First Merchants delivered a positive third quarter, with results that exceeded Wall Street’s expectations for both revenue and adjusted earnings per share. Management credited the quarter’s performance to higher net interest margin, disciplined credit management, and stable deposit growth. CEO Mark Hardwick highlighted that “net interest margin expanded to its highest level in more than two years,” driven by a favorable shift toward higher-yielding loans and proactive portfolio management. The company also noted that previously identified problem credits were resolved as planned, limiting new provision expenses and stabilizing asset quality.
Is now the time to buy FRME? Find out in our full research report (it’s free for active Edge members).
First Merchants (FRME) Q3 2026 highlights:
- Revenue: $205.3 million vs analyst estimates of $203.9 million (19.1% year-on-year growth, 0.7% beat)
- Adjusted EPS: $1.10 vs analyst estimates of $1.04 (5.4% beat)
- Market Capitalization: $2.54 billion
While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our top 5 analyst questions from First Merchants’s Q3 earnings call
- Daniel Tamayo (Raymond James) pressed for details on how much of the new nonaccrual loans would be charged off next quarter and whether reserves would remain stable. CFO Michele Kawiecki clarified that not the full amount would be charged off and reserve coverage ratios are expected to remain in the low to mid-1.30% range.
- Russell Gunther (Stephens) asked about the drivers of anticipated loan growth and the impact of interest rates on demand. President Michael Stewart explained that core commercial and asset-based lending segments have strong pipelines, while higher rates mainly impact consumer mortgage demand.
- Damon Del Monte (KBW) inquired about the outlook for fee income, especially mortgage banking and noninterest income. Kawiecki said fee income should remain stable, with gains from new business lines like SBA and first lien HELOCs offsetting softness in mortgage banking.
- Nathan Race (Piper Sandler) questioned if expense growth would include new banker hires, especially in Michigan. Stewart confirmed that expansion in Michigan is a focus due to market opportunities, but overall team size is largely stable elsewhere.
- Brendan Nosal (Hovde Group) sought clarification on the decline in the shared national credit (SNC) portfolio and risk appetite. Stewart and Chief Credit Officer John Martin explained this was due to selective participation decisions and normal renewals, not a broad portfolio strategy shift.
Catalysts in upcoming quarters
In the coming quarters, the StockStory team will be monitoring (1) the pace and mix of loan growth across commercial and consumer segments, (2) the impact of expense investments on deposit gathering and organic expansion, and (3) credit performance as the bank works through the resolution of existing problem loans. Successful integration of new hires in Michigan and the sustained execution of the company’s relationship-based growth strategy will also be critical signposts.
First Merchants currently trades at $41.41, up from $39.96 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).
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