First Merchants Corporation · NASDAQ:FRME

First Merchants — INVESTIndiana Equity Conference 2010

48 slides from First Merchants's conference presentation, Sep 3, 2010

  1. Slide 1: First Merchants Corporation

    First Merchants Corporation INVESTIndiana Equity Conference September 9, 2010

  2. Slide 2: Presenters: Michael C. Rechin and Mark K. Hardwick

    Michael C. Rechin President and Chief Executive Officer Mark K. Hardwick Executive Vice President and Chief Financial Officer

  3. Slide 3: 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

  4. Slide 4: First Merchants' Story

    § First Merchants Corporation (NASDAQ: FRME), celebrating its 117th anniversary, is the largest financial services holding company headquartered in Central Indiana § FMC (holding company) organized in 1982 § Founding bank proudly serving Indiana since 1893 § Total assets at 6/30/10 of $4.2 billion §

  5. Slide 5: Vision

    Vision A financial services company focused on building deep, lifelong client relationships and providing maximum shareholder value. We provide an environment where customers can bank with their neighbors, realizing that our business begins and ends with people.

  6. Slide 6: Mission

    Mission To deliver superior personalized solutions to consumer and closely held commercial clients in diverse community markets by providing sound advice and products that exceed customer expectations.

  7. Slide 7: Executive Management Team

    Executive Management Team MICHAEL C. RECHIN President and CEO Prior to joining FMC in 2005, Mike was Executive Vice President of Corporate Banking for National City Bank, managing its Indiana operations. During his tenure with National City, Mike had responsibility for all commercial banking activit

  8. Slide 8: Executive Management Team

    Executive Management Team MARK K. HARDWICK Executive Vice President and CFO Prior to joining FMC in 1997, Mark was a senior accountant with BKD, LLP. Mark is a graduate of Ball State University with a Bachelors degree in Accounting and an MBA and also is a Certified Public Accountant.

  9. Slide 9: Executive Management Team

    MICHAEL J. STEWART Executive Vice President and Chief Banking Officer Previous to joining FMC in 2008, Mike spent 18 years with National City Bank, most recently as Executive Vice President of the Corporate Banking and Sales Manager for the Regional Large Corporate Group. A graduate of Millikin Univ

  10. Slide 10: Total Loans

    Total Loans § Muncie - $1,011M § Indianapolis - $999M § Lafayette - $560M § Columbus - $493M

  11. Slide 11: First Merchants Headquarters

    First Merchants Headquarters Muncie, Indiana First Merchants Indianapolis, Indiana

  12. Slide 12: Strength of Big, Service of Small

    “Strength of Big, Service of Small” FIRST MERCHANTS’ STRATEGY We specialize in our communities. Deliver superior service with presence close to the customer for. . . § Retail Banking § Mortgage Banking § Small Business Banking § Commercial Banking q Middle Market q Agriculture q Healthcare Services

  13. Slide 13: First Merchants' Current Plan

    FIRST MERCHANTS’ CURRENT PLAN § Protect and Strengthen the Franchise § Short-Term - 1 to 2 years: q Capital Preservation Plan q Cultural and Process Initiatives q Low-Capital Intensive Infrastructure Projects § Growth and Top-Tier Performance § Long-Term - 3 to 5 Years: q Internal Growth - • Build o

  14. Slide 14: First Merchants' Current Plan

    FIRST MERCHANTS’ CURRENT PLAN § Navigate the current environment § Service-driven alternative to super-regional bank competitors § Sustain and deploy low-cost deposit shares § Build out growth markets of Indianapolis, Indiana, and Columbus, Ohio § Gain the efficiencies of a single charter banking co

  15. Slide 15: Tactical Action Plan and Business Strategy

    TACTICAL ACTION PLAN AND BUSINESS STRATEGY § Credit Cycle Challenge § NPA Management § Accelerate workout process to maximize resolutions § Loan resolution and OREO liquidations managed centrally § Capital Mix Challenge § Registered direct placement: 4.2MM shares raised $24.5MM, March 2010 § CPP Pre

  16. Slide 16: Market Segmentation

    Established Markets High-Growth Markets Client Demographics § Aging § Middle-income and lower § Basic product orientation § Middle-income and higher § Greater propensity towards investment, wealth management, and insurance needs § Diversified employment base, including strong service sector Client F

  17. Slide 17: Indianapolis / Columbus Strategy

    INDIANAPOLIS / COLUMBUS STRATEGY § Organic growth opportunities with improved segment penetration and branding § Deployment of rural deposit base into growth markets creates optimal margin structure § Creates franchise value § Continuously assess operating efficiencies

  18. Slide 18: Indianapolis

    § Population 2008: 1,915,664* § Population 2013 Projection: 2,023,886* § 12th largest city in the U.S. § 29th largest metropolitan area in the U.S. Indianapolis § Between 1990-2000 Indianapolis- Carmel metro grew at a faster pace (11.1% growth) than Indiana (4.4% growth) and the U.S. (7.2% growth) *

  19. Slide 19: Columbus

    § Population 2008: 1,773,120 § Population 2015 Projection: 1,911,154 § 16 th largest city in the U.S. § 32 nd largest metropolitan area *24-7 PressRelease § Columbus economy expected to resume economic growth in 2010* COLUMBUS

  20. Slide 20: Deposit Market Position by County

    County Region Market Position Market % $$ Deposits Delaware County, IN Muncie 1 46.39% $752,341 Jasper County, IN Lafayette 1 29.11% 159,603 Jay County, IN Muncie 1 43.50% 112,573 Union County, IN Muncie 1 63.41% 58,953 White County, IN Lafayette 1 34.15% 147,166 Adams County, IN Muncie 2 23.21% 212

  21. Slide 21: 2nd Quarter 2010 Highlights

    2nd Quarter 2010 Highlights § Second quarter earnings of $.35 per common share § Successful exchange of CPP Preferred Stock to Trust Preferred Securities contributing to a Tangible Common Equity Ratio of 5.88% § Quarterly normalized pre-tax, pre-provision earnings remains strong at $16.8M § Quarterl

  22. Slide 22: Total Assets

    2008 2009 Q1-’10 Q2-’10 1. Investments $ 482 $ 563 $ 639 $ 6 2. Loans 3,722 3,278 3,138 3,059 3. Allowance (50) (92) (89) (87) 4. CD&I & Goodwill 166 159 158 156 5. BOLI 93 95 95 96 6. Other 371 478 435 313 7. Total Assets $4,784 $4,481 $4,376 $4,183 ($ in Millions) TOTAL ASSETS

  23. Slide 23: Total Liabilities and Capital

    2008 2009 Q1-’10 Q2-’10 1. Customer Non-Maturity Deposits $1,858 $2,042 $2,000 $1,976 2. Customer Time Deposits 1,384 1,220 1,167 1,090 3. Brokered Deposits 477 275 231 195 4. Borrowings 507 339 320 292 5. Other Liabilities 51 30 58 31 6. Hybrid Capital 111 111 111 142 7. Preferred Stock (CPP) - 112

  24. Slide 24: Earnings

    2008 2009 Q1-’10 Q2-’10 1. Net Interest Income-FTE $133.1 $159.1 $37.8 $37.7 2. Non Interest Income 1 38.5 46.5 11.7 11.0 3. Non Interest Expense 2 106.0 134.7 31.0 31.9 4. Pre-Tax Pre-Provision Earnings $ 65.6 $ 70.9 $18.5 $16.8 5. Provision (28.2) (122.2) (13.9) (15.0) 6. Adjustments (5.0) (12.1)

  25. Slide 25: Total Assets

    2008 2009 Q1-’10 Q2-’10 1. Investments $ 482 $ 563 $ 639 $ 6 2. Loans 3,722 3,278 3,138 3,059 3. Allowance (50) (92) (89) (87) 4. CD&I & Goodwill 166 159 158 156 5. BOLI 93 95 95 96 6. Other 371 478 435 313 7. Total Assets $4,784 $4,481 $4,376 $4,183 ($ in Millions) TOTAL ASSETS

  26. Slide 26: Credit Policy and Portfolio Metrics

    ($ in Millions) CREDIT POLICY AND PORTFOLIO METRICS § Legal Lending Limit = $63.8 § House Lending Limit = $20.0 § Largest 25 Relationship Commitments Average = $11.6 § Shared National Credit Commitments = $76.7 § Shared National Credit Outstandings = $50.5

  27. Slide 27: Loan Composition (as of 6/30/10)

    Loan Composition (as of 6/30/10) YTD Yield = 5.71% Total = $3.1B LOAN AND CREDIT DETAIL

  28. Slide 28: Commercial Loan Concentration

    Commercial Loan Concentration (as of 6/30/2010) *Other=Mining, Public Administration, Information Technology, Transportation and Warehousing, Finance & Insurance, Hotel Services, Wholesale Trade and Other Services Total = $2.1B LOAN AND CREDIT DETAIL

  29. Slide 29: Non-Accrual Loans (as of 6/30/10)

    Non-Accrual Loans (as of 6/30/10) LOAN AND CREDIT DETAIL

  30. Slide 30: Loan Delinquency Trends

    ($ in millions) LOAN DELINQUENCY TRENDS

  31. Slide 31: Other Real Estate Owned

    ($ in millions) OTHER REAL ESTATE OWNED

  32. Slide 32: Total Non-Performing Assets

    ($ in millions) TOTAL NON-PERFORMING ASSETS

  33. Slide 33: Allowance Coverage to Non-Accrual Loans

    ALLOWANCE COVERAGE TO NON-ACCRUAL LOANS

  34. Slide 34: Loan and Credit Detail: YTD Charge-Off Composition

    LOAN AND CREDIT DETAIL *Annualized YTD Charge-Off Composition (as of 6/30/10)

  35. Slide 35: Total Assets

    2008 2009 Q1-’10 Q2-’10 1. Investments $ 482 $ 563 $ 639 $ 6 2. Loans 3,722 3,278 3,138 3,059 3. Allowance (50) (92) (89) (87) 4. CD&I & Goodwill 166 159 158 156 5. BOLI 93 95 95 96 6. Other 371 478 435 313 7. Total Assets $4,784 $4,481 $4,376 $4,183 ($ in Millions) TOTAL ASSETS

  36. Slide 36: Investment Portfolio

    INVESTMENT PORTFOLIO (as of 6/30/10) § $646 Million Balance § Average duration - 3.9 years § Tax equivalent yield of 4.51% § No private label MBS exposure § Trust Preferred Pools with book balance of $6.3 million and a market value of $1.4 million § Net unrealized gain of the entire portfolio totals

  37. Slide 37: Total Liabilities and Capital

    2008 2009 Q1-’10 Q2-’10 1. Customer Non-Maturity Deposits $1,858 $2,042 $2,000 $1,976 2. Customer Time Deposits 1,384 1,220 1,167 1,090 3. Brokered Deposits 477 275 231 195 4. Borrowings 507 339 320 292 5. Other Liabilities 51 30 58 31 6. Hybrid Capital 111 111 111 142 7. Preferred Stock (CPP) - 112

  38. Slide 38: Deposits (as of 6/30/10)

    YTD Yield = 1.55% Total = $3.3B DEPOSITS (as of 6/30/10)

  39. Slide 39: Total Liabilities and Capital

    2008 2009 Q1-’10 Q2-’10 1. Customer Non-Maturity Deposits $1,858 $2,042 $2,000 $1,976 2. Customer Time Deposits 1,384 1,220 1,167 1,090 3. Brokered Deposits 477 275 231 195 4. Borrowings 507 339 320 292 5. Other Liabilities 51 30 58 31 6. Hybrid Capital 111 111 111 142 7. Preferred Stock (CPP) - 112

  40. Slide 40: Capital Ratios

    2008 2009 Q1-’10 Q2-’10 1. Total Risk-Based Capital Ratio 10.24% 13.04% 14.44% 14.72% 2. Tier 1 Risk-Based Capital Ratio 7.71% 10.32% 11.65% 11.88% 3. Leverage Ratio 8.16% 8.20% 9.13% 9.21% 4. TCE/TCA 5.01% 4.54% 5.27% 5.88% CAPITAL RATIOS

  41. Slide 41: Net Interest Margin

    $3,463 $4,245 $3,956 $3,869 ― Net Interest Margin 3.82% 3.90% 3.84% 3.74% NET INTEREST MARGIN

  42. Slide 42: Non-Interest Income

    2008 2009 Q1-’10 Q2-’10 1. Service Charges on Deposit Accounts $13.0 $15.1 $ 3.3 $ 3.5 2. Trust Fees 8.0 7.4 2.1 2.0 3. Insurance Commission Income 5.8 6.4 2.0 1.5 4. Cash Surrender Value of Life Ins (0.3) 1.6 0.5 0.5 5. Gains on Sales Mortgage Loans 2.5 6.8 1.1 1.2 6. Securities Gains/Losses (2.1)

  43. Slide 43: Non-Interest Expense

    NON-INTEREST EXPENSE 2008 2009 Q1-’10 Q2-’10 1. Salary & Benefits $63.0 $76.3 $17.6 $17.9 2. Premises & Equipment 14.4 17.9 4.7 3.9 3. Core Deposit Intangible 3.2 5.1 1.2 1.2 4. Professional Services 2.6 4.4 1.5 1.3 5. OREO/Credit-Related Expense 2.8 9.8 2.7 1.5 6. FDIC Expense 1.7 10.4 1.7 2.3 7. F

  44. Slide 44: Net Charge-offs, Provision and Allowance for Loan Losses

    2008 2009 Q1-'10 Q2-10 @ Net Charge-offs D) Provison @ Allowance for Loan Losses

  45. Slide 45: Earnings

    2008 2009 Q1-’10 Q2-’10 1. Net Interest Income-FTE $133.1 $159.1 $37.8 $37.7 2. Non Interest Income 1 38.5 46.5 11.7 11.0 3. Non Interest Expense 2 106.0 134.7 31.0 31.9 4. Pre-Tax Pre-Provision Earnings $ 65.6 $ 70.9 $18.5 $16.8 5. Provision (28.2) (122.2) (13.9) (15.0) 6. Adjustments (5.0) (12.1)

  46. Slide 46: Valuation Attributes

    VALUATION ATTRIBUTES § Well Capitalized, Well Positioned, Well Reserved § 3 rd largest Indiana bank with energized & experienced management team § Attractive long-term deposit market shares § Indianapolis momentum § State-of-the-industry technology with scalable operations platform § $16.8M Pre-Tax

  47. Slide 47: Research Coverage

    RESEARCH COVERAGE § FIG Partners § Howe Barnes Hoefer & Arnett § Macquarie Capital (USA), Inc. § Sandler O'Neill + Partners, L.P .

  48. Slide 48: Contact Information

    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

First Merchants — INVESTIndiana Equity Conference 2010 on 6ix