UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported): October 25, 2016
Commission File Number 0-17071
FIRST MERCHANTS CORPORATION
(Exact name of registrant as specified in its charter)
INDIANA | 35-1544218 |
(State or other jurisdiction of incorporation) | (IRS Employer Identification No.) |
200 East Jackson Street
P.O. Box 792
Muncie, IN 47305-2814
(Address of principal executive offices, including zip code)
(765) 747-1500
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On Tuesday, October 25, 2016, First Merchants Corporation will conduct a third quarter earnings conference call and web cast at 2:30 p.m. (ET). A copy of the slide presentation utilized on the conference call is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Exhibits.
Exhibit 99.1 | Slide presentation, utilized October 25, 2016, during conference call and web cast by First Merchants Corporation |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
First Merchants Corporation
(Registrant)
By: /s/ Mark K. Hardwick
Mark K. Hardwick
Executive Vice President,
Chief Financial Officer and Chief Operating Officer
Dated: October 25, 2016
EXHIBIT INDEX
Exhibit No. | Description |
99.1 | Slide presentation, utilized October 25, 2016, during conference call and web cast by First Merchants Corporation |
FIRST MERCHANTS
CORPORATION
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
Third Quarter 2016
Earnings Highlights
October 25, 2016
NASDAQ: FRME
Michael C. Rechin Mark K. Hardwick John J. Martin
President Executive Vice President Executive Vice President
Chief Executive Officer Chief Financial Officer Chief Credit Officer
Chief Operating Officer
®
THE STRENGTH OF BIG. THE SERVICE OF SMALL.
www.firstmerchants.com
2
The Corporation may make forward-looking statements about its relative business outlook. These forward-
looking statements and all other statements made during this meeting that do not concern historical facts are
subject to risks and uncertainties that may materially affect actual results. Specific forward-looking statements
include, but are not limited to, any indications regarding the financial services industry, the economy and future
growth of the balance sheet or income statement. Please refer to our press releases, Form 10-Qs and 10-Ks
concerning factors that could cause actual results to differ materially from any forward-looking statements.
Non-GAAP Financial Measures
These slides contain non-GAAP financial measures. For purposes of Regulation G, a non-GAAP financial measure
is a numerical measure of the registrant’s historical or future financial performance, financial position or cash
flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are
included in the most directly comparable measure calculated and presented in accordance with GAAP in the
statement of income, balance sheet or statement of cash flows (or equivalent statements) of the issuer; or
includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from
the most directly comparable measure so calculated and presented. In this regard, GAAP refers to generally
accepted accounting principles in the United States. Pursuant to the requirements of Regulation G, First
Merchants Corporation has provided reconciliations within the slides, as necessary, of the non-GAAP financial
measure to the most directly comparable GAAP financial measure.
® Forward-Looking Statement
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
3
3rd Quarter 2016 Highlights
Record Net Income of $21.1 Million, a 23.4% Increase over 3Q2015
Earnings Per Share of $0.51, a 13.3% Increase over 3Q2015; Highest in Company’s History
Total Assets Crossed the $7 Billion Level and Grew by 13.5% over 3Q2015
$280 Million of Organic Loan Growth for the Year Reflects an 8% Annualized Growth Rate
Net Interest Margin Stays Strong; Expanding to 3.94%
1.22% Return on Average Assets
Efficiency Ratio of 55.12%
®
“Record Level Performance Metrics”
Mark K. Hardwick
Executive Vice President
Chief Financial Officer
and Chief Operating Officer
®
5
Total Assets
($ in Millions)
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®
2014 2015 Q1-’16 Q2-’16 Q3-’16
1. Investments $1,181 $1,277 $1,271 $1,298 $1,300
2. Loans Held for Sale 7 10 4 19 1
3. Loans 3,925 4,694 4,710 4,791 4,974
4. Allowance (64) (62) (62) (62) (63)
5. CD&I & Goodwill 219 260 262 261 260
6. BOLI 169 201 201 201 202
7. Other 387 381 413 398 348
8. Total Assets $5,824 $6,761 $6,799 $6,906 $7,022
9. Annualized Asset Growth 16.1% 5.1%
®
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
Commercial &
Industrial
23.0%
Commercial
Real Estate
Owner-Occupied
10.5%
Commercial
Real Estate
Non-Owner
Occupied
25.4%
Construction Land
& Land
Development
7.4%
Agricultural
Land
3.1%
Agricultural
Production
1.9%
Other
Commercial
4.2%
Residential
Mortgage
14.9%
Home
Equity
8.0%
Other
Consumer
1.6%
QTD Yield = 4.64%
YTD Yield = 4.59%
Total Loans = $5.0 Billion
Loan and Yield Detail
(as of 9/30/2016)
6
®
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
Mortgage-
Backed
Securities
32%
Collateralized
Mortgage
Obligations
21%
U. S. Agencies
3%
Corporate
Obligations
1%
Tax-Exempt
Municipals
43%
Investment Portfolio
(as of 9/30/2016)
$1.3 Billion
Modified duration of 4.1 years
Tax equivalent yield of 3.69%
Net unrealized gain of $53.3 Million
7
2014 2015 Q1-’16 Q2-’16 Q3-’16
1. Customer Non-Maturity Deposits $3,523 $4,096 $4,140 $4,269 $4,290
2. Customer Time Deposits 784 880 841 820 795
3. Brokered Deposits 334 314 330 319 359
4. Borrowings 290 446 420 435 500
5. Other Liabilities 44 51 79 53 55
6. Hybrid Capital 122 123 122 122 122
7. Common Equity 727 851 867 888 901
8. Total Liabilities and Capital $5,824 $6,761 $6,799 $6,906 $7,022
Total Liabilities and Capital
($ in Millions)
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®
8
®
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
Deposit Detail
(as of 09/30/2016)
QTD Cost = .38%
YTD Cost = .39%
Total = $5.4 Billion
9
Demand Deposits
50%
Savings Deposits
28%
Certificates &
Time Deposits of
>$100,000
6%
Certificates &
Time Deposits of
<$100,000
9% Brokered
Deposits
7%
11.16%
11.40%
11.37%
11.22%
11.31% 11.49% 11.42% 11.39%
11.05%
8.97% 9.06%
9.21%
8.95%
9.17% 9.08% 9.26%
9.43% 9.48%
15.21%
15.34%
15.12%
14.92% 14.85% 14.94% 14.79% 14.67%
14.18%
6.00%
7.00%
8.00%
9.00%
10.00%
11.00%
12.00%
13.00%
14.00%
15.00%
16.00%
17.00%
18.00%
3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
Total Risk-Based Capital Ratio (Target = 13.50%)
Common Equity Tier 1 Capital Ratio (Target = 10.00%)
Tangible Common Equity Ratio (TCE) (Target = 8.50%) 10
Capital Ratios
(Target)
(Target)
(Target)
®
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11
Net Interest Margin
®
($ in Millions) Q3 - '14 Q4 - '14 Q1 - '15 Q2 - '15 Q3 - '15 Q4 - '15 Q1 - '16 Q2 - '16 Q3 - '16
Net Interest Income - FTE $ 49.9 $ 49.2 $ 49.2 $ 51.7 $ 53.3 $ 53.2 $ 57.6 $ 59.2 $ 61.1
Fair Value Accretion $ 3.5 $ 1.4 $ 2.2 $ 2.2 $ 2.0 $ 1.9 $ 2.5 $ 3.2 $ 3.8
Tax Equivalent Yield on Earning
Assets 4.41% 4.26% 4.24% 4.26% 4.30% 4.20% 4.28% 4.30% 4.37%
Cost of Supporting Liabilities 0.43% 0.46% 0.46% 0.45% 0.45% 0.45% 0.45% 0.44% 0.43%
Net Interest Margin 3.98% 3.80% 3.78% 3.81% 3.85% 3.75% 3.83% 3.86% 3.94%
3.98%
3.80% 3.78%
3.81% 3.85%
3.75%
3.83% 3.86%
3.94%
3.71% 3.69% 3.61% 3.65%
3.71%
3.62%
3.66% 3.65%
3.70%
2.60%
2.80%
3.00%
3.20%
3.40%
3.60%
3.80%
4.00%
4.20%
$34
$38
$42
$46
$50
$54
$58
$62
Q3 - '14 Q4 - '14 Q1 - '15 Q2 - '15 Q3 - '15 Q4 - '15 Q1 - '16 Q2 - '16 Q3 - '16
Net Interest Income - FTE ($millions) Net Interest Margin Net Interest Margin - Adjusted for Fair Value Accretion
11
12
Non-Interest Income
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
®
–
–
–
–
–
–
–
–
–
–
–
2014 2015 Q1-’16 Q2-’16 Q3-’16
1. Service Charges on Deposit Accounts $15.7 $16.2 $ 4.1 $ 4.4 $ 4.7
2. Wealth Management Fees 11.7 11.3 3.1 3.0 3.3
3. Insurance Commission Income 7.4 4.1
4. Card Payment Fees 11.8 13.4 3.8 3.8 3.8
5. Cash Surrender Value of Life Ins 3.7 2.9 1.5 1.3 0.6
6. Gains on Sales Mortgage Loans 4.9 6.5 1.5 1.7 2.0
7. Securities Gains/Losses 3.6 2.7 1.0 0.7 0.8
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 1.7
11. Total $61.8 $69.8 $15.8 $16.4 $16.9
($ in Millions)
13
Non-Interest Expense
2014 2015 Q1-’16 Q2-’16 Q3-’16
1. Salary & Benefits $ 96.5 $101.9 $27.3 $25.6 $26.7
2. Premises & Equipment 23.2 25.5 7.3 7.3 7.3
3. Core Deposit Intangible Amortization 2.4 2.8 1.0 1.0 1.0
4. Professional & Other Outside Services 8.1 9.9 2.2 1.5 1.2
5. OREO/Credit-Related Expense 3.4 3.9 0.7 0.9 0.6
6. FDIC Expense 3.7 3.7 1.0 1.0 0.5
7. Outside Data Processing 7.3 7.1 2.1 2.0 2.4
8. Marketing 3.5 3.5 0.7 0.9 0.6
9. Other 15.8 16.5 4.1 4.7 3.8
10. Non-Interest Expense $163.9 $174.8 $46.4 $44.9 $44.1
($ in Millions)
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®
14
2014 2015 Q1-’16 Q2-’16 Q3-’16
1. Net Interest Income $ 187.0 $ 196.4 $ 54.5 $ 56.0 $ 57.7
2. Provision for Loan Losses (2.6) (0.4) (0.6) (0.8) (1.9)
3. Net Interest Income after Provision 184.4 196.0 53.9 55.2 55.8
4. Non-Interest Income 61.8 69.8 15.8 16.4 16.9
5. Non-Interest Expense (163.9) (174.8) (46.4) (44.9) (44.1)
6. Income before Income Taxes 82.3 91.0 23.3 26.7 28.6
7. Income Tax Expense (22.1) (25.6) (5.6) (6.7) (7.5)
8. Net Income Avail. for Distribution $ 60.2 $ 65.4 $ 17.7 $ 20.0 $ 21.1
9. EPS $ 1.65 $ 1.72 $ 0.43 $ 0.49 $ 0.51
10. Efficiency Ratio 62.44% 61.19% 61.78% 57.33% 55.12%
Earnings
($ in Millions)
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®
15
Per Share Results
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®
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 $ .51 – $ 1.43
2. Dividends $ .11 $ .14 $ .14 – $ .39
2. Tangible Book Value $15.02 $15.53 $15.86 –
$9.21 $9.64
$10.95
$12.17
$13.65
$14.68
$15.86
THE STRENGTH OF BIG. THE SERVICE OF SMALL.
Dividends and Tangible Book Value
0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
.08
www.firstmerchants.com
®
.01
.03
.05
.11
.14
2.09%
Forward
Dividend
Yield
27.5%
Dividend
Payout Ratio
=
Quarterly Dividends Tangible Book Value
16
John J. Martin
Executive Vice President
and Chief Credit Officer
®
18
Loan Portfolio Trends
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
®
($ in Millions)
2014 2015 Q1-'16 Q2-'16 Q3-'16 $ %186.1 186.1 186.1
1. Commercial & Industrial 897$ 1,057$ 1,061$ 1,085$ 1,147$ 62$ 5.7%
2. Construction, Land and
Land Development 207 367 392 353 368 15 4.2%
3. CRE Non-Owner Occupied 976 1,090 1,106 1,179 1,264 85 7.2%
4. CRE Owner Occupied 535 554 544 543 524 (19) (3.5%)
5. Agricultural Production 105 98 92 95 93 (2) (2.1%)
6. Agricultural Land 162 158 155 148 153 5 3.4%
7. Residential Mortgage 647 786 770 759 740 (19) (2.5%)
8. Home Equity 287 349 354 374 399 25 6.7%
9. Other Commercial 36 160 162 180 209 29 16.1%
10. Other Consumer 73 75 74 75 77 2 2.7%
11. Total Loans 3,925$ 4,694$ 4,710$ 4,791$ 4,974$ 183$ 3.8%
12. Construction Concentration
1
52.3% 46.1% 47.3%
13. Investment RE Concentration
1
200.4% 199.8% 209.9%
1As a % of Risk Based Capital
Change
Linked Quarter
19
Asset Quality Summary
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
®
($ in Millions)
2014 2015 Q1-'16 Q2-'16 Q3-'16 $ %
1. Non-Accrual Loans 48.8$ 31.4$ 36.7$ 33.6$ 34.1$ 0.5$ 1.5%
2. Other Real Estate 19.3 17.3 15.6 13.2 10.2 (3.0) (22.7%)
3. Renegotiated Loans 2.0 1.9 1.0 4.3 4.0 (0.3) (7.0%)
4. 90+ Days Delinquent Loans 4.6 0.9 1.0 0.4 1.6 1.2 300.0%
5. Total NPAs & 90+ Days Delinquent 74.7$ 51.5$ 54.3$ 51.5$ 49.9$ (1.6)$ (3.1%)
6. NPAs & 90+ Days/Loans & ORE 1.9% 1.1% 1.2% 1.1% 1.0%
7. Classified Assets 191.8$ 171.8$ 170.9$ 173.2$ 173.4$ 0.2$ 0.1%
8. Criticized Assets (includes
Classified) 253.6$ 275.0$ 305.8$ 297.6$ 305.8$ 8.2$ 2.8%
Change
Linked Quarter
20
Non-Performing Asset Reconciliation
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
®
($ in Millions) Q4-'15 Q1-'16 Q2-'16 Q3-'16
1. Beginning Balance NPAs & 90+ Days Delinquent 53.2$ 51.5$ 54.3$ 51.5$
Non-Accrual
2. Add: New Non-Accruals 3.9 10.7 3.6 6.0
3. Less: To Accrual/Payoff/Renegotiated (2.4) (2.7) (4.5) (3.2)
4. Less: To OREO (0.8) (0.1) (0.2) (0.4)
5. Less: Charge-offs (1.9) (2.6) (2.0) (1.9)
6. Increase / (Decrease): Non-Accrual Loans (1.2) 5.3 (3.1) 0.5
Other Real Estate Owned (ORE)
7. Add: New ORE Properties 6.5 0.1 0.2 0.4
8. Less: ORE Sold (3.6) (1.5) (2.1) (3.1)
9. Less: ORE Losses (write-downs) (0.5) (0.3) (0.5) (0.3)
10. Increase / (Decrease): ORE 2.4 (1.7) (2.4) (3.0)
11. Increase / (Decrease): 90+ Days Delinquent (1.0) 0.1 (0.6) 1.2
12. Increase / (Decrease): Renegotiated Loans (1.9) (0.9) 3.3 (0.3)
13. Total NPAs & 90+ Days Delinquent Change (1.7) 2.8 (2.8) (1.6)
14. Ending Balance NPAs & 90+ Days Delinquent 51.5$ 54.3$ 51.5$ 49.9$
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2012 2013 Q1-'14 Q2-'14 Q3-'14 Q4-'14 Q1-'15 Q2-'15 Q3-'15 Q4-'15 Q1-'16 Q2-'16 Q3-'16
Cumulative Loan
Income
Cumulative Offset
Charge-Offs
Remaining Fair
Value Adjustment
21
ALLL and Fair Value Summary
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®
16.3%
43.8%
39.9%
($ in Millions) Q3-'15 Q4-'15 Q1-'16 Q2-'16 Q3-'16
1. Allowance for Loan Losses (ALLL) 62.9$ 62.5$ 62.1$ 62.2$ 63.5$
2. Fair Value Adjustment (FVA) 37.9 47.0 47.1 42.3 37.9
3. Total ALLL plus FVA 100.8$ 109.5$ 109.2$ 104.5$ 101.4$
4. Specific Reserves 2.0$ 1.8$ 1.4$ 2.1$ 1.6$
5. Purchased Loans plus FVA 674.5 965.4 917.6 863.4 771.6
6. ALLL/Non-Accrual Loans 192.8% 199.0% 169.1% 185.3% 186.1%
7. ALLL/Non-purchased Loans 1.70% 1.65% 1.62% 1.56% 1.50%
8. ALLL/Loans 1.45% 1.33% 1.32% 1.29% 1.28%
9. ALLL & FVA/Total Loan Balances plus FVA
1
2.31% 2.31% 2.29% 2.15% 2.02%
1 Management uses this Non-GAAP measure to demonstrate coverage and credit risk
22
Asset Quality & Portfolio Summary
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
®
Strong diverse loan growth of $183 million this quarter led by CRE,
C&I, Other Commercial and Home Equity.
Construction and CRE portfolios are 47% and 210% of risk-based
capital, respectively, and beneath regulatory guidelines with capacity
to grow.
Second quarter of continued reduction in total NPAs & 90 days.
Provision of $1.9 million exceeded charge-offs of $630,000 to provide
for loan growth.
ALLL to non-purchased loans of 1.5% and 2.02% with fair value
adjustments on total loans.
Michael C. Rechin
President and Chief Executive Officer
®
24
FMC Strategy and Tactics Overview
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
Looking Forward . . .
®
Continue to Win in our Markets – Geographic Community-Based Banking Model
Increase Focus on Treasury Management Services for Deposit and Fee Generation
Exploit Back-Office Infrastructure for Efficiency and Operating Leverage
Mergers and Acquisitions as a Core Competency
Build or Acquire Specialty Finance Businesses and Lending Verticals
Persistent Focus on Banking Center Optimization in Alignment with Digital
Channels Migration
Capital Optimization
25
Contact Information
First Merchants Corporation common stock is
traded on the NASDAQ Global Select Market
under the symbol FRME.
Additional information can be found at
www.FIRSTMERCHANTS.COM
Investor inquiries:
David L. Ortega
Investor Relations
Telephone: 765.378.8937
dortega@firstmerchants.com
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®
Appendix
®
27
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
Appendix – Non-GAAP Reconciliation ®
CAPITAL RATIOS (dollars in thousands):
3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16
Total Risk-Based Capital Ratio
Total Stockholders' Equity (GAAP) 684,553 726,827 739,658 749,955 766,984 850,509 867,263 887,550 900,865
Adjust for Accumulated Other Comprehensive (Income) Loss a (4,150) 1,630 1,915 6,490 3,614 1,362 (2,066) (7,035) (3,924)
Less: Preferred Stock
(125)
(125)
(125)
(125)
(125)
(125)
(125)
Add: Qualifying Capital Securities 55,000 55,000 56,827 56,827 51,827 55,776 55,236 55,296 55,355
Less: Tier 1 Capital Deductions (4,381) (2,371) (3,418) (2,516) (1,999) (1,828) (1,440)
Less: Disallowed Goodwill and Intangible Assets (200,992) (218,755) (205,818) (208,980) (208,749) (247,006) (250,367) (249,932) (249,541)
Less: Disallowed Servicing Assets
(166)
(167)
Less: Disallowed Deferred Tax Assets (1,786) (1,581) (1,144) (1,677) (2,998) (2,743) (2,161)
Total Tier 1 Capital (Regulatory) $ 534,245 $ 564,535 $ 586,290 $ 600,215 $ 608,989 $ 656,323 $ 664,944 $ 681,183 $ 699,029
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 53,803 55,972 58,688 60,865 62,012 62,453 62,086 62,186 63,456
Total Risk-Based Capital (Regulatory) $ 653,048 $ 685,507 $ 709,978 $ 726,080 $ 736,001 $ 783,776 $ 792,030 $ 808,369 $ 827,485
Net Risk-Weighted Assets (Regulatory) $ 4,292,495 $ 4,469,765 $ 4,695,073 $ 4,865,157 $ 4,956,737 $ 5,247,617 $ 5,355,827 $ 5,511,557 $ 5,836,806
Total Risk-Based Capital Ratio (Regulatory) 15.21% 15.34% 15.12% 14.92% 14.85% 14.94% 14.79% 14.67% 14.18%
Common Equity Tier 1 Capital Ratio
Total Tier 1 Capital (Regulatory) $ 534,245 $ 564,535 $ 586,290 $ 600,215 $ 608,989 $ 656,323 $ 664,944 $ 681,183 $ 699,029
Less: Qualified Capital Securities (55,000) (55,000) (56,827) (56,827) (51,827) (55,776) (55,236) (55,296) (55,355)
Add: Additional Tier 1 Capital Deductions 4,381 2,371 3,418 2,516 1,999 1,828 1,440
Less: Preferred Stock
(125)
(125)
Common Equity Tier 1 Capital (Regulatory) $ 479,120 $ 509,410 $ 533,844 $ 545,759 $ 560,580 $ 603,063 $ 611,707 $ 627,715 $ 645,114
Net Risk-Weighted Assets (Regulatory) $ 4,292,495 $ 4,469,765 $ 4,695,073 $ 4,865,157 $ 4,956,737 $ 5,247,617 $ 5,355,827 $ 5,511,557 $ 5,836,806
Common Equity Tier 1 Capital Ratio (Regulatory) 11.16% 11.40% 11.37% 11.22% 11.31% 11.49% 11.42% 11.39% 11.05%
a Includes net unrealized gains or losses on securities available for sale, net gains or losses on cash flow hedges, and amounts resulting from the application of the applicable accounting guidance
for defined benefit and other postretirement plans.
28
Appendix – Non-GAAP Reconciliation
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
®
TANGIBLE COMMON EQUITY RATIO (dollars in thousands):
3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16
Total Stockholders' Equity (GAAP) $ 684,553 $ 726,827 $ 739,658 $ 749,955 $ 766,984 $ 850,509 $ 867,263 $ 887,550 $ 900,865
Less: Preferred Stock (125) (125) (125) (125) (125) (125) (125) (125) (125)
Less: Intangible Assets (200,991) (218,755) (218,033) (220,196) (219,503) (259,764) (261,799) (260,822) (259,844)
Tangible Common Equity (non-GAAP) $ 483,437 $ 507,947 $ 521,500 $ 529,634 $ 547,356 $ 590,620 $ 605,339 $ 626,603 $ 640,896
Total Assets (GAAP) $ 5,591,383 $ 5,824,127 $ 5,877,521 $ 6,140,308 $ 6,189,797 $ 6,761,003 $ 6,798,539 $ 6,906,418 $ 7,022,352
Less: Intangibles Assets (200,991) (218,755) (218,033) (220,196) (219,503) (259,764) (261,799) (260,822) (259,844)
Tangible Assets (non-GAAP) $ 5,390,392 $ 5,605,372 $ 5,659,488 $ 5,920,112 $ 5,970,294 $ 6,501,239 $ 6,536,740 $ 6,645,596 $ 6,762,508
Tangible Common Equity Ratio (non-GAAP) 8.97% 9.06% 9.21% 8.95% 9.17% 9.08% 9.26% 9.43% 9.48%
TANGIBLE COMMON EQUITY PER SHARE
(dollars in thousands):
4Q10 4Q11 4Q12 4Q13 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16
Total Stockholders' Equity (GAAP) $ 454,408 $ 514,467 $ 552,236 $ 634,923 $ 726,827 $ 739,658 $ 749,955 $ 766,984 $ 850,509 $ 867,263 $ 887,550 $ 900,865
Less: Preferred Stock
(67,880)
(90,783)
(90,908)
(125)
(125)
(125)
(125)
(125)
(125)
(125)
(125)
(125)
Less: Intangible Assets
(154,019)
(150,471)
(149,529)
(202,767) (218,755) (218,033)
(220,196)
(219,503)
(259,764)
(261,799) (260,822) (259,844)
Tax Benefit
2,907
2,224
2,249
4,973
6,085
5,849
5,619
5,388
6,278
6,753 6,453 6,204
Tangible Common Equity, Net of Tax
(non-GAAP) $ 235,416 $ 275,437 $ 314,048 $ 437,004 $ 514,032 $ 527,349 $ 535,253 $ 552,744 $ 596,898 $ 612,092 $ 633,056 $ 647,100
Shares Outstanding
25,574,251 28,559,707
28,692,616
35,921,761 37,669,948 37,781,488
37,824,649 37,873,921 40,664,258 40,749,340 40,772,896 40,799,025
Tangible Common Equity per Share (non-
GAAP) $ 9.21 $ 9.64 $ 10.95 $ 12.17 $ 13.65 $ 13.96 $ 14.15 $ 14.59 $ 14.68 $ 15.02 $ 15.53 $ 15.86
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Appendix – Non-GAAP Reconciliation
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
®
EFFICIENCY RATIO (dollars in thousands):
2014 2015 1Q16 2Q16 3Q16
Non Interest Expense (GAAP) $ 164,008 $ 174,806 $ 46,475 $ 44,835 $ 44,115
Less: Core Deposit Intangible Amortization (2,445) (2,835) (978) (977) (978)
Less: OREO and Foreclosure Expenses (3,462) (3,956) (751) (915) (637)
Adjusted Non Interest Expense (non-GAAP) 158,101 168,015 44,746 42,943 42,500
Net Interest Income (GAAP) 187,037 196,404 54,455 55,962 57,682
Plus: Fully Taxable Equivalent Adjustment 7,921 10,975 3,136 3,256 3,402
Net Interest Income on a Fully Taxable Equivalent Basis (non-GAAP) 194,958 207,379 57,591 59,218 61,084
Non Interest Income (GAAP) 61,816 69,868 15,837 16,385 16,861
Less: Investment Securities Gains (Losses) (3,581) (2,670) (997) (706) (839)
Adjusted Non Interest Income (non-GAAP) 58,235 67,198 14,840 15,679 16,022
Adjusted Revenue (non-GAAP) 253,193 274,577 72,431 74,897 77,106
Efficiency Ratio (non-GAAP) 62.44% 61.19% 61.78% 57.33% 55.12%
ALLOWANCE AS A PERCENTAGE OF NON-PURCHASED LOANS (dollars in thousands):
3Q15 4Q15 1Q16 2Q16 3Q16
Loans Held for Sale (GAAP) $ 1,943 $ 9,894 $ 3,628 $ 18,854 $ 1,482
Loans (GAAP) 4,321,715 4,693,822 4,709,907 4,791,429 4,973,844
Total Loans 4,323,658 4,703,716 4,713,535 4,810,283 4,975,326
Less: Purchased Loans (636,581) (917,589) (870,507) (821,158) (733,715)
Non-Purchased Loans (non-GAAP) $ 3,687,077 $ 3,786,127 $ 3,843,028 $ 3,989,125 $ 4,241,611
Allowance for Loan Losses (GAAP) $ 62,861 $ 62,453 $ 62,086 $ 62,186 $ 63,456
Fair Value Adjustment (FVA) (GAAP) 37,922 47,057 47,104 42,291 37,898
Allowance plus FVA (non-GAAP) $ 100,783 $ 109,510 $ 109,190 $ 104,477 $ 101,354
Total Loans $ 4,323,658 $ 4,703,716 $ 4,713,535 $ 4,810,283 $ 4,975,326
Fair Value Adjustment (FVA) (GAAP) 37,922 47,057 47,104 42,291 37,898
Total Loans plus FVA (non-GAAP) $ 4,361,580 $ 4,750,773 $ 4,760,639 $ 4,852,574 $ 5,013,224
Allowance as a Percentage of Non-Purchased Loans (non-GAAP) 1.70% 1.65% 1.62% 1.56% 1.50%
Allowance plus FVA as a Percentage of Total Loans plus FVA (non-GAAP) 2.31% 2.31% 2.29% 2.15% 2.02%
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Appendix – Non-GAAP Reconciliation
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com
®
CONSTRUCTION AND INVESTMENT REAL ESTATE CONCENTRATIONS (dollars in thousands):
1Q16 2Q16 3Q16
Total Risk-Based Capital (Subsidiary Bank Only)
Total Stockholders' Equity (GAAP) $ 945,283 $ 967,099 $ 972,182
Adjust for Accumulated Other Comprehensive (Income) Loss 1 (4,566) (9,699) (6,332)
Less: Preferred Stock (125) (125) (125)
Less: Tier 1 Capital Deductions (1,805) (1,427) (889)
Less: Disallowed Goodwill and Intangible Assets (249,919) (249,484) (249,093)
Less: Disallowed Deferred Tax Assets (2,708) (2,141) (1,334)
Total Tier 1 Capital (Regulatory) 686,160 704,223 714,409
Allowance for Loan Losses includible in Tier 2 Capital 62,086 62,186 63,456
Total Risk-Based Capital (Regulatory) $ 748,246 $ 766,409 $ 777,865
Construction, Land and Land Development Loans $ 391,621 $ 352,980 $ 368,241
Concentration as a % of the Bank's Risk-Based Capital 52.3% 46.1% 47.3%
Construction, Land and Land Development Loans $ 391,621 $ 352,980 $ 368,241
Investment Real Estate Loans 1,107,288 1,178,660 1,264,304
Total Construction and Investment RE Loans $ 1,498,909 $ 1,531,640 $ 1,632,545
Concentration as a % of the Bank's Risk-Based Capital 200.4% 199.8% 209.9%
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.