First Merchants Corp. (FRME)
NASDAQ:FRME
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First Merchants
(NASDAQ:FRME)
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Rating:76Outperform
Price Target:
$41.00
▲(8.32% Upside)
Action:ReiteratedDate: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
Consistent, high-quality free cash flow and full conversion of net income to FCF provide durable internal funding for dividends, buybacks, loan growth and integration costs. Over the next 2–6 months this underpins capital flexibility and reduces dependence on external funding when deploying strategic initiatives.
Negative Factors
Cooling revenue growth
Slowing top-line momentum reduces operating leverage and makes near-term EPS reliant on margin management and cost saves. If revenue stagnation persists beyond 2–6 months, it limits the bank’s ability to grow net income organically and raises pressure to deliver acquisition synergies or fee gains to offset.
Read all positive and negative factors
Positive Factors
Negative Factors
Cash generation
Consistent, high-quality free cash flow and full conversion of net income to FCF provide durable internal funding for dividends, buybacks, loan growth and integration costs. Over the next 2–6 months this underpins capital flexibility and reduces dependence on external funding when deploying strategic initiatives.
Read all positive factors
First Merchants (FRME) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$2.40B
Dividend Yield3.72%
Average Volume (3M)451.61K
Price to Earnings (P/E)9.6
Beta (1Y)0.82
Revenue Growth-1.76%
EPS Growth32.44%
CountryUS
Employees2,120
SectorFinancial
Sector Strength70
IndustryBanks - Regional
Share Statistics
EPS (TTM)0.99
Shares Outstanding63,392,750
10 Day Avg. Volume463,948
30 Day Avg. Volume451,614
Financial Highlights & Ratios
PEG Ratio0.68
Price to Book (P/B)0.88
Price to Sales (P/S)2.06
P/FCF Ratio7.63
Enterprise Value/Market Cap1.38
Enterprise Value/Revenue3.15
Enterprise Value/Gross Profit5.17
Enterprise Value/Ebitda11.49
Forecast
1Y Price Target
$46.50Price Target Upside22.85% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering2
EPS Forecast (FY)4.11
Revenue Forecast (FY)$803.93M
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 esta...
How the Company Makes Money
First Merchants makes money primarily through banking spread and fee-based businesses. (1) Net interest income: The largest revenue driver for most regional banks, generated from the difference between interest earned on interest-earning assets (n...
First Merchants Earnings Call Summary
Earnings Call Date:Jan 26, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:Apr 28, 2026
Earnings Call Sentiment Positive
The call conveyed strong positive operational and financial momentum: record assets, loans, deposits, net income and EPS; robust loan and deposit growth; margin and fee income gains; solid capital ratios; and an accretive acquisition with planned cost synergies. Headwinds were noted but appear manageable: modest margin compression from rate cuts, a limited number of credit charge-offs and new nonaccruals, some short-term expense and integration costs, and a higher-cost mix of certain deposits. Management provided a constructive 2026 outlook (mid- to high-single-digit loan growth, double-digit fee income growth target, continued buybacks) and emphasized confidence in asset quality and capital positions. Overall, positives materially outweighed the setbacks discussed.Positive Updates
Record Financial Results
Record total assets of $19.0B, record total loans of $13.8B and record total deposits of $15.3B. Full-year net income was $224.1M and record diluted EPS of $3.88 (up ~13.8% YoY). Annual ROA was 1.21% and annual return on tangible common equity was 14.08%.
Negative Updates
Pressure on Loan Yield and Margin Headwinds
Total loan portfolio yield declined 8 bps from prior quarter to 6.32% due to recent Fed rate cuts. Management expects modest core margin compression of a few basis points in 2026 if rate cuts continue, despite deposit repricing efforts.
Read all updates
Q4-2025 Updates
Positive
Negative
Record Financial Results
Record total assets of $19.0B, record total loans of $13.8B and record total deposits of $15.3B. Full-year net income was $224.1M and record diluted EPS of $3.88 (up ~13.8% YoY). Annual ROA was 1.21% and annual return on tangible common equity was 14.08%.
Read all positive updates
Company Guidance
Management guided to continued mid-single-digit loan growth in Q1 and mid- to high-single-digit growth for 2026 (roughly 6–8%), driven by commercial C&I and consumer pipelines, supported by using expected investment portfolio cash flows ($282M next 12 months at a ~2.09% roll-off yield) to fund higher-yielding loans; they expect net interest income growth despite modest margin pressure (Q4 NIM 3.29% up 5 bps, total loan yield 6.32% down 8 bps, new/renewed loan yield 6.51%) with a small annual core NIM compression of a few basis points and a Q1 seasonal dip (~5 bps). On deposits, they highlighted rate relief (deposit rate down 12 bps to 2.32%, Q4 deposit growth $424.9M or 11.4% annualized; $800M of CDs maturing in Q1–Q2 with weighted average rates ~3.75% and 3.65%, 12‑month special at 3.30%), continued focus on funding mix and deposit cost, and net interest income upside from ~$350M of fixed-rate loan repricings (~4.40%) in 2026. They forecast double-digit noninterest income growth (~10%), budget core noninterest expense up ~3–5% (plus First Savings operating expense with close Feb 1 and integration in May), expect to realize ~27.5% annualized cost savings from the acquisition (mostly back half 2026), maintain efficiency <55% with strong operating leverage, and continue opportunistic buybacks while remaining well capitalized (CET1 11.7%, tangible common equity 9.38% pre-close, ~8.7–8.8% post-close, above 8% target). Asset quality guidance was stable: Q4 net charge-offs ~$6M (annualized ~18 bps), ACL $195.6M (coverage 1.42%) with NPAs $74.5M (adjusted NPA rate ~0.45%) and classified loans ~2.56%; overall earnings targets included continued NII and fee growth to support EPS accretion after closing the ~$2.4B First Savings acquisition.First Merchants Financial Statement Overview
Summary
Income Statement
74
Positive
Balance Sheet
72
Positive
Cash Flow
76
Positive
| 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
Neutral
37.85
Price Trends
39.02
Negative
37.90
Negative
37.89
Negative
Market Momentum
-0.40
Negative
47.73
Neutral
85.84
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For FRME, the sentiment is Neutral. The current price of 37.85 is above the 20-day moving average (MA) of 37.47, below the 50-day MA of 39.02, and below the 200-day MA of 37.89, indicating a neutral trend. The MACD of -0.40 indicates Negative momentum. The RSI at 47.73 is Neutral, neither overbought nor oversold. The STOCH value of 85.84 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for FRME.
First Merchants Risk Analysis
First Merchants disclosed 31 risk factors in its most recent earnings report. First Merchants reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
First Merchants Peers Comparison
UnderperformOutperform
Sector (68)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
76 Outperform | $2.40B | 9.57 | 9.46% | 3.72% | -1.76% | 32.44% | |
70 Outperform | $2.29B | 18.91 | 7.03% | 1.69% | -5.72% | -3.86% | |
68 Neutral | $2.19B | 8.81 | 9.51% | 3.33% | 11.63% | 5.58% | |
68 Neutral | $18.00B | 11.42 | 9.92% | 3.81% | 9.73% | 1.22% | |
67 Neutral | $2.04B | 10.97 | 10.28% | 2.97% | 6.98% | 15.08% | |
67 Neutral | $2.31B | 11.16 | 11.25% | ― | -0.37% | -20.30% | |
66 Neutral | $1.88B | 13.61 | 13.69% | 1.88% | 11.74% | 26.27% |
* Financial Sector Average
FRME
First Merchants
37.85
-1.10
-2.82%
BANR
Banner
59.74
-2.04
-3.30%
FBNC
First Bancorp
55.19
15.43
38.81%
NBTB
NBT Bancorp
41.86
0.40
0.96%
SYBT
Stock Yards Bancorp
63.91
-3.91
-5.77%
CUBI
Customers Bancorp
67.66
17.46
34.78%
First Merchants Corporate Events
Dividends
First Merchants Declares Quarterly Cash Dividend to Shareholders
Positive
Feb 10, 2026
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 sharehol...
Business Operations and StrategyExecutive/Board ChangesM&A Transactions
First Merchants Adds Larry Myers to Expanded Board
Positive
Feb 9, 2026
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-...
Business Operations and StrategyExecutive/Board Changes
First Merchants Adopts 2026 Senior Management Incentive Plan
Positive
Feb 6, 2026
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 exp...
Business Operations and StrategyM&A Transactions
First Merchants completes acquisition of First Savings Financial
Positive
Feb 2, 2026
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...
Business Operations and StrategyM&A TransactionsRegulatory Filings and Compliance
First Merchants clears final approval for First Savings merger
Positive
Jan 16, 2026
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 remai...
Dividends
First Merchants Declares Quarterly Dividend on Preferred Stock
Positive
Jan 12, 2026
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 shar...
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.