First Merchants Corporation · NASDAQ:FRME
First Merchants — Q3 2021 Earnings Presentation
27 slides from First Merchants's earnings presentation, Oct 26, 2021
Slide 1: Investor Update Third Quarter 2021
INVESTOR UPDATE Third Quarter 2021
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 9/30/2021 $15.1 Billion $9.0 Billion $12.3 Billion $6.3 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: 1.43% 8.9
Slide 5: Third Quarter Highlights
Third Quarter Highlights 5 Year-to-Date Highlights 1.43% ROA 1.69% PTPP ROA ROA $157.8 Million $2.92 Per Share Net Income & EPS 11.32% ROE 16.65% ROTCE ROE & ROTCE ▪ 5.8% annualized loan growth, excluding PPP loans ▪ Deployment of Online Account Origination technology ▪ Repurchased 529,498 shares to
Slide 6: Strategy & Key Lines of Business
Strategy & Key Lines of Business 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
Slide 7: Region and Line of Business Third Quarter Highlights
▪ Economic Impact Payments in Consumer Portfolio continued to be utilized ▪ Commercial growth is driven by Economic Stimulus Payments within the municipal and public relationships and organic growth with clients Deposit Growth Annualized Consumer Group (2%) Commercial Group 6% Total Deposits 5% Regi
Slide 8: Third Quarter Financial Results
Third Quarter Financial Results 8 ▪ 51.18% Efficiency Ratio ▪ 5.8% annualized loan growth, over prior quarter excluding PPP loans ▪ Net interest income, increased $0.5 million over prior quarter, $2.0 million excluding the Paycheck Protection Program (PPP) loan impact ▪ Pre-Tax, Pre-Provision (PTPP)
Slide 9: 2021 Year-to-Date Financial Results
2021 Year-to-Date Financial Results 9 2021 Year-to-Date Highlights ▪ 50.10% Efficiency Ratio ▪ Pre-Tax, Pre-Provision (PTPP) earnings totaled $186.1 million, an increase of $14.7 million or 9% over prior year ▪ Tangible book value per share increased $0.83 over prior year ($M except per share data)
Slide 10: Investment Portfolio Highlights
▪ Net unrealized Gain of $82.0 million Investment Portfolio Highlights 10 3Q21 Investment Portfolio Composition Yield on Investments (%) / Total Investments ($B) $4.4B Total Investment Portfolio GainsHighlights Realized Gains ▪ 3Q 2020 $1.8 million ▪ 4Q 2020 $2.4 million ▪ 1Q 2021 $1.8 million ▪ 2Q
Slide 11: Loan Portfolio Highlights
$8.3 $8.6 $8.6 $8.7 $8.8 $0.4 $0.2 3.93% 4.20% 3.98% 4.05% 4.07% 3Q20 4Q20 1Q21 2Q21 3Q21 Total Loans ex. PPP ($B) PPP Loans ($B) Yield on Loans (%) Loan Portfolio Highlights 11 3Q21 Loan Composition Yield on Loans (%) / Total Loans ($B) $9.0B Total 3Q21 Portfolio by Yield Type Highlights Total loan
Slide 12: Allowance for Credit Losses - Loans
Allowance for Credit Losses - Loans 12 3Q21 Allowance for Credit Losses - Loans Change in ACL – Loans1 Highlights ▪ Allowance to Loans, excluding PPP loans, is 2.26% ▪ The reserve for unfunded commitments was unchanged at $20.5 million, and recorded in Other Liabilities ▪ Remaining fair value adjust
Slide 13: Deposit Portfolio Highlights
13 3Q21 Deposit Composition Highlights $12.3B 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 • ~55% yield 5 bps or l
Slide 14: Net Interest Margin
Net Interest Margin 14 $105.1$97.1 $97.3 $105.1 $107.0$97.8 3.15% 3.38% 3.23% 3.22% 3.20% 3Q20 4Q20 1Q21 2Q21 3Q21 Net Interest Income - FTE ($millions) Net Interest Margin $97.3 $107.0 $97.3 $105.1 $110.0$109.2 3Q20 4Q20 1Q21 2Q21 3Q21 1. Net Interest Income - FTE ($millions) 97.3$ 107.0$ 105.1$ 10
Slide 15: Non-Interest Income Detail
15 3Q21 Non-Interest Income Detail ($M) $28.5M Total Non-Interest Income Trends ($M) Fee Income / Revenue Non-Interest Income Highlights Highlights ▪ 81% in Customer-related fees totaling $23.2 million for 3Q21 • Decreased $3.7 million from 2Q21 driven by a decline in gains on the sale of loans refl
Slide 16: Non-Interest Expense Detail
16 3Q21 Non-Interest Expense Detail $71.4M Total Non-Interest Expense Trends ($M) Efficiency Ratio Non-Interest Expense Highlights Highlights ▪ 3Q21 expenses increased $2.1 million over 2Q21 reflecting higher salary expense and incentive accruals and an increase in marketing spend Salary & Benefits
Slide 17: Capital Ratios
17 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% 9.04% 8.94% 10.19% 9.99% 9.10% 9.10% 8.82% 3Q20 4Q20 1Q21 2Q21 3Q21 TCE Ratio TCE ex. PPP Target TCE (9.00%) 9.57% 9.57% 8.78%9.65% 14.38% 14.36% 14.
Slide 18: Loan Portfolio
▪ Total loans grew $126 million excluding PPP • $129 million C&I (excl. PPP) • $ 31 million Construction • $ 41 million Home Equity ▪ $218 million PPP net reduction Loan Portfolio 18 Highlights vs. Prior Quarter vs. 3Q20 ▪ $504 million total loan growth excluding PPP • $289 million C&I (excl. PPP) •
Slide 19: Asset Quality
Asset Quality 19 Asset Quality Trends ($M) vs. Prior Quarter vs. 3Q20 ▪ Non-accrual loans decreased $6.1 million ▪ NPAs + 90PD decreased $6.2 million, declining to 58 basis points of loans + ORE ▪ Classified loans decreased $39.1 million • Largest reductions in C&I manufacturing loans ▪ Non-accrual
Slide 20: Non-Performing Assets
▪ $6.2 million net reduction in NPAs + 90 PD ▪ $22.6 million in new non-accrual loans • $15.8 million in C&I • $ 5.3 million in CRE ▪ Two non-accrual loans totaling $23.4 million paid off ▪ Top three non-accrual relationships total $32.4 million ▪ $0.6 million of gross charge-offs in 3Q21 with recov
Slide 21: Track Record of Shareholder Value
Track Record of Shareholder Value 21 10-Year Total Return (9/30/11 – 9/30/21) Earnings per Share Tangible Book Value per Share Dividends per Share CAGR 2010-2020: 19.0% CAGR 2010-2020: 10.2% CAGR 2010-2020: 38.5% $0.48 $0.34 $1.41 $1.41 $1.65 $1.72 $1.98 $2.12 $3.22 $3.19 $2.74 $2.92 $9.21 $9.64 $10
Slide 22: History of Organic and Whole Bank Acquisition Growth
History of Organic and Whole Bank Acquisition Growth 22 Total Assets ($B) Growth Through Acquisition ✓ Experienced Acquirer ✓ Expanded in Current High-Growth Markets ✓ Extended into Additional High-Growth Markets ✓ Added to Franchise with Stable Deposit Gathering Markets 2000 Decatur Bank & Trust 20
Slide 23: Vision for the Future
Vision for the Future 23 People: ▪ Enhance our culture through the power of collaboration, accountability and effective teams ▪ Source, recruit, onboard and engage a diverse and inclusive workforce with a commitment to career pathing and market level compensation ▪ Communicate our Corporate Social R
Slide 24: Appendix
APPENDIX irst Merchants Corporation
Slide 25: Non-GAAP: Capital Ratios
Non-GAAP 25 1 Includes net unrealized gains or losses on securities available for sale, net gains or losses on cash flow hedges, and amounts resulting from the application of the applicable accounting guidance for defined benefit and other postretirement plans. CAPITAL RATIOS (dollars in thousands):
Slide 26: Non-GAAP: Tangible Common Equity Ratio
Non-GAAP 26 TANGIBLE COMMON EQUITY RATIO (dollars in thousands): 3Q20 4Q20 1Q21 2Q21 3Q21 Tangible Common Equity Ratio (dollars in thousands) Total Stockholders' Equity (GAAP) 1,833,656$ 1,875,645$ 1,805,856$ 1,871,800$ 1,868,090$ Less: Preferred Stock (125) (125) (125) (125) (125) Less: Intangible
Slide 27: Non-GAAP: Efficiency Ratio
Non-GAAP 27 EFFICIENCY RATIO (dollars in thousands): 3Q20 4Q20 1Q21 2Q21 3Q21 3Q19 YTD 3Q20 YTD 3Q21 YTD EFFICIENCY RATIO (dollars in thousands): Non Interest Expense (GAAP) 64,709$ 72,536$ 66,098$ 69,295$ 71,384$ 181,562$ 190,869$ 206,777$ Less: Intangible Asset Amortization (1,486) (1,476) (1,357)