First Merchants Corporation · NASDAQ:FRME
First Merchants — Q3 2024 Earnings Presentation
34 slides from First Merchants's earnings presentation, Oct 24, 2024
Slide 1: Investor Update Third Quarter 2024
INVESTOR UPDATE Third Quarter 2024
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 Mark Hardwick FMB: Chief Executive Officer 26 Yrs 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 Fina
Slide 4: First Merchants Corporation (NASDAQ: FRME)
First Merchants Corporation (NASDAQ: FRME) Largest financial services holding company headquartered in Central Indiana Financial Highlights as of 9/30/2024 Illinois Branch Sale $18.3 Billion YTD ROAA: 0.99% Pending sale of five Illinois Total Assets branches expected to close YTD Return on TCE 12.64
Slide 5: Highlights
Highlights Third Quarter Net Income & EPS1 ROA (Annualized) ROE & ROTCE (Annualized) $48.7 Million 1.07% ROA 7.16% ROE $0.84 Per Share 1.34% PTPP ROA2 13.39% ROTCE2 ▪ EPS of $0.951,2 when adjusted for the loss from repositioning of ▪ Grew net income and margin available for sale securities portfolio
Slide 6: Business Strategy
Business Strategy Commercial Banking Consumer Banking Full Spectrum of Debt Capital and Treasury Service Offerings Full Spectrum of Consumer Deposit and Lending Offerings Located in Prime Growth Markets Supported by: Talented, Customer Service Oriented Banking Center Small Business & SBA Asset Based
Slide 7: Business Highlights - Loans
Business Highlights - Loans Michigan Monroe MSA Rank: 1 Loan Growth Summary Detroit MSA Rank: 9 Deposits: $2.7B 3Q24 Balance ($B) Growth Loans: $2.8B Commercial 9.6 -0.2% Consumer 3.0 1.5% Northeast Indiana Total Loan Growth QTD 0.5% Muncie MSA Rank: 1 Ft Wayne MSA Rank: 4 Total Loan Growth YTD 1.9%
Slide 8: Business Highlights - Deposits
Business Highlights - Deposits Michigan Monroe MSA Rank: 1 Detroit MSA Rank: 9 Deposit Growth Summary 1,2 Deposits: $2.7B Loans: $2.8B 3Q24 Balance ($B) Growth Commercial 7.2 4.7% Northeast Indiana Consumer 6.2 -11.0% Muncie MSA Rank: 1 Ft Wayne MSA Rank: 4 Total Deposit Growth QTD 2.3% Deposits: $4
Slide 9: Third Quarter Financial Results
Third Quarter Financial Results ($M except per share data) For the Three Months Ended, Variance % Variance Linked Linked QTR- 9/30/23 12/31/23 3/31/24 6/30/24 9/30/24 Quarter Annualized Balance Sheet & Asset Quality 3Q24 Highlights 1. Total Assets $18,078.3 $18,309.5 $18,317.8 $18,303.4 $18,347.6 $4
Slide 10: Year-to-Date Financial Results
Year-to-Date Financial Results ($M except per share data) For the Nine Months Ended September 30, Variance % Variance 2022 2023 2024 YOY YOY Year-to-Date Highlights Balance Sheet & Asset Quality 1. Total Assets $17,719.0 $17,996.6 $18,347.6 $350.9 1.9% 2. Total Loans 11,675.4 12,302.4 12,687.5 385.1
Slide 11: Investment Portfolio Highlights
Investment Portfolio Highlights 3Q24 Investment Portfolio Composition Yield on Investments (%) / Total Investments ($B) Corporate U.S. Agencies Obligations 12% 1% Collateralized Mortgage Obligations 2.61% 2.63% 2.55% 2.56% 2.58% 5% $3.7B Municipal $3.7 $3.8 $3.8 $3.8 $3.7 Mortgage- Total Bonds 56% B
Slide 12: Loan Portfolio Highlights
Loan Portfolio Highlights 3Q24 Loan Composition Highlights Construction Land & Land Development 6.4% Commercial Real Estate Agricultural Land & ▪ Portfolio composition is ~75% Commercial oriented Production 1.9% Non-Owner Occupied 17.8% Public Finance/Other Commercial 7.7% ▪ Total loan yield of 6.86
Slide 13: Allowance for Credit Losses - Loans
Allowance for Credit Losses - Loans 3Q24 Allowance for Credit Losses - Loans Highlights ▪ $5.0 million Q3 provision expense ▪ The reserve for unfunded commitments totals $19.5 million 1.67% 1.64% 1.64% 1.50% 1.48% and is recorded in Other Liabilities ▪ The remaining fair value accretion on acquired
Slide 14: Deposit Portfolio Highlights
Deposit Portfolio Highlights 3Q24 Deposit Composition Highlights Certificates & Time Brokered Certificates of ▪ Strong core deposit base Deposits Deposits 1 < $100k 2% • 89% core deposits2 Certificates & Time 6% • 16% noninterest bearing Deposits > $100k • 37% yield 5 bps or less 9% ▪ Rate paid on i
Slide 15: Net Interest Margin
Net Interest Margin 3Q23 4Q23 1Q24 2Q24 3Q24 1. Net Interest Income - FTE ($millions) $ 139.3 $ 135.9 $ 132.9 $ 134.4 $ 137.0 2. Fair Value Accretion $ 2.0 $ 1.7 $ 1.4 $ 1.5 $ 1.4 3. Adjusted Net Interest Income - FTE1 $ 137.3 $ 134.2 $ 131.5 $ 132.9 $ 135.6 4. Tax Equivalent Yield on Earning Assets
Slide 16: Noninterest Income Highlights
Noninterest Income Highlights 3Q24 Noninterest Income Detail ($M) Noninterest Income Trends Fee Income / Revenue Card 18.9% Payment Fees 16.6% 16.3% 16.7% $5.1 Gain (Loss) on 15.4% 12% Sale of Securities Service Charges ($9.1) $8.4 -21% 19% Customer-Related Fees ($M) $24.9M Derivative Gain on Total
Slide 17: Noninterest Expense Highlights
Noninterest Expense Highlights 3Q24 Noninterest Expense Detail Noninterest Expense Trends ($M) Efficiency Ratio 63.26% Premises & Equipment Outside Data Processing 59.21% $13.9 $7.2 53.91% 53.84% 53.76% 15% 8% Professional & Other Outside Services 55.56%1 57.03%1 $3.0 3% $94.6M Intangible Asset Amor
Slide 18: Capital Ratios
Capital Ratios Tangible Common Equity Ratio Highlights ▪ Capital ratios reflect $65 million of sub debt 8.76% 8.40% 8.32% 8.27% redemption and $50 million of stock buyback YTD 7.65% 9.57% 9.31% ▪ TCE increase due to strong earnings and securities 9.31% valuation recapture in AOCI 9.65% 9.04% 9.31% 9
Slide 19: Loan Portfolio
Loan Portfolio Loan Portfolio Trends ($M) 3Q24 Highlights Strong C&I loan demand. Higher rates moderating investment real estate activity ▪ C&I and CRE OO up $73.4 million ▪ CRE NOO & Construction down $78.3 million Real Estate Concentration Levels: ▪ CRE Construction: 42.7% / 100% ▪ CRE Total: 160.
Slide 20: Loan Portfolio Insights
Loan Portfolio Insights Commercial C&I C&I - Sponsor Finance ▪ $840.6 million to 89 companies, top borrowers in Construction, Rental and Leasing, Finance and Insurance, Manufacturing, and Other Admin/Prof. Services ▪ Senior Debt/Adj. EBITDA < 3.0X ~ 81.3% ▪ Total Debt/Adj. EBITDA < 4.0X ~ 80.3% ▪ FC
Slide 21: Loan Portfolio Insights (continued)
Loan Portfolio Insights (continued) Commercial Real Estate (Non-Owner Occupied) ($M) Warehouse Nursing Total CRE Multi-Family Industrial Retail Office / Storage Homes Other (NOO) Balance: $ 642.0 $ 346.7 $ 334.7 $ 260.4 $ 241.6 $ 123.3 $ 305.1 $ 2,254 Commitment: $ 672.6 $ 360.9 $ 338.3 $ 263.7 $ 24
Slide 22: Asset Quality
Asset Quality Asset Quality Trends ($M) Highlights 3Q23 4Q23 1Q24 2Q24 3Q24 Non-Accruals: ▪ Largest: Hospitality, Nursing Care Facilities, 1. Non-Accrual Loans $ 53.1 $ 53.6 $ 62.5 $ 61.9 $ 59.1 Manufacturing 2. Other Real Estate 6.5 4.8 4.9 4.8 5.2 3. 90PD Loans 0.1 0.2 2.8 1.7 14.1 ▪ Non-accrual l
Slide 23: Nonperforming Assets
Nonperforming Assets Nonperforming Assets Roll Forward ($M) 3Q24 Highlights Non-Accrual Migration: ▪ New non-accruals down from 1st and 2nd quarter to $13.2 million ▪ $5.6 million of $7.6 million gross charge-off a result of additional loss related to prior quarter charge-off of trucking company rel
Slide 24: Track Record of Shareholder Value
Track Record of Shareholder Value 10-Year Total Return (2013-2023) Earnings per Share CAGR 2013-2023: 10.2% $3.81 $3.81 $3.73 215% $3.22 $3.19 $2.74 $2.31 $1.98 $2.12 $1.65 $1.72 $1.41 191% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 YTD'24 Dividends per Share FRME S&P BMI US Bank CAGR 20
Slide 25: History of Organic and Whole Bank Acquisition Growth
History of Organic and Whole Bank Acquisition Growth Total Assets ($B) Growth Through Acquisition ✓ Experienced Acquirer ✓ Expanded in Current High-Growth Markets ✓ Extended into Additional High-Growth Markets $18.3 $18.3 $17.9 ✓ Added to Franchise with Stable Deposit Gathering Markets $15.5 $14.1 $
Slide 26: Vision for the Future
Vision for the Future Our Vision: To enhance the financial wellness of the diverse communities we serve. Our Mission: To be the most attentive, knowledgeable, and high-performing bank for our clients, teammates, and shareholders. Our Team: We are a collection of dynamic colleagues with diverse exper
Slide 27: Appendix
APPENDIX ss 00) First Merchants Corporation Helping you prosper
Slide 28: Non-GAAP: Adjusted Net Income and Diluted EPS
Non-GAAP ADJUSTED NET INCOME AND DILUTED EARNINGS PER COMMON SHARE 3Q23 4Q23 1Q24 2Q24 3Q24 9/30/22 YTD 9/30/23 YTD 9/30/24 YTD (Dollars in Thousands, Except Per Share Amounts) Net Income Available to Common Stockholders - GAAP $ 55,898 $ 42,010 $ 47,472 $ 39,456 $ 48,719 $ 150,391 $ 179,901 $ 135,6
Slide 29: Non-GAAP: Pre-Tax, Pre-Provision Earnings
Non-GAAP PRE-TAX, PRE-PROVISION ("PTPP") EARNINGS, AS ADJUSTED 3Q23 4Q23 1Q24 2Q24 3Q24 9/30/22 YTD 9/30/23 YTD 9/30/24 YTD (Dollars in Thousands, Except Per Share Amounts) Net Interest Income (GAAP) $ 133,383 $ 130,064 $ 127,063 $ 128,571 $ 131,110 $ 371,247 $ 415,337 $ 386,744 Other Income (GAAP)
Slide 30: Non-GAAP: Net Interest Margin, Adjusted
Non-GAAP NET INTEREST MARGIN ("NIM"), ADJUSTED 3Q23 4Q23 1Q24 2Q24 3Q24 9/30/22 YTD 9/30/23 YTD 9/30/24 YTD (Dollars in Thousands, Except Per Share Amounts) Net Interest Income (GAAP) $ 133,383 $ 130,063 $ 127,063 $ 128,571 $ 131,110 $ 371,247 $ 415,337 $ 386,744 Fully Taxable Equivalent ("FTE") Adj
Slide 31: Non-GAAP: Efficiency Ratio
Non-GAAP EFFICIENCY RATIO (dollars in thousands): 3Q23 4Q23 1Q24 2Q24 3Q24 3Q22 YTD 3Q23 YTD 3Q24 YTD EFFICIENCY RATIO (dollars in thousands): Non Interest Expense (GAAP) $ 93,854 $ 108,103 $ 96,935 $ 91,413 $ 94,629 $ 266,016 $ 280,167 282,977 Less: Intangible Asset Amortization (2,182) (2,182) (1,
Slide 32: Non-GAAP: Capital Ratios
Non-GAAP CAPITAL RATIOS (dollars in thousands): 3Q22 3Q23 4Q23 1Q24 2Q24 3Q24 Total Risk-Based Capital Ratio (dollars in thousands) Total Stockholders' Equity (GAAP) 1,906,666 2,092,644 2,247,713 2,224,803 2,212,525 2,302,373 1 Adjust for Accumulated Other Comprehensive (Income) Loss 314,089 307,270
Slide 33: Non-GAAP: Tangible Common Equity Ratio
Non-GAAP 3Q22 3Q23 4Q23 1Q24 2Q24 3Q24 Tangible Common Equity Ratio (dollars in thousands) Total Stockholders' Equity (GAAP) $ 1,906,666 $ 2,092,644 $ 2,247,713 $ 2,224,803 $ 2,212,525 $ 2,302,373 Less: Preferred Stock (25,125) (25,125) (25,125) (25,125) (25,125) (25,125) Less: Intangible Assets (75
Slide 34: Non-GAAP: Return on Tangible Common Equity
Non-GAAP 2013 2014 2015 2016 2017 2018 2019 Return on Tangible Common Equity Total Average Stockholders' Equity (GAAP) $ 540,255 $ 675,295 $ 753,724 $ 884,664 $ 1,110,524 $ 1,343,861 $ 1,569,615 Less: Average Preferred Stock (47,537) (125) (125) (125) (125) (125) (125) Less: Average Intangible Asset