UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
FORM 8-K
______________________________
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
July 21, 2004
(Date of earliest event reported)
______________________________
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 July 21, 2004, issued by
First Merchants Corporation
ITEM 9. REGULATION FD DISCLOSURE.
See "ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION" below.
ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On July 21, 2004, First Merchants Corporation issued a press release
to report its financial results for the second quarter ended June 30, 2004. The
press release is attached hereto as Exhibit 99.1, is being furnished by the
Registrant pursuant to Regulation FD and is not being filed.
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: July 21, 2004
EXHIBIT INDEX
-------------
Exhibit No.
- -----------
99.1 Description
-----------
Press Release, dated July 21, 2004, issued by
First Merchants Corporation.
First Merchants Corporation
Exhibit No. 99.1
Press Release, dated July 21, 2004
N / E / W / S R / E / L / E / A / S / E
July 21, 2004
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, Muncie, Indiana
FIRST MERCHANTS CORPORATION ANNOUNCES MID YEAR 2004 RESULTS
First Merchants Corporation (NASDAQ - FRME) has reported June 30, 2004,
year-to-date, diluted earnings per share of $.77, a 3.75 percent decline from
$.80 recorded in 2003. Net income during the period totaled $14.3 million
compared to $14.4 million in 2003.
Total assets of the Corporation equaled $3.1 billion as of June 30, 2004, an
increase of $71 million from the prior year. Loans, investments and bank owned
life insurance, the Corporation's three primary earning assets totaled $2.8
billion, an increase of $100 million over the June 30, 2003 amount of $2.7
million. The improvement in earning assets was primarily funded by increases in
deposits and capital totaling $62 million and reductions in cash and cash
equivalents.
Year-to-date net interest margin equaled 3.87 percent, a 30 basis point decline
from the mid-year point of 2003, causing a reduction in net interest income for
the period of $4.1 million. The decline in net interest income was mitigated by
a reduction in the provision for loan losses as credit quality continues to show
improvement.
Non-performing loans as a percentage of total loans equaled .93 percent, down
from 1.30 percent as of June 30, 2003. The Corporation's provision for loan
losses declined by $3.6 million from the prior year and net charge-off's totaled
26 basis points. The allowance for loan losses totaled 1.08 percent at period
end.
The addition of CNBC Bancorporation on March 1, 2003, resulted in an additional
two months of 2004 net income totaling $472,000. The additional two months also
accounted for $2.0 million of additional net interest income, $133,000 of
non-interest income and $1.4 million of additional non-interest expense.
Michael L. Cox, President and Chief Executive Officer, stated that, "First
Merchants Corporation's second quarter 2004 results represent a continuation of
positive trends. Despite higher provisioning for loan losses than planned,
earnings per share improved by another $.03 over the prior quarter and
non-performing loans declined to the lowest level in two years." Cox also added,
"Management was pleased to see the Federal Open Market Committee increase the
target Fed Funds rate by 25 basis points. Given our asset sensitive interest
rate risk position and the fact that we have a little over $800 million in loans
tied to prime we expect to see some improvement in our net interest margin for
the remainder of the year."
CONFERENCE CALL
First Merchants Corporation will conduct a conference call at 2:30 p.m. Eastern
Standard Time/3:30 p.m. Eastern Daylight Time on Wednesday, July 21, 2004. To
participate dial 888-710-8192 and reference First Merchants Corporation's second
quarter earnings release. A digital recording will be available two hours after
the completion of the conference from July 21, 2004, to July 23, 2004. To
access, US/Canada participants should call 800-642-1687 or for
International/Local participants, call 706-645-9291 and enter the Conference
I.D. 8733433.
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,
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. 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,
2004 2003
Assets
Cash and due from banks $ 72,432 $ 89,126
Federal funds sold 0 14,150
----------- -----------
Cash and cash equivalents 72,432 103,276
Interest-bearing time deposits 20,424 8,777
Investment securities 411,140 363,103
Mortgage loans held for sale 4,001 15,151
Loans 2,365,380 2,324,576
Less: Allowance for loan losses (25,510) (30,639)
---------- -----------
Net Loans 2,339,870 2,293,937
Premises and equipment 38,437 39,313
Federal Reserve and Federal Home Loan Bank stock 22,494 13,933
Interest receivable 14,943 16,592
Core deposit intangibles and goodwill 141,014 144,663
Cash surrender value of life insurance 41,288 34,575
Other assets 22,247 23,641
----------- -----------
Total assets $ 3,128,290 $ 3,056,961
=========== ===========
Liabilities
Deposits
Noninterest-bearing $ 334,018 $ 324,735
Interest-bearing 2,038,092 1,988,593
----------- -----------
Total deposits 2,372,110 2,313,328
Borrowings 422,885 417,669
Interest payable 4,216 5,494
Other liabilities 24,811 19,460
----------- -----------
Total liabilities 2,824,022 2,755,951
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 - 18,483,936 and 18,408,177 2,310 2,301
Additional paid-in capital 149,194 148,296
Retained earnings 154,876 144,457
Accumulated other comprehensive income (loss) (2,112) 5,956
----------- -----------
Total stockholders' equity 304,268 301,010
----------- -----------
Total liabilities and stockholders' equity $ 3,128,290 $ 3,056,961
=========== ===========
FINANCIAL HIGHLIGHTS
Three Months Ended Six Months Ended
(In thousands) June 30, June 30,
2004 2003 2004 2003
NET CHARGE OFF'S $ 2,669 $ 1,217 $ 3,075 $ 2,229
AVERAGE BALANCES
Total Assets $3,077,161 $3,001,760 $3,059,499 $2,868,161
Total Loans 2,343,270 2,313,688 2,341,175 2,212,932
Total Deposits 2,320,546 2,278,743 2,316,627 2,179,316
Total Stockholders' Equity 307,750 297,214 307,171 285,143
FINANCIAL RATIOS
Return on Average Assets .96% 1.17% .93% 1.00%
Return on Avg. Stockholders' Equity 9.56 11.77 9.30 10.10
Avg. Earning Assets to Avg. Assets 89.64 90.14 89.85 90.15
Allowance for Loan Losses as %
Of Total Loans 1.08 1.31 1.08 1.31
Net Charge Off's as % Of Avg. Loans
(Annualized) .46 .21 .26 .20
Dividend Payout Ratio 57.50 45.83 59.74 55.00
Avg. Stockholders' Equity to Avg. Assets 10.00 9.90 10.04 9.94
Tax Equivalent Yield on Earning Assets 5.65 5.99 5.68 6.23
Cost of Supporting Liabilities 1.78 2.01 1.81 2.06
Net Int. Margin (FTE) on Earning Assets 3.87 3.98 3.87 4.17
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share data) Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
Interest Income
Loans receivable
Taxable $ 34,021 $ 35,759 $ 68,248 $ 70,932
Tax exempt 137 162 300 327
Investment securities
Taxable 2,052 1,600 4,001 3,279
Tax exempt 1,420 1,626 2,850 3,257
Federal funds sold 37 177 55 290
Deposits with financial institutions 125 19 234 41
Federal Reserve and Federal Home Loan Bank stock 307 211 635 409
-------- -------- -------- --------
Total interest income 38,099 39,554 76,323 78,535
-------- -------- -------- --------
Interest expense
Deposits 7,879 9,048 16,069 17,932
Securities sold under repurchase agreements 98 454 318 903
Federal Home Loan Bank advances 2,433 2,395 4,875 4,668
Subordinated debentures, revolving
credit and term loans 1,635 1,660 3,245 2,999
Other borrowings 207 42 337 68
-------- -------- -------- --------
Total interest expense 12,252 13,599 24,844 26,570
-------- -------- -------- --------
Net interest income 25,847 25,955 51,479 51,965
Provision for loan losses 1,720 2,123 3,092 6,724
-------- -------- -------- --------
Net interest income
after provision for loan losses 24,127 23,832 48,387 45,241
-------- -------- -------- --------
Other income
Fiduciary activities 2,002 1,889 3,812 3,586
Service charges on deposit accounts 2,996 2,743 5,768 5,527
Other customer fees 966 1,036 2,036 2,124
Net realized gains on
sales of available-for-sale securities 363 67 400 438
Commission income 777 707 1,730 1,461
Earnings on cash surrender value of
Life insurance 482 204 911 403
Net gains and fees on sales of loans 1,352 3,351 2,153 4,286
Other income 318 1,156 662 1,614
-------- -------- -------- --------
Total other income 9,256 11,153 17,472 19,439
-------- -------- -------- --------
Other expenses
Salaries and employee benefits 13,059 12,902 26,083 24,679
Net occupancy expenses 1,335 1,200 2,589 2,291
Equipment expenses 1,954 2,016 3,933 3,860
Marketing expense 385 411 825 845
Deposit insurance expense
Outside data processing fees 1,211 1,102 2,434 2,030
Printing and office supplies 388 432 786 839
Goodwill and core deposit amortization 852 991 1,744 1,819
Other expenses 3,438 3,881 6,792 8,013
-------- -------- -------- --------
Total other expenses 22,622 22,935 45,186 44,376
-------- -------- -------- --------
Income before income tax 10,761 12,050 20,673 20,304
Income tax expense 3,406 3,305 6,383 5,901
-------- -------- -------- --------
Net income $ 7,355 $ 8,745 $ 14,290 $ 14,403
======== ======== ======== ========
Per Share Data(1)
Basic Net Income .40 .48 .77 .80
Diluted Net Income .40 .48 .77 .80
Cash Dividends Paid .23 .22 .46 .44
(1) Restated for a five percent (5%) stock dividend distributed September 2003.
CONSOLIDATED BALANCE SHEETS
(in thousands) June 30, March 31, December 31, September 30, June 30,
2004 2004 2003 2003 2003
Assets
Cash and due from banks $ 72,432 $ 60,366 $ 77,112 $ 87,619 $ 89,126
Federal funds sold 0 0 32,415 0 14,150
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents 72,432 60,366 109,527 87,619 103,276
Interest-bearing time deposits 20,424 10,674 8,141 3,789 8,777
Investment securities 411,140 376,974 356,797 316,852 363,103
Mortgage loans held for sale 4,001 3,883 3,043 12,042 15,151
Loans 2,365,380 2,320,103 2,353,503 2,351,405 2,324,576
Less: Allowance for loan losses (25,510) (26,459) (25,493) (29,842) (30,639)
----------- ----------- ---------- ---------- -----------
Net loans 2,339,870 2,293,644 2,328,010 2,321,563 2,293,937
Premises and equipment 38,437 38,972 39,639 39,475 39,313
Federal Reserve and Federal Home Loan Bank stock 22,494 21,956 15,502 14,057 13,933
Interest receivable 14,943 15,061 16,840 17,139 16,592
Core deposit intangibles and goodwill 141,014 141,867 142,723 143,648 144,663
Cash surrender value of life insurance 41,288 40,843 37,927 37,536 34,575
Other assets 22,247 20,901 18,663 18,000 23,641
----------- ----------- ----------- ----------- -----------
Total assets $ 3,128,290 $ 3,025,041 $ 3,076,812 $ 3,011,720 $ 3,056,961
=========== =========== =========== =========== ===========
Liabilities
Deposits
Noninterest-bearing $ 334,018 $ 303,694 $ 338,201 $ 316,058 $ 324,735
Interest-bearing 2,038,092 2,009,726 2,023,900 1,994,146 1,988,593
----------- ----------- ----------- ----------- -----------
Total deposits 2,372,110 2,313,420 2,362,101 2,310,204 2,313,328
Borrowings 422,885 372,356 383,170 374,051 417,669
Interest payable 4,216 4,542 4,680 5,200 5,494
Other liabilities 24,811 25,676 22,896 21,064 19,460
----------- ----------- ----------- ----------- -----------
Total liabilities 2,824,022 2,715,994 2,772,847 2,710,519 2,755,951
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 2,310 2,317 2,314 2,311 2,301
Additional paid-in capital 149,194 150,679 150,310 149,810 148,296
Retained earnings 154,876 151,771 149,096 147,559 144,457
Accumulated other comprehensive income (loss) (2,112) 4,380 2,245 1,521 5,956
----------- ----------- ----------- ----------- -----------
Total stockholders' equity 304,268 309,147 303,965 301,201 301,010
----------- ----------- ----------- ----------- -----------
Total liabilities and stockholders' equity $ 3,128,290 $ 3,025,141 $ 3,076,812 $ 3,011,720 $ 3,056,961
=========== =========== =========== =========== ===========
NON-PERFORMING ASSETS
(In thousands) June 30, March 31, December 31, September 30, June 30,
2004 2004 2003 2003 2003
90 days past due $ 2,488 $ 4,770 $ 6,530 $ 4,790 $ 5,295
Non-accrual loans 17,702 19,914 19,453 20,093 22,532
Other real estate 1,653 1,571 1,399 1,547 2,351
---------- ---------- ------------ ------------ ----------
Total non-performing assets $ 21,843 $ 26,255 $ 27,382 $ 26,430 $ 30,178
========== ========== ============ ============ ==========
Average total loans for the quarter $2,343,270 $2,339,080 $ 2,349,536 $ 2,348,817 $2,313,688
Total non-performing assets as a
percent of average total loans .93% 1.12% 1.17% 1.13% 1.30%
Restructured loans $ 926 $ 957 $ 641 $ 647 $ 899
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
(in thousands, except share data) June 30, March 31, December 31, September 30, June 30,
2004 2004 2003 2003 2003
Interest Income
Loans receivable
Taxable $ 34,021 $ 34,227 $ 34,697 $ 35,607 $ 35,759
Tax exempt 137 163 195 185 162
Investment securities
Taxable 2,052 1,949 1,484 1,342 1,600
Tax exempt 1,420 1,430 1,451 1,562 1,626
Federal funds sold 37 18 148 49 177
Deposits with financial institutions 125 109 22 13 19
Federal Reserve and Federal Home Loan Bank stock 307 328 39 201 211
-------- -------- -------- -------- --------
Total interest income 38,099 38,224 38,036 38,959 39,554
-------- -------- -------- -------- --------
Interest expense
Deposits 7,879 8,190 8,303 8,623 9,048
Securities sold under repurchase agreements 98 220 248 370 454
Federal Home Loan Bank advances 2,433 2,442 2,362 2,409 2,395
Subordinated debentures, revolving credit
and term loans 1,635 1,610 1,587 1,575 1,660
Other borrowings 207 130 233 108 42
-------- -------- -------- -------- --------
Total interest expense 12,252 12,592 12,733 13,085 13,599
-------- -------- -------- -------- --------
Net interest income 25,847 25,632 25,303 25,874 25,955
Provision for loan losses 1,720 1,372 1,047 1,706 2,123
-------- -------- -------- -------- --------
Net interest income
after provision for loan losses 24,127 24,260 24,256 24,168 23,832
-------- -------- -------- -------- --------
Other income
Fiduciary activities 2,002 1,810 1,603 1,547 1,889
Service charges on deposit accounts 2,996 2,772 2,717 2,861 2,743
Other customer fees 966 1,070 1,039 961 1,036
Net realized gains on sales of
available-for-sale securities 363 37 0 512 67
Commission income 777 953 569 638 707
Earnings on cash surrender value
of life insurance 482 429 446 498 204
Net gains and fees on sales of loans 1,352 801 770 1,332 3,351
Other income 318 344 443 527 1,156
-------- -------- -------- -------- --------
Total other income 9,256 8,216 7,587 8,876 11,153
-------- -------- -------- -------- --------
Other expenses
Salaries and employee benefits 13,059 13,024 12,599 13,206 12,902
Net occupancy expenses 1,335 1,254 1,414 1,189 1,200
Equipment expenses 1,954 1,979 2,217 1,996 2,016
Marketing expense 385 440 538 414 411
Outside data processing fees 1,211 1,223 1,063 1,025 1,102
Printing and office supplies 388 398 466 401 432
Goodwill and core deposit amortization 852 892 923 958 991
Other expenses 3,438 3,354 4,623 3,771 3,881
-------- -------- -------- -------- --------
Total other expenses 22,622 22,564 23,843 22,960 22,935
-------- -------- -------- -------- --------
Income before income tax 10,761 9,912 8,000 10,084 12,050
Income tax expense 3,406 2,977 2,181 2,735 3,305
-------- -------- -------- -------- --------
Net income $ 7,355 $ 6,935 $ 5,819 $ 7,349 $ 8,745
======== ======== ======== ======== ========
Per Share Data(1)
Basic Net Income $ .40 $ .37 $ .31 $ .40 $ .48
Diluted Net Income .40 .37 .31 .39 .48
Cash Dividends Paid .23 .23 .23 .23 .22
Average Diluted Shares
Outstanding (in thousands) 18,633 18,646 18,666 18,622 18,519
FINANCIAL RATIOS
Return on Average Assets .96% .91% .76% .97% 1.17%
Return on Avg. Stockholders' Equity 9.56 9.05 7.69 9.76 11.77
Avg. Earning Assets to Avg. Assets 89.64 90.05 90.19 89.48 90.14
Allowance for Loan Losses as %
Of Total Loans 1.08 1.14 1.08 1.26 1.31
Net Charge Off's as % Of Avg. Loans
(Annualized) .46 .07 .92 .43 .21
Dividend Payout Ratio 57.50 62.16 74.19 58.97 45.83
Avg. Stockholders' Equity to Avg. Assets 10.00 10.08 9.86 9.93 9.90
Tax Equivalent Yield on Earning Assets 5.65 5.71 5.62 5.89 5.99
Cost of Supporting Liabilities 1.78 1.84 1.84 1.93 2.01
Net Int. Margin (FTE) on Earning Assets 3.87 3.87 3.78 3.96 3.98
(1) Restated for a five percent (5%) stock dividend distributed September 2003.