First Merchants Corporation · NASDAQ:FRME
First Merchants — Q3 2019 Earnings Presentation
31 slides from First Merchants's earnings presentation, Oct 24, 2019
Slide 1: 3rd Quarter Earnings Highlights October 24, 2019
3rd Quarter Earnings Highlights October 24, 2019
Slide 2: Forward-Looking Statement
Forward-Looking Statement This presentation contains forward-looking statements made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements can often, but not always, be identified by the use of words like “believe”, “continue”
Slide 3: Michael C. Rechin, President and CEO
Michael C. Rechin President Chief Executive Officer
Slide 4: 3rd Quarter 2019 Highlights
3rd Quarter 2019 Highlights Acquisition of MBT Financial Corporation Completed on September 1, 2019 $36.8 Million of Net Income, or $0.71 Per Share Acquisition Expense Totaled $11.2 Million, or $0.17 Per Share Total Assets of $12.3 Billion; Grew by 25.9% over 3Q 2018 Annualized Organic Loan Growth o
Slide 5: Mark K. Hardwick, EVP, CFO and COO
Mark K. Hardwick Executive Vice President Chief Financial Officer and Chief Operating Officer
Slide 6: Total Assets
Total Assets ($ in Millions) 2017 2018 Q1-’19 Q2-’19 Q3-’19 1. Investments $1,561 $1,633 $ 1,863 $ 2,093 $ 2,489 2. Loans 6,758 7,229 7,303 7,517 8,307 3. Allowance (75) (81) (81) (81) (81) 4. Goodwill & Intangibles 477 470 468 467 580 5. BOLI 224 225 226 226 287 6. Other 422 409 432 516 743 7. Tota
Slide 7: Loan Yield and Detail
Loan Yield and Detail (as of September 30, 2019) QTD Yield = 5.28% Commercial Agricultural Agricultural YTD Yield = 5.30% Real Estate Construction Land & Public Land Production Total Loans = $8.3 Billion Non-Owner Land Development Finance/Other 2.9% 1.1% Occupied 8.1% Commercial 24.2% 5.7% Variable
Slide 8: Investment Portfolio
Investment Portfolio (as of September 30, 2019) Tax-Exempt Mortgage-Backed Municipals 45% Securities 33% $2.5 Billion Portfolio Modified duration of 4.7 years Tax equivalent yield of 3.22% Net unrealized gain of $75.8 Million Collateralized Corporate Mortgage Obligations U. S. Obligations 1% Agencie
Slide 9: Total Liabilities and Capital
Total Liabilities and Capital ($ in Millions) 2017 2018 Q1-’19 Q2-’19 Q3-’19 1. Customer Non-Maturity Deposits $5,741 $6,268 $ 6,439 $ 6,668 $ 7,993 2. Customer Time Deposits 1,051 1,241 1,375 1,450 1,543 3. Brokered Deposits 381 246 234 201 229 Total Deposits 7,173 7,755 8,048 8,319 9,765 4. Borrow
Slide 10: Deposit Detail
Deposit Detail (as of September 30, 2019) Certificates & Time Deposits Certificates & QTD Cost = 1.33% Time Deposits >$100,000 YTD Cost = 1.29% 8% <$100,000 Savings 8% Total = $9.8 Billion Deposits 29% Brokered Deposits 2% Demand Deposits 53% 10
Slide 11: Capital Ratios
Capital Ratios Total Risk-Based Capital Ratio (Target = 12.50%) Common Equity Tier 1 Capital Ratio (Target = 10.00%) Tangible Common Equity Ratio (TCE) (Target = 9.00%) 15.00% 14.71% 14.61% 14.56% 14.37% 14.25% 13.81% 14.00% 13.76% 13.69% 13.69% 13.00% 12.12% 12.14% 11.98% 12.05% 12.00% 11.64% 11.21
Slide 12: Net Interest Margin
Net Interest Margin Q3 - '17 Q4 - '17 Q1 - '18 Q2 - '18 Q3 - '18 Q4 - '18 Q1 - '19 Q2 - '19 Q3 - '19 Net Interest Income - FTE ($ millions) $ 78.9 $ 83.5 $ 82.5 $ 87.2 $ 89.2 $ 90.7 $ 87.8 $ 88.4 $ 92.3 Fair Value Accretion $ 3.2 $ 4.1 $ 3.2 $ 3.8 $ 3.2 $ 3.9 $ 2.3 $ 2.2 $ 2.5 Tax Equivalent Yield o
Slide 13: Non-Interest Income
Non-Interest Income ($ in Millions) 2017 2018 Q1-’19 Q2-’19 Q3-’19 1. Service Charges on Deposit Accounts $ 18.7 $ 21.0 $ 5.1 $ 5.4 $ 6.1 2. Wealth Management Fees 14.7 14.9 3.8 3.9 4.4 3. Card Payment Fees 16.1 18.0 4.8 4.9 5.2 4. Gains on Sales of Mortgage Loans 7.6 7.0 1.3 1.7 2.2 5. Derivative H
Slide 14: Non-Interest Expense
Non-Interest Expense ($ in Millions) 2017 2018 Q1-’19 Q2-’19 Q3-’19 1. Salary & Benefits $119.8 $131.7 $33.0 $32.7 $38.9 2. Premises & Equipment 30.1 32.7 8.7 8.6 8.8 3. Intangible Asset Amortization 5.6 6.7 1.5 1.5 1.4 4. Professional & Other Outside Services 12.8 8.2 1.9 2.4 8.3 5. OREO/Credit-Rel
Slide 15: Earnings
Earnings ($ in Millions) 2017 2018 Q1-’19 Q2-’19 Q3-’19 1. Net Interest Income $ 277.3 $ 338.8 $84.9 $85.3 $88.9 2. Provision for Loan Losses (9.1) (7.2) (1.2) (0.5) (0.6) 3. Net Interest Income after Provision 268.2 331.6 83.7 84.8 88.3 4. Non-Interest Income 71.0 76.5 18.7 21.6 22.1 5. Non-Interes
Slide 16: Per Share Results
Per Share Results 2018 Q1 Q2 Q3 Q4 Total 1. Earnings Per Share $ .74 $ .80 $ .83 $ .85 $ 3.22 2. Dividends $ .18 $ .22 $ .22 $ .22 $ .84 3. Tangible Book Value $17.14 $17.71 $18.16 $19.12 2019 Q1 Q2 Q3 Q4 Total 1. Earnings Per Share $ .78 $ .83 $ .71 1 – $2.32 2. Dividends $ .22 $ .26 $ .26 – $ .74
Slide 17: Dividends and Tangible Book Value
Dividends and Tangible Book Value Quarterly Dividends Tangible Book Value .26 0.26 0.24 $21.26 .22 0.22 $19.12 0.20 .18 $16.96 0.18 $15.85 $14.68 .15 0.16 .14 $13.65 0.14 $12.17 $10.95 .11 0.12 $9.21 $9.64 0.10 .08 0.08 0.06 .05 0.04 .03 0.02 .01 0.00 2.76% Forward Dividend Yield Compound Annual Gro
Slide 18: John J. Martin, EVP, Chief Credit Officer
John J. Martin Executive Vice President Chief Credit Officer
Slide 19: Loan Portfolio Trends
Loan Portfolio Trends Change FMB Linked Quarter ($ in Millions) 2017 2018 Q1-'19 Q2-'19 Q3-'191 MBT Q3-'19 $ 1 $ % 1. Commercial & Industrial $ 1,494 $ 1,727 $ 1,789 $ 1,877 $ 1,879 $ 155 $ 2,034 $ 2 $ 157 8.4% 2. CRE Owner Occupied 700 725 714 726 755 137 892 29 166 22.9% 3. Construction, Land and
Slide 20: Asset Quality Summary
Asset Quality Summary Change ($ in Millions) FMB Linked Quarter 1 1 186.12017 2018 Q1-'19 Q2-'19 Q3-'19 MBT Q3-'19 $ $ % 1. Non-Accrual Loans $ 28.7 $ 26.1 $ 28.0 $ 25.6 $ 17.2 $ 5.5 $ 22.7 $ (8.4) $ (2.9) (11.3%) 2. Other Real Estate 10.4 2.2 1.9 1.1 7.0 0.1 7.1 5.9 6.0 545.5% 3. Renegotiated Loans
Slide 21: Non-Performing Asset Reconciliation
Non-Performing Asset Reconciliation ($ in Millions) FMB Q4-'18 Q1-'19 Q2-'19 Q3-'191 MBT Q3-'19 1. Beginning Balance NPAs & 90+ Days Delinquent $ 30.3 $ 31.3 $ 30.7 $ 27.6 $ 27.6 Non-Accrual 2. Add: New Non-Accruals 12.1 5.2 1.6 2.0 $ 5.5 7.5 3. Less: To Accrual/Payoff/Renegotiated (5.4) (1.2) (2.5)
Slide 22: ALLL and Fair Value Summary
ALLL and Fair Value Summary ($ in Millions) Q4-'18 Q1-'19 Q2-'19 Q3-'19 1. Beginning Allowance for Loan Losses (ALLL) $ 78.4 $ 80.6 $ 80.9 $ 81.3 2. Less: Net Charge-offs (Recoveries) (0.5) 0.9 0.1 1.3 3. Add: Provision Expense 1.7 1.2 0.5 0.6 4. Ending Allowance for Loan Losses (ALLL) $ 80.6 $ 80.9
Slide 23: Portfolio Summary
Portfolio Summary Strong economic tailwinds, including low unemployment, low inflation and low interest rates, continue to contribute to stable and improving credit metrics. A lot of global economic discussion to monitor in 2020. 3rd quarter organic loan portfolio growth of 3.1% annualized. Drivers
Slide 24: Michael C. Rechin, President and CEO
Michael C. Rechin President Chief Executive Officer
Slide 25: Strategy and Tactics Overview
Strategy and Tactics Overview Looking Forward… Integration of Monroe Bank & Trust in the 4Q 2019 Grow Net Interest Income, Despite Margin Pressure Maintain Loan and Deposit Pricing Discipline Leverage Balance Sheet Position. . . Liquidity and Capital Optimization Sustain Organic Growth Protocol. Man
Slide 26: Stock Information and Investor Inquiries
First Merchants Corporation common stock is traded on the NASDAQ Global Select Market under the symbol FRME Additional information can be found at www.firstmerchants.com Investor Inquiries: Nicole Weaver, Investor Relations 765.521.7619 nweaver@firstmerchants.com 26
Slide 27: Appendix
Appendix f First Merchants Corporation
Slide 28: Appendix – Non-GAAP Reconciliation: Capital Ratios
Appendix – Non-GAAP Reconciliation CAPITAL RATIOS (dollars in thousands): 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 Total Risk-Based Capital Ratio Total Stockholders' Equity (GAAP) 1,283,120 1,303,463 1,313,073 1,340,328 1,361,426 1,408,260 1,455,848 1,501,636 1,749,012 Adjust for Accumulated Oth
Slide 29: Appendix – Non-GAAP Reconciliation: Tangible Common Equity Ratio
Appendix – Non-GAAP Reconciliation TANGIBLE COMMON EQUITY RATIO (dollars in thousands): 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 Total Stockholders' Equity (GAAP) $ 1,283,120 $ 1,303,463 $ 1,313,073 $ 1,340,328 $ 1,361,426 $ 1,408,260 $ 1,455,848 $ 1,501,636 $ 1,749,012 Less: Preferred Stock (12
Slide 30: Appendix – Non-GAAP Reconciliation: Efficiency Ratio
Appendix – Non-GAAP Reconciliation EFFICIENCY RATIO (dollars in thousands): 2017 2018 1Q19 2Q19 3Q19 Non Interest Expense (GAAP) $ 205,556 $ 219,951 $ 56,621 $ 57,587 $ 67,354 Less: Intangible Asset Amortization (5,647) (6,719) (1,528) (1,520) (1,356) Less: OREO and Foreclosure Expenses (1,903) (1,4
Slide 31: Appendix – Non-GAAP Reconciliation: Real Estate Concentrations
Appendix – Non-GAAP Reconciliation CONSTRUCTION AND INVESTMENT REAL ESTATE CONCENTRATIONS (dollars in thousands): 2017 2018 1Q19 2Q19 3Q19 Total Risk-Based Capital (Subsidiary Bank Only) Total Stockholders' Equity (GAAP) $ 1,404,303 $ 1,456,220 $ 1,487,947 $ 1,513,662 $ 1,764,062 Adjust for Accumula