Company: FRME
Filing Date: 2025-05-01
Form Type: 10-Q
Source: 0000712534-25-000117
Chunk: 233

Company: FIRST MERCHANTS CORP
Filing Date: 2025-05-01
Form: 10-Q
Item: Part I, Item 2
Chunk 233
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-at-risk, measures the sensitivity of net interest income to various interest rate movements. The Corporation's asset liability process monitors simulated net interest income under three separate interest rate scenarios; base, rising and falling.  Estimated net interest income for each scenario is calculated over a twelve-month horizon.  The immediate and parallel changes to the base case scenario used in the model are presented below.  The interest rate scenarios are used for analytical purposes and do not necessarily represent management's view of future market movements.  Rather, these are intended to provide a measure of the degree of volatility interest rate movements may introduce into the earnings of the Corporation.

The base scenario is highly dependent on numerous assumptions embedded in the model, including assumptions related to future interest rates. While the base sensitivity analysis incorporates management's best estimate of interest rate and balance sheet dynamics under various market rate movements, the actual behavior and resulting earnings impact will likely differ from those projected.  For certain assets, the base simulation model captures the expected prepayment behavior under changing interest rate environments.  Assumptions and methodologies regarding the interest rate or balance behavior of indeterminate maturity products, such as savings, money market, interest-bearing and demand deposits, reflect management's best estimate of expected future behavior.  Historical retention rate assumptions are applied to non-maturity deposits for modeling purposes.

The comparative rising 200 and 100 basis points and falling 200 and 100 basis points scenarios below, as of March 31, 2025 and December 31, 2024, assume further interest rate changes in addition to the base simulation discussed above. These changes are immediate and parallel changes to the base case scenario.

Results for the rising 200 and 100 basis points and falling 200 and 100 basis points interest rate scenarios are listed below based upon the Corporation’s rate sensitive assets and liabilities at March 31, 2025 and December 31, 2024.  The change from the base scenario represents cumulative net interest income over a twelve-month time horizon.  Balance sheet assumptions used for the base scenario are the same for the rising and falling simulations.

March 31, 2025December 31, 2024Rising 200 basis points from base case2.8 %4.1 %Rising 100 basis points from base case1.5 %2.5 %Falling 100 basis points from base case(2.2)%(2.2)%Falling 200 basis points from base case(4.8)%(4.5)