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Investing.com - Raymond James downgraded First Merchants (NASDAQ:FRME), a $2.25 billion market cap regional bank trading at 0.97x book value, from Outperform to Market Perform following the bank’s announcement to acquire First Savings Financial.
The downgrade comes as Raymond James analysts believe the acquisition, while creating entry into the Louisville market and boosting EPS forecasts, reduces the likelihood of share repurchases and securities restructurings in the near term. InvestingPro data shows the bank has maintained dividend payments for 37 consecutive years, with a current yield of 3.7%.
The deal was executed at what Raymond James considers a fair market price of 1.35x price-to-tangible book value, but the firm expressed concerns about potential funding headwinds from the acquired specialty business lines that offer minimal funding sources.
Raymond James also noted that First Merchants faces net interest margin challenges in a lower interest rate environment, which could delay the bank’s path toward core financial improvement.
The research firm indicated that several quarters will be necessary to prove the merits of the acquisition, and with shares trading mostly in-line with peers, analysts see fewer near-term catalysts for outperformance despite forecasts for solid profitability, growth, and credit metrics.
In other recent news, First Merchants Corporation has announced a definitive merger agreement to acquire First Savings Financial Group, Inc. in an all-stock transaction valued at approximately $241.3 million. Under the terms of the agreement, First Savings shareholders will receive 0.85 shares of First Merchants common stock for each First Savings share. Additionally, First Merchants declared a quarterly cash dividend of $0.36 per common share, maintaining the same payout level as its previous distribution. The dividend is scheduled for payment on September 19, 2025, to shareholders of record as of September 5, 2025.
In other developments, Fermi America has filed for a listing on the Nasdaq stock exchange under the ticker symbol ’FRMI.’ The company has appointed UBS Investment Bank, Cantor, and Mizuho as the book-running managers for the offering. These recent developments highlight significant corporate actions and financial activities by First Merchants Corporation and Fermi America.
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