N / E / W / S     R / E / L / E / A / S / E


August 22, 2001

FOR IMMEDIATE RELEASE
For more information, contact:
James L. Thrash, Senior Vice President/Chief Financial Officer, 765-747-1390
http://firstmerchants.com

SOURCE: First Merchants Corporation

FIRST MERCHANTS ANNOUNCES 19TH CONSECUTIVE ANNUAL DIVIDEND INCREASE

First Merchants Corporation  (NASDAQ-FRME) has announced today that its Board of
Directors has declared a 5% share dividend payable to its shareholders of record
on September  3, 2001.  The Board also  declared a $.23 per share cash  dividend
payable to shareholders of record on September 10, 2001. Both the stock and cash
dividends  will be distributed  September 24, 2001.  Although the $.23 per share
cash  dividend  does not  represent  an  increase  from the  prior  four  fiscal
quarters, shareholders of record on September 3, 2001, are effectively receiving
the equivalent of a 5% increase by virtue of the stock dividend. First Merchants
Corporation  has raised its  dividend  every year for the past 19 years,  and is
preserving that record through this share dividend.

Michael L. Cox,  President  and Chief  Executive  Officer,  commented  that "our
Corporation has significant new  opportunities for growth that will be supported
by greater internally generated capital in the future. Our dividend payout ratio
is  currently  one of the highest  among our peer group  companies,  and we have
elected to reward our  shareholders  with this 5% share dividend to reflect both
our  appreciation  of their  support  and our future  prospects.  The ability to
generate and retain a greater portion of operating earnings will be important as
we pursue the opportunities available to us. Our annualized dividend of $.92 per
share currently  represents a 3.8% yield at today's market price.  This yield is
well above current Money Market rates and represents an attractive payout to our
shareholders."

First Merchants  recently  announced first half 2001 cash basis earnings of $.97
per share  compared to $.90 in 2000, a 7.8% increase.  Second  quarter  earnings
were stronger and represented a 10.9% increase on a cash basis.  The Corporation
is experiencing  improved  operating margins and has seen significant  growth in
its lending portfolios throughout its eight-bank family of community banks.

First  Merchants  Corporation  is an  East  Central  Indiana  Financial  Holding
Company.  Its subsidiaries include First Merchants Bank in Delaware and Hamilton
Counties,  the Madison  Community Bank in Madison  County,  First United Bank in
Henry County,  Union County  National Bank, The Randolph  County Bank, the First
National  Bank of Portland in Jay County,  Decatur Bank & Trust Company in Adams
County and Frances Slocum Bank in Wabash.  The  Corporation  also operates First
Merchants Insurance Services, a full-service  property casualty,  personal lines
and healthcare insurer, headquartered in Muncie, Indiana.

First  Merchants  Corporation  common  stock is traded  over-the-counter  on the
NASDAQ  National Market System under the symbol FRME and is rated A+ by Standard
and Poors  Corporation.  Quotations  are carried in daily  newspapers and can be
found on the company's Internet Web page.




(http://firstmerchants.com).  Nine  brokerage  firms  make  a  market  in  First
Merchants  Corporation stock:  Robert W. Baird & Co., Inc.; daily newspapers and
can be found on the company's Internet Web ny's Internet and Kellog.


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