FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

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

                         SECURITIES EXCHANGE ACT OF 1934


        For Quarter Ended September 30, 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 of organization) Identification No.)

                 200 East Jackson Street - Muncie, IN 47305-2814

                  (Address of principal executive office) (Zip
                                     code)

                                 (765) 747-1500

              (Registrant's telephone number, including area code)

                                 Not Applicable


               (Former name former address and former fiscal year,
                         if changed since last report.)



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

         As of October 31, 2001, there were 12,676,707 outstanding common
shares, without par value, of the registrant.

         This report including the cover page contains a total of 20 pages.


<PAGE>



                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

                                      INDEX

                                                                        Page No.

PART I.           Financial information:

 Item 1.          Financial Statements:

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

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

                  Consolidated Condensed Statement of
                  Comprehensive Income.........................................5

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

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

                  Notes to Consolidated Condensed Financial Statements.........7

 Item 2.          Management's Discussion and Analysis of Financial
                  Condition and Results of Operations.........................13

 Item 3.          Quantitative and Qualitative Disclosures About
                  Market Risk.................................................19

PART II. Other Information:

 Item 4.          Submission of Matters to a Vote of Security Holders.........20

 Item 6.          Exhibits and Reports of Form 8-K............................20

Signatures        ............................................................21


<PAGE>
<TABLE>
<CAPTION>

                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q
                          PART I. FINANCIAL INFORMATION
                          Item 1. FINANCIAL STATEMENTS
                      CONSOLIDATED CONDENSED BALANCE SHEET
                             (Dollars in thousands)
                                   (Unaudited)
                                                                                  September 30,       December 31,
                                                                                      2001                2000
                                                                                   ----------         -----------
<S>                                                                                 <C>                <C>
   ASSETS:
     Cash and due from banks....................................................   $   46,149         $    52,563
     Federal funds sold.........................................................       18,525              14,900
                                                                                   -----------         -----------
       Cash and cash equivalents................................................       64,674              67,463
     Interest-bearing deposits..................................................        3,119                 883
     Investment securities available for sale...................................      241,080             295,730
     Investment Securities held to maturity.....................................        8,942              12,233
     Mortgage loans held for sale...............................................          830
     Loans, net of allowance for loan losses of $14,907 and $12,454.............    1,346,731           1,163,132
     Premises and equipment.....................................................       27,184              23,868
     Federal Reserve and Federal Home Loan Bank Stock...........................        7,856               7,185
     Interest receivable........................................................       13,556              13,135
     Core deposit intangibles and goodwill......................................       32,795              21,055
     Cash surrender value of life insurance.....................................        6,387               6,312
     Other assets...............................................................        8,517              10,067
                                                                                   -----------         -----------
         Total assets...........................................................   $1,761,671          $1,621,063
                                                                                   ===========         ===========
   LIABILITIES:
     Deposits:
       Noninterest-bearing......................................................   $  163,689          $  157,053
       Interest-bearing.........................................................    1,224,881           1,131,246
                                                                                   -----------         -----------
         Total deposits.........................................................    1,388,570           1,288,299
     Borrowings.................................................................      182,455             163,581
     Interest payable...........................................................        6,593               6,335
     Other liabilities..........................................................        6,468               6,785
                                                                                   -----------         -----------
         Total liabilities......................................................    1,584,086           1,465,000
   STOCKHOLDERS' EQUITY:
     Perferred stock, no-par value:
       Authorized and unissued-500,000 shares...................................
     Common Stock, $.125 stated value:
       Authorized --- 50,000,000 shares.........................................
       Issued and outstanding - 12,675,203 and 12,192,319 shares................        1,584               1,524
     Additional paid-in capital.................................................       50,817              41,592
     Retained earnings..    ....................................................      121,711             113,244
     Accumulated other comprehensive income (loss)..............................        3,473                (297)
                                                                                   -----------         -----------
         Total stockholders' equity.............................................      177,585             156,063
                                                                                   -----------         -----------
         Total liabilities and stockholders' equity.............................   $1,761,671          $1,621,063
                                                                                   ===========         ===========
   See notes to consolidated condensed financial statements.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                           FIRST MERCHANTS CORPORATION

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

                                                                                       Three Months Ended        Nine Months Ended
                                                                                          September 30             September 30
                                                                                       -------------------      -------------------
                                                                                        2001         2000        2001         2000
                                                                                       -------     -------      -------     -------
<S>                                                                                    <C>         <C>          <C>         <C>
Interest Income:
  Loans receivable
    Taxable.....................................................................       $27,152     $25,522      $77,322     $69,870
    Tax exempt..................................................................           106          76          310         224
  Investment securities:
    Taxable.....................................................................         3,027       3,623        9,343      11,001
    Tax exempt..................................................................         1,032       1,175        3,083       3,444
  Federal funds sold............................................................           109          28          404         276
  Deposits with financial institutions..........................................            12          28           32          61
  Federal Reserve and Federal Home Loan Bank stock..............................           120         164          419         411
                                                                                       -------     -------      -------     -------
      Total interest income.....................................................        31,558      30,616       90,913      85,287
                                                                                       -------     -------      -------     -------
Interest expense:
  Deposits......................................................................        11,670      13,028       35,817      35,713
  Securities sold under repurchase agreements...................................           817       1,129        2,665       3,181
  Federal Home Loan Bank advances...............................................         1,715       1,691        4,836       3,662
  Other Borrowings..............................................................            94         354          373       1,254
                                                                                       -------     -------      -------     -------
      Total interest expense....................................................        14,296      16,202       43,691      43,810
                                                                                       -------     -------      -------     -------
Net Interest Income.............................................................        17,262      14,414       47,222      41,477
Provision for loan losses.......................................................         1,023         603        2,371       1,747
                                                                                       -------     -------      -------     -------
Net Interest Income After Provision for Loan Losses.............................        16,239      13,811       44,851      39,730
                                                                                       -------     -------      -------     -------

Net realized gains (losses) on available-for-sale securities....................          (167)          5         (167)       (180)
Other Income....................................................................         4,798       4,374       13,809      12,363
                                                                                       -------     -------      -------     -------
Total other income..............................................................         4,631       4,379       13,642      12,183
Total other expenses............................................................        11,980      10,193       32,959      29,481
                                                                                       -------     -------      -------     -------
Income before income tax........................................................         8,890       7,997       25,234      22,432
Income tax expense..............................................................         2,870       2,722        8,834       7,334
                                                                                       -------     -------      -------     -------
Net Income......................................................................       $ 6,020     $ 5,275      $16,700     $15,098
                                                                                       =======     =======      =======     =======

Per share:

  Net Income:(1)
    Diluted Cash Earnings.......................................................       $   .49     $   .45      $ 1.42      $  1.31
    Basic Net Income............................................................           .48         .43        1.36         1.28
    Diluted Net Income..........................................................           .47         .43        1.35         1.27
    Cash Dividends Paid.........................................................           .23         .22         .67          .64

(1) Prior period per share earnings have been restated for the 5% stock dividend
    paid in September, 2001.

See notes to consolidated condensed financial statements.

</TABLE>

<PAGE>

<TABLE>
<CAPTION>


                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q
             CONSOLIDATED CONDENSED STATEMENT OF COMPREHENSIVE INCOME
                          (Dollar amounts in thousands)
                                   (Unaudited)

                                                                                   Three Months Ended           Nine Months Ended
                                                                                      September 30                 September 30
                                                                                 ----------------------       ----------------------
                                                                                    2001         2000            2001         2000
                                                                                 ---------    ---------       ---------    ---------
<S>                                                                              <C>          <C>             <C>          <C>
Net Income...................................................................... $  6,020     $  5,275        $ 16,700     $ 15,098

Other comprehensive income(loss), net of tax:
  Unrealized (losses) gains on securities available for sale:
    Unrealized holding (losses) gains arising during the period, net of income
        tax (expense) benefit of $(1,219), $(1,973), $(2,448), and $(715).......    1,827        2,960           3,670        1,072
    Less:  Reclassification adjustment for gains (losses) included in net
        income, net of income tax (expense) benefit of $66, $(2), $66 and $72...     (101)           3            (101)        (108)
                                                                                 ---------    ---------       ---------    ---------
                                                                                    1,928        2,957           3,771        1,180
                                                                                 ---------    ---------       ---------    ---------
Comprehensive income............................................................ $  7,948     $  8,232        $ 20,471     $ 16,278
                                                                                 =========    =========       =========    =========
</TABLE>

<TABLE>
<CAPTION>



                           FIRST MERCHANTS CORPORATION

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


                                                                      2001         2000
                                                                   ---------    ---------
<S>                                                                <C>          <C>
Balances, January 1 ............................................   $ 156,063    $ 126,296

Net income .....................................................      16,700       15,098

Cash dividends .................................................      (8,233)      (7,644)

Other comprehensive income (loss), net of tax...................       3,771        1,180

Issuance of stock related to acquisition........................      14,601       21,173

Stock issued under employee benefits plans......................         504          648

Stock issued under dividend reinvestment and stock purchase plan         583          430

Stock options exercised ........................................         176          475

Stock Redeemed .................................................      (6,580)      (4,786)
                                                                   ---------    ---------

Balances, September 30 .........................................   $ 177,585    $ 152,870
                                                                   =========    =========
</TABLE>
   See notes to consolidated condensed financial statements



<PAGE>



                           FIRST MERCHANTS CORPORATION

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

                                                                                               Nine Months Ended
                                                                                                 September 30,
                                                                                      ----------------------------------
                                                                                           2001               2000
                                                                                      ----------------    --------------
<S>                                                                                   <C>                 <C>
Cash Flows From Operating Activities:
  Net income........................................................................  $        16,700     $       15,098
  Adjustments to reconcile net income to net cash provided by operating activities
    Provision for loan losses.......................................................            2,371              1,747
    Depreciation and amortization...................................................            3,430              2,916
    Securities amortization,  net...................................................             (127)                36
    Securities losses, net..........................................................              167                180
    Gains on sale of premises and equipment.........................................              (70)              (105)
    Mortgage loans originated for sale..............................................          (14,285)             1,224
    Proceeds from sales of mortgage loans...........................................           13,455             (1,163)
    Change in interest receivable...................................................              982             (1,043)
    Change in interest payable......................................................             (622)             1,206
    Other adjustments   ............................................................             (981)               200
                                                                                      ----------------    ---------------
      Net cash provided by operating activities.....................................  $        21,020     $       20,296
                                                                                      ----------------    ---------------


Cash Flows From Investing Activities:
  Net change in interest-bearing deposits...........................................           (2,236)               962
  Purchases of
    Securities available for sale...................................................          (15,933)            (8,575)
  Proceeds from maturities of
    Securities available for sale...................................................           82,347             36,292
    Securities held to maturity.....................................................            3,295              4,292
  Proceeds from sales of
    Securities available for sale...................................................              770             12,440
  Net change in loans...............................................................          (51,465)           (76,849)
  Purchase of FHLB stock............................................................              (98)              (716)
  Purchases of premises and equipment...............................................           (1,256)            (3,497)
  Proceeds from sale of fixed assets................................................              162                448
  Net cash received in acquisition..................................................            5,261                280
                                                                                      ----------------    ---------------
    Net cash provided (used) by investing activities................................           20,847            (34,923)
                                                                                      ----------------    ---------------


</TABLE>

(continued)
<PAGE>



                           FIRST MERCHANTS CORPORATION

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

                                                                                         Nine Months Ended
                                                                                           September 30,
                                                                                -----------------------------------
                                                                                     2001                2000
                                                                                ----------------    ---------------
<S>                                                                             <C>                 <C>
Cash Flows From Financing Activities:
  Net change in
    Demand and savings deposits...........................................      $        (21,959)   $     (12,739)
    Certificates of deposit and other time deposits.......................               (28,021)            (399)
    Borrowings............................................................                18,874           (1,428)
  Cash dividends..........................................................                (8,233)          (7,644)
  Stock issued under employee benefit plans...............................                   504              648
  Stock issued under dividend reinvestment and stock purchase plan........                   583              430
  Stock options exercised.................................................                   176              475
  Stock repurchased.......................................................                (6,580)          (4,786)
                                                                                ----------------    --------------
    Net cash provided (used) by financing activities......................               (44,656)         (25,443)
                                                                                ----------------    --------------
Net Change in Cash and Cash Equivalents...................................                (2,789)         (40,070)
Cash and Cash Equivalents, January 1......................................                67,463           84,293
                                                                                ----------------    --------------
Cash and Cash Equivalents, September 30...................................      $         64,674    $      44,223
                                                                                ================    ==============

</TABLE>

See notes to consolidated condensed financial statements.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 1.  General

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

NOTE 2.  Accounting Matters

Accounting for derivative  instruments and hedging activities - During 1998, the
Financial Accounting Standards Board (FASB) issued Statement No. 133, Accounting
for Derivative  Instruments  and Hedging  Activities.  This  Statement  requires
companies to record derivatives on the balance sheet at their fair market value.
Statement No. 133 also  acknowledges that the method of recording a gain or loss
depends on the use of the derivative.

The new Statement applies to all entities. If hedge accounting is elected by the
entity, the method of assessing the effectiveness of the hedging derivative and
the measurement approach of determining the hedge's ineffectiveness must be
established at the inception of the hedge.

Statement No. 133 amends Statement No. 52 and supercedes  Statements No. 80, 105
and 119. Statement No. 107 is amended to include the disclosure provisions about
the  concentrations  of credit risk from  Statement  No. 105.  Several  Emerging
Issues Task Force consensuses are also changed or nullified by the provisions of
Statement No. 133.

Statement No. 133 was originally  effective for all fiscal years beginning after
June 15, 2000 and is not expected to have a material impact on the operations of
the  Corporation.  The Statement may not be applied  retroactively  to financial
statements of prior periods.

Statement No. 133 was adopted on July 1, 2000 and did not have a material
impact on the operations of the Corporation.

<PAGE>
                           FIRST MERCHANTS CORPORATION

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

NOTE 2.  Accounting Matters (continued)

Impact of New Accounting Standards

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.

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  will adopt 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 $26,457,000 at September 30, 2001 and  amortization  of $225,000
and $748,000 for the three and nine months ended September 30, 2001.

<PAGE>


                          FIRST MERCHANTS CORPORATION

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

NOTE 3.  Business Combinations

On July 1, 2001, the Corporation  acquired Francor Financial,  Inc., the holding
company of Frances  Slocum  Bank & Trust  Company.  Frances  Slocum Bank & Trust
Company is a state chartered bank with branches located in eastcentral  Indiana.
Francor Financial, Inc. was merged into the Corporation, and Frances Slocum Bank
& Trust  Company  will  maintain  its state  charter  as a  subsidiary  of First
Merchants Corporation.

The  combination  was  accounted  for under the purchase  method of  accounting.
Francor Financial Inc.'s results of operations are included in the Corporation's
consolidated  income statement  beginning July 1, 2001.  Shareholders of Francor
Financial,  Inc.  on July 1, 2001,  had the right to convert  their  shares into
either  4.32 shares of the  Corporation's  common  stock,  or 2.59 shares of the
Corporation's  common  stock  and  $48.70  in cash,  or  $121.74  in  cash.  The
Corporation  issued  677,972 shares of its common stock at a cost of $21.536 per
share and  $14,490,985 in cash to complete the  transaction.  The purchase had a
recorded   acquisition   cost  of   $29,454,000   and  goodwill  of  $7,907,000.
Additionally,  core deposit intangibles  totaling $4,804,000 were recognized and
will be amortized over 10 years using the 150% declining balance method.

All assets and liabilities  were recorded at fair values as of July 1, 2001. The
purchase  accounting  adjustments  will  be  amortized  over  the  life  of  the
respective asset or liability.

The following proforma discloses 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.
<TABLE>

                                                         Nine Months Ended
                                                           September 30,

                                                        2001           2000
                                                    -----------    -----------
<S>                                                 <C>            <C>
      Net Interest Income:........................  $   50,213     $   46,226

      Net Income:.................................      16,045         16,338

      Per share - combined:
        Diluted Cash Earnings ....................  $     1.32     $     1.34
        Basic Net Income..........................        1.26           1.31
        Diluted Net Income........................        1.25           1.30
</TABLE>

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 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 Lafayette
Bancorporation, and appropriate regulatory agencies. The Corporation anticipates
amortizing  core deposit  intangibles  over ten years.  As of December 31, 2000,
Lafayette   Bancorporation   had  total  assets  and  shareholders'   equity  of
$741,147,000 and $52,801,000 respectively.

<PAGE>

                           FIRST MERCHANTS CORPORATION

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

NOTE 4.  Investment Securities
                                                        Gross       Gross
                                           Amortized  Unrealized  Unrealized    Fair
                                              Cost       Gains      Losses     Value
<S>                                        <C>         <C>        <C>        <C>

Available for sale at September 30, 2001
  U.S. Treasury ........................   $  1,124   $      6              $  1,130
  Federal agencies......................     28,221        880   $    (13)    29,088
  State and municipal ..................     78,830      2,208        (43)    80,995
  Mortgage-backed securities ...........    112,313      2,213               114,526
  Other asset-backed securities.........     10,275        226                10,501
  Corporate obligations.................      3,500        133                 3,633
  Marketable equity securities..........      1,316                  (109)     1,207
                                           --------   --------   --------   --------
      Total available for sale .........    235,579      5,666       (165)   241,080
                                           --------   --------   --------   --------


Held to maturity at September 30, 2001
  State and municipal...................      8,688        198        (29)     8,857
  Mortgage-backed securities............        254                              254
                                           --------   --------   --------   --------
      Total held to maturity ...........      8,942        198        (29)     9,111
                                           --------   --------   --------   --------
      Total investment securities ......   $244,521   $  5,864   $   (194)  $250,191
                                           ========   ========   ========   ========


</TABLE>


<PAGE>



                           FIRST MERCHANTS CORPORATION

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

<TABLE>

                                                       Gross      Gross
                                           Amortized Unrealized Unrealized     Fair
                                             Cost      Gains      Losses      Value
<S>                                        <C>         <C>        <C>        <C>
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
                                           ========    ========   ========   ========


</TABLE>


<PAGE>



                           FIRST MERCHANTS CORPORATION

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

NOTE 5.  Loans and Allowance
<TABLE>

                                                                                   September 30,  December 31,
                                                                                        2001         2000
                                                                                        ----         ----
<S>                                                                                <C>            <C>
Loans:
  Commercial and industrial loans ..............................................   $   290,838    $   258,405
  Agricultural production financing and other loans to farmers .................        34,786         24,547
  Real estate loans:
    Construction ...............................................................        57,949         45,412
    Commercial and farmland ....................................................       220,624        167,317
    Residential ................................................................       530,653        466,660
  Individuals' loans for household and other personal expenditures .............       206,492        201,629
  Tax-exempt loans .............................................................         7,912          6,093
  Other loans ..................................................................        12,384          5,523
                                                                                   -----------    -----------
      Total.....................................................................   $ 1,361,638    $ 1,175,586
                                                                                   ===========    ===========

                                                                                        Nine Months Ended
                                                                                           September 30,

                                                                                       2001           2000
                                                                                   -----------    -----------
Allowance for loan losses:
  Balances, January 1 ..........................................................   $    12,454    $    10,128
  Allowance acquired in acquisition.............................................         2,085          1,413
  Provision for losses .........................................................         2,371          1,747
  Recoveries on loans ..........................................................           464            461
  Loans charged off ............................................................        (2,467)        (1,517)
                                                                                   -----------    -----------
  Balances, September 30........................................................   $    14,907    $    12,232
                                                                                   ===========    ===========
</TABLE>
NOTE 6.  Net Income Per Share
<TABLE>

                                                                     Three Months Ended September 30,
                                                           2001                                          2000
                                        -------------------------------------------    ------------------------------------------
                                                        Weighted-                                     Weighted-
                                                         Average        Per Share                      Average         Per Share
                                         Income           Shares         Amount         Income          Shares          Amount
                                         ------           ------         ------         ------          ------          ------
<S>                                      <C>            <C>             <C>             <C>            <C>             <C>
Basic net income per share:
  Net income available to
    common stockholders................. $    6,020        12,711,385    $     .48      $   5,275      12,273,134       $    .43
                                                                         ==========                                    ==========
Effect of dilutive stock options........                       92,632                                      75,937
                                         ----------       ------------                  ---------     ------------
Diluted net income per share:
  Net income available to
    common stockholders
    and assumed conversions............. $    6,020        12,804,017    $     .47       $   5,275     12,349,071       $    .43
                                         ==========       ============   ==========     ==========    =============    ==========

<PAGE>

</TABLE>
<TABLE>
<CAPTION>

                                                                    Nine Months Ended September 30,
                                                           2001                                          2000
                                        -------------------------------------------    ------------------------------------------
                                                        Weighted-                                     Weighted-
                                                         Average        Per Share                      Average         Per Share
                                         Income           Shares         Amount         Income          Shares          Amount
                                         ------           ------         ------         ------          ------          ------
<S>                                      <C>            <C>             <C>             <C>            <C>             <C>
Basic net income per share:
  Net income available to
    common stockholders................. $   16,700        12,306,708    $    1.36      $  15,098      11,790,275       $   1.28
                                                                         ==========                                    ==========
Effect of dilutive stock options........                       83,434                                      82,117
                                         ----------       ------------                  ---------     ------------
Diluted net income per share:
  Net income available to
    common stockholders
    and assumed conversions............. $   16,700        12,390,142    $    1.35      $  15,098      11,872,392       $   1.27
                                         ==========       ============   ==========     ==========    =============    ==========


</TABLE>


                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

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

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

Forward-Looking Statements

         Congress passed the Private Securities Litigation Report Act of 1995 to
encourage corporations to provide investors with information about the company's
anticipated future financial performance, goals, and strategies. The act
anticipated future financial performance, goals, and strategies. The act
provides a safe harbor for such disclosure, or in other words, protection from
unwarranted litigation if actual results are not the same as management's
expectations.

         First Merchants Corporation desires to provide its shareholders with
sound information about past performance and future trends. Consequently, this
Quarterly Report, including Management's Discussion and Analysis of Financial
Condition and Results of Operations, contains forward-looking statements that
are subject to numerous assumptions, risks, and uncertainties. Actual results
could differ materially from those contained in or implied by First Merchants
Corporation's statements due to a variety of factors including: changes in
economic conditions; movements in interest rates; competitive pressures on
product pricing and services; success and timing of business strategies; the
successful integration of acquired businesses; the nature and extent of
governmental actions and reform; and extended disruption of vital
infrastructure. The management of First Merchants Corporation encourages readers
of this report to understand forward-looking statements to be strategic
objectives rather than absolute targets of future performance.

Results of Operations

         Net income for the three months ended September 30, 2001, was
$6,020,000,  compared to $5,275,000  earned in the same period of 2000.  Diluted
earnings per share were $.47 an increase of $.04 over the $.43  reported for the
first quarter 2000.

        Net income for the nine months ended September 30, 2001, was
$16,700,000, compared to $15,098,000 during the same period in 2000.  Diluted
earnings per share were $1.35, a 6.3% increase over $1.27 in 2000.

         Cash basis earnings per share for the quarter increased 8.9% to $.49
up $.04 from $.45.  Year to date cash basis earnings per share increased 8.4%
to $1.42 from $1.31 in 2000.

         Annualized returns on average assets and average shareholder's equity
for nine months ended September 30, 2001 were 1.35 percent and 13.66 percent,
respectively, compared with 1.32 percent and 14.61 percent for the same period
of 2000.


<PAGE>


                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

Capital

         The Corporation's capital strength continues to exceed regulatory
minimums and peer group averages. Management believes that strong capital is a
distinct advantage in the competitive environment in which the Corporation
operates and will provide a solid foundation for continued growth.

         The Corporation's Tier I capital to average assets ratio was 8.7
percent at year-end 2000 and 8.1 percent at September 30, 2001. At September 30,
2001, the Corporation had a Tier I risk-based  capital ratio of 11.0 percent and
total risk-based  capital ratio of 12.1 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. Banks with Tier I risk-based capital ratios of 6.0
percent and total risk-based capital ratios of 10.0 percent are considered "well
capitalized."  All of the Banks remain "well  capitalized"  as of September  30,
2001.

Asset Quality/Provision for Loan Losses

         The Corporation's asset quality and loan loss experience have
consistently been superior to that of its peer group, as summarized on the
following page. 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 cannot be specifically identified.

         The following table summarizes the risk elements for the Corporation.
<TABLE>

--------------------------------------------------------------------------------
(Dollars in Thousands)                       September 30,        December 31,
                                                 2001                 2000
--------------------------------------------------------------------------------
<S>                                             <C>                  <C>
Non-accrual loans ..................            $3,330               $2,370
Loans contractually past due 90 days
  Or more other than nonaccruing
                                                 2,978                2,465
Restructured loans .................             2,886                3,085
                                                ------               ------
              Total ................            $9,194               $7,920
                                                ======               ======

--------------------------------------------------------------------------------
</TABLE>

         At September 30, 2001, non-performing loans totaled $9,194,000, an
increase of $1,274,000 from December 31, 2000.

         At December 31, 2000,  impaired loans totaled  $14,839,000.  An
allowance  for losses was not  deemed  necessary  for  impaired  loans  totaling
$6,977,000,  but an allowance  of  $2,253,000  was  recorded  for the  remaining
balance of impaired loans of $7,862,000.  The average  balance of impaired loans
for 2000 was $15,053,000.

         At September 30, 2001, the allowance for loan losses increased by
$2,453,000, to $14,907,000, up from year end 2000.  The increase was primarily
due to the allowance acquired in the acquisition of Francor Financial, Inc.,
which totaled $2,085,000.  As a percent of loans, the allowance was 1.09
percent, up from 1.06 percent at year end 2000.


<PAGE>
                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

        For the nine months ended September 30, 2001, the provision totaled
$2,371,000. The provision was $624,000 more than the $1,747,000 provision from
the comparable period in 2000, primarily due to the general downturn in the
economy and an increase in non-performing loans. Net charge offs amounted to
$2,003,000 during the nine months ended September 30, 2001.

        The third quarter 2001 provision of $1,023,000 increased $420,000 from
$603,000 for the same quarter in 2000, primarily due to the general downturn in
the economy and an increase in non-performing loans.  Net charge offs amounted
to $706,000 during the quarter.

<TABLE>

                                                               Nine Months Ended
                                                                 September 30,
                                                               ------------------
                                                               ------------------
                                                              2001           2000
                                                              ----           ----
                                                            (Dollars in Thousands)
<S>                                                          <C>           <C>
  Balance at beginning of period .........................   $12,454       $10,128
                                                             -------       -------
  Allowance acquired in acquisition.......................     2,085         1,413

  Chargeoffs .............................................    (2,467)       (1,517)
  Recoveries .............................................       464           461
                                                             -------       -------
  Net chargeoffs .........................................    (2,003)       (1,056)
  Provision for loan losses ..............................     2,371         1,747
                                                             -------       -------
  Balance at end of period................................   $14,907       $12,232
                                                             =======       =======

Ratio of net chargeoffs during the period to average loans
  outstanding during the period - annualized..............       .21%          .13%


</TABLE>

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 ensure that changes in interest rates will not adversely
affect earnings. Decisions regarding investment and the pricing of loan and
deposit products are made after analysis of reports designed to measure
liquidity, rate sensitivity, the Corporation's exposure to changes in net
interest income given various rate scenarios, and the economic and competitive
environments.

         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.

         The Corporation's liquidity and interest sensitivity position at
March 31, 2001, remained adequate to meet the Corporation's primary goal of
achieving optimum interest margins while avoiding undue interest rate risk.

         First Merchants Corporation believes the March 31, 2001, data, on the
following page, materially reflects the Corporation's interest sensitivity
position on September 30, 2001.  This data is presented rather than September
30, 2001 information, as the Corporation is currently in process of converting
and revising its software utilized for modeling and reporting purposes.  Upon
completion of this process, the September 30, 2001 results for the flat, rising
(rate shock), and falling (rate shock) interest scenarios will be presented in
an amendment to the September 30, 2001, Form 10-Q filing.

<PAGE>

                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

         The Corporation places its greatest credence in net interest income
simulation modeling. The GAP/Interest Rate Sensitivity Report is known 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.

         The Corporation's asset liability process monitors simulated net
interest income under three separate interest rate scenarios; rising (rate
shock), falling (rate shock) and base case (flat rates). Net Interest income is
simulated over a 12-month horizon. By policy, the difference between the best
performing and the worst performing rate scenarios are not allowed to show a
variance greater than 5 percent.

         Assumed interest rate changes are simulated to move incrementally over
12 months.  The total rate movement (beginning point minus ending point) to
noteworthly interest rate indexes are as follows:

                                        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-Note                       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 flat, rising (rate shock), and falling (rate shock)
interest scenarios are listed below. The net interest income shown represents
cumulative net interest income over a 12-month time horizon. Balance sheet
assumptions are the same under all scenarios:
<TABLE>
                                                            Base Case
                                                            Flat Rates              Rising               Falling
     -----------------------------------------------------------------------------------------------------------
<S>                                                           <C>                   <C>                  <C>

     Net Interest Income (Dollars in Thousands)               $61,027               $59,570              $60,376
     Change vs. Base Case                                                            (1,457)                (651)
     Percent Change                                                                   (2.39)%              (1.07)%
     Policy Limitation                                                                (5.00)%              (5.00)%

</TABLE>
                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

Earning Assets

         The following table presents the earning asset mix as of September 30,
2001, and December 31, 2000, and December 31, 1999.

         Loans grew by over $186 million from December 31, 2000 to
September 30, 2001, which included $134.5 million of loans acquired as part of
the Francor Financial, Inc. acquisition.  Investment securities declined by
$57.9 million during the same period. Commercial and industrial loans increased
by more than $32 million, while individuals' loans for household and personal
expenditures increased by nearly $4.9 million.
<TABLE>
------------------------------------------------------------------------------------------------------------------------
EARNING ASSETS
(Dollars in Millions)                                           September 30,          December 31,        December 31,
                                                                   2001                  2000                 1999
------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>                   <C>                  <C>
Federal funds sold and interest-bearing deposits               $    21.6             $     15.8           $     27.1

Investment securities available for sale .......                   241.1                  295.7                329.7

Investment securities held to maturity .........                     8.9                   12.2                 14.3

Mortgage loans held for sale ...................                      .8

Loans ..........................................                 1,361.6                1,175.6                998.9

Federal Reserve and Federal Home Loan Bank stock                     7.9                    7.2                  5.8
                                                               ----------            ----------           ----------

                     Total .....................               $ 1,641.9             $  1,506.5           $  1,375.8
                                                               ==========            ==========           ==========
</TABLE>
<PAGE>

                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

Net Interest Income

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

         The table below presents the Corporation's asset yields, interest
expense, and net interest income as a percent of average earning assets for the
nine months ended September 30, 2001 and 2000.

         Annualized net interest income (FTE) for the nine months ended
September 30, 2001 increased by  $7,472,000, or 12.9 percent over the same
period in 2000, due to an increase in average earning assets of over $109
million.

<TABLE>

--------------------------- ------------------- -------------------- -------------------- -------------- --------------------
(Dollars in Thousands)
                             Interest Income                         Net Interest Income                     Annualized
                            (FTE) as a Percent   Interest Expense    (FTE) as a Percent                  Net Interest Income
                                of Average         as a Percent          of Average          Average             On a
                              Earning Assets        of Average         Earning Assets        Earning        Fully Taxable
                                                  Earning Assets                             Assets        Equivalent Basis
--------------------------- ------------------- -------------------- -------------------- -------------- --------------------
For the three months
  Ended September 30,
<S>                               <C>                  <C>                  <C>            <C>                 <C>
           2001                   7.79%                3.46%                4.33%          $1,652,318          $71,526

           2000                   8.20%                4.24%                3.96%          $1,527,890          $60,486

-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
-------------------------- ------------------- -------------------- -------------------- -------------- ---------------------
(Dollars in Thousands)
                             Interest Income                         Net Interest Income                     Annualized
                            (FTE) as a Percent   Interest Expense    (FTE) as a Percent                  Net Interest Income
                                of Average         as a Percent          of Average          Average             On a
                              Earning Assets        of Average         Earning Assets        Earning        Fully Taxable
                                                  Earning Assets                             Assets        Equivalent Basis
-------------------------- ------------------- -------------------- -------------------- -------------- ---------------------
For the nine months
 Ended September30,
<S>                               <C>                  <C>                  <C>            <C>                 <C>
           2001                   8.00%                3.77%                4.23%          $1,545,820          $65,408

           2000                   8.10%                4.07%                4.03%          $1,436,429          $57,936

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.
-----------------------------------------------------------------------------------------------------------------------------

</TABLE>

<PAGE>

                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q
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 the third quarter of 2001 exceeded the same quarter in
the prior year by $424,000, or 9.7 percent.

Two major areas account for most of the increase:

1.       Service charges on deposit accounts increased $265,000 or 21.4 percent
         due to increased number of accounts and price adjustments.

2.       Gains on sale of mortgage loans increased by $240,000 due to declining
         interest rates and increased mortgage volume.

        Other income in the first nine months of 2001 exceeded the same period
in the prior year by $1,446,000, or 11.7 percent.

Three major areas account for most of the increase:

1.       Service charges on deposit accounts increased $618,000 or 17.7 percent
         due to increased number of accounts and price adjustments.

2.       Revenues from fiduciary activities increased $366,000 or 9.8 percent
         due primarily to increased sales efforts of First Merchants Insurance
         Services, Inc.

3.       Gains on sale of mortgage loans increased by $592,000 due to declining
         interest rates and increased mortgage volume.

Other Expense

         Total other expenses represent non-interest operating expenses of the
Corporation. Other expense during the third quarter of 2001 exceeded the same
period of the prior year by $1,787,000, or 17.5 percent.

Three major areas account for most of the increase:

1.       Salaries  and benefit expense grew  $971,000 or 17.7 percent,  due to
         normal salary increases and staff additions.

2.       Processing expense increased by $123,000 or 17.8 percent, due to an
         increased volume of activity.

3.       Other outside services expense increased by $114,000, primarily
         attributed to an increased use of such services.

        Total other expense during the first nine months in 2001 exceeded the
same period of the prior year by $3,478,000, or 11.8 percent.

Three major areas account for most of the increase:

1.       Salaries  and benefit expense grew  $1,971,000 or 12.2 percent,  due to
         normal salary increases and staff additions.

2.       Goodwill amortization increased by $604,000, due to utilization of the
         purchase method of accounting for the Corporation's June 1, 2000
         acquisition of Decatur Bank & Trust Company.

3.       Equipment expense grew $265,000 or 23.2%, due to decisions made to
         maintain and repair equipment items, rather than purchasing new
         equipment.


<PAGE>


                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

Income Taxes

        Income tax expense during the third quarter totaled $2,870,000, an
increase of $148,000 over the $2,722,000 reported in the same quarter of 2000.

         Income tax expense, for the nine months ended September 30, 2001,
increased by $1,500,000 over the same period in 2000.

Other

         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, and that address is (http://www.sec.gov).


Item 3.  Quantitative and Qualitative Disclosures About Market Risk

The information required under this item is included as part of Management's
Discussion and Analysis under the heading Liquidity, Interest Sensitivity, and
Disclosures About Market Risk.



<PAGE>


                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

                           PART II. OTHER INFORMATION

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

         None

Item 6.  Exhibits and Reports on Form 8-K

         None
<PAGE>

                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

                                   SIGNATURES

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

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




Date    11/14/01                           by /s/ Michael L. Cox
    ---------------------------            -------------------------------------
                                           Michael L. Cox
                                           President and Chief Executive Officer



Date    11/14/01                           by /s/ James L. Thrash
    ---------------------------            -------------------------------------
                                           James L. Thrash
                                           Chief Financial & Principal
                                           Accounting Officer



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