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First Merchants
(NASDAQ:FRME)
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Rating:69Neutral
Price Target:
$44.00
â–²(5.57% Upside)
Action:Reiterated
Date:10/22/26
FRME scores well on fundamentals and cash-flow quality, supported by reasonable valuation and an attractive dividend. The main offsets are mixed/weak technical momentum and earnings-call risk items around elevated credit activity and higher expense levels, despite constructive margin and capital-return commentary.
Positive Factors
Margin and revenue growth
Higher net interest margin and strong year-to-date net interest income growth indicate improving earnings power from the core banking franchise. Continued loan repricing and a higher-yielding asset mix can support revenue durability over the next several quarters, provided funding costs remain controlled.
Negative Factors
Elevated credit activity
Recent charge-offs, new nonaccrual loans, and higher criticized classifications show that credit normalization remains an important earnings risk. Although management states that major relationships were previously reserved, further deterioration could increase provisions and reduce profitability over the coming quarters.
Read all positive and negative factors
Positive Factors
Negative Factors
Margin and revenue growth
Higher net interest margin and strong year-to-date net interest income growth indicate improving earnings power from the core banking franchise. Continued loan repricing and a higher-yielding asset mix can support revenue durability over the next several quarters, provided funding costs remain controlled.
Read all positive factors
First Merchants (FRME) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$2.53B
Dividend Yield3.59%
Average Volume (3M)505.98K
Price to Earnings (P/E)12.6
Beta (1Y)0.73
Revenue Growth7.98%
EPS Growth-19.37%
CountryUS
Employees2,086
SectorFinancial
Sector Strength70
IndustryBanks - Regional
Share Statistics
EPS (TTM)3.14
Shares Outstanding62,210,133
10 Day Avg. Volume373,946
30 Day Avg. Volume505,982
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 Cap1.43
Enterprise Value/Revenue3.32
Enterprise Value/Gross Profit5.64
Enterprise Value/Ebitda15.15
Forecast
1Y Price Target
$46.67Price Target Upside11.96% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering3
EPS Forecast (FY)3.24
Revenue Forecast (FY)$806.11M
First Merchants Business Overview & Revenue Model
Company Description
First Merchants Corporation operates as a financial holding entity, primarily conducting its business through its subsidiary, First Merchants Bank. This institution delivers a full spectrum of community banking solutions. It accepts various types ...
How the Company Makes Money
First Merchants primarily makes money through (1) net interest income and (2) noninterest income. Net interest income is earned by collecting interest on loans and other interest-earning assets (such as securities) and paying interest on funding s...
First Merchants Earnings Call Summary
Earnings Call Date:Oct 21, 2026
(Q3-2026)
| % Change Since: |
Next Earnings Date:Jan 28, 2027
Earnings Call Sentiment Positive
The call was broadly positive, supported by double-digit earnings and revenue growth, net interest margin expansion, strong capital, continued organic loan and deposit opportunities, and confidence in the leadership transition. The main challenges were modest quarterly loan growth, softer consumer mortgage demand, elevated but largely previously reserved credit activity, higher expenses, and some near-term fee-income and margin offsets.Positive Updates
Strong Third-Quarter Earnings Growth
Third-quarter net income was $67.8 million, or $1.09 per diluted share. Earnings per share increased 11% from the third quarter of last year and nearly 30% from the third quarter of 2024. Adjusted EPS, excluding a small amount of remaining acquisition-related expenses, was $1.10.
Negative Updates
Modest Third-Quarter Loan Growth
Third-quarter loans increased at a 1.8% annualized rate, which management described as more modest after a strong second quarter. Overall commercial loans were relatively flat because normal-course payoffs in sponsor finance and shared national credit portfolios offset production elsewhere.
Read all updates
Q3-2026 Updates
Positive
Negative
Strong Third-Quarter Earnings Growth
Third-quarter net income was $67.8 million, or $1.09 per diluted share. Earnings per share increased 11% from the third quarter of last year and nearly 30% from the third quarter of 2024. Adjusted EPS, excluding a small amount of remaining acquisition-related expenses, was $1.10.
Read all positive updates
Company Guidance
Management expects loan growth to continue through the fourth quarter in the mid single digits, net charge offs of 38 to 40 basis points for the remainder of the year, not for the quarter, but for the full year annualized, and a more normalized charge off run rate of 20 to 25-basis points; specific reserves could resolve around $10 million or so, with coverage expected to be low to mid 1 thirties. Q4 margin is expected to be stable, with a little bit of lift in 2027, while Q4 expenses are expected to use the Q3 run rate and 2027 expense growth is expected to be 3% to 5%; Q4 fee income should be a pretty consistent level with Q3, client related fee categories are expected to grow somewhere between 8% to 10% in 2027, share buyback is expected at an elevated level in Q4 maybe potentially in Q1 as well, and a 14% effective tax rate is suggested for modeling. Each 25-basis point rate hike typically increases margin 1 to 2 basis points, and about 350 million of fixed rate loans at a 4.90 rate will reprice over the next 12 months.First Merchants Financial Statement Overview
Summary
Income Statement
72
Positive
Balance Sheet
68
Positive
Cash Flow
75
Positive
| Breakdown | TTM | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 1.09B | 1.05B | 1.05B | 999.49M | 712.95M | 555.96M |
| Gross Profit | 640.32M | 640.17M | 591.01M | 647.50M | 611.39M | 520.00M |
| EBITDA | 238.28M | 288.54M | 258.58M | 270.94M | 267.49M | 251.49M |
| Net Income | 185.97M | 226.00M | 201.40M | 223.79M | 222.09M | 205.53M |
Balance Sheet | ||||||
| Total Assets | 21.35B | 19.03B | 18.31B | 18.41B | 17.94B | 15.45B |
| Cash, Cash Equivalents and Short-Term Investments | 3.91B | 1.49B | 1.77B | 2.18B | 2.23B | 2.99B |
| Total Debt | 1.60B | 999.93M | 1.16B | 1.03B | 1.31B | 634.25M |
| Total Liabilities | 18.65B | 16.56B | 16.01B | 16.16B | 15.90B | 13.54B |
| Stockholders Equity | 2.70B | 2.47B | 2.30B | 2.25B | 2.03B | 1.91B |
Cash Flow | ||||||
| Free Cash Flow | 314.90M | 283.65M | 266.21M | 258.83M | 284.29M | 215.34M |
| Operating Cash Flow | 314.90M | 283.65M | 266.21M | 258.83M | 284.29M | 215.34M |
| Investing Cash Flow | -365.68M | -773.82M | -252.42M | -344.43M | -462.69M | -1.48B |
| Financing Cash Flow | 55.88M | 486.72M | -38.82M | 75.65M | 133.84M | 1.24B |
First Merchants Technical Analysis
Positive
41.68
Price Trends
40.70
Negative
41.46
Negative
40.11
Positive
Market Momentum
-0.13
Negative
56.03
Neutral
85.81
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For FRME, the sentiment is Positive. The current price of 41.68 is above the 20-day moving average (MA) of 39.72, above the 50-day MA of 40.70, and above the 200-day MA of 40.11, indicating a neutral trend. The MACD of -0.13 indicates Negative momentum. The RSI at 56.03 is Neutral, neither overbought nor oversold. The STOCH value of 85.81 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive 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 |
|---|---|---|---|---|---|---|---|
82 Outperform | $1.91B | 13.41 | 12.17% | 2.40% | 21.78% | 43.92% | |
79 Outperform | $2.10B | 11.96 | 13.75% | 1.92% | 3.90% | 20.76% | |
77 Outperform | $3.43B | 11.37 | 10.07% | 3.09% | 11.65% | 13.28% | |
74 Outperform | $2.50B | 10.91 | 9.51% | 3.43% | 35.64% | 113.53% | |
71 Outperform | $1.45B | 13.33 | 14.67% | 3.56% | 1.83% | 18.85% | |
69 Neutral | $2.53B | 12.56 | 7.54% | 3.59% | 7.98% | -19.37% | |
68 Neutral | $18.00B | 11.42 | 9.92% | 3.81% | 9.73% | 1.22% |
* Financial Sector Average
FRME
First Merchants
40.68
5.27
14.88%
SRCE
1St Source
87.29
29.13
50.09%
BUSE
First Busey
30.33
7.98
35.72%
FFBC
First Financial Bancorp
32.64
9.44
40.70%
GABC
German American Bancorp
50.84
12.74
33.45%
LKFN
Lakeland Financial
58.39
1.72
3.03%
First Merchants Corporate Events
Dividends
First Merchants Declares Quarterly Preferred Stock Dividend
Positive
Oct 15, 2026
On October 15, 2026, First Merchants Corporation announced that its Board of Directors declared a quarterly cash dividend on its 7.50% Non-Cumulative Perpetual Preferred Stock Series A. The dividend is set at $46.88 per share, equivalent to $0.468...
Business Operations and StrategyExecutive/Board Changes
First Merchants Announces CEO Retirement and Leadership Transition
Positive
Oct 1, 2026
On October 1, 2026, First Merchants Corporation announced that long-time Chief Executive Officer Mark Hardwick will retire at the end of 2026 after 29 years with the bank, marking the conclusion of a tenure that included 18 acquisitions and signif...
Business Operations and StrategyPrivate Placements and FinancingRegulatory Filings and Compliance
First Merchants Issues New Subordinated Notes Offering
Positive
Sep 25, 2026
First Merchants Corporation entered into an indenture and first supplemental indenture with U.S. Bank Trust Company, National Association, on September 25, 2026, to issue $100 million of 6.750% fixed-to-floating rate subordinated notes due October...
Business Operations and StrategyStock BuybackPrivate Placements and Financing
First Merchants Launches $100 Million Subordinated Notes Offering
Positive
Sep 24, 2026
On September 23, 2026, First Merchants Corporation entered into an underwriting agreement with Piper Sandler Co. and other underwriters for a registered public offering of $100 million in 6.750% fixed-to-floating rate subordinated notes due 2036....
Dividends
First Merchants Declares Quarterly Cash Dividend to Shareholders
Positive
Aug 14, 2026
On August 14, 2026, First Merchants Corporation declared a cash dividend of $0.37 per common share, reinforcing its capital return strategy to shareholders. The dividend will be paid on September 18, 2026 to common stockholders of record as of Sep...
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.