UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 20549

                                    FORM 10-K

                Annual Report Pursuant to Section 13 or 15 (d) of
                       the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2001       Commission file number 0-17071

                           FIRST MERCHANTS CORPORATION

             (Exact name of registrant as specified in its charter)

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

       200 East Jackson                                         47305-2814
        Muncie, Indiana                                         (Zip Code)

(Address of principal executive offices)

        Registrant's telephone number, including area code: (765) 747-1500

Securities registered pursuant to Section 12 (b) of the Act: None

Securities registered pursuant to Section
12 (g) of the Act:

                   Common Stock, $.125 stated value per share

                                (Title of Class)

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 [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein,and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [X]

The aggregate  market value (not necessarily a reliable indication of the price
at which more than a limited number of shares would  trade) of the voting stock
held by non-affiliates of the registrant was $309,923,269  as of March 15, 2002.

As of March 15, 2002 there were 12,780,341 outstanding common shares, without
par value, of the registrant.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                                      Part of Form 10-K
              Documents                            Into Which Incorporated

Portions of the Registrant's Annual Report  Part II (Items 5, 6, 7, 7A, 8 and 9)
   to Shareholders for the year ended
          December 31, 2001
Portions of the Registrant's
     Definitive Proxy Statement for
     Annual Meeting of Shareholders
      to be held April 11, 2002                 Part III (Items 10 through 13)

Exhibit Index:  Page 31

FORM 10-K TABLE OF CONTENTS

                                                                       Form 10-K
                                                                          Page
                                                                         Number

Part I

  Item 1 - Business............................................................3

  Item 2 - Properties.........................................................21

  Item 3 - Legal Proceedings..................................................21

  Item 4 - Submission of Matters to a Vote of Security Holders................21

  Supplemental Information - Executive Officers of the Registrant.............22

Part II

  Item 5 -  Market For the Registrant's Common Equity and
            Related Stockholder Matters.......................................23

  Item 6 -  Selected Financial Data...........................................23

  Item 7 -  Management's Discussion and Analysis of Financial
            Condition and Results of Operations...............................23

  Item 7A-  Quantitative and Qualitative Disclosures about Market Risk........23

  Item 8 -  Financial Statements and Supplementary Data.......................26

  Item 9 -  Changes In and Disagreements With Accountants on
            Accounting and Financial Disclosures..............................26

Part III

  Item 10- Directors and Executive Officers of the Registrant.................27

  Item 11- Executive Compensation.............................................27

  Item 12- Security Ownership of Certain Beneficial
           Owners and Management..............................................27

  Item 13- Certain Relationships and Related Transactions.....................27

Part IV

  Item 14- Financial Statement Schedules, Exhibits and
           Reports on Form 8-K................................................28

           Signatures.........................................................30

                                                                       Page 2

                                     PART I

ITEM 1.  BUSINESS
- --------------------------------------------------------------------------------

GENERAL

First Merchants  Corporation (the  "Corporation") was incorporated under Indiana
law on September 20, 1982, as the bank holding company for First Merchants Bank,
National  Association  ("First  Merchants"),   a  national  banking  association
incorporated in 1893.  Prior to December 16, 1991, First Merchants' name was The
Merchants  National  Bank of Muncie.  On  November  30,  1988,  the  Corporation
acquired Pendleton Banking Company  ("Pendleton"),  a state chartered commercial
bank organized in 1872. On July 31, 1991, the Corporation  acquired First United
Bank ("First United"),  a state chartered  commercial bank organized in 1882. On
August 1, 1996,  the  Corporation  acquired  The Union County  National  Bank of
Liberty ("Union County"),  a national banking association  incorporated in 1872.
On October 2, 1996, the Corporation acquired The Randolph County Bank ("Randolph
County"),  a state chartered  commercial bank founded in 1865. On April 1, 1998,
Pendleton  acquired the Muncie  office of Insurance and Risk  Management,  Inc.,
which was renamed, on April 1, 1998, First Merchants Insurance Services, Inc. On
April 1, 1999,  the  Corporation  acquired The First  National  Bank of Portland
("First  National"),  a national  banking  association  incorporated in 1904. On
April 21, 1999, the Corporation acquired Anderson Community Bank ("Anderson"), a
state  charted  commercial  bank founded in 1995.  Pendleton  and Anderson  were
combined on April 21, 1999, to form Madison Community Bank ("Madison").  Decatur
Bank and Trust Company ("Decatur")a state chartered commercial bank organized in
1966 was  acquired  on June 1,  2000.  On  January  19,  2000,  First  Merchants
Reinsurance  Company was formed to underwrite  accident,  health and credit life
insurance. On July 1, 2001, the Corporation acquired Frances Slocum Bank & Trust
Company ("Frances Slocum"), a state chartered commercial bank organized in 1963.
Effective  January 1, 2002, the  Corporation  acquired  Delaware County Abstract
Company, Inc. and Beebe & Smith Title Insurance Company, Inc., which were merged
into  Indiana  Title  Insurance  Company,  a  wholly-owned   subsidiary  of  the
Corporation.  Such title insurance  operations were subsequently  contributed to
Indiana  Title  Insurance  Company,  LLC in which the  Corporation  has a 52.12%
ownership interest.

As of December 31, 2001,  the  Corporation  had  consolidated  assets of $1.787
billion,  consolidated  deposits of $1.421 billion and  stockholders'  equity of
$179.1 million.

The Corporation is headquartered in Muncie, Indiana, and is presently engaged in
conducting  commercial  banking  business  through  the  offices  of its eight
banking  subsidiaries.  As  of  December  31,  2001,  the  Corporation  and  its
subsidiaries had 783 full-time equivalent employees.

Through its bank subsidiaries, the Corporation offers a broad range of financial
services,  including:   accepting  time, savings  and  demand  deposits;  making
consumer, commercial, agri-business and real estate mortgage loans; renting safe
deposit facilities;  providing personal and corporate trust services;  providing
full service  brokerage;  and providing  other  corporate  services,  letters of
credit and repurchase  agreements.  Through  various nonbank  subsidiaries,  the
Corporation  also offers personal and commercial  lines of insurance and engages
in the title agency  business and the reinsurance of credit life,  accident, and
health insurance.

Acquisition Policy and Pending Transactions

The  Corporation  anticipates  that it will  continue  its policy of  geographic
expansion  of its  banking  business  through  the  acquisition  of banks  whose
operations  are consistent  with its community  banking  philosophy.  Management
routinely  explores  opportunities to acquire  financial  institutions and other
financial  services-related  businesses and to enter into strategic alliances to
expand the scope of its services and its customer base.

On October 15,  2001,  the  Corporation  and  Lafayette  Bancorporation  jointly
announced  the signing of a  definitive  agreement  pursuant to which  Lafayette
Bancorporation will be merged with and into the Corporation.  As a result of the
merger,  Lafayette Bank and Trust Company will become a wholly-owned  subsidiary
of the Corporation.  Although the merger is subject to various contingencies, it
is expected to be  completed  on April 1, 2002.  All  required  shareholder  and
regulatory approvals relating to the merger have been obtained.

Lafayette Bank and Trust Company operates 20 branches in the Indiana counties of
Carroll,  Jasper,  Tippecanoe and White. The Corporation intends to operate each
of these  branches  after the  merger  under the name  Lafayette  Bank and Trust
Company.  At December 31,  2001,  Lafayette  Bancorporation  had total assets of
approximately $762 million and deposits of approximately $618 million.

As part of the merger,  shareholders  of Lafayette  Bancorporation  will receive
approximately  2,773,059 shares of Corporation common stock and $50.9 million in
cash. The  Corporation  will account for the merger under the purchase method of
accounting.
                                                                       Page 3

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

COMPETITION

The Corporation's banking subsidiaries are located in Adams, Delaware,  Fayette,
Hamilton, Henry, Howard, Jay, Madison, Miami, Wabash, Wayne, Randolph, and Union
counties in Indiana and Butler  county in Ohio.  In addition to the  competition
provided  by  the  lending  and  deposit  gathering   subsidiaries  of  national
manufacturers,  retailers,  insurance  companies  and  investment  brokers,  the
banking  subsidiaries compete vigorously with other banks, thrift  institutions,
credit unions and finance companies located within their service areas.

                           REGULATION AND SUPERVISION

                       OF FIRST MERCHANTS AND SUBSIDIARIES

BANK HOLDING COMPANY REGULATION

The  Corporation is registered as a bank holding company and has elected to be a
financial  holding company.  It is subject to the supervision of, and regulation
by the Board of  Governors of the Federal  Reserve  System  ("Federal  Reserve")
under the Bank Holding  Company Act of 1956,  as amended  (the "BHC Act").  Bank
holding  companies are required to file periodic reports with and are subject to
periodic  examination  by the Federal  Reserve.  The Federal  Reserve has issued
regulations  under the BHC Act  requiring a bank  holding  company to serve as a
source of financial and managerial strength to its subsidiary banks. Thus, it is
the policy of the Federal Reserve that, a bank holding company should stand
ready to use its resources to provide  adequate  capital funds to its subsidiary
banks during periods of financial stress or adversity.  Additionally,  under the
Federal Deposit  Insurance  Corporation  Improvement Act of 1991  ("FDICIA"),  a
bank  holding  company is  required  to  guarantee  the  compliance  of any
subsidiary  bank that may become  "undercapitalized"  (as defined in the FDICIA)
with the terms of any capital restoration plan filed by such subsidiary with its
appropriate  federal banking agency.  Under the BHC Act, the Federal Reserve has
the authority to require a bank  holding  company to terminate any activity
or relinquish  control of a nonbank  subsidiary (other than a nonbank subsidiary
of a bank) upon the determination that such activity  constitutes a serious risk
to the financial stability of any bank subsidiary.

The BHC Act requires the Corporation to obtain the prior approval of the Federal
Reserve before:

1.  Acquiring direct or indirect control or ownership of any voting shares of
    any bank or bank holding company if, after such acquisition, the bank
    holding company will directly or indirectly own or control more than 5% of
    the voting shares of the bank or bank holding company.

2.  Merging or consolidating with another bank holding company; or

3.  Acquiring substantially all of the assets of any bank.

The BHC Act  generally  prohibits  bank holding  companies  that have not become
financial  holding  companies from (i) engaging in activities other than banking
or managing or controlling  banks or other  permissible  subsidiaries,  and
(ii) acquiring or retaining direct or indirect control of any company engaged in
the activities other than those activities  determined by the Federal Reserve to
be closely related to banking or managing or controlling banks.

The BHC Act does not place territorial  restrictions on such  nonbanking-related
activities.

                                                                       Page 4

CAPITAL ADEQUACY GUIDELINES FOR BANK HOLDING COMPANIES

     The Corporation is required to comply with the Federal Reserve's
risk-based capital guidelines. These guidelines require a minimum ratio of
capital to risk-weighted assets of 8% (including certain off-balance sheet
activities such as standby letters of credit). At least half of the total
required capital must be "Tier 1 capital," consisting principally of common
shareholders' equity, noncumulative perpetual preferred stock, a limited amount
of cumulative perpetual preferred stock and minority interest in the equity
accounts of consolidated subsidiaries, less certain goodwill items. The
remainder may consist of a limited amount of subordinate debt and
intermediate-term preferred stock, certain hybrid capital instruments and other
debt securities, cumulative perpetual preferred stock, and a limited amount of
the general loan loss allowance.

     In addition to the risk-based capital  guidelines,  the Federal Reserve has
adopted a Tier 1  (leverage)  capital  ratio  under  which the Corporation  must
maintain a minimum level of Tier 1 capital to average total consolidated assets.
The ratio is 3% in the case of bank  holding  companies  which have the  highest
regulatory  examination ratings and are not contemplating  significant growth or
expansion.  All other bank holding companies are expected to maintain a ratio of
at least 1% to 2% above the stated minimum.

     The following are the Corporation's regulatory capital ratios as of
December  31, 2001:

                                      Corporation       Regulatory Minimum
                                                            Requirement

Tier 1 Capital:                          10.6%                 4.0%
(to risk-weighted assets)

Total Capital:                           11.8%                 8.0%

BANK REGULATION

     First Merchants, Union County, and First  National are  national  banks and
are  supervised,  regulated and examined by the Office of the Comptroller of the
Currency  (the "OCC").  First  United,  Madison,  Randolph  County,  Decatur and
Frances  Slocum  are  state  banks  chartered  in  Indiana  and are  supervised,
regulated and examined by the Indiana Department of Financial  Institutions.  In
addition,  five  of  the  Corporation's  subsidiaries,  Madison,  First  United,
Randolph  County,  Decatur  and Frances  Slocum are  supervised,  regulated  and
examined by the FDIC. Each regulator has the authority to issue cease-and-desist
orders if it  determines  that  activities  of the bank  regularly  represent an
unsafe and unsound banking practice or a violation of law.

     Both federal and state law extensively  regulate various aspects of the
banking   business   such  as   reserve   requirements,   truth-in-lending   and
truth-in-savings  disclosures, equal credit opportunity,  fair credit reporting,
trading in securities and other aspects of banking  operations.  Current federal
law also requires banks,  among other things,  to make deposited funds available
within specified time periods.
                                                                        Page 5

BANK REGULATION continued

     Insured state-chartered banks are prohibited under FDICIA from engaging
as the principal in activities that are not permitted for national banks, unless
(i) the FDIC determines that the activity would pose no significant  risk to the
appropriate  deposit  insurance fund, and (ii) the bank is, and continues to be,
in compliance with all applicable capital standards.

BANK CAPITAL REQUIREMENTS

     The FDIC and the OCC have adopted  risk-based  capital ratio guidelines
to which  state-chartered  banks and national banks are subject.  The guidelines
establish a framework that makes regulatory capital  requirements more sensitive
to  differences in risk  profiles.  Risk-based  capital ratios are determined by
allocating   assets  and  specified   off-balance   sheet  commitments  to  four
risk-weighted  categories,  with higher levels of capital being required for the
categories perceived as representing greater risk.

     Like the capital guidelines  established by the Federal Reserve,  these
guidelines divide a bank's capital into tiers.  Banks are required to maintain a
total risk-based  capital ratio of 8%. The FDIC or OCC may, however,  set higher
capital  requirements  when a bank's  particular  circumstances  warrant.  Banks
experiencing or anticipating significant growth are expected to maintain capital
ratios, including tangible capital positions, well above the minimum levels.

     In addition,  the FDIC and the OCC established guidelines prescribing a
minimum  Tier 1 leverage  ratio  (Tier 1 capital  to  adjusted  total  assets as
specified  in the  guidelines).  These  guidelines  provide for a minimum Tier 1
leverage ratio of 3% for banks that meet specified criteria, including that they
have the highest  regulatory  rating and are not  experiencing  or  anticipating
significant  growth.  All other banks are required to maintain a Tier 1 leverage
ratio of 3% plus an additional 100 to 200 basis points.

     All of the Corporation's affiliate banks exceed the risk-based  capital
guidelines of the FDIC and/or the OCC as of December 31, 2001.

     The  Federal  Reserve,  the  FDIC  and the OCC  have  adopted  rules to
incorporate  market and  interest  rate risk  components  into their  risk-based
capital   standards.   Amendments  to  the  risk-based   capital   requirements,
incorporating  market  risk,  became  effective  January 1, 1998.  Under the new
market risk  requirements,  capital  will be  allocated to support the amount of
market risk related to a financial institution's ongoing trading activities.

FDICIA

     FDICIA   requires,   among  other  things,   federal  bank   regulatory
authorities  to take "prompt  corrective  action" with respect to banks which do
not meet minimum capital  requirements.  For these purposes,  FDICIA establishes
five capital tiers: well capitalized, adequately capitalized,  undercapitalized,
significantly  undercapitalized  and critically  undercapitalized.  The FDIC has
adopted  regulations  to implement the prompt  corrective  action  provisions of
FDICIA.

     "Undercapitalized"  banks are  subject  to growth  limitations  and are
required to submit a capital  restoration  plan. A bank's  compliance  with such
plan is required to be guaranteed by the bank's parent  holding  company.  If an
"undercapitalized"  bank fails to submit an acceptable plan, it is treated as if
it is significantly undercapitalized. "Significantly undercapitalized" banks are
subject  to one or more  restrictions,  including  an  order by the FDIC to sell
sufficient voting stock to become adequately capitalized, requirements to reduce
total  assets and cease  receipt  of  deposits  from  correspondent  banks,  and
restrictions    on    compensation    of   executive    officers.    "Critically
undercapitalized"  institutions  may  not,  beginning  60  days  after  becoming
"critically  undercapitalized,"  make any  payment of  principal  or interest on
certain subordinated debt or extend credit for a highly leveraged transaction or
enter into any transaction outside the ordinary course of business. In addition,
"critically  undercapitalized"  institutions  are  subject to  appointment  of a
receiver or conservator.

                                                                        Page 6

FDICIA continued

     As of December 31, 2001,  each bank  subsidiary of First  Merchants is
"well capitalized" based on the "prompt corrective action" ratios and deadlines
described above. It should be noted, however, that a bank's capital category is
determined  solely for the purpose of applying the OCC's (or the FDIC's) "prompt
corrective action" regulations and that the capital category may not constitute
an accurate  representation  of the bank's overall  financial condition or
prospects.

DEPOSIT INSURANCE

     The Corporation's affiliated banks are insured up to  regulatory  limits by
the FDIC and,  accordingly,  are  subject to deposit  insurance  assessments  to
maintain  the Bank  Insurance  Fund  (the  "BIF")  and the  Savings  Association
Insurance  Fund  ("SAIF")  administered  by  the  FDIC.  The  FDIC  has  adopted
regulations  establishing a permanent  risk-related deposit insurance assessment
system. Under this system, the FDIC places each insured bank in one of nine risk
categories  based  on  (i)  the  bank's  capitalization,  and  (ii)  supervisory
evaluations provided to the FDIC by the institution's primary federal regulator.
Each insured bank's  insurance  assessment  rate is then  determined by the risk
category in which it is classified by the FDIC.

     The Deposit  Insurance Funds Act of 1996 provides for assessments to be
imposed on insured  depository  institutions with respect to deposits insured by
the BIF and the SAIF (in addition to assessments currently imposed on depository
institutions with respect to BIF- and SAIF-insured deposits) to pay for the cost
of Financing  Corporation  ("FICO")  funding.  The FICO  assessments do not vary
depending  upon  a  depository   institution's   capitalization  or  supervisory
evaluations.

DIVIDEND LIMITATIONS

     National and state banking laws restrict the amount of dividends that an
affiliate  bank  may  declare  in a  year  without  obtaining  prior  regulatory
approval. National and state banks are limited to the bank's retained net income
(as defined)  for the current  year plus those for the  previous  two years.  At
December 31, 2001, the Corporation's affiliate banks had no retained net profits
available  for  2002  dividends  to the  Corporation  without  prior  regulatory
approval.

BROKERED DEPOSITS

     Under FDIC  regulations,  no  FDIC-insured  depository  institution can
accept  brokered  deposits  unless  it (i)  is  well  capitalized,  or  (ii)  is
adequately  capitalized and received a waiver from the FDIC. In addition,  these
regulations  prohibit any depository  institution  that is not well  capitalized
from (a) paying an interest  rate on deposits in excess of 76 basis  points over
certain prevailing market rates or (b) offering "pass through" deposit insurance
on certain  employee  benefit plan accounts unless it provides certain notice to
affected depositors.

INTERSTATE BANKING AND BRANCHING

     Under the Riegle-Neal  Interstate Banking and Branching  Efficiency Act
of 1994  ("Riegle-Neal")  subject  to  certain  concentration  limits,  required
regulatory  approvals and other  requirements,  (i) financial  holding companies
such as the Corporation  are  permitted  to  acquire  banks  and  bank  holding
companies  located in any state;  (ii) any bank that is a  subsidiary  of a bank
holding  company is permitted to receive  deposits,  renew time deposits,  close
loans,  service  loans and receive loan  payments as an agent for any other bank
subsidiary  of that holding  company;  and (iii) banks are  permitted to acquire
branch  offices  outside their home states by merging with  out-of-state  banks,
purchasing  branches in other states, and establishing de novo branch offices in
other states.
                                                                        Page 7

FINANCIAL SERVICES MODERNIZATION ACT

     The Gramm-Leach-Bliley Act of 1999 (the "Financial Services Modernization
Act")  establishes  a  comprehensive  framework  to  permit  affiliations  among
commercial  banks,  insurance  companies,  securities firms, and other financial
service  providers by revising and  expanding  the existing BHC Act.  Under this
legislation,  bank holding  companies would be permitted to conduct  essentially
unlimited  securities  and  insurance  activities  as well as  other  activities
determined by the Federal  Reserve Board to be financial in nature or related to
financial services.  As a result,  the Corporation is able to provide securities
and insurance services.  Furthermore, under this legislation, the Corporation is
able to acquire, or be acquired by, brokerage and securities firms and insurance
underwriters. In addition, the Financial Services Modernization Act broadens the
activities  that may be conducted  by national  banks  through the  formation of
financial  subsidiaries.  Finally,  the  Financial  Services  Modernization  Act
modifies the laws governing the implementation of the Community Reinvestment Act
and  addresses a variety of other legal and  regulatory  issues  affecting  both
day-to-day operations and long-term activities of financial institutions.

     A bank holding  company  may become a financial  holding company if each of
its  subsidiary  banks is well  capitalized,  is well managed and has at least a
satisfactory   rating  under  the  Community   Reinvestment  Act,  by  filing  a
declaration  that the bank holding company wishes to become a financial  holding
company. Also effective March 11, 2000, no regulatory approval is required for a
financial  holding  company to  acquire a company,  other than a bank or savings
association, engaged in activities that are financial in nature or incidental to
activities  that are financial in nature,  as determined by the Federal  Reserve
Board.  The  Federal  Reserve  Bank  of  Chicago   approved  the   Corporation's
application to become a Financial Holding Company effective September 13, 2000.

ADDITIONAL MATTERS

     The Corporation and its affiliate banks are subject to the Federal Reserve
Act,  which  restricts  financial  transactions  between  banks  and  affiliated
companies.  The statute limits credit  transactions  between  banks,  affiliated
companies and its executive officers and its affiliates.  The statute prescribes
terms and  conditions for bank  affiliate  transactions  deemed to be consistent
with safe and sound  banking  practices,  and  restricts the types of collateral
security  permitted  in  connection  with the bank's  extension  of credit to an
affiliate.  Additionally,  all transactions  with an affiliate must be on terms
substantially  the same or at least as  favorable  to the  institution  as those
prevailing at the time for comparable transactions with non-affiliated parties.

     In addition to the matters discussed above, the Corporation's  affiliate
banks are subject to  additional  regulation  of their  activities,  including a
variety of consumer protection regulations affecting their lending,  deposit and
collection  activities  and  regulations  affecting  secondary  mortgage  market
activities.

     The earnings of  financial  institutions  are also  affected by general
economic  conditions and prevailing  interest rates,  both domestic and foreign,
and by the monetary and fiscal policies of the United States  Government and its
various agencies, particularly the Federal Reserve.

     Additional legislation and administrative actions affecting the banking
industry may be considered by the United States Congress, state legislatures and
various  regulatory  agencies,  including  those referred to above. It cannot be
predicted with certainty whether such legislation or administrative  action will
be  enacted  or the  extent to which the  banking  industry  in general or the
Corporation and its affiliate banks in particular would be affected.

                                                                        Page 8

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     The Corporation from time to time includes forward-looking statements in
its oral and written communication.  The Corporation may include forward-looking
statements in filings with the Securities and Exchange Commission,  such as this
Form 10-K, in other  written  materials  and in oral  statements  made by senior
management to analysts, investors,  representatives of the media and others. The
Corporation intends these  forward-looking  statements to be covered by the safe
harbor  provisions  for  forward-looking  statements  contained  in the  Private
Securities  Litigation Reform Act of 1995, and the Corporation is including this
statement  for  purposes  of  these  safe  harbor  provisions.   Forward-looking
statements  can  often  be  identified  by the  use of  words  like  "estimate,"
"project,"  "intend,"  "anticipate,"  "expect"  and similar  expressions.  These
forward-looking statements include:

     *  statements of the Corporation's goals, intentions and expectations;

     *  statements regarding the Corporation's business plan and growth
        strategies;

     *  statements regarding the asset quality of the Corporation's loan and
        investment portfolios; and

     *  estimates of the Corporation's risks and future costs and benefits.

     These forward-looking statements are subject to significant risks,
assumptions and uncertainties, including, among other things, the following
important factors which could affect the actual outcome of future events:

     *  fluctuations in market rates of interest and loan and deposit pricing,
        which could negatively affect the Corporation's net interest margin,
        asset valuations and expense expectations;

     *  adverse changes in the Indiana economy, which might affect the
        Corporation's business prospects and could cause credit-related losses
        and expenses;

     *  adverse developments in the Corporation's loan and investment
        portfolios;

     *  competitive factors in the banking industry, such as the trend towards
        consolidation in the Corporation's market; and

     *  changes in the banking legislation or the regulatory requirements of
        federal and state agencies applicable to bank holding companies and
        banks like the Corporation's affiliate banks.

     Because of these and other uncertainties, the Corporation's actual future
results may be materially different from the results indicated by these forward-
looking statements.  In addition, the Corporation's past results of operations
do not necessarily indicate its future results.

                                                                         Page 9

STATISTICAL DATA

The following tables set forth statistical data relating the Corporation and its
subsidiaries.

DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL
The daily average balance sheet amounts, the related interest income or expense,
and average rates earned or paid are presented in the following table.
(Dollars in Thousands)

                                                  2001                            2000                            1999
                                   -------------------------------  -------------------------------  -------------------------------
                                               Interest                         Interest                         Interest
                                    Average    Income/    Average    Average    Income/    Average    Average    Income/    Average
                                    Balance    Expense      Rate     Balance    Expense      Rate     Balance    Balance      Rate
                                   ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------
                                                                                                  
Assets:
Federal funds sold ........       $   31,820    $    899     2.8%  $    9,938    $    666     6.7%   $   14,369    $    657   4.6%
Interest-bearing deposits......        2,060         106     5.1        1,807         103     5.7         1,105          59   5.3
Federal Reserve and
  Federal Home Loan Bank stock.        7,657         559     7.3        6,456         585     9.1         5,121         446   8.7
Securities: (1)
  Taxable .......................    179,006      11,207     6.3      235,745      14,478     6.1       256,424      15,459   6.0
  Tax-exempt ....................     85,288       6,312     7.4       95,836       7,057     7.4       111,437       8,066   7.2
                                  ----------    --------           ----------    --------            ----------    --------
    Total Securities.............    264,294      17,519     6.6      331,581      21,535     6.5       367,861      23,525   6.4
Mortgage loans held for sale.....        481          41     8.5           75           8    10.7           125          15  12.0
Loans: (2)
  Commercial ....................    612,031      49,786     8.1      492,793      45,373     9.2       416,757      35,616   8.5
  Bankers' acceptance and
    Commercial paper purchased...                                                                           371          18   4.9
  Real estate mortgage...........    404,831      31,908     7.9      372,104      29,795     8.0       332,670      26,604   8.0
  Installment ...................    245,978      21,388     8.7      233,966      20,622     8.8       183,534      16,113   8.8
  Tax-exempt ....................      7,234         674     9.3        5,075         478     9.4         2,259         358  15.8
                                  ----------    --------           ----------    --------            ----------    --------
    Total loans .................  1,270,555     103,797     8.2    1,104,013      96,276     8.7       935,716      78,724   8.4
                                  ----------    --------           ----------    --------            ----------    --------
    Total earning assets.........  1,576,386     122,880     7.8    1,453,795     119,165     8.2     1,324,172     103,411   7.8
                                  ----------    --------           ----------    --------            ----------    --------
Net unrealized gain (loss) on securities
available for sale...............      2,608                          (13,421)                              (47)
Allowance for loan losses........    (13,736)                         (11,570)                          (10,821)
Cash and due from banks..........     42,814                           39,250                            36,873
Premises and equipment ..........     25,265                           22,349                            19,794
Other assets ....................     56,357                           42,308                            27,259
                                   ---------                        ---------                         ---------
    Total assets ................ $1,689,694                       $1,532,711                        $1,397,230
                                  ==========                       ==========                        ==========
Liabilities:
  Interest-bearing deposits:
    NOW accounts ................ $  192,573       2,475     1.3%  $  168,773       2,920     1.7%   $  152,268       2,642   1.7%

    Money market deposit accounts    214,087       6,386     3.0      193,932       9,000     4.6       177,091       6,804   3.8
    Savings deposits ............    122,175       2,310     1.9       98,988       2,477     2.5        95,344       2,399   2.5
    Certificates and other
      time deposits .............    655,477      34,655     5.3      612,605      35,210     5.7       518,624      26,694   5.1
                                  ----------    --------           ----------    --------            ----------    --------
  Total interest-bearing
    deposits.....................  1,184,312      45,826     3.9    1,074,298      49,607     4.6       943,327      38,539   4.1

Borrowings ......................    171,771      10,248     6.0      169,869      10,939     6.4       154,839       8,359   5.4
                                  ----------    --------           ----------    --------            ----------    --------
  Total interest-bearing
    liabilities..................  1,356,083      56,074     4.1    1,244,167      60,546     4.9     1,098,166      46,898   4.3
Noninterest-bearing deposits.....    147,318                          134,717                           129,747
Other liabilities ...............     20,061                           12,381                            19,595
                                  ----------                       ----------                        ----------
    Total liabilities............  1,523,462                        1,391,265                         1,247,508
Stockholders' equity ............    166,232                          141,446                           149,722
                                  ----------                       ----------                        ----------
    Total liabilities and
     stockholders' equity........ $1,689,694      56,074     3.6(3)$1,532,711      60,546     4.2(3) $1,397,230      46,898   3.5(3)
                                  ==========    --------           ==========    --------            ==========    --------
    Net interest income .........               $ 66,806                          $ 58,619                          $ 56,513
                                                ========                          ========                          ========
    Net interest margin..........                            4.2                               4.0                            4.3
(1)     Average  balance of securities  is computed  based on the average of the
        historical amortized cost balances without the effects of the fair value
        adjustment.
(2)     Nonaccruing loans have been included in the average balances.
(3)     Total interest expense divided by total earning assets adjustment
        to convert tax exempt investment  securities to fully taxable equivalent
        basis,    using   marginal   rate   of   35%   for   2001,   2000,   and
        1999.............................
                                                 $2,445                            $2,637                            $2,948
                                                 ======                            ======                            ======
                                                                         Page 10

STATISTICAL DATA (continued)
- ----------------

ANALYSIS OF CHANGES IN NET INTEREST INCOME

The following table presents net interest income  components on a tax-equivalent
basis and reflects  changes between  periods  attributable to movement in either
the  average  balance  or  average  interest  rate for both  earning  assets and
interest-bearing  liabilities.  The  volume  differences  were  computed  as the
difference in volume  between the current and prior year times the interest rate
of the  prior  year,  while the  interest  rate  changes  were  computed  as the
difference  in rate  between  the current and prior year times the volume of the
prior  year.  Volume/rate  variances  have  been  allocated  on the basis of the
absolute relationship between volume variances and rate variances.

                                                 2001 Compared to 2000                              2000 Compared to 1999
                                               Increase (Decrease) Due To                         Increase (Decrease) Due To
                                        -----------------------------------------          -----------------------------------------

                                          Volume         Rate          Total                Volume         Rate          Total
                                          ------         ----          -----                ------         ----          -----
                                                        (Dollars in Thousands on Fully Taxable Equivalent Basis)

Interest income:
  Federal funds sold ...............     $   795       $   (562)     $    233               $  (240)      $    249     $      9
  Interest-bearing deposits ........          14            (11)            3                    40              4           44
  Federal Reserve and Federal
    Home Loan Bank stock ...........          98           (124)         (26)                   120             19          139
  Securities .......................      (4,452)           436       (4,016)                (2,351)           361       (1,990)
  Mortgage loans held for sale .....          35             (2)          33                     (5)            (2)          (7)
  Loans ............................      13,843         (6,355)       7,488                 14,593          2,966       17,559
                                         --------      ---------    ---------               --------      ---------    ---------
  Totals ...........................      10,333         (6,618)       3,715                 12,157          3,597       15,754
                                         --------      ---------    ---------               --------      ---------    ---------
Interest expense:
  NOW accounts .....................         374           (819)        (445)                   286             (8)         278
  Money market deposit
    accounts........................         860         (3,474)      (2,614)                   689          1,507        2,196
  Savings deposits..................         511           (678)        (167)                    91            (13)          78
  Certificates and other
    time deposits...................       2,372         (2,927)        (555)                 5,181          3,335        8,516
  Borrowings........................         121           (812)        (691)                   864          1,716        2,580
                                         --------      ---------    ---------               --------      ---------    ---------
    Totals..........................       4,238         (8,710)      (4,472)                 7,111         (6,537)      13,648
                                         --------      ---------    ---------               --------      ---------    ---------

Change in net interest
  income (fully taxable
  equivalent basis)................      $ 6,095       $  2,092     $  8,187                $ 5,046       $ (2,940)    $  2,106
                                         ========      =========                            ========      =========

Tax equivalent adjustment
  using marginal rate
  of 35% for 2001, 2000,
 and 1999..........................                                      192                                                311
                                                                   ----------                                         ----------

Change in net interest
  income...........................                                $   8,379                                          $   2,417
                                                                   ==========                                         ==========

                                                                        Page 11

STATISTICAL DATA (continued)

INVESTMENT SECURITIES

The  amortized  cost,  gross  unrealized  gains,  gross  unrealized  losses  and
approximate  market value of the  investment  securities at the dates  indicated
were:

                                                                          Gross            Gross
                                                       Amortized        Unrealized      Unrealized          Fair
                                                         Cost             Gains           Losses            Value
                                                    ----------------  ---------------  --------------  --------------
                                                                          (Dollars in Thousands)

Available for sale at December 31, 2001:
    U.S. Treasury..............................        $    124                                          $    124
    Federal agencies...........................          30,808         $    767        $      2           31,573
    State and municipal........................          74,776            1,644             215           76,205
    Mortgage-backed securities.................         100,811            1,710               1          102,520
    Other asset-backed securities  ............          10,116              167                           10,283
    Corporate obligations  ....................           3,498              116                            3,614
    Marketable equity securities...............           7,472                              123            7,349
                                                       --------         --------        --------         --------
       Total available for sale................         227,605            4,404             341          231,668
                                                       --------         --------        --------         --------

Held to maturity at December 31, 2001:
   State and municipal.........................           8,426              166              58            8,534
   Mortgage-backed securities..................             228                                               228
                                                       --------         --------        --------         --------
      Total held to maturity...................           8,654              166              58            8,762
                                                       --------         --------        --------         --------
      Total investment securities..............        $236,259         $  4,570        $    399         $240,430
                                                       ========         ========        ========         ========

Available for sale at December 31, 2000:
    U.S. Treasury..............................        $  2,997                                          $  2,997
    Federal agencies...........................          55,403         $    268        $    155           55,516
    State and municipal........................          81,370            1,045             103           82,312
    Mortgage-backed securities.................         127,907              139             922          127,124
    Other asset-backed securities  ............          19,924               10             148           19,786
    Corporate obligations  ....................           7,238                9             395            6,852
    Marketable equity securities...............           1,277                              134            1,143
                                                       --------         --------        --------         --------
       Total available for sale................         296,116            1,471           1,857          295,730
                                                       --------         --------        --------         --------

Held to maturity at December 31, 2000:
   U.S. Treasury...............................             250                                               250
   State and municipal.........................          11,645              131              36           11,740
   Mortgage-backed securities..................             338                                               338
                                                       --------         --------        --------         --------
      Total held to maturity...................          12,233              131              36           12,328
                                                       --------         --------        --------         --------
      Total investment securities..............        $308,349         $  1,602        $  1,893         $308,058
                                                       ========         ========        ========         ========

                                                                        Page 12

- --------------------------------------------------------------------------------
STATISTICAL DATA (continued)

                                                                            Gross          Gross
                                                       Amortized         Unrealized      Unrealized        Fair
                                                          Cost              Gains          Losses         Value
                                                     ---------------   --------------  --------------  ------------
                                                                                             
Available for sale at December 31, 1999:
    U.S. Treasury..............................       $   7,337         $      3         $    72         $  7,268
    Federal agencies...........................          61,215               50           1,199           60,066
    State and municipal........................          94,598              568             945           94,221
    Mortgage-backed securities.................         141,673               58           4,332          137,399
    Other asset-backed securities  ............          21,773                              758           21,015
    Corporate obligations  ....................           9,082                4             140            8,946
    Marketable equity securities...............             915                              162              753
                                                      ---------         --------         -------         --------
       Total available for sale................         336,593              683           7,608          329,668
                                                      ---------         --------         -------         --------

Held to maturity at December 31, 1999:
   U.S. Treasury...............................             250                                2              248
   State and municipal.........................          13,243               77              13           13,307
   Mortgage-backed securities..................             311                1               1              311
   Other asset-backed securities...............             499                               81              418
                                                      ---------         --------         -------         --------
      Total held to maturity...................          14,303               78              97           14,284
                                                      ---------         --------         -------         --------
      Total investment securities..............       $ 350,896         $    761         $ 7,705         $343,952
                                                      =========         ========         =======         ========

                                                                              Cost
                                                    ----------------------------------------------------------
                                                          2001                 2000                 1999
                                                          ----                 ----                 ----
                                                                                         
Federal Reserve and Federal Home Loan
   Bank stock at December 31:
Federal Reserve Bank stock ....................         $  493               $  493               $  493
Federal Home Loan Bank stock ..................          7,857                6,692                5,365
                                                         -----                -----                -----
    Total .....................................         $8,350               $7,185               $5,858
                                                        ======               ======               ======

The Fair value of Federal Reserve and Federal Home Loan Bank stock  approximates
cost.

The maturity  distribution  (dollars in  thousands)  and average  yields for the
securities portfolio at December 31, 2001 were:

Securities available for sale December 31, 2001:

                                                 Within 1 Year                 1-5 Years                  5-10 Years
                                                 -------------                 ---------                  ----------
                                              Amount        Yield*        Amount        Yield*       Amount        Yield*
                                              ------        ------        ------        ------       ------        ------
                                                                                                   
U.S. Treasury......................          $   124          2.1%
Federal Agencies...................            2,529          5.6        $21,145         5.0%       $ 5,894          2.5%
State and Municipal................           15,741          6.9         35,648         7.3          9,462          8.0
Corporate Obligations..............            1,537          6.5          2,077         6.5
                                             -------                     -------                    -------
    Total..........................          $19,931          6.7%       $58,870         6.5%       $15,356          5.9%
                                             =======                     =======                    =======

                                                                        Page 13

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

STATISTICAL DATA (continued)

                                                                            Marketable Equity,
                                                                            Mortgage and Other
                                             Due After Ten Years         Asset-Backed Securities                Total
                                             -------------------         -----------------------                -----
                                            Amount         Yield*         Amount         Yield*          Amount        Yield*
                                            ------         ------         ------         ------          ------        ------
                                                                                                      
U.S. Treasury........................                                                                  $    124         2.1%
Federal Agencies.....................     $  2,005           2.5%                                        31,573         4.8
State and Municipal..................       15,354           7.9                                         76,205         7.4
Corporate Obligations................                                                                     3,614         6.5
Marketable Equity Security...........                                  $   7,349           5.6%           7,349         5.6
Mortgage-backed securities...........                                    102,520           6.4          102,520         6.4
Other asset-backed securities........                                     10,283           5.7           10,283         5.7
                                          --------                     ---------                       --------
    Total............................     $ 17,359           7.3%      $ 120,152           6.3%        $231,668         6.5%
                                          ========                     =========                       ========

Securities held to maturity at December 31, 2001:

                                                  Within 1 Year                1-5 Years                   5-10 Years
                                                  -------------                ---------                   ----------
                                            Amount         Yield*         Amount        Yield*       Amount         Yield*
                                            ------         ------         ------        ------       ------         ------
                                                                                                    
State and Municipal..................     $  2,545           6.9%        $ 3,217          7.4%       $1,944           7.9%

                                                                             Mortgage Backed
                                            Due After Ten Years                Securities                     Total
                                            -------------------               ------------                    -----
                                           Amount          Yield*         Amount        Yield*        Amount        Yield*
                                           ------          ------         ------        ------        ------        ------
                                                                                                    
State and Municipal..................     $   720            8.7%                                     $ 8,426         7.5%
Mortgage-backed securities...........                                    $   228          8.2%            228         8.2
                                          -------                        -------                      -------
     Total............................    $   720            8.7%        $   228          8.2%        $ 8,654         7.5%
                                          =======                        =======                      =======

   *Interest  yields on state and municipal  securities are presented on a fully
   taxable equivalent basis using a 35% rate.

Federal Reserve and Federal Home Loan Bank stock at December 31, 2001:

                                           Amount          Yield
                                                      
Federal Reserve Bank Stock...........     $  493            6.00%
Federal Home Loan Bank stock.........      7,857            6.75
                                          -------
    Total............................     $8,350            6.71%
                                          =======

                                                                        Page 14

STATISTICAL DATA (continued)

LOAN PORTFOLIO

TYPES OF LOANS

The loan portfolio at the dates indicated is presented below:

                                                     2001              2000             1999             1998            1997
                                                     ----              ----             ----             ----            ----
                                                                               (Dollars in Thousands)
                                                                                                         
Loans at December 31:
  Commercial and
    industrial loans...........................   $  301,962        $  258,405         $224,712        $188,841         $178,696
  Bankers acceptances and loans
    to financial institutions..................                                                             900              705
  Agricultural production
    financing and other loans
    to farmers.................................       29,645            24,547           21,547          21,951           16,764
  Real estate loans:
    Construction...............................       58,316            45,412           31,996          31,719           22,710
    Commercial and farmland....................      230,233           167,317          150,544         137,671          142,394
    Residential................................      544,028           466,660          380,596         361,611          331,405
  Individuals' loans for
    household and other
    personal expenditures......................      179,364           201,629          181,906         143,075          139,620
  Tax-exempt loans.............................        7,277             6,093            4,070           2,652            2,598
  Other loans..................................        8,800             5,523            3,552           2,073            3,782
                                                   ----------        ----------        ---------       ---------        ---------
                                                   1,359,625         1,175,586          998,923         890,493          838,674
  Unearned interest on loans...................          (39)                               (28)           (137)            (487)
                                                   ----------        ----------        ---------       ---------        ---------
            Total loans........................   $1,359,586        $1,175,586         $998,895        $890,356         $838,187
                                                   ==========        ==========        =========       =========        =========

Residential  Real Estate Loans Held for Sale at December 31, 2001,  2000,  1999,
1998, and 1997 were $307,000, $0, $61,000, $775,800, and $471,400.

MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST RATES

Presented in the table below are the maturities of loans  (excluding  commercial
real  estate,  banker  acceptances,   farmland,   residential  real  estate  and
individuals'  loans) outstanding as of December 31, 2001. Also presented are the
amounts due after one year classified according to the sensitivity to changes in
interest rates.

                                                                               Maturing
                                                    Within              1-5               Over
                                                    1 Year             Years             5 Years            Total
                                                 --------------    ---------------    --------------     ------------
                                                                        (Dollars in Thousands)
                                                                                              
Commercial and industrial loans................  $  218,241        $  59,372           $  24,349          $  301,962
Agricultural production financing
  and other loans to farmers...................      26,281            2,656                 708              29,645
Real estate - Construction.....................      35,759           19,720               2,837              58,316
Tax-exempt loans...............................         144            3,969               3,164               7,277
Other loans....................................       2,340            6,447                  13               8,800
                                                 ----------        ---------            ---------         ----------
      Total....................................  $  282,765        $  92,164            $ 31,071          $  406,000
                                                 ==========        =========            =========         ==========

                                                                        Page 15

STATISTICAL DATA  (continued)

                                                                       Maturing
                                                  ---------------------------------------------------
                                                           1 - 5                       Over
                                                           Years                     5 Years
                                                           -----                     -------
                                                                (Dollars in Thousands)
                                                                          
Loans maturing after one year with:

  Fixed rate..............................          $      55,141               $     31,038
  Variable rate...........................                 37,023                         33
                                                    -------------               ------------
    Total.................................          $      92,164               $     31,071
                                                    =============               ============

NONACCRUING, CONTRACTUALLY PAST DUE 90 DAYS OR MORE
OTHER THAN NONACCRUING AND RESTRUCTURED LOANS

                                                                              December 31
                                                  --------------------------------------------------------------------
                                                   2001          2000           1999           1998            1997
                                                   ----          ----           ----            ----           ----
                                                                       (Dollars in Thousands)
                                                                                                
Nonaccruing loans.........................        $6,327        $2,370         $1,280          $1,073          $2,146
Loans contractually past due 90
  days or more other than
  nonaccruing.............................         4,828         2,483          2,826           2,334           2,034
Restructured loans........................         3,511         3,085            908           1,110           1,086

Nonaccruing loans are loans which are reclassified to a nonaccruing  status when
in  management's  judgment the collateral  value and financial  condition of the
borrower do not justify accruing interest. Interest previously recorded, but not
deemed  collectible,  is reversed and charged against  current income.  Interest
income on these loans is then recognized when collected.

Restructured  loans are loans for which the  contractual  interest rate has been
reduced  or  other  concessions  are  granted  to  the  borrower, because  of  a
deterioration  in the  financial  condition  of the  borrower  resulting  in the
inability of the borrower to meet the original contractual terms of the loans.

Interest income of $412,000 for the year ended December 31, 2001, was recognized
on the nonaccruing  and  restructured  loans listed in the table above,  whereas
interest income of $542,000 would have been recognized under their original loan
terms.

Potential problem loans:

Management  has  identified  certain  other loans  totaling $18,798,000 as of
December 31, 2001,  not included in the table above,  or impaired  loan table in
the footnotes to the consolidated  financial  statements,  about which there are
doubts as to the borrowers' ability to comply with present repayment terms.

The Corporation's affiliate banks generate  commercial,  mortgage  and  consumer
loans from customers located  primarily in central and east-central  Indiana and
Butler County, Ohio. The Banks' loans are generally secured by specific items of
collateral,  including  real property,  consumer  assets,  and business  assets.
Although the Banks have diversified loan  portfolios,  a substantial  portion of
their  debtors'  ability to honor their  contracts  is dependent  upon  economic
conditions in the automotive and agricultural industries.
                                                                        Page 16

STATISTICAL DATA (continued)
- ----------------

SUMMARY OF LOAN LOSS EXPERIENCE

The following table summarizes the loan loss experience for the years indicated.

                                                    2001            2000            1999            1998           1997
                                                    ----            ----            ----            ----           ----
                                                                          (Dollars in Thousands)
                                                                                                  
Allowance for loan losses:
  Balance at January 1....................        $ 12,454        $ 10,128        $  9,209        $ 8,429        $ 8,010

  Chargeoffs:
    Commercial and industrial(1)...........          1,688             974             361            794            543
    Real estate mortgage(3)................            227              43              40             44             31
    Individuals' loans for household and
      other personal expenditures,
      including other loans................          1,632           1,274           1,368          1,393          1,375
                                                  --------        --------        --------        -------        -------
      Total chargeoffs.....................          3,547           2,291           1,769          2,231          1,949
                                                  --------        --------        --------        -------        -------
  Recoveries:
    Commercial and industrial(2)...........            176             171             114            325            364
    Real estate mortgage(4)................             32               1              32             20              1
    Individuals' loans for household and
      other personal expenditures,
      including other loans................            365             407             301            294            268
                                                  --------        --------        --------        -------        -------
      Total recoveries.....................            573             579             447            639            633
                                                  --------        --------        --------        -------        -------

  Net chargeoffs...........................          2,974           1,712           1,322          1,592          1,316
                                                  --------        --------        --------        -------        -------
  Provisions for loan losses...............          3,576           2,625           2,241          2,372          1,735
  Allowance acquired in purchase...........          2,085           1,413
                                                  --------        --------        --------        -------        -------
  Balance at December 31...................        $15,141         $12,454         $10,128        $ 9,209        $ 8,429
                                                  ========        ========        ========        =======        =======

  (1)Category also includes the chargeoffs for bankers acceptances, loans to
     financial institutions, tax-exempt loans and agricultural production
     financing and other loans to farmers.
  (2)Category also includes the recoveries for bankers acceptances, loans to
     financial institutions, tax-exempt loans and agricultural production
     financing and other loans to farmers.
  (3)Category includes the chargeoffs for construction, commercial and farmland
     and residential real estate loans.
  (4)Category includes the recoveries for construction, commercial and farmland
     and residential real estate loans.

  Ratio of net chargeoffs during the
   period to average loans
   outstanding during the period..........           .23%             .16%            .14%           .18%           .16%

                                                                        Page 17

STATISTICAL DATA (continued)
- ----------------

Allocation of the Allowance for Loan Losses at December 31:

Presented  below is an analysis of the  composition  of the  allowance  for loan
losses and per cent of loans in each category to total loans:

                                                                     2001                            2000
                                                         -------------------------       -------------------------
                                                          Amount          Per Cent        Amount          Per Cent
                                                         --------         --------       --------         --------
                                                                          (Dollars in Thousands)
                                                                                                 
Balance at December 31:
  Commercial and industrial(1)................           $  6,884            28.8%       $  4,478            28.0%
  Real estate mortgage(2).....................              2,655            56.9           1,554            53.9
  Individuals' loans for household and
    other personal expenditures,
    including other loans.....................              5,502            14.3           4,622            18.1
  Unallocated.................................                100            N/A            1,800            N/A
                                                         --------           ------       --------           ------
  Totals......................................           $ 15,141           100.0%       $ 12,454           100.0%
                                                         ========           ======       ========           ======

                                                                    1999                             1998
                                                         -------------------------        -------------------------
                                                          Amount          Per Cent         Amount          Per Cent
                                                         --------         --------        --------         --------
                                                                           (Dollars in Thousands)
Balance at December 31:
  Commercial and industrial(1)................           $  3,347            27.8%        $  2,954           27.3%
  Real estate mortgage(2).....................              1,297            53.2            1,313           56.1
  Individuals' loans for household and
    other personal expenditures,
    including other loans.....................              3,914            19.0            3,514           16.6
  Unallocated.................................              1,570            N/A             1,428            N/A
                                                         --------           ------        --------          ------
  Totals......................................           $ 10,128           100.0%        $  9,209          100.0%
                                                         ========           ======        ========          ======

                                                                    1997
                                                         -------------------------
                                                          Amount          Per Cent
                                                         --------         --------
Balance at December 31:                                   (Dollars in Thousands)
  Commercial and industrial(1)................           $  3,230            26.1%
  Real estate mortgage(2).....................              1,319            56.5
  Individuals' loans for household and
    other personal expenditures,
    including other loans.....................              2,122            17.4
  Unallocated. .... ..........................              1,758            N/A
                                                         --------           ------
  Totals......................................           $  8,429           100.0%
                                                         ========           ======

  (1) Category also includes the allowance for loan losses and per cent of loans
      for bankers acceptances, loans to financial institutions, tax-exempt loans
      and agricultural production financing and other loans to farmers.
  (2) Category includes the allowance for loan losses and per cent of loans for
      construction, commercial and farmland and residential real estate loans.

                                                                        Page 18

STATISTICAL DATA (continued)
- ----------------

Loan Loss Chargeoff Procedures

The   Corporation's   affiliate   banks  have  weekly  meetings  at  which  loan
delinquencies,  maturities  and problems are  reviewed.  The Boards of Directors
receive and review reports on loans monthly.

The Executive  Committee of the Corporation's Board of Directors meets bimonthly
to approve or  disapprove  all new loans in excess of  $1,000,000  and the Board
reviews  all  commercial  loans in excess of $50,000  which were made or renewed
during the  preceding  month.  Madison's  and First  United's  loan  committees,
consisting of all loan officers and the  president,  meet as required to approve
or  disapprove  any loan  which is in excess  of an  individual  loan  officer's
lending limit.

The Loan/Discount  Committee of Union County's Board meets monthly to approve or
disapprove all loans to borrowers  with  aggregate  loans in excess of $300,000.
The Loan  Committee  of  Randolph  County's  Board  meets  weekly to  approve or
disapprove any loan which is in excess of an individual  loan officer's  lending
limit.

All  chargeoffs  are approved by the senior loan officer and are reported to the
Banks' Boards.  The Banks charge off loans when a determination is made that all
or a  portion  of a loan is  uncollectible  or as a result  of  examinations  by
regulators and the independent auditors.

Provision for Loan Losses

In banking,  loan losses are one of the costs of doing  business.  Although  the
Banks' management emphasize the early detection and chargeoff of loan losses, it
is inevitable  that at any time certain losses exist in the portfolio which have
not been specifically identified.  Accordingly, the provision for loan losses is
charged to earnings on an  anticipatory  basis,  and recognized  loan losses are
deducted from the allowance so established.  Over time, all net loan losses must
be charged to earnings.  During the year, an estimate of the loss experience for
the year serves as a starting point in determining the appropriate level for the
provision. However, the amount actually provided in any period may be greater or
less than net loan losses, based on management's  judgment as to the appropriate
level of the allowance for loan losses.  The  determination  of the provision in
any period is based on management's continuing review and evaluation of the loan
portfolio,  and its judgment as to the impact of current economic  conditions on
the portfolio.  The evaluation by management includes consideration of past loan
loss  experience,  changes in the  composition  of the loan  portfolio,  and the
current condition and amount of loans outstanding.

Impaired loans are measured by the present value of expected  future cash flows,
or the fair value of the  collateral  of the  loans,  if  collateral  dependent.
Information on impaired loans is summarized below:

                                                                           2001              2000               1999
                                                                     ---------------   ---------------    ----------------
                                                                                    (Dollars in Thousands)
                                                                                                  
For the year ending December 31:
  Impaired loans with an allowance...................                 $     10,381      $      7,862       $      2,742
  Impaired loans for which the discounted
    cash flows or collateral value exceeds the
    carrying value of the loan.......................                       10,780             6,977              4,398
                                                                      ------------      ------------       ------------

        Total impaired loans.........................                 $     21,161      $     14,839       $      7,140
                                                                      ============      ============       ============

  Allowance for impaired loans (included in the
    Corporation's allowance for loan losses).........                 $      3,251      $      2,253       $      1,061
  Average balance of impaired loans..................                       22,327            15,053              8,770
  Interest income recognized on impaired loans.......                        1,538             1,361                705
  Cash basis interest included above.................                        1,555             1,080                637

                                                                        Page 19

- --------------------------------------------------------------------------------
STATISTICAL DATA (continued)

DEPOSITS

The average balances,  interest income and expense and average rates on deposits
for the years  ended  December  2001,  2000 and 1999 are  presented  within  the
Distribution of Assets, Liabilities and Stockholders' Equity table on page 10 of
this Form 10-K.

As of December  31,  2001,  certificates  of deposit and other time  deposits of
$100,000 or more mature as follows:

                                                                       Maturing
                                                   -------------------------------------------------
                                    3 Months            3-6              6-12            Over 12
                                    or less           Months            Months           Months             Total
                                  -------------    --------------    --------------   --------------    --------------
                                                                (Dollars in Thousands)
                                                                                            
Certificates of deposit and
  other time deposits..........     $ 84,008         $ 31,571           $ 40,524         $ 36,297          $192,400
Per cent.......................           44%              16%                21%              19%              100%

RETURN ON EQUITY AND ASSETS

                                                                     2001                2000                 1999
                                                              -----------------   -----------------    -----------------
                                                                                                     
Return on assets (net income divided by
  average total assets)....................                          1.31%               1.30%                1.37%
Return on equity (net income divided by
  average equity)..........................                         13.36               14.10                12.75
Dividend payout ratio (dividends per
  share divided by net income per share)...                         51.69               51.81                53.33
Equity to assets ratio (average equity
  divided by average total assets).........                          9.84                9.23                10.72

SHORT-TERM BORROWINGS

                                                                     2001                2000                 1999
                                                              -----------------   -----------------    -----------------
                                                                               (Dollars in Thousands)
                                                                                                  
Balance at December 31:
  Securities sold under repurchase
    agreements (short-term portion)........                       $  22,732           $  31,956            $  42,957
  Federal funds purchased..................                          10,500                 975               28,885
  U.S. Treasury demand notes...............                           6,273               4,968                9,506
                                                                  ---------           ---------            ---------

          Total short-term borrowings.........                    $  39,505           $  37,899            $  81,348
                                                                  =========           =========            =========

                                                                        Page 20

Securities sold under repurchase  agreements are borrowings  maturing within one
year and are secured by U.S. Treasury and Federal agency obligations.

Pertinent information with respect to short-term borrowings is summarized below:

                                                                       2001                2000                 1999
                                                                 -----------------   -----------------    -----------------
                                                                                   (Dollars in Thousands)
                                                                                                        
Weighted average interest rate on outstanding
balance at December 31:

    Securities sold under repurchase
        agreements(short-term portion)..............                   3.3%                6.2%                 5.5%
    Total short-term borrowings.....................                   2.4                 5.6                  5.3

Weighted average interest rate during the year:
    Securities sold under repurchase
        Agreements (short-term portion).............                   3.7%                5.6%                 4.5%
    Total short-term borrowings.....................                   4.0                 5.0                  4.5

Highest amount outstanding at any month end
during the year:
    Securities sold under repurchase
        agreements (short-term portion).............             $  17,750           $  14,505            $  19,700
    Total short-term borrowings.....................                46,195              56,099               55,893

Average amount outstanding during the year:
    Securities sold under repurchase
        agreements (short-term portion).............             $  14,036           $  12,116            $  17,696
    Total short-term borrowings.....................                22,126              33,165               36,157

ITEM 2.  PROPERTIES.
- --------------------------------------------------------------------------------

The headquarters of the Corporation and First Merchants are located in a
five-story building at 200 East Jackson Street, Muncie, Indiana. The building is
owned by First Merchants.

The Corporation's  affiliate banks conduct business through numerous  facilities
owned and leased by the respective  affiliate  banks.  Of the 48 banking offices
operated by the  Corporation's  affiliate  banks, 40 are owned by the respective
banks and 8 are leased from non-affiliated third parties.

None of the properties owned by the Corporation's affiliate banks are subject to
any major  encumbrances.  The net investment of the Corporation and subsidiaries
in real estate and equipment at December 31, 2001 was $27,684,000.

- --------------------------------------------------------------------------------
ITEM 3.  LEGAL PROCEEDINGS.

There is no pending legal  proceeding,  other than ordinary  routine  litigation
incidental to the business of the Corporation or its subsidiaries, of a material
nature to which the  Corporation or its  subsidiaries is a party or of which any
of their properties are subject.  Further, there is no material legal proceeding
in which any  director,  officer,  principal  shareholder,  or  affiliate of the
Corporation,  or any  associate  of any  such  director,  officer  or  principal
shareholder, is a party, or has a material interest, adverse to the Corporation
or any of its subsidiaries.

None of the routine legal  proceedings,  individually  or in the  aggregate,  in
which the  Corporation  or its  affiliates  are  involved are expected to have a
material  adverse impact on the financial  position or the results of operations
of the Corporation.

- --------------------------------------------------------------------------------
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No  matters  were  submitted  during  the  fourth  quarter  of 2001 to a vote of
security holders, through the solicitation of proxies or otherwise.

                                                                        Page 21

SUPPLEMENTAL INFORMATION - EXECUTIVE OFFICERS OF THE REGISTRANT.
- --------------------------------------------------------------------------------
The names,  ages, and positions with the Corporation and subsidiary banks of all
executive officers of the Corporation and all persons chosen to become executive
officers are listed below.

                                                                               
                                                 Offices with the Corporation                 Principal Occupation
               Name and Age                          And Subsidiary Banks                    During Past Five Years
- ------------------------------------------- ---------------------------------------- ----------------------------------------

Michael L. Cox                              President, Chief Executive Officer       Chief Executive Officer of the
57                                          Corporation                              Corporation since April 1999;
                                                                                     President First Merchants from
                                                                                     April 1999 to September 2000;
                                                                                     President and Chief Operating Officer,
                                                                                     Corporation since August 1998 and
                                                                                     May, 1994 to April 1999 respectively;
                                                                                     President and Chief Operating Officer,
                                                                                     First Merchants from April, 1996 to
                                                                                     April 1999; Director, Corporation
                                                                                     and First  Merchants since December, 1984

Roger M. Arwood                             Executive Vice President, Corporation    President and Chief Executive Officer First
50                                          and President and CEO First Merchants    Merchants since September 2000, Bank of
                                                                                     America from 1983 to February 2000.
                                                                                     Executive Vice President of the
                                                                                     Corporation and First Merchants since
                                                                                     February of 2000

Larry R. Helms                              Executive Vice President, Corporation    Executive Vice President, Corporation
61                                          and First Merchants; General Counsel     since September 2000; Senior Vice President
                                            and Secretary, Corporation               General Counsel, Corporation 1982 to September
                                                                                     2000 Corporation since 1990 and Secretary
                                                                                     since January 1, 1997; Senior Vice
                                                                                     President, First Merchants since
                                                                                     January 1979; Director of First United
                                                                                     Bank since 1991 and Pendleton Banking
                                                                                     Company since 1992

James L. Thrash(1)                          Senior Vice President, Corporation       Senior Vice President and Chief
52                                          and First Merchants; Chief Financial     Financial Officer of the Corporation
                                            Officer, Corporation                     since 1990; Senior Vice President,
                                                                                     First Merchants since 1990

Roy A. Eon                                  Senior Vice President of Operations      Senior Vice President One Valley Bancorp;
50                                          and Technology, Corporation and First    Senior Vice President and National Manager of
                                            Merchants since January 8, 2001          Deposit Operations, Banc One Corporation;
                                                                                     Senior Vice President State Operations Manager
                                                                                     for Kentucky, Banc One Corporation.

Mark K. Hardwick(1)                         Vice President, Corporate Controller,    Corporate Controller, Corporation since
31                                          Corporation                              November 1997; Senior Accountant, Geo. S.
                                                                                     Olive & Company from September 1994 to October
                                                                                     1997

(1) On April 12, 2002, Mr. Hardwick will replace Mr. Thrash as the Corporation's
    Chief Financial Officer.  Mr. Thrash will become the head of First Merchants
    Trust and Investment Services division.

                                                                        Page 22

                                     PART II

ITEM 5.     MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
                  STOCKHOLDER MATTERS.
- --------------------------------------------------------------------------------

Except as noted below, the information  required under this item is incorporated
by reference to page 44 of the Corporation's  2001 Annual Report to Stockholders
under the caption "Stock Information," Exhibit 13.

On July 1, 2001, the Corporation  issued  nonqualified  stock options to acquire
7,350  shares  of  common  stock of the  Corporation  to  directors  of its lead
subsidiary bank,  First Merchants.  The stock option  exercise price was $21.75,
and no  consideration  was paid by the  directors  for such stock  options.  The
options,  which have a ten year life, become 100 percent vested after six months
from the date of grant and are fully exercisable when vested.

The stock options were issued without  registration  under the Securities Act of
1933  ("Securities  Act") in  reliance on an exemption under Section 3(a)(11) of
the Securities Act and Rule 147 promulgated  thereunder.  As provided under Rule
147, both the Corporation and directors are deemed to be a resident of the State
of Indiana.  In addition,  the Corporation is deemed to be doing business in the
State of Indiana,  and  the Rule 147 resale  limitations and precautions against
interstate offers and sales are being strictly adhered to.

ITEM 6.      SELECTED FINANCIAL DATA.
- --------------------------------------------------------------------------------

The  information  on  page  2  of  the  Corporation's   2001  Annual  Report  to
Stockholders - Financial Review under the caption "Five-Year Summary of Selected
Financial Data", is expressly incorporated herein by reference.

ITEM 7.      MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND
                  RESULTS OF OPERATIONS.
- --------------------------------------------------------------------------------

The information on page 3 through 11 of the Corporation's  2001 Annual Report to
Stockholders  - Financial  Review under the caption  "Management's  Discussion &
Analysis  of  Financial  Condition  and  Results of  Operations",  is  expressly
incorporated herein by reference.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
- --------------------------------------------------------------------------------

     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 review how changes in interest rates may 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.

     It is the objective of the Corporation to monitor and manage risk exposure
to net interest  income caused by changes in interest  rates.  It is the goal of
the  Corporation's  Asset/Liability  function to provide  optimum and stable net
interest income. To accomplish this,  management uses two asset liability tools.
GAP/Interest  Rate  Sensitivity  Reports  and  Net  Interest  Income  Simulation
Modeling are both constructed, presented and monitored quarterly.

                                                                        Page 23

     Management believes that the Corporation's liquidity and interest
sensitivity  position  at  December  31,  2001,  remained  adequate  to meet the
Corporation's  primary goal of achieving optimum interest margins while avoiding
undue  interest  rate risk.  The  following  table  presents  the  Corporation's
interest rate sensitivity analysis as of December 31, 2001.

INTEREST RATE SENSITIVITY ANALYSIS
(dollars in thousands)                                                                At December 31, 2001
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                1-180 DAYS   181-365 DAYS    1-5 YEARS    BEYOND 5 YEARS     TOTAL
====================================================================================================================================
                                                                                                           
Rate-Sensitive Assets:
   Federal funds sold and interest-bearing deposits .........   $   38,156                                                $   38,156
   Investment securities ....................................       49,359    $   48,319     $   99,688     $   42,956       240,322
   Loans ....................................................      651,749       103,333        479,332        125,211     1,359,625
   Federal Reserve and Federal Home Loan Bank stock .........        8,350                                                     8,350
                                                                ----------    ----------     ----------     ----------    ----------
        Total rate-sensitive assets .........................      747,614       151,652        579,020        168,167     1,646,453
                                                                ----------    ----------     ----------     ----------    ----------
Rate-Sensitive Liabilities:
   Interest-bearing deposits ................................      508,028       345,873        344,841         35,522     1,234,264
   Securities sold under repurchase agreements ..............       22,732                       22,900                       45,632
   Other short-term borrowings ..............................       16,773                                                    16,773
   Federal Home Loan Bank advances ..........................        4,756        14,422         59,069         25,252       103,499
   Other borrowed funds .....................................                      8,500                                       8,500
                                                                ----------    ----------     ----------     ----------    ----------
        Total rate-sensitive liabilities ....................      552,289       368,795        426,810         60,774     1,408,668
                                                                ----------    ----------     ----------     ----------    ----------

Interest rate sensitivity gap by period .....................   $  195,325    $ (217,143)    $  152,210     $  107,393
Cumulative rate sensitivity gap .............................      195,325       (21,818)       130,392        237,785
Cumulative rate sensitivity gap ratio
   at December 31, 2001 .....................................        135.4%         97.6%         109.7%         116.9%
   at December 31, 2000 .....................................         94.1%         77.0%         102.1%         116.3%

The  Corporation  had a cumulative  negative gap of  $21,818,000 in the one-year
horizon  at  December  31,  2001,  just over 1.2  percent of total  assets.  Net
interest income at financial  institutions  with negative gaps tends to increase
when rates decrease and decrease as interest rates increase.

The Corporation  places its greatest  credence in net interest income simulation
modeling.   The  GAP/Interest  Rate  Sensitivity   Report  is  believed  by  the
Corporation's  management to have two major  shortfalls.  The GAP/Interest  Rate
Sensitivity Report fails to precisely gauge how often an interest rate sensitive
product  reprices,  nor is it able to measure the magnitude of potential  future
rate movements.

Net interest  income  simulation  modeling,  or  earnings-at-risk,  measures the
sensitivity  of net interest  income to various  interest  rate  movements.  The
Corporation's  asset liability  process  monitors  simulated net interest income
under  three  separate  interest  rate  scenarios;  base,  rising  and  falling.
Estimated net interest  income for each  scenario is calculated  over a 12-month
horizon.  The immediate  and parallel  changes to the base case scenario used in
the  model  are  presented  below.  The  interest  rate  scenarios  are used for
analytical purposes and do not necessarily represent management's view of future
market movements.  Rather, these are intended to provide a measure of the degree
of  volatility  interest rate  movements may introduce  into the earnings of the
Corporation.

The base scenario is highly  dependent on numerous  assumptions  embedded in the
model,  including  assumptions  related to future interest rates. While the base
sensitivity  analysis  incorporates  management's best estimate of interest rate
and balance sheet  dynamics  under  various  market rate  movements,  the actual
behavior and resulting  earnings  impact will likely differ from that projected.
For  mortgage-related  assets,  the base simulation  model captures the expected
prepayment  behavior under changing interest rate environments.  Assumptions and
methodologies  regarding the interest rate or balance  behavior of indeterminate
maturity products,  e.g.,  savings,money market, NOW and demand deposits reflect
management's best estimate of expected future behavior.

                                                                       Page 24

The  comparative  rising and falling  scenarios for the year ended  December 31,
2002 assume  further  interest  rate changes in addition to the base  simulation
discussed  above.  These changes are immediate and parallel  changes to the base
case senario.  In addition,  total rate movements  (beginning point minus ending
point) to each of the various  driver rates  utilized by  management in the base
simulation for the year ended December 31, 2002 are as follows:

Driver Rates                      RISING              FALLING
================================================================================
Prime                             200 Basis Points   (150)Basis Points
Federal Funds                     200                (100)
One-Year T-Bill                   200                (100)
Two-Year T-Bill                   200                (100)
Interest Checking                 100                 (25)
MMIA Savings                       75                 (25)
Money Market Index                200                (100)
CD's                              170                (130)
FHLB Advances                     200                (100)

Results for the base,  rising and falling  interest  rate  scenarios  are listed
below,  based upon the Corporation's rate sensitive assets at December 31, 2001.
The net interest income shown  represents  cumulative net interest income over a
12-month time horizon.  Balance sheet assumptions used for the base scenario are
the same for the rising and falling simulations.

                                                BASE        RISING     FALLING
================================================================================
Net Interest Income (dollars in thousands)    $ 74,029    $ 74,356    $ 71,540

Variance from base                                        $    327    $ (2,489)

Percent of change from base                                    .44%      (3.36)%

The  comparative  rising and falling  scenarios for the year ended  December 31,
2001 assume  further  interest  rate changes in addition to the base  simulation
discussed  above.  These changes are immediate and parallel  changes to the base
case senario.  In addition,  total rate movements  (beginning point minus ending
point) to each of the various  driver rates  utilized by  management in the base
simulation for the year ended December 31, 2001 are as follows:

Driver Rates                      RISING              FALLING
================================================================================
Prime                             200 Basis Points   (200)Basis Points
Federal Funds                     200                (200)
90-Day T-Bill                     200                (200)
One-Year T-Bill                   200                (200)
Three-Year T-Bill                 200                (200)
Five-Year T-Note                  200                (200)
Ten-Year T-Note                   200                (200)
Interest Checking                  67                 (67)
MMIA Savings                      200                (200)
Money Market Index                200                (200)
Regular Savings                    67                 (67)

Results for the base,  rising and falling  interest  rate  scenarios  are listed
below,  based upon the Corporation's rate sensitive assets at December 31, 2000.
The net interest income shown  represents  cumulative net interest income over a
12-month time horizon.  Balance sheet assumptions used for the base scenario are
the same for the rising and falling simulations.

                                                BASE        RISING     FALLING
================================================================================
Net Interest Income (dollars in thousands)    $ 57,657    $ 55,554    $ 57,713

Variance from base                                        $ (2,104)   $     55

Percent of change from base                                  (3.65)%       .10%

                                                                        Page 25

Item 7A.  includes  forward-looking  statements.  Readers are cautioned that, by
their  nature,  forward-looking  statements  are  based on  assumptions  and are
subject to risks,  uncertainties,  and other factors.  Actual results may differ
materially  from the  expectations  of the  Corporation  that are  expressed  or
implied  by  any  forward-looking  statement.   Factors  that  could  cause  the
Corporation's  actual results to vary materially from those expressed or implied
by  any   forward-looking   statements   include  the  effects  of  competition,
technological  changes and legal and regulatory  developments;  acquisitions  of
other businesses by the Corporation and integration of such acquired businesses;
changes in fiscal,  monetary and tax policies;  market,  economic,  operational,
liquidity,  credit and interest  rate risks  associated  with the  Corporation's
business;  inflation; competition in the financial services industry; changes in
general  economic  conditions,  either  nationally or regionally,  resulting in,
among other things, credit quality deterioration;  changes in the  securities
markets;  and  the  continued   availability  of  earnings  and  excess  capital
sufficient for the lawful and prudent declaration and payment of cash dividends.
Investors  should  consider  these  risks, uncertainties,  and other  factors in
addition  to  those  mentioned  by the  Corporation  from  time  to  time in the
Corporation's other SEC reports when considering any forward-looking statement.

ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- --------------------------------------------------------------------------------

Pages 12 through 42 of the  Corporation's 2001 Annual Report to Stockholders -
Financial Review, are expressly incorporated herein by reference.

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
                 FINANCIAL DISCLOSURE.
- --------------------------------------------------------------------------------

In  connection  with its  audits  for the two most  recent  fiscal  years  ended
December  31,  2001,  there have been no  disagreements  with the  Corporation's
independent  certified public accountants on any matter of accounting principles
or practices,  financial statement  disclosure or audit scope or procedure,  nor
have there been any changes in accountants.

                                                                       Page 26

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
- --------------------------------------------------------------------------------

The  information in the  Corporation's  Proxy  Statement dated February 26, 2002
furnished to its  stockholders  in connection  with an annual meeting to be held
April 11, 2002 (the "2002 Proxy  Statement"),  under the  captions  "Election of
Directors"  and "Section 16(a)  Beneficial  Ownership Reporting  Compliance", is
expressly incorporated herein by reference.  The information required under this
item  relating  to  executive  officers  is set  forth in Part I,  "Supplemental
Information  - Executive  Officers of the  Registrant"  of this annual report on
Form 10-K and is expressly incorporated herein by reference.

ITEM 11.  EXECUTIVE COMPENSATION.
- --------------------------------------------------------------------------------

The information in the Corporation's  2002 Proxy Statement,  under the captions,
"Compensation of Directors", "Compensation of Executive Officers", "Compensation
and  Human   Resources   Committee   Interlocks   and  Insider   Participation",
"Compensation  and Human Resources  Committee Report on Executive  Compensation"
and "Performance Graph," is expressly incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- --------------------------------------------------------------------------------

The information in the  Corporation's  2002 Proxy Statement,  under the caption,
"Security  Ownership of Certain  Beneficial Owners and Management," is expressly
incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

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

The information in the  Corporation's  2002 Proxy  Statement,  under the caption
"Interest of  Management  in Certain  Transactions,"  is expressly  incorporated
herein by reference.

                                                                      Page 27

                                     PART IV

ITEM 14.  FINANCIAL STATEMENT SCHEDULES, EXHIBITS AND REPORTS ON FORM 8-K.
- --------------------------------------------------------------------------------

                                                                          

(a) 1.      Financial Statements:
                 Independent accountant's report
                 Consolidated balance sheets at
                      December 31, 2001 and 2000
                 Consolidated statements of income,
                      years ended December 31, 2001,
                      2000 and 1999
                 Consolidated statements of comprehensive income,
                      years ended December 31, 2001, 2000 and 1999
                 Consolidated statements of stockholders' equity,
                      years ended December 31, 2001, 2000 and 1999
                 Consolidated statements of cash flows,
                      years ended December 31, 2001,
                      2000 and 1999
                 Notes to consolidated financial
                      statements

(a) 2.      Financial statement schedules:
                          All schedules are omitted because
                          they are not applicable or not required,
                          or because the required information is included in the
                          consolidated financial statements or related notes.

(a) 3.      Exhibits:

Exhibit No:                           Description of Exhibits:
- -----------                           ------------------------

    2          Agreement of Reorganization and Merger between First Merchants
               Corporation and Lafayette Bancorporation dated October 14, 2001.
               (Incorporated by reference to registrant's Form 8-K filed on
               October 15, 2001)

    3a         First Merchants Corporation Articles of Incorporation.
               (Incorporated by reference to registrant's Form 10-Q for quarter
               ended June 30, 1999)

    3b         First Merchants Corporation Bylaws (Incorporated by reference to
               registrant's Form 10-Q/A for quarter ended September 30, 2001 and
               filed on December 19, 2001)

   10a         First   Merchants   Corporation  and  First  Merchants  Bank,
               National    Association    Management   Incentive   Plan.
               (Incorporated by reference to registrant's  Form 10-K for year
               ended December 31, 1996)(1)

   10b         First Merchants Corporation Senior Management Incentive
               Compensation Program, as amended.  (Incorporated by reference to
               the registrant's Form 10-K for the year ended December 31,
               2000)(1)

   10c         First Merchants Bank, National  Association Unfunded Deferred
               Compensation Plan, as amended.  (Incorporated by reference to
               registrant's Form 10-K for year ended December 31, 1996)(1)

   10d         First  Merchants   Corporation  1994  Stock  Option  Plan.
               (Incorporated by reference to Registrant's  Form 10-K for year
               ended December 31, 1993)(1)

                                                                        Page 28

ITEM 14.  FINANCIAL STATEMENT SCHEDULES, EXHIBITS AND REPORTS ON
              FORM 8-K (continued)
- --------------------------------------------------------------------------------

       10e         First Merchants  Corporation Change of Control Agreement with
                   Roy A. Eon dated February 13, 2001(1)(2)

       10f         First Merchants Corporation change of Control Agreement with
                   Roger M. Arwood dated November 14, 2000(1)(2)

       10g         First Merchants Corporation Change of Control Agreement with
                   Larry R. Helms dated November 14, 2000(1)(2)

       10h         First Merchants Corporation Change of Control Agreement with
                   James L. Thrash dated May 11, 1999(1)(2)

       10i         First Merchants Change of Control Agreement with Michael L.
                   Cox dated May 11, 1999(1)(2)

       10j         First Merchants  Corporation  Unfunded Deferred  Compensation
                   Plan.  (Incorporated  by reference to registrant's  Form 10-K
                   for year ended December 31, 1996)(1)

       10k         First Merchants Corporation Supplemental Executive Retirement
                   Plan and amendments  thereto.  (Incorporated by reference to
                   registrant's Form 10-K for year ended December 31, 1997)(1)

       10l         First Merchants Corporation 1999 Long-term Equity Incentive
                   Plan. (Incorporated by reference to registrant's
                   registration statement on Form S-8 (SEC File No. 333-80117)
                   effective on June 7, 1999)(1)

       13          2001 Annual Report to Stockholders  (except for the pages and
                   information  expressly  incorporated by reference in
                   this Form 10-K, the Annual Report to Stockholders is provided
                   solely for the  information of the  Securities  and  Exchange
                   Commission  and is not  deemed  "filed"  as part of this Form
                   10-K(2)

       21          Subsidiaries of Registrant(2)

       23          Consent of Independent Accountants(2)

       24          Limited Power of Attorney(2)

       99.1        Financial statements and independent accountant's report for
                   First Merchants Corporation Employee Stock Purchase Plan(2)

       (1) Management contract or compensatory plan.
       (2) Filed here within.
                                                                       Page 29

(b) Reports on Form 8-K:

       A report on Form 8-K, dated October 15, 2001, was filed under report item
       number 5, concerning the Registrant and Lafayette Bancorporation
       ("Lafayette") jointly announcing the signing of a definitive agreement
       pursuant to which Lafayette will be merged with and into the Registrant
       (the "Merger").  The Agreement of Reorganization and Merger between the
       Corporation and Lafayette dated October 14, 2001, was attached to this
       Form 8-K as Exhibit 2 and incorporated therein by reference.

       A report on Form 8-K, dated November 27, 2001, was filed under report
       item number 5, filing audited consolidated financial statements of
       Lafayette as of December 31, 2000 and 1999 and for each of the three
       years in the period ended December 31, 2000; unaudited consolidated
       financial statements of Lafayette as of September 30, 2001 and for each
       of the three and nine month periods ended September 30, 2001 and 2000;
       and unaudited proforma combined consolidated financial information for
       Registrant and for Lafayette giving effect to the Merger as of September
       30, 2001, for the nine month period ended September 30, 2001, and for the
       year ended December 31, 2000.  In addition, this Form 8-K announced the
       execution of two agreements pursuant to which the Registrant would
       acquire Delaware County Abstract Company, Inc.  and Beebe & Smith
       Title Insurance Company, Inc. (the "Acquisitions").  A copy of the
       November 27, 2001 press release announcing the Acquisitions was
       attached to this Form 8-K.

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) 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, on this 1st day of April,
2002.

                                               FIRST MERCHANTS CORPORATION

                                               By /s/ Michael L.Cox
                                               -----------------------------
                                                      Michael L. Cox, President
                                                      & Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
on Form  10-K  has  been  signed  by the  following  persons  on  behalf  of the
registrant and in the capacities indicated, on this 1st day of April, 2002.

/s/ Michael L. Cox                        /s/James L. Thrash
- --------------------------------------    --------------------------------------
    Michael L. Cox  President and           James L. Thrash  Sr. Vice President
                    Chief Executive                          and Chief Financial
                    Officer (Principal                       Officer (Principal
                    Executive Officer)                       Financial and
                                                             Accounting Officer)

/s/ Stefan S. Anderson*                    /s/ Thomas B. Clark*
- -----------------------------------        ------------------------------------
    Stefan S. Anderson     Director            Thomas B. Clark         Director

/s/Roger M. Arwood*                        /s/ Michael L. Cox
- ------------------------------------       ------------------------------------
   Roger M. Arwood         Director            Michael L. Cox          Director

                                           /s/ Barry J. Hudson*
- ------------------------------------       ------------------------------------
    James F. Ault           Director           Barry J. Hudson         Director

/s/ Jerry M. Ault*                         /s/ Norman M. Johnson*
- ------------------------------------       ------------------------------------
    Jerry M. Ault           Director           Norman M. Johnson       Director

/s/ Dennis A. Bieberich*
- ------------------------------------       ------------------------------------
    Dennis A. Bieberich     Director           George A. Sissel        Director

- ------------------------------------       ------------------------------------
    Blaine M. Brownell      Director           Robert M. Smitson       Director

                                           /s/ Dr. John E. Worthen*
- ------------------------------------       ------------------------------------
    Frank A. Bracken        Director           Dr. John E. Worthen     Director

* By James L. Thrash as Attorney-in Fact pursuant to a limited Power of Attorney
executed by the directors  listed above,  which Power of Attorney is being filed
with the Securities and Exchange Commission as an exhibit hereto.
                                                 By  /s/  James L. Thrash
                                                 ------------------------------
                                                          James L. Thrash
                                                          As Attorney-in-Fact
                                                          April 1, 2002

                                                                         Page 30

INDEX TO EXHIBITS
- --------------------------------------------------------------------------------

   (a)3.   Exhibits:

      Exhibit No:                          Description of Exhibit:

    2          Agreement of Reorganization and Merger between First Merchants
               Corporation and Lafayette Bancorporation dated October 14, 2001.
               (Incorporated by reference to registrant's Form 8-K filed on
               October 15, 2001)

    3a         First Merchants Corporation Articles of Incorporation.
               (Incorporated by reference to registrant's Form 10-Q for quarter
               ended June 30, 1999)

    3b         First Merchants Corporation Bylaws (Incorporated by reference to
               registrant's Form 10-Q/A for quarter ended September 30, 2001 and
               filed on December 19, 2001)

   10a         First   Merchants   Corporation  and  First  Merchants  Bank,
               National    Association    Management   Incentive   Plan.
               (Incorporated by reference to registrant's  Form 10-K for year
               ended December 31, 1996)(1)

   10b         First Merchants Corporation Senior Management Incentive
               Compensation Program, as amended.  (Incorporated by reference to
               the registrant's Form 10-K for the year ended December 31,
               2000)(1)

   10c         First Merchants Bank, National  Association Unfunded Deferred
               Compensation Plan, as amended.  (Incorporated by reference to
               registrant's Form 10-K for year ended December 31, 1996)(1)

   10d         First  Merchants   Corporation  1994  Stock  Option  Plan.
               (Incorporated by reference to Registrant's  Form 10-K for year
               ended December 31, 1993)(1)

   10e         First Merchants  Corporation Change of Control Agreement with
               Roy A. Eon dated February 13, 2001(1)(2)

   10f         First Merchants Corporation change of Control Agreement with
               Roger M. Arwood dated November 14, 2000(1)(2)

   10g         First Merchants Corporation Change of Control Agreement with
               Larry R. Helms dated November 14, 2000(1)(2)

   10h         First Merchants Corporation Change of Control Agreement with
               James L. Thrash dated May 11, 1999(1)(2)

   10i         First Merchants Change of Control Agreement with Michael L.
               Cox dated May 11, 1999(1)(2)

   10j         First Merchants  Corporation  Unfunded Deferred  Compensation
               Plan.  (Incorporated  by reference to registrant's  Form 10-K
               for year ended December 31, 1996)(1)

   10k         First Merchants Corporation Supplemental Executive Retirement
               Plan and amendments  thereto.  (Incorporated by reference to
               registrant's Form 10-K for year ended December 31, 1997)(1)

   10l         First Merchants Corporation 1999 Long-term Equity Incentive
               Plan. (Incorporated by reference to registrant's
               registration statement on Form S-8 (SEC File No. 333-80117)
               effective on June 7, 1999)(1)

   13          2001 Annual Report to Stockholders  (except for the pages and
               information  expressly  incorporated by reference in
               this Form 10-K, the Annual Report to Stockholders is provided
               solely for the  information of the  Securities  and  Exchange
               Commission  and is not  deemed  "filed"  as part of this Form
               10-K(2)

   21          Subsidiaries of Registrant(2)

   23          Consent of Independent Accountants(2)

   24          Limited Power of Attorney(2)

   99.1        Financial statements and independent accountant's report for
               First Merchants Corporation Employee Stock Purchase Plan(2)

   (1) Management contract or compensatory plan.
   (2) Filed here within.

                                                                        Page 31

                                   EXHIBIT 10e
                           CHANGE OF CONTROL AGREEMENT

     This  Agreement is made and entered into this 13th day of February, 2001,
by and  between  First  Merchants  Corporation,  an  Indiana  corporation
(hereinafter  referred to as "Corporation"),  and First Merchants Bank, National
Association  (hereinafter  referred to as "Bank"), a wholly-owned  subsidiary of
the Corporation,  both with their principal  offices located at 200 East Jackson
Street,   Muncie,   Indiana,  and  Roy  A.  Eon  (hereinafter   referred  to  as
"Executive"), of Muncie, Indiana.

     WHEREAS,  the Corporation  and the Bank consider the continuance of
proficient  and  experienced  management  to  be  essential  to  protecting  and
enhancing the best interests of the Corporation, the Bank, and the Corporation's
shareholders; and

     WHEREAS,  the Corporation and the Bank desire to assure the continued
services of the Executive on behalf of the Corporation and the Bank; and

     WHEREAS,  the  Corporation  and the Bank  recognize that if faced with a
proposal for a Change of Control, as hereinafter  defined,  the Executive will
have a significant role in helping the Board of Directors assess the options and
advising  the  Board  of  Directors  on what  is in the  best  interests  of the
Corporation,  the Bank, and the Corporation's shareholders;  and it is necessary
for the  Executive to be able to provide this advice and counsel  without  being
influenced by the uncertainties of the Executive's own situation; and

     WHEREAS,  the Corporation and the Bank desire to provide fair and
reasonable  benefits to the Executive on the terms and subject to the conditions
set forth in this Agreement.

     NOW,  THEREFORE,  in  consideration  of the mutual  covenants and
undertakings  herein contained and the continued  employment of the Executive by
the  Corporation  as its Senior Vice  President  and the Bank as its Senior Vice
President of Operations  and  Technology,  the  Corporation,  the Bank,  and the
Executive, each intending to be legally bound, covenant and agree as follows:

     1.  Term of Agreement.

     This Agreement shall continue in effect through December 31, 2001;
provided,  however,  that  commencing  on December 31, 2001 and each December 31
thereafter,  the term of this Agreement shall  automatically be extended for one
additional  year  unless,  not  later  than  October  31,  2001  or  October  31
immediately  preceding any December 31 thereafter,  the  Corporation or the Bank
shall  have  given the  Executive  notice  that it does not wish to extend  this
Agreement;  and provided further, that if a Change of Control of the Corporation
or the Bank, as defined in Section 2, shall have occurred during the original or
extended term of this  Agreement,  this Agreement shall continue in effect for a
period of not less than  twenty-four  (24) months beyond the month in which such
Change of Control occurred.

     2.  Definitions.

     For purposes of this Agreement, the following definitions shall apply:

            A.  Cause:  "Cause" shall mean:

                   (1)  professional incompetence;

                   (2)  willful misconduct;

                   (3)  personal dishonesty;

                   (4)  breach of fiduciary duty involving personal profit;

                   (5)  intentional failure to perform stated duties;

                   (6)  willful   violation  of  any  law,  rule  or  regulation
                        (other  than  traffic violations or similar offenses) or
                        final cease and desist orders; and

                   (7)  any  intentional material  breach of any term, condition
                        or covenant of this Agreement.

            (B)    Change of Control:  "Change of Control" shall mean:

                   (1)  any person (as such term is used in Sections  13(d) and
                        14(d) of the Securities Exchange  Act of 1934
                        ["Exchange  Act"]),  other than the  Corporation,  is or
                        becomes the Beneficial  Owner (as defined in Rule 13d-3
                        under the Exchange Act) directly  or  indirectly  of
                        securities  of  the   Corporation   or  the  Bank
                        representing  twenty-five percent (25%) or more of the
                        combined voting power of the Corporation's or the Bank's
                        then outstanding securities;

                   (2)  persons  constituting  a majority of the Board of
                        Directors of the  Corporation or the  Bank  were not
                        directors  of the  respective  Board  for at least  the
                        twenty-four (24) preceding months;

                   (3)  the   stockholders  of  the  Corporation  or  the  Bank
                        approve  a  merger  or consolidation of the Corporation
                        or the Bank with any other corporation,  other than
                        (a) a merger or consolidation  which would result in the
                        voting securities of  the  Corporation  or  the  Bank
                        outstanding   immediately   prior  thereto continuing to
                        represent (either by remaining  outstanding or by being
                        converted into voting  securities of the surviving
                        entity) more than fifty percent (50%) of the combined
                        voting power of the voting  securities of the
                        Corporation  or the Bank or such surviving entity
                        outstanding  immediately after such a merger or
                        consolidation,  or (b) a merger or  consolidation
                        effected to  implement a recapitalization  of the
                        Corporation or the Bank (or similar  transaction)  in
                        which no person  acquires  fifty percent  (50%) or more
                        of the combined  voting power of the Corporation's or
                        the Bank's then outstanding securities; or

                   (4)  the stockholders of the Corporation  approve a plan of
                        complete  liquidation of the  Corporation or the Bank or
                        an agreement for the sale or disposition by the
                        Corporation or the Bank of all or  substantially  all of
                        the  Corporation's  or the Bank's assets.

            (C)    Date of  Termination:  "Date of  Termination"  shall mean the
                   date  stated in the Notice of Termination  (as  hereinafter
                   defined) or thirty (30) days from the date of delivery of
                   such notice, as hereinafter defined, whichever comes first.

            (D)    Disability:  "Disability"  shall  mean  the  definition  of
                   such  term  as  used in the disability  policy then in effect
                   for the  Corporation or the Bank, and a  determination of
                   full disability by the  Corporation or the Bank;  provided
                   that in the event there is no  disability  insurance  then in
                   force,  "disability"  shall  mean  incapacity  due to
                   physical or mental  illness  which will have caused the
                   Executive to have been unable to perform  his duties  with
                   the Corporation  and/or the Bank on a full time basis for one
                   hundred eighty (180) consecutive calendar days.

            (E)    Notice  of  Termination:   "Notice  of   Termination"   shall
                   mean  a  written  notice, communicated   to  the  other
                   parties   hereto,   which  shall  indicate  the  specific
                   termination  provisions  of this  Agreement  relied  upon and
                   set forth  in  reasonable detail the facts and  circumstances
                   claimed to provide a basis for  termination  of the
                   Executive's employment under the provisions so indicated.

            (F)    Retirement:  "Retirement" shall mean  termination  of
                   employment  by the  Executive in accordance  with the
                   Corporation's  or the Bank's normal  retirement  policy
                   generally applicable to its salaried employees in effect at
                   the time of a Change of Control.

     3.  Termination.

            (A)    General.  If any of the events  described in Section 2
                   constituting a Change in Control of the  Corporation or the
                   Bank shall have occurred,  the Executive shall be entitled to
                   the benefits  described in Section 4 upon the subsequent
                   termination of the Executive's employment  during the term of
                   this  Agreement,  unless such  termination is (a) because of
                   the death or  Disability of the  Executive,  (b) by the
                   Corporation  or the Bank for Cause,  or (c) by the Executive
                   other than on account of  Constructive  Termination (as
                   hereinafter defined).

            (B)    If, following a Change of Control, the Executive's employment
                   shall be terminated for Cause,  the  Corporation  and/or the
                   Bank shall pay him his salary  through  the Date of
                   Termination  at the rate in effect on the date of the  Notice
                   of  Termination,  and the Corporation and the Bank shall have
                   no further  obligations  under this  Agreement.  If,
                   following a Change of Control,  the  Executive's  employment
                   shall be  terminated  as a result of death or Disability,
                   compensation  to the Executive shall be made pursuant to
                   the  Corporation's  and the Bank's then existing  policies on
                   death or  Disability,  and the  Corporation  and the Bank
                   shall have no further  obligations  under this Agreement.
                   If,  following a Change of Control,  the Executive's
                   employment is terminated by and at the request of the
                   Executive as a result of  Retirement,  compensation  to the
                   Executive shall be made  pursuant to the  Corporation's  and
                   the Bank's normal  retirement  policy generally  applicable
                   to its  salaried  employees at the time of the Change of
                   Control, and  the  Corporation  and the  Bank  shall  have no
                   further  obligations  under  this Agreement.

            (C)    Constructive  Termination.  The Executive  shall be entitled
                   to terminate his employment upon the  occurrence  of
                   Constructive  Termination.  For  purposes of this  Agreement,
                   "Constructive Termination" shall mean, without the
                   Executive's express written consent, the  occurrence,  after
                   a Change of Control of the  Corporation  or the Bank,  of any
                   of the following circumstances:

                   (1)  The  assignment  to the  Executive  of any duties
                        inconsistent  (unless in the nature of a promotion) with
                        the position in the  Corporation  or the Bank that the
                        Executive  held  immediately  prior  to  the  Change  of
                        Control  of  the Corporation  or the Bank, or a
                        significant  adverse  reduction or alteration in the
                        nature or status of the Executive's  position, duties or
                        responsibilities or the conditions of  the  Executive's
                        employment  from  those  in  effect immediately prior to
                        such Change of Control;

                   (2)  a reduction in the  Executive's  annual base salary,  as
                        in effect  immediately prior to the Change of Control of
                        the  Corporation  or the Bank or as the same may  be
                        adjusted  from  time  to  time,  except  for across-the-
                        board  salary reductions  similarly affecting all
                        management  personnel of the Corporation or the Bank;

                   (3)  the  Bank  and/or  the  Corporation  requires  the
                        Executive  to be  relocated anywhere other than their
                        offices in Muncie, Indiana;

                   (4)  the  taking of any action to  deprive  the  Executive of
                        any  material  fringe benefit enjoyed by him at the time
                        of the Change of Control,  or the failure to provide
                        him with the number of paid  vacation  days to which he
                        is entitled on the  basis of years of  service  with the
                        Corporation  and/or the Bank and in accordance  with the
                        Corporation's or the Bank's  normal  vacation  policy in
                        effect at the time of the Change of Control;

                   (5)  the failure to continue to provide the Executive  with
                        benefits  substantially similar to those enjoyed by the
                        Executive  under any of the  Corporation's or the Bank's
                        life insurance,  medical,  health and accident,  or
                        disability plans in which the Executive was
                        participating  at the time of the Change of Control of
                        the  Corporation  or the Bank,  or the  taking of any
                        action  which  would directly or indirectly materially
                        reduce any of such benefits; or

                   (6)  the  failure of the Corporation or the Bank to  continue
                        this  Agreement  in effect, or to obtain a satisfactory
                        agreement from any successor to assume and  agree to
                        perform this Agreement, as contemplated in Section 5
                        hereof.

     4.  Compensation Upon Termination.

     Following a Change of Control,  if his  employment by the  Corporation  or
the Bank  shall be  terminated  by the  Executive  on  account  of  Constructive
Termination  or by the  Corporation  or the Bank other  than for  Cause,  death,
Disability,  or Retirement  (by and at the request of the  Executive),  then the
Executive shall be entitled to the benefits provided below:

            (A)    No later than the fifth day following the Date of
                   Termination,  the  Corporation or the Bank shall pay to the
                   Executive his full base salary  through the Date of
                   Termination, at the rate in  effect  at the time  Notice  of
                   Termination  is  given,  plus all other amounts  to  which
                   the  Executive  is  entitled  under  any  incentive, bonus or
                   other compensation  plan of the  Corporation  or the Bank in
                   effect at the time such  payments are due;

            (B)    In lieu of any further  salary  payments to the Executive for
                   periods  subsequent to the Date of  Termination,  no later
                   than the fifth day  following  the Date of  Termination,
                   the  Corporation  or the Bank shall pay to the Executive a
                   lump sum  severance  payment, in cash,  equal to two (2.00)
                   times the sum of (a) the  Executive's  annual base salary
                   rate as in effect on the date of the Notice of  Termination,
                   and (b) the largest  bonus received by the  Executive  during
                   the two (2) years  immediately  preceding the Date of
                   Termination under the  Corporation's  Management   Incentive
                   Plan   covering  the Executive;

            (C)    During the period  beginning with the  Executive's  Date of
                   Termination  and continuing until the  earlier of (a) the
                   second  anniversary  of such Date of  Termination,  or (b)
                   Executive's  sixty-fifth  (65th) birthday,  the Corporation
                   or the Bank shall arrange to provide the Executive  with
                   life,  disability,  accident and health  insurance  benefits
                   substantially  similar to those which the Executive was
                   receiving  immediately  prior to the  Notice  of  Termination
                   and  shall  pay the  same  percentage  of the cost of such
                   benefits  as the  Corporation  or the Bank was paying on the
                   Executive's  behalf on the date of such Notice;

            (D)    In lieu of shares of common stock of the  Corporation
                   ("Corporation  Shares")  issuable upon the exercise of
                   outstanding options  ("Options"),  if any, granted to the
                   Executive under any  Corporation  stock option plan (which
                   Options  shall be  cancelled  upon the making of the  payment
                   referred to below),  the  Executive  shall  receive an amount
                   in cash  equal to the  product  of (a) the  excess of the
                   higher of the  closing  price of Corporation  Shares as
                   reported  on the NASDAQ  National  Market  System,  the
                   American Stock Exchange or the New York Stock Exchange,
                   wherever listed,  on or nearest the Date of Termination or
                   the highest per share price for  Corporation  Shares actually
                   paid in connection  with any Change of Control of the
                   Corporation, over the per share exercise price of each Option
                   held by the  Executive  (whether  or not then fully
                   exercisable), times (b) the number of Corporation Shares
                   covered by each such Option;

            (E)    If the  payments or  benefits,  if any,  received  or to be
                   received  by the  Executive (whether  under  this  Agreement
                   or under any other  plan,  arrangement,  or  agreement
                   between the Executive and the Corporation or the Bank),  in
                   connection with  termination or  Constructive Termination  of
                   the  Executive's  employment  following  a  Change  of
                   Control,  constitute an "excess  parachute  payment"  within
                   the meaning of Section 280G of the Internal  Revenue  Code
                   ("Code"), the  Corporation  or the  Bank  shall  pay  to  the
                   Executive,  no  later  than  the  fifth  day  following  the
                   Date  of  Termination,  an additional amount (as determined
                   by the Corporation's  independent  public  accountants)
                   equal to the excise tax, if any, imposed on the "excess
                   parachute payment" under Section 4999 of the Code;  provided,
                   however, if the amount of such excise tax is finally
                   determined to be more or less than the amount paid to the
                   Executive  hereunder,  the Corporation or the Bank (or the
                   Executive if the finally  determined  amount is less than the
                   original amount  paid)  shall pay the  difference  between
                   the  amount  originally  paid and the finally  determined
                   amount to the other party no later than the fifth day
                   following the date such final determination is made;

            (F)    The  Corporation  or the Bank shall pay to the Executive all
                   reasonable  legal fees and expenses incurred by the Executive
                   as a result of such termination  (including all such fees and
                   expenses,  if any,  incurred in contesting or disputing any
                   such termination or in seeking  to obtain or  enforce  any
                   right or  benefit  provided  by this  Agreement), unless the
                   decision-maker  in any proceeding,  contest,  or dispute
                   arising  hereunder makes  a  formal  finding  that  the
                   Executive  did not  have a  reasonable  basis  for
                   instituting such proceeding, contest, or dispute;

            (G)    The  Corporation or the Bank shall provide the Executive with
                   individual  out-placement services in accordance  with the
                   general  custom and practice  generally  accorded to an
                   executive of the Executive's position.

     5.  Successors; Binding Agreement.

            (A)    The  Corporation  or the Bank shall require any successor
                   (whether  direct or indirect, by purchase,  merger,
                   consolidation  or otherwise) to all or  substantially  all of
                   the business and/or assets of the  Corporation or the Bank to
                   expressly  assume and agree to perform this Agreement  in the
                   same manner and to the same extent that the  Corporation  or
                   the Bank  would be  required  to perform it if no such
                   succession  had taken  place.  Failure of the  Corporation or
                   the Bank to obtain such  assumption  and agreement  prior to
                   the  effectiveness  of any such succession  shall be a breach
                   of this  Agreement and shall  entitle the Executive to
                   compensation  from the  Corporation  or the Bank in the
                   same amount and on the same terms to which the  Executive
                   would be  entitled  hereunder if the  Executive  terminates
                   his  employment  on account of  Constructive  Termination
                   following  a Change of  Control  of the  Corporation  or the
                   Bank,  except  that for the purposes of implementing  the
                   foregoing,  the date on which any such succession  becomes
                   effective shall be deemed  the Date of  Termination.  As used
                   in this  Agreement,  "the Corporation  or the Bank" shall
                   mean the  Corporation  or the Bank and any  successor to
                   their  business  and/or  assets as  aforesaid  which  assumes
                   and agrees to perform this Agreement, by operation of law or
                   otherwise.

            (B)    This  Agreement  shall inure to the benefit of and be
                   enforceable  by the Executive and his personal or legal
                   representatives,  executors,  administrators,  successors,
                   heirs, distributees,  devisees  and  legatees.  If the
                   Executive  should die while any amount would still be payable
                   to the Executive  hereunder had the Executive  continued to
                   live, all such amounts,  unless otherwise  provided  herein,
                   shall be paid in accordance with the terms of this  Agreement
                   to the devisee,  legatee or other  designee or, if there is
                   no such designee, to his estate.

     6.  Guarantee by Corporation and Bank.

     In  consideration  of the value of the continued  employment of the
Executive  by the  Corporation  or the Bank,  and the  benefits  derived  by the
Corporation and the Bank from the  Executive's  employment by the Corporation or
the  Bank,  the  Corporation  and the  Bank  hereby  unconditionally  and  fully
guarantee and endorse the  obligations of the other  hereunder,  and agree to be
fully bound by the terms of this  Agreement in the event that the other fails to
perform, honor, or otherwise complete fully its obligations hereunder.

     7.  Miscellaneous.

     No provision of this Agreement may be modified,  waived or discharged
unless such waiver, modification or discharge is agreed to in writing and signed
by the  Executive  and such  officer as may be  specifically  designated  by the
Corporation.  No waiver by either  party hereto at the time of any breach by the
other party hereto of, or  compliance  with,  any condition or provision of this
Agreement  to be  performed  by such  other  party  shall be  deemed a waiver of
similar or  dissimilar  provisions  or conditions at the same or at any prior or
subsequent time. No agreement or representations,  oral or otherwise, express or
implied,  with  respect to the  subject  matter  hereof have been made by either
party  which  are not  expressly  set  forth in this  Agreement.  The  validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the  State of  Indiana  without  regard to its  conflicts  of law
principles. All references to a section of the Exchange Act or the Code shall be
deemed also to refer to any successor  provisions to such section.  Any payments
provided for hereunder shall be paid net of any applicable  withholding required
under federal,  state or local law. The  obligations of the  Corporation and the
Bank under Section 4 shall survive the expiration of the term of this Agreement.

     8.  Validity.

     The invalidity or  unenforceability  of any provision of this Agreement
shall not affect the validity or  enforceability  of any other provision of this
Agreement, which shall remain in full force and effect.

     9.  Counterparts.

     This Agreement may be executed in several  counterparts,  each of which
shall be deemed to be an original,  but all of which together  shall  constitute
one and the same instrument.

     10. Arbitration.

     Any  dispute  or  controversy  arising  under or in  connection  with  this
Agreement shall be settled exclusively by arbitration,  conducted before a panel
of three (3) arbitrators in Muncie,  Indiana in accordance with the rules of the
American Arbitration  Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that the
Executive shall be entitled to seek specific performance of his right to be paid
until the Date of Termination  during the pendency of any dispute or controversy
arising under or in connection with this Agreement.

     11. Entire Agreement.

     This  Agreement  sets forth the entire  agreement of the parties  hereto in
respect  of the  subject  matter  contained  herein  and  supersedes  all  prior
agreements, promises, covenants, arrangements,  communications,  representations
or  warranties,   whether  oral  or  written,   by  any  officer,   employee  or
representative  of any party  hereto;  and any prior  agreement  of the  parties
hereto in respect of the subject matter  contained  herein is hereby  terminated
and cancelled.

     IN WITNESS  WHEREOF,  the Corporation and the Bank have caused this
Agreement to be executed by their duly  authorized  officers,  and the Executive
has hereunder subscribed his name, this 13th day of February, 2001.

"CORPORATION"                                        "EXECUTIVE"

FIRST MERCHANTS CORPORATION

By ______________________________           By ______________________________
      Stefan S. Anderson,                         Roy A. Eon
      Chairman of the Board

"BANK"

FIRST MERCHANTS BANK, NATIONAL ASSOCIATION

By ______________________________
      Stefan S. Anderson,
      Chairman of the Board

                                   EXHIBIT 10f
                           CHANGE OF CONTROL AGREEMENT

     This  Agreement is made and entered into this 14th day of November, 2000,
by and  between  First  Merchants  Corporation,  an  Indiana  corporation
(hereinafter  referred to as "Corporation"),  and First Merchants Bank, National
Association  (hereinafter  referred to as "Bank"), a wholly-owned  subsidiary of
the Corporation,  both with their principal  offices located at 200 East Jackson
Street,   Muncie,  Indiana,  and  Roger M. Arwood (hereinafter  referred  to  as
"Executive"), of Muncie, Indiana.

     WHEREAS,  the Corporation  and the Bank consider the continuance of
proficient  and  experienced  management  to  be  essential  to  protecting  and
enhancing the best interests of the Corporation, the Bank, and the Corporation's
shareholders; and

     WHEREAS,  the Corporation and the Bank desire to assure the continued
services of the Executive on behalf of the Corporation and the Bank; and

     WHEREAS,  the  Corporation  and the Bank  recognize that if faced with a
proposal for a Change of Control, as hereinafter  defined,  the Executive will
have a significant role in helping the Board of Directors assess the options and
advising  the  Board  of  Directors  on what  is in the  best  interests  of the
Corporation,  the Bank, and the Corporation's shareholders;  and it is necessary
for the  Executive to be able to provide this advice and counsel  without  being
influenced by the uncertainties of the Executive's own situation; and

     WHEREAS,  the Corporation and the Bank desire to provide fair and
reasonable  benefits to the Executive on the terms and subject to the conditions
set forth in this Agreement.

     NOW,  THEREFORE,  in  consideration  of the mutual  covenants and
undertakings  herein contained and the continued  employment of the Executive by
the  Corporation  as its Executive Vice President and the Bank as its President
and Chief Executive Officer,  the  Corporation,  the Bank,  and the
Executive, each intending to be legally bound, covenant and agree as follows:

     1.  Term of Agreement.

     This Agreement shall continue in effect through December 31, 2001;
provided,  however,  that  commencing  on December 31, 2001 and each December 31
thereafter,  the term of this Agreement shall  automatically be extended for one
additional  year  unless,  not  later  than  October  31,  2001  or  October  31
immediately  preceding any December 31 thereafter,  the  Corporation or the Bank
shall  have  given the  Executive  notice  that it does not wish to extend  this
Agreement;  and provided further, that if a Change of Control of the Corporation
or the Bank, as defined in Section 2, shall have occurred during the original or
extended term of this  Agreement,  this Agreement shall continue in effect for a
period of not less than  twenty-four  (24) months beyond the month in which such
Change of Control occurred.

     2.  Definitions.

     For purposes of this Agreement, the following definitions shall apply:

            A.  Cause:  "Cause" shall mean:

                   (1)  professional incompetence;

                   (2)  willful misconduct;

                   (3)  personal dishonesty;

                   (4)  breach of fiduciary duty involving personal profit;

                   (5)  intentional failure to perform stated duties;

                   (6)  willful   violation  of  any  law,  rule  or  regulation
                        (other  than  traffic violations or similar offenses) or
                        final cease and desist orders; and

                   (7)  any  intentional material  breach of any term, condition
                        or covenant of this Agreement.

            (B)    Change of Control:  "Change of Control" shall mean:

                   (1)  any person (as such term is used in Sections  13(d) and
                        14(d) of the Securities Exchange  Act of 1934
                        ["Exchange  Act"]),  other than the  Corporation,  is or
                        becomes the Beneficial  Owner (as defined in Rule 13d-3
                        under the Exchange Act) directly  or  indirectly  of
                        securities  of  the   Corporation   or  the  Bank
                        representing  twenty-five percent (25%) or more of the
                        combined voting power of the Corporation's or the Bank's
                        then outstanding securities;

                   (2)  persons  constituting  a majority of the Board of
                        Directors of the  Corporation or the  Bank  were not
                        directors  of the  respective  Board  for at least  the
                        twenty-four (24) preceding months;

                   (3)  the   stockholders  of  the  Corporation  or  the  Bank
                        approve  a  merger  or consolidation of the Corporation
                        or the Bank with any other corporation,  other than
                        (a) a merger or consolidation  which would result in the
                        voting securities of  the  Corporation  or  the  Bank
                        outstanding   immediately   prior  thereto continuing to
                        represent (either by remaining  outstanding or by being
                        converted into voting  securities of the surviving
                        entity) more than fifty percent (50%) of the combined
                        voting power of the voting  securities of the
                        Corporation  or the Bank or such surviving entity
                        outstanding  immediately after such a merger or
                        consolidation,  or (b) a merger or  consolidation
                        effected to  implement a recapitalization  of the
                        Corporation or the Bank (or similar  transaction)  in
                        which no person  acquires  fifty percent  (50%) or more
                        of the combined  voting power of the Corporation's or
                        the Bank's then outstanding securities; or

                   (4)  the stockholders of the Corporation  approve a plan of
                        complete  liquidation of the  Corporation or the Bank or
                        an agreement for the sale or disposition by the
                        Corporation or the Bank of all or  substantially  all of
                        the  Corporation's  or the Bank's assets.

            (C)    Date of  Termination:  "Date of  Termination"  shall mean the
                   date  stated in the Notice of Termination  (as  hereinafter
                   defined) or thirty (30) days from the date of delivery of
                   such notice, as hereinafter defined, whichever comes first.

            (D)    Disability:  "Disability"  shall  mean  the  definition  of
                   such  term  as  used in the disability  policy then in effect
                   for the  Corporation or the Bank, and a  determination of
                   full disability by the  Corporation or the Bank;  provided
                   that in the event there is no  disability  insurance  then in
                   force,  "disability"  shall  mean  incapacity  due to
                   physical or mental  illness  which will have caused the
                   Executive to have been unable to perform  his duties  with
                   the Corporation  and/or the Bank on a full time basis for one
                   hundred eighty (180) consecutive calendar days.

            (E)    Notice  of  Termination:   "Notice  of   Termination"   shall
                   mean  a  written  notice, communicated   to  the  other
                   parties   hereto,   which  shall  indicate  the  specific
                   termination  provisions  of this  Agreement  relied  upon and
                   set forth  in  reasonable detail the facts and  circumstances
                   claimed to provide a basis for  termination  of the
                   Executive's employment under the provisions so indicated.

            (F)    Retirement:  "Retirement" shall mean  termination  of
                   employment  by the  Executive in accordance  with the
                   Corporation's  or the Bank's normal  retirement  policy
                   generally applicable to its salaried employees in effect at
                   the time of a Change of Control.

     3.  Termination.

            (A)    General.  If any of the events  described in Section 2
                   constituting a Change in Control of the  Corporation or the
                   Bank shall have occurred,  the Executive shall be entitled to
                   the benefits  described in Section 4 upon the subsequent
                   termination of the Executive's employment  during the term of
                   this  Agreement,  unless such  termination is (a) because of
                   the death or  Disability of the  Executive,  (b) by the
                   Corporation  or the Bank for Cause,  or (c) by the Executive
                   other than on account of  Constructive  Termination (as
                   hereinafter defined).

            (B)    If, following a Change of Control, the Executive's employment
                   shall be terminated for Cause,  the  Corporation  and/or the
                   Bank shall pay him his salary  through  the Date of
                   Termination  at the rate in effect on the date of the  Notice
                   of  Termination,  and the Corporation and the Bank shall have
                   no further  obligations  under this  Agreement.  If,
                   following a Change of Control,  the  Executive's  employment
                   shall be  terminated  as a result of death or Disability,
                   compensation  to the Executive shall be made pursuant to
                   the  Corporation's  and the Bank's then existing  policies on
                   death or  Disability,  and the  Corporation  and the Bank
                   shall have no further  obligations  under this Agreement.
                   If,  following a Change of Control,  the Executive's
                   employment is terminated by and at the request of the
                   Executive as a result of  Retirement,  compensation  to the
                   Executive shall be made  pursuant to the  Corporation's  and
                   the Bank's normal  retirement  policy generally  applicable
                   to its  salaried  employees at the time of the Change of
                   Control, and  the  Corporation  and the  Bank  shall  have no
                   further  obligations  under  this Agreement.

            (C)    Constructive  Termination.  The Executive  shall be entitled
                   to terminate his employment upon the  occurrence  of
                   Constructive  Termination.  For  purposes of this  Agreement,
                   "Constructive Termination" shall mean, without the
                   Executive's express written consent, the  occurrence,  after
                   a Change of Control of the  Corporation  or the Bank,  of any
                   of the following circumstances:

                   (1)  The  assignment  to the  Executive  of any duties
                        inconsistent  (unless in the nature of a promotion) with
                        the position in the  Corporation  or the Bank that the
                        Executive  held  immediately  prior  to  the  Change  of
                        Control  of  the Corporation  or the Bank, or a
                        significant  adverse  reduction or alteration in the
                        nature or status of the Executive's  position, duties or
                        responsibilities or the conditions of  the  Executive's
                        employment  from  those  in  effect immediately prior to
                        such Change of Control;

                   (2)  a reduction in the  Executive's  annual base salary,  as
                        in effect  immediately prior to the Change of Control of
                        the  Corporation  or the Bank or as the same may  be
                        adjusted  from  time  to  time,  except  for across-the-
                        board  salary reductions  similarly affecting all
                        management  personnel of the Corporation or the Bank;

                   (3)  the  Bank  and/or  the  Corporation  requires  the
                        Executive  to be  relocated anywhere other than their
                        offices in Muncie, Indiana;

                   (4)  the  taking of any action to  deprive  the  Executive of
                        any  material  fringe benefit enjoyed by him at the time
                        of the Change of Control,  or the failure to provide
                        him with the number of paid  vacation  days to which he
                        is entitled on the  basis of years of  service  with the
                        Corporation  and/or the Bank and in accordance  with the
                        Corporation's or the Bank's  normal  vacation  policy in
                        effect at the time of the Change of Control;

                   (5)  the failure to continue to provide the Executive  with
                        benefits  substantially similar to those enjoyed by the
                        Executive  under any of the  Corporation's or the Bank's
                        life insurance,  medical,  health and accident,  or
                        disability plans in which the Executive was
                        participating  at the time of the Change of Control of
                        the  Corporation  or the Bank,  or the  taking of any
                        action  which  would directly or indirectly materially
                        reduce any of such benefits; or

                   (6)  the  failure of the Corporation or the Bank to  continue
                        this  Agreement  in effect, or to obtain a satisfactory
                        agreement from any successor to assume and  agree to
                        perform this Agreement, as contemplated in Section 5
                        hereof.

     4.  Compensation Upon Termination.

     Following a Change of Control,  if his  employment by the  Corporation  or
the Bank  shall be  terminated  by the  Executive  on  account  of  Constructive
Termination  or by the  Corporation  or the Bank other  than for  Cause,  death,
Disability,  or Retirement  (by and at the request of the  Executive),  then the
Executive shall be entitled to the benefits provided below:

            (A)    No later than the fifth day following the Date of
                   Termination,  the  Corporation or the Bank shall pay to the
                   Executive his full base salary  through the Date of
                   Termination, at the rate in  effect  at the time  Notice  of
                   Termination  is  given,  plus all other amounts  to  which
                   the  Executive  is  entitled  under  any  incentive, bonus or
                   other compensation  plan of the  Corporation  or the Bank in
                   effect at the time such  payments are due;

            (B)    In lieu of any further  salary  payments to the Executive for
                   periods  subsequent to the Date of  Termination,  no later
                   than the fifth day  following  the Date of  Termination, the
                   Corporation or the Bank shall pay to the Executive a lump sum
                   severance payment, in cash, equal to two and ninety-nine
                   hundredths (2.99) times the sum of (a) the Executive's annual
                   base salary rate as in effect on the date of the Notice of
                   Termination, and (b) the largest  bonus received by the
                   Executive during the two (2) years immediately  preceding the
                   Date of Termination under the Corporation's  Management
                   Incentive Plan   covering  the Executive;

            (C)    During the period  beginning with the  Executive's  Date of
                   Termination  and continuing until the  earlier of (a) the
                   second  anniversary  of such Date of  Termination,  or (b)
                   Executive's  sixty-fifth  (65th) birthday,  the Corporation
                   or the Bank shall arrange to provide the Executive  with
                   life,  disability,  accident and health  insurance  benefits
                   substantially  similar to those which the Executive was
                   receiving  immediately  prior to the  Notice  of  Termination
                   and  shall  pay the  same  percentage  of the cost of such
                   benefits  as the  Corporation  or the Bank was paying on the
                   Executive's  behalf on the date of such Notice;

            (D)    In lieu of shares of common stock of the  Corporation
                   ("Corporation  Shares")  issuable upon the exercise of
                   outstanding options  ("Options"),  if any, granted to the
                   Executive under any  Corporation  stock option plan (which
                   Options  shall be  cancelled  upon the making of the  payment
                   referred to below),  the  Executive  shall  receive an amount
                   in cash  equal to the  product  of (a) the  excess of the
                   higher of the  closing  price of Corporation  Shares as
                   reported  on the NASDAQ  National  Market  System,  the
                   American Stock Exchange or the New York Stock Exchange,
                   wherever listed,  on or nearest the Date of Termination or
                   the highest per share price for  Corporation  Shares actually
                   paid in connection  with any Change of Control of the
                   Corporation, over the per share exercise price of each Option
                   held by the  Executive  (whether  or not then fully
                   exercisable), times (b) the number of Corporation Shares
                   covered by each such Option;

            (E)    If the  payments or  benefits,  if any,  received  or to be
                   received  by the  Executive (whether  under  this  Agreement
                   or under any other  plan,  arrangement,  or  agreement
                   between the Executive and the Corporation or the Bank),  in
                   connection with  termination or  Constructive Termination  of
                   the  Executive's  employment  following  a  Change  of
                   Control,  constitute an "excess  parachute  payment"  within
                   the meaning of Section 280G of the Internal  Revenue  Code
                   ("Code"), the  Corporation  or the  Bank  shall  pay  to  the
                   Executive,  no  later  than  the  fifth  day  following  the
                   Date  of  Termination,  an additional amount (as determined
                   by the Corporation's  independent  public  accountants)
                   equal to the excise tax, if any, imposed on the "excess
                   parachute payment" under Section 4999 of the Code;  provided,
                   however, if the amount of such excise tax is finally
                   determined to be more or less than the amount paid to the
                   Executive  hereunder,  the Corporation or the Bank (or the
                   Executive if the finally  determined  amount is less than the
                   original amount  paid)  shall pay the  difference  between
                   the  amount  originally  paid and the finally  determined
                   amount to the other party no later than the fifth day
                   following the date such final determination is made;

            (F)    The  Corporation  or the Bank shall pay to the Executive all
                   reasonable  legal fees and expenses incurred by the Executive
                   as a result of such termination  (including all such fees and
                   expenses,  if any,  incurred in contesting or disputing any
                   such termination or in seeking  to obtain or  enforce  any
                   right or  benefit  provided  by this  Agreement), unless the
                   decision-maker  in any proceeding,  contest,  or dispute
                   arising  hereunder makes  a  formal  finding  that  the
                   Executive  did not  have a  reasonable  basis  for
                   instituting such proceeding, contest, or dispute;

            (G)    The  Corporation or the Bank shall provide the Executive with
                   individual  out-placement services in accordance  with the
                   general  custom and practice  generally  accorded to an
                   executive of the Executive's position.

     5.  Successors; Binding Agreement.

            (A)    The  Corporation  or the Bank shall require any successor
                   (whether  direct or indirect, by purchase,  merger,
                   consolidation  or otherwise) to all or  substantially  all of
                   the business and/or assets of the  Corporation or the Bank to
                   expressly  assume and agree to perform this Agreement  in the
                   same manner and to the same extent that the  Corporation  or
                   the Bank  would be  required  to perform it if no such
                   succession  had taken  place.  Failure of the  Corporation or
                   the Bank to obtain such  assumption  and agreement  prior to
                   the  effectiveness  of any such succession  shall be a breach
                   of this  Agreement and shall  entitle the Executive to
                   compensation  from the  Corporation  or the Bank in the
                   same amount and on the same terms to which the  Executive
                   would be  entitled  hereunder if the  Executive  terminates
                   his  employment  on account of  Constructive  Termination
                   following  a Change of  Control  of the  Corporation  or the
                   Bank,  except  that for the purposes of implementing  the
                   foregoing,  the date on which any such succession  becomes
                   effective shall be deemed  the Date of  Termination.  As used
                   in this  Agreement,  "the Corporation  or the Bank" shall
                   mean the  Corporation  or the Bank and any  successor to
                   their  business  and/or  assets as  aforesaid  which  assumes
                   and agrees to perform this Agreement, by operation of law or
                   otherwise.

            (B)    This  Agreement  shall inure to the benefit of and be
                   enforceable  by the Executive and his personal or legal
                   representatives,  executors,  administrators,  successors,
                   heirs, distributees,  devisees  and  legatees.  If the
                   Executive  should die while any amount would still be payable
                   to the Executive  hereunder had the Executive  continued to
                   live, all such amounts,  unless otherwise  provided  herein,
                   shall be paid in accordance with the terms of this  Agreement
                   to the devisee,  legatee or other  designee or, if there is
                   no such designee, to his estate.

     6.  Guarantee by Corporation and Bank.

     In  consideration  of the value of the continued  employment of the
Executive  by the  Corporation  or the Bank,  and the  benefits  derived  by the
Corporation and the Bank from the  Executive's  employment by the Corporation or
the  Bank,  the  Corporation  and the  Bank  hereby  unconditionally  and  fully
guarantee and endorse the  obligations of the other  hereunder,  and agree to be
fully bound by the terms of this  Agreement in the event that the other fails to
perform, honor, or otherwise complete fully its obligations hereunder.

     7.  Miscellaneous.

     No provision of this Agreement may be modified,  waived or discharged
unless such waiver, modification or discharge is agreed to in writing and signed
by the  Executive  and such  officer as may be  specifically  designated  by the
Corporation.  No waiver by either  party hereto at the time of any breach by the
other party hereto of, or  compliance  with,  any condition or provision of this
Agreement  to be  performed  by such  other  party  shall be  deemed a waiver of
similar or  dissimilar  provisions  or conditions at the same or at any prior or
subsequent time. No agreement or representations,  oral or otherwise, express or
implied,  with  respect to the  subject  matter  hereof have been made by either
party  which  are not  expressly  set  forth in this  Agreement.  The  validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the  State of  Indiana  without  regard to its  conflicts  of law
principles. All references to a section of the Exchange Act or the Code shall be
deemed also to refer to any successor  provisions to such section.  Any payments
provided for hereunder shall be paid net of any applicable  withholding required
under federal,  state or local law. The  obligations of the  Corporation and the
Bank under Section 4 shall survive the expiration of the term of this Agreement.

     8.  Validity.

     The invalidity or  unenforceability  of any provision of this Agreement
shall not affect the validity or  enforceability  of any other provision of this
Agreement, which shall remain in full force and effect.

     9.  Counterparts.

     This Agreement may be executed in several  counterparts,  each of which
shall be deemed to be an original,  but all of which together  shall  constitute
one and the same instrument.

     10. Arbitration.

     Any  dispute  or  controversy  arising  under or in  connection  with  this
Agreement shall be settled exclusively by arbitration,  conducted before a panel
of three (3) arbitrators in Muncie,  Indiana in accordance with the rules of the
American Arbitration  Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that the
Executive shall be entitled to seek specific performance of his right to be paid
until the Date of Termination  during the pendency of any dispute or controversy
arising under or in connection with this Agreement.

     11. Entire Agreement.

     This  Agreement  sets forth the entire  agreement of the parties  hereto in
respect  of the  subject  matter  contained  herein  and  supersedes  all  prior
agreements, promises, covenants, arrangements,  communications,  representations
or  warranties,   whether  oral  or  written,   by  any  officer,   employee  or
representative  of any party  hereto;  and any prior  agreement  of the  parties
hereto in respect of the subject matter  contained  herein is hereby  terminated
and cancelled.

     IN WITNESS  WHEREOF,  the Corporation and the Bank have caused this
Agreement to be executed by their duly  authorized  officers,  and the Executive
has hereunder subscribed his name, this 14th day of November, 2000.

"CORPORATION"                                        "EXECUTIVE"

FIRST MERCHANTS CORPORATION

By ______________________________           By ______________________________
      Stefan S. Anderson,                         Roger M. Arwood
      Chairman of the Board

"BANK"

FIRST MERCHANTS BANK, NATIONAL ASSOCIATION

By ______________________________
      Stefan S. Anderson,
      Chairman of the Board

                                   EXHIBIT 10g
                           CHANGE OF CONTROL AGREEMENT

     This  Agreement is made and entered into this 14th day of November, 2000,
by and  between  First  Merchants  Corporation,  an  Indiana  corporation
(hereinafter  referred to as "Corporation"),  and First Merchants Bank, National
Association  (hereinafter  referred to as "Bank"), a wholly-owned  subsidiary of
the Corporation,  both with their principal  offices located at 200 East Jackson
Street,   Muncie,   Indiana,  and Larry R. Helms (hereinafter   referred  to  as
"Executive"), of Muncie, Indiana.

     WHEREAS,  the Corporation  and the Bank consider the continuance of
proficient  and  experienced  management  to  be  essential  to  protecting  and
enhancing the best interests of the Corporation, the Bank, and the Corporation's
shareholders; and

     WHEREAS,  the Corporation and the Bank desire to assure the continued
services of the Executive on behalf of the Corporation and the Bank; and

     WHEREAS,  the  Corporation  and the Bank  recognize that if faced with a
proposal for a Change of Control, as hereinafter  defined,  the Executive will
have a significant role in helping the Board of Directors assess the options and
advising  the  Board  of  Directors  on what  is in the  best  interests  of the
Corporation,  the Bank, and the Corporation's shareholders;  and it is necessary
for the  Executive to be able to provide this advice and counsel  without  being
influenced by the uncertainties of the Executive's own situation; and

     WHEREAS,  the Corporation and the Bank desire to provide fair and
reasonable  benefits to the Executive on the terms and subject to the conditions
set forth in this Agreement.

     NOW,  THEREFORE,  in  consideration  of the mutual  covenants and
undertakings  herein contained and the continued  employment of the Executive by
the  Corporation as its Senior Vice President and Corporate Counsel and the Bank
as its Executive Vice President,  the  Corporation,  the Bank,  and the
Executive, each intending to be legally bound, covenant and agree as follows:

     1.  Term of Agreement.

     This Agreement shall continue in effect through December 31, 2001;
provided,  however,  that  commencing  on December 31, 2001 and each December 31
thereafter,  the term of this Agreement shall  automatically be extended for one
additional  year  unless,  not  later  than  October  31,  2001  or  October  31
immediately  preceding any December 31 thereafter,  the  Corporation or the Bank
shall  have  given the  Executive  notice  that it does not wish to extend  this
Agreement;  and provided further, that if a Change of Control of the Corporation
or the Bank, as defined in Section 2, shall have occurred during the original or
extended term of this  Agreement,  this Agreement shall continue in effect for a
period of not less than  twenty-four  (24) months beyond the month in which such
Change of Control occurred.

     2.  Definitions.

     For purposes of this Agreement, the following definitions shall apply:

            A.  Cause:  "Cause" shall mean:

                   (1)  professional incompetence;

                   (2)  willful misconduct;

                   (3)  personal dishonesty;

                   (4)  breach of fiduciary duty involving personal profit;

                   (5)  intentional failure to perform stated duties;

                   (6)  willful   violation  of  any  law,  rule  or  regulation
                        (other  than  traffic violations or similar offenses) or
                        final cease and desist orders; and

                   (7)  any  intentional material  breach of any term, condition
                        or covenant of this Agreement.

            (B)    Change of Control:  "Change of Control" shall mean:

                   (1)  any person (as such term is used in Sections  13(d) and
                        14(d) of the Securities Exchange  Act of 1934
                        ["Exchange  Act"]),  other than the  Corporation,  is or
                        becomes the Beneficial  Owner (as defined in Rule 13d-3
                        under the Exchange Act) directly  or  indirectly  of
                        securities  of  the   Corporation   or  the  Bank
                        representing  twenty-five percent (25%) or more of the
                        combined voting power of the Corporation's or the Bank's
                        then outstanding securities;

                   (2)  persons  constituting  a majority of the Board of
                        Directors of the  Corporation or the  Bank  were not
                        directors  of the  respective  Board  for at least  the
                        twenty-four (24) preceding months;

                   (3)  the   stockholders  of  the  Corporation  or  the  Bank
                        approve  a  merger  or consolidation of the Corporation
                        or the Bank with any other corporation,  other than
                        (a) a merger or consolidation  which would result in the
                        voting securities of  the  Corporation  or  the  Bank
                        outstanding   immediately   prior  thereto continuing to
                        represent (either by remaining  outstanding or by being
                        converted into voting  securities of the surviving
                        entity) more than fifty percent (50%) of the combined
                        voting power of the voting  securities of the
                        Corporation  or the Bank or such surviving entity
                        outstanding  immediately after such a merger or
                        consolidation,  or (b) a merger or  consolidation
                        effected to  implement a recapitalization  of the
                        Corporation or the Bank (or similar  transaction)  in
                        which no person  acquires  fifty percent  (50%) or more
                        of the combined  voting power of the Corporation's or
                        the Bank's then outstanding securities; or

                   (4)  the stockholders of the Corporation  approve a plan of
                        complete  liquidation of the  Corporation or the Bank or
                        an agreement for the sale or disposition by the
                        Corporation or the Bank of all or  substantially  all of
                        the  Corporation's  or the Bank's assets.

            (C)    Date of  Termination:  "Date of  Termination"  shall mean the
                   date  stated in the Notice of Termination  (as  hereinafter
                   defined) or thirty (30) days from the date of delivery of
                   such notice, as hereinafter defined, whichever comes first.

            (D)    Disability:  "Disability"  shall  mean  the  definition  of
                   such  term  as  used in the disability  policy then in effect
                   for the  Corporation or the Bank, and a  determination of
                   full disability by the  Corporation or the Bank;  provided
                   that in the event there is no  disability  insurance  then in
                   force,  "disability"  shall  mean  incapacity  due to
                   physical or mental  illness  which will have caused the
                   Executive to have been unable to perform  his duties  with
                   the Corporation  and/or the Bank on a full time basis for one
                   hundred eighty (180) consecutive calendar days.

            (E)    Notice  of  Termination:   "Notice  of   Termination"   shall
                   mean  a  written  notice, communicated   to  the  other
                   parties   hereto,   which  shall  indicate  the  specific
                   termination  provisions  of this  Agreement  relied  upon and
                   set forth  in  reasonable detail the facts and  circumstances
                   claimed to provide a basis for  termination  of the
                   Executive's employment under the provisions so indicated.

            (F)    Retirement:  "Retirement" shall mean  termination  of
                   employment  by the  Executive in accordance  with the
                   Corporation's  or the Bank's normal  retirement  policy
                   generally applicable to its salaried employees in effect at
                   the time of a Change of Control.

     3.  Termination.

            (A)    General.  If any of the events  described in Section 2
                   constituting a Change in Control of the  Corporation or the
                   Bank shall have occurred,  the Executive shall be entitled to
                   the benefits  described in Section 4 upon the subsequent
                   termination of the Executive's employment  during the term of
                   this  Agreement,  unless such  termination is (a) because of
                   the death or  Disability of the  Executive,  (b) by the
                   Corporation  or the Bank for Cause,  or (c) by the Executive
                   other than on account of  Constructive  Termination (as
                   hereinafter defined).

            (B)    If, following a Change of Control, the Executive's employment
                   shall be terminated for Cause,  the  Corporation  and/or the
                   Bank shall pay him his salary  through  the Date of
                   Termination  at the rate in effect on the date of the  Notice
                   of  Termination,  and the Corporation and the Bank shall have
                   no further  obligations  under this  Agreement.  If,
                   following a Change of Control,  the  Executive's  employment
                   shall be  terminated  as a result of death or Disability,
                   compensation  to the Executive shall be made pursuant to
                   the  Corporation's  and the Bank's then existing  policies on
                   death or  Disability,  and the  Corporation  and the Bank
                   shall have no further  obligations  under this Agreement.
                   If,  following a Change of Control,  the Executive's
                   employment is terminated by and at the request of the
                   Executive as a result of  Retirement,  compensation  to the
                   Executive shall be made  pursuant to the  Corporation's  and
                   the Bank's normal  retirement  policy generally  applicable
                   to its  salaried  employees at the time of the Change of
                   Control, and  the  Corporation  and the  Bank  shall  have no
                   further  obligations  under  this Agreement.

            (C)    Constructive  Termination.  The Executive  shall be entitled
                   to terminate his employment upon the  occurrence  of
                   Constructive  Termination.  For  purposes of this  Agreement,
                   "Constructive Termination" shall mean, without the
                   Executive's express written consent, the  occurrence,  after
                   a Change of Control of the  Corporation  or the Bank,  of any
                   of the following circumstances:

                   (1)  The  assignment  to the  Executive  of any duties
                        inconsistent  (unless in the nature of a promotion) with
                        the position in the  Corporation  or the Bank that the
                        Executive  held  immediately  prior  to  the  Change  of
                        Control  of  the Corporation  or the Bank, or a
                        significant  adverse  reduction or alteration in the
                        nature or status of the Executive's  position, duties or
                        responsibilities or the conditions of  the  Executive's
                        employment  from  those  in  effect immediately prior to
                        such Change of Control;

                   (2)  a reduction in the  Executive's  annual base salary,  as
                        in effect  immediately prior to the Change of Control of
                        the  Corporation  or the Bank or as the same may  be
                        adjusted  from  time  to  time,  except  for across-the-
                        board  salary reductions  similarly affecting all
                        management  personnel of the Corporation or the Bank;

                   (3)  the  Bank  and/or  the  Corporation  requires  the
                        Executive  to be  relocated anywhere other than their
                        offices in Muncie, Indiana;

                   (4)  the  taking of any action to  deprive  the  Executive of
                        any  material  fringe benefit enjoyed by him at the time
                        of the Change of Control,  or the failure to provide
                        him with the number of paid  vacation  days to which he
                        is entitled on the  basis of years of  service  with the
                        Corporation  and/or the Bank and in accordance  with the
                        Corporation's or the Bank's  normal  vacation  policy in
                        effect at the time of the Change of Control;

                   (5)  the failure to continue to provide the Executive  with
                        benefits  substantially similar to those enjoyed by the
                        Executive  under any of the  Corporation's or the Bank's
                        life insurance,  medical,  health and accident,  or
                        disability plans in which the Executive was
                        participating  at the time of the Change of Control of
                        the  Corporation  or the Bank,  or the  taking of any
                        action  which  would directly or indirectly materially
                        reduce any of such benefits; or

                   (6)  the  failure of the Corporation or the Bank to  continue
                        this  Agreement  in effect, or to obtain a satisfactory
                        agreement from any successor to assume and  agree to
                        perform this Agreement, as contemplated in Section 5
                        hereof.

     4.  Compensation Upon Termination.

     Following a Change of Control,  if his  employment by the  Corporation  or
the Bank  shall be  terminated  by the  Executive  on  account  of  Constructive
Termination  or by the  Corporation  or the Bank other  than for  Cause,  death,
Disability,  or Retirement  (by and at the request of the  Executive),  then the
Executive shall be entitled to the benefits provided below:

            (A)    No later than the fifth day following the Date of
                   Termination,  the  Corporation or the Bank shall pay to the
                   Executive his full base salary  through the Date of
                   Termination, at the rate in  effect  at the time  Notice  of
                   Termination  is  given,  plus all other amounts  to  which
                   the  Executive  is  entitled  under  any  incentive, bonus or
                   other compensation  plan of the  Corporation  or the Bank in
                   effect at the time such  payments are due;

            (B)    In lieu of any further  salary  payments to the Executive for
                   periods  subsequent to the Date of  Termination,  no later
                   than the fifth day  following  the Date of  Termination,
                   the  Corporation  or the Bank shall pay to the Executive a
                   lump sum  severance  payment, in cash,  equal to two (2.00)
                   times the sum of (a) the  Executive's  annual base salary
                   rate as in effect on the date of the Notice of  Termination,
                   and (b) the largest  bonus received by the  Executive  during
                   the two (2) years  immediately  preceding the Date of
                   Termination under the  Corporation's  Management   Incentive
                   Plan   covering  the Executive;

            (C)    During the period  beginning with the  Executive's  Date of
                   Termination  and continuing until the  earlier of (a) the
                   second  anniversary  of such Date of  Termination,  or (b)
                   Executive's  sixty-fifth  (65th) birthday,  the Corporation
                   or the Bank shall arrange to provide the Executive  with
                   life,  disability,  accident and health  insurance  benefits
                   substantially  similar to those which the Executive was
                   receiving  immediately  prior to the  Notice  of  Termination
                   and  shall  pay the  same  percentage  of the cost of such
                   benefits  as the  Corporation  or the Bank was paying on the
                   Executive's  behalf on the date of such Notice;

            (D)    In lieu of shares of common stock of the  Corporation
                   ("Corporation  Shares")  issuable upon the exercise of
                   outstanding options  ("Options"),  if any, granted to the
                   Executive under any  Corporation  stock option plan (which
                   Options  shall be  cancelled  upon the making of the  payment
                   referred to below),  the  Executive  shall  receive an amount
                   in cash  equal to the  product  of (a) the  excess of the
                   higher of the  closing  price of Corporation  Shares as
                   reported  on the NASDAQ  National  Market  System,  the
                   American Stock Exchange or the New York Stock Exchange,
                   wherever listed,  on or nearest the Date of Termination or
                   the highest per share price for  Corporation  Shares actually
                   paid in connection  with any Change of Control of the
                   Corporation, over the per share exercise price of each Option
                   held by the  Executive  (whether  or not then fully
                   exercisable), times (b) the number of Corporation Shares
                   covered by each such Option;

            (E)    If the  payments or  benefits,  if any,  received  or to be
                   received  by the  Executive (whether  under  this  Agreement
                   or under any other  plan,  arrangement,  or  agreement
                   between the Executive and the Corporation or the Bank),  in
                   connection with  termination or  Constructive Termination  of
                   the  Executive's  employment  following  a  Change  of
                   Control,  constitute an "excess  parachute  payment"  within
                   the meaning of Section 280G of the Internal  Revenue  Code
                   ("Code"), the  Corporation  or the  Bank  shall  pay  to  the
                   Executive,  no  later  than  the  fifth  day  following  the
                   Date  of  Termination,  an additional amount (as determined
                   by the Corporation's  independent  public  accountants)
                   equal to the excise tax, if any, imposed on the "excess
                   parachute payment" under Section 4999 of the Code;  provided,
                   however, if the amount of such excise tax is finally
                   determined to be more or less than the amount paid to the
                   Executive  hereunder,  the Corporation or the Bank (or the
                   Executive if the finally  determined  amount is less than the
                   original amount  paid)  shall pay the  difference  between
                   the  amount  originally  paid and the finally  determined
                   amount to the other party no later than the fifth day
                   following the date such final determination is made;

            (F)    The  Corporation  or the Bank shall pay to the Executive all
                   reasonable  legal fees and expenses incurred by the Executive
                   as a result of such termination  (including all such fees and
                   expenses,  if any,  incurred in contesting or disputing any
                   such termination or in seeking  to obtain or  enforce  any
                   right or  benefit  provided  by this  Agreement), unless the
                   decision-maker  in any proceeding,  contest,  or dispute
                   arising  hereunder makes  a  formal  finding  that  the
                   Executive  did not  have a  reasonable  basis  for
                   instituting such proceeding, contest, or dispute;

            (G)    The  Corporation or the Bank shall provide the Executive with
                   individual  out-placement services in accordance  with the
                   general  custom and practice  generally  accorded to an
                   executive of the Executive's position.

     5.  Successors; Binding Agreement.

            (A)    The  Corporation  or the Bank shall require any successor
                   (whether  direct or indirect, by purchase,  merger,
                   consolidation  or otherwise) to all or  substantially  all of
                   the business and/or assets of the  Corporation or the Bank to
                   expressly  assume and agree to perform this Agreement  in the
                   same manner and to the same extent that the  Corporation  or
                   the Bank  would be  required  to perform it if no such
                   succession  had taken  place.  Failure of the  Corporation or
                   the Bank to obtain such  assumption  and agreement  prior to
                   the  effectiveness  of any such succession  shall be a breach
                   of this  Agreement and shall  entitle the Executive to
                   compensation  from the  Corporation  or the Bank in the
                   same amount and on the same terms to which the  Executive
                   would be  entitled  hereunder if the  Executive  terminates
                   his  employment  on account of  Constructive  Termination
                   following  a Change of  Control  of the  Corporation  or the
                   Bank,  except  that for the purposes of implementing  the
                   foregoing,  the date on which any such succession  becomes
                   effective shall be deemed  the Date of  Termination.  As used
                   in this  Agreement,  "the Corporation  or the Bank" shall
                   mean the  Corporation  or the Bank and any  successor to
                   their  business  and/or  assets as  aforesaid  which  assumes
                   and agrees to perform this Agreement, by operation of law or
                   otherwise.

            (B)    This  Agreement  shall inure to the benefit of and be
                   enforceable  by the Executive and his personal or legal
                   representatives,  executors,  administrators,  successors,
                   heirs, distributees,  devisees  and  legatees.  If the
                   Executive  should die while any amount would still be payable
                   to the Executive  hereunder had the Executive  continued to
                   live, all such amounts,  unless otherwise  provided  herein,
                   shall be paid in accordance with the terms of this  Agreement
                   to the devisee,  legatee or other  designee or, if there is
                   no such designee, to his estate.

     6.  Guarantee by Corporation and Bank.

     In  consideration  of the value of the continued  employment of the
Executive  by the  Corporation  or the Bank,  and the  benefits  derived  by the
Corporation and the Bank from the  Executive's  employment by the Corporation or
the  Bank,  the  Corporation  and the  Bank  hereby  unconditionally  and  fully
guarantee and endorse the  obligations of the other  hereunder,  and agree to be
fully bound by the terms of this  Agreement in the event that the other fails to
perform, honor, or otherwise complete fully its obligations hereunder.

     7.  Miscellaneous.

     No provision of this Agreement may be modified,  waived or discharged
unless such waiver, modification or discharge is agreed to in writing and signed
by the  Executive  and such  officer as may be  specifically  designated  by the
Corporation.  No waiver by either  party hereto at the time of any breach by the
other party hereto of, or  compliance  with,  any condition or provision of this
Agreement  to be  performed  by such  other  party  shall be  deemed a waiver of
similar or  dissimilar  provisions  or conditions at the same or at any prior or
subsequent time. No agreement or representations,  oral or otherwise, express or
implied,  with  respect to the  subject  matter  hereof have been made by either
party  which  are not  expressly  set  forth in this  Agreement.  The  validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the  State of  Indiana  without  regard to its  conflicts  of law
principles. All references to a section of the Exchange Act or the Code shall be
deemed also to refer to any successor  provisions to such section.  Any payments
provided for hereunder shall be paid net of any applicable  withholding required
under federal,  state or local law. The  obligations of the  Corporation and the
Bank under Section 4 shall survive the expiration of the term of this Agreement.

     8.  Validity.

     The invalidity or  unenforceability  of any provision of this Agreement
shall not affect the validity or  enforceability  of any other provision of this
Agreement, which shall remain in full force and effect.

     9.  Counterparts.

     This Agreement may be executed in several  counterparts,  each of which
shall be deemed to be an original,  but all of which together  shall  constitute
one and the same instrument.

     10. Arbitration.

     Any  dispute  or  controversy  arising  under or in  connection  with  this
Agreement shall be settled exclusively by arbitration,  conducted before a panel
of three (3) arbitrators in Muncie,  Indiana in accordance with the rules of the
American Arbitration  Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that the
Executive shall be entitled to seek specific performance of his right to be paid
until the Date of Termination  during the pendency of any dispute or controversy
arising under or in connection with this Agreement.

     11. Entire Agreement.

     This  Agreement  sets forth the entire  agreement of the parties  hereto in
respect  of the  subject  matter  contained  herein  and  supersedes  all  prior
agreements, promises, covenants, arrangements,  communications,  representations
or  warranties,   whether  oral  or  written,   by  any  officer,   employee  or
representative  of any party  hereto;  and any prior  agreement  of the  parties
hereto in respect of the subject matter  contained  herein is hereby  terminated
and cancelled.

     IN WITNESS  WHEREOF,  the Corporation and the Bank have caused this
Agreement to be executed by their duly  authorized  officers,  and the Executive
has hereunder subscribed his name, this 14th day of November, 2000.

"CORPORATION"                                        "EXECUTIVE"

FIRST MERCHANTS CORPORATION

By ______________________________           By ______________________________
      Stefan S. Anderson,                         Larry R. Helms
      Chairman of the Board

"BANK"

FIRST MERCHANTS BANK, NATIONAL ASSOCIATION

By ______________________________
      Stefan S. Anderson,
      Chairman of the Board

                                   EXHIBIT 10h
                           CHANGE OF CONTROL AGREEMENT

     This  Agreement is made and entered into this 11th day of May, 1999,
by and  between  First  Merchants  Corporation,  an  Indiana  corporation
(hereinafter  referred to as "Corporation"),  and First Merchants Bank, National
Association  (hereinafter  referred to as "Bank"), a wholly-owned  subsidiary of
the Corporation,  both with their principal  offices located at 200 East Jackson
Street,   Muncie,  Indiana,  and  James L. Thrash (hereinafter  referred  to  as
"Executive"), of Muncie, Indiana.

     WHEREAS,  the Corporation  and the Bank consider the continuance of
proficient  and  experienced  management  to  be  essential  to  protecting  and
enhancing the best interests of the Corporation, the Bank, and the Corporation's
shareholders; and

     WHEREAS,  the Corporation and the Bank desire to assure the continued
services of the Executive on behalf of the Corporation and the Bank; and

     WHEREAS,  the  Corporation  and the Bank  recognize that if faced with a
proposal for a Change of Control, as hereinafter  defined,  the Executive will
have a significant role in helping the Board of Directors assess the options and
advising  the  Board  of  Directors  on what  is in the  best  interests  of the
Corporation,  the Bank, and the Corporation's shareholders;  and it is necessary
for the  Executive to be able to provide this advice and counsel  without  being
influenced by the uncertainties of the Executive's own situation; and

     WHEREAS,  the Corporation and the Bank desire to provide fair and
reasonable  benefits to the Executive on the terms and subject to the conditions
set forth in this Agreement.

     NOW,  THEREFORE,  in  consideration  of the mutual  covenants and
undertakings  herein contained and the continued  employment of the Executive by
the  Corporation  as its Senior Vice  President and Chief Financial Officer and
the Bank as its Senior Vice President,  the  Corporation,  the Bank,  and the
Executive, each intending to be legally bound, covenant and agree as follows:

     1.  Term of Agreement.

     This Agreement shall continue in effect through December 31, 1999;
provided,  however,  that  commencing  on December 31, 1999 and each December 31
thereafter,  the term of this Agreement shall  automatically be extended for one
additional  year  unless,  not  later  than  October  31,  1999  or  October  31
immediately  preceding any December 31 thereafter,  the  Corporation or the Bank
shall  have  given the  Executive  notice  that it does not wish to extend  this
Agreement;  and provided further, that if a Change of Control of the Corporation
or the Bank, as defined in Section 2, shall have occurred during the original or
extended term of this  Agreement,  this Agreement shall continue in effect for a
period of not less than  twenty-four  (24) months beyond the month in which such
Change of Control occurred.

     2.  Definitions.

     For purposes of this Agreement, the following definitions shall apply:

            A.  Cause:  "Cause" shall mean:

                   (1)  professional incompetence;

                   (2)  willful misconduct;

                   (3)  personal dishonesty;

                   (4)  breach of fiduciary duty involving personal profit;

                   (5)  intentional failure to perform stated duties;

                   (6)  willful   violation  of  any  law,  rule  or  regulation
                        (other  than  traffic violations or similar offenses) or
                        final cease and desist orders; and

                   (7)  any  intentional material  breach of any term, condition
                        or covenant of this Agreement.

            (B)    Change of Control:  "Change of Control" shall mean:

                   (1)  any person (as such term is used in Sections  13(d) and
                        14(d) of the Securities Exchange  Act of 1934
                        ["Exchange  Act"]),  other than the  Corporation,  is or
                        becomes the Beneficial  Owner (as defined in Rule 13d-3
                        under the Exchange Act) directly  or  indirectly  of
                        securities  of  the   Corporation   or  the  Bank
                        representing  twenty-five percent (25%) or more of the
                        combined voting power of the Corporation's or the Bank's
                        then outstanding securities;

                   (2)  persons  constituting  a majority of the Board of
                        Directors of the  Corporation or the  Bank  were not
                        directors  of the  respective  Board  for at least  the
                        twenty-four (24) preceding months;

                   (3)  the   stockholders  of  the  Corporation  or  the  Bank
                        approve  a  merger  or consolidation of the Corporation
                        or the Bank with any other corporation,  other than
                        (a) a merger or consolidation  which would result in the
                        voting securities of  the  Corporation  or  the  Bank
                        outstanding   immediately   prior  thereto continuing to
                        represent (either by remaining  outstanding or by being
                        converted into voting  securities of the surviving
                        entity) more than fifty percent (50%) of the combined
                        voting power of the voting  securities of the
                        Corporation  or the Bank or such surviving entity
                        outstanding  immediately after such a merger or
                        consolidation,  or (b) a merger or  consolidation
                        effected to  implement a recapitalization  of the
                        Corporation or the Bank (or similar  transaction)  in
                        which no person  acquires  fifty percent  (50%) or more
                        of the combined  voting power of the Corporation's or
                        the Bank's then outstanding securities; or

                   (4)  the stockholders of the Corporation  approve a plan of
                        complete  liquidation of the  Corporation or the Bank or
                        an agreement for the sale or disposition by the
                        Corporation or the Bank of all or  substantially  all of
                        the  Corporation's  or the Bank's assets.

            (C)    Date of  Termination:  "Date of  Termination"  shall mean the
                   date  stated in the Notice of Termination  (as  hereinafter
                   defined) or thirty (30) days from the date of delivery of
                   such notice, as hereinafter defined, whichever comes first.

            (D)    Disability:  "Disability"  shall  mean  the  definition  of
                   such  term  as  used in the disability  policy then in effect
                   for the  Corporation or the Bank, and a  determination of
                   full disability by the  Corporation or the Bank;  provided
                   that in the event there is no  disability  insurance  then in
                   force,  "disability"  shall  mean  incapacity  due to
                   physical or mental  illness  which will have caused the
                   Executive to have been unable to perform  his duties  with
                   the Corporation  and/or the Bank on a full time basis for one
                   hundred eighty (180) consecutive calendar days.

            (E)    Notice  of  Termination:   "Notice  of   Termination"   shall
                   mean  a  written  notice, communicated   to  the  other
                   parties   hereto,   which  shall  indicate  the  specific
                   termination  provisions  of this  Agreement  relied  upon and
                   set forth  in  reasonable detail the facts and  circumstances
                   claimed to provide a basis for  termination  of the
                   Executive's employment under the provisions so indicated.

            (F)    Retirement:  "Retirement" shall mean  termination  of
                   employment  by the  Executive in accordance  with the
                   Corporation's  or the Bank's normal  retirement  policy
                   generally applicable to its salaried employees in effect at
                   the time of a Change of Control.

     3.  Termination.

            (A)    General.  If any of the events  described in Section 2
                   constituting a Change in Control of the  Corporation or the
                   Bank shall have occurred,  the Executive shall be entitled to
                   the benefits  described in Section 4 upon the subsequent
                   termination of the Executive's employment  during the term of
                   this  Agreement,  unless such  termination is (a) because of
                   the death or  Disability of the  Executive,  (b) by the
                   Corporation  or the Bank for Cause,  or (c) by the Executive
                   other than on account of  Constructive  Termination (as
                   hereinafter defined).

            (B)    If, following a Change of Control, the Executive's employment
                   shall be terminated for Cause,  the  Corporation  and/or the
                   Bank shall pay him his salary  through  the Date of
                   Termination  at the rate in effect on the date of the  Notice
                   of  Termination,  and the Corporation and the Bank shall have
                   no further  obligations  under this  Agreement.  If,
                   following a Change of Control,  the  Executive's  employment
                   shall be  terminated  as a result of death or Disability,
                   compensation  to the Executive shall be made pursuant to
                   the  Corporation's  and the Bank's then existing  policies on
                   death or  Disability,  and the  Corporation  and the Bank
                   shall have no further  obligations  under this Agreement.
                   If,  following a Change of Control,  the Executive's
                   employment is terminated by and at the request of the
                   Executive as a result of  Retirement,  compensation  to the
                   Executive shall be made  pursuant to the  Corporation's  and
                   the Bank's normal  retirement  policy generally  applicable
                   to its  salaried  employees at the time of the Change of
                   Control, and  the  Corporation  and the  Bank  shall  have no
                   further  obligations  under  this Agreement.

            (C)    Constructive  Termination.  The Executive  shall be entitled
                   to terminate his employment upon the  occurrence  of
                   Constructive  Termination.  For  purposes of this  Agreement,
                   "Constructive Termination" shall mean, without the
                   Executive's express written consent, the  occurrence,  after
                   a Change of Control of the  Corporation  or the Bank,  of any
                   of the following circumstances:

                   (1)  The  assignment  to the  Executive  of any duties
                        inconsistent  (unless in the nature of a promotion) with
                        the position in the  Corporation  or the Bank that the
                        Executive  held  immediately  prior  to  the  Change  of
                        Control  of  the Corporation  or the Bank, or a
                        significant  adverse  reduction or alteration in the
                        nature or status of the Executive's  position, duties or
                        responsibilities or the conditions of  the  Executive's
                        employment  from  those  in  effect immediately prior to
                        such Change of Control;

                   (2)  a reduction in the  Executive's  annual base salary,  as
                        in effect  immediately prior to the Change of Control of
                        the  Corporation  or the Bank or as the same may  be
                        adjusted  from  time  to  time,  except  for across-the-
                        board  salary reductions  similarly affecting all
                        management  personnel of the Corporation or the Bank;

                   (3)  the  Bank  and/or  the  Corporation  requires  the
                        Executive  to be  relocated anywhere other than their
                        offices in Muncie, Indiana;

                   (4)  the  taking of any action to  deprive  the  Executive of
                        any  material  fringe benefit enjoyed by him at the time
                        of the Change of Control,  or the failure to provide
                        him with the number of paid  vacation  days to which he
                        is entitled on the  basis of years of  service  with the
                        Corporation  and/or the Bank and in accordance  with the
                        Corporation's or the Bank's  normal  vacation  policy in
                        effect at the time of the Change of Control;

                   (5)  the failure to continue to provide the Executive  with
                        benefits  substantially similar to those enjoyed by the
                        Executive  under any of the  Corporation's or the Bank's
                        life insurance,  medical,  health and accident,  or
                        disability plans in which the Executive was
                        participating  at the time of the Change of Control of
                        the  Corporation  or the Bank,  or the  taking of any
                        action  which  would directly or indirectly materially
                        reduce any of such benefits; or

                   (6)  the  failure of the Corporation or the Bank to  continue
                        this  Agreement  in effect, or to obtain a satisfactory
                        agreement from any successor to assume and  agree to
                        perform this Agreement, as contemplated in Section 5
                        hereof.

     4.  Compensation Upon Termination.

     Following a Change of Control,  if his  employment by the  Corporation  or
the Bank  shall be  terminated  by the  Executive  on  account  of  Constructive
Termination  or by the  Corporation  or the Bank other  than for  Cause,  death,
Disability,  or Retirement  (by and at the request of the  Executive),  then the
Executive shall be entitled to the benefits provided below:

            (A)    No later than the fifth day following the Date of
                   Termination,  the  Corporation or the Bank shall pay to the
                   Executive his full base salary  through the Date of
                   Termination, at the rate in  effect  at the time  Notice  of
                   Termination  is  given,  plus all other amounts  to  which
                   the  Executive  is  entitled  under  any  incentive, bonus or
                   other compensation  plan of the  Corporation  or the Bank in
                   effect at the time such  payments are due;

            (B)    In lieu of any further  salary  payments to the Executive for
                   periods  subsequent to the Date of  Termination,  no later
                   than the fifth day  following  the Date of  Termination,
                   the  Corporation  or the Bank shall pay to the Executive a
                   lump sum  severance  payment, in cash,  equal to one and
                   one-half (1.50) times the sum of (a) the  Executive's  annual
                   base salary rate as in effect on the date of the Notice of
                   Termination, and (b) the largest  bonus received by the
                   Executive  during the two (2) years  immediately  preceding
                   the Date of Termination under the  Corporation's  Management
                   Incentive Plan   covering  the Executive;

            (C)    During the period  beginning with the  Executive's  Date of
                   Termination  and continuing until the  earlier of (a) the
                   second  anniversary  of such Date of  Termination,  or (b)
                   Executive's  sixty-fifth  (65th) birthday,  the Corporation
                   or the Bank shall arrange to provide the Executive  with
                   life,  disability,  accident and health  insurance  benefits
                   substantially  similar to those which the Executive was
                   receiving  immediately  prior to the  Notice  of  Termination
                   and  shall  pay the  same  percentage  of the cost of such
                   benefits  as the  Corporation  or the Bank was paying on the
                   Executive's  behalf on the date of such Notice;

            (D)    In lieu of shares of common stock of the  Corporation
                   ("Corporation  Shares")  issuable upon the exercise of
                   outstanding options  ("Options"),  if any, granted to the
                   Executive under any  Corporation  stock option plan (which
                   Options  shall be  cancelled  upon the making of the  payment
                   referred to below),  the  Executive  shall  receive an amount
                   in cash  equal to the  product  of (a) the  excess of the
                   higher of the  closing  price of Corporation  Shares as
                   reported  on the NASDAQ  National  Market  System,  the
                   American Stock Exchange or the New York Stock Exchange,
                   wherever listed,  on or nearest the Date of Termination or
                   the highest per share price for  Corporation  Shares actually
                   paid in connection  with any Change of Control of the
                   Corporation, over the per share exercise price of each Option
                   held by the  Executive  (whether  or not then fully
                   exercisable), times (b) the number of Corporation Shares
                   covered by each such Option;

            (E)    If the  payments or  benefits,  if any,  received  or to be
                   received  by the  Executive (whether  under  this  Agreement
                   or under any other  plan,  arrangement,  or  agreement
                   between the Executive and the Corporation or the Bank),  in
                   connection with  termination or  Constructive Termination  of
                   the  Executive's  employment  following  a  Change  of
                   Control,  constitute an "excess  parachute  payment"  within
                   the meaning of Section 280G of the Internal  Revenue  Code
                   ("Code"), the  Corporation  or the  Bank  shall  pay  to  the
                   Executive,  no  later  than  the  fifth  day  following  the
                   Date  of  Termination,  an additional amount (as determined
                   by the Corporation's  independent  public  accountants)
                   equal to the excise tax, if any, imposed on the "excess
                   parachute payment" under Section 4999 of the Code;  provided,
                   however, if the amount of such excise tax is finally
                   determined to be more or less than the amount paid to the
                   Executive  hereunder,  the Corporation or the Bank (or the
                   Executive if the finally  determined  amount is less than the
                   original amount  paid)  shall pay the  difference  between
                   the  amount  originally  paid and the finally  determined
                   amount to the other party no later than the fifth day
                   following the date such final determination is made;

            (F)    The  Corporation  or the Bank shall pay to the Executive all
                   reasonable  legal fees and expenses incurred by the Executive
                   as a result of such termination  (including all such fees and
                   expenses,  if any,  incurred in contesting or disputing any
                   such termination or in seeking  to obtain or  enforce  any
                   right or  benefit  provided  by this  Agreement), unless the
                   decision-maker  in any proceeding,  contest,  or dispute
                   arising  hereunder makes  a  formal  finding  that  the
                   Executive  did not  have a  reasonable  basis  for
                   instituting such proceeding, contest, or dispute;

            (G)    The  Corporation or the Bank shall provide the Executive with
                   individual  out-placement services in accordance  with the
                   general  custom and practice  generally  accorded to an
                   executive of the Executive's position.

     5.  Successors; Binding Agreement.

            (A)    The  Corporation  or the Bank shall require any successor
                   (whether  direct or indirect, by purchase,  merger,
                   consolidation  or otherwise) to all or  substantially  all of
                   the business and/or assets of the  Corporation or the Bank to
                   expressly  assume and agree to perform this Agreement  in the
                   same manner and to the same extent that the  Corporation  or
                   the Bank  would be  required  to perform it if no such
                   succession  had taken  place.  Failure of the  Corporation or
                   the Bank to obtain such  assumption  and agreement  prior to
                   the  effectiveness  of any such succession  shall be a breach
                   of this  Agreement and shall  entitle the Executive to
                   compensation  from the  Corporation  or the Bank in the
                   same amount and on the same terms to which the  Executive
                   would be  entitled  hereunder if the  Executive  terminates
                   his  employment  on account of  Constructive  Termination
                   following  a Change of  Control  of the  Corporation  or the
                   Bank,  except  that for the purposes of implementing  the
                   foregoing,  the date on which any such succession  becomes
                   effective shall be deemed  the Date of  Termination.  As used
                   in this  Agreement,  "the Corporation  or the Bank" shall
                   mean the  Corporation  or the Bank and any  successor to
                   their  business  and/or  assets as  aforesaid  which  assumes
                   and agrees to perform this Agreement, by operation of law or
                   otherwise.

            (B)    This  Agreement  shall inure to the benefit of and be
                   enforceable  by the Executive and his personal or legal
                   representatives,  executors,  administrators,  successors,
                   heirs, distributees,  devisees  and  legatees.  If the
                   Executive  should die while any amount would still be payable
                   to the Executive  hereunder had the Executive  continued to
                   live, all such amounts,  unless otherwise  provided  herein,
                   shall be paid in accordance with the terms of this  Agreement
                   to the devisee,  legatee or other  designee or, if there is
                   no such designee, to his estate.

     6.  Guarantee by Corporation and Bank.

     In  consideration  of the value of the continued  employment of the
Executive  by the  Corporation  or the Bank,  and the  benefits  derived  by the
Corporation and the Bank from the  Executive's  employment by the Corporation or
the  Bank,  the  Corporation  and the  Bank  hereby  unconditionally  and  fully
guarantee and endorse the  obligations of the other  hereunder,  and agree to be
fully bound by the terms of this  Agreement in the event that the other fails to
perform, honor, or otherwise complete fully its obligations hereunder.

     7.  Miscellaneous.

     No provision of this Agreement may be modified,  waived or discharged
unless such waiver, modification or discharge is agreed to in writing and signed
by the  Executive  and such  officer as may be  specifically  designated  by the
Corporation.  No waiver by either  party hereto at the time of any breach by the
other party hereto of, or  compliance  with,  any condition or provision of this
Agreement  to be  performed  by such  other  party  shall be  deemed a waiver of
similar or  dissimilar  provisions  or conditions at the same or at any prior or
subsequent time. No agreement or representations,  oral or otherwise, express or
implied,  with  respect to the  subject  matter  hereof have been made by either
party  which  are not  expressly  set  forth in this  Agreement.  The  validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the  State of  Indiana  without  regard to its  conflicts  of law
principles. All references to a section of the Exchange Act or the Code shall be
deemed also to refer to any successor  provisions to such section.  Any payments
provided for hereunder shall be paid net of any applicable  withholding required
under federal,  state or local law. The  obligations of the  Corporation and the
Bank under Section 4 shall survive the expiration of the term of this Agreement.

     8.  Validity.

     The invalidity or  unenforceability  of any provision of this Agreement
shall not affect the validity or  enforceability  of any other provision of this
Agreement, which shall remain in full force and effect.

     9.  Counterparts.

     This Agreement may be executed in several  counterparts,  each of which
shall be deemed to be an original,  but all of which together  shall  constitute
one and the same instrument.

     10. Arbitration.

     Any  dispute  or  controversy  arising  under or in  connection  with  this
Agreement shall be settled exclusively by arbitration,  conducted before a panel
of three (3) arbitrators in Muncie,  Indiana in accordance with the rules of the
American Arbitration  Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that the
Executive shall be entitled to seek specific performance of his right to be paid
until the Date of Termination  during the pendency of any dispute or controversy
arising under or in connection with this Agreement.

     11. Entire Agreement.

     This  Agreement  sets forth the entire  agreement of the parties  hereto in
respect  of the  subject  matter  contained  herein  and  supersedes  all  prior
agreements, promises, covenants, arrangements,  communications,  representations
or  warranties,   whether  oral  or  written,   by  any  officer,   employee  or
representative  of any party  hereto;  and any prior  agreement  of the  parties
hereto in respect of the subject matter  contained  herein is hereby  terminated
and cancelled.

     IN WITNESS  WHEREOF,  the Corporation and the Bank have caused this
Agreement to be executed by their duly  authorized  officers,  and the Executive
has hereunder subscribed his name, this 11th day of May, 1999.

"CORPORATION"                                        "EXECUTIVE"

FIRST MERCHANTS CORPORATION

By ______________________________           By ______________________________
      Stefan S. Anderson,                         James L. Thrash
      Chairman of the Board

"BANK"

FIRST MERCHANTS BANK, NATIONAL ASSOCIATION

By ______________________________
      Stefan S. Anderson,
      Chairman of the Board

                                   EXHIBIT 10i
                           CHANGE OF CONTROL AGREEMENT

     This  Agreement is made and entered into this 11th day of May, 1999,
by and  between  First  Merchants  Corporation,  an  Indiana  corporation
(hereinafter  referred to as "Corporation"),  and First Merchants Bank, National
Association  (hereinafter  referred to as "Bank"), a wholly-owned  subsidiary of
the Corporation,  both with their principal  offices located at 200 East Jackson
Street,   Muncie,  Indiana,  and  Michael L. Cox (hereinafter   referred  to  as
"Executive"), of Muncie, Indiana.

     WHEREAS,  the Corporation  and the Bank consider the continuance of
proficient  and  experienced  management  to  be  essential  to  protecting  and
enhancing the best interests of the Corporation, the Bank, and the Corporation's
shareholders; and

     WHEREAS,  the Corporation and the Bank desire to assure the continued
services of the Executive on behalf of the Corporation and the Bank; and

     WHEREAS,  the  Corporation  and the Bank  recognize that if faced with a
proposal for a Change of Control, as hereinafter  defined,  the Executive will
have a significant role in helping the Board of Directors assess the options and
advising  the  Board  of  Directors  on what  is in the  best  interests  of the
Corporation,  the Bank, and the Corporation's shareholders;  and it is necessary
for the  Executive to be able to provide this advice and counsel  without  being
influenced by the uncertainties of the Executive's own situation; and

     WHEREAS,  the Corporation and the Bank desire to provide fair and
reasonable  benefits to the Executive on the terms and subject to the conditions
set forth in this Agreement.

     NOW,  THEREFORE,  in  consideration  of the mutual  covenants and
undertakings  herein contained and the continued  employment of the Executive by
the  Corporation and the Bank as their President and Chief Executive Officer,
the  Corporation,  the Bank,  and the Executive, each intending to be legally
bound, covenant and agree as follows:

     1.  Term of Agreement.

     This Agreement shall continue in effect through December 31, 1999;
provided,  however,  that  commencing  on December 31, 1999 and each December 31
thereafter,  the term of this Agreement shall  automatically be extended for one
additional  year  unless,  not  later  than  October  31,  1999  or  October  31
immediately  preceding any December 31 thereafter,  the  Corporation or the Bank
shall  have  given the  Executive  notice  that it does not wish to extend  this
Agreement;  and provided further, that if a Change of Control of the Corporation
or the Bank, as defined in Section 2, shall have occurred during the original or
extended term of this  Agreement,  this Agreement shall continue in effect for a
period of not less than  twenty-four  (24) months beyond the month in which such
Change of Control occurred.

     2.  Definitions.

     For purposes of this Agreement, the following definitions shall apply:

            A.  Cause:  "Cause" shall mean:

                   (1)  professional incompetence;

                   (2)  willful misconduct;

                   (3)  personal dishonesty;

                   (4)  breach of fiduciary duty involving personal profit;

                   (5)  intentional failure to perform stated duties;

                   (6)  willful   violation  of  any  law,  rule  or  regulation
                        (other  than  traffic violations or similar offenses) or
                        final cease and desist orders; and

                   (7)  any  intentional material  breach of any term, condition
                        or covenant of this Agreement.

            (B)    Change of Control:  "Change of Control" shall mean:

                   (1)  any person (as such term is used in Sections  13(d) and
                        14(d) of the Securities Exchange  Act of 1934
                        ["Exchange  Act"]),  other than the  Corporation,  is or
                        becomes the Beneficial  Owner (as defined in Rule 13d-3
                        under the Exchange Act) directly  or  indirectly  of
                        securities  of  the   Corporation   or  the  Bank
                        representing  twenty-five percent (25%) or more of the
                        combined voting power of the Corporation's or the Bank's
                        then outstanding securities;

                   (2)  persons  constituting  a majority of the Board of
                        Directors of the  Corporation or the  Bank  were not
                        directors  of the  respective  Board  for at least  the
                        twenty-four (24) preceding months;

                   (3)  the   stockholders  of  the  Corporation  or  the  Bank
                        approve  a  merger  or consolidation of the Corporation
                        or the Bank with any other corporation,  other than
                        (a) a merger or consolidation  which would result in the
                        voting securities of  the  Corporation  or  the  Bank
                        outstanding   immediately   prior  thereto continuing to
                        represent (either by remaining  outstanding or by being
                        converted into voting  securities of the surviving
                        entity) more than fifty percent (50%) of the combined
                        voting power of the voting  securities of the
                        Corporation  or the Bank or such surviving entity
                        outstanding  immediately after such a merger or
                        consolidation,  or (b) a merger or  consolidation
                        effected to  implement a recapitalization  of the
                        Corporation or the Bank (or similar  transaction)  in
                        which no person  acquires  fifty percent  (50%) or more
                        of the combined  voting power of the Corporation's or
                        the Bank's then outstanding securities; or

                   (4)  the stockholders of the Corporation  approve a plan of
                        complete  liquidation of the  Corporation or the Bank or
                        an agreement for the sale or disposition by the
                        Corporation or the Bank of all or  substantially  all of
                        the  Corporation's  or the Bank's assets.

            (C)    Date of  Termination:  "Date of  Termination"  shall mean the
                   date  stated in the Notice of Termination  (as  hereinafter
                   defined) or thirty (30) days from the date of delivery of
                   such notice, as hereinafter defined, whichever comes first.

            (D)    Disability:  "Disability"  shall  mean  the  definition  of
                   such  term  as  used in the disability  policy then in effect
                   for the  Corporation or the Bank, and a  determination of
                   full disability by the  Corporation or the Bank;  provided
                   that in the event there is no  disability  insurance  then in
                   force,  "disability"  shall  mean  incapacity  due to
                   physical or mental  illness  which will have caused the
                   Executive to have been unable to perform  his duties  with
                   the Corporation  and/or the Bank on a full time basis for one
                   hundred eighty (180) consecutive calendar days.

            (E)    Notice  of  Termination:   "Notice  of   Termination"   shall
                   mean  a  written  notice, communicated   to  the  other
                   parties   hereto,   which  shall  indicate  the  specific
                   termination  provisions  of this  Agreement  relied  upon and
                   set forth  in  reasonable detail the facts and  circumstances
                   claimed to provide a basis for  termination  of the
                   Executive's employment under the provisions so indicated.

            (F)    Retirement:  "Retirement" shall mean  termination  of
                   employment  by the  Executive in accordance  with the
                   Corporation's  or the Bank's normal  retirement  policy
                   generally applicable to its salaried employees in effect at
                   the time of a Change of Control.

     3.  Termination.

            (A)    General.  If any of the events  described in Section 2
                   constituting a Change in Control of the  Corporation or the
                   Bank shall have occurred,  the Executive shall be entitled to
                   the benefits  described in Section 4 upon the subsequent
                   termination of the Executive's employment  during the term of
                   this  Agreement,  unless such  termination is (a) because of
                   the death or  Disability of the  Executive,  (b) by the
                   Corporation  or the Bank for Cause,  or (c) by the Executive
                   other than on account of  Constructive  Termination (as
                   hereinafter defined).

            (B)    If, following a Change of Control, the Executive's employment
                   shall be terminated for Cause,  the  Corporation  and/or the
                   Bank shall pay him his salary  through  the Date of
                   Termination  at the rate in effect on the date of the  Notice
                   of  Termination,  and the Corporation and the Bank shall have
                   no further  obligations  under this  Agreement.  If,
                   following a Change of Control,  the  Executive's  employment
                   shall be  terminated  as a result of death or Disability,
                   compensation  to the Executive shall be made pursuant to
                   the  Corporation's  and the Bank's then existing  policies on
                   death or  Disability,  and the  Corporation  and the Bank
                   shall have no further  obligations  under this Agreement.
                   If,  following a Change of Control,  the Executive's
                   employment is terminated by and at the request of the
                   Executive as a result of  Retirement,  compensation  to the
                   Executive shall be made  pursuant to the  Corporation's  and
                   the Bank's normal  retirement  policy generally  applicable
                   to its  salaried  employees at the time of the Change of
                   Control, and  the  Corporation  and the  Bank  shall  have no
                   further  obligations  under  this Agreement.

            (C)    Constructive  Termination.  The Executive  shall be entitled
                   to terminate his employment upon the  occurrence  of
                   Constructive  Termination.  For  purposes of this  Agreement,
                   "Constructive Termination" shall mean, without the
                   Executive's express written consent, the  occurrence,  after
                   a Change of Control of the  Corporation  or the Bank,  of any
                   of the following circumstances:

                   (1)  The  assignment  to the  Executive  of any duties
                        inconsistent  (unless in the nature of a promotion) with
                        the position in the  Corporation  or the Bank that the
                        Executive  held  immediately  prior  to  the  Change  of
                        Control  of  the Corporation  or the Bank, or a
                        significant  adverse  reduction or alteration in the
                        nature or status of the Executive's  position, duties or
                        responsibilities or the conditions of  the  Executive's
                        employment  from  those  in  effect immediately prior to
                        such Change of Control;

                   (2)  a reduction in the  Executive's  annual base salary,  as
                        in effect  immediately prior to the Change of Control of
                        the  Corporation  or the Bank or as the same may  be
                        adjusted  from  time  to  time,  except  for across-the-
                        board  salary reductions  similarly affecting all
                        management  personnel of the Corporation or the Bank;

                   (3)  the  Bank  and/or  the  Corporation  requires  the
                        Executive  to be  relocated anywhere other than their
                        offices in Muncie, Indiana;

                   (4)  the  taking of any action to  deprive  the  Executive of
                        any  material  fringe benefit enjoyed by him at the time
                        of the Change of Control,  or the failure to provide
                        him with the number of paid  vacation  days to which he
                        is entitled on the  basis of years of  service  with the
                        Corporation  and/or the Bank and in accordance  with the
                        Corporation's or the Bank's  normal  vacation  policy in
                        effect at the time of the Change of Control;

                   (5)  the failure to continue to provide the Executive  with
                        benefits  substantially similar to those enjoyed by the
                        Executive  under any of the  Corporation's or the Bank's
                        life insurance,  medical,  health and accident,  or
                        disability plans in which the Executive was
                        participating  at the time of the Change of Control of
                        the  Corporation  or the Bank,  or the  taking of any
                        action  which  would directly or indirectly materially
                        reduce any of such benefits; or

                   (6)  the  failure of the Corporation or the Bank to  continue
                        this  Agreement  in effect, or to obtain a satisfactory
                        agreement from any successor to assume and  agree to
                        perform this Agreement, as contemplated in Section 5
                        hereof.

     4.  Compensation Upon Termination.

     Following a Change of Control,  if his  employment by the  Corporation  or
the Bank  shall be  terminated  by the  Executive  on  account  of  Constructive
Termination  or by the  Corporation  or the Bank other  than for  Cause,  death,
Disability,  or Retirement  (by and at the request of the  Executive),  then the
Executive shall be entitled to the benefits provided below:

            (A)    No later than the fifth day following the Date of
                   Termination,  the  Corporation or the Bank shall pay to the
                   Executive his full base salary  through the Date of
                   Termination, at the rate in  effect  at the time  Notice  of
                   Termination  is  given,  plus all other amounts  to  which
                   the  Executive  is  entitled  under  any  incentive, bonus or
                   other compensation  plan of the  Corporation  or the Bank in
                   effect at the time such  payments are due;

            (B)    In lieu of any further  salary  payments to the Executive for
                   periods  subsequent to the Date of  Termination,  no later
                   than the fifth day  following  the Date of  Termination, the
                   Corporation or the Bank shall pay to the Executive a lump sum
                   severance payment, in cash, equal to two and ninety-nine
                   hundredths (2.99) times the sum of (a) the Executive's annual
                   base salary rate as in effect on the date of the Notice of
                   Termination, and (b) the largest  bonus received by the
                   Executive during the two (2) years immediately  preceding the
                   Date of Termination under the Corporation's  Management
                   Incentive Plan   covering  the Executive;

            (C)    During the period  beginning with the  Executive's  Date of
                   Termination  and continuing until the  earlier of (a) the
                   second  anniversary  of such Date of  Termination,  or (b)
                   Executive's  sixty-fifth  (65th) birthday,  the Corporation
                   or the Bank shall arrange to provide the Executive  with
                   life,  disability,  accident and health  insurance  benefits
                   substantially  similar to those which the Executive was
                   receiving  immediately  prior to the  Notice  of  Termination
                   and  shall  pay the  same  percentage  of the cost of such
                   benefits  as the  Corporation  or the Bank was paying on the
                   Executive's  behalf on the date of such Notice;

            (D)    In lieu of shares of common stock of the  Corporation
                   ("Corporation  Shares")  issuable upon the exercise of
                   outstanding options  ("Options"),  if any, granted to the
                   Executive under any  Corporation  stock option plan (which
                   Options  shall be  cancelled  upon the making of the  payment
                   referred to below),  the  Executive  shall  receive an amount
                   in cash  equal to the  product  of (a) the  excess of the
                   higher of the  closing  price of Corporation  Shares as
                   reported  on the NASDAQ  National  Market  System,  the
                   American Stock Exchange or the New York Stock Exchange,
                   wherever listed,  on or nearest the Date of Termination or
                   the highest per share price for  Corporation  Shares actually
                   paid in connection  with any Change of Control of the
                   Corporation, over the per share exercise price of each Option
                   held by the  Executive  (whether  or not then fully
                   exercisable), times (b) the number of Corporation Shares
                   covered by each such Option;

            (E)    If the  payments or  benefits,  if any,  received  or to be
                   received  by the  Executive (whether  under  this  Agreement
                   or under any other  plan,  arrangement,  or  agreement
                   between the Executive and the Corporation or the Bank),  in
                   connection with  termination or  Constructive Termination  of
                   the  Executive's  employment  following  a  Change  of
                   Control,  constitute an "excess  parachute  payment"  within
                   the meaning of Section 280G of the Internal  Revenue  Code
                   ("Code"), the  Corporation  or the  Bank  shall  pay  to  the
                   Executive,  no  later  than  the  fifth  day  following  the
                   Date  of  Termination,  an additional amount (as determined
                   by the Corporation's  independent  public  accountants)
                   equal to the excise tax, if any, imposed on the "excess
                   parachute payment" under Section 4999 of the Code;  provided,
                   however, if the amount of such excise tax is finally
                   determined to be more or less than the amount paid to the
                   Executive  hereunder,  the Corporation or the Bank (or the
                   Executive if the finally  determined  amount is less than the
                   original amount  paid)  shall pay the  difference  between
                   the  amount  originally  paid and the finally  determined
                   amount to the other party no later than the fifth day
                   following the date such final determination is made;

            (F)    The  Corporation  or the Bank shall pay to the Executive all
                   reasonable  legal fees and expenses incurred by the Executive
                   as a result of such termination  (including all such fees and
                   expenses,  if any,  incurred in contesting or disputing any
                   such termination or in seeking  to obtain or  enforce  any
                   right or  benefit  provided  by this  Agreement), unless the
                   decision-maker  in any proceeding,  contest,  or dispute
                   arising  hereunder makes  a  formal  finding  that  the
                   Executive  did not  have a  reasonable  basis  for
                   instituting such proceeding, contest, or dispute;

            (G)    The  Corporation or the Bank shall provide the Executive with
                   individual  out-placement services in accordance  with the
                   general  custom and practice  generally  accorded to an
                   executive of the Executive's position.

     5.  Successors; Binding Agreement.

            (A)    The  Corporation  or the Bank shall require any successor
                   (whether  direct or indirect, by purchase,  merger,
                   consolidation  or otherwise) to all or  substantially  all of
                   the business and/or assets of the  Corporation or the Bank to
                   expressly  assume and agree to perform this Agreement  in the
                   same manner and to the same extent that the  Corporation  or
                   the Bank  would be  required  to perform it if no such
                   succession  had taken  place.  Failure of the  Corporation or
                   the Bank to obtain such  assumption  and agreement  prior to
                   the  effectiveness  of any such succession  shall be a breach
                   of this  Agreement and shall  entitle the Executive to
                   compensation  from the  Corporation  or the Bank in the
                   same amount and on the same terms to which the  Executive
                   would be  entitled  hereunder if the  Executive  terminates
                   his  employment  on account of  Constructive  Termination
                   following  a Change of  Control  of the  Corporation  or the
                   Bank,  except  that for the purposes of implementing  the
                   foregoing,  the date on which any such succession  becomes
                   effective shall be deemed  the Date of  Termination.  As used
                   in this  Agreement,  "the Corporation  or the Bank" shall
                   mean the  Corporation  or the Bank and any  successor to
                   their  business  and/or  assets as  aforesaid  which  assumes
                   and agrees to perform this Agreement, by operation of law or
                   otherwise.

            (B)    This  Agreement  shall inure to the benefit of and be
                   enforceable  by the Executive and his personal or legal
                   representatives,  executors,  administrators,  successors,
                   heirs, distributees,  devisees  and  legatees.  If the
                   Executive  should die while any amount would still be payable
                   to the Executive  hereunder had the Executive  continued to
                   live, all such amounts,  unless otherwise  provided  herein,
                   shall be paid in accordance with the terms of this  Agreement
                   to the devisee,  legatee or other  designee or, if there is
                   no such designee, to his estate.

     6.  Guarantee by Corporation and Bank.

     In  consideration  of the value of the continued  employment of the
Executive  by the  Corporation  or the Bank,  and the  benefits  derived  by the
Corporation and the Bank from the  Executive's  employment by the Corporation or
the  Bank,  the  Corporation  and the  Bank  hereby  unconditionally  and  fully
guarantee and endorse the  obligations of the other  hereunder,  and agree to be
fully bound by the terms of this  Agreement in the event that the other fails to
perform, honor, or otherwise complete fully its obligations hereunder.

     7.  Miscellaneous.

     No provision of this Agreement may be modified,  waived or discharged
unless such waiver, modification or discharge is agreed to in writing and signed
by the  Executive  and such  officer as may be  specifically  designated  by the
Corporation.  No waiver by either  party hereto at the time of any breach by the
other party hereto of, or  compliance  with,  any condition or provision of this
Agreement  to be  performed  by such  other  party  shall be  deemed a waiver of
similar or  dissimilar  provisions  or conditions at the same or at any prior or
subsequent time. No agreement or representations,  oral or otherwise, express or
implied,  with  respect to the  subject  matter  hereof have been made by either
party  which  are not  expressly  set  forth in this  Agreement.  The  validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the  State of  Indiana  without  regard to its  conflicts  of law
principles. All references to a section of the Exchange Act or the Code shall be
deemed also to refer to any successor  provisions to such section.  Any payments
provided for hereunder shall be paid net of any applicable  withholding required
under federal,  state or local law. The  obligations of the  Corporation and the
Bank under Section 4 shall survive the expiration of the term of this Agreement.

     8.  Validity.

     The invalidity or  unenforceability  of any provision of this Agreement
shall not affect the validity or  enforceability  of any other provision of this
Agreement, which shall remain in full force and effect.

     9.  Counterparts.

     This Agreement may be executed in several  counterparts,  each of which
shall be deemed to be an original,  but all of which together  shall  constitute
one and the same instrument.

     10. Arbitration.

     Any  dispute  or  controversy  arising  under or in  connection  with  this
Agreement shall be settled exclusively by arbitration,  conducted before a panel
of three (3) arbitrators in Muncie,  Indiana in accordance with the rules of the
American Arbitration  Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that the
Executive shall be entitled to seek specific performance of his right to be paid
until the Date of Termination  during the pendency of any dispute or controversy
arising under or in connection with this Agreement.

     11. Entire Agreement.

     This  Agreement  sets forth the entire  agreement of the parties  hereto in
respect  of the  subject  matter  contained  herein  and  supersedes  all  prior
agreements, promises, covenants, arrangements,  communications,  representations
or  warranties,   whether  oral  or  written,   by  any  officer,   employee  or
representative  of any party  hereto;  and any prior  agreement  of the  parties
hereto in respect of the subject matter  contained  herein is hereby  terminated
and cancelled.

     IN WITNESS  WHEREOF,  the Corporation and the Bank have caused this
Agreement to be executed by their duly  authorized  officers,  and the Executive
has hereunder subscribed his name, this 11th day of May, 1999.

"CORPORATION"                                        "EXECUTIVE"

FIRST MERCHANTS CORPORATION

By ______________________________           By ______________________________
      Stefan S. Anderson,                         Michael L. Cox
      Chairman of the Board

"BANK"

FIRST MERCHANTS BANK, NATIONAL ASSOCIATION

By ______________________________
      Stefan S. Anderson,
      Chairman of the Board

                                   EXHIBIT 13
             2001 ANNUAL REPORT TO STOCKHOLDERS - FINANCIAL REVIEW

EXHIBIT 13--2001 ANNUAL REPORT TO STOCKHOLDERS - FINANCIAL REVIEW
================================================================================

Financial Review

================================================================================

FIVE-YEAR SUMMARY OF
SELECTED FINANCIAL DATA                                                     2

MANAGEMENT'S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS                               3

INDEPENDENT ACCOUNTANT'S REPORT                                            12

CONSOLIDATED
FINANCIAL STATEMENTS                                                       13

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS                                                       17

STOCKHOLDER INFORMATION                                                    43

================================================================================

                                        1

================================================================================

FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA

================================================================================

 (in thousands, except share data)                               2001           2000           1999           1998           1997
====================================================================================================================================
                                                                                                          
Operations
Net Interest Income
     Fully Taxable Equivalent (FTE) Basis ...............    $   66,806     $   58,619     $   56,513     $   52,463     $   49,403
Less Tax Equivalent Adjustment ..........................         2,445          2,637          2,948          2,767          2,611
                                                             ----------     ----------     ----------     ----------     ----------
Net Interest Income .....................................        64,361         55,982         53,565         49,696         46,792
Provision for Loan Losses ...............................         3,576          2,625          2,241          2,372          1,735
                                                             ----------     ----------     ----------     ----------     ----------
Net Interest Income
     After Provision for Loan Losses ....................        60,785         53,357         51,324         47,324         45,057
Total Other Income ......................................        18,543         16,634         14,573         12,880         10,146
Total Other Expenses ....................................        45,195         40,083         36,710         32,741         30,016
                                                             ----------     ----------     ----------     ----------     ----------
     Income Before Income Tax Expense ...................        34,133         29,908         29,187         27,463         25,187
Income Tax Expense ......................................        11,924          9,968         10,099          9,556          8,704
                                                             ----------     ----------     ----------     ----------     ----------
Net Income ..............................................    $   22,209     $   19,940     $   19,088     $   17,907     $   16,483
                                                             ==========     ==========     ==========     ==========     ==========

Per share data (1)
Basic Net Income ........................................    $     1.79     $     1.67     $     1.51     $     1.43     $     1.33
Diluted Net Income ......................................          1.78           1.66           1.50           1.41           1.31
Cash Dividends Paid (2) .................................           .92            .86            .80            .73            .66
December 31 Book Value ..................................         14.14          12.80          11.00          12.24          11.38
December 31 Market Value (Bid Price) ....................         24.01          21.55          24.34          24.76          23.17

Average balances
Total Assets ............................................    $1,689,694     $1,532,691     $1,397,230     $1,254,223     $1,151,081
Total Loans .............................................     1,270,555      1,104,013        935,716        870,317        799,430
Total Deposits ..........................................     1,331,631      1,209,015      1,073,074      1,016,629        825,808
Securities Sold Under Repurchase Agreements
     (long-term portion) ................................        44,394         53,309         56,181         34,900
Total Federal Home Loan Bank Advances ...................       103,941         80,008         57,062         30,742         18,238
Total Stockholders' Equity ..............................       166,232        141,446        149,727        148,052        135,958

Year-end balances
Total Assets ............................................    $1,787,035     $1,621,063     $1,474,048     $1,362,527     $1,181,359
Total Loans .............................................     1,359,893      1,175,586        998,956        891,132        838,658
Total Deposits ..........................................     1,421,251      1,288,299      1,147,203      1,085,952        976,972
Securities Sold Under Repurchase Agreements
      (long-term portion) ...............................        32,500         32,500         35,000         28,000
Total Federal Home Loan Bank Advances ...................       103,499         93,182         73,514         47,068         25,500
Total Stockholders' Equity ..............................       179,128        156,063        126,296        153,891        141,794

Financial ratios
Return on Average Assets ................................          1.31%          1.30%          1.37%          1.43%          1.43%
Return on Average Stockholders' Equity (3) ..............         13.36          14.10          12.75          12.09          12.12
Average Earning Assets to Total Assets ..................         93.29          94.85          94.77          94.80          94.62
Allowance for Loan Losses as % of Total Loans ...........          1.11           1.06           1.01           1.03           1.01
Dividend Payout Ratio ...................................         51.69          51.81          53.33          51.77          50.38
Average Stockholders' Equity to Average Assets ..........          9.84           9.23          10.72          11.80          11.81
Tax Equivalent Yield on Earning Assets (4) ..............          7.80           8.19           7.81           8.15           8.34
Cost of Supporting Liabilities ..........................          3.56           4.16           3.54           3.74           3.80
Net Interest Margin on Earning Assets ...................          4.24           4.03           4.27           4.41           4.54

(1)  Restated for a five percent (5%) stock dividend distributed September,
     2001.

(2)  Dividends per share is for First Merchants Corporation only, not restated
     for pooling transactions.

(3)  Average stockholders' equity is computed by averaging the last five
     quarters ending balance.

(4)  Average earning assets include the average balance of securities classified
     as available for sale, computed based on the average of the historical
     amortized cost balances without the effects of the fair value adjustment.

                                       2

================================================================================

MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

================================================================================

The Corporation's financial data has been restated for all mergers accounted for
as pooling of interests.

RESULTS OF OPERATIONS

     Net income for the year 2001 reached $22,209,000, up from $19,940,000 in
2000.  Diluted  earnings per share  totaled  $1.78,  a 7.2%  increase over $1.66
reported for 2000. Cash basis earnings per share were $1.86, an increase of 7.5%
over the 2000 level of $1.73.  Cash basis  earnings per share are computed based
upon earnings,  excluding  amortization costs of intangible assets and goodwill,
which totaled  $1,064,000 for the year ended  December 31, 2001. In 2001,  First
Merchants Corporation ("Corporation") recorded the twenty-sixth consecutive year
of improvement in net income on both an aggregate and per share basis.

     Net income for the year 2000 reached $19,940,000 up from $19,088,000 in
1999.  Diluted  earnings per share totaled  $1.66,  a 10.7%  increase over $1.50
reported  for 1999.  Cash basis  earnings  per share were $1.73,  an increase of
13.8% over the 1999 level of $1.52.  Cash basis  earning per share are  computed
based upon  earnings,  excluding  amortization  costs of  intangible  assets and
goodwill, which totaled $765,000 for the year ended December 31, 2000.

     Return on equity was 13.36 percent in 2001, as compared to the 2000 and
1999 figures of 14.10 percent and 12.75 percent.

     Return on assets was 1.31 percent in 2001, 1.30 percent in 2000 and 1.37
percent in 1999.

CAPITAL

     The Corporation's capital strength continues to exceed regulatory minimums
and  management  believes  that its capital levels continue  to be a distinct
advantage in the competitive environment in which the Corporation operates.

     The Corporation's Tier I capital to average assets ratio was 8.7 percent
at  December  31,  2001 and  2000.  In  addition,  at  December  31,  2001,  the
Corporation  had a Tier I  risk-based  capital  ratio of 10.6  percent and total
risk-based capital ratio of 11.8 percent.  Regulatory capital guidelines require
a Tier I risk-based  capital ratio of 4.0 percent and a total risk-based capital
ratio of 8.0 percent.

     The Corporation has an employee stock purchase plan and an employee stock
option plan. Activity under these plans is described in Note 14 to the
Consolidated Financial Statements. The transactions under these plans have not
had a material effect on the Corporation's capital position.

                                       3

================================================================================

MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

================================================================================

ASSET QUALITY/PROVISION FOR LOAN LOSSES

     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  and an
independent  loan review provided by an outside  accounting firm. The evaluation
takes into consideration  identified credit problems, as well as the possibility
of losses inherent in the loan portfolio that are not specifically identified.

     At December 31, 2001, non-performing loans totaled $14,666,000, an increase
of $6,728,000, as noted in the table below.  This increase was primarily due to
the addition of $2,606,000 in non-performing loans related to the acquisition of
Francor Financial, Inc. and the general downturn in the economy.

     At December 31, 2001, impaired loans totaled $21,161,000, an increase of
$6,322,000.  The increase was primarily attributable to the addition of impaired
loans related to the acquisition of Francor  Financial,  Inc. and four borrowers
whose loans are considered  impaired at December 31, 2001, but were not impaired
at December 31, 2000.  At December  31,  2001,  an allowance  for losses was not
deemed  necessary for impaired loans totaling  $10,780,000,  but an allowance of
$3,251,000  was  recorded  for  the  remaining  balance  of  impaired  loans  of
$10,381,000 and is included in the Corporation's  allowance for loan losses. The
average balance of impaired loans for 2001 was $22,327,000.

     At December 31, 2001, the allowance for loan losses was $15,141,000, an
increase of $2,687,000 from year end 2000. As a percent of loans, the allowance
was 1.11 percent, up from 1.06 percent at year-end 2000.

     The provision for loan losses in 2001 was $3,576,000, up $951,000 or 36.2%
from $2,625,000 in 2000, primarily due to the general downturn in the economy
and an increase in non-performing loans.

The following table summarizes the non-accrual, contractually past due 90 days
or more other than non-accruing and restructured loans for the Corporation.

(dollars in thousands)                                         December 31,
- --------------------------------------------------------------------------------
                                                           2001            2000
================================================================================

Non-accrual loans ..............................         $ 6,327          $2,370

Loans contractually
   past due 90 days or more
   other than non-accruing .....................           4,828           2,483

Restructured loans .............................           3,511           3,085
                                                         -------          ------

   Total .......................................         $14,666          $7,938
                                                         =======          ======
                                       4

================================================================================

MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

================================================================================

The table below presents loan loss experience for the years indicated.

(Dollars in Thousands)                                                                2001                2000                1999
====================================================================================================================================

Allowance for loan losses:
    Balance at January 1 ...............................................            $12,454             $10,128             $ 9,209
                                                                                    -------             -------             -------
    Chargeoffs .........................................................              3,547               2,291               1,769
    Recoveries .........................................................                573                 579                 447
                                                                                    -------             -------             -------
    Net chargeoffs .....................................................              2,974               1,712               1,322
    Provision for loan losses ..........................................              3,576               2,625               2,241
    Allowance acquired in acquisition...................................              2,085               1,413
                                                                                    -------             -------             -------
    Balance at December 31 .............................................            $15,141             $12,454             $10,128
                                                                                    =======             =======             =======
   Ratio of net chargeoffs during the period to
     average loans outstanding during the period .......................               .23%                .16%                .14%

LIQUIDITY, INTEREST SENSITIVITY AND DISCLOSURES ABOUT MARKET RISK

     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 review how changes in interest rates may 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.

     It is the objective of the Corporation to monitor and manage risk exposure
to net interest  income caused by changes in interest  rates.  It is the goal of
the  Corporation's  Asset/Liability  function to provide  optimum and stable net
interest income. To accomplish this,  management uses two asset liability tools.
GAP/Interest  Rate  Sensitivity  Reports  and  Net  Interest  Income  Simulation
Modeling are both constructed, presented and monitored quarterly.

     Management believes that the Corporation's liquidity and interest
sensitivity  position  at  December  31,  2001,  remained  adequate  to meet the
Corporation's  primary goal of achieving optimum interest margins while avoiding
undue  interest  rate risk.  The  following  table  presents  the  Corporation's
interest rate sensitivity analysis as of December 31, 2001.

                                       5

================================================================================

MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

================================================================================

INTEREST RATE SENSITIVITY ANALYSIS
(dollars in thousands)                                                                At December 31, 2001
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                1-180 DAYS   181-365 DAYS    1-5 YEARS    BEYOND 5 YEARS     TOTAL
====================================================================================================================================
                                                                                                           
Rate-Sensitive Assets:
   Federal funds sold and interest-bearing deposits .........   $   38,156                                                $   38,156
   Investment securities ....................................       49,359    $   48,319     $   99,688     $   42,956       240,322
   Loans ....................................................      651,749       103,333        479,332        125,211     1,359,625
   Federal Reserve and Federal Home Loan Bank stock .........        8,350                                                     8,350
                                                                ----------    ----------     ----------     ----------    ----------
        Total rate-sensitive assets .........................      747,614       151,652        579,020        168,167     1,646,453
                                                                ----------    ----------     ----------     ----------    ----------
Rate-Sensitive Liabilities:
   Interest-bearing deposits ................................      508,028       345,873        344,841         35,522     1,234,264
   Securities sold under repurchase agreements ..............       22,732                       22,900                       45,632
   Other short-term borrowings ..............................       16,773                                                    16,773
   Federal Home Loan Bank advances ..........................        4,756        14,422         59,069         25,252       103,499
   Other borrowed funds .....................................                      8,500                                       8,500
                                                                ----------    ----------     ----------     ----------    ----------
        Total rate-sensitive liabilities ....................      552,289       368,795        426,810         60,774     1,408,668
                                                                ----------    ----------     ----------     ----------    ----------

Interest rate sensitivity gap by period .....................   $  195,325    $ (217,143)    $  152,210     $  107,393
Cumulative rate sensitivity gap .............................      195,325       (21,818)       130,392        237,785
Cumulative rate sensitivity gap ratio
   at December 31, 2001 .....................................        135.4%         97.6%         109.7%         116.9%
   at December 31, 2000 .....................................         94.1%         77.0%         102.1%         116.3%

The Corporation had a cumulative negative gap of $21,818,000 in the one-year
horizon at December 31, 2001, just over 1.2 percent of total assets. Net
interest income at financial institutions with negative gaps tends to increase
when rates decrease and decrease as interest rates increase.

EARNING ASSETS

     Earning assets increased $140.4 million during 2001. The table below
reflects the earning asset mix for the years 2001 and 2000 (at December 31).

     Loans grew by $184.3 million while investment securities declined by $67.5
million. The acquisition of Francor Financial, Inc. combined with increased loan
demand resulted in a 15.7% increase in the  Corporation's  loan  portfolio.  The
decline in  investment  securities  was the  result of  corporate  loan  growth,
investment maturities and cash required for the acquistion.

EARNING ASSETS
(dollars in millions)                                            December 31,
================================================================================
                                                                2001       2000
                                                             --------   --------
     Federal funds sold and interest-bearing time deposits   $   38.2   $   15.8
     Securities available for sale .......................      231.7      295.7
     Securities held to maturity .........................        8.7       12.2
     Loans ...............................................    1,359.9    1,175.6
     Federal Reserve and Federal Home Loan Bank stock ....        8.4        7.2
                                                             --------   --------
         Total ...........................................   $1,646.9   $1,506.5
                                                             ========   ========

                                       6

================================================================================

MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

================================================================================

DEPOSITS AND BORROWINGS

     The table below reflects the level of deposits and borrowed funds (Federal
funds purchased, repurchase agreements, U.S. Treasury demand notes, Federal
Home Loan Bank advances and other borrowed funds) based on year-end levels at
December 31, 2001 and 2000.

As of December 31
(dollars in millions)
- ------------------------------------------------------------------------------------------------------------------------------------
                                     SECURITIES SOLD UNDER           OTHER SHORT-TERM          FEDERAL HOME LOAN      OTHER BORROWED
                    DEPOSITS         REPURCHASE AGREEMENTS               BORROWINGS              BANK ADVANCES             FUNDS
====================================================================================================================================

2001                $1,421.3                 $45.6                         $16.8                        $103.5             $8.5
2000                 1,288.3                  64.5                           5.9                          93.2

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  earning  assets.
The table below reflects the Corporation's asset yields,  interest expense,  and
net interest  income as a percent of average  earning  assets for the three-year
period ending in 2001.

     In 2001, asset yields decreased 39 basis points (FTE) and interest cost
decreased 60 basis points, resulting in a 21 basis point (FTE) increase in net
interest income.  Increased loan activity, especially in commercial and mortgage
lending, contributed to this result.

 (dollars in thousands)
- --------------------------------------------------------------------------------------------------------------
            INTEREST INCOME    INTEREST EXPENSE   NET INTEREST INCOME                      NET INTEREST INCOME
           (FTE) as a Percent    as a Percent      (FTE)as a Percent         AVERAGE              On a
               of Average         of Average          of Average             EARNING          Fully Taxable
             Earning Assets      Earning Assets      Earning Assets          ASSETS          Equivalent Basis
==============================================================================================================

  2001             7.80%             3.56%             4.24%             $1,576,334             $66,806
  2000             8.19              4.16              4.03               1,453,795              58,619
  1999             7.81              3.54              4.27               1,324,172              56,513

     Average earning assets include the average balance of securities classified
     as available for sale, computed based on the average of the historical
     amortized cost balances without the effects of the fair value adjustment.

                                       7

================================================================================

MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

================================================================================

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 in 2001 amounted to $18,543,000 or 11.5 percent higher than in
2000.  The increase of  $1,909,000  is primarily  attributable  to the following
factors:

1.   Service charges on deposit accounts increased $953,000, or 20.0 percent due
     to increased number of accounts and price adjustments.

2.   Gains on sale of mortgage loans included in other income increased by
     $611,000, or 97.9 percent, due to increased mortgage volume.  In addition,
     decreasing mortgage loan interest rates caused an increase in refinancing
     volume, which facilitated an increase in loan sales activity.

OTHER INCOME

     Other income in 2000 amounted to $16,634,000 or 14.1 percent higher than in
1999.  The increase of  $2,061,000  is primarily  attributable  to the following
factors:

1.   Other customer fees increased $430,000, or 13.9 percent, due to increased
     fees from electronic card usage and price adjustments.

2.   Commission income increased $421,000, or 27.5 percent, due to
     increased sales initiatives in 2000.

3.   Revenues from fiduciary activity grew $372,000, or 8.1 percent, due to
     strong new business activity and markets.

4.   Service charges on deposit accounts increased $326,000 or 7.3 percent due
     to increased number of accounts and price adjustments.

5.   Other income increased $876,000, or 135.2 percent due primarily to
     $209,000 of new revenue resulting from First Merchants Reinsurance
     Company, and a $147,000 gain on sale of a Bank building in 2000.

                                       8

================================================================================

MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

================================================================================

OTHER EXPENSES

     Other expenses represent non-interest operating expenses of the
Corporation. Other expenses in 2001 amounted to $45,195,000, an increase of 12.8
percent from the prior year, or $5,112,000.

Three major areas account for most of the increase:

1.   Salary and benefit expenses grew by $3,293,000, or 15.4 percent, due to
     normal salary increases, staff additions and additional salary cost related
     to the acquisition of Frances Slocum Bank and Trust Company.
2.   Data processing fees increased by $507,000, or 29.2 percent, primarily due
     to increases in processing expenses related to greater usage of debit/ATM
     cards by customers and increases in loans originated and processed
     during the year.
3.   Goodwill and core deposit amortization increased by $786,000, or 87.7
     percent, due to utilization of the purchase method of accounting for the
     Corporation's June 1, 2000 acquisition of Decatur Bank and Trust Company
     and July 1, 2001 acquisition of Frances Slocum Bank and Trust Company.

     Other expenses amounted to $40,083,000 in 2000, an increase of 9.2
percent from the prior year, or $3,373,000.

Two major areas account for most of the increase:

1.   Salary and benefit expenses, which account for over one-half of the
     Corporation's non-interest operating expenses, grew by $1,598,000, or 8.1
     percent, due to normal salary increases and staff additions and the
     additional salary cost related to the acquisition of Decatur Bank and Trust
     Company.
2.   Equipment expenses increased $584,000, or 15.7 percent, reflecting the
     Corporation's capital investments in it's operation center and it's efforts
     to improve efficiency and provide electronic service delivery to its
     customers.

                                       9

================================================================================

MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

================================================================================

INCOME TAXES

     The increase in 2001 tax expenses of $1,956,000 is attributable primarily
to a $4,225,000 increase in net pre-tax income. The decrease in 2000 tax expense
of $131,000 is  attributable  primarily to decreased  state taxes as a result of
changes in the state tax laws.  In addition, the effective tax rates for the
periods ending December 31, 2001, 2000 and 1999 were 34.9%, 33.3% and 34.6%,
respectively.

ACCOUNTING MATTERS

ACCOUNTING FOR A BUSINESS COMBINATION

     Statement  of  Financial  Accounting Standards  ("SFAS") No. 141 requires
that all business combinations should be accounted for using the purchase method
of accounting; use of the pooling method is prohibited.

     This Statement requires that goodwill be initially recognized as an asset
in the financial statement and measured as the excess of the cost of an acquired
entity over the net of the amounts assigned to identifiable  assets acquired and
liabilities  assumed. In addition,  SFAS No. 141 requires all other intangibles,
such as core deposit intangibles for a financial institution, to be identified.

     The  provisions of Statement No. 141 are effective for any business
combination that was initiated after June 30, 2001.

ACCOUNTING FOR GOODWILL

     Under the provisions of SFAS No. 142,  goodwill should not be  amortized
but should be tested for impairment at the reporting unit level. Impairment test
of goodwill  should be done on an annual  basis unless  events or  circumstances
indicate  impairment has occurred in the interim period.  The annual  impairment
test can be  performed  at any time  during the year as long as the  measurement
date is used consistently from year to year.

     Impairment testing is a two step process, as outlined within the statement.
If the fair value of goodwill is less than its carrying value, then the goodwill
is deemed  impaired and a loss  recognized.  Any impairment loss recognized as a
result of completing  the  transitional  impairment  test should be treated as a
change in  accounting  principle  and  recognized  in the first  interim  period
financial statements.

                                       10

================================================================================

MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

================================================================================
     The  provisions  of  Statement  No.  142 would be  effective  for  fiscal
years  beginning  after  December 15, 2001. A calendar  year end company  cannot
adopt early and must wait until January 1, 2002.  Goodwill and intangible assets
acquired  in a  transaction  completed  after  June  30,  2001 but  before  this
Statement is initially  applied would be accounted  for in  accordance  with the
amortization  and  nonamortization  provisions  of  the  Statement.  The  useful
economic life of previously  recognized  intangible  assets should be reassessed
upon adoption of the  Statement,  and remaining  amortization  periods should be
adjusted accordingly.  Intangible assets deemed to have an indefinite life would
no longer be amortized.

     The Corporation  adopted  these  new  accounting  rules on January 1, 2002.
As a result,  the  Corporation  will not  amortize  the goodwill it has recorded
prior to June 30, 2001, but will make an annual  assessment of any impairment in
goodwill  and, if  necessary,  recognize an  impairment  loss at that time.  The
Corporation  had goodwill of $26,081,000 at December 31, 2001 and  amortization
of $1,003,000 for the period ended December 31, 2001.

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 the Corporation's net interest income,
loan  volume  and  other  operating  expenses,  such as  employee  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 financial holding company's  operations is such that there
will generally be an excess of monetary  assets over monetary  liabilities, and,
thus, a financial  holding  company  will tend to suffer from an increase in the
rate of inflation and benefit from a decrease.

                                       11

================================================================================

INDEPENDENT ACCOUNTANT'S REPORT

================================================================================

To the Stockholders and Board of Directors
First Merchants Corporation
Muncie, Indiana

We have audited the accompanying consolidated  balance sheets of First Merchants
Corporation  as of December 31, 2001 and 2000, and the related consolidated
statements of income, comprehensive income,  stockholders' equity and cash flows
for each of the three  years in the  period  ended  December  31, 2001. These
consolidated financial statements are the responsibility of the Corporation's
management.  Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our  opinion,  based on our  audits, the  consolidated  financial  statements
referred to above present fairly,  in all material  respects,  the  consolidated
financial  position  of  First  Merchants  Corporation  as of December 31, 2001
and 2000,  and the results of its  operations and its cash flows for each of
the three years in the period  ended  December  31,  2001,  in conformity with
accounting principles generally accepted in the United States of America.

                                             BKD LLP

                                             Indianapolis, Indiana
                                             January 18, 2002

                                       12

================================================================================

CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)                                                                            December 31,
====================================================================================================================================

                                                                                                    2001                   2000
Assets
   Cash and due from banks ...........................................................           $    68,743            $    52,563
   Federal funds sold ................................................................                34,285                 14,900
                                                                                                 -----------            -----------
   Cash and cash equivalents .........................................................               103,028                 67,463
   Interest-bearing time deposits ....................................................                 3,871                    883
   Investment securities
      Available for sale .............................................................               231,668                295,730
      Held to maturity (fair value of $8,762 and $12,328).............................                 8,654                 12,233
                                                                                                 -----------            -----------
        Total investment securities ..................................................               240,322                307,963
   Mortgage loans held for sale ......................................................                   307
   Loans, net of allowance for loan losses of $15,141 and $12,454.....................             1,344,445              1,163,132
   Premises and equipment ............................................................                27,684                 23,868
   Federal Reserve and Federal Home Loan Bank stock ..................................                 8,350                  7,185
   Interest receivable ...............................................................                12,024                 13,135
   Core deposit intangibles ............ .............................................                 6,096                  1,936
   Goodwill...........................................................................                26,081                 19,119
   Cash surrender value of life insurance.............................................                 6,470                  6,312
   Other assets ......................................................................                 8,357                 10,067
                                                                                                 -----------            -----------
        Total assets .................................................................           $ 1,787,035            $ 1,621,063
                                                                                                 ===========            ===========

Liabilities
   Deposits
     Noninterest-bearing .............................................................           $   186,987            $   157,053
     Interest-bearing ................................................................             1,234,264              1,131,246
                                                                                                 -----------            -----------
           Total deposits ............................................................             1,421,251              1,288,299
   Borrowings ........................................................................               174,404                163,581
   Interest payable ..................................................................                 5,488                  6,335
   Other liabilities .................................................................                 6,764                  6,785
                                                                                                 -----------            -----------
           Total liabilities .........................................................             1,607,907              1,465,000

COMMITMENTS AND CONTINGENT LIABILITIES

Stockholders' equity
   Preferred stock, no-par value
      Authorized and unissued -- 500,000 shares
   Common stock, $.125 stated value
      Authorized -- 50,000,000 shares
      Issued and outstanding -- 12,670,307 and 12,192,319 shares .....................                 1,584                  1,524
   Additional paid-in capital ........................................................                50,642                 41,592
   Retained earnings .................................................................               124,304                113,244
   Accumulated other comprehensive income (loss)......................................                 2,598                   (297)
                                                                                                 -----------            -----------
        Total stockholders' equity ...................................................               179,128                156,063
                                                                                                 -----------            -----------
        Total liabilities and stockholders' equity ...................................           $ 1,787,035            $ 1,621,063
                                                                                                 ===========            ===========

See notes to consolidated financial statements.
                                       13

================================================================================

CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share data)                                                                Year Ended December 31,
====================================================================================================================================
                                                                                                                  
                                                                                       2001               2000               1999
Interest income
   Loans receivable
     Taxable .............................................................           $103,123           $ 95,798           $ 78,366
     Tax exempt ..........................................................                438                311                233
   Investment securities
     Taxable .............................................................             11,207             14,478             15,459
     Tax exempt ..........................................................              4,103              4,587              5,243
   Federal funds sold ....................................................                899                666                657
   Deposits with financial institutions ..................................                106                103                 59
   Federal Reserve and Federal Home Loan Bank stock ......................                559                585                446
                                                                                     --------           --------           --------
       Total interest income .............................................            120,435            116,528            100,463
                                                                                     --------           --------           --------
Interest expense
   Deposits ..............................................................             45,856             49,607             38,539
   Securities sold under repurchase agreements ...........................              3,208              4,263              4,273
   Federal Home Loan Bank advances .......................................              6,556              5,315              3,260
   Other borrowings ......................................................                454              1,361                826
                                                                                     --------           --------           --------
        Total interest expense ...........................................             56,074             60,546             46,898
                                                                                     --------           --------           --------
Net interest income ......................................................             64,361             55,982             53,565
   Provision for loan losses .............................................              3,576              2,625              2,241
                                                                                     --------           --------           --------

Net interest income
after provision for loan losses ..........................................             60,785             53,357             51,324
                                                                                     --------           --------           --------
Other income
   Fiduciary activities ..................................................              5,429              4,972              4,600
   Service charges on deposit accounts ...................................              5,729              4,776              4,450
   Other customer fees ...................................................              3,166              3,519              3,089
   Net realized gains (losses) on
     sales of available-for-sale securities ..............................               (200)              (107)               257
   Commission income .....................................................              1,945              1,950              1,529
   Other income ..........................................................              2,474              1,524                648
                                                                                     --------           --------           --------
        Total other income ...............................................             18,543             16,634             14,573
                                                                                     --------           --------           --------

Other expenses
   Salaries and employee benefits ........................................             24,711             21,418             19,820
   Net occupancy expenses ................................................              2,729              2,471              2,139
   Equipment expenses ....................................................              4,521              4,299              3,715
   Marketing expenses.....................................................              1,072              1,010                869
   Deposit insurance expenses.............................................                259                240                129
   Outside data processing fees ..........................................              2,243              1,736              1,647
   Printing and office supplies ..........................................              1,143              1,144              1,275
   Merger-related expenses ...............................................                                                      804
   Goodwill and core deposit amortization.................................              1,682                896                223
   Other expenses ........................................................              6,835              6,869              6,089
                                                                                     --------           --------           --------
        Total other expenses .............................................             45,195             40,083             36,710
                                                                                     --------           --------           --------

Income before income tax .................................................             34,133             29,908             29,187
   Income tax expense ....................................................             11,924              9,968             10,099
                                                                                     --------           --------           --------
Net income ...............................................................           $ 22,209           $ 19,940           $ 19,088
                                                                                     ========           ========           ========

Net income per share:
   Basic .................................................................           $   1.79           $   1.67           $   1.51
   Diluted ...............................................................               1.78               1.66               1.50

See notes to consolidated financial statements.
                                       14

================================================================================

CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Year Ended December 31,
 (in thousands)                                                                                2001            2000           1999
====================================================================================================================================
                                                                                                                  
Net income .............................................................................     $ 22,209       $ 19,940       $ 19,088
                                                                                             --------       --------       --------
Other comprehensive income, net of tax:
  Unrealized gains (loss) on securities available for sale:
     Unrealized holding gains (loss) arising during the period,
     net of income tax (expense) benefit of $(1,848), $(2,610), $4,258..................        2,775          3,831         (6,249)
  Less: Reclassification adjustment for gains (loss) included in net income,
      net of income tax (expense) benefit of  $80, $43, $(103)..........................         (120)           (64)           154
                                                                                             --------       --------       --------
                                                                                                2,895          3,895         (6,403)
                                                                                             --------       --------       --------
  COMPREHENSIVE INCOME                                                                       $ 25,104       $ 23,835       $ 12,685
                                                                                             ========       ========       ========

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands, except share data)
- ------------------------------------------------------------------------------------------------------------------------------------
                                                        COMMON STOCK
                                                   -----------------------    ADDITIONAL    RETAINED   ACCUMULATED OTHER
                                                      SHARES       AMOUNT   PAID-IN CAPITAL EARNINGS     COMPREHENSIVE       TOTAL
                                                                                                         INCOME (LOSS)
                                                   -----------    --------  --------------  --------- --------------------  -------
                                                                                                        
Balances, January 1, 1999 ......................    11,975,955    $  1,497      $ 31,263    $ 118,920       $  2,211      $ 153,891
  Net income for 1999...........................                                               19,088                        19,088
  Cash dividends ($ .80 per share) .............                                               (9,759)                       (9,759)
  Other comprehensive loss, net of tax   .......                                                              (6,403)        (6,403)
  Stock issued under employee benefit plans ....        20,870           3           454                                        457
  Stock issued under dividend reinvestment
     and stock purchase plan ...................        30,227           4           718                                        722
  Stock options exercised ......................        55,234           6           265                                        271
  Stock redeemed ...............................    (1,145,669)                   (7,384)     (24,609)                      (32,136)
  Tax benefit of stock dispositions ............                      (143)          165                                        165
                                                   -----------    --------      --------    ---------      ---------      ---------
Balances, December 31, 1999 ....................    10,936,617       1,367        25,481      103,640         (4,192)       126,296
  Net income for 2000...........................                                               19,940                        19,940
  Cash dividends ($ .86 per share) .............                                              (10,331)                      (10,331)
  Other comprehensive income, net of tax .......                                                               3,895          3,895
  Stock issued under employee benefit plans ....        26,778           3           478                                        481
  Stock issued under dividend reinvestment
     and stock purchase plan ...................        35,611           5           806                                        811
  Stock options exercised ......................        33,906           4           506                                        510
  Stock redeemed ...............................      (292,000)        (37)       (6,670)          (5)                       (6,712)
  Issuance of stock related to acquisition......       870,957         109        21,068                                     21,177
  Cash paid in lieu of fractional shares........          (137)                       (4)                                        (4)
                                                   -----------    --------      --------    ---------      ---------      ---------
Balances, December 31, 2000   ..................    11,611,732       1,451        41,665      113,244           (297)       156,063
  Net income for 2001...........................                                               22,209                        22,209
  Cash dividends ($.92 per share)...............                                              (11,127)                      (11,127)
  Other comprehensive income, net of tax .......                                                               2,895          2,895
  Stock issued under employee benefit plans ....        28,466           4           500                                        504
  Stock issued under dividend reinvestment
     and stock purchase plan ...................        35,348           4           799                                        803
  Stock options exercised ......................        19,627           2           223                                        225
  Stock redeemed ...............................      (306,966)        (38)       (6,985)                                    (7,023)
  Issuance of stock related to acquisition......       677,972          85        14,516                                     14,601
  Five percent (5%) stock dividend..............       604,128          76           (76)
  Cash paid in lieu of fractional shares........                                                 (22)                           (22)
                                                   -----------    --------      --------    ---------      ---------      ---------
Balances, December 31, 2001                         12,670,307    $  1,584      $ 50,642    $ 124,304      $   2,598      $ 179,128
                                                   ===========    ========      ========    =========      =========      =========

See notes to consolidated financial statements.

                                       15

================================================================================

CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

CONSOLIDATED STATEMENTS OF CASH FLOWS
====================================================================================================================================
                                                                                                 Year Ended December 31,
(in thousands, except share data)                                                    2001                 2000                1999
====================================================================================================================================
                                                                                                                 
Operating activities:
   Net income ..........................................................          $  22,209            $  19,940          $  19,088
   Adjustments to reconcile net income to
     net cash provided by operating activities:
     Provision for loan losses .........................................              3,576                2,625              2,241
     Depreciation ......................................................              2,984                3,198              2,517
     Amortization of goodwill and intangibles ..........................              1,682                  896                232
     Deferred income tax ...............................................                616                 (767)            (1,122)
     Securities amortization, net ......................................                  8                   72                358
     Securities losses (gains), net ....................................                200                  107               (257)
     Loss (gain) on sale of premises and equipment .....................                  2                 (105)                (4)
     Mortgage loans originated for sale ................................            (22,705)              (2,111)            (6,179)
     Proceeds from sales of mortgage loans .............................             22,398                2,172              6,894
     Net change in
         Interest receivable ...........................................              2,514                 (825)              (482)
         Interest payable ..............................................             (1,727)               1,479                465
     Other adjustments .................................................               (545)               3,104              1,932
                                                                                  ---------            ---------          ---------
         Net cash provided by operating activities .....................             31,212               29,785             25,683
                                                                                  ---------            ---------          ---------

Investing activities:
   Net change in interest-bearing deposits .............................             (2,988)               1,330               (722)
   Purchases of
     Securities available for sale .....................................            (34,500)             (11,437)          (148,210)
     Securities held to maturity .......................................                                                     (2,667)
   Proceeds from maturities of
     Securities available for sale .....................................            108,692               49,975            120,509
     Securities held to maturity .......................................              3,612                5,617              7,226
   Proceeds from sales of
     Securities available for sale .....................................                770               14,654             19,627
   Net change in loans .................................................            (50,384)             (87,658)          (109,861)
   Purchase of Federal Home Loan Bank stock ............................               (592)                (712)            (1,403)
   Purchases of premises and equipment .................................             (2,438)              (4,409)            (3,679)
   Proceeds from sale of fixed assets ..................................                 37                  449                 56
   Net cash received in acquisition.....................................              5,261
   Other investing activities ..........................................                                     280
                                                                                  ---------            ---------          ---------
         Net cash provided (used) by investing activities ..............             27,470              (31,911)          (119,124)
                                                                                  ---------            ---------          ---------

Financing activities:
   Net change in
     Demand and savings deposits .......................................             55,640                  772             17,411
     Certificates of deposit and other time deposits ...................            (72,940)              33,268             43,840
     Repurchase agreements and other borrowings ........................                506              (51,385)            49,713
   Federal Home Loan Bank advances .....................................             60,930              199,396            314,500
   Repayment of Federal Home Loan Bank advances ........................            (50,613)            (181,510)          (288,054)
   Cash dividends ......................................................            (11,127)             (10,331)            (9,759)
   Stock issued under employee benefit plans ...........................                504                  481                457
   Stock issued under dividend reinvestment
     and stock purchase plan ...........................................                803                  811                722
   Stock options exercised .............................................                225                  510                271
   Stock redeemed ......................................................             (7,023)              (6,712)           (32,136)
   Cash paid in lieu of issuing fractional shares ......................                (22)                  (4)
                                                                                  ---------            ---------          ---------
         Net cash provided (used) by financing activities ..............            (23,117)             (14,704)            96,965
                                                                                  ---------            ---------          ---------
Net change in cash and cash equivalents ................................             35,565              (16,830)             3,524
Cash and cash equivalents, beginning of year ...........................             67,463               84,293             80,769
                                                                                  ---------            ---------          ---------
Cash and cash equivalents, end of year .................................          $ 103,028            $  67,463          $  84,293
                                                                                  =========            =========          =========
Additional cash flows information:
   Interest paid .......................................................          $  56,921            $  58,810          $  46,433
   Income tax paid .....................................................             12,440                9,544             10,157

See notes to consolidated financial statements.
                                       16

================================================================================

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(table dollar amounts in thousands, except share data)

================================================================================

NOTE 1

NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The accounting and reporting policies of First Merchants Corporation
("Corporation"), and its wholly owned subsidiaries, First Merchants Bank, N.A.
("First  Merchants"),  Madison  Community  Bank  ("Madison"),  First United Bank
("First  United"),  The Randolph County Bank ("Randolph  County"),  Union County
National  Bank ("Union  National"),  First  National  Bank  ("First  National"),
Decatur  Bank and Trust  Company  ("Decatur"),  and Frances  Slocum Bank & Trust
Company  ("Frances  Slocum"),  (collectively  "the  Banks"),  First  Merchants
Insurance  Services,  Inc.  ("FMIS"),  and First Merchants  Reinsurance  Company
("FMRC"),  conform to generally  accepted  accounting  principles  and reporting
practices followed by the banking industry. The more significant of the policies
are described below.

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

     The Corporation is a financial holding company whose principal activity is
the ownership and  management of the Banks and operates in a single  significant
business  segment.  First  Merchants,  Union National and First National operate
under national bank charters and provide full banking services,  including trust
services. As national banks, First Merchants,  First National and Union National
are subject to the  regulation of the Office of the  Comptroller of the Currency
and the Federal Deposit Insurance Corporation ("FDIC").  Madison,  First United,
Randolph  County,  Decatur and Frances  Slocum operate under state bank charters
and provide full banking  services,  including trust  services.  As state banks,
Madison,  First United,  Randolph County, Decatur and Frances Slocum are subject
to the regulation of the Department of Financial Institutions, State of Indiana,
and the FDIC.

     The Banks generate commercial, mortgage, and consumer loans and receive
deposits from customers  located  primarily in central and east central  Indiana
and Butler  County,  Ohio.  The Banks' loans are  generally  secured by specific
items of  collateral,  including  real property,  consumer  assets  and business
assets.  Although the Banks have a  diversified  loan  portfolio,  a substantial
portion of their  debtors'  ability to honor their  contracts is dependent  upon
economic conditions in the automotive and agricultural industries.

CONSOLIDATION

     The consolidated financial statements include the accounts of the
Corporation  and  all  its  subsidiaries,  after  elimination  of  all  material
intercompany transactions.
                                       17

================================================================================

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(table dollar amounts in thousands, except share data)

================================================================================

NOTE 1

NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

INVESTMENT  SECURITIES-Debt  securities  are classified as held to maturity when
the  Corporation  has the positive  intent and ability to hold the securities to
maturity.  Securities  held to maturity  are  carried at  amortized  cost.  Debt
securities  not  classified as held to maturity are  classified as available for
sale.  Securities  available for sale are carried at fair value with  unrealized
gains and losses reported separately in accumulated other comprehensive  income,
net of tax.

Amortization  of premiums and  accretion  of discounts  are recorded as interest
income from  securities.  Realized gains and losses are recorded as net security
gains  (losses).  Gains and losses on sales of securities  are determined on the
specific-identification method.

LOANS HELD FOR SALE are carried at the lower of aggregate cost or market. Market
is determined using the aggregate  method.  Net unrealized  losses,  if any, are
recognized  through a  valuation  allowance  by charges  to income  based on the
difference between estimated sales proceeds and aggregate cost.

LOANS are carried at the principal amount  outstanding.  Certain  nonaccrual and
substantially  delinquent  loans may be  considered  to be  impaired.  A loan is
impaired when, based on current  information or events,  it is probable that the
Banks  will be unable to  collect  all  amounts  due  (principal  and  interest)
according  to the  contractual  terms of the loan  agreement.  In  applying  the
provisions of Statement of Financial  Accounting Standards ("SFAS") No. 114, the
Corporation considers its investment in one-to-four family residential loans and
consumer  installment  loans  to be  homogeneous  and  therefore  excluded  from
separate identification for evaluation of impairment. Interest income is accrued
on the principal  balances of loans,  except for  installment  loans with add-on
interest,  for which a method that  approximates the level yield method is used.
The accrual of interest on impaired loans is discontinued  when, in management's
opinion,  the borrower may be unable to meet  payments as they become due.  When
interest accrual is  discontinued,  all unpaid accrued interest is reversed when
considered uncollectable. Interest income is subsequently recognized only to the
extent cash payments are received.  Certain loan fees and direct costs are being
deferred and amortized as an adjustment of yield on the loans.
                                       18

================================================================================

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(table dollar amounts in thousands, except share data)

================================================================================

NOTE 1

NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

ALLOWANCE FOR LOAN LOSSES is maintained to absorb losses inherent in the loan
portfolio. The allowance is based on ongoing, quarterly assessments of the
probable estimated losses inherent in the loan portfolio. The allowance is
increased by the provision for loan losses, which is charged against current
period operating results and decreased by the amount of chargeoffs, net of
recoveries. The Corporation's methodology for assessing the appropriateness of
the allowance consists of several key elements, which include the formula
allowance, specific allowances for identified problem loans, and the unallocated
allowance.

The formula  allowance is  calculated  by applying  loss factors to  outstanding
loans and certain  unused  commitments,  in each case based on the internal risk
grade of such loans,  pools of loans or  commitments.  Changes in risk grades of
both  performing  and  nonperforming  loans  affect  the  amount of the  formula
allowance.  Loss factors are based on our historical  loss experience and may be
adjusted for  significant  factors that, in management's  judgement,  affect the
collectibility of the portfolio as of the evaluation date.

Specific  allowances are  established  in cases where  management has identified
significant  conditions  or  circumstances  related to a credit that  management
believes indicate the probability that a loss has been incurred in excess of the
amount determined by the application of the formula allowance.

The  unallocated  allowance  is based upon  management's  evaluation  of various
conditions,  the effects of which are not directly measured in the determination
of the formula and specific allowances. The evaluation of the inherent loss with
respect to these conditions is subject to a higher degree of uncertainty because
they are not  identified  with specific  credits.  The  conditions  evaluated in
connection with the unallocated  allowance may include existing general economic
and business  conditions  affecting the Banks' key lending areas, credit quality
trends,  collateral values,  loan volumes and  concentrations,  seasoning of the
loan portfolio,  specific industry conditions within portfolio segments,  recent
loss experience in particular segments of the portfolio, duration of the current
business  cycle,  bank  regulatory  examination  results,  and  findings  of  an
independent third party conducting reviews of the loan portfolio.
                                       19

================================================================================

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(table dollar amounts in thousands, except share data)

================================================================================

NOTE 1

NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

PREMISES AND EQUIPMENT are carried at cost net of accumulated depreciation.
Depreciation is computed using the straight-line and declining balance methods
based on the estimated useful lives of the assets. Maintenance and repairs are
expensed as incurred, while major additions and improvements are capitalized.
Gains and losses on dispositions are included in current operations.

FEDERAL RESERVE AND FEDERAL HOME LOAN BANK STOCK are required investments for
institutions that are members of the Federal Reserve Bank ("FRB") and Federal
Home Loan Bank ("FHLB") systems. The required investment in the common stock is
based on a predetermined formula.

INTANGIBLE ASSETS that are subject to amortization,  including goodwill and core
deposit  intangibles,   are  being  amortized  on  both  the  straight-line  and
accelerated basis over periods ranging from 7 to 25 years. Intangible assets are
periodically evaluated as to the recoverability of their carrying value.

INCOME TAX in the consolidated statements of income includes deferred income tax
provisions or benefits for all significant  temporary differences in recognizing
income and  expenses  for  financial  reporting  and income  tax  purposes.  The
Corporation files consolidated income tax returns with its subsidiaries.

STOCK  OPTIONS  are  granted  for a fixed  number of shares  to  employees.  The
Corporation accounts for stock option grants in accordance  with APB Opinion
No. 25,  Accounting  for Stock Issued to Employees, and  accordingly, recognizes
compensation  expense for the stock option grants which have been granted  with
an exercise  price less than the fair value of the shares at the date of grant.

EARNINGS PER SHARE have been computed based upon the weighted average common and
common equivalent shares  outstanding during each year and have been restated to
give  effect to a five percent (5%) stock dividend on its shares of outstanding
common stock  distributed  to  stockholders  on September 24, 2001.

                                       20

================================================================================

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(table dollar amounts in thousands, except share data)

================================================================================

NOTE 2

BUSINESS COMBINATIONS

     On October 15, 2001, the  Corporation  signed a definitive  agreement to
acquire Lafayette  Bancorporation,  Lafayette,  Indiana. The acquisition will be
accounted for under the purchase  method of  accounting.  Under the terms of the
agreement,  the  Corporation  will  exchange  1.11 shares,  which are subject to
adjustment in certain circumstances, of the Corporation's common stock or $30.00
in cash for each of the outstanding shares of Lafayette Bancorporation. However,
no more than $50,329,248 aggregate cash may be paid in the merger, and there may
be allocations of stock to certain  shareholders  if this threshold is exceeded.
The  transaction  is subject to approval  by  stockholders  of the  Corporation,
Lafayette Bancorporation and appropriate regulatory agencies. As of December 31,
2001,  Lafayette  Bancorporation  had total assets and  stockholders'  equity of
$762,318,000 and $59,120,000 respectively.

      On July 1, 2001,  the  Corporation  acquired  100% of the  outstanding
stock of Francor Financial, Inc., the holding company of Frances Slocum. Frances
Slocum is a state chartered bank with branches located in east-central  Indiana.
Francor  Financial,  Inc. was merged into the  Corporation,  and Frances  Slocum
maintained its state charter as a subsidiary of First Merchants Corporation. The
Corporation  issued  711,871 shares of its common stock at a cost of $21.536 per
share and  $14,490,985 in cash to complete the  transaction.  As a result of the
acquisition,  the Corporation  will have an opportunity to increase its customer
base and  continue to increase  its market  share.  The  purchase had a recorded
acquisition  price of  $29,454,000,  including  goodwill of $7,907,000,  none of
which is deductible  for tax purposes.  Additionally,  core deposit  intangibles
totaling  $4,804,000  were  recognized and will be amortized over 10 years using
the 150% declining balance method.

      The combination was accounted for under the purchase method of accounting.
All assets and  liabilities  were  recorded  at their fair  values as of July 1,
2001. The purchase accounting adjustments will be amortized over the life of the
respective  asset or liability.  Francor  Financial Inc.'s results of operations
are included in the Corporation's  consolidated  income statement beginning July
1, 2001. The following table  summarizes the estimated fair values of the assets
acquired and liabilities assumed at the date of acquisition.

       Loans...........................    $ 134,505
       Premises and equipment..........        4,401
       Core deposit intangibles........        4,804
       Goodwill........................        7,907
       Other...........................       34,581
                                           ---------
         Total assets acquired.........      186,198
                                           ---------
       Deposits........................      150,252
       Other...........................        6,492
                                           ---------
         Total liabilities acquired....      156,744
                                           ---------
         Net assets acquired...........    $  29,454
                                           =========
                                       21

================================================================================

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(table dollar amounts in thousands, except share data)

================================================================================

NOTE 2

BUSINESS COMBINATIONS continued

     The following proforma disclosures, including the effect of  the  purchase
accounting  adjustments,  depict the results of  operations as though the merger
had taken place at the beginning of each period.

                                                            Year Ended
                                                           December 31,

                                                        2001           2000
                                                    -----------    -----------
                                                             
      Net Interest Income.........................  $    67,352    $    62,296

      Net Income..................................       21,876         21,438

      Per share - combined:
        Basic Net Income..........................         1.71           1.70
        Diluted Net Income........................         1.70           1.69

     On May 31, 2000, the Corporation acquired Decatur Financial Inc., the
holding  company  of  Decatur  Bank and Trust  Company.  Decatur  Bank and Trust
Company  is  a  state  chartered   commercial  bank  with  branches  located  in
east-central  Indiana.  Decatur  Financial Inc. was merged into the  Corporation
through  the  exchange  of  914,505  shares  of newly  issued  common  stock and
$12,355,000 of cash. The combination was accounted for under the purchase method
of accounting. Decaturs' results of operations are included in the Corporation's
consolidated  income statement  beginning June 1, 2000. The purchase resulted in
core deposit intangibles of $2,046,000,  which are being amortized over 10 years
using 150% declining  balance  method.  The purchase had a recorded  acquisition
price of $33,299,000, including goodwill of $17,040,000.

     The purchase  resulted in the  Corporation  recording net loans of
$89,332,000,  held to maturity and available  for sale  securities of $3,921,000
and $14,132,000 respectively, deposit liabilities of $107,056,000 and borrowings
of $7,218,000. All assets and liabilities were recorded at fair values as of May
31, 2000. The purchase accounting adjustments will be amortized over the life of
the respective asset or liability.

     The following proforma disclosures including the effect of the purchase
accounting adjustments, depict the results of operations as though the merger
had taken place at the beginning of each period.

                                                     Year Ended
                                                    December 31
                                               ----------------------
                                                  2000         1999
                                               ---------    ---------
Net Interest Income:.......................... $ 57,849     $ 57,577

Net Income:................................... $ 19,563     $ 19,474

Net Income per share - combined:
Basic  ....................................... $   1.55     $   1.44
Diluted  .....................................     1.54         1.43

                                       22

================================================================================

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(table dollar amounts in thousands, except share data)

================================================================================

NOTE 2

Business Combinations  continued

     On April 1, 1999, the Corporation  issued 1,153,735 shares of its common
stock in exchange  for  all of the  outstanding  shares  of  Jay  Financial
Corporation, Portland, Indiana.  At December 31, 1998, Jay Financial Corporation
had total assets and stockholders'  equity of $114,895,000 and $14,903,000,
respectively.  The  transaction  was  accounted  for under the
pooling-of-interests  method of accounting.

     On April 21, 1999, the Corporation issued 851,174 shares of its common
stock in exchange for all of the outstanding shares of Anderson Community Bank,
Anderson, Indiana.  At December 31,  1998,  Anderson  Community  Bank had total
assets and stockholders' equity of $77,984,000  and $7,740,000,   respectively.
The transaction  was  accounted for under the  pooling-of-interests   method  of
accounting.  The financial information contained herein reflects the mergers and
reports  the  financial  condition  and  results  of  operations  as though  the
Corporations had been combined as of January 1, 1999. Separate operating results
of Jay Financial  Corporation and Anderson  Community Bank for the period prior
to the merger were as follows:

                                                                              1999
                                                                       
Net interest income:
   First Merchants Corporation .............................              $   50,175
   Jay Financial Corporation ...............................                   2,250
   Anderson Community Bank .................................                   1,140
                                                                          ----------
     Combined ..............................................              $   53,565
                                                                          ==========
Net income:
   First Merchants Corporation .............................              $   17,934
   Jay Financial Corporation ...............................                     703
   Anderson Community Bank .................................                     451
                                                                          ----------
     Combined ..............................................              $   19,088
                                                                          ==========
Net income per share:
  Basic:
   First Merchants Corporation .............................              $     1.42
   Jay Financial Corporation ...............................                     .06
   Anderson Community Bank .................................                     .04
                                                                          ----------
     Combined ..............................................              $     1.52
                                                                          ==========
  Diluted:
   First Merchants Corporation .............................              $     1.41
   Jay Financial Corporation ...............................                     .06
   Anderson Community Bank .................................                     .04
                                                                          ----------
     Combined ..............................................              $     1.51
                                                                          ==========

NOTE 3

RESTRICTION ON CASH AND DUE FROM BANKS

     The Banks are required to maintain reserve funds in cash and/or on deposit
with the Federal Reserve Bank.  The reserve required at December 31, 2001, was
$21,653,000.
                                       23

================================================================================

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(table dollar amounts in thousands, except share data)

================================================================================

NOTE 4

INVESTMENT SECURITIES

                                                                                         GROSS             GROSS
                                                                     AMORTIZED         UNREALIZED        UNREALIZED           FAIR
                                                                       COST              GAINS             LOSSES             VALUE
====================================================================================================================================

Available for sale at December 31, 2001
   U.S. Treasury ...........................................          $    124                                              $    124
   Federal agencies ........................................            30,808          $    767          $      2            31,573
   State and municipal .....................................            74,776             1,644               215            76,205
   Mortgage-backed securities ..............................           100,811             1,710                 1           102,520
   Other asset-backed securities ...........................            10,116               167                              10,283
   Corporate obligations ...................................             3,498               116                               3,614
   Marketable equity securities ............................             7,472                                 123             7,349
                                                                      --------          --------          --------          --------
      Total available for sale .............................           227,605             4,404               341           231,668
                                                                      --------          --------          --------          --------

Held to maturity at December 31, 2001
   State and municipal .....................................             8,426               166                58             8,534
   Mortgage-backed securities ..............................               228                                                   228
                                                                      --------          --------          --------          --------
      Total held to maturity ...............................             8,654               166                58             8,762
                                                                      --------          --------          --------          --------
      Total investment securities ..........................          $236,259          $  4,570          $    399          $240,430
                                                                      ========          ========          ========          ========

Available for sale at December 31, 2000
   U.S. Treasury ...........................................          $  2,997                                              $  2,997
   Federal agencies ........................................            55,403          $    268          $    155            55,516
   State and municipal .....................................            81,370             1,045               103            82,312
   Mortgage-backed securities ..............................           127,907               139               922           127,124
   Other asset-backed securities ...........................            19,924                10               148            19,786
   Corporate obligations ...................................             7,238                 9               395             6,852
   Marketable equity securities ............................             1,277                                 134             1,143
                                                                      --------          --------          --------          --------
      Total available for sale .............................           296,116             1,471             1,857           295,730
                                                                      --------          --------          --------          --------

Held to maturity at December 31, 2000
   U.S. Treasury ...........................................               250                                                   250
   State and municipal .....................................            11,645               131                36            11,740
   Mortgage-backed securities ..............................               338                                                   338
                                                                      --------          --------          --------          --------
      Total held to maturity ...............................            12,233               131                36            12,328
                                                                      --------          --------          --------          --------
      Total investment securities ..........................          $308,349          $  1,602          $  1,893          $308,058
                                                                      ========          ========          ========          ========

                                       24

================================================================================

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(table dollar amounts in thousands, except share data)

================================================================================

NOTE 4

INVESTMENT SECURITIES   continued
     The amortized cost and fair value of securities available for sale and held
to maturity at December 31, 2001,  by  contractual  maturity,  are shown  below.
Expected maturities will differ from contractual  maturities because issuers may
have the right to call or prepay  obligations with or without call or prepayment
penalties.

- ------------------------------------------------------------------------------------------------------------------------------------
                                                                               AVAILABLE FOR SALE               HELD TO MATURITY
                                                                         AMORTIZED COST    FAIR VALUE    AMORTIZED COST   FAIR VALUE
====================================================================================================================================
                                                                                                                
Maturity distribution at December 31, 2001:
  Due in one year or less...........................................        $ 19,844        $ 19,931        $  2,545        $  2,571
  Due after one through five years .................................          57,109          58,870           3,217           3,331
  Due after five through ten years .................................          14,966          15,356           1,944           1,899
  Due after ten years ..............................................          17,287          17,359             720             733
                                                                            --------        --------        --------        --------
                                                                             109,206         111,516           8,426           8,534

  Mortgage-backed securities .......................................         100,811         102,520             228             228
  Other asset-backed securities ....................................          10,116          10,283
  Marketable equity securities .....................................           7,472           7,349
                                                                            --------        --------        --------        --------

    Totals .........................................................        $227,605        $231,668        $  8,654        $  8,762
                                                                            ========        ========        ========        ========

     Securities with a carrying value of approximately $106,476,000 and
$149,266,000  were  pledged  at  December  31,  2001 and 2000 to secure  certain
deposits and securities sold under repurchase agreements, and for other purposes
as permitted or required by law.

     In addition, all otherwise unpledged securities are pledged as collateral
for Federal Home Loan Bank advances with qualified first mortgage loans.

     Proceeds from sales of securities available for sale during 2001, 2000 and
1999 were $770,000,  $14,654,000 and $19,627,000.  Gross losses of $200,000 and
$107,000 in 2001 and 2000, and gross gains of $257,000 in 1999 were  realized on
those sales.
                                       25

================================================================================

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(table dollar amounts in thousands, except share data)

================================================================================

NOTE 5

LOANS AND ALLOWANCE

                                                                                2001                2000
===========================================================================================================
                                                                                          
Loans at December 31:
  Commercial and industrial loans ..........................................$  301,962          $  258,405
  Agricultural production financing and other loans to farmers .............    29,645              24,547
  Real estate loans:
       Construction ........................................................    58,316              45,412
       Commercial and farmland .............................................   230,233             167,317
       Residential .........................................................   544,028             466,660
  Individuals' loans for household and other personal expenditures .........   179,364             201,629
  Tax-exempt loans .........................................................     7,277               6,093
  Other loans ..............................................................     8,800               5,523
                                                                             ---------           ---------
                                                                             1,359,625           1,175,586
   Unearned interest on loans...............................................       (39)
   Allowance for loan losses................................................   (15,141)            (12,454)
                                                                             ---------           ---------
       Total loans .........................................................$1,344,445          $1,163,132
                                                                             =========           =========

                                        2001          2000           1999
===========================================================================
Allowance for loan losses:
   Balance, January 1 .............. $ 12,454      $ 10,128       $  9,209
   Allowance acquired in acquisition    2,085         1,413
   Provision for losses ............    3,576         2,625          2,241
   Recoveries on loans .............      573           579            447
   Loans charged off ...............   (3,547)       (2,291)        (1,769)
                                     --------      --------       --------
   Balance, December 31 ............ $ 15,141      $ 12,454       $ 10,128
                                     ========      ========       ========

Information on impaired loans is summarized below:                   2001                 2000               1999
==================================================================================================================
                                                                                                   
As of, and for the year ending December 31:
   Impaired loans with an allowance ..........................     $10,381              $ 7,862             $2,742
   Impaired loans for which the discounted
       cash flows or collateral value exceeds the
       carrying value of the loan ............................      10,780                6,977              4,398
                                                                   -------              -------             ------
          Total impaired loans ...............................     $21,161              $14,839             $7,140
                                                                   =======              =======             ======
   Allowance for impaired loans (included in the
       Corporation's allowance for loan losses) ..............     $ 3,251              $ 2,253             $1,061
   Average balance of impaired loans .........................      22,327               15,053              8,770
   Interest income recognized on impaired loans ..............       1,538                1,361                705
   Cash basis interest included above ........................       1,555                1,080                637

     The Corporation  has  entered into transactions  with  certain  directors,
executive officers, significant stockholders, and their affiliates or associates
("related  parties").  Such  transactions  were made in the  ordinary  course of
business on  substantially  the same terms and  conditions,  including  interest
rates  and  collateral,  as those  prevailing  at the same  time for  comparable
transactions  with other  customers,  and did not, in the opinion of management,
involve more than normal credit risk or present other unfavorable features.

The aggregate amount of loans, as defined, to such related parties is as
follows:

Balances, January 1, 2001 ........  $12,118
New loans,
   including renewals.............      493
Payments, etc.,
   including renewals.............   (3,357)
                                    -------
Balances, December 31, 2001 ......  $ 9,254
                                    =======

                                       26

================================================================================

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(table dollar amounts in thousands, except share data)

================================================================================

NOTE  6

PREMISES AND EQUIPMENT
                                                          2001           2000
================================================================================
Cost at December 31:
   Land ..........................................      $  5,626       $  4,020
   Buildings and leasehold improvements ..........        26,747         21,662
   Equipment .....................................        26,127         24,284
                                                        --------       --------
       Total cost ................................        58,500         49,966
   Accumulated depreciation and amortization .....       (30,816)       (26,098)
                                                        --------       --------
       Net .......................................      $ 27,684       $ 23,868
                                                        ========       ========

     The  Corporation is committed  under various  noncancelable lease contracts
for certain subsidiary office facilities. Total lease expense for 2001, 2000 and
1999 was $771,000,  $515,000,  and $336,000,  respectively.  The future  minimum
rental commitments required under the operating leases in effect at December 31,
2001,  expiring  at various  dates  through the year 2013 are as follows for the
years ending December 31:

====================================================
2002  ................................        $  630
2003  ................................           471
2004  ................................           308
2005  ................................           169
2006  ................................           145
After 2006 ...........................           450
                                              ------
Total future minimum obligations              $2,173
                                              ======

NOTE  7

DEPOSITS

                                                          2001           2000
================================================================================
Deposits at December 31:

   Demand deposits .............................       $  418,481     $  354,911
   Savings deposits ............................          366,084        299,868
   Certificates and other time deposits
     of $100,000 or more .......................          192,400        199,410
   Other certificates and time deposits ........          444,286        434,110
                                                       ----------     ----------
       Total deposits ..........................       $1,421,251     $1,288,299
                                                       ==========     ==========

=====================================================
Certificates and other time deposits maturing
in years ending December 31:

2002 .......................                 $448,074
2003 .......................                  105,192
2004 .......................                   58,332
2005 .......................                   17,704
2006 .......................                    7,010
After 2006 .................                      374
                                             --------
                                             $636,686
                                             ========

                                       27

================================================================================

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(table dollar amounts in thousands, except share data)

================================================================================

NOTE  8

BORROWINGS

                                                             2001         2000
================================================================================
Borrowings at December 31:
   Securities sold under repurchase agreements .......     $ 45,632     $ 64,456
   Federal funds purchased ...........................       10,500          975
   U. S. Treasury demand notes .......................        6,273        4,968
   Federal Home Loan Bank advances ...................      103,499       93,182
   Other borrowed funds...............................        8,500
                                                           --------     --------
       Total borrowings ..............................     $174,404     $163,581
                                                           ========     ========

     Securities sold under repurchase agreements consist of obligations of the
Banks to other parties.  The obligations are secured by U.S.  Treasury,  Federal
agency obligations and corporate asset-backed securities.  The maximum amount of
outstanding agreements at any month-end during 2001 and 2000 totaled $68,546,000
and  $80,489,000,  and the average of such  agreements  totaled  $59,365,000 and
$69,953,000.

Maturities  of  Federal  Home Loan  Bank  advances  and  securities  sold  under
repurchase agreements as of December 31, 2001, are as follows:

                                                        FEDERAL HOME LOAN                           SECURITIES SOLD UNDER
                                                          BANK ADVANCES                             REPURCHASE AGREEMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                    WEIGHTED-AVERAGE                             WEIGHTED-AVERAGE
                                                  AMOUNT              INTEREST RATE              AMOUNT           INTEREST RATE
====================================================================================================================================
                                                                                                           
Maturities in years ending December 31:

      2002 ..............                       $ 25,790                 6.26%                 $22,732                 3.27%
      2003 ..............                         12,000                 4.86                   13,800                 5.80
      2004 ..............                         16,000                 4.96                    9,100                 5.68
      2005 ..............                         11,500                 5.51
      2006 ..............                         13,000                 5.45
      After 2006 ........                         25,209                 5.60
                                                --------                                       -------
             Total ......                       $103,499                 5.55%                 $45,632                 4.51%
                                                ========                                       =======

     The terms of a security agreement with the FHLB require the Corporation to
pledge,  as collateral  for advances,  qualifying  first  mortgage loans and all
otherwise  unpledged  investment  securities  in an amount equal to at least 160
percent of these advances.  Advances are subject to restrictions or penalties in
the event of prepayment.

     Other borrowed funds consists of an unsecured revolving credit note payable
to the Northern  Trust  Company with  interest  payable  monthly  based upon the
Federal Funds Rate plus .875%.  Principal  and remaining  interest are due on or
before July 9, 2002. The total principal amount  outstanding at any one time may
not exceed $10,000,000.

     The  Corporation  has filed a  registration  statement with the  Securities
and Exchange Commission for the issuance of trust preferred  securities by newly
created business trusts.  The aggregate  initial offering price of the preferred
securities  offered by the trusts will not exceed  $70,000,000.  The trusts will
offer  the  preferred  securities  in  amounts,  at  prices  and on  terms to be
determined by market  conditions at the time of the  offerings.

                                       28

================================================================================

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(table dollar amounts in thousands, except share data)

================================================================================

NOTE 8

BORROWINGS continued

     The proceeds of the  offering  will be loaned to the  Corporation  by  the
trusts in exchange for  subordinated  debentures  with terms that are similar to
the  preferred  securities  and will be  recorded  as debt in the  Corporation's
consolidated financial statements.  The subordinated debentures will be the sole
asset of the  trusts.  Issuance  costs  will be  amortized  over the life of the
preferred  securities.  The Corporation will guarantee the preferred  securities
and distributions.

NOTE  9

LOAN SERVICING

     Mortgage loans serviced for others are not included in the accompanying
consolidated  balance sheets.  The loans are serviced  primarily for the Federal
Home Loan Mortgage  Corporation,  and the unpaid  balances totaled  $37,909,000,
$22,591,000 and $22,769,000 at December 31, 2001, 2000 and 1999.

NOTE  10

INCOME TAX

                                                                                         2001              2000              1999
====================================================================================================================================
                                                                                                                  
Income tax expense for the year ended December 31:
  Currently payable:
     Federal .................................................................          $  9,098          $  9,236         $  8,491
     State ...................................................................             2,210             1,499            2,730
  Deferred:
     Federal .................................................................               406              (715)            (939)
     State ...................................................................               210               (52)            (183)
                                                                                        --------          --------         --------
        Total income tax expense .............................................          $ 11,924          $  9,968         $ 10,099
                                                                                        ========          ========         ========

Reconciliation of federal statutory to actual tax expense:
     Federal statutory income tax at 34% .....................................          $ 11,539          $ 10,169         $  9,924
     Tax-exempt interest .....................................................            (1,319)           (1,308)          (1,555)
     Graduated tax rates .....................................................               312               299              291
     Effect of state income taxes ............................................             1,597               941            1,656
     Other ...................................................................              (205)             (133)            (217)
                                                                                        --------          --------         --------
        Actual tax expense ...................................................          $ 11,924          $  9,968         $ 10,099
                                                                                        ========          ========         ========

Tax expense (benefit) applicable to security gains and losses for the years
ended December 31, 2001, 2000 and 1999, was ($80,000), $(43,000), and $103,000,
respectively.
                                       29

================================================================================

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(table dollar amounts in thousands, except share data)

================================================================================

NOTE 10

INCOME TAX continued

A cumulative net deferred tax asset is included in other assets. The components
of the asset are as follows:

                                                                                           2001                2000
=====================================================================================================================
                                                                                                        
Deferred tax asset at December 31:
Assets:
   Differences in accounting for loan losses .............................                $5,103              $5,110
   Deferred compensation .................................................                 1,069                 923
   Net unrealized loss on securities available for sale ..................                                        88
   Other .................................................................                   268                 217
                                                                                          ------              ------
       Total assets ......................................................                 6,440               6,338
                                                                                          ------              ------
Liabilities:
   Differences in depreciation methods ...................................                   838                 754
   Differences in accounting for loans and securities ....................                 2,137                 173
   Differences in accounting for loan fees ...............................                   436                 413
   Differences in accounting for pensions
     and other employee benefits .........................................                   315                 177
   State income tax ......................................................                   115                 256
   Net unrealized gain on securities available for sale...................                 1,464
   Other .................................................................                   756                 455
                                                                                          ------              ------
       Total liabilities .................................................                 6,061               2,228
                                                                                          ------              ------
       Net deferred tax asset ............................................                $  379              $4,110
                                                                                          ======              ======

NOTE 11

COMMITMENTS AND CONTINGENT LIABILITIES

     In the normal course of business there are outstanding commitments and
contingent liabilities, such as commitments to extend credit and standby letters
of credit, which are not included in the accompanying financial statements.  The
Corporation's  exposure  to credit  loss in the event of  nonperformance  by the
other party to the financial  instruments  for  commitments to extend credit and
standby  letters of credit is represented by the  contractual or notional amount
of those  instruments.  The Banks use the same  credit  policies  in making such
commitments  as they do for  instruments  that are included in the  consolidated
balance sheets.

     Financial instruments whose contract amount represents credit risk as of
December 31, were as follows:

                              2001               2000
                            --------           --------
Commitments
to extend credit            $199,656           $220,613

Standby letters
of credit                      9,806              6,558

                                       30

================================================================================

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(table dollar amounts in thousands, except share data)

================================================================================

NOTE 11

COMMITMENTS AND CONTINGENT LIABILITIES continued

     Commitments to extend credit are agreements to lend to a customer, as long
as  there  is no  violation  of  any  condition  established  in  the  contract.
Commitments  generally have fixed expiration dates or other termination  clauses
and may require  payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash  requirements.  The Banks evaluate each customer's  credit
worthiness on a case-by-case basis. The amount of collateral obtained, if deemed
necessary by the Banks upon extension of credit, is based on management's credit
evaluation.  Collateral  held  varies,  but  may  include  accounts  receivable,
inventory, property and equipment, and income-producing commercial properties.

     Standby letters of credit are conditional commitments issued by the Banks
to guarantee the performance of a customer to a third party.

     The Corporation and subsidiaries are also subject to claims and lawsuits,
which arise primarily in the ordinary  course of business.  It is the opinion of
management  that the  disposition  or  ultimate  resolution  of such  claims and
lawsuits will not have a material adverse effect on the  consolidated  financial
position of the Corporation.

NOTE  12

STOCKHOLDERS' EQUITY

     National and state banking laws restrict the maximum amount of dividends
that a bank may pay in any calendar  year.  National and state banks are limited
to the bank's  retained  net income (as defined) for the current year plus those
for the previous two years. At December 31, 2001, the Banks' had no retained net
profits available for 2002 dividends to the Corporation without prior regulatory
approval.

     Total stockholders' equity for all subsidiaries at December 31, 2001, was
$180,048,000, of which $178,245,000 was restricted from dividend distribution to
the Corporation.

     The Corporation has a Dividend Reinvestment and Stock Purchase Plan,
enabling  stockholders  to elect to have their cash dividends on all shares held
automatically  reinvested in additional  shares of the Corporation's  common
stock. In addition,  stockholders may elect to make optional cash payments up to
an  aggregate  of $2,500 per quarter for the  purchase of  additional  shares of
common  stock.  The stock is  credited  to  participant  accounts at fair market
value.  Dividends  are  reinvested on a quarterly  basis.  At December 31, 2001,
there were 388,176 shares of common stock reserved for purchase under the plan.

                                       31

================================================================================

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(table dollar amounts in thousands, except share data)

================================================================================

NOTE 12

STOCKHOLDERS' EQUITY continued

     On August 14, 2001, the Board of Directors of the Corporation declared a
five percent  (5%) stock  dividend on its  outstanding  common  shares.  The new
shares were distributed on September 24, 2001, to holders of record on September
3, 2001.

NOTE 13

REGULATORY CAPITAL

     The Corporation and Banks are subject to various regulatory capital
requirements  administered by the federal banking agencies and are assigned to a
capital category.  The assigned capital category is largely  determined by three
ratios that are  calculated  according to the  regulations:  total risk adjusted
capital,  Tier 1 capital, and Tier 1 leverage ratios. The ratios are intended to
measure capital  relative to assets and credit risk associated with those assets
and off-balance sheet exposures of the entity.  The capital category assigned to
an entity can also be  affected  by  qualitative  judgments  made by  regulatory
agencies about the risk inherent in the entity's activities that are not part of
the calculated ratios.

     There are five capital categories defined in the regulations, ranging from
well capitalized to critically undercapitalized. Classification of a bank in any
of the  undercapitalized  categories  can result in actions by  regulators  that
could have a material effect on a bank's operations.

     At December 31, 2001, the management of the Corporation believes that it
meets all capital adequacy  requirements to which it is subject. The most recent
notifications from the regulatory agencies categorized the Corporation and Banks
as well capitalized under the regulatory framework for prompt corrective action.
To be categorized as well  capitalized,  the Banks must maintain a minimum total
capital to risk-weighted assets, Tier I capital to risk-weighted assets and Tier
I  capital  to  average  assets  of  10  percent,   6  percent  and  5  percent,
respectively.  There have been no conditions  or events since that  notification
that management believes have changed this categorization.

                                       32

================================================================================

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(table dollar amounts in thousands, except share data)

================================================================================

NOTE 13

REGULATORY CAPITAL   continued

     Actual and required capital amounts and ratios are listed below.

                                                                  2001                                        2000
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                       REQUIRED FOR                                REQUIRED FOR
                                                      ACTUAL        ADEQUATE CAPITAL (1)          ACTUAL        ADEQUATE CAPITAL (1)
                                                AMOUNT      RATIO    AMOUNT      RATIO      AMOUNT      RATIO    AMOUNT      RATIO
====================================================================================================================================
                                                                                                     
December 31
Total Capital (1)(to risk-weighted assets)
   Consolidated ......................        $159,315     11.75%  $108,514      8.00%    $147,609     12.72%  $ 92,814      8.00%
   First Merchants ...................          70,562     11.69     48,281      8.00       62,220     10.92     45,600      8.00
   Madison ...........................          19,329     11.61     13,320      8.00       19,860     12.24     12,979      8.00
   First United ......................           8,245     13.17      5,009      8.00        7,982     11.49      5,560      8.00
   Randolph County ...................           7,009     11.97      4,684      8.00        6,665     10.46      5,096      8.00
   Union County ......................          17,897     13.50     10,606      8.00       17,867     13.21     10,821      8.00
   First National ....................          10,387     12.34      6,731      8.00        9,386     11.12      6,750      8.00
   Decatur ...........................          11,871     14.41      6,588      8.00       10,678     12.37      6,904      8.00
   Frances Slocum.....................          13,634     10.25     10,638      8.00

Tier I Capital (1)(to risk-weighted assets)
   Consolidated ......................        $144,174     10.63%  $ 54,257      4.00%    $135,155     11.65%  $ 46,407      4.00%
   First Merchants ...................          64,817     10.74     24,140      4.00       57,403     10.07     22,800      4.00
   Madison ...........................          17,852     10.72      6,660      4.00       18,094     11.15      6,489      4.00
   First United ......................           7,546     12.05      2,504      4.00        7,306     10.51      2,780      4.00
   Randolph County ...................           6,277     10.72      2,342      4.00        5,868      9.21      2,548      4.00
   Union County ......................          16,332     12.32      5,303      4.00       16,227     12.00      5,411      4.00
   First National ....................           9,389     11.16      3,366      4.00        8,331      9.87      3,375      4.00
   Decatur ...........................          10,834     13.16      3,294      4.00        9,593     11.12      3,452      4.00
   Frances Slocum.....................          12,007      9.03      5,319      4.00

Tier I Capital (1) (to average assets)
   Consolidated ......................        $144,174      8.70%  $ 66,298      4.00%    $135,155      8.72%  $ 62,023      4.00%
   First Merchants ...................          64,817      8.17     31,737      4.00       57,403      7.47     30,742      4.00
   Madison ...........................          17,852      8.24      8,667      4.00       18,094      8.80      8,228      4.00
   First United ......................           7,546      9.52      3,171      4.00        7,306      8.12      3,597      4.00
   Randolph County ...................           6,277      7.73      3,250      4.00        5,868      7.13      3,293      4.00
   Union County ......................          16,332      7.94      8,227      4.00       16,227      7.26      8,946      4.00
   First National ....................           9,389      7.93      4,736      4.00        8,331      7.30      4,562      4.00
   Decatur ...........................          10,834      8.40      5,159      4.00        9,593      7.49      5,123      4.00
   Frances Slocum.....................          12,007      7.05      6,809      4.00

(1) as defined by regulatory agencies

NOTE 14

EMPLOYEE BENEFIT PLANS

     The Corporation's defined-benefit pension plans cover substantially all of
the  Corporation's  employees.  The  benefits  are based  primarily  on years of
service  and  employees'  pay near  retirement.  Contributions  are  intended to
provide not only for benefits attributed to service-to-date,  but also for those
expected to be earned in the future.
                                       33

================================================================================

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(table dollar amounts in thousands, except share data)

================================================================================

NOTE 14

EMPLOYEE BENEFIT PLANS  continued

     The table below sets forth the plans' funded status and amounts recognized
in the consolidated balance sheets at December 31:

                                                            December 31
                                                         2001       2000
===========================================================================
Change in benefit obligation
     Benefit obligation at beginning of year ......    $ 16,953   $ 15,806
     Service cost .................................         926        714
     Interest cost ................................       1,269      1,181
     Actuarial loss ...............................       1,969        180
     Benefits paid ................................      (1,024)      (928)
                                                       --------   --------
     Benefit obligation at end of year ............      20,093     16,953
                                                       --------   --------
Change in plan assets
     Fair value of plan assets at beginning of year      23,967     22,325
     Actual return (loss) on plan assets ..........      (2,305)     2,570
     Benefits paid ................................      (1,024)      (928)
                                                       --------   --------
     Fair value of plan assets at end of year .....      20,638     23,967
                                                       --------   --------
     Funded status ................................         545      7,014
     Unrecognized net actuarial (gain) loss........         363     (6,315)
     Unrecognized prior service cost ..............        (107)      (119)
     Unrecognized transition asset ................         (69)      (206)
                                                       --------   --------
     Prepaid benefit cost .........................    $    732   $    374
                                                       ========   ========

                                                                 2001       2000        1999
==============================================================================================
                                                                             
Pension benefit includes the following components:
   Service cost-benefits earned during the year ............    $   926    $   714    $   737
   Interest cost on projected benefit obligation ...........      1,269      1,181      1,081
   Actual (return) loss on plan assets .....................      2,305     (2,570)    (3,871)
   Net amortization and deferral ...........................     (4,858)       160      1,915
                                                                -------    -------    -------
      Total pension benefit ................................    $  (358)   $  (515)   $  (138)
                                                                =======    =======    =======

                                                                  2001       2000        1999
==============================================================================================
Assumptions used in the accounting as of December 31 were:
      Discount rate ........................................      7.11%      7.70%       7.68%
      Rate of increase in compensation .....................      4.00%      4.00%       4.00%
      Expected long-term rate of return on assets ..........      9.00%      9.00%       9.00%

      The 1994 Stock Option Plan reserved  496,125 shares of Corporation  common
stock  for the  granting  of  options  to  certain  employees  and  non-employee
directors. The exercise price of the shares may not be less than the fair market
value of the shares  upon the grant of the  option.  Options  become 100 percent
vested when  granted and are fully  exercisable  generally  six months after the
date of the grant, for a period of ten years. There were no shares available for
grant.
                                       34

================================================================================

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(table dollar amounts in thousands, except share data)

================================================================================

NOTE 14

EMPLOYEE BENEFIT PLANS  continued

     The  1999  Long-term  Equity   Incentive  Plan  reserved  1,260,000  shares
of Corporation common stock for the granting of options to certain employees and
non-employee directors.  The maximum number of options granted in any given year
cannot  exceed  1.5% of the shares  outstanding  at the end of the prior  fiscal
year. Options,which have a ten year life, become 100 percent vested ranging from
six month to two  years  and are  fully  exercisable  when  vested.  There  were
984,504 shares available for grant at December 31, 2001.

     The table below is a summary of the status of the Corporation's stock
option plans and changes in those plans as of and for the years ended December
31, 2001, 2000 and 1999. The number of shares and prices have been restated to
give effect to the Corporation's 2001 stock dividend.

Year Ended December 31,                                         2001                       2000                       1999
- ------------------------------------------------------------------------------------------------------------------------------------

                                                           WEIGHTED-AVERAGE           WEIGHTED-AVERAGE           WEIGHTED-AVERAGE
       OPTIONS                                        SHARES     EXERCISE PRICE  SHARES     EXERCISE PRICE  SHARES    EXERCISE PRICE
====================================================================================================================================
                                                                                                        
Outstanding, beginning of year ................       597,089        $ 18.89     596,695        $ 18.63     521,854       $ 16.78
Granted .......................................       127,829          21.72     135,398          20.29     143,220         21.15
Exercised .....................................       (24,237)         10.81     (50,297)         15.37     (67,040)         9.34
Cancelled .....................................        (3,701)         21.88     (84,707)         21.27      (1,339)        23.41
                                                      -------                    -------                    -------
Outstanding, end of year ......................       696,980        $ 19.75     597,089        $ 18.89     596,695       $ 18.63
                                                      =======                    =======                    =======
Options exercisable at year end ...............       471,392                    469,646                    465,156
Weighted-average fair value of
   options granted during the year ............                      $  6.30                    $  5.22                   $  5.50

As of December 31, 2001,  other  information by exercise price range for options
outstanding and exercisable is as follows:

                                    OUTSTANDING                                                      EXERCISABLE
- ---------------------------------------------------------------------------------          -------------------------------
  EXERCISE PRICE         NUMBER     WEIGHTED-AVERAGE        WEIGHTED-AVERAGE                 NUMBER       WEIGHTED-AVERAGE
      RANGE             OF SHARES    EXERCISE PRICE    REMAINING CONTRACTUAL LIFE          OF SHARES        EXERCISE PRICE
==========================================================================================================================
                                                                                                 
$  0.00 - $19.92         265,534         $15.43                 3.8 years                   263,270             $15.56

  20.09 -  21.75         319,664          21.15                 8.7 years                    96,351              21.44

  22.56 -  28.99         111,782          25.99                 6.9 years                   111,771              25.99
                         -------                                                            -------
                         696,980         $19.75                 6.5 years                   471,392             $19.23
                         =======                                                            =======

     The Corporation's stock option plans are accounted for in accordance with
Accounting  Principles Board Opinion ("APB") No. 25, Accounting for Stock Issued
to  Employees,  and related  interpretations.  APB No. 25 requires  compensation
expense  for stock  options to be  recognized  only if the  market  price of the
underlying  stock  exceeds  the  exercise  price  on  the  date  of  the  grant.
Accordingly, the Corporation recognized compensation expense of $23,000 in 2001,
$23,000 in 2000 and $35,000 in 1999.

     Although the Corporation has elected to follow APB No. 25, SFAS No. 123
requires pro forma disclosures of net income and earnings per share as if the
Corporation had accounted for its employee stock options under that Statement.
                                       35

================================================================================

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(table dollar amounts in thousands, except share data)

================================================================================

NOTE 14

EMPLOYEE BENEFIT PLANS  continued

     The fair value of each option grant was estimated on the grant date using
an option-pricing model with the following assumptions:

                                        2001           2000           1999

Risk-free interest rates........       5.32%          6.01%          5.72%

Dividend yields.................       3.59%          3.38%          3.23%

Volatility factors of expected
    market price common stock...      30.95%         22.86%         21.98%

Weighted-average expected
    life of the options ........       8.50 years     8.50 years     8.50 years

     Under SFAS No. 123, compensation cost is recognized in the amount of the
estimated fair value of the options and amortized to expense over the options'
vesting period. The pro forma effect on net income and earnings per share of
this statement are shown as follows:

                                       2001          2000          1999

Net Income
     As reported.................... $22,209       $19,940       $19,088
     Pro Forma......................  21,630        19,481        18,661
Earnings per share
   Basic:
     As reported....................   $1.79         $1.67         $1.51
     Pro forma......................    1.74          1.63          1.47
   Diluted:
     As reported....................   $1.78         $1.66         $1.50
     Pro forma......................    1.73          1.62          1.46

     The 1999 Employee Stock Purchase Plan enables eligible employees to
purchase  the  Corporation's  common  stock.  A total of  262,500  shares of the
Corporation's  common stock were initially reserved for issuance pursuant to the
plan.  The price of the stock to be paid by the  employees is  determined by the
Corporation's compensation committee, but may not be less than 85 percent of the
lesser  of the  fair  market  value  of the  Corporation's  common  stock at the
beginning or at the end of the offering period.  Common stock purchases are made
annually and are paid through advance payroll  deductions of up to 20 percent of
eligible  compensation.  Participants under the plan purchased 28,466 in 2001 at
$17.69 per share. The fair value on the purchase date was $19.41.

                                       36

================================================================================

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(table dollar amounts in thousands, except share data)

================================================================================

NOTE 14

EMPLOYEE BENEFIT PLANS  continued

     At December 31, 2001, there were 221,534 shares of Corporation common stock
reserved  for purchase  under the plan,  and  $336,000  has been  withheld  from
compensation,  plus interest, toward the purchase of shares after June 30, 2002,
the end of the annual offering period.

     The  Corporation's  Employee  Stock Purchase Plan is accounted for in
accordance  with APB No. 25.  Although the Corporation has elected to follow APB
No. 25, SFAS No. 123 requires pro forma  disclosures  of net income and earnings
per share as if the  Corporation  had accounted  for the purchased  shares under
that  statement.  The pro forma  disclosures  are  included  in the table on the
previous  page and  were  estimated  using  an  option  pricing  model  with the
following assumptions for 2001, 2000 and 1999,  respectively:  dividend yield of
3.59,  3.38,  and 3.23  percent;  an  expected  life of one year for all  years;
expected volatility of 30.95,  22.86, and 21.98 percent;  and risk-free interest
rates of 5.32,  6.01 and 5.72 percent.  The fair value of those purchase  rights
granted in 2001, 2000 and 1999 was $5.63, $4.01 and $4.50 respectively.

     The Corporation has a retirement savings 401(k) plans in which
substantially all employees may participate.  The Corporation matches employees'
contributions  at the rate of 25 to 50  percent  for the first 5 to 6 percent of
base salary contributed by participants. The Corporations' expense for the plans
was $190,000 for 2001, $182,000 for 2000 and $191,000 for 1999.

NOTE  15

NET INCOME PER SHARE

==================================================================================================================================
Year Ended December 31,                           2001                           2000                          1999
- ----------------------------------------------------------------------------------------------------------------------------------
                                       WEIGHTED-AVERAGE PER SHARE     WEIGHTED-AVERAGE PER SHARE    WEIGHTED-AVERAGE PER SHARE
                                      INCOME     SHARES     AMOUNT   INCOME     SHARES     AMOUNT  INCOME     SHARES    AMOUNT
==================================================================================================================================
                                                                                               
Basic net income per share:
  Net income available  to
    common stockholders ..........   $22,209    12,399,985   $1.79  $19,940    11,909,457   $1.67  $19,088   12,608,560   $1.51
Effect of dilutive stock options .                  89,344   =====                 82,819   =====               114,194   =====
                                     -------    ----------          -------    ----------          -------   ----------
Diluted net income per share:
  Net income available to
    common stockholders
    and assumed conversions ......   $22,209    12,489,329   $1.78  $19,940    11,992,276   $1.66  $19,088   12,722,754   $1.50
                                     =======    ==========   =====  =======    ==========   =====  =======   ==========   =====

     Options to purchase  112,024,  217,817 and 118,941  shares of common  stock
with  weighted  average  exercise  prices of of  $26.00,  $23.75  and  $25.87 at
December 31, 2001,  2000 and 1999 were excluded from the  computation of diluted
net income per share  because the options  exercise  price was greater  than the
average market price of the common stock.

                                       37

================================================================================

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(table dollar amounts in thousands, except share data)

================================================================================

NOTE 16

FAIR VALUES OF FINANCIAL INSTRUMENTS

The following  methods and  assumptions  were used to estimate the fair value of
each class of financial instrument:

CASH  AND  CASH  EQUIVALENTS  The  fair  value  of  cash  and  cash  equivalents
approximates carrying value.

INTEREST-BEARING  TIME DEPOSITS The fair value of interest-bearing time deposits
approximates carrying value.

INVESTMENT SECURITIES Fair values are based on quoted market prices.

MORTGAGE  LOANS  HELD  FOR  SALE  The  fair  value  of  mortgages  held for sale
approximates carrying values.

LOANS For both short-term loans and variable-rate  loans that reprice frequently
and with no significant change in credit risk, fair values are based on carrying
values.  The fair value for other loans is estimated using  discounted cash flow
analyses,  using interest rates  currently  being offered for loans with similar
terms to borrowers of similar credit quality.

INTEREST  RECEIVABLE/PAYABLE  The fair  values  of  interest  receivable/payable
approximate carrying values.

FEDERAL  RESERVE AND FEDERAL HOME LOAN BANK STOCK The fair value of FRB and FHLB
stock is based on the price at which it may be resold to the FRB and FHLB.

CASH SURRENDER VALUE OF LIFE INSURANCE The fair value of cash surrender value of
life insurance approximates carrying value.

DEPOSITS   The   fair   values   of    noninterest-bearing    demand   accounts,
interest-bearing  demand  accounts and savings  deposits are equal to the amount
payable on demand at the balance sheet date.  The carrying  amounts for variable
rate,  fixed-term  certificates of deposit  approximate their fair values at the
balance sheet date. Fair values for fixed-rate certificates of deposit and other
time  deposits are  estimated  using a  discounted  cash flow  calculation  that
applies  interest rates currently being offered on certificates to a schedule of
aggregated expected monthly maturities on such time deposits.

                                       38

================================================================================

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(table dollar amounts in thousands, except share data)

================================================================================

NOTE 16

FAIR VALUES OF FINANCIAL INSTRUMENTS   continued

FEDERAL FUNDS PURCHASED, U.S. TREASURY DEMAND NOTES AND OTHER BORROWED FUNDS

These financial instruments are short-term borrowing arrangements.  The rates at
December 31, approximate market rates, thus the fair value approximates carrying
value.

SECURITIES SOLD UNDER REPURCHASE AGREEMENTS AND FEDERAL HOME LOAN BANK ADVANCES

The fair value of the these borrowings is estimated using a discounted cash flow
calculation, based on current rates for similar debt.

OFF-BALANCE SHEET COMMITMENTS

Loan commitments and letters-of-credit generally have short-term, variable-rate
features and contain clauses which limit the Banks' exposure to changes in
customer credit quality. Accordingly, their carrying values, which are
immaterial at the respective balance sheet dates, are reasonable estimates of
fair value.

The estimated  fair values of the  Corporation's  financial  instruments  are as
follows:

                                                                                    2001                              2000
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                        CARRYING           FAIR           CARRYING           FAIR
                                                                         AMOUNT            VALUE           AMOUNT            VALUE
====================================================================================================================================
                                                                                                              
Assets at December 31:
   Cash and cash equivalents ...................................      $  103,028        $  103,028      $   67,463        $   67,463
   Interest-bearing time deposits ..............................           3,871             3,871             883               883
   Investment securities available for sale ....................         231,668           231,668         295,730           295,730
   Investment securities held to maturity ......................           8,654             8,762          12,233            12,328
   Mortgage loans held for sale ................................             307               307
   Loans .......................................................       1,344,445         1,386,515       1,163,132         1,157,723
   FRB and FHLB stock ..........................................           8,350             8,350           7,185             7,185
   Interest receivable .........................................          12,024            12,024          13,135            13,135
   Cash surrender of life insurance.............................           6,470             6,470           6,312             6,312

Liabilities at December 31:
   Deposits ....................................................       1,421,251         1,448,336       1,288,299         1,286,762
   Borrowings:
       Securities sold under repurchase agreements .............          45,632            45,939          64,456            64,558
       Federal funds purchased .................................          10,500            10,500             975               975
       U.S. Treasury demand notes ..............................           6,273             6,273           4,968             4,968
       FHLB advances ...........................................         103,499           105,955          93,182            92,387
       Other borrowed funds.....................................           8,500             8,500
   Interest payable ............................................           5,488             5,488           6,335             6,335

                                       39

================================================================================

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(table dollar amounts in thousands, except share data)

================================================================================

NOTE  17

CONDENSED FINANCIAL INFORMATION   (parent company only)

     Presented below is condensed financial information as to financial
position, results of operations, and cash flows of the Corporation:

CONDENSED BALANCE SHEET
                                                                December 31,
                                                              2001         2000
================================================================================
Assets
   Cash ..............................................     $  3,041     $ 13,184
   Investment securities available for sale...........        3,500
   Investment in subsidiaries ........................      180,423      143,903
   Goodwill ..........................................          448          485
   Other assets ......................................        1,396          378
                                                           --------     --------
      Total assets ...................................     $188,808     $157,950
                                                           ========     ========
Liabilities
   Borrowings ........................................     $  8,500
   Other liabilities .................................        1,180     $  1,887
                                                           --------     --------
      Total liabilities ..............................        9,680        1,887

Stockholders' equity .................................      179,128      156,063
                                                           --------     --------
      Total liabilities and stockholders' equity .....     $188,808     $157,950
                                                           ========     ========

CONDENSED STATEMENT OF INCOME

                                                                                                         December 31,
                                                                                            2001            2000            1999
====================================================================================================================================
                                                                                                                
Income
  Dividends from subsidiaries ................................................           $ 20,245        $ 71,705        $  9,894
  Gain on sale of available-for-sale securities ..............................                                                 98
  Administrative services fees................................................              4,133
  Other income ...............................................................                269             174             112
                                                                                         --------        --------        --------
     Total income ............................................................             24,647          71,879          10,104
                                                                                         --------        --------        --------
Expenses
  Amortization of core deposit intangibles,
   goodwill, and fair value adjustments ......................................                 66              50              43
  Business combination expenses ..............................................                                                804
  Interest expense............................................................                 88             788
  Salaries and employee benefits..............................................              4,767             185             388
  Net occupancy expenses......................................................              1,002              11              12
  Equipment expenses..........................................................                898              18               9
  Telephone expenses..........................................................                547
  Other expenses..............................................................              1,003             581             425
                                                                                         --------        --------        --------
     Total expenses ..........................................................              8,371           1,633           1,681
                                                                                         --------        --------        --------
Income before income tax benefit and equity in
undistributed income of subsidiaries .........................................             16,276          70,246           8,423
     Income tax benefit ......................................................             (1,567)           (496)           (321)
                                                                                         --------        --------        --------
Income before equity in undistributed income of subsidiaries .................             17,843          70,742           8,744

   Equity in undistributed (distributions in excess of)
    income of subsidiaries ...................................................              4,366         (50,802)         10,344
                                                                                         --------        --------        --------
Net Income ...................................................................           $ 22,209        $ 19,940        $ 19,088
                                                                                         ========        ========        ========

                                       40

================================================================================

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(table dollar amounts in thousands, except share data)

================================================================================

NOTE 17

CONDENSED FINANCIAL INFORMATION (parent company only)

CONDENSED STATEMENT OF CASH FLOWS

                                                                                    Year Ended December 31,
=====================================================================================================================

                                                                             2001             2000             1999
=====================================================================================================================
                                                                                                   
Operating activities:
   Net income ........................................................    $ 22,209         $ 19,940         $ 19,088
   Adjustments to reconcile net income to net cash
     provided by operating activities:
     Amortization ....................................................          66               50               43
     Distributions in excess of (equity in undistributed)
       income of subsidiaries ............... ........................      (4,366)          50,802          (10,344)
     Security gains ..................................................                                           (98)
     Net change in:
        Other assets .................................................      (1,274)              (36)             (53)
        Other liabilities ............................................        (842)            1,270              349
                                                                          --------         --------         --------
           Net cash provided by operating activities .................      15,793           72,026            8,985
                                                                          --------         --------         --------
Investing activities:
   Net change in loans ...............................................                        2,350             (850)
   Purchase of securities available for sale..........................      (3,500)
   Proceeds from sales of securities available for sale ..............                                           383
   Investment in subsidiary ..........................................     (14,296)         (14,159)
   Other investing activities ........................................                                            55
                                                                          --------         --------         --------
           Net cash used by investing activities .....................     (17,796)         (11,809)            (412)
                                                                          --------         --------         --------
Financing activities:
   Cash dividends ....................................................     (11,127)         (10,331)          (9,759)
   Borrowing from affiliates .........................................                       13,000           32,000
   Repayment of borrowings from affiliates ...........................                      (45,000)
   Borrowings.........................................................       8,500
   Stock issued under employee benefit plans .........................         504              481              457
   Stock issued under dividend reinvestment
     and stock purchase plan .........................................         803              811              722
   Stock options exercised ...........................................         225              510              271
   Stock redeemed ....................................................      (7,023)          (6,712)         (32,136)
   Cash paid in lieu of issuing fractional shares ....................         (22)              (4)
                                                                          --------         --------         --------
           Net cash used by financing activities .....................      (8,140)         (47,245)          (8,445)
                                                                          --------         --------         --------
Net change in cash ...................................................     (10,143)          12,972              128
Cash, beginning of year ..............................................      13,184              212               84
                                                                          --------         --------         --------
Cash, end of year ....................................................    $  3,041         $ 13,184         $    212
                                                                          ========         ========         ========

NOTE 18

NEW ACCOUNTING PRONOUNCEMENT

     The FASB recently adopted SFAS 142, "Goodwill and Other Intangible Assets".
This Statement  establishes new financial accounting and reporting standards for
acquired  goodwill and other  intangible  assets.  The  Statement  addresses how
intangible assets that are acquired individually or with a group of other assets
(but not those  acquired in a business  combination)  should be accounted for in
financial statements upon their acquisition.  It also addresses how goodwill and
other intangible  assets  (including  those acquired in a business  combination)
should be  accounted  for  after  they have  been  initially  recognized  in the
financial  statements.  SFAS 142 is effective for fiscal years  beginning  after
December  15,  2001.  The  Corporation  expects  to apply  SFAS 142 in the first
quarter of its fiscal year ending  December 31, 2002. Upon adoption of SFAS 142,
the  Corporation  will no longer amortize the goodwill it currently has recorded
in  the  consolidated  financial  statements.  Goodwill  will  be  reviewed  for
impairment in accordance with SFAS 142.  Amortization of goodwill for the period
ended December 31, 2001 totaled $1,003,000.

                                       41

================================================================================

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(table dollar amounts in thousands, except share data)

================================================================================

NOTE 19

QUARTERLY RESULTS OF OPERATIONS (unaudited)

The following table sets forth certain quarterly results for the years ended
December 31, 2001 and 2000:
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                    AVERAGE SHARES OUTSTANDING  NET INCOME PER SHARE
   QUARTER            INTEREST    INTEREST    NET INTEREST  PROVISION FOR     NET   --------------------------  --------------------
    ENDED              INCOME      EXPENSE       INCOME      LOAN LOSSES     INCOME      BASIC        DILUTED     BASIC   DILUTED
                                                                                               
2001:
March ............   $   30,088   $  15,399    $    14,689   $    653      $  5,106    12,178,006    12,262,050   $ .42   $ .42
June .............       29,267      13,997         15,270        695         5,574    12,024,871    12,105,173     .46     .46
September.........       31,558      14,296         17,262      1,023         6,020    12,711,385    12,804,017     .48     .47
December..........       29,522      12,382         17,140      1,205         5,509    12,676,774    12,782,452     .43     .43
                     ----------   ----------   -----------   --------      --------                               -----   -----
                     $  120,435   $  56,074    $    64,361   $  3,576      $ 22,209    12,399,985    12,489,329   $1.79   $1.78
                     ==========   ==========   ===========   ========      ========                               =====   =====

2000:
March ............   $   26,574   $  13,301    $    13,273   $    479      $  4,820    11,449,253    11,557,764   $ .41   $ .41
June .............       28,097      14,307         13,790        665         5,003    11,645,787    11,716,711     .43     .43
September.........       30,616      16,202         14,414        603         5,275    12,273,134    12,349,071     .43     .43
December..........       31,241      16,736         14,505        878         4,842    12,264,391    12,350,840     .40     .39
                     ----------   ----------   -----------   --------      --------                               -----   -----
                     $  116,528   $  60,546    $    55,982   $  2,625      $ 19,940    11,909,457    11,992,276   $1.67   $1.66
                     ==========   ==========   ===========   ========      ========                               =====   =====

                                       42

================================================================================

STOCKHOLDER INFORMATION

================================================================================

First  Merchants  Corporation,  a  financial  holding  company  based in Muncie,
Indiana,  was  organized in  September  of 1982 as the bank holding  company for
Merchants  National Bank of Muncie,  now First  Merchants  Bank,  N.A. Since its
organization,  First Merchants  Corporation has grown to include eight affiliate
banks, multi-line insurance agency and an offshore reinsurance company with over
48 locations in 13 Indiana counties and one Ohio county.

Affiliates  include First Merchants Bank,  First Merchants  Insurance  Services,
Madison Community Bank in Madison County, First United Bank in Henry County, the
Randolph  County Bank,  First National Bank of Portland,  Union County  National
Bank,  Decatur Bank & Trust  Company and Frances  Slocum Bank & Trust Company in
Miami County.  The Company also  operates a  "non-chartered"  branch  affiliate,
First Merchants Bank-Hamilton County with six locations.

The Corporation's  Trust Division,  which operates through First Merchants Bank,
is one of the ten largest trust  departments in Indiana with fiduciary assets in
excess of $1.37 billion dollars at market value through year-end 2001.

First Merchants  Corporation  completed its 26th  consecutive  year of increased
earnings at the end of 2001. In addition,  the Corporation  continues to receive
an A+ rating from Standard & Poor's for its common stock (NASDAQ  symbol FRME).

First Merchants' operating  philosophy is to be customer focused,  value driven,
plan disciplined and managed for achievers from both an employee and shareholder
perspective.

                                Corporate Office
                             200 East Jackson Street
                              Muncie, Indiana 47305

                                  765-747-1500
                         http://www.firstmerchants.com

                                       43

================================================================================

ANNUAL MEETING

================================================================================

First Merchants  Corporation currently provides services through offices located
in Adams,  Delaware,  Fayette,  Hamilton,  Henry,  Howard, Jay, Madison,  Miami,
Wabash, Wayne, Randolph and Union counties in Indiana and Butler county in Ohio.

The Annual Meeting of Stockholders
of First Merchants Corporation
will be held...

Thursday, April 11, 2002 at 3:30 p.m.

Horizon Convention Center
401 South High Street
Muncie, Indiana

STOCK INFORMATION

                                                                             PRICE PER SHARE
    QUARTER                                      HIGH                              LOW                     DIVIDENDS DECLARED
================================================================================================================================
                                         2001             2000            2001             2000           2001              2000
                                      -------------------------        --------------------------    ---------------------------
                                                                                                     
First Quarter  .............          $  24.05         $  25.36        $   19.94        $   18.93    $    .230         $    .209
Second Quarter .............             22.79            21.79            20.71            17.62         .230              .209
Third Quarter ..............             24.75            21.90            20.96            18.33         .230              .219
Fourth Quarter .............             24.97            22.74            22.65            20.71         .230              .219

The table above lists per share  prices and  dividend  payments  during 2001 and
2000. Prices are as reported by the National  Association of Securities Dealers.
Automated Quotation - National Market System.

Numbers rounded to nearest cent when applicable.

Common stock listing

First  Merchants  Corporation  common  stock is traded  over-the-counter  on the
NASDAQ National Market System.  Quotations are carried in many daily papers. The
NASDAQ symbol is FRME (Cusip #320817-10-9). At the close of business on December
31, 2001,  the number of shares  outstanding  was  12,670,307.  There were 2,483
stockholders of record on that date.

General stockholder inquiries

Stockholders and interested investors may obtain information about the
Corporation upon written request or by calling:

Mr. Brian Edwards
Shareholder Relations Officer

First Merchants Corporation
P. O. Box 792
Muncie, Indiana 47308-0792
765-741-7278
1-800-262-4261 Ext. 7278

Stock transfer agent and registrar

First Merchants Bank, N.A.
Corporate Trust Department
P. O. Box 792
Muncie, Indiana 47308-0792
                                       44

================================================================================

STOCK PRICE & DIVIDEND INFORMATION

================================================================================

MARKET MAKERS
The following firms make a market in First Merchants Corporation stock:

Midwest Research First Tennessee
Keefe, Bruyette & Woods, Inc.
Knight Securities, L.P.
Herzog, Heine, Geduld, Inc.
Howe Barnes Investments, Inc.
Sandler O'Neill & Partners
NatCity Investments, Inc.
Sherwood Securities Corp.
Spear, Leeds, & Kellog
Dain Rauscher, Inc.
Stifel, Nicolaus & Company, Inc.

FORM 10-K AND FINANCIAL INFORMATION

First Merchants Corporation, upon request and without charge, will furnish
stockholders, security analysts and investors a copy of Form 10-K filed with the
Securities and Exchange Commission.

The  Securities  and  Exchange  Commission  maintains  a Web site that  contains
reports,  proxy  and  information  statements  and other  information  regarding
registrants  that  file  electronically  with  the  commission,   including  the
Corporation; that address is http://www.sec.gov

Please contact:
Mr. James Thrash
Senior Vice President
and Chief Financial Officer

First Merchants Corporation
P. O. Box 792
Muncie, Indiana 47308-0792

765-747-1390
1-800-262-4261 Ext. 1390

                                       45

                                   EXHIBIT 21
                         SUBSIDIARIES OF THE REGISTRANT

EXHIBIT 21--SUBSIDIARIES OF THE REGISTRANT
- --------------------------------------------------------------------------------

                                                          State of
Name                                                    Incorporation
- ----                                                    -------------

First Merchants Bank, National Association (also doing
  business as First Merchants Bank of Hamilton County)....U.S.

The Madison Community Bank..............................Indiana

First United Bank.......................................Indiana

The Union County National Bank of Liberty.................U.S.

The Randolph County Bank................................Indiana

The First National Bank of Portland.......................U.S.

Decatur Bank & Trust Company.............................Indiana

Frances Slocum Bank & Trust Company......................Indiana

First Merchants Capital Trust I.........................Delaware

First Merchants Capital Trust II........................Delaware

First Merchants Capital Trust III.......................Delaware

First Merchants Insurance Services, Inc.................Indiana

First Merchants Reinsurance Co. Ltd.....................Providencials Turkes and
                                                        Caicos, Island

Indiana Title Insurance Company.........................Indiana

Indiana Title Insurance Company, LLC....................Indiana

                                   EXHIBIT-23
                       CONSENT OF INDEPENDENT ACCOUNTANTS

EXHIBIT 23 - CONSENT OF INDEPENDENT ACCOUNTANTS

We  hereby  consent  to the  incorporation  by  reference  to  the  Registration
Statement on Form S-8,  File Numbers  333-50484,  333-80119 and 333-80117 of our
report dated January 18,2002, on the consolidated  financial statements of First
Merchants Corporation which report is included in the Annual Report on Form 10-K
of First Merchants Corporation.

BKD LLP

Indianapolis, Indiana
March 29, 2002

                                   EXHIBIT-24
                            LIMITED POWER OF ATTORNEY

EXHIBIT 24--LIMITED POWER OF ATTORNEY

KNOW ALL MEN BY THESE  PRESENTS that the  undersigned  directors and officers of
First  Merchants  Corporation,  an Indiana  corporation,  hereby  constitute and
appoint James L. Thrash, the true and lawful agent and  attorney-in-fact  of the
undersigned with full power and authority in said agent and  attorney-in-fact to
sign for the undersigned and in their respective names as directors and officers
of the  Corporation  the  Form  10-K of the  Corporation  to be  filed  with the
Securities  and Exchange  Commission,  Washington,  D.C.,  under the  Securities
Exchange Act of 1934,  as amended,  and to sign any amendment to such Form 10-K,
hereby   ratifying   and   confirming   all  acts   taken  by  such   agent  and
attorney-in-fact, as herein authorized.

Dated: February 12, 2002

/s/ Michael L. Cox                          /s/ Stefan S. Anderson
- --------------------------------------      ------------------------------------
    Michael L. Cox  President and               Stefan S. Anderson      Director
                    Chief Executive
                    Officer (Principal
                    Executive Officer)

/s/James L. Thrash                          /s/ Roger M. Arwood
- --------------------------------------      ------------------------------------
   James L. Thrash  Sr. Vice President          Roger M. Arwood         Director
                    and Chief Financial
                    Officer (Principal
                    Financial and
                    Accounting Officer)
                                            ------------------------------------
                                                James F. Ault           Director

                                            /s/ Jerry M. Ault
                                            ------------------------------------
                                                Jerry M. Ault           Director

                                            /s/ Dennis A. Bieberich
                                            ------------------------------------
                                                Dennis A. Bieberich     Director

                                            ------------------------------------
                                                Blaine M. Brownell      Director

                                            ------------------------------------
                                                Frank A. Bracken        Director

                                            /s/ Thomas B. Clark
                                            ------------------------------------
                                                Thomas B. Clark         Director

                                            /s/ Michael L. Cox
                                            ------------------------------------
                                                Michael L. Cox          Director

                                            /s/ Barry J. Hudson
                                            ------------------------------------
                                                Barry J. Hudson         Director

                                            /s/ Norman M. Johnson
                                            ------------------------------------
                                                Norman M. Johnson       Director

                                            ------------------------------------
                                                George A. Sissel        Director

                                            ------------------------------------
                                                Robert M. Smitson       Director

                                            /s/ Dr. John E. Worthen
                                            ------------------------------------
                                                Dr. John E. Worthen     Director

                                  EXHIBIT-99.1
                     ACCOUNTANT'S REPORT FOR FIRST MERCHANTS
                          EMPLOYEE STOCK PURCHASE PLAN

EXHIBIT 99.1--FINANCIAL STATEMENTS AND INDEPENDENT ACCOUNTANT'S REPORT FOR
              FIRST MERCHANTS CORPORATION EMPLOYEE STOCK PURCHASE PLAN
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The annual finanial statements and independent accountant's report thereon for
First Merchants Corporation Employee Stock Purchase Plan for the year ending
December 31, 2001, will be filed as an amendment to the 2001 Annual Report on
Form 10-K.