FIRST MERCHANTS CORP
For the period ended Jun 30, 2025. Filed Jul 31, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2025 · Filed Jul 31, 2025
FRME$40.83-0.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-03-31; filed 2025-05-01.
0000712534-25-000117
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-06-30; filed 2025-07-31.
0000712534-25-000171
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 123 previous paragraphs and 136 current paragraphs.
80 unchanged; 30 reworded; 22 added; 12 removed; 1 previous and 4 current paragraphs rearranged.
Tables are not compared: 18 previous and 20 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (22)
Current report
The Corporation's other liabilities as of June 30, 2025 decreased $41.1 million compared to December 31, 2024. This decrease was partially due to a decrease in the derivative liabilities of $20.0 million, as a result of a decline in market interest rates. Additional decreases included accrued other expenses of $7.3 million, accrued salaries and incentives of $5.3 million, and unfunded commitments of $3.6 million related to the Corporation's affordable housing investments compared to December 31, 2024.
Current report
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.
Current report
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.
Current report
Average borrowings increased $364.6 million, driven by a $318.6 million increase in FHLB advances and a $76.2 million increase in federal funds purchased. These increases were partially offset by a $38.5 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.
Current report
Six months ended June 30, 2025 and 2024
Current report
Total average earning assets remained relatively flat at $17.1 billion for the six months ended June 30, 2025, compared to the same period in 2024. Average loans increased $528.5 million, or 4.2 percent, to $13.1 billion, driven by growth of $244.2 million and $221.8 million in commercial and tax-exempt loans, respectively. This increase was offset by a $364.7 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.
Current report
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.
Current report
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.
Current report
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.
Current report
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 second half of 2024. Approximately 69.3 percent of the Corporation's loan portfolio was variable rate as of June 30, 2025. New and renewed loans yielded 7.04 percent for the three months ended June 30, 2025 compared to 8.13 percent for the same period in 2024.
Current report
Interest expense on deposits declined $14.9 million, reflecting lower rates across all deposit categories. The total 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.
Current report
Six months ended June 30, 2025 and 2024
Current report
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.
Current report
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.
Current report
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, which increased to 2.67 percent from 2.45 percent.
Current report
Noninterest income remained flat at $31.3 million for the three months ended June 30, 2025 compared to the same period in 2024. Modest increases in net gains on sales of loans, treasury management fees, derivative hedge fees and card payment fees totaling $1.6 million were offset by a comparable decline in other income, which included lower contributions from CRA-related activities.
Current report
For the six months ended June 30, 2025, noninterest income totaled $61.4 million, representing a $3.4 million, or 5.8 percent, increase over the same period in 2024. The increase was attributable to a $4.1 million improvement in customer-related fees, including an increase in net gains from loan sales, derivative hedge fees, treasury management fees and card payment fees. These increases were partially offset by a decrease in other income, in part due to reduced earnings from CRA investments.
Current report
Noninterest expense totaled $93.6 million for the three months ended June 30, 2025, a $2.2 million, or 2.4 percent, increase from the second quarter of 2024. Salaries and employee benefits expense increased by $2.3 million, primarily due to higher incentives paid during the three months ended June 30, 2025.
Current report
For the six months ended June 30, 2025, noninterest expense totaled $186.5 million, a $1.8 million, or 1.0 percent, decrease compared to the same period in 2024. This decrease was primarily driven by a $1.0 million decrease in salaries and employee benefits, a $0.9 million decrease in outside data processing fees and a $0.8 million decrease in professional and other outside services expenses. These decreases were partially offset by a $1.1 million increase in equipment-related expenses.
Current report
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act and the restoration of favorable tax treatment for certain business provisions. We continue to assess any potential impact to our consolidated financial statements but anticipate any impact will be immaterial.
Current report
At June 30, 2025, nonaccrual loans totaled $67.4 million, a decrease of $6.4 million from December 31, 2024, primarily due to decreases of $9.6 million, $1.6 million, and $1.2 million in nonaccrual balances in construction, home equity, and commercial real estate, non-owner occupied loan classes, respectively. The decrease was offset by an increase in nonaccrual balances within the commercial real estate, owner occupied loan portfolio of $6.7 million.
Current report
Provision Expense and Allowance for Credit Losses on Loans
Removed paragraphs (12)
Previous report
Net interest margin, on an FTE basis, increased 12 basis points to 3.22 percent for the three months ended March 31, 2025 compared to 3.10 percent for the same period in 2024.
Previous report
Average earning assets for the three months ended March 31, 2025 decreased $163.4 million compared to the same period in 2024. The decrease for the three months ended March 31, 2025 was driven by a decrease in the average investment securities portfolio and interest-bearing deposits of $348.2 million and $281.7 million, respectively, as the Corporation repositioned the securities portfolio in the second half of 2024 by selling $268.5 million of lower-yielding securities. Offsetting these decreases was an increase in average loan balances of $464.3 million, primarily in the commercial and tax-exempt portfolios.
Previous report
Total average deposits for the three months ended March 31, 2025 decreased $461.9 million, when compared to the same period in 2024. The decline was primarily due to $267.4 million of deposits sold in the Illinois branch sale that closed in the fourth quarter of 2024. Average interest-bearing deposits for the three months ended March 31, 2025 decreased $245.3 million compared to the same period in 2024, with the largest decreases in certificates and other time deposits and savings deposits, partially offset by an increase in money market deposits and interest-bearing demand deposits. Average noninterest-bearing deposits declined $216.5 million in the three months ended March 31, 2025 when compared to the same period in 2024. This decrease reflects clients continuing to move funds from noninterest-bearing accounts into interest-bearing deposit products.
Previous report
Average borrowings increased $251.1 million for the three months ended March 31, 2025, compared to the same period in 2024. Average FHLB advances and federal funds purchased increased $243.8 million and $62.8 million, respectively, during the three months ended March 31, 2025 when compared to the same period in 2024 as the Corporation utilized funding sources to fund loan growth and supplement deposits. These increases were partially offset by a $13.4 million decrease in average securities sold under repurchase agreements for the same period. Additionally, average subordinated debt decreased $41.9 million for the three months ended March 31, 2025 when compared to the same period in 2024, due to the Corporation's redemption of $65.0 million of subordinated debt in the first and second quarters of 2024 and $30.0 million in the first quarter of 2025.
Previous report
In the first quarter of 2025, FTE asset yields decreased 26 basis points compared to the same period in 2024 and was primarily due to the Federal Open Market Committee ("FOMC") decreasing interest rates a total of 100 basis points in the second half of 2024. This resulted in a decrease in interest income, on an FTE basis, of $13.1 million during the three months ended March 31, 2025 compared to the same period in 2024. The Corporation's loan portfolio is 68.3 percent variable and repricing occurred when the FOMC decreased interest rates. As a result, yields on new and renewed loans were 6.96 percent for the three months ended March 31, 2025 compared to 8.15 percent for the same period in 2024. The Corporation also recognized fair value accretion income on purchased loans, which is included in interest income, of $1.1 million, which accounted for 3 basis points of net interest margin in the three months ended March 31, 2025. Comparatively, the Corporation recognized $1.4 million of accretion income for the three months ended March 31, 2024, or 3 basis points of net interest margin.
Previous report
Interest expense on deposits decreased $17.7 million for the three months ended March 31, 2025, or 52 basis points, when compared to the same period in 2024. The total cost of interest-bearing liabilities was 2.74 percent for the three months ended March 31, 2025 compared to 3.23 percent during the same period in 2024. The total cost of interest-bearing liabilities decreased 49 basis points, which mitigated the 26 basis point decrease in asset yields and resulted in a 23 basis point increase in FTE net interest spread when compared to the same period in 2024. The decrease in interest expense was primarily due to a decrease in the cost of all deposit products and borrowings as the average balance of total interest-bearing liabilities was comparable to the prior year period.
Previous report
Noninterest income totaled $30.0 million for the three months ended March 31, 2025, a $3.4 million, or 12.8 percent, increase compared to the three months ended March 31, 2024. The increase was primarily driven by a $1.8 million increase in net gains and fees on sales of loans and a $0.6 million increase in earnings on cash surrender value of life insurance.
Previous report
Noninterest expense totaled $92.9 million for the three months ended March 31, 2025, a $4.0 million, or 4.2 percent, decrease from the first quarter of 2024. There was a $3.3 million decrease in salaries and employee benefits expenses related to lower headcount driven by the voluntary early retirement program and the Illinois branch sale that both occurred in 2024. Additionally, there was a $1.0 million decrease in outside data processing fees due to digital platform conversion costs in the first quarter of 2024.
Previous report
At March 31, 2025, non-accrual loans totaled $81.9 million, an increase of $8.1 million from December 31, 2024, primarily due to increases of $6.8 million and $1.9 million in non-accrual balances in commercial real estate, owner occupied and residential, respectively. The increase was offset by a decline in non-accrual balances within the commercial and industrial loan portfolio of $2.0 million.
Previous report
In April 2025, the Corporation received $22.0 million in principal payments related to a multi-family construction relationship that was in
Previous report
nonaccrual status as of March 31, 2025. The payments represented full collection of principal.
Previous report
Provision and Allowance for Credit Losses on Loans
Reworded paragraphs (30)
Previous wording
Generally accepted accounting principles are complex and require us to apply significant judgments to various accounting, reporting and disclosure matters. Management must use assumptions and estimates to apply those principles where actual measurement is not possible or practical. The judgments and assumptions made are based upon historical experience or other factors that management believes to be reasonable under the circumstances. Because of the nature of the judgments and assumptions, actual results could differ from estimates, which could have a material effect on our financial condition and results of operations. There have been no significant changes during the three months ended March 31, 2025 to the items disclosed as our critical accounting policies and estimates in Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2024. For a complete discussion of our significant accounting policies, see “Notes to the Consolidated Financial Statements” in our Annual Report on Form 10-K for the year ended December 31, 2024.
Current wording
Generally accepted accounting principles are complex and require us to apply significant judgments to various accounting, reporting and disclosure matters. Management must use assumptions and estimates to apply those principles where actual measurement is not possible or practical. The judgments and assumptions made are based upon historical experience or other factors that management believes to be reasonable under the circumstances. Because of the nature of the judgments and assumptions, actual results could differ from estimates, which could have a material effect on our financial condition and results of operations. There have been no significant changes during the six months ended June 30, 2025 to the items disclosed as our critical accounting policies and estimates in Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2024. For a complete discussion of our significant accounting policies, see “Notes to the Consolidated Financial Statements” in our Annual Report on Form 10-K for the year ended December 31, 2024.
Previous wording
The Corporation reported first quarter 2025 net income available to common stockholders and diluted earnings per common share of $54.9 million and $0.94 per diluted share, respectively, compared to $47.5 million and $0.80 per diluted share, respectively, during the first quarter of 2024.
Current wording
The Corporation reported second quarter 2025 net income available to common stockholders and diluted earnings per common share of $56.4 million and $0.98 per diluted share, respectively, compared to $39.5 million and $0.68 per diluted share, respectively, during the second quarter of 2024. The Corporation reported net income available to common stockholders and diluted earnings per common share of $111.2 million and $1.92 per diluted share, respectively, for the six months ended June 30, 2025 compared to $86.9 million and $1.48 per diluted share, respectively, for the six months ended June 30, 2024.
Previous wording
When adjusting for certain non-recurring items, adjusted net income available to common stockholders was $54.9 million and adjusted diluted earnings per common share totaled $0.94 for the first quarter of 2025, compared to $50.1 million and $0.85, respectively, in the first quarter of 2024. These adjusted net income and earnings per share amounts are non-GAAP measures. For reconciliations of GAAP earnings per share measures to the corresponding non-GAAP measures provided above, refer to the "NON-GAAP FINANCIAL MEASURES" section of this Management's Discussion and Analysis of Financial Condition and Results of Operations.
Current wording
When adjusting for certain non-recurring items, adjusted net income available to common stockholders was $56.4 million and adjusted diluted earnings per common share totaled $0.98 for the second quarter of 2025, compared to $39.5 million and $0.68, respectively, in the second quarter of 2024. Adjusted net income available to common stockholders and adjusted diluted earnings per common share for the six months ended June 30, 2025, totaled $111.2 million and $1.92, respectively, compared to $89.6 million and $1.53, respectively, for the same period in 2024. These adjusted net income and earnings per share amounts are non-GAAP measures. For reconciliations of GAAP earnings per share measures to the corresponding non-GAAP measures provided above, refer to the "NON-GAAP FINANCIAL MEASURES" section of this Management's Discussion and Analysis of Financial Condition and Results of Operations.
Previous wording
As of March 31, 2025, total assets equaled $18.4 billion, an increase of $127.8 million or 0.7 percent from December 31, 2024.
Current wording
As of June 30, 2025, total assets equaled $18.6 billion, an increase of $280.8 million or 1.5 percent from December 31, 2024.
Previous wording
Cash and due from banks and interest-bearing deposits increased $31.1 million from December 31, 2024. Total investment securities decreased $33.6 million from December 31, 2024, primarily due to $35.3 million in maturities and redemptions of available for sale securities and held to maturity securities. The investment portfolio as a percentage of total assets was 18.6 percent at March 31, 2025 and 18.9 percent at December 31, 2024. Additional details of the Corporation's investment securities portfolio are discussed within NOTE 3. INVESTMENT SECURITIES of the Notes to Consolidated Condensed Financial Statements of this Quarterly Report on Form 10-Q.
Current wording
Cash and due from banks and interest-bearing deposits decreased $81.6 million from December 31, 2024. Total investment securities decreased $79.7 million from December 31, 2024, primarily due to $79.8 million in maturities and redemptions of available for sale securities and held to maturity securities. The investment portfolio as a percentage of total assets was 18.2 percent at June 30, 2025 and 18.9 percent at December 31, 2024. Additional details of the Corporation's investment securities portfolio are discussed within NOTE 3. INVESTMENT SECURITIES of the Notes to Consolidated Condensed Financial Statements of this Quarterly Report on Form 10-Q.
Previous wording
The Corporation's total loan portfolio increased $154.9 million, or 4.8 percent on an annualized basis, since December 31, 2024. The composition of the loan portfolio is 75.4 percent commercial oriented with the largest loan classes of commercial and industrial and commercial real estate, non-owner occupied, representing 33.1 percent and 16.7 percent of the total loan portfolio, respectively. The increase was primarily driven by an increase in commercial and industrial, commercial real estate, owner occupied, public finance and residential loans. Partially offsetting those increases was a decrease in commercial real estate, non-owner occupied, construction, home equity, and individuals' loans for household and other personal expenditures. Additional details of the changes in the Corporation's loans are discussed within NOTE 4. LOANS AND ALLOWANCE FOR CREDIT LOSSES of the Notes to Consolidated Condensed Financial Statements of this Quarterly Report on Form 10-Q, and the "LOAN QUALITY AND PROVISION FOR CREDIT LOSSES ON LOANS" section of this Management's Discussion and Analysis of Financial Condition and Results of Operations.
Current wording
The Corporation's total loan portfolio increased $452.5 million, or 7.0 percent on an annualized basis, since December 31, 2024. The composition of the loan portfolio is 75.7 percent commercial oriented with the largest loan classes of commercial and industrial and commercial real estate, non-owner occupied, representing 33.3 percent and 16.3 percent of the total loan portfolio, respectively. The increase was primarily driven by increases in commercial and industrial, commercial real estate, owner occupied, construction, public finance, and residential loans. Partially offsetting those increases was a decrease in commercial real estate, non-owner occupied and individuals' loans for household and other personal expenditures. Additional details of the changes in the Corporation's loans are discussed within NOTE 4. LOANS AND ALLOWANCE FOR CREDIT LOSSES of the Notes to Consolidated Condensed Financial Statements of this Quarterly Report on Form 10-Q, and the "LOAN QUALITY AND PROVISION FOR CREDIT LOSSES ON LOANS" section of this Management's Discussion and Analysis of Financial Condition and Results of Operations.
Previous wording
The Corporation’s ACL - loans totaled $192.0 million as of March 31, 2025 and equaled 1.47 percent of total loans, compared to $192.8 million and 1.50 percent of total loans at December 31, 2024. The ACL - loans decreased $0.7 million from December 31, 2024. During the three months ended March 31, 2025, the Corporation recorded net charge-offs of $4.9 million and $4.2 million of provision for credit losses - loans. During the three months ended March 31, 2024, the Corporation recorded net charge-offs of $2.3 million and $2.0 million of provision for credit losses - loans. Nonaccrual loans at March 31, 2025 were $81.9 million and increased $8.1 million from December 31, 2024 primarily due to increases of $6.8 million and $1.9 million in non-accrual balances in commercial real estate, owner occupied and residential, respectively. The increases were partially offset by a decline in non-accrual balances within the commercial and industrial loan portfolio of $2.0 million. The Corporation's reserve for unfunded commitments was $18.0 million at March 31, 2025 and December 31, 2024, and is recorded in Other Liabilities. Additional details of the Corporation's allowance methodology and asset quality are discussed within NOTE 4. LOANS AND ALLOWANCE FOR CREDIT LOSSES of the Notes to Consolidated Condensed Financial Statements of this Quarterly Report on Form 10-Q and within the “LOAN QUALITY AND PROVISION FOR CREDIT LOSSES ON LOANS” section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Current wording
The Corporation’s ACL - Loans totaled $195.3 million as of June 30, 2025 and equaled 1.47 percent of total loans, compared to $192.8 million and 1.50 percent of total loans at December 31, 2024. The ACL - Loans decreased $2.6 million from December 31, 2024. During the three and six months ended June 30, 2025, the Corporation recorded net charge-offs of $2.3 million and $7.2 million, respectively, and $5.6 million and $9.8 million of provision for credit losses - loans, for the same periods respectively. During the three and six months ended June 30, 2024, the Corporation recorded net charge-offs of $39.6 million and $41.9 million, respectively, and $24.5 million and $26.5 million of provision for credit losses - loans, for the same periods respectively. Nonaccrual loans at June 30, 2025 were $67.4 million and decreased $6.4 million from December 31, 2024 primarily due to declines in nonaccrual balances of $9.6 million in construction, $1.6 million in home equity and $1.2 million in commercial real estate, non-owner occupied. The decreases were partially offset by an increase in nonaccrual balances within the commercial real estate, owner occupied portfolio of $6.7 million. The Corporation's reserve for unfunded commitments was $18.0 million at June 30, 2025 and December 31, 2024, and is recorded in Other Liabilities. Additional details of the Corporation's allowance methodology and asset quality are discussed within NOTE 4. LOANS AND ALLOWANCE FOR CREDIT LOSSES of the Notes to Consolidated Condensed Financial Statements of this Quarterly Report on Form 10-Q and within the “LOAN QUALITY AND PROVISION FOR CREDIT LOSSES ON LOANS” section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Previous wording
The Corporation's other assets decreased $18.0 million from December 31, 2024 and was driven by a decline in the fair value of derivatives included in other assets from $77.1 million at December 31, 2024 to $63.7 million at March 31, 2025. The decrease in derivatives is due primarily to a decrease in market interest rates.
Current wording
The Corporation's other assets decreased $6.3 million from December 31, 2024 and was driven by a decline in the fair value of derivatives included in other assets from $77.1 million at December 31, 2024 to $57.6 million at June 30, 2025. The decrease in derivatives is due primarily to a decline in market interest rates. This decrease was partially offset by an increase of $11.9 million related to the Corporation's continual investment in community redevelopment funds. Additional details of the Corporation's investments in community redevelopment funds are discussed in NOTE 7. QUALIFIED AFFORDABLE HOUSING INVESTMENTS.
Previous wording
As of March 31, 2025, total deposits equaled $14.5 billion, a decrease of $59.6 million from December 31, 2024, or 1.6 percent on an annualized basis. The Corporation experienced decreases from December 31, 2024 in time deposits of $213.8 million and demand deposits of $193.5 million. Partially offsetting these decreases was an increase in savings deposits of $269.1 million and brokered certificates of deposits of $78.5 million from December 31, 2024. The overall deposit decrease was driven by a decrease in public funds and partially offset by an increase in wholesale deposits. Total deposits less time deposits greater than $100,000, or core deposits, represented 91.3 percent of the deposit portfolio at March 31, 2025. Noninterest bearing deposits represents 15.1 percent of the deposit portfolio at March 31, 2025, compared to 16.0 percent at December 31, 2024. The loan to deposit ratio increased to 90.1 percent at period end from 88.6 percent as of December 31, 2024.
Current wording
As of June 30, 2025, total deposits equaled $14.8 billion, an increase of $276.0 million from December 31, 2024, or 3.8 percent on an annualized basis. The Corporation experienced increases from December 31, 2024 in money market and savings deposits of $461.9 million and brokered certificates of deposits of $221.6 million. Partially offsetting these increases was a decrease in time deposits of $226.1 million and demand deposits of $181.4 million from December 31, 2024. The overall deposit increase was driven primarily by an increase in wholesale deposits used to fund loan growth and a shift in the deposit mix from time deposits to money market as a result of product repricing. Total deposits less time deposits greater than $100,000, or core deposits, represented 90.9 percent of the deposit portfolio at June 30, 2025. Noninterest bearing deposits represents 14.8 percent of the deposit portfolio at June 30, 2025, compared to 16.0 percent at December 31, 2024. The loan to deposit ratio increased to 90.1 percent at period end from 88.6 percent as of December 31, 2024.
Previous wording
The average account balance within the deposit portfolio was $36,000 at March 31, 2025. Insured deposits totaled 69.6 percent of total deposits, with the State of Indiana's Public Deposit Insurance Fund, which insures certain public deposits, providing insurance to 12.4 percent of deposits and the Federal Deposit Insurance Corporation ("FDIC") providing insurance to the remaining 57.2 percent. Only 30.4 percent of deposits are uninsured and our available liquidity is ample to cover those when considering both on balance sheet sources of liquidity and unused capacity from the Federal Reserve Discount Window, FHLB and unsecured borrowing sources.
Current wording
The average account balance within the deposit portfolio was $37,000 at June 30, 2025. Insured deposits totaled 70.3 percent of total deposits, with the State of Indiana's Public Deposit Insurance Fund, which insures certain public deposits, providing insurance to 14.7 percent of deposits and the FDIC providing insurance to the remaining 55.6 percent. Only 29.7 percent of deposits are uninsured and our available liquidity is ample to cover those when considering both on balance sheet sources of liquidity and unused capacity from the Federal Reserve Discount Window, FHLB and unsecured borrowing sources.
Previous wording
Total borrowings increased $184.9 million as of March 31, 2025, compared to December 31, 2024. This increase was primarily driven by an increase of $149.9 million in FHLB advances and $85.8 million in federal funds purchased from December 31, 2024. Subordinated debentures and other borrowings decreased $30.9 million compared to December 31, 2024 as the Corporation utilized excess liquidity to pay down $30.0 million of subordinated debentures during the first quarter of 2025. Securities sold under repurchase agreements decreased $19.9 million from December 31, 2024 as clients moved into other deposit products.
Current wording
Total borrowings increased $2.9 million as of June 30, 2025, compared to December 31, 2024. This increase was primarily driven by an increase of $76.1 million in FHLB advances and partially offset by a decrease of $14.2 million in federal funds purchased from December 31, 2024. Subordinated debentures and other borrowings decreased $30.9 million compared to December 31, 2024 as the Corporation utilized excess liquidity to pay down $30.0 million of subordinated debentures during the first quarter of 2025. Securities sold under repurchase agreements decreased $28.1 million from December 31, 2024 as clients moved into other deposit products.
Previous wording
Net interest income is the most significant component of our earnings, comprising 81.3 percent of revenues for the three months ended March 31, 2025. Net interest income and margin are influenced by many factors, primarily the volume and mix of earning assets, funding sources, and interest rate fluctuations. Other factors include the level of accretion income on purchased loans, prepayment risk on loan and investment-related assets, 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 margin.
Current wording
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.
Previous wording
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.
Current wording
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.
Previous wording
The following tables present the Corporation’s average balance sheet, interest income/interest expense, and the average rate as a percent of average earning assets/liabilities for the three months ended March 31, 2025 and 2024.
Current wording
The following tables present the Corporation’s average balance sheet, interest income/interest expense, and the average rate as a percent of average earning assets/liabilities for the three and six months ended June 30, 2025 and 2024.
Previous wording
Income tax expense for the three months ended March 31, 2025 was $7.9 million on pre-tax net income of $63.2 million. For the same period in 2024, income tax expense was $6.8 million on pre-tax income of $54.8 million. The effective income tax rates for the first quarter of 2025 and 2024 were 12.5 percent.
Current wording
Income tax expense for the three months ended June 30, 2025 was $8.3 million on pre-tax income of $65.1 million. For the same period in 2024, income tax expense was $4.1 million on pre-tax income of $44.0 million. The effective income tax rates for the second quarter of 2025 and 2024 were 12.7 percent and 9.2 percent, respectively.
Previous wording
The effective income tax rate for the three months ended March 31, 2025 when compared to the same period in 2024 experienced a favorable rate impact due to increased tax credits offset by tax-exempt interest income being a smaller portion of pre-tax income in 2025.
Current wording
The higher effective income tax rate for the three and six months ended June 30, 2025 when compared to the same period in 2024 was primarily a result of tax-exempt interest income being a smaller portion of pre-tax income in 2025.
Previous wording
As part of the Level One acquisition, the Corporation issued 10,000 shares of newly created 7.5 percent non-cumulative perpetual preferred stock, with a liquidation preference of $2,500 per share, in exchange for the outstanding Level One Series B preferred stock, and as part of that exchange, each outstanding Level One depository share representing a 1/100th interest in a share of the Level One preferred stock was converted into a depository share of the Corporation representing a 1/100th interest in a share of its newly issued preferred stock. The Corporation had $25 million of outstanding preferred stock at March 31, 2025 and December 31, 2024. During the three months ended March 31, 2025 and 2024, the Corporation declared and paid dividends of $46.88 per share (equivalent to $0.4688 per depository share) equal to $0.5 million. The Series A preferred stock qualifies as tier 1 capital for purposes of the regulatory capital calculations.
Current wording
As part of the Level One acquisition, the Corporation issued 10,000 shares of newly created 7.5 percent non-cumulative perpetual preferred stock, with a liquidation preference of $2,500 per share, in exchange for the outstanding Level One Series B preferred stock, and as part of that exchange, each outstanding Level One depository share representing a 1/100th interest in a share of the Level One preferred stock was converted into a depository share of the Corporation representing a 1/100th interest in a share of its newly issued preferred stock. The Corporation had $25.0 million of outstanding preferred stock at June 30, 2025 and December 31, 2024. During the three and six months ended June 30, 2025 and 2024, the Corporation declared and paid dividends of $46.88 per share (equivalent to $0.4688 per depository share) and $93.76 per share, respectively, equal to $0.5 million and $0.9 million, respectively. The Series A preferred stock qualifies as tier 1 capital for purposes of the regulatory capital calculations.
Previous wording
On January 27, 2021, the Board of Directors of the Corporation approved a stock repurchase program of up to 3,333,000 shares of the Corporation's outstanding common stock; provided, however, that the total aggregate investment in shares repurchased under the program may not exceed $100,000,000. On a share basis, the amount of common stock subject to the repurchase program represented approximately 6 percent of the Corporation's outstanding shares at the time the program became effective. The Corporation repurchased 0.9 million shares of its common stock pursuant to the repurchase program during the three months ended March 31, 2024. As of March 31, 2024 the Corporation had approximately 1.8 million shares at an aggregate value of $44.6 million available to repurchase under the program. The stock repurchase program approved in 2021 was discontinued as of March 18, 2025.
Current wording
On January 27, 2021, the Board of Directors of the Corporation approved a stock repurchase program of up to 3,333,000 shares of the Corporation's outstanding common stock; provided, however, that the total aggregate investment in shares repurchased under the program may not exceed $100.0 million. On a share basis, the amount of common stock subject to the repurchase program represented approximately 6 percent of the Corporation's outstanding shares at the time the program became effective. During the three and six months ended June 30, 2024, the Corporation repurchased approximately 0.6 million and 1.5 million shares of its common stock, respectively, under its share repurchase program, for total considerations of $20.0 million and $50.0 million, at average prices of $33.69 and $33.72 per share, respectively. As of June 30, 2024 the Corporation had approximately 1.2 million shares at an aggregate value of $24.6 million available to repurchase under the program. The stock repurchase program approved in 2021 was discontinued as of March 18, 2025.
Previous wording
On March 18, 2025, the Board of Directors of the Corporation approved a stock repurchase program of up to 2,927,000 shares of the Corporation's outstanding common stock; provided, however, that the total aggregate investment in shares repurchased under the program may not exceed $100,000,000. On a share basis, the amount of common stock subject to the repurchase program represented approximately 5 percent of the Corporation's outstanding shares at the time the program became effective. The Corporation repurchased 0.2 million shares of its common stock pursuant to the repurchase program during the three months ended March 31, 2025. As of March 31, 2025, the Corporation had approximately 2.7 million shares at an aggregate value of $90.0 million available to repurchase under the program approved in 2025.
Current wording
On March 18, 2025, the Board of Directors of the Corporation approved a stock repurchase program of up to 2,927,000 shares of the Corporation's outstanding common stock; provided, however, that the total aggregate investment in shares repurchased under the program may not exceed $100.0 million. On a share basis, the amount of common stock subject to the repurchase program represented approximately 5 percent of the Corporation's outstanding shares at the time the program became effective. During the three and six months ended June 30, 2025, the Corporation repurchased 0.6 million and 0.8 million shares of its common stock, respectively, under the program, for total consideration of $22.1 million and $30.0 million, respectively. The average purchase prices were $37.93 and $38.62 per share, respectively. As of June 30, 2025, approximately 2.2 million shares remained available for repurchase under the program, with an aggregate remaining authorization of $70.0 million.
Previous wording
In August 2022, the Inflation Reduction Act of 2022 (the "IRA") was enacted. Among other things, the IRA imposes a new 1 percent excise tax on the fair market value of stock repurchased after December 31, 2022 by publicly traded U.S. corporations (like the Corporation). With certain exceptions, the value of stock repurchased is determined net of stock issued in the year, including shares issued pursuant to compensatory arrangements. During the three months ended March 31, 2025 and 2024, the Corporation recorded excise tax of $0.1 million and $0.3 million, respectively, related to its share repurchases during the period, which is reflected in the Statement of Stockholders' Equity as a component of additional paid-in capital.
Current wording
In August 2022, the Inflation Reduction Act of 2022 (the "IRA") was enacted. Among other things, the IRA imposes a new 1 percent excise tax on the fair market value of stock repurchased after December 31, 2022 by publicly traded U.S. corporations (like the Corporation). With certain exceptions, the value of stock repurchased is determined net of stock issued in the year, including shares issued pursuant to compensatory arrangements. During the three and six months ended June 30, 2025, the Corporation recorded excise tax of $0.2 million and $0.3 million, respectively. During the three and six months ended June 30, 2024, the Corporation recorded excise tax of $0.2 million and $0.5 million, respectively, related to its share repurchases during the period, which is reflected in the Statement of Stockholders' Equity as a component of additional paid-in capital.
Previous wording
On November 1, 2013, the Corporation completed the private issuance and sale to four institutional investors of an aggregate of $70.0 million of debt comprised of (a) 5.00 percent Fixed-to-Floating Rate Senior Notes due 2028 in the aggregate principal amount of $5 million and (b) 6.75 percent Fixed-to-Floating Rate Subordinated Notes due October 30, 2028 in the aggregate principal amount of $65.0 million. The Corporation exercised its right to redeem $65 million of the subordinated debt on the scheduled interest payment date during the first half of 2024.
Current wording
On November 1, 2013, the Corporation completed the private issuance and sale to four institutional investors of an aggregate of $70.0 million of debt comprised of (a) 5.00 percent Fixed-to-Floating Rate Senior Notes due 2028 in the aggregate principal amount of $5.0 million and (b) 6.75 percent Fixed-to-Floating Rate Subordinated Notes due October 30, 2028 in the aggregate principal amount of $65.0 million. The Corporation exercised its right to redeem $65.0 million of the subordinated debt on the scheduled interest payment date during the first half of 2024. On June 9, 2025, the Corporation, through its trustee, distributed notice of redemption of the remaining $5.0 million in principal amount of its 5.00 percent Fixed-to-Floating Senior Notes due October 30, 2028. The Corporation exercised its right to redeem the $5.0 million of the Senior Notes on the scheduled interest payment date of July 30, 2025.
Previous wording
On April 1, 2022, the Corporation assumed $30.0 million of subordinated notes in conjunction with its acquisition of Level One. On February 14, 2025, the Corporation, through its trustee, distributed notice of redemption of all $30.0 million in principal amount of its 4.75% Fixed-to-Floating Subordinated Notes due December 18, 2029. The Corporation exercised its right to redeem $30 million of the subordinated debt on the scheduled interest payment date of March 18, 2025.
Current wording
On April 1, 2022, the Corporation assumed $30.0 million of subordinated notes in conjunction with its acquisition of Level One. On February 14, 2025, the Corporation, through its trustee, distributed notice of redemption of all $30.0 million in principal amount of its 4.75 percent Fixed-to-Floating Subordinated Notes due December 18, 2029. The Corporation exercised its right to redeem $30 million of the subordinated debt on the scheduled interest payment date of March 18, 2025.
Previous wording
The Corporation's tangible common equity measures are capital adequacy metrics that are meaningful to the Corporation, as well as analysts and investors, in assessing the Corporation's use of equity and in facilitating period-to-period and company-to-company comparisons. Tangible common equity to tangible assets ratio was 8.90 percent at March 31, 2025, and 8.81 percent at December 31, 2024.
Current wording
The Corporation's tangible common equity measures are capital adequacy metrics that are meaningful to the Corporation, as well as analysts and investors, in assessing the Corporation's use of equity and in facilitating period-to-period and company-to-company comparisons. Tangible common equity to tangible assets ratio was 8.92 percent at June 30, 2025, and 8.81 percent at December 31, 2024.
Previous wording
The following tables present the maturity distribution of our loan portfolio, excluding loans held for sale, by collateral classification at March 31, 2025 according to contractual maturities of (1) one year or less, (2) after one year but within five years and (3) after five years. The tables also present the portion of loans by loan classification that have fixed interest rates or variable interest rates that fluctuate over the life of the loans in accordance with changes in an interest rate index.
Current wording
The following tables present the maturity distribution of our loan portfolio, excluding loans held for sale, by collateral classification at June 30, 2025 according to contractual maturities of (1) one year or less, (2) after one year but within five years and (3) after five years.
Previous wording
At March 31, 2025, loans 90-days or more delinquent and still accruing totaled $4.3 million, a decrease of $1.6 million from December 31, 2024.
Current wording
At June 30, 2025, loans 90-days or more delinquent and still accruing totaled $4.4 million, a decrease of $1.5 million from December 31, 2024.
Previous wording
The Corporation’s loan balances, excluding loans held for sale, increased $150.5 million from December 31, 2024 to $13.0 billion at March 31, 2025. At March 31, 2025, the ACL -loans totaled $192.0 million, which represents a decrease of $0.7 million from December 31, 2024. As a percentage of loans, the ACL - loans was 1.47 percent and 1.50 percent at March 31, 2025 and December 31, 2024, respectively.
Current wording
The Corporation’s loan balances, excluding loans held for sale, increased $442.4 million from December 31, 2024 to $13.3 billion at June 30, 2025. At June 30, 2025, the ACL - Loans totaled $195.3 million, which represents a decrease of $2.6 million from December 31, 2024. As a percentage of loans, the ACL - Loans was 1.47 percent and 1.50 percent at June 30, 2025 and December 31, 2024, respectively.
Previous wording
Net charge-offs totaling $4.9 million were recognized for the three months ended March 31, 2025, and provision for credit losses of $4.2 million was recorded for the same period in 2025. Net charge-offs totaling $2.3 million were recognized for the three months ended March 31, 2024, with $2.0 million in provision for credit losses recorded in the same period in 2024.
Current wording
Net charge-offs totaling $2.3 million and $7.2 million were recognized for the three and six months ended June 30, 2025, respectively, and provision for credit losses of $5.6 million and $9.8 million, respectively, were recorded for the same periods in 2025. Net charge-offs totaling $39.6 million and $41.9 million were recognized for the three and six months ended June 30, 2024, respectively, with $24.5 million and $26.5 million in provision for credit losses recorded in the same periods in 2024, respectively.
Previous wording
The distribution of the net charge-offs (recoveries) for the three months ended March 31, 2025 and 2024 is reflected in the following table.
Current wording
The distribution of the net charge-offs (recoveries) for the three and six months ended June 30, 2025 and 2024 are reflected in the following table.
Previous wording
The principal source of asset-funded liquidity is investment securities classified as available for sale, the market values of which totaled $1.4 billion at March 31, 2025, a decrease of $8.0 million, or 0.6 percent, from December 31, 2024. Securities classified as held to maturity that are maturing within a short period of time can also be a source of liquidity. Securities classified as held to maturity and that are maturing in one year or less totaled $5.3 million at March 31, 2025. In addition, other types of assets such as cash and interest-bearing deposits with other banks, federal funds sold and loans maturing within one year are sources of liquidity.
Current wording
The principal source of asset-funded liquidity is investment securities classified as available for sale, the market values of which totaled $1.4 billion at June 30, 2025, a decrease of $28.3 million, or 2.0 percent, from December 31, 2024. Securities classified as held to maturity that are maturing within a short period of time can also be a source of liquidity. Securities classified as held to maturity and that are maturing in one year or less totaled $4.9 million at June 30, 2025. In addition, other types of assets such as cash and interest-bearing deposits with other banks, federal funds sold and loans maturing within one year are sources of liquidity.
Previous wording
The most stable source of liability-funded liquidity for both the long-term and short-term is deposit growth and retention in the core deposit base. Federal funds purchased and securities sold under agreements to repurchase are also considered a source of liquidity. In addition, FHLB advances and Federal Reserve Discount Window borrowings are utilized as a funding source. At March 31, 2025, total borrowings from the FHLB were $972.5 million and there were no outstanding borrowings from the Federal Reserve Discount Window. The Bank has pledged certain mortgage loans and investments to the FHLB and Federal Reserve. The total available remaining borrowing capacity from the FHLB and Federal Reserve at March 31, 2025 was $625.4 million and $2.4 billion, respectively.
Current wording
The most stable source of liability-funded liquidity for both the long-term and short-term is deposit growth and retention in the core deposit base. Federal funds purchased and securities sold under agreements to repurchase are also considered a source of liquidity. In addition, FHLB advances and Federal Reserve Discount Window borrowings are utilized as a funding source. At June 30, 2025, total borrowings from the FHLB were $898.7 million and there were no outstanding borrowings from the Federal Reserve Discount Window. The Bank has pledged certain mortgage loans and investments to the FHLB and Federal Reserve. The total available remaining borrowing capacity from the FHLB and Federal Reserve at June 30, 2025 was $689.2 million and $5.1 billion, respectively.
Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
Three months ended June 30, 2025 and 2024
Current report — wording carried from elsewhere
Three months ended June 30, 2025 and 2024
Current report — wording carried from elsewhere
Income tax expense for the six months ended June 30, 2025 was $16.2 million on pre-tax income of $128.3 million. For the same period in 2024, income tax expense was $10.9 million on pre-tax income of $98.8 million. The effective income tax rates for the six months ended June 30, 2025 and 2024 were 12.6 percent and 11.0 percent, respectively.
Current report — wording carried from elsewhere
The tables also present the portion of loans by loan classification that have fixed interest rates or variable interest rates that fluctuate over the life of the loans in accordance with changes in an interest rate index.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
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