INVESTOR UPDATE Fourth Quarter 2021
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 the expected timing and benefits of the proposed merger (the “Merger”) between First Merchants Corporation (“First Merchants”) and Level One Bancorp, Inc. (“Level One”), including future financial and operating results, cost savings, enhanced revenues, and accretion/dilution to reported earnings that may be realized from the Merger, as well as other statements of expectations regarding the Merger, and other statements of 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 whether with respect to the merger or otherwise. 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: the risk that the businesses of First Merchants and Level One will not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; expected revenue synergies and cost savings from the Merger may not be fully realized or realized within the expected time frame; revenues following the Merger may be lower than expected; customer and employee relationships and business operations may be disrupted by the Merger; the ability to obtain required regulatory approvals or the approval of Level One’s common shareholders, and the ability to complete the Merger on the expected timeframe; 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; the severity and duration of the COVID-19 pandemic and its impact on general economic and financial market conditions and First Merchants’ business, results of operations, and financial condition; and other risks and factors identified in each of First Merchants’ filings with the Securities and Exchange Commission (“SEC”). 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, First Merchants’ past results of operations do not necessarily indicate its anticipated future results. ADDITIONAL INFORMATION Communications in this presentation do not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any proxy vote or approval. First Merchants has filed a Registration Statement on Form S-4 with the SEC in connection with the proposed Merger including a Proxy Statement for Level One and a Prospectus for First Merchants, which, have been submitted to Level One common shareholders for their consideration. INVESTORS ARE URGED TO READ THE PROXY STATEMENT PROSPECTUS REGARDING THE MERGER, AS WELL AS ANY OTHER RELEVANT DOCUMENTS CONCERNING THE PROPOSED TRANSACTION, TOGETHER WITH ALL AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, AS THEY CONTAIN IMPORTANT INFORMATION. This document and other documents relating to the Merger filed by First Merchants and Level One can be obtained free of charge from the SEC’s website at www.sec.gov. First Merchants and Level One and certain of their directors and executive officers may be deemed to be participants in the solicitation of proxies from the common shareholders of Level One in connection with the proposed Merger. Information about the directors and executive officers of First Merchants is set forth in the proxy statement for First Merchants’ 2021 annual meeting of shareholders, as filed with the SEC on Schedule 14A on April 1, 2021, which information has been updated by First Merchants from time to time in subsequent filings with the SEC. Information about the directors and executive officers of Level One is set forth in the Proxy Statement-Prospectus relating to the proposed Merger. Additional information regarding the interests of these participants, including Level One’s officers and directors, is also included in the Proxy Statement-Prospectus regarding the proposed Merger. 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.
Executive Management Team 3 Mark Hardwick Chief Executive Officer Mark K. Hardwick currently serves as the Chief Executive Officer of First Merchants Corporation and First Merchants Bank. Mark joined First Merchants in November of 1997 as Corporate Controller and was promoted to Chief Financial Officer in April of 2002. In 2016, Mark’s title expanded to include Chief Operating Officer, overseeing the leadership responsibilities for finance, operations, technology, risk, legal, and facilities for the corporation. Prior to joining First Merchants Corporation, Mark served as a senior accountant with BKD, LLP in Indianapolis. Mark is a graduate of Ball State University with a Master of Business Administration and Bachelor’s degree in Accounting. He is also a certified public accountant and a graduate of the Stonier School of Banking. FMB: 24 Yrs Banking: 24 Yrs FMB: 6 Yrs Banking: 18 Yrs Michele Kawiecki Chief Financial Officer Michele Kawiecki currently serves as Executive Vice President and Chief Financial Officer for First Merchants Corporation and First Merchants Bank. Michele joined First Merchants in 2015 as Director of Finance. Prior to joining First Merchants, Michele spent 12 years with UMB Financial Corporation in Kansas City, Missouri having served as Senior Vice President of Capital Management and Assistant Treasurer; Director of Corporate Development and the Enterprise Project Management Office; and Chief Risk Officer. Prior to UMB, she worked for PriceWaterhouseCoopers LLP as an Audit Manager. Michele earned both a Master of Science in Accounting and an Executive Master of Business Administration from the University of Missouri-Kansas City and a Bachelor’s degree in Accounting from Dakota Wesleyan University. FMB: 14 Yrs Banking: 34 Yrs Mike Stewart President Mike Stewart currently serves as President for First Merchants Corporation and First Merchants Bank overseeing the Commercial, Private Wealth, and Consumer Lines of Business for the Bank. Mike joined the bank in 2008 as Chief Banking Officer. Prior to joining First Merchants, Mike spent 18 years with National City Bank in various commercial sales and credit roles. Mike has a Master of Business Administration from Butler University and a Bachelor’s degree in Finance from Millikin University. FMB: 14 Yrs Banking: 32 Yrs John Martin Chief Credit Officer John Martin currently serves as Executive Vice President and Chief Credit Officer of First Merchants Corporation overseeing the Commercial, Small Business and Consumer Credit functions, as well as the Mortgage Line of Business. Prior to joining First Merchants, John spent 18 years with National City Bank in various sales and senior credit roles. John is a graduate of Indiana University where he earned a Bachelor of Arts in Economics. He also holds a Master of Business Administration in Finance from Case Western Reserve University.
First Merchants Corporation (NASDAQ: FRME) Financial Highlights as of 12/31/2021 $15.5 Billion $9.3 Billion $12.7 Billion $6.4 Billion Assets Under Advisement* Total Assets Total Loans Total Deposits TCE/TA: YTD Return on TCE YTD ROAA: Dividend Yield: Price / Tangible Book: Price / LTM EPS: 1.39% 9.01% 16.17% 2.70% 1.66x 11.0x Moody’s a3 Baseline Credit Assessment1 Market Cap $2.2B Largest financial services holding company headquartered in Central Indiana 109 Banking Centers 4 *Assets Under Management - $3.5 Billion 1Moody’s Credit Opinion – First Merchants Corporation, September 24, 2021, baseline Credit Assessment (BCA) reflects a bank’s standalone credit strength 109 Banking Locations
Fourth Quarter Highlights 5 Year-to-Date Highlights 1.39% ROA 1.63% PTPP ROA ROA $205.5 Million $3.81 Per Share Net Income & EPS 11.01% ROE 16.17% ROTCE ROE & ROTCE ▪ 13.4% annualized loan growth, excluding Paycheck Protection Program (PPP) loans ▪ 12.4% annualized deposit growth ▪ Repurchased 116,604 shares totaling $4.6 Million ▪ Announced the acquisition of Level One Bancorp in Farmington Hills, Michigan 10.10% ROE 14.78% ROTCE ROE & ROTCE (Annualized) $47.7 Million $0.89 Per Share Net Income & EPS 1.25% ROA 1.44% PTPP ROA ROA (Annualized) ▪ Completed 17 branch consolidations year-to-date ▪ 6.6% annual loan growth, excluding PPP loans ▪ 12.1% annual deposit growth ▪ Repurchased 646,102 shares totaling $25.4 Million ▪ Completed integration of Hoosier Trust Company ▪ Deployment of Online Account Origination technology
Strategy & Key Lines of Business 6 Consumer BankingCommercial Banking Private Wealth Advisors Full Spectrum of Debt Capital and Treasury Service Offerings Located in Prime Growth Markets Small Business & SBA Middle Market C&I Investment Real Estate Public Finance Sponsor Finance Asset Based Lending Syndications Treasury Management Services Merchant Processing Services Diverse Locations in Stable Rural and Growth Metro Markets Supported by: Talented Customer Service Oriented Banking Center and Call Center Professionals Competitive Digital Solutions ▪ Deposit and CRM ▪ Online Banking ▪ Mobile Banking Full Spectrum of Consumer Lending Offerings Comprehensive and coordinated approach to personal wealth management Expertise in: Investment Management Private Banking Fiduciary Estate Financial Planning Strengthen commercial relationships with personal services for executives/owners and retirement plan services for companies Partner with consumer to offer personal investment advice through First Merchants Investment Services Our Vision To enhance the financial wellness of the diverse communities we serve To be the most responsive, knowledgeable, and high-performing bank for our clients, teammates and shareholders Our Mission
4Q21 2021 Commercial Group 2.2% 16.3% Consumer Group 12.6% 6.4% Total Deposits 12.4% 12.1% ▪ For the full year, commercial growth was driven by retention of stimulus payments primarily in municipal and public entity relationships ▪ For the full year, stimulus payments have largely been utilized and Consumer deposit growth was reflective of both customer acquisition and core balance growth Deposit Growth Annualized Region and Line of Business Highlights 7 Indianapolis Indianapolis MSA Rank: 9 Deposits: $2.7B Loans: $3.2B Columbus Columbus MSA Rank: 10 Deposits: $0.8B Loans: $1.3B Northwest Indiana Lake County Rank: 4 Lafayette MSA Rank: 2 Deposits: $3.4B Loans: $2.2B Northeast Indiana Muncie MSA Rank: 1 Ft Wayne MSA Rank: 3 Deposits: $4.4B Loans: $2.0B Michigan Monroe MSA Rank: 1 Deposits: $1.4B Loans: $0.6B MSA ranking data per S&P Global and is pro forma for pending transactions Loan Growth Annualized ▪ Strong Commercial growth led by C&I of 19% and IRE of 6% ▪ Line utilization increased within the Commercial group along with construction advances ▪ Consumer Loans benefited from both originations and HELOC line increases ▪ Pipeline remains stable across each business segment with IRE outpacing other segments 4Q21 2021 Commercial Group1 16.8% 9.6% Consumer Group 3.7% -0.5% Private Wealth Group 1.2% 11.4% Mortgage Group2 5.5% 0.2% Total Loans – Adjusted1 13.4% 6.6% 1Excluding Change in PPP Loans 2Excluding 2Q21 Mortgage Portfolio Loan Sale
Fourth Quarter Financial Results 8 ▪ 53.49% Efficiency Ratio ▪ 13.4% annualized loan growth, over prior quarter excluding PPP loans ▪ Net interest income, excluding the impact of PPP loan income, increased $1.0 million over prior quarter ▪ PPP fee income totaled $3.3 million, a decrease of $4.1 million from prior quarter. Remaining unearned fees total $2.8 million. ▪ Pre-Tax, Pre-Provision (PTPP) Earnings totaled $55.2 million, PTPP ROA was 1.44% and PTPP ROE was 11.68% 4Q21 Highlights ($M except per share data) 12/31/20 3/31/21 6/30/21 9/30/21 12/31/21 Variance Linked Quarter % Variance Linked QTR- Annualized Balance Sheet & Asset Quality 1. Total Assets $14,067.2 $14,629.1 $14,923.1 $15,060.7 $15,453.1 $392.4 10.4% 2. Total Loans 9,247.1 9,322.7 9,139.8 9,047.6 9,253.0 205.5 9.1% 3. Investments 3,146.8 3,700.9 4,148.3 4,445.5 4,524.4 78.8 7.1% 4. Deposits 11,361.6 11,951.8 12,203.4 12,348.7 12,732.6 383.9 12.4% 5. Common Equity 1,875.5 1,805.9 1,871.8 1,868.1 1,912.6 44.5 9.5% 6. TCE Ratio 9.65% 8.78% 9.04% 8.94% 9.01% 0.07% 7. Total RBC Ratio 14.36 14.33 14.23 14.02 13.92 -0.10 8. ACL / Loans 1.41 2.16 2.19 2.21 2.11 -0.10 9. NCOs / Avg Loans 0.02 0.16 0.06 -0.01 0.20 0.21 10. NPAs + 90PD / Assets 0.47 0.41 0.40 0.35 0.29 -0.06 Summary Income Statement 11. Net Interest Income $102.3 $100.4 $104.3 $104.7 $101.3 ($3.4) -13.1% 12. Provision for Loan Losses 4.5 0.0 0.0 0.0 0.0 0.0 0.0% 13. Non-interest Income 27.5 24.1 30.9 28.5 25.8 (2.7) -37.2% 14. Non-interest Expense 72.5 66.1 69.3 71.4 72.4 1.1 5.9% 15. Pre-tax Income 52.8 58.4 65.9 61.8 54.7 (7.1) -46.2% 16. Provision for Taxes 7.6 8.9 10.3 9.1 7.0 (2.1) -93.2% 17. Net Income 45.2 49.5 55.6 52.8 47.7 (5.0) -38.2% 18. ROAA 1.29% 1.39% 1.51% 1.41% 1.25% -0.16% 19. ROAE 9.72 10.75 12.04 11.17 10.10 -1.07 20. ROTCE 14.37 15.87 17.77 16.33 14.78 -1.55 21. Net Interest Margin 3.38 3.23 3.22 3.20 3.04 -0.16 22. Efficiency Ratio 55.01 50.23 48.91 51.18 53.49 2.31 Per Share 23. Earnings per Diluted Share $0.83 $0.91 $1.03 $0.98 $0.89 ($0.09) 24. Tangible Book Value per Share 24.27 22.98 24.15 24.31 25.21 0.90 25. Dividend per Share 0.26 0.26 0.29 0.29 0.29 0.00 26. Dividend Payout Ratio 31.3% 28.6% 28.2% 29.6% 32.6% 3.0% For the Three Months Ended,
2021 Year End Financial Results 9 2021 Year End Highlights ▪ 50.94% Efficiency Ratio ▪ 6.6% annualized loan growth, over prior year excluding PPP loans ▪ Pre-Tax, Pre-Provision (PTPP) earnings totaled $241.3 million, an increase of $12.8 million or 6% over prior year ▪ Tangible book value per share increased $0.94 over prior year ▪ 2021 ROTCE totaled 16.17% ($M except per share data) 2019 2020 2021 Variance YOY % Variance YOY Balance Sheet & Asset Quality 1. Total Assets $12,457.3 $14,067.2 $15,453.1 $1,385.9 9.9% 2. Total Loans 8,468.3 9,247.1 9,253.0 5.9 0.1% 3. Investments 2,596.1 3,146.8 4,524.4 1,377.6 43.8% 4. Deposits 9,840.0 11,361.6 12,732.6 1,371.0 12.1% 5. Common Equity 1,786.4 1,875.6 1,912.6 36.9 2.0% 6. TCE Ratio 10.16% 9.65% 9.01% -0.64% 7. Total RBC Ratio 14.29 14.36 13.92 -0.44 8. ALLL / Loans 0.95 1.41 2.11 0.70 9. NCOs / Avg Loans 0.04 0.09 0.10 0.01 10. NPAs + 90PD / Assets 0.20 0.47 0.29 -0.18 Summary Income Statement 11. Net Interest Income $356.7 $382.1 $410.7 $28.6 7.5% 12. Provision for Loan Losses 2.8 58.7 0.0 (58.7) -100.0% 13. Non-interest Income 86.7 109.9 109.3 (0.6) -0.5% 14. Non-interest Expense 246.8 263.4 279.2 15.8 6.0% 15. Pre-tax Income 193.8 170.0 240.8 70.8 41.7% 16. Provision for Taxes 29.3 21.4 35.3 13.9 65.0% 17. Net Income 164.5 148.6 205.5 56.9 38.3% 18. ROAA 1.48% 1.10% 1.39% 0.29% 19. ROAE 10.48 8.14 11.01 2.87 20. ROTCE 15.81 12.21 16.17 3.96 21. Net Interest Margin 3.69 3.29 3.18 -0.11 22. Efficiency Ratio 52.73 51.71 50.94 -0.77 Per Share 23. Earnings per Diluted Share $3.19 $2.74 $3.81 $1.07 24. Tangible Book Value per Share 21.94 24.27 25.21 0.94 25. Dividend per Share 1.00 1.04 1.13 0.09 26. Dividend Payout Ratio 31.3% 38.0% 29.7% -8.3% For the Year Ended December 31,
Municipal Bonds 57% Mortgage- Backed Securities 27% Collateralized Mortgage Obligations 5% U.S. Agencies 10% Corporate Obligations 1% ▪ Net unrealized Gain of $98.4 million Investment Portfolio Highlights 10 4Q21 Investment Portfolio Composition Yield on Investments (%) / Total Investments ($B) $4.5B Total Investment Portfolio GainsHighlights Realized Gains ▪ 4Q 2020 $2.4 million ▪ 1Q 2021 $1.8 million ▪ 2Q 2021 $1.8 million ▪ 3Q 2021 $1.7 million ▪ 4Q 2021 $0.4 million Unrealized Gains▪ Modified duration of 5.8 years ▪ 2022 roll off cash flow $327 million / ~2.09% yield ▪ Current purchase tax equivalent yield of ~2.30% ▪ AA rated municipal bond portfolio ▪ The Allowance for Credit Losses for Investments is $245,000 $3.1 $3.7 $4.1 $4.4 $4.5 2.78% 2.70% 2.59% 2.56% 2.51% 4Q20 1Q21 2Q21 3Q21 4Q21 Investments ($B) Yield on Investments (%)
Loan Portfolio Highlights 11 4Q21 Loan Composition Yield on Loans (%) / Total Loans ($B) $9.3B Total 4Q21 Portfolio by Yield Type Highlights Total loan rate mix as of 4Q21 • $6.3 billion variable rate • $3.0 billion fixed rate • $200 million SOFR-Based loans ▪ Portfolio composition remains ~80% Commercial oriented • Composition mostly unchanged from prior quarter ▪ Loan yields remained strong at 3.87%, 3.70% excluding PPP loans and fair value accretion ▪ New/renewed loan yields averaged 3.14% for the quarter $0.9 $0.7 $0.7 Commercial & Industrial 29.3% Commercial Real Estate Owner-Occupied 10.7% Commercial Real Estate Non-Owner Occupied 23.1% Construction Land & Land Development 5.6% Agricultural Land & Production 2.7% Public Finance/Other Commercial 8.7% Residential Mortgage 12.6% Home Equity 5.7% Other Consumer 1.6% $0.4$0.7$0.7 $9.2 $9.3 $9.1 $9.0 $9.3 4.20% 3.98% 4.05% 4.07% 3.87% 4Q20 1Q21 2Q21 3Q21 4Q21 Total Loans ($B) Yield on Loans (%) Non-PPP Fixed Rate 32% LIBOR-Based 39% Prime-Based 14% Other Variable Rates 12% SOFR-Based 2% PPP Fixed Rate 1%
Allowance for Credit Losses - Loans 12 4Q21 Allowance for Credit Losses - Loans Change in ACL – Loans1 Highlights ▪ Allowance to Loans, excluding PPP loans, is 2.14% ▪ The reserve for unfunded commitments was unchanged at $20.5 million, and recorded in Other Liabilities ▪ Remaining fair value adjustment on acquired loans is $10.9 million 1Beginning January 1, 2021, calculation is based on the current expected credit losses methodology. Prior to January 1, 2021, calculation was based on incurred loss methodology $130.6 $201.1 $199.8 $200.0 $195.4 1.41% 2.16% 2.19% 2.21% 2.11% 4Q20 1Q21 2Q21 3Q21 4Q21 Allowance Allowance to Loans $130,648 $204,703 $195,397 $74,055 $0 $9,306 $9,000 $59,000 $109,000 $159,000 $209,000 Increase Decrease
13 4Q21 Deposit Composition Highlights $12.7B Total 1Defined as total deposits less time deposits > $100k vs. Prior Periods Cost of Total Deposits (%) / Total Deposits ($B) Deposit Portfolio Highlights ▪ Strong core deposit base • 98% core deposits1 • 21% non-interest bearing • ~55% yield 5 bps or less ▪ Consumer DDA average balance per account hit a new peak in December 2021 and is 35% higher than pre-pandemic levels ▪ Total deposit costs remained stable and low at 0.18% • Down 9 bps from 4Q20 ▪ Average deposits up 10% when annualized from 3Q21, and 12% over prior year • Reflects retention of public fund stimulus payments • Time deposits continue to migrate to money market and non-time interest bearing accounts Demand Deposits 61% Savings Deposits 34% Certificates & Time Deposits > $100k 2% Certificates & Time Deposits < $100k 3% $11.4 $12.0 $12.2 $12.3 $12.7 0.27% 0.21% 0.19% 0.18% 0.18% 4Q20 1Q21 2Q21 3Q21 4Q21 Total Deposits ($B) Cost of Total Deposits (%)
Net Interest Margin 14 $105.1$97.1 $97.3 $105.1 $107.0$97.8 $107.0 $97.3 $105.1 $110.0$109.2 4Q20 1Q21 2Q21 3Q21 4Q21 1. Net Interest Income - FTE ($millions) 107.0$ 105.1$ 109.2$ 110.0$ 106.9$ 2. Fair Value Accretion 3.0$ 1.8$ 2.5$ 1.5$ 1.5$ 3. PPP Loan Income 11.6$ 9.2$ 9.7$ 8.2$ 3.7$ 4. Tax Equivalent Yield on Earning Assets 3.72% 3.52% 3.49% 3.46% 3.29% 5. Interest Expense/Average Earning Assets 0.34% 0.29% 0.27% 0.26% 0.25% 6. Net Interest Margin 3.38% 3.23% 3.22% 3.20% 3.04% 7. Fair Value Accretion Effect 0.09% 0.06% 0.07% 0.04% 0.04% 8. Impact of PPP Loans 0.16% 0.13% 0.15% 0.17% 0.08% 3.38% 3.23% 3.22% 3.20% 3.04% 4Q20 1Q21 2Q21 3Q21 4Q21 Net Interest Income - FTE ($millions) Net Interest Margin $107.0 $105.1 $109.2 $110.0 $106.9
15 4Q21 Non-Interest Income Detail ($M) $25.8M Total Non-Interest Income Trends ($M) Fee Income / Revenue Non-Interest Income Highlights Highlights ▪ 89% in Customer-related fees totaling $22.8 million for 4Q21, and $93.6 million for the year, an increase of $2.6 million over prior year despite a decline in card payment fees due to the impact of Durbin adoption in mid-2020 ▪ Decrease in Other Income primarily reflects a $1.4 million decrease in net realized gains on the sale of securities Wealth Management $7.1 28% Gain on Sale of Loans $3.4 13% Service Charges $6.5 25% Card Payment Fees $3.9 15% Gain on Sale of Securities $0.4 2% Derivative Hedge Fees $1.6 6% BOLI $2.0 8% Other Customer Fees $0.3 1% Other $0.6 2% 20.5% 18.6% 22.1% 20.6% 19.4% $6.3 $6.4 $7.5 $7.4 $7.1 $5.4 $4.0 $8.3 $4.0 $3.4 $5.5 $5.3 $5.6 $6.2 $6.5 $3.5 $4.4 $4.2 $4.2 $3.9 $6.8 $4.0 $5.3 $6.7 $4.9 $27.5M $24.1M $30.9M $28.5M $25.8M 4Q20 1Q21 2Q21 3Q21 4Q21 Wealth Management Gain on Sale of Loans Service Charges Card Payment Fees Other
16 4Q21 Non-Interest Expense Detail $72.4M Total Non-Interest Expense Trends ($M) Efficiency Ratio Non-Interest Expense Highlights Highlights ▪ 4Q21 expenses increased $1.0 million over 3Q21 which included $0.5 million of Level One acquisition expenses Salary & Benefits $42.4 58% Premises & Equipment $10.6 15% Outside Data Processing… Professional & Other Outside Services $3.6 … Intangible Asset Amortization $1.5 2% Marketing $1.9 3% FDIC Expense $1.9 3% Other $5.9 8% $41.8 $38.8 $42.4 $43.3 $42.4 $15.2 $11.5 $10.5 $10.1 $10.6 $3.8 $4.2 $4.7 $4.8 $4.6 $11.7 $11.6 $11.7 $13.2 $14.8 $72.5M $66.1M $69.3M $71.4M $72.4M 4Q20 1Q21 2Q21 3Q21 4Q21 Salary & Benefits Premises & Equipment Outside Data Processing Other 55.01% 50.23% 48.91% 51.18% 53.49%
17 Tangible Common Equity Ratio Common Equity Tier 1 Ratio Total Risk-Based Capital Ratio Capital Ratios 9.31% 9.31% 9.57% 9.31% 9.31% 9.65%9.57%9.31% 9.57% 9.65% 9.04%8.78% 12.02% 11.99% 11.94% 11.75% 11.68% 4Q20 1Q21 2Q21 3Q21 4Q21 CET 1 Ratio Target CET1 Ratio (10.00%) 14.36% 14.33% 14.23% 14.02% 13.92% 4Q20 1Q21 2Q21 3Q21 4Q21 TRBC Ratio Target TRBC Ratio (12.50%) 9.65% 8.78% 9.04% 8.94% 9.01% 4Q20 1Q21 2Q21 3Q21 4Q21 TCE Ratio Target TCE (9.00%)
Loan Portfolio 18 Highlights Geography / C&I Top Industries Loan Portfolio Trends ($M) 4Q20 1Q21 2Q21 3Q21 4Q21 1. Commercial & Industrial 2,429$ 2,450$ 2,214$ 2,125$ 2,213$ 2. Sponsor Finance 351 430 460 448 504 3. CRE Owner Occupied 955 946 950 953 984 4. Construction/Land/Land Dev. 485 541 491 522 523 5. CRE Non-Owner Occupied 2,221 2,179 2,264 2,150 2,136 6. Agricultural 282 246 235 241 246 7. Public Finance/Other Commercial 648 678 759 782 807 8. Total Commercial Loans 7,371 7,470 7,373 7,221 7,413 9. Residential Mortgage 1,236 1,244 1,146 1,159 1,168 10. Home Equity 508 482 490 531 524 11. Other Consumer 132 127 131 137 148 12. Total Resid. Mortgage & Consumer 1,876 1,853 1,767 1,827 1,840 13. Total Loans 9,247$ 9,323$ 9,140$ 9,048$ 9,253$ 14. Paycheck Protection Program Loans(1) 667$ 742$ 416$ 198$ 107$ ▪ Diversified and growing loan portfolio by: • Line of business • Industry and geography • Type: commercial, mortgage and consumer Portfolio vs. Prior Quarter Loans grew $566 million / 6.6% ex PPP Loans grew $296 million / 13.4% annualized ex PPP vs. Prior Year 20.3% 9.4% 8.5% 8.1% 6.8% 6.6% 6.1% 4.9% 4.1% 4.0% Manufacturing Wholesale Trade Investment CRE Admin Services Retail Trade Prof. Services Finance/Insur. Construction Transp./Warehouse Specialty Trade Top Industries % of C&I loans 1Included in C&I and Sponsor above
Asset Quality 19 Asset Quality Trends ($M) Highlights vs. Prior Quarter vs. Prior Year Improved Asset Quality ▪ Non-accrual loans decreased $8.4 million ▪ Classified loans decreased $21.9 million • Largest reductions in agriculture and specialty trade loans Favorable Asset Quality Trends ▪ Non-accrual loans decreased $18.4 million ▪ NPAs + 90PD decreased $21.5 million ▪ Classified loans decreased $127.3 million, a 50.9% decline • Senior living, manufacturing, agriculture and admin services portfolios contributed majority of reduction 4Q20 1Q21 2Q21 3Q21 4Q21 1. Non-Accrual Loans 61.5$ 57.9$ 57.6$ 51.5$ 43.1$ 2. Other Real Estate 0.9 0.6 0.6 0.7 0.5 3. 90PD Loans 0.8 1.1 0.2 0.2 1.0 4. Renegotiated Loans 3.2 0.7 0.6 0.4 0.3 5. NPAs + 90PD 66.4$ 60.3$ 59.0$ 52.8$ 44.9$ 6. NPAs + 90PD/Loans and ORE 0.72% 0.65% 0.65% 0.58% 0.49% 7. Classified Loans 250.0$ 247.7$ 183.7$ 144.6$ 122.7$ 8. Classified Loans/Loans 2.70% 2.66% 2.01% 1.60% 1.33% 9. Net Charge-offs (QTD) 0.6$ 3.6$ 1.3$ (0.2)$ 4.6$ 10. QTD NCO/Avg. Loans (Annualized) 0.02% 0.16% 0.06% -0.01% 0.20%
Non-Performing Assets 20 Non-Performing Assets Roll Forward ($M) Highlights $7.9 million net reduction in NPAs + 90 PD ▪ $9.5 million in resolved non-accrual loans ▪ Top three non-accrual relationships total $23.4 million ▪ $5.3 million of gross charge-offs in 4Q21 with recoveries of $0.7 million 4th Quarter NPA Roll Forward $21.5 million net reduction in NPAs + 90 PD ▪ $40.9 million in new non-accrual loans during 2021 • Top industries - lessors of real estate, agribusiness and construction ▪ $47.2 million in resolved non-accrual loans ▪ $11.9 million of gross charge-offs in 2021 with recoveries of $2.6 million 1Q21 2Q21 3Q21 4Q21 2021 1. Beginning Balance NPAs + 90PD 66.4$ 60.3$ 59.0$ 52.8$ 66.4$ Non-Accrual 2. Add: New Non-Accruals 6.5 5.4 22.6 6.4 40.9 3. Less: To Accrual/ (5.8) (4.0) (27.9) (9.5) (47.2) Payoff/Renegotiated 4. Less: To OREO - - (0.2) - (0.2) 5. Less: Charge-offs (4.3) (1.7) (0.6) (5.3) (11.9) 6. Non-Accrual Loans Change (3.6) (0.3) (6.1) (8.4) (18.4) Other Real Estate Owned (ORE) 7. Add: New ORE Properties - - 0.2 - 0.2 8. Less: ORE Sold (0.3) - (0.1) - (0.4) 9. Less: ORE Losses (write-downs) - - - (0.2) (0.2) 10. ORE Change (0.3) - 0.1 (0.2) (0.4) 11. 90PD Change 0.3 (0.9) - 0.8 0.2 12. Renegotiated Loans Change (2.5) (0.1) (0.2) (0.1) (2.9) 13. NPAs + 90PD Change (6.1) (1.3) (6.2) (7.9) (21.5) 14. Ending Balance NPAs + 90PD 60.3$ 59.0$ 52.8$ 44.9$ 44.9$ 2021
$0.04 $0.10 $0.18 $0.29 $0.41 $0.54 $0.69 $0.84 $1.00 $1.04 $1.13 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 $9.64 $10.95 $12.17 $13.65 $14.68 $15.85 $16.96 $19.12 $21.94 $24.27 $25.21 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 $0.34 $1.41 $1.41 $1.65 $1.72 $1.98 $2.12 $3.22 $3.19 $2.74 $3.81 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Track Record of Shareholder Value 21 10-Year Total Return (12/31/11 – 12/31/21) Earnings per Share Tangible Book Value per Share Dividends per Share CAGR 2011-2021: 27.3% CAGR 2011-2021: 10.1% CAGR 2011-2021: 39.7% Return on Tangible Common Equity 398.9% 192.2% FRME SNL U.S. Bank 4.37% 14.04% 12.69% 12.94% 12.47% 13.26% 13.29% 18.77% 15.81% 12.21% 16.17% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
$1.6 $1.8 $2.7 $3.1 $3.2 $3.2 $3.6 $3.8 $4.8 $4.5 $4.2 $4.2 $4.3 $5.4 $5.8 $6.8 $7.2 $9.4 $9.9 $12.5 $14.1 $15.5 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 History of Organic and Whole Bank Acquisition Growth 22 Total Assets ($B) Growth Through Acquisition ✓ Experienced Acquirer ✓ Expanded in Current High-Growth Markets ✓ Extended into Additional High-Growth Markets ✓ Added to Franchise with Stable Deposit Gathering Markets 2000 Decatur Bank & Trust 2001 Frances Slocum Bank & Trust 2002 Lafayette Bank & Trust 2003 Commerce National Bank 2008 Lincoln Bank 2012 Shelby County Bank 2013 Citizens Financial Bank 2014 Community Bank 2015 Cooper State Bank Ameriana Bank 2017 Arlington Bank iAB Financial Bank 2019 Monroe Bank & Trust 2022 (Pending)
Vision for the Future 23 Our Vision: To enhance the financial wellness of the diverse communities we serve. To be the most responsive, knowledgeable, and high-performing bank for our clients, teammates, and shareholders. We are a collection of dynamic colleagues with diverse experiences and perspectives who share a passion for positively impacting lives. We are genuinely committed to attracting and engaging teammates of diverse backgrounds. We believe in the power of inclusion and belonging. ▪ Lead a brand-focused cultural transformation through inclusivity, teamwork, performance management, career development, rewards and work-life balance ▪ Produce organic growth across all lines of businesses and markets through focused, data driven industry leading client acquisition, expansion and retention activities ▪ Invest in the digital transformation of our delivery channels to simplify the client experience ▪ Maintain top-quartile financial results supported by industry-leading governance, risk and compliance practices to ensure long-term sustainability ▪ Continue to leverage our core competency in acquisitions to enhance growth, efficiency and high performance ▪ Cultivate a high-quality shareholder base that values environmental, social and governance initiatives inspired by our stakeholder-centric business model Strategic Imperatives: Our Mission: Our Team:
24 APPENDIX
Non-GAAP 25 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. 4Q20 1Q21 2Q21 3Q21 4Q21 Total Risk-Based Capital Ratio (dollars in thousands) Total Stockholders' Equity (GAAP) 1,875,645 1,805,856 1,871,800 1,868,090 1,912,571 Adjust for Accumulated Other Comprehensive (Income) Loss 1 (74,836) (35,810) (60,080) (39,889) (55,113) Less: Preferred Stock (125) (125) (125) (125) (125) Add: Qualifying Capital Securities 46,368 46,427 46,487 46,546 46,606 Less: Tier 1 Capital Deductions - - - - - Less: Disallowed Goodwill and Intangible Assets (564,982) (563,889) (566,412) (565,221) (564,002) Less: Disallowed Deferred Tax Assets - (1,379) (1,152) (1,005) (239) Add: Modified CECL Transition Amount - 40,314 40,314 34,542 34,542 Total Tier 1 Capital (Regulatory) 1,282,070$ 1,291,394$ 1,330,832$ 1,342,938$ 1,374,240$ Qualifying Subordinated Debentures 65,000 65,000 65,000 65,000 65,000 Allowance for Loan Losses includible in Tier 2 Capital 128,481 131,061 135,690 139,200 143,241 Total Risk-Based Capital (Regulatory) 1,475,551$ 1,487,455$ 1,531,522$ 1,547,138$ 1,582,481$ Net Risk-Weighted Assets (Regulatory) 10,276,333$ 10,383,360$ 10,759,672$ 11,037,663$ 11,369,907$ Total Risk-Based Capital Ratio (Regulatory) 14.36% 14.33% 14.23% 14.02% 13.92% Common Equity Tier 1 Capital Ratio Total Tier 1 Capital (Regulatory) 1,282,070$ 1,291,394$ 1,330,832$ 1,342,938$ 1,374,240$ Less: Qualified Capital Securities (46,368) (46,427) (46,487) (46,546) (46,606) Add: Additional Tier 1 Capital Deductions - - - - - Common Equity Tier 1 Capital (Regulatory) 1,235,702$ 1,244,967$ 1,284,345$ 1,296,392$ 1,327,634$ Net Risk-Weighted Assets (Regulatory) 10,276,333$ 10,383,360$ 10,759,672$ 11,037,663$ 11,369,907$ Common Equity Tier 1 Capital Ratio (Regulatory) 12.02% 11.99% 11.94% 11.75% 11.68%
Non-GAAP 26 4Q20 1Q21 2Q21 3Q21 4Q21 Tangible Common Equity Ratio (dollars in thousands) Total Stockholders' Equity (GAAP) 1,875,645$ 1,805,856$ 1,871,800$ 1,868,090$ 1,912,571$ Less: Preferred Stock (125) (125) (125) (125) (125) Less: Intangible Assets (572,893) (571,536) (573,786) (572,323) (570,860) Tangible Common Equity (non-GAAP) 1,302,627$ 1,234,195$ 1,297,889$ 1,295,642$ 1,341,586$ Total Assets (GAAP) 14,067,210$ 14,629,066$ 14,923,097$ 15,060,725$ 15,453,149$ Less: Intangible Assets (572,893) (571,536) (573,786) (572,323) (570,860) Tangible Assets (non-GAAP) 13,494,317$ 14,057,530$ 14,349,311$ 14,488,402$ 14,882,289$ Tangible Common Equity Ratio (non-GAAP) 9.65% 8.78% 9.04% 8.94% 9.01% 4Q11 4Q12 4Q13 4Q14 4Q15 4Q16 4Q17 Tangible Common Equity Per Share Total Stockholders' Equity (GAAP) 514,467$ 552,236$ 634,923$ 726,827$ 850,509$ 901,657$ 1,303,463$ Less: Preferred Stock (90,783) (90,908) (125) (125) (125) (125) (125) Less: Intangible Assets (150,471) (149,529) (202,767) (218,755) (259,764) (258,866) (476,503) Tax Benefit 2,224 2,249 4,973 6,085 6,278 5,930 6,788 Tangible Common Equity, Net of Tax (non-GAAP) 275,437$ 314,048$ 437,004$ 514,032$ 596,898$ 648,596$ 833,623$ Shares Outstanding 28,559,707 28,692,616 35,921,761 37,669,948 40,664,258 40,912,697 49,158,238 Tangible Common Equity per Share (non-GAAP) 9.64$ 10.95$ 12.17$ 13.65$ 14.68$ 15.85$ 16.96$ 4Q18 4Q19 4Q20 1Q21 2Q21 3Q21 4Q21 Tangible Common Equity Per Share Total Stockholders' Equity (GAAP) 1,408,260$ 1,786,437$ 1,875,645$ 1,805,856$ 1,871,800$ 1,868,090$ 1,912,571$ Less: Preferred Stock (125) (125) (125) (125) (125) (125) (125) Less: Intangible Assets (469,784) (578,881) (572,893) (571,536) (573,786) (572,323) (570,860) Tax Benefit 5,017 7,257 5,989 5,710 5,432 5,153 4,875 Tangible Common Equity, Net of Tax (non-GAAP) 943,368$ 1,214,688$ 1,308,616$ 1,239,905$ 1,303,321$ 1,300,795$ 1,346,461$ Shares Outstanding 49,349,800 55,368,482 53,922,359 53,953,723 53,972,386 53,510,745 53,410,411 Tangible Common Equity per Share (non-GAAP) 19.12$ 21.94$ 24.27$ 22.98$ 24.15$ 24.31$ 25.21$
Non-GAAP 27 2019 4Q20 2020 1Q21 2Q21 3Q21 4Q21 2021 EFFICIENCY RATIO (dollars in thousands): Non Interest Expense (GAAP) 246,763$ 72,536$ 263,405$ 66,098$ 69,295$ 71,384$ 72,436$ 279,213$ Less: Intangible Asset Amortization (5,994) (1,476) (5,987) (1,357) (1,464) (1,463) (1,463) (5,747) Less: OREO and Foreclosure Expenses (2,428) 1,576 (330) (734) (178) 91 (171) (992) Adjusted Non Interest Expense (non-GAAP) 238,341 72,636 257,088 64,007 67,653 70,012 70,802 272,474 Net Interest Income (GAAP) 356,660 102,311 382,127 100,428 104,264 104,715 101,273 410,680 Plus: Fully Taxable Equivalent Adjustment 13,085 4,644 16,966 4,711 4,948 5,331 5,594 20,586 Net Interest Income on a Fully Taxable Equivalent Basis (non-GAAP) 369,745 106,955 399,093 105,139 109,212 110,046 106,867 431,266 Non Interest Income (GAAP) 86,688 27,483 109,926 24,091 30,884 28,501 25,847 109,323 Less: Investment Securities Gains (Losses) (4,415) (2,398) (11,895) (1,799) (1,761) (1,756) (358) (5,674) Adjusted Non Interest Income (non-GAAP) 82,273 25,085 98,031 22,292 29,123 26,745 25,489 103,649 Adjusted Revenue (non-GAAP) 452,018 132,040 497,124 127,431 138,335 136,791 132,356 534,915 Efficiency Ratio (non-GAAP) 52.73% 55.01% 51.71% 50.23% 48.91% 51.18% 53.49% 50.94% 2011 2012 2013 2014 2015 2016 2017 2018 Return on Tangible Common Equity Total Average Stockholders' Equity (GAAP) 478,440$ 535,506$ 540,255$ 675,295$ 753,724$ 884,664$ 1,110,524$ 1,343,861$ Less: Average Preferred Stock (74,181) (90,908) (47,537) (125) (125) (125) (125) (125) Less: Average Intangible Assets, Net of Tax (149,554) (147,889) (153,519) (199,354) (215,281) (254,332) (360,005) (467,421) Average Tangible Common Equity, Net of Tax (non-GAAP) 254,705$ 296,709$ 339,199$ 475,816$ 538,318$ 630,207$ 750,394$ 876,315$ Net Income (GAAP) 9,013$ 40,583$ 42,150$ 60,162$ 65,384$ 81,051$ 96,070$ 159,139$ Less: Intangible Asset Amortization, Net of Tax 2,112 1,081 892 1,395 1,720 2,542 3,670 5,307 Tangible Net Income (non-GAAP) 11,125$ 41,664$ 43,042$ 61,557$ 67,104$ 83,593$ 99,740$ 164,446$ Return on Tangible Common Equity (non-GAAP) 4.37% 14.04% 12.69% 12.94% 12.47% 13.26% 13.29% 18.77% 2019 4Q20 2020 1Q21 2Q21 3Q21 4Q21 2021 Return on Tangible Common Equity Total Average Stockholders' Equity (GAAP) 1,569,615$ 1,856,896$ 1,825,135$ 1,840,432$ 1,846,037$ 1,889,037$ 1,890,229$ 1,866,632$ Less: Average Preferred Stock (125) (125) (125) (125) (125) (125) (125) (125) Less: Average Intangible Assets, Net of Tax (499,622) (567,631) (569,377) (566,469) (569,107) (567,852) (566,616) (567,512) Average Tangible Common Equity, Net of Tax (non-GAAP) 1,069,868$ 1,289,140$ 1,255,633$ 1,273,838$ 1,276,805$ 1,321,060$ 1,323,488$ 1,298,995$ Net Income (GAAP) 164,460$ 45,135$ 148,600$ 49,469$ 55,559$ 52,770$ 47,733$ 205,531$ Less: Intangible Asset Amortization, Net of Tax 4,736 1,166 4,730 1,072 1,156 1,156 1,156 4,540 Tangible Net Income (non-GAAP) 169,196$ 46,301$ 153,330$ 50,541$ 56,715$ 53,926$ 48,889$ 210,071$ Return on Tangible Common Equity (non-GAAP) 15.81% 14.37% 12.21% 15.87% 17.77% 16.33% 14.78% 16.17%