Company: FRME
Filing Date: 2025-05-01
Form Type: 10-Q
Source: 0000712534-25-000117
Chunk: 142

Company: FIRST MERCHANTS CORP
Filing Date: 2025-05-01
Form: 10-Q
Item: Part I, Item 8
Chunk 142
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:Loan commitments to extend credit$5,321,554 $5,006,085 Standby letters of credit$65,210 $71,271 The Corporation maintains an accrual for credit losses on off-balance sheet commitments using the CECL methodology.  Reserves for unfunded commitments were $18.0 million at March 31, 2025 and December 31, 2024.  There was no provision for credit losses on unfunded commitments during the three months ended March 31, 2025 and 2024. This reserve level remains appropriate and is reported in Other Liabilities as of March 31, 2025 and December 31, 2024 in the Consolidated Condensed Balance Sheets.

24

PART I. FINANCIAL INFORMATION ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS(table dollar amounts in thousands, except share data)(Unaudited)

NOTE 5

DERIVATIVE FINANCIAL INSTRUMENTSNon-designated HedgesThe Corporation does not use derivatives for trading or speculative purposes.  Derivatives not designated as hedges are not speculative and result from a service the Corporation provides to certain customers.  The Corporation executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies.  Those interest rate swaps are simultaneously hedged by offsetting interest rate swaps that the Corporation executes with a third party, such that the Corporation minimizes its net risk exposure resulting from such transactions.  As the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. Commitments to fund certain mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of mortgage loans to third party investors are considered derivatives.  It is the Corporation's practice to enter into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of changes in interest rates resulting from its commitments to fund the loans.  These mortgage banking derivatives are not designated in hedge relationships.  Fair values were estimated based on changes in mortgage interest rates from the date of the commitments.  Changes in the fair value of these mortgage banking derivatives are included in net gains and fees on sales of loans. The table below presents the fair value of the Corporation’s non-designated hedges, as well as