FRME Stock Risk & Deep Value Analysis
First Merchants Corp
Financial Services • Banks - Regional
DVR Score
out of 10
What You Need to Know About FRME Stock
We analyzed First Merchants Corp using our deep value framework. Sign in to see our full verdict and DVR Score.
We ran FRME through our deep value framework — analyzing financial health, distress signals, competitive moat, and risk factors. Our risk assessment: Moderate. Here's what we found.
FRME Risk Analysis & Red Flags
What Could Go Wrong
An economic downturn or significant shifts in interest rates could negatively impact First Merchants' net interest margin, lead to increased loan defaults, and impede the realization of synergies from its recent acquisition, potentially causing earnings to miss expectations.
Risk Matrix
Overall
Moderate
Financial
Low
Market
Medium
Competitive
Medium
Execution
Medium
Regulatory
High
Red Flags
- ⚠
GAAP EPS down 52.1% YoY in Q1 2026, though attributed to non-core items, highlights sensitivity to acquisition-related and mark-to-market adjustments.
- ⚠
Regional banking sector faces ongoing competitive pressure from larger national banks and emerging fintech solutions.
Upcoming Risk Events
- 📅
Unexpected sharp increase in deposit costs or decrease in loan demand due to interest rate volatility
- 📅
Deterioration of asset quality or increase in non-performing loans due to economic slowdown
When to Reconsider
- 🚪
Exit if Net Interest Margin (NIM) declines significantly over two consecutive quarters.
- 🚪
Sell if asset quality deteriorates substantially, evidenced by a material increase in non-performing assets.
- 🚪
Exit if the First Savings acquisition integration faces major setbacks or fails to deliver projected synergies.
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What Does First Merchants Corp (FRME) Do?
Market Cap
$2.48B
Sector
Financial Services
Industry
Banks - Regional
Employees
2,120
First Merchants Corporation operates as the financial holding company for First Merchants Bank that provides commercial and consumer banking services. The company offers a range of financial services, including checking, savings, and deposit products; debit and credit cards; mortgages, home equity lending, vehicle loans, and personal loans; and local commercial lending, asset-based lending solutions, agricultural lending, commercial real estate solutions, debt capital markets, practice finance, public finance, small business administration lending, and sponsor finance services. It also provides personal and commercial wealth management services, trust services, retirement planning, brokerage, investment management, private banking, fiduciary estate, and financial planning services. The company operates banking locations in Indiana, Ohio, and Michigan counties. It offers its services through electronic and mobile delivery channels. First Merchants Corporation was founded in 1893 and is headquartered in Muncie, Indiana.
Visit First Merchants Corp WebsiteInvestment Thesis
First Merchants Corp (FRME) represents a fundamentally sound regional bank with a track record of consistent performance and strategic growth through M&A, such as the recent First Savings acquisition. While it lacks 10x growth potential, its strong balance sheet, efficient operations (evidenced by improving NIM and deposit costs), and disciplined capital allocation (share repurchases) make it a stable income-generating asset for a diversified portfolio, especially appealing to value-oriented investors.
Is FRME Stock Undervalued?
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FRME Price Targets & Strategy
12-Month Target
$44.10
Bull Case
$50.40
Bear Case
$33.60
Valuation Basis
Based on 10.5x forward P/E applied to estimated FY26 adjusted EPS of $4.20.
Entry Strategy
Consider accumulation in the $38-$40 range, aligning with recent trading activity. Technical levels such as the 50-day or 200-day SMA could provide further support, though not explicitly provided in research.
Exit Strategy
Consider profit-taking if the stock approaches $48-$50. A stop-loss order below the recent lows, around $36-$37, is advisable to limit downside.
Portfolio Allocation
1-3% for a moderate-risk portfolio seeking stable financial exposure; not suitable for aggressive 10x growth-focused allocation.
Price Targets & Strategy
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Is FRME Financially Healthy?
Valuation
P/E Ratio
12.50
Profitability
Operating Margin
44.30%
Net Margin
37.76%
Return on Equity
8.03%
Revenue Growth
61.80%
EPS
$3.43
Balance Sheet
Debt/Equity
0.08
Other
Beta (Volatility)
0.89
Dividend Yield
3.61%
Does FRME Have a Competitive Moat?
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🛡️ Narrow
Moat Trend
Stable
Moat Sources
3 Identified
First Merchants' moat is supported by established customer relationships, branch network, and brand recognition within its regional footprint. While not immune to disruption from larger national banks or digital challengers, the high switching costs for established businesses and personal banking relationships contribute to its durability.
Moat Erosion Risks
- •Increasing competition from digital-only banks and fintech platforms.
- •Pressure on net interest margin from persistent low-interest-rate environments or aggressive competitor pricing.
- •Demographic shifts or economic stagnation in its core operating areas.
FRME Competitive Moat Analysis
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FRME Market Intelligence
Sentiment & Insider Activity
Social Sentiment
Neutral (No specific data provided to indicate strong bullish or bearish retail sentiment).
Institutional Sentiment
Positive (Vanguard Capital Management and Vanguard Portfolio Management disclosed over 5% beneficial ownership stakes in separate filings dated April 29, 2026 and March 31, 2026 respectively).
Insider Activity (Form 4)
No Form 4 insider buys/sells were identified in the last 90 days. Vanguard filings are institutional ownership, not insider transactions.
Options Flow
Normal options activity (No specific options flow data was provided in the research).
Earnings Intelligence
Next Earnings
Estimated late July 2026 (for Q2 2026)
Surprise Probability
Medium (Q1 2026 reported an adjusted EPS beat of 15.73%, but future guidance is unknown).
Historical Earnings Pattern
Q1 2026 earnings showed a strong adjusted EPS beat, indicating potential for positive market reaction on future beats, assuming non-core impacts remain contained.
Key Metrics to Watch
Competitive Position
Top Competitor
Unknown (Specific peers were not listed in the provided research, but typical peers would be other strong regional banks in the Midwest such as Old National Bancorp or Wintrust Financial Corp.)
Market Share Trend
Gaining (Through the strategic acquisition of First Savings, which added $2.4 billion in assets).
Valuation vs Peers
Likely trades at a valuation broadly in line with or slightly above well-managed regional banking peers, especially considering the recent acquisition and adjusted EPS beat.
Competitive Advantages
- •Strong local market presence and community ties in its Midwest footprint.
- •Disciplined deposit cost management (average deposit cost fell to 2.09% in Q1 2026).
- •Healthy capital position (Common Equity Tier 1 ratio of 11.22%).
Market Intelligence
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What Could Drive FRME Stock Higher?
Near-Term (0-6 months)
- •Q2 2026 Earnings Report (estimated late July 2026)
- •Successful integration updates for the First Savings acquisition
Medium-Term (6-18 months)
- •Continued NIM expansion driven by favorable interest rate environment and deposit cost management
- •Synergies and cost efficiencies realized from the First Savings acquisition
Long-Term (18+ months)
- •Sustained economic growth in key operating regions driving loan and deposit growth
- •Potential for further accretive regional acquisitions
Catalysts & Growth Drivers
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What's the Bull Case for FRME?
- ✓
Acceleration in organic loan and deposit growth rates post-acquisition.
- ✓
Continued expansion or stability in Net Interest Margin (NIM).
- ✓
Maintenance of a strong Common Equity Tier 1 ratio.
Bull Case Analysis
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Competing with FRME
See how First Merchants Corp compares to related companies
| Company | Market Cap | DVR Score | P/E | Revenue | Profit Margin | Rev Growth | |
|---|---|---|---|---|---|---|---|
First Merchants Corp FRME | $2.5B | 0.6 | 12.5 | $163.5M | 37.8% | 61.8% | |
Bank of America Corp BAC | $366.2B | 0.1 | 11.6 | — | 30.2% | 99.4% | Compare → |
JPMorgan Chase & Co JPM | $831.2B | 0.9 | 14.1 | $177.0B | 33.3% | 109.0% | Compare → |
Mastercard Inc MA | $431.8B | 0.8 | 27.7 | $28.9B | 45.9% | 16.8% | Compare → |
Visa Inc V | $605.8B | 1.6 | 27.2 | $41.4B | 51.7% | 14.4% | Compare → |
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How First Merchants Corp Makes Money
First Merchants Corp is a financial holding company providing a full range of financial services primarily through its community banking subsidiary, First Merchants Bank. It generates revenue by gathering deposits from individuals, businesses, and public entities, and then deploying these funds into various loans, including commercial, real estate, and consumer loans, earning interest. Additionally, the company generates non-interest income from services like wealth management, credit card services, and mortgage banking. Its business model focuses on serving local communities with personalized banking solutions and expanding its market reach through strategic acquisitions.
Read Full Business Model BreakdownFAQ
What is the DVR Score for First Merchants Corp (FRME)?
As of May 14, 2026, First Merchants Corp has a DVR Score of 0.6 out of 10, placing it in the "Distressed" category. This score is generated by our AI-powered deep value analysis framework that evaluates growth potential, financial health, competitive moat, and risk factors.
What is the market capitalization of First Merchants Corp?
First Merchants Corp's market capitalization is approximately $2.5B. The company operates in the Financial Services sector within the Banks - Regional industry.
What ticker symbol does First Merchants Corp use?
FRME is the ticker symbol for First Merchants Corp. The company trades on the NMS.
What is the risk level for FRME stock?
Our analysis rates First Merchants Corp's overall risk as Moderate. This assessment considers execution risk, market risk, financial risk, competitive risk, and regulatory risk. For a full breakdown, see the risk analysis section above.
What is the P/E ratio of FRME?
First Merchants Corp currently has a price-to-earnings (P/E) ratio of 12.5. This is below the market average, which could indicate the stock is undervalued or facing headwinds.
Does First Merchants Corp pay a dividend?
Yes, First Merchants Corp pays a dividend with a current yield of approximately 3.61%.
Is First Merchants Corp's revenue growing?
First Merchants Corp has reported revenue growth of 61.8%. The company is showing strong top-line momentum.
Is FRME stock profitable?
First Merchants Corp has a profit margin of 37.8%. This indicates strong profitability.
How often is the FRME DVR analysis updated?
Our AI-powered analysis of First Merchants Corp is refreshed regularly to incorporate the latest financial data, market conditions, and news. The most recent update was on May 14, 2026.
Important Disclaimer – Not Financial Advice
Deep Value Reports is an independent research platform for educational and informational purposes only. We are not financial advisors, investment advisors, or licensed professionals. The analysis, scores, and information provided on this page for FRME (First Merchants Corp) should not be construed as personalized investment advice, a recommendation to buy or sell any security, or an offer to provide investment advisory services.
All investments involve risk, including the potential loss of principal. Past performance does not guarantee future results. Always conduct your own research, consider your financial situation, and consult with a qualified financial advisor before making any investment decisions.