First Merchants Corporation · NASDAQ:FRME
First Merchants — Q4 2010 Earnings Presentation
29 slides from First Merchants's earnings presentation, Jan 27, 2011
Slide 1: First Merchants Corporation 4th Quarter 2010 Earnings Call
First Merchants Corporation 4th Quarter 2010 Earnings Call January 27, 2011
Slide 2: Michael C. Rechin, President and CEO
Michael C. Rechin President and Chief Executive Officer
Slide 3: Forward-Looking Statement
Forward-Looking Statement 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
Slide 4: 4th Quarter 2010 Highlights
4th Quarter 2010 Highlights § Fourth quarter earnings of $2.6M, or $.10 per common share § Year-to-date earnings of $11.7M, or $.48 per common share § Sequential improvement in loan quality continues § Loan loss reserve ample for projected future losses at 2.90% of total loans § Core business profit
Slide 5: Mark K. Hardwick, EVP and CFO
Mark K. Hardwick Executive Vice President and Chief Financial Officer
Slide 6: Total Assets
2008 2009 2010 1. Investments $ 482 $ 563 $827 2. Loans 3,722 3,278 2,857 3. Allowance (50) (92) (83) 4. CD&I & Goodwill 166 159 154 5. BOLI 93 95 97 6. Other 371 478 318 7. Total Assets $4,784 $4,481 $4,170 ($ in Millions) TOTAL ASSETS
Slide 7: Loan Composition (as of 12/31/10)
Loan Composition (as of 12/31/10) YTD Yield = 5.66% Total = $2.9B LOAN AND CREDIT DETAIL
Slide 8: Investment Portfolio
INVESTMENT PORTFOLIO (as of 12/31/10) § $827 Million Balance § Average duration of 4.7 years § Tax equivalent yield of 4.15% § No private label MBS exposure § Trust Preferred Pools with book balance of $5.8 million and a market value of $200K § Net unrealized gain of the entire portfolio totals $1.6
Slide 9: Total Liabilities and Capital
2008 2009 2010 1. Customer Non-Maturity Deposits $1,858 $2,042 $2,127 2. Customer Time Deposits 1,384 1,220 996 3. Brokered Deposits 477 275 146 4. Borrowings 507 339 277 5. Other Liabilities 51 30 28 6. Hybrid Capital 111 111 142 7. Preferred Stock (CPP) - 112 68 8. Common Equity 396 352 386 9. Tot
Slide 10: Deposit Composition and Cost
YTD Cost = 1.42% 43% 23% 20% 10% Total = $3.3B
Slide 11: Capital Ratios
2008 2009 2010 1. Total Risk-Based Capital Ratio 10.24% 13.04% 15.72% 2. Tier 1 Risk-Based Capital Ratio 7.71% 10.32% 12.80% 3. Leverage Ratio 8.16% 8.20% 9.49% 4. TCE/TCA 5.01% 4.54% 5.84% CAPITAL RATIOS
Slide 12: Net Interest Margin
3,463 4,245 3,862 3.87% 3.84% 3.74% ― Net Interest Margin NET INTEREST MARGIN
Slide 13: Non-Interest Income
2008 2009 2010 1. Service Charges on Deposit Accounts $13.0 $15.1 $13.3 2. Trust Fees 8.0 7.4 7.7 3. Insurance Commission Income 5.8 6.4 6.2 4. Cash Surrender Value of Life Ins (0.3) 1.6 2.1 5. Gains on Sales Mortgage Loans 2.5 6.8 6.8 6. Securities Gains/Losses (2.1) 4.4 1.9 7. Other 9.5 9.5 10.5 8
Slide 14: Non-Interest Expense
NON-INTEREST EXPENSE 2008 2009 2010 1. Salary & Benefits $63.0 $76.3 $73.3 2. Premises & Equipment 14.4 17.9 17.2 3. Core Deposit Intangible 3.2 5.1 4.7 4. Professional Services 1.7 1.3 1.4 5. OREO/Credit-Related Expense 3.7 12.9 14.6 6. FDIC Expense 1.7 10.4 8.1 7. FHLB Prepayment Penalties - 1.9 -
Slide 15: Earnings
2008 2009 2010 1. Net Interest Income-FTE $133.1 $159.1 $149.4 2. Non Interest Income 1 38.5 46.5 46.6 3. Non Interest Expense 2 (106.0) (134.7) (127.7) 4. Pre-Tax Pre-Provision Earnings $ 65.6 $ 70.9 $68.3 5. Provision (28.2) (122.2) (46.5) 6. Adjustments (5.0) (12.1) (12.7) 7. Taxes - FTE (11.8) 2
Slide 16: John J. Martin, SVP and Chief Credit Officer
John J. Martin Senior Vice President and Chief Credit Officer
Slide 17: 4th Quarter Highlights: Portfolio Overview
4th Quarter Highlights PORTFOLIO OVERVIEW • Non-accrual loans declined 8% from $98.6 at 09/30/10 to $90.6 million at 12/31/10. • Allowance for Loan and Lease Losses is 2.90% of total loans at 12/31/10 and up from 2.86% at 09/30/10. Allowance coverage to Non-Accrual Loans increased to 92%. • 30-89 da
Slide 18: Non-Accrual Loans
($ in millions) NON-ACCRUAL LOANS
Slide 19: Non-Accrual Loans by Category
% of Period End Total Loans Plus Loans Held For Sale NON-ACCRUAL LOANS 12134109 03/34/10 06/30/10 09/30/10 12/3110 Commercial & Industrial 5.16% 3.68% 3.55% 3.19% 1.75% Land and Lot, 12.60% 10.25% 8.91% 6.25% 16.10% Commercial Mortgage 3.18% 4.65% 4.74% 4.22% 3.69% Agricuture Production 0.28% 0.86%
Slide 20: Largest New Non-Accrual Loans
($ in millions) Industry: § Single Family Housing Construction § Residential Land Development/Home Construction § Retail Center § Retail Center and Apartment Building § CRE Investments § Personal Residence Total New Non-Accrual Greater than $500,000 $4.195 3.648 2.911 2.313 2.037 1.092 $14.527 LARGE
Slide 21: Other Real Estate Owned
($ in millions) OTHER REAL ESTATE OWNED
Slide 22: Loan Delinquency Trends
90+ Day Delinquency 30+ Day Delinquency (as a % of period end total loans) (as a % of period end total loans) LOAN DELINQUENCY TRENDS
Slide 23: Non-Performing Asset Reconciliation
($ in millions) 60; Q2 Q3 Q4 Beginning Period 3/31/2010 6 /30/2010 9 /30/2010 Beginning Balance NPAs & 90+ Days Past due $144.6 $146.5 $130.8 Non-Accrual Add: New NPLs $ 27.3 $ 15.5 $ 27.4 Less: To Accrual/Payoff/Restructured ( 8.3) ( 18.6) ( 14.5) Less: To OREO ( 4.0) ( 6.7) ( 7.0) Less: Charge-o
Slide 24: Net Charge-offs by Loan Category
Commercial Commercial Land and Total Residential Home Other —_—Total (Sin millions) Industrial Mortgage Lot Agriculture Commercial Mortgage Equity Consumer Consumer —_Total Loan Balances $560.4 $1,2290 $1066 $955 $1,9015 $5435 $2020 © $120.2 $865.7 $2,8572 % of total 19.6% 43.0% 37% 3.4% 69.7% 19.0%
Slide 25: Net Charge-offs, Provision and Allowance for Loan Losses
2008 2009 2010 @ Net Charge-offs 0 Provison @ Allowance for Loan Losses
Slide 26: Allowance Coverage to Non-Accrual Loans
ALLOWANCE COVERAGE TO NON-ACCRUAL LOANS
Slide 27: Michael C. Rechin, President and CEO
Michael C. Rechin President and Chief Executive Officer
Slide 28: Overview of Operating Strategy and Tactics
Overview of Operating Strategy and Tactics “Strengthen and Grow” § Capitalize on our newly formed Retail Line of Business Structure to streamline and solidify our brand position as a community bank competing primarily in consumer, small business, and middle market § Continue to improve asset quality
Slide 29: 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: David L. Ortega Investor Relations Telephone: 765.378.8937 dortega@firstmerchants.com