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, 2005
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 Income and Savings Plan
(f/k/a First Merchants Corporation
Retirement Savings Plan)
EIN 35-1544218 PN 002
Accountants' Report and Financial Statements
December 31, 2005 and 2004
First Merchants Corporation
Retirement Income and Savings Plan
(f/k/a First Merchants Corporation
Retirement Savings Plan)
December 31, 2005 and 2004
Contents
Report of Independent Registered Public Accounting Firm.......................................................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.....................11
Exhibit
Exhibit 23, Consent of Independent Registered Public Accounting Firm.....................................12
Signature....................................................................................................13
[GRAPHIC OMITTED][GRAPHIC OMITTED]
Report of Independent Registered Public Accounting Firm
Administrative Committee
First Merchants Corporation Retirement Income and Savings Plan
(f/k/a 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 Income and Savings Plan (f/k/a First
Merchants Corporation Retirement Savings Plan) (Plan) as of December 31, 2005
and 2004, and the related statements of changes in net assets available for
benefits for the years then ended. 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, 2005 and 2004, and the changes in its net assets available for
benefits for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
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.
[GRAPHIC OMITTED][GRAPHIC OMITTED]
/s/BKD, LLP
Indianapolis, Indiana
April 26, 2006
Federal Employer Identification Number: 44-0160260
[GRAPHIC OMITTED][GRAPHIC OMITTED]
First Merchants Corporation
Retirement Income and Savings Plan
(f/k/a First Merchants Corporation
Retirement Savings Plan)
Statements of Net Assets Available for Benefits
December 31, 2005 and 2004
Assets
2005 2004
-------------------------------------------
Investments
Common stock $ 1,073,188 $ 1,030,460
Mutual funds 32,548,714 19,364,358
Collective investment fund 2,125,941 1,189,461
Money market funds 1,179,757 513,096
Participant loans 254,981 -
------------------ ----------------
Total investments 37,182,581 22,097,375
------------------ ----------------
Receivables
Accrued income - 9,924
Employer contributions 1,108,481 -
Participant contributions 108,047 -
------------------ ----------------
Total receivables 1,216,528 9,924
------------------ ----------------
Cash 324 60,744
------------------ ----------------
Total assets 38,399,433 22,168,043
Liabilities
Excess contributions refundable 6,224 15,042
------------------ ----------------
Net Assets Available for Benefits $ 38,393,209 $ 22,153,001
================== ================
See Notes to Financial Statements 2
First Merchants Corporation
Retirement Income and Savings Plan
(f/k/a First Merchants Corporation
Retirement Savings Plan)
Statements of Changes in Net Assets Available for Benefits
Years Ended December 31, 2005 and 2004
2005 2004
-------------------------------------------
Investment Income
Net appreciation in fair value of investments $ 605,869 $ 1,701,917
Interest and dividends 1,650,407 627,209
------------------ ----------------
Net investment income 2,256,276 2,329,126
------------------ ----------------
Contributions
Participants 2,458,499 1,554,532
Employer 1,846,810 241,128
Rollovers 1,111,492 754,966
Transfer from other plans 10,502,523 220,791
------------------ ----------------
15,919,324 2,771,417
------------------ ----------------
Total additions 18,175,600 5,100,543
Deductions - benefits paid to participants 1,935,392 930,182
------------------ ----------------
Net Increase 16,240,208 4,170,361
Net Assets Available for Benefits, Beginning of Year 22,153,001 17,982,640
------------------ ----------------
Net Assets Available for Benefits, End of Year $ 38,393,209 $ 22,153,001
================== ================
See Notes to Financial Statements 3
First Merchants Corporation
Retirement Income and Savings Plan
(f/k/a First Merchants Corporation
Retirement Savings Plan)
Notes to Financial Statements
December 31, 2005 and 2004
Note 1: Description of Plan
The following description of First Merchants Corporation Retirement Income and
Savings Plan (f/k/a 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 and recordkeeper of the Plan.
PrimeVest Financial Services was the custodian for a majority of the Plan's
assets during 1995. In November 2005, the assets were moved to Mid Atlantic
Capital Corporation who is now 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 75% of eligible compensation
up to the maximum allowed by law. Employee rollover contributions are also
permitted.
Prior to March 1, 2005, the Corporation made matching contributions of its
employees' salary deferral amounts of 25% of the first 5% of employees' eligible
compensation for all participating employees. After March 1, 2005, the matching
contribution described above is the only type of employer contribution granted
to grandfathered participants who are at least age 55 and credited with at least
ten years of service at February 28, 2005. The remaining participants receive
the following three different types of employer contributions. The Corporation
contributions are as follows:
o Retirement security contributions: range from 2% of pay to 7% of pay
based on years of service. The participant must have 1,000 hours of
service and be employed at the end of the plan year
o Matching contributions: 50% of the first 6% of employees' eligible
compensation for all participating employees.
o Transition contributions: 3% of eligible compensation for all
participants who are at least age 45, credited with at least ten years of
service at February 28, 2005 and were participating in the Corporation's
defined-benefit plan at February 28, 2005. The participant must have
1,000 hours of service and be employed at the end of the plan year.
This contribution will only be applicable through the 2009 Plan year.
4
First Merchants Corporation
Retirement Income and Savings Plan
(f/k/a First Merchants Corporation
Retirement Savings Plan)
Notes to Financial Statements
December 31, 2005 and 2004
The entry date for retirement security and transition contributions is March 1,
2005 and each subsequent January 1. Catch-up contributions are also available
participants after they reach 50 years of age before the end of the applicable
year. Prior to March 1, 2005, Corporation profit-sharing contributions were
discretionary as determined by the Corporation's Board of Directors.
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. Contributions are
subject to certain limitations.
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. Allocations to the Corporation common stock fund are generally
limited to 25% of the applicable account balance.
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.
Vesting
Participants are immediately vested in their voluntary contributions and
rollover contribution accounts plus earnings thereon. Vesting in the
Corporation's matching contribution portion of their accounts plus earnings
thereon is based on years of continuous service. A participant is fully vested
in the matching contribution portion of their account after five years of
credited service. Effective March 1, 2005, vesting in the retirement security
contribution portion of their account plus earnings is 100% after five years of
service. Effective March 1, 2005, vesting in the transition contribution portion
of their account plus earnings is immediate since all eligible participants have
at least ten years of service. The nonvested balance is forfeited upon
termination of service. Forefeitures are used to reduce the Corporation's
contribution or to pay reasonable administrative expenses of the Plan.
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.
5
First Merchants Corporation
Retirement Income and Savings Plan
(f/k/a First Merchants Corporation
Retirement Savings Plan)
Notes to Financial Statements
December 31, 2005 and 2004
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. Participant
loans and 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.
The guaranteed investment contract, Federated Capital Preservation Fund, is
valued at contract value. Contract value represents contributions made under the
contract, plus interest at the contract rate, less funds used to pay retirement
benefits.
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.
6
First Merchants Corporation
Retirement Income and Savings Plan
(f/k/a First Merchants Corporation
Retirement Savings Plan)
Notes to Financial Statements
December 31, 2005 and 2004
Payment of Benefits
Benefit payments to participants are recorded upon distribution.
Participant Loans
Effective March 1, 2005, participant loans were acquired from the merged plans.
Participant loans have never been allowed in the Plan. Effective March 1, 2005,
no new loans will be granted under the Plan with respect to any merged plan that
had an active loan program. Any outstanding loan will continue to be repaid
based on the term of the loan from the merged plan.
Administrative Expenses
Administrative expenses may be paid by the Corporation or the Plan, at the
Corporation's discretion.
Note 3: Investments
At December 31, 2005, the Plan's investments are held by Mid Atlantic Capital
Corporation and the Corporation. The Federated Capital Preservation Fund
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:
2005
Net
Appreciation
(Depreciation) 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 $ (65,023) $ 1,073,188
Mutual funds 670,892 32,548,714
Investments at contract value
Federated Capital Preservation Fund - 2,125,941
Investments at cost, which approximates market
Money market funds - 1,179,757
Participant loans - 254,981
------------------ ----------------
$ 605,869 $ 37,182,581
================== ================
7
First Merchants Corporation
Retirement Income and Savings Plan
(f/k/a First Merchants Corporation
Retirement Savings Plan)
Notes to Financial Statements
December 31, 2005 and 2004
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
================== ================
Interest and dividends realized on the Plan's investments for the years ended
2005 and 2004 were $1,650,407 and $627,209, respectively.
Information on the Federated Capital Preservation Fund carried at contract value
is as follows:
2005 2004
-----------------------------------------
Average yield 3.98% 3.72%
Crediting interest rate at December 31 3.59% 3.41%
Fair value $ 2,028,000 $ 1,175,000
8
First Merchants Corporation
Retirement Income and Savings Plan
(f/k/a First Merchants Corporation
Retirement Savings Plan)
Notes to Financial Statements
December 31, 2005 and 2004
The fair values of individual investments that represented 5% or more of the
Plan's assets were as follows:
2005 2004
-----------------------------------------
American Funds Amcap Fund $ 5,265,001 $ 3,524,022
Franklin Short-Intermediate U. S. Government Securities Fund - 1,198,797
Goldman Sachs Mid Cap Equity Fund 3,786,673 2,050,028
MFS Value Fund 4,431,452 3,096,735
Oppenheimer Main Street Income and Growth Fund - 1,651,649
Oppenheimer Main Street Fund 2,538,016 -
PIMCO Total Return Fund 2,358,389 1,918,245
Oppenheimer Small & Mid Cap Value Fund 3,180,749 1,487,941
Federated Capital Preservation Fund (at contract value) 2,125,941 1,189,461
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, 2004 $ 619,177
Changes 411,283
-------------
Balance, December 31, 2004 1,030,460
Changes 42,728
-------------
Balance, December 31, 2005 $ 1,073,188
=============
The Corporation provides certain administrative services at no cost to the Plan.
9
First Merchants Corporation
Retirement Income and Savings Plan
(f/k/a First Merchants Corporation
Retirement Savings Plan)
Notes to Financial Statements
December 31, 2005 and 2004
Note 5: Plan Amendments
In February 2004, participants of a Commerce National Bank subsidiary 401(k)
plan were transferred into the Plan. Assets transferred totaled $220,791.
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 as described in Note 1.
10
Supplemental Schedule
First Merchants Corporation
Retirement Income and Savings Plan
(f/k/a First Merchants Corporation
Retirement Savings Plan)
Schedule H, Line 4i - Schedule of Assets Held for Investment Purposes
at End of Year
December 31, 2005
Employer Identification Number: 35-1544218 Plan Number: 002
(a)(b) (c) (e)
Identity of Issue, Description of Investment
Borrower, Lessor, or Including Par or Current
Similar Party Maturity Value Value
--------------------------------------------------------------------------------------------------------------------
Common Stock
*First Merchants Corporation 41,276 shares $ 1,073,188
----------------
Mutual Funds
AIM Small Cap Equity Fund 61,447 shares 753,346
AIM Real Estate Fund 16,862 shares 470,280
American Funds Amcap Fund 278,130 shares 5,265,001
American Funds High Income Trust Fund 62,007 shares 750,913
Federated Max-Cap Index Fund 69,593 shares 1,716,162
Fidelity Advisor Diversified International Fund 25,712 shares 537,651
First American Mid Cap Growth Opportunity Fund 28,483 shares 1,099,458
Franklin Limited Maturity U. S. Government Fund 162,999 shares 1,615,317
Goldman Sachs Mid Cap Equity Fund 108,938 shares 3,786,673
ING Index Plus Mid Cap Fund 63,035 shares 1,065,920
MFS Value Fund 191,755 shares 4,431,452
MFS International Discovery Fund 26,666 shares 627,981
Oppenheimer Main Street Fund 69,156 shares 2,538,016
Oppenheimer Small & Mid Cap Value Fund 97,839 shares 3,180,749
PIMCO Foreign Bond Fund 20,383 shares 212,392
PIMCO Total Return Fund 224,608 shares 2,358,389
Putnam Small Cap Growth Fund 52,949 shares 1,168,590
Templeton Foreign Fund 77,018 shares 970,424
----------------
32,548,714
----------------
Collective Investment Fund
Federated Capital Preservation Fund 212,594 shares 2,125,941
----------------
Money Market Fund
Federated Prime Cash Obligations Fund 1,179,757 shares 1,179,757
----------------
*Participant Loans 7.25% - 9.00% 254,981
----------------
$ 37,182,581
================
*Party-in-interest
11
Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statements of
First Merchants Corporation on Form S-8 (File No. 333-50484) of our report dated
April 26, 2006, of our audit on the financial statements of First Merchants
Corporation Retirement Income and Savings Plan (f/k/a First Merchants
Corporation Retirement Savings Plan) for the year ended December 31, 2005, which
report is included in its Annual Report on Form 11-K.
/s/ BKD, LLP
Indianapolis, Indiana
June 29, 2006
12
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: 06/29/06 By: /s/ Kimberly J. Ellington
-------- -------------------------
Kimberly J. Ellington
First Merchants Corporation
Retirement Savings Plan
13