FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549



          [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE

                         SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31, 2006

                                       OR
         [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE

                        SECURITIES EXCHANGE ACT OF 1934

               For the Transition Period from _______ to _______

                         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 Street
         Muncie, IN                                                47305-2814

(Address of principal executive offices)                           (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 [ ]

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated  filer, or a  non-accelerated  filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.
(Check one):

Large accelerated filer [ ]   Accelerated filer [X]   Non-accelerated filer [ ]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).  Yes [ ] No [X]

As of April 18, 2006, there were 18,442,576 outstanding common shares, without
par value, of the registrant.



<PAGE>


                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

                                      INDEX

                                                                        Page No.


PART I.  Financial Information:

 Item 1.          Financial Statements:

                  Consolidated Condensed Balance Sheets........................3

                  Consolidated Condensed Statements of Income..................4

                  Consolidated Condensed Statements of
                  Comprehensive Income.........................................5

                  Consolidated Condensed Statements of
                  Stockholders' Equity.........................................6

                  Consolidated Condensed Statements of Cash Flows..............7

                  Notes to Consolidated Condensed Financial Statements.........8

 Item 2.          Management's Discussion and Analysis of Financial
                  Condition and Results of Operations.........................17

 Item 3.          Quantitative and Qualitative Disclosures About
                  Market Risk.................................................27

 Item 4.          Controls and Procedures.....................................27

PART II. Other Information:

 Item 1.          Legal Proceedings...........................................28

 Item 1.A.        Risk Factors................................................28

 Item 2.          Unregistered Sales of Equity
                  Securities and Use of Proceeds..............................28

 Item 3.          Defaults Upon Senior Securities.............................28

 Item 4.          Submission of Matters to a Vote of Security Holders.........28

 Item 5.          Other Information...........................................28

 Item 6.          Exhibits....................................................29

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

 Index to Exhibits............................................................31


                                                                          Page 2
<PAGE>


                           FIRST MERCHANTS CORPORATION

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

                                                                      March 31,   December 31,
                                                                        2006          2005
                                                                   ------------   ------------
                                                                    (Unaudited)
  <S>                                                               <C>            <C>
  ASSETS:
  Cash and due from banks .......................................   $    59,176    $    70,417
  Interest-bearing deposits......................................         9,104          8,748
  Investment securities available for sale ......................       431,190        422,627
  Investment securities held to maturity ........................        10,461         11,639
  Mortgage loans held for sale...................................         5,170          4,910
  Loans, net of allowance for loan losses of $25,623 and $25,188.     2,465,865      2,432,239
  Premises and equipment ........................................        39,029         39,417
  Federal Reserve and Federal Home Loan Bank stock...............        23,421         23,200
  Interest receivable ...........................................        19,035         19,690
  Core deposit intangibles ......................................        16,805         17,567
  Goodwill ......................................................       121,369        121,266
  Cash surrender value of life insurance.........................        43,964         43,579
  Other assets ..................................................        25,346         21,780
                                                                    -----------    -----------
      Total assets ..............................................   $ 3,269,935    $ 3,237,079
                                                                    ===========    ===========
  LIABILITIES:
  Deposits:
    Noninterest-bearing .........................................   $   325,548    $   314,335
    Interest-bearing ............................................     2,120,524      2,068,241
                                                                    -----------    -----------
      Total deposits ............................................     2,446,072      2,382,576
  Borrowings ....................................................       469,002        508,236
  Interest payable ..............................................         6,412          5,874
  Other liabilities..............................................        31,711         26,997
                                                                    -----------    -----------
      Total liabilities .........................................     2,953,197      2,923,683

  COMMITMENTS AND CONTINGENT LIABILITIES

  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 - 18,440,316 and 18,416,714 shares....         2,305          2,302
  Additional paid-in capital ....................................       146,374        145,682
  Retained earnings .............................................       177,975        174,717
  Accumulated other comprehensive loss ..........................        (9,916)        (9,305)
                                                                    -----------    -----------
      Total stockholders' equity ................................       316,738        313,396
                                                                    -----------    -----------
      Total liabilities and stockholders' equity ................   $ 3,269,935    $ 3,237,079
                                                                    ===========    ===========
</TABLE>

  See notes to consolidated condensed financial statements.




                                                                          Page 3
<PAGE>



                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q
                   CONSOLIDATED CONDENSED STATEMENTS OF INCOME
                (Dollars in thousands, except per share amounts)
                                   (Unaudited)
<TABLE>
                                                                   Three Months Ended
                                                                        March 31,
                                                                    2006        2005
<S>                                                               <C>          <C>
Interest Income:
  Loans receivable
    Taxable ...................................................   $ 43,079    $ 36,822
    Tax exempt ................................................        168         134
  Investment securities
    Taxable ...................................................      2,726       2,329
    Tax exempt ................................................      1,647       1,553
  Federal funds sold ..........................................         17          27
  Deposits with financial institutions ........................        114         142
  Federal Reserve and Federal Home Loan Bank stock ............        311         308
                                                                  --------    --------
    Total interest income .....................................     48,062      41,315
                                                                  --------    --------
Interest expense:
  Deposits ....................................................     14,419       9,806
  Borrowings ..................................................      6,054       4,567
                                                                  --------    --------
    Total interest expense ....................................     20,473      14,373
                                                                  --------    --------
Net Interest Income ...........................................     27,589      26,942
Provision for loan losses .....................................      1,726       2,667
                                                                  --------    --------
Net Interest Income After Provision for Loan Losses ...........     25,863      24,275
                                                                  --------    --------

Total other income ............................................      8,597       9,046

Total other expenses:
  Salaries and benefits .......................................     14,392      14,821
  Other expenses ..............................................      9,396       9,410
                                                                  --------    --------
    Total other expenses ......................................     23,788      24,231

Income before income tax ......................................     10,672       9,090
Income tax expense ............................................      3,163       2,523
                                                                  --------    --------
Net Income ....................................................   $  7,509    $  6,567
                                                                  ========    ========


Per share:

    Basic .....................................................   $    .41    $    .35
    Diluted ...................................................        .41         .35
    Dividends .................................................        .23         .23


</TABLE>
See notes to consolidated condensed financial statements.
                                                                          Page 4
<PAGE>


                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q
           CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
                             (Dollars in thousands)
                                   (Unaudited)

<TABLE>
                                                                                   Three Months Ended
                                                                                        March 31
                                                                                 ----------------------
                                                                                    2006         2005
                                                                                 ---------    ---------
<S>                                                                              <C>          <C>
Net Income...................................................................... $  7,509     $  6,567

Other comprehensive income (loss), net of tax:
  Unrealized losses on securities available for sale:
    Unrealized holding losses arising during the period, net of
      income tax benefit of $407, and $2,522 ...................................     (611)      (3,783)
                                                                                 ---------    ---------
Comprehensive income ........................................................... $  6,898     $  2,784
                                                                                 =========    =========

</TABLE>
See notes to consolidated condensed financial statements.







                                                                          Page 5
<PAGE>



                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q
            CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
                             (Dollars in thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                      2006         2005
                                                                   ---------    ---------
<S>                                                                <C>          <C>
Balances, January 1 ............................................   $ 313,396    $ 314,603

Net income .....................................................       7,509        6,567

Cash dividends on common stock .................................      (4,238)      (4,264)

Cash dividends on restricted stock awards ......................         (13)

Other comprehensive income (loss), net of tax...................        (611)      (3,783)

Stock issued under dividend reinvestment and stock purchase plan         291          335

Stock options exercised ........................................         255          757

Tax benefit from stock options exercised .......................          24

Stock redeemed .................................................         (69)      (3,617)

Share-based compensation .......................................         194
                                                                   ---------    ---------

Balances, March 31 .............................................   $ 316,738    $ 310,598
                                                                   =========    =========

</TABLE>
   See notes to consolidated condensed financial statements.
                                                                          Page 6
<PAGE>

                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)
                                   (Unaudited)
<TABLE>

                                                                                             Three Months Ended
                                                                                                  March 31,
                                                                                      ------------------------------------
                                                                                            2006                2005
                                                                                      ----------------    ----------------
<S>                                                                                   <C>                 <C>
Cash Flows From Operating Activities:
  Net income........................................................................  $         7,509     $         6,567
  Adjustments to reconcile net income to net cash provided by operating activities
    Provision for loan losses.......................................................            1,726               2,667
    Depreciation and amortization...................................................            1,323               2,276
    Share-based compensation........................................................              194
    Tax benefits from stock options exercised.......................................              (24)
    Mortgage loans originated for sale..............................................          (28,586)            (12,840)
    Proceeds from sales of mortgage loans...........................................           28,326              13,123
    Change in interest receivable...................................................              655                 712
    Change in interest payable......................................................              538                 885
    Other adjustments...............................................................            2,000               2,111
                                                                                      ----------------    ----------------
      Net cash provided by operating activities.....................................           13,661              15,501
                                                                                      ----------------    ----------------


Cash Flows From Investing Activities:
  Net change in interest-bearing deposits...........................................             (356)             (1,394)
  Purchases of
    Securities available for sale...................................................          (22,781)            (11,654)
  Proceeds from maturities of
    Securities available for sale...................................................           13,282              16,246
    Securities held to maturity.....................................................              949               1,048
  Proceeds from sales of securities available for sale..............................
  Purchase of Federal Reserve and
    Federal Home Loan Bank Stock....................................................             (221)                (25)
  Net change in loans...............................................................          (35,352)             13,225
  Other adjustments.................................................................             (935)               (510)
                                                                                      ----------------    ----------------
      Net cash provided (used) by investing activities..............................          (45,414)             16,936
                                                                                      ----------------    ----------------

Cash Flows From Financing Activities:
  Net change in
    Demand and savings deposits.....................................................          (56,553)            (95,211)
    Certificates of deposit and other time deposits.................................          120,049             139,280
  Borrowings........................................................................           36,150             (49,698)
  Repayment of borrowings...........................................................          (75,384)
  Cash dividends on common stock....................................................           (4,238)             (4,264)
  Cash dividends on restricted stock awards.........................................              (13)
  Stock issued under dividend reinvestment and stock purchase plan..................              291                 335
  Stock options exercised...........................................................              255                 757
  Tax benefit from stock options exercised..........................................               24
  Stock redeemed....................................................................              (69)             (3,617)
                                                                                      ----------------    ----------------
      Net cash provided (used) by financing activities..............................           20,512             (12,418)
                                                                                      ----------------    ----------------
Net Change in Cash and Cash Equivalents.............................................          (11,241)             20,019
Cash and Cash Equivalents, January 1................................................           70,417              69,960
                                                                                      ----------------    ----------------
Cash and Cash Equivalents, March 31.................................................  $        59,176     $        89,979
                                                                                      ================    ================
Additional cash flows information:
  Interest paid ....................................................................  $        19,935     $        13,488
  Income tax paid ..................................................................                                  500

</TABLE>
See notes to consolidated condensed financial statements.
                                                                          Page 7

<PAGE>

                           FIRST MERCHANTS CORPORATION

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

NOTE 1.  General

Financial Statement Preparation

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 as discussed  below within the caption  "Change in
Accounting  Principle".  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.

The consolidated  condensed  balance sheet of the Corporation as of December 31,
2005 has  been  derived  from  the  audited  consolidated  balance  sheet of the
Corporation as of that date. Certain  information and note disclosures  normally
included in the Corporation's annual financial statements prepared in accordance
with accounting  principles  generally  accepted in the United States of America
have  been  condensed  or  omitted.   These  consolidated   condensed  financial
statements  should  be read  in  conjunction  with  the  consolidated  financial
statements  and notes  thereto  included in the  Corporation's  Form 10-K annual
report  filed  with the  Securities  and  Exchange  Commission.  The  results of
operations  for the three month period ended March 31, 2006 are not  necessarily
indicative of the results to be expected for the year.

Change in Accounting Principle

Effective  January 1, 2006,  the  Corporation  adopted  Statement  of  Financial
Accounting  Standards No.  123(R),  Share-Based  Payment ("SFAS  123(R)").  SFAS
123(R) addresses all forms of share-based payment awards, including shares under
employee  stock  purchase  plans,  stock  options,  restricted  stock  and stock
appreciation  rights.  SFAS  123(R)  requires  all  share-based  payments  to be
recognized as expense, based upon their fair values, in the financial statements
over the vesting period of the awards.  The Corporation has elected the modified
prospective application and, as a result, has recorded approximately $194,000 in
compensation  expense  related to vested stock options,  Employee Stock Purchase
Plan options and restricted stock awards,  less estimated  forfeitures,  for the
three month period ended March 31, 2006.

NOTE 2.  Share-Based Compensation

Stock  options  and  restricted  stock  awards  ("RSAs")  have  been  issued  to
directors,  officers and other management employees under the Corporation's 1994
Stock  Option  Plan and The 1999  Long-term  Equity  Incentive  Plan.  The stock
options,  which have a ten year life,  become 100 percent  vested  ranging  from
three months to two years and are fully exercisable when vested. Option exercise
prices equal the Corporation's  common stock closing price on NASDAQ on the date
of grant.  RSAs provide for the issuance of shares of the  Corporation's  common
stock at no cost to the holder and  generally  vest after three years.  The RSAs
vest only if the employee is actively employed by the Corporation on the vesting
date and, therefore, any unvested shares are forfeited.

The  Corporation's  2004 Employee Stock Purchase Plan ("ESPP") provides eligible
employees of the  Corporation  and its  subsidiaries  an opportunity to purchase
shares of common stock of the Corporation  through annual offerings  financed by
payroll  deductions.  The price of the stock to be paid by the employees 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.

SFAS 123(R) requires the Corporation to begin recording  compensation expense in
2006 related to unvested share-based awards outstanding as of December 31, 2005,
by recognizing  the  unamortized  grant date fair value of these awards over the
remaining service periods of those awards, with no change in historical reported
fair values and earnings.  Awards  granted after December 31, 2005 are valued at
fair value in accordance  with provisions of SFAS 123(R) and are recognized on a
straight-line  basis over the  service  periods of each award.  To complete  the
exercise  of vested  stock  options,  RSA's and ESPP  options,  the  Corporation
generally  issues new shares from its  authorized  but unissued  share pool.  At
March 31, 2006,  share-based  compensation  for the three months ended March 31,
2006 totaled  $194,000,  and has been  recognized as a component of salaries and
benefits  expense  in the  accompanying  Consolidated  Condensed  Statements  of
Income.

                                                                          Page 8
<PAGE>
                           FIRST MERCHANTS CORPORATION

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

NOTE 2.  Share-Based Compensation  continued

Prior to  2006,  the  Corporation  accounted  for  share-based  compensation  in
accordance with APB 25 using the intrinsic  value method,  which did not require
that  compensation  expense be recognized for the  Corporation's  stock and ESPP
options;  however,  under  APB  25,  the  Corporation  was  required  to  record
compensation  expense over the vesting period for the value of RSAs granted,  if
any.

The Corporation  provided pro forma  disclosure  amounts in accordance with SFAS
No. 148,  "Accounting for Stock-Based  Compensation - Transition and Disclosure"
(SFAS No.  148),  as if the fair value  method  defined by SFAS No. 123 had been
applied to its share-based  compensation.  The  Corporation's net income and net
income  per share for the three  months  ended  March 31,  2005  would have been
reduced  if  compensation  expense  related to stock and ESPP  options  had been
recorded in the financial statements, based on fair value at the grant dates.

The estimated  fair value of the stock options  granted during 2006 and in prior
years was calculated  using a Black Scholes option pricing model.  The following
summarizes the assumptions used in the 2006 Black Scholes model:

      Risk-free interest rate                              4.59%
      Expected price volatility                           29.84%
      Dividend yield                                       3.54%
      Forfeiture rate                                      4.00%
      Weighted-average expected life, until exercise       5.75 years

The Black Scholes model  incorporates  assumptions to value share-based  awards.
The  risk-free  rate of interest,  for periods equal to the expected life of the
option,  is based on a zero-coupon  U.S.  government  instrument  over a similar
contractual term of the equity instrument. Expected price volatility is based on
historical  volatility  of the  Corporation's  common  stock.  In addition,  the
Corporation  generally  uses  historical  information  to determine the dividend
yield  and  weighted-average  expected  life  of the  options,  until  exercise.
Separate groups of employees that have similar historical exercise behavior with
regard to option exercise timing and forfeiture rates are considered  separately
for valuation and attribution purposes.

Share-based  compensation  expense  recognized  in  the  Consolidated  Condensed
Statements  of  Income  is based on awards  ultimately  expected  to vest and is
reduced for  estimated  forfeitures.  SFAS  123(R)  requires  forfeitures  to be
estimated at the time of grant and revised, if necessary, in subsequent periods,
if actual forfeitures differ from those estimates.  Pre-vesting forfeitures were
estimated  to be  approximately  4 percent for the three  months ended March 31,
2006, based on historical experience. In the Corporation's pro forma disclosures
required under SFAS 123(R) for the periods prior to fiscal 2006, the Corporation
accounted for forfeitures as they occurred.

As a result of adopting SFAS 123(R), net income of the Corporation for the three
months ended March 31, 2006 was $161,000 lower (net of $33,000 in tax benefits),
than if it had continued to account for share-based  compensation  under APB 25.
The impact on both basic and  diluted  earnings  per share for the three  months
ended March 31, 2006 was less than $.01 per share.

                                                                         Page 9
<PAGE>

                           FIRST MERCHANTS CORPORATION

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

NOTE 2.  Share-Based Compensation  continued

Pro forma net income, as if the fair value based method had been  applied to all
awards, is as follows:

(In thousands, except for per share amounts)
<TABLE>
<CAPTION>
                                                                                     Three Months Ended
                                                                                          March 31,
                                                                                     2006          2005
                                                                                  -------------------------
<S>                                                                                  <C>           <C>
      Net income as reported ...................................................  $    7,509    $    6,567
      Add: Share-based compensation awards recorded as expense,
           net of income taxes .................................................         161
      Less: Share-based compensation cost, determined under
           the fair value based method, net of income taxes ....................        (161)         (276)
                                                                                  ----------    ----------
      Pro forma net income .....................................................  $    7,509    $    6,291
                                                                                  ==========    ==========

      Earnings per share:
           Basic - as reported .................................................  $      .41    $      .35
           Basic - pro forma ...................................................         .41           .34
           Diluted - as reported ...............................................         .41           .35
           Diluted - pro forma .................................................         .41           .34
</TABLE>

The following table summarizes the components of the Corporation's share-based
compensation awards recorded as expense:

<TABLE>
<CAPTION>
                                                                             Three Months Ended
                                                                                  March 31,
                                                                                    2006
                                                                                -----------
<S>                                                                               <C>
      Stock and ESPP Options:
           Pre-tax compensation expense ........................................$      136

           Income tax benefit ..................................................       (12)
                                                                                ----------
      Stock and ESPP option expense, net of income taxes .......................$      124
                                                                                ==========

      Restricted Stock Awards:
           Pre-tax compensation expense ........................................$       58

           Income tax benefit ..................................................       (21)
                                                                                ----------
      Restricted stock awards expense, net of income taxes .....................$       37
                                                                                ==========

      Total Share-Based Compensation:
           Pre-tax compensation expense ........................................$      194

           Income tax benefit ..................................................       (33)
                                                                                ----------
      Total share-based compensation expense, net of income taxes ..............$      161
                                                                                ==========
</TABLE>

                                                                         Page 10
<PAGE>

                           FIRST MERCHANTS CORPORATION

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

NOTE 2.  Share-Based Compensation  continued

As of  March  31,  2006,  unrecognized  compensation  expense  related  to stock
options,  RSAs and ESPP  options  totaling  $437,000,  $1,219,000  and  $53,000,
respectively,  is expected to be  recognized  over  weighted-average  periods of
1.60, 2.83 and .25 years, respectively.

Stock option activity under the Corporation's stock option plans as of March 31,
2006 and changes during the three months ended March 31, 2006 were as follows:
<TABLE>
<CAPTION>
                                                                                      Weighted-
                                                                                       Average
                                                                       Weighted-      Remaining
                                                       Number           Average      Contractual      Aggregate
                                                         of            Exercise         Term          Intrinsic
                                                       Shares           Price        (in Years)        Value
                                                     ----------      ------------   -----------     ----------
<S>                                                  <C>            <C>             <C>             <C>
  Outstanding at January 1, 2006 ..................  1,104,787       $     23.28
  Granted .........................................     74,570             25.14
  Exercised .......................................    (13,929)            16.89
  Cancelled .......................................       (217)            26.27
                                                     ----------
  Outstanding at March 31, 2006 ...................  1,165,211       $     23.48           6.35     $2,814,000
                                                     ==========
  Vested and Expected to Vest at March 31, 2006....  1,159,772       $     23.47            .11     $2,812,000
  Exercisable at March 31, 2006 ...................  1,079,140       $     23.34           6.08     $2,787,000

</TABLE>

The  weighted-average  grant date fair value was $6.15 for stock options granted
during the three months ended March 31, 2006.

The aggregate  intrinsic  value in the table above  represents the total pre-tax
intrinsic value (the difference between the Corporation's closing stock price on
the last  trading  day of the  first  quarter  of 2006 and the  exercise  price,
multiplied by the number of in-the-money  options) that would have been received
by the option  holders had all option holders  exercised  their stock options on
March 31, 2006. The amount of aggregate intrinsic value will change based on the
fair market value of the Corporation's common stock.

The aggregate  intrinsic value of stock options  exercised  during first quarter
2006 was $130,000.  Exercise of options during this same period resulted in cash
receipts of $166,000.  The Corporation recognized a tax benefit of approximately
$24,000 in the first  quarter  2006,  related to the exercise of employee  stock
options and has been recorded as an increase to additional paid-in capital.

The following table summarizes  information on unvested  restricted stock awards
outstanding as of March 31, 2006:

<TABLE>
<CAPTION>
                                                                Weighted-Average
                                                   Number of     Grant-Date Fair
                                                    Shares           Value
                                                  ----------      -----------
<S>                                               <C>            <C>
  Unvested RSAs at January 1, 2006 .............          0                 0
  Granted ......................................     58,167       $     25.10
  Forfeited ....................................
  Vested .......................................
                                                  ----------
  Unvested RSAs at March 31, 2006 ..............     58,167       $     25.10
                                                  ==========

</TABLE>
                                                                         Page 11
<PAGE>
                           FIRST MERCHANTS CORPORATION

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

NOTE 2.  Share-Based Compensation  continued

The grant date fair value of ESPP options was  estimated at the beginning of the
July 1, 2005 offering period and  approximates  $212,000.  The ESPP options vest
during the twelve month period  ending June 30, 2006.  At March 31, 2006,  total
unrecognized  compensation expense related to unvested ESPP options was $53,000,
which is expected to be recognized over a period of three months.

<TABLE>
NOTE 3.  Investment Securities
                                                          Gross       Gross
                                             Amortized  Unrealized  Unrealized    Fair
                                                Cost       Gains      Losses     Value
<S>                                          <C>         <C>        <C>        <C>
Available for sale at March 31, 2006
  U.S. Treasury ........................     $  1,595              $     (1)  $  1,594
  U.S. Government-sponsored
    agency securities...................       94,737   $     23     (2,036)    92,724
  State and municipal ..................      162,593      2,075     (1,244)   163,424
  Mortgage-backed securities ...........      169,542        106     (6,247)   163,401
  Marketable equity securities..........       10,423                  (376)    10,047
                                             --------   --------   --------   --------
      Total available for sale .........      438,890      2,204     (9,904)   431,190
                                             --------   --------   --------   --------


Held to maturity at March 31, 2006
  State and municipal...................       10,437        306       (338)    10,405
  Mortgage-backed securities............           24                               24
                                             --------   --------   --------   --------
      Total held to maturity ...........       10,461        306       (338)    10,429
                                             --------   --------   --------   --------
      Total investment securities ......     $449,351   $  2,510   $(10,242)  $441,619
                                             ========   ========   ========   ========

</TABLE>

<TABLE>
<CAPTION>
                                                           Gross       Gross
                                              Amortized  Unrealized  Unrealized   Fair
                                                Cost       Gains       Losses    Value
<S>                                             <C>       <C>        <C>       <C>
Available for sale at December 31, 2005
  U.S. Treasury ........................       $  1,586             $     (1) $  1,585
  U.S. Government-sponsored
    agency securities ..................         83,026  $      1     (1,836)   81,191
  State and municipal ..................        167,095     2,159     (1,131)  168,123
  Mortgage-backed securities ...........        168,019       139     (5,656)  162,502
  Other asset-backed securities.........              1                              1
  Marketable equity securities .........          9,660                 (435)    9,225
                                               --------  --------   --------  --------
     Total available for sale ..........        429,387     2,299     (9,059)  422,627
                                               --------  --------   --------  --------

Held to maturity at December 31, 2005
  State and municipal ..................         11,609       283       (412)   11,480
  Mortgage-backed securities ...........             30                             30
                                               --------  --------   --------  --------
     Total held to maturity ............         11,639       283       (412)   11,510
                                               --------  --------   --------  --------
     Total investment securities .......       $441,026  $  2,582   $ (9,471) $434,137
                                               ========  ========   ========  ========


</TABLE>

                                                                         Page 12
<PAGE>



                           FIRST MERCHANTS CORPORATION

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

NOTE 4.  Loans and Allowance

<TABLE>
                                                                                     March 31,    December 31,
                                                                                       2006          2005
                                                                                   -----------    -----------
<S>                                                                                <C>            <C>
Loans:
  Commercial and industrial loans ..............................................   $   486,411    $   461,102
  Agricultural production financing and other loans to farmers .................        87,433         95,130
  Real estate loans:
    Construction ...............................................................       175,784        174,783
    Commercial and farmland ....................................................       743,905        734,865
    Residential ................................................................       746,410        751,217
  Individuals' loans for household and other personal expenditures .............       202,478        200,139
  Tax-exempt loans .............................................................        13,656          8,263
  Lease financing receivables, net of unearned income...........................         8,193          8,713
  Other loans ..................................................................        27,218         23,215
                                                                                   -----------    -----------
                                                                                     2,491,488      2,457,427
  Allowance for loan losses.....................................................       (25,623)       (25,188)
                                                                                   -----------    -----------
      Total Loans...............................................................   $ 2,465,865    $ 2,432,239
                                                                                   ===========    ===========

                                                                                      Three Months Ended
                                                                                           March 31,

                                                                                       2006           2005
                                                                                   -----------    -----------
Allowance for loan losses:
  Balances, January 1 ..........................................................   $    25,188    $    22,548

  Provision for losses .........................................................         1,726          2,667

  Recoveries on loans ..........................................................           308            222

  Loans charged off ............................................................        (1,599)          (949)
                                                                                   -----------    -----------
  Balances, March 31 ...........................................................   $    25,623    $    24,488
                                                                                   ===========    ===========
</TABLE>

Information on nonaccruing, contractually
past due 90 days or more other than
nonaccruing and restructured loans is                March 31,      December 31,
summarized below:                                      2006            2005
================================================================================

Non-accrual loans................................    $ 11,424       $ 10,030

Loans contractually past due 90 days
  or more other than nonaccruing.................       5,188          3,965

Restructured loans...............................         114            310
                                                     --------       --------
    Total........................................    $ 16,726       $ 14,305
                                                     ========       ========

                                                                         Page 13
<PAGE>

                           FIRST MERCHANTS CORPORATION

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

NOTE 5.  Net Income Per Share

Basic net income per share is computed by dividing  net income by the  weighted-
average shares outstanding  during the reporting period.  Diluted net income per
share is computed  by dividing  net income by the  combination  of all  dilutive
common share  equivalents,  comprised of shares issuable under the Corporation's
share-based  compensation  plans, and the  weighted-average  shares  outstanding
during the reporting period.

Dilutive  common share  equivalents  include the dilutive effect of in-the-money
share-based  awards,  which are calculated  based on the average share price for
each period using the treasury  stock method.  Under the treasury  stock method,
the exercise price of share-based awards, the amount of compensation expense, if
any, for future service that the  Corporation  has not yet  recognized,  and the
amount  of  estimated   tax  benefits  that  would  be  recorded  in  additional
paid-in-captial when share-based awards are exercised, are assumed to be used to
repurchase common stock in the current period.

<TABLE>

                                                                         Three Months Ended March 31,
                                                               2006                                         2005
                                             -------------------------------------------  ------------------------------------------
                                                             Weighted-                                    Weighted-
                                              Net             Average       Per Share      Net             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......................$    7,509        18,425,047    $     .41    $    6,567        18,559,664    $     .35
                                                                             ==========                                   ==========

Effect of dilutive common
 share equivalents ..........................                     107,089                                      136,862
                                             ----------       ------------                ----------       ------------
Diluted net income per share:
  Net income available to
    common stockholders
    and assumed conversions..................$    7,509        18,532,136    $     .41    $    6,567        18,696,526    $     .35
                                             ==========       ============   ==========   ==========       ============   ==========

</TABLE>
Stock options to purchase  397,339 and 152,158 shares for the three months ended
March 31, 2006 and 2005 were not included in the earnings per share  calculation
because the exercise price exceeded the average market price.

                                                                         Page 14
<PAGE>

                           FIRST MERCHANTS CORPORATION

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

Note 6.  Defined Benefit Pension Costs

The Corporation has defined  benefit  pension plans covering  substantially  all
employees.  The  plans  provide  benefits  that  are  based  on  the  employees'
compensation and years of service. The Corporation uses an actuarial calculation
to determine pension plan costs and paid no contributions to its defined-benefit
pension plans during the first quarter of 2006.

In  January  2005,  the  Board of  Directors  of the  Corporation  approved  the
curtailment of the accumulation of defined benefits for future services provided
by certain  participants in the First Merchants  Corporation  Retirement Pension
Plan (the "Plan").  Employees of the Corporation and certain of its subsidiaries
who are participants in the Plan were notified that, on and after March 1, 2005,
no  additional  pension  benefits  will be earned by employees who have not both
attained  the age of  fifty-five  (55) and  accrued  at least ten (10)  years of
"Vesting  Service".  As a result of this  action,  the  Corporation  recorded  a
$1,630,000  pension  curtailment loss to record  previously  unrecognized  prior
service  costs in  accordance  with  SFAS No.  88,  "Employers'  Accounting  for
Settlements  and  Curtailments  of  Defined  Benefit  Plans and for  Termination
Benefits." This loss was recognized and recorded by the Corporation in the first
quarter of 2005.

The following  represents  the pension cost for the three months ended March 31,
2006.

<TABLE>
<CAPTION>
                                                               Three Months Ended
                                                                     March 31,
                                                                2006          2005
                                                           -------------------------
Pension Cost
------------
<S>                                                        <C>           <C>
Service cost............................................   $      131    $      145

Interest cost ..........................................          683           658

Expected return on plan assets .........................         (728)         (768)

Amortization of the transition asset....................                         (7)

Amortization of prior service cost......................            1             1

Amortization of the net loss............................           87            24

Curtailment loss........................................                      1,630
                                                           ----------    ----------
      Total Pension Cost................................   $      174    $    1,683
                                                           ==========    ==========
</TABLE>

                                                                         Page 15
<PAGE>

                           FIRST MERCHANTS CORPORATION

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

Note 7.  Impact of Accounting Changes

In March 2006,  the Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standard No. 156 ("SFAS No. 156").  This Statement amends
SFAS No. 140,  Accounting  for Transfers  and Servicing of Financial  Assets and
Extinguishments  of  Liabilities,  with respect to the accounting for separately
recognized servicing assets and servicing liabilities.

SFAS No. 156  requires an entity to  initially  recognize  a servicing  asset or
servicing  liability  at fair value each time it  undertakes  an  obligation  to
service  a  financial  asset by  entering  into a  servicing  contract  in other
specific situations.

In addition,  SFAS No. 156 permits an entity to choose  either of the  following
subsequent measurement methods for each class of separately recognized servicing
assets and servicing liabilities:

o    Amortization method- Amortize  servicing assets or servicing liabilities in
     proportion to and over the period of estimated net servicing  income or net
     servicing loss and assess  servicing  assets or servicing  liabilities  for
     impairment or increased  obligation, based on fair value at each  reporting
     date.

o    Fair  value  measurement  method- Measure  servicing  assets  or  servicing
     liabilities at fair value at each reporting date and report changes in fair
     value in earnings in the period in which the changes occur.

SFAS No. 156 is effective  for the  Corporation  at the  beginning of its  first
fiscal  year that  begins  after  September  15,  2006,  and  should be  applied
prospectively  for recognition and initial  measurement of servicing  assets and
servicing  liabilities.  Earlier adoption is permitted as of the beginning of an
entity's  fiscal  year,  provided  the  entity  has  not  yet  issued  financial
statements,  including  interim  financial  statements,  for any  period of that
fiscal year.

The  Corporation  did not early  adopt SFAS No.  156 on  January  1,  2006.  The
Corporation is currently  evaluating the effect of adoption of this Statement on
its financial condition and results of operations.
                                                                        Page 16
<PAGE>

                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

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

FORWARD-LOOKING STATEMENTS

We from time to time include forward-looking  statements in our oral and written
communication.  We may include  forward-looking  statements  in filings with the
Securities  and Exchange  Commission,  such as this Form 10-Q,  in other written
materials  and in  oral  statements  made  by  senior  management  to  analysts,
investors,   representatives   of  the  media  and  others.   We  intend   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 we are  including  this  statement  for purposes of these safe
harbor provisions. Forward-looking statements can often be identified by the use
of words like "believe", "continue", "pattern", "estimate", "project", "intend",
"anticipate",  "expect" and similar  expressions or future or conditional  verbs
such as "will", "would",  "should",  "could",  "might", "can", "may", or similar
expressions. These forward-looking statements include:

     *  statements of our goals, intentions and expectations;

     *  statements regarding our business plan and growth strategies;

     *  statements regarding the asset quality of our loan and investment
        portfolios; and

     *  estimates of our 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 our net interest margin, asset valuations
        and expense expectations;

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

     *  adverse developments in our loan and investment portfolios;

     *  competitive factors in the banking industry, such as the trend towards
        consolidation in our market;

     *  changes in the banking legislation or the regulatory requirements of
        federal and state agencies applicable to bank holding companies and
        banks like our affiliate banks;

     *  acquisitions  of other businesses by us and integration of such acquired
        businesses;

     *  changes in market, economic, operational, liquidity, credit and interest
        rate risks  associated  with our business; and

     *  the  continued availability of  earnings and  excess  capital sufficient
        for the lawful and prudent declaration and payment of cash dividends.

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

                                                                         Page 17
<PAGE>

                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

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

CRITICAL ACCOUNTING POLICIES

Generally  accepted  accounting  principles  are complex and require us to apply
significant  judgments to various accounting,  reporting and disclosure matters.
We must use  assumptions  and estimates to apply these  principles  where actual
measurement  is not  possible or  practical.  For a complete  discussion  of our
significant  accounting  policies,  see  "Notes  to the  Consolidated  Financial
Statements" in the  Corporation's  Annual Report on Form 10-K for the year ended
December 31, 2005.  Certain  policies are considered  critical  because they are
highly  dependent  upon  subjective  or  complex   judgments,   assumptions  and
estimates.  Changes  in such  estimates  may have a  significant  impact  on the
financial  statements.  We have reviewed the  application of these policies with
the Audit Committee of our Board of Directors.

We believe there have been no significant changes during the quarter ended March
31, 2006 to the items that we disclosed as our critical  accounting policies and
estimates in  Management's  Discussion  and Analysis of Financial  Condition and
Results of  Operations in the  Corporation's  Annual Report on Form 10-K for the
year ended December 31, 2005.

BUSINESS SUMMARY

We are a financial holding company headquartered in Muncie,  Indiana.  Since our
organization  in 1982,  we have  grown to  include  8  affiliate  banks  with 65
locations in 17 Indiana and 3 Ohio counties.  In addition to our branch network,
our delivery  channels  include ATMs,  check cards,  interactive  voice response
systems and internet technology.

Our  business  activities  are  currently  limited to one  significant  business
segment,  which is community  banking.  Our financial service affiliates include
eight  nationally  chartered  banks:  First  Merchants  Bank,  N.A., The Madison
Community Bank,  N.A.,  United  Communities  National Bank, First National Bank,
Decatur Bank and Trust Company, N.A., Frances Slocum Bank & Trust Company, N.A.,
Lafayette  Bank and Trust  Company,  N.A. and Commerce  National Bank. The banks
provide commercial and retail banking services. In addition,  our trust company,
multi-line  insurance  company and title company provide trust asset  management
services,  retail and commercial  insurance  agency services and title services,
respectively.

We believe  that our  mission,  guiding  principles  and  strategic  initiatives
produce  profitable  growth for  stockholders.  Our vision is to satisfy all the
financial  needs  of  our  customers,  help  them  succeed  financially  and  be
recognized as the premier financial services company in our markets. Our primary
strategy  to  achieve  this  vision is to  increase  product  usage and focus on
providing  each customer  with all of the financial  products that fulfill their
needs. Our cross-sell strategy and diversified  business model facilitate growth
in strong and weak economic cycles.

We believe it is  important  to  maintain a well  controlled  environment  as we
continue to grow our  businesses.  Sound  credit  policies  are  maintained  and
interest rate and market risks inherent in our asset and liability  balances are
managed within prudent ranges,  while ensuring  adequate  liquidity and funding.
Our stockholder value has continued to increase due to customer satisfaction and
the balanced way we manage our business risk.

RESULTS OF OPERATIONS

Net  income for the three  months  ended  March 31,  2006,  equaled  $7,509,000,
compared to  $6,567,000 in the same period of 2005.  Diluted  earnings per share
were $.41,  an increase of 17.1  percent  from the $.35  reported  for the first
quarter 2005.  The increase in earnings  during the period is due to an increase
in net interest  income,  a decrease in the  provision  for loan  losses,  and a
pension  accounting loss recorded in the first quarter 2005,  resulting from the
curtailment of the accumulation of defined benefits in the Corporation's defined
benefit  plan.  These factors are discussed  within the  respective  sections of
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations.

Annualized  returns on average assets and average  stockholders'  equity for the
three  months  ended  March  31,  2006,  were  .93  percent  and  9.49  percent,
respectively,  compared with .83 percent and 8.33 percent for the same period of
2005.

                                                                         Page 18
<PAGE>
                           FIRST MERCHANTS CORPORATION
                                    FORM 10-Q

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

CAPITAL

Our  regulatory  capital  continues  to  exceed  regulatory  "well  capitalized"
standards.  Tier I regulatory capital consists primarily of total  stockholders'
equity and  subordinated  debentures  issued to business  trusts  categorized as
qualifying borrowings,  less non-qualifying intangible assets and unrealized net
securities  gains. Our Tier I capital to average assets ratio was 7.8 percent at
March 31, 2006 and 7.7 percent at year end 2005. In addition, at March 31, 2006,
we had a Tier I  risk-based  capital  ratio of 9.7 percent and total  risk-based
capital ratio of 11.7 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.

Our GAAP capital ratio,  defined as total stockholders'  equity to total assets,
equaled 9.7 percent at March 31, 2006 and  December  31,  2005.  When we acquire
other  companies for stock,  GAAP capital  increases by the entire amount of the
purchase price.

Our  tangible  capital  ratio,   defined  as  total  stockholders'  equity  less
intangibles net of tax to total assets less  intangibles net of tax, equaled 5.9
percent as of March 31, 2006, and 5.8 percent at December 31, 2005.

We believe that all of the above capital ratios are meaningful  measurements for
evaluating  our safety and  soundness.  Additionally,  we believe the  following
table is also meaningful when  considering our performance  measures.  The table
details and reconciles  tangible earnings per share,  return on tangible capital
and tangible assets to traditional GAAP measures.

                                               March 31,    December 31,
(Dollars in thousands)                           2006           2005

Average Goodwill ..........................  $   121,369    $   120,867
Average Core Deposit Intangible (CDI) .....       17,171         19,087
Average Deferred Tax on CDI ...............       (6,237)        (7,141)
                                             -----------    -----------
  Intangible Adjustment ...................  $   132,303    $   132,813
                                             ===========    ===========

Average Stockholders' Equity (GAAP Capital)  $   316,629    $   315,907
Intangible Adjustment .....................     (132,303)      (132,813)
                                             -----------    -----------
  Average Tangible Capital ................  $   184,326    $   183,094
                                             ===========    ===========

Average Assets ............................  $ 3,235,933    $ 3,195,784
Intangible Adjustment .....................     (132,303)      (132,813)
                                             -----------    -----------
  Average Tangible Assets .................  $ 3,103,630    $ 3,062,971
                                             ===========    ===========

Net Income ................................  $     7,509    $    30,239
CDI Amortization, net of tax ..............          480          1,952
                                             -----------    -----------
  Tangible Net Income .....................  $     7,989    $    32,191
                                             ===========    ===========

Diluted Earnings per Share ................  $      0.41    $      1.63
Diluted Tangible Earnings per Share .......  $      0.43    $      1.73

Return on Average GAAP Capital ............         9.49%          9.58%
Return on Average Tangible Capital ........        17.34%         17.58%

Return on Average Assets ..................         0.93%          0.95%
Return on Average Tangible Assets .........         1.03%          1.05%

                                                                         Page 19
<PAGE>
                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q


ASSET QUALITY/PROVISION FOR LOAN LOSSES

Our primary  business  focus is middle market  commercial and  residential  real
estate,   auto  and  small   consumer   lending,   which  results  in  portfolio
diversification. We ensure that appropriate methods to understand and underwrite
risk  are  utilized.   Commercial  loans  are   individually   underwritten  and
judgmentally risk rated.  They are periodically  monitored and prompt corrective
actions  are  taken  on   deteriorating   loans.   Retail  loans  are  typically
underwritten with statistical  decision-making  tools and are managed throughout
their life cycle on a portfolio basis.

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  ongoing  loan  review.  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 March 31, 2006,  non-performing  loans  totaled  $16,726,000,  an increase of
$2,421,000  from  December  31, 2005,  as noted in Note 4. Loans and  Allowance,
included within the Notes to Consolidated Condensed Financial Statements of this
Form 10-Q.  This increase was primarily due to one commercial  loan credit added
to non-performing loans, during the first quarter of 2006.

At March 31, 2006, impaired loans totaled $54,295,000, an increase of $1,915,000
from  December 31,  2005.  At March 31,  2006,  an allowance  for losses was not
deemed  necessary for impaired loans totaling  $44,795,000,  but an allowance of
$3,523,000  was  recorded  for  the  remaining  balance  of  impaired  loans  of
$9,500,000 and is included in our allowance for loan losses.

At  December  31,  2005,  impaired  loans  totaled  $52,380,000,  an increase of
$2,969,000  from year end 2004.  At December 31, 2005, a specific  allowance for
losses was not deemed necessary for impaired loans totaling  $44,840,000,  but a
specific  allowance of  $2,824,000  was recorded  for the  remaining  balance of
impaired  loans of $7,540,000  and is included in our allowance for loan losses.
The average balance of impaired loans for 2005 was $44,790,000.  The increase of
total impaired loans is primarily due to the increase of performing, substandard
classified  loans,  which comprise a portion of the total impaired loans. A loan
is deemed impaired when, based on current  information or events, it is probable
that all amounts due of  principal  and interest  according  to the  contractual
terms of the loan  agreement  will not be collected.  For the  Corporation,  all
performing,  substandard  classified  loans are  included in the  impaired  loan
total.

At March 31, 2006, the allowance for loan losses was $25,623,000, an increase of
$435,000  from year end 2005.  As a percent  of loans,  the  allowance  was 1.03
percent at March 31, 2006 and 1.02 percent at December 31, 2005.

The provision for loan losses for the first three months of 2006 was $1,726,000,
a  decrease  of  $941,000  from  $2,667,000  for the same  period  in 2005.
                                                                         Page 20

<PAGE>

                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q
LIQUIDITY

Liquidity  management  is the  process by which we ensure that  adequate  liquid
funds are  available for us and our  subsidiaries.  These funds are necessary in
order for us and our  subsidiaries  to meet  financial  commitments  on a timely
basis.  These  commitments  include  withdrawals by  depositors,  funding credit
obligations to borrowers,  paying  dividends to  shareholders,  paying operating
expenses,   funding  capital  expenditures,   and  maintaining  deposit  reserve
requirements.  Liquidity is monitored and closely managed by the asset/liability
committees at each subsidiary and by our asset/liability committee.

Our  liquidity  is  dependent  upon  our  receipt  of  dividends  from  our bank
subsidiaries,  which are subject to certain regulatory limitations and access to
other funding sources.  Liquidity of our bank  subsidiaries is derived primarily
from core deposit growth,  principal  payments  received on loans,  the sale and
maturity of investment  securities,  net cash provided by operating  activities,
and access to other funding sources.

The most stable source of liability-funded liquidity for both the long- term and
short-term  is  deposit  growth  and  retention  in the core  deposit  base.  In
addition,  we utilize  advances from the Federal Home Loan Bank.  ("FHLB") and a
revolving line of credit with LaSalle Bank,  N.A. as funding  sources.  At March
31,  2006,  total  borrowings  from  the  FHLB  were   $225,640,000.   Our  bank
subsidiaries have pledged certain mortgage loans and certain  investments to the
FHLB. The total available  remaining  borrowing  capacity from the FHLB at March
31, 2006, was $82,557,000. At March 31, 2006, our revolving line of credit had a
balance of $13,000,000 and a remaining borrowing capacity of $7,000,000.

The  principal  source  of  asset-funded   liquidity  is  investment  securities
classified   as   available-for-sale,   the  market   values  of  which  totaled
$431,190,000  at March 31, 2006,  an increase of  $8,563,000 or 2.0 percent over
December 31, 2005.  Securities  classified as held-to-maturity that are maturing
within a short  period  of time can also be a source  of  liquidity.  Securities
classified as held-to-maturity and that are maturing in one year or less totaled
$674,000 at March 31, 2006. In addition,  other types of assets such as cash and
due from banks,  federal funds sold and securities purchased under agreements to
resell, and loans and interest-bearing deposits with other banks maturing within
one year are sources of liquidity.

In the  normal  course  of  business,  we  are a  party  to a  number  of  other
off-balance  sheet  activities that contain credit,  market and operational risk
that  are not  reflected  in  whole  or in part  in our  consolidated  financial
statements.    Such   activities   include:    traditional   off-balance   sheet
credit-related  financial  instruments,  commitments  under operating leases and
long-term debt.

We  provide  customers  with  off-balance  sheet  credit  support  through  loan
commitments and standby letters of credit.  Summarized  credit-related financial
instruments at March 31, 2006 are as follows:

                                                                   At March 31,
(Dollars in thousands)                                                2006
================================================================================
Amounts of commitments:
Loan commitments to extend credit ............................... $  617,967
Standby letters of credit .......................................     31,266
                                                                  ----------
                                                                  $  649,233
                                                                  ==========

Since many of the commitments are expected to expire unused or be only partially
used,  the total amount of unused  commitments  in the preceding  table does not
necessarily represent future cash requirements.

In  addition  to owned  banking  facilities,  we have  entered  into a number of
long-term leasing  arrangements to support our ongoing activities.  The required
payments  under such  commitments  and  long-term  debt at March 31, 2006 are as
follows:
<TABLE>
<CAPTION>
                                2006       2007       2008       2009       2010       2011       Total
(Dollars in thousands)       remaining                                              and after
=======================================================================================================
<S>                          <C>        <C>        <C>        <C>        <C>        <C>        <C>
Operating leases .........   $  1,542   $  1,756   $  1,275   $  1,111   $  1,057   $  1,649   $  8,390
Long-term debt ...........    172,741     45,495     32,806     13,378     35,179    169,403    469,002
                             --------   --------   --------   --------   --------   --------   --------
Total ....................   $174,283   $ 47,251   $ 34,081   $ 14,489   $ 36,236   $171,052   $477,392
                             ========   ========   ========   ========   ========   ========   ========
</TABLE>
                                                                         Page 21
<PAGE>
                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

INTEREST SENSITIVITY AND DISCLOSURES ABOUT MARKET RISK

Asset/Liability Management has been an important factor in our ability to record
consistent  earnings  growth  through  periods of interest rate  volatility  and
product  deregulation.  Management  and  the  Board  of  Directors  monitor  our
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,  our exposure to changes in net
interest  income given various rate  scenarios and the economic and  competitive
environments.

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

We believe that our  liquidity  and interest  sensitivity  position at March 31,
2006,  remained  adequate to meet our primary goal of achieving optimum interest
margins while avoiding undue interest rate risk.

We place our greatest credence in net interest income simulation  modeling.  The
GAP/Interest  Rate Sensitivity  Report is believed by our 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. Our 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 our view of future market  movements.  Rather,  these are
intended  to  provide  a  measure  of the  degree of  volatility  interest  rate
movements may introduce into our earnings.

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 our 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
our best estimate of expected future behavior.

                                                                         Page 22
<PAGE>

                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

The comparative  rising and falling  scenarios for the period ended February 28,
2007 assume  further  interest  rate changes in addition to the base  simulation
discussed  above.  These changes are immediate and parallel  changes to the base
case scenario.  In addition,  total rate movements (beginning point minus ending
point) to each of the various driver rates utilized by us in the base simulation
for the period ended February 28, 2007 are as follows:

Driver Rates            RISING             FALLING
=============================================================
Prime                   200 Basis Points   (200) Basis Points
Federal Funds           200                (200)
One-Year CMT            200                (200)
Two-Year CMT            200                (200)
Three-Year CMT          200                (200)
Five-Year CMT           200                (200)
CD's                    200                 (59)
FHLB Advances           200                (200)

Results for the base,  rising and falling  interest  rate  scenarios  are listed
below,  based upon our rate  sensitive  assets and  liabilities  at February 28,
2006. 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
                                                (Dollars in thousands)
=========================================================================
Net Interest Income                         $110,882  $112,447   $100,249

Variance from base                                    $  1,565   $(10,633)

Percent of change from base                               1.41%     (9.59)%

The comparative  rising and falling  scenarios for the period ended December 31,
2006 assume  further  interest  rate changes in addition to the base  simulation
discussed  above.  These changes are immediate and parallel  changes to the base
case scenario.  In addition,  total rate movements (beginning point minus ending
point) to each of the various driver rates utilized by us in the base simulation
for the period ended December 31, 2006 are as follows:

Driver Rates            RISING             FALLING
=============================================================
Prime                   200 Basis Points   (200) Basis Points
Federal Funds           200                (200)
One-Year CMT            200                (200)
Two-Year CMT            200                (200)
Three-Year CMT          200                (200)
Five-Year CMT           200                (200)
CD's                    200                 (89)
FHLB Advances           200                (200)

Results for the base,  rising and falling  interest  rate  scenarios  are listed
below,  based upon our rate  sensitive  assets and  liabilities  at November 30,
2005. 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
                                                (Dollars in thousands)
=========================================================================
Net Interest Income                         $111,989  $114,930   $109,220

Variance from base                                    $  2,941   $ (2,769)

Percent of change from base                               2.63%     (2.47)%

                                                                         Page 23
<PAGE>


                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

EARNING ASSETS

The following  table  presents the earning  asset mix as of March 31, 2006,  and
December 31, 2005.

Loans increased  approximately  $34,321,000  from December 31, 2005 to March 31,
2006, and investment securities increased by approximately $7,385,000 during the
same period.  Real estate  construction,  real estate  commercial  and farmland,
commercial  and  industrial  loans,  tax exempt loans and other loans  increased
approximately  $47,085,000  during the first three months of 2006 as compared to
the balances  outstanding at December 31, 2005. These increases were offset by a
$12,764,000  decline in agricultural  loans,  residential  real estate loans and
leases.

<TABLE>

----------------------------------------------------------------------------------------------------
EARNING ASSETS
(Dollars in thousands)                                           March 31,              December 31,
                                                                   2006                     2005
----------------------------------------------------------------------------------------------------
<S>                                                            <C>                     <C>
Interest-bearing time deposits ......................             $ 9,104                  $ 8,748

Investment securities available for sale ............             431,190                  422,627

Investment securities held to maturity ..............              10,461                   11,639

Mortgage loans held for sale ........................               5,170                    4,910

Loans ...............................................           2,491,488                2,457,427

Federal Reserve and Federal Home Loan Bank stock                   23,421                   23,200
                                                               ----------               ----------

                     Total ..........................          $2,970,834               $2,928,551
                                                               ==========               ==========

</TABLE>
--------------------------------------------------------------------------------
DEPOSITS AND BORROWINGS

The table below reflects the level of deposits and borrowed funds (federal funds
purchased;   repurchase  agreements;   Federal  Home  Loan  Bank  advances;  and
subordinated debentures,  revolving credit lines and term loans) based on period
ending amounts as of March 31, 2006 and December 31, 2005.

(Dollars in thousands)                               March 31,     December 31,
                                                       2006           2005
                                                    ----------     ----------
Deposits ........................................   $2,446,072     $2,382,576
Federal funds purchased..........................       64,150         50,000
Securities sold under repurchase agreements......       77,256        106,415
Federal Home Loan Bank advances .................      225,640        247,865
Subordinated debentures, revolving credit lines
   and term loans................................      101,956        103,956
                                                    ----------     ----------
                                                    $2,915,074     $2,890,812
                                                    ==========     ==========

We have  continued to leverage our capital  position with Federal Home Loan Bank
advances,  as well as repurchase  agreements  which are pledged against acquired
investment  securities as collateral for the borrowings.  The interest rate risk
is  included  as part  of our  interest  simulation  discussed  in  Management's
Discussion and Analysis of Financial  Condition and Results of Operations  under
the headings "LIQUIDITY" and "INTEREST  SENSITIVITY AND DISCLOSURES ABOUT MARKET
RISK".

                                                                         Page 24
<PAGE>

                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

NET INTEREST INCOME

Net Interest  Income is the primary source of our earnings.  It is a function of
net interest  margin and the level of average  earning  assets.  The table below
presents  our asset  yields,  interest  expense,  and net  interest  income as a
percent of average  earning assets for the three months ended March 31, 2006 and
2005.

During the three months ended March 31,  2006,  asset yields  increased 74 basis
points (FTE) and interest  costs  increased 76 basis points,  resulting in a two
basis point (FTE) decrease in net interest income as compared to the same period
in 2005. The increases in interest income and interest  expense were primarily a
result of seven 25 basis point  overnight  federal  funds rate  increases by the
Federal Open Market Committee during this period.

<TABLE>
<CAPTION>
                                                            Three Months Ended
                                                                 March 31,
<S>                                                     <C>           <C>
(Dollars in thousands)                                      2006          2005

Annualized Net Interest Income........................  $  110,356    $  107,768

Annualized FTE Adjustment.............................  $    3,910    $    3,634

Annualized Net Interest Income
  On a Fully Taxable Equivalent Basis.................  $  114,267    $  111,402

Average Earning Assets................................  $2,953,290    $2,866,551

Interest Income (FTE) as a Percent
  of Average Earning Assets...........................        6.64%         5.90%

Interest Expense as a Percent
  of Average Earning Assets...........................        2.77%         2.01%

Net Interest Income (FTE) as a Percent
  of Average Earning Assets...........................        3.87%         3.89%


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.  In addition,
annualized amounts are computed utilizing a 30/360 day basis.
</TABLE>

                                                                         Page 25
<PAGE>

                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q
OTHER INCOME

Other income in the first three months of 2006 was $449,000 or 5.0 percent lower
than the same period of 2005.

Three items primarily account for the change:

1.       We realized an increase of $318,000 in debit card  fees due to greater
         usage by customers.

2.       Service charges in the first quarter of 2006 were $297,000 lower than
         the same period in 2005.

3.       A cash payment was received in the first quarter of 2005 of
         approximately $232,000, related to our membership in a credit card
         network that was merged with another card network.  No such payment was
         received during the same period in 2006.

OTHER EXPENSES

Other expenses in the first  three  months of 2006 was  $443,000  or 1.8 percent
lower than the same period in 2005.

Two areas account for most of the change:

1.       A pension accounting loss, totaling approximately $1,630,000, was
         recorded during the first quarter of 2005.  The loss resulted from the
         curtailment of the accumulation of defined benefits in our defined
         benefit pension plan.

2.       Salary expenses were $1,033,000 higher in the first quarter of 2006,
         as compared to the same period in 2005, primarily due to staff
         additions and normal annual increases.  In addition, salary expenses of
         $194,000 were recorded in the first quarter of 2006, due to share-based
         compensation expense recorded.

                                                                         Page 26
<PAGE>


                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

INCOME TAXES

Income tax expense,  for the three  months  ended March 31,  2006,  increased by
$640,000 from the same period in 2005.  The effective tax rate was 29.6 and 27.8
percent for the 2006 and 2005 periods.

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 us, 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 of Financial Condition and Results of Operations,  under
the headings "LIQUIDITY" and "INTEREST  SENSITIVITY AND DISCLOSURES ABOUT MARKET
RISK".

Item 4.  Controls and Procedures
-------------------------------------------------------------------

At the end of the period  covered by this report,  we carried out an evaluation,
under the supervision and with the  participation  of our management,  including
our Chief Executive Officer and Chief Financial Officer, of the effectiveness of
the design and operation of our disclosure  controls and procedures.  Based upon
that  evaluation,  our  Chief  Executive  Officer  and Chief  Financial  Officer
concluded that our disclosure controls and procedures are effective.  Disclosure
controls and procedures are controls and procedures  that are designed to ensure
that  information  required to be  disclosed  in our reports  filed or submitted
under the Securities  Exchange Act of 1934 are recorded,  processed,  summarized
and reported  within the time periods  specified in the  Securities and Exchange
Commission's rules and forms.

There have been no changes in our internal  controls  over  financial  reporting
identified  in connection  with the  evaluation  referenced  above that occurred
during our last fiscal quarter that have materially  affected,  or is reasonably
likely to materially affect, our internal control over financial reporting.

                                                                         Page 27
<PAGE>
                           FIRST MERCHANTS CORPORATION
                                    FORM 10-Q
                           PART II. OTHER INFORMATION

Item 1.   Legal Proceedings
---------------------------

          None

Item 1.A. Risk Factors
----------------------

There have been no material changes from the risk factors  previously  disclosed
in the Corporation's December 31, 2005 Annual Report on Form 10-K.

Item 2.   Unregistered Sales of Equity
          Securities and Use of Proceeds
---------------------------------------------------

         a.  None

         b.  None

         c.  Issuer Purchases of Equity Securities

The following  table  presents  information  relating to our purchases of equity
securities during the quarter ended March 31, 2006, as follows(1):
<TABLE>
<CAPTION>
                                                                                              MAXIMUM NUMBER OF
                                                                   TOTAL NUMBER OF           SHARES THAT MAY YET
                        TOTAL NUMBER OF     AVERAGE PRICE     SHARES PURCHASED AS PART        BE PURCHASED UNDER
      PERIOD            SHARES PURCHASED    PAID PER SHARE    OF BOARD AUTHORIZATION(1)     BOARD AUTHORIZATION(1)
      ------            ----------------    --------------    -------------------------    ------------------------
<S>                     <C>                 <C>               <C>                          <C>
01/01/06 - 01/31/06           2,648(2)          $26.85                    0                           0
02/01/06 - 02/28/06               0                0                      0                           0
03/01/06 - 03/31/06               0                0                      0                           0
</TABLE>

(1) On February 14, 2006,  the  Corporation's  Board  authorized  management  to
repurchase  up to  250,000  shares  of  the  Corporation's  Common  Stock.  This
authorization  was not publicly  announced and expires  February 13, 2007. There
were  250,000  remaining  shares  that  may yet be  purchased  pursuant  to such
authorizations as of March 31, 2006.

(2) These  shares were  purchased  in  connection  with the  exercise of certain
outstanding stock options.

Item 3.  Defaults Upon Senior Securities
----------------------------------------

         None

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

         None

Item 5.  Other Information
--------------------------

         a.  None

         b.  None
                                                                        Page 28
<PAGE>

                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

                           PART II. OTHER INFORMATION


Item 6.  Exhibits
-----------------------------------------

             Exhibit No.:       Description of Exhibit:      Form 10-Q Page No.:
             ------------       -------------------------    -------------------

                31.1            Certification of Chief               32
                                Executive Officer Pursuant
                                to Section 302 of the
                                Sarbanes - Oxley Act of
                                2002

                31.2            Certification of Chief               33
                                Financial Officer Pursuant
                                to Section 302 of the
                                Sarbanes - Oxley Act of
                                2002

                32              Certifications Pursuant to           34
                                18 U.S.C. Section 1350, as
                                Adopted Pursuant to Section
                                906 of the Sarbanes-Oxley
                                Act of 2002


                                                                         Page 29


<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: May 9, 2006                       by /s/ Michael C. Rechin
     --------------------------            -------------------------------------
                                           Michael C. Rechin
                                           Executive Vice President and
                                           Chief Operating Officer
                                           (Principal Executive Officer)

Date: May 9, 2006                       by /s/ Mark K. Hardwick
     --------------------------            -------------------------------------
                                           Mark K. Hardwick
                                           Executive Vice President and
                                           Chief Financial Officer
                                           (Principal Financial and
                                           Chief Accounting Officer)


                                                                         Page 30

<PAGE>
                          FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

                               INDEX TO EXHIBITS

INDEX TO EXHIBITS

      (a)3.  Exhibits:

             Exhibit No.:       Description of Exhibit:      Form 10-Q Page No.:
             ------------       -------------------------    -------------------

                31.1            Certification of Chief               32
                                Executive Officer Pursuant
                                to Section 302 of the
                                Sarbanes - Oxley Act of
                                2002

                31.2            Certification of Chief               33
                                Financial Officer Pursuant
                                to Section 302 of the
                                Sarbanes - Oxley Act of
                                2002

                32              Certifications Pursuant to           34
                                18 U.S.C. Section 1350, as
                                Adopted Pursuant to Section
                                906 of the Sarbanes-Oxley
                                Act of 2002


                                                                         Page 31

<PAGE>

                                  EXHIBIT-31.1

                           FIRST MERCHANTS CORPORATION

                                   FORM 10-Q
                           CERTIFICATIONS PURSUANT TO
                                 SECTION 302 OF
                         THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION
-------------

I, Michael C. Rechin,  Executive Vice President and Chief  Operating  Officer of
First Merchants Corporation, certify that:

1.     I have reviewed this Quarterly Report on Form 10-Q of First Merchants
       Corporation;

2.     Based on my knowledge, this report does not contain any untrue statement
       of a material fact or omit to state a material fact necessary to make the
       statements made, in light of the circumstances under which such
       statements were made, not misleading with respect to the period covered
       by this report;

3.     Based on my knowledge, the financial statements, and other financial
       information included in this report, fairly present in all material
       respects the financial condition, results of operations and cash flows of
       the registrant as of, and for, the periods presented in this report;

4.     The registrant's other certifying officer and I are responsible for
       establishing and maintaining disclosure controls and procedures (as
       defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
       control over financial reporting (as defined in the Exchange Act Rules
       13a-15(f) and 15d-15(f)) for the registrant and have:

       (a) Designed such disclosure controls and procedures, or caused such
           disclosure controls and procedures to be designed under our
           supervision, to ensure that material information relating to the
           registrant, including its consolidated subsidiaries, is made known to
           us by others within those entities, particularly during the period in
           which this report is being prepared;

       (b) Designed such internal control over financial reporting, or caused
           such internal control over financial reporting to be designed under
           our supervision, to provide reasonable assurance regarding the
           reliability of financial reporting and the preparation of financial
           statements for external purposes in accordance with generally
           accepted accounting principles;

       (c) Evaluated the effectiveness of the registrant's disclosure controls
           and procedures and presented in this report our conclusions about the
           effectiveness of the disclosure controls and procedures, as of the
           end of the period covered by this report, based on such evaluation;
           and

       (d) Disclosed in this report any change in the registrant's internal
           control over financial reporting that occurred during the
           registrant's most recent fiscal quarter (the registrant's fourth
           fiscal quarter in the case of an annual report) that has materially
           affected, or is reasonably likely to materially affect, the
           registrant's internal control over financial reporting; and

5.     The registrant's other certifying officer and I have disclosed, based on
       our most recent evaluation of internal control over financial reporting,
       to the registrant's auditors and the audit committee of the registrant's
       board or directors (or persons performing the equivalent functions):

       (a) All significant deficiencies and material weaknesses in the design or
           operation of internal control over financial reporting which are
           reasonably likely to adversely affect the registrant's ability to
           record, process, summarize and report financial information; and

       (b) Any fraud, whether or not material, that involves management or other
           employees who have a significant role in the registrant's internal
           control over financial reporting.

Date: May 9, 2006                       /s/Michael C. Rechin
                                        ----------------------------------------
                                           Michael C. Rechin
                                           Executive Vice President and
                                           Chief Operating Officer
                                           (Principal Executive Officer)

                                                                         Page 32
<PAGE>
                                  EXHIBIT-31.2

                           FIRST MERCHANTS CORPORATION

                                   FORM 10-Q
                           CERTIFICATIONS PURSUANT TO
                                 SECTION 302 OF
                         THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION
-------------

I, Mark K. Hardwick,  Executive Vice  President and Chief  Financial  Officer of
First Merchants Corporation, certify that:

1.     I have reviewed this Quarterly Report on Form 10-Q of First Merchants
       Corporation;

2.     Based on my knowledge, this report does not contain any untrue statement
       of a material fact or omit to state a material fact necessary to make the
       statements made, in light of the circumstances under which such
       statements were made, not misleading with respect to the period covered
       by this report;

3.     Based on my knowledge, the financial statements, and other financial
       information included in this report, fairly present in all material
       respects the financial condition, results of operations and cash flows of
       the registrant as of, and for, the periods presented in this report;

4.     The registrant's other certifying officer and I are responsible for
       establishing and maintaining disclosure controls and procedures (as
       defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
       control over financial reporting (as defined in the Exchange Act Rules
       13a-15(f) and 15d-15(f)) for the registrant and have:

       (a) Designed such disclosure controls and procedures, or caused such
           disclosure controls and procedures to be designed under our
           supervision, to ensure that material information relating to the
           registrant, including its consolidated subsidiaries, is made known to
           us by others within those entities, particularly during the period in
           which this report is being prepared;

       (b) Designed such internal control over financial reporting, or caused
           such internal control over financial reporting to be designed under
           our supervision, to provide reasonable assurance regarding the
           reliability of financial reporting and the preparation of financial
           statements for external purposes in accordance with generally
           accepted accounting principles;

       (c) Evaluated the effectiveness of the registrant's disclosure controls
           and procedures and presented in this report our conclusions about the
           effectiveness of the disclosure controls and procedures, as of the
           end of the period covered by this report, based on such evaluation;
           and

       (d) Disclosed in this report any change in the registrant's internal
           control over financial reporting that occurred during the
           registrant's most recent fiscal quarter (the registrant's fourth
           fiscal quarter in the case of an annual report) that has materially
           affected, or is reasonably likely to materially affect, the
           registrant's internal control over financial reporting; and

5.     The registrant's other certifying officer and I have disclosed, based on
       our most recent evaluation of internal control over financial reporting,
       to the registrant's auditors and the audit committee of the registrant's
       board or directors (or persons performing the equivalent functions):

       (a) All significant deficiencies and material weaknesses in the design or
           operation of internal control over financial reporting which are
           reasonably likely to adversely affect the registrant's ability to
           record, process, summarize and report financial information; and

       (b) Any fraud, whether or not material, that involves management or other
           employees who have a significant role in the registrant's internal
           control over financial reporting.

Date: May 9, 2006                       /s/Mark K. Hardwick
                                        ----------------------------------------
                                           Mark K. Hardwick
                                           Executive Vice President and
                                           Chief Financial Officer
                                           (Principal Financial  and
                                           Chief Accounting Officer)

                                                                         Page 33
<PAGE>

                                  EXHIBIT-32

                           CERTIFICATIONS PURSUANT TO
                            18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                 SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection  with the quarterly  report of First  Merchants  Corporation  (the
"Corporation")  on Form 10-Q for the period  ending March 31, 2006 as filed with
the  Securities  and Exchange  Commission on the date hereof (the  "Report"),  I
Michael C. Rechin,  Executive Vice President and Chief Operating  Officer of the
Corporation,  do hereby certify,  in accordance with 18 U.S.C.  Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

        (1) The Report fully complies with the requirements of  section 13(a) or
15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o (d)); and

        (2) The  information  contained  in  the  Report fairly presents, in all
material  respects,  the  financial  condition  and results of operations of the
Corporation.

Date: May 9, 2006                       by /s/ Michael C. Rechin
    ---------------------------            -------------------------------------
                                           Michael C. Rechin
                                           Executive Vice President and
                                           Chief Operating Officer
                                           (Principal Executive Officer)

A  signed  copy of this  written  statement  required  by  Section  906 has been
provided to First Merchants  Corporation and will be retained by First Merchants
Corporation and furnished to the Securities and Exchange Commission or its staff
upon request.



In connection  with the quarterly  report of First  Merchants  Corporation  (the
"Corporation")  on Form 10-Q for the period  ending March 31, 2006 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I Mark
K.  Hardwick, Executive Vice  President  and  Chief  Financial  Officer  of  the
Corporation,  do hereby certify,  in accordance with 18 U.S.C.  Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

        (1) The Report fully  complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o (d)); and

        (2) The  information  contained  in  the  Report fairly presents, in all
material  respects,  the  financial  condition  and results of operations of the
Corporation.

Date: May 9, 2006                       by /s/ Mark K. Hardwick
    ---------------------------            -------------------------------------
                                           Mark K. Hardwick
                                           Executive Vice President and
                                           Chief Financial Officer
                                           (Principal Financial and
                                           Chief Accounting Officer)

A  signed  copy of this  written  statement  required  by  Section  906 has been
provided to First Merchants  Corporation and will be retained by First Merchants
Corporation and furnished to the Securities and Exchange Commission or its staff
upon request.


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