Company: FRME
Filing Date: 2025-10-30
Form Type: 10-Q
Source: 0000712534-25-000197
Chunk: 223

Company: FIRST MERCHANTS CORP
Filing Date: 2025-10-30
Form: 10-Q
Item: Part I, Item 8
Chunk 223
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SSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Summarized credit-related financial instruments at September 30, 2025 are as follows:

(Dollars in Thousands)September 30, 2025Amounts of commitments:Loan commitments to extend credit$5,552,327 Standby and commercial letters of credit72,972 $5,625,299 

Since many of the commitments are expected to expire unused or be only partially used, the total amount of unused commitments in the preceding table does not necessarily represent future cash requirements.

INTEREST SENSITIVITY AND DISCLOSURE ABOUT MARKET RISK

Asset/Liability management has been an important factor in the Corporation's ability to record consistent earnings growth through periods of interest rate volatility and product deregulation.  Management and the Board of Directors monitor the Corporation's liquidity and interest sensitivity positions at regular meetings to review how changes in interest rates may affect earnings.  Decisions regarding investment and the pricing of loan and deposit products are made after analysis of reports designed to measure liquidity, rate sensitivity, the Corporation’s exposure to changes in net interest income given various rate scenarios and the economic and competitive environments.

It is the objective of the Corporation to monitor and manage risk exposure to net interest income caused by changes in interest rates.  It is the goal of the Corporation’s Asset/Liability management function to provide optimum and stable net interest income.  To accomplish this, management uses two asset liability tools.  GAP/Interest Rate Sensitivity Reports and Net Interest Income Simulation Modeling are constructed, presented and monitored quarterly.  Management believes that the Corporation's liquidity and interest sensitivity position at September 30, 2025, remained adequate to meet the Corporation’s primary goal of achieving optimum interest margins while avoiding undue interest rate risk. 

Net interest income simulation modeling, or earnings-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