First Merchants
Annual Report 2010

Plain-text annual report

2010 Annual report 19 The Strength of Big, the Service of Small 2010 annual report First merchants Corporation 20 First Merchants Corporation CoRPoRATE PR oFILE First merchants Corporation (nasdaq: FRmE) is the largest financial holding company based in Central Indiana. Since 1893, First merchants has provided the best of what banking can offer, customer- valued products and services delivered locally by bankers who are known and trusted in their communities. The Corporation has grown to include banks with 79 locations in 23 Indiana and 2 ohio counties, a trust company and a multi-line insurance company. As of december 31, 2010 total asset size of First merchants Corporation was $4.2 billion. We are focused on building deep, lifelong client relationships and providing maximum shareholder value. We provide an experience where customers can bank with their neighbors, realizing that our business begins and ends with people. TABLE oF ConTEnTS Financial Highlights To our Stockholders The Year in Review Financial Statements Locations 1 2 4 8 15 directors & Executive officers 17 Corporate Information 17 BAnk dIvISIonS Bank divisions within the corporation include: First merchants Bank n.A., in Adams, Brown, delaware, Fayette, Hamilton, Hendricks, Henry, Howard, Jay, Johnson, madison, miami, morgan, Randolph, union, Wabash, Wayne in Indiana and Butler County, ohio. Lafayette Bank and Trust Company, a division of First merchants Bank n.A., in Carroll, Clinton, Jasper, montgomery, Tippecanoe and White counties. Commerce national Bank, a division of First merchants Bank n.A., in Franklin County, ohio. First merchants Trust Company, a division of First merchants Bank, n.A., represents one of the largest trust companies in the state of Indiana. The Corporation also operates First merchants Insurance Group, a full-service property, casualty, personal lines, and health care insurance agency.   First Merchants Bank n.A.   lafayette Bank and Trust Company   Commerce national Bank To deliver superior personalized financial solutions to consumer and closely held commercial clients in diverse community markets by providing sound advice and products that exceed customer expectations. mISSIon FinAnCiAl hiGhliGhTS (Dollars in thousands, except share data) YEAR–End BALAnCES Total Assets Total loans Total deposits Total Stockholders’ equity RESuLTS oF oPERATIonS net interest income Total other income Provision for loan losses Total other expenses net income (loss) available to common stockholders PER SHARE dATA net income (loss) Per Share (diluted) available to common stockholders Cash dividends Paid – Common december 31 Book value – Common december 31 Market value (Bid Price) – Common FInAnCIAL RATIoS return on Average Assets return on Average Stockholders’ equity Allowance for loan losses as % of Total loans See Annual Report on Form 10-K for complete consolidated financials. 1 2010 Annual report 21 2010 Annual report december 31 2010 2009 Percent Change $ 4,170,848 2,857,152 3,268,880 454,408 $ 4,480,952 3,277,824 3,536,536 463,785 – 6.9 % – 12.8 – – 7.6 2.0 $ 143,569 $ 153,346 – 6.4 % 48,544 46,483 142,311 11,722 51,201 122,176 151,558 (45,742 ) – 5.2 – 62.0 – 6.1 + 125.6 $ 0.48 0.04 15.11 8.86 0.27 % 2.49 2.90 $ (2.17 ) + 122.1 % 0.47 16.55 5.94 – 91.5 – 8.7 + 49.2 (0.98 )% + 127.6 % (9.59 ) 2.81 + 126.0 + 3.2 Average Stockholders’ Equity (in millions) Net Interest Margin on Earning Assets Allowance as % of Loans Loan to Deposit Ratio $477 $470 3.71% 3.55% 3.84% 3.74% 3.87% 2.90% 2.81% 100% 102% 103% 98% 91% $350 $320 $331 1.33% 0.99% 0.98% ’06 ’07 ’08 ’09 ’10 ’06 ’07 ’08 ’09 ’10 ’06 ’07 ’08 ’09 ’10 ’06 ’07 ’08 ’09 ’10 2 First Merchants Corporation To our SToCkholderS: The results of 2010 are much better than those of 2009 — a $57 million positive swing in profitability and a $14 million improvement in earnings in the fourth quarter over those of the same quarter of 2009. Certainly a substantial improvement, but not nearly what we can achieve. Here are a few comparative highlights: (a more detailed analysis follows in the “The Year in Review,” beginning on page 4.) Earnings per share for 2010 were $0.48 compared with a loss of $2.17 per share in 2009. The improved results reflected an approximate $10 million gain achieved when we restructured some of our CPP capital (Government’s Capital Purchase Program), improved net investment income, and substantially reduced amounts needed to provide for loan losses, thus indicating an improving trend in the quality of our loans. Simultaneously, our net interest margin improved 13 basis points to 3.87 percent of earning assets from the previous year. This resulted from additional core deposits, improved funding costs and reduced interest rates in effect in 2010. Equally important, our net interest margin was 5.2 percent better than our banking peers. Finally, earnings from operations were the highest in our fourth quarter, and it appears that trend is continuing in 2011, barring any unforeseen events this year. That said, 2010 figures are history, and we believe that shareholders want to know more about the outlook for 2011. THE Look AHEAd First, the economy seems to be recovering from the doldrums of the past two years. Second, our two largest Charles E. Schalliol, Chairman, (left) with michael C. Rechin, President & CEo markets (Indianapolis, Indiana, and Columbus, ohio,) are achieving improved results largely because we’ve hit upon a successful marketing strategy that attracts higher-income, financially sound commercial borrowers. As a result, we are able to channel funds beyond the needs of our mature markets into these growing markets without the usual costs to fund these additional loans. Because these are quality relationships located in markets where we already have staff to administer and service these relationships, our costs relative to them are more economical. oPTImAL SIzE The costs to a be a public corporation and an FdIC insured bank weigh disproportionately heavily on small bank holding companies, as they have relatively few bank offices to absorb these costs. As a result they have little left over for marketing ventures and improving customer services. “marked improvements throughout the Company enabled us to earn demonstrably more in 2010 than in 2009. more important, we are better positioned in all of our markets to drive earnings even higher.” — Michael C. Rechin, President and CEO 2010 Annual report 3 Consequently, their ability to compete is challenged. Some may become available for mutually beneficial acquisitions that will fit well within our community banking model. With more than $4 billion in assets we are well positioned to secure additional growth in the marketplace. our size (the largest in central Indiana) relative to the national banking giants also plays in our favor: Simply stated, we are more nimble and able to prioritize service. our ability to move quickly becomes strategically deci- sive in delivering customer service. This we think will prove to be the factor that determines future banking prosperity. Size also impacts costs. The smaller banks find their pay structure insufficient to attract outstanding personnel, and the giant national banks have layers of bureaucracy that slow the decision process and make many loans less profitable. In short we’re large enough to outcompete smaller banks when it comes to introducing and delivering new products and services and yet agile enough to outmaneuver the larger banks when it comes to personalized service. While attractive acquisitions will almost certainly become available in the years ahead, we do not rely on them as the primary driver to boost earnings. Rather, we believe the lion’s share of our results will be derived primarily from expanding our core business, which is precisely our focus for the next several years. visible to the investing community. Given what the near- term future appears to hold, we believe that value investors may well be attracted to our stock as it is presently selling for just under 90 percent of tangible book value. We plan to utilize our website more effectively and make our investment rationale more transparent to our shareholders. Further, we recognize the present dividend falls short of what income investors require. We plan to address this as soon as a larger payout becomes assuredly sustainable. Finally, at the start of 2010, we challenged our associates to deliver the service that would be the envy in all of our markets, streamlined our operations to bring us a unified front throughout our systems and improved our capital structure to enable us to thrive as we embark upon the next phase of our growth plan. We believe we are well on our way. Sincerely, michael C. Rechin President and CEo SHAREHoLdER RELATIonS A sizable portion of our plan going forward is to make the inherent worth of our bank holding company more readily Charles E. Schalliol Chairman of the Board march 21, 2011 Total Capital to Risk-weighted Assets Tier 1 Capital to Risk-weighted Assets Tier 1 Capital to Average Assets Tangible Capital to Tangible Assets 15.74% 13.04% 11.09% 10.55%10.24% 12.82% 10.32% 9.18% 8.75% 7.71% 9.50% 5.67% 5.72% 5.86% 8.16% 8.20% 7.37% 7.19% 5.01% 4.54% ’06 ’07 ’08 ’09 ’10 ’06 ’07 ’08 ’09 ’10 ’06 ’07 ’08 ’09 ’10 ’06 ’07 ’08 ’09 ’10 The YeAr in review ImPRovEmEnTS In SToCkHoLdERS’ EquITY our efforts during this past year resulted in improved performance throughout the organization. our primary efforts were to improve our capital structure, specifically the mix of Hybrid Capital and Equity Capital. Here’s what we did and why it’s important. In February 2009, we decided to participate in the u.S. Treasury’s voluntary Capital Purchase Program (CPP) and received $116 million in equity capital by issuing 116,000 shares of Preferred Stock and a warrant to purchase additional shares of the company’s common stock. Fast forward to march of 2010. Here we took the initiative and presented the u.S. Treasury with a proposal to exchange $46.4 million of the Company’s cumulative perpetual preferred stock for trust preferred securities. They agreed, and on June 30th we completed the transaction, which resulted in a $10.1 million gain due to the favorable accounting treatment of the newer securities. This transaction increased the holding company’s Tangible Common Equity Ratio nearly 25 basis points. Second, we raised $24.15 million in private placement equity by selling 4.2 million common shares to six different institutional investors. All told these activities improved the bank’s key capital ratios to even healthier levels and substantially above the “well capitalized” regulatory guidelines. 4 First Merchants Corporation Top: Because of the accelerated growth of their Company, mr. Patrick James, CEo and david Washburn of Heritage Technologies partnered with First merchants and secured $11.5 million in loans to build a 30,000 sq. ft. expansion to add new product lines to their mirconutrient business. Middle: Home to Super Bowl 2012, Indianapolis is growing faster than the national average and is one of the Bank’s fastest growing markets. Right: We grew deposits last year in our Lafayette market, home to the Purdue Research Park where more than 140 companies working in the fields of life sciences, advanced manufacturing and engineering, have originated. First merchants has developed several banking relationships with companies located at the 725 acre campus just north of Purdue university. 2010 Annual report 5 A RETuRn To PRoFITABILITY For the year, the Company earned $0.48 cents per common share from net income totaling $11.7 million. This compares quite favorably to 2009’s results of a loss of $2.17 per common share and a net loss of $45.7 million. The $57 million swing to the positive was driven by prudent management of the loan portfolio which resulted in a dramatic $75.7 million reduction in the provision for loan losses to $46.5 million compared with $122.2 million in 2009. net interest income after provi- sion for loan losses increased 211% to $97 million, up from $31.1 million in 2009. This, along with a reduction in our expenses, proved our resiliency to adapt to what is still a sluggish economy. Above: not content to stand pat, the Bank contin- ues to invest in its mature markets. First merchants is investing nearly $1 million to upgrade its madison Street location in muncie. Because of a nation-wide consumer focus on reducing debt and much uncertainty in the job market, our total assets were down $311 million to $4.17 billion at the end of 2010. We simply did not lend as much money last year as we did in 2009, and total loans, including those held for sale decreased by $421 million to $2.86 billion. However, we did not sit idle. We used the additional liquidity to pay down higher-priced deposit liabilities and advances from the Federal Home Loan Bank. These reductions totaled $400 million for 2010. Further, we took the remaining surplus funds and reinvested them in our investment portfolio which now totals $827 million, an increase of $264 million during the past year. Its yield is an enviable 4.15% compared with our peer group’s average of approximately 3.75%. management has worked diligently on the portfolio and is pleased with its position over the near term. THE onLY ConSTAnT IS CHAnGE one of the most important accomplishments last year was the melding of our back-office operations into one common platform that will enable us to move decisively quicker and more profitably when we implement system wide changes in our efforts to better serve our customer. Part of it was necessitated because of the various banking charters that we maintained and part of it was caused by the evolution of banking software. Previously the Company had nine different charters. now we have one. This has become increasingly important as a direct result of the dramatic changes in the banking industry and the demographic changes of our customers. 6 First Merchants Corporation In 1990 there were slightly more than 15,000 banks. Today that number is 7,830. This consolidation is expected to accelerate in the next five years with estimates putting the number of banks at 5,000, an additional 33% reduction. In addition to consolidation, banks today are faced with the online banking explosion of services. Households banking on line grew 170% from 2001 to 2009. mobile banking software, unheard of a few years ago, is now available for Above: Columbus, OH: our custom marketing program, unheard of for a bank our size, is geared toward privately held companies with an emphasis in healthcare. The Bank provided several loans to drs. Love and Barry that enabled them to greatly expand their dental practice as well as assisted them in restructuring the partnership. While the dental practice had several competitive banking bids to chose from ultimately their access to the Bank’s senior management for counsel and service let them choose First merchants’ division, Commerce national. 2010 Annual report 7 Small business loans will help drive earnings in our markets in 2011. just about every smartphone. Generation Y consumers value mobile device capabilities more than the availability of branches and ATms when choosing a bank. Couple this definite transition from a physical to a virtual distribution of banking services and one can see how a single platform from which new services and features can be implemented immediately delivers a compelling argument for First merchants. As banking regulations become increasingly onerous for smaller banks, even the higher performing ones will have to consider a merger if they want to serve these changing demographics. our back-office operations center is intelligently designed to handle a demonstrably larger asset base than it does currently with no discernible increase in expense. BoARd oF dIRECToRS CHAnGES We wish to acknowledge the departure of two board members. Thomas Clark has chosen to not stand for reelection after 22 years of faithful and valuable service. Barry Hudson is leaving us because he has reached the mandatory retirement age for our directors. Barry joined us with the acquisition of First national Bank of Portland in 1999 and has been a banking and community leader in our East Central Indiana markets. Their candor and advice in these trying times were especially valuable, and each will be sorely missed. We wish them well in their future endeavors. Total Return Performance The following graph compares the cumulative 5-year total return to shareholders on First merchants Corporation’s common stock relative to the cumulative total returns of the Russell 2000 index and the SnL Bank $1B – $5B index. The graph assumes that the value of the investment in the Corporation’s common stock and in each of the indexes (including reinvestment of dividends) was $100 on december 31, 2005 and tracks it through december 31, 2010. E u L A v x E d n I 140 120 100 80 60 40 20 0 First Merchants Corporation russell 2000 Snl Bank $1B–$5B 12/31/05 12/31/06 12/31/07 12/31/08 12/31/09 12/31/10 Index dec. 31, 2005 dec. 31, 2006 dec. 31, 2007 dec. 31, 2008 dec. 31, 2009 dec. 31, 2010 First merchants Corporation Russell 2000 SnL Bank $1B-$5B 100.00 100.00 100.00 108.47 118.37 115.72 90.75 116.51 84.29 96.23 77.15 69.91 27.29 98.11 50.11 40.91 124.46 56.81 The stock price performance included in this graph is not necessarily indicative of future stock price performance. 8 First Merchants Corporation Five–YeAr SuMMAr Y oF SeleCTed FinAnCiAl d ATA (Dollars in thousands, except share data) 2010 2009 2008 2007 2006 oPERATIonS (1) net interest income Fully Taxable equivalent (FTe) Basis less Tax equivalent Adjustment net interest income Provision for loan losses net interest income After Provision for loan losses Total other income Total other expenses Income (Loss) Before Income Tax Expense (Benefit) Income Tax Expense (Benefit) net income (loss) Gain on exchange of Preferred Stock to Trust Preferred debt Preferred Stock dividends and discount Accretion net income (loss) Available to Common Stockholders PER SHARE dATA Basic net income (loss) Available to Common Stockholders diluted net income (loss) Available to Common Stockholders Cash dividends Paid – Common december 31 Book value – Common december 31 Tangible Book value – Common december 31 Market value (Bid Price) – Common $ $ $ 149,434 $ 159,068 $ 133,083 $ 117,247 $ 114,076 5,865 5,722 3,699 4,127 3,981 8,507 28,238 36,367 46,483 122,176 97,086 48,544 51,201 143,569 153,346 129,384 113,120 110,095 6,258 31,170 101,146 104,613 103,837 40,551 34,613 142,311 151,558 108,792 102,182 96,057 42,982 42,393 11,343 12,195 31,639 30,198 3,319 (3,590 ) 6,303 10,052 5,239 11,722 $ (45,742 ) $ 20,638 $ 31,639 $ 30,198 (69,187 ) (28,424 ) (40,763 ) 28,721 8,083 20,638 4,979 0.48 $ 0.48 0.04 15.11 9.21 8.86 (2.17 ) $ (2.17 ) 0.47 16.55 9.25 5.94 1.14 $ 1.14 0.92 18.69 10.93 22.21 1.73 $ 1.73 0.92 18.88 11.60 27.84 1.64 1.64 0.92 17.75 10.52 27.19 AvERAGE BALAnCES (2) Total Assets Total loans (3) Total deposits $ 4,271,715 $ 4,674,590 $ 3,811,166 $ 3,639,772 $ 3,371,386 3,050,850 3,546,316 3,002,628 2,794,824 2,569,847 3,337,747 3,603,509 2,902,902 2,752,443 2,568,070 Securities Sold under repurchase Agreements (long-term portion) 24,250 107,753 243,105 237,791 259,463 234,629 Total Federal home loan Bank Advances Total Subordinated debentures, revolving Credit lines and Term loans 126,650 110,826 107,752 104,680 99,456 470,379 477,148 349,594 330,786 319,519 Total Stockholders’ equity 23,813 24,250 34,250 YEAR-End BALAnCES (1) Total Assets Total loans (2) Total deposits $ 4,170,848 $ 4,480,952 $ 4,784,155 $ 3,782,087 $ 3,554,870 2,857,152 3,277,824 3,726,247 2,880,578 2,698,014 3,268,880 3,536,536 3,718,811 2,884,121 2,750,538 Securities Sold under repurchase Agreements (long-term portion) 24,250 34,250 82,684 129,749 360,217 294,101 242,408 Total Federal home loan Bank Advances Total Subordinated debentures, revolving Credit lines and Term loans 226,440 194,790 135,826 115,826 83,956 454,408 463,785 395,903 339,936 327,325 Total Stockholders’ equity 34,250 24,250 FInAnCIAL RATIoS (1) return on Average Assets return on Average Stockholders’ equity Average earning Assets to Total Assets (1) Allowance for loan losses as % of Total loans dividend Payout ratio Average Stockholders’ equity to Average Assets Tax equivalent Yield on earning Assets Cost of Supporting liabilities net interest Margin on earning Assets 0.27 % 2.49 90.42 2.90 8.33 11.01 5.32 1.45 3.87 -0.98 % (9.59 ) 94.74 2.81 n/m (3) 10.21 5.56 1.82 3.74 0.54 % 5.90 72.39 1.33 80.70 9.17 6.44 2.60 3.84 0.87 % 9.56 90.15 0.98 53.18 9.09 7.10 3.55 3.55 0.90 % 9.45 91.15 0.99 56.10 9.48 6.92 3.21 3.71 The following selected data has been taken from the Corporation’s consolidated financial statements. Refer to First Merchants Corporation’s Annual Report on Form 10-K for complete consolidated financials. (1) On December 31, 2008, the Corporation acquired 100 percent of the outstanding stock of Lincoln Bancorp, the holding company of Lincoln Bank, which was located in Plainfield, Indiana. Lincoln Bank was a state chartered bank with branches in central indiana. lincoln Bancorp was merged into the Corporation and in 2009, lincoln Bank was ultimately merged into First Merchants Bank, national Association, a subsidiary of the Corporation. The Corporation issued approximately 3,040,415 shares of its common stock at a cost of $19.78 per share and approximately $16.8 million in cash to complete the transaction. As a result of the acquisition, the Corporation has an opportunity to increase its customer base and continue to increase its market share. The purchase had a recorded acquisition price of $77,290,000, including investments of $122,093,000; loans of $628,277,000, premises and equipment of $15,624,000; other assets of $86,091,000; deposits of $655,370,000; other liabilities of $136,280,000 and goodwill of $19,813,000. Additionally, core deposit intangibles totaling $12,461,000 were recognized and will be amortized over ten years. The combination was accounted for under the purchase method of accounting. All assets and liabilities were recorded at their fair values as of december 31, 2008. The purchase accounting adjustments are being amortized over the life of the respective asset or liability. (2) includes loans held for sale. (3) not meaningful. ConSolid ATed B AlAnCe SheeTS (Dollars in thousands, except share data) ASSETS Cash and due from banks Federal funds sold Cash and cash equivalents interest-bearing time deposits investment securities available for sale investment securities held to maturity (fair value of $286,270 and $147,336) Mortgage loans held for sale loans less: Allowance for loan losses net loans Premises and equipment Federal reserve and Federal home loan Bank stock interest receivable Core deposit intangibles Goodwill Cash surrender value of life insurance other real estate owned Tax asset, deferred and receivable other assets ToTAL ASSETS LIABILITIES deposits: noninterest-bearing interest-bearing Total deposits Borrowings: Securities sold under repurchase agreements Federal home loan Bank advances Subordinated debentures, revolving credit lines and term loans Total Borrowings interest payable other liabilities Total Liabilities CommITmEnTS And ConTInGEnT LIABILITIES SToCkHoLdERS’ EquITY Preferred Stock, no-par value: Authorized – 500,000 shares Series A, issued and outstanding – 69,600 and 116,000 shares Cumulative Preferred Stock, $1,000 par value, $1,000 liquidation value: Authorized – 600 shares issued and outstanding – 125 shares Common Stock, $.125 stated value: Authorized – 50,000,000 shares issued and outstanding – 25,574,251 and 21,227,741 shares Additional paid-in capital retained earnings Accumulated other comprehensive loss Total Stockholders’ Equity ToTAL LIABILITIES And SToCkHoLdERS’ EquITY See Annual Report on Form 10-K for complete consolidated financials. 2010 Annual report 9 december 31, 2010 2009 $ 50,844 7,463 58,307 65,216 539,370 287,427 21,469 2,835,683 (82,977 ) 2,752,706 52,450 33,884 18,674 12,662 141,357 96,731 20,927 45,623 24,045 $ 4,170,848 $ 583,696 2,685,184 3,268,880 109,871 82,684 226,440 418,995 4,262 24,303 3,716,440 76,801 $ 102,346 179,147 74,025 413,607 149,510 8,036 3,269,788 (92,131 ) 3,177,657 55,804 38,576 20,818 17,383 141,357 94,636 14,879 64,394 31,123 $ 4,480,952 $ 516,487 3,020,049 3,536,536 125,687 129,749 194,790 450,226 5,711 24,694 4,017,167 67,880 112,373 125 125 3,197 232,503 160,860 (10,157 ) 454,408 $ 4,170,848 2,653 206,600 150,860 (8,826 ) 463,785 $ 4,480,952 10 First Merchants Corporation ConSolid ATed STATeMenTS oF oPerATionS (Dollars in thousands, except share data) InTEREST InComE loans receivable: Taxable Tax-exempt investment securities: Taxable Tax-exempt Federal funds sold Deposits with financial institutions Federal reserve and Federal home loan Bank stock Total Interest Income InTEREST ExPEnSE deposits Federal funds purchased Securities sold under repurchase agreements Federal home loan Bank advances Subordinated debentures, revolving credit lines and term loans Total Interest Expense nET InTEREST InComE Provision for loan losses nET InTEREST InComE AFTER PRovISIon FoR LoAn LoSSES oTHER InComE Service charges on deposit accounts Fiduciary activities other customer fees Commission income earnings on cash surrender value of life insurance net gains and fees on sales of loans net realized gains on sales of available for sale securities other-than-temporary impairment on available for sale securities Portion of loss recognized in other comprehensive income before taxes net impairment losses recognized in earnings other income Total other Income oTHER ExPEnSES Salaries and employee benefits net occupancy equipment Marketing outside data processing fees Printing and office supplies Core deposit amortization FdiC assessments other real estate owned and credit related expenses other expenses Total other Expenses InComE (LoSS) BEFoRE InComE TAx Income tax expense (benefit) nET InComE (LoSS) Gain on exchange of preferred stock for trust preferred debt Preferred stock dividends and discount accretion nET InComE (LoSS) AvAILABLE To Common SToCkHoLdERS nET InComE (LoSS) AvAILABLE To Common SToCkHoLdERS PER SHARE: Basic diluted See Annual Report on Form 10-K for complete consolidated financials. 2010 december 31, 2009 2008 $ 174,070 515 $ 205,616 1,038 $ 198,385 1,013 12,957 10,377 26 381 1,252 199,578 39,876 5 1,712 5,368 9,048 56,009 143,569 46,483 97,086 13,283 7,692 8,990 6,225 2,098 6,806 3,406 (3,049 ) 1,505 (1,544 ) 1,588 48,544 73,253 9,935 7,323 1,970 5,093 1,259 4,721 8,121 12,436 18,200 142,311 3,319 (3,590 ) 6,909 10,052 (5,239 ) $ 11,722 12,335 9,587 118 366 1,379 230,439 58,391 28 1,997 9,232 7,445 77,093 153,346 122,176 31,170 15,128 7,409 7,922 6,397 1,614 6,849 11,141 (11,134 ) 4,405 (6,729 ) 1,470 51,201 76,325 10,250 7,595 2,134 6,186 1,419 5,109 10,394 9,823 22,323 151,558 (69,187 ) (28,424 ) (40,763 ) (4,979 ) $ (45,742 ) 12,046 5,855 28 755 1,391 219,473 67,581 1,856 2,600 11,168 6,884 90,089 129,384 28,238 101,146 13,002 8,031 6,776 5,824 (267 ) 2,490 599 (2,682 ) (2,682 ) 2,594 36,367 63,006 7,711 6,659 2,311 4,087 1,214 3,216 857 2,785 16,946 108,792 28,721 8,083 20,638 $ 20,638 $ $ 0.48 0.48 $ $ (2.17 ) (2.17 ) $ $ 1.14 1.14 2010 Annual report 11 ConSolid ATed STATeMenTS oF CoMPrehenSive inCoMe (loSS) (Dollars in thousands, except share data) net income (loss) other comprehensive income (loss), net of tax: unrealized holding gain (loss) on securities available for sale arising during the period, net of tax of $106, ($5,587) and $1,356 unrealized gain (loss) on securities available for sale for which a portion of an other-than-temporary impairment has been recognized in income, net of tax of $539, $1,333 and $0 Unrealized gains (losses) on cash flow hedges: unrealized gains (losses) arising during the period, net of tax of ($155), $622 and ($1) Reclassification adjustment for gains (losses) included in net income net of tax of $652, $1,544 and ($833) Defined Benefit Pension Plans, net of tax of ($526), ($1,826) and $7,689 net Gain Arising during Period Prior Service Cost Arising during Period Amortization of Prior Service Cost Comprehensive income (loss) 2010 december 31, 2009 2008 $ 6,909 $ (40,763 ) $ 20,638 (197 ) 10,376 (2,518 ) (1,001 ) (2,476 ) 288 (933 ) 2 (1,210 ) (2,868 ) 1,250 156 583 50 (1,331 ) $ 5,578 3,043 (326 ) 22 6,838 $ (33,925 ) (11,518 ) (15 ) (12,799 ) $ 7,839 The following table represents the components of accumulated other comprehensive income: (Dollars in thousands) net unrealized gain (loss) on securities available for sale net unrealized loss on securities available for sale for which a portion of an other-than-temporary impairment has been recognized in income Net realized gain on cash flow hedges Defined Benefit Plans See Annual Report on Form 10-K for complete consolidated financials. december 31, 2010 2009 $ 2,767 $ 6,650 (1,001 ) (2,476 ) 288 (12,211 ) $ (10,157 ) (13,000 ) $ (8,826 ) 12 First Merchants Corporation ConSolid ATed STATeMenTS oF ST oCkholderS’ equiTY (Dollars in thousands, except share data) BALAnCES, dECEmBER 31, 2007 net income for 2008 Cash dividends ($.92 per Share) effects of changing the pension plan measurement date pursuant to FASB no. 158 Service Cost, interest cost and expected rate of return on plan assets for october 1 – december 31, 2009, net of tax Amortization of prior service costs for october 1 – december 31, 2007, net of tax Cumulative preferred stock issued other Comprehensive income (loss), net of Tax Tax Benefit from Stock Options Exercised Share-based Compensation Stock Issued Under Employee Benefit Plans Stock issued under dividend reinvestment and Stock Purchase Plan Stock options exercised Stock redeemed issuance of Stock related to Acquisitions BALAnCES, dECEmBER 31, 2008 net loss for 2009 Cash dividends on Common Stock ($.47 per Share) Cash dividends on Preferred Stock under Capital Purchase Program warrants issued under Capital Purchase Program Accretion of discount on Preferred Stock Preferred Stock issued under Capital Purchase Program other Comprehensive income, net of Tax Tax Benefit from Stock Options Exercised Share-based Compensation Stock Issued Under Employee Benefit Plans Stock issued under dividend reinvestment and Stock Purchase Plan Stock options exercised Stock redeemed Adjustment to issuance of stock related to acquisition BALAnCES, dECEmBER 31, 2009 Comprehensive income net income other Comprehensive income, net of Tax Cash dividends on Common Stock ($.04 per Share) Cash dividends on Preferred Stock under Capital Purchase Program Cumulative Preferred Stock Converted to Trust Preferred Securities Accretion of discount on Preferred Stock Private Stock issuance Tax Benefit (Loss) from Stock Options Exercised Share-based Compensation Stock Issued Under Employee Benefit Plans Stock issued under dividend reinvestment and Stock Purchase Plan Stock redeemed BALAnCES, dECEmBER 31, 2010 See Annual Report on Form 10-K for complete consolidated financials. Preferred Shares Amount Common Stock Shares 18,002,787 Amount $ 2,250 Additional Paid in Capital $ 137,801 Accumulated other Comprehensive income (loss) $ (2,865 ) 125 $ 125 (12,799 ) (12,799 ) 125 $ 125 $ 2,647 $ 206,496 $ (15,664 ) 116,000 619 111,754 116,125 $ 112,498 $ 2,653 $ 206,600 $ 150,860 $ (8,826 ) (46,400 ) (45,099 ) 606 4,200,000 525 23,625 69,725 $ 68,005 25,574,251 $ 3,197 $ 232,503 $ 160,860 $ (10,157 ) $ 454,408 retained earnings $ 202,750 20,638 (16,775 ) (64 ) (53 ) (40,763 ) (9,985 ) (4,269 ) (619 ) 6,909 (989 ) (5,366 ) 10,052 (606 ) Total $ 339,936 20,638 (16,775 ) (64 ) (53 ) 125 156 1,898 773 1,021 1,633 (2,188 ) 61,602 $ 395,903 (40,763 ) (9,985 ) (4,269 ) 4,245 — 111,754 6,838 60 2,294 825 527 (193 ) (3,451 ) $ 463,785 6,909 (1,331 ) (989 ) (5,366 ) (35,047 ) — 24,150 (50 ) 1,750 582 91 (76 ) 6,838 (1,331 ) 225 50,119 44,554 122,890 (134,169 ) 3,091,717 21,178,123 50,564 122,572 65,015 (14,059 ) (174,474 ) 21,227,741 49,833 97,966 11,545 (12,834 ) 1 6 6 15 (17 ) 386 6 16 8 (2 ) (22 ) 6 12 2 (1 ) 156 1,897 767 1,015 1,618 (2,171 ) 61,216 $ 202,299 4,245 60 2,288 809 519 (191 ) (3,429 ) (50 ) 1,744 570 89 (75 ) (Dollars in thousands, except share data) BALAnCES, dECEmBER 31, 2007 net income for 2008 Cash dividends ($.92 per Share) effects of changing the pension plan measurement date pursuant to FASB no. 158 Service Cost, interest cost and expected rate of return on plan assets for october 1 – december 31, 2009, net of tax Amortization of prior service costs for october 1 – december 31, 2007, net of tax Preferred Shares Amount Common Stock Shares 18,002,787 Amount $ 2,250 Additional Paid in Capital $ 137,801 225 50,119 44,554 122,890 (134,169 ) 3,091,717 21,178,123 1 6 6 15 (17 ) 386 $ 2,647 retained earnings $ 202,750 20,638 (16,775 ) (64 ) (53 ) Accumulated other Comprehensive income (loss) $ (2,865 ) (12,799 ) $ 206,496 $ (15,664 ) (40,763 ) (9,985 ) (4,269 ) (619 ) 6,838 156 1,897 767 1,015 1,618 (2,171 ) 61,216 $ 202,299 4,245 60 2,288 809 519 2010 Annual report 13 Total $ 339,936 20,638 (16,775 ) (64 ) (53 ) 125 (12,799 ) 156 1,898 773 1,021 1,633 (2,188 ) 61,602 $ 395,903 (40,763 ) (9,985 ) (4,269 ) 4,245 — 111,754 6,838 60 2,294 825 527 (193 ) (3,451 ) $ 463,785 6,909 (1,331 ) (989 ) (5,366 ) (35,047 ) — 24,150 (50 ) 1,750 582 91 (76 ) $ 454,408 6 16 8 50,564 122,572 65,015 (14,059 ) (174,474 ) 21,227,741 (2 ) (22 ) $ 2,653 (191 ) (3,429 ) $ 206,600 $ 150,860 $ (8,826 ) 4,200,000 525 49,833 97,966 11,545 (12,834 ) 25,574,251 6 12 2 (1 ) $ 3,197 23,625 (50 ) 1,744 570 89 (75 ) $ 232,503 (1,331 ) 6,909 (989 ) (5,366 ) 10,052 (606 ) $ 160,860 $ (10,157 ) Cumulative preferred stock issued other Comprehensive income (loss), net of Tax Tax Benefit from Stock Options Exercised Share-based Compensation Stock Issued Under Employee Benefit Plans Stock options exercised Stock redeemed issuance of Stock related to Acquisitions BALAnCES, dECEmBER 31, 2008 net loss for 2009 Stock issued under dividend reinvestment and Stock Purchase Plan Cash dividends on Common Stock ($.47 per Share) Cash dividends on Preferred Stock under Capital Purchase Program warrants issued under Capital Purchase Program Accretion of discount on Preferred Stock Preferred Stock issued under Capital Purchase Program other Comprehensive income, net of Tax Tax Benefit from Stock Options Exercised Share-based Compensation Stock Issued Under Employee Benefit Plans Stock issued under dividend reinvestment and Stock Purchase Plan Adjustment to issuance of stock related to acquisition Stock options exercised Stock redeemed BALAnCES, dECEmBER 31, 2009 Comprehensive income net income other Comprehensive income, net of Tax Cash dividends on Common Stock ($.04 per Share) Cash dividends on Preferred Stock under Capital Purchase Program Cumulative Preferred Stock Converted to Trust Preferred Securities Accretion of discount on Preferred Stock Private Stock issuance Tax Benefit (Loss) from Stock Options Exercised Share-based Compensation Stock Issued Under Employee Benefit Plans Stock issued under dividend reinvestment and Stock Purchase Plan Stock redeemed BALAnCES, dECEmBER 31, 2010 See Annual Report on Form 10-K for complete consolidated financials. 125 $ 125 125 $ 125 116,000 619 111,754 116,125 $ 112,498 (46,400 ) (45,099 ) 606 69,725 $ 68,005 14 First Merchants Corporation ConSolid ATed STATeMenTS oF C ASh FlowS (Dollars in thousands) Cash Flow From operating Activities: net income (loss) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Provision for loan losses depreciation and amortization Change in deferred taxes Share-based compensation Tax expense (benefit) from stock options exercised Mortgage loans originated for sale Proceeds from sales of mortgage loans Gains on sales of securities available for sale recognized loss on other-than-temporary-impairment Change in interest receivable Change in interest payable Pension adjustment for measurement date change other adjustments net cash provided by operating activities Cash Flows from investing Activities: net change in interest-bearing deposits Purchases of: Securities available for sale Securities held to maturity Proceeds from sales of securities available for sale Proceeds from maturities of Securities available for sale Securities held to maturity Proceeds from sales of mortgages Change in Federal reserve and Federal home loan Bank stock Purchase of bank owned life insurance net cash paid in acquisitions net change in loans Proceeds from the sale of other real estate owned other adjustments net cash provided by (used in) investing activities Cash Flows from Financing Activities: net change in : demand and savings deposits Certificates of deposit and other time deposits Borrowings repayment of borrowings Cash dividends on common stock Cash dividends on preferred stock Stock issued in private equity placement Stock issued under employee benefit plans Stock issued under dividend reinvestment and stock purchase plans Stock options exercised Cumulative preferred stock issued Tax (expense) benefit from stock options exercised Stock redeemed Net cash provided by (used in) financing activities net Change in Cash and Cash equivalents Cash and Cash equivalents, January 1 Cash and Cash equivalents, december 31 Additional cash flows information: interest paid income tax paid (refunded) exchange of preferred stock for trust preferred debt loans transferred to other real estate owned See Annual Report on Form 10-K for complete consolidated financials. 2010 december 31, 2009 2008 $ 6,909 $ (40,763 ) $ 20,638 46,483 5,702 (1,810 ) 1,750 50 (254,712 ) 241,279 (3,406 ) 1,544 2,144 (1,449 ) 36,567 $ 81,051 122,176 5,962 (10,858 ) 2,294 (60 ) (305,778 ) 302,037 (11,141 ) 6,729 3,158 (3,133 ) (53,013 ) $ 17,610 28,238 4,613 (8,666 ) 1,898 (156 ) (102,591 ) 104,250 (599 ) 2,682 2,858 (1,217 ) (117 ) (12,818 ) 39,013 $ $ 8,809 $ (35,202 ) $ 10,716 (311,465 ) (180,311 ) 117,804 65,688 40,825 4,692 345,518 20,641 (2,348 ) $ 109,853 $ 84,993 (352,649 ) 2,382 (65,247 ) (989 ) (4,931 ) 24,150 582 91 (50 ) (76 ) $ (311,744 ) (120,840 ) 179,147 $ 58,307 $ 57,458 (17,674 ) 46,400 32,950 (385,697 ) (165,844 ) 309,246 134,337 38,568 33,452 (4,257 ) 296,416 39,595 (2,125 ) $ 258,489 $ 184,228 (366,503 ) 126,587 (294,715 ) (9,985 ) (4,269 ) 825 527 116,000 60 (193 ) $ (247,438 ) 28,661 150,486 $ 179,147 (100,988 ) (29,058 ) 60,335 139,825 17,042 (261 ) (706 ) 6,934 (250,621 ) 10,775 (4,181 ) $ (140,188 ) $ 74,992 144,328 961,074 (1,048,161 ) (16,775 ) 773 1,021 1,633 125 156 (2,188 ) $ 116,978 15,803 134,683 $ 150,486 $ 80,226 3,184 $ 89,570 18,393 42,708 24,647 2010 Annual report 15 2010 Annual report 15 D e s i g n P r o o f : 2 / 7 / 1 1 IndIAn A AdAmS CounTY decatur downtown 103 east Monroe Street decatur, in 46733 (260) 724-2157 decatur main 520 north 13th Street decatur, in 46733 (260) 724-2157 decatur ATm Adams County Memorial hospital 1100 Mercer Avenue decatur, in 46733 Woodcrest 1300 Mercer Avenue decatur, in 46733 (260) 724-2157 BRoWn CounTY nashville 189 Commercial drive nashville, in 47448 (812) 988-1200 CARRoLL CounTY Flora 805 east Columbia Street Flora, in 46929 (574) 967-4318 CLInTon CounTY Frankfort 1900 east wabash Street Frankfort, in 46041 (765) 654-8742 Frankfort downtown 60 South Main Street Frankfort, in 46041 (765) 654-8533 dELAWARE CounTY Albany 937 west walnut Street Albany, in 47320 (765) 789-4426 i S n o T A C o l daleville 14500 west davis drive daleville, in 47334 (765) 378-7077 daleville ATm 9301 South innovation drive daleville, in 47334 East Jackson 101 South Country Club road Muncie, in 47303 (765) 747-1332 Eaton 107 east harris Street eaton, in 47338 (765) 396-3311 Eaton ATm Marathon vP 17000 north State road 3 eaton, in 47338 madison 2101 South Madison Street Muncie, in 47302 (765) 747-1541 muncie main 200 east Jackson Street Muncie, in 47305 (765) 747-1500 northwest 1628 west McGalliard road Muncie, in 47304 (765) 747-1552 Southway 3700 South Madison Street Muncie, in 47302 (765) 747-1574 Tillotson 801 South Tillotson Avenue Muncie, in 47304 (765) 747-1335 village 1701 west university Avenue Muncie, in 47303 (765) 747-1592 Westminster village 5801 west Bethel Avenue Muncie, in 47304 (765) 378-8760 Yorktown 1501 north nebo road Muncie, in 47304 (765) 747-4910 First merchants Insurance Group 302 east Jackson Street Muncie, in 47307 (765) 213-3400 FAYETTE CounTY Connersville 9th Street 832 north Central Avenue Connersville, in 47331 (765) 827-0811 Connersville north 3030 western Avenue Connersville, in 47331 (765) 827-9846 HAmILTon CounTY Carmel one east Carmel drive Suite 100 Carmel, in 46032 (317) 844-5675 Fishers 12514 east 116th Street Fishers, in 46037 (317) 913-9020 Indianapolis 10333 north Meridian Street Suite 350 indianapolis, in 46290 (317) 844-2980 noblesville 17833 Foundation drive noblesville, in 46060 (317) 770-7570 Westfield 3002 State road 32 east Westfield, IN 46074 (317) 867-5488 HEndRICkS CounTY Avon 7648 east u.S. highway 36 Avon, in 46123 (317) 272-0467 Brownsburg 975 east Main Street Brownsburg, in 46112 (317) 852-3134 Plainfield 1121 east Main Street Plainfield, IN 46168 (317) 837-3640 HEnRY CounTY middletown 790 west Mill Street Middletown, in 47356 (765) 354-2291 mooreland 110 South Broad Street Mooreland, in 47360 (765) 766-5375 Sulphur Springs 105 east Main Street Sulphur Springs, in 47388 (765) 533-4171 HoWARd CounTY kokomo 1306 east Gano Street kokomo, in 46901 (765) 236-0730 JAPSER CounTY demotte 437 north halleck Street demotte, in 46310 (219) 987-5812 Remington 101 east division Street remington, in 47977 (219) 261-2161 Rensselaer 200 west washington Street rensselaer, in 47978 (219) 866-7121 16 First Merchants Corporation Rensselaer ATm St. Joseph College halleck Center 910 west Schaefer Circle rensselaer, in 47978 JAY CounTY Portland main 112 west Main Street Portland, in 47371 (260) 726-7158 Portland Supercenter 218 west lincoln Street Portland, in 47371 (260) 726-7158 JoHnSon CounTY Franklin 2259 north Morton Street Franklin, in 46131 (317) 346-7474 Emerson 1250 north emerson Avenue Greenwood, in 46143 (317) 881-1414 Greenwood mall 1275 u.S. highway 31 north Greenwood, in 46142 (317) 884-1045 Greenwood – State Road 135 996 South State road 135 Greenwood, in 46143 (317) 882-4790 Worthsville Road 18 Providence drive Greenwood, in 46143 (317) 883-3559 Trafalgar 110 north State road 135 Trafalgar, in 46181 (317) 878-4111 Treybourne 648 Treybourne drive Greenwood, in 46142 (317) 883-8811 mAdISon CounTY Anderson main 33 west 10th Street Anderson, in 46016 (765) 622-9773 university 1933 university Blvd. Anderson, in 46012 (765) 640-4973 53rd Street 1526 east 53rd Street Anderson, in 46013 (765) 648-4950 nichol 2825 nichol Avenue Anderson, in 46011 (765)640-4981 Anderson ATm Anderson university 1100 east 5th Street Anderson, in 46012 Hartman 416 east hartman road Anderson, in 46012 (765) 608-3336 Heritage 3055 u.S. highway 36 west Pendleton, in 46064 (765) 778-9793 Ingalls ATm 227 north Swain Street ingalls, in 46048 Lapel 1011 north Main Street lapel, in 46051 (765) 534-3181 Pendleton 100 east State Street Pendleton, in 46064 (765) 778-2132 First merchants Insurance Group 915 Jackson Street Anderson, in 46016 (765)644-7818 First merchants Insurance Group 117 north Pendleton Avenue Pendleton, in 46064 (765) 778-2525 mIAmI CounTY maconaquah 990 west Main Street Peru, in 46970 (765) 472-4363 miami 855 north Broadway Peru, in 46970 (765) 472-0253 montgomery office Crawfordsville 134 South washington Street Crawfordsville, in 47933 (765) 362-0200 moRGAn CounTY mooresville 1010 north old State road 67 Mooresville, in 46158 (317) 834-4100 morgantown 180 west washington Street Morgantown, in 46160 (812) 597-4425 RAndoLPH CounTY union City 450 west Chestnut Street union City, in 47390 (765) 964-3702 Winchester 122 west washington Street winchester, in 47394 (765) 584-2501 First merchants Insurance Group 207 north Columbia union City, in 47390 (765) 964-3116 First merchants Insurance Group 107 South Main Street winchester, in 47394 (765) 584-1121 TIPPECAnoE CounTY 26 East 3901 State road 26 east lafayette, in 47905 (765) 423-7167 Attica ATm Supertest 301 South Brady Street Attica, in 47918 Elston 2862 u.S. highway 231 South lafayette, in 47909 (765) 423-7166 Lafayette Station 2504 Teal road lafayette, in 47905 (765) 423-7164 Lafayette main 250 Main Street lafayette, in 47901 (765) 423-7100 Lafayette – 350 South ATm Supertest 1803 east 350 South lafayette, in 47909 Lafayette ATm Supertest 1309 Sagamore Parkway South lafayette, in 47905 market Square 2200 elmwood Avenue lafayette, in 47904 (765) 423-7163 Purdue ATm Purdue university Memorial union 101 north Grant Street west lafayette, in 47906 Tippecanoe Court 2513 Maple Point drive lafayette, in 47905 (765) 423-3821 valley Lakes 1803 east 350 South lafayette, in 47909 (765) 423-3841 West Lafayette 2329 north Salisbury Street west lafayette, in 47906 (765) 423-7162 West Lafayette ATm JB Battlefield 5851 State road 43 north west lafayette, in 47906 unIon CounTY Liberty 107 west union Street liberty, in 47353 (765) 458-5131 WABASH CounTY Chippewa 1250 north Cass Street wabash, in 46992 (260) 563-4116 meshingomesia 901 State road 114 west north Manchester, in 46962 (260) 982-7504 Wabash downtown 189 west Market Street wabash, in 46992 (260) 563-4116 WAYnE CounTY Richmond – Chester Blvd 2206 Chester Blvd. richmond, in 47374 (765) 935-4505 Richmond – Glen miller 1 Glen Miller Parkway richmond, in 47374 (765) 962-8150 White County Brookston 103 north Prairie Street Brookston, in 47923 (765) 563-6400 monticello main 116 east washington Street Monticello, in 47960 (574) 583-4666 monticello Walmart 1088 west Broadway Street Monticello, in 47960 (574) 583-3078 Reynolds 105 east 2nd Street reynolds, in 47980 (219) 984-5471 oHIo BuTLER CounTY oxford 4 north College Avenue oxford, oh 45056 (513) 524-8301 FRAnkLIn CounTY Columbus main 3650 olentangy river road Suite 100 Columbus, oh 43214 (614) 583-2200 HAmILTon CounTY Cincinnati 8170 Corporate Park drive Suite 240 Cincinnati, oh 45242 (513) 794-7450 1 1 / 7 / 2 : f o o r P n g i s e D 2010 Annual report 2010 Annual report 17 CoRP oRATE InFoRmATIon Corporate Headquarters 200 east Jackson Street P. o. Box 792 Muncie, in 47305-2814 (765) 747-1500 Ticker Symbol nASdAq: FrMe Transfer Agent and Registrar American Stock Transfer & Trust Co. 6201 15th Ave Brooklyn, nY 11219 (800) 937-5449 Form 10-k and Proxy Statement A copy of the company’s Form 10-k and Proxy Statement will be sent to shareholders upon written request to Mark k. hardwick, executive vice President and Chief Financial Officer Website www.firstmerchants.com Investor Relations Contact david l. ortega (765) 378-8937 or (800) 262-4261, ext. 28937 dortega@firstmerchants.com Independent Registered Public Accounting Firm Bkd, llP indianapolis, in Annual meeting Tuesday, May 3, 2011 at the horizon Convention Center, 401 South high Street, Muncie, in 47305 at 3:30 p.m., local time. Summary Annual Report This report is in a summary format. it is intended to present 2010 results in a simple, readable style. The more detailed oper ational and financial material is part of the Annual report on Form 10-k. BoARd oF dIRECT oRS And ExECuTIvE oFFICERS BoARd Charles E. Schalliol Chairman Baker and daniels llP of Counsel michael C. Rechin First Merchants Corporation President and Chief Executive Officer Thomas B. Clark Jarden Corporation Chairman of the Board, President and Chief Executive Officer (retired) Jerry R. Engle First Merchants Bank, n.A. Senior vice President and Community leader Roderick English The James Monroe Group, llC President and Chief Executive Officer dr. Jo Ann m. Gora Ball State university President William L. Hoy Columbus Sign Company Chief Executive Officer and Co-Owner Barry J. Hudson First national Bank of Portland Chairman of the Board (retired) Patrick A. Sherman Sherman & Armbruster, llP Partner and CPA Terry L. Walker Muncie Power Products, inc. Chairman of the Board and Chief Executive Officer Jean L. Wojtowicz Cambridge Capital Management Corporation President and Chief Executive Officer mAnAGEmEnT michael C. Rechin President and Chief Executive Officer mark k. Hardwick executive vice President and Chief Financial Officer michael J. Stewart executive vice President and Chief Banking Officer Jami L. Bradshaw Senior vice President and Chief Accounting Officer Robert R. Connors Senior vice President, operations and Technology kimberly J. Ellington Senior vice President and director of human resources Jeffrey B. Lorentson Senior vice President and Chief Risk Officer John J. martin Senior vice President and Chief Credit Officer ouR vISIon A community bank focused on building deep, lifelong client relationships and providing maximum shareholder value. We provide an experience where customers can bank with their neighbors, realizing that our business begins and ends with people. m o c . c n i s t r o p e r l a u n n a . w w w y b n o i t c u d o r P d n a n g i s e D 18 First Merchants Corporation 200 East Jackson Street P.o. Box 792 muncie, In 47305 (765) 747-1500 www.firstmerchants.com 

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