Slide 1: 1st Quarter 2011 Earnings Call
1 st Quarter 2011 Earnings Call April 28, 2011
Slide 2: Michael C. Rechin, President and Chief Executive Officer
Michael C. Rechin President and Chief Executive Officer
Slide 3: Forward-Looking Statement
Forward-Looking Statement The Corporation may make forward-looking statements about its relative business outlook. These forward-looking statements and all other statements made during this meeting that do not concern historical facts are subject to risks and uncertainties that may materially affect
Slide 4: 1st Quarter 2011 Highlights
1st Quarter 2011 Highlights § First quarter earnings of $4.5M, or $.17 per common share § Core business profitability solidifying through: § Margin expansion § Expense level management § Improvement in asset quality continues § Loan loss reserve ample for projected future losses at 2.93% of total lo
Slide 5: Mark K. Hardwick, Executive Vice President and Chief Financial Officer
Mark K. Hardwick Executive Vice President and Chief Financial Officer
Slide 6: Total Assets
2009 2010 Q1-’10 Q1-’11 1. Investments $ 563 $ 827 $ 639 $ 886 2. Loans 3,278 2,857 3,138 2,766 3. Allowance (92) (83) (89) (81) 4. CD&I & Goodwill 159 154 158 153 5. BOLI 95 97 95 102 6. Other 478 319 435 291 7. Total Assets $4,481 $4,171 $4,376 $4,117 ($ in Millions) TOTAL ASSETS
Slide 7: Loan Composition (as of 3/31/11)
Loan Composition (as of 3/31/11 ) YTD Yield = 5.56% Total = $2.8B LOAN AND CREDIT DETAIL
Slide 8: Collateralized Mortgage Obligations
Collateralized Mortgage Obligations § $886 Million Balance § Average duration - 4.6 years § Tax equivalent yield of 4.14% § Net unrealized gain of $8.1 million
Slide 9: Total Liabilities and Capital
2009 2010 Q1-’10 Q1-’11 1. Customer Non-Maturity Deposits $2,042 $2,127 $2,000 $2,083 2. Customer Time Deposits 1,220 996 1,167 943 3. Brokered Deposits 275 146 231 126 4. Borrowings 339 277 320 305 5. Other Liabilities 30 28 58 56 6. Hybrid Capital 111 142 111 142 7. Preferred Stock (CPP) 112 68 11
Slide 10: Deposits (as of 3/31/11)
First Merchants BANKING. INSURANCE, TRUST, | WWWIIRSTMERCHANTS.COM DEPOSITS (as of 3/31/11) Brokered Deposits, 4% Demand Deposits, 42% Certificates & Time Deposits of <$100,000, 20% Certificates & Time Deposits of Savings Deposits, >$100,000, 24% 10% THE STRENGTH OF BIG. THE SERVICE OF SMALL.
Slide 11: Capital Ratios
2009 2010 Q1-’10 Q1-’11 1. Total Risk-Based Capital Ratio 13.04% 15.74% 14.44% 15.66% 2. Tier 1 Risk-Based Capital Ratio 10.32% 12.82% 11.65% 13.05% 3. Leverage Ratio 8.20% 9.50% 9.13% 9.80% 4. Tier 1 Common Risk- Based Capital Ratio 5.40% 7.64% 6.42% 7.75% 5. TCE/TCA 4.54% 5.86% 5.27% 6.16% CAPITAL
Slide 12: Net Interest Margin
NET INTEREST MARGIN Q1-’09 Q2-’09 Q3-’09 Q4-’09 Q1-’10 Q2-’10 Q3-’10 Q4-’10 Q1-’11 Net Interest Income-FTE ($millions) $ 39.6 $ 39.8 $ 40.5 $39.2 $37.8 $37.7 $37.2 $36.7 $36.9 Tax Equivalent Yield on Earning Assets 5.69% 5.52% 5.56% 5.48% 5.39% 5.38% 5.38% 5.13% 5.11% Cost of Supporting Liabilities
Slide 13: Non-Interest Income
2009 2010 Q1-’10 Q1-’11 1. Service Charges on Deposit Accounts $15.1 $13.3 $ 3.3 $ 2.8 2. Trust Fees 7.4 7.7 2.1 2.0 3. Insurance Commission Income 6.4 6.2 2.0 1.9 4. Electronic Card Fees 4.9 6.1 1.7 1.5 5. Cash Surrender Value of Life Ins 1.6 2.1 0.5 0.6 6. Gains on Sales Mortgage Loans 6.8 6.8 1.1
Slide 14: Non-Interest Expense
NON-INTEREST EXPENSE 2009 2010 Q1-’10 Q1-’11 1. Salary & Benefits $76.3 $73.3 $17.6 $17.2 2. Premises & Equipment 17.9 17.2 4.7 4.5 3. Core Deposit Intangible 5.1 4.7 1.2 1.1 4. Professional Services 1.3 1.4 0.5 0.6 5. OREO/Credit-Related Expense 12.9 14.6 3.7 3.2 6. FDIC Expense 10.4 8.1 1.7 2.1 7.
Slide 15: Earnings
2009 2010 Q1-’10 Q1-’11 1. Net Interest Income-FTE $159.1 $149.4 $ 37.8 $36.9 2. Non Interest Income 1 46.5 46.6 11.7 11.8 3. Non Interest Expense 2 (134.7) (127.7) (31.0) (30.7) 4. Pre-Tax Pre-Provision Earnings $ 70.9 $68.3 $18.5 $18.0 5. Provision (122.2) (46.5) (13.9) (5.6) 6. Adjustments (12.1)
Slide 16: John J. Martin, Senior Vice President and Chief Credit Officer
John J. Martin Senior Vice President and Chief Credit Officer
Slide 17: Portfolio Overview: 1st Quarter Highlights
§ Non-performing assets plus 90+ days delinquent declined $12.3 million to $107.6 million, decreasing for the third consecutive quarter. § New non-accrual loans were $11.7 million, down from $27.4 million in the 4th Quarter 2010. § 30-89 day delinquent loans declined from $30.0 million at 12/31/10 t
Slide 18: Non-Accrual Trend
12/31/09 03/31/10 06/30/10 09/30/10 12/31/10 03/31/11 NON-ACCRUAL LOANS BY CATEGORY % $ (in millions) Commercial & Industrial 5.16% 3.68% 3.55% 3.19% 1.75% 1.55% $ 8.8 Land and Lot 12.60% 10.25% 8.91% 6.25% 16.10% 14.76% 15.3 Commercial Mortgage 3.18% 4.65% 4.74% 4.22% 3.69% 3.66% 43.9 Agriculture P
Slide 19: New Non-Accrual Loans Over $500,000
Industry: ($ in millions) § Commercial Rental Property $ 1.1 § 1-4 Family Residential Rental Property 0.9 § 1-4 Family Residential Rental Property 0.7 § Commercial Real Estate (Retail) 0.7 § Investments 0.6 § Commercial Real Estate (Retail Strip Center) 0.6 § Engineering 0.6 § Builder 0.6 § Resident
Slide 20: Other Real Estate Owned
Commercial Real Estate Land & Construction 1-4 Family Total Book Balance $5.2 $7.7 $4.2 $17.1 % ORE 30.7% 45.0% 24.3% 100% OTHER REAL ESTATE OWNED ($ in millions)
Slide 21: Loan Delinquency Trends
LOAN DELINQUENCY TRENDS 90+ Day Delinquency
Slide 22: Loan Charge-Off Trend
12/31/09 03/31/10 06/30/10 09/30/10 12/31/10 03/31/11 NET CHARGE-OFFs BY CATEGORY Commercial & Industrial 5.12% 7.60% 4.65% 3.22% 2.69% 0.30% Land and Lot 9.03% 0.19% 5.10% 4.14% 4.27% 9.96% Commercial Mortgage 1.52% 0.92% 1.98% 2.44% 2.18% 1.15% Agriculture Production 0.72% 2.86% 1.18% 1.36% 1.04%
Slide 23: Non-Performing Assets Rollforward
Q2-’10 Q3-’10 Q4-’10 Q1-’11 Beginning Balance NPAs & 90+ Days Delinquent ($ in millions) $ 144.6 $ 146.5 $ 130.8 $ 120.0 Non-Accrual Add: New NPLs $ 27.3 $ 15.5 $ 27.4 $ 11.7 Less: To Accrual/Payoff/Restructured ( 8.3) ( 18.6) ( 14.5) ( 3.2) Less: To OREO ( 4.0) ( 6.7) ( 7.0) ( 2.0) Less: Charge-off
Slide 24: Allowance for Loan and Lease Loss Coverage
Q1-’10 Q2-’10 Q3-’10 Q4-’10 Q1-’11 1. Allowance for Loan and Lease Losses $88.6 $87.0 $83.7 $83.0 $80.9 2. Non-Accrual Loans $122.9 $120.2 $98.6 $90.6 $87.7 3. ALLL % of Non-Accrual Loans 72.1% 72.4% 84.9% 91.6% 92.3% 4. Impaired Loans $157.4 $150.6 $125.7 $116.2 $116.8 5. Specific Reserves $21.8 $1
Slide 25: Credit Costs Over Time
—~ )) First Merchants ARNCNRANE. ARG (ARRAN ES CREDIT COSTS OVER TIME $122.2 $22.4 $88.6 $81.6 $83.0 $80.9 $55.6 546.5} $174 gy, $76 gs 6 2009 2010 Q1-2010 1-201 mNet Charge-Offs Provision Expense mAllowance for Loan Losses THE STI THE SE ‘TH OF BIG. CE OF SMALL.
Slide 26: Michael C. Rechin, President and Chief Executive Officer
Michael C. Rechin President and Chief Executive Officer
Slide 27: Overview of 2011 Strategy and Tactics
Overview of 2011 Strategy and Tactics “Strengthen and Grow” § Implement systems and processes to standardize and accelerate small business opportunities. § Realize investment in online banking § Preserve margin while intensifying revenue activity using market coverage tactics. § Continue to improve
Slide 28: Contact Information
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