Company: FRME
Filing Date: 2025-10-30
Form Type: 10-Q
Source: 0000712534-25-000197
Chunk: 163

Company: FIRST MERCHANTS CORP
Filing Date: 2025-10-30
Form: 10-Q
Item: Part I, Item 8
Chunk 163
---
alance sheet commitments using the CECL methodology.  Reserves for unfunded commitments were $18.0 million at September 30, 2025 and December 31, 2024.  There was no provision for credit losses on unfunded commitments during the three and nine months ended September 30, 2025 and 2024. This reserve level remains appropriate and is reported in Other Liabilities as of September 30, 2025 and December 31, 2024 in the Consolidated Condensed Balance Sheets.

NOTE 5

DERIVATIVE FINANCIAL INSTRUMENTSNon-designated HedgesDerivatives not designated as hedges are not used for speculative purposes. Instead, they arise from services provided to commercial banking customers as part of their risk management strategies.  The Corporation executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies.  Those interest rate swaps are simultaneously hedged by offsetting interest rate swaps that the Corporation executes with a third party, such that the Corporation minimizes its net risk exposure resulting from such transactions.  As the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. Interest rate lock commitments related to mortgage loans and forward sale commitments to third-party investors are also considered derivatives.  It is the Corporation's practice to enter into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of changes in interest rates resulting from its commitments to fund the loans.  These mortgage banking derivatives are not designated in hedge relationships.  Fair values were estimated using observable market inputs, primarily changes in mortgage interest rates, from the date of the commitment to the reporting date.  Changes in the fair value of these mortgage banking derivatives are included in net gains and fees on sales of loans. The table below presents the fair value of the Corporation’s non-designated hedges, as well as their classification on the Consolidated Condensed Balance Sheets, as of September 30, 2025 and December 31, 2024. September 30, 2025December 31, 2024Notional AmountFair ValueNotional AmountFair ValueIncluded in other assets:Interest rate swaps$1,456,442 $49,673 $1,386,757 $76,528 Forward contracts related to mortgage loans to be delivered for sale