First Merchants Corporation · NASDAQ:FRME
First Merchants — Q2 2019 Earnings Presentation
32 slides from First Merchants's earnings presentation, Jul 25, 2019
Slide 1: 2nd Quarter Earnings Highlights July 25, 2019
2nd Quarter Earnings Highlights July 25, 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 Chief Executive Officer
Michael C. Rechin President Chief Executive Officer
Slide 4: 2nd Quarter 2019 Highlights
2nd Quarter 2019 Highlights Earnings Per Share of $ .83, a 3.8% Increase over 2Q2018 $41.1 Million of Net Income, a 3.6% Increase over 2Q2018 Total Assets of $10.7 Billion; Grew by 10.3% over 2Q2018 Annualized Organic Loan & Deposit Growth of 11.8% and 13.5%, respectively High Performance Measures 1
Slide 5: Mark K. Hardwick, EVP, CFO and COO
Mark K. Hardwick Executive Vice President Chief Financial Officer and Chief Operating Officer
Slide 6: Total Assets
Total Assets ($ in Millions) 2017 2018 Q1-’19 Q2-’19 1. Investments $1,561 $1,633 $1,863 $ 2,093 2. Loans 6,758 7,229 7,303 7,517 3. Allowance (75) (81) (81) (81) 4. Goodwill & Intangibles 477 470 468 467 5. BOLI 224 225 226 226 6. Other 422 409 432 516 7. Total Assets $9,367 $9,885 $10,211 $10,738
Slide 7: Loan Yield and Detail (as of June 30, 2019)
Loan Yield and Detail (as of June 30, 2019) QTD Yield = 5.32% Commercial Agricultural YTD Yield = 5.31% Construction Land & Agricultural Real Estate Land Public Land Development Production Total Loans = $7.5 Billion Non-Owner 3.1% Finance/Other 8.3% 1.1% Occupied Commercial 24.8% 6.1% Variable = $5.
Slide 8: Investment Portfolio (as of June 30, 2019)
Investment Portfolio (as of June 30, 2019) Tax-Exempt Municipals Mortgage-Backed 47% Securities 29% $2.1 Billion Portfolio Modified duration of 4.9 years Tax equivalent yield of 3.35% Net unrealized gain of $55.5 Million Collateralized Mortgage Corporate U. S. Obligations Obligations Agencies 20% 1%
Slide 9: Total Liabilities and Capital
Total Liabilities and Capital ($ in Millions) 2017 2018 Q1-’19 Q2-’19 1. Customer Non-Maturity Deposits $5,741 $6,268 $6,439 $ 6,668 2. Customer Time Deposits 1,051 1,241 1,375 1,450 3. Brokered Deposits 381 246 234 201 Total Deposits 7,173 7,755 8,048 8,319 4. Borrowings 701 538 481 659 5. Other Li
Slide 10: Deposit Detail (as of June 30, 2019)
Deposit Detail (as of June 30, 2019) QTD Cost = 1.32% Certificates & YTD Cost = 1.26% Time Deposits Certificates & >$100,000 Time Deposits Total = $8.3 Billion Savings 9% <$100,000 Deposits 9% Brokered 28% Deposits 2% Demand Deposits 52% 10
Slide 11: Retail Checking Account Migration
Retail Checking Account Migration Retail Demand and Interest Checking Account Trend $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $- 6/30/17 9/30/17 12/31/17 3/31/18 6/30/18 9/30/18 12/31/18 3/31/19 6/30/19 Demand Deposits Interest Checking Migrated approximately 150,000 accounts with $1
Slide 12: Capital Ratios
Capital Ratios Total Risk-Based Capital Ratio (Target = 12.50%) Common Equity Tier 1 Capital Ratio (Target = 10.00%) Tangible Common Equity Ratio (TCE) (Target = 9.00%) 15.00% 14.71% 14.61% 14.56% 14.25% 14.01% 13.76% 13.81% 14.00% 13.69% 13.69% 13.00% 12.12% 11.98% 12.05% 12.00% 11.64% 11.21% 11.11
Slide 13: Net Interest Margin
Net Interest Margin Q2 - '17 Q3 - '17 Q4 - '17 Q1 - '18 Q2 - '18 Q3 - '18 Q4 - '18 Q1 - '19 Q2 - '19 Net Interest Income - FTE ($millions) $ 67.2 $ 78.9 $ 83.5 $ 82.5 $ 87.2 $ 89.2 $ 90.7 $ 87.8 $ 88.4 Fair Value Accretion $ 2.3 $ 3.2 $ 4.1 $ 3.2 $ 3.8 $ 3.2 $ 3.9 $ 2.3 $ 2.2 Tax Equivalent Yield on
Slide 14: Non-Interest Income
Non-Interest Income ($ in Millions) 2017 2018 Q1-’19 Q2-’19 1. Service Charges on Deposit Accounts $ 18.7 $ 21.0 $ 5.1 $ 5.4 2. Wealth Management Fees 14.7 14.9 3.8 3.9 3. Card Payment Fees 16.1 18.0 4.8 4.9 4. Gains on Sales of Mortgage Loans 7.6 7.0 1.3 1.7 5. Derivative Hedge Fees 2.0 2.5 0.8 1.5
Slide 15: Non-Interest Expense
Non-Interest Expense ($ in Millions) 2017 2018 Q1-’19 Q2-’19 1. Salary & Benefits $119.8 $131.7 $ 33.0 $32.7 2. Premises & Equipment 30.1 32.7 8.7 8.6 3. Intangible Asset Amortization 5.6 6.7 1.5 1.5 4. Professional & Other Outside Services 12.8 8.2 1.9 2.4 5. OREO/Credit-Related Expense 1.9 1.5 1.2
Slide 16: Earnings
Earnings ($ in Millions) 2017 2018 Q1-’19 Q2-’19 1. Net Interest Income $ 277.3 $ 338.8 $ 84.9 $85.3 2. Provision for Loan Losses (9.1) (7.2) (1.2) (0.5) 3. Net Interest Income after Provision 268.2 331.6 83.7 84.8 4. Non-Interest Income 71.0 76.5 18.7 21.6 5. Non-Interest Expense (205.6) (220.0) (5
Slide 17: 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 – – $ 1 .61 2. Dividends $ .22 $ .26 – – $ .48 3. Tangi
Slide 18: Dividends and Tangible Book Value
Dividends and Tangible Book Value Quarterly Dividends Tangible Book Value .26 0.26 0.24 .22 $21.01 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 $9.64 0.10 .08 0.08 0.06 .05 0.04 .03 0.02 .01 0.00 2.74% Forward Dividend Yield Compound Annual Gro
Slide 19: John J. Martin, Executive Vice President, Chief Credit Officer
John J. Martin Executive Vice President Chief Credit Officer
Slide 20: Loan Portfolio Trends
Loan Portfolio Trends Change Linked Quarter ($ in Millions) 2017 2018 Q1-'19 Q2-'19 $ % 1. Commercial & Industrial $ 1,494 $ 1,727 $ 1,789 $ 1,877 $ 88 4.9% 2. CRE Owner Occupied 700 725 714 726 12 1.7% 3. Construction, Land and 612 546 542 625 83 15.3% Land Development 4. CRE Non-Owner Occupied 1,6
Slide 21: Asset Quality Summary
Asset Quality Summary Change ($ in Millions) Linked Quarter 186.12017 2018 Q1-'19 Q2-'19 $ % 1. Non-Accrual Loans $ 28.7 $ 26.1 $ 28.0 $ 25.6 $ (2.4) (8.6%) 2. Other Real Estate 10.4 2.2 1.9 1.1 (0.8) (42.1%) 3. Renegotiated Loans 1.0 1.1 0.7 0.7 - 0.0% 4. 90+ Days Delinquent Loans 0.9 1.9 0.1 0.2 0
Slide 22: Non-Performing Asset Reconciliation
Non-Performing Asset Reconciliation ($ in Millions) Q3-'18 Q4-'18 Q1-'19 Q2-'19 1. Beginning Balance NPAs & 90+ Days Delinquent $ 29.9 $ 30.3 $ 31.3 $ 30.7 Non-Accrual 2. Add: New Non-Accruals 4.6 12.1 5.2 1.6 3. Less: To Accrual/Payoff/Renegotiated (2.5) (5.4) (1.2) (2.5) 4. Less: To OREO (0.1) (0.
Slide 23: ALLL and Fair Value Summary
ALLL and Fair Value Summary ($ in Millions) Q3-'18 Q4-'18 Q1-'19 Q2-'19 1. Beginning Allowance for Loan Losses (ALLL) $ 77.5 $ 78.4 $ 80.6 $ 80.9 2. Less: Net Charge-offs (Recoveries) 0.5 (0.5) 0.9 0.1 3. Add: Provision Expense 1.4 1.7 1.2 0.5 4. Ending Allowance for Loan Losses (ALLL) $ 78.4 $ 80.6
Slide 24: Portfolio Summary
Portfolio Summary 2nd quarter loans increased 3%, or 12% annualized led by growth in Construction and C&I loans. Non-Accrual loans and ORE decreased $2.4 and $.8 million this quarter. Asset Quality remained healthy with NPAs & 90+ days at .4% of loans. Net charge-offs were $.1 million with gross cha
Slide 25: Michael C. Rechin, President and Chief Executive Officer
Michael C. Rechin President Chief Executive Officer
Slide 26: Strategy and Tactics Overview
Strategy and Tactics Overview Looking Forward… Continue organic growth protocol. Manage market presence, core banking business margin and fee generation. Optimize our retail and commercial deposit strategy . . . products and pricing Leverage balance sheet muscle . . . Liquidity, Capital, Credit Impl
Slide 27: 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 27
Slide 28: Appendix
Appendix f First Merchants Corporation
Slide 29: Appendix – Non-GAAP Reconciliation
Appendix – Non-GAAP Reconciliation 29
Slide 30: Appendix – Non-GAAP Reconciliation
Appendix – Non-GAAP Reconciliation 30
Slide 31: Appendix – Non-GAAP Reconciliation
Appendix – Non-GAAP Reconciliation 31
Slide 32: Appendix – Non-GAAP Reconciliation
Appendix – Non-GAPP Reconciliation 32