1
 2nd Quarter 2011 Earnings Call
 July 28, 2011





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
 2nd Quarter 2011 Highlights
 §  Second quarter earnings of $4.5M, or $.18 per commonshare
 § Core business profitability solidifying through:
 §  Margin and net interest income expansion
 §  Increasing commercial loan demand
 §  Additional revenue-generating staff
 § Improvement in asset quality continues
 §  Loan loss reserve ample for projected future losses at2.83% of total loans





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





6
 
 
 2009  2010  Q1-’11  Q2-’11
 1.  Investments $563$827$886$938
 2.  Loans3,2782,8572,7662,729
 3.  Allowance(92)(83)(81)(77)
 4.  CD&I & Goodwill 159154153152
 5.  BOLI9597102103
 6.  Other 478  319  291  249
 7.  Total Assets$4,481$4,171$4,117$4,094
 ($ in Millions)
 TOTAL ASSETS





7
 (as of 6/30/2011 )
 YTD Yield = 5.51%
 Total = $2.7B
 LOAN PORTFOLIO





8
 §  $938 Million Balance
 § Average duration - 4.5 years
 § Tax equivalent yield of 4.08%
 § Net unrealized gain of $14.6million





9
 
 2009  2010  Q1-’11  Q2-’11
 1.  Customer Non-Maturity
 Deposits  $2,042$2,127$2,083$2,114
 2.  Customer Time Deposits1,220996943890
 3.  Brokered Deposits275146126139
 4.  Borrowings339277305306
 5.  Other Liabilities30285635
 6.  Hybrid Capital111142142142
 7.  Preferred Stock (CPP)112686868
 8.  Common Equity 352  387  394  400
 9.  Total Liabilities and Capital$4,481$4,171$4,117$4,094
 ($ in Millions)
 TOTAL LIABILITIES AND CAPITAL





10
 YTD Cost = .98%
 Total = $3.1B





11
 2009  2010  Q1-’11  Q2-’11
 1.  Total Risk-Based
 Capital Ratio 13.04% 15.74%15.66%16.05%
 2.  Tier 1 Risk-Based
 Capital Ratio 10.32%12.82%13.05%13.42%
 3.  Leverage Ratio8.20%9.50%9.80%9.94%
 4.  Tier 1 Common Risk-
 Based Capital Ratio5.40%7.64%7.75%8.07%
 5.  TCE/TCA 4.54%5.86%6.16%6.36%
 CAPITAL RATIOS





12
 NET INTEREST MARGIN





13
 
 2009  2010  Q1-’11  Q2-’11
 1.  Service Charges on Deposit Accounts $15.1$13.3$ 2.8$3.0
 2.  Trust Fees 7.47.72.01.9
 3.  Insurance Commission Income6.46.21.91.0
 4.  Electronic Card Fees4.96.11.51.7
 5.  Cash Surrender Value of Life Ins 1.6 2.10.60.6
 6.  Gains on Sales Mortgage Loans 6.8 6.81.91.0
 7.  Securities Gains/Losses4.41.90.10.8
 8.  Other 4.6  4.4  1.1  1.1
 9.  Total$51.2$48.5$11.9$11.1
 10.  Adjusted Non-Interest Income 1 $46.5$46.6$11.8$10.3
 1Adjusted for gains and losses in bond portfolio and one-time mortgage sale
 ($ in Millions)
 NON-INTEREST INCOME





14
 NON-INTEREST EXPENSE
 2009  2010  Q1-’11  Q2-’11
 1. Salary & Benefits$76.3$73.3$17.2$18.6
 2. Premises & Equipment17.917.24.54.1
 3. Core Deposit Intangible 5.14.71.11.1
 4. Professional Services      1.31.40.60.5
 5. OREO/Credit-Related Expense 12.914.63.22.8
 6. FDIC Expense10.48.12.11.5
 7. FHLB Prepayment Penalties1.9― ― ―
 8. Outside Data Processing6.25.11.41.5
 9. Marketing2.12.00.40.4
 10. Other 17.5  15.9  3.4  3.9
 11. Total$151.6$142.3$33.9$34.4
 12. Adjusted Non-Interest Expense 2 $134.7$127.7$30.7$31.6
 1 Credit-related professional services are reclassed to OREO/credit-related expenses
 2Adjusted for the FDIC special assessment, FHLB prepayment penalties & OREO
 expense & credit-related professional services
 ($ in Millions)
 1
 1





15
 2009  2010  Q1-’11  Q2-’11
 1.  Net Interest Income-FTE $159.1$149.4$ 36.9$ 37.3
 2.  Non Interest Income146.546.611.810.3
 3.  Non Interest Expense2 (134.7)(127.7)(30.7)(31.6)
 4.  Pre-Tax Pre-Provision Earnings$ 70.9$ 68.3$ 18.0$ 16.0
 5.  Provision(122.2)(46.5)(5.6)(5.6)
 6.  Adjustments(12.1)(12.7)(3.1)(2.0)
 7.  Taxes - FTE                                           22.7(2.3)(3.8)(2.9)
 8.  Gain on Exchange of Preferred
 Stock for Trust Preferred Debt—10.1 —  —
 9.CPP Dividend( 5.0)  (5.2)  (1.0)  (1.0)
 10.Net Income Avail. for Distribution($45.7)$11.7$ 4.5$ 4.5
 11.EPS($2.17)$0.48  $ .17$ .18
 1Adjusted for gains and losses in bond portfolio and one-time mortgage sale
 2Adjusted for the FDIC special assessment, FHLB prepayment penalties & OREO
 expense & credit-related professional services
 ($ in Millions)
 EARNINGS





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





17
 PORTFOLIO OVERVIEW
 2nd Quarter Highlights
 §  Continued reduction in Criticized and Classified Assets coupled withreduction in impaired loans
 §  Stabilized Non-Accrual and Non-Performing Assets
 §  Improving 90+ day delinquency. Increase in 30-89 day delinquentloans related to two matured relationships totaling $9.4 million.Oneresolved and the other in the process of resolution
 §  Allowance declined from $80.9 million to $77.1 million in line withimprovement in portfolio and $2.1 million reduction in specificreserves.





18
 NON-ACCRUAL TREND
 Q2-’10
 Q3-’10
 Q4-’10
 Q1-’11
  NON-ACCRUAL LOANS BY CATEGORY
 
 
 Commercial & Industrial
 3.55%
 3.19%
 1.75%
 1.55%
 3.69%
 $21.1
 Construction & Land Development
 8.91%
 6.25%
 16.10%
 14.76%
 14.66%
 14.1
 Commercial Mortgage
 4.74%
 4.22%
 3.69%
 3.66%
 2.88%
 33.8
 Agricultural Production and Other Commercial
 1.27%
 0.64%
 0.57%
 1.06%
 0.91%
 0.9
 Total Commercial
 4.43%
 3.84%
 3.66%
 3.52%
 3.61%
 $69.9
 Residential Mortgage
 3.86%
 3.26%
 2.78%
 3.21%
 2.99%
 $14.9
 Home Equity
 1.74%
 1.39%
 1.31%
 1.31%
 1.42%
 2.8
 Other Consumer
 0.00%
 0.01%
 0.00%
 0.03%
 0.00%
 0.0
 Total Consumer and
 Residential Mortgage
 2.83%
 2.36%
 2.05%
 2.32%
 2.24%
 $17.7
 Total Consumer and Commercial
 3.93%
 3.37%
 3.17%
 3.17%
 3.21%
 $87.6
 (% of period end total loans by category and loans held for sale)
 Q2-’11
 (in millions)
 Q2-’11





19
 OTHER REAL ESTATE OWNED
 Commercial

Real Estate
Land &Construction
1-4 Family
TotalBook Balance
$ 4.8
$ 7.4
$ 3.2
$15.4% ORE
31.0%
48.1%
20.9%
100.0% ($ in millions)





20
 LOAN DELINQUENCY TRENDS
 90+ Day Delinquency





21
 LOAN CHARGE-OFF TREND
 Q2-’10
 Q3-’10
 Q4-’10
 Q1-’11
 Q2-’11
 NET CHARGE-OFFS BY CATEGORY
 Commercial & Industrial
 4.65%
 3.22%
 2.69%
 0.30%
 ( 1.72%)
 Construction/Land Development
 5.10%
 4.14%
 4.27%
 9.96%
 10.78%
 Commercial Mortgage
 1.98%
 2.44%
 2.18%
 1.15%
 2.33%
 Agricultural Production and Other
Commercial
 1.18%
 1.36%
 1.04%
 0.00%
 (0.33%)
 Total Commercial
 2.88%
 2.69%
 2.39%
 1.32%
 1.42%
 Residential Mortgage
 0.79%
 1.09%
 1.12%
 0.27%
 0.72%
 Home Equity
 0.71%
 1.04%
 0.25%
 1.11%
 1.24%
 Other Consumer
 0.96%
 1.15%
 1.28%
 1.13%
 0.60%
 Total Consumer and Residential Mortgage
 0.79%
 1.09%
 0.94%
 0.59%
 0.83%
 
 (Annualized year-to-date net charge-offs by category as a % of period end total loans plus loans held for sale)





22
 NON-PERFORMING ASSET RECONCILIATION
 Q3-’10
Q4-’10
Q1-’11
Q2-’11Beginning Balance NPAs & 90+ Days Delinquent($ in millions)
$ 146.5
$ 130.8
$ 120.0
$107.6Non-AccrualAdd: New Non-Accruals
$ 15.5
$ 27.4
$ 11.7
$ 26.7Less: To Accrual/Payoff/Restructured
( 18.6)
( 14.5)
( 3.2)
( 8.3)Less: To OREO
( 6.7)
( 7.0)
( 2.0)
( 1.6)Less: Charge-offs (includes write-downs for transfer to OREO)
( 11.8)
(13.9)
( 9.4)
(16.9)Increase /(Decrease):Non-Accrual Loans
($ 21.6)
($ 8.0)
($ 2.9)
($ .1)Other Real Estate Owned (ORE)Add: New ORE Properties
$6.6
$7.2
$ 2.2
$ 1.6Less: ORE Sold
(3.8)
( 4.2)
( 3.6)
( 1.6)Less: ORE Losses (write-downs)
( 1.4)
( 3.6)
( 2.5)
( 1.6)Increase /(Decrease): ORE
$1.4
($ .60)
($ 3.9)
($ 1.6)Increase /(Decrease): 90 Days Delinquent
$0.8
($ 4.0)
($ 0.6)
($ 0.5)Increase /(Decrease): Restructured/Renegotiated Loans
$  3.7
$  1.8
($ 5.0)
$  4.1Total NPA Change
$(15.7)
($ 10.8)
($ 12.4)
$1.9Ending Balance NPAs & 90+ Days Delinquent
$ 130.8
$ 120.0
$ 107.6
$ 109.5





23
 IMPROVEMENT AND STABILIZATION IN CREDIT METRICS
 Q2-’10
Q3-’10
Q4-’10
Q1-’11
Q2-’111. Classified Assets
$341.6
$334.2
$313.0
$293.8
$282.22. Criticized Assets(includes Classified)
442.9
408.6
393.0
383.7
360.53. 90 day Delinquent Loans
4.5
5.3
1.3
.8
.24. Non-Accrual Loans
120.2
98.6
90.6
87.7
87.65. Impaired Loans
150.6
125.7
116.2
116.8
108.36. Specific Reserves
18.4
14.9
13.9
15.8
13.77. Allowance for Loan and LeaseLosses
87.0
83.7
83.0
80.9
77.184.9%
91.6%
92.3%
88.1% ($ in millions)
 Allowance for Loan and
Lease Losses down 11.3%
 Criticized Assets Down 18.6%  Classified Assets Down 17.4%  Non-Accrual Loans Down 27.1%





24
 NET CHARGE-OFFS, PROVISION AND ALLOWANCE
 ($ in millions)





25
 Michael C. Rechin
 President
 and Chief Executive Officer





26
 Overview of 2011 Strategy and Tactics “Strengthen and Grow”
 §  Implement systems to standardize and acceleratesmall business opportunities.
 § Preserve margin while intensifying revenue activityusing market coverage tactics and the addition ofrevenue-generating staff in key markets.
 § Realize investment in online and mobile banking.
 § Continue to improve asset quality, reduce credit costs,and maximize resolutions.





27
 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