First Merchants Corporation · NASDAQ:FRME
First Merchants — Q1 2019 Earnings Presentation
31 slides from First Merchants's earnings presentation, Apr 25, 2019
Slide 1: 1st Quarter Earnings Highlights
1st Quarter Earnings Highlights A p r i l 2 5 , 2 0 1 9
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: Michael C. Rechin, President and Chief Executive Officer
Michael C. Rechin President Chief Executive Officer
Slide 4: 1st Quarter 2019 Highlights
1st Quarter 2019 Highlights Earnings Per Share of $ .78, a 5.4% Increase over 1Q2018 $38.8 Million of Net Income, a 5.8% Increase over 1Q2018 Total Assets of $10.2 Billion; Grew by 7.8% over 1Q2018 Organic Loan & Deposit Growth of 5.7% and 9.8%, respectively, over 1Q2018 1.54% Return on Average Asse
Slide 5: Mark K. Hardwick, EVP, CFO and COO
Mark K. Hardwick Executive Vice President Chief Financial Officer and Chief Operating Officer
Slide 6: Total Assets
Total Assets ($ in Millions) 2017 2018 Q1-’18 Q1-’19 1. Investments $1,561 $1,633 $1,544 $1,863 2. Loans 6,758 7,229 6,906 7,303 3. Allowance (75) (81) (76) (81) 4. Goodwill & Intangibles 477 470 475 468 5. BOLI 224 225 222 226 6. Other 422 409 402 432 7. Total Assets $9,367 $9,885 $9,473 $10,211 An
Slide 7: Loan Yield and Detail (as of March 31, 2019)
Loan Yield and Detail (as of March 31, 2019) YTD Yield = 5.30% Commercial Agricultural Total Loans = $7.3 Billion Construction Land & Agricultural Real Estate Land Public Land Development Production Non-Owner 3.2% Finance/Other Occupied 7.4% 1.1% Commercial Variable = $5.0 Billion 25.9% 5.9% Fixed =
Slide 8: Investment Portfolio (as of March 31, 2019)
Investment Portfolio (as of March 31, 2019) Tax-Exempt Mortgage-Backed Municipals Securities 47% 27% $1.9 Billion Portfolio Modified duration of 5.1 years Tax equivalent yield of 3.49% Net unrealized gain of $26.1 Million Collateralized Mortgage Corporate U. S. Obligations Obligations Agencies 22% 1
Slide 9: Total Liabilities and Capital
Total Liabilities and Capital ($ in Millions) 2017 2018 Q1-’18 Q1-’19 1. Customer Non-Maturity Deposits $5,741 $6,268 $5,850 $6,439 2. Customer Time Deposits 1,051 1,241 1,137 1,375 3. Brokered Deposits 381 246 341 234 Total Deposits 7,173 7,755 7,328 8,048 4. Borrowings 701 538 644 481 5. Other Lia
Slide 10: Deposit Detail (as of March 31, 2019)
Deposit Detail (as of March 31, 2019) YTD Cost = 1.20% Certificates & Certificates & Total = $8.0 Billion Time Deposits Time Deposits >$100,000 <$100,000 Savings 8% Deposits 9% Brokered 29% Deposits 3% Demand Deposits 51% 10
Slide 11: Capital Ratios
Capital Ratios Total Risk-Based Capital Ratio (Target = 12.50%) Common Equity Tier 1 Capital Ratio (Target = 10.00%) Tangible Common Equity Ratio (TCE) (Target = 9.00%) 14.71% 15.00% 14.61% 14.24% 14.25% 14.01% 13.81% 14.00% 13.76% 13.69% 13.69% 13.00% 12.12% 11.98% 12.00% 11.64% 11.16% 11.11% 11.04
Slide 12: Net Interest Margin
Net Interest Margin Q1 - '17 Q2 - '17 Q3 - '17 Q4 - '17 Q1 - '18 Q2 - '18 Q3 - '18 Q4 - '18 Q1 - '19 Net Interest Income - FTE ($millions) $ 64.9 $ 67.2 $ 78.9 $ 83.5 $ 82.5 $ 87.2 $ 89.2 $ 90.7 $ 87.8 Fair Value Accretion $ 4.3 $ 2.3 $ 3.2 $ 4.1 $ 3.2 $ 3.8 $ 3.2 $ 3.9 $ 2.3 Tax Equivalent Yield on
Slide 13: Non-Interest Income
Non-Interest Income ($ in Millions) 2017 2018 Q1-’18 Q1-’19 1. Service Charges on Deposit Accounts $ 18.7 $ 21.0 $ 4.8 $ 5.1 2. Wealth Management Fees 14.7 14.9 3.8 3.8 3. Card Payment Fees 16.1 18.0 4.6 4.8 4. Gains on Sales of Mortgage Loans 7.6 7.0 1.8 1.3 5. Derivative Hedge Fees 2.0 2.5 0.8 0.8
Slide 14: Non-Interest Expense
Non-Interest Expense ($ in Millions) 2017 2018 Q1-’18 Q1-’19 1. Salary & Benefits $119.8 $131.7 $ 32.2 $ 33.0 2. Premises & Equipment 30.1 32.7 8.4 8.7 3. Intangible Asset Amortization 5.6 6.7 1.7 1.5 4. Professional & Other Outside Services 12.8 8.2 1.5 1.9 5. OREO/Credit-Related Expense 1.9 1.5 0.
Slide 15: Earnings
Earnings ($ in Millions) 2017 2018 Q1-’18 Q1-’19 1. Net Interest Income $ 277.3 $ 338.8 $ 79.9 $ 84.9 2. Provision for Loan Losses (9.1) (7.2) (2.5) (1.2) 3. Net Interest Income after Provision 268.2 331.6 77.4 83.7 4. Non-Interest Income 71.0 76.5 19.6 18.7 5. Non-Interest Expense (205.6) (220.0) (
Slide 16: Per Share Results
Per Share Results 2018 Q1 Q2 Q3 Q4 Total 1. Earnings Per Share $ .74 $ .80 $ .83 $ .85 $ 3.22 2. Dividends $ .18 $ .22 $ .22 $ .22 $ .84 3. Tangible Book Value $17.14 $17.71 $18.16 $19.12 2019 Q1 Q2 Q3 Q4 Total 1. Earnings Per Share $ .78 – – – $ .78 2. Dividends $ .22 – – – $ .22 3. Tangible Book V
Slide 17: Dividends and Tangible Book Value
Dividends and Tangible Book Value Quarterly Dividends Tangible Book Value .22 0.22 0.20 .18 $20.07 0.18 $19.12 0.16 .15 $16.96 .14 $15.85 $14.68 0.14 $13.65 0.12 .11 $12.17 $10.95 0.10 $9.64 .08 $9.21 0.08 0.06 .05 0.04 .03 0.02 .01 0.00 2.39% Forward Dividend Yield Compound Annual Growth Rate of 9.
Slide 18: John J. Martin, EVP, Chief Credit Officer
John J. Martin Executive Vice President Chief Credit Officer
Slide 19: Loan Portfolio Trends
Loan Portfolio Trends Change Change Linked Quarter Year Over Year ($ in Millions) 2017 2018 Q1-'18 Q1-'19 $ % $ % 1. Commercial & Industrial $ 1,494 $ 1,727 $ 1,554 $ 1,789 $ 62 3.6% $ 235 15.1% 2. CRE Owner Occupied 700 725 709 714 (11) (1.5%) 5 0.7% 3. Construction, Land and 612 546 590 542 (4) (0
Slide 20: Asset Quality Summary
Asset Quality Summary Change Change ($ in Millions) Linked Quarter Year Over Year 186.12017 2018 Q1-'18 Q1-'19 $ % $ % 1. Non-Accrual Loans $ 28.7 $ 26.1 $ 27.5 $ 28.0 $ 1.9 7.3% $ 0.5 1.8% 2. Other Real Estate 10.4 2.2 9.7 1.9 (0.3) (13.6%) (7.8) (80.4%) 3. Renegotiated Loans 1.0 1.1 0.6 0.7 (0.4)
Slide 21: Non-Performing Asset Reconciliation
Non-Performing Asset Reconciliation ($ in Millions) Q2-'18 Q3-'18 Q4-'18 Q1-'19 1. Beginning Balance NPAs & 90+ Days Delinquent $ 38.5 $ 29.9 $ 30.3 $ 31.3 Non-Accrual 2. Add: New Non-Accruals 2.7 4.6 12.1 5.2 3. Less: To Accrual/Payoff/Renegotiated (6.3) (2.5) (5.4) (1.2) 4. Less: To OREO (0.1) (0.
Slide 22: ALLL and Fair Value Summary
ALLL and Fair Value Summary ($ in Millions) Q2-'18 Q3-'18 Q4-'18 Q1-'19 1. Beginning Allowance for Loan Losses (ALLL) $ 76.4 $ 77.5 $ 78.4 $ 80.6 2. Net Charge-offs (Recoveries) 0.6 0.5 (0.5) 0.9 3. Provision Expense 1.7 1.4 1.7 1.2 4. Ending Allowance for Loan Losses (ALLL) $ 77.5 $ 78.4 $ 80.6 $ 8
Slide 23: Portfolio Summary
Portfolio Summary 1st quarter loans increased 1%, or 4% annualized with year over year loan growth of 5.7%. C&I led the increase in the quarter growing by 3.6% with year over year growth of 15.1%. Asset Quality remained healthy with NPAs & 90+ days at .4% of loans and ORE and classified assets decre
Slide 24: Michael C. Rechin, President and Chief Executive Officer
Michael C. Rechin President Chief Executive Officer
Slide 25: Strategy and Tactics Overview
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 Leverage balance sheet muscle… Liquidity, Capital, Credit Market Disruptions = Opportunity I
Slide 26: Stock listing and investor inquiries
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 Weaver, Investor Relations 765.521.7619 nweaver@firstmerchants.com 26
Slide 27: Appendix
Appendix f First Merchants Corporation
Slide 28: Appendix – Non-GAAP Reconciliation: Capital Ratios
Appendix – Non-GAAP Reconciliation CAPITAL RATIOS (dollars in thousands): 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 Total Risk-Based Capital Ratio Total Stockholders' Equity (GAAP) 929,470 1,035,116 1,283,120 1,303,463 1,313,073 1,340,328 1,361,426 1,408,260 1,455,848 Adjust for Accumulated Other
Slide 29: Appendix – Non-GAAP Reconciliation: Tangible Common Equity Ratio
Appendix – Non-GAAP Reconciliation TANGIBLE COMMON EQUITY RATIO (dollars in thousands): 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 Total Stockholders' Equity (GAAP) $ 929,470 $ 1,035,116 $ 1,283,120 $ 1,303,463 $ 1,313,073 $ 1,340,328 $ 1,361,426 $ 1,408,260 $ 1,455,848 Less: Preferred Stock (125)
Slide 30: Appendix – Non-GAAP Reconciliation: Efficiency Ratio
Appendix – Non-GAAP Reconciliation EFFICIENCY RATIO (dollars in thousands): 2017 1Q18 2018 1Q19 Non Interest Expense (GAAP) $ 205,556 $ 53,687 $ 219,951 $ 56,621 Less: Intangible Asset Amortization (5,647) (1,726) (6,719) (1,528) Less: OREO and Foreclosure Expenses (1,903) (402) (1,470) (1,165) Adju
Slide 31: Appendix – Construction and Investment Real Estate Concentrations
Appendix – Non-GAPP Reconciliation CONSTRUCTION AND INVESTMENT REAL ESTATE CONCENTRATIONS (dollars in thousands): 2017 1Q18 2018 1Q19 Total Risk-Based Capital (Subsidiary Bank Only) Total Stockholders' Equity (GAAP) $ 1,404,303 $ 1,414,109 $ 1,456,220 $ 1,487,947 Adjust for Accumulated Other Compreh