First Merchants Corporation (FRME, Financial) reported a robust performance in the first quarter of 2025, showcasing notable growth in both income and earnings. The net income available to common shareholders reached $54.9 million, with diluted earnings per share hitting $0.94. These figures mark an improvement from the adjusted net income of $50.1 million and earnings per share of $0.85 recorded in the same quarter of the previous year.
The bank attributes this success to solid loan growth and rising profitability. Chief Executive Officer Mark Hardwick highlighted that the bank's 2025 strategy remains centered on expanding organic loan volumes, maintaining margin stability, boosting fee income, managing expenses effectively, and ensuring high credit quality. Despite ongoing market fluctuations, First Merchants has not observed any signs of strain among its clients or in the markets.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 6 analysts, the average target price for First Merchants Corp (FRME, Financial) is $49.33 with a high estimate of $55.00 and a low estimate of $44.00. The average target implies an upside of 33.80% from the current price of $36.87. More detailed estimate data can be found on the First Merchants Corp (FRME) Forecast page.
Based on the consensus recommendation from 6 brokerage firms, First Merchants Corp's (FRME, Financial) average brokerage recommendation is currently 2.0, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for First Merchants Corp (FRME, Financial) in one year is $42.31, suggesting a upside of 14.75% from the current price of $36.87. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the First Merchants Corp (FRME) Summary page.
FRME Key Business Developments
Release Date: January 30, 2025
- Earnings Per Share (EPS): $1.10 for Q4, adjusted to $1.00 after accounting for a $20 million gain and an $11.6 million bond loss.
- Loan Growth: 6% for Q4, with full-year growth at 3%.
- Net Interest Margin: Improved by 5 basis points from Q3 to Q4.
- Efficiency Ratio: Sub 54% for the quarter.
- Tangible Common Equity Ratio: 8.81% at the end of Q4.
- Tangible Book Value Per Share: $26.78, a 25% increase over the last two years.
- Net Income: $200 million for the full year 2024.
- Commercial Loan Growth: $148 million increase in Q4, with C&I portfolio growing by $66 million.
- Deposit Growth: 4.4% annualized rate for Q4; full-year deposits were flat.
- Net Interest Income: Increased by $3.3 million sequentially in Q4.
- Non-Interest Income: Increased by $17.9 million in Q4, reflecting a $20 million gain from branch sales.
- Pre-Tax Pre-Provision Earnings: $73.2 million for Q4.
- Allowance for Credit Losses: $192.8 million, with a coverage ratio of 1.5%.
- Cost of Deposits: Declined by 26 basis points to 2.43% in Q4.
- Non-Interest Expense: $96.3 million for Q4, an increase of $1.7 million from the prior quarter.
- Common Equity Tier 1 Ratio: 11.43% at year-end.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- First Merchants Corp (FRME, Financial) reported strong loan growth of 6% for the fourth quarter, aligning with 2025 expectations.
- Net interest margin improved by 5 basis points from Q3 to Q4, contributing to a 4% growth in pre-tax pre-provision net revenue.
- The tangible common equity ratio increased to 8.81%, with tangible book value per share rising by 25% over the last two years.
- The company successfully completed several strategic initiatives, including technology upgrades and the sale of non-core branches, positioning it for focused growth in core markets.
- First Merchants Corp (FRME) maintained a low efficiency ratio of 53.6% for the quarter, indicating strong cost management.
Negative Points
- The agribusiness segment remains challenged due to high input costs and soft equipment purchases, impacting growth potential.
- The allowance for credit losses remains high at $192.8 million, with a coverage ratio of 1.5%, indicating ongoing credit risk concerns.
- Non-accrual loans increased by $14.7 million, largely due to a $22 million multifamily housing loan dispute.
- The cost of deposits remains relatively high at 2.43%, although there was a slight improvement by the end of December.
- Public fund balances, which are high-cost deposits, declined by 6% throughout 2024, impacting overall deposit growth.
