Company: FRME
Filing Date: 2025-07-31
Form Type: 10-Q
Source: 0000712534-25-000171
Chunk: 196

Company: FIRST MERCHANTS CORP
Filing Date: 2025-07-31
Form: 10-Q
Item: Part I, Item 8
Chunk 196
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.7 million decline in investment securities and a $176.0 million decline in interest-bearing deposits, consistent with the Corporation’s strategy to reallocate assets toward higher-yielding loans.

Total average deposits decreased $362.2 million million year-over-year. Average interest-bearing deposits decreased $172.5 million, with the largest decreases in certificates and other time deposits and money market deposits. Average noninterest-bearing deposits declined $189.8 million, reflecting continued client migration to interest-bearing alternatives.

Average borrowings increased $307.8 million, primarily due to a $281.3 million increase in FHLB advances and a $69.6 million increase in federal funds purchased. These increases were partially offset by a $40.3 million decline in subordinated debt, reflecting the Corporation’s redemption of $30.0 million in the first quarter of 2025 and the redemption of $25.0 million of subordinated debt in April of 2024. The increase in borrowings supported loan growth and helped manage deposit runoff while optimizing the Corporation’s overall cost of funds.

Interest Income/Expense and Average Yields

Three months ended June 30, 2025 and 2024

Net interest income on an FTE basis increased by 3.6 percent to $139.2 million for the three months ended June 30, 2025, compared to $134.4 million for the three months ended June 30, 2024. Net interest margin ("NIM") improved to 3.25 percent, up from 3.16 percent in the prior year quarter. This improvement was driven by a 39 basis point reduction in the cost of interest-bearing liabilities, which declined to 2.82 percent from 3.21 percent, offsetting a 19 basis point decrease in asset yields to 5.50 percent. The Corporation recognized $1.0 million of fair value accretion income on purchased loans, contributing approximately 2 basis points to NIM in the three months ended June 30, 2025.  This compares to $1.5 million, or 3 basis points, in the same period of 2024.

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

Interest income on an FTE basis decreased $6.3 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