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): July 20, 2007
------------------------------
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 July 20, 2007, First Merchants Corporation issued a press release
to report its financial results for the second quarter ended June 30, 2007. 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 July 20, 2007, 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: July 20, 2007
Page 3 of 11
EXHIBIT INDEX
-------------
Exhibit No. Description
----------- -----------
99.1 Press Release, dated July 20, 2007, issued by
First Merchants Corporation.
Page 4 of 11
First Merchants Corporation
Exhibit No. 99.1
Press Release, dated July 20, 2007
N / E / W / S R / E / L / E / A / S / E
July 20, 2007
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 SECOND QUARTER EARNINGS PER SHARE
First Merchants Corporation (NASDAQ - FRME) has reported June 30, 2007 net
income of $13,979,000, a $821,000 decrease over the $14,800,000 earned in the
first half of 2006. Diluted earnings per share totaled $.76, a $.04 decrease
over 2006 first half earnings per share of $.80.
Second quarter net income totaled $6,208,000, down from the 2006 second quarter
$7,291,000. Diluted earnings per share totaled $.34, a $.05 decline from the
second quarter of 2006.
Included in the second quarter and first half results were special charges
related to the early redemption of the Corporation's subordinated debentures
payable to First Merchants Capital Trust I and subsequent redemption by First
Merchants Capital Trust I of its outstanding common and preferred fixed rate
securities (NASDAQ-FRMEP) as reported on Form 8-K on April 26, 2007. The early
redemption of the debentures required the Corporation to accelerate the
recognition of the remaining unamortized underwriting fee of approximately $1.8
million, or $.06 per share, during the second quarter. Going forward, the
Corporation's more favorable terms provide savings of $1.2 million, or $.04 per
share annually.
Additionally, in a January 24, 2007 press release, the Corporation announced its
plan to integrate the data operations of its Columbus, Ohio, bank into its
corporate operations center. The company finalized the re-branding of four bank
charters into First Merchants Bank on April 1, 2007. Of the four merged charters
one data consolidation is complete. The expense related to these efforts was
reported to cost just over $1 million in 2007. As of June 30, 2007, the
Corporation has expensed $601,000, or $.02 per share.
Total assets equaled $3.67 billion at quarter-end, an increase of $261 million,
or 7.7 percent, from June 30, 2006. Loans and investments, the Corporation's
primary earning assets, totaled $3.29 billion, an increase of $227 million, or
7.5 percent, over the prior period.
Non-interest income increased by $2,562,000, or 15.1 percent, through June as
service charges on deposits increased by $777,000, earnings on cash surrender
value of bank-owned life insurance increased by $612,000, and insurance
commission increased by $457,000.
Second quarter net-Interest margin, when normalized for the recognition of the
previously mentioned remaining unamortized underwriting fee totaling
approximately $1.8 million, or 22 basis points, equaled the first quarter
net-interest margin of 3.50 percent.
Year-to-date operating expense, absent the $601,000 related to operational
conversions, increased by $1,879,000, or 3.9 percent.
The allowance for loan losses increased during the last twelve months by $1.7
million as non-performing loans totaled 1.39 basis points of average total loans
and the allowance for loan losses as a percent of total loans equaled .98
percent.
Michael C. Rechin, President and Chief Executive Officer, stated that, "The
Corporation's normalized earnings per share for the quarter totaled $.42 per
share and $.84 for the first half of 2007, representing increases of 7.7 percent
and 5.0 percent, respectively." Rechin also added, "The tactical execution of
our 2007 plan continues to proceed as expected. The continued growth of our
balance sheet and fee income combined with the refinance of our trust preferred
securities, charter consolidation and tax management should prove to accelerate
our performance into the second half of 2007."
Page 5 of 11
CONFERENCE CALL
First Merchants Corporation will conduct a conference call at 2:30 p.m. Eastern
Daylight Time on Friday, July 20, 2007. To participate, dial (Toll Free)
877-407-9210 and reference First Merchants Corporation's second quarter
earnings. A replay will be available until July 27, 2007. 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 # 247985.
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., First Merchants Bank of Central Indiana, 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).
* * * *
Page 6 of 11
CONSOLIDATED BALANCE SHEETS
(in thousands) June 30,
2007 2006
Assets
Cash and due from banks $ 80,921 $ 71,275
Interest-bearing time deposits 8,898 8,529
Investment securities 479,281 466,882
Mortgage loans held for sale 2,842 5,338
Loans 2,806,068 2,591,440
Less: Allowance for loan losses (27,608) (25,884)
---------- ----------
Net loans 2,778,460 2,565,556
Premises and equipment 44,126 41,122
Federal Reserve and Federal Home Loan Bank stock 23,822 23,889
Interest receivable 21,615 19,539
Core deposit intangibles and goodwill 137,056 137,429
Cash surrender value of life insurance 69,111 44,358
Other assets 23,383 24,346
----------- -----------
Total assets $ 3,669,515 $ 3,408,263
=========== ===========
Liabilities
Deposits
Noninterest-bearing $ 362,083 $ 340,046
Interest-bearing 2,357,518 2,195,354
----------- -----------
Total deposits 2,719,601 2,535,400
Borrowings 587,574 527,347
Interest payable 10,417 6,927
Other liabilities 24,543 25,585
----------- -----------
Total liabilities 3,342,135 3,095,259
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 -- 18,285,359 and 18,259,256 shares 2,286 2,282
Additional paid-in capital 143,317 142,037
Retained earnings 193,460 181,042
Accumulated other comprehensive loss (11,683) (12,357)
----------- -----------
Total stockholders' equity 327,380 313,004
----------- -----------
Total liabilities and stockholders' equity $ 3,669,515 $ 3,408,263
=========== ===========
FINANCIAL HIGHLIGHTS
Three Months Ended Six Months Ended
(In thousands) June 30, June 30,
2007 2006 2007 2006
NET CHARGE OFF'S $ 859 $ 1,468 $ 2,179 $ 2,759
AVERAGE BALANCES
Total Assets $3,601,473 $3,321,852 $3,562,122 $3,279,130
Total Loans 2,764,209 2,534,675 2,733,840 2,504,886
Total Deposits 2,729,145 2,491,665 2,709,635 2,449,888
Total Stockholders' Equity 329,613 316,871 328,981 316,751
FINANCIAL RATIOS
Return on Average Assets .69% .88% .78% .90%
Return on Avg. Stockholders' Equity 7.53 9.20 8.50 9.35
Avg. Earning Assets to Avg. Assets 90.96 91.21 91.04 91.24
Allowance for Loan Losses as %
Of Total Loans .98 1.00 .98 1.00
Net Charge Off's as % Of Avg. Loans
(Annualized) .12 .23 .16 .22
Dividend Payout Ratio 67.65 58.97 60.53 57.50
Avg. Stockholders' Equity to Avg. Assets 9.15 9.54 9.24 9.66
Tax Equivalent Yield on Earning Assets 7.09 6.87 7.05 6.76
Cost of Supporting Liabilities 3.81 3.07 3.66 2.92
Net Int. Margin (FTE) on Earning Assets 3.28 3.80 3.39 3.83
Page 7 of 11
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share data) Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
Interest income
Loans receivable
Taxable $ 51,204 $ 45,658 $100,849 $ 88,737
Tax exempt 249 231 450 399
Investment securities
Taxable 3,394 3,082 6,676 5,808
Tax exempt 1,651 1,613 3,312 3,260
Federal funds sold 91 11 92 28
Deposits with financial institutions 120 132 243 246
Federal Reserve and Federal Home Loan Bank stock 299 320 627 631
-------- -------- -------- --------
Total interest income 57,008 51,047 112,249 99,109
-------- -------- -------- --------
Interest expense
Deposits 22,390 16,914 44,196 31,333
Federal funds purchased 1,047 625 1,901 1,114
Securities sold under repurchase agreements 910 1,053 1,479 1,888
Federal Home Loan Bank advances 3,009 2,610 5,945 5,266
Subordinated debentures, revolving credit lines
and term loans 3,808 2,020 5,809 4,011
Other borrowings 59 142
-------- -------- -------- --------
Total interest expense 31,164 23,281 59,330 43,754
-------- -------- -------- --------
Net interest income 25,844 27,766 52,919 55,355
Provision for loan losses 1,648 1,729 3,247 3,455
-------- -------- -------- --------
Net interest income
after provision for loan losses 24,196 26,037 49,672 51,900
-------- -------- -------- --------
Other income
Fiduciary activities 2,257 1,949 4,293 3,900
Service charges on deposit accounts 3,091 2,771 5,974 5,197
Other customer fees 1,535 1,389 3,026 2,744
Net realized gains on
sales of available-for-sale securities (9) (1)
Commission income 1,269 946 2,907 2,450
Earnings on cash surrender value
of life insurance 782 432 1,467 855
Net gains and fees on sales of loans 611 511 1,143 1,065
Other income 221 422 761 797
-------- -------- -------- --------
Total other income 9,766 8,411 19,570 17,008
-------- -------- -------- --------
Other expenses
Salaries and employee benefits 14,796 13,543 29,522 27,935
Net occupancy expenses 1,612 1,477 3,210 2,911
Equipment expenses 1,783 2,007 3,505 3,956
Marketing expense 653 438 1,140 838
Outside data processing fees 1,036 921 1,987 1,804
Printing and office supplies 388 424 687 728
Core deposit amortization 790 761 1,581 1,523
Other expenses 4,910 4,323 8,530 7,987
-------- -------- -------- --------
Total other expenses 25,968 23,894 50,162 47,682
-------- -------- -------- --------
Income before income tax 7,994 10,554 19,080 21,226
Income tax expense 1,786 3,263 5,101 6,426
-------- -------- -------- --------
Net income $ 6,208 $ 7,291 $ 13,979 $ 14,800
======== ======== ======== ========
Per Share Data
Basic Net Income .34 .39 .76 .80
Diluted Net Income .34 .39 .76 .80
Cash Dividends Paid .23 .23 .46 .46
Average Diluted Shares
Outstanding (in thousands) 18,369 18,463 18,432 18,495
Page 8 of 11
CONSOLIDATED BALANCE SHEETS
(in thousands) June 30, March 31, December 31, September 30, June 30,
2007 2007 2006 2006 2006
Assets
Cash and due from banks $ 80,921 $ 43,629 $ 89,957 $ 65,641 $ 71,275
Interest-bearing time deposits 8,898 6,785 11,284 8,717 8,529
Investment securities 479,281 476,199 465,217 468,074 466,882
Mortgage loans held for sale 2,842 2,732 5,413 3,395 5,338
Loans 2,806,068 2,731,140 2,692,601 2,641,644 2,591,440
Less: Allowance for loan losses (27,608) (26,819) (26,540) (26,975) (25,884)
----------- ----------- ----------- ----------- -----------
Net loans 2,778,460 2,704,321 2,666,061 2,614,669 2,565,556
Premises and equipment 44,126 43,262 42,393 40,511 41,122
Federal Reserve and Federal Home Loan Bank stock 23,822 23,691 23,691 23,620 23,889
Interest receivable 21,615 21,941 24,345 23,946 19,539
Core deposit intangibles and goodwill 137,056 137,847 138,638 136,666 137,429
Cash surrender value of life insurance 69,111 68,360 64,213 63,539 44,358
Other assets 23,383 26,047 23,658 23,261 24,346
----------- ----------- ----------- ----------- -----------
Total assets $ 3,669,515 $ 3,554,814 $ 3,554,870 $ 3,472,039 $ 3,408,263
=========== =========== =========== =========== ===========
Liabilities
Deposits
Noninterest-bearing $ 362,083 $ 325,615 $ 362,058 $ 324,601 $ 340,046
Interest-bearing 2,357,518 2,361,773 2,388,480 2,369,690 2,195,354
----------- ----------- ----------- ----------- -----------
Total deposits 2,719,601 2,687,388 2,750,538 2,694,291 2,535,400
Borrowings 587,574 497,188 440,764 419,146 527,347
Interest payable 10,417 10,834 9,326 10,236 6,927
Other liabilities 24,543 30,756 26,917 26,075 25,585
----------- ----------- ----------- ----------- -----------
Total liabilities 3,342,135 3,226,166 3,227,545 3,149,748 3,095,259
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 2,286 2,289 2,305 2,292 2,282
Additional paid-in capital 143,317 143,672 146,460 143,688 142,037
Retained earnings 193,460 191,476 187,965 184,555 181,042
Accumulated other comprehensive loss (11,683) (8,789) (9,405) (8,244) (12,357)
----------- ----------- ----------- ----------- -----------
Total stockholders' equity 327,380 328,648 327,325 322,291 313,004
----------- ----------- ----------- ----------- -----------
Total liabilities and stockholders' equity $ 3,669,515 $ 3,554,814 $ 3,554,870 $ 3,472,039 $ 3,408,263
=========== =========== =========== =========== ===========
NON-PERFORMING ASSETS
(in thousands) June 30, March 31, December 31, September 30, June 30,
2007 2007 2006 2006 2006
90 days past due $ 5,203 $ 4,554 $ 2,870 $ 4,253 $ 8,818
Non-accrual loans 30,820 22,704 17,926 16,524 12,611
Other real estate 2,274 3,102 2,160 2,194 2,497
---------- ---------- ---------- ---------- ----------
Total non-performing assets $ 38,297 $ 30,360 $ 22,956 $ 22,971 $ 23,926
========== ========== ========== ========== ==========
Average total loans for the quarter $2,764,209 $2,703,134 $2,653,700 $2,613,805 $2,534,675
Total non-performing assets as a
percent of average total loans 1.39% 1.12% .87% .87% .94%
Restructured loans $ 58 $ 59 $ 84 $ 93 $ 111
Page 9 of 11
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
(in thousands, except share data) June 30, March 31, December 31, September 30 June 30,
2007 2007 2006 2006 2006
Interest Income
Loans receivable
Taxable $ 51,204 $ 49,645 $ 49,293 $ 48,738 $ 45,658
Tax exempt 249 201 240 189 231
Investment securities
Taxable 3,394 3,282 3,219 3,289 3,082
Tax exempt 1,651 1,661 1,660 1,645 1,613
Federal funds sold 91 1 332 13 11
Deposits with financial institutions 120 123 110 144 132
Federal Reserve and Federal Home Loan Bank stock 299 328 318 307 320
-------- -------- -------- -------- --------
Total interest income 57,008 55,241 55,172 54,325 51,047
-------- -------- -------- -------- --------
Interest expense
Deposits 22,390 21,806 22,690 20,291 16,914
Federal funds purchased 1,047 854 93 635 625
Securities sold under repurchase agreements 910 569 488 852 1,053
Federal Home Loan Bank advances 3,009 2,936 2,672 2,796 2,610
Subordinated debentures, revolving credit
lines and term loans 3,808 2,001 2,046 2,067 2,020
Other borrowings 67 60 59
-------- -------- -------- -------- --------
Total interest expense 31,164 28,166 28,056 26,701 23,281
-------- -------- -------- -------- --------
Net interest income 25,844 27,075 27,116 27,624 27,766
Provision for loan losses 1,648 1,599 1,245 1,558 1,729
-------- -------- -------- -------- --------
Net interest income
after provision for loan losses 24,196 25,476 25,871 26,066 26,037
-------- -------- -------- -------- --------
Other income
Fiduciary activities 2,257 2,036 1,862 1,863 1,949
Service charges on deposit accounts 3,091 2,883 3,010 3,055 2,771
Other customer fees 1,535 1,491 1,387 1,386 1,389
Net realized gains (losses) on sales of
available-for-sale securities (1) (4) (9)
Commission income 1,269 1,638 881 971 946
Earnings on cash surrender value
of life insurance 782 685 712 719 432
Net gains and fees on sales of loans 611 532 613 493 511
Other income 221 540 309 348 422
-------- -------- -------- -------- --------
Total other income 9,766 9,804 8,770 8,835 8,411
-------- -------- -------- -------- --------
Other expenses
Salaries and employee benefits 14,796 14,726 14,157 14,033 13,543
Net occupancy expenses 1,612 1,598 1,498 1,477 1,477
Equipment expenses 1,783 1,722 1,956 2,035 2,007
Marketing expense 653 487 508 586 438
Outside data processing fees 1,036 951 804 841 921
Printing and office supplies 388 299 401 367 424
Core deposit amortization 790 791 781 762 761
Other expenses 4,910 3,620 4,315 3,854 4,323
-------- -------- -------- -------- --------
Total other expenses 25,968 24,194 24,420 23,955 23,894
-------- -------- -------- -------- --------
Income before income tax 7,994 11,086 10,221 10,946 10,554
Income tax expense 1,786 3,315 2,562 3,207 3,263
-------- -------- -------- -------- --------
Net income $ 6,208 $ 7,771 $ 7,659 $ 7,739 $ 7,291
======== ======== ======== ======== ========
Per Share Data
Basic Net Income $ .34 $ .42 $ .42 $ .42 $ .39
Diluted Net Income .34 .42 .42 .42 .39
Cash Dividends Paid .23 .23 .23 .23 .23
Average Diluted Shares
Outstanding (in thousands) 18,369 18,497 18,498 18,381 18,463
FINANCIAL RATIOS
Return on Average Assets .69% .88% .88% .90% .88%
Return on Avg. Stockholders' Equity 7.53 9.47 9.39 9.72 9.20
Avg. Earning Assets to Avg. Assets 90.96 91.13 90.87 91.26 91.21
Allowance for Loan Losses as %
Of Total Loans .98 .98 .99 1.02 1.00
Net Charge Off's as % Of Avg. Loans
(Annualized) .23 .20 .25 .07 .23
Dividend Payout Ratio 67.65 54.76 56.10 54.76 58.97
Avg. Stockholders' Equity to Avg. Assets 9.15 9.32 9.32 9.30 9.54
Tax Equivalent Yield on Earning Assets 7.09 7.01 7.07 7.08 6.87
Cost of Supporting Liabilities 3.81 3.51 3.53 3.42 3.07
Net Int. Margin (FTE) on Earning Assets 3.28 3.50 3.54 3.66 3.80
Page 10 of 11
LOANS
(in thousands) June 30, March 31, December 31, September 30, June 30,
2007 2007 2006 2006 2006
Commercial and industrial loans $ 590,345 $ 557,304 $ 537,305 $ 497,280 $ 501,238
Agricultural production financing and
other loans to farmers 103,713 97,784 100,098 104,147 95,352
Real estate loans:
Construction 172,247 151,782 169,491 175,753 178,254
Commercial and farmland 895,301 906,726 861,429 835,403 813,171
Residential 768,392 756,316 749,921 757,116 744,552
Individuals' loans for household and other
personal expenditures 206,435 210,578 223,504 215,237 208,768
Tax exempt loans 23,181 15,306 14,423 16,550 13,656
Lease financing receivables, net of unearned income 7,906 7,648 8,010 8,543 8,589
Other loans 38,548 27,696 28,420 31,615 27,860
----------- ---------- ------------ ---------- ----------
2,806,068 2,731,140 2,692,601 2,641,644 2,591,440
Allowance for loan losses (27,608) (26,819) (26,540) (26,975) (25,884)
----------- ---------- ------------ ---------- ----------
Total loans $2,778,460 $2,704,321 $2,666,061 $2,614,669 $2,565,556
=========== ========== ============ ========== ==========
DEPOSITS
(in thousands) June 30, March 31, December 31, September 30, June 30,
2007 2007 2006 2006 2006
Demand deposits $ 855,458 $ 787,538 $ 883,294 $ 743,154 $ 758,132
Savings deposits 494,738 530,692 507,431 512,112 510,878
Certificates and other time deposits of
$100,000 or more 443,355 398,061 408,910 394,724 313,751
Other certificates and time deposits 926,050 971,097 950,903 1,044,301 952,639
----------- ---------- ----------- ----------- -----------
Total deposits $ 2,719,601 $2,687,388 $2,750,538 $2,694,291 $2,535,400
=========== ========== =========== =========== ===========
Page 11 of 11