First Merchants Corporation · NASDAQ:FRME
First Merchants — Q2 2019 Earnings Presentation
56 slides from First Merchants's earnings presentation, Aug 2, 2019
Slide 1: First Merchants Corporation 2nd Quarter 2019 Highlights
i First Merchants Corporation NASDAQ: FRME 2°4 Quarter Highlights 2.019 —_. ie BEST ,|_ ToworKin 2\| INDIANA First Merchants Corporation ) 200 E. Jackson St., P.O. Box 792, Muncie, IN 47305 ) 765.747.1500
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: Why Invest in First Merchants?
Why Invest in First Merchants? 3 3
Slide 4: Company Profile (as of June 30, 2019)
Company Profile (as of June 30, 2019) First Merchants Market Information Common Shares Outstanding 49,456,594 ₎ First Merchants Bank, formed in 1893, celebrating its 126th anniversary. Market Cap $1,874,405 Dividend Yield 2.43% ₎ First Merchants Corporation, organized in 1982, is Price/Tangible Book
Slide 5: Our Franchise
Our Franchise Key Market Profiles Loans Deposits $1,333M Columbus $ 608M 784M Fort Wayne 994M 2,613M Indianapolis 1,793M 642M Lafayette 1,133M 1,203M Muncie 2,474M 942M Lakeshore 1,317M $7,517M Total $8,319M (as of June 30, 2019) Mission Statement To be the most responsive, knowledgeable and high-pe
Slide 6: Key FMC Deposit Market Share – FDIC Data
Key FMC Deposit Market Share – FDIC Data June 30, 2018 County Region/Type Market Position Market % $ Deposits Delaware County, IN Muncie (Established) 1 53.48% $ 1,315,724 Jasper County, IN Lafayette (Established) 1 33.64% 201,364 White County, IN Lafayette (Established) 1 34.50% 164,957 Jay County,
Slide 7: First Merchants “Whole Bank” Strategy
First Merchants “Whole Bank” Strategy Commercial Banking Consumer Banking Private Wealth Advisors Growth Strategy Organic Merger/Acquisition 7 7
Slide 8: First Merchants Strategy: Commercial Banking
First Merchants Strategy Commercial Bank Located in Prime Growth Commercial Banking Markets Indianapolis, Indiana Columbus, Ohio Fort Wayne, Indiana Lafayette, Indiana Lakeshore - Northwest Indiana Hire the Best Talent Supported with the Finest: Sales Management Process Lending and Cash Management S
Slide 9: First Merchants Strategy: Consumer Retail Bank
First Merchants Strategy Consumer Retail Bank Diverse Locations in Stable Rural and Growth Metro Markets Supported by: Talented Customer Service Oriented Banking Center and Call Center Professionals State-of-the-Art Deposit and CRM Systems Highly Usable Online Banking System Widely Available Mobile
Slide 10: First Merchants Strategy: Private Wealth Advisors
First Merchants Strategy Private Wealth Advisors Comprehensive and coordinated approach to personal wealth management Expertise in Investment Management, Private Banking, Fiduciary, Estate and Financial Planning Strengthen commercial relationships with personal services for executives/owners and ret
Slide 11: First Merchants Strategy
First Merchants Strategy “Service-driven alternative to super-regional bank competitors. Deliver superior service with presence close to the customer for . . . ” Consumer Banking Mortgage Banking Commercial Banking Business Banking Commercial & Industrial Agriculture Sponsor Finance Public Finance H
Slide 12: Line-of-Business Strategies
Line-of-Business Strategies CONSUMER COMMERCIAL MORTGAGE WEALTH BANKING BANKING ADVISORY Indianapolis Columbus, OH Lafayette Muncie Lakeshore Fort Wayne Higher Growth Higher Growth Established Established Higher Growth Higher Growth Delaware, Fayette, Hamilton, Hancock, Carroll, Clinton, Franklin Co
Slide 13: Organic Growth Opportunities Exists in All Directions
Organic Growth Opportunities Exists in All Directions Lakeshore - NW Indiana MSA* Fort Wayne MSA Entered: 2013 Entered: 2017 Total Population: 686,153 Total Population: 438,721 Deposit Market Share: 14.70% Deposit Market Share: 7.76% FOUNDING MARKET Muncie MSA Established: 1893 Lafayette MSA Total P
Slide 14: Ranked Best in the Midwest for Business
Ranked Best in the Midwest for Business AAA Credit Rating since 20081 Leading the Nation in Manufacturing Job Growth 1st in Midwest and 5th Nationally for Best State for Doing Business2 1st Metro Area for Strong Job Opportunities with Affordable Housing 1st Nationally for Highway Accessibility 1st i
Slide 15: Muncie Market
Muncie Market ₎ Located 58 miles northeast of Indianapolis in the east central portion of the Notable Major Employers state ₎ Described by several national studies as a typical American community, Delaware County offers the advantages of larger cities without the hassles and costs associated with li
Slide 16: Indianapolis Market
Indianapolis Market ₎ Indianapolis metropolitan area includes four of the five fastest- growing counties in Indiana and 10 of the 11 fastest-growing cities Notable Major Employers and towns with populations of at least 5,000* ₎ The population data released by the U.S. Census Bureau show suburban Ham
Slide 17: Lafayette Market
Lafayette Market ₎ Ranked #1, MSN Money, Fastest Growing Cities in the State of Indiana Notable Major Employers ₎ Ranked #2, Forbes Best Small Places for Business and Careers ₎ Ranked #2 in Indiana for STEM job density, with 13.6% of the workforce, topping the state’s 10.9% & national average of 11.
Slide 18: Lakeshore Market
Lakeshore Market ₎ Indiana’s second-most populous market Notable Major Employers ₎ Benefit from its Chicago proximity ₎ Continue to produce finest steels, refine the cleanest fuels and deliver the best products to the Midwest** ₎ New investments by world-class companies like BP, Pratt Industries, Al
Slide 19: Fort Wayne Market
Fort Wayne Market ₎ 2nd Largest MSA in the State of Indiana Notable Major Employers ₎ Diversified economy (manufacturing, health care, retail trade, food services) ₎ Attractive location for businesses to locate and expand – located between the Chicago, Detroit, Dayton, Toledo and Indianapolis metro
Slide 20: Columbus, Ohio Market
Columbus, Ohio Market ₎ Second-most populous county in Ohio Notable Major Employers ₎ Within 600 miles of 60% of All U.S. and Canadian Population ₎ Ranked 2nd in CNBC’s 2010 study of state transportation systems for its infrastructure, vitality, quality roads, and ability to cost-effectively ship go
Slide 21: Growth Through Acquisition
Growth Through Acquisition Experienced Acquirer Expand in Current High-Growth Markets Extend into Additional High-Growth Markets Add to Franchise with Stable Deposit Gathering Markets 21
Slide 22: Acquisition Experience
Acquisition Experience Notoral ak 2015 * Cooper GB 1903 1988 t k * Merchants * Pendleton Decatur # Lincoin + Citizens State Bani National Bank} — Banking Bank & Bank Financial * Ameriana Company Trust Bank Bank 1999 ii W200: 2003 an 2012 ii 2014 2019 * First + First * Frances * Commerce —« Shelby *
Slide 23: First Merchants Acquisition Process
First Merchants Acquisition Process Continuous Relationship Building Complete and Thorough Due Diligence Process Demonstrated Pricing Discipline Detailed Project Management Integration Process Single Charter Operating Environment Scalable Technology and Operations Center 23
Slide 24: Operational Delivery Highlights
Operational Delivery Highlights Strategic differentiator in support of growth and scalability Operational services execution “hub” focusing on value creation Functional focus: Operations Project Management Technology Risk Management Vendor Management Credit Administration Located on the interstate l
Slide 25: Operational Delivery Highlights: Customer, Digital Channel & Transaction Activity
Operational Delivery Highlights Customer, Digital Channel & Transaction Activity ₎ Retail Households: 177,800 ₎ Online Banking/Digital Channel ₎ Cash Management Annual Volume • Consumer: 85K Users • Automated Clearing House (ACH) • 1.5M logins monthly • # Originated: 2.5M Items ($8B) • 14K bill pay
Slide 26: 2nd Quarter 2019 Highlights
2nd Quarter 2019 Highlights Earnings Per Share of $ .83, a 3.8% Increase over 2Q2018 $41.1 Million of Net Income, a 3.6% Increase over 2Q2018 Total Assets of $10.7 Billion; Grew by 10.3% over 2Q2018 Annualized Organic Loan & Deposit Growth of 11.8% and 13.5%, respectively High Performance Measures 1
Slide 27: Total Assets
Total Assets ($ in Millions) 2017 2018 Q1-’19 Q2-’19 1. Investments $1,561 $1,633 $1,863 $ 2,093 2. Loans 6,758 7,229 7,303 7,517 3. Allowance (75) (81) (81) (81) 4. Goodwill & Intangibles 477 470 468 467 5. BOLI 224 225 226 226 6. Other 422 409 432 516 7. Total Assets $9,367 $9,885 $10,211 $10,738
Slide 28: Loan Yield and Detail
Loan Yield and Detail (as of June 30, 2019) QTD Yield = 5.32% Commercial Agricultural YTD Yield = 5.31% Construction Land & Agricultural Real Estate Land Public Land Development Production Total Loans = $7.5 Billion Non-Owner 3.1% Finance/Other 8.3% 1.1% Occupied Commercial 24.8% 6.1% Variable = $5.
Slide 29: CRE Loan Concentration
CRE Loan Concentration First Merchants Results in Relation to FDIC Guidelines FDIC GUIDELINES TO IDENTIFY INSTITUTIONS POTENTIALLY EXPOSED TO CRE RISK: Guideline 1: Total loans for construction, land development, and other land representing 100% or more of total capital Guideline 2: Total CRE loans
Slide 30: Investment Portfolio
Investment Portfolio (as of June 30, 2019) Tax-Exempt Municipals Mortgage-Backed 47% Securities 29% $2.1 Billion Portfolio Modified duration of 4.9 years Tax equivalent yield of 3.35% Net unrealized gain of $55.5 Million Collateralized Mortgage Corporate U. S. Obligations Obligations Agencies 20% 1%
Slide 31: Total Liabilities and Capital
Total Liabilities and Capital ($ in Millions) 2017 2018 Q1-’19 Q2-’19 1. Customer Non-Maturity Deposits $5,741 $6,268 $6,439 $ 6,668 2. Customer Time Deposits 1,051 1,241 1,375 1,450 3. Brokered Deposits 381 246 234 201 Total Deposits 7,173 7,755 8,048 8,319 4. Borrowings 701 538 481 659 5. Other Li
Slide 32: Deposit Detail
Deposit Detail (as of June 30, 2019) QTD Cost = 1.32% Certificates & YTD Cost = 1.26% Time Deposits Certificates & >$100,000 Time Deposits Total = $8.3 Billion Savings 9% <$100,000 Deposits 9% Brokered 28% Deposits 2% Demand Deposits 52% 32
Slide 33: Retail Checking Account Migration
Retail Checking Account Migration Retail Demand and Interest Checking Account Trend $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $- 6/30/17 9/30/17 12/31/17 3/31/18 6/30/18 9/30/18 12/31/18 3/31/19 6/30/19 Demand Deposits Interest Checking Migrated approximately 150,000 accounts with $1
Slide 34: Capital Ratios
Capital Ratios Total Risk-Based Capital Ratio (Target = 12.50%) Common Equity Tier 1 Capital Ratio (Target = 10.00%) Tangible Common Equity Ratio (TCE) (Target = 9.00%) 15.00% 14.71% 14.61% 14.56% 14.25% 14.01% 13.76% 13.81% 14.00% 13.69% 13.69% 13.00% 12.12% 11.98% 12.05% 12.00% 11.64% 11.21% 11.11
Slide 35: Net Interest Margin
Net Interest Margin Q2 - '17 Q3 - '17 Q4 - '17 Q1 - '18 Q2 - '18 Q3 - '18 Q4 - '18 Q1 - '19 Q2 - '19 Net Interest Income - FTE ($millions) $ 67.2 $ 78.9 $ 83.5 $ 82.5 $ 87.2 $ 89.2 $ 90.7 $ 87.8 $ 88.4 Fair Value Accretion $ 2.3 $ 3.2 $ 4.1 $ 3.2 $ 3.8 $ 3.2 $ 3.9 $ 2.3 $ 2.2 Tax Equivalent Yield on
Slide 36: Non-Interest Income
Non-Interest Income ($ in Millions) 2017 2018 Q1-’19 Q2-’19 1. Service Charges on Deposit Accounts $ 18.7 $ 21.0 $ 5.1 $ 5.4 2. Wealth Management Fees 14.7 14.9 3.8 3.9 3. Card Payment Fees 16.1 18.0 4.8 4.9 4. Gains on Sales of Mortgage Loans 7.6 7.0 1.3 1.7 5. Derivative Hedge Fees 2.0 2.5 0.8 1.5
Slide 37: Private Wealth Advisors
Private Wealth Advisors Delivers broad advisory capabilities and expertise through Equity market performance reflected in asset levels local, engaged and empowered leaders Continued strong new client acquisition in Q2 Private Banking continuing to drive expansion of existing Business lines include:
Slide 38: Mortgage Banking
Mortgage Banking Key component of Fee Income Mortgage Banking Revenue 8 ₎ Mortgage Production for sale and $7.56M $7.0M $7.01M 7 portfolio via commissioned and $6.5M salaried loan originators 6 ₎ Strong loan origination teams in high-growth areas of Indianapolis 5 and Columbus, OH 4 ₎ Centralized un
Slide 39: Non-Interest Expense
Non-Interest Expense ($ in Millions) 2017 2018 Q1-’19 Q2-’19 1. Salary & Benefits $119.8 $131.7 $ 33.0 $32.7 2. Premises & Equipment 30.1 32.7 8.7 8.6 3. Intangible Asset Amortization 5.6 6.7 1.5 1.5 4. Professional & Other Outside Services 12.8 8.2 1.9 2.4 5. OREO/Credit-Related Expense 1.9 1.5 1.2
Slide 40: Earnings
Earnings ($ in Millions) 2017 2018 Q1-’19 Q2-’19 1. Net Interest Income $ 277.3 $ 338.8 $ 84.9 $85.3 2. Provision for Loan Losses (9.1) (7.2) (1.2) (0.5) 3. Net Interest Income after Provision 268.2 331.6 83.7 84.8 4. Non-Interest Income 71.0 76.5 18.7 21.6 5. Non-Interest Expense (205.6) (220.0) (5
Slide 41: 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 $ .83 – – $ 1 .61 2. Dividends $ .22 $ .26 – – $ .48 3. Tangi
Slide 42: Dividends and Tangible Book Value
Dividends and Tangible Book Value Quarterly Dividends Tangible Book Value .26 0.26 0.24 .22 $21.01 0.22 $19.12 0.20 .18 $16.96 0.18 $15.85 $14.68 .15 0.16 .14 $13.65 0.14 $12.17 $10.95 .11 0.12 $9.21 $9.64 0.10 .08 0.08 0.06 .05 0.04 .03 0.02 .01 0.00 2.74% Forward Dividend Yield Compound Annual Gro
Slide 43: Asset Quality Summary
Asset Quality Summary Change ($ in Millions) Linked Quarter 186.12017 2018 Q1-'19 Q2-'19 $ % 1. Non-Accrual Loans $ 28.7 $ 26.1 $ 28.0 $ 25.6 $ (2.4) (8.6%) 2. Other Real Estate 10.4 2.2 1.9 1.1 (0.8) (42.1%) 3. Renegotiated Loans 1.0 1.1 0.7 0.7 - 0.0% 4. 90+ Days Delinquent Loans 0.9 1.9 0.1 0.2 0
Slide 44: ALLL and Fair Value Summary
ALLL and Fair Value Summary ($ in Millions) Q3-'18 Q4-'18 Q1-'19 Q2-'19 1. Beginning Allowance for Loan Losses (ALLL) $ 77.5 $ 78.4 $ 80.6 $ 80.9 2. Less: Net Charge-offs (Recoveries) 0.5 (0.5) 0.9 0.1 3. Add: Provision Expense 1.4 1.7 1.2 0.5 4. Ending Allowance for Loan Losses (ALLL) $ 78.4 $ 80.6
Slide 45: Total Return Performance
Total Return Performance Total Return Percentage Return Total 6/30/2013 6/30/2014 6/30/2015 6/30/2016 6/30/2017 6/30/2018 6/30/2019 45
Slide 46: A Leading Midwest Banking Franchise Crossing $10 Billion with Strategic Entry into Michigan
A Leading Midwest Banking Franchise Crossing $10 Billion with Strategic Entry into Michigan Pro Forma Highlights1 Ticker: FRME Headquarters: Muncie, IN Founded: 1893 Banking Centers: 134 Assets: $11.1 Billion Loans: $7.8 Billion Deposits: $8.7 Billion Current First Merchants Locations MBTF Locations
Slide 47: Overview of MBT Financial Corporation
Overview of MBT Financial Corporation Company Highlights Geographic FootprintFarmington Hills Northville . Headquartered in Monroe, Michigan Plymouth Redford Highland Park Livonia 75 Westland . Founded in 1858 Dearborn Ann Arbor 275 Allen Park . Operates 20 Banking Centers 94 75 Southgate . Balance
Slide 48: Strategy and Tactics Overview
Strategy and Tactics Overview Looking Forward… Continue organic growth protocol. Manage market presence, core banking business margin and fee generation. Optimize our retail and commercial deposit strategy . . . products and pricing Leverage balance sheet muscle . . . Liquidity, Capital, Credit Impl
Slide 49: Why Invest in First Merchants?
Why Invest in First Merchants? Forbes Magazine recognition as a Top 2 Commercial Presence that Creates a Ranking in “America’s Best Banks” Client Preference Performance Ranked Best among Indiana State-of-the-Art Technology and Banks by Bank Director Magazine Operations Center Attractive and Growing
Slide 50: Research Coverage
Research Coverage SANDLER BP KEEFE, BRUYETTE & WOODS QO’ N E | L L IBN) Specialists in Financial Services ae PA RT N : R S A Stifel Company Piper Jaffray. Stephens GROUP pm D\ADAVIDSON Ae x cowessy RAYMOND JAMES iFirst Merchants Corporation
Slide 51: 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 51
Slide 52: Appendix
Appendix f First Merchants Corporation
Slide 53: Appendix – Non-GAAP Reconciliation
Appendix – Non-GAAP Reconciliation 53
Slide 54: Appendix – Non-GAAP Reconciliation
Appendix – Non-GAAP Reconciliation 54
Slide 55: Appendix – Non-GAAP Reconciliation
Appendix – Non-GAAP Reconciliation 55
Slide 56: Appendix – Non-GAAP Reconciliation
Appendix – Non-GAPP Reconciliation 56