Slide 1: First Merchants Corporation
First Merchants Corporation miciiaan INDIANA Kentucky NASDAQ: FRME October 24, 2013 Mark K. Hardwick John J. President Chief Executive Officer Chief Financial Officer
Slide 2: Forward-Looking Statement
2 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 affe
Slide 3: Michael C. Rechin, President and Chief Executive Officer
Michael C. Rechin President and Chief Executive Officer THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ®
Slide 4: 2013 Performance Highlights
Earnings & Growth • $10 Million Net Income Available to Common Stockholders • 3.97% 3rd Quarter Net Interest Margin • $89.1 Million YOY Loan Growth, Approximately 3.1% • Credit-Related Costs Decline Reflecting Continued Loan Quality Improvement Progressing to Near-Term Completion of CFS Bancorp, Inc
Slide 5: Mark K. Hardwick, Executive Vice President and Chief Financial Officer
Mark K. Hardwick Executive Vice President and Chief Financial Officer THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ®
Slide 6: Total Assets
6 Total Assets 2011 2012 Q1-’13 Q2-’13 Q3-’13 1. Investments $ 946 $ 874 $ 870 $ 909 $ 914 2. Loans Held for Sale 18 22 27 15 5 3. Loans 2,713 2,902 2,880 2,920 2,926 4. Allowance (71) (69) (69) (68) (66) 5. CD&I & Goodwill 150 150 149 149 148 6. BOLI 124 125 126 127 127 7. Other 293 301 270 286 272
Slide 7: Loan and Yield Detail
7 Commercial & Industrial Loans 22.3% Commercial Real Estate Owner- Occupied 14.6% Commercial Real Estate Non-Owner Occupied 23.9%Construction, Land & Land Development 5.1% Agricultural Land 4.6% Agricultural Production 3.4% Other Non-Consumer 1.1% Residential Mortgage 15.6% Home Equity 7.1% Other C
Slide 8: Investment Portfolio
Mortgage- Backed Securities 33% Collateralized Mortgage Obligations 30% Corporate Obligations 4% Tax-Exempt Municipals 33% 8 THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® • $914 Million Balance • Average duration – 4.5 years • Tax equivalent yield of 3.81% • Net unrealized gain
Slide 9: Total Liabilities and Capital
9 2011 2012 Q1-’13 Q2-’13 Q3-’13 1. Customer Non-Maturity Deposits $2,196 $2,479 $2,482 $2,565 $2,548 2. Customer Time Deposits 816 739 706 655 613 3. Brokered Deposits 123 128 123 113 95 4. Borrowings 378 260 260 316 417 5. Other Liabilities 34 39 37 43 33 6. Hybrid Capital 111 107 107 107 107 7. P
Slide 10: Deposits and Cost of Funds Detail
10 Demand Deposits 49% Savings Deposits 29% Certificates & Time Deposits of >$100,000 6% Certificates & Time Deposits of <$100,000 13% Brokered Deposits 3% QTD Cost = .35% YTD Cost = .40% Total = $3.3B Deposits and Cost of Funds Detail (as of 09/30/2013) THE STRENGTH OF BIG. THE SERVICE OF SMALL. ww
Slide 11: Capital Ratios
11 2011 2012 Q1-’13 Q2-’13 Q3-’13 1. Total Risk-Based Capital Ratio 16.54% 16.34% 15.91% 15.69% 14.96% 2. Tier 1 Risk-Based Capital Ratio 13.92% 14.15% 14.03% 13.83% 13.10% 3. Leverage Ratio 10.17% 11.03% 11.00% 11.02% 10.54% 4. Tier 1 Common Risk- Based Capital Ratio 8.83% 9.62% 10.20% 10.13% 10.42
Slide 12: Net Interest Margin
12 Net Interest Margin THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® Q3 - '11 Q4 - '11 Q1 - '12 Q2 - '12 Q3 - '12 Q4 - '12 Q1 - '13 Q2 - '13 Q3 - '13 Net Interest Income - FTE ($millions) $ 37.3 $ 37.6 $ 37.6 $ 39.5 $ 41.3 $ 39.7 $ 40.8 $ 38.1 $ 38.6 Tax Equivalent Yield on Ear
Slide 13: Non-Interest Income
13 2011 2012 Q1-’13 Q2-’13 Q3-’13 1. Service Charges on Deposit Accounts $12.0 $11.6 $ 2.7 $ 2.9 $ 3.1 2. Trust Fees 7.7 7.9 2.1 2.3 2.0 3. Insurance Commission Income 5.7 6.2 2.2 1.7 1.6 4. Electronic Card Fees 6.5 7.3 1.8 1.8 1.8 5. Cash Surrender Value of Life Ins 2.6 3.4 0.7 0.6 0.6 6. Gains on
Slide 14: Non-Interest Expense
14 Non-Interest Expense 2011 2012 Q1-’13 Q2-’13 Q3-’13 1. Salary & Benefits $ 74.7 $ 79.4 $20.8 $20.5 $20.6 2. Premises & Equipment 16.9 17.4 4.4 4.0 4.3 3. Core Deposit Intangible 3.5 1.9 0.4 0.4 0.4 4. Professional Services 2.2 2.3 0.6 0.6 0.7 5. OREO/Credit-Related Expense 10.6 8.2 1.9 1.5 1.6 6.
Slide 15: Earnings
15 2011 2012 Q1-’13 Q2-’13 Q3-’13 1. Net Interest Income-FTE1 $149.1 $153.5 $ 40.0 $ 37.7 $ 38.2 2. Non Interest Income2 47.1 52.8 13.7 13.9 11.8 3. Non Interest Expense (135.9) (137.1) (34.7) (33.7) (34.2) 4. Pre-Tax Pre-Provision Earnings $ 60.3 $ 69.2 $ 19.0 $17.9 $15.8 5. Provision ( 22.6) ( 18.
Slide 16: Earnings Per Share
16 Earnings Per Share 2011 Q1 Q2 Q3 Q4 Total 1. Reported $ .17 $ .18 ($ .25) $ .24 $ .34 2. Adjusted $ .17 $ .18 $ .211 $ .24 $ .80 2012 Q1 Q2 Q3 Q4 Total 1. Reported $ .46 $ .28 $ .35 $ .32 $1.41 2. Adjusted2 $ .25 $ .26 $ .29 $ .29 $1.09 2013 Q1 Q2 Q3 Q4 Total 1. Reported $ .38 $ .34 $ .35 $ – $ 1
Slide 17: John J. Martin, Executive Vice President and Chief Credit Officer
John J. Martin Executive Vice President and Chief Credit Officer THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ®
Slide 18: Asset Quality Summary
18 Asset Quality Summary THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® ($ in Millions) 2011 2012 Q1-'13 Q2-'13 Q3-'13 % Change Linked Qtr. 1. Non-Accrual Loans 69.6$ 53.4$ 46.8$ 39.0$ 35.0$ (10.3%) 2. Other Real Estate 16.3$ 13.3$ 13.1$ 11.8$ 12.1$ 2.5% 3. Renegotiated Loans 14
Slide 19: Net Charge-Offs, Provision & Allowance
19 Net Charge-Offs, Provision & Allowance THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® Decline in Non-Accrual Loans continues. Non-accruals at 1.2% of Total Loans. Allowance to loans at 2.26% YTD Net Charge-offs of $8.77 Million and YTD Provision Expense of $5.63 Million $57.0
Slide 20: Non-Performing Asset Reconciliation
20 Non-Performing Asset Reconciliation THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® ($ in Millions) Q4-'12 Q1-'13 Q2-'13 Q3-'13 1. Beginning Balance NPA's & 90+ Days Delinquent $79.6 $81.4 $66.3 $56.2 Non-Accrual 2. Add: New Non-Accruals 6.8 6.9 4.2 7.7 3. Less: To Accrual/Pay
Slide 21: Loan Portfolio Trends
21 Loan Portfolio Trends THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® ($ in Millions) 2011 2012 Q1-'13 Q2-'13 Q3-'13 $ % 1. Commercial & Industrial 532.5$ 622.6$ 638.0$ 657.8$ 652.3$ (5.5)$ (0.8%) 2. Construction, land and land development 81.8 98.6 75.9 101.9 149.9 48.0 47.1%
Slide 22: Michael C. Rechin, President and Chief Executive Officer
Michael C. Rechin President and Chief Executive Officer THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ®
Slide 23: FMC Priority Overview
• Close and Integrate CFS Bancorp Acquisition • Completion of Hybrid Capital Re-Structure Plan • Reshape/Refine Post CFS Acquisition Balance Sheet for Earnings and Asset Quality • Attain Expense Targets Developed within CFS Planning • Achieve Efficiency Gains Throughout FMC 23 FMC Priority Overview
Slide 24: Contact Information
24 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