First Merchants Corporation (NASDAQ:FRME) Q2 2021 Earnings Conference Call July 26, 2021 2:30 PM ET Company Participants Mark Hardwick - CEO Mike Stewart - President John Martin - Chief Credit Officer Michele Kawiecki - CFO Conference Call Participants Scott Siefers - Piper Sandler Daniel Tamayo - Raymond James Damon DelMonte - KBW Terry McEvoy - Stephens Brian Martin - Janney Montgomery Operator Good day, and welcome to the First Merchants Corporation Second Quarter 2021 Earnings Conference Call. All parti ...

First Merchants Corporation NASDAQ: FRME INVESTOR UPDATE Second Quarter 2021 First Merchants Corporation | 200 E. Jackson St., P.O. Box 792, Muncie, IN 47305 | 765.747.1500 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", "in ...

FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from _______ to _______ Commission File Number 0-17071 FIRST MERCHANTS CORPORATION (Exact name of registrant as specified in its charter) | Indiana | 35-1544218 | | --- | --- | | (State ...

Call Start: 14:30 January 1, 0000 3:16 PM ET First Merchants Corporation (NASDAQ:FRME) Q1 2021 Earnings Conference Call April 22, 2021 02:30 PM ET Company Participants Mark Hardwick - Chief Executive Officer Mike Stewart - President John Martin - Chief Credit Officer Michele Kawiecki - Chief Financial Officer Conference Call Participants Scott Siefers - Piper Sandler Terry McEvoy - Stephens Daniel Tamayo - Raymond James Damon DelMonte - KBW Brian Martin - Janney Montgomery Daniel Tamayo - Raymond James Bryc ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 _______________________________ FORM 10-K [Mark One] ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________to_________ Commission file number 0-17071 FIRST MERCHANTS CORPORATION (Exact name of registrant as specified in its charte ...

Financial Data and Key Metrics Changes - The company reported a net income of $149 million and earnings per share of $2.74 for the year, with a pretax, pre-provision return on assets of 1.7% [19][36] - The fourth quarter earnings per share totaled $0.83, an increase of $0.16 over the prior quarter [20] - Total asset growth was exceptional at $1.6 billion or 12.9% over 2019, reflecting strong loan and deposit production [36] Business Line Data and Key Metrics Changes - The commercial banking team achieved a 10% annual loan growth rate in the fourth quarter, with core loan growth of 11.2% [10][17] - Consumer banking saw an acceleration in the usage of digital and online banking products, with plans for further investment in product capabilities [11] - The private wealth team is fully integrated into each market, contributing to balanced full-service banking growth [13] Market Data and Key Metrics Changes - The company reported a 9.2% increase in loans and a 15.5% growth in deposits [16] - The investment portfolio grew by $213.5 million in the fourth quarter, representing a 29% annualized growth [22] - The yield on the loan portfolio was strong at 4.2%, with 62% of the loan portfolio being variable [23] Company Strategy and Development Direction - The new vision statement emphasizes enhancing financial wellness and diversity within the communities served [6][7] - The company plans to consolidate 17 banking centers and invest significantly in technology to digitize operations over the next three years [17][18] - The acquisition of Hoosier Trust Company is expected to provide strong top-line momentum heading into 2021 [17] Management's Comments on Operating Environment and Future Outlook - Management expressed pride in the 2020 results despite headwinds, highlighting the successful navigation of the Paycheck Protection Program [16] - The company anticipates a stable core net interest margin in 2021, with expectations for continued loan growth [31][86] - Management remains cautious about the economic environment but is optimistic about the potential for growth and recovery [75][94] Other Important Information - The company announced a new $100 million share repurchase program aimed at driving top quartile returns on equity [18] - The efficiency ratio for the fourth quarter was reported at a low 51.6%, excluding one-time charges [20] - The allowance for loan losses increased to $130.6 million, with a coverage ratio of 1.41% [26] Q&A Session Summary Question: What is the expectation for the remaining PPP loans? - Management expects significant forgiveness in the first half of the year, likely more weighted towards the second quarter [63] Question: What are the expectations for core expenses moving forward? - The run rate for 2021 is projected to be between $68 million to $70 million per quarter, reflecting increased investments in corporate social responsibility [69] Question: How does the company view the CECL adoption and reserve levels? - The company anticipates a healthy reserve level of 2.22% post-CECL adoption, with a cautious approach to provisioning [74][91] Question: What is the outlook for fee income? - Fee income for 2021 is expected to be in line with Q4 2020, with additional contributions from the Hoosier Trust acquisition [88] Question: What is the company's strategy regarding M&A? - The company remains open to opportunistic acquisitions, particularly in the Michigan market, and is actively exploring potential opportunities [84][101]

First Merchants Corporation NASDAQ: FRME INVESTOR UPDATE Fourth Quarter 2020 First Merchants Corporation | 200 E. Jackson St., P.O. Box 792, Muncie, IN 47305 | 765.747.1500 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", "in ...

FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE (Exact name of registrant as specified in its charter) | Indiana | 35-1544218 | | --- | --- | | (State or other jurisdiction of | (I.R.S. Employer | | incorporation or organization) | Identification No.) | | 200 East Jackson Street, Muncie, IN | 47305-2814 | (Address of principal executive offices) (Zip code) (Registrant's telephone number, including area code): (765) 747-1500 SECUR ...

Financial Data and Key Metrics Changes - First Merchants reported Q3 2020 net income of $36.2 million, a slight decrease from $36.8 million in Q3 2019, with earnings per share at $0.67 compared to $0.71 in the same period last year [9] - The pretax pre-provision income was $54.4 million, resulting in a return on assets of 1.59% [9] - Total assets increased by $1.3 billion, or 13.7% annualized since year-end 2019, while total deposits rose by $1.1 billion, or 14.4% annualized [17][22] Business Line Data and Key Metrics Changes - The loan portfolio increased by $779 million since year-end, with PPP loans accounting for $901 million of this growth [18] - Non-interest income totaled $26.1 million, with customer-related fees increasing to $23 million from $21.1 million in Q2 2020 [27] - Non-interest expense was $64.7 million, with expectations for similar levels in Q4 2020 [29] Market Data and Key Metrics Changes - The company noted a stabilization in core net interest margin, which decreased by 4 basis points to a predictable level for the near future [25] - The investment portfolio produced a yield of 2.94% with an unrealized gain of $141.5 million, indicating strong performance compared to peers [21] Company Strategy and Development Direction - The company is focused on capital preservation and is actively working on its 2021 plan, emphasizing digital investment and banking center optimization [63][65] - First Merchants aims to maintain a mid-to-high single-digit growth rate in loans and low-to-mid single-digit growth in deposits, with potential for M&A opportunities [106] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the economic environment, noting that clients are wary but opportunistic [77] - The company anticipates a gradual recovery in loan demand, particularly in the mortgage sector, which has shown strong performance [78] Other Important Information - The allowance for loan losses increased to $126.7 million, representing 1.65% of total loans, with a provision expense of $12.5 million for the quarter [32] - The company plans to adopt the CECL methodology in the next quarter, which is expected to increase the allowance for loan losses significantly [34] Q&A Session Summary Question: Loan growth outlook and customer sentiment - Management noted that customers are cautious but looking for opportunities, with a healthy level of loan originations despite lower utilization rates [77][78] Question: Impact of CECL on reserves - The $52.2 million CECL impact will go through equity, while any additional adjustments will be reflected in the income statement [84][86] Question: Branch footprint and consolidation plans - The company is evaluating its branch footprint and plans to optimize its storefront census, with potential closures in 2021 [90] Question: Dividend and buyback considerations - Management is open to increasing dividends in the future but has decided to maintain the current level due to economic uncertainty [115]

[Part I. Financial Information](index=4&type=section&id=Part%20I.%20Financial%20Information) This section provides the company's financial statements and management's analysis of its financial condition and operational results [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated condensed financial statements for First Merchants Corporation as of June 30, 2020, and for the three and six-month periods then ended, reflecting significant impacts from the COVID-19 pandemic [Consolidated Condensed Balance Sheets](index=4&type=section&id=Consolidated%20Condensed%20Balance%20Sheets) Total assets grew to **$13.82 billion** as of June 30, 2020, primarily driven by increases in net loans and total deposits, while stockholders' equity remained stable Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2020 | December 31, 2019 | Change (%) | | :--- | :--- | :--- | :--- | | **Total Assets** | **$13,819,378** | **$12,457,254** | **+10.9%** | | Loans, net | $9,177,422 | $8,379,026 | +9.5% | | Total Deposits | $10,965,988 | $9,839,956 | +11.4% | | Total Borrowings | $867,164 | $732,703 | +18.3% | | Total Stockholders' Equity | $1,809,095 | $1,786,437 | +1.3% | [Consolidated Condensed Statements of Income](index=5&type=section&id=Consolidated%20Condensed%20Statements%20of%20Income) Net income for Q2 2020 decreased to **$33.0 million** due to a significant increase in the provision for loan losses, reflecting the economic impact of COVID-19 Q2 2020 vs. Q2 2019 Performance (in thousands, except per share data) | Metric | Q2 2020 | Q2 2019 | Change (%) | | :--- | :--- | :--- | :--- | | Net Interest Income | $93,018 | $85,278 | +9.1% | | Provision for loan losses | $21,895 | $500 | +4279.0% | | Net Income Available to Common Stockholders | $32,992 | $41,056 | -19.6% | | Diluted EPS | $0.62 | $0.83 | -25.3% | Six Months Ended June 30 Performance (in thousands, except per share data) | Metric | 2020 | 2019 | Change (%) | | :--- | :--- | :--- | :--- | | Net Interest Income | $186,895 | $170,144 | +9.8% | | Provision for loan losses | $41,647 | $1,700 | +2349.8% | | Net Income Available to Common Stockholders | $67,255 | $79,873 | -15.8% | | Diluted EPS | $1.24 | $1.61 | -23.0% | [Consolidated Condensed Statements of Comprehensive Income](index=7&type=section&id=Consolidated%20Condensed%20Statements%20of%20Comprehensive%20Income) Comprehensive income for Q2 2020 was **$43.2 million**, a decrease primarily due to lower net income, partially offset by unrealized gains on available-for-sale securities Comprehensive Income Summary (in thousands) | Component | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | | :--- | :--- | :--- | | Net income | $32,992 | $41,056 | | Other comprehensive income, net of tax | $10,189 | $16,197 | | **Comprehensive income** | **$43,181** | **$57,253** | [Consolidated Condensed Statements of Stockholders' Equity](index=8&type=section&id=Consolidated%20Condensed%20Statements%20of%20Stockholders%27%20Equity) Stockholders' equity increased to **$1.81 billion** by June 30, 2020, driven by net income and other comprehensive income, partially offset by common stock repurchases and cash dividends - During the first six months of 2020, the Corporation repurchased **1,634,437 shares** of common stock for a total of **$55.9 million**[19](index=19&type=chunk) [Consolidated Condensed Statements of Cash Flows](index=10&type=section&id=Consolidated%20Condensed%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities was **$114.7 million**, while investing activities used **$1.24 billion**, and financing activities provided **$1.18 billion**, resulting in a net increase in cash and cash equivalents Cash Flow Summary - Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $114,708 | $83,008 | | Net cash used in investing activities | ($1,239,642) | ($756,780) | | Net cash provided by financing activities | $1,177,492 | $662,710 | | **Net Change in Cash and Cash Equivalents** | **$52,558** | **($11,062)** | [Notes to Consolidated Condensed Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Condensed%20Financial%20Statements) Detailed notes cover accounting policies, the impact of COVID-19, the MBT Financial Corp acquisition, and specifics on CECL implementation delay, loan modifications, and PPP loans - The Corporation elected to delay the implementation of the Current Expected Credit Loss (CECL) model, as permitted by the CARES Act[37](index=37&type=chunk)[72](index=72&type=chunk) - During the first six months of 2020, loan modifications were completed on approximately **$1.1 billion** of loans, representing **12.1%** of the portfolio[34](index=34&type=chunk)[102](index=102&type=chunk)[198](index=198&type=chunk) - The acquisition of MBT Financial Corp. on September 1, 2019, resulted in **$98.6 million** of goodwill and a core deposit intangible of **$16.5 million**[46](index=46&type=chunk)[48](index=48&type=chunk) - The Bank funded over **5,000** Paycheck Protection Program (PPP) loans totaling **$882.9 million** (net of fees) as of June 30, 2020[71](index=71&type=chunk)[194](index=194&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the significant impact of the COVID-19 pandemic on financial results, including PPP participation, loan modifications, increased loan loss provisions, and asset and deposit growth - Net income for Q2 2020 was **$33.0 million** (**$0.62 per share**), down from **$41.1 million** (**$0.83 per share**) in Q2 2019, primarily due to a **$21.9 million** provision for loan losses driven by the economic outlook related to COVID-19[202](index=202&type=chunk)[206](index=206&type=chunk) - Total assets grew by **$1.4 billion** (**10.9%**) since year-end 2019 to **$13.8 billion**, largely due to the origination of **$882.9 million** in PPP loans and strong deposit growth of **$1.1 billion**[204](index=204&type=chunk)[209](index=209&type=chunk) - Net interest margin on a tax equivalent basis decreased to **3.19%** for Q2 2020 from **3.71%** in Q2 2019, impacted by FOMC rate cuts and the addition of low-yielding PPP loans[217](index=217&type=chunk) - The allowance for loan losses increased to **1.30%** of total loans (**1.44%** excluding PPP loans) at June 30, 2020, up from **0.95%** at year-end 2019[267](index=267&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=60&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The Corporation is asset-sensitive, with net interest income projected to increase by **6.7%** in a **+200 basis point** interest rate shock scenario - The company's simulation modeling as of June 30, 2020, shows that a **200 basis point** parallel upward shift in interest rates would increase net interest income by **6.7%** over a 12-month horizon[285](index=285&type=chunk) [Controls and Procedures](index=61&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective, with no material changes to internal control over financial reporting identified - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures are effective as of the end of the period covered by the report[296](index=296&type=chunk) - There were no changes in internal control over financial reporting during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, these controls[297](index=297&type=chunk) [Part II. Other Information](index=62&type=section&id=Part%20II.%20Other%20Information) This section covers legal proceedings, new risk factors related to COVID-19 and PPP, unregistered sales of equity securities, and other required disclosures [Legal Proceedings](index=62&type=section&id=Item%201.%20Legal%20Proceedings) There are no pending material legal proceedings against the Corporation or its subsidiaries beyond routine litigation incidental to business operations - There are no material legal proceedings pending against the Corporation or its subsidiaries, other than routine litigation incidental to its business[299](index=299&type=chunk) [Risk Factors](index=62&type=section&id=Item%201A.%20Risk%20Factors) New risk factors include the uncertain economic impact of the COVID-19 pandemic, potential for increased credit losses, and litigation risk associated with PPP loan processing - The ongoing COVID-19 pandemic is identified as a significant risk factor, with potential adverse impacts on business, financial results, credit quality, and net interest income[302](index=302&type=chunk) - Participation as a lender in the PPP exposes the Corporation to risks of litigation from clients regarding loan processing and the risk that the SBA may not fully honor its loan guarantees if deficiencies are found in origination or servicing[307](index=307&type=chunk)[309](index=309&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=63&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Corporation repurchased **304 shares** during Q2 2020 to satisfy employee tax withholding obligations on vested restricted stock awards, not as part of a public plan - During the second quarter of 2020, the company repurchased **304 shares** at an average price of **$26.16 per share** to satisfy employee tax withholding obligations on vested restricted stock[311](index=311&type=chunk) [Defaults Upon Senior Securities](index=63&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported for the period [Mine Safety Disclosures](index=63&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Corporation [Other Information](index=63&type=section&id=Item%205.%20Other%20Information) No other information was reported under this item for the period [Exhibits](index=64&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including corporate documents, agreements, and CEO/CFO certifications