First Merchants Corporation · NASDAQ:FRME
First Merchants — Q2 2021 Earnings Presentation
27 slides from First Merchants's earnings presentation, Jul 26, 2021
Slide 1: Investor Update Second Quarter 2021
INVESTOR UPDATE Second Quarter 2021
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: Executive Management Team
Executive Management Team 3 Mark Hardwick Chief Executive Officer Mark K. Hardwick currently serves as the Chief Executive Officer of First Merchants Corporation and First Merchants Bank. Mark joined First Merchants in November of 1997 as Corporate Controller and was promoted to Chief Financial Offi
Slide 4: First Merchants Corporation Financial Highlights
First Merchants Corporation (NASDAQ: FRME) Financial Highlights as of 6/30/2021 $14.9 Billion $9.1 Billion $12.2 Billion $6.0 Billion Assets Under Advisement* Total Assets Total Loans Total Deposits TCE/TA: YTD Return on TCE YTD ROAA: Dividend Yield: Price / Tangible Book: Price / 2021 Est. EPS: 1.4
Slide 5: Second Quarter Highlights and Year-to-Date Highlights
Second Quarter Highlights 5 Year-to-Date Highlights 1.45% ROA 1.71% PTPP ROA ROA $105.0 Million $1.94 Per Share Net Income & EPS 11.40% ROE 16.82% ROTCE ROE & ROTCE Completed integration of Hoosier Trust Company 6.7% annualized loan growth, excluding PPP loans 12.04% ROE 17.77% ROTCE ROE & ROTCE
Slide 6: Strategy & Key Lines of Business
Strategy & Key Lines of Business 6 Consumer BankingCommercial Banking Private Wealth Advisory Full Spectrum of Debt Capital and Treasury Service Offerings Located in Prime Growth Markets Small Business & SBA Middle Market C&I Investment Real Estate Public Finance Sponsor Finance Asset Based Lending
Slide 7: Deposit Growth and Loan Growth by Region and Line of Business
Deposit Growth Annualized Consumer Group (7%) Commercial Group 29% Total Deposits 8% Region and Line of Business Second Quarter Highlights 7 Indianapolis Indianapolis MSA Rank: 10 Deposits: $2.5B Loans: $3.1B Columbus Columbus MSA Rank: 11 Deposits: $766M Loans: $1.3B Northwest Indiana Lake County R
Slide 8: Second Quarter Financial Results
Second Quarter Financial Results 8 48.91% Efficiency Ratio Pre-Tax, Pre-Provision (PTPP) Earnings totaled $65.9, an increase of $7.4 million from 1Q21 6.7% annualized loan growth, over prior quarter excluding PPP loans Non-interest income increased $6.8 million over prior quarter; including
Slide 9: 2021 Year-to-Date Financial Results
2021 Year-to-Date Financial Results 9 2021 Year-to-Date Highlights 49.54 Efficiency Ratio Pre-Tax, Pre-Provision (PTPP) earnings totaled $124.3 million, an increase of $7.4 million over prior year Net income, excluding the impact of PPP loans, increased $26.9 million over prior year Tangible
Slide 10: Investment Portfolio Highlights
Net unrealized Gain of $131.7 million Investment Portfolio Highlights 10 2Q21 Investment Portfolio Composition Yield on Investments (%) / Total Investments ($B) $4.1B Total Investment Portfolio GainsHighlights Realized Gains 2Q 2020 $3.1 million 3Q 2020 $1.8 million 4Q 2020 $2.4 million 1Q
Slide 11: Loan Portfolio Highlights
Commercial & Industrial 29.2% Commercial Real Estate Owner-Occupied 10.4% Commercial Real Estate Non-Owner Occupied 24.8% Construction Land & Land Development 5.4% Agricultural Land & Production 2.6% Public Finance/Other Commercial 8.3% Residential Mortgage 12.5% Home Equity 5.4% Other Consumer 1.4%
Slide 12: Allowance for Credit Losses - Loans
$130,648 $204,703 $199,775 $74,055 $0 $4,928 $9,000 $59,000 $109,000 $159,000 $209,000 ALLL 12/31/2020 Day 1 CECL Adjustment ACL - Loans 1/1/2021 Net Charge- offs Provision Expense ACL - Loans 6/30/2021 Increase Decrease Allowance for Credit Losses - Loans 12 2Q21 Allowance for Credit Losses - Loans
Slide 13: Deposit Portfolio Highlights
Demand Deposits 60% Savings Deposits 34% Certificates & Time Deposits > $100k 2% Certificates & Time Deposits < $100k 3% Brokered Deposits 1% 13 2Q21 Deposit Composition Highlights $12.2B Total 1Defined as total deposits less time deposits > $100k vs. Prior Periods Cost of Total Deposits (%) / Total
Slide 14: Net Interest Margin
Net Interest Margin 14 $105.1$97.1 $97.3 $105.1 $107.0$97.8 2Q20 3Q20 4Q20 1Q21 2Q21 1. Net Interest Income - FTE ($millions) 97.1$ 97.3$ 107.0$ 105.1$ 109.2$ 2. Fair Value Accretion 3.7$ 3.3$ 3.0$ 1.8$ 2.5$ 3. PPP Loan Income 4.7$ 6.1$ 11.6$ 9.2$ 9.7$ 4. Tax Equivalent Yield on Earning Assets 3.72%
Slide 15: Non-Interest Income Highlights
15 2Q21 Non-Interest Income Detail ($M) $30.9M Total Non-Interest Income Trends ($M) Fee Income / Revenue Non-Interest Income Highlights Highlights 87% in Customer-related fees totaling $26.9 million for 2Q21 • Increased $6.2 million over 1Q21 driven by a $4.3 million increase in gains on the sale
Slide 16: Non-Interest Expense Highlights
Salary & Benefits $42.4 61% Premises & Equipment $10.5 15% Outside Data Processing $4.7 7% Professional & Other Outside Services $3.0 4% Intangible Asset Amortization $1.5 2%Marketing $1.1 2% FDIC Expense $1.4 2% Other $4.7 7% 16 2Q21 Non-Interest Expense Detail $69.3M Total Non-Interest Expense Tre
Slide 17: Capital Ratios
17 Tangible Common Equity Ratio Common Equity Tier 1 Ratio Total Risk-Based Capital Ratio Capital Ratios 9.31% 9.31% 9.57% 9.31% 9.31% 11.84% 12.02% 12.02% 11.99% 11.94% 2Q20 3Q20 4Q20 1Q21 2Q21 CET 1 Ratio Target CET1 Ratio (10.00%) 14.18% 14.38% 14.36% 14.33% 14.23% 2Q20 3Q20 4Q20 1Q21 2Q21 TRBC R
Slide 18: Loan Portfolio
19.4% 9.5% 7.4% 6.8% 6.3% 6.2% 4.8% 4.8% 4.7% 4.2% Manufacturing Wholesale Trade Retail Trade Admin Services Prof. Service Investment CRE Specialty Trade Finance & Insur. Construction Medical Total loans grew $143 million excluding PPP • $ 30 million Sponsor Finance • $ 85 million CRE Non-Owner Oc
Slide 19: Asset Quality
$19.4 $15.0 $2.7 $2.0 3 3 2 2 Hotel Entertainment Investment RE Manuf & Other $ in Deferral # in Deferral Asset Quality 19 Asset Quality Trends ($M) Highlights vs. Prior Quarter vs. 2Q20 Non-accrual loans decreased $.3 million NPAs + 90PD decreased $1.3 million, remained at 65 basis points of lo
Slide 20: Non-Performing Assets
$1.3 million net reduction in NPAs + 90 PD $5.4 million in new non-accruals • Mainly from three commercial real estate loans Top Three Nonaccrual Names total $36.2 million $1.7 million of gross charge-offs in 2Q21 with recoveries of $.4 million Non-Performing Assets 20 Highlights 2nd Quarter
Slide 21: Track Record of Shareholder Value
Track Record of Shareholder Value 21 10-Year Total Return (6/30/11 – 6/30/21) Earnings per Share Tangible Book Value per Share Dividends per Share CAGR 2010-2020: 19.0% CAGR 2010-2020: 10.2% CAGR 2010-2020: 38.5% $0.48 $0.34 $1.41 $1.41 $1.65 $1.72 $1.98 $2.12 $3.22 $3.19 $2.74 $1.94 $9.21 $9.64 $10
Slide 22: History of Organic and Whole Bank Acquisition Growth
$1.6 $1.8 $2.7 $3.1 $3.2 $3.2 $3.6 $3.8 $4.8 $4.5 $4.2 $4.2 $4.3 $5.4 $5.8 $6.8 $7.2 $9.4 $9.9 $12.5 $14.1 $14.6 $14.9 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 1Q21 2Q21 History of Organic and Whole Bank Acquisition Growth 22 Total Asse
Slide 23: Vision for the Future
Vision for the Future 23 People: Enhance our culture through the power of collaboration, accountability and effective teams Source, recruit, onboard and engage a diverse and inclusive workforce with a commitment to career pathing and market level compensation Communicate our Corporate Social R
Slide 24: Appendix
APPENDIX First Merchants Corporation
Slide 25: Non-GAAP
Non-GAAP 25 1 Includes net unrealized gains or losses on securities available for sale, net gains or losses on cash flow hedges, and amounts resulting from the application of the applicable accounting guidance for defined benefit and other postretirement plans. CAPITAL RATIOS (dollars in thousands):
Slide 26: Non-GAAP
Non-GAAP 26 TANGIBLE COMMON EQUITY RATIO (dollars in thousands): 2Q20 3Q20 4Q20 1Q21 2Q21 Tangible Common Equity Ratio (dollars in thousands) Total Stockholders' Equity (GAAP) 1,809,095$ 1,833,656$ 1,875,645$ 1,805,856$ 1,871,800$ Less: Preferred Stock (125) (125) (125) (125) (125) Less: Intangible
Slide 27: Non-GAAP
Non-GAAP 27 RETURN ON TANGIBLE COMMON EQUITY (dollars in thousands): 2Q21 YTD 2Q21 Return on Tangible Common Equity Total Average Stockholders' Equity (GAAP) 1,843,250$ 1,846,037$ Less: Average Preferred Stock (125) (125) Less: Average Intangible Assets, Net of Tax (567,795) (569,107) Average Tangib