**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:

 

**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))**

 

 

 

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**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.**

 

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

 

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

 

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

 

|   | Exhibit 99.1 | Slide presentation, utilized February 1, 2010, during conference call and web cast by First Merchants Corporation |
|--------|--------------|-------------------------------------------------------------------------------------------------------------------|

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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**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: February 1, 2010

 

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EXHIBIT INDEX

 

Exhibit No.

 

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

 

Slide presentation, utilized February 1, 2010, during conference call and web cast by First Merchants Corporation

 

 

 

 

 

 

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First Merchants Corporation

 

Exhibit No. 99.1

 

Presentation Slides, utilized February 1, 2010

 

 

----

 

 

First Merchants Corporation            4thQuarter 2009             Earnings Call            February 1, 2010

1

Michael C. Rechin

President 

and Chief Executive Officer

2

Forward-Looking StatementThe 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

           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 4thQuarter

4

           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

5

Mark K. Hardwick

Executive Vice President 

and Chief Financial Officer

6

Financial Performance

7

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

8

LOAN AND CREDIT DETAIL

**Loan Composition (as of 12/31/09****)**

Yield = 5.78%

9

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

10

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

11

DEPOSITS (as of 12/31/09)

$782M

$275M

$1,309M

$733M

Cost of Funds = 1.87%

12

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%

13

NET INTEREST MARGIN

14

CREDIT COSTS OVER TIME

15

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

16

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

17

EARNINGS

($ in Millions)

**2****007**

**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

18

John J. Martin

Senior Vice President 

and Chief Credit Officer

19

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**

20

CHARGE-OFF OVERVIEW

4thQuarter Charge-Off Analysis

**The 10 largest charge-offs totaled $12.5 million and comprised 60% of 4****th****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

21

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%

22

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%

23

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**

**         **

24

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%

25

($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

26

ALLOWANCE COVERAGE TO NON-ACCRUAL LOANS

Allowance as a % of Non-Accrual Loans

($000)

27

Michael C. Rechin

President 

and Chief Executive Officer

28

“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.

29

“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

30

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

31