736 281 3.91 24,588 335 5.45 Bank stockInvestment Securities: ^(1)Taxable 1,282,080 6,147 1.92 1,054,068 6,998 2.66 Tax-Exempt ^(2) 1,317,527 12,682 3.85 910,295 9,435 4.15 Total Investment 2,599,607 18,829 2.90 1,964,363 16,433 3.35 SecuritiesLoans held for sale 12,630 131 4.15 11,430 127 4.44 Loans: ^(3) Commercial 6,890,010 69,463 4.03 5,419,169 74,638 5.51 Real Estate 887,257 10,122 4.56 766,528 8,686 4.53 MortgageInstallment 724,165 7,596 4.20 677,133 9,373 5.54 Tax-Exempt ^(2) 666,548 6,784 4.07 511,055 5,372 4.20 Total Loans 9,180,610 94,096 4.10 7,385,315 98,196 5.32 Total Earning 12,187,442 113,340 3.72 % 9,518,892 115,748 4.86 %AssetsNet unrealized gain(loss) on 56,807 12,841 securitiesavailable for saleAllowance for loan (106,858 ) (81,691 ) lossesCash and cash 303,491 130,987 equivalentsPremises and 113,528 91,563 equipmentOther assets 1,100,912 827,356 Total Assets $ 13,655,322 $ 10,499,948 Liabilities: Interest-bearing deposits:Interest-bearing $ 3,951,819 $ 4,186 0.42 % $ 2,935,925 $ 8,541 1.16 %depositsMoney market 1,673,104 1,696 0.41 1,220,020 3,509 1.15 depositsSavingsdeposits 1,521,312 596 0.16 1,164,901 2,525 0.87 Certificates and 1,498,002 6,229 1.66 1,652,203 8,512 2.06 other time depositsTotalInterest-bearing 8,644,237 12,707 0.59 6,973,049 23,087 1.32 DepositsBorrowings 909,258 3,527 1.55 613,446 4,274 2.79 TotalInterest-bearing 9,553,495 16,234 0.68 7,586,495 27,361 1.44 LiabilitiesNoninterest-bearing 2,145,672 1,348,410 depositsOther liabilities 160,646 85,789 Total Liabilities 11,859,813 9,020,694 Stockholders' 1,795,509 1,479,254 EquityTotal Liabilitiesand Stockholders' $ 13,655,322 16,234 $ 10,499,948 27,361 EquityNet Interest Income $ 97,106 $ 88,387 (FTE)Net Interest Spread 3.04 % 3.42 %(FTE) ^(4) Net Interest Margin (FTE):Interest Income(FTE) / Average 3.72 % 4.86 %Earning AssetsInterest Expense /Average Earning 0.53 % 1.15 %AssetsNet Interest Margin 3.19 % 3.71 %(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 $4,088 and $3,109 for the three months ended June 30, 2020and 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 Six Months Ended June 30, 2020 June 30, 2019 Interest Average Interest Average Average Balance Income / Rate Average Balance Income / Rate Expense ExpenseAssets: Federal Funds Sold Interest-bearing $ 269,174 $ 709 0.53 % $ 145,277 $ 1,659 2.28 %time depositsFederal Home Loan 28,736 580 4.04 24,588 673 5.47 Bank stockInvestment Securities: ^(1)Taxable 1,325,313 13,778 2.08 978,654 13,093 2.68 Tax-Exempt ^(2) 1,263,122 24,499 3.88 869,914 18,133 4.17 Total Investment 2,588,435 38,277 2.96 1,848,568 31,226 3.38 SecuritiesLoans held for sale 14,924 324 4.34 10,697 239 4.47 Loans: ^(3) Commercial 6,562,673 146,415 4.46 5,364,884 147,394 5.49 Real Estate 878,956 20,524 4.67 755,070 17,008 4.51 MortgageInstallment 741,889 16,701 4.50 671,125 18,664 5.56 Tax-Exempt ^(2) 655,149 13,511 4.12 506,370 10,629 4.20 Total Loans 8,853,591 197,475 4.46 7,308,146 193,934 5.31 Total Earning 11,739,936 237,041 4.04 % 9,326,579 227,492 4.88 %AssetsNet unrealized gainon securities 52,732 3,963 available for saleAllowance for loan (94,009 ) (81,301 ) lossesCash and cash 231,624 124,143 equivalentsPremises and 113,670 92,395 equipmentOther assets 1,070,327 825,426 Total Assets $ 13,114,280 $ 10,291,205 Liabilities: Interest-bearing deposits:Interest-bearing $ 3,770,530 $ 12,461 0.66 % $ 2,813,541 $ 15,560 1.11 %depositsMoney market 1,604,474 5,479 0.68 1,179,765 6,291 1.07 depositsSavingsdeposits 1,473,183 2,424 0.33 1,157,852 4,792 0.83 Certificates and 1,582,322 14,091 1.78 1,609,130 16,038 1.99 other time depositsTotalInterest-bearing 8,430,509 34,455 0.82 6,760,288 42,681 1.26 DepositsBorrowings 828,721 7,709 1.86 624,192 8,627 2.76 TotalInterest-bearing 9,259,230 42,164 0.91 7,384,480 51,308 1.39 LiabilitiesNoninterest-bearing 1,907,582 1,369,832 depositsOther liabilities 141,505 82,260 Total Liabilities 11,308,317 8,836,572 Stockholders' 1,805,963 1,454,633 EquityTotal Liabilitiesand Stockholders' $ 13,114,280 42,164 $ 10,291,205 51,308 EquityNet Interest Income $ 194,877 $ 176,184 (FTE)Net Interest Spread 3.13 % 3.49 %(FTE) ^(4) Net Interest Margin (FTE):Interest Income(FTE) / Average 4.04 % 4.88 %Earning AssetsInterest Expense /Average Earning 0.72 % 1.10 %AssetsNet Interest Margin 3.32 % 3.78 %(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 $7,982 and $6,040 for the six months ended June 30, 2020 and2019, 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