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1. Company Snapshot

1.a. 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.

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1.b. Last Insights on FRME

First Merchants Corporation's recent performance faced challenges due to a tariff-driven economic slowdown in its markets, which may likely drag profits. Despite beating Q3 earnings estimates with $0.99 per share, compared to the Zacks Consensus Estimate of $0.96 per share, and reporting net income available to common stockholders of $56.3 million, the company's efficiency ratio has been better than expected. Additionally, the company declared a cash dividend of $0.36 per common share and a quarterly cash dividend on its 7.50% Non-Cumulative Perpetual Preferred Stock Series A. (Source: Zacks)

1.c. Company Highlights

2. First Merchants' Q3 2025 Earnings: Strong Loan Growth and Resilient Margin

First Merchants reported a strong third quarter in 2025, with total revenues growing meaningfully, driven by a $0.7 million increase in net interest income and a $1.2 million rise in noninterest income. Earnings per share (EPS) came in at $0.99, beating analyst estimates of $0.96. The net interest margin (NIM) remained stable at 3.24%, demonstrating the bank's ability to maintain its margin despite a changing interest rate environment. The company's efficiency ratio was 55%, indicating high performance.

Publication Date: Oct -28

📋 Highlights
  • Loan Growth & Earnings:: 9% loan growth quarter-over-quarter, $0.98 EPS, and 1.22% ROA for 9 months ended September 30, 2025.
  • Acquisition Impact:: Acquisition of First Savings Financial Group added $2.4 billion in assets, expanding into Southern Indiana.
  • Tangible Book Value Growth:: 4% linked-quarter and 9% YoY increase in tangible book value, with 8.5% CAGR post-dividends, buybacks, and acquisitions.
  • Credit Metrics:: Sponsor finance portfolio shows 85% borrowers with senior leverage under 3x, 63% with fixed charge coverage above 1.5x, and $15.1M in losses over $2B funded loans.
  • Margin Resilience:: Stable 3.24% net interest margin, with 2 basis point decline per 25 basis point rate cut projected due to 2/3 variable-rate loans.

Loan Growth and Credit Quality

The bank saw robust loan growth across its portfolio, with a $289 million increase in total balances quarter-over-quarter, or 8.7% annualized. The sponsor finance portfolio continues to perform well, with $911 million in outstandings across 100 companies in diverse industries. Credit metrics in this portfolio remain solid, with 85% of borrowers having a senior leverage under 3x and 63% maintaining a fixed charge coverage ratio above 1.5x. As John Martin noted, "Losses have remained nominal over the life of the portfolio with only $15.1 million in losses over a 10-year history with nearly $2 billion in funded loans."

Acquisition and Expansion

First Merchants announced the acquisition of First Savings Financial Group on September 25, adding approximately $2.4 billion in assets and expanding its presence into Southern Indiana. The company is confident in its ability to build on First Savings' meaningful deposit franchise and create a true community bank in the region. The acquisition is expected to contribute to the company's growth and diversification.

Valuation and Dividend Yield

With a Price-to-Tangible Book Value (P/TBV) ratio of approximately 0.88, First Merchants appears to be reasonably valued. The company's Dividend Yield stands at 3.86%, making it an attractive option for income-seeking investors. Analysts estimate revenue growth of 13.8% for the next year, indicating a positive outlook for the company's top line. The current valuation multiples, including a P/E Ratio of 9.05, suggest that the market has reasonable expectations for the company's future performance.

Outlook and Conclusion

First Merchants' strong loan growth, resilient margin, and strategic acquisition position the company for continued success. The bank's ability to manage deposit costs and maintain a strong credit profile will be key to its future performance. With a reasonable valuation and attractive dividend yield, First Merchants appears to be a solid investment opportunity in the banking sector.

3. NewsRoom

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Fisher Asset Management LLC Sells 54,489 Shares of First Merchants Corporation $FRME

Dec -04

Source: defenseworld.net

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Edgestream Partners L.P. Acquires Shares of 159,491 First Merchants Corporation $FRME

Dec -03

Source: defenseworld.net

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Ceredex Value Advisors LLC Purchases 4,800 Shares of First Merchants Corporation $FRME

Nov -29

Source: defenseworld.net

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First Merchants Corporation $FRME Position Lifted by Creative Planning

Nov -27

Source: defenseworld.net

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First Merchants Corporation Announces Cash Dividend

Nov -14

Source: globenewswire.com

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Does First Merchants (FRME) Have the Potential to Rally 26.14% as Wall Street Analysts Expect?

Nov -14

Source: zacks.com

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First Merchants: I Prefer The Common Over The Preferred Stock

Nov -08

Source: seekingalpha.com

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Teacher Retirement System of Texas Sells 2,447 Shares of First Merchants Corporation $FRME

Nov -06

Source: defenseworld.net

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.00%)

6. Segments

Community Banking

Expected Growth: 4.0%

First Merchants Corporation's 4.0% growth in Community Banking is driven by strategic branch expansion, increased commercial lending, and a focus on customer relationships. Additionally, investments in digital banking platforms and targeted marketing efforts have contributed to deposit growth and improved customer acquisition.

7. Detailed Products

Commercial Loans

First Merchants Corporation offers a range of commercial loans to help businesses achieve their goals, including term loans, lines of credit, and construction loans.

Treasury Management Services

First Merchants Corporation provides treasury management services to help businesses manage their cash flow, including account management, payment processing, and fraud protection.

Personal Banking Services

First Merchants Corporation offers a range of personal banking services, including checking and savings accounts, credit cards, and personal loans.

Wealth Management Services

First Merchants Corporation provides wealth management services, including investment management, retirement planning, and estate planning.

Mortgage Lending

First Merchants Corporation offers mortgage lending services, including residential and commercial mortgages, construction loans, and refinancing options.

Insurance Services

First Merchants Corporation provides insurance services, including life insurance, disability insurance, and long-term care insurance.

Online Banking and Mobile Banking

First Merchants Corporation offers online banking and mobile banking services, allowing customers to manage their accounts, pay bills, and transfer funds remotely.

8. First Merchants Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for First Merchants Corporation is medium due to the presence of alternative banking services and financial institutions.

Bargaining Power Of Customers

The bargaining power of customers for First Merchants Corporation is low due to the lack of concentration of buyers and the availability of multiple banking options.

Bargaining Power Of Suppliers

The bargaining power of suppliers for First Merchants Corporation is medium due to the presence of multiple suppliers and the moderate level of dependence on them.

Threat Of New Entrants

The threat of new entrants for First Merchants Corporation is low due to the high barriers to entry in the banking industry and the regulatory requirements.

Intensity Of Rivalry

The intensity of rivalry for First Merchants Corporation is high due to the presence of multiple competitors in the banking industry and the need to differentiate itself to attract and retain customers.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 31.52%
Debt Cost 4.14%
Equity Weight 68.48%
Equity Cost 9.43%
WACC 7.76%
Leverage 46.02%

11. Quality Control: First Merchants Corporation passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
First Merchants

A-Score: 6.6/10

Value: 7.3

Growth: 6.1

Quality: 6.4

Yield: 7.0

Momentum: 5.0

Volatility: 7.7

1-Year Total Return ->

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Third Coast Bancshares

A-Score: 6.6/10

Value: 7.2

Growth: 9.3

Quality: 7.1

Yield: 0.0

Momentum: 9.0

Volatility: 6.7

1-Year Total Return ->

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Stock-Card
First Business Financial Services

A-Score: 6.5/10

Value: 7.1

Growth: 7.9

Quality: 5.3

Yield: 4.0

Momentum: 7.0

Volatility: 7.7

1-Year Total Return ->

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Veritex Holdings

A-Score: 6.3/10

Value: 5.4

Growth: 6.4

Quality: 6.4

Yield: 6.0

Momentum: 8.0

Volatility: 5.3

1-Year Total Return ->

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Stock-Card
Financial Institutions

A-Score: 5.9/10

Value: 6.4

Growth: 3.6

Quality: 3.8

Yield: 9.0

Momentum: 6.0

Volatility: 6.7

1-Year Total Return ->

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Park National

A-Score: 5.8/10

Value: 4.9

Growth: 5.6

Quality: 6.2

Yield: 6.0

Momentum: 4.0

Volatility: 8.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

37.33$

Current Price

37.33$

Potential

-0.00%

Expected Cash-Flows