First Merchants Corporation · NASDAQ:FRME
First Merchants — Q1 2017 Earnings Presentation
30 slides from First Merchants's earnings presentation, Apr 27, 2017
Slide 1: 1st Quarter 2017 Earnings Highlights
1st Quarter 2017 Earnings Highlights April 27, 2017 Michael C. Rechin President Chief Executive Officer Mark K. Hardwick Executive Vice President Chief Financial Officer Chief Operating Officer John J. Martin Executive Vice President Chief Credit Officer
Slide 2: Forward-looking statements
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”, “pattern”, “estimate”, “
Slide 3: 1st Quarter 2017 Highlights
3 1st Quarter 2017 Highlights Earnings Per Share of $ .56, a 30.2% Increase over 1Q2016 $23.2 Million of Net Income, a 31.1% Increase over 1Q2016 Total Assets of $7.3 Billion Grew Organically by 7.8% over 1Q2016 1.29% Return on Average Assets; 10.15% Return on Average Equity 52.61% Efficie
Slide 4: Mark K. Hardwick, EVP, CFO and COO
Mark K. Hardwick Executive Vice President Chief Financial Officer and Chief Operating Officer
Slide 5: Total Assets
Total Assets 2015 2016 Q1-’16 Q1-’17 1. Investments $1,277 $1,305 $1,271 $1,327 2. Loans Held for Sale 10 3 4 1 3. Loans 4,694 5,140 4,710 5,275 4. Allowance (62) (66) (62) (68) 5. CD&I & Goodwill 260 259 262 258 6. BOLI 201 202 201 203 7. Other 381 369 413 330 8. Total Assets $6,761 $7,212 $6,799 $
Slide 6: Loan and Yield Detail
Commercial & Industrial 23.9% Commercial Real Estate Owner-Occupied 10.4% Commercial Real Estate Non-Owner Occupied 27.0% Construction Land & Land Development 6.4% Agricultural Land 2.8% Agricultural Production 1.5% Public Finance/Other Commercial 4.6% Residential Mortgage 14.0% Home Equity 8.0% Oth
Slide 7: Investment Portfolio
Mortgage-Backed Securities 31% Collateralized Mortgage Obligations 20% U. S. Agencies 2% Corporate Obligations 1% Corporate Equities 1% Tax-Exempt Municipals 45% Investment Portfolio (as of 3/31/2017) $1.3 Billion Portfolio Modified duration of 4.9 years Tax equivalent yield of 3.88% Net unr
Slide 8: Total Liabilities and Capital
8 Total Liabilities and Capital ($ in Millions) 2015 2016 Q1-’16 Q1-’17 1. Customer Non-Maturity Deposits $4,096 $4,428 $4,140 $4,426 2. Customer Time Deposits 880 747 841 789 3. Brokered Deposits 314 381 330 420 4. Borrowings 446 572 420 587 5. Other Liabilities 51 60 79 53 6. Hybrid Capital 123 12
Slide 9: Deposit Detail
Deposit Detail (as of 3/31/2017) YTD Cost = .39% Total = $5.6 Billion 9 Demand Deposits 51% Savings Deposits 28% Certificates & Time Deposits of >$100,000 6% Certificates & Time Deposits of <$100,000 8% Brokered Deposits 7%
Slide 10: Capital Ratios
11.37% 11.22% 11.31% 11.49% 11.42% 11.39% 11.05% 11.10% 11.16% 9.21% 8.95% 9.17% 9.08% 9.26% 9.43% 9.48% 9.24% 9.50% 15.12% 14.92% 14.85% 14.94% 14.79% 14.67% 14.18% 14.21% 14.24% 6.00% 7.00% 8.00% 9.00% 10.00% 11.00% 12.00% 13.00% 14.00% 15.00% 16.00% 17.00% 18.00% 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q1
Slide 11: Net Interest Margin
3.78% 3.81% 3.85% 3.75% 3.83% 3.86% 3.94% 3.90% 3.98% 3.61% 3.65% 3.71% 3.62% 3.66% 3.65% 3.70% 3.72% 3.72% 2.80% 3.00% 3.20% 3.40% 3.60% 3.80% 4.00% 4.20% $38 $42 $46 $50 $54 $58 $62 $66 Q1 - '15 Q2 - '15 Q3 - '15 Q4 - '15 Q1 - '16 Q2 - '16 Q3 - '16 Q4 - '16 Q1 - '17 Net Interest Income - FTE ($mil
Slide 12: Non-Interest Income
12 Non-Interest Income – – – – – – – – – 2015 2016 Q1-’16 Q1-’17 1. Service Charges on Deposit Accounts $16.2 $17.8 $ 4.1 $ 4.2 2. Wealth Management Fees 11.3 12.6 3.1 3.4 3. Insurance Commission Income 4.1 4. Card Payment Fees 13.4 15.0 3.8 3.7 5. Cash Surrender Value of Life Ins 2.9 4.3 1.5 0.9 6.
Slide 13: Non-Interest Expense
13 Non-Interest Expense 2015 2016 Q1-’16 Q1-’17 1. Salary & Benefits $101.9 $102.6 $ 27.3 $ 25.7 2. Premises & Equipment 25.5 29.5 7.3 7.0 3. Core Deposit Intangible 2.8 3.9 1.0 0.9 4. Professional & Other Outside Services 9.9 6.5 2.2 1.7 5. OREO/Credit-Related Expense 3.9 2.9 0.7 0.5 6. FDIC Expens
Slide 14: Earnings
14 2015 2016 Q1-’16 Q1-’17 1. Net Interest Income $196.4 $226.5 $ 54.5 $ 61.0 2. Provision for Loan Losses (0.4) (5.7) (0.6) (2.4) 3. Net Interest Income after Provision 196.0 220.8 53.9 58.6 4. Non-Interest Income 69.8 65.2 15.8 14.9 5. Non-Interest Expense (174.8) (177.3) (46.4) (43.1) 6. Income b
Slide 15: Per Share Results
2016 Q1 Q2 Q3 Q4 Total 1. Earnings Per Share $ .43 $ .49 $ .51 $ .55 $ 1.98 2. Dividends $ .11 $ .14 $ .14 $ .15 $ .54 3. Tangible Book Value $15.02 $15.53 $15.86 $15.85 2017 Q1 Q2 Q3 Q4 Total 1. Earnings Per Share $ .56 – – – $ .56 2. Dividends $ .15 – – – $ .15 3. Tangible Book Value $ 16.49 – – –
Slide 16: Dividends and Tangible Book Value
$9.21 $9.64 $10.95 $12.17 $13.65 $14.68 $15.85 $16.49 Dividends and Tangible Book Value 0.00 0.02 0.04 0.06 0.08 0.10 0.12 0.14 0.16 .11 .01 .03 .05 .14 .15 1.53% Forward Dividend Yield 26.8% Dividend Payout Ratio = Quarterly Dividends Tangible Book Value .08 16
Slide 17: John J. Martin, EVP and Chief Credit Officer
John J. Martin Executive Vice President and Chief Credit Officer
Slide 18: Loan Portfolio Trends
18 Loan Portfolio Trends •Net $69 million Construction and CRE NOO growth •Combined 4.1% Q1 growth ($ in Millions) 2015 2016 Q1-'16 Q1-'17 $ % $ % 186.1 186.1 1. Commercial & Industrial 1,057$ 1,195$ 1,061$ 1,259$ 64$ 5.4% 198$ 18.7% 2. Construction, Land and Land Development 367 419 392 337 (82) (1
Slide 19: Asset Quality Summary
19 Asset Quality Summary ($ in Millions) 2015 2016 Q1-'16 Q1-'17 $ % $ % 1. Non-Accrual Loans 31.4$ 30.0$ 36.7$ 27.9$ (2.1)$ (7.0%) (8.8)$ (24.0%) 2. Other Real Estate 17.3 9.0 15.6 8.3 (0.7) (7.8%) (7.3) (46.8%) 3. Renegotiated Loans 1.9 4.7 1.0 0.9 (3.8) (80.9%) (0.1) (10.0%) 4. 90+ Days Delinquen
Slide 20: Non-Performing Asset Reconciliation
20 Non-Performing Asset Reconciliation ($ in Millions) Q2-'16 Q3-'16 Q4-'16 Q1-'17 1. Beginning Balance NPAs & 90+ Days Delinquent 54.3$ 51.5$ 49.9$ 43.8$ Non-Accrual 2. Add: New Non-Accruals 3.6 6.0 4.3 2.5 3. Less: To Accrual/Payoff/Renegotiated (4.5) (3.2) (6.5) (2.6) 4. Less: To OREO (0.2) (0.4)
Slide 21: ALLL and Fair Value Summary
21 ALLL and Fair Value Summary ($ in Millions) Q2-'16 Q3-'16 Q4-'16 Q1-'17 1. Beginning Allowance for Loan Losses (ALLL) 62.1$ 62.2$ 63.5$ 66.0$ 2. Net Charge-offs (Recoveries) 0.7 0.6 (0.1) 0.2 3. Provision Expense 0.8 1.9 2.4 2.4 4. Ending Allowance for Loan Losses (ALLL) 62.2 63.5 66.0 68.2 5. Fa
Slide 22: Asset Quality & Portfolio Summary
22 Asset Quality & Portfolio Summary Strong quarterly loan growth of $135 million led by C&I and CRE. Construction and CRE portfolios are 41% and 215% of risk-based capital, respectively; well beneath regulatory guidelines. Total NPAs & 90 days decreased $6.6 million this quarter dropping to .
Slide 23: Michael C. Rechin, President and CEO
Michael C. Rechin President and Chief Executive Officer
Slide 24: FMC Strategy and Tactics Overview
24 FMC Strategy and Tactics Overview Looking Forward . . . Execute on Closing and Integrating The Arlington Bank and Independent Alliance Bank, Inc. Transactions Continue to Win in our Markets – Geographic Community-Based Banking Model Continue Focus on Treasury Management Services for Deposit
Slide 25: Contact Information
25 Contact Information First Merchants Corporation common stock is traded on the NASDAQ Global Select Market under the symbol FRME. Additional information can be found at www.FIRSTMERCHANTS.COM Investor inquiries: David L. Ortega Investor Relations Telephone: 765.378.8937 [email protected]
Slide 26: Appendix
First Merchants Corporation THE STRENGTH OF BIG THE SERVICE OF SMALL Appendix NASDAQ: FRME
Slide 27: Appendix – Non-GAAP Reconciliation: Capital Ratios
27 Appendix – Non-GAAP Reconciliation CAPITAL RATIOS (dollars in thousands): 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 Total Risk-Based Capital Ratio Total Stockholders' Equity (GAAP) 739,658 749,955 766,984 850,509 867,263 887,550 900,865 901,657 929,470 Adjust for Accumulated Other Comprehensiv
Slide 28: Appendix – Non-GAAP Reconciliation: Tangible Common Equity Ratio
28 Appendix – Non-GAAP Reconciliation TANGIBLE COMMON EQUITY RATIO (dollars in thousands): 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 Total Stockholders' Equity (GAAP) 739,658$ 749,955$ 766,984$ 850,509$ 867,263$ 887,550$ 900,865$ 901,657$ 929,470$ Less: Pr ferred Stock (125) (125) (125) (125) (12
Slide 29: Appendix – Non-GAAP Reconciliation: Dividend Yield, Payout, Efficiency
29 Appendix – Non-GAAP Reconciliation FORWARD DIVIDEND YIELD 1Q17 Most recent quarter's dividend per share $ 0.15 Most recent quarter's dividend per share - Annualized $ 0.60 Stock Price at 3/31/17 $ 39.32 Forward Dividend Yield 1.53% DIVIDEND PAYOUT RATIO 2017 Dividends per share $ 0.15 Earnings Pe
Slide 30: Appendix – Non-GAAP Reconciliation: Real Estate Concentrations
30 Appendix – Non-GAAP Reconciliation CONSTRUCTION AND INVESTMENT REAL ESTATE CONCENTRATIONS (dollars in thousands): 2015 2016 1Q16 1Q17 Total Risk-Based Capital (Subsidiary Bank Only) Total Stockholders' Equity (GAAP) 927,774$ 973,641$ 945,283$ 993,130$ Adjust for Accumulated Other Comprehensive (I