First Merchants Corporation · NASDAQ:FRME
First Merchants — Q2 2017 Earnings Presentation
31 slides from First Merchants's earnings presentation, Jul 27, 2017
Slide 1: 2nd Quarter 2017 Earnings Highlights
2nd Quarter 2017 Earnings Highlights July 27, 2017 Michael C. Rechin President Chief Executive Officer Mark K. Hardwick Executive Vice President Chief Financial Officer Chief Operating Officer John J. Martin Executive Vice President Chief Credit Officer
Slide 2: Forward-Looking Statements
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”, “pattern”, “estimate”, “
Slide 3: 2nd Quarter 2017 Financial Highlights
3 2nd Quarter 2017 Financial Highlights Earnings Per Share of $ .57, a 16.3% Increase over 2Q2016 $24.1 Million of Net Income, a 20.6% Increase over 2Q2016 Total Assets of $7.8 Billion Grew by 13.0% over 2Q2016 Organic Loan Growth of $114 Million, an 8.6% Annualized Growth Rate Organic Depos
Slide 4: 2nd Quarter 2017 Performance Highlights
4 2nd Quarter 2017 Performance Highlights 1.28% Return on Average Assets 9.82% Return on Average Equity $16.97 Tangible Book Value Per Share, a 9.3% Increase over 2Q2016 53.61% Efficiency Ratio Completed Acquisition of The Arlington Bank on May 19, 2017 Completed Acquisition of Independe
Slide 5: Mark K. Hardwick, Chief Operating Officer and Chief Financial Officer
Mark K. Hardwick Executive Vice President Chief Operating Officer and Chief Financial Officer
Slide 6: Total Assets
Total Assets 2015 2016 Q1-’17 Q2-’17 1. Investments $1,277 $1,305 $1,327 $1,343 2. Loans Held for Sale 10 3 1 4 3. Loans 4,694 5,140 5,275 5,613 4. Allowance (62) (66) (68) (70) 5. CDI & Goodwill 260 259 258 310 6. BOLI 201 202 203 200 7. Other 381 369 330 405 8. Total Assets $6,761 $7,212 $7,326 $7
Slide 7: Loan and Yield Detail
Commercial & Industrial 23.0% Commercial Real Estate Owner-Occupied 10.3% Commercial Real Estate Non-Owner Occupied 25.7% Construction Land & Land Development 7.9% Agricultural Land 2.6% Agricultural Production 1.3% Public Finance/Other Commercial 4.9% Residential Mortgage 15.2% Home Equity 7.8% Oth
Slide 8: Investment Portfolio
Mortgage-Backed Securities 30% Collateralized Mortgage Obligations 20% U. S. Agencies 2% Corporate Obligations 2% Corporate Equities 1% Tax-Exempt Municipals 45% Investment Portfolio (as of 6/30/2017) $1.3 Billion Portfolio Modified duration of 4.7 years Tax equivalent yield of 3.85% Net unr
Slide 9: Total Liabilities and Capital
9 Total Liabilities and Capital ($ in Millions) 2015 2016 Q1-’17 Q2-’17 1. Customer Non-Maturity Deposits $4,096 $4,428 $4,426 $4,724 2. Customer Time Deposits 880 747 789 875 3. Brokered Deposits 314 381 420 418 4. Borrowings 446 572 587 581 5. Other Liabilities 51 60 53 49 6. Hybrid Capital 123 12
Slide 10: Deposit Detail
Deposit Detail (as of 6/30/2017) QTD Cost = .45% YTD Cost = .42% Total = $6.0 Billion 10 Demand Deposits 50% Savings Deposits 28% Certificates & Time Deposits of >$100,000 6% Certificates & Time Deposits of <$100,000 9% Brokered Deposits 7%
Slide 11: Capital Ratios
11.22% 11.31% 11.49% 11.42% 11.39% 11.05% 11.10% 11.16% 11.11% 8.95% 9.17% 9.08% 9.26% 9.43% 9.48% 9.24% 9.50% 9.68% 14.92% 14.85% 14.94% 14.79% 14.67% 14.18% 14.21% 14.24% 14.01% 6.00% 7.00% 8.00% 9.00% 10.00% 11.00% 12.00% 13.00% 14.00% 15.00% 16.00% 17.00% 18.00% 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q1
Slide 12: Net Interest Margin
12 Net Interest Margin Q2 - '15 Q3 - '15 Q4 - '15 Q1 - '16 Q2 - '16 Q3 - '16 Q4 - '16 Q1 - '17 Q2 - '17 Net Interest Income - FTE ($millions) $ 51.7 $ 53.3 $ 53.2 $ 57.6 $ 59.2 $ 61.1 $ 62.1 $ 64.9 $ 67.2 Fair Value Accretion $ 2.2 $ 2.0 $ 1.9 $ 2.5 $ 3.2 $ 3.8 $ 2.9 $ 4.3 $ 2.3 Tax Equivalent Yield
Slide 13: Non-Interest Income
13 Non-Interest Income – – – – – – – – – 2015 2016 Q1-’17 Q2-’17 1. Service Charges on Deposit Accounts $16.2 $17.8 $ 4.2 $ 4.4 2. Wealth Management Fees 11.3 12.6 3.4 3.4 3. Insurance Commission Income 4.1 4. Card Payment Fees 13.4 15.0 3.7 4.2 5. Cash Surrender Value of Life Ins 2.9 4.3 0.9 3.0 6.
Slide 14: Non-Interest Expense
14 Non-Interest Expense 2015 2016 Q1-’17 Q2-’17 1. Salary & Benefits $101.9 $102.6 $ 25.7 $ 27.1 2. Premises & Equipment 25.5 29.5 7.0 6.9 3. Core Deposit Intangible 2.8 3.9 0.9 1.0 4. Professional & Other Outside Services 9.9 6.5 1.7 3.3 5. OREO/Credit-Related Expense 3.9 2.9 0.5 0.7 6. FDIC Expens
Slide 15: Earnings
15 2015 2016 Q1-’17 Q2-’17 1. Net Interest Income $196.4 $226.5 $ 61.0 $ 63.1 2. Provision for Loan Losses (0.4) (5.7) (2.4) (2.9) 3. Net Interest Income after Provision 196.0 220.8 58.6 60.2 4. Non-Interest Income 69.8 65.2 14.9 18.4 5. Non-Interest Expense (174.8) (177.3) (43.1) (47.3) 6. Income b
Slide 16: Per Share Results
2016 Q1 Q2 Q3 Q4 Total 1. Earnings Per Share $ .43 $ .49 $ .51 $ .55 $ 1.98 2. Dividends $ .11 $ .14 $ .14 $ .15 $ .54 3. Tangible Book Value $15.02 $15.53 $15.86 $15.85 2017 Q1 Q2 Q3 Q4 Total 1. Earnings Per Share $ .56 $ .57 – – $ 1.13 2. Dividends $ .15 .18 – – $ .33 3. Tangible Book Value $16.49
Slide 17: Dividends and Tangible Book Value
$9.21 $9.64 $10.95 $12.17 $13.65 $14.68 $15.85 $16.97 Dividends and Tangible Book Value 0.00 0.02 0.04 0.06 0.08 0.10 0.12 0.14 0.16 0.18 .11 .01 .03 .05 .14 .15 1.79% Forward Dividend Yield 29.2% YTD Dividend Payout Ratio = Quarterly Dividends Tangible Book Value .08 17 .18
Slide 18: John J. Martin, Executive Vice President and Chief Credit Officer
John J. Martin Executive Vice President and Chief Credit Officer
Slide 19: Loan Portfolio Trends
19 Loan Portfolio Trends ($ in Millions) FMB 2015 2016 Q1-'17 Q2-'17 1 Arlington Q2-'17 $ 1 $ % 1. Commercial & Industrial 1,057$ 1,195$ 1,259$ 1,287$ 3$ 1,290$ 28$ 31$ 2.5% 2. Construction, Land and Land Development 367 419 337 418 24 442 81 105 31.2% 3. CRE Non-Owner Occupied 1,090 1,272 1,423 1,3
Slide 20: Asset Quality Summary
20 Asset Quality Summary ($ in Millions) FMB 2015 2016 Q1-'17 Q2-'17 1 Arlington Q2-'17 $ 1 $ % 186.1 1. Non-Accrual Loans 31.4$ 30.0$ 27.9$ 26.1$ 1.3$ 27.4$ (1.8)$ (0.5)$ (1.8%) 2. Other Real Estate 17.3 9.0 8.3 11.9 - 11.9 3.6 3.6 43.4% 3. Renegotiated Loans 1.9 4.7 0.9 0.4 - 0.4 (0.5) (0.5) (55.6
Slide 21: Non-Performing Asset Reconciliation
21 Non-Performing Asset Reconciliation ($ in Millions) FMB Q3-'16 Q4-'16 Q1-'17 Q2-'17 1 Arlington Q2-'17186.1 1. Beginning Balance NPAs & 90+ Days Delinquent 51.5$ 49.9$ 43.8$ 37.2$ 37.2$ Non-Accrual 2. Add: New Non-Accruals 6.0 4.3 2.5 8.7 1.3$ 10.0 3. Less: To Accrual/Payoff/Renegotiated (3.2) (6
Slide 22: ALLL and Fair Value Summary
22 ALLL and Fair Value Summary ($ in Millions) Q3-'16 Q4-'16 Q1-'17 Q2-'17 1. Beginning Allowance for Loan Losses (ALLL) 62.2$ 63.5$ 66.0$ 68.2$ 2. Net Charge-offs (Recoveries) 0.6 (0.1) 0.2 0.6 3. Provision Expense 1.9 2.4 2.4 2.9 4. Ending Allowance for Loan Losses (ALLL) 63.5 66.0 68.2 70.5 5. Fa
Slide 23: Asset Quality & Portfolio Summary
23 Asset Quality & Portfolio Summary Strong organic quarterly loan growth of $114 million led by Construction, C&I and Public Finance. With Arlington Bank, loans grew $338 million. Construction and CRE portfolios are 51% and 216% of risk-based capital, respectively; well beneath regulatory guide
Slide 24: Michael C. Rechin, President and Chief Executive Officer
Michael C. Rechin President and Chief Executive Officer
Slide 25: FMC Strategy and Tactics Overview
25 FMC Strategy and Tactics Overview Looking Forward . . . Drive to gain the synergies and market expansion the Arlington Bank and Independent Alliance Bank acquisitions offer. Win in all our Markets in all Businesses; Lending, Deposit Gathering, Payments, and Private Wealth Management; be the s
Slide 26: Contact Information
26 Contact Information First Merchants Corporation common stock is traded on the NASDAQ Global Select Market under the symbol FRME. Additional information can be found at www.FIRSTMERCHANTS.COM Investor inquiries: David L. Ortega Investor Relations Telephone: 765.378.8937 dortega@firstmerchants.com
Slide 27: First Merchants Corporation Appendix
First Merchants Corporation THE STRENGTH OF BIG THE SERVICE OF SMALL Appendix NASDAQ: FRME
Slide 28: Appendix – Non-GAAP Reconciliation: Capital Ratios
28 Appendix – Non-GAAP Reconciliation CAPITAL RATIOS (dollars in thousands): 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Total Risk-Based Capital Ratio Total Stockholders' Equity (GAAP) 749,955 766,984 850,509 867,263 887,550 900,865 901,657 929,470 1,035,116 Adjust for Accumulated Other Comprehens
Slide 29: Appendix – Non-GAAP Reconciliation: Tangible Common Equity Ratio
29 Appendix – Non-GAAP Reconciliation TANGIBLE COMMON EQUITY RATIO (dollars in thousands): 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Total Stockholders' Equity (GAAP) 749,955$ 766,984$ 850,509$ 867,263$ 887,550$ 900,865$ 901,657$ 929,470$ 1,035,116$ Less: Preferred Stock (125) (125) (125) (125) (
Slide 30: Appendix – Non-GAAP Reconciliation: Efficiency Ratio
30 Appendix – Non-GAAP Reconciliation EFFICIENCY RATIO (dollars in thousands): 2015 2016 1Q17 2Q17 Non Interest Expense (GAAP) 174,806$ 177,359$ 43,099$ 47,316$ Less: Core Deposit Intangible Amortization (2,835) (3,910) (903) (991) Less: OREO and Foreclosure Expenses (3,956) (2,877) (531) (731) Adju
Slide 31: Appendix – Non-GAAP Reconciliation: Construction and Investment Real Estate Concentrations
31 Appendix – Non-GAAP Reconciliation CONSTRUCTION AND INVESTMENT REAL ESTATE CONCENTRATIONS (dollars in thousands): 2015 2016 1Q17 2Q17 Total Risk-Based Capital (Subsidiary Bank Only) Total Stockholders' Equity (GAAP) 927,774$ 973,641$ 993,130$ 1,099,762$ Adjust for Accumulated Other Comprehensive