Edgar Filing: FIRST MERCHANTS CORP

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

Form S-4

As filed with the Securities and Exchange Commission on July 3, 2013

Registration Statement No. 333-

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

FIRST MERCHANTS CORPORATION

(Exact name of registrant as specified in its charter)

INDIANA

35-1544218

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

6712

(Primary Standard Industrial Classification Code Number)

200 East Jackson Street

Muncie, Indiana 47305

(765) 747-1500

(Address, including Zip Code, and telephone number, including area code, of registrant’s principal executive offices)

Mark K. Hardwick

Executive Vice President

Chief Financial Officer

First Merchants Corporation

200 East Jackson Street

Muncie, Indiana 47305

(765) 747-1500

(Name, address, including Zip Code, and telephone number, including area code, of agent for service)

With copies to:

David R. Prechtel, Esq.

Jeremy E. Hill, Esq.

Bingham Greenebaum Doll LLP

2700 Market Tower

10 W. Market Street

Indianapolis, Indiana 46204

(317) 635-8900

Daniel C. McKay, II, Esq.

Jennifer Durham King, Esq.

Vedder Price P.C.

222 North LaSalle Street

Chicago, Illinois 60601

(312) 609-7500

Approximate date of commencement of the proposed sale of the securities to the public: As soon as practicable after the effective date of this Registration Statement and upon the effective time of the merger described in the accompanying Joint Proxy Statement-Prospectus.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) ¨

Exchange Act Rule 14d-1(d) (Cross-Border Third Party Tender Offer) ¨

CALCULATION OF REGISTRATION FEE



Title of Each Class of Securities to be Registered	Amount to be Registered (1)	Proposed Maximum Offering Price Per Share (2)	Proposed Maximum Aggregate Offering Price (2)	Amount of Registration Fee (3)
Common Stock, no par value	Up to 7,277,395 shares	$16.57	$120,580,834	$16,448

(1)

This represents the maximum number of shares of First Merchants Corporation common stock estimated to be issuable upon completion of the merger described herein. This number is based on the number of shares of CFS Bancorp, Inc. common stock outstanding and reserved for issuance upon exercise of outstanding options as of June 28, 2013, and the exchange of each such shares of CFS Bancorp, Inc. common stock for 0.65 shares of First Merchants Corporation common stock, pursuant to the terms of the Agreement of Reorganization and Merger, dated as of May 13, 2013, by and between First Merchants Corporation and CFS Bancorp, Inc., which is attached to the joint proxy statement-prospectus as Annex A.

(2)

Estimated solely for the purpose of calculating the registration fee required by Section 6(b) of the Securities Act and computed pursuant to Rules 457(f) and 457(c) under the Securities Act, based on (A) $10.77, the average of the high and low price of CFS Bancorp, Inc. common stock as reported on The NASDAQ Stock Market on June 21, 2013, multiplied by (B) 11,195,992, the estimated maximum shares of CFS Bancorp, Inc. common stock that may be exchanged for First Merchants common stock upon consummation of the merger, including shares reserved for issuance upon exercise of outstanding options.

(3)	The registration fee of $16,448 for the securities registered hereby has been calculated pursuant to Rule 457(f) under the Securities Act of 1933, as amended, as $120,580,834 multiplied by 0.00013640.

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

THE INFORMATION IN THIS JOINT PROXY STATEMENT-PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. WE MAY NOT ISSUE THESE SECURITIES UNTIL THE REGISTRATION STATEMENT IS EFFECTIVE. THIS JOINT PROXY STATEMENT-PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

PRELIMINARY JOINT PROXY STATEMENT-PROSPECTUS

DATED JULY 3, 2013, SUBJECT TO COMPLETION


FIRST MERCHANTS CORPORATION		CFS BANCORP, INC.

YOUR VOTE IS VERY IMPORTANT

PROSPECTUS OF FIRST MERCHANTS CORPORATION FOR UP TO

7,277,395 SHARES OF COMMON STOCK AND

JOINT PROXY STATEMENT OF CFS BANCORP, INC.

AND FIRST MERCHANTS CORPORATION

The Board of Directors of First Merchants Corporation (First Merchants) and the Board of Directors of CFS Bancorp, Inc. (CFS) have agreed to merge CFS into First Merchants. This proposed strategic business combination will create the second largest bank holding company headquartered in the State of Indiana. Following the merger, the combined company will have approximately 95 banking branches in three states and have assets of $5.4 billion, $3.5 billion in loans, $4.3 billion in deposits, and total shareholders’ equity of $652 million.

In the merger, each share of CFS common stock (including all restricted shares currently issued under CFS’ equity compensation plans) will be converted into the right to receive 0.65 shares of First Merchants common stock. First Merchants will pay cash for any fractional shares resulting from application of the exchange ratio.

We cannot complete the merger unless the shareholders of both of our companies approve it. Each of us will hold a meeting of our shareholders to vote on this merger proposal. Your vote is very important. Whether or not you plan to attend your shareholder meeting, please take the time to vote by completing and mailing the enclosed proxy card to us. If you sign, date and mail your proxy card without indicating how you want to vote, your proxy will be counted as a vote in favor of the merger. Not returning your card or not instructing your broker how to vote any shares held for you in “street name” will have the same effect as a vote against the merger.

The dates, times and places of the meetings are as follows:


For First Merchants Shareholders:		For CFS Shareholders
, 2013, : .m., local time		, 2013, : .m., local time

This document provides you with detailed information about these meetings and the proposed merger. You can also get information about our companies from publicly available documents that our companies have filed with the Securities and Exchange Commission. First Merchants common stock is listed on The NASDAQ Global Select Market under the symbol “FRME.” CFS common stock is listed on The NASDAQ Global Market under the symbol “CITZ.”

We strongly support the merger of our companies and join with all of the other members of our Boards of Directors in unanimously recommending that you vote in favor of the merger.

Michael C. Rechin

Daryl D. Pomranke

President and Chief Executive Officer

FIRST MERCHANTS CORPORATION

President and Chief Executive Officer

CFS BANCORP, INC.

For a discussion of certain risk factors which you should consider in evaluating the merger, see “Risk Factors” beginning on page 24. We encourage you to read this entire document carefully.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued pursuant to this joint proxy statement-prospectus or determined if this joint proxy statement-prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

These securities are not savings or deposit accounts or other obligations of any bank or non-bank subsidiary of either of our companies, and they are not insured by the Federal Deposit Insurance Corporation, the Deposit Insurance Fund or any other federal or state governmental agency.

Joint Proxy Statement-Prospectus dated , 2013,

and first mailed to shareholders on or about , 2013.

CFS BANCORP, INC.

707 Ridge Road

Munster, Indiana 46321

NOTICE OF SPECIAL MEETING OF

SHAREHOLDERS TO BE HELD ON

, 2013

To Our Shareholders:

We will hold a special meeting of the shareholders of CFS Bancorp, Inc. (“CFS”) on , , 2013, at : .m. local time, at .

The purposes of the special meeting are the following:

To consider and vote upon a proposal to approve the Agreement of Reorganization and Merger dated May 13, 2013 (the “Merger Agreement”), between First Merchants Corporation and CFS, and to approve the transactions contemplated thereby (the “CFS Merger Proposal”). Pursuant to the Merger Agreement, CFS will merge into First Merchants Corporation (the “Merger”) and, immediately thereafter, Citizens Financial Bank will merge into First Merchants Bank. The Merger is more fully described in this joint proxy statement-prospectus and the Merger Agreement is attached as Annex A to this joint proxy statement-prospectus;

To approve one or more adjournments of the CFS special meeting, if necessary or appropriate, to solicit additional proxies in favor of the CFS Merger Proposal (the “CFS Adjournment Proposal”);

To approve, in a non-binding advisory vote, the compensation payable to CFS’ named executive officers in connection with the Merger, and

To transact such other business which may properly be presented at the special meeting or any adjournment or postponement of the special meeting.

We have fixed the close of business on , 2013, as the record date for determining those shareholders who are entitled to notice of, and to vote at, the special meeting and any adjournment or postponement of the special meeting. Approval of the CFS Merger Proposal requires the affirmative vote of at least a majority of the outstanding shares of CFS common stock.

The CFS Board of Directors unanimously recommends that you vote “FOR” (1) approval of the CFS Merger Proposal; (2) approval of the CFS Adjournment Proposal; (3) approval of the non-binding advisory resolution regarding the Merger-related compensation payable to CFS’ named executive officers, and (4) approval of such other business which may properly come before the meeting.

Whether or not you plan to attend the special meeting in person, please submit your proxy via the Internet, by telephone, or by completing, signing, and dating the enclosed proxy card and returning it as soon as possible using the enclosed postage-prepaid envelope. If you attend the special meeting, you may vote in person if you wish, even if you have previously submitted your proxy. Not submitting your proxy or not instructing your broker how to vote any shares held for you in “street name” will have the same effect as a vote against the merger.

FIRST MERCHANTS CORPORATION

200 East Jackson Street

P.O. Box 792

Muncie, Indiana 47305

NOTICE OF SPECIAL MEETING OF

SHAREHOLDERS TO BE HELD ON

, 2013

To Our Shareholders:

We will hold a special meeting of the shareholders of First Merchants Corporation on , , 2013, at _: .m. local time, at .

The purposes of the special meeting are the following:

To consider and vote upon a proposal to approve the Agreement of Reorganization and Merger dated May 13, 2013, between First Merchants Corporation and CFS Bancorp, Inc.(the “Merger Agreement”), and to approve the transactions contemplated thereby (the “First Merchants Merger Proposal”). Pursuant to the Merger Agreement, CFS Bancorp, Inc. will merge into First Merchants Corporation and, immediately thereafter, Citizens Financial Bank will merge into First Merchants Bank. The merger is more fully described in this joint proxy statement-prospectus and the Merger Agreement is attached as Annex A to this joint proxy statement-prospectus;

To approve one or more adjournments of the First Merchants special meeting, if necessary or appropriate, to solicit additional proxies in favor of the First Merchants Merger Proposal (the “First Merchants Adjournment Proposal”); and

To transact such other business which may properly be presented at the special meeting or any adjournment or postponement of the special meeting.

We have fixed the close of business on , 2013, as the record date for determining those shareholders who are entitled to notice of, and to vote at, the special meeting and any adjournment or postponement of the special meeting. Approval of the First Merchants Merger Proposal requires the affirmative vote of at least a majority of the outstanding shares of First Merchants common stock.

The First Merchants Corporation Board of Directors unanimously recommends that you vote “FOR” (1) approval of the First Merchants Merger Proposal (2) approval of the First Merchants Adjournment Proposal; and (3) approval of such other business which may properly come before the meeting.

ADDITIONAL INFORMATION

This document incorporates important business and financial information about First Merchants Corporation (First Merchants) and CFS Bancorp, Inc. (CFS) from other documents filed by each of First Merchants and CFS with the Securities and Exchange Commission that are not delivered with or included in this document. This information (including the documents incorporated herein by reference) is available to you without charge upon your written or oral request. You may request these documents in writing or by telephone from the appropriate company at the following addresses and telephone numbers:

First Merchants Corporation

200 East Jackson Street

Muncie, Indiana 47305

Attention: David L. Ortega,

Corporate Secretary

Telephone: (765) 747-1500

CFS Bancorp, Inc.

707 Ridge Road

Munster, Indiana 46321

Attention: Monica F. Sullivan,

Corporate Secretary

Telephone: (219) 836-2960

To ensure timely delivery, shareholders must request the documents containing the information described above no later than five business days prior to the date of the applicable special meetings of the shareholders. Accordingly, if you would like to make such a request, please do so by , 2013, in order to receive the requested information before the meeting.

You can also obtain copies of the documents incorporated by reference in this document through the SEC’s website at www.sec.gov. See “WHERE YOU CAN FIND ADDITIONAL INFORMATION” on page .

FORWARD-LOOKING STATEMENTS

This joint proxy statement-prospectus contains forward-looking statements made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements can often, but not always, be identified by the use of words like “believe,” “continue,” “pattern,” “estimate,” “project,” “intend,” “anticipate,” “expect” and similar expressions, or future or conditional verbs such as “will,” would,” “should,” “could,” “might,” “can,” “may,” or similar expressions. These forward-looking statements include, but are not limited to, statements relating to the benefits of the proposed merger (the “Merger”) between First Merchants and CFS, including future financial and operating results, cost savings, enhanced revenues, and accretion/dilution to reported earnings that may be realized from the Merger, as well as other statements of expectations regarding the Merger, and other statements of First Merchants’ goals, intentions and expectations; statements regarding First Merchants’ business plan and growth strategies; statements regarding the asset quality of First Merchants’ loan and investment portfolios; and estimates of First Merchants’ risks and future costs and benefits, whether with respect to the Merger or otherwise.

These forward-looking statements are subject to significant risks, assumptions and uncertainties that may cause results to differ materially from those set forth in forward-looking statements, including, among other things: the risk that the businesses of the First Merchants and CFS will not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; expected revenue synergies and cost savings from the Merger may not be fully realized or realized within the expected time frame; revenues following the Merger may be lower than expected; customer and employee relationships and business operations may be disrupted by the Merger; the ability to obtain required governmental and stockholder approvals, and the ability to complete the Merger on the expected timeframe; possible changes in economic and business conditions; the existence or exacerbation of general geopolitical instability and uncertainty; possible changes in monetary and fiscal policies, and laws and regulations; the effects of easing restrictions on participants in the financial services industry; the cost and other effects of legal and administrative cases; possible changes in the credit worthiness of customers and the possible impairment of collectability of loans; fluctuations in market rates of interest; competitive factors in the banking industry; changes in the banking legislation or regulatory requirements of federal and state agencies applicable to banks and bank holding companies; continued availability of earnings and excess capital sufficient to support continued dividends; changes in market, economic, operational, liquidity, credit and interest rate risks associated with the First Merchants’ and CFS’ business; and other risks and factors identified in each of First Merchants’ and CFS’ filings with the SEC.

Neither First Merchants nor CFS undertakes any obligation to update any forward-looking statement, whether written or oral, relating to the matters discussed herein unless required to under the federal securities laws. In addition, First Merchants’ and CFS’ past results of operations do not necessarily indicate either of their anticipated future results, whether the Merger is effectuated or not.

TABLE OF CONTENTS


	PAGE
QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SHAREHOLDER MEETINGS		3
SUMMARY		7
FIRST MERCHANTS AND CFS HISTORICAL AND PRO FORMA PER SHARE AND CAPITAL RATIO DATA		18
SELECTED CONSOLIDATED FINANCIAL DATA		19
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF FIRST MERCHANTS		20
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF CFS		21
UNAUDITED PRO FORMA SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA OF FIRST MERCHANTS		22
RISK FACTORS		24
THE CFS SPECIAL MEETING		29
General Information		29
Matters To Be Considered		29
Votes Required		29
Proxies		30
Solicitation of Proxies		30
Recommendation of the CFS Board of Directors		31
Other Matters		31
Beneficial Ownership of CFS Common Stock by Certain Shareholders		31
CFS MERGER-RELATED PROPOSALS		33
PROPOSAL NO. 1: CFS MERGER PROPOSAL		33
PROPOSAL NO. 2: CFS ADJOURNMENT PROPOSAL		33
PROPOSAL NO. 3: CFS MERGER-RELATED COMPENSATION PROPOSAL		34
THE FIRST MERCHANTS SPECIAL MEETING		35
General Information		35
Matters To Be Considered		35
Votes Required		35
Proxies		35
Solicitation of Proxies		36
Recommendation of the First Merchants Board of Directors		36
Other Matters		37
Beneficial Ownership of First Merchants Common Stock by Certain Shareholders		37
FIRST MERCHANTS MERGER-RELATED PROPOSALS		39
PROPOSAL NO. 1: FIRST MERCHANTS MERGER PROPOSAL		39
PROPOSAL NO. 2: FIRST MERCHANTS ADJOURNMENT PROPOSAL		40
THE MERGER		40
Description of the Merger		40
Exchange of CFS Common Stock		40
Effect of the Merger on First Merchants Shareholders		41
Background of the Merger		41
First Merchants’ Reasons for the Merger		45
Opinion of First Merchants’ Financial Advisor		46
CFS’ Reasons for the Merger		58
Opinion of CFS’ Financial Advisor		60
Recommendation of the First Merchants Board of Directors		68
Recommendation of the CFS Board of Directors		68
Rights of Dissenting Shareholders		68
Registration of First Merchants Common Stock		68
Regulatory Approvals		68


Effective Date of the Merger			69
The NASDAQ Global Select Market Listing			69
Accounting Treatment			69
Registration Statement			70
Interests of Certain Persons in the Merger			70
Merger-Related Compensation Payable to CFS’ Named Executive Officers			71
THE MERGER AGREEMENT			72
Description of the Merger			72
Exchange of CFS Common Stock			72
Representations and Warranties			74
Conditions to Completion of the Merger			75
Termination; Waiver; Amendment			75
Restrictions Affecting the Parties Prior to Completion of the Merger			76
Fees and Expenses			77
Management After the Merger			77
Indemnification and Insurance of CFS Directors and Officers			78
Treatment of Options to Acquire Shares of CFS Common Stock			78
Employee Benefit Plans			78
Interests of Certain Persons in the Merger			79
Voting Agreement			79
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES			80
Tax Consequences of the Merger Generally			80
Tax Consequences to First Merchants, First Merchants Shareholders and CFS			81
Tax Consequences of the Merger to U.S. Holders of CFS Common Stock			81
Information Reporting and Backup Withholding			81
Reporting Requirements			81
UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION			83
DESCRIPTION OF FIRST MERCHANTS			88
Business			88
Incorporation of Certain Information Regarding First Merchants by Reference			89
DESCRIPTION OF CFS			89
Business			89
Incorporation of Certain Information Regarding CFS by Reference			89
COMPARISON OF COMMON STOCK			90
LEGAL MATTERS			100
EXPERTS			100
SHAREHOLDER PROPOSALS			100
WHERE YOU CAN FIND ADDITIONAL INFORMATION			100
ANNEX A: AGREEMENT OF REORGANIZATION AND MERGER			A-1
ANNEX B: OPINION OF RIVER BRANCH CAPITAL LLC			B-1
ANNEX C: OPINION OF SANDLER O’NEILL & PARTNERS, L.P.			C-1

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SHAREHOLDER MEETINGS

Q:	Why are First Merchants and CFS proposing to merge?

We believe the merger is in the best interests of both companies and our respective shareholders. CFS and First Merchants believe that the merger will bring together two complementary institutions to create a strategically, operationally and financially strong company that is positioned for further growth. The merger will give the combined company greater scale and geographic diversity, not only for serving existing customers more efficiently, but also for future expansion. The combination will create the second largest bank holding company based in the State of Indiana. We believe the merger will enhance our capabilities to provide banking and financial services to our customers and strengthen the competitive position of the combined organization.

You should review the background of and reasons for the merger described in greater detail beginning on page .

Q:	What will CFS shareholders receive in the merger?

For each share of CFS common stock (including all restricted shares currently issued under CFS’ equity compensation plans) you own before the merger, you will have the right to receive 0.65 shares of First Merchants common stock. First Merchants will pay cash to a CFS shareholder for any fractional share interests resulting from the exchange ratio.

Because the exchange ratio for the consideration is fixed, the value of the consideration will fluctuate with the market price of First Merchants common stock. As of , 2013, the closing price per share of First Merchants common stock was $ and the closing price per share of CFS common stock was $ . You should obtain current market prices for shares of First Merchants common stock and CFS common stock. First Merchants common stock is listed on The NASDAQ Global Select Market under the symbol “FRME.” CFS common stock is listed on The NASDAQ Global Market under the symbol “CITZ.”

Q:	What risks should I consider before I vote on the merger?

A:	You should carefully review the section captioned “RISK FACTORS” beginning on page .

Q:	Will First Merchants shareholders receive any shares or cash as a result of the merger?

A:	No. After the merger, First Merchants shareholders will continue to own the same number of First Merchants shares they owned before the merger.

Q:	When is the merger expected to be completed?

We are working to complete the merger as quickly as possible. We must first obtain the necessary regulatory approvals and the approvals of both CFS shareholders and First Merchants shareholders at the special meeting that each company will hold for its shareholders to vote on the merger. We currently expect to complete the merger during the fourth quarter of 2013.

Q:	What are the tax consequences of the merger to me?

We have structured the merger so that First Merchants, First Merchants shareholders, CFS and CFS shareholders will not recognize any gain or loss for federal income tax purposes on the exchange of CFS shares for First Merchants shares in the merger. In other words, to the extent a CFS shareholder receives First Merchants shares in the merger, it will generally be tax-free. However, to the extent a CFS shareholder receives cash in lieu of a fractional share of First Merchants common stock, any gain such CFS shareholder realizes as a result of the exchange of those fractional shares will be taxed, but generally not in an amount in excess of the cash received. At the closing, CFS and First Merchants will each receive an opinion from their

tax advisors confirming these tax consequences. See “MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES” beginning on page . Your individual tax consequences will depend on your personal situation. You should consult your tax advisor for a full understanding of the tax consequences of the merger to you.

Q:	Will I have dissenters’ rights?

No. CFS shareholders are not entitled to dissenters’ rights under Indiana Code § 23-1-44, as amended, because CFS’ common stock is listed on The NASDAQ Global Market. Similarly, First Merchants shareholders are not entitled to dissenters’ rights under Indiana Code § 23-1-44, as amended, because the First Merchants’ common stock is listed on The NASDAQ Global Select Market.

Q:	What do I need to do now?

You should carefully read and consider the information contained in this document and any information incorporated herein by reference. Then, please submit your proxy via the Internet, by telephone, or by completing, signing, and dating the enclosed proxy card and returning it as soon as possible using the enclosed postage-prepaid envelope so that your shares can be voted at the , 2013 First Merchants special shareholder meeting, if you are a First Merchants shareholder, or at the , 2013 CFS special shareholder meeting, if you are a CFS shareholder.

CFS shareholders: If a returned proxy card is signed but does not specify how you wish to vote your shares, your proxy will be voted “FOR” (1) approval of the CFS Merger Proposal; (2) approval of the adjournment of the meeting, if necessary, to solicit additional proxies if enough votes have not been cast to approve the CFS Merger Proposal at the time of the meeting; (3) approval of the non-binding advisory resolution regarding the merger-related compensation payable to CFS’ named executive officers, and (4) approval of such other business as may properly come before the meeting including at an adjournment or postponement of the meeting.

First Merchants shareholders: If a returned proxy card is signed but does not specify how you wish to vote your shares, your proxy will be voted “FOR” (1) approval of the First Merchants Merger Proposal; (2) approval of the adjournment of the meeting, if necessary, to solicit additional proxies if enough votes have not been cast to approve the First Merchants Merger Proposal at the time of the meeting; (3) approval of such other business as may properly come before the meeting including at an adjournment or postponement of the meeting.

Q:	What if I don’t vote or I abstain from voting?

To approve the CFS Merger Proposal and First Merchants Merger Proposal, the holders of at least a majority of the shares of outstanding CFS common stock and outstanding First Merchants common stock, respectively, must vote in their favor. As a result, if you do not vote or you abstain from voting, your abstention will count as a vote “AGAINST” the merger. The CFS shareholder advisory vote on the merger-related compensation payable to CFS’ named executive officers only requires that there be more votes in favor than against so abstentions and broker non-votes will have no effect on this proposal.

Q:	If my shares are held by my broker in “street name,” will my broker vote my shares for me?

Your broker will vote any shares you hold in “street name” only if you provide instructions to your broker on how to vote your shares. You should follow the directions provided by your broker to vote your shares. If you do not provide your broker with instructions on how to vote your shares held in “street name,” your broker will not be permitted to vote your shares, which will have the effect of a vote “AGAINST” the merger and will not be counted for purposes of the CFS shareholder advisory vote on merger-related compensation.

Q:	Why am I being asked to cast an advisory (non-binding) vote to approve the compensation payable to certain CFS officers in connection with the merger?

A:	The SEC, in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, has adopted rules that require CFS to seek an advisory (non-binding) vote with respect to certain payments that are payable to CFS’ named executive officers in connection with the merger.

Q:	What will happen if CFS’ shareholders do not approve such compensation at the CFS special meeting?

CFS shareholder approval of the compensation payable to certain of CFS’ executive officers in connection with the merger is not a condition to completion of the merger. The vote with respect to such compensation is an advisory vote and will not be binding on CFS (or First Merchants after the merger) regardless of whether the Merger Agreement is approved. Accordingly, because the compensation to be paid to certain CFS executives in connection with the merger is contractual, such compensation will be payable if the merger is completed regardless of the outcome of the advisory vote.

Q:	May I change my vote after I have submitted my proxy?

Yes. You may change your vote at any time before your proxy is voted at the meeting. You can do this in one of three ways. First, you can send a written notice stating that you would like to revoke your proxy and subsequently submit a new proxy. Second, you can complete and submit a new proxy card dated a later date than the first proxy you submitted. If you choose either of these two methods, you must submit your notice of revocation and/or your new proxy card to your company before its meeting. If you are a First Merchants shareholder, submit your notice of revocation and/or new proxy card to First Merchants Corporation, 200 East Jackson Street, Muncie, Indiana 47305, Attention: David L. Ortega, Corporate Secretary. If you are a CFS shareholder, submit your notice of revocation and/or new proxy card to CFS Bancorp, Inc., 707 Ridge Road, Munster, Indiana 46321, Attention: Monica F. Sullivan, Corporate Secretary. Third, you may attend the meeting and vote in person. Simply attending the meeting, however, will not revoke your proxy. You must request a ballot and vote the ballot at the meeting. If you have instructed a broker to vote your shares, you must follow directions received from your broker to change your vote.

Q:	Should I send in my stock certificate(s) now?

No. After the merger is completed, CFS shareholders will receive written instructions from First Merchants for exchanging their stock certificates for shares of First Merchants common stock to be received by them in the merger. First Merchants shareholders need not do anything. Any CFS shares held in book-entry form will be automatically exchanged for shares of First Merchants common stock in book-entry form and any cash to be paid in exchange for fractional shares in the merger. If you are a First Merchants shareholder, you should retain your certificates, as you will continue to hold the First Merchants shares you currently own.

Q:	Whom should I contact if I have other questions about the CFS Merger Proposal, the First Merchants Merger Proposal or the merger?

A:	You may contact , the Information Agent for the merger at . Banks and brokerage firms should also call at .

CFS shareholders may also contact:

CFS Bancorp, Inc.

707 Ridge Road

Munster, Indiana 46321

Attention: Monica F. Sullivan,

Corporate Secretary

Telephone (219) 836-2960

First Merchants shareholders may also contact:

First Merchants Corporation

200 East Jackson Street

Muncie, Indiana 47305

Attention: David L. Ortega,

Corporate Secretary

Telephone: (765) 747-1500

SUMMARY

This summary highlights selected information from this joint proxy statement-prospectus. Because this is a summary, it does not contain all of the information that is important to you. You should carefully read this entire document, including the documents incorporated herein by reference, and the other documents to which we have referred you before you decide how to vote. See “WHERE YOU CAN FIND ADDITIONAL INFORMATION” on page for a description of documents that we incorporate by reference into this document. Each item in this summary includes a page reference that directs you to a more complete description in this document of the topic discussed.

The Companies (pages and )

First Merchants Corporation

200 East Jackson Street

Muncie, Indiana 47305

(765) 747-1500

First Merchants is a financial holding company headquartered in Muncie, Indiana and was organized in September 1982. First Merchants common stock is listed on The NASDAQ Global Select Market under the symbol “FRME.” First Merchants has one full-service bank charter, First Merchants Bank, National Association, which opened for business in Muncie, Indiana, in March 1893. First Merchants Bank also operates Lafayette Bank and Trust, Commerce National Bank and First Merchants Trust Company as divisions of First Merchants Bank. First Merchants Bank includes 76 banking locations in 24 Indiana and two Ohio counties. First Merchants Bank’s business activities are currently limited to one significant business segment, which is community banking. First Merchants also operates First Merchants Insurance Services, Inc., operating as First Merchants Insurance Group, a full-service property, casualty, personal lines, and employee benefit insurance agency headquartered in Muncie, Indiana.

As of March 31, 2013, First Merchants had consolidated assets of $4.3 billion, consolidated deposits of $3.3 billion and shareholders’ equity of $539 million. As of March 31, 2013, First Merchants and its subsidiaries had 1,166 full-time equivalent employees. See “DESCRIPTION OF FIRST MERCHANTS” on page .

CFS Bancorp, Inc.

707 Ridge Road

Munster, Indiana 46321

(219) 836-2960

CFS is a savings and loan holding company, incorporated under Indiana law and headquartered in Munster, Indiana. CFS’ wholly-owned bank subsidiary is Citizens Financial Bank, a federal savings bank. Citizens Financial Bank has been operating in Northwest Indiana since 1934 and the far southern suburbs of Chicago, Illinois, since 1998. Citizens Financial Bank has 20 full service banking centers located in Lake and Porter counties in Northwest Indiana and Cook and DuPage counties in Illinois. CFS employed 262 full-time equivalent employees at March 31, 2013. Citizens Financial Bank has one wholly-owned subsidiary, WHCC, LLC, which holds certain other real estate owned from Citizens Financial Bank.

At March 31, 2013, on a consolidated basis, CFS had assets of approximately $1.1 billion, deposits of approximately $974 million, and shareholders’ equity of approximately $113 million. CFS’ common shares are traded on The NASDAQ Global Market under the symbol “CITZ.” See “DESCRIPTION OF CFS” on page .

The Merger (page )

We have attached a copy of the Agreement of Reorganization and Merger (Merger Agreement) to this document as Annex A. Please read the Merger Agreement in its entirety. It is the legal document that governs the merger.

CFS will merge with First Merchants and, thereafter, CFS will cease to exist. Immediately following the merger, Citizens Financial Bank will merge into First Merchants Bank and Citizens Financial Bank will cease to exist. We expect to complete the merger during the fourth quarter of 2013.

Reasons for the Merger (pages and )

First Merchants. First Merchants’ Board of Directors considered a number of financial and nonfinancial factors in making its decision to merge with CFS, including its respect for the ability and integrity of the CFS Board of Directors, management and staff. The Board believes that expanding First Merchants’ operations in the market areas where CFS operates offers financial and strategic benefits to First Merchants and CFS as a combined company. In addition, the Board of Directors considered the fairness opinion of Sandler O’Neill & Partners, L.P., First Merchants’ financial advisor, indicating that the exchange ratio under the Merger Agreement is fair to First Merchants from a financial point of view.

CFS. In considering the merger with First Merchants, CFS’ Board of Directors collected and evaluated a variety of economic, financial and market information regarding First Merchants and its subsidiaries, their respective businesses and First Merchants’ reputation and future prospects. In the opinion of CFS’ Board of Directors, favorable factors included First Merchants’ strong earnings and stock performance, its management, the compatibility of its markets to those of CFS, the likelihood of regulatory approvals of the merger, and the attractiveness of First Merchants’ offer from a financial perspective. In addition, the Board of Directors considered the fairness opinion of River Branch Capital LLC, CFS’ financial advisor.

Opinion of CFS’ Financial Advisor (page )

The Board of Directors of CFS received the written fairness opinion of River Branch Capital LLC, dated May 10, 2013, that, based upon and subject to the various factors, assumptions and limitations set forth in such opinion, River Branch’s experience as investment bankers, River Branch’s work as described in such opinion and other factors River Branch deemed relevant, as of May 10, 2013, the exchange ratio set forth in the Merger Agreement was fair, from a financial point of view, to holders of CFS common stock. We have attached a copy of the River Branch fairness opinion to this document as Annex B. CFS shareholders should read the River Branch fairness opinion in its entirety.

Opinion of First Merchants’ Financial Advisor (page )

The Board of Directors of First Merchants received the written fairness opinion of Sandler O’Neill & Partners, L.P., dated May 8, 2013, that the exchange ratio under the Merger Agreement is fair from a financial point of view to First Merchants. We have attached a copy of the Sandler O’Neill fairness opinion to this document as Annex C. First Merchants shareholders should read the Sandler O’Neill fairness opinion in its entirety.

What CFS Shareholders Will Receive (page )

As a CFS shareholder, each share of CFS common stock you own will be converted into 0.65 shares of First Merchants common stock as provided in the Merger Agreement. Cash will be paid for any fractional shares of First Merchants common stock resulting from the application of the exchange ratio.

After we complete the merger, CFS shareholders will receive instructions on how to surrender their CFS stock certificates and receive their certificates representing their First Merchants common stock received in the merger

(or cash in lieu of any fractional shares). Any CFS shares held in book-entry form will be automatically exchanged for shares of First Merchants common stock in book-entry form and any cash to be paid in exchange for fractional shares in the merger.

Because the exchange ratio is fixed and because the market price of First Merchants common stock will fluctuate, the market value of the stock of First Merchants you will receive in the merger is not fixed. See “SUMMARY – Comparative Market Price Information” on page .

What First Merchants Shareholders Will Receive (page )

First Merchants shareholders will not receive any consideration in the merger. After the merger, First Merchants shareholders will continue to own the same number of First Merchants shares owned before the merger.

The CFS Special Shareholders Meeting (page )

The special meeting of CFS shareholders will be held on , , 2013, at : .m. local time, at .

At the special meeting, CFS shareholders will be asked:

to approve the Merger Agreement, including the merger of CFS and First Merchants and the transactions contemplated thereby (the “CFS Merger Proposal”);

to approve one or more adjournments of the meeting, if necessary, to solicit additional proxies if enough votes have not been cast to approve the CFS Merger Proposal at the time of the meeting;

to approve, on a non-binding advisory basis, certain compensation payable to CFS’ named executive officers in connection with the merger; and

to act on any other items that may be properly submitted to a vote at the CFS special meeting.

CFS Recommendation to Shareholders (page )

The Board of Directors of CFS believes that the merger is in your best interests and unanimously recommends that you vote “FOR” the CFS Merger Proposal, “FOR” the proposal to adjourn the meeting, if necessary, to solicit additional proxies if enough votes have not been cast to approve the CFS Merger Proposal at the time of the meeting, “FOR” the non-binding advisory vote on merger-related compensation and “FOR” such other items that may be properly submitted to a vote at the CFS special meeting.

CFS Record Date; Vote Required (page )

You can vote at the CFS special meeting of shareholders if you owned shares of CFS common stock at the close of business on , 2013. You can cast one vote for each share of stock you owned on that date. To approve the CFS Merger Proposal, the holders of at least a majority of the shares of CFS common stock outstanding must vote in its favor. Approval of the proposal to adjourn the special meeting to allow extra time to solicit proxies, if necessary, and approval of the advisory vote on the merger-related compensation payable to certain of the executive officers of CFS each require more votes to be cast in favor of the proposal than are cast against it. You can vote your shares by attending the CFS special meeting, or you can vote by proxy through the Internet, by telephone or by marking the enclosed proxy card with your vote, signing it and mailing it in the enclosed return envelope. You can revoke your proxy as late as the date of the CFS special meeting by sending in a new proxy or written notice of revocation or by attending the CFS special meeting and voting in person.

Each member of the Board of Directors of CFS as of May 13, 2013, the date the Merger Agreement was executed, signed a voting agreement with First Merchants to cause all CFS common stock owned by each of them of record or beneficially on such date to be voted in favor of the CFS Merger Proposal. See “THE MERGER—Voting Agreement” on page . As of the record date, the members of the CFS Board of Directors and their affiliates had power to vote an aggregate of share of CFS common stock outstanding, representing % of the outstanding shares on that date. In addition, we also currently expect that each of the executive officers of CFS will vote all of their shares in favor of the CFS Merger Proposal. As of March 15, 2013, CFS’ executive officers, directors and their affiliates owned or had the power to vote 1,401,648 shares, or approximately 12.8%, of CFS common stock outstanding on such date.

The First Merchants Special Shareholders Meeting (page )

The special meeting of First Merchants shareholders will be held on , , 2013, at : .m. local time, at .

At the special meeting, First Merchants shareholders will be asked:

to approve the Merger Agreement, including the merger of First Merchants and CFS, and the transactions contemplated thereby (the “First Merchants Merger Proposal”);

to approve the adjournment of the meeting, if necessary, to solicit additional proxies if enough votes have not been cast to approve the First Merchants Merger Proposal at the time of the meeting; and

to act on any other items that may be properly submitted to a vote at the First Merchants special meeting.

First Merchants Recommendation to Shareholders (page )

The Board of Directors of First Merchants believes that the merger is in your best interests and unanimously recommends that you vote “FOR” the First Merchants Merger Proposal, “FOR” the proposal to adjourn the meeting, if necessary, to solicit additional proxies if enough votes have not been cast to approve the First Merchants Merger Proposal at the time of the meeting, and “FOR” the approval of other items that may be properly submitted to a vote at the special meeting.

First Merchants Record Date; Vote Required (page )

You can vote at the First Merchants special meeting of shareholders if you owned First Merchants common stock at the close of business on , 2013. You can cast one vote for each share of stock you owned on that date. To approve the First Merchants Merger Proposal, the holders of at least a majority of the shares of First Merchants common stock outstanding must vote in its favor. Approval of the proposal to adjourn the special meeting to allow extra time to solicit proxies, if necessary, requires more votes to be cast in favor of the proposal than are cast against it. You can vote your shares by attending the First Merchants special meeting, or you can vote by proxy through the Internet, by telephone, or by marking the enclosed proxy card with your vote, signing it and mailing it in the enclosed return envelope. You can revoke your proxy as late as the date of the First Merchants special meeting by sending in a new proxy or written notice of revocation or by attending the First Merchants special meeting and voting in person.

As of March 1, 2013, First Merchants’ executive officers, directors and their affiliates owned or had the power to vote 715,414 shares, or approximately 2.43%, of First Merchants common stock outstanding on that date. First Merchants expects these shares will be voted “FOR” each of the proposals.

What We Need to Do to Complete the Merger (page )

Completion of the merger depends on a number of conditions being met. In addition to our compliance with the Merger Agreement, these conditions include among others:

approval of the CFS Merger Proposal by the shareholders of CFS;

approval of the First Merchants Merger Proposal by the shareholders of First Merchants;

approval of the merger by certain regulatory agencies and the expiration of any regulatory waiting periods;

the receipt of an opinion of Vedder Price P.C. that, for U.S. federal income tax purposes, the merger will be treated as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, and that no gain or loss will be recognized in the merger by CFS shareholders to the extent the CFS shareholders receive shares of First Merchants common stock as consideration for their shares of CFS common stock, except that gain or loss will be recognized with respect to any cash received in lieu of fractional shares of First Merchants common stock;

the receipt of an opinion of Bingham Greenebaum Doll LLP that, for U.S. federal income tax purposes, the merger will be treated as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended;

notification to The NASDAQ Stock Market regarding the common stock that First Merchants will issue to CFS shareholders in the merger;

the receipt of all third party consents required for consummation of the merger; and

other customary conditions and obligations of the parties set forth in the Merger Agreement.

Regulatory Approvals (page )

With respect to the merger of First Merchants and CFS, we have applied for approval of the Board of Governors of the Federal Reserve System (Federal Reserve). With respect to the merger of First Merchants Bank and Citizens Financial Bank, we have applied for approval of the Office of the Comptroller of the Currency.

Conduct of Business Pending Merger (page )

Under the Merger Agreement, CFS and First Merchants must carry on their business in the ordinary course and may not take certain extraordinary actions without first obtaining the other party’s approval.

We have agreed that CFS will continue to pay quarterly dividends at no more than the current rate of $0.01 per share until the merger closes. We will each cooperate to insure that CFS shareholders will receive only one quarterly dividend for the quarter in which the merger closes, and not a separate dividend from both First Merchants and CFS.

Agreements of First Merchants (pages , and )

In the Merger Agreement, First Merchants has agreed to:

•

Proceed and use its reasonable and diligent efforts to obtain any consents and approvals for the merger. See “THE MERGER—Regulatory Approvals” on page .

•

Take action as may be necessary to allow CFS and its subsidiaries’ employees, no later than the effective date of the merger, to participate in benefit plans First Merchants maintains for its employees. See “THE MERGER AGREEMENT—Employee Benefit Plans” on page .

•

Provide, or allow for, director and officer liability insurance and indemnification. See “THE MERGER—Indemnification and Insurance of CFS Directors and Officers” on page .

Dissenters’ Rights (page )

Under Indiana Code § 23-1-44, dissenters’ rights are not available to holders of shares listed on The NASDAQ Stock Market or a similar market. Because both First Merchants’ and CFS’ common stock is presently listed on The NASDAQ Stock Market, neither the shareholders of First Merchants nor the shareholders of CFS presently have dissenters’ rights with respect to their shares. See “THE MERGER—Rights of Dissenting Shareholders” on page .

Management and Operations After the Merger (page )

CFS’ corporate existence will cease after the merger. Accordingly, except as otherwise described herein, directors and officers of CFS will not serve in such capacities after the effective date of the merger. Upon completion of the merger, the current officers and directors of First Merchants will continue to serve in such capacities. A condition of the completion of the merger is the effectiveness of new employment agreements between First Merchants Bank and Mr. Daryl D. Pomranke, CFS’ current president and CEO (who will assume the title of Regional President of the “North” Region with First Merchants Bank) and Mr. Dale Clapp, the current Executive Vice President—Sales Management of Citizens Financial Bank (who will assume the title of Senior Vice President and Chief Sales Officer of the “North” Region with First Merchants Bank).

Interests of Directors and Officers in the Merger That Are Different From Your Interests (page )

You should be aware that some of CFS’ and Citizens Financial Bank’s directors and executive officers may have interests in the merger that are different from, or in addition to, their interests as shareholders. Both CFS’ Board of Directors and First Merchants’ Board of Directors were aware of these interests and took them into account in approving the merger. These interests are as follows:

•

First Merchants Bank will offer two year employment agreements to two current officers of CFS (Messrs. Pomranke and Clapp), to be effective following the effective time of the merger, and the closing of the merger is conditioned upon the signing of those agreements. Under his Employment Agreement, Mr. Pomranke will be paid an annual salary of $260,000 and Mr. Clapp will be paid an annual salary of $195,000. Mr. Pomranke will also be offered $764,342 in retention payments and Mr. Clapp will receive $180,339. Both Mr. Pomranke and Mr. Clapp will also each receive 6,250 restricted shares of First Merchants common stock (valued at $102,500 assuming a $16.40 price per share of First Merchants common stock) under First Merchants 2009 Long-Term Equity Incentive Plan.

•

Directors and executive officers of CFS and Citizens Financial Bank held stock options that entitled them to purchase, in the aggregate, up to 123,145 shares of CFS’ common stock as of June 30, 2013. Options for 15,000 of these shares would not be exercisable but for the merger. In addition, directors and executive officers of CFS and Citizens Financial Bank hold 45,497 shares of restricted stock issued under CFS’ equity incentive plans. The Merger Agreement provides that these options immediately vest and become exercisable and the restrictions on the restricted stock are lifted upon the effectiveness of the merger. Following the merger, the options will be converted into options to acquire First Merchants common stock applying the exchange ratio provided for in the Merger Agreement. The shares of CFS restricted stock will be converted into shares of First Merchants applying the exchange ratio.

•

Certain executive officers of CFS and Citizens Financial Bank currently have change-in-control agreements or employment agreements that provide for the executive to receive, following a change-in-

control of CFS, a multiple of the executive’s compensation prior to the change-in-control, subject to certain limitations. Under these agreements, five of such executive officers would be entitled to receive an aggregate of approximately $1.7 million. Certain of these officers have agreed to accept retention agreements from First Merchants Bank in exchange for termination of their change-in-control and employment agreements with CFS and Citizens Financial Bank. As mentioned above, the amount payable to Mr. Pomranke as a result of these retention payments is $764,342 and the amount payable to Mr. Clapp is $180,339.

•

First Merchants has agreed that for a period of six years after the effective time of the merger, it will maintain directors’ and officers’ liability insurance in force covering CFS’ directors and officers, subject to certain conditions set forth in the Merger Agreement.

Termination of the Merger (page )

Both First Merchants and CFS can mutually agree to terminate the Merger Agreement before we complete the merger. In addition, either CFS or First Merchants acting alone can terminate the Merger Agreement under the circumstances described on page .

CFS has agreed to pay First Merchants a termination fee of $4,500,000 if:

•

CFS’ Board of Directors terminates the Merger Agreement in the exercise of its fiduciary duties after receipt of an unsolicited acquisition proposal from a third party;

•

First Merchants terminates the Merger Agreement because CFS’ Board of Directors withdraws or modifies its recommendation to CFS’ shareholders to vote for the merger following receipt of a written proposal for an acquisition from a third party; or

•

First Merchants terminates the Merger Agreement because CFS fails to give First Merchants written notice that it intends to furnish information to or enter into discussions or negotiations with a third party relating to a proposed acquisition of CFS, or if CFS, within 45 days after giving such notice, does not terminate such discussions or negotiations.

Material U.S. Federal Income Tax Consequences (page )

It is a condition to the closing of the merger that Vedder Price P.C. and Bingham Greenebaum Doll LLP deliver opinions, effective as of the date of the merger, to CFS and First Merchants, respectively, substantially to the effect that, for United States federal income tax purposes, the merger will be treated as a “reorganization” within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the “Code”). These opinions will not, however, bind the Internal Revenue Service (the “IRS”) which could take a different view.

Determining the actual tax consequences of the merger to you can be complicated. We suggest you consult with your own tax advisors with respect to the tax consequences of the merger to you.

For a more detailed description of the material federal income tax consequences of the merger to First Merchants and CFS shareholders, see “MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES” on page .

Accounting Treatment (page )

The merger will be accounted for as a purchase transaction for accounting and financial reporting purposes. As a result, CFS’ assets, including identified intangible assets, and liabilities will be recorded by First Merchants on its books at their fair market values and added to those of First Merchants. Any excess payment by First Merchants over the fair market value of the net assets and identifiable intangibles of CFS will be recorded as

goodwill on the financial statements of First Merchants. Conversely, any excess of the fair value of the net assets acquired over the payment made by First Merchants will be allocated as a reduction of all assets.

Comparative Rights of First Merchants Shareholders and CFS Shareholders (page )

The rights of shareholders of First Merchants and CFS differ in some respects. The rights of holders of First Merchants common stock are governed by First Merchants’ Articles of Incorporation and By-Laws. The rights of holders of CFS common stock are governed by CFS’ Articles of Incorporation and By-Laws. Upon completion of the merger, CFS shareholders who receive First Merchants common stock will take such stock subject to First Merchants Articles of Incorporation and By-Laws.


*Authorized But Unissued Shares*

First Merchants		CFS
First Merchants’ Articles of Incorporation authorize the issuance of 50,000,000 shares of common stock, of which 28,781,559 shares were outstanding as of April 30, 2013. First Merchants’ Board of Directors may authorize the issuance of additional shares of common stock up to the amounts authorized in First Merchants’ Articles of Incorporation without shareholder approval, subject only to the restrictions of the Indiana Business Corporation Law and the Articles of Incorporation. First Merchants has 500,000 shares of preferred stock authorized. First Merchants has designated 116,000 of those preferred shares as Fixed Rate Cumulative Perpetual Preferred Stock, Series A, $1,000 per share liquidation amount, no shares of which are currently outstanding. First Merchants has designated 90,823.23 of the preferred shares as Senior Non-Cumulative Perpetual Preferred Stock, Series B, $1,000 per share liquidation amount, 34,043 shares of which are currently outstanding and held by the U.S. Department of the Treasury (the “Treasury”) under the Small Business Lending Fund Program. The preferred shares are available to be issued, without prior shareholder approval, in classes with the rights, privileges and preferences determined for each class by the Board of Directors of First Merchants. As of March 31, 2013, First Merchants had 575,494 shares of its common stock reserved and remaining available for issuance under its 2009 Long-term Equity Incentive Plan; and 135,590 shares of its common stock reserved and remaining available for issuance under its Dividend Reinvestment and Stock Purchase Plan. In addition, as of March 31, 2013, First Merchants had no options granted under its 1994 Stock Option Plan, 751,865 options granted but unexercised under its 1999 Long-term Equity Incentive Plan, and		The Articles of Incorporation of CFS authorize the issuance of 85,000,000 shares of common capital stock and 15,000,000 shares of preferred stock. As of May 13, 2013, there were 10,934,597 shares of common stock outstanding (including all shares of restricted stock issued under CFS’ current equity incentive plans). No shares of preferred stock are currently outstanding. The CFS Board of Directors may authorize and direct the issuance of shares of common and preferred stock up to the authorized amounts, without shareholder approval, subject only to the restrictions of the Indiana Business Corporation Law and the Articles of Incorporation. The preferred shares may be issued by the Board of Directors, without prior shareholder approval, in classes with designations, privileges, limitations and rights determined for each class by the Board of Directors of CFS.


153,050 options granted but unexercised under its 2009 Long-term Equity Incentive Plan, with shares reserved and remaining available equal to the outstanding options under each plan. The issuance of additional shares of First Merchants common stock or the issuance of additional First Merchants preferred stock may adversely affect the interests of First Merchants shareholders by diluting their voting and ownership interests.

*Preferred Stock*

First Merchants		CFS
First Merchants currently has 34,043 shares of Series B Preferred Stock outstanding ($34,043,000 liquidation amount). This preferred stock has liquidation and dividend rights superior to the holders of its common stock. The Treasury, as the holder of Series B Preferred Stock, is entitled to receive non-cumulative dividends, payable quarterly, on each January 1, April 1, July 1 and October 1. The dividend rate, as a percentage of the liquidation amount, can fluctuate between 1% and 5% on a quarterly basis until April 1, 2015, based upon changes in certain small business lending levels of First Merchants Bank. In addition to the dividend, in the event First Merchants Bank’s level of small business lending has not increased relative to a level set by the Treasury, on January 1, 2014, First Merchants will be subject to an additional lending incentive fee equal to two percent (2%) per annum. From April 1, 2014 through March 31, 2016, the dividend rate will be fixed at between one percent (1%) and seven percent (7%) per annum based upon the increase in small business lending as compared to the Treasury’s enumerated baseline. After March 31, 2016, the dividend rate will increase to nine percent (9%). The Series B Preferred Stock may be redeemed at any time at First Merchants’ option, at a redemption price of 100% of the liquidation amount plus accrued but unpaid dividends to the date of redemption, subject to the approval of the Federal Reserve.		CFS has not designated a class of capital stock with preferences superior to the rights of holders of its common stock.

Completion of the Merger (page )

The merger of CFS into First Merchants will become effective when we file Articles of Merger with the Secretary of the State of Indiana, or at such later date and time as may be set forth in the Articles of Merger. We expect the merger to become effective during the fourth quarter of 2013.

Recent Developments (page )

Comparative Market Price Information

Shares of First Merchants common stock are listed on The NASDAQ Global Select Market under the symbol “FRME.” Shares of CFS common stock are listed on The NASDAQ Global Market under the symbol “CITZ.” The following table presents quotation information for First Merchants common stock and for CFS common stock on May 10, 2013, the business day before the merger was publicly announced, and , 2013, the last practicable trading day for which information was available prior to the date of this joint proxy statement-prospectus.


	First Merchants Common Stock						CFS Common Stock
	(Dollars Per Share)
	High		Low		Close		High		Low		Close
May 10, 2013	$	16.32	$	16.06	$	16.14	$	9.39	$	9.16	$	9.22
, 2013	$		$		$		$		$		$

The market value of the aggregate consideration that CFS shareholders will receive in the merger is approximately $114.7 million (or $10.49 per share of CFS common stock) based on 10,934,597 shares of CFS common stock outstanding (including all restricted shares currently issued under CFS’ equity incentive plans), and First Merchants’ closing stock price of $16.14 on May 10, 2013, the business day before the merger was publicly announced.

The market value of the aggregate consideration that CFS shareholders will receive in the merger is approximately $ million (or $ per share of CFS common stock) based on shares of CFS common stock outstanding (including all restricted shares currently issued under CFS’ equity incentive plans) and First Merchants’ closing stock price of $ on , 2013, the last practicable trading day for which information was available prior to the date of this joint proxy statement-prospectus.

Also set forth below for each of the closing prices of First Merchants common stock on May 10, 2013, and , 2013, is the equivalent pro forma price of CFS common stock, which we determined by multiplying the applicable price of First Merchants common stock by the number of shares of First Merchants common stock we are issuing for each share of CFS common stock in the merger, which is the exchange ratio of 0.65. The equivalent pro forma price of CFS common stock shows the implied value to be received in the merger by CFS shareholders who receive First Merchants common stock in exchange for a share of CFS common stock on these dates.


	First Merchants Common Stock		CFS Common Stock		CFS Equivalent Pro Forma
May 10, 2013	$	16.14	$	9.22	$	10.49
, 2013	$		$		$

We suggest you obtain current market quotations for First Merchants common stock and CFS common stock. We expect that the market price of First Merchants common stock will fluctuate between the date of this document and the date on which the merger is completed and thereafter. Because the exchange ratio is fixed and the market price of First Merchants common stock is subject to fluctuation, the value of the shares of First Merchants common stock that CFS shareholders will receive in the merger may increase or decrease prior to and after the merger.

Comparative Per Share Data

The following table shows historical information about our companies’ earnings per share, dividends per share and book value per share, and similar information reflecting the merger, which we refer to as “pro forma” information. In presenting the comparative pro forma information, we have assumed that the two companies had been combined throughout the periods shown in the table. The pro forma information reflects the “purchase” method of accounting. We derived the First Merchants and CFS pro forma data in the manner described under “UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION” on page .

The information listed as “equivalent pro forma” was obtained by multiplying the pro forma amounts by the exchange ratio of 0.65. First Merchants and CFS present this information to reflect the value of shares of First Merchants common stock that CFS shareholders will receive in the merger for each share of CFS common stock exchanged.

We expect that we will incur reorganization and restructuring expenses as a result of combining our two companies. We also anticipate that the merger will provide the combined company with financial benefits that include reduced operating expenses and the opportunity to earn more revenue. The pro forma information, while helpful in illustrating the financial characteristics of the combined company, does not take into account these expected expenses or these anticipated financial benefits, and does not attempt to predict or suggest future results. It also does not necessarily reflect what the historical results of the merged company would have been had our companies been merged during the periods presented.

The information in the following table is based on historical financial information of CFS and First Merchants, which is included in each company’s respective annual and quarterly reports previously filed with the SEC. The historical financial information of First Merchants and CFS has been incorporated into this document by reference. See “WHERE YOU CAN FIND ADDITIONAL INFORMATION” on page for a description of documents that we incorporate by reference into this document and how to obtain copies of them.

FIRST MERCHANTS AND CFS

HISTORICAL AND PRO FORMA PER SHARE AND CAPITAL RATIO DATA


	First Merchants Historical			CFS Historical			Pro forma (1)(2)
Net income per share
Three months ended March 31, 2013
Basic	$	0.38		$	0.14		$	0.35
Diluted	$	0.38		$	0.14		$	0.35
Twelve months ended December 31, 2012
Basic	$	1.42		$	0.43		$	1.27
Diluted	$	1.42		$	0.43		$	1.27
Cash dividends per share
Three months ended March 31, 2013	$	0.03		$	0.01		$	0.03
Twelve months ended December 31, 2012	$	0.10		$	0.04		$	0.10
Tangible Capital Ratio
At March 31, 2013		7.88	%		9.84	%		7.52	%
At December 31, 2012		7.55	%		9.83	%		7.33	%

(1)	See note (1) in “Notes to Unaudited Pro forma Summary of Selected Consolidated Financial Data” on page .

(2)	See note (2) in “Notes to Unaudited Pro forma Summary of Selected Consolidated Financial Data” on page .

SELECTED CONSOLIDATED FINANCIAL DATA

The following tables set forth certain summary historical consolidated financial data for each of our companies. First Merchants’ and CFS’ balance sheet and income statement data as of and for the five years in the period ended December 31, 2012 are taken from each of First Merchants’ and CFS’ respective audited consolidated financial statements. First Merchants’ and CFS’ balance sheet data and income statement data as of and for the three months ended March 31, 2013 and 2012 are taken from our respective unaudited consolidated financial statements. Results for the three months ended March 31, 2013 do not necessarily indicate results expected or anticipated for the entire year.

The following tables also set forth certain summary unaudited pro forma consolidated financial information for First Merchants and CFS reflecting the merger. The income statement information presented gives effect to the merger as if it occurred on the first day of each period presented. The balance sheet information presented gives effect to the merger as if it occurred on March 31, 2013.

The pro forma information reflects the “purchase” method of accounting, with CFS’ assets and liabilities recorded at their estimated fair values as of March 31, 2013. The actual fair value adjustments to the assets and the liabilities of CFS will be made on the basis of appraisals and evaluations that will be made as of the date the merger is completed. Thus, the actual fair value adjustments may differ significantly from those reflected in these pro forma financial statements. In the opinion of First Merchants’ management, the estimates used in the preparation of these pro forma financial statements are reasonable under the circumstances.

We expect that we will incur reorganization and restructuring expenses as a result of combining our companies. We also anticipate that the merger will provide the combined company with financial benefits that include reduced operating expenses and the opportunity to earn more revenue. The pro forma information, while helpful in illustrating the financial characteristics of the combined company under two sets of assumptions, does not take into account these expected expenses or anticipated financial benefits, and does not attempt to predict or suggest future results.

This selected financial data is only a summary and you should read it in conjunction with First Merchants’ and CFS’ consolidated financial statements and related notes incorporated into this document by reference, and in conjunction with the Unaudited Pro Forma Combined Consolidated Financial Information appearing on page in this document. See “WHERE YOU CAN FIND ADDITIONAL INFORMATION” on page for a description of documents that we incorporate by reference into this document and how to obtain copies of such documents.

FIRST MERCHANTS

FIVE YEAR SUMMARY OF SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

(Dollars in Thousands, Except Per Share Amounts)


	For the Three Months Ended March						For the Years Ended December 31,
	2013			2012			2012			2011			2010			2009			2008
Summary of Operations
Interest Income	$	43,738		$	43,469		$	175,949		$	181,245		$	199,578		$	230,439		$	219,473
Interest Expense		4,280			7,353			23,613			37,890			56,009			77,093			90,089

Net Interest Income		39,458			36,116			152,336			143,355			143,569			153,346			129,384
Provision for loan losses		2,102			4,875			18,534			22,630			46,483			122,176			28,238

Net interest income after provision		37,356			31,241			133,802			120,725			97,086			31,170			101,146
Noninterest Income		13,877			22,658			64,302			49,120			48,544			51,201			36,367
Noninterest Expense		34,700			34,028			137,115			135,938			142,311			151,558			108,792

Net income before income tax		16,533			19,871			60,989			33,907			3,319			(69,187	)		28,721
Income tax expense(benefit)		4,668			5,500			15,867			8,655			(3,590	)		(28,424	)		8,083

Net Income		11,865			14,371			45,122			25,252			6,909			(40,763	)		20,638
Preferred stock dividends and discount accretion		(857	)		(1,135	)		(4,539	)		(3,981	)		(5,239	)		(4,979	)		—
Loss on extinguishment of trust preferred securities		—			—			—			(10,857	)		—			—			—
Loss on CPP unamortized discount		—			—			—			(1,401	)		(1,301	)		—			—
Gain on exchange of preferred stock for trust preferred debt		—			—			—			—			11,353			—			—

Net Income Available to Common Shareholders	$	11,008		$	13,236		$	40,583		$	9,013		$	11,722		$	(45,742	)	$	20,638


Per Share Data (1)
Net income
Basic	$	0.38		$	0.46		$	1.42		$	0.34		$	0.48		$	(2.17	)	$	1.14
Diluted	$	0.38		$	0.46		$	1.41		$	0.34		$	0.48		$	(2.17	)	$	1.14
Cash Dividends (2)	$	0.03		$	0.01		$	0.10		$	0.04		$	0.04		$	0.47		$	0.92

Balance End of Period
Total assets	$	4,252,830		$	4,236,366		$	4,304,821		$	4,173,076		$	4,170,848		$	4,480,952		$	4,784,155
Total loans		2,906,097			2,815,127			2,924,509			2,731,279			2,857,152			3,277,824			3,726,247
Total deposits		3,310,808			3,279,578			3,346,383			3,134,655			3,268,880			3,536,536			3,718,811
Fed funds purchased		—			10,936			18,862			—			—			—			—
Securities sold under repurchase agreements		161,813			139,308			141,828			156,305			109,871			125,687			122,311
Federal Home Loan Bank advances		93,169			131,496			94,238			138,095			82,684			129,749			360,217
Total subordinated debentures, revolving credit lines, term loans and other		111,778			115,969			112,161			194,974			226,440			194,790			135,826
Shareholders’ equity		538,558			527,941			552,236			514,467			454,408			463,785			395,903

Selected Ratios
Return on average assets		1.04	%		1.26	%		0.96	%		0.22	%		0.27	%		-0.98	%		0.54	%
Return on average equity		8.25	%		10.23	%		7.58	%		1.88	%		2.49	%		-9.59	%		5.90	%

(1)	Restated for all stock dividends and splits

(2)	Dividends per share are for First Merchants only, not restated for pooling transactions

CFS

FIVE YEAR SUMMARY OF SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

(Dollars in Thousands, Except Per Share Amounts)


	For the Three Months Ended March						For the Years Ended December 31,
	2013			2012			2012			2011			2010			2009			2008
Summary of Operations
Interest Income	$	9,417		$	10,609		$	41,332		$	43,704		$	46,770		$	51,308		$	59,538
Interest Expense		1,216			1,686			5,974			7,853			10,187			13,715			24,656

Net Interest Income		8,201			8,923			35,358			35,851			36,583			37,593			34,882
Provision for loan losses		510			1,050			4,210			17,114			3,877			12,588			26,296

Net interest income after provision		7,691			7,873			31,148			18,737			32,706			25,005			8,586
Noninterest Income		2,854			2,824			12,009			12,851			9,236			11,470			5,622
Noninterest Expense		8,455			10,207			36,800			41,117			37,775			39,280			34,176

Net income before income tax		2,090			490			6,357			(9,529	)		4,167			(2,805	)		(19,968	)
Income tax expense (benefit)		588			—			1,692			945			707			(2,262	)		(8,673	)

Net Income	$	1,502		$	490		$	4,665		$	(10,474	)	$	3,460		$	(543	)	$	(11,295	)


Per Share Data (1)
Net income
Basic	$	0.14		$	0.05		$	0.43		$	(0.98	)	$	0.33		$	(0.05	)	$	(1.10	)
Diluted	$	0.14		$	0.05		$	0.43		$	(0.98	)	$	0.32		$	(0.05	)	$	(1.10	)
Cash Dividends (2)	$	0.01		$	0.01		$	0.04		$	0.04		$	0.04		$	0.04		$	0.40

Balance End of Period
Total assets	$	1,146,368		$	1,170,542		$	1,138,109		$	1,148,950		$	1,121,676		$	1,081,515		$	1,121,855
Total loans		664,308			706,938			692,267			711,226			732,584			762,386			749,973
Total deposits		974,328			1,004,441			965,791			977,424			945,884			849,758			824,097
Fed funds purchased		—			—			—			—			—			8,640			10,800
Securities sold under repurchase agreements		10,377			12,123			11,053			14,334			13,352			15,659			17,512
Federal Home Loan Bank advances		39,451			39,812			39,509			39,866			40,198			87,509			144,625
Total subordinated debentures, revolving credit lines and term loans		—			—			—			—			—			—			—
Shareholders’ equity		112,777			103,335			111,822			103,248			112,928			110,373			111,809

Selected Ratios
Return on average assets		0.53	%		0.17	%		0.41	%		-0.91	%		0.31	%		-0.05	%		-0.99	%
Return on average equity		5.43	%		1.89	%		4.41	%		-9.10	%		3.07	%		-0.48	%		-8.93	%

(1)	Restated for all stock dividends and splits

(2)	Dividends per share are for CFS only, not restated for pooling transactions

FIRST MERCHANTS

UNAUDITED PRO FORMA SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA


	(Dollars in Thousands, Except Per Share Amounts)
	For the Three Months Ended March 31, 2013			For the Year Ended December 31, 2012
Summary of Operations
Interest income	$	53,733		$	219,592
Interest expense		5,296			28,787

Net interest income		48,437			190,805
Provision for loan losses		2,612			22,744

Net interest income after provision		45,825			168,061
Noninterest income		16,731			76,311
Noninterest expense		43,831			176,620

Net income before income tax		18,725			67,752
Income tax expense		5,292			17,701

Net income		13,433			50,051
Preferred stock dividend and discount accretion		(857	)		(4,539	)

Net Income Available to Common Shareholders	$	12,576		$	45,512


Per Share Data (1)
Net income
Basic	$	0.35		$	1.27
Diluted	$	0.35		$	1.27
Cash Dividends	$	0.03		$	0.10
Tangible Capital Ratio		7.52	%		7.33	%

Balance End of Period
Total assets	$	5,412,197
Earning assets		4,855,238
Investment securities		1,103,340
Loans, net		3,518,760
Total deposits		4,285,136
Borrowings		419,388
Shareholders’ equity		652,208
Allowance for loan losses		68,537

Notes to Unaudited Pro Forma Summary of Selected Consolidated Financial Data appear on the following page .

NOTES TO UNAUDITED PRO FORMA SUMMARY OF SELECTED

CONSOLIDATED FINANCIAL DATA

(Dollars in Thousands, Except Per Share Amounts)

(1)	This table assumes the issuance of 7,107,488 shares of First Merchants common stock, which represents an assumed 10,934,597 shares of CFS common stock outstanding multiplied by the exchange ratio of 0.65.

(2)	Purchase Price


CFS outstanding shares		10,934,597
Exchange ratio		X0.65

Shares of First Merchants stock issued		7,107,488
First Merchants stock price	$	16.34

Total Purchase Price	$	116,136

Total Purchase Price	$	116,136
Allocated to:
Historical book value of CFS assets and liabilities	$	112,777
CFS estimated transaction costs, net of tax		(6,840	)

Adjusted book value of CFS	$	105,937

Adjustments to record assets and liabilities at fair value:
Loans, credit mark	$	(31,800	)
Loans, interest rate mark		(20,800	)
CFS Allowance for loan losses write-off		12,024
Securities		(1,400	)
Premises and equipment		(1,800	)
Core deposits intangible		11,000
Other real estate owned		(5,900	)
Deferred taxes		14,517
Borrowings		(2,800	)

Total allocation	$	(26,959	)

Goodwill	$	37,159

RISK FACTORS

In addition to general investment risks and the other information contained in or incorporated by reference into this joint proxy statement-prospectus, including the matters addressed under the section “FORWARD-LOOKING STATEMENTS,” you should carefully consider the following risk factors in deciding how to vote for the proposals presented in this joint proxy statement-prospectus. You should also consider the other information in this joint proxy statement-prospectus and the other documents incorporated by reference into this joint proxy statement-prospectus. See “WHERE YOU CAN FIND ADDITIONAL INFORMATION.”

Risk Factors Relating to the Merged Company and Its Industry

Combining the two companies may be more difficult, costly or time consuming than expected and the anticipated benefits and costs savings of the merger may not be realized.

Even though First Merchants has acquired other financial services businesses in the past, the success of the merger with CFS will depend on a number of factors, including, but not limited to, the merged company’s ability to:

•

integrate CFS’ operations with the operations of First Merchants;

•

maintain existing relationships with First Merchants’ depositors and CFS’ depositors to minimize withdrawals of deposits subsequent to the acquisition;

•

maintain and enhance existing relationships with borrowers of First Merchants and CFS;

•

achieve projected net income of First Merchants Bank and expected cost savings and revenue enhancements from the merged company;

•

control the incremental non-interest expense to maintain overall operating efficiencies;

•

retain and attract key and qualified management, lending and other banking personnel; and

•

compete effectively in the communities served by First Merchants and CFS, and in nearby communities.

First Merchants’ failure to successfully integrate CFS into its business may adversely affect its financial condition and results of operations.

The value of the merger consideration to be received by CFS shareholders will fluctuate.

If the merger is completed, CFS shareholders will receive a number of shares of First Merchants common stock based on a fixed exchange ratio of 0.65 shares of First Merchants common stock for each share of CFS common stock. Because the market value of First Merchants common stock may fluctuate, the value of the consideration you receive for your shares may also fluctuate. The market value of First Merchants common stock could fluctuate for any number of reasons, including those specific to First Merchants and those that influence trading prices of equity securities generally. As a result, you will not know the exact value of the shares of First Merchants common stock you will receive at the time you must vote your shares. The value of First Merchants common stock on the closing date of the merger may be greater or less than the market price of First Merchants common stock on the record date, on the date of this joint proxy statement-prospectus or on the date of the special meetings. Moreover, the fairness opinions of River Branch Capital LLC and Sandler O’Neill & Partners, L.P. are dated May 10, 2013 and May 8, 2013, respectively. Neither CFS nor First Merchants intends to obtain any update of the fairness opinions. Changes in the operations and prospects of First Merchants and CFS, general market and economic conditions and other factors which are both within and outside of the control of First Merchants and CFS, on which the fairness opinions are based, may alter the relative value of the companies. Therefore, the fairness opinions do not address the fairness of the exchange ratio at the time the merger will be completed.

We suggest you obtain current market quotations for First Merchants common stock and CFS common stock because the value of the First Merchants shares you receive may be more or less than the value of such shares as of the date of this document.

The merged company’s allowance for loan losses may not be adequate to cover actual loan losses.

The merged company’s loan customers may not repay their loans according to their terms, and the customers’ collateral securing the payment of their loans may be insufficient to assure repayment. Approximately 64% of the merged company’s loans are comprised of commercial real estate and commercial lines of credit and term and development loans, which can result in higher loan loss experience than residential loans in economic downturns. The underwriting, review and monitoring that will be performed by the merged company’s officers and directors cannot eliminate all of the risks related to these loans.

Each of First Merchants and CFS make various assumptions and judgments about the collectability of their respective loan portfolios and provide an allowance for loan losses based on a number of factors. If the assumptions are wrong or the facts and circumstances subsequently and materially change, the allowance for loan losses and merger-related credit marks may not be sufficient to cover the merged company’s loan losses. The merged company may have to increase its allowance for loan losses in the future, which could decrease its net income.

Deterioration in loan quality will adversely affect the merged company’s results of operations and financial condition.

Each of First Merchants and CFS seek to mitigate the risks inherent in their respective loan portfolios by adhering to sound underwriting practices. Their lending strategies also include emphasizing diversification on a geographic, industry and customer level, regular credit quality reviews and management reviews of large credit exposures and loans experiencing deterioration of credit quality. There is continuous review of their loan portfolios, including internally administered loan “watch” lists and independent loan reviews. These evaluations take into consideration identified credit problems, as well as the possibility of losses inherent in the loan portfolio that are not specifically identified. In connection with continuing negative economic trends, the values of real estate collateral supporting many real estate loans have declined. If current trends in the housing and real estate markets do not reverse, we expect that loan delinquencies and credit losses will continue at an elevated level. Although First Merchants and CFS believe their underwriting and loan review procedures are appropriate for the various kinds of loans they make, the merged company’s results of operations and financial condition will be adversely affected in the event the quality of their respective loan portfolios deteriorates. As of March 31, 2013, First Merchants had $52,206,000 and CFS had $25,048,000 in non-performing loans. As of December 31, 2012, First Merchants had $66,080,000 and CFS had $26,933,000 in non-performing loans.

Changes in interest rates may reduce the merged company’s net interest income.

Like other financial institutions, the merged company’s net interest income is its primary revenue source. Net interest income is the difference between interest earned on loans and investments and interest expense incurred on deposits and other borrowings. The merged company’s net interest income will be affected by changes in market rates of interest, the interest rate sensitivity of its assets and liabilities, prepayments on its loans and investments and limits on increases in the rates of interest charged on its residential real estate loans.

The merged company will not be able to predict or control changes in market rates of interest. Market rates of interest are affected by regional and local economic conditions, as well as monetary policies of the Federal Reserve Board. The following factors also may affect market interest rates:

•

inflation;

•

slow or stagnant economic growth or recession;

•

unemployment;

•

money supply;

•

international disorders;

•

instability in domestic and foreign financial markets; and

•

other factors beyond the merged company’s control.

Each of First Merchants and CFS has policies and procedures designed to manage the risks from changes in market interest rates; however, despite risk management, changes in interest rates could adversely affect the merged company’s results of operations and financial condition.

Changes in economic conditions and the geographic concentration of the merged company’s markets could adversely affect the merged company’s financial condition.

The merged company’s success will depend to a great extent upon the general economic conditions of the Central and Northwestern Indiana and Central Ohio areas. Unlike larger banks that are more geographically diversified, the merged company will provide banking and financial services to customers primarily located in these areas. Favorable economic conditions may not exist in the merged company’s markets.

A continued economic slowdown could have the following consequences:

•

loan delinquencies may increase;

•

problem assets and foreclosures may increase;

•

demand for the products and services of CFS and First Merchants may decline; and

•

collateral for loans made by CFS and First Merchants may decline in value, in turn reducing customers’ borrowing power, and reducing the value of assets and collateral associated with existing loans.

Anti-takeover defenses may delay or prevent future mergers.

Provisions contained in First Merchants’ Articles of Incorporation and By-Laws and certain provisions of Indiana law could make it more difficult for a third party to acquire First Merchants, even if doing so might be beneficial to First Merchants shareholders. See “COMPARISON OF COMMON STOCK—Anti-Takeover Provisions” on page . These provisions could limit the price that some investors might be willing to pay in the future for shares of First Merchants common stock and may have the effect of delaying or preventing a change in control.

If the merger is not completed, the parties will have incurred substantial expenses without realizing the expected benefits.

First Merchants and CFS have incurred substantial expenses in connection with the transactions described in this joint proxy statement-prospectus. The completion of the merger depends on the satisfaction of several conditions. We cannot guarantee that these conditions will be met. CFS expects to incur approximately $10,500,000 in merger related expenses and First Merchants expects to incur approximately $3,800,000 in merger related expenses, which include legal, accounting and financial advisory expenses and which excludes any termination fees, if applicable. These expenses could have a material adverse impact on the financial condition of First Merchants and CFS because they would not have realized the expected benefits of the merger. There can be no assurance that the merger will be completed.

The termination fee and the restrictions on solicitation contained in the Merger Agreement may discourage other companies from trying to acquire CFS.

Until the completion of the merger, with some exceptions, CFS is prohibited from soliciting, initiating, encouraging or participating in any discussion of or otherwise considering any inquiries or proposals that may

lead to an acquisition proposal, such as a merger or other business combination transaction, with any person other than First Merchants. In addition, CFS has agreed to pay a termination fee and expenses of $4,500,000 to First Merchants if the CFS Board of Directors does not recommend approval of the Merger Agreement to the CFS shareholders by reason of a superior acquisition proposal. These provisions could discourage other companies from trying to acquire CFS even though such other companies might be willing to offer greater value to CFS’ shareholders than First Merchants has offered in the Merger Agreement. The payment of the termination fee also could have a material adverse effect on CFS’ results of operations and financial condition.

The market price of First Merchants common stock after the merger may be affected by factors different from those affecting the shares of CFS or First Merchants currently.

Upon completion of the merger, holders of CFS common stock will become holders of First Merchants common stock. First Merchants’ business differs in important respects from that of CFS, and, accordingly, the results of operations of the combined company and the market price of First Merchants common stock after the completion of the merger may be affected by factors different from those currently affecting the independent results of operations of each of First Merchants and CFS. For a discussion of the businesses of First Merchants and CFS and of some important factors to consider in connection with those businesses, see the documents incorporated by reference in this joint proxy statement-prospectus and referred to under “WHERE YOU CAN FIND ADDITIONAL INFORMATION” on page .

The unaudited pro forma condensed combined financial statements included in this document are preliminary and the actual financial condition and results of operations after the merger may differ materially.

The unaudited pro forma condensed combined financial statements in this document are presented for illustrative purposes only and are not necessarily indicative of what First Merchants’ actual financial condition or results of operations would have been had the merger been completed on the dates indicated. The unaudited pro forma condensed combined financial statements reflect adjustments, which are based upon preliminary estimates, to record the CFS identifiable assets acquired and liabilities assumed at fair value and the resulting goodwill recognized. The purchase price allocation reflected in this document is preliminary, and final allocation of the purchase price will be based upon the actual purchase price and the fair value of the assets and liabilities of CFS as of the merger completion date. Accordingly, the final acquisition accounting adjustments may differ materially from the pro forma adjustments reflected in this document. For more information, see “UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION” on page .

Risk Factors Relating to the Merger

Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or that could have an adverse effect on the combined company following the merger.

Before the merger and the bank merger may be completed, First Merchants and CFS must obtain approvals from the Federal Reserve Board and the Office of the Comptroller of the Currency. Other approvals, waivers or consents from regulators may also be required. In determining whether to grant these approvals, the regulators consider a variety of factors, including the regulatory standing of each party and the factors described under “THE MERGER—Regulatory Approvals.” An adverse development in either party’s regulatory standing or these factors could result in an inability to obtain approval or delay its receipt. These regulators may impose conditions on the completion of the merger or the bank merger or require changes to the terms of the merger or the bank merger. Such conditions or changes could have the effect of delaying or preventing completion of the merger or the bank merger or imposing additional costs on or limiting the revenues of the combined company following the merger and the bank merger, any of which might have an adverse effect on the combined company following the merger. Regulatory approvals could also be impacted based on the status of any ongoing investigation of either party or its customers, including subpoenas to provide information or investigations, by a federal, state or local governmental agency.

Certain of CFS’ Directors and executive officers have interests in the merger that may differ from the interests of CFS’ shareholders.

CFS shareholders should be aware that some of CFS’ executive officers and directors have interests in the merger and have arrangements that are different from, or in addition to, those of CFS shareholders generally. CFS’ Board of Directors was aware of and considered these interests, among other matters, when making its decision to approve the Merger Agreement, and in recommending that CFS shareholders vote in favor of approving the CFS Merger Proposal.

These interests include the following:

•

The terms of the restricted stock and stock option awards held by CFS directors and officers provide for accelerated vesting of the awards upon a change-in-control such as the merger.

•

CFS previously entered into employment agreements and/or change in control agreements with several of its officers, which entitle each of them to certain payments and benefits upon a termination in connection with a change in control such as the merger. In connection with the merger, Messrs. Pomranke and Clapp, Mr. Jerry Weberling, Mr. Daniel Zimmer and Ms. Rebecca Rees, each currently an executive officer of CFS, will enter into agreements with First Merchants that, upon the closing of the merger, will supersede the CFS agreements and provide certain retention and/or severance benefits to such individuals.

For a more complete description of these interests, see “THE MERGER—Interests of Certain Persons in the Merger” on page .

CFS and First Merchants will be subject to business uncertainties and contractual restrictions while the merger is pending.

Uncertainty about the effect of the merger on employees and customers may have an adverse effect on CFS or First Merchants. These uncertainties may impair CFS’ or First Merchants’ ability to attract, retain and motivate key personnel until the merger is completed, and could cause customers and others that deal with CFS or First Merchants to seek to change existing business relationships with CFS or First Merchants. Retention of certain employees by CFS or First Merchants may be challenging while the merger is pending, as certain employees may experience uncertainty about their future roles with CFS or First Merchants. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with CFS or First Merchants, CFS’ and/or First Merchants’ business could be harmed. In addition, subject to certain exceptions, each of CFS and First Merchants has agreed to operate its business in the ordinary course prior to closing. See THE MERGER AGREEMENT–Restrictions Affecting the Parties Prior to Completion of the Merger” on page for a description of the restrictive covenants applicable to CFS and First Merchants while the merger is pending.

The shares of First Merchants common stock to be received by CFS shareholders as a result of the merger will have different rights from the shares of CFS common stock.

Upon completion of the merger, CFS shareholders will become First Merchants shareholders and their rights as shareholders will be governed by the First Merchants Articles of Incorporation and Bylaws. The rights associated with CFS common stock may be different from the rights associated with First Merchants common stock. Please see “COMPARISON OF COMMON STOCK” beginning on page for a discussion of the different rights associated with First Merchants common stock.

Neither CFS shareholders nor First Merchants shareholders are expected to have dissenters’ rights in the merger.

Dissenters’ rights are statutory rights that, if applicable under law, enable shareholders to dissent from an extraordinary transaction, such as a merger, and to demand that the corporation pay the fair value for their shares

as determined by a court in a judicial proceeding instead of receiving the consideration offered to shareholders in connection with the extraordinary transaction. Under the Indiana Business Corporation Law, a shareholder may not dissent from a merger as to shares that are listed on a national securities exchange.

Because both First Merchants’ and CFS’ common stock is listed on The NASDAQ Stock Market, a national securities exchange, neither First Merchants’ nor CFS’ shareholders will be entitled to dissenters’ or appraisal rights in the merger with respect to their shares.

THE CFS SPECIAL MEETING

Special Meeting of Shareholders of

CFS Bancorp, Inc.

General Information

We are furnishing this document to the shareholders of CFS in connection with the solicitation by the Board of Directors of CFS of proxies for use at the CFS special meeting of shareholders to be held on , 2013, at : .m., local time, at . This document is first being mailed to CFS shareholders on , 2013 and includes the notice of CFS special meeting, and is accompanied by a form of proxy.

Matters To Be Considered

The purposes of the special meeting are for you to consider and vote upon the approval of:

the Merger Agreement, including the merger of CFS and First Merchants and the transactions contemplated thereby (the “CFS Merger Proposal”);

the adjournments of the special meeting, if necessary or appropriate, to solicit additional proxies if enough votes have not been cast to approve the CFS Merger Proposal at the time of the meeting;

on a non-binding advisory basis, certain compensation payable to CFS’ named executive officers in connection with the merger; and

any other items that may be properly submitted to a vote at the CFS special meeting.

Pursuant to the Merger Agreement, CFS will merge into First Merchants. The Merger Agreement is attached to this document as Annex A and is incorporated in this document by this reference. For a description of the Merger Agreement, see “THE MERGER AGREEMENT,” beginning on page ..

Votes Required

Approval of the CFS Merger Proposal requires the affirmative vote of at least a majority of the outstanding shares of CFS common stock. The approval of adjournment of the special meeting to allow extra time to solicit proxies, if necessary or appropriate, the approval of the advisory vote on the merger-related compensation payable to certain executive officers of CFS, and the approval of the transaction of any other business that may properly come before the special meeting each require more votes to be cast in favor of the proposal than are cast against it. CFS has fixed , 2013, as the record date for determining those CFS shareholders entitled to notice of, and to vote at, the special meeting. Accordingly, if you were a CFS shareholder of record at the close of business on , 2013, you will be entitled to notice of and to vote at the special meeting. If you are not the record holder of your shares and instead hold your shares in a “street name” through a bank, broker or other record holder, please follow the instructions on the voting instruction card furnished by the record holder. Each share of CFS common stock you own on the record date entitles you to one vote on each matter presented at the special meeting. At the close of business on the record date of , 2013, there were approximately shares of CFS common stock outstanding held by approximately shareholders of record.

As of the record date, CFS’ executive officers, directors and their affiliates had voting power with respect to an aggregate of shares or approximately % of CFS’ common stock outstanding. Each member of the Board of Directors of CFS as of May 13, 2013, the date the Merger Agreement was executed, signed a voting agreement with First Merchants to cause all shares of CFS common stock owned by them of record or beneficially to be voted in favor of the CFS Merger Proposal. See “THE MERGER AGREEMENT—Voting Agreement” on page . As of the record date, the members of the CFS Board of Directors and their affiliates had power to vote an aggregate of shares of CFS common stock outstanding representing % of the outstanding shares. In addition, we also currently expect that the executive officers of CFS will vote all of their shares in favor of the CFS Merger Proposal. We also expect the executive officers, directors and their affiliates to vote in favor of the approval of the adjournment of the special meeting, if necessary or appropriate to solicit additional proxies, and the approval, on a non-binding advisory basis, of the merger-related compensation payable to the named executive officers of CFS.

Proxies

If you are a CFS shareholder, you should have received a proxy card for use at the CFS special meeting with this joint proxy statement-prospectus. The accompanying proxy card is for your use at the special meeting if you are unable or do not wish to attend the special meeting in person. The shares represented by proxies properly signed and returned will be voted at the special meeting as instructed by the CFS shareholder giving the proxies. Proxy cards that are properly signed and returned but do not have voting instructions will be voted “FOR” approval of the CFS Merger Proposal, “FOR” approval of the proposal to adjourn the special meeting to allow extra time to solicit proxies, if necessary or appropriate, “FOR” approval of the merger-related compensation payable to the named executive officers of CFS and “FOR” such other business which may properly be presented at the special meeting or any adjournment or postponement of the special meeting.

If you deliver a properly signed proxy card, you may revoke your proxy at any time before it is exercised by:

•

delivering to the Secretary of CFS at or prior to the special meeting a written notice of revocation addressed to CFS Bancorp, Inc., 707 Ridge Road, Munster, Indiana 46321, Attention: Monica F. Sullivan, Corporate Secretary; or

•

delivering to CFS at or prior to the special meeting a properly completed proxy by Internet, telephone or proxy card having a later date; or

•

voting in person by ballot at the special shareholders meeting. If your shares are held in the name of your broker, bank or other nominee, and you wish to vote in person, you must bring an account statement and authorization from your nominee so that you may vote your shares in person or by proxy at the special meeting.

Because approval of the CFS Merger Proposal requires the affirmative vote of at least a majority of the outstanding shares of CFS common stock, abstentions and broker non-votes will have the same effect as voting AGAINST approval of the CFS Merger Proposal. Accordingly, your Board of Directors urges all CFS shareholders to vote by proxy through the Internet, by telephone or by completing, dating and signing the accompanying proxy and returning it promptly in the enclosed postage-paid envelope. You should not send stock certificates with your proxy card.

Solicitation of Proxies

CFS will bear the entire cost of soliciting proxies from and mailing proxies to its shareholders in connection with the CFS special meeting. CFS will request that banks, brokers, fiduciaries and other record holders or custodians send proxies and proxy material to the beneficial owners of stock held by them and secure their voting instructions, if necessary. CFS will reimburse these banks, brokers and other record holders for their reasonable expenses. In addition to solicitation of proxies by mail, proxies may be solicited personally or by telephone by directors, officers and certain employees of CFS, who will not be specially compensated for such soliciting.

In soliciting proxies, no one has any authority to make any representations and warranties about the merger or the CFS Merger Proposal in addition to or contrary to the provisions stated in this document. No statement regarding the merger, the Merger Agreement or the CFS Merger Proposal should be relied upon except as expressly stated in this document.

Recommendation of the CFS Board of Directors

CFS’ Board of Directors has unanimously approved the CFS Merger Proposal. CFS’ Board believes that the merger is fair to and in the best interests of CFS and its shareholders. The Board unanimously recommends that the CFS shareholders vote “FOR” approval of the CFS Merger Proposal; “FOR” approval of the adjournment of the meeting, if necessary, to solicit additional proxies if enough votes have not been cast to approve the CFS Merger Proposal at the time of the special meeting and “FOR” approval of the merger-related compensation payable to the named executive officers of CFS. See “THE MERGER—CFS’ Reasons for the Merger” on page and “THE MERGER—Recommendation of the CFS Board of Directors” on page .

Other Matters

The special meeting of CFS shareholders has been called for the purposes set forth in the Notice to CFS shareholders included in this document. Your Board of Directors is unaware of any matter for action by shareholders at the special meeting other than as stated in the Notice or in this joint proxy-statement prospectus. However, the enclosed proxy will give discretionary authority to the persons named in the proxy with respect to matters which are not known to your Board of Directors as of the date hereof and which may properly come before the special meeting. It is the intention of the persons named in the proxy to vote with respect to such matters in accordance with the recommendations of the Board of Directors of CFS.

Beneficial Ownership of CFS Common Stock by Certain Shareholders

The following table shows, as of March 15, 2013, the number and percentage of shares of common stock held by CFS’ directors, executive officers, holders of more than five percent of CFS’ common stock, and directors and executive officers as a group.

The information provided in the table is based on our records, information filed with the SEC, and information provided to us, except where otherwise noted. The number of shares beneficially owned by each individual is determined under SEC rules and the information is not necessarily indicative of beneficial ownership for any other purpose, including the ability to vote such shares at the special meeting. Under these rules, beneficial ownership includes any shares as to which the individual has the right to acquire within 60 days through the exercise of any stock option or other right. Unless otherwise indicated, each person has sole voting and investment power (or shares these powers with his or her spouse) with respect to the shares set forth in the following table.

BENEFICIAL OWNERSHIP OF CFS COMMON STOCK

BY CERTAIN SHAREHOLDERS


Name of Beneficial Owner	Number of Common Shares Beneficially Owned (1)			Options Exercisable		Unvested Restricted Stock (2)		Total Amount of Beneficial Ownership		Total Percentage Ownership
PL Capital, LLC 20 E. Jefferson Ave., Suite 22 Naperville, IL 60540		1,057,659	(3)		—		—		1,057,659		9.67	%

Dimensional Fund Advisors LP Palisades West, Building One 6300 Bee Cave Road Austin, TX 78746		921,513	(4)		—		—		921,513		8.42	%

Citizens Financial Bank 401(k) Retirement Plan c/o Vanguard Fiduciary Trust Services 500 Admiral Nelson Blvd. Malvern, PA 19355		686,652	(5)		—		—		686,652		6.28	%

Directors:
Gregory W. Blaine		31,292			11,000		408		42,700		*
Gene Diamond		65,029	(6)		11,000		408		76,437		*
John W. Palmer		1,057,659	(3)		—		—		1,057,659		9.67	%
Daryl D. Pomranke		46,268	(7)		5,000		20,675		71,943		*
Robert R. Ross		16,316	(8)		16,000		408		32,724		*
Joyce M. Simon		22,380	(9)		16,000		408		38,788		*

Other Named Executive Officers:
Jerry A. Weberling		74,353	(10)		—		13,754		88,107		*
Dale S. Clapp		19,915	(11)		—		12,651		32,566		*
Daniel J. Zimmer		11,933	(12)		—		8,968		20,901		*
Rebecca D. Rees		56,503	(13)		24,000		7,809		88,312		*
All Directors and Executive Officers of CFS as a group (10 persons)		1,401,648			83,000		65,489		1,550,137		14.07	%

*	Represents less than 1% of the outstanding stock.

(1)	Based upon filings made under the Exchange Act and information furnished by the Directors and Executive Officers named in this table. Unless otherwise indicated, the named beneficial owner has sole voting and dispositive power with respect to the shares.

(2)

Shares of unvested restricted stock are included in the table because the recipient of the shares has the right to vote and receive any dividends declared and payable on such shares during such time as the shares remain unvested. Once shares of restricted stock are vested, the shares are included in the number of common shares beneficially owned.

(3)

Based on information provided by Mr. Palmer on his Directors and Officers Questionnaire signed and dated February 10, 2013 regarding his beneficial ownership of the Company’s common stock. Includes shares owned by PL Capital, LLC.; Financial Edge Fund, L.P.; Financial Edge–Strategic Fund, L.P.; Goodbody/PL Capital, L.P.; PL Capital/Focused Fund, L.P.; PL Capital Advisors, LLC; Goodbody/PL Capital, LLC; John W. Palmer; Richard J. Lashley; Beth Lashley; Dr. Robin Lashley; Danielle Lashley; Irving A. Smokler; Red Rose Trading Estonia OU; and PL Capital Pension Plan. Certain of these parties have sole and/or shared voting and dispositive power with respect to these shares.

(4)	Information included is based solely on a Schedule 13G/A filed with the SEC by Dimensional Fund Advisors LP on February 11, 2013, in which Dimensional Fund Advisors expressly disclaims beneficial ownership of these securities.

(5)

The Citizens Financial Bank 401(k) Retirement Plan (Retirement Plan) is governed by the terms of a written document adopted by the CFS Board of Directors. Vanguard Fiduciary Trust Company acts as the trustee of the Retirement Plan under the terms of a trust agreement with CFS. In accordance with the agreement, the shares held in the Retirement Plan are voted in accordance with the instructions of the participating employees. If no instructions are received from a participant, the trustee votes the shares in proportion with the instructions that were received from other participants. Information provided is based on Schedule 13G/A filed with the SEC on February 1, 2013.

(6)	Includes 1,237 shares held in an individual retirement plan for Mr. Diamond; 42,000 shares owned jointly with his spouse; and 3,000 shares held by a private foundation he established.

(7)	Includes 4,394 shares allocated to Mr. Pomranke’s account in the Retirement Plan; 24,874 shares owned jointly with his spouse; and 1,000 shares owned by his adult children.

(8)	Mr. Ross’ shares are owned jointly with his two adult children.

(9)	Includes 18,588 shares held in a trust for Ms. Simon established by CFS to fund its obligations with respect to the Directors’ deferred compensation plan and 1,000 shares owned jointly with her spouse.

(10)	Includes 12,229 shares allocated to Mr. Weberling’s account in the Retirement Plan; 33,700 shares held in an individual retirement account; and 27,000 shares owned jointly with his spouse.

(11)	Includes 1,055 shares allocated to Mr. Clapp’s account in the Retirement Plan and 2,693 shares owned jointly with his spouse.

(12)	Includes 2,690 shares allocated to Mr. Zimmer’s account in the Retirement Plan.

(13)	Includes 30,046 shares allocated to Ms. Rees’ account in the Retirement Plan.

CFS MERGER-RELATED PROPOSALS

PROPOSAL NO. 1

CFS MERGER PROPOSAL

CFS is asking its shareholders to approve the CFS Merger Proposal. Holders of CFS common stock should read this joint proxy statement-prospectus carefully and in its entirety, including the annexes, for more detailed information concerning the Merger Agreement and the merger. A copy of the Merger Agreement is attached to this joint proxy statement-prospectus as Annex A.

After careful consideration, the CFS Board of Directors unanimously approved the CFS Merger Proposal and declared it to be advisable and in the best interest of CFS and its shareholders of CFS. See “THE MERGER—CFS’ Reasons for the Merger; Recommendation of CFS’ Board of Directors” included elsewhere in this joint proxy statement-prospectus for a more detailed discussion of the CFS Board of Directors’ recommendation.

The CFS Board of Directors unanimously recommends a vote “FOR” the CFS Merger Proposal.

PROPOSAL NO. 2

CFS ADJOURNMENT PROPOSAL

The CFS special meeting may be adjourned to another time or place, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the CFS special meeting to approve the CFS Merger Proposal (the “CFS Adjournment Proposal”).

If, at the CFS special meeting, the number of shares of CFS common stock present or represented and voting in favor of the CFS Merger Proposal is insufficient to approve the CFS Merger Proposal, CFS intends to move to

adjourn the CFS special meeting in order to enable the CFS Board of Directors to solicit additional proxies for approval of the CFS Merger Proposal. In that event, CFS will ask its shareholders to vote upon the CFS Adjournment Proposal, but not the CFS Merger Proposal or the CFS advisory, non-binding merger-related compensation proposal.

In this proposal, CFS is asking its shareholders to authorize the holder of any proxy solicited by the CFS Board of Directors, on a discretionary basis, to vote in favor of adjourning the CFS special meeting to another time and place for the purpose of soliciting additional proxies, including the solicitation of proxies from CFS shareholders who have previously voted.

The CFS Board of Directors unanimously recommends a vote “FOR” the CFS Adjournment Proposal.

PROPOSAL NO. 3

CFS MERGER-RELATED COMPENSATION PROPOSAL

As required by Section 14A of the Exchange Act and Rule 14a-21(c) promulgated thereunder, CFS is required to submit a proposal to its shareholders for a non-binding advisory vote to approve the payment of certain compensation to the named executive officers of CFS that is based upon or otherwise relates to the merger. This compensation is disclosed in the table entitled “Golden Parachute Compensation” on page and a narrative discussion of such compensation is included in the section entitled “THE MERGER-Merger-Related Compensation Payable to CFS’ Named Executive Officers” on page . The five “named executive officers” of CFS are Messrs. Daryl Pomranke, Dale Clapp, Jerry Weberling and Daniel Zimmer and Ms. Rebecca Rees.

CFS is requesting the approval of its shareholders, on a non-binding advisory basis, of the compensation of the CFS’ named executive officers based on or related to the merger and the agreements and understandings concerning such compensation. As required by Rule 14a-21(c) of the Exchange Act, CFS is asking its shareholders to adopt the following resolution:

RESOLVED, that the compensation to be paid or become payable to the named executive officers of CFS Bancorp, Inc. that is based on or otherwise relates to the Merger of CFS Bancorp, Inc. with and into First Merchants Corporation, and the agreements and understandings concerning such compensation, as disclosed pursuant to Item 402(t) of Regulation S–K in “THE MERGER-Merger-Related Compensation Payable to CFS’ Named Executive Officers” below are hereby APPROVED.

The advisory non-binding vote on compensation is a vote separate and apart from the vote on approval of the CFS Merger Proposal. Accordingly, you may vote to approve the CFS Merger Proposal and not approve the CFS merger-related compensation and vice versa. Because the approval of this proposal is advisory in nature, a vote for or against approval will not be binding on either First Merchants or CFS regardless of whether the merger is approved. Accordingly, as the compensation to be paid to the named executive officers of CFS based on or related to the merger is contractual with respect to such executives, regardless of the outcome of this vote, such compensation will be payable in accordance with the applicable agreements if the merger is completed. This proposal includes compensation that would be paid or provided by CFS if paid or provided prior to or upon the closing of the merger, and which would be paid or provided by First Merchants if paid or provided following closing of the merger. If the merger is not completed, CFS’ Board of Directors will consider the results of the vote in making future executive compensation decisions.

The CFS Board of Directors unanimously recommends a vote “FOR,” on a non-binding advisory basis, the CFS merger-related compensation proposal.

THE FIRST MERCHANTS SPECIAL MEETING

Special Meeting of Shareholders of

First Merchants Corporation

General Information

We are furnishing this document to the shareholders of First Merchants in connection with the solicitation by the Board of Directors of First Merchants of proxies for use at the special meeting of First Merchants shareholders to be held on , , 2013, at _: .m., local time, at . This document is first being mailed to First Merchants shareholders on , 2013, and includes the notice of First Merchants special meeting and is accompanied by a form of proxy.

Matters To Be Considered

The purposes of the special meeting are for you to consider and vote upon approval of:

the Merger Agreement, including the merger of First Merchants and CFS, and the transactions contemplated thereby (the “First Merchants Merger Proposal”);

the adjournment of the meeting, if necessary, to solicit additional proxies if enough votes have not been cast to approve the First Merchants Merger Proposal at the time of the meeting; and

to act on any other items that may be properly submitted to a vote at the First Merchants special meeting.

The Merger Agreement is attached to this document as Annex A and is incorporated in this document by this reference. For a description of the Merger Agreement, see “THE MERGER AGREEMENT,” beginning on page .

Votes Required

Approval of the First Merchants Merger Proposal requires the affirmative vote of at least a majority of the outstanding shares of First Merchants common stock. The approval of adjournment of the special meeting to allow extra time to solicit proxies, if necessary, only requires a majority of the shareholders present at the meeting. First Merchants has fixed , 2013, as the record date for determining those First Merchants shareholders entitled to notice of, and to vote at, the special meeting. Accordingly, if you were a First Merchants shareholder of record at the close of business on , 2013, you will be entitled to notice of and to vote at the special meeting. If you are not the record holder of your shares and instead hold your shares in a “street name” through a bank, broker or other record holder, that person will vote your shares in accordance with the instructions you provide them on the enclosed proxy. Each share of First Merchants common stock you own on the record date entitles you to one vote on each matter presented at the special meeting. At the close of business on the record date of , 2013, there were approximately shares of First Merchants common stock outstanding held by approximately shareholders.

As of the record date, First Merchants executive officers, directors and their affiliates had voting power with respect to an aggregate of shares or approximately % of the shares of First Merchants common stock outstanding. We currently expect that the directors and executive officers will vote all of their shares in favor of the proposal to approve the Merger Agreement and the merger.

Proxies

If you are a First Merchants shareholder, you should have received a proxy card for use at the First Merchants special meeting with this joint proxy statement-prospectus. The accompanying proxy card is for your use at the special meeting if you are unable or do not wish to attend the special meeting in person. The shares

represented by proxies properly signed and returned will be voted at the special meeting as instructed by the First Merchants shareholders giving the proxies. Proxy cards that are properly signed and returned but do not have voting instructions will be voted “FOR” approval of the First Merchants Merger Proposal; “FOR” adjournment of the meeting, if necessary or appropriate, to solicit additional proxies if enough votes have not been cast to approve the First Merchants Merger Proposal at the time of the meeting; and “FOR” such other business which may properly be presented at the special meeting or any adjournment or postponement of the special meeting. Properly signed and returned proxy cards will also confer on the persons named as proxies the power to vote in the discretion of such persons as to any other matter which may properly come before the special meeting. The Board of Directors of First Merchants is unaware of any other matters that may be presented for action at the special meeting.

If you deliver a properly signed proxy card, you may revoke your proxy at any time before it is exercised by:

•

delivering to the Secretary of First Merchants prior to the special meeting a written notice of revocation addressed to David L. Ortega, First Merchants Corporation, 200 East Jackson Street, Muncie, Indiana 47305; or

•

delivering to First Merchants prior to the special meeting a properly completed proxy by Internet, telephone or proxy card having a later date; or

•

voting in person by ballot at the special meeting. If your shares are held in the name of your broker, bank or other nominee, and you wish to vote in person, you must bring an account statement and authorization from your nominee so that you may vote your shares in person or by proxy at the special meeting.

Because approval of the First Merchants Merger Proposal requires the affirmative vote of at least a majority of the outstanding shares of First Merchants common stock, abstentions and broker non-votes will have the same effect as voting AGAINST approval of the First Merchants Merger Proposal. Accordingly, your Board of Directors urges all First Merchants shareholders to vote by proxy through the Internet, by telephone, or by completing, dating and signing the accompanying proxy and returning it promptly in the enclosed postage-paid envelope.

Solicitation of Proxies

First Merchants will bear the entire cost of soliciting proxies from First Merchants shareholders. In addition, First Merchants will bear the cost of printing and mailing this document. First Merchants will request that banks, brokers and other record holders send proxies and proxy material to the beneficial owners of stock held by them and secure their voting instructions, if necessary. First Merchants will reimburse these banks, brokers and other record holders for their reasonable expenses. In addition to solicitation of proxies by mail, proxies may be solicited personally or by telephone by directors, officers and certain employees of First Merchants, who will not be specially compensated for such soliciting. In addition, has been engaged to assist with the solicitation of proxies and will receive fees estimated at $ plus reimbursement of out-of-pocket expenses. First Merchants will also make arrangements with brokerage firms, fiduciaries and other custodians who hold shares of record to forward solicitation materials to the beneficial owners of these shares. First Merchants will reimburse these brokerage firms, fiduciaries and other custodians for their reasonable out-of-pocket expenses in connection with this solicitation.

In soliciting proxies, no one has any authority to make any representations and warranties about the merger or the Merger Agreement in addition to or contrary to the provisions stated in this document. No statement regarding the merger or the Merger Agreement should be relied upon except as expressly stated in this document.

Recommendation of the First Merchants Board of Directors

The First Merchants Board of Directors has unanimously approved the First Merchants Proposal. The Board believes that the merger is in the best interests of First Merchants and its shareholders. The Board unanimously

recommends that the First Merchants shareholders vote “FOR” approval of the First Merchants Merger Proposal and “FOR” adjournment of the meeting, if necessary, to solicit additional proxies if enough votes have not been cast to approve the Merger Agreement at the time of the meeting. See “THE MERGER—First Merchants’ Reasons for the Merger” and “THE MERGER—Recommendation of the First Merchants Board of Directors.”

Other Matters

The special meeting of First Merchants shareholders is called for the purposes set forth in the Notice to First Merchants shareholders included in this document. The Board of Directors of First Merchants is unaware of any other matter for action by shareholders at the special meeting other than the proposals related to the First Merchants Merger Proposal. However, the enclosed proxy will give discretionary authority to the persons named in the proxy with respect to matters which are not known to the Board of Directors as of the date hereof and which may properly come before the special meeting. It is the intention of the persons named in the proxy to vote with respect to such matters in accordance with the recommendations of the management of First Merchants.

Beneficial Ownership of First Merchants Common Stock by Certain Shareholders

The following table shows, as of March 1, 2013, the number and percentage of shares of common stock held by First Merchants’ directors, executive officers, holders of more than five percent of First Merchants’ common stock, and directors and executive officers as a group.

BENEFICIAL OWNERSHIP OF FIRST MERCHANTS COMMON STOCK

BY CERTAIN SHAREHOLDERS


Beneficial Owner	Amount and Nature of Beneficial Ownership			Percent of Class
Wellington Management Company, LLP 280 Congress Street Boston, MA 02210		2,377,914	(1)		8.17	%
Dimensional Fund Advisors LP Palisades West, Building One 6300 Bee Cave Road Austin, TX 78746		2,077,162	(2)		7.14	%
BlackRock, Inc. 40 East 52nd Street New York, NY 10022		1,869,486	(3)		6.42	%

Directors and Named Executive Officers
Michael R. Becher		2,770	(4)		*
Roderick English		20,466	(5)		*
Jo Ann M. Gora		20,452	(6)		*
William L. Hoy		26,927	(7)		*
Gary J. Lehman		20,695	(8)		*
Michael C. Rechin		138,551	(9)		*
Charles E. Schalliol		43,277	(10)		*
Patrick A. Sherman		28,956	(11)		*
Terry L. Walker		49,873	(12)		*
Jean L. Wojtowicz		24,511	(13)		*
Robert R. Connors		54,891	(14)		*
Mark K. Hardwick		113,210	(15)		*
John J. Martin		26,174	(16)		*
Michael J. Stewart		58,705	(17)		*
Directors and Executive (Officers as a Group (17 persons)		715,414	(18)		2.43	%

*	Percentage beneficially owned is less than 1% of the outstanding shares.

(1)	Based on a Schedule 13G filing with the SEC, Wellington Management Company, LLP is an investment advisor in accordance with Rule 13(d)-1(b)(1)(ii)(E) under the Exchange Act. Wellington Management Company, LLP shares voting and/or dispositive power over the shares.

(2)

Based on a Schedule 13G filing with the SEC, Dimensional Fund Advisors LP is an investment advisor in accordance with Rule 13(d)-1(b)(1)(ii)(E) under the Exchange Act. It furnishes investment advice to four investment companies registered under the Investment Advisors Act of 1940 and serves as investment manager to certain other commingled group trusts and separate accounts. These investment companies, trusts and accounts are the “Funds.” In certain cases, subsidiaries of Dimensional Fund Advisors LP may act as an advisor or sub-advisor to certain Funds. In its role as investment advisor sub-advisor and/or manager, neither Dimensional Fund Advisors LP nor its subsidiaries (collectively, “Dimensional”) possess voting and/or investment power over the shares of First Merchants common stock held by the Funds, and may be deemed to be the beneficial owner of these shares under rules of the SEC. However, all of these shares are owned by the Funds. Dimensional disclaims beneficial ownership of such shares for any other purpose.

(3)

Based on a Schedule 13G filing with the SEC, BlackRock, Inc. is a parent holding company in accordance with Rule 13(d)-1(b)(1)(ii)(G) under the Exchange Act. It is the parent holding company of six subsidiaries, BlackRock Japan Co. Ltd., BlackRock Institutional Trust Company, N.A., BlackRock Fund Advisors, BlackRock Asset Management Canada Limited, BlackRock Advisors, LLC, and BlackRock Investment

Management, LLC, that are the beneficial owners and possess voting and investment power over these shares of First Merchants common stock.

(4)	Includes 1,070 restricted shares and 1,500 shares that he has the right to acquire by exercising vested options.

(5)	Includes 6,462 restricted shares and 10,628 shares that he has the right to acquire by exercising vested options.

(6)	Includes 6,462 restricted shares and 10,628 shares that she has the right to acquire by exercising vested options.

(7)	Includes 6,462 restricted shares, and 7,157 shares that he has the right to acquire by exercising vested options; 6,473 of the shares have been pledged as security for loans.

(8)	Includes 3,333 restricted shares and 3,000 shares that he has the right to acquire by exercising vested options.

(9)	Includes 42,120 restricted shares, 4,000 shares held jointly with his spouse, Debra Rechin, and 65,000 shares that he has the right to acquire by exercising vested options.

(10)	Includes 12,892 restricted shares and 10,628 shares that he has the right to acquire by exercising vested options.

(11)	Includes 7,294 restricted shares and 6,000 shares that he has the right to acquire by exercising vested options.

(12)	Includes 7,684 restricted shares, 30,157 shares held jointly with his spouse, Cheryl L. Walker, 551 shares held by his spouse and 8,314 shares that he has the right to acquire by exercising vested options.

(13)	Includes 8,505 restricted shares and 11,785 shares that she has the right to acquire by exercising vested options.

(14)	Includes 5,792 restricted shares, 3,568 shares held jointly with his spouse, Ann Connors, and 35,950 shares that he has the right to acquire by exercising vested options.

(15)	Includes 31,103 restricted shares, 401 shares held by his spouse, Catherine Hardwick, and 52,249 shares that he has the right to acquire by exercising vested options.

(16)	Includes 15,193 restricted shares and 5,000 shares that he has the right to acquire by exercising vested options.

(17)	Includes 30,952 restricted shares and 14,000 shares that he has the right to acquire by exercising vested options.

(18)	Includes 203,045 restricted shares and 282,059 shares that the directors and executive officers as a group have the right to acquire by exercising vested options.

FIRST MERCHANTS MERGER-RELATED PROPOSALS

PROPOSAL NO. 1

FIRST MERCHANTS MERGER PROPOSAL

First Merchants is asking its shareholders to approve the First Merchants Merger Proposal. Holders of First Merchants common stock should read this joint proxy statement-prospectus carefully and in its entirety, including the annexes, for more detailed information concerning the Merger Agreement and the merger. A copy of the Merger Agreement is attached to this joint proxy statement-prospectus as Annex A.

After careful consideration, the First Merchants Board of Directors approved the First Merchants Merger Proposal and declared it to be advisable and in the best interest of First Merchants and the shareholders of First Merchants. See “THE MERGER—First Merchants’ Reasons for the Merger” and “THE MERGER—Recommendation of the First Merchants Board of Directors” included elsewhere in this joint proxy statement-prospectus for a more detailed discussion of the First Merchants Board of Directors’ recommendation.

The First Merchants Board of Directors unanimously recommends a vote “FOR” the First Merchants Merger Proposal.

PROPOSAL NO. 2

FIRST MERCHANTS ADJOURNMENT PROPOSAL

The First Merchants special meeting may be adjourned to another time or place, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the First Merchants special meeting to approve the First Merchants Merger Proposal (the “First Merchants Adjournment Proposal”).

If, at the First Merchants special meeting, the number of shares of First Merchants common stock present or represented and voting in favor of the First Merchants Merger Proposal is insufficient to approve the First Merchants Merger Proposal, First Merchants intends to move to adjourn the First Merchants special meeting in order to enable the First Merchants Board of Directors to solicit additional proxies for approval of the First Merchants Merger Proposal. In that event, First Merchants will ask its shareholders to vote upon the First Merchants Adjournment Proposal, but not the First Merchants Merger Proposal.

In this proposal, First Merchants is asking its shareholders to authorize the holder of any proxy solicited by the First Merchants Board of Directors on a discretionary basis to vote in favor of adjourning the First Merchants special meeting to another time and place for the purpose of soliciting additional proxies, including the solicitation of proxies from First Merchants shareholders who have previously voted.

The First Merchants Board of Directors unanimously recommends a vote “FOR” the First Merchants Adjournment Proposal.

THE MERGER

At the special meetings, the shareholders of First Merchants and CFS will consider and vote upon approval of the Agreement of Reorganization and Merger dated May 13, 2013, between First Merchants and CFS (the Merger Agreement). The following summary highlights certain information about the merger. To understand the merger, you should read carefully this entire joint proxy statement-prospectus, including the Merger Agreement, which is attached to this document as Annex A.

Description of the Merger

Under the terms of the Merger Agreement unanimously approved by each of the CFS and First Merchants Board of Directors, CFS will merge with First Merchants and the separate corporate existence of CFS will cease. Immediately following the merger, Citizens Financial Bank will merge with and into First Merchants Bank and Citizens Financial Bank will cease to exist as a separate entity. The Articles of Incorporation and Bylaws of First Merchants, as in effect prior to the merger, will be the Articles of Incorporation and Bylaws of First Merchants after the merger.

Exchange of CFS Common Stock

As of the effective date of the merger, each CFS shareholder will be entitled to receive, for each outstanding share of CFS common stock held (including all restricted shares issued under CFS’ equity compensation plans) 0.65 shares of First Merchants common stock. First Merchants will not issue fractional shares of First Merchants common stock to CFS shareholders. Each CFS shareholder who otherwise would be entitled to a fractional interest in a First Merchants share as a result of the exchange ratio will be paid a cash amount for the fractional interest.

Effect of the Merger on First Merchants Shareholders

The approval of the First Merchants shareholders of the merger is required in order to complete the merger. However, First Merchants shareholders will not be entitled to exchange their shares for any consideration as a result of the merger. After the merger, First Merchants shareholders will continue to own the same number of First Merchants shares they owned before the merger.

Background of the Merger

As part of its ongoing Board discussions and strategic planning sessions, CFS’ Board of Directors and management have from time to time discussed potential strategic opportunities and alternatives, including possible combinations with other financial institutions through potential acquisitions, mergers-of-equals or a sale to a larger institution. In recent years, as part of its annual budget planning and business plan preparation, the CFS Board of Directors and management noted the negative impact that the struggling economy, modest loan growth, increased regulation and robust competition for customers and employees was having on CFS’ ability to achieve its business objectives.

In the fall of 2012, the Board of Directors discussed a number of strategic alternatives for CFS. The Board decided to engage River Branch Capital LLC (“River Branch”) to provide CFS with advice regarding the availability and advisability of various strategic alternatives. CFS formally engaged River Branch on November 1, 2012. After discussions between the Board of Directors and River Branch regarding various strategic opportunities and alternatives, the Board asked River Branch to contact certain financial institutions to determine interest in a possible transaction. As a result, in late 2012 and early 2013, River Branch initiated contact with 12 Midwestern-based financial institutions to gauge interest in a potential business combination transaction with CFS.

Between December 31, 2012 and January 11, 2013, five financial institutions signed non-disclosure agreements with CFS, and during January and February 2013, these companies conducted preliminary due diligence, including a review of CFS’ loan portfolio, and held discussions with representatives of River Branch regarding CFS.

On February 21, 2013, a representative from River Branch initiated contact with Michael C. Rechin, President and Chief Executive Officer of First Merchants, to determine First Merchants’ interest in a possible transaction with CFS. On February 22, 2013, First Merchants signed a non-disclosure agreement and began its due diligence.

On March 4, 2013, as part of First Merchants’ due diligence review, Mr. Rechin and Daryl Pomranke, President and Chief Executive Officer of CFS, met in person to discuss a potential merger, including cultural and strategic issues at each of their respective companies. After this meeting, First Merchants continued its due diligence review of CFS.

On March 6, 2013, senior executive officers of CFS and representatives of River Branch met with numerous senior executive officers of a financial institution, referred to herein as “Bank A,” at Bank A’s corporate headquarters.

On March 8, 2013, CFS received a non-binding letter of intent (“LOI”) from a financial institution, referred to herein as “Bank B.”

On March 12, 2013, the First Merchants Board of Directors held a meeting to consider, based on presentations from First Merchants’ management, the status of a potential business combination transaction with CFS. First Merchants’ management further reviewed for the First Merchants Board of Directors the background of discussions with CFS and the progress of negotiations, and reported on First Merchants’ preliminary due diligence investigations. Following questions and discussions among those in attendance, First Merchants’ Board of Directors authorized First Merchants’ management to continue negotiations with CFS including presenting an indication of interest.

On March 13, 2013, CFS received a LOI from First Merchants. On March 19, 2013, the Bank received a LOI from Bank A. Also, another financial institution, referred to herein as “Bank C,” actively conducted due diligence on CFS, including a preliminary review of CFS’ loan portfolio. Representatives of River Branch and CFS met with Bank C’s Chief Executive Officer, Chief Financial Officer and Chief Credit Officer at River Branch’s offices on March 13, 2013. On March 15, 2013, representatives of CFS, River Branch and Bank C had a follow-up conference call to discuss credit matters. On March 21, 2013, after completing its due diligence, Bank C informed River Branch that it decided that it would not submit a LOI.

The LOIs received from First Merchants, Bank A and Bank B contained a range of offers to acquire CFS, with the initial bid submitted by First Merchants being the highest among the three initial offers and reflected an implied price per share of CFS common stock at the time the LOI was initially submitted of $9.94 based on a proposed fixed exchange ratio and the then-current price of First Merchants’ common stock. Bank B provided a range for the possible purchase price based on a fixed, average price exchange ratio. Bank A offered a specific purchase price based on a fixed exchange ratio. Each of Bank A, Bank B and First Merchants expressed an interest in retaining certain members of the CFS management team as part of a combined company post-closing.

River Branch and CFS’ management then analyzed all three competitive LOIs and the terms thereof. On March 25, 2013, the Board of Directors of CFS met to discuss the terms of each LOI, which included a discussion of each LOI with River Branch, including the LOI from First Merchants. Representatives of CFS’ outside counsel, Vedder Price P.C. (“Vedder Price”) also attended this meeting and discussed the legal issues raised by each of the LOIs.

On March 28, 2013, Bank B contacted River Branch suggesting that it may increase its offer price range, subject to further due diligence. Previously, Bank B had proposed the lowest offer dollar amount among the three institutions that submitted LOIs. Subsequently, Mr. Pomranke, Dale S. Clapp, Executive Vice President—Sales Management of Citizens Financial Bank, and Jerry A. Weberling, CFS’ Executive Vice President and Chief Financial Officer, and representatives of River Branch met with senior executive officers of Bank B at River Branch’s offices on April 11, 2013 to discuss the strategy and benefits of a proposed transaction, geographic footprint of a combined company and other potential merger-related cultural issues. Following further due diligence, Bank B ultimately declined to submit a revised LOI.

Additionally, on March 29, 2013, Mr. Pomranke met with the Chief Executive Officer of Bank A to discuss a potential transaction. Bank A continued its due diligence review during the week of April 1, 2013.

On April 1, 2013, representatives from River Branch met with Mr. Rechin and Mark K. Hardwick, First Merchants’ Executive Vice President and Chief Financial Officer, to discuss First Merchants’ initial LOI. They discussed a variety of topics, including reverse due diligence matters, the assumptions on which First Merchants’ initial bid was based, and First Merchants’ earnings outlook, credit performance and stock price valuation. On April 11, 2013, Mr. Pomranke and Mr. Rechin met in person to discuss the terms and conditions of a possible merger transaction. There was also significant discussion regarding CFS and how the two companies might complement each other and create value for First Merchants’ and CFS’ shareholders.

On April 9, 2013, the First Merchants Board of Directors held another meeting to consider, based on presentations from First Merchants’ management, the status of a potential business combination transaction with CFS. First Merchants’ management further reviewed for the First Merchants Board of Directors the continuing discussions with CFS and the progress of negotiations, and reported on First Merchants’ continuing due diligence investigations of CFS. Following questions and discussions among those in attendance, First Merchants’ Board of Directors authorized First Merchants’ management to complete negotiations with CFS, engage Sandler O’Neill & Partners, L.P. (“Sandler O’Neill”) as its financial advisor for the transaction and finalize definitive documentation regarding the potential transaction. On April 15, 2013, First Merchants engaged Sandler O’Neill, to act as its financial advisor in connection with a possible transaction with CFS.

Representatives of River Branch continued to hold discussions with Bank A, and on April 12, 2013, Mr. Clapp and Daniel J. Zimmer, Senior Vice President and Senior Credit Officer of Citizens Financial Bank, met in Chicago with senior officers of Bank A to discuss certain potential merger-related issues, including credit administration, integration and cultural matters. Subsequently, on April 16, 2013, CFS received a revised LOI from Bank A.

CFS received a revised LOI from First Merchants on April 16, 2013, which proposed a stock-for-stock transaction based on a proposed fixed exchange ratio, which resulted in an implied price per share of CFS common stock of $9.70 based on First Merchants’ closing stock price on April 15, 2013. It also contemplated the retention of certain members of CFS’ and Citizens Financial Bank’s senior management with the combined company post-closing. After receiving the updated LOI from First Merchants, River Branch had a conference call with representatives from First Merchants to discuss the updated terms contained in the LOI.

After CFS received the revised LOIs from First Merchants and Bank A, River Branch prepared a summary of each of the two revised LOIs for the CFS Board. The bid submitted by First Merchants at this stage was the highest among the two remaining offers.

On April 17, 2013, the CFS Board of Directors met and discussed the terms of each of the revised LOIs. Also, Mr. Pomranke updated the Board regarding his recent meeting and discussions with Mr. Rechin. Representatives from River Branch and Vedder Price were present at the meeting. During the meeting, representatives from River Branch discussed the material terms contained in each of the recently received revised LOIs and provided a status update regarding the ongoing discussions with the two remaining potential bidders. Representatives from Vedder Price then discussed the relevant legal issues arising in connection with the LOIs. The Board then proceeded to discuss, among other things, a comparison of indicative pricing and key valuation metrics, estimated transaction accretion and dilution, key LOI terms, process timing, and future prospects for both First Merchants and Bank A. Upon conclusion of the discussion, the Board determined that the First Merchants proposal was superior and the directors present unanimously determined that it was in the best interests of CFS’ shareholders, depositors and employees to authorize management and River Branch to negotiate a definitive merger agreement with First Merchants.

Following the April 17, 2013 Board meeting, CFS’ management team, along with representatives from River Branch and Vedder Price, began negotiating the terms of a proposed merger with First Merchants and its financial and legal advisors. In addition, shortly after the April 17, 2013 Board meeting, CFS began the process of conducting its reverse due diligence on First Merchants.

On April 24, 2013, First Merchants provided an initial draft of a definitive merger agreement pursuant to which CFS would merge with and into First Merchants. Subsequently, CFS and its advisors reviewed and revised this draft agreement, and during the next few weeks the parties engaged in ongoing negotiations of the definitive agreement and related ancillary documents.

On April 28, 2013, Mark Hardwick, the Chief Financial Officer of First Merchants, met with representatives of River Branch and Mr. Pomranke at River Branch’s Chicago offices so that CFS and River Branch could conduct reverse due diligence. Mr. Rechin participated in the discussions via conference call. They discussed a variety of topics including a review of First Merchants’ business units, its long term strategic operating, financial and capital plans and credit performance

On May 1, 2013, based on the negotiations between the parties, CFS provided an updated draft of the definitive agreement to First Merchants. CFS’ Board of Directors then held a meeting on May 3, 2013, at which representatives of River Branch and Vedder Price were present, to discuss the May 1, 2013 draft of the definitive agreement and related documents. During the meeting, Vedder Price made a presentation to the Board of Directors regarding the material terms of the definitive agreement and the material open issues. Additionally, River Branch provided the Board with an update on the negotiation of the financial terms of the transaction with First Merchants, including the proposed final exchange ratio of 0.65 shares of First Merchants common stock for

each share of CFS common stock. The Board of Directors then discussed the current draft definitive agreement and the material terms of the transaction. After discussing the terms of the proposed transaction, the Board asked CFS management, along with River Branch and Vedder Price, to continue to negotiate the terms of the proposed transaction.

Following the May 3, 2013 Board meeting, CFS’ management team, in conjunction with River Branch and Vedder Price, continued to negotiate the terms of the definitive agreement and ancillary agreements with First Merchants and its advisors. The parties exchanged revised drafts of the definitive agreement and ancillary agreements following the May 3, 2013 Board meeting.

On May 9, 2013, the First Merchants Board of Directors held another meeting to consider the proposed merger of CFS with and into First Merchants in accordance with the terms of the draft Agreement of Reorganization and Merger. The Board considered presentations from First Merchants’ management and Sandler O’Neill regarding the key terms of the merger agreement and the strategic and financial rationales for the proposed merger. First Merchants’ management also reported on First Merchants’ due diligence investigations of CFS. Representatives of Sandler O’Neill reviewed with the First Merchants Board of Directors additional information, including financial information regarding First Merchants, CFS and the transaction and its financial analysis of the exchange ratio. Sandler O’Neill delivered an oral opinion (which was subsequently confirmed in writing) to the effect that, as of May 8, 2013 and based on and subject to various assumptions and limitations described in its opinion, the exchange ratio provided for in the merger was fair, from a financial point of view, to First Merchants. First Merchants’ management and Sandler O’Neill also responded to questions from the Directors throughout the meeting and there were discussions among the Directors and management. Following these discussions, and review and discussion among the members of the First Merchants Board of Directors, including consideration of the factors described under “First Merchants’ Reasons for the Merger” below, the First Merchants Board of Directors determined that the Merger Agreement and the transactions contemplated thereby, including the merger, are advisable and in the best interests of First Merchants and its shareholders, and the Directors voted unanimously to approve and adopt the Merger Agreement and the transactions contemplated thereby and recommended that First Merchants shareholders approve the First Merchants Merger Proposal.

On May 10, 2013, the CFS Board of Directors held another meeting to discuss the proposed transaction with First Merchants and to review and discuss the draft transaction documents with CFS’ financial and legal advisors. A representative from Vedder Price provided the Board with a presentation regarding the Board’s fiduciary duties and the terms of the proposed transaction, including, among other things, the amount and form of consideration (including the exchange ratio), the treatment of CFS’ currently outstanding stock options, the effect on CFS’ pension plan and existing employment and change-in-control agreements, the proposed post-merger employment and retention agreements with First Merchants, employee severance matters, directors’ and officers’ insurance, representations and warranties, closing conditions, no shop and fiduciary out provisions, termination rights, termination dates and “break-up” fees.

After Vedder Price’s presentation and discussion, River Branch described for the Board its fairness opinion issuance process, its analysis of the proposed exchange ratio and how River Branch made its determination with respect thereto. River Branch informed the CFS Board of Directors that, based on the terms of the transaction as proposed and discussed, it was prepared to give its oral opinion (which was subsequently confirmed in writing) that, based upon and subject to the various factors, assumptions and limitations set forth in such opinion, River Branch’s representatives’ experience as investment bankers, River Branch’s work as described in such opinion and other factors River Branch deemed relevant, as of May 10, 2013, the exchange ratio set forth in the Merger Agreement was fair, from a financial point of view, to the holders of CFS’ common stock.

Following the presentations by Vedder Price and River Branch, the Board engaged in discussions regarding the Merger Agreement and the transactions contemplated thereby. The Board asked the representatives of River Branch and Vedder Price a number of questions regarding the terms and conditions of the proposed transaction. The Board of Directors then discussed the material terms of the definitive Merger Agreement, Voting Agreement and Bank Merger Agreement. During its discussion, the Board noted that the Merger Agreement, as presented to

the Board, provided that shareholders of CFS would have the right to receive 0.65 shares of First Merchants common stock for each share of CFS common stock owned and that, based on the closing price of First Merchants’ common stock on May 9, 2013 of $16.25, the transaction value would be approximately $115.5 million, with an implied price per share of CFS common stock of $10.56.

After an extensive discussion of all of the material terms of the proposed transaction with First Merchants, including consideration of the factors described under “CFS’ Reasons for the Merger” below, the CFS Board of Directors determined that the proposed merger was advisable and in the best interests of CFS and its shareholders, and unanimously approved entering into the Merger Agreement with First Merchants, and recommended that CFS’ shareholders approve and adopt the CFS Merger Proposal.

The parties executed the definitive transaction documents on May 13, 2013, and publicly announced the transaction by joint press release on May 13, 2013.

First Merchants’ Reasons for the Merger

In reaching its decision to adopt and approve the Merger Agreement, the merger and the other transactions contemplated by the Merger Agreement, and to recommend that its shareholders approve the First Merchants Merger Proposal, the First Merchants Board of Directors consulted with First Merchants management, as well as Sandler O’Neill, and considered a number of factors, including the following material factors:

•

each of First Merchants’ and CFS’ business, operations, financial condition, asset quality, earnings and prospects. In reviewing these factors, the First Merchants Board of Directors considered that the merger (1) will expand First Merchants’ business into adjacent yet new demographically attractive markets in and around Northwest Indiana; (2) will increase First Merchants’ core deposit base, an important funding source; (3) will provide First Merchants with an experienced management team and quality bank branches in and around Northwest Indiana; and (4) will provide First Merchants with the opportunity to sell First Merchants’ broad array of products to CFS’ client base;

•

its understanding of the current and prospective environment in which First Merchants and CFS operate, including national and local economic conditions, the competitive environment for financial institutions generally, and the likely effect of these factors on First Merchants both with and without the proposed transaction;

•

management’s expectation regarding cost synergies, accretion and internal rate of return, including the expectation that First Merchants will realize cost savings of 30%, or approximately $11.5 million, that the transaction is expected to be accretive to earnings beginning in 2014, that the tangible book value will be earned back within three years, and that the transaction will have a minimal impact to capital ratios;

•

its review and discussions with First Merchants’ management concerning the due diligence examination of CFS;

•

the complementary nature of the cultures of the two companies, which management believes should facilitate integration and implementation of the transaction;

•

the written opinion of Sandler O’Neill, First Merchants’ financial advisor, dated as of May 8, 2013, delivered to the First Merchants Board of Directors to the effect that, as of that date, and subject to and based on the various assumptions, considerations, qualifications and limitations set forth in the opinion, the exchange ratio pursuant to the Merger Agreement was fair, from a financial point of view, to First Merchants;

•

the financial and other terms of the Merger Agreement, including the fixed exchange ratio, tax treatment and deal protection and termination fee provisions, which it reviewed with its outside financial and legal advisors;

•

the potential risks associated with achieving anticipated cost synergies and savings and successfully integrating CFS’ business, operations and workforce with those of First Merchants;

•

the potential risk of diverting management attention and resources from the operation of First Merchants’ business towards the completion of the merger; and

•

the regulatory and other approvals required in connection with the merger and the expectation that such regulatory approvals will be received in a timely manner and without the imposition of unacceptable conditions.

The foregoing discussion of the information and factors considered by the First Merchants Board of Directors is not intended to be exhaustive, but includes the material factors considered by the First Merchants Board of Directors. In reaching its decision to approve and adopt the Merger Agreement, the merger and the other transactions contemplated by the Merger Agreement, the First Merchants Board of Directors did not quantify or assign any relative weights to the factors considered, and individual Directors may have given different weights to different factors. The First Merchants Board of Directors considered all these factors as a whole, including discussions with, and questioning of, First Merchants’ management and First Merchants’ financial and legal advisors, and overall considered the factors to be favorable to, and to support, its determination.

For the reasons set forth above, the First Merchants Board of Directors unanimously determined that the Merger Agreement and the transactions contemplated by the Merger Agreement are advisable and in the best interests of First Merchants and its shareholders, and unanimously adopted and approved the First Merchants Merger Proposal.

Opinion of First Merchants’ Financial Advisor

By letter dated April 15, 2013, First Merchants retained Sandler O’Neill to act as its financial advisor and to issue a fairness opinion to First Merchants’ Board of Directors in connection with the Board’s consideration of a possible business combination with CFS. Sandler O’Neill is a nationally recognized investment banking firm whose principal business specialty is financial institutions. In the ordinary course of its investment banking business, Sandler O’Neill is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions.

Sandler O’Neill provided a fairness opinion to the First Merchants Board of Directors in connection with the proposed transaction. At the May 9, 2013 meeting at which the First Merchants Board of Directors considered and approved the Merger Agreement, Sandler O’Neill delivered to the Board its oral opinion, which was subsequently confirmed in writing, that, as of such date, the exchange ratio provided in the Merger Agreement was fair to First Merchants from a financial point of view. The full text of Sandler O’Neill’s opinion is attached as Annex C to this joint proxy statement-prospectus. The opinion outlines the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Sandler O’Neill in rendering its opinion. The description of the opinion set forth below is qualified in its entirety by reference to the full text of the opinion. Holders of First Merchants common stock are urged to read the entire opinion carefully in connection with their consideration of the proposed merger.

Sandler O’Neill’s opinion speaks only as of the date of the opinion. The opinion was directed to First Merchants’ Board and is directed only to the fairness of the exchange ratio to First Merchants from a financial point of view. It does not address the underlying business decision of First Merchants to engage in the merger or any other aspect of the merger and is not a recommendation to any holder of First Merchants common stock as to how such holder of First Merchants common stock should vote at the special meeting with respect to the merger or any other matter.

In connection with rendering its opinion dated May 8, 2013, Sandler O’Neill reviewed and considered, among other things:

•

a draft of the Merger Agreement, dated May 8, 2013;

•

certain publicly available financial statements and other historical financial information of First Merchants that Sandler O’Neill deemed relevant;

•

certain publicly available financial statements and other historical financial information of CFS that Sandler O’Neill deemed relevant;

•

internal financial projections for First Merchants for the years ending December 31, 2013 through 2017 as provided by and discussed with senior management of First Merchants;

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internal financial projections for CFS for the years ending December 31, 2013 as provided by senior management of CFS and as adjusted by senior management of First Merchants and estimated growth rates for the years thereafter as discussed with senior management of First Merchants;

•

the pro forma financial impact of the merger on First Merchants based on assumptions relating to transaction expenses, purchase accounting adjustments, cost savings and other synergies as determined by the senior management of First Merchants;

•

the relative contributions of assets, liabilities, equity and earnings of First Merchants and CFS to the resulting institution;

•

a comparison of certain financial information for First Merchants and CFS with similar institutions for which publicly available information is available;

•

the financial terms of certain recent business combinations in the commercial banking industry, to the extent publicly available;

•

the current market environment generally and the banking environment in particular; and

•

such other information, financial studies, analyses and investigations and financial, economic and market criteria as Sandler O’Neill considered relevant.

Sandler O’Neill also discussed with certain members of the senior management of First Merchants the independent business, financial condition, results of operations and prospects of First Merchants respectively.

In performing its reviews, Sandler O’Neill relied upon the accuracy and completeness of all of the financial and other information that was available to Sandler O’Neill from public sources, that was provided to Sandler O’Neill by First Merchants and CFS or their respective representatives or that was otherwise reviewed by Sandler O’Neill and have assumed such accuracy and completeness for purposes of rendering its opinion. Sandler O’Neill further relied on the assurances of the respective managements of First Merchants and CFS that they were not aware of any facts or circumstances that would make any of such information inaccurate or misleading. Sandler O’Neill was not asked to undertake, and did not undertake an independent verification of any of such information and Sandler O’Neill assumes no responsibility or liability for the accuracy or completeness thereof. Sandler O’Neill did not make an independent evaluation or appraisal of the specific assets, the collateral securing assets or the liabilities (contingent or otherwise) of First Merchants or CFS or any of their respective subsidiaries. Sandler O’Neill did not render an opinion or evaluation on the collectability of any assets or the future performance of any loans of First Merchants and CFS. Sandler O’Neill did not make an independent evaluation of the adequacy of the allowance for loan losses of First Merchants or CFS, or the combined entity after the merger and Sandler O’Neill did not review any individual credit files relating to First Merchants or CFS. Sandler O’Neill assumed that the respective allowances for loan losses for both First Merchants and CFS, together with the assumed purchase accounting adjustments made by First Merchants’ with respect to CFS, are adequate to cover such losses and will be adequate on a pro forma basis for the combined entity.

In preparing its analyses, Sandler O’Neill used internal financial projections for First Merchants as provided by senior management of First Merchants and internal financial projections and an estimated long term growth rate for CFS as discussed with the senior management of First Merchants. Sandler O’Neill also received and used in its analyses certain projections of transaction costs, purchase accounting adjustments, expected cost savings and other synergies which were prepared by and/or reviewed with the senior management of First Merchants. With respect to those projections, estimates and judgments, the management of First Merchants confirmed to Sandler O’Neill that those projections, estimates and judgments reflected the best currently available estimates and judgments of the respective managements of the respective future financial performance of First Merchants and

CFS and we assumed that such performance would be achieved. Sandler O’Neill expresses no opinion as to such estimates or the assumptions on which they are based. Sandler O’Neill has also assumed that there has been no material change in First Merchants’ and CFS’ assets, financial condition, results of operations, business or prospects since the date of the most recent financial statements made available to Sandler O’Neill. Sandler O’Neill also assumed in all respects material to its analysis that First Merchants and CFS would remain as going concerns for all periods relevant to Sandler O’Neill’s analyses, that all of the representations and warranties contained in the Merger Agreement are true and correct in all material respects, that each party to the Merger Agreement will perform in all material respects all of the covenants required to be performed by such party under the Merger Agreement and that the conditions precedent in the Merger Agreement are not waived and that the merger will qualify as a tax-free reorganization for federal income tax purposes. Finally, Sandler O’Neill has relied upon the advice First Merchants has received from its legal, accounting and tax advisors as to all legal, accounting and tax matters relating to the merger and the other transactions contemplated by the Merger Agreement.

Sandler O’Neill’s opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to Sandler O’Neill as of, the date of its opinion. Events occurring after the date thereof could materially affect its opinion. Sandler O’Neill has not undertaken to update, revise, reaffirm or withdraw its opinion or otherwise comment upon events occurring after the date of its opinion.

In rendering its fairness opinion, Sandler O’Neill performed a variety of financial analyses. The following is a summary of the material analyses performed by Sandler O’Neill, but is not a complete description of all the analyses underlying Sandler O’Neill’s opinion. The summary includes information presented in tabular format. In order to fully understand the financial analyses, these tables must be read together with the accompanying text. The tables alone do not constitute a complete description of the financial analyses. The preparation of a fairness opinion is a complex process involving subjective judgments as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. The process, therefore, is not necessarily susceptible to a partial analysis or summary description. Sandler O’Neill believes that its analyses must be considered as a whole and that selecting portions of the factors and analyses to be considered without considering all factors and analyses, or attempting to ascribe relative weights to some or all such factors and analyses, could create an incomplete view of the evaluation process underlying its opinion. Also, no company included in Sandler O’Neill’s comparative analyses described below is identical to First Merchants or CFS and no transaction is identical to the merger. Accordingly, an analysis of comparable companies or transactions involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies and other factors that could affect the public trading values or merger transaction values, as the case may be, of First Merchants and CFS and the companies to which they are being compared.

In performing its analyses, Sandler O’Neill also made numerous assumptions with respect to industry performance, business and economic conditions and various other matters, many of which cannot be predicted and are beyond the control of First Merchants, CFS and Sandler O’Neill. The analyses performed by Sandler O’Neill are not necessarily indicative of actual values or future results, both of which may be significantly more or less favorable than suggested by such analyses. Sandler O’Neill prepared its analyses solely for purposes of rendering its opinion and provided such analyses to the First Merchants Board of Directors at the Board of Directors’ May 9, 2013 meeting. Estimates on the values of companies do not purport to be appraisals or necessarily reflect the prices at which companies or their securities may actually be sold. Such estimates are inherently subject to uncertainty and actual values may be materially different. Accordingly, Sandler O’Neill’s analyses do not necessarily reflect the value of First Merchants common stock or CFS common stock or the prices at which First Merchants common stock or CFS common stock may be sold at any time. The analyses of Sandler O’Neill and its opinion were among a number of factors taken into consideration by First Merchants’ Board of Directors in making its determination to approve of First Merchants’ entry into the Merger Agreement and the analyses described below should not be viewed as determinative of the decision First Merchants’ Board of Directors or management with respect to the fairness of the merger.

In arriving at its opinion Sandler O’Neill did not attribute any particular weight to any analysis or factor that it considered. Rather, it made qualitative judgments as to the significance and relevance of each analysis and factor. Sandler O’Neill did not form an opinion as to whether any individual analysis or factor (positive or negative) considered in isolation supported or failed to support its opinions; rather, Sandler O’Neill made its determination as to the fairness of the exchange ratio on the basis of its experience and professional judgment after considering the results of all its analyses taken as a whole.

Summary of Proposal

Sandler O’Neill reviewed the financial terms of the proposed transaction. As described in the Merger Agreement, CFS stockholders will be converted into the right to receive consideration consisting of 0.65 shares of First Merchants common stock for each CFS common share, and any outstanding options to acquire CFS common stock at the time of the merger will automatically vest and be converted to the right to acquire shares of First Merchants common stock on the same terms and conditions as were applicable under the CFS option plan. Based upon the $16.34 closing price for First Merchants common stock as of May 6, 2013, Sandler O’Neill calculated merger consideration of $116.6 million¹ or $10.62 per CFS share. Based upon financial information as or for the twelve month period ended March 31, 2013 and First Merchants’ closing stock price as of May 6, 2013, Sandler O’Neill calculated the following transaction ratios:


	Implied Transaction Multiple			Nationwide Transactions ⁶			Midwest Transactions⁷
Price / Book Value Per Share:		103	%		111	%		97	%
Price / Tangible Book Value Per Share:		103	%		111	%		99	%
Price / Last Twelve Months’ Earnings Per Share:		20.0	x		21.8	x		24.2	x
Price / Estimated 2013 Earnings Per Share²:		19.7	x		—			—
Core Deposit Premium³:		0.6	%		2.2	%		(0.1	%)
Market Premium⁴:		15	%		42	%		47	%
Pre-Public Market Premium⁵:		30	%		—			—

1	Based on 10,898,168 common shares outstanding plus $850 thousand attributable to the value of CFS options outstanding

2	Based on First Merchants management guidance

3	Tangible book premium to core deposits = (Deal Value—Tangible Common Equity) / (Core Deposits)

4	Based on closing price as of May 6, 2013

5	Based on closing price as of April 10, 2013, prior to Crain’s Chicago Business’ report of CFS’ rumored sale was published

6	Nationwide bank and thrift transactions since January 1, 2011 with deal value greater than $50 million, tangible common equity to tangible assets greater than 6.00% and NPAs to assets greater than 3.00%

7	Midwest bank and thrift transactions since January 1, 2011 with deal value greater than $10 million, tangible common equity to tangible assets greater than 6.00% and NPAs to assets greater than 3.00%

First Merchants—Comparable Company Analysis

Sandler O’Neill used publicly available information to compare selected financial information for First Merchants and a group of financial institutions as selected by Sandler O’Neill. The First Merchants peer group consisted of NASDAQ or NYSE-traded banks headquartered in the Midwest with assets as of the most recently reported period between $3 billion and $10 billion. The group excluded thrifts, merger targets and niche-focused banks.


1st Source Corp.		Great Southern Bancorp Inc.
Chemical Financial Corp.		Heartland Financial USA Inc.
Community Trust Bancorp Inc.		MB Financial Inc.
Enterprise Financial Services		Old National Bancorp
First Busey Corp.		Park National Corp.
First Financial Bancorp.		Republican Bancorp Inc.
First Midwest Bancorp Inc.		Taylor Capital Group Inc.

The analysis compared publicly available financial information for First Merchants and the mean and median financial and market trading data for the First Merchants peer group as of or for the most recently reported period with pricing data as of May 6, 2013. The table below sets forth the data for First Merchants and the mean and median data for the First Merchants peer group.

Financial data as of or for the twelve months ended March 31, 2013

Market data as of May 6, 2013

Selected Midwest Publicly Traded Banks with Total Assets $3.0 Billion - $10.0 Billion


			Balance Sheet				Capital Adequacy						LTM Profitability								Asset Quality							Valuation
	City, State	Ticker	Total Assets ($mm)		Loans / Deposits (%)		TCE / TA (%)		Tier 1 Lev. Ratio (%)		Total RBC Ratio (%)		ROAA (%)		ROAE (%)		NIM (%)		Eff. Ratio (%)		LLR / Loans (%)		NPAs / Assets (1) (%)		NCOs / Avg. Loans (%)			Price /						Market Cap. ($mm)
Company	City, State	Ticker	Total Assets ($mm)		Loans / Deposits (%)		TCE / TA (%)		Tier 1 Lev. Ratio (%)		Total RBC Ratio (%)		ROAA (%)		ROAE (%)		NIM (%)		Eff. Ratio (%)		LLR / Loans (%)		NPAs / Assets (1) (%)		NCOs / Avg. Loans (%)			TBV (%)		LTM EPS (x)		2013 E EPS (x)		Market Cap. ($mm)
Old National Bancorp	Evansville, IN	ONB		9,674		72.3		8.96		8.71		15.14		1.49		12.02		4.18		66.7		1.04		1.62		0.11			152.1		13.0		12.6		1,269
MB Financial Inc.	Chicago, IL	MBFI		9,386		76.6		9.42		10.74		16.22		1.00		7.53		3.66		63.4		2.13		1.56		(0.07	)		166.2		14.8		13.9		1,400
First Midwest Bancorp Inc.	Itasca, IL	FMBI		8,056		81.2		8.66		8.75		12.05		0.81		6.59		3.82		66.2		1.82		1.75		3.01			143.7		NM		14.6		967
Park National Corp.	Newark, OH	PRK		6,747		90.2		8.71		9.26		16.01		0.72		4.53		3.75		61.5		1.24		2.80		0.72			182.8		16.1		13.9		1,063
First Financial Bancorp.	Cincinnati, OH	FFBC		6,349		81.7		9.51		10.00		17.15		1.02		8.98		4.26		58.4		2.37		1.21		0.65			147.5		14.0		14.8		896
Chemical Financial Corp.	Midland, MI	CHFC		5,991		83.6		8.08		8.80		13.30		0.93		8.74		3.70		59.9		1.97		1.89		0.53			145.4		13.3		13.0		688
Taylor Capital Group Inc.	Rosemont, IL	TAYC		5,770		84.9		6.40		10.91		16.50		1.33		14.45		3.22		62.5		2.11		1.71		0.39			114.3		7.3		8.5		422
Heartland Financial USA Inc.	Dubuque, IA	HTLF		4,901		72.8		6.09		9.84		15.35		1.07		12.71		3.82		73.7		1.30		1.41		0.28			148.3		9.4		10.7		439
1st Source Corp.	South Bend, IN	SRCE		4,558		91.6		10.76		11.73		15.73		1.11		9.09		3.65		63.8		2.48		1.06		0.08			120.6		11.7		—		580
Great Southern Bancorp Inc.	Springfield, MO	GSBC		4,037		73.8		7.75		9.60		17.00		1.23		13.65		4.71		56.5		1.69		1.84		2.03			115.5		7.4		13.0		361
Community Trust Bancorp Inc.	Pikeville, KY	CTBI		3,672		87.4		9.44		10.86		16.58		1.23		11.29		3.97		54.3		1.30		2.15		0.38			161.8		12.2		12.0		551
First Busey Corp.	Champaign, IL	BUSE		3,648		68.3		8.53		11.30		18.63		0.60		5.12		3.17		68.6		2.32		0.71		0.96			122.8		20.8		16.6		379
Republic Bancorp Inc.	Louisville, KY	RBCAA		3,401		125.4		15.69		16.36		25.28		1.48		9.33		3.58		67.0		0.90		1.16		0.13			85.9		9.1		13.1		457
Enterprise Financial Services	Clayton, MO	EFSC		3,124		90.9		6.69		8.83		12.98		1.00		12.79		5.12		52.3		2.02		1.26		0.70			128.5		9.2		9.2		265

High				9,674		125.4		15.69		16.36		25.28		1.49		14.45		5.12		73.7		2.48		2.80		3.01			182.8		20.8		16.6		1,400
Low				3,124		68.3		6.09		8.71		12.05		0.60		4.53		3.17		52.3		0.90		0.71		(0.07	)		85.9		7.3		8.5		265
Mean				5,665		84.3		8.91		10.41		16.28		1.07		9.65		3.90		62.5		1.76		1.58		0.71			138.2		12.2		12.8		696
Median				5,335		82.6		8.69		9.92		16.12		1.02		9.09		3.78		63.0		1.90		1.59		0.46			144.5		12.2		13.0		565

First Merchants				4,253		87.0		7.83		11.00		15.91		1.00		7.90		4.16		63.6		2.36		1.43		0.62			146.4		12.3		12.4		470

CFS—Comparable Company Analysis

Sandler O’Neill used publicly available information to compare selected financial information for CFS and a group of financial institutions as selected by Sandler O’Neill. The CFS peer group consisted of NASDAQ or NYSE-traded banks headquartered in the Midwest with assets as of the most recently reported period between $500 million and $2 billion, non-performing assets to total assets ratio greater than 3.0% and tangible common equity to tangible assets ratio greater than 6.0%. The group excluded merger targets and niche-focused banks.


Camco Financial Corp.		Macatawa Bank Corp.
Farmers Capital Bank Corp.		MBT Financial Corp.
First Clover Leaf Financial Corp.		NASB Financial Inc.
Guaranty Federal Bancshares Inc.		United Bancshares Inc.
Hawthorn Bancshares Inc.		United Community Financial Corp.

The analysis compared publicly available financial information for CFS and the mean and median financial and market trading data for the CFS peer group as of or for the most recently reported period with pricing data as of May 6, 2013. The table below sets forth the data for CFS and the mean and median data for the CFS peer group.

Financial data as of or for the twelve months ended March 31, 2013

Market data as of May 6, 2013

Selected Midwest Publicly Traded Banks and Thrifts with Total Assets $500 Million - $2.0 Billion, NPAs / Assets > 3.0%, and TCE / TA > 6.0%


			Balance Sheet				Capital Adequacy						LTM Profitability								Asset Quality						Valuation
	City, State	Ticker	Total Assets ($mm)		Loans / Deposits (%)		TCE / TA (%)		Tier 1 Lev. Ratio (%)		Total RBC Ratio (%)		ROAA (%)		ROAE (%)		NIM (%)		Eff. Ratio (%)		LLR / Loans (%)		NPAs / Assets (2) (%)		NCOs / Avg. Loans (%)		Price /						Market Cap. ($mm)
Company	City, State	Ticker	Total Assets ($mm)		Loans / Deposits (%)		TCE / TA (%)		Tier 1 Lev. Ratio (%)		Total RBC Ratio (%)		ROAA (%)		ROAE (%)		NIM (%)		Eff. Ratio (%)		LLR / Loans (%)		NPAs / Assets (2) (%)		NCOs / Avg. Loans (%)		TBV (%)		LTM EPS (x)		2013 E EPS (x)		Market Cap. ($mm)
United Community Finl Corp. (1)	Youngstown, OH	UCFC		1,808		74.4		9.43		—		16.21		NM		NM		3.26		82.4		1.92		3.66		1.74		78.8		NM		14.3		161
Farmers Capital Bank Corp.	Frankfort, KY	FFKT		1,795		73.0		7.80		11.24		19.53		0.68		7.56		3.27		70.2		2.31		4.30		0.45		105.4		13.5		11.3		144
Macatawa Bank Corp.	Holland, MI	MCBC		1,507		85.4		6.64		10.45		15.35		2.23		29.82		3.45		74.7		2.23		4.36		0.16		150.4		4.5		32.2		150
MBT Financial Corp.	Monroe, MI	MBTF		1,286		57.9		6.59		6.43		11.53		0.68		10.57		2.97		71.9		2.90		3.89		1.42		83.9		8.4		—		72
NASB Financial Inc. (1)	Grandview, MO	NASB		1,253		82.6		14.20		—		—		1.77		13.10		3.96		60.8		3.14		6.17		3.61		100.8		8.3		11.6		179
Hawthorn Bancshares Inc. (1)	Jefferson City, MO	HWBK		1,182		85.2		6.27		10.37		16.83		0.24		2.93		3.84		68.6		1.75		4.63		0.93		76.0		NM		—		56
Camco Financial Corp.	Cambridge, OH	CAFI		763		88.6		7.95		8.43		13.04		0.55		8.19		3.32		85.3		2.06		3.95		0.46		79.6		8.3		10.6		48
Guaranty Federal Bcshs Inc.	Springfield, MO	GFED		650		91.6		6.09		9.91		14.50		0.32		3.96		3.40		64.9		1.76		3.01		1.74		68.4		29.1		—		27
First Clover Leaf Fin Corp. (1)	Edwardsville, IL	FCLF		601		87.1		11.27		—		19.25		0.74		5.17		3.39		57.8		1.48		3.03		0.85		92.1		15.4		—		60
United Bancshares Inc.	Columbus Grove, OH	UBOH		569		63.8		9.92		11.20		17.59		0.81		7.26		3.39		72.0		1.97		3.09		0.52		75.7		9.2		—		42

High				1,808		91.6		14.20		11.24		19.53		2.23		29.82		3.96		85.3		3.14		6.17		3.61		150.4		29.1		32.2		179
Low				569		57.9		6.09		6.43		11.53		NM		NM		2.97		57.8		1.48		3.01		0.16		68.4		4.5		10.6		27
Mean				1,141		78.9		8.62		9.72		15.98		0.72		6.77		3.43		70.9		2.15		4.01		1.19		91.1		12.1		16.0		94
Median				1,217		83.9		7.88		10.37		16.21		0.80		8.02		3.39		71.1		2.02		3.92		0.89		81.7		8.8		11.6		66

CFS				1,146		68.2		9.84		—		14.86		0.50		5.27		3.37		73.7		1.81		4.25		0.49		89.5		17.5		—		101

¹	Financial data as of or for the twelve months ended December 31, 2012

First Merchants—Stock Price Performance

Sandler O’Neill reviewed the history of the publicly reported trading prices of First Merchants common stock for the one-year period ended May 6, 2013. Sandler O’Neill then compared the relationship between the movements in the price of First Merchants’ common stock against the movements in the prices of First Merchants’ peer group (as described on page ) and NASDAQ Bank Index.

First Merchants’ One-Year Stock Performance


	Beginning Index Value May 4, 2012			Ending Index Value May 6, 2013
First Merchants		100.0	%		131.0	%
First Merchants Peer Group		100.0	%		109.1	%
NASDAQ Bank Index		100.0	%		116.6	%

CFS—Stock Price Performance

Sandler O’Neill reviewed the history of the publicly reported trading prices of CFS common stock for the one-year period ended May 6, 2013. Sandler O’Neill then compared the relationship between the movements in the price of CFS common stock against the movements in the prices of CFS’ peer group (as described on page ) and NASDAQ Bank Index.

CFS’s One Year Stock Performance


	Beginning Index Value May 4, 2012			Ending Index Value May 6, 2013
CFS		100.0	%		174.7	%
CFS Peer Group		100.0	%		167.8	%
NASDAQ Bank Index		100.0	%		116.6	%

First Merchants—Net Present Value Analysis

Sandler O’Neill performed an analysis that estimated the net present value per share of First Merchants common stock under various circumstances. Sandler O’Neill based the analysis on First Merchants’ projected earnings stream as derived from the internal financial projections provided by First Merchants management for the years ending December 31, 2013 through 2017.

To approximate the terminal value of First Merchants common stock at December 31, 2017, Sandler O’Neill applied price to earnings multiples ranging from 8.0x to 18.0x and multiples of tangible book value ranging from 100% to 200%. The terminal values were then discounted to present values using different discount rates ranging from 9.0% to 14.0% chosen to reflect different assumptions regarding required rates of return of holders for prospective buyers of First Merchants’ common stock.

During the First Merchants Board of Directors’ meeting on May 9, 2013, Sandler O’Neill noted that the terminal value analysis is a widely used valuation methodology, but the results of such methodology are highly dependent upon the numerous assumptions that must be made, and the results thereof are not necessarily indicative of actual values or future results.

As illustrated in the following tables, the analysis indicates an imputed range of values per share of First Merchants common stock of $7.78 to $20.44 when applying multiples of earnings to the applicable amounts indicated in the First Merchants projections and $9.72 to $23.13 when applying multiples of tangible book value to the applicable amounts indicated in the First Merchants projections.

Earnings Per Share Multiples


Discount Rate			8.0x		10.0x		12.0x		14.0x		16.0x		18.0x
	9.00	%	$	9.65	$	11.81	$	13.97	$	16.13	$	18.29	$	20.44
	10.00	%	$	9.24	$	11.30	$	13.36	$	15.42	$	17.49	$	19.55
	11.00	%	$	8.84	$	10.81	$	12.79	$	14.76	$	16.73	$	18.70
	11.58	%	$	8.62	$	10.55	$	12.47	$	14.39	$	16.31	$	18.23
	12.00	%	$	8.47	$	10.36	$	12.24	$	14.13	$	16.01	$	17.90
	13.00	%	$	8.47	$	9.92	$	11.72	$	13.53	$	15.33	$	17.13
	14.00	%	$	7.78	$	9.51	$	11.23	$	12.96	$	14.68	$	16.41

Tangible Book Value Multiples


Discount Rate			100%		120%		140%		160%		180%		200%
	9.00	%	$	12.07	$	14.28	$	16.49	$	18.71	$	20.92	$	23.13
	10.00	%	$	11.55	$	13.66	$	15.77	$	17.89	$	20.00	$	22.11
	11.00	%	$	11.05	$	13.07	$	15.09	$	17.11	$	19.13	$	21.15
	11.58	%	$	10.78	$	12.75	$	14.71	$	16.68	$	18.65	$	20.62
	12.00	%	$	10.59	$	12.52	$	14.45	$	16.38	$	18.31	$	20.24
	13.00	%	$	10.14	$	12.99	$	13.83	$	16.68	$	17.53	$	19.37
	14.00	%	$	9.72	$	11.49	$	13.25	$	15.02	$	16.79	$	18.55

Sandler O’Neill also considered and discussed with the First Merchants Board of Directors how this analysis would be affected by changes in the underlying assumptions, including variations with respect to net income. To illustrate this impact, Sandler O’Neill performed a similar analysis assuming First Merchants net income varied from 25% above projections to 25% below projections. This analysis resulted in the following range of per share

values for First Merchants common stock, using the same price to earnings multiples of 8.0x to 18.0x and a discount rate of 11.58%.

Earnings Per Share Multiples


Annual Budget Variance			8.0x		10.0x		12.0x		14.0x		16.0x		18.0x
	(25.0	%)	$	6.70	$	8.14	$	9.59	$	11.03	$	12.47	$	13.91
	(20.0	%)	$	7.09	$	8.62	$	10.16	$	11.70	$	13.23	$	14.77
	(15.0	%)	$	7.47	$	9.10	$	10.74	$	12.37	$	14.00	$	15.63
	(10.0	%)	$	7.86	$	9.59	$	11.31	$	13.04	$	14.77	$	16.50
	(5.0	%)	$	8.24	$	10.07	$	11.89	$	13.71	$	15.54	$	17.36
	0.0	%	$	8.62	$	10.55	$	12.47	$	14.39	$	16.31	$	18.23
	5.0	%	$	9.01	$	11.03	$	13.04	$	15.06	$	17.08	$	19.09
	10.0	%	$	9.39	$	11.51	$	13.62	$	15.73	$	17.84	$	19.96
	15.0	%	$	9.78	$	11.99	$	14.19	$	16.40	$	18.61	$	20.82
	20.0	%	$	10.16	$	12.47	$	14.77	$	17.08	$	19.38	$	21.68
	25.0	%	$	10.55	$	12.95	$	15.35	$	17.75	$	20.15	$	22.55

CFS—Net Present Value Analysis

Sandler O’Neill performed two sets of analyses that estimated the net present value per share of CFS common stock under various circumstances.

Sandler O’Neill based the first set of analysis on CFS’ projected earnings stream as derived from the internal financial projections provided by CFS management for the years ending December 31, 2013 through 2017.

To approximate the terminal value of CFS common stock at December 31, 2017, Sandler O’Neill applied price to earnings multiples ranging from 9.0x to 14.0x and multiples of tangible book value ranging from 70% to 120%. The terminal values were then discounted to present values using different discount rates ranging from 10.0% to 16.0% chosen to reflect different assumptions regarding required rates of return of holders for prospective buyers of CFS common stock.

At the May 9, 2013 First Merchants Board of Directors meeting, Sandler O’Neill noted that the net present value analysis is a widely used valuation methodology, but the results of such methodology are highly dependent upon the numerous assumptions that must be made, and the results thereof are not necessarily indicative of actual values or future results.

As illustrated in the following tables, the analysis indicates an imputed range of values per share of CFS common stock of $2.63 to $5.22 when applying earnings multiples to the applicable amounts indicated in the CFS projections and $4.37 to $9.64 when applying multiples of tangible book value to the applicable amounts indicated in the CFS projections.

Earnings Per Share Multiples


Discount Rate			9.0x		10.0x		11.0x		12.0x			13.0x		14.0x
	10.00	%	$	3.41	$	3.77	$	4.14	$	4.50		$	4.86	$	5.22
	11.00	%	$	3.26	$	3.61	$	3.96	$	4.30		$	4.65	$	5.00
	12.00	%	$	3.12	$	3.46	$	3.79	$	4.12		$	4.45	$	4.78
	13.59	%	$	2.92	$	3.22	$	3.53	$	3.84	&nb