First Merchants Corporation · NASDAQ:FRME
First Merchants — Q3 2023 Earnings Presentation
31 slides from First Merchants's earnings presentation, Oct 26, 2023
Slide 1: Investor Update Third Quarter 2023
INVESTOR UPDATE Third Quarter 2023
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 25 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 9/30/2023 $18.0 Billion YTD ROAA: 1.33% Total Assets YTD Return on TCE 18.10% $12.3 Billion TCE/TA: 7.69% Total Loans Market Cap $1.7B $14.6 Billion Divid
Slide 5: Highlights Third Quarter Year-to-Date
Highlights Third Quarter Net Income & EPS1 ROA (Annualized) ROE & ROTCE (Annualized) $55.9 Million 1.24% ROA 10.38% ROE $0.94 Per Share 1.48% PTPP ROA2 16.54% ROTCE2 ▪ Total deposits increased $65.4 million or 1.8% annualized on a linked quarter basis ▪ Commercial & Consumer deposits increased $327.
Slide 6: Business Strategy
Business Strategy Commercial Banking Consumer Banking Full Spectrum of Debt Capital and Treasury Service Offerings Full Spectrum of Consumer Deposit and Lending Offerings Located in Prime Growth Markets Supported by: Talented, Customer Service Oriented Banking Center Small Business & SBA Asset Based
Slide 7: Business Highlights
Business Highlights Loan Growth Annualized1 Michigan 3Q23 Balance ($B) Growth Monroe MSA Rank: 1 Commercial $9.3 (1.7)% Detroit MSA Rank: 9 Deposits: $2.8B Consumer $2.9 7.3% Loans: $2.6B Total Loan Growth QTD 0.2% Total Loan Growth YTD 3.2% Northeast Indiana *Adjusted Total Loan Growth YTD 4.6% Mun
Slide 8: Third Quarter Financial Results
Third Quarter Financial Results ($M except per share data) For the Three Months Ended, Variance % Variance Linked Linked QTR- 9/30/22 12/31/22 3/31/23 6/30/23 9/30/23 Quarter Annualized Balance Sheet & Asset Quality 3Q23 Highlights 1. Total Assets $17,719.0 $17,938.3 $18,178.9 $17,968.4 $17,996.6 $2
Slide 9: Year-to-Date Financial Results
Year-to-Date Financial Results ($M except per share data) For the Nine Months Ended September 30, Variance % Variance 2021 2022 2023 YOY YOY Balance Sheet & Asset Quality Year-to-Date Highlights 1. Total Assets $15,060.7 $17,719.0 $17,996.6 $277.7 1.6% 2. Total Loans 9,047.6 11,675.4 12,302.4 627.0
Slide 10: Investment Portfolio Highlights
Investment Portfolio Highlights 3Q23 Investment Portfolio Composition Yield on Investments (%) / Total Investments ($B) U.S. Agencies Corporate Obligations 12% 1% Collateralized Mortgage Obligations 2.66% 2.66% 2.63% 2.56% 2.55% 6% $3.7B Municipal $4.3 $4.3 $4.1 $3.9 $3.7 Mortgage- Total Bonds 56% 3
Slide 11: Loan Portfolio Highlights
Loan Portfolio Highlights 3Q23 Loan Composition Highlights Construction Land & Land Development 8.3% Agricultural Land & ▪ Portfolio composition is ~75% Commercial oriented Commercial Real Estate Production 1.9% Non-Owner Occupied Public Finance/Other 19.2% Commercial 7.8% ▪ Loan yields remained str
Slide 12: Allowance for Credit Losses - Loans
Allowance for Credit Losses - Loans 3Q23 Allowance for Credit Losses - Loans Highlights ▪ $2.0 million Q3 provision expense ▪ $5.0 million provision exp. recorded for ACL – Loans ▪ $3.0 million reserve reduction for unfunded 1.94% 1.86% 1.82% 1.80% 1.67% commitments ▪ The reserve for unfunded commit
Slide 13: Deposit Portfolio Highlights
Deposit Portfolio Highlights 3Q23 Deposit Composition Highlights Certificates & Time Deposits Brokered Certificates of ▪ Strong core deposit base Deposits 1 < $100k Certificates & Time 5% 1% • 91% core deposits2 Deposits • 17% noninterest bearing > $100k 9% • 41% yield 5 bps or less ▪ Total deposit
Slide 14: Net Interest Margin
Net Interest Margin 3Q22 4Q22 1Q23 2Q23 3Q23 1. Net Interest Income - FTE ($millions) $ 146.6 $ 155.3 $ 150.4 $ 143.7 $ 139.3 2. Fair Value Accretion $ 3.2 $ 2.7 $ 2.4 $ 2.0 $ 2.0 3. PPP Loan Income $ 0.3 $ 0.1 $ - $ - $ - 4. Adjusted Net Interest Income - FTE1 $ 143.1 $ 152.5 $ 148.0 $ 141.7 $ 137.
Slide 15: Noninterest Income Highlights
Noninterest Income Highlights 3Q23 Noninterest Income Detail ($M) Noninterest Income Trends ($M) Fee Income / Revenue Service Charges $8.0 16.8% 16.6% Card 15.5% 26% 14.2% Payment Fees 13.4% $4.7 15% Gain (Loss) on Sale of Securities ($1.7) Gain on $27.8M -5% Derivative $29.6M $27.8M Sale of Loans $
Slide 16: Noninterest Expense Highlights
Noninterest Expense Highlights 3Q23 Noninterest Expense Detail Noninterest Expense Trends ($M) Premises & Equipment $12.5 Efficiency Ratio 13% Outside Data Processing 53.34% 53.91% 51.72% 52.21% $6.6 7% 48.60% Professional & Other Outside Services 51.39%1 $3.8 48.37%1 4% $93.9M Intangible Asset Amor
Slide 17: Capital Ratios
Capital Ratios Tangible Common Equity Ratio Highlights 7.75% 7.99% 7.69% 7.34% ▪ TCE Ratio including marks on held-to-maturity 6.66% 9.57% securities portfolio is 5.64% 9.31% ▪ CET1 9.31%including net unrealized loss in AOCI on available-for-sale securities is 9.39% 9.65% 9.04% 9.31% 9.31% 9.57% 9.6
Slide 18: Loan Portfolio
Loan Portfolio Loan Portfolio Trends ($M) 3Q23 Highlights 3Q22 4Q22 1Q23 2Q23 3Q23 ▪ C&I - Sponsor Finance up $31 million ▪ Construction/Land/Land Dev. up $72 million 1. C&I - Regional Banking $ 2,703 $ 2,827 $ 2,831 $ 2,733 $ 2,662 2. C&I - Sponsor Finance 630 612 674 798 829 Year Over Year Highlig
Slide 19: Loan Portfolio Insights
Loan Portfolio Insights Commercial C&I C&I - Sponsor Finance ▪ $829 million to 86 companies ▪ Senior Debt/Adj. EBITDA < 3.0X ~ 68% 1 ▪ Total Debt/Adj. EBITDA < 4.0X ~ 80% ▪ FCCR > 1.50X ~ 60% ▪ ~2.7% Classified Construction Finance C&I Includes commercial and ▪ $185 million Resi Real Estate Construc
Slide 20: Loan Portfolio Insights (continued)
Loan Portfolio Insights (continued) Commercial Real Estate (Non-Owner Occupied) ($M) Multi- Warehouse Total CRE Family Industrial Retail Office / Storage Hotel Other (NOO) Balance: $678.6 $388.0 $374.5 $259.8 $240.8 $153.6 $265.3 $2,360.6 Commitment: $717.6 $400.4 $380.8 $265.8 $255.9 $154.1 $298.0
Slide 21: Asset Quality
Asset Quality Asset Quality Trends ($M) Highlights 3Q22 4Q22 1Q23 2Q23 3Q23 ▪ Top three nonaccruals declined from $34.6 million to $17.1 million 1. Non-Accrual Loans $ 43.5 $ 42.3 $ 46.6 $ 69.2 $ 53.1 • Senior Living • Rental and sale of machinery equipment 2. Other Real Estate 6.5 6.5 7.8 7.7 6.5 •
Slide 22: Nonperforming Assets
Nonperforming Assets Nonperforming Assets Roll Forward ($M) Highlights 3Q22 4Q22 1Q23 2Q23 3Q23 Nonaccrual Migration: 1. Beginning Balance NPAs + 90PD $53.3 $50.9 $50.7 $61.4 $77.3 ▪ $17.6 million reduction in NPAs and 90 day past due Nonaccrual • $7.5 million in new nonaccruals. Largest loan 2. Add
Slide 23: Track Record of Shareholder Value
Track Record of Shareholder Value 10-Year Total Return (2012-2022) Earnings per Share CAGR 2012-2022: 10.5% $3.81 $3.81 $3.22 $3.19 $3.03 $2.74 242.2% $1.98 $2.12 $1.65 $1.72 $1.41 $1.41 165.4% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 YTD'23 Dividends per Share FRME S&P BMI US Bank CAG
Slide 24: History of Organic and Whole Bank Acquisition Growth
History of Organic and Whole Bank Acquisition Growth Total Assets ($B) Growth Through Acquisition ✓ Experienced Acquirer ✓ Expanded in Current High-Growth Markets $18.0 $17.9 ✓ Extended into Additional High-Growth Markets ✓ Added to Franchise with Stable Deposit Gathering Markets $15.5 $14.1 $12.5 $
Slide 25: 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 26: Appendix
APPENDIX ss 00) First Merchants Corporation Helping you prosper
Slide 27: Non-GAAP
Non-GAAP ADJUSTED EPS EXCLUDING PAYCHECK PROTECTION PROGRAM ("PPP") AND ACQUISITION-RELATED EXPENSES 3Q22 4Q22 1Q23 2Q23 3Q23 9/30/21 YTD 9/30/22 YTD 9/30/23 YTD (Dollars in Thousands, Except Per Share Amounts) Net Income Available to Common Stockholders - GAAP $ 63,283 $ 70,292 $ 63,610 $ 60,393 $
Slide 28: Non-GAAP
Non-GAAP EFFICIENCY RATIO (dollars in thousands): 3Q22 4Q22 1Q23 2Q23 3Q23 3Q21 YTD 3Q22 YTD 3Q23 YTD EFFICIENCY RATIO (dollars in thousands): Non Interest Expense (GAAP) $ 96,378 $ 89,699 $ 93,720 $ 92,593 $ 93,854 $ 206,777 $ 266,016 $ 280,167 Less: Intangible Asset Amortization (2,303) (2,303) (2
Slide 29: Non-GAAP
Non-GAAP CAPITAL RATIOS (dollars in thousands): 3Q21 3Q22 4Q22 1Q23 2Q23 3Q23 Total Risk-Based Capital Ratio (dollars in thousands) Total Stockholders' Equity (GAAP) 1,868,090 1,906,666 2,034,770 2,122,448 2,145,565 2,092,644 Adjust for Accumulated Other Comprehensive (Income) Loss 1 (39,889) 314,08
Slide 30: Non-GAAP
Non-GAAP TANGIBLE COMMON EQUITY RATIO (dollars in thousands): 3Q21 3Q22 4Q22 1Q23 2Q23 3Q23 Tangible Common Equity Ratio (dollars in thousands) Total Stockholders' Equity (GAAP) $ 1,868,090 $ 1,906,666 $ 2,034,770 $ 2,122,448 $ 2,145,565 $ 2,092,644 Less: Preferred Stock (125) (25,125) (25,125) (25,
Slide 31: Non-GAAP
Non-GAAP RETURN ON TANGIBLE COMMON EQUITY (dollars in thousands): 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 YTD Return on Tangible Common Equity Total Average Stockholders' Equity (GAAP) $ 535,506 $ 540,255 $ 675,295 $ 753,724 $ 884,664 $ 1,110,524 $ 1,343,861 $ 1,569,615 $ 1,825,135 $ 1,858