Company: FRME
Filing Date: 2025-07-31
Form Type: 10-Q
Source: 0000712534-25-000171
Chunk: 240

Company: FIRST MERCHANTS CORP
Filing Date: 2025-07-31
Form: 10-Q
Item: Part I, Item 2
Chunk 240
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 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 and investors by allowing them to make peer comparisons.  For reconciliations of GAAP net interest margin to the corresponding non-GAAP measures provided below, refer to the "NON-GAAP FINANCIAL MEASURES" section of this Management's Discussion and Analysis of Financial Condition and Results of Operations.

Average Balance Sheet

Three months ended June 30, 2025 and 2024

Total average earning assets increased $145.0 million, or 0.9 percent, to $17.2 billion for the three months ended June 30, 2025, compared to the same period in 2024.  This increase was primarily driven by a $591.2 million, or 4.7 percent, increase in average total loans, which reached $13.2 billion. The growth in loans was led by a $314.9 million increase in commercial loans and a $218.1 million increase in tax-exempt loans. These increases were partially offset by a $381.0 million decline in average investment securities and a $70.0 million decline in interest-bearing deposits, reflecting a strategic shift away from lower-yielding assets.

Total average deposits decreased $263.8 million year-over-year. Average interest-bearing deposits decreased $100.9 million, primarily due to reductions in certificates and other time deposits and savings deposits, partially offset by an increase in money market deposits. Average noninterest-bearing deposits declined $162.8 million, as clients continued to migrate balances into interest-bearing products in response to the rate environment.

Average borrowings increased $364.6 million, driven by a $318.6 million increase in FHLB advances and a $76.2 million increase