First Merchants (FRME) AI Stock Analysis

• Market Cap: $2.49B
• Dividend Yield: 3.72%
• Average Volume (3M): 411.94K
• Price to Earnings (P/E): 10.1
• Beta (1Y): 0.83
• Revenue Growth: -1.76%
• EPS Growth: 32.44%
• Country: US
• Employees: 2,120
• Sector: Financial
• Sector Strength: 70
• Industry: Banks - Regional
• EPS (TTM): 0.99
• Shares Outstanding: 63,392,750
• 10 Day Avg. Volume: 414,631
• 30 Day Avg. Volume: 411,940
• PEG Ratio: 0.68
• Price to Book (P/B): 0.88
• Price to Sales (P/S): 2.06
• P/FCF Ratio: 7.63
• Enterprise Value/Market Cap: 1.36
• Enterprise Value/Revenue: 3.23
• Enterprise Value/Gross Profit: 5.29
• Enterprise Value/Ebitda: 11.75
• 1Y Price Target: $46.50
• Price Target Upside: 18.90% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 2
• EPS Forecast (FY): 4.1
• Revenue Forecast (FY): $806.59M

• Rating: 76 Outperform
• Price Target: $46.00 ▲(17.62% Upside)
• Action: Reiterated Date: 02/26/26
• Date: Action: Reiterated 02/26/26

FRME scores well primarily on solid financial quality (profits, cash generation, and improving leverage) and an attractive valuation (low P/E with a solid dividend yield). The earnings call reinforced a positive outlook (growth targets, buybacks, and acquisition synergies), while the main offsets are slowing revenue momentum, expected modest margin compression, and some credit/integration-related near-term risk. Technicals are supportive but not strongly momentum-driven.

Positive Factors

Cash generation / Free cash flow

Consistent and rising free cash flow, with FCF matching net income, provides durable internal funding for dividends, buybacks and loan growth. Strong cash conversion reduces reliance on external financing, supporting capital returns and strategic investments over the next several quarters.

Improving leverage and balance sheet

Meaningful improvement in leverage and steady equity growth bolster financial flexibility and loss-absorption capacity. A stronger balance sheet supports continued lending, acquisition integration and opportunistic capital returns while lowering refinancing and liquidity risk over a mid-term horizon.

Strategic acquisition & scale

The First Savings deal enlarges the franchise, diversifies geography and product mix (SBA, net-lease platforms) and creates meaningful cost-synergy potential. Scale gains should increase fee income potential, efficiency and competitive position once integration delivers the planned savings.

Negative Factors

Slowing revenue growth

Top-line momentum has decelerated to flat year-over-year, reducing operating leverage. Persistently softer revenue forces greater dependence on margin expansion, cost cuts or M&A synergies to drive EPS, making near-term profitability gains more contingent on execution.

Margin/NIM pressure

Even small core NIM compression materially impacts a regional bank's net interest income and ROE. If deposit rate relief and repricing of securities are insufficient, recurring margin erosion will require offsetting loan growth, fee gains or cost reductions to sustain earnings power.

Elevated credit stress / NPAs

Rising charge-offs, new nonaccruals and higher NPAs signal localized asset-quality stress (construction, sponsor finance, CRE). Continued deterioration would increase provisions, strain earnings and capital, and could constrain lending or capital returns until reserves normalize.

First Merchants Business Overview & Revenue Model

Company Description

First Merchants Corporation operates as the financial holding company for First Merchants Bank that provides community banking services. It accepts time, savings, and demand deposits; and provides consumer, commercial, agri-business, and real estate mortgage loans, as well as public finance. The company also offers personal and corporate trust; brokerage and private wealth management; and letters of credit, repurchase agreements, and other corporate services. It operates 109 banking locations in Indiana, Illinois, Ohio, and Michigan counties. The company also offers its services through electronic and mobile delivery channels. First Merchants Corporation was founded in 1893 and is headquartered in Muncie, Indiana.

How the Company Makes Money

First Merchants generates revenue primarily through net interest income and non-interest income. Net interest income is derived from the difference between the interest earned on loans and the interest paid on deposits. The bank offers a variety of loans, including commercial, residential, and consumer loans, which contribute significantly to its interest income. Non-interest income comes from services such as wealth management fees, mortgage origination fees, and transaction fees from services like treasury management and merchant services. Additionally, the bank may engage in partnerships with other financial service providers, which can enhance its offerings and generate additional revenue streams. Overall, the company's diversified product portfolio and focus on customer service drive its financial performance.

First Merchants Financial Statement Overview

Summary

Solid overall fundamentals: resilient earnings with a healthy net margin, consistently positive free cash flow with strong cash conversion, and improving leverage (lower debt-to-equity). Offsetting factors are cooling revenue growth and some drift lower in margins/ROE versus 2021–2022 highs.

Income Statement

Revenue expanded meaningfully over the period (roughly doubling from 2020 to 2025), but growth has clearly cooled recently (2025 essentially flat vs. 2024). Profitability remains solid with a healthy 2025 net margin (~21.5%) and stable operating profitability, though margins have trended down from the unusually strong 2021–2022 levels. Net income improved in 2025 vs. 2024, signaling resilient earnings power, but the margin compression and slower top-line momentum temper the outlook.

Balance Sheet

The balance sheet looks generally sound: leverage improved with debt-to-equity declining to ~0.41 in 2025 from ~0.50 in 2024, and equity has grown steadily over time. Returns on equity are respectable for a regional bank (about 9.2% in 2025), though down from earlier peaks (~10–11% in 2021–2022). Total assets have grown over the cycle, but the step-down in ROE suggests efficiency/profitability is not keeping pace with balance sheet expansion.

Cash Flow

Cash generation is a relative strength: operating cash flow and free cash flow rose in 2025, and free cash flow has been consistently positive across the years provided. Free cash flow also matches net income in every period shown (free cash flow to net income = 1.0), indicating strong cash conversion in the dataset. The main blemish is volatility in free cash flow growth (notably a decline in 2023 before rebounding), suggesting cash generation can fluctuate year to year.

Breakdown	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	1.05B	1.05B	999.49M	712.95M	555.96M
Gross Profit	640.17M	591.01M	647.50M	611.39M	520.00M
EBITDA	288.54M	258.58M	270.94M	267.49M	251.49M
Net Income	226.00M	201.40M	223.79M	222.09M	205.53M
Balance Sheet
Total Assets	19.03B	18.31B	18.41B	17.94B	15.45B
Cash, Cash Equivalents and Short-Term Investments	1.49B	1.77B	2.18B	2.23B	2.99B
Total Debt	999.93M	1.16B	1.03B	1.31B	634.25M
Total Liabilities	16.56B	16.01B	16.16B	15.90B	13.54B
Stockholders Equity	2.47B	2.30B	2.25B	2.03B	1.91B
Cash Flow
Free Cash Flow	283.65M	266.21M	258.83M	284.29M	215.34M
Operating Cash Flow	283.65M	266.21M	258.83M	284.29M	215.34M
Investing Cash Flow	-773.82M	-252.42M	-344.43M	-462.69M	-1.48B
Financing Cash Flow	486.72M	-38.82M	75.65M	133.84M	1.24B

First Merchants Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 39.11
• 50DMA: Negative
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For FRME, the sentiment is Negative. The current price of 39.11 is below the 20-day moving average (MA) of 41.41, below the 50-day MA of 39.54, and above the 200-day MA of 38.17, indicating a neutral trend. The MACD of 0.18 indicates Positive momentum. The RSI at 42.25 is Neutral, neither overbought nor oversold. The STOCH value of 20.71 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for FRME.

First Merchants Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
FRME	76 Outperform	$2.49B	10.07	9.47%	3.72%	-1.76%	32.44%
FBNC	75 Outperform	$2.41B	21.20	6.39%	1.69%	-5.72%	-3.86%
NBTB	68 Neutral	$2.23B	12.84	8.87%	3.33%	11.63%	5.58%
Sector *	68 Neutral	$18.00B	11.42	9.92%	3.81%	9.73%	1.22%
BANR	67 Neutral	$2.06B	10.44	10.28%	2.97%	6.98%	15.08%
CUBI	67 Neutral	$2.36B	11.14	11.34%	―	-0.37%	-20.30%
SYBT	66 Neutral	$1.91B	13.50	13.69%	1.88%	11.74%	26.27%

First Merchants Corporate Events

First Merchants Declares Quarterly Cash Dividend to Shareholders

On February 9, 2026, First Merchants Corporation declared a cash dividend of $0.36 per common share, underscoring its ongoing practice of returning capital to shareholders. The dividend is scheduled to be paid on March 20, 2026, to common shareholders of record as of March 6, 2026, providing near-term income to investors and signaling management’s confidence in the company’s financial position.

The most recent analyst rating on (FRME) stock is a Buy with a $49.00 price target. To see the full list of analyst forecasts on First Merchants stock, see the FRME Stock Forecast page.

First Merchants Adds Larry Myers to Expanded Board

On February 9, 2026, First Merchants Corporation expanded its Board of Directors from 12 to 13 members and appointed Larry W. Myers to the new Class III seat, with his initial term running until the 2026 annual shareholders meeting. Myers, a long-time community banking executive, was also named to the Boards of First Merchants Corporation and First Merchants Bank and assigned to the corporation’s Risk and Credit Policy Committee.

Myers’ appointment follows the completion of the merger between First Merchants and First Savings Bank on February 1, 2026, which strengthened First Merchants’ presence in southern Indiana. Executives highlighted that his decades of experience, leadership roles in state and national banking associations, and deep knowledge of the southern Indiana market are expected to bolster strategic governance, support disciplined growth, and ensure the region retains a strong voice within the enlarged franchise.

The most recent analyst rating on (FRME) stock is a Buy with a $49.00 price target. To see the full list of analyst forecasts on First Merchants stock, see the FRME Stock Forecast page.

First Merchants Adopts 2026 Senior Management Incentive Plan

On February 3, 2026, First Merchants Corporation’s board approved a 2026 Senior Management Incentive Compensation Program, a non-equity cash incentive plan for named executive officers and other senior managers, with payout opportunities expressed as a percentage of base salary and scaled at threshold, target and maximum performance levels. The plan ties incentive payouts primarily to the bank’s operating earnings on a diluted GAAP basis, with the chief commercial officer’s award additionally linked to commercial business revenue and net contribution, applies strict threshold and cap rules, requires continued employment at payout (subject to limited exceptions), and is subject to the company’s clawback policy for payments based on materially inaccurate financial results or as otherwise required by law, underscoring a stronger pay-for-performance and accountability framework for senior leadership compensation.

The most recent analyst rating on (FRME) stock is a Buy with a $49.00 price target. To see the full list of analyst forecasts on First Merchants stock, see the FRME Stock Forecast page.

First Merchants completes acquisition of First Savings Financial

On February 1, 2026, First Merchants Corporation completed its previously announced stock-based acquisition of First Savings Financial Group, legally merging First Savings into First Merchants and subsequently combining First Savings Bank with and into First Merchants Bank. The all-stock transaction, which converted each First Savings share into 0.85 of a First Merchants share and included cash settlements for options and fractional shares, will add roughly $2.4 billion in assets from one of southern Indiana’s largest community banks and expand First Merchants’ footprint in southern Indiana and the broader Midwest through First Savings’ community banking network and national single-tenant net lease and SBA lending platforms. Following the deal, First Merchants’ assets rise to approximately $21.4 billion, reinforcing its position as the second-largest financial holding company headquartered in Indiana, with integration of the combined operations expected to be completed in the second quarter of 2026, and executives from both institutions emphasizing enhanced scale, diversification and community-focused service as strategic benefits for customers and local markets.

The most recent analyst rating on (FRME) stock is a Buy with a $46.00 price target. To see the full list of analyst forecasts on First Merchants stock, see the FRME Stock Forecast page.

First Merchants clears final approval for First Savings merger

First Merchants Corporation announced that on January 15, 2026, it received a non-objection from the Federal Reserve Bank of Chicago to its waiver request tied to the pending merger with First Savings Financial Group, Inc., clearing the last remaining regulatory hurdle. The transaction, governed by a merger agreement signed on September 24, 2025, had already secured approvals from the Federal Deposit Insurance Corporation, the Indiana Department of Financial Institutions, the boards of both companies in September 2025, and First Savings’ shareholders on December 19, 2025; with all regulatory and corporate approvals in place, the parties now expect the merger to become effective on February 1, 2026, subject only to customary closing conditions, positioning First Merchants for an expanded footprint and enhanced scale in its regional banking markets.

The most recent analyst rating on (FRME) stock is a Buy with a $44.00 price target. To see the full list of analyst forecasts on First Merchants stock, see the FRME Stock Forecast page.

First Merchants Declares Quarterly Dividend on Preferred Stock

On January 12, 2026, First Merchants Corporation announced that its board of directors declared a quarterly cash dividend of $46.88 per share on its 7.50% Non-Cumulative Perpetual Preferred Stock Series A, equivalent to $0.4688 per depositary share, payable on February 16, 2026, to stockholders of record as of January 30, 2026. The decision underscores the bank holding company’s continued commitment to returning capital to holders of its preferred securities, signaling stability in its capital management strategy and providing income visibility for preferred shareholders.

The most recent analyst rating on (FRME) stock is a Buy with a $42.00 price target. To see the full list of analyst forecasts on First Merchants stock, see the FRME Stock Forecast page.