Slide 1: Investor Update Fourth Quarter 2023
INVESTOR UPDATE Fourth 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 26 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 12/31/2023 $18.3 Billion YTD ROAA: 1.23% Total Assets YTD Return on TCE 16.76% $12.5 Billion TCE/TA: 8.44% Total Loans Market Cap $2.2B $14.8 Billion Divi
Slide 5: Highlights
Highlights Fourth Quarter Net Income & EPS1 ROA (Annualized) ROE & ROTCE (Annualized) $42.0 Million 0.92% ROA 7.89% ROE $0.71 Per Share 1.33% PTPP ROA2 12.75% ROTCE2 ▪ Annualized loan growth of 6.6% on a linked quarter basis, with new/renewed loan yields averaging 8.01% for the quarter ▪ Annualized
Slide 6: Business Strategy
Business Strategy Commercial Banking Consumer Banking Full Spectrum of Debt Capital and Treasury Service Offerings Full Spectrum of Consumer Deposit and Lending Offerings Located in Prime Growth Markets Supported by: Talented, Customer Service Oriented Banking Center Small Business & SBA Asset Based
Slide 7: Business Highlights
Business Highlights Loan Growth Annualized1 Michigan 4Q23 Balance ($B) Growth Monroe MSA Rank: 1 Detroit MSA Rank: 9 Commercial $9.5 8.0% Deposits: $2.7B Consumer $2.9 2.7% Loans: $2.6B Total Loan Growth QTD 6.6% Total Loan Growth YTD 4.1% Northeast Indiana *Adjusted Total Loan Growth YTD 5.1% Munci
Slide 8: Fourth Quarter Financial Results
Fourth Quarter Financial Results ($M except per share data) For the Three Months Ended, Variance % Variance Linked Linked QTR- 12/31/22 3/31/23 6/30/23 9/30/23 12/31/23 Quarter Annualized Balance Sheet & Asset Quality 4Q23 Highlights 1. Total Assets $17,938.3 $18,178.9 $17,968.4 $17,996.6 $18,309.5
Slide 9: Year-to-Date Financial Results
Year-to-Date Financial Results ($M except per share data) For the Year Ended December 31, Variance % Variance 2021 2022 2023 YOY YOY Balance Sheet & Asset Quality Year-to-Date Highlights 1. Total Assets $15,453.1 $17,938.3 $18,309.5 $371.2 2.1% 2. Total Loans 9,253.0 12,013.0 12,505.0 492.0 4.1% 3.
Slide 10: Investment Portfolio Highlights
Investment Portfolio Highlights 4Q23 Investment Portfolio Composition Yield on Investments (%) / Total Investments ($B) Corporate Obligations U.S. Agencies 1% 12% Collateralized Mortgage Obligations 2.66% 2.63% 2.56% 2.55% 2.56% 6% $3.8B Municipal $4.3 $4.1 $3.9 $3.7 $3.8 Mortgage- Total Bonds 56% B
Slide 11: Loan Portfolio Highlights
Loan Portfolio Highlights 4Q23 Loan Composition Highlights Construction Land & Land Development 7.7% Agricultural Land & ▪ Portfolio composition is ~75% Commercial oriented Commercial Real Estate Production 2.1% Non-Owner Occupied 19.2% Public Finance/Other Commercial 7.6% ▪ Total loan yield increas
Slide 12: Allowance for Credit Losses - Loans
Allowance for Credit Losses - Loans 4Q23 Allowance for Credit Losses - Loans Highlights ▪ $1.5 million Q4 provision expense ▪ $2.3 million provision exp. recorded for ACL – Loans ▪ $0.8 million reserve reduction for unfunded 1.86% 1.82% 1.80% commitments 1.67% 1.64% ▪ $3.5 million YTD provision expe
Slide 13: Deposit Portfolio Highlights
Deposit Portfolio Highlights 4Q23 Deposit Composition Highlights Certificates & Time Brokered Certificates of ▪ Strong core deposit base Deposits Deposits 1 • 90% core deposits2 < $100k 1% Certificates & Time 6% • 17% noninterest bearing Deposits > $100k • 39% yield 5 bps or less 9% ▪ Total deposit
Slide 14: Net Interest Margin
Net Interest Margin 4Q22 1Q23 2Q23 3Q23 4Q23 1. Net Interest Income - FTE ($millions) $ 155.3 $ 150.4 $ 143.7 $ 139.3 $ 135.9 2. Fair Value Accretion $ 2.7 $ 2.4 $ 2.0 $ 2.0 $ 1.7 3. PPP Loan Income $ 0.1 $ - $ - $ - $ - 4. Adjusted Net Interest Income - FTE1 $ 152.5 $ 148.0 $ 141.7 $ 137.3 $ 134.2
Slide 15: Noninterest Income Highlights
Noninterest Income Highlights 4Q23 Noninterest Income Detail ($M) Noninterest Income Trends ($M) Fee Income / Revenue 16.6% 16.3% Service Charges Card 15.5% 13.4% 14.2% $7.7 Payment Fees 25% $4.4 Gain (Loss) on 14% Sale of Securities ($2.3) $27.8M -7% $26.3M $26.4M Gain on $26.4M Derivative $24.1M $
Slide 16: Noninterest Expense Highlights
Noninterest Expense Highlights 4Q23 Noninterest Expense Detail Noninterest Expense Trends ($M) Outside Data Processing $5.9 Efficiency Ratio 63.26% Premises & Equipment 6% $15.2 Professional & Other Outside Services 14% 52.21% 53.91% $4.0 51.72% 4% 48.60% 55.56%1 Intangible Asset Amortization $2.2 $
Slide 17: Capital Ratios
Capital Ratios Tangible Common Equity Ratio Highlights 7.99% 8.44% 7.75% 7.69% ▪ TCE Ratio including marks on held-to-maturity 7.34% 9.57% securities portfolio is 7.13% 9.31% ▪ CET1 9.31%including net unrealized loss in AOCI on available-for-sale securities is 10.30% 9.65% 9.04% 9.31% 9.31% 9.57% 9.
Slide 18: Loan Portfolio
Loan Portfolio Loan Portfolio Trends ($M) 4Q23 Highlights 4Q22 1Q23 2Q23 3Q23 4Q23 ▪ C&I – Regional Banking up $214 million 1.C&I - Regional Banking $ 2,827 $ 2,831 $ 2,733 $ 2,662 $ 2,876 ▪ CRE NOO (Investment) up $41 million 2.C&I - Sponsor Finance 612 674 798 829 795 3.CRE Owner Occupied 1,244 1,
Slide 19: Loan Portfolio Insights
Loan Portfolio Insights Commercial C&I C&I - Sponsor Finance ▪ $795 million to 86 companies, 53 active sponsors, top 5 borrower industries include manufacturing, packaging services, and comm transportation equipment ▪ Senior Debt/Adj. EBITDA < 3.0X ~ 74% ▪ Total Debt/Adj. EBITDA < 4.0X ~ 78% ▪ FCCR
Slide 20: Loan Portfolio Insights (continued)
Loan Portfolio Insights (continued) Commercial Real Estate (Non-Owner Occupied) ($M) Multi- Warehouse Total CRE Family Industrial Retail Office / Storage Hotel Other (NOO) Balance: $724.0 $384.3 $348.4 $253.4 $241.8 $148.7 $300.2 $2,400.8 Commitment: $755.3 $398.9 $353.6 $258.1 $255.3 $149.2 $323.4
Slide 21: Asset Quality
Asset Quality Asset Quality Trends ($M) Highlights 4Q22 1Q23 2Q23 3Q23 4Q23 ▪ Stable credit metrics • NPAs + 90 day past due 47 basis points of Loans and 1. Non-Accrual Loans $ 42.3 $ 46.6 $ 69.2 $ 53.1 $ 53.6 ORE 2. Other Real Estate 6.5 7.8 7.7 6.5 4.8 • NPAs + 90 day past due declined $1.1 millio
Slide 22: Nonperforming Assets
Nonperforming Assets Nonperforming Assets Roll Forward ($M) Highlights 1Q23 2Q23 3Q23 4Q23 2023 4Q23 Nonperforming Asset Migration: 1. Beginning Balance NPAs + 90PD $50.7 $61.4 $77.3 $59.7 $50.7 ▪ Improvement for the quarter with $1.1 million Non-Accrual reduction in NPAs and 90 day past due overall
Slide 23: Track Record of Shareholder Value
Track Record of Shareholder Value 10-Year Total Return (2013-2023) Earnings per Share CAGR 2013-2023: 10.2% $3.81 $3.81 $3.73 215% $3.22 $3.19 $2.74 $1.98 $2.12 $1.65 $1.72 $1.41 191% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Dividends per Share FRME S&P BMI US Bank CAGR 2013-2023: 22.2
Slide 24: History of Organic and Whole Bank Acquisition Growth
History of Organic and Whole Bank Acquisition Growth Total Assets ($B) Growth Through Acquisition ✓ Experienced Acquirer ✓ Expanded in Current High-Growth Markets $18.3 ✓ Extended into Additional High-Growth Markets $17.9 ✓ 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 NET INCOME AND DILUTED EARNINGS PER COMMON SHARE 4Q22 1Q23 2Q23 3Q23 4Q23 2021 2022 2023 (Dollars in Thousands, Except Per Share Amounts) Net Income Available to Common Stockholders - GAAP $ 70,292 $ 63,610 $ 60,393 $ 55,898 $ 42,010 $ 205,531 $ 220,683 $ 221,911 Adjustments: PPP l
Slide 28: Non-GAAP
Non-GAAP PRE-TAX, PRE-PROVISION ("PTPP") EARNINGS, AS ADJUSTED 4Q22 1Q23 2Q23 3Q23 4Q23 (Dollars in Thousands, Except Per Share Amounts) Net Interest Income (GAAP) $ 148,956 $ 144,119 $ 137,835 $ 133,383 $ 130,064 Other Income (GAAP) 24,151 24,997 26,319 27,842 26,443 Total Revenue 173,107 169,116 1
Slide 29: Non-GAAP
Non-GAAP EFFICIENCY RATIO (dollars in thousands): 2021 4Q22 2022 1Q23 2Q23 3Q23 4Q23 2023 EFFICIENCY RATIO (dollars in thousands): Non Interest Expense (GAAP) $ 279,213 $ 89,699 $ 355,715 $ 93,720 $ 92,593 $ 93,854 $ 108,103 $ 388,270 Less: Intangible Asset Amortization (5,747) (2,303) (8,275) (2,19
Slide 30: Non-GAAP
Non-GAAP CAPITAL RATIOS (dollars in thousands): 4Q21 4Q22 1Q23 2Q23 3Q23 4Q23 Total Risk-Based Capital Ratio (dollars in thousands) Total Stockholders' Equity (GAAP) 1,912,571 2,034,770 2,122,448 2,145,565 2,092,644 2,247,713 Adjust for Accumulated Other Comprehensive (Income) Loss 1 (55,113) 239,15
Slide 31: Non-GAAP
Non-GAAP TANGIBLE COMMON EQUITY RATIO (dollars in thousands): 4Q21 4Q22 1Q23 2Q23 3Q23 4Q23 Tangible Common Equity Ratio (dollars in thousands) Total Stockholders' Equity (GAAP) $ 1,912,571 $ 2,034,770 $ 2,122,448 $ 2,145,565 $ 2,092,644 $ 2,247,713 Less: Preferred Stock (125) (25,125) (25,125) (25,
Slide 32: Non-GAAP
Non-GAAP RETURN ON TANGIBLE COMMON EQUITY (dollars in thousands): 2013 2014 2015 2016 2017 2018 2019 2020 Return on Tangible Common Equity Total Average Stockholders' Equity (GAAP) $ 540,255 $ 675,295 $ 753,724 $ 884,664 $ 1,110,524 $ 1,343,861 $ 1,569,615 $ 1,825,135 Less: Average Preferred Stock (