Slide 1: Second Quarter 2016 Earnings Highlights
FIRST MERCHANTS CORPORATION THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com Second Quarter 2016 Earnings Highlights July 26, 2016 NASDAQ: FRME Michael C. Rechin Mark K. Hardwick John J. Martin President Executive Vice President Executive Vice President Chief Executive Officer Chief
Slide 2: Forward-Looking Statement
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 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 facts are subject to risks an
Slide 3: 2nd Quarter 2016 Highlights
THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com 3 2nd Quarter 2016 Highlights $20.0 Million of Net Income, an 11.3% increase over 2Q2015 Earnings Per Share of $ .49, a 4.3% increase over 2Q2015 Delivered a strong 3.86% Net Interest Margin Total Assets of $6.9 Billion grew b
Slide 4: Mark K. Hardwick, Chief Financial Officer and Chief Operating Officer
Mark K. Hardwick Executive Vice President Chief Financial Officer and Chief Operating Officer ®
Slide 5: Total Assets
5 Total Assets ($ in Millions) THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® 2014 2015 Q1-’16 Q2-’16 1. Investments $1,181 $1,277 $1,271 $1,298 2. Loans Held for Sale 7 10 4 19 3. Loans 3,925 4,694 4,710 4,791 4. Allowance (64) (62) (62) (62) 5. CD&I & Goodwill 219 260 262 261
Slide 6: Loan and Yield Detail
® THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com Commercial & Industrial 22.6% Commercial Real Estate Owner-Occupied 11.3% Commercial Real Estate Non-Owner Occupied 24.5% Construction Land & Land Development 7.3% Agricultural Land 3.1% Agricultural Production 2.0% Other Commercial
Slide 7: Investment Portfolio
® THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com Mortgage- Backed Securities 32% Collateralized Mortgage Obligations 23% U. S. Agencies 2% Corporate Obligations 1% Tax-Exempt Municipals 42% Investment Portfolio (as of 6/30/2016) $1.3 Billion Modified duration of 4.0 years Ta
Slide 8: Total Liabilities and Capital
2014 2015 Q1-’16 Q2-’16 1. Customer Non-Maturity Deposits $3,523 $4,096 $4,140 $4,269 2. Customer Time Deposits 784 880 841 820 3. Brokered Deposits 334 314 330 319 4. Borrowings 290 446 420 435 5. Other Liabilities 44 51 79 53 6. Hybrid Capital 122 123 122 122 7. Common Equity 727 851 867 888 8. To
Slide 9: Deposit Detail
® THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com Demand Deposits 49% Savings Deposits 29% Certificates & Time Deposits of >$100,000 6% Certificates & Time Deposits <$100,000 10% Brokered Deposits 6% Deposit Detail (as of 06/30/2016) QTD Cost = .39% YTD Cost = .40% Total = $5.4 Bil
Slide 10: Capital Ratios
11.00% 11.16% 11.40% 11.37% 11.22% 11.31% 11.49% 11.42% 11.39% 8.74% 9.05% 9.16% 9.31% 9.03% 9.25% 9.17% 9.35% 9.52% 15.11% 15.21% 15.34% 15.12% 14.92% 14.85% 14.94% 14.79% 14.67% 6.00% 7.00% 8.00% 9.00% 10.00% 11.00% 12.00% 13.00% 14.00% 15.00% 16.00% 17.00% 18.00% 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q1
Slide 11: Net Interest Margin
11 Net Interest Margin THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® ($ in Millions) Q2 - '14 Q3 - '14 Q4 - '14 Q1 - '15 Q2 - '15 Q3 - '15 Q4 - '15 Q1 - '16 Q2 - '16 Net Interest Income - FTE $ 48.1 $ 49.9 $ 49.2 $ 49.2 $ 51.7 $ 53.3 $ 53.2 $ 57.6 $ 59.2 Fair Value Accretion $
Slide 12: Non-Interest Income
($ in Millions) 2014 2015 Q1-’16 Q2-’16 1. Service Charges on Deposit Accounts $15.7 $16.2 $ 4.1 $ 4.4 2. Wealth Management Fees 11.7 11.3 3.1 3.0 3. Insurance Commission Income 7.4 4.1 4. Card Payment Fees 11.8 13.4 3.8 3.8 5. Cash Surrender Value of Life Ins 3.7 2.9 1.5 1.3 6. Gains on Sales Mortg
Slide 13: Non-Interest Expense
13 Non-Interest Expense 2014 2015 Q1-’16 Q2-’16 1. Salary & Benefits $ 96.5 $101.9 $ 27.3 $ 25.6 2. Premises & Equipment 23.2 25.5 7.3 7.3 3. Core Deposit Intangible Amortization 2.4 2.8 1.0 1.0 4. Professional & Other Outside Services 8.1 9.9 2.2 1.5 5. OREO/Credit-Related Expense 3.4 3.9 0.7 0.9 6
Slide 14: Earnings
14 2014 2015 Q1-’16 Q2-’16 1. Net Interest Income $ 187.0 $ 196.4 $ 54.5 $ 56.0 2. Provision for Loan Losses (2.6) (0.4) (0.6) (0.8) 3. Net Interest Income after Provision 184.4 196.0 53.9 55.2 4. Non-Interest Income 61.8 69.8 15.8 16.4 5. Non-Interest Expense (163.9) (174.8) (46.4) (44.9) 6. Income
Slide 15: Per Share Results
15 2015 Q1 Q2 Q3 Q4 Total 1. Earnings Per Share $ .43 $ .47 $ .45 $ .37 $ 1.72 2. Dividends $ .08 $ .11 $ .11 $ .11 $ .41 3. Tangible Book Value $13.96 $14.15 $14.59 $ 14.68 2016 Q1 Q2 Q3 Q4 Total 1. Earnings Per Share $ .43 $ .49 – – $ .92 2. Dividends $ .11 $ .14 – – $ .25 2. Tangible Book Value $
Slide 16: Dividends and Tangible Book Value
$9.21 $9.64 $10.95 $12.17 $13.65 $14.68 $15.53 THE STRENGTH OF BIG. THE SERVICE OF SMALL. Dividends and Tangible Book Value 0.00 0.02 0.04 0.06 0.08 0.10 0.12 0.14 .08 www.firstmerchants.com ® .01 .03 .05 .11 .14 2.25% Forward Dividend Yield 29% Dividend Payout Ratio = Quarterly Dividends Tangible B
Slide 17: John J. Martin, Executive Vice President and Chief Credit Officer
John J. Martin Executive Vice President and Chief Credit Officer ®
Slide 18: Loan Portfolio Trends
18 Loan Portfolio Trends THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® ($ in Millions) 2014 2015 Q1-'16 Q2-'16 $ %186.1 186.1 1. Commercial & Industrial 897$ 1,057$ 1,061$ 1,085$ 24$ 2.3% 2. Construction, Land and Land Development 207 367 392 353 (39) (9.9%) 3. CRE Non-Owner Oc
Slide 19: Asset Quality Summary
19 Asset Quality Summary THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® ($ in Millions) 2014 2015 Q1-'16 Q2-'16 $ % 1. Non-Accrual Loans 48.8$ 31.4$ 36.7$ 33.6$ (3.1)$ (8.4%) 2. Other Real Estate 19.3 17.3 15.6 13.2 (2.4) (15.4%) 3. Renegotiated Loans 2.0 1.9 1.0 4.3 3.3 330.0%
Slide 20: Non-Performing Asset Reconciliation
20 Non-Performing Asset Reconciliation THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® ($ in Millions) Q3-'15 Q4-'15 Q1-'16 Q2-'16 1. Beginning Balance NPAs & 90+ Days Delinquent 58.5$ 53.2$ 51.5$ 54.3$ Non-Accrual 2. Add: New Non-Accruals 3.9 3.9 10.7 3.6 3. Less: To Accrual/Pay
Slide 21: ALLL and Fair Value Summary
21 ALLL and Fair Value Summary THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® 36.5% 15.5% 48.0% ($ in Millions) Q2-'15 Q3-'15 Q4-'15 Q1-'16 Q2-'16 1. Allowance for Loan Losses (ALLL) 62.6$ 62.9$ 62.5$ 62.1$ 62.2$ 2. Fair Value Adjustment (FVA) 40.7 37.9 47.0 47.1 42.3 3. Total A
Slide 22: Asset Quality & Portfolio Summary
22 Asset Quality & Portfolio Summary THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® Loan growth of $81 million led by Commercial Real Estate and C & I. Continued growth in construction commitments. Criticized and Classified Assets improving but elevated as a result of purcha
Slide 23: Michael C. Rechin, President and Chief Executive Officer
Michael C. Rechin President and Chief Executive Officer ®
Slide 24: FMC Strategy and Tactics Overview
24 FMC Strategy and Tactics Overview THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com Looking Forward . . . ® Continue to Win in our Markets – Geographic Community-Based Banking Model Increase Focus on Treasury Management Services for Deposit and Fee Generation Build or Acquir
Slide 25: Contact Information
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 Investor Relations Telephone: 765.378.8937 dortega@firstmerchants.com
Slide 26: Appendix
Appendix ®
Slide 27: Appendix – Non-GAAP Reconciliation: Capital Ratios
27 THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com Appendix – Non-GAAP Reconciliation ® CAPITAL RATIOS (dollars in thousands): 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 Total Risk-Based Capital Ratio Total Stockholders' Equity (GAAP) 652,111 670,596 684,553 726,827 739,658
Slide 28: Appendix – Non-GAAP Reconciliation: Tangible Common Equity Ratio
28 Appendix – Non-GAAP Reconciliation THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® TANGIBLE COMMON EQUITY RATIO (dollars in thousands): 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 Total Stockholders' Equity (GAAP) $ 670,596 $ 684,553 $ 726,827 $ 739,658 $ 749,955 $ 766,984 $
Slide 29: Appendix – Non-GAAP Reconciliation: Efficiency Ratio
29 Appendix – Non-GAAP Reconciliation THE STRENGTH OF BIG. THE SERVICE OF SMALL. www.firstmerchants.com ® EFFICIENCY RATIO (dollars in thousands): 2014 2015 1Q16 2Q16 Non Interest Expense (GAAP) $ 164,008 $ 174,806 $ 46,475 $ 44,835 Less: Core Deposit Intangible Amortization (2,445) (2,835) (978) (9