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): October 23, 2006
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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 11
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On October 23, 2006, First Merchants Corporation issued a press
release to report its financial results for the third quarter ended September
30, 2006. 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 October 23, 2006, issued by
First Merchants Corporation
Page 2 of 11
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
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Principal Accounting Officer)
Dated: October 23, 2006
Page 3 of 11
EXHIBIT INDEX
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Exhibit No.
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99.1 Description
-----------
Press Release, dated October 23, 2006, issued by
First Merchants Corporation.
Page 4 of 11
First Merchants Corporation
Exhibit No. 99.1
Press Release, dated October 23, 2006
N / E / W / S R / E / L / E / A / S / E
October 23, 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 3rd QUARTER EARNINGS PER SHARE
First Merchants Corporation (NASDAQ - FRME) has reported September 30, 2006
year-to-date diluted earnings per share totaling $1.22, equaling 2005.
Third quarter diluted earnings per share totaled $.42, a $.02 decline from
second quarter earnings per share of $.44 in 2005. Net income for the quarter
totaled $7.7 million compared to $8.2 million in 2005.
Total assets reached a record $3.5 billion at quarter-end, an increase of $233
million, or 7.2 percent from September 30, 2005. Loans and investments, the
Corporation's primary earning assets, totaled $3.1 billion, an increase of $229
million or 8.0 percent over the prior year.
Net income declined by $169,000 for the nine months ended September 30, 2006,
reflecting the challenges of a sustained and increasingly inverted yield curve.
Net-interest income declined by $24,000 despite increases in earning assets as
the Corporation's volume variance totaled a positive $4,180,000 mitigated by a
negative rate variance of $4,204,000.
Non-interest income declined by $745,000 resulting primarily from reduced gains
from the sale of mortgage loans totaling $668,000. Year-to-date operating
expense increased by a modest 1.3 percent as management continues the process of
streamlining its operating structure.
The allowance for loan losses has increased during the year by $1.8 million as
the Corporation's provision for loan losses declined by $1.4 million. As of
September 30, 2006, non-performing loans totaled 87 basis points of average
total loans and the allowance for loan losses as a percent of total loans
equaled 1.02 percent.
Michael L. Cox, President and Chief Executive Officer, stated that, "High single
digit growth of loans and deposits coupled with expense management and talent
acquisition continues to be the most positive representations of the
controllable items in this business. Management is pleased with balance sheet
growth, but the yield curve remains a challenge."
CONFERENCE CALL
First Merchants Corporation will conduct a conference call at 2:30 p.m. Eastern
Daylight Time on Monday, October 23, 2006. To participate, dial (Toll Free)
877-407-9210 and reference First Merchants Corporation's third quarter earnings.
A replay will be available until October 30, 2006. 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 # 216501.
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., Madison Community Bank, N.A., United Communities National Bank, First
National Bank, Decatur Bank & Trust Company, N.A., Frances Slocum Bank, 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.
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) September 30,
2006 2005
Assets
Cash and due from banks $ 65,641 $ 81,310
Interest-bearing time deposits 8,717 10,708
Investment securities 468,074 436,794
Mortgage loans held for sale 3,395 5,026
Loans 2,641,644 2,443,931
Less: Allowance for loan losses (26,975) (25,149)
---------- ----------
Net loans 2,614,669 2,418,782
Premises and equipment 40,511 38,473
Federal Reserve and Federal Home Loan Bank stock 23,620 23,165
Interest receivable 23,946 19,561
Core deposit intangibles and goodwill 136,666 139,597
Cash surrender value of life insurance 63,539 43,230
Other assets 23,261 21,792
----------- -----------
Total assets $ 3,472,039 $ 3,238,438
=========== ===========
Liabilities
Deposits
Noninterest-bearing $ 324,601 $ 346,318
Interest-bearing 2,369,690 2,118,975
----------- -----------
Total deposits 2,694,291 2,465,293
Borrowings 419,146 423,959
Interest payable 10,236 5,643
Other liabilities 26,075 25,153
----------- -----------
Total liabilities 3,149,748 2,920,048
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 -- 18,334,811 and 18,507,970 shares 2,292 2,313
Additional paid-in capital 143,688 148,004
Retained earnings 184,555 171,419
Accumulated other comprehensive loss (8,244) (3,346)
----------- -----------
Total stockholders' equity 322,291 318,390
----------- -----------
Total liabilities and stockholders' equity $ 3,472,039 $ 3,238,438
=========== ===========
FINANCIAL HIGHLIGHTS
Three Months Ended Nine Months Ended
(In thousands) September 30, September 30,
2006 2005 2006 2005
NET CHARGE OFF'S $ 467 $ 1,736 $ 3,226 $ 3,808
AVERAGE BALANCES
Total Assets $3,424,504 $3,202,198 $3,328,120 $3,185,815
Total Loans 2,613,805 2,444,131 2,541,589 2,429,530
Total Deposits 2,613,507 2,419,204 2,505,027 2,420,268
Total Stockholders' Equity 318,327 316,615 317,282 314,856
FINANCIAL RATIOS
Return on Average Assets .90% 1.03% .90% .95%
Return on Avg. Stockholders' Equity 9.72 10.38 9.47 9.62
Avg. Earning Assets to Avg. Assets 91.26 90.83 91.25 90.75
Allowance for Loan Losses as %
Of Total Loans 1.02 1.03 1.02 1.03
Net Charge Off's as % Of Avg. Loans
(Annualized) .07 .28 .17 .21
Dividend Payout Ratio 54.76 52.27 56.56 56.56
Avg. Stockholders' Equity to Avg. Assets 9.30 9.89 9.53 9.88
Tax Equivalent Yield on Earning Assets 7.08 6.40 6.87 6.15
Cost of Supporting Liabilities 3.42 2.40 3.09 2.19
Net Int. Margin (FTE) on Earning Assets 3.66 4.00 3.78 3.96
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share data) Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
Interest income
Loans receivable
Taxable $ 48,738 $ 40,853 $137,475 $116,506
Tax exempt 189 160 588 483
Investment securities
Taxable 3,289 2,427 9,097 7,132
Tax exempt 1,645 1,595 4,905 4,702
Federal funds sold 13 51 41 190
Deposits with financial institutions 144 185 390 493
Federal Reserve and Federal Home Loan Bank stock 307 296 938 889
-------- -------- -------- --------
Total interest income 54,325 45,567 153,434 130,395
-------- -------- -------- --------
Interest expense
Deposits 20,291 12,172 51,624 32,707
Federal funds purchased 635 1,749
Securities sold under repurchase agreements 852 523 2,740 965
Federal Home Loan Bank advances 2,796 2,549 8,062 7,367
Subordinated debentures, revolving credit lines
and term loans 2,067 1,894 6,078 5,522
Other borrowings 60 289 202 831
-------- -------- -------- --------
Total interest expense 26,701 17,427 70,455 47,392
-------- -------- -------- --------
Net interest income 27,624 28,140 82,979 83,003
Provision for loan losses 1,558 1,794 5,013 6,409
-------- -------- -------- --------
Net interest income
after provision for loan losses 26,066 26,346 77,966 76,594
-------- -------- -------- --------
Other income
Fiduciary activities 1,863 1,794 5,763 5,719
Service charges on deposit accounts 3,055 2,836 8,252 8,607
Other customer fees 1,386 1,389 4,130 3,662
Net realized gains on
sales of available-for-sale securities 16 22
Commission income 971 870 3,421 3,131
Earnings on cash surrender value
of life insurance 719 441 1,574 1,281
Net gains and fees on sales of loans 493 770 1,558 2,226
Other income 348 664 1,145 1,940
-------- -------- -------- --------
Total other income 8,835 8,780 25,843 26,588
-------- -------- -------- --------
Other expenses
Salaries and employee benefits 14,033 13,384 41,968 41,463
Net occupancy expenses 1,477 1,570 4,388 4,368
Equipment expenses 2,035 1,901 5,991 5,610
Marketing expense 586 446 1,424 1,387
Outside data processing fees 841 979 2,645 3,021
Printing and office supplies 367 328 1,095 969
Core deposit amortization 762 770 2,285 2,335
Other expenses 3,854 3,923 11,841 11,578
-------- -------- -------- --------
Total other expenses 23,955 23,301 71,637 70,731
-------- -------- -------- --------
Income before income tax 10,946 11,825 32,172 32,451
Income tax expense 3,207 3,605 9,633 9,743
-------- -------- -------- --------
Net income $ 7,739 $ 8,220 $ 22,539 $ 22,708
======== ======== ======== ========
Per Share Data
Basic Net Income .42 .45 1.23 1.23
Diluted Net Income .42 .44 1.22 1.22
Cash Dividends Paid .23 .23 .69 .69
Average Diluted Shares
Outstanding (in thousands) 18,381 18,590 18,455 18,606
CONSOLIDATED BALANCE SHEETS
(in thousands) September 30, June 30, March 31, December 31, September 30,
2006 2006 2006 2005 2005
Assets
Cash and due from banks $ 65,641 $ 71,275 $ 59,176 $ 70,417 $ 81,310
Interest-bearing time deposits 8,717 8,529 9,104 8,748 10,708
Investment securities 468,074 466,882 441,651 434,266 436,794
Mortgage loans held for sale 3,395 5,338 5,170 4,910 5,026
Loans 2,641,644 2,591,440 2,491,488 2,457,427 2,443,931
Less: Allowance for loan losses (26,975) (25,884) (25,623) (25,188) (25,149)
----------- ----------- ----------- ----------- -----------
Net loans 2,614,669 2,565,556 2,465,865 2,432,239 2,418,782
Premises and equipment 40,511 41,122 39,029 39,417 38,473
Federal Reserve and Federal Home Loan Bank stock 23,620 23,889 23,421 23,200 23,165
Interest receivable 23,946 19,539 19,035 19,690 19,561
Core deposit intangibles and goodwill 136,666 137,429 138,174 138,833 139,597
Cash surrender value of life insurance 63,539 44,358 43,964 43,579 43,230
Other assets 23,261 24,346 25,346 21,780 21,792
----------- ----------- ----------- ----------- -----------
Total assets $ 3,472,039 $ 3,408,263 $ 3,269,935 $ 3,237,079 $ 3,238,438
=========== =========== =========== =========== ===========
Liabilities
Deposits
Noninterest-bearing $ 324,601 $ 340,046 $ 325,548 $ 314,335 $ 346,318
Interest-bearing 2,369,690 2,195,354 2,120,524 2,068,241 2,118,975
----------- ----------- ----------- ----------- -----------
Total deposits 2,694,291 2,535,400 2,446,072 2,382,576 2,465,293
Borrowings 419,146 527,347 469,002 508,236 423,959
Interest payable 10,236 6,927 6,412 5,874 5,643
Other liabilities 26,075 25,585 31,711 26,997 25,153
----------- ----------- ----------- ----------- -----------
Total liabilities 3,149,748 3,095,259 2,953,197 2,923,683 2,920,048
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 2,292 2,282 2,305 2,302 2,313
Additional paid-in capital 143,688 142,037 146,374 145,682 148,004
Retained earnings 184,555 181,042 177,975 174,717 171,419
Accumulated other comprehensive loss (8,244) (12,357) (9,916) (9,305) (3,346)
----------- ----------- ----------- ----------- -----------
Total stockholders' equity 322,291 313,004 316,738 313,396 318,390
----------- ----------- ----------- ----------- -----------
Total liabilities and stockholders' equity $ 3,472,039 $ 3,408,263 $ 3,269,935 $ 3,237,079 $ 3,238,438
=========== =========== =========== =========== ===========
NON-PERFORMING ASSETS
(in thousands) September 30, June 30, March 31, December 31, September 30,
2006 2006 2006 2005 2005
90 days past due $ 4,253 $ 8,818 $ 5,188 $ 3,965 $ 3,560
Non-accrual loans 16,524 12,611 11,424 10,030 11,757
Other real estate 2,194 2,497 3,209 2,835 3,023
---------- ---------- ---------- ---------- ----------
Total non-performing assets $ 22,971 $ 23,926 $ 19,821 $ 16,830 $ 18,340
========== ========== ========== ========== ==========
Average total loans for the quarter $2,613,805 $2,534,675 $2,474,759 $2,447,794 $2,444,131
Total non-performing assets as a
percent of average total loans .87% .94% .80% .69% .75%
Restructured loans $ 93 $ 111 $ 114 $ 310 $ 454
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
(in thousands, except share data) September 30, June 30, March 31, December 31, September 30,
2006 2006 2006 2005 2005
Interest Income
Loans receivable
Taxable $ 48,738 $ 45,658 $ 43,079 $ 41,930 $ 40,853
Tax exempt 189 231 168 160 160
Investment securities
Taxable 3,289 3,082 2,726 2,480 2,427
Tax exempt 1,645 1,613 1,647 1,672 1,595
Federal funds sold 13 11 17 74 51
Deposits with financial institutions 144 132 114 202 185
Federal Reserve and Federal Home Loan Bank stock 307 320 311 296 296
-------- -------- -------- -------- --------
Total interest income 54,325 51,047 48,062 46,814 45,567
-------- -------- -------- -------- --------
Interest expense
Deposits 20,291 16,914 14,419 13,414 12,172
Federal funds purchased 635 625 489 163 256
Securities sold under repurchase agreements 852 1,053 835 647 523
Federal Home Loan Bank advances 2,796 2,610 2,656 2,410 2,549
Subordinated debentures, revolving credit
lines and term loans 2,067 2,020 1,991 1,910 1,894
Other borrowings 60 59 83 144 33
-------- -------- -------- -------- --------
Total interest expense 26,701 23,281 20,473 18,688 17,427
-------- -------- -------- -------- --------
Net interest income 27,624 27,766 27,589 28,126 28,140
Provision for loan losses 1,558 1,729 1,726 1,945 1,794
-------- -------- -------- -------- --------
Net interest income
after provision for loan losses 26,066 26,037 25,863 26,181 26,346
-------- -------- -------- -------- --------
Other income
Fiduciary activities 1,863 1,949 1,951 1,762 1,794
Service charges on deposit accounts 3,055 2,771 2,426 2,691 2,836
Other customer fees 1,386 1,389 1,355 1,432 1,389
Net realized gains (losses) on sales of
available-for-sale securities (9) 9 (24) 16
Commission income 971 946 1,504 690 870
Earnings on cash surrender value
of life insurance 719 432 423 386 441
Net gains and fees on sales of loans 493 511 554 676 770
Other income 348 422 375 516 664
-------- -------- -------- -------- --------
Total other income 8,835 8,411 8,597 8,129 8,780
-------- -------- -------- -------- --------
Other expenses
Salaries and employee benefits 14,033 13,543 14,392 12,596 13,384
Net occupancy expenses 1,477 1,477 1,434 1,428 1,570
Equipment expenses 2,035 2,007 1,949 1,952 1,901
Marketing expense 586 438 400 625 446
Outside data processing fees 841 921 883 989 979
Printing and office supplies 367 424 304 400 328
Core deposit amortization 762 761 762 767 770
Other expenses 3,854 4,323 3,664 4,469 3,923
-------- -------- -------- -------- --------
Total other expenses 23,955 23,894 23,788 23,226 23,301
-------- -------- -------- -------- --------
Income before income tax 10,946 10,554 10,672 11,084 11,825
Income tax expense 3,207 3,263 3,163 3,553 3,605
-------- -------- -------- -------- --------
Net income $ 7,739 $ 7,291 $ 7,509 $ 7,531 $ 8,220
======== ======== ======== ======== ========
Per Share Data
Basic Net Income $ .42 $ .39 $ .41 $ .41 $ .45
Diluted Net Income .42 .39 .41 .41 .44
Cash Dividends Paid .23 .23 .23 .23 .23
Average Diluted Shares
Outstanding (in thousands) 18,381 18,463 18,526 18,558 18,590
FINANCIAL RATIOS
Return on Average Assets .90% .88% .93% .95% 1.03%
Return on Avg. Stockholders' Equity 9.72 9.20 9.49 9.49 10.38
Avg. Earning Assets to Avg. Assets 91.26 91.21 91.27 91.47 90.83
Allowance for Loan Losses as %
Of Total Loans 1.02 1.00 1.03 1.02 1.03
Net Charge Off's as % Of Avg. Loans
(Annualized) .07 .23 .21 .31 .28
Dividend Payout Ratio 54.76 58.97 56.10 56.10 52.27
Avg. Stockholders' Equity to Avg. Assets 9.30 9.54 9.78 10.05 9.89
Tax Equivalent Yield on Earning Assets 7.08 6.87 6.64 6.62 6.40
Cost of Supporting Liabilities 3.42 3.07 2.77 2.59 2.40
Net Int. Margin (FTE) on Earning Assets 3.66 3.80 3.87 4.03 4.00
LOANS
(in thousands) September 30, June 30, March 31, December 31, September 30,
2006 2006 2006 2005 2005
Commercial and industrial loans $ 497,280 $ 501,238 $ 486,411 $ 461,102 $ 476,010
Agricultural production financing and
other loans to farmers 104,147 95,352 87,433 95,130 94,262
Real estate loans:
Construction 175,753 178,254 175,784 174,783 171,667
Commercial and farmland 835,403 813,171 743,905 734,865 719,154
Residential 757,116 744,552 746,410 751,217 746,777
Individuals' loans for household and other
personal expenditures 215,237 208,768 202,478 200,139 186,792
Tax exempt loans 16,550 13,656 13,656 8,263 12,439
Lease financing receivables, net of unearned income 8,543 8,589 8,193 8,713 9,538
Other loans 31,615 27,860 27,218 23,215 27,292
----------- ---------- ----------- ----------- ----------
2,641,644 2,591,440 2,491,488 2,457,427 2,443,931
Allowance for loan losses (26,975) (25,884) (25,623) (25,188) (25,149)
----------- ---------- ----------- ----------- ----------
Total loans $2,614,669 $2,565,556 $2,465,865 $2,432,239 $2,418,782
=========== ========== =========== =========== ==========
DEPOSITS
(in thousands) September 30, June 30, March 31, December 31, September 30,
2006 2006 2006 2005 2005
Demand deposits $ 743,154 $ 758,132 $ 671,027 $ 690,923 $ 697,597
Savings deposits 512,112 510,878 526,554 566,212 568,366
Certificates and other time deposits of
$100,000 or more 394,724 313,751 320,213 264,665 320,640
Other certificates and time deposits 1,044,301 952,639 928,278 860,776 878,690
----------- ----------- ----------- ----------- -----------
$2,694,291 $2,535,400 $2,446,072 $2,382,576 $2,465,293
=========== =========== =========== =========== ===========