First Merchants Corporation · NASDAQ:FRME
First Merchants — Q3 2017 Earnings Presentation
31 slides from First Merchants's earnings presentation, Oct 26, 2017
Slide 1: 3rd Quarter 2017 Earnings Highlights
3rd Quarter 2017 Earnings Highlights October 26, 2017 Michael C. Rechin President Chief Executive Officer Mark K. Hardwick Executive Vice President Chief Financial Officer Chief Operating Officer John J. Martin Executive Vice President Chief Credit Officer
Slide 2: Forward-looking statements
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”, “pattern”, “estimate”, “
Slide 3: 3rd Quarter 2017 Financial Highlights
3 3rd Quarter 2017 Financial Highlights Earnings Per Share of $.50 $24.4 Million of Net Income, a 15.7% Increase over 3Q2016 Includes $7.9 Million in Acquisition Expenses, or $.11 Per Share Total Assets of $9.0 Billion, Grew by 28.9% over 3Q2016 $16.62 Tangible Book Value Per Share, a 6.5%
Slide 4: 3rd Quarter 2017 Performance Highlights
4 3rd Quarter 2017 Performance Highlights Winning Market Strategy Delivering Consistent Organic Growth: Organic Loan Growth of $145 Million, a 9.2% Annualized Growth Rate Organic Non-Brokered Deposit Growth of $75 Million, a 4.6% Annualized Growth Rate Grew Net-Interest Income to $74.4 Milli
Slide 5: Mark K. Hardwick, EVP, COO and CFO
Mark K. Hardwick Executive Vice President Chief Operating Officer and Chief Financial Officer
Slide 6: Total Assets
Total Assets 2015 2016 Q1-’17 Q2-’17 Q3-’17 1. Investments $1,277 $1,305 $1,327 $1,343 $1,469 2. Loans Held for Sale 10 3 1 4 5 3. Loans 4,694 5,140 5,275 5,613 6,483 4. Allowance (62) (66) (68) (70) (73) 5. Goodwill & Intangibles 260 259 258 310 479 6. BOLI 201 202 203 200 222 7. Other 381 369 330
Slide 7: Loan and Yield Detail
Commercial & Industrial 22.1% Commercial Real Estate Owner- Occupied 10.4% Commercial Real Estate Non-Owner Occupied 25.4% Construction Land & Land Development 7.7% Agricultural Land 3.8% Agricultural Production 1.8% Public Finance/Other Commercial 5.1% Residential Mortgage 14.5% Home Equity 7.8% Ot
Slide 8: Investment Portfolio
Mortgage-Backed Securities 29% Collateralized Mortgage Obligations 22% U. S. Agencies 1% Corporate Obligations 2% Tax-Exempt Municipals 46% Investment Portfolio (as of 9/30/2017) $1.5 Billion Portfolio Modified duration of 4.9 years Tax equivalent yield of 3.88% Net unrealized gain of $23.4
Slide 9: Total Liabilities and Capital
2015 2016 Q1-’17 Q2-’17 Q3-’17 1. Customer Non-Maturity Deposits $4,096 $4,428 $4,426 $4,724 $5,448 2. Customer Time Deposits 880 747 789 875 1,088 3. Brokered Deposits 314 381 420 418 375 4. Borrowings 446 572 587 581 656 5. Other Liabilities 51 60 53 49 66 6. Hybrid Capital 123 122 122 123 133 7.
Slide 10: Deposit Detail
Deposit Detail (as of 9/30/2017) QTD Cost = .52% YTD Cost = .46% Total = $6.9 Billion 10 Demand Deposits 52% Savings Deposits 27% Certificates & Time Deposits of >$100,000 7% Certificates & Time Deposits of <$100,000 9% Brokered Deposits 5%
Slide 11: Capital Ratios
11.31% 11.49% 11.42% 11.39% 11.05% 11.10% 11.16% 11.11% 11.03% 9.17% 9.08% 9.26% 9.43% 9.48% 9.24% 9.50% 9.68% 9.39% 14.85% 14.94% 14.79% 14.67% 14.18% 14.21% 14.24% 14.01% 13.76% 6.00% 7.00% 8.00% 9.00% 10.00% 11.00% 12.00% 13.00% 14.00% 15.00% 16.00% 17.00% 18.00% 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q1
Slide 12: Net Interest Margin
12 Net Interest Margin ` NET INTEREST MARGIN Q3 - '15 Q4 - '15 Q1 - '16 Q2 - '16 Q3 - '16 Q4 - '16 Q1 - '17 Q2 - '17 Q3 - '17 Net Interest Income - FTE ($millions) $ 53.3 $ 53.2 $ 57.6 $ 59.2 $ 61.1 $ 62.1 $ 64.9 $ 67.2 $ 78.9 Fair Value Accretion $ 2.0 $ 1.9 $ 2.5 $ 3.2 $ 3.8 $ 2.9 $ 4.3 $ 2.3 $ 3.
Slide 13: Non-Interest Income
13 Non-Interest Income – – – – – – – – ($ in Millions) 2015 2016 Q1-’17 Q2-’17 Q3-’17 1. Service Charges on Deposit Accounts $16.2 $17.8 $ 4.2 $ 4.4 $ 5.0 2. Wealth Management Fees 11.3 12.6 3.4 3.4 3.8 3. Insurance Commission Income 4.1 4. Card Payment Fees 13.4 15.0 3.7 4.2 4.1 5. Cash Surrender V
Slide 14: Non-Interest Expense
14 Non-Interest Expense 2015 2016 Q1-’17 Q2-’17 Q3-’17 1. Salary & Benefits $101.9 $102.6 $ 25.7 $ 27.1 $ 33.2 2. Premises & Equipment 25.5 29.5 7.0 6.9 7.9 3. Intangible Asset Amortization 2.8 3.9 0.9 1.0 1.7 4. Professional & Other Outside Services 9.9 6.5 1.7 3.3 5.8 5. OREO/Credit-Related Expens
Slide 15: Earnings
15 2015 2016 Q1-’17 Q2-’17 Q3-’17 1. Net Interest Income $196.4 $226.5 $ 61.0 $ 63.1 $ 74.4 2. Provision for Loan Losses (0.4) (5.7) (2.4) (2.9) (2.1) 3. Net Interest Income after Provision 196.0 220.8 58.6 60.2 72.3 4. Non-Interest Income 69.8 65.2 14.9 18.4 18.7 5. Non-Interest Expense (174.8) (17
Slide 16: Per Share Results
2016 Q1 Q2 Q3 Q4 Total 1. Earnings Per Share $ .43 $ .49 $ .51 $ .55 $ 1.98 2. Dividends $ .11 $ .14 $ .14 $ .15 $ .54 3. Tangible Book Value $15.02 $15.53 $15.86 $15.85 2017 Q1 Q2 Q3 Q4 Total 1. Earnings Per Share $ .56 $ .57 $ .50 – $ 1.63 2. Dividends $ .15 .18 .18 – $ .51 3. Tangible Book Value
Slide 17: Dividends and Tangible Book Value
$9.21 $9.64 $10.95 $12.17 $13.65 $14.68 $15.85 $16.62 Dividends and Tangible Book Value 0.00 0.02 0.04 0.06 0.08 0.10 0.12 0.14 0.16 0.18 .11 .01 .03 .05 .14 .15 1.68% Forward Dividend Yield 31.3% YTD Dividend Payout Ratio = Quarterly Dividends Tangible Book Value .08 17 .18
Slide 18: John J. Martin, EVP and Chief Credit Officer
John J. Martin Executive Vice President and Chief Credit Officer
Slide 19: Loan Portfolio Trends
19 Loan Portfolio Trends ($ in Millions) FMB 2015 2016 Q1-'17 Q2-'17 Q3-'17 1 iAB Q3-'17 $ 1 $ % 1. Commercial & Industrial 1,057$ 1,195$ 1,259$ 1,290$ 1,325$ 111$ 1,436$ 35$ 146$ 11.3% 2. Construction, Land and Land Development 367 419 337 442 458 41 499 16 57 12.9% 3. CRE Non-Owner Occupied 1,090
Slide 20: Asset Quality Summary
20 Asset Quality Summary ($ in Millions) FMB 2015 2016 Q1-'17 Q2-'17 Q3-'17 1 iAB Q3-'17 $ 1 $ % 186.1 1. Non-Accrual Loans 31.4$ 30.0$ 27.9$ 27.4$ 26.8$ 5.5$ 32.3$ (0.6)$ 4.9$ 17.9% 2. Other Real Estate 17.3 9.0 8.3 11.9 11.9 - 11.9 - - 0.0% 3. Renegotiated Loans 1.9 4.7 0.9 0.4 0.6 - 0.6 0.2 0.2 5
Slide 21: Non-Performing Asset Reconciliation
21 Non-Performing Asset Reconciliation ($ in Millions) FMB Q4-'16 Q1-'17 Q2-'17 Q3-'17 1 iAB Q3-'17186.1 1. Beginning Balance NPAs & 90+ Days Delinquent 49.9$ 43.8$ 37.2$ 40.3$ 40.3$ Non-Accrual 2. Add: New Non-Accruals 4.3 2.5 10.0 7.2 5.5$ 12.7 3. Less: To Accrual/Payoff/Renegotiated (6.5) (2.6) (
Slide 22: ALLL and Fair Value Summary
22 ALLL and Fair Value Summary ($ in Millions) Q4-'16 Q1-'17 Q2-'17 Q3-'17 1. Beginning Allowance for Loan Losses (ALLL) 63.5$ 66.0$ 68.2$ 70.5$ 2. Net Charge-offs (Recoveries) (0.1) 0.2 0.6 (0.8) 3. Provision Expense 2.4 2.4 2.9 2.1 4. Ending Allowance for Loan Losses (ALLL) 66.0 68.2 70.5 73.4 5.
Slide 23: Portfolio Summary
23 Portfolio Summary Strong organic quarterly loan growth of $145 million, led by C&I, Commercial Real Estate, Home Equity and Public Finance. With iAB, loans grew $870 million Construction and CRE portfolios are 50% and 215% of risk-based capital, respectively; well beneath regulatory guideline
Slide 24: Michael C. Rechin, President and CEO
Michael C. Rechin President and Chief Executive Officer
Slide 25: Looking Forward . . .
25 Looking Forward . . . Complete Independent Alliance Bank integration and gain synergies and market expansion opportunities that Arlington Bank and Independent Alliance Bank acquisitions offer; continue to evaluate M&A opportunities for strategic fit Win in all our markets, in all lines of bus
Slide 26: Contact Information
26 Contact Information First Merchants Corporation common stock is traded on the NASDAQ Global Select Market under the symbol FRME. Additional information can be found at www.FIRSTMERCHANTS.COM Investor inquiries: David L. Ortega Investor Relations Telephone: 765.378.8937 dortega@firstmerchants.com
Slide 27: Appendix
First Merchants Corporation THE STRENGTH OF BIG THE SERVICE OF SMALL Appendix NASDAQ: FRME
Slide 28: Appendix – Non-GAAP Reconciliation: Capital Ratios
28 Appendix – Non-GAAP Reconciliation CAPITAL RATIOS (dollars in thousands): 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 Total Risk-Based Capital Ratio Total Stockholders' Equity (GAAP) 766,984 850,509 867,263 887,550 900,865 901,657 929,470 1,035,116 1,283,120 Adjust for Accumulated Other Comprehe
Slide 29: Appendix – Non-GAAP Reconciliation: Tangible Common Equity Ratio
29 Appendix – Non-GAAP Reconciliation TANGIBLE COMMON EQUITY RATIO (dollars in thousands): 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 Total Stockholders' Equity (GAAP) 766,984$ 850,509$ 867,263$ 887,550$ 900,865$ 901,657$ 929,470$ 1,035,116$ 1,283,120$ Less: Preferred Stock (125) (125) (125) (125)
Slide 30: Appendix – Non-GAAP Reconciliation: Dividend Yield, Efficiency Ratio
30 Appendix – Non-GAAP Reconciliation FORWARD DIVIDEND YIELD 3Q17 Most recent quarter's dividend per share 0.18$ Most recent quarter's dividend per share - Annualized 0.72$ Stock Price at 9/30/17 42.93$ Forward Dividend Yield 1.68% DIVIDEND PAYOUT RATIO 2017 YTD Dividends per share 0.51$ Earnings Pe
Slide 31: Appendix – Non-GAAP Reconciliation: Real Estate Concentrations
31 Appendix – Non-GAAP Reconciliation CONSTRUCTION AND INVESTMENT REAL ESTATE CONCENTRATIONS (dollars in thousands): 2015 2016 1Q17 2Q17 3Q17 Total Risk-Based Capital (Subsidiary Bank Only) Total Stockholders' Equity (GAAP) 927,774$ 973,641$ 993,130$ 1,099,762$ 1,384,867$ Adjust for Accumulated Othe