Attached files
| file | filename |
|---|---|
| 8-K - 8-K FIRST MERCHANTS CORP INVESTOR PRESENTATION - FIRST MERCHANTS CORP | a8k-2ndqtr2016investorslid.htm |
FIRST MERCHANTS
CORPORATION
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
NASDAQ: FRME
Michael C. Rechin Mark K. Hardwick Michael J. Stewart John J. Martin
President Executive Vice President Executive Vice President Executive Vice President
Chief Executive Officer Chief Financial Officer Chief Banking Officer Chief Credit Officer
Chief Operating Officer
®
2nd Quarter 2016
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.
Why Invest in First Merchants?
www.firstmerchants.com
3
®
Financial Highlights
Assets $6,906,418
Loans, Net $4,729,243
Deposits $5,407,554
Tangible Common Equity $633,056
TCE/TA 9.52%
2016 Net Income – YTD $37,699
2016 ROAA – YTD 1.11%
2016 ROATCE - YTD 12.70%
NPAs/Loans + OREO 1.06%
THE STRENGTH OF BIG. THE SERVICE OF SMALL.
Company Profile (as of 6/30/2016)
www.firstmerchants.com
4
Market Information
Common Shares Outstanding 40,772,896
Market Cap $1,016,468
Dividend Yield 1.89%
Price/Tangible Book Value 1.61x
Price/LTM EPS 14.3x
Price/2016 Est. EPS 13.3x
Leadership Team – First Merchants
Name/Title
Michael C. Rechin, President & CEO
Mark K. Hardwick, EVP, Chief Financial Officer &
Chief Operating Officer
Michael J. Stewart, EVP & Chief Banking Officer
John J. Martin, EVP & Chief Credit Officer
First Merchants
First Merchants Bank, formed in 1893, celebrating its
123rd anniversary.
First Merchants Corporation, organized in 1982, is the
largest financial services holding company
headquartered in Central Indiana
®
($ in Thousands)
THE STRENGTH OF BIG. THE SERVICE OF SMALL.
Our Franchise
www.firstmerchants.com
5
First Merchants Corporation
operates more than 100 locations
in 27 Indiana counties, 2 Ohio
counties, and 2 Illinois counties
Key Market Profiles
Loans Deposits
$2,067M Indianapolis $1,542M
899M Muncie 1,546M
608M Munster 987M
588M Lafayette 1,008M
629M Columbus 325M
(as of June 30, 2016)
®
County Region/Type Market Position Market % $ Deposits
Delaware County, IN Muncie (Established) 1 47.92% $ 918,048
Henry County, IN Muncie (Established) 1 39.41% 252,871
Jasper County, IN Lafayette (Established) 1 29.87% 180,331
White County, IN Lafayette (Established) 1 32.07% 155,980
Jay County, IN Muncie (Established) 1 41.50% 93,923
Union County, IN Muncie (Established) 1 45.43% 46,707
Tippecanoe County, IN Lafayette (Established) 2 21.05% 479,784
Madison County, IN Indianapolis (Growth) 2 24.58% 308,532
Shelby County, IN Indianapolis (Growth) 2 18.63% 94,086
Wabash County, IN Muncie (Established) 2 14.49% 51,930
Hendricks County, IN Indianapolis (Growth) 3 11.83% 232,586
Adams County, IN Muncie (Established) 3 17.78% 99,389
Randolph County, IN Muncie (Established) 3 8.76% 78,063
Clinton County, IN Lafayette (Established) 3 14.98% 63,096
Brown County, IN Indianapolis (Growth) 3 21.69% 23,413
Hamilton County, IN Indianapolis (Growth) 4 8.70% 493,289
Hancock County, IN Indianapolis (Growth) 4 9.63% 78,134
Morgan County, IN Indianapolis (Growth) 4 7.19% 54,988
Carroll County, IN Lafayette (Established) 4 10.43% 32,386
Johnson County, IN Indianapolis (Growth) 5 7.88% 146,883
Fayette County, IN Muncie (Established) 5 8.96% 26,725
Miami County, IN Muncie (Established) 5 7.31% 25,922
Sub Total $3,937,066
First Merchants Total $5,238,944
Key FMC Deposit Market Share
FDIC Data June 30, 2015
6 THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
THE STRENGTH OF BIG. THE SERVICE OF SMALL.
First Merchants Strategy
www.firstmerchants.com
7
Commercial Bank
• Lending Engine
Supported by Consumer Retail Bank
• Deposit Engine
Growth
• Organic
• Growth by Acquisition
®
THE STRENGTH OF BIG. THE SERVICE OF SMALL.
First Merchants Strategy
www.firstmerchants.com
8
Commercial Bank
• Located in Prime Growth Commercial Banking Markets
• Indianapolis, Indiana
• Columbus, Ohio
• Lafayette, Indiana
• Northwest Indiana
• Hire the Best Talent Supported with the Finest:
• Sales Management Process
• Lending and Cash Management Services
• Revenue-Based Incentive System
®
THE STRENGTH OF BIG. THE SERVICE OF SMALL.
First Merchants Strategy
www.firstmerchants.com
9
Consumer Retail Bank
• Diversely Located in Stable Rural and Growth Metro
Markets
• Supported by:
• Talented Customer Service Oriented Banking Center
and Call Center Professionals
• State-of-the-Art Deposit and CRM Systems
• Highly Usable Online Banking System
• Widely Available Mobile Banking System
• Customer Service and Relationship Growth-Oriented
Incentive System
®
THE STRENGTH OF BIG. THE SERVICE OF SMALL.
First Merchants Strategy
www.firstmerchants.com
10
“Service-driven alternative to super-regional bank competitors.
Deliver superior service with presence close to the customer for . . . ”
“We specialize in our communities”
Retail Banking
Mortgage Banking
Commercial Banking
• Business Banking
• Commercial & Industrial
• Agriculture
• Healthcare Services
• Real Estate
• Cash Management Services
Private Wealth Advisory (private banking, investment management,
personal trust, brokerage, and retirement)
®
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
11
WEALTH
ADVISORY
MORTGAGE COMMERCIAL
BANKING
RETAIL
BANKING
Supported by LOB Strategies
Indianapolis
Higher Growth
Brown, Hamilton,
Hancock, Hendricks,
Johnson, Madison,
Marion, Morgan,
Shelby Counties
Columbus, OH
Higher Growth
Franklin County, OH
Lafayette
Established
Carroll, Clinton,
Jasper, Montgomery,
Tippecanoe, White
Counties
Muncie
Established
Adams, Butler, Delaware
Fayette, Henry, Howard,
Jay, Miami, Randolph,
Union, Wabash,
Wayne Counties
Munster
Higher Growth
Lake & Porter, IN
Cook & DuPage, IL
Vision, Mission, Culture Statement, Core Values, Business Model
How We Deliver ®
THE STRENGTH OF BIG. THE SERVICE OF SMALL.
Organic Growth Opportunities
Exists in All Directions
www.firstmerchants.com
12
Lafayette MSA
Entered: 2002
Total Population: 211,900
Deposit Market Share: 18.11%
Indianapolis MSA
Entered: 1998
Total Population: 1,955,766
Deposit Market Share: 3.43%
Columbus, Ohio MSA
Entered: 2003
Total Population: 1,971,051
Deposit Market Share: .62%
Northwest Indiana MSA*
Entered: 2013
Total Population: 690,960
Deposit Market Share: 7.24%
*Includes Jasper, Lake, and Porter counties
LEGACY MARKET
Muncie MSA
Established: 1893
Total Population:
117,000
Current Market
Share: 47.92%
®
4.58%
2.64% 2.68%
3.50%
1.62%
-0.37%
U.S. Indiana Delaware Co.
HHI Pop. 13
Delaware County, IN*
Rank
Branches
Deposits
Mkt.
Share
1 First Merchants Corporation 12 918,048 47.92%
2 Mutual First Financial 9 471,551 24.62%
3 J.P. Morgan Chase 4 213,100 11.12%
4 Old National Bancorp 7 186,905 9.76%
5 Star Financial Group 5 125,289 6.54%
6 Woodforest Financial Group 1 701 0.04%
Market Total 38 $1,915,594
Projected HHI & Pop. Change 2014-2019
*SNL Financial FDIC Summary of Deposits as of June 30, 2015
Notable Major Employers for Delaware County
Located 58 miles northeast of Indianapolis in the east central portion of the
state
Described by several national studies as a typical American community,
Delaware County offers the advantages of larger cities without the hassles
and costs associated with living in major metropolitan areas.
Easy access to the top 100 markets in the country, Muncie-Delaware
County has a diverse economic landscape
Ranked #27, Forbes Best Small Places for Business and Careers
Workforce experienced in life science, advanced manufacturing, 21st
century logistics and information technology
Home to Ball State University
Muncie Market
®
4.58%
2.64%
8.32%
3.50%
1.62%
7.86%
U.S. Indiana Hamilton Co.
HHI Pop.
Projected HHI & Pop. Change 2014-2019
14
Hamilton County, IN**
Rank
Branches
Deposits
Mkt.
Share
1 JPMorgan Chase & Co. 15 1,169,302 20.63%
2 Merchants Bancorp 2 721,276 12.73%
3 PNC Financial Services Group 11 517,540 9.13%
4 First Merchants Corporation 18 493,289 8.70%
5 Fifth Third Bancorp 7 467,980 8.26%
6 Huntington Bancshares 11 366,000 6.46%
7 Bank of Montreal 9 344,512 6.08%
8 Lakeland Financial Corp 2 264,690 4.67%
9 KeyCorp 7 251,914 4.44%
10 Regions Financial Corp 6 245,316 4.33%
Market Total 117 $5,668,063
Indianapolis metropolitan area includes four of the five fastest-
growing counties in Indiana and 10 of the 11 fastest-growing cities
and towns with populations of at least 5,000*
The 2015 population estimates released by the U.S. Census Bureau
show suburban Hamilton County’s population grew 13% over the last
five years*
Indiana’s population has grown 2% since 2010*
Indiana’s population growth outpaced those of neighboring states
Illinois, Kentucky, Michigan and Ohio*
With 862,781 residents, Indianapolis was the nation’s 14th largest city*
*IBJ.com
**SNL Financial FDIC Summary of Deposits as of June 30, 2015
Notable Major Employers for Hamilton County
Indianapolis Market
®
4.58%
2.64%
3.42% 3.50%
1.62%
4.73%
U.S. Indiana Tippecanoe Co.
HHI Pop.
15
Tippecanoe County, IN**
Rank
Branches
Deposits
Mkt.
Share
1 JPMorgan Chase & Co. 6 $ 637,112 27.95%
2 First Merchants Corporation 9 479,784 21.05%
3 Old National Bancorp 7 297,262 13.04%
4 Regions Financial Corp 7 277,085 12.15%
5 Lafayette Community Bancorp 4 140,977 6.18%
6 Huntington Bancshares, Inc. 4 125,805 5.52%
7 Fifth Third Bancorp 3 79,586 3.49%
8 First Bancshares, Inc. 4 77,933 3.42%
9 1st Source Corp 3 49,362 2.17%
10 Salin Bancshares 3 48,754 2.14%
Market Total 58 $ 2,279,636
Ranked #1 in Indiana and #8 nationally, Fortune, Best Place for Small
Business, based on cost of business, jobs growth, educational achievements
Ranked #2, Forbes Best Small Places for Business and Careers
Ranked #2 in Indiana for STEM job density, with 13.6% of the workforce,
topping the state’s 10.9% & national average of 11.9% (Lafayette up 70.6%
since 2001, with 4,850 new jobs)**
Ranked #17 of 200, New Geography, Best Cities for Manufacturing
Home to Purdue University
Projected HHI & Pop. Change 2014-2019
Notable Major Employers for Tippecanoe County
*SNL Financial FDIC Summary of Deposits as of June 30, 2015
**Indianapolis Business Journal
Lafayette Market
®
16
Lake County, IN*
Rank
Branches
Deposits
Mkt.
Share
1 JPMorgan Chase & Co. 25 $ 1,727,334 21.32%
2 First Bancshares, Inc. 30 1,642,798 20.28%
3 First Midwest Bancorp 17 803,560 9.92%
4 Northwest Indiana Bancorp 15 705,685 8.71%
5 First Financial Bancorp 8 602,068 7.43%
6 First Merchants Corporation 11 561,276 6.93%
7 Bank of Montreal 16 457,304 5.65%
8 Fifth Third Bancorp 16 433,404 5.35%
9 Standard Bancshares, Inc. 6 226,463 2.80%
10 PNC Financial Services Group 4 171,386 2.12%
Market Total 173 $ 8,100,905
Indiana’s second-most populous market
Benefit from its Chicago proximity
Continue to produce finest steels, refine the cleanest fuels and deliver
the best products to the Midwest**
New investments by world-class companies like BP, Pratt Industries,
Alcoa Howmet, Urschel Labs and Monosol**
Lakefront being revitalized through the Marquette Plan and
assistance of the Regional Development Authority**
4.58%
2.64% 2.76%
3.50%
1.62%
-0.56%
U.S. Indiana Lake County
HHI Pop.
Projected HHI & Pop. Change 2014-2019
Notable Major Employers for Lake County
*SNL Financial FDIC Summary of Deposits as of June 30, 2015
**www.nwiforum.org/nwi-becoming-an-economic powerhouse
Northwest Indiana Market
®
17
Second-most populous county in Ohio
Within 600 miles of 60% of All U.S. and Canadian Population
Ranked 2nd in CNBC’s 2010 study of state transportation systems for
its infrastructure, vitality, quality roads, and ability to cost-effectively
ship goods by land, air, and water**
Home to Ohio State University
4.58%
3.57% 3.56% 3.50%
0.02%
4.33%
U.S. Ohio Franklin County
HHI Pop.
Projected HHI & Pop. Change 2014-2019
Notable Major Employers for Franklin County, OH
*SNL Financial FDIC Summary of Deposits as of June 30, 2015
**http://jobs-ohio.com/manufacturing/
Franklin County, OH*
Rank
Branches
Deposits
Mkt.
Share
1 Huntington Bancshares 65 $ 16,435,270 37.41%
2 JP Morgan Chares & Co 49 11,105,577 25.28%
3 PNC Financial Services Group 43 5,261,305 11.98%
4 Fifth Third Bancorp 45 3,977,952 9.06%
5 Key Corp 22 1,327,416 3.02%
6 U. S. Bancorp 35 1,188,498 2.71%
7 Wells Fargo & Co 1 760,372 1.73%
8 FirstMerit Corp 5 492,144 1.12%
9 Heartland BancCorp 10 469,021 1.07%
10 First Financial Bancorp 5 456,606 1.04%
13 First Merchants Corporation 7 331,758 0.76%
Market Total 334 $ 43,927,946
Columbus, Ohio Market
®
THE STRENGTH OF BIG. THE SERVICE OF SMALL.
Growth Through Acquisition
www.firstmerchants.com
18
Experienced Acquirer
Expand in Current High-Growth Markets
Extend into Additional High-Growth Markets
Add to Franchise with Stable Deposit Gathering Markets
®
THE STRENGTH OF BIG. THE SERVICE OF SMALL.
19
FIRST MERCHANTS
ACQUISITION EXPERIENCE
1893-2015
®
20
Continuous Relationship Building
Complete and Thorough Due Diligence Process
Demonstrated Pricing Discipline:
• Average Price to TBV of 129%
• Average EPS Accretion within One Year
• Average TBV Earn-back of 2.8 Years
Detailed Project Managed Integration Process
Single Charter Operating Environment
Scalable Technology and Operations Center
FIRST MERCHANTS
ACQUISITION PROCESS
®
THE STRENGTH OF BIG. THE SERVICE OF SMALL.
Operational Delivery Highlights
www.firstmerchants.com
21
Daleville Operations Facility
Strategic differentiator in support of growth and scalability
Operational services execution “hub” focusing on value creation
Functional focus:
• Operations • Credit Administration
• Risk Management • Technology
• Project Management • Vendor Management
Located off interstate, less than an hour north of Indianapolis, IN
60,000+ square feet of flexible space
Strategic Vendor Partners
®
Retail Households: 145K
Online Banking/Digital Channel
• Consumer: 62K Users
• 810K logins monthly
• 12K bill pay users
• 74K payments monthly
Cash Management Annual Volume
• Automated Clearing House (ACH)
• # Originated: 2M Items ($5B)
• # Received: 12M Items ($17B)
• Mobile: 26K Users
• 22 average logins per month
• 80% average active user rate
• Domestic Wires
• # Originated: 33K Items ($9B)
• # Received: 31K Items ($14B)
• Business: 9K Users
• 10% use ACH/Wire/Positive Pay
• International Wires
• # Originated: 4K Items ($207M)
• # Received: 530 Items ($8M)
• Total ATMS: 124
Total Debit Cards
• 137K active cards
• 3M monthly card swipes
• $100M in monthly volume
• Commercial Remote Deposit Capture
• 462 businesses using solution
• 117K deposits annually
• 1.3M items deposited annually
• $2.7B in total deposits
22
Operational Delivery Highlights
Customer, Digital Channel & Transaction Activity
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
®
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
23
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 $6.9 Billion grew by 12.5% over 2Q2015
1.17% Return on Average Assets
Efficiency Ratio of 57.33%
Completed conversion to an Indiana State Chartered Bank on April 15, 2016
®
“Record Level Performance Metrics”
24
Total Assets
($ 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)
25
®
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
26
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)
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
®
27
®
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 = $5.4 Billion
28
11.00%
11.16% 11.40% 11.37% 11.22% 11.31%
11.49% 11.42% 11.39%
8.74% 9.05%
9.16% 9.31% 9.03%
9.25% 9.17% 9.35% 9.52%
15.11%
15.21% 15.34%
15.12%
14.92% 14.85% 14.94% 14.79% 14.67%
6.00%
7.00%
8.00%
9.00%
10.00%
11.00%
12.00%
13.00%
14.00%
15.00%
16.00%
17.00%
18.00%
2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
Total Risk-Based Capital Ratio (Target = 13.50%)
Common Equity Tier 1 Capital Ratio (Target = 10.00%)
Tangible Common Equity Ratio (TCE) (Target = 8.50%) 29
Capital Ratios
(Target)
(Target)
(Target)
®
30
Net Interest Margin
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
®
($ 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
31
Non-Interest Income
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
®
–
–
–
–
–
–
–
–
32
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
®
33
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)
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
®
34
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
$15.53
THE STRENGTH OF BIG. THE SERVICE OF SMALL.
Dividends and Tangible Book Value
0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
.08
www.firstmerchants.com
®
.01
.03
.05
.11
.14
2.25%
Forward
Dividend
Yield
29%
Dividend
Payout Ratio
=
Quarterly Dividends Tangible Book Value
35
36
Asset Quality Summary
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
®
($ 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
37
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
THE STRENGTH OF BIG. THE SERVICE OF SMALL.
www.firstmerchants.com
38
-50
0
50
100
150
200
250
First Merchants Corporation SNL U.S. Bank Russell 2000
Total Return Performance
®
12/31/10 12/31/11 12/31/12 12/31/13 12/31/14 12/31/15
%
6/30/16
39
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
40
Why Invest in First Merchants?
Attractive and Growing Earnings Stream
One of SNL’s Top 25 Best-Performing Regional Banks in 2015
2nd Largest Indiana Bank with an Energized and Experienced
Management Team
Attractive Long-Term Deposit Market Shares
Commercial Presence that Creates a Client Preference
State-of-the-Art Technology and Operations Center
Successful Acquisition and Integration Track Record
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
®
41
D. A. Davidson
FIG Partners
Keefe, Bruyette & Woods, Inc.
Piper Jaffray
Sandler O’Neill + Partners, L.P.
Stephens, Inc.
Research Coverage
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
®
42
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
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
®
43
Appendix
®
44
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.
45
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
46
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%