Slide 1: 4th Quarter 2015 Earnings Highlights
First Merchants Corporation 4th QUARTER 2015 Earnings Highlights January 28, 2016 ® Michael C. Rechin Mark K. Hardwick John J. Martin President Executive Vice President Executive Vice President Chief Executive Officer Chief Financial Officer Chief Credit Officer NASDAQ: FRME
Slide 2: Forward-Looking Statement
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com Forward-Looking Statement 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 f
Slide 3: First Merchants 2015 Performance
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 3 ® First Merchants 2015 Performance Full-Year Highlights • $65.4 Million of Record Net Income Available to Common Stockholders • Earnings Per Share of $1.72, a 4.2% increase over FY2014 • $4.6 Billion in Net Loans, a 20% Increase • S
Slide 4: Mark K. Hardwick, Chief Financial Officer
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 4 ® Mark K. Hardwick Executive Vice President and Chief Financial Officer
Slide 5: Total Assets
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 5 Total Assets ($ in Millions) 2013 2014 2015 1. Investments $1,096 $1,181 $1,277 2. Loans Held for Sale 5 7 10 3. Loans 3,633 3,925 4,694 4. Allowance (68) (64) (62) 5. CD&I & Goodwill 203 219 260 6. BOLI 165 169 201 7. Other 403 387
Slide 6: Loan and Yield Detail
Commercial & Industrial 22.5% Commercial Real Estate Owner- Occupied 11.8% Commercial Real Estate Non-Owner Occupied 23.2% Construction, Land & Land Development 7.8% Agricultural Land 3.4% Agricultural Production 2.1% Other Commercial 3.4% Residential Mortgage 16.9% Home Equity 7.4% Other Consumer 1
Slide 7: Investment Portfolio
Mortgage- Backed Securities 33% Collateralized Mortgage Obligations 25% Corporate Obligations 3% Tax-Exempt Municipals 39% THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 7 ® Investment Portfolio (as of 12/31/2015) • $1.3 Billion • Modified duration of 4.6 years • Tax equivalent yi
Slide 8: Total Liabilities and Capital
® THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 8 Total Liabilities and Capital ($ in Millions) 2013 2014 2015 1. Customer Non-Maturity Deposits $3,276 $3,523 $4,096 2. Customer Time Deposits 868 784 880 3. Brokered Deposits 87 334 314 4. Borrowings 401 290 446 5. Other Liabiliti
Slide 9: Deposits and Cost of Funds Detail
Demand Deposits 48% Savings Deposits 29% Certificates & Time Deposits of >$100,000 6% Certificates & Time Deposits of <$100,000 11% Brokered Deposits 6% THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 9 ® Deposits and Cost of Funds Detail (as of 12/31/2015) QTD Cost = .41% YTD Cost
Slide 10: Capital Ratios
Total Risk-Based Capital Ratio (Target = 13.50%) Common Equity Tier 1 Capital Ratio (Target = 10.00%) Tangible Common Equity/Tangible Assets (TCE) (Target = 8.50%) THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 10 10.37% 10.86% 11.00% 11.16% 11.40% 11.37% 11.22% 11.31% 11.49% 8.34
Slide 11: Net Interest Margin
® THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com Net Interest Margin 11 Q4 - '13 Q1 - '14 Q2 - '14 Q3 - '14 Q4 - '14 Q1 - '15 Q2 - '15 Q3 - '15 Q4 - '15 Net Interest Income - FTE ($millions) $ 42.8 $ 47.8 $ 48.1 $ 49.9 $ 49.2 $ 49.2 $ 51.7 $ 53.3 $ 53.2 Fair Value Accretion $ 0.6
Slide 12: Non-Interest Income
($ in Millions) THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 12 ® Non-Interest Income 1Adjusted for Bond Gains & Losses, Gain on Sale of Insurance Subsidiary, and Gain on Cancellation of Trust Preferred Debt – – 2013 2014 2015 1. Service Charges on Deposit Accounts $12.4 $15.7 $
Slide 13: Non-Interest Expense
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 13 Non-Interest Expense 2013 2014 2015 1. Salary & Benefits $ 85.4 $ 96.5 $101.9 2. Premises & Equipment 18.0 23.2 25.5 3. Core Deposit Intangible 1.6 2.4 2.8 4. Professional & Other Outside Services 8.3 8.1 9.9 5. OREO/Credit-Related
Slide 14: 2015 One-Time Expenses
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 14 ® 2015 One-Time Expenses ($ In Millions) +$2.4 +$0.7 +$2.1 +$4.0 $167.7 Total One-Time Expenses $9.8MM +$0.6 $177.5 TOTAL NON- INTEREST EXPENSE Online Banking & Other FMIG Cooper Community Ameriana ® CORE NON- INTEREST EXPENSE
Slide 15: Earnings
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 15 Earnings – ($ in Millions) – 2013 2014 2015 1. Net Interest Income $154.3 $187.0 $196.4 2. Provision for Loan Losses (6.6) (2.6) (0.4) 3. Net Interest Income after Provision 147.7 184.4 196.0 4. Non-Interest Income 56.0 66.4 72.5 5
Slide 16: Earnings Per Share
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 16 2014 Q1 Q2 Q3 Q4 Total 1. Reported $ .38 $ .41 $ .45 $ .41 $ 1.65 2. FV Accretion EPS Impact $ .03 $ .04 $ .06 $ .03 $ .16 2015 Q1 Q2 Q3 Q4 Total 1. Reported $ .43 $ .47 $ .45 $ .37 $ 1.72 2. FV Accretion EPS Impact $ .04 $ .04 $ .
Slide 17: John J. Martin, Chief Credit Officer
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 17 ® John J. Martin Executive Vice President and Chief Credit Officer
Slide 18: Loan Portfolio Trends
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 18 Loan Portfolio Trends ® ($ in Millions) Ameriana FMB 2014 Q3-'15 2015 1 & Cooper 2015 $ 2 $ % $ 1 $ % 186.1 186.1 1. Commercial & Industrial 896.7$ 999.2$ 1,035.6$ 21.5$ 1,057.1$ 36.6$ 57.9$ 5.8% 138.9$ 160.4$ 17.9% 2. Construction
Slide 19: Asset Quality Summary
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 19 Asset Quality Summary ($ in Millions) Ameriana FMB 2013 2014 2015 1 & Cooper 2015 % 1 % 1. Non-Accrual Loans 56.4$ 48.8$ 29.2$ 2.2$ 31.4$ (40.2%) (35.7%) 2. Other Real Estate 22.2 19.3 11.6 5.7 17.3 (39.9%) (10.4%) 3. Renegotiated
Slide 20: Non-Performing Asset Reconciliation
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 20 Non-Performing Asset Reconciliation ($ in Millions) Q1-Q3 2014 2015 Q4-'15 1 Ameriana 2015 1. Beginning Balance NPAs & 90+ Days Delinquent 83.0$ 74.7$ 53.2$ 74.7$ Non-Accrual 2. Add: New Non-Accruals 46.8 16.1 1.7 2.2$ 20.0 3. Less
Slide 21: ALLL and Fair Value Summary
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 21 ALLL and Fair Value Summary 1 Management uses this Non-GAAP measure to demonstrate coverage and credit risk 2 Includes an estimated FVA for Ameriana Bank acquired loans of $11.3 million at 12/31/15 30.5% 13.8% 55.7% ($ in Millions)
Slide 22: Portfolio Perspective
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 22 ® Portfolio Perspective • Organic loan growth driven by commercial, construction, and home equity. • Non-Performing Assets plus 90+ day delinquent loans continue trend of improvement. • Combined Allowance for Loan Losses and Loan M
Slide 23: Michael C. Rechin, President and CEO
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 23 ® Michael C. Rechin President and Chief Executive Officer
Slide 24: FMC Strategy and Tactics Overview
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 24 ® FMC Strategy and Tactics Overview Focus on our Clients and Performance • Leverage 3rd Quarter mobile and online banking upgrade for additional revenue and product penetration • Continue organic growth throughout the franchise • D
Slide 25: Contact Information
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 25 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 In
Slide 26: Appendix
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 26 ® Appendix
Slide 27: Appendix – Non-GAAP Reconciliation: ROATCE and Efficiency Ratio
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 27 ® Appendix – Non-GAAP Reconciliation RETURN ON AVERAGE TANGIBLE COMMON EQUITY (dollars in thousands): 2015 Average Stockholders' Equity (GAAP) $ 753,724 Less: Average Preferred Stock (125) Less: Average Intangible Assets, net of ta
Slide 28: Appendix – Non-GAAP Reconciliation: Capital Ratios
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 28 ® Appendix – Non-GAAP Reconciliation CAPITAL RATIOS (dollars in thousands): 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 Total Risk-Based Capital Ratio Total Stockholders' Equity (GAAP) 634,923 652,111 670,596 684,553 726,827 739,6
Slide 29: Appendix – Non-GAAP Reconciliation: Tangible Common Equity Ratio
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 29 ® Appendix – Non-GAAP Reconciliation TANGIBLE COMMON EQUITY RATIO AND BOOK VALUE PER SHARE (dollars in thousands): 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 Total Stockholders' Equity (GAAP) $ 634,923 $ 652,111 $ 670,596 $ 684,5