First Merchants Corporation Announces 3rd Quarter Earnings Per Share

http://www.businesswire.com/news/home/20091102006195/en

MUNCIE, Ind.--(Business Wire)--
First Merchants Corporation (NASDAQ: FRME) has reported a third quarter 2009 net
loss of $6.4 million, or $.30 per fully diluted common share. The Corporation`s
third quarter contributed to year-to-date fully diluted common share loss of
$1.62, down from the prior year income of $1.13.

The loss for the quarter was primarily due to provision for loan losses of $24
million. While the quarterly provision and charge offs remain elevated, the
credit costs are significantly beneath the $59 million provision and $40 million
of net charge offs in the second quarter of 2009. The Corporation`s allowance
for loan losses, as a percent of total loans, increased to $87 million or 2.54
percent of total loans as of quarter-end from 1.14 percent, as of September 30,
2008, a $52 million increase.

Loan charge-offs were $14.4 million for the quarter. Commercial real estate
charge-offs totaled $4.6 million, land and lot development loans totaled $2
million, 1-4 family residential properties totaled $1.5 million, commercial and
industrial loans totaled $5.6 million. Non-performing assets plus 90 days
delinquent loans were $156 million, or 3.49 percent of total assets at
quarter-end.

As of September 30, 2009, the Corporation`s total risk-based capital improved to
13.08 percent, Tier 1 risk-based capital totaled 10.44 percent, Tier 1 leverage
ratio totaled 8.47 percent, and tangible common equity ratio totaled 4.75
percent. All regulatory capital ratios exceed the regulatory definitions of
"well capitalized."

Net-Interest margin improved by 19 basis points during the linked quarter to
3.83 percent as net interest income totaled nearly $39 million, reflecting the
strength of ongoing operations.

Total non-interest income, linked quarter-over-quarter, increased by $4.2
million. Gains from the sale of securities totaled $5.2 million including
other-than-temporary impairment charges related to pooled trust preferred
holdings totaled $1.2 million.

Total non-interest expense, linked quarter-over-quarter, increased by $800,000
as the other expense category totaled $10.2 million. The largest items included
in the category include expenses related to OREO write-downs of $3.6 million,
professional services related to credit losses totaled $.7 million and $1.9
million of prepayment penalties of FHLB advances.

The Corporation`s pre-tax, pre-provision net income totaled $15.5 million for
the quarter. When normalized for a fully taxable equivalent net interest income
and extraordinary items, the pre-tax, pre-provision net income totaled $19
million. Extraordinary items include such items as bond gains, OTTI expense, ORE
write-downs, professional services related to credit losses and FHLB prepayment
penalties.

Michael C. Rechin, President and Chief Executive Officer, stated that, "The
continued impact of the recession on our results is disappointing to our
management team. The level of credit costs suggests that the bottom of the cycle
occurred in the second quarter, although evidence of weakness in our franchise
footprint remains."

Rechin continued, "We are pleased to see our efforts in balance sheet management
demonstrate benefit. Our net-interest margin growth reflects the active
reduction in higher-cost liabilities accompanying this period of lesser loan
demand. Margin strength, coupled with active expense control, will accelerate
our return to profitability."

CONFERENCE CALL

First Merchants Corporation will conduct a third quarter earnings conference
call and web cast at 2:30 p.m. (ET) on Tuesday, November 3, 2009. To
participate, dial (Toll Free) 800-860-2442 and reference First Merchants
Corporation's third quarter earnings release. International callers please call
+1 412-858-4600. In order to view the web cast and presentation slides, please
go to http://www.talkpoint.com/viewer/starthere.asp?Pres=128214during the time
of the call. A replay of the call will be available until November 9, 2009 at
9:00 a.m. (ET). To access a replay of the call, US/Canada participants should
dial (Toll Free) 877-344-7529 or for International participants, dial +1
412-317-0088. The replay passcode is 434332.

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.

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, A Division of First Merchants
Bank, N.A., Commerce National Bank, A Division of First Merchants Bank, N.A., as
well as First Merchants Trust Company, N.A., and First Merchants Insurance
Services, a full-service property casualty, personal lines, and healthcare
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).

Detailed financial results are reported on the attached pages:

CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
September 30,
2009 2008
ASSETS
Cash and due from banks $ 66,887 $ 69,846
Federal funds sold 52,828 7,818
Cash and cash equivalents 119,715 77,664
Interest-bearing time deposits 44,312 15,623
Investment securities 489,010 388,808
Mortgage loans held for sale 25,173 2,062
Loans 3,398,722 3,078,768
Less: Allowance for loan losses (86,918 ) (34,985 )
Net loans 3,311,804 3,043,783
Premises and equipment 58,482 44,402
Federal Reserve and Federal Home Loan Bank stock 38,576 25,494
Interest receivable 22,359 21,569
Core deposit intangibles and goodwill 160,017 135,701
Cash surrender value of life insurance 94,267 73,448
Other real estate owned 21,778 16,916
Other assets 90,991 18,604
TOTAL ASSETS $ 4,476,484 $ 3,864,074
LIABILITIES
Deposits:
Noninterest-bearing $ 477,040 $ 384,928
Interest-bearing 3,035,455 2,529,355
Total Deposits 3,512,495 2,914,283
Borrowings:
Federal funds purchased 57,600
Securities sold under repurchase agreements 125,045 100,227
Federal Home Loan Bank advances 130,024 237,225
Subordinated debentures, revolving credit lines and term loans 194,787 176,256
Total Borrowings 449,856 571,308
Interest payable 5,722 6,529
Other liabilities 32,511 19,861
Total Liabilities 4,000,584 3,511,981
STOCKHOLDERS' EQUITY
Preferred Stock, no-par value:
Authorized -- 500,000 shares
Series A, Issued and outstanding - 116,000 shares 112,190
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 - 21,185,851 and 18,125,090 shares 2,648 2,266
Additional paid-in capital 205,759 141,777
Retained earnings 164,419 210,605
Accumulated other comprehensive loss (9,241 ) (2,680 )
Total Stockholders' Equity 475,900 352,093
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,476,484 $ 3,864,074

CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
(Dollars in thousands, except per share amounts) September 30, September 30,
2009 2008 2009 2008
INTEREST INCOME
Loans receivable:
Taxable $ 50,683 $ 49,828 $ 157,319 $ 149,952
Tax exempt 280 321 742 664
Investment securities:
Taxable 2,963 2,943 9,987 9,139
Tax exempt 2,788 1,379 6,919 4,344
Federal funds sold 27 10 81 21
Deposits with financial institutions 73 146 291 561
Federal Reserve and Federal Home Loan Bank stock 359 351 1,031 1,056
Total Interest Income 57,173 54,978 176,370 165,737
INTEREST EXPENSE
Deposits 13,666 16,213 45,946 51,943
Federal funds purchased 6 502 28 1,748
Securities sold under repurchase agreements 512 650 1,486 2,098
Federal Home Loan Bank advances 2,209 2,724 7,605 8,585
Subordinated debentures, revolving credit lines and term loans 1,932 1,635 5,524 5,127
Total Interest Expense 18,325 21,724 60,589 69,501
NET INTEREST INCOME 38,848 33,254 115,781 96,236
Provision for loan losses 24,240 7,094 96,156 17,987
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 14,608 26,160 19,625 78,249
OTHER INCOME
Service charges on deposit accounts 3,963 3,568 11,393 9,656
Fiduciary activities 1,844 1,932 5,583 6,200
Other customer fees 2,004 1,696 5,953 5,142
Commission income 1,459 1,457 5,216 4,553
Earnings on cash surrender value of life insurance 391 519 1,045 1,863
Net gains and fees on sales of loans 1,997 648 5,105 1,959
Net realized and unrealized gains on sales of available for sale securities 5,211 185 9,157 271
Other-than-temporary impairment on available for sale securities (1,227 ) (1,440 ) (3,750 ) (1,440 )
Other income 41 655 1,942 1,877
Total Other Income 15,683 9,220 41,644 30,081
OTHER EXPENSES
Salaries and employee benefits 17,945 15,330 57,645 47,126
Net occupancy 2,422 1,857 7,434 5,412
Equipment 1,875 1,649 5,660 4,946
Marketing 508 605 1,621 1,701
Outside data processing fees 1,360 1,068 4,698 2,959
Printing and office supplies 300 281 1,060 853
Core deposit amortization 1,277 809 3,832 2,407
FDIC assessments 3,121 262 7,191 531
Other expenses 10,187 5,254 22,760 13857
Total Other Expenses 38,995 27,115 111,901 79,792
INCOME (LOSS) BEFORE INCOME TAX (8,704 ) 8,265 (50,632 ) 28,538
Income tax expense (benefit) (3,774 ) 2,516 (20,090 ) 8,121
NET INCOME (LOSS) (4,930 ) 5,749 (30,542 ) 20,417
Preferred stock dividends and discount accretion 1,450 3,528
NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS $ (6,380 ) $ 5,749 $ (34,070 ) $ 20,417
Per Share Data:
Basic Net Income (Loss) Available to Common Stockholders $ (0.30 ) $ 0.32 $ (1.62 ) $ 1.13
Diluted Net Income (Loss) Available to Common Stockholders $ (0.30 ) $ 0.32 $ (1.62 ) $ 1.13
Cash Dividends Paid $ 0.08 $ 0.23 $ 0.39 $ 0.69
Average Diluted Shares Outstanding (in thousands) 21,170 18,196 21,085 18,129

FINANCIAL HIGHLIGHTS
Three Months End Nine Months Ended
(Dollars in thousands) September 30, September 30,
2009 2008 2009 2008
NET CHARGE OFF'S $ 14,441 $ 3,706 $ 60,821 $ 11,230

AVERAGE BALANCES:
Total Assets $ 4,664,010 $ 3,844,905 $ 4,732,389 $ 3,791,362
Total Loans 3,512,101 3,045,672 3,614,129 2,975,957
Total Deposits 3,564,502 2,929,774 3,623,485 2,867,237
Total Stockholders' Equity 477,196 349,652 478,542 348,396

FINANCIAL RATIOS:
Return on Average Assets (0.55 )% 0.60 % (0.96 )% 0.72 %
Return on Average Stockholders' Equity (5.35 ) 6.58 (9.49 ) 7.81
Average Earning Assets to Average Assets 90.82 91.02 90.98 90.78
Allowance for Loan Losses as % of Total Loans 2.54 1.14 2.54 1.14
Net Charge Off's as % of Average Loans (Annualized) 1.64 0.49 2.24 0.50
Dividend Payout Ratio (26.67 ) 72.80 (24.07 ) 61.27
Average Stockholders' Equity to Average Assets 10.23 9.09 10.11 9.19
Tax Equivalent Yield on Earning Assets 5.56 6.39 5.59 6.52
Cost of Supporting Liabilities 1.73 2.48 1.88 2.69
Net Interest Margin (FTE) on Earning Assets 3.83 3.91 3.71 3.83

NON-PERFORMING ASSETS

(Dollars in thousands) September 30, June 30, March 31, December 31, September 30,
2009 2009 2009 2008 2008

Non-Accrual Loans $ 123,290 $ 112,220 $ 108,546 $ 87,546 $ 37,879
Renegotiated Loans 5,595 4,216 130 135
Non-Performing Loans (NPL) 128,885 116,436 108,546 87,676 38,014
Real Estate Owned and Repossessed Assets 21,778 20,227 22,077 18,458 16,916
Non-Performing Assets (NPA) 150,663 136,663 130,623 106,134 54,930
90+ Days Delinquent 5,422 3,596 7,732 5,982 8,056
NPAS & 90 Day Delinquent $ 156,085 $ 140,259 $ 138,355 $ 112,116 $ 62,986

Loan Loss Reserve $ 86,918 $ 77,119 $ 58,502 $ 49,543 $ 34,985
YTD Charge-offs 60,821 46,380 6,002 15,602 11,230
NPAs / Actual Assets % 3.37 % 2.90 % 2.67 % 2.22 % 1.42 %
NPAs & 90 Day / Actual Assets % 3.49 % 2.97 % 2.83 % 2.34 % 1.63 %
NPAs / Actual Loans and REO % 4.37 % 3.80 % 3.54 % 2.83 % 1.77 %
Loan Loss Reserves / Actual Loans (%) 2.54 % 2.16 % 1.60 % 1.33 % 1.14 %
NCOs / YTD Average Loans (%) 1.68 % 1.27 % 0.16 % 0.52 % 0.38 %

CONSOLIDATED BALANCE SHEETS
(Dollars in thousands) September 30, June 30, March 31, December 31, September 30,
2009 2009 2009 2008 2008
ASSETS
Cash and due from banks $ 66,887 $ 73,668 $ 96,606 $ 84,249 $ 69,846
Federal funds sold 52,828 89,282 66,237 7,818
Cash and cash equivalents 119,715 73,668 185,888 150,486 77,664
Interest-bearing time deposits 44,312 44,595 158,295 38,823 15,623
Investment securities 489,010 630,958 446,316 481,984 388,808
Mortgage loans held for sale 25,173 23,070 8,659 4,295 2,062
Loans 3,398,722 3,554,229 3,654,074 3,721,952 3,078,768
Less: Allowance for loan losses (86,918 ) (77,119 ) (58,502 ) (49,543 ) (34,985 )
Net loans 3,311,804 3,477,110 3,595,572 3,672,409 3,043,783
Premises and equipment 58,482 58,692 58,948 59,641 44,402
Federal Reserve and Federal Home Loan Bank stock 38,576 34,441 34,420 34,319 25,494
Interest receivable 22,359 20,778 20,783 23,976 21,569
Core deposit intangibles and goodwill 160,017 161,294 162,571 165,974 135,701
Cash surrender value of life insurance 94,267 93,876 93,544 93,222 73,448
Other real estate owned 21,778 20,227 22,077 18,458 16,916
Other assets 90,991 78,336 99,824 40,568 18,604
TOTAL ASSETS $ 4,476,484 $ 4,717,045 $ 4,886,897 $ 4,784,155 $ 3,864,074
LIABILITIES
Deposits:
Noninterest-bearing $ 477,040 $ 512,368 $ 462,167 $ 460,519 $ 384,928
Interest-bearing 3,035,455 3,078,555 3,222,797 3,258,292 2,529,355
Total Deposits 3,512,495 3,590,923 3,684,964 3,718,811 2,914,283
Borrowings:
Federal funds purchased 15,042 57,600
Securities sold under repurchase agreements 125,045 115,011 113,106 122,311 100,227
Federal Home Loan Bank advances 130,024 268,938 278,583 360,217 237,225
Subordinated debentures, revolving credit lines and term loans 194,787 194,783 204,779 135,826 176,256
Total Borrowings 449,856 593,774 596,468 618,354 571,308
Interest payable 5,722 7,351 8,278 8,844 6,529
Other liabilities 32,511 51,619 89,082 42,243 19,861
Total Liabilities 4,000,584 4,243,667 4,378,792 4,388,252 3,511,981
STOCKHOLDERS' EQUITY
Preferred Stock, no-par value:
Authorized -- 500,000 shares
Series A, Issued and outstanding - 116,000 shares 112,190 112,009 111,831
Cumulative Preferred Stock, $1,000 par value, $1,000 liquidation value:
Authorized -- 600 shares
Issued and outstanding - 125 shares 125 125 125 125 125
Common Stock, $.125 stated value:
Authorized -- 50,000,000 shares
Issued and outstanding - 21,185,851 and 18,125,090 shares 2,648 2,633 2,632 2,647 2,266
Additional paid-in capital 205,759 204,403 203,889 202,299 141,777
Retained earnings 164,419 172,688 205,616 206,496 210,605
Accumulated other comprehensive loss (9,241 ) (18,480 ) (15,988 ) (15,664 ) (2,680 )
Total Stockholders' Equity 475,900 473,378 508,105 395,903 352,093
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,476,484 $ 4,717,045 $ 4,886,897 $ 4,784,155 $ 3,864,074

CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts) September 30, June 30, March 31, December 31, September 30,
2009 2009 2009 2008 2008
INTEREST INCOME
Loans receivable:
Taxable $ 50,683 $ 52,843 $ 53,793 $ 48,433 $ 49,828
Tax exempt 280 247 215 349 321
Investment securities:
Taxable 2,963 3,261 3,763 2,907 2,943
Tax exempt 2,788 2,362 1,769 1,511 1,379
Federal funds sold 27 42 12 7 10
Deposits with financial institutions 73 116 102 194 146
Federal Reserve and Federal Home Loan Bank stock 359 199 473 335 351
Total Interest Income 57,173 59,070 60,127 53,736 54,978
INTEREST EXPENSE
Deposits 13,666 15,569 16,711 15,638 16,213
Federal funds purchased 6 22 108 502
Securities sold under repurchase agreements 512 507 467 502 650
Federal Home Loan Bank advances 2,209 2,447 2,949 2,583 2,724
Subordinated debentures, revolving credit lines and term loans 1,932 2,113 1,479 1,757 1,635
Total Interest Expense 18,325 20,636 21,628 20,588 21,724
NET INTEREST INCOME 38,848 38,434 38,499 33,148 33,254
Provision for loan losses 24,240 58,995 12,921 10,251 7,094
NET INTEREST INCOME (LOSS) AFTER PROVISION FOR LOAN LOSSES 14,608 (20,561 ) 25,578 22,897 26,160
OTHER INCOME
Service charges on deposit accounts 3,963 3,888 3,542 3,346 3,568
Fiduciary activities 1,844 1,680 2,059 1,831 1,932
Other customer fees 2,004 1,946 2,003 1,634 1,696
Commission income 1,459 1,698 2,059 1,271 1,457
Earnings on cash surrender value of life insurance 391 331 323 (2,130 ) 519
Net gains and fees on sales of loans 1,997 1,678 1,430 531 648
Net realized and unrealized gains on sales of available for sale securities 5,211 1,154 2,792 328 185
Other-than-temporary impairment on available for sale securities (1,227 ) (2,045 ) (478 ) (1,242 ) (1,440 )
Other income 41 1,160 741 717 655
Total Other Income 15,683 11,490 14,471 6,286 9,220
OTHER EXPENSES
Salaries and employee benefits 17,945 19,685 20,015 15,880 15,330
Net occupancy 2,422 2,443 2,569 2,299 1,857
Equipment 1,875 1,909 1,876 1,713 1,649
Marketing 508 564 549 610 605
Outside data processing fees 1,360 1,405 1,933 1,128 1,068
Printing and office supplies 300 397 363 361 281
Core deposit amortization 1,277 1,278 1,277 809 809
FDIC assessments 3,121 3,494 576 530 262
Other expenses 10,187 7,017 5,556 5,670 5,254
Total Other Expenses 38,995 38,192 34,714 29,000 27,115
INCOME (LOSS) BEFORE INCOME TAX (8,704 ) (47,263 ) 5,335 183 8,265
Income tax expense (benefit) (3,774 ) (17,534 ) 1,218 (38 ) 2,516
NET INCOME (LOSS) (4,930 ) (29,729 ) 4,117 221 5,749
Preferred stock dividends and discount accretion 1,450 1,450 628
NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS $ (6,380 ) $ (31,179 ) $ 3,489 $ 221 $ 5,749
PER SHARE:
Basic Net Income (Loss) Available to Common Stockholders $ (0.30 ) $ (1.49 ) $ 0.17 $ 0.01 $ 0.32
Diluted Net Income (Loss) Available to Common Stockholders $ (0.30 ) $ (1.49 ) $ 0.17 $ 0.01 $ 0.32
Cash Dividends Paid $ 0.08 $ 0.08 $ 0.23 $ 0.23 $ 0.23
Average Diluted Shares Outstanding (in thousands) 21,170 21,120 21,093 18,257 18,196
FINANCIAL RATIOS:
Return on Average Assets (0.55 )% (2.59 )% 0.30 % 0.02 % 0.60 %
Return on Average Stockholders' Equity (5.35 ) (24.58 ) 3.10 0.25 6.58
Average Earning Assets to Average Assets 90.82 91.07 91.07 91.15 91.02
Allowance for Loan Losses as % of Total Loans 2.54 2.16 1.60 1.33 1.14
Net Charge Off's as % of Average Loans (Annualized) 1.64 4.44 0.65 0.57 0.49
Dividend Payout Ratio (26.67 ) (5.41 ) 135.29 2,300.00 71.88
Average Stockholders' Equity to Average Assets 10.23 10.54 9.55 9.13 9.09
Tax Equivalent Yield on Earning Assets 5.56 5.52 5.69 6.21 6.39
Cost of Supporting Liabilities 1.73 1.88 2.01 2.33 2.48
Net Interest Margin (FTE) on Earning Assets 3.83 3.64 3.68 3.88 3.91

LOANS
(Dollars in thousands) September 30, June 30, March 31, December 31, September 30,
2009 2009 2009 2008 2008
Commercial and industrial loans $ 806,289 $ 874,671 $ 891,393 $ 904,646 $ 851,233
Agricultural production financing and other loans to farmers 124,601 121,361 120,462 135,099 136,176
Real estate loans:
Construction 147,343 162,765 208,145 252,487 167,512
Commercial and farmland 1,228,983 1,231,986 1,246,450 1,202,372 966,259
Residential 855,931 930,714 949,259 956,245 731,065
Individuals' loans for household and other personal expenditures 177,338 174,363 193,109 201,632 145,345
Tax exempt loans 23,846 23,596 18,121 28,070 34,010
Lease financing receivables, net of unearned income 7,797 8,095 8,178 8,996 9,262
Other loans 26,594 26,678 18,957 32,405 37,906
3,398,722 3,554,229 3,654,074 3,721,952 3,078,768
Allowance for loan losses (86,918 ) (77,119 ) (58,502 ) (49,543 ) (34,985 )
TOTAL LOANS $ 3,311,804 $ 3,477,110 $ 3,595,572 $ 3,672,409 $ 3,043,783

DEPOSITS
(Dollars in thousands) September 30, June 30, March 31, December 31, September 30,
2009 2009 2009 2008 2008
Demand deposits $ 1,178,372 $ 1,197,646 $ 1,166,205 $ 1,136,267 $ 921,034
Savings deposits 726,894 740,340 743,812 721,387 540,596
Certificates and other time deposits of $100,000 or more 492,875 503,971 511,873 509,730 469,426
Other certificates and time deposits 803,173 835,899 853,149 874,144 636,495
Brokered deposits 311,181 313,067 409,925 477,283 346,732
TOTAL DEPOSITS $ 3,512,495 $ 3,590,923 $ 3,684,964 $ 3,718,811 $ 2,914,283

First Merchants Corporation
Mark K. Hardwick, 765-751-1857
Executive Vice President/Chief Financial Officer
http://www.firstmerchants.com

Copyright Business Wire 2009