Company: FRME
Filing Date: 2025-07-31
Form Type: 10-Q
Source: 0000712534-25-000171
Chunk: 159

Company: FIRST MERCHANTS CORP
Filing Date: 2025-07-31
Form: 10-Q
Item: Part I, Item 8
Chunk 159
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 without being drawn upon, the contractual amounts do not necessarily represent future cash requirements.  However, should the commitments be drawn upon and should the Corporation’s customers default on their resulting obligation to the Corporation, the maximum exposure to credit loss, without consideration of collateral, is represented by the contractual amount of those commitments.  Financial instruments with off-balance sheet risk were as follows:June 30, 2025December 31, 2024Amounts of commitments:Loan commitments to extend credit$5,455,944 $5,006,085 Standby letters of credit$66,711 $71,271 The Corporation maintains an accrual for credit losses on off-balance sheet commitments using the CECL methodology.  Reserves for unfunded commitments were $18.0 million at June 30, 2025 and December 31, 2024.  There was no provision for credit losses on unfunded commitments during the three and six months ended June 30, 2025 and 2024. This reserve level remains appropriate and is reported in Other Liabilities as of June 30, 2025 and December 31, 2024 in the Consolidated Condensed Balance Sheets.

26

PART I. FINANCIAL INFORMATION ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS(table dollar amounts in thousands, except share data)(Unaudited)

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