Slide 1: 4th Quarter 2014 Earnings Call
First Merchants Corporation 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 ® THE STRENGTH OF BIG. THE SERVICE OF SMALL. 4th QUARTER 2014 EARNINGS CALL Janu
Slide 2: Forward-Looking Statement
Forward-Looking Statement THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com www.firstmerchants.com ® 2 THE STRENGTH OF BIG. THE SERVICE OF SMALL. This filing and the exhibits hereto contain forward-looking statements made pursuant to the safe-harbor provisions of the Private Securiti
Slide 3: Additional Information
Additional Information THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com www.firstmerchants.com ® 3 THE STRENGTH OF BIG. THE SERVICE OF SMALL. This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any proxy
Slide 4: First Merchants 2014 Performance
www.firstmerchants.com First Merchants 2014 Performance 4 Full-Year Highlights • $60.2 Million of Record Net Income Available to Common Stockholders • Earnings Per Share of $1.65, a 17% increase over FY 2013 • Return on Average Assets of 1.08% • Return on Average Tangible Common Equity of 12.94% • S
Slide 5: Community Bank of Noblesville Overview
Community Bank of Noblesville Overview THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® 5 Headquartered in Noblesville, Indiana Founded in 1991 Acquisition Completed: November 7, 2014 Loans Acquired Net of F
Slide 6: Post-Closing Observations
Post-Closing Observations THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® 6 Indianapolis Market Expansion 9 Full-Service Banking Centers with $228.4M in deposits Adds 7 locations in Hamilton County, the fastest
Slide 7: Executive Vice President and Chief Financial Officer
Executive Vice President and Chief Financial Officer www.firstmerchants.com ® 7 THE STRENGTH OF BIG. THE SERVICE OF SMALL.
Slide 8: Total Assets
www.firstmerchants.com Total Assets 2012 2013 2014 1. Investments $ 874 $1,096 $1,181 2. Loans Held for Sale 22 5 7 3. Loans 2,902 3,633 3,925 4. Allowance (69) (68) (64) 5. CD&I & Goodwill 150 203 219 6. BOLI 125 165 169 7. Other 301 403 387 8. Total Assets $4,305 $5,437 $5,824 ($ in Millions) 8 ®
Slide 9: Loan and Yield Detail
www.firstmerchants.com Commercial & Industrial 22.8% Commercial Real Estate Owner-Occupied 13.6% Commercial Real Estate Non-Owner Occupied 24.8%Construction, Land & Land Development 5.3% Agricultural Land 4.1% Agricultural Production 2.7% Other Commercial 0.9% Residential Mortgage 16.6% Home Equity
Slide 10: Investment Portfolio
www.firstmerchants.com • $1.2 billion balance • Average duration of 4.2 years • Tax equivalent yield of 3.89% • Net unrealized gain of $42.4 million Investment Portfolio (as of 12/31/2014) 10 Mortgage- Backed Securities 32% Collateralized Mortgage Obligations 30% Corporate Obligations 3% Tax-Exempt
Slide 11: Total Liabilities and Capital
www.firstmerchants.com 2012 2013 2014 1. Customer Non-Maturity Deposits $2,479 $3,276 $3,523 2. Customer Time Deposits 739 868 784 3. Brokered Deposits 128 87 334 4. Borrowings 260 401 290 5. Other Liabilities 39 48 44 6. Hybrid Capital 107 122 122 7. Preferred Stock (SBLF) 91 8. Common Equity 462 6
Slide 12: Deposits and Cost of Funds Detail
www.firstmerchants.com Deposits and Cost of Funds Detail (as of 12/31/2014) 12 ® Demand Deposits 46% Savings Deposits 30% Certificates & Time Deposits of >$100,000 6% Certificates & Time Deposits of <$100,000 11% Brokered Deposits 7% QTD Cost = .38% YTD Cost = .34% Total Deposits = $4.6 Billion THE
Slide 13: Capital Ratios
www.firstmerchants.com Capital Ratios 9.62% 10.20% 10.13% 10.42% 10.37% 10.86% 11.00% 11.16% 11.40% 7.55% 7.88% 7.74% 7.97% 8.34% 8.65% 8.74% 9.05% 9.16% 16.34% 15.91% 15.69% 14.96% 14.54% 15.04% 15.11% 15.21% 15.34% 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.
Slide 14: Net Interest Margin
www.firstmerchants.com Net Interest Margin 14 ® THE STRENGTH OF BIG. THE SERVICE OF SMALL. $158.1 $160.3 $195.0 4.12% 3.99% 3.91% 4.00% 3.94% 3.73% 3.00% 3.20% 3.40% 3.60% 3.80% 4.00% 4.20% $100 $120 $140 $160 $180 $200 2012 2013 2014 Net Interest Income - FTE ($millions) Net Interest Margin Net Int
Slide 15: Non-Interest Income
www.firstmerchants.com 2012 2013 2014 1. Service Charges on Deposit Accounts $11.6 $12.4 $15.7 2. Trust Fees 7.9 8.6 9.0 3. Insurance Commission Income 6.2 7.1 7.4 4. Electronic Card Fees 7.3 7.5 9.7 5. Cash Surrender Value of Life Ins 3.4 2.6 3.7 6. Gains on Sales Mortgage Loans 10.6 7.5 4.9 7. Sec
Slide 16: Non-Interest Expense
www.firstmerchants.com Non-Interest Expense 2012 2013 2014 1. Salary & Benefits $ 79.4 $ 85.4 $ 96.5 2. Premises & Equipment 17.4 18.0 23.2 3. Core Deposit Intangible 1.9 1.6 2.4 4. Professional & Other Outside Services 6.2 8.3 8.1 5. OREO/Foreclosure Expense 8.2 6.7 8.0 6. FDIC Expense 3.5 2.9 3.7
Slide 17: Earnings
2012 2013 2014 1. Net Interest Income $152.3 $154.3 $187.0 2. Provision for Loan Losses (18.5) (6.6) (2.6) 3. Net Interest Income after Provision 133.8 147.7 184.4 4. Non-Interest Income 64.3 54.8 65.7 5. Non-Interest Expense (137.1) (143.2) (168.5) 6. Income before Income Taxes 61.0 59.3 81.6 7. In
Slide 18: Earnings Per Share
2012 Q1 Q2 Q3 Q4 Total 1. Reported $ .46 $ .28 $ .35 $ .32 $ 1.41 2. FV Accretion EPS Impact $ .02 $ .06 $ .03 $ .11 3. Gain on FDIC Transaction $ .21 $ .21 2013 Q1 Q2 Q3 Q4 Total 1. Reported $ .38 $ .34 $ .35 $ .34 $ 1.41 2. FV Accretion EPS Impact $ .02 $ .01 $ .01 $ .01 $ .05 2014 Q1 Q2 Q3 Q4 Tot
Slide 19: Executive Vice President and Chief Credit Officer
Executive Vice President and Chief Credit Officer www.firstmerchants.com ® 19 THE STRENGTH OF BIG. THE SERVICE OF SMALL.
Slide 20: Loan Portfolio Trends
® www.firstmerchants.com 20 Loan Portfolio Trends ($ in Millions) THE STRENGTH OF BIG. THE SERVICE OF SMALL. FMB 2013 Q3-'14 2014 1 CBN 2014 $ % 1 % $ % 1 % 186.1 1. Commercial & Industrial 761.7$ 901.0$ 888.3$ 8.4$ 896.7$ (4.3)$ (1.4%) (0.5%) 135.0$ 16.6% 17.7% 2. Construction, Land and Land Develo
Slide 21: Asset Quality Summary
www.firstmerchants.com Asset Quality Summary ® 21 ($ in Millions) THE STRENGTH OF BIG. THE SERVICE OF SMALL. FMB 2012 2013 2014 1 CBN 2014 % % 1 1. Non-Accrual Loans 53.4$ 56.4$ 43.1$ 5.7$ 48.8$ (13.5%) (23.6%) 2. Other Real Estate 13.3$ 22.2$ 12.6$ 6.7$ 19.3$ (13.1%) (43.2%) 3. Renegotiated Loans
Slide 22: Non-Performing Assets Rollforward
Q1-Q3 2013 2014 Q4-'14 1 CBN 2014 1. Beginning Balance NPA's & 90+ Days Delinquent 81.4$ 83.0$ 65.6$ 83.0$ Non-Accrual 2. Add: New Non-Accruals 45.7 35.7 5.4 5.7$ 46.8 3. Less: To Accrual/Payoff/Renegotiated (17.0) (26.7) (5.7) (32.4) 4. Less: To OREO (7.6) (3.9) (0.7) (4.6) 5. Less: Charge-offs (18
Slide 23: ALLL and Fair Value Summary
® www.firstmerchants.com 23 ALLL and Fair Value Summary (as of 12/31/2014) ($ in Millions) THE STRENGTH OF BIG. THE SERVICE OF SMALL. 24.3% 14.0% 61.7% Q4-'13 Q1-'14 Q2-'14 Q3-'14 Q4 -'14 1. Allowance for Loan Losses (ALLL) 67.9$ 69.6$ 68.4$ 65.6$ 64.0$ 2. Fair Value Adjustment (FVA) 49.4 47.2 43.9
Slide 24: President and Chief Executive Officer
President and Chief Executive Officer www.firstmerchants.com ® 24 THE STRENGTH OF BIG. THE SERVICE OF SMALL.
Slide 25: Strategy and Tactics Overview
www.firstmerchants.com Strategy and Tactics Overview ® 25 Focus on the Customer Experience • Continue to advance our loan process for speed and accuracy • Evaluate and enhance our technology platforms • Invest in mobile and online banking Intensify Revenue-Generating Activities • Achieve organic gro
Slide 26: Cooper State Bank Summary
Cooper State Bank Summary THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® 26 Definitive Agreement Signed January 5, 2015 Headquartered in Columbus, Ohio Founded in 2004 Balance Sheet as of September 30, 201
Slide 27: Financial Overview
Financial Overview THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® 27 Transaction Value $14.5 Million Consideration 100% Cash Required Approvals Regulatory and C Financial Corporation Shareholders Key Assumptions C
Slide 28: Transaction Rationale
Transaction Rationale THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® 28 Columbus Ohio Market Expansion Adds 6 Full-Service Banking Centers to our $500M Commercial Banking Presence • Banking Centers situated in
Slide 29: 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 FIRST MERCHANTS and the
Slide 30: ®
www.firstmerchants.com ® 30 THE STRENGTH OF BIG. THE SERVICE OF SMALL.
Slide 31: Appendix – Non-GAAP Reconciliation: Tangible Capital
® www.firstmerchants.com 31 Appendix – Non-GAAP Reconciliation THE STRENGTH OF BIG. THE SERVICE OF SMALL. TANGIBLE CAPITAL (dollars in thousands) 2014 Return on Average Tangible Equity Average Stockholders' Equity (GAAP) $ 675,295 Less: Average Preferred Stock (125) Less: Average Intangible Assets,
Slide 32: Appendix – Non-GAAP Reconciliation: Capital Ratios
® www.firstmerchants.com 32 Appendix – Non-GAAP Reconciliation THE STRENGTH OF BIG. THE SERVICE OF SMALL. CAPITAL RATIOS (dollars in thousands) 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 Total Risk-Based Capital Ratio Total Stockholders' Equity (GAAP) $ 552,236 538,558 539,293 513,469 634,923 652,
Slide 33: Appendix – Non-GAAP Reconciliation: Tangible Equity and Ratios
® www.firstmerchants.com 33 Appendix – Non-GAAP Reconciliation THE STRENGTH OF BIG. THE SERVICE OF SMALL. TANGIBLE EQUITY AND TANGIBLE RATIOS (dollars in thousands) Tangible Common Equity/Tangible Assets (non-GAAP) 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 Total Stockholders' Equity (GAAP) $ 552,