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Relative valuation derived from Financials sector median benchmarks. Model weights: EV/EBITDA (40%), P/B (35%), P/S (25%). Multiples adjusted for extreme outliers and non-recurring volatility.
Auditing capital efficiency...
Quality Profile Audit
Score: 55GRADE C+
Composite assessment of profitability, capital efficiency, and financial strength. Top-tier entities demonstrate sustainable cash flow generation.
Return on Equity
Profit generated per dollar of shareholder equity
8.8%
Sector: 8.5%
Dividend Analysis audit
INCOME
3.77%
Trailing Yield
$3.77
Per $100 Invested
Solid dividend yield for income-focused strategies.
Est. Payout Ratio
45%SAFE
Analyst Projections
Analyst Consensus
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Based on our 6-factor quantitative model, FIRST MERCHANTS CORP (FRME) receives a "Hold" rating with a composite score of 52.5/100, ranked #346 out of 4446 stocks. Key factor scores: Quality 55/100, Value 73/100, Momentum 43/100. This is quantitative analysis only — not investment advice.
FIRST MERCHANTS CORP (FRME) Stock Analysis — April 2026 Rating, Price, and Forecast
Company Overview — What Does FIRST MERCHANTS CORP Do?
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. FIRST MERCHANTS CORP (FRME) is classified as a mid-cap stock in the Financials sector, specifically within the Banking industry. The company is led by CEO Mark K. Hardwick and employs approximately 2,120 people, headquartered in Muncie, Indiana. With a market capitalization of $2.5B, FRME is one of the notable companies in the Financials sector.
FIRST MERCHANTS CORP (FRME) Stock Rating — Hold (April 2026)
As of April 2026, FIRST MERCHANTS CORP receives a Hold rating with a composite score of 52.5/100 and 3 out of 5 stars from the Blank Capital Research quantitative model.FRME ranks #346 out of 4,446 stocks in our coverage universe. Within the Financials sector, FIRST MERCHANTS CORP ranks #121 of 891 stocks, placing it in the top quartile of its Financials peers. The rating is generated by a multi-factor model that weighs quality (30%), momentum (25%), value (15%), investment (10%), stability (10%), and short interest (10%).
FRME Stock Price and 52-Week Range
FIRST MERCHANTS CORP (FRME) currently trades at $40.97. The stock lost $0.50 (1.2%) in the most recent trading session. The 52-week high for FRME is $43.22, which means the stock is currently trading -5.2% from its annual peak. The 52-week low is $33.13, putting the stock 23.7% above its annual trough. Recent trading volume was 349K shares, suggesting relatively thin trading activity.
Is FRME Overvalued or Undervalued? — Valuation Analysis
FIRST MERCHANTS CORP (FRME) carries a value factor score of 73/100 in the Blank Capital model, suggesting the stock trades at a meaningful discount to its fundamental earning power. The trailing price-to-earnings ratio is 11.86x, compared to the Financials sector average of 14.88x — a discount of 20%. The price-to-book ratio stands at 1.05x, versus the sector average of 1.22x. The price-to-sales ratio is 2.79x, compared to 0.90x for the average Financials stock. On an enterprise value basis, FRME trades at 9.32x EV/EBITDA, versus 3.26x for the sector.
Based on these multiples, FIRST MERCHANTS CORP appears attractively valued relative to both its sector peers and the broader market. Value-oriented investors may find the current entry point compelling, particularly if the company's fundamental quality metrics also score well.
FIRST MERCHANTS CORP Profitability — ROE, Margins, and Quality Score
FIRST MERCHANTS CORP (FRME) earns a quality factor score of 55/100, indicating solid business quality with consistent operational execution. The return on equity (ROE) is 8.8%, compared to the Financials sector average of 8.5%, which is below typical expectations for high-quality companies. Return on assets (ROA) comes in at 1.1% versus the sector average of 1.2%.
On a margin basis, FIRST MERCHANTS CORP reports gross margins of 0.0%. The operating margin is 27.0% (sector: 21.8%). Net profit margin stands at 23.5%, versus 17.7% for the average Financials stock. Revenue growth is running at -0.5% on a trailing basis, compared to 9.4% for the sector. The overall profitability profile is adequate, though there may be room for margin expansion.
FRME Debt, Balance Sheet, and Financial Health
FIRST MERCHANTS CORP has a debt-to-equity ratio of 671.0%, compared to the Financials sector average of 121.0%. This elevated leverage warrants close monitoring, as it increases the company's sensitivity to rising interest rates and economic downturns. The current ratio is 1.15x, suggesting adequate working capital coverage. Total debt on the balance sheet is $978M. Cash and equivalents stand at $88M.
FRME has a beta of 0.77, meaning it is less volatile than the S&P 500, making it a relatively defensive holding. The stability factor score for FIRST MERCHANTS CORP is 81/100, indicating low-volatility characteristics and consistent price behavior that appeals to risk-averse investors.
FIRST MERCHANTS CORP Revenue and Earnings History — Quarterly Trend
In TTM 2026, FIRST MERCHANTS CORP reported revenue of $928M and earnings per share (EPS) of $3.90. Net income for the quarter was $218M. Gross margin was 0.0%. Operating income came in at $250M.
In FY 2025, FIRST MERCHANTS CORP reported revenue of $925M and earnings per share (EPS) of $3.90. Net income for the quarter was $226M. Revenue grew -2.4% year-over-year compared to FY 2024. Operating income came in at $259M.
In Q3 2025, FIRST MERCHANTS CORP reported revenue of $235M and earnings per share (EPS) of $0.98. Net income for the quarter was $57M. Revenue grew -2.5% year-over-year compared to Q3 2024. Operating income came in at $65M.
In Q2 2025, FIRST MERCHANTS CORP reported revenue of $230M and earnings per share (EPS) of $0.98. Net income for the quarter was $57M. Revenue grew -2.8% year-over-year compared to Q2 2024. Operating income came in at $65M.
Over the past 8 quarters, FIRST MERCHANTS CORP has demonstrated a growth trajectory, with revenue expanding from $236M to $928M. Investors analyzing FRME stock should weigh these quarterly trends alongside the valuation and quality metrics discussed above.
FRME Dividend Yield and Income Analysis
FIRST MERCHANTS CORP (FRME) currently pays a dividend yield of 3.8%. At this yield, a $10,000 investment in FRME stock would generate approximately $$377.00 in annual dividend income. This compares to the Financials sector average dividend yield of 2.5%, meaning FRME offers above-average income for its sector. With a net margin of 23.5%, the dividend appears well-covered by earnings, suggesting sustainable payouts going forward.
FRME Momentum and Technical Analysis Profile
FIRST MERCHANTS CORP (FRME) has a momentum factor score of 43/100, reflecting neutral trend characteristics. The stock is neither significantly outperforming nor underperforming the broader market on a momentum basis. The investment factor score is 34/100, which measures capital allocation efficiency and asset growth patterns. The short interest score of 28/100 signals elevated short interest, which can indicate bearish sentiment among institutional investors.
FRME vs Competitors — Financials Sector Ranking and Peer Comparison
Comparing FRME against the S&P 500 benchmark is also instructive for understanding relative performance. Investors can view the full FRME vs S&P 500 (SPY) comparison to assess how FIRST MERCHANTS CORP stacks up against the broader market across all factor dimensions.
FRME Next Earnings Date
No upcoming earnings date has been announced for FIRST MERCHANTS CORP (FRME) at this time. Check the earnings calendar for the latest scheduling updates across all stocks in our coverage universe.
Should You Buy FRME? — Investment Thesis Summary
FIRST MERCHANTS CORP presents a balanced picture with arguments on both sides. The value score of 73/100 suggests attractive pricing relative to fundamentals. Low volatility (stability score 81/100) reduces downside risk.
In summary, FIRST MERCHANTS CORP (FRME) earns a Hold rating with a composite score of 52.5/100 as of April 2026. The rating is derived from the Blank Capital Research methodology, which combines six factor dimensions into a single quantitative ranking. Investors should consider these quantitative signals alongside their own fundamental research, risk tolerance, and investment time horizon before making buy or sell decisions on FRME stock.
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Institutional Research Dossier
FIRST MERCHANTS CORP (FRME) Deep Dive Analysis
Published on March 24, 2026
Action RatingHold
Sections
Executive Summary
First Merchants Corporation (FRME) currently holds a BCR Action Rating of Hold, a position supported by a mixed quantitative profile. While the company exhibits strong value characteristics and stability, its investment profile and momentum scores are less compelling. The primary takeaway is that FRME presents a balanced risk-reward proposition, lacking a clear catalyst for significant outperformance or underperformance in the near term.
The company's valuation appears attractive relative to its peers, but concerns regarding revenue growth and capital allocation temper enthusiasm. A deeper understanding of FRME's strategic initiatives and its ability to navigate the evolving banking landscape is crucial for determining its long-term investment potential. The Hold rating reflects the need for further evidence of sustainable growth and improved capital deployment before considering a more bullish stance.
Business Strategy & Overview
First Merchants Corporation operates as a community bank, primarily serving customers in Indiana, Illinois, Ohio, and Michigan. Its core business revolves around traditional banking activities: accepting deposits and extending loans to individuals and businesses. The company generates revenue primarily from net interest income, the difference between interest earned on loans and interest paid on deposits, and non-interest income, which includes fees from services like wealth management, brokerage, and trust services.
FRME's strategic positioning emphasizes relationship banking and local market expertise. This approach aims to differentiate itself from larger national banks by providing personalized service and building strong ties within the communities it serves. The company's expansion strategy has historically involved both organic growth and strategic acquisitions of smaller banks, allowing it to expand its geographic footprint and customer base.
The company's product pipeline appears to be focused on enhancing its digital banking capabilities and expanding its wealth management offerings. This reflects a broader trend in the banking industry towards greater digital adoption and a growing demand for sophisticated financial planning services. FRME's success will depend on its ability to effectively compete with both traditional banks and fintech companies in these areas.
The banking industry is currently facing several challenges, including rising interest rates, increased regulatory scrutiny, and heightened competition. FRME's ability to navigate these challenges will be critical to its long-term success. Specifically, the company must effectively manage its interest rate risk, comply with evolving regulations, and adapt to changing customer preferences.
FRME's focus on community banking provides a degree of insulation from the most intense competition in major metropolitan areas. However, it also limits its growth potential compared to banks with a national or international presence. The company's success hinges on its ability to maintain its competitive advantages in its core markets and to selectively expand into new markets that align with its strategic objectives.
Execution Benchmarks audit
Revenue Growth
YOY expansion rate
-0.5%
Sector: 9.4%
-106% VS SCTR
Economic Moat Analysis
First Merchants Corporation's economic moat can be classified as Narrow. The company possesses some competitive advantages, but they are not substantial enough to create a wide and durable moat. The primary source of its moat stems from its established presence and reputation within its local markets.
The company benefits from customer relationships built over many years, creating a degree of customer loyalty and inertia. Switching costs for banking services can be moderate, particularly for businesses that have established banking relationships and integrated their financial operations with FRME. However, these switching costs are not insurmountable, and customers can readily switch to competing banks if they offer better rates or services.
FRME's intangible assets, such as its brand reputation and local market knowledge, contribute to its competitive advantage. However, these assets are not unique or proprietary, and other banks can readily replicate them. The company does not possess any significant cost advantages or economies of scale that would give it a sustainable edge over its competitors.
Efficient scale is not a significant factor in FRME's business. While banking does benefit from economies of scale to some extent, the company's relatively small size limits its ability to achieve significant cost savings compared to larger banks. Furthermore, the community banking model emphasizes personalized service and local decision-making, which can offset some of the potential cost advantages of scale.
Network effects are not a material driver of FRME's competitive advantage. While a larger customer base can create some benefits, such as increased liquidity and a wider range of services, these effects are not strong enough to create a significant barrier to entry for competitors. Overall, FRME's narrow moat provides some protection from competition, but it is not a guarantee of long-term success. The company must continue to innovate and adapt to maintain its competitive position.
Financial Health & Profitability
First Merchants Corporation's financial health presents a mixed picture. The company demonstrates solid profitability, with a net margin of 23.5% and an operating margin of 27.0%, both significantly higher than the sector averages of 17.8% and 22.0%, respectively. The Return on Equity (ROE) of 8.8% is slightly above the sector average of 8.5%, indicating efficient use of shareholder equity. However, revenue growth is a concern, with a TTM revenue decline of 0.5% compared to the sector's growth of 9.3%. This suggests potential challenges in expanding its business or maintaining market share.
Analyzing the quarterly financial history reveals some fluctuations in revenue and net income. While the most recent fiscal year (FY2025) shows a slight revenue decrease compared to FY2024 ($924.79M vs. $948.01M), net income has increased ($226.00M vs. $201.40M), indicating improved efficiency or cost management. Operating margins have remained relatively stable, hovering around 28% in recent quarters.
The balance sheet reveals a high level of debt. The Debt-to-Equity (D/E) ratio of 671.00 is significantly higher than the sector average of 115.00, indicating substantial leverage. While banks inherently operate with higher leverage, FRME's D/E ratio warrants close monitoring. The current ratio of 1.15 suggests adequate liquidity to meet short-term obligations.
Free Cash Flow (FCF) generation is relatively weak, with a TTM FCF of $19.34M. This limited FCF could constrain the company's ability to invest in growth initiatives, return capital to shareholders, or reduce debt. The company's ability to improve FCF generation will be crucial for enhancing its financial flexibility.
Overall, FRME's financial health is characterized by strong profitability but is tempered by concerns regarding revenue growth, high leverage, and weak free cash flow. The company's ability to address these challenges will be critical for sustaining its financial performance and creating long-term shareholder value.
Valuation Assessment
First Merchants Corporation's valuation appears attractive based on several key metrics. The company's P/E ratio of 9.4x is significantly lower than the sector average of 15.5x, suggesting that the stock may be undervalued relative to its earnings. Similarly, the EV/EBITDA ratio of 2.0x is substantially lower than the sector average of 3.5x, further supporting the notion that the company is undervalued based on its enterprise value and earnings before interest, taxes, depreciation, and amortization.
However, it's crucial to consider the company's growth prospects when assessing its valuation. The negative revenue growth of 0.5% raises concerns about the sustainability of its earnings. While the company's profitability metrics are strong, a lack of revenue growth could limit its ability to generate future earnings growth. Therefore, the low valuation multiples may reflect investor concerns about the company's growth potential.
A discounted cash flow (DCF) analysis would be necessary to determine the intrinsic value of the stock more accurately. However, given the limited information available, it's difficult to perform a reliable DCF analysis. The weak free cash flow generation also complicates the valuation assessment, as it suggests that the company may have limited capacity to generate future cash flows.
Compared to its historical valuation, FRME's current multiples are generally in line with its past averages. This suggests that the market's perception of the company's value has not changed significantly over time. However, it's important to note that the banking industry has undergone significant changes in recent years, and historical valuation multiples may not be entirely relevant in the current environment.
Overall, FRME's valuation appears cheap relative to its sector peers, but the lack of revenue growth and weak free cash flow generation warrant caution. The stock may be fairly valued, considering its growth prospects and financial health. A more in-depth analysis, including a DCF valuation and a thorough assessment of the company's growth opportunities, is needed to determine its true intrinsic value.
Risk & Uncertainty
First Merchants Corporation faces several specific risks that could negatively impact its business and financial performance. One significant risk is interest rate risk. As a bank, FRME's profitability is sensitive to changes in interest rates. Rising interest rates could increase the cost of funding while potentially slowing loan growth, thereby compressing net interest margins. Conversely, falling interest rates could reduce the yield on its loan portfolio.
Another key risk is credit risk. FRME's loan portfolio is exposed to the risk of borrowers defaulting on their loans. Economic downturns or industry-specific challenges could increase the likelihood of loan losses, which would negatively impact the company's earnings and capital. The company's concentration in specific geographic areas (Indiana, Illinois, Ohio, and Michigan) also exposes it to regional economic risks.
Regulatory risk is also a significant concern for FRME. The banking industry is heavily regulated, and changes in regulations could increase compliance costs, restrict lending activities, or require the company to hold more capital. Increased regulatory scrutiny could also lead to enforcement actions or penalties, which would negatively impact the company's reputation and financial performance.
Competition from larger banks and fintech companies poses another risk to FRME. Larger banks have greater resources and economies of scale, allowing them to offer more competitive products and services. Fintech companies are disrupting the traditional banking industry with innovative technologies and business models, potentially eroding FRME's market share. The company's ability to adapt to these competitive pressures will be crucial for its long-term success.
Finally, integration risk associated with acquisitions is a potential concern. FRME has historically grown through acquisitions, and integrating acquired banks can be challenging. Integration difficulties could lead to higher-than-expected costs, loss of customers, or disruption of operations.
Bulls Say / Bears Say
The Bull Case
BULL VIEWFRME's attractive valuation multiples, particularly its low P/E and EV/EBITDA ratios, suggest that the stock is undervalued and offers significant upside potential.
BULL VIEWThe company's strong profitability, with high net and operating margins, demonstrates its efficient operations and ability to generate earnings.
BULL VIEWFRME's focus on community banking and relationship building provides a competitive advantage in its local markets, fostering customer loyalty and stability.
The Bear Case
BEAR VIEWFRME's negative revenue growth indicates potential challenges in expanding its business and maintaining market share, limiting its long-term growth prospects.
BEAR VIEWThe company's high debt-to-equity ratio raises concerns about its financial leverage and vulnerability to interest rate fluctuations.
BEAR VIEWWeak free cash flow generation restricts FRME's ability to invest in growth initiatives, return capital to shareholders, or reduce debt.
About the Author
Marques Blank
Founder & Chief Investment Officer, Blank Capital
Marques brings 15 years of institutional finance and investing experience, having overseen financial planning for a $1.6B defense business unit. He developed the proprietary 6-factor quantitative model used to score FRME and 4,400+ other equities.
FIRST MERCHANTS CORP exhibits a 90% valuation premium relative to institutional benchmarks. This represents a potential valuation overextension based on current multiples.
Return on Assets
Efficiency of asset utilization
1.1%
Sector: 1.2%
Gross Margin
Pricing power and cost efficiency
0.0%
Sector: 0.0%
Operating Margin
Core business profitability
27.0%
Sector: 21.8%
Net Margin
Bottom-line profitability
23.5%
Sector: 17.7%
Factor Methodology
The Quality factor evaluates the persistence and magnitude of cash flows. Companies with scores >70 exhibit superior competitive moats and financial resilience through economic cycles.
Sector Avg Yield2.48%
Yield Delta+52%
Income Projection audit
A $10,000 investment would generate approximately $377 annually in dividends at the current trailing rate.
