First Merchants Releases 3Q Earnings

Nov 05, 2009 (Close-Up Media via COMTEX) -- FRME | Quote | Chart | News | PowerRating -- First Merchants Corp. has reported a third quarter 2009 net loss of $6.4 million, or $.30 per fully diluted common share.

In a release on November 1, the Company noted that its 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 Corp.'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, the Corp.'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 Corp.'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, said 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."

First Merchants Corp. is a financial holding company headquartered in Muncie, Indiana.

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