First Merchants Corporation Announces 3rd Quarter Earnings Per Share
MUNCIE, Ind.--(BUSINESS WIRE)-- First Merchants Corporation (NASDAQ: FRME) has reported a third quarter 2009 net loss of $6.4 million, or $.30 per fully diluted common share. The Corporation's third quarter contributed to year-to-date fully diluted common share loss of $1.62, down from the prior year income of $1.13.
The loss for the quarter was primarily due to provision for loan losses of $24 million. While the quarterly provision and charge offs remain elevated, the credit costs are significantly beneath the $59 million provision and $40 million of net charge offs in the second quarter of 2009. The Corporation's allowance for loan losses, as a percent of total loans, increased to $87 million or 2.54 percent of total loans as of quarter-end from 1.14 percent, as of September 30, 2008, a $52 million increase.
Loan charge-offs were $14.4 million for the quarter. Commercial real estate charge-offs totaled $4.6 million, land and lot development loans totaled $2 million, 1-4 family residential properties totaled $1.5 million, commercial and industrial loans totaled $5.6 million. Non-performing assets plus 90 days delinquent loans were $156 million, or 3.49 percent of total assets at quarter-end.
As of September 30, 2009, the Corporation's total risk-based capital improved to 13.08 percent, Tier 1 risk-based capital totaled 10.44 percent, Tier 1 leverage ratio totaled 8.47 percent, and tangible common equity ratio totaled 4.75 percent. All regulatory capital ratios exceed the regulatory definitions of "well capitalized."
Net-Interest margin improved by 19 basis points during the linked quarter to 3.83 percent as net interest income totaled nearly $39 million, reflecting the strength of ongoing operations.
Total non-interest income, linked quarter-over-quarter, increased by $4.2 million. Gains from the sale of securities totaled $5.2 million including other-than-temporary impairment charges related to pooled trust preferred holdings totaled $1.2 million.
Total non-interest expense, linked quarter-over-quarter, increased by $800,000 as the other expense category totaled $10.2 million. The largest items included in the category include expenses related to OREO write-downs of $3.6 million, professional services related to credit losses totaled $.7 million and $1.9 million of prepayment penalties of FHLB advances.
The Corporation's pre-tax, pre-provision net income totaled $15.5 million for the quarter. When normalized for a fully taxable equivalent net interest income and extraordinary items, the pre-tax, pre-provision net income totaled $19 million. Extraordinary items include such items as bond gains, OTTI expense, ORE write-downs, professional services related to credit losses and FHLB prepayment penalties.
Michael C. Rechin, President and Chief Executive Officer, stated that, "The continued impact of the recession on our results is disappointing to our management team. The level of credit costs suggests that the bottom of the cycle occurred in the second quarter, although evidence of weakness in our franchise footprint remains."
Rechin continued, "We are pleased to see our efforts in balance sheet management demonstrate benefit. Our net-interest margin growth reflects the active reduction in higher-cost liabilities accompanying this period of lesser loan demand. Margin strength, coupled with active expense control, will accelerate our return to profitability."
CONFERENCE CALL
First Merchants Corporation will conduct a third quarter earnings conference call and web cast at 2:30 p.m. (ET) on Tuesday, November 3, 2009. To participate, dial (Toll Free) 800-860-2442 and reference First Merchants Corporation's third quarter earnings release. International callers please call +1 412-858-4600. In order to view the web cast and presentation slides, please go to http://www.talkpoint.com/viewer/starthere.asp?Pres=128214 during the time of the call. A replay of the call will be available until November 9, 2009 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 434332.
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.
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 Services, 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).
Detailed financial results are reported on the attached pages:
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
September 30,
2009 2008
ASSETS
Cash and due from banks $ 66,887 $ 69,846
Federal funds sold 52,828 7,818
Cash and cash equivalents 119,715 77,664
Interest-bearing time deposits 44,312 15,623
Investment securities 489,010 388,808
Mortgage loans held for sale 25,173 2,062
Loans 3,398,722 3,078,768
Less: Allowance for loan losses (86,918 ) (34,985 )
Net loans 3,311,804 3,043,783
Premises and equipment 58,482 44,402
Federal Reserve and Federal Home Loan Bank 38,576 25,494
stock
Interest receivable 22,359 21,569
Core deposit intangibles and goodwill 160,017 135,701
Cash surrender value of life insurance 94,267 73,448
Other real estate owned 21,778 16,916
Other assets 90,991 18,604
TOTAL ASSETS $ 4,476,484 $ 3,864,074
LIABILITIES
Deposits:
Noninterest-bearing $ 477,040 $ 384,928
Interest-bearing 3,035,455 2,529,355
Total Deposits 3,512,495 2,914,283
Borrowings:
Federal funds purchased 57,600
Securities sold under repurchase agreements 125,045 100,227
Federal Home Loan Bank advances 130,024 237,225
Subordinated debentures, revolving credit 194,787 176,256
lines and term loans
Total Borrowings 449,856 571,308
Interest payable 5,722 6,529
Other liabilities 32,511 19,861
Total Liabilities 4,000,584 3,511,981
STOCKHOLDERS' EQUITY
Preferred Stock, no-par value:
Authorized -- 500,000 shares
Series A, Issued and outstanding - 116,000 112,190
shares
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 - 21,185,851 and 2,648 2,266
18,125,090 shares
Additional paid-in capital 205,759 141,777
Retained earnings 164,419 210,605
Accumulated other comprehensive loss (9,241 ) (2,680 )
Total Stockholders' Equity 475,900 352,093
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,476,484 $ 3,864,074
CONSOLIDATED STATEMENTS
OF OPERATIONS
Three Months Ended Nine Months Ended
(Dollars in thousands,
except per share September 30, September 30,
amounts)
2009 2008 2009 2008
INTEREST INCOME
Loans receivable:
Taxable $ 50,683 $ 49,828 $ 157,319 $ 149,952
Tax exempt 280 321 742 664
Investment securities:
Taxable 2,963 2,943 9,987 9,139
Tax exempt 2,788 1,379 6,919 4,344
Federal funds sold 27 10 81 21
Deposits with financial 73 146 291 561
institutions
Federal Reserve and
Federal Home Loan Bank 359 351 1,031 1,056
stock
Total Interest Income 57,173 54,978 176,370 165,737
INTEREST EXPENSE
Deposits 13,666 16,213 45,946 51,943
Federal funds purchased 6 502 28 1,748
Securities sold under 512 650 1,486 2,098
repurchase agreements
Federal Home Loan Bank 2,209 2,724 7,605 8,585
advances
Subordinated debentures,
revolving credit lines 1,932 1,635 5,524 5,127
and term loans
Total Interest Expense 18,325 21,724 60,589 69,501
NET INTEREST INCOME 38,848 33,254 115,781 96,236
Provision for loan 24,240 7,094 96,156 17,987
losses
NET INTEREST INCOME
AFTER PROVISION FOR LOAN 14,608 26,160 19,625 78,249
LOSSES
OTHER INCOME
Service charges on 3,963 3,568 11,393 9,656
deposit accounts
Fiduciary activities 1,844 1,932 5,583 6,200
Other customer fees 2,004 1,696 5,953 5,142
Commission income 1,459 1,457 5,216 4,553
Earnings on cash
surrender value of life 391 519 1,045 1,863
insurance
Net gains and fees on 1,997 648 5,105 1,959
sales of loans
Net realized and
unrealized gains on 5,211 185 9,157 271
sales of available for
sale securities
Other-than-temporary
impairment on available (1,227 ) (1,440 ) (3,750 ) (1,440 )
for sale securities
Other income 41 655 1,942 1,877
Total Other Income 15,683 9,220 41,644 30,081
OTHER EXPENSES
Salaries and employee 17,945 15,330 57,645 47,126
benefits
Net occupancy 2,422 1,857 7,434 5,412
Equipment 1,875 1,649 5,660 4,946
Marketing 508 605 1,621 1,701
Outside data processing 1,360 1,068 4,698 2,959
fees
Printing and office 300 281 1,060 853
supplies
Core deposit 1,277 809 3,832 2,407
amortization
FDIC assessments 3,121 262 7,191 531
Other expenses 10,187 5,254 22,760 13857
Total Other Expenses 38,995 27,115 111,901 79,792
INCOME (LOSS) BEFORE (8,704 ) 8,265 (50,632 ) 28,538
INCOME TAX
Income tax expense (3,774 ) 2,516 (20,090 ) 8,121
(benefit)
NET INCOME (LOSS) (4,930 ) 5,749 (30,542 ) 20,417
Preferred stock
dividends and discount 1,450 3,528
accretion
NET INCOME (LOSS)
AVAILABLE TO COMMON $ (6,380 ) $ 5,749 $ (34,070 ) $ 20,417
STOCKHOLDERS
Per Share Data:
Basic Net Income (Loss)
Available to Common $ (0.30 ) $ 0.32 $ (1.62 ) $ 1.13
Stockholders
Diluted Net Income
(Loss) Available to $ (0.30 ) $ 0.32 $ (1.62 ) $ 1.13
Common Stockholders
Cash Dividends Paid $ 0.08 $ 0.23 $ 0.39 $ 0.69
Average Diluted Shares
Outstanding (in 21,170 18,196 21,085 18,129
thousands)
FINANCIAL
HIGHLIGHTS
Three Months End Nine Months Ended
(Dollars in September 30, September 30,
thousands)
2009 2008 2009 2008
NET CHARGE OFF'S $ 14,441 $ 3,706 $ 60,821 $ 11,230
AVERAGE
BALANCES:
Total Assets $ 4,664,010 $ 3,844,905 $ 4,732,389 $ 3,791,362
Total Loans 3,512,101 3,045,672 3,614,129 2,975,957
Total Deposits 3,564,502 2,929,774 3,623,485 2,867,237
Total
Stockholders' 477,196 349,652 478,542 348,396
Equity
FINANCIAL
RATIOS:
Return on (0.55 )% 0.60 % (0.96 )% 0.72 %
Average Assets
Return on
Average (5.35 ) 6.58 (9.49 ) 7.81
Stockholders'
Equity
Average Earning
Assets to 90.82 91.02 90.98 90.78
Average Assets
Allowance for
Loan Losses as % 2.54 1.14 2.54 1.14
of Total Loans
Net Charge Off's
as % of Average 1.64 0.49 2.24 0.50
Loans
(Annualized)
Dividend Payout (26.67 ) 72.80 (24.07 ) 61.27
Ratio
Average
Stockholders' 10.23 9.09 10.11 9.19
Equity to
Average Assets
Tax Equivalent
Yield on Earning 5.56 6.39 5.59 6.52
Assets
Cost of
Supporting 1.73 2.48 1.88 2.69
Liabilities
Net Interest
Margin (FTE) on 3.83 3.91 3.71 3.83
Earning Assets
NON-PERFORMING
ASSETS
(Dollars in September June 30, March 31, December September
thousands) 30, 31, 30,
2009 2009 2009 2008 2008
Non-Accrual $ 123,290 $ 112,220 $ 108,546 $ 87,546 $ 37,879
Loans
Renegotiated 5,595 4,216 130 135
Loans
Non-Performing 128,885 116,436 108,546 87,676 38,014
Loans (NPL)
Real Estate
Owned and 21,778 20,227 22,077 18,458 16,916
Repossessed
Assets
Non-Performing 150,663 136,663 130,623 106,134 54,930
Assets (NPA)
90+ Days 5,422 3,596 7,732 5,982 8,056
Delinquent
NPAS & 90 Day $ 156,085 $ 140,259 $ 138,355 $ 112,116 $ 62,986
Delinquent
Loan Loss $ 86,918 $ 77,119 $ 58,502 $ 49,543 $ 34,985
Reserve
YTD 60,821 46,380 6,002 15,602 11,230
Charge-offs
NPAs / Actual 3.37 % 2.90 % 2.67 % 2.22 % 1.42 %
Assets %
NPAs & 90 Day
/ Actual 3.49 % 2.97 % 2.83 % 2.34 % 1.63 %
Assets %
NPAs / Actual
Loans and REO 4.37 % 3.80 % 3.54 % 2.83 % 1.77 %
%
Loan Loss
Reserves / 2.54 % 2.16 % 1.60 % 1.33 % 1.14 %
Actual Loans
(%)
NCOs / YTD
Average Loans 1.68 % 1.27 % 0.16 % 0.52 % 0.38 %
(%)
CONSOLIDATED
BALANCE SHEETS
(Dollars in September June 30, March 31, December September
thousands) 30, 31, 30,
2009 2009 2009 2008 2008
ASSETS
Cash and due from $ 66,887 $ 73,668 $ 96,606 $ 84,249 $ 69,846
banks
Federal funds sold 52,828 89,282 66,237 7,818
Cash and cash 119,715 73,668 185,888 150,486 77,664
equivalents
Interest-bearing 44,312 44,595 158,295 38,823 15,623
time deposits
Investment 489,010 630,958 446,316 481,984 388,808
securities
Mortgage loans held 25,173 23,070 8,659 4,295 2,062
for sale
Loans 3,398,722 3,554,229 3,654,074 3,721,952 3,078,768
Less: Allowance for (86,918 ) (77,119 ) (58,502 ) (49,543 ) (34,985 )
loan losses
Net loans 3,311,804 3,477,110 3,595,572 3,672,409 3,043,783
Premises and 58,482 58,692 58,948 59,641 44,402
equipment
Federal Reserve and
Federal Home Loan 38,576 34,441 34,420 34,319 25,494
Bank stock
Interest receivable 22,359 20,778 20,783 23,976 21,569
Core deposit
intangibles and 160,017 161,294 162,571 165,974 135,701
goodwill
Cash surrender
value of life 94,267 93,876 93,544 93,222 73,448
insurance
Other real estate 21,778 20,227 22,077 18,458 16,916
owned
Other assets 90,991 78,336 99,824 40,568 18,604
TOTAL ASSETS $ 4,476,484 $ 4,717,045 $ 4,886,897 $ 4,784,155 $ 3,864,074
LIABILITIES
Deposits:
Noninterest-bearing $ 477,040 $ 512,368 $ 462,167 $ 460,519 $ 384,928
Interest-bearing 3,035,455 3,078,555 3,222,797 3,258,292 2,529,355
Total Deposits 3,512,495 3,590,923 3,684,964 3,718,811 2,914,283
Borrowings:
Federal funds 15,042 57,600
purchased
Securities sold
under repurchase 125,045 115,011 113,106 122,311 100,227
agreements
Federal Home Loan 130,024 268,938 278,583 360,217 237,225
Bank advances
Subordinated
debentures,
revolving credit 194,787 194,783 204,779 135,826 176,256
lines and term
loans
Total Borrowings 449,856 593,774 596,468 618,354 571,308
Interest payable 5,722 7,351 8,278 8,844 6,529
Other liabilities 32,511 51,619 89,082 42,243 19,861
Total Liabilities 4,000,584 4,243,667 4,378,792 4,388,252 3,511,981
STOCKHOLDERS'
EQUITY
Preferred Stock,
no-par value:
Authorized --
500,000 shares
Series A, Issued
and outstanding - 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 - 2,648 2,633 2,632 2,647 2,266
21,185,851 and
18,125,090 shares
Additional paid-in 205,759 204,403 203,889 202,299 141,777
capital
Retained earnings 164,419 172,688 205,616 206,496 210,605
Accumulated other (9,241 ) (18,480 ) (15,988 ) (15,664 ) (2,680 )
comprehensive loss
Total Stockholders' 475,900 473,378 508,105 395,903 352,093
Equity
TOTAL LIABILITIES
AND STOCKHOLDERS' $ 4,476,484 $ 4,717,045 $ 4,886,897 $ 4,784,155 $ 3,864,074
EQUITY
CONSOLIDATED
STATEMENTS OF
OPERATIONS
(Dollars in September March December September
thousands, except 30, June 30, 31, 31, 30,
per share amounts)
2009 2009 2009 2008 2008
INTEREST INCOME
Loans receivable:
Taxable $ 50,683 $ 52,843 $ 53,793 $ 48,433 $ 49,828
Tax exempt 280 247 215 349 321
Investment
securities:
Taxable 2,963 3,261 3,763 2,907 2,943
Tax exempt 2,788 2,362 1,769 1,511 1,379
Federal funds sold 27 42 12 7 10
Deposits with
financial 73 116 102 194 146
institutions
Federal Reserve and
Federal Home Loan 359 199 473 335 351
Bank stock
Total Interest 57,173 59,070 60,127 53,736 54,978
Income
INTEREST EXPENSE
Deposits 13,666 15,569 16,711 15,638 16,213
Federal funds 6 22 108 502
purchased
Securities sold
under repurchase 512 507 467 502 650
agreements
Federal Home Loan 2,209 2,447 2,949 2,583 2,724
Bank advances
Subordinated
debentures, 1,932 2,113 1,479 1,757 1,635
revolving credit
lines and term loans
Total Interest 18,325 20,636 21,628 20,588 21,724
Expense
NET INTEREST INCOME 38,848 38,434 38,499 33,148 33,254
Provision for loan 24,240 58,995 12,921 10,251 7,094
losses
NET INTEREST INCOME
(LOSS) AFTER 14,608 (20,561 ) 25,578 22,897 26,160
PROVISION FOR LOAN
LOSSES
OTHER INCOME
Service charges on 3,963 3,888 3,542 3,346 3,568
deposit accounts
Fiduciary activities 1,844 1,680 2,059 1,831 1,932
Other customer fees 2,004 1,946 2,003 1,634 1,696
Commission income 1,459 1,698 2,059 1,271 1,457
Earnings on cash
surrender value of 391 331 323 (2,130 ) 519
life insurance
Net gains and fees 1,997 1,678 1,430 531 648
on sales of loans
Net realized and
unrealized gains on 5,211 1,154 2,792 328 185
sales of available
for sale securities
Other-than-temporary
impairment on (1,227 ) (2,045 ) (478 ) (1,242 ) (1,440 )
available for sale
securities
Other income 41 1,160 741 717 655
Total Other Income 15,683 11,490 14,471 6,286 9,220
OTHER EXPENSES
Salaries and 17,945 19,685 20,015 15,880 15,330
employee benefits
Net occupancy 2,422 2,443 2,569 2,299 1,857
Equipment 1,875 1,909 1,876 1,713 1,649
Marketing 508 564 549 610 605
Outside data 1,360 1,405 1,933 1,128 1,068
processing fees
Printing and office 300 397 363 361 281
supplies
Core deposit 1,277 1,278 1,277 809 809
amortization
FDIC assessments 3,121 3,494 576 530 262
Other expenses 10,187 7,017 5,556 5,670 5,254
Total Other Expenses 38,995 38,192 34,714 29,000 27,115
INCOME (LOSS) BEFORE (8,704 ) (47,263 ) 5,335 183 8,265
INCOME TAX
Income tax expense (3,774 ) (17,534 ) 1,218 (38 ) 2,516
(benefit)
NET INCOME (LOSS) (4,930 ) (29,729 ) 4,117 221 5,749
Preferred stock
dividends and 1,450 1,450 628
discount accretion
NET INCOME (LOSS)
AVAILABLE TO COMMON $ (6,380 ) $ (31,179 ) $ 3,489 $ 221 $ 5,749
STOCKHOLDERS
PER SHARE:
Basic Net Income
(Loss) Available to $ (0.30 ) $ (1.49 ) $ 0.17 $ 0.01 $ 0.32
Common Stockholders
Diluted Net Income
(Loss) Available to $ (0.30 ) $ (1.49 ) $ 0.17 $ 0.01 $ 0.32
Common Stockholders
Cash Dividends Paid $ 0.08 $ 0.08 $ 0.23 $ 0.23 $ 0.23
Average Diluted
Shares Outstanding 21,170 21,120 21,093 18,257 18,196
(in thousands)
FINANCIAL RATIOS:
Return on Average (0.55 )% (2.59 )% 0.30 % 0.02 % 0.60 %
Assets
Return on Average (5.35 ) (24.58 ) 3.10 0.25 6.58
Stockholders' Equity
Average Earning
Assets to Average 90.82 91.07 91.07 91.15 91.02
Assets
Allowance for Loan
Losses as % of Total 2.54 2.16 1.60 1.33 1.14
Loans
Net Charge Off's as
% of Average Loans 1.64 4.44 0.65 0.57 0.49
(Annualized)
Dividend Payout (26.67 ) (5.41 ) 135.29 2,300.00 71.88
Ratio
Average
Stockholders' Equity 10.23 10.54 9.55 9.13 9.09
to Average Assets
Tax Equivalent Yield 5.56 5.52 5.69 6.21 6.39
on Earning Assets
Cost of Supporting 1.73 1.88 2.01 2.33 2.48
Liabilities
Net Interest Margin
(FTE) on Earning 3.83 3.64 3.68 3.88 3.91
Assets
LOANS
(Dollars in September June 30, March 31, December September
thousands) 30, 31, 30,
2009 2009 2009 2008 2008
Commercial
and $ 806,289 $ 874,671 $ 891,393 $ 904,646 $ 851,233
industrial
loans
Agricultural
production
financing 124,601 121,361 120,462 135,099 136,176
and other
loans to
farmers
Real estate
loans:
Construction 147,343 162,765 208,145 252,487 167,512
Commercial 1,228,983 1,231,986 1,246,450 1,202,372 966,259
and farmland
Residential 855,931 930,714 949,259 956,245 731,065
Individuals'
loans for
household 177,338 174,363 193,109 201,632 145,345
and other
personal
expenditures
Tax exempt 23,846 23,596 18,121 28,070 34,010
loans
Lease
financing
receivables, 7,797 8,095 8,178 8,996 9,262
net of
unearned
income
Other loans 26,594 26,678 18,957 32,405 37,906
3,398,722 3,554,229 3,654,074 3,721,952 3,078,768
Allowance
for loan (86,918 ) (77,119 ) (58,502 ) (49,543 ) (34,985 )
losses
TOTAL LOANS $ 3,311,804 $ 3,477,110 $ 3,595,572 $ 3,672,409 $ 3,043,783
DEPOSITS
(Dollars in September June 30, March 31, December September
thousands) 30, 31, 30,
2009 2009 2009 2008 2008
Demand $ 1,178,372 $ 1,197,646 $ 1,166,205 $ 1,136,267 $ 921,034
deposits
Savings 726,894 740,340 743,812 721,387 540,596
deposits
Certificates
and other
time 492,875 503,971 511,873 509,730 469,426
deposits of
$100,000 or
more
Other
certificates 803,173 835,899 853,149 874,144 636,495
and time
deposits
Brokered 311,181 313,067 409,925 477,283 346,732
deposits
TOTAL $ 3,512,495 $ 3,590,923 $ 3,684,964 $ 3,718,811 $ 2,914,283
DEPOSITS
Source: First Merchants Corporation
Contact: First Merchants Corporation Mark K. Hardwick, 765-751-1857 Executive Vice President/Chief Financial Officer http://www.firstmerchants.com