First Merchants Corporation · NASDAQ:FRME
First Merchants — Q1 2018 Earnings Presentation
30 slides from First Merchants's earnings presentation, Apr 26, 2018
Slide 1: 1st Quarter Earnings Highlights
1 1st Quarter Earnings Highlights April 26, 2018
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: 1st Quarter 2018 Highlights
1st Quarter 2018 Highlights Earnings Per Share of $ .74, a 32.1% Increase over 1Q2017 $36.7 Million of Net Income, a 58.1% Increase over 1Q2017 Total Assets of $9.5 Billion Grew by 29.3% over 1Q2017 Annualized Organic Loan & Deposit Growth of Nearly 9% 1.57% Return on Average Assets; 11.21
Slide 4: Mark K. Hardwick, EVP, CFO and COO
Mark K. Hardwick EXECUTIVE VICE PRESIDENT CHIEF F INANCIAL OFFICER AND CHIEF OPERATING OFFICER 4
Slide 5: Total Assets
Total Assets ($ in Millions) 1 2017 Loans include acquired loans of $225 from The Arlington Bank and $725 from Independent Alliance Banks 2 Annualized from 12.31.2017 Annualized Asset Growth 29.9% 4.5% 1 2 5 2016 2017 Q1-’17 Q1-’18 1. Investments $1,305 $1,561 $1,327 $1,544 2. Loans 5,143 6,758 5,27
Slide 6: Loan and Yield Detail
Loan and Yield Detail (as of 3/31/2018) Commercial & Industrial 22.5% Commercial Real Estate Owner-Occupied 10.3% Commercial Real Estate Non-Owner Occupied 25.5% Construction Land & Land Development 8.5% Agricultural Land 3.5% Agricultural Production 1.4% Public Finance/Other Commercial 5.8% Residen
Slide 7: Investment Portfolio
Investment Portfolio (as of 3/31/2018) Mortgage-Backed Securities 23% Collateralized Mortgage Obligations 26% U. S. Agencies 2% Corporate Obligations 2% Tax-Exempt Municipals 47% $1.5 Billion Portfolio Modified duration of 5.5 years Tax equivalent yield of 3.47% Net unrealized loss of $10.3
Slide 8: Total Liabilities and Capital
Total Liabilities and Capital 2016 2017 Q1-’17 Q1-’18 1. Customer Non-Maturity Deposits $4,428 $5,741 $4,426 $5,850 2. Customer Time Deposits 747 1,051 789 1,137 3. Brokered Deposits 381 381 420 341 4. Borrowings 572 701 587 644 5. Other Liabilities 60 57 53 55 6. Hybrid Capital 122 133 122 133 7. C
Slide 9: Deposit Detail
Deposit Detail (as of 3/31/2018) YTD Cost = .65% Total = $7.3 Billion Demand Deposits 51% Savings Deposits 29% Certificates & Time Deposits of >$100,000 7% Certificates & Time Deposits of <$100,000 8% Brokered Deposits 5% 9
Slide 10: Capital Ratios
Capital Ratios 11.42% 11.39% 11.05% 11.10% 11.16% 11.11% 11.03% 11.00% 11.04% 9.26% 9.43% 9.48% 9.24% 9.50% 9.68% 9.39% 9.30% 9.32% 14.79% 14.67% 14.18% 14.21% 14.24% 14.01% 13.76% 13.69% 13.69% 7.00% 8.00% 9.00% 10.00% 11.00% 12.00% 13.00% 14.00% 15.00% 16.00% 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q1
Slide 11: Net Interest Margin
Net Interest Margin 3.83% 3.86% 3.94% 3.90% 3.98% 3.95% 4.03% 4.10% 3.92% 2.80% 3.00% 3.20% 3.40% 3.60% 3.80% 4.00% 4.20% $48 $52 $56 $60 $64 $68 $72 $76 $80 $84 Q1 - '16 Q2 - '16 Q3 - '16 Q4 - '16 Q1 - '17 Q2 - '17 Q3 - '17 Q4 - '17 Q1 - '18 Net Interest Income - FTE ($millions) Net Interest Margin
Slide 12: Non-Interest Income
Non-Interest Income 2016 2017 Q1-’17 Q1-’18 1. Service Charges on Deposit Accounts $17.8 $ 18.7 $ 4.2 $ 4.8 2. Wealth Management Fees 12.6 14.7 3.4 3.8 3. Card Payment Fees 15.0 16.1 3.7 4.6 4. Cash Surrender Value of Life Ins 4.3 6.6 0.9 1.2 5. Gains on Sales of Mortgage Loans 7.1 7.6 1.3 1.8 6. Ga
Slide 13: Non-Interest Expense
Non-Interest Expense ($ in Millions) 2016 2017 Q1-’17 Q1-’18 1. Salary & Benefits $102.6 $119.8 $ 25.7 $ 32.2 2. Premises & Equipment 29.5 30.1 7.0 8.4 3. Intangible Asset Amortization 3.9 5.6 0.9 1.7 4. Professional & Other Outside Services 6.5 12.8 1.7 1.5 5. OREO/Credit-Related Expense 2.9 1.9 0.
Slide 14: Earnings
Earnings 2016 2017 Q1-’17 Q1-’18 1. Net Interest Income $226.5 $ 277.3 $ 61.0 $ 79.9 2. Provision for Loan Losses (5.7) (9.1) (2.4) (2.5) 3. Net Interest Income after Provision 220.8 268.2 58.6 77.4 4. Non-Interest Income 65.2 71.0 14.9 19.6 5. Non-Interest Expense (177.3) (205.6) (43.1) (53.7) 6. I
Slide 15: 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 – – – $ .74 2. Dividends $ .18 – – – $ .18 3. Tangible Book V
Slide 16: Dividends and Tangible Book Value
Dividends and Tangible Book Value $9.21 $9.64 $10.95 $12.17 $13.65 $14.68 $15.85 $16.96 $17.14 .01 .03 .05 .08 .11 .14 .15 0.00 0.02 0.04 0.06 0.08 0.10 0.12 0.14 0.16 0.18 1.73% Forward Dividend Yield 24.3% Dividend Payout Ratio Quarterly Dividends Tangible Book Value .18 16
Slide 17: John J. Martin, EVP and Chief Credit Officer
EXECUTIVE VICE PRESIDENT AND CHIEF CREDIT OFFICER 17 John J. Martin
Slide 18: Loan Portfolio Trends
Loan Portfolio Trends 18 ($ in Millions) 2016 2017 Q1-'17 Q1-'18 $ % $ % 1. Commercial & Industrial 1,195$ 1,494$ 1,259$ 1,554$ 60$ 4.0% 295$ 23.4% 2. Construction, Land and Land Development 419 612 337 590 (22) (3.6%) 253 75.1% 3. CRE Non-Owner Occupied 1,272 1,618 1,423 1,760 142 8.8% 337 23.7% 4.
Slide 19: Asset Quality Summary
Asset Quality Summary 19 ($ in Millions) 2016 2017 Q1-'17 Q1-'18 $ % $ % 186.1 1. Non-Accrual Loans 30.0$ 28.7$ 27.9$ 27.5$ (1.2)$ (4.2%) (0.4)$ (1.4%) 2. Other Real Estate 9.0 10.4 8.3 9.7 (0.7) (6.7%) 1.4 16.9% 3. Renegotiated Loans 4.7 1.0 0.9 0.6 (0.4) (40.0%) (0.3) (33.3%) 4. 90+ Days Delinquen
Slide 20: Non-Performing Asset Reconciliation
Non-Performing Asset Reconciliation 20 ($ in Millions) Q2-'17 Q3-'17 Q4-'17 Q1-'18 1. Beginning Balance NPAs & 90+ Days Delinquent 37.2$ 40.3$ 45.2$ 41.0$ Non-Accrual 2. Add: New Non-Accruals 10.0 12.7 4.9 4.8 3. Less: To Accrual/Payoff/Renegotiated (2.3) (6.1) (7.3) (4.1) 4. Less: To OREO (6.8) (0.
Slide 21: ALLL and Fair Value Summary
ALLL and Fair Value Summary 21 ($ in Millions) Q2-'17 Q3-'17 Q4-'17 Q1-'18 1. Beginning Allowance for Loan Losses (ALLL) 68.2$ 70.5$ 73.4$ 75.0$ 2. Net Charge-offs (Recoveries) 0.6 (0.8) 0.2 1.1 3. Provision Expense 2.9 2.1 1.8 2.5 4. Ending Allowance for Loan Losses (ALLL) 70.5$ 73.4$ 75.0$ 76.4$ 5
Slide 22: Portfolio Summary
Portfolio Summary 22 Strong quarterly loan growth of $148 million, led by CRE and C&I loans Construction and CRE portfolios are 57% and 226% of risk-based capital, respectively; well beneath regulatory guidelines Non-Accrual Loans and ORE both declined for the quarter, while Total NPAs & 90+ D
Slide 23: Michael C. Rechin, President and CEO
Michael C. Rechin PRESIDENT AND CHIEF EXECUTIVE OFFICER 23
Slide 24: FMC Strategy and Tactics Overview
FMC Strategy and Tactics Overview Looking Forward . . . Build market presence and cultivate the First Merchants’ Brand in former Arlington Bank and Independent Alliance Bank communities Capitalize on talent opportunities from performance and preferred employer recognitions Build out of special
Slide 25: Contact Information
Contact Information First Merchants Corporation common stock is traded on the NASDAQ Global Select Market under the symbol FRME. Additional information can be found at www.FIRSTMERCHANTS.COM Investor inquiries: Nicole M. Weaver Investor Relations Telephone: 765.521.7619 nweaver@firstmerchants.com 25
Slide 26: Appendix
GiFirst Merchants Corporation Appendix
Slide 27: Appendix – Non-GAAP Reconciliation: Capital Ratios
Appendix – Non-GAAP Reconciliation 27 CAPITAL RATIOS (dollars in thousands): 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 Total Risk-Based Capital Ratio Total Stockholders' Equity (GAAP) 867,263 887,550 900,865 901,657 929,470 1,035,116 1,283,120 1,303,463 1,313,073 Adjust for Accumulated Other Comp
Slide 28: Appendix – Non-GAAP Reconciliation: Tangible Common Equity Ratio
Appendix – Non-GAAP Reconciliation 28 TANGIBLE COMMON EQUITY RATIO (dollars in thousands): 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 Total Stockholders' Equity (GAAP) 867,263$ 887,550$ 900,865$ 901,657$ 929,470$ 1,035,116$ 1,283,120$ 1,303,463$ 1,313,073$ Less: Preferred Stock (125) (125) (125) (
Slide 29: Appendix – Non-GAAP Reconciliation: Efficiency Ratio
Appendix – Non-GAAP Reconciliation 29 EFFICIENCY RATIO (dollars in thousands): 2016 1Q17 2017 1Q18 Non Interest Expense (GAAP) 177,359$ 43,099$ 205,556$ 53,687$ Less: Intangible Asset Amortization (3,910) (903) (5,647) (1,726) Less: OREO and Foreclosure Expenses (2,877) (531) (1,903) (402) Adjusted
Slide 30: Appendix – Non-GAAP Reconciliation: Construction and Investment Real Estate Concentrations
Appendix – Non-GAAP Reconciliation 30 CONSTRUCTION AND INVESTMENT REAL ESTATE CONCENTRATIONS (dollars in thousands): 2016 1Q17 2017 1Q18 Total Risk-Based Capital (Subsidiary Bank Only) Total Stockholders' Equity (GAAP) 973,641$ 993,130$ 1,404,303$ 1,414,109$ Adjust for Accumulated Other Comprehensiv