First Merchants Corporation · NASDAQ:FRME
First Merchants — Q4 2021 Earnings Presentation
27 slides from First Merchants's earnings presentation, Jan 27, 2022
Slide 1: Investor Update Fourth Quarter 2021
INVESTOR UPDATE Fourth 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 12/31/2021 $15.5 Billion $9.3 Billion $12.7 Billion $6.4 Billion Assets Under Advisement* Total Assets Total Loans Total Deposits TCE/TA: YTD Return on TCE YTD ROAA: Dividend Yield: Price / Tangible Book: Price / LTM EPS: 1.39% 9.
Slide 5: Fourth Quarter Highlights and Year-to-Date Highlights
Fourth Quarter Highlights 5 Year-to-Date Highlights 1.39% ROA 1.63% PTPP ROA ROA $205.5 Million $3.81 Per Share Net Income & EPS 11.01% ROE 16.17% ROTCE ROE & ROTCE ▪ 13.4% annualized loan growth, excluding Paycheck Protection Program (PPP) loans ▪ 12.4% annualized deposit growth ▪ Repurchased 116,6
Slide 6: Strategy & Key Lines of Business
Strategy & Key Lines of Business 6 Consumer BankingCommercial Banking Private Wealth Advisors Full Spectrum of Debt Capital and Treasury Service Offerings Located in Prime Growth Markets Small Business & SBA Middle Market C&I Investment Real Estate Public Finance Sponsor Finance Asset Based Lending
Slide 7: Deposit Growth and Region and Line of Business Highlights
4Q21 2021 Commercial Group 2.2% 16.3% Consumer Group 12.6% 6.4% Total Deposits 12.4% 12.1% ▪ For the full year, commercial growth was driven by retention of stimulus payments primarily in municipal and public entity relationships ▪ For the full year, stimulus payments have largely been utilized and
Slide 8: Fourth Quarter Financial Results
Fourth Quarter Financial Results 8 ▪ 53.49% Efficiency Ratio ▪ 13.4% annualized loan growth, over prior quarter excluding PPP loans ▪ Net interest income, excluding the impact of PPP loan income, increased $1.0 million over prior quarter ▪ PPP fee income totaled $3.3 million, a decrease of $4.1 mill
Slide 9: 2021 Year End Financial Results
2021 Year End Financial Results 9 2021 Year End Highlights ▪ 50.94% Efficiency Ratio ▪ 6.6% annualized loan growth, over prior year excluding PPP loans ▪ Pre-Tax, Pre-Provision (PTPP) earnings totaled $241.3 million, an increase of $12.8 million or 6% over prior year ▪ Tangible book value per share
Slide 10: Investment Portfolio Highlights
Municipal Bonds 57% Mortgage- Backed Securities 27% Collateralized Mortgage Obligations 5% U.S. Agencies 10% Corporate Obligations 1% ▪ Net unrealized Gain of $98.4 million Investment Portfolio Highlights 10 4Q21 Investment Portfolio Composition Yield on Investments (%) / Total Investments ($B) $4.5
Slide 11: Loan Portfolio Highlights
Loan Portfolio Highlights 11 4Q21 Loan Composition Yield on Loans (%) / Total Loans ($B) $9.3B Total 4Q21 Portfolio by Yield Type Highlights Total loan rate mix as of 4Q21 • $6.3 billion variable rate • $3.0 billion fixed rate • $200 million SOFR-Based loans ▪ Portfolio composition remains ~80% Comm
Slide 12: Allowance for Credit Losses - Loans
Allowance for Credit Losses - Loans 12 4Q21 Allowance for Credit Losses - Loans Change in ACL – Loans1 Highlights ▪ Allowance to Loans, excluding PPP loans, is 2.14% ▪ The reserve for unfunded commitments was unchanged at $20.5 million, and recorded in Other Liabilities ▪ Remaining fair value adjust
Slide 13: Deposit Composition Highlights
13 4Q21 Deposit Composition Highlights $12.7B Total 1Defined as total deposits less time deposits > $100k vs. Prior Periods Cost of Total Deposits (%) / Total Deposits ($B) Deposit Portfolio Highlights ▪ Strong core deposit base • 98% core deposits1 • 21% non-interest bearing • ~55% yield 5 bps or l
Slide 14: Net Interest Margin
Net Interest Margin 14 $105.1$97.1 $97.3 $105.1 $107.0$97.8 $107.0 $97.3 $105.1 $110.0$109.2 4Q20 1Q21 2Q21 3Q21 4Q21 1. Net Interest Income - FTE ($millions) 107.0$ 105.1$ 109.2$ 110.0$ 106.9$ 2. Fair Value Accretion 3.0$ 1.8$ 2.5$ 1.5$ 1.5$ 3. PPP Loan Income 11.6$ 9.2$ 9.7$ 8.2$ 3.7$ 4. Tax Equiv
Slide 15: 4Q21 Non-Interest Income Detail
15 4Q21 Non-Interest Income Detail ($M) $25.8M Total Non-Interest Income Trends ($M) Fee Income / Revenue Non-Interest Income Highlights Highlights ▪ 89% in Customer-related fees totaling $22.8 million for 4Q21, and $93.6 million for the year, an increase of $2.6 million over prior year despite a de
Slide 16: 4Q21 Non-Interest Expense Detail
16 4Q21 Non-Interest Expense Detail $72.4M Total Non-Interest Expense Trends ($M) Efficiency Ratio Non-Interest Expense Highlights Highlights ▪ 4Q21 expenses increased $1.0 million over 3Q21 which included $0.5 million of Level One acquisition expenses Salary & Benefits $42.4 58% Premises & Equipmen
Slide 17: Capital Ratios
17 Tangible Common Equity Ratio Common Equity Tier 1 Ratio Total Risk-Based Capital Ratio Capital Ratios 9.31% 9.31% 9.57% 9.31% 9.31% 9.65%9.57%9.31% 9.57% 9.65% 9.04%8.78% 12.02% 11.99% 11.94% 11.75% 11.68% 4Q20 1Q21 2Q21 3Q21 4Q21 CET 1 Ratio Target CET1 Ratio (10.00%) 14.36% 14.33% 14.23% 14.02%
Slide 18: Loan Portfolio Highlights
Loan Portfolio 18 Highlights Geography / C&I Top Industries Loan Portfolio Trends ($M) 4Q20 1Q21 2Q21 3Q21 4Q21 1. Commercial & Industrial 2,429$ 2,450$ 2,214$ 2,125$ 2,213$ 2. Sponsor Finance 351 430 460 448 504 3. CRE Owner Occupied 955 946 950 953 984 4. Construction/Land/Land Dev. 485 541 491 52
Slide 19: Asset Quality
Asset Quality 19 Asset Quality Trends ($M) Highlights vs. Prior Quarter vs. Prior Year Improved Asset Quality ▪ Non-accrual loans decreased $8.4 million ▪ Classified loans decreased $21.9 million • Largest reductions in agriculture and specialty trade loans Favorable Asset Quality Trends ▪ Non-accru
Slide 20: Non-Performing Assets
Non-Performing Assets 20 Non-Performing Assets Roll Forward ($M) Highlights $7.9 million net reduction in NPAs + 90 PD ▪ $9.5 million in resolved non-accrual loans ▪ Top three non-accrual relationships total $23.4 million ▪ $5.3 million of gross charge-offs in 4Q21 with recoveries of $0.7 million 4t
Slide 21: Track Record of Shareholder Value
$0.04 $0.10 $0.18 $0.29 $0.41 $0.54 $0.69 $0.84 $1.00 $1.04 $1.13 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 $9.64 $10.95 $12.17 $13.65 $14.68 $15.85 $16.96 $19.12 $21.94 $24.27 $25.21 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 $0.34 $1.41 $1.41 $1.65 $1.72 $1.98 $2.12 $3.22
Slide 22: 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 $15.5 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 History of Organic and Whole Bank Acquisition Growth 22 Total Assets ($B) Gro
Slide 23: Vision for the Future
Vision for the Future 23 Our Vision: To enhance the financial wellness of the diverse communities we serve. To be the most responsive, knowledgeable, and high-performing bank for our clients, teammates, and shareholders. We are a collection of dynamic colleagues with diverse experiences and perspect
Slide 24: Appendix
APPENDIX First Merchants Corporation
Slide 25: Non-GAAP
Non-GAAP 25 1 Includes net unrealized gains or losses on securities available for sale, net gains or losses on cash flow hedges, and amounts resulting from the application of the applicable accounting guidance for defined benefit and other postretirement plans. 4Q20 1Q21 2Q21 3Q21 4Q21 Total Risk-Ba
Slide 26: Non-GAAP Tangible Common Equity Ratio
Non-GAAP 26 4Q20 1Q21 2Q21 3Q21 4Q21 Tangible Common Equity Ratio (dollars in thousands) Total Stockholders' Equity (GAAP) 1,875,645$ 1,805,856$ 1,871,800$ 1,868,090$ 1,912,571$ Less: Preferred Stock (125) (125) (125) (125) (125) Less: Intangible Assets (572,893) (571,536) (573,786) (572,323) (570,8
Slide 27: Non-GAAP Efficiency Ratio
Non-GAAP 27 2019 4Q20 2020 1Q21 2Q21 3Q21 4Q21 2021 EFFICIENCY RATIO (dollars in thousands): Non Interest Expense (GAAP) 246,763$ 72,536$ 263,405$ 66,098$ 69,295$ 71,384$ 72,436$ 279,213$ Less: Intangible Asset Amortization (5,994) (1,476) (5,987) (1,357) (1,464) (1,463) (1,463) (5,747) Less: OREO a