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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 24, 2006
------------------------------
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 24, 2006, First Merchants Corporation issued a press
release to report its financial results for the second quarter ended June 30,
2006. 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 24, 2006, 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 24, 2006
Page 3 of 11
EXHIBIT INDEX
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Exhibit No.
-----------
99.1 Description
-----------
Press Release, dated July 24, 2006, issued by
First Merchants Corporation.
Page 4 of 11
First Merchants Corporation
Exhibit No. 99.1
Press Release, dated July 24, 2006
N / E / W / S R / E / L / E / A / S / E
July 24, 2006
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 YEAR TO DATE EARNINGS PER SHARE INCREASE
OF 2.6 PERCENT
First Merchants Corporation (NASDAQ - FRME) has reported year-to-date diluted
earnings per share totaling $.80, a 2.6 percent increase over $.78 recorded in
2005. Net income for the six months ended June 30, 2006 totaled $14.8 million
compared to $14.5 million in 2005.
Second quarter diluted earnings per share of $.39, a $.04 decline from second
quarter earnings per share of $.43 in 2005. Net income for the quarter totaled
$7.3 million compared to $7.9 million in 2005.
Total assets reached a record $3.4 billion at quarter-end, an increase of $207
million, or 6.5 percent from June 30, 2005. Loans and investments, the
Corporation's primary earning assets, totaled $3.1 billion, an increase of $197
million or 6.9 percent over the prior year.
Net-interest income improved by $492,000, or 1.00 percent for the six month
ended June 30, 2006, reflecting the challenges of a sustained inverted yield
curve. Non-interest income declined by $833,000 resulting from reduced mortgage
loans sales and rising earnings credit rates on commercial checking accounts.
Operating expense increased by a modest half of a percentage point as management
continues the process of streamlining its operating structure. Included in the
second quarter results is a charge relating to the disposition of fixed assets
from a branch closing of $290,000 or $.01 per share.
The allowance for loan losses increased during the period by $793,000 as the
Corporation's provision for loan losses declined by $1.2 million reflecting
reductions in specific reserve allocations. As of June 30, 2006, non-performing
loans totaled 94 basis points of average total loans and the allowance for loan
losses as a percent of total loans equaled 1.00 percent.
Michael L. Cox, President and Chief Executive Officer, stated that,
"Year-to-date growth in loans of 6.0 percent, growth in deposits of 5.5 percent
and expense containment are positive representations of the controllable items
in this business." Cox also added, "Management believes that a continued focus
on customer acquisition and cross selling is the best way to maximize
shareholder value."
CONFERENCE CALL
First Merchants Corporation will conduct a conference call at 2:30 p.m. Eastern
Daylight Time on Monday, July 24, 2006. To participate dial (Toll Free)
877-407-9210 and reference First Merchants Corporation's second quarter earnings
release. A replay will be available until July 31, 2006. 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 # 207562.
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,
Madison Community Bank, United Communities National Bank, First National Bank,
Decatur Bank & Trust Company, Frances Slocum Bank, Lafayette Bank & Trust
Company, Commerce National Bank and First Merchants Trust Company. The
Corporation also operates First Merchants Insurance Services, a full-service
property casualty, personal lines, and healthcare insurance agency,
headquartered in Muncie, Indiana, 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).
* * * *
CONSOLIDATED BALANCE SHEETS
(in thousands) June 30,
2006 2005
Assets
Cash and due from banks $ 71,275 $ 71,498
Interest-bearing time deposits 8,529 9,255
Investment securities 466,882 420,685
Mortgage loans held for sale 5,338 1,356
Loans 2,591,440 2,440,906
Less: Allowance for loan losses (25,884) (25,091)
---------- ----------
Net loans 2,565,556 2,415,815
Premises and equipment 41,122 37,240
Federal Reserve and Federal Home Loan Bank stock 23,889 23,054
Interest receivable 19,539 16,950
Core deposit intangibles and goodwill 137,429 139,799
Cash surrender value of life insurance 44,358 42,827
Other assets 24,346 22,819
----------- -----------
Total assets $ 3,408,263 $ 3,201,298
=========== ===========
Liabilities
Deposits
Noninterest-bearing $ 340,046 $ 363,654
Interest-bearing 2,195,354 2,040,624
----------- -----------
Total deposits 2,535,400 2,404,278
Borrowings 527,347 454,400
Interest payable 6,927 5,068
Other liabilities 25,585 24,194
----------- -----------
Total liabilities 3,095,259 2,887,940
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 -- 18,259,256 and 18,415,725 shares 2,282 2,302
Additional paid-in capital 142,037 146,057
Retained earnings 181,042 167,452
Accumulated other comprehensive loss (12,357) (2,453)
----------- -----------
Total stockholders' equity 313,004 313,358
----------- -----------
Total liabilities and stockholders' equity $ 3,408,263 $ 3,201,298
=========== ===========
FINANCIAL HIGHLIGHTS
Three Months Ended Six Months Ended
(In thousands) June 30, June 30,
2006 2005 2006 2005
NET CHARGE OFF'S $ 1,468 $ 1,345 $ 2,759 $ 2,072
AVERAGE BALANCES
Total Assets $3,321,852 $3,191,275 $3,279,130 $3,177,488
Total Loans 2,534,675 2,430,081 2,504,886 2,422,110
Total Deposits 2,491,665 2,422,688 2,449,888 2,420,810
Total Stockholders' Equity 316,871 312,611 316,751 313,961
FINANCIAL RATIOS
Return on Average Assets .88% .99% .90% .91%
Return on Avg. Stockholders' Equity 9.20 10.13 9.35 9.23
Avg. Earning Assets to Avg. Assets 91.21 90.81 91.24 90.71
Allowance for Loan Losses as %
Of Total Loans 1.00 1.03 1.00 1.03
Net Charge Off's as % Of Avg. Loans
(Annualized) .23 .22 .22 .17
Dividend Payout Ratio 58.97 53.49 57.50 58.98
Avg. Stockholders' Equity to Avg. Assets 9.54 9.80 9.66 9.88
Tax Equivalent Yield on Earning Assets 6.87 6.14 6.76 6.01
Cost of Supporting Liabilities 3.07 2.15 2.92 2.08
Net Int. Margin (FTE) on Earning Assets 3.80 3.99 3.83 3.93
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share data) Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
Interest income
Loans receivable
Taxable $ 45,658 $ 38,831 $ 88,737 $ 75,653
Tax exempt 231 189 399 323
Investment securities
Taxable 3,082 2,376 5,808 4,705
Tax exempt 1,613 1,554 3,260 3,107
Federal funds sold 11 112 28 139
Deposits with financial institutions 132 166 246 308
Federal Reserve and Federal Home Loan Bank stock 320 285 631 593
-------- -------- -------- --------
Total interest income 51,047 43,513 99,109 84,828
-------- -------- -------- --------
Interest expense
Deposits 16,914 10,729 31,333 20,535
Federal funds purchased 625 161 1,114 204
Securities sold under repurchase agreements 1,053 193 1,888 543
Federal Home Loan Bank advances 2,610 2,443 5,266 4,818
Subordinated debentures, revolving credit lines
and term loans 2,020 1,839 4,011 3,628
Other borrowings 59 227 142 237
-------- -------- -------- --------
Total interest expense 23,281 15,592 43,754 29,965
-------- -------- -------- --------
Net interest income 27,766 27,921 55,355 54,863
Provision for loan losses 1,729 1,948 3,455 4,615
-------- -------- -------- --------
Net interest income
after provision for loan losses 26,037 25,973 51,900 50,248
-------- -------- -------- --------
Other income
Fiduciary activities 1,949 1,963 3,900 3,925
Service charges on deposit accounts 2,771 3,048 5,197 5,771
Other customer fees 1,389 1,188 2,744 2,273
Net realized gains on
sales of available-for-sale securities (9) 6 0 6
Commission income 946 757 2,450 2,261
Earnings on cash surrender value
of life insurance 432 439 855 840
Net gains and fees on sales of loans 511 779 1,065 1,456
Other income 422 582 797 1,309
-------- -------- -------- --------
Total other income 8,411 8,762 17,008 17,841
-------- -------- -------- --------
Other expenses
Salaries and employee benefits 13,543 13,258 27,935 28,079
Net occupancy expenses 1,477 1,422 2,911 2,831
Equipment expenses 2,007 1,852 3,956 3,709
Marketing expense 438 526 838 941
Outside data processing fees 921 1,033 1,804 2,042
Printing and office supplies 424 304 728 641
Core deposit amortization 761 778 1,523 1,565
Other expenses 4,323 4,026 7,987 7,657
-------- -------- -------- --------
Total other expenses 23,894 23,199 47,682 47,463
-------- -------- -------- --------
Income before income tax 10,554 11,536 21,226 20,626
Income tax expense 3,263 3,615 6,426 6,138
-------- -------- -------- --------
Net income $ 7,291 $ 7,921 $ 14,800 $ 14,488
======== ======== ======== ========
Per Share Data
Basic Net Income .39 .43 .80 .78
Diluted Net Income .39 .43 .80 .78
Cash Dividends Paid .23 .23 .46 .46
Average Diluted Shares
Outstanding (in thousands) 18,463 18,536 18,495 18,614
CONSOLIDATED BALANCE SHEETS
(in thousands) June 30, March 31, December 31, September 30, June 30,
2006 2006 2005 2005 2005
Assets
Cash and due from banks $ 71,275 $ 59,176 $ 70,417 $ 81,310 $ 71,498
Interest-bearing time deposits 8,529 9,104 8,748 10,708 9,255
Investment securities 466,882 441,651 434,266 436,794 420,685
Mortgage loans held for sale 5,338 5,170 4,910 5,026 1,356
Loans 2,591,440 2,491,488 2,457,427 2,443,931 2,440,906
Less: Allowance for loan losses (25,884) (25,623) (25,188) (25,149) (25,091)
----------- ----------- ----------- ----------- -----------
Net loans 2,565,556 2,465,865 2,432,239 2,418,782 2,415,815
Premises and equipment 41,122 39,029 39,417 38,473 37,240
Federal Reserve and Federal Home Loan Bank stock 23,889 23,421 23,200 23,165 23,054
Interest receivable 19,539 19,035 19,690 19,561 16,950
Core deposit intangibles and goodwill 137,429 138,174 138,833 139,597 139,799
Cash surrender value of life insurance 44,358 43,964 43,579 43,230 42,827
Other assets 24,346 25,346 21,780 21,792 22,819
----------- ----------- ----------- ----------- -----------
Total assets $ 3,408,263 $ 3,269,935 $ 3,237,079 $ 3,238,438 $ 3,201,298
=========== =========== =========== =========== ===========
Liabilities
Deposits
Noninterest-bearing $ 340,046 $ 325,548 $ 314,335 $ 346,318 $ 363,654
Interest-bearing 2,195,354 2,120,524 2,068,241 2,118,975 2,040,624
----------- ----------- ----------- ----------- -----------
Total deposits 2,535,400 2,446,072 2,382,576 2,465,293 2,404,278
Borrowings 527,347 469,002 508,236 423,959 454,400
Interest payable 6,927 6,412 5,874 5,643 5,068
Other liabilities 25,585 31,711 26,997 25,153 24,194
----------- ----------- ----------- ----------- -----------
Total liabilities 3,095,259 2,953,197 2,923,683 2,920,048 2,887,940
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 2,282 2,305 2,302 2,313 2,302
Additional paid-in capital 142,037 146,374 145,682 148,004 146,057
Retained earnings 181,042 177,975 174,717 171,419 167,452
Accumulated other comprehensive loss (12,357) (9,916) (9,305) (3,346) (2,453)
----------- ----------- ----------- ----------- -----------
Total stockholders' equity 313,004 316,738 313,396 318,390 313,358
----------- ----------- ----------- ----------- -----------
Total liabilities and stockholders' equity $ 3,408,263 $ 3,269,935 $ 3,237,079 $ 3,238,438 $ 3,201,298
=========== =========== =========== =========== ===========
NON-PERFORMING ASSETS
(in thousands) June 30, March 31, December 31, September 30, June 30,
2006 2006 2005 2005 2005
90 days past due $ 8,818 $ 5,188 $ 3,965 $ 3,560 $ 3,696
Non-accrual loans 12,611 11,424 10,030 11,757 11,626
Other real estate 2,497 3,209 2,835 3,023 1,804
---------- ---------- ---------- ---------- ----------
Total non-performing assets $ 23,926 $ 19,821 $ 16,830 $ 18,340 $ 17,126
========== ========== ========== ========== ==========
Average total loans for the quarter $2,534,675 $2,474,759 $2,447,794 $2,444,131 $2,430,081
Total non-performing assets as a
percent of average total loans .94% .80% .69% .75% .70%
Restructured loans $ 111 $ 114 $ 310 $ 454 $ 531
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
(in thousands, except share data) June 30, March 31, December 31, September 30, June 30,
2006 2006 2005 2005 2005
Interest Income
Loans receivable
Taxable $ 45,658 $ 43,079 $ 41,930 $ 40,853 $ 38,831
Tax exempt 231 168 160 160 189
Investment securities
Taxable 3,082 2,726 2,480 2,427 2,376
Tax exempt 1,613 1,647 1,672 1,595 1,554
Federal funds sold 11 17 74 51 112
Deposits with financial institutions 132 114 202 185 166
Federal Reserve and Federal Home Loan Bank stock 320 311 296 296 285
-------- -------- -------- -------- --------
Total interest income 51,047 48,062 46,814 45,567 43,513
-------- -------- -------- -------- --------
Interest expense
Deposits 16,914 14,419 13,414 12,172 10,729
Federal funds purchased 625 489 163 256 161
Securities sold under repurchase agreements 1,053 835 647 523 193
Federal Home Loan Bank advances 2,610 2,656 2,410 2,549 2,443
Subordinated debentures, revolving credit
lines and term loans 2,020 1,991 1,910 1,894 1,839
Other borrowings 59 83 144 33 227
-------- -------- -------- -------- --------
Total interest expense 23,281 20,473 18,688 17,427 15,592
-------- -------- -------- -------- --------
Net interest income 27,766 27,589 28,126 28,140 27,921
Provision for loan losses 1,729 1,726 1,945 1,794 1,948
-------- -------- -------- -------- --------
Net interest income
after provision for loan losses 26,037 25,863 26,181 26,346 25,973
-------- -------- -------- -------- --------
Other income
Fiduciary activities 1,949 1,951 1,762 1,794 1,963
Service charges on deposit accounts 2,771 2,426 2,691 2,836 3,048
Other customer fees 1,389 1,355 1,432 1,389 1,188
Net realized gains (losses) on sales of
available-for-sale securities (9) 9 (24) 16 6
Commission income 946 1,504 690 870 757
Earnings on cash surrender value
of life insurance 432 423 386 441 439
Net gains and fees on sales of loans 511 554 676 770 779
Other income 422 375 516 664 582
-------- -------- -------- -------- --------
Total other income 8,411 8,597 8,129 8,780 8,762
-------- -------- -------- -------- --------
Other expenses
Salaries and employee benefits 13,543 14,392 12,596 13,384 13,258
Net occupancy expenses 1,477 1,434 1,428 1,570 1,422
Equipment expenses 2,007 1,949 1,952 1,901 1,852
Marketing expense 438 400 625 446 526
Outside data processing fees 921 883 989 979 1,033
Printing and office supplies 424 304 400 328 304
Core deposit amortization 761 762 767 770 778
Other expenses 4,323 3,664 4,469 3,923 4,026
-------- -------- -------- -------- --------
Total other expenses 23,894 23,788 23,226 23,301 23,199
-------- -------- -------- -------- --------
Income before income tax 10,554 10,672 11,084 11,825 11,536
Income tax expense 3,263 3,163 3,553 3,605 3,615
-------- -------- -------- -------- --------
Net income $ 7,291 $ 7,509 $ 7,531 $ 8,220 $ 7,921
======== ======== ======== ======== ========
Per Share Data
Basic Net Income $ .39 $ .41 $ .41 $ .45 $ .43
Diluted Net Income .39 .41 .41 .44 .43
Cash Dividends Paid .23 .23 .23 .23 .23
Average Diluted Shares
Outstanding (in thousands) 18,463 18,526 18,558 18,590 18,536
FINANCIAL RATIOS
Return on Average Assets .88% .93% .95% 1.03% .99%
Return on Avg. Stockholders' Equity 9.20 9.49 9.49 10.38 10.13
Avg. Earning Assets to Avg. Assets 91.21 91.27 91.47 90.83 90.81
Allowance for Loan Losses as %
Of Total Loans 1.00 1.03 1.02 1.03 1.03
Net Charge Off's as % Of Avg. Loans
(Annualized) .23 .21 .31 .28 .22
Dividend Payout Ratio 58.97 56.10 56.10 52.27 53.49
Avg. Stockholders' Equity to Avg. Assets 9.54 9.78 10.05 9.89 9.80
Tax Equivalent Yield on Earning Assets 6.87 6.64 6.62 6.40 6.14
Cost of Supporting Liabilities 3.07 2.77 2.59 2.40 2.15
Net Int. Margin (FTE) on Earning Assets 3.80 3.87 4.03 4.00 3.99
LOANS
(in thousands) June 30, March 31, December 31, September 30, June 30,
2006 2006 2005 2005 2005
Commercial and industrial loans $ 501,238 $ 486,411 $ 461,102 $ 476,010 $ 463,002
Agricultural production financing and
other loans to farmers 95,352 87,433 95,130 94,262 93,274
Real estate loans:
Construction 178,254 175,784 174,783 171,667 166,367
Commercial and farmland 813,171 743,905 734,865 719,154 723,099
Residential 744,552 746,410 751,217 746,777 759,003
Individuals' loans for household and other
personal expenditures 208,768 202,478 200,139 186,792 182,362
Tax exempt loans 13,656 13,656 8,263 12,439 14,135
Lease financing receivables, net of unearned income 8,589 8,193 8,713 9,538 10,533
Other loans 27,860 27,218 23,215 27,292 29,131
----------- ----------- ----------- ---------- -----------
2,591,440 2,491,488 2,457,427 2,443,931 2,440,906
Allowance for loan losses (25,884) (25,623) (25,188) (25,149) (25,091)
----------- ----------- ----------- ---------- -----------
Total loans $2,565,556 $2,465,865 $2,432,239 $2,418,782 $2,415,815
=========== =========== =========== ========== ===========
DEPOSITS
(in thousands) June 30, March 31, December 31, September 30, June 30,
2006 2006 2005 2005 2005
Demand deposits $ 758,132 $ 671,027 $ 690,923 $ 697,597 $ 720,263
Savings deposits 510,878 526,554 566,212 568,366 593,770
Certificates and other time deposits of
$100,000 or more 313,751 320,213 264,665 320,640 234,988
Other certificates and time deposits 952,639 928,278 860,776 878,690 855,257
----------- ----------- ----------- ----------- -----------
$2,535,400 $2,446,072 $2,382,576 $2,465,293 $2,404,278
=========== =========== =========== =========== ===========