ACQUISITIONS AND DIVESTITURES

Ameriana Bancorp, Inc.

On December 31, 2015, the Corporation acquired 100 percent of Ameriana Bancorp, Inc., ("Ameriana"). Ameriana merged with and into the Corporation (the "Ameriana Merger") whereupon the separate corporate existence of Ameriana ceased and the Corporation survived. Immediately following the Ameriana Merger, Ameriana Bank, and Indiana Bank and wholly-owned subsidiary of Ameriana, merged with and into First Merchants Bank, National Association, a national Bank and wholly-owned subsidiary of the Corporation (the "Bank"), with the Bank continuing as the surviving bank. Ameriana was headquartered in New Castle, Indiana and had 13 banking centers serving central and east central Indiana. Pursuant to the merger agreement, each Ameriana shareholder received 0.9037 shares of First Merchants common stock for each outstanding share of Ameriana common stock held. The Corporation issued approximately 2.8 million shares of common stock, which was valued at approximately $70.4 million.

The Corporation engaged in this transaction with the expectation that it would be accretive and expand the existing footprint in central and east central Indiana. Goodwill resulted from this transaction due to the expected synergies and economies of scale that are expected.

Under the acquisition method of accounting, the total purchase price is allocated to net tangible and intangible assets based on their current estimated fair values on the date of the acquisition. Based on preliminary valuations of the fair value of tangible and intangible assets acquired and liabilities assumed, which are based on assumptions that are subject to change, the purchase price for the Ameriana acquisition is detailed in the following table. Prior to the end of the one year measurement period for finalizing the purchase price allocation, if information becomes available which would indicate adjustments are required to the purchase price allocation, such adjustments will be included in the purchase price allocation retrospectively.



	Fair Value
Cash and cash equivalents	$	4,068
Interest-bearing time deposits	8,790
Investment securities	60,365
Loans	319,664
Premises and equipment	14,491
Federal Home Loan Bank stock	2,693
Other real estate owned	5,719
Interest receivable	1,306
Cash surrender value of life insurance	28,188
Other assets	7,086
Deposits	(382,547		)
Interest payable	(24		)
Federal Home Loan Bank Advances	(24,938		)
Subordinated Debentures	(5,961		)
Other liabilities	(9,451		)
Net tangible assets acquired	29,449
Core deposit intangible	3,200
Goodwill	37,753
Purchase price	$	70,402

Of the total purchase price, $3,200,000 has been allocated to a core deposit intangible that will be amortized over its estimated life of 10 years. The residual purchase price has been allocated to goodwill, which is not deductible for tax purposes.

C Financial Corporation

On April 17, 2015, the Corporation acquired 100 percent of C Financial Corporation, ("C Financial"). C Financial merged with and into the Corporation (the “C Financial Merger”) whereupon the separate corporate existence of C Financial ceased and the Corporation survived. Immediately following the C Financial Merger, Cooper State Bank, an Ohio state bank and wholly-owned subsidiary of C Financial, merged with and into the Bank, with the Bank continuing as the surviving bank. C Financial was headquartered in Columbus, Ohio and had 6 full service banking centers serving the Columbus, Ohio market. As part of the $14.5 million C Financial Merger, shareholders of C Financial received $6.738 in cash for each share of C Financial common stock held. The Corporation expects the transaction to be accretive to income and expand the existing footprint in Columbus, Ohio. Goodwill resulted from this transaction due to the synergies and economies of scale that are expected.

Under the acquisition method of accounting, the total purchase price is allocated to net tangible and intangible assets based on their current estimated fair values on the date of the acquisition. Based on preliminary valuations of the fair value of tangible and intangible assets acquired and liabilities assumed, which are based on assumptions that are subject to change, the purchase price for the C Financial acquisition is detailed in the following table. Prior to the end of the one year measurement period for finalizing the purchase price allocation, if information becomes available which would indicate adjustments are required to the purchase price allocation, such adjustments will be included in the purchase price allocation retrospectively.



	Fair Value
Cash and cash equivalents	$	2,496
Federal Funds sold	7,018
Interest-bearing time deposits	922
Loans	110,625
Premises and equipment	7,290
Federal Home Loan Bank stock	855
Interest receivable	292
Other assets	119
Deposits	(105,326		)
Interest payable	(29		)
Federal Home Loan Bank Advances	(18,958		)
Other liabilities	(2,911		)
Net tangible assets acquired	2,393
Core deposit intangible	981
Goodwill	11,126
Purchase price	$	14,500

Of the total purchase price, $981,000 has been allocated to a core deposit intangible that will be amortized over its estimated life of 10 years. The residual purchase price has been allocated to goodwill, which is deductible for tax purposes because the transaction was considered a taxable exchange.

Community Bancshares, Inc.

On November 7, 2014, the Corporation acquired 100 percent of Community Bancshares, Inc. ("Community"). Community merged with and into the Corporation (the "Community Merger") whereupon the separate corporate existence of Community ceased and the Corporation survived. Immediately following the Community Merger, Community Bank, an Indiana bank and wholly-owned subsidiary of Community, merged with and into the Bank, with the Bank continuing as the surviving bank. Community was headquartered in Noblesville, Indiana and had 10 full-service banking centers serving central Indiana. Pursuant to the merger agreement, each outstanding share of common stock of Community was converted into the right to receive either (a) 4.0926 shares of the Corporation's common stock, plus cash in lieu of fractional shares; or (b) $85.94 in cash, based upon shareholder elections. The Corporation paid $14.2 million in cash and issued approximately 1.6 million shares of common stock, valued at approximately $35.0 million, for a total purchase price of approximately $49.2 million.

The Corporation engaged in this transaction with the expectation that it would be accretive and expand the existing footprint in central Indiana. Goodwill resulted from this transaction due to the expected synergies from combining operations. The purchase price of the Community acquisition was allocated as follows:



	Fair Value
Cash and cash equivalents	$	4,124
Interest -bearing time deposits	16,526
Investment Securities, available for sale	76,807
Loans	145,064
Premises and equipment	3,610
Federal Home Loan Bank stock	1,950
Interest Receivable	767
Cash surrender value of life insurance	3,266
Other real estate owned	6,662
Taxes, deferred and receivable	3,348
Other assets	167
Deposits	(228,424		)
Interest payable	(98		)
Other liabilities	(3,014		)
Net tangible assets acquired	$	30,755
Core deposit intangible	4,658
Goodwill	13,776
Purchase price	$	49,189

Of the total purchase price, $4,658,000 has been allocated to a core deposit intangible that will be amortized over its estimated life of 10 years. The residual purchase price has been allocated to goodwill, which is not deductible for tax purposes.

CFS Bancorp, Inc.

On November 12, 2013, the Corporation acquired 100 percent of CFS Bancorp, Inc. ("CFS") in an all stock transaction. CFS merged with and into the Corporation (the "CFS Merger") whereupon the separate corporate existence of CFS ceased and the Corporation survived. Immediately following the CFS Merger, Citizens Financial Bank, a federal savings bank and wholly-owned subsidiary of CFS, merged with and into the Bank, with the Bank continuing as the surviving bank. CFS was headquartered in Munster, Indiana and had 20 full-service banking centers serving the northwestern Indiana and northeastern Illinois areas. Pursuant to the merger agreement, the shareholders of CFS received 0.65 percent of a share of the Corporation's common stock for each share of CFS common stock held. The Corporation issued approximately 7.1 million shares of common stock, which was valued at approximately $135.6 million.

The Corporation engaged in this transaction with the expectation that it would be accretive and add a new market area with a demographic profile consistent with many of the current Indiana markets served by the Bank. Goodwill resulted from this transaction due to the expected synergies from combining operations. The purchase price for the CFS acquisition was allocated as follows:



	Fair Value
Cash and cash equivalents	$	10,992
Interest-bearing time deposits	213,379
Investment securities available for sale	15,913
Investment securities held to maturity	14,372
Mortgage loans held for sale	189
Loans	603,114
Premises and equipment	19,643
Federal Home Loan Bank stock	6,188
Interest receivable	1,770
Cash surrender value of life insurance	36,555
Other real estate owned	12,857
Tax asset, deferred and receivable	30,717
Other assets	111,656
Deposits	(955,432		)
Securities sold under repurchase agreements	(9,830		)
Federal Home Loan Bank advances	(15,000		)
Interest payable	(294		)
Other liabilities	(16,033		)
Net tangible assets acquired	$	80,756
Core deposit intangible	7,313
Goodwill	47,573
Purchase price	$	135,642

Of the total purchase price, $7,313,000 has been allocated to a core deposit intangible that will be amortized over its estimated life of 10 years. The residual purchase price has been allocated to goodwill, which is not deductible for tax purposes.

First Merchants Insurance Services, Inc.

On June 12, 2015, the Corporation sold all of its stock in First Merchants Insurance Services, Inc., an Indiana Corporation ("FMIG"), to USI Insurance Services LLC, a Delaware limited liability company ("USI"). The sale price was $18.0 million, of which $16.0 million was paid at closing with the remaining $2.0 million paid through a two-year promissory note. The sale of FMIG generated a gain on sale of $8.3 million.

Pro Forma Financial Information

The results of operations of C Financial, Community and CFS have been included in the Corporation's consolidated financial statements since the acquisition dates. The following schedule includes pro forma results for the periods ended December 31, 2015, 2014 and 2013 as if the Ameriana, Community and CFS acquisitions had occurred as of the beginning of the comparable prior annual reporting period. Pro forma financial information of the C Financial acquisition is not included in the table below as it is deemed immaterial.



	2015		2014		2013
Total revenue (net interest income plus other income)	$	291,614	$	284,890	$	253,668
Net income	$	60,497	$	64,174	$	39,979
Net income available to common shareholders	$	60,497	$	64,174	$	37,559
Earnings per share:
Basic	$	1.49	$	1.58	$	0.98
Diluted	$	1.48	$	1.57	$	0.97

The pro forma information includes adjustments for interest income on loans, amortization of intangibles arising from the transaction, interest expense on deposits and borrowings acquired, premises expense for the banking centers acquired and the related income tax effects. The pro forma information for the year ended 2015 includes operating results from Ameriana as if the acquisition occurred at the beginning of the year. The 2015 pro forma includes $12.0 million, net of tax, of non-recurring expenses directly attributable to the Ameriana, C Financial and Community acquisitions and the FMIG divestiture. The pro forma information for the year ended 2014 includes $1.6 million of operating revenue from Community since the acquisition and approximately $1.8 million, net of tax, of non-recurring expenses directly attributable to the Community acquisition. The pro forma information for the year ended 2013 includes $4.9 million of operating revenue from CFS since the acquisition and approximately $9.5 million, net of tax, of non-recurring expenses directly attributable to the CFS acquisition.

The pro forma financial information is presented for information purposes only and is not indicative of the results of operations that actually would have been achieved had the acquisition consummated as of that time, nor is it intended to be a projection of future results.