First Merchants Corporation · NASDAQ:FRME

First Merchants — KBW 2013 Community Bank Investor Conference

43 slides from First Merchants's conference presentation, Jul 30, 2013

  1. Slide 1: First Merchants Corporation – KBW 2013 Community Bank Investor Conference

    TT] First Merchants Corporation KBW 2013 Community Bank Investor Conference - July 30, 2013 ‘MICHIGAN kentucky NASDAQ: FRME

  2. Slide 2: 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

  3. Slide 3: Company Snapshot

    THE STRENGTH OF BIG. THE SERVICE OF SMALL. Company Snapshot • First Merchants Bank, formed in 1893, is celebrating its 120th anniversary • First Merchants Corporation, organized in 1982, is the largest financial services holding company headquartered in Central Indiana • First Merchants Corporation

  4. Slide 4: Our Franchise

    Our Franchise Total Loans • Indianapolis - $1,129M • Muncie - $797M • Lafayette - $533M • Columbus - $475M (as of June 30, 2013) THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 4 ® ®

  5. Slide 5: County deposit market position

    County Region/Type Market Position Market % $$ Deposits Delaware County, IN Muncie (Established) 1 40.51% $ 660,543 Tippecanoe County, IN Lafayette (Established) 1 22.78% 463,220 White County, IN Lafayette (Established) 1 33.07% 170,838 Jasper County, IN Lafayette (Established) 1 28.41% 169,549 Jay

  6. Slide 6: Vision

    Vision THE STRENGTH OF BIG. THE SERVICE OF SMALL. A community bank focused on building deep, lifelong client relationships and providing maximum shareholder value. We provide an experience where customers can bank with their neighbors, realizing that our business begins and ends with people. www.fir

  7. Slide 7: FMC Strategy

    FMC Strategy THE STRENGTH OF BIG. THE SERVICE OF SMALL. “Service-driven alternative to super-regional bank competitors. Deliver superior service with presence close to the customer for . . .” • Retail Banking • Commercial Banking • Middle Market • Agriculture • Healthcare Services • Real Estate • Bu

  8. Slide 8: Strategy Drivers

    Strategy Drivers THE STRENGTH OF BIG. THE SERVICE OF SMALL. The confluence of these key elements form the nucleus for our strategy Solid product fundamentals in retail and commercial banking Community bank employees delivering high-touch service Operate in markets in which we have a knowledge edge w

  9. Slide 9: Strategy Drivers: Established vs Higher Growth Markets

    Strategy Drivers THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 9 ® Established Markets Higher Growth Markets Client Demographics • Maturing • Middle-income and lower • Basic product orientation • Middle-income and higher • Greater propensity towards investment, wealth management,

  10. Slide 10: Market Delivery

    Market Delivery THE STRENGTH OF BIG. THE SERVICE OF SMALL. First Merchants Corporation Vision, Mission, Culture Statement, Core Values Business Model Supported by LOB Strategies Retail Banking Comercial Bamnking Insurance Mortgage Trust Indianapolis Higher Growth Brown, Hamilton, Hendricks, Johnson,

  11. Slide 11: Indiana

    Indiana THE STRENGTH OF BIG. THE SERVICE OF SMALL. • Population 2012: 6,539,197* • 15th Largest State in the U. S.** • State Reports Record Breaking Economic Development Results (Nov. 2012) • Projected Population Change 2012-2017: 2.29%** • Indiana was ranked 1st in the Midwest in the Tax Foundation

  12. Slide 12: Indianapolis

    Indianapolis THE STRENGTH OF BIG. THE SERVICE OF SMALL. • Population 2012 1,782,614* • Projected Population Change 2012-2017: 4.70%* • 13th Largest City in the U. S. • 29th Largest Metropolitan Area in the U. S.** *SNL Financial **geography.about.com www.firstmerchants.com 12 ® ®

  13. Slide 13: Columbus

    Columbus THE STRENGTH OF BIG. THE SERVICE OF SMALL. *SNL Financial **geography.about.com • Population 2012: 1,862,673* • Projected Population Change 2012 - 2017: 4.28%* • 15th Largest City in the U. S. • 31st Largest Metropolitan Area www.firstmerchants.com 13 ® ®

  14. Slide 14: Indianapolis/Indiana/Columbus Growth Plan

    Indianapolis/Indiana/Columbus Growth Plan THE STRENGTH OF BIG. THE SERVICE OF SMALL. Organic Growth Opportunities with Improved Segment Penetration Closely Align with the Indiana Vision 2025 Plan to Capture the Opportunities Created by the Plan: • developing and retaining outstanding talent • creati

  15. Slide 15: 2013 Performance Highlights

    Earnings & Growth • $0.34 Second Quarter EPS, $0.72 YTD EPS • 3.88% 2nd Quarter Net Interest Margin • $122.4 Million YOY Loan Growth, Approximately 4.4% • Redeemed $56.7 Million of SBLF Preferred Shares in 2013 • Continued Asset Quality Improvement Announced Definitive Agreement to Acquire CFS Banco

  16. Slide 16: Total Assets

    16 Total Assets 2011 2012 Q1-’13 Q2-’13 1. Investments $ 946 $ 874 $ 870 $ 909 2. Loans Held for Sale 18 22 27 15 3. Loans 2,713 2,902 2,880 2,920 4. Allowance (71) (69) (69) (68) 5. CD&I & Goodwill 150 150 149 149 6. BOLI 124 125 126 127 7. Other 293 301 270 286 8. Total Assets $4,173 $4,305 $4,253

  17. Slide 17: Loan and Yield Detail

    17 Commercial & Industrial Loans 22.4% Commercial Real Estate Owner- Occupied 14.9% Commercial Real Estate Non-Owner Occupied 24.1%Land & Lot 3.5% Agricultural Land 4.4% Agricultural Production 3.6% Other Non- Consumer 1.3% Residential Mortgage 16.2% Home Equity 6.9% Other Consumer 2.7% Loan and Yie

  18. Slide 18: Loan Portfolio Trends

    18 Loan Portfolio Trends THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® ($ in Millions) 2011 2012 Q1-'13 Q2-'13 $ % 1. Commercial & Industrial 532.5$ 622.6$ 638.0$ 657.8$ 19.8 3.1% 2. Construction, land and land development 81.8 98.6 75.9 101.9 26.0 34.3% 3. CRE Non-Owner Occupi

  19. Slide 19: Investment Portfolio

    19 Investment Portfolio (as of 6/30/2013) • $909 Million Balance • Average duration – 4.3 years • Tax equivalent yield of 3.67% • Net unrealized gain of $11.6 million THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® Mortgage- Backed Securities 34% Collateralized Mortgage Obligatio

  20. Slide 20: Total Liabilities and Capital

    20 2011 2012 Q1-’13 Q2-’13 1. Customer Non-Maturity Deposits $2,196 $2,479 $2,482 $2,565 2. Customer Time Deposits 816 739 706 655 3. Brokered Deposits 123 128 123 113 4. Borrowings 378 260 260 316 5. Other Liabilities 34 39 37 43 6. Hybrid Capital 111 107 107 107 7. Preferred Stock (SBLF) 91 91 68

  21. Slide 21: Deposits and Cost of Funds Detail

    21 Demand Deposits, 50% Savings Deposits, 28% Certificates & Time Deposits of >$100,000, 6% Certificates & Time Deposits of <$100,000, 13% Brokered Deposits, 3% QTD Cost = .40% YTD Cost = .43% Total = $3.3B Deposits and Cost of Funds Detail (as of 06/30/2013) THE STRENGTH OF BIG. THE SERVICE OF SMAL

  22. Slide 22: Capital Ratios

    22 2011 2012 Q1-’13 Q2-’13 1. Total Risk-Based Capital Ratio 16.54% 16.34% 15.91% 15.69% 2. Tier 1 Risk-Based Capital Ratio 13.92% 14.15% 14.03% 13.83% 3. Leverage Ratio 10.17% 11.03% 11.00% 11.02% 4. Tier 1 Common Risk- Based Capital Ratio 8.83% 9.62% 10.20% 10.13% 5. TCE/TCA 6.84% 7.55% 7.88% 7.74

  23. Slide 23: Net Interest Margin

    23 Net Interest Margin THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® Q2 - '11 Q3 - '11 Q4 - '11 Q1 - '12 Q2 - '12 Q3 - '12 Q4 - '12 Q1 - '13 Q2 - '13 . Net Interest Income - FTE ($millions) $ 37.3 $ 37.3 $ 37.6 $ 37.6 $ 39.5 $ 41.3 $ 39.7 $ 40.8 $ 38.1 Tax Equivalent Yield on E

  24. Slide 24: Non-Interest Income

    24 2011 2012 Q1-’13 Q2-’13 1. Service Charges on Deposit Accounts $12.0 $11.6 $ 2.7 $ 2.9 2. Trust Fees 7.7 7.9 2.1 2.3 3. Insurance Commission Income 5.7 6.2 2.2 1.7 4. Electronic Card Fees 6.5 7.3 1.8 1.8 5. Cash Surrender Value of Life Ins 2.6 3.4 0.7 0.6 6. Gains on Sales Mortgage Loans 7.4 10.6

  25. Slide 25: Non-Interest Expense

    25 Non-Interest Expense 2011 2012 Q1-’13 Q2-’13 1. Salary & Benefits $ 74.7 $ 79.4 $20.8 $20.5 2. Premises & Equipment 16.9 17.4 4.4 4.0 3. Core Deposit Intangible 3.5 1.9 0.4 0.4 4. Professional Services 2.2 2.3 0.6 0.6 5. OREO/Credit-Related Expense 10.6 8.2 1.9 1.5 6. FDIC Expense 5.5 3.5 0.7 0.7

  26. Slide 26: Earnings

    26 2011 2012 Q1-’13 Q2-’13 1. Net Interest Income-FTE1 $149.1 $153.5 $ 40.0 $ 37.7 2. Non Interest Income2 47.1 52.8 13.7 13.9 3. Non Interest Expense (135.9) (137.1) (34.7) (33.7) 4. Pre-Tax Pre-Provision Earnings $ 60.3 $ 69.2 $ 19.0 $17.9 5. Provision ( 22.6) ( 18.5) ( 2.1) ( 2.0) 6. Adjustments1

  27. Slide 27: Earnings Per Share

    27 Earnings Per Share 2011 Q1 Q2 Q3 Q4 Total 1. Reported $ .17 $ .18 ($ .25) $ .24 $ .34 2. Adjusted $ .17 $ .18 $ .21 $ .24 $ .80 2012 Q1 Q2 Q3 Q4 Total 1. Reported $ .46 $ .28 $ .35 $ .32 $1.41 2. Adjusted $ .25 $ .26 $ .29 $ .29 $1.09 2013 Q1 Q2 Q3 Q4 Total 1. Reported $ .38 $ .34 – – $ .72 2. Ad

  28. Slide 28: Asset Quality Summary

    28 Asset Quality Summary THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® ($ in Millions) 2011 2012 Q1-'13 Q2-'13 % Change Linked Qtr. 1. Non-Accrual Loans 69.6$ 53.4$ 46.8$ 39.0$ (16.7%) 2. Other Real Estate 16.3$ 13.3$ 13.1$ 11.8$ (9.9%) 3. Renegotiated Loans 14.3$ 12.7$ 5.4$ 4.

  29. Slide 29: Acquisition Experience

    Acquisition Experience THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 29 ® ®

  30. Slide 30: Strategic Market Expansion Pro Forma Highlights

    THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 30 ® Strategic Market Expansion Pro Forma Highlights Ticker: FRME Headquarters: Muncie, IN Founded: 1893 Branches: 96 Assets: $5.4 Billion Loans: $3.6 Billion Deposits: $4.3 Billion ®

  31. Slide 31: Transaction Overview

    THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 31 ® Deal Value: $114.7 Million* Consideration 100% Stock; Fixed 0.65 Exchange Ratio, Tax-Free Implied Price Per Share $10.49* Required Approvals: Regulatory and Shareholder Key Assumptions: Cost Savings Estimated to be 30% or $11.5 M

  32. Slide 32: CFS Bancorp, Inc. Overview

    THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 32 ® CFS Bancorp, Inc. Overview  Headquartered in Munster, Indiana  Founded in 1934  Operates 20 Banking Centers  12 in Northwest Indiana  8 in Northeast Illinois, South of Chicago  Market Capitalization: $101 Million  Balance

  33. Slide 33: CFS Turnaround

    THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 33 ® CFS Turnaround  New Management in 2007  48 New Senior Managers Hired  4 out of 5 Executive Officers Hired  Four Key Objectives  Reduce Non-Performing Assets  Improve Efficiency Ratio through Revenue Enhancement and Cost Red

  34. Slide 34: Transaction Rationale

    THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 34 ® Transaction Rationale  Contiguous Market Expansion  Adds 20 Full-Service Banking Centers, $974 Million in Deposits, $664 Million in Loans  #1 Market Share Position in Munster, Indiana Strategic Opportunity Financially Attracti

  35. Slide 35: Indiana Market Share

    THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 35 ® Indiana Market Share 2012 Rank Company 2012 # of Branches 2012 Total Deposits in Market 2012 Total Market Share (%) 1 JP Morgan Chase & Co. (NY) 189 $13.640 13.43 2 PNC Financial Services Group (PA) 160 9.673 9.52 3 Fifth Third B

  36. Slide 36: Transaction Pricing

    THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 36 ® Transaction Pricing Transactions FRME/CITZ Recent Transactions Price/Tangible Book Value 1.02x 1.11x Market Premium (%) 13.8% 42.0% Core Deposit Premium (%) 0.3% 2.2% ®

  37. Slide 37: 1-Year Stock Price Chart

    1-Year Stock Price Chart THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 37 ® ®

  38. Slide 38: Why Invest in First Merchants?

    THE STRENGTH OF BIG. THE SERVICE OF SMALL. Why Invest in First Merchants? • 3rd Largest Indiana Bank with an Energized and Experienced Management Team and Employees • Attractive Long-Term Deposit Market Shares • Indianapolis / Columbus, Ohio Momentum • State-of-the-Industry Technology Center with Sc

  39. Slide 39: Executive Management Team

    Executive Management Team THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com PRESIDENT & CHIEF EXECUTIVE OFFICER Mike joined FMC in 2005 and since that time negotiated the acquisition of Lincoln Bancorp in 2008, and successfully led the company through its multi- charter to single-cha

  40. Slide 40: Executive Management Team

    Executive Management Team THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com EXECUTIVE VICE PRESIDENT & CHIEF FINANCIAL OFFICER Mark joined FMB in 1997 and since that time led the company’s finance function and was responsible for the pricing and financing of the eight acquisitions co

  41. Slide 41: Executive Management Team

    Executive Management Team THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com EXECUTIVE VICE PRESIDENT & CHIEF BANKING OFFICER Mike joined FMC in 2008 and since that time led the company’s transformation to a line-of-business organization. Prior to joining FMC, Mike spent 18 years with

  42. Slide 42: Executive Management Team

    Executive Management Team THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com EXECUTIVE VICE PRESIDENT & CHIEF CREDIT OFFICER John joined First Merchants in 2007 as Senior Manager of Lending Process in the Credit Division, was promoted to Deputy Chief Credit Officer in 2008 and to Chie

  43. Slide 43: Contact Information

    THE STRENGTH OF BIG. THE SERVICE OF SMALL. Contact Information 43 FIRST MERCHANTS and the Shield Logo are registered trademarks of First Merchants Corporation ® ® First Merchants Corporation common stock is traded on the NASDAQ Global Select Market under the symbol FRME. Additional information can b

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