First Merchants Corporation · NASDAQ:FRME
First Merchants — Q4 2024 Earnings Presentation
34 slides from First Merchants's earnings presentation, Jan 30, 2025
Slide 1: Investor Update Fourth Quarter 2024
INVESTOR UPDATE Fourth Quarter 2024
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 27 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 12/31/2024 Illinois Branch Sale $18.3 Billion YTD ROAA: 1.09% Sale of five Illinois branches Total Assets closed December 6, 2024. YTD Return on TCE 13.71
Slide 5: Highlights
Highlights Fourth Quarter Net Income & EPS1 ROA (Annualized) ROE & ROTCE (Annualized) $64 Million 1.39% ROA 11.05% ROE $1.10 Per Share 1.75% PTPP ROA2 16.75% ROTCE2 ▪ EPS of $1.001,2 when adjusted for non-core items compared to ▪ Grew net interest income and margin core EPS of $0.901,2 in 4Q23 ▪ Str
Slide 6: Business Strategy
Business Strategy Commercial Banking Consumer Banking Full Spectrum of Debt Capital and Treasury Service Offerings Full Spectrum of Consumer Deposit and Lending Offerings Located in Prime Growth Markets Supported by: Talented, Customer Service Oriented Banking Center Small Business & SBA Asset Based
Slide 7: Business Highlights - Loans
Business Highlights - Loans Michigan Loan Growth Summary1 Monroe MSA Rank: 1 Detroit MSA Rank: 9 4Q24 Balance ($B) Growth Deposits: $2.5B Loans: $2.8B Commercial 9.7 6.2% Northwest Indiana Lake County Rank: 4 Consumer 3.0 6.0% Lafayette MSA Rank: 2 Total Loan Growth QTD 5.9% Deposits: $3.0B Total Lo
Slide 8: Business Highlights - Deposits
Business Highlights - Deposits Michigan Monroe MSA Rank: 1 Deposit Growth Summary 1,2 Detroit MSA Rank: 9 Deposits: $2.5B 4Q24 Balance ($B) Growth Northwest Indiana Loans: $2.8B Commercial 7.3 2.7% Lake County Rank: 4 Lafayette MSA Rank: 2 Consumer 5.9 -22.4% Deposits: $3.0B Total Deposit Growth QTD
Slide 9: Fourth Quarter Financial Results
Fourth Quarter Financial Results ($M except per share data) For the Three Months Ended, Variance % Variance Linked Linked QTR- 12/31/23 3/31/24 6/30/24 9/30/24 12/31/24 Quarter Annualized Balance Sheet & Asset Quality 4Q24 Highlights 1. Total Assets $18,309.5 $18,317.8 $18,303.4 $18,347.6 $18,312.0
Slide 10: Year-to-Date Financial Results
Year-to-Date Financial Results ($M except per share data) For the Year Ended December 31, Variance % Variance 2022 2023 2024 YOY YOY Year-to-Date Highlights Balance Sheet & Asset Quality 1. Total Assets $18,002.2 $18,405.9 $18,312.0 ($93.9) -0.5% 2. Total Loans 12,013.0 12,505.0 12,873.0 368.1 2.9%
Slide 11: Investment Portfolio Highlights
Investment Portfolio Highlights 4Q24 Investment Portfolio Composition Yield on Investments (%) / Total Investments ($B) Corporate U.S. Agencies Obligations 12% 1% Collateralized Mortgage 2.56% 2.58% 2.61% 2.63% 2.67% Obligations 5% $3.5B Municipal $3.8 $3.8 $3.8 $3.7 $3.5 Mortgage- Total Bonds 56% B
Slide 12: Loan Portfolio Highlights
Loan Portfolio Highlights 4Q24 Loan Composition Highlights Construction Land & Land Development 6.2% Agricultural Land & Commercial Real Estate Production 2.0% ▪ Portfolio composition is ~75% Commercial oriented Non-Owner Occupied 17.7% Public Finance/Other Commercial 8.2% ▪ Total loan yield of 6.55
Slide 13: Allowance for Credit Losses - Loans
Allowance for Credit Losses - Loans 4Q24 Allowance for Credit Losses - Loans Highlights ▪ $4.2 million Q4 provision expense ▪ $5.7 million provision recorded for ACL – Loans ▪ $1.5 million reserve reduction for unfunded commitments 1.64% 1.64% 1.50% 1.48% 1.50% ▪ The reserve for unfunded commitments
Slide 14: Deposit Portfolio Highlights
Deposit Portfolio Highlights 4Q24 Deposit Composition Highlights Certificates & Time Deposits Brokered Certificates of ▪ Strong core deposit base < $100k Deposits 1 2% • 91% core deposits2 5% Certificates & Time • 16% noninterest bearing Deposits > $100k • 37% of total deposits yield 0 to 5 bps 7% ▪
Slide 15: Net Interest Margin
Net Interest Margin 4Q23 1Q24 2Q24 3Q24 4Q24 1. Net Interest Income - FTE ($millions) $ 135.9 $ 132.9 $ 134.4 $ 137.0 $ 140.2 2. Fair Value Accretion $ 1.7 $ 1.4 $ 1.5 $ 1.4 $ 1.4 1 3. Adjusted Net Interest Income - FTE $ 134.2 $ 131.5 $ 132.9 $ 135.6 $ 138.8 4. Tax Equivalent Yield on Earning Asset
Slide 16: Noninterest Income Highlights
Noninterest Income Highlights 4Q24 Noninterest Income Detail ($M) Noninterest Income Trends Fee Income / Revenue 23.4% Loss on 18.9% Sale of Securities 16.3% 16.7% ($11.6) Gain on Branch Sale 15.4% -18% $20.0 30% Card Payment Fees Customer-Related Fees ($M) $5.0 8% $42.7M Service Charges Total Deriv
Slide 17: Noninterest Expense Highlights
Noninterest Expense Highlights 4Q24 Noninterest Expense Detail Noninterest Expense Trends ($M) Efficiency Ratio Premises & Equipment Outside Data Processing 63.26% $14.4 $6.0 59.21% Salary & Benefits 15% 6% 53.84% 53.76% 53.60%1 $55.4 Professional & Other Outside Services 57% $3.8 55.56%1 57.03%1 4%
Slide 18: Capital Ratios
Capital Ratios Tangible Common Equity Ratio Highlights ▪ TCE increased over 3Q24 due to strong earnings 8.76% 8.81% 8.40% 8.32% 8.27% growth 9.57% 9.31% ▪ Capital ratios reflect $65 million of sub debt 9.31% redemption and $56.2 million of stock buyback during 2024 9.65% 9.04% 9.31% 9.31% 9.57% 9.65
Slide 19: Loan Portfolio
Loan Portfolio Loan Portfolio Trends ($M) 4Q24 Highlights 4Q23 1Q24 2Q24 3Q24 4Q24 ▪ Strong 5.9% C&I and Total Loan growth 1. C&I - Regional Banking $ 2,876 $ 2,910 $ 3,132 $ 3,201 $ 3,349 ▪ Robust Public Finance activity driven by market dynamics 2. C&I - Sponsor Finance 795 813 818 841 766 ▪ Ample
Slide 20: Loan Portfolio Insights
Loan Portfolio Insights Commercial C&I C&I - Sponsor Finance ▪ $765.4 million in loans to 85 companies in a diversity of industries ▪ Senior Debt/Adj. EBITDA < 3.0X ~79% ▪ Total Debt/Adj. EBITDA < 4.0X ~80% ▪ FCCR > 1.50X ~66% ▪ ~5.2% Classified (as a % of portfolio) ▪ Excellent credit history with
Slide 21: Loan Portfolio Insights (continued)
Loan Portfolio Insights (continued) Commercial Real Estate (Non-Owner Occupied) ($M) Office (Non-Owner Occupied) ($M) Office % Total Loans Office - Maturities Office Total Loans Maturities $12.9 $242.8 Billion Million ▪ Top 10 loans are 52.0% of total office with WALTV of ~63.6 at origination ▪ Larg
Slide 22: Asset Quality
Asset Quality Asset Quality Trends ($M) 4Q24 Highlights Non-Accruals: ▪ Non-accruals up $14.7 million with NPAs + 90 days $84.6 million or 66 basis point ▪ Largest: Multi-family, Nursing Care Facility, and Construction Charge-offs: ▪ ~$770 thousand net charge-offs; ▪ $1.1 million related to Transpor
Slide 23: Nonperforming Assets
Nonperforming Assets Nonperforming Assets Roll Forward ($M) 4Q24 Highlights 1Q24 2Q24 3Q24 4Q24 2024 Non-Accrual Migration: 1. Beginning Balance NPAs + 90PD $ 58.6 $ 70.2 $ 68.4 $ 78.4 $ 58.6 ▪ Single relationship accounted for $22 million of the Non-Accrual $42.9 million new non-accrual balances 2.
Slide 24: Track Record of Shareholder Value
Track Record of Shareholder Value 10-Year Total Return (2014-2024) Earnings per Share CAGR 2014-2024: 7.5% $3.81 $3.81 $3.73 $3.22 $3.19 $3.41 230.09% $2.74 $1.98 $2.12 $1.65 $1.72 200.33% 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Dividends per Share FRME KBW NASDAQ Regional Banking Ind
Slide 25: History of Organic and Whole Bank Acquisition Growth
History of Organic and Whole Bank Acquisition Growth Total Assets ($B) Growth Through Acquisition ✓ Experienced Acquirer ✓ Expanded in Current High-Growth Markets ✓ Extended into Additional High-Growth Markets $17.9 $18.3 $18.3 ✓ Added to Franchise with Stable Deposit Gathering Markets $15.5 $14.1 $
Slide 26: 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 27: Appendix
APPENDIX ss 00) First Merchants Corporation Helping you prosper
Slide 28: Non-GAAP: Adjusted Net Income and Diluted EPS
Non-GAAP ADJUSTED NET INCOME AND DILUTED EARNINGS PER COMMON SHARE 4Q23 1Q24 2Q24 3Q24 4Q24 2022 2023 2024 (Dollars in Thousands, Except Per Share Amounts) Net Income Available to Common Stockholders - GAAP $ 42,010 $ 47,472 $ 39,456 $ 48,719 $ 63,880 $ 220,683 $ 221,911 $ 199,527 Adjustments: PPP l
Slide 29: Non-GAAP: Pre-Tax, Pre-Provision Earnings
Non-GAAP PRE-TAX, PRE-PROVISION ("PTPP") EARNINGS, AS ADJUSTED 4Q23 1Q24 2Q24 3Q24 4Q24 2022 2023 2024 (Dollars in Thousands, Except Per Share Amounts) Net Interest Income (GAAP) $ 130,064 $ 127,063 $ 128,571 $ 131,110 $ 134,370 $ 520,203 $ 545,401 $ 521,114 Other Income (GAAP) 26,443 26,638 31,334
Slide 30: Non-GAAP: Net Interest Margin, Adjusted
Non-GAAP NET INTEREST MARGIN ("NIM"), ADJUSTED 4Q23 1Q24 2Q24 3Q24 4Q24 2022 2023 2024 (Dollars in Thousands, Except Per Share Amounts) Net Interest Income (GAAP) $ 130,063 $ 127,063 $ 128,571 $ 131,110 $ 134,370 $ 520,203 $ 545,400 $ 521,114 Fully Taxable Equivalent ("FTE") Adjustment 5,853 5,795 5
Slide 31: Non-GAAP: Efficiency Ratio
Non-GAAP EFFICIENCY RATIO (dollars in thousands): 4Q23 1Q24 2Q24 3Q24 4Q24 2022 2023 2024 EFFICIENCY RATIO (dollars in thousands): Non Interest Expense (GAAP) $ 108,103 $ 96,935 $ 91,413 $ 94,629 $ 96,289 $ 355,715 $ 388,270 $ 379,266 Less: Intangible Asset Amortization (2,182) (1,957) (1,771) (1,77
Slide 32: Non-GAAP: Capital Ratios
Non-GAAP CAPITAL RATIOS (dollars in thousands): 4Q22 4Q23 1Q24 2Q24 3Q24 4Q24 Total Risk-Based Capital Ratio (dollars in thousands) Total Stockholders' Equity (GAAP) 2,034,770 2,247,713 2,224,803 2,212,525 2,302,373 2,304,983 Adjust for Accumulated Other Comprehensive (Income) Loss 1 239,151 175,970
Slide 33: Non-GAAP: Tangible Common Equity Ratio
Non-GAAP TANGIBLE COMMON EQUITY RATIO (dollars in thousands): 4Q22 4Q23 1Q24 2Q24 3Q24 4Q24 Tangible Common Equity Ratio (dollars in thousands) Total Stockholders' Equity (GAAP) $ 2,034,770 $ 2,247,713 $ 2,224,803 $ 2,212,525 $ 2,302,373 $ 2,304,983 Less: Preferred Stock (25,125) (25,125) (25,125) (
Slide 34: Non-GAAP: Return on Tangible Common Equity
Non-GAAP RETURN ON TANGIBLE COMMON EQUITY (dollars in thousands): 2014 2015 2016 2017 2018 2019 2020 2021 Return on Tangible Common Equity Total Average Stockholders' Equity (GAAP) $ 675,295 $ 753,724 $ 884,664 $ 1,110,524 $ 1,343,861 $ 1,569,615 $ 1,825,135 $ 1,866,632 Less: Average Preferred Stock