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): January 27, 2006
------------------------------
FIRST MERCHANTS CORPORATION
(Exact name of registrant as specified in its charter)
-------------------------------
INDIANA 0-17071 35-1544218
(State or other jurisdiction (Commission file number) (IRS Employer
of incorporation) 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:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Page 1 of 12
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On January 27, 2006, First Merchants Corporation issued a press
release to report its financial results for the fourth quarter ended December
31, 2005 and year to date results for the period ending December 31, 2005. A
copy of the press release is furnished as Exhibit 99.1 to this Current Report on
Form 8-K.
The information in this Current Report on Form 8-K, including Exhibit
No. 99.1 hereto, shall not be deemed "filed" for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, or otherwise subject to liability
of that section. The information in this Current Report shall not be
incorporated by reference into any filing or other document pursuant to the
Securities Act of 1933, as amended, except as shall be expressly set forth by
specific reference in such filing or document.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits.
Exhibit 99.1 Press Release, dated January 27, 2006, issued by
First Merchants Corporation
Page 2 of 12
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)
By: /s/ Mark K. Hardwick
--------------------------------------------
Mark K. Hardwick
Senior Vice President and
Chief Financial Officer
(Principal Financial and Chief
Accounting Officer)
Dated: January 27, 2006
Page 3 of 12
EXHIBIT INDEX
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Exhibit No.
-----------
99.1 Description
-----------
Press Release, dated January 27, 2006, issued by
First Merchants Corporation.
Page 4 of 12
First Merchants Corporation
Exhibit No. 99.1
Press Release, dated January 27, 2006
N / E / W / S R / E / L / E / A / S / E
January 27, 2006
FOR IMMEDIATE RELEASE
For more information, contact:
Mark K. Hardwick, Executive Vice President/Chief Financial Officer, 765-751-1857
http://firstmerchants.com
SOURCE: First Merchants Corporation, Muncie, Indiana
FIRST MERCHANTS CORPORATION ANNOUNCES INCREASE IN 2005 EARNINGS PER SHARE
First Merchants Corporation (NASDAQ - FRME) has reported fourth-quarter diluted
earnings per share of $.41, a 2.5 percent increase over $.40 recorded in the
fourth quarter of 2004. Net income during the quarter totaled $8.2 million
compared to $7.7 million in 2004.
Full-year 2005 diluted earnings per share totaled $1.63, a 3.2 percent increase
over $1.58 recorded in 2004. Net income totaled
$30.2 million compared to $29.4 million in 2004.
2005 net-interest income improved by $5.7 million, or 5.4 percent, as
net-interest margin improved to 3.97 percent, a 9-basis point increase over
2004. Core non-interest income also increased by $1,353,000, or 4.1 percent,
after discounting nonrecurring gains from the sale of securities of $1.2 million
taken in 2004.
The allowance for loan losses improved to 1.02 percent of total loans on
December 31, 2005, a 9-basis point improvement over 2004. The improvement in the
allowance is reflective of increased provisions of $2.6 million during 2005.
Additionally, non-performing assets declined from 79-basis points in 2004 to 69
basis points in 2005, a $2 million dollar improvement.
Operating expenses increased by $2.3 million, or 2.5 percent in 2005. However,
as reported in the Corporation's 8-K filing of February 16, 2005, a $1.6 million
charge related to the curtailment of the Corporation's defined benefit pension
plan is included in the increase. Absent the curtailment charge, operating
expenses increased by just .7 percent.
Total assets equaled $3.2 billion at year-end, an increase of $45 million, or
1.4 percent from December 31, 2004. Loans, investments and bank-owned life
insurance, the Corporation's three primary earning assets, totaled $2.9 billion,
an increase of $44 million over the prior year.
Michael L. Cox, President and Chief Executive Officer, stated that, "Given the
many extraordinary events of the year, including our voluntary increase in the
allowance for loan losses, the absence of non-recurring gains from the sale of
securities and the pension curtailment expense, 2005 represents a good
improvement in the overall run rate and financial condition of the Corporation.
First Merchants' earnings have now increased in 29 of the past 30 years."
CONFERENCE CALL
First Merchants Corporation will conduct a conference call at 2:30 p.m. (ET)
today, Friday, January 27, 2006. To participate dial (Toll Free) 877-407-9210
and reference First Merchants Corporation's fourth quarter earnings release. A
replay will be available until February 3, 2006. To access, 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 # 186821.
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,
Madison Community Bank, United Communities National Bank, First National Bank,
Decatur Bank & Trust Company, Frances Slocum Bank, Lafayette Bank & Trust
Company, Commerce National Bank and Merchants Trust Company. The Corporation
also operates First Merchants Insurance Services, a full-service property
casualty, personal lines, and healthcare insurance agency, headquartered in
Muncie, Indiana, and is a majority member of Indiana Title Insurance Company,
LLC, a title insurance agency.
First Merchants Corporation's common stock is traded over-the-counter on the
NASDAQ National 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).
* * * *
CONSOLIDATED BALANCE SHEETS
(in thousands) December 31,
2005 2004
Assets
Cash and due from banks $ 70,417 $ 69,960
Interest-bearing time deposits 8,748 9,343
Investment securities 434,266 421,535
Mortgage loans held for sale 4,910 3,367
Loans 2,457,427 2,428,051
Less: Allowance for loan losses (25,188) (22,548)
---------- ----------
Net Loans 2,432,239 2,405,503
Premises and equipment 39,417 38,254
Federal Reserve and Federal Home Loan Bank stock 23,200 22,858
Interest receivable 19,690 17,318
Core deposit intangibles and goodwill 138,833 141,284
Cash surrender value of life insurance 43,579 42,061
Other assets 21,780 20,185
----------- -----------
Total assets $ 3,237,079 $ 3,191,668
=========== ===========
Liabilities
Deposits
Noninterest-bearing $ 314,335 $ 330,685
Interest-bearing 2,068,241 2,077,465
----------- -----------
Total deposits 2,382,576 2,408,150
Borrowings 508,236 440,891
Interest payable 5,874 4,411
Other liabilities 26,997 23,613
----------- -----------
Total liabilities 2,923,683 2,877,065
Stockholders' equity
Preferred stock, no-par value
Authorized and unissued -- 500,000 shares
Common stock, $.125 stated value
Authorized -- 50,000,000 shares
Issued and outstanding - 18,416,714 and 18,573,997 2,302 2,322
Additional paid-in capital 145,682 150,862
Retained earnings 174,717 161,459
Accumulated other comprehensive loss (9,305) (40)
----------- -----------
Total stockholders' equity 313,396 314,603
----------- -----------
Total liabilities and stockholders' equity $ 3,237,079 $ 3,191,668
=========== ===========
FINANCIAL HIGHLIGHTS
Three Months Ended Year Ended
(In thousands) December 31, December 31,
2005 2004 2005 2004
NET CHARGE OFF'S $ 1,906 $ 3,929 $ 5,714 $ 8,650
AVERAGE BALANCES
Total Assets $3,160,619 $3,184,109 $3,179,464 $3,109,104
Total Loans 2,447,794 2,409,170 2,434,134 2,369,017
Total Deposits 2,414,251 2,444,563 2,418,752 2,365,306
Total Stockholders' Equity 317,510 315,869 315,525 310,004
FINANCIAL RATIOS
Return on Average Assets .95% .94% .95% .95%
Return on Avg. Stockholders' Equity 9.49 9.46 9.58 9.49
Avg. Earning Assets to Avg. Assets 91.47 91.38 90.93 90.28
Allowance for Loan Losses as %
Of Total Loans 1.02 .93 1.02 .93
Net Charge Off's as % Of Avg. Loans
(Annualized) .31 .65 .23 .37
Dividend Payout Ratio 56.10 57.50 56.44 58.23
Avg. Stockholders' Equity to Avg. Assets 10.05 9.92 9.92 9.97
Tax Equivalent Yield on Earning Assets 6.62 5.74 6.26 5.72
Cost of Supporting Liabilities 2.59 1.89 2.29 1.84
Net Int. Margin (FTE) on Earning Assets 4.03 3.85 3.97 3.88
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share data) Three Months Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
Interest income
Loans receivable
Taxable $ 41,930 $ 36,363 $ 158,436 $ 139,953
Tax exempt 160 138 643 581
Investment securities
Taxable 2,480 2,224 9,612 8,371
Tax exempt 1,672 1,569 6,374 6,098
Federal funds sold 74 92 264 165
Deposits with financial institutions 202 167 695 555
Federal Reserve and Federal Home Loan Bank stock 296 297 1,185 1,251
-------- -------- -------- --------
Total interest income 46,814 40,850 177,209 156,974
-------- -------- -------- --------
Interest expense
Deposits 13,414 9,288 46,121 33,844
Securities sold under repurchase agreements 647 183 1,612 517
Federal Home Loan Bank advances 2,410 2,418 9,777 9,777
Subordinated debentures, revolving
credit lines and term loans 1,910 1,717 7,432 6,784
Other borrowings 307 126 1,138 663
-------- -------- -------- --------
Total interest expense 18,688 13,732 66,080 51,585
-------- -------- -------- --------
Net interest income 28,126 27,118 111,129 105,389
Provision for loan losses 1,945 1,233 8,354 5,705
-------- -------- -------- --------
Net interest income
after provision for loan losses 26,181 25,885 102,775 99,684
-------- -------- -------- --------
Other income
Fiduciary activities 1,762 1,897 7,481 7,632
Service charges on deposit accounts 2,691 2,924 11,298 11,638
Other customer fees 1,432 1,068 5,094 4,083
Net realized gains (losses) on
sales of available-for-sale securities (24) 456 (2) 1,188
Commission income 690 671 3,821 3,088
Earnings on cash surrender value
of life insurance 386 439 1,667 1,798
Net gains and fees on sales of loans 676 801 2,902 3,629
Other income 516 415 2,456 1,498
-------- -------- -------- --------
Total other income 8,129 8,671 34,717 34,554
-------- -------- -------- --------
Other expenses
Salaries and employee benefits 12,596 13,309 54,059 52,479
Net occupancy expenses 1,428 1,328 5,796 5,308
Equipment expenses 1,952 1,879 7,562 7,665
Marketing expense 625 521 2,012 1,709
Outside data processing fees 989 1,158 4,010 4,920
Printing and office supplies 400 397 1,369 1,580
Core deposit amortization 767 802 3,102 3,375
Other expenses 4,469 4,272 16,047 14,606
-------- -------- -------- --------
Total other expenses 23,226 23,666 93,957 91,642
-------- -------- -------- --------
Income before income tax 11,084 10,890 43,535 42,596
Income tax expense 3,553 3,422 13,296 13,185
-------- -------- -------- --------
Net income $ 7,531 $ 7,468 $ 30,239 $ 29,411
======== ======== ======== ========
Per Share Data
Basic Net Income .41 .41 1.64 1.59
Diluted Net Income .41 .40 1.63 1.58
Cash Dividends Paid .23 .23 .92 .92
Average Diluted Shares
Outstanding (in thousands) 18,558 18,721 18,596 18,667
CONSOLIDATED BALANCE SHEETS
(in thousands) December 31, September 30, June 30, March 31, December 31,
2005 2005 2005 2005 2004
Assets
Cash and due from banks $ 70,417 $ 81,310 $ 71,498 $ 67,904 $ 69,960
Federal funds sold 22,075
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents 70,417 81,310 71,498 89,979 69,960
Interest-bearing time deposits 8,748 10,708 9,255 10,737 9,343
Investment securities 434,266 436,794 420,685 409,820 421,535
Mortgage loans held for sale 4,910 5,026 1,356 3,084 3,367
Loans 2,457,427 2,443,931 2,440,906 2,414,099 2,428,051
Less: Allowance for loan losses (25,188) (25,149) (25,091) (24,488) (22,548)
----------- ----------- ----------- ----------- -----------
Net loans 2,432,239 2,418,782 2,415,815 2,389,611 2,405,503
Premises and equipment 39,417 38,473 37,240 37,525 38,254
Federal Reserve and Federal Home Loan Bank stock 23,200 23,165 23,054 22,883 22,858
Interest receivable 19,690 19,561 16,950 16,606 17,318
Core deposit intangibles and goodwill 138,833 139,597 139,799 140,578 141,284
Cash surrender value of life insurance 43,579 43,230 42,827 42,426 42,061
Other assets 21,780 21,792 22,819 24,337 20,185
----------- ----------- ----------- ----------- -----------
Total assets $ 3,237,079 $ 3,238,438 $ 3,201,298 $ 3,187,586 $ 3,191,668
=========== =========== =========== =========== ===========
Liabilities
Deposits
Noninterest-bearing $ 314,335 $ 346,318 $ 363,654 $ 333,614 $ 330,685
Interest-bearing 2,068,241 2,118,975 2,040,624 2,118,605 2,077,465
----------- ----------- ----------- ----------- -----------
Total deposits 2,382,576 2,465,293 2,404,278 2,452,219 2,408,150
Borrowings 508,236 423,959 454,400 391,193 440,891
Interest payable 5,874 5,643 5,068 6,562 4,411
Other liabilities 26,997 25,153 24,194 27,014 23,613
----------- ----------- ----------- ----------- -----------
Total liabilities 2,923,683 2,920,048 2,887,940 2,876,988 2,877,065
Stockholders' equity
Preferred stock, no-par value
Authorized and unissued -- 500,000 shares
Common stock, $.125 stated value
Authorized -- 50,000,000 shares
Issued and outstanding 2,302 2,313 2,302 2,312 2,322
Additional paid-in capital 145,682 148,004 146,057 148,347 150,862
Retained earnings 174,717 171,419 167,452 163,761 161,459
Accumulated other comprehensive loss (9,305) (3,346) (2,453) (3,822) (40)
----------- ----------- ----------- ----------- -----------
Total stockholders' equity 313,396 318,390 313,358 310,598 314,603
----------- ----------- ----------- ----------- -----------
Total liabilities and stockholders' equity$ 3,237,079 $ 3,238,438 $ 3,201,298 $ 3,187,586 $ 3,191,668
=========== =========== =========== =========== ===========
NON-PERFORMING ASSETS
(in thousands) December 31, September 30, June 30, March 31, December 31,
2005 2005 2005 2005 2004
90 days past due $ 3,965 $ 3,560 $ 3,696 $ 1,948 $ 1,907
Non-accrual loans 10,030 11,757 11,626 13,272 15,355
Other real estate 2,835 3,023 1,804 2,003 1,650
---------- ---------- ---------- ---------- ----------
Total non-performing assets $ 16,830 $ 18,340 $ 17,126 $ 17,223 $ 18,912
========== ========== ========== ========== ==========
Average total loans for the quarter $2,447,794 $2,444,131 $2,430,081 $2,414,050 $2,409,170
Total non-performing assets as a
percent of average total loans .69% .75% .70% .71% .79%
Restructured loans $ 310 $ 454 $ 531 $ 337 $ 2,019
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
(in thousands, except share data) December 31, September 30, June 30, March 31, December 31,
2005 2005 2005 2005 2004
Interest Income
Loans receivable
Taxable $ 41,930 $ 40,853 $ 38,831 $ 36,822 $ 36,363
Tax exempt 160 160 189 134 138
Investment securities
Taxable 2,480 2,427 2,376 2,329 2,224
Tax exempt 1,672 1,595 1,554 1,553 1,569
Federal funds sold 74 51 112 27 92
Deposits with financial institutions 202 185 166 142 167
Federal Reserve and Federal Home Loan Bank stock 296 296 285 308 297
-------- -------- -------- -------- --------
Total interest income 46,814 45,567 43,513 41,315 40,850
-------- -------- -------- -------- --------
Interest expense
Deposits 13,414 12,172 10,729 9,806 9,288
Securities sold under repurchase agreements 647 523 193 249 183
Federal Home Loan Bank advances 2,410 2,549 2,443 2,375 2,418
Subordinated debentures, revolving credit
Lines and term loans 1,910 1,894 1,839 1,789 1,717
Other borrowings 307 289 388 154 126
-------- -------- -------- -------- --------
Total interest expense 18,688 17,427 15,592 14,373 13,732
-------- -------- -------- -------- --------
Net interest income 28,126 28,140 27,921 26,942 27,118
Provision for loan losses 1,945 1,794 1,948 2,667 1,233
-------- -------- -------- -------- --------
Net interest income
after provision for loan losses 26,181 26,346 25,973 24,275 25,885
-------- -------- -------- -------- --------
Other income
Fiduciary activities 1,762 1,794 1,963 1,962 1,897
Service charges on deposit accounts 2,691 2,836 3,048 2,723 2,924
Other customer fees 1,432 1,389 1,188 1,085 1,068
Net realized gains (losses) on sales of
available-for-sale securities (24) 16 6 456
Commission income 690 870 757 1,504 671
Earnings on cash surrender value
of life insurance 386 441 439 401 439
Net gains and fees on sales of loans 676 770 779 677 801
Other income 516 664 582 694 415
-------- -------- -------- -------- --------
Total other income 8,129 8,780 8,762 9,046 8,671
-------- -------- -------- -------- --------
Other expenses
Salaries and employee benefits 12,596 13,384 13,258 14,821 13,309
Net occupancy expenses 1,428 1,570 1,422 1,376 1,328
Equipment expenses 1,952 1,901 1,852 1,857 1,879
Marketing expense 625 446 526 415 521
Outside data processing fees 989 979 1,033 1,009 1,158
Printing and office supplies 400 328 304 337 397
Core deposit amortization 767 770 778 787 802
Other expenses 4,469 3,923 4,026 3,629 4,272
-------- -------- -------- -------- --------
Total other expenses 23,226 23,301 23,199 24,231 23,666
-------- -------- -------- -------- --------
Income before income tax 11,084 11,825 11,536 9,090 10,890
Income tax expense 3,553 3,605 3,615 2,523 3,422
-------- -------- -------- -------- --------
Net income $ 7,531 $ 8,220 $ 7,921 $ 6,567 $ 7,468
======== ======== ======== ======== ========
Per Share Data
Basic Net Income $ .41 $ .45 $ .43 $ .35 $ .41
Diluted Net Income .41 .44 .43 .35 .40
Cash Dividends Paid .23 .23 .23 .23 .23
Average Diluted Shares
Outstanding (in thousands) 18,558 18,590 18,536 18,697 18,721
FINANCIAL RATIOS
Return on Average Assets .95% 1.03% .99% .83% .94%
Return on Avg. Stockholders' Equity 9.49 10.38 10.13 8.33 9.46
Avg. Earning Assets to Avg. Assets 91.47 90.83 90.81 90.61 91.38
Allowance for Loan Losses as %
Of Total Loans 1.02 1.03 1.03 1.01 .93
Net Charge Off's as % Of Avg. Loans
(Annualized) .31 .28 .22 .12 .65
Dividend Payout Ratio 56.10 52.27 53.49 65.71 57.50
Avg. Stockholders' Equity to Avg. Assets 10.05 9.89 9.80 9.97 9.92
Tax Equivalent Yield on Earning Assets 6.62 6.40 6.14 5.90 5.74
Cost of Supporting Liabilities 2.59 2.40 2.15 2.01 1.89
Net Int. Margin (FTE) on Earning Assets 4.03 4.00 3.99 3.89 3.85
LOANS
(in thousands) December 31, September 30, June 30, March 31, December 31,
2005 2005 2005 2005 2004
Commercial and industrial loans $ 461,102 $ 476,010 $ 463,002 $ 447,552 $ 451,227
Agricultural production financing and
other loans to farmers 95,130 94,262 93,274 83,800 98,902
Real estate loans:
Construction 174,783 171,667 166,367 170,498 164,738
Commercial and farmland 734,865 719,154 723,099 726,345 709,163
Residential 751,217 746,777 759,003 760,560 761,163
Individuals' loans for household and other
personal expenditures 200,139 186,792 182,362 187,552 198,532
Tax exempt loans 8,263 12,439 14,135 10,592 8,203
Lease financing receivables, net of unearned income 8,713 9,538 10,533 10,704 11,311
Other loans 23,215 27,292 29,131 16,496 24,812
----------- ---------- ----------- ----------- -----------
2,457,427 2,443,931 2,440,906 2,414,099 2,428,051
Allowance for loan losses (25,188) (25,149) (25,091) (24,488) (22,548)
----------- ---------- ----------- ----------- -----------
Total loans $2,432,239 $2,418,782 $2,415,815 $2,389,611 $2,405,503
=========== ========== =========== =========== ===========
DEPOSITS
(in thousands) December 31, September 30, June 30, March 31, December 31,
2005 2005 2005 2005 2004
Demand deposits $ 690,923 $ 697,597 $ 720,263 $ 686,695 $ 703,989
Savings deposits 566,212 568,366 593,770 655,643 634,132
Certificates and other time deposits of
$100,000 or more 264,665 320,640 234,988 285,878 258,362
Other certificates and time deposits 860,776 878,690 855,257 824,003 811,667
----------- ----------- ----------- ----------- -----------
$2,382,576 $2,465,293 $2,404,278 $2,452,219 $2,408,150
=========== =========== =========== =========== ===========