Company: FRME
Filing Date: 2025-07-31
Form Type: 10-Q
Source: 0000712534-25-000171
Chunk: 156

Company: FIRST MERCHANTS CORP
Filing Date: 2025-07-31
Form: 10-Q
Item: Part I, Item 8
Chunk 156
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-owner occupied loans.ConstructionConstruction loans are underwritten utilizing a combination of tools and techniques including feasibility and market studies, independent appraisals and appraisal reviews, absorption and interest rate sensitivity analysis as well as the financial analysis of the developer and all guarantors.  Construction loans are monitored by either in house or third party inspectors limiting advances to a percentage of costs or stabilized project value.  These loans frequently involve the disbursement of significant funds with the repayment dependent upon the successful completion and, where necessary, the future stabilization of the project.  The predominant inherent risk of this portfolio is associated with the borrower's ability to successfully complete a project on time, within budget and stabilize the projected as originally projected.Consumer and ResidentialWith respect to residential loans that are secured by 1-4 family residences, which are typically owner occupied, the Corporation generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded.  Home equity loans are secured by a subordinate interest in 1-4 family residences, and consumer loans are secured by consumer assets such as automobiles or recreational vehicles.  Some consumer loans, such as small installment loans and certain lines of credit, are unsecured.  Repayment of these loans is primarily dependent on the personal income and credit rating of the borrowers and can also be impacted by changes in property values.  Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.The ACL - Loans increased $3.3 million and $2.6 million during the three and six months ended June 30, 2025, respectively.  Net charge-offs totaled $2.3 million and $7.2 million during the three and six months ended June 30, 2025, respectively.  Provision expense of $5.6 million and $9.8 million was recorded during the three and six months ended June 30, 2025, respectively.  The following tables summarize changes in the allowance for credit losses by loan segment for the three and six months ended June 30, 2025 and 2024.Three Months Ended June 30, 2025CommercialCommercial Real EstateConstructionConsumer & ResidentialTotalAllowance for credit losses - loansBalances, March 31, 2025$99,982 $46,336 $11,541 $34,172 $192,031 Provision for credit losses - loans(406)(83)(2,735)8,