First Merchants Corporation · NASDAQ:FRME
First Merchants — Q1 2022 Earnings Presentation
27 slides from First Merchants's earnings presentation, Apr 26, 2022
Slide 1: Investor Update First Quarter 2022
INVESTOR UPDATE First Quarter 2022
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 3/31/2022 $15.5 Billion $9.4 Billion $12.9 Billion $6.6 Billion Assets Under Advisement* Total Assets Total Loans Total Deposits TCE/TA: YTD Return on TCE YTD ROAA: Dividend Yield: Price / Tangible Book: Price / LTM EPS: 1.26% 8.3
Slide 5: First Quarter Highlights
First Quarter Highlights 5 ▪ Stated EPS of $0.91 is same as Q1 2021 EPS of $0.91. Excluding Paycheck Protection Program (“PPP”) income, current quarter EPS was $0.88 and Q1 2021 EPS was $0.781 ▪ 5.4% annualized deposit growth ▪ Legal close of the acquisition of Level One Bancorp in Farmington Hills,
Slide 6: Business Strategy
Business Strategy 6 Consumer BankingCommercial Banking Private Wealth Advisors 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 Syndications Tr
Slide 7: Business Highlights and Deposit Growth by Market
▪ Strong C&I growth continued at over 10% annualized ▪ C&I demand remains strong with line utilization continuing to increase ▪ Commercial growth rate offset by IRE payoffs of $40 million during the quarter ▪ Portfolio mortgage growth driven by construction products and variable pricing structures ▪
Slide 8: First Quarter Financial Results
First Quarter Financial Results 8 ▪ 52.79% Efficiency Ratio ▪ Net interest income, excluding the impact of PPP loan income and fair value accretion, increased $3.2 million over prior quarter and $10.1 million over 1Q 2021 ▪ PPP fee income totaled $1.7 million, a decrease of $1.7 million from prior q
Slide 9: Investment Portfolio Highlights
Municipal Bonds 57% Mortgage- Backed Securities 26% Collateralized Mortgage Obligations 6% U.S. Agencies 10% Corporate Obligations 1% ▪ Net unrealized AFS Loss of $101.3 million Investment Portfolio Highlights 9 1Q22 Investment Portfolio Composition Yield on Investments (%) / Total Investments ($B)
Slide 10: Loan Portfolio Highlights
Loan Portfolio Highlights 10 1Q22 Loan Composition Yield on Loans (%) / Total Loans ($B) $9.4B Total 1Q22 Portfolio by Yield Type Highlights Total loan rate mix as of 1Q22 • $6.4 billion variable rate • $3.0 billion fixed rate ▪ Portfolio composition remains ~80% Commercial oriented • Composition mo
Slide 11: Allowance for Credit Losses - Loans
Allowance for Credit Losses - Loans 11 1Q22 Allowance for Credit Losses - Loans Change in ACL – Loans1 Highlights ▪ Allowance to Loans, excluding PPP loans, is 2.10% ▪ The reserve for unfunded commitments was unchanged at $20.5 million, and recorded in Other Liabilities ▪ Remaining fair value adjust
Slide 12: Deposit Composition Highlights
12 1Q22 Deposit Composition Highlights $12.9B Total 1Defined as total deposits less time deposits > $100k vs. Prior Periods Cost of Total Deposits (%) / Total Deposits ($B) Deposit Portfolio Highlights ▪ Strong core deposit base • 98% core deposits1 • 21% non-interest bearing • ~56% yield 5 bps or l
Slide 13: Net Interest Margin
Net Interest Margin 13 $105.1$97.1 $97.3 $105.1 $107.0$97.8 $107.0 $97.3 $105.1 $110.0$109.2 $107.0 $105.1 $109.2 $110.0 $106.9 $105.1 $109.2 $110.0 $106.9 $108.0 3.23% 3.22% 3.20% 3.04% 3.03% 1Q21 2Q21 3Q21 4Q21 1Q22 Net Interest Income - FTE ($millions) Net Interest Margin 1Q21 2Q21 3Q21 4Q21 1Q22
Slide 14: Non-Interest Income Detail
14 1Q22 Non-Interest Income Detail ($M) $25.9M Total Non-Interest Income Trends ($M) Fee Income / Revenue Non-Interest Income Highlights Highlights ▪ 89% in Customer-related fees totaling $23.0 million for 1Q22, an increase of $0.1 million over 4Q21 driven by service charges, wealth management fees
Slide 15: Non-Interest Expense Detail
15 1Q22 Non-Interest Expense Detail $72.3M Total Non-Interest Expense Trends ($M) Efficiency Ratio Non-Interest Expense Highlights Highlights ▪ 1Q22 expense levels were consistent with 4Q21 decreasing $0.1 million Salary & Benefits $42.5 59% Premises & Equipment $11.3 16% Outside Data Processing $4.
Slide 16: Capital Ratios
16 Tangible Common Equity Ratio Common Equity Tier 1 Ratio Total Risk-Based Capital Ratio Capital Ratios 9.31% 9.31% 9.57% 9.31% 9.31% 9.65%9.57%9.31% 9.57% 9.65% 9.04%8.78% 8.78% 9.04% 8.94 9.01% 8.31% 1Q21 2Q21 3Q21 4Q21 1Q22 TCE Ratio Target TCE (9.00%) 11.99% 11.94% 11.75% 11.68% 11.63% 1Q21 2Q2
Slide 17: Loan Portfolio
19.1% 9.5% 9.3% 8.3% 7.1% 6.5% 6.2% 4.9% 3.6% 3.6% Manufacturing Wholesale Trade Investment CRE Admin Services Retail Trade Finance/Insur. Prof. Services Construction Transp./Warehouse Specialty Trade Loan Portfolio 17 Highlights Geography / C&I Top Industries Loan Portfolio Trends ($M) ▪ Diversifie
Slide 18: Asset Quality
Asset Quality 18 Asset Quality Trends ($M) Highlights vs. Prior Quarter vs. Prior Year Favorable Asset Quality Position ▪ Continued reduction in non-accrual loans ▪ $5.8 million ORE from performing Multi-family Housing project. Loss not expected. ▪ Classified loans continue favorable trend, decreasi
Slide 19: Non-Performing Assets
Non-Performing Assets 19 Non-Performing Assets Roll Forward ($M) Highlights ▪ Recoveries of $1.1 million offset by gross charge-offs of $0.5 million ▪ $5.8 million performing property moved to ORE ▪ $6.3 million increase in NPAs + 90 PD 1Q22 ▪ Top three non-accrual relationships total $22.5 million
Slide 20: Track Record of Shareholder Value
398.9% 192.2% FRME SNL U.S. Bank Track Record of Shareholder Value 20 10-Year Total Return (2011-2021) Earnings per Share Tangible Book Value per Share Dividends per Share CAGR 2011-2021: 27.3% CAGR 2011-2021: 10.1% CAGR 2011-2021: 39.7% Return on Tangible Common Equity $0.04 $0.10 $0.18 $0.29 $0.41
Slide 21: 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 $15.5 $15.5 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 1Q22 History of Organic and Whole Bank Acquisition Growth 21 Total Asse
Slide 22: Vision for the Future
Vision for the Future 22 Our Vision: To enhance the financial wellness of the diverse communities we serve. To be the most responsive, knowledgeable, and high-performing bank for our clients, teammates, and shareholders. We are a collection of dynamic colleagues with diverse experiences and perspect
Slide 23: Appendix
APPENDIX First Merchants Corporation
Slide 24: Non-GAAP Capital Ratios
Non-GAAP 24 CAPITAL RATIOS (dollars in thousands): 1Q21 2Q21 3Q21 4Q21 1Q22 Total Risk-Based Capital Ratio (dollars in thousands) Total Stockholders' Equity (GAAP) 1,805,856 1,871,800 1,868,090 1,912,571 1,807,633 Adjust for Accumulated Other Comprehensive (Income) Loss 1 (35,810) (60,080) (39,889)
Slide 25: Non-GAAP Tangible Common Equity Ratio
Non-GAAP 25 TANGIBLE COMMON EQUITY RATIO (dollars in thousands): 1Q21 2Q21 3Q21 4Q21 1Q22 Tangible Common Equity Ratio (dollars in thousands) Total Stockholders' Equity (GAAP) 1,805,856$ 1,871,800$ 1,868,090$ 1,912,571$ 1,807,633$ Less: Preferred Stock (125) (125) (125) (125) (125) Less: Intangible
Slide 26: Non-GAAP Efficiency Ratio
Non-GAAP 26 EFFICIENCY RATIO (dollars in thousands): 1Q21 2Q21 3Q21 4Q21 1Q22 EFFICIENCY RATIO (dollars in thousands): Non Interest Expense (GAAP) 66,098$ 69,295$ 71,384$ 72,436$ 72,325$ Less: Intangible Asset Amortization (1,357) (1,464) (1,463) (1,463) (1,366) Less: OREO and Foreclosure Expenses (
Slide 27: Non-GAAP Return on Tangible Common Equity
Non-GAAP 27 RETURN ON TANGIBLE COMMON EQUITY (dollars in thousands): 2011 2012 2013 2014 2015 2016 2017 2018 Return on Tangible Common Equity Total Average Stockholders' Equity (GAAP) 478,440$ 535,506$ 540,255$ 675,295$ 753,724$ 884,664$ 1,110,524$ 1,343,861$ Less: Average Preferred Stock (74,181) (