First Merchants Corporation · NASDAQ:FRME
First Merchants — Q3 2018 Earnings Presentation
33 slides from First Merchants's earnings presentation, Oct 24, 2018
Slide 1: 3rd Quarter Earnings Highlights
3rd Quarter Earnings Highlights October 24, 2018 1
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: Additional Information
Additional Information Communications in this press release do not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any proxy vote or approval. The proposed merger will be submitted to MBT Financial Corporation shareholders for their consideratio
Slide 4: 3rd Quarter 2018 Highlights
3rd Quarter 2018 Highlights $41.1 Million of Net Income, a 68.8% Increase over 3Q2017 Earnings Per Share of $.83, a 66.0% Increase over 3Q2017 Total Assets of $9.8 Billion Grew Organically by 8.2% over 3Q2017 1.69% ROAA; 12.10% ROAE 49.25% Efficiency Ratio Definitive Agreement Announced
Slide 5: Mark K. Hardwick, EVP, CFO and COO
Mark K. Hardwick EXECUTIVE VICE PRESIDENT CHIEF FINANCIAL OFFICER AND CHIEF OPERATING OFFICER 5
Slide 6: Total Assets
Total Assets ($ in Millions) 2016 2017 Q1-’18 Q2-’18 Q3-’18 1. Investments $1,305 $1,561 $1,544 $1,620 $1,625 2. Loans 5,143 6,758 6,906 7,083 7,091 3. Allowance (66) (75) (76) (78) (78) 4. Goodwill & Intangibles 259 477 475 473 471 5. BOLI 202 224 222 223 224 6. Other 369 422 402 414 454 7. Total A
Slide 7: Loan and Yield Detail (as of 9/30/2018)
Loan and Yield Detail (as of 9/30/2018) QTD Yield = 5.25% Agricultural YTD Yield = 5.08% Commercial Construction Land & Agricultural Land Public Total Loans = $7.1 Billion Real Estate Land Development Production 3.4% Finance/Other Non-Owner 1.2% 9.4% Commercial Occupied 5.6% Variable = $4.8 Billion
Slide 8: Investment Portfolio (as of 9/30/2018)
Investment Portfolio (as of 9/30/2018) Mortgage-Backed Securities Tax-Exempt 24% Municipals 48% $1.6 Billion Portfolio Modified duration of 5.9 years Tax equivalent yield of 3.48% Net unrealized loss of $34.6 Million Collateralized Mortgage Obligations Corporate 24% Obligations U. S. Agencie
Slide 9: Total Liabilities and Capital
Total Liabilities and Capital ($ in Millions) 2016 2017 Q1-’18 Q2-’18 Q3-’18 1. Customer Non-Maturity Deposits $4,428 $5,741 $5,850 $6,033 $6,084 2. Customer Time Deposits 747 1,051 1,137 1,158 1,227 3. Brokered Deposits 381 381 341 313 322 4. Borrowings 572 701 644 706 600 5. Other Liabilities 60 5
Slide 10: Deposit Detail (as of 9/30/2018)
Deposit Detail (as of 9/30/2018) QTD Cost = .90% YTD Cost = .79% Total = $7.6 Billion Certificates & Certificates & Time Deposits of Time Deposits of >$100,000 <$100,000 Savings 8% 8% Deposits Brokered 29% Deposits 4% Demand Deposits 51% 10
Slide 11: Capital Ratios
Capital Ratios Total Risk-Based Capital Ratio (Target = 12.50%) Common Equity Tier 1 Capital Ratio (Target = 10.00%) 16.00% Tangible Common Equity Ratio (TCE) (Target = 9.00%) 15.00% 14.18% 14.21% 14.24% 14.25% 14.01% 13.81% 14.00% 13.76% 13.69% 13.69% 13.00% 12.00% 11.64% 11.10% 11.16% 11.11% 11.03
Slide 12: Net Interest Margin
Net Interest Margin Q3 - '16 Q4 - '16 Q1 - '17 Q2 - '17 Q3 - '17 Q4 - '17 Q1 - '18 Q2 - '18 Q3 - '18 Net Interest Income - FTE ($millions) $ 61.1 $ 62.1 $ 64.9 $ 67.2 $ 78.9 $ 83.5 $ 82.5 $ 87.2 $ 89.2 Fair Value Accretion $ 3.8 $ 2.9 $ 4.3 $ 2.3 $ 3.2 $ 4.1 $ 3.2 $ 3.8 $ 3.2 1 2 3 Tax Equivalent Yi
Slide 13: Non-Interest Income
Non-Interest Income ($ in Millions) 2016 2017 Q1-’18 Q2-’18 Q3-’18 1. Service Charges on Deposit Accounts $17.8 $ 18.7 $ 4.8 $ 5.0 $ 5.6 2. Wealth Management Fees 12.6 14.7 3.8 3.6 3.7 3. Card Payment Fees 15.0 16.1 4.6 4.5 4.6 4. Cash Surrender Value of Life Ins 4.3 6.6 1.2 1.0 1.0 5. Gains on Sale
Slide 14: Non-Interest Expense
Non-Interest Expense ($ in Millions) 2016 2017 Q1-’18 Q2-’18 Q3-’18 1. Salary & Benefits $102.6 $119.8 $ 32.2 $ 32.2 $32.9 2. Premises & Equipment 29.5 30.1 8.4 7.9 8.1 3. Intangible Asset Amortization 3.9 5.6 1.7 1.7 1.7 4. Professional & Other Outside Services 6.5 12.8 1.5 1.8 1.8 5. OREO/Credit-R
Slide 15: Earnings
Earnings ($ in Millions) 2016 2017 Q1-’18 Q2-’18 Q3-’18 1. Net Interest Income $226.5 $ 277.3 $ 79.9 $ 84.6 $86.5 2. Provision for Loan Losses (5.7) (9.1) (2.5) (1.7) (1.4) 3. Net Interest Income after Provision 220.8 268.2 77.4 82.9 85.1 4. Non-Interest Income 65.2 71.0 19.6 18.2 19.5 5. Non-Intere
Slide 16: Per Share Results
Per Share Results 2017 Q1 Q2 Q3 Q4 Total 1. Earnings Per Share $ .56 $ .57 $ .50 $ .49 $ 2.12 2. Dividends $ .15 $ .18 $ .18 $ .18 $ .69 3. Tangible Book Value $16.49 $16.97 $16.62 $16.96 2018 Q1 Q2 Q3 Q4 Total 1. Earnings Per Share $ .74 $ .80 $ .83 – $ 2.37 2. Dividends $ .18 $ .22 $ .22 – $ .62 3
Slide 17: Dividends and Tangible Book Value
Dividends and Tangible Book Value Quarterly Dividends Tangible Book Value .22 0.22 $18.16 0.20 $16.96 .18 $15.85 0.18 $14.68 0.16 .15 $13.65 .14 $12.17 0.14 $10.95 .11 0.12 $9.21 $9.64 0.10 .08 0.08 0.06 .05 0.04 .03 0.02 .01 0.00 1.96% Forward Dividend Yield Compound Annual Growth Rate of 9.16% Equ
Slide 18: John J. Martin, EVP and Chief Credit Officer
John J. Martin EXECUTIVE VICE PRESIDENT AND CHIEF CREDIT OFFICER 18
Slide 19: Loan Portfolio Trends
Loan Portfolio Trends Change ($ in Millions) Linked Quarter 2016 2017 Q1-'18 Q2-'18 Q3-'18 $ % 1. Commercial & Industrial $ 1,195 $ 1,494 $ 1,554 $ 1,658 $ 1,656 $ (2) (0.1%) Commitments: 2. Construction, Land and 3Q ‘18 $1.200 B Land Development 419 612 590 715 669 (46) (6.4%) 2Q ‘18 $1.244 B 1Q ‘1
Slide 20: Asset Quality Summary
Asset Quality Summary Change ($ in Millions) Linked Quarter 2016 186.1 2017 Q1-'18 Q2-'18 Q3-'18 $ % 1. Non-Accrual Loans $ 30.0 $ 28.7 $ 27.5 $ 20.1 $ 20.4 $ 0.3 2. Other Real Estate 9.0 10.4 9.7 9.1 8.9 (0.2) 3. Renegotiated Loans 4.7 1.0 0.6 0.5 0.9 0.4 4. 90+ Days Delinquent Loans 0.1 0.9 0.7 0.
Slide 21: Non-Performing Asset Reconciliation
Non-Performing Asset Reconciliation ($ in Millions) Q4-'17 Q1-'18 Q2-'18 Q3-'18 1. Beginning Balance NPAs & 90+ Days Delinquent $ 45.2 $ 41.0 $ 38.5 $ 29.9 Non-Accrual 2. Add: New Non-Accruals 4.9 4.8 2.7 4.6 3. Less: To Accrual/Payoff/Renegotiated (7.3) (4.1) (6.3) (2.5) 4. Less: To OREO (0.2) (0.1
Slide 22: ALLL and Fair Value Summary
ALLL and Fair Value Summary ($ in Millions) Q4-'17 Q1-'18 Q2-'18 Q3-'18 1. Beginning Allowance for Loan Losses (ALLL) $ 73.4 $ 75.0 $ 76.4 $ 77.5 2. Net Charge-offs (Recoveries) 0.2 1.1 0.6 0.5 3. Provision Expense 1.8 2.5 1.7 1.4 4. Ending Allowance for Loan Losses (ALLL) $ 75.0 $ 76.4 $ 77.5 $ 78.
Slide 23: Portfolio Summary
Portfolio Summary Loan portfolio remained at $7.1 Billion with an increase in CRE of $61 Million offset by a decline in construction loans of $46 Million and owner occupied real estate loans of $14 Million. Total NPAs & 90+ Days remained low at 0.4% of Loans and ORE. Classified Assets increase
Slide 24: Michael C. Rechin, President and Chief Executive Officer
Michael C. Rechin PRESIDENT AND CHIEF EXECUTIVE OFFICER 24
Slide 25: A Leading Midwest Banking Franchise Crossing $10 Billion
A Leading Midwest Banking Franchise Crossing $10 Billion with Strategic Entry into Michigan Pro Forma Highlights1 Ticker: FRME Headquarters: Muncie, IN Founded: 1893 Banking Centers: 134 Assets: $11.1 Billion Loans: $7.8 Billion Deposits: $8.7 Billion Current First Merchants Locations MBTF Locations
Slide 26: Overview of MBT Financial Corporation
Overview of MBT Financial Corporation Company Highlights Geographic FootprintFarmington Hills . Northville Headquartered in Monroe, Michigan Plymouth Redford Highland Park Livonia 75 . Westland Founded in 1858 Dearborn Ann Arbor 275 Allen Park . 94 Southgate Operates 20 Banking Centers 75 MICHIGAN T
Slide 27: FMC Strategy and Tactics Overview
FMC Strategy and Tactics Overview Looking Forward . . . Manage market presence and our core banking business. Continue organic growth protocol. Optimize our retail and commercial deposit strategy… products and pricing. Build out of specialty finance businesses in sponsor finance, public financ
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: Nicole M. Weaver Investor Relations Telephone: 765.521.7619 nweaver@firstmerchants.com 28
Slide 29: Appendix
ist Merchants Corporation Appendix FIRST MERCHANTS CORPORATION 29 200 E Jackson St, P.O. Box 782, Muncie, IN47305 | 705.747.1500
Slide 30: Appendix – Non-GAAP Reconciliation: Capital Ratios
Appendix – Non-GAAP Reconciliation CAPITAL RATIOS (dollars in thousands): 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 Total Risk-Based Capital Ratio Total Stockholders' Equity (GAAP) 900,865 901,657 929,470 1,035,116 1,283,120 1,303,463 1,313,073 1,340,328 1,361,426 Adjust for Accumulated Other Com
Slide 31: Appendix – Non-GAAP Reconciliation: Tangible Common Equity Ratio
Appendix – Non-GAAP Reconciliation TANGIBLE COMMON EQUITY RATIO (dollars in thousands): 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 Total Stockholders' Equity (GAAP) $ 900,865 $ 901,657 $ 929,470 $ 1,035,116 $ 1,283,120 $ 1,303,463 $ 1,313,073 $ 1,340,328 $ 1,361,426 Less: Preferred Stock (125) (12
Slide 32: Appendix – Non-GAAP Reconciliation: Efficiency Ratio
Appendix – Non-GAAP Reconciliation EFFICIENCY RATIO (dollars in thousands): 2016 2017 1Q18 2Q18 3Q18 Non Interest Expense (GAAP) $ 177,359 $ 205,556 $ 53,687 $ 53,504 $ 55,022 Less: Intangible Asset Amortization (3,910) (5,647) (1,726) (1,718) (1,650) Less: OREO and Foreclosure Expenses (2,877) (1,9
Slide 33: Appendix – Non-GAAP Reconciliation: Construction and Investment Real Estate Concentrations
Appendix – Non-GAAP Reconciliation CONSTRUCTION AND INVESTMENT REAL ESTATE CONCENTRATIONS (dollars in thousands): 2016 2017 1Q18 2Q18 3Q18 Total Risk-Based Capital (Subsidiary Bank Only) Total Stockholders' Equity (GAAP) $ 973,641 $ 1,404,303 $ 1,414,109 $ 1,432,722 $ 1,436,173 Adjust for Accumulate