First Merchants Corporation Announces 1st Quarter Profit and Improved Tangible Capital
MUNCIE, Ind.--(BUSINESS WIRE)-- First Merchants Corporation (NASDAQ: FRME) has reported a first quarter return to profitability. Earnings per share totaled $.01 per fully diluted common share, a $.16 reduction from the first quarter of 2009. Net income totaled $136,000 for the quarter, an $11.8 million improvement over the fourth quarter of 2009.
Michael C. Rechin, President and Chief Executive Officer, stated, "Returning to profitability in the first quarter of 2010 is a significant milestone as the Corporation emerges from the deepest recession in decades. Our expense management during the quarter was highly encouraging despite a continuation of elevated levels of credit related legal and other real estate owned (OREO) costs." Rechin also stated, "It's satisfying to see our registered direct private placement of $24.2 million completed on March 30, 2010 receive such positive acceptance in the market. Our improved tangible common equity ratio of 5.27 percent and total risk-based capital level of 14.44 percent provide a very stable capital base for the future. Our focus moving forward remains on meeting the needs of the communities and customers we serve and monitoring the recovery of our local economies and our loan portfolio."
Total assets were $4.376 billion as of quarter end and total loans were $3.134 billion as loan demand for quality credit opportunities remains challenging. The added liquidity produced from growth in the Corporation's demand deposits of $95 million and loan maturities, through the quarter, resulted in strategic reductions of higher paying deposit liabilities and borrowings and increases in the Corporation's bond portfolio. The Corporation's loan to deposit ratio is now 92.25 percent and its loan to asset ratio totals 71.63 percent.
Non-performing assets (NPA) plus 90 days delinquent loans declined for the second quarter in a row totaling $145 million, or 3.30 percent of total assets. The Corporation's allowance for loan losses increased to 2.82 percent of total loans, a $30 million increase over the same period last year. Net charge-offs for the quarter totaled $17.4 million exceeding provision expense of $13.9 million by $3.5 million.
Net-Interest margin expanded by 14 basis points and remained strong compared to this time last year totaling 3.82 percent as net interest income totaled just over $36 million, reflecting the strength of ongoing operations. Interest reversals on non-accrual loans totaled more than $700,000 during the quarter reducing net interest margin by just over 7 basis points.
Non-interest income totaled $11.6 million for the quarter, after adjusting for gains from the sale of securities totaling $1.8 million and other-than-temporary impairment (OTTI) charges of $488,000. The first quarter of 2009 totaled $12.2 million on a comparative basis. Of the decline, nearly $500,000 is related to the lower income derived from interest rate floors that expired early last year.
Total non-interest expense for the first quarter of 2010 totaled $34.6 million and is now back in line with first quarter 2009 results. During 2009, OREO expenses increased as a result of the difficult credit environment peaking at $5.8 million during the third quarter and still remain high totaling $2.7 million, or $2.2 million higher than the first quarter of 2009. However, the stabilization of credit related costs when combined with aggressive salary and benefit expense reductions of $2.5 million, or 12.2 percent, produced a $5 million decrease linked quarter over quarter.
The Corporation's pre-tax, pre-provision earnings totaled $14.5 million for the quarter. When normalized for a fully taxable equivalent net interest income and extraordinary items, the pre-tax, pre-provision earnings totaled $18.5 million for the first quarter of 2010, an improvement over the first quarter 2009 total of $17.6 million.
As of March 31, 2010, the Corporation's total risk-based capital measured 14.44 percent, Tier 1 risk-based capital totaled 11.65 percent, Tier 1 leverage ratio totaled 9.13 percent, and tangible common equity ratio totaled 5.27 percent. All regulatory capital ratios exceed the regulatory definitions of "well capitalized".
CONFERENCE CALL
First Merchants Corporation will conduct a first quarter earnings conference call and web cast at 2:30 p.m. (ET) on Wednesday, April 28, 2010.
To participate, dial (Toll Free) 800-860-2442 and reference First Merchants Corporation's first quarter earnings release. International callers please call +1 412-858-4600. A replay of the call will be available until May 10, 2010 at 9:00 a.m. (ET). To access a replay of the call, US/Canada participants should dial (Toll Free) 877-344-7529 or for International participants, dial +1 412-317-0088. The replay passcode is 439167.
In order to view the web cast and presentation slides, please go to http://www.talkpoint.com/viewer/starthere.asp?Pres=130292 during the time of the call.
During the call, Forward-Looking Statements about the relative business outlook may be made. 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.
About First Merchants Corporation
First Merchants Corporation is a financial holding company headquartered in Muncie, Indiana. The Corporation is comprised of First Merchants Bank, N.A., which also operates as Lafayette Bank & Trust, A Division of First Merchants Bank, N.A., Commerce National Bank, A Division of First Merchants Bank, N.A., as well as First Merchants Trust Company, N.A., and First Merchants Insurance Group, a full-service property casualty, personal lines, and healthcare 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
(Dollars in thousands) March 31,
2010 2009
ASSETS
Cash and due from banks $ 52,679 $ 96,606
Federal funds sold 7,044 89,282
Cash and cash equivalents 59,723 185,888
Interest-bearing time deposits 157,735 158,295
Investment securities 639,081 446,316
Mortgage loans held for sale 3,646 8,659
Loans 3,134,540 3,654,074
Less: Allowance for loan losses (88,568 ) (58,502 )
Net loans 3,045,972 3,595,572
Premises and equipment 54,431 58,948
Federal Reserve and Federal Home Loan Bank stock 36,721 34,420
Interest receivable 19,532 20,783
Core deposit intangibles and goodwill 157,532 162,571
Cash surrender value of life insurance 95,146 93,544
Other real estate owned 18,268 22,077
Tax asset, deferred and receivable 59,190 36,543
Other assets 28,889 63,281
TOTAL ASSETS $ 4,375,866 $ 4,886,897
LIABILITIES
Deposits:
Noninterest-bearing $ 520,551 $ 462,167
Interest-bearing 2,877,235 3,222,797
Total Deposits 3,397,786 3,684,964
Borrowings:
Securities sold under repurchase agreements 112,826 113,106
Federal Home Loan Bank advances 123,261 278,583
Subordinated debentures, revolving credit lines 194,794 204,779
and term loans
Total Borrowings 430,881 596,468
Interest payable 4,812 8,278
Other liabilities 53,446 89,082
Total Liabilities 3,886,925 4,378,792
STOCKHOLDERS' EQUITY
Preferred Stock, no-par value:
Authorized -- 500,000 shares
Series A, Issued and outstanding - 116,000 shares 112,559 111,831
Cumulative Preferred Stock, $1,000 par value,
$1,000 liquidation value:
Authorized -- 600 shares
Issued and outstanding - 125 shares 125 125
Common Stock, $.125 stated value:
Authorized -- 50,000,000 shares
Issued and outstanding - 25,495,550 and 21,055,881 3,187 2,632
shares
Additional paid-in capital 230,764 203,889
Retained earnings 150,595 205,616
Accumulated other comprehensive loss (8,289 ) (15,988 )
Total Stockholders' Equity 488,941 508,105
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,375,866 $ 4,886,897
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts) Three Months Ended
March 31,
2010 2009
INTEREST INCOME
Loans receivable:
Taxable $ 45,448 $ 53,793
Tax exempt 277 215
Investment securities:
Taxable 2,891 3,763
Tax exempt 2,646 1,769
Federal funds sold 17 12
Deposits with financial institutions 60 102
Federal Reserve and Federal Home Loan Bank stock 360 473
Total Interest Income 51,699 60,127
INTEREST EXPENSE
Deposits 11,495 16,711
Federal funds purchased 22
Securities sold under repurchase agreements 499 467
Federal Home Loan Bank advances 1,564 2,949
Subordinated debentures, revolving credit lines and term 1,926 1,479
loans
Total Interest Expense 15,484 21,628
NET INTEREST INCOME 36,215 38,499
Provision for loan losses 13,869 12,921
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 22,346 25,578
OTHER INCOME
Service charges on deposit accounts 3,262 3,542
Fiduciary activities 2,060 2,059
Other customer fees 2,498 2,003
Commission income 1,989 2,059
Earnings on cash surrender value of life insurance 508 323
Net gains and fees on sales of loans 1,149 1,430
Net realized and unrealized gains on sales of available 1,842 2,792
for sale securities
Other-than-temporary impairment on available for sale (488 ) (478 )
securities
Other income 144 741
Total Other Income 12,964 14,471
OTHER EXPENSES
Salaries and employee benefits 17,562 20,015
Net occupancy 2,851 2,569
Equipment 1,853 1,876
Marketing 429 549
Outside data processing fees 1,280 1,933
Printing and office supplies 318 363
Core deposit amortization 1,207 1,277
FDIC assessments 1,722 576
Other expenses 7,418 5,556
Total Other Expenses 34,640 34,714
INCOME BEFORE INCOME TAX 670 5,335
Income tax expense (benefit) (916 ) 1,218
NET INCOME 1,586 4,117
Preferred stock dividends and discount accretion 1,450 628
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 136 $ 3,489
Per Share Data:
Basic Net Income Available to Common Stockholders $ 0.01 $ 0.17
Diluted Net Income Available to Common Stockholders $ 0.01 $ 0.17
Cash Dividends Paid $ 0.01 $ 0.23
Average Diluted Shares Outstanding (in thousands) 21,462 21,093
FINANCIAL HIGHLIGHTS
(Dollars in thousands) Three Months Ended
March 31,
2010 2009
NET CHARGE OFF'S $ 17,432 $ 6,002
AVERAGE BALANCES:
Total Assets $ 4,363,768 $ 4,720,134
Total Loans 3,203,826 3,696,076
Total Earning Assets 3,955,515 4,298,621
Total Deposits 3,431,831 3,637,656
Total Stockholders' Equity 466,994 450,654
FINANCIAL RATIOS:
Return on Average Assets 0.01 % 0.30 %
Return on Average Stockholders' Equity 0.12 3.10
Average Earning Assets to Average Assets 90.64 91.07
Allowance for Loan Losses as % of Total Loans 2.82 1.60
Net Charge Off's as % of Average Loans 2.18 0.65
(Annualized)
Dividend Payout Ratio 100.00 135.29
Average Stockholders' Equity to Average Assets 10.70 9.55
Tax Equivalent Yield on Earning Assets 5.39 5.69
Cost of Supporting Liabilities 1.57 2.01
Net Interest Margin (FTE) on Earning Assets 3.82 3.68
NON-PERFORMING ASSETS
(Dollars in March 31, December 31, September June 30, March 31,
thousands) 30,
2010 2009 2009 2009 2009
Non-Accrual $ 122,891 $ 118,409 $ 123,290 $ 112,220 $ 108,546
Loans
Renegotiated 859 8,833 5,595 4,216
Loans
Non-Performing 123,750 127,242 128,885 116,436 108,546
Loans (NPL)
Real Estate
Owned and 18,268 14,879 21,778 20,227 22,077
Repossessed
Assets
Non-Performing 142,018 142,121 150,663 136,663 130,623
Assets (NPA)
90+ Days 2,600 3,967 5,422 3,596 7,732
Delinquent
NPAS & 90 Day $ 144,618 $ 146,088 $ 156,085 $ 140,259 $ 138,355
Delinquent
Loan Loss $ 88,568 $ 92,131 $ 86,918 $ 77,119 $ 58,502
Reserve
YTD 17,432 81,628 60,821 46,380 6,002
Charge-offs
NPAs / Actual 3.25 % 3.17 % 3.37 % 2.90 % 2.67 %
Assets %
NPAs & 90 Day
/ Actual 3.30 % 3.26 % 3.49 % 2.97 % 2.83 %
Assets %
NPAs / Actual
Loans and REO 4.50 % 4.32 % 4.37 % 3.80 % 3.54 %
%
Loan Loss
Reserves / 2.82 % 2.81 % 2.54 % 2.16 % 1.60 %
Actual Loans
(%)
NCOs / YTD
Average Loans 0.54 % 2.30 % 1.68 % 1.27 % 0.16 %
(%)
CONSOLIDATED BALANCE SHEETS
(Dollars in March 31, December 31, September 30, June 30, March 31,
thousands)
2010 2009 2009 2009 2009
ASSETS
Cash and due from $ 52,679 $ 76,801 $ 66,887 $ 73,668 $ 96,606
banks
Federal funds sold 7,044 102,346 52,828 89,282
Cash and cash 59,723 179,147 119,715 73,668 185,888
equivalents
Interest-bearing 157,735 74,025 44,312 44,595 158,295
time deposits
Investment 639,081 563,117 489,010 630,958 446,316
securities
Mortgage loans held 3,646 8,036 25,173 23,070 8,659
for sale
Loans 3,134,540 3,269,788 3,398,722 3,554,229 3,654,074
Less: Allowance for (88,568 ) (92,131 ) (86,918 ) (77,119 ) (58,502 )
loan losses
Net loans 3,045,972 3,177,657 3,311,804 3,477,110 3,595,572
Premises and 54,431 55,804 58,482 58,692 58,948
equipment
Federal Reserve and
Federal Home Loan 36,721 38,576 38,576 34,441 34,420
Bank stock
Interest receivable 19,532 20,818 22,359 20,778 20,783
Core deposit
intangibles and 157,532 158,740 160,017 161,294 162,571
goodwill
Cash surrender
value of life 95,146 94,636 94,267 93,876 93,544
insurance
Other real estate 18,268 14,879 21,778 20,227 22,077
owned
Tax asset, deferred 59,190 64,394 59,244 62,183 36,543
and refundable
Other assets 28,889 31,123 31,747 16,153 63,281
TOTAL ASSETS $ 4,375,866 $ 4,480,952 $ 4,476,484 $ 4,717,045 $ 4,886,897
LIABILITIES
Deposits:
Noninterest-bearing $ 520,551 $ 516,487 $ 477,040 $ 512,368 $ 462,167
Interest-bearing 2,877,235 3,020,049 3,035,455 3,078,555 3,222,797
Total Deposits 3,397,786 3,536,536 3,512,495 3,590,923 3,684,964
Borrowings:
Federal funds 15,042
purchased
Securities sold
under repurchase 112,826 125,687 125,045 115,011 113,106
agreements
Federal Home Loan 123,261 129,749 130,024 268,938 278,583
Bank advances
Subordinated
debentures,
revolving credit 194,794 194,790 194,787 194,783 204,779
lines and term
loans
Total Borrowings 430,881 450,226 449,856 593,774 596,468
Interest payable 4,812 5,711 5,722 7,351 8,278
Other liabilities 53,446 24,694 32,511 51,619 89,082
Total Liabilities 3,886,925 4,017,167 4,000,584 4,243,667 4,378,792
STOCKHOLDERS'
EQUITY
Preferred Stock,
no-par value:
Authorized --
500,000 shares
Series A, Issued
and outstanding - 112,559 112,373 112,190 112,009 111,831
116,000 shares
Cumulative
Preferred Stock,
$1,000 par value,
$1,000 liquidation
value:
Authorized -- 600
shares
Issued and
outstanding - 125 125 125 125 125 125
shares
Common Stock, $.125
stated value:
Authorized --
50,000,000 shares
Issued and
outstanding - 3,187 2,653 2,648 2,633 2,632
25,495,550 and
21,055,881 shares
Additional paid-in 230,764 206,600 205,759 204,403 203,889
capital
Retained earnings 150,595 150,860 164,419 172,688 205,616
Accumulated other (8,289 ) (8,826 ) (9,241 ) (18,480 ) (15,988 )
comprehensive loss
Total Stockholders' 488,941 463,785 475,900 473,378 508,105
Equity
TOTAL LIABILITIES
AND STOCKHOLDERS' $ 4,375,866 $ 4,480,952 $ 4,476,484 $ 4,717,045 $ 4,886,897
EQUITY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in December September
thousands, except March 31, 31, 30, June 30, March 31,
per share amounts)
2010 2009 2009 2009 2009
INTEREST INCOME
Loans receivable:
Taxable $ 45,448 $ 48,297 $ 50,683 $ 52,843 $ 53,793
Tax exempt 277 296 280 247 215
Investment
securities:
Taxable 2,891 2,348 2,963 3,261 3,763
Tax exempt 2,646 2,668 2,788 2,362 1,769
Federal funds sold 17 37 27 42 12
Deposits with
financial 60 75 73 116 102
institutions
Federal Reserve and
Federal Home Loan 360 348 359 199 473
Bank stock
Total Interest 51,699 54,069 57,173 59,070 60,127
Income
INTEREST EXPENSE
Deposits 11,495 12,445 13,666 15,569 16,711
Federal funds 6 22
purchased
Securities sold
under repurchase 499 511 512 507 467
agreements
Federal Home Loan 1,564 1,627 2,209 2,447 2,949
Bank advances
Subordinated
debentures, 1,926 1,921 1,932 2,113 1,479
revolving credit
lines and term loans
Total Interest 15,484 16,504 18,325 20,636 21,628
Expense
NET INTEREST INCOME 36,215 37,565 38,848 38,434 38,499
Provision for loan 13,869 26,020 24,240 58,995 12,921
losses
NET INTEREST INCOME
(LOSS) AFTER 22,346 11,545 14,608 (20,561 ) 25,578
PROVISION FOR LOAN
LOSSES
OTHER INCOME
Service charges on 3,262 3,735 3,963 3,888 3,542
deposit accounts
Fiduciary activities 2,060 1,826 1,844 1,680 2,059
Other customer fees 2,498 1,969 2,004 1,946 2,003
Commission income 1,989 1,181 1,459 1,698 2,059
Earnings on cash
surrender value of 508 569 391 331 323
life insurance
Net gains and fees 1,149 1,744 1,997 1,678 1,430
on sales of loans
Net realized and
unrealized gains on 1,842 1,984 5,211 1,154 2,792
sales of available
for sale securities
Other-than-temporary
impairment on (488 ) (2,979 ) (1,227 ) (2,045 ) (478 )
available for sale
securities
Other income 144 (472 ) 41 1,160 741
Total Other Income 12,964 9,557 15,683 11,490 14,471
OTHER EXPENSES
Salaries and 17,562 18,680 17,945 19,685 20,015
employee benefits
Net occupancy 2,851 2,816 2,422 2,443 2,569
Equipment 1,853 1,935 1,875 1,909 1,876
Marketing 429 513 508 564 549
Outside data 1,280 1,488 1,360 1,405 1,933
processing fees
Printing and office 318 359 300 397 363
supplies
Core deposit 1,207 1,277 1,277 1,278 1,277
amortization
FDIC assessments 1,722 3,203 3,121 3,494 576
Other expenses 7,418 9,386 10,187 7,017 5,556
Total Other Expenses 34,640 39,657 38,995 38,192 34,714
INCOME (LOSS) BEFORE 670 (18,555 ) (8,704 ) (47,263 ) 5,335
INCOME TAX
Income tax expense (916 ) (8,334 ) (3,774 ) (17,534 ) 1,218
(benefit)
NET INCOME (LOSS) 1,586 (10,221 ) (4,930 ) (29,729 ) 4,117
Preferred stock
dividends and 1,450 1,451 1,450 1,450 628
discount accretion
NET INCOME (LOSS)
AVAILABLE TO COMMON $ 136 $ (11,672 ) $ (6,380 ) $ (31,179 ) $ 3,489
STOCKHOLDERS
PER SHARE:
Basic Net Income
(Loss) Available to $ 0.01 $ (0.55 ) $ (0.30 ) $ (1.49 ) $ 0.17
Common Stockholders
Diluted Net Income
(Loss) Available to $ 0.01 $ (0.55 ) $ (0.30 ) $ (1.49 ) $ 0.17
Common Stockholders
Cash Dividends Paid $ 0.01 $ 0.08 $ 0.08 $ 0.08 $ 0.23
Average Diluted
Shares Outstanding 21,462 21,211 21,170 21,120 21,093
(in thousands)
FINANCIAL RATIOS:
Return on Average 0.01 % -1.04 % -0.55 % -2.59 % 0.30 %
Assets
Return on Average 0.12 (9.87 ) (5.35 ) (24.58 ) 3.10
Stockholders' Equity
Average Earning
Assets to Average 90.64 90.28 90.82 91.07 91.07
Assets
Allowance for Loan
Losses as % of Total 2.82 2.81 2.54 2.16 1.60
Loans
Net Charge Off's as
% of Average Loans 2.18 2.49 1.64 4.44 0.65
(Annualized)
Dividend Payout 100.00 (14.55 ) (26.67 ) (5.41 ) 135.29
Ratio
Average
Stockholders' Equity 10.70 10.50 10.23 10.54 9.55
to Average Assets
Tax Equivalent Yield 5.39 5.48 5.56 5.52 5.69
on Earning Assets
Cost of Supporting 1.57 1.62 1.73 1.88 2.01
Liabilities
Net Interest Margin
(FTE) on Earning 3.82 3.86 3.83 3.64 3.68
Assets
LOANS
(Dollars in March 31, December 31, September 30, June 30, March 31,
thousands)
2010 2009 2009 2009 2009
Commercial
and $ 621,591 $ 675,860 $ 806,289 $ 874,671 $ 891,393
industrial
loans
Agricultural
production
financing 109,457 121,031 124,601 121,361 120,462
and other
loans to
farmers
Real estate
loans:
Construction 131,548 158,725 147,343 162,765 208,145
Commercial 1,259,588 1,254,115 1,228,983 1,231,986 1,246,450
and farmland
Residential 821,014 841,584 855,931 930,714 949,259
Individuals'
loans for
household 142,108 154,132 177,338 174,363 193,109
and other
personal
expenditures
Tax exempt 23,047 22,049 23,846 23,596 18,121
loans
Lease
financing
receivables, 6,396 7,135 7,797 8,095 8,178
net of
unearned
income
Other loans 19,791 35,157 26,594 26,678 18,957
3,134,540 3,269,788 3,398,722 3,554,229 3,654,074
Allowance
for loan (88,568 ) (92,131 ) (86,918 ) (77,119 ) (58,502 )
losses
TOTAL LOANS $ 3,045,972 $ 3,177,657 $ 3,311,804 $ 3,477,110 $ 3,595,572
DEPOSITS
(Dollars in March 31, December 31, September 30, June 30, March 31,
thousands)
2010 2009 2009 2009 2009
Demand $ 1,261,305 $ 1,308,741 $ 1,178,372 $ 1,197,646 $ 1,166,205
deposits
Savings 738,742 733,142 726,894 740,340 743,812
deposits
Certificates
and other
time 416,113 438,264 492,875 503,971 511,873
deposits of
$100,000 or
more
Other
certificates 750,382 781,509 803,173 835,899 853,149
and time
deposits
Brokered 231,244 274,880 311,181 313,067 409,925
deposits
TOTAL $ 3,397,786 $ 3,536,536 $ 3,512,495 $ 3,590,923 $ 3,684,964
DEPOSITS
Source: First Merchants Corporation
Contact: First Merchants Corporation Mark K. Hardwick, Executive Vice President/Chief Financial Officer, 765-751-1857 http://www.firstmerchants.com