Company: FRME
Filing Date: 2025-02-24
Form Type: 10-K
Source: 0000712534-25-000058
Chunk: 219

Company: FIRST MERCHANTS CORP
Filing Date: 2025-02-24
Form: 10-K
Item: Item 7
Chunk 219
---
 LOANS 

The 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.  Commercial loans are individually underwritten and judgmentally risk rated.  They are periodically monitored and prompt corrective actions are taken on deteriorating loans.  Consumer loans are typically underwritten with statistical decision-making tools and are managed throughout their life cycle on a portfolio basis.

Loan Quality 

The quality of the loan portfolio and the amount of nonperforming loans may increase or decrease as a result of acquisitions, organic portfolio growth, problem loan recognition and resolution through collections, sales or charge-offs.  The performance of any loan can be affected by external factors such as economic conditions, or internal factors specific to a particular borrower, such as the actions of a customer’s internal management.

At December 31, 2024, non-accrual loans totaled $73.8 million, an increase of $20.2 million from December 31, 2023, primarily due to a $24.1 million increase in non-accrual balances within the construction loan class.  The increase was offset by a $3.6 million decrease in non-accrual balances within the residential loan class. 

At December 31, 2024, loans 90-days or more delinquent and still accruing totaled $5.9 million, an increase of $5.7 million from December 31, 2023.  The increase was primarily driven by two loans totaling $5.3 million, including $3.7 million and $1.6 million within the construction and commercial and industrial loan classes, respectively. 

According to applicable accounting guidance, loans that no longer exhibit similar risk characteristics are evaluated individually to determine if there is a need for a specific reserve.  Commercial loans under $500,000 and consumer loans are not individually evaluated.  The determination for individual evaluation is made based on current information or events that may suggest it is probable that not all amounts due of principal and interest, according to the contractual terms of the loan agreement, will be substantially collected.

The Corporation’s nonperforming assets plus accruing loans 90 days or more delinquent and individually evaluated loans are presented in the table below.

(Dollars in Thousands)December 31, 2024December 31, 2023Nonperforming assets:  Nonaccrual loans$73,773 $53,580 OREO