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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
 
FORM 8-K
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
 
DATE OF REPORT (Date of earliest event reported): July 28, 2010

 Commission File Number 0-17071

 
FIRST MERCHANTS CORPORATION
(Exact name of registrant as specified in its charter)

INDIANA
35-1544218
(State or other jurisdiction of incorporation)
(IRS Employer Identification No.)

200 East Jackson Street
P.O. Box 792
Muncie, IN 47305-2814
(Address of principal executive offices, including zip code)
 
(765) 747-1500
(Registrant's telephone number, including area code)
 
Not Applicable
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
 
 
 Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
 Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
 Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
 Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 

 
 
 

 
 
 


ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On July 28, 2010, First Merchants Corporation will conduct a second quarter earnings conference call and web cast on Wednesday, July 28, 2010 at 2:30 p.m. (ET). A copy of the slide presentation utilized on the conference call is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

(a)        Not applicable.

(b)        Not applicable.

(c)        Exhibits.

Exhibit 99.1
Slide presentation, utilized July 28, 2010, during conference call and web cast by First Merchants Corporation
 
 
 

 
 
 


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.
 
                   First Merchants Corporation
(Registrant)

By: /s/ Mark K. Hardwick
Mark K. Hardwick
Executive Vice President and Chief Financial Officer
(Principal Financial and Principal Accounting Officer)


Dated: July 28, 2010
 

 
 
 


EXHIBIT INDEX
 
Exhibit No.

99.1  
Description

Slide presentation, utilized July 28, 2010, during conference call and web cast by First Merchants Corporation
 
 
 
 
 
 
 
earningslides2ndqtr2010.htm
1
First Merchants Corporation

2nd Quarter 2010
Earnings Call

July 28, 2010
 
 
 
First Merchants Corporation
2nd Quarter 2010 - Earnings Call
2
Michael C. Rechin
President
and Chief Executive Officer
 
 
 
First Merchants Corporation
2nd Quarter 2010 - Earnings Call
3
Forward-Looking Statement

The Corporation may make forward-looking statements about its
relative business outlook. These forward-looking statements and all
other statements made during this meeting 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.

Please refer to our press releases, Form 10-Qs and 10-Ks concerning
factors that could cause actual results to differ materially from any
forward-looking statements.
 
 
 
First Merchants Corporation
2nd Quarter 2010 - Earnings Call
4
2nd Quarter 2010 Highlights
§ Second quarter earnings of $.35 per common share
§ Successful exchange of CPP Preferred Stock to Trust
 Preferred Securities contributing to a Tangible Common
 Equity Ratio of 5.88%
§ Quarterly normalized pre-tax, pre-provision earnings
 remains strong at $16.8M
§ Quarterly operating expense levels declined by $3.8M
 from last year to $34.3M
§ Loan loss reserve ample for projected future losses at
 2.84% of total loans
 
 
 
First Merchants Corporation
2nd Quarter 2010 - Earnings Call
5
Mark K. Hardwick
Executive Vice President
and Chief Financial Officer
 
 
 
First Merchants Corporation
2nd Quarter 2010 - Earnings Call
6
  
     
    2008  2009 Q1-’10 Q2-’10
1. Investments  $ 482 $ 563 $ 639 $ 6 46
2. Loans 3,722 3,278 3,138  3,059 
3. Allowance (50) (92) (89) (87)
4. CD&I & Goodwill  166 159 158 156
5. BOLI 93  95 95 96
6. Other 371 478 435 313
7. Total Assets $4,784  $4,481 $4,376 $4,183
($ in Millions)
TOTAL ASSETS
 
 
 
First Merchants Corporation
2nd Quarter 2010 - Earnings Call
7
Loan Composition (as of 6/30/10)
YTD Yield = 5.71%
19.9%
41.5%
19.8%
LOAN AND CREDIT DETAIL
 
 
 
First Merchants Corporation
2nd Quarter 2010 - Earnings Call
8
INVESTMENT PORTFOLIO
(as of 6/30/10)
§ $646 Million Balance
§ Average duration - 3.9 years
§ Tax equivalent yield of 4.51%
§ No private label MBS exposure
§ Trust Preferred Pools with book balance of
 $6.3 million and a market value of $1.4
 million
§ Net unrealized gain of the entire portfolio
 totals $19.4 million
 
 
 
First Merchants Corporation
2nd Quarter 2010 - Earnings Call
9
      
  
    2008  2009 Q1-’10  Q2-’10
1. Customer Non-Maturity
  Deposits  $1,858 $2,042 $2,000 $1,976
2. Customer Time Deposits 1,384 1,220 1,167 1,090
3. Brokered Deposits 477 275 231 195
4. Borrowings 507 339 320 292
5. Other Liabilities  51  30 58 31
6. Hybrid Capital 111 111 111 142
7. Preferred Stock (CPP) -  112 113 68
8. Common Equity  396 352 376 389
9. Total Liabilities and Capital $4,784  $4,481 $4,376 $4,183
($ in Millions)
TOTAL LIABILITIES AND CAPITAL
 
 
 
First Merchants Corporation
2nd Quarter 2010 - Earnings Call
10
YTD Yield = 1.55%
39%
22%
22%
11%
DEPOSITS (as of 6/30/10)
 
 
 
First Merchants Corporation
2nd Quarter 2010 - Earnings Call
11
     
      
   2008  2009 Q1-’10  Q2-’10
1. Total Risk-Based
  Capital Ratio  10.24% 13.04%  14.44% 14.72%
2. Tier 1 Risk-Based
  Capital Ratio  7.71% 10.32% 11.65% 11.88%
3. Leverage Ratio 8.16% 8.20% 9.13% 9.21%
4. TCE/TCA  5.01% 4.54% 5.27% 5.88%
CAPITAL RATIOS
 
 
 
First Merchants Corporation
2nd Quarter 2010 - Earnings Call
12
$3,463
$4,245
$3,956
$3,869
― Net Interest Margin
3.82%
3.90%
3.84%
3.74%
NET INTEREST MARGIN
 
 
 
First Merchants Corporation
2nd Quarter 2010 - Earnings Call
13
      
  
    2008  2009 Q1-’10  Q2-’10
1. Service Charges on Deposit
  Accounts  $13.0 $15.1 $ 3.3 $ 3.5
2. Trust Fees        8.0 7.4 2.1 2.0
3. Insurance Commission Income 5.8 6.4 2.0 1.5
4. Cash Surrender Value of Life Ins  (0.3)  1.6 0.5 0.5
5. Gains on Sales Mortgage Loans  2.5  6.8 1.1 1.2
6. Securities Gains/Losses (2.1) 4.4 1.3 (0.1)
7. Other         9.5 9.5 2.7 2.3
8. Total   $36.4 $51.2 $13.0 $10.9
9. Adjusted Non-Interest Income1 $38.5 $46.5 $11.7 $11.0
1Adjusted for Bond Gains & Losses and one-time mortgage sale
($ in Millions)
NON-INTEREST INCOME
 
 
 
First Merchants Corporation
2nd Quarter 2010 - Earnings Call
14
NON-INTEREST EXPENSE
   2008  2009 Q1-’10  Q2-’10
1. Salary & Benefits $63.0  $76.3 $17.6 $17.9
2. Premises & Equipment 14.4  17.9 4.7 3.9
3. Core Deposit Intangible  3.2  5.1 1.2 1.2
4. Professional Services 2.6 4.4 1.5 1.3
5. OREO/Credit-Related Expense  2.8 9.8 2.7 1.5
6. FDIC Expense 1.7 10.4 1.7 2.3
7. FHLB Prepayment Penalties - 1.9 - -
8. Outside Data Processing 4.1 6.2 1.3 1.3
9. Marketing 2.3 2.1 0.4 0.5
10. Other 14.7 17.5 3.6 4.4
11. Total $108.8  $151.6 $34.7 $34.3
12. Adjust Non-Interest Expense2 $106.0 $134.7 $31.0 $31.9
2Adjusted for the FDIC Special Assessment, FHLB Prepayment Penalties & OREO
 Expense & Credit-Related Professional Services
($ in Millions)
 
 
 
First Merchants Corporation
2nd Quarter 2010 - Earnings Call
15
  2008  2009  Q1-’10 Q2-’10
1. Net Interest Income-FTE  $133.1 $159.1 $37.8 $37.7
2. Non Interest Income1 38.5 46.5 11.7 11.0
3. Non Interest Expense2  106.0 134.7 31.0 31.9
4. Pre-Tax Pre-Provision Earnings $ 65.6 $ 70.9 $18.5 $16.8
5. Provision (28.2) (122.2) (13.9) (15.0)
6. Adjustments (5.0) (12.1) (2.3) (2.6)
7. Taxes - FTE (11.8) 22.7 (0.7) 0.4
8. Gain on Exchange of Preferred Stock
 for Trust Preferred Debt - - - 10.1
9. CPP Dividend  -  (5.0) (1.5)< font style="FONT-SIZE: 15pt; COLOR: #000000; FONT-FAMILY: Arial"> (1.4)
10. Net Income Avail. for Common Stockholders      $20.6 ($45.7) $.1 $ 8.3
11. EPS $1.14 ($2.17) $.01 $ .35
1Adjusted for Bond Gains & Losses and one-time mortgage sale
2Adjusted for the FDIC Special Assessment, FHLB Prepayment Penalties & OREO
 Expense & Credit-Related Professional Services
($ in Millions)
EARNINGS
 
 
 
First Merchants Corporation
2nd Quarter 2010 - Earnings Call
16
John J. Martin
Senior Vice President
and Chief Credit Officer
 
 
 
First Merchants Corporation
2nd Quarter 2010 - Earnings Call
17
2nd Quarter Highlights
PORTFOLIO OVERVIEW
§ Non-accrual loans declined to $120 million from $122.9 million at
 3/31/2010, third consecutive quarterly decline in Non-Performing Loans
§ Allowance for Loan and Lease Losses increased to 2.84% of total assets
 with Allowance coverage to Non-Accrual Loans unchanged at 72%
§ 30-89 day delinquent loans were $32 million in line with $31.6 million at
 3/31/2010, down from high of $54.1 million at 09/30/2009
§ 90+ day delinquent loans increased to $4.5 million from $2.6 million,
 working with customers as loans mature to address changes in market
 conditions
§ Non-performing assets plus 90+ day delinquency increased to $146.5
 million from 3/31/2010 of $144.6 million, in line with first quarter and down
 from peak of $156.1 million at 09/30/2009
 
 
 
First Merchants Corporation
2nd Quarter 2010 - Earnings Call
18
NON-ACCRUAL LOANS
 
 
 
First Merchants Corporation
2nd Quarter 2010 - Earnings Call
19
NON-ACCRUAL TREND
 
 
 
First Merchants Corporation
2nd Quarter 2010 - Earnings Call
20
($ in millions)
LARGEST NEW NON-ACCRUAL LOANS
 Balance Type Description
 $4.2 CL Commercial Investment Real Estate
  3.1 CL Utility Company
  3.1 CL Multi-Family Housing Tax Credit
  2.8 CL Commercial Real Estate Development
  2.2 CL Commercial Investment Real Estate
  1.2 CL Commercial Business Park
  1.2 CL Commercial Construction Contractor
  1.2 CL Home Builder
  0.8 CL Dairy Farm
  0.5 CL Real Estate Developer
  $20.3
 
 
 
First Merchants Corporation
2nd Quarter 2010 - Earnings Call
21
($ in millions)
OTHER REAL ESTATE OWNED
 
 
 
First Merchants Corporation
2nd Quarter 2010 - Earnings Call
22
($ in millions)
LOAN DELINQUENCY TRENDS
 
 
 
First Merchants Corporation
2nd Quarter 2010 - Earnings Call
23
($ in millions)
NON-PERFORMING ASSET RECONCILIATION
Beginning NPAs & 90+ Days Past Due (3/31/2010)                                 $144.6
Non-Accrual
 Add: New NPLs      $ 27.3
 Less: To Accrual/Payoff/Restructured ( 8.3)
 Less: To OREO and Charge-off ( 5.4)
 Less: Charge-offs (includes write-downs for transfer to OREO) ( 16.3)
^ in Non-Accrual Loans      ($ 2.7)
Other Real Estate Owned (ORE)
 Add: New ORE Properties $  4.0
 Less: ORE Sold   (  0.2)
 Less: ORE Losses (write-downs) (    1.9)
^ in ORE   $   1.9
^ 90 Days Past Due $  1.9
^ Restructured/Renegotiated Loans                                                                       $  0.8
Total NPA Change  $ 1.9
Ending NPAs & 90+ Days Past Due (06/30/2010)                                  $146.5
 
 
 
First Merchants Corporation
2nd Quarter 2010 - Earnings Call
24
CHARGE-OFF TREND
 
 
 
First Merchants Corporation
2nd Quarter 2010 - Earnings Call
25
ALLOWANCE COVERAGE TO NON-ACCRUAL LOANS
 
 
 
First Merchants Corporation
2nd Quarter 2010 - Earnings Call
26
CREDIT COSTS OVER TIME
 
 
 
First Merchants Corporation
2nd Quarter 2010 - Earnings Call
27
Michael C. Rechin
President
and Chief Executive Officer
 
 
 
First Merchants Corporation
2nd Quarter 2010 - Earnings Call
28
Financial Reform
§ 90% Reg E opt-in rate for heavy users of our
 overdraft protection services; don’t expect much
 downward pressure on overdraft protection fees
§ Trust Preferred Securities grandfathered as Tier 1
 Capital; protects existing sources of hybrid capital
§ Expect increased compliance burden in our product
 areas, primarily mortgage
§ Expected passage of the Small Business Lending
 Fund Act seen as beneficial to the delivery of small
 business banking services in our primary markets
 
 
 
First Merchants Corporation
2nd Quarter 2010 - Earnings Call
29
Overview of 2010 Strategy and Tactics
“Protect and Strengthen”
§ Manage asset yields and deposit costs to preserve margin,
 while intensifying revenue activity using market coverage
 tactics  
§ Continue to improve asset quality and reduce all-in credit
 costs
§ Solidify brand position as community bank competing
 primarily in consumer, small business, and middle market
§ Complete implementation of opt-in Reg E strategy around
 education and choice
§ Continue to harvest expense savings from conversion to
 single platform and database
 
 
 
First Merchants Corporation
2nd Quarter 2010 - Earnings Call
30
Contact Information
First Merchants Corporation common stock is
traded on the NASDAQ Global Select Market
under the symbol FRME.
Additional information can be found at
www.firstmerchants.com
Investor inquiries:
David L. Ortega
Investor Relations
Telephone: 765.378.8937
dortega@firstmerchants.com