Regional banking company First Merchants (NASDAQ:FRME) missed Wall Street’s revenue expectations in Q2 CY2025 as sales rose 2.8% year on year to $164.3 million. Its non-GAAP profit of $0.98 per share was 3.7% above analysts’ consensus estimates.
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Net Interest Income: $133 million vs analyst estimates of $139.1 million (3.5% year-on-year growth, 4.4% miss)
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Net Interest Margin: 3.3% vs analyst estimates of 3.3% (9 basis point year-on-year increase, in line)
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Revenue: $164.3 million vs analyst estimates of $165.8 million (2.8% year-on-year growth, 0.9% miss)
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Efficiency Ratio: 54% vs analyst estimates of 54.6% (0.6 percentage point beat)
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Adjusted EPS: $0.98 vs analyst estimates of $0.95 (3.7% beat)
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Market Capitalization: $2.42 billion
“Our strong balance sheet and earnings growth in the first half of the year underscore the strength and resilience of our business model,” said Mark Hardwick, Chief Executive Officer of First Merchants Bank.
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.
Two primary revenue streams drive bank earnings. While net interest income, which is earned by charging higher rates on loans than paid on deposits, forms the foundation, fee-based services across banking, credit, wealth management, and trading operations provide additional income.
Over the last five years, First Merchants grew its revenue at a decent 6.9% compounded annual growth rate. Its growth was slightly above the average bank company and shows its offerings resonate with customers.
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 marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 1.3% 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’s revenue grew by 2.8% year on year to $164.3 million, falling short of Wall Street’s estimates.
Net interest income made up 80.8% of the company’s total revenue during the last five years, meaning First Merchants barely relies on non-interest income to drive its overall growth.
