First Merchants Corporation · NASDAQ:FRME
First Merchants — Macquarie Capital (USA), Inc. Small & Mid-Cap Conference 2010
44 slides from First Merchants's conference presentation, Jun 15, 2010
Slide 1: First Merchants Corporation
First Merchants Corporation Macquarie Capital (USA), Inc. Small & Mid-Cap Conference June 15-16, 2010
Slide 2: Michael C. Rechin and Mark K. Hardwick
Michael C. Rechin President and Chief Executive Officer Mark K. Hardwick Executive Vice President and Chief Financial Officer
Slide 3: Forward-Looking Statement
Forward-Looking Statement 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 and uncertainties that may materially affect
Slide 4: First Merchants' Story
§ First Merchants Corporation (NASDAQ: FRME), celebrating its 117th anniversary, is the largest financial services holding company headquartered in Central Indiana § FMC (holding company) organized in 1982 § Founding bank proudly serving Indiana since 1893 § Total assets at 3/31/10 of $4.4 billion §
Slide 5: First Merchants' Franchise
FIRST MERCHANTS’ FRANCHISE
Slide 6: First Merchants Headquarters
First Merchants Headquarters Muncie, Indiana First Merchants Indianapolis, Indiana
Slide 7: "Strength of Big, Service of Small"
“Strength of Big, Service of Small” FIRST MERCHANTS’ STRATEGY We specialize in our communities. Deliver superior service with presence close to the customer for. . . § Retail Banking § Mortgage Banking § Small Business Banking § Commercial Banking § Middle Market § Agriculture § Healthcare Services
Slide 8: First Merchants' Current Plan
FIRST MERCHANTS’ CURRENT PLAN § Protect and Strengthen the Franchise § Short-Term - 1 to 2 years: q Capital Preservation Plan q Cultural and Process Initiatives q Low-Capital Intensive Infrastructure Projects § Growth and Top-Tier Performance § Long-Term - 3 to 5 Years: q Internal Growth - • Build o
Slide 9: First Merchants' Current Plan
FIRST MERCHANTS’ CURRENT PLAN § Navigate the current environment § Service-driven alternative to super-regional bank competitors § Sustain and deploy low-cost deposit shares § Build out growth markets of Indianapolis, Indiana, and Columbus, Ohio § Gain the efficiencies of a single charter banking co
Slide 10: Tactical Action Plan and Business Strategy
TACTICAL ACTION PLAN AND BUSINESS STRATEGY § Credit Cycle Challenge § NPA Management q Accelerate workout process to maximize resolutions q Loan sale and OREO liquidations managed centrally § Capital Mix Challenge § Registered direct placement: 4.2MM shares raised $24.5MM, March 2010 § Total risk-ba
Slide 11: Indianapolis / Columbus Strategy
INDIANAPOLIS / COLUMBUS STRATEGY § Organic growth opportunities with improved segment penetration and branding § Deployment of rural deposit base into growth markets creates optimal margin structure § Creates franchise value § Continuously assess operating efficiencies
Slide 12: Indianapolis
§ Population 2008: 1,915,664* § Population 2013 Projection: 2,023,886* § 12th largest city in the U.S. § 29th largest metropolitan area in the U.S. Indianapolis § Between 1990-2000 Indianapolis- Carmel metro grew at a faster pace (11.1% growth) than Indiana (4.4% growth) and the U.S. (7.2% growth) *
Slide 13: Columbus
§ Population 2008: 1,773,120 § Population 2015 Projection: 1,911,154 § 16 th largest city in the U.S. § 32 nd largest metropolitan area § Columbus economy expected to resume economic growth in 2010* § Unemployment rate dropped to 9.3 in April from 9.5 in March** *24-7 PressRelease **The Columbus Dis
Slide 14: Key FMC Deposit Market Shares
County Market Position Market % $$ Deposits Delaware County, IN 1 46.39% $752,341 Jasper County, IN 1 29.11% 159,603 Jay County, IN 1 43.50% 112,573 Union County, IN 1 63.41% 58,953 White County, IN 1 34.15% 147,166 Adams County, IN 2 23.21% 212,911 Clinton County, IN 2 18.87% 80,522 Hendricks Count
Slide 15: Total Assets
12-31-08 12-31-09 Q1-’09 Q1-’10 1. Investments $ 482 $ 563 $ 446 $ 6 2. Loans 3,722 3,278 3,654 3,138 3. Allowance (50) (92) (59) (89) 4. CD&I & Goodwill 166 159 163 158 5. BOLI 93 95 94 95 6. Other 371 478 589 435 7. Total Assets $4,784 $4,481 $4,887 $4,376 ($ in Millions) TOTAL ASSETS
Slide 16: Total Liabilities and Capital
2008 2009 Q1-’09 Q1-’10 1. Customer Non-Maturity Deposits $1,858 $2,042 $1,910 $2,000 2. Customer Time Deposits 1,384 1,220 1,365 1,167 3. Brokered Deposits 477 275 410 231 4. Borrowings 507 339 485 320 5. Other Liabilities 51 30 98 58 6. Hybrid Capital 111 111 111 111 7. Preferred Stock (CPP) 0 112
Slide 17: Earnings
2008 2009 Q1-’09 Q1-’10 1. Net Interest Income-FTE $133.1 $159.1 $39.6 $ 37.8 2. Non Interest Income 1 38.5 46.5 12.2 11.7 3. Non Interest Expense 2 106.0 134.7 34.2 31.0 4. Pre-Tax Pre-Provision Earnings $ 65.6 $ 70.9 $17.6 $ 18.5 5. Provision 28.2 122.2 12.9 13.9 6. Adjustments 5.0 12.1 (1.7) 2.3
Slide 18: Total Assets
12-31-08 12-31-09 Q1-’09 Q1-’10 1. Investments $ 482 $ 563 $ 446 $ 6 2. Loans 3,722 3,278 3,654 3,138 3. Allowance (50) (92) (59) (89) 4. CD&I & Goodwill 166 159 163 158 5. BOLI 93 95 94 95 6. Other 371 478 589 435 7. Total Assets $4,784 $4,481 $4,887 $4,376 ($ in Millions) TOTAL ASSETS
Slide 19: Credit Policy and Portfolio Metrics
($ in Millions) CREDIT POLICY AND PORTFOLIO METRICS § Legal Lending Limit = $64.0 § House Lending Limit = $20.0 § Largest 25 Relationship Commitments Average = $12.2 § Shared National Credit Commitments = $76.0 § Shared National Credit Outstandings = $49.0
Slide 20: Loan Composition
Loan Composition (as of 3/31/10 ) YTD Yield = 5.74% LOAN AND CREDIT DETAIL
Slide 21: Industry Concentration
Industry Concentration LOAN AND CREDIT DETAIL
Slide 22: Non-Accrual Loans
Non-Accrual Loans (as of 3/31/10) ($ in Millions) LOAN AND CREDIT DETAIL
Slide 23: Loan Delinquency Trends
30+ Day Delinquency (as a % of period end total loans) (as a % of period end total loans) LOAN DELINQUENCY TRENDS
Slide 24: Other Real Estate Owned
($ in millions) OTHER REAL ESTATE OWNED
Slide 25: Non-Performing Assets
NON-PERFORMING ASSETS (PLUS 90-DAY DELINQUENT)
Slide 26: Allowance Coverage to Non-Accrual Loans
Allowance as a % of Non-Accrual Loans ($ in millions) ALLOWANCE COVERAGE TO NON-ACCRUAL LOANS
Slide 27: YTD Charge-Off Composition
LOAN AND CREDIT DETAIL YTD Charge-Off Composition (as of 3/31/10)
Slide 28: Total Assets
12-31-08 12-31-09 Q1-’09 Q1-’10 1. Investments $ 482 $ 563 $ 446 $ 6 2. Loans 3,722 3,278 3,654 3,138 3. Allowance (50) (92) (59) (89) 4. CD&I & Goodwill 166 159 163 158 5. BOLI 93 95 94 95 6. Other 371 478 589 435 7. Total Assets $4,784 $4,481 $4,887 $4,376 ($ in Millions) TOTAL ASSETS
Slide 29: Investment Portfolio
INVESTMENT PORTFOLIO (as of 3/31/10) § $639 Million Balance § Average duration - 4.4 years § Tax equivalent yield of 4.71% § No private label MBS exposure § Trust Preferred Pools with book balance of $6.6 million and a market value of $1.4 million § Net unrealized gain of the entire portfolio totals
Slide 30: Total Liabilities and Capital
2008 2009 Q1-’09 Q1-’10 1. Customer Non-Maturity Deposits $1,858 $2,042 $1,910 $2,000 2. Customer Time Deposits 1,384 1,220 1,365 1,167 3. Brokered Deposits 477 275 410 231 4. Borrowings 507 339 485 320 5. Other Liabilities 51 30 98 58 6. Hybrid Capital 111 111 111 111 7. Preferred Stock (CPP) 0 112
Slide 31: Deposits
$751M $231M $1,261M $739M YTD Cost of Deposits = 1.60% DEPOSITS (as of 3/31/10)
Slide 32: Total Liabilities and Capital
2008 2009 Q1-’09 Q1-’10 1. Customer Non-Maturity Deposits $1,858 $2,042 $1,910 $2,000 2. Customer Time Deposits 1,384 1,220 1,365 1,167 3. Brokered Deposits 477 275 410 231 4. Borrowings 507 339 485 320 5. Other Liabilities 51 30 98 58 6. Hybrid Capital 111 111 111 111 7. Preferred Stock (CPP) 0 112
Slide 33: Capital Ratios
2008 2009 Q1-’09 Q1-’10 1. Total Risk-Based Capital Ratio 10.24% 13.04% 12.97% 14.44% 2. Tier 1 Risk-Based Capital Ratio 7.71% 10.32% 10.47% 11.65% 3. Leverage Ratio 8.16% 8.20% 9.17% 9.13% 4. TCE/TCA 5.01% 4.54% 4.89% 5.27% CAPITAL RATIOS
Slide 34: Net Interest Margin
$3,463 $4,245 $4,299 $3,956 ― Net Interest Margin 3.68% 3.82% 3.84% 3.74% NET INTEREST MARGIN
Slide 35: Non-Interest Income
2008 2009 Q1-’09 Q1-’10 1. Service Charges on Deposit Accounts $13.0 $15.1 $3.5 $ 3.3 2. Trust Fees 8.0 7.4 2.1 2.1 3. Insurance Commission Income 5.8 6.4 2.1 2.0 4. Cash Surrender Value of Life Ins (0.3) 1.6 0.3 0.5 5. Gains on Sales Mortgage Loans 2.5 6.8 1.4 1.1 6. Securities Gains/Losses (2.1) 4
Slide 36: Non-Interest Expense
NON-INTEREST EXPENSE 2008 2009 Q1-’09 Q1-’10 1. Salary & Benefits $63.0 $76.3 $20.0 $17.6 2. Premises & Equipment 14.4 17.9 4.4 4.7 3. Core Deposit Intangible 3.2 5.1 1.3 1.2 4. Professional Services 2.6 4.4 1.1 1.5 5. OREO/Credit-Related Expense 2.8 9.8 0.5 2.7 6. FDIC Expense 1.7 10.4 0.8 1.7 7. F
Slide 37: Credit Costs Over Time
($ in Millions) CREDIT COSTS OVER TIME
Slide 38: Earnings
2008 2009 Q1-’09 Q1-’10 1. Net Interest Income-FTE $133.1 $159.1 $39.6 $ 37.8 2. Non Interest Income 1 38.5 46.5 12.2 11.7 3. Non Interest Expense 2 106.0 134.7 34.2 31.0 4. Pre-Tax Pre-Provision Earnings $ 65.6 $ 70.9 $17.6 $ 18.5 5. Provision 28.2 122.2 12.9 13.9 6. Adjustments 5.0 12.1 (1.7) 2.3
Slide 39: "Well Capitalized - Well Reserved"
“WELL CAPITALIZED - WELL RESERVED” § “Well Capitalized” q Total Risk-Based Capital Ratio 14.44% q Tier 1 Risk-Based Capital Ratio 11.65% q Leverage Ratio 9.13% q Tier 1 Common Risk-Based Capital Ratio 6.42% q Tangible Common Equity Ratio 5.27% § “Well Reserved” q $89 Million Allowance q 2.82% Allowa
Slide 40: "Well Positioned"
“WELL POSITIONED” § Single Charter (centralized back office) § $18.5M Pre-Tax Pre-Provision Quarterly Run Rate § Indianapolis Momentum from 2008 Acquisition § TCE Preservation Plan/ROA Focus q Reduction of Non-Strategic/Leveraged Assets and Liabilities q Reduce Brokered Deposits/FHLB Advances q Marg
Slide 41: Overview of 2010 Strategy and Tactics
OVERVIEW OF 2010 STRATEGY AND TACTICS § Complete CPP exchange transaction with Treasury Department in second quarter § Continue to improve asset quality and reduce all-in credit costs § Intensify revenue activity using common platforms and market coverage tactics § Solidify brand position as communi
Slide 42: Valuation Attributes
VALUATION ATTRIBUTES • 3 rd largest Indiana bank with energized & experienced management team • Attractive long-term deposit market shares • Local bank alternative for middle market clients served by regional banks • State-of-the-Industry technology with scalable operations platform • Average daily
Slide 43: Research Coverage
RESEARCH COVERAGE § Macquarie Capital (USA), Inc. § Sandler O’Neill Partners § FIG Partners § Howe Barnes Hoefer & Arnett
Slide 44: Contact Information
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 First Vice President - Investor Relations Telephone: 765.378.8937 dortega
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