Muncie-based First Merchants Corp. (Nasdaq: FRME) has reached a more than $46 million agreement to acquire Community Bancshares Inc. in Noblesville. The deal is expected to close early next year. In November, First Merchants also completed a $140 million merger with Citizens Financial Bank in Munster. July 22, 2014

News Release

MUNCIE, Ind. & NOBLESVILLE, Ind. – First Merchants Corporation and Community Bancshares, Inc. today announced they have executed a definitive agreement whereby Community Bancshares will merge with and into First Merchants, and its wholly-owned bank subsidiary, Community Bank, will merge with and into First Merchants Bank, N.A.

The merger agreement provides that shareholders of Community Bancshares will have the right to exchange each Community Bancshares common share held for either or a combination of (i) 4.0926 shares of First Merchants' common stock, or (ii) $85.94 in cash. In the event that the total amount of cash elections exceeds $15 million, proration will occur to limit the cash paid to $15 million. Based on the closing price of First Merchants' common stock on July 21, 2014 of $20.38, the transaction value is approximately $46.3 million.

The transaction is expected to be completed in the first quarter of 2015, subject to the approval of Community Bancshares shareholders, regulatory approvals, and other customary closing conditions. The combined financial institutions, which will do business as First Merchants Bank, expect to complete the integration during the second quarter of 2015.

Based upon current financials, First Merchants and Community Bancshares will have combined assets of $5.7 billion and will remain the second largest financial holding company headquartered in Indiana. The combined company will have 107 banking offices in twenty-six Indiana counties, as well as two counties in both Ohio and Illinois.

Michael C. Rechin, President and Chief Executive Officer of First Merchants, said, “Like First Merchants, Community Bank has a deep-rooted commitment to community banking and we are excited for it to become the newest member of the First Merchants family. The addition of Community Bank supports our goal of becoming a more efficient, higher performing company. The Community Bank franchise will add seven locations to our six banking centers in Hamilton County, the fastest growing Indiana market. In addition, the Community Bank partnership will add two new communities in Madison County that we currently don't serve: Summitville and Alexandria. We believe our partnership will provide our business and consumer customers with a broader range of services, greater access and expanded product offerings, while maintaining our legacy of local community banking. From Community Bank's beginning in 1991, Chuck Crow and his management team have played a pivotal role serving Hamilton and Madison County commercial and consumer clients.”

“We expect this combination to be mutually beneficial to First Merchants and Community Bancshares shareholders. We anticipate earnings per share accretion in the first full year of combination and beyond through identified operating efficiencies of approximately 40 percent, resulting in a tangible book value earnback of less than four years,” Rechin added.

Charles L. Crow, Community's Chief Executive Officer, Larry W. Riggs, President, and Russell W. Freed, Executive Vice President will join the First Merchants management team working to seamlessly assimilate the two companies' partnership. Mr. Crow stated, “We are excited about the opportunity to become part of the First Merchants family, and believe this partnership will be good for our clients, shareholders, staff and communities. Since our inception 23 years ago, our executive management team has been driven to be the 'community bank' of choice in our marketplace. We look forward to taking advantage of new product capabilities of First Merchants and continuing to build momentum with our clients. The core values of both companies share a commitment to local decision making, personal service, long-term relationships and community involvement.”

First Merchants expects the acquisition to be accretive during the first full year with a tangible book value earnback of less than four years. Cost savings are expected to total 40 percent, including potential banking center consolidations. The credit and OREO marks total $13.2 million, or 8 percent.

First Merchants' legal advisor was Bingham Greenebaum Doll LLP.

SunTrust Robinson Humphrey, Inc. rendered a fairness opinion to the Community Bancshares' board of directors in this transaction and Krieg DeVault LLP served as legal advisor to Community Bancshares.

About First Merchants Corporation

First Merchants Corporation is a financial holding company headquartered in Muncie, Indiana. The Corporation is comprised of First Merchants Bank, N.A., which also operates as Lafayette Bank & Trust, Commerce National Bank, and First Merchants Trust Company as divisions of First Merchants Bank, N.A. First Merchants Corporation also operates First Merchants Insurance Group, a full-service property casualty, personal lines, and healthcare insurance agency.

First Merchants Corporation’s common stock is traded on the NASDAQ Global Select Market System under the symbol FRME. Quotations are carried in daily newspapers and can be found on the company’s Internet web page ( ).

FIRST MERCHANTS and the Shield Logo are federally registered trademarks of First Merchants Corporation.

Source: First Merchants Corp. and Community Bancshares Inc.

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