UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 22, 2003
FIRST MERCHANTS CORPORATION
(Exact name of registrant as specified in its charter)
INDIANA
(State or other jurisdiction of incorporation)
0-17071 35-1544218
(Commission File Number) (IRS Employer Identification No.)
200 East Jackson Street
P.O. Box 792
Muncie, Indiana 47305-2814
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (765) 747-1500
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
Exhibit 99.1 Press Release, dated October 22, 2003, issued by
First Merchants Corporation
ITEM 9. REGULATION FD DISCLOSURE (INFORMATION PROVIDED UNDER ITEM 12 - RESULTS
OF OPERATIONS AND FINANCIAL CONDITION).
The following information is being provided under Item 12 - Results of
Operations and Financial Condition. It is being furnished under Item 9
of this Form 8-K in accordance with interim guidance issued by the SEC
in Release No. 33-8216. Such information, including the Exhibit
attached hereto, shall not be deemed "filed" for purposes of Section 18
of the Securities Exchange Act of 1934.
On October 22, 2003, First Merchants Corporation issued a press release
to report its financial results for the quarter ended September 30,
2003. The release is furnished as Exhibit 99.1 hereto.
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.
By: /s/ Larry R. Helms
--------------------------------------------
Larry R. Helms, Senior Vice President
Dated: October 22, 2003
EXHIBIT INDEX
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Exhibit No.
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99.1 Description
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Press Release, dated October 22, 2003, issued by
First Merchants Corporation.
First Merchants Corporation
Exhibit No. 99.1
Press Release, dated October 22, 2003
N / E / W / S R / E / L / E / A / S / E
October 22, 2003
FOR IMMEDIATE RELEASE
For more information, contact:
Mark K. Hardwick, Senior Vice President/Chief Financial Officer
765-751-1857
http://firstmerchants.com
SOURCE: First Merchants Corporation
FIRST MERCHANTS ANNOUNCES 3rd QUARTER EARNINGS PER SHARE
First Merchants Corporation (NASDAQ - FRME) has reported that third quarter 2003
diluted earnings per share equaled $.39, a decrease of 15.2%, from $.46 in the
prior year. Net income decreased $478,000, or 6.1%, during the same period.
Year-to-date diluted earnings were $1.19 per share compared to $1.31 in 2002.
Year-to-date net income increased $512,000, or 2.4%, from $21,240,000 to
$21,752,000.
Net interest margin for the nine months ended September 30, 2003 declined 34
basis points as the Corporation's yield on earning assets declined 83 basis
points and the cost of supporting liabilities declined by 49 basis points.
For the quarter, net interest margin declined 47 basis points as the
Corporation's yield on earning assets declined 1.03 percent and the cost of
supporting liabilities declined by 56 basis points.
Year-to-date gains from the sale of mortgage loans increased from $990,000 to
$5,618,000, and the provision for loan losses increased from $4,297,000 to
$8,430,000.
For the quarter, gains from the sale of mortgage loans increased by $876,000 and
the provision for loan losses decreased by $115,000.
Michael L. Cox, President and Chief Executive Officer, commented that, "Changes
in the yield curve, during the quarter, increased pressure on earnings as the
Corporation maintains an asset sensitive interest rate risk position. This
position has increased our dependence on gains generated from the sales of
mortgage loans during this record low interest rate environment. The Federal
Reserve Bank's reduction in the target fed funds rate of 25-basis points, during
the last week of June, coupled with more than a 100-basis point increase in the
30-year treasury and mortgage rates, have proven to be challenging."
Total loans outstanding reached $2.4 billion, an increase of $355 million over
the prior year. Of the increase, $318 million is attributable to the acquisition
of CNBC Bancorp on March 1, 2003. The remaining net increase of $37 million
resulted primarily from increased commercial real estate loans outstanding of
$55 million, mitigated by reductions in both residential real estate loans and
individual loans for household and other personal expenditures.
Total non-performing assets decreased from 1.21% of total loans in the third
quarter of 2002 to 1.13% as of September 30, 2003. The Corporation's allowance
for loan losses increased to 1.27% versus 1.10% during the same period last
year.
During the quarter, the Corporation completed a sale of non-performing loans.
The sale reduced non-performing loans by $2 million and significantly reduced
classified assets in one bank. Additionally, the remaining banks in the
Corporation reduced non-performing loans by another $1.7 million.
The Corporation's Board of Directors also authorized management to proceed with
its strategic initiative of minimizing the number of regulatory agencies
governing its banks. The Corporation is in the process of converting all of its
state chartered banks to National Charters. The Office of the Comptroller of the
Currency and the Federal Reserve Bank will be the remaining regulators once the
conversion is complete.
CONFERENCE CALL
First Merchants Corporation will conduct a conference call at 2:30 p.m. Eastern
Standard Time on Wednesday, October 22, 2003. To participate, dial 888-710-8192
and reference First Merchants Corporation's third quarter earnings release. A
digital recording will be available two hours after the completion of the
conference from October 22, 2003, to October 24, 2003. To access, US/Canada
guests should call 800-642-1687; or for International/Local guests, call
706-645-9291 and enter the Conference I.D. 3236274.
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,
NA, Madison Community Bank, First United Bank, Union County National Bank, The
Randolph County Bank, First National Bank, Decatur Bank & Trust Company, Frances
Slocum Bank, Lafayette Bank & Trust Company, Commerce National Bank and
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 and is rated A+ by Standard
& Poor's Corporation. 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) September 30,
2003 2002
Assets
Cash and due from banks $ 87,619 $ 73,223
Federal funds sold 0 8,750
----------- -----------
Cash and cash equivalents 87,619 81,973
Interest-bearing time deposits 3,789 10,222
Investment securities 316,852 345,452
Mortgage loans held for sale 12,042 14,089
Loans, net of allowance for loan losses
of $29,842 and $22,147 2,321,563 1,971,891
Premises and equipment 39,475 39,179
Federal Reserve and Federal Home Loan Bank stock 14,057 11,097
Interest receivable 17,139 18,622
Core deposit intangibles and goodwill 143,648 106,753
Cash surrender value of life insurance 37,536 14,143
Other assets 18,000 16,065
----------- -----------
Total assets $ 3,011,720 $ 2,629,486
=========== ===========
Liabilities
Deposits
Noninterest-bearing $ 316,058 $ 246,410
Interest-bearing 1,994,146 1,773,325
----------- -----------
Total deposits 2,310,204 2,019,735
Borrowings 374,051 328,933
Interest payable 5,200 6,813
Other liabilities 21,064 14,132
----------- -----------
Total liabilities 2,710,519 2,369,613
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 - 18,487,974 and 17,124,914 2,311 2,141
Additional paid-in capital 149,810 116,102
Retained earnings 147,559 135,266
Accumulated other comprehensive income 1,521 6,364
----------- -----------
Total stockholders' equity 301,201 259,873
----------- -----------
Total liabilities and stockholders' equity $ 3,011,720 $ 2,629,486
=========== ===========
FINANCIAL HIGHLIGHTS
Three Months Ended Nine Months Ended
(In thousands) September 30, September 30,
2003 2002 2003 2002
NET CHARGE OFF'S $ 2,503 $ 1,637 $ 4,732 $ 4,193
AVERAGE BALANCES
Total Assets $3,030,935 $2,635,606 $2,923,015 $2,319,049
Total Loans 2,348,817 1,984,323 2,258,725 1,766,879
Total Deposits 2,305,589 2,018,242 2,221,870 1,800,894
Total Stockholders' Equity 301,048 254,654 290,503 229,634
FINANCIAL RATIOS
Return on Average Assets 0.97% 1.19% 0.99% 1.22%
Return on Avg. Stockholders' Equity 9.76 12.40 9.98 12.45
Avg. Earning Assets to Avg. Assets 89.48 90.27 89.92 91.11
Allowance for Loan Losses as %
Of Total Loans 1.26 1.10 1.26 1.10
Net Charge Off's as % Of Avg. Loans
(Annualized) .43 .32 .28 .32
Dividend Payout Ratio 58.97 47.83 56.30 50.38
Avg. Stockholders' Equity to Avg. Assets 9.93 9.58 9.94 9.81
Tax Equivalent Yield on Earning Assets 5.89 6.92 6.11 6.94
Cost of Supporting Liabilities 1.93 2.49 2.01 2.50
Net Int. Margin (FTE) on Earning Assets 3.96 4.43 4.10 4.44
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share data) Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
Interest Income
Loans receivable
Taxable $ 35,607 $ 35,362 $106,539 $ 94,504
Tax exempt 185 169 512 403
Investment securities
Taxable 1,342 2,442 4,621 6,986
Tax exempt 1,562 1,793 4,819 4,450
Federal funds sold 49 123 339 388
Deposits with financial institutions 13 53 54 159
Federal Reserve and Federal Home Loan Bank stock 201 206 610 527
-------- -------- -------- --------
Total interest income 38,959 40,148 117,494 107,417
-------- -------- -------- --------
Interest expense
Deposits 8,623 10,696 26,555 29,766
Securities sold under repurchase agreements 370 517 1,273 1,558
Federal Home Loan Bank advances 2,409 2,283 7,077 5,807
Trust preferred securities 1,232 1,181 3,697 2,143
Other borrowings 451 143 1,053 355
-------- -------- -------- --------
Total interest expense 13,085 14,820 39,655 39,629
-------- -------- -------- --------
Net interest income 25,874 25,328 77,839 67,788
Provision for loan losses 1,706 1,821 8,430 4,297
-------- -------- -------- --------
Net interest income
after provision for loan losses 24,168 23,507 69,409 63,491
-------- -------- -------- --------
Other income
Fiduciary activities 1,547 1,651 5,133 4,771
Service charges on deposit accounts 2,861 2,626 8,388 6,635
Other customer fees 961 957 3,085 2,925
Net realized gains on
sales of available-for-sale securities 512 162 950 570
Commission income 638 557 2,099 1,617
Other income 2,357 1,693 8,660 3,343
-------- -------- -------- --------
Total other income 8,876 7,646 28,315 19,861
-------- -------- -------- --------
Other expenses
Salaries and employee benefits 13,206 10,606 37,885 28,301
Net occupancy expenses 1,189 999 3,480 2,699
Equipment expenses 1,996 1,880 5,856 4,848
Marketing expense 414 415 1,259 1,079
Deposit insurance expense 143 290
Outside data processing fees 1,025 1,018 3,055 2,724
Printing and office supplies 401 388 1,240 1,155
Goodwill and core deposit amortization 958 786 2,777 1,839
Other expenses 3,771 2,952 11,784 8,194
-------- -------- -------- --------
Total other expenses 22,960 19,187 67,336 51,129
-------- -------- -------- --------
Income before income tax 10,084 11,966 30,388 32,223
Income tax expense 2,735 4,139 8,636 10,983
-------- -------- -------- --------
Net income $ 7,349 $ 7,827 $ 21,752 $ 21,240
======== ======== ======== ========
Per Share Data (1)
Basic Net Income .40 .47 1.20 1.32
Diluted Net Income .39 .46 1.19 1.31
Cash Dividends Paid .23 .22 .67 .66
(1) Restated for a five percent (5%) stock dividend distributed September 2003.
CONSOLIDATED BALANCE SHEETS
(in thousands) September 30, June 30, March 31, December 31, September 30,
2003 2003 2003 2002 2002
Assets
Cash and due from banks $ 87,619 $ 89,126 $ 81,789 $ 87,638 $ 73,223
Federal funds sold 0 14,150 54,925 31,400 8,750
----------- ----------- ----------- ------------ -----------
Cash and cash equivalents 87,619 103,276 136,714 119,038 81,973
Interest-bearing time deposits 3,789 8,777 5,170 3,568 10,222
Investment securities 316,852 363,103 333,692 342,062 345,452
Mortgage loans held for sale 12,042 15,151 13,558 21,545 14,089
Loans 2,351,405 2,324,576 2,291,178 2,004,377 1,994,038
Less: Allowance for loan losses (29,842) (30,639) (29,733) (22,417) (22,147)
---------- ----------- ----------- ------------ ----------
Net loans 2,321,563 2,293,937 2,261,445 1,981,960 1,971,891
Premises and equipment 39,475 39,313 38,861 38,645 39,179
Federal Reserve and Federal Home Loan Bank stock 14,057 13,933 13,912 11,409 11,097
Interest receivable 17,139 16,592 16,789 17,346 18,622
Core deposit intangibles and goodwill 143,648 144,663 141,226 107,217 106,753
Cash surrender value of life insurance 37,536 34,575 14,567 14,309 14,143
Other assets 18,000 23,641 23,088 21,588 16,065
----------- ----------- ----------- ------------ -----------
Total assets $ 3,011,720 $ 3,056,961 $ 2,999,022 $ 2,678,687 $ 2,629,486
=========== =========== =========== ============ ===========
Liabilities
Deposits
Noninterest-bearing $ 316,058 $ 324,735 $ 289,835 $ 272,128 $ 246,410
Interest-bearing 1,994,146 1,988,593 1,996,836 1,764,560 1,773,325
----------- ----------- ----------- ------------ -----------
Total deposits 2,310,204 2,313,328 2,286,671 2,036,688 2,019,735
Borrowings 374,051 417,669 388,821 356,927 328,933
Interest payable 5,200 5,494 5,694 6,019 6,813
Other liabilities 21,064 19,460 28,212 17,924 14,132
----------- ----------- ----------- ------------ -----------
Total liabilities 2,710,519 2,755,951 2,709,398 2,417,558 2,369,613
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 2,311 2,301 2,298 2,142 2,141
Additional paid-in capital 149,810 148,296 143,505 116,401 116,102
Retained earnings 147,559 144,457 139,743 138,110 135,266
Accumulated other comprehensive income 1,521 5,956 4,078 4,476 6,364
----------- ----------- ----------- ------------ -----------
Total stockholders' equity 301,201 301,010 289,624 261,129 259,873
----------- ----------- ----------- ------------ -----------
Total liabilities and stockholders' equity $ 3,011,720 $ 3,056,961 $ 2,999,022 $ 2,678,687 $ 2,629,486
=========== =========== =========== ============ ===========
NON-PERFORMING ASSETS
(In thousands) September 30, June 30, March 31, December 31, September 30,
2003 2003 2003 2002 2002
90 days past due $ 4,790 $ 5,295 $ 3,552 $ 6,676 $ 9,786
Non-accrual loans 20,093 22,532 19,747 14,134 13,285
Other real estate 1,547 2,351 1,841 1,691 868
------------ ---------- ---------- ------------ ------------
Total non-performing assets $ 26,430 $ 30,178 $ 25,140 $ 22,501 $ 23,939
============ ========== ========== ============ ============
Average total loans for the quarter $ 2,348,817 $2,313,688 $2,111,056 $ 2,066,616 $ 1,984,323
Total non-performing assets as a
percent of average total loans 1.13% 1.30% 1.19% 1.09% 1.21%
Restructured loans $ 647 $ 899 $ 2,194 $ 2,508 $ 2,326
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
(in thousands, except share data) September 30, June 30, March 31, December 31, September 30,
2003 2003 2003 2002 2002
Interest Income
Loans receivable
Taxable $ 35,607 $ 35,759 $ 35,173 $ 34,775 $ 35,362
Tax exempt 185 162 165 235 169
Investment securities
Taxable 1,342 1,600 1,679 2,100 2,442
Tax exempt 1,562 1,626 1,631 1,740 1,793
Federal funds sold 49 177 113 169 123
Deposits with financial institutions 13 19 22 38 53
Federal Reserve and Federal Home Loan Bank stock 201 211 198 208 206
-------- -------- -------- -------- --------
Total interest income 38,959 39,554 38,981 39,265 40,148
-------- -------- -------- -------- --------
Interest expense
Deposits 8,623 9,048 8,884 9,934 10,696
Securities sold under repurchase agreements 370 454 449 502 517
Federal Home Loan Bank advances 2,409 2,395 2,273 2,359 2,283
Trust preferred securities 1,232 1,259 1,206 1,181 1,181
Other borrowings 451 443 159 154 143
-------- -------- -------- -------- --------
Total interest expense 13,085 13,599 12,971 14,130 14,820
-------- -------- -------- -------- --------
Net interest income 25,874 25,955 26,010 25,135 25,328
Provision for loan losses 1,706 2,123 4,601 2,877 1,821
-------- -------- -------- -------- --------
Net interest income
after provision for loan losses 24,168 23,832 21,409 22,258 23,507
-------- -------- -------- -------- --------
Other income
Fiduciary activities 1,547 1,889 1,697 1,487 1,651
Service charges on deposit accounts 2,861 2,743 2,784 2,695 2,626
Other customer fees 961 1,036 1,088 993 957
Net realized gains on sales of
available-for-sale securities 512 67 371 169 162
Commission income 638 707 754 586 557
Other income 2,357 4,711 1,592 1,286 1,693
-------- -------- -------- -------- --------
Total other income 8,876 11,153 8,286 7,216 7,646
-------- -------- -------- -------- --------
Other expenses
Salaries and employee benefits 13,206 12,902 11,777 10,849 10,606
Net occupancy expenses 1,189 1,200 1,091 933 999
Equipment expenses 1,996 2,016 1,844 1,861 1,880
Marketing expense 414 411 434 416 415
Deposit insurance expense 0 104 143
Outside data processing fees 1,025 1,102 928 940 1,018
Printing and office supplies 401 432 407 442 388
Goodwill and core deposit amortization 958 991 828 750 786
Other expenses 3,771 3,881 4,132 3,591 2,952
-------- -------- -------- -------- --------
Total other expenses 22,960 22,935 21,441 19,886 19,187
-------- -------- -------- -------- --------
Income before income tax 10,084 12,050 8,254 9,588 11,966
Income tax expense 2,735 3,305 2,596 2,998 4,139
-------- -------- -------- -------- --------
Net income $ 7,349 $ 8,745 $ 5,658 $ 6,590 $ 7,827
======== ======== ======== ======== ========
Per Share Data(1)
Basic Net Income $ .40 $ .48 $ .32 $ .38 $ .47
Diluted Net Income .39 .48 .32 .38 .46
Cash Dividends Paid .23 .22 .22 .22
..22
(1) Restated for a five percent (5%) stock dividend distributed September 2003.