First Merchants Corporation · NASDAQ:FRME
First Merchants — Q4 2012 Earnings Presentation
26 slides from First Merchants's earnings presentation, Jan 24, 2013
Slide 1: First Merchants Corporation 4th Quarter 2012 Earnings Call
First Merchants Corporation 4th Quarter 2012 Earnings Call January 24, 2013
Slide 2: Michael C. Rechin, President and Chief Executive Officer
Michael C. Rechin President and Chief Executive Officer
Slide 3: Forward-looking statements
The Corporation may make forward-looking statements about its relative business outlook. These forward-looking statements and all other statements made during this meeting that do not concern historical facts are subject to risks and uncertainties that may materially affect actual results. Specific
Slide 4: EPS
EPS § 2012 Record Net Income of $40.6 Million § $1.41 Full-Year EPS § $0.32 4 th Quarter EPS Reported Total Revenue and Loan Growth § $189M Loan Growth, 7.0% Year-over-Year Increase § $158M Total Net-Interest Income-FTE, 6.0% Year-over-Year Increase § $64M Total Non-Interest Income, 31.0%Year-over-Y
Slide 5: Mark K. Hardwick, Executive Vice President and Chief Financial Officer
Mark K. Hardwick Executive Vice President and Chief Financial Officer
Slide 6: Assets ($ in Millions)
($ in Millions) 2011 2012 1. Investments $ 827 $ 946 $ 874 2. Loans Held for Sale 21 18 22 3. Loans 2,836 2,713 2,902 4. Allowance (83) (71) (69) 5. CD&I & Goodwill 154 150 150 6. BOLI 97 124 125 7. Other 319 293 301 8. Total Assets $4,171 $4,173 $4,305
Slide 7: Loan portfolio yield (as of 12/31/2012)
(as of 12/31/2012 ) QTD Yield = 4.97% YTD Yield = 5.16% Total = $2.9B
Slide 8: Investment portfolio (as of 12/31/2012)
(as of 12/31/2012) § $874 Million Balance § Average duration - 3.7 years § Tax equivalent yield of 3.70% § Net unrealized gain of $39.6 million
Slide 9: Liabilities and Capital ($ in Millions)
2011 2012 1. Customer Non-Maturity Deposits $2,127 $2,196 $2,479 2. Customer Time Deposits 996 816 739 3. Brokered Deposits 146 123 128 4. Borrowings 277 378 260 5. Other Liabilities 28 34 39 6. Hybrid Capital 142 111 107 7. Preferred Stock (CPP) 68 ― ― 8. Preferred Stock (SBLF) ― 91 91 9. Common Eq
Slide 10: Deposits and Cost of Funds Detail
Deposits and Cost of Funds Detail QTD Cost = .50% Brokered Deposits YTD Cost = .57% A% Total = $3.3B Demand Deposits 49% Certificates & Time Deposits of <$100,000 15% Certificates & Time Deposits of >$100,000 7% Savings Deposits 25% First Merchants Corporation
Slide 11: Capital ratios
2011 2012 1. Total Risk-Based Capital Ratio 15.74% 16.54% 16.34% 2. Tier 1 Risk-Based Capital Ratio 12.82% 13.92% 14.15% 3. Leverage Ratio 9.50% 10.17% 11.03% 4. Tier 1 Common Risk- Based Capital Ratio 7.64% 8.83% 9.62% 5. TCE/TCA 5.86% 6.84% 7.55%
Slide 12: Net interest income and margin trend
Q4-’10 Q1-’11 Q2-’11 Q3-’11 Q4-’11 Q1-’12 Q2-’12 Q3-’12 Q4-’12 Net Interest Income - FTE ($millions) $ 36.7 $ 36.9 $ 37.3 $ 37.3 $ 37.6 $ 37.6 $ 39.5 $ 41.3 $ 39.7 Tax Equivalent Yield on Earning Assets 5.13% 5.11% 5.04% 5.01% 4.83% 4.74% 4.75% 4.89% 4.58% Cost of Supporting Liabilities 1.30% 1.16%
Slide 13: Non-interest income
2010 2011 2012 1. Service Charges on Deposit Accounts $13.3 $12.0 $11.6 2. Trust Fees 7.7 7.7 7.9 3. Insurance Commission Income 6.2 5.7 6.2 4. Electronic Card Fees 6.1 6.5 7.3 5. Cash Surrender Value of Life Ins 2.1 2.6 3.4 6. Gains on Sales Mortgage Loans 6.8 7.4 10.6 7. Securities Gains/Losses 1.
Slide 14: Non-interest expense
2011 2012 1. Salary & Benefits $ 73.3 $ 74.7 $ 79.4 2. Premises & Equipment 17.2 16.9 17.4 3. Core Deposit Intangible 4.7 3.5 1.9 4. Professional Services 1.4 2.2 2.3 5. OREO/Credit-Related Expense 14.6 10.6 8.2 6. FDIC Expense 8.1 5.5 3.5 7. Outside Data Processing 5.1 5.7 5.7 8. Marketing 2.0 2.0
Slide 15: Earnings summary 2010-2012
2010 2011 2012 1. Net Interest Income-FTE 1 $149.4 $149.1 $153.5 2. Non Interest Income 2 46.6 47.1 52.8 3. Non Interest Expense (142.3) (135.9) (137.1) 4. Pre-Tax Pre-Provision Earnings $ 53.7 $ 60.3 $69.2 5. Provision ( 46.5) ( 22.6) ( 18.5) 6. Adjustments 1,2 1.9 2.0 16.1 7. Taxes - FTE ( 2.3) (
Slide 16: Reported vs adjusted EPS
2010 Q1 Q2 Q3 Q4 Total 1. Reported $ .01 $ .35 $ .02 $ .10 $ .48 2. Adjusted $ .01 ($ .05) $ .02 $ .10 $ .08 2011 Q1 Q2 Q3 Q4 Total 3. Reported $ .17 $ .18 ($ .25) $ .24 $ .34 4. Adjusted $ .17 $ .18 $ .21 $ .24 $ .80 2012 Q1 Q2 Q3 Q4 Total 5. Reported $ .46 $ .28 $ .35 $ .32 $1.41 6. Adjusted $ .25
Slide 17: John J. Martin, Senior Vice President and Chief Credit Officer
John J. Martin Senior Vice President and Chief Credit Officer
Slide 18: Asset Quality Summary
Asset Quality Summary ‘% Change (Sin Millions) Year- 2010 2011 Qt-12 © Q2-412, 3-42, Q4-42_~—over-Year 1. Non-Accrual Loans $906 $696| $745 $631 $57.0 $ 534 (23.3%) 2. Other Real Estate $209 $163) $156 $142 $138 $ 133 (18.4%) 3. Renegotiated Loans $ 74 $143) $ 67 $ 39 $ 69 §$ 127 (11.2%) 4. 90+ Days
Slide 19: Allowance coverage of non-accrual loans increased to 129.9%
Allowance coverage of non-accrual loans increased to 129.9%
Slide 20: Asset Reconciliation
if (i Peale sset Reconciliation (¢ in Millions) O34 414 112-212 3-12 412 1. Beginning Balance NPA's & 90+ Days Delinquent $109.5] $106.7 $100.8 $97.0 $81.9 $79.6 Non-Accrual 2. Add: New Non-Accruals 21.4 10.2 16.4 66 83 68 3. Less: To Accrual/Payoft/Renegotiated (7) (7.6) (27) (8.2) (5.4) (3.2) 4. L
Slide 21: Loan Portfolio Trends
Loan Portfolio Trends ($ in Millions) Change Linked Quarter Year-over-Year Loan Portfolio 2010 2011 Qt-12 © Q212 - Q3-12, 4-12 $ % $ % Core Loan Portfolio $ 2,835.7 $2,713.4 | $2,793.0 $2,797.6 $2,836.3 $2,902.2|$ 659 2:3%|$188.8 7.0% Held for Sale (HFS) 21.5 179 22.4 15.3 27.7 22.3| (5.4) (19.5%)|
Slide 22: Classified and criticized assets reduced
Classified Assets Reduced $42.8 Million, or 18.8%, and Criticized Assets Reduced $69.0 Million, or 21.6% (YOY) Renegotiated “A/B” Note Strategy Improving Asset Quality Balanced Core Loan Portfolio Growth Led by C & I and CRE OREO and Other Credit-Related Expenses Trending Lower in 2012
Slide 23: Michael C. Rechin, President and Chief Executive Officer
Michael C. Rechin President and Chief Executive Officer
Slide 24: Growth Company Performance Accomplishments
Growth Company Performance Accomplishments § Commercial Pipelines Transitioned to the Balance Sheet § Non-Banking Lines-of-Business Showing Momentum § Integration Capabilities Affirmed and Retested § Earnings Drove Tangible Common Equity to 7.55% § Ample Reserve Level for Portfolio Risk § Developed
Slide 25: Achieve Top-Tier Performance
“Achieve Top-Tier Performance” Intensify Revenue-Generating Activity and Grow the Franchise § Add Market Coverage from Additional Business Banking Build-out § Evaluate Acquisition Opportunities and Execute on Those that Drive Shareholder Value Focus on Customer Experience and Improve Efficiency § Ev
Slide 26: Investor information and contact
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