NasdaqGS:FRME

Stock Analysis Report

Executive Summary

First Merchants Corporation operates as the financial holding company for First Merchants Bank that provides community banking services.

Rewards

Trading at 40.5% below its fair value

Earnings are forecast to grow 8.26% per year

Earnings have grown 23.6% per year over the past 5 years

Risk Analysis

Unstable dividend track record

Significant insider selling over the past 3 months



Snowflake Analysis

Flawless balance sheet average dividend payer.


Similar Companies

South State

NasdaqGS:SSB

Share Price & News

How has First Merchants's share price performed over time and what events caused price changes?


Latest Share Price and Events

Stable Share Price: FRME has not had significant price volatility in the past 3 months.


Market Performance


7 Day Return

-2.5%

FRME

-2.9%

US Banks

-1.3%

US Market


1 Year Return

6.6%

FRME

11.7%

US Banks

22.0%

US Market

Return vs Industry: FRME underperformed the US Banks industry which returned 21.7% over the past year.

Return vs Market: FRME underperformed the US Market which returned 24.7% over the past year.


Shareholder returns

FRMEIndustryMarket
7 Day-2.5%-2.9%-1.3%
30 Day-2.2%-5.1%1.6%
90 Day1.8%2.5%8.9%
1 Year9.5%6.6%15.0%11.7%24.7%22.0%
3 Year11.0%4.3%26.8%17.8%49.4%39.7%
5 Year104.1%84.8%86.1%65.3%78.1%58.5%

Price Volatility Vs. Market

How volatile is First Merchants's share price compared to the market and industry in the last 5 years?


Simply Wall St News

Valuation

Is First Merchants undervalued compared to its fair value and its price relative to the market?

40.5%

Undervalued compared to fair value


Share Price vs. Fair Value

Below Fair Value: FRME ($41.24) is trading below our estimate of fair value ($69.28)

Significantly Below Fair Value: FRME is trading below fair value by more than 20%.


Price To Earnings Ratio

PE vs Industry: FRME is poor value based on its PE Ratio (12.7x) compared to the Banks industry average (12.6x).

PE vs Market: FRME is good value based on its PE Ratio (13x) compared to the US market (18.9x).


Price to Earnings Growth Ratio

PEG Ratio: FRME is poor value based on its PEG Ratio (1.6x)


Price to Book Ratio

PB vs Industry: FRME is overvalued based on its PB Ratio (1.3x) compared to the US Banks industry average (1.2x).


Next Steps

Future Growth

How is First Merchants forecast to perform in the next 1 to 3 years based on estimates from 5 analysts?

8.3%

Forecasted annual earnings growth


Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: FRME's forecast earnings growth (8.3% per year) is above the savings rate (1.7%).

Earnings vs Market: FRME's earnings (8.3% per year) are forecast to grow slower than the US market (14.3% per year).

High Growth Earnings: FRME's earnings are forecast to grow, but not significantly.

Revenue vs Market: FRME's revenue (7.5% per year) is forecast to grow slower than the US market (7.5% per year).

High Growth Revenue: FRME's revenue (7.5% per year) is forecast to grow slower than 20% per year.


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: FRME's Return on Equity is forecast to be low in 3 years time (11.1%).


Next Steps

Past Performance

How has First Merchants performed over the past 5 years?

23.6%

Historical annual earnings growth


Earnings and Revenue History

Quality Earnings: FRME has high quality earnings.

Growing Profit Margin: FRME's current net profit margins (37.3%) are higher than last year (35.6%).


Past Earnings Growth Analysis

Earnings Trend: FRME's earnings have grown significantly by 23.6% per year over the past 5 years.

Accelerating Growth: FRME's earnings growth over the past year (11.7%) is below its 5-year average (23.6% per year).

Earnings vs Industry: FRME earnings growth over the past year (11.7%) underperformed the Banks industry 27.1%.


Return on Equity

High ROE: FRME's Return on Equity (9.1%) is considered low.


Return on Assets


Return on Capital Employed


Next Steps

Financial Health

How is First Merchants's financial position? (This company is analysed differently as a bank or financial institution)


Financial Position Analysis


Debt to Equity History and Analysis


Balance Sheet

Inventory Level: FRME has a low level of unsold assets or inventory.

Debt Coverage by Assets: FRME's debt is not covered by short term assets (assets are 0.8x debt).


Financial Institutions Analysis

Asset Level: FRME's level of assets compared to its equity is low.

Allowance for Bad Loans: FRME has a sufficient allowance for bad loans.

Low Risk Liabilities: FRME's liabilities are made up of primarily low risk sources of funding.

Loan Level: FRME has an acceptable proportion of non-loan assets held.

Low Risk Deposits: FRME's loans are broadly funded by customer deposits.

Level of Bad Loans: FRME has an appropriate level of bad loans (0.28%)


Next Steps

Dividend

What is First Merchants's current dividend yield, its reliability and sustainability?

2.58%

Current Dividend Yield


Dividend Yield vs Market

company2.6%marketbottom25%1.4%markettop25%3.7%industryaverage2.9%forecastin3Years3.0%

Current dividend yield vs market & industry

Notable Dividend: FRME's dividend (2.52%) is higher than the bottom 25% of dividend payers in the US market (1.4%).

High Dividend: FRME's dividend (2.52%) is low compared to the top 25% of dividend payers in the US market (3.66%).


Stability and Growth of Payments

Stable Dividend: FRME's dividend payments have been volatile in the past 10 years.

Growing Dividend: FRME's dividend payments have increased over the past 10 years.


Current Payout to Shareholders

Dividend Coverage: With its reasonably low payout ratio (30.2%), FRME's dividend payments are well covered by earnings.


Future Payout to Shareholders

Future Dividend Coverage: FRME's dividends in 3 years are forecast to be well covered by earnings (36.5% payout ratio).


Next Steps

Management

What is the CEO of First Merchants's salary, the management and board of directors tenure and is there insider trading?

12.6yrs

Average management tenure


CEO

Mike Rechin (60yo)

12.8yrs

Tenure

US$2,046,901

Compensation

Mr. Michael C. Rechin, also known as Mike has been the Chief Executive Officer and President of First Merchants Corporation since April 24, 2007. Mr. Rechin serves as the Chief Executive Officer of First M ...


CEO Compensation Analysis

Compensation vs Market: Mike's total compensation ($USD2.05M) is below average for companies of similar size in the US market ($USD3.86M).

Compensation vs Earnings: Mike's compensation has been consistent with company performance over the past year.


Management Age and Tenure

12.6yrs

Average Tenure

54yo

Average Age

Experienced Management: FRME's management team is seasoned and experienced (12.6 years average tenure).


Board Age and Tenure

11.5yrs

Average Tenure

66yo

Average Age

Experienced Board: FRME's board of directors are seasoned and experienced ( 11.5 years average tenure).


Insider Trading

Insider Buying: FRME insiders have sold more shares than they have bought in the past 3 months.


Recent Insider Transactions

BuyUS$50003 Jan 20
Patrick Sherman
EntityIndividual
Role
Member of the Board of Directors
Independent Director
Shares12.06
Max PriceUS$41.45
SellUS$205,57419 Dec 19
Jeffrey Lorentson
EntityIndividual
Role
Senior Key Executive
Senior VP & Chief Risk Officer
Shares4,907
Max PriceUS$41.89
SellUS$220,23709 Dec 19
H. Chaffin
EntityIndividual
Shares5,484
Max PriceUS$40.16
BuyUS$1,66704 Dec 19
Gary Lehman
EntityIndividual
Role
Member of the Board of Directors
Independent Director
Shares41.01
Max PriceUS$40.64
BuyUS$50004 Dec 19
Patrick Sherman
EntityIndividual
Role
Member of the Board of Directors
Independent Director
Shares12.3
Max PriceUS$40.64
SellUS$91,38620 Nov 19
Michael Stewart
EntityIndividual
Role
Senior Key Executive
Executive VP & Chief Banking Officer
Shares2,250
Max PriceUS$40.62
BuyUS$1,66705 Nov 19
Gary Lehman
EntityIndividual
Role
Member of the Board of Directors
Independent Director
Shares41.6
Max PriceUS$40.06
BuyUS$50005 Nov 19
Patrick Sherman
EntityIndividual
Role
Member of the Board of Directors
Independent Director
Shares12.48
Max PriceUS$40.06
BuyUS$1,66702 Oct 19
Gary Lehman
EntityIndividual
Role
Member of the Board of Directors
Independent Director
Shares44.09
Max PriceUS$37.80
BuyUS$50002 Oct 19
Patrick Sherman
EntityIndividual
Role
Member of the Board of Directors
Independent Director
Shares13.23
Max PriceUS$37.80
SellUS$150,95023 Sep 19
Stephan Fluhler
EntityIndividual
Role
Chief Information Officer
Senior VP & Chief Information Officer
Shares3,873
Max PriceUS$38.98
SellUS$277,25412 Sep 19
Charles Schalliol
EntityIndividual
Role
Chairman of the Board
Chairman of the Board
Shares7,300
Max PriceUS$37.98
BuyUS$1,66705 Sep 19
Gary Lehman
EntityIndividual
Role
Member of the Board of Directors
Independent Director
Shares47.34
Max PriceUS$35.21
BuyUS$50005 Sep 19
Patrick Sherman
EntityIndividual
Role
Member of the Board of Directors
Independent Director
Shares14.2
Max PriceUS$35.21
BuyUS$1,66705 Aug 19
Gary Lehman
EntityIndividual
Role
Member of the Board of Directors
Independent Director
Shares43.1
Max PriceUS$38.67
BuyUS$50005 Aug 19
Patrick Sherman
EntityIndividual
Role
Member of the Board of Directors
Independent Director
Shares12.93
Max PriceUS$38.67
BuyUS$1,66702 Jul 19
Gary Lehman
EntityIndividual
Role
Member of the Board of Directors
Independent Director
Shares44.95
Max PriceUS$37.08
BuyUS$50002 Jul 19
Patrick Sherman
EntityIndividual
Role
Member of the Board of Directors
Independent Director
Shares13.48
Max PriceUS$37.08
SellUS$169,69720 Jun 19
Charles Schalliol
EntityIndividual
Role
Chairman of the Board
Chairman of the Board
Shares4,680
Max PriceUS$36.26
BuyUS$50005 Jun 19
Patrick Sherman
EntityIndividual
Role
Member of the Board of Directors
Independent Director
Shares14.78
Max PriceUS$33.83
BuyUS$1,66705 Jun 19
Gary Lehman
EntityIndividual
Role
Member of the Board of Directors
Independent Director
Shares49.26
Max PriceUS$33.83
BuyUS$1,66702 May 19
Gary Lehman
EntityIndividual
Role
Member of the Board of Directors
Independent Director
Shares45.23
Max PriceUS$36.85
BuyUS$50002 May 19
Patrick Sherman
EntityIndividual
Role
Member of the Board of Directors
Independent Director
Shares13.57
Max PriceUS$36.85
BuyUS$50002 Apr 19
Patrick Sherman
EntityIndividual
Role
Member of the Board of Directors
Independent Director
Shares13.52
Max PriceUS$36.99
BuyUS$1,66702 Apr 19
Gary Lehman
EntityIndividual
Role
Member of the Board of Directors
Independent Director
Shares45.06
Max PriceUS$36.99
BuyUS$50004 Mar 19
Patrick Sherman
EntityIndividual
Role
Member of the Board of Directors
Independent Director
Shares12.3
Max PriceUS$40.65
BuyUS$1,66704 Mar 19
Gary Lehman
EntityIndividual
Role
Member of the Board of Directors
Independent Director
Shares41
Max PriceUS$40.65
BuyUS$50005 Feb 19
Patrick Sherman
EntityIndividual
Role
Member of the Board of Directors
Independent Director
Shares13.5
Max PriceUS$37.05
BuyUS$1,66705 Feb 19
Gary Lehman
EntityIndividual
Role
Member of the Board of Directors
Independent Director
Shares44.99
Max PriceUS$37.05

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.


Management Team

  • Mark Hardwick (48yo)

    Executive VP

    • Tenure: 17.8yrs
    • Compensation: US$1.14m
  • Mike Rechin (60yo)

    President

    • Tenure: 12.8yrs
    • Compensation: US$2.05m
  • Brian Hunt (59yo)

    Secretary & Legal Counsel

    • Tenure: 2yrs
  • Jeff Lorentson (55yo)

    Senior VP & Chief Risk Officer

    • Tenure: 12.6yrs
    • Compensation: US$165.10k
  • Karen Evens

    VP & Director of Marketing

    • Tenure: 14.9yrs
  • Mike Stewart (53yo)

    Executive VP & Chief Banking Officer

    • Tenure: 13.1yrs
    • Compensation: US$1.05m
  • Stephan Fluhler (50yo)

    Senior VP & Chief Information Officer

    • Tenure: 5.7yrs
    • Compensation: US$556.25k
  • John Martin (52yo)

    Executive VP & Chief Credit Officer

    • Tenure: 10.6yrs
    • Compensation: US$834.76k
  • Nicole Weaver

    VP & Director of Corporate Administration

    • Steven Harris (55yo)

      Senior Vice President & Director of Human Resources

      • Tenure: 3.3yrs

    Board Members

    • Jean Wojtowicz (61yo)

      Independent Director

      • Tenure: 16yrs
      • Compensation: US$114.55k
    • Bill Hoy (70yo)

      Independent Director

      • Tenure: 12.3yrs
      • Compensation: US$99.05k
    • Charles Schalliol (71yo)

      Chairman of the Board

      • Tenure: 12.8yrs
      • Compensation: US$151.00k
    • Mike Rechin (60yo)

      President

      • Tenure: 12.8yrs
      • Compensation: US$2.05m
    • Gary Lehman (66yo)

      Independent Director

      • Tenure: 8.7yrs
      • Compensation: US$99.05k
    • Patrick Sherman (70yo)

      Independent Director

      • Tenure: 10.7yrs
      • Compensation: US$104.52k
    • Terry Walker (72yo)

      Independent Director

      • Tenure: 13.5yrs
      • Compensation: US$112.04k
    • F. Halderman (52yo)

      Independent Director

      • Tenure: 6.2yrs
      • Compensation: US$104.29k
    • Mike Becher (66yo)

      Independent Director

      • Tenure: 7.6yrs
      • Compensation: US$114.09k
    • Jud Fisher (49yo)

      Independent Director

      • Tenure: 2.9yrs
      • Compensation: US$96.35k

    Company Information

    First Merchants Corporation's company bio, employee growth, exchange listings and data sources


    Key Information

    • Name: First Merchants Corporation
    • Ticker: FRME
    • Exchange: NasdaqGS
    • Founded: 1982
    • Industry: Regional Banks
    • Sector: Banks
    • Market Cap: US$2.248b
    • Shares outstanding: 55.70m
    • Website: https://www.firstmerchants.com

    Number of Employees


    Location

    • First Merchants Corporation
    • 200 East Jackson Street
    • Muncie
    • Indiana
    • 47305
    • United States

    Listings

    TickerExchangePrimary SecuritySecurity TypeCountryCurrencyListed on
    FRMENasdaqGS (Nasdaq Global Select)YesCommon StockUSUSDJun 1989
    FM5BST (Boerse-Stuttgart)YesCommon StockDEEURJun 1989

    Biography

    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 rents safe deposit facilities. The company also provides personal and corporate trust; brokerage and private wealth management; and letters of credit, repurchase agreements, and other corporate services, as well as electronic and mobile delivery channels. It operates 116 banking locations in 31 Indiana, 2 Illinois, and 2 Ohio counties. The company offers its services through electronic and mobile delivery channels. First Merchants Corporation was founded in 1982 and is headquartered in Muncie, Indiana. 


    Company Analysis and Financial Data Status

    All financial data provided by Standard & Poor's Capital IQ.
    DataLast Updated (UTC time)
    Company Analysis2020/01/26 00:06
    End of Day Share Price2020/01/24 00:00
    Earnings2019/09/30
    Annual Earnings2018/12/31


    Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.