First Merchants Corporation · NASDAQ:FRME
First Merchants — Q1 2021 Earnings Presentation
28 slides from First Merchants's earnings presentation, Apr 22, 2021
Slide 1: Investor Update First Quarter 2021
INVESTOR UPDATE First 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 3/31/2021 $14.6 Billion $9.3 Billion $12.0 Billion $4.5 Billion Assets Under Management Total Assets Total Loans Total Deposits TCE/TA: YTD Return on TCE YTD ROAA: Dividend Yield: Price / Tangible Book: Price / 2021 Est. EPS: 1.39
Slide 5: Strategy & Key Lines of Business
Strategy & Key Lines of Business 5 Consumer BankingCommercial Banking Private Wealth Advisory Full Spectrum of Debt Capital Offerings Located in Prime Growth Markets Small Business & SBA Middle Market C&I Investment Real Estate Public Finance Sponsor Finance Asset Based Lending Syndications Treasury
Slide 6: Attractive Markets of Operation
Attractive Markets of Operation 6 Indianapolis Indianapolis MSA Rank: 10 Deposits: $2.5B Loans: $3.2B Columbus Columbus MSA Rank: 11 Deposits: $810M Loans: $1.3B Northwest Indiana Lake County Rank: 4 Lafayette MSA Rank: 2 Deposits: $3.1B Loans: $2.0B Northeast Indiana Muncie MSA Rank: 1 Ft Wayne MSA
Slide 7: First Quarter Highlights
First Quarter Highlights 7 10.75% ROE 15.87% ROTCE ROE & ROTCE (Annualized) ▪ Returned to the office and reopened Banking Center lobbies ▪ Hoosier Trust Company acquisition closed on April 1, 2021; annualized revenue contribution of $1.5 million ▪ Completed 13 branch consolidations year-to-date ▪ Di
Slide 8: First Quarter Financial Results
First Quarter Financial Results 8 ▪ 50.23% Efficiency Ratio ▪ Pre-Tax, Pre-Provision (PTPP) Earnings totaled $58.4, an increase of $1.2 million from 4Q20 ▪ 3.3% annualized loan growth, loan balances were stable excluding PPP loans over prior quarter ▪ Net interest income, decreased $1.9 million over
Slide 9: Investment Portfolio Highlights
Municipal Bonds 53%Mortgage- Backed Securities 32% Collateralized Mortgage Obligations 6% U.S. Agencies 8% Corporate Obligations 1% ▪ Net unrealized Gain of $85.3 million Investment Portfolio Highlights 9 1Q21 Investment Portfolio Composition Yield on Investments (%) / Total Investments ($B) $3.7B T
Slide 10: Loan Portfolio Highlights
Loan Portfolio Highlights 10 1Q21 Loan Composition Yield on Loans (%) / Total Loans ($B) $9.3B Total 1Q21 Portfolio by Yield Type Highlights Total loan rate mix as of 1Q21 • $5.7 billion variable rate • $3.6 billion fixed rate $0.9 ▪ Portfolio composition remains ~80% Commercial oriented • Compositi
Slide 11: Allowance for Credit Losses - Loans
Allowance for Credit Losses - Loans 11 1Q21 Allowance for Credit Losses - Loans Key Model Assumptions Change in ACL – Loans1 Highlights $0.9 ▪ In addition to ACL – Loans, a reserve for unfunded commitments of $20.5 million, was recorded in Other Liabilities ▪ Allowance to Loans, excluding PPP loans,
Slide 12: Deposit Portfolio Highlights
Demand Deposits 61% Savings Deposits 32% Certificates & Time Deposits > $100k 3% Certificates & Time Deposits < $100k 3% Brokered Deposits 1% 12 1Q21 Deposit Composition Highlights $12.0B Total 1Defined as total deposits less time deposits > $100k vs. Prior Periods Cost of Total Deposits (%) / Total
Slide 13: Net Interest Margin
Net Interest Margin 13 1Q20 2Q20 3Q20 4Q20 1Q21 1. Net Interest Income - FTE ($millions) 97.8$ 97.1$ 97.3$ 107.0$ 105.1$ 2. Fair Value Accretion 3.5$ 3.7$ 3.3$ 3.0$ 1.8$ 3. PPP Loan Income 4.7$ 6.1$ 11.6$ 9.2$ 4. Tax Equivalent Yield on Earning Assets 4.38% 3.72% 3.58% 3.72% 3.52% 5. Interest Expens
Slide 14: Non-Interest Income Detail
Wealth Management $6.4 27% Gain on Sale of Loans $4.0 17% Service Charges $5.3 22% Card Payment Fees $4.4 18% Gain on Sale of Securities $1.8 7% Derivative Hedge Fees $0.3 1% BOLI $1.3 5% Other Customer Fees $0.4 … Other $0.2 1% 14 1Q21 Non-Interest Income Detail ($M) $24.1M Total Non-Interest Incom
Slide 15: Non-Interest Expense Detail
Salary & Benefits $38.8 59% Premises & Equipment $11.5 17% Outside Data Processing $4.2 6% Professional & Other Outside Services $2.5 4% Intangible Asset Amortization $1.4 2% Marketing $1.1 2% FDIC Expense $1.4 2% Other $5.2 8% 15 1Q21 Non-Interest Expense Detail $66.1M Total Non-Interest Expense Tr
Slide 16: Capital Ratios
16 Tangible Common Equity Ratio Common Equity Tier 1 Ratio Total Risk-Based Capital Ratio Capital Ratios 9.31% 9.31% 9.65% 8.78% 9.91% 9.93% 10.19% 9.99% 9.10% 1Q20 2Q20 3Q20 4Q20 1Q21 TCE Ratio TCE ex. PPP Target TCE (9.00%) 9.57% 9.31% 11.58% 11.84% 12.02% 12.02% 11.99% 1Q20 2Q20 3Q20 4Q20 1Q21 CE
Slide 17: Loan Portfolio Highlights
Loan Portfolio 17 Highlights vs. Prior Quarter vs. 1Q20 ▪ Total loans grew $76 million • $ 75 million PPP • $ 79 million Sponsor Finance • $ 56 million Construction • $ 30 million Public Finance ▪ $711 Million total loan growth • $742 million PPP • $117 million Residential Mortgage • $ 91 million Pu
Slide 18: Pandemic Related Modifications and PPP Loans
$48.7 $7.3 $7.6 $0.4 8 4 13 4 Hotel Investment CRE Other Admin/Services Other Commercial $ Mods in Deferral # Mods in Deferral Pandemic Modifications by Portfolio ($M) 18 Pandemic related Modifications and PPP Loans Modifications in deferral are .7% of total loans. Paycheck Protection Program ▪ Part
Slide 19: Pandemic Impacted Industries: Hotel and Senior Living Portfolios
7.0% 6.3% 12.5% 32.4% 41.8% 1 Brands Marriott Hilton Hyatt Intercontinental Other Pandemic Impacted Industries 19 Hotel Portfolio ▪ 120 loans to 76 borrowers totaling $189 million • 57 PPP loans outstanding totaling $8.0 million • 36 of 57 originated 1Q21 totaling $6.0 million • 26 borrowers $1 Mill
Slide 20: Asset Quality
Asset Quality 20 Asset Quality Trends ($M) Highlights vs. Prior Quarter vs. 1Q20 ▪ Non-accrual loans decreased $3.6 million ▪ Renegotiated Loans decreased $2.5 million ▪ NPAs + 90PD decreased $6.1 million, 65 basis points of loans + ORE ▪ Classified loans decreased $2.3 million ▪ Net charge-offs 1Q2
Slide 21: Non-Performing Assets Roll Forward
▪ $6.1 million net reduction in NPAs + 90 PD ▪ $6.5 million in new non-accruals • $4.1 million commercial real estate loan moved to non-accrual ▪ $4.3 million of gross charge-offs in 1Q21 with recoveries of $.7 million ▪ $2.6 million charge-offs in two senior living facility loans Non-Performing Ass
Slide 22: Track Record of Shareholder Value
Track Record of Shareholder Value 22 10-Year Total Return (3/31/11 – 3/31/21) 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 $0.91 2010 2011 2012
Slide 23: History of Organic and Whole Bank Acquisition Growth
$1.6 $1.8 $2.7 $3.1 $3.2 $3.2 $3.6 $3.8 $4.8 $4.5 $4.2 $4.2 $4.3 $5.4 $5.8 $6.8 $7.2 $9.4 $9.9 $12.5 $14.1 $14.6 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 1Q21 History of Organic and Whole Bank Acquisition Growth 23 Total Assets ($B) Gro
Slide 24: Vision for the Future
Vision for the Future 24 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 25: Appendix
APPENDIX First Merchants Corporation
Slide 26: Non-GAAP Total Risk-Based Capital Ratio
Non-GAAP 26 1Q20 2Q20 3Q20 4Q20 1Q21 Total Risk-Based Capital Ratio (dollars in thousands) Total Stockholders' Equity (GAAP) 1,777,960 1,809,095 1,833,656 1,875,645 1,805,856 Adjust for Accumulated Other Comprehensive (Income) Loss 1 (53,656) (63,845) (65,468) (74,836) (35,810) Less: Preferred Stock
Slide 27: Non-GAAP Tangible Common Equity Ratio
Non-GAAP 27 1Q20 2Q20 3Q20 4Q20 1Q21 Tangible Common Equity Ratio (dollars in thousands) Total Stockholders' Equity (GAAP) 1,777,960$ 1,809,095$ 1,833,656$ 1,875,645$ 1,805,856$ Less: Preferred Stock (125) (125) (125) (125) (125) Less: Intangible Assets (577,366) (575,855) (574,369) (572,893) (571,5
Slide 28: Non-GAAP Efficiency Ratio
Non-GAAP 28 1Q20 2Q20 3Q20 4Q20 1Q21 EFFICIENCY RATIO (dollars in thousands): Non Interest Expense (GAAP) 66,171$ 59,989$ 64,709$ 72,536$ 66,098$ Less: Intangible Asset Amortization (1,514) (1,511) (1,486) (1,476) (1,357) Less: OREO and Foreclosure Expenses (505) (684) (717) 1,576 (734) Adjusted Non