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): August 4, 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 August 4, 2009, First Merchants Corporation will conduct a second quarter earnings conference call and web cast on Tuesday, August 4, 2009 at 2:30 p.m. (ET). A copy of the slide presentation that will be 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 that will be utilized August 4, 2009, during a 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.

 

|   | DATE: August 4, 2009 |
|--------|----------------------|

 

|   | FIRST MERCHANTS CORPORATION |
|--------|-----------------------------|

 

 

|   | By: _/s/Mark K. Hardwick___________ |
|--------|-------------------------------------|

 

|   | Mark K. Hardwick,

Executive Vice President and

Chief Financial Officer |
|--------|--------------------------------------------------------------------------|

 

 

 

 

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Exhibit Index

 

| Exhibit No. | Description |
|-------------|-------------|

 

|   | Exhibit 99.1 | Slide presentation that will be utilized August 4, 2009, during a conference call and web cast by First Merchants Corporation |
|--------|--------------|------------------------------------------------------------------------------------------------------------------------------------|

 

 

 

 

----

First Merchants Corporation

 

Exhibit No. 99.1

 

Presentation Slides that will be utilized August 4, 2009

 

 

 

 

First Merchants Corporation 

2ndQuarter 2009 

Earnings Call 

August 4, 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

 

Loss of $1.48 per diluted share for the quarter ended June             30, 2009, reflects the company’s focused efforts to build             appropriate allowance for loan loss reserve and to address             loan portfolio stress. 

Allowance for loan losses increased to 2.16% of loans,             “well reserved”, with year-to-date $72 million provision for             loan losses, exceeding net charge-offs by ~ $26MM. 

Year-to-date net loan charge-offs totaled $46 million, or an             annualized 2.53%, of average loans. Resultant non-            performing asset levels are essentially flat with 1stquarter. 

Capital levels soundly in excess of “well capitalized”             thresholds. 

Key Points for 2ndQuarter

4

 

Solid underlying business performance produces             pre-tax pre-provision run rate averaging ~ $16             million per quarter. 

Bank charter combination planned for 3rdquarter             completion maximizes efficiency. 

Achievement update on year one targets for             Lincoln Bank acquisition: 

Branding 

Core operation conversion 

Expense savings capture 

Credit quality

“Well Positioned”

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

1.

Investments                               $   451    $   482                       $   446               $   631 

2. Loans                                                         2,877      3,722                                                           3,654      3,554 

3.

Allowance                                                         (28)         (50)                                              (59)                         (77) 

4.

CD&I & Goodwill            136                     166                                                                   163         161 

5. BOLI                                                                                      71            93                                                                 94                                 94 

6. Other                                                                              275                             371                                                589                354

7.

Total            Assets                     $3,782                   $4,784                                              $4,887    $4,717 

(Millions $)

8

 

Loan Composition as of 6/30/09

Yield = 5.96%

9

 

$631 Million Balance 

Average duration - 4.0 years 

Tax equivalent yield of 4.90% 

No private label MBS exposure 

Trust Preferred Pools with book balance of $11.1             million and a market value of $2.0 million 

Net unrealized loss of the entire portfolio totals $5             million 

Investment Portfolio

10

 

Total Liabilities and Capital

           

           

             2007             2008                          Q1-’09       Q2-’09

**1.**

Customer            Deposits*****                                             $2,605  $3,242                     $3,275    $3,278 

2.   Brokered            Deposits                                                                      239       477                                                      410        313 

3.

Bank-Level            Borrowings                                              483                  507                                          485                   483 

4.

Other            Liabilities                                                                                            29         51                                98                                        59 

5.

Hybrid            Capital                                                                                                      86       111                                           111                    111 

5.   Preferred Stock            (CPP)                                                  0           0                                                  112                                 112 

6.   Common            Equity                                                                     340            396                                                   396             361

7.

Total Liabilities and            Capital               $3,782   $4,784          $4,887    $4,717 

* Total deposits less brokered deposits

($ in Millions)

11

 

Deposits as of 6/30/09

$836M

$383M

$1,198M

$740M

Cost of Funds = 2.05%

12

 

                                                                                                                                                                            mp;n bsp;                          

                                                                                                                                                                            mp;n bsp;                                            

                       2007                                                                                                                     2008Q1-’09Q2-’09

1.

Total Risk-Based Capital Ratio         10.55% 10.24%               12.97%   12.56% 

2.

Tier 1 Risk-Based Capital Ratio           8.75%                    7.71%  10.47%  10.01% 

3.

Leverage            Ratio                                                                                               7.19%    8.16%   9.17%        8.31% 

4.

TCE/TCA                                                                                                           5.72%    5.01%   4.89%            4.42% 

Capital Ratios

13

 

Net Interest Margin

$117

$133

$158

$159

$3,309

$3,463

$4,298

$4,384

%

%

%

%

14

 

Costs of Credit

($ in Millions)

15

 

Non-Interest Income

           

           

                                                                                              2007          2008                 Q1-’09                Q2-’09

1.

Service Charges on Deposit 

      Accounts                                                                                                                                $12.4   $13.0                                                        $3.5        $3.9 

2.    Trust            Fees                                   8.4                                8.0                 2.1                           1.7            

3.

Insurance Comm.            Income                                                   5.1       5.8                                                  2.1                       1.7 

4.

Cash Surrender Value of Life Ins.    3.7                 (0.3)                0.3                          0.3 

5.

Gains on Sales Mortgage Loans        2.4       2.5                                                            1.4                                     1.7 

6.

Securities            Gains/Losses                                                       0                 (2.1)                                                 2.3         (0.9) 

7. Other                                                                                                                                             ; ;  8.6                   9.5                                     2.8                              3.1

8.  Total                                                    $40.6      $ 36.4                                  $ 14.5                          $ 11.5 

($ in Millions)

16

 

Non-Interest Expense

           

           

                                                                                                                                                2007              2008         Q1-’09                   Q2-’09

1. Salary &            Benefits                                               $58.8   $ 63.0       $ 20.0                            $ 19.7 

2. Premises &            Equipment                           13.4      14.4                                           4.4                                         4.4 

3. Core Deposit            Intangible                              3.2                   3.2                                1.3                                       1.3 

4. Professional            Services                                      2.0                   2.6                                  1.1           0.9 

6. OREO            Expense                                                                            1.0        2.8                                  0.5           1.6 

7.

FDIC            Expense                                                                                            1.5                   1.7                                   0.8           3.7 

8.

Other                                                                                                                                   22.3     21.1                                     6.6                      6.6

          Total                                                                                                                    $102.2 $ 108.8        $34.7                  $ 38.2                                                                                                                                                        

          

($ in Millions)

17

 

Earnings

                  

                                                                                                                                                                            mp;n bsp;               2007             2008               Q1-’09      Q2-’09

1.

Net Interest Income-FTE                                                         $117.2  $133.1               $39.6               $ 39.8 

2.         Non Interest            Income1                                                                     40.6      38.5                 12.2        12.4 

3.

Non Interest            Expense2                                                             101.2    108.6      34.2                    33.6 

**4.**

**Pre-Tax Pre-Provision Earnings****        ****$ 52.5   $            61.9    $16.5****                   ****$17.2**

5.         Provision                                                                                                                                          8.5      28.2                  12.9        59.0 

6.         Adjustments                                                                                                                            1.1        5.0                              (1.7)         5.4 

7.

Taxes -            FTE                                                                                                                           15.4      11.8                       2.3       (16.1)            

8.

CPP            Dividend                                                                                                                          0                               0                     .6                            1.5

9.         Net Income Avail. for            Distribution             $31.6    $20.6       $3.5             ($31.2) 

10.    EPS                                                                                                                                                         $1.73    $1.14                $0.17    ($1.48) 

                1Adjusted for Bond Gains & Losses 

                2Adjusted for FDIC Assessment & 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 totaled $140 million or 2.90% of assets for the quarter.  This             compares to $138 million as of March 31, 2009 and $112 million as of year-end. 

OREO declined $1.85 million to $20.2 million from the prior quarter of $22.1 million.

90 days delinquent loans fell to $3.6 million from the prior quarter of $7.7 million. 

Restructured loans totaled $4.2 million as of quarter-end. 

Total construction and development loans outstanding declined to $162 million from             $208 million during the quarter. 

Impaired loan portfolio is marked by 36% (specific reserves and charge-offs).

20

 

Portfolio Overview

Charge-Off Review

2ndQuarter charge-offs totaled $40 million and provision expense totaled             $59 million. 

16 loans with charge-offs greater than $500,000 comprise $35 million of the             $40 million in 2ndQuarter charge-offs. 

Charge-off of one commercial loan of $10.2 million or ~25% of total charge-            offs which was taken as a result of fraudulent financial statements provided             by a large commercial and industrial borrower.

21

**($000)**

**C & I**

**Commercial**

**Mortgage**

**Land and**

**Lot**

**Ag**

**Total**

**Commercial**

**Residential**

**Mortgage**

**Home Equity**

**Other**

**Consumer**

**Total**

**Consumer**

**Total**

**Consumer**

**And**

**Commercial**

# of Loan

7

2

6

0

15

0

1

0

1

16

($000)

25,846

$ 

1,970

$              

6,911

$      

-

$       

34,727

$       

-

$           

500

$            

-

$          

500

$          

35,227

$        

 

Charge-Off Composition as of June 30, 2009

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**

$       874,671 

$    1,114,484 

$       162,765 

$       262,459 

$    2,414,379 

$       723,830 

$       229,954 

$       209,136 

$    1,162,920 

$    3,577,299 

**% of total**

24.5%

31.2%

4.5%

7.3%

67.5%

20.2%

6.4%

5.8%

32.5%

**Net Charge-offs YTD**

25,115

$         

8,253

$           

7,264

$           

101

$              

40,733

$         

2,413

$           

965

$              

2,269

$           

5,647

$           

46,380

$         

**Net Charge-off ratio***

5.73%

1.48%

8.93%

0.08%

3.37%

0.67%

0.84%

2.19%

0.97%

2.59%

***Annualized based on ending balances**

 

Non-Performing Assets Composition as of June 30, 2009

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**

$       874,671 

$    1,114,484 

$       162,765 

$       262,459 

$    2,414,379 

$       723,830 

$       229,954 

$       209,136 

$    1,162,920 

$    3,577,299 

**% of total**

24.5%

31.2%

4.5%

7.3%

67.5%

20.2%

6.4%

5.8%

32.5%

**NPAs**

26,838

$         

47,784

$         

33,085

$         

8,105

$           

115,812

$       

22,131

$         

2,012

$           

305

$              

24,448

$         

140,260

$       

**NPA Ratio**

3.06%

4.29%

20.33%

3.09%

4.79%

3.06%

0.87%

0.15%

2.11%

3.92%

 

OREO Composition as of June 30, 2009

24

**($000)**

**CRE**

**Land and**

**Construction**

**1-4 Family**

**Ag**

**Total**

Book Balance

8,362

$

6,927

$           

4,823

$     

115

$

20,227

$

% or ORE

41%

34%

24%

1%

100%

 

Portfolio Risk Drivers

**Delinquencies**

**Problem Assets**

**Charge-offs**

**Allowance**

3rd  - 4thQuarters ‘08

3rd– 2nd  Quarters  ‘08-’09

**Decline in Real Estate            Prices/Oil Price Spike**

**           Results**

Current Situation

**Economic Recession**

Sectors effected:

Construction and Land                  Development 

Agricultural Inputs 

Energy Producers 

Metal dependent mfg. 

Losses and non-performing loans due to:

Stalled Construction and Land             Development 

Increasing residential home foreclosures 

Declining automobile sales and             manufacturing 

Insufficient alternative sources of             refinancing 

Increase in fraudulent activity

Sectors effected:

Consumer Demand 

Housing 

General Manufacturing 

Automobile Suppliers 

Dealer Floor Plan

25

 

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**

26

 

Tactical Action Plan and Business Update

Asset Quality Improvement & Capital Preservation 

Non-Performing Loan and OREO Disposition 

Enhanced Corporate Special Asset Team 

Executive Team working on NPA Sale Alternatives 

Second Quarter Dividend Reduction 

Non-Strategic Asset Reduction 

Charter Consolidation 

“Well Capitalized – Well Reserved – Well Positioned”

27

 

Stakeholder Focused

Shareholders

Communities

Customers

Employees

28

 

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

29