Company: FRME
Filing Date: 2025-02-24
Form Type: 10-K
Source: 0000712534-25-000058
Chunk: 41

Company: FIRST MERCHANTS CORP
Filing Date: 2025-02-24
Form: 10-K
Item: Item 8
Chunk 41
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NOTE 5

LOANS AND ALLOWANCE FOR CREDIT LOSSESThe Corporation’s primary lending focus is small business and middle market commercial, commercial real estate, public finance and residential real estate, which results in portfolio diversification.  The following tables show the composition of the loan portfolio and credit quality characteristics by collateral classification, excluding loans held for sale.  Loans held for sale at December 31, 2024 and December 31, 2023, were $18.7 million and $18.9 million, respectively.The following table illustrates the composition of the Corporation’s loan portfolio by loan class as of the dates indicated: December 31, 2024December 31, 2023Commercial and industrial loans$4,114,292 $3,670,948 Agricultural land, production and other loans to farmers256,312 263,414 Real estate loans:Construction792,144 957,545 Commercial real estate, non-owner occupied2,274,016 2,400,839 Commercial real estate, owner occupied1,157,944 1,162,083 Residential2,374,729 2,288,921 Home equity659,811 617,571 Individuals' loans for household and other personal expenditures166,028 168,388 Public finance and other commercial loans1,059,083 956,318 Loans$12,854,359 $12,486,027 Credit QualityAs part of the ongoing monitoring of the credit quality of the Corporation’s loan portfolio, management tracks certain credit quality indicators including trends related to: (i) the level of criticized commercial loans, (ii) net charge-offs, (iii) nonperforming loans, (iv) covenant failures and (v) the general national and local economic conditions.The Corporation utilizes a risk grading of pass, special mention, substandard, doubtful and loss to assess the overall credit quality of large commercial loans.  All large commercial credit grades are reviewed at a minimum of once a year for pass grade loans.  Loans with grades below pass are reviewed more frequently depending on the grade.  A description of the general characteristics of these grades is as follows: •Pass - Loans that are considered to be of acceptable credit quality.•Special Mention - Loans which possess some credit deficiency or potential weakness, which deserves close attention.  If left uncorrected, these potential weaknesses may result in deterioration of the