SEC Comment Letter for FIRST MERCHANTS CORP (FRME, FRMEP) (CIK 0000712534) (FRME) — Jan 9, 2009
FIRST MERCHANTS CORP (FRME, FRMEP) (CIK 0000712534)
Date: Jan. 9, 2009 · CIK: 0000712534 · Accession: 0000000000-09-001472
AI Filing Summary & Sentiment
File numbers found in text: 000-17071, 333-153656
Letter
Mail Stop 4561 November 21, 2008 Mr. Michael C. Rechin President and Chief Executive Officer First Merchants Corporation 200 East Jackson Street Muncie, Indiana 47305 By U.S. Mail and facsimile to (317)236-9907
Re: First Merchants Corporation Form S-4 Filed September 24, 2008 File No. 333-153656 Form 10-K FYE December 31, 2007 File No. 000-17071 Forms 10-Q FQE 3/31/2008, 6/30/2008 and 9/30/2008
Dear Mr. Rechin: We have reviewed your filing and have the following comments. Where indicated, we think you should re vise your document in response to these comments. If you disagree, we will consider your explanation as to why our comment is inapplicable or a revision is unnecessary. Please be as deta iled as necessary in your explanation. In some of our comments, we may ask you to provi de us with information so we may better understand your disclosure. After reviewing th is information, we may raise additional comments. The purpose of our review process is to assist you in your compliance with the applicable disclosure requirements and to enhance the overall disclosure in your filing. We look forward to working with you in th ese respects. We welcome any questions you may have about our comments or any other aspect of our review. Feel free to call us at the telephone numbers listed at the end of this letter.
Mr. Michael C. Rechin First Merchants Corporation Form S-4 filed September 24, 2008 Page 2
Form S-4 Recent Developments, page 104 1. Please refer to the response to prior comment 2 of our November 7, 2008 letter and provide us a copy of the impairme nt analysis you performed under SFAS 142 and SFAS 144 on your intangible assets as referenced in your response.
Lincoln Bancorp and Subsidiary Financial Statements, beginning on page F-1
Note 2. Investment Securities, page F-35
2. We note your response to prior comment 5 of our November 7, 2008 letter. In order to help us understand the basis for your determinations, please provide us a detailed analysis of how you determined your corporate obligations where not other-than-temporarily impaired. In your response, please iden tify the issuer(s) and describe how you considered the severity and the duration of the unrecognized loss and illiquid markets in your analysis. It may be helpful to provide us the cash flow analysis and trustee reports you relied on in performing your analysis. Note 4. Disclosures About Fair Values of Assets and Liabilities, page F-37
3. Please refer to the response to prior comment 6 of our November 7, 2008 letter. We note that you use third party vendors to compile prices for your investment securities and that you determine the securities leveliz ation under SFAS 157 based on such pricing information. Para graph 22 of SFAS 157 indicates that the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowe st level input that is significant to the fair value measurement in its entirety, and thus it is unrelated to whether a third party vendor is used to price the financ ial instrument. Thus, classification is based upon the assumptions and inputs used to value the instrument and whether they are based on market observable i nputs, or unobservable inputs. Please address the following:
• Please tell us how you concluded that ther e was not a signifi cant input into the valuation methodology used by third party vendors that was based on unobservable data.
• Please tell us and revise future filings to disclose the specific procedures management uses to validate the pric ing received from third party vendors, including the material assumptions used to arrive at the prices.
• Please revise your future filings to ensure that your disclosure does not imply that the classification in the fair value hier archy is based upon whether the value is determined based on a third party vendor. Instead, please provide disclosure
Mr. Michael C. Rechin First Merchants Corporation Form S-4 filed September 24, 2008 Page 3
discussing the techniques used, the data used for the inputs/assumptions, and whether the inputs/assumptions are base d on unobservable inputs, and how this information drove the classificati on in the fair value hierarchy.
First Merchants Corporation Form 10-Q for the Period Ended September 30, 2008 Note 3. Disclosures About Fair Values of Assets and Liabilities, page 11 4. Please refer to the response to prior comment 7 of our November 7, 2008 letter. We note that you use third party vendors to compile prices for your investment securities and that you determine the securities leveliz ation under SFAS 157 based on such pricing information. Para graph 22 of SFAS 157 indicates that the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowe st level input that is significant to the fair value measurement in its entirety, and thus it is unrelated to whether a third party vendor is used to price the financ ial instrument. Thus, classification is based upon the assumptions and inputs used to value the instrument and whether they are based on market observable i nputs, or unobservable inputs. Please address the following:
• Please tell us how you concluded that ther e was not a signifi cant input into the valuation methodology used by third party vendors that was based on unobservable data.
• Please tell us and revise future filings to disclose the specific procedures management uses to validate the pric ing received from third party vendors, including the material assumptions used to arrive at the prices.
• Please revise your future filings to ensure that your disclosure does not imply that the classification in the fair value hier archy is based upon whether the value is determined based on a third party vendor. Instead, please provide disclosure discussing the techniques used, the data used for the inputs/assumptions, and whether the inputs/assumptions are base d on unobservable inputs, and how this information drove the classificati on in the fair value hierarchy.
Note 4. Investment Securities, page 13
5. We note your response to prior comment 9 of our November 7, 2004. In order to help us understand the basis for your determ inations, please provide us a detailed analysis of how you determined your mark etable equity securities where not other-than-temporarily impaired. In your response, please iden tify the investee(s) and describe how you considered the severity and the duration of the unrecognized loss, illiquid markets and fu ture cash flows in your analysis.
Mr. Michael C. Rechin First Merchants Corporation Form S-4 filed September 24, 2008 Page 4
* * * * * * * * * * * * * As appropriate, please amend your regist ration statement in response to these comments. You may wish to provide us with marked copies of the amendment to expedite our review. Please furnish a cove r letter with your amendment that keys your responses to our comments and provides any requested information. Detailed cover letters greatly facilitate our review. Please understand that we may have additional comments after reviewing your amendmen t and responses to our comments. We urge all persons who are responsible for the accuracy and adequacy of the disclosure in the filing review ed by the staff to be certain that they have provided all information investors require for an info rmed decision. Since the company and its management are in possession of all facts re lating to a company’s disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made. In connection with responding to our comments, please provide, in writing, a statement from the company and each filing person acknowledging that: the company or filing person is respons ible for the adequacy and accuracy of the disclosure in the filing;
staff comments or changes to disclosu re in response to staff comments do not foreclose the Commission from ta king any action with respect to the filing; and
the company or filing person may not a ssert staff comments as a defense in any proceeding initiated by th e Commission or any person under the federal securities laws of the United States.
In addition, please be advise d that the Division of Enfo rcement has access to all information you provide to the staff of the Divi sion of Corporation Fi nance in our review of your filing or in response to our comments on your filing.
Mr. Michael C. Rechin First Merchants Corporation Form S-4 filed September 24, 2008 Page 5
You may contact Paul Cline at (202 ) 551- 3851 or Kevin Vaughn at 202-551- 3494 if you have questions regarding comments on the financial statements and related matters. Please contact either Jessica Livi ngston at (202) 551-3448 or me at (202) 551- 3434 with any other questions. S i n c e r e l y , Michael Clampitt Senior Counsel cc: David R. Prechtel Bingham McHale LLP 2700 Market Tower 10 West Market Street Indianapolis, Indiana 46204 David A. Butcher Bose McKinney & Evans LLP 111 Monument Circle Suite 2700 Indianapolis, Indiana 46204
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Mail Stop 4561 November 21, 2008 Mr. Michael C. Rechin President and Chief Executive Officer First Merchants Corporation 200 East Jackson Street Muncie, Indiana 47305 By U.S. Mail and facsimile to (317)236-9907 Re: First Merchants Corporation Form S-4 Filed September 24, 2008 File No. 333-153656 Form 10-K FYE December 31, 2007 File No. 000-17071 Forms 10-Q FQE 3/31/2008, 6/30/2008 and 9/30/2008 Dear Mr. Rechin: We have reviewed your filing and have the following comments. Where indicated, we think you should re vise your document in response to these comments. If you disagree, we will consider your explanation as to why our comment is inapplicable or a revision is unnecessary. Please be as deta iled as necessary in your explanation. In some of our comments, we may ask you to provi de us with information so we may better understand your disclosure. After reviewing th is information, we may raise additional comments. The purpose of our review process is to assist you in your compliance with the applicable disclosure requirements and to enhance the overall disclosure in your filing. We look forward to working with you in th ese respects. We welcome any questions you may have about our comments or any other aspect of our review. Feel free to call us at the telephone numbers listed at the end of this letter. Mr. Michael C. Rechin First Merchants Corporation Form S-4 filed September 24, 2008 Page 2 Form S-4 Recent Developments, page 104 1. Please refer to the response to prior comment 2 of our November 7, 2008 letter and provide us a copy of the impairme nt analysis you performed under SFAS 142 and SFAS 144 on your intangible assets as referenced in your response. Lincoln Bancorp and Subsidiary Financial Statements, beginning on page F-1 Note 2. Investment Securities, page F-35 2. We note your response to prior comment 5 of our November 7, 2008 letter. In order to help us understand the basis for your determinations, please provide us a detailed analysis of how you determined your corporate obligations where not other-than-temporarily impaired. In your response, please iden tify the issuer(s) and describe how you considered the severity and the duration of the unrecognized loss and illiquid markets in your analysis. It may be helpful to provide us the cash flow analysis and trustee reports you relied on in performing your analysis. Note 4. Disclosures About Fair Values of Assets and Liabilities, page F-37 3. Please refer to the response to prior comment 6 of our November 7, 2008 letter. We note that you use third party vendors to compile prices for your investment securities and that you determine the securities leveliz ation under SFAS 157 based on such pricing information. Para graph 22 of SFAS 157 indicates that the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowe st level input that is significant to the fair value measurement in its entirety, and thus it is unrelated to whether a third party vendor is used to price the financ ial instrument. Thus, classification is based upon the assumptions and inputs used to value the instrument and whether they are based on market observable i nputs, or unobservable inputs. Please address the following: • Please tell us how you concluded that ther e was not a signifi cant input into the valuation methodology used by third party vendors that was based on unobservable data. • Please tell us and revise future filings to disclose the specific procedures management uses to validate the pric ing received from third party vendors, including the material assumptions used to arrive at the prices. • Please revise your future filings to ensure that your disclosure does not imply that the classification in the fair value hier archy is based upon whether the value is determined based on a third party vendor. Instead, please provide disclosure Mr. Michael C. Rechin First Merchants Corporation Form S-4 filed September 24, 2008 Page 3 discussing the techniques used, the data used for the inputs/assumptions, and whether the inputs/assumptions are base d on unobservable inputs, and how this information drove the classificati on in the fair value hierarchy. First Merchants Corporation Form 10-Q for the Period Ended September 30, 2008 Note 3. Disclosures About Fair Values of Assets and Liabilities, page 11 4. Please refer to the response to prior comment 7 of our November 7, 2008 letter. We note that you use third party vendors to compile prices for your investment securities and that you determine the securities leveliz ation under SFAS 157 based on such pricing information. Para graph 22 of SFAS 157 indicates that the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowe st level input that is significant to the fair value measurement in its entirety, and thus it is unrelated to whether a third party vendor is used to price the financ ial instrument. Thus, classification is based upon the assumptions and inputs used to value the instrument and whether they are based on market observable i nputs, or unobservable inputs. Please address the following: • Please tell us how you concluded that ther e was not a signifi cant input into the valuation methodology used by third party vendors that was based on unobservable data. • Please tell us and revise future filings to disclose the specific procedures management uses to validate the pric ing received from third party vendors, including the material assumptions used to arrive at the prices. • Please revise your future filings to ensure that your disclosure does not imply that the classification in the fair value hier archy is based upon whether the value is determined based on a third party vendor. Instead, please provide disclosure discussing the techniques used, the data used for the inputs/assumptions, and whether the inputs/assumptions are base d on unobservable inputs, and how this information drove the classificati on in the fair value hierarchy. Note 4. Investment Securities, page 13 5. We note your response to prior comment 9 of our November 7, 2004. In order to help us understand the basis for your determ inations, please provide us a detailed analysis of how you determined your mark etable equity securities where not other-than-temporarily impaired. In your response, please iden tify the investee(s) and describe how you considered the severity and the duration of the unrecognized loss, illiquid markets and fu ture cash flows in your analysis. Mr. Michael C. Rechin First Merchants Corporation Form S-4 filed September 24, 2008 Page 4 * * * * * * * * * * * * * As appropriate, please amend your regist ration statement in response to these comments. You may wish to provide us with marked copies of the amendment to expedite our review. Please furnish a cove r letter with your amendment that keys your responses to our comments and provides any requested information. Detailed cover letters greatly facilitate our review. Please understand that we may have additional comments after reviewing your amendmen t and responses to our comments. We urge all persons who are responsible for the accuracy and adequacy of the disclosure in the filing review ed by the staff to be certain that they have provided all information investors require for an info rmed decision. Since the company and its management are in possession of all facts re lating to a company’s disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made. In connection with responding to our comments, please provide, in writing, a statement from the company and each filing person acknowledging that: the company or filing person is respons ible for the adequacy and accuracy of the disclosure in the filing; staff comments or changes to disclosu re in response to staff comments do not foreclose the Commission from ta king any action with respect to the filing; and the company or filing person may not a ssert staff comments as a defense in any proceeding initiated by th e Commission or any person under the federal securities laws of the United States. In addition, please be advise d that the Division of Enfo rcement has access to all information you provide to the staff of the Divi sion of Corporation Fi nance in our review of your filing or in response to our comments on your filing. Mr. Michael C. Rechin First Merchants Corporation Form S-4 filed September 24, 2008 Page 5 You may contact Paul Cline at (202 ) 551- 3851 or Kevin Vaughn at 202-551- 3494 if you have questions regarding comments on the financial statements and related matters. Please contact either Jessica Livi ngston at (202) 551-3448 or me at (202) 551- 3434 with any other questions. S i n c e r e l y , Michael Clampitt Senior Counsel cc: David R. Prechtel Bingham McHale LLP 2700 Market Tower 10 West Market Street Indianapolis, Indiana 46204 David A. Butcher Bose McKinney & Evans LLP 111 Monument Circle Suite 2700 Indianapolis, Indiana 46204