Attached files
| file | filename |
|---|---|
| 8-K - FIRST MERCHANTS CORPORATION - 1ST QTR 2011 - EARNINGS PRESENTATION SLIDES - FIRST MERCHANTS CORP | f8kearningslides04282011.htm |
1
1st Quarter 2011 Earnings Call
April 28, 2011
2
Michael C. Rechin
President
and Chief Executive Officer
3
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 actual results.
Specific forward-looking statements include, but are not limited to,
any indications regarding the financial services industry, the economy
and future growth of the balance sheet or income statement.
Please refer to our press releases, Form 10-Qs and 10-Ks concerning
factors that could cause actual results to differ materially from any
forward-looking statements.
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 actual results.
Specific forward-looking statements include, but are not limited to,
any indications regarding the financial services industry, the economy
and future growth of the balance sheet or income statement.
Please refer to our press releases, Form 10-Qs and 10-Ks concerning
factors that could cause actual results to differ materially from any
forward-looking statements.
4
1st Quarter 2011 Highlights
§ First quarter earnings of $4.5M, or $.17 per common
share
share
§ Core business profitability solidifying through:
§ Margin expansion
§ Expense level management
§ Improvement in asset quality continues
§ Loan loss reserve ample for projected future losses at
2.93% of total loans
2.93% of total loans
5
Mark K. Hardwick
Executive Vice President
and Chief Financial Officer
6
2009 2010 Q1-’10 Q1-’11
1. Investments $ 563 $ 827 $ 639 $ 886
2. Loans 3,278 2,857 3,138 2,766
3. Allowance (92) (83) (89) (81)
4. CD&I & Goodwill 159 154 158 153
5. BOLI 95 97 95 102
6. Other 478 319 435 291
7. Total Assets $4,481 $4,171 $4,376 $4,117
($ in Millions)
TOTAL ASSETS
7
Loan Composition (as of 3/31/11)
YTD Yield = 5.56%
Total = $2.8B
LOAN AND CREDIT DETAIL
8
Collateralized
Mortgage
Obligations
Mortgage
Obligations
§ $886 Million Balance
§ Average duration - 4.6 years
§ Tax equivalent yield of 4.14%
§ Net unrealized gain of $8.1
million
million
9
2009 2010 Q1-’10 Q1-’11
1. Customer Non-Maturity
Deposits $2,042 $2,127 $2,000 $2,083
2. Customer Time Deposits 1,220 996 1,167 943
3. Brokered Deposits 275 146 231 126
4. Borrowings 339 277 320 305
5. Other Liabilities 30 28 58 56
6. Hybrid Capital 111 142 111 142
7. Preferred Stock (CPP) 112 68 113 68
8. Common Equity 352 387 376 394
9. Total Liabilities and Capital $4,481 $4,171 $4,376 $4,117
($ in Millions)
TOTAL LIABILITIES AND CAPITAL
10
YTD Cost = 1.05%
Total = $3.2B
11
2009 2010 Q1-’10 Q1-’11
1. Total Risk-Based
Capital Ratio 13.04% 15.74% 14.44% 15.66%
2. Tier 1 Risk-Based
Capital Ratio 10.32% 12.82% 11.65% 13.05%
3. Leverage Ratio 8.20% 9.50% 9.13% 9.80%
4. Tier 1 Common Risk-
Based Capital Ratio 5.40% 7.64% 6.42% 7.75%
5. TCE/TCA 4.54% 5.86% 5.27% 6.16%
CAPITAL RATIOS
12
|
NET INTEREST MARGIN
|
|
|
Q1-’09
|
Q2-’09
|
Q3-’09
|
Q4-’09
|
Q1-’10
|
Q2-’10
|
Q3-’10
|
Q4-’10
|
Q1-’11
|
|
Net Interest Income-FTE ($millions)
|
$ 39.6
|
$ 39.8
|
$ 40.5
|
$39.2
|
$37.8
|
$37.7
|
$37.2
|
$36.7
|
$36.9
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Equivalent Yield on Earning Assets
|
5.69%
|
5.52%
|
5.56%
|
5.48%
|
5.39%
|
5.38%
|
5.38%
|
5.13%
|
5.11%
|
|
Cost of Supporting Liabilities
|
2.01%
|
1.88%
|
1.73%
|
1.62%
|
1.57%
|
1.48%
|
1.45%
|
1.30%
|
1.16%
|
|
Net Interest Margin
|
3.68%
|
3.64%
|
3.83%
|
3.86%
|
3.82%
|
3.90%
|
3.93%
|
3.83%
|
3.95%
|
13
2009 2010 Q1-’10 Q1-’11
1. Service Charges on Deposit Accounts $15.1 $13.3 $ 3.3 $ 2.8
2. Trust Fees 7.4 7.7 2.1 2.0
3. Insurance Commission Income 6.4 6.2 2.0 1.9
4. Electronic Card Fees 4.9 6.1 1.7 1.5
5. Cash Surrender Value of Life Ins 1.6 2.1 0.5 0.6
6. Gains on Sales Mortgage Loans 6.8 6.8 1.1 1.9
7. Securities Gains/Losses 4 4 1.9 1.3 0.1
8. Other 4.6 4.4 1.0 1.1
9. Total $51.2 $48.5 $13.0 $11.9
10. Adjusted Non-Interest Income1 $46.5 $46.6 $11.7 $11.8
1Adjusted for Bond Gains & Losses and one-time mortgage sale
($ in Millions)
NON-INTEREST INCOME
14
NON-INTEREST EXPENSE
2009 2010 Q1-’10 Q1-’11
1. Salary & Benefits $76.3 $73.3 $17.6 $17.2
2. Premises & Equipment 17.9 17.2 4.7 4.5
3. Core Deposit Intangible 5.1 4.7 1.2 1.1
4. Professional Services 1.3 1.4 0.5 0.6
5. OREO/Credit-Related Expense 12.9 14.6 3.7 3.2
6. FDIC Expense 10.4 8.1 1.7 2.1
7. FHLB Prepayment Penalties 1.9 ― ― ―
8. Outside Data Processing 6.2 5.1 1.3 1.4
9. Marketing 2.1 2.0 0.4 0.4
10. Other 17.5 15.9 3.6 3.4
11. Total $151.6 $142.3 $34.7 $33.9
12. Adjusted Non-Interest Expense 2 $134.7 $127.7 $31.0 $30.7
1Credit-Related Professional Services are Reclassed to OREO/Credit-Related Expenses
2Adjusted for the FDIC Special Assessment, FHLB Prepayment Penalties & OREO
Expense & Credit-Related Professional Services
($ in Millions)
1
1
15
2009 2010 Q1-’10 Q1-’11
1. Net Interest Income-FTE $159.1 $149.4 $ 37.8 $36.9
2. Non Interest Income1 46.5 46.6 11.7 11.8
3. Non Interest Expense2 (134.7) (127.7) (31.0) (30.7)
4. Pre-Tax Pre-Provision Earnings $ 70.9 $68.3 $18.5 $18.0
5. Provision (122.2) (46.5) (13.9) (5.6)
6. Adjustments (12.1) (12.7) (2.3) (3.1)
7. Taxes - FTE 22.7 (2.3) (0.7) (3.8)
8. Gain on Exchange of Preferred
Stock for Trust Preferred Debt — 10.1 — —
9. CPP Dividend (5.0) (5.2) (1.5) (1.0)
10. Net Income Avail. for Distribution ($45.7) $11.7 $0.1 $4.5
11. EPS ($2.17) $0.48 $.01 $.17
1Adjusted for Bond Gains & Losses and one-time mortgage sale
2Adjusted for the FDIC Special Assessment, FHLB Prepayment Penalties & OREO
Expense & Credit-Related Professional Services
($ in Millions)
EARNINGS
16
John J. Martin
Senior Vice President
and Chief Credit Officer
17
§ Non-performing assets plus 90+ days delinquent declined $12.3 million to
$107.6 million, decreasing for the third consecutive quarter.
$107.6 million, decreasing for the third consecutive quarter.
§ New non-accrual loans were $11.7 million, down from $27.4 million in the
4th Quarter 2010.
4th Quarter 2010.
§ 30-89 day delinquent loans declined from $30.0 million at 12/31/10 to $21.7
million at 3/31/2011.
million at 3/31/2011.
§ 90+ day delinquent loans decreased to $752,000 from $1.3 million at
12/31/2010.
12/31/2010.
§ Total criticized assets declined to $383.7 million, down from $393.0 million
at 12/31/2010; fourth consecutive quarterly decline and down $126.3 million
from the peak at 9/30/2009.
at 12/31/2010; fourth consecutive quarterly decline and down $126.3 million
from the peak at 9/30/2009.
PORTFOLIO OVERVIEW
1st Quarter Highlights
18
NON-ACCRUAL TREND
|
|
12/31/09
|
03/31/10
|
06/30/10
|
09/30/10
|
12/31/10
|
03/31/11
|
|
|
NON-ACCRUAL LOANS BY CATEGORY
|
|
|
%
|
$ (in millions)
|
|||
|
Commercial & Industrial
|
5.16%
|
3.68%
|
3.55%
|
3.19%
|
1.75%
|
1.55%
|
$ 8.8
|
|
Land and Lot
|
12.60%
|
10.25%
|
8.91%
|
6.25%
|
16.10%
|
14.76%
|
15.3
|
|
Commercial Mortgage
|
3.18%
|
4.65%
|
4.74%
|
4.22%
|
3.69%
|
3.66%
|
43.9
|
|
Agriculture Production
|
0.28%
|
0.86%
|
1.27%
|
0.64%
|
0.57%
|
1.06%
|
0.9
|
|
Total Commercial
|
4.31%
|
4.51%
|
4.43%
|
3.84%
|
3.66%
|
3.52%
|
$68.9
|
|
Residential Mortgage
|
3.01%
|
3.86%
|
3.86%
|
3.26%
|
2.78%
|
3.21%
|
$16.2
|
|
Home Equity
|
0.76%
|
0.79%
|
1.74%
|
1.39%
|
1.31%
|
1.31%
|
2.6
|
|
Other Consumer
|
0.07%
|
0.06%
|
0.00%
|
0.01%
|
0.00%
|
0.03%
|
0.0
|
|
Total Consumer
|
2.05%
|
2.59%
|
2.83%
|
2.36%
|
2.05%
|
2.32%
|
$18.8
|
|
|
|
|
|
|
|
|
|
|
Total Consumer and Commercial
|
3.61%
|
3.92%
|
3.93%
|
3.37%
|
3.17%
|
3.17%
|
$87.7
|
|
(% of Period End Total Loans by Category and Loans Held for Sale)
|
|
|
|||||
19
NEW NON-ACCRUAL LOANS OVER $500,000
|
Industry:
|
($ in millions)
|
|
§ Commercial Rental Property
|
$ 1.1
|
|
§ 1-4 Family Residential Rental Property
|
0.9
|
|
§ 1-4 Family Residential Rental Property
|
0.7
|
|
§ Commercial Real Estate (Retail)
|
0.7
|
|
§ Investments
|
0.6
|
|
§ Commercial Real Estate (Retail Strip Center)
|
0.6
|
|
§ Engineering
|
0.6
|
|
§ Builder
|
0.6
|
|
§ Residential Real Estate
|
0.5
|
|
§ Mini-Storage Facility
|
0.5
|
|
Total
|
$ 6.8
|
|
Q1-’10
|
|
Q2-’10
|
|
Q3-’10
|
|
Q4 ‘10
|
|
Q1-’11
|
|||||
|
$
|
#
|
$
|
#
|
$
|
#
|
$
|
#
|
$
|
#
|
||||
|
$28.4
|
10
|
|
$20.3
|
10
|
|
$6.8
|
6
|
|
$14.5
|
6
|
|
$6.8
|
10
|
($ in millions)
20
OTHER REAL ESTATE OWNED
|
|
Commercial
Real Estate
|
Land &
Construction |
1-4 Family
|
Total
|
|
Book Balance
|
$5.2
|
$7.7
|
$4.2
|
$17.1
|
|
% ORE
|
30.7%
|
45.0%
|
24.3%
|
100%
|
($ in millions)
21
LOAN DELINQUENCY TRENDS
90+ Day Delinquency
22
LOAN CHARGE-OFF TREND
|
|
12/31/09
|
03/31/10
|
06/30/10
|
09/30/10
|
12/31/10
|
03/31/11
|
|
NET CHARGE-OFFs BY CATEGORY
|
||||||
|
Commercial & Industrial
|
5.12%
|
7.60%
|
4.65%
|
3.22%
|
2.69%
|
0.30%
|
|
Land and Lot
|
9.03%
|
0.19%
|
5.10%
|
4.14%
|
4.27%
|
9.96%
|
|
Commercial Mortgage
|
1.52%
|
0.92%
|
1.98%
|
2.44%
|
2.18%
|
1.15%
|
|
Agriculture Production
|
0.72%
|
2.86%
|
1.18%
|
1.36%
|
1.04%
|
0.00%
|
|
Total Commercial
|
3.13%
|
2.95%
|
2.88%
|
2.69%
|
2.38%
|
1.32%
|
|
Residential Mortgage
|
0.82%
|
0.55%
|
0.79%
|
1.09%
|
1.12%
|
0.27%
|
|
Home Equity
|
1.21%
|
0.43%
|
0.71%
|
1.04%
|
0.25%
|
1.11%
|
|
Other Consumer
|
1.72%
|
1.03%
|
0.96%
|
1.15%
|
1.28%
|
1.13%
|
|
Total Consumer
|
1.04%
|
0.59%
|
0.79%
|
1.09%
|
0.94%
|
0.59%
|
|
|
|
|
|
|
|
|
|
Total Consumer and
Commercial |
2.49%
|
2.22%
|
2.23%
|
2.18%
|
1.95%
|
1.10%
|
|
(Annualized Year-to-Date Net Charge-Offs by Category as a % of Period End Total Loans plus Loans Held for Sale)
|
||||||
23
NON-PERFORMING ASSET RECONCILIATION
|
Q2-’10
|
Q3-’10
|
Q4-’10
|
Q1-’11
|
|
|
Beginning Balance NPAs & 90+ Days Delinquent ($ in millions)
|
$ 144.6
|
$ 146.5
|
$ 130.8
|
$ 120.0
|
|
Non-Accrual
|
|
|
|
|
|
Add: New NPLs
|
$ 27.3
|
$ 15.5
|
$ 27.4
|
$ 11.7
|
|
Less: To Accrual/Payoff/Restructured
|
( 8.3)
|
( 18.6)
|
( 14.5)
|
( 3.2)
|
|
Less: To OREO
|
( 4.0)
|
( 6.7)
|
( 7.0)
|
( 2.0)
|
|
Less: Charge-offs (includes write-downs for transfer to OREO)
|
( 17.7)
|
( 11.8)
|
(13.9)
|
( 9.4)
|
|
Increase /(Decrease): Non-Accrual Loans
|
($ 2.7)
|
($ 21.6)
|
($ 8.0)
|
($ 2.9)
|
|
Other Real Estate Owned (ORE)
|
|
|
|
|
|
Add: New ORE Properties
|
$ 4.0
|
$ 6.6
|
$7.2
|
$ 2.2
|
|
Less: ORE Sold
|
( 0.2)
|
( 3.8)
|
( 4.2)
|
( 3.6)
|
|
Less: ORE Losses (write-downs)
|
( 1.9)
|
( 1.4)
|
( 3.6)
|
( 2.5)
|
|
Increase /(Decrease): ORE
|
$ 1.9
|
$ 1.4
|
($ .60)
|
($ 3.9)
|
|
Increase /(Decrease): 90 Days Delinquent
|
$ 1.9
|
$ 0.8
|
($ 4.0)
|
($ 0.6)
|
|
Increase /(Decrease): Restructured/Renegotiated Loans
|
$ 0.8
|
$ 3.7
|
$ 1.8
|
($ 5.0)
|
|
Total NPA Change
|
$ 1.9
|
($ 15.7)
|
($ 10.8)
|
($ 12.4)
|
|
Ending Balance NPAs & 90+ Days Delinquent
|
$ 146.5
|
$ 130.8
|
$ 120.0
|
$ 107.6
|
24
Allowance for Loan and Lease Loss Coverage
|
|
Q1-’10
|
Q2-’10
|
Q3-’10
|
Q4-’10
|
Q1-’11
|
|
1. Allowance for Loan and Lease
Losses |
$88.6
|
$87.0
|
$83.7
|
$83.0
|
$80.9
|
|
2. Non-Accrual Loans
|
$122.9
|
$120.2
|
$98.6
|
$90.6
|
$87.7
|
|
3. ALLL % of Non-Accrual Loans
|
72.1%
|
72.4%
|
84.9%
|
91.6%
|
92.3%
|
|
4. Impaired Loans
|
$157.4
|
$150.6
|
$125.7
|
$116.2
|
$116.8
|
|
5. Specific Reserves
|
$21.8
|
$18.4
|
$14.9
|
$13.9
|
$15.8
|
|
6. Classified Assets
|
$328.2
|
$341.6
|
$334.2
|
$313.0
|
$293.8
|
|
7. Criticized Assets (includes Classified)
|
$424.5
|
$442.9
|
$408.6
|
$393.0
|
$383.7
|
|
|
|
|
|
|
|
($ in millions)
25
($ in millions)
26
Michael C. Rechin
President
and Chief Executive Officer
27
Overview of 2011 Strategy and Tactics
“Strengthen and Grow”
“Strengthen and Grow”
§ Implement systems and processes to standardize and
accelerate small business opportunities.
accelerate small business opportunities.
§ Realize investment in online banking
§ Preserve margin while intensifying revenue activity using
market coverage tactics.
market coverage tactics.
§ Continue to improve asset quality, reduce credit costs,
and maximize resolutions.
and maximize resolutions.
§ Streamline and solidify our brand position as a
community bank competing and growing in consumer,
small business and middle market.
community bank competing and growing in consumer,
small business and middle market.
28
Contact Information
First Merchants Corporation common stock is
traded on the NASDAQ Global Select Market
under the symbol FRME.
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
dortega@firstmerchants.com