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8-K - FIRST MERCHANTS CORPORATION - 4TH QUARTER 2011 EARNINGS SLIDES - FIRST MERCHANTS CORP | f8kearningslides12312011.htm |
January 26, 2012
4th Quarter 2011
Earnings Call
Earnings Call
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
4th Quarter and
Fiscal Year-End 2011 Highlights
Fiscal Year-End 2011 Highlights
§ The company continued its trend of improving core earnings
resulting in quarter-to-date earnings per share of $.24 per fully
diluted common share.
resulting in quarter-to-date earnings per share of $.24 per fully
diluted common share.
§ Pre-tax pre-provision earnings improved by $2.6M over 2010 to
$70.9M through non-interest income improvements and non-
interest expense reduction.
$70.9M through non-interest income improvements and non-
interest expense reduction.
§ Year-over-year improvement in asset quality continues with a
27.4% reduction in Classified Assets, an 18.8% improvement in
Criticized Assets, and a 23.2% reduction in Non-Accrual Loans.
27.4% reduction in Classified Assets, an 18.8% improvement in
Criticized Assets, and a 23.2% reduction in Non-Accrual Loans.
§ Loan growth, led by strong C&I lending, contributed to positive
revenue increases.
revenue increases.
5
Mark K. Hardwick
Executive Vice President
and Chief Financial Officer
6
2009 2010 2011
1. Investments
$ 563 $ 827 $ 946
2. Loans 3,278 2,857 2,731
3. Allowance (92) (83) (71)
4. CD&I & Goodwill 159 154 150
5. BOLI 95 97 124
6. Other 478 319 293
7. Total Assets $4,481 $4,171 $4,173
($ in Millions)
TOTAL ASSETS
7
(as of 12/31/2011)
YTD Yield = 5.41%
Total = $2.7B
LOAN PORTFOLIO
8
§ $946 Million Balance
§ Average duration - 3.8 years
§ Tax equivalent yield of 3.91%
§ Net unrealized gain of $29.6
million
million
9
2009 2010 2011
1. Customer Non-Maturity
Deposits $2,042 $2,127 $2,196
2. Customer Time Deposits 1,220 996 816
3. Brokered Deposits 275 146 123
4. Borrowings 339 277 378
5. Other Liabilities 30 28 34
6. Hybrid Capital 111 142 111
7. Preferred Stock (CPP) 112 68 ―
8. Preferred Stock (SBLF) ― ― 91
9. Common Equity
352 387 424
10. Total Liabilities and Capital $4,481 $4,171 $4,173
($ in Millions)
TOTAL LIABILITIES AND CAPITAL
10
YTD Cost = .87%
Total = $3.1B
11
2009 2010 2011
1. Total Risk-Based
Capital Ratio 13.04% 15.74% 16.54%
2. Tier 1 Risk-Based
Capital Ratio 10.32% 12.82% 13.92%
3. Leverage Ratio 8.20% 9.50% 10.17%
4. Tier 1 Common Risk-
Based Capital Ratio 5.40% 7.64% 8.83%
5. TCE/TCA 4.54% 5.86% 6.84%
CAPITAL RATIOS
12
|
NET INTEREST MARGIN
13
2009 2010 2011
1. Service Charges on Deposit Accounts $15.1 $13.3 $12.0
2. Trust Fees 7.4 7.7 7.7
3. Insurance Commission Income 6.4 6.2 5.7
4. Electronic Card Fees 4.9 6.1 6.5
5. Cash Surrender Value of Life Ins 1.6 2.1 2.6
6. Gains on Sales Mortgage Loans 6.8 6.8 7.4
7. Securities Gains/Losses 4.4 1.9 2.0
8. Other
4.6 4.4 5.2
9. Total $51.2 $48.5 $49.1
10. Adjusted Non-Interest
Income1 $46.5 $46.6 $47.1
1Adjusted for gains and losses in bond portfolio and one-time mortgage sale
($ in Millions)
NON-INTEREST INCOME
14
NON-INTEREST EXPENSE
2009
2010 2011
1. Salary & Benefits $ 76.3 $ 73.3 $74.7
2. Premises & Equipment 17.9 17.2 16.9
3. Core Deposit Intangible 5.1 4.7 3.5
4. Professional
Services 1.3 1.4 2.2
5. OREO/Credit-Related Expense 12.9 14.6
10.6
6. FDIC Expense 10.4 8.1 5.5
7. FHLB Prepayment Penalties 1.9 ― ―
8. Outside Data Processing 6.2 5.1 5.7
9. Marketing 2.1 2.0 2.0
10. Other
17.5 15.9 14.8
11. Total
$151.6 $142.3 $135.9
12. Adjusted Non-Interest Expense 2 $134.7
$127.7 $125.3
1Credit-related professional services are reclassed to OREO/credit-related expenses
2Adjusted for the FDIC special assessment, FHLB prepayment penalties & OREO
expense & credit-related professional services
($ in Millions)
1
1
15
2009
2010 2011
1. Net Interest Income-FTE $159.1
$149.4 $149.1
2. Non Interest
Income1 46.5 46.6 47.1
3. Non Interest
Expense2 ( 134.7) ( 127.7)
( 125.3)
4. Pre-Tax Pre-Provision Earnings
$ 70.9 $ 68.3 $ 70.9
5. Provision (
122.2) ( 46.5) ( 22.6)
6. Adjustments ( 12.1) ( 12.7) ( 8.6)
7. Taxes - FTE
22.7 ( 2.3) ( 14.4)
8. Gain /(Loss) on CPP/Trust Preferred — 10.1 ( 12.3)
9. Preferred Stock Dividend
( 5.0) ( 5.2) ( 4.0)
10. Net Income Avail. for Distribution ($ 45.7) $ 11.7 $ 9.0
11. EPS ($
2.17) $ 0.48 $0.34
1Adjusted for gains and losses in bond portfolio and one-time mortgage sale
2Adjusted for the FDIC special assessment, FHLB prepayment penalties & OREO
expense & credit-related professional services
($ 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) $ .24 $ .34
4. Adjusted $ .17 $ .18 $ .21 $ .24 $ .80
*Adjusted for gains and losses on CPP/Trust Preferred refinance and repayment
net of taxes (Line 8 on slide 15)
17
John J. Martin
Senior Vice President
and Chief Credit Officer
18
($ in Millions)
ASSET QUALITY SUMMARY
2009 2010 2011
1. Non-Accrual Loans $118.4 $ 90.6 $ 69.6
2. Other Real Estate 14.9 20.9 16.3
3. Restructured Loans 8.8 7.1 14.3
4. 90-Day Delinquent Loans 4.0 1.3 .6
5. Impaired
Loans 178.8 116.2 79.8
6. Specific Reserves 26.3 13.9 7.6
7. Allowance for Loan and
Lease Losses 92.1 83.0 70.9
8. ALLL % of Non-Accrual
Loans 77.8% 91.6% 101.9%
9. Classified Assets $375.7 $313.0 $227.2
10. Criticized Assets
(includes Classified) $509.9 $393.0 $319.2
19
Criticized Assets down 18.8% YOY
and 8.3% linked quarter
and 8.3% linked quarter
Classified Assets down 27.4% YOY
and 8.4% linked quarter
and 8.4% linked quarter
Non-Accrual Loans down 23.2% YOY
and 11.8% linked quarter
and 11.8% linked quarter
Allowance for Loan and
Lease Losses as a % of
Nonaccrual Loans
exceeds 100%
Lease Losses as a % of
Nonaccrual Loans
exceeds 100%
($ in Millions)
($ in Millions)
IMPROVEMENT IN CREDIT METRICS AND ALLL COVERAGE
20
NON-PERFORMING ASSET RECONCILIATION
($ in millions)
|
Q3-’10
|
Q4-’10
|
Q1-’11
|
Q2-’11
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Q3-’11
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Q4-’11
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1. Beginning Balance NPAs & 90+ Days Delinquent
|
$ 146.5
|
$ 130.8
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$ 120.0
|
$ 107.6
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$ 109.5
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$ 106.7
|
Non-Accrual
|
|
|
|
|
|
|
2. Add: New Non-Accruals
|
15.5
|
27.4
|
11.7
|
26.7
|
21.4
|
10.2
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3. Less: To Accrual/Payoff/Restructured
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( 18.6)
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( 14.5)
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( 3.2)
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( 8.3)
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( 8.7)
|
( 7.6)
|
4. Less: To OREO
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( 6.7)
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( 7.0)
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( 2.0)
|
( 1.6)
|
( 9.7)
|
( 1.2)
|
5. Less: Charge-offs
|
( 11.8)
|
( 13.9)
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( 9.4)
|
(16.9)
|
(11.6)
|
(10.7)
|
6. Increase /(Decrease): Non-Accrual Loans
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(21.6)
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(8.0)
|
( 2.9)
|
( .1)
|
(8.6)
|
(9.3)
|
Other Real Estate Owned (ORE)
|
|
|
|
|
|
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7. Add: New ORE Properties
|
6.6
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7.2
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2.2
|
1.6
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9.7
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1.2
|
8. Less: ORE Sold
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(3.8)
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(4.2)
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( 3.6)
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( 1.6)
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( 5.0)
|
( 3.3)
|
9. Less: ORE Losses (write-downs)
|
( 1.4)
|
( 3.6)
|
( 2.5)
|
( 1.6)
|
( 0.7)
|
( 1.1)
|
10. Increase /(Decrease): ORE
|
1.4
|
( .6)
|
( 3.9)
|
( 1.6)
|
4.0
|
(3.2)
|
11. Increase /(Decrease): 90 Days Delinquent
|
.8
|
( 4.0)
|
( 0.6)
|
( 0.5)
|
1.4
|
(1.0)
|
12. Increase /(Decrease): Restructured Loans
|
3.7
|
1.8
|
( 5.0)
|
4.1
|
.4
|
7.6
|
13. Total NPA Change
|
(15.7)
|
(10.8)
|
(12.4)
|
1.9
|
(2.8)
|
(5.9)
|
14. Ending Balance NPAs & 90+ Days Delinquent
|
$ 130.8
|
$ 120.0
|
$ 107.6
|
$ 109.5
|
$ 106.7
|
$ 100.8
|
31.2%
21
($ in Millions)
22
Credit Summary
§ Asset Quality continues to show improvement.
§ Lower OREO and other related credit expenses
associated with fewer properties and improved
credit metrics.
associated with fewer properties and improved
credit metrics.
§ Increase in Restructured Loans resulting from
“A/B” restructures until performance demonstrated.
“A/B” restructures until performance demonstrated.
§ Charge-offs and provision expense lower and in
line with improvement in credit quality.
line with improvement in credit quality.
23
Michael C. Rechin
President
and Chief Executive Officer
24
2011 Review
§ Capital strategy executed successfully
§ Tangible Common Equity ratio improved by 98 basis points in
2011 to 6.84% through:
2011 to 6.84% through:
§ Core earnings improvement
§ $21.2M Direct Private Placement
§ $90.8M SBLF investment
§ $116M TARP CPP redemption
§ Solidified our brand position as a community bank - competing
primarily in consumer, mortgage, small business and middle market
primarily in consumer, mortgage, small business and middle market
§ Beginnings of organic balance sheet growth
25
2012 Strategy and Tactics
“Growth and Top Tier Performance”
“Growth and Top Tier Performance”
§ Grow revenue by intensifying revenue-generating activity:
§ market coverage tactics
§ accelerate commercial banking opportunities
§ additional investment in business banking professionals in key
markets
markets
§ retail CRM and sales management system
§ Implement systems and processes to improve efficiency:
§ banking center rationalization
§ enhance systems in consumer collections, human resources,
and finance
and finance
§ leverage back-office infrastructure
§ Seek non-organic growth opportunities
26
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