Regional banking company First Merchants (NASDAQ: FRME) missed Wall Street’s revenue expectations in Q4 CY2025, with sales falling 11.5% year on year to $172.2 million. Its non-GAAP profit of $0.98 per share was 3% above analysts’ consensus estimates.
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First Merchants (FRME) Q4 CY2025 Highlights:
- Net Interest Income: $139.1 million vs analyst estimates of $139.6 million (3.5% year-on-year growth, in line)
- Net Interest Margin: 3.3% vs analyst estimates of 3.2% (8.6 basis point beat)
- Revenue: $172.2 million vs analyst estimates of $173.1 million (11.5% year-on-year decline, 0.5% miss)
- Efficiency Ratio: 54.5% vs analyst estimates of 55.2% (68.3 basis point beat)
- Adjusted EPS: $0.98 vs analyst estimates of $0.95 (3% beat)
- Tangible Book Value per Share: $30.18 vs analyst estimates of $29.71 (13% year-on-year growth, 1.6% beat)
- Market Capitalization: $2.20 billion
"First Merchants delivered record double-digit earnings and high single-digit loan growth in 2025. Our capital, liquidity and credit positions remain very strong and position us for continued success," said Mark Hardwick, Chief Executive Officer.
Company Overview
Dating back to 1893 when it first opened its doors in Indiana, First Merchants (NASDAQ: FRME) is a Midwest regional bank providing commercial, consumer, and wealth management services through branches in Indiana, Ohio, Michigan, and Illinois.
Sales Growth
Net interest income and and fee-based revenue are the two pillars supporting bank earnings. The former captures profit from the gap between lending rates and deposit costs, while the latter encompasses charges for banking services, credit products, wealth management, and trading activities. Regrettably, First Merchants’s revenue grew at a tepid 6.5% compounded annual growth rate over the last five years. This fell short of our benchmark for the banking sector and is a poor baseline for our analysis.
Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. First Merchants’s recent performance shows its demand has slowed as its revenue was flat over the last two years. 
Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.
This quarter, First Merchants missed Wall Street’s estimates and reported a rather uninspiring 11.5% year-on-year revenue decline, generating $172.2 million of revenue.
Net interest income made up 78.2% of the company’s total revenue during the last five years, meaning lending operations are First Merchants’s largest source of revenue.
Our experience and research show the market cares primarily about a bank’s net interest income growth as non-interest income is considered a lower-quality and non-recurring revenue source.
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Tangible Book Value Per Share (TBVPS)
Banks operate as balance sheet businesses, with profits generated through borrowing and lending activities. Valuations reflect this reality, emphasizing balance sheet strength and long-term book value compounding ability.
This explains why tangible book value per share (TBVPS) stands as the premier banking metric. TBVPS strips away questionable intangible assets, revealing concrete per-share net worth that investors can trust. Traditional metrics like EPS are helpful but face distortion from M&A activity and loan loss accounting rules.
First Merchants’s TBVPS grew at a mediocre 4.6% annual clip over the last five years. However, TBVPS growth has accelerated recently, growing by 10% annually over the last two years from $24.96 to $30.18 per share.
Over the next 12 months, Consensus estimates call for First Merchants’s TBVPS to grow by 3.5% to $31.23, lousy growth rate.
Key Takeaways from First Merchants’s Q4 Results
It was encouraging to see First Merchants beat analysts’ tangible book value per share expectations this quarter. On the other hand, its revenue slightly missed and its EPS slightly exceeded Wall Street’s estimates. Overall, this was a softer quarter. The stock remained flat at $38.02 immediately after reporting.
So do we think First Merchants is an attractive buy at the current price? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here (it’s free).
