Company: FRME
Filing Date: 2025-02-24
Form Type: 10-K
Source: 0000712534-25-000058
Chunk: 16

Company: FIRST MERCHANTS CORP
Filing Date: 2025-02-24
Form: 10-K
Item: Item 8
Chunk 16
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 principal amount outstanding, net of unearned income and principal charge-offs.  Loan origination fees, net of direct loan origination costs, and commitment fees are deferred and amortized as an adjustment to yield over the life of the loan, or over the commitment period, as applicable.  Interest income is accrued on the principal balances of loans.  The accrual of interest is discontinued on a loan when, in management’s opinion, the borrower may be unable to meet payments as they become due.  When the interest accrual is discontinued, all unpaid accrued interest is reversed against earnings when considered uncollectible.  Interest income accrued in the prior year, if any, is charged to the allowance for credit losses.  Interest income is subsequently recognized only to the extent cash payments are received and the loan is returned to accruing status.  Details of the Corporation’s loan portfolio are included in NOTE 5.  LOANS AND ALLOWANCE FOR CREDIT LOSSES of these Notes to Consolidated Financial Statements.PURCHASED CREDIT DETERIORATED (“PCD”) LOANS The Corporation accounts for its acquisitions under ASC Topic 805, Business Combinations, which requires the use of the acquisition method of accounting.  All identifiable assets acquired, including loans, are recorded at fair value.  The fair value of acquired loans at the time of acquisition is based on a variety of factors including discounted expected cash flows, adjusted for estimated prepayments and credit losses.  In accordance with ASC 326, Financial Instruments – Credit Losses, the fair value adjustment is recorded as a premium or discount to the unpaid principal balance of each acquired loan.  Acquired loans are classified into two categories: loans with more than insignificant credit deterioration (“PCD”) since origination, and loans with insignificant credit deterioration (“non-PCD”) since origination.  Factors considered when determining whether a loan has a more-than-insignificant deterioration since origination include, but are not limited to, the materiality of the credit, risk grade, delinquency, nonperforming status, bankruptcies, and other qualitative factors.  The net premium or discount on PCD loans is recorded in the Corporation’s allowance for credit losses on loans at the time of acquisition.  The remaining net premium or discount is accreted or amortized into interest income over the remaining life of the loan using an effective yield method.  The net premium or discount on non-PCD loans, that includes credit and non-credit components, is accreted or amortized