First Merchants: 3 Key Takeaways for Long-Term Investors

On its third-quarter 2026 earnings call, held on Oct. 22, 2026, First Merchants (NASDAQ:FRME) announced third quarter net income of $67.8 million. The Midwestern regional bank is expanding its net interest margin (the difference between interest earned on loans and interest paid on deposits) while clearing legacy problem loans without incurring major new provision expenses.

Three takeaways from the call stand out for long-term investors.

1. Pricing Discipline Drives Loan Yield Improvement

Management continues to push higher origination yields across its commercial portfolio to protect earnings against funding costs. That pricing discipline ensures higher-yielding production replaces older assets over time.

During the quarter, new and renewed loans originated at an average yield of 6.34% compared to 6.28% in the prior quarter which continues to be a tailwind for the overall portfolio yield and reflects the pricing discipline from our team.
-- Michele Kawiecki, Chief Financial Officer

2. Problem Loans Require Minimal New Provisions

Bad loan write-offs increased during the quarter, but they caused little bottom-line damage because management had already set aside reserves. Moving these stressed accounts to nonaccrual status (where a bank stops recording unpaid interest as income) resolves legacy issues without taking a fresh bite out of earnings.

Although these relationships were newly reported as nonaccrual in the third quarter, the expected loss content had already been recognized through specific reserves established in prior periods.
-- John J. Martin, Chief Credit Officer

3. Organic Growth Replaces Shared National Credit Exposure

The bank is intentionally reducing its exposure to shared national credits (large syndicated loans divided among multiple institutions) in favor of core regional business. This pivot trades transactional corporate volume for sticky local client relationships.

Our primary business strategy is to build on our Midwestern strength through disciplined organic growth. Our goal is to be the bank of choice across the Midwest, earn through trusted relationships.
-- Michael J. Stewart, President

Looking Ahead

Earnings power is accelerating following recent acquisition integrations, and leadership isn't hiding its satisfaction. Strong Midwestern relationships give the bank durable deposit stability, while management prioritizes loan pricing discipline.

The third quarter delivered on that belief.
-- Mark K. Hardwick, Chief Executive Officer

As CEO Mark Hardwick retires at year-end, incoming leadership keeps its sights set on long-term compound growth.

And together with Michael, John, and the rest of our leadership team, Mike and First Merchants are well positioned to build on our Midwestern strength deepen our client relationships, and deliver sustainable earnings growth and shareholder value.
-- Mark K. Hardwick, Chief Executive Officer

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