First Merchants Corporation · NASDAQ:FRME

First Merchants — Q2 2014 Earnings Presentation

32 slides from First Merchants's earnings presentation, Jul 24, 2014

  1. Slide 1: 2nd Quarter 2014 Earnings Call

    First Merchants Corporation NASDAQ: FRME 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 ® THE STRENGTH OF BIG. THE SERVICE OF SMALL. 2nd QUARTER 2014 EARNINGS CALL July

  2. Slide 2: Forward-Looking Statement

    Forward-Looking Statement THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® 2 This presentation contains forward-looking statements made pursuant to the safe-harbor provisions of the Private Securities Litigation Ref

  3. Slide 3: Additional Information

    Additional Information THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® 3 Communications in this presentation do not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitatio

  4. Slide 4: 2nd Quarter Highlights

    www.firstmerchants.com THE STRENGTH OF BIG. THE SERVICE OF SMALL. 2nd Quarter 2014 Highlights 4 • Earnings • Earnings Per Share of $.41 per share • 21% Increase in Earnings Per Share Q-O-Q • Net Income Available to Shareholders of $15.2 Million • Return on Average Assets of 1.10% • Loans • 2.9% Quar

  5. Slide 5: Executive Vice President and Chief Financial Officer

    Executive Vice President and Chief Financial Officer www.firstmerchants.com THE STRENGTH OF BIG. THE SERVICE OF SMALL. ® 5

  6. Slide 6: Total Assets

    www.firstmerchants.com Total Assets THE STRENGTH OF BIG. THE SERVICE OF SMALL. 2012 2013 Q1-’14 Q2-’14 1. Investments $ 874 $1,096 $1,150 $1,214 2. Loans Held for Sale 22 5 7 7 3. Loans 2,902 3,633 3,617 3,723 4. Allowance (69) (68) (70) (68) 5. CD&I & Goodwill 150 203 202 202 6. BOLI 125 165 165 16

  7. Slide 7: Loan and Yield Detail

    www.firstmerchants.com Commercial & Industrial 23.0% Commercial Real Estate Owner-Occupied 13.5% Commercial Real Estate Non-Owner Occupied 25.8%Construction, Land & Land Development 4.4% Agricultural Land 4.1% Agricultural Production 2.7% Other Non-Consumer 0.6% Residential Mortgage 17.1% Home Equit

  8. Slide 8: Investment Portfolio

    www.firstmerchants.com • $1.2 billion balance • Average duration of 4.3 years • Tax equivalent yield of 3.84% • Net unrealized gain of $35.6 million Investment Portfolio (as of 6/30/2014) THE STRENGTH OF BIG. THE SERVICE OF SMALL. 8 Mortgage- Backed Securities 32% Collateralized Mortgage Obligations

  9. Slide 9: Total Liabilities and Capital

    www.firstmerchants.com 2012 2013 Q1-’14 Q2-’14 1. Customer Non-Maturity Deposits $2,479 $3,276 $3,249 $3,292 2. Customer Time Deposits 739 868 834 786 3. Brokered Deposits 128 87 200 251 4. Borrowings 260 401 362 459 5. Other Liabilities 39 48 34 34 6. Hybrid Capital 107 122 122 122 7. Preferred Sto

  10. Slide 10: Deposits and Cost of Funds Detail

    www.firstmerchants.com Deposits and Cost of Funds Detail (as of 06/30/2014) THE STRENGTH OF BIG. THE SERVICE OF SMALL. 10 ® Demand Deposits 47% Savings Deposits 29% Certificates & Time Deposits of >$100,000 6% Certificates & Time Deposits of <$100,000 12% Brokered Deposits 6% QTD Cost = .34% YTD Cos

  11. Slide 11: Capital Ratios

    THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com Capital Ratios 9.54% 9.71% 9.62% 10.20% 10.13% 10.42% 10.37% 10.86% 11.00% 7.27% 7.51% 7.55% 7.88% 7.74% 7.97% 8.34% 8.65% 8.74% 16.75% 16.62% 16.34% 15.91% 15.69% 14.96% 14.54% 15.04% 15.11% 6.00% 7.00% 8.00% 9.00% 10.00% 11.00% 12.0

  12. Slide 12: Net Interest Margin

    www.firstmerchants.com Net Interest Margin THE STRENGTH OF BIG. THE SERVICE OF SMALL. 12 ® Q2 - '12 Q3 - '12 Q4 - '12 Q1 - '13 Q2 - '13 Q3 - '13 Q4 - '13 Q1 - '14 Q2 - '14 Net Interest Income - FTE ($millions) $ 39.5 $ 41.3 $ 39.7 $ 40.8 $ 38.1 $ 38.6 $ 42.8 $ 47.8 $ 48.1 Fair Value Accretion $ 0.7

  13. Slide 13: Non-Interest Income

    www.firstmerchants.com 2012 2013 Q1-’14 Q2-’14 1. Service Charges on Deposit Accounts $11.6 $12.4 $ 3.6 $ 4.1 2. Trust Fees 7.9 8.6 2.2 2.4 3. Insurance Commission Income 6.2 7.1 2.3 1.9 4. Electronic Card Fees 7.3 7.5 2.3 2.5 5. Cash Surrender Value of Life Ins 3.4 2.6 0.7 0.7 6. Gains on Sales Mor

  14. Slide 14: Non-Interest Expense

    www.firstmerchants.com Non-Interest Expense 2012 2013 Q1-’14 Q2-’14 1. Salary & Benefits $ 79.4 $ 85.4 $ 25.3 $23.4 2. Premises & Equipment 17.4 18.0 6.6 5.3 3. Core Deposit Intangible 1.9 1.6 0.6 0.6 4. Professional & Other Outside Services 6.2 8.3 1.4 1.5 5. OREO/Credit-Related Expense 8.2 6.7 1.8

  15. Slide 15: Earnings

    2012 2013 Q1-’14 Q2-’14 1. Net Interest Income $152.3 $154.3 $ 45.9 $ 46.1 2. Provision for Loan Losses (18.5) (6.6) – – 3. Net Interest Income after Provision 133.8 147.7 45.9 46.1 4. Non-Interest Income 64.3 54.8 15.2 15.9 5. Non-Interest Expense (137.1) (143.2) (43.1) (41.2) 6. Income before Inco

  16. Slide 16: Earnings Per Share

    www.firstmerchants.com Earnings Per Share 2013 Q1 Q2 Q3 Q4 Total 1. Reported $ .38 $ .34 $ .35 $ .34 $ 1.41 2. FV Accretion EPS Impact $ .02 $ .01 $ .01 $ .01 $ .05 2014 Q1 Q2 Q3 Q4 Total 1. Reported $ .38 $ .41 – – $ .79 2. FV Accretion EPS Impact $ .03 $ .04 – – $ .07 ® THE STRENGTH OF BIG. THE SE

  17. Slide 17: Executive Vice President and Chief Credit Officer

    Executive Vice President and Chief Credit Officer www.firstmerchants.com THE STRENGTH OF BIG. THE SERVICE OF SMALL. ® 17

  18. Slide 18: Loan Portfolio Trends

    Change 2012 2013 Q1-'14 Q2-'14 $ % 149.9 1. Commercial & Industrial 622.6$ 761.7$ 787.4$ 857.8$ 70.4$ 8.9% 2. Construction, Land and Land Development 98.6 177.1 155.1 165.4 10.3 6.6% 3. CRE Non-Owner Occupied 706.3 963.4 954.9 963.8 8.9 0.9% 4. CRE Owner Occupied 434.2 501.1 503.0 504.0 1.0 0.2% 5.

  19. Slide 19: Asset Quality Summary

    ($ in Millions) 2012 2013 Q1-'14 Q2-'14 $ % 1. Non-Accrual Loans 53.4$ 56.4$ 55.7$ 51.3$ (4.4)$ (7.9%) 2. Other Real Estate 13.3$ 22.2$ 21.1$ 18.6$ (2.5)$ (11.8%) 3. Renegotiated Loans 12.7$ 3.0$ 0.4$ 1.4$ 1.0$ 250.0% 4. 90+ Days Delinquent Loans 2.0$ 1.4$ 1.7$ 1.1$ (0.6)$ (35.3%) 5. NPAs/Loans and

  20. Slide 20: Non-Performing Asset Reconciliation

    www.firstmerchants.com Non-Performing Asset Reconciliation ® THE STRENGTH OF BIG. THE SERVICE OF SMALL. 20 ($ in Millions) Q3-'134-'13 Q4-'13 Q1-'14 Q2-'14 1. Beginning Balance NPA's & 90+ Days Delinquent 56.2$ 51.2$ 83.0$ 78.9$ Non-Accrual 2. Add: New Non-Accruals 7.7 4.2 9.1 8.3 3. Add: Citizens N

  21. Slide 21: Net Charge-Offs, Provision & Allowance

    www.firstmerchants.com Net Charge-Offs, Provision & Allowance ® THE STRENGTH OF BIG. THE SERVICE OF SMALL. 21 ($ i n m il li o n s ) •Decrease in non-accrual loans • Increased allowance coverage of non-accrual loans • Q2 recoveries of $1.2 million •YTD recoveries of $4.8 million • Q2 charge-offs of

  22. Slide 22: ALLL and Fair Value Summary

    ® www.firstmerchants.com THE STRENGTH OF BIG. THE SERVICE OF SMALL. 22 ALLL and Fair Value Summary (as of 06/30/2014) ($ in Millions) FMB 1 SCB CFS Total 1. Allowance for Loan Losses (ALLL) 68.0$ -$ 0.4$ 68.4$ 2. Fair Value Adjustment 8.3 35.6 43.9 3. Total ALLL plus FV Adjustments 68.0$ 8.3$ 36.0$

  23. Slide 23: President and Chief Executive Officer

    President and Chief Executive Officer www.firstmerchants.com THE STRENGTH OF BIG. THE SERVICE OF SMALL. ® 23

  24. Slide 24: 2014 Strategy and Tactics Overview

    www.firstmerchants.com 2014 Strategy and Tactics Overview ® THE STRENGTH OF BIG. THE SERVICE OF SMALL. 24 • Intensify Revenue-Generating Activities • Achieve organic growth throughout the franchise • First Merchants brand investment in new “Lakeshore Region” • Develop and retain outstanding talent •

  25. Slide 25: Community Bancshares Provides Indianapolis Market Expansion

    Community Bancshares Provides Indianapolis Market Expansion THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® 25 Pro Forma Highlights Ticker: FRME Headquarters: Muncie, IN Founded: 1893 Branches: 107 Assets: $5.9 Bil

  26. Slide 26: Community Bancshares, Inc. Overview

    Community Bancshares, Inc. Overview THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® 26  Headquartered in Noblesville, Indiana  Founded in 1991  Operates 10 Full Service Banking Centers  Balance Sheet as of Marc

  27. Slide 27: Transaction Overview

    Transaction Overview THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® 27 Deal Value $46.3 Million or 125% of Tangible Book Value* Consideration 68.3% Stock, 31.7% Cash** Required Approvals Regulatory and Community’s

  28. Slide 28: Transaction Rationale

    Transaction Rationale THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® 28  Indianapolis Market Expansion  10 Full-Service Banking Centers with $236M in deposits  Adds 7 locations in Hamilton County, the fastest g

  29. Slide 29: Hamilton County Market Share

    Hamilton County Market Share THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® 29 2013 Rank Company 2013 # of Branches 2013 Total Deposits in Market 2013 Total Market Share (%) 1 JP Morgan Chase & Co. (NY) 15 974,650

  30. Slide 30: Madison County Market Share

    Madison County Market Share THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® 30 2013 Rank Company 2013 # of Branches 2013 Total Deposits in Market 2013 Total Market Share (%) 1 PNC Financial Services Group (PA) 8 33

  31. Slide 31: Summary Thoughts

    FIRST MERCHANTS and the Shield Logo are registered trademarks of First Merchants Corporation Summary Thoughts ® THE STRENGTH OF BIG. THE SERVICE OF SMALL. 31 www.firstmerchants.com  Additional Indianapolis MSA Investment; New Consumer and Business Clients  Expand Current Hamilton County and Madiso

  32. Slide 32: 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 and the

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