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TMCNet:  First Merchants Corporation Announces 2012 Record Net Income of More Than $40 Million Dollars

[January 24, 2013]

First Merchants Corporation Announces 2012 Record Net Income of More Than $40 Million Dollars

MUNCIE, Ind. --(Business Wire)--

First Merchants Corporation (NASDAQ: FRME) has reported full year 2012 record net income available to common shareholders of $40.6 million compared to $9.0 million earned in 2011.

Michael C. Rechin, President and Chief Executive Officer, stated, "Our 2012 results represent a return to high performance banking. Our Board of Directors, management team and dedicated employees are very pleased to have established record high net income results for our shareholders. Beyond the level of net income, our highlights for 2012 include a successful closing of an immediately accretive in-market acquisition, an increase in the rate of organic loan growth and an increase in the level of our common dividend." Rechin also stated, "our team is encouraged by the momentum we take into 2013 despite the challenging low interest rate environment."

Year-to-date earnings per share totaled $1.41, a $1.07 per share increase over the prior year total of $.34 per share. Within the $1.41 earnings per share, $.21 is related to the one-time gain on the Corporation's FDIC purchase and assumption agreement with SCB Bank in Shelbyville, Indiana, during the first quarter of 2012. The balance of our 2012 results represent increased levels of earnings from our relationship-driven banking model that produced higher levels of revenue from multiple income sources.

Fourth quarter 2012 earnings per share of $.32 compared to $.24 per share during the same period in 2011. Net income available to common shareholders totaled $9.2 million for the quarter, a $2.7 million increase over the fourth quarter of 2011.

Total assets equaled $4.3 billion, as loans and investments totaled $2.9 billion and $874 million, respectively. Loans increased for the fifth consecutive quarter due to the addition of calling officers and economic improvements in our marketplace. The Corporation's loan-to-deposit ratio and loan-to-asset ratio remained steady at 87 percent and 67 percent, respectively.

Net-interest income totaled $38.3 million for the fourth quarter of 2012 and net-interest margin remained strong totaling 4.10 percent as yields on earning assets totaled 4.58 percent and the cost of supporting liabilities totaled .48 percent. Discount accretion resulting from the SCB transaction added $1.3 million, or 13 basis points, to net-interest income and net-interest margin for the fourth quarter of 2012. YTD net-interest income totaled $152.3 million, an increase of $9.0 million over 2011.

Non-interest income totaled $14.2 million for the fourth quarter of 2012 and $64.3 million year-to-date. After normalizing for bond gains and the first quarter 2012 FDIC gain, non-interest income for 2012 improved by $5.7 million, or 12 percent over 2011. Gains from the sale of mortgage loans accounted for $3.2 million of the increase as our investment in mortgage origination and fulfillment maximized the advantageous mortgage rate environment. Total non-interest expenses of $137.1 million increased by $1.2 million, or less than 1 percent, during 2012.

Provision expense totaled $4.5 million for the fourth quarter 2012 and $18.5 million year-to-date, compared to $5.9 million and $22.6 million in 2011. Net charge-offs were $4.6 million for the fourth quarter of 2012 and $20.1 million year-to-date, compared to $8.0 million and $34.7 million in 2011. The allowance for loan losses is $69.4 million, or 2.37 percent of total loans and 130 percent of non-accrual loans, the highest coverage ratio since 2006.

As of December 31, 2012, the Corporation's total risk-based capital equaled 16.34 percent, Tier 1 common risk-based capital equaled 9.62 percent, and tangible common equity ratio totaled 7.55 percent. As of December 31, 2011 the Corporation's total risk-based capital equaled 16.54 percent, Tier 1 common risk-based capital equaled 8.83 percent, and tangible common equity ratio totaled 6.84 percent.

CONFERENCE CALL

First Merchants Corporation will conduct a fourth quarter earnings conference call and web cast at 2:30 p.m. (ET) on Thursday, January 24, 2013.

To participate, dial (Toll Free) 888-317-6016 and reference First Merchants Corporation's fourth quarter earnings release. International callers please call +1 412-317-6016. A replay of the call will be available until January 24, 2014. To access a replay of the call, US participants should dial (Toll Free) 877-344-7529 or for International participants, dial +1 412-317-0088. The replay passcode is 10023446.

In order to view the web cast and presentation slides, please go to http://services.choruscall.com/links/frme130124.html during the time of the call.

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.

Detailed financial results are reported on the attached pages.

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, Commerce National Bank, and First Merchants Trust Company as divisions of First Merchants Bank, N.A. First Merchants Corporation also operates First Merchants Insurance Group, a full-service property casualty, personal lines, and healthcare insurance agency.

First Merchants Corporation's common stock is traded on the NASDAQ Global Select 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
(Dollars In Thousands) December 31,
2012 2011
ASSETS
Cash and cash equivalents $ 101,460 $ 73,312
Interest-bearing time deposits 38,443 52,851
Investment securities 874,363 946,400
Mortgage loans held for sale 22,300 17,864
Loans 2,902,209 2,713,415
Less: Allowance for loan losses   (69,366 )   (70,898 )
Net loans 2,832,843 2,642,517
Premises and equipment 52,749 51,013
Federal Reserve and Federal Home Loan Bank stock 32,785 31,270
Interest receivable 16,367 17,723
Core deposit intangibles and goodwill 149,529 150,471
Cash surrender value of life insurance 125,397 124,329
Other real estate owned 13,263 16,289
Tax asset, deferred and receivable 30,867 36,424
Other assets   14,455   12,613
TOTAL ASSETS $ 4,304,821 $ 4,173,076
LIABILITIES
Deposits:
Noninterest-bearing $ 801,597 $ 646,508
Interest-bearing   2,544,786   2,488,147
Total Deposits 3,346,383 3,134,655
Borrowings:
Federal funds purchased 18,862
Securities sold under repurchase agreements 141,828 156,305
Federal Home Loan Bank advances 94,238 138,095
Subordinated debentures and term loans   112,161   194,974
Total Borrowings 367,089 489,374
Interest payable 1,841 2,925
Other liabilities   37,272   31,655
Total Liabilities 3,752,585 3,658,609
STOCKHOLDERS' EQUITY
Preferred Stock, no-par value, $1,000 liquidation value:
Authorized -- 500,000 shares
Senior Non-Cumulative Perpetual Preferred Stock, Series B
Issued and outstanding - 90,782.94 shares 90,783 90,783
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 - 28,692,616 and 28,559,707 shares 3,587 3,570
Additional paid-in capital 256,843 254,874
Retained earnings 206,397 168,717
Accumulated other comprehensive loss   (5,499 )   (3,602 )
Total Stockholders' Equity   552,236   514,467
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,304,821 $ 4,173,076
 
   
CONSOLIDATED STATEMENTS OF INCOME Three Months Ended Twelve Months Ended
(Dollars In Thousands, Except Per Share Amounts) December 31, December 31,
2012   2011 2012   2011
INTEREST INCOME
Loans receivable:
Taxable $ 36,085 $ 36,497 $ 146,745 $ 149,716
Tax-exempt 122 93 480 528
Investment securities:
Taxable 3,809 4,565 17,027 19,230
Tax-exempt 2,544 2,550 10,189 10,167
Federal funds sold 3
Deposits with financial institutions 31 54 100 282
Federal Reserve and Federal Home Loan Bank stock   373   314   1,408   1,319
Total Interest Income   42,964   44,073   175,949   181,245
INTEREST EXPENSE
Deposits 3,234 4,505 14,800 22,281
Federal funds purchased 7 3 69 25
Securities sold under repurchase agreements 204 363 907 1,511
Federal Home Loan Bank advances 501 1,114 2,624 4,181
Subordinated debentures and term loans   753   1,908   5,213   9,892
Total Interest Expense   4,699   7,893   23,613   37,890
NET INTEREST INCOME 38,265 36,180 152,336 143,355
Provision for loan losses   4,505   5,855   18,534   22,630
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES   33,760   30,325   133,802   120,725
OTHER INCOME
Service charges on deposit accounts 2,962 3,027 11,587 11,972
Fiduciary activities 1,984 1,804 7,891 7,650
Other customer fees 2,757 2,572 11,233 10,024
Commission income 1,454 1,220 6,224 5,660
Earnings on cash surrender value of life insurance 693 803 3,418 2,596
Net gains and fees on sales of loans 3,513 2,747 10,628 7,418
Net realized gains on sales of available for sale securities 255 290 2,389 2,439
Other-than-temporary impairment on available for sale securities (400 )
Gain on FDIC modified whole bank transaction 9,124
Other income   588   508   1,808   1,761
Total Other Income   14,206   12,971   64,302   49,120
OTHER EXPENSES
Salaries and employee benefits 20,320 19,035 79,398 74,735
Net occupancy 2,494 2,428 10,186 10,118
Equipment 1,942 1,672 7,201 6,794
Marketing 616 650 2,158 2,002
Outside data processing fees 1,361 1,377 5,656 5,671
Printing and office supplies 321 340 1,169 1,242
Core deposit amortization 489 591 1,927 3,548
FDIC assessments 738 775 3,509 5,531
Other real estate owned and credit-related expenses 1,766 2,569 8,178 10,614
Other expenses   4,456   3,999   17,733   15,683
Total Other Expenses   34,503   33,436   137,115   135,938
INCOME BEFORE INCOME TAX 13,463 9,860 60,989 33,907
Income tax expense   3,153   2,299   15,867   8,655
NET INCOME 10,310 7,561 45,122 25,252
Loss on CPP unamortized discount (1,401 )
Loss on extinguishment of trust preferred securities (10,857 )
Preferred stock dividends and discount accretion   (1,135 )   (1,135 )   (4,539 )   (3,981 )
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 9,175 $ 6,426 $ 40,583 $ 9,013

Per Share Data:

Basic Net Income Available to Common Stockholders $ 0.32 $ 0.24 $ 1.42 $ 0.34
Diluted Net Income Available to Common Stockholders $ 0.32 $ 0.24 $ 1.41 $ 0.34
Cash Dividends Paid $ 0.03 $ 0.01 $ 0.10 $ 0.04
Average Diluted Shares Outstanding (in thousands) 28,930 28,700 28,847 26,694
 
       
FINANCIAL HIGHLIGHTS
(Dollars in thousands) Three Months Ended Twelve Months Ended
December 31, December 31,
2012 2011 2012 2011
NET CHARGE OFF'S $ 4,632 $ 8,031 $ 20,066 $ 34,709
 
AVERAGE BALANCES:
Total Assets $ 4,293,082 $ 4,200,685 $ 4,245,996 $ 4,143,850
Total Loans 2,867,793 2,719,155 2,819,816 2,748,684
Total Earning Assets 3,875,969 3,766,352 3,833,174 3,744,027
Total Deposits 3,321,997 3,165,505 3,263,020 3,175,762
Total Stockholders' Equity 551,414 513,366 535,497 478,440
 
FINANCIAL RATIOS:
Return on Average Assets 0.85 % 0.61 % 0.96 % 0.22 %
Return on Average Stockholders' Equity 6.66 5.01 7.58 1.88
Return on Average Common Stockholders' Equity 7.97 6.08 9.13 2.22
Average Earning Assets to Average Assets 90.28 89.66 90.28 90.35
Allowance for Loan Losses as % of Total Loans 2.37 2.60 2.37 2.60
Net Charge Off's as % of Average Loans (Annualized) 0.65 1.18 0.71 1.26
Average Stockholders' Equity to Average Assets 12.84 12.22 12.61 11.55
Tax Equivalent Yield on Earning Assets 4.58 4.83 4.74 4.99
Cost of Supporting Liabilities 0.48 0.84 0.62 1.01
Net Interest Margin (FTE) on Earning Assets 4.10 3.99 4.12 3.98
 
         
NON-PERFORMING ASSETS
(Dollars In Thousands) December 31, September 30, June 30, March 31, December 31,
2012 2012 2012 2012 2011
Non-Accrual Loans $ 53,399 $ 56,999 $ 63,127 $ 74,456 $ 69,592
Renegotiated Loans   12,681   6,871   3,921   6,695   14,308
Non-Performing Loans (NPL) 66,080 63,870 67,048 81,151 83,900
Other Real Estate Owned   13,263   13,780   14,183   15,628   16,289
Non-Performing Assets (NPA) 79,343 77,650 81,231 96,779 100,189
90+ Days Delinquent   2,037   1,974   665   253   580
NPAS & 90 Day Delinquent $ 81,380 $ 79,624 $ 81,896 $ 97,032 $ 100,769
 

Loan Loss Reserve

$ 69,366 $ 69,493 $ 70,143 $ 70,369 $ 70,898
Quarterly Net Charge-offs 4,632 5,259 4,771 5,404 8,031
NPAs / Actual Assets % 1.84 % 1.83 % 1.92 % 2.28 % 2.40 %
NPAs & 90 Day / Actual Assets % 1.89 % 1.87 % 1.93 % 2.29 % 2.41 %
NPAs / Actual Loans and REO % 2.70 % 2.70 % 2.87 % 3.42 % 3.65 %
Loan Loss Reserves / Actual Loans (%) 2.37 % 2.43 % 2.49 % 2.50 % 2.60 %
Net Charge Off's as % of Average Loans (Annualized) 0.65 % 0.74 % 0.68 % 0.78 % 1.18 %
 
         
CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands) December 31, September 30, June 30, March 31, December 31,
2012 2012 2012 2012 2011
ASSETS
Cash and cash equivalents $ 101,460 $ 57,027 $ 68,493 $ 60,991 $ 73,312
Interest-bearing time deposits 38,443 35,324 41,760 34,290 52,851
Investment securities 874,363 928,716 944,321 960,032 946,400
Mortgage loans held for sale 22,300 27,711 15,278 22,138 17,864
Loans 2,902,209 2,836,324 2,797,634 2,792,989 2,713,415
Less: Allowance for loan losses   (69,366 )   (69,493 )   (70,143 )   (70,369 )   (70,898 )
Net loans 2,832,843 2,766,831 2,727,491 2,722,620 2,642,517
Premises and equipment 52,749 51,373 51,335 51,541 51,013
Federal Reserve and Federal Home Loan Bank stock 32,785 32,824 33,033 33,026 31,270
Interest receivable 16,367 17,519 16,506 16,730 17,723
Core deposit intangibles and goodwill 149,529 150,019 150,006 150,486 150,471
Cash surrender value of life insurance 125,397 124,702 124,018 123,355 124,329
Other real estate owned 13,263 13,780 14,183 15,628 16,289
Tax asset, deferred and receivable 30,867 29,344 32,003 32,112 36,424
Other assets   14,455   14,998   13,996   13,417   12,613
TOTAL ASSETS $ 4,304,821 $ 4,250,168 $ 4,232,423 $ 4,236,366 $ 4,173,076
LIABILITIES
Deposits:
Noninterest-bearing 801,597 $ 679,818 $ 684,101 $ 677,643 $ 646,508
Interest-bearing   2,544,786   2,514,933   2,604,797   2,601,935   2,488,147
Total Deposits 3,346,383 3,194,751 3,288,898 3,279,578 3,134,655
Borrowings:
Federal funds purchased 18,862 57,024 652 10,936
Securities sold under repurchase agreements 141,828 153,454 160,127 139,308 156,305
Federal Home Loan Bank advances 94,238 145,467 96,847 131,496 138,095
Subordinated debentures and term loans   112,161   112,169   115,951   115,969   194,974
Total Borrowings 367,089 468,114 373,577 397,709 489,374
Interest payable 1,841 1,591 2,168 2,094 2,925
Other liabilities   37,272   38,857   32,104   29,044   31,655
Total Liabilities 3,752,585 3,703,313 3,696,747 3,708,425 3,658,609
STOCKHOLDERS' EQUITY
Preferred Stock, no-par value, $1,000 liquidation value:
Authorized -- 500,000 shares
Senior Non-Cumulative Perpetual Preferred Stock, Series B
Issued and outstanding 90,783 90,783 90,783 90,783 90,783
Cumulative Preferred Stock, $1,000 par value, $1,000 liquidation value:
Authorized -- 600 shares
Issued and outstanding 125 125 125 125 125
Common Stock, $.125 stated value:
Authorized -- 50,000,000 shares
Issued and outstanding 3,587 3,584 3,580 3,578 3,570
Additional paid-in capital 256,843 256,290 255,632 255,116 254,874
Retained earnings 206,397 198,094 188,863 181,664 168,717
Accumulated other comprehensive loss   (5,499 )   (2,021 )   (3,307 )   (3,325 )   (3,602 )
Total Stockholders' Equity   552,236   546,855   535,676   527,941   514,467
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,304,821 $ 4,250,168 $ 4,232,423 $ 4,236,366 $ 4,173,076
 
         
CONSOLIDATED STATEMENTS OF INCOME
(Dollars In Thousands, Except Per Share Amounts) December 31, September 30, June 30, March 31, December 31,
2012 2012 2012 2012 2011
INTEREST INCOME
Loans receivable:
Taxable $ 36,085 $ 38,160 $ 36,652 $ 35,848 $ 36,497
Tax exempt 122 118 123 117 93
Investment securities:
Taxable 3,809 4,176 4,468 4,574 4,565
Tax exempt 2,544 2,532 2,551 2,562 2,550
Federal funds sold
Deposits with financial institutions 31 16 28 25 54
Federal Reserve and Federal Home Loan Bank stock   373   345   347   343   314
Total Interest Income   42,964   45,347   44,169   43,469   44,073
INTEREST EXPENSE
Deposits 3,234 3,517 3,939 4,110 4,505
Federal funds purchased 7 38 12 12 3
Securities sold under repurchase agreements 204 211 197 295 363
Federal Home Loan Bank advances 501 492 637 994 1,114
Subordinated debentures, revolving credit lines and term loans   753   1,187   1,331   1,942   1,908
Total Interest Expense   4,699   5,445   6,116   7,353   7,893
NET INTEREST INCOME 38,265 39,902 38,053 36,116 36,180
Provision for loan losses   4,505   4,609   4,545   4,875   5,855
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES   33,760   35,293   33,508   31,241   30,325
OTHER INCOME
Service charges on deposit accounts 2,962 2,913 2,893 2,819 3,027
Fiduciary activities 1,984 1,986 1,938 1,983 1,804
Other customer fees 2,757 2,740 3,150 2,586 2,572
Commission income 1,454 1,618 1,485 1,667 1,220
Earnings on cash surrender value of life insurance 693 685 662 1,378 803
Net gains and fees on sales of loans 3,513 2,849 2,314 1,952 2,747
Net realized gains on sales of available for sale securities 255 843 502 789 290
Gain on FDIC modified whole bank transaction 9,124
Other income   588   639   221   360   508
Total Other Income   14,206   14,273   13,165   22,658   12,971
OTHER EXPENSES
Salaries and employee benefits 20,320 20,083 19,641 19,354 19,035
Net occupancy 2,494 2,568 2,473 2,651 2,428
Equipment 1,942 1,798 1,656 1,805 1,672
Marketing 616 536 564 442 650
Outside data processing fees 1,361 1,413 1,506 1,376 1,377
Printing and office supplies 321 287 294 267 340
Core deposit amortization 489 489 480 469 591
FDIC assessments 738 792 862 1,117 775
Other real estate owned and credit-related expenses 1,766 2,104 2,122 2,186 2,569
Other expenses   4,456   4,334   4,582   4,361   3,999
Total Other Expenses   34,503   34,404   34,180   34,028   33,436
INCOME BEFORE INCOME TAX 13,463 15,162 12,493 19,871 9,860
Income tax expense   3,153   3,926   3,288   5,500   2,299
NET INCOME 10,310 11,236 9,205 14,371 7,561
Preferred stock dividends and discount accretion   (1,135 )   (1,134 )   (1,135 )   (1,135 )   (1,135 )
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 9,175 $ 10,102 $ 8,070 $ 13,236 $ 6,426
 

PER SHARE:

Basic Net Income Available to Common Stockholders $ 0.32 $ 0.35 $ 0.29 $ 0.46 $ 0.24
Diluted Net Income Available to Common Stockholders $ 0.32 $ 0.35 $ 0.28 $ 0.46 $ 0.24
Cash Dividends Paid $ 0.03 $ 0.03 $ 0.03 $ 0.01 $ 0.01
Average Diluted Shares Outstanding (in thousands) 28,930 28,888 28,815 28,755 28,700
FINANCIAL RATIOS:
Return on Average Assets 0.85 % 0.95 % 0.76 % 1.26 % 0.61 %
Return on Average Stockholders' Equity 6.66 7.47 6.07 10.23 5.01
Return on Average Common Stockholders' Equity 7.97 8.98 7.32 12.40 6.08
Average Earning Assets to Average Assets 90.28 90.36 90.30 90.16 89.66
Allowance for Loan Losses as % of Total Loans 2.37 2.43 2.49 2.50 2.60
Net Charge Off's as % of Average Loans (Annualized) 0.65 0.74 0.68 0.78 1.18
Average Stockholders' Equity to Average Assets 12.84 12.77 12.51 12.32 12.22
Tax Equivalent Yield on Earning Assets 4.58 4.89 4.75 4.74 4.83
Cost of Supporting Liabilities 0.48 0.57 0.64 0.78 0.84
Net Interest Margin (FTE) on Earning Assets 4.10 4.32 4.11 3.96 3.99
 
         
LOANS
(Dollars In Thousands) December 31, September 30, June 30, March 31, December 31,
2012 2012 2012 2012 2011
Commercial and industrial loans $ 622,579 $ 592,517 $ 552,353 $ 546,304 $ 532,523
Agricultural production financing and other loans to farmers 112,527 107,166 106,135 97,165 104,526
Real estate loans:
Construction 98,639 93,610 99,588 92,694 81,780
Commercial and farm land 1,266,682 1,241,054 1,219,114 1,229,195 1,194,230
Residential 473,537 475,272 480,917 498,354 481,493
Home Equity 203,406 204,888 207,250 210,564 191,631
Individuals' loans for household and other personal expenditures 75,748 77,171 83,933 78,711 84,172
Lease financing receivables, net of unearned income 2,590 2,970 2,976 3,112 3,555
Other loans   46,501   41,676   45,368   36,890   39,505
Loans 2,902,209 2,836,324 2,797,634 2,792,989 2,713,415
Allowance for loan losses   (69,366 )   (69,493 )   (70,143 )   (70,369 )   (70,898 )
NET LOANS $ 2,832,843 $ 2,766,831 $ 2,727,491 $ 2,722,620 $ 2,642,517
 
 
 
DEPOSITS
(Dollars In Thousands) December 31, September 30, June 30, March 31, December 31,
2012 2012 2012 2012 2011
Demand deposits $ 1,646,756 $ 1,455,568 $ 1,521,194 $ 1,470,938 $ 1,438,513
Savings deposits 831,952 837,409 822,299 801,935 757,166
Certificates and other time deposits of $100,000 or more 236,470 256,077 261,156 269,796 264,787
Other certificates and time deposits 502,927 527,304 546,182 566,934 551,247
Brokered deposits   128,278   118,393   138,067   169,975   122,942
TOTAL DEPOSITS $ 3,346,383 $ 3,194,751 $ 3,288,898 $ 3,279,578 $ 3,134,655


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