Company: FRME
Filing Date: 2025-02-24
Form Type: 10-K
Source: 0000712534-25-000058
Chunk: 119

Company: FIRST MERCHANTS CORP
Filing Date: 2025-02-24
Form: 10-K
Item: Item 1
Chunk 119
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•reduced flexibility for the Corporation to generate or originate certain revenue-producing assets based on increased regulatory capital standards; 

•limitations on the Corporation’s ability to expand consumer product and service offerings due to stricter consumer protection laws and regulations; and

•as the Corporation’s assets now exceed $10 billion, compliance with the Durbin Amendment has resulted in a material reduction of interchange fee income paid by merchants when debit cards are used as payment.

The Economic Growth, Regulatory Relief, and Consumer Protection Act (the “Economic Growth Act”), which was enacted in May 2018, repealed or modified several provisions of the Dodd-Frank Act.  In particular, the asset threshold at which banks are subject to annual company-run stress tests were increased from $10 billion to $250 billion under the Economic Growth Act.  As a result, the Corporation and the Bank are not subject to the Dodd-Frank Act stress testing requirements. 

The Corporation’s management continues to take the steps necessary to minimize the adverse impact of the Dodd-Frank Act on its business, financial condition and results of operation.

Durbin Amendment

Under the Durbin Amendment to the Dodd-Frank Act, the Federal Reserve adopted rules establishing standards for assessing whether the interchange fees that may be charged with respect to certain electronic debit transactions are “reasonable and proportional” to the costs incurred by issuers for processing such transactions.

Interchange fees, or “swipe” fees, are charges that merchants pay the Bank and other card-issuing banks for processing electronic payment transactions.  Federal Reserve rules applicable to financial institutions that have assets of $10 billion or more provide that the maximum permissible interchange fee for an electronic debit transaction is the sum of 21 cents per transaction and 5 basis points multiplied by the value of the transaction.  An upward adjustment of no more than 1 cent to the issuer’s debit card interchange fee is allowed if the card issuer develops and implements policies and procedures reasonably designed to achieve certain fraud-prevention standards.  The Federal Reserve also has rules governing routing and exclusivity that require issuers to offer two unaffiliated networks for routing transactions on each debit or prepaid product.

Volcker Rule

The Volcker Rule, which was adopted under the Dodd-Frank Act, places certain limitations on the trading activity of insured depository institutions and their affiliates subject to certain exceptions.  The restricted trading activity includes purchasing or selling certain types of securities or instruments in order to benefit from short-term price movements or to realize short-term profits.  Exceptions to the Volcker Rule include trading in certain