Company: FRME
Filing Date: 2025-02-24
Form Type: 10-K
Source: 0000712534-25-000058
Chunk: 60

Company: FIRST MERCHANTS CORP
Filing Date: 2025-02-24
Form: 10-K
Item: Item 8
Chunk 60
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 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 decreased $12.2 million during the year ended December 31, 2024.  The allowance decreased primarily due to $49.4 million of net charge-offs during the year ended December 31, 2024.  The increase in net charge-offs was primarily related to two commercial relationships that accounted for $42.7 million of charge-offs. One borrower experienced a sudden change in revenue from the cancellation and inability to renegotiate their contracts with the U.S. Government. This negatively impacted the value of the borrower’s business and resulted in their inability to repay principal and interest. The second borrower provided notification of its plans to cease operations. The Corporation does not believe these charge-offs are indicative of the portfolio as a whole. In 2024, the Corporation recorded $37.2 million in provision for credit losses - loans, which was offset by a release in reserve of $1.5 million related to the allowance for unfunded commitments, resulting in a net provision expense for the year ended December 31, 2024 of $35.7 million. 

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PART II: ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATANOTES TO CONSOLIDATED FINANCIAL STATEMENTS(table dollar amounts in thousands, except share data)

The following tables summarize changes in the ACL - Loans by loan segment for the years ended December 31, 2024, 2023 and 2022:Year Ended December 31, 2024CommercialCommercial Real EstateConstructionConsumer & ResidentialTotalAllowance for credit losses - loansBalances, December 31, 2023$97,348 $44,048 $24,823 $38,715 $204,934 Provision