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f8kearningslides12312011.htm

 
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): January 26, 2012

 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:
 
 
 
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
o 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 January 26, 2012, First Merchants Corporation will conduct a fourth quarter earnings conference call and web cast on Thursday, January 26, 2012 at 2:30 p.m. (EDT). 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 January 26, 2012, 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: January 26, 2012
 

 
 
 


EXHIBIT INDEX
 
Exhibit No.                                Description

99.1
Slide presentation, utilized January 26, 2012, during conference call and web cast by First Merchants Corporation
 
 
 

earningsslides4thqtr2011.htm
January 26, 2012
4th Quarter 2011
Earnings Call
 
 
 
2
Michael C. Rechin
President
and Chief Executive Officer
 
 
 
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.
 
 
 
4
4th Quarter and
Fiscal Year-End 2011 Highlights
§ The company continued its trend of improving core earnings
 resulting in quarter-to-date earnings per share of $.24 per fully
 diluted common share.
§ Pre-tax pre-provision earnings improved by $2.6M over 2010 to
 $70.9M through non-interest income improvements and non-
 interest expense reduction.
§ Year-over-year improvement in asset quality continues with a
 27.4% reduction in Classified Assets, an 18.8% improvement in
 Criticized Assets, and a 23.2% reduction in Non-Accrual Loans.
§ Loan growth, led by strong C&I lending, contributed to positive
 revenue increases.
 
 
 
5
Mark K. Hardwick
Executive Vice President
and Chief Financial Officer
 
 
 
6
  
     
    2009 2010  2011
1. Investments  $ 563  $ 827  $ 946
2. Loans 3,278         2,857 2,731
3. Allowance (92) (83) (71)
4. CD&I & Goodwill  159 154 150
5. BOLI 95 97 124
6. Other 478 319 293
7. Total Assets       $4,481 $4,171 $4,173
($ in Millions)
TOTAL ASSETS
 
 
 
7
(as of 12/31/2011)
YTD Yield = 5.41%
Total = $2.7B
LOAN PORTFOLIO
 
 
 
8
§ $946 Million Balance
§ Average duration - 3.8 years
§ Tax equivalent yield of 3.91%
§ Net unrealized gain of $29.6
 million
 
 
 
9
     
   
    2009 2010  2011
1. Customer Non-Maturity
  Deposits  $2,042 $2,127 $2,196
2. Customer Time Deposits 1,220 996 816
3. Brokered Deposits 275 146 123
4. Borrowings 339 277 378
5. Other Liabilities 30 28 34
6. Hybrid Capital 111 142 111
7. Preferred Stock (CPP) 112 68  ―
8. Preferred Stock (SBLF)  ―  ― 91
9. Common Equity  352 387 424
10. Total Liabilities and Capital  $4,481 $4,171 $4,173
($ in Millions)
TOTAL LIABILITIES AND CAPITAL
 
 
 
10
YTD Cost = .87%
Total = $3.1B
 
 
 
11
  2009 2010  2011
1. Total Risk-Based
 Capital Ratio  13.04%  15.74% 16.54%
2. Tier 1 Risk-Based
 Capital Ratio  10.32% 12.82% 13.92%
3. Leverage Ratio 8.20% 9.50% 10.17%
4. Tier 1 Common Risk- 
 Based Capital Ratio 5.40% 7.64% 8.83%
5. TCE/TCA  4.54% 5.86% 6.84%
CAPITAL RATIOS
 
 
 
12
 
NET INTEREST MARGIN
 
 
 
13
     
   
    2009 2010 2011
1. Service Charges on Deposit Accounts    $15.1 $13.3 $12.0
2. Trust Fees  7.4 7.7 7.7
3. Insurance Commission Income            6.4 6.2 5.7
4. Electronic Card Fees 4.9 6.1 6.5
5. Cash Surrender Value of Life Ins           1.6  2.1 2.6
6. Gains on Sales Mortgage Loans            6.8    6.8 7.4
7. Securities Gains/Losses 4.4 1.9 2.0
8. Other  4.6 4.4 5.2
9. Total $51.2 $48.5 $49.1
10. Adjusted Non-Interest Income1            $46.5   $46.6    $47.1
1Adjusted for gains and losses in bond portfolio and one-time mortgage sale
($ in Millions)
NON-INTEREST INCOME
 
 
 
14
NON-INTEREST EXPENSE
   2009  2010  2011
1. Salary & Benefits $ 76.3        $ 73.3           $74.7
2. Premises & Equipment   17.9 17.2 16.9
3. Core Deposit Intangible  5.1 4.7 3.5
4. Professional Services               1.3 1.4 2.2
5. OREO/Credit-Related Expense          12.9 14.6         10.6
6. FDIC Expense 10.4 8.1 5.5
7. FHLB Prepayment Penalties 1.9 ―  ―
8. Outside Data Processing 6.2 5.1 5.7
9. Marketing 2.1 2.0 2.0
10. Other                       17.5 15.9 14.8
11. Total                      $151.6 $142.3       $135.9
12. Adjusted Non-Interest Expense 2        $134.7        $127.7       $125.3
1Credit-related professional services are reclassed to OREO/credit-related expenses
2Adjusted for the FDIC special assessment, FHLB prepayment penalties & OREO
 expense & credit-related professional services
($ in Millions)
1
1
 
 
 
15
  2009  2010 2011
1. Net Interest Income-FTE             $159.1  $149.4 $149.1
2. Non Interest Income1                  46.5  46.6 47.1
3. Non Interest Expense2                ( 134.7) ( 127.7)      ( 125.3)
4. Pre-Tax Pre-Provision Earnings          $ 70.9 $ 68.3      $ 70.9
5. Provision                      ( 122.2) ( 46.5) ( 22.6)
6. Adjustments                   ( 12.1) ( 12.7) ( 8.6)
7. Taxes - FTE                     22.7        ( 2.3)        ( 14.4)
8. Gain /(Loss) on CPP/Trust Preferred          —  10.1  ( 12.3)
9. Preferred Stock Dividend              ( 5.0) ( 5.2) ( 4.0)
10. Net Income Avail. for Distribution         ($ 45.7) $ 11.7 $ 9.0
11. EPS                         ($ 2.17) $ 0.48 $0.34
1Adjusted for gains and losses in bond portfolio and one-time mortgage sale
2Adjusted for the FDIC special assessment, FHLB prepayment penalties & OREO
 expense & credit-related professional services
($ in Millions)
EARNINGS
 
 
 
16
EARNINGS PER SHARE
*
*
2010 Q1 Q2 Q3 Q4 Total
1. Actual $ .01 $ .35 $ .02 $ .10 $ .48
2. Adjusted $ .01 ($.05) $ .02 $ .10 $ .08
2011 Q1 Q2 Q3 Q4 Total
3. Actual $ .17 $ .18 ($.25) $ .24 $ .34
4. Adjusted $ .17 $ .18 $ .21 $ .24 $ .80
*Adjusted for gains and losses on CPP/Trust Preferred refinance and repayment
 net of taxes (Line 8 on slide 15)
 
 
 
17
John J. Martin
Senior Vice President
and Chief Credit Officer
 
 
 
18
($ in Millions)
ASSET QUALITY SUMMARY
   2009 2010  2011
1. Non-Accrual Loans $118.4 $ 90.6  $ 69.6
2. Other Real Estate 14.9 20.9  16.3
3. Restructured Loans 8.8 7.1  14.3
4. 90-Day Delinquent Loans 4.0 1.3  .6
5. Impaired Loans             178.8 116.2   79.8
6. Specific Reserves  26.3         13.9  7.6
7. Allowance for Loan and
  Lease Losses  92.1 83.0  70.9
8. ALLL % of Non-Accrual
  Loans    77.8%  91.6%  101.9%
9. Classified Assets  $375.7 $313.0   $227.2
10. Criticized Assets
 
(includes Classified) $509.9  $393.0   $319.2
 
 
 
19
Criticized Assets down 18.8% YOY
and 8.3% linked quarter
Classified Assets down 27.4% YOY
and 8.4% linked quarter
Non-Accrual Loans down 23.2% YOY
and 11.8% linked quarter
Allowance for Loan and
Lease Losses as a % of
Nonaccrual Loans
exceeds 100%
($ in Millions)
($ in Millions)
IMPROVEMENT IN CREDIT METRICS AND ALLL COVERAGE
 
 
 
20
NON-PERFORMING ASSET RECONCILIATION
($ in millions)
Q3-’10
Q4-’10
Q1-’11
Q2-’11
Q3-’11
Q4-’11
1. Beginning Balance NPAs & 90+ Days Delinquent
$ 146.5
$ 130.8
$ 120.0
$ 107.6
$ 109.5
$ 106.7
 Non-Accrual
 
 
 
 
 
 
2. Add: New Non-Accruals
 15.5
 27.4
 11.7
 26.7
 21.4
 10.2
3. Less: To Accrual/Payoff/Restructured
( 18.6)
( 14.5)
( 3.2)
( 8.3)
( 8.7)
( 7.6)
4. Less: To OREO
( 6.7)
( 7.0)
( 2.0)
( 1.6)
( 9.7)
( 1.2)
5. Less: Charge-offs
( 11.8)
( 13.9)
( 9.4)
(16.9)
(11.6)
(10.7)
6. Increase /(Decrease): Non-Accrual Loans
(21.6)
(8.0)
 ( 2.9)
 ( .1)
 (8.6)
 (9.3)
 Other Real Estate Owned (ORE)
 
 
 
 
 
 
7. Add: New ORE Properties
 6.6
 7.2
2.2
1.6
9.7
1.2
8. Less: ORE Sold
(3.8)
(4.2)
( 3.6)
( 1.6)
( 5.0)
( 3.3)
9. Less: ORE Losses (write-downs)
( 1.4)
( 3.6)
( 2.5)
( 1.6)
( 0.7)
( 1.1)
10.  Increase /(Decrease): ORE
1.4
( .6)
 ( 3.9)
 ( 1.6)
 4.0
(3.2)
11.  Increase /(Decrease): 90 Days Delinquent
.8
( 4.0)
 ( 0.6)
 ( 0.5)
 1.4
 (1.0)
12. Increase /(Decrease): Restructured Loans
 3.7
 1.8
 ( 5.0)
 4.1
.4
7.6
13. Total NPA Change
(15.7)
(10.8)
(12.4)
 1.9
 (2.8)
 (5.9)
14. Ending Balance NPAs & 90+ Days Delinquent
$ 130.8
$ 120.0
$ 107.6
$ 109.5
$ 106.7
$ 100.8
31.2%
 
 
 
21
($ in Millions)
 
 
 
22
Credit Summary
§ Asset Quality continues to show improvement.
§ Lower OREO and other related credit expenses
 associated with fewer properties and improved
 credit metrics.
§ Increase in Restructured Loans resulting from
 “A/B” restructures until performance demonstrated.
§ Charge-offs and provision expense lower and in
 line with improvement in credit quality.
 
 
 
23
Michael C. Rechin
President
and Chief Executive Officer
 
 
 
24
2011 Review
§ Capital strategy executed successfully
 § Tangible Common Equity ratio improved by 98 basis points in
 2011 to 6.84% through:
 § Core earnings improvement
 § $21.2M Direct Private Placement
 § $90.8M SBLF investment
 § $116M TARP CPP redemption
§ Solidified our brand position as a community bank - competing
 primarily in consumer, mortgage, small business and middle market 
§ Beginnings of organic balance sheet growth
 
 
 
25
2012 Strategy and Tactics
“Growth and Top Tier Performance”
§ Grow revenue by intensifying revenue-generating activity:
 § market coverage tactics
 § accelerate commercial banking opportunities
 § additional investment in business banking professionals in key
 markets
 § retail CRM and sales management system
§ Implement systems and processes to improve efficiency:
 § banking center rationalization
 § enhance systems in consumer collections, human resources,
 and finance
 § leverage back-office infrastructure
§ Seek non-organic growth opportunities
 
 
 
26
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