First Merchants Corporation · NASDAQ:FRME
First Merchants — Q4 2018 Earnings Presentation
35 slides from First Merchants's earnings presentation, Jan 31, 2019
Slide 1: 4th Quarter 2018 Earnings Highlights
44ththQuarterQuarter 2018Earnings Earnings Highlights Highlights JanuaryJanuary 31, 31, 20192019
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: Additional Information
Additional Information Communications in this press release do not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any proxy vote or approval. The proposed merger between First Merchants Corporation and MBT Financial Corporation will be submitte
Slide 4: Full Year 2018 Performance
Full Year 2018 Performance Record Net Income of $159.1 Million, a 65.6% increase over 2017 Earnings per share of $3.22, a 51.9% increase over 2017 Total Assets of $9.9 Billion; grew organically by 5.5% over 2017 1.64% ROAA; 11.84% ROAE; 50.21% Efficiency Ratio Organic Loan Growth of $471 M
Slide 5: 4th Quarter 2018 Highlights
4th Quarter 2018 Highlights Earnings Per Share of $.85, a 73.5% increase over 4Q2017 $41.7 Million of Net Income, a 71.1% increase over 4Q2017 Winning marketplace execution delivering growth Organic Loan Growth of $138 Million, a 7.8% annualized growth rate Organic Deposit Growth of $121 M
Slide 6: Mark K. Hardwick, CFO and COO
Mark K. Hardwick EXECUTIVE VICE PRESIDENT CHIEF FINANCIAL OFFICER AND CHIEF OPERATING OFFICER 6
Slide 7: Total Assets
Total Assets ($ in Millions) 2016 2017 2018 1. Investments $1,305 $1,561 $1,633 2. Loans 5,143 6,758 1 7,229 3. Allowance (66) (75) (81) 4. Goodwill & Intangibles 259 477 470 5. BOLI 202 224 225 6. Other 369 422 409 7. Total Assets $7,212 $9,367 $9,885 Annualized Asset Growth 6.7% 29.9% 5.5% 1 2017
Slide 8: Loan and Yield Detail
Loan and Yield Detail (as of 12/31/2018) QTD Yield = 5.41% Commercial Agricultural YTD Yield = 5.16% Construction Land & Agricultural Real Estate Land Public Total Loans = $7.2 Billion Land Development Production Non-Owner 3.3% Finance/Other 7.6% 1.3% Occupied Commercial Variable = $4.9 Billion 25.8
Slide 9: Investment Portfolio
Investment Portfolio (as of 12/31/2018) Mortgage-Backed Securities Tax-Exempt 24% Municipals 48% $1.6 Billion Portfolio Modified duration of 5.6 years Tax equivalent yield of 3.54% Net unrealized loss of $8.0 Million Collateralized Mortgage Obligations Corporate 24% Obligations U. S. Agencie
Slide 10: Total Liabilities and Capital
Total Liabilities and Capital ($ in Millions) 2016 2017 2018 1. Customer Non-Maturity Deposits $4,428 $5,741 1 $6,268 2. Customer Time Deposits 747 1,0512 1,241 3. Brokered Deposits 381 381 246 4. Borrowings 572 701 538 5. Other Liabilities 60 57 51 6. Hybrid Capital 122 133 133 7. Common Equity 902
Slide 11: Deposit Detail
Deposit Detail (as of 12/31/2018) QTD Cost = 1.04% YTD Cost = .86% Total = $7.8 Billion Certificates & Certificates & Time Deposits Time Deposits >$100,000 <$100,000 Savings 8% 8% Deposits 29% Brokered Deposits 3% Demand Deposits 52% 11
Slide 12: Capital Ratios
Capital Ratios Total Risk-Based Capital Ratio (Target = 12.50%) Common Equity Tier 1 Capital Ratio (Target = 10.00%) Tangible Common Equity Ratio (TCE) (Target = 9.00%) 15.00% 14.61% 14.21% 14.24% 14.25% 14.01% 13.81% 14.00% 13.76% 13.69% 13.69% 13.00% 11.98% 12.00% 11.64% 11.16% 11.11% 11.21% 11.10
Slide 13: Net Interest Margin
Net Interest Margin Q4 - '16 Q1 - '17 Q2 - '17 Q3 - '17 Q4 - '17 Q1 - '18 Q2 - '18 Q3 - '18 Q4 - '18 Net Interest Income - FTE ($millions) $ 62.1 $ 64.9 $ 67.2 $ 78.9 $ 83.5 $ 82.5 $ 87.2 $ 89.2 $ 90.7 Fair Value Accretion $ 2.9 $ 4.3 $ 2.3 $ 3.2 $ 4.1 $ 3.2 $ 3.8 $ 3.2 $ 3.9 1 2 4 Tax Equivalent Yi
Slide 14: Non-Interest Income
Non-Interest Income ($ in Millions) 2016 2017 2018 1. Service Charges on Deposit Accounts $17.8 $ 18.7 $ 21.0 2. Wealth Management Fees 12.6 14.7 14.9 3. Card Payment Fees 15.0 16.1 18.0 4. Cash Surrender Value of Life Ins 4.3 6.6 4.2 5. Gains on Sales of Mortgage Loans 7.1 7.6 7.0 6. Gains on Sales
Slide 15: Non-Interest Expense
Non-Interest Expense ($ in Millions) 2016 2017 2018 1. Salary & Benefits $102.6 $119.8 $131.7 2. Premises & Equipment 29.5 30.1 32.7 3. Intangible Asset Amortization 3.9 5.6 6.7 4. Professional & Other Outside Services 6.5 12.8 8.2 5. OREO/Credit-Related Expense 2.9 1.9 1.5 6. FDIC Expense 3.0 2.6 2
Slide 16: Earnings
Earnings ($ in Millions) 2016 2017 2018 1. Net Interest Income $226.5 $ 277.3 $ 338.8 2. Provision for Loan Losses (5.7) (9.1) (7.2) 3. Net Interest Income after Provision 220.8 268.2 331.6 4. Non-Interest Income 65.2 71.0 76.5 5. Non-Interest Expense (177.3) (205.6) (220.0) 6. Income before Income
Slide 17: Quarterly Earnings
Quarterly Earnings ($ in Millions) Q1-’18 Q2-’18 Q3-’18 Q4-’18 1. Net Interest Income $79.9 $84.6 $86.5 $87.8 2. Provision for Loan Losses (2.5) (1.7) (1.4) (1.6) 3. Net Interest Income after Provision 77.4 82.9 85.1 86.2 4. Non-Interest Income 19.6 18.2 19.5 19.2 5. Non-Interest Expense (53.7) (53.
Slide 18: Per Share Results
Per Share Results 2017 Q1 Q2 Q3 Q4 Total 1. Earnings Per Share $ .56 $ .57 $ .50 $ .49 $ 2.12 2. Dividends $ .15 $ .18 $ .18 $ .18 $ .69 3. Tangible Book Value $16.49 $16.97 $16.62 $16.96 2018 Q1 Q2 Q3 Q4 Total 1. Earnings Per Share $ .74 $ .80 $ .83 $ .85 $ 3.22 2. Dividends $ .18 $ .22 $ .22 $ .22
Slide 19: Dividends and Tangible Book Value
Dividends and Tangible Book Value Quarterly Dividends Tangible Book Value 0.22 .22 0.20 .18 $19.12 0.18 $16.96 0.16 .15 $15.85 .14 $14.68 0.14 $13.65 $12.17 0.12 .11 $10.95 0.10 $9.21 $9.64 .08 0.08 0.06 .05 0.04 .03 0.02 .01 0.00 2.57% Forward Dividend Yield Compound Annual Growth Rate of 9.56% Equ
Slide 20: John J. Martin, Chief Credit Officer
John J. Martin EXECUTIVE VICE PRESIDENT AND CHIEF CREDIT OFFICER 20
Slide 21: Loan Portfolio Trends
Loan Portfolio Trends Change Change Linked Quarter 2018 Over 2017 ($ in Millions) 2016 2017 Q3-'18 2018 $ % $ % 1. Commercial & Industrial $ 1,195 $ 1,494 $ 1,656 $ 1,727 $ 71 4.3% $ 233 15.6% 2. Construction, Land and 419 612 669 546 (123) (18.4%) (66) (10.8%) Land Development 3. CRE Non-Owner Occu
Slide 22: Asset Quality Summary
Asset Quality Summary Change Change ($ in Millions) Linked Quarter 2018 Over 2017 2016 186.1 2017 Q3-'18 2018 $ % $ % 1. Non-Accrual Loans $ 30.0 $ 28.7 $ 20.4 $ 26.1 $ 5.7 27.9% $ (2.6) (9.1%) 2. Other Real Estate 9.0 10.4 8.9 2.2 (6.7) (75.3%) (8.2) (78.8%) 3. Renegotiated Loans 4.7 1.0 0.9 1.1 0.
Slide 23: Non-Performing Asset Reconciliation
Non-Performing Asset Reconciliation ($ in Millions) 2016 2017 2018 1. Beginning Balance NPAs & 90+ Days Delinquent $ 51.5 $ 43.8 $ 41.0 Non-Accrual 2. Add: New Non-Accruals 24.6 30.1 24.2 3. Less: To Accrual/Payoff/Renegotiated (17.0) (18.3) (18.2) 4. Less: To OREO (1.6) (8.1) (0.6) 5. Less: Charge-
Slide 24: ALLL and Fair Value Summary
ALLL and Fair Value Summary ($ in Millions) Q4-'17 Q1-'18 Q2-'18 Q3-'18 Q4-'18 1. Beginning Allowance for Loan Losses (ALLL) $ 73.4 $ 75.0 $ 76.4 $ 77.5 $ 78.4 2. Net Charge-offs (Recoveries) 0.2 1.1 0.6 0.5 (0.5) 3. Provision Expense 1.8 2.5 1.7 1.4 1.7 4. Ending Allowance for Loan Losses (ALLL) $
Slide 25: Portfolio Summary
Portfolio Summary 4th quarter loans increased 1.9%, or 7.8% annualized. Growth in CRE, C&I and public finance. NPAs & 90+ days remained low at 0.4% of loans and ORE. 4th quarter net recovery of $500,000. For the year, net charge-offs of $1.7 million with provision expense of $7.2 million sup
Slide 26: Michael C. Rechin, President and CEO
Michael C. Rechin PRESIDENT AND CHIEF EXECUTIVE OFFICER 26
Slide 27: A Leading Midwest Banking Franchise Crossing $10 Billion
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 28: 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 . 94 Southgate Operates 20 Banking Centers 75 MICHIGAN T
Slide 29: FMC Strategy and Tactics Overview
FMC 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. Cross $10 Billion with the acquisition of MBT Financial Corporation and org
Slide 30: 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: Nicole M. Weaver Investor Relations Telephone: 765.521.7619 nweaver@firstmerchants.com 30
Slide 31: Appendix
ist Merchants Corporation Appendix FIRST MERCHANTS CORPORATION Al 200 E Jackson St, P.O. Box 782, Muncie, IN47305 | 705.747.1500
Slide 32: Appendix – Non-GAAP Reconciliation: Capital Ratios
Appendix – Non-GAAP Reconciliation CAPITAL RATIOS (dollars in thousands): 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 Total Risk-Based Capital Ratio Total Stockholders' Equity (GAAP) 901,657 929,470 1,035,116 1,283,120 1,303,463 1,313,073 1,340,328 1,361,426 1,408,260 Adjust for Accumulated Other C
Slide 33: Appendix – Non-GAAP Reconciliation: Tangible Common Equity Ratio
Appendix – Non-GAAP Reconciliation TANGIBLE COMMON EQUITY RATIO (dollars in thousands): 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 Total Stockholders' Equity (GAAP) $ 901,657 $ 929,470 $ 1,035,116 $ 1,283,120 $ 1,303,463 $ 1,313,073 $ 1,340,328 $ 1,361,426 $ 1,408,260 Less: Preferred Stock (125) (
Slide 34: Appendix – Non-GAAP Reconciliation: Efficiency Ratio
Appendix – Non-GAAP Reconciliation EFFICIENCY RATIO (dollars in thousands): 2016 2017 1Q18 2Q18 3Q18 4Q18 2018 Non Interest Expense (GAAP) $ 177,359 $ 205,556 $ 53,687 $ 53,504 $ 55,022 $ 57,738 $ 219,951 Less: Intangible Asset Amortization (3,910) (5,647) (1,726) (1,718) (1,650) (1,625) (6,719) Les
Slide 35: Appendix – Non-GAAP Reconciliation: Real Estate Concentrations
Appendix – Non-GAAP Reconciliation CONSTRUCTION AND INVESTMENT REAL ESTATE CONCENTRATIONS (dollars in thousands): 2016 2017 3Q18 2018 Total Risk-Based Capital (Subsidiary Bank Only) Total Stockholders' Equity (GAAP) $ 973,641 $ 1,404,303 $ 1,436,173 $ 1,456,220 Adjust for Accumulated Other Comprehen