UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported): February 1, 2010
Commission File Number 0-17071
FIRST MERCHANTS CORPORATION
(Exact name of registrant as specified in its charter)
INDIANA 35-1544218
(State or other jurisdiction of incorporation) (IRS Employer Identification No.)
200 East Jackson Street
P.O. Box 792
Muncie, IN 47305-2814
(Address of principal executive offices, including zip code)
(765) 747-1500
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On February 1, 2010, First Merchants Corporation will conduct a third quarter earnings conference call and web cast on Monday, February 1, 2010 at 2:30 p.m. (ET). A copy of the slide presentation utilized on the conference call is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
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(a) |
Not applicable. |
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(b) |
Not applicable. |
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(c) |
Exhibits. |
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Exhibit 99.1 |
Slide presentation, utilized February 1, 2010, during conference call and web cast by First Merchants Corporation |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
First Merchants Corporation
(Registrant)
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By: /s/ Mark K. Hardwick |
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Mark K. Hardwick |
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Executive Vice President and Chief Financial Officer |
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(Principal Financial and Principal Accounting Officer) |
Dated: February 1, 2010
EXHIBIT INDEX
Exhibit No.
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99.1 |
Description |
Slide presentation, utilized February 1, 2010, during conference call and web cast by First Merchants Corporation
First Merchants Corporation
Exhibit No. 99.1
Presentation Slides, utilized February 1, 2010
Forward-Looking Statement
The Corporation may make forward-looking statements about its
relative business outlook. These forward-looking statements and all other
statements made during this meeting 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.
Please refer to our press releases, Form 10-Qs and 10-Ks concerning factors
that could cause actual results to differ materially from any forward-looking
statements.
Loss of $.55 per diluted share for the quarter ended
December 31, 2009, reflects continued efforts to build loan
loss reserve, maximize net interest margin, and preserve
capital.
Growth in core deposit level produces growing liquidity and
reduced wholesale funding use.
Improvement in the risk profile of the loan portfolio across the
continuum of credit measures from delinquency to non-
performing status.
Active balance sheet management maintains regulatory ratios
soundly in excess of “well capitalized”
thresholds.
Key Points for 4th Quarter
Pre-tax pre-provision run rate captures early benefit
of Lincoln Bancorp acquisition.
Charter combination accelerates adoption of
common processes and policies to identify
efficiencies.
Credit profile in loan portfolio and investment
portfolio improves at year-end.
Reduced common dividend to preserve capital.
Key Points for Full Year 2009
TOTAL ASSETS
($ in Millions)
2007
2008
2009
1.
Investments
$
451
$
482
$
563
2.
Loans
2,877
3,722
3,278
3.
Allowance
(28)
(50)
(92)
4.
CD&I & Goodwill
136
166
159
5.
BOLI
71
93
95
6.
Other
275
371
478
7.
Total Assets
$3,782
$4,784
$4,481
INVESTMENT PORTFOLIO
(as of 12/31/09)
$563 Million Balance
Average duration - 4.5 years
Tax equivalent yield of 4.86%
No private label MBS exposure
Trust Preferred Pools with book balance of
$7.0 million and a market value of $2.4
million
Net unrealized gain of the entire portfolio
totals $8.4 million
TOTAL LIABILITIES AND CAPITAL
($ in Millions)
2007
2008
2009
1.
Customer Deposits*
$2,605
$3,242
$3,262
2.
Brokered Deposits
239
477
275
3.
Bank-Level Borrowings
483
507
339
4.
Other Liabilities
29
51
30
5.
Hybrid Capital
86
111
111
6.
Preferred Stock (CPP)
0
0
112
7.
Common Equity
340
396
352
8.
Total Liabilities and Cap
$3,782
$4,784
$4,481
* Total deposits less brokered deposits
CAPITAL RATIOS
2007
2008
2009
1.
Total Risk-Based
Capital Ratio
10.55%
10.24%
13.04%
2.
Tier 1 Risk-Based
Capital Ratio
8.75%
7.71%
10.32%
3.
Leverage Ratio
7.19%
8.16%
8.20%
4.
TCE/TCA
5.72%
5.01%
4.54%
NON-INTEREST INCOME
($ in Millions)
2007
2008
2009
1.
Service Charges on Deposit
Accounts
$12.4
$13.0
$15.1
2.
Trust Fees
8.4
8.0
7.4
3.
Insurance Comm. Income
5.1
5.8
6.4
4.
Cash Surrender Value of Life Ins.
3.7
(0.3)
1.6
5.
Gains on Sales Mortgage Loans
2.4
2.5
6.8
6.
Securities Gains/Losses
0
(2.1)
4.4
7.
Other
8.6
9.5
9.5
8.
Total
$40.6
$36.4
$51.2
NON-INTEREST EXPENSE
($ in Millions)
2007
2008
2009
1.
Salary & Benefits
$58.8
$63.0
$76.3
2.
Premises & Equipment
13.4
14.4
17.9
3.
Core Deposit Intangible
3.2
3.2
5.1
4.
Professional Services
2.0
2.6
4.4
5.
OREO Expense
1.0
2.8
9.8
6.
FDIC Expense
1.5
1.7
10.4
7.
FHLB Prepayment Penalties
0
0
1.9
8.
Outside Data Processing
3.8
4.1
6.2
9.
Marketing
2.2
2.3
2.1
10.
Other
16.3
14.7
17.5
Total
$102.2
$108.8
$151.6
EARNINGS
($ in Millions)
2007
2008
2009
1.
Net Interest Income-FTE
$117.2
$133.1
$159.1
2.
Non Interest Income1
40.6
38.5
46.5
3.
Non Interest Expense2
101.2
106.0
134.7
4.
Pre-Tax Pre-Provision Earnings
$ 56.6
$ 65.6
$ 70.9
5.
Provision
8.5
28.2
122.2
6.
Adjustments
1.1
5.0
12.1
7.
Taxes - FTE
15.4
11.8
(22.7)
8.
CPP Dividend
0
0
5.0
9.
Net Income Avail. for Distribution
$31.6
$20.6
($45.7)
10.
EPS
$1.73
$1.14
($2.17)
1Adjusted for Bond Gains & Losses and one-time mortgage sale
2Adjusted for the FDIC Special Assessment, FHLB Prepayment Penalties & OREO
Expense & Credit-Related Professional Services
PORTFOLIO OVERVIEW
4th Quarter Highlights
The quarter exhibited positive trends in multiple asset quality measurements*.
30+ days delinquent loans declined from $59.5 to $40.5 million, the lowest
in the last 6 quarters.
90+ days delinquent loans declined from $5.4 to $4 million.
Non-accrual loans declined from $123.3 to $118.4 million.
Other real estate owned declined from $21.8 to $14.9 million.
Non-performing assets declined from $150.7 to $142 million.
The allowance for loan loss increased to 78% of non-accrual loans.
* Linked quarters
CHARGE-OFF OVERVIEW
4th Quarter Charge-Off Analysis
The 10 largest charge-offs totaled $12.5 million and comprised 60% of 4th
quarter net charge-offs.
4th quarter net charge-offs totaled $20.8 million and provision expense
totaled $26 million.
The largest charge-off is related to a troubled debt restructure of a fuel
distributor.
Other real estate owned write-down was $2.7 million.
($000)
Commercial &
Industrial
Commercial
Mortgage
Land and Lot
# of Loan
1
4
5
($000)
$5,164
$3,352
$3,975
YTD CHARGE-OFF COMPOSITION AS OF 12/31/09
($000)
Commercial &
Industrial
Commercial
Mortgage
Land and
Lot
Agriculture
Total Commercial
Residential
Mortgage
Home
Equity
Other
Consumer
Total
Consumer
Total
Consumer and
Commercial
Loan Balances
$682,996
$1,129,921
$158,725
$267,274
$2,238,916
$629,478
$220,142
$189,289
$1,038,909
$3,277,825
% of total
20.84%
34.47%
4.84%
8.15%
68.30%
19.20%
6.72%
5.77%
31.70%
Net Charge-offs Q4
$5,701
$5,315
$5,087
$894
$16,997
$2,300
$429
$1,081
$3,810
$20,807
Net Charge-offs YTD
$36,432
$18,165
$14,329
$1,287
$70,213
$6,180
$1,610
$3,625
$11,415
$81,628
Net Charge-off ratio
5.33%
1.61%
9.03%
0.48%
3.14%
0.98%
0.73%
1.92%
1.10%
2.49%
NON-ACCRUAL LOAN COMPOSITION AS OF 12/31/09
($000)
Commercial &
Industrial
Commercial
Mortgage
Land and
Lot
Agriculture
Total Commercial
Residential
Mortgage
Home
Equity
Other
Consumer
Total
Consumer
Total
Consumer and
Commercial
Loan Balances
$682,996
$1,129,921
$158,725
$267,274
$2,238,916
$629,478
$220,142
$189,289
$1,038,909
$3,277,825
% of total
20.84%
34.47%
4.84%
8.15%
68.30%
19.20%
6.72%
5.77%
31.70%
NPAs (including 90+ DPD)
$41,337
$47,284
$28,023
$5,512
$122,155
$21,505
$1,899
$528
$23,932
$146,087
NPA Ratio
6.05%
4.18%
17.66%
2.06%
5.46%
3.42%
0.86%
0.28%
2.30%
4.46%
TOP NEW NON-ACCRUAL LOANS
Balance
Type
Industry
21,032
CL
Tool & die - automotive industry
6,788
CL
Commercial investment real estate
1,350
CL
Campground
1,183
CL
Car dealer
1,075
CL
Residential rentals
826
CL
Trailer and towable manufacturer
724
CL
Residential real estate development
661
CL
Motorcycle sales and service
33,640
OTHER REAL ESTATE OWNED COMPOSITION
AS OF 12/31/09
($000)
Commercial
Mortgage
Land and
Construction
1-4 Family
Total
Book Balance
$6,063
$6,899
$1,916
$14,879
% of ORE
41%
46%
13%
100%
($000)
$156,086
$40,234
($18,059)
($5,755)
($21,301)
($4,881)
$2,517
($6,749)
($2,668)
($6,900)
($1,455)
$3,238
($9,998)
$146,088
Beginning NPAs & 90+ Days Past Due (9/30/2009)
Non-accrual
Add: New NPL*s (From Call report)
Less: To Accrual/Pay-off
Less: Restructure/OREO
Less: Charge-offs
in Non-accrual loans
Other Real Estate Owned (ORE)
Add: New ORE Properties
Less: ORE Sold
Less: ORE write-downs
in ORE
90 days past due
Restructured/Renegotiated Loans
Total NPA Change
Ending NPAs & 90+ Days Past Due (12/31/2009)
NON-PERFORMING ASSETS RECONCILIATION
“Protect and Strengthen”
Strategic and Tactical Direction for 2010
Continue to improve asset quality
Establish a trend in lower credit costs
Reduction in need to build loan loss reserve
Execute on common growth objectives
Improve capital levels for credit adequacy and growth
opportunities.
“Protect and Strengthen”
Strategic and Tactical Direction for 2010
Drive Revenue with simpler, faster structure
Deploy liquidity in growth markets
Greater investment in brand building
Reduced provision with pre-tax pre-provision
foundation provides a return to profitability
Contact Information
First Merchants Corporation common stock is
traded on the NASDAQ Global Select Market
under the symbol FRME.
Additional information can be found at
www.firstmerchants.com
Investor inquiries:
Mark K. Hardwick
Executive Vice President-Chief Financial
Officer
Telephone: 765.751.1857
mhardwick@firstmerchants.com