First Merchants (FRME) Stock Forecast & Price Target

First Merchants Corp has demonstrated robust loan growth, with average loans increasing by 6% and ending period loans held for investment (HFI) climbing 9% quarter-over-quarter, reflecting solid demand and operational performance. The company exhibits strong profitability metrics, reporting a return on assets (ROA) of 1.20% and a return on tangible common equity (ROTCE) of 13.8% in the third quarter, alongside improved capital ratios, as evidenced by a tangible common equity (TCE) growth of 26 basis points to 9.18%. Additionally, projected growth in net interest income (NII) and operating leverage expectations for 2026, coupled with anticipated share gains from technology enhancements in treasury management and core fee businesses, position the firm favorably for future performance.

First Merchants Corp has reported core fee income of $32.5 million, which fell 1-2% short of expectations due to lower mortgage generation revenue, indicating potential weaknesses in their revenue streams. The company anticipates moderate net interest margin (NIM) pressure to 3.15% by 4Q26, driven by loan yield headwinds as interest rates decrease and competitive pressures on deposit pricing intensify. Additionally, while non-performing assets (NPAs) have slightly decreased, potential risks such as deterioration in credit quality, slow growth in loans and core deposits, and elevated operating expenses present concerns for the company’s financial stability going forward.