Slide 1: Investor Update Fourth Quarter 2022
INVESTOR UPDATE Fourth 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: First Merchants Corporation Financial Highlights
First Merchants Corporation (NASDAQ: FRME) Financial Highlights as of 12/31/2022 $17.9 Billion $12.0 Billion $14.4 Billion $6.4 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: 1.29% 7
Slide 5: Highlights
Highlights 5 ▪ Reported EPS of $1.19 compared to $0.89 in Q4 2021 and $1.08 in Q3 2022. Excluding Paycheck Protection Program (“PPP”) income and expenses related to the Level One acquisition, current quarter EPS was $1.19 compared to Q4 2021 of $0.84 and Q3 2022 of $1.121,2 ▪ 11.8% 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 Servi
Slide 7: Deposit and loan segment commentary
▪ Commercial deposit declines are primarily within Public Fund accounts. We continue to balance margin expansion with funding needs. ▪ The Consumer segment quarterly growth comes from continued new account expansion and response to new CD and Money Market promotions. ▪ Strong Commercial growth for t
Slide 8: Fourth Quarter Financial Results
Fourth Quarter Financial Results 8 ▪ 48.60% Efficiency Ratio ▪ Net interest income, excluding the impact of PPP loan income and fair value accretion, increased $9.3 million over prior quarter and $50.0 million over 4Q 2021 ▪ Pre-Tax, Pre-Provision (PTPP) Earnings totaled $83.8 million PTPP ROA was 1
Slide 9: Year-to-Date Financial Results
Year-to-Date Financial Results 9 ▪ 53.20% Efficiency Ratio, 50.66% excluding acquisition costs1 ▪ Net interest income, excluding the impact of PPP loan income and fair value accretion, increased $134.4 million or 36.1% over prior year ▪ Pre-Tax, Pre-Provision (PTPP) Earnings totaled $289.0 million e
Slide 10: Investment Portfolio Highlights
▪ Net unrealized AFS Loss of $296.7 million Investment Portfolio Highlights 10 4Q22 Investment Portfolio Composition Yield on Investments (%) / Total Investments ($B) $4.3B Total Investment Portfolio Gains / LossesHighlights Realized Gains ▪ 4Q 2021 $0.4 million ▪ 1Q 2022 $0.6 million ▪ 2Q 2022 $0.1
Slide 11: Loan Portfolio Highlights
Loan Portfolio Highlights 11 4Q22 Loan Composition Yield on Loans (%) / Total Loans ($B) $12B Total 4Q22 Portfolio by Yield Type Highlights Total loan rate mix as of 4Q22 • $8.0 billion variable rate • $4.0 billion fixed rate ▪ Portfolio composition is ~75% Commercial oriented ▪ Loan yields remained
Slide 12: Allowance for Credit Losses - Loans
Allowance for Credit Losses - Loans 12 4Q22 Allowance for Credit Losses - Loans Highlights ▪ No Q4 provision expense ▪ Year-to-date 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 c
Slide 13: Deposit Portfolio Highlights
Deposit Portfolio Highlights 13 4Q22 Deposit Composition Highlights $14.4B Total 1Defined as total deposits less time deposits > $100k Cost of Total Deposits (%) / Total Deposits ($B) ▪ Strong core deposit base • 95% core deposits1 • 22% non-interest bearing • ~51% yield 5 bps or less ▪ Total deposi
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 $106.9 1Adjusted for Fair Value Accretion and PPP Loan Income 4Q21 1Q22 2Q22 3Q22 4Q22 1. Net Interest Income - FTE ($millions) 106.9$ 108.0$ 134.8$ 146.6$ 155.3$ 2. Fair Value Ac
Slide 15: Non-Interest Income Highlights
Non-Interest Income Highlights 15 4Q22 Non-Interest Income Detail ($M) $24.1M Total Non-Interest Income Trends ($M) Fee Income / Revenue Highlights ▪ Customer-related fees totaling $21.9 million for 4Q22, declined $1.0 million from 3Q22 ▪ Other Fee Income declined by $5.0 million from prior quarter
Slide 16: Non-Interest Expense Highlights
53.49% 52.79% 58.45% 53.34% 48.60% Non-Interest Expense Highlights 16 4Q22 Non-Interest Expense Detail $89.7M Total Non-Interest Expense Trends ($M) Efficiency Ratio Highlights ▪ 4Q22 reflects a normalized expense run rate with Level One as 3Q22 included $3.4 million of acquisition-related expense ▪
Slide 17: Capital Ratios
Capital Ratios 17 Tangible Common Equity Ratio Common Equity Tier 1 Ratio Total Risk-Based Capital Ratio 9.31% 9.31% 9.57% 9.31% 9.65%9.57%9.31% 9.57% 9.65% 9.04%8.78% ▪ TCE remains below target levels due to AOCI changes in equity resulting from market volatility and cash consideration used in acqu
Slide 18: Loan Portfolio Geography and Trends
4Q22 Highlights2 Loan Portfolio 18 Geography Loan Portfolio Trends ($M) 1Included in C&I and Sponsor above 2Excluding change in PPP loans and annualized where applicable 3Excluding $1.6 billion of loans acquired from Level One and change in PPP loans where applicable 84% of borrowers within four sta
Slide 19: Loan Portfolio Insights
Sponsor Finance ▪ Line utilization stable at 41.0% end of Q4 ‘22 compared to 40.2% end of Q3 and 42.3% end of Q4 ‘21 ▪ $706 million in Shared National Credits ▪ $0 dollars in operating leases ▪ $70 million of SBA guaranteed loans Loan Portfolio Insights 19 C & I ▪ $145 million Residential Constructi
Slide 20: Asset Quality
Asset Quality 20 Asset Quality Trends ($M) Highlights Strong and Stable Asset Quality ▪ NPAs + 90PD declined to 0.42% of loans and ORE • Lowest in five quarters • Non-accrual loans down $1.2 million ▪ Classified Loan/Loans below pre-pandemic levels ▪ Q4 Net Charge-offs of $3.4 million • 0.12% of ave
Slide 21: Non-Performing Assets
Non-Performing Assets 21 Non-Performing Assets Roll Forward ($M) 2022 Highlights Strong and Stable Asset Quality ▪ Net non-accrual loans down $1.2 million • $7.3 million new non-accrual migration ▪ Top three non-accrual relationships total $18.7 million • Senior Living (2 relationships) • Medical Of
Slide 22: Track Record of Shareholder Value
$10.95 $12.17 $13.65 $14.68 $15.85 $16.96 $19.12 $21.94 $24.27 $25.21 $21.45 $10.44 $12.12 $13.27 $14.38 $15.83 $16.78 $19.24 $21.24 $22.64 $24.09 $25.42 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 TBVPS TBVPS Without AFS OCI 242.2% 165.4% FRME S&P BMI US Bank $1.41 $1.41 $1.65 $1.72 $1.9
Slide 23: History of Organic and Whole Bank Acquisition Growth
$4.3 $5.4 $5.8 $6.8 $7.2 $9.4 $9.9 $12.5 $14.1 $15.5 $17.9 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 History of Organic and Whole Bank Acquisition Growth 23 Total Assets ($B) Growth Through Acquisition ✓ Experienced Acquirer ✓ Expanded in Current High-Growth Markets ✓ Extended into Addi
Slide 24: Vision for the Future
Vision for the Future 24 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 25: Appendix
APPENDIX aad 00) First Merchants Corporation Helping you prosper
Slide 26: Non-GAAP: Capital Ratios
Non-GAAP 26 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 the defined benefit and other postretirement plans. CAPITAL RATIOS (dollars in thousan
Slide 27: Non-GAAP: Tangible Common Equity Ratio
Non-GAAP 27 TANGIBLE COMMON EQUITY RATIO (dollars in thousands): 4Q20 4Q21 1Q22 2Q22 3Q22 4Q22 Tangible Common Equity Ratio (dollars in thousands) Total Stockholders' Equity (GAAP) 1,875,645$ 1,912,571$ 1,807,633$ 1,977,641$ 1,906,666$ 2,034,770$ Less: Preferred Stock (125) (125) (125) (25,125) (25,
Slide 28: Non-GAAP: Adjusted EPS Excluding PPP and Acquisition Expenses
Non-GAAP 28 ADJUSTED EPS EXCLUDING PAYCHECK PROTECTION PROGRAM ("PPP") AND ACQUISITION-RELATED EXPENSES 4Q21 1Q22 2Q22 3Q22 4Q22 12/31/20 YTD 12/31/21 YTD 12/31/22 YTD (Dollars in Thousands, Except Per Share Amounts) Net Income Available to Common Stockholders - GAAP 47,733$ 48,586$ 38,522$ 63,283$
Slide 29: Non-GAAP: Efficiency Ratio
Non-GAAP 29 EFFICIENCY RATIO (dollars in thousands): 2020 4Q21 2021 1Q22 2Q22 3Q22 4Q22 2022 EFFICIENCY RATIO (dollars in thousands): Non Interest Expense (GAAP) 263,405$ 72,436$ 279,213$ 72,325$ 97,313$ 96,378$ 89,699$ 355,715$ Less: Intangible Asset Amortization (5,987) (1,463) (5,747) (1,366) (2,
Slide 30: Non-GAAP: Return on Tangible Common Equity
Non-GAAP 30 RETURN ON TANGIBLE COMMON EQUITY (dollars in thousands): 2012 2013 2014 2015 2016 2017 2018 2019 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$ Less: Average Preferred Stock (90,908)