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| 8-K - 8-K 4TH QTR 2017 INVESTOR SLIDE PRESENTATION - FIRST MERCHANTS CORP | a8k-4thqtr2017investorslid.htm |
Michael C. Rechin
President
Chief Executive Officer
Mark K. Hardwick
Executive Vice President
Chief Operating Officer
Chief Financial Officer
John J. Martin
Executive Vice President
Chief Credit Officer
Michael J. Stewart
Executive Vice President
Chief Banking Officer
4th Quarter 2017
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”, “project”, “intend”, “anticipate”, “expect” and similar expressions or future or conditional verbs such as “will”, would”, “should”,
“could”, “might”, “can”, “may”, or similar expressions. These forward-looking statements include, but are not limited to, statements relating to
First Merchants’ goals, intentions and expectations; statements regarding the First Merchants’ business plan and growth strategies; statements
regarding the asset quality of First Merchants’ loan and investment portfolios; and estimates of First Merchants’ risks and future costs and
benefits. These forward-looking statements are subject to significant risks, assumptions and uncertainties that may cause results to differ
materially from those set forth in forward-looking statements, including, among other things: possible changes in economic and business
conditions; the existence or exacerbation of general geopolitical instability and uncertainty; the ability of First Merchants to integrate recent
acquisitions and attract new customers; possible changes in monetary and fiscal policies, and laws and regulations; the effects of easing
restrictions on participants in the financial services industry; the cost and other effects of legal and administrative cases; possible changes in the
credit worthiness of customers and the possible impairment of collectability of loans; fluctuations in market rates of interest; competitive
factors in the banking industry; changes in the banking legislation or regulatory requirements of federal and state agencies applicable to bank
holding companies and banks like First Merchants’ affiliate bank; continued availability of earnings and excess capital sufficient for the lawful
and prudent declaration of dividends; changes in market, economic, operational, liquidity, credit and interest rate risks associated with the First
Merchants’ business; and other risks and factors identified in each of First Merchants’ filings with the Securities and Exchange Commission. First
Merchants undertakes no obligation to update any forward-looking statement, whether written or oral, relating to the matters discussed in this
presentation or press release. In addition, the company’s past results of operations do not necessarily indicate its anticipated future results.
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.
2
Forward-Looking Statements
3
Why Invest in First Merchants?
4
Financial Highlights
Assets $9,367,478
Loans, Net $6,676,167
Deposits $7,172,530
Tangible Common Equity $ 826,834
TCE/TA 9.30%
2017 Net Income – YTD $ 96,070
2017 ROAA – YTD 1.17%
2017 ROATCE - YTD 13.30%
NPAs/Loans + OREO 0.59%
Company Profile (as of 12/31/2017)
Market Information
Common Shares Outstanding 49,158,238
Market Cap $2,067,595
Dividend Yield 1.64%
Price/Tangible Book Value 2.48x
Price/LTM EPS 19.8x
Price/2017 Est. EPS 18.7x
Leadership Team – First Merchants
Name/Title
Michael C. Rechin, President & CEO
Mark K. Hardwick, EVP, Chief Operating Officer &
Chief Financial Officer
Michael J. Stewart, EVP & Chief Banking Officer
John J. Martin, EVP & Chief Credit Officer
First Merchants
First Merchants Bank, formed in 1893, celebrating its
124th anniversary.
First Merchants Corporation, organized in 1982, is the
largest financial services holding company
headquartered in Central Indiana
($ in Thousands)
5
Key Market Profiles
Loans Deposits
$1,109M Columbus $ 611M
718M Fort Wayne 825M
2,559M Indianapolis 1,820M
605M Lafayette 1,024M
983M Muncie 1,841M
777M Northwest 1,052M
$6,751M Total $7,173M
(as of December 31, 2017)
Mission Statement
To be the most responsive, knowledgeable and
high-performing bank for our clients,
teammates and shareholders.
Our Franchise
County Region/Type Market Position Market % $ Deposits
Delaware County, IN Muncie (Established) 1 48.98% $ 1,068,364
Jasper County, IN Lafayette (Established) 1 31.54% 205,997
White County, IN Lafayette (Established) 1 33.69% 158,748
Wells County, IN Fort Wayne (Growth) 1 26.35% 119,473
Jay County, IN Muncie (Established) 1 43.22% 90,907
Union County, IN Muncie (Established) 1 40.54% 43,439
Tippecanoe County, IN Lafayette (Established) 2 19.47% 504,153
Henry County, IN Muncie (Established) 2 37.32% 227,295
Clinton County, IN Lafayette (Established) 2 14.11% 59,950
Wabash County, IN Muncie (Established) 2 14.07% 57,158
Madison County, IN Indianapolis (Growth) 3 23.21% 314,515
Adams County, IN Muncie (Established) 3 16.19% 109,619
Shelby County, IN Indianapolis (Growth) 3 16.62% 91,243
Randolph County, IN Muncie (Established) 3 5.88% 72,162
Hendricks County, IN Indianapolis (Growth) 4 9.88% 234,216
Morgan County, IN Indianapolis (Growth) 4 10.69% 97,943
Huntington County, IN Fort Wayne (Growth) 4 16.55% 95,330
Hancock County, IN Indianapolis (Growth) 4 8.66% 87,632
Marshall County, IN Fort Wayne (Growth) 4 8.74% 65,252
Carroll County, IN Lafayette (Established) 4 11.30% 33,052
Brown County, IN Indianapolis (Growth) 4 18.32% 19,620
Hamilton County, IN Indianapolis (Growth) 5 6.51% 594,976
Allen County, IN Fort Wayne (Growth) 5 8.68% 585,513
Johnson County, IN Indianapolis (Growth) 5 7.88% 169,017
Fayette County, IN Muncie (Established) 5 8.25% 27,006
Miami County, IN Muncie (Established) 5 7.97% 31,250
Sub Total $5,163,830
First Merchants Total $6,913,176
Key FMC Deposit Market Share – FDIC Data June 30, 2017 (includes June 30, 2017, balances of iAB Financial Bank)
6
7
First Merchants “Whole Bank” Strategy
Commercial Banking
Consumer Banking
Private Wealth Advisors
Growth Strategy
• Organic
• Merger/Acquisition
8
First Merchants Strategy
Commercial Bank
• Located in Prime Growth Commercial Banking Markets
• Indianapolis, Indiana
• Columbus, Ohio
• Fort Wayne, Indiana
• Lafayette, Indiana
• Northwest Indiana
• Hire the Best Talent Supported with the Finest:
• Sales Management Process
• Lending and Cash Management Services
• Revenue-Based Incentive System
9
First Merchants Strategy
Consumer Retail Bank
• Diverse Locations 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
10
First Merchants Strategy
“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
• Specialty Finance
• Healthcare Services
• Real Estate
• Treasury Management Services
Private Wealth Advisory (private banking, investment management, personal trust,
brokerage, and retirement)
11
WEALTH
ADVISORY
MORTGAGE COMMERCIAL
BANKING
RETAIL
BANKING
Supported by LOB Strategies
Indianapolis
Higher Growth
Brown, Hamilton,
Hancock, Hendricks,
Johnson, Marion,
Morgan, Shelby
Counties
Columbus, OH
Higher Growth
Franklin County, OH
Lafayette
Established
Carroll, Clinton,
Jasper, Montgomery,
Tippecanoe, White
Counties
Muncie
Established
Delaware, Fayette,
Henry, Jay,
Madison, Randolph,
Union, Wabash,
Wayne Counties, IN
Butler, County, OH
Northwest
Higher Growth
Lake & Porter, IN
Cook & DuPage, IL
How We Deliver
Fort Wayne
Higher Growth
Adams, Allen,
Huntington, Marshall,
Miami, Wells
Counties
12
Lafayette MSA
Entered: 2002
Total Population: 220,164
Deposit Market Share: 17.18%
Indianapolis MSA
Entered: 1998
Total Population: 2,031,027
Deposit Market Share: 3.41%
Columbus, Ohio MSA
Entered: 2003
Total Population: 2,075,642
Deposit Market Share: 1.00%
Northwest Indiana MSA*
Entered: 2013
Total Population: 684,795
Deposit Market Share: 13.91%
*Includes Jasper, Lake, and Porter counties
FOUNDING MARKET
Muncie MSA
Established: 1893
Total Population:
114,969
Current Market
Share: 48.98%
Organic Growth
Opportunities Exists in All
Directions
Fort Wayne MSA
Entered: 2017
Total Population: 435,505
Deposit Market Share: 9.19%
13
Ranked Best in the Midwest
for Business*
AAA Credit Rating**
1st in Midwest and 5th Nationally for Best State for Doing
Business***
1st in the Nation for Small Business Growth
1st Nationally for Cost of Doing Business
1st Nationally for Highway Accessibility
1st in the Midwest/8th Nationally for Low Taxes
1st in Government****
Leading the Nation in Manufacturing Job Growth
2nd Nationally for Availability of Skilled Labor
2nd Best City in the Nation for Recent Graduates
(Indianapolis)
Home to the 2nd Largest Global Fed Ex Air Hub
Regulatory Climate Ranks 2nd in the Nation
4th Nationally for Cost of Living
Indiana’s 3 Maritime Ports Rank 6th in Waterborne Shipping
Indiana
*IEDC
**S&P, Moody’s & Fitch
***Chief Executive Magazine
****US News & World Reports
14
Delaware County, IN*
Rank
Branches
Deposits
Mkt.
Share
1 First Merchants Corporation 11 $ 1,068,364 48.98%
2 Mutual First Financial 7 537,800 24.66%
3 J.P. Morgan Chase 4 238,666 10.94%
4 Old National Bancorp 4 199,567 9.15%
5 Star Financial Group 3 135,667 6.22%
6 Woodforest Financial Group 1 957 0.04%
Market Total 30 $ 2,181,021
Projected HHI & Pop. Change 2017-2022
*SNL Financial FDIC Summary of Deposits as of June 30, 2017
Notable Major Employers
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
7.27%
8.00% 8.01%
3.77%
2.11%
0.15%
U.S. Indiana Delaware Co.
HHI Pop.
7.27%
8.00%
8.97%
3.77%
2.11%
7.34%
U.S. Indiana Hamilton Co.
HHI Pop.
Projected HHI & Pop. Change 2017-2022
15
Hamilton County, IN**
Rank
Branches
Deposits
Mkt.
Share
1 First Internet Bancorp 1 $ 1,746,030 19.11%
2 JPMorgan Chase & Co. 15 1,558,738 17.06%
3 Merchants Bancorp 2 1,254,403 13.73%
4 PNC Financial Services Group 12 614,405 6.72%
5 First Merchants Corporation 11 594,976 6.51%
6 Lakeland Financial Corp 3 518,183 5.67%
7 Fifth Third Bancorp 6 492,718 5.39%
8 Huntington Bancshares 11 432,562 4.73%
9 Bank of Montreal 9 373,205 4.08%
10 KeyCorp 7 273,681 3.00%
Market Total 117 $ 9,136,439
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, 2017
Notable Major Employers
Indianapolis Market
7.27%
8.00%
3.77% 3.77%
2.11%
5.19%
U.S. Indiana Tippecanoe Co.
HHI Pop.
16
Tippecanoe County, IN**
Rank
Branches
Deposits
Mkt.
Share
1 JPMorgan Chase & Co. 6 $ 824,748 31.85%
2 First Merchants Corporation 9 504,153 19.47%
3 Regions Financial Corp 6 311,047 12.01%
4 Old National Bancorp 5 259,975 10.04%
5 Horizon Bancorp 4 147,379 5.69%
6 Huntington Bancshares, Inc. 4 129,307 4.99%
7 First Bancshares, Inc. 6 119,618 4.62%
8 Fifth Third Bancorp 3 90,997 3.51%
9 1st Source Corp 3 70,529 2.72%
10 Salin Bancshares 3 52,512 2.03%
Market Total 58 $ 2,589,317
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 2017-2022
Notable Major Employers
*SNL Financial FDIC Summary of Deposits as of June 30, 2017
**Indianapolis Business Journal
Lafayette Market
17
Lake County, IN*
Rank
Branches
Deposits
Mkt.
Share
1 JPMorgan Chase & Co. 23 $ 1,947,270 21.89%
2 First Bancshares, Inc. 29 1,853,302 20.83%
3 First Midwest Bancorp 17 1,011,308 11.37%
4 First Financial Bancorp 9 776,948 8.76%
5 Northwest Indiana Bancorp 15 762,955 8.58%
6 First Merchants Corporation 10 703,991 7.91%
7 Fifth Third Bancorp 13 477,393 5.37%
8 BMO Financial Corp 15 476,600 5.36%
9 AMB Financial Corp 5 178,837 2.01%
10 PNC Financial Services Group 4 171,860 1.93%
Market Total 158 $ 8,895,310
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**
7.27%
8.00% 8.16%
3.77%
2.11%
-0.54%
U.S. Indiana Lake County
HHI Pop.
Notable Major Employers
*SNL Financial FDIC Summary of Deposits as of June 30, 2017
**www.nwiforum.org/nwi-becoming-an-economic powerhouse
Northwest Indiana Market
Projected HHI & Pop. Change 2017-2022
18
Allen County, IN*
Rank
Branches
Deposits
Mkt.
Share
1 Wells Fargo 13 $ 1,860,166 27.59%
2 JP Morgan Chase & Co. 12 1,144,376 16.97%
3 Lakeland Financial Corp. 5 707,704 10.50%
4 PNC Financial Services Group 11 654,070 9.70%
5 First Merchants Corporation 8 585,513 8.68%
6 Old National Bancorp 5 489,317 7.26%
7 STAR Financial Group, Inc. 9 357,447 5.30%
8 1st Source Corp. 8 294,082 4.36%
9 Fifth Third Bancorp 8 236,108 3.50%
10 G.S.B. Financial Corp. 1 69,199 1.03%
Market Total 102 $ 6,741,959
2nd Largest MSA in the State of Indiana
Diversified economy (manufacturing, health care, retail trade, food
services)
Attractive location for businesses to locate and expand – located between
the Chicago, Detroit, Dayton, Toledo and Indianapolis metro areas
Fort Wayne-Allen County economic engine of the Northeast Indiana
region
#1 place to raise a family (2017, SmartAsset.com)
7.27%
8.00% 7.86%
3.77%
2.11%
4.78%
U.S. Indiana Allen County
HHI Pop.
Notable Major Employers
*SNL Financial FDIC Summary of Deposits as of June 30, 2017
Fort Wayne Market
Projected HHI & Pop. Change 2017-2022
19
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
7.27%
8.07% 7.59%
3.77%
0.89%
5.04%
U.S. Ohio Franklin County
HHI Pop.
Projected HHI & Pop. Change 2017-2022
Notable Major Employers
*SNL Financial FDIC Summary of Deposits as of June 30, 2017
**http://jobs-ohio.com/manufacturing/
Franklin County, OH*
Rank
Branches
Deposits
Mkt.
Share
1 Huntington Bancshares 63 $ 21,024,114 41.96%
2 JP Morgan Chares & Co 48 12,503,686 24.95%
3 PNC Financial Services Group 42 5,001,589 9.98%
4 Fifth Third Bancorp 41 4,365,885 8.71%
5 Key Corp 21 1,411,859 2.82%
6 U.S. Bancorp 33 1,149,694 2.29%
7 Wells Fargo & Co 1 796,395 1.59%
8 First Merchants Corporation 10 609,366 1.22%
9 Heartland Bancorp 12 570,458 1.14%
10 First Financial Bancorp 6 527,051 1.05%
Market Total 321 $ 50,106,324
Columbus, Ohio Market
20
Growth Through Acquisition
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.
21
21
22
Continuous Relationship Building
Complete and Thorough Due Diligence Process
Demonstrated Pricing Discipline
Detailed Project Management
Integration Process
Single Charter Operating Environment
Scalable Technology and Operations Center
First Merchants Acquisition Process
Operational Delivery Highlights
23
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: 185K
Online Banking/Digital Channel
• Consumer: 79K Users
• 1.3M logins monthly
• 13K bill pay users
• 83K payments monthly
Cash Management Annual Volume
• Automated Clearing House (ACH)
• # Originated: 2.5M Items ($8B)
• # Received: 14M Items ($23B)
• Mobile: 45K Users
• 24 average logins per month
• 14K mobile deposits per month
• Domestic Wires
• # Originated: 42K Items ($21B)
• # Received: 43K Items ($27B)
• Business: 9.9K Users
• 13% use ACH/Wire/Positive Pay
• International Wires
• # Originated: 1K Items ($35M)
• # Received: 159 Items ($2.6M)
• Total ATMS: 140 + 25,000 MoneyPass ATMs
Total Debit Cards
• 157K active cards
• 3.2M monthly card swipes
• $127M in monthly volume
Commercial Remote Deposit Capture
• 591 businesses using solution
• 143K deposits annually
• 1.7M items deposited annually
• $3.7B in total deposits
24
Operational Delivery Highlights
Customer, Digital Channel & Transaction Activity
25
4th Quarter 2017 Financial Highlights
Earnings Per Share of $.49
$24.4 Million of Net Income, a 9.4% increase over 4Q2016
Includes $6.5 Million in DTA write down and acquisition expenses, or $.12 per share
Net Interest Margin expands to 4.10% following December rate move
Completed conversion of Independent Alliance Banks on November 12, 2017
Winning marketplace execution delivering growth
Organic Loan Growth of $270 Million, a 16.7% annualized growth rate
Organic Deposit Growth of $262 Million, a 15.1% annualized growth rate
“Record Level Results”
26
Full Year 2017 Performance
Record Net Income of $96.1 Million, an 18.5% increase over 2016
Earnings per share of $2.12, a 7.1% increase over 2016; highest in Company’s history
Includes $17.3 Million, or $.29 per share of acquisition expense and DTA write down
Total Assets of $9.4 Billion; grew by 29.9% over 2016
$658 Million of organic loan growth for the year reflects a 12.8% growth rate
Tangible Book Value increased to $16.96 per share, or 7.0% over year-end 2016
Franchise expansion through The Arlington Bank and Independent Alliance Banks acquisitions
Forbes Magazine recognition as a Top 5 Ranking in “America’s Best Banks”
“Record Level Results”
Total Assets
2015 2016 2017
1. Investments $1,277 $1,305 $1,561
2. Loans Held for Sale 10 3 7
3. Loans 4,694 5,140 6,751
4. Allowance (62) (66) (75)
5. Goodwill & Intangibles 260 259 477
6. BOLI 201 202 224
7. Other 381 369 422
8. Total Assets $6,761 $7,212 $9,367
Annualized Asset Growth 16.1% 6.7% 29.9%
27 1 2017 Loans include acquired loans of $225 from The Arlington Bank and $725 from Independent Alliance Banks
($ in Millions)
1
Commercial &
Industrial
22.1%
Commercial
Real Estate Owner-
Occupied
10.4%
Commercial
Real Estate
Non-Owner
Occupied
23.9%
Construction Land
& Land
Development
9.1%
Agricultural
Land
3.6%
Agricultural
Production
1.8%
Public
Finance/Other
Commercial
5.9%
Residential
Mortgage
14.3%
Home
Equity
7.6%
Other
Consumer
1.3%
QTD Yield = 4.93%
YTD Yield = 4.76%
Total Loans = $6.8 Billion
Loan and Yield Detail
(as of 12/31/2017)
28
CRE Loan Concentration
First Merchants Results in Relation to FDIC Guidelines
0.0% 20.0% 40.0% 60.0% 80.0% 100.0%
4Q2015
1Q2016
2Q2016
3Q2016
4Q2016
1Q017
2Q2017
3Q2017
4Q2017
Quar
te
r-
En
d
GUIDELINE #1
0.0% 100.0% 200.0% 300.0%
4Q2015
1Q2016
2Q2016
3Q2016
4Q2016
1Q2017
2Q2017
3Q2017
4Q2017
Quar
te
r-
En
d
GUIDELINE #2
FDIC GUIDELINES TO IDENTIFY INSTITUTIONS POTENTIALLY EXPOSED TO CRE RISK:
Guideline 1: Total loans for construction, land development, and other land representing 100% or
more of total capital
Guideline 2: Total CRE loans representing 300% or more of total capital AND a CRE portfolio that has
increased 50% or more during the prior 36 months
29
Mortgage-Backed
Securities
27%
Collateralized
Mortgage
Obligations
23%
U. S. Agencies
1%
Corporate
Obligations
2%
Tax-Exempt
Municipals
47%
Investment Portfolio
(as of 12/31/2017)
30
1 Using a Federal tax rate of 21%
$1.6 Billion Portfolio
Modified duration of 5.1 years
Tax equivalent yield of 3.45%
Net unrealized gain of $23.0 Million
1
2015 2016 2017
1. Customer Non-Maturity Deposits $4,096 $4,428 $5,741
2. Customer Time Deposits 880 747 1,051
3. Brokered Deposits 314 381 381
4. Borrowings 446 572 701
5. Other Liabilities 51 60 57
6. Hybrid Capital 123 122 133
7. Common Equity 851 902 1,303
8. Total Liabilities and Capital $6,761 $7,212 $9,367
31
Total Liabilities and Capital
($ in Millions)
1 2017 includes acquired Non-Maturity Deposits of $169 from The Arlington Bank and $719 from Independent Alliance Banks
2 2017 includes acquired Time Deposits of $84 from The Arlington Bank and $143 from Independent Alliance Banks
1
2
Deposit Detail
(as of 12/31/2017) QTD Cost = .58%
YTD Cost = .49%
Total = $7.2 Billion
32
Demand Deposits
52%
Savings Deposits
28%
Certificates &
Time Deposits of
>$100,000
7%
Certificates &
Time Deposits of
<$100,000
8%
Brokered
Deposits
5%
11.49% 11.42% 11.39%
11.05%
11.10% 11.16% 11.11% 11.03% 11.00%
9.08%
9.26%
9.43% 9.48%
9.24%
9.50% 9.68%
9.39% 9.30%
14.94% 14.79%
14.67%
14.18% 14.21% 14.24%
14.01%
13.76% 13.69%
7.00%
8.00%
9.00%
10.00%
11.00%
12.00%
13.00%
14.00%
15.00%
16.00%
4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
Total Risk-Based Capital Ratio (Target = 13.50%)
Common Equity Tier 1 Capital Ratio (Target = 10.00%)
Tangible Common Equity Ratio (TCE) (Target = 8.50%) 33
Capital Ratios
(Target)
(Target)
(Target)
34
Net Interest Margin
Q4 - '15 Q1 - '16 Q2 - '16 Q3 - '16 Q4 - '16 Q1 - '17 Q2 - '17 Q3 - '17 Q4 - '17
Net Interest Income - FTE ($millions) $ 53.2 $ 57.6 $ 59.2 $ 61.1 $ 62.1 $ 64.9 $ 67.2 $ 78.9 $ 83.5
Fair Value Accretion $ 1.9 $ 2.5 $ 3.2 $ 3.8 $ 2.9 $ 4.3 $ 2.3 $ 3.2 $ 4.1
Tax Equivalent Yield on Earning Assets 4.20% 4.28% 4.30% 4.37% 4.32% 4.42% 4.44% 4.56% 4.67%
Cost of Supporting Liabilities 0.45% 0.45% 0.44% 0.43% 0.42% 0.44% 0.49% 0.53% 0.57%
Net Interest Margin 3.75% 3.83% 3.86% 3.94% 3.90% 3.98% 3.95% 4.03% 4.10%
Fair Value Accretion Effect 0.13% 0.17% 0.21% 0.24% 0.18% 0.26% 0.14% 0.17% 0.20%
3.75%
3.83% 3.86%
3.94%
3.90%
3.98%
3.95%
4.03%
4.10%
2.80%
3.00%
3.20%
3.40%
3.60%
3.80%
4.00%
4.20%
$48
$52
$56
$60
$64
$68
$72
$76
$80
$84
Q4 - '15 Q1 - '16 Q2 - '16 Q3 - '16 Q4 - '16 Q1 - '17 Q2 - '17 Q3 - '17 Q4 - '17
Net Interest Income - FTE ($millions) Net Interest Margin 34
35
Non-Interest Income
–
–
–
–
–
–
–
–
2015 2016 2017
1. Service Charges on Deposit Accounts $16.2 $17.8 $18.7
2. Wealth Management Fees 11.3 12.6 14.7
3. Insurance Commission Income 4.1
4. Card Payment Fees 13.4 15.0 16.1
5. Cash Surrender Value of Life Ins 2.9 4.3 6.6
6. Gains on Sales Mortgage Loans 6.5 7.1 7.6
7. Securities Gains/Losses 2.7 3.4 2.6
8. Gain on Sale of Insurance Subsidiary 8.3
9. Gain on Cancellation of Trust Preferred Debt 1.3
10. Other 3.1 5.0 4.7
11. Total $69.8 $65.2 $71.0
($ in Millions)
–
–
–
-I t r st In
35
–
–
–
26.3%
20.7%
22.7%
9.3%
10.7%
3.7% 6.6%
Service Charges on Deposit Accounts - $18.7 Wealth Management Fees - $14.7
Card Payment Fees - $16.1 Cash Surrender Value of Life Ins - $6.6
Gains on Sales Mortage Loans - $7.6 Securities Gains/Losses - $2.6
Other - $4.7 Total - $71.0
36
Non-Interest Income YTD 12/31/2017
($ in Millions)
37
Private Wealth Advisors
Delivers broad advisory capabilities and expertise through
local, engaged and empowered leaders
Business lines include:
Investment Management – Personal and Institutional
Retirement Plan Services
Trust Administration
Private Banking
Retail Brokerage (not reflected below)
Record quarterly revenue and assets under management
Key contributor to pre-tax income
Double-digit growth in Investment Management/Agency
and IRAs in 2017
Average Individual/Family relationship over $1.3mm
Average Retirement Plan over $2.4mm
Personal Trust/Fiduciary represents over 36% of total
assets under management
2014 2015 2016 2017
Total Revenue
(excludes brokerage revenue)
Total Revenue
$8.65M
$9.23M
$9.79M
$11.5M
2014 2015 2016 2017
Total Assets under Management
Total Assets
$3.0B
$2.5B
$2.0B
$1.5B
$1.0B
$0.5B
0
$12M
$10M
$ 8M
$ 6M
$ 4M
$ 2M
0
$2.83B
$1.68B
$1.94B
$1.72B
Key component of Fee
Income
0
1
2
3
4
5
6
7
8
2014 2015 2016 2017
Mortgage Banking Revenue
Servicing fees Gain on Sale
$4.26M
Mortgage Production for sale and
portfolio via commissioned and
salaried loan originators
Strong loan origination teams in
high-growth areas of Indianapolis
and Columbus, OH
Centralized underwriting and
processing
Strong connectivity with retail
branches
Majority of the pipeline is driven
by purchase business
12/31/2017 YTD 2,146 mortgages
for $391M in volume
$5.88M $6.24M $6.46M
$640 $620 $760 $1.1M
Mortgage Banking
$4.9M
$6.5M
$7.0M
$7.56M
38
39
Non-Interest Expense
2015 2016 2017
1. Salary & Benefits $101.9 $102.6 $119.8
2. Premises & Equipment 25.5 29.5 30.1
3. Intangible Asset Amortization 2.8 3.9 5.6
4. Professional & Other Outside Services 9.9 6.5 12.8
5. OREO/Credit-Related Expense 3.9 2.9 1.9
6. FDIC Expense 3.7 3.0 2.6
7. Outside Data Processing 7.1 9.2 12.2
8. Marketing 3.5 3.0 3.7
9. Other 16.5 16.7 16.9
10. Non-Interest Expense $174.8 $177.3 $205.6
($ in Millions)
1 2017 includes acquisition-related expenses of $12.2 million, reflected in ($ in Millions): $3.9 Salaries & Benefits, $0.6 Premises &
Equipment, $6.3 Professional & Other Outside Services, $0.5 Outside Data Processing, $0.3 Marketing and $0.6 Other
1
2015 2016 2017
1. Net Interest Income $196.4 $226.5 $277.3
2. Provision for Loan Losses (0.4) (5.7) (9.1)
3. Net Interest Income after Provision 196.0 220.8 268.2
4. Non-Interest Income 69.8 65.2 71.0
5. Non-Interest Expense (174.8) (177.3) (205.6)
6. Income before Income Taxes 91.0 108.7 133.6
7. Income Tax Expense (25.6) (27.6) (37.5)
8. Net Income Avail. for Distribution $ 65.4 $ 81.1 $ 96.1
9. EPS $ 1.72 $ 1.98 $ 2.12
10. Efficiency Ratio 61.19% 56.51% 54.56%
40
Earnings
($ in Millions)
1 2017 includes $5.1 million of additional tax expense due to revaluing deferred taxes as a result of the Tax Cuts and Jobs Act
2 Acquisition-related expenses, the impact of tax reform, and pension settlement accounting reduced EPS by $0.30 for 2017
3 Acquisition-related expenses and pension settlement accounting added 3.57% to the Efficiency Ratio
1
2
3
41
Q1-’17 Q2-’17 Q3-’17 Q4-’17
1. Net Interest Income $61.0 $63.1 $74.4 $78.8
2. Provision for Loan Losses (2.4) (2.9) (2.1) (1.8)
3. Net Interest Income after Provision 58.6 60.2 72.3 77.0
4. Non-Interest Income 14.9 18.4 18.7 19.1
5. Non-Interest Expense (43.1) (47.3) (58.7) (56.4)
6. Income before Income Taxes 30.4 31.3 32.3 39.6
7. Income Tax Expense (7.2) (7.2) (7.9) (15.2)
8. Net Income Avail. for Distribution $ 23.2 $ 24.1 $ 24.4 $ 24.4
9. EPS $ 0.56 $ 0.57 $ 0.50 $ 0.49
10. Efficiency Ratio 52.61% 53.61% 58.30% 53.29%
Quarterly Earnings
($ in Millions)
1 Includes acquisition-related expenses of ($ in millions): $0.4 in Q1-’17; $2.5 in Q2-’17; $7.9 in Q3-’17; and $1.4 in Q4-’17
2 Q4-’17 includes $5.1 million of additional tax expense due to revaluing deferred taxes as a result of the Tax Cuts and Jobs Act
3 Q4-’17 acquisition-related expenses, the impact of tax reform, and pension settlement accounting reduced EPS by $0.13
4 Q4-’17 acquisition-related expenses and pension settlement accounting added 2.14% to the Efficiency Ratio
1
3
4
2
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 $ .57 $ .50 $ .49 $ 2.12
2. Dividends $ .15 $ .18 $ .18 $ .18 $ .69
3. Tangible Book Value $16.49 $16.97 $16.62 $16.96
42
Per Share Results
$9.21 $9.64
$10.95
$12.17
$13.65
$14.68
$15.85
$16.96
Dividends and Tangible Book Value
0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
0.16
0.18
.11
.01
.03
.05
.14
.15 1.71%
Forward
Dividend
Yield
32.6%
YTD Dividend
Payout Ratio
=
Quarterly Dividends Tangible Book Value
.08
43
.18
44
Asset Quality Summary
($ in Millions)
2015 2016 Q3-'17 2017 $ % $ % 186.1
1. Non-Accrual Loans 31.4$ 30.0$ 32.3$ 28.7$ (3.6)$ (11.1%) (1.3)$ (4.3%)
2. Other Real Estate 17.3 9.0 11.9 10.4 (1.5) (12.6%) 1.4 15.6%
3. Renegotiated Loans 1.9 4.7 0.6 1.0 0.4 66.7% (3.7) (78.7%)
4. 90+ Days Delinquent Loans 0.9 0.1 0.4 0.9 0.5 125.0% 0.8 800.0%
5. Total NPAs & 90+ Days Delinquent 51.5$ 43.8$ 45.2$ 41.0$ (4.2)$ (9.3%) (2.8)$ (6.4%)
6. Total NPAs & 90+ Days/Loans & ORE 1.1% 0.9% 0.7% 0.6%
7. Classified Assets 171.8$ 174.1$ 169.6$ 153.1$ (16.5)$ (9.7%) (21.0)$ (12.1%)
8. Specific Reserves 1.8$ 0.9$ 1.8$ 1.6$ (0.2)$ (11.1%) 0.7$ 77.8%
Change
Linked Quarter
Change
2017 Over 2016
45
ALLL and Fair Value Summary
($ in Millions) Q4-'16 Q1-'17 Q2-'17 Q3-'17 Q4-'17
1. Beginning Allowance for Loan Losses (ALLL) 63.5$ 66.0$ 68.2$ 70.5$ 73.4$
2. Net Charge-offs (Recoveries) (0.1) 0.2 0.6 (0.8) 0.2
3. Provision Expense 2.4 2.4 2.9 2.1 1.8
4. Ending Allowance for Loan Losses (ALLL) 66.0 68.2 70.5 73.4 75.0
5. ALLL/Non-Accrual Loans 220.1% 244.4% 257.7% 227.4% 261.2%
6. ALLL/Non-Purchased Loans 1.47% 1.46% 1.45% 1.44% 1.36%
7. ALLL/Loans 1.28% 1.29% 1.25% 1.13% 1.11%
8. Fair Value Adjustment (FVA) 34.9$ 30.6$ 29.7$ 50.4$ 46.3$
9. Total ALLL plus FVA 100.9 98.8 100.2 123.8 121.3
10. Purchased Loans plus FVA 700.4 639.3 792.6 1,445.8 1,304.7
11. FVA/Purchased Loans plus FVA 4.99% 4.79% 3.74% 3.49% 3.55%
46
47
Looking Forward . . .
Tax reform benefits in 2018 will be realized in the effective tax rate change from ~ 26% to ~ 16%
Tax benefit to be invested in announced compensation changes, technologies, and branding, all of
which augment shareholder value
Gained synergies and market expansion opportunities that The Arlington Bank and Independent
Alliance Banks acquisitions offer; continue to evaluate M&A opportunities for strategic fit
Expand specialty finance businesses in asset-based lending, sponsor finance, public finance and
loan syndication
Leverage asset-sensitive balance sheet as interest rates rise
Complete checking account migration to new product set and streamline front and back-office
processes; continue implementation of workflow technologies and automation agents for back-
office efficiency and operating leverage
Continue preparation to successfully cross $10 Billion asset level
“Responsive, Knowledgeable, High-Performing”
48
Why Invest in First Merchants?
2nd Largest Indiana Bank with an Energized and Experienced Management Team
Attractive and Growing Earnings Stream
Attractive Long-Term Deposit Market Shares
Commercial Presence that Creates a Client Preference
State-of-the-Art Technology and Operations Center
Successful Acquisition and Integration Track Record
Focused on Providing Sustainable Shareholder Value
49
Research Coverage
50
Contact Information
First Merchants Corporation common stock is
traded on the NASDAQ Global Select Market
under the symbol FRME.
Additional information can be found at
www.FIRSTMERCHANTS.COM
Investor inquiries:
Nicole M. Weaver
Investor Relations
Telephone: 765.521.7619
nweaver@firstmerchants.com
Appendix
52
Appendix – Non-GAAP Reconciliation
CAPITAL RATIOS (dollars in thousands):
4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
Total Risk-Based Capital Ratio
Total Stockholders' Equity (GAAP) 850,509 867,263 887,550 900,865 901,657 929,470 1,035,116 1,283,120 1,303,463
Adjust for Accumulated Other Comprehensive (Income) Loss 1 1,362 (2,066) (7,035) (3,924) 13,581 3,722 (1,384) 6,358 3,534
Less: Preferred Stock (125) (125) (125) (125) (125) (125) (125) (125) (125)
Add: Qualifying Capital Securities 55,776 55,236 55,296 55,355 55,415 55,474 55,534 65,864 65,919
Less: Tier 1 Capital Deductions (2,516) (1,999) (1,828) (1,440) (376) (80) (166) - -
Less: Disallowed Goodwill and Intangible Assets (247,006) (250,367) (249,932) (249,541) (249,104) (250,493) (300,307) (462,080) (464,066)
Less: Disallowed Deferred Tax Assets (1,677) (2,998) (2,743) (2,161) (564) (320) (665) - -
Total Tier 1 Capital (Regulatory) 656,323$ 664,944$ 681,183$ 699,029$ 720,484$ 737,648$ 788,003$ 893,137$ 908,725$
Qualifying Subordinated Debentures 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 62,453 62,086 62,186 63,456 66,037 68,225 70,471 73,354 75,032
Total Risk-Based Capital (Regulatory) 783,776$ 792,030$ 808,369$ 827,485$ 851,521$ 870,873$ 923,474$ 1,031,491$ 1,048,757$
Net Risk-Weighted Assets (Regulatory) 5,247,617$ 5,355,827$ 5,511,557$ 5,836,806$ 5,993,381$ 6,114,112$ 6,592,710$ 7,497,321$ 7,660,604$
Total Risk-Based Capital Ratio (Regulatory) 14.94% 14.79% 14.67% 14.18% 14.21% 14.24% 14.01% 13.76% 13.69%
Common Equity Tier 1 Capital Ratio
Total Tier 1 Capital (Regulatory) 656,323$ 664,944$ 681,183$ 699,029$ 720,484$ 737,648$ 788,003$ 893,137$ 908,725$
Less: Qualified Capital Securities (55,776) (55,236) (55,296) (55,355) (55,415) (55,474) (55,534) (65,864) (65,919)
Add: Additional Tier 1 Capital Deductions 2,516 1,999 1,828 1,440 376 80 166 - -
Common Equity Tier 1 Capital (Regulatory) 603,063$ 611,707$ 627,715$ 645,114$ 665,445$ 682,254$ 732,635$ 827,273$ 842,806$
Net Risk-Weighted Assets (Regulatory) 5,247,617$ 5,355,827$ 5,511,557$ 5,836,806$ 5,993,381$ 6,114,112$ 6,592,710$ 7,497,321$ 7,660,604$
Common Equity Tier 1 Capital Ratio (Regulatory) 11.49% 11.42% 11.39% 11.05% 11.10% 11.16% 11.11% 11.03% 11.00%
1 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.
53
Appendix – Non-GAAP Reconciliation
TANGIBLE COMMON EQUITY RATIO (dollars in thousands):
4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
Total Stockholders' Equity (GAAP) $ 850,509 $ 867,263 $ 887,550 $ 900,865 $ 901,657 $ 929,470 $ 1,035,116 $ 1,283,120 $ 1,303,463
Less: Preferred Stock (125) (125) (125) (125) (125) (125) (125) (125) (125)
Less: Intangible Assets (259,764) (261,799) (260,822) (259,844) (258,866) (257,963) (309,686) (478,558) (476,503)
Tangible Common Equity (non-GAAP) $ 590,620 $ 605,339 $ 626,603 $ 640,896 $ 642,666 $ 671,382 $ 725,305 $ 804,437 $ 826,835
Total Assets (GAAP) $ 6,761,003 $ 6,798,539 $ 6,906,418 $ 7,022,352 $ 7,211,611 $ 7,326,193 $ 7,805,029 $ 9,049,403 $ 9,367,478
Less: Intangible Assets (259,764) (261,799) (260,822) (259,844) (258,866) (257,963) (309,686) (478,558) (476,503)
Tangible Assets (non-GAAP) $ 6,501,239 $ 6,536,740 $ 6,645,596 $ 6,762,508 $ 6,952,745 $ 7,068,230 $ 7,495,343 $ 8,570,845 $ 8,890,975
Tangible Common Equity Ratio (non-GAAP) 9.08% 9.26% 9.43% 9.48% 9.24% 9.50% 9.68% 9.39% 9.30%
NGIBLE COMMON EQUITY PER SHARE (dollars in thousands):
4Q10 4Q11 4Q12 4Q13 4Q14 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
Total Stockholders' Equity (GAAP) 454,408$ 514,467$ 552,236$ 634,923$ 726,827$ 850,509$ 867,263$ 887,550$ 900,865$ 901,657$ 929,470$ 1,035,116$ 1,283,120$ 1,303,463$
Less: Preferre Stock (67,880) (90,783) (90,908) (125) (125) (125) (125) (125) (125) (125) (125) (125) (125) (125)
Less: Intangible Assets (154,019) (150,471) (149,529) (202,767) (218,755) (259,764) (261,799) (260,822) (259,844) (258,866) (257,963) (309,686) (478,558) (476,503)
Tax Be efit 2,907 2,224 2,249 4,973 6,085 6,278 6,753 6,453 6,204 5,930 5,659 6,941 12,510 6,788
Tangible Common Equity, Net of Tax (non-GAAP) 235,416$ 275,437$ 314,048$ 437,004$ 514,032$ 596,898$ 612,092$ 633,056$ 647,100$ 648,596$ 677,041$ 732,246$ 816,947$ 833,623$
0
Shares Outstanding 25,574,251 28,559,707 28,692,616 35,921,761 37,669,948 40,664,258 40,749,340 40,772,896 40,799,025 40,912,697 41,047,543 43,153,509 49,140,594 49,158,238
Tangible Common Equity per Share (non-GAAP) 9.21$ 9.64$ 10.95$ 12.17$ 13.65$ 14.68$ 15.02$ 15.53$ 15.86$ 15.85$ 16.49$ 16.97$ 16.62$ 16.96$
54
Appendix – Non-GAAP Reconciliation
EFFICIENCY RATIO (dollars in thousands):
2015 2016 1Q17 2Q17 3Q17 4Q17 2017
Non Interest Expense (GAAP) $ 174,806 $ 177,359 $ 43,099 $ 47,316 $ 58,708 $ 56,433 $ 205,556
Less: Intangible Asset Amortization (2,835) (3,910)
(903) (991) (1,698) (2,055) (5,647)
Less: OREO and Foreclosure Expenses (3,956) (2,877)
(531) (731) (330) (311) (1,903)
Adjusted Non Interest Expense (non-GAAP) 168,015 170,572 41,665 45,594 56,680 54,067 198,006
Net Interest Income (GAAP) 196,404 226,473 60,999 63,100 74,420 78,765 277,284
Plus: Fully Taxable Equivalent Adjustment 10,975 13,541 3,950 4,083 4,472 4,764 17,270
Net Interest Income on a Fully Taxable Equivalent Basis (non-GAAP) 207,379 240,014 64,949 67,183 78,892 83,529 294,554
Non Interest Income (GAAP) 69,868 65,203 14,846 18,434 18,668 19,061 71,009
Less: Investment Securities Gains (Losses) (2,670) (3,389)
(598) (567) (332) (1,134) (2,631)
Adjusted Non Interest Income (non-GAAP) 67,198 61,814 14,248 17,867 18,336 17,927 68,378
Adjusted Revenue (non-GAAP) 274,577 301,828 79,197 85,050 97,228 101,456 362,932
Efficiency Ratio (non-GAAP) 61.19% 56.51% 52.61% 53.61% 58.30% 53.29% 54.56%
FORWARD DIVIDEND YIELD
4Q17
Most recent quarter's dividend per share $ 0.18
Most recent quarter's dividend per share - Annualized $ 0.72
Stock Price at 12/31/17 $ 42.06
Forward Dividend Yield 1.71%
DIVIDEND PAYOUT RATIO
2017
Dividends per share $ 0.69
Earnings Per Share $ 2.12
Dividend Payout Ratio 32.6%
55
Appendix – Non-GAAP Reconciliation ALLOWANCE AS A PERCENTAGE OF NON-PURCHASED LOANS (dollars in thousands):
4Q16 1Q17 2Q17 3Q17 4Q17
Loans Held for Sale (GAAP) 2,929$ 1,262$ 4,036$ 4,514$ 7,216$
Loans (GAAP) 5,139,645 5,274,909 5,613,144 6,483,448 6,751,199
Total Loans 5,142,574 5,276,171 5,617,180 6,487,962 6,758,415
Less: Purchased Loans (665,417) (608,724) (762,893) (1,395,368) (1,258,386)
Non-Purchased Loans (non-GAAP) 4,477,157$ 4,667,447$ 4,854,287$ 5,092,594$ 5,500,029$
Allowance for Loan Losses (GAAP) 66,037$ 68,225$ 70,471$ 73,354$ 75,032$
Fair Value Adjustment (FVA) (GAAP) 34,936 30,623 29,664 50,434 46,304
Allowance plus FVA (non-GAAP) 100,973$ 98,848$ 100,135$ 123,788$ 121,336$
Purchased Loans (GAAP) 665,417$ 608,724$ 762,893$ 1,395,368$ 1,258,386$
Fair Value Adjustment (FVA) (GAAP) 34,936 30,623 29,664 50,434 46,304
Purchased Loans plus FVA (non-GAAP) 700,353$ 639,347$ 792,557$ 1,445,802$ 1,304,690$
Allowance as a Percentage of Non-Purchased Loans (non-GAAP) 1.47% 1.46% 1.45% 1.44% 1.36%
FVA as a Percentage of Purchased Loans plus FVA (non-GAAP) 4.99% 4.79% 3.74% 3.49% 3.55%
CONSTRUCTION AND INVESTMENT REAL ESTATE CONCENTRATIONS (dollars in thousands):
2015 2016 3Q17 2017
Total Risk-Based Capital (Subsidiary Bank Only)
Total Stockholders' Equity (GAAP) 927,774$ 973,641$ 1,384,867$ 1,404,303$
Adjust for Accumulated Other Comprehensive (Income) Loss 1 (579) 9,701 3,170 763
Less: Preferred Stock (125) (125) (125) (125)
Less: Tier 1 Capital Deductions (1,903) - - -
Less: Disallowed Goodwill and Intangible Assets (246,558) (248,656) (461,632) (463,618)
Less: Disallowed Deferred Tax Assets (1,269) - - -
Total Tier 1 Capital (Regulatory) 677,340 734,561 926,280 941,323
Allowance for Loan Losses includible in Tier 2 Capital 62,453 66,037 73,354 75,032
Total Risk-Based Capital (Regulatory) 739,793$ 800,598$ 999,634$ 1,016,355$
Construction, Land and Land Development Loans 366,704$ 418,703$ 498,862$ 612,219$
Concentration as a % of the Bank's Risk-Based Capital 50% 52% 50% 60%
Construction, Land and Land Development Loans 366,704$ 418,703$ 498,862$ 612,219$
Investment Real Estate Loans 1,090,573 1,272,415 1,647,797 1,617,943
Total C nstruction and Investment RE Loans 1,457,277$ 1,691,118$ 2,146,659$ 2,230,162$
Concentration as a % of the Bank's Risk-Based Capital 19 % 211% 215% 219%
1 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.