UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file number 0-17071
A. Full title of the plan and the address of the plan, if different from that
of the Issuer named below:
First Merchants Corporation
Retirement Savings Plan
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal office:
First Merchants Corporation
200 East Jackson Street
Muncie, Indiana 47305
First Merchants Corporation Retirement Savings Plan
EIN 35-1544218 PN 002
Accountants' Report and Financial Statements
December 31, 2004 and 2003
First Merchants Corporation
Retirement Savings Plan
December 31, 2004 and 2003
Contents
Independent Accountants' Report..............................................1
Financial Statements
Statements of Net Assets Available for Benefits............................2
Statements of Changes in Net Assets Available for Benefits.................3
Notes to Financial Statements..............................................4
Supplemental Schedule
Schedule H, Line 4i - Schedule of Assets Held for Investment Purposes
at End of Year...........................................................9
Exhibit
Exhibit 23, Consent of Independent Registered Public Accounting Firm......10
Signature...................................................................11
[LETTERHEAD OF BKD LLP]
Administrative Committee
First Merchants Corporation
Retirement Savings Plan
Muncie, Indiana
We have audited the accompanying statements of net assets available for benefits
of First Merchants Corporation Retirement Savings Plan (Plan) as of December 31,
2004 and 2003, and the related statements of changes in net assets available for
benefits for the years ended December 31, 2004 and 2003. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2004 and 2003, and the changes in net assets available for benefits
for the years ended December 31, 2004 and 2003 in conformity with U. S.
generally accepted accounting principles.
The accompanying supplemental schedule is presented for the purpose of
additional analysis and is not a required part of the basic financial
statements, but is supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. This supplemental schedule is the
responsibility of the Plan's management. The supplemental schedule has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, is fairly stated, in all material
respects, in relation to the basic financial statements taken as a whole.
/s/ BKD, LLP
Indianapolis, Indiana
April 26, 2005
Federal Employer Identification Number: 44-0160260
First Merchants Corporation
Retirement Savings Plan
Statements of Net Assets Available for Benefits
December 31, 2004 and 2003
2004 2003
---------------------------
Assets
Investments
Common stock $ 1,030,460 $ 619,177
Mutual funds 19,364,358 15,705,757
Collective investment fund 1,189,461 1,222,302
Money market funds 513,096 433,587
------------ ------------
Total investments 22,097,375 17,980,823
Accrued Income Receivable 9,924 353
Cash 60,744 1,464
------------ ------------
Total assets 22,168,043 17,982,640
Liabilities
Excess contributions refund 15,042 --
------------ ------------
Net Assets Available for Benefits $ 22,153,001 $ 17,982,640
============ ============
See Notes to Financial Statements 2
First Merchants Corporation
Retirement Savings Plan
Statements of Changes in Net Assets Available for Benefits
Years Ended December 31, 2004 and 2003
2004 2003
--------------------------
Investment Income
Net appreciation in fair value of investments $ 1,701,917 $ 2,725,365
Interest and dividends 627,209 335,636
------------ ------------
Net investment income 2,329,126 3,061,001
------------ ------------
Contributions
Participants 1,554,532 1,415,358
Employer 241,128 220,350
Rollovers 754,966 60,813
Transfer from another plan 220,791 413,545
------------ ------------
2,771,417 2,110,066
------------ ------------
Total additions 5,100,543 5,171,067
Deductions - benefits paid to participants 930,182 1,015,584
------------ ------------
Net Increase 4,170,361 4,155,483
Net Assets Available for Benefits, Beginning of Year 17,982,640 13,827,157
------------ ------------
Net Assets Available for Benefits, End of Year $ 22,153,001 $ 17,982,640
============ ============
See Notes to Financial Statements 3
First Merchants Corporation
Retirement Savings Plan
Notes to Financial Statements
December 31, 2004 and 2003
Note 1: Description of Plan
The following description of First Merchants Corporation Retirement
Savings Plan (Plan) provides only general information. Participants
should refer to the Plan Document and Summary Plan Description for a
more complete description of the Plan's provisions, which are
available from the plan administrator.
General
The Plan is a defined-contribution plan sponsored by First Merchants
Corporation (Corporation) for the benefit of all employees who are
age 18 or older. It is subject to the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA). Merchants Trust
Company is the trustee of the Plan. PrimeVest Financial Services is
the custodian for a majority of the Plan's assets.
Contributions
The Plan permits eligible employees through a salary deferral
election to have the Corporation make annual contributions of up to
the limit allowed by the Internal Revenue Code. Employee rollover
contributions are also permitted. The Corporation makes matching
contributions of its employees' salary deferral amounts of 25% of
the first 5% of employees' eligible compensation. Company
profit-sharing contributions are discretionary as determined by the
Company's Board of Directors. Contributions are subject to certain
limitations.
The Plan document also includes an automatic deferral feature
whereby a participant is treated as electing to defer 3% of eligible
compensation unless the participant made an affirmative election
otherwise.
Participant Investment Account Options
Investment account options available include various funds including
a Corporation common stock fund. Each participant has the option of
directing his contributions into any of the separate investment
accounts and may change the allocation daily.
Participant Accounts
Each participant's account is credited with the participant's
contribution, the Corporation's contribution and plan earnings.
Allocations of Plan earnings are based on participant account
balances, as defined. The benefits to which a participant is
entitled is the benefit that can be provided from the participant's
vested account.
4
First Merchants Corporation
Retirement Savings Plan
Notes to Financial Statements
December 31, 2004 and 2003
Vesting
Participants are immediately vested in their voluntary contributions
and rollover contribution accounts plus earnings thereon. Vesting in
the Corporation's contribution portion of their accounts plus
earnings thereon is based on years of continuous service. A
participant is fully vested after five years of credited service.
The nonvested balance is forfeited upon termination of service.
Forefeitures are used to reduce the Corporation's contribution.
Payment of Benefits
Upon termination of service, participants may elect to receive a
lump-sum amount or installments equal to the value of their
accounts. Withdrawals other than for termination are permitted under
circumstances provided by the Plan.
Plan Termination
Although it has not expressed any intent to do so, the Corporation
has the right under the Plan to discontinue its contributions at any
time and to terminate the Plan subject to the provisions of ERISA.
In the event of Plan termination, participants will become 100%
vested in their accounts.
Note 2: Summary of Significant Accounting Policies
Method of Accounting
The accompanying financial statements are prepared on the accrual
method of accounting.
Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that
affect the reported amounts of net assets and changes in net assets
available for benefits. Actual results could differ from those
estimates.
Valuation of Investments and Income Recognition
Quoted market prices, if available, are used to value investments.
The Federated Capital Preservation Fund is carried at contract
value. Money market funds are valued at cost, which approximates
market. Investment in the Corporation's unrestricted common stock is
valued at the quoted market price.
Purchases and sales of securities are recorded on a trade-date
basis. Interest income is recorded on the accrual basis.
5
First Merchants Corporation
Retirement Savings Plan
Notes to Financial Statements
December 31, 2004 and 2003
Plan Tax Status
The Plan obtained its latest determination letter in September 2001,
in which the Internal Revenue Service stated that the Plan and
related trust, as then designed, were in compliance with the
applicable requirements of the Internal Revenue Code and therefore
not subject to tax. The Plan has been amended and restated since
receiving the determination letter. However, the Plan administrator
believes that the Plan and related trust are currently designed and
being operated in compliance with the applicable requirements of the
Internal Revenue Code.
Payment of Benefits
Benefit payments to participants are recorded upon distribution.
Administrative Expenses
Administrative expenses may be paid by the Corporation or the Plan,
at the Corporation's discretion.
Note 3: Investments
The Plan's investments are held by PrimeVest Financial Services,
Inc. and the Corporation. The investment contract included in Plan
assets may be subject to withdrawal charges upon contract
termination. Crediting interest rates on the guaranteed interest
portion of the investment contract are determined by the issuer. The
Plan's investments (including investments bought, sold, and held
during the year) appreciated in fair value as follows:
2004
Net
Appreciation Fair Value
in Fair Value at End
During Year of Year
----------------------------
Investments at estimated fair value as determined by quoted
prices in an active market
Common stock $ 107,194 $ 1,030,460
Mutual funds 1,594,723 19,364,358
Investments at contract value
Federated Capital Preservation Fund -- 1,189,461
Investments at cost, which approximates market
Money market funds -- 513,096
------------ ------------
$ 1,701,917 $ 22,097,375
============ ============
6
First Merchants Corporation
Retirement Savings Plan
Notes to Financial Statements
December 31, 2004 and 2003
2003
Net
Appreciation Fair Value
in Fair Value at End
During Year of Year
----------------------------
Investments at estimated fair value as determined by quoted
prices in an active market
Common stock $ 76,195 $ 619,177
Mutual funds 2,649,170 15,705,757
Investments at contract value
Federated Capital Preservation Fund -- 1,222,302
Investments at cost, which approximates market
Money market funds -- 433,587
------------ ------------
$ 2,725,365 $ 17,980,823
============ ============
Interest and dividends realized on the Plan's investments for the
years ended 2004 and 2003 were $627,209 and $335,636, respectively.
Information on the Federated Capital Preservation Fund carried at
contract value is as follows:
2004 2003
--------------------------
Average yield 3.72% 4.50%
Crediting interest rate at December 31 3.41% 4.02%
Fair value $ 1,175,000 $ 1,262,000
----------- -----------
The fair values of individual investments that represented 5% or
more of the Plan's assets were as follows:
2004 2003
--------------------------
American Funds Amcap Fund $ 3,524,022 $ 3,037,555
Franklin Short-Intermediate U. S. Government Securities Fund 1,198,797 1,146,707
Goldman Sachs Mid Cap Fund 2,050,028 --
MFS Value Fund 3,096,735 2,565,200
Oppenheimer Main Street Income and Growth Fund 1,651,649 1,337,599
PIMCO Total Return Fund 1,918,245 1,892,358
Oppenheimer Small Cap. Value Fund 1,487,941 989,621
Federated Capital Preservation Fund (at contract value) 1,189,461 1,222,302
American Century Equity Income Fund -- 1,394,376
7
First Merchants Corporation
Retirement Savings Plan
Notes to Financial Statements
December 31, 2004 and 2003
Note 4: Party-in-Interest Transactions
Party-in-interest transactions include those with fiduciaries or
employees of the Plan, any person who provides services to the Plan,
an employer whose employees are covered by the Plan, an employee
organization whose members are covered by the Plan, a person who
owns 50 percent or more of such an employer or employee association,
or relatives of such persons.
The Plan invests in First Merchants Corporation common stock.
Activity at fair value was as follows:
First Merchants
Corporation
Common
Stock
---------------
Balance, January 1, 2003 $ 397,275
Changes 221,902
-----------
Balance, December 31, 2003 619,177
Changes 411,283
-----------
Balance, December 31, 2004 $ 1,030,460
===========
The Corporation provides certain administrative services at no cost
to the Plan.
Note 5: Plan Amendments
In September 2003, employees of Frances Slocum Bank (Frances Slocum
Bank & Trust Company Profit Sharing Plan) were added to the Plan,
and assets of $413,545 were transferred into the Plan.
In February 2004, participants of a Commerce National Bank
subsidiary 401(k) plan were transferred into the Plan. Assets
transferred totaled $220,791.
Note 6: Subsequent Events
Effective March 1, 2005, the Plan was amended and restated to allow
the employees of Lafayette Bank and Trust Company, Commerce National
Bank, First Merchants Insurance Services and Indiana Title Insurance
Company to become participants in the Plan. Approximately
$10,500,000 was transferred into the Plan from these 401(k) plans
and approximately 400 new participants were added to the Plan. The
Plan's name was also changed to First Merchants Corporation
Retirement Income and Savings Plan and the employer matching
contribution changed to 50% of the first 6% of employees' eligible
compensation. There were also additional employer contribution
provisions added to the Plan.
8
Supplemental Schedule
First Merchants Corporation
Retirement Savings Plan
Schedule H, Line 4i - Schedule of Assets Held for Investment Purposes
at End of Year
December 31, 2004
Employer Identification Number: 35-1544218 Plan Number: 002
(b) (c) (e)
Identity of Issue, Description of Investment
Borrower, Lessor, or Including Par or Current
(a) Similar Party Maturity Value Value
-----------------------------------------------------------------------------------------------------
Common Stock
*First Merchants Corporation 36,412 shares $ 1,030,460
------------
Mutual Funds
AIM Small Cap Equity Fund 34,521 shares 441,875
American Funds Amcap. Fund 193,947 shares 3,524,022
American High Income Trust Fund 30,780 shares 388,134
Federated Max-Cap Index Fund 31,545 shares 769,692
Fidelity Advisor International Capital
Appreciation Fund 5,764 shares 97,005
Franklin Short-Intermediate U. S. Government
Securities Fund 117,760 shares 1,198,797
Franklin Templeton Foreign Fund 23,196 shares 285,316
Goldman Sachs Mid Cap Fund 61,729 shares 2,050,028
ING Index Plus Mid Cap Fund 33,980 shares 544,018
MFS Value Fund 134,000 shares 3,096,735
MFS Mid-Cap Growth Fund 81,195 shares 722,638
Oppenheimer Main Street Income and Growth Fund 46,578 shares 1,651,649
Oppenheimer Small Cap Value Fund 47,599 shares 1,487,941
PIMCO Foreign Bond Fund 5,297 shares 55,459
PIMCO Total Return Fund 179,779 shares 1,918,245
Putnam International Voyager Fund 14,399 shares 351,059
Putnam Small Cap Growth Fund 36,209 shares 781,745
------------
19,364,358
------------
Collective Investment Fund
Federated Capital Preservation Fund 118,946 shares 1,189,461
------------
Money Market Fund
Federated Prime Cash Obligations Fund 513,096 shares 513,096
------------
$ 22,097,375
============
* Party-in-interest
9
Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement of
First Merchants Corporation on Form S-8 (File Number 333-50484) of our report
dated April 26, 2005, of our audit on the financial statements of First
Merchants Corporation Retirement Savings Plan for the year ended December 31,
2004, which report is included in its Annual Report on Form 11-K.
/s/ BKD, LLP
BKD, LLP
Indianapolis, Indiana
June 27, 2005
10
Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan
Administrator has duly caused this annual report to be signed on its behalf by
the undersigned hereunto duly authorized.
Date: 06/29/05 By: /s/ Kimberly J. Ellington
-------- -------------------------
Kimberly J. Ellington
First Merchants Corporation
Retirement Savings Plan
11