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| 8-K - 8K 2ND QTR 2016 EARNINGS PRESENTATION - FIRST MERCHANTS CORP | a8k2q16earningsreleaseslid.htm |
FIRST MERCHANTS
CORPORATION
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
Second Quarter 2016
Earnings Highlights
July 26, 2016
NASDAQ: FRME
Michael C. Rechin Mark K. Hardwick John J. Martin
President Executive Vice President Executive Vice President
Chief Executive Officer Chief Financial Officer Chief Credit Officer
Chief Operating Officer
®
THE STRENGTH OF BIG. THE SERVICE OF SMALL.
www.firstmerchants.com
2
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.
Non-GAAP Financial Measures
These slides contain non-GAAP financial measures. For purposes of Regulation G, a non-GAAP
financial measure is a numerical measure of the registrant’s historical or future financial performance,
financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect
of excluding amounts, that are included in the most directly comparable measure calculated and
presented in accordance with GAAP in the statement of income, balance sheet or statement of cash
flows (or equivalent statements) of the issuer; or includes amounts, or is subject to adjustments that
have the effect of including amounts, that are excluded from the most directly comparable measure so
calculated and presented. In this regard, GAAP refers to generally accepted accounting principles in
the United States. Pursuant to the requirements of Regulation G, First Merchants Corporation has
provided reconciliations within the slides, as necessary, of the non-GAAP financial measure to the most
directly comparable GAAP financial measure.
® Forward-Looking Statement
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
3
2nd Quarter 2016 Highlights
$20.0 Million of Net Income, an 11.3% increase over 2Q2015
Earnings Per Share of $ .49, a 4.3% increase over 2Q2015
Delivered a strong 3.86% Net Interest Margin
Total Assets of $6.9 Billion grew by 12.5% over 2Q2015
1.17% Return on Average Assets
Efficiency Ratio of 57.33%
Completed conversion to an Indiana State Chartered Bank on April 15, 2016
®
“Record Level Performance Metrics”
Mark K. Hardwick
Executive Vice President
Chief Financial Officer
and Chief Operating Officer
®
5
Total Assets
($ in Millions)
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
®
2014 2015 Q1-’16 Q2-’16
1. Investments $1,181 $1,277 $1,271 $1,298
2. Loans Held for Sale 7 10 4 19
3. Loans 3,925 4,694 4,710 4,791
4. Allowance (64) (62) (62) (62)
5. CD&I & Goodwill 219 260 262 261
6. BOLI 169 201 201 201
7. Other 387 381 413 398
8. Total Assets $5,824 $6,761 $6,799 $6,906
9. Percent Growth Annualized 16.1% 4.3%
®
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
Commercial &
Industrial
22.6%
Commercial
Real Estate
Owner-Occupied
11.3%
Commercial
Real Estate
Non-Owner
Occupied
24.5%
Construction Land
& Land
Development
7.3%
Agricultural
Land
3.1%
Agricultural
Production
2.0%
Other
Commercial
3.7%
Residential
Mortgage
16.2%
Home
Equity
7.8%
Other
Consumer
1.5%
QTD Yield = 4.59%
YTD Yield = 4.54%
Total Loans = $4.8 Billion
Loan and Yield Detail
(as of 6/30/2016)
6
®
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
Mortgage-
Backed
Securities
32%
Collateralized
Mortgage
Obligations
23%
U. S. Agencies
2%
Corporate
Obligations
1%
Tax-Exempt
Municipals
42%
Investment Portfolio
(as of 6/30/2016)
$1.3 Billion
Modified duration of 4.0 years
Tax equivalent yield of 3.77%
Net unrealized gain of $62.9 Million
7
2014 2015 Q1-’16 Q2-’16
1. Customer Non-Maturity Deposits $3,523 $4,096 $4,140 $4,269
2. Customer Time Deposits 784 880 841 820
3. Brokered Deposits 334 314 330 319
4. Borrowings 290 446 420 435
5. Other Liabilities 44 51 79 53
6. Hybrid Capital 122 123 122 122
7. Common Equity 727 851 867 888
8. Total Liabilities and Capital $5,824 $6,761 $6,799 $6,906
Total Liabilities and Capital
($ in Millions)
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®
8
®
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
Demand
Deposits
49%
Savings
Deposits
29%
Certificates & Time
Deposits of
>$100,000
6%
Certificates & Time
Deposits <$100,000
10%
Brokered Deposits
6%
Deposit Detail
(as of 06/30/2016)
QTD Cost = .39%
YTD Cost = .40%
Total = $5.4 Billion
9
11.00%
11.16% 11.40% 11.37% 11.22% 11.31%
11.49% 11.42% 11.39%
8.74% 9.05%
9.16% 9.31% 9.03%
9.25% 9.17% 9.35% 9.52%
15.11%
15.21% 15.34%
15.12%
14.92% 14.85% 14.94% 14.79% 14.67%
6.00%
7.00%
8.00%
9.00%
10.00%
11.00%
12.00%
13.00%
14.00%
15.00%
16.00%
17.00%
18.00%
2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
Total Risk-Based Capital Ratio (Target = 13.50%)
Common Equity Tier 1 Capital Ratio (Target = 10.00%)
Tangible Common Equity Ratio (TCE) (Target = 8.50%) 10
Capital Ratios
(Target)
(Target)
(Target)
®
11
Net Interest Margin
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
®
($ in Millions) Q2 - '14 Q3 - '14 Q4 - '14 Q1 - '15 Q2 - '15 Q3 - '15 Q4 - '15 Q1 - '16 Q2 - '16
Net Interest Income - FTE $ 48.1 $ 49.9 $ 49.2 $ 49.2 $ 51.7 $ 53.3 $ 53.2 $ 57.6 $ 59.2
Fair Value Accretion $ 2.2 $ 3.5 $ 1.4 $ 2.2 $ 2.2 $ 2.0 $ 1.9 $ 2.5 $ 3.2
Tax Equivalent Yield on Earning
Assets 4.33% 4.41% 4.26% 4.24% 4.26% 4.30% 4.20% 4.28% 4.30%
Cost of Supporting Liabilities 0.44% 0.43% 0.46% 0.46% 0.45% 0.45% 0.45% 0.45% 0.44%
Net Interest Margin 3.89% 3.98% 3.80% 3.78% 3.81% 3.85% 3.75% 3.83% 3.86%
3.89%
3.98%
3.80% 3.78% 3.81%
3.85%
3.75%
3.83%
3.86%
3.71% 3.71% 3.69%
3.61%
3.65%
3.71%
3.62% 3.66% 3.65%
2.50%
2.70%
2.90%
3.10%
3.30%
3.50%
3.70%
3.90%
4.10%
$32
$36
$40
$44
$48
$52
$56
$60
Q2 - '14 Q3 - '14 Q4 - '14 Q1 - '15 Q2 - '15 Q3 - '15 Q4 - '15 Q1 - '16 Q2 - '16
Net Interest Income - FTE ($millions) Net Interest Margin Net Interest Margin - Adjusted for Fair Value Accretion
($ in Millions) 2014 2015 Q1-’16 Q2-’16
1. Service Charges on Deposit Accounts $15.7 $16.2 $ 4.1 $ 4.4
2. Wealth Management Fees 11.7 11.3 3.1 3.0
3. Insurance Commission Income 7.4 4.1
4. Card Payment Fees 11.8 13.4 3.8 3.8
5. Cash Surrender Value of Life Ins 3.7 2.9 1.5 1.3
6. Gains on Sales Mortgage Loans 4.9 6.5 1.5 1.7
7. Securities Gains/Losses 3.6 2.7 1.0 0.7
8. Gain on Sale of Insurance Subsidiary 8.3
9. Gain on Cancellation of Trust Preferred Debt 1.3
10. Other 3.0 3.1 0.8 1.5
11. Total $61.8 $69.8 $15.8 $16.4
12
Non-Interest Income
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
®
–
–
–
–
–
–
–
–
13
Non-Interest Expense
2014 2015 Q1-’16 Q2-’16
1. Salary & Benefits $ 96.5 $101.9 $ 27.3 $ 25.6
2. Premises & Equipment 23.2 25.5 7.3 7.3
3. Core Deposit Intangible Amortization 2.4 2.8 1.0 1.0
4. Professional & Other Outside Services 8.1 9.9 2.2 1.5
5. OREO/Credit-Related Expense 3.4 3.9 0.7 0.9
6. FDIC Expense 3.7 3.7 1.0 1.0
7. Outside Data Processing 7.3 7.1 2.1 2.0
8. Marketing 3.5 3.5 0.7 0.9
9. Other 15.8 16.5 4.1 4.7
10. Non-Interest Expense $163.9 $174.8 $ 46.4 $44.9
($ in Millions)
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
®
14
2014 2015 Q1-’16 Q2-’16
1. Net Interest Income $ 187.0 $ 196.4 $ 54.5 $ 56.0
2. Provision for Loan Losses (2.6) (0.4) (0.6) (0.8)
3. Net Interest Income after Provision 184.4 196.0 53.9 55.2
4. Non-Interest Income 61.8 69.8 15.8 16.4
5. Non-Interest Expense (163.9) (174.8) (46.4) (44.9)
6. Income before Income Taxes 82.3 91.0 23.3 26.7
7. Income Tax Expense (22.1) (25.6) (5.6) (6.7)
8. Net Income Avail. for Distribution $ 60.2 $ 65.4 $ 17.7 $ 20.0
9. EPS $ 1.65 $ 1.72 $ 0.43 $ 0.49
10. Efficiency Ratio 62.44% 61.19% 61.78% 57.33%
Earnings
($ in Millions)
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®
15
2015 Q1 Q2 Q3 Q4 Total
1. Earnings Per Share $ .43 $ .47 $ .45 $ .37 $ 1.72
2. Dividends $ .08 $ .11 $ .11 $ .11 $ .41
3. Tangible Book Value $13.96 $14.15 $14.59 $ 14.68
2016 Q1 Q2 Q3 Q4 Total
1. Earnings Per Share $ .43 $ .49 – – $ .92
2. Dividends $ .11 $ .14 – – $ .25
2. Tangible Book Value $15.02 $15.53 – –
Per Share Results
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
®
$9.21 $9.64
$10.95
$12.17
$13.65
$14.68
$15.53
THE STRENGTH OF BIG. THE SERVICE OF SMALL.
Dividends and Tangible Book Value
0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
.08
www.firstmerchants.com
®
.01
.03
.05
.11
.14
2.25%
Forward
Dividend
Yield
29%
Dividend
Payout Ratio
=
Quarterly Dividends Tangible Book Value
16
John J. Martin
Executive Vice President
and Chief Credit Officer
®
18
Loan Portfolio Trends
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
®
($ in Millions)
2014 2015 Q1-'16 Q2-'16 $ %186.1 186.1
1. Commercial & Industrial 897$ 1,057$ 1,061$ 1,085$ 24$ 2.3%
2. Construction, Land and
Land Development 207 367 392 353 (39) (9.9%)
3. CRE Non-Owner Occupied 976 1,090 1,106 1,179 73 6.6%
4. CRE Owner Occupied 535 554 544 543 (1) (0.2%)
5. Agricultural Production 105 98 92 95 3 3.3%
6. Agricultural Land 162 158 155 148 (7) (4.5%)
7. Residential Mortgage 647 786 770 759 (11) (1.4%)
8. Home Equity 287 349 354 374 20 5.6%
9. Other Commercial 36 160 162 180 18 11.1%
10. Other Consumer 73 75 74 75 1 1.4%
11. Total Loans 3,925$ 4,694$ 4,710$ 4,791$ 81$ 1.7%
Linked Quarter
Change
19
Asset Quality Summary
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
®
($ in Millions)
2014 2015 Q1-'16 Q2-'16 $ %
1. Non-Accrual Loans 48.8$ 31.4$ 36.7$ 33.6$ (3.1)$ (8.4%)
2. Other Real Estate 19.3 17.3 15.6 13.2 (2.4) (15.4%)
3. Renegotiated Loans 2.0 1.9 1.0 4.3 3.3 330.0%
4. 90+ Days Delinquent Loans 4.6 0.9 1.0 0.4 (0.6) (60.0%)
5. Total NPAs & 90+ Days Delinquent 74.7$ 51.5$ 54.3$ 51.5$ (2.8)$ (5.2%)
6. NPAs & 90+ Days/Loans & ORE 1.9% 1.1% 1.2% 1.1%
7. Classified Assets 191.8$ 171.8$ 170.9$ 173.2$ 2.3$ 1.3%
8. Criticized Assets (includes
Classified) 253.6$ 275.0$ 305.8$ 297.6$ (8.2)$ (2.7%)
Change
Linked Quarter
20
Non-Performing Asset Reconciliation
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
®
($ in Millions) Q3-'15 Q4-'15 Q1-'16 Q2-'16
1. Beginning Balance NPAs & 90+ Days Delinquent 58.5$ 53.2$ 51.5$ 54.3$
Non-Accrual
2. Add: New Non-Accruals 3.9 3.9 10.7 3.6
3. Less: To Accrual/Payoff/Renegotiated (6.8) (2.4) (2.7) (4.5)
4. Less: To OREO (0.1) (0.8) (0.1) (0.2)
5. Less: Charge-offs (2.1) (1.9) (2.6) (2.0)
6. Increase / (Decrease): Non-Accrual Loans (5.1) (1.2) 5.3 (3.1)
Other Real Estate Owned (ORE)
7. Add: New ORE Properties 0.1 6.5 0.1 0.2
8. Less: ORE Sold (3.4) (3.6) (1.5) (2.1)
9. Less: ORE Losses (write-downs) (1.1) (0.5) (0.3) (0.5)
10. Increase / (Decrease): ORE (4.4) 2.4 (1.7) (2.4)
11. Increase / (Decrease): 90+ Days Delinquent 1.3 (1.0) 0.1 (0.6)
12. Increase / (Decrease): Renegotiated Loans 2.9 (1.9) (0.9) 3.3
13. Total NPAs & 90+ Days Delinquent Change (5.3) (1.7) 2.8 (2.8)
14. Ending Balance NPAs & 90+ Days Delinquent 53.2$ 51.5$ 54.3$ 51.5$
21
ALLL and Fair Value Summary
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
®
36.5%
15.5%
48.0%
($ in Millions) Q2-'15 Q3-'15 Q4-'15 Q1-'16 Q2-'16
1. Allowance for Loan Losses (ALLL) 62.6$ 62.9$ 62.5$ 62.1$ 62.2$
2. Fair Value Adjustment (FVA) 40.7 37.9 47.0 47.1 42.3
3. Total ALLL plus FVA 103.3$ 100.8$ 109.5$ 109.2$ 104.5$
4. Specific Reserves 3.1$ 2.0$ 1.8$ 1.4$ 2.1$
5. Purchased Loans plus FVA 727.8 674.5 965.4 917.6 863.4
6. ALLL/Non-Accrual Loans 165.9% 192.8% 199.0% 169.1% 185.3%
7. ALLL/Non-purchased Loans 1.76% 1.70% 1.65% 1.62% 1.56%
8. ALLL/Loans 1.47% 1.45% 1.33% 1.32% 1.29%
9. ALLL & FVA/Total Loan Balances plus FVA
1
2.41% 2.31% 2.31% 2.29% 2.15%
1 Management uses this Non-GAAP measure to demonstrate coverage and credit risk
22
Asset Quality & Portfolio Summary
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
®
Loan growth of $81 million led by Commercial Real Estate and C & I.
Continued growth in construction commitments.
Criticized and Classified Assets improving but elevated as a result of
purchased portfolios and prior year agricultural results.
Provision in line with charge-offs resulting in a 1.56% ALLL to non-purchased
loans and 2.15% with fair value adjustments.
Minimal amount (<$20 million) of direct exposure to energy (coal). Other
related energy exposure is associated with commodity price fluctuations and
the effect on agricultural portfolio.
Michael C. Rechin
President and Chief Executive Officer
®
24
FMC Strategy and Tactics Overview
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
Looking Forward . . .
®
Continue to Win in our Markets – Geographic Community-Based Banking
Model
Increase Focus on Treasury Management Services for Deposit and Fee
Generation
Build or Acquire Specialty Finance Businesses and Lending Verticals
Mergers and Acquisitions as a Core Competency
Exploit Back-Office Infrastructure for Efficiency and Operating Leverage
Persistent Focus on Banking Center Optimization in Alignment with Digital
Channels Migration
Capital Optimization
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
dortega@firstmerchants.com
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®
Appendix
®
27
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
Appendix – Non-GAAP Reconciliation ®
CAPITAL RATIOS (dollars in thousands):
1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16
Total Risk-Based Capital Ratio
Total Stockholders' Equity (GAAP) 652,111 670,596 684,553 726,827 739,658 749,955 766,984 850,509 867,263 887,550
Adjust for Accumulated Other Comprehensive (Income)
Loss* 1,016 (4,210) (4,150) 1,630 1,915 6,490 3,614 1,362 (2,066) (7,035)
Less: Preferred Stock (125) (125) (125) (125) (125) (125)
Add: Qualifying Capital Securities 55,000 55,000 55,000 55,000 56,827 56,827 51,827 55,776 55,236 55,296
Less: Tier 1 Capital Deductions (4,381) (2,371) (3,418) (2,516) (1,999) (1,828)
Less: Disallowed Goodwill and Intangible Assets (202,175) (201,583) (200,992) (218,755) (205,818) (208,980) (208,749) (247,006) (250,367) (249,932)
Less: Disallowed Servicing Assets (177) (171) (166) (167)
Less: Disallowed Deferred Tax Assets (4,677) (1,357) (1,786) (1,581) (1,144) (1,677) (2,998) (2,743)
Total Tier 1 Capital (Regulatory) $ 501,098 $ 518,275 $ 534,245 $ 564,535 $ 586,290 $ 600,215 $ 608,989 $ 656,323 $ 664,944 $ 681,183
Qualifying Subordinated Debentures 65,000 65,000 65,000 65,000 65,000 65,000 65,000 65,000 65,000 65,000
Allowance for Loan Losses includible in Tier 2 Capital 51,556 52,809 53,803 55,972 58,688 60,865 62,012 62,453 62,086 62,186
Total Risk-Based Capital (Regulatory) $ 617,654 $ 636,084 $ 653,048 $ 685,507 $ 709,978 $ 726,080 $ 736,001 $ 783,776 $ 792,030 $ 808,369
Net Risk-Weighted Assets (Regulatory) $ 4,106,423 $ 4,209,145 $ 4,292,495 $ 4,469,765 $ 4,695,073 $ 4,865,157 $ 4,956,737 $ 5,247,617 $ 5,355,827 $ 5,511,557
Total Risk-Based Capital Ratio (Regulatory) 15.04% 15.11% 15.21% 15.34% 15.12% 14.92% 14.85% 14.94% 14.79% 14.67%
Common Equity Tier 1 Capital Ratio
Total Tier 1 Capital (Regulatory) $ 501,098 $ 518,275 $ 534,245 $ 564,535 $ 586,290 $ 600,215 $ 608,989 $ 656,323 $ 664,944 $ 681,183
Less: Qualified Capital Securities (55,000) (55,000) (55,000) (55,000) (56,827) (56,827) (51,827) (55,776) (55,236) (55,296)
Add: Additional Tier 1 Capital Deductions 4,381 2,371 3,418 2,516 1,999 1,828
Less: Preferred Stock (125) (125) (125) (125)
Common Equity Tier 1 Capital (Regulatory) $ 445,973 $ 463,150 $ 479,120 $ 509,410 $ 533,844 $ 545,759 $ 560,580 $ 603,063 $ 611,707 $ 627,715
Net Risk-Weighted Assets (Regulatory) $ 4,106,423 $ 4,209,145 $ 4,292,495 $ 4,469,765 $ 4,695,073 $ 4,865,157 $ 4,956,737 $ 5,247,617 $ 5,355,827 $ 5,511,557
Common Equity Tier 1 Capital Ratio (Regulatory) 10.86% 11.00% 11.16% 11.40% 11.37% 11.22% 11.31% 11.49% 11.42% 11.39%
*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.
28
Appendix – Non-GAAP Reconciliation
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
®
TANGIBLE COMMON EQUITY RATIO (dollars in thousands):
2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16
Total Stockholders' Equity (GAAP) $ 670,596 $ 684,553 $ 726,827 $ 739,658 $ 749,955 $ 766,984 $ 850,509 $ 867,263 $ 887,550
Less: Preferred Stock
(125)
(125)
(125)
(125)
(125)
(125)
(125)
(125)
(125)
Less: Intangible Assets, net of tax
(196,781) (196,315) (212,669) (212,184) (214,577) (214,115) (253,486) (255,046) (254,368)
Tangible Common Equity (non-GAAP) $ 473,690 $ 488,113 $ 514,033 $ 527,349 $ 535,253 $ 552,744 $ 596,898 $ 612,092 $ 633,057
Total Assets (GAAP) $ 5,615,120 $ 5,591,383 $ 5,824,127 $ 5,877,521 $ 6,140,308 $ 6,189,797 $ 6,761,003 $ 6,798,539 $ 6,906,418
Less: Intangibles, net of tax
(196,781) (196,315) (212,669) (212,184) (214,577) (214,115) (253,486) (255,046) (254,368)
Tangible Assets (non-GAAP) $ 5,418,339 $ 5,395,068 $ 5,611,458 $ 5,665,337 $ 5,925,731 $ 5,975,682 $ 6,507,517 $ 6,543,493 $ 6,652,050
Tangible Common Equity Ratio (non-GAAP) 8.74% 9.05% 9.16% 9.31% 9.03% 9.25% 9.17% 9.35% 9.52%
TANGIBLE COMMON EQUITY PER SHARE (dollars in thousands):
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16
Total Stockholders' Equity (GAAP) $ 739,658 $ 749,955 $ 766,984 $ 850,509 $ 867,263 $ 887,550
Less: Preferred Stock (125) (125) (125) (125) (125) (125)
Less: Intangible Assets, net of tax (212,184) (214,577) (214,115) (253,486) (255,046) (254,368)
Tangible Common Equity (non-GAAP) $ 527,349 $ 535,253 $ 552,744 $ 596,898 $ 612,092 $ 633,057
Shares Outstanding 37,781,488 37,824,649 37,873,921 40,664,258 40,749,340 40,772,896
Tangible Common Equity per Share (non-GAAP) $ 13.96 $ 14.15 $ 14.59 $ 14.68 $ 15.02 $ 15.53
29
Appendix – Non-GAAP Reconciliation
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
®
EFFICIENCY RATIO (dollars in thousands):
2014 2015 1Q16 2Q16
Non Interest Expense (GAAP) $ 164,008 $ 174,806 $ 46,475 $ 44,835
Less: Core Deposit Intangible Amortization (2,445) (2,835) (978) (977)
Less: OREO and Foreclosure Expenses (3,462) (3,956) (751) (915)
Adjusted Non Interest Expense (non-GAAP) 158,101 168,015 44,746 42,943
Net Interest Income (GAAP) 187,037 196,404 54,455 55,962
Plus: Fully Taxable Equivalent Adjustment 7,921 10,975 3,136 3,256
Net Interest Income on a Fully Taxable Equivalent Basis (non-GAAP) 194,958 207,379 57,591 59,218
Non Interest Income (GAAP) 61,816 69,868 15,837 16,385
Less: Investment Securities Gains (Losses) (3,581) (2,670) (997) (706)
Adjusted Non Interest Income (non-GAAP) 58,235 67,198 14,840 15,679
Adjusted Revenue (non-GAAP) 253,193 274,577 72,431 74,897
Efficiency Ratio (non-GAAP) 62.44% 61.19% 61.78% 57.33%
ALLOWANCE AS A PERCENTAGE OF NON-PURCHASED LOANS (dollars in thousands):
2Q15 3Q15 4Q15 1Q16 2Q16
Loans Held for Sale (GAAP) $ 8,295 $ 1,943 $ 9,894 $ 3,628 $ 18,854
Loans (GAAP) 4,238,205 4,321,715 4,693,822 4,709,907 4,791,429
Total Loans 4,246,500 4,323,658 4,703,716 4,713,535 4,810,283
Less: Purchased Loans (687,096) (636,581) (917,589) (870,507) (821,158)
Non-Purchased Loans (non-GAAP) $ 3,559,404 $ 3,687,077 $ 3,786,127 $ 3,843,028 $ 3,989,125
Allowance for Loan Losses (GAAP) $ 62,550 $ 62,861 $ 62,453 $ 62,086 $ 62,186
Fair Value Adjustment (FVA) (GAAP) 40,710 37,922 47,057 47,104 42,291
Allowance plus FVA (non-GAAP) $ 103,260 $ 100,783 $ 109,510 $ 109,190 $ 104,477
Total Loans $ 4,246,500 $ 4,323,658 $ 4,703,716 $ 4,713,535 $ 4,810,283
Fair Value Adjustment (FVA) (GAAP) 40,710 37,922 47,057 47,104 42,291
Total Loans plus FVA (non-GAAP) $ 4,287,210 $ 4,361,580 $ 4,750,773 $ 4,760,639 $ 4,852,574
Allowance as a Percentage of Non-Purchased Loans (non-GAAP) 1.76% 1.70% 1.65% 1.62% 1.56%
Allowance plus FVA as a Percentage of Total Loans plus FVA (non-GAAP) 2.41% 2.31% 2.31% 2.29% 2.15%