First Merchants Corporation · NASDAQ:FRME
First Merchants — Q2 2018 Earnings Presentation
30 slides from First Merchants's earnings presentation, Jul 26, 2018
Slide 1: 2nd Quarter Earnings Highlights
2nd Quarter Earnings Highlights July 26, 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: 2nd Quarter 2018 Financial Highlights
2nd Quarter 2018 Financial Highlights $39.6 Million of Net Income, a 64.2% Increase over 2Q2017 Earnings Per Share of $ .80, a 40.4% Increase over 2Q2017 Total Assets of $9.7 Billion Grew by 24.7% over 2Q2017 Annualized Organic Loan & Deposit Growth of Approximately 10% 1.63% ROAA; 11.94%
Slide 4: Mark K. Hardwick, CFO and COO
Mark K. Hardwick EXECUTIVE VICE PRESIDENT CHIEF FINANCIAL OFFICER AND CHIEF OPERATING OFFICER 4
Slide 5: Total Assets
Total Assets ($ in Millions) 2016 2017 Q1-’18 Q2-’18 1. Investments $1,305 $1,561 $1,544 $1,620 2. Loans 5,143 6,758 6,906 7,083 3. Allowance (66) (75) (76) (78) 4. Goodwill & Intangibles 259 477 475 473 5. BOLI 202 224 222 223 6. Other 369 422 402 414 7. Total Assets $7,212 $9,367 $9,473 $9,735 Ann
Slide 6: Loan and Yield Detail
Loan and Yield Detail (as of 6/30/2018) QTD Yield = 5.12% Commercial Agricultural Agricultural Construction Land & Public Real Estate Land Production YTD Yield = 4.99% Land Development Finance/Other Non-Owner 3.4% 1.3% Total Loans = $7.1 Billion 10.1% Commercial Occupied 5.5% 24.0% Residential Mortg
Slide 7: Investment Portfolio
Investment Portfolio (as of 6/30/2018) Tax-Exempt Mortgage-Backed Municipals Securities 46% 24% $1.6 Billion Portfolio Modified duration of 5.7 years Tax equivalent yield of 3.47% Net unrealized loss of $16.4 Million Collateralized Mortgage Obligations 26% Corporate U. S. Agencies Obligation
Slide 8: Total Liabilities and Capital
Total Liabilities and Capital ($ in Millions) 2016 2017 Q1-’18 Q2-’18 1. Customer Non-Maturity Deposits $4,428 $5,741 $5,850 $6,033 2. Customer Time Deposits 747 1,051 1,137 1,158 3. Brokered Deposits 381 381 341 313 4. Borrowings 572 701 644 706 5. Other Liabilities 60 57 55 52 6. Hybrid Capital 12
Slide 9: Deposit Detail
Deposit Detail (as of 6/30/2018) QTD Cost = .81% YTD Cost = .74% Total = $7.5 Billion Certificates & Certificates & Time Deposits of Time Deposits of >$100,000 <$100,000 Savings 7% 8% Deposits Brokered 28% Deposits 4% Demand Deposits 53% 9
Slide 10: Capital Ratios
Capital Ratios Total Risk-Based Capital Ratio (Target = 12.50%) Common Equity Tier 1 Capital Ratio (Target = 10.00%) 16.00% Tangible Common Equity Ratio (TCE) (Target = 9.00%) 15.00% 14.67% 14.18% 14.21% 14.24% 14.01% 13.81% 14.00% 13.76% 13.69% 13.69% 13.00% 12.00% 11.39% 11.11% 11.05% 11.10% 11.16
Slide 11: Net Interest Margin
Net Interest Margin Q2 - '16 Q3 - '16 Q4 - '16 Q1 - '17 Q2 - '17 Q3 - '17 Q4 - '17 Q1 - '18 Q2 - '18 Net Interest Income - FTE ($millions) $ 59.2 $ 61.1 $ 62.1 $ 64.9 $ 67.2 $ 78.9 $ 83.5 $ 82.5 $ 87.2 Fair Value Accretion $ 3.2 $ 3.8 $ 2.9 $ 4.3 $ 2.3 $ 3.2 $ 4.1 $ 3.2 $ 3.8 Tax Equivalent Yield on
Slide 12: Non-Interest Income
Non-Interest Income ($ in Millions) 2016 2017 Q1-’18 Q2-’18 1. Service Charges on Deposit Accounts $17.8 $ 18.7 $ 4.8 $ 5.0 2. Wealth Management Fees 12.6 14.7 3.8 3.6 3. Card Payment Fees 15.0 16.1 4.6 4.5 4. Cash Surrender Value of Life Ins 4.3 6.6 1.2 1.0 5. Gains on Sales of Mortgage Loans 7.1 7
Slide 13: Non-Interest Expense
Non-Interest Expense ($ in Millions) 2016 2017 Q1-’18 Q2-’18 1. Salary & Benefits $102.6 $119.8 $ 32.2 $ 32.2 2. Premises & Equipment 29.5 30.1 8.4 7.9 3. Intangible Asset Amortization 3.9 5.6 1.7 1.7 4. Professional & Other Outside Services 6.5 12.8 1.5 1.8 5. OREO/Credit-Related Expense 2.9 1.9 0.
Slide 14: Earnings
Earnings ($ in Millions) 2016 2017 Q1-’18 Q2-’18 1. Net Interest Income $226.5 $ 277.3 $ 79.9 $ 84.6 2. Provision for Loan Losses (5.7) (9.1) (2.5) (1.7) 3. Net Interest Income after Provision 220.8 268.2 77.4 82.9 4. Non-Interest Income 65.2 71.0 19.6 18.2 5. Non-Interest Expense (177.3) (205.6) (5
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 $ .80 – – $ 1.54 2. Dividends $ .18 $ .22 – – $ .40 3. Tangib
Slide 16: Dividends and Tangible Book Value
Dividends and Tangible Book Value Quarterly Dividends Tangible Book Value 0.22 0.22 $17.71 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 $9.64 0.10 .08 0.08 0.06 .05 0.04 .03 0.02 .01 0.00 1.90% Forward Dividend Yield Compound Annual Growth Rate of 9.11% Eq
Slide 17: John J. Martin, Chief Credit Officer
John J. Martin EXECUTIVE VICE PRESIDENT AND CHIEF CREDIT OFFICER 17
Slide 18: Loan Portfolio Trends
Loan Portfolio Trends Change ($ in Millions) Linked Quarter 2016 2017 Q1-'18 Q2-'18 $ % Const. Commitments: 1. Commercial & Industrial $ 1,195 $ 1,494 $ 1,554 $ 1,658 $ 104 6.7% Billions Util. 2Q ‘18 $1.244 58% 2. Construction, Land and 1Q ‘18 $1.151 51% 2017 $1.253 49% Land Development 419 612 590
Slide 19: Asset Quality Summary
Asset Quality Summary Change ($ in Millions) Linked Quarter 2016 2017 Q1-'18 Q2-'18 $ % 1. Non-Accrual Loans $ 30.0 $ 28.7 $ 27.5 $ 20.1 $ (7.4) (26.9%) 2. Other Real Estate 9.0 10.4 9.7 9.1 (0.6) (6.2%) 3. Renegotiated Loans 4.7 1.0 0.6 0.5 (0.1) (16.7%) 4. 90+ Days Delinquent Loans 0.1 0.9 0.7 0.2
Slide 20: Non-Performing Asset Reconciliation
Non-Performing Asset Reconciliation ($ in Millions) Q3-'17 Q4-'17 Q1-'18 Q2-'18 1. Beginning Balance NPAs & 90+ Days Delinquent $ 40.3 $ 45.2 $ 41.0 $ 38.5 Non-Accrual 2. Add: New Non-Accruals 12.7 4.9 4.8 2.7 3. Less: To Accrual/Payoff/Renegotiated (6.1) (7.3) (4.1) (6.3) 4. Less: To OREO (0.6) (0.
Slide 21: ALLL and Fair Value Summary
ALLL and Fair Value Summary ($ in Millions) Q3-'17 Q4-'17 Q1-'18 Q2-'18 1. Beginning Allowance for Loan Losses (ALLL) $ 70.5 $ 73.4 $ 75.0 $ 76.4 2. Net Charge-offs (Recoveries) (0.8) 0.2 1.1 0.6 3. Provision Expense 2.1 1.8 2.5 1.7 4. Ending Allowance for Loan Losses (ALLL) $ 73.4 $ 75.0 $ 76.4 $ 7
Slide 22: Portfolio Summary
Portfolio Summary Strong quarterly loan growth of $177 million, led by Construction and C&I loans Non-Accrual Loans and ORE both declined for the quarter, Total NPAs & 90+ Days remained low at 0.4% of Loans and ORE Classified Assets decreased $12.1 million to $166.3 million Quarterly Net cha
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 . . . Manage market presence and our core banking business. Continue organic growth protocol. Optimize our retail and commercial deposit strategy… products and pricing. Capitalize on talent opportunities from performance and preferred employer
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
Grist Merchants Corporation Appendix FIRST MERCHANTS CORPORATION "200 E, Jackson St, P.O. Box 792, Muncie, IN 47205 |, 706.747.1500
Slide 27: Appendix – Non-GAAP Reconciliation: Capital Ratios
Appendix – Non-GAAP Reconciliation CAPITAL RATIOS (dollars in thousands): 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 Total Risk-Based Capital Ratio Total Stockholders' Equity (GAAP) 887,550 900,865 901,657 929,470 1,035,116 1,283,120 1,303,463 1,313,073 1,340,328 Adjust for Accumulated Other Compr
Slide 28: Appendix – Non-GAAP Reconciliation: Tangible Common Equity Ratio
Appendix – Non-GAAP Reconciliation TANGIBLE COMMON EQUITY RATIO (dollars in thousands): 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 Total Stockholders' Equity (GAAP) $ 887,550 $ 900,865 $ 901,657 $ 929,470 $ 1,035,116 $ 1,283,120 $ 1,303,463 $ 1,313,073 $ 1,340,328 Less: Preferred Stock (125) (125)
Slide 29: Appendix – Non-GAAP Reconciliation: Efficiency Ratio
Appendix – Non-GAAP Reconciliation EFFICIENCY RATIO (dollars in thousands): 2016 2017 1Q18 2Q18 Non Interest Expense (GAAP) $ 177,359 $ 205,556 $ 53,687 $ 53,504 Less: Intangible Asset Amortization (3,910) (5,647) (1,726) (1,718) Less: OREO and Foreclosure Expenses (2,877) (1,903) (402) (362) Adjust
Slide 30: Appendix – Non-GAAP Reconciliation: Construction and Investment RE Concentrations
Appendix – Non-GAAP Reconciliation CONSTRUCTION AND INVESTMENT REAL ESTATE CONCENTRATIONS (dollars in thousands): 2016 2017 1Q18 2Q18 Total Risk-Based Capital (Subsidiary Bank Only) Total Stockholders' Equity (GAAP) $ 973,641 $ 1,404,303 $ 1,414,109 $ 1,432,722 Adjust for Accumulated Other Comprehen