First Merchants Corporation Announces Third Quarter Earnings Per Share

Business Wire, Oct 18, 2007

MUNCIE, Ind. -- First Merchants Corporation (NASDAQ:FRME) has reported third quarter 2007 earnings per share of $.46, a 9.5 percent increase over $.42 earned in the third quarter of 2006. Net income for the quarter totaled $8,350,000 for the quarter compared to $7,739,000 in 2006.

Year-to-date earnings per share totaled $1.22 for the nine months ended September 30, 2007 equaling the same total for 2006. Included in the year-to-date results are two strategic non-recurring expenses as detailed in our second quarter earnings release totaling $.08 per share.

Third quarter net interest margin totaled 3.52 percent, a decrease of 14 basis points from 2006. Total assets equaled $3.75 billion at quarter-end, an increase of $282 million, or 8.1 percent, over September 30, 2006. Loans and investments, the Corporation's primary earning assets, totaled $3.35 billion, an increase of $235 million, or 7.5 percent, over the same period last year.

Year-to-date net interest margin totaled 3.51 percent, a 27 basis point decline from the prior year total of 3.78 percent. The decline is significant, however, the Corporation's net interest margin has stabilized in a range of 3.50 percent to 3.54 percent over the last four quarters.

Third quarter non-interest income increased by $2,013,000, or 22.8 percent throughout a variety of categories. All line items produced increases ranging from a low of 6.1 percent to a high of 51.9 percent. Other income also increased by $585,000 resulting from the sale of two real estate properties.

Year-to-date non-interest income has improved by $4,575,000, or 17.7 percent through September as service charges on deposits increased by $963,000, earnings on cash surrender value of bank-owned life insurance increased by $891,000, other customer fees increased by $663,000, insurance commission increased by $661,000 and fiduciary activities increased by $515,000.

Operating expenses increased by $1 million or 4.4 percent during the third quarter while year-to-date operating expense, absent the $1.8 million in charges related to the Corporations debt refinance and expenses related to operational conversions of $771,000, increased by $2.8 million, or 3.8 percent.

The provision for loan losses, in the third quarter, increased by $1.3 million to cover net charge off's and to ensure the adequacy of the Corporation's allowance for loan losses. Year-to-date provisions increased by $1 million based on the Corporation's continued evaluation of the adequacy of the loan losses. Non-performing loans totaled 1.25 percent of average total loans, down from the June 30, 2007 level of 1.39 percent and the allowance for loan losses, as a percent of total loans equaled .96 percent.

Michael C. Rechin, President and Chief Executive Officer, stated that, "The tactical execution of our 2007 plan continues to proceed as expected. Continued growth in loans and fee income combined with the refinance of our trust preferred securities, charter consolidation and tax management strategies have proven to accelerate our performance into the second half of 2007." Rechin also added, "Our management team is encouraged to have produced improved results in a difficult operating environment. We are mindful of the credit climate facing our customers and intend to balance our growth initiatives with asset quality improvement. With several organizational efforts behind us, in terms of charter consolidations and re-branding, our focus is on meeting our customers' needs and providing great service."

CONFERENCE CALL

First Merchants Corporation will conduct a conference call at 2:30 p.m. Eastern Daylight Time on Thursday, October 18, 2007. To participate, dial (Toll Free) 877-407-9210 and reference First Merchants Corporation's third quarter earnings. A replay will be available until October 25, 2007. To access replay, US/Canada participants should dial (Toll Free) 877-660-6853 or for International participants, dial 201-612-7415. The replay will require the Account # 286 and Conference ID # 257964.

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

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

Detailed financial results are reported on the attached pages:

First Merchants Corporation is a financial holding company headquartered in Muncie, Indiana. Subsidiaries of the Corporation include First Merchants Bank, N.A., First Merchants Bank of Central Indiana, N.A., Lafayette Bank & Trust Company, N.A., Commerce National Bank and First Merchants Trust Company, N.A. The Corporation also operates First Merchants Insurance Services, a full-service property casualty, personal lines, and healthcare insurance agency and is a majority member of Indiana Title Insurance Company, LLC, a title insurance agency.