Slide 1: First Merchants Corporation First Quarter 2016
FIRST MERCHANTS CORPORATION THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com First Quarter 2016 NASDAQ: FRME Michael C. Rechin Mark K. Hardwick Michael J. Stewart John J. Martin President Executive Vice President Executive Vice President Executive Vice President Chief Executive Offi
Slide 2: Forward-Looking Statement
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 2 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 an
Slide 3: Why Invest in First Merchants?
THE STRENGTH OF BIG. THE SERVICE OF SMALL. Why Invest in First Merchants? www.firstmerchants.com 3 ®
Slide 4: Financial Highlights and Company Profile
Financial Highlights Assets $6,798,539 Loans, Net $4,647,821 Deposits $5,311,070 Tangible Common Equity $612,092 TCE/TA 9.35% 2016 Net Income – YTD $17,693M 2016 ROAA – YTD 1.05% 2016 ROATCE - YTD 12.10% NPAs/Loans + OREO 1.13% THE STRENGTH OF BIG. THE SERVICE OF SMALL. Company Profile (as of 3/31/2
Slide 5: Our Franchise
THE STRENGTH OF BIG. THE SERVICE OF SMALL. Our Franchise www.firstmerchants.com 5 First Merchants Corporation operates more than 100 locations in 28 Indiana counties, 2 Ohio counties, and 2 Illinois counties Key Market Profiles Loans Deposits $2,061M Indianapolis $1,416M 877M Muncie 1,577M 577M Muns
Slide 6: County market position and deposits
County Region/Type Market Position Market % $ Deposits Delaware County, IN Muncie (Established) 1 47.92% $ 918,048 Henry County, IN Muncie (Established) 1 39.41% 252,871 Jasper County, IN Lafayette (Established) 1 29.87% 180,331 White County, IN Lafayette (Established) 1 32.07% 155,980 Jay County, I
Slide 7: First Merchants Strategy
THE STRENGTH OF BIG. THE SERVICE OF SMALL. First Merchants Strategy www.firstmerchants.com 7 Commercial Bank • Lending Engine Supported by Consumer Retail Bank • Deposit Engine Growth • Organic • Growth by Acquisition ®
Slide 8: First Merchants Strategy: Commercial Bank
THE STRENGTH OF BIG. THE SERVICE OF SMALL. First Merchants Strategy www.firstmerchants.com 8 Commercial Bank • Located in Prime Growth Commercial Banking Markets • Indianapolis, Indiana • Columbus, Ohio • Lafayette, Indiana • Northwest Indiana • Hire the Best Talent Supported with the Finest: • Sa
Slide 9: First Merchants Strategy: Consumer Retail Bank
THE STRENGTH OF BIG. THE SERVICE OF SMALL. First Merchants Strategy www.firstmerchants.com 9 Consumer Retail Bank • Diversely Located in Stable Rural and Growth Metro Markets • Supported by: • Talented Customer Service Oriented Banking Center and Call Center Professionals • State-of-the-Art Deposi
Slide 10: First Merchants Strategy
THE STRENGTH OF BIG. THE SERVICE OF SMALL. First Merchants Strategy www.firstmerchants.com 10 “Service-driven alternative to super-regional bank competitors. Deliver superior service with presence close to the customer for . . . ” “We specialize in our communities” Retail Banking Mortgage Bankin
Slide 11: Markets and line of business strategies
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 11 WEALTH ADVISORY MORTGAGE COMMERCIAL BANKING RETAIL BANKING Supported by LOB Strategies Indianapolis Higher Growth Brown, Hamilton, Hancock, Hendricks, Johnson, Madison, Marion, Morgan, Shelby Counties Columbus, OH Higher Growth Fra
Slide 12: Organic Growth Opportunities Exists in All Directions
THE STRENGTH OF BIG. THE SERVICE OF SMALL. Organic Growth Opportunities Exists in All Directions www.firstmerchants.com 12 Lafayette MSA Entered: 2002 Total Population:211,900 Deposit Market Share: 18.11% Indianapolis MSA Entered: 1998 Total Population: 1,955,766 Deposit Market Share: 3.43% Columbus
Slide 13: Delaware County, IN
4.58% 2.64% 2.68% 3.50% 1.62% -0.37% U.S. Indiana Delaware Co. HHI Pop. 13 Delaware County, IN* Rank Branches Deposits Mkt. Share 1 First Merchants Corporation 12 918,048 47.92% 2 Mutual First Financial 9 471,551 24.62% 3 J.P. Morgan Chase 4 213,100 11.12% 4 Old National Bancorp 7 186,905 9.76% 5 St
Slide 14: Hamilton County, IN
4.58% 2.64% 8.32% 3.50% 1.62% 7.86% U.S. Indiana Hamilton Co. HHI Pop. Projected HHI & Pop. Change 2014-2019 14 Hamilton County, IN** Rank Branches Deposits Mkt. Share 1 JPMorgan Chase & Co. 15 1,169,302 20.63% 2 Merchants Bancorp 2 721,276 12.73% 3 PNC Financial Services Group 11 517,540 9.13% 4 Fi
Slide 15: Tippecanoe County, IN
4.58% 2.64% 3.42% 3.50% 1.62% 4.73% U.S. Indiana Tippecanoe Co. HHI Pop. 15 Tippecanoe County, IN** Rank Branches Deposits Mkt. Share 1 JPMorgan Chase & Co. 6 $ 637,112 27.95% 2 First Merchants Corporation 9 479,784 21.05% 3 Old National Bancorp 7 297,262 13.04% 4 Regions Financial Corp 7 277,085 12
Slide 16: Lake County, IN
16 Lake County, IN* Rank Branches Deposits Mkt. Share 1 JPMorgan Chase & Co. 25 $ 1,727,334 21.32% 2 First Bancshares, Inc. 30 1,642,798 20.28% 3 First Midwest Bancorp 17 803,560 9.92% 4 Northwest Indiana Bancorp 15 705,685 8.71% 5 First Financial Bancorp 8 602,068 7.43% 6 First Merchants Corporatio
Slide 17: Franklin County, OH
17 Second-most populous county in Ohio Within 600 miles of 60% of All U.S. and Canadian Population Ranked 2nd in CNBC’s 2010 study of state transportation systems for its infrastructure, vitality, quality roads, and ability to cost-effectively ship goods by land, air, and water** Home to Ohi
Slide 18: Growth Through Acquisition
THE STRENGTH OF BIG. THE SERVICE OF SMALL. Growth Through Acquisition www.firstmerchants.com 18 Experienced Acquirer Expand in Current High-Growth Markets Extend into Additional High-Growth Markets Add to Franchise with Stable Deposit Gathering Markets ®
Slide 19: First Merchants Acquisition Experience 1893-2015
THE STRENGTH OF BIG. THE SERVICE OF SMALL. 19 FIRST MERCHANTS ACQUISITION EXPERIENCE 1893-2015 ®
Slide 20: First Merchants Acquisition Process
20 Continuous Relationship Building Complete and Thorough Due Diligence Process Demonstrated Pricing Discipline: • Average Price to TBV of 129% • Average EPS Accretion within One Year • Average TBV Earn-back of 2.8 Years Detailed Project Managed Integration Process Single Charter Operating
Slide 21: Operational Delivery Highlights
THE STRENGTH OF BIG. THE SERVICE OF SMALL. Operational Delivery Highlights www.firstmerchants.com 21 Daleville Operations Facility Strategic differentiator in support of growth and scalability Operational services execution “hub” focusing on value creation Functional focus: • Operations • Cred
Slide 22: Operational Delivery Highlights: Customer, Digital Channel & Transaction Data
Retail Households: 145K Online Banking/Digital Channel • Consumer: 62K Users • 810K logins monthly • 12K bill pay users • 74K payments monthly Cash Management Annual Volume • Automated Clearing House (ACH) • # Originated: 2M Items ($5B) • # Received: 12M Items ($17B) • Mobile: 26K Users • 22 a
Slide 23: 1st Quarter 2016 Highlights
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 23 1st Quarter 2016 Highlights 1st Quarter Highlights Earnings Per Share of $ .43, Equal to 1Q2015 $17.7 Million of Net Income, a 9.4% increase over 1Q2015 1st Quarter Results Include Acquisition Expenses of $1.9 Million ($.03 p
Slide 24: Total Assets
24 Total Assets ($ in Millions) THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® 2014 2015 Q1-’15 Q1-’16 1. Investments $1,181 $1,277 $1,189 $1,271 2. Loans Held for Sale 7 10 6 4 3. Loans 3,925 4,694 3,966 4,710 4. Allowance (64) (62) (63) (62) 5. CD&I & Goodwill 219 260 218 262
Slide 25: Loan and Yield Detail
® THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com Commercial & Industrial 22.5% Commercial Real Estate Owner- Occupied 11.6% Commercial Real Estate Non-Owner Occupied 23.5% Construction, Land & Land Development 8.3% Agricultural Land 3.3% Agricultural Production 2.0% Other Commerci
Slide 26: Investment Portfolio
® THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com Mortgage- Backed Securities 31% Collateralized Mortgage Obligations 24% U. S. Agencies 1% Corporate Obligations 3% Tax-Exempt Municipals 41% Investment Portfolio (as of 3/31/2016) $1.3 Billion Modified duration of 4.2 years Ta
Slide 27: Total Liabilities and Capital
2014 2015 Q1-’15 Q1-’16 1. Customer Non-Maturity Deposits $3,523 $4,096 $3,518 $4,140 2. Customer Time Deposits 784 880 800 841 3. Brokered Deposits 334 314 330 330 4. Borrowings 290 446 305 420 5. Other Liabilities 44 51 63 79 6. Hybrid Capital 122 123 122 122 7. Common Equity 727 851 740 867 8. To
Slide 28: Deposit Detail
® THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com Demand Deposits 49% Savings Deposits 29% Certificates & Time Deposits of >$100,000 6% Certificates & Time Deposits <$100,000 10% Brokered Deposits 6% Deposit Detail (as of 03/31/2016) YTD Cost = .40% Total = $5.3 Billion 28
Slide 29: Capital Ratios
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com Total Risk-Based Capital Ratio (Target = 13.50%) Common Equity Tier 1 Capital Ratio (Target = 10.00%) Tangible Common Equity/Tangible Assets (TCE) (Target = 8.50%) 29 10.86% 11.00% 11.16% 11.40% 11.37% 11.22% 11.31% 11.49% 11.42% 8.65
Slide 30: Net Interest Margin
3.97% 3.89% 3.98% 3.80% 3.78% 3.81% 3.85% 3.75% 3.83% 3.83% 3.71% 3.71% 3.69% 3.61% 3.65% 3.71% 3.62% 3.66% 2.50% 2.70% 2.90% 3.10% 3.30% 3.50% 3.70% 3.90% 4.10% $30 $34 $38 $42 $46 $50 $54 $58 Q1 - '14 Q2 - '14 Q3 - '14 Q4 - '14 Q1 - '15 Q2 - '15 Q3 - '15 Q4 - '15 Q1 - '16 Net Interest Income - FTE
Slide 31: Non-Interest Income
($ in Millions) 2014 2015 Q1-’15 Q1-’16 1. Service Charges on Deposit Accounts $15.7 $16.2 $ 3.5 $ 4.1 2. Trust Fees 9.0 9.2 2.5 2.5 3. Insurance Commission Income 7.4 4.1 2.3 4. Electronic Card Fees 9.7 11.1 2.5 3.2 5. Cash Surrender Value of Life Ins 3.7 2.9 0.7 1.5 6. Gains on Sales Mortgage Loan
Slide 32: Non-Interest Expense
32 Non-Interest Expense 2014 2015 Q1-’15 Q1-’16 1. Salary & Benefits $ 96.5 $101.9 $ 24.5 $ 27.3 2. Premises & Equipment 23.2 25.5 6.4 7.3 3. Core Deposit Intangible 2.4 2.8 0.7 1.0 4. Professional & Other Outside Services 8.1 9.9 1.5 2.2 5. OREO/Credit-Related Expense 8.0 6.1 1.2 1.2 6. FDIC Expens
Slide 33: Earnings
33 2014 2015 Q1-’15 Q1-’16 1. Net Interest Income $187.0 $196.4 $ 47.0 $ 54.5 2. Provision for Loan Losses (2.6) (0.4) (0.6) 3. Net Interest Income after Provision 184.4 196.0 47.0 53.9 4. Non-Interest Income 66.4 72.5 16.2 16.3 5. Non-Interest Expense (168.5) (177.5) (41.2) (46.9) 6. Income before
Slide 34: Per Share Results
34 2015 Q1 Q2 Q3 Q4 Total 1. Earnings Per Share $ .43 $ .47 $ .45 $ .37 $ 1.72 2. Tangible Book Value $ 13.96 $ 14.15 $ 14.59 $ 14.68 3. Dividends $ .08 $ .11 $ .11 $ .11 $ .41 2016 Q1 Q2 Q3 Q4 Total 1. Earnings Per Share $ .43 – – – $ .43 2. Tangible Book Value $ 15.02 – – – 3. Dividends $ .11 – –
Slide 35: Dividends and Tangible Book Value
THE STRENGTH OF BIG. THE SERVICE OF SMALL. Dividends and Tangible Book Value 35 0 0.02 0.04 0.06 0.08 0.1 0.12 0.14 .08 www.firstmerchants.com ® .01 .03 .05 .11 .14 0.0 0.10 2.25% Dividend Yield 30% Dividend Payout Ratio = $9.21 $9.64 $10.95 $12.17 $13.65 $14.68 Quarterly Dividends Tangible Book Val
Slide 36: Asset Quality Summary
($ in Millions) 2014 2015 Q1-'15 Q1-'16 $ % $ % 1. Non-Accrual Loans 48.8$ 31.4$ 44.3$ 36.7$ 5.3 16.9% (7.6) (17.2%) 2. Other Real Estate 19.3 17.3 19.1 15.6 (1.7) (9.8%) (3.5) (18.3%) 3. Renegotiated Loans 2.0 1.9 1.3 1.0 (0.9) (47.4%) (0.3) (23.1%) 4. 90+ Days Delinquent Loans 4.6 0.9 1.7 1.0 0.1
Slide 37: ALLL and Fair Value Summary
37 ALLL and Fair Value Summary THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® 32.5% 13.6% 53.9% ($ in Millions) Q1-'15 Q2-'15 Q3-'15 Q4-'15 Q1-'16 1. Allowance for Loan Losses (ALLL) 62.8$ 62.6$ 62.9$ 62.5$ 62.1$ 2. Fair Value Adjustment (FVA) 40.6 40.7 37.9 47.0 47.1 3. Total A
Slide 38: Total Return Performance
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 38 -50 0 50 100 150 200 250 First Merchants Corporation SNL U.S. Bank Russell 2000 Total Return Performance ® 12/31/10 12/31/11 12/31/12 12/31/13 12/31/14 12/31/15 %
Slide 39: FMC Strategy and Tactics Overview
39 FMC Strategy and Tactics Overview THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com Focus on our Clients, Performance and Growth Focus on gaining deeper penetration of new Treasury Management, Mobile, and Online banking services for additional revenue and deposit generation Re
Slide 40: FMC Strategy and Tactics Overview: Looking Forward
40 FMC Strategy and Tactics Overview THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com Looking Forward . . . ® Continue to Win in our Markets – Geographic Community-Based Banking Model Exploit Back-Office Infrastructure for Efficiency and Operating Leverage Maintain Focus on Tr
Slide 41: Why Invest in First Merchants?
41 Why Invest in First Merchants? Attractive and Growing Earnings Stream One of SNL’s Top 25 Best-Performing Regional Banks in 2015 2nd Largest Indiana Bank with an Energized and Experienced Management Team Attractive Long-Term Deposit Market Shares Commercial Presence that Creates a Clien
Slide 42: Research Coverage
42 Stephens, Inc. FIG Partners Keefe, Bruyette & Woods, Inc. Sandler O’Neill + Partners, L.P. Sun Trust Robinson Research Coverage THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ®
Slide 43: Contact Information
43 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
Slide 44: Appendix
44 Appendix ®
Slide 45: Appendix – Non-GAAP Reconciliation
45 THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com Appendix – Non-GAAP Reconciliation ®
Slide 46: Appendix – Non-GAAP Reconciliation
46 Appendix – Non-GAAP Reconciliation THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ®
Slide 47: Appendix – Non-GAAP Reconciliation
47 Appendix – Non-GAAP Reconciliation THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ®