Slide 1: First Merchants Corporation 2nd Quarter 2012 Earnings Call
First Merchants Corporation 2 nd Quarter 2012 Earnings Call July 26, 2012
Slide 2: Michael C. Rechin, President and Chief Executive Officer
Michael C. Rechin President and Chief Executive Officer
Slide 3: Forward-looking statements
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 actual results. Specific
Slide 4: Second quarter highlights
§ EPS § $.28 2 nd Quarter EPS (56% year-over-year growth) § $.74 YTD EPS (111% year-over-year growth) § Quarterly Dividend increased from $.01 to $.03 § Core Revenue Growth § $52.1M 2 nd Qtr Revenue (10% YOY growth) § $39.5M 2 nd Qtr Net Interest Income (6% YOY growth) § $12.7M 2 nd Qtr Non-Interest
Slide 5: Mark K. Hardwick, Executive Vice President and Chief Financial Officer
Mark K. Hardwick Executive Vice President and Chief Financial Officer
Slide 6: Assets
2011 Q1-’12 Q2-’12 1. Investments $ 827 $ 946 $ 960 $ 944 2. Loans Held for Sale 21 18 22 15 3. Loans 2,836 2,713 2,793 2,798 4. Allowance (83) (71) (70) (70) 5. CD&I & Goodwill 154 150 150 150 6. BOLI 97 124 123 124 7. Other 319 293 258 271 8. Total Assets $4,171 $4,173 $4,236 $4,232 ($ in Millions
Slide 7: Loan portfolio yield as of 06/30/2012
(as of 06/30/2012 ) QTD Yield = 5.22% YTD Yield = 5.19% Total = $2.8B
Slide 8: Investment portfolio as of 06/30/2012
(as of 06/30/2012) § $944 Million Balance § Average duration - 3.8 years § Tax equivalent yield of 3.79% § Net unrealized gain of $32.4 million
Slide 9: Liabilities and capital
2011 Q1-’12 Q2-’12 1. Customer Non-Maturity Deposits $2,127 $2,196 $2,273 $2,343 2. Customer Time Deposits 996 816 836 808 3. Brokered Deposits 146 123 170 138 4. Borrowings 277 378 287 263 5. Other Liabilities 28 34 31 33 6. Hybrid Capital 142 111 111 111 7. Preferred Stock (CPP) 68 ― ― ― 8. Prefer
Slide 10: Cost of deposits as of 06/30/2012
(as of 06/30/2012) QTD Cost = .60%
Slide 11: Capital ratios
2011 Q1-’12 Q2-’12 1. Total Risk-Based Capital Ratio 15.74% 16.54% 16.39% 16.75% 2. Tier 1 Risk-Based Capital Ratio 12.82% 13.92% 14.14% 14.49% 3. Leverage Ratio 9.50% 10.17% 10.61% 10.73% 4. Tier 1 Common Risk- Based Capital Ratio 7.64% 8.83% 9.20% 9.54% 5. TCE/TCA 5.86% 6.84% 7.07% 7.27%
Slide 12: Net interest income and margin trends
Q2-’10 Q3-’10 Q4-’10 Q1-’11 Q2-’11 Q3-’11 Q4-’11 Q1-’12 Q2-’12 Net Interest Income - FTE ($millions) $ 37.7 $ 37.2 $ 36.7 $ 36.9 $ 37.3 $ 37.3 $ 37.6 $ 37.6 $ 39.5 Tax Equivalent Yield on Earning Assets 5.38% 5.38% 5.13% 5.11% 5.04% 5.01% 4.83% 4.74% 4.75% Cost of Supporting Liabilities 1.48% 1.45%
Slide 13: Non-interest income
2010 2011 Q1-’12 Q2-’12 1. Service Charges on Deposit Accounts $13.3 $12.0 $2.8 $ 2.9 2. Trust Fees 7.7 7.7 2.0 1.9 3. Insurance Commission Income 6.2 5.7 1.7 1.5 4. Electronic Card Fees 6.1 6.5 1.7 2.1 5. Cash Surrender Value of Life Ins 2.1 2.6 1.4 0.7 6. Gains on Sales Mortgage Loans 6.8 7.4 2.0
Slide 14: Non-interest expense
($ in Millions) 2011 Q1-’12 Q2-’12 1. Salary & Benefits $ 73.3 $74.7 $19.4 $19.6 2. Premises & Equipment 17.2 16.9 4.4 4.1 3. Core Deposit Intangible 4.7 3.5 0.5 0.5 4. Professional Services 1.4 2.2 0.7 0.5 5. OREO/Credit-Related Expense 14.6 10.6 2.2 2.1 6. FDIC Expense 8.1 5.5 1.1 0.9 7. Outside D
Slide 15: Earnings summary
2010 2011 Q1-’12 Q2-’12 1. Net Interest Income-FTE $149.4 $149.1 $37.6 $39.5 2. Non Interest Income 1 46.6 47.1 12.8 12.7 3. Non Interest Expense (142.3) (135.9) (34.0) (34.2) 4. Pre-Tax Pre-Provision Earnings $ 53.7 $ 60.3 $16.4 $18.0 5. Provision (46.5) (22.6) (4.9) (4.5) 6. Adjustments 1 1.9 2.0
Slide 16: Actual and core EPS by quarter
2010 Q1 Q2 Q3 Q4 Total 1. Actual $ .01 $ .35 $ .02 $ .10 $ .48 2. Core $ .01 ($ .05) $ .02 $ .10 $ .08 2011 Q1 Q2 Q3 Q4 Total 3. Actual $ .17 $ .18 ($ .25) $ .24 $ .34 4. Core $ .17 $ .18 $ .21 $ .24 $ .80 2012 Q1 Q2 Q3 Q4 Total 5. Actual $ .46 $ .28 - - $ .74 6. Core $ .25 $ .28 - - $ .53 1 Adjuste
Slide 17: John J. Martin, Senior Vice President and Chief Credit Officer
John J. Martin Senior Vice President and Chief Credit Officer
Slide 18: Asset Quality Summary
Asset Quality Summary 2010 2011 Qr12 Q212 1 Non-Accrual Loans $ 906 $ 696 | $ 74.5 $ 63.1 2 Other Real Estate 20.9 16.3 15.6 14.2 3 Renegotiated Loans 7.1 14.3 6.7 3.9 4 90+ Days Delinquent Loans 1.3 0.6 0.2 0.7 5 Specific Reserves 13.9 76 5.9 61 6 Allowance for Loan and Lease Losses 83.0 70.9 70.4
Slide 19: Allowance coverage of non-accruals
§ Allowance coverage of non-accruals increases to 111.1% § Allowance remains strong at 2.49% of total loans § Provision and charge-offs continue to decline
Slide 20: Non-performing asset reconciliation
Non-Performing Asset Reconciliation 1 Beginning Balance NPA's & 90+ Days Delinquent Non-Accrual 2 Add New Non-Accruals 3 Less: To Accrual/Payoff/Renegotiated 4° Less: ToOREO 5 Less: Charge-offs 6 Increase / (Decrease): Non-Accrual Loans Other Real Estate Owned (ORE) 7 Add: New ORE Properties 8 Less:
Slide 21: Core loan portfolio growth and declines
2Q-’11 3Q-’11 4Q-’11 1Q-’12 2Q-’12 $ Δ 1Q to 2Q Core Loan Portfolio 2,724.0 2,712.9 2,713.4 2,793.0 2,797.6 4.6 Held for Sale 4.9 12.3 17.9 22.1 15.3 (6.8) Loan Growth: 2Q-’11 3Q-’11 4Q-’11 1Q-’12 2Q-’12 $ Δ 1Q to 2Q Commercial/Industrial 546.7 525.7 540.0 550.5 567.9 17.4 Ag Production 99.4 106.8 1
Slide 22: Loan portfolio and credit highlights
§ Core loan portfolio growth led by C & I, IRE and Ag production § Renegotiated “A/B” note strategy improving asset quality § Focus on progress of agriculture production portfolio § OREO and other credit related expenses trending lower
Slide 23: Michael C. Rechin, President and Chief Executive Officer
Michael C. Rechin President and Chief Executive Officer
Slide 24: Increasing, growing and investing summary
Increasing Core EPS - $.28, linked qtr 12% and year over year 56% Increasing Tangible Book Value - $297M, year over year 18% Increasing Dividend - $.01 to $.03 Growing Revenue - $52.1M, year over year 10% Growing Loans - $2.8B, year over year 3% Growing Deposits - $3.3B, year over year 5% Growing Ne
Slide 25: Growth and Top-Tier Performance
“Growth and Top-Tier Performance” § Continue to grow revenue by intensifying revenue-generating activity: § sustain market coverage tactics to accelerate Commercial banking opportunities…convert pipeline § bear fruits of new retail checking account packaging § continue to make additional investments
Slide 26: Stock listing and investor contact
§ 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