First Merchants Corporation · NASDAQ:FRME
First Merchants — Keefe, Bruyette & Woods 16th Annual Community Bank Investor Conference (July 2015)
48 slides from First Merchants's conference presentation, Jul 28, 2015
Slide 1: First Merchants Corporation at KBW Community Bank Investor Conference
First Merchants Corporation Keefe, Bruyette & Woods 16th Annual Community Bank Investor Conference ® Michael C. Rechin Mark K. Hardwick President Executive Vice President Chief Executive Officer Chief Financial Officer NASDAQ: FRME
Slide 2: Forward-Looking Statement
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com Forward-Looking Statement 2 ® 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 no
Slide 3: Forward-Looking Statement and Non-GAAP Financial Measures
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com Forward-Looking Statement 3 ® First Merchants does not undertake any obligation to update any forward-looking statement, whether written or oral, relating to the matters discussed in this filing. In addition, First Merchants’ and Amer
Slide 4: Why Invest in First Merchants?
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 4 ® Why Invest in First Merchants?
Slide 5: Company Profile
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 5 ® Company Profile (as of 06/30/2015) Market Information Common Shares Outstanding 37,824,649 Market Cap $934.3M Dividend Yield 1.42% Price/Tangible Book Value 1.75x Price/LTM EPS 14.0x Price/2015 Est. EPS 13.8x Leadership Team – Fir
Slide 6: Our Franchise
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 6 ® Our Franchise Loans by Market • Indianapolis - $1,659M • Muncie - $ 773M • Munster - $ 596M • Lafayette - $ 573M • Columbus - $ 645M (as of June 30, 2015) First Merchants Corporation operates 109 locations in 26 Indiana counties,
Slide 7: Market position by county
THE STRENGTH OF BIG. THE SERVICE OF SMALL. County Region/Type Market Position Market % $ Deposits Delaware County, IN Muncie (Established) 1 45.42% $ 803,491 Jasper County, IN Lafayette (Established) 1 27.47% 172,012 White County, IN Lafayette (Established) 1 30.91% 169,166 Jay County, IN Muncie (Es
Slide 8: First Merchants Strategy
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 8 ® First Merchants Strategy Commercial Bank • Lending Engine Supported by Consumer Retail Bank • Deposit Engine Growth • Organic • Growth by Acquisition
Slide 9: Strategy: Commercial Bank
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 9 ® First Merchants Strategy Commercial Bank • Located in Prime Growth Commercial Banking Markets • Indianapolis, Indiana • Columbus, Ohio • Lafayette, Indiana • Northwest Indiana • Hire the Best Talent Supported with the Finest: •
Slide 10: Strategy: Consumer Retail Bank
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 10 ® First Merchants Strategy Consumer Retail Bank • Diversely Located in Stable Rural and Growth Metro Markets • Supported by: • Talented Customer Service Oriented Banking Center and Call Center Professionals • State-of-the-Art Dep
Slide 11: First Merchants Strategy: Service-driven alternative
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 11 ® First Merchants Strategy “Service-driven alternative to super-regional bank competitors. Deliver superior service with presence close to the customer for . . . ” “We specialize in our communities” Retail Banking Mortgage Bank
Slide 12: How We Deliver
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 12 TRUST MORTGAGE COMMERCIAL BANKING RETAIL BANKING How We Deliver Supported by LOB Strategies Indianapolis Higher Growth Brown, Hamilton, Hendricks, Johnson, Madison, Morgan, Shelby Counties Columbus, OH Higher Growth Franklin County
Slide 13: Organic Growth Opportunities in All Directions
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 13 ® Organic Growth Opportunities in All Directions Lafayette MSA Entered: 2002 Total Population:209,563 Deposit Market Share: 18.35% Indianapolis MSA Entered: 1998 Total Population: 1,955,766 Deposit Market Share: 3.12% Columbus, Ohi
Slide 14: Muncie Market
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 14 ® Muncie Market Delaware County, IN* Rank Branches Deposits Mkt. Share 1 First Merchants Corporation 12 803,491 45.42% 2 Mutual First Financial 9 452,686 26.15% 3 J.P. Morgan Chase 6 199,849 9.91% 4 Old National Bancorp 6 181,386 1
Slide 15: Indianapolis Market
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 15 ® Indianapolis Market Hamilton County, IN** Rank Branches Deposits Mkt. Share 1 JPMorgan Chase & Co. 15 1,088,975 23.97% 2 PNC Financial Services Group 11 477,910 10.52% 3 Fifth Third Bancorp 7 450,029 9.91% 4 First Merchants Corpo
Slide 16: Lafayette Market
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 16 ® Lafayette Market Tippecanoe County, IN** Rank Branches Deposits Mkt. Share 1 JPMorgan Chase & Co. 5 $ 686,418 29.77% 2 First Merchants Corporation 9 452,238 19.62% 3 Old National Bancorp 8 366,560 15.90% 4 Regions Financial Corp
Slide 17: Northwest Indiana Market
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 17 ® Northwest Indiana Market Lake County, IN* Rank Branches Deposits Mkt. Share 1 JPMorgan Chase & Co. 25 $ 1,737,035 21.82% 2 First Bancshares, Inc. 31 1,529,789 19.22% 3 First Midwest Bancorp 17 828,750 10.41% 4 Northwest Indiana B
Slide 18: Columbus, Ohio Market
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 18 ® Columbus, Ohio Market • Second-most populous county in Ohio • Within 600 miles of 60% of All U.S. and Canadian Population • Ranked 2nd in CNBC’s 2010 study of state transportation systems for its infrastructure, vitality, quality
Slide 19: Growth Through Acquisition
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 19 ® Growth Through Acquisition • Experienced Acquirer • Expand in Current High-Growth Markets • Extend into Additional High-Growth Markets • Add to Franchise with Stable Deposit Gathering Markets
Slide 20: THE STRENGTH OF BIG. THE SERVICE OF SMALL. 20 THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
THE STRENGTH OF BIG. THE SERVICE OF SMALL. 20 THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
Slide 21: Acquisition approach and pricing discipline
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 21 • Continuous Relationship Building • Complete and Thorough Due Diligence Process • Demonstrated Pricing Discipline: • Average Price to TBV of 116% • Average EPS Accretion within One Year • Average TBV Earn-back of 2.6 Years • Detai
Slide 22: Community Bank Overview
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 22 ® Community Bank Overview • Headquartered in Noblesville, Indiana • Founded in 1991 • Acquisition Completed: November 7, 2014 • Loans Acquired Net of Fair Value Marks: $145.1 Million • Deposits Acquired: $228.4 Million • Transactio
Slide 23: Cooper State Bank Overview
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 23 ® Cooper State Bank Overview • Headquartered in Columbus, Ohio • Founded in 2004 • Acquisition Completed: April 17, 2015 • Loans Acquired Net of Fair Value Marks: $111 Million • Deposits Acquired: $105 Million • Transaction Value:
Slide 24: Ameriana Bank Acquisition Overview
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 24 ® Ameriana Bank Acquisition Overview Deal Value $68.8 Million Consideration 100% Stock, .9037 Fixed Exchange Ratio Required Approvals Regulatory and Ameriana Bancorp Shareholders Key Assumptions Cost Savings Estimated to be 57%, or
Slide 25: Ameriana Bank Summary
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 25 ® Ameriana Bank Summary Headquartered in New Castle, Indiana Founded in 1890 Operates 13 Banking Centers Balance Sheet as of March 31, 2015 $483 Million in Assets $325 Million in Loans $391 Million in Deposits Incom
Slide 26: Ameriana Bank Transaction Rationale
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 26 ® Ameriana Bank Transaction Rationale Strategic Opportunity Attractive Risk Profile Full Due Diligence Process Completed Midwestern Cultural Fit FMC Experienced Acquirer, Core Competency in Integration Processes Proforma Firs
Slide 27: 2nd Quarter 2015 Highlights
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 27 ® 2nd Quarter 2015 Highlights 2nd Quarter Highlights • Earnings Per Share of $ .47, a 15% Increase over 2Q2014 • $18 Million of Net Income, a 19% Increase over 2Q2014 • 1.19% Return on Average Assets • 9.63% Return on Average Stock
Slide 28: Total Assets
THE STRENGTH OF BIG. THE SERVICE OF SMALL. ® www.firstmerchants.com 28 Total Assets 2013 2014 Q1-’15 Q2-’15 1. Investments $1,096 $1,181 $1,189 $1,213 2. Loans Held for Sale 5 7 6 8 3. Loans 3,633 3,925 3,966 4,238 4. Allowance (68) (64) (63) (63) 5. CD&I & Goodwill 203 219 218 220 6. BOLI 165 169 1
Slide 29: Loan and Yield Detail
Commercial & Industrial 23.2% Commercial Real Estate Owner- Occupied 12.8% Commercial Real Estate Non-Owner Occupied 23.9% Construction, Land & Land Development 6.0% Agricultural Land 3.5% Agricultural Production 2.2% Other Commercial 3.4% Residential Mortgage 16.4% Home Equity 7.1% Other Consumer 1
Slide 30: Investment Portfolio
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 30 ® Investment Portfolio (as of 6/30/2015) • $1.2 Billion • Modified duration of 4.6 years • Tax equivalent yield of 3.93% • Net unrealized gain of $28.1 Million Mortgage- Backed Securities 30% Collateralized Mortgage Obligations 26%
Slide 31: Total Liabilities and Capital
® THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 31 Total Liabilities and Capital 2013 2014 Q1-’15 Q2-’15 1. Customer Non-Maturity Deposits $3,276 $3,523 $3,518 $3,651 2. Customer Time Deposits 868 784 800 812 3. Brokered Deposits 87 334 330 327 4. Borrowings 401 290 305 431 5. Ot
Slide 32: Deposits and Cost of Funds Detail
Demand Deposits 46% Savings Deposits 30% Certificates & Time Deposits of >$100,000 6% Certificates & Time Deposits of <$100,000 11% Brokered Deposits 7% THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 32 ® Deposits and Cost of Funds Detail (as of 06/30/2015) QTD Cost = .40% YTD Cos
Slide 33: Capital Ratios
Total Risk-Based Capital Ratio (Target = 14.50%) Common Equity Tier 1 Capital Ratio (Target = 10.00%) Tangible Common Equity/Tangible Assets (TCE) (Target = 8.00%) THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 33 ® 10.13% 10.42% 10.37% 10.86% 11.00% 11.16% 11.40% 11.37% 11.22% 7.
Slide 34: Net Interest Margin
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com Net Interest Margin ® Q2 - '13 Q3 - '13 Q4 - '13 Q1 - '14 Q2 - '14 Q3 - '14 Q4 - '14 Q1 - '15 Q2 - '15 Net Interest Income - FTE ($millions) $ 38.1 $ 38.6 $ 42.8 $ 47.8 $ 48.1 $ 49.9 $ 49.2 $ 49.2 $ 51.7 Fair Value Accretion $ 0.4 $ 0
Slide 35: Non-Interest Income
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 35 ® Non-Interest Income 1Adjusted for Bond Gains & Losses and Gain on Sale of Insurance Subsidiary 2013 2014 Q1-’15 Q2-’15 1. Service Charges on Deposit Accounts $12.4 $15.7 $ 3.5 $ 4.1 2. Trust Fees 8.6 9.0 2.5 2.3 3. Insurance Comm
Slide 36: Non-Interest Expense
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 36 ® Non-Interest Expense 2013 2014 Q1-’15 Q2-’15 1. Salary & Benefits $ 85.4 $ 96.5 $ 24.5 $26.4 2. Premises & Equipment 18.0 23.2 6.4 6.3 3. Core Deposit Intangible 1.6 2.4 0.7 0.7 4. Professional & Other Outside Services 8.3 8.1 1.
Slide 37: Non-Interest Expense – Core vs. Non-Recurring
Core + FMIG + Community + Cooper + Non-Recurring* Q2 Total Core FMIG Community Bank Cooper State Bank Other Non-Recurring $42.0 + $2.3 + $0.8 + $1.1 + $0.2 $46.4 THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 37 ® Non-Interest Expense – Core vs. Non-Recurring *Other Non-Recurring
Slide 38: Earnings
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 38 ® 2013 2014 Q1-’15 Q2-’15 1. Net Interest Income $154.3 $187.0 $ 47.0 $ 49.0 2. Provision for Loan Losses (6.6) (2.6) (0.4) 3. Net Interest Income after Provision 147.7 184.4 47.0 48.6 4. Non-Interest Income 56.0 66.4 16.2 24.6 5.
Slide 39: Earnings Per Share
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 39 ® 2014 Q1 Q2 Q3 Q4 Total 1. Reported $ .38 $ .41 $ .45 $ .41 $ 1.65 2. FV Accretion EPS Impact $ .03 $ .04 $ .06 $ .03 $ .16 2015 Q1 Q2 Q3 Q4 Total 1. Reported $ .43 $ .47 – – $ .90 2. FV Accretion EPS Impact $ .04 $ .04 – – $ .08
Slide 40: Asset Quality Summary
($ in Millions) 2013 2014 Q1-'15 Q2-'15 1. Non-Accrual Loans 56.4$ 48.8$ 44.3$ 37.7$ (6.6)$ (14.9%) 2. Other Real Estate 22.2 19.3 19.1 19.3 0.2 1.0% 3. Renegotiated Loans 3.0 2.0 1.3 0.9 (0.4) (30.8%) 4. 90+ Days Delinquent Loans 1.4 4.6 1.7 0.6 (1.1) (64.7%) 5. Total NPA's & 90+ Days Delinquent 83
Slide 41: ALLL and Fair Value Summary
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 41 ® ALLL and Fair Value Summary 29.8% 14.6% 55.6% ($ in Millions) Q2-'14 Q3-'14 Q4-'14 Q1-'15 Q2-'15 1. Allowance for Loan Losses (ALLL) 68.4$ 65.6$ 64.0$ 62.8$ 62.6$ 2. Fair Value Adjustment (FVA) 43.9 35.5 43.2 40.6 40.7 3. Total A
Slide 42: 1-Year Stock Price Chart
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 42 ® 1-Year Stock Price Chart
Slide 43: Why Invest in First Merchants?
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 43 ® Why Invest in First Merchants? • Attractive and Growing Earnings Stream • 2nd Largest Indiana Bank with an Energized and Experienced Management Team • Attractive Long-Term Deposit Market Shares • Commercial Presence that Creates
Slide 44: Research Coverage
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 44 ® • Keefe, Bruyette & Woods, Inc. • Raymond James & Associates, Inc. • Sandler O’Neill + Partners, L.P. • FIG Partners Research Coverage
Slide 45: Contact Information
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 45 Contact Information ® 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: David L. Ortega In
Slide 46: Appendix
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 46 ® Appendix
Slide 47: Appendix – Non-GAAP Reconciliation: Capital Ratios
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 47 ® Appendix – Non-GAAP Reconciliation CAPITAL RATIOS (dollars in thousands) 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 Total Risk-Based Capital Ratio Total Stockholders' Equity (GAAP) 539,293 513,469 634,923 652,111 670,596 684,55
Slide 48: Appendix – Non-GAAP Reconciliation: Tangible Equity and Ratios
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 48 ® Appendix – Non-GAAP Reconciliation TANGIBLE EQUITY AND TANGIBLE RATIOS (dollars in thousands) Tangible Common Equity/Tangible Assets (non-GAAP) 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 Total Stockholders' Equity (GAAP) 539,29