Company: FRME
Filing Date: 2025-07-31
Form Type: 10-Q
Source: 0000712534-25-000171
Chunk: 194

Company: FIRST MERCHANTS CORP
Filing Date: 2025-07-31
Form: 10-Q
Item: Part I, Item 8
Chunk 194
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-GAAP)$139,213 $134,430 $275,610 $267,289 Noninterest income (GAAP)$31,303 $31,334 $61,351 $57,972 Less:  Investment securities (gains) losses1 49 8 51 Adjusted noninterest income (non-GAAP)$31,304 $31,383 $61,359 $58,023 Adjusted revenue (non-GAAP)$170,517 $165,813 $336,969 $325,312 Efficiency ratio (non-GAAP)53.99 %53.84 %54.26 %56.47 %

44

PART I: FINANCIAL INFORMATIONITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

NET INTEREST INCOME

Net interest income is the most significant component of our earnings, comprising 81.1 percent of total revenue for the six months ended June 30, 2025.  Net interest income and net interest margin are influenced by the volume and mix of earning assets and funding sources, as well as prevailing interest rate conditions. Other factors include accretion income on purchased loans, prepayment activity and the composition and maturity of earning assets and interest-bearing liabilities.  Loans typically generate more interest income than investment securities with similar maturities.  Funding from customer deposits generally costs less than wholesale funding sources. Factors such as general economic activity, Federal Reserve Board monetary policy, and price volatility of competing alternative investments, can also exert significant influence on our ability to optimize the mix of assets and funding and the net interest income and net interest margin.

Net interest income is the excess of interest received from earning assets over interest paid on interest-bearing liabilities.  For analytical purposes, net interest income is also presented on an FTE basis in the table that follows to reflect what our tax-exempt assets would need to yield in order to achieve the same after-tax yield as a taxable asset.  The federal statutory rate of 21 percent was used for 2025 and 2024.  The FTE analysis portrays the income tax benefits associated with tax-exempt assets and helps to facilitate a comparison between taxable and tax-exempt assets.  Management believes that it is a standard practice in the banking industry to present net interest margin and net interest income on a fully taxable equivalent basis.  Therefore, management believes these measures provide useful information for both management