1
 First Merchants Corporation 3rd Quarter 2010
Earnings Call
October 28, 2010





2
 Michael C. Rechin
 President
 and Chief Executive Officer





3
 Forward-Looking Statement  The Corporation may make forward-looking statements about its
relative business outlook. These forward-looking statements and all
other statements made during this meeting that do not concern
historical facts are subject to risks and uncertainties that may
materially affect actual results.
Specific forward-looking statements include, but are not limited to,
any indications regarding the financial services industry, the economy
and future growth of the balance sheet or income statement.
Please refer to our press releases, Form 10-Qs and 10-Ks concerning
factors that could cause actual results to differ materially from any
forward-looking statements.





4
 3rd Quarter 2010 Highlights
 §  Third quarter earnings of $765,000, or $.02 percommon share
 § Year-to-date earnings of $9.2M, or $.38 per commonshare
 § Quarterly normalized pre-tax, pre-provision earningsremains strong at $17.0M
 § Quarterly operating expense levels declined by$3.9M from last year to $35.1M
 § Loan loss reserve ample for projected futurelosses at 2.86% of total loans





5
 Mark K. Hardwick
 Executive Vice President
 and Chief Financial Officer





6
 
 
 2008  2009  Q1-’10  Q2-’10  Q3-’10
 1.  Investments $482$563$639$646$702
 2.  Loans3,7223,2783,138 3,0592,929
 3.  Allowance(50)(92)(89)(87)(84)
 4.  CD&I & Goodwill 166159158156155
 5.  BOLI93 95959696
 6.  Other 371  478  435  313  382
 7.  Total Assets$4,784 $4,481$4,376$4,183  $4,180
 ($ in Millions)
 TOTAL ASSETS





7
 Loan Composition (as of 9/30/10)
 YTD Yield = 5.69%
 Total = $2.9B
 LOAN AND CREDIT DETAIL





8
 INVESTMENT PORTFOLIO
(as of 9/30/10)
 §  $702 Million Balance
 §  Average duration of 4.1 years
 §  Tax equivalent yield of 4.38%
 §  No private label MBS exposure
 §  Trust Preferred Pools with book balance of$5.7 million and a market value of $1.0 million
 §  Net unrealized gain of the entire portfoliototals $27.3 million





9
 
 2008  2009  Q1-’10  Q2-’10  Q3-’10
 1.  Customer Non-Maturity
 Deposits  $1,858$2,042$2,000$1,976$2,050
 2.  Customer Time Deposits1,3841,2201,1671,0901,036
 3.  Brokered Deposits477275231195168
 4.  Borrowings507339320292288
 5.  Other Liabilities 51 30583134
 6.  Hybrid Capital111111111142142
 7.  Preferred Stock (CPP)- 1121136868
 8.  Common Equity 396  352  376  389  394
 9.  Total Liabilities and Capital$4,784 $4,481$4,376$4,183$4,180
 ($ in Millions)
 TOTAL LIABILITIES AND CAPITAL





10
 YTD Cost = 1.49%
 40%
 23%
 21%
 11%





11
 
 
 2008  2009  Q1-’10  Q2-’10  Q3-’10
 1.  Total Risk-Based
 Capital Ratio 10.24% 13.04% 14.44%14.72%15.52%
 2.  Tier 1 Risk-Based
 Capital Ratio 7.71%10.32%11.65%11.88%12.63%
 3.  Leverage Ratio8.16%8.20%9.13%9.21%9.66%
 4.  TCE/TCA 5.01%4.54%5.27%5.88%6.02%
 CAPITAL RATIOS





12
 $3,463
 $4,245
 $3,956
 $3,869
 ―  Net Interest Margin
 3.82%
 3.90%
 3.84%
 3.74%
 $3,791
 3.93%
 NET INTEREST MARGIN





13
 
 2008  2009  Q1-’10  Q2-’10  Q3-’10
 1.  Service Charges on Deposit
 Accounts $13.0$15.1$ 3.3$ 3.5$ 3.4
 2.  Trust Fees 8.07.42.12.01.8
 3.  Insurance Commission Income5.86.42.01.51.5
 4.  Cash Surrender Value of Life Ins (0.3) 1.60.50.50.5
 5.  Gains on Sales Mortgage Loans 2.5 6.81.11.22.1
 6.  Securities Gains/Losses(2.1)4.41.3(0.1)(0.7)
 7.  Other 9.5  9.5  2.7  2.3  2.4
 8.  Total$36.4$51.2$13.0$10.9$11.0
 9.  Adjusted Non-Interest Income 1 $38.5$46.5$11.7$11.0$11.7
 1Adjusted for Bond Gains & Losses and one-time mortgage sale
 ($ in Millions)
 NON-INTEREST INCOME





14
 NON-INTEREST EXPENSE
 2008  2009  Q1-’10  Q2-’10  Q3-’10
 1. Salary & Benefits$63.0 $76.3$17.6$17.9$18.1
 2. Premises & Equipment14.4 17.94.73.94.4
 3. Core Deposit Intangible 3.2 5.11.21.21.2
 4. Professional Services2.64.41.51.30.4 1
 5. OREO/Credit-Related Expense 2.89.82.71.53.0 1
 6. FDIC Expense1.710.41.72.32.1
 7. FHLB Prepayment Penalties -1.9 -  -  -
 8. Outside Data Processing4.16.21.31.31.3
 9. Marketing2.32.10.40.50.5
 10. Other 14.7  17.5  3.6  4.4  4.1
 11. Total$108.8 $151.6$34.7$34.3$35.1
 12. Adjust Non-Interest Expense 2 $106.0$134.7$31.0$31.9$31.9
 1Credit-Related Professional Services are now included in OREO/Credit-Related Expenses
 2Adjusted for the FDIC Special Assessment, FHLB Prepayment Penalties & OREO Expense & CreditRelated Professional Services
 ($ in Millions)





15
 2008  2009  Q1-’10  Q2-’10  Q3-’10
 1.  Net Interest Income-FTE $133.1$159.1$37.8$37.7$37.2
 2.  Non Interest Income 1 38.546.511.711.011.7
 3.  Non Interest Expense 2 106.0134.731.031.931.9
 4.  Pre-Tax Pre-Provision Earnings$ 65.6$ 70.9$18.5$16.8$17.0
 5.  Provision(28.2)(122.2)(13.9)(15.0)(10.5)
 6.  Adjustments(5.0)(12.1)(2.3)(2.6)(3.9)
 7.  Taxes - FTE(11.8)22.7(0.7)0.4(0.9)
 8.  Gain on Exchange of Preferred
 Stock for Trust Preferred Debt- -  - 10.1 -
 9. CPP Dividend- ( 5.0)  (1.5)  (1.4)  (0.9)
 10. Net Income Avail. for Common
 Stockholders$20.6($45.7)$.1$ 8.3$.8
 11. EPS$1.14($2.17)$.01$ .35$.02
 1Adjusted for Bond Gains & Losses and one-time mortgage sale
 2Adjusted for the FDIC Special Assessment, FHLB Prepayment Penalties & OREO
 Expense & Credit-Related Professional Services
 ($ in Millions except in per share data)
 EARNINGS





16
 John J. Martin
 Senior Vice President
 and Chief Credit Officer





17
 3rd Quarter Highlights
 PORTFOLIO OVERVIEW
 §  Non-accrual loans declined 18% from $120.2 to $98.6 million at9/30/10.
 §  Allowance for Loan and Lease Losses held at 2.86% of total loans.Allowance coverage to Non-Accrual Loans increased to 85%.
 §  30-89 day delinquent loans down to $23.8 million from $32 million at6/30/10.Continued improvement from high of $54.1 million at09/30/09.
 §  90+ day delinquent loans increased to $5.3 million from $4.5 million.
 §  Restructured loans increased from $1.7 million to $5.3 million.
 §  Total Non-performing assets plus 90+ day delinquent loans decreasedto $130.8 million from $146.5 million at 06/30/10.Down from peak of$156.1 million at 09/30/09.





18
 ($ in millions)
 NON-ACCRUAL LOANS





19
 NON-ACCRUAL TREND





20
 ($ in millions)
 Industry:
 §  Wholesale Food Processor and Distributor
 §  Residential Land Development
 §  Commercial Office
 §  Self Storage
 §  Lessor of Residential Real Estate
 §  Rehabilitation and Lessor of Residential RealEstate
 Total New Non-Accrual Greater than $500,000
 $3.774
 .675
 .665
 .647
 .550
 .524
 $6.835
 LARGEST NEW NON-ACCRUAL LOANS





21
 OTHER REAL ESTATE OWNED





22
 LOAN DELINQUENCY TRENDS





23
 ($ in millions)
 Beginning Period:
 
 Beginning Balance NPAs & 90+Days Past Due
 Non-Accrual
 Add: New NPLs
 Less: To Accrual/Payoff/Restructured
 Less: To ORE
 Less:Charge-offs (includes write downs fro transfer to ORE
 Non-Accrual Loans
 Other Real Estate Owned (ORE)
 Add:New ORE Properties
 Less: ORE Sold
 Less: ORE Losses (write-downs)
 ORE
 90 Days Past Due
 Restructured/Renegotiated Loans
 Total NPA Change
 Ending Balance NPAs & 90+ Days Past Due
 Ending Period
 Q2Q3
 3/31/2010  6/30/2010
 $ 144.6$ 146.5
 $ 27.3$ 15.5
 (8.3)(18.6)
 (4.0)(6.7)
 ( 17.7)  (11.8)
 ($ 2.7)($ 21.6)
 $4.0$6.6
 (0.2)(3.8)
 (1.9)  (1.4)
 $1.9$1.4
 $1.9$1.4
 $0.8  $3.7
 $1.9($15.7 )
 $ 146.5$ 130.8
 6/30/20109/30/2010
 NON-PERFORMING ASSET RECONCILIATION





24
 CHARGE-OFF TREND





25
 ALLOWANCE COVERAGE TO NON-ACCRUAL LOANS





26
 CREDIT COSTS OVER TIME





27
 Michael C. Rechin
 President
 and Chief Executive Officer





28
 Overview of Operating Strategy
and Tactics “Strengthen and Grow”
 § Solidify brand position as community bankcompeting primarily in consumer, small business,and middle market
 § Continue to improve asset quality, reduce creditcosts, and maximize resolutions
 § Preserve margin while intensifying revenue activityusing market coverage tactics
 § Implement systems to standardize and acceleratesmall business opportunities





29
 Contact Information
 First Merchants Corporation common stock is
traded on the NASDAQ Global Select Market
under the symbol FRME.
 Additional information can be found at
 www.firstmerchants.com
 Investor inquiries:
 David L. Ortega
 Investor Relations
 Telephone: 765.378.8937
 dortega@firstmerchants.com