SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1998 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
Muncie, Indiana 47305-2814
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (317) 747-1500
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.125 stated value per share
(Title of Class)
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 check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value (not necessarily a reliable indication of the price
at which more than a limited number of shares would trade) of the voting stock
held by non-affiliates of the registrant was $231,676,424 as of March 5, 1999.
As of March 5, 1999 there were outstanding 10,072,888 common shares, without par
value, of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
Part of Form 10-K
Documents Into Which Incorporated
--------- -----------------------
1998 Annual Report to Stockholders Part II (Items 5, 6, 7, 7A, and 8)
Definitive Proxy Statement for
Annual Meeting of Shareholders
to be held April 14, 1999 Part III (Items 10 through 13)
Exhibit Index: Page 26
FORM 10-K TABLE OF CONTENTS
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Form 10-K
Page
Number
Part I
Item 1 - Business.........................................................3
Item 2 - Properties......................................................19
Item 3 - Legal Proceedings...............................................19
Item 4 - Submission of Matters to a Vote of Security Holders.............19
Supplemental Information - Executive Officers of the Registrant...........20
Part II
Item 5 - Market For the Registrant's Common Equity and
Related Stockholder Matters.....................................21
Item 6 - Selected Financial Data.........................................21
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................21
Item 7A - Quantitative and Qualitative Disclosures about Market Risk......21
Item 8 - Financial Statements and Supplementary Data.....................21
Item 9 - Changes In and Disagreements With Accountants on
Accounting and Financial Disclosures............................21
Part III
Item 10 - Directors and Executive Officers of the Registrant.............21
Item 11 - Executive Compensation.........................................21
Item 12 - Security Ownership of Certain Beneficial
Owners and Management..........................................21
Item 13 - Certain Relationships and Related Transactions.................22
Part IV
Item 14 - Exhibits, Financial Statement Schedules, and
Reports on Form 8-K............................................22
Signatures..................................................................24
Page 2
PART I
ITEM 1. BUSINESS.
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GENERAL
First Merchants Corporation (the "Corporation") was incorporated under Indiana
law on September 20, 1982, as the bank holding company for First Merchants Bank,
National Association ("First Merchants"), a national banking association
incorporated in 1893. Prior to December 16, 1991, First Merchants' name was The
Merchants National Bank of Muncie. On November 30, 1988, the Corporation
acquired Pendleton Banking Company ("Pendleton"), a state chartered commercial
bank organized in 1872. On July 31, 1991, the Corporation acquired First United
Bank ("First United"), a state chartered commercial bank organized in 1882. On
August 1, 1996, the Corporation acquired The Union County National Bank of
Liberty ("Union County"), a national banking association incorporated in 1872.
On October 2, 1996, the Corporation acquired The Randolph County Bank ("Randolph
County"), a state chartered commercial bank founded in 1865. On April 1, 1998,
Pendleton acquired the Muncie office of Insurance and Risk Management, Inc.,
which was renamed, on April 1, 1998, First Merchants Insurance Services, Inc.
After the holding company was formed in 1982, the Corporation's practice was to
appoint each of the outside directors of First Merchants as a director of the
Corporation. However, as the Corporation grew through acquisition of four other
financial institutions, it became apparent that increased separation of the
operation and direction of the Corporation and First Merchants would be
desirable, and that this objective was hindered by the substantial overlap in
the composition of the two Boards of Directors. Therefore, the Corporation's
Board appointed an ad hoc Committee on Board Structure to review the structure
and makeup of the two Boards. The Committee's report and recommendations,
including a plan to restructure the respective Boards effective as of January 1,
1997, were unanimously adopted by the Boards of both the Corporation and First
Merchants on December 10, 1996. As a result of the restructuring, six of the
directors who were serving on both Boards became directors of First Merchants
only, and five of the directors who were serving on both Boards became directors
of the Corporation only. The size of the Corporation's Board was reduced from
eighteen to twelve members, and the size of the First Merchants' Board was
reduced from fifteen to ten members.
As of December 31, 1998, the Corporation had consolidated assets of $1.177
billion, consolidated deposits of $926.8 million and stockholders' equity of
$131.5 million.
The Corporation is headquartered in Muncie, Indiana, and is presently engaged in
conducting commercial banking business through the 27 offices of its five
banking subsidiaries. As of December 31, 1998, the Corporation and its
subsidiaries had 492 full-time equivalent employees.
Through its subsidiaries, the Corporation offers a broad range of financial
services, including: accepting time and transaction deposits; making consumer,
commercial, agri-business and real estate mortgage loans; issuing credit cards;
renting safe deposit facilities; providing personal and corporate trust
services; and providing other corporate services, letters of credit and
repurchase agreements.
ACQUISITION POLICY AND PENDING TRANSACTIONS
The Corporation anticipates that it will continue its policy of geographic
expansion through consideration of acquisitions of additional financial
institutions. Management of the Corporation periodically engages in reviewing
and analyzing potential acquisitions.
At the present time, management of the Corporation has signed definitive
agreements with both Jay Financial Corporation and Anderson Community Bank
regarding their affiliation with the Corporation.
Page 3
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COMPETITION
The Corporation's banking subsidiaries are located in Delaware, Fayette,
Hamilton, Henry, Madison, Wayne, Randolph, and Union counties in Indiana and
Butler county in Ohio. In addition to the competition provided by the lending
and deposit gathering subsidiaries of national manufacturers, retailers,
insurance companies and investment brokers, the banking subsidiaries compete
vigorously with other banks, thrift institutions, credit unions and finance
companies located within their service areas.
SUPERVISION AND REGULATION
The Corporation is a bank holding company ("BHC") subject to regulation under
the Bank Holding Company Act of 1956, as amended (the "Act"). The Act generally
requires a BHC to obtain prior approval of the Federal Reserve Board (the "FRB")
to acquire or hold more than a 5% voting interest in any bank. The Act restricts
the non-banking activities of BHCs to those which are closely related to banking
activities. As a result of the provisions in the Financial Institutional Reform,
Recovery and Enforcement Act of 1989, BHCs may now own and operate savings and
loan associations or savings banks which, in the past, was prohibited. First
Merchants and Union County are national banks and are supervised, regulated and
examined by the Comptroller of the Currency. Pendleton, First United, and
Randolph County are state banks and are supervised, regulated and examined by
the Indiana Department of Financial Institutions (the "DFI"). In addition, First
Merchants, as a member of the Federal Reserve System, is supervised and
regulated by the Federal Reserve. In addition, Pendleton, First United, and
Randolph County, which are not members of the Federal Reserve System, are
supervised and regulated by the Federal Deposit Insurance Corporation ("FDIC").
The deposits of First Merchants, Union County, Pendleton, First United, and
Randolph County (the "Banks") are insured by the FDIC. Each regulator has the
authority to issue cease-and-desist orders if it determines their activities
represent an unsafe and unsound practice or violation of law.
Under the Act and under regulations of the FRB, the Corporation and its
subsidiaries are prohibited from engaging in certain tie-in arrangements in
connection with the extension of credit and are subject to limitations as to
certain intercompany transactions.
Subject to certain limitations, an Indiana bank may establish branches de novo
and may establish branches by acquisition in any location or locations within
Indiana. Indiana law permits intrastate bank holding company acquisitions,
subject to certain limitations. Effective July 1, 1992, Indiana bank holding
companies were permitted to acquire banks, and banks and bank holding companies
in Indiana were permitted to be acquired by bank holding companies, located in
any state in the United States which permits reciprocal entry by Indiana bank
holding companies. Prior to July 1, 1992, such interestate bank holding company
acquisitions were permitted only on a regional, as opposed to national, basis.
Neither the Corporation nor its subsidiaries presently contemplate engaging in
any non-banking related business activities.
During 1991, Congress passed the Federal Deposit Insurance Corporation
Improvement Act ("FDICIA"). In addition to addressing the insurance fund's
financial needs, FDICIA expanded the power of the federal banking regulators.
FDICIA introduced a new system of classifying financial institutions with
respect to their capitalization. Effective in 1993, FDICIA also requires certain
financial institutions, such as First Merchants, to have annual audits and
requires management to issue supplemental reports attesting to an institution's
compliance with laws and regulations and to the adequacy of its internal
controls and procedures.
Page 4
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SUPERVISION AND REGULATION (continued)
The Riegle Community Development and Regulatory Improvement Act of 1994 ("Act")
was signed into law in 1994. The Act contains seven titles pertaining to
community development and home ownership protection, small business capital
formation, paperwork reduction and regulatory improvement, money laundering and
flood insurance. The Act grants the authority to several agencies to promulgate
regulations under the Act. No regulations have yet been promulgated. The
Corporation cannot predict with certainty the impact of the Act on the banking
industry.
In September, 1994, the Riegle-Neal Interstate Banking and Branching Efficiency
Act of 1994 ("Interstate Act") was enacted into law. The Interstate Act
authorized interstate acquisitions, mergers and bank branching and agency
banking with affiliates in different states. The Interstate Act amends the Bank
Holding Company Act to allow adequately capitalized and managed bank holding
companies to acquire a bank located in another state beginning in September,
1995. The new act permits full interstate branching after June 1, 1997. After
that date, BHCs may merge existing bank subsidiaries into one bank, with banks
also permitted to merge unaffiliated banks across state lines. States may permit
interstate branching earlier than June 1, 1997, where both states involved with
a bank merger expressly permit it by statute. The Interstate Act permits states
to enact a law expressly prohibiting interstate mergers. Such laws must apply
equally to all out-of-state banks and be passed before June 1, 1997.
The monetary policies of regulatory authorities, including the Federal Reserve
Board, have a significant effect on the operating results of banks and bank
holding companies. The nature of future monetary policies and the effect of such
policies on the future business and earnings of the Corporation and its
subsidiary banks cannot be predicted.
The Corporation is under the jurisdiction of the Securities and Exchange
Commission and state securities commission for matters relating to the offering
and sale of its securities and is subject to the Securities and Exchange
Commission's rules and regulations relating to periodic reporting, reporting to
stockholders, proxy solicitation, and insider trading.
The Corporation's income is principally derived from dividends paid on the
common stock of its subsidiaries. The payment of these dividends are subject to
certain regulatory restrictions.
CAPITAL REQUIREMENTS
The Corporation and its subsidiary banks must meet certain minimum capital
requirements mandated by the FRB, the FDIC and DFI. These regulatory agencies
require BHCs and banks to maintain certain minimum ratios of primary capital to
total assets and total capital to total assets. As of January 1, 1991, the FRB
required bank holding companies to maintain a minimum Tier 1 leverage ratio to 3
per cent capital to total assets; however, for all but the most highly rated
institutions which do not anticipate significant growth, the minimum Tier 1
ratio is 3 per cent plus an additional cushion of 100 to 200 basis points. As of
December 31, 1998, the Corporation's leverage ratio of capital to total assets
was 11.9 per cent.
The FRB and FDIC each have approved the imposition of "risk-adjusted" capital
ratios on BHCs and financial institutions. The Corporation and its subsidiaries
had capital to assets ratios and risk-adjusted capital ratios at December 31,
1998, in excess of the applicable regulatory minimum requirements.
Page 5
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CAPITAL REQUIREMENTS (continued)
The following table summarizes the Corporation's risk-adjusted capital ratios
under FRB guidelines at December 31, 1998:
Corporation's Regulatory
Consolidated Minimum
Ratio Requirement
------------- -----------
Tier 1 Capital to Risk-Weighted
Assets Ratio.................. 16.0% 4.0%
Total Capital to Risk-Weighted
Assets Ratio.................. 16.9% 8.0%
Page 6
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STATISTICAL DATA
The following tables set forth statistical data relating the Corporation and its
subsidiaries.
DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY; INTEREST RATES AND
INTEREST DIFFERENTIAL
The daily average balance sheet amounts, the related interest income or expense,
and average rates earned or paid are presented in the following table.
1998 1997 1996
-------------------------- -------------------------- --------------------------
Interest Interest Interest
Average Income/ Average Average Income/ Average Average Income/ Average
Balance Expense Rate Balance Expense Rate Balance Expense Rate
------- ------- ------- ------- ------- ------- ------- ------- -------
(Dollars in Thousands on Fully Taxable Equivalent Basis)
Assets:
Federal funds sold..........................$ 15,172 $ 720 4.7% $ 3,127 $ 172 5.5% $ 9,359 $ 498 5.3%
Interest-bearing deposits................ 598 27 4.5 693 34 4.9 346 16 4.6
Federal Reserve and
Federal Home Loan Bank stock............ 3,590 278 7.7 3,144 242 7.7 2,800 212 7.6
Securities:(1)
Taxable.................................. 175,281 10,858 6.2 172,993 10,818 6.3 204,323 12,752 6.2
Tax-exempt............................... 93,438 7,049 7.5 86,568 6,647 7.7 77,996 5,892 7.6
--------- ------- -------- ------- -------- -------
Total Securities....................... 268,719 17,907 6.7 259,561 17,465 6.7 282,319 18,644 6.6
Mortgage loans held for sale............... 773 98 12.7 406 47 11.6 262 21 8.0
Loans:(2)
Commercial............................... 296,329 26,737 9.0 272,483 25,125 9.2 230,848 21,232 9.2
Bankers' acceptance and commercial paper
purchased............................... 1,366 67 4.9 1,193 68 5.7 20 1 5.5
Real estate mortgage..................... 274,573 22,786 8.3 258,499 21,430 8.3 233,830 19,543 8.4
Installment.............................. 145,379 13,374 9.2 141,290 13,103 9.3 119,379 11,300 9.5
Tax-exempt............................... 3,511 309 8.8 2,021 178 8.8 1,566 140 8.9
--------- ------- -------- ------- -------- -------
Total loans............................ 721,158 63,273 8.8 675,486 59,904 8.9 585,643 52,216 8.9
--------- ------- -------- ------- -------- -------
Total earning assets................... 1,010,010 82,303 8.1 942,417 77,864 8.3 880,729 71,607 8.1
--------- ------- -------- ------- -------- -------
Net unrealized gain on securities
available for sale....................... 2,897 1,273 961
Allowance for loan losses.................. (7,020) (6,761) (6,672)
Cash and due from banks.................... 29,249 30,647 28,341
Premises and equipment..................... 16,608 14,950 14,879
Other assets............................... 12,970 10,812 13,906
---------- -------- --------
Total assets........................... $1,064,714 $993,338 $932,144
========== ======== ========
Liabilities:
Interest-bearing deposits:
NOW accounts............................ $ 116,026 $ 2,329 2.0 $104,620 $ 2,450 2.3 $109,792 $ 2,503 2.3
Money market deposit accounts........... 140,015 5,810 4.1 105,628 4,188 4.0 100,897 3,701 3.7
Savings deposits........................ 68,016 1,653 2.4 69,633 1,740 2.5 70,875 1,898 2.7
Certificates and other time deposits.... 434,897 23,960 5.5 425,478 23,542 5.5 381,378 21,037 5.5
---------- ------- -------- ------- -------- -------
Total interest-bearing deposits........ 758,954 33,752 4.4 705,359 31,920 4.5 662,942 29,139 4.4
Borrowings................................ 77,508 4,298 5.5 68,640 3,805 5.5 60,960 3,210 5.3
---------- ------- -------- ------- -------- -------
Total interest-bearing liabilities..... 836,462 38,050 4.6 773,999 35,725 4.6 723,902 32,349 4.5
Noninterest-bearing deposits.............. 97,771 94,759 90,719
Other liabilities......................... 3,769 7,566 9,429
---------- -------- --------
Total liabilities...................... 938,002 876,324 824,050
Stockholders' equity...................... 126,712 117,014 108,094
---------- -------- --------
Total liabilities and stockholders'equity $1,064,714 38,050 3.8(3) $993,338 35,725 3.8(3) $932,144 32,349 3.6(3)
========== ------- ======== -------- ======== --------
Net interest income...................... $44,254 4.3 $ 42,139 4.5 $ 39,258 4.5
======= ======== ========
(1) Average balance of securities is computed based on the average of the
historical amortized cost balances without the effects of the fair value
adjustment.
(2) Nonaccruing loans have been included in the average balances.
(3) Total interest expense divided by total earning assets
Adjustment to convert tax exempt investment securities to fully
taxable equivalent basis, using marginal rate of 35% for 1996, 1997,
and 1998................................ $ 2,575 $ 2,389 $ 2,111
======= ======== ========
Page 7
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STATISTICAL DATA (continued)
ANALYSIS OF CHANGES IN NET INTEREST INCOME
The following table presents net interest income components on a tax-equivalent
basis and reflects changes between periods attributable to movement in either
the average balance or average interest rate for both earning assets and
interest-bearing liabilities. The volume differences were computed as the
difference in volume between the current and prior year times the interest rate
of the prior year, while the interest rate changes were computed as the
difference in rate between the current and prior year times the volume of the
prior year. Volume/rate variances have been allocated on the basis of the
absolute relationship between volume variances and rate variances.
1998 Compared to 1997 1997 Compared to 1996
Increase (Decrease) Due To Increase (Decrease) Due To
-------------------------- --------------------------
Volume Rate Total Volume Rate Total
------ ---- ----- ------ ---- -----
(Dollars in Thousands on Fully Taxable Equivalent Basis)
Interest income:
Federal funds sold................... $ 575 $ ( 27) $ 548 $( 343) $ 17 $( 326)
Interest-bearing deposits............ ( 4) ( 3) ( 7) 17 1 18
Federal Reserve and Federal
Home Loan Bank stock............... 35 1 36 26 4 30
Securities........................... 612 (170) 442 (1,461) 282 (1,179)
Mortgage loans held for sale......... 46 5 51 14 12 26
Loans................................ 4,013 (644) 3,369 7,966 (278) 7,688
------- -------- ------- -------- ------- --------
Totals............................. 5,277 (838) 4,439 6,219 38 6,257
------- -------- ------- -------- ------- --------
Interest expense:
NOW accounts......................... 251 (372) (121) ( 126) 73 ( 53)
Money market deposit
accounts........................... 1,419 203 1,622 179 308 487
Savings deposits..................... (40) ( 47) ( 87) ( 33) (125) ( 158)
Certificates and other
time deposits...................... 519 (101) 418 2,440 65 2,505
Borrowings........................... 492 1 493 382 44 426
------- -------- ------- -------- ------- --------
Totals............................. 2,641 (316) 2,325 2,839 537 3,376
------- -------- ------- -------- ------- --------
Change in net interest
income (fully taxable
equivalent basis).................... $2,636 $ (522) $2,114 $ 3,380 $ (449) $ 2,881
======= ======== ======== =======
Tax equivalent adjustment
using marginal rate
of 35% for 1996, 1997,
and 1998............................. (186) (278)
------- -------
Change in net interest
income............................... $1,928 $2,603
======= =======
Page 8
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STATISTICAL DATA (continued)
INVESTMENT SECURITIES
The amortized cost, gross unrealized gains, gross unrealized losses and
approximate market value of the investment securities at the dates indicated
were:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ---------
(Dollars in Thousands)
Available for sale at December 31, 1998:
U.S. Treasury.............................. $ 20,269 $ 95 $ $ 20,364
Federal agencies........................... 52,598 577 19 53,156
State and municipal........................ 86,537 2,620 4 89,153
Mortgage-backed securities................. 126,329 424 183 126,570
Other asset-backed securities.............. 265 1 11 255
Corporate obligations...................... 18,624 143 8 18,759
Marketable equity securities............... 250 250
--------- ------ ------ ---------
Total available for sale................. 304,872 3,860 225 308,507
--------- ------ ------ ---------
Held to maturity at December 31, 1998:
U.S. Treasury.............................. 249 4 253
Federal agencies........................... 500 1 501
State and municipal........................ 17,480 348 1 17,827
Mortgage-backed securities................. 864 3 867
Other asset-backed securities.............. 1,761 2 27 1,736
--------- ------ ------ ---------
Total held to maturity................... 20,854 358 28 21,184
--------- ------ ------ ---------
Total investment securities.............. $ 325,726 $4,218 $ 253 $ 329,691
========= ====== ====== =========
Available for sale at December 31, 1997:
U.S. Treasury.............................. $ 19,207 $ 104 $ 11 $ 19,300
Federal agencies........................... 66,783 405 48 67,140
State and municipal........................ 67,842 1,815 28 69,629
Mortgage-backed securities................. 36,682 362 86 36,958
Other asset-backed securities.............. 487 2 54 435
Corporate obligations...................... 18,219 139 30 18,328
Marketable equity securities............... 250 250
--------- ------ ------ ---------
Total available for sale................. 209,470 2,827 257 212,040
--------- ------ ------ ---------
Held to maturity at December 31, 1997:
U.S. Treasury.............................. 249 2 247
Federal agencies........................... 3,412 6 1 3,417
State and municipal........................ 26,206 252 2 26,456
Mortgage-backed securities................. 1,255 4 1 1,258
Other asset-backed securities.............. 4,210 7 166 4,051
--------- ------ ------ ---------
Total held to maturity................... 35,332 269 172 35,429
--------- ------ ------ ---------
Total investment securities.............. $ 244,802 $3,096 $ 429 $ 247,469
========= ====== ====== =========
Page 9
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STATISTICAL DATA (continued)
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ---------
(Dollars in Thousands)
Available for sale at December 31, 1996:
U.S. Treasury.............................. $ 21,570 $ 92 $ 46 $ 21,616
Federal agencies........................... 79,130 540 180 79,490
State and municipal........................ 52,026 1,173 106 53,093
Mortgage-backed securities................. 35,946 297 145 36,098
Other asset-backed securities.............. 6,204 130 6,074
Corporate obligations...................... 31,470 156 128 31,498
Marketable equity securities............... 510 510
--------- ------ ------ ---------
Total available for sale.................. 226,856 2,258 735 228,379
--------- ------ ------ ---------
Held to maturity at December 31, 1996:
U.S. Treasury.............................. 249 7 242
Federal agencies........................... 5,729 23 5 5,747
State and municipal........................ 36,405 381 21 36,765
Mortgage-backed securities................. 1,053 1,053
Other asset-backed securities.............. 3,791 17 121 3,687
--------- ------ ------ ---------
Total held to maturity................... 47,227 421 154 47,494
--------- ------ ------ ---------
Total investment securities.............. $ 274,083 $2,679 $ 889 $ 275,873
========= ====== ====== =========
Cost
----------------------------------
1998 1997 1996
------ ------ ------
Federal Reserve and Federal Home Loan
Bank stock at December 31:
Federal Reserve Bank stock . . . . . . . . $ 397 $ 397 $ 397
Federal Home Loan Bank stock . . . . . . . 3,326 2,976 2,693
------ ------ ------
Total. . . . . . . . . . . . . . . . . $3,723 $3,373 $3,090
====== ====== ======
The Fair value of Federal Reserve and Federal Home Loan Bank stock approximates
cost.
The maturity distribution (dollars in thousands) and average yields for the
securities portfolio at December 31, 1998 were:
Securities available for sale December 31, 1998:
Within 1 Year 1-5 Years 5-10 Years
----------------- ---------------- ----------------
Amount Yield* Amount Yield* Amount Yield*
--------- ------ ------- ------ -------- ------
U.S. Treasury............ $ 19,265 5.39% $ 1,004 6.53%
Federal Agencies......... 13,313 6.35 38,272 5.99 $ 1,013 5.53%
State and Municipal...... 7,547 5.65 47,767 4.53 25,817 5.14
Corporate Obligations.... 12,454 5.50 6,170 6.68
--------- ------- --------
Total................. $ 52,579 5.70% $93,213 5.29% $ 26,830 5.15%
========= ======= ========
Page 10
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STATISTICAL DATA (continued)
Marketable Equity,
Mortgage and Other
Due After Ten Years Asset-Backed Securities Total
------------------- ----------------------- --------------------
Amount Yield* Amount Yield* Amount Yield*
------- ------ -------- ------- ------ ------
U.S. Treasury.................. $ 20,269 5.44%
Federal Agencies............... 52,598 6.07
State and Municipal............ $ 5,406 5.69% 86,537 4.88
Corporate Obligations.......... 18,624 5.89
Marketable Equity Security..... $ 250 7.90% 250 7.90
Mortgage-backed securities..... 126,329 6.23 126,329 6.23
Other asset-backed securities.. 265 6.93 265 6.93
------- -------- --------
Total....................... $ 5,406 5.69% $126,844 6.23% $304,872 5.75%
======= ======== ========
Securities held to maturity at December 31, 1998:
Within 1 Year 1-5 Years 5-10 Years
---------------- ----------------- ----------------
Amount Yield* Amount Yield* Amount Yield*
------ ------ ------- ------ ------ ------
U.S. Treasury.................. $ 249 5.36%
Federal Agencies............... $ 500 6.17%
State and Municipal............ 4,870 5.15 10,492 4.74 $ 1,638 5.10%
------- ------- -------
Total....................... $ 5,370 5.24% $10,741 4.75% $ 1,638 5.10%
======= ======= =======
Mortgage and other
Due After Ten Years asset-backed Total
------------------- ------------------- ------------------
Amount Yield* Amount Yield* Amount Yield*
------- ------ ------ ------ ------ ------
U.S. Treasury................ $ 249 5.36%
Federal Agencies............. 500 6.17
State and Municipal.......... $ 480 5.88% 17,480 4.92
Mortgage-backed securities... $ 864 6.57% 864 6.57
Other asset-backed securities 1,761 7.38 1,761 7.38
------- ------- -------
Total.................... $ 480 5.88% $ 2,625 7.11% $20,854 5.23
======= ======= =======
*Interest yields on state and municipal securities are presented on a fully
taxable equivalent basis using a 35% rate.
Federal Reserve and Federal Home Loan Bank stock at December 31, 1998:
Amount Yield
------ -----
Federal Reserve Bank stock........................ $ 397 6.00%
Federal Home Loan Bank stock...................... 3,326 8.00
------
Total........................................... $3,723 7.79%
======
Page 11
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STATISTICAL DATA (continued)
LOAN PORTFOLIO
TYPES OF LOANS
The loan portfolio at the dates indicated is presented below:
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
(Dollars in Thousands)
Loans at December 31:
Commercial and
industrial loans.................. $ 169,685 $ 148,281 $ 132,134 $ 98,880 $ 89,696
Bankers acceptances and loans
to financial institutions......... 900 705 625 2,925
Agricultural production
financing and other loans
to farmers........................ 16,661 16,764 18,906 17,203 17,255
Real estate loans:
Construction...................... 26,426 21,389 13,167 9,913 8,126
Commercial and farmland........... 95,172 97,503 97,596 104,731 95,092
Residential....................... 302,680 287,072 253,530 215,738 217,148
Individuals' loans for
household and other
personal expenditures............. 128,253 125,706 113,507 102,313 99,812
Tax-exempt loans.................... 2,115 2,598 1,643 1,204 1,514
Other loans......................... 1,217 3,782 1,672 949 1,608
---------- ---------- ---------- ---------- ----------
743,109 703,800 632,780 553,856 530,251
Unearned interest on loans.......... (137) (487) (1,364) (1,518) (1,610)
---------- ---------- ---------- ---------- ----------
Total loans................... $ 742,972 $ 703,313 $ 631,416 $ 552,338 $ 528,641
========== ========== ========== ========== ==========
Residential Real Estate Loans Held for Sale at December 31, 1998, 1997, 1996,
1995, and 1994 were $775,800, $471,400, $284,020, 735,522, and $0.
MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST RATES
Presented in the table below are the maturities of loans (excluding commercial
real estate, banker acceptances, farmland, residential real estate and
individuals' loans) outstanding as of December 31, 1998. Also presented are the
amounts due after one year classified according to the sensitivity to changes in
interest rates.
Maturing
-----------------------------------------------
Within 1-5 Over 5
1 Year Years Years Total
-------- -------- -------- --------
(Dollars in Thousands)
Commercial and industrial loans............ $ 66,367 $ 53,164 $ 50,154 $169,685
Agricultural production financing
and other loans to farmers............... 12,022 3,333 1,306 16,661
Real estate - Construction................. 13,431 5,677 7,318 26,426
Tax-exempt loans........................... 401 367 1,347 2,115
Other loans................................ 978 143 96 1,217
-------- -------- -------- --------
Total ................................ $ 93,199 $ 62,684 $ 60,221 $216,104
======== ======== ======== ========
Page 12
- --------------------------------------------------------------------------------
STATISTICAL DATA (continued)
Maturing
----------------------
1 - 5 Over
Years 5 Years
------- --------
(Dollars in Thousands)
Loans maturing after one
year with:
Fixed rates................ $16,407 $26,627
Variable rate.............. 46,277 33,594
------- -------
Total.................... $62,684 $60,221
======= =======
RISK ELEMENTS
December 31
---------------------------------------------
1998 1997 1996 1995 1994
------- ------- -------- ------- -------
(Dollars in Thousands)
Nonaccruing loans.................... $ 735 $ 1,410 $ 2,777 $ 576 $ 398
Loans contractually past due 90
days or more other than
nonaccruing......................... 2,275 1,972 1,699 1,119 1,322
Restructured loans................... 926 282 1,540 1,075 1,242
Nonaccruing loans are loans which are reclassified to a nonaccruing status when
in management's judgment the collateral value and financial condition of the
borrower do not justify accruing interest. Interest previously recorded but not
deemed collectible is reversed and charged against current income. Interest
income on these loans is then recognized when collected.
Restructured loans are loans for which the contractual interest rate has been
reduced or other concessions are granted to the borrower because of a
deterioration in the financial condition of the borrower resulting in the
inability of the borrower to meet the original contractual terms of the loans.
Interest income of $94,000 for the year ended December 31, 1998, was recognized
on the nonaccruing and restructured loans listed in the table above, whereas
interest income of $163,000 would have been recognized under their original loan
terms.
POTENTIAL PROBLEM LOANS:
Management has identified certain other loans totaling $7,039,000 as of December
31, 1998, not included in the risk elements table, or impaired loan table, about
which there are doubts as to the borrowers' ability to comply with present
repayment terms.
The Banks generate commercial, mortgage and consumer loans from customers
located primarily in central and east central Indiana and Butler County, Ohio.
The Banks'loans are generally secured by specific items of collateral, including
real property, consumer assets, and business assets. Although the Banks have
diversified loan portfolio, a substantial portion of their debtors' ability to
honor their contracts is dependent upon economic conditions in the automotive
and agricultural industries.
Page 13
- --------------------------------------------------------------------------------
STATISTICAL DATA (continued)
SUMMARY OF LOAN LOSS EXPERIENCE
The following table summarizes the loan loss experience for the years indicated.
1998 1997 1996 1995 1994
------- ------- -------- ------- -------
(Dollars in Thousands)
Allowance for loan losses:
Balance at January 1.............. $ 6,778 $ 6,622 $ 6,696 $ 6,603 $ 6,467
Chargeoffs:
Commercial...................... 694 443 767 794 973
Real estate mortgage............ 44 31 14 1 53
Installment..................... 1,143 1,135 855 759 462
------- ------- ------- ------- -------
Total chargeoffs............... 1,881 1,609 1,636 1,554 1,488
------- ------- ------- ------- -------
Recoveries:
Commercial...................... 217 264 106 127 269
Real estate mortgage............ 20 1 7 4 30
Installment..................... 294 203 196 128 123
------- ------- ------- ------- -------
Total recoveries............... 531 468 309 259 422
------- ------- ------- ------- -------
Net chargeoffs.................... 1,350 1,141 1,327 1,295 1,066
------- ------- ------- ------- -------
Provisions for loan losses........ 1,984 1,297 1,253 1,388 1,202
------- ------- ------- ------- -------
Balance at December 31............ $ 7,412 $ 6,778 $ 6,622 $ 6,696 $ 6,603
======= ======= ======= ======= =======
Ratio of net chargeoffs during the
period to average loans
outstanding during the period..... .18% .17% .23% .24% .21%
Peer Group.......................... N/A .29% .26% .26% .25%
Page 14
- --------------------------------------------------------------------------------
STATISTICAL DATA (continued)
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES AT DECEMBER 31:
Presented below is an analysis of the composition of the allowance for loan
losses and per cent of loans in each category to total loans:
1998 1997
------------------- -------------------
Amount Per Cent Amount Per Cent
------ -------- ------ --------
(Dollars in Thousands)
Balance at December 31:
Commercial, financial and
agricultural................. $ 2,375 25.2% $ 2,594 23.6%
Real estate - construction..... 3 3.6 3 3.0
Real estate - mortgage......... 1,057 53.5 1,061 54.7
Installment.................... 2,824 17.4 1,702 18.3
Tax-exempt loans............... 4 .3 4 .4
Unallocated.................... 1,149 N/A 1,414 N/A
------- ------ ------- ------
Totals......................... $ 7,412 100.0% $ 6,778 100.0%
======= ====== ======= ======
1996 1995
------------------- -------------------
Amount Per Cent Amount Per Cent
------ -------- ------ --------
(Dollars in Thousands)
Balance at December 31:
Commercial, financial and
agricultural................. $ 2,924 24.2% $ 3,105 21.8%
Real estate - construction..... 3 2.1 1 1.8
Real estate - mortgage......... 1,041 55.6 1,121 58.0
Installment.................... 1,576 17.8 1,506 18.2
Tax-exempt loans............... 16 .3 4 .2
Unallocated.................... 1,062 N/A 959 N/A
------- ------ ------- ------
Totals......................... $ 6,622 100.0% $ 6,696 100.0%
======= ====== ======= ======
1994
-------------------
Amount Per Cent
------ --------
(Dollars in Thousands)
Balance at December 31:
Commercial, financial and
agricultural................. $ 3,080 20.5%
Real estate - construction..... 4 1.5
Real estate - mortgage......... 1,048 59.1
Installment.................... 1,550 18.6
Tax-exempt loans............... 4 .3
Unallocated.................... 917 N/A
------- ------
Totals......................... $ 6,603 100.0%
======= ======
Page 15
- --------------------------------------------------------------------------------
STATISTICAL DATA (continued)
LOAN LOSS CHARGEOFF PROCEDURES
The Banks have weekly meetings at which loan delinquencies, maturities and
problems are reviewed. The Board of Directors receive and review reports on
loans monthly.
The Executive Committee of First Merchants' Board meets bimonthly to approve or
disapprove all new loans in excess of $1,000,000 and the Board reviews all
commercial loans in excess of $50,000 which were made or renewed during the
preceding month. Pendleton's and First United's loan committees, consisting of
all loan officers and the president, meet as required to approve or disapprove
any loan which is in excess of an individual loan officer's lending limit.
The Loan/Discount Committee of Union County's Board meets monthly to approve or
disapprove all loans to borrowers with aggregate loans in excess of $300,000.
The Loan Committee of Randolph County's Board meets weekly to approve or
disapprove any loan which is in excess of an individual loan officer's lending
limit.
All chargeoffs are approved by the senior loan officer and are reported to the
Banks' Boards. The Banks charge off loans when a determination is made that all
or a portion of a loan is uncollectible or as a result of examinations by
regulators and the independent auditors.
PROVISION FOR LOAN LOSSES
In banking, loan losses are one of the costs of doing business. Although the
Banks' management emphasize the early detection and chargeoff of loan losses, it
is inevitable that at any time certain losses exist in the portfolio which have
not been specifically identified. Accordingly, the provision for loan losses is
charged to earnings on an anticipatory basis, and recognized loan losses are
deducted from the allowance so established. Over time, all net loan losses must
be charged to earnings. During the year, an estimate of the loss experience for
the year serves as a starting point in determining the appropriate level for the
provision. However, the amount actually provided in any period may be greater or
less than net loan losses, based on management's judgment as to the appropriate
level of the allowance for loan losses. The determination of the provision in
any period is based on management's continuing review and evaluation of the loan
portfolio, and its judgment as to the impact of current economic conditions on
the portfolio. The evaluation by management includes consideration of past loan
loss experience, changes in the composition of the loan portfolio, and the
current condition and amount of loans outstanding.
Impaired loans are measured by the present value of expected future cash flows,
or the fair value of the collateral of the loans, if collateral dependent.
Information on impaired loans is summarized below:
1998 1997 1996
---- ---- ----
(Dollars in Thousands)
For the year ending December 31:
Impaired loans with an allowance................ $ 1,946 $ 1,476 $ 3,124
Impaired loans for which the discounted
cash flows or collateral value exceeds the
carrying value of the loan.................... 6,882 1,075 868
------- ------- -------
Total impaired loans........................ $ 8,828 $ 2,551 $ 3,992
======= ======= =======
Allowance for impaired loans (included in the
Corporation's allowance for loan losses)...... $ 712 $ 407 $ 1,092
Average balance of impaired loans............... 8,318 3,414 5,213
Interest income recognized on impaired loans.... 873 180 311
Cash basis interest included above.............. 745 162 291
Page 16
- --------------------------------------------------------------------------------
STATISTICAL DATA (continued)
DEPOSITS
The following table shows the average amount of deposits and average rate of
interest paid thereon for the years indicated.
1998 1997 1996
-------------- -------------- --------------
Amount Rate Amount Rate Amount Rate
------ ---- ------ ---- ------ ----
(Dollars in Thousands)
Balance at December 31:
Noninterest bearing deposits............ $ 97,771 $ 94,759 $ 90,719
NOW accounts............................ 116,026 2.0% 104,620 2.3% 109,792 2.3%
Money market deposit accounts........... 140,015 4.1 105,628 4.0 100,897 3.7
Savings deposits........................ 68,016 2.4 69,633 2.5 70,875 2.7
Certificates of deposit and
other time deposits.................... 434,897 5.5 425,478 5.5 381,378 5.5
-------- -------- --------
Total deposits....................... $856,725 3.9 $800,118 4.0 $753,661 3.9
======== ======== ========
As of December 31, 1998, certificates of deposit and other time deposits of
$100,000 or more mature as follows:
Maturing
----------------------------------------------
3 Months 3-6 6-12 Over 12
or less Months Months Months Total
-------- ------ ------ ------- -----
(Dollars in Thousands)
Certificates of deposit and
other time deposits.................. $ 35,033 $14,426 $22,774 $19,346 $91,579
Per cent............................... 38% 16% 25% 21% 100%
RETURN ON EQUITY AND ASSETS
1998 1997 1996
---- ---- ----
Return on assets (net income divided by
average total assets)......................... 1.45% 1.45% 1.41%
Return on equity (net income divided by
average equity).............................. 12.15 12.28 12.16
Dividend payout ratio (dividends per
share divided by net income per share)....... 50.47 47.93 40.85
Equity to assets ratio (average equity
divided by average total assets)............. 11.90 11.78 11.60
Page 17
- --------------------------------------------------------------------------------
STATISTICAL DATA (continued)
SHORT-TERM BORROWINGS
1998 1997 1996
---- ---- ----
(Dollars in Thousands)
Balance at December 31:
Securities sold under repurchase
agreements(short-term portion)......... $ 20,836 $ 15,398 $ 20,054
Federal funds purchased.................. 17,070 4,070 20,725
U.S. Treasury demand notes............... 2,226 7,361 4,258
-------- -------- --------
Total short-term borrowings......... $ 40,132 $ 26,829 $ 45,037
======== ======== ========
Securities sold under repurchase agreements are borrowings maturing within one
year and are secured by U. S. Treasury and Federal agency obligations.
Pertinent information with respect to short-term borrowings is summarized below:
1998 1997 1996
---- ---- ----
(Dollars in Thousands)
Weighted average interest rate on outstanding balance at December 31:
Securities sold under repurchase
agreements (short-term portion).... 5.07% 5.13% 4.92%
Total short-term borrowings ............ 5.27 5.38 5.78
Weighted average interest rate during the year:
Securities sold under repurchase
agreements (short-term portion).... 5.10 4.99 5.07
Total short-term borrowings ............ 4.99 5.36 5.19
Highest amount outstanding at any month end during the year:
Securities sold under repurchase
agreements (short-term portion).... $27,002 $49,750 $52,221
Total short-term borrowings ............ 61,355 84,860 83,678
Average amount outstanding during the year:
Securities sold under repurchase
agreements (short-term portion).... 24,526 31,327 42,140
Total short-term borrowings ............ 37,854 53,185 51,768
Page 18
ITEM 2. PROPERTIES.
- --------------------------------------------------------------------------------
The headquarters of the Corporation and First Merchants are located in a
five-story building at 200 East Jackson Street, Muncie, Indiana. This building
and eight branch buildings are owned by First Merchants; four remaining branches
of First Merchants are located in leased premises. Twelve automated cash
dispensers are located in leased premises. All of the Corporation's and First
Merchants' facilities are located in Delaware and Madison Counties of Indiana.
The principal offices of Pendleton are located at 100 West State Street,
Pendleton, Indiana. Pendleton also operates three branches. All of Pendleton's
properties are owned by Pendleton and are located in Madison County, Indiana.
Two automated dispensers are located in leased premises.
The principal offices of First United are located at 790 West Mill Street,
Middletown, Indiana. First United also operates two branches. All of First
United's properties are owned by First United and are located in Henry County,
Indiana.
The principal offices of Union County are located at 107 West Union Street,
Liberty, Indiana. This building and two branches are owned by Union National;
one branch is located in leased premises. Three automated cash dispensers are
located in leased premises. All of Union National's facilities are located in
Union, Fayette and Wayne Counties of Indiana.
The principal office of Randolph County is located at 122 West Washington
Street, Winchester, Indiana. This building is owned by Randolph County and is
located in Randolph County, Indiana.
None of the properties owned by the banks are subject to any major encumbrances.
The net investment of the Corporation and subsidiaries in real estate and
equipment at December 31, 1998 was $16,954,400.
ITEM 3. LEGAL PROCEEDINGS.
- --------------------------------------------------------------------------------
There is no pending legal proceeding, other than ordinary routine litigation
incidental to the business of the Corporation or its subsidiaries, of a material
nature to which the Corporation or its subsidiaries is a party or of which any
of their properties are subject. Further, there is no material legal proceeding
in which any director, officer, principal shareholder, or affiliate of the
Corporation, or any associate of any such director, officer or principal
shareholder, is a party, or has a material interest, adverse to the Corporation.
None of the routine legal proceedings, individually or in the aggregate, in
which the Corporation or its affiliates are involved are expected to have a
material adverse impact on the financial position or the results of operations
of the Corporation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- --------------------------------------------------------------------------------
No matters were submitted during the fourth quarter of 1998 to a vote of
security holders, through the solicitation of proxies or otherwise.
Page 19
SUPPLEMENTAL INFORMATION - EXECUTIVE OFFICERS OF THE REGISTRANT.
- --------------------------------------------------------------------------------
The names, ages, and positions with the Corporation and subsidiary banks of all
executive officers of the Corporation are listed below.
Offices with the Corporation Principal Occupation
Name and Age And Subsidiary Banks During Past Five Years
- ------------ ---------------------------- ----------------------
Stefan S. Anderson Chairman of the Board, Chairman of the Board of
64 Chief Executive Officer, the Corporation and First
Corporation; Chairman of the Merchants since 1987;
Board and Chief Executive Chief Executive Officer of
Officer, First Merchants the Corporation since
Bank, N.A. 1982; President of the
Corporation from 1982 to
August 1998, and Chief
Executive Officer of First
Merchants Bank since 1979
Michael L. Cox President, Chief Operating President and Chief
54 Officer and Director, Operating Officer,
Corporation; President, Corporation since
Chief Operating Officer and August 1998 and May, 1994
Director, First Merchants respectively; President
Bank, N.A. and Chief Operating
Officer, First Merchants
since April, 1996;
Director, Corporation and
First Merchants since
December, 1984; President,
Information Services
Group, Ontario Corporation
prior to May 1994
Larry R. Helms Senior Vice President, Senior Vice President,
58 General Counsel and Corporation since 1982;
Secretary, Corporation; General Counsel,
Senior Vice President, First Corporation since 1990 and
Merchants Bank, N.A.; Secretary since January 1,
Director of First United 1997; Senior Vice
Bank; Director of Pendleton President, First Merchants
Banking Company since January 1979;
Director of First United
Bank since 1991 and
Pendleton Banking Company
since 1992
Ted J. Montgomery Senior Vice President and Senior Vice President and
59 Director, Corporation; Director, Corporation
President, Chief Executive since August 1996;
Officer and Director, The President, Union County
Union County National Bank of National Bank since 1983
Liberty and Director since 1981
James L. Thrash Senior Vice President and Senior Vice President and
49 Chief Financial Officer, Chief Financial Officer of
Corporation; Senior Vice the Corporation since
President, First Merchants 1990; Senior Vice
Bank, N.A. President, First Merchants
since 1990
Page 20
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
- --------------------------------------------------------------------------------
The information required under this item is incorporated by reference to page 50
of the Corporation's 1998 Annual Report to Stockholders under the caption
"Stockholder Information," Exhibit 13.
ITEM 6. SELECTED FINANCIAL DATA.
- --------------------------------------------------------------------------------
The information required under this item is incorporated by reference to page 18
of the Corporation's 1998 Annual Report to Stockholders - Financial Review under
the caption "Five-Year Summary of Selected Financial Data," Exhibit 13.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
- --------------------------------------------------------------------------------
The information required under this item is incorporated by reference to page 19
through 27 of the Corporation's 1998 Annual Report to Stockholders - Financial
Review under the caption "Management's Discussion and Analysis," Exhibit 13.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- --------------------------------------------------------------------------------
The information required under this item is incorporated by reference to page 21
and 22 of the corporation's 1998 Annual Report to Stockholders - Financial
Review under the caption "Management's Discussion and Analysis," Exhibit 13.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- --------------------------------------------------------------------------------
The financial statements and supplementary data required under this item are
incorporated herein by reference to page 17 and pages 28 through 47 of the
Corporation's 1998 Annual Report to Stockholders - Financial Review, Exhibit 13.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
- --------------------------------------------------------------------------------
In connection with its audits for the two most recent fiscal years ended
December 31, 1998, there have been no disagreements with the Corporation's
independent certified public accountants on any matter of accounting principles
or practices, financial statement disclosure or audit scope or procedure, nor
have there been any changes in accountants.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
- --------------------------------------------------------------------------------
The information required under this item relating to directors is incorporated
by reference to the Corporation's 1999 Proxy Statement furnished to its
stockholders in connection with an annual meeting to be held April 14, 1999 (the
"1998 Proxy Statement"), under the caption "Election of Directors," which Proxy
Statement has been filed with the Commission. The information required under
this item relating to executive officers is set forth in Part I, "Supplemental
Information - Executive Officers of the Registrant" of this annual report on
Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION.
- --------------------------------------------------------------------------------
The information required under this item is incorporated by reference to the
Corporation's 1999 Proxy Statement, under the captions, "Compensation of
Directors" and "Compensation of Executive Officers," which Proxy Statement has
been filed with the Commission.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- --------------------------------------------------------------------------------
The information required under this item is incorporated by reference to the
Corporation's 1999 Proxy Statement, under the caption, "Security Ownership of
Certain Beneficial Owners and Management," which Proxy Statement has been filed
with the Commission.
Page 21
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- --------------------------------------------------------------------------------
The information required under this item is incorporated by reference to the
Corporation's 1999 Proxy Statement, under the caption "Interest of Management in
Certain Transactions," which Proxy Statement has been filed with the Commission.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
- --------------------------------------------------------------------------------
Exhibit 13
Page
Number
----------
(a)1. Financial Statements:
Independent auditor's report.............................. 17
Consolidated balance sheet at
December 31, 1998 and 1997.............................. 28
Consolidated statement of income,
years ended December 31, 1998,
1997 and 1996........................................... 29
Consolidated statement of comprehensive income,
Years ended December 31, 1998, 1997, and 1996........... 30
Consolidated statement of changes in
stockholders' equity, years ended
December 31, 1998, 1997 and 1996........................ 30
Consolidated statement of cash flows,
years ended December 31, 1998,
1997 and 1996........................................... 31
Notes to consolidated financial
statements.............................................. 32-47
(a)2. Financial statement schedules:
All schedules are omitted because
they are not applicable or not required,
or because the required information is included in the
consolidated financial statements or related notes.
(a)3. Exhibits:
Exhibit No: Description of Exhibit:
- ----------- -----------------------
3.1 First Merchants Corporation Articles of Incorporation and the
Articles and amendment thereto is incorporated by reference to
registrant's Form 10-Q for quarter ended June 30, 1997.
3.2 First Merchants Corporation Bylaws and amendments thereto (same as
above).
10.1 First Merchants Corporation and First Merchants Bank, National
Association Management Incentive Plan is incorporated by reference
to registrant's Form 10-K for year ended December 31, 1996.
10.2 First Merchants Bank, National Association Unfunded Deferred
Compensation Plan, as amended is incorporated by reference to
registrant's Form 10-K for year ended December 31, 1996.
10.3 First Merchants Corporation 1989 Stock Option Plan is incorporated
by reference to Registrant's Registration Statement on Form S-8 (SEC
File No. 33-28901) effective on May 24, 1989.
10.4 First Merchants Corporation 1994 Stock Option Plan is incorporated
by reference to Registrant's Form 10-K for year ended December 31,
1993.
Page 22
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K (continued)
- --------------------------------------------------------------------------------
10.5 First Merchants Corporation Change of Control Agreements are
incorporated by reference to registrant's Form 10-K for year ended
December 31, 1996.
10.6 First Merchants Corporation Unfunded Deferred Compensation Plan is
incorporated by reference to registrant's Form 10-K for year ended
December 31, 1996.
10.7 First Merchants Corporation Supplemental Executive Retirement Plan
and amendments thereto is incorporated by reference to registrant's
Form 10-K for year ended December 31, 1997.
13 1998 Annual Report to Stockholders (except for the Pages and
information thereof expressly incorporated by reference in this Form
10-K, the Annual Report to Stockholders is provided solely for the
information of the Securities and Exchange Commission and is not
deemed "filed" as part of this Form 10-K)
21 Subsidiaries of Registrant
23 Consent of Independent Auditors
27 Financial Data Schedule, year ended December 31, 1998
99.1 Financial statements and independent auditor's report for First
Merchants Corporation Employee Stock Purchase Plan
(b) Reports on Form 8-K:
None
Page 23
Pursuant to the requirements of Section 13 or 15(d) 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, on this 31st day of March,
1999.
FIRST MERCHANTS CORPORATION
By /s/ Stefan S. Anderson
--------------------------------------
Stefan S. Anderson, Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
on Form 10-K has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Capacity Date
- ------------------------------ ------------------------------ ----
/s/ Stefan S. Anderson
- ------------------------------ Director, March 31, 1999
Stefan S. Anderson Principal Executive Officer
/s/ James L. Thrash
- ------------------------------ Principal Financial and March 31, 1999
James L. Thrash Principal Accounting Officer
/s/ Michael L. Cox
- ------------------------------ Director March 31, 1999
Michael L. Cox
/s/ Frank A. Bracken
- ------------------------------ *Director March 31, 1999
Frank A. Bracken
/s/ Thomas B. Clark
- ------------------------------ *Director March 31, 1999
Thomas B. Clark
/s/ David A. Galliher
- ------------------------------ *Director March 31, 1999
David A. Galliher
/s/ Norman M. Johnson
- ------------------------------ *Director March 31, 1999
Norman M. Johnson
/s/ Ted J. Montgomery
- ------------------------------ *Director March 31, 1999
Ted J. Montgomery
/s/ George A. Sissel
- ------------------------------ *Director March 31, 1999
George A. Sissel
Page 24
Signature Capacity Date
- ------------------------------ ------------------------------ ----
/s/ Robert M. Smitson
- ------------------------------ *Director March 31, 1999
Robert M. Smitson
/s/ Michael D. Wickersham
- ------------------------------ *Director March 31, 1999
Michael D. Wickersham
/s/ John E. Worthen
- ------------------------------ *Director March 31, 1999
John E. Worthen
* By James L. Thrash as Attorney-in-Fact pursuant to a limited Power of Attorney
executed by the directors listed above, which Power of Attorney has been filed
with the Securities and Exchange Commission.
By /s/ James L. Thrash
--------------------------------------
James L. Thrash
As Attorney-in-Fact
March 31, 1999
Page 25
INDEX TO EXHIBITS
- --------------------------------------------------------------------------------
(a)3. Exhibits:
Exhibit No: Description of Exhibit:
- ----------- -----------------------
13 1998 Annual Report to Stockholders (Except for the Pages and
information thereof expressly incorporated by reference in this Form
10-K, the Annual Report to Stockholders is provided solely for the
information of the Securities and Exchange Commission and is not
deemed "filed" as part of this Form 10-K.)
21 Subsidiaries of Registrant
23 Consent of Independent Auditors
24 Limited Power of Attorney
27 Financial Data Schedule, year ended December 31, 1998
99.1 Financial statements and independent auditor's report for First
Merchants Corporation Employee Stock Purchase Plan
Page 26