FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2004
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 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 office) (Zip code)
(765) 747-1500
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by checkmark whether the registrant is an accelerated filer (as defined
in Rule 12b-2 of the Exchange Act). Yes [x] No [ ]
As of July 31, 2004, there were 18,547,613 outstanding common shares, without
par value, of the registrant.
FIRST MERCHANTS CORPORATION
FORM 10-Q
INDEX
Page No.
PART I. Financial Information:
Item 1. Financial Statements:
Consolidated Condensed Balance Sheets........................3
Consolidated Condensed Statements of Income..................4
Consolidated Condensed Statements of
Comprehensive Income.........................................5
Consolidated Condensed Statements of
Stockholders' Equity.........................................6
Consolidated Condensed Statements of Cash Flows..............7
Notes to Consolidated Condensed Financial Statements.........8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.........................14
Item 3. Quantitative and Qualitative Disclosures About
Market Risk.................................................24
Item 4. Controls and Procedures.....................................24
PART II. Other Information:
Item 1. Legal Proceedings...........................................25
Item 2. Changes in Securities, Use of Proceeds and
Issuer Purchases of Equity Securities.......................25
Item 3. Defaults Upon Senior Securities.............................25
Item 4. Submission of Matters to a Vote of Security Holders.........25
Item 5. Other Information...........................................25
Item 6. Exhibits and Reports of Form 8-K............................26
Signatures...................................................................28
Exhibit Index................................................................29
Page 2
FIRST MERCHANTS CORPORATION
FORM 10-Q
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
June 30, December 31,
2004 2003
------------ ------------
(Unaudited)
ASSETS:
Cash and due from banks ....................................... $ 72,432 $ 77,112
Federal funds sold ............................................ 0 32,415
----------- -----------
Cash and cash equivalents ................................... 72,432 109,527
Interest-bearing deposits...................................... 20,424 8,141
Investment securities available for sale ...................... 405,237 348,860
Investment securities held to maturity ........................ 5,903 7,937
Mortgage loans held for sale................................... 4,001 3,043
Loans, net of allowance for loan losses of $25,510 and $30,639. 2,339,870 2,328,010
Premises and equipment ........................................ 38,437 39,639
Federal Reserve and Federal Home Loan Bank stock............... 22,494 15,502
Interest receivable ........................................... 14,943 16,840
Goodwill ...................................................... 118,715 118,679
Core deposit intangibles ...................................... 22,299 24,044
Cash surrender value of life insurance......................... 41,288 37,927
Other assets .................................................. 22,247 18,663
----------- -----------
Total assets .............................................. $ 3,128,290 $ 3,076,812
=========== ===========
LIABILITIES:
Deposits:
Noninterest-bearing ......................................... $ 334,018 $ 338,201
Interest-bearing ............................................ 2,038,092 2,023,900
----------- -----------
Total deposits ............................................ 2,372,110 2,362,101
Borrowings .................................................... 422,885 383,170
Interest payable .............................................. 4,216 4,680
Other liabilities.............................................. 24,811 22,896
----------- -----------
Total liabilities ......................................... 2,824,022 2,772,847
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY:
Perferred stock, no-par value:
Authorized and unissued - 500,000 shares
Common Stock, $.125 stated value:
Authorized --- 50,000,000 shares
Issued and outstanding - 18,483,936 and 18,408,177 shares.... 2,310 2,314
Additional paid-in capital .................................... 149,194 150,310
Retained earnings ............................................. 154,876 149,096
Accumulated other comprehensive income (loss).................. (2,112) 2,245
----------- -----------
Total stockholders' equity ................................ 304,268 303,965
----------- -----------
Total liabilities and stockholders' equity ................ $ 3,128,290 $ 3,076,812
=========== ===========
See notes to consolidated condensed financial statements.
Page 3
FIRST MERCHANTS CORPORATION
FORM 10-Q
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
Interest Income:
Loans receivable
Taxable ................................................... $34,021 $35,759 $ 68,248 $ 70,932
Tax exempt ................................................ 137 162 300 327
Investment securities
Taxable ................................................... 2,052 1,600 4,001 3,279
Tax exempt ................................................ 1,420 1,626 2,850 3,257
Federal funds sold .......................................... 37 177 55 290
Deposits with financial institutions ........................ 125 19 234 41
Federal Reserve and Federal Home Loan Bank stock ............ 307 211 635 409
------- ------- -------- --------
Total interest income ..................................... 38,099 39,554 76,323 78,535
------- ------- -------- --------
Interest expense:
Deposits .................................................... 7,879 9,048 16,069 17,932
Borrowings .................................................. 4,373 4,551 8,775 8,638
------- ------- ------- -------
Total interest expense .................................... 12,252 13,599 24,844 26,570
------- ------- ------- -------
Net Interest Income ........................................... 25,847 25,955 51,479 51,965
Provision for loan losses ..................................... 1,720 2,123 3,092 6,724
------- ------- ------- -------
Net Interest Income After Provision for Loan Losses ........... 24,127 23,832 48,387 45,241
------- ------- ------- -------
Other Income:
Net realized gains on sales of available-for-sale securities. 1,352 3,351 2,153 4,286
Other income ................................................ 7,904 7,802 15,319 15,153
------- ------- ------- -------
Total other income ............................................ 9,256 11,153 17,472 19,439
Total other expenses .......................................... 22,622 22,935 45,186 44,376
------- ------- ------- -------
Income before income tax ...................................... 10,761 12,050 20,673 20,304
Income tax expense ............................................ 3,406 3,305 6,383 5,901
------- ------- ------- -------
Net Income .................................................... $ 7,355 $ 8,745 $14,290 $14,403
======= ======= ======= =======
Per share:(1)
Basic ..................................................... $ .40 $ .48 $ .77 $ .80
Diluted ................................................... .40 .48 .77 .80
Dividends ................................................. .23 .22 .46 .44
(1) Prior period per share amounts have been restated for the 5% stock dividend
paid in September 2003.
See notes to consolidated condensed financial statements.
Page 4
FIRST MERCHANTS CORPORATION
FORM 10-Q
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
---------------------- ---------------------
2004 2003 2004 2003
--------- --------- --------- --------
Net Income...................................................................... $ 7,355 $ 8,745 $14,290 $14,403
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on securities available for sale:
Unrealized holding gains (losses) arising during the period, net of
income tax (expense) benefit of $(4,183), $1,279, $(2,745) and $1,162..... (6,274) 1,918 (4,117) 1,743
Less: Reclassification adjustment for gains included
in net income, net of income tax expense of $145, $27, $160 and $175...... 218 40 240 263
--------- --------- --------- ---------
(6,492) 1,878 (4,357) 1,480
--------- --------- --------- ---------
Comprehensive income ........................................................... $ 863 $ 10,623 $ 9,933 $15,883
========= ========= ========= =========
See notes to consolidated condensed financial statements
Page 5
FIRST MERCHANTS CORPORATION
FORM 10-Q
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands)
(Unaudited)
2004 2003
--------- ---------
Balances, January 1 ............................................ $ 303,965 $ 261,129
Net income ..................................................... 14,290 14,403
Cash dividends ................................................. (8,510) (8,058)
Other comprehensive income (loss), net of tax................... (4,357) 1,480
Stock issued under dividend reinvestment and stock purchase plan 674 570
Stock options exercised ........................................ 636 277
Stock Redeemed ................................................. (2,430) (125)
Issuance of stock in acquisitions............................... 31,218
Cash paid in lieu of fractional shares.......................... 116
--------- ---------
Balances, June 30 .............................................. $ 304,268 $ 301,010
========= =========
See notes to consolidated condensed financial statements
Page 6
FIRST MERCHANTS CORPORATION
FORM 10-Q
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Six Months Ended
June 30,
----------------------------------
2004 2003
---------------- --------------
Cash Flows From Operating Activities:
Net income........................................................................ $ 14,290 $ 14,403
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan losses....................................................... 3,092 6,724
Depreciation and amortization................................................... 2,549 2,254
Mortgage loans originated for sale.............................................. (47,746) (139,855)
Proceeds from sales of mortgage loans........................................... 46,788 146,249
Change in interest receivable................................................... 1,897 1,616
Change in interest payable...................................................... (464) (881)
Other adjustments............................................................... 1,302 (3,376)
--------------- ---------------
Net cash provided by operating activities..................................... $ 21,708 $ 27,134
--------------- ---------------
Cash Flows From Investing Activities:
Net change in interest-bearing deposits........................................... $ (12,283) $ (5,209)
Purchases of
Securities available for sale................................................... (126,522) (172,549)
Proceeds from maturities of
Securities available for sale................................................... 44,001 106,228
Proceeds from sales of
Securities available for sale................................................... 23,180 37,493
Purchase of Federal Reserve and
Federal Home Loan Bank Stock.................................................... (6,992)
Net change in loans............................................................... (14,952) (19,999)
Other adjustments................................................................. (3,830) (7,793)
Net cash paid in acquisition...................................................... (1,680)
--------------- ---------------
Net cash provided by investing activities..................................... $ (97,398) $ (63,509)
--------------- ---------------
Cash Flows From Financing Activities:
Net change in
Demand and savings deposits..................................................... $ (26,586) $ (2,210)
Certificates of deposit and other time deposits................................. 36,594 7,313
Borrowings...................................................................... 38,216 22,732
Cash dividends.................................................................... (8,510) (8,183)
Stock issued under dividend reinvestment and stock purchase plan.................. 674 570
Stock options exercised........................................................... 637 275
Stock redeemed.................................................................... (2,430)
Cash paid in lieu of fractional shares............................................ 116
--------------- ---------------
Net cash used by financing activities......................................... 38,595 20,613
--------------- ---------------
Net Change in Cash and Cash Equivalents............................................. (37,095) (15,762)
Cash and Cash Equivalents, January 1................................................ 109,527 119,038
--------------- ---------------
Cash and Cash Equivalents, June 30.................................................. $ 72,432 $ 103,276
=============== ===============
See notes to consolidated condensed financial statements.
Page 7
FIRST MERCHANTS CORPORATION
FORM 10-Q
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Table dollars in thousands)
(Unaudited)
NOTE 1. General
The significant accounting policies followed by First Merchants Corporation
("Corporation") and its wholly owned subsidiaries for interim financial
reporting are consistent with the accounting policies followed for annual
financial reporting. All adjustments which are of a normal recurring nature and
are in the opinion of management necessary for a fair statement of the results
for the periods reported have been included in the accompanying consolidated
condensed financial statements.
The consolidated condensed balance sheet of the Corporation as of December 31,
2003 has been derived from the audited consolidated balance sheet of the
Corporation as of that date. Certain information and note disclosures normally
included in the Corporation's annual financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been condensed or omitted. These consolidated condensed financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Corporation's Form 10-K annual
report filed with the Securities and Exchange Commission.
The results of operations for the three and six month periods ended June 30,
2004 are not necessarily indicative of the results to be expected for the year.
Stock options are granted for a fixed number of shares to employees. The
Corporation's stock option plans are accounted for in accordance with Accounting
Principles Board Opinion ("APB") No. 25, Accounting for Stock Issued to
Employees, and related interpretations. APB No. 25 requires compensation expense
for stock options to be recognized only if the market price of the underlying
stock exceeds the exercise price on the date of the grant. For all grants, no
stock-based employee compensation cost is reflected in net income, as options
granted under those plans had an exercise price equal to the market value of the
underlying common stock on the grant date.
The following table illustrates the effect on net income and earnings per share
if the Corporation has applied the fair value provisions of FASB Statement No.
123, Accounting for Stock-Based Compensation, to stock-based employee
compensation.
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
------------------------- ------------------------
Net income, as reported ..................................... $ 7,355 $ 8,745 $ 14,290 $ 14,403
Add: Total stock-based employee compensation
cost included in reported net income, net
of income taxes........................................... 4 10
Less: Total stock-based employee compensation
cost determined under the fair value based
method, net of income taxes .............................. (229) (242) (459) (492)
---------- ---------- ---------- ----------
Pro forma net income ........................................ $ 7,126 $ 8,507 $ 13,831 $ 13,921
========== ========== ========== ==========
Earnings per share:
Basic - as reported ...................................... $ .40 $ .48 $ .77 $ .80
Basic - pro forma ........................................ .38 .46 .75 .77
Diluted - as reported .................................... .40 .48 .77 .80
Diluted - pro forma ...................................... .38 .46 .74 .77
Page 8
FIRST MERCHANTS CORPORATION
FORM 10-Q
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Table dollars in thousands)
(Unaudited)
NOTE 1. General (continued)
The Corporation makes its Annual Report on Form 10-K, Quarterly Reports on Form
10-Q, Current Reports on Form 8-K and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended, available on its website at www.firstmerchants.com without
charge, as soon as reasonably practicable after such reports are electronically
filed with, or furnished to, the Securities and Exchange Commission.
Additionally, upon request the Corporation will also provide without charge, a
copy of its Form 10-Q to any shareholder by mail. Requests should be sent to Mr.
Brian Edwards, Shareholder Relations Officer, First Merchants Corporation, P.O.
Box 792, Muncie, IN 47308-0792.
NOTE 2. Investment Securities
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Available for sale at June 30, 2004
U.S. Treasury .................... $ 1,498 $ $ (1) $ 1,497
Federal agencies.................. 37,265 42 (323) 36,984
State and municipal .............. 156,392 4,213 (153) 160,452
Mortgage-backed securities ....... 191,488 430 (4,574) 187,344
Other asset-backed securities..... 519 519
Corporate obligations............. 500 4 504
Marketable equity securities...... 17,931 6 17,937
-------- -------- -------- --------
Total available for sale ..... 405,593 4,695 (5,051) 405,237
-------- -------- -------- --------
Held to maturity at June 30, 2004
State and municipal............... 5,843 199 6,042
Mortgage-backed securities........ 60 60
-------- -------- -------- --------
Total held to maturity ....... 5,903 199 6,102
-------- -------- -------- --------
Total investment securities .. $411,496 $ 4,894 $ (5,051) $411,339
======== ======== ======== ========
Page 9
FIRST MERCHANTS CORPORATION
FORM 10-Q
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Table dollars in thousands)
(Unaudited)
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Available for sale at December 31, 2003
U.S. Treasury ....................... $ 1,498 $ 1,498
Federal agencies .................... 38,290 $ 523 $ (52) 38,761
State and municipal ................. 118,794 6,932 (86) 125,640
Mortgage-backed securities .......... 174,208 813 (1,817) 173,204
Corporate obligations ............... 500 16 516
Marketable equity securities ........ 9,237 4 9,241
-------- -------- -------- --------
Total available for sale ......... 342,527 8,288 (1,955) 348,860
-------- -------- -------- --------
Held to maturity at December 31, 2003
State and municipal ................. 7,860 389 8,249
Mortgage-backed securities .......... 77 77
-------- -------- -------- --------
Total held to maturity ........... 7,937 389 8,326
-------- -------- -------- --------
Total investment securities ...... $350,464 $ 8,677 $ (1,955) $357,186
======== ======== ======== ========
Page 10
FIRST MERCHANTS CORPORATION
FORM 10-Q
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Table dollars in thousands)
(Unaudited)
NOTE 3. Loans and Allowance
June 30, December 31,
2004 2003
---- ----
Loans:
Commercial and industrial loans .............................................. $ 458,354 $ 443,140
Agricultural production financing and other loans to farmers ................. 95,258 95,048
Real estate loans:
Construction ............................................................... 149,069 149,865
Commercial and farmland .................................................... 576,309 564,578
Residential ................................................................ 849,389 866,477
Individuals' loans for household and other personal expenditures ............. 206,761 196,093
Tax-exempt loans ............................................................. 7,258 16,363
Other loans .................................................................. 22,982 21,939
----------- -----------
2,365,380 2,353,503
Allowance for loan losses..................................................... (25,510) (25,493)
----------- -----------
Total Loans............................................................... $ 2,339,870 $ 2,328,010
=========== ===========
Six Months Ended
June 30,
2004 2003
----------- -----------
Allowance for loan losses:
Balances, January 1 .......................................................... $ 25,493 $ 22,417
Allowance acquired in acquisition............................................. 3,727
Provision for losses ......................................................... 3,092 6,724
Recoveries on loans .......................................................... 632 1,013
Loans charged off ............................................................ (3,707) (3,242)
----------- -----------
Balances, June 30 ............................................................ $ 25,510 $ 30,639
=========== ===========
Information on nonaccruing, contractually
past due 90 days or more other than
nonaccruing and restructured loans is June 30, December 31,
summarized below: 2004 2003
================================================================================
Non-accrual loans................................ $ 17,702 $ 19,453
Loans contractually past due 90 days
or more other than nonaccruing................. 2,488 6,530
Restructured loans............................... 926 641
-------- --------
Total........................................ $ 21,116 $ 26,624
======== ========
Page 11
FIRST MERCHANTS CORPORATION
FORM 10-Q
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Table dollars in thousands)
(Unaudited)
NOTE 4. Net Income Per Share
Three Months Ended June 30,
2004 2003
------------------------------------------- -------------------------------------------
Weighted- Weighted-
Average Per Share Average Per Share
Income Shares Amount Income Shares Amount
------ ------ ------ ------ ------ ------
Basic net income per share:
Net income available to
common stockholders................. $ 7,355 18,511,190 $ .40 $ 8,745 18,392,925 $ .48
========== ==========
Effect of dilutive stock options........ 122,111 126,230
---------- ------------ ---------- ------------
Diluted net income per share:
Net income available to
common stockholders
and assumed conversions............. $ 7,355 18,633,301 $ .40 $ 8,745 18,519,155 $ .48
========== ============ ========== ========== ============ ==========
Options to purchase 234,282 and 225,628 shares for the three months ended June
30, 2004 and 2003 were not included in the earnings per share calculation
because the exercise price exceeded the average market price.
Six Months Ended June 30,
2004 2003
------------------------------------------- --------------------------------------------
Weighted- Weighted-
Average Per Share Average Per Share
Income Shares Amount Income Shares Amount
------ ------ ------ ------ ------ ------
Basic net income per share:
Net income available to
common stockholders................. $ 14,290 18,514,716 $ .77 $ 14,403 17,981,451 $ .80
========== ==========
Effect of dilutive stock options........ 130,237 118,883
---------- ------------ ---------- ------------
Diluted net income per share:
Net income available to
common stockholders
and assumed conversions............. $ 14,290 18,644,953 $ .77 $ 14,403 18,100,334 $ .80
========== ============ ========== ========== ============ ==========
Options to purchase 234,283 and 226,469 shares for the six months ended June 30,
2004 and 2003 were not included in the earnings per share calculation because
the exercise price exceeded the average market price.
Page 12
FIRST MERCHANTS CORPORATION
FORM 10-Q
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Table dollars in thousands)
(Unaudited)
Note 5. Defined Benefit Pension Costs
The Corporation has defined benefit pension plans covering substantially all
employees. The plans provide benefits that are based on the employees'
compensation and years of service. The Corporation uses an actuarial calculation
to determine pension plan costs.
The following represents the pension cost for the three and six months ended
June 30.
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
------------------------- -------------------------
Pension Cost
- ------------
Service cost............................................ $ 410 $ 392 $ 960 $ 782
Interest cost .......................................... 697 654 1,394 1,308
Expected return on plan assets ......................... (742) (630) (1,402) (1,259)
Amortization of the transition asset.................... (38) (38) (75) (75)
Amortization of prior service cost...................... 34 34 69 69
Amortization of the net loss............................ 88 65 176 129
---------- ---------- ---------- ----------
Total Pension Cost................................ $ 449 $ 477 $ 1,122 $ 954
========== ========== ========== ==========
Page 13
FIRST MERCHANTS CORPORATION
FORM 10-Q
Item 2. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
- --------------
FORWARD-LOOKING STATEMENTS
The Corporation from time to time includes forward-looking statements in
its oral and written communication. The Corporation may include forward-looking
statements in filings with the Securities and Exchange Commission, such as this
Form 10-Q, in other written materials and in oral statements made by senior
management to analysts, investors, representatives of the media and others. The
Corporation intends these forward-looking statements to be covered by the safe
harbor provisions for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995, and the Corporation is including this
statement for purposes of these safe harbor provisions. Forward-looking
statements can often 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:
* statements of the Corporation's goals, intentions and expectations;
* statements regarding the Corporation's business plan and growth
strategies;
* statements regarding the asset quality of the Corporation's loan and
investment portfolios; and
* estimates of the Corporation's risks and future costs and benefits.
These forward-looking statements are subject to significant risks,
assumptions and uncertainties, including, among other things, the following
important factors which could affect the actual outcome of future events:
* fluctuations in market rates of interest and loan and deposit pricing,
which could negatively affect the Corporation's net interest margin,
asset valuations and expense expectations;
* adverse changes in the economy, which might affect the Corporation's
business prospects and could cause credit-related losses and expenses;
* adverse developments in the Corporation's loan and investment
portfolios;
* competitive factors in the banking industry, such as the trend towards
consolidation in the Corporation's market;
* changes in the banking legislation or the regulatory requirements of
federal and state agencies applicable to bank holding companies and
banks like the Corporation's affiliate banks;
* acquisitions of other businesses by the Corporation and integration of
such acquired businesses;
* changes in market, economic, operational, liquidity, credit and interest
rate risks associated with the Corporation's business; and
* the continued availability of earnings and excess capital sufficient
for the lawful and prudent declaration and payment of cash dividends.
Because of these and other uncertainties, the Corporation's actual future
results may be materially different from the results indicated by these forward-
looking statements. In addition, the Corporation's past results of operations do
not necessarily indicate its future results.
Page 14
FIRST MERCHANTS CORPORATION
FORM 10-Q
Item 2. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations continued
- ------------------------
CRITICAL ACCOUNTING POLICIES
Generally accepted accounting principles are complex and require
management to apply significant judgments to various accounting, reporting and
disclosure matters. Management of the Corporation must use assumptions and
estimates to apply these principles where actual measurement is not possible or
practical. For a complete discussion of the Corporation's significant accounting
policies, see "Notes to the Consolidated Financial Statements" in the
Corporation's 2003 Annual Report. Certain policies are considered critical
because they are highly dependent upon subjective or complex judgments,
assumptions and estimates. Changes in such estimates may have a significant
impact on the financial statements. Management has reviewed the application of
these policies with the Audit Committee of the Corporation's Board of Directors.
For a discussion of applying critical accounting policies, see "Critical
Accounting Policies" beginning on page 4 in the Corporation's 2003 Annual
Report.
RESULTS OF OPERATIONS
Net income for the three months ended June 30, 2004, equaled
$7,355,000, compared to $8,745,000 in the same period of 2003. Diluted earnings
per share were $.40, an decrease of 16.7 percent from the $.48 reported for the
second quarter 2003.
Net income for the six months ended June 30, 2004, equaled $14,290,000,
compared to $14,403,000 during the same period in 2003. Diluted earnings per
share were $.77, a 3.9 percent decrease from the $.80 reported in 2003.
Annualized returns on average assets and average stockholders' equity
for the six months ended June 30, 2004 were .93 percent and 9.30 percent,
respectively, compared with 1.00 percent and 10.10 percent for the same period
of 2003.
The decreases in diluted earning per share, return on equity and return
on assets are primarily due to a decrease in net interest margin of 30 basis
points or $4,138,000, decreased gains from the sale of mortgage loans of
$2,133,000 mitigated by a reduction in the provision for loan losses of
$3,632,000. For further analysis, see the respective sections of Management's
Discussion and Analysis of Financial Conditions and Results of Operations.
Page 15
FIRST MERCHANTS CORPORATION
FORM 10-Q
CAPITAL
The Corporation's regulatory capital continues to exceed regulatory
"well capitalized" standards. Tier I regulatory capital consists primarily of
total stockholders' equity and trust-preferred securities, less non-qualifying
intangible assets and unrealized net securities gains. The Corporation's Tier I
capital to average assets ratio was 7.5 percent at June 30, 2004 and 7.4 percent
at year end 2003. In addition, at June 30, 2004, the Corporation had a Tier I
risk-based capital ratio of 9.5 percent and total risk-based capital ratio of
11.7 percent. Regulatory capital guidelines require a Tier I risk-based capital
ratio of 4.0 percent and a total risk-based capital ratio of 8.0
percent.
The Corporation's GAAP capital ratio, defined as total stockholders'
equity to total assets, equaled 9.7 percent as of June 30, 2004, down from
9.9 percent in 2003. When the Corporation acquires other companies, GAAP
capital increases by the entire amount of the purchase price.
The Corporation's tangible capital ratio, defined as total
stockholders' equity less intangibles net of tax to total assets less
intangibles net of tax, equaled 5.7 percent as of June 30, 2004, down from 6.1
percent in 2003.
Management believes that all of the above capital ratios are meaningful
measurements for evaluating the safety and soundness of the Corporation.
Additionally, management believes the following table is also meaningful when
considering performance measures of the Corporation. The table details and
reconciles tangible earnings per share, return on tangible capital and tangible
assets to traditional GAAP measures.
June 30, December 31,
(Dollars in Thousands) 2004 2003
Average Goodwill .......................... $ 112,281 $ 107,232
Average Core Deposit Intangible (CDI) ..... 22,993 24,393
Average Deferred Tax on CDI ............... (8,406) (8,951)
----------- -----------
Intangible Adjustment ................... $ 126,868 $ 122,674
=========== ===========
Average Stockholders' Equity (GAAP Capital) $ 307,171 $ 293,603
Intangible Adjustment ..................... (126,868) (122,674)
----------- -----------
Average Tangible Capital ................ $ 180,303 $ 170,929
=========== ===========
Average Assets ............................ $ 3,059,499 $ 2,960,195
Intangible Adjustment ..................... (126,868) (122,674)
----------- -----------
Average Tangible Assets ................. $ 2,932,631 $ 2,837,521
=========== ===========
Net Income ................................ $ 14,290 $ 27,571
CDI Amortization, net of tax .............. 1,104 2,341
----------- -----------
Tangible Net Income ..................... $ 15,394 $ 29,912
=========== ===========
Diluted Earnings per Share ................ $ 0.77 $ 1.50
Diluted Tangible Earnings per Share ....... $ 0.83 $ 1.63
Return on Average GAAP Capital ............ 9.30% 9.39%
Return on Average Tangible Capital ........ 17.08% 17.50%
Return on Average Assets .................. 0.93% 0.93%
Return on Average Tangible Assets ......... 1.05% 1.05%
Page 16
FIRST MERCHANTS CORPORATION
FORM 10-Q
ASSET QUALITY/PROVISION FOR LOAN LOSSES
The allowance for loan losses is maintained through the provision
for loan losses, which is a charge against earnings. The amount provided for
loan losses and the determination of the adequacy of the allowance are based on
a continuous review of the loan portfolio, including an internally administered
loan "watch" list and an independent loan review primarily provided by an
outside accounting firm. The evaluation takes into consideration identified
credit problems, as well as the possibility of losses inherent in the loan
portfolio that are not specifically identified.
At June 30, 2004, non-performing loans totaled $21,116,000, a
decrease during the period of $5,508,000 from December 31, 2003, as noted in the
table on page 11.
At June 30, 2004, impaired loans totaled $44,665,000, a decrease of
$107,000 from December 31, 2003. At June 30, 2004, an allowance for losses was
not deemed necessary for impaired loans totaling $32,817,000, but an allowance
of $5,016,000 was recorded for the remaining balance of impaired loans of
$11,848,000 and is included in the Corporation's allowance for loan losses. The
average balance of impaired loans for the first six months of 2004 was
$41,778,000.
At December 31, 2003, impaired loans totaled $44,772,000. An allowance
for losses was not deemed necessary for impaired loans totaling $32,047,000, but
an allowance of $5,728,000 was recorded for the remaining balance of impaired
loans of $12,725,000 and is included in the Corporation's allowance for loan
losses. The average balance of impaired loans for 2003 was $50,245,000.
At June 30, 2004, the allowance for loan losses was $25,510,000, an
increase of $17,000 from year end 2003. As a percent of loans, the allowance
was 1.08 percent at both June 30, 2004 and December 31, 2003.
The provision for loan losses for the first six months of 2004 was
$3,092,000, a decrease of $3,632,000 from $6,724,000 for the same period in
2003. The Corporation's provision for loan losses reflects reduced specific
reserves, net charge-offs and non-performing loans, resulting in decreased
provision expense. Current declines in the amount of non-performing loans and
average impaired loan balances indicate that loan asset quality has improved
during the first six months of 2004.
Page 17
FIRST MERCHANTS CORPORATION
FORM 10-Q
LIQUIDITY
Liquidity management is the process by which the Corporation ensures that
adequate liquid funds are available for the Corporation and its subsidiaries.
These funds are necessary in order for the Corporation and its subsidiaries to
meet financial commitments on a timely basis. These commitments include
withdrawals by depositors, funding credit obligations to borrowers, paying
dividends to shareholders, paying operating expenses, funding capital
expenditures, and maintaining deposit reserve requirements. Liquidity is
monitored and closely managed by the asset/liability committees at each
subsidiary and by the Corporation's asset/liability committee.
The liquidity of the Corporation is dependent upon the receipt of
dividends from its bank subsidiaries, which are subject to certain regulatory
limitations and access to other funding sources. Liquidity of the Corporation's
bank subsidiaries is derived primarily from core deposit growth, principal
payments received on loans, the sale and maturity of investment securities, net
cash provided by operating activities, and access to other funding sources. The
most stable source of liability-funded liquidity for both the long-term and
short-term is deposit growth and retention in the core deposit base. In
addition, the Corporation utilizes advances from the Federal Home Loan Bank
("FHLB") and a revolving line of credit with LaSalle Bank, N.A. as a funding
source. At June 30, 2004, total borrowings from the FHLB were $226,738,000. The
Corporation's bank subsidiaries have pledged certain mortgage loans and certain
investments to the FHLB. The total available remaining borrowing capacity from
the FHLB at June 30, 2004, was $165,316,000. At June 30, 2004, the Corporation's
revolving line of credit had a balance of $5,094,000 and a remaining borrowing
capacity of $14,906,000. The principal source of asset-funded liquidity is
investment securities classified as available-for-sale, the market values of
which totaled $405,237,000 at June 30, 2004, an increase of $56,377,000 or 16.2%
over December 31, 2003. Securities classified as held-to-maturity that are
maturing within a short period of time can also be a source of liquidity.
Securities classified as held-to-maturity and that are maturing in one year or
less totaled $1,168,000 at June 30, 2004. In addition, other types of assets
such as cash and due from banks, federal funds sold and securities purchased
under agreements to resell, and loans and interest-bearing deposits with other
banks maturing within one year are sources of liquidity.
In the normal course of business, the Corporation is a party to a number
of other off-balance sheet activities that contain credit, market and
operational risk that are not reflected in whole or in part in the Corporation's
consolidated financial statements. Such activities include: traditional
off-balance sheet credit-related financial instruments, commitments under
operating leases and long-term debt.
The Corporation provides customers with off-balance sheet credit support
through loan commitments and standby letters of credit. Summarized
credit-related financial instruments at June 30, 2004 are as follows:
At June 30,
(Dollars in thousands) 2004
================================================================================
Amounts of commitments:
Loan commitments to extend credit ............................... $ 532,654
Standby letters of credit ....................................... 28,641
----------
$ 561,295
==========
Since many of the commitments are expected to expire unused or be only
partially used, the total amount of unused commitments in the preceding table
does not necessarily represent future cash requirements.
In addition to owned banking facilities, the Corporation has entered into a
number of long-term leasing arrangements to support the ongoing activities of
the Corporation. The required payments under such commitments and long-term debt
at June 30, 2004 are as follows:
2004 2005 2006 2007 2008 2009 Total
(Dollars in thousands) remaining and after
=======================================================================================================
Operating leases ......... $ 767 $ 1,443 $ 1,327 $ 1,112 $ 916 $ 3,255 $ 8,820
Long-term debt ........... 120,955 29,727 25,882 20,995 51,901 173,425 422,885
-------- -------- -------- -------- -------- -------- --------
Total .................... $121,722 $ 31,170 $ 27,209 $ 22,107 $ 52,817 $176,680 $431,705
======== ======== ======== ======== ======== ======== ========
Page 18
FIRST MERCHANTS CORPORATION
FORM 10-Q
INTEREST SENSITIVITY AND DISCLOSURES ABOUT MARKET RISK
Asset/Liability Management has been an important factor in the
Corporation's ability to record consistent earnings growth through periods of
interest rate volatility and product deregulation. Management and the Board of
Directors monitor the Corporation's liquidity and interest sensitivity positions
at regular meetings to review how changes in interest rates may affect earnings.
Decisions regarding investment and the pricing of loan and deposit products are
made after analysis of reports designed to measure liquidity, rate sensitivity,
the Corporation's exposure to changes in net interest income given various rate
scenarios and the economic and competitive environments.
It is the objective of the Corporation to monitor and manage risk
exposure to net interest income caused by changes in interest rates. It is the
goal of the Corporation's Asset Liability function to provide optimum and stable
net interest income. To accomplish this, management uses two asset liability
tools. GAP/Interest Rate Sensitivity Reports and Net Interest Income Simulation
Modeling are both constructed, presented, and monitored quarterly.
Management believes that the Corporation's liquidity and interest
sensitivity position at June 30, 2004, remained adequate to meet the
Corporation's primary goal of achieving optimum interest margins while avoiding
undue interest rate risk.
The Corporation places its greatest credence in net interest income
simulation modeling. The GAP/Interest Rate Sensitivity Report is believed by the
Corporation's management to have two major shortfalls. The GAP/Interest Rate
Sensitivity Report fails to precisely gauge how often an interest rate sensitive
product reprices, nor is it able to measure the magnitude of potential future
rate movements.
Net interest income simulation modeling, or earnings-at-risk, measures
the sensitivity of net interest income to various interest rate movements. The
Corporation's asset liability process monitors simulated net interest income
under three separate interest rate scenarios; base, rising and falling.
Estimated net interest income for each scenario is calculated over a 12-month
horizon. The immediate and parallel changes to the base case scenario used in
the model are presented below. The interest rate scenarios are used for
analytical purposes and do not necessarily represent management's view of future
market movements. Rather, these are intended to provide a measure of the degree
of volatility interest rate movements may introduce into the earnings of the
Corporation.
The base scenario is highly dependent on numerous assumptions embedded
in the model, including assumptions related to future interest rates. While the
base sensitivity analysis incorporates management's best estimate of interest
rate and balance sheet dynamics under various market rate movements, the actual
behavior and resulting earnings impact will likely differ from that projected.
For mortgage-related assets, the base simulation model captures the expected
prepayment behavior under changing interest rate environments. Assumptions and
methodologies regarding the interest rate or balance behavior of indeterminate
maturity products, e.g., savings, money market, NOW and demand deposits reflect
management's best estimate of expected future behavior.
Page 19
FIRST MERCHANTS CORPORATION
FORM 10-Q
The comparative rising and falling scenarios for the period ended June 30,
2005 assume further interest rate changes in addition to the base simulation
discussed above. These changes are immediate and parallel changes to the base
case senario. In addition, total rate movements (beginning point minus ending
point) to each of the various driver rates utilized by management in the base
simulation for the period ended March 31, 2005 are as follows:
Driver Rates RISING FALLING
================================================================================
Prime 200 Basis Points (200) Basis Points
Federal Funds 200 (100)
One-Year T-Bill 200 (157)
Two-Year T-Bill 200 (233)
Three-Year T-Bill 200 (290)
Interest Checking 100 (14)
MMIA Savings 100 (24)
First Flex 100 (24)
CD's 200 (200)
FHLB Advances 200 (200)
Results for the base, rising and falling interest rate scenarios are listed
below, based upon the Corporation's rate sensitive assets at March 31, 2004. The
net interest income shown represents cumulative net interest income over a
12-month time horizon. Balance sheet assumptions used for the base scenario are
the same for the rising and falling simulations.
BASE RISING FALLING
================================================================================
Net Interest Income (dollars in thousands) $102,936 $104,685 $ 94,248
Variance from base $ 1,749 $ (8,688)
Percent of change from base 1.70% (8.44)%
The comparative rising and falling scenarios for the period ended December 31,
2004 assume further interest rate changes in addition to the base simulation
discussed above. These changes are immediate and parallel changes to the base
case scenario. In addition, total rate movements (beginning point minus ending
point) to each of the various driver rates utilized by management in the base
simulation for the period ended December 31, 2004 are as follows:
Driver Rates RISING FALLING
================================================================================
Prime 200 Basis Points (200) Basis Points
Federal Funds 200 (100)
One-Year T-Bill 200 (138)
Two-Year T-Bill 200 (194)
Interest Checking 100 (14)
MMIA Savings 100 (24)
First Flex 100 (24)
CD's 200 (59)
FHLB Advances 200 (117)
Results for the base, rising and falling interest rate scenarios are listed
below. The net interest income shown represents cumulative net interest income
over a 12-month time horizon. Balance sheet assumptions used for the base
scenario are the same for the rising and falling simulations.
BASE RISING FALLING
===============================================================================
Net Interest Income (dollars in thousands) $100,873 $102,792 $ 87,217
Variance from base $ 1,919 $(13,655)
Percent of change from base 1.90% (13.54)%
Page 20
FIRST MERCHANTS CORPORATION
FORM 10-Q
EARNING ASSETS
The following table presents the earning asset mix as of June 30,
2004, and December 31, 2003.
Loans increased approximately $11.8 million from December 31, 2003 to
June 30, 2004, while investment securities increased by $56.3 million during the
same period. The Corporation's interest sensitivity and liquidity position has
allowed management to purchase securities resulting in increased net interest
income from securities.
- ----------------------------------------------------------------------------------------------------
EARNING ASSETS
(Dollars in Millions) June 30, December 31,
2004 2003
- ---------------------------------------------------------------------------------------------------
Federal funds sold and interest-bearing deposits $ 20.4 $ 40.6
Investment securities available for sale ....... 405.2 348.9
Investment securities held to maturity ......... 5.9 7.9
Mortgage loans held for sale ................... 4.0 3.0
Loans .......................................... 2,365.4 2,353.6
Federal Reserve and Federal Home Loan Bank stock 22.5 15.5
---------- ----------
Total ..................... $ 2,823.4 $ 2,769.5
========== ==========
- --------------------------------------------------------------------------------
DEPOSITS AND BORROWINGS
The following table presents the level of deposits and borrowed funds
(Federal funds purchased, repurchase agreements, U.S. Treasury demand notes,
Federal Home Loan Bank advances, subordinated debentures and other borrowed
funds)at June 30, 2004, and December 31, 2003.
- --------------------------------------------------------------------------------
(Dollars in Millions) June 30, December 31,
2004 2003
---------- ------------
Deposits ........................................ $ 2,372.1 $ 2,362.1
Securities sold under repurchase agreements...... 63.4 71.1
Federal funds purchased
and U.S. Treasury demand notes................ 38.5
Federal Home Loan Bank advances ................. 226.7 212.8
Subordinated debentures, revolving credit lines
and term loans................................ 94.1 97.8
Other borrowed funds ............................ .2 1.5
The Corporation has continued to leverage its capital position with
Federal Home Loan Bank advances, as well as repurchase agreements which are
pledged against acquired investment securities as collateral for the borrowings.
The interest rate risk is included as part of the Corporation's interest
simulation discussed in Management's Discussion and Analysis under the headings
"LIQUIDITY" and "INTEREST SENSITIVITY AND DISCLOSURES ABOUT MARKET RISK".
Page 21
FIRST MERCHANTS CORPORATION
FORM 10-Q
NET INTEREST INCOME
Net Interest Income is the primary source of the Corporation's
earnings. It is a function of net interest margin and the level of average
earning assets. The table below presents the Corporation's asset yields,
interest expense, and net interest income as a percent of average earning assets
for the six months ended June 30, 2004 and 2003.
Annualized net interest income (FTE) for the six months ended June
30, 2004 decreased by $1.5 million, or 1.4 percent over the same period in 2003.
For the same period interest income and interest expense, as a percent of
average earning assets, decreased 55 basis points and 25 basis points
respectively. This resulted in a 30 basis point decline in net interest income,
as a percent of average earning assets, from the first six months 2003 margin of
4.17 percent. Federal Reserve Bank rate reductions during 2003 significantly
contributed to this margin compression; however, management's ability to
favorably reprice deposit interest costs caused the first quarter of 2004 net
interest margin of 3.87 percent to increase 9 basis points, as compared to the
fourth quarter 2003 net interest margin of 3.78 percent. This increase was
maintained in the second quarter of 2004.
Three Months Ended Six Months Ended
June 30, June 30,
(Dollars in Thousands) 2004 2003 2004 2003
Annualized Net Interest Income........................ $ 103,389 $ 103,819 $ 102,958 $ 103,929
Annualized FTE Adjustment............................. $ 3,352 $ 3,804 $ 3,292 $ 3,836
Annualized Net Interest Income
On a Fully Taxable Equivalent Basis................. $ 106,741 $ 107,623 $ 106,250 $ 107,765
Average Earning Assets................................ $2,758,369 $2,705,844 $2,748,832 $2,585,749
Interest Income (FTE) as a Percent
of Average Earning Assets........................... 5.65% 5.99% 5.68% 6.23%
Interest Expense as a Percent
of Average Earning Assets........................... 1.78% 2.01% 1.81% 2.06%
Net Interest Income (FTE) as a Percent
of Average Earning Assets........................... 3.87% 3.98% 3.87% 4.17%
Average earning assets include the average balance of securities classified as
available for sale, computed based on the average of the historical amortized
cost balances without the effects of the fair value adjustment. In addition,
annualized amounts are computed utilizing a 30/360 day basis.
Page 22
FIRST MERCHANTS CORPORATION
FORM 10-Q
OTHER INCOME
Other income in the second quarter of 2004 was $1,897,000 or 17.0%
lower than the same quarter of 2003. Gains decreased by $1,999,000 from the same
period in 2003 as stabilizing mortgage rates caused reduced volume from
refinancing of mortgage loans.
Other income in the first six months of 2004 was $1,967,000 of 10.0%
lower than the same period of 2003. Gains decreased by $2,133,000 from the same
period in 2003 as stabilizing mortgage rates caused reduced volume from
refinancing of mortgage loans.
OTHER EXPENSES
Total other expenses represent non-interest expenses of the
Corporation. Total other expenses during the second quarter of 2004 decreased
from the second quarter of 2003 by $313,000 or 1.4%.
Total other expenses during the first six months of 2004 exceeded the
same period in 2003 by $810,000 or 1.8%.
Two areas account for the change:
1. Salaries and benefit expense grew $1,404,000, due to normal salary
increases, staff additions and additional salary cost related to the
March 1, 2003 acquisition of Commerce National Bank.
2. In 2003, the Corporation accrued $460,000 in anticipation of a
settlement of a claim. The claim is being settled for $200,000 causing
a reduction in other expenses of $260,000 during the second quarter of
2004.
Page 23
FIRST MERCHANTS CORPORATION
FORM 10-Q
INCOME TAXES
Income tax expense, for the six months ended June 30, 2004,
increased by $482,000 from the same period in 2003. The effective tax rate was
30.9 and 29.1 percent for the 2004 and 2003 periods.
OTHER
The Securities and Exchange Commission maintains a Web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission, including
the Corporation, and that address is (http://www.sec.gov).
Item 3. Quantitative and Qualitative Disclosures About Market Risk
- -------------------------------------------------------------------
The information required under this item is included as part of Management's
Discussion and Analysis of Financial Condition and Results of Operations, under
the headings "LIQUIDITY" and "INTEREST SENSITIVITY AND DISCLOSURES ABOUT MARKET
RISK".
Item 4. Controls and Procedures
- -------------------------------------------------------------------
At the end of the period covered by this report, the Corporation carried out an
evaluation, under the supervision and with the participation of the
Corporation's management, including the Corporation's Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the design and operation of
it's disclosure controls and procedures. Based upon that evaluation, the
Corporation's Chief Executive Officer and Chief Financial Officer concluded that
the Corporation's disclosure controls and procedures are effective. Disclosure
controls and procedures are controls and procedures that are designed to ensure
that information required to be disclosed in Corporation reports filed or
submitted under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms.
There have been no changes in the Corporation's internal controls over financial
reporting identified in connection with the evaluation referenced above that
occurred during the Corporation's last fiscal quarter that have materially
affected, or is reasonably likely to materially affect, the Corporation's
internal control over financial reporting.
Page 24
FIRST MERCHANTS CORPORATION
FORM 10-Q
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
None
Item 2. Changes in Securities, Use of Proceeds and
Issuer Purchases of Equity Securities
- ---------------------------------------------------
a. None
b. None
c. None
d. None
e. Issuer purchases of Equity Securities
MAXIMUM NUMBER OF
TOTAL NUMBER OF SHARES THAT MAY YET
TOTAL NUMBER OF AVERAGE PRICE SHARES PURCHASED AS PART BE PURCHASED UNDER
PERIOD SHARES PURCHASED PAID PER SHARE OF BOARD AUTHORIZATION(1) BOARD AUTHORIZATION(1)
------ ---------------- -------------- ------------------------- ------------------------
April 1-30, 2004 0 0 250,000
May 1-31, 2004 66,625 $23.16 64,000 186,000
June 1-30, 2004 36,136 $24.32 31,000 155,000
(1) On February 10, 2004, the Corporation's Board authorized management to
repurchase up to 250,000 shares of the Corporation's Common Stock. This
authorization expires February 8, 2005.
Item 3. Defaults Upon Senior Securities
- ----------------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
a. The Annual Meeting of Shareholders of the Corporation was held on
April 22, 2004.
b. No response is required.
c. The following matters were voted on by shareholders:
i) Election of Directors - The following directors were elected for a
term of three years.
Vote Count
------------------------------------------------
Vote For Vote Against Vote Abstained
---------------- -------------- --------------
Michael L. Cox 15,205,594 0 465,799
Norman M. Johnson 15,301,859 0 369,535
Thomas D. McAuliffe 15,278,641 0 392,756
Robert M. Smitson 15,288,806 0 382,590
ii) Approval of the First Merchants Corporation 2004 Employee Stock
Purchase Plan: Votes For - 12,204,838, Votes Against - 470,315,
Votes Abstained - 168,254.
iii) Ratification of the appointment of Independent Public Accountants
- BKD, LLP, Indianapolis, Indiana: Votes For - 15,487,156,
Votes Against - 84,904, Votes Abstained - 99,333.
d. Not applicable.
Item 5. Other Information
- --------------------------
a. None
b. None
Page 25
FIRST MERCHANTS CORPORATION
FORM 10-Q
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
a. Exhibits
Exhibit No.: Description of Exhibit: Form 10-Q Page No.:
------------ ------------------------- -------------------
3(ii) Bylaws of First Merchants 30
Corporation, as most
recently amended on
April 22, 2004
10a First Merchants Corporation 45
2005 Employee Stock Purchase
Plan approved on April 22,
2004
31.1 Certification of Chief 50
Executive Officer Pursuant
to Section 302 of the
Sarbanes - Oxley Act of
2002
31.2 Certification of Chief 51
Financial Officer Pursuant
to Section 302 of the
Sarbanes - Oxley Act of
2002
32 Certifications Pursuant to 52
18 U.S.C. Section 1350, as
Adopted Pursuant to Section
906 of the Sarbanes-Oxley
Act of 2002
Page 26
FIRST MERCHANTS CORPORATION
FORM 10-Q
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K continued
- ---------------------------------------------------
b. Reports on Form 8-K
A report on Form 8-K, dated April 22, 2004, was filed on
April 22, 2004 under report items number 9 and 7, concerning the
Press Release announcing first quarter 2004 earnings.
Under report item number 7, the following exhibit was included in
this Form 8-K.
(c) Exhibit
(99) Press Release, dated April 22, 2004, issued by
First Merchants Corporation
A report on Form 8-K, dated April 23, 2004 was filed on April 27,
2004 under report item 5, concerning the Corporation's intention to
merge two of its wholly owned subsidiaries: The Randolph County
Bank, National Association and The Union County National Bank of
Liberty.
Under report item number 5, the following exhibit was included in
this Form 8-K.
(c) Exhibit
(99) Press release dated April 23, 2004
A report on Form 8-K, dated June 22, 2004, was filed on
June 22, 2004 under report item number 5, concerning the
Corporation's declaration of a cash dividend on its shares of
common stock paid on June 18, 2004. The dividend was paid
to shareholders of record on June 4, 2004. The dividend was
distributed along with a letter to shareholders.
Under report item number 7, the following exhibit was included in
the Form 8-K.
(c) Exhibit
(99) Press release dated February 13, 2004.
Page 27
FIRST MERCHANTS CORPORATION
FORM 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
First Merchants Corporation
---------------------------
(Registrant)
Date 08/09/04 by /s/ Michael L. Cox
--------------------------- -------------------------------------
Michael L. Cox
President and Chief Executive Officer
Date 08/09/04 by /s/ Mark K. Hardwick
--------------------------- -------------------------------------
Mark K. Hardwick
Senior Vice President and
Chief Financial Officer
(Principal Financial and Chief
Accounting Officer)
Page 28
FIRST MERCHANTS CORPORATION
FORM 10-Q
INDEX TO EXHIBITS
INDEX TO EXHIBITS
(a)3. Exhibits:
Exhibit No.: Description of Exhibit: Form 10-Q Page No.:
------------ ------------------------- -------------------
3(ii) Bylaws of First Merchants 30
Corporation, as most
recently amended on
April 22, 2004
10a First Merchants Corporation 45
2005 Employee Stock Purchase
Plan approved on April 22,
2004
31.1 Certification of Chief 50
Executive Officer Pursuant
to Section 302 of the
Sarbanes - Oxley Act of
2002
31.2 Certification of Chief 51
Financial Officer Pursuant
to Section 302 of the
Sarbanes - Oxley Act of
2002
32 Certifications Pursuant to 52
18 U.S.C. Section 1350, as
Adopted Pursuant to Section
906 of the Sarbanes-Oxley
Act of 2002
Page 29
Exhibit 3(ii)
BYLAWS OF
FIRST MERCHANTS CORPORATION
Following are the Bylaws, as amended, of First Merchants Corporation
(hereinafter referred to as the "Corporation"), a corporation existing pursuant
to the provisions of the Indiana Business Corporation Law, as amended
(hereinafter referred to as the "Act"):
ARTICLE I
Section 1. Name. The name of the Corporation is First Merchants
Corporation.
Section 2. Principal Office and Resident Agent. The post office
address of the principal office of the Corporation is 200 East Jackson Street,
Muncie, Indiana 47305, and the name of its Resident Agent in charge of such
office is Larry R. Helms.
Section 3. Seal. The seal of the Corporation shall be circular
in form and mounted upon a metal die, suitable for impressing the same upon
paper. About the upper periphery of the seal shall appear the words "First
Merchants Corporation" and about the lower periphery thereof the word "Muncie,
Indiana". In the center of the seal shall appear the word "Seal".
ARTICLE II
The fiscal year of the Corporation shall begin each year on the first
day of January and end on the last day of December of the same year.
ARTICLE III
Capital Stock
Section 1. Number of Shares and Classes of Capital Stock. The
total number of shares of capital stock which the Corporation shall have
authority to issue shall be as stated in the Articles of Incorporation.
Section 2. Consideration for No Par Value Shares. The shares of
stock of the Corporation without par value shall be issued or sold in such
manner and for such amount of consideration as may be fixed from time to time by
the Board of Directors. Upon payment of the consideration fixed by the Board of
Directors, such shares of stock shall be fully paid and nonassessable.
Section 3. Consideration for Treasury Shares. Treasury shares
may be disposed of by the Corporation for such consideration as may be
determined from time to time by the Board of Directors.
Page 30
2.
Section 4. Payment for Shares. The consideration for the
issuance of shares of capital stock of the Corporation may be paid, in whole or
in part, in money, in other property, tangible or intangible, or in labor
actually performed for, or services actually rendered to the Corporation;
provided, however, that the part of the surplus of the Corporation which is
transferred to stated capital upon the issuance of shares as a share dividend
shall be deemed to be the consideration for the issuance of such shares. When
payment of the consideration for which a share was authorized to be issued shall
have been received by the Corporation, or when surplus shall have been
transferred to stated capital upon the issuance of a share dividend, such share
shall be declared and taken to be fully paid and not liable to any further call
or assessment, and the holder thereof shall not be liable for any further
payments thereon. In the absence of actual fraud in the transaction, the
judgment of the Board of Directors as to the value of such property, labor or
services received as consideration, or the value placed by the Board of
Directors upon the corporate assets in the event of a share dividend, shall be
conclusive. Promissory notes, uncertified checks, or future services shall not
be accepted in payment or part payment of the capital stock of the Corporation,
except as permitted by the Act.
Section 5. Certificate for Shares. Each holder of capital stock
of the Corporation shall be entitled to a stock certificate, signed by the
President or a Vice President and the Secretary or any Assistant Secretary of
the Corporation, with the seal of the Corporation thereto affixed, stating the
name of the registered holder, the number of shares represented by such
certificate, the par value of each share of stock or that such shares of stock
are without par value, and that such shares are fully paid and nonassessable. If
such shares are not fully paid, the certificates shall be legibly stamped to
indicate the per cent which has been paid, and as further payments are made, the
certificate shall be stamped accordingly.
If the Corporation is authorized to issue shares of more than one
class, every certificate shall state the kind and class of shares represented
thereby, and the relative rights, interests, preferences and restrictions of
such class, or a summary thereof; provided, that such statement may be omitted
from the certificate if it shall be set forth upon the face or back of the
certificate that such statement, in full, will be furnished by the Corporation
to any shareholder upon written request and without charge.
Section 6. Facsimile Signatures. If a certificate is
countersigned by the written signature of a transfer agent other than the
Corporation or its employee, the signatures of the officers of the Corporation
may be facsimiles. If a certificate is countersigned by the written signature of
a registrar other than the Corporation or its employee, the signatures of the
transfer agent and the officers of the Corporation may be facsimiles. In case
any officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent, or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer,
transfer agent, or registrar at the date of its issue.
Section 7. Transfer of Shares. The shares of capital stock of
the Corporation shall be transferable only on the books of the Corporation upon
surrender of the certificate or certificates representing the same, properly
endorsed by the registered holder or by his duly authorized attorney or
accompanied by proper evidence of succession, assignment or authority to
transfer.
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Section 8. Cancellation. Every certificate surrendered to the
Corporation for exchange or transfer shall be canceled, and no new certificate
or certificates shall be issued in exchange for any existing certificate until
such existing certificate shall have been so canceled, except in cases provided
for in Section 10 of this Article III.
Section 9. Transfer Agent and Registrar. The Board of Directors
may appoint a transfer agent and a registrar for each class of capital stock of
the Corporation and may require all certificates representing such shares to
bear the signature of such transfer agent and registrar. Shareholders shall be
responsible for notifying the Corporation or transfer agent and registrar for
the class of stock held by such shareholder in writing of any changes in their
addresses from time to time, and failure so to do shall relieve the Corporation,
its shareholders, Directors, officers, transfer agent and registrar of liability
for failure to direct notices, dividends, or other documents or property to an
address other than the one appearing upon the records of the transfer agent and
registrar of the Corporation.
Section 10. Lost, Stolen or Destroyed Certificates. The
Corporation may cause a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or certificates, the
Corporation may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to give the Corporation a bond in
such sum and in such form as it may direct to indemnify against any claim that
may be made against the Corporation with respect to the certificates alleged to
have been lost, stolen or destroyed or the issuance of such new certificate. The
Corporation, in its discretion, may authorize the issuance of such new
certificates without any bond when in its judgment it is proper to do so.
Section 11. Registered Shareholders. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of such shares to receive dividends, to vote as such owner, to hold
liable for calls and assessments, and to treat as owner in all other respects,
and shall not be bound to recognize any equitable or other claims to or interest
in such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of Indiana.
Section 12. Options to Officers and Employees. The issuance,
including the consideration, of rights or options to Directors, officers or
employees of the Corporation, and not to the shareholders generally, to purchase
from the Corporation shares of its capital stock shall be approved by the
affirmative vote of the holders of a majority of the shares entitled to vote
thereon or shall be authorized by and consistent with a plan approved by such a
vote of the shareholders.
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ARTICLE IV
Meetings of Shareholders
Section 1. Place of Meeting. Meetings of shareholders of the
Corporation shall be held at such place, within or without the State of Indiana,
as may from time to time be designated by the Board of Directors, or as may be
specified in the notices or waivers of notice of such meetings.
Section 2. Annual Meeting. The annual meeting of shareholders
for the election of Directors, and for the transaction of such other business as
may properly come before the meeting, shall be held on the third Tuesday in
April of each year, if such day is not a holiday, and if a holiday, then on the
first following day that is not a holiday, or in lieu of such day may be held on
such other day as the Board of Directors may set by resolution, but not later
than the end of the fifth month following the close of the fiscal year of the
Corporation. Failure to hold the annual meeting at the designated time shall not
work any forfeiture or a dissolution of the Corporation, and shall not affect
otherwise valid corporate acts.
Section 3. Special Meetings. Special meetings of the
shareholders, for any purpose or purposes, unless otherwise prescribed by
statute or by the Articles of Incorporation, may be called by the Board of
Directors or the President and shall be called by the President or Secretary at
the request in writing of a majority of the Board of Directors, or at the
request in writing of shareholders holding of record not less than one-fourth
(1/4) of all the shares outstanding and entitled by the Articles of
Incorporation to vote on the business for which the meeting is being called.
Section 4. Notice of Meetings. A written or printed notice,
stating the place, day and hour of the meeting, and in case of a special
meeting, or when required by any other provision of the Act, or of the Articles
of Incorporation, as now or hereafter amended, or these Bylaws, the purpose or
purposes for which the meeting is called, shall be delivered or mailed by the
Secretary, or by the officers or persons calling the meeting, to each
shareholder of record entitled by the Articles of Incorporation, as now or
hereafter amended, and by the Act to vote at such meeting, at such address as
appears upon the records of the Corporation, at least ten (10) days before the
date of the meeting. Notice of any such meeting may be waived in writing by any
shareholder, if the waiver sets forth in reasonable detail the purpose or
purposes for which the meeting is called, and the time and place thereof.
Attendance at any meeting in person, or by proxy, shall constitute a waiver of
notice of such meeting. Each shareholder, who has in the manner above provided
waived notice of a shareholders' meeting, or who personally attends a
shareholders' meeting, or is represented thereat by a proxy authorized to appear
by an instrument of proxy, shall be conclusively presumed to have been given due
notice of such meeting. Notice of any adjourned meeting of shareholders shall
not be required to be given if the time and place thereof are announced at the
meeting at which the adjournment is taken except as may be expressly required by
law.
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Section 5. Addresses of Shareholders. The address of any
shareholder appearing upon the records of the Corporation shall be deemed to be
the latest address of such shareholder appearing on the records maintained by
the Corporation or its transfer agent for the class of stock held by such
shareholder.
Section 6. Voting at Meetings.
(a) Quorum. The holders of record of a majority of the issued and
outstanding stock of the Corporation entitled to vote at such meeting, present
in person or by proxy, shall constitute a quorum at all meetings of shareholders
for the transaction of business, except where otherwise provided by law, the
Articles of Incorporation or these Bylaws. In the absence of a quorum, any
officer entitled to preside at, or act as secretary of, such meeting shall have
the power to adjourn the meeting from time to time until a quorum shall be
constituted. At any such adjourned meeting at which a quorum shall be present,
any business may be transacted which might have been transacted at the original
meeting, but only those shareholders entitled to vote at the original meeting
shall be entitled to vote at any adjournment or adjournments thereof unless a
new record date is fixed by the Board of Directors for the adjourned meeting.
(b) Voting Rights. Except as otherwise provided by law or by the
provisions of the Articles of Incorporation, every shareholder shall have the
right at every shareholders' meeting to one vote for each share of stock having
voting power, registered in his name on the books of the Corporation on the date
for the determination of shareholders entitled to vote, on all matters coming
before the meeting including the election of directors. At any meeting of
shareholders, every shareholder having the right to vote shall be entitled to
vote in person, or by proxy executed in writing by the shareholder or a duly
authorized attorney in fact and bearing a date not more than eleven (11) months
prior to its execution, unless a longer time is expressly provided therein.
(c) Required Vote. When a quorum is present at any meeting, the vote of
the holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which, by express provision of the Act or of the
Articles of Incorporation or by these Bylaws, a greater vote is required, in
which case such express provision shall govern and control the decision of such
question.
Section 7. Voting List. The Corporation or its transfer agent
shall make, at least five (5) days before each election of directors, a complete
list of the shareholders entitled by the Articles of Incorporation, as now or
hereafter amended, to vote at such election, arranged in alphabetical order,
with the address and number of shares so entitled to vote held by each, which
list shall be on file at the principal office of the Corporation and subject to
inspection by any shareholder. Such list shall be produced and kept open at the
time and place of election and subject to the inspection of any shareholder
during the holding of such election. The original stock register or transfer
book, or a duplicate thereof kept in the State of Indiana, shall be the only
evidence as to who are the shareholders entitled to examine such list or the
stock ledger or transfer book or to vote at any meeting of the shareholders.
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6.
Section 8. Fixing of Record Date to Determine Shareholders
Entitled to Vote. The Board of Directors may fix a record date, not exceeding
seventy (70) days prior to the date of any meeting of the shareholders, for the
purpose of determining the shareholders entitled to notice of and to vote at the
meeting. In the absence of action by the Board of Directors fixing a record date
as herein provided, the record date shall be the sixtieth (60th) day prior to
the date of the meeting. A new record date must be fixed if a meeting of the
shareholders is adjourned to a date more than one hundred twenty (120) days
after the date fixed for the original meeting.
Section 9. Nominations for Director. Nominations for election to
the Board of Directors may be made by the Board of Directors or by an
shareholder of any outstanding class of capital stock of the Corporation
entitled to vote for the election of directors. Nominations, other than those
made by or on behalf of the existing management of the Corporation, shall be
made in writing and shall be delivered or mailed to the President of the
Corporation not less than ten (10) days nor more than fifty (50) days prior to
any meeting of shareholders called for the election of Directors. Such
notification shall contain the following information to the extent known to the
notifying shareholder: (a) the name and address of each proposed nominee; (b)
the principal occupation of each proposed nominee; (c) the total number of
shares of capital stock of the Corporation that will be voted for each proposed
nominee; (d) the name and residence address of the notifying shareholder; and
(e) the number of shares of capital stock of the Corporation owned by the
notifying shareholder. Nominations not made in accordance herewith may, in his
discretion, be disregarded by the chairman of the meeting, and upon his
instructions, the vote tellers may disregard all votes cast for each such
nominee.
ARTICLE V
Board of Directors
BE IT RESOLVED that Article V, Section 1, of the Bylaws of the
Corporation is hereby amended to read as follows, effective April 22, 2004:
Section 1. Election, Number and Term of Office. The number of Directors
of the Corporation to be elected by the holders of the shares of stock
entitled by the Articles of Incorporation to elect Directors shall be
thirteen (13) unless changed by amendment of this Section by a
two-thirds (2/3) vote of the Board of Directors.
The Directors shall be divided into three (3) classes as nearly equal
in number as possible, all Directors to serve three (3) year terms
except as provided in the third paragraph of this Section. One class
shall be elected at each annual meeting of the shareholders, by the
holders of the shares of stock entitled by the Articles of
Incorporation to elect Directors. Unless the number of Directors is
changed by amendment of this Section, Classes I and II shall each have
four (4) Directors, and Class III shall have five (5) Directors. No
decrease in the number of Directors shall have the effect of shortening
the term of any incumbent Director.
No person shall serve as a Director subsequent to the annual meeting of
shareholders following the end of the calendar year in which such
person attains the age of seventy (70) years. The term of a Director
shall expire as of the annual meeting following which the Director is
no longer eligible to serve under the provisions of this paragraph,
even if fewer than three (3) years have elapsed since the commencement
of the Director's term.
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Except in the case of earlier resignation, removal or death, all
Directors shall hold office until their respective successors are
chosen and qualified.
The provisions of this Section of the Bylaws may not be
changed or amended except by a two-thirds (2/3) vote of the Board of
Directors.
Section 2. Vacancies. Any vacancy occurring in the Board of
Directors caused by resignation, death or other incapacity, or an increase in
the number of Directors, shall be filled by a majority vote of the remaining
members of the Board of Directors, until the next annual meeting of the
shareholders, or at the discretion of the Board of Directors, such vacancy may
be filled by a vote of the shareholders at a special meeting called for that
purpose.
Section 3. Annual Meeting of Directors. The Board of Directors
shall meet each year immediately after the annual meeting of the shareholders,
at the place where such meeting of the shareholders has been held either within
or without the State of Indiana, for the purpose of organization, election of
officers, and consideration of any other business that may properly come before
the meeting. No notice of any kind to either old or new members of the Board of
Directors for such annual meeting shall be necessary.
Section 4. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such times and places, either within or without the
State of Indiana, as may be fixed by the Directors. Such regular meetings of the
Board of Directors may be held without notice or upon such notice as may be
fixed by the Directors.
Section 5. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board, the President, or by not
less than a majority of the members of the Board of Directors. Notice of the
time and place, either within or without the State of Indiana, of a special
meeting shall be served upon or telephoned to each Director at least twenty-four
(24) hours, or mailed, telegraphed or cabled to each Director at his usual place
of business or residence at least forty-eight (48) hours, prior to the time of
the meeting. Directors, in lieu of such notice, may sign a written waiver of
notice either before the time of the meeting, at the meeting or after the
meeting. Attendance by a Director in person at any special meeting shall
constitute a waiver of notice.
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Section 6. Quorum. A majority of the actual number of Directors
elected and qualified, from time to time, shall be necessary to constitute a
quorum for the transaction of any business except the filling of vacancies, and
the act of a majority of the Directors present at the meeting, at which a quorum
is present, shall be the act of the Board of Directors, unless the act of a
greater number is required by the Act, by the Articles of Incorporation, or by
these Bylaws. A Director, who is present at a meeting of the Board of Directors,
at which action on any corporate matter is taken, shall be conclusively presumed
to have assented to the action taken, unless (a) his dissent shall be
affirmatively stated by him at and before the adjournment of such meeting (in
which event the fact of such dissent shall be entered by the secretary of the
meeting in the minutes of the meeting), or (b) he shall forward such dissent by
registered mail to the Secretary of the Corporation immediately after the
adjournment of the meeting. The right of dissent provided for by either clause
(a) or cause (b) of the immediately preceding sentence shall not be available,
in respect of any matter acted upon at any meeting, to a Director who voted at
the meeting in favor of such matter and did not change his vote prior to the
time that the result of the vote on such matter was announced by the chairman of
such meeting.
A member of the Board of Directors may participate in a meeting of the
Board by means of a conference telephone or similar communications equipment by
which all Directors participating in the meeting can communicate with each
other, and participation by these means constitutes presence in person at the
meeting.
Section 7. Consent Action by Directors. Any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if prior to such action a
written consent to such action is signed by all members of the Board of
Directors or such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board of Directors or committee.
Section 8. Removal. Any or all members of the Board of Directors
may be removed, with or without cause, at a meeting of the shareholders called
expressly for that purpose by the affirmative vote of the holders of not less
than two-thirds (2/3) of the outstanding shares of capital stock then entitled
to vote on the election of Directors, except that if the Board of Directors, by
an affirmative vote of at least two-thirds (2/3) of the entire Board of
Directors, recommends removal of a Director to the shareholders, such removal
may be effected by the affirmative vote of the holders of not less than a
majority of the outstanding shares of capital stock then entitled to vote on the
election of Directors at a meeting of shareholders called expressly for that
purpose.
The provisions in this Section of the Bylaws may not be changed or
amended except by a two-thirds (2/3) vote of the Board of Directors.
Section 9. Dividends. The Board of Directors shall have power,
subject to any restrictions contained in the Act or in the Articles of
Incorporation and out of funds legally available therefor, to declare and pay
dividends upon the outstanding capital stock of the Corporation as and when they
deem expedient. Before declaring any dividend, there may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the Board
of Directors from time to time in their absolute discretion deem proper for
working capital, or as a reserve or reserves to meet contingencies or for such
other purposes as the Board of Directors may determine, and the Board of
Directors may in their absolute discretion modify or abolish any such reserve in
the manner in which it was created.
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Section 10. Fixing of Record Date to Determine Shareholders
Entitled to Receive Corporate Benefits. The Board of Directors may fix a day and
hour not exceeding fifty (50) days preceding the date fixed for payment of any
dividend or for the delivery of evidence of rights, or for the distribution of
other corporate benefits, or for a determination of shareholders for any other
purpose, as a record time for the determination of the shareholders entitled to
receive any such dividend, rights or distribution, and in such case only
shareholders of record at the time so fixed shall be entitled to receive such
dividend, rights or distribution. If no record date is fixed for the
determination of shareholders entitled to receive payment of a dividend, the end
of the day on which the resolution of the Board of Directors declaring such
dividend is adopted shall be the record date for such determination.
Section 11. Interest of Directors in Contracts. Any contract or
other transaction between the Corporation or any corporation in which this
Corporation owns a majority of the capital stock shall be valid and binding,
notwithstanding that the Directors or officers of this Corporation are identical
or that some or all of the Directors or officers, or both, are also directors or
officers of such other corporation.
Any contract or other transaction between the Corporation and one or
more of its Directors or members or employees, or between the Corporation and
any firm of which one or more of its Directors are members or employees or in
which they are interested, or between the Corporation and any corporation or
association of which one or more of its Directors are stockholders, members,
directors, officers, or employees or in which they are interested, shall be
valid for all purposes, notwithstanding the presence of such Director or
Directors at the meeting of the Board of Directors of the Corporation which acts
upon, or in reference to, such contract or transaction and notwithstanding his
or their participation in such action, if the fact of such interest shall be
disclosed or known to the Board of Directors and the Board of Directors shall
authorize, approve and ratify such contract or transaction by a vote of a
majority of the Directors present, such interested Director or Directors to be
counted in determining whether a quorum is present, but not to be counted in
calculating the majority of such quorum necessary to carry such vote. This
Section shall not be construed to invalidate any contract or other transaction
which would otherwise be valid under the common and statutory law applicable
thereto.
Section 12. Committees. The Board of Directors may, by resolution
adopted by a majority of the actual number of Directors elected and qualified,
from time to time, designate from among its members an executive committee and
one or more other committees.
Page 38
During the intervals between meetings of the Board of Directors, any
executive committee so appointed, unless expressly provided otherwise by law or
these Bylaws, shall have and may exercise all the authority of the Board of
Directors, including, but not limited to, the authority to issue and sell or
approve any contract to issue or sell, securities or shares of the Corporation
or designate the terms of a series or class of securities or shares of the
Corporation. The terms which may be affixed by the executive committee include,
but are not limited to, the price, dividend rate, and provisions of redemption,
a sinking fund, conversion, voting, or preferential rights or other features of
securities or class or series of a class of shares. Such committee may have full
power to adopt a final resolution which sets forth these terms and to authorize
a statement of such terms to be filed with the Secretary of State. However, such
executive committee shall not have the authority to declare dividends or
distributions, amend the Articles of Incorporation or the Bylaws, approve a plan
of merger or consolidation, even if such plan does not require shareholder
approval, reduce earned or capital surplus, authorize or approve the
reacquisition of shares unless pursuant to a general formula or method specified
by the Board of Directors, or recommend to the shareholders a voluntary
dissolution of the Corporation or a revocation thereof.
The Board of Directors may, in its discretion, constitute and appoint
other committees, in addition to an executive committee, to assist in the
management and control of the affairs of the Corporation, with responsibilities
and powers appropriate to the nature of the several committees and as provided
by the Board of Directors in the resolution of appointment or in subsequent
resolutions and directives. Such committees may include, but are not limited to,
an audit committee and a compensation and human resources committee.
No member of any committee appointed by the Board of Directors shall
continue to be a member thereof after he ceases to be a Director of the
Corporation. However, where deemed in the best interests of the Corporation, to
facilitate communication and utilize special expertise, directors of the
Corporation's affiliated banks and corporations may be appointed to serve on
such committees, as "affiliate representatives." Such affiliate representatives
may attend and participate fully in meetings of such committees, but they shall
not be entitled to vote on any matter presented to the meeting nor shall they be
counted for the purpose of determining whether a quorum exists. The calling and
holding of meetings of any such committee and its method of procedure shall be
determined by the Board of Directors. To the extent permitted by law, a member
of the Board of Directors, and any affiliate representative, serving on any such
committee shall not be liable for any action taken by such committee if he has
acted in good faith and in a manner he reasonably believes is in the best
interests of the Corporation. A member of a committee may participate in a
meeting of the committee by means of a conference telephone or similar
communications equipment by which all members participating in the meeting can
communicate with each other, and participation by these means constitutes
presence in person at the meeting.
ARTICLE VI
Officers
Section 1. Principal Officers. The principal officers of the
Corporation shall be a Chairman of the Board, Vice Chairman of the Board, a
President, one (1) or more Vice Presidents, a Treasurer and a Secretary. The
Corporation may also have, at the discretion of the Board of Directors, such
other subordinate officers as may be appointed in accordance with the provisions
of these Bylaws. Any two (2) or more offices may be held by the same person,
except the duties of President and Secretary shall not be performed by the same
person. No person shall be eligible for the office of Chairman of the Board,
Vice Chairman of the Board, or President who is not a Director of the
Corporation.
Section 2. Election and Term of Office. The principal officers
of the Corporation shall be chosen annually by the Board of Directors at the
annual meeting thereof. Each such officer shall hold office until his successor
shall have been duly chosen and qualified, or until his death, or until he shall
resign, or shall have been removed in the manner hereinafter provided.
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Section 3. Removal. Any principal officer may be removed, either
with or without cause, at any time, by resolution adopted at any meeting of the
Board of Directors by a majority of the actual number of Directors elected and
qualified from time to time.
Section 4. Subordinate Officers. In addition to the principal
officers enumerated in Section 1 of this Article VI, the Corporation may have
one or more Assistant Treasurers, one or more Assistant Secretaries and such
other officers, agents and employees as the Board of Directors may deem
necessary, each of whom shall hold office for such period, may be removed with
or without cause, have such authority, and perform such duties as the President,
or the Board of Directors may from time to time determine. The Board of
Directors may delegate to any principal officer the power to appoint and to
remove any such subordinate officers, agents or employees.
Section 5. Resignations. Any officer may resign at any time by
giving written notice to the Chairman of the Board of Directors, or to the
President, or to the Secretary. Any such resignation shall take effect upon
receipt of such notice or at any later time specified therein, and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 6. Vacancies. Any vacancy in any office for any cause
may be filled for the unexpired portion of the term in the manner prescribed in
these Bylaws for election or appointment to such office for such term.
Section 7. Chairman of the Board. The Chairman of the Board, who
shall be chosen from among the Directors, shall preside at all meetings of
shareholders and at all meetings of the Board of Directors. He shall perform
such other duties and have such other powers as, from time to time, may be
assigned to him by the Board of Directors.
Section 8. Vice Chairman of the Board. The Vice Chairman of the
Board, who shall be chosen from among the Directors, shall act in the absence of
the Chairman of the Board. He shall perform such other duties and have such
other powers as, from time to time, may be assigned to him by the Board of
Directors.
Section 9. President. The President, who shall be chosen from
among the Directors, shall be the chief executive officer of the Corporation and
as such shall have general supervision of the affairs of the Corporation,
subject to the control of the Board of Directors. He shall be an ex officio
member of all standing committees. In the absence or disability of the Chairman
of the Board and Vice Chairman of the Board, the President shall preside at all
meetings of shareholders and at all meetings of the Board of Directors. Subject
to the control and direction of the Board of Directors, the President may enter
into any contract or execute and deliver any instrument in the name and on
behalf of the Corporation. In general, he shall perform all duties and have all
powers incident to the office of President, as herein defined, and all such
other duties and powers as, from time to time, may be assigned to him by the
Board of Directors.
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Section 10. Vice Presidents. The Vice Presidents in the order of
their seniority, unless otherwise determined by the Board of Directors, shall,
in the absence or disability of the President and Executive Vice President,
perform the duties and exercise the powers of the President. They shall perform
such other duties and have such other powers as the President or the Board of
Directors may from time to time assign.
Section 11. Treasurer. The Treasurer shall have charge and
custody of, and be responsible for, all funds and securities of the Corporation
and shall deposit all such funds in the name of the Corporation in such banks or
other depositories as shall be selected by the Board of Directors. He shall upon
request exhibit at all reasonable times his books of account and records to any
of the Directors of the Corporation during business hours at the office of the
Corporation where such books and records shall be kept; shall render upon
request by the Board of Directors a statement of the condition of the finances
of the Corporation at any meeting of the Board of Directors or at the annual
meeting of the shareholders; shall receive, and give receipt for, moneys due and
payable to the Corporation from any source whatsoever; and in general, shall
perform all duties incident to the office of Treasurer and such other duties as
from time to time may be assigned to him by the President or the Board of
Directors. The Treasurer shall give such bond, if any, for the faithful
discharge of his duties as the Board of Directors may require.
Section 12. Secretary. The Secretary shall keep or cause to be
kept in the books provided for that purpose the minutes of the meetings of the
shareholders and of the Board of Directors; shall duly give and serve all
notices required to be given in accordance with the provisions of these Bylaws
and by the Act; shall be custodian of the records and of the seal of the
Corporation and see that the seal is affixed to all documents, the execution of
which on behalf of the Corporation under its seal is duly authorized in
accordance with the provisions of these Bylaws; and, in general, shall perform
all duties incident to the office of Secretary and such other duties as may,
from time to time, be assigned to him by the President or the Board of
Directors.
Section 13. Salaries. The salaries of the principal officers
shall be fixed from time to time by the Board of Directors, and the salaries of
any subordinate officers may be fixed by the President.
Section 14. Voting Corporation's Securities. Unless otherwise
ordered by the Board of Directors, the Chairman of the Board, the President and
Secretary, and each of them, are appointed attorneys and agents of the
Corporation, and shall have full power and authority in the name and on behalf
of the Corporation, to attend, to act, and to vote all stock or other securities
entitled to be voted at any meetings of security holders of corporations, or
associations in which the Corporation may hold securities, in person or by
proxy, as a stockholder or otherwise, and at such meetings shall possess and may
exercise any and all rights and powers incident to the ownership of such
securities, and which as the owner thereof the Corporation might have possessed
and exercised, if present, or to consent in writing to any action by any such
other corporation or association. The Board of Directors by resolution from time
to time may confer like powers upon any other person or persons.
Page 41
ARTICLE VII
Indemnification
Section 1. Indemnification of Directors, Officers, Employees and
Agents. Every person who is or was a Director, officer, employee or agent of
this Corporation or of any other corporation for which he is or was serving in
any capacity at the request of this Corporation shall be indemnified by this
Corporation against any and all liability and expense that may be incurred by
him in connection with or resulting from or arising out of any claim, action,
suit or proceeding, provided that such person is wholly successful with respect
thereto or acted in good faith in what he reasonably believed to be in or not
opposed to the best interest of this Corporation or such other corporation, as
the case may be, and, in addition, in any criminal action or proceeding in which
he had no reasonable cause to believe that his conduct was unlawful. As used
herein, "claim, action, suit or proceeding" shall include any claim, action,
suit or proceeding (whether brought by or in the right of this Corporation or
such other corporation or otherwise), civil, criminal, administrative or
investigative, whether actual or threatened or in connection with an appeal
relating thereto, in which a Director, officer, employee or agent of this
Corporation may become involved, as a party or otherwise,
(i) by reason of his being or having been a Director, officer,
employee, or agent of this Corporation or such other
corporation or arising out of his status as such or
(ii) by reason of any past or future action taken or not taken by
him in any such capacity, whether or not he continues to be
such at the time such liability or expense is incurred.
The terms "liability" and "expense" shall include, but shall not be limited to,
attorneys' fees and disbursements, amounts of judgments, fines or penalties, and
amounts paid in settlement by or on behalf of a Director, officer, employee, or
agent, but shall not in any event include any liability or expenses on account
of profits realized by him in the purchase or sale of securities of the
Corporation in violation of the law. The termination of any claim, action, suit
or proceeding, by judgment, settlement (whether with or without court approval)
or conviction or upon a plea of guilty or of nolo contendere, or its equivalent,
shall not create a presumption that a Director, officer, employee, or agent did
not meet the standards of conduct set forth in this paragraph.
Any such Director, officer, employee, or agent who has been wholly
successful with respect to any such claim, action, suit or proceeding shall be
entitled to indemnification as a matter of right. Except as provided in the
preceding sentence, any indemnification hereunder shall be made only if
Page 42
(i) the Board of Directors acting by a quorum consisting of
Directors who are not parties to or who have been wholly
successful with respect to such claim, action, suit or
proceeding shall find that the Director, officer, employee,
or agent has met the standards of conduct set forth in the
preceding paragraph; or
(ii) independent legal counsel shall deliver to the Corporation
their written opinion that such Director, officer, employee,
or agent has met such standards of conduct.
If several claims, issues or matters of action are involved, any such
person may be entitled to indemnification as to some matters even though he is
not entitled as to other matters.
The Corporation may advance expenses to or, where appropriate, may at
its expense undertake the defense of any such Director, officer, employee, or
agent upon receipt of an undertaking by or on behalf of such person to repay
such expenses if it should ultimately be determined that he is not entitled to
indemnification hereunder.
The provisions of this Section shall be applicable to claims, actions,
suits or proceedings made or commenced after the adoption hereof, whether
arising from acts or omissions to act during, before or after the adoption
hereof.
The rights of indemnification provided hereunder shall be in addition
to any rights to which any person concerned may otherwise be entitled by
contract or as a matter of law and shall inure to the benefit of the heirs,
executors and administrators of any such person.
The Corporation may purchase and maintain insurance on behalf of any
person who is or was a Director, officer, employee or agent of the Corporation
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation against any liability asserted against
him and incurred by him in any capacity or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Section or otherwise.
Page 43
ARTICLE VIII
Amendments
Except as expressly provided herein or in the Articles of
Incorporation, the Board of Directors may make, alter, amend or repeal these
Bylaws by an affirmative vote of a majority of the actual number of Directors
elected and qualified.
Page 44
Exhibit 10a
FIRST MERCHANTS CORPORATION
2004 EMPLOYEE STOCK PURCHASE PLAN
INTRODUCTION
The First Merchants Corporation 2004 Employee Stock Purchase Plan (the "Plan")
was adopted by the Board of Directors (the "Board") of First Merchants
Corporation (the "Company") on December 9, 2003, subject to approval of the
Company's shareholders at their annual meeting on April 22, 2004. The effective
date of the Plan shall be July 1, 2004, if it is approved by the shareholders.
The purpose of the Plan is to provide eligible employees of the Company and its
subsidiaries a convenient opportunity to purchase shares of common stock of the
Company through annual offerings financed by payroll deductions. As used in this
Plan, "subsidiary" means a corporation or other form of business association of
which shares (or other ownership interests) having 50% or more of the voting
power are, or in the future become, owned or controlled, directly or indirectly,
by the Company.
The Plan may continue until all the stock allocated to it has been purchased or
until after the fifth offering is completed, whichever is earlier. The Board may
terminate the Plan at any time, or make such amendment of the Plan as it may
deem advisable, but no amendment may be made without the approval of the
Company's shareholders if it would materially: (i) increase the benefits
accruing to participants under the Plan; (ii) modify the requirements as to
eligibility for participation in the Plan; (iii) increase the number of shares
which may be issued under the Plan, (iv) increase the cost of the Plan to the
Company; or (v) alter the allocation of Plan benefits among participating
employees.
The Plan is not qualified under Section 401(a) of the Internal Revenue Code of
1986 (the "Code") and is not subject to any provisions of the Employee
Retirement Income Security Act of 1974 (ERISA). It is the Company's intention to
have the Plan qualify as an "employee stock purchase plan" under Section 423 of
the Code, and the provisions of the Plan shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that Section
of the Code.
ADMINISTRATION
The Plan is administered by the Compensation and Human Resources Committee (the
"Committee"), which consists of two or more members of the Board, none of whom
are eligible to participate in the Plan and all of whom are "non-employee
directors," as such term is defined in Rule 16b-3(b)(3) of the Securities and
Exchange Commission, under the Securities Exchange Act of 1934, as amended (the
"1934 Act"). The Committee shall prescribe rules and regulations for the
administration of the Plan and interpret its provisions. The Committee may
correct any defect, reconcile any inconsistency or resolve any ambiguity in the
Plan. The actions and determinations of the Committee on matters relating to the
Plan are conclusive. The Committee and its members may be addressed in care of
the Company at its principal office. The members of the Committee do not serve
for fixed periods but may be appointed or removed at any time by the Board.
Page 45
STOCK SUBJECT TO THE PLAN
An aggregate of 400,000 shares of common stock, without par value, of the
Company (the "Common Stock") is available for purchase under the Plan. Shares of
Common Stock which are to be delivered under the Plan may be obtained by the
Company by authorized purchases on the open market or from private sources, or
by issuing authorized but unissued shares of Common Stock. In the event of any
change in the Common Stock through recapitalization, merger, consolidation,
stock dividend or split, combination or exchanges of shares or otherwise, the
Committee may make such equitable adjustments in the Plan and the then
outstanding offering as it deems necessary and appropriate including, but not
limited to, changing the number of shares of Common Stock reserved under the
Plan and the price of the current offering. If the number of shares of Common
Stock that participating employees become entitled to purchase is greater than
the number of shares of Common Stock available, the available shares shall be
allocated by the Committee among such participating employees in such manner as
it deems fair and equitable. No fractional shares of Common Stock shall be
issued or sold under the Plan.
ELIGIBILITY
All employees of the Company and such of its subsidiaries as shall be designated
by the Committee will be eligible to participate in the Plan. No employee shall
be eligible to participate in the Plan if his or her customary employment is
less than 20 hours per week. No employee shall be eligible to participate in an
offering unless he or she has been continuously employed by the Company or
subsidiary for at least six months as of the first day of such offering. No
employee shall be eligible to participate in the Plan if, immediately after an
option is granted under the Plan, the employee owns more than five percent (5%)
of the total combined voting power or value of all classes of shares of the
Company or of any parent or subsidiary of the Company.
OFFERINGS, PARTICIPATING, DEDUCTIONS
The Company may make up to five offerings of 12 months' duration each to
eligible employees to purchase Common Stock under the Plan. An eligible employee
may participate in such offering by authorizing at any time prior to the first
day of such offering a payroll deduction for such purpose in whole dollar
amounts, up to a maximum of twenty percent (20%) of his or her basic salary or
wages, excluding any bonus, overtime, incentive or other similar extraordinary
remuneration received by such employee. The Committee may at any time suspend an
offering if required by law or if determined by the Committee to be in the best
interests of the Company.
Page 46
The Company will maintain or cause to be maintained payroll deduction accounts
for all participating employees. All funds received or held by the Company or
its subsidiaries under the Plan may be, but need not be, segregated from other
corporate funds. Payroll deduction accounts will be credited with interest at
such rates and intervals as the Committee shall determine from time to time. Any
balance remaining in any employee's payroll deduction account at the end of an
offering period will be refunded to the employee.
Each participating employee will receive a statement of his or her payroll
deduction account and the number of shares of Common Stock purchased therewith
following the end of each offering period.
Subject to rules, procedures and forms adopted by the Committee, a participating
employee may at any time during the offering period increase, decrease or
suspend his or her payroll deduction, or may withdraw the entire balance of his
or her payroll deduction account and thereby withdraw from participation in an
offering. Under the initial rules established by the Committee, payroll
deductions may not be altered more than once in each offering period and
withdrawal requests may be received on or before the last day of such offering.
In the event of a participating employee's retirement, death or termination of
employment, his or her participation in any offering under the Plan shall cease,
no further amounts shall be deducted pursuant to the Plan, and the balance in
the employee's account shall be paid to the employee, or, in the event of the
employee's death, to the employee's beneficiary designated on a form approved by
the Committee (or, if the employee has not designated a beneficiary, to his or
her estate).
PURCHASE, LIMITATIONS, PRICE
Each employee participating in any offering under the Plan will be granted an
option, upon the effective date of such offering, for as many full shares of
Common Stock as the amount of his or her payroll deduction account at the end of
any offering period can purchase. No employee may be granted an option under the
Plan which permits his or her rights to purchase Common Stock under the Plan,
and any other stock purchase plan of the Company or a parent or subsidiary of
the Company qualified under Section 423 of the Code, to accrue at a rate which
exceeds $25,000 of Fair Market Value of such Common Stock (determined at the
time the option is granted) for each calendar year in which the option is
outstanding at any time. As of the last day of the offering period, the payroll
deduction account of each participating employee shall be totaled. If such
account contains sufficient funds to purchase one or more full shares of Common
Stock as of that date, the employee shall be deemed to have exercised an option
to purchase the largest number of full shares of Common Stock at the offering
price. Such employee's account will be charged for the amount of the purchase
and the employee's book entry stock account will be credited with the number of
shares of Common Stock purchased.
Page 47
The Committee shall determine the purchase price of the shares of Common Stock
which are to be sold under each offering, which price shall be the lesser of (i)
an amount equal to 85 percent of the Fair Market Value of the Common Stock at
the time such option is granted, or (ii) an amount equal to 85 percent of the
Fair Market Value of the Common Stock at the time such option is exercised.
"Fair Market Value" of a share of Common Stock on a given date is defined as the
last reported sale price of a share on such date, or if no sale took place, the
last reported sale price of a share of stock on the most recent day on which a
sale of a share of stock took place as recorded on the Nasdaq Stock Market or
national securities exchange on which the Common Stock of the Company is listed
on such date. If the Common Stock of the Company isn't listed on such date on
the Nasdaq Stock Market or a national securities exchange, "Fair Market Value"
is defined as the fair market value of a share on such date as determined in
good faith by the Committee.
STOCK ACCOUNTS, TRANSFER OF INTERESTS
Shares of Common Stock purchased under the Plan may be registered in the name of
a nominee or held in such other manner as the Committee determines to be
appropriate. A book entry stock account will be established in each
participating employee's name. Each participating employee will be the
beneficial owner of the Common Stock purchased under the Plan and credited to
his or her stock account, and he or she will have all rights of beneficial
ownership in such Common Stock. The Company or its nominee will retain custody
of the Common Stock purchased under the Plan until specifically requested in
writing by the participating employee to be sold, transferred or delivered. A
participating employee may request that a stock certificate, representing all or
part of the shares of Common Stock credited to his or her stock account, be
issued and delivered to the participating employee at any time.
No option, right or benefit under the Plan may be transferred by a participating
employee other than by will or the laws of descent and distribution, and all
options, rights and benefits under the Plan may be exercised during the
participating employee's lifetime only by such employee or the employee's
guardian or legal representative. There are no restrictions imposed by or under
the Plan upon the resale of shares of Common Stock issued under the Plan.
Page 48
Certain officers of the Company are subject to restrictions under Section 16(b)
of the 1934 Act. With respect to such officers, transactions under the Plan are
intended to comply with all applicable conditions of Rule 16b-3 or its
successors under the 1934 Act. To the extent any provision of the Plan or action
by the Committee fails to so comply, it shall be deemed null and void if
permitted by law and deemed advisable by the Committee.
Beneficial ownership of the shares of Common Stock purchased under the Plan may
be held only in the name of the participating employee, or, if such employee so
indicates on his or her authorization form, in his or her name jointly with a
member of his or her family, with right of survivorship. A participating
employee who is a resident of a jurisdiction which does not recognize such a
joint tenancy may hold shares in the employee's name as tenant in common with a
member of his or her family, without right of survivorship.
Page 49
Exhibit 31.1
CERTIFICATION PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Michael L. Cox, President and Chief Executive Officer of First Merchants
Corporation, certify that:
1. I have reviewed this quarterly report on Form 10-Q of First Merchants
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report, based on such evaluation;
and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of the registrant's
board or directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: August 9, 2004 /s/Michael L. Cox
----------------------------------------
Michael L. Cox
President and Chief Executive Officer
Page 50
Exhibit 31.2
CERTIFICATION PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Mark K. Hardwick, Senior Vice President and Chief Financial Officer of First
Merchants Corporation, certify that:
1. I have reviewed this quarterly report on Form 10-Q of First Merchants
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report, based on such evaluation;
and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of the registrant's
board or directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: August 9, 2004 /s/Mark K. Hardwick
----------------------------------------
Mark K. Hardwick
Senior Vice President and
Chief Financial Officer
(Principal Financial and Chief
Accounting Officer)
Page 51
Exhibit 32
CERTIFICATIONS PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of First Merchants Corporation (the
"Corporation") on Form 10-Q for the period ending June 30, 2004 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I
Michael L. Cox, President and Chief Executive Officer of the Corporation, do
hereby certify, in accordance with 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o (d)); and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Corporation.
Date 08/09/04 by /s/ Michael L. Cox
--------------------------- -------------------------------------
Michael L. Cox
President and Chief Executive Officer
A signed copy of this written statement required by Section 906 has been
provided to First Merchants Corporation and will be retained by First Merchants
Corporation and furnished to the Securities and Exchange Commission or its staff
upon request.
In connection with the quarterly report of First Merchants Corporation (the
"Corporation") on Form 10-Q for the period ending June 30, 2004 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I Mark
K. Hardwick, Senior Vice President and Chief Financial Officer of the
Corporation, do hereby certify, in accordance with 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o (d)); and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Corporation.
Date 08/09/04 by /s/ Mark K. Hardwick
--------------------------- -------------------------------------
Mark K. Hardwick
Senior Vice President and
Chief Financial Officer
(Principal Financial and Chief
Accounting Officer)
A signed copy of this written statement required by Section 906 has been
provided to First Merchants Corporation and will be retained by First Merchants
Corporation and furnished to the Securities and Exchange Commission or its staff
upon request.
Page 52