Slide 1: Investor Update Second Quarter 2022
INVESTOR UPDATE Second Quarter 2022
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 3 Mark Hardwick Chief Executive Officer 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 Financial Offi
Slide 4: Financial Highlights
First Merchants Corporation (NASDAQ: FRME) Financial Highlights as of 6/30/2022 $17.8 Billion $11.4 Billion $14.6 Billion $6.6 Billion Assets Under Advisement* Total Assets Total Loans Total Deposits TCE/TA: YTD Return on TCE YTD ROAA: Dividend Yield: Price / Tangible Book: Price / LTM EPS: 1.05% 7.
Slide 5: Highlights
Highlights 5 ▪ Reported EPS of $0.63 compared to $1.03 in Q2 2021 and $0.91 in Q1 2022. Excluding Paycheck Protection Program (“PPP”) income and expenses related to the Level One acquisition, current quarter EPS was $1.01 compared to Q2 2021 of $0.89 and Q1 2022 of $0.881,2 ▪ 20.1% annualized organi
Slide 6: Business Strategy
Business Strategy 6 Full Spectrum of Debt Capital and Treasury Service Offerings Located in Prime Growth Markets Small Business & SBA Middle Market C&I Investment Real Estate Public Finance Sponsor Finance Full Spectrum of Consumer Deposit and Lending Offerings Supported by: Talented Customer Servic
Slide 7: Loan and deposit growth trends
▪ C&I growth continues to be the driver of strong Commercial growth in the current quarter and year to date. IRE grew balances in the current quarter yet still down on a year-to-date basis ▪ Consumer loan growth increases showed strength in the current quarter with HELOC and Small Business as the ke
Slide 8: Second Quarter Financial Results
Second Quarter Financial Results 8 ▪ 58.45% Efficiency Ratio, 50.75% excluding acquisition costs1 ▪ Net interest income, excluding the impact of PPP loan income and fair value accretion, increased $25.1 million over prior quarter and $32.5 million over 2Q 2021 ▪ Pre-Tax, Pre-Provision (PTPP) Earning
Slide 9: Year to Date Financial Results
Year to Date Financial Results 9 ▪ 55.90% Efficiency Ratio, 51.62% excluding acquisition costs1 ▪ Net interest income, excluding the impact of PPP loan income and fair value accretion, increased $42.6 million or 23.5% over prior year ▪ Pre-Tax, Pre-Provision (PTPP) Earnings totaled $128.2, an increa
Slide 10: Investment Portfolio Highlights
▪ Net unrealized AFS Loss of $246.1 million Investment Portfolio Highlights 10 2Q22 Investment Portfolio Composition Yield on Investments (%) / Total Investments ($B) $4.6B Total Investment Portfolio Gains / LossesHighlights Realized Gains ▪ 2Q 2021 $1.8 million ▪ 3Q 2021 $1.7 million ▪ 4Q 2021 $0.4
Slide 11: Loan Portfolio Highlights
Loan Portfolio Highlights 11 2Q22 Loan Composition Yield on Loans (%) / Total Loans ($B) $11.4B Total 2Q22 Portfolio by Yield Type Highlights Total loan rate mix as of 2Q22 • $7.4 billion variable rate • $4.0 billion fixed rate ▪ Portfolio composition remains ~80% Commercial oriented • Composition m
Slide 12: Allowance for Credit Losses - Loans
Allowance for Credit Losses - Loans 12 2Q22 Allowance for Credit Losses - Loans Change in ACL – Loans Highlights ▪ Q2 provision expense of $16.8 million reflects: • $14 million for CECL Day 1 non-PCD loans • $2.8 million for Level One’s unfunded commitments ▪ The reserve for unfunded commitments now
Slide 13: Deposit Portfolio Highlights
Deposit Portfolio Highlights 13 2Q22 Deposit Composition Highlights $14.6B Total 1Defined as total deposits less time deposits > $100k Cost of Total Deposits (%) / Total Deposits ($B) ▪ Strong core deposit base • 97% core deposits1 • 24% non-interest bearing • ~54% yield 5 bps or less ▪ Acquired Lev
Slide 14: Net Interest Margin
Net Interest Margin 14 $105.1$97.1 $97.3 $105.1 $107.0$97.8 $107.0 $97.3 $105.1 $110.0$109.2 $107.0 $105.1 $109.2 $110.0 $106.9 1Adjusted for Fair Value Accretion and PPP Loan Income 2Q21 3Q21 4Q21 1Q22 2Q22 1. Net Interest Income - FTE ($millions) 109.2$ 110.0$ 106.9$ 108.0$ 134.8$ 2. Fair Value Ac
Slide 15: Non-Interest Income Highlights
Non-Interest Income Highlights 15 2Q22 Non-Interest Income Detail ($M) $28.3M Total Non-Interest Income Trends ($M) Fee Income / Revenue Highlights ▪ 91% in Customer-related fees totaling $25.8 million for 2Q22, an increase of $2.8 million over 1Q22 driven by higher service charges on deposits, gain
Slide 16: Non-Interest Expense Highlights
Non-Interest Expense Highlights 16 2Q22 Non-Interest Expense Detail $97.3M Total Non-Interest Expense Trends ($M) Efficiency Ratio Highlights ▪ 2Q22 included acquisition costs of $12.5 million of which $10 million were one-time charges ▪ Core expense increase of $1.5 million in salaries and incentiv
Slide 17: Capital Ratios
Capital Ratios 17 Tangible Common Equity Ratio Common Equity Tier 1 Ratio Total Risk-Based Capital Ratio 9.31% 9.31% 9.57% 9.31% 9.65%9.57%9.31% 9.57% 9.65% 9.04%8.78% 9.04% 8.94% 9.01% 8.31% 7.04% 2Q21 3Q21 4Q21 1Q22 2Q22 TCE Ratio Target TCE (9.00%) 11.94% 11.75% 11.68% 11.63% 10.27% 2Q21 3Q21 4Q2
Slide 18: Loan Portfolio
18.6% 9.7% 9.4% 9.5% 7.6% 6.6% 6.3% 4.9% 4.1% 3.9% Manufacturing Wholesale Trade Investment CRE Admin Services Retail Trade Finance/Insur. Prof. Services Construction Specialty Trade Transp./Warehouse Loan Portfolio 18 Highlights Geography / C&I Top Industries Loan Portfolio Trends ($M) Top Industri
Slide 19: Asset Quality
Asset Quality 19 Asset Quality Trends ($M) Highlights Acquired Level One Portfolio ▪ Favorable Asset Quality Position • NPA +90PD at 0.61% of loans vs. Prior Quarter vs. Prior Year ▪ Strong Asset Quality • Continued reduction in non-accrual loans on the legacy portfolio • NPAs +90PD of .47% of loans
Slide 20: Non-Performing Assets
Non-Performing Assets 20 Non-Performing Assets Roll Forward ($M) Highlights ▪ Stable Asset Quality • Reduction of $7.9 million in NPAs +90PD offset by the addition of $10 million in new Level One NPAs +90PD Non-accrual loans declined $6.1 million with $8.9 million resolved on line 3 • Top three no
Slide 21: Track Record of Shareholder Value
398.9% 192.2% FRME SNL U.S. Bank Track Record of Shareholder Value 21 10-Year Total Return (2011-2021) Earnings per Share Tangible Book Value per Share Dividends per Share CAGR 2011-2021: 27.3% CAGR 2011-2021: 10.1% CAGR 2011-2021: 39.7% Return on Tangible Common Equity $0.34 $1.41 $1.41 $1.65 $1.72
Slide 22: History of Organic and Whole Bank Acquisition Growth
$1.6 $1.8 $2.7 $3.1 $3.2 $3.2 $3.6 $3.8 $4.8 $4.5 $4.2 $4.2 $4.3 $5.4 $5.8 $6.8 $7.2 $9.4 $9.9 $12.5 $14.1 $15.5 $17.8 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2Q22 History of Organic and Whole Bank Acquisition Growth 22 Total Asse
Slide 23: Vision for the Future
Vision for the Future 23 Our Vision: To enhance the financial wellness of the diverse communities we serve. To be the most responsive, knowledgeable, and high-performing bank for our clients, teammates, and shareholders. We are a collection of dynamic colleagues with diverse experiences and perspect
Slide 24: Appendix
APPENDIX aad 00) First Merchants Corporation Helping you prosper
Slide 25: Non-GAAP: Capital Ratios
Non-GAAP 25 1 Includes net unrealized gains or losses on securities available for sale, net gains or losses on cash flow hedges, and amounts resulting from the application of the applicable accounting guidance for defined benefit and other postretirement plans. CAPITAL RATIOS (dollars in thousands):
Slide 26: Non-GAAP: Tangible Common Equity Ratio
Non-GAAP 26 TANGIBLE COMMON EQUITY RATIO (dollars in thousands): 2Q20 2Q21 3Q21 4Q21 1Q22 2Q22 Tangible Common Equity Ratio (dollars in thousands) Total Stockholders' Equity (GAAP) 1,809,095$ 1,871,800$ 1,868,090$ 1,912,571$ 1,807,633$ 1,977,641$ Less: Preferred Stock (125) (125) (125) (125) (125) (
Slide 27: Non-GAAP: Adjusted EPS Excluding PPP and Acquisition Expenses
Non-GAAP 27 ADJUSTED EPS EXCLUDING PAYCHECK PROTECTION PROGRAM ("PPP") AND ACQUISITION-RELATED EXPENSES 2Q21 3Q21 4Q21 1Q22 2Q22 6/30/20 YTD 6/30/21 YTD 6/30/22 YTD (Dollars in Thousands, Except Per Share Amounts) Net Income Available to Common Stockholders - GAAP 55,559$ 52,770$ 47,733$ 48,586$ 38,
Slide 28: Non-GAAP: Efficiency Ratio
Non-GAAP 28 EFFICIENCY RATIO (dollars in thousands): 2Q21 3Q21 4Q21 1Q22 2Q22 2Q20 YTD 2Q21 YTD 2Q22 YTD EFFICIENCY RATIO (dollars in thousands): Non Interest Expense (GAAP) 69,295$ 71,384$ 72,436$ 72,325$ 97,313$ 126,160$ 135,393$ 169,638$ Less: Intangible Asset Amortization (1,464) (1,463) (1,463)
Slide 29: Non-GAAP: Return on Tangible Common Equity
Non-GAAP 29 RETURN ON TANGIBLE COMMON EQUITY (dollars in thousands): 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 YTD Return on Tangible Common Equity Total Average Stockholders' Equity (GAAP) 478,440$ 535,506$ 540,255$ 675,295$ 753,724$ 884,664$ 1,110,524$ 1,343,861$ 1,569,615$ 1,805,963$ Less