Shares of First Merchants were essentially flat at the last close, but the 10-Q reads like a corporate balance sheet in motion: the bank grew, and it paid for that growth with borrowed money.
The filing shows the acquisition of First Savings is not just a line item for goodwill; it changed how the bank funds itself and what sits on its balance sheet.
Here is the clearest dial the 10-Q flips: borrowings jumped, and management says FHLB advances are the main reason.
"Average borrowings increased $389.9 million, primarily driven by higher FHLB advances, including advances assumed in connection with the First Savings acquisition, and borrowings used to support balance sheet growth and liquidity needs."
First Merchants / 10-Q / 2026-07-31
That sentence compresses the filing's main shift: the bank assumed advances with the deal and leaned on wholesale funding to support a bigger balance sheet.
The filing also puts numbers on the funding mix at the deposit side. Interest expense on deposits ticked up as average interest-bearing deposits grew by roughly $933 million.
"Interest expense on deposits increased $5.6 million compared to the prior year period, reflecting a $932.8 million increase in average interest‑bearing deposit balances, partially offset by lower deposit pricing across all deposit categories."
First Merchants / 10-Q / 2026-07-31
Plain English read: deposits grew a lot, but the price of those deposits softened. The bank’s funding picture is now a mix of bigger, cheaper deposits and more wholesale borrowing.
Other balance-sheet consequences are visible in the 10-Q, too: the acquisition added goodwill, intangibles, life-insurance cash surrender value, and assumed liabilities tied to the deal and to a new Michigan headquarters. Those are one-time additions to scale; the borrowings and deposit dynamics are the recurring story.
Why this matters: a heavier reliance on FHLB advances changes interest‑rate exposure and liquidity posture. Cheaper deposit pricing sounds good for interest expense, until the wholesale borrowings that funded growth carry a higher, variable cost.
Two concrete receipts from this 10-Q settle the judgement calls into things you can monitor going forward: the level and cost of FHLB advances, and the trend in deposit pricing and deposit interest expense.
Watch for the next quarterly 10-Q to show whether average FHLB advance balances and the bank’s net interest income or margin move materially as the larger balance sheet weathers rate changes. That single disclosure will narrow the practical question the filing opens.
Can heavier FHLB borrowing and cheaper deposit pricing coexist with stable margins?
Source: First Merchants Corporation, 10-Q filed July 31, 2026.