Slide 1: Investor Update First Quarter 2023
INVESTOR UPDATE First 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 25 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 3/31/2023 $18.2 Billion YTD ROAA: 1.42% Total Assets YTD Return on TCE 19.82% $12.3 Billion TCE/TA: 7.75% Total Loans Market Cap $2.0B $14.7 Billion Divid
Slide 5: First Quarter Highlights
First Quarter Highlights Net Income & EPS1 ROA (Annualized) ROE & ROTCE (Annualized) $63.6 Million 1.42% ROA 12.21% ROE $1.07 Per Share 1.67% PTPP ROA2 19.82% ROTCE2 ▪ Balance sheet strength ▪ Increased deposits and liquidity ▪ Improved all capital ratios ▪ Continued loan growth, while increasing ne
Slide 6: Business Strategy
Business Strategy Commercial Banking Consumer Banking Full Spectrum of Debt Capital and Treasury Service Offerings Full Spectrum of Consumer Deposit and Lending Offerings Located in Prime Growth Markets Supported by: Talented, Customer Service Oriented Banking Center Small Business & SBA Asset Based
Slide 7: Business Highlights
Business Highlights Michigan Loan Growth Annualized1 Monroe MSA Rank: 1 Detroit MSA Rank: 9 1Q23 Balance ($B) Growth Deposits: $2.9B Loans: $2.4B Commercial $9.3 5.6% Consumer $0.8 (4.1)% Northeast Indiana Mortgage $1.9 23.0% Muncie MSA Rank: 1 Ft Wayne MSA Rank: 4 ▪ Total loan growth = 7.9% Deposit
Slide 8: First Quarter Financial Results
First Quarter Financial Results ($M except per share data) For the Three Months Ended, Variance % Variance Linked Linked QTR- 3/31/22 6/30/22 9/30/22 12/31/22 3/31/23 Quarter Annualized Balance Sheet & Asset Quality 1Q23 Highlights 1. Total Assets $15,465.3 $17,780.5 $17,719.0 $17,938.3 $18,178.9 $2
Slide 9: Investment Portfolio Highlights
Investment Portfolio Highlights 1Q23 Investment Portfolio Composition Yield on Investments (%) / Total Investments ($B) Corporate U.S. Agencies Obligations 12% 1% Collateralized Mortgage Obligations 2.55% 2.63% 2.66% 2.66% 2.63% 6% $4.1B $4.5 $4.6 $4.3 $4.3 $4.1 Municipal Mortgage- Total Bonds 1Q22
Slide 10: Loan Portfolio Highlights
Loan Portfolio Highlights 1Q23 Loan Composition Highlights Construction Land & Land Development 7.8% Agricultural Land & ▪ Portfolio composition is ~75% Commercial oriented Commercial Real Estate Production 1.8% Non-Owner Occupied 19.4% Public Finance/Other ▪ Loan yields remained strong at 6.00% Com
Slide 11: Allowance for Credit Losses - Loans
Allowance for Credit Losses - Loans 1Q23 Allowance for Credit Losses - Loans Highlights ▪ No Q1 provision expense 2.09% 1.98% 1.94% 1.86% 1.82% ▪ The reserve for unfunded commitments totals $23.3 million and is recorded in Other Liabilities ▪ The remaining fair value accretion on acquired loans is $
Slide 12: Deposit Portfolio Highlights
Deposit Portfolio Highlights 1Q23 Deposit Composition Highlights Certificates & Time Deposits Brokered Certificates of ▪ Strong core deposit base Deposits Certificates & Time < $100k 1% • 92% core deposits1 4% Deposits • 20% non-interest bearing > $100k 7% • 47% yield 5 bps or less ▪ Total deposit c
Slide 13: Deposit and Funding Insights
Deposit and Funding Insights Commercial Deposit Diversification Low Uninsured Deposit Levels ($M) Professional and Tech Svcs 18.1% 5.8% Investment CRE 12.6% 4.0% PDIF Insured1 8.5% $2,170.0 Finance/Insurance 2.7% 14.8% Construction 7.3% 2.3% Admin Services 6.6% 2.1% Uninsured Social and Civic Orgs 5
Slide 14: Net Interest Margin
Net Interest Margin 1Q22 2Q22 3Q22 4Q22 1Q23 1. Net Interest Income - FTE ($millions) $ 108.0 $ 134.8 $ 146.6 $ 155.3 $ 150.4 2. Fair Value Accretion $ 1.0 $ 3.2 $ 3.2 $ 2.7 $ 2.4 3. PPP Loan Income $ 1.9 $ 0.9 $ 0.3 $ 0.1 $ - 4. Adjusted Net Interest Income - FTE1 $ 105.1 $ 130.7 $ 143.1 $ 152.5 $
Slide 15: Non-Interest Income Highlights
Non-Interest Income Highlights 1Q23 Non-Interest Income Detail ($M) Non-Interest Income Trends ($M) Fee Income / Revenue 19.3% Service Charges Card 17.3% 16.8% $7.4 Payment Fees $5.2 13.4% 14.2% 26% 18% Gain (Loss) on Sale of Securities ($1.6) $25M -6% $28.3M $29.6M Gain on Derivative Sale of Loans
Slide 16: Non-Interest Expense Highlights
Non-Interest Expense Highlights 1Q23 Non-Interest Expense Detail Non-Interest Expense Trends ($M) Premises & Equipment Efficiency Ratio $13.4 58.45% 14% 53.34% 52.79% 51.72% Outside Data Processing $6.1 48.60% 7% Professional & Other Outside 50.75%1 51.39%1 48.37%1 Services $3.7 $93.7M 4% Intangible
Slide 17: Capital Ratios
Capital Ratios Tangible Common Equity Ratio Highlights 8.31% 7.75% ▪ TCE Ratio including marks on held-to-maturity 7.34% 7.04% 9.57% securities portfolio is 6.36% 6.66% 9.31% ▪ CET1 9.31%including net unrealized loss in AOCI on available-for-sale securities is 9.61% 9.65% 8.78% 9.04% 9.31% 9.31% 9.5
Slide 18: Loan Portfolio
Loan Portfolio Loan Portfolio Trends ($M) 1Q23 Highlights 1Q22 2Q22 3Q22 4Q22 1Q23 Loan growth of $238 million or 7.9%1 1. Commercial & Industrial $ 2,283 $ 2,681 $ 2,703 $ 2,827 $ 2,831 ▪ Construction growth - $125 million 2. Sponsor Finance 546 619 630 612 674 ▪ Residential ARM growth - $92 millio
Slide 19: Loan Portfolio Insights
Loan Portfolio Insights Commercial C&I C&I - Sponsor Finance ▪ $673 million to 76 companies ▪ Senior Debt/Adj. EBITDA < 3.0X ~ 68% ▪ Total Debt/Adj. EBITDA < 4.0X ~ 84% ▪ FCCR > 1.50X ~ 74% ▪ ~ 3.5% Classified C&I Includes commercial and industrial, sponsor and owner- Construction Finance occupied r
Slide 20: Loan Portfolio Insights (continued)
Loan Portfolio Insights (continued) Commercial Real Estate (Non-owner occupied) ($M) Ware- Total Multi- house/ CRE Family Industrial Retail Office Storage Hotel Other (NOO) Balance: $732.1 $396.0 $385.2 $259.9 $231.6 $146.9 $223.7 $2,375.4 Commitment: $784.7 $411.8 $391.6 $268.0 $236.5 $147.4 $271.1
Slide 21: Asset Quality
Asset Quality Asset Quality Trends ($M) Highlights 1Q22 2Q22 3Q22 4Q22 1Q23 Strong and Stable Asset Quality 1. Non-Accrual Loans $ 42.7 $ 46.0 $ 43.5 $ 42.3 $ 46.6 ▪ NPAs + 90PD increased to 0.50% of loans and ORE 2. Other Real Estate 6.3 6.5 6.5 6.5 7.8 • Down from 0.55% 1Q22 3. 90PD Loans 2.1 0.6
Slide 22: Non-Performing Assets
Non-Performing Assets Non-Performing Assets Roll Forward ($M) Highlights 1Q22 2Q22 3Q22 4Q22 1Q23 Strong and Stable Asset Quality 1. Beginning Balance NPAs + 90PD $44.9 $51.2 $53.3 $50.9 $50.7 ▪ Non-accrual loans net increase of $4.3 million Non-Accrual • $15.4 million new non-accrual migration 2. A
Slide 23: Track Record of Shareholder Value
Track Record of Shareholder Value 10-Year Total Return (2012-2022) Earnings per Share CAGR 2012-2022: 10.5% $3.81 $3.81 $3.22 $3.19 $2.74 242.2% $1.98 $2.12 $1.65 $1.72 $1.41 $1.41 $1.07 165.4% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 YTD'23 Dividends per Share FRME S&P BMI US Bank CAG
Slide 24: History of Organic and Whole Bank Acquisition Growth
History of Organic and Whole Bank Acquisition Growth Total Assets ($B) Growth Through Acquisition ✓ Experienced Acquirer $17.9 $18.2 ✓ Expanded in Current High-Growth Markets $15.5 ✓ Extended into Additional High-Growth Markets $14.1 ✓ Added to Franchise with Stable Deposit Gathering Markets $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 responsive, knowledgeable, and high-performing bank for our clients, teammates, and shareholders. Our Team: We are a collection of dynamic colleagues with diverse expe
Slide 26: Appendix
APPENDIX ss 00) First Merchants Corporation Helping you prosper
Slide 27: Non-GAAP
Non-GAAP CAPITAL RATIOS (dollars in thousands): 1Q22 2Q22 3Q22 4Q22 1Q23 Total Risk-Based Capital Ratio (dollars in thousands) Total Stockholders' Equity (GAAP) 1,807,633 1,977,641 1,906,666 2,034,770 2,122,448 1 Adjust for Accumulated Other Comprehensive (Income) Loss 84,392 198,556 314,089 239,151
Slide 28: Non-GAAP
Non-GAAP TANGIBLE COMMON EQUITY RATIO (dollars in thousands): 1Q22 2Q22 3Q22 4Q22 1Q23 Tangible Common Equity Ratio (dollars in thousands) Total Stockholders' Equity (GAAP) $ 1,807,633 $ 1,977,641 $ 1,906,666 $ 2,034,770 $ 2,122,448 Less: Preferred Stock (125) (25,125) (25,125) (25,125) (25,125) Les
Slide 29: Non-GAAP
Non-GAAP ADJUSTED EPS EXCLUDING PAYCHECK PROTECTION PROGRAM ("PPP") AND ACQUISITION-RELATED EXPENSES 1Q22 2Q22 3Q22 4Q22 1Q23 (Dollars in Thousands, Except Per Share Amounts) Net Income Available to Common Stockholders - GAAP $ 48,586 $ 38,522 $ 63,283 $ 70,292 $ 63,610 Adjustments: PPP loan income
Slide 30: Non-GAAP
Non-GAAP EFFICIENCY RATIO (dollars in thousands): 1Q22 2Q22 3Q22 4Q22 1Q23 EFFICIENCY RATIO (dollars in thousands): Non Interest Expense (GAAP) $ 72,325 $ 97,313 $ 96,378 $ 89,699 $ 93,720 Less: Intangible Asset Amortization (1,366) (2,303) (2,303) (2,303) (2,197) Less: OREO and Foreclosure Expenses
Slide 31: Non-GAAP
Non-GAAP RETURN ON TANGIBLE COMMON EQUITY (dollars in thousands): 2012 2013 2014 2015 2016 2017 2018 2019 Return on Tangible Common Equity Total Average Stockholders' Equity (GAAP) $ 535,506 $ 540,255 $ 675,295 $ 753,724 $ 884,664 $ 1,110,524 $ 1,343,861 $ 1,569,615 Less: Average Preferred Stock (90