Company: FRME
Filing Date: 2025-10-30
Form Type: 10-Q
Source: 0000712534-25-000197
Chunk: 246

Company: FIRST MERCHANTS CORP
Filing Date: 2025-10-30
Form: 10-Q
Item: Part I, Item 2
Chunk 246
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 actions aimed at reducing reliance on higher-cost CDs. Savings deposits also decreased $213.8 million. Average noninterest-bearing deposits declined $190.1 million, reflecting continued client migration to interest-bearing alternatives. These changes align with the Corporation's strategy to emphasize growth in non-maturity deposits while managing overall funding costs.

Average borrowings increased $204.5 million, primarily due to a $196.5 million increase in FHLB advances and a $46.8 million increase in federal funds purchased. These increases were partially offset by a $37.1 million decline in subordinated debt, primarily driven by the Corporation’s redemption of $30.0 million of subordinated debt in the first quarter of 2025. 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 September 30, 2025 and 2024

Net interest income on an FTE basis increased by 2.1 percent to $139.9 million for the three months ended September 30, 2025, compared to $137.0 million for the three months ended September 30, 2024. Net interest margin on an FTE basis increased slightly to 3.24 percent, up from 3.23 percent in the prior year quarter. This improvement was driven by a 34 basis point reduction in the cost of interest-bearing liabilities, which declined to 2.94 percent from 3.28 percent, offsetting a 24 basis point decrease in asset yields to 5.58 percent. The Corporation recognized $0.9 million of fair value accretion income on purchased loans, contributing approximately 2 basis points to net interest margin in the three months ended September 30, 2025.  This compares to $1.4 million, or 4 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 $5.7 million compared to the same period in the prior 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 and a 25 basis point rate reduction in the third quarter of 2025. Approximately 70.1 percent of the Corporation's loan portfolio was variable rate