Slide 1: 2nd Quarter 2011 Earnings Call
2 nd Quarter 2011 Earnings Call July 28, 2011
Slide 2: Michael C. Rechin, President and CEO
Michael C. Rechin President and Chief Executive Officer
Slide 3: Forward-Looking Statement
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
Slide 4: 2nd Quarter 2011 Highlights
2 nd Quarter 2011 Highlights § Second quarter earnings of $4.5M, or $.18 per common share § Core business profitability solidifying through: § Margin and net interest income expansion § Increasing commercial loan demand § Additional revenue-generating staff § Improvement in asset quality continues §
Slide 5: Mark K. Hardwick, EVP and CFO
Mark K. Hardwick Executive Vice President and Chief Financial Officer
Slide 6: Total Assets
2009 2010 Q1-’11 Q2-’11 1. Investments $ 563 $ 827 $ 886 $ 938 2. Loans 3,278 2,857 2,766 2,729 3. Allowance (92) (83) (81) (77) 4. CD&I & Goodwill 159 154 153 152 5. BOLI 95 97 102 103 6. Other 478 319 291 249 7. Total Assets $4,481 $4,171 $4,117 $4,094 ($ in Millions) TOTAL ASSETS
Slide 7: Loan Portfolio
(as of 6/30/2011 ) YTD Yield = 5.51% Total = $2.7B LOAN PORTFOLIO
Slide 8: Investment Portfolio
§ $938 Million Balance § Average duration - 4.5 years § Tax equivalent yield of 4.08% § Net unrealized gain of $14.6 million
Slide 9: Total Liabilities and Capital
2009 2010 Q1-’11 Q2-’11 1. Customer Non-Maturity Deposits $2,042 $2,127 $2,083 $2,114 2. Customer Time Deposits 1,220 996 943 890 3. Brokered Deposits 275 146 126 139 4. Borrowings 339 277 305 306 5. Other Liabilities 30 28 56 35 6. Hybrid Capital 111 142 142 142 7. Preferred Stock (CPP) 112 68 68 6
Slide 10: Deposits
First Merchants BANKING. INSURANCE. TRUST, | WWW.TIRSTMERCHANTS.COM DEPOSITS (as of 6/30/2011) Brokered Deposits, 4% Demand Deposits, 44% Certificates & Time Deposits of <$100,000, 19% Certificates & Time Deposits of , >$100,000, baa ert 9% ° THE STRENGTH OF BIG. THE SERVICE OF SMALL.
Slide 11: Capital Ratios
2009 2010 Q1-’11 Q2-’11 1. Total Risk-Based Capital Ratio 13.04% 15.74% 15.66% 16.05% 2. Tier 1 Risk-Based Capital Ratio 10.32% 12.82% 13.05% 13.42% 3. Leverage Ratio 8.20% 9.50% 9.80% 9.94% 4. Tier 1 Common Risk- Based Capital Ratio 5.40% 7.64% 7.75% 8.07% 5. TCE/TCA 4.54% 5.86% 6.16% 6.36% CAPITAL
Slide 12: Net Interest Income and Net Interest Margin
First Merchants BANKING. INSURANCE. TRUST. | WWW.Tl Q2-'09 Q3-"09 Q4-09 Q1-10 Q2-10 Q3-10 Q4-"10 Qi-'11 Q2-"14 Net Interest Income -FTE ($million $ 39.8 $ 405 $ 392 $ 378 $ 37.7 $ 372 $ 367 $ 369 $ 373 Tax Equivalent Yieldon EamingAs 5.52% 5.56% 5.48% 5.39% 5.38% 5.38% + = 5.13% + 55.11% + 5.04% Cos
Slide 13: Non-Interest Income
2009 2010 Q1-’11 Q2-’11 1. Service Charges on Deposit Accounts $15.1 $13.3 $ 2.8 $ 3.0 2. Trust Fees 7.4 7.7 2.0 1.9 3. Insurance Commission Income 6.4 6.2 1.9 1.0 4. Electronic Card Fees 4.9 6.1 1.5 1.7 5. Cash Surrender Value of Life Ins 1.6 2.1 0.6 0.6 6. Gains on Sales Mortgage Loans 6.8 6.8 1.9
Slide 14: Non-Interest Expense
NON-INTEREST EXPENSE 2009 2010 Q1-’11 Q2-’11 1. Salary & Benefits $76.3 $73.3 $17.2 $18.6 2. Premises & Equipment 17.9 17.2 4.5 4.1 3. Core Deposit Intangible 5.1 4.7 1.1 1.1 4. Professional Services 1.3 1.4 0.6 0.5 5. OREO/Credit-Related Expense 12.9 14.6 3.2 2.8 6. FDIC Expense 10.4 8.1 2.1 1.5 7.
Slide 15: Earnings
2009 2010 Q1-’11 Q2-’11 1. Net Interest Income-FTE $159.1 $149.4 $ 36.9 $ 37.3 2. Non Interest Income 1 46.5 46.6 11.8 10.3 3. Non Interest Expense 2 (134.7) (127.7) (30.7) (31.6) 4. Pre-Tax Pre-Provision Earnings $ 70.9 $ 68.3 $ 18.0 $ 16.0 5. Provision (122.2) (46.5) (5.6) (5.6) 6. Adjustments (12
Slide 16: John J. Martin, SVP and Chief Credit Officer
John J. Martin Senior Vice President and Chief Credit Officer
Slide 17: Portfolio Overview 2nd Quarter Highlights
PORTFOLIO OVERVIEW 2 nd Quarter Highlights § Continued reduction in Criticized and Classified Assets coupled with reduction in impaired loans § Stabilized Non-Accrual and Non-Performing Assets § Improving 90+ day delinquency. Increase in 30-89 day delinquent loans related to two matured relationship
Slide 18: Non-Accrual Trend
NON-ACCRUAL TREND Q2-’10 Q3-’10 Q4-’10 Q1-’11 NON-ACCRUAL LOANS BY CATEGORY Commercial & Industrial 3.55% 3.19% 1.75% 1.55% 3.69% $21.1 Construction & Land Development 8.91% 6.25% 16.10% 14.76% 14.66% 14.1 Commercial Mortgage 4.74% 4.22% 3.69% 3.66% 2.88% 33.8 Agricultural Production and Other Comme
Slide 19: Other Real Estate Owned
Commercial Real Estate Land & Construction 1-4 Family Total Book Balance $ 4.8 $ 7.4 $ 3.2 $15.4 % ORE 31.0% 48.1% 20.9% 100.0% OTHER REAL ESTATE OWNED ($ in millions)
Slide 20: Loan Delinquency Trends
LOAN DELINQUENCY TRENDS 90+ Day Delinquency
Slide 21: Loan Charge-Off Trend
LOAN CHARGE-OFF TREND Q2-’10 Q3-’10 Q4-’10 Q1-’11 Q2-’11 NET CHARGE-OFFS BY CATEGORY Commercial & Industrial 4.65% 3.22% 2.69% 0.30% ( 1.72%) Construction/Land Development 5.10% 4.14% 4.27% 9.96% 10.78% Commercial Mortgage 1.98% 2.44% 2.18% 1.15% 2.33% Agricultural Production and Other Commercial 1.
Slide 22: NPAs and 90+ Days Delinquent Rollforward
Q3-’10 Q4-’10 Q1-’11 Q2-’11 Beginning Balance NPAs & 90+ Days Delinquent ($ in millions) $ 146.5 $ 130.8 $ 120.0 $107.6 Non-Accrual Add: New Non-Accruals $ 15.5 $ 27.4 $ 11.7 $ 26.7 Less: To Accrual/Payoff/Restructured ( 18.6) ( 14.5) ( 3.2) ( 8.3) Less: To OREO ( 6.7) ( 7.0) ( 2.0) ( 1.6) Less: Cha
Slide 23: Improvement and Stabilization in Credit Metrics
Q2-’10 Q3-’10 Q4-’10 Q1-’11 Q2-’11 1. Classified Assets $341.6 $334.2 $313.0 $293.8 $282.2 2. Criticized Assets (includes Classified) 442.9 408.6 393.0 383.7 360.5 3. 90 day Delinquent Loans 4.5 5.3 1.3 .8 .2 4. Non-Accrual Loans 120.2 98.6 90.6 87.7 87.6 5. Impaired Loans 150.6 125.7 116.2 116.8 10
Slide 24: Net Charge-Offs, Provision and Allowance
NET CHARGE-OFFS, PROVISION AND ALLOWANCE ($ in millions)
Slide 25: Michael C. Rechin, President and CEO
Michael C. Rechin President and Chief Executive Officer
Slide 26: Overview of 2011 Strategy and Tactics
Overview of 2011 Strategy and Tactics “Strengthen and Grow” § Implement systems to standardize and accelerate small business opportunities. § Preserve margin while intensifying revenue activity using market coverage tactics and the addition of revenue-generating staff in key markets. § Realize inves
Slide 27: Contact Information
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