UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported): November 10, 2020
Commission File Number 0-17071
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (IRS Employer Identification No.) | ||||
(Address of principal executive offices, including zip code)
(765 ) 747-1500
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12 (b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
ITEM 7.01 REGULATION FD DISCLOSURE.
The executive officers of First Merchants Corporation intend to use the material filed herewith, in whole or in part, in one or more meetings with investors and analysts. A copy of the investor presentation is attached hereto as Exhibit 99.1.
First Merchants Corporation does not intend for this item 7.01 or Exhibit 99.1 to be treated as "filed" for purposes of the Securities Exchange Act of 1934, as amended, or incorporated into its filings under the Securities Act of 1933, as amended.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Exhibits.
Exhibit 99.1 First Merchants Corporation Investor Presentation
Exhibit 104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
First Merchants Corporation
(Registrant)
By: /s/ Mark K. Hardwick
Mark K. Hardwick
Executive Vice President,
Chief Financial Officer and Chief Operating Officer
Dated: November 10, 2020
3Q Highlights | 2020
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”, “pattern”, “estimate”, “project”, “intend”, “anticipate”, “expect” and similar expressions or future or conditional verbs such as “will”, would”, “should”, “could”, “might”, “can”, “may”, or similar expressions. These forward- looking statements include, but are not limited to, statements relating to First Merchants’ goals, intentions and expectations; statements regarding the First Merchants’ business plan and growth strategies; statements regarding the asset quality of First Merchants’ loan and investment portfolios; and estimates of First Merchants’ risks and future costs and benefits. These forward-looking statements are subject to significant risks, assumptions and uncertainties that may cause results to differ materially from those set forth in forward-looking statements, including, among other things: possible changes in economic and business conditions; the existence or exacerbation of general geopolitical instability and uncertainty; the effects of a pandemic or other unforeseeable event; the ability of First Merchants to integrate recent acquisitions and attract new customers; possible changes in monetary and fiscal policies, and laws and regulations; the effects of easing restrictions on participants in the financial services industry; the cost and other effects of legal and administrative cases; possible changes in the credit worthiness of customers and the possible impairment of collectability of loans; fluctuations in market rates of interest; competitive factors in the banking industry; changes in the banking legislation or regulatory requirements of federal and state agencies applicable to bank holding companies and banks like First Merchants’ affiliate bank; continued availability of earnings and excess capital sufficient for the lawful and prudent declaration of dividends; changes in market, economic, operational, liquidity, credit and interest rate risks associated with the First Merchants’ business; and other risks and factors identified in each of First Merchants’ filings with the Securities and Exchange Commission. First Merchants undertakes no obligation to update any forward-looking statement, whether written or oral, relating to the matters discussed in this presentation or press release. In addition, the company’s past results of operations do not necessarily indicate its anticipated future results. NON-GAAP FINANCIAL MEASURES These slides contain non-GAAP financial measures. For purposes of Regulation G, a non-GAAP financial measure is a numerical measure of the registrant’s historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet or statement of cash flows (or equivalent statements) of the issuer; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. In this regard, GAAP refers to generally accepted accounting principles in the United States. Pursuant to the requirements of Regulation G, First Merchants Corporation has provided reconciliations within the slides, as necessary, of the non-GAAP financial measure to the most directly comparable GAAP financial measure.
Company Profile (as of September 30, 2020) (in Thousands) First Merchants Market Information Common Shares Outstanding 53,891,733 First Merchants Bank formed in 1893, celebrating its Market Cap 1,248,133 127th anniversary Dividend Yield 4.49% First Merchants Corporation, organized in 1982, is Price/Tangible Book Value 0.99x the largest financial services holding company Price/LTM EPS 8.3x headquartered in Central Indiana Price/2020 Est. EPS 9.7x Financial Highlights($ in Thousands) Assets $13,737,350 Leadership Team (Name, title, age) Loans, Net $9,120,290 Michael C. Rechin, President & CEO 62 Deposits $10,906,153 Mark K. Hardwick, EVP, COO & CFO 49 Tangible Common Equity $1,259,161 Michael J. Stewart, EVP & Chief Banking Officer 55 TCE/TA 9.57% John J. Martin, EVP & Chief Credit Officer 54 2020 Net Income – YTD $103,465 Michele M. Kawiecki, SVP, Director of Finance 48 2020 ROAA – YTD 1.04% 2020 ROATCE - YTD 11.47% Michael B. Joyce, SVP, President PWA 46 NPAs/Loans + OREO 0.72% Carrie A. Valek, SVP, Director Consumer Banking 44 3
Why Invest in First Merchants? 4
Our Franchise Key Market Profiles Loans Deposits $1,332M Columbus $ 752M 895M Fort Wayne 1,217M 3,103M Indianapolis 2,179M 782M Lafayette 1,415M 1,142M Lakeshore 1,459M 743M Michigan 1,280M 1,250M Muncie 2,604M $9,247M Total $10,906M (as of September 30, 2020) Mission Statement To be the most responsive, knowledgeable and high-performing bank for our clients, teammates and shareholders. 5
Key FMC Market Share Data County Region/Type Market Position Market % $ Deposits Delaware County, IN Muncie (Established) 1 55.84% $ 1,591,928 Monroe, MI Michigan (Established) 1 47.81% 1,047,013 Madison County, IN Indianapolis (Growth) 1 28.59% 460,024 White County, IN Lafayette (Established) 1 34.03% 178,809 Wells County, IN Fort Wayne (Growth) 1 23.84% 126,678 Jay County, IN Muncie (Established) 1 45.73% 118,998 Union County, IN Muncie (Established) 1 50.66% 47,132 Tippecanoe County, IN Lafayette (Established) 2 23.50% 755,800 Henry County, IN Muncie (Established) 2 35.32% 262,841 Jasper County, IN Lafayette (Established) 2 31.83% 226,029 Shelby County, IN Indianapolis (Growth) 2 16.71% 120,015 Randolph County, IN Muncie (Established) 2 24.69% 84,583 Wabash County, IN Muncie (Established) 2 14.23% 71,332 Clinton County, IN Lafayette (Established) 2 11.98% 60,762 Hendricks County, IN Indianapolis (Growth) 3 11.51% 379,879 Adams County, IN Muncie (Established) 3 15.31% 121,576 Huntington County, IN Fort Wayne (Growth) 3 15.93% 111,793 Hamilton County, IN Indianapolis (Growth) 4 7.04% 1,075,074 Allen County, IN Fort Wayne (Growth) 4 10.88% 781,024 Johnson County, IN Indianapolis (Growth) 4 9.94% 287,984 Morgan County, IN Indianapolis (Growth) 4 12.35% 141,987 Hancock County, IN Indianapolis (Growth) 4 10.04% 128,330 Carroll County, IN Lafayette (Established) 4 14.21% 45,892 Miami County, IN Muncie 4 8.82% 39,507 Fayette County, IN Muncie 5 9.43% 36,004 Sub Total $8,302,994 First Merchants Total $10,998,218 FDIC Data June 30, 2020 6
First Merchants Strategy “Service-driven alternative to super-regional bank competitors. Deliver superior service with presence close to the customer for . . . ” Commercial Banking Consumer Banking Business Banking Mortgage Banking Commercial & Industrial Agriculture Private Wealth Advisory Sponsor Finance Private Banking Public Finance Investment Management Healthcare Services Personal Trust Investment Real Estate Brokerage Treasury Management Retirement Merchant Processing Services Asset-Based Lending “We specialize in our communities” 7
First Merchants Strategy Commercial Bank Located in Prime Growth Commercial Banking Markets Indianapolis, Indiana Monroe, Michigan Columbus, Ohio Fort Wayne, Indiana Lafayette, Indiana Lakeshore - Northwest Indiana Hire the Best Talent Supported with the Finest Sales Management Process Credit and Treasury Services Revenue-Based Incentive System 8
First Merchants Strategy Consumer Retail Bank Diverse Locations in Stable Rural and Growth Metro Markets Supported by: Talented Customer Service Oriented Banking Center and Call Center Professionals State-of-the-Art Systems Deposit and CRM Systems Online Banking System Mobile Banking System Customer Service and Relationship Growth-Oriented Incentive System 9
First Merchants Strategy Private Wealth Advisors Comprehensive and coordinated approach to personal wealth management Expertise in Investment Management, Private Banking, Fiduciary, Estate and Financial Planning Strengthen commercial relationships with personal services for executives/owners and retirement plan services for companies Partner with consumer bank to offer personal investment advice through First Merchants Investment Services 10
Organic Growth Opportunities Exists in All Directions Lakeshore - NW Indiana* Fort Wayne MSA Entered: 2013 Entered: 2017 Total Population: 689,444 Total Population: 417,788 Deposit Market Share: 8.39% Deposit Market Share: 10.08% FOUNDING MARKET Lafayette MSA Muncie MSA Columbus, Ohio MSA Entered: 2002 Established: 1893 Entered: 2003 Total Population: 236,352 Total Population: Total Population: 2,155,749 Deposit Market Share: 20.80% 113,450 Deposit Market Share: 0.94% Current Market Share: 55.84% Indianapolis MSA Monroe, Michigan MSA Entered: 1998 Entered: 2019 Total Population: 2,105,615 Total Population: 150,667 Deposit Market Share: 3.92% Deposit Market Share: 47.81% *Includes Jasper, Lake and Porter counties 11
Ranked Best in the Midwest for Business AAA Credit Rating since 20081 Leading the Nation in Manufacturing Job Growth 1st in Midwest and 5th Nationally for Best State for Doing Business2 1st Metro Area for Strong Job Opportunities with Affordable Housing 1st Nationally for Highway Accessibility 1st in the Midwest/8th Nationally for Low Taxes 1st for Quality of Government and Government Administration3 1st for Best Business Regulatory Climate4 Top 5 Nationally for Cost of Doing Business 2nd in the Nation for Small Business Growth 2nd Nationally for Availability of Skilled Labor 2nd Best City in the Nation for Recent Graduates (Indianapolis) 2nd Nationally for Top States for Business - Infrastructure 2nd Largest Global Fed Ex Air Hub 4th Nationally for Women in Tech and 10th in Overall Tech Job Growth 1S&P, Moody’s & Fitch 2Chief Executive Magazine 2017 3US News & World Reports 2017 4Forbes 2017 Unless otherwise noted, source IEDC 12
Muncie Market ₎ Located 58 miles northeast of Indianapolis in the east central portion of the Notable Major Employers state ₎ Described by several national studies as a typical American community, Delaware County offers the advantages of larger cities without the hassles and costs associated with living in major metropolitan areas. ₎ Easy access to the top 100 markets in the country, Muncie-Delaware County has a diverse economic landscape ₎ Ranked #27, Forbes Best Small Places for Business and Careers ₎ Workforce experienced in life science, advanced manufacturing, 21st century logistics and information technology ₎ Home to Ball State University Delaware County, IN* Mkt. Rank Branches Deposits Share 1 First Merchants Corporation 9 $1,591,928 55.84% Projected HHI & Pop. Change 2021-2026 2 Northwest Bancshares 7 551,757 19.35% 9.01% 9.13% 3 J.P. Morgan Chase 2 299,507 10.51% 4 Old National Bancorp 3 212,255 7.45% 5.02% 5 Star Financial Group 3 194,039 6.81% 2.91% 6 Woodforest Financial Group 1 1,464 0.05% 2.01% Market Total 25 $ 2,850,950 U.S. Indiana Delaware Co.-0.66% *SNL Financial FDIC Summary of Deposits as of June 30, 2020 HHI Pop. 13
Indianapolis Market ₎ Indianapolis metropolitan area includes four of the five fastest-growing counties in Indiana and 10 of the 11 fastest-growing cities and towns with Notable Major Employers populations of at least 5,000* ₎ The population data released by the U.S. Census Bureau show suburban Hamilton County’s population grew 20.2% since 2010 ₎ Indiana’s population growth outpaced those of neighboring states Illinois, Kentucky, Michigan and Ohio* ₎ With 867,125 residents, Indianapolis was the nation’s 17th largest city* Indianapolis-Carmel-Anderson, IN MSA** Mkt. Rank Branches Deposits Share 1 JP Morgan Chase 65 $13,560,163 19.86% 2 PNC Financial Services Group 60 9,711,209 14.23% 3 Fifth Third Bancorp 42 6,585,140 9.65% 4 Huntington Bancshares 40 4,349,026 6.37% 5 Bank of Montreal 35 3,980,376 5.83% Projected HHI & Pop. Change 2021-2026 6 Merchants Bancorp 3 3,963,129 5.81% 7 KeyCorp 19 3,915,739 5.74% 11.18% 8 First Internet Bancorp 1 3,414,357 5.00 9.01% 9.13% 9 Bank of America 6 3,365,633 4.93% 10 First Merchants Corporation 32 2,673,392 3.92% 2.91% 2.95% Market Total 522 $68,263,881 2.01% *IN.gov **SNL Financial FDIC Summary of Deposits as of June 30, 2020 U.S. Indiana Marion Co. ***Marion County, IN HHI Pop. 14
Lafayette Market Notable Major Employers ₎ Ranked #1, MSN Money, Fastest Growing Cities in the State of Indiana ₎ Ranked #2, Forbes Best Small Places for Business and Careers ₎ Ranked #2 in Indiana for STEM job density, with 13.6% of the workforce, topping the state’s 10.9% & national average of 11.9% (Lafayette up 70.6% since 2001, with 4,850 new jobs)** ₎ Ranked among 24/7 Wall St., American City Adding the Most Jobs ₎ Home to Purdue University Tippecanoe County, IN** Mkt. Rank Branches Deposits Share 1 JPMorgan Chase & Co. 5 $ 1,025,056 31.88% 2 First Merchants Corporation 7 755,800 23.50% 3 Regions Financial Corp 4 300,941 9.36% 4 Old National Bancorp 3 262,068 8.15% 5 Horizon Bancorp 5 224,761 6.99% Projected HHI & Pop. Change 2021-2026 6 Huntington Bancshares, Inc. 2 173,477 5.39% 9.01% 9.13% 7 First Bancshares 5 122,206 4.39% 8 Fifth Third Bancorp 2 138,888 4.32% 5.82% 9 1st Source Corp 3 121,133 3.77% 4.42% 10 First Bancshares 5 117,958 3.67% 2.91% 2.01% Market Total 47 $ 3,215,806 *Indianapolis Business Journal U.S. Indiana Tippecanoe Co. **SNL Financial FDIC Summary of Deposits as of June 30, 2020 HHI Pop. 15
Lakeshore Market ₎ Indiana’s second-most populous market Notable Major Employers ₎ Benefit from its Chicago proximity ₎ Continue to produce finest steels, refine the cleanest fuels and deliver the best products to the Midwest** ₎ New investments by world-class companies like BP, Pratt Industries, Alcoa Howmet, Urschel Labs and Monosol** ₎ Lakefront being revitalized through the Marquette Plan and assistance of the Regional Development Authority** Lake County, IN* Mkt. Rank Branches Deposits Share 1 First Bancshares, Inc. 28 $ 2,717,377 23.46% 2 JPMorgan Chase & Co. 18 2,475,670 21.37% 3 First Midwest Bancorp 14 1,228,806 10.61% Projected HHI & Pop. Change 2021-2026 4 First Merchants Corporation 10 1,003,762 8.67% 9.01% 9.13% 9.35% 5 Northwest Indiana Bancorp 15 913,260 7.88% 6 First Financial Bancorp 7 878,896 7.59% 7 Bank of Montreal 13 656,395 5.67% 8 Fifth Third Bancorp 10 586,086 5.06% 9 AMB Financial Corp 5 219,623 1.90% 2.91% 2.01% 10 Providence Financial Corp 3 215,721 1.86% Market Total 141 $11,582,319 0.03% *SNL Financial FDIC Summary of Deposits as of June 30, 2020 U.S. Indiana Lake County **www.nwiforum.org/nwi-becoming-an-economic powerhouse HHI Pop. 16
Fort Wayne Market ₎ 2nd Largest MSA in the State of Indiana ₎ Diversified economy (manufacturing, health care, retail trade, food Notable Major Employers services) ₎ Attractive location for businesses to locate and expand – located between the Chicago, Detroit, Dayton, Toledo and Indianapolis metro areas ₎ Fort Wayne-Allen County economic engine of the Northeast Indiana region ₎ #1 place to raise a family (2017, SmartAsset.com) Allen County, IN* Mkt. Rank Branches Deposits Share 1 JP Morgan Chase & Co. 12 1,572,235 21.90% 2 Lakeland Financial Corp. 5 1,003,657 13.98% 3 PNC Financial Services Group 11 865,788 12.06% 4 First Merchants Corporation 8 781,024 10.88% Projected HHI & Pop. Change 2021-2026 5 Flagstar Bancorp 13 606,304 8.44% 6 STAR Financial Group, Inc. 9 581,112 8.09% 7 1st Source Corp. 8 415,372 5.79% 9.01% 9.13% 9.57% 8 Old National Bancorp 4 380,767 5.30% 9 Fifth Third Bancorp 7 313,639 4.37% 2.91% 3.24% 10 Premier Financial Corp. 3 177,040 2.47% 2.01% Market Total 97 $ 7,179,553 U.S. Indiana Allen County *SNL Financial FDIC Summary of Deposits as of June 30, 2020 HHI Pop. 17
Columbus, Ohio Market ₎ Second-most populous county in Ohio Notable Major Employers ₎ Within 600 miles of 60% of All U.S. and Canadian Population ₎ Ranked 2nd in CNBC’s 2010 study of state transportation systems for its infrastructure, vitality, quality roads, and ability to cost-effectively ship goods by land, air, and water** ₎ Home to Ohio State University Franklin County, OH* Mkt. Rank Branches Deposits Share 1 Huntington Bancshares 56 $ 26,495,352 38.04% 2 JP Morgan Chares & Co 51 17,758,726 25.49% 3 PNC Financial Services Group 37 6,669,397 9.57% 4 Fifth Third Bancorp 37 5,507,666 7.91% 5 Bank of America Corp. 4 5,081,346 7.29% 6 U.S. Bancorp 27 1,677,381 2.41% Projected HHI & Pop. Change 2021-2026 7 KeyCorp 21 1,230,692 1.77% 9.01% 9.26% 8 Heartland BancCorp 15 929,926 1.33% 7.97% 9 First Merchants Corporation 9 787,938 1.13% 3.89% 10 WesBanco 10 541,034 .78% 2.91% Market Total 313 $ 69,659,835 0.63% U.S. Ohio Franklin County *SNL Financial FDIC Summary of Deposits as of June 30, 2020 **http://jobs-ohio.com/manufacturing/ HHI Pop. 18
Monroe, Michigan Market ₎ Monroe is located on the western shore of Lake Erie, approximately 14 miles Notable Major Employers north of Toledo, Ohio and 25 miles south of Detroit ₎ Michigan is within 500 miles of nearly half the U.S. and Canadian population and commerce centers providing unparalleled access to market ₎ $500 Million in trade crosses between Michigan and Canada daily via the Ambassador Bridge, the busiest border crossing in North America ₎ Michigan’s cost of living is 10% below the national average and ranks as the fourth most affordable state in the country Monroe County, MI* Mkt. Rank Branches Deposits Share 1 First Merchants Corporation 15 $ 1,047,013 47.81% 2 Huntington Bancshares 4 409,409 18.69% 3 Fifth Third Bancorp 3 278,187 12.70% 4 PNC Financial Services Group 2 180,050 8.22% 5 KeyCorp 3 170,438 7.78% Projected HHI & Pop. Change 2021-2026 6 Old National Bancorp 1 70,434 3.22% 13.83% 7 Flagstar Bancorp 1 34,539 1.58% 10.15% Market Total 29 $ 2,190,070 9.01% 2.91% 0.46% 0.13% U.S. Michigan Monroe County *SNL Financial FDIC Summary of Deposits as of June 30, 2020 HHI Pop. 19
Growth Through Acquisition Experienced Acquirer Expand in Current High-Growth Markets Extend into Additional High-Growth Markets Add to Franchise with Stable Deposit Gathering Markets 20
Acquisition Experience 21
Acquisition Process Continuous Relationship Building Complete and Thorough Due Diligence Process Demonstrated Pricing Discipline Detailed Project Management Integration Process Scalable Technology and Operations Center Achieve Announced Financial Return Targets 22
Operational Delivery Highlights Strategic differentiator in support of growth and scalability Operational services execution “hub” focusing on value creation Functional focus: . Operations . Project Management . Technology . Risk Management . Vendor Management . Credit Administration Located on the interstate less than 30 minutes north of Indianapolis + 130,000 square feet of flexible space Strategic Vendor Partners 23
Operational Delivery Highlights Customer, Digital Channel & Transaction Activity Total Households: 208,176 Online Banking/Digital Channel Treasury Management Annual Volume • Consumer: 97K Users • Automated Clearing House (ACH) • 1.1M logins monthly • # Originated: 3.3M Items ($13.3B) • 16K bill pay users • # Received: 20.6M Items ($38.8B) • 91K bill payment transactions monthly ($33M) • Mobile: 72K Users • Domestic Wires • 22.35 average logins per user, per month • # Originated: 57K Items ($20B) • 22K mobile deposits per month • # Received: 62K Items ($28B) • Business: 14K Users • International Wires • 196K logins monthly • # Originated: 1K Items ($10.3M) • 6.22% use ACH/Wire/Positive Pay • # Received: 67 Items ($5.6M) • Total ATMS: 164 + 25,000 MoneyPass ATMs Total Debit Cards Commercial Remote Deposit Capture • 205K active cards • 864 businesses using solution • 3.8M monthly card swipes • 197K deposits annually • $162M in monthly volume • 2.2M items deposited annually • $5.6B in total deposits 24
3rd Quarter 2020 Highlights . Earnings Per Share of $.67; Net Income of $36.2 Million; ROA 1.06% Earnings . Pre-Tax Pre-Provision Income of $54.4 Million . PTPP ROA 1.59%; PTPP ROE 11.88% . Core Net Interest Margin Stabilized on a Linked Quarter Basis . Total Assets of $13.7 Billion; Grew by 11.5% over 3Q 2019 Assets . Total Loans of $9.2 Billion; Grew by $940 Million over 3Q 2019 . Total Deposits of $10.9 Billion; Grew by $1.1 Billion over 3Q 2019 Deposits . Deposit Costs Declined by 61 bps from 4Q 2019 to 36 bps . Tangible Common Equity to Assets of 9.57%, an increase of 26 bps Capital . $23.48 TBV Per Share; 10.4% Increase over 3Q 2019 . a3 Baseline Credit Assessment from Moody’s Investor Service1 1Moody’s Credit Opinion – First Merchants Corporation, September 29, 2020, Baseline credit assessment reflects a bank’s stand alone credit strength. 25
3rd Quarter 2020 Highlights cont. . Allowance & Fair Value Marks totaling 1.65% of Loans Asset Quality . $12.5 Million Provision; Allowance increased by 57.3% over 3Q 2019 . Ample liquidity with Loan to Deposit Ratio of 84.8% Liquidity . Loan to Asset Ratio of 67.3% . Cash and Investment Security levels remain strong at $3.4 Billion . $176 Million in Loan modifications or 2% of the total portfolio in deferral COVID-19 Loan . Robust process for 2nd request modifications Modifications . Residual Covid Modifications concentrated in hospitality industry receiving focused attention . SBA Paycheck Protection Program institution with more than 5,000 applications and greater than $900 Million funded to businesses (FMB is, and has been, a preferred CARES Act SBA Lender) . Started to accept and file applications for forgiveness 26
Our Franchise ILLINOIS Unemployment1 MICHIGAN April 2020 16.4% June 2020 14.6% Unemployment1 August 2020 11.0% April 2020 22.7% September 2020 10.2% June 2020 14.8% August 2020 8.7% September 2020 8.5% OHIO INDIANA Unemployment1 1 Unemployment April 2020 16.8% April 2020 16.9% June 2020 10.9% June 2020 11.2% August 2020 8.9% August 2020 6.4% September 2020 8.4% September 2020 6.2% 1US Bureau of Labor Statistics 27
Total Assets ($ in Millions) 2018 2019 Q1-’20 Q2-’20 Q3-’20 1. Investments $1,633 $2,596 $2,698 $2,789 $2,933 2. Loans 7,229 8,468 8,612 9,2991 9,247 1 3. Allowance (81) (80) (99) (121) (127) 4. Goodwill & Intangibles 470 579 577 576 574 5. BOLI 225 288 290 291 292 6. Cash & Other 409 606 616 985 818 7. Total Assets $9,885 $12,457 $12,694 $13,819 $13,737 1 1 Includes SBA Paycheck Protection Program loans of $883 million in Q2 and $901 million in Q3 28
Loan Yield and Detail (as of September 30, 2020) QTD Yield = 3.93% Commercial YTD Yield = 4.28% Agricultural Real Estate Construction Land & Agricultural Total Loans = $9.2 Billion Land Non-Owner Land Development Production 2.4% Public Occupied 6.7% 0.9% Finance/Other 22.7% Commercial Variable = $5.5 Billion 6.7% Fixed = $3.7 Billion Residential Mortgage 12.4% Home LIBOR- Prime- Equity Based Based 5.7% Other 34% 13% Variable Rates 12% Commercial Real Estate Owner-Occupied Other 10.1% Consumer 1.3% Commercial & PPP Fixed Industrial Rate Non-PPP 31.1% 10% Fixed Rate 31% 29
Investment Portfolio (as of September 30, 2020) $2.9 Billion Portfolio Mortgage-Backed Modified duration of 4.9 years Tax-Exempt Municipals Securities Tax equivalent yield of 2.94% 56% 30% Net unrealized gain of $141.5 Million Realized gains on Investment Portfolio 1Q 2020 $4.6 Million 2Q 2020 $3.1 Million 3Q 2020 $1.8 Million Corporate Collateralized Obligations Mortgage 1% Taxable U. S. Agencies Obligations Municipals 3% 9% 1% 30
Total Liabilities and Capital ($ in Millions) 2018 2019 Q1-’20 Q2-’20 Q3-’20 1. Customer Non-Maturity Deposits $6,268 $8,147 $8,256 $9,567 $ 9,798 2. Customer Time Deposits 1,241 1,478 1,411 1,276 1,010 3. Brokered Deposits 246 215 203 123 98 Total Deposits 7,755 9,840 9,870 10,966 10,906 4. Borrowings 538 599 716 754 673 5. Other Liabilities 51 98 206 177 211 6. Hybrid Capital 133 134 124 113 113 7. Common Equity 1,408 1,786 1,778 1,809 1,834 8. Total Liabilities and Capital $9,885 $12,457 $12,694 $13,819 $13,737 31
Deposit Detail (as of September 30, 2020) QTD Cost = 0.36% Certificates & Certificates & Time Time Deposits YTD Cost = 0.56% Deposits <$100,000 >$100,000 Brokered Total Deposits = $10.9 Billion 5% Savings 4% Deposits Deposits 1% 32% 4Q 2020 CD maturities totaling $348 Million with average rate of 1.67% Demand Deposits 58% 32
Capital Ratios Total Risk-Based Capital Ratio (Target = 12.50%) Common Equity Tier 1 Capital Ratio (Target = 10.00%) Tangible Common Equity Ratio (TCE) (Target = 9.00%) 15.00% 14.61% 14.71% 14.56% 14.37% 14.29% 14.38% 14.25% 14.18% 14.00% 13.80% 13.00% 12.12% 12.05% 12.14% 12.13% 11.98% 12.02% 12.00% 11.84% 11.64% 11.58% 11.00% 10.19% 9.93% without without PPP Loans 10.16% 10.14% 10.07% PPP Loans 9.97% 9.95% 10.00% 9.91% 9.55% 9.57% 9.31% 9.00% 8.00% 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 33
Net Interest Margin Q3 - '18 Q4 - '18 Q1 - '19 Q2 - '19 Q3 - '19 Q4 - '19 Q1 - '20 Q2 - '20 Q3 - '20 Net Interest Income - FTE ($millions) $ 89.2 $ 90.7 $ 87.8 $ 88.4 $ 92.3 $ 101.2 $ 97.8 $ 97.1 $ 97.3 Fair Value Accretion $ 3.2 $ 3.9 $ 2.3 $ 2.2 $ 2.5 $ 5.0 $ 3.5 $ 3.7 $ 3.3 Tax Equivalent Yield on Earning Assets 4.88% 4.97% 4.89% 4.86% 4.77% 4.63% 4.38% 3.72% 3.58% Interest Expense/Average Earning Assets 0.83% 0.93% 1.05% 1.15% 1.15% 1.01% 0.92% 0.53% 0.43% Net Interest Margin 4.05% 4.04% 3.84% 3.71% 3.62% 3.62% 3.46% 3.19% 3.15% Fair Value Accretion Effect 0.15% 0.17% 0.09% 0.09% 0.10% 0.18% 0.12% 0.12% 0.10% $104 4.50% $100 4.00% 4.05% 4.04% $96 3.84% 3.50% 3.71% 3.62% 3.62% $92 3.46% 3.00% $88 3.19% 3.15% 2.50% $84 2.00% $80 $76 1.50% $72 1.00% $68 0.50% $64 0.00% Q3 - '18 Q4 - '18 Q1 - '19 Q2 - '19 Q3 - '19 Q4 - '19 Q1 - '20 Q2 - '20 Q3 - '20 Net Interest Income - FTE ($millions) Net Interest Margin 34
Non-Interest Income ($ in Millions) 2018 2019 Q1-’20 Q2-’20 Q3-’20 1. Service Charges on Deposit Accounts $ 21.0 $23.0 $ 6.0 $ 4.3 $ 5.2 2. Wealth Management Fees 14.9 17.6 6.0 5.6 5.9 3. Card Payment Fees 18.0 20.2 5.9 6.1 4.0 4. Gains on Sales of Mortgage Loans 7.0 7.9 3.4 3.7 5.8 5. Derivative Hedge Fees 2.5 5.4 1.9 1.1 1.7 6. Other Customer Fees 1.9 1.7 0.4 0.3 0.4 Total Customer Related Fees 65.3 75.8 23.6 21.1 23.0 7. Cash Surrender Value of Life Ins 4.2 4.5 1.4 1.3 1.2 8. Gains on Sales of Securities 4.3 4.4 4.6 3.1 1.8 9. Other 2.7 2.0 0.2 1.0 0.1 10. Total Non-Interest Income $76.5 $86.7 $29.8 $26.5 $26.1 35
Non-Interest Expense ($ in Millions) 2018 2019 Q1-’20 Q2-’20 Q3-’20 1. Salary & Benefits $131.7 $144.0 $39.2 $35.7 $39.2 2. Premises & Equipment 32.7 35.8 10.2 9.9 10.8 3. Intangible Asset Amortization 6.7 6.0 1.5 1.5 1.5 4. Professional & Other Outside Services 8.2 15.4 2.3 1.6 2.3 5. OREO/Credit-Related Expense 1.5 2.4 0.5 0.7 0.7 6. FDIC Expense 2.9 0.7 1.5 1.5 1.2 7. Outside Data Processing 13.2 16.5 4.2 2.6 3.8 8. Marketing 4.7 6.7 1.4 2.1 1.3 9. Other 18.4 19.3 5.3 4.4 3.9 10. Total Non-Interest Expense $220.0 $246.8 1 $66.1 $60.0 $64.7 2 1Includes acquisition-related expenses of $13.7 million 2Includes COVID related cleaning and PPE expenses of $618,000 QTD and 1.1 million YTD 36
Earnings ($ in Millions) 2018 2019 Q1-’20 Q2-’20 Q3-’20 1. Net Interest Income $ 338.8 $356.7 $93.9 $93.0 $92.9 2. Provision for Loan Losses (7.2) (2.8) (19.8) (21.9) (12.5) 3. Net Interest Income after Provision 331.6 353.9 74.1 71.1 80.4 4. Non-Interest Income 76.5 86.7 29.8 26.5 26.1 5. Non-Interest Expense (220.0) (246.8) (66.1) (60.0) (64.7) 6. Income Before Income Taxes 188.1 193.8 37.8 37.6 41.8 7. Income Tax Expense (29.0) (29.3) (3.5) (4.6) (5.6) 8. Net Income Avail. for Distribution $ 159.1 $164.5 $34.3 $33.0 $36.2 9. EPS $ 3.22 $ 3.19 1 $0.62 $0.62 $0.67 10. Efficiency Ratio 50.21% 52.73% 2 52.17% 47.95% 51.40% 1Acquisition-related expenses reduced EPS by $0.21 2Acquisition-related expenses increased the Efficiency Ratio by 3.04% 37
Per Share Results 2019 Q1 Q2 Q3 Q4 Total 1 1. Earnings Per Share $ .78 $ .83 1 $ .711 $ .87 1 $ 3.19 2. Dividends $ .22 $ .26 $ .26 $ .26 $ 1.00 3. Dividend Payout Ratio 28.2% 31.3% 36.6% 29.9% 31.4% 4. Tangible Book Value $20.07 $21.01 $21.26 $21.94 2020 Q1 Q2 Q3 Q4 Total 1. Earnings Per Share $ .62 $ .62 $ .67 – $ 1.91 2. Dividends $ .26 $ .26 $ .26 – $ .78 3. Dividend Payout Ratio 41.9% 41.9% 38.8% – 40.8% 4. Tangible Book Value $22.46 $23.04 $23.48 – 1Acquisition-related expenses reduced EPS by $0.01 in Q2; $0.17 in Q3; $0.03 in Q4; and $0.21 for full-year 2019 38
Dividends and Tangible Book Value Quarterly Dividends Tangible Book Value .26 .26 0.26 $23.48 0.24 $21.94 .22 0.22 $19.12 0.20 .18 $16.96 0.18 $15.85 .15 $14.68 0.16 .14 $13.65 0.14 $12.17 $10.95 .11 0.12 $9.21 $9.64 0.10 .08 0.08 0.06 .05 0.04 .03 0.02 .01 0.00 4.49% Forward Dividend Yield Compound Annual Growth Rate of 10.07% 39
ALLL and Fair Value Summary Q3-'19 Q4-'19 Q1-'20 Q2-'20 Q3-'20 1. Beginning Allowance for Loan Losses (ALLL) $ 81.3 $ 80.6 $ 80.3 $ 99.5 $ 121.1 2. Less: Net Charge-offs (Recoveries) 1.3 0.8 0.6 0.2 6.9 3. Add: Provision Expense 0.6 0.5 19.8 21.9 12.5 4. Ending Allowance for Loan Losses (ALLL) $ 80.6 $ 80.3 $ 99.5 $ 121.1 $ 126.7 5. Specific Reserves $ 2.3 $ 0.7 $ 0.6 $ 13.0 $ 9.1 6. ALLL/Non-Accrual Loans 354.5% 503.4% 635.5% 241.7% 223.3% 7. ALLL/Non-Purchased Loans 1.16% 1.11% 1.33% 1.46% 1.52% 8. ALLL/Loans 0.97% 0.95% 1.15% 1.30% 1.37% 9. Fair Value Adjustment (FVA) $ 41.3 $ 36.6 $ 33.1 $ 29.3 $ 26.0 10. Total ALLL plus FVA 121.9 116.9 132.5 150.4 152.7 11. Purchased Loans plus FVA 1,410.3 1,271.2 1,155.1 1,039.4 940.4 12. FVA/Purchased Loans plus FVA 2.93% 2.88% 2.86% 2.82% 2.76% 40
Loan Loss Coverage & Capital Strength ALLL ALLL/Loans ALLL/Loans - PPP Loans Allowance for Loan Losses - 6/30/20 $ 121.1 1.30% 1.44% Q3-'20 increase in ALLL $ 5.6 Allowance for Loan Losses - 9/30/20 $ 126.7 1.37% 1.52% CECL Day 1 Adoption Impact* $ 52.2 Allowance for Loan Losses with CECL Day 1 Impact $ 178.9 1.93% 2.14% *CECL has not been adopted and is included for illustrative purposes only. The impact assumes retrospective measurement back to January 1, 2020 and reflects the range disclosed in the 12/31/19 Form 10-K. Adoption impact would also include $18.5 million in reserve for unfunded commitments recorded in Other Liabilities. Total Risk Based Capital Ratio with CECL Adoption 13.89% (Stated – 14.38%) Post-CECL allowance + excess capital Excess Capital provides over $500 million in reserves 3.39% $338 million without considering future earnings or of excess capital remaining fair value marks of $26 million Well Capitalized 10.50% 41
Loan Portfolio Portfolio Trending – Q3-’20 Change Linked Quarter ($ in Millions) 2018 2019 Q1-'20 Q2-'20 Q3-'20 $ % 1. Commercial & Industrial $ 1,498 $ 1,802 $ 1,858 $ 2,576 $ 2,539 $ (37) (1.4%) 2. Sponsor Finance 233 312 345 326 340 14 4.3% 3. CRE Owner Occupied 725 910 921 915 928 13 1.4% 4. Construction, Land and 546 787 644 640 622 (18) (2.8%) Land Development 5. CRE Non-Owner Occupied 1,861 1,899 2,114 2,098 2,099 1 0.0% 6. Agricultural Production 92 94 87 94 83 (11) (11.7%) 7. Agricultural Land 242 240 229 223 218 (5) (2.2%) 8. Public Finance/Other Commercial 433 547 587 625 616 (9) (1.4%) 9. Total Commercial Loans 5,630 6,591 6,785 7,497 7,445 (52) (0.7%) 10. Residential Mortgage 970 1,149 1,127 1,146 1,147 1 0.1% 11. Home Equity 528 589 570 532 527 (5) (0.9%) 12. Other Consumer 101 139 130 124 128 4 3.2% 13. Total Residential Mortgage and Consumer Loans 1,599 1,877 1,827 1,802 1,802 0 0.0% 14. Total Loans $ 7,229 $ 8,468 $ 8,612 $ 9,299 $ 9,247 $ (52) (0.6%) 1As a % of Risk Based Capital 42
CRE Loan Concentration First Merchants Results in Relation to FDIC Guidelines FDIC GUIDELINES TO IDENTIFY INSTITUTIONS POTENTIALLY EXPOSED TO CRE RISK: Guideline 1: Total loans for construction, land development, and other land representing 100% or more of total capital Guideline 2: Total CRE loans representing 300% or more of total capital AND a CRE portfolio that has increased 50% or more during the prior 36 months Guideline #1 Guideline #2 3Q2020 3Q2020 2Q2020 2Q2020 1Q2020 1Q2020 - End - End 4Q2019 4Q2019 3Q2019 3Q2019 Quarter Quarter 2Q2019 2Q2019 1Q2019 1Q2019 4Q2018 4Q2018 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 0.0% 100.0% 200.0% 300.0% 43
Loan Portfolio C & I Line Utilization COVID-19 Modifications1 by Loan Type $176 million, 1.9% of loans, have COVID-19 Mod in Deferral Q3. Commitments up $60MM in Q3; $109MM ($ in Millions) 2 YTD $ 1st $ 2nd In Deferral Q3 Mod Mod $ # C & I utilization Commercial & Industrial $ 150 $ 12 $ 24 32 declined in Q3 Sponsor Finance 6 6 6 1 reducing CRE Owner Occupied 246 5 18 22 balances by $46 Construction & Land Development 30 1 3 1 MM; $185MM YTD CRE Non-Owner Occupied 456 80 115 36 Agriculture 1 1 2 6 Geography Residential Mortgage 80 11 7 50 Home Equity 7 - 1 11 Other Consumer 3 - - 20 Total Loans $ 979 $ 116 $ 176 179 By State 1 1st Mod refers to loans with 1 Covid Mod. 2nd Mod refers to loans with a 2nd Covid Mod. 2 In Deferral is where the last extended payment due date is Q3 or in future. 44
COVID-19 Loan Modifications by Industry Loan Balances by Industry Balance / Covid Mod In Deferral Q3 ($ in Millions) Q3 - % of Total 1st 2nd In Deferral Q3 Segments based on NAICS Code '20 Loans Mod Mod $ # Manufacturing $795 $12 Manufacturing $ 795 8.6% $ 67 $ 5 $ 12 10 Public Administration $556 Public Administration 556 6.0% 2 - - - Other Administrative Services $382 Other Administrative Services 382 4.1% 27 4 2 6 Agriculture $361 Agriculture 361 3.9% 1 1 1 3 Wholesale Trade $321 Wholesale Trade 321 3.5% 34 4 9 9 $9 Retail Trade $302 Retail Trade 302 3.3% 50 - 1 3 Senior Living $290 Senior Living 290 3.1% 2 14 - - Construction $238 Construction 238 2.6% 8 - - 1 Professional Service $233 Professional Service 233 2.5% 10 - 3 3 Hotels $198 Hotels 198 2.1% 118 52 92 15 $92 $187 Medical 187 2.0% 27 - - - Medical $182 Finance & Insurance 182 2.0% 1 - - - Finance & Insurance Specialty Trade 170 1.8% 4 - - 2 Specialty Trade $170 Restaurant & Food Services 150 1.6% 39 - - 2 Restaurant & Food Services $150 Other Service 148 1.6% 18 2 2 5 Other Service $148 Transportation & Warehouse 147 1.6% 14 - 1 3 Transportation & Warehouse $147 Religious Organizations 111 1.2% 10 - - 3 Religious Organizations $111 Dental 104 1.1% 58 - - 3 Dental $104 Private Banking/Private Household 92 1.0% 4 - 1 2 Private Banking/Private Household $92 Mining & Utilities 44 0.5% - - - - Mining & Utilities $44 Veterinary 29 0.4% 6 - - - Veterinary $29 Total Commercial Portfolio by NAICS 5,040 54.5% 500 82 124 70 Lessors of Real Estate NAICS 2,405 26.0% 389 23 44 28 Mortgage and Consumer Loans 1,802 19.5% 90 11 8 81 Balance In deferral Total Loans 9,247 100.0% $ 979 $ 116 $ 176 179 45
Residential Mortgage & Consumer Residential Mortgage and Consumer Modifications – Q3-’20 ($ in Millions) % Total 1st 2nd In Deferral Q3 Q3 - '20 Loans Mod Mod $ # Residential Mortgage $ 1,147 12.4% $ 80 $ 11 $ 7 50 Home Equity 527 5.7% 7 - 1 11 Other Consumer 128 1.4% 3 - - 20 Total $ 1,802 19.5% $ 90 $ 11 $ 8 81 Residential Mortgage Gain On Sale Gain On Sale up 56.8% over Q2 to $5.8 million Offering extended locks with minimal impact on gain sale economics Taking 15 year fixed rate fully salable on balance sheet at yield favorable to comparable MBS Placing 7/1 and 10/1 jumbo mortgages on balance sheet. 46
Sponsor and Leveraged Lending Sponsor Finance Leveraged Loans 44 Borrowers, $340 million outstanding 64 Borrowers, $485 million outstanding Private Equity Firms in the Midwest and Borrowers where: Southeast acquiring companies with less • Greater than 3X Senior Funded Debt/EBITDA than $10 million in EBITDA. • Greater than 4X Total Funded Debt/EBITDA Senior Secured, Amortizing Term Loans and Revolving Lines of Credit Sponsor and Total Leveraged Balances Q3 – ‘20 ($ in Millions) Leveraged % of Total Other % of Total 1st 2nd In Deferral Q3 Q3 ' 20 Loans C&I1 Leveraged Loans Mod Mod $ # Sponsor Finance C&I $ 340 3.7% $ 99 $ 241 2.6% $ 6 $ 6 $ 6 1 Regional Commercial C&I 2,282 24.7% 2,160 122 1.3% 4 4 4 1 Shared National Credits 257 2.8% 135 122 1.3% - - - - Total Sponsor, C&I and SNC $ 2,879 31.1% $ 2,394 $ 485 5.2% $ 10 $10 $ 10 2 1 Total balances with borrowers not meeting leveraged definition 47
Investment Real Estate IRE Portfolio – Q3-’20 ($ in Millions) % of Total Average 1st 2nd In Deferral Q3 Investment Real Estate Q3 - '20 Loans Loan Size Mod Mod $ # Multi-family $ 719 7.8% $ 1.4 $102 $ 3 $ 8 6 Commercial Real Estate 1,380 14.9% 1.1 354 77 107 30 $ 2,099 22.7% $ 1.2 $456 $ 80 $ 115 36 Loans by Geography Loans by Top Metros % Total 1st 2nd In Deferral Q3 Metro Areas Q3 '20 Inv. RE Mod Mod $ # Indianapolis, IN $ 351 16.7% $ 77 $ 3 $ 10 6 Chicago, IL 187 8.9% 48 0 2 1 By Columbus, OH 185 8.8% 15 24 0 0 State Lafayette, IN 162 7.7% 23 1 4 2 Northwest Indiana 152 7.2% 23 2 2 1 Fort Wayne, IN 134 6.4% 41 0 19 4 Detroit, MI 79 3.8% 41 2 3 1 48
COVID-19 Sensitive Industries Hospitality ($ in Millions) % Total Average 1st 2nd In Deferral Q3 Q3 '20 Loans # Loans loan size Mod Mod $ # Hospitality (includes hotel/motel and other accomodations) $ 198 2.1% 145 $ 1.4 $ 118 $ 52 $ 92 15 Highlights Hotel Brands Hotels: 109 loans to 72 borrowers totaling $186 million • Includes 46 PPP loans totaling $4 million where 19 borrowers are PPP loan only 1% 10% 1% Marriott Loan stage ($): 8% 35% Hilton • 80% stabilized, 14% stabilizing, 4% construction, Hyatt and 2% PPP 13% Intercontinental 26 loans totaling $172 million with a balance > $1 million Wyndham • Weighted Average (WA) Loan to Value of ~55% Choice 32% • WA occupancy of ~46% (24 hotels reporting) Other • WA breakeven occupancy of ~56% (18 hotels reporting) 49
COVID-19 Sensitive Industries Retail ($ in Millions) % Total Average 1st 2nd In Deferral Q3 Q3 '20 Loans # Loans loan size Mod Mod $ # Retail - real estate secured $ 451 4.9% 719 $ 0.6 $ 183 $ 5 $ 17 12 Retail Trade 142 1.5% 1,426 0.1 4 - - 2 Total $ 593 6.4% 2,145 $ 0.3 $ 187 $ 5 $ 17 14 RE secured includes: Retail trade includes: • $246 million lessors of retail RE • $61 million in automotive dealers • $48 million automotive dealerships • $14 million in automotive parts • $25 million tire and automotive parts • $16 million in building material dealers retailers • $5 million in grocery stores • $42 million gas stations • $5 million jewelry, luggage and leather goods • $90 million other retail RE for businesses stores in 65 different industries such as furniture • $4 million lawn and garden equipment stores, grocery stores, and building • $4 million in book and music materials. 50
COVID-19 Sensitive Industries Restaurants and Food Service ($ in Millions) % Total # Average 1st 2nd In Deferral Q3 Q3 '20 Loans Loans Loan Size Mod Mod $ # Restaurants Real Estate Secured $ 103 1.1% 231 $ 0.4 $ 46 $ 1 $ 3 5 Non Real Estate Secured 94 1.0% 579 0.2 9 - 1 1 Total $ 197 2.1% 810 $ 0.2 $ 55 $ 1 $ 4 6 Senior Living ($ In Millions) % Total # Average 1st 2nd In Deferral Q3 Q3 '20 Loans Loans Loan Size Mod Mod $ # Senior Living Skilled Nursing Facilities $ 166 1.8% 28 $ 5.9 $ - $ - $ - - Assisted Living Facilities & other 125 1.4% 44 2.8 2 14 - - Total $ 291 3.2% 72 $ 4.0 $ 2 $ 14 $ - - 51
Asset Quality Summary Asset Quality – Q3-’20 Change ($ in Millions) Linked Quarter 2018 2019 Q1-'20 Q2-'20 Q3-'20 $ % 1. Non-Accrual Loans $ 26.1 $ 16.0 $ 15.6 $ 50.1 $ 56.7 $ 6.6 13.2% 2. Other Real Estate 2.2 7.5 8.0 7.4 7.0 (0.4) (5.4%) 3. Renegotiated Loans 1.1 0.8 0.7 1.1 2.7 1.6 145.5% 4. 90+ Days Delinquent Loans 1.9 0.1 0.3 5.0 1.3 (3.7) (74.0%) 5. Total NPAs & 90+ Days Delinquent $ 31.3 $ 24.4 $ 24.6 $ 63.6 $ 67.7 $ 4.1 6.4% 6. Total NPAs & 90+ Days/Loans & ORE 0.4% 0.3% 0.3% 0.7% 0.7% 7. Classified Loans $167.4 $200.1 $ 207.0 $ 239.6 $ 252.8 $ 13.2 5.5% 8. Classified Loans/Total Loans 2.3% 2.4% 2.4% 2.6% 2.7% 52
Non-Performing Asset Reconciliation ($ in Millions) Q4-'19 Q1-'20 Q2-'20 Q3-'20 1. Beginning Balance NPAs & 90+ Days Delinquent $ 30.5 $ 24.4 $ 24.6 $ 63.6 Non-Accrual 2. Add: New Non-Accruals 2.3 2.8 35.6 20.8 3. Less: To Accrual/Payoff/Renegotiated (6.9) (1.2) (0.6) (6.8) 4. Less: To OREO (0.8) (0.7) - - 5. Less: Charge-offs (1.3) (1.3) (0.5) (7.4) 6. Increase / (Decrease): Non-Accrual Loans (6.7) (0.4) 34.5 6.6 Other Real Estate Owned (ORE) 7. Add: New ORE Properties 0.8 0.7 - - 8. Less: ORE Sold (0.3) (0.2) (0.3) (0.3) 9. Less: ORE Losses (write-downs) (0.1) - (0.3) (0.1) 10. Increase / (Decrease): ORE 0.4 0.5 (0.6) (0.4) 11. Increase / (Decrease): 90+ Days Delinquent - 0.2 4.7 (3.7) 12. Increase / (Decrease): Renegotiated Loans 0.2 (0.1) 0.4 1.6 13. Total NPAs & 90+ Days Delinquent Change (6.1) 0.2 39.0 4.1 14. Ending Balance NPAs & 90+ Days Delinquent $ 24.4 $ 24.6 $ 63.6 $ 67.7 53
Payroll Protection Loans Payroll Protection Summary Payroll Protection Distribution • $922.9 million in loans to 5,241 PPP Loan Balances # PPP Loans $158.3 borrowers Manufacturing 393 $102.7 • $30.2 million in fees on PPP loans, Professional Service 564 $92.7 Other Admin Services 445 $3.8 amortized this quarter and $23.5 $85.8 Specialty Trade 379 $62.9 million remaining Construction 231 Transportation & Warehouse $59.0 242 • 2,682 loans < $50,000 total $54 million $55.7 Retail Trade 523 $48.8 • Accepting and filing applications for Wholesale Trade 194 $38.4 forgiveness Restaurant 378 $37.2 Medical 232 $29.4 Geographic Other Service 434 $28.3 Investment CRE 242 $19.5 Religious Org 240 $19.2 Finance & Insurance 175 $19.2 Dental 180 $19.1 Agriculture 215 PPP $46.7 Other Sectors Combined 174 loans 54
Credit Response to COVID-19 . Proactively engaging customers to chart path forward Loan Portfolio . Maintaining existing underwriting standards while recognizing the impact of pandemic . Opportunistic portfolio growth to well positioned borrowers . Beginning credit cycle with stronger credit profile and enhanced processes Asset Quality . Net Charge-offs of $6.9 million or .30% of average loans (annualized), .11% YTD . Focus remains on deferrals in Hospitality portfolio and Senior Living workouts . Retained 100% of PPP loans with forgiveness processing underway . $94 million, 154 applications, filed for forgiveness as of October 26, 2020 Approach . Quarterly portfolio reviews on targeted asset classes (Hospitality and Senior) . Experienced workout staff with special asset process in tact from last recession 55
Private Wealth Advisors Delivers broad advisory capabilities and expertise through local, engaged and empowered leaders AUM levels flat due to market volatility New business development rebounded in Q3 and pipelines are strong – decision timelines have been elongated given volatility and the pending US elections Private Banking business has seen a resumption of loan growth following reset of personal balance sheets in Q2 Strong client asset retention and expansion FMIS business improving on strengthened partnership with Consumer Bank and continued move to a recurring revenue model from transactional model Total Assets Total Revenue (in Millions $) (excludes First Merchants Investment Services) $5.00 $25.00 $7.59 $8.00 $4.27 $22.25 $1.68 $7.00 $4.66 $4.00 $3.82 $20.00 $17.85 $5.64 $6.00 $1.34 $14.68 $2.93 $2.45 $1.21 $5.00 $3.00 $2.68 $2.72 $2.63 $2.61 $15.00 $12.63 $1.78 $15.11 $4.57 $3.10 $0.64 $4.00 $2.04 $2.78 $13.13 $1.79 $1.70 $3.79 $3.95 $2.00 $10.00 $11.59 $12.00 $3.00 $1.25 $9.82 $10.20 $8.78 $2.77 $2.00 Assets $ (in Billions) $ (in Assets $1.00 $5.00 $7.29 $1.00 $- $- $0.00 12/31/2016 12/31/2017 12/31/2018 12/31/2019 9/30/2020 12/31/2016 12/31/2017 12/31/2018 12/31/2019 3Q19 3Q20 Annual Revenues (LHS) Quarterly Revenues (RHS) Total Assets Total Assets Under Management Total Fee Revenue FMIS Revenue Net Interest Income Core Fee Revenue 56
Total Return Performance 200 150 100 50 Total Percentage Return Total 0 First Merchants Corporation Russell 2000 SNL Bank >$10B 9/30/2013 9/30/2014 9/30/2015 9/30/2016 9/30/2017 9/30/2018 9/30/2019 9/30/2020 57
First Merchants… Well positioned for the future… Looking Forward… Succession Planning Yields Continuity and Growth Mark Hardwick – Chief Executive Officer Mike Stewart - President Michele Kawiecki – Chief Financial Officer Industry Leading Performance Return on Assets and Efficiency Ratios Pre-Tax Pre-Provision Earnings strength of $54.4 Million Capital Preservation and Strength TCE of 10.19% excluding effect of PPP Loans Diversified loan portfolio, long-term consistent asset quality and underwriting Allowance for Loan Losses & Fair Value Marks total approximately 1.65% of loans Initiatives Corporate Social Responsibility investment fortifies our communities staying power Accelerate our delivery channel change “Compelling value proposition” 58
Why Invest in First Merchants? High Performance Financial Metrics Attractive Long-Term Deposit Market Shares Commercial Presence that Creates a Client Preference Successful Acquisition and Integration Track Record Focused on Providing Sustainable Shareholder Value 59
Research Coverage 60
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: Nicole Weaver, Investor Relations 765.521.7619 nweaver@firstmerchants.com 61
Appendix
Appendix – Non-GAAP Reconciliation CAPITAL RATIOS (dollars in thousands): 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 Total Risk-Based Capital Ratio Total Stockholders' Equity (GAAP) 1,361,426 1,408,260 1,455,848 1,501,636 1,749,012 1,786,437 1,777,960 1,809,095 1,833,656 Adjust for Accumulated Other Comprehensive (Income) Loss1 35,409 21,422 1,595 (14,602) (25,648) (27,874) (53,656) (63,845) (65,468) Less: Preferred Stock (125) (125) (125) (125) (125) (125) (125) (125) (125) Add: Qualifying Capital Securities 66,086 66,141 66,197 66,252 66,308 66,363 56,419 46,248 46,308 Less: Tier 1 Capital Deductions - - - - - - - - - Less: Disallowed Goodwill and Intangible Assets (464,658) (463,525) (462,202) (460,885) (570,098) (569,468) (568,442) (567,246) (566,072) Less: Disallowed Deferred Tax Assets (1,111) - (4,037) (2,587) (3,460) - - - - Total Tier 1 Capital (Regulatory) $ 997,027 $ 1,032,173 $ 1,057,276 $ 1,089,689 $ 1,215,989 $ 1,255,333 $ 1,212,156 $ 1,224,127 $ 1,248,299 Qualifying Subordinated Debentures 65,000 65,000 65,000 65,000 65,000 65,000 65,000 65,000 65,000 Allowance for Loan Losses includible in Tier 2 Capital 78,406 80,552 80,902 81,274 80,571 80,284 99,454 121,119 125,032 Total Risk-Based Capital (Regulatory) $ 1,140,433 $ 1,177,725 $ 1,203,178 $ 1,235,963 $ 1,361,560 $ 1,400,617 $ 1,376,610 $ 1,410,246 $ 1,438,331 Net Risk-Weighted Assets (Regulatory) $ 8,001,191 $ 8,060,882 $ 8,176,677 $ 8,491,188 $ 9,474,126 $ 9,799,329 $ 9,978,462 $ 9,946,087 $ 10,000,878 Total Risk-Based Capital Ratio (Regulatory) 14.25% 14.61% 14.71% 14.56% 14.37% 14.29% 13.80% 14.18% 14.38% Common Equity Tier 1 Capital Ratio Total Tier 1 Capital (Regulatory) $ 997,027 $ 1,032,173 $ 1,057,276 $ 1,089,689 $ 1,215,989 $ 1,255,333 $ 1,212,156 $ 1,224,127 $ 1,248,299 Less: Qualified Capital Securities (66,086) (66,141) (66,197) (66,252) (66,308) (66,363) (56,419) (46,248) (46,308) Add: Additional Tier 1 Capital Deductions - - - - - - - - - Common Equity Tier 1 Capital (Regulatory) $ 930,941 $ 966,032 $ 991,079 $ 1,023,437 $ 1,149,681 $ 1,188,970 $ 1,155,737 $ 1,177,879 $ 1,201,991 Net Risk-Weighted Assets (Regulatory) $ 8,001,191 $ 8,060,882 $ 8,176,677 $ 8,491,188 $ 9,474,126 $ 9,799,329 $ 9,978,462 $ 9,946,087 $ 10,000,878 Common Equity Tier 1 Capital Ratio (Regulatory) 11.64% 11.98% 12.12% 12.05% 12.14% 12.13% 11.58% 11.84% 12.02% 1 Includes net unrealized gains or losses on securities available for sale, net gains or losses on cash flow hedges, and amounts resulting from the application of the applicable accounting guidance for defined benefit and other postretirement plans. 63
Appendix – Non-GAAP Reconciliation TANGIBLE COMMON EQUITY RATIO (dollars in thousands): 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 Total Stockholders' Equity (GAAP) $ 1,361,426 $ 1,408,260 $ 1,455,848 $ 1,501,636 $ 1,749,012 $ 1,786,437 $ 1,777,960 $ 1,809,095 $ 1,833,656 Less: Preferred Stock (125) (125) (125) (125) (125) (125) (125) (125) (125) Less: Intangible Assets (471,409) (469,784) (468,256) (466,736) (579,751) (578,881) (577,366) (575,855) (574,369) Tangible Common Equity (non-GAAP) $ 889,892 $ 938,351 $ 987,467 $ 1,034,775 $ 1,169,136 $ 1,207,431 $ 1,200,469 $ 1,233,115 $ 1,259,162 Total Assets (GAAP) $ 9,787,282 $ 9,884,716 $ 10,210,925 $ 10,737,857 $ 12,325,061 $ 12,457,254 $12,693,518 $13,819,378 $13,737,350 Less: Intangible Assets (471,409) (469,784) (468,256) (466,736) (579,751) (578,881) (577,366) (575,855) (574,369) Tangible Assets (non-GAAP) $ 9,315,873 $ 9,414,932 $ 9,742,669 $ 10,271,121 $ 11,745,310 $ 11,878,373 $12,116,152 $13,243,523 $13,162,981 Tangible Common Equity Ratio (non-GAAP) 9.55% 9.97% 10.14% 10.07% 9.95% 10.16% 9.91% 9.31% 9.57% TANGIBLE COMMON EQUITY PER SHARE (dollars in thousands): 4Q10 4Q11 4Q12 4Q13 4Q14 4Q15 4Q16 Total Stockholders' Equity (GAAP) $ 454,408 $ 514,467 $ 552,236 $ 634,923 $ 726,827 $ 850,509 $ 901,657 Less: Preferred Stock (67,880) (90,783) (90,908) (125) (125) (125) (125) Less: Intangible Assets (154,019) (150,471) (149,529) (202,767) (218,755) (259,764) (258,866) Tax Benefit 2,907 2,224 2,249 4,973 6,085 6,278 5,930 Tangible Common Equity, Net of Tax (non-GAAP) $ 235,416 $ 275,437 $ 314,048 $ 437,004 $ 514,032 $ 596,898 $ 648,596 Shares Outstanding 25,574,251 28,559,707 28,692,616 35,921,761 37,669,948 40,664,258 40,912,697 Tangible Common Equity per Share (non-GAAP) $ 9.21 $ 9.64 $ 10.95 $ 12.17 $ 13.65 $ 14.68 $ 15.85 4Q17 1Q18 2Q18 3Q18 3Q19 3Q20 Total Stockholders' Equity (GAAP) $ 1,303,463 $ 1,313,073 $ 1,340,328 $ 1,361,426 $ 1,749,012 $ 1,833,656 Less: Preferred Stock (125) (125) (125) (125) (125) (125) Less: Intangible Assets (476,503) (474,777) (473,059) (471,409) (579,751) (574,369) Tax Benefit 6,788 6,043 5,690 5,351 7,627 6,292 Tangible Common Equity, Net of Tax (non-GAAP) $ 833,623 $ 844,214 $ 872,834 $ 895,243 $ 1,176,763 $ 1,265,454 Shares Outstanding 49,158,238 49,243,096 49,280,188 49,304,542 55,345,672 53,891,733 Tangible Common Equity per Share (non-GAAP) $ 16.96 $ 17.14 $ 17.71 $ 18.16 $ 21.26 $ 23.48 64
Appendix – Non-GAAP Reconciliation EFFICIENCY RATIO (dollars in thousands): 2018 2019 1Q20 2Q20 3Q20 Non Interest Expense (GAAP) $ 219,951 $ 246,763 $ 66,171 $ 59,989 $ 64,709 Less: Intangible Asset Amortization (6,719) (5,994) (1,514) (1,511) (1,486) Less: OREO and Foreclosure Expenses (1,470) (2,428) (505) (684) (717) Adjusted Non Interest Expense (non-GAAP) 211,762 238,341 64,152 57,794 62,506 Net Interest Income (GAAP) 338,857 356,660 93,877 93,018 92,921 Plus: Fully Taxable Equivalent Adjustment 10,732 13,085 3,894 4,088 4,340 Net Interest Income on a Fully Taxable Equivalent Basis (non-GAAP) 349,589 369,745 97,771 97,106 97,261 Non Interest Income (GAAP) 76,459 86,688 29,799 26,481 26,163 Less: Investment Securities Gains (Losses) (4,269) (4,415) (4,612) (3,068) (1,817) Adjusted Non Interest Income (non-GAAP) 72,190 82,273 25,187 23,413 24,346 Adjusted Revenue (non-GAAP) 421,779 452,018 122,958 120,519 121,607 Efficiency Ratio (non-GAAP) 50.21% 52.73% 52.17% 47.95% 51.40% FORWARD DIVIDEND YIELD 3Q20 Most recent quarter's dividend per share $ 0.26 Most recent quarter's dividend per share - Annualized $ 1.04 Stock Price at 9/30/20 $ 23.16 Forward Dividend Yield 4.49% 65
Appendix – Non-GAAP Reconciliation CONSTRUCTION AND INVESTMENT REAL ESTATE CONCENTRATIONS (dollars in thousands): 2018 2019 1Q20 2Q20 3Q20 Total Risk-Based Capital (Subsidiary Bank Only) Total Stockholders' Equity (GAAP) $ 1,456,220 $ 1,787,006 $ 1,850,513 $ 1,882,807 $ 1,908,858 Adjust for Accumulated Other Comprehensive (Income) Loss 1 19,031 (30,495) (56,807) (66,941) (68,423) Less: Preferred Stock (125) (125) (125) (125) (125) Less: Tier 1 Capital Deductions - - - - - Less: Disallowed Goodwill and Intangible Assets (463,076) (569,021) (567,994) (566,799) (565,624) Less: Disallowed Deferred Tax Assets - - - - - Total Tier 1 Capital (Regulatory) 1,012,050 1,187,365 1,225,587 1,248,942 1,274,686 Allowance for Loan Losses includible in Tier 2 Capital 80,552 80,284 99,454 121,119 125,428 Total Risk-Based Capital (Regulatory) $ 1,092,602 $ 1,267,649 $ 1,325,041 $ 1,370,061 $ 1,400,114 Construction, Land and Land Development Loans $ 545,729 $ 787,568 $ 643,674 $ 640,560 $ 622,084 Concentration as a % of the Bank's Risk-Based Capital 50% 62% 49% 47% 44% Construction, Land and Land Development Loans $ 545,729 $ 787,568 $ 643,674 $ 640,560 $ 622,084 Investment Real Estate Loans 1,865,544 1,902,692 2,118,148 2,097,767 2,098,589 Total Construction and Investment RE Loans $ 2,411,273 $ 2,690,260 $ 2,761,822 $ 2,738,327 $ 2,720,673 Concentration as a % of the Bank's Risk-Based Capital 221% 212% 208% 200% 194% 1 Includes net unrealized gains or losses on securities available for sale, net gains or losses on cash flow hedges, and amounts resulting from the application of the applicable accounting guidance for defined benefit and other postretirement plans. 66