FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C.  20549

               QUARTERLY REPORT UNDER SECTION 13 or 15 (d) of THE

                         SECURITIES EXCHANGE ACT OF 1934

For Quarter Ended September 30, 1994

Commission File Number 0-17071

                           First Merchants Corporation
- - --------------------------------------------------------------------------------
            (Exact name of registrant as specified in its character)

               Indiana                                 35-1544218
- - --------------------------------------------------------------------------------
    (State or other jurisdiction of                   (I.R.S. Employer
     incorporation of organization)                    Identification No.)

   200 East Jackson Street - Muncie, IN                47305-2814
- - --------------------------------------------------------------------------------
  (Address of principal executive office)              (Zip code)

                                 (317) 747-1500
- - --------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

                                 Not Applicable
- - --------------------------------------------------------------------------------
               (Former name former address and former fiscal year,
                         if changed since last report.)

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days,
                                  Yes   X    No
                                      _____     _____

     As of November 7, 1994, there were outstanding 3,372,824 common shares,
without par value, of the registrant.

                                                                    Page 1 of 19

                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

                                      INDEX

                                                                        PAGE NO.

PART I.          Financial information:

 Item 1.         Financial Statements:

                 Consolidated Condensed Balance Sheet. . . . . . . . . .     3

                 Consolidated Condensed Statement of Income. . . . . . .     4

                 Consolidated Condensed Statement of Changes in
                 Stockholders' Equity. . . . . . . . . . . . . . . . . .     5

                 Consolidated Condensed Statement of Cash Flows. . . . .     6

                 Notes to Consolidated Condensed Financial Statements. .     7

 Item 2.         Management's Discussion and Analysis of Financial
                 Condition and Results of Operations . . . . . . . . . .    10

PART II.         Other Information:

 Item 6.         Exhibits and Reports of Form 8-K. . . . . . . . . . . .    18

Signatures       . . . . . . . . . . . . . . . . . . . . . . . . . . . .    19

                                                                    Page 2 of 19

                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q
                         PART I.   FINANCIAL INFORMATION
                         Item 1.   FINANCIAL STATEMENTS
                      CONSOLIDATED CONDENSED BALANCE SHEET
                (Dollars in thousands, except per share amounts)
                                   (Unaudited)

                                                                         September 30   December 31
                                                                            1994           1993
                                                                         ------------   -----------
                                                                                   
ASSETS:
  Cash and due from banks. . . . . . . . . . . . . . . . . . . . . .       $   21,889    $   24,942
  Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . .            1,225         1,625
                                                                           ----------    ----------
    Cash and cash equivalents. . . . . . . . . . . . . . . . . . . .           23,114        26,567
  Interest-bearing time deposits . . . . . . . . . . . . . . . . . .                            254
  Securities available for sale. . . . . . . . . . . . . . . . . . .          100,447
  Investment securities (market value $89,543 and $209,301). . . . .           89,957       206,243
  Loans:
    Loans, net of unearned interest. . . . . . . . . . . . . . . . .          393,394       376,872
    Less:   Allowance for loan losses. . . . . . . . . . . . . . . .            5,120         4,800
                                                                           ----------    ----------
      Net loans. . . . . . . . . . . . . . . . . . . . . . . . . . .          388,274       372,072
  Premises and equipment . . . . . . . . . . . . . . . . . . . . . .            9,139         9,441
  Interest receivable. . . . . . . . . . . . . . . . . . . . . . . .            5,839         5,665
  Core deposit intangibles and goodwill. . . . . . . . . . . . . . .            2,009         2,108
  Others assets. . . . . . . . . . . . . . . . . . . . . . . . . . .            5,361         3,763
                                                                           ----------    ----------
       Total assets. . . . . . . . . . . . . . . . . . . . . . . . .       $  624,140    $  626,113
                                                                           ----------    ----------
                                                                           ----------    ----------
LIABILITIES:
  Deposits:
    Noninterest bearing. . . . . . . . . . . . . . . . . . . . . . .       $   71,221    $   74,546
    Interest bearing . . . . . . . . . . . . . . . . . . . . . . . .          434,474       431,756
                                                                           ----------    ----------
       Total deposits. . . . . . . . . . . . . . . . . . . . . . . .          505,695       506,302
  Short-term borrowings. . . . . . . . . . . . . . . . . . . . . . .           42,533        46,890
  Interest payable . . . . . . . . . . . . . . . . . . . . . . . . .            1,227         1,226
  Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . .            3,411         2,891
                                                                           ----------   -----------
       Total liabilities . . . . . . . . . . . . . . . . . . . . . .          552,866       557,309
STOCKHOLDERS' EQUITY:
  Preferred stock, no-par value:
    Authorized and unissued -- 500,000 shares
  Common stock, $.125 stated value:
    Authorized --- 20,000,000 shares
    Issued and outstanding -- 3,391,229 and  3,389,591 shares. . . .              424           424
  Additional paid-in capital . . . . . . . . . . . . . . . . . . . .           17,035        17,068
  Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . .           55,505        51,312
  Net unrealized losses on securities available for sale . . . . . .           (1,690)
                                                                           ----------    ----------
       Total stockholders' equity. . . . . . . . . . . . . . . . . .           71,274        68,804
                                                                           ----------    ----------
       Total liability and stockholders' equity. . . . . . . . . . .       $  624,140    $  626,113
                                                                           ----------    ----------
                                                                           ----------    ----------
See notes to consolidated condensed financial statements.

                                                                    Page 3 of 19

                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q
                   CONSOLIDATED CONDENSED STATEMENT OF INCOME
                (Dollars in thousands, except per share amounts)
                                   (Unaudited)

                                                                 Three Months Ended        Nine Months Ended
                                                                     September 30             September 30
                                                                ----------------------   ----------------------
                                                                   1994        1993         1994        1993
                                                                ----------  ----------   ----------  ----------
                                                                                         
Interest Income:
  Loans, including fees:
    Taxable. . . . . . . . . . . . . . . . . . . . . . .        $    8,301  $    7,059   $   23,280  $   21,472
    Tax exempt . . . . . . . . . . . . . . . . . . . . .                20          26           64          94
  Securities:
    Taxable. . . . . . . . . . . . . . . . . . . . . . .             2,063       2,484        6,657       7,869
    Tax exempt . . . . . . . . . . . . . . . . . . . . .               618         620        1,819       1,765
  Federal funds sold . . . . . . . . . . . . . . . . . .                14         134           84         395
  Interest-bearing time deposits . . . . . . . . . . . .                             4            2          32
                                                                ----------  ----------   ----------  ----------
       Total interest income . . . . . . . . . . . . . .            11,016      10,327       31,906      31,627
Interest Expense:
  Deposits . . . . . . . . . . . . . . . . . . . . . . .             3,600       3,740       10,440      11,784
  Short-term borrowings. . . . . . . . . . . . . . . . .               591         311        1,448         838
                                                                ----------  ----------   ----------  ----------
       Total interest expense. . . . . . . . . . . . . .             4,191       4,051       11,888      12,622
                                                                ----------  ----------   ----------  ----------
Net Interest Income. . . . . . . . . . . . . . . . . . .             6,825       6,276       20,018      19,005
Provision for loan losses. . . . . . . . . . . . . . . .               201         243          593         782
                                                                ----------  ----------   ----------  ----------
Net Interest Income After Provision for loan losses. . .             6,624       6,033       19,425      18,223
Other Income:
  Securities, Gains, Net . . . . . . . . . . . . . . . .                                         11         394
  Other Income . . . . . . . . . . . . . . . . . . . . .             1,557       1,481        4,686       4,607
                                                                ----------  ----------   ----------  ----------
       Total other income. . . . . . . . . . . . . . . .             1,557       1,481        4,697       5,001
Total other expenses . . . . . . . . . . . . . . . . . .             4,758       4,467       13,668      13,490
                                                                ----------  ----------   ----------  ----------
Income before income tax and cumulative effect of
  change in accounting method. . . . . . . . . . . . . .             3,423       3,047       10,454       9,734
Income tax expense . . . . . . . . . . . . . . . . . . .             1,196       1,033        3,621       3,346
                                                                ----------  ----------   ----------  ----------
Income before cumulative effect of change in
  accounting method. . . . . . . . . . . . . . . . . . .             2,227       2,014        6,833       6,388
Cumulative effect of change in method
  of accounting for income taxes . . . . . . . . . . . .                                                    227
                                                                ----------  ----------   ----------  ----------
Net Income . . . . . . . . . . . . . . . . . . . . . . .        $    2,227  $    2,014   $    6,833  $    6,615
                                                                ----------  ----------   ----------  ----------
                                                                ----------  ----------   ----------  ----------
Per Share:
  Income before cumulative effect of change in
    accounting method. . . . . . . . . . . . . . . . . .        $      .66  $      .59   $     2.02  $     1.87
  Net income . . . . . . . . . . . . . . . . . . . . . .               .66         .59         2.02        1.94
  Dividends. . . . . . . . . . . . . . . . . . . . . . .               .28         .25          .78         .69
Weighted average shares outstanding. . . . . . . . . . .         3,390,705   3,426,651    3,386,946   3,415,206

See notes to consolidated condensed financial statements.

                                                                    Page 4 of 19

                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q
       CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                          (Dollar amounts in thousands)
                                   (Unaudited)

                                                                                     1994            1993
                                                                                 ------------    ------------
                                                                                            
Balance, January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . .          $   68,804      $   63,935
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               6,833           6,615
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              (2,640)         (2,357)
Stock issued under employee benefit plans. . . . . . . . . . . . . . . .                 250             247
Stock issued under dividend reinvestment and stock
   purchase plan . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 261             214
Stock options exercised. . . . . . . . . . . . . . . . . . . . . . . . .                  94             148
Stock redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                (638)
Cash paid in lieu of issuing fractional shares . . . . . . . . . . . . .                                  (4)
Change in net unrealized losses on securities available for sale . . . .              (1,690)
                                                                                  ----------      ----------

Balances, September 30 . . . . . . . . . . . . . . . . . . . . . . . . .          $   71,274      $   68,798
                                                                                  ----------      ----------
                                                                                  ----------      ----------

See notes to consolidated condensed financial statements.

                                                                    Page 5 of 19

                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q
                 CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
                          (Dollar amounts in thousands)
                                   (Unaudited)

                                                                                               Nine Months Ended
                                                                                                 September 30
                                                                                           -------------------------
                                                                                              1994           1993
                                                                                           ----------     ----------
                                                                                                    
Cash Flows From Operating Activities:
  Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       $   6,833      $   6,615
  Adjustments to reconcile net income to net cash provided by operating activities:
    Provision for loan losses. . . . . . . . . . . . . . . . . . . . . . . . . . .               593            782
    Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . .               842            644
    Securities amortization, net . . . . . . . . . . . . . . . . . . . . . . . . .               825            703
    Change in interest receivable. . . . . . . . . . . . . . . . . . . . . . . . .              (214)          (136)
    Change in interest payable . . . . . . . . . . . . . . . . . . . . . . . . . .                 1           (158)
    Other adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 8           (964)
                                                                                           ---------      ---------
      Net cash provided by operating activities. . . . . . . . . . . . . . . . . .             8,888          7,486

Cash Flows From Investing Activities:
  Net change in interest-bearing time deposits . . . . . . . . . . . . . . . . . .               254          1,250
  Purchases of:
    Securities available for sale. . . . . . . . . . . . . . . . . . . . . . . . .           (18,204)
    Investment securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . .           (28,382)       (91,541)
  Proceeds from maturities and sales of:
    Securities available for sale. . . . . . . . . . . . . . . . . . . . . . . . .            23,870
    Investment securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . .            34,875         73,400
  Net change in loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           (17,044)       (13,574)
  Purchases of premises and equipment. . . . . . . . . . . . . . . . . . . . . . .              (540)        (2,054)
  Other investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . .               467            350
                                                                                           ---------      ---------
    Net cash used in investing activities. . . . . . . . . . . . . . . . . . . . .            (4,704)       (32,169)

Cash Flows From Financing Activities:
  Net change in noninterest-bearing, NOW, money market and savings deposits. . . .            (4,076)         3,167
  Net change in certificates of deposit and other time deposits. . . . . . . . . .             3,469        (11,898)
  Net change in short-term borrowings. . . . . . . . . . . . . . . . . . . . . . .            (4,357)         7,521
  Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            (2,640)        (2,357)
  Stock issued under employee benefit pans . . . . . . . . . . . . . . . . . . . .               250            247
  Stock issued under dividend reinvestment and stock purchase plan . . . . . . . .               261            214
  Stock options exercised. . . . . . . . . . . . . . . . . . . . . . . . . . . . .                94            148
  Stock redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              (638)
  Cash paid in lieu of issuing fractional shares . . . . . . . . . . . . . . . . .                               (4)
                                                                                           ---------      ---------
    Net cash used in financing activities. . . . . . . . . . . . . . . . . . . . .            (7,637)        (2,962)

                                                                                           ---------      ---------
Net Decrease in Cash and Cash Equivalents. . . . . . . . . . . . . . . . . . . . .            (3,453)       (27,645)
Cash and Cash Equivalents, January 1 . . . . . . . . . . . . . . . . . . . . . . .            26,567         53,696
                                                                                           ---------      ---------
Cash and Cash Equivalents, September 30. . . . . . . . . . . . . . . . . . . . . .         $  23,114      $  26,051
                                                                                           ---------      ---------
                                                                                           ---------      ---------
See notes to consolidated condensed financial statements.

                                                                    Page 6 of 19

                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                       (Table dollar amounts in thousands)
                                   (Unaudited)

NOTE 1.     General

The significant accounting policies followed by First Merchants Corporation
("Corporation") and its subsidiaries for interim financial reporting are
consistent with the accounting policies followed for annual financial reporting,
except for the change in method of accounting for investment securities
discussed more fully in Note 2. All adjustments which are in the opinion of
management necessary for a fair statement of the results for the periods
reported have been included in the accompanying consolidated financial
statements.

NOTE 2.     Change In Method of Accounting for Investment Securities

In May, 1993, the Financial Accounting Standard Board issued Statement of
Financial Accounting Standards No. 115 (SFAS No. 115), ACCOUNTING FOR CERTAIN
INVESTMENTS IN DEBT AND EQUITY SECURITIES. The statement requires that
securities be classified in three categories and provides specific accounting
treatment for each. Trading securities are bought and held primarily for sale in
the near term and are carried at fair value, with unrealized holding gains and
losses included in earnings; held-to-maturity securities, for which the intent
is to hold to maturity, are carried at amortized cost; and available-for-sale
securities are all others and are carried at fair value with unrealized holding
gains and losses excluded from earnings and reported as a separate component of
stockholders' equity.

The Corporation adopted SFAS No. 115 on January 1, 1994. At that date,
securities with an approximate carrying value of $107,569,000 were reclassified
as available for sale. This reclassification resulted in an increase in total
stockholders' equity, net of tax, of $644,000.

NOTE 3.      Securities Available for Sale

                                                                          Gross           Gross         Approximate
                                                         Amortized      Unrealized      Unrealized        Market
                                                           Cost           Gains           Losses           Value
                                                        -----------    ------------    ------------    -------------
                                                                                              
Securities available for sale at September 30, 1994:
  U.S. Treasury. . . . . . . . . . . . . . . . .         $   10,865                      $      380       $   10,485
  Federal agencies . . . . . . . . . . . . . . .             31,829      $        3             671           31,161
  State and municipal. . . . . . . . . . . . . .              9,035              53             262            8,826
  Mortgage and other asset-backed
    securities . . . . . . . . . . . . . . . . .             23,027              54             665           22,416
  Federal Reserve stock. . . . . . . . . . . . .                307                                              307
  Federal Home Loan Bank stock . . . . . . . . .              1,572                                            1,572
  Corporate obligations. . . . . . . . . . . . .             26,610              17             947           25,680
                                                         ----------      ----------      ----------       ----------

      Totals . . . . . . . . . . . . . . . . . .         $  103,245      $      127      $    2,925       $  100,447
                                                         ----------      ----------      ----------       ----------
                                                         ----------      ----------      ----------       ----------

                                                                    Page 7 of 19

                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                       (Table dollar amounts in thousands)
                                   (Unaudited)

NOTE 4.     Investment Securities

                                                                          Gross           Gross         Approximate
                                                         Amortized      Unrealized      Unrealized        Market
                                                           Cost           Gains           Losses           Value
                                                        -----------    ------------    ------------    -------------
                                                                                              
Investment Securities at September 30, 1994:
  U.S. Treasury. . . . . . . . . . . . . . . . .         $   14,194      $       71      $      155       $   14,110
  Federal agencies . . . . . . . . . . . . . . .             24,916              97             302           24,711
  State and municipal. . . . . . . . . . . . . .             47,870             349             437           47,782
  Mortgage and other asset-backed
    securities . . . . . . . . . . . . . . . . .                433               2                              435
  Corporate obligations. . . . . . . . . . . . .              2,544               1              40            2,505
                                                         ----------      ----------      ----------       ----------

      Totals . . . . . . . . . . . . . . . . . .         $   89,957      $      520      $      934       $   89,543
                                                         ----------      ----------      ----------       ----------
                                                         ----------      ----------      ----------       ----------

                                                                          Gross           Gross         Approximate
                                                         Amortized      Unrealized      Unrealized        Market
                                                           Cost           Gains           Losses           Value
                                                        -----------    ------------    ------------    -------------
                                                                                              
Investment Securities at December 31, 1993:
  U.S. Treasury. . . . . . . . . . . . . . . . .         $   45,397      $      654      $        1       $   46,050
  Federal agencies . . . . . . . . . . . . . . .             53,452             691              62           54,081
  State and municipal. . . . . . . . . . . . . .             44,866           1,211              55           46,022
  Mortgage and other asset-backed
    securities . . . . . . . . . . . . . . . . .             23,690             219              93           23,816
  Federal Reserve stock. . . . . . . . . . . . .                307                                              307
  Federal Home Loan Bank stock . . . . . . . . .              1,572                                            1,572
  Corporate obligations. . . . . . . . . . . . .             36,959             581              87           37,453
                                                         ----------      ----------      ----------       ----------

      Totals . . . . . . . . . . . . . . . . . .         $  206,243      $    3,356      $      298       $  209,301
                                                         ----------      ----------      ----------       ----------
                                                         ----------      ----------      ----------       ----------

                                                                    Page 8 of 19

                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                       (Table dollar amounts in thousands)
                                   (Unaudited)

NOTE 5.     Loans and Allowance

                                                                         September 30   December 31
                                                                            1994           1993
                                                                         ------------   -----------
                                                                                   
Loans:
  Commercial and industrial loans. . . . . . . . . . . . . . . . . .       $   72,319    $   76,760
  Bankers' acceptances and loans to financial institutions . . . . .            3,000         3,000
  Agricultural production financing and other loans to farmers . . .            7,902         5,591
  Real estate loans:
    Construction . . . . . . . . . . . . . . . . . . . . . . . . . .            7,021         8,127
    Commercial and farmland. . . . . . . . . . . . . . . . . . . . .           63,794        58,235
    Residential. . . . . . . . . . . . . . . . . . . . . . . . . . .          162,091       150,572
  Individuals' loans for household and other personal expenditures .           74,870        70,347
  Tax exempt loans . . . . . . . . . . . . . . . . . . . . . . . . .            1,081         1,474
  Other loans. . . . . . . . . . . . . . . . . . . . . . . . . . . .            1,316         2,766
                                                                           ----------    ----------
       Total loans . . . . . . . . . . . . . . . . . . . . . . . . .       $  393,394    $  376,872
                                                                           ----------    ----------
                                                                           ----------    ----------

Nonperforming loans:
  Nonaccruing loans. . . . . . . . . . . . . . . . . . . . . . . . .       $      237    $      527
  Loans contractually past due 90 days
    or more other than nonaccruing . . . . . . . . . . . . . . . . .              776           616
  Restructured loans . . . . . . . . . . . . . . . . . . . . . . . .              836           879

                                                                                Nine Months Ended
                                                                                  September 30
                                                                           ------------------------
                                                                              1994          1993
                                                                           ----------    ----------
                                                                                   
Allowance for loan losses:
  Balances, January 1. . . . . . . . . . . . . . . . . . . . . . . .       $    4,800    $    4,351
  Provision for losses . . . . . . . . . . . . . . . . . . . . . . .              593           782
  Recoveries on loans. . . . . . . . . . . . . . . . . . . . . . . .              249           196
  Loans charged off. . . . . . . . . . . . . . . . . . . . . . . . .             (522)         (712)
                                                                           ----------    ----------
  Balances, September 30 . . . . . . . . . . . . . . . . . . . . . .       $    5,120    $    4,617
                                                                           ----------    ----------
                                                                           ----------    ----------

NOTE 6.     Commitments and Contingent Liabilities

      On May 11, 1993, the Corporation and First Merchants Bank, N.A., ("First
Merchants") approved a change in the data processing function. In the fourth
quarter of 1993, First Merchants assumed responsibility for the data processing
function for the Corporation and its wholly owned subsidiaries. The data
processing agreement with an outside party to provide data processing services
was terminated three months early. The cost of the conversion, equipment and
software was approximately $1,700,000. The equipment and software cost will be
depreciated on a straight-line method based on the estimated useful lives of the
assets.

                                                                    Page 9 of 19

                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

Item 2.     Management's Discussion and Analysis of Financial Condition and
            Results of Operations

RESULTS OF OPERATIONS

     The Corporation has recorded 18 consecutive years of growth in operating
earnings per share, reaching $2.48 in 1993 up 7.8 per cent from the prior year.
Including the accounting adjustment described below, earnings per share totalled
$2.55.

     Return on average assets which exceeded 1 per cent for the first time in
1988, reached 1.21 per cent in 1991, 1.29 per cent in 1992, and 1.39 per cent in
1993.

     Return on equity exceeded 12 per cent for the first time in 1989 (12.19 per
cent), was 12.41 per cent in 1991, 12.71 per cent in 1992, and 13.01 per cent in
1993.

     Improvement was achieved in two of these ratios during the first nine
months of 1994, as compared to the same period in 1993. Return on equity
declined slightly. The 1993 ratios exclude the accounting adjustment described
below.

     - Earning per share were $2.02 up 8.0 per cent from $1.87
     - Return on assets was 1.44 per cent increasing from 1.37 per cent
     - Return on equity totalled 13.04 per cent compared to 12.83 per cent for
       the first nine months of 1993

     In February 1992, The Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 109 (SFAS 109) on accounting for income
taxes. The Corporation adopted SFAS 109 on January 1, 1993, the effect of which
was to increase 1993 earnings by $227,000 or $ .07 per share in the first
quarter of 1993.

CAPITAL

     First Merchants Corporation's capital strength continues to exceed
regulatory minimums and peer group averages. Management believes that strong
capital is a distinct advantage in the competitive environment in which the
Corporation operates, and will provide a solid foundation for continued growth,
and instilling customer confidence. First Merchants Corporation and its
subsidiaries have received honors from various financial rating services
recognizing the Banks for safety and soundness. Earnings asset quality and
capital strength were considered in the ratings.

     The Corporation's capital to assets ratio was 10.36 per cent at year end
1992, 10.99 per cent at December 31, 1993, and 11.42 per cent at September 30,
1994. Regulatory capital guidelines require a Tier I risk-based capital ratio of
4.0 per cent and a total risk-based capital ratio of 8.0 per cent.

The following table presents risk-based capital ratios for September 30, 1994
and December 31, 1993.

                                             September 30    December 31
                                                 1994           1993
                                             ------------    -----------
                                                         
Tier I risk-based capital ratio                 16.68%         16.36%
Total risk-based capital ratio                  17.87          17.53
Leverage ratio                                  11.32          10.41

     The Corporation has an employee stock purchase plan and an employee stock
option plan. Activity under this program is detailed in the Consolidated
Condensed Statement of Changes in Stockholders' Equity. The transactions under
these plans have not had a material effect in the Corporation's capital
position.

                                                                   Page 10 of 19

                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

ASSET QUALITY/PROVISION FOR LOAN LOSSES

     First Merchants Corporation's asset quality and loan loss experience has
consistently been superior to that of its peer group, as summarized below. Asset
quality has been a major factor in the Corporation's ability to generate
consistent profit improvement.

     The allowance for loan losses is maintained through the provision for loan
losses, which is a charge against earnings. The amount provided for loan losses,
and the determination of the adequacy of the allowance are based on a continuous
review of the loan portfolio, including an internally administered loan "watch"
list. The evaluation takes into consideration identified credit problems as well
as the possibility of losses inherent in the loan portfolio that cannot be
specifically identified.

     The following table summarizes the risk elements for First Merchants
Corporation and its peer group, consisting of bank holding companies with
average assets between $500 million and $1 billion. The statistics were provided
by the Federal Reserve System.

                                                      Non-Performing Loans (1)
                                                        at December 31 as a
                                                          Per Cent of Loans
                                                   -----------------------------
                                                        First              Peer
                                                      Merchants            Group
                                                      ---------            -----
                                                                     
1994 (September 30)                                        .26%            N/A
1993 . . . . . . . . . . . . . . . . . . .                 .30             1.55%
1992 . . . . . . . . . . . . . . . . . . .                 .41             1.87
1991 . . . . . . . . . . . . . . . . . . .                 .86             2.59
1990 . . . . . . . . . . . . . . . . . . .                1.09             2.62
1989 . . . . . . . . . . . . . . . . . . .                1.54             2.12

     (1)  Accruing loans past due 90 days or more, and non-accruing loans, but
          excluding restructured loans.

     On September 30, 1994, the loan loss reserve stood at $5,120,000. As a per
cent of loans, the reserve stood at 1.30 per cent compared to 1.27 per cent at
year end 1993, and 1.24 per cent at year end 1992. Activity to the reserve is
detailed in the following table. The provision for loan losses for the first
nine months of 1994 declined to $593,000 from $782,000 for the same period of
1993, based on management's analysis of the adequacy of the reserve in light of
improving credit quality in the loan portfolio.

                                                                   Page 11 of 19

                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

     The following table presents loan loss experience for the years indicated
and compares the Corporation's loss experience to its peer group.

                                                      1994 (1)      1993          1992          1991          1990
                                                      --------      ----          ----          ----          ----
                                                                    (Dollar amounts in thousands)
                                                                                             
Allowance for loan losses
  Balance at January 1 . . . . . . . . . . . . .      $  4,800    $  4,351      $  3,867      $  3,254      $  2,915
  Addition resulting from acquisition. . . . . .                                                   252
                                                      --------    --------      --------      --------      --------

Chargeoffs:
  Commercial . . . . . . . . . . . . . . . . . .           251         391           588           806           614
  Real estate mortgage . . . . . . . . . . . . .            13         129           100            41            46
  Installment. . . . . . . . . . . . . . . . . .           258         388           552           511           590
                                                      --------    --------      --------      --------      --------
    Total chargeoffs . . . . . . . . . . . . . .           522         908         1,240         1,358         1,250
                                                      --------    --------      --------      --------      --------

Recoveries:
  Commercial . . . . . . . . . . . . . . . . . .           162         240           215           227           195
  Real estate mortgage . . . . . . . . . . . . .            24           5            38             7             1
  Installment. . . . . . . . . . . . . . . . . .            63          98           114            84            98
                                                      --------    --------      --------      --------      --------
    Total recoveries . . . . . . . . . . . . . .           249         343           367           318           294
                                                      --------    --------      --------      --------      --------

Net chargeoffs . . . . . . . . . . . . . . . . .           273         565           873         1,040           956
                                                      --------    --------      --------      --------      --------

Provision for loan losses. . . . . . . . . . . .           593       1,014         1,357         1,401         1,295
                                                      --------    --------      --------      --------      --------

Balance at December 31 . . . . . . . . . . . . .      $  5,120    $  4,800      $  4,351      $  3,867      $  3,254
                                                      --------    --------      --------      --------      --------
                                                      --------    --------      --------      --------      --------

Ratio of net chargeoffs during the period to average
  loans outstanding during the period. . . . . .          .07%        .16%          .26%          .35%          .35%
Peer Group . . . . . . . . . . . . . . . . . . .          N/A         .50%          .63%          .95%          .93%

(1) Through September 30, 1994

                                                                   Page 12 of 19

                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

LIQUIDITY AND INTEREST SENSITIVITY

     Asset/Liability Management has been an important factor in the
Corporation's ability to record consistent earnings growth through periods of
interest rate volatility and product deregulation. Management and the Board of
Directors monitor the Corporation's liquidity and interest sensitivity positions
at regular meetings to ensure that changes in interest rates will not adversely
affect earnings. Decisions regarding investment and the pricing of loan and
deposit products are made after analysis of reports designed to measure
liquidity, rate sensitivity, the Corporation's exposure to changes in net
interest income given various rate scenarios, and the economic and competitive
environments.

     First Merchants Corporation's liquidity and interest sensitivity position
at September 30, 1994, remained adequate to meet the Corporation's primary goal
of achieving optimum interest margins while avoiding undue interest rate risk.
The table below represents the Corporation's interest rate sensitivity analysis
as of September 30, 1994.

                       INTEREST-RATE SENSITIVITY ANALYSIS
                          (Dollar amounts in thousands)

                                                                 At September 30, 1994
                                             --------------------------------------------------------------
                                                1-180       181-365        1-5        Beyond
                                                Days          Days        Years       5 Years      Total
                                               -------      -------       -----       -------      -----
                                                                                    
Rate-sensitive assets:
  Federal funds sold and interest-bearing
    time deposits. . . . . . . . . . . . .     $  1,225                                           $  1,225
  Securities . . . . . . . . . . . . . . .       40,623     $ 22,432     $ 120,194    $  7,155     190,404
  Loans. . . . . . . . . . . . . . . . . .      197,855       44,343       107,181      44,015     393,394
                                               --------     --------     ---------    --------    --------
Total rate-sensitive assets. . . . . . . .      239,703       66,775       227,375      51,170     585,023
                                               --------     --------     ---------    --------    --------

Rate-sensitive liabilities:
  Interest-bearing deposits. . . . . . . .      209,999       25,090       199,266         119     434,474
  Other borrowed funds . . . . . . . . . .       42,533                                             42,533
                                               --------     --------      --------    --------    --------

Total rate-sensitive liabilities . . . . .      252,532       25,090       199,266         119     477,007
                                               --------     --------      --------    --------    --------

Interest rate sensitivity gap by period. .     $(12,829)    $ 41,685      $ 28,109    $ 51,051

Cumulative gap . . . . . . . . . . . . . .      (12,829)      28,856        56,965     108,016

Cumulative ratio at September 30, 1994 . .        94.9%       100.4%        111.9%      122.6%

                                                                   Page 13 of 19

                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

EARNING ASSETS

     Earning assets grew $12.7 million in 1993 and remained level during the
first nine months of 1994. The following table presents the earning asset mix
for the years ended 1992, 1993 and at September 30, 1994.

                                                                  EARNING ASSETS
                                                            (Dollar amounts in Millions)
                                                     September 30     December 31     December 31
                                                        1994             1993            1992
                                                     ------------    ------------    ------------
                                                                               
Federal funds sold and interest bearing
  time deposits. . . . . . . . . . . . . . . . .       $   1.2          $   1.9         $  25.7
Securities . . . . . . . . . . . . . . . . . . .         190.4            206.2           196.3
Loans. . . . . . . . . . . . . . . . . . . . . .         393.4            376.9           350.3
                                                       -------          -------         -------
  Total. . . . . . . . . . . . . . . . . . . . .       $ 585.0          $ 585.0         $ 572.3
                                                       -------          -------         -------
                                                       -------          -------         -------

Loans comprise 67.2 per cent of earning assets at September 30, 1994, up from
64.4 per cent at December 31, 1993, and 61.2 per cent at December 31, 1992.
Strong loan demand and lack of deposit growth (see below) account for the
increase.

DEPOSITS AND BORROWINGS

     Total deposits declined by $5.7 million in 1993. Average deposits, however,
grew $16.3 million in 1993, up 3.3 per cent from the same figure in 1992.

     At September 30, 1994, deposits totalled at $505.7  million, down slightly
from year end 1993. Average deposits during the nine month period equalled
$509.5 million, down $2.3 million from the same period one year earlier.

     Short-term borrowings amounted to $42.5 million, down from $46.9 million at
year end 1993.

                                                                   Page 14 of 19

                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

NET INTEREST INCOME

     Net interest income is the primary source of the Corporation's earnings. It
is a function of net interest margin and the level of average earnings assets.

     The table below indicates that the Corporation's asset yields have
historically been more rate sensitive (volatile) than its cost of funds.
Consequently, interest margins have tended to decline during falling interest
rate environments since interest income declines at a faster rate than interest
expense. The reverse has been true in a rising interest rate environment.

     In 1993, margins declined slightly as the rate of decline in asset yield
exceeded the decline in costs. The decline in margin was offset by growth in
earning assets resulting in an increases in net interest income during 1993 of
$406,000.

     During the first nine months of 1994 average earning assets grew by just
under $8 million while interest margins improved .13 per cent (interest expense
as a per cent of average earning assets fell .14 per cent while asset yields
fell only .01 per cent). Those two factors combine to result in an improvement
of $1,024,000 in net interest income on a fully taxable equivalent basis.

                                 Net Interest Income            Net Interest Margin            Average
                                  on a Fully Taxable             on a Fully Taxable            Earning
                                   Equivalent Basis               Equivalent Basis              Assets
                                   ----------------               ----------------              ------
                                                               (Dollars in Thousands)
                                                                                     
    1994  (1st Nine months)            $ 20,987                          4.70%                $ 594,954
    1993                                 26,806                          4.57                   587,009
    1992                                 26,400                          4.66                   566,467
    1991                                 23,277                          4.43                   525,799
    1990                                 20,055                          4.19                   478,113
    1989                                 19,018                          4.20                   453,098

                                 Interest Income                Interest Expense               Net Interest
                               (FTE) as a Per Cent               as a Per Cent              Income (FTE) as a
                                   of Average                      of Average              Per Cent of Average
                                 Earning Assets                  Earning Assets               Earning Assets
                                 --------------                  --------------               --------------
                                                                                         
    1994 (1st Nine months)                7.37%                          2.67%                    4.70%
    1993                                  7.38                           2.81                     4.57
    1992                                  8.31                           3.65                     4.66
    1991                                  9.48                           5.05                     4.43
    1990                                 10.09                           5.90                     4.19
    1989                                 10.28                           6.08                     4.20

                                                                   Page 15 of 19

                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

     Recent action by the Federal Reserve has pushed interest rates higher. This
would serve to widen interest margins except for the fact depositors may opt for
longer term liabilities which pay higher rates of interest. The Corporation
does, as mentioned earlier, consider the effect of changing rates in its loan
and deposit pricing decisions and expects no significant change in the level of
net interest margin as a result of higher interest rates.

OTHER INCOME

     The Corporation has placed emphasis on the growth of non-interest income in
recent years by offering a wide range of fee-based services. Fee schedules are
regularly reviewed by a pricing committee to ensure that the products and
services offered by the Corporation are priced to be competitive and profitable.

     Other income reached $6,588,000 in 1993, an increase of 18.2 per cent over
the prior year. Trust revenues grew $180,000, or 8.1 per cent while service
charges on deposit accounts were up by $250,000, or 11.1 per cent. Securities
gains totalled $395,000, an increase of $328,000, or 493.4 per cent.

     Other income was $4,697,000 in the first nine months of 1994, down $304,000
from the same period in 1993. All of the decline is attributable to securities
gains which totaled $394,000 in 1993, but only $11,000 in 1994.

OTHER EXPENSE

     Total "other expenses" represent non-interest operating expenses of the
Corporation. Those expenses reached $18,215,000 in 1993, up $611,000, or 3.5 per
cent, from 1992. Salary and benefit expenses increased by $330,000, or 3.8 per
cent, and premises and equipment expense rose $254,000, or 12.8 per cent.

     In the first nine months of 1994 other expenses were up $178,000 or 1.3 per
cent from the same period in 1993. Increased salary and benefit expense of
$636,000 (10.4 per cent) was mostly offset by declines in several other
categories, primarily data processing costs.

     On May 11, 1993, the Corporation and First Merchants approved a change in
the data processing function. In the fourth quarter of 1993, First Merchants
assumed responsibility for the data processing function for the Corporation and
its wholly owned subsidiaries. The data processing agreement with an outside
party to provide data processing management was terminated three months early.
The cost of the conversion, equipment and software was approximately $1,700,000.
The equipment and software costs will be depreciated on a straight-line method
based on the estimated useful lives of the assets. The Corporation estimates
that data processing costs declined under the new arrangement by more than
$300,000 during the nine months of 1994.

                                                                   Page 16 of 19

                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

INCOME TAXES

     The increase in 1993 tax expense was attributable to a $1,042,000 increase
in pre-tax net income.

     During the first nine months of 1994, income tax expense grew $275,000 from
the same period one year earlier, also due to a $720,000 increase in pre-tax net
income.

     The following is a breakdown, by year, of federal and state income taxes.

                                                      Twelve Months Ended
                                                           December 31
                                                   --------------------------
                                                      1993            1992
                                                   -----------    -----------
                                                     (Dollars in Thousands)
                                                            
Federal taxes. . . . . . . . . . . . . . . .       $     3,272    $     3,033
State taxes. . . . . . . . . . . . . . . . .             1,124          1,008
                                                   -----------    -----------
Total. . . . . . . . . . . . . . . . . . . .       $     4,396    $     4,041

                                                   -----------    -----------
                                                   -----------    -----------

                                                       Nine Months Ended
                                                          September 30
                                                   --------------------------
                                                      1994           1993
                                                   -----------    -----------
                                                     (Dollars in Thousands)

Federal taxes. . . . . . . . . . . . . . . .       $     2,733    $     2,523
State taxes. . . . . . . . . . . . . . . . .               888            823
                                                   -----------    -----------
Total. . . . . . . . . . . . . . . . . . . .       $     3,621    $     3,346
                                                   -----------    -----------
                                                   -----------    -----------

     In February, 1992, The Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 109 (SFAS 109) on accounting for
income taxes. The Corporation adopted SFAS on January 1, 1993, the effect of
which was to increase earnings by $227,000.

INFLATION

     Changing prices of goods, services and capital affect the financial
position of every business enterprise. The level of market interest rates and
the price of funds loaned or borrowed fluctuate due to changes in the rate of
inflation and various other factors, including government monetary policy.

     Fluctuating interest rates affect First Merchants' net interest income,
loan volume, and other operating expenses, such as employees' salaries and
benefits, reflecting the effects of escalating prices, as well as increased
levels of operations and other factors. As the inflation rate increases, the
purchasing power of the dollar decreases. Those holding fixed rate monetary
assets incur a loss while those holding fixed rate monetary liabilities enjoy a
gain. The nature of a bank holding company's operations is such that there will
be an excess of monetary assets over monetary liabilities and, thus, a bank
holding company will tend to suffer from an increase the rate of inflation and
benefit from a decrease.

                                                                   Page 17 of 19

                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

                           PART II.  OTHER INFORMATION

Item 6.   EXHIBITS AND REPORTS ON FORM 8-K

          (a)  No exhibits are required to be filed.

          (b)  No reports were filed on Form 8-K during the quarter ended
               September 30, 1994.
- - --------------------------------------------------------------------------------

No other information is required to be filed under Part II of this form.

                                                                   Page 18 of 19

                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

                                   SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                                 First Merchants Corporation
                                                 ---------------------------
                                                        (Registrant)

Date         November 9, 1994         by           /s/ Stefan S. Anderson
       ----------------------------         ------------------------------------
                                                     Stefan S. Anderson
                                                   President and Director

Date         November 9, 1994         by           /s/ James L. Thrash
       ----------------------------         ------------------------------------
                                                     James L. Thrash
                                                Chief Financial & Principal
                                                    Accounting Officer

                                                                   Page 19 of 19

 9

THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED BALANCE SHEET AND CONSOLIDATED CONDENSED STATEMENT OF
INCOME FOUND ON PAGE 3 AND 4 OF THE COMPANY'S FORM 10-Q FOR THE YEAR-TO-DATE,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.

 1,000

                   9-MOS
                          DEC-31-1994
                             JAN-01-1994
                               SEP-30-1994
                                          21,889
                               0
                                 1,225
                                     0
                    100,447
                          89,957
                            89,543
                                        393,394
                                      5,120
                                 624,140
                                     505,695
                                    42,533
                              4,638
                                          0
                                           424
                                0
                                          0
                                      70,850
                 624,140
                                 23,344
                                8,476
                                    86
                                31,906
                              10,440
                              11,888
                           20,018
                                      593
                                  11
                                 13,668
                                 10,454
                       6,833
                                      0
                                            0
                                     6,833
                                     2.02
                                     2.02
                                       0
                                          0
                                         0
                                     0
                                      0
                                     0
                                        0
                                         0
                                    0
                                 0
                                  0
                              0