First Merchants, First Financial mull expansion

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At a time when the financial industry was experiencing some of its worst stresses since the Great Depression, two banks swooped
into the Indianapolis area and made acquisitions.

In September 2008, Muncie-based First Merchants Corp. acquired Lincoln Bancorp. Lincoln, headquartered in Plainfield, went
for $78 million.

Then, nearly a year ago, in September 2009, Cincinnati-based First Financial Bancorp took over $2.1 billion in deposits of
Irwin Financial Corp. in a deal brokered by the Federal Deposit Insurance Corp. Columbus-based Irwin collapsed under the weight
of soured mortgages and was shuttered by the FDIC.

First Merchants and First Financial both have finished digesting their deals. The following is a synopsis of the status of
the institutions in the Indianapolis area and their plans for the market.

First Merchants

First Merchants laid off 60 of Lincoln’s 210 employees, mostly in back-office operations. The layoffs were
planned as part of the deal and were not a result of the recession, First Merchants officials say.

First Merchants since has added 15 employees, including mortgage originators, loan officers and a senior trust officer.

All of the 14 Lincoln branches remain open, as do the four existing First Merchants locations in Carmel.

Checking, money markets, savings accounts, IRAs and other non-time deposits are up 6 percent, to $18 million, from June 2009
to June 2010, said Mike Hurst, who manages First Merchants’ commercial lending in the Indianapolis market. The figures
are from former Lincoln branches as well as the Hamilton County branch where commercial loans are originated.

The increase came from both existing and new customers, Hurst said.

First Merchants plans to add branches beginning in 12 to 18 months, said Jerry Engle, Lincoln’s president and now First
Merchants’ president for its Indianapolis market. Boone County will get at least one. First Merchants also has decided
to expand into Marion County from Lincoln’s strengths in Hendricks and Johnson counties; the main question now is whether
to stay inside or outside of Interstate 465.

Before moving ahead with brick-and-mortar, First Merchants plans to work through its nonperforming assets. Nearly 3.4 percent
of its assets fit the status—about triple banks’ target in normal times.

“Clearly, First Merchants is going to be internally focused on solving these credit quality issues,” said Mike
Renninger, a bank analyst based in Carmel.

First Financial

First Financial made out like a bandit by taking over $2.1 billion in Irwin deposits for only a 1-percent premium.

The Cincinnati institution finished the conversion in February this year.

At least one employee has been added at each of the three Irwin branches in the Indianapolis area received as part of the
deal, and the institution is looking to ramp up U.S. Small Business Administration lending, which is one of its strengths
in Ohio.

The downtown branch has been moved from 300 N. Meridian St. to the Gibson Building in the 400 block of North Capitol Avenue.

First Financial plans to add branches in Indianapolis and surrounding counties, but isn’t tipping its hand about timetables
or precise locations.

Renninger, the analyst, said First Financial is now theoretically large enough that it could use cash to swallow any Indiana-based
bank except for First Merchants; 1st Source Corp. in South Bend; First Financial Corp. in Terre Haute; Lakeland Financial
Corp. in Warsaw; MainSource Financial Group in Greensburg; and Integra Bank Corp. and Old National Bancorp, both in Evansville.

Mainly, Renninger predicted, First Financial will want to expand its presence in Indianapolis suburbs.

Fueling that push will likely be First Financial CEO Claude Davis, Renninger said. Davis, he noted, jumped from Irwin to
First Financial in 2004, but not before running Irwin’s commercial bank for seven years—and likely amassing a
reasonably good understanding of which Irwin loans to keep and which ones to hand to the FDIC.

Moreover, the former Carmel resident is a Butler University grad and now a Butler trustee, so he knows something about the

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