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
The primary risk stems from adverse macroeconomic conditions, particularly significant increases in interest rates or a sharp economic downturn in its operating regions. This could lead to a compression of Net Interest Margin, higher loan loss provisions, and a general reduction in banking activity, directly impacting profitability.
Risk Matrix
Overall
Moderate
Financial
Low
Market
Medium
Competitive
Medium
Execution
Low
Regulatory
High
Red Flags
- ⚠
Business model inherently limits 10x growth potential within target timeframe.
- ⚠
Lack of disruptive technology or innovative service offerings for exponential scaling.
- ⚠
High reliance on traditional banking which is sensitive to economic cycles and interest rate fluctuations.
Upcoming Risk Events
- 📅
Unexpected economic downturn leading to increased loan defaults
- 📅
Adverse changes in interest rates compressing Net Interest Margin
- 📅
Increased regulatory scrutiny or costs for regional banks
When to Reconsider
- 🚪
Significant deterioration in asset quality or sharp increase in non-performing loans.
- 🚪
Consistent quarterly decline in Net Interest Margin (NIM).
- 🚪
Material negative regulatory actions impacting operations or profitability.
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What Does First Merchants Corp (FRME) Do?
Market Cap
$2.29B
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 represents a stable, regionally focused financial institution with a conservative operating model. Its investment appeal lies in its consistent performance within a mature sector, potential for incremental growth through strategic M&A, and ability to generate steady returns. It is best suited for investors seeking capital preservation and modest growth within the financial sector, rather than disruptive 10x returns.
Is FRME Stock Undervalued?
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FRME Price Targets & Strategy
12-Month Target
$44.00
Bull Case
$48.00
Bear Case
$36.00
Valuation Basis
Based on a modest 10-12% average annual appreciation typical for a stable regional bank, plus potential dividend yield, projecting a forward 12-month target.
Entry Strategy
Dollar-cost average between $38-$40, considering the stock's recent trading range. Look for price stability post Q1 earnings.
Exit Strategy
Consider profit-taking if the stock approaches the $48 mark within the next 12-18 months. Set a stop loss around $36, representing approximately 10% downside from current levels.
Portfolio Allocation
1-2% for moderate risk tolerance, considered as a stable, non-growth component. Not suitable for aggressive 10x growth portfolios.
Price Targets & Strategy
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Is FRME Financially Healthy?
Valuation
P/E Ratio
10.14
Forward P/E
10.50
EV/EBITDA
8.38
PEG Ratio
4.03
Price/Book
0.95
Price/Sales
3.54
Profitability
Return on Equity
9.78%
Revenue Growth
11.12%
EPS
$3.88
Other
Dividend Yield
3.61%
Does FRME Have a Competitive Moat?
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🛡️ Narrow
Moat Trend
Stable
Moat Sources
3 Identified
First Merchants benefits from a stable deposit base, established local brand, and the high switching costs associated with changing primary banking relationships for both retail and commercial customers. This creates a narrow but durable moat, albeit one that is unlikely to facilitate exponential growth.
Moat Erosion Risks
- •Increased competition from larger national banks or digitally native fintechs.
- •Erosion of local presence advantage as banking increasingly shifts online.
- •Dependence on a specific regional economy for growth and asset quality.
FRME Competitive Moat Analysis
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FRME Market Intelligence
Sentiment & Insider Activity
Social Sentiment
Neutral - No specific data available, but regional banks generally don't generate strong retail social media buzz for 10x growth.
Institutional Sentiment
Neutral - No analyst consensus or significant institutional buying/selling trends are available in the provided data.
Insider Activity (Form 4)
Director Kevin D. Johnson acquired 564 shares (stock award) at $38.73/share on 03/31/2026. Director Jason R. Sondhi acquired 605 shares (stock award) at $38.73/share (date unspecified, within recent Form 4 filings). These are stock awards, not open market purchases indicating strong conviction.
Options Flow
Normal options activity - No specific unusual options activity or put/call ratio direction provided in the research.
Earnings Intelligence
Next Earnings
2026-04-22
Surprise Probability
Low
Historical Earnings Pattern
Regional banks typically exhibit modest stock price reactions to earnings unless there are significant deviations from expectations regarding loan growth, asset quality, or interest rate outlook.
Key Metrics to Watch
Competitive Position
Top Competitor
FNB
Market Share Trend
Stable - Regional banks typically maintain stable market shares within their local operating geographies, with growth often driven by opportunistic M&A.
Valuation vs Peers
Cannot accurately compare valuation (P/E, P/B) without specific ratios for FRME or its peers from the provided data.
Competitive Advantages
- •Established local brand and customer relationships in its operating regions.
- •Regulatory barriers to entry and operational scale within its niche.
- •Sticky deposit base providing a low-cost source of funding.
Market Intelligence
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What Could Drive FRME Stock Higher?
Near-Term (0-6 months)
- •Q1 2026 Earnings Release (April 22, 2026)
- •Conference Call (April 23, 2026)
Medium-Term (6-18 months)
- •Potential future, incremental regional bank acquisitions to expand market share
- •Favorable shifts in interest rate environment boosting Net Interest Margin (NIM)
Long-Term (18+ months)
- •Continued steady economic growth in its operating regions
- •Successful integration of any future small-scale M&A activities
Catalysts & Growth Drivers
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What's the Bull Case for FRME?
- ✓
Consistent growth in Net Interest Income (NII) and Net Interest Margin (NIM).
- ✓
Healthy loan and deposit growth figures.
- ✓
Stable or improving credit quality metrics (e.g., non-performing assets).
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 | $2.3B | 0.5 | 10.1 | $641.7M | 0.0% | 11.1% | |
Bank of America Corp BAC | $352.6B | 0.1 | 12.9 | $113.1B | 16.2% | 12.3% | Compare → |
JPMorgan Chase & Co. JPM | — | 1.5 | — | — | — | — | Compare → |
Visa Inc V | $585.4B | 1.4 | 28.8 | $10.9B | 50.2% | 14.6% | Compare → |
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How First Merchants Corp Makes Money
First Merchants Corporation is a financial holding company that operates as a regional commercial bank. It primarily makes money by accepting deposits from individuals and businesses and then lending out that money in the form of loans (commercial, real estate, consumer). The difference between the interest earned on loans and the interest paid on deposits (Net Interest Income) is its main revenue driver. It also generates non-interest income through services like wealth management, credit card fees, and other banking services, serving customers predominantly in its operating regions.
Read Full Business Model BreakdownFAQ
What is the DVR Score for First Merchants Corp (FRME)?
As of April 5, 2026, First Merchants Corp has a DVR Score of 0.5 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 $2.3B. 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 10.1. 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 11.1%. The company is showing strong top-line momentum.
Is FRME stock profitable?
First Merchants Corp has a profit margin of 0.0%. The company is currently unprofitable.
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 April 5, 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.