FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
---------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------ ------------
Commission File Number: 33-9540
---------
First Merchants Bancorp, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
West Virginia 55-0670580
------------------------------- ---------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
Fourth Avenue and Washington Street, Montgomery, WV 25136
----------------------------------------------------------
(Address of principal executive offices, Zip Code)
(304) 442-2475
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of share outstanding of each of the issuer's classes of
common stock, as of May 12, 1995.
576,000 shares of voting common stock, par value $2 per share.
(page 1 of 17)
FIRST MERCHANTS BANCORP, INC. AND SUBSIDIARY
FORM 10-Q
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
Consolidated Balance Sheets (Unaudited)
March 31, 1995 and December 31, 1994. . . . . . . . . 3
Consolidated Statements of Income
(Unaudited) for the Three Months
Ended March 31, 1995 and 1994 . . . . . . . . . . . . 4
Consolidated Statements of Stockholders'
Equity (Unaudited) for the Three Months
Ended March 31, 1995 and 1994 . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows
(Unaudited) for the Three Months Ended
March 31, 1995 and 1994 . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations . . . . . . . . . . . . . . . . . . 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . Not applicable
Item 2. Changes in Securities . . . . . . . . Not applicable
Item 3. Defaults Upon Senior Securities . . . Not applicable
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . Not applicable
Item 5. Other Information . . . . . . . . . . Not applicable
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . 16
(2)
PART I. FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
FIRST MERCHANTS BANCORP, INC. AND SUBSIDIARY
MARCH 31 DECEMBER 31
1995 1994
(UNAUDITED)
ASSETS ------------ ------------
Cash and due from banks $4,520,275 $5,211,650
Federal funds sold 50,000 810,000
------------ ------------
CASH AND CASH EQUIVALENTS 4,570,275 6,021,650
Interest-bearing deposits in other banks 643,304 670,734
Securities available for sale (cost: 03-31-95 -
$16,217,850: 12-31-94 - $16,204,906) 15,397,296 14,888,731
Securities held to maturity (approximate market
value: 3-31-95 - $29,914,923;
12-31-94 - $28,304,476) 29,576,766 28,648,209
Loans - gross 51,808,607 59,015,396
Less: Unearned income (140,358) (141,203)
Allowance for loan losses (474,166) (460,000)
------------ ------------
LOANS - NET 51,194,083 58,414,193
Premises and equipment 3,572,119 3,452,390
Other assets 3,192,401 3,195,202
------------ ------------
TOTAL ASSETS $108,146,244 $115,291,109
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest bearing $14,001,035 $13,674,107
Interest bearing 81,038,184 81,867,045
------------ ------------
TOTAL DEPOSITS 95,039,219 95,541,152
Short-term borrowings:
Securities sold under agreements
to repurchase 1,697,766 8,634,139
Other short-term borrowings 274,217 509,881
------------ ------------
TOTAL SHORT-TERM BORROWINGS 1,971,983 9,144,020
Other liabilities 1,154,957 1,144,151
------------ ------------
TOTAL LIABILITIES 98,166,159 105,829,323
Stockholders' equity:
Common stock, $2 par value, 1,000,000 shares
authorized, 576,000 shares issued and
outstanding 1,152,000 1,152,000
Surplus 649,343 649,343
Retained earnings 8,671,075 8,450,153
Net unrealized (loss) gain on Securities
available for sale, net of related taxes
of $(328,221) and $(526,465), respectively (492,333) (789,710)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 9,980,085 9,461,786
------------ ------------,
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $108,146,244 $115,291,109
============ ============
See notes to consolidated financial statements.
(3)
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FIRST MERCHANTS BANCORP, INC. AND SUBSIDIARY
THREE MONTHS ENDED
MARCH 31
1995 1994
---------- ----------
INTEREST INCOME
Interest and fees on loans $1,255,395 $1,158,982
Interest and dividends on securities:
Taxable 549,750 432,004
Nontaxable 168,826 194,909
Interest on federal funds sold 11,497 10,997
Interest on deposits with other banks 15,849 23,273
---------- ----------
TOTAL INTEREST INCOME 2,001,317 1,820,165
INTEREST EXPENSE
Interest on deposits 724,923 679,740
Interest on short-term borrowings 56,881 25,033
---------- ----------
TOTAL INTEREST EXPENSE 781,804 704,773
---------- ----------
NET INTEREST INCOME 1,219,513 1,115,393
PROVISION FOR LOAN LOSSES 18,000 25,500
---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,201,513 1,089,892
OTHER INCOME
Service charges on deposit accounts 88,276 73,117
Other service charges and fees 10,831 11,395
Other income 55,140 49,707
Investment securities gains, net 0 8,300
---------- ----------
TOTAL OTHER INCOME 154,247 142,519
OTHER EXPENSE
Salaries and employee benefits 471,142 461,057
Occupancy expense of premises 80,113 71,758
Furniture and equipment expense 71,446 71,802
Other operating expenses 337,282 310,072
---------- ----------
TOTAL OTHER EXPENSE 959,983 914,689
---------- ----------
INCOME BEFORE INCOME TAXES 395,777 317,722
INCOME TAXES 99,975 69,699
---------- ----------
NET INCOME $295,802 $248,023
========== ==========
EARNINGS PER COMMON SHARE :
Net income $.51 $.43
======== ========
AVERAGE SHARES OUTSTANDING 576,000 576,000
======== ========
See notes to consolidated financial statements.
(4)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
FIRST MERCHANTS BANCORP, INC. AND SUBSIDIARY
Net
Unrealized
(Loss) Gain Total
Common Retained on St'holders'
Stock Surplus Earnings Securities Equity
---------- ---------- ---------- ---------- ----------
Balance at
Dec. 31, 1994 $1,152,000 $649,343 $8,450,153 $(789,710) $9,461,786
Net income 295,802 295,802
Cash dividends
declared
($.13 per share) (74,880) (74,880)
Change in net
unrealized gain
(loss) on
Securities AFS
net of taxes of
$(198,244) 297,377 297,377
---------- ---------- ---------- ---------- ----------
Balance at
March 31, 1995 $1,152,000 $649,343 $8,671,075 $(492,333) $9,980,085
========== ========== ========== ========== ==========
Balance at
Dec. 31, 1993 $1,152,000 $649,343 $7,665,033 $304,990 $9,771,366
Net income 248,023 248,023
Cash dividends
declared
($.13 per share) (74,880) (74,880)
Change in net
unrealized gain
(loss) on
securities AFS
net of taxes
of (237,772) (356,679) (356,679)
---------- ---------- ---------- ---------- ----------
Balance at
March 31, 1994 $1,152,000 $649,343 $7,838,176 $(51,689) $9,587,830
========== ========== ========== ========== ==========
See notes to consolidated financial statements.
(5)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FIRST MERCHANTS BANCORP, INC. AND SUBSIDIARY
THREE MONTHS ENDED
MARCH 31 MARCH 31
1995 1994
---------- ----------
OPERATING ACTIVITIES
Net income $295,802 $248,023
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Net amortization (11,811) 39,474
Provision for loan losses 18,000 25,500
Depreciation 50,665 51,900
Securities, gain net 0 (8,300)
Purchases of trading securities 0 0
Proceeds from sales of trading securities 0 0
Increase in other assets (186,153) (127,285)
Increase (Decrease) in other liabilities 108,725 (26,783)
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 275,228 202,529
INVESTING ACTIVITIES
Purchases of securities held to maturity (2,237,949) (669,238)
Purchases of securities available for sale (18,500) (698,238)
Proceeds from maturities and calls of securities
held to maturity 1,326,768 1,038,389
Proceeds from sales of securities
held to maturity 0 0
Proceeds from sales of securities
available for sale 0 500,000
Net decrease in short-term investments 27,430 587,531
Net decrease (increase) in loans 7,185,628 (2,710,101)
Purchases of premises and equipment (170,394) (10,479)
Proceeds from sale of other real estate owned 7,185 0
---------- ----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 6,120,168 (1,962,136)
FINANCING ACTIVITIES
Net increase in noninterest-bearing deposits 326,928 1,727,574
Net (decrease) increase in
interest-bearing deposits (828,861) 1,445,110
Net (decrease) in repurchase agreements (6,936,374) (1,124,862)
Net (decrease) in other short-term borrowings (235,664) (55,920)
Cash dividends paid (172,800) (155,520)
---------- ----------
NET CASH (USED IN ) PROVIDED BY
FINANCING ACTIVITIES (7,846,771) 1,836,382
---------- ----------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (1,451,375) 76,775
Cash and cash equivalents at beginning of period 6,021,650 5,146,864
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD 4,570,275 5,223,639
========== ==========
See notes to consolidated financial statements.
(6)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIRST MERCHANTS BANCORP, INC. AND SUBSIDIARY
March 31, 1995
NOTE A - GENERAL
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information, and with the instructions to Form 10-Q and
Article 10 of Regulation S-X, and conform to general reporting practices
within the banking industry. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. The accounting and reporting
policies followed in the preparation of these financial statements are
consistent with those applied in the preparation of the Consolidated
Financial Statements of First Merchants Bancorp, Inc. and Subsidiary (the
Company) as of and for the year ended December 31, 1994. The notes included
herein should be read in conjunction with the notes to consolidated
financial statements included in the 1994 annual report on Form 10-k.
In the opinion of management, all adjustments necessary for a fair
presentation of financial position and results of operations for the interim
periods have been made. Such adjustments are of a normal recurring nature.
Operating results for the three months ended March 31, 1995 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1995.
NOTE B - INCOME TAXES
The principal reasons for the difference between the effective tax rate and
the statutory federal tax rate are tax exempt interest and state income tax
expense.
At the end of each month, the Company makes its best estimate of the
effective tax rate expected for the year and uses this rate in providing for
income taxes on an interim basis.
NOTE C - COMMITMENTS AND CONTINGENCIES
In the normal course of business, there are various commitments to extend
credit under standby letters of credit and lines of credit which are not
reflected in the accompanying financial statements. As of March 31, 1995
the Company's subsidiary had commitments outstanding to extend credit under
standby letters of credit and lines of credit of approximately $422,051 and
$2,288,323, respectively. Such commitments have essentially the same credit
risk as that involved in extending loans to customers and are subject to the
Company's standard credit policies. Historically, substantially all standby
letters of credit expire unfunded. Management does not anticipate any
material losses as a result of these commitments.
NOTE D - ACCOUNTING PRONOUNCEMENTS WITH DELAYED EFFECTIVE DATES
The Company adopted the provisions of FASB Statement No. 114, "Accounting by
Creditors for Impairment of a Loan," effective January 1, 1995. Statement
114 requires that certain impaired loans be measured based on the present
value of expected future cash flows, discounted at the effective interest
rate of the loan, or, as a practical expedient, the loan may be valued at
the fair value of the collateral if the loan is collateral dependent.
Adoption of the Statement was not material to the Company's financial
condition.
(7)
NOTE E - PENDING MERGER
On March 14, 1995, the Company's Board of Directors approved a plan of
merger whereunder the Company will be acquired by City Holding Company. The
merger is subject to approval of shareholders and regulators and is expected
to be consummated in the summer of 1995.
(8)
Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SUMMARY OF CHANGES IN FINANCIAL POSITION
First Merchants' total assets as of March 31, 1995 decreased approximately
$7.1 million or 6.2% when compared with December 31, 1994. This decrease
was primarily due to a decline in short-term financial instruments
classified as loans of approximately $10.5 million. This decrease was the
result of a decrease in the level of securities sold under agreement to
repurchase of approximately $6.9 million and an increase in outstanding
loans of approximately $3.3 million.
Net loans outstanding, exclusive of certain short-term instruments
classified as loans, increased approximately $3.3 million during the first
three months of 1995. The majority of this increase can be attributed to an
increase in the installment (or consumer) loan portfolio of approximately
$2.6 million and a $.7 million increase in the real estate loan portfolio.
For financial statement purposes, purchases of commercial loan
participations and commercial paper are classified as net loans outstanding.
The following table provides a comparative analysis of the loan portfolio
segregated by the typical loan products offered by Merchants National to its
customers and short-term financial instruments classified as loans:
3-31-95 12-31-94
----------- -----------
Loans, net of unearned income
and allowance for loan losses $51,194,083 $47,913,738
Short-term financial instruments
classified as loans 0 10,500,455
----------- -----------
Net loans outstanding $51,194,083 $58,414,193
=========== ===========
Historically, the Company has purchased the short-term financial instruments
classified as loans to match the maturities of repurchase agreements and
volatile deposits. With the decrease in repurchase agreements and increase
in loan volume previously discussed, management has reduced its holdings of
these instruments. Management has directed its marketing efforts towards
generating additional loan demand through more competitive pricing of its
loan products in an effort to preserve its net yield on earning assets. A
more detailed discussion of this strategy may be found in the Net Interest
Income section here of.
Securities sold under agreement to repurchase decreased during the first
quarter of 1995. This was a result of more aggressive bidding by other
banks for public funds during the first three months of 1995.
Net unrealized (loss) gain, on Securities available for sale increased by
approximately $297,000 during the first three months of 1995. This increase
can be attributed to a decline in interest rates during the first three
months of the year which has resulted in increasing market values of
securities classified as available for sale.
As of March 31, 1995, management is not aware of any current recommendations
by regulatory authorities, which if implemented, would have or are
reasonably likely to have a material effect on the Company's liquidity,
capital resources or operations. There are also no known trends, demands,
commitments, or uncertainties that have had, or that are reasonably expected
to have, a material favorable or unfavorable impact on the financial results
of the Company.
(9)
SUMMARY OF RESULTS OF OPERATIONS
First Merchants' consolidated net income for the three months ended March
31, 1995 increased approximately $48,000 or 19.26% when compared with the
corresponding period of the preceding year. A more detailed discussion by
income statement category follows:
NET INTEREST INCOME
The Company's net interest income increased approximately $112,000 for the
three months ended March 31, 1995 when compared with the corresponding
period of the preceding year. The Company's net yield on earning assets
increased from 4.63% during the first three months of 1994 to 5.26% during
the first three months of 1995. The following table presents the weighted
yield on earning assets, weighted cost of funds and net yield on earning
assets for each of the periods presented:
THREE MONTHS ENDED
3-31-95 3-31-94
--------- ---------
WEIGHTED YIELD ON EARNING ASSETS (1) 8.40% 7.47%
WEIGHTED COST OF RATE SENSITIVE LIABILITIES 3.64 3.27
NET YIELD ON EARNING ASSETS 5.26 4.63
(1) Weighted average yields on assets exempt from federal income taxes have
been computed on a fully tax equivalent basis assuming a tax rate of 34
percent.
The liability sensitive financial position of Merchants National makes the
Company somewhat vulnerable should interest rates rise dramatically within a
short period of time. Management is aware of the potential negative impact
this would have on earnings, and has taken steps to control this risk by
shortening the maturity of its earning assets, and by designating a
substantial portion of the investment portfolio as available for sale so it
can be used to off-set dramatic shifts in the interest rate. Investments
are limited to traditional debt securities and the Company does not invest
in any derivative instruments. The following tables present the subsidiary
bank's asset (liability) sensitivity position:
(10)
MARCH 31, 1995:
REPRICING FREQUENCY
------------------------------------------
0 - 30 31 - 90 91 - 365 365+
DAYS DAYS DAYS DAYS TOTAL
--------- --------- --------- --------- ---------
(In Thousands of Dollars)
Interest bearing
deposits with
other banks $ 643 $ 643
Federal funds sold 50 50
Securities available
for sale 7,839 7,494 64 15,397
Securities held
to maturity 250 1,857 27,470 29,577
Loans 14,190 3,275 12,185 22,158 51,808
--------- --------- --------- --------- ---------
TOTAL EARNING ASSETS 22,722 3,525 21,536 49,692 97,475
Interest bearing
demand deposits $12,928 $12,928
Savings deposits 3,113 6,225 22,070 31,408
Time deposits 3,715 4,587 15,116 $13,284 36,702
Short-term borrowings 1,778 194 1,972
--------- --------- --------- --------- ---------
TOTAL RATE SENSITIVE
LIABILITIES 21,534 11,006 37,186 13,284 83,010
--------- --------- --------- --------- ---------
ASSET (LIABILITY)
SENSITIVITY
AT 3-31-95 $1,188 $(7,481) $(15,650) $36,408 $14,465
========= ========= ========= ========= =========
Cumulative gap 1,188 (6,293) (21,943) 14,465
========= ========= ========= =========
(11)
DECEMBER 31, 1994:
REPRICING FREQUENCY
------------------------------------------
0 - 30 31 - 90 91 - 365 365+
DAYS DAYS DAYS DAYS TOTAL
--------- --------- --------- --------- ---------
(In Thousands of Dollars)
Interest bearing
deposits with
other banks 29 642 671
Federal funds sold 810 810
Securities available
for sale 7,246 7,247 396 14,889
Securities held
to maturity 750 510 1,001 26,387 28,648
Loans 20,262 6,612 12,000 19,540 58,414
--------- --------- --------- --------- ---------
TOTAL EARNING ASSETS 29,097 7,122 20,890 46,323 103,432
Interest bearing
demand deposits 13,942 13,942
Savings deposits 3,225 6,450 22,686 32,361
Time deposits 4,457 5,525 13,803 11,779 35,564
Short-term borrowings 5,952 3,192 9,144
--------- --------- --------- --------- ---------
TOTAL RATE SENSITIVE
LIABILITIES 27,576 15,167 36,489 11,779 91,011
--------- --------- --------- --------- ---------
ASSET (LIABILITY)
SENSITIVITY
AT 12-31-94 1,521 (8,045) (15,599) 34,544 12,421
========= ========= ========= ========= =========
Cumulative gap 1,521 (6,524) (22,123) 12,421
========= ========= ========= =========
The analysis above is a "static gap" presentation applicable at a particular
point in time. Various assumptions and estimates have been made by
management in determining maturity and repayment patterns for purposes of
these tables.
PROVISION FOR LOAN LOSSES
The provision for loan losses for the three months ended March 31, 1995
decreased $7,500 when compared with the corresponding period of the
preceding year.
The provision for loan losses is based on the Company's normal quarterly
review of the adequacy of the allowance for loan losses. A portion of the
allowance is allocated to specific loans which have been identified as
potentially uncollectible either in part or in full as a result of the
Company's quarterly reviews. The remainder of the allowance is unallocated,
and is based on the Company's historical charge-off percentages and the
estimated risk inherent in the portfolio. The allowance for loan losses as
(12)
a percentage of net long-term loans outstanding as of each of the respective
balance sheet dates is presented in the following table:
3-31-95 12-31-94
------------ ------------
Allowance for loan losses $474,166 $460,000
Long-term loans outstanding 51,194,083 47,913,738
Percentage of allowance to net
long-term loans outstanding 0.93% 0.96%
Transactions in the allowance for loan losses are summarized as follows:
THREE MONTHS ENDED
MARCH 30
1995 1994
--------------------
Balance at beginning of period $460,000 $445,000
Provision charged to operations 18,000 25,500
Loans charged off (11,506) (12,258)
Recoveries 7,672 3,947
-------- --------
Balance at end of period $474,166 $462,189
======== ========
Nonperforming assets as of each of the respective balance sheet dates presented
are as follows:
3-31-95 12-31-94
------------ ------------
Accruing loans greater than 90
days past due $112,770 $201,975
Troubled debt restructuring 0 0
Nonaccrual loans 21,618 14,286
----------- -----------
$134,388 $216,261
=========== ===========
As a percentage of long-term
loans outstanding 0.26% 0.45%
=========== ===========
Other real estate owned 26,482 17,185
=========== ===========
Allowance for loan losses as a
percentage of nonperforming loans 353% 213%
=========== ===========
For purposes of calculating the above percentages, short-term loans
representing commercial loan participations with average maturities of 30 days
and commercial paper were excluded from net loans outstanding. Such
instruments are acquired to match maturities of repurchase agreements and other
(13)
volatile deposits. This strategy serves to reduce the Company's interest rate
risk as well as to prevent potential liquidity concerns. In management's
opinion, these are extremely low-risk loans which do not warrant an allocation
of the allowance for loan losses.
OTHER INCOME
Noninterest income for the three months ended March 31, 1995 increased
approximately $12,000 when compared with the corresponding period of the
preceding year. The principle reason for the increase in the three month
period ending March 31, 1995 when compared to the corresponding period of the
preceding year is an increase in the volume of returned check charges.
OTHER EXPENSE
Noninterest expense for the three months ended March 31, 1995 increased
approximately $45,000 when compared with the corresponding period of the
preceding year. This increase was primarily due to an increase in the
Companys' other operating expenses.
INCOME TAXES
At the end of each month, the Company makes its best estimate of the effective
tax rate expected for the year and uses this rate in providing for income taxes
on an interim basis.
The estimated effective tax rate for 1995, as of March 31, was 25.26% as
compared with an effective tax rate for the year ended December 31, 1994 of
22.97%.
LIQUIDITY
First Merchants currently has a strong liquidity position and material changes
in such position are not expected. In addition to assuring the availability
of adequate funds to meet its cash flow requirements, First Merchants'
management closely monitors its liquidity position in order to reduce exposure
to interest rate risk. This is accomplished largely by matching maturities of
assets and liabilities, particularly volatile funds such as securities sold
under agreements to repurchase and large denomination certificates of deposit.
The major internal sources of liquidity are balances maintained by Merchants
National with its correspondent banks as well as cash on hand. A significant
volume of U.S. Government securities for which there is an active national
market and the various short-term financial instruments classified as loans
complement the balance of cash and cash equivalents. First Merchants has also
demonstrated the ability to obtain external financing in the event such needs
arise. Management does not anticipate the need to sell securities to meet its
cash requirements in the ordinary course of business.
In order to reduce the Bank's liability sensitive financial position,
management has attempted to invest more heavily in short-term financial
instruments and has generally shortened the maturities of securities purchased
for the long-term portion of the investment portfolio. The Bank does not
invest in any derivative instruments.
(14)
CAPITAL RESOURCES
The ratio of average equity to average assets was 8.87% and 8.82% for the three
months ended March 31, 1995 and the year ended December 31, 1994, respectively.
The subsidiary bank's total risk-based capital ratio approximated 16.48% at
March 31, 1995, while the ratio of Tier One capital to risk-weighted assets
approximated 15.69%. Both of these ratios were above the regulatory minimums
of 8% for qualifying total capital to risk-weighted assets and 4% for Tier One
capital to risk-weighted assets. First Merchants is not subject to the risk-
based capital guidelines since consolidated total assets are less than $150
million.
The Company's primary source of funds for payment of dividends to stockholders
is dividends received from Merchants National; however, certain restrictions
exist regarding the ability of the subsidiary bank to transfer funds to the
Company in the form of cash dividends. Federal banking regulations require
regulatory approval prior to declaring dividends in excess of the current
year's retained net profits, combined with retained net profits for the two
preceding years.
As of March 31, 1995, the Bank's retained net profits available for
distribution to the Company as dividends without regulatory approval
approximate $1,610,000 plus retained net profits for the interim period through
the date of declaration.
(15)
PART II. OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) See Exhibit Index.
(b) The company has not filed a report on Form 8-K in the three
months ended March 31, 1995.
Exhibit Index
27 Financial Data Schedule As Attached
(16)
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 thereunto duly authorized.
FIRST MERCHANTS BANCORP, INC.
-------------------------------
(Registrant)
Date May 12, 1995 /s/ George F. Davis
------------------- -------------------------------
George F. Davis, President,
Chief Executive Officer and
Chief Financial Officer
(17)
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 4,520,275
<INT-BEARING-DEPOSITS> 643,304
<FED-FUNDS-SOLD> 50,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 15,397,296
<INVESTMENTS-CARRYING> 29,576,766
<INVESTMENTS-MARKET> 29,914,923
<LOANS> 51,668,249
<ALLOWANCE> (474,166)
<TOTAL-ASSETS> 108,146,244
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0
0
<OTHER-SE> 8,828,085
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<INTEREST-INCOME-NET> 1,219,513
<LOAN-LOSSES> 18,000
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<EPS-PRIMARY> .51
<EPS-DILUTED> .51
<YIELD-ACTUAL> 5.26
<LOANS-NON> 21,618
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<ALLOWANCE-OPEN> (460,000)
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<ALLOWANCE-CLOSE> (474,166)
<ALLOWANCE-DOMESTIC> (362,698)
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> (111,468)
</TABLE>
