Slide 1: First Merchants Corporation 3rd Quarter 2016
FIRST MERCHANTS CORPORATION THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com NASDAQ: FRME Michael C. Rechin Mark K. Hardwick Michael J. Stewart John J. Martin President Executive Vice President Executive Vice President Executive Vice President Chief Executive Officer Chief Financial
Slide 2: Forward-Looking Statement
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 an
Slide 3: Why Invest in First Merchants?
THE STRENGTH OF BIG. THE SERVICE OF SMALL. Why Invest in First Merchants? www.firstmerchants.com 3 ®
Slide 4: Company Profile (as of 9/30/2016)
Financial Highlights Assets $7,022,352 Loans, Net $4,910,388 Deposits $5,444,240 Tangible Common Equity $640,897 TCE/TA 9.48% 2016 Net Income – YTD $58,758 2016 ROAA – YTD 1.15% 2016 ROATCE - YTD 12.97% NPAs/Loans + OREO 0.97% THE STRENGTH OF BIG. THE SERVICE OF SMALL. Company Profile (as of 9/30/20
Slide 5: Our Franchise
THE STRENGTH OF BIG. THE SERVICE OF SMALL. Our Franchise www.firstmerchants.com 5 First Merchants Corporation operates more than 100 locations in 27 Indiana counties, 2 Ohio counties, and 2 Illinois counties Key Market Profiles Loans Deposits $2,176M Indianapolis $1,542M 940M Muncie 1,559M 643M Muns
Slide 6: Market Position by County
County Region/Type Market Position Market % $ Deposits Delaware County, IN Muncie (Established) 1 46.17% $ 893,981 Jasper County, IN Lafayette (Established) 1 31.26% 198,089 White County, IN Lafayette (Established) 1 33.24% 159,014 Shelby County, IN Indianapolis (Growth) 1 19.18% 103,239 Jay County,
Slide 7: First Merchants Strategy
THE STRENGTH OF BIG. THE SERVICE OF SMALL. First Merchants Strategy www.firstmerchants.com 7 Commercial Bank • Lending Engine Supported by Consumer Retail Bank • Deposit Engine Growth • Organic • Growth by Acquisition ®
Slide 8: First Merchants Strategy: Commercial Bank
THE STRENGTH OF BIG. THE SERVICE OF SMALL. First Merchants Strategy www.firstmerchants.com 8 Commercial Bank • Located in Prime Growth Commercial Banking Markets • Indianapolis, Indiana • Columbus, Ohio • Lafayette, Indiana • Northwest Indiana • Hire the Best Talent Supported with the Finest: • Sa
Slide 9: First Merchants Strategy: Consumer Retail Bank
THE STRENGTH OF BIG. THE SERVICE OF SMALL. First Merchants Strategy www.firstmerchants.com 9 Consumer Retail Bank • Diversely Located in Stable Rural and Growth Metro Markets • Supported by: • Talented Customer Service Oriented Banking Center and Call Center Professionals • State-of-the-Art Deposi
Slide 10: First Merchants Strategy
THE STRENGTH OF BIG. THE SERVICE OF SMALL. First Merchants Strategy www.firstmerchants.com 10 “Service-driven alternative to super-regional bank competitors. Deliver superior service with presence close to the customer for . . . ” “We specialize in our communities” Retail Banking Mortgage Bankin
Slide 11: Lines of Business and Market Regions
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 11 WEALTH ADVISORY MORTGAGE COMMERCIAL BANKING RETAIL BANKING Supported by LOB Strategies Indianapolis Higher Growth Brown, Hamilton, Hancock, Hendricks, Johnson, Madison, Marion, Morgan, Shelby Counties Columbus, OH Higher Growth Fra
Slide 12: Organic Growth Opportunities Exist in All Directions
THE STRENGTH OF BIG. THE SERVICE OF SMALL. Organic Growth Opportunities Exists in All Directions www.firstmerchants.com 12 Lafayette MSA Entered: 2002 Total Population: 217,817 Deposit Market Share: 18.18% Indianapolis MSA Entered: 1998 Total Population: 2,017,134 Deposit Market Share: 3.41% Columbu
Slide 13: Ranked Best in the Midwest for Business
13 Ranked Best in the Midwest for Business* AAA Credit Rating** 1st in the Nation for Small Business Growth 1st Nationally for Cost of Doing Business 1st Nationally for Highway Accessibility 1st in the Midwest/8th Nationally for Low Taxes 2nd Nationally for Availability of Skilled Labor
Slide 14: Delaware County, IN
14 Delaware County, IN* Rank Branches Deposits Mkt. Share 1 First Merchants Corporation 12 893,981 46.17% 2 Mutual First Financial 9 476,957 24.63% 3 J.P. Morgan Chase 4 220,534 11.39% 4 Old National Bancorp 7 206,538 10.67% 5 Star Financial Group 3 136,933 7.07% 6 Woodforest Financial Group 1 1,391
Slide 15: Hamilton County, IN
7.27% 8.00% 8.97% 3.77% 2.11% 7.34% U.S. Indiana Hamilton Co. HHI Pop. Projected HHI & Pop. Change 2017-2022 15 Hamilton County, IN** Rank Branches Deposits Mkt. Share 1 First Internet Bancorp 1 1,397,573 17.05% 2 JPMorgan Chase & Co. 15 1,339,119 16.34% 3 Merchants Bancorp 2 1,119,000 13.65% 4 PNC
Slide 16: Tippecanoe County, IN
7.27% 8.00% 3.77% 3.77% 2.11% 5.19% U.S. Indiana Tippecanoe Co. HHI Pop. 16 Tippecanoe County, IN** Rank Branches Deposits Mkt. Share 1 JPMorgan Chase & Co. 6 $ 701,835 28.72% 2 First Merchants Corporation 9 510,925 20.91% 3 Regions Financial Corp 7 296,336 12.13% 4 Old National Bancorp 5 257,117 10
Slide 17: Lake County, IN
17 Lake County, IN* Rank Branches Deposits Mkt. Share 1 JPMorgan Chase & Co. 24 $ 1,812,142 21.17% 2 First Bancshares, Inc. 29 1,790,048 20.91% 3 First Midwest Bancorp 21 1,015,796 11.87% 4 Northwest Indiana Bancorp 15 731,032 8.54% 5 First Merchants Corporation 11 670,030 7.83% 6 First Financial Ba
Slide 18: Franklin County, OH
18 Second-most populous county in Ohio Within 600 miles of 60% of All U.S. and Canadian Population Ranked 2nd in CNBC’s 2010 study of state transportation systems for its infrastructure, vitality, quality roads, and ability to cost-effectively ship goods by land, air, and water** Home to Ohi
Slide 19: Growth Through Acquisition
THE STRENGTH OF BIG. THE SERVICE OF SMALL. Growth Through Acquisition www.firstmerchants.com 19 Experienced Acquirer Expand in Current High-Growth Markets Extend into Additional High-Growth Markets Add to Franchise with Stable Deposit Gathering Markets ®
Slide 20: First Merchants Acquisition Experience 1893-2016
THE STRENGTH OF BIG. THE SERVICE OF SMALL. 20 FIRST MERCHANTS ACQUISITION EXPERIENCE 1893-2016 ®
Slide 21: First Merchants Acquisition Process
21 Continuous Relationship Building Complete and Thorough Due Diligence Process Demonstrated Pricing Discipline: • Average Price to TBV of 129% • Average EPS Accretion within One Year • Average TBV Earn-back of 2.8 Years Detailed Project Managed Integration Process Single Charter Operating
Slide 22: Operational Delivery Highlights
THE STRENGTH OF BIG. THE SERVICE OF SMALL. Operational Delivery Highlights www.firstmerchants.com 22 Daleville Operations Facility Strategic differentiator in support of growth and scalability Operational services execution “hub” focusing on value creation Functional focus: • Operations • Cred
Slide 23: Operational Delivery Highlights: Customer, Digital Channel & Transaction Data
Retail Households: 145K Online Banking/Digital Channel • Consumer: 62K Users • 810K logins monthly • 12K bill pay users • 74K payments monthly Cash Management Annual Volume • Automated Clearing House (ACH) • # Originated: 2M Items ($5B) • # Received: 12M Items ($17B) • Mobile: 26K Users • 22 a
Slide 24: 3rd Quarter 2016 Highlights
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 24 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 $7 Billion Level an
Slide 25: Total Assets
25 Total Assets ($ in Millions) THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® 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
Slide 26: Loan and Yield Detail
® 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
Slide 27: Investment Portfolio
® 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 Ta
Slide 28: Total Liabilities and Capital
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. Co
Slide 29: Deposit Detail
® 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 29 Demand Deposits 50% Savings Deposits 28% Certificates & Time Deposits of >$100,000 6% Certificates & Time Deposits of <$100,000 9% Brokered De
Slide 30: Capital Ratios
11.16% 11.40% 11.37% 11.22% 11.31% 11.49% 11.42% 11.39% 11.05% 8.97% 9.06% 9.21% 8.95% 9.17% 9.08% 9.26% 9.43% 9.48% 15.21% 15.34% 15.12% 14.92% 14.85% 14.94% 14.79% 14.67% 14.18% 6.00% 7.00% 8.00% 9.00% 10.00% 11.00% 12.00% 13.00% 14.00% 15.00% 16.00% 17.00% 18.00% 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q1
Slide 31: Net Interest Margin
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 31 Net Interest Margin ® ($ 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 $
Slide 32: Non-Interest Income
32 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
Slide 33: Non-Interest Expense
33 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 Ex
Slide 34: Earnings
34 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) (
Slide 35: Per Share Results
35 Per Share Results THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® 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 S
Slide 36: Dividends and Tangible Book Value
$9.21 $9.64 $10.95 $12.17 $13.65 $14.68 $15.86 THE STRENGTH OF BIG. THE SERVICE OF SMALL. Dividends and Tangible Book Value 0.00 0.02 0.04 0.06 0.08 0.10 0.12 0.14 .08 www.firstmerchants.com ® .01 .03 .05 .11 .14 2.09% Forward Dividend Yield 27.5% Dividend Payout Ratio = Quarterly Dividends Tangible
Slide 37: Asset Quality Summary
37 Asset Quality Summary THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® ($ 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
Slide 38: ALLL and Fair Value Summary
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 38 ALLL and Fair Value Summary THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstm
Slide 39: Total Return Performance
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 39 -50 0 50 100 150 200 250 First Merchants Corporation SNL U.S. Bank Russell 2000 Total Return Performance ® 12/31/10 12/31/11 12/31/12 12/31/13 12/31/14 12/31/15 % 9/30/16
Slide 40: FMC Strategy and Tactics Overview Looking Forward
40 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-Of
Slide 41: Why Invest in First Merchants?
41 Why Invest in First Merchants? Attractive and Growing Earnings Stream One of SNL’s Top 25 Best-Performing Regional Banks in 2015 2nd Largest Indiana Bank with an Energized and Experienced Management Team Attractive Long-Term Deposit Market Shares Commercial Presence that Creates a Clien
Slide 42: Research Coverage
42 D. A. Davidson FIG Partners Keefe, Bruyette & Woods, Inc. Piper Jaffray Sandler O’Neill + Partners, L.P. Stephens, Inc. Research Coverage THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ®
Slide 43: Contact Information
43 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
Slide 44: Appendix
44 Appendix ®
Slide 45: Appendix – Non-GAAP Reconciliation: Capital Ratios
45 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) 684,553 726,827 739,658 749,955 766,984 850,5
Slide 46: Appendix – Non-GAAP Reconciliation: Tangible Common Equity Ratio
46 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 $
Slide 47: Appendix – Non-GAAP Reconciliation: Efficiency Ratio
47 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
Slide 48: Appendix – Non-GAAP Reconciliation: Real Estate Concentrations
48 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 $ 967,09