Michael C. Rechin First Merchants Corporation President & Chief Executive Officer THE STRENGTH OF BIG. THE SERVICE OF SMALL. Re-Shaping First Merchants

Michael C. RechinFirst Merchants Corporation

President & Chief Executive Officer

THE STRENGTH OF BIG. THE SERVICE OF SMALL.

Re-Shaping First Merchants

for the Future


www.firstmerchants.com

Company Snapshot

• First Merchants Bank, formed in 1893, is celebrating its 121st anniversary

• First Merchants Corporation, organized in 1982, is the largest financial services holding company headquartered in Central Indiana

• First Merchants Corporation operates 97 locations in 26 Indiana counties, 2 Ohio counties, and 2 Illinois counties

Banking

$5.5B in Assets

Trust

$1.6B Trust Assetsunder Management

Insurance

$75M in Insurance Premiums

First Merchants Corporation®

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®

Our Franchise

Total Loans

• Indianapolis - $1,242M

• Muncie - $776M

• Munster - $594M

• Lafayette - $547M

• Columbus - $464M

(as of March 31, 2014)

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Capital Ratios

9.20%

9.54% 9.71% 9.62%

10.20%10.13%

10.42% 10.37%

10.86%

7.07%7.27%

7.51% 7.55%7.88% 7.74%

7.97%8.34%

8.65%

16.39%16.75% 16.62%

16.34%15.91%

15.69%

14.96%14.54%

15.04%

6.00%

7.00%

8.00%

9.00%

10.00%

11.00%

12.00%

13.00%

14.00%

15.00%

16.00%

17.00%

18.00%

1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14

Total Risk-Based Capital Ratio (Target = 14.50%) Tier 1 Common Risk-Based Capital Ratio (Target = 10.00%)Tangible Common Equity/Tangible Assets (TCE) (Target = 8.00%)

(Target)

(Target)

(Target)

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®


2007 First Merchants®


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• Michael C. Rechin named President and CEO, April 24, 2007• $3.6B Asset Size, 65 Locations, Indiana and Ohio• 8 Banks, 1 Title Company, 1 Insurance Agency, 1 Trust Company• Multi-Charter Organization – 8 Banking Charters

• 8 Names• 8 Cultures• 8 Decision-Makers• 8 Regulatory Exams• 8 Boards of Directors• 8 Ways of Doing Everything – Credit Decisioning

• Result• Company Divided / Bank vs. Bank / Line vs. Operations• Duplication of Effort – Highly Inefficient• Inconsistent Service Delivery

• Need – Unify and Simplify the Company• Common Vision• Seat at the Table

“Get Simpler”


2008 Our First Steps Towards Higher Performance®


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• Began to Simplify the Company – Project “Gold Shield”• Merged 4 Bank Charters into the Lead Bank (First Merchants Bank)

• Defined and Promoted “First Merchants” Brand, Internally and Externally • Defined and Promoted “One Company – One Culture”• Established a Corporate Credit Function• Established a Risk Management Function• Began to Adopt the Balanced Scorecard Methodology

• 3rd Quarter 2008 – Signed Definitive Agreement to Acquire Lincoln Bank located in High-Growth Western and Southern Suburbs of Indianapolis• Completed Lincoln Bank Acquisition on 12/31/2008

“Achieving Buy-in”


2009 Great Recession®


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• Housing Bubble Burst – Housing Prices Began to Fall

• Institutions Involved in Housing Began to Realize Losses Depleting their Capital

• Overnight Borrowing Ceased to Exist

• Financial Institutions Stopped New Commercial and Consumer Lending

• Bear Sterns, Lehman Brothers, Countrywide, Washington Mutual, General Motors & Chrysler Failed

• 389 Banks Failed Between 2009 and 2011


2009 Simplification Accelerated by Great Recession®


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• Applied for and Received $116M from Capital Purchase Program as Capital Insurance

• Lincoln Integration Completed in April

• Made Decision to Merge All Bank Charters into One; Reduced the Number of Boards to Single Board

• Experienced Significant Credit Losses

• Company Experiences First Loss Year

• Share Price Tumbles

• Dividend Reduced


2010 Economic Recovery Begins – Refocus on the Plan®


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Five-Year Strategic Plan Developed• Capital Preservation

• Issued 4.8 Million shares for $24.1M in New Capital

• Restructured Capital Purchase Program Funding for $10.1M Capital Gain

• Cultural Initiatives

• Brand Promise Reinforced, “Strength of Big, Service of Small”

• Retail Banking Group Formed – 1st Line of Business Organization Structure Established

• Regional and Market President Roles Redefined

• Full Company Use of Employee Engagement Surveys and Meetings

• Results

• Company Earns $1.6M (Excluding $10.1 Extraordinary Gain)

“Protect and Strengthen the Franchise”


2011 Economy Continues to Improve – Stay on Plan®


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• Capital Preservation• Issued 2.8 Million Shares for $21.1M in New Capital• Participated in the Small Business Lending Fund Program at

$90.8M• Redeemed Capital Purchase Program Funding (TARP)

• Strengthen the Customer Experience (Growth)• Established Commercial Sales Management Process• Small Business Banking Group Established• Expanded Brokerage Representation Throughout Franchise

• Strengthen the Employee Relationship (Engagement)• Leadership Coaching Introduced

• Results• Profitability Continued to Improve – Earned $9M

“Sales and Credit Culture”

• Shelby County Bank Acquired Through FDIC-Assisted Transaction• $126M in Deposits• $113M in Loans

• Investment Real Estate Focus and Process Implemented• Customer Relationship Management System

Implementation• Banking Center Optimization• Instituted a Management Development Program to Grow

Future Leaders

• Company Earned Record Net Income of $40.6M


2012 “Defense to Offense”®


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“Gaining Momentum”


2013 Growth and Top-Tier Performance®


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• Aggressive Market Coverage Across All Lines of Business

• Re-structured Hybrid Capital/Paid Off Small Business Lending Fund

• $70 Million Subordinated Debt Issue (6.75%)

• Citizens Financial Acquisition Announced and Completed (Nov. 2013)

• $1.1 Billion in Assets

• $955 Million in Deposits

• $603 Million in Loans

• Ranked in Top 25 Regional Banks in the U. S. by SNL Financial

• Company Set All-Time Record Earnings $42.2M

• New Financial Business Model• Access to Capital is King: Strong Capital a Necessity

• Emphasis on Top Line Revenue Growth

• Interest Income

• Fee Income

• Strong Customer Franchise, Focused on Cross-Sales

• Mature Industry Focused on Efficiency and Productivity

• Emphasis on Enterprise Risk Management



Industry Trends to Understand®

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“Be Open to Change”



®

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Drivers of Rapid Consolidation in Banking

• Revenue Headwinds for the Industry

• Asset Quality Problems

• Regulatory/Compliance Requirements

• Slow/Low Growth Economic Environment

• Management and Board Fatigue

• TARP

Industry Trends to Understand


www.firstmerchants.com 15

• Electronic Payments Exploding• Non-Cash Payments in the U.S. Increased from

109 Billion in 2009 to 122.8 Billion in 2012. • Online Banking

• 51% of U.S. Adults and 61% of Internet Users, Bank Online

• Account acquisition, cross-selling, etc.• Mobile Device Migration Emerging –iPhone/Android

apps, Text Banking• 48% of Smartphone Owners Use Mobile Banking

• Banking Center Optimization vs. Expansion



®

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“From Physical to Virtual”

“The New Battleground”

Industry Trends to Understand

• Retail Banking• Commercial Banking

• Middle Market• Investment Real Estate

• Business Banking• Cash Management• Agriculture• Healthcare Services•Mortgage Banking

• Trust Services (Fiduciary, Custody) - $1.6B Trust Assets under Management• Insurance Products - $75M Insurance Premiums



®

FMC Strategy

“Service-driven alternative to super-regional bank competitors.

Deliver superior service with presence close to the customer for . . . ”

“We specialize in our communities”17

•Clear Expectation from Senior Management that Ethics are a Higher Priority than Financial

Results

•Values Should Drive Decisions

•Creating an Ethical Atmosphere

•Trickle-Down Effect on Employees

•Foundation for All Other Components of Control



Tone at the Top®

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• Tougher Environment to Be Successful

• We Believe that Smart, Engaged Employees

Build Processes that . . .• …deliver great products and services that…• …highly satisfy our clients that…• …will produce superior financial results



Ensuring the Future®

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•Talent Attraction

•Regulatory Cost and Compliance

•Prolonged Low Interest Rate Environment

•Customer Channel Preferences

•Information Security Investment

•Outsourcing/Partner Risks



Current Challenges®

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Michael C. RechinCEO

“Keeping Me Awake . . .”


Closing Thoughts and Questions…

www.firstmerchants.com 21FIRST MERCHANTS and the Shield Logo are registered trademarks of First Merchants Corporation

Documents

Michael C. Rechin First Merchants Corporation President & Chief Executive Officer THE STRENGTH OF BIG. THE SERVICE OF SMALL. Re-Shaping First Merchants