First Merchants Corporation Announces Second Quarter Earnings Per Share
MUNCIE, Ind.--(BUSINESS WIRE)--
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."
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).
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
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
CONSOLIDATED BALANCE SHEETS
(in thousands) June 30, March 31, December 31,
2007 2007 2006
Assets
Cash and due from banks $80,921 $43,629 $89,957
Interest-bearing time
deposits 8,898 6,785 11,284
Investment securities 479,281 476,199 465,217
Mortgage loans held for sale 2,842 2,732 5,413
Loans 2,806,068 2,731,140 2,692,601
Less: Allowance for loan
losses (27,608) (26,819) (26,540)
----------- ----------- ------------
Net loans 2,778,460 2,704,321 2,666,061
Premises and equipment 44,126 43,262 42,393
Federal Reserve and Federal
Home Loan Bank stock 23,822 23,691 23,691
Interest receivable 21,615 21,941 24,345
Core deposit intangibles and
goodwill 137,056 137,847 138,638
Cash surrender value of life
insurance 69,111 68,360 64,213
Other assets 23,383 26,047 23,658
----------- ----------- ------------
Total assets $3,669,515 $3,554,814 $3,554,870
=========== =========== ============
Liabilities
Deposits
Noninterest-bearing $362,083 $325,615 $362,058
Interest-bearing 2,357,518 2,361,773 2,388,480
----------- ----------- ------------
Total deposits 2,719,601 2,687,388 2,750,538
Borrowings 587,574 497,188 440,764
Interest payable 10,417 10,834 9,326
Other liabilities 24,543 30,756 26,917
----------- ----------- ------------
Total liabilities 3,342,135 3,226,166 3,227,545
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
Additional paid-in capital 143,317 143,672 146,460
Retained earnings 193,460 191,476 187,965
Accumulated other
comprehensive loss (11,683) (8,789) (9,405)
----------- ----------- ------------
Total stockholders'
equity 327,380 328,648 327,325
----------- ----------- ------------
Total liabilities and
stockholders' equity $3,669,515 $3,554,814 $3,554,870
=========== =========== ============
CONSOLIDATED BALANCE SHEETS
(in thousands) September 30, June 30,
2006 2006
Assets
Cash and due from banks $65,641 $71,275
Interest-bearing time deposits 8,717 8,529
Investment securities 468,074 466,882
Mortgage loans held for sale 3,395 5,338
Loans 2,641,644 2,591,440
Less: Allowance for loan losses (26,975) (25,884)
------------- -----------
Net loans 2,614,669 2,565,556
Premises and equipment 40,511 41,122
Federal Reserve and Federal Home Loan
Bank stock 23,620 23,889
Interest receivable 23,946 19,539
Core deposit intangibles and goodwill 136,666 137,429
Cash surrender value of life insurance 63,539 44,358
Other assets 23,261 24,346
------------- -----------
Total assets $3,472,039 $3,408,263
============= ===========
Liabilities
Deposits
Noninterest-bearing $324,601 $340,046
Interest-bearing 2,369,690 2,195,354
------------- -----------
Total deposits 2,694,291 2,535,400
Borrowings 419,146 527,347
Interest payable 10,236 6,927
Other liabilities 26,075 25,585
------------- -----------
Total liabilities 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 2,292 2,282
Additional paid-in capital 143,688 142,037
Retained earnings 184,555 181,042
Accumulated other comprehensive loss (8,244) (12,357)
------------- -----------
Total stockholders' equity 322,291 313,004
------------- -----------
Total liabilities and stockholders'
equity $3,472,039 $3,408,263
============= ===========
NON-PERFORMING ASSETS
(in thousands) June 30, March 31, December 31,
2007 2007 2006
90 days past due $5,203 $4,554 $2,870
Non-accrual loans 30,820 22,704 17,926
Other real estate 2,274 3,102 2,160
---------- ---------- -----------
Total non-performing
assets $38,297 $30,360 $22,956
========== ========== ===========
Average total loans for the
quarter $2,764,209 $2,703,134 $2,653,700
Total non-performing assets
as a percent of average
total loans 1.39% 1.12% .87%
Restructured loans $58 $59 $84
NON-PERFORMING ASSETS
(in thousands) September 30, June 30,
2006 2006
90 days past due $4,253 $8,818
Non-accrual loans 16,524 12,611
Other real estate 2,194 2,497
------------ ----------
Total non-performing assets $22,971 $23,926
============ ==========
Average total loans for the quarter $2,613,805 $2,534,675
Total non-performing assets as a percent
of average total loans .87% .94%
Restructured loans $93 $111
CONSOLIDATED STATEMENTS OF
INCOME
Three Months Ended
(in thousands, except share
data) June 30, March 31, December 31,
2007 2007 2006
Interest Income
Loans receivable
Taxable $51,204 $49,645 $49,293
Tax exempt 249 201 240
Investment securities
Taxable 3,394 3,282 3,219
Tax exempt 1,651 1,661 1,660
Federal funds sold 91 1 332
Deposits with financial
institutions 120 123 110
Federal Reserve and Federal
Home Loan Bank stock 299 328 318
---------- ---------- -----------
Total interest income 57,008 55,241 55,172
---------- ---------- -----------
Interest expense
Deposits 22,390 21,806 22,690
Federal funds purchased 1,047 854 93
Securities sold under
repurchase agreements 910 569 488
Federal Home Loan Bank
advances 3,009 2,936 2,672
Subordinated debentures,
revolving credit lines and
term loans 3,808 2,001 2,046
Other borrowings 67
----------- ----------- -----------
Total interest expense 31,164 28,166 28,056
---------- ---------- -----------
Net interest income 25,844 27,075 27,116
Provision for loan losses 1,648 1,599 1,245
---------- ---------- -----------
Net interest income after
provision for loan losses 24,196 25,476 25,871
---------- ---------- -----------
Other income
Fiduciary activities 2,257 2,036 1,862
Service charges on deposit
accounts 3,091 2,883 3,010
Other customer fees 1,535 1,491 1,387
Net realized gains (losses)
on sales of available-for-
sale securities (1) (4)
Commission income 1,269 1,638 881
Earnings on cash surrender
value of life insurance 782 685 712
Net gains and fees on sales
of loans 611 532 613
Other income 221 540 309
---------- ---------- -----------
Total other income 9,766 9,804 8,770
---------- ---------- -----------
Other expenses
Salaries and employee
benefits 14,796 14,726 14,157
Net occupancy expenses 1,612 1,598 1,498
Equipment expenses 1,783 1,722 1,956
Marketing expense 653 487 508
Outside data processing fees 1,036 951 804
Printing and office supplies 388 299 401
Core deposit amortization 790 791 781
Other expenses 4,910 3,620 4,315
---------- ---------- -----------
Total other expenses 25,968 24,194 24,420
---------- ---------- -----------
Income before income tax 7,994 11,086 10,221
Income tax expense 1,786 3,315 2,562
---------- ---------- -----------
Net income $6,208 $7,771 $7,659
========== ========== ===========
Per Share Data
Basic Net Income $.34 $.42 $.42
Diluted Net Income .34 .42 .42
Cash Dividends Paid .23 .23 .23
Average Diluted Shares
Outstanding (in thousands) 18,369 18,497 18,498
FINANCIAL RATIOS
Return on Average Assets .69% .88% .88%
Return on Avg. Stockholders'
Equity 7.53 9.47 9.39
Avg. Earning Assets to Avg.
Assets 90.96 91.13 90.87
Allowance for Loan Losses as %
Of Total Loans .98 .98 .99
Net Charge Off's as % Of Avg.
Loans (Annualized) .23 .20 .25
Dividend Payout Ratio 67.65 54.76 56.10
Avg. Stockholders' Equity to
Avg. Assets 9.15 9.32 9.32
Tax Equivalent Yield on
Earning Assets 7.09 7.01 7.07
Cost of Supporting Liabilities 3.81 3.51 3.53
Net Int. Margin (FTE) on
Earning Assets 3.28 3.50 3.54
LOANS
(in thousands) June 30, March 31, December 31,
2007 2007 2006
Commercial and industrial loans $590,345 $557,304 $537,305
Agricultural production
financing and other loans to
farmers 103,713 97,784 100,098
Real estate loans:
Construction 172,247 151,782 169,491
Commercial and farmland 895,301 906,726 861,429
Residential 768,392 756,316 749,921
Individuals' loans for household
and other personal expenditures 206,435 210,578 223,504
Tax exempt loans 23,181 15,306 14,423
Lease financing receivables, net
of unearned income 7,906 7,648 8,010
Other loans 38,548 27,696 28,420
---------- ---------- -----------
2,806,068 2,731,140 2,692,601
Allowance for loan losses (27,608) (26,819) (26,540)
---------- ---------- -----------
Total loans $2,778,460 $2,704,321 $2,666,061
========== ========== ===========
DEPOSITS
(in thousands) June 30, March 31, December 31,
2007 2007 2006
Demand deposits $855,458 $787,538 $883,294
Savings deposits 494,738 530,692 507,431
Certificates and other time
deposits of $100,000 or more 443,355 398,061 408,910
Other certificates and time
deposits 926,050 971,097 950,903
---------- ---------- -----------
Total deposits $2,719,601 $2,687,388 $2,750,538
========== ========== ===========
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
(in thousands, except share data) September 30 June 30,
2006 2006
Interest Income
Loans receivable
Taxable $48,738 $ 45,658
Tax exempt 189 231
Investment securities
Taxable 3,289 3,082
Tax exempt 1,645 1,613
Federal funds sold 13 11
Deposits with financial institutions 144 132
Federal Reserve and Federal Home Loan
Bank stock 307 320
------------- ----------
Total interest income 54,325 51,047
------------- ----------
Interest expense
Deposits 20,291 16,914
Federal funds purchased 635 625
Securities sold under repurchase
agreements 852 1,053
Federal Home Loan Bank advances 2,796 2,610
Subordinated debentures, revolving credit
lines and term loans 2,067 2,020
Other borrowings 60 59
------------- ----------
Total interest expense 26,701 23,281
------------- ----------
Net interest income 27,624 27,766
Provision for loan losses 1,558 1,729
------------- ----------
Net interest income after provision for loan
losses 26,066 26,037
------------- ----------
Other income
Fiduciary activities 1,863 1,949
Service charges on deposit accounts 3,055 2,771
Other customer fees 1,386 1,389
Net realized gains (losses) on sales of
available-for-sale securities (9)
Commission income 971 946
Earnings on cash surrender value of life
insurance 719 432
Net gains and fees on sales of loans 493 511
Other income 348 422
------------- ----------
Total other income 8,835 8,411
------------- ----------
Other expenses
Salaries and employee benefits 14,033 13,543
Net occupancy expenses 1,477 1,477
Equipment expenses 2,035 2,007
Marketing expense 586 438
Outside data processing fees 841 921
Printing and office supplies 367 424
Core deposit amortization 762 761
Other expenses 3,854 4,323
------------- ----------
Total other expenses 23,955 23,894
------------- ----------
Income before income tax 10,946 10,554
Income tax expense 3,207 3,263
------------- ----------
Net income $7,739 $7,291
============= ==========
Per Share Data
Basic Net Income $.42 $ .39
Diluted Net Income .42 .39
Cash Dividends Paid .23 .23
Average Diluted Shares Outstanding (in
thousands) 18,381 18,463
FINANCIAL RATIOS
Return on Average Assets .90% .88%
Return on Avg. Stockholders' Equity 9.72 9.20
Avg. Earning Assets to Avg. Assets 91.26 91.21
Allowance for Loan Losses as %
Of Total Loans 1.02 1.00
Net Charge Off's as % Of Avg. Loans
(Annualized) .07 .23
Dividend Payout Ratio 54.76 58.97
Avg. Stockholders' Equity to Avg. Assets 9.30 9.54
Tax Equivalent Yield on Earning Assets 7.08 6.87
Cost of Supporting Liabilities 3.42 3.07
Net Int. Margin (FTE) on Earning Assets 3.66 3.80
LOANS
(in thousands) September 30, June 30,
2006 2006
Commercial and industrial loans $497,280 $501,238
Agricultural production financing and other
loans to farmers 104,147 95,352
Real estate loans:
Construction 175,753 178,254
Commercial and farmland 835,403 813,171
Residential 757,116 744,552
Individuals' loans for household and other
personal expenditures 215,237 208,768
Tax exempt loans 16,550 13,656
Lease financing receivables, net of unearned
income 8,543 8,589
Other loans 31,615 27,860
------------- ----------
2,641,644 2,591,440
Allowance for loan losses (26,975) (25,884)
------------- ----------
Total loans $2,614,669 $2,565,556
============= ==========
DEPOSITS
(in thousands) September 30, June 30,
2006 2006
Demand deposits $743,154 $758,132
Savings deposits 512,112 510,878
Certificates and other time deposits of
$100,000 or more 394,724 313,751
Other certificates and time deposits 1,044,301 952,639
------------- ----------
Total deposits $2,694,291 $2,535,400
============= ==========
Source: First Merchants Corporation
Contact: First Merchants Corporation Mark K. Hardwick, 765-751-1857 Executive Vice President/Chief Financial Officer http://firstmerchants.com