Company: FRME
Filing Date: 2025-02-24
Form Type: 10-K
Source: 0000712534-25-000058
Chunk: 15

Company: FIRST MERCHANTS CORP
Filing Date: 2025-02-24
Form: 10-K
Item: Item 8
Chunk 15
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’s allowance for credit losses on investment securities available for sale are included in NOTE 4.  INVESTMENT SECURITIES of these Notes to Consolidated Financial Statements.  ALLOWANCE FOR CREDIT LOSSES ON INVESTMENT SECURITIES HELD TO MATURITY (“ACL - INVESTMENTS”)The ACL - Investments is a contra asset-valuation account that is deducted from the amortized cost basis of investment securities held to maturity to present the net amount expected to be collected.  Investment securities held to maturity are charged off against the ACL - Investments when deemed uncollectible.  Adjustments to the ACL - Investments are reported in the income statement as a component of the provision for credit loss.  The Corporation measures expected credit losses on held to maturity debt securities on a collective basis by major security type with each type sharing similar risk characteristics, and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.  The Corporation has made the accounting policy election to exclude accrued interest receivable on investment securities held to maturity from the estimate of credit losses.  With regard to U.S. Government-sponsored agency and mortgage-backed securities, all these securities are issued by a U.S. government-sponsored entity and have an implicit or explicit government guarantee.  With regard to securities issued by states and municipalities and other investment securities held to maturity, management considers (1) issuer bond ratings, (2) the financial condition of the issuer, (3) historical loss rates for given bond ratings, and (4) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities.  Historical loss rates associated with securities having similar grades as those in the Corporation’s portfolio have generally not been significant.  An allowance for credit losses of $245,000 was recorded on state and municipal securities classified as held to maturity based on applying the long-term historical credit loss rate, as published by Moody’s, for similarly rated securities.  Details of the Corporation’s ACL - Investments are included in NOTE 4.  INVESTMENT SECURITIES of these Notes to Consolidated Financial Statements.  LOANS HELD FOR SALE Loans held for sale are carried at the lower of aggregate cost or market value.  Loan fees (net of certain direct loan origination costs) on loans held for sale are deferred until the related loans are sold or repaid.  Gains or losses on loan sales are recognized at the time of sale and determined using the specific identification method.LOANS The Corporation’s loan portfolio is carried at the