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, 2008

                                       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, a non-accelerated  filer, or a smaller reporting company. See
definition  of "large  accelerated  filer,"  "accelerated  filer"  and  "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [ ]   Accelerated filer [X]   Non-accelerated filer [ ]
Smaller reporting company [ ]

(Do not check if smaller reporting company)

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 30, 2008, there were 18,204,227 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,
                                                                        2008          2007
                                                                   ------------   ------------
                                                                    (Unaudited)
  <S>                                                               <C>            <C>
  ASSETS:
  Cash and due from banks .......................................   $    89,961    $   134,683
  Interest-bearing deposits......................................        21,280         24,931
  Investment securities available for sale ......................       415,638        440,836
  Investment securities held to maturity ........................        10,417         10,331
  Mortgage loans held for sale...................................         3,494          3,735
  Loans, net of allowance for loan losses of $29,094 and $28,228.     2,908,616      2,848,615
  Premises and equipment ........................................        44,526         44,445
  Federal Reserve and Federal Home Loan Bank stock...............        25,345         25,250
  Interest receivable ...........................................        21,212         23,402
  Core deposit intangibles ......................................        11,621         12,412
  Goodwill ......................................................       123,435        123,444
  Cash surrender value of life insurance.........................        71,663         70,970
  Other assets ..................................................        19,950         19,033
                                                                    -----------    -----------
      Total assets ..............................................   $ 3,767,158    $ 3,782,087
                                                                    ===========    ===========
  LIABILITIES:
  Deposits:
    Noninterest-bearing .........................................   $   380,364    $   370,397
    Interest-bearing ............................................     2,432,763      2,473,724
                                                                    -----------    -----------
      Total deposits ............................................     2,813,127      2,844,121
  Borrowings:
    Federal funds purchased .....................................       111,144         52,350
    Securities sold under repurchase agreements .................       103,024        106,497
    Federal Home Loan Bank Advances .............................       244,468        294,101
    Subordinated debentures, revolving credit lines
      and term loans ............................................       115,826        115,826
                                                                    -----------    -----------
      Total borrowings ..........................................       574,462        568,774
  Interest payable ..............................................         7,621          8,325
  Other liabilities..............................................        23,107         20,931
                                                                    -----------    -----------
      Total liabilities .........................................     3,418,317      3,442,151

  COMMITMENTS AND CONTINGENT LIABILITIES

  STOCKHOLDERS' EQUITY:
  Cumulative Preferred Stock, $1,000 par value:
    Authorized -- 600 shares
    Issued and outstanding - 125 shares..........................           125
  Preferred stock, no-par value:
    Authorized and unissued - 500,000 shares
  Common Stock, $.125 stated value:
    Authorized -- 50,000,000 shares
    Issued and outstanding - 17,978,263 and 18,002,787 shares....         2,247          2,250
  Additional paid-in capital ....................................       137,633        137,801
  Retained earnings .............................................       206,710        202,750
  Accumulated other comprehensive income/(loss)..................         2,126         (2,865)
                                                                    -----------    -----------
      Total stockholders' equity ................................       348,841        339,936
                                                                    -----------    -----------
      Total liabilities and stockholders' equity ................   $ 3,767,158    $ 3,782,087
                                                                    ===========    ===========
</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>
<CAPTION>
                                                                   Three Months Ended
                                                                        March 31,
<S>                                                               <C>          <C>
                                                                    2008        2007
Interest Income:
  Loans receivable
    Taxable ...................................................   $51,101     $49,645
    Tax exempt ................................................       165         201
  Investment securities
    Taxable ...................................................     3,249       3,282
    Tax exempt ................................................     1,513       1,661
  Federal funds sold ..........................................         8           1
  Deposits with financial institutions ........................       282         123
  Federal Reserve and Federal Home Loan Bank stock ............       335         328
                                                                  -------     -------
    Total interest income .....................................    56,653      55,241
                                                                  -------     -------
Interest Expense:
  Deposits ....................................................    19,433      21,806
  Borrowings ..................................................     6,411       6,360
                                                                  -------     -------
    Total interest expense ....................................    25,844      28,166
                                                                  -------     -------
Net Interest Income ...........................................    30,809      27,075
Provision for loan losses .....................................     3,823       1,599
                                                                  -------     -------
Net Interest Income After Provision for Loan Losses ...........    26,986      25,476
                                                                  -------     -------
Other Income:
  Service charges on deposit accounts .........................     2,931       2,883
  Fiduciary activities ........................................     2,142       2,036
  Other customer fees .........................................     1,679       1,491
  Commission income ............................................     1,669      1,638
  Earnings on cash surrender value of life insurance ..........       738         685
  Net gains and fees on sales of loans ........................       643         532
  Net realized gains/(losses) on sales of
    available-for-sale securities .............................        73          (1)
  Other income ................................................       652         540
                                                                  -------     -------
Total other income ............................................    10,527       9,804
                                                                  -------     -------
Other expenses:
  Salaries and benefits .......................................    16,098      14,726
  Net occupancy ...............................................     1,805       1,598
  Equipment ...................................................     1,654       1,722
  Marketing ...................................................       484         487
  Outside data processing fees.................................       882         951
  Printing and office supplies.................................       281         299
  Core deposit amortization....................................       790         791
  Other expenses ..............................................     4,279       3,620
                                                                  -------     -------
Total other expenses ..........................................    26,273      24,194
                                                                  -------     -------
Income Before Income Tax ......................................    11,240      11,086
Income tax expense ............................................     3,114       3,315
                                                                  -------     -------
Net Income ....................................................   $ 8,126     $ 7,771
                                                                  =======     =======

Per share:

    Basic .....................................................   $   .45     $   .42
    Diluted ...................................................       .45         .42
    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,
                                                                                 ----------------------
                                                                                    2008         2007
                                                                                 ---------    ---------
<S>                                                                              <C>          <C>
Net Income...................................................................... $  8,126     $  7,771

Other comprehensive income net of tax:
  Unrealized gains on securities available for sale:
    Unrealized holding gains arising during the period, net of
      income tax benefit of $(1,824) and $(298).................................    3,388          553

  Unrealized gains on cash flow hedges:
    Unrealized gains arising during the period, net of income tax of
      $(1,183) and $(41) .......................................................    1,774           62

  Amortization of items previously recorded in accumulated other
    comprehensive income, net of income tax expense of $85 and $0 ..............     (127)

Reclassification adjustment for gains/(losses) included in net
  income, net of income tax expense of $29 and $0 ..............................      (44)           1
                                                                                 ---------    ---------
                                                                                    4,991          616
                                                                                 ---------    ---------
Comprehensive income ........................................................... $ 13,117     $  8,387
                                                                                 =========    =========
</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>
                                                                      2008         2007
                                                                   ---------    ---------
<S>                                                                  <C>            <C>
Balances, January 1 ............................................   $ 339,936    $ 327,325

Net income .....................................................       8,126        7,771

Cash dividends on common stock .................................      (4,166)      (4,260)

Other comprehensive income net of tax...........................       4,991          616

Stock issued under dividend reinvestment and stock purchase plan         272          291

Stock options exercised, net ...................................       1,160          140

Tax benefit from stock options exercised .......................          96           17

Stock redeemed .................................................      (2,137)      (3,503)

Cumulative preferred stock issued ..............................         125

Share-based compensation .......................................         438          251
                                                                   ---------    ---------

Balances, March 31 .............................................   $ 348,841    $ 328,648
                                                                   =========    =========

</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,
                                                                                      ----------------------------------
                                                                                            2008              2007
                                                                                      ----------------  ----------------
<S>                                                                                   <C>               <C>
Cash Flows From Operating Activities:
  Net income........................................................................  $        8,126    $        7,771
  Adjustments to reconcile net income to net cash provided by operating activities
    Provision for loan losses.......................................................           3,823             1,599
    Depreciation and amortization...................................................           1,126             1,150
    Share-based compensation........................................................             438               251
    Tax benefits from stock options exercised.......................................             (96)              (17)
    Mortgage loans originated for sale..............................................         (28,904)          (28,046)
    Proceeds from sales of mortgage loans...........................................          29,145            30,727
    Change in interest receivable...................................................           2,190             2,404
    Change in interest payable......................................................            (704)            1,508
    Other adjustments...............................................................           1,310             1,546
                                                                                      ---------------   ---------------
      Net cash provided by operating activities.....................................  $       16,454    $       18,893
                                                                                      ---------------   ---------------


Cash Flows From Investing Activities:
  Net change in interest-bearing deposits...........................................  $        3,651    $        4,499
  Purchases of
    Securities available for sale...................................................            (550)          (25,137)
    Securities held to maturity.....................................................            (500)
  Proceeds from maturities of
    Securities available for sale...................................................          30,890            14,446
    Securities held to maturity.....................................................             413               389
  Purchase of Federal Reserve and
    Federal Home Loan Bank Stock....................................................             (95)
  Purchase of bank owned life insurance ............................................                            (3,500)
  Net change in loans...............................................................         (63,824)          (39,859)
  Other adjustments.................................................................          (1,207)           (2,019)
                                                                                      ---------------   ---------------
      Net cash used by investing activities.........................................  $      (31,222)   $      (51,181)
                                                                                      ---------------   ---------------

Cash Flows From Financing Activities:
  Net change in
    Demand and savings deposits.....................................................  $      (11,318)   $      (72,495)
    Certificates of deposit and other time deposits.................................         (19,674)            9,345
  Borrowings........................................................................          62,794            82,333
  Repayment of borrowings...........................................................         (57,106)          (25,908)
  Cash dividends on common stock....................................................          (4,166)           (4,260)
  Stock issued under dividend reinvestment and stock purchase plans.................             272               291
  Stock options exercised...........................................................           1,160               140
  Cumulative preferred stock issued.................................................             125
  Tax benefit from stock options exercised..........................................              96                17
  Stock redeemed....................................................................          (2,137)           (3,503)
                                                                                      ---------------   ---------------
      Net cash used by financing activities.........................................         (29,954)          (14,040)
                                                                                      ---------------   ---------------
Net Change in Cash and Cash Equivalents.............................................         (44,722)          (46,328)
Cash and Cash Equivalents, January 1................................................         134,683            89,957
                                                                                      ---------------   ---------------
Cash and Cash Equivalents, March 31.................................................  $       89,961    $       43,629
                                                                                      ===============   ===============

Additional cash flows information:
  Interest paid ....................................................................  $        26,548   $        26,657
  Income tax paid ..................................................................            1,500               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. 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,
2007 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  months  ended  March  31,  2008 are not  necessarily
indicative of the results to be expected for the year.

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) required 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.
Share-based  compensation  for the three  months  ended  March 31, 2008 and 2007
totaled $438,000 and $251,000,  respectively.  Share based compensation 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

The estimated  fair value of the stock options  granted during 2008 and in prior
years was calculated  using a Black Scholes option pricing model.  The following
summarizes the assumptions used in the 2008 Black Scholes model:

      Risk-free interest rate                              2.69%
      Expected price volatility                           32.13%
      Dividend yield                                       3.68%
      Forfeiture rate                                      5.00%
      Weighted-average expected life, until exercise       6.53 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  5 percent for the three  months ended March 31,
2008, based on historical experience.

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

<TABLE>
<CAPTION>
                                                                                    Three Months Ended
                                                                                         March 31,
                                                                                    2008         2007
                                                                                -----------  -----------
<S>                                                                               <C>          <C>
      Stock and ESPP Options:
           Pre-tax compensation expense ........................................$      181   $      119

           Income tax benefit ..................................................       (15)          (7)
                                                                                ----------   ----------
      Stock and ESPP option expense, net of income taxes .......................$      166   $      112
                                                                                ==========   ==========

      Restricted Stock Awards:
           Pre-tax compensation expense ........................................$      257   $      132

           Income tax benefit ..................................................       (90)         (46)
                                                                                ----------   ----------
      Restricted stock awards expense, net of income taxes .....................$      167   $       86
                                                                                ==========   ==========

      Total Share-Based Compensation:
           Pre-tax compensation expense ........................................$      438   $      251

           Income tax benefit ..................................................      (105)         (53)
                                                                                ----------   ----------
      Total share-based compensation expense, net of income taxes ..............$      333   $      198
                                                                                ==========   ==========
</TABLE>

                                                                         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

As of  March  31,  2008,  unrecognized  compensation  expense  related  to stock
options,  RSAs and ESPP  options  totaling  $551,000,  $2,531,000  and  $46,000,
respectively,  is expected to be  recognized  over  weighted-average  periods of
1.42, 2.00 and 0.25 years, respectively.

Stock option activity under the Corporation's stock option plans as of March 31,
2008 and changes during the three months  ended  March 31, 2008 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, 2008 ..................  1,054,430       $     24.30
  Granted .........................................     72,300             27.93
  Exercised .......................................   (100,722)            22.59
  Cancelled .......................................    (13,390)            22.32
                                                     ----------
  Outstanding at March 31, 2008 ...................  1,012,618       $     24.76           5.68     $3,832,357
                                                     ==========
  Vested and Expected to Vest at March 31, 2008 ...    999,957       $     24.72           5.64     $3,815,778
  Exercisable at March 31, 2008 ...................    882,768       $     24.39           5.13     $3,662,314

</TABLE>

The  weighted-average  grant date fair value was $6.54 for stock options granted
during the three months ended March 31, 2008.

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 three  months of 2008 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, 2008. 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 the first three
months of 2008 was  $502,000.  Exercise  of  options  during  this  same  period
resulted in cash  receipts  of  $1,160,000.  The  Corporation  recognized  a tax
benefit of approximately  $96,000 in the first three months of 2008,  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, 2008:

<TABLE>
<CAPTION>
                                                                Weighted-Average
                                                   Number of     Grant-Date Fair
                                                    Shares           Value
                                                  ----------      -----------
<S>                                               <C>            <C>
  Unvested RSAs at January 1, 2008 .............     98,027        $    27.12
  Granted ......................................     61,525             27.81
  Forfeited ....................................     (1,227)            25.67
  Vested .......................................       (488)            25.97
                                                  ----------
  Unvested RSAs at March 31, 2008 ..............    157,837        $    27.85
                                                  ==========

</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

The grant date fair value of ESPP options was  estimated at the beginning of the
July 1, 2007 offering period and approximates  $184,000.  The ESPP options vests
during the twelve month period  ending June 30, 2008.  At March 31, 2008,  total
unrecognized compensation expense related to unvested ESPP  options was $46,000,
which is expected to be recognized over a period of three months.

Note 3.  Disclosures About Fair Value of Assets and Liabilities

Effective  January 1, 2008,  the  Corporation  adopted  Statement  of  Financial
Accounting Standards No. 157, Fair Value Measurements (FAS 157). FAS 157 defines
fair  value,  establishes  a  framework  for  measuring  fair value and  expands
disclosures   about  fair  value   measurements.   FAS  157  has  been   applied
prospectively as of the beginning of the year.

FAS 157 defines  fair value as the price that would be received to sell an asset
or  paid to  transfer  a  liability  in an  orderly  transaction between  market
participants  at the  measurement  date.  FAS 157 also  establishes a fair value
hierarchy which requires an entity to maximize the use of observable  inputs and
minimize the use of unobservable  inputs when measuring fair value. The standard
describes three levels of inputs that may be used to measure fair value:

Level 1  Quoted prices in active markets for identical assets or liabilites

Level 2  Observable inputs other than Level 1 prices,  such as quoted prices for
         similar assets or liabilites;  quoted prices in active markets that are
         not active; or other inputs that are observable  or can be corroborated
         by observable market data for substantially the full term of the assets
         or liabilities

Level 3  Unobservable inputs that are supported by little or no market  activity
         and that are significant to the fair value of the assets or liabilities

Following is a description of the valuation  methodologies  used for instruments
measured at fair value on a recurring  basis and recognized in the  accompanying
balance  sheet,  as  well as the  general  classification  of  such  instruments
pursuant to the valuation hierarchy.

Available-for-sale securities

Where quoted  market prices are available in an active  market,  securities  are
classified  within Level 1 of the valuation  hierarchy.  There are no securities
classified  within Level 1 of the  hierarchy.  If quoted  market  prices are not
available, then fair values are estimated by using pricing models, quoted prices
of securities with similar  characteristics  or discounted  cash flows.  Level 2
securities  include treasury  securities,  agencies,  mortgage backs,  state and
municipal,  corporate obligations,  and marketable equity securities. In certain
cases  where  Level  1 or  Level 2  inputs  are not  available,  securities  are
classified  within  Level  3  of  the  hierarchy  and  include  mortgage  backed
securities and corporate obligations.

The  following  table  presents  the  fair  value  measurements  of  assets  and
liabilities  recognized in the accompanying balance sheet measured at fair value
on a recurring  basis and the level  within the FAS 157 fair value  hierarchy in
which the fair value measurements fall at March 31, 2008.
<table>
<caption>
                                                                              Fair Value Measurements Using
                                                          -----------------------------------------------------------------
                                                                 Quoted Prices in     Significant
                                                                  Active Markets         Other             Significant
                                                                  for Identical       Observable           Unobservable
                                                                    Assets               Inputs               Inputs
                                             Fair Value            (Level 1)           (Level 2)             (Level 3)
                                           --------------------------------------------------------------------------------
<S>                                           <C>                     <C>                <C>                    <C>
Available-for-sale securities                $415,638                                  $404,477              $11,161

</table>
                                                                         Page 11
<page>
                           FIRST MERCHANTS CORPORATION

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

The  following  is a  reconciliation  of the  beginning  and ending  balances of
recurring fair value measurements  recognized in the accompanying  balance sheet
using significant unobservable Level 3 inputs:
<table>
<caption>
                                                        Available-for-Sale
                                                           Securities
                                                        -----------------
 
                                                           <C>
Beginning balance                                           $ 12,023

Total realized and unrealized gains and losses
  Included in other comprehensive income                        (862)
                                                          ----------

Ending balance                                              $ 11,161
                                                          ==========
</table>
There  were  no  gains  or  losses  included  in  the  first  quarter   earnings
attributable  to the change in unrealized  gains or losses related to assets and
liabilites still held at March 31, 2008.

Following is a  description  of  valuation  methodologies  used for  instruments
measured  at  fair  value  on  a  non-recurring  basis  and  recognized  in  the
accompanying  balance  sheet,  as well  as the  general  classification  of such
instruments pursuant to the valuation hierarchy.

Impaired Loans

Loan impairment is reported when scheduled  payments under contractual terms are
deemed  uncollectible.  Impaired  loans  are  carried  at the  present  value of
estimated future cash flows using the loan's existing rate, or the fair value of
collateral if the loan is collateral  dependent.  A portion of the allowance for
loan losses is allocated to impaired  loans if the value of such loans is deemed
to be less than the unpaid balance. If these allocations cause the allowance for
loan losses to  increase,  such  increase  is  reported  as a  component  of the
provision for loan losses.  Loan losses are charged  against the allowance  when
management believes the  uncollectability  of the loan is confirmed.  During the
first quarter of 2008,  certain  impaired  loans were  partially  charged-off or
re-evaluated,  resulting in a remaining balance for these loans, net of specific
reserve,  of $13,679,000 as of March 31, 2008. The valuation would be considered
Level 3,  consisting of appraisals of underlying  collateral and discounted cash
flow analysis.
                                                                         Page 12
<page>
                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                          (Table dollars in thousands)
                                   (Unaudited)
<TABLE>
NOTE 4.  Investment Securities
                                                          Gross       Gross
                                             Amortized  Unrealized  Unrealized    Fair
                                                Cost       Gains      Losses     Value
<S>                                          <C>         <C>        <C>        <C>
Available for sale at March 31, 2008
  U.S. Treasury ........................     $  1,501    $    32              $  1,533
  U.S. Government-sponsored
    agency securities...................       51,880        776                52,656
  State and municipal ..................      146,266      3,805    $     5    150,066
  Mortgage-backed securities ...........      190,303      4,199        187    194,315
  Corporate obligations ................       13,700                 2,146     11,554
  Marketable equity securities..........        6,215                   701      5,514
                                             --------   --------   --------   --------
      Total available for sale .........      409,865      8,812      3,039    415,638
                                             --------   --------   --------   --------


Held to maturity at March 31, 2008
  State and municipal...................       10,405        453        113     10,745
  Mortgage-backed securities............           12                               12
                                             --------   --------   --------   --------
      Total held to maturity ...........       10,417        453        113     10,757
                                             --------   --------   --------   --------
      Total investment securities ......     $420,282   $  9,265   $  3,152   $426,395
                                             ========   ========   ========   ========
</TABLE>
<TABLE>
<CAPTION>
                                                           Gross       Gross
                                              Amortized  Unrealized  Unrealized   Fair
                                                Cost       Gains       Losses    Value
<S>                                             <C>       <C>        <C>       <C>
Available for sale at December 31, 2007
  U.S. Treasury ........................       $  1,501  $     18             $  1,519
  U.S. Government-sponsored
    agency securities ..................         67,793       240    $    98    67,935
  State and municipal ..................        150,744     2,324        156   152,912
  Mortgage-backed securities ...........        199,591     1,654      1,444   199,801
  Corporate obligations ................         13,740                1,294    12,446
  Marketable equity securities .........          6,835                  612     6,223
                                               --------  --------   --------  --------
     Total available for sale ..........        440,204     4,236      3,604   440,836
                                               --------  --------   --------  --------

Held to maturity at December 31, 2007
  State and municipal ..................         10,317       237        298    10,256
  Mortgage-backed securities ...........             14                             14
                                               --------  --------   --------  --------
     Total held to maturity ............         10,331       237        298    10,270
                                               --------  --------   --------  --------
     Total investment securities .......       $450,535  $  4,473   $  3,902  $451,106
                                               ========  ========   ========  ========


</TABLE>

                                                                         Page 13
<page>
                           FIRST MERCHANTS CORPORATION

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

NOTE 5.  Loans and Allowance

<TABLE>
                                                                                     March 31,    December 31,
                                                                                       2008          2007
                                                                                   -----------    -----------
<S>                                                                                <C>            <C>
Loans:
  Commercial and industrial loans ..............................................   $   724,643    $   662,701
  Agricultural production financing and other loans to farmers .................       123,314        114,324
  Real estate loans:
    Construction ...............................................................       178,171        165,425
    Commercial and farmland ....................................................       961,431        947,234
    Residential ................................................................       728,956        744,627
  Individuals' loans for household and other personal expenditures .............       174,857        187,880
  Tax-exempt loans .............................................................        11,646         16,423
  Lease financing receivables, net of unearned income...........................         8,438          8,351
  Other loans ..................................................................        26,254         29,878
                                                                                   -----------    -----------
                                                                                     2,937,710      2,876,843
  Allowance for loan losses.....................................................       (29,094)       (28,228)
                                                                                   -----------    -----------
      Total Loans...............................................................   $ 2,908,616    $ 2,848,615
                                                                                   ===========    ===========

                                                                                        Three Months Ended
                                                                                             March 31,

                                                                                       2008           2007
                                                                                   -----------    -----------
Allowance for loan losses:
  Balances, January 1 ..........................................................   $    28,228    $    26,540

  Provision for losses .........................................................         3,823          1,599

  Recoveries on loans ..........................................................           913            231

  Loans charged off ............................................................        (3,870)        (1,551)
                                                                                   -----------    -----------
  Balances, March 31 ...........................................................   $    29,094    $    26,819
                                                                                   ===========    ===========
</TABLE>

                                                    March 31,      December 31,
Non Performing Assets:                                2008             2007
================================================================================

Non-accrual loans................................    $ 27,465       $ 29,031
Renegotiated loans...............................         142            145
                                                     --------       --------
Non performing loans (NPL).......................      27,607         29,176
Real estate owned and repossessed assets.........       7,372          2,573
                                                     --------       --------
Non performing assets (NPA)......................      34,979         31,749
90+ days delinquent..............................       4,996          3,578
                                                     --------       --------
NPAS & 90+ days delinquent.......................    $ 39,975       $ 35,327
                                                     ========       ========
                                                                         Page 14
<PAGE>

                           FIRST MERCHANTS CORPORATION

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

NOTE 6.  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,
                                                               2008                                         2007
                                             -------------------------------------------  ------------------------------------------
                                                             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......................$    8,126        17,938,442    $     .45    $    7,771        18,410,958    $     .42
                                                                             ==========                                   ==========

Effect of dilutive stock options.............                     116,525                                       85,576
                                             ----------       ------------                ----------       ------------
Diluted net income per share:
  Net income available to
    common stockholders
    and assumed conversions..................$    8,126        18,054,967    $     .45    $    7,771        18,496,534    $     .42
                                             ==========       ============   ==========   ==========       ============   ==========

</TABLE>
Stock options to purchase  571,407 and 610,971 shares for the three months ended
March 31, 2008 and 2007 were not included in the earnings per share  calculation
because the exercise price exceeded the average market price.


                                                                         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

EFFECT OF NEWLY ISSUED ACCOUNTING STANDARDS

Statement of Financial  Accounting  Standards No. 159, The Fair Value Option for
Financial  Assets and Financial  Liabilities  (FAS 159) became effective for the
Corporation  on January 1, 2008.  FAS 159 allows  companies  an option to report
selected  financial  assets and  liabilities  at fair value.  Because we did not
elect  the fair value  measurement  provision for any of our financial assets or
liabilities,  the  adoption  of SFAS  159 did not have  any  impact  on our 2008
consolidated financial statements.  Presently, we have not determined whether we
will elect the fair value measurement provisions for future transactions.

Effective  January 1, 2008, the  Corporation  adopted EITF 06-4,  Accounting for
Deferred  Compensation  and  Postretirement   Benefit  Aspects  of   Endorsement
Split-Dollar Life Insurance Arrangements and EITF 06-10, Accounting for Deferred
Compensation  and  Postretirement   Benefit  Aspects  of  Collateral  Assignment
Split-Dollar  Life  Insurance  Arrangements.  The adoption of EITF 06-4 and EITF
06-10 did not have any impact on our 2008 consolidated financial statements.

Future Accounting Matters

Financial  Accounting  Standards Board Statement No. 141 (SFAS 141R),  "Business
Combinations  (Revised 2007)," was issued in December 2007 and replaces SFAS 141
which applies to all  transactions  and other events in which one entity obtains
control over one or more other businesses.  SFAS 141R requires an acquirer, upon
initially  obtaining  control  of  another  entity,  to  recognize  the  assets,
liabilities and any non-controlling interest in the acquiree at fair value as of
the acquisition date. Contingent  consideration is required to be recognized and
measured  at fair value on the date of  acquisition  rather than at a later date
when the amount of that  consideration  may be determinable  beyond a reasonable
doubt.  This fair value approach  replaces the cost allocation  process required
under  SFAS  141  whereby  the  cost  of an  acquisition  was  allocated  to the
individual asset acquired and liabilities  assumed based on their estimated fair
value.  SFAS 141R  requires  acquirers to expense  acquisition-related  costs as
incurred   rather  than  allocating  such  costs  to  the  assets  acquired  and
liabilities assumed.  Under SFAS 141R, the requirements of SFAS 146, "Accounting
for Costs Associated with Exit or Disposal  Activities," would have to be met in
order to accrue for a restructuring plan in purchase accounting. Pre-acquisition
contingencies are to be recognized at fair value, unless it is a non-contractual
contingency that is not likely to materialize,  in which case, nothing should be
recognized in purchase accounting. Instead, that contingency would be subject to
the probable and estimable  recognition  criteria under SFAS 5,  "Accounting for
Contingencies."  The Corporation is evaluating the  requirements of SFAS 141R to
determine if it will have a significant  impact on the  Corporation's  financial
condition or results of operations.

Financial   Accounting   Standards   Board   Statement   No.  160  (SFAS   160),
"Noncontrolling  Interest in Consolidated Financial Statements,  an amendment of
ARB Statement No. 51," was issued in December  2007 and  establishes  accounting
and reporting standards for the non-controlling interest in a subsidiary and for
the  deconsolidation of a subsidiary.  SFAS 160 clarifies that a non-controlling
interest in a subsidiary, which is sometimes referred to as a minority interest,
is an ownership interest in the consolidated entity that should be reported as a
component  of equity  in the  consolidated  financial  statements.  Among  other
requirements,  SFAS 160  requires  consolidated  net  income to be  reported  at
amounts  that  are  attributable  to both  the  parent  and the  non-controlling
interest.  It also requires  disclosure,  on the face of the consolidated income
statement,  of the amounts of consolidated net income attributable to the parent
and to the non-controlling  interest.  SFAS 160 is effective for the Corporation
on  January  1, 2009 and is not  expected  to have a  significant  impact on the
Corporation's financial statements.

Financial Accounting Standards Board Statement No. 161 (SFAS 161),  "Disclosures
About  Derivative  Instruments  and Hedging  Activities,  an  Amendment  of FASB
Statement  No.  133," was  issued  in March  2008 and  amends  and  expands  the
disclosure  requirements of SFAS 133 to provide greater  transparency  about (i)
how  and  why  an  entity  uses  derivative  instruments,  (ii)  how  derivative
instruments  and related  hedge items are  accounted  for under SFAS 133 and its
related interpretations, and (iii) how derivative instruments and related hedged
items affect an entity's  financial  position,  results of  operations  and cash
flows. To meet those objectives, SFAS 161 requires qualitative disclosures about
objectives and strategies for using derivatives,  quantitative disclosures about
fair value amounts of gains and losses on derivative instruments and disclosures
about credit-risk-related contingent features in derivative agreements. SFAS 161
is effective for the  Corporation on January 1, 2009 and is not expected to have
a significant impact on the Corporation's financial statements.

                                                                        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 our Annual  Report on Form 10-K for the year ended  December 31,
2007. 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, 2008 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 our  Annual  Report on Form 10-K for the year  ended
December 31, 2007.

BUSINESS SUMMARY

We are a diversified financial holding company headquartered in Muncie, Indiana.
Since its  organization in 1982, the Corporation has grown to include 65 banking
center  locations in 18 Indiana and 3 Ohio  counties.  In addition to its branch
network,  the  Corporation's   delivery  channels  include  ATMs,  check  cards,
interactive voice response systems and internet technology.

The Corporation's  business  activities are currently limited to one significant
business  segment,  which is  community  banking.  As of  March  31,  2008,  the
Corporation's  financial service affiliates  included four nationally  chartered
banks:  First  Merchants  Bank,  National  Association,  First Merchants Bank of
Central  Indiana,  National  Association,  Lafayette  Bank  and  Trust  Company,
National  Association and Commerce  National Bank. The banks provide  commercial
and  retail  banking  services.  In  addition,  our  trust  company,  multi-line
insurance  company and a title company provide trust asset management  services,
retail  and   commercial   insurance   agency   services  and  title   services,
respectively.

Management believes that its vision, mission,  culture statement and core values
produce  profitable  growth for  stockholders.  Management  also  believes it is
important to maintain a strong  control  environment  as we continue to grow our
businesses.  Interest rate and market risks  inherent in our asset and liability
balances are managed within prudent ranges,  while ensuring  adequate  liquidity
and funding.  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.


RESULTS OF OPERATIONS

Net  income for the three  months  ended  March 31,  2008,  equaled  $8,126,000,
compared to  $7,771,000 in the same period of 2007.  Diluted  earnings per share
were $.45,  an  increase  of 7.1 percent  from the $.42  reported  for the first
quarter  2007.

Annualized  returns on average assets and average  stockholders'  equity for the
three  months  ended  March  31,  2008,  were  .86  percent  and  9.43  percent,
respectively,  compared with .88 percent and 9.47 percent for the same period of
2007.
                                                                         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 7.3 percent at
March 31, 2008 and 7.2 percent at year end 2007. In addition, at March 31, 2008,
we had a Tier I  risk-based  capital  ratio of 8.6 percent and total  risk-based
capital ratio of 11.2 percent.  Regulatory  capital  guidelines require a Tier I
risk-based  capital ratio of at least 4.0 percent and a total risk-based capital
ratio of at least 8.0 percent.

Our GAAP capital ratio,  defined as total stockholders'  equity to total assets,
equaled 9.3 percent at March 31, 2008 and 9.0 percent at December 31, 2007. 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 6.0
percent as of March 31, 2008, and 5.7 percent at December 31, 2007.

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)                           2008           2007
                                             ===========    ===========

Average goodwill ..........................  $   123,435    $   123,191
Average core deposit intangible (CDI) .....       11,978         13,868
Average deferred tax on CDI ...............       (3,178)        (3,659)
                                             -----------    -----------
  Intangible adjustment ...................  $   132,235    $   133,400
                                             ===========    ===========

Average stockholders' equity (GAAP capital)  $   344,780    $   330,786
Intangible adjustment .....................     (132,235)      (133,400)
                                             -----------    -----------
  Average tangible capital ................  $   212,545    $   197,386
                                             ===========    ===========

Average assets ............................  $ 3,758,491    $ 3,639,772
Intangible adjustment .....................     (132,235)      (133,400)
                                             -----------    -----------
  Average tangible assets .................  $ 3,626,256    $ 3,506,372
                                             ===========    ===========

Net income ................................  $     8,126    $    31,639
CDI amortization, net of tax ..............          480          1,919
                                             -----------    -----------
  Tangible net income .....................  $     8,606    $    33,558
                                             ===========    ===========

Diluted earnings per share ................  $       .45    $      1.73
Diluted tangible earnings per share .......  $       .48    $      1.83

Return on average GAAP capital ............         9.43%          9.56%
Return on average tangible capital ........        16.42%         17.00%

Return on average assets ..................          .86%           .87%
Return on average tangible assets .........          .95%           .96%

                                                                         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, 2008,  non-performing  assets,  which  includes  nonaccrual  loans,
restructured loans, and other real estate owned totaled $34,979,000, an increase
of  $3,203,000  from  December 31, 2007 as noted in Note 5 Loans and  Allowance,
included within the Notes to Consolidated Condensed Financial Statements of this
Form 10Q. Other real estate owned  increased  $4,799,000 from December 31, 2007,
primarily  due to one borrower.  Non-performing  loans will increase or decrease
going forward due to portfolio  growth,  routine  problem loan  recognition  and
resolution  through  collections,  sales or charge-offs.  The performance of any
loan can be affected  by  external  factors,  such as  economic  conditions,  or
factors particular to a borrower, such as actions of a borrower's management.

At March 31, 2008, impaired loans totaled $93,718,000, an increase of $6,769,000
from  December 31,  2007.  At March 31,  2008,  an allowance  for losses was not
deemed  necessary  for  impaired  loans  totaling  $71,890,000,  as there was no
identified  loss on these  credits.  An allowance of $6,121,000 was recorded for
the remaining  balance of impaired loans of  $21,828,000  and is included in our
allowance for loan losses. The increase of total impaired loans is primarily due
to the increase of performing,  substandard  classified loans,  which comprise a
portion of our total impaired  loans. A loan is deemed  impaired when,  based on
current  information  or events,  it is probable  all  amounts due of  principle
interest  according to the  contractual  terms of the loan agreement will not be
collected. All of our criticized loans, including substandard, doubtful and loss
credits, are included in the impaired loan total.

At March 31, 2008, the allowance for loan losses was $29,094,000, an increase of
$866,000  from year end 2007.  As a percent  of  loans,  the  allowance  was .99
percent at March 31, 2008 and .98 percent at December 31, 2007.

The provision for loan losses for the first three months of 2008 was $3,823,000,
an increase  of  $2,224,000  from  $1,599,000  for the same period in 2007.  The
increase  from the prior  quarter was a result of  increased  net charge offs of
$1,637,000.  The  determination  of the  provision  in any  period  is  based on
management's  continuing  review and evaluation of the loan  portfolio,  and its
judgment as to the impact of current economic  conditions on the portfolio.  The
evaluation by management  includes  consideration  of past loan loss experience,
changes in the composition of the loan portfolio,  and the current condition and
amount of loans outstanding.
                                                                         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 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 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,  2008,  total  borrowings  from  the  FHLB  were   $244,468,000.   Our  bank
subsidiaries  have pledged  certain  mortgage loans and investments to the FHLB.
The total  available  remaining  borrowing  capacity  from the FHLB at March 31,
2008,  was  $35,029,000.  At March 31, 2008, our revolving line of credit had no
balance and a remaining borrowing capacity of $25,000,000. On February 15, 2008,
we paid down the outstanding $25,000,000 balance on the revolving line of credit
through an increase of the subordinated debenture with LaSalle.

The  principal  source  of  asset-funded   liquidity  is  investment  securities
classified   as   available-for-sale,   the  market   values  of  which  totaled
$415,638,000  at March 31, 2008, a decrease of  $25,198,000 or 5.7 percent below
December 31, 2007.  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
$1,033,000  at March 31, 2008.  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, 2008 are as follows:

                                                                  At March 31,
(Dollars in thousands)                                               2008
================================================================================
Amounts of commitments:
Loan commitments to extend credit ............................... $  764,722
Standby letters of credit .......................................     25,009
                                                                  ----------
                                                                  $  789,731
                                                                  ==========

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 borrowings at March 31, 2008 are as follows:
<TABLE>
<CAPTION>
                                2008       2009       2010       2011       2012       2013       Total
(Dollars in thousands)       remaining                                              and after
=======================================================================================================
<S>                          <C>        <C>        <C>        <C>        <C>        <C>        <C>
Operating leases .........   $  1,253   $  1,420   $  1,190   $    961   $    606   $     79   $  5,509
Borrowings ...............    234,794     55,348     58,071     18,944     65,874    141,431    574,462
                             --------   --------   --------   --------   --------   --------   --------
Total ....................   $236,047   $ 56,768   $ 59,261   $ 19,905   $ 66,480   $141,510   $579,971
                             ========   ========   ========   ========   ========   ========   ========
</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  investments
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 of 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,
2008,  remained  adequate to meet our primary goal of achieving optimum interest
margins while avoiding undue interest rate risk.

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 on
the following page. 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 below 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 are as follows:

Driver Rates            RISING             FALLING
=============================================================
Prime                   200 Basis Points   (200) Basis Points
Federal Funds           200                (200)
One-Year CMT            200                (156)
Three-Year CMT          200                (182)
Five-Year CMT           200                (200)
CD's                    200                (158)
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  March 31,
2008. 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                         $123,123  $123,353   $119,882

Variance from base                                    $    230   $ (3,241)

Percent of change from base                               (0.2)%     (2.6)%

The comparative  rising and falling scenarios below 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 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                (193)
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 December 31,
2007. 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                         $117,693  $120,089   $116,063

Variance from base                                    $  2,396   $ (1,630)

Percent of change from base                                2.0 %     (1.4)%

                                                                         Page 23
<PAGE>


                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

EARNING ASSETS

The following  table  presents the earning  asset mix as of March 31, 2008,  and
December 31, 2007.  Earning assets  increased by $31,958,000 in the three months
ended March 31, 2008.  Loans and loans held for sale  increased by  $60,626,000.
The three largest loan segments that increased were in commerical and industrial
at  $61,492,000,  commercial  and  farmland  at  $14,197,000,  and  real  estate
construction at $12,746,000.  Loan segments that decreased were residential real
estate of  $15,671,000  and loans to  individuals  of  $13,023,000.  Investments
decreased  by  $25,000,000  as  lower  yielding  investments  matured  and  were
reinvested in higher yielding loans.

<TABLE>

----------------------------------------------------------------------------------------------------
EARNING ASSETS
(Dollars in thousands)                                           March 31,              December 31,
                                                                   2008                     2007
----------------------------------------------------------------------------------------------------
<S>                                                            <C>                     <C>
Interest-bearing time deposits ......................             $21,280                  $24,931

Investment securities available for sale ............             415,638                  440,836

Investment securities held to maturity ..............              10,417                   10,331

Mortgage loans held for sale ........................               3,494                    3,735

Loans ...............................................           2,937,710                2,876,843

Federal Reserve and Federal Home Loan Bank stock                   25,345                   25,250
                                                               ----------               ----------

                     Total ..........................          $3,413,884               $3,381,926
                                                               ==========               ==========

</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, 2008 and December 31, 2007.

(Dollars in thousands)                               March 31,     December 31,
                                                       2008           2007
                                                    ----------     ----------
Deposits ........................................   $2,813,127     $2,844,121
Federal funds purchased..........................      111,144         52,350
Securities sold under repurchase agreements......      103,024        106,497
Federal Home Loan Bank advances .................      244,468        294,101
Subordinated debentures, revolving credit lines,
   term loans and other .........................      115,826        115,826
                                                    ----------     ----------
                                                    $3,387,589     $3,412,895
                                                    ==========     ==========

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, 2008 and
2007.

During the three months ended March 31,  2008,  asset yields  decreased 23 basis
points on a fully taxable equivalent basis (FTE) and interest costs decreased 47
basis  points  (FTE),  resulting  in an 24 basis  point  (FTE)  increase  in net
interest income as compared to the same period in 2007.

<TABLE>
<CAPTION>
                                                            Three Months Ended
                                                                 March 31,
<S>                                                     <C>           <C>
(Dollars in Thousands)                                      2008         2007
                                                        ===========  ===========

Annualized net interest income........................  $  123,237   $  108,302

Annualized FTE adjustment.............................  $    3,615   $    4,010

Annualized net interest income
  On a fully taxable equivalent basis.................  $  126,852   $  112,312

Average earning assets................................  $3,396,641   $3,209,807

Interest income (FTE) as a percent
  of average earning assets...........................        6.78%        7.01%

Interest expense as a percent
  of average earning assets...........................        3.04%        3.51%

Net interest income (FTE) as a percent
  of average earning assets...........................        3.74%        3.50%


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>

HEDGING ACTIVITIES

On August 1, 2006, the  Corporation  purchased three  prime-based  interest rate
floor  agreements  with an aggregate  notional amount of $250 million and strike
rates  ranging  from 6% to 7%.  The  combined  purchase  price of  approximately
$550,000  was  to be  amortized  on an  allocated  fair  value  basis  over  the
three-year term of the agreements.  On March 19, 2008, the Corporation  received
$5,216,000 in connection  with the  termination of the three interest rate floor
agreements.  The contractual  maturity of the floors was August 1, 2009.  During
the life of the floors, pre-tax gains of approximately  $4,662,500 were deferred
in accumulated  other  comprehensive  income (AOCI) in accordance with cash flow
hedge  accounting rules  established by SFAS No. 133,  Accounting for Derivative
Instruments and Hedging  Activities (as amended).  The amounts  deferred in AOCI
will be  reclassified  out of equity into earnings  over the  remaining  sixteen
months of the original contract. SFAS 133 requires that amounts deferred in AOCI
be  reclassified  into earnings in the same periods  during which the originally
hedged  cash  flows  (prime-based  interest  payments  on loan  assets)  affects
earnings,  as long as the  originally  hedged  cash  flows  remain  probable  of
occurring (i.e. the principal  amount of designated  prime-based  loans match or
exceed the notional  amount of the terminated  floor through August 1, 2009). If
the  principal  amount of the  originally  hedged loans falls below the notional
amount of the terminate floors,  then amounts in AOCI could be accelerated.  The
Corporation  decided to terminate the interest rate floor  agreements only after
considering the impact of the transaction on its risk management  objectives and
after  alternative  strategies  were in place to mitigate the adverse  impact of
falling  interest  rates on its net  interest  margin.  At March 31,  2008,  the
remaining pre-tax gains are approximately $4.2 million.

                                                                         Page 25
<PAGE>

                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q
OTHER INCOME

Total  other  income in  the first  three  months of  2008 was  $723,000  or 7.4
percent higher than the same period of 2007.

Four items primarily account for the change:

1.   Gains of $277,000  related to the  termination of three interest rate floor
     agreements occurred in the first quarter of 2008.

2.   Other  customer  fees up $188,000  due to increased  fees to customers  and
     increased interchange fees.

3.   Net gains and fees on sales of mortgages  loans  increased  $111,000 due to
     additional loans sold in the secondary market.

4.   Trust fees increased $106,000 as a result of increased trust business.



OTHER EXPENSES

Other expenses in the first three months of 2008 were  $2,079,000 or 8.6 percent
higher than the same period in 2007.

Two items primarily account for the change:

1.   Salary and employee  benefit  expenses were $1,372,000  higher in the first
     quarter of 2008,  as compared to the same period in 2007  primarily  due to
     staff additions and normal annual increases.  Approximately $187,000 of the
     increase is due to increases in share-based compensation expense.

2.   Expenses  related to other real estate  owned and  repossessed  assets were
     $193,000 higher in 2008 than in the same period in 2007.


                                                                         Page 26
<PAGE>


                           FIRST MERCHANTS CORPORATION

                                    FORM 10-Q

INCOME TAXES

Income tax expense,  for the three  months  ended March 31,  2008,  decreased by
$201,000 from the same period in 2007.  The effective tax rate was 27.7 and 29.9
percent for the 2008 and 2007 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 are 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, 2007 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, 2008, as follows(1):
<TABLE>
<CAPTION>
                                                                                               MAXIMUM NUMBER (OR
                                                                    TOTAL NUMBER OF        APPROXIMATE DOLLAR VALUE)
                                                               SHARES PURCHASED AS PART     OF SHARES THAT MAY YET
                        TOTAL NUMBER OF     AVERAGE PRICE        OF PUBLICLY ANNOUNCED         BE PURCHASED UNDER
      PERIOD            SHARES PURCHASED    PAID PER SHARE        PLANS OR PROGRAMS          THE PLANS OR PROGRAMS
      ------            ----------------    --------------    -------------------------    ------------------------
<S>                     <C>                 <C>               <C>                          <C>
01/01/08 - 01/31/08         103,443(1)          $22.64               95,000                     390,000
02/01/08 - 02/29/08          30,308(2)           26.87                    0                     390,000
03/01/08 - 03/31/08           1,983(2)           29.44                    0                     390,000
</TABLE>


(1)  On December 4, 2007,  the  Corporation's  Board  authorized  management  to
     repurchase up to 500,000  shares of the  Corporation's  Common Stock.  This
     authorization was publicly  announced and expires December 31, 2008. Of the
     103,443  shares  referenced  above,  95,000  shares were  purchased in open
     market  transactions  pursuant to this  authorization.  There were  390,000
     remaining shares that may yet be purchased pursuant to such  authorizations
     as of March  31,  2008.  The  remaining  8,443  shares  were  purchased  in
     connection with the exercise of certain outstanding stock options.

(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, 2008                       by /s/ Michael C. Rechin
     --------------------------            -------------------------------------
                                           Michael C. Rechin
                                           President and
                                           Chief Executive Officer
                                           (Principal Executive Officer)

Date: May 9, 2008                       by /s/ Mark K. Hardwick
     --------------------------            -------------------------------------
                                           Mark K. Hardwick
                                           Executive Vice President and
                                           Chief Financial Officer
                                           (Principal Financial 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,  President and Chief Executive  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 of 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, 2008                       by /s/ Michael C. Rechin
                                           -------------------------------------
                                           Michael C. Rechin
                                           President and
                                           Chief Executive 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 of 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, 2008                   by: /s/Mark K. Hardwick
                                        ----------------------------------------
                                           Mark K. Hardwick
                                           Executive Vice President and
                                           Chief Financial Officer
                                           (Principal Financial 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, 2008 as filed with
the Securities  and Exchange  Commission on the date hereof (the  "Report"),  I,
Michael C. Rechin, President and Chief Executive 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, 2008                       by /s/ Michael C. Rechin
    ---------------------------            -------------------------------------
                                           Michael C. Rechin
                                           President and
                                           Chief Executive 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, 2008 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, 2008                       by /s/ Mark K. Hardwick
    ---------------------------            -------------------------------------
                                           Mark K. Hardwick
                                           Executive Vice President and
                                           Chief Financial Officer
                                           (Principal Financial 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.

                                                                         Page 34