Slide 1: Investor Update Second Quarter 2024
INVESTOR UPDATE Second Quarter 2024
Slide 2: Forward Looking Statement
Forward Looking Statement 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”
Slide 3: Executive Management Team
Executive Management Team Mark Hardwick FMB: Chief Executive Officer 26 Yrs Mark K. Hardwick currently serves as the Chief Executive Officer of First Merchants Corporation and First Merchants Bank. Mark joined First Merchants in November of 1997 as Corporate Controller and was promoted to Chief Fina
Slide 4: First Merchants Corporation (NASDAQ: FRME)
First Merchants Corporation (NASDAQ: FRME) Largest financial services holding company headquartered in Central Indiana Financial Highlights as of 6/30/2024 $18.3 Billion YTD ROAA: 0.96% Total Assets YTD Return on TCE 12.26% $12.7 Billion TCE/TA: 8.27% Total Loans Market Cap $1.9B $14.6 Billion Divid
Slide 5: Highlights
Highlights Second Quarter Net Income & EPS1 ROA (Annualized) ROE & ROTCE (Annualized) $39.5 Million 0.87% ROA 7.16% ROE $0.68 Per Share 1.52% PTPP ROA2 11.29% ROTCE2 ▪ Grew net interest income and net interest margin ▪ Efficiency ratio of 53.84% ▪ Annualized loan growth of 6.1% ▪ Completed our 4th a
Slide 6: Business Strategy
Business Strategy Commercial Banking Consumer Banking Full Spectrum of Debt Capital and Treasury Service Offerings Full Spectrum of Consumer Deposit and Lending Offerings Located in Prime Growth Markets Supported by: Talented, Customer Service Oriented Banking Center Small Business & SBA Asset Based
Slide 7: Business Highlights
Business Highlights Loan Growth Annualized1 Michigan 2Q24 Balance ($B) Growth Monroe MSA Rank: 1 Commercial 9.6 5.7% Detroit MSA Rank: 9 Deposits: $2.7B Consumer 3.0 10.5% Loans: $2.8B Total Loan Growth QTD 6.1% Total Loan Growth YTD 2.7% Northeast Indiana ▪ Strong Commercial loan growth fueled by C
Slide 8: Second Quarter Financial Results
Second Quarter Financial Results ($M except per share data) For the Three Months Ended, Variance % Variance Linked Linked QTR- 6/30/23 9/30/23 12/31/23 3/31/24 6/30/24 Quarter Annualized Balance Sheet & Asset Quality 2Q24 Highlights 1. Total Assets $18,032.3 $18,078.3 $18,309.5 $18,317.8 $18,303.4 (
Slide 9: Year-to-Date Financial Results
Year-to-Date Financial Results ($M except per share data) For the Six Months Ended June 30, Variance % Variance 2022 2023 2024 YOY YOY Balance Sheet & Asset Quality Year-to-Date Highlights 1. Total Assets $17,780.5 $18,032.3 $18,303.4 $271.1 1.5% 2. Total Loans 11,406.5 12,297.5 12,671.9 374.4 3.0%
Slide 10: Investment Portfolio Highlights
Investment Portfolio Highlights 2Q24 Investment Portfolio Composition Yield on Investments (%) / Total Investments ($B) Corporate U.S. Agencies Obligations 12% 1% Collateralized Mortgage Obligations 2.56% 2.55% 2.56% 2.58% 2.61% 5% $3.8B Municipal $3.9 $3.7 $3.8 $3.8 $3.8 Mortgage- Total Bonds Backe
Slide 11: Loan Portfolio Highlights
Loan Portfolio Highlights 2Q24 Loan Composition Highlights Construction Land & Land Development 6.5% Agricultural Land & Commercial Real Estate Production 1.9% ▪ Portfolio composition is ~75% Commercial oriented Non-Owner Occupied Public Finance/Other 18.3% Commercial 7.6% ▪ Total loan yield of 6.72
Slide 12: Allowance for Credit Losses - Loans
Allowance for Credit Losses - Loans 2Q24 Allowance for Credit Losses - Loans Highlights ▪ $24.5 million Q2 provision expense 1.80% ▪ The reserve for unfunded commitments totals $19.5 million 1.67% 1.64% 1.64% and is recorded in Other Liabilities 1.50% ▪ The remaining fair value accretion on acquired
Slide 13: Deposit Portfolio Highlights
Deposit Portfolio Highlights 2Q24 Deposit Composition Highlights Certificates & Time Deposits Brokered Certificates of ▪ Strong core deposit base < $100k Deposits 1 6% 1% • 89% core deposits2 Certificates & Time • 16% noninterest bearing Deposits • 38% yield 5 bps or less > $100k 10% ▪ Rate paid on
Slide 14: Net Interest Margin
Net Interest Margin 2Q23 3Q23 4Q23 1Q24 2Q24 1. Net Interest Income - FTE ($millions) $ 143.7 $ 139.3 $ 135.9 $ 132.9 $ 134.4 2. Fair Value Accretion $ 2.0 $ 2.0 $ 1.7 $ 1.4 $ 1.5 1 3. Adjusted Net Interest Income - FTE $ 141.7 $ 137.3 $ 134.2 $ 131.5 $ 132.9 4. Tax Equivalent Yield on Earning Asset
Slide 15: Noninterest Income Highlights
Noninterest Income Highlights 2Q24 Noninterest Income Detail ($M) Noninterest Income Trends ($M) Fee Income / Revenue Service Charges $8.2 18.9% 26% 16.6% 16.3% 16.7% 15.5% Card Payment Fees $4.7 $31.3M Gain on 15% Sale of Loans $5.1 $31.3M Derivative $26.3M $27.8M $26.4M $26.6M $4.5 16% Total Hedge
Slide 16: Noninterest Expense Highlights
Noninterest Expense Highlights 2Q24 Noninterest Expense Detail Noninterest Expense Trends ($M) Efficiency Ratio 63.26% Premises & Equipment Outside Data Processing 59.21% $13.3 $7.1 52.21% 53.91% 53.84% 14% 8% Salary & Benefits $52.2 Professional & Other Outside Services 55.56%1 57.03%1 57% $3.8 4%
Slide 17: Capital Ratios
Capital Ratios Tangible Common Equity Ratio Highlights ▪ Capital ratios reflect $25 million of sub debt redemption and $20 million of stock buyback during 8.40% 8.32% 8.27% 9.57% 2Q24; $65 million of sub debt redemption and $50 7.96% 7.65% 9.31% million of stock buyback YTD 9.31% ▪ TCE Ratio includi
Slide 18: Loan Portfolio
Loan Portfolio Loan Portfolio Trends ($M) 2Q24 Highlights Strong C&I loan demand. Higher rates moderating investment real estate activity. ▪ C&I and CRE OO up $263 million ▪ CRE NOO & Construction down $163.3 million Real Estate Concentration Levels: ▪ CRE Construction: 43.2% / 100% ▪ CRE Total: 164
Slide 19: Loan Portfolio Insights
Loan Portfolio Insights Commercial C&I C&I - Sponsor Finance ▪ $817.5 million to 84 companies, top borrowers in Construction, Rental and Leasing, Finance and Insurance, Manufacturing, and Other Admin/Prof. Services ▪ Senior Debt/Adj. EBITDA < 3.0X ~ 81.7% ▪ Total Debt/Adj. EBITDA < 4.0X ~ 76.5% ▪ FC
Slide 20: Loan Portfolio Insights (continued)
Loan Portfolio Insights (continued) Commercial Real Estate (Non-Owner Occupied) ($M) Multi- Warehouse Total CRE Family Industrial Retail / Storage Office Hotel Other (NOO) Balance: $ 693.5 $ 349.2 $ 333.9 $ 272.7 $ 243.3 $ 129.6 $ 301.3 $ 2,323.5 Commitment: $ 724.5 $ 366.3 $ 339.6 $ 277.3 $ 247.6 $
Slide 21: Asset Quality
Asset Quality Asset Quality Trends ($M) Highlights 2Q23 3Q23 4Q23 1Q24 2Q24 ▪ Largest Non-Accruals: • Hospitality 1. Non-Accrual Loans $ 69.2 $ 53.1 $ 53.6 $ 62.5 $ 61.9 • Nursing Care Facilities 2. Other Real Estate 7.7 6.5 4.8 4.9 4.8 • Transportation 3. 90PD Loans 0.4 0.1 0.2 2.8 1.7 4. NPAs + 90
Slide 22: Nonperforming Assets
Nonperforming Assets Nonperforming Assets Roll Forward ($M) 2Q24 Highlights 2Q23 3Q23 4Q23 1Q24 2Q24 Non-Accrual Migration: 1. Beginning Balance NPAs + 90PD $ 61.4 $ 77.3 $ 59.7 $ 58.6 $ 70.2 ▪ $1.8 million decrease in NPAs and 90+ days past due Non-Accrual 2. Add: New Non-Accruals 33.2 7.5 10.3 17.
Slide 23: Track Record of Shareholder Value
Track Record of Shareholder Value 10-Year Total Return (2013-2023) Earnings per Share CAGR 2013-2023: 10.2% $3.81 $3.81 $3.73 215% $3.22 $3.19 $2.74 $1.98 $2.12 $1.65 $1.72 $1.41 $1.48 191% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 YTD'24 Dividends per Share $1.34 FRME S&P BMI US Bank C
Slide 24: History of Organic and Whole Bank Acquisition Growth
History of Organic and Whole Bank Acquisition Growth Total Assets ($B) Growth Through Acquisition ✓ Experienced Acquirer ✓ Expanded in Current High-Growth Markets ✓ Extended into Additional High-Growth Markets $18.3 $18.3 ✓ Added to Franchise with Stable Deposit Gathering $17.9 Markets $15.5 $14.1 $
Slide 25: Vision for the Future
Vision for the Future Our Vision: To enhance the financial wellness of the diverse communities we serve. Our Mission: To be the most attentive, knowledgeable, and high-performing bank for our clients, teammates, and shareholders. Our Team: We are a collection of dynamic colleagues with diverse exper
Slide 26: Appendix
APPENDIX ss 00) First Merchants Corporation Helping you prosper
Slide 27: Non-GAAP: Adjusted Net Income and Diluted EPS
Non-GAAP ADJUSTED NET INCOME AND DILUTED EARNINGS PER COMMON SHARE 2Q23 3Q23 4Q23 1Q24 2Q24 6/30/22 YTD 6/30/23 YTD 6/30/24 YTD (Dollars in Thousands, Except Per Share Amounts) Net Income Available to Common Stockholders - GAAP $ 60,393 $ 55,898 $ 42,010 $ 47,472 $ 39,456 $ 87,108 $ 124,003 $ 86,928
Slide 28: Non-GAAP: Pre-Tax, Pre-Provision Earnings
Non-GAAP PRE-TAX, PRE-PROVISION ("PTPP") EARNINGS, AS ADJUSTED 2Q23 3Q23 4Q23 1Q24 2Q24 6/30/22 YTD 6/30/23 YTD 6/30/24 YTD (Dollars in Thousands, Except Per Share Amounts) Net Interest Income (GAAP) $ 137,835 $ 133,383 $ 130,064 $ 127,063 $ 128,571 $ 230,941 $ 281,954 $ 255,634 Other Income (GAAP)
Slide 29: Non-GAAP: Net Interest Margin, Adjusted
Non-GAAP NET INTEREST MARGIN ("NIM"), ADJUSTED 2Q23 3Q23 4Q23 1Q24 2Q24 (Dollars in Thousands, Except Per Share Amounts) Net Interest Income (GAAP) $ 137,835 $ 133,383 $ 130,063 $ 127,063 $ 128,571 Fully Taxable Equivalent ("FTE") Adjustment 5,858 5,911 5,853 5,795 5,859 Net Interest Income (FTE) (n
Slide 30: Non-GAAP: Efficiency Ratio
Non-GAAP EFFICIENCY RATIO (dollars in thousands): 2Q23 3Q23 4Q23 1Q24 2Q24 2Q22 YTD 2Q23 YTD 2Q24 YTD EFFICIENCY RATIO (dollars in thousands): Non Interest Expense (GAAP) $ 92,593 $ 93,854 $ 108,103 $ 96,935 $ 91,413 $ 169,638 $ 186,313 188,348 Less: Intangible Asset Amortization (2,182) (2,182) (2,
Slide 31: Non-GAAP: Capital Ratios
Non-GAAP CAPITAL RATIOS (dollars in thousands): 2Q22 2Q23 3Q23 4Q23 1Q24 2Q24 Total Risk-Based Capital Ratio (dollars in thousands) Total Stockholders' Equity (GAAP) 1,977,641 2,145,565 2,092,644 2,247,713 2,224,803 2,212,525 Adjust for Accumulated Other Comprehensive (Income) Loss 1 198,556 217,964
Slide 32: Non-GAAP: Tangible Common Equity Ratio
Non-GAAP TANGIBLE COMMON EQUITY RATIO (dollars in thousands): 2Q22 2Q23 3Q23 4Q23 1Q24 2Q24 Tangible Common Equity Ratio (dollars in thousands) Total Stockholders' Equity (GAAP) $ 1,977,641 $ 2,145,565 $ 2,092,644 $ 2,247,713 $ 2,224,803 $ 2,212,525 Less: Preferred Stock (25,125) (25,125) (25,125) (
Slide 33: Non-GAAP: Return on Tangible Common Equity
Non-GAAP RETURN ON TANGIBLE COMMON EQUITY (dollars in thousands): 2013 2014 2015 2016 2017 2018 2019 Return on Tangible Common Equity Total Average Stockholders' Equity (GAAP) $ 540,255 $ 675,295 $ 753,724 $ 884,664 $ 1,110,524 $ 1,343,861 $ 1,569,615 Less: Average Preferred Stock (47,537) (125) (12