EXHIBIT 99(c)
UNAUDITED PRO FORMA COMBINED
CONSOLIDATED FINANCIAL INFORMATION
The following is the unaudited pro forma combined consolidated financial
information for First Merchants Corporation ("First Merchants") and for
Lafayette Bancorporation ("Lafayette") giving effect to the merger of Lafayette
with and into First Merchants. The information is presented under two separate
assumptions relating to the level of shares of Lafayette common stock which are
exchanged for First Merchants common stock. The financial information listed for
"Assumption A" was compiled assuming 100% of the outstanding shares of Lafayette
common stock are exchanged for shares of First Merchants common stock through
the merger. The financial information listed for "Assumption B" was compiled
assuming 60% of the outstanding shares of Lafayette common stock are exchanged
for shares of First Merchants common stock and 40% of the outstanding shares of
Lafayette common stock are exchanged for cash, as financed through the issuance
of First Merchants trust preferred securities. The balance sheet information
presented gives effect to the merger and, under Assumption B, the related
issuance of the First Merchants trust preferred securities, as if each occurred
on September 30, 2001. The income statement information presented gives effect
to the merger and, under Assumption B, the related issuance of the First
Merchants trust preferred securities as if each occurred on the first day of
each period presented.
The pro forma combined figures are simply arithmetical combinations of
First Merchants' and Lafayette's separate financial results in order to assist
you in analyzing the future prospects of First Merchants. The pro forma combined
figures illustrate the possible scope of the change in First Merchants'
historical figures caused by the merger. You should not assume that First
Merchants and Lafayette would have achieved the pro forma combined results if
the merger had actually occurred during the periods presented.
The combined company expects to achieve merger benefits in the form of
operating cost savings. The pro forma earnings, which do not reflect any
potential savings that are expected to result from the consolidation of the
operations of First Merchants and Lafayette, are not indicative of the results
of future operations. No assurances can be given with respect to the ultimate
level of expense savings.
The pro forma information reflects the "purchase" method of accounting,
with Lafayette's assets and liabilities recorded at their estimated fair values
as of September 30, 2001. The actual fair value adjustments to the assets and
the liabilities of Lafayette will be made on the basis of appraisals and
evaluations that will be made as of the date the merger is completed. Thus, the
actual fair value adjustments may differ significantly from those reflected in
these pro forma financial statements. In the opinion of First Merchants'
management, the estimates used in the preparation of these pro forma financial
statements are reasonable under the circumstances.
You should read the unaudited pro forma combined consolidated financial
information in conjunction with the accompanying notes.
UNAUDITED PROFORMA COMBINED CONSOLIDATED CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 2001
ASSUMPTION A--100% STOCK ISSUED
(Dollar Amounts in Thousands)
First Proforma Proforma
Merchants Lafayette Adjustments Combined
----------- ----------- ----------- -----------
Assets
Cash and due from banks .......................... $ 46,149 $ 22,416 $ (1,400)(1) $ 69,064
(400)(2)
3,303 (3)
(1,004)(4)
Interest-bearing deposits ........................ 14,942 14,942
Federal funds sold ............................... 18,525 8,800 27,325
----------- ----------- ----------- -----------
Cash and cash equivalents ...................... 64,674 46,158 499 111,331
Interest-bearing time deposits ................... 3,119 3,119
Investment securities
Available for sale ............................. 241,080 94,235 335,315
Held to maturity ............................... 8,942 3,918 177 (5) 13,037
----------- ----------- ----------- -----------
Total investment securities .................. 250,022 98,153 177 348,352
Mortgage loans held for sale ..................... 830 9,253 165 (5) 10,248
Loans, net of allowance .......................... 1,346,731 549,793 3,140 (5) 1,899,664
Premises and equipment ........................... 27,184 10,756 9,441 (6) 47,381
Federal Reserve and FHLB stock ................... 7,856 2,344 10,200
Interest Receivable .............................. 13,556 7,411 20,967
Core deposit intangible and goodwill ............. 32,795 12,470 30,156 (7) 79,151
(12,470)(8)
16,200 (9)
Other assets ..................................... 14,904 11,215 755 (10) 34,914
9,957 (11)
(1,917)(15)
----------- ----------- ----------- -----------
Total assets ................................ $ 1,761,671 $ 747,553 $ 56,103 $ 2,565,327
=========== =========== =========== ===========
Liabilities
Deposits
Noninterest-bearing ............................ $ 163,689 $ 65,432 $ 229,121
Interest-bearing ............................... 1,224,881 538,028 4,799 (5) 1,767,708
----------- ----------- ----------- -----------
Total deposits .............................. 1,388,570 603,460 4,799 1,996,829
Borrowings ....................................... 182,455 78,085 509 (5) 261,049
Trust preferred
Other liabilities ................................ 13,061 7,354 139 (16) 20,554
----------- ----------- ----------- -----------
Total liabilities .......................... 1,584,086 688,899 5,447 2,278,432
Stockholders' equity
Preferred stock-no par value
Common stock ................................... 1,584 3,962 (3,962)(13) 2,166
582 (14)
Additional paid in capital ..................... 50,817 38,119 (38,119)(13) 159,545
108,728 (14)
Retained earnings .............................. 121,711 15,461 (15,461)(13) 121,711
Accumulated comprehensive income ............... 3,473 1,112 (1,112)(13) 3,473
----------- ----------- ----------- -----------
Total stockholders' equity ................. 177,585 58,654 50,656 286,895
----------- ----------- ----------- -----------
Total liabilities and stockholder's equity .. $ 1,761,671 $ 747,553 $ 56,103 $ 2,565,327
=========== =========== =========== ===========
The accompanying notes are an integral part of the
unaudited proforma combined consolidated financial information.
UNAUDITED PROFORMA COMBINED CONSOLIDATED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2000
ASSUMPTION A--100% STOCK ISSUED
(Dollar Amounts in Thousands, except Share and Per Share Amounts)
First Proforma Proforma
Merchants Lafayette Adjustments Combined
----------- ----------- ----------- -----------
Interest Income
Loans receivable ............................ $ 96,109 $ 46,620 $ (648)(17) $ 142,081
Investment securities ....................... 19,065 4,982 (39)(17) 24,008
Other ....................................... 1,354 784 2,138
----------- ----------- ----------- -----------
Total interest income .................... 116,528 52,386 (687) 168,227
----------- ----------- ----------- -----------
Interest Expense
Deposits .................................... 49,607 23,016 (4,799)(17) 67,824
Securities sold under repurchase agreements . 4,263 1,773 6,036
Federal Home Loan Bank advances & other ..... 6,676 2,616 (339)(17) 8,953
----------- ----------- ----------- -----------
Total interest expense ................... 60,546 27,405 (5,138) 82,813
----------- ----------- ----------- -----------
Net Interest Income .............................. 55,982 24,981 4,451 85,414
Provision for loan losses ................... 2,625 1,200 3,825
----------- ----------- ----------- -----------
Net interest income after provision for loan losses 53,357 23,781 4,451 81,589
----------- ----------- ----------- -----------
Other Income
Fiduciary activities ........................ 4,972 1,187 6,159
Service charges on deposit accounts ......... 4,776 1,880 6,656
Other customer fees ......................... 3,519 1,042 4,561
Net realized losses on sales of
available-for-sale securities ............ (107) (12) (119)
Commission income ........................... 1,950 758 2,708
Other income ................................ 1,524 970 2,494
----------- ----------- ----------- -----------
Total other income ....................... 16,634 5,825 22,459
----------- ----------- ----------- -----------
Other expenses
Salaries and employee benefits .............. 21,418 10,681 32,099
Net occupancy expenses ...................... 2,471 1,247 236 (18) 3,954
Equipment expenses .......................... 4,299 1,731 6,030
Goodwill and core deposit amortization ...... 896 740 3,600 (20) 4,496
(740)(22)
Other expenses .............................. 10,999 4,777 15,776
----------- ----------- ----------- -----------
Total other expenses ..................... 40,083 19,176 3,096 62,355
----------- ----------- ----------- -----------
Income before income tax ......................... 29,908 10,430 1,355 41,693
Income tax expense ............................... 9,968 3,514 549 (19) 14,031
----------- ----------- ----------- -----------
Net income ....................................... $ 19,940 $ 6,916 $ 806 $ 27,662
=========== =========== =========== ===========
Per Share Data
Basic earnings per common share ............ $ 1.67 $ 1.75 $ 1.67
Diluted earnings per common share .......... 1.66 1.74 1.66
Average common shares-basic ................ 11,909,457 3,950,297 16,564,912
Average common shares-diluted .............. 11,992,231 3,985,521 16,647,686
The accompanying notes are an integral part of the
unaudited proforma combined consolidated financial information.
UNAUDITED PROFORMA COMBINED CONSOLIDATED CONDENSED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
ASSUMPTION A--100% STOCK ISSUED (Dollar
Amounts in Thousands, except Share and Per Share Amounts)
First Proforma Proforma
Merchants Lafayette Adjustments Combined
----------- ----------- ----------- -----------
Interest Income
Loans receivable ............................ $ 77,632 $ 35,581 $ (486)(17) $ 112,727
Investment securities ....................... 12,426 3,752 (30)(17) 16,148
Other ....................................... 855 1,571 2,426
----------- ----------- ----------- -----------
Total interest income .................... 90,913 40,904 (516) 131,301
Interest Expense
Deposits .................................... 35,817 17,876 (3,599)(17) 50,094
Securities sold under repurchase agreements . 2,665 1,291 3,956
Federal Home Loan Bank advances and other ... 5,209 2,114 (255)(17) 7,068
----------- ----------- ----------- -----------
Total interest expense ................... 43,691 21,281 (3,854) 61,118
----------- ----------- ----------- -----------
Net Interest Income .............................. 47,222 19,623 3,338 70,183
Provision for loan losses ................... 2,371 900 3,271
----------- ----------- ----------- -----------
Net interest income after provision for loan losses 44,851 18,723 3,338 66,912
----------- ----------- ----------- -----------
Other Income
Fiduciary activities ........................ 4,117 890 5,007
Service charges on deposit accounts ......... 4,106 1,551 5,657
Other customer fees ......................... 231 793 1,024
Net realized losses on sales of
available-for-sale securities ............ (167) (167)
Commission income ........................... 1,465 308 1,773
Other income ................................ 3,890 1,773 5,663
----------- ----------- ----------- -----------
Total other income ....................... 13,642 5,315 18,957
----------- ----------- ----------- -----------
Other expenses
Salaries and employee benefits .............. 18,094 9,226 27,320
Net occupancy expenses ...................... 2,037 965 177 (18) 3,179
Equipment expenses .......................... 3,282 1,395 4,677
Goodwill and core deposit amortization ...... 1,181 537 2,700 (20) 3,881
(537)(22)
Other expenses .............................. 8,365 3,732 12,097
----------- ----------- ----------- -----------
Total other expenses ..................... 32,959 15,855 2,340 51,154
----------- ----------- ----------- -----------
Income before income tax ......................... 25,534 8,183 998 34,714
Income tax expense .......................... 8,834 2,580 404 (19) 11,818
----------- ----------- ----------- -----------
Net income ....................................... $ 16,700 $ 5,603 $ 594 $ 22,897
=========== =========== =========== ===========
Per Share Data
Basic earnings per common share ............ $ 1.36 $ 1.41 $ 1.35
Diluted earnings per common share .......... 1.35 1.40 1.34
Average common shares-basic ................ 12,306,708 3,958,906 16,962,163
Average common shares-diluted .............. 12,390,142 3,997,540 17,045,597
The accompanying notes are an integral part of the
unaudited proforma combined consolidated financial information.
UNAUDITED PROFORMA COMBINED CONSOLIDATED CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 2001
ASSUMPTION B-60% STOCK ISSUED
(Dollar Amounts in Thousands)
First Proforma Proforma
Merchants Lafayette Adjustments Combined
----------- ----------- ----------- -----------
Assets
Cash and due from banks .......................... $ 46,149 $ 22,416 $ (1,400)(1) $ 69,064
(400)(2)
3,303 (3)
(1,004)(4)
Interest-bearing deposits ........................ 14,942 14,942
Federal funds sold ............................... 18,525 8,800 4,871 (12) 32,196
----------- ----------- ----------- -----------
Cash and cash equivalents ...................... 64,674 46,158 5,370 116,202
Interest-bearing time deposits ................... 3,119 3,119
Investment securities
Available for sale ............................. 241,080 94,235 335,315
Held to maturity ............................... 8,942 3,918 177 (5) 13,037
----------- ----------- ----------- -----------
Total investment securities .................. 250,022 98,153 177 348,352
Mortgage loans held for sale ..................... 830 9,253 165(5) 10,248
Loans, net of allowance .......................... 1,346,731 549,793 3,140(5) 1,899,664
Premises and equipment ........................... 27,184 10,756 9,441(6) 47,381
Federal Reserve and FHLB stock ................... 7,856 2,344 10,200
Interest Receivable .............................. 13,556 7,411 20,967
Core deposit intangible and goodwill ............. 32,795 12,470 36,761 (7) 85,756
(12,470)(8)
16,200 (9)
Other assets ..................................... 14,904 11,215 755 (10) 34,914
9,957 (11)
(1,917)(15)
----------- ----------- ----------- -----------
Total assets ................................ $ 1,761,671 $ 747,553 $ 67,579 $ 2,576,803
=========== =========== =========== ===========
Liabilities
Deposits
Noninterest-bearing ............................ $ 163,689 $ 65,432 $ 229,121
Interest-bearing ............................... 1,224,881 538,028 4,799 (5) 1,767,708
----------- ----------- ----------- -----------
Total deposits .............................. 1,388,570 603,460 4,799 1,996,829
Borrowings ....................................... 182,455 78,085 509 (5) 261,049
Trust preferred 55,200 (12) 55,200
Other liabilities ................................ 13,061 7,354 139 (16) 20,554
----------- ----------- ----------- -----------
Total liabilities .......................... 1,584,086 688,899 60,647 2,333,632
Stockholders' equity
Preferred stock-no par value ...................
Common stock ................................... 1,584 3,962 (3,962)(13) 1,933
349 (14)
Additional paid in capital ..................... 50,817 38,119 (38,119)(13) 116,054
65,237 (14)
Retained earnings .............................. 121,711 15,461 (15,461)(13) 121,711
Accumulated comprehensive income ............... 3,473 1,112 (1,112)(13) 3,473
----------- ----------- ----------- -----------
Total stockholders' equity ................. 177,585 58,654 6,932 243,171
----------- ----------- ----------- -----------
Total liabilities and stockholders' equity . $ 1,761,671 $ 747,553 $ 67,579 $ 2,576,803
=========== =========== =========== ===========
The accompanying notes are an integral part of the
unaudited proforma combined consolidated financial information.
UNAUDITED PROFORMA COMBINED CONSOLIDATED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2000
ASSUMPTION B--60% STOCK ISSUED
(Dollar Amounts in Thousands, except Share and Per Share Amounts)
First Proforma Proforma
Merchants Lafayette Adjustments Combined
----------- ----------- ----------- -----------
Interest Income
Loans receivable $ 96,109 $ 46,620 $ (648)(17) $ 142,081
Investment securities 19,065 4,982 (39)(17) 24,008
Other 1,354 784 73 (23) 2,211
----------- ----------- ----------- -----------
Total interest income 116,528 52,386 (614) 168,300
----------- ----------- ----------- -----------
Interest Expense
Deposits 49,607 23,016 (4,799)(17) 67,824
Securities sold under repurchase agreements 4,263 1,773 6,036
Federal Home Loan Bank advances & other 6,676 2,616 (339)(17) 8,953
Trust Preferred 4,964 (21) 4,964
----------- ----------- ----------- -----------
Total interest expense 60,546 27,405 (174) 87,777
----------- ----------- ----------- -----------
Net Interest Income 55,982 24,981 (440) 80,523
Provision for loan losses 2,625 1,200 3,825
----------- ----------- ----------- -----------
Net interest income after provision for loan losses 53,357 23,781 (440) 76,698
----------- ----------- ----------- -----------
Other Income
Fiduciary activities 4,972 1,187 6,159
Service charges on deposit accounts 4,776 1,880 6,656
Other customer fees 3,519 1,042 4,561
Net realized losses on sales of
available-for-sale securities (107) (12) (119)
Commission income 1,950 758 2,708
Other income 1,524 970 2,494
----------- ----------- ----------- -----------
Total other income 16,634 5,825 22,459
----------- ----------- ----------- -----------
Other expenses
Salaries and employee benefits 21,418 10,681 32,099
Net occupancy expenses 2,471 1,247 236 (18) 3,954
Equipment expenses 4,299 1,731 6,030
Goodwill and core deposit amortization 896 740 3,600 (20) 4,496
(740)(22)
Other expenses 10,999 4,777 15,776
----------- ----------- ----------- -----------
Total other expenses 40,083 19,176 3,096 62,355
----------- ----------- ----------- -----------
Income before income tax 29,908 10,430 (3,536) 36,802
Income tax expense 9,968 3,514 (1,433)(19) 12,049
----------- ----------- ----------- -----------
Net income $ 19,940 $ 6,916 $ (2,103) $ 24,753
=========== =========== =========== ===========
Per Share Data
Basic earnings per common share $ 1.67 $ 1.75 $ 1.68
Diluted earnings per common share 1.66 1.74 1.67
Average common shares-basic 11,909,457 3,950,297 14,702,730
Average common shares-diluted 11,992,231 3,985,521 14,785,504
The accompanying notes are an integral part of the
unaudited proforma combined consolidated financial information.
UNAUDITED PROFORMA COMBINED CONSOLIDATED CONDENSED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
ASSUMPTION B--60% STOCK ISSUED
(Dollar Amounts in Thousands, except Share and Per Share Amounts)
First Proforma Proforma
Merchants Lafayette Adjustments Combined
----------- ----------- ----------- -----------
Interest Income
Loans receivable $ 77,632 $ 35,581 $ (486)(17) $ 112,727
Investment securities 12,426 3,752 (30)(17) 16,148
Other 855 1,571 55 (23) 2,481
----------- ----------- ----------- -----------
Total interest income 90,913 40,904 (461) 131,356
----------- ----------- ----------- -----------
Interest Expense
Deposits 35,817 17,876 (3,599)(17) 50,094
Securities sold under repurchase agreements 2,665 1,291 3,956
Federal Home Loan Bank advances and other 5,209 2,114 (255)(17) 7,068
Trust Preferred 3,723 (21) 3,723
----------- ----------- ----------- -----------
Total interest expense 43,691 21,281 (131) 64,841
----------- ----------- ----------- -----------
Net Interest Income 47,222 19,623 (330) 66,515
Provision for loan losses 2,371 900 3,271
----------- ----------- ----------- -----------
Net interest income after provision for loan losses 44,851 18,723 (330) 63,244
----------- ----------- ----------- -----------
Other Income
Fiduciary activities 4,117 890 5,007
Service charges on deposit accounts 4,106 1,551 5,657
Other customer fees 231 793 1,024
Net realized losses on sales of
available-for-sale securities (167) -- (167)
Commission income 1,465 308 1,773
Other income 3,890 1,773 5,663
----------- ----------- ----------- -----------
Total other income 13,642 5,315 18,957
----------- ----------- ----------- -----------
Other expenses
Salaries and employee benefits 18,094 9,226 27,320
Net occupancy expenses 2,037 965 177 (18) 3,179
Equipment expenses 3,282 1,395 4,677
Goodwill and core deposit amortization 1,181 537 2,700 (20) 3,881
(537)(22)
Other expenses 8,365 3,732 12,097
Total other expenses 32,959 15,855 2,340 51,154
----------- ----------- ----------- -----------
Income before income tax 25,534 8,183 (2,670) 31,047
Income tax expense 8,834 2,580 (1,082)(19) 10,332
----------- ----------- ----------- -----------
Net income $ 16,700 $ 5,603 $ (1,588) $ 20,755
=========== =========== =========== ===========
Per Share Data
Basic earnings per common share $ 1.36 $ 1.41 $ 1.37
Diluted earnings per common share 1.35 1.40 1.36
Average common shares-basic 12,306,708 3,958,906 15,099,981
Average common shares-diluted 12,390,142 3,997,540 15,183,415
The accompanying notes are an integral part of the
unaudited proforma combined consolidated financial information.
Notes to Unaudited Pro Forma Combined Consolidated Financial Information
Note 1 - Basis of Presentation
First Merchants has agreed to acquire Lafayette for a fixed exchange ratio
of 1.11 shares of First Merchants Corporation stock for each share of
Lafayette stock, subject to possible upward or downward adjustment as
provided for in the Merger Agreement, or a fixed payment of $30.00 per
share for each share of Lafayette stock up to 1,677,642 shares. The
acquisition will be accounted for under the purchase method of accounting
and, accordingly, the assets and liabilities of Lafayette have been marked
to estimated fair value based upon conditions as of September 30, 2001.
Since these are proforma statements, we cannot assure that the amounts
reflected in these financial statements would have been representative of
the actual amounts earned had the companies been combined at the time.
Note 2 - Pro Forma Adjustments
(1) To record payment by Lafayette for estimated transaction costs.
(2) To record payment by First Merchants for estimated transaction costs.
(3) To record receipt of cash for stock options exercised.
(4) To record payment of stock appreciation rights.
(5) To adjust interest-earning assets and interest-bearing liabilities of
Lafayette to estimated fair value.
(6) To record premises and equipment at estimated fair value.
(7) To record goodwill for the cost of acquisition over the estimated fair
value of net assets acquired as follows:
Assumption A Assumption B
------------ ------------
Purchase Price:
Common stock $ 582 $ 349
Additional paid in capital 108,728 65,237
Acquisition costs 400 400
Cash paid to Lafayette stockholders 50,329
--------- ---------
Total purchase price paid 109,710 116,315
--------- ---------
Allocated to:
Historical book value of Lafayette's assets and liabilities 58,654 58,654
Record transaction costs of Lafayette (1,400) (1,400)
Record payment of stock appreciation rights (1,004) (1,004)
Cash received for stock options exercised 3,303 3,303
Write off of Lafayette's historical goodwill and core
deposit intangible (12,470) (12,470)
--------- ---------
Adjusted book value of Lafayette 47,083 47,083
--------- ---------
Core deposit intangible 16,200 16,200
Adjustments to record assets and liabilities at fair value:
Securities 177 177
Mortgage loans held for sale 165 165
Loans 3,140 3,140
Premises and equipment 9,441 9,441
Other assets 755 755
Deposits (4,799) (4,799)
Borrowings (509) (509)
Deferred taxes 9,957 9,957
Pension assets/Liability (2,056) (2,056)
--------- ---------
Total allocation 32,471 32,471
--------- ---------
Goodwill $ 30,156 $ 36,761
========= =========
Notes to Unaudited Pro Forma Combined Consolidated Financial Information
(continued)
(8) To eliminate Lafayette's historical goodwill and core deposit
intangible.
(9) To record core deposit intangible.
(10) To record other assets at fair value.
(11) To record deferred taxes on the purchase accounting adjustments.
(12) To record issuance of the trust preferred securities by First
Merchants and investing of excess funds.
(13) To eliminate Lafayette's equity accounts.
(14) To record issuance of 4,655,455 shares of First Merchants' stock under
Assumption A and the issuance of 2,793,273 shares of First Merchants'
stock under Assumption B.
(15) To eliminate Lafayette's prepaid pension costs.
(16) To recognize Lafayette's pension liability.
(17) To record effect of amortization of purchase accounting adjustments in
a manner that approximates the level yield method.
(18) To record amortization of purchase accounting adjustment related to
premises and equipment.
(19) To record tax effect of purchase accounting adjustments at an
effective rate of 40.525%.
(20) To record amortization of core deposit premium intangible.
(21) To record interest expense on the trust preferred securities issued by
First Merchants.
(22) To eliminate Lafayette's goodwill and core deposit intangible
amortization expense.
(23) To record interest income on investment of excess proceeds from
issuance of trust preferred securities.