Company: FRME
Filing Date: 2025-07-31
Form Type: 10-Q
Source: 0000712534-25-000171
Chunk: 81

Company: FIRST MERCHANTS CORP
Filing Date: 2025-07-31
Form: 10-Q
Item: Part I, Item 1
Chunk 81
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 cost of interest-bearing liabilities decreased 39 basis points, to 2.82 percent for the three months ended June 30, 2025, down from 3.21 percent for the three months ended June 30, 2024. This reduction in funding costs more than offset the decline in asset yields and resulted in a 20 basis point improvement in the FTE net interest spread, which increased to 2.68 percent from 2.48 percent.  The average balance of total interest-bearing liabilities remained relatively stable year-over-year, indicating that the improvement in spread was primarily rate-driven. 

Six months ended June 30, 2025 and 2024

Net interest income on an FTE basis increased by 3.1 percent to $275.6 million for the six months ended June 30, 2025, compared to $267.3 million for the same period in 2024. NIM improved to 3.23 percent, up from 3.13 percent in the prior-year period. This improvement was driven by a 44 basis point reduction in the cost of interest-bearing liabilities, which declined to 2.78 percent from 3.22 percent, offsetting a 22 basis point decrease in asset yields to 5.45 percent. The Corporation recognized $2.1 million of fair value accretion income on purchased loans, contributing approximately 2 basis points to NIM in the six months ended June 30, 2025.  This compares to $2.9 million, or 3 basis points, in the same period of 2024.

Interest income on an FTE basis decreased $19.4 million year-over-year, primarily due to lower yields on variable rate loans following the Federal Open Market Committee's 100 basis point rate reduction in the second half of 2024. New and renewed loans yielded 7.01 percent for the six months ended June 30, 2025 compared to 8.14 percent for the same period in 2024.  

Interest expense on deposits decreased $32.6 million, reflecting lower rates across all deposit categories. The total cost of interest-bearing liabilities decreased 44 basis points, to 2.78 percent for the six months ended June 30, 2025, down from 3.22 percent for the same period in 2024. This reduction in funding costs more than offset the decline in asset yields and resulted in a 22 basis point improvement in the FTE net interest spread