FIRST MERCHANTS CORPORATION (NASDAQ:FRME) Files An 8-K Entry into a Material Definitive Agreement

On February 17, 2017, First Merchants Corporation, an Indiana
corporation (First Merchants), and Independent Alliance Banks,
Inc., an Indiana corporation (“IALB”), entered into an Agreement
and Plan of Reorganization and Merger (the Merger Agreement), to
which IALB will, subject to the terms and conditions of the Merger
Agreement, merge with and into First Merchants (the Merger),
whereupon the separate corporate existence of IALB will cease and
First Merchants will survive. Immediately following the Merger,
IALB’s wholly-owned subsidiary, iAB Financial Bank, shall be
merged with and into First Merchants’ wholly-owned subsidiary,
First Merchants Bank, with First Merchants Bank as the surviving
bank.

On November 21, 2016, First Merchants purchased 495,112 shares or
12.1% of IALB’s outstanding common stock from an IALB shareholder
for $19.8 million. Based on the closing price of First Merchants
common stock on February 16, 2017 of $42.10 per share, the
transaction value for the remaining shares of common stock, not
owned by First Merchants, is approximately $251.3 million.

The transaction is expected to be a tax-free stock exchange for
IALB’s shareholders who will be receiving First Merchants common
stock to the Merger. Subject to IALB’s shareholders approval of
the Merger, regulatory approvals and other customary closing
conditions, the parties anticipate completing the Merger in the
third quarter of 2017. A copy of the Merger Agreement is filed as
Exhibit 2.1 and incorporated herein by reference.

The Boards of Directors of First Merchants and IALB have approved
the Merger Agreement. The members of the Board of Directors of IALB
have entered into a Voting Agreement to which they have agreed to
vote their shares of IALB common stock in favor of the Merger. A
copy of the Voting Agreement is filed as Exhibit 10.1 and
incorporated herein by reference.

Subject to the terms and conditions of the Merger Agreement, upon
the completion of the Merger, each share of outstanding IALB common
stock, without par value, will be converted into 1.6530 shares (the
Exchange Ratio) of First Merchants common stock, $0.125 stated
value per share. The Exchange Ratio is subject to adjustments for
stock splits, stock dividends, recapitalization, or similar
transactions, or as otherwise described in the Merger Agreement.
Fractional shares of First Merchants common stock will not be
issued in respect of fractional interests arising from the Exchange
Ratio but will be paid in cash to the Merger Agreement.

The Merger Agreement contains representations, warranties and
covenants of IALB and First Merchants, including, among others,
covenants (i) to, subject to certain exceptions as more fully set
forth in the Merger Agreement, conduct their respective businesses
in the ordinary course during the period between the execution of
the Merger Agreement and consummation of the Merger and (ii)
prohibiting IALB, subject to certain exceptions more fully set
forth in the Merger Agreement, from engaging in certain kinds of
transactions during such period. The Board of Directors of IALB has
adopted a resolution recommending the approval and adoption of the
Merger Agreement by its shareholders, and IALB has agreed to hold a
shareholder meeting to put the Merger before its shareholders for
consideration. IALB has also agreed, for a period of time and
subject to certain exceptions as set forth in the Merger Agreement,
not to (i) solicit proposals relating to alternative business
combination transactions or (ii) enter into discussions or
negotiations or provide confidential information in connection with
any proposals for alternative business combination transactions.

Consummation of the Merger is subject to various conditions,
including, among others, (i) requisite approvals of the holders of
IALB common stock; (ii) effectiveness of a Form S-4 registration
statement relating to the First Merchants common stock to be issued
in the Merger and listing of the First Merchants common stock to be
issued in the Merger on the NASDAQ Global Select Market; and (iii)
receipt of regulatory approvals.

The Merger Agreement contains certain termination rights for both
First Merchants and IALB. Under certain circumstances, termination
of the Merger Agreement may result in the payment of a termination
fee to First Merchants, all as more fully described in the Merger
Agreement.

The foregoing description of the Merger Agreement and the Voting
Agreement is not complete and is qualified in its entirety by
reference to the Merger Agreement and the Voting Agreement, which
are filed as Exhibits 2.1 and 10.1, respectively, and, as mentioned
above, are incorporated by reference.

Item 7.01. Regulation FD Disclosure.

On February 17, 2017, First Merchants and IALB issued a joint press
release announcing the execution of the Merger Agreement. A copy of
the press release is attached hereto as Exhibit 99.1 and
incorporated by reference herein.

In addition, on February 17, 2017, First Merchants intends to
provide supplemental information regarding the Merger in connection
with a conference call with analysts and investors. A copy of the
slides that will be made available in connection with the call is
attached hereto as Exhibit 99.2 and incorporated herein by
reference.

FORWARD-LOOKING STATEMENTS

This filing and the exhibits hereto contain forward-looking
statements made 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 expected timing and
benefits of the proposed Merger, 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
First Merchants and IALB 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 regulatory and shareholder 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; the ability of
First Merchants to integrate recent acquisitions and attract new
customers; 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
creditworthiness 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 bank holding companies and banks like First
Merchants affiliate bank; continued availability of earnings and
excess capital sufficient for the lawful and prudent declaration of
dividends; changes in market, economic, operational, liquidity,
credit and interest rate risks associated with First Merchants
business; and other risks and factors identified in First Merchants
filings with the Securities and Exchange Commission.

First Merchants does not undertake any obligation to update any
forward-looking statement, whether written or oral, relating to the
matters discussed in this filing. In addition, First Merchants and
IALB’s past results of operations do not necessarily indicate
either of their anticipated future results, whether the Merger is
effectuated or not.

ADDITIONAL INFORMATION FOR SHAREHOLDERS

This filing does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any proxy vote or approval. The proposed Merger will be submitted
to IALB’s shareholders for their consideration. In connection with
the proposed Merger, First Merchants will file with the SEC a
Registration Statement on Form S-4 that will include a Proxy
Statement for IALB and a Prospectus of First Merchants, as well as
other relevant documents concerning the proposed transaction.
SHAREHOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT AND THE
CORRESPONDING PROXY STATEMENT-PROSPECTUS REGARDING THE MERGER WHEN
THEY BECOME AVAILABLE, AS WELL AS ANY OTHER RELEVANT DOCUMENTS
FILED WITH THE SEC, TOGETHER WITH ALL AMENDMENTS OR SUPPLEMENTS TO
THOSE DOCUMENTS, AS THEY WILL CONTAIN IMPORTANT

INFORMATION. Once filed, you may obtain a free copy of the Proxy
Statement- Prospectus, when it becomes available, as well as other
filings containing information about First Merchants and IALB, at
the SECs website (http://www.sec.gov). You may also obtain these
documents, free of charge, by accessing First Merchants website
(http://www.firstmerchants.com) under the tab Investors, then under
the heading Financial Information and finally under the link SEC
Filings, or by accessing IALB’s website
(http://www.iabfinancial.com) under the tab “Investor Relations”.

IALB and its directors and executive officers may be deemed to be
participants in the solicitation of proxies from the shareholders
of IALB in connection with the proposed Merger. Additional
information regarding the interests of those participants and other
persons who may be deemed participants in the transaction may be
obtained by reading the Proxy Statement-Prospectus regarding the
proposed Merger when it becomes available. Free copies of this
document may be obtained as described in the preceding paragraph.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No. Description of Exhibit