<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 or 15 (d) of THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1997
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 of 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
--- ---
As of August 4, 1997, there were outstanding 6,648,967 common shares,
without par value, of the registrant.
The exhibit index appears on page 18.
This report including the cover page contains a total of 49 pages.
Page 1
<PAGE>
FIRST MERCHANTS CORPORATION
FORM 10-Q
INDEX
PAGE NO.
PART I. Financial information:
Item 1. Financial Statements:
Consolidated Condensed Balance Sheet. . . . . . . . . . . . . . . . .3
Consolidated Condensed Statement of Income . . . . . . . . . . . . .4
Consolidated Condensed Statement of Changes in
Stockholders' Equity. . . . . . . . . . . . . . . . . . . . . . . . .5
Consolidated Condensed Statement of Cash Flows. . . . . . . . . . . .6
Notes to Consolidated Condensed Financial Statements. . . . . . . . .7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . .12
PART II. Other Information:
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . .18
Item 6. Exhibits and Reports of Form 8-K. . . . . . . . . . . . . . . . . . .18
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Page 2
<PAGE>
FIRST MERCHANTS CORPORATION
FORM 10-Q
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEET
(Dollars in thousands, except per share amounts)
(Unaudited)
June 30, December 31,
1997 1996
----------- -----------
ASSETS:
Cash and due from banks . . . . . . . . . . $ 36,072 $ 33,882
Federal funds sold . . . . . . . . . . . . 1,150
----------- -----------
Cash and cash equivalents 36,072 35,032
Interest-bearing deposits 481 290
Investment securities available for sale 226,319 228,379
Investment securities held to maturity 39,794 47,227
Mortgage loans held for sale 491 284
Loans . . . . . . . . . . . . . . . . . . . 680,406 631,416
Less: Allowance for loan losses . . . . (6,710) (6,622)
----------- -----------
Net loans 673,696 624,794
Premises and equipment . . . . . . . . . . . 15,458 15,303
Federal Reserve and Federal Home
Loan Bank stock . . . . . . . . . . . . . 3,205 3,090
Interest receivable . . . . . . . . . . . . 8,979 8,643
Core deposit intangibles and goodwill . . . 1,649 1,714
Others assets. . . . . . . . . . . . . . . . 4,291 3,237
----------- -----------
Total assets . . . . . . . . . . . . . . $1,010,435 $ 967,993
----------- -----------
----------- -----------
LIABILITIES:
Deposits:
Noninterest-bearing . . . . . . . . . . . $ 99,870 $ 110,175
Interest-bearing . . . . . . . . . . . . . 721,198 684,276
----------- -----------
Total deposits . . . . . . . . . . . . 821,068 794,451
Short-term borrowings . . . . . . . . . . 49,120 45,037
Federal Home Loan Bank advances . . . . . 16,700 9,150
Interest payable . . . . . . . . . . . . . 3,689 3,376
Other liabilities . . . . . . . . . . . . 2,947 3,292
----------- -----------
Total liabilities . . . . . . . . . . . 893,524 855,306
STOCKHOLDERS' EQUITY:
Preferred stock, no-par value:
Authorized and unissued -- 500,000 shares
Common stock, $.125 stated value:
Authorized --- 20,000,000 shares
Issued and outstanding --
6,632,049 and 6,603,319 shares . . . 829 825
Additional paid-in capital . . . . . . . . 23,376 22,968
Retained earnings. . . . . . . . . . . . . 91,938 87,978
Net unrealized gain on securities
available for sale . . . . . . . . . 768 916
----------- -----------
Total stockholders' equity . . . . . . 116,911 112,687
----------- -----------
Total liabilities and stockholders'
equity . . . . . . . . . . . . . . . $1,010,435 $ 967,993
----------- -----------
----------- -----------
See notes to consolidated condensed financial statements.
Page 3
<PAGE>
FIRST MERCHANTS CORPORATION
FORM 10-Q
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1997 1996 1997 1996
-------- -------- -------- --------
Interest Income:
Loans receivable
Taxable . . . . . . . . . $ 14,923 $ 12,670 $ 28,716 $ 25,150
Tax exempt . . . . . . . 30 19 59 37
Investment securities:
Taxable . . . . . . . . . 2,858 3,168 5,807 6,458
Tax exempt . . . . . . . 1,082 945 2,121 1,856
Federal funds sold . . . . . . 117 27 387
Deposits with financial
institutions. . . . . . . 3 3 6 8
Federal Reserve and
Federal Home Loan Bank stock 84 70 128 106
-------- -------- -------- --------
Total interest income . . 18,980 16,992 36,864 34,002
Interest expense:
Deposits . . . . . . . . . . . 7,828 7,140 15,330 14,505
Short-term borrowings . . . . 864 576 1,572 1,123
Federal Home Loan Bank advances 209 140 342 265
-------- -------- -------- --------
Total interest expense . 8,901 7,856 17,244 15,893
-------- -------- -------- --------
Net Interest Income . . . . . . 10,079 9,136 19,620 18,109
Provision for loan losses . . . 290 300 577 580
-------- -------- -------- --------
Net Interest Income After
Provision For Loan Losses 9,789 8,836 19,043 17,529
Other Income:
Net realized gains (losses)
on sales of available-
for-sale securities . . . (9) 9 1 26
Other income . . . . . . 2,360 2,000 4,463 3,955
-------- -------- -------- --------
Total other income . . . . . . . 2,351 2,009 4,464 3,981
Total other expenses . . . . . . 6,431 5,888 12,618 11,710
-------- -------- -------- --------
Income before income tax . . . . 5,709 4,957 10,889 9,800
Income tax expense . . . . . . . 2,002 1,684 3,753 3,340
-------- -------- -------- --------
Net Income . . . . . . . . . . . $ 3,707 $ 3,273 $ 7,136 $ 6,460
-------- -------- -------- --------
-------- -------- -------- --------
Per share:
Net income. . . . . . . . $ .56 $ .50 $ 1.08 $ .99
Dividends (1) . . . . . . .24 .20 .48 .40
Weighted average shares
outstanding . . . . . . .6,618,723 6,570,648 6,611,867 6,567,589
(1) Dividends per share is for First Merchants Corporation only, not restated
for pooling transactions.
See notes to consolidated condensed financial statements.
Page 4
<PAGE>
FIRST MERCHANTS CORPORATION
FORM 10-Q
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Dollar amounts in thousands)
(Unaudited)
1997 1996
---------- ----------
Balances, January 1 . . . . . . . . . . . . . . $ 112,687 $ 104,967
Net income. . . . . . . . . . . . . . . . . . . 7,136 6,460
Cash dividends. . . . . . . . . . . . . . . . . (3,176) (2,242)
Net change in unrealized gain (loss) on
securities available for sale . . . . . . . . (148) (2,126)
Stock issued under dividend reinvestment and
stock purchase plan . . . . . . . . . . . . . 345 235
Stock options exercised . . . . . . . . . . . . 67 46
---------- ----------
Balances, June 30. . . . . . . . . . . . . . . . $ 116,911 $ 107,340
---------- ----------
---------- ----------
See notes to consolidated condensed financial statements.
Page 5
<PAGE>
FIRST MERCHANTS CORPORATION
FORM 10-Q
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Dollar amounts in thousands)
(Unaudited)
Six Months Ended
June 30
-------------------------
1997 1996
---------- ----------
Cash Flows From Operating Activities:
Net income. . . . . . . . . . . . . . . . . . $ 7,136 $ 6,460
Adjustments to reconcile net income to net
cash provided by operating activities
Provision for loan losses . . . . . . . . 577 580
Depreciation and amortization . . . . . . 887 790
Securities amortization, net. . . . . . . 148 311
Securities losses (gains), net. . . . . . (1) (26)
Mortgage loans originated for sale. . . . (1,762) (464)
Proceeds from sales of mortgage loans . . 1,586 1,212
Change in interest receivable . . . . . . (252) 77
Change in interest payable. . . . . . . . 313 116
Other adjustments . . . . . . . . . . . . (194) (854)
---------- ----------
Net cash provided by operating
activities . . . . . . . . . . . . . 8,438 8,202
Cash Flows From Investing Activities:
Net change in interest-bearing deposits . . . (191) 103
Purchases of
Securities available for sale . . . . . . (35,638) (69,509)
Securities held to maturity . . . . . . . (1,301) (18,472)
Proceeds from maturities of
Securities available for sale . . . . . . 33,763 60,201
Securities held to maturity . . . . . . . 9,271 25,892
Proceeds from sales of
Securities available for sale . . . . . . 3,289 4,521
Net change in loans . . . . . . . . . . . . . (51,256) (34,015)
Purchases of premises and equipment . . . . . (1,041) (717)
Other investing activities. . . . . . . . . . 220 180
---------- ----------
Net cash used by investing activities . . (42,884) (31,816)
(continued)
Page 6
<PAGE>
FIRST MERCHANTS CORPORATION
FORM 10-Q
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Dollar amounts in thousands)
(Unaudited)
Six Months Ended
June 30
-------------------------
1997 1996
---------- ----------
Cash Flows From Financing Activities:
Net change in
Demand and savings deposits. . . . . . . $ (7,144) $ (17,379)
Certificates of deposit and other
time deposits. . . . . . . . . . . . . 33,761 5,922
Short-term borrowings. . . . . . . . . . 4,083 11,009
Federal Home Loan Bank advances. . . . . . . 7,550 6,000
Repayment of Federal Home Loan Bank
advances . . . . . . . . . . . . . . . . . (6,000)
Cash dividends . . . . . . . . . . . . . . . (3,176) (2,242)
Stock issued under dividend reinvestment
and stock purchase plan. . . . . . . . . . 345 235
Stock options exercised. . . . . . . . . . . 67 46
---------- ----------
Net cash used by financing activities . . 35,486 (2,409)
---------- ----------
Net Change in Cash and Cash Equivalents . . . . 1,040 (26,023)
Cash and Cash Equivalents, January 1. . . . . . 35,032 77,874
---------- ----------
Cash and Cash Equivalents, June 30. . . . . . . $ 36,072 $ 51,851
---------- ----------
---------- ----------
See notes to consolidated condensed financial statements.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
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, except for the change in method of accounting discussed
more fully in Note 2. 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.
NOTE 2. Change in Methods of Accounting
Statement of Financial Accounting Standards ("SFAS") No. 125, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities, was adopted by the Corporation on January 1, 1997. SFAS No. 125
provides consistent standards for distinguishing transfers of financial
assets that are sales from transfers that are considered secured borrowings.
A transfer of financial assets in which the transferor surrenders control
over those assets is accounted for as a sale to the extent that consideration
other than beneficial interests in the transferred assets is received in
exchange. The transferor has surrendered control over transferred assets
only if all specific conditions are met. This Statement provides detailed
measurement standards for assets and liabilities included in these
transactions. The adoption of this Statement had no material impact on the
Corporation's financial condition and results of operations.
Page 7
<PAGE>
FIRST MERCHANTS CORPORATION
FORM 10-Q
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Table dollar amounts in thousands, except per share amounts)
(Unaudited)
NOTE 3. Business Combinations
On August 1, 1996, the Corporation issued 942,685 shares of its common stock
in exchange for all of the outstanding shares of Union National Bancorp,
Liberty, Indiana. On October 2, 1996, the Corporation issued 565,705 shares
of its common stock in exchange for all of the outstanding shares of Randolph
County Bancorp, Winchester, Indiana. These transactions were accounted for
under the pooling-of-interests method of accounting. The financial
information contained herein reflects the mergers and reports the financial
condition and results of operations as though the Corporation had been
combined as of January 1, 1996. Separate operating results of Union National
Bancorp and Randolph County Bancorp for the periods prior to the merger were
as follows:
Three Months Six Months
Ended Ended
June 30 June 30
1996 1996
------------ ------------
Net Interest Income:
First Merchants Corporation. . . . . . $ 7,176 $ 14,200
Union National Bancorp . . . . . . . . 1,273 2,514
Randolph County Bancorp. . . . . . . . 687 1,395
------------ ------------
Combined. . . . . . . . . . . . . $ 9,136 $ 18,109
------------ ------------
------------ ------------
Net Income:
First Merchants Corporation. . . . . . $ 2,580 $ 5,159
Union National Bancorp . . . . . . . . 465 836
Randolph County Bancorp. . . . . . . . 228 465
------------ ------------
Combined. . . . . . . . . . . . . $ 3,273 $ 6,460
------------ ------------
------------ ------------
Net Income Per Share:
First Merchants Corporation. . . . . . $ .40 $ .79
Union National Bancorp . . . . . . . . .07 .13
Randolph County Bancorp. . . . . . . . .03 .07
------------ ------------
Combined. . . . . . . . . . . . . $ .50 $ .99
------------ ------------
------------ ------------
Page 8
<PAGE>
FIRST MERCHANTS CORPORATION
FORM 10-Q
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Table dollar amounts in thousands)
(Unaudited)
NOTE 4. Investment Securities
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Available for sale at June 30, 1997:
U.S. Treasury. . . . . . . . . . . . . . $ 19,834 $ 60 $ 36 $ 19,858
Federal agencies . . . . . . . . . . . . 81,858 333 180 82,011
State and municipal . . . . . . . . . . 61,156 1,140 144 62,152
Mortgage-backed securities . . . . . . . 37,860 353 236 37,977
Other asset-backed securities . . . . . 540 7 13 534
Corporate obligations . . . . . . . . . 23,277 83 85 23,275
Marketable equity security . . . . . . . 512 512
---------- ---------- ---------- ----------
Total available for sale . . . . . . . 225,037 1,976 694 226,319
---------- ---------- ---------- ----------
Held to maturity at June 30, 1997:
U.S. Treasury . . . . . . . . . . . . . 249 7 242
Federal agencies . . . . . . . . . . . . 3,421 11 4 3,428
State and municipal . . . . . . . . . . 30,540 191 23 30,708
Mortgage-backed securities . . . . . . . 4,013 9 4,004
Other asset-backed securities . . . . . 1,571 120 1,451
---------- ---------- ---------- ----------
Total held to maturity . . . . . . . . 39,794 202 163 39,833
---------- ---------- ---------- ----------
Total investment securities . . . . . $ 264,831 $ 2,178 $ 857 $ 266,152
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
Page 9
<PAGE>
FIRST MERCHANTS CORPORATION
FORM 10-Q
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Table dollar amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
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 . . . . . . 41,441 297 275 41,463
Other asset-backed securities . . . . 709 709
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 . . . . . . 2,730 13 2,717
Other asset-backed securities . . . . 2,114 17 108 2,023
---------- ---------- ---------- ----------
Total held to maturity . . . . . . 47,227 421 154 47,494
---------- ---------- ---------- ----------
Total investment securities . . . . $ 274,083 $ 2,679 $ 889 $ 275,873
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
Page 10
<PAGE>
FIRST MERCHANTS CORPORATION
FORM 10-Q
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Table dollar amounts in thousands)
(Unaudited)
NOTE 5. Loans and Allowance
<TABLE>
<CAPTION>
June December 31,
1997 1996
-------- -------------
<S> <C> <C>
Loans:
Commercial and industrial loans . . . . . . . . . . . . . . . . . . . . . $ 139,938 $ 132,134
Bankers' acceptances and loans to financial institutions . . . . . . . . . 1,040 625
Agricultural production financing and other loans to farmers . . . . . . . 17,839 18,906
Real estate loans:
Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,005 13,167
Commercial and farmland . . . . . . . . . . . . . . . . . . . . . . . . 102,734 97,596
Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 276,320 253,530
Individuals' loans for household and other personal expenditures . . . . . 122,876 113,507
Tax-exempt loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,334 1,643
Other loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,128 1,672
Unearned interest on loans . . . . . . . . . . . . . . . . . . . . . . . . (808) ( 1,364)
--------- ------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 680,406 $ 631,416
--------- ------------
--------- ------------
Six Months Ended
June 30
------------------------
Allowance for loan losses: 1997 1996
---------- ----------
Balances, January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,622 $ 6,696
Provision for losses . . . . . . . . . . . . . . . . . . . . . . . . . . . 577 580
Recoveries on loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 331 144
Loans charged off . . . . . . . . . . . . . . . . . . . . . . . . . . . . (820) (789)
---------- ----------
Balances, June 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,710 $ 6,631
---------- ----------
---------- ----------
</TABLE>
Page 11
<PAGE>
FIRST MERCHANTS CORPORATION
FORM 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Corporation's financial data for periods prior to mergers accounted
for as pooling of interests has been restated.
RESULTS OF OPERATIONS
The Corporation has recorded 21 consecutive years of growth in earnings
per share, reaching $2.00 in 1996, an increase of 8.7 per cent over 1995.
Return on assets rose to 1.41 per cent in 1996, from 1.35 per cent in
1995, and 1.22 per cent in 1994.
Return on equity, was 12.16 per cent in 1996, 12.17 per cent in 1995,
and 12.42 per cent in 1994.
Following are the levels achieved in each of these ratios during the
first half of 1997, as compared to the same period in 1996.
- Earnings per share were $1.08, up 9.1 per cent from $.99
- Return on assets was 1.46 per cent increasing from 1.41 per cent
- Return on equity totaled 12.47 per cent compared to 12.19 per cent for
the first half of 1996
CAPITAL
The Corporation's capital strength continues to exceed regulatory
minimums and peer group averages. Management believes that strong capital is
a distinct advantage in the competitive environment in which the Corporation
operates and will provide a solid foundation for continued growth.
The Corporation's Tier I capital to average assets ratio was 11.6 per
cent at year-end 1996 and 11.7 per cent at June 30, 1997. At June 30, 1997,
the Corporation had a Tier I risk-based capital ratio of 16.7 per cent, total
risk-based capital ratio of 17.68 per cent, and a leverage ratio of 11.53 per
cent. Regulatory capital guidelines require a Tier I risk-based capital ratio
of 4.0 per cent and a total risk-based capital ratio of 8.0 per cent.
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 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 cannot be specifically identified.
Page 12
<PAGE>
FIRST MERCHANTS CORPORATION
FORM 10-Q
The following table summarized the risk elements for the Corporation.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands) June 30, December 31, December 31,
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Non-accrual loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,527 $2,777 $ 576
Loans contractually past due 90 days
or more other than nonaccruing . . . . . . . . . . . . . . . . . . . . . 3,705 1,699 1,119
Restructured loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,237 1,540 1,075
------ ------ ------
Total $8,469 $6,016 $2,770
------ ------ ------
------ ------ ------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The increase in non-performing loans from December 31, 1995, to December
31, 1996, is primarily attributable to one loan placed in non-accrual status
during 1996. This loan is included in impaired loans at December 31, 1996,
for which an allowance was recorded. Management is in the process of
resolving this loan situation and anticipates that no additional provision
for loan losses will be required. The increase at June 30, 1997, is
primarily due to one loan of $1.7 million which is performing but which the
Corporation refused to renew. The Corporation will be paid when financing
arrangements with another bank are completed.
The Corporation adopted SFAS No. 114 and No. 118 ACCOUNTING BY CREDITORS
FOR IMPAIRMENT OF A LOAN AND ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A
LOAN-INCOME RECOGNITION AND DISCLOSURES on January 1, 1995. Impaired loans
included in the table above, totaled $3,992,000 at December 31, 1996. An
allowance for loan losses was not deemed necessary for impaired loans
totaling $868,000, but an allowance of $1,092,000 was recorded for the
remaining balance of impaired loans of $3,124,000. The average balance of
impaired loans for 1996 was $5,213,000. The balance of impaired loans has
not changed significantly since December 31, 1996.
At December 31, 1996, the allowance for loan losses was $6,622,000, down
slightly from year end 1995. As a per cent of loans, the allowance was 1.05
per cent, down from 1.21 per cent at year end 1995. The provision for loan
losses in 1996 was $1,253,000 compared to $1,388,000 in 1995.
At June 30, 1997, the allowance for loan losses stood at $6,710,000 or
.99 per cent of loans. $577,000 was provided for loan losses in the first
half of 1997 compared to $580,000 in the same period of 1996.
The table below presents loan loss experience for the years indicated
and compares the Corporation's loss experience to that of its peer group,
consisting of bank holding companies with assets between $500 million and $1
billion.
<TABLE>
<CAPTION>
1997 (1) 1996 1995 1994
-------- ------ ------ ------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Allowance for loan losses:
Balance at January 1 . . . . . . . . . . . . . . . . $6,622 $6,696 $6,603 $6,467
------ ------ ------ ------
Chargeoffs . . . . . . . . . . . . . . . . . . . . . 820 1,636 1,554 1,488
Recoveries . . . . . . . . . . . . . . . . . . . . . 331 309 259 422
------ ------ ------ ------
Net chargeoffs . . . . . . . . . . . . . . . . . . . 489 1,327 1,295 1,066
Provision for loan losses . . . . . . . . . . . . . 577 1,253 1,388 1,202
------ ------ ------ ------
Balance at December 31 . . . . . . . . . . . . . . . $6,710 $6,622 $6,696 $6,603
------ ------ ------ ------
------ ------ ------ ------
Ratio of net chargeoffs during the period to average loans
outstanding during the period . . . . . . . . . . . . .15% (2) .23% .24% .21%
Peer Group . . . . . . . . . . . . . . . . . . . . . . N/A .26% .26% .25%
(1) Through June 30, 1997
(2) First six months annualized
</TABLE>
Page 13
<PAGE>
FIRST MERCHANTS CORPORATION
FORM 10-Q
LIQUIDITY AND INTEREST SENSITIVITY
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 ensure that changes in interest rates will
not adversely 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.
The Corporation's liquidity and interest sensitivity position at June
30, 1997, remained adequate to meet the Corporation's primary goal of
achieving optimum interest margins while avoiding undue interest rate risk.
The table below presents the Corporation's interest rate sensitivity analysis
as of June 30, 1997.
<TABLE>
<CAPTION>
INTEREST-RATE SENSITIVITY ANALYSIS
At June 30, 1997
(Dollars in Thousands) Beyond
1-180 Days 181-365 Days 1-5 Years 5 Years Total
---------- ------------ --------- ------- ---------
<S> <C> <C> <C> <C> <C>
Rate-Sensitive Assets:
Federal funds sold and
interest-bearing deposits . . . . . . . . $ 481 $ 481
Investment securities . . . . . . . . . . 57,463 $ 51,208 $ 126,091 $ 31,351 266,113
Loans . . . . . . . . . . . . . . . . . . 310,511 76,688 230,062 63,636 680,897
Federal Reserve and Federal
Home Loan Bank stock . . . . . . . . . . 2,808 397 3,205
--------- --------- --------- --------- -------
Total rate-sensitive assets. . . . . . . 371,263 127,896 356,153 95,384 950,696
Rate-Sensitive Liabilities:
Interest bearing deposits . . . . . . . . 336,435 78,755 303,913 2,095 721,198
Short-term borrowings . . . . . . . . . . 48,425 695 49,120
Federal Home Loan Bank
advances . . . . . . . . . . . . . . . . 149 2,144 9,578 4,829 16,700
-------- -------- -------- -------- -------
Total rate-sensitive liabilities . . . . 385,009 81,594 313,491 6,924 787,018
Interest rate sensitivity gap by period . . (13,746) 46,302 42,662 88,460
Cumulative rate sensitivity gap . . . . . . (13,746) 32,556 75,218 163,678
Cumulative rate sensitivity gap ratio. . . .
June 30, 1997 . . . . . . . . . . . . . . 96.4% 107.0% 109.6% 120.8%
March 31, 1997 . . . . . . . . . . . . . . 97.1 106.3 109.2 120.1
</TABLE>
The Corporation had a cumulative positive gap of $32,556,000 in the one
year horizon at June 30, 1997 or 3.2 per cent of total assets. Net interest
income at financial institutions with positive gaps tends to increase when
rates increase and generally decrease as interest rates decline.
Page 14
<PAGE>
FIRST MERCHANTS CORPORATION
FORM 10-Q
EARNING ASSETS
Earning assets increased by $30.3 million during 1996, and $38.9 million
during the first half of 1997.
The following table presents the earning asset mix for the years ended
1996 and 1995 and at June 30, 1997.
Loans grew by more than $79 million during 1996 while short-term
investments and securities declined, reflecting the Corporation's intent to
change the balance sheet mix to emphasize loans which generally carry higher
yields than federal funds sold, interest-bearing deposits and investment
securities and often provide collateral business. The same trend continued
during the first half of 1997. Loans grew by more than $49.5 million,
accounting for all of the growth in earning assets.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
EARNING ASSETS
(Dollars in Millions) June 30, December 31, December 31,
1997 1996 1995
-------- ------------ ------------
<S> <C> <C> <C>
Federal funds sold and interest-bearing deposits . . . . $ 0.5 $ 1.4 $ 39.2
Investment securities available for sale . . . . . . . . 226.3 228.4 225.9
Investment securities held to maturity . . . . . . . . . 39.8 47.2 60.7
Mortgage loans held for sale . . . . . . . . . . . . . . 0.5 0.3 0.7
Loans . . . . . . . . . . . . . . . . . . . . . . . . . 680.4 631.4 552.3
Federal Reserve and Federal Home Loan Bank stock . . . . 3.2 3.1 2.7
------- --------- -----------
Total . . . . . . . . . . . . . . . . . . . . . $ 950.7 $ 911.8 $ 881.5
------- ---------- --------
------- ---------- --------
- ---------------------------------------------------------------------------------------------------
</TABLE>
DEPOSITS, SHORT-TERM BORROWINGS AND FEDERAL HOME LOAN BANK ADVANCES
The following table presents the level of deposits and borrowed funds
(Federal funds purchased, repurchase agreements with customers, U.S. Treasury
demand notes and Federal Home Loan Bank advances) for the years ended 1996
and 1995 and at June 30, 1997. Lack of substantial deposit growth coupled
with loan growth has resulted in a greater reliance on borrowed funds. The
Corporation plans to place further emphasis on deposit growth going forward
through advertising and product development.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DEPOSITS, SHORT-TERM BORROWINGS AND
FEDERAL HOME LOAN BANK ADVANCES
(Dollars in Millions) June 30, December 31, December 31,
1997 1996 1995
-------- ------------ ------------
<S> <C> <C> <C>
Deposits . . . . . . . . . . . . . . . . . . . . . . . . $ 821.1 $ 794.5 $ 783.9
Short-term borrowings . . . . . . . . . . . . . . . . . 49.9 45.0 37.4
Federal Home Loan Bank advances . . . . . . . . . . . . 16.7 9.2 9.0
</TABLE>
Page 15
<PAGE>
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.
Asset yields improved slightly in 1996 (.04 per cent FTE) due to strong
loan growth. Interest costs declined by a like amount, primarily due to rate
reductions to three interest-bearing deposit products: interest checking,
Money Market investment account and regular savings.
The resulting "spread" increase of .08 per cent combined with earning
asset growth of $35.5 million accounted for the growth in net interest income
(FTE) of $2.2 million.
During the first half of 1997, both interest yields and interest costs
remained stable, increasing by .03 per cent. All of the increase in net
interest income is attributable to earning asset growth which amounted to
nearly $52 million.
The table below presents the Corporation's asset yields, interest
expense, and net interest income as a per cent of average earning assets for
the three-year period ending in 1996 and the first half of 1997.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
Interest Income Interest Expense Net Interest Income Net Interest Income
(FTE) as a Per Cent as a Per Cent (FTE) as a Per Cent Average on a
of Average of Average of Average Earning Fully Taxable
Earning Assets Earning Assets Earning Assets Assets Equivalent Basis
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997 (1) 8.16% 3.70 % 4.46% $932,441 $ 41,588
1996 8.13 3.67 4.46 880,729 39,258
1995 8.09 3.71 4.38 845,198 37,049
1994 7.42 2.96 4.46 805,987 35,909
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.
(1) First Six Months Annualized
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
OTHER INCOME
The Corporation has placed emphasis on the growth of non-interest income
in recent years by offering a wide range of fee-based services. Fee
schedules are regularly reviewed by a pricing committee to ensure that the
products and services offered by the Corporation are priced to be competitive
and profitable.
Other income in 1996 amounted to $8,342,000 or 9.9 per cent higher than
in 1995. The increase of $750,000 is primarily attributable to the following
five factors:
1. Trust revenues increased $166,000 (5.9 per cent) due to stronger
business activity and investment returns.
2. Deposit service charges increased $195,000 (6.9 per cent) primarily
due to changes in pricing.
3. Interchange fees for the Corporation's credit and debit card
programs grew by $169,000 (142 per cent) due to increased product
offerings.
4. The Corporation recorded securities gains of $148,000 compared to
losses of $30,000 last year, an increase of $178,000 as shorter
maturity, available for sale securities were sold at gains and
longer maturity, higher yielding investments were purchased.
5. Postal money order agent fees increased $79,000 (19.4 per cent) due
to an increased client base.
Page 16
<PAGE>
FIRST MERCHANTS CORPORATION
FORM 10-Q
Other income in the first half of 1997 exceeded the same period in the
prior year by $487,000 or 8.1 per cent. Two categories accounted for most of
this increase:
1. Trust fees grew by $203,000 or 14.5 per cent, again due to new
business and positive investment returns.
2. Deposit service charges increased by $154,000 or 9.8 per cent due
primarily to changes in pricing.
OTHER EXPENSE
Total "other expenses" represent non-interest operating expenses of the
Corporation. Those expenses amounted to $24,135,000 in 1996, an increase of 5.0
per cent from the prior year, or $1,142,000.
Including an $813,000 reduction in deposit insurance premiums, remaining
operating expenses grew by $1,955,000. Four major areas account for most of
this increase:
1. Salary and benefit expenses, which account for over one-half of the
Corporation's non-interest operating expenses, increased by $640,000
(5.0 per cent) due to normal salary increases.
2. Equipment expense rose $223,000, reflecting the Corporation's
investment in technology to increase productivity and improve
customer service.
3. Expenses related to mergers with Union National Bancorp and Randolph
County Bancorp amounted to $258,000.
4. The previous year included a $238,000 refund from the State of
Indiana for intangibles taxes paid in 1988 and 1989.
First half other expense in 1997 exceeded the same period of the prior
year by $908,000 or 7.8 per cent. Four primary areas account for this
increase:
1. Salaries and benefits grew by $277,000 or 4.1 per cent due primarily
to normal annual salary adjustments.
2. Business supply expense grew by $85,000 or nearly 20.4 per cent
primarily due to increased use of data processing supplies and
personal money order forms.
3. Equipment expense grew $114,000 or 11.4 per cent, again reflecting
the Corporation's investment in technology to increase productivity
and improve customer service.
4. Deposit insurance expense increased $40,000 (571.4 per cent) due to
higher insurance premiums.
INCOME TAXES
1996 income tax expense increased by $698,000 due to a $1,792,000
increase in net pre-tax income. Likewise, the increase of $413,000 in the
first half of 1997, as compared to the same period in 1996, results from a
$1,089,000 increase in pre-tax net income.
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 the address is (http://www.sec.gov).
Page 17
<PAGE>
FIRST MERCHANTS CORPORATION
FORM 10-Q
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1997 Annual Meeting of Stockholders was held on April 8, 1997. Set
forth below are the matters, other than the election of directors and the
ratification of the independent auditor, voted upon at the Annual Meeting and
the resulting vote:
- The adoption of an amendment to the Corporation's Articles of
Incorporation to reduce the minimum number of directors to the
Corporation from twelve to nine.
Shares % of
Voted Eligible Shares Voted
--------- ---------------------
For 6,015,368 91.09%
Against 47,694 .72
Abstaining 56,191 .85
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Form 10-Q
Page
Exhibit No.: Description of Exhibit: Number
------------ ----------------------- ----------
3.1 First Merchants Corporation
Articles of Incorporation, as amended . . . 20
3.2 First Merchants Corporation
Bylaws, as amended. . . . . . . . . . . . . 32
27.1 Financial Data Schedule, Period
Ending June 30, 1997 . . . . . . . . . . . 47
27.2 Restated Financial Data Schedule, Period
Ending June 30, 1996 . . . . . . . . . . . 48
27.3 Restated Financial Data Schedule, Period
Ending June 30, 1995 . . . . . . . . . . . 49
(b) Reports on Form 8-K:
No reports were filed on Form 8-K during the quarter ended June 30,
1997.
Page 18
<PAGE>
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 August 6, 1997 by /s/ Michael L. Cox
------------------- -------------------------------
Michael L. Cox
Executive Vice President
and Director
Date August 6, 1997 by /s/ James L. Thrash
------------------- -------------------------------
James L. Thrash
Chief Financial & Principal
Accounting Officer
Page 19
<PAGE>
ARTICLES OF INCORPORATION
OF
FIRST MERCHANTS CORPORATION
Following are the Articles of Incorporation, 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
NAME
The name of the Corporation is First Merchants Corporation.
ARTICLE II
PURPOSES
The purposes for which the Corporation is formed are:
SECTION 1. To acquire control of The Merchants National Bank of Muncie and
to operate as a bank holding company.
SECTION 2. GENERAL POWERS. To possess, exercise, and enjoy all rights,
powers and privileges conferred upon bank holding companies by the Bank
Holding Company Act of 1956 as amended and as hereafter amended or
supplemented, and all other rights and powers authorized by the laws of the
State of Indiana, and the laws of the United States of America applicable to
bank holding companies and the regulations of the Board of Governors of the
Federal Reserve System.
SECTION 3. TO DEAL IN REAL PROPERTY. Subject to the limitations of
Section 2 above, to acquire by purchase, exchange, lease or otherwise, and to
hold, own, use, construct, improve, equip, manage, occupy, mortgage, sell,
lease, convey, exchange or otherwise dispose of, alone or in conjunction with
others, real estate and leaseholds of every kind, character and description
whatsoever and wheresoever situated, and any other interests therein,
including, but without limiting the generality thereof, buildings, factories,
warehouses, offices and structures of all kinds.
SECTION 4. CAPACITY TO ACT. Subject to the limitations of Section 2
above, to have the capacity to act possessed by natural persons and to
perform such acts as are necessary and advisable to accomplish the purposes,
activities and business of the Corporation.
SECTION 5. TO ACT AS AGENT. Subject to the limitations of Section 2
above, to act as agent or representative for any firm, association, corporation,
partnership, government or person, public or private, with respect to any
activity or business of the Corporation.
<PAGE>
SECTION 6. TO MAKE CONTRACTS AND GUARANTEES. Subject to the
limitations of Section 2 above, to make, execute and perform, or cancel and
rescind, contracts of every kind and description, including guarantees and
contracts of suretyship, with any firm, association, corporation,
partnership, government or person, public or private.
SECTION 7. TO BORROW FUNDS. Subject to the limitations of Section 2
above, to borrow moneys for any activity or business of the Corporation and,
from time to time, without limit as to amount, to draw, make, accept,
endorse, execute and issue promissory notes, drafts, bills of exchange,
warrants, bonds, debentures, notes, trust receipts, and other negotiable or
non-negotiable instruments and evidences of indebtedness, and to secure the
payment thereof, and the interest thereon, by mortgage, pledge, conveyance,
or assignment in trust of all or any part of the assets of the Corporation,
real, personal or mixed, including contract rights, whether at the time owned
or thereafter acquired, and to sell, exchange or otherwise dispose of such
securities or other obligations of the Corporation.
SECTION 8. TO DEAL IN ITS OWN SECURITIES. Subject to the limitations
of Section 2 above, to purchase, take, receive or otherwise acquire, and to
hold, own, pledge, transfer or otherwise dispose of shares of its own capital
stock and other securities. Purchases of the Corporation's own shares,
whether direct or indirect, may be made without shareholder approval only to
the extent of unreserved and unrestricted earned surplus available therefor.
ARTICLE III
PERIOD OF EXISTENCE
The period during which the Corporation shall continue is perpetual.
ARTICLE IV
RESIDENT AGENT AND PRINCIPAL OFFICE
SECTION 1. RESIDENT AGENT. The name and address of the Corporation's
Resident Agent for service of process is:
Larry R. Helms
200 East Jackson Street
Muncie, IN 47305
-2-
<PAGE>
SECTION 2. PRINCIPAL OFFICE. The post office address of the principal
office of the Corporation is:
200 East Jackson Street
Muncie, IN 47305
ARTICLE V
AUTHORIZED SHARES
SECTION 1. NUMBER OF SHARES. The total number of shares of common
stock which the Corporation is to have authority to issue is 20,000,000, all
with no par value. The total number of shares of preferred stock the
Corporation is to have authority to issue is 500,000, all with no par value.
SECTION 2. TERMS OF SHARES. The authorized shares of "Common Stock"
shall be equal to every other share of Common Stock and shall participate
equally with other shares of Common Stock in all earnings and profits of the
Corporation and on distribution of assets, either on dissolution, liquidation
or otherwise. The authorized shares of "Preferred Stock" shall be equal to
every other share of Preferred Stock and shall participate equally with other
shares of Preferred Stock. The terms of the Preferred Stock and its relative
rights, preferences, limitations or restrictions shall be established by the
Board of Directors prior to issuance of any Preferred Stock.
SECTION 3. VOTING RIGHTS. Each holder of Common Stock shall have the
right to vote on all matters presented to shareholders and shall be entitled
on all matters including elections of Directors to one vote for each share of
Common Stock registered in his/her name on the books of the Corporation. The
voting rights of the Preferred Stock, if any, shall be determined by the
Board of Directors prior to issuance of the Preferred Stock.
ARTICLE VI
REQUIREMENTS PRIOR TO DOING BUSINESS
The Corporation will not commence business until consideration of the
value of at least One Thousand Dollars ($1,000.00) has been received for the
issuance of shares.
ARTICLE VII
DIRECTORS
SECTION 1. NUMBER. The number of Directors of the Corporation shall
not be less than nine (9) nor more than twenty-one (21), as may be specified
from time to time by the Bylaws. If and whenever the Bylaws do not contain a
provision specifying the number of Directors, the number shall be sixteen
(16). The Directors shall be classified, with respect to the time for which
they
-3-
<PAGE>
severally hold office, into three (3) classes as nearly equal in number as
possible, as shall be specified in the Bylaws, one class to be elected for a
term expiring at each annual meeting of shareholders, with each Director to
hold office until his successor is elected and qualified. At each annual
meeting of shareholders, the successor of each Director whose term expires at
that meeting shall be elected to hold office for a term expiring at the
annual meeting of shareholders held in the third year following the year of
his election, or until his successor is elected and qualified.
SECTION 2. NAMES AND POST OFFICE ADDRESSES OF THE DIRECTORS. The names
and post office addresses of the initial Board of Directors of the
Corporation are:
NAME NUMBER AND STREET OR BUILDING CITY STATE ZIP CODE
- ---- ----------------------------- ---- ----- --------
Stefan S. Anderson 2705 W. Twickingham Drive Muncie IN 47304
Thomas F. Bluemle 1900 N. Brentwood Lane Muncie IN 47304
Frank A. Bracken 1011 E. Parkway Drive Muncie IN 47304
Clell W. Douglass 305 Normandy Drive Muncie IN 47304
David A. Galliher 2500 W. Berwyn Road Muncie IN 47304
William P. Givens 1209 W. Beechwood Avenue Muncie IN 47303
John W. Hartmeyer 818 W. Riverside Avenue Muncie IN 47303
David W. Howell Rural Route #2, Box 174 Middletown IN 47358
Betty J. Kendall Rural Route #14, Box 425 Muncie IN 47302
Don E. Marsh 1250 Warwick Road Muncie IN 47304
Robert H. Mohlman 3405 N. Vienna Woods Drive Muncie IN 47304
Robert R. Park Rural Route #2, Box 126 Gaston IN 47342
Peter L. Roesner 2207 W. Wiltshire Road Muncie IN 47304
Hamer D. Shafer 3500 W. Gatewood Lane Muncie IN 47304
Robert M. Smitson 2601 W. Chelsea Drive Muncie IN 47304
Reed D. Voran 2308 W. Wiltshire Road Muncie IN 47304
SECTION 3. QUALIFICATIONS OF DIRECTORS. Directors need not be
shareholders of the Corporation.
ARTICLE VIII
INCORPORATOR(S)
The name and post office address of the incorporator of the Corporation is:
Stefan S. Anderson
200 East Jackson Street
Muncie, IN 47305
-4-
<PAGE>
ARTICLE IX
PROVISIONS FOR REGULATION OF BUSINESS
AND CONDUCT OF AFFAIRS OF CORPORATION
SECTION 1. MEETINGS OF SHAREHOLDERS. Meetings of shareholders of the
Corporation shall be held at such place, within or without the State of
Indiana, as may be specified in the notices or waivers of notice of such
meetings.
SECTION 2. MEETINGS OF DIRECTORS. Meetings of Directors of the
Corporation shall be held at such place, within or without the State of
Indiana, as may be specified in the notices or waivers of notice of such
meetings. A member of the Board of Directors or of a committee designated by
the Board may participate in a meeting of the Board or committee by means of
a conference telephone or similar communications equipment by which all
persons participating in the meeting can communicate with each other, and
participation by these means constitutes presence in person at the meeting.
SECTION 3. CONSIDERATION FOR SHARES. Shares of stock of the
Corporation 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.
SECTION 4. BYLAWS OF THE CORPORATION. The Board of Directors, unless
otherwise provided in the Bylaws or in these Articles of Incorporation, may
by a majority vote of the actual number of Directors elected and qualified
from time to time make, alter, amend or repeal the Bylaws.
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, each of which, to the extent provided in the resolution, the
Articles of Incorporation, or the Bylaws, may exercise all of the authority
of the Board of Directors of the Corporation, including, but not limited to,
the authority to issue and sell or approve any contract to issue and sell,
securities or shares of the Corporation or designate the terms of a series of
a class of securities or shares of the Corporation. The terms which may be
affixed by each such 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. Each such committee may have full power to adopt
a final resolution which sets forth those terms and to authorize a statement
of such terms to be filed with the Secretary of State. However, no such
committee has 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. No member of any such committee shall
continue to be a member thereof after he ceases to be a Director of the
Corporation. The calling and
-5-
<PAGE>
holding of meetings of any such committee and its method of procedure shall
be determined by the Board of Directors. A member of the Board of Directors
shall not be liable for any action taken by any such committee if he is not a
member of that committee and has acted in good faith and in a manner he
reasonably believes is in the best interest of the Corporation.
SECTION 5. CONSENT ACTION BY SHAREHOLDERS. Any action required by
statute to be taken at a meeting of the shareholders, or any action which may
be taken at a meeting of the shareholders, may be taken without a meeting if,
prior to such action, a consent in writing, setting forth the action so
taken, shall be signed by all of the shareholders entitled to vote with
respect to the subject matter thereof, and such written consent is filed with
the minutes of the proceedings of the shareholders.
SECTION 6. CONSENT ACTION BY DIRECTORS. Any action required or
permitted to be taken at any meeting of the Board of Directors or 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 7. 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 8. 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,
-6-
<PAGE>
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
(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.
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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.
SECTION 9. DISTRIBUTIONS OUT OF CAPITAL SURPLUS. The Board of
Directors of the Corporation may from time to time distribute to its
shareholders out of the capital surplus of the Corporation a portion of its
assets, in cash or property, without the assent or vote of the shareholders,
provided that with respect to such a distribution the requirements of the Act
other than shareholder approval are satisfied.
SECTION 10. POWERS OF DIRECTORS. In addition to the powers and the
authority granted by these Articles or by statute expressly conferred, the
Board of Directors of the Corporation is hereby authorized to exercise all
powers and to do all acts and things as may be exercised or done under the
laws of the State of Indiana by a corporation organized and existing under
the provisions of the Act and not specifically prohibited or limited by these
Articles.
SECTION 11. REMOVAL OF DIRECTORS. Any and 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.
SECTION 12. FAIR PRICE, FORM OF CONSIDERATION AND PROCEDURAL SAFEGUARDS
FOR CERTAIN BUSINESS COMBINATIONS.
(A) The affirmative vote of the holders of not less than three-fourths
(3/4) of the Voting Shares (as hereinafter defined) of the Corporation shall
be required for the authorization or adoption, except as provided in
subsection (D) of this Section, of the following transactions:
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1. Any merger or consolidation of the Corporation or its subsidiary or
subsidiaries (as hereinafter defined) with or into either of the
following:
(a) 10% Shareholders (as hereinafter defined); or
(b) Any other corporation (whether or not itself a 10% Shareholder)
which, after such merger or consolidation, would be an Affiliate
(as hereinafter defined) of a 10% Shareholder.
2. Any sale, lease, exchange, transfer or other disposition (including,
without limitation, the granting of a mortgage or other security
interest) to or with any 10% Shareholder of any material part of the
assets of the Corporation or any of its subsidiaries; and
3. A liquidation or dissolution of the Corporation or any material
subsidiary thereof or adoption of any plan with respect thereto.
4. Any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its subsidiaries or any
other transaction (whether or not with or into or otherwise involving
a 10% Shareholder) which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of any
class of equity or convertible securities of the Corporation or any
subsidiary which is directly or indirectly owned by any 10%
Shareholder; and
5. Any agreement, contract or other arrangement providing for any one or
more of the actions specified in the foregoing clauses (A)1. through
(A)4.
(B) Prior to the approval of any of the transactions referred to in
subsection (A) of this section ("Business Combination"), the Board of
Directors of the Corporation shall make an evaluation of all relevant
factors and issues arising out of or in connection with any such Business
Combination and shall report to the shareholders the conclusion which the
Board of Directors reaches from such evaluation. Relevant factors and
issues shall include consideration of the impact which any such Business
Combination will have on the community in which the Corporation or its
subsidiaries conducts business, the employees of the Corporation or any of
its subsidiaries, and the suppliers and customers of the Corporation and
its subsidiaries, and shall also include any and all other factors which
the Board of Directors in its discretion deems relevant.
(C) The following definitions shall apply when used in this Section:
1. "10% Shareholder" shall mean, in respect of any Business
Combination, any person (other than the Corporation) who or
which, as of the record date for the determination of
shareholders entitled to notice of and to vote on such
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Business Combination or immediately prior to the consummation of
any such Business Combination:
(a) Is the beneficial owner (as determined in accordance with
Rule 13d-3 promulgated by the Securities and Exchange
Commission) ("Beneficial Owner"), directly or indirectly,
of not less than ten percent (10%) of the Voting Shares;
or
(b) Is an Affiliate (as hereinafter defined) of the
Corporation and at any time within two years prior thereto
was the Beneficial Owner, directly or indirectly, of not
less than ten percent (10%) of the then outstanding Voting
Shares; or
(c) Any individual, corporation, partnership or other person
or entity which, together with any of its Affiliates (as
hereinafter defined), beneficially owns in the aggregate
more than ten percent (10%) of the Voting Shares of the
Corporation.
2. "Voting Shares" includes:
(a) Any securities of the Corporation which are entitled to
vote on any matter referred to in this Section;
(b) Any securities, including but not limited to, preferred
stock, bonds, debentures, or options, which can be
converted into voting securities at the time of the vote
referred to in this Section; and
(c) Security agreements of any nature for which voting
securities are pledged as collateral.
3. "Affiliate" shall include all persons who would be defined as
affiliates under Rule 12b-2 under the Securities Exchange Act of
1934.
4. "Subsidiary" means any corporation of which a majority of any
class of equity securities (as defined in Rule 3a 11-1 of the
general rules and regulations under the Securities Exchange Act
of 1934) are owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of a
10% Shareholder set forth above, the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
5. "Fair Market Value" means:
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(1) In the case of stock, in the absence of any
determination price as established on a national,
regional, or local exchange or over-the-counter market, or
in the absence of any market-maker dealing in the stock on
a regular basis, the fair market value of such stock on
the date in question as determined by the Board in good
faith; and
(2) In the case of property other than cash or stock,
the fair market value of such property on the date in
question as determined by the Board in good faith.
(D) The additional voting requirement set forth in subsection (A) above
shall not be applicable, and any such Business Combination shall require the
affirmative vote of two-thirds (2/3) of the Voting Shares, if one of the
following occurs:
1. The Business Combination shall have been approved by two-thirds
(2/3) of the Directors of the Corporation; or
2. All of the following conditions shall have been met:
(a) The aggregate amount of the cash and the Fair Market Value
as of the date of the consummation of the Business Combination of
consideration other than cash to be received per share by holders of
Common Stock in such Business Combination shall be at least equal to
the greater of (i) and (ii), where (i) is the highest per share price
(including any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by the 10% Shareholder or any other party for any
shares of Common Stock acquired within the two-year period immediately
prior to the first public announcement of the proposal of the Business
Combination (the "Announcement Date") or, if higher, the per share
price paid in the transaction in which the 10% Shareholder became a
10% Shareholder, and (ii) is the per share book value of the
Corporation reported at the end of the fiscal quarter immediately
preceding the later of any public announcement of any proposed
Business Combination or the meeting date on which the shareholders are
to consider the proposed Business Combination;
(b) The consideration to be received by holders of a
particular class of outstanding Voting Stock (including Common Stock)
shall be in cash or in the same form as the 10% Shareholder has
previously paid for shares of such class of Voting Stock. If the 10%
Shareholder has paid for shares of any class of Voting Stock with
varying forms of consideration, the form of consideration for such
class of Voting Stock shall be either cash or the form used to acquire
the largest number of shares of such class of Voting Stock previously
acquired by it;
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(c) A proxy or information statement describing the proposed
merger or consolidation and complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations
thereunder (or any subsequent provisions replacing such Act, rules or
regulations) shall be mailed to shareholders of the Corporation at
least thirty (30) days prior to the meeting of shareholders called to
consider the proposed Business Combination or, if no meeting, thirty
(30) days prior to the consummation of such Business Combination
(whether or not such proxy or information statement is required to be
mailed pursuant to such Act or subsequent provisions).
ARTICLE X
AMENDMENTS
These Articles of Incorporation may be amended at any time, subject to
the provisions of this Article, by the affirmative vote of a majority of the
outstanding shares of stock of the Corporation entitled to vote on such
amendment. No amendment shall be adopted which shall repeal, modify, amend,
alter or diminish in any way the provisions of Article V, Section 1 of
Article VII, Section 4 of Article IX, Section 11 of Article IX, Section 12 of
Article IX, or this Article X without the affirmative vote of three-fourths
(3/4) of the outstanding shares of stock of the Corporation entitled to vote
on such amendment.
The Bylaws of the Corporation may be amended as provided herein and
therein except that no amendment shall in any way repeal, modify, amend,
alter or diminish the provisions of this Article or the other provisions of
the Articles of Incorporation referenced in this Article.
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EXHIBIT 3.2
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 Rodney A. Medler.
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.
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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.
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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.
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
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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.
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
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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.
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
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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.
SECTION 8. FIXING OF RECORD DATE TO DETERMINE SHAREHOLDERS ENTITLED TO
VOTE. The Board of Directors may prescribe a period not exceeding fifty (50)
days prior to meetings of the shareholders, during which no transfer of stock on
the books of the Corporation may be made; or, in lieu of prohibiting the
transfer of stock may fix a day and hour not more than fifty (50) days prior to
the holding of any meeting of shareholders as the time as of which shareholders
entitled to notice of, and to vote at, such meeting shall be determined, and all
persons who are holders of record of voting stock at such time, and no others,
shall be entitled to notice of, and to vote at, such meeting. In the absence of
such a determination, such date shall be ten (10) days prior to the date of such
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
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 eleven (11)
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
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Class III shall have three (3) 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; however, for current Directors who served as a
director of the Corporation's subsidiary, The Merchants National Bank of Muncie
(now known as First Merchants Bank, N.A.) on or before January 1, 1971, such age
shall be seventy-two (72) 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.
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
-7-
<PAGE>
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.
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.
-8-
<PAGE>
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.
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.
-9-
<PAGE>
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.
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.
-10-
<PAGE>
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.
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
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<PAGE>
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.
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
-12-
<PAGE>
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.
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
-13-
<PAGE>
(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
(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.
-14-
<PAGE>
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.
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.
-15-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FIRST
MERCHANTS CORPORATION'S CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
FOR PERIOD ENDING JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 36,072
<INT-BEARING-DEPOSITS> 481
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 226,319
<INVESTMENTS-CARRYING> 39,794
<INVESTMENTS-MARKET> 39,833
<LOANS> 680,406
<ALLOWANCE> 6,710
<TOTAL-ASSETS> 1,010,435
<DEPOSITS> 821,068
<SHORT-TERM> 49,120
<LIABILITIES-OTHER> 6,636
<LONG-TERM> 16,700
0
0
<COMMON> 829
<OTHER-SE> 116,082
<TOTAL-LIABILITIES-AND-EQUITY> 1,010,435
<INTEREST-LOAN> 28,775
<INTEREST-INVEST> 7,928
<INTEREST-OTHER> 161
<INTEREST-TOTAL> 36,864
<INTEREST-DEPOSIT> 15,330
<INTEREST-EXPENSE> 17,244
<INTEREST-INCOME-NET> 19,620
<LOAN-LOSSES> 577
<SECURITIES-GAINS> 1
<EXPENSE-OTHER> 12,618
<INCOME-PRETAX> 10,889
<INCOME-PRE-EXTRAORDINARY> 7,136
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,136
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 1.08
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FOR FIRST MERCHANTS
CORPORATION FOR PERIOD ENDING JUNE 30, 1996 RESTATED AS A RESULT OF POOLING OF
INTEREST TRANSACTIONS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 36,751
<INT-BEARING-DEPOSITS> 156
<FED-FUNDS-SOLD> 15,100
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 173,295
<INVESTMENTS-CARRYING> 107,993
<INVESTMENTS-MARKET> 108,166
<LOANS> 583,964
<ALLOWANCE> 6,631
<TOTAL-ASSETS> 945,096
<DEPOSITS> 772,479
<SHORT-TERM> 48,386
<LIABILITIES-OTHER> 7,893
<LONG-TERM> 9,000
0
0
<COMMON> 822
<OTHER-SE> 106,518
<TOTAL-LIABILITIES-AND-EQUITY> 945,096
<INTEREST-LOAN> 25,187
<INTEREST-INVEST> 8,374
<INTEREST-OTHER> 501
<INTEREST-TOTAL> 34,002
<INTEREST-DEPOSIT> 14,505
<INTEREST-EXPENSE> 15,893
<INTEREST-INCOME-NET> 18,109
<LOAN-LOSSES> 580
<SECURITIES-GAINS> 26
<EXPENSE-OTHER> 11,708
<INCOME-PRETAX> 9,802
<INCOME-PRE-EXTRAORDINARY> 6,460
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,460
<EPS-PRIMARY> .99
<EPS-DILUTED> .99
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FOR FIRST MERCHANTS
CORPORATION FOR PERIOD ENDING JUNE 30, 1995 RESTATED AS A RESULT OF POOLING OF
INTEREST TRANSACTIONS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 30,991
<INT-BEARING-DEPOSITS> 277
<FED-FUNDS-SOLD> 41,075
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 148,519
<INVESTMENTS-CARRYING> 126,372
<INVESTMENTS-MARKET> 126,983
<LOANS> 551,190
<ALLOWANCE> 6,689
<TOTAL-ASSETS> 923,673
<DEPOSITS> 752,190
<SHORT-TERM> 56,711
<LIABILITIES-OTHER> 5,544
<LONG-TERM> 8,000
0
0
<COMMON> 610
<OTHER-SE> 99,030
<TOTAL-LIABILITIES-AND-EQUITY> 923,673
<INTEREST-LOAN> 23,844
<INTEREST-INVEST> 7,777
<INTEREST-OTHER> 401
<INTEREST-TOTAL> 32,020
<INTEREST-DEPOSIT> 13,189
<INTEREST-EXPENSE> 14,571
<INTEREST-INCOME-NET> 17,449
<LOAN-LOSSES> 591
<SECURITIES-GAINS> (48)
<EXPENSE-OTHER> 11,486
<INCOME-PRETAX> 8,880
<INCOME-PRE-EXTRAORDINARY> 5,939
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,939
<EPS-PRIMARY> .91
<EPS-DILUTED> .91
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
