First Merchants Corporation · NASDAQ:FRME
First Merchants — Q1 2010 Earnings Presentation
29 slides from First Merchants's earnings presentation, Apr 28, 2010
Slide 1: First Merchants Corporation 1st Quarter 2010 Earnings Call
First Merchants Corporation 1st Quarter 2010 Earnings Call April 28, 2010
Slide 2: Michael C. Rechin, President and Chief Executive Officer
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: 1st Quarter 2010 Highlights
1st Quarter 2010 Highlights § Return to profitability with $.01 earnings per share § Successful private equity placement augments tangible common equity and regulatory ratios § Pre-tax pre-provision run rate remains strong despite smaller loan portfolio balances § Operating expense levels declined d
Slide 5: Mark K. Hardwick, Executive Vice President and Chief Financial Officer
Mark K. Hardwick Executive Vice President and Chief Financial Officer
Slide 6: Total Assets
12-31-08 12-31-09 Q1-’09 Q1-’10 1. Investments $ 482 $ 563 $ 446 $ 6 2. Loans 3,722 3,278 3,654 3,138 3. Allowance (50) (92) (59) (89) 4. CD&I & Goodwill 166 159 163 158 5. BOLI 93 95 94 95 6. Other 371 478 589 435 7. Total Assets $4,784 $4,481 $4,887 $4,376 ($ in Millions) TOTAL ASSETS
Slide 7: Loan Composition (as of 3/31/10)
Loan Composition (as of 3/31/10 ) YTD Yield = 5.74% LOAN AND CREDIT DETAIL
Slide 8: Investment Portfolio
INVESTMENT PORTFOLIO (as of 3/31/10) § $639 Million Balance § Average duration - 4.4 years § Tax equivalent yield of 4.71% § No private label MBS exposure § Trust Preferred Pools with book balance of $6.6 million and a market value of $1.4 million § Net unrealized gain of the entire portfolio totals
Slide 9: Total Liabilities and Capital
2008 2009 Q1-’09 Q1-’10 1. Customer Non-Maturity Deposits $1,858 $2,042 $1,910 $2,000 2. Customer Time Deposits 1,384 1,220 1,365 1,167 3. Brokered Deposits 477 275 410 231 4. Borrowings 507 339 485 320 5. Other Liabilities 51 30 98 58 6. Hybrid Capital 111 111 111 111 7. Preferred Stock (CPP) 0 112
Slide 10: Deposits (as of 3/31/10)
$751M $231M $1,261M $739M YTD Cost of Deposits = 1.60% DEPOSITS (as of 3/31/10)
Slide 11: Capital Ratios
2008 2009 Q1-’09 Q1-’10 1. Total Risk-Based Capital Ratio 10.24% 13.04% 12.97% 14.44% 2. Tier 1 Risk-Based Capital Ratio 7.71% 10.32% 10.47% 11.65% 3. Leverage Ratio 8.16% 8.20% 9.17% 9.13% 4. TCE/TCA 5.01% 4.54% 4.89% 5.27% CAPITAL RATIOS
Slide 12: Net Interest Margin
$3,463 $4,245 $4,299 $3,956 ― Net Interest Margin 3.68% 3.82% 3.84% 3.74% NET INTEREST MARGIN
Slide 13: Net Charge-offs, Provision and Allowance for Loan Losses
$17.4 $13.9 2008 2009 Q1-'09 Q1-'10 @ Net Charge-offs D) Provison @ Allowance for Loan Losses
Slide 14: Non-Interest Income
2008 2009 Q1-’09 Q1-’10 1. Service Charges on Deposit Accounts $13.0 $15.1 $3.5 $ 3.3 2. Trust Fees 8.0 7.4 2.1 2.1 3. Insurance Commission Income 5.8 6.4 2.1 2.0 4. Cash Surrender Value of Life Ins (0.3) 1.6 0.3 0.5 5. Gains on Sales Mortgage Loans 2.5 6.8 1.4 1.1 6. Securities Gains/Losses (2.1) 4
Slide 15: Non-Interest Expense
NON-INTEREST EXPENSE 2008 2009 Q1-’09 Q1-’10 1. Salary & Benefits $63.0 $76.3 $20.0 $17.6 2. Premises & Equipment 14.4 17.9 4.4 4.7 3. Core Deposit Intangible 3.2 5.1 1.3 1.2 4. Professional Services 2.6 4.4 1.1 1.5 5. OREO/Credit-Related Expense 2.8 9.8 0.5 2.7 6. FDIC Expense 1.7 10.4 0.8 1.7 7. F
Slide 16: Earnings
2008 2009 Q1-’09 Q1-’10 1. Net Interest Income-FTE $133.1 $159.1 $39.6 $ 37.8 2. Non Interest Income 1 38.5 46.5 12.2 11.7 3. Non Interest Expense 2 106.0 134.7 34.2 31.0 4. Pre-Tax Pre-Provision Earnings $ 65.6 $ 70.9 $17.6 $ 18.5 5. Provision 28.2 122.2 12.9 13.9 6. Adjustments 5.0 12.1 (1.7) 2.3
Slide 17: John J. Martin, Senior Vice President and Chief Credit Officer
John J. Martin Senior Vice President and Chief Credit Officer
Slide 18: 1st Quarter Highlights: Portfolio Overview
1st Quarter Highlights 30+ day delinquent loans declined from $40.5 to $34.2 million, the third consecutive quarterly decline. 90+ day delinquent loans declined from $4.0 to $2.6 million, the third consecutive quarterly decline. Non-accrual loans increased from $118.4 to $122.9 million for the quart
Slide 19: Non-Accrual Loans
($ in millions) NON-ACCRUAL LOANS
Slide 20: New Non-Accrual Loans
($ in millions) NEW NON-ACCRUAL LOANS
Slide 21: Other Real Estate Owned
($ in millions) OTHER REAL ESTATE OWNED
Slide 22: Loan Delinquency Trends
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
Beginning NPAs & 90+ Days Past Due (12/31/2009) Non-accrual Add: New NPLs Less: To Accrual/Pay-off/Restructured Less: To OREO and Charge-off Less: Charge-offs (includes write-downs for transfer to OREO) Δ in Non-accrual loans Other Real Estate Owned (ORE) Add: New ORE Properties Less: ORE Sold Less:
Slide 24: Net Charge-offs (annualized)
Total Consumer Commercial] Land and | Commercial Total | Residential Other Total and (Sinmillions) | &industrial| Lot _| Mortgage _| Agricuture |Commercial| Mortgage |Home Equity| Consumer | Consumer |Commercial [Loan Balances $042.3 | $191.5 | $1,921 | $2600 | $2,1659 | s6046 | $2200 | Sta76 | s072
Slide 25: Allowance Coverage to Non-Accrual Loans
Allowance as a % of Non-Accrual Loans ($ in millions) ALLOWANCE COVERAGE TO NON-ACCRUAL LOANS
Slide 26: Portfolio Summary
PORTFOLIO SUMMARY • Classified loans declined for the quarter from $305 to $286 million. • Non-accrual coverage is in line with 3rd quarter of 2009. Non-accrual loans are up for quarter but in line with 3 rd quarter. • Five largest Classified accruing relationships average $6.3 million with none exc
Slide 27: Michael C. Rechin, President and Chief Executive Officer
Michael C. Rechin President and Chief Executive Officer
Slide 28: Overview of 2010 Strategy and Tactics
Overview of 2010 Strategy and Tactics “Protect and Strengthen” § Complete CPP exchange transaction with Treasury Department in second quarter § Continue to improve asset quality and reduce all-in credit costs § Intensify revenue activity using common platforms and market coverage tactics § Solidify
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: Mark K. Hardwick Executive Vice President & Chief Financial Officer Telephone: 765.751.18