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First Merchants Corp.$37.26($.15)(.40%)

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 First Merchants Corporation Announces Record 2017 Results
   Thursday, January 25, 2018 10:03:55 AM ET

First Merchants Corporation (FRME ) reported record fourth quarter 2017 net income of $24.4 million, compared to $22.3 million during the fourth quarter of 2016. Earnings per share for the period totaled $.49 per share compared to $.55 during the same period in 2016. Our fourth quarter results included the impact of the recently enacted Tax Cuts and Jobs Act (the "TCJA"). Specifically, our federal income tax expense was elevated by $5.1 million, or $.10 per share due to deferred tax asset write-downs. Acquisition expenses related to the completion of our Independent Alliance Banks acquisition totaled $1.4 million, or $.02 per share, for the quarter.

Year-to-date net income totaled a record $96.1 million, compared to $81.1 million during the same period in 2016. Earnings per share for the year ended December 31, 2017 totaled $2.12 per share, an increase of $.14 per share, or 7.1 percent, over 2016. The enactment of the TCJA resulted in a reduction of annual profits by $5.1 million, or $.11 per share. Acquisition expenses related to The Arlington Bank and Independent Alliance Banks totaled $12.2 million, or $.18 per share. Our 2017 franchise expansion impacts balance sheet, income, expense and share growth throughout the financial statements.

Michael C. Rechin, President and Chief Executive Officer, stated, "2017 was a record setting year for First Merchants. Our results were fueled by the growth of our clients and the skill and commitment of our teammates. Annual organic loan growth of 12.8 percent, when combined with the acquisitions of Independent Alliance Banks in the Fort Wayne market and The Arlington Bank in the Columbus, Ohio MSA, allowed our total assets to increase by 30 percent for the year." Rechin also added, "Profitability enhancements in 2017 are further accelerated by significant tax savings in 2018. These improvements in our core business allowed First Merchants to achieve a record share price in 2017 and our business begins 2018 with optimism."

Total assets reached a record $9.4 billion as of year-end and loans totaled a record $6.8 billion, compared to $7.2 billion and $5.1 billion, as of December 31, 2016. Organic loan growth totaled an annualized rate of 16.7 percent for the fourth quarter and 12.8 percent for the year. Organic deposits grew at an annualized rate of 15.1 percent in the fourth quarter and 9 percent during the year. Inclusive of acquisition growth, total deposits reached $7.2 billion as of December 31, 2017, representing a 29.1 percent increase. Tangible common equity also increased to record levels for the year totaling $834 million, or $16.96 per share, compared to $649 million, or $15.85 per share, as of December 31, 2016.

Net-interest income totaled $78.8 million for the quarter and net-interest margin increased by 20 basis points over the fourth quarter of 2016, totaling 4.10 percent. Yields on earning assets totaled 4.67 percent and the cost of supporting liabilities totaled .57 percent. Fair value accretion added 20 basis points to net-interest margin this quarter compared to 18 basis points in the fourth quarter of 2016.

Non-interest income totaled $19.1 million for the quarter, up $3.0 million from the fourth quarter of 2016 total of $16.1 million. Non-interest expense totaled $56.4 million for the quarter, an increase from $41.9 million during the fourth quarter of 2016, reflecting the inclusion of $1.4 million of merger related expenses.

Tax expense for the quarter totaled $15.2 million, or 38.4 percent of income before income taxes, compared to $7.9 million, or 26.0 percent in the fourth quarter of 2016. The impact of the deferred tax asset write-downs in 2017 will be more than offset by the savings from the reduced tax rate to be realized in 2018.

The Corporation’s provision expense totaled $1.8 million compared to $2.4 million during the same period in 2016. The provision expense in the quarter provided allowance coverage for the organic loan growth. The allowance for loan losses now totals $75.0 million as of December 31, 2017, an increase from $66.0 million as of December 31, 2016. Non-accrual loans totaled $28.7 million as of year-end and the allowance is 1.11 percent of total loans and 1.36 percent of non-purchased loans.

As of December 31, 2017, the Corporation’s total risk-based capital ratio equaled 13.69 percent, common equity tier 1 capital ratio equaled 11.00 percent, and the tangible common equity ratio totaled 9.30 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 25, 2018.

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 25, 2018. To access a replay of the call, US participants should dial (Toll Free) 877-344-7529, or for International participants, dial +1 412-317-0088. The replay passcode is 10114961.

In order to view the web cast and presentation slides, please go to http://services.choruscall.com/links/frme180125.html during the time of the call. A replay of the web cast will be available until January 25, 2019.

Detailed financial results are reported on the attached pages.

About First Merchants Corporation

First Merchants Corporation is a financial holding company headquartered in Muncie, Indiana. The Corporation has one full-service bank charter, First Merchants Bank. The Bank also operates as Lafayette Bank & Trust and First Merchants Private Wealth Advisors (each as a division of First Merchants Bank).

First Merchants Corporation’s common stock is traded on the NASDAQ Global Select Market System under the symbol FRME. Quotations are carried in daily newspapers and can be found on the company’s Internet web page (http://www.firstmerchants.com )">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
                                                                        2017              2016
ASSETS
Cash and cash equivalents                                               $    154,905      $    127,927
Interest-bearing time deposits                                          35,027            24,459
Investment securities                                                   1,560,602         1,304,505
Loans held for sale                                                     7,216             2,929
Loans                                                                   6,751,199         5,139,645
Less: Allowance for loan losses                                         (75,032        )  (66,037        )
Net loans                                                               6,676,167         5,073,608
Premises and equipment                                                  95,852            94,432
Federal Home Loan Bank stock                                            23,825            17,964
Interest receivable                                                     37,130            26,194
Goodwill and other intangibles                                          476,503           258,866
Cash surrender value of life insurance                                  223,557           201,671
Other real estate owned                                                 10,373            8,966
Tax asset, deferred and receivable                                      23,983            39,384
Other assets                                                            42,338            30,706
TOTAL ASSETS                                                            $    9,367,478    $    7,211,611
LIABILITIES
Deposits:
Noninterest-bearing                                                     $    1,761,553    $    1,348,267
Interest-bearing                                                        5,410,977         4,208,231
Total Deposits                                                          7,172,530         5,556,498
Borrowings:
Federal funds purchased                                                 144,038           120,349
Securities sold under repurchase agreements                             136,623           146,480
Federal Home Loan Bank advances                                         414,377           298,923
Subordinated debentures and term loans                                  139,349           128,445
Total Borrowings                                                        834,387           694,197
Interest payable                                                        4,390             3,110
Other liabilities                                                       52,708            56,149
Total Liabilities                                                       8,064,015         6,309,954
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 and 50,000,000 shares
Issued and outstanding - 49,158,238 and 40,912,697 shares               6,145             5,114
Additional paid-in capital                                              834,870           509,018
Retained earnings                                                       465,231           400,981
Accumulated other comprehensive income (loss)                           (2,908         )  (13,581        )
Total Stockholders’ Equity                                              1,303,463         901,657
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY                              $    9,367,478    $    7,211,611

On May 1, 2017, the shareholders of First Merchants Corporation approved an amendment to the Articles of Incorporation to increase the number of shares of common stock authorized to issue from 50,000,000 to 100,000,000 shares.

CONSOLIDATED STATEMENTS OF INCOME                            Three Months Ended        Twelve Months Ended
(Dollars In Thousands, Except Per Share Amounts)             December 31,              December 31,
                                                             2017         2016         2017          2016
INTEREST INCOME
Loans receivable:
Taxable                                                      $   76,470   $   53,895   $   263,704   $   210,302
Tax-exempt                                                   3,018        2,096        10,694        6,525
Investment securities:
Taxable                                                      4,477        3,893        17,489        16,415
Tax-exempt                                                   5,830        4,862        21,379        18,622
Deposits with financial institutions                         294          67           736           350
Federal Reserve and Federal Home Loan Bank stock             259          192          894           1,098
Total Interest Income                                        90,348       65,005       314,896       253,312
INTEREST EXPENSE
Deposits                                                     7,835        3,886        23,806        15,914
Federal funds purchased                                      55           40           561           102
Securities sold under repurchase agreements                  146          91           477           374
Federal Home Loan Bank advances                              1,577        797          5,196         3,264
Subordinated debentures and term loans                       1,970        1,817        7,572         7,185
Total Interest Expense                                       11,583       6,631        37,612        26,839
NET INTEREST INCOME                                          78,765       58,374       277,284       226,473
Provision for loan losses                                    1,800        2,417        9,143         5,657
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES          76,965       55,957       268,141       220,816
OTHER INCOME
Service charges on deposit accounts                          5,066        4,534        18,722        17,762
Fiduciary activities                                         3,345        2,500        11,589        9,818
Other customer fees                                          5,346        4,784        20,956        19,315
Earnings on cash surrender value of life insurance           1,133        886          6,577         4,273
Net gains and fees on sales of loans                         2,355        1,886        7,564         7,052
Net realized gains on sales of available for sale securities 1,134        847          2,631         3,389
Other income                                                 682          683          2,970         3,594
Total Other Income                                           19,061       16,120       71,009        65,203
OTHER EXPENSES
Salaries and employee benefits                               33,760       22,994       119,812       102,552
Net occupancy                                                4,424        4,568        16,976        16,997
Equipment                                                    3,898        3,069        13,090        12,497
Marketing                                                    1,361        790          3,739         3,008
Outside data processing fees                                 3,378        2,672        12,242        9,148
Printing and office supplies                                 378          301          1,283         1,348
Intangible asset amortization                                2,055        977          5,647         3,910
FDIC assessments                                             711          550          2,564         3,036
Other real estate owned and foreclosure expenses             311          574          1,903         2,877
Professional and other outside services                      1,914        1,634        12,757        6,516
Other expenses                                               4,243        3,805        15,543        15,470
Total Other Expenses                                         56,433       41,934       205,556       177,359
INCOME BEFORE INCOME TAX                                     39,593       30,143       133,594       108,660
Income tax expense                                           15,210       7,850        37,524        27,609
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS                  $   24,383   $   22,293   $   96,070    $   81,051
Per Share Data:
Basic Net Income Available to Common Stockholders            $   0.49     $   0.55     $   2.13      $   1.99
Diluted Net Income Available to Common Stockholders          $   0.49     $   0.55     $   2.12      $   1.98
Cash Dividends Paid                                          $   0.18     $   0.15     $   0.69      $   0.54
Average Diluted Shares Outstanding (in thousands)            49,379       41,124       45,403        41,013
FINANCIAL HIGHLIGHTS
(Dollars in thousands)                             Three Months Ended                    Twelve Months Ended
                                                   December 31,                          December 31,
                                                   2017               2016               2017               2016
NET CHARGE-OFFS                                    $    122           $    (164      )   $    148           $    2,073
AVERAGE BALANCES:
Total Assets                                       $    9,174,237     $    7,086,456     $    8,196,229     $    6,899,265
Total Loans                                        6,575,055          5,008,066          5,881,284          4,814,005
Total Earning Assets                               8,139,993          6,367,973          7,335,702          6,180,050
Total Deposits                                     7,142,375          5,585,468          6,368,751          5,438,217
Total Stockholders’ Equity                         1,294,810          903,610            1,110,524          884,664
FINANCIAL RATIOS:
Return on Average Assets                           1.06           %   1.26           %   1.17           %   1.17           %
Return on Average Stockholders’ Equity             7.53               9.87               8.65               9.16
Return on Average Common Stockholders’ Equity      7.53               9.87               8.65               9.16
Average Earning Assets to Average Assets           88.73              89.86              89.50              89.58
Allowance for Loan Losses as % of Total Loans      1.11               1.28               1.11               1.28
Net Charge-offs as % of Average Loans (Annualized) 0.01               (0.01          )   --                 0.04
Average Stockholders’ Equity to Average Assets     14.11              12.75              13.55              12.82
Tax Equivalent Yield on Earning Assets             4.67               4.32               4.53               4.32
Cost of Supporting Liabilities                     0.57               0.42               0.51               0.43
Net Interest Margin (FTE) on Earning Assets        4.10               3.90               4.02               3.89
Efficiency Ratio                                   53.29              52.18              54.56              56.51
Tangible Common Book Value Per Share               $    16.96         $    15.85         $    16.96         $    15.85
NON-PERFORMING ASSETS
(Dollars In Thousands)                             December 31,      September 30,     June 30,       March 31,       December 31,
                                                   2017              2017              2017           2017            2016
Non-Accrual Loans                                  $    28,724       $    32,253       $   27,347     $   27,920      $    29,998
Renegotiated Loans                                 1,013             626               384            876             4,747
Non-Performing Loans (NPL)                         29,737            32,879            27,731         28,796          34,745
Other Real Estate Owned                            10,373            11,912            11,893         8,293           8,966
Non-Performing Assets (NPA)                        40,110            44,791            39,624         37,089          43,711
90+ Days Delinquent                                924               425               634            123             112
NPAs & 90 Day Delinquent                           $    41,034       $    45,216       $   40,258     $   37,212      $    43,823
Allowance for Loan Losses                          $    75,032       $    73,354       $   70,471     $   68,225      $    66,037
Quarterly Net Charge-offs                          122               (800        )     629            197             (164        )
NPAs / Actual Assets %                             0.43        %     0.49        %     0.51       %   0.51       %    0.61        %
NPAs & 90 Day / Actual Assets %                    0.44        %     0.50        %     0.52       %   0.51       %    0.61        %
NPAs / Actual Loans and OREO %                     0.59        %     0.69        %     0.70       %   0.70       %    0.85        %
Allowance for Loan Losses / Actual Loans (%)       1.11        %     1.13        %     1.25       %   1.29       %    1.28        %
Net Charge-offs as % of Average Loans (Annualized) 0.01        %     (0.05       )%    0.05       %   0.02       %    (0.01       )%
CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)                                                  December 31,         September 30,        June 30,           March 31,           December 31,
                                                                        2017                 2017                 2017               2017                2016
ASSETS
Cash and cash equivalents                                               $    154,905         $    146,607         $    142,650       $    104,247        $    127,927
Interest-bearing time deposits                                          35,027               72,950               48,305             20,439              24,459
Investment securities                                                   1,560,602            1,468,887            1,343,323          1,327,217           1,304,505
Loans held for sale                                                     7,216                4,514                4,036              1,262               2,929
Loans                                                                   6,751,199            6,483,448            5,613,144          5,274,909           5,139,645
Less: Allowance for loan losses                                         (75,032        )     (73,354        )     (70,471        )   (68,225        )    (66,037        )
Net loans                                                               6,676,167            6,410,094            5,542,673          5,206,684           5,073,608
Premises and equipment                                                  95,852               102,485              92,637             91,311              94,432
Federal Home Loan Bank stock                                            23,825               23,825               19,015             17,964              17,964
Interest receivable                                                     37,130               32,366               27,597             25,174              26,194
Goodwill and other intangibles                                          476,503              478,558              309,686            257,963             258,866
Cash surrender value of life insurance                                  223,557              222,437              200,125            202,574             201,671
Other real estate owned                                                 10,373               11,912               11,893             8,293               8,966
Tax asset, deferred and receivable                                      23,983               36,024               27,331             32,074              39,384
Other assets                                                            42,338               38,744               35,758             30,991              30,706
TOTAL ASSETS                                                            $    9,367,478       $    9,049,403       $    7,805,029     $    7,326,193      $    7,211,611
LIABILITIES
Deposits:
Noninterest-bearing                                                     $    1,761,553       $    1,662,814       $    1,398,237     $    1,373,778      $    1,348,267
Interest-bearing                                                        5,410,977            5,248,205            4,618,867          4,261,531           4,208,231
Total Deposits                                                          7,172,530            6,911,019            6,017,104          5,635,309           5,556,498
Borrowings:
Federal funds purchased                                                 144,038              100,000              134,608            102,000             120,349
Securities sold under repurchase agreements                             136,623              142,107              127,884            139,007             146,480
Federal Home Loan Bank advances                                         414,377              406,820              312,715            338,919             298,923
Subordinated debentures and term loans                                  139,349              139,686              128,742            128,862             128,445
Total Borrowings                                                        834,387              788,613              703,949            708,788             694,197
Interest payable                                                        4,390                4,956                3,477              3,875               3,110
Other liabilities                                                       52,708               61,695               45,383             48,751              56,149
Total Liabilities                                                       8,064,015            7,766,283            6,769,913          6,396,723           6,309,954
STOCKHOLDERS’ EQUITY
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 -- 100,000,000 and 50,000,000 shares
Issued and outstanding                                                  6,145                6,143                5,394              5,131               5,114
Additional paid-in capital                                              834,870              833,451              593,904            509,953             509,018
Retained earnings                                                       465,231              449,759              434,309            417,983             400,981
Accumulated other comprehensive income (loss)                           (2,908         )     (6,358         )     1,384              (3,722         )    (13,581        )
Total Stockholders’ Equity                                              1,303,463            1,283,120            1,035,116          929,470             901,657
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY                              $    9,367,478       $    9,049,403       $    7,805,029     $    7,326,193      $    7,211,611

On May 1, 2017, the shareholders of First Merchants Corporation approved an amendment to the Articles of Incorporation to increase the number of shares of common stock authorized to issue from 50,000,000 to 100,000,000 shares.

CONSOLIDATED STATEMENTS OF INCOME
(Dollars In Thousands, Except Per Share Amounts)             December 31,      September 30,     June 30,       March 31,       December 31,
                                                             2017              2017              2017           2017            2016
INTEREST INCOME
Loans receivable:
Taxable                                                      $    76,470       $    71,491       $   59,386     $   56,357      $    53,895
Tax-exempt                                                   3,018             2,851             2,492          2,333           2,096
Investment securities:
Taxable                                                      4,477             4,524             4,180          4,308           3,893
Tax-exempt                                                   5,830             5,455             5,091          5,003           4,862
Deposits with financial institutions                         294               284               114            44              67
Federal Reserve and Federal Home Loan Bank stock             259               242               204            189             192
Total Interest Income                                        90,348            84,847            71,467         68,234          65,005
INTEREST EXPENSE
Deposits                                                     7,835             6,710             5,137          4,124           3,886
Federal funds purchased                                      55                175               103            228             40
Securities sold under repurchase agreements                  146               133               110            88              91
Federal Home Loan Bank advances                              1,577             1,464             1,177          978             797
Subordinated debentures and term loans                       1,970             1,945             1,840          1,817           1,817
Total Interest Expense                                       11,583            10,427            8,367          7,235           6,631
NET INTEREST INCOME                                          78,765            74,420            63,100         60,999          58,374
Provision for loan losses                                    1,800             2,083             2,875          2,385           2,417
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES          76,965            72,337            60,225         58,614          55,957
OTHER INCOME
Service charges on deposit accounts                          5,066             5,044             4,438          4,174           4,534
Fiduciary activities                                         3,345             2,995             2,609          2,640           2,500
Other customer fees                                          5,346             5,341             5,406          4,863           4,784
Earnings on cash surrender value of life insurance           1,133             1,575             2,971          898             886
Net gains and fees on sales of loans                         2,355             2,317             1,617          1,275           1,886
Net realized gains on sales of available for sale securities 1,134             332               567            598             847
Other income                                                 682               1,064             826            398             683
Total Other Income                                           19,061            18,668            18,434         14,846          16,120
OTHER EXPENSES
Salaries and employee benefits                               33,760            33,244            27,076         25,732          22,994
Net occupancy                                                4,424             4,371             3,965          4,216           4,568
Equipment                                                    3,898             3,478             2,907          2,807           3,069
Marketing                                                    1,361             1,021             792            565             790
Outside data processing fees                                 3,378             3,162             3,086          2,616           2,672
Printing and office supplies                                 378               366               275            264             301
Intangible asset amortization                                2,055             1,698             991            903             977
FDIC assessments                                             711               704               579            570             550
Other real estate owned and foreclosure expenses             311               330               731            531             574
Professional and other outside services                      1,914             5,843             3,266          1,734           1,634
Other expenses                                               4,243             4,491             3,648          3,161           3,805
Total Other Expenses                                         56,433            58,708            47,316         43,099          41,934
INCOME BEFORE INCOME TAX                                     39,593            32,297            31,343         30,361          30,143
Income tax expense                                           15,210            7,939             7,207          7,168           7,850
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS                  $    24,383       $    24,358       $   24,136     $   23,193      $    22,293
Per Share Data:
Basic Net Income Available to Common Stockholders            $    0.49         $    0.50         $   0.57       $   0.57        $    0.55
Diluted Net Income Available to Common Stockholders          $    0.49         $    0.50         $   0.57       $   0.56        $    0.55
Cash Dividends Paid                                          $    0.18         $    0.18         $   0.18       $   0.15        $    0.15
Average Diluted Shares Outstanding (in thousands)            49,379            48,644            42,244         41,221          41,124
FINANCIAL RATIOS:
Return on Average Assets                                     1.06        %     1.11        %     1.28       %   1.29       %    1.26        %
Return on Average Stockholders’ Equity                       7.53              7.83              9.82           10.15           9.87
Return on Average Common Stockholders’ Equity                7.53              7.83              9.82           10.15           9.87
Average Earning Assets to Average Assets                     88.73             89.16             89.97          90.43           89.86
Allowance for Loan Losses as % of Total Loans                1.11              1.13              1.25           1.29            1.28
Net Charge-offs as % of Average Loans (Annualized)           0.01              (0.05       )     0.05           0.02            (0.01       )
Average Stockholders’ Equity to Average Assets               14.11             14.15             12.98          12.67           12.75
Tax Equivalent Yield on Earning Assets                       4.67              4.56              4.44           4.42            4.32
Cost of Supporting Liabilities                               0.57              0.53              0.49           0.44            0.42
Net Interest Margin (FTE) on Earning Assets                  4.10              4.03              3.95           3.98            3.90
Efficiency Ratio                                             53.29             58.30             53.61          52.61           52.18
Tangible Common Book Value Per Share                         $    16.96        $    16.62        $   16.97      $   16.49       $    15.85
LOANS
(Dollars In Thousands)                                           December 31,         September 30,        June 30,           March 31,           December 31,
                                                                 2017                 2017                 2017               2017                2016
Commercial and industrial loans                                  $    1,493,493       $    1,436,092       $    1,289,884     $    1,258,840      $    1,194,646
Agricultural production financing and other loans to farmers     121,757              117,751              75,746             77,021              79,689
Real estate loans:
Construction                                                     612,219              498,862              442,389            336,931             418,703
Commercial and farmland                                          2,562,691            2,571,253            2,167,729          2,118,431           1,953,062
Residential                                                      962,765              938,437              847,580            737,918             739,169
Home equity                                                      514,021              502,240              436,038            423,708             418,525
Individuals’ loans for household and other personal expenditures 86,935               86,406               79,887             77,590              77,479
Lease financing receivables, net of unearned income              2,527                3,877                232                261                 311
Other commercial loans                                           394,791              328,530              273,659            244,209             258,061
Loans                                                            6,751,199            6,483,448            5,613,144          5,274,909           5,139,645
Allowance for loan losses                                        (75,032        )     (73,354        )     (70,471        )   (68,225        )    (66,037        )
NET LOANS                                                        $    6,676,167       $    6,410,094       $    5,542,673     $    5,206,684      $    5,073,608
DEPOSITS
(Dollars In Thousands)                                   December 31,     September 30,    June 30,         March 31,        December 31,
                                                         2017             2017             2017             2017             2016
Demand deposits                                          $    3,746,654   $    3,562,718   $    3,015,846   $    2,861,384   $    2,866,853
Savings deposits                                         1,994,366        1,884,705        1,708,478        1,565,174        1,560,752
Certificates and other time deposits of $100,000 or more 468,895          503,668          362,589          312,327          276,274
Other certificates and time deposits                     581,894          585,042          511,935          476,741          471,247
Brokered deposits                                        380,721          374,886          418,256          419,683          381,372
TOTAL DEPOSITS                                           $    7,172,530   $    6,911,019   $    6,017,104   $    5,635,309   $    5,556,498
NET INTEREST INCOME
(Dollars in Thousands)                               For the Three Months Ended
                                                     December 31, 2017                                                   December 31, 2016
                                                     Average Balance            Interest                  Average        Average Balance            Interest                  Average
                                                                                Income /                  Rate                                      Income /                  Rate
                                                                                Expense                                                             Expense
Assets:
Interest-bearing time deposits                       $           87,172         $           294           1.35        %  $           49,835         $           66            0.53        %
Federal Reserve and Federal Home Loan Bank stock     23,825                     259                       4.35           18,041                     193                       4.28
Investment Securities:
Taxable                                              755,341                    4,477                     2.37           710,902                    3,893                     2.19
Tax-Exempt                                           698,600                    8,969                     5.14           581,129                    7,480                     5.15
Total Investment Securities                          1,453,941                  13,446                    3.70           1,292,031                  11,373                    3.52
Loans held for sale                                  13,657                     216                       6.33           1,611                      81                        20.11
Loans:
Commercial                                           4,806,978                  60,015                    4.99           3,655,414                  41,830                    4.58
Real Estate Mortgage                                 737,668                    8,320                     4.51           557,259                    6,125                     4.40
Installment                                          617,591                    7,919                     5.13           519,257                    5,859                     4.51
Tax-Exempt                                           399,161                    4,643                     4.65           274,525                    3,225                     4.70
Total Loans                                          6,575,055                  81,113                    4.93           5,008,066                  57,120                    4.56
Total Earning Assets                                 8,139,993                  95,112                    4.67           6,367,973                  68,752                    4.32
Net unrealized gain on securities available for sale 4,131                                                               7,221
Allowance for loan losses                            (73,675                 )                                           (63,999                 )
Cash and cash equivalents                            182,970                                                             113,414
Premises and equipment                               102,605                                                             95,245
Other assets                                         818,213                                                             566,602
Total Assets                                         $           9,174,237                                               $           7,086,456
Liabilities:
Interest-bearing deposits:
Interest-bearing NOW deposits                        $           1,970,916      $           2,185         0.44        %  $           1,524,324      $           730           0.19        %
Money market deposits                                1,071,037                  1,101                     0.41           795,045                    328                       0.17
Savings deposits                                     922,052                    214                       0.09           766,232                    164                       0.09
Certificates and other time deposits                 1,458,365                  4,335                     1.19           1,132,962                  2,664                     0.94
Total Interest-bearing Deposits                      5,422,370                  7,835                     0.58           4,218,563                  3,886                     0.37
Borrowings                                           678,242                    3,748                     2.21           531,059                    2,745                     2.07
Total Interest-bearing Liabilities                   6,100,612                  11,583                    0.76           4,749,622                  6,631                     0.56
Noninterest-bearing deposits                         1,720,005                                                           1,366,905
Other liabilities                                    58,810                                                              66,319
Total Liabilities                                    7,879,427                                                           6,182,846
Stockholders’ Equity                                 1,294,810                                                           903,610
Total Liabilities and Stockholders’ Equity           $           9,174,237      11,583                    0.57           $           7,086,456      6,631                     0.42
Net Interest Income                                                             $           83,529                                                  $           62,121
Net Interest Margin                                                                                       4.10        %                                                       3.90        %
Average balance of securities is computed based on the average of the historical amortized cost balances without the effects of the fair value adjustments.
Tax-exempt securities and loans are presented on a fully taxable equivalent basis, using a marginal tax rate of 35 percent for 2017 and 2016.  These totals equal $4,764 and $3,747 for the three months ended December 31, 2017 and 2016, respectively.
Non accruing loans have been included in the average balances.
NET INTEREST INCOME
(Dollars in Thousands)                               For the Twelve Months Ended
                                                     December 31, 2017                                                   December 31, 2016
                                                     Average Balance            Interest                  Average        Average Balance            Interest                  Average
                                                                                Income /                  Rate                                      Income /                  Rate
                                                                                Expense                                                             Expense
Assets:
Interest-bearing time deposits                       $           75,417         $           736           0.98        %  $           69,753         $           350           0.50        %
Federal Reserve and Federal Home Loan Bank stock     20,921                     894                       4.27           24,268                     1,098                     4.52
Investment Securities:
Taxable                                              726,004                    17,489                    2.41           721,689                    16,415                    2.27
Tax-Exempt                                           632,076                    32,891                    5.20           550,335                    28,649                    5.21
Total Investment Securities                          1,358,080                  50,380                    3.71           1,272,024                  45,064                    3.54
Loans held for sale                                  7,707                      462                       5.99           4,050                      372                       9.19
Loans:
Commercial                                           4,267,651                  204,771                   4.80           3,541,098                  162,848                   4.60
Real Estate Mortgage                                 679,284                    30,267                    4.46           566,050                    25,156                    4.44
Installment                                          573,100                    28,204                    4.92           485,111                    21,926                    4.52
Tax-Exempt                                           353,542                    16,452                    4.65           217,696                    10,039                    4.61
Total Loans                                          5,881,284                  280,156                   4.76           4,814,005                  220,341                   4.58
Total Earning Assets                                 7,335,702                  332,166                   4.53        %  6,180,050                  266,853                   4.32        %
Net unrealized gain on securities available for sale 4,360                                                               9,969
Allowance for loan losses                            (70,380                 )                                           (62,976                 )
Cash and cash equivalents                            142,503                                                             105,443
Premises and equipment                               97,446                                                              96,023
Other assets                                         686,598                                                             570,756
Total Assets                                         $           8,196,229                                               $           6,899,265
Liabilities:
Interest-bearing deposits:
Interest-bearing NOW deposits                        $           1,730,272      $           5,817         0.34        %  $           1,427,535      $           2,579         0.18        %
Money market deposits                                938,959                    2,788                     0.30           825,681                    1,705                     0.21
Savings deposits                                     844,825                    734                       0.09           731,902                    618                       0.08
Certificates and other time deposits                 1,339,866                  14,467                    1.08           1,151,700                  11,012                    0.96
Total Interest-bearing Deposits                      4,853,922                  23,806                    0.49           4,136,818                  15,914                    0.38
Borrowings                                           664,045                    13,806                    2.08           512,356                    10,925                    2.13
Total Interest-bearing Liabilities                   5,517,967                  37,612                    0.68           4,649,174                  26,839                    0.58
Noninterest-bearing deposits                         1,514,829                                                           1,301,399
Other liabilities                                    52,909                                                              64,028
Total Liabilities                                    7,085,705                                                           6,014,601
Stockholders’ Equity                                 1,110,524                                                           884,664
Total Liabilities and Stockholders’ Equity           $           8,196,229      37,612                    0.51           $           6,899,265      26,839                    0.43
Net Interest Income                                                             $           294,554                                                 $           240,014
Net Interest Margin                                                                                       4.02        %                                                       3.89        %
Average balance of securities is computed based on the average of the historical amortized cost balances without the effects of the fair value adjustments.
Tax-exempt securities and loans are presented on a fully taxable equivalent basis, using a marginal tax rate of 35 percent for 2017 and 2016.  These totals equal $17,270 and $13,541 for the years ended December 31, 2017 and 2016, respectively.
Non accruing loans have been included in the average balances.

For more information, contact:

Nicole M. Weaver, Director of Corporate Administration and Vice President

765-521-7619

http://www.firstmerchants.com

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