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 28, 2005 ------------------------------ FIRST MERCHANTS CORPORATION (Exact name of registrant as specified in its charter) ------------------------------- INDIANA 0-17071 35-1544218 (State or other jurisdiction (Commission file number) (IRS Employer of incorporation) 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)) Page 1 of 10 ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION. On January 28, 2005, First Merchants Corporation issued a press release to report its financial results for the fourth quarter ended December 31, 2004. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K. The information in this Form 8-K and the attached Exhibit shall not be deemed filed for purposes of Section 18 of the Securities Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS. (a) Not applicable. (b) Not applicable. (c) Exhibits. Exhibit 99.1 Press Release, dated January 28, 2005, issued by First Merchants Corporation Page 2 of 10 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 Senior Vice President and Chief Financial Officer (Principal Financial and Chief Accounting Officer) Dated: January 28, 2005 Page 3 of 10 EXHIBIT INDEX ------------- Exhibit No. ----------- 99.1 Description ----------- Press Release, dated January 28, 2005, issued by First Merchants Corporation. Page 4 of 10 First Merchants Corporation Exhibit No. 99.1 Press Release, dated January 28, 2005 N / E / W / S R / E / L / E / A / S / E January 28, 2005 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 29 PERCENT INCREASE IN FOURTH QUARTER EARNINGS PER SHARE First Merchants Corporation (NASDAQ - FRME) has reported fourth quarter diluted earnings per share totaling $.40, a 29 percent increase over $.31 recorded in the fourth quarter of 2003. Net income during the period totaled $7.5 million compared to $5.8 million in 2003. Quarterly net interest income after the provision for loan losses improved by $1.6 million, or 6.7 percent and non-interest income rose by $1.1 million, or 14.3 percent. For the year ending December 31, 2004, diluted earnings per share equaled $1.58 a 5.3 percent increase over $1.50 recorded in 2003. Net income totaled $29.4 million compared to $27.6 million in 2003. Net interest income for the year improved by $6 million, or 6.4 percent. Gains from the sale of mortgage loans, reflecting lower refinancing activity, declined by $2.8 million resulting in decreased non-interest income of $1.3 million. Total assets equaled $3.2 billion at year-end, an increase of $115 million, or 3.7 percent from December 31, 2003. Loans, investments and bank owned life insurance, the Corporation's three primary earning assets, totaled $2.9 billion, an increase of $143 million over the prior year. Michael L. Cox, President and Chief Executive Officer, stated that, "Our fourth quarter and full year results are encouraging and reflect an improving environment for our banking services. Our banking activity continued to expand as evidenced by $164 million growth in our commercial loan portfolio. Mortgage banking activity, while near historic high levels, continues to be volatile and impacting gain on sale income. Overall, we are pleased with the year-end, and look forward to continued growth in 2005." CONFERENCE CALL First Merchants Corporation will conduct a conference call at 2:30 p.m. Eastern Time on Friday, January 28, 2005. To participate dial (Toll Free) 877-407-8289 and reference First Merchants Corporation's fourth quarter earnings release. A replay will be available until January 31, 2005 at 11:59 p.m. To access, US/Canada participants should dial (Toll Free) 877-660-6853 or for International participants, dial 201-612-7415. The replay will require the Account # 1628 and Conference ID # 136101. 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) December 31, 2004 2003 Assets Cash and due from banks $ 69,960 $ 77,112 Federal funds sold 32,415 ----------- ----------- Cash and cash equivalents 69,960 109,527 Interest-bearing time deposits 9,343 8,141 Investment securities 421,535 356,797 Mortgage loans held for sale 3,367 3,043 Loans 2,428,051 2,353,503 Less: Allowance for loan losses (22,548) (25,493) ---------- ----------- Net Loans 2,405,503 2,328,010 Premises and equipment 38,254 39,639 Federal Reserve and Federal Home Loan Bank stock 22,858 15,502 Interest receivable 17,318 16,840 Core deposit intangibles and goodwill 141,284 142,723 Cash surrender value of life insurance 42,061 37,927 Other assets 20,185 18,663 ----------- ----------- Total assets $ 3,191,668 $ 3,076,812 =========== =========== Liabilities Deposits Noninterest-bearing $ 330,685 $ 338,201 Interest-bearing 2,077,465 2,023,900 ----------- ----------- Total deposits 2,408,150 2,362,101 Borrowings 440,891 383,170 Interest payable 4,411 4,680 Other liabilities 23,613 22,896 ----------- ----------- Total liabilities 2,877,065 2,772,847 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 - 18,573,997 and 18,512,834 2,322 2,314 Additional paid-in capital 150,862 150,310 Retained earnings 161,459 149,096 Accumulated other comprehensive income (loss) (40) 2,245 ----------- ----------- Total stockholders' equity 314,603 303,965 ----------- ----------- Total liabilities and stockholders' equity $ 3,191,668 $ 3,076,812 =========== =========== FINANCIAL HIGHLIGHTS Three Months Ended Year Ended (In thousands) December 31, December 31, 2004 2003 2004 2003 NET CHARGE OFF'S $ 3,929 $ 5,396 $ 8,650 $ 10,128 AVERAGE BALANCES Total Assets $3,184,109 $3,070,523 $3,109,104 $2,906,195 Total Loans 2,409,170 2,349,536 2,369,017 2,281,614 Total Deposits 2,444,563 2,361,544 2,365,306 2,257,075 Total Stockholders' Equity 315,869 302,803 310,004 293,603 FINANCIAL RATIOS Return on Average Assets .94% .76% .95% .93% Return on Avg. Stockholders' Equity 9.46 7.69 9.49 9.39 Avg. Earning Assets to Avg. Assets 91.38 90.19 90.28 89.99 Allowance for Loan Losses as % Of Total Loans .93 1.08 .93 1.08 Net Charge Off's as % Of Avg. Loans (Annualized) .65 .92 .37 .44 Dividend Payout Ratio 57.50 74.19 58.23 60.00 Avg. Stockholders' Equity to Avg. Assets 9.92 9.86 9.97 9.92 Tax Equivalent Yield on Earning Assets 5.74 5.62 5.72 5.98 Cost of Supporting Liabilities 1.89 1.84 1.84 1.97 Net Int. Margin (FTE) on Earning Assets 3.85 3.78 3.88 4.01 CONSOLIDATED STATEMENTS OF INCOME (in thousands, except share data) Three Months Ended Year Ended December 31, December 31, 2004 2003 2004 2003 Interest income Loans receivable Taxable $ 36,363 $ 34,697 $ 139,953 $ 141,236 Tax exempt 138 195 581 707 Investment securities Taxable 2,224 1,484 8,371 6,105 Tax exempt 1,569 1,451 6,098 6,270 Federal funds sold 92 148 165 487 Deposits with financial institutions 167 22 555 76 Federal Reserve and Federal Home Loan Bank stock 297 39 1,251 649 -------- -------- -------- -------- Total interest income 40,850 38,036 156,974 155,530 -------- -------- -------- -------- Interest expense Deposits 9,288 8,303 33,844 34,858 Securities sold under repurchase agreements 183 248 517 1,521 Federal Home Loan Bank advances 2,418 2,362 9,777 9,439 Subordinated debentures, revolving credit and term loans 1,717 1,587 6,784 6,161 Other borrowings 126 233 663 409 -------- -------- -------- -------- Total interest expense 13,732 12,733 51,585 52,388 -------- -------- -------- -------- Net interest income 27,118 25,303 105,389 103,142 Provision for loan losses 1,233 1,047 5,705 9,477 -------- -------- -------- -------- Net interest income after provision for loan losses 25,885 24,256 99,684 93,665 -------- -------- -------- -------- Other income Fiduciary activities 1,897 1,603 7,632 6,736 Service charges on deposit accounts 2,924 2,717 11,638 11,105 Other customer fees 1,068 1,039 4,083 4,124 Net realized gains on sales of available-for-sale securities 456 1,188 950 Commission income 671 569 3,088 2,668 Earnings on cash surrender value of life insurance 439 446 1,798 1,347 Net gains and fees on sales of loans 801 770 3,629 6,388 Other income 415 443 1,498 2,584 -------- -------- -------- -------- Total other income 8,671 7,587 34,554 35,902 -------- -------- -------- -------- Other expenses Salaries and employee benefits 13,309 12,599 52,479 50,484 Net occupancy expenses 1,328 1,414 5,308 4,894 Equipment expenses 1,879 2,217 7,665 8,073 Marketing expense 521 538 1,709 1,797 Outside data processing fees 1,158 1,063 4,920 4,118 Printing and office supplies 397 466 1,580 1,706 Goodwill and core deposit amortization 802 923 3,373 3,704 Other expenses 4,272 4,623 14,608 16,503 -------- -------- -------- -------- Total other expenses 23,666 23,843 91,642 91,279 -------- -------- -------- -------- Income before income tax 10,890 8,000 42,596 38,288 Income tax expense 3,422 2,181 13,185 10,717 -------- -------- -------- -------- Net income $ 7,468 $ 5,819 $ 29,411 $ 27,571 ======== ======== ======== ======== Per Share Data Basic Net Income .41 .31 1.59 1.51 Diluted Net Income .40 .31 1.58 1.50 Cash Dividends Paid .23 .23 .92 .90 CONSOLIDATED BALANCE SHEETS (in thousands) December 31, September 30, June 30, March 31, December 31, 2004 2004 2004 2004 2003 Assets Cash and due from banks $ 69,960 $ 73,367 $ 72,432 $ 60,366 $ 77,112 Federal funds sold 22,700 32,415 ----------- ----------- ----------- ----------- ----------- Cash and cash equivalents 69,960 96,067 72,432 60,366 109,527 Interest-bearing time deposits 9,343 12,204 20,424 10,674 8,141 Investment securities 421,535 420,645 411,140 376,974 356,797 Mortgage loans held for sale 3,367 2,715 4,001 3,883 3,043 Loans 2,428,051 2,395,306 2,365,380 2,320,103 2,353,503 Less: Allowance for loan losses (22,548) (25,243) (25,510) (26,459) (25,493) ----------- ----------- ----------- ----------- ---------- Net loans 2,405,503 2,370,063 2,339,870 2,293,644 2,328,010 Premises and equipment 38,254 38,170 38,437 38,972 39,639 Federal Reserve and Federal Home Loan Bank stock 22,858 22,750 22,494 21,956 15,502 Interest receivable 17,318 17,594 14,943 15,061 16,840 Core deposit intangibles and goodwill 141,284 140,186 141,014 141,867 142,723 Cash surrender value of life insurance 42,061 41,700 41,288 40,843 37,927 Other assets 20,185 19,268 22,247 20,901 18,663 ----------- ----------- ----------- ----------- ----------- Total assets $ 3,191,668 $ 3,181,362 $ 3,128,290 $ 3,025,041 $ 3,076,812 =========== =========== =========== =========== =========== Liabilities Deposits Noninterest-bearing $ 330,685 $ 373,548 $ 334,018 $ 303,694 $ 338,201 Interest-bearing 2,077,465 2,083,271 2,038,092 2,009,726 2,023,900 ----------- ----------- ----------- ----------- ----------- Total deposits 2,408,150 2,456,819 2,372,110 2,313,420 2,362,101 Borrowings 440,891 379,922 422,885 372,356 383,170 Interest payable 4,411 5,706 4,216 4,542 4,680 Other liabilities 23,613 25,253 24,811 25,676 22,896 ----------- ----------- ----------- ----------- ----------- Total liabilities 2,877,065 2,867,700 2,824,022 2,715,994 2,772,847 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 2,322 2,320 2,310 2,317 2,314 Additional paid-in capital 150,862 148,993 149,194 150,679 150,310 Retained earnings 161,459 160,004 154,876 151,771 149,096 Accumulated other comprehensive income (loss) (40) 2,345 (2,112) 4,380 2,245 ----------- ----------- ----------- ----------- ----------- Total stockholders' equity 314,603 313,662 304,268 309,147 303,965 ----------- ----------- ----------- ----------- ----------- Total liabilities and stockholders' equity $ 3,191,668 $ 3,181,362 $ 3,128,290 $ 3,025,141 $ 3,076,812 =========== =========== =========== =========== =========== NON-PERFORMING ASSETS (in thousands) December 31, September 30, June 30, March 31, December 31, 2004 2004 2004 2004 2003 90 days past due $ 1,907 $ 6,664 $ 2,488 $ 4,770 $ 6,530 Non-accrual loans 15,355 16,852 17,702 19,914 19,453 Other real estate 1,650 1,546 1,653 1,571 1,399 ---------- ---------- ---------- ---------- ------------ Total non-performing assets $ 18,912 $ 25,062 $ 21,843 $ 26,255 $ 27,382 ========== ========== ========== ========== ============ Average total loans for the quarter $2,409,170 $2,383,942 $2,343,270 $2,339,080 $ 2,349,536 Total non-performing assets as a percent of average total loans .79% 1.05% .93% 1.12% 1.17% Restructured loans $ 2,019 $ 2,169 $ 926 $ 957 $ 641 CONSOLIDATED STATEMENTS OF INCOME Three Months Ended (in thousands, except share data) December 31, September 30, June 30, March 31, December 31, 2004 2004 2004 2004 2003 Interest Income Loans receivable Taxable $ 36,363 $ 35,342 $ 34,021 $ 34,227 $ 34,697 Tax exempt 138 143 137 163 195 Investment securities Taxable 2,224 2,146 2,052 1,949 1,484 Tax exempt 1,569 1,679 1,420 1,430 1,451 Federal funds sold 92 18 37 18 148 Deposits with financial institutions 167 154 125 109 22 Federal Reserve and Federal Home Loan Bank stock 297 319 307 328 39 -------- -------- -------- -------- -------- Total interest income 40,850 39,801 38,099 38,224 38,036 -------- -------- -------- -------- -------- Interest expense Deposits 9,288 8,487 7,879 8,190 8,303 Securities sold under repurchase agreements 183 16 98 220 248 Federal Home Loan Bank advances 2,418 2,484 2,433 2,442 2,362 Subordinated debentures, revolving credit and term loans 1,717 1,822 1,635 1,610 1,587 Other borrowings 126 200 207 130 233 -------- -------- -------- -------- -------- Total interest expense 13,732 13,009 12,252 12,592 12,733 -------- -------- -------- -------- -------- Net interest income 27,118 26,792 25,847 25,632 25,303 Provision for loan losses 1,233 1,380 1,720 1,372 1,047 -------- -------- -------- -------- -------- Net interest income after provision for loan losses 25,885 25,412 24,127 24,260 24,256 -------- -------- -------- -------- -------- Other income Fiduciary activities 1,897 1,923 2,002 1,810 1,603 Service charges on deposit accounts 2,924 2,946 2,996 2,772 2,717 Other customer fees 1,068 979 966 1,070 1,039 Net realized gains on sales of available-for-sale securities 456 332 363 37 Commission income 671 687 777 953 569 Earnings on cash surrender value of life insurance 439 448 482 429 446 Net gains and fees on sales of loans 801 675 1,352 801 770 Other income 415 421 318 344 443 -------- -------- -------- -------- -------- Total other income 8,671 8,411 9,256 8,216 7,587 -------- -------- -------- -------- -------- Other expenses Salaries and employee benefits 13,309 13,087 13,059 13,024 12,599 Net occupancy expenses 1,328 1,391 1,335 1,254 1,414 Equipment expenses 1,879 1,853 1,954 1,979 2,217 Marketing expense 521 363 385 440 538 Outside data processing fees 1,158 1,328 1,211 1,223 1,063 Printing and office supplies 397 397 388 398 466 Goodwill and core deposit amortization 802 827 852 892 923 Other expenses 4,272 3,544 3,438 3,354 4,623 -------- -------- -------- -------- -------- Total other expenses 23,666 22,790 22,622 22,564 23,843 -------- -------- -------- -------- -------- Income before income tax 10,890 11,033 10,761 9,912 8,000 Income tax expense 3,422 3,380 3,406 2,977 2,181 -------- -------- -------- -------- -------- Net income $ 7,468 $ 7,653 $ 7,355 $ 6,935 $ 5,819 ======== ======== ======== ======== ======== Per Share Data Basic Net Income $ .41 $ .41 $ .40 $ .37 $ .31 Diluted Net Income .40 .41 .40 .37 .31 Cash Dividends Paid .23 .23 .23 .23 .23 Average Diluted Shares Outstanding (in thousands) 18,721 18,658 18,633 18,646 18,666 FINANCIAL RATIOS Return on Average Assets .94% .98% .96% .91% .76% Return on Avg. Stockholders' Equity 9.46 9.88 9.56 9.05 7.69 Avg. Earning Assets to Avg. Assets 91.38 89.98 89.64 90.05 90.19 Allowance for Loan Losses as % Of Total Loans .93 1.05 1.08 1.14 1.08 Net Charge Off's as % Of Avg. Loans (Annualized) .65 .34 .46 .07 .92 Dividend Payout Ratio 57.50 56.10 57.50 62.16 74.19 Avg. Stockholders' Equity to Avg. Assets 9.92 9.89 10.00 10.08 9.86 Tax Equivalent Yield on Earning Assets 5.74 5.79 5.65 5.71 5.62 Cost of Supporting Liabilities 1.89 1.85 1.78 1.84 1.84 Net Int. Margin (FTE) on Earning Assets 3.85 3.94 3.87 3.87 3.78