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)

 

_______________________________

 

|   | INDIANA | 0-17071 | 35-1544218 |
|--------|---------|---------|------------|

|   | (State or other jurisdiction | (Commission File Number) | (IRS Employer Identification No.) |
|--------|------------------------------|--------------------------|-----------------------------------|

|   | 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: 

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) 

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) 

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) 

oPre-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.**

 

| (a) | Not applicable. |
|-----|-----------------|

 

| (b) | Not applicable. |
|-----|-----------------|

 

| (c) | Exhibits. |
|-----|-----------|

 

|   | Exhibit 99.1 | Slide presentation, utilized November 3, 2009, 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)

 

|   | By: /s/ Mark K. Hardwick |
|--------|--------------------------|

|   | Mark K. Hardwick |
|--------|------------------|

|   | Executive Vice President and Chief Financial Officer |
|--------|------------------------------------------------------|

|   | (Principal Financial and Principal Accounting Officer) |
|--------|--------------------------------------------------------|

 

 

Dated: November 03, 2009

 

----

EXHIBIT INDEX

 

Exhibit No.

 

| 99.1 | Description |
|------|-------------|

 

|   | Slide presentation, utilized November 3, 2009, during conference call and web |
|--------|-------------------------------------------------------------------------------|

|   | 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)

18

 

**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

19

 

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

3rdquarter 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 3rdquarter             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