Attached files
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| 8-K - FIRST MERCHANTS CORPORATION - 3RD QTR 2011 - EARNING SLIDES - FIRST MERCHANTS CORP | f8kearningslides09302011.htm |
3rd Quarter 2011
Earnings Call
October 25, 2011
Earnings Call
October 25, 2011
2
Michael C. Rechin
President
and Chief Executive Officer
3
Forward-Looking Statement
The Corporation may make forward-looking statements about its
relative business outlook. These forward-looking statements and all
other statements made during this meeting that do not concern
historical facts are subject to risks and uncertainties that may
materially affect actual results.
Specific forward-looking statements include, but are not limited to,
any indications regarding the financial services industry, the economy
and future growth of the balance sheet or income statement.
Please refer to our press releases, Form 10-Qs and 10-Ks concerning
factors that could cause actual results to differ materially from any
forward-looking statements.
The Corporation may make forward-looking statements about its
relative business outlook. These forward-looking statements and all
other statements made during this meeting that do not concern
historical facts are subject to risks and uncertainties that may
materially affect actual results.
Specific forward-looking statements include, but are not limited to,
any indications regarding the financial services industry, the economy
and future growth of the balance sheet or income statement.
Please refer to our press releases, Form 10-Qs and 10-Ks concerning
factors that could cause actual results to differ materially from any
forward-looking statements.
4
3rd Quarter 2011 Highlights
§ Quarter-to-date earnings per share, including one-time charge,
resulted in a loss of $.25 per fully diluted common share. After
adjusting for the one-time charge, the normalized core earnings
totaled $.22 per fully diluted common share.
resulted in a loss of $.25 per fully diluted common share. After
adjusting for the one-time charge, the normalized core earnings
totaled $.22 per fully diluted common share.
§ Quarterly pre-tax pre-provision earnings improved by $1.4M
over 2nd Quarter to $17.4M, through Net-Interest Margin expansion
and Non-Interest Income improvement.
over 2nd Quarter to $17.4M, through Net-Interest Margin expansion
and Non-Interest Income improvement.
§ Improvement in asset quality continues with a 12.1% reduction in
Classified Assets, a 3.5% improvement in Criticized Assets, and a
9.9% reduction in Non-Accrual Loans.
Classified Assets, a 3.5% improvement in Criticized Assets, and a
9.9% reduction in Non-Accrual Loans.
§ Tangible Common Equity ratio improved by 52 basis points to
6.88% through a $21.2M Direct Private Placement, a $90.8M
SBLF investment and a $116M TARP CPP Redemption.
6.88% through a $21.2M Direct Private Placement, a $90.8M
SBLF investment and a $116M TARP CPP Redemption.
5
Mark K. Hardwick
Executive Vice President
and Chief Financial Officer
6
2009 2010 Q1-’11
Q2-’11 Q3-’11
1. Investments
$ 563 $ 827 $ 886 $ 938 $ 938
2. Loans 3,278 2,857 2,766 2,729 2,725
3. Allowance (92) (83) (81) (77) (73)
4. CD&I & Goodwill 159 154 153 152 151
5. BOLI 95 97 102 103 124
6. Other 478 319 291 249 254
7. Total Assets $4,481 $4,171 $4,117 $4,094 $4,119
($ in Millions)
TOTAL ASSETS
7
(as of 9/30/2011)
YTD Yield = 5.45%
Total = $2.7B
LOAN PORTFOLIO
8
§ $938 Million Balance
§ Average duration - 3.9 years
§ Tax equivalent yield of 4.03%
§ Net unrealized gain of $25.4
million
million
9
2009 2010
Q1-’11 Q2-’11
Q3-’11
1. Customer Non-Maturity
Deposits
$2,042 $2,127 $2,083 $2,114 $2,073
2. Customer Time Deposits 1,220 996 943 890 848
3. Brokered Deposits 275 146 126 139 143
4. Borrowings 339 277 305 306 398
5. Other Liabilities 30 28 56 35 33
6. Hybrid Capital 111 142 142 142 111
7. Preferred Stock (CPP) 112 68 68 68 ―
8. Preferred Stock (SBLF) ― ― ― ― 91
9. Common Equity
352 387 394 400 422
10. Total Liabilities and Capital $4,481 $4,171 $4,117 $4,094 $4,119
($ in Millions)
TOTAL LIABILITIES AND CAPITAL
10
YTD Cost = .92%
Total = $3.1B
11
2009 2010 Q1-’11 Q2-’11
Q3-’11
1. Total Risk-Based
Capital Ratio 13.04% 15.74% 15.66% 16.05% 16.21%
2. Tier 1 Risk-Based
Capital Ratio 10.32% 12.82% 13.05% 13.42% 13.60%
3. Leverage Ratio 8.20% 9.50% 9.80% 9.94% 10.20%
4. Tier 1 Common Risk-
Based Capital Ratio 5.40% 7.64% 7.75% 8.06% 8.53%
5. TCE/TCA 4.54% 5.86% 6.16% 6.36% 6.88%
CAPITAL RATIOS
12
|
|
Q3-’09 Q4-’09
Q1-’10 Q2-’10 Q3-’10 Q4-’10
Q1-’11 Q2-’11 Q3-’11
Net Interest Income - FTE ($millions) $ 40.5 $ 39.2 $ 37.8
$ 37.7 $ 37.2 $ 36.7 $ 36.9 $ 37.3 $ 37.3
Tax Equivalent Yield on Earning Assets 5.56% 5.48%
5.39% 5.38% 5.38% 5.13% 5.11% 5.04% 5.01%
Cost of Supporting Liabilities 1.73% 1.62%
1.57% 1.48% 1.45% 1.30% 1.16% 1.05% 0.99%
Net Interest Margin 3.83% 3.86%
3.82% 3.90% 3.93% 3.83% 3.95% 3.99% 4.02%
NET INTEREST MARGIN
13
2009 2010 Q1-’11 Q2-’11 Q3-’11
1. Service Charges on Deposit Accounts $15.1 $13.3 $ 2.8 $ 3.0 $ 3.2
2. Trust Fees 7.4 7.7
2.0 1.9 1.9
3. Insurance Commission Income 6.4 6.2 1.9 1.0 1.5
4. Electronic Card Fees 4.9 6.2
1.5 1.7 1.7
5. Cash Surrender Value of Life Ins 1.6 2.1 0.6 0.6 0.6
6. Gains on Sales Mortgage Loans 6.8 6.8 1.9 1.0 1.8
7. Securities Gains/Losses 4.4 1.9 0.1 0.8 0.9
8. Other 4.6 4.4
1.1 1.1 1.6
9. Total
$51.2 $48.5 $11.9 $11.1 $13.2
10. Adjusted Non-Interest Income1
$46.5 $46.6 $11.8 $10.3 $12.3
1Adjusted for gains and losses in bond portfolio and one-time mortgage sale
($ in Millions)
NON-INTEREST INCOME
14
NON-INTEREST EXPENSE
2009
2010 Q1-’11 Q2-’11 Q3-’11
1. Salary & Benefits $ 76.3 $ 73.3 $ 17.2 $ 18.6 $ 20.0
2. Premises & Equipment 17.9 17.2 4.5 4.1 4.2
3. Core Deposit Intangible 5.1 4.7 1.1 1.1 0.8
4. Professional Services 1.3 1.4 0.6 0.5 0.5
5. OREO/Credit-Related Expense 12.9 14.6 3.2 2.8 2.0
6. FDIC Expense 10.4 8.1 2.1 1.5 1.2
7. FHLB Prepayment Penalties 1.9 ― ― ― ―
8. Outside Data Processing 6.2 5.1 1.4 1.5 1.4
9. Marketing 2.1 2.0 0.4
0.4 0.5
10. Other
17.5 15.9 3.4
3.9 3.6
11. Total $151.6 $142.3 $ 33.9 $ 34.4 $ 34.2
12. Adjusted Non-Interest Expense 2 $134.7 $127.7 $ 30.7 $ 31.6 $
32.2
1Credit-related professional services are reclassed to OREO/credit-related expenses
2Adjusted for the FDIC special assessment, FHLB prepayment penalties & OREO
expense & credit-related professional services
($ in Millions)
1
1
15
2009
2010 Q1-’11 Q2-’11 Q3-’11
1. Net Interest Income-FTE $159.1 $149.4 $ 36.9 $ 37.3 $37.3
2. Non Interest Income1
46.5 46.6 11.8 10.3 12.3
3. Non Interest Expense2
(134.7) (127.7) (30.7) (31.6) (32.2)
4. Pre-Tax Pre-Provision Earnings $ 70.9 $ 68.3 $ 18.0 $
16.0 $ 17.4
5. Provision (122.2) (46.5)
(5.6) (5.6) (5.6)
6. Adjustments (12.1) (12.7)
(3.1) (2.0) (1.1)
7. Taxes - FTE 22.7 (2.3)
(3.8) (2.9) (4.0)
8. Gain /(Loss) on CPP/Trust Preferred — 10.1 — — (12.3)
9. CPP Dividend
(5.0) (5.2)
(1.0)
(1.0) (0.8)
10. Net Income Avail. for Distribution ($ 45.7) $
11.7 $ 4.5 $ 4.5 ($ 6.4)
11. EPS ($ 2.17) $
0.48 $ .17 $ .18 ($ .25)
1Adjusted for gains and losses in bond portfolio and one-time mortgage sale
2Adjusted for the FDIC special assessment, FHLB prepayment penalties & OREO
expense & credit-related professional services
($ in Millions)
EARNINGS
16
EARNINGS PER SHARE
2010 Q1 Q2 Q3 Q4 Total
1. Actual $ .01 $ .35 $ .02 $ .10 $ .48
2. Adjusted* $ .01 ($.05) $ .02 $
.10 $ .08
2011 Q1 Q2 Q3 Q4 Total
3. Actual $ .17 $ .18 ($.25) − $ .10
4. Adjusted* $ .17 $ .18 $ .22 − $ .57
*Adjusted for gains and losses on CPP/Trust Preferred refinance and repayment net of taxes
(Line 8 on slide 15)
(Line 8 on slide 15)
17
John J. Martin
Senior Vice President
and Chief Credit Officer
18
IMPROVEMENT AND STABILIZATION IN CREDIT METRICS
$ 1.6
$ .2
$ .8
$ 1.3
$ 5.3
3. 90 day Delinquent Loans
$ 87.8
$108.3
$116.8
$116.2
$125.7
5. Impaired Loans
$ 78.9
$ 87.6
$ 87.7
$ 90.6
$ 98.6
4. Non-Accrual Loans
$347.9
$360.5
$383.7
$393.0
$408.6
2. Criticized Assets (includes Classified)
$248.1
$282.2
$293.8
$313.0
$334.2
1. Classified Assets
$ 8.2
$ 13.7
$ 15.8
$ 13.9
$ 14.9
6. Specific Reserves
Q3-’10
Q4-’10
Q1-’11
Q2-’11
Q3-’11
7. Allowance for Loan and Lease
Losses
Losses
$ 83.7
$ 83.0
$ 80.9
$ 77.1
$ 73.1
8. ALLL % of Non-Accrual Loans
84.9%
91.6%
92.3%
88.1%
92.6%
($ in millions)
Allowance for Loan and
Lease Losses down 5.3%
Lease Losses down 5.3%
19
NON-PERFORMING ASSET RECONCILIATION
|
($ in millions)
|
Q3-’10
|
Q4-’10
|
Q1-’11
|
Q2-’11
|
Q3-’11
|
|
1. Beginning Balance NPAs & 90+ Days Delinquent
|
$ 146.5
|
$ 130.8
|
$ 120.0
|
$ 107.6
|
$ 109.5
|
|
Non-Accrual
|
|
|
|
|
|
|
2. Add: New Non-Accruals
|
15.5
|
27.4
|
11.7
|
26.7
|
21.4
|
|
3. Less: To Accrual/Payoff/Restructured
|
( 18.6)
|
( 14.5)
|
( 3.2)
|
( 8.3)
|
( 8.7)
|
|
4. Less: To OREO
|
(6.7)
|
( 7.0)
|
( 2.0)
|
( 1.6)
|
( 9.7)
|
|
5. Less: Charge-offs
|
( 11.8)
|
( 13.9)
|
( 9.4)
|
(16.9)
|
(11.6)
|
|
6. Increase /(Decrease): Non-Accrual Loans
|
(21.6)
|
(8.0)
|
( 2.9)
|
( .1)
|
(8.6)
|
|
Other Real Estate Owned (ORE)
|
|
|
|
|
|
|
7. Add: New ORE Properties
|
6.6
|
7.2
|
2.2
|
1.6
|
9.7
|
|
8. Less: ORE Sold
|
(3.8)
|
(4.2)
|
( 3.6)
|
( 1.6)
|
( 5.0)
|
|
9. Less: ORE Losses (write-downs)
|
( 1.4)
|
( 3.6)
|
( 2.5)
|
( 1.6)
|
( 0.7)
|
|
10. Increase /(Decrease): ORE
|
1.4
|
( .6)
|
( 3.9)
|
( 1.6)
|
4.0
|
|
11. Increase /(Decrease): 90 Days Delinquent
|
.8
|
( 4.0)
|
( 0.6)
|
( 0.5)
|
1.4
|
|
12. Increase /(Decrease): Restructured/Renegotiated Loans
|
3.7
|
1.8
|
( 5.0)
|
4.1
|
.4
|
|
13. Total NPA Change
|
(15.7)
|
(10.8)
|
(12.4)
|
1.9
|
(2.8)
|
|
14. Ending Balance NPAs & 90+ Days Delinquent
|
$130.8
|
$ 120.0
|
$ 107.6
|
$ 109.5
|
$ 106.7
|
20
NET CHARGE-OFFS, PROVISION AND ALLOWANCE
($ in millions)
21
Credit Summary
§ Key credit metrics continue to improve although
challenges remain.
challenges remain.
§ Criticized and Classified Assets continue to show
improving trends.
improving trends.
§ Other Real Estate and other credit related
expenses moderating.
expenses moderating.
§ Charge-offs and provision expense lower with
improvement in credit quality.
improvement in credit quality.
22
Michael C. Rechin
President
and Chief Executive Officer
23
Overview of 2011 Strategy and Tactics
“Strengthen and Grow”
“Strengthen and Grow”
§ Streamline and solidify our brand position as a community bank
competing primarily in consumer, small business and middle
market.
competing primarily in consumer, small business and middle
market.
§ Pipeline is growing by intensifying revenue activity using market
coverage tactics and the addition of revenue-generating staff in
key markets.
coverage tactics and the addition of revenue-generating staff in
key markets.
§ Implement systems and processes to standardize and accelerate
commercial banking opportunities.
commercial banking opportunities.
§ Capital strategy executed successfully - capital positioned well
for the future . . . exceeds Basel III requirements.
for the future . . . exceeds Basel III requirements.
24
Contact Information
First Merchants Corporation common stock is
traded on the NASDAQ Global Select Market
under the symbol FRME.
traded on the NASDAQ Global Select Market
under the symbol FRME.
Additional information can be found at
www.firstmerchants.com
Investor inquiries:
David L. Ortega
Investor Relations
Telephone: 765.378.8937
dortega@firstmerchants.com