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): November 3, 2009
______________________________
FIRST MERCHANTS CORPORATION
(Exact Name of Registrant as Specified in its Charter)
_______________________________
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INDIANA |
0-17071 |
35-1544218 |
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(State or other jurisdiction |
(Commission File Number) |
(IRS Employer Identification No.) |
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of incorporation) |
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)
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 November 3, 2009, First Merchants Corporation will conduct a third quarter earnings conference call and web cast on Tuesday, November 3, 2009 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 November 3, 2009, during conference call and web |
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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: November 03, 2009
EXHIBIT INDEX
Exhibit No.
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99.1 |
Description |
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Slide presentation, utilized November 3, 2009, during conference call and web |
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cast by First Merchants Corporation |
First Merchants Corporation
Exhibit No. 99.1
Presentation Slides, utilized November 3, 2009
First Merchants Corporation
3rd Quarter 2009
Earnings Call
November 3, 2009
1
Michael C. Rechin
President
and Chief Executive Officer
F I R S T M E R C H A N T S C O R P O R A T I O N
2
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.
3
Key Points for 3rd Quarter
Loss of $.30 per diluted share for the quarter ended September 30,
2009, reflects the company’s focused efforts to build appropriate
allowance for loan loss reserve, maximize net interest margin and
preserve capital.
Allowance for loan losses increased to 2.54% of loans, “well
reserved”, with year-to-date provision for loan losses exceeding net
charge-offs by $35MM. Quarter-to-date net loan charge-offs of $14MM
for an annualized net charge offs of 1.64%.
Year-to-date net loan charge-offs totaled $61 million, or an annualized
2.24%, of average loans. Non-performing loans are up 11% and loan
loss reserve coverage of non-accruing loans increased to 70%.
Improved regulatory capital levels soundly in excess of “well
capitalized” thresholds.
4
“Well Positioned”
Charter combination completion to First Merchants
Bank, N. A. provides efficiency in capital, liquidity, and
risk management.
Net Interest Margin strength provided by active
balance sheet management strategies.
Revenue growth and expense control produce pre-
tax, pre-provision run-rate averaging ~ $17 million per
quarter.
5
F I R S T M E R C H A N T S C O R P O R A T I O N
Mark K. Hardwick
Executive Vice President
and Chief Financial Officer
6
F I R S T M E R C H A N T S C O R P O R A T I O N
Financial Performance
7
Total Assets
2007 2008 Q1-’09 Q2-’09 Q3-’09
1.
Investments $ 451 $ 482 $ 446 $ 631 $ 489
2.
Loans 2,877 3,722 3,654 3,554 3,399
3.
Allowance (28) (50) (59) (77) (87)
4.
CD&I & Goodwill 136 166 163 161 160
5.
BOLI 71 93 94 94 94
6.
Other 275 371 589 354 421
7.
Total Assets $3,782 $4,784 $4,887 $4,717 $4,476
(Millions $)
8
Loan Composition as of 9/30/09
Yield = 5.92%
9
$489 Million Balance
Average duration - 4.3 years
Tax equivalent yield of 5.10%
No private label MBS exposure
Trust Preferred Pools with book balance of $9.9
million and a market value of $3.7 million
Net unrealized gain of the entire portfolio totals $9.0
million
Investment Portfolio
10
Total Liabilities and Capital
2007 2008 Q1-’09 Q2-’09 Q3-’09
1.
Customer Deposits* $2,605 $3,242 $3,275 $3,278 $3,199
2.
Brokered Deposits 239 477 410 313 313
3.
Bank-Level Borrowings 483 507 485 483 339
4.
Other Liabilities 29 51 98 59 38
5.
Hybrid Capital 86 111 111 111 111
6.
Preferred Stock (CPP) 0 0 112 112 112
7.
Common Equity 340 396 396 361 364
8.
Total Liabilities and Capital $3,782 $4,784 $4,887 $4,717 $4,476
* Total deposits less brokered deposits
($ in Millions)
11
Deposits as of 9/30/09
$803M
$311M
$1,178M
$727M
Cost of Funds = 1.95%
12
2007 2008 Q1-’09 Q2-’09 Q3-’09
1.
Total Risk-Based
Capital Ratio 10.55% 10.24% 12.97% 12.56% 13.08%
2.
Tier 1 Risk-Based
Capital Ratio 8.75% 7.71% 10.47% 10. 01% 10.44%
3.
Leverage Ratio 7.19% 8.16% 9.17% 8.31% 8.47%
4.
TCE/TCA 5.72% 5.01% 4.89% 4.42% 4.75%
Capital Ratios
13
Net Interest Margin
$117
$133
$158
$159
$3,309
$3,463
$4,298
$4,384
%
%
%
%
$4,049
%
$162
14
Costs of Credit
($ in Millions)
15
Non-Interest Income
2007 2008 Q1-’09 Q2-’09 Q3-’09
1.
Service Charges on Deposit
Accounts $12.4 $13.0 $3.5 $3.9 $4.0
2.
Trust Fees 8.4 8.0 2.1 1.7 1.8
3.
Insurance Comm. Income 5.1 5.8 2.1 1.7 1.5
4.
Cash Surrender Value of Life Ins. 3.7 (0.3) 0.3 0.3 0.4
5.
Gains on Sales Mortgage Loans 2.4 2.5 1.4 1.7 2.0
6.
Securities Gains/Losses 0 (2.1) 2.3 (0.9) 4.0
7.
Other 8.6 9.5 2.8 3.1 2.0
8.
Total $40.6 $36.4 $14.5 $11.5 $15.7
($ in Millions)
16
Non-Interest Expense
2007 2008 Q1-’09 Q2-’09 Q3-’09
1.
Salary & Benefits $58.8 $63.0 $20.0 $19.7 $17.9
2.
Premises & Equipment 13.4 14.4 4.4 4.4 4.3
3.
Core Deposit Intangible 3.2 3.2 1.3 1.3 1.3
4.
Professional Services 2.0 2.6 1.1 .9 .7
5.
OREO Expense 1.0 2.8 0.5 1.6 3.6
6.
FDIC Expense 1.5 1.7 0.8 3.7 3.1
7.
FHLB Prepayment Penalties 0 0 0 0 1.9
8.
Other 22.3 21.1 6.6 6.6 6.2
Total $102.2 $108.8 $34.7 $38.2 $39.0
($ in Millions)
17
Earnings
2007 2008 Q1-’09 Q2-’09 Q3-’09
1.
Net Interest Income-FTE $117.2 $133.1 $39.6 $39.8 $40.5
2.
Non Interest Income1 40.6 38.5 12.2 12.4 11.3
3.
Non Interest Expense2 101.2 108.6 34.2 33.6 32.8
4.
Pre-Tax Pre-Provision Earnings $52.5 $61.9 $16.5 $17.2 $19.0
5.
Provision 8.5 28.2 12.9 59.0 24.2
6.
Adjustments 1.1 5.0 (1.7) 5.4 1.9
7.
Taxes - FTE 15.4 11.8 2.3 (16.1) (2.2)
8.
CPP Dividend 0 0 .6 1.5 1.5
9.
Net Income Avail. for Distribution $31.6 $20.6 $3.5 ($31.2) ($6.4)
10.
EPS $1.73 $1.14 $0.17 ($1.49) ($0.30)
1Adjusted for Bond Gains & Losses and one-time mortgage sale
2Adjusted for the FDIC Special Assessment, FHLB Prepayment Penalties & OREO
Expense & Credit-
Related Professional Services
($ in Millions)
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F I R S T M E R C H A N T S C O R P O R A T I O N
John J. Martin
Senior Vice President
Chief Credit Officer
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Portfolio Overview
Quarterly Highlights
Non-performing assets increased to $151 million, or 3.37% of assets for the quarter.
This compares to $137 million as of June 30, 2009 and $131 million as of March 31,
2009.
Other Real Estate Owned totaled to $21.8 million compared to $20.2 million as of
June 30, 2009 and $22.1 million as of March 31, 2009.
90 days delinquent loans totaled $5.4 million compared to $3.6 million as of June 30,
2009 and $7.7 million as of March 31, 2009.
Restructured loans increased $5.6 million compared to $4.2 prior quarter.
Total construction and development loans outstanding declined to $147 million from
$163 million as of June 30, 2009 and $208 million as of March 31, 2009.
Impaired loan portfolio is marked by 30% (specific impairment reserves and charge-
offs).
20
Charge-Off Overview
Quarterly Review
3rd quarter net charge-offs totaled $14.4 million and provision expense
totaled $24.2 million.
5 customers with charge-offs comprise $7.75 million of the 3rd quarter
charge-offs.
A $4.2 million charge-off relating to one commercial customer, broken out
between $3.2 million of commercial and industrial and $1 million of
commercial mortgage, is ~29% of total charge-offs.
21
($000)
C & I
Commercial
Mortgage
Land and
Lot
Ag
Total
Commercial
# of Loan
2
5
1
0
8
($000)
3,990
$
3,140
$
626
$
-
$
7,755
$
YTD Charge-Off Composition as of 9/30/09
22
($000)
C & I
Commercial
Mortgage
Land and
Lot
Ag
Total
Commercial
Residential
Mortgage
Home
Equity
Other
Consumer
Total
Consumer
Total
Consumer
and
Commercial
Loan Balances
$ 814,086
$ 1,107,197
$ 147,343
$ 270,233
$ 2,338,859
$ 664,294
$ 216,810
$ 203,932
$ 1,085,036
$ 3,423,895
% of total
23.8%
32.3%
4.3%
7.9%
68.3%
19.4%
6.3%
6.0%
31.7%
Net Charge-offs YTD
30,731
$
12,850
$
9,242
$
393
$
53,216
$
3,880
$
1,181
$
2,544
$
7,605
$
60,821
$
Net Charge-off ratio*
5.03%
1.55%
8.36%
0.19%
3.03%
0.78%
0.73%
1.66%
0.93%
2.37%
*Annualized based on ending balances
Non-Performing Asset Composition as of 9/30/09
23
($000)
C & I
Commercial
Mortgage
Land and Lot
Ag
Total Commercial
Residential
Mortgage
Home Equity
Other
Consumer
Total
Consumer
Total Consumer
and
Commercial
Loan Balances
$ 814,086
$ 1,107,197
$ 147,343
$ 270,233
$ 2,338,859
$ 664,294
$ 216,810
$ 203,932
$ 1,085,036
$ 3,423,895
% of total
23.8%
32.3%
4.3%
7.9%
68.3%
19.4%
6.3%
6.0%
31.7%
NPAs (including 90+ DPD)
32,732
$
58,466
$
31,741
$
7,570
$
130,509
$
23,214
$
1,800
$
562
$
25,576
$
156,085
$
NPA Ratio
4.02%
5.28%
21.54%
2.80%
5.58%
3.49%
0.83%
0.28%
2.36%
4.56%
$12,180
Civic/social club
1,370
Manufacturing - custom compounding of plastic resin
1,910
Hospitality
2,250
Residential real estate lessors and developers
3,200
New single family real estate construction
$3,450
Industry
Balance
(Book)
Top New Non-Performing Loans
24
Allowance Coverage to Non-Accrual Loans
Allowance as a % of Non-Accrual Loans
($000)
25
OREO Composition as of 9/30/09
26
($000)
CRE
Land and
Construction
1-4 Family
Ag
Total
Book Balance
13,069
$
5,089
$
3,620
$
-
$
21,778
$
% or ORE
60%
23%
17%
0%
100%
Michael C. Rechin
President
and Chief Executive Officer
F I R S T M E R C H A N T S C O R P O R A T I O N
27
Tactical Action Plan and Business Update
Continue Focus on Asset Quality Improvement
Capital Preservation Plan
Margin Expansion Opportunity Continues
Non-Strategic Asset Class Reductions
Successful Charter Consolidation Allows Efficiency Gains
“Well Capitalized – Well Reserved – Well Positioned”
28
Stakeholder Focused
Shareholders
Communities
Customers
Employees
29
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
Contact Information
30