Does First Merchants’ (FRME) Preferred Dividend Payout Reflect Confidence in Its Loan Quality Strategy?

• First Merchants Corporation has declared a quarterly cash dividend of $46.88 per share on its 7.50% Non-Cumulative Perpetual Preferred Stock Series A, with depositary shareholders receiving $0.4688 per share payable November 14, 2025, to stockholders of record as of October 31, 2025.
• This move comes amid heightened concerns about loan quality throughout the regional banking industry, triggered by recent large charge-offs and collateral issues reported by peer banks.
• We'll evaluate how First Merchants' continued dividend payments signal its financial strength amid renewed focus on sector-wide loan quality risks.

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First Merchants Investment Narrative Recap

To be a shareholder in First Merchants right now, you need conviction in the Midwest’s long-term economic resilience, ongoing loan demand, and the bank’s ability to manage risks like net interest margin compression and loan quality pressures. The newly declared preferred dividend reaffirms financial stability, but, given sector-wide concerns about credit quality, this specific news does not materially affect the main near-term catalyst, ongoing earnings growth, or the key risk around deteriorating loan performance.

Among recent events, the upcoming Q3 2025 earnings report set for October 22 is most relevant, coming at a time of investor sensitivity to loan quality disclosures by regional peers. Insights from this report are likely to have a more direct bearing on investor confidence and the trajectory for net interest income growth than the current dividend announcement.

Yet, in contrast, the risk that rising funding costs amid tight deposit competition could squeeze margins and earnings remains an issue that investors should watch for...

Read the full narrative on First Merchants (it's free!)

First Merchants' narrative projects $790.6 million revenue and $221.9 million earnings by 2028. This requires 7.4% yearly revenue growth and a $1.9 million decrease in earnings from $223.8 million today.

Uncover how First Merchants' forecasts yield a $46.83 fair value, a 31% upside to its current price.

Exploring Other Perspectives

Simply Wall St Community members provided two fair value estimates for First Merchants, ranging widely from US$28.00 to US$46.83. While some see upside, many are weighing ongoing risks from elevated funding costs that could impact long-term returns, so review the full range of opinions.

Explore 2 other fair value estimates on First Merchants - why the stock might be worth 22% less than the current price!

Build Your Own First Merchants Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your First Merchants research is our analysis highlighting 6 key rewards that could impact your investment decision.
• Our free First Merchants research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate First Merchants' overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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