First Merchants Corporation
Retirement Savings Plan
EIN 35-1544218 PN 002
Accountants' Report and Financial Statements
December 31, 2001 and 2000
First Merchants Corporation
Retirement Savings Plan
December 31, 2001 and 2000
Contents
Independent Accountants' Report.................................................................1
Financial Statements
Statements of Net Assets Available for Benefits.............................................2
Statements of Changes in Net Assets Available for Benefits..................................3
Notes to Financial Statements...............................................................4
Supplemental Schedules
Schedule H, Line 4i - Schedule of Assets Held for Investment Purposes at End of Year........9
Schedule H, Line 4j - Schedule of Reportable Transactions..................................10
Exhibit
Exhibit 23, Consent of Independent Accountants.............................................12
Independent Accountants' Report
Administrative Committee
First Merchants Corporation
Retirement Savings Plan
Muncie, Indiana
We have audited the accompanying statements of net assets available for benefits
of First Merchants Corporation Retirement Savings Plan as of December 31, 2001
and 2000, and the related statements of changes in net assets available for
benefits for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of First Merchants
Corporation Retirement Savings Plan at December 31, 2001 and 2000, and the
changes in its net assets available for benefits for the years then ended, in
conformity with accounting principles generally accepted in the United States of
America.
The accompanying supplemental schedules of (1) assets held for investment
purposes at end of year, and (2) reportable transactions are presented for the
purpose of additional analysis and are not a required part of the basic
financial statements but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. The supplemental schedules
are the responsibility of the Plan's management. The supplemental schedules have
been subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, are fairly stated, in all material
respects, in relation to the basic financial statements taken as a whole.
BKD, LLP
Indianapolis, Indiana
May 29, 2002
Federal Employer Identification Number: 44-0160260
First Merchants Corporation
Retirement Savings Plan
Statements of Net Assets Available for Benefits
December 31, 2001 and 2000
Assets
2001 2000
----------------------------------------
Investments, at fair value
Temporary deposit funds $ 880,831 $ 415,194
Collective investment funds 11,295,638 10,232,468
Common stock 134,872
Mutual funds 1,089,898 681,184
---------------- ----------------
Total investments 13,401,239 11,328,846
Employee contributions receivable 24,673
Employer contributions receivable 15,651 27,739
Accrued income receivable 2,057 2,372
Cash 228
---------------- ----------------
Total assets 13,419,175 11,383,630
Liabilities
Cash overdraft 68,203
---------------- ----------------
Net Assets Available for Benefits $ 13,419,175 $ 11,315,427
================ ================
First Merchants Corporation
Retirement Savings Plan
Statements of Changes in Net Assets Available for Benefits
Years Ended December 31, 2001 and 2000
2001 2000
-------------------------------------------
Additions
Investment income
Net appreciation (depreciation) in fair value of
investments $ (948,700) $ 98,238
Interest and dividends 65,008 68,532
---------------- ----------------
(883,692) 166,770
Employee contributions 848,547 740,332
Employer contributions 126,549 124,756
Employee rollover contributions 210,367 58,390
Transfers from other plans 2,389,965
---------------- ----------------
Total additions 2,691,736 1,090,248
---------------- ----------------
Deductions
Benefits paid to participants 546,833 577,014
Administrative expenses 41,155
---------------- ----------------
Total deductions 587,988 577,014
---------------- ----------------
Net Increase 2,103,748 513,234
Net Assets Available for Benefits, Beginning of Year 11,315,427 10,802,193
---------------- ----------------
Net Assets Available for Benefits, End of Year $ 13,419,175 $ 11,315,427
================ ================
First Merchants Corporation
Retirement Savings Plan
Notes to Financial Statements
December 31, 2001 and 2000
Note 1: Description of Plan
The following description of First Merchants Corporation Retirement
Savings Plan (Plan) provides only general information. Participants
should refer to the Plan document for a more complete description of the
Plan's provisions.
General
The Plan is a defined-contribution plan sponsored by First Merchants
Corporation (Corporation) for the benefit of all employees who have
completed one year of service, worked at least 1000 hours, and are age
twenty-one or older. As of January 1, 2001, the eligibility age was
lowered to age 18. It is subject to the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA). First Merchants Bank,
N.A. (Bank) is the trustee of the Plan.
Contributions
The Plan permits eligible employees through a salary deferral election
to have the Corporation make annual contributions of up to 15% of
eligible compensation. Employee rollover contributions are also
permitted. The Corporation makes matching contributions of its
employees' salary deferral amounts of 25% of the first 5% of employees'
eligible compensation. Forfeitures are used to reduce the Corporation's
contributions.
Participant Investment Account Options
Investment account options available include a managed, fixed value,
bond, stock, international equity and small cap fund, and as of
January 1, 2001, a Corporation stock fund. Each participant has the
option of directing his contributions into any of the separate
investment accounts and may change the allocation quarterly.
Participant Accounts
Each participant's account is credited with the participant's
contribution, allocation of the Corporation contribution and Plan
earnings. Allocations of Plan earnings are based on participant account
balances, as defined. The benefit to which a participant is entitled is
the benefit that can be provided from the participant's account.
Vesting
Participants are immediately vested in their salary deferral and
rollover contribution accounts plus actual earnings thereon. Vesting in
the remainder of their accounts is based on years of continuous service.
A participant is 100% vested after five years of credited service.
First Merchants Corporation
Retirement Savings Plan
Notes to Financial Statements
December 31, 2001 and 2000
Payment of Benefits
Upon termination of service, participants may elect to receive a
lump-sum amount or installments equal to the value of their accounts.
Withdrawals other than for termination are permitted under circumstances
provided by the Plan.
Plan Termination
Although it has not expressed any intent to do so, the Corporation has
the right under the Plan to discontinue its contributions at any time
and to terminate the Plan subject to the provisions of ERISA. In the
event of Plan termination, participants will become 100% vested in their
accounts.
Note 2: Summary of Significant Accounting Policies
Method of Accounting
The accompanying financial statements are prepared on the accrual method
of accounting.
Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of net assets and changes in net assets available for benefits.
Actual results could differ from those estimates.
Investments
Investments are valued at estimated fair value. Temporary deposit funds
are valued at cost, which approximates market. Purchases and sales of
securities are recorded on a trade-date basis.
Payment of Benefits
Benefits are recorded when paid.
Administrative Expenses
Administrative expenses may be paid by the Corporation or the Plan, at
the Corporation's discretion.
First Merchants Corporation
Retirement Savings Plan
Notes to Financial Statements
December 31, 2001 and 2000
Reclassifications
Certain reclassifications have been made to the 2000 financial
statements to conform to the 2001 financial statement presentation.
These reclassifications had no effect on changes in net assets available
for benefits.
Note 3: Investments
The Plan's investments are held by a bank-administered trust fund. The
Plan's investments (including investments bought, sold, and held during
the year) appreciated (depreciated) in fair value as follows:
2001
Net
Appreciation
(Depreciation) Fair Value
in Fair Value at End
During Year of Year
-------------------------------------------
Investments at estimated fair value as determined by quoted
prices in an active market
Common stock $ 11,311 $ 134,872
Mutual funds (61,186) 1,089,898
Investments at estimated fair value and cost which
approximates market
Temporary deposit funds 880,831
Collective investment funds (898,825) 11,295,638
---------------- ----------------
$ (948,700) $ 13,401,239
================ ================
2000
Net
Appreciation
(Depreciation) Fair Value
in Fair Value at End
During Year of Year
-------------------------------------------
Investments at estimated fair value as determined by quoted
prices in an active market
Mutual funds $ (101,887) $ 681,184
Investments at estimated fair value and cost which
approximates market
Temporary deposit funds 415,194
Collective investment funds 200,125 10,232,468
---------------- ----------------
$ 98,238 $ 11,328,846
================ ================
First Merchants Corporation
Retirement Savings Plan
Notes to Financial Statements
December 31, 2001 and 2000
The fair values of individual investments that represented 5% or more of
the Plan's assets were as follows:
2001 2000
-----------------------------------------
First Merchants Bank, N.A. Intermediate Growth Fund for Tax
Exempt Accounts $ 8,766,390 $ 8,206,877
First Merchants Bank, N.A. Intermediate Term Income Fund for
Tax Exempt Accounts 2,529,248 2,025,591
First Merchants Bank, N.A. Temporary Fund II 880,831
Note 4: Party-in-Interest Transactions
Party-in-interest transactions include those with fiduciaries or
employees of the Plan, any person who provides services to the Plan, an
employer whose employees are covered by the Plan, an employee
organization whose members are covered by the Plan, a person who owns 50
percent or more of such an employer or employee association, or
relatives of such persons.
The Plan invests in First Merchants Bank, N.A. Temporary Fund II,
Intermediate Growth Fund for Tax Exempt Account, Intermediate Term
Income Fund for Tax Exempt Accounts and common stock.
Activity at fair value was as follows:
First Merchants First Merchants
Bank, N.A. Bank, N.A.
First Merchants Intermediate Growth Intermediate Term First Merchants
Bank, N.A. Fund for Tax Income Fund for Corporation
Temporary Exempt Tax Exempt Common
Deposit Fund Accounts Accounts Stock
--------------------------------------------------------------------------------------
Balance, January 1, 2000
$ 477,969 $ 7,816,447 $ 1,790,011 $
Changes (62,775) 390,430 235,580
--------------- ------------------ --------------- ---------------
Balance, December 31, 2000 415,194 8,206,877 2,025,591
Changes 465,637 559,513 503,657 134,872
--------------- ------------------ --------------- ---------------
Balance, December 31, 2001 $ 880,831 $ 8,766,390 $ 2,529,248 $ 134,872
=============== ================== =============== ===============
The Corporation provided certain administrative services at no cost to
the Plan in 2000. Effective January 1, 2001, fees for certain trust and
administrative services provided by the trustee are now paid by the Plan
and were $41,155 for 2001.
First Merchants Corporation
Retirement Savings Plan
Notes to Financial Statements
December 31, 2001 and 2000
Note 5: Tax Status
The Internal Revenue Service has advised that the Plan constitutes a
qualified plan under Section 401 of the Internal Revenue Code and that
the trust established under the Plan is therefore exempt from federal
income taxes. The Plan has been restated since receiving the
determination letter. However, the Plan administrator believes that the
Plan is currently designed and being operated in compliance with the
applicable requirements of the Internal Revenue Code and that the Plan
was qualified and the related trust was tax exempt as of the financial
statement date.
Note 6: Plan Changes and Restatement
Effective January 1, 2001, employees of Decatur Bank and Trust Company
(Decatur Bank and Trust Company 401(k) Profit Sharing Plan) were added
to the Plan, and assets of approximately $2,390,000 were transferred
into the Plan.
The Plan was restated effective January 1, 1998. As of January 1, 2001,
a Corporation stock fund was added as an investment account option, and
the Plan eligibility age was lowered to age 18.
Supplemental Schedules
First Merchants Corporation
Retirement Savings Plan
Schedule H, Line 4i - Schedule of Assets Held for Investment Purposes
at End of Year
December 31, 2001
Employer Identification Number: 35-1544218 Plan Number: 002
(a) (b) (c) (e)
Identity of Issue, Description of Investment
Borrower, Lessor, or Including Par or Current
Similar Party Maturity Value Value
- --------------------------------------------------------------------------------------------------------------------
Temporary Deposit Funds
*First Merchants Bank, N.A. Temporary Fund II $880,831 $ 880,831
----------------
Collective Investment Funds
*First Merchants Bank, N.A. Intermediate Growth
Fund for Tax Exempt Accounts 428,275 shares 8,766,390
*First Merchants Bank, N.A. Intermediate Term
Income Fund for Tax Exempt Accounts 289,438 shares 2,529,248
----------------
11,295,638
----------------
Common Stock
*First Merchants Corporation 5,615 shares 134,872
----------------
Mutual Funds
T. Rowe Price International Fund 6,391 shares 70,232
Scudder International Fund 1,896 shares 69,499
Franklin Templeton Foreign Fund 9,545 shares 88,291
Vanguard International Fund 4,872 shares 73,138
Franklin Small Cap Growth Fund 8,221 shares 257,398
Managers Special Equity Fund 3,623 shares 255,772
T. Rowe Price Small Cap Value Fund 12,122 shares 274,685
Franklin Templeton Developing Markets 89 shares 883
----------------
1,089,898
----------------
$ 13,401,239
================
*Party-in-interest
First Merchants Corporation
Retirement Savings Plan
Schedule H, Line 4j - Schedule of Reportable Transactions
(Transactions in Excess of 5% of Plan Assets at Beginning of Year)
Year Ended December 31, 2001
Employer Identification Number: 35-1544218 Plan Number: 002
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Current Value
Expenses of Asset on
Identity of Party Description of Purchase Selling Lease Incurred With Cost of Transaction Net Gain
Involved Assets Price Price Rental Transaction Asset Date or (Loss)
- ------------------------------------------------------------------------------------------------------------------------------------
Issuer First Merchants Bank, N.A.
Temporary Fund 11
Purchases $ 9,481,458 $ 9,481,458 $ 9,481,458
Sales $ 9,015,821 9,015,821 9,015,821 $
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in a Registration Statement of
First Merchants Corporation on Form S-8 (File Number 333-50484) of our report
dated May 29, 2002, of our audit on the financial statements of the First
Merchants Corporation Retirement Savings Plan for the year ended December 31,
2001, which report is included in its Annual Report on Form 11-K.
BKD, LLP
Indianapolis, Indiana
June 25, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan
Administrator has duly caused this annual report to be signed on its behalf by
the undersigned hereunto duly authorized.
Date: 05/29/02 By: /s/ Kimberly J. Ellington
-------- -------------------------
Kimberly J. Ellington
First Merchants Corporation
Retirement Savings Plan