Page    1
                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
               QUARTERLY RETORT UNDER SECTION 13 or 15 (d) of THE
                         SECURITIES EXCHANGE ACT OF 1934

For Quarter Ended March 31, 2000

Commission File Number 0-17071

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

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

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

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

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

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the  Securities  Exchange Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days,

                                    Yes X No
                                       ---

         As of May 10, 2000 there were outstanding 10,786,575 common shares,
         without par value, of the registrant.

         The exhibit index appears on page 2.

         This report including the cover page contains a total of 22 pages.


<PAGE>


                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

                                      INDEX

                                                                        Page No.

PART I.           Financial information:

 Item 1.          Financial Statements:

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

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

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

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

                  Consolidated Condensed Statement 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.........................12

 Item 3.          Quantitative and Qualitative Disclosures About
                  Market Risk.................................................18

PART II. Other Information:

 Item 4.          Submission of Matters to a Vote of Security Holders.........19

 Item 6.          Exhibits and Reports of Form 8-K............................19

Signatures        ............................................................20


<PAGE>
<TABLE>
<CAPTION>

                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q
                          PART I. FINANCIAL INFORMATION
                          Item 1. FINANCIAL STATEMENTS
                      CONSOLIDATED CONDENSED BALANCE SHEET
                             (Dollars in thousands)
                                   (Unaudited)
                                                                                    March 31,          December
                                                                                      2000             31, 1999
                                                                                   ----------         ----------
<S>                                                                                 <C>                <C>
   ASSETS:
     Cash and due from banks....................................................   $   37,418          $   58,893
     Federal funds sold.........................................................        1,800              25,400
                                                                                   -----------         -----------
       Cash and cash equivalents................................................       39,218              84,293
     Interest-bearing deposits..................................................          482               1,730
     Investment securities available for sale...................................      305,929             329,668
     Investment securities held to maturity.....................................       11,951              14,303
     Mortgage loans held for sale...............................................          227                  61
     Loans......................................................................    1,043,567             998,895
       Less:  Allowance for loan losses.........................................      (10,468)            (10,128)
                                                                                   -----------         -----------
         Net loans..............................................................    1,033,326             988,767
     Premises and equipment.....................................................       20,552              20,073
     Federal Reserve and Federal Home Loan Bank Stock...........................        5,858               5,858
     Interest receivable........................................................       10,843              11,279
     Core deposit intangibles and goodwill......................................        2,820               2,885
     Others assets..............................................................       15,199              15,131
                                                                                   -----------         -----------
         Total assets...........................................................   $1,446,178          $1,474,048
                                                                                   ===========         ===========
   LIABILITIES:
     Deposits:
       Noninterest-bearing......................................................   $  138,022          $  140,547
       Interest-bearing.........................................................    1,005,741           1,006,656
                                                                                   -----------         -----------
         Total deposits.........................................................    1,143,763           1,147,203
     Borrowings.................................................................      166,312             189,862
     Interest payable...........................................................        5,114               4,599
     Other liabilities..........................................................        6,201               6,088
                                                                                   -----------         -----------
         Total liabilities......................................................    1,321,390           1,347,752
   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 - 10,809,430 and 10,936,617 shares................        1,351               1,367
     Additional paid-in capital.................................................       22,419              25,481
     Retained earnings..    ....................................................      106,064             103,640
     Accumulated other comprehensive income (loss)..............................       (5,046)             (4,192)
                                                                                   -----------         -----------
         Total stockholders' equity.............................................      124,788             126,296
                                                                                   -----------         -----------
         Total liabilities and stockholders' equity.............................   $1,446,178          $1,474,048
                                                                                   ===========         ===========
   See notes to consolidated condensed financial statements.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                           FIRST MERCHANTS CORPORATION

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

                                                                                       Three Months Ended
                                                                                         March 31, 2000
                                                                                       -------------------
                                                                                        2000         1999
                                                                                       -------     -------
<S>                                                                                    <C>         <C>
Interest Income:
  Loans receivable

    Taxable.....................................................................       $21,430     $18,580
    Tax exempt..................................................................            72          53
  Investment securities:
    Taxable.....................................................................         3,744       3,495
    Tax exempt..................................................................         1,142       1,310
  Federal funds sold............................................................            51         228
  Deposits with financial institutions..........................................            14           4
  Federal Reserve and Federal Home Loan Bank stock..............................           121         100
                                                                                       -------     -------
      Total interest income.....................................................        26,574      23,770
                                                                                       -------     -------
Interest expense:
  Deposits......................................................................        10,903       9,341
  Borrowings....................................................................         2,398       1,590
                                                                                       -------     -------
    Total interest expense......................................................        13,301      10,931
                                                                                       -------     -------
Net Interest Income.............................................................        13,273      12,839
Provision for loan losses.......................................................           479         505
                                                                                       -------     -------
Net Interest Income After Provision for Loan Losses.............................        12,794      12,334
                                                                                       -------     -------
Other Income:
  Net realized gains (losses) on sales of available-for-sale securities.........          (198)         15
  Other income..................................................................         3,903       3,413
                                                                                       -------     -------
Total other income..............................................................         3,705       3,428
Total other expenses............................................................         9,407       8,690
                                                                                       -------     -------
Income before income tax........................................................         7,092       7,072
Income tax expense..............................................................         2,272       2,429
                                                                                       -------     -------
Net Income......................................................................       $ 4,820     $ 4,643
                                                                                       =======     =======

Per share:

  Net Income:
    Basic.......................................................................       $   .44     $   .39
    Diluted.....................................................................           .44         .38
Dividends.......................................................................           .22         .20





See notes to consolidated condensed financial statements.

</TABLE>

<PAGE>

<TABLE>
<CAPTION>


                           FIRST MERCHANTS CORPORATION

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

                                                                                   Three Months Ended
                                                                                      March 31, 2000
                                                                                 ----------------------
                                                                                    2000         1999
                                                                                 ---------    ---------
<S>                                                                              <C>          <C>
Net Income...................................................................... $  4,820     $  4,643

Other comprehensive income, net of tax:
  Unrealized (losses) gains on securities available for sale:
    Unrealized holding (losses) gains arising during the period, net of
        income tax (expense) benefit of $648, and $461..........................     (972)        (692)
    Less:  Reclassification adjustment for gains (losses) included
      in net income, net of income tax (expense) benefit of $80 and $(6)........     (118)           9
                                                                                 ---------    ---------
                                                                                     (854)        (701)
                                                                                 ---------    ---------
Comprehensive income............................................................ $  3,966     $  3,942
                                                                                 =========    =========
</TABLE>

<PAGE>
<TABLE>
<CAPTION>



                           FIRST MERCHANTS CORPORATION

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

                                                                                       2000             1999
                                                                                     ---------        ---------
   <S>                                                                               <C>              <C>
   Balances, January 1..........................................................     $126,296         $153,891

   Net income...................................................................        4,820            4,643

   Cash dividends...............................................................       (2,392)          (2,111)

   Other comprehensive income (loss), net of tax................................         (854)            (701)

   Stock issued under dividend reinvestment and stock purchase plan.............          192              182

   Stock options exercised......................................................          322              166

   Stock Redeemed...............................................................       (3,596)            (339)
                                                                                     ---------        ---------
   Balances, March 31...........................................................     $124,788         $155,731
                                                                                     =========        =========

   See notes to consolidated condensed financial statements


</TABLE>

<PAGE>

<TABLE>
<CAPTION>


                           FIRST MERCHANTS CORPORATION

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

                                                                                             Three Months Ended
                                                                                                  March 31,
                                                                                       -----------------------------
                                                                                          2000               1999
                                                                                       ---------           ---------
<S>                                                                                    <C>                 <C>
Cash Flows From Operating Activities:
  Net income......................................................................     $  4,820            $  4,643
  Adjustments to reconcile net income to net cash provided by operating activities
    Provision for loan losses.....................................................          479                 505
    Depreciation and amortization.................................................          758                 649
    Securities amortization, net..................................................           66                   3
    Securities losses (gains), net................................................          198                 (15)
    Gains on sale of premises and equipment.......................................         (105)
    Mortgage loans originated for sale............................................          240              (3,376)
    Proceeds from sales of mortgage loans.........................................         (406)              4,152
    Change in interest receivable.................................................          436                 287
    Change in interest payable....................................................         (515)                 26
    Other adjustments.............................................................        1,886               4,111
                                                                                       ---------           ---------
      Net cash provided by operating activities...................................     $  7,857            $ 10,985
                                                                                       ---------           ---------


Cash Flows From Investing Activities:
  Net change in interest-bearing deposits.........................................        1,248                (175)
  Purchases of
    Securities available for sale.................................................                          (86,845)
    Proceeds from maturities of
    Securities available for sale.................................................       12,928              52,401
  Proceeds from sales of
    Securities available for sale.................................................        2,312               1,778
    Securities held to maturity...................................................        9,151               1,955
  Net change in loans.............................................................      (45,040)             (9,967)
  Purchases of premises and equipment.............................................       (1,579)             (1,231)
  Proceeds from sale of fixed assets..............................................          512                  17
                                                                                       ---------           ---------
    Net cash provided (used) by investing activities..............................      (20,468)            (42,067)
                                                                                       ---------           ---------

</TABLE>
                                                                     (continued)

<PAGE>

<TABLE>
<CAPTION>


                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q
                 CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
                          (Dollar amounts in thousands)
                                   (Unaudited)
                                                                                             Three Months Ended
                                                                                                  March 31
                                                                                       -----------------------------
                                                                                          2000                1999
                                                                                       ---------           ---------
<S>                                                                                    <C>                 <C>
Cash Flows From Financing Activities:
  Net change in
    Demand and savings deposits...................................................     $ (2,525)           $(22,781)
    Certificates of deposit and other time deposits...............................         (915)            (22,865)
    Borrowings....................................................................      (23,550)             44,975
  Cash dividends..................................................................       (2,392)             (2,111)
  Stock issued under dividend  reinvestment  and stock purchase  plan.............          192                 182
  Stock options exercised.........................................................          322                 166
  Stock repurchased...............................................................       (3,596)               (339)
                                                                                       ---------           ---------
    Net cash provided (used) by financing activities..............................      (32,464)             (2,773)
                                                                                       ---------           ---------
Net Change in Cash and Cash Equivalents...........................................      (45,075)            (33,855)
Cash and Cash Equivalents, January 1..............................................       84,293              77,769
                                                                                       ---------           ---------
Cash and Cash Equivalents, March 31...............................................     $ 39,218            $ 43,914
                                                                                       =========           =========


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

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 1.  General

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

NOTE 2.  Accounting Matters

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

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

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

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



<PAGE>



                           FIRST MERCHANTS CORPORATION

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

NOTE 3.  Subsequent Event--Acquisition

On January 21, 2000, the Corporation signed a definitive agreement to acquire
Decatur Financial Inc., Decatur, Indiana.  The acquisition will be accounted for
under the purchase method of accounting.  Under the terms of the agreement, the
Corporation will issue 1,346,000 shares of its common stock in exchange for all
of the common stock of Decatur Financial, Inc.  The transaction is subject to
approval by stockholders of Decatur Financial, Inc., and appropriate regulatory
agencies.  The Corporation anticipates amortizing core deposit intangibles over
eight years and goodwill over twenty years.  As of December 31, 1999, Decatur
Financial, Inc., had total assets and shareholders'equity of $128,140,000 and
$14,253,000 respectively.

<TABLE>
<CAPTION>

NOTE 4.  Investment Securities

                                                                             Gross            Gross
                                                           Amortized       Unrealized       Unrealized          Fair
                                                             Cost            Gains            Losses            Value
                                                           ---------       ----------       ----------       ---------
<S>                                                       <C>             <C>              <C>               <C>
Available for sale at March 31, 2000
  U.S. Treasury......................................     $   2,993                        $      28         $   2,965
  Federal agencies...................................        57,877                            1,290            56,587
  State and municipal................................        82,001       $     394              977            81,418
  Mortgage-backed securities.........................       140,928              42            5,320           135,650
  Other asset-backed securities......................        21,327                              846            20,481
  Corporate obligations..............................         8,253                              179             8,074
  Marketable equity securities.......................           915                              161               754
                                                          ---------       ---------        ---------         ---------
      Total available for sale.......................       314,294             436            8,801           305,929
                                                          ---------       ---------        ---------         ---------


Held to maturity at March 31, 2000
  U.S. Treasury......................................           250                                2               248
  State and municipal................................        11,124              49               19            11,154
  Mortgage-backed securities.........................           311               1               15               297
  Other asset-backed securities......................           266                                1               265
                                                          ---------       ---------        ---------         ---------
      Total held to maturity.........................        11,951              50               37            11,964
                                                          ---------       ---------        ---------         ---------
      Total investment securities....................     $ 326,245       $     486        $   8,838         $ 317,893
                                                          =========       =========        =========         =========

</TABLE>


<PAGE>
<TABLE>
<CAPTION>

                           FIRST MERCHANTS CORPORATION

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


                                                                            Gross             Gross
                                                          Amortized       Unrealized       Unrealized       Fair
                                                             Cost           Gains            Losses         Value
                                                          ---------        -------          --------       --------
<S>                                                       <C>              <C>               <C>          <C>
Available for sale at December 31, 1999:

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

  U.S. Treasury......................................           250                                2           248
  State and municipal................................        13,243            77                 13        13,307
  Mortgage-backed securities.........................           311             1                  1           311
  Other asset-backed securities......................           499             0                 81           418
                                                          ---------        ------            -------      --------
      Total held to maturity.........................        14,303            78                 97        14,284
                                                          ---------        ------            -------      --------
      Total investment securities....................     $ 350,896        $  761            $ 7,705      $343,952
                                                          =========        ======            =======      ========

</TABLE>

<PAGE>
<TABLE>
<CAPTION>



                           FIRST MERCHANTS CORPORATION

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

NOTE 5.  Loans and Allowance

                                                                                   March 31,          December 31,
                                                                                     2000                1999
                                                                                   ---------           ---------
<S>                                                                                <C>                 <C>
Loans:
  Commercial and industrial loans...............................................   $253,604            $224,712
  Agricultural production financing and other loans to farmers..................     22,485              21,547
  Real estate loans:
    Construction................................................................     32,810              31,996
    Commercial and farmland.....................................................    149,171             150,544
    Residential.................................................................    383,413             380,596
  Individuals' loans for household and other personal expenditures..............    193,999             181,906
  Tax-exempt loans..............................................................      4,765               4,070
  Other loans...................................................................      3,339               3,552
  Unearned interest on loans....................................................        (19)                (28)
                                                                                 -----------           ---------
      Total..................................................................... $1,043,567            $998,895
                                                                                 ===========           =========

                                                                                        Three Months Ended
                                                                                             March 31

                                                                                     2000                 1999
                                                                                   --------            ---------
Allowance for loan losses:
  Balances, January 1...........................................................   $10,128             $  9,209
  Provision for losses..........................................................       479                  505
  Recoveries on loans...........................................................       149                  163
  Loans charged off.............................................................      (288)                (321)
                                                                                   --------            ---------
  Balances, March 31............................................................   $10,468             $  9,556
                                                                                   ========            =========
</TABLE>
NOTE 6.  Net Income Per Share

<TABLE>
<CAPTION>

                                                                     Three Months Ended March 31,
                                                           2000                                          1999
                                        -------------------------------------------    ------------------------------------------
                                                        Weighted-                                     Weighted-
                                                         Average        Per Share                      Average         Per Share
                                         Income           Shares         Amount         Income          Shares          Amount
<S>                                     <C>            <C>               <C>            <C>           <C>               <C>

Basic net income per share:
  Net income available to
    common stockholders..............   $4,820         10,904,050        $  .44         $4,643        11,978,451        $  .39
                                                                         ======                                         ======
Effect of dilutive stock options.....                     103,344                                       119,963
                                                       ----------                                    ----------
Diluted net income per share:
  Net income available to
    common stockholders
    and assumed conversions..........   $4,820         11,007,394        $  .44         $4,643        12,098,414        $   .38
                                        ======         ==========        ======         ======        ==========        =======
</TABLE>
<PAGE>


                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

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

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

Forward-Looking Statements

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

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

Results of Operations

         Net income for the three months ended March 31, 2000,  was  $4,820,000,
compared to $4,643,000  earned in the same period of 1999.  Diluted earnings per
share were $.44 a 15.8% increase over $.38 reported for the first quarter 1999.

         The increase in earnings was primarily due to growth in earning  assets
and non-interest  income.  Net interest income increased $434,000 or 3.4 percent
over the first  three  months of 1999 due to  growth  in  average  assets of 8.4
percent.  Non-interest  income increased  $277,000 or 8.1 percent over the first
three  months  of 1999  due  primarily  to  increased  revenues  from  fiduciary
activities and commission income.

         Annualized returns on average assets and average  shareholder's  equity
for  quarter  ended  March  31,  2000  were  1.34  percent  and  15.36  percent,
respectively,  compared  with 1.40 percent and 11.97 percent for the same period
of 1999.


<PAGE>


                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

Capital

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

         The  Corporation's  Tier I capital  to  average  assets  ration was 9.2
percent at year-end 1999 and 8.8 percent at March 31, 2000. At March 31, 2000,
the Corporation had a Tier I risk-based  capital ratio of 12.3 percent,  total
risk-based capital ratio of 13.3 percent, and a leverage ratio of 8.8 percent.
Regulatory  capital  guidelines  require a Tier I  risk-based  capital  ratio of
4.0 percent and a total  risk-based  capital ratio of 8.0  percent.  Banks with
Tier I  risk-based  capital  ratios  of 6.0  percent  and total  risk-based
capital ratios of 10.0 percent are considered "well capitalized."

Asset Quality/Provision for Loan Losses

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

         The allowance  for loan losses is maintained  through the provision for
loan losses, which is a charge against earnings.

         The  amount  provided  for loan  losses  and the  determination  of the
adequacy  of the  allowance  are  based  on a  continuous  review  of  the  loan
portfolio,  including  an  internally  administered  loan  "watch"  list  and an
independent  loan review provided by an outside  accounting firm. The evaluation
takes into consideration  identified credit problems, as well as the possibility
of losses inherent in the loan portfolio that cannot be specifically identified.

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

---------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)                                           March 31,          December 31,        December 31,
                                                                   2000                 1999                1998
---------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>                 <C>                 <C>
Non-accrual loans............................................     $1,115              $1,280              $1,073
Loans contractually past due 90 days
  Or more other than nonaccruing.............................      2,466               2,327               2,334
Restructured loans...........................................      2,802                 908               1,110
                                                                  ------              ------              ------
              Total..........................................     $6,383              $4,515              $4,517
                                                                  ======              ======              ======

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

         At March  31,  2000,  non-performing  loans  totaled  $6,383,000, an
increase of  $1,868,000 from December 31, 1999.  Impaired  loans at December 31,
1999 included  in  the  table  above  totaled $1,380,000.

The Corporation adopted Statement of Financial Accounting Standards ("SFAS") No.
113 and No. 118, Accounting by Creditors for Impairment of a Loan and Accounting
by Creditors for Impairment of a Loan - Income  recognition and Disclosures,  on
January 1, 1995.  At December 31, 1999,  impaired  loans totaled  $7,140,000,  a
decrease of $1,947,000 from December 31, 1998. On December 31, 1999 an allowance
for losses was not deemed  necessary for impaired loans totaling $4,398,000,
but an allowance of $1,061,000 was recorded for the remaining  balance of
impaired loans of $2,742,000. The average balance of impaired loans for 1999 was
$8,770,000.

         At March 31, 2000, the allowance for loan losses increased by $340,000,
to  $10,468,000,  up  slightly  from year end 1999.  As a percent of loans,  the
allowance was 1.00 percent, down from 1.01 percent at year end 1999.


<PAGE>


                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

         The first  quarter  2000  provision  of $479,000  was down $26,000 from
$505,000  for the same  quarter in 1999.  Net charge  offs  amounted to $139,000
during the quarter.

         This  table  below  presents  loan  loss  experience  for  the  periods
indicated  and compares the  Corporation's  loss  experience to that of its peer
group,  consisting of bank holding  companies with assets between $1 billion and
$3 billion.
<TABLE>
<CAPTION>

                                                                      Three Months Ended                  Year Ended
                                                                           March 31,                     December 31,
                                                                  ----------------------------    -------------------------
                                                                     2000             1999          1999            1998
                                                                   -------          --------       ------          ------
                                                                                     (Dollars in Thousands)
<S>                                                                <C>              <C>            <C>             <C>
Allowance for loan losses:
  Balance at beginning of period............................       $10,128          $  9,209       $8,429          $8,010
                                                                   -------          --------       ------          ------
  Chargeoffs................................................           288             1,769        2,231           1,949
  Recoveries................................................           149               447          639             633
                                                                   -------          --------       ------          ------
  Net chargeoffs............................................           139             1,322        1,592           1,316
  Provision for loan losses.................................           479             2,241        2,372           1,735
                                                                   -------          --------       ------          ------
  Balance at end of period..................................       $10,468           $10,128       $9,209          $8,429
                                                                   =======           =======       ======          ======

Ratio of net chargeoffs during the period to average loans
  outstanding during the period.............................        .06%(1)             .14%         .18%            .16%

Peer Group                                                           N/A                N/A          .26%            .29%

(1)  First three months annualized
</TABLE>

Liquidity, Interest Sensitivity, and Disclosures About Market Risk

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

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

         The Corporation's  liquidity and interest sensitivity position at March
31, 2000, remained adequate to meet the Corporation's  primary goal of achieving
optimum interest margins while avoiding undue interest rate risk.

         The  Corporation  had a cumulative  negative gap of  $95,837,000 in the
three month  horizon at March 31,  2000,  or just over 6.6 percent of total
assets. Net interest income at a financial institution with a negative gap tends
to decrease when rates rise and generally increase as interest rates decline.

         The  GAP/Interest  Rate  Sensitive  Report  is a  tool  which  displays
repricing timing differences  between interest sensitive assets and liabilities.
The 0-180 day  Sensitivity  Gap  Ratio  depicts  the  institution  is  liability
sensitive with a rate sensitive asset to rate sensitive liability ratio of 76.5
percent.


<PAGE>


                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

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

         The  Corporation's  asset  liability  process  monitors  simulated  net
interest  income under three  separate  interest  rate  scenarios;  rising (rate
shock),  falling (rate shock) and base case (flat rates). Net Interest Income is
simulated over a 12-month horizon.  By policy, the variance between rising rates
and base case nor falling rates and base case can be more than a negative 5
percent.

         Assumed interest rate changes are simulated to move  immediate and
parallel.  The rate movement to noteworthy interest rate indexes appear below:

<TABLE>
<CAPTION>

                                             Rising                Falling
--------------------------------------------------------------------------------
              <S>                       <C>                   <C>
              Prime                     200 Basis Points      (200) Basis Points
              Federal Funds             200                   (200)
              90 Day T-Bill             200                   (200)
              One Year T-Bill           200                   (200)
              Three Year T-Note         200                   (200)
              Five Year T-Note          200                   (200)
              Ten Year T-Note           200                   (200)
              Interest Checking          67                   ( 67)
              MMIA Savings              200                   (200)
              Money Market Index        200                   (200)
              Regular Savings            67                   ( 67)

         Results for the flat,  rising (rate  shock),  and falling  (rate shock)
interest  scenarios are listed below.  The net interest income shown  represents
cumulative  net interest  income over an 12-month  time  horizon.  Balance sheet
assumptions are the same under all scenarios:
</TABLE>
<TABLE>
<CAPTION>
                                                        Base Case
                                                        Flat Rates      Rising         Falling
     ------------------------------------------------------------------------------------------
     <S>                                                 <C>            <C>            <C>
     Net Interest Income (Dollars in Thousands)          $54,782        $52,312        $56,504
     Change vs. Base Case                                              ($ 2,470)       $ 1,722
     Percent Change                                                      (4.51%)         3.14%
     Policy Limitation                                                   (5.00%)        (5.00%)
</TABLE>

<PAGE>


                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

Earning Assets

         The  following  table  presents  the earning  asset mix as of March 31,
2000, and December 31, 1999, and December 31, 1998.

         Loans grew by $44.7  million from  December 31, 1999, to March 31,
2000, while  investment securities declined by $26.1 million during the same
period. Commercial and  industrial loans  increased by more than  $28.9 million,
while individuals' loans for household and personal  expenditures grew by nearly
$12.1 million.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
EARNING ASSETS

(Dollars in Millions)                                            March 31,            December 31,         December 31,
                                                                   2000                  1999                 1998
--------------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>                 <C>                  <C>
Federal funds sold and interest-bearing deposits...........      $     1.8           $     27.1           $     46.3

Investment securities available for sale...................          305.9                329.7                329.5

Investment securities held to maturity.....................           12.0                 14.3                 21.7

Mortgage loans held for sale...............................            0.2                                       0.8

Loans......................................................        1,043.6                998.9                890.4

Federal Reserve and Federal Home Loan Bank stock...........            5.8                  5.8                  4.5
                                                                 ---------            ---------            ---------
                     Total.................................      $ 1,369.3            $ 1,375.8            $ 1,293.2
                                                                 =========            =========            =========

Deposits, Securities Sold Under Repurchase Agreements, Federal Funds Sold and Other Short-tern Borrowing
</TABLE>

         The following  table  presents the level of deposits and borrowed funds
(Federal funds purchased,  repurchase  agreements with customers,  U.S. Treasury
demand notes and Federal Home Loan Bank  advances)  for the years ended 1999 and
1998 and at March 31, 2000.

<TABLE>
<CAPTION>

(Dollars in Millions)                                                 March 31,         December 31,        December 31,
                                                                        2000                1999                1998
                                                                   -------------------------------------------------------
<S>                                                                   <C>                 <C>                 <C>
Deposits.........................................................     $1,143.8            $1,147.2            $1,086.0
Securities sold under repurchase agreements......................         63.7                78.0                48.8
Other short-term borrowings......................................         26.6                38.4                17.8
Federal Home Loan Bank advances..................................         76.0                73.5                47.1
</TABLE>

         The  Corporation  has continued to leverage its large 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 the  Corporation's
interest simulation discussed in Management's  Discussion and Analysis under the
heading Liquidity,  Interest Sensitivity, and Disclosures about Market Risk. The
effect on the Corporation"  capital ratios is minimal as the Corporation remains
adequately capitalized.


<PAGE>

                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

Net Interest Income

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

         The table below  presents  the  Corporation's  asset  yields,  interest
expense,  and net interest income as a percent of average earning assets for the
three months ended March 31, 2000 and 1999.

         Net  interest  income  (FTE) for the three  months ended March 31, 2000
increased by $$354,000,  or 2.6 percent over the same period in 1999,  due to an
increase in average  earning assets of over $$107  million.  For the same period
interest  income and interest  expense,  as a percent of average earning assets,
increased 19 basis points, 43 basis points respectively,  due to lower interest
rates and increased non-deposit funding.

<TABLE>
<CAPTION>

(Dollars in Thousands)
------------------------------------------------------------------------------------------------------------------------------
                             Interest Income                            Net Interest
                              (FTE) as a           Interest Expense        Income                         Net Interest Income
                                Percent             as a Percent     (FTE) as a Percent      Average             On a
                              of Average            of Average           of Average          Earning        Fully Taxable
                             Earning Assets        Earning Assets       Earning Assets        Assets       Equivalent Basis
------------------------------------------------------------------------------------------------------------------------------
<S>                              <C>                  <C>                   <C>             <C>               <C>
For the three months
  Ended March 31,
      2000                       7.95%                3.89%                 4.07%           $1,369,343        $55,740
      1999                       7.76%                3.46%                 4.30%           $1,262,664        $54,288

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

</TABLE>


<PAGE>



                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q
Other Income

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

         Other income in the first  quarter of 2000 exceeded the same quarter in
the prior year by $490,000, or 14.4 percent.

Two major areas account for most of the increase:

         1.Serves charges on deposit accounts increased $136,000 or 14.2 percent
           due to increased number of accounts and price adjustments.

         2.Commission income increased $127,000 or 38.4 percent due primarily to
           increased sales efforts of First Merchants Insurance Services, Inc.

Other Expense

         Total other expenses represent  non-interest  operating expenses of the
Corporation.  First  quarter  other expense in 2000 exceeded the same quarter of
the prior year by $717,000, or 8.3 percent.

Two major areas account for most of the increase:

         1. Salaries and benefit expense grew $318,000 or 6.5 percent, due to
            normal salary increases and staff additions.

         2. Equipment  expense   increased  by  $138,000,   or  16.6  percent,
            reflecting  the  Corporation's  efforts to improve  efficiency and
            provide electronic service delivery to its customers.

Income Taxes

         Income  tax  expense,  for the  three  months  ended  March  31,  2000,
decreased by $157,000 over the same period in 1999,  due to reduced state income
tax liability.

Other

         The  Securities  and  Exchange  Commission  maintains  a Web site  that
contains  reports,  proxy  and  information  statements  and  other  information
regarding  registrants that file electronically  with the Commission,  including
the Corporation, and that address is (http://www.sec.gov).

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

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


<PAGE>


                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

                           PART II. OTHER INFORMATION

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

                  None

Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits:

                                                                    Form 10-Q
                                                                      Page
         Exhibit No.:      Description of Exhibit:                   Number
         ------------      -----------------------                   ------
     2 Plans of acquisition/reorganization are incorporated by
       reference to forms S-4 filed on March 24, 2000.

    27 Financial Data Schedule, Period Ending March 31, 2000           21




<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   05/11-00               by  /s/Michael L. Cox
             ------------------------      -------------------------------------
                                           Michael L. Cox
                                           President and Chief Executive Officer

         Date   05/11/00               by  /s/James L. Thrash
             ------------------------      -------------------------------------
                                           James L. Thrash
                                           Chief Financial & Principal
                                           Accounting Officer