First Merchants Corp. (Indiana) – Value Analysis (NASDAQ:FRME) : December 12, 2017

Capitalcube gives First Merchants Corp. (Indiana) a score of 61.

Our analysis is based on comparing First Merchants Corp. (Indiana) with the following peers – First Financial Corporation, 1st Source Corporation, Horizon Bancorp, Old National Bancorp, MainSource Financial Group, Inc., German American Bancorp, Inc., Lakeland Financial Corporation and MutualFirst Financial, Inc. (THFF-US, SRCE-US, HBNC-US, ONB-US, MSFG-US, GABC-US, LKFN-US and MFSF-US).

Fundamental Overview

First Merchants Corp. (Indiana) has a fundamental score of 61 and has a relative valuation of OVERVALUED.

Fundamental Score

Company Overview

  • It’s current Price/Book of 1.62 is about median in its peer group.
  • The market expects FRME-US to grow at about the same rate as the peers and to maintain the median returns it currently generates.
  • FRME-US‘s relatively high profit margins are burdened by capital inefficiency.
  • The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
  • FRME-US‘s return on equity currently and over the past five years is around the peer median and suggest that it does not have any particular operational advantages versus peers.
  • While FRME-US‘s revenues in recent years have grown faster than the peer median, the market gives the stock a P/E ratio that is around peer median suggesting that the market has some questions about the company’s long-term strategy.
  • The company’s equity capital investment seems appropriate for a business with peer median returns.

Drivers of Margin

  • Margins do not suggest any relative benefit from a pricing or an operating cost advantage.
  • The company’s net interest income (net interest income/total revenues) of 79.05% is around peer median suggesting that FRME-US‘s lending operations does not benefit from any differentiating pricing advantage. In addition, FRME-US‘s pre-tax margin of 38.20% is also around the peer median suggesting no operating cost advantage relative to peers.
  • The company’s proportion of fee based income (i.e. non interest income/total revenues) of 20.95% is around peer median. In addition, FRME-US‘s proportion of overhead costs (i.e. non interest expense/total revenues) of 58.79x is also around peer median — suggesting no cost advantage on fee-based overhead operations.
Drivers of Margins

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Differentiated; High Cost, Commodity; High Cost, Commodity; Low Cost

Company Profile

First Merchants Corp. operates as financial holding company. Its provides consumer, mortgage and business banking, and cash and wealth management services to its customers through its subsidiaries First Merchants Bank NA, Lafayette Bank and Trust NA, First Merchants Bank of Central Indiana NA, Commerce National Bank, First Merchants Trust Co. NA and First Merchants Insurance Services. It offers financial services, including accepting time deposits, savings and demand deposits; making consumer, commercial, agri-business and real estate mortgage loans; renting safe deposit facilities; providing personal and corporate trust services; providing full-service brokerage; and providing other corporate services, letters of credit and repurchase agreements. The company also operates a full-service property, casualty, personal lines, and employee benefit insurance agency through its subsidiary First Merchants Insurance services. First Merchants was founded in September 1982 and is headquartered in Muncie, IN.