FORM 10-Q

                          SECURITIES AND EXCHANGE COMMISSION

                               WASHINGTON, D.C.  20549

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

                           SECURITIES EXCHANGE ACT OF 1934

For Quarter Ended June 30, 1996

Commission File Number 0-17071

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

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

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

                                    (317) 747-1500
- -------------------------------------------------------------------------------
                 (Registrant's telephone number, including area code)

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

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

    As of August 5, 1996, there were outstanding 6,023,829 common shares,
without par value, of the registrant.

                                                                   Page 1 of 20

                             FIRST MERCHANTS CORPORATION

                                      FORM 10-Q

                                        INDEX

                                                                   Page No.

PART I.  Financial information:

   Item 1.    Financial Statements:

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

              Consolidated Condensed Statement of Income . . . . .     4

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

              Consolidated Condensed Statement of Cash Flows . . .     6

              Notes to Consolidated Condensed Financial Statements     7

   Item 2.    Management's Discussion and Analysis of Financial 
              Condition and Results of Operations . . . . . . . .     11

PART II.      Other Information:

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

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

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

                             Page 2 of 20

                             FIRST MERCHANTS CORPORATION

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

                                                   June 30,       December 31,
                                                     1996             1995 
                                                   --------       ------------
ASSETS:
   Cash and due from banks                         $ 31,106        $ 31,432
   Federal funds sold                                15,100          37,500
                                                   --------        --------
      Cash and cash equivalents                      46,206          68,932
   Interest-bearing deposits with financial
    institutions                                                        155
   Securities available for sale                    145,992         143,120
   Securities held to maturity                       51,015          58,214
   Mortgage Loans held for sale                                         736
   Loans:
      Loans                                         439,926         418,994
      Less:   Allowance for loan losses              (4,919)         (4,957)
                                                   --------        --------
         Net loans                                  435,007         414,037
   Premises and equipment                            10,467          10,476
   Federal Reserve and Federal Home Loan Bank
    stock                                             2,029           1,892
   Interest receivable                                6,244           6,187
   Core deposit intangibles and goodwill              1,780           1,845
   Others assets                                      5,469           2,265
                                                   --------        --------
         Total assets                              $704,209        $707,859
                                                   --------        --------
                                                   --------        --------

LIABILITIES:
   Deposits:
      Noninterest-bearing                          $ 82,777        $ 99,432
      Interest-bearing                              491,448         488,724
                                                   --------        --------
         Total deposits                             574,225         588,156
   Short-term borrowings                             41,611          33,975
   Federal Home Loan Bank advance                                     1,000
   Interest payable                                   1,786           1,866
   Other liabilities                                  4,086           2,389
                                                   --------        --------
         Total liabilities                          621,708         627,386

STOCKHOLDERS' EQUITY:
   Preferred stock, no-par value:
      Authorized and unissued -- 500,000 shares
   Common stock, $.125 stated value:
      Authorized --- 20,000,000 shares
      Issued and outstanding -- 5,065,470 and
       5,053,901 shares                                 633             632
   Additional paid-in capital                        16,132          15,852
   Retained earnings                                 65,971          62,836
   Net unrealized gain (loss) on securities
    available for sale                                 (235)          1,153
                                                   --------        --------
         Total stockholders' equity                  82,501          80,473
                                                   --------        --------
         Total liabilities and stockholders'
          equity                                   $704,209        $707,859
                                                   --------        --------
                                                   --------        --------

See notes to consolidated condensed financial statements.

                               Page 3 of 20

                             FIRST MERCHANTS CORPORATION

                                      FORM 10-Q
                         CONSOLIDATED CONDENSED BALANCE SHEET
               (Dollar amounts in thousands, except per share amounts)
                                     (Unaudited)

                                               Three Months Ended         Six Months Ended
                                                   June 30                     June 30
                                             ---------------------    ---------------------
                                               1996        1995         1996        1995
                                             ---------   ---------    ---------   ---------
                                                                      
Interest Income:
   Loans, including fees:
       Taxable. . . . . . . . . . . . . .    $  9,646    $  9,425     $ 19,197    $ 18,362
       Tax exempt . . . . . . . . . . . .          14          27           27          45
   Securities:
       Taxable. . . . . . . . . . . . . .       2,202       2,048        4,464       4,060
       Tax exempt . . . . . . . . . . . .         652         618        1,288       1,163
   Federal funds sold . . . . . . . . . .         111         277          322         319
   Interest-bearing deposits with
    financial institutions  . . . . . . .           1           1            3           1
   Federal Reserve and Federal Home
    Loan Bank stock . . . . . . . . . . .          39          39           75          73
                                             ---------   ---------    ---------   ---------
              Total interest income . . .      12,665      12,435       25,376      24,023

Interest Expense:
    Deposits. . . . . . . . . . . . . . .       4,957       4,944       10,118       9,002
    Short-term borrowings . . . . . . . .         518         490        1,029       1,093
    Federal Home Loan Bank advance. . . .          14           1           29           1
                                             ---------   ---------    ---------   ---------
               Total interest expense . .       5,489       5,435       11,176      10,096
                                             ---------   ---------    ---------   ---------
Net Interest Income . . . . . . . . . . .       7,176       7,000       14,200      13,927
Provision for loan losses . . . . . . . .         160         160          320         320
                                             ---------   ---------    ---------   ---------
Net Interest Income After Provision
  For Loan Losses . . . . . . . . . . . .       7,016       6,840       13,880      13,607
Other Income:
     Net realized gains (losses) on
      sale of available for sale 
      securities. . . . . . . . . . . . .          10         (76)          20         (66)
     Other income . . . . . . . . . . . .       1,795       1,644        3,590       3,277
                                             ---------   ---------    ---------   ---------
Total other income  . . . . . . . . . . .       1,805       1,568        3,610       3,211
Total other expenses. . . . . . . . . . .       4,858       4,591        9,546       9,303
                                             ---------   ---------    ---------   ---------
Income before income tax. . . . . . . . .       3,963       3,817        7,944       7,515
Income tax expense. . . . . . . . . . . .       1,383       1,288        2,785       2,595
                                             ---------   ---------    ---------   ---------
Net Income. . . . . . . . . . . . . . . .     $ 2,580     $ 2,529      $ 5,159    $  4,920
                                             ---------   ---------    ---------   ---------
                                             ---------   ---------    ---------   ---------

  Per share:
      Net income (1). . . . . . . . . . .     $   .51     $   .50      $ 1.02     $    .97
      Dividends (1) . . . . . . . . . . .         .20         .19         .40          .38
  Weighted average shares outstanding (1)   5,059,199   5,055,723   5,062,259    5,053,478

(1) Restated for 3-for-2 stock split distributed October, 1995.

See notes to consolidated financial statements.

                                     Page 4 of 20

                             FIRST MERCHANTS CORPORATION

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

                                                    1996         1995
                                                   -------      -------
Balances, January 1                                $80,473      $71,018
Net income                                           5,159        4,920
Cash dividends                                      (2,024)      (1,887)
Net change in unrealized gain (loss) on
 securities available for sale                      (1,388)       2,579
Stock issued under dividend reinvestment and
 stock purchase plan                                   235          201
Stock options exercised                                 46          187
Stock redeemed                                                     (392)
                                                   -------      -------
Balances, June 30                                  $82,501      $76,626
                                                   -------      -------
                                                   -------      -------

See notes to consolidated condensed financial statements.

                                     Page 5 of 20

                             FIRST MERCHANTS CORPORATION

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

                                                         Six Months Ended
                                                              June 30
                                                        -----------------
                                                         1996       1995 
                                                        -------   -------
Cash Flows From Operating Activities:
   Net income                                           $ 5,159   $ 4,920
   Adjustments to reconcile net income to net
    cash provided by operating activities:
      Provision for loan losses                             320       320
      Depreciation and amortization                         619       592
      Securities amortization, net                          194       499
      Mortgage loans originated for sale                   (464)     (600)
      Proceeds from sale of mortgage loans                1,212       604
      Change in interest receivable                          83      (442)
      Change in interest payable                            (80)      368
      Other adjustments                                    (505)     (233)
                                                        -------   -------
         Net cash provided by operating activities        6,538     6,028

Cash Flows From Investing Activities:
   Net change in interest-bearing deposits with
    financial institutions                                  155       (46)
   Purchases of:
      Securities available for sale                     (59,472)  (34,036)
      Securities held to maturity                       (18,186)  (14,851)
   Proceeds from maturities of:
      Securities available for sale                      50,508     7,991
      Securities held to maturity                        25,288    18,419
   Proceeds from sales of securities available
    for sale                                              3,551    11,196
   Net change in loans                                  (21,601)  (18,046)
   Purchases of premises and equipment                     (611)     (920)
   Other investing activities                               142       118
                                                        -------   -------
      Net cash used by investing activities             (20,226)  (30,175)

Cash Flows From Financing Activities:
   Net change in:
       Noninterest-bearing, NOW, money market and
        savings deposits                                (14,451)   (2,423)
       Certificates of deposit and other time
        deposits                                            520    34,821
       Short-term borrowings                              7,636    13,685
       Federal Home Loan Bank advance                    (1,000)
   Cash dividends                                        (2,024)   (1,887)
   Stock issued under dividend reinvestment and
    stock purchase plan                                     235       201
   Stock options exercised                                   46       187
   Stock redeemed                                                    (392)
                                                        -------   -------
      Net cash provided (used) by financing
       activities                                        (9,038)   44,192
                                                        -------   -------
Net Increase (Decrease) in Cash and Cash
 Equivalents                                            (22,726)   20,045
Cash and Cash Equivalents, January 1                     68,932    46,359
                                                        -------   -------
Cash and Cash Equivalents, June 30                      $46,206   $66,404
                                                        -------   -------
                                                        -------   -------
See notes to consolidated condensed financial statements.

                                   Page 6 of 20

                             FIRST MERCHANTS CORPORATION

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

NOTE 1.     General

The significant accounting policies followed by First Merchants Corporation 
("Corporation") and its wholly owned subsidiaries for interim financial 
reporting are consistent with the accounting policies followed for annual 
financial reporting, except for the changes in methods of accounting 
discussed more fully in Note 2.  All adjustments which 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 financial 
statements.

NOTE 2.    Change in Methods of Accounting

Statement of Financial Accounting Standards ("SFAS") No. 123, Stock-Based 
Compensation, is effective for the Corporation for 1996.  This statement 
establishes a fair value based method of accounting for stock-based 
compensation plans.  The Corporation intends to account for stock-based 
compensation as prescribed in Accounting Principles Board Opinion No. 25, 
Accounting for Stock Issued to Employees.

NOTE 3.      Acquisitions

On January 17, 1996, the Corporation signed a definitive agreement to acquire 
all of the outstanding shares of Randolph County Bancorp, Winchester, 
Indiana. Under terms of the agreement which has been approved by Randolph 
County Bancorp shareholders, the Corporation will issue approximately 566,000 
shares of its common stock.  The transaction will be accounted for under the 
pooling of interests method of accounting and is subject to approval by 
appropriate regulatory agencies.  Although the corporation anticipates that 
the merger will be consummated during the third quarter of 1996, there can be 
no assurance that the acquisition will be completed.  At December 31, 1995, 
Randolph County Bancorp had total assets and stockholders' equity of 
$73,333,000 and $8,867,000, respectively.

On July 31, 1996, the Corporation issued 942,685 shares of its common stock 
in exchange for all of the outstanding shares of Union National Bancorp, 
Liberty, Indiana (Union National).  At December 31, 1995, Union National had 
total assets and shareholders' equity of $161,078,000 and $15,741,000, 
respectively.  The transaction will be accounted for under the pooling of 
interests method of accounting.  The financial information contained herein 
does not reflect the merger.  Pro forma unaudited results of operations 
assuming the merger had occurred on January 1, 1995, are as follows:

                                Three Months Ended         Six Months Ended
                                     June 30                   June 30
                                ------------------         -----------------
                                 1996        1995           1996      1995
                                ------      ------         -------   -------
Net interest income. . . . .    $8,458      $8,132         $16,726   $16,174

Net income . . . . . . . . .     3,028       2,849           5,975     5,594

Net income per share . . . .       .50         .47            1.00       .93

                                     Page 7 of 20

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

NOTE 4.  Investment Securities

                                                                        Gross        Gross
                                                       Amortized     Unrealized    Unrealized     Fair
                                                         Cost           Gains        Losses       Value
                                                       ---------     ----------    ----------   ---------
                                                                                    
Available for sale at June 30, 1996:
   U.S. Treasury                                       $ 12,227      $      11     $       83   $  12,155
   Federal agencies                                      68,394            381            447      68,328
   State and municipal                                   22,067            227            106      22,188
   Mortgage and other asset-backed securities            20,278             63            259      20,082
   Corporate obligations                                 23,165             71            247      22,989
   Marketable equity security                               250                                       250
                                                       ---------     ----------    ----------   ---------
         Total available for sale                       146,381            753          1,142     145,992
                                                       ---------     ----------    ----------   ---------

Held to maturity at June 30, 1996:
   U.S. Treasury                                            850              1             10         841
   Federal agencies                                       8,100             28             23       8,105
   State and municipal                                   37,741            253             94      37,900
   Mortgage and other asset-backed securities             4,324             18                      4,342
                                                       ---------     ----------    ----------   ---------
         Total held to maturity                          51,015            300            127      51,188
                                                       ---------     ----------    ----------   ---------
         Total investment securities                   $197,396      $   1,053     $    1,269   $ 197,180
                                                       ---------     ----------    ----------   ---------
                                                       ---------     ----------    ----------   ---------

                                     Page 8 of 20

                             FIRST MERCHANTS CORPORATION

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

                                                                        Gross        Gross
                                                       Amortized     Unrealized    Unrealized     Fair
                                                         Cost           Gains        Losses       Value
                                                       ---------     ----------    ----------   ---------
                                                                                    
Available for sale at December 31, 1995:
   U.S. Treasury . . . . . . . . . . . . . . . . . .   $   4,531      $    26        $   3      $   4,554
   Federal agencies  . . . . . . . . . . . . . . . .      67,518        1,299           72         68,745
   State and municipal . . . . . . . . . . . . . . .      18,769          398           37         19,130
   Mortgage and other asset-backed securities. . . .      24,023          210          121         24,112
   Corporate obligations . . . . . . . . . . . . . .      26,120          264           55         26,329
   Marketable equity security. . . . . . . . . . . .         250                                      250
                                                       ---------     ----------    ----------   ---------
      Total available for sale . . . . . . . . . . .     141,211        2,197          288        143,120
                                                       ---------     ----------    ----------   ---------

Held to maturity at December 31, 1995:
   U.S. Treasury . . . . . . . . . . . . . . . . . .       3,103            8            2          3,109
   Federal agencies  . . . . . . . . . . . . . . . .      11,645           69           21         11,693
   State and municipal . . . . . . . . . . . . . . .      40,013          483           57         40,439
   Mortgage and other asset-backed securities. . . .       2,953            8                       2,961
   Corporate obligations . . . . . . . . . . . . . .         500                         1            499
                                                       ---------     ----------    ----------   ---------
      Total held to maturity . . . . . . . . . . . .      58,214          568           81         58,701
                                                       ---------     ----------    ----------   ---------
      Total investment securities  . . . . . . . . .   $ 199,425     $  2,765       $  369      $ 201,821
                                                       ---------     ----------    ----------   ---------
                                                       ---------     ----------    ----------   ---------

                                        Page 9 of 20

                             FIRST MERCHANTS CORPORATION

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

NOTE 5.     Loans and Allowance 

                                                      June 30,    December 31,
                                                        1996          1995
                                                     --------     ------------
Loans:
   Commercial and industrial loans                   $ 98,670       $ 85,690
   Bankers' acceptances and loans to financial
    institutions                                        1,465          2,925
   Agricultural production financing and other
    loans to farmers                                    6,414          5,796
   Real estate loans:
      Construction                                     10,864          9,913
      Commercial and farmland                          67,665         66,749
      Residential                                     173,284        166,414
   Individuals' loans for household and other
    personal expenditures                              79,711         79,993
   Tax-exempt loans                                       917            863
   Other loans                                            936            651
                                                     --------     ------------
         Total loans                                 $439,926       $418,994
                                                     --------     ------------
                                                     --------     ------------

                                                          Six Months Ended
                                                              June 30
                                                     -------------------------
                                                        1996          1995
                                                     --------     ------------
Allowance for loan losses:
   Balances, January 1                                $4,957         $ 4,998 
   Provision for losses                                  320             320 
   Recoveries on loans                                   105              94 
   Loans charged off                                    (463)           (316)
                                                     --------     ------------
   Balances, June 30                                  $4,919         $ 5,096
                                                     --------     ------------
                                                     --------     ------------

                                    Page 10 of 20

                             FIRST MERCHANTS CORPORATION

                                      FORM 10-Q

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

RESULTS OF OPERATIONS

     The Corporation has recorded 20 consecutive years of growth in operating 
earnings per share, reaching $1.95 in 1995, an increase of 8.3 per cent over 
1994.

     Return on assets, which exceeded 1 per cent for the first time in 1988, 
rose to 1.48 per cent in 1995, from 1.44 per cent in 1994, and 1.39 per cent 
in 1993. 

     Return on equity, which exceeded 12 per cent for the first time in 1989, 
was 13.01 per cent in 1993, 13.06 per cent in 1994, and 12.97 in 1995.  

     Following are the levels achieved in each of these ratios during the 
first half of 1996, as compared to the same period in 1995.

        -   Earnings per share were $1.02, up 5.2 per cent from $.97

        -   Return on assets was 1.51 per cent decreasing from 1.53 per cent

        -   Return on equity totaled 12.67 per cent compared to 13.34 per 
            cent for the first half of 1995

CAPITAL

     First Merchants Corporation's capital strength continues to exceed 
regulatory minimums and peer group averages.  Management believes that strong 
capital is a distinct advantage in the competitive environment in which the 
Corporation operates, and will provide a solid foundation for continued 
growth, and instilling customer confidence.  First Merchants Corporation and 
its subsidiaries have received honors from various financial rating services 
recognizing the Banks for safety and soundness.  Earnings asset quality and 
capital strength were considered in the ratings.

      The Corporation's capital to assets ratio was 11.02 per cent at 
December 31, 1994, 11.37 per cent at December 31, 1995, and 11.93 per cent at 
March 31, 1996.  At June 30, 1996, the Corporation had a Tier I risk-based 
capital ratio of 17.34 per cent, total risk-based capital ratio of 18.39 per 
cent and a leverage ratio of 11.88 per cent. Regulatory capital guidelines 
require a Tier I risk-based capital ratio of 4.0 per cent and a total 
risk-based capital ratio of 8.0 per cent.

       The Corporation has an employee stock purchase plan and an employee 
stock option plan.  Activity under this program is detailed in the 
Consolidated Condensed Statement of Changes in Stockholders' Equity.  The 
transactions under these plans have not had a material effect in the 
Corporation's capital position.

                                  Page 11 of 20

                             FIRST MERCHANTS CORPORATION

                                      FORM 10-Q

ASSET QUALITY/PROVISION FOR LOAN LOSSES

     First Merchants Corporation's asset quality and loan loss experience has 
consistently been superior to that of its peer group, as summarized below.  
Asset quality has been a major factor in the Corporation's ability to 
generate consistent profit improvement.  The increase in non-performing loans 
from December 1, 1995 to June 30, 1996 is primarily attributable to two loans 
placed in non-accrual status during the first half. Management is in the 
process of resolving these loan situations and anticipates that no material 
losses will occur.

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

       The following table summarizes the risk elements for First Merchants 
Corporation and its peer group, consisting of bank holding companies with 
average assets between $500 million and $1 billion.  The statistics were 
provided by the Federal Reserve System.

                                               Non-Performing Loans (1)
                                                 at December 31 as a 
                                                  Per Cent of Loans
                                             ---------------------------
                                               First
                                              Merchants            Peer
                                             Corporation          Group
                                             -----------          -----
1996 (June 30)                                  .94%               N/A

1995                                            .16                .91%

1994                                            .26               1.01

1993                                            .30               1.55

1992                                            .41               1.85

1991                                            .86               2.54

(1)  Accruing loans past due 90 days or more, and non-accruing loans, but 
excluding restructured loans.

    On June 30, 1996, the loan loss reserve stood at $4,919,000.  As a per 
cent of loans, the reserve stood at 1.12 per cent compared to 1.18 per cent 
at year end 1995, and 1.24 per cent at year end 1994.  The provision for loan 
losses for the first half of 1996 remained at $320,000 equal to the same 
period of 1995. The Corporation adopted SFAS No. 114 and No. 118, Accounting 
by Creditors for Impairment of a Loan and Accounting by Creditors for 
Impairment of a Loan - Income Recognition and Disclosures on January 1, 1995. 
Impaired loans totaled $3,122,000 at December 31, 1995.  An allowance for 
losses at December 31, 1995, was not deemed necessary for impaired loans 
totaling $1,900,000, but an allowance of $559,000 was recorded for the 
remaining balance of impaired loans of $1,222,000.  The balance of impaired 
loans has not changed significantly since December 31, 1995.

                                   Page 12 of 20

                             FIRST MERCHANTS CORPORATION

                                      FORM 10-Q

    The following table presents loan loss experience for the years indicated 
and compares the Corporation's loss experience to its peer group (table 
dollar amounts in thousands).

                                    1996 (1)   1995    1994    1993    1992
                                    --------  ------  ------  ------  ------
Allowance for loan losses:
   Balance at January 1              $4,957   $4,998  $4,800  $4,351  $3,867

Chargeoffs:
   Commercial                           101      586     526     391     588
   Real estate mortgage                                   41     129     100
   Installment                          362      296     346     388     552
                                    --------  ------  ------  ------  ------
      Total chargeoffs                  463      882     913     908   1,240
                                    --------  ------  ------  ------  ------

Recoveries:
   Commercial                            41       89     216     240     215
   Real estate mortgage                   5        4      30       5      38
   Installment                           59      108      83      98     114
                                    --------  ------  ------  ------  ------
      Total recoveries                  105      201     329     343     367
                                    --------  ------  ------  ------  ------

Net chargeoffs                          358      681     584     565     873
                                    --------  ------  ------  ------  ------

Provision for loan losses               320     640      782   1,014   1,357
                                    --------  ------  ------  ------  ------

Balance at December 31               $4,919   $4,957  $4,998  $4,800  $4,351
                                    --------  ------  ------  ------  ------
                                    --------  ------  ------  ------  ------

Ratio of net chargeoffs during
 the period to average loans 
 outstanding during the period       .17%(2)    .16%    .15%    .16%    .26%
Peer Group                            N/A       .26%    .25%    .49%    .65%

(1) Through June 30, 1996
(2) Annualized

                                   Page 13 of 20

                             FIRST MERCHANTS CORPORATION

                                      FORM 10-Q

LIQUIDITY AND INTEREST SENSITIVITY

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

    First Merchants Corporation's liquidity and interest sensitivity position 
at June 30, 1996, remained adequate to meet the Corporation's primary goal of 
achieving optimum interest margins while avoiding undue interest rate risk.  
The table below represents the Corporation's interest rate sensitivity 
analysis as of June 30, 1996 (table dollar amounts in thousands).

                                                          Interest-Rate Sensitivity Analysis
                                                                    At June 30, 1996
                                                 ---------------------------------------------------
                                                  1-180     181-365     1-5      Beyond
                                                   Days      Days      Years     5 Years     Total
                                                 --------   -------   --------   --------   --------
                                                                             
Rate-sensitive assets:
   Federal funds sold and interest-bearing
      deposits with financial institutions       $ 15,100                                   $ 15,100
   Investment securities                           30,528   $27,328   $128,632   $ 10,519    197,007
   Loans                                          230,703    40,876    116,211     52,136    439,926
   Federal Reserve and Federal Home
      Loan Bank stock                               1,722                             307      2,029
                                                 --------   -------   --------   --------   --------
Total rate-sensitive assets                       278,053    68,204    244,843     62,962    654,062
                                                 --------   -------   --------   --------   --------

Rate-sensitive liabilities:
   Interest-bearing deposits                      213,124    42,829    235,425         70    491,448
   Short-term borrowing                            41,611                                     41,611
                                                 --------   -------   --------   --------   --------
Total rate-sensitive liabilities                  254,735    42,829    235,425         70    533,059
                                                 --------   -------   --------   --------   --------

Periodic rate sensitivity gap                    $ 23,318   $25,375   $  9,418   $ 62,892
Cumulative rate sensitivity gap                    23,318    48,693     58,111    121,003

Cumulative rate sensitivity gap ratio
     June 30, 1996                                    109%      116%       111%       123%
     December 31, 1995                                117%      128%       113%       126%

                                   Page 14 of 20

                             FIRST MERCHANTS CORPORATION

                                      FORM 10-Q

EARNING ASSETS

    Earning assets increased $76.4 million during 1995 but declined $6.6 
million during the first half of 1996. 

    The following table presents the earning asset mix for the years ended 
1994, 1995 and at June 30, 1996 (table dollar amounts in millions).

                                                           Earning Assets
                                              ----------------------------------------
                                              June 30,    December 31,    December 31,
                                                1996         1995             1994
                                              --------    ------------    ------------
                                                                          
Federal funds sold and interest-bearing 
   deposits with financial institutions       $ 15.1        $ 37.7           $  3.7
Securities available for sale                  146.0         143.1             99.3
Securities held to maturity                     51.0          58.2             77.7
Mortgage loans held for sale                                    .7  
Federal Reserve and Federal Home
   Loan Bank stock                               2.0           1.9              1.9
Loans                                          439.9         419.0            401.6  
                                              --------    ------------    ------------
   Total                                      $654.0        $660.6           $584.2 
                                              --------    ------------    ------------
                                              --------    ------------    ------------

DEPOSITS AND BORROWINGS

    The following tables present the level of deposits and borrowed funds 
(Federal funds purchased, repurchase agreements with customers, U.S. Treasury 
demand notes, and Federal Home Loan Bank advance) based on period end levels 
and average daily balances for the past two years and the six month period 
ended June 30, 1996 (table dollar amounts in thousands).     

                                                Period End Balance
                                    ------------------------------------------
                                                                 Federal Home
                                                   Short-term      Loan Bank
                                     Deposits       Borrowing       Advance
                                    ----------   -------------  --------------
June 30, 1996 . . . . . . . . .      $574,225        $41,611        
December 31, 1995 . . . . . . .       588,156         33,975        $1,000
December 31, 1994 . . . . . . .       529,830         39,189  

                                                   Average Balances
                                    ------------------------------------------
                                                                 Federal Home
                                                   Short-term      Loan Bank
                                     Deposits       Borrowing       Advance
                                    ----------   -------------  --------------
June 30, 1996 . . . . . . . . .      $555,362        $39,577        $  940
December 31, 1995 . . . . . . .       538,539         44,799           515
December 31, 1994 . . . . . . .       514,029         45,639    

                                   Page 15 of 20

                             FIRST MERCHANTS CORPORATION

                                      FORM 10-Q

NET INTEREST INCOME

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

    The table below presents the Corporation's interest income, interest 
expense, and net interest income as a per cent of average earning assets for 
the four-year period ending in 1995 and the first half of 1996.  (Table 
dollar amounts in thousands.)

    Asset yields improved .71 per cent in 1995, while interest expense 
increased .81 per cent.  The resulting "spread" decrease of .10 per cent 
(4.64% vs 4.74%) was offset by a $32.7 million increase in average earning 
assets, enabling fully taxable equivalent net interest income to increase by 
$963,000. 

    During the first six months of 1996, interest income (FTE) grew $572,000 
on an annualized basis due to growth in average earning assets of $12.5 
million. Net interest income (FTE) as a per cent of earning assets remained 
level with the prior year as yields (FTE) and expenses both declined by .03 
per cent of average earning assets.

    The Corporation does consider the effect of changing rates in its loan 
and deposit pricing and structure decisions, and in its investment strategy; 
and expects no significant change in net interest income as a result of 
interest rate changes.

                          Interest Income    Interest Expense     Net Interest
                          (FTE) as a Per      as a Per Cent      Income (FTE) as     Average   Net Interest Income
                          Cent of Average      of Average         a Per Cent of      Earning    on a Fully Taxable
                           Earning Assets     Earning Assets      Earning Assets      Assets     Equivalent Basis
                          ---------------    ----------------    ---------------    ---------  --------------------
                                                                                
1996(1)                        8.12%              3.48%              4.64%          $642,301         $29,817

1995                           8.15               3.51               4.64            629,784          29,245

1994                           7.44               2.70               4.74            597,102          28,282

1993                           7.38               2.81               4.57            587,009          26,806

1992                           8.31               3.65               4.66            566,467          26,400

(1) First six months annualized.

                                   Page 16 of 20

                             FIRST MERCHANTS CORPORATION

                                      FORM 10-Q

OTHER INCOME

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

    Other income reached $6,907,000 in 1995, exceeding the prior year by 
$609,000 or 9.7 per cent.  Major factors include:

    1.  A $205,000 (8.0 per cent) increase in trust revenues.
    2.  A gain of $205,000 on the sale of approximately $8,000,000 of the
        Corporation's student loans.

    Other income in the first six months of 1996 amounted to $3,610,000 or 
12.4 per cent higher than the first six months of 1995.  $369,000 of the 
increase of $399,000 is attributable to four factors:

    1.  Trust revenues increased $104,000 (8.1 per cent).
    2.  Deposit service charges increased $99,000 (8.1 per cent).
    3.  Interchange fees for the Corporation's credit and debit card programs
        grew by $80,000 (55.9 per cent) due to increased product offerings.
    4.  The Corporation recorded securities gains of $20,000 compared to losses
        of $66,000 last year, an increase of $86,000.

OTHER EXPENSE

    Total "other expenses" represent non-interest operating expenses of the 
Corporation.  Those expenses amounted to $18,842,000 in 1995, an increase of 
2.2 per cent from the prior year.  

    Salary and benefit expenses, which account for over one-half of the 
Corporation's non-interest operating expenses, increased by $510,000 (5.1 per 
cent).  Increases in occupancy, equipment, printing and office supplies and 
advertising expenses totaling $449,000 were offset by a $530,000 reduction in 
the cost of deposit insurance and by a refund of $238,000 from the State of 
Indiana for intangibles taxes paid in 1988 and 1989.

    First half 1996 expenses of $9,546,000 were $243,000 or 2.6 per cent 
above the same period of 1995.  The following table details the change in 
"Other Expense".

                   1996 "Other Expense" Compared to 1995
                             (through June 30)
- -------------------------------------------------------------------------------
1.  Salary and benefit expense increased 4.2 per cent                 $228,000

2.  Various other operating expenses increased                         351,000

3.  FDIC deposit insurance premiums declined                          (574,000)

4.  1995 "other expense" included a refund from the State of
    Indiana for taxes paid in 1988 and 1989.  This served to
    reduce 1995 "Other Expense".                                       238,000
                                                                      --------

Net Change                                                            $243,000 
                                                                      --------
                                                                      --------

INCOME TAXES

    The increase in 1995 tax expense was attributable to a $1,241,000 
increase in pre-tax net income. 

    During the first half of 1996, income tax expense grew $190,000 from the 
same period one year earlier, primarily due to a $429,000 increase in pre-tax 
net income.

                                   Page 17 of 20

                              FIRST MERCHANTS CORPORATION

                                      FORM 10-Q

    The following is a breakdown, by year, of federal and state income taxes 
(table dollar amounts in thousands).

                                      Six Months Ended    Twelve Months Ended
                                          June 30,           December 31, 
                                      ----------------    -------------------
                                       1996      1995      1995         1994
                                      ------    ------    ------       ------
Federal taxes . . . . . . . . .       $2,103    $1,976    $4,146       $3,735

State taxes . . . . . . . . . .          682       619     1,302        1,172
                                      ------    ------    ------       ------
  Total   . . . . . . . . . . .       $2,785    $2,595    $5,448       $4,907
                                      ------    ------    ------       ------
                                      ------    ------    ------       ------
INFLATION

    Changing prices of goods, services and capital affect the financial 
position of every business enterprise.  The level of market interest rates 
and the price of funds loaned or borrowed fluctuate due to changes in the 
rate of inflation and various other factors, including government monetary 
policy.

    Fluctuating interest rates affect First Merchants' net interest income, 
loan volume, and other operating expenses, such as employees' salaries and 
benefits, reflecting the effects of escalating prices, as well as increased 
levels of operations and other factors.  As the inflation rate increases, the 
purchasing power of the dollar decreases.  Those holding fixed rate monetary 
assets incur a loss while those holding fixed rate monetary liabilities enjoy 
a gain.  The nature of a bank holding company's operations is such that there 
will be an excess of monetary assets over monetary liabilities and, thus, a 
bank holding company will tend to suffer from an increase the rate of 
inflation and benefit from a decrease.

                                   Page 18 of 20

                             FIRST MERCHANTS CORPORATION

                                      FORM 10-Q

                             PART II.  OTHER INFORMATION

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

    The 1996 Annual Meeting of Stockholders was held on April 4, 1996. 
Shareholders voted upon the election of directors and the ratification of the 
independent auditor.  No other matters were voted upon at the Annual Meeting.

Item 6.   Exhibits and Reports on Form 8-K

    (a)   No exhibits are required to be filed.

    (b)   No reports were filed on Form 8-K during the quarter ended June 30,
          1996.

                                   Page 19 of 20

                             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   August 12, 1996       by             /s/ Stefan S. Anderson 
     --------------------                 -----------------------------
                                              Stefan S. Anderson  
                                            President and Director 

Date   August 12, 1996       by             /s/ James L. Thrash 
     --------------------                 -----------------------------
                                                James L. Thrash 
                                            Chief Financial & Principal 
                                               Accounting Officer 

                                   Page 20 of 20

 9

THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 
CONSOLIDATED CONDENSED BALANCE SHEET (PAGE 3), CONSOLIDATED CONDENSED 
STATEMENT OF INCOME (PAGE 4), AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE 
TO SUCH FINANCIAL STATEMENTS.

 1,000

                   6-MOS
                          DEC-31-1996
                             JAN-01-1996
                               JUN-30-1996
                                          31,106
                               0
                                15,100
                                     0
                    145,992
                          51,015
                            51,188
                                        439,926
                                      4,919
                                 704,209
                                     574,225
                                    41,611
                              5,872
                                          0
                                0
                                          0
                                           633
                                      81,868
                 704,209
                                 19,224
                                5,752
                                   400
                                25,736
                              10,118
                              11,176
                           14,200
                                      320
                                  20
                                  9,546
                                  7,944
                       5,159
                                      0
                                            0
                                     5,159
                                     1.02
                                     1.02
                                       0
                                          0
                                         0
                                     0
                                      0
                                     0
                                        0
                                         0
                                    0
                                 0
                                  0
                              0