Slide 1: First Merchants Corporation
First Merchants Corporation \ iworana eNTUCKY NASDAQ: FRME January 28, 2014 Michael C. Rechin Mark K. Hardwick John J. Martin President Chief Executive Officer Chief Financial Officer Chief Credit Officer
Slide 2: Forward-Looking Statements
2 Forward-Looking Statements 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 aff
Slide 3: Michael C. Rechin, President and Chief Executive Officer
Michael C. Rechin President and Chief Executive Officer THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ®
Slide 4: 2013 Performance: Full-Year and 4th Quarter Highlights
Full-Year Highlights • $42.2 Million of Record Net Income Available to Common Stockholders • Market Capitalization Grows 92% to $816 Million • Capital Actions and Credit Metrics Enhanced Balance Sheet Strength • Increased Common Equity Dividends During 2nd Quarter 4th Quarter Highlights • $11.2 Mill
Slide 5: Mark K. Hardwick, Executive Vice President and Chief Financial Officer
Mark K. Hardwick Executive Vice President and Chief Financial Officer THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ®
Slide 6: Total Assets
6 Total Assets 2011 2012 2013 1. Investments $ 946 $ 874 $ 1,096 2. Loans Held for Sale 18 22 5 3. Loans 2,713 2,902 3,633 4. Allowance (71) (69) (68) 5. CD&I & Goodwill 150 150 203 6. BOLI 124 125 165 7. Other 293 301 403 8. Total Assets $4,173 $4,305 $5,437 ® THE STRENGTH OF BIG. THE SERVICE OF SM
Slide 7: Loan and Yield Detail
7 Commercial & Industrial Loans 20.9% Commercial Real Estate Owner- Occupied 13.8% Commercial Real Estate Non-Owner Occupied 26.5%Construction, Land & Land Development 4.9% Agricultural Land 4.0% Agricultural Production 3.1% Other Non-Consumer 0.7% Residential Mortgage 17.1% Home Equity 7.0 Other Co
Slide 8: Investment Portfolio
Mortgage-Backed Securities 32% Collateralized Mortgage Obligations 30% U. S. Treasuries 1% Corporate Obligations 4% Tax-Exempt Municipals 33% 8 THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® • $1.1 Billion Balance • Average duration – 4.3 years • Tax equivalent yield of 3.82% •
Slide 9: Total Liabilities and Capital
9 2011 2012 2013 1. Customer Non-Maturity Deposits $2,196 $2,479 $3,276 2. Customer Time Deposits 816 739 868 3. Brokered Deposits 123 128 87 4. Borrowings 378 260 401 5. Other Liabilities 34 39 48 6. Hybrid Capital 111 107 122 7. Preferred Stock (SBLF) 91 91 ‒ 8. Common Equity 424 462 635 9. Total
Slide 10: Deposits and Cost of Funds Detail
10 Demand Deposits 48% Savings 30% Certificates & Time Deposits of >$100,000 6% Certificates & Time Deposits of <$100,000 14% Brokered Deposits 2% QTD Cost = .31% YTD Cost = .38% Total = $4.2B Deposits and Cost of Funds Detail (as of 12/31/2013) THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstme
Slide 11: Capital Ratios
11 Capital Ratios ® THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 8.83% 9.20% 9.54% 9.71% 9.62% 10.20% 10.13% 10.42% 10.37% 6.84% 7.07% 7.27% 7.51% 7.55% 7.88% 7.74% 7.97% 8.34% 16.54% 16.39% 16.75% 16.62% 16.34% 15.91% 15.69% 14.96% 14.54% 6.00% 7.00% 8.00% 9.00% 10.00% 11.00% 1
Slide 12: Net Interest Margin
12 Net Interest Margin THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® 1 1Adjusted for Fair Market Value Accretion Q4 - '11 Q1 - '12 Q2 - '12 Q3 - '12 Q4 - '12 Q1 - '13 Q2 - '13 Q3 - '13 Q4 - '13 Net Interest Income - FTE ($millions) $ 37.6 $ 37.6 $ 39.5 $ 41.3 $ 39.7 $ 40.8 $ 38
Slide 13: Non-Interest Income
13 2011 2012 2013 1. Service Charges on Deposit Accounts $12.0 $11.6 $12.4 2. Trust Fees 7.7 7.9 8.6 3. Insurance Commission Income 5.7 6.2 7.1 4. Electronic Card Fees 6.5 7.3 7.5 5. Cash Surrender Value of Life Ins 2.6 3.4 2.6 6. Gains on Sales Mortgage Loans 7.4 10.6 7.5 7. Securities Gains/Losses
Slide 14: Non-Interest Expense
14 Non-Interest Expense 2011 2012 2013 1. Salary & Benefits $ 74.7 $ 79.4 $ 85.4 2. Premises & Equipment 16.9 17.4 18.0 3. Core Deposit Intangible 3.5 1.9 1.6 4. Professional Services 2.2 2.3 2.6 5. OREO/Credit-Related Expense 10.6 8.2 6.7 6. FDIC Expense 5.5 3.5 2.9 7. Outside Data Processing 5.7 5
Slide 15: Earnings
15 2011 2012 2013 1. Net Interest Income $143.3 $152.3 $154.3 2. Provision for Loan Losses (22.6) (18.5) (6.6) 3. Net Interest Income after Provision 120.7 133.8 147.7 4. Non-Interest Income 49.1 64.3 54.8 5. Non-Interest Expense (135.9) (137.1) (143.2) 6. Income before Income Taxes 33.9 61.0 59.3 7
Slide 16: Earnings Per Share
16 Earnings Per Share 2011 Q1 Q2 Q3 Q4 Total 1. Reported $ .17 $ .18 ($ .25) $ .24 $ .34 2. Adjusted $ .17 $ .18 $ .211 $ .24 $ .80 2012 Q1 Q2 Q3 Q4 Total 1. Reported $ .46 $ .28 $ .35 $ .32 $1.41 2. Adjusted2 $ .25 $ .26 $ .29 $ .29 $1.09 2013 Q1 Q2 Q3 Q4 Total 1. Reported $ .38 $ .34 $ .35 $ .34 $
Slide 17: John J. Martin, Executive Vice President and Chief Credit Officer
John J. Martin Executive Vice President and Chief Credit Officer THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ®
Slide 18: Loan Portfolio Trends
18 Loan Portfolio Trends THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® Change Year Over Year ($ in Millions) 2011 2012 2013 $ % 1. Commercial & Industrial 532.5$ 622.6$ 761.7$ 139.1$ 22.3% 2. Construction, Land and Land Development 81.8 98.6 177.1 78.5 79.6% 3. CRE Non-Owner Oc
Slide 19: Quarterly Loan Portfolio Trends excluding loans acquired from CFS
19 Quarterly Loan Portfolio Trends THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® 1 excluding loans acquired from CFS Change FMB ($ in Millions) Q3-'13 2013 1 CFS 2013 $ % 149.9 1. Commercial & Industrial 652.3$ 679.5$ 82.2$ 761.7$ 109.4$ 16.8% 2. Construction, Land and Land Dev
Slide 20: Asset Quality Summary
20 Asset Quality Summary THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® 1 excluding loans acquired from CFS ($ in Millions) FMB Year over 2011 2012 2013 1 CFS 2013 Year 1. Non-Accrual Loans 69.6$ 53.4$ 33.7$ 22.7$ 56.4$ 5.6% 2. Other Real Estate 16.3$ 13.3$ 9.3$ 12.9$ 22.2$ 66.9
Slide 21: Non-Performing Asset Reconciliation
21 Non-Performing Asset Reconciliation THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® 1 excluding loans acquired from CFS FMB ($ in Millions) 2012 2013 1 CFS 2013 1. Beginning Balance NPA's & 90+ Days Delinquent $100.8 $81.4 $81.4 Non-Accrual 2. Add: New Non-Accruals 38.1 23.0 2
Slide 22: Net Charge-Offs, Provision & Allowance
22 Net Charge-Offs, Provision & Allowance THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® ($ i n m il li o n s ) • With the addition of $22.7MM in Non-accrual loans from CFS, non-accruals increased $21.4MM for the quarter • Q4 net recoveries of $630,000 • YTD charge-offs down to
Slide 23: ALLL and Fair Value Summary
23 ALLL and Fair Value Summary THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® As of 12/31/2013 ($ in Millions) FMB 1 SCB 2 CFS 2 Total 1. Allowance for Loan Losses (ALLL) 67.7$ 0.2$ -$ 67.9$ 2. Fair Value Adjustment 9.8 39.6 49.4 3. Total ALLL plus FV Adjustments 67.7$ 10.0$ 39.
Slide 24: Michael C. Rechin, President and Chief Executive Officer
Michael C. Rechin President and Chief Executive Officer THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ®
Slide 25: 2014 Overview
• Complete CFS Integration During 1st Quarter • Position CFS (Lakeshore Region) for Client Retention and Growth Tactics • Achieve Expense Targets Associated with Acquisition Plan • Maintain Organic Growth Initiatives Throughout Entire Franchise • Continue Assessment of Our Retail Franchise • Evaluat
Slide 26: Contact Information
26 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