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First Merchants
(NASDAQ:FRME)
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Rating:67Neutral
Price Target:
$43.00
â–²(3.17% Upside)
Action:Reiterated
Date:10/01/26
FRME scores in the upper-middle range primarily on solid financial performance and cash flow quality, supported by reasonable valuation and a good dividend yield. The score is held back by weak technical momentum and notable, relationship-specific credit deterioration discussed on the latest call, with additional caution from higher-cost capital issuance despite improved flexibility.
Positive Factors
Cash generation quality
Operating cash flow of about $315M TTM, 12% FCF growth, and FCF covering net income indicate earnings are converting into cash. That supports organic lending, technology investment, dividends and buybacks, while reducing reliance on external funding to sustain the franchise over coming quarters.
Negative Factors
Credit deterioration
Two commercial credits moving to nonaccrual and a $33M provision create a direct earnings drag and raise uncertainty around credit costs. Management expects 2026 net charge-offs of roughly 40–45 basis points, which could limit capital generation and offset operating gains over the next several quarters.
Read all positive and negative factors
Positive Factors
Negative Factors
Cash generation quality
Operating cash flow of about $315M TTM, 12% FCF growth, and FCF covering net income indicate earnings are converting into cash. That supports organic lending, technology investment, dividends and buybacks, while reducing reliance on external funding to sustain the franchise over coming quarters.
Read all positive factors
First Merchants (FRME) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$2.49B
Dividend Yield3.64%
Average Volume (3M)438.79K
Price to Earnings (P/E)12.8
Beta (1Y)0.77
Revenue Growth5.05%
EPS Growth-19.06%
CountryUS
Employees2,086
SectorFinancial
Sector Strength70
IndustryBanks - Regional
Share Statistics
EPS (TTM)3.14
Shares Outstanding62,801,422
10 Day Avg. Volume601,233
30 Day Avg. Volume438,792
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 Cap<0.01
Enterprise Value/Revenue<0.01
Enterprise Value/Gross Profit<0.01
Enterprise Value/Ebitda<0.01
Forecast
1Y Price Target
$50.50Price Target Upside21.16% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering2
EPS Forecast (FY)3.24
Revenue Forecast (FY)$805.79M
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:Jul 22, 2026
(Q2-2026)
| % Change Since: |
Next Earnings Date:Oct 21, 2026
Earnings Call Sentiment Neutral
The call presented a mix of solid operational momentum — including NIM expansion, strong loan production, revenue growth, successful integration of First Savings, improved liquidity, and resumed buybacks — alongside material, relationship-specific credit deterioration that required a sizeable provision and is expected to drive higher net charge-offs for 2026. Management characterized the credit issues as isolated and the broader portfolio as performing within expectations. Given the meaningful positive trends in revenue, margins, balance sheet repositioning and capital return capacity, but balanced by the notable near-term credit headwinds and increased NPAs/classified loans, the overall tone is balanced with cautious optimism.Positive Updates
Scale and Franchise Expansion
Operating footprint of 126 banking centers following the First Savings acquisition; total assets $21.3B, loans $15.5B and deposits $16.8B, demonstrating expanded geographic and balance sheet scale.
Negative Updates
Two Significant Credits Moved to Nonaccrual
Two commercial credits were placed on nonaccrual (a $28.1M participation in a syndicated wireless retail credit and a $13.7M sponsor-financed roofing contractor loan), prompting specific reserves and negatively impacting Q2 results.
Read all updates
Q2-2026 Updates
Positive
Negative
Scale and Franchise Expansion
Operating footprint of 126 banking centers following the First Savings acquisition; total assets $21.3B, loans $15.5B and deposits $16.8B, demonstrating expanded geographic and balance sheet scale.
Read all positive updates
Company Guidance
Management guided to mid-single-digit loan growth through the end of 2026 while assuming no further Fed moves (expecting net interest margin to tick up a couple basis points in H2); they plan to redeploy bond cash flows (expected rolloffs of $156.2M at ~2.69%) and the $271M mortgage-sale proceeds into higher-yielding loans (loan portfolio yield 6.11%, new/renewed loans 6.28%). They reiterated quarterly expense run-rate guidance of $111–$114M (organic expense growth 3–5% annually) and expect noninterest income to be up ~10% year-over-year; tax guidance is ~13% effective rate. Credit guidance reflects a $33M provision this quarter (including $29.7M specific reserves), an allowance of $241.6M (coverage 1.56%), Q2 net charge-offs of $3.9M and an anticipated full‑year 2026 net charge‑off rate of roughly 40–45 bps driven largely by two known credits. Capital and liquidity posture remains supportive of buybacks and growth (total assets $21.3B, loans $15.5B, deposits $16.8B, tangible common equity 8.99%, tangible book $29.80 up $0.46 linked quarter; YTD repurchases ~1M shares for $38.3M with a $100M authorization).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 | 229.02M | 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
Negative
41.68
Price Trends
41.66
Negative
41.39
Negative
39.91
Negative
Market Momentum
-0.49
Positive
34.54
Neutral
20.02
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 41.68 is above the 20-day moving average (MA) of 40.83, above the 50-day MA of 41.66, and above the 200-day MA of 39.91, indicating a bearish trend. The MACD of -0.49 indicates Positive momentum. The RSI at 34.54 is Neutral, neither overbought nor oversold. The STOCH value of 20.02 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative 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 |
|---|---|---|---|---|---|---|---|
83 Outperform | $1.44B | 13.49 | 14.67% | 3.49% | 1.83% | 18.85% | |
82 Outperform | $2.07B | 12.44 | 13.41% | 1.93% | 4.24% | 21.67% | |
82 Outperform | $1.83B | 13.03 | 12.17% | 2.47% | 21.78% | 43.92% | |
77 Outperform | $3.31B | 11.10 | 10.07% | 3.17% | 11.65% | 13.28% | |
74 Outperform | $2.43B | 10.69 | 9.51% | 3.46% | 35.64% | 113.53% | |
68 Neutral | $18.00B | 11.42 | 9.92% | 3.81% | 9.73% | 1.22% | |
67 Neutral | $2.49B | 12.83 | 7.26% | 3.64% | 5.05% | -19.06% |
* Financial Sector Average
FRME
First Merchants
40.15
3.55
9.71%
SRCE
1St Source
86.85
27.67
46.77%
BUSE
First Busey
29.73
7.46
33.51%
FFBC
First Financial Bancorp
31.87
6.70
26.63%
GABC
German American Bancorp
49.40
11.34
29.78%
LKFN
Lakeland Financial
59.07
-2.67
-4.32%
First Merchants Corporate Events
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...
Dividends
First Merchants Declares Quarterly Dividend on Preferred Shares
Positive
Jul 13, 2026
On July 13, 2026, First Merchants Corporation announced that its board declared a quarterly cash dividend on its 7.50% Non-Cumulative Perpetual Preferred Stock Series A, paying $46.88 per share, or $0.4688 per depositary share. The dividend applie...
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.