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 18, 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 July 18, 2005, First Merchants Corporation issued a press release to report its financial results for the second quarter ended June 30, 2005. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K. The information in this Current Report on Form 8-K, including Exhibit No. 99.1 hereto, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section. The information in this Current Report shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document. ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS. (a) Not applicable. (b) Not applicable. (c) Exhibits. Exhibit 99.1 Press Release, dated July 18, 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: July 18, 2005 Page 3 of 10 EXHIBIT INDEX ------------- Exhibit No. ----------- 99.1 Description ----------- Press Release, dated July 18, 2005, issued by First Merchants Corporation. Page 4 of 10 First Merchants Corporation Exhibit No. 99.1 Press Release, dated July 18, 2005 N / E / W / S R / E / L / E / A / S / E July 18, 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 7.5% INCREASE IN SECOND QUARTER EARNINGS PER SHARE First Merchants Corporation (NASDAQ - FRME) has reported second quarter diluted earnings per share of $.43, a 7.5 percent increase over $.40 recorded in the second quarter of 2004. Net income during the quarter totaled $7.9 million compared to $7.4 million in 2004. Year-to-date diluted earnings per share totaled $.78, a 1.3 percent increase over $.77 recorded in 2004. Net income for the six months ended June 30, 2005 totaled $14.5 million compared to $14.3 million in 2004. Year-to-date net-interest income improved by $3.4 million, or 6.6 percent, as net-interest margin improved to 3.93 percent. Non-interest income also increased by $336,000, or 1.9 percent. Mitigating costs include increased provisions for loan losses of $1.5 million and increased operating expenses of $2.2 million, or 5.0 percent. However, as reported in the Corporation's 8-K filing of February 16, 2005, a $1.6 million charge related to the curtailment of the Corporation's defined benefit pension plan is included in the 5.0 percent increase. As of June 30, 2005, non-performing loans totaled 70 basis points of average total loans and the allowance for loan losses as a percent of total loans equaled 1.03 percent. Total assets equaled $3.2 billion at quarter-end, an increase of $73 million, or 2.3 percent from June 30, 2004. Loans, investments and bank-owned life insurance, the Corporation's three primary earning assets, totaled $2.9 billion, an increase of $84 million over the prior year. Michael L. Cox, President and Chief Executive Officer, stated that, "Core revenue growth remains positive as operating income on a fully taxable equivalent basis improved by 6.1%. Absent the curtailment expense, our operating expenses are up just 1.4%. The Corporation's financial results continue to show steady improvement." CONFERENCE CALL First Merchants Corporation will conduct a conference call at 2:30 p.m. (CT)/3:30 p.m. (ET) on Wednesday, July 20, 2005. To participate dial (Toll Free) 877-407-9210 and reference First Merchants Corporation's second quarter earnings release. A replay will be available until July 27, 2005. 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 # 286 and Conference ID # 160762. 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, Madison Community Bank, First United Bank, United Communities National 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) June 30, 2005 2004 Assets Cash and due from banks $ 71,498 $ 72,432 Federal funds sold 0 0 ----------- ----------- Cash and cash equivalents 71,498 72,432 Interest-bearing time deposits 9,255 20,424 Investment securities 420,685 411,140 Mortgage loans held for sale 1,356 4,001 Loans 2,440,906 2,365,380 Less: Allowance for loan losses (25,091) (25,510) ---------- ---------- Net Loans 2,415,815 2,339,870 Premises and equipment 37,240 38,437 Federal Reserve and Federal Home Loan Bank stock 23,054 22,494 Interest receivable 16,950 14,943 Core deposit intangibles and goodwill 139,799 141,014 Cash surrender value of life insurance 42,827 41,288 Other assets 22,819 22,247 ----------- ----------- Total assets $ 3,201,298 $ 3,128,290 =========== =========== Liabilities Deposits Noninterest-bearing $ 363,654 $ 334,018 Interest-bearing 2,040,624 2,038,092 ----------- ----------- Total deposits 2,404,278 2,372,110 Borrowings 454,400 422,885 Interest payable 5,068 4,216 Other liabilities 24,194 24,811 ----------- ----------- Total liabilities 2,887,940 2,824,022 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 - 18,415,725 and 18,483,936 2,302 2,310 Additional paid-in capital 146,057 149,194 Retained earnings 167,452 154,876 Accumulated other comprehensive income (2,453) (2,112) ----------- ----------- Total stockholders' equity 313,358 304,268 ----------- ----------- Total liabilities and stockholders' equity $ 3,201,298 $ 3,128,290 =========== =========== FINANCIAL HIGHLIGHTS Three Months Ended Six Months Ended (In thousands) June 30, June 30, 2005 2004 2005 2004 NET CHARGE OFF'S $ 1,345 $ 2,669 $ 2,072 $ 3,075 AVERAGE BALANCES Total Assets $3,191,275 $3,077,161 $3,177,488 $3,059,499 Total Loans 2,430,081 2,343,270 2,422,110 2,341,175 Total Deposits 2,422,688 2,320,546 2,420,810 2,316,627 Total Stockholders' Equity 312,611 307,750 313,961 307,171 FINANCIAL RATIOS Return on Average Assets .99% .96% .91% .93% Return on Avg. Stockholders' Equity 10.13 9.56 9.23 9.30 Avg. Earning Assets to Avg. Assets 90.81 89.64 90.71 89.85 Allowance for Loan Losses as % Of Total Loans 1.03 1.08 1.03 1.08 Net Charge Off's as % Of Avg. Loans (Annualized) .22 .46 .17 .26 Dividend Payout Ratio 53.49 57.50 58.98 59.74 Avg. Stockholders' Equity to Avg. Assets 9.80 10.00 9.88 10.04 Tax Equivalent Yield on Earning Assets 6.14 5.65 6.01 5.68 Cost of Supporting Liabilities 2.15 1.78 2.08 1.81 Net Int. Margin (FTE) on Earning Assets 3.99 3.87 3.93 3.87 CONSOLIDATED STATEMENTS OF INCOME (in thousands, except share data) Three Months Ended Six Months Ended June 30, June 30, 2005 2004 2005 2004 Interest Income Loans receivable Taxable $ 38,831 $ 34,021 $ 75,653 $ 68,248 Tax exempt 189 137 323 300 Investment securities Taxable 2,376 2,052 4,705 4,001 Tax exempt 1,554 1,420 3,107 2,850 Federal funds sold 112 37 139 55 Deposits with financial institutions 166 125 308 234 Federal Reserve and Federal Home Loan Bank stock 285 307 593 635 -------- -------- -------- -------- Total interest income 43,513 38,099 84,828 76,323 -------- -------- -------- -------- Interest expense Deposits 10,729 7,879 20,535 16,069 Securities sold under repurchase agreements 193 98 442 318 Federal Home Loan Bank advances 2,443 2,433 4,818 4,875 Subordinated debentures, revolving credit and term loans 1,839 1,635 3,628 3,245 Other borrowings 388 207 542 337 -------- -------- -------- -------- Total interest expense 15,592 12,252 29,965 24,844 -------- -------- -------- -------- Net interest income 27,921 25,847 54,863 51,479 Provision for loan losses 1,948 1,720 4,615 3,092 -------- -------- -------- -------- Net interest income after provision for loan losses 25,973 24,127 50,248 48,387 -------- -------- -------- -------- Other income Fiduciary activities 1,963 2,002 3,925 3,812 Service charges on deposit accounts 3,048 2,996 5,771 5,768 Other customer fees 1,188 966 2,273 2,036 Net realized gains on sales of available-for-sale securities 6 363 6 400 Commission income 757 777 2,261 1,730 Earnings on cash surrender value of Life insurance 439 482 840 911 Net gains and fees on sales of loans 779 1,352 1,456 2,153 Other income 582 318 1,276 662 -------- -------- -------- -------- Total other income 8,762 9,256 17,808 17,472 -------- -------- -------- -------- Other expenses Salaries and employee benefits 13,258 13,059 28,079 26,083 Net occupancy expenses 1,422 1,335 2,798 2,589 Equipment expenses 1,852 1,954 3,709 3,933 Marketing expense 526 385 941 825 Outside data processing fees 1,033 1,211 2,042 2,434 Printing and office supplies 304 388 641 786 Goodwill and core deposit amortization 778 852 1,565 1,744 Other expenses 4,026 3,438 7,655 6,792 -------- -------- -------- -------- Total other expenses 23,199 22,622 47,430 45,186 -------- -------- -------- -------- Income before income tax 11,536 10,761 20,626 20,673 Income tax expense 3,615 3,406 6,138 6,383 -------- -------- -------- -------- Net income $ 7,921 $ 7,355 $ 14,488 $ 14,290 ======== ======== ======== ======== Per Share Data Basic Net Income .43 .40 .78 .77 Diluted Net Income .43 .40 .78 .77 Cash Dividends Paid .23 .23 .46 .46 Average Diluted Shares Outstanding (in thousands) 18,536 18,633 18,614 18,645 CONSOLIDATED BALANCE SHEETS (in thousands) June 30, March 31, December 31, September 30, June 30, 2005 2005 2004 2004 2004 Assets Cash and due from banks $ 71,498 $ 67,904 $ 69,960 $ 73,367 $ 72,432 Federal funds sold 22,075 22,700 ----------- ----------- ----------- ----------- ----------- Cash and cash equivalents 71,498 89,979 69,960 96,067 72,432 Interest-bearing time deposits 9,255 10,737 9,343 12,204 20,424 Investment securities 420,685 409,820 421,535 420,645 411,140 Mortgage loans held for sale 1,356 3,084 3,367 2,715 4,001 Loans 2,440,906 2,414,099 2,428,051 2,395,306 2,365,380 Less: Allowance for loan losses (25,091) (24,488) (22,548) (25,243) (25,510) ----------- ----------- ----------- ----------- ----------- Net loans 2,415,815 2,389,611 2,405,503 2,370,063 2,339,870 Premises and equipment 37,240 37,525 38,254 38,170 38,437 Federal Reserve and Federal Home Loan Bank stock 23,054 22,883 22,858 22,750 22,494 Interest receivable 16,950 16,606 17,318 17,594 14,943 Core deposit intangibles and goodwill 139,799 140,578 141,284 140,186 141,014 Cash surrender value of life insurance 42,827 42,426 42,061 41,700 41,288 Other assets 22,819 24,337 20,185 19,268 22,247 ----------- ----------- ----------- ----------- ----------- Total assets $ 3,201,298 $ 3,187,586 $ 3,191,668 $ 3,181,362 $ 3,128,290 =========== =========== =========== =========== =========== Liabilities Deposits Noninterest-bearing $ 363,654 $ 333,614 $ 330,685 $ 373,548 $ 334,018 Interest-bearing 2,040,624 2,118,605 2,077,465 2,083,271 2,038,092 ----------- ----------- ----------- ----------- ----------- Total deposits 2,404,278 2,452,219 2,408,150 2,456,819 2,372,110 Borrowings 454,400 391,193 440,891 379,922 422,885 Interest payable 5,068 6,562 4,411 5,706 4,216 Other liabilities 24,194 27,014 23,613 25,253 24,811 ----------- ----------- ----------- ----------- ----------- Total liabilities 2,887,940 2,876,988 2,877,065 2,867,700 2,824,022 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 2,302 2,312 2,322 2,320 2,310 Additional paid-in capital 146,057 148,347 150,862 148,993 149,194 Retained earnings 167,452 163,761 161,459 160,004 154,876 Accumulated other comprehensive income (loss) (2,453) (3,822) (40) 2,345 (2,112) ----------- ----------- ----------- ----------- ----------- Total stockholders' equity 313,358 310,598 314,603 313,662 304,268 ----------- ----------- ----------- ----------- ----------- Total liabilities and stockholders' equity $ 3,201,298 $ 3,187,586 $ 3,191,668 $ 3,181,362 $ 3,128,290 =========== =========== =========== =========== =========== NON-PERFORMING ASSETS (in thousands) June 30, March 31, December 31, September 30, June 30, 2005 2005 2004 2004 2004 90 days past due $ 3,696 $ 1,948 $ 1,907 $ 6,664 $ 2,488 Non-accrual loans 11,626 13,272 15,355 16,852 17,702 Other real estate 1,804 2,003 1,650 1,546 1,653 ---------- ---------- ---------- ---------- ---------- Total non-performing assets $ 17,126 $ 17,223 $ 18,912 $ 25,062 $ 21,843 ========== ========== ========== ========== ========== Average total loans for the quarter $2,430,081 $2,414,050 $2,409,170 $2,383,942 $2,343,270 Total non-performing assets as a percent of average total loans .70% .71% .79% 1.05% .93% Restructured loans $ 531 $ 337 $ 2,019 $ 2,169 $ 926 CONSOLIDATED STATEMENTS OF INCOME Three Months Ended (in thousands, except share data) June 30, March 31, December 31, September 30, June 30, 2005 2005 2004 2004 2004 Interest Income Loans receivable Taxable $ 38,831 $ 36,822 $ 36,363 $ 35,342 $ 34,021 Tax exempt 189 134 138 143 137 Investment securities Taxable 2,376 2,329 2,224 2,146 2,052 Tax exempt 1,554 1,553 1,569 1,679 1,420 Federal funds sold 112 27 92 18 37 Deposits with financial institutions 166 142 167 154 125 Federal Reserve and Federal Home Loan Bank stock 285 308 297 319 307 -------- -------- -------- -------- -------- Total interest income 43,513 41,315 40,850 39,801 38,099 -------- -------- -------- -------- -------- Interest expense Deposits 10,729 9,806 9,288 8,487 7,879 Securities sold under repurchase agreements 193 249 183 16 98 Federal Home Loan Bank advances 2,443 2,375 2,418 2,484 2,433 Subordinated debentures, revolving credit and term loans 1,839 1,789 1,717 1,822 1,635 Other borrowings 388 154 126 200 207 -------- -------- -------- -------- -------- Total interest expense 15,592 14,373 13,732 13,009 12,252 -------- -------- -------- -------- -------- Net interest income 27,921 26,942 27,118 26,792 25,847 Provision for loan losses 1,948 2,667 1,233 1,380 1,720 -------- -------- -------- -------- -------- Net interest income after provision for loan losses 25,973 24,275 25,885 25,412 24,127 -------- -------- -------- -------- -------- Other income Fiduciary activities 1,963 1,962 1,897 1,923 2,002 Service charges on deposit accounts 3,048 2,723 2,924 2,946 2,996 Other customer fees 1,188 1,085 1,068 979 966 Net realized gains on sales of available-for-sale securities 6 456 332 363 Commission income 757 1,504 671 687 777 Earnings on cash surrender value of life insurance 439 401 439 448 482 Net gains and fees on sales of loans 779 677 801 675 1,352 Other income 582 694 415 421 318 -------- -------- -------- -------- -------- Total other income 8,762 9,046 8,671 8,411 9,256 -------- -------- -------- -------- -------- Other expenses Salaries and employee benefits 13,258 14,821 13,309 13,087 13,059 Net occupancy expenses 1,422 1,376 1,328 1,391 1,335 Equipment expenses 1,852 1,857 1,879 1,853 1,954 Marketing expense 526 415 521 363 385 Outside data processing fees 1,033 1,009 1,158 1,328 1,211 Printing and office supplies 304 337 397 397 388 Goodwill and core deposit amortization 778 787 802 827 852 Other expenses 4,026 3,629 4,272 3,544 3,438 -------- -------- -------- -------- -------- Total other expenses 23,199 24,231 23,666 22,790 22,622 -------- -------- -------- -------- -------- Income before income tax 11,536 9,090 10,890 11,033 10,761 Income tax expense 3,615 2,523 3,422 3,380 3,406 -------- -------- -------- -------- -------- Net income $ 7,921 $ 6,567 $ 7,468 $ 7,653 $ 7,355 ======== ======== ======== ======== ======== Per Share Data Basic Net Income $ .43 $ .35 $ .41 $ .41 $ .40 Diluted Net Income .43 .35 .40 .41 .40 Cash Dividends Paid .23 .23 .23 .23 .23 Average Diluted Shares Outstanding (in thousands) 18,536 18,697 18,721 18,658 18,633 FINANCIAL RATIOS Return on Average Assets .99% .83% .94% .98% .96% Return on Avg. Stockholders' Equity 10.13 8.33 9.46 9.88 9.56 Avg. Earning Assets to Avg. Assets 90.81 90.61 91.38 89.98 89.64 Allowance for Loan Losses as % Of Total Loans 1.03 1.01 .93 1.05 1.08 Net Charge Off's as % Of Avg. Loans (Annualized) .22 .12 .65 .34 .46 Dividend Payout Ratio 53.49 65.71 57.50 56.10 57.50 Avg. Stockholders' Equity to Avg. Assets 9.80 9.97 9.92 9.89 10.00 Tax Equivalent Yield on Earning Assets 6.14 5.90 5.74 5.79 5.65 Cost of Supporting Liabilities 2.15 2.01 1.89 1.85 1.78 Net Int. Margin (FTE) on Earning Assets 3.99 3.89 3.85 3.94 3.87