FRME 10-Q Quarterly Report March 31, 2025

FIRST MERCHANTS CORP

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frme-20250331

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

___________________

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from _______ to _______

FIRST MERCHANTS CORP ORATION

(Exact name of registrant as specified in its charter)


Indiana
(State or other jurisdiction of incorporation)
001-41342			35-1544218
(Commission File Number)			(IRS Employer Identification No.)

200 East Jackson Street , Muncie , IN 47305-2814

(Address of principal executive offices) (Zip code)

(Registrant’s telephone number, including area code): ( 765 ) 747-1500

Not Applicable

(Former name, former address and former fiscal year,

if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.125 stated value per share	FRME	The Nasdaq Stock Market LLC
Depositary Shares, each representing a 1/100th interest in a share of Non-Cumulative Perpetual Preferred Stock, Series A	FRMEP	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every interactive data file required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated Filer

☐

Non-Accelerated Filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 28, 2025, there were 58,306,987 outstanding common shares of the registrant.

TABLE OF CONTENTS

FIRST MERCHANTS CORPORATION


		Page No.
Glossary of Defined Terms		3

Part I. Financial Information
Item 1.	Fin ancial Statements:
	Consolidated Condensed Balance Sheets	4
	Consolidated Condensed Statements of Income	5
	Consolidated Condensed Statements of Comprehensive Income (Loss)	6
	Consolidated Condensed Statements of Stockholders' Equity	7
	Consolidated Condensed Statements of Cash Flows	8
	Notes to Consolidated Condensed Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	52
Item 4.	Controls and Procedures	52

Part II. Other Information
Item 1.	Legal Proceedings	53
Item 1A.	Risk Factors	53
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 3.	Defaults Upon Senior Securities	53
Item 4.	Mine Safety Disclosures	53
Item 5.	Other Information	53
Item 6.	Exhibits	54

Signatures		55

GLOSSARY OF DEFINED TERMS

FIRST MERCHANTS CORPORATION





ACL			Allowance for Credit Losses
ASC			Accounting Standards Codification
ASU			Accounting Standards Update
Bank			First Merchants Bank, a wholly-owned subsidiary of the Corporation

CECL			FASB Accounting Standards Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , adopted by the Corporation on January 1, 2021.
CET1			Common Equity Tier 1




CODM			Chief operating decision maker
Corporation			First Merchants Corporation

CRE			Commercial Real Estate
Credit Agreement			Credit agreement entered into on September 30, 2024 with U.S. Bank, N.A.
Credit Facility			Revolving line of credit related to Credit Agreement entered into on September 30, 2024
EITF			FASB's Emerging Issues Task Force
ESPP			Employee Stock Purchase Plan
FASB			Financial Accounting Standards Board
FDIC			Federal Deposit Insurance Corporation
Federal Reserve			Board of Governors of the Federal Reserve System
FHLB			Federal Home Loan Bank
FMC Trust II			First Merchants Capital Trust II
FOMC			Federal Open Market Committee, the monetary policymaking body of the Federal Reserve System.
FTE			Fully taxable equivalent
GAAP			U.S. Generally Accepted Accounting Principles




IRA			Inflation Reduction Act of 2022
Lender			U.S. Bank, N.A., entered into Credit Agreement with the Corporation on September 30, 2024
Level One			Level One Bancorp, Inc., which was acquired by the Corporation on April 1, 2022.
OREO			Other real estate owned


RSA			Restricted Stock Awards
Senior Debt			Fixed-to-Floating Rate Senior Notes due 2028
Subordinated Debt			Fixed-to-Floating Rate Subordinated Notes due 2028
SOFR			Secured Overnight Financing Rate

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

CONSOLIDATED CONDENSED BALANCE SHEETS


	March 31, 2025		December 31, 2024
	(Unaudited)
ASSETS
Cash and due from banks	$	86,113	$	87,616
Interest-bearing deposits	331,534		298,891
Investment securities available for sale	1,378,489		1,386,475
Investment securities held to maturity, net of allowance for credit losses of $ 245 and $ 245 (fair value of $ 1,705,006 and $ 1,723,520 )	2,048,632		2,074,220
Loans held for sale	23,004		18,663
Loans	13,004,905		12,854,359
Less: Allowance for credit losses - loans	( 192,031 )		( 192,757 )
Net loans	12,812,874		12,661,602
Premises and equipment	128,749		129,743
Federal Home Loan Bank stock	45,006		41,690
Interest receivable	88,352		91,829
Goodwill	712,002		712,002
Other intangibles	18,302		19,828
Cash surrender value of life insurance	304,918		304,906
Other real estate owned	4,966		4,948
Tax asset, deferred and receivable	87,665		92,387
Other assets	369,181		387,169
TOTAL ASSETS	$	18,439,787	$	18,311,969
LIABILITIES
Deposits:
Noninterest-bearing	$	2,185,057	$	2,325,579
Interest-bearing	12,276,921		12,196,047
Total Deposits	14,461,978		14,521,626
Borrowings:
Federal funds purchased	185,000		99,226
Securities sold under repurchase agreements	122,947		142,876
Federal Home Loan Bank advances	972,478		822,554
Subordinated debentures and other borrowings	62,619		93,529
Total Borrowings	1,343,044		1,158,185

Interest payable	13,304		16,102
Other liabilities	289,247		311,073
Total Liabilities	16,107,573		16,006,986
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY




Cumulative Preferred Stock, $ 1,000 par value, $ 1,000 liquidation value:
Authorized - 600 cumulative shares
Issued and outstanding - 125 cumulative shares	125		125
Preferred Stock, Series A, no par value, $ 2,500 liquidation preference:
Authorized - 10,000 non-cumulative perpetual shares
Issued and outstanding - 10,000 non-cumulative perpetual shares	25,000		25,000
Common Stock, $ 0.125 stated value:
Authorized - 100,000,000 shares
Issued and outstanding - 57,810,232 and 57,974,535 shares	7,226		7,247
Additional paid-in capital	1,183,263		1,188,768
Retained earnings	1,306,911		1,272,528
Accumulated other comprehensive loss	( 190,311 )		( 188,685 )
Total Stockholders' Equity	2,332,214		2,304,983
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	18,439,787	$	18,311,969

See NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended March 31,
	2025		2024
INTEREST INCOME
Loans receivable:
Taxable	$	187,728	$	198,023
Tax exempt	10,532		8,190
Investment securities:
Taxable	8,372		8,748
Tax exempt	12,517		13,611

Deposits with financial institutions	2,372		6,493
Federal Home Loan Bank stock	997		835
Total Interest Income	222,518		235,900
INTEREST EXPENSE
Deposits	80,547		98,285
Federal funds purchased	812		—
Securities sold under repurchase agreements	742		1,032
Federal Home Loan Bank advances	9,364		6,773
Subordinated debentures and other borrowings	783		2,747
Total Interest Expense	92,248		108,837
NET INTEREST INCOME	130,270		127,063
Provision for credit losses	4,200		2,000
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES	126,070		125,063
NONINTEREST INCOME
Service charges on deposit accounts	8,072		7,907
Fiduciary and wealth management fees	8,644		8,200
Card payment fees	4,526		4,500
Net gains and fees on sales of loans	5,022		3,254
Derivative hedge fees	404		263
Other customer fees	415		427
Earnings on cash surrender value of life insurance	2,179		1,592

Net realized losses on sales of available for sale securities	( 7 )		( 2 )
Other income	793		497
Total Noninterest Income	30,048		26,638
NONINTEREST EXPENSES
Salaries and employee benefits	54,982		58,293
Net occupancy	7,216		7,312
Equipment	7,008		6,226
Marketing	1,353		1,198
Outside data processing fees	5,929		6,889
Printing and office supplies	347		353
Intangible asset amortization	1,526		1,957
FDIC assessments	3,648		4,287
Other real estate owned and foreclosure expenses	600		534
Professional and other outside services	3,261		3,952
Other expenses	7,032		5,934
Total Noninterest Expenses	92,902		96,935
INCOME BEFORE INCOME TAX	63,216		54,766
Income tax expense	7,877		6,825
NET INCOME	55,339		47,941
Preferred stock dividends	469		469
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	54,870	$	47,472
Per Share Data:
Basic Net Income Available to Common Stockholders	$	0.95	$	0.80
Diluted Net Income Available to Common Stockholders	$	0.94	$	0.80
Cash Dividends Paid	$	0.35	$	0.34
Average Diluted Common Shares Outstanding (in thousands)	58,242		59,273

See NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	Three Months Ended March 31,
	2025		2024
Net income	$	55,339	$	47,941
Other comprehensive loss:
Unrealized losses on securities available-for-sale:
Unrealized holding loss arising during the period	( 2,066 )		( 27,925 )
Reclassification adjustment for losses included in net income	7		2
Tax effect	433		5,864













Total other comprehensive loss, net of tax	( 1,626 )		( 22,059 )
Comprehensive income	$	53,713	$	25,882

See NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)



	Three Months Ended March 31, 2025
	Cumulative Preferred Stock			Non-Cumulative Preferred Stock			Common Stock			Additional				Accumulated Other
	Shares	Amount		Shares	Amount		Shares	Amount		Paid in Capital		Retained Earnings		Comprehensive Loss		Total
Balances, December 31, 2024	125	$	125	10,000	$	25,000	57,974,535	$	7,247	$	1,188,768	$	1,272,528	$	( 188,685 )	$	2,304,983
Comprehensive income:
Net income	—	—		—	—		—	—		—		55,339		—		55,339
Other comprehensive loss, net of tax	—	—		—	—		—	—		—		—		( 1,626 )		( 1,626 )
Cash dividends on preferred stock ($ 46.88 per share)	—	—		—	—		—	—		—		( 469 )		—		( 469 )
Cash dividends on common stock ($ 0.35 per share)	—	—		—	—		—	—		—		( 20,487 )		—		( 20,487 )

Repurchases of common stock	—	—		—	—		( 194,311 )	( 24 )		( 7,881 )		—		—		( 7,905 )
Excise tax on stock repurchase	—	—		—	—		—	—		( 74 )		—		—		( 74 )
Share-based compensation	—	—		—	—		5,666	1		1,594		—		—		1,595
Stock issued under employee benefit plans	—	—		—	—		4,892	—		173		—		—		173
Stock issued under dividend reinvestment and stock purchase plan	—	—		—	—		13,880	1		565		—		—		566
Stock options exercised	—	—		—	—		5,752	1		125		—		—		126
Restricted shares withheld for taxes	—	—		—	—		( 182 )	—		( 7 )		—		—		( 7 )
Balances, March 31, 2025	125	$	125	10,000	$	25,000	57,810,232	$	7,226	$	1,183,263	$	1,306,911	$	( 190,311 )	$	2,332,214


	Three Months Ended March 31, 2024
	Cumulative Preferred Stock			Non-Cumulative Preferred Stock			Common Stock			Additional				Accumulated Other
	Shares	Amount		Shares	Amount		Shares	Amount		Paid in Capital		Retained Earnings		Comprehensive Loss		Total
Balances, December 31, 2023	125	$	125	10,000	$	25,000	59,424,122	$	7,428	$	1,236,506	$	1,154,624	$	( 175,970 )	$	2,247,713
Comprehensive income:
Net income	—	—		—	—		—	—		—		47,941		—		47,941
Other comprehensive loss, net of tax	—	—		—	—		—	—		—		—		( 22,059 )		( 22,059 )
Cash dividends on preferred stock ($ 46.88 per share)	—	—		—	—		—	—		—		( 469 )		—		( 469 )
Cash dividends on common stock ($ 0.34 per share)	—	—		—	—		—	—		—		( 20,157 )		—		( 20,157 )

Repurchase of common stock	—	—		—	—		( 888,442 )	( 111 )		( 29,863 )		—		—		( 29,974 )
Excise tax on stock repurchase	—	—		—	—		—	—		( 297 )		—		—		( 297 )
Share-based compensation	—	—		—	—		7,413	1		1,401		—		—		1,402
Stock issued under employee benefit plans	—	—		—	—		6,259	1		185		—		—		186
Stock issued under dividend reinvestment and stock purchase plan	—	—		—	—		16,215	2		540		—		—		542

Restricted shares withheld for taxes	—	—		—	—		( 748 )	—		( 25 )		—		—		( 25 )
Balances, March 31, 2024	125	$	125	10,000	$	25,000	58,564,819	$	7,321	$	1,208,447	$	1,181,939	$	( 198,029 )	$	2,224,803

See NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)


	Three Months Ended March 31,
	2025		2024
Cash Flow from Operating Activities:
Net income	$	55,339	$	47,941
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	4,200		2,000
Depreciation and amortization	7,840		3,194
Change in deferred taxes	( 652 )		( 2,260 )
Share-based compensation	1,595		1,402

Loans originated for sale	( 95,744 )		( 182,793 )
Proceeds from sales of loans held for sale	95,159		188,347
Gains on sales of loans held for sale	( 3,756 )		( 1,738 )


Net losses on sales and redemptions of securities available for sale	7		2

Increase in cash surrender value of life insurance	( 1,540 )		( 1,449 )
Gains on life insurance benefits	( 639 )		( 143 )
Change in interest receivable	3,477		5,114
Change in interest payable	( 2,798 )		350
Other adjustments	( 788 )		( 1,119 )
Net cash provided by operating activities	61,700		58,848
Cash Flows from Investing Activities:
Net change in interest-bearing deposits	( 32,643 )		25,583
Purchases of:
Securities available for sale	( 5,906 )		( 32,231 )


Proceeds from maturities and redemptions of:
Securities available for sale	10,535		9,415
Securities held to maturity	24,729		20,006
Change in Federal Home Loan Bank stock	( 3,316 )		11
Payment of capital calls to qualified affordable housing investments	( 12,213 )		( 7,975 )

Net change in loans	( 139,975 )		56,511


Proceeds from the sale of other real estate owned	228		78
Proceeds from life insurance benefits	2,167		1,865

Proceeds from commercial portfolio loan sale	—		3,273
Other adjustments	( 4,024 )		6,344
Net cash provided (used) by investing activities	( 160,418 )		82,880
Cash Flows from Financing Activities:
Net change in:
Demand and savings deposits	75,609		( 30,726 )
Certificates of deposit and other time deposits	( 135,257 )		93,857
Borrowings	455,834		60
Repayment of borrowings	( 270,975 )		( 167,182 )
Cash dividends on preferred stock	( 469 )		( 469 )
Cash dividends on common stock	( 20,487 )		( 20,157 )

Stock issued under employee benefit plans	173		186
Stock issued under dividend reinvestment and stock purchase plans	566		542
Stock options exercised	126		—


Repurchase of common stock	( 7,905 )		( 29,974 )
Net cash provided (used) by financing activities	97,215		( 153,863 )
Net Change in Cash and Cash Equivalents	( 1,503 )		( 12,135 )
Cash and Cash Equivalents, January 1	87,616		112,649
Cash and Cash Equivalents, March 31	$	86,113	$	100,514
Additional cash flow information:
Interest paid	$	95,046	$	108,487
Income tax paid (refunded)	( 1,296 )		( 1 )
Loans transferred to other real estate owned	246		127

Non-cash investing activities using trade date accounting	15,743		41,719

ROU assets obtained in exchange for new operating lease liabilities	161		3,343

See NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

NOTE 1

GENERAL

Financial Statement Preparation

The Consolidated Condensed Balance Sheet of the Corporation as of December 31, 2024, has been derived from the audited consolidated balance sheet of the Corporation as of that date. Certain information and note disclosures normally included in the Corporation’s annual financial statements, prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted. These consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission. The results of operations for the three months ended March 31, 2025, are not necessarily indicative of the results to be expected for the year. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses.

Significant Accounting Policies

The significant accounting policies followed by the Corporation and its wholly-owned subsidiaries for interim financial reporting are consistent with the accounting policies followed for annual financial reporting. All adjustments, which are of a normal recurring nature and are in the opinion of management necessary for a fair statement of the results for the periods reported, have been included in the accompanying Consolidated Condensed Financial Statements.

Recent Accounting Changes Adopted in 2025

The Corporation did not adopt any new accounting standards during the three months ended March 31, 2025.

New Accounting Pronouncements Not Yet Adopted

The Corporation continually monitors potential accounting pronouncements and the following pronouncements have been deemed to have the most applicability to the Corporation's financial statements:

FASB Accounting Standards Update - No. 2023-09 - Income Taxes (Topic 740): Improvements to Income Tax Disclosures

Summary - The FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures in the fourth quarter of 2023. This ASU is intended to enhance income tax disclosures to address investor requests for more information about the tax risks and opportunities present in an entity’s worldwide operations.

The two primary enhancements disaggregate existing income tax disclosures related to the effective tax rate reconciliation and income taxes paid. These amendments require that public business entities on an annual basis disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. The amendments also require that all entities disclose on an annual basis the amount of income taxes paid (net of refunds received) disaggregated by federal, state and foreign taxes and the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than five percent of total income taxes paid (net of refunds received).

For public business entities, the amendments are effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issue. The amendments should be applied on a prospective basis. The Corporation is assessing the terms of this guidance, but adoption of the standard is not expected to have a significant impact on the Corporation’s financial statements or disclosures.

FASB Accounting Standards Update - No. 2024-03 - Income Statement - Reporting Comprehensive Income-Expense Disaggregation Disclosures

Summary - The FASB issued ASU No. 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures in the fourth quarter of 2024. This ASU requires public business entities to disclose specific information about certain costs and expenses in the notes to its financial statements for interim and annual reporting periods.

The objective of the disclosure requirements is to provide disaggregated information about a public business entity's expenses to help investors (a) better understand the entity's performance, (b) better assess the entity's prospects for future cash flows, and (c) compare an entity's performance over time and with that of other entities.

The amendments in this Update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Corporation is assessing the terms of this guidance, but adoption of the standard is not expected to have a significant impact on the Corporation’s financial statements or disclosures.

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

NOTE 2

ACQUISITIONS AND DISPOSITIONS

Old Second National Bank Branch Sale

On December 6, 2024 the Bank completed its sale of five branches in the suburban Chicago market to Old Second National Bank ("Old Second"). Pursuant to the terms of the branch sale agreement, Old Second assumed certain deposit liabilities and acquired certain loans, as well as cash and premises and equipment. The Bank recognized a gain on sale of $ 20.0 million related to the branch sale for the year ended December 31, 2024.

The following table summarizes the assets and liabilities related to the branch sale:


	December 6, 2024
Assets
Cash and due from banks	$	419
Loans	7,410
Premises and equipment	3,233
Interest receivable and other assets	21
Total Assets	$	11,083
Liabilities
Deposits	$	267,448
Interest payable and other liabilities	692
Total Liabilities	$	268,140

NOTE 3

INVESTMENT SECURITIES

The following tables summarize the amortized cost, gross unrealized gains and losses and approximate fair value of investment securities available for sale as of March 31, 2025 and December 31, 2024.


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale at March 31, 2025

U.S. Government-sponsored agency securities	$	93,758	$	—	$	13,832	$	79,926
State and municipal	994,697		56		149,570		845,183
U.S. Government-sponsored mortgage-backed securities	517,564		996		77,614		440,946
Corporate obligations	12,964		—		530		12,434

Total available for sale	$	1,618,983	$	1,052	$	241,546	$	1,378,489


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale at December 31, 2024

U.S. Government-sponsored agency securities	$	95,462	$	—	$	16,081	$	79,381
State and municipal	996,541		19		133,386		863,174
U.S. Government-sponsored mortgage-backed securities	519,943		403		88,724		431,622
Corporate obligations	12,960		—		662		12,298

Total available for sale	$	1,624,906	$	422	$	238,853	$	1,386,475

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

The following tables summarize the amortized cost, gross unrealized gains and losses, approximate fair value and allowance for credit losses on investment securities held to maturity as of March 31, 2025 and December 31, 2024.


	Amortized Cost		Allowance for Credit Losses		Net Carrying Amount		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Held to maturity at March 31, 2025
U.S. Government-sponsored agency securities	$	341,245	$	—	$	341,245	$	—	$	54,935	$	286,310
State and municipal	1,079,688		245		1,079,443		148		200,377		879,459
U.S. Government-sponsored mortgage-backed securities	626,444		—		626,444		—		88,705		537,739
Foreign investment	1,500		—		1,500		—		2		1,498
Total held to maturity	$	2,048,877	$	245	$	2,048,632	$	148	$	344,019	$	1,705,006


	Amortized Cost		Allowance for Credit Losses		Net Carrying Amount		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Held to maturity at December 31, 2024
U.S. Government-sponsored agency securities	$	345,531	$	—	$	345,531	$	—	$	63,112	$	282,419
State and municipal	1,085,921		245		1,085,676		299		185,784		900,436
U.S. Government-sponsored mortgage-backed securities	641,513		—		641,513		—		102,343		539,170
Foreign investment	1,500		—		1,500		—		5		1,495
Total held to maturity	$	2,074,465	$	245	$	2,074,220	$	299	$	351,244	$	1,723,520

Accrued interest on investment securities available for sale and held to maturity at March 31, 2025 and December 31, 2024 of $ 19.7 million and $ 22.5 million, respectively, are included in the Interest Receivable line on the Corporation's Consolidated Condensed Balance Sheets. The total amount of accrued interest is excluded from the amortized cost of available for sale and held to maturity securities presented above.

In determining the allowance for credit losses on investment securities available for sale that are in an unrealized loss position, the Corporation first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through the income statement. For investment securities available for sale that do not meet the aforementioned criteria, the Corporation evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Corporation considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Unrealized losses that have not been recorded through an allowance for credit losses are recognized in other comprehensive loss. Adjustments to the allowance are reported in the income statement as a component of the provision for credit losses. The Corporation has made the accounting policy election to exclude accrued interest receivable on investment securities available for sale from the estimate of credit losses. Investment securities available for sale are charged off against the allowance or, in the absence of any allowance, written down through the income statement when deemed uncollectible or when either of the aforementioned criteria regarding intent or requirement to sell is met. The Corporation did not record an allowance for credit losses on its investment securities available for sale as the unrealized losses were attributable to changes in interest rates, not credit quality.

The allowance for credit losses on investment securities held to maturity is a contra asset-valuation account that is deducted from the amortized cost basis of investment securities held to maturity to present the net amount expected to be collected. Investment securities held to maturity are charged off against the allowance when deemed uncollectible. Adjustments to the allowance are reported in the income statement as a component of the provision for credit losses. The Corporation measures expected credit losses on investment securities held to maturity on a collective basis by major security type with each type sharing similar risk characteristics, and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. The Corporation has made the accounting policy election to exclude accrued interest receivable on investment securities held to maturity from the estimate of credit losses. With regard to U.S. Government-sponsored agency and U.S. Government-sponsored mortgage-backed securities, all these securities are issued by a U.S. Government-sponsored entity and have an implicit or explicit government guarantee; therefore, no allowance for credit losses has been recorded for these securities. With regard to securities issued by states and municipalities and other investment securities held to maturity, management considers (1) issuer bond ratings, (2) historical loss rates for given bond ratings, (3) the financial condition of the issuer, and (4) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities. Historical loss rates associated with securities having similar grades as those in the Corporation's portfolio have been insignificant. Furthermore, as of March 31, 2025, there were no past due

principal and interest payments associated with these securities. The balance of the allowance for credit losses on investment securities held to maturity remained unchanged at $ 245,000 as of March 31, 2025 and December 31, 2024 based on applying the long-term historical credit rate, as published by Moody's, for similar rated securities.

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

On a quarterly basis, the Corporation monitors the credit quality of investment securities held to maturity through the use of credit ratings. The following table summarizes the amortized cost of investment securities held to maturity at March 31, 2025 and December 31, 2024, aggregated by credit quality indicator.


	March 31, 2025
	U.S. Government-sponsored agency securities (1)		State and municipal		U.S. Government-sponsored mortgage-backed securities (1)		Foreign investment		Total
Credit Rating:
Aaa	$	341,245	$	120,618	$	626,444	$	—	$	1,088,307
Aa1	—		149,926		—		—		149,926
Aa2	—		183,052		—		—		183,052
Aa3	—		185,117		—		—		185,117
A1	—		65,659		—		—		65,659
A2	—		20,321		—		—		20,321


Non-rated	—		354,995		—		1,500		356,495
Total	$	341,245	$	1,079,688	$	626,444	$	1,500	$	2,048,877


	December 31, 2024
	U.S. Government-sponsored agency securities (1)		State and municipal		U.S. Government-sponsored mortgage-backed securities (1)		Foreign investment		Total
Credit Rating:
Aaa	$	345,531	$	120,801	$	641,513	$	—	$	1,107,845
Aa1	—		148,923		—		—		148,923
Aa2	—		184,341		—		—		184,341
Aa3	—		185,166		—		—		185,166
A1	—		65,665		—		—		65,665
A2	—		20,317		—		—		20,317


Non-rated	—		360,708		—		1,500		362,208
Total	$	345,531	$	1,085,921	$	641,513	$	1,500	$	2,074,465

(1) U.S. Government agency securities and U.S. Government mortgage-backed securities are included within the Aaa credit rating category due to their explicit or implicit government guarantees, which provide a high level of assurance regarding the timely collection of principal and interest payments.

The following tables summarize, as of March 31, 2025 and December 31, 2024, investment securities available for sale in an unrealized loss position for which an allowance for credit losses has not been recorded, aggregated by security type and length of time in a continuous unrealized loss position.


	Less than 12 Months				12 Months or Longer				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Investment securities available for sale at March 31, 2025

U.S. Government-sponsored agency securities	$	—	$	—	$	79,926	$	13,832	$	79,926	$	13,832
State and municipal	14,702		921		828,805		148,649		843,507		149,570
U.S. Government-sponsored mortgage-backed securities	55,519		645		320,890		76,969		376,409		77,614
Corporate obligations	—		—		12,402		530		12,402		530
Total investment securities available for sale	$	70,221	$	1,566	$	1,242,023	$	239,980	$	1,312,244	$	241,546


	Less than 12 Months				12 Months or Longer				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Investment securities available for sale at December 31, 2024

U.S. Government-sponsored agency securities	$	—	$	—	$	79,381	$	16,081	$	79,381	$	16,081
State and municipal	40,398		2,115		820,663		131,271		861,061		133,386
U.S. Government-sponsored mortgage-backed securities	82,724		1,660		318,310		87,064		401,034		88,724
Corporate obligations	—		—		12,268		662		12,268		662
Total investment securities available for sale	$	123,122	$	3,775	$	1,230,622	$	235,078	$	1,353,744	$	238,853

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

The following tables summarize investment securities available for sale in an unrealized loss position for which an allowance for credit losses has not been recorded, aggregated by security type and the number of securities in the portfolio as of the dates indicated.


	Gross Unrealized Losses		Number of Securities
Investment securities available for sale at March 31, 2025

U.S. Government-sponsored agency securities	$	13,832	12
State and municipal	149,570		611
U.S. Government-sponsored mortgage-backed securities	77,614		114
Corporate obligations	530		10
Total investment securities available for sale	$	241,546	747


	Gross Unrealized Losses		Number of Securities
Investment securities available for sale at December 31, 2024

U.S. Government-sponsored agency securities	$	16,081	12
State and municipal	133,386		611
U.S. Government-sponsored mortgage-backed securities	88,724		127
Corporate obligations	662		10
Total investment securities available for sale	$	238,853	760

The unrealized losses in the Corporation’s investment portfolio were the result of changes in interest rates and not credit quality. As a result, the Corporation expects to recover the amortized cost basis over the term of the securities. The Corporation does not intend to sell the investments and it is not more likely than not that the Corporation will be required to sell the investments before recovery of their amortized cost basis, which may be maturity.

Certain investment securities available for sale are reported in the financial statements at an amount less than their historical cost as indicated in the table below.


	March 31, 2025			December 31, 2024
Investments available for sale reported at less than historical cost:
Historical cost	$	1,553,790		$	1,592,597
Fair value	1,312,244			1,353,744
Gross unrealized losses	$	241,546		$	238,853
Percentage of the Corporation's investment securities available for sale in an unrealized loss position	95.2		%	97.6		%

In determining the fair value of the investment securities portfolio, the Corporation utilizes a third party for portfolio accounting services, including market value input, for those securities classified as Level 1 and Level 2 in the fair value hierarchy. The Corporation has obtained an understanding of what inputs are being used by the vendor in pricing the portfolio and how the vendor classified these securities based upon these inputs. From these discussions, the Corporation’s management is comfortable that the classifications are proper. The Corporation has gained trust in the data for two reasons: (a) independent spot testing of the data is conducted by the Corporation through obtaining market quotes from various brokers on a periodic basis; and (b) actual gains or losses resulting from the sale of certain securities has proven the data to be accurate over time. Fair value of securities classified as Level 3 in the valuation hierarchy was determined using a discounted cash flow model that incorporated market estimates of interest rates and volatility in markets that have not been active.

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

The amortized cost and fair value of investment securities available for sale and held to maturity at March 31, 2025 and December 31, 2024, by contractual maturity are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity are shown separately.


	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Maturity Distribution at March 31, 2025
Due in one year or less	$	1,317	$	1,316	$	5,268	$	5,264
Due after one through five years	12,995		12,608		119,035		114,249
Due after five through ten years	178,514		159,809		187,050		165,301
Due after ten years	908,593		763,810		1,111,080		882,453
	1,101,419		937,543		1,422,433		1,167,267
U.S. Government-sponsored mortgage-backed securities	517,564		440,946		626,444		537,739

Total investment securities	$	1,618,983	$	1,378,489	$	2,048,877	$	1,705,006


	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Maturity Distribution at December 31, 2024
Due in one year or less	$	1,800	$	1,795	$	5,268	$	5,254
Due after one through five years	12,189		11,857		124,004		117,999
Due after five through ten years	168,338		151,467		174,533		154,533
Due after ten years	922,636		789,734		1,129,147		906,564
	1,104,963		954,853		1,432,952		1,184,350
U.S. Government-sponsored mortgage-backed securities	519,943		431,622		641,513		539,170

Total investment securities	$	1,624,906	$	1,386,475	$	2,074,465	$	1,723,520

Securities with a carrying value of approximately $ 3.4 billion and $ 3.3 billion were pledged at March 31, 2025 and December 31, 2024, respectively, to secure certain deposits and securities sold under repurchase agreements, and for other purposes as permitted or required by law.

The book value of securities pledged and available under agreements to repurchase amounted to $ 143.7 million at March 31, 2025 and $ 173.0 million at December 31, 2024.

Gross gains and losses on the sales of investment securities available for sale for the three months ended March 31, 2025 and 2024 are shown below.


	Three Months Ended March 31,
	2025		2024
Sales and redemptions of investment securities available for sale:
Gross gains	$	—	$	—
Gross losses	( 7 )		( 2 )

Net gains (losses) on sales and redemptions of investment securities available for sale	$	( 7 )	$	( 2 )

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

NOTE 4

LOANS AND ALLOWANCE FOR CREDIT LOSSES

Loan Portfolio and Credit Quality

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. 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 March 31, 2025 and December 31, 2024, were $ 23.0 million and $ 18.7 million respectively.

The following table illustrates the composition of the Corporation’s loan portfolio by loan class as of the dates indicated.


	March 31, 2025		December 31, 2024

Commercial and industrial loans	$	4,306,597	$	4,114,292
Agricultural land, production and other loans to farmers	243,864		256,312
Real estate loans:
Construction	793,175		792,144
Commercial real estate, non-owner occupied	2,177,869		2,274,016
Commercial real estate, owner occupied	1,214,739		1,157,944
Residential	2,389,852		2,374,729
Home equity	650,499		659,811
Individuals' loans for household and other personal expenditures	140,954		166,028
Public finance and other commercial loans	1,087,356		1,059,083
Loans	$	13,004,905	$	12,854,359

Credit Quality

As 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 repayment prospects for the asset or in the Corporation's credit position at some future date. Special mention assets are not adversely classified and do not expose the Corporation to sufficient risk to warrant adverse classification.

• Substandard - Loans that are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified have a well-defined weakness that jeopardizes the liquidation of the debt. They are characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected.

• Doubtful - Loans that have all of the weaknesses of those classified as Substandard. However, based on existing facts, conditions and values, these weaknesses make full collection of principal highly questionable and improbable.

• Loss – Loans that are considered uncollectible and of such little value that continuing to carry them as an asset is not warranted. Loans will be classified as Loss when it is neither practical or desirable to defer charging-off or reserving all or a portion of a basically worthless asset, even though partial recovery may be possible at some time in the future.

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

The following tables summarize the risk grading of the Corporation’s loan portfolio and gross charge-offs by loan class and by year of origination for the periods indicated. Consumer loans are not risk graded. For the purposes of this disclosure, consumer loans are classified in the following manner: loans that are less than 30 days past due are Pass, loans 30-89 days past due are Special Mention and loans greater than 89 days past due are Substandard. The entire balance of a loan is considered delinquent if the minimum payment contractually required to be made is not received by the specified due date.


March 31, 2025
	Term Loans (amortized cost basis by origination year)
	2025		2024		2023		2022		2021		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total
Commercial and industrial loans
Pass	$	431,109	$	1,184,550	$	441,048	$	165,738	$	142,290	$	91,465	$	1,614,342	$	—	$	4,070,542
Special Mention	138		6,225		6,271		21,724		823		2,286		44,753		—		82,220
Substandard	18,505		14,539		18,614		26,623		3,570		1,281		66,790		—		149,922
Doubtful	—		1,974		12		—		1,350		577		—		—		3,913

Total Commercial and industrial loans	449,752		1,207,288		465,945		214,085		148,033		95,609		1,725,885		—		4,306,597
Current period gross charge-offs	—		630		1,040		16		3,094		87		—		—		4,867
Agricultural land, production and other loans to farmers
Pass	18,823		24,089		22,240		29,683		25,580		53,261		60,772		—		234,448
Special Mention	—		159		29		476		—		863		1,227		—		2,754
Substandard	380		2,515		44		780		668		1,322		953		—		6,662


Total Agricultural land, production and other loans to farmers	19,203		26,763		22,313		30,939		26,248		55,446		62,952		—		243,864

Real estate loans:
Construction
Pass	25,407		243,728		200,293		60,604		13,178		10,994		10,327		—		564,531
Special Mention	12,176		97,317		23,145		44,557		—		35		—		—		177,230
Substandard	22,000		10,518		—		18,292		604		—		—		—		51,414


Total Construction	59,583		351,563		223,438		123,453		13,782		11,029		10,327		—		793,175

Commercial real estate, non-owner occupied
Pass	100,071		325,566		250,185		330,932		394,174		561,031		33,931		—		1,995,890
Special Mention	3,286		52,913		11,867		38,487		11,423		4,941		86		—		123,003
Substandard	12,892		11,430		2,436		6,364		6,641		19,211		2		—		58,976


Total Commercial real estate, non-owner occupied	116,249		389,909		264,488		375,783		412,238		585,183		34,019		—		2,177,869
Current period gross charge-offs	—		—		—		178		—		15		—		—		193
Commercial real estate, owner occupied
Pass	74,568		177,392		147,507		159,448		213,429		308,349		36,114		—		1,116,807
Special Mention	481		15,365		5,129		9,712		7,719		8,369		460		—		47,235
Substandard	16,822		14,027		7,033		1,820		3,508		3,914		—		—		47,124
Doubtful	—		3,573		—		—		—		—		—		—		3,573

Total Commercial real estate, owner occupied	91,871		210,357		159,669		170,980		224,656		320,632		36,574		—		1,214,739
Current period gross charge-offs	—		51		152		—		—		5		—		—		208
Residential
Pass	49,584		215,741		417,482		665,752		392,322		599,913		8,327		48		2,349,169
Special Mention	—		485		3,581		6,036		3,667		4,948		150		16		18,883
Substandard	—		1,480		2,162		8,917		4,078		4,816		347		—		21,800


Total Residential	49,584		217,706		423,225		680,705		400,067		609,677		8,824		64		2,389,852
Current period gross charge-offs	—		26		50		121		—		187		—		—		384
Home equity
Pass	2,289		11,023		4,193		23,629		49,320		14,843		532,713		2,105		640,115
Special Mention	—		38		—		—		467		36		4,069		114		4,724
Substandard	61		738		—		663		776		983		2,439		—		5,660


Total Home Equity	2,350		11,799		4,193		24,292		50,563		15,862		539,221		2,219		650,499
Current period gross charge-offs	—		6		—		11		2		44		—		—		63
Individuals' loans for household and other personal expenditures
Pass	14,306		24,848		19,061		28,870		8,844		5,912		38,013		—		139,854
Special Mention	—		257		369		272		141		16		45		—		1,100



Total Individuals' loans for household and other personal expenditures	14,306		25,105		19,430		29,142		8,985		5,928		38,058		—		140,954
Current period gross charge-offs	—		88		140		141		46		52		—		—		467
Public finance and other commercial loans
Pass	21,960		149,522		53,341		202,166		192,512		434,690		30,437		—		1,084,628
Special Mention	—		—		478		—		—		2,250		—		—		2,728



Total Public finance and other commercial loans	21,960		149,522		53,819		202,166		192,512		436,940		30,437		—		1,087,356

Loans	$	824,858	$	2,590,012	$	1,636,520	$	1,851,545	$	1,477,084	$	2,136,306	$	2,486,297	$	2,283	$	13,004,905
Total current period gross charge-offs	$	—	$	801	$	1,382	$	467	$	3,142	$	390	$	—	$	—	$	6,182

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)


December 31, 2024
	Term Loans (amortized cost basis by origination year)
	2024		2023		2022		2021		2020		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total
Commercial and industrial loans
Pass	$	1,314,174	$	493,138	$	196,877	$	158,215	$	55,639	$	49,554	$	1,576,409	$	130	$	3,844,136
Special Mention	14,982		13,282		20,837		1,097		2,222		348		41,187		—		93,955
Substandard	29,238		32,285		26,973		7,249		1,081		1,134		75,649		513		174,122
Doubtful	1,473		606		—		—		—		—		—		—		2,079

Total Commercial and industrial loans	1,359,867		539,311		244,687		166,561		58,942		51,036		1,693,245		643		4,114,292
Current period gross charge-offs	1,242		39,087		341		8,605		500		424		—		—		50,199
Agricultural land, production and other loans to farmers
Pass	28,600		23,070		30,518		26,442		27,105		29,930		84,502		—		250,167
Special Mention	169		—		245		—		446		422		528		—		1,810
Substandard	2,554		48		800		682		34		81		136		—		4,335


Total Agricultural land, production and other loans to farmers	31,323		23,118		31,563		27,124		27,585		30,433		85,166		—		256,312

Real estate loans:
Construction
Pass	241,622		203,829		114,794		31,864		6,398		8,549		12,836		—		619,892
Special Mention	74,879		21,853		19,019		15,214		—		40		—		—		131,005
Substandard	22,305		—		18,292		—		—		—		—		—		40,597
Doubtful	—		—		—		650		—		—		—		—		650

Total Construction	338,806		225,682		152,105		47,728		6,398		8,589		12,836		—		792,144

Commercial real estate, non-owner occupied
Pass	383,279		275,907		342,442		406,289		327,372		278,362		19,863		—		2,033,514
Special Mention	79,440		9,051		35,230		12,975		5,287		28,200		—		—		170,183
Substandard	34,215		2,506		6,737		6,656		18,607		1,598		—		—		70,319


Total Commercial real estate, non-owner occupied	496,934		287,464		384,409		425,920		351,266		308,160		19,863		—		2,274,016
Current period gross charge-offs	—		339		3		—		—		1		—		—		343
Commercial real estate, owner occupied
Pass	194,703		141,964		164,725		217,319		198,314		127,431		31,573		—		1,076,029
Special Mention	1,887		11,013		7,555		9,910		8,603		1,951		460		—		41,379
Substandard	13,310		7,669		3,189		11,294		1,522		3,552		—		—		40,536


Total Commercial real estate, owner occupied	209,900		160,646		175,469		238,523		208,439		132,934		32,033		—		1,157,944
Current period gross charge-offs	—		—		—		—		9		—		—		—		9
Residential
Pass	221,016		413,552		672,713		397,192		326,154		293,785		8,887		13		2,333,312
Special Mention	1,528		1,953		6,228		4,102		2,891		3,152		150		—		20,004
Substandard	1,306		1,912		8,849		3,989		1,216		3,794		347		—		21,413


Total Residential	223,850		417,417		687,790		405,283		330,261		300,731		9,384		13		2,374,729
Current period gross charge-offs	—		173		779		136		20		288		—		—		1,396
Home equity
Pass	6,788		4,354		24,810		51,313		10,486		3,976		535,132		12,124		648,983
Special Mention	38		—		375		285		297		69		4,568		442		6,074
Substandard	61		—		572		815		—		96		2,244		966		4,754


Total Home Equity	6,887		4,354		25,757		52,413		10,783		4,141		541,944		13,532		659,811
Current period gross charge-offs	—		10		35		22		—		267		—		—		334
Individuals' loans for household and other personal expenditures
Pass	40,819		21,867		31,356		10,520		2,276		4,693		53,180		180		164,891
Special Mention	153		234		347		175		59		40		128		—		1,136
Substandard	—		—		—		—		—		—		—		1		1


Total Individuals' loans for household and other personal expenditures	40,972		22,101		31,703		10,695		2,335		4,733		53,308		181		166,028
Current period gross charge-offs	208		920		523		184		47		80		—		—		1,962
Public finance and other commercial loans
Pass	161,072		53,750		203,884		195,066		146,377		298,802		132		—		1,059,083




Total Public finance and other commercial loans	161,072		53,750		203,884		195,066		146,377		298,802		132		—		1,059,083

Loans	$	2,869,611	$	1,733,843	$	1,937,367	$	1,569,313	$	1,142,386	$	1,139,559	$	2,447,911	$	14,369	$	12,854,359
Total current period gross charge-offs	$	1,450	$	40,529	$	1,681	$	8,947	$	576	$	1,060	$	—	$	—	$	54,243

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

Total past due loans equaled $ 140.0 million as of March 31, 2025 representing a $ 23.8 million increase from $ 116.2 million at December 31, 2024. At March 31, 2025, 30-59 days past due increased $ 1.8 million from December 31, 2024. At March 31, 2025, 60-89 days past due increased $ 20.6 million from December 31, 2024 as commercial and industrial, and commercial real estate, owner occupied loan classes increased $ 25.1 million and $ 4.5 million, respectively, which was partially offset by a decrease in the construction loan class of $ 6.8 million. At March 31, 2025, 90 days or more past due increased $ 1.4 million from December 31, 2024. The tables below show a past due aging of the Corporation’s loan portfolio, by loan class, as of the dates indicated:


	March 31, 2025
	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total		Loans > 90 Days or More Past Due And Accruing
Commercial and industrial loans	$	4,260,713	$	13,082	$	25,602	$	7,200	$	4,306,597	$	3,905
Agricultural land, production and other loans to farmers	243,504		119		241		—		243,864		—
Real estate loans:
Construction	777,629		35		15,226		285		793,175		—
Commercial real estate, non-owner occupied	2,159,499		4,878		1,869		11,623		2,177,869		—
Commercial real estate, owner occupied	1,202,715		2,020		4,496		5,508		1,214,739		183
Residential	2,352,273		12,758		5,027		19,794		2,389,852		192
Home equity	641,332		3,840		561		4,766		650,499		—
Individuals' loans for household and other personal expenditures	139,854		908		192		—		140,954		—

Public finance and other commercial loans	1,087,356		—		—		—		1,087,356		—
Loans	$	12,864,875	$	37,640	$	53,214	$	49,176	$	13,004,905	$	4,280


	December 31, 2024
	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total		Loans > 90 Days or More Past Due And Accruing
Commercial and industrial loans	$	4,096,605	$	7,428	$	473	$	9,786	$	4,114,292	$	2,010
Agricultural land, production and other loans to farmers	256,148		164		—		—		256,312		—
Real estate loans:
Construction	761,819		4,332		22,005		3,988		792,144		3,683
Commercial real estate, non-owner occupied	2,259,549		2,407		1,718		10,342		2,274,016		—
Commercial real estate, owner occupied	1,153,861		3,783		—		300		1,157,944		—
Residential	2,337,002		12,302		6,606		18,819		2,374,729		208
Home equity	649,238		4,431		1,569		4,573		659,811		—
Individuals' loans for household and other personal expenditures	164,891		926		210		1		166,028		1

Public finance and other commercial loans	1,059,083		—		—		—		1,059,083		—
Loans	$	12,738,196	$	35,773	$	32,581	$	47,809	$	12,854,359	$	5,902

Loans are reclassified to a nonaccruing status when, in management’s judgment, the collateral value and financial condition of the borrower do not justify accruing interest. At the time the accrual is discontinued, all unpaid accrued interest is reversed against earnings. Interest income accrued in prior years, if any, is charged to the allowance for credit losses. Payments subsequently received on nonaccrual loans are applied to principal. A loan is returned to accrual status when principal and interest are no longer past due and collectability is probable, typically after a minimum of six consecutive months of performance.

The following table summarizes the Corporation’s nonaccrual loans by loan class as of the dates indicated.


	March 31, 2025				December 31, 2024
	Nonaccrual Loans		Nonaccrual Loans with no Allowance for Credit Losses		Nonaccrual Loans		Nonaccrual Loans with no Allowance for Credit Losses
Commercial and industrial loans	$	6,136	$	736	$	8,090	$	4,937
Agricultural land, production and other loans to farmers	70		—		75		—
Real estate loans:
Construction	24,520		604		24,629		22,650
Commercial real estate, non-owner occupied	13,403		10,976		12,118		10,153
Commercial real estate, owner occupied	9,208		4,709		2,440		1,904
Residential	23,347		—		21,491		—
Home equity	5,238		—		4,924		—
Individuals' loans for household and other personal expenditures	—		—		6		—

Loans	$	81,922	$	17,025	$	73,773	$	39,644

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

Interest income on nonaccrual loans is recognized only to the extent that cash payments are received in excess of principal due. There was no interest income recognized on nonaccrual loans for the three months ended March 31, 2025 or 2024.

Determining fair value for collateral dependent loans requires obtaining a current independent appraisal of the collateral and applying a discount factor, which includes selling costs if applicable, to the value. The fair value of real estate is generally based on appraisals by qualified licensed appraisers. The appraisers typically determine the value of the real estate by utilizing an income or market valuation approach. If an appraisal is not available, the fair value may be determined by using a cash flow analysis. Fair value on other collateral such as business assets is typically ascertained by assessing, either singularly or some combination of, asset appraisals, accounts receivable aging reports, inventory listings and or customer financial statements. Both appraised values and values based on borrower’s financial information are discounted as considered appropriate based on age and quality of the information and current market conditions.

The tables below present the amortized cost basis of collateral dependent loans by loan class and their respective collateral type, which are individually evaluated to determine expected credit losses. The total collateral dependent loan balance decreased $ 2.2 million, primarily related to a decrease of $ 5.3 million in the commercial and industrial loan class, partially offset by increases of $ 1.3 million and $ 1.9 million in commercial real estate, non-owner occupied, and commercial real estate, owner occupied loan classes, respectively, for the three months ended March 31, 2025. The total related allowance balance increased $ 5.6 million, primarily related to increases of $ 2.4 million, $ 1.6 million, and $ 1.4 million in construction, commercial real estate, owner occupied, and commercial and industrial loan classes, respectively, for the three months ended March 31, 2025.


	March 31, 2025
	Commercial Real Estate		Residential Real Estate		Other		Total		Allowance on Collateral Dependent Loans
Commercial and industrial loans	$	—	$	—	$	18,173	$	18,173	$	9,243

Real estate loans:
Construction	—		22,606		—		22,606		2,432
Commercial real estate, non-owner occupied	28,919		—		—		28,919		4,435
Commercial real estate, owner occupied	11,609		—		—		11,609		1,606
Residential	—		1,150		—		1,150		183
Home equity	—		195		—		195		24


Loans	$	40,528	$	23,951	$	18,173	$	82,652	$	17,923


	December 31, 2024
	Commercial Real Estate		Residential Real Estate		Other		Total		Allowance on Collateral Dependent Loans
Commercial and industrial loans	$	—	$	—	$	23,455	$	23,455	$	7,803

Real estate loans:
Construction	—		22,652		—		22,652		—
Commercial real estate, non-owner occupied	27,583		—		—		27,583		4,295
Commercial real estate, owner occupied	9,748		—		—		9,748		—
Residential	—		1,174		—		1,174		189
Home equity	—		201		—		201		25


Loans	$	37,331	$	24,027	$	23,455	$	84,813	$	12,312

In certain situations, the Corporation may modify the terms of a loan to a debtor experiencing financial difficulty. The modifications may include principal forgiveness, interest rate reductions, payment delays, term extensions or combinations of these modifications. The following tables present the amortized cost basis of loans at March 31, 2025 and 2024 that were both experiencing financial difficulty and modified during the three months ended March 31, 2025 and 2024, by class and by type of modification. For the three months ended March 31, 2025, the table below excludes loan modifications considered insignificant. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below.


	Three Months Ended March 31, 2025
	Loan Modifications Made to Borrowers Experiencing Financial Difficulty
	Payment Delay		Term Extension		% of Total Class of Financing Receivable
Commercial and industrial loans	$	—	$	7,365	0.17	%

Real estate loans:
Construction	—		22,000		2.77	%

Commercial real estate, owner occupied	—		10,254		0.84	%
Residential	269		—		0.01	%



Total	$	269	$	39,619

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)


	Three Months Ended March 31, 2024
	Loan Modifications Made to Borrowers Experiencing Financial Difficulty
	Payment Delay		Term Extension		Interest Rate Reduction		Combination Payment Delay & Term Extension		% of Total Class of Financing Receivable
Commercial and industrial loans	$	1,542	$	2,798	$	250	$	14	0.12	%

Real estate loans:


Commercial real estate, owner occupied	—		190		—		—		0.02	%
Residential	1,617		—		—		—		0.07	%
Home equity	90		266		—		—		0.06	%


Total	$	3,249	$	3,254	$	250	$	14

The following tables present the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the three months ended March 31, 2025 and 2024.

Three Months Ended March 31, 2025

Financial Effect of Loan Modifications

Payment Delay

Term Extension

Commercial and industrial loans

Extended loans by a weighted average of 3 months.

Real estate loans:

Construction

Extended loans by a weighted average of 5 months.

Commercial real estate, owner occupied

Extended loans by a weighted average of 3 months.

Residential

Provided payment deferrals with weighted average delayed amounts of $ 6 .

Three Months Ended March 31, 2024

Financial Effect of Loan Modifications

Payment Delay

Term Extension

Interest Rate Reduction

Combination Payment Delay & Term Extension

Commercial and industrial loans

Provided payment deferrals with weighted average delayed amounts of $ 50 .

Extended loans by a weighted average of 15 months.

Reduced the weighted average contractual interest rate from 9.00 % to 8.00 %.

Provided payment deferrals with weighted average delayed amounts of $ 5 . Extended loans by a weighted average of 3 months.

Real estate loans:

Commercial real estate, owner occupied

Extended loans by a weighted average of 5 months.

Residential

Provided payment deferrals with weighted average delayed amounts of $ 31 .

Home equity

Provided payment deferrals with weighted average delayed amounts of $ 4 .

Extended loans by a weighted average of 6 months.

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

The Corporation closely monitors the performance of financial difficulty modifications to understand the effectiveness of its efforts. The following tables present the performance of financial difficulty modifications in the twelve months following modification.


	March 31, 2025
	Current		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Total
Commercial and industrial loans	$	17,281	$	—	$	—	$	4,231	$	21,512
Agricultural land, production and other loans to farmers	2,212		—		—		—		2,212
Real estate loans:
Construction	22,000		—		—		—		22,000

Commercial real estate, owner occupied	12,730		—		—		3,573		16,303
Residential	4,846		298		25		1,740		6,909
Home equity	261		—		—		—		261


Total	$	59,330	$	298	$	25	$	9,544	$	69,197


	March 31, 2024
	Current		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Total
Commercial and industrial loans	$	4,605	$	—	$	—	$	98	$	4,703

Real estate loans:


Commercial real estate, owner occupied	189		—		7		—		196
Residential	—		—		122		1,617		1,739
Home equity	356		—		—		—		356


Total	$	5,150	$	—	$	129	$	1,715	$	6,994

During the three months ended March 31, 2025, there were payment defaults of $ 9.5 million on loans to borrowers whose loans were modified due to financial difficulties within the previous twelve months. The payment defaults did not materially impact the allowance for credit losses on loans. There were $ 1.7 million payment defaults during the three months ended March 31, 2024 on loans that had been modified within the previous twelve months.

Upon the Corporation's determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or portion of the loan) is charged-off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.

Allowance for Credit Losses on Loans

The Allowance for Credit Losses on Loans ("ACL - Loans") is a valuation account that is deducted from the amortized cost basis of loans to present the net amount expected to be collected on loans over the contractual term. The ACL - Loans is adjusted by the provision for credit losses, which is reported in earnings, and reduced by charge-offs for loans, net of recoveries. Provision for credit losses on loans reflects the totality of actions taken on all loans for a particular period including any necessary increases or decreases in the allowance related to changes in credit loss expectations associated with specific loans or pools of loans. Loans are charged-off against the allowance when the uncollectibility of the loan is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

The allowance represents the Corporation’s best estimate of current expected credit losses on loans using relevant available information from internal and external sources, related to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. The CECL calculation is performed and evaluated quarterly and losses are estimated over the expected life of the loan. The level of the allowance for credit losses is believed to be adequate to absorb all expected future losses inherent in the loan portfolio at the measurement date.

In calculating the allowance for credit losses, the loan portfolio was pooled into ten loan segments with similar risk characteristics. Common characteristics include the type or purpose of the loan, underlying collateral and historical/expected credit loss patterns. In developing the loan segments, the Corporation analyzed the degree of correlation in how loans within each portfolio respond when subjected to varying economic conditions and scenarios as well as other portfolio stress factors.

The expected credit losses are measured over the life of each loan segment utilizing the Probability of Default / Loss Given Default methodology combined with economic forecast models to estimate the current expected credit loss inherent in the loan portfolio. This approach is also leveraged to estimate the expected credit losses associated with unfunded loan commitments incorporating expected utilization rates.

The Corporation sub-segmented certain commercial portfolios by risk level and certain consumer portfolios by delinquency status where appropriate. The Corporation utilized a four-quarter reasonable and supportable economic forecast period followed by a six-quarter, straight-line reversion period to the historical macroeconomic mean for the remaining life of the loans. Econometric modeling was performed using historical default rates and a selection of economic forecast scenarios published by Moody’s to develop a range of estimated credit losses for which to determine the best credit loss estimate within. Macroeconomic factors utilized in the modeling process include the national unemployment rate, BBB US corporate index, Commercial Real Estate ("CRE") price index and the home price index.

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

The Corporation qualitatively adjusts model results for risk factors that are not inherently considered in the quantitative modeling process, but are nonetheless relevant in assessing the expected credit losses within the loan portfolio. These adjustments may increase or decrease the estimate of expected credit losses based upon the assessed level of risk for each qualitative factor. The various risks that may be considered in making qualitative adjustments include, among other things, the impact of (i) changes in the nature and volume of the loan portfolio, (ii) changes in the existence, growth and effect of any concentrations in credit, (iii) changes in lending policies and procedures, including changes in underwriting standards and practices for collections, charge-offs, and recoveries, (iv) changes in the quality of the credit review function, (v) changes in the experience, ability and depth of lending, investment, collection and other relevant management staff, (vi) changes in the volume and severity of past due financial assets, the volume of the nonaccrual assets, and the volume and severity of adversely classified or graded assets, (vii) the value of underlying collateral for loans that are not collateral dependent, and (viii) other environmental factors such as regulatory, legal and technological considerations, as well as competition and changes in the economic and business conditions that affect the collectability of financial assets.

In some cases, management may determine that an individual loan exhibits unique risk characteristics which differentiate the loan from other loans within the loan segments. In such cases, the loans are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. Specific reserve allocations of the allowance for credit losses are determined by analyzing the borrower’s ability to repay amounts owed, collateral deficiencies, the relative risk grade of the loan and economic conditions affecting the borrower’s industry, among other things. A loan is considered to be collateral dependent when, based upon management's assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. In such cases, expected credit losses are based on the fair value of the collateral at the measurement date, adjusted for estimated selling costs if satisfaction of the loan depends on the sale of the collateral. The fair value of collateral supporting collateral dependent loans is evaluated on a quarterly basis.

The risk characteristics of the Corporation’s portfolio segments are as follows:

Commercial

Commercial lending is primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the tangible assets being financed such as equipment or real estate or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee. Other loans may be unsecured, secured but under-collateralized or otherwise made on the basis of the enterprise value of an organization. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

Commercial real estate

Commercial real estate loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. The Corporation monitors commercial real estate loans based on collateral and risk grade criteria, as well as the levels of owner-occupied versus non-owner occupied loans.

Construction

Construction loans are underwritten utilizing a combination of tools and techniques including feasibility and market studies, independent appraisals and appraisal reviews, absorption and interest rate sensitivity analysis as well as the financial analysis of the developer and all guarantors. Construction loans are monitored by either in house or third party inspectors limiting advances to a percentage of costs or stabilized project value. These loans frequently involve the disbursement of significant funds with the repayment dependent upon the successful completion and, where necessary, the future stabilization of the project. The predominant inherent risk of this portfolio is associated with the borrower's ability to successfully complete a project on time, within budget and stabilize the projected as originally projected.

Consumer and Residential

With respect to residential loans that are secured by 1-4 family residences, which are typically owner occupied, the Corporation generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. Home equity loans are secured by a subordinate interest in 1-4 family residences, and consumer loans are secured by consumer assets such as automobiles or recreational vehicles. Some consumer loans, such as small installment loans and certain lines of credit, are unsecured. Repayment of these loans is primarily dependent on the personal income and credit rating of the borrowers and can also be impacted by changes in property values. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

The ACL - Loans decreased $ 0.7 million during the three months ended March 31, 2025. Net charge-offs totaled $ 4.9 million and provision expense of $ 4.2 million was recorded during the three months ended March 31, 2025. The following tables summarize changes in the allowance for credit losses by loan segment for the three months ended March 31, 2025 and 2024:


	Three Months Ended March 31, 2025
	Commercial		Commercial Real Estate		Construction		Consumer & Residential		Total
Allowance for credit losses - loans
Balances, December 31, 2024	$	94,757	$	51,099	$	9,784	$	37,117	$	192,757



Provision for credit losses - loans	9,154		( 4,367 )		1,757		( 2,344 )		4,200


Recoveries on loans	938		5		—		313		1,256
Loans charged off	( 4,867 )		( 401 )		—		( 914 )		( 6,182 )
Balances, March 31, 2025	$	99,982	$	46,336	$	11,541	$	34,172	$	192,031


	Three Months Ended March 31, 2024
	Commercial		Commercial Real Estate		Construction		Consumer & Residential		Total
Allowance for credit losses - loans
Balances, December 31, 2023	$	97,348	$	44,048	$	24,823	$	38,715	$	204,934
Provision for credit losses - loans	3,145		1,528		( 4,454 )		1,781		2,000


Recoveries on loans	551		53		—		296		900
Loans charged off	( 1,831 )		( 351 )		—		( 971 )		( 3,153 )
Balances, March 31, 2024	$	99,213	$	45,278	$	20,369	$	39,821	$	204,681

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

Off-Balance Sheet Arrangements, Commitments And Contingencies

In the normal course of business, the Corporation has entered into off-balance sheet financial instruments which include commitments to extend credit and standby letters of credit. Commitments to extend credit are usually the result of lines of credit granted to existing borrowers under agreements that the total outstanding indebtedness will not exceed a specific amount during the term of the indebtedness. Typical borrowers are commercial customers that use lines of credit to supplement their treasury management functions, and thus their total outstanding indebtedness may fluctuate during any time period based on the seasonality of their business and the resultant timing for their cash flows. Other typical lines of credit are related to home equity loans granted to customers. Commitments to extend credit generally have fixed expiration dates or other termination clauses that may require a fee.

Standby letters of credit are generally issued on behalf of an applicant (the Corporation’s customer) to a specifically named beneficiary and are the result of a particular business arrangement that exists between the applicant and the beneficiary. Standby letters of credit have fixed expiration dates and are usually for terms of two years or less unless terminated beforehand due to criteria specified in the standby letter of credit. The standby letter of credit would permit the beneficiary to obtain payment from the Corporation under certain prescribed circumstances. Subsequently, the Corporation would seek reimbursement from the applicant pursuant to the terms of the standby letter of credit.

The Corporation typically follows the same credit policies and underwriting practices when making these commitments as it does for on-balance sheet instruments. Each customer’s creditworthiness is typically evaluated on a case-by-case basis, and the amount of collateral obtained, if any, is based on management’s credit evaluation of the customer. Collateral held varies but may include cash, real estate, marketable securities, accounts receivable, inventory, equipment and personal property. The contractual amounts of these commitments are not reflected in the consolidated financial statements and only amounts drawn upon would be reflected in the future. Since many of the commitments are expected to expire 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:


	March 31, 2025		December 31, 2024
Amounts of commitments:
Loan commitments to extend credit	$	5,321,554	$	5,006,085
Standby letters of credit	$	65,210	$	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 March 31, 2025 and December 31, 2024. There was no provision for credit losses on unfunded commitments during the three months ended March 31, 2025 and 2024. This reserve level remains appropriate and is reported in Other Liabilities as of March 31, 2025 and December 31, 2024 in the Consolidated Condensed Balance Sheets.

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 INSTRUMENTS

Non-designated Hedges

The Corporation does not use derivatives for trading or speculative purposes. Derivatives not designated as hedges are not speculative and result from a service the Corporation provides to certain customers. 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.

Commitments to fund certain mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of mortgage loans to third party investors are 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 based on changes in mortgage interest rates from the date of the commitments. 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 March 31, 2025, and December 31, 2024.


	March 31, 2025				December 31, 2024
	Notional Amount		Fair Value		Notional Amount		Fair Value
Included in other assets:
Interest rate swaps	$	1,381,111	$	62,871	$	1,386,757	$	76,528
Forward contracts related to mortgage loans to be delivered for sale	38,472		576		39,142		465
Interest rate lock commitments	35,890		287		15,000		140
Included in other assets	$	1,455,473	$	63,734	$	1,440,899	$	77,133
Included in other liabilities:
Interest rate swaps	$	1,489,483	$	62,785	$	1,486,764	$	76,450
Forward contracts related to mortgage loans to be delivered for sale	37,000		113		13,020		18
Interest rate lock commitments	15,934		46		14,457		100
Included in other liabilities	$	1,542,417	$	62,944	$	1,514,241	$	76,568

In the normal course of business, the Corporation may decide to settle a forward contract rather than fulfill the contract. Cash received or paid in this settlement manner is included in "Net gains and fees on sales of loans" in the Consolidated Condensed Statements of Income and is considered a cost of executing a forward contract. The amount of gain (loss) recognized into income related to non-designated hedging instruments is included in the table below for the periods indicated.


Derivatives Not Designated as Hedging Instruments under FASB ASC 815-10	Location of Gain (Loss) Recognized Income on Derivative	Amount of Gain (Loss) Recognized into Income on Derivatives
		Three Months Ended March 31, 2025		Three Months Ended March 31, 2024
Forward contracts related to mortgage loans to be delivered for sale	Net gains and fees on sales of loans	$	( 232 )	$	( 1 )
Interest rate lock commitments	Net gains and fees on sales of loans	201		( 13 )
Total net gain (loss) recognized in income		$	( 31 )	$	( 14 )

The Corporation’s exposure to credit risk occurs because of nonperformance by its counterparties. The counterparties approved by the Corporation are usually financial institutions, which are well capitalized and have credit ratings through Moody’s and/or Standard & Poor’s at or above investment grade. The Corporation’s mitigation of such risk is through quarterly financial reviews, comparing mark-to-market values with policy limitations, credit ratings and collateral pledging.

Credit-risk-related Contingent Features

The Corporation has agreements with certain of its derivative counterparties that contain a provision where if the Corporation fails to maintain its status as a well or adequately capitalized institution, then the Corporation could be required to terminate or fully collateralize all outstanding derivative contracts. Additionally, the Corporation has agreements with certain of its derivative counterparties that contain a provision where if the Corporation defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Corporation could also be declared in default on its derivative obligations. As of March 31, 2025, the termination value of derivatives in a net liability position related to these agreements was $ 8.0 million, which resulted in no collateral pledged to counterparties as of March 31, 2025. While the Corporation did not breach any of these provisions as of March 31, 2025, if it had, the Corporation could have been required to settle its obligations under the agreements at their termination value.

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

NOTE 6

FAIR VALUES OF FINANCIAL INSTRUMENTS

The Corporation used fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The accounting guidance defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC 820 applies only when other guidance requires or permits assets or liabilities to be measured at fair value; it does not expand the use of fair value in any new circumstances.

As defined in ASC 820, fair value is the price to sell an asset or transfer a liability in an orderly transaction between market participants. It represents an exit price at the measurement date. Market participants are buyers and sellers, who are independent, knowledgeable, and willing and able to transact in the principal (or most advantageous) market for the asset or liability being measured. Current market conditions, including imbalances between supply and demand, are considered in determining fair value. The Corporation values its assets and liabilities in the principal market where it sells the particular asset or transfers the liability with the greatest volume and level of activity. In the absence of a principal market, the valuation is based on the most advantageous market for the asset or liability (i.e., the market where the asset could be sold or the liability transferred at a price that maximizes the amount to be received for the asset or minimizes the amount to be paid to transfer the liability).

Valuation inputs refer to the assumptions market participants would use in pricing a given asset or liability. Inputs can be observable or unobservable. Observable inputs are those assumptions which market participants would use in pricing the particular asset or liability. These inputs are based on market data and are obtained from a source independent of the Corporation. Unobservable inputs are assumptions based on the Corporation’s own information or estimate of assumptions used by market participants in pricing the asset or liability. Unobservable inputs are based on the best and most current information available on the measurement date. All inputs, whether observable or unobservable, are ranked in accordance with a prescribed fair value hierarchy which gives the highest ranking to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest ranking to unobservable inputs for which there is little or no market activity (Level 3). Fair values for assets or liabilities classified as Level 2 are based on one or a combination of the following factors: (i) quoted prices for similar assets; (ii) observable inputs for the asset or liability, such as interest rates or yield curves; or (iii) inputs derived principally from or corroborated by observable market data. The level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Corporation considers an input to be significant if it drives 10 percent or more of the total fair value of a particular asset or liability.

RECURRING MEASUREMENTS

Assets and liabilities are considered to be measured at fair value on a recurring basis if fair value is measured regularly (i.e., daily, weekly, monthly or quarterly). Recurring valuation occurs at a minimum on the measurement date. Assets and liabilities are considered to be measured at fair value on a nonrecurring basis if the fair value measurement of the instrument does not necessarily result in a change in the amount recorded on the balance sheet. Generally, nonrecurring valuation is the result of the application of other accounting pronouncements which require assets or liabilities to be assessed for impairment and recorded at the lower of cost or fair value. The fair value of assets or liabilities transferred in or out of Level 3 is measured on the transfer date, with any additional changes in fair value subsequent to the transfer considered to be realized or unrealized gains or losses.

Following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis and recognized in the

accompanying balance sheets, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Investment Securities

Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. The Corporation did not hold any Level 1 securities as of March 31, 2025, and December 31, 2024. Where significant observable inputs, other than Level 1 quoted prices, are available, securities are classified within Level 2 of the valuation hierarchy. Level 2 securities include U.S. Government-sponsored agency and mortgage-backed securities, state and municipal securities and corporate obligations. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy and include state and municipal securities and corporate obligations. Fair values for Level 3 securities were determined using discounted cash flow models that incorporated market estimates of interest rates and volatility in markets that have not been active.

Third party vendors compile prices from various sources and may apply such techniques as matrix pricing to determine the value of identical or similar investment securities (Level 2). Matrix pricing is a mathematical technique widely used in the banking industry to value investment securities without relying exclusively on quoted prices for specific investment securities but rather relying on the investment securities’ relationship to other benchmark quoted investment securities. Any investment security not valued based upon the methods above are considered Level 3.

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

Derivative Financial Agreements

See information regarding the Corporation’s derivative financial agreements in NOTE 5. DERIVATIVE FINANCIAL INSTRUMENTS of these Notes to Consolidated Condensed Financial Statements.

The following table presents the fair value measurements of assets and liabilities recognized in the accompanying balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2025, and December 31, 2024.


			Fair Value Measurements Using:
March 31, 2025	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available for sale securities:

U.S. Government-sponsored agency securities	$	79,926	$	—	$	79,926	$	—
State and municipal	845,183		—		843,031		2,152
U.S. Government-sponsored mortgage-backed securities	440,946		—		440,946		—
Corporate obligations	12,434		—		12,403		31
Derivative assets	63,734		—		63,734		—
Derivative liabilities	62,944		—		62,944		—


			Fair Value Measurements Using:
December 31, 2024	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available for sale securities:


U.S. Government-sponsored agency securities	$	79,381	$	—	$	79,381	$	—
State and municipal	863,174		—		860,793		2,381
U.S. Government-sponsored mortgage-backed securities	431,622		—		431,618		4
Corporate obligations	12,298		—		12,267		31

Derivative assets	77,133		—		77,133		—
Derivative liabilities	76,568		—		76,568		—

Level 3 Reconciliation

The following is a reconciliation of the beginning and ending balances of recurring fair value measurements recognized in the accompanying

balance sheets using significant unobservable Level 3 inputs for the three months ended March 31, 2025 and 2024.


	Available for Sale Securities
	Three Months Ended
	March 31, 2025		March 31, 2024
Balance at beginning of the period	$	2,416	$	3,310


Included in other comprehensive income	( 6 )		( 95 )


Principal payments	( 227 )		32
Ending balance	$	2,183	$	3,247

There were no gains or losses included in earnings that were attributable to the changes in unrealized gains or losses related to assets or

liabilities held at March 31, 2025 or December 31, 2024.

Transfers Between Levels

There were no transfers in or out of Level 3 during the three months ended March 31, 2025 and 2024.

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

Nonrecurring Measurements

Following is a description of valuation methodologies used for instruments measured at fair value on a nonrecurring basis and recognized in the accompanying balance sheets, as well as the general classification of such instruments pursuant to the valuation hierarchy at March 31, 2025, and December 31, 2024.


			Fair Value Measurements Using
March 31, 2025	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Collateral dependent loans	$	49,700	$	—	$	—	$	49,700


			Fair Value Measurements Using
December 31, 2024	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Collateral dependent loans	$	46,810	$	—	$	—	$	46,810

Collateral Dependent Loans

Unobservable (Level 3) Inputs

The following tables present quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements, other than goodwill, at March 31, 2025 and December 31, 2024.

March 31, 2025

Fair Value

Valuation Technique

Unobservable Inputs

Range (Weighted-Average)

State and municipal securities

2,152

Discounted cash flow

Maturity/Call date

1 month to 6 years

US Muni BQ curve

BBB

Discount rate

3.6 % - 5.1 %

Weighted-average coupon

3.6 %

Corporate obligations

Discounted cash flow

Risk free rate

3 month CME Term SOFR plus 26 bps

plus premium for illiquidity (basis points)

plus 200 bps

Weighted-average coupon

0 %

Collateral dependent loans

49,700

Collateral based measurements

Discount to reflect current market conditions and ultimate collectability

0 % - 21 %

Weighted-average discount by loan balance

1.9 %

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

December 31, 2024

Fair Value

Valuation Technique

Unobservable Inputs

Range (Weighted-Average)

State and municipal securities

2,381

Discounted cash flow

Maturity/Call date

1 month to 6 years

US Muni BQ curve

BBB

Discount rate

3.6 % - 4.7 %

Weighted-average coupon

3.6 %

Corporate obligations and U.S. Government-sponsored mortgage-backed securities

Discounted cash flow

Risk free rate

3 month CME Term

SOFR plus 26 bps

plus premium for illiquidity (basis points)

plus 200 bps

Weighted-average coupon

0 %

Collateral dependent loans

46,810

Collateral based measurements

Discount to reflect current market conditions and ultimate collectability

0 % - 16 %

Weighted-average discount by loan balance

12.6 %

The following is a discussion of the sensitivity of significant unobservable inputs, the interrelationships between those inputs and other unobservable inputs used in recurring fair value measurement and how those inputs might magnify or mitigate the effect of changes in the unobservable inputs on the fair value measurement.

State and Municipal Securities and Corporate Obligations

The significant unobservable inputs used in the fair value measurement of the Corporation's state and municipal securities and corporate obligations are premiums for unrated securities and marketability discounts. Significant increases or decreases in either of those inputs in isolation would result in a significantly lower or higher fair value measurement. Generally, changes in either of those inputs will not affect the other input.

Fair Value of Financial Instruments

The following tables present estimated fair values of the Corporation’s financial instruments not carried at fair value and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2025 and December 31, 2024.


			March 31, 2025
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Carrying Amount		(Level 1)		(Level 2)		(Level 3)		Total Fair Value
Assets:
Cash and due from banks	$	86,113	$	86,113	$	—	$	—	$	86,113
Interest-bearing deposits	331,534		331,534		—		—		331,534

Investment securities held to maturity, net	2,048,632		—		1,698,685		6,321		1,705,006
Loans held for sale	23,004		—		23,004		—		23,004
Net loans	12,812,874		—		—		12,641,050		12,641,050
Federal Home Loan Bank stock	45,006		—		45,006		—		45,006

Interest receivable	88,352		—		88,352		—		88,352
Liabilities:
Deposits	$	14,461,978	$	12,578,429	$	1,877,517	$	—	14,455,946
Borrowings:

Securities sold under repurchase agreements	122,947		—		122,938		—		122,938
Federal Home Loan Bank advances	972,478		—		973,038		—		973,038
Subordinated debentures and other borrowings	62,619		—		58,041		—		58,041


Interest payable	13,304		—		13,304		—		13,304

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)


			December 31, 2024
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Carrying Amount		(Level 1)		(Level 2)		(Level 3)		Total Fair Value
Assets:
Cash and due from banks	$	87,616	$	87,616	$	—	$	—	$	87,616
Interest-bearing deposits	298,891		298,891		—		—		298,891

Investment securities held to maturity, net	2,074,220		—		1,716,647		6,873		1,723,520
Loans held for sale	18,663		—		18,663		—		18,663
Net loans	12,661,602		—		—		12,437,523		12,437,523
Federal Home Loan Bank stock	41,690		—		41,690		—		41,690

Interest receivable	91,829		—		91,829		—		91,829
Liabilities:
Deposits	$	14,521,626	$	12,502,819	$	2,010,348	$	—	14,513,167
Borrowings:

Securities sold under repurchase agreements	142,876		—		142,865		—		142,865
Federal Home Loan Bank advances	822,554		—		816,786		—		816,786
Subordinated debentures and other borrowings	93,529		—		84,108		—		84,108

Interest payable	16,102		—		16,102		—		16,102

NOTE 7

QUALIFIED AFFORDABLE HOUSING INVESTMENTS

The Corporation has investments in various limited partnerships that sponsor affordable housing projects. The purpose of these investments is to earn an adequate return of capital through the receipt of low income housing tax credits and to assist the Corporation in achieving goals associated with the Community Reinvestment Act. These investments are included in other assets on the Consolidated Condensed Balance Sheets, with any unfunded commitments included in other liabilities. The investments are amortized as a component of income tax expense.

The following table summarizes the Corporation’s affordable housing investments as of March 31, 2025 and December 31, 2024:


	March 31, 2025				December 31, 2024
Investment Type	Investment		Unfunded Commitment		Investment		Unfunded Commitment
LIHTC	$	163,663	$	120,013	$	167,685	$	132,226

The following table summarizes the amortization expense and tax credits recognized for the Corporation’s affordable housing investments for the three months ended March 31, 2025 and 2024:


	Three Months Ended March 31,
	2025		2024
Amortization expense	$	4,021	$	1,696
Tax credits recognized	4,922		1,644

NOTE 8

BORROWINGS

The following table summarizes the Corporation’s borrowings as of March 31, 2025 and December 31, 2024:


	March 31, 2025		December 31, 2024
Federal funds purchased	$	185,000	$	99,226
Securities sold under repurchase agreements	122,947		142,876
Federal Home Loan Bank advances	972,478		822,554
Subordinated debentures and other borrowings	62,619		93,529
Total Borrowings	$	1,343,044	$	1,158,185

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

Securities sold under repurchase agreements consist of obligations of the Bank to other parties and are secured by U.S. Government-sponsored enterprise obligations. The maximum amount of outstanding agreements at any month-end during the three months ended March 31, 2025 and 2024 totaled $ 169.1 million and $ 194.2 million, respectively, and the average balance of such agreements totaled $ 159.3 million and $ 172.7 million during the same period of 2025 and 2024, respectively.

The collateral pledged for all repurchase agreements that are accounted for as secured borrowings as of March 31, 2025 and December 31, 2024 were:


	March 31, 2025
	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater Than 90 Days		Total
U.S. Government-sponsored mortgage-backed securities	$	122,947	$	—	$	—	$	—	$	122,947


	December 31, 2024
	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater Than 90 Days		Total
U.S. Government-sponsored mortgage-backed securities	$	142,876	$	—	$	—	$	—	$	142,876

Contractual maturities of borrowings as of March 31, 2025, are as follows:


Maturities in Years Ending December 31:	Federal Funds Purchased		Securities Sold Under Repurchase Agreements		Federal Home Loan Bank Advances		Subordinated Debentures and Term Loans
2025	$	185,000	$	122,947	$	175,000	$	1,129
2026	—		—		75,000		—
2027	—		—		270,000		—
2028	—		—		240,000		5,000
2029	—		—		150,000		—
2030 and after	—		—		62,478		60,660
ASC 805 fair value adjustments at acquisition	—		—		—		( 4,170 )
	$	185,000	$	122,947	$	972,478	$	62,619

At March 31, 2025, the outstanding FHLB advances had interest rates from 1.50 to 4.83 percent and are subject to restrictions or penalties in the event of prepayment. The total available remaining borrowing capacity from the FHLB at March 31, 2025, was $ 625.4 million. As of March 31, 2025, the Corporation had $ 355.0 million of putable advances with the FHLB.

Subordinated Debentures and Term Loans. As of March 31, 2025 and December 31, 2024, subordinated debentures and term loans totaled $ 62.6 million and $ 93.5 million, respectively.

• First Merchants Capital Trust II (“FMC Trust II”). At March 31, 2025 and December 31, 2024, the Corporation had $ 41.7 million of subordinated debentures issued to FMC Trust II, a wholly-owned statutory business trust. FMC Trust II was formed in July 2007 for purposes of issuing trust preferred securities to investors. At that time, it simultaneously issued and sold its common securities to the Corporation, which constituted all of the issued and outstanding common securities of FMC Trust II. The subordinated debentures, which were purchased with the proceeds of the sale of the trust’s capital securities, are the sole assets of FMC Trust II and are fully and unconditionally guaranteed by the Corporation. As of March 31, 2025 and December 31, 2024, the subordinated debentures and trust preferred securities bear interest at a variable rate equal to the three-month CME Term Secured Overnight Financing Rate ("SOFR"), plus the 0.26161 percent spread adjustment. The interest rate at March 31, 2025 and December 31, 2024 was 6.12 percent and 6.18 percent, respectively. The trust preferred securities are currently redeemable at par and without penalty, subject to the Corporation having first redeemed the related subordinated debentures, with the prior approval of the Federal Reserve if then required under applicable capital guidelines or policies. The trust preferred securities and the subordinated debentures of FMC Trust II will mature on September 15, 2037. The Corporation continues to hold all outstanding common securities of FMC Trust II.

• Ameriana Capital Trust I. At March 31, 2025 and December 31, 2024, the Corporation had $ 10.3 million of subordinated debentures issued to Ameriana Capital Trust I. On December 31, 2015, the Corporation acquired Ameriana Capital Trust I in conjunction with its acquisition of Ameriana Bancorp, Inc. With a trust preferred structure substantially similar to that described above for FMC Trust II, the subordinated debentures held by Ameriana Capital Trust I were purchased with the proceeds of the sale of the trust’s capital securities. As of March 31, 2025 and December 31, 2024, the subordinated debentures and trust preferred securities bear interest at a variable rate equal to the three-month CME Term SOFR, plus the 0.26161 percent spread adjustment. The interest rate at March 31, 2025 and December 31, 2024 was 6.06 percent and 6.12 percent, respectively. The trust preferred securities of Ameriana Capital Trust I are currently redeemable at par and without penalty, subject to the Corporation having first redeemed the related subordinated debentures, with the prior approval of the Federal Reserve if then required under applicable capital guidelines or policies. The trust preferred securities and the subordinated debentures of Ameriana Capital Trust I will mature in March 2036. The Corporation continues to hold all of the outstanding common securities of Ameriana Capital Trust I.

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

• First Merchants Senior Notes and Subordinated Notes. On November 1, 2013, the Corporation completed the private issuance and sale to four institutional investors of an aggregate of $ 70 million of debt comprised of (a) 5.00 percent Fixed-to-Floating Rate Senior Notes due 2028 in the aggregate principal amount of $ 5 million (the “Senior Debt”) and (b) 6.75 percent Fixed-to-Floating Rate Subordinated Notes due 2028 in the aggregate principal amount of $ 65 million (the “Subordinated Debt”). The interest rate on the Senior Debt and Subordinated Debt remained fixed for the first ten ( 10 ) years and converted to floating on October 30, 2023. As of March 31, 2025 and December 31, 2024, the Senior Debt has an annual floating rate equal to three-month CME Term SOFR, plus the 0.26161 percent spread adjustment plus 2.345 percent. The interest rate on the Senior Debt was 6.90 percent and 7.18 percent as of March 31, 2025 and December 31, 2024, respectively. The Corporation had an option to redeem the Subordinated Debt in whole or in part at a redemption price equal to 100 percent of the principal amount of the redeemed Subordinated Notes, plus accrued and unpaid interest to the date of the redemption. The option of redemption was subject to the approval of the Federal Reserve Board. The Corporation has an option to redeem the Senior Debt in whole or in part at a redemption price equal to 100 percent of the principal amount of the redeemed Senior Notes, plus accrued and unpaid interest to the date of the redemption; provided, however, that no Subordinated Notes (as defined in the Issuing and Paying Agency Agreement) may remain outstanding subsequent to any early redemption of Senior Notes. The Subordinated Debt and the Senior Debt options to redeem began with the interest payment date on October 30, 2023, or on any scheduled interest payment date thereafter. During the first quarter of 2024, the Corporation exercised its rights to redeem $ 40.0 million in principal and paid the debt in full on the scheduled interest payment date. Additionally, in the second quarter of 2024, the Corporation exercised its rights to redeem the remaining $ 25.0 million in principal and paid the debt on the scheduled interest payment date. Both redemptions were permitted under the optional redemptions provisions of the Subordinated Note Certificate representing the Subordinated Debt. The Senior Debt agreement contains certain customary representations and warranties and financial and negative covenants. As of March 31, 2025 and December 31, 2024 the Corporation was in compliance with these covenants.

• Level One Subordinated Notes. On April 1, 2022, the Corporation assumed certain subordinated notes in conjunction with its acquisition of Level One. The $ 30.0 million of subordinated notes issued on December 18, 2019 had a fixed interest rate of 4.75 percent per annum, payable semiannually through December 18, 2024. The notes had a floating interest rate equal to the of three-month CME Term SOFR plus 3.11 percent, payable quarterly, after December 18, 2024 through maturity. The Corporation had the option to redeem any or all of the subordinated notes without premium or penalty any time after December 18, 2024 or upon the occurrence of a tier 2 capital event or tax event. During the first quarter of 2025, the Corporation exercised its rights to redeem $ 30.0 million in principal and paid the debt in full on the scheduled interest payment date. The redemption was permitted under the optional redemption provisions of the subordinated notes. No principal amount remains outstanding related to the subordinated notes as of March 31, 2025.

• Other Borrowings. During the third quarter of 2023, the Corporation acquired a secured borrowing in conjunction with the purchase of the Indianapolis regional headquarters building. The secured borrowing bears a fixed interest rate of 3.41 percent, has a maturity date of March 2035, and had a balance of $ 7.1 million as of March 31, 2025 and December 31, 2024. On April 1, 2022, the Corporation acquired a secured borrowing in conjunction with its acquisition of Level One. The secured borrowing related to a certain loan participation sold by Level One that did not qualify for sales treatment. The secured borrowing bears a fixed rate of 1.00 percent and had a balance of $ 1.1 million as of March 31, 2025 and December 31, 2024.

Line of Credit. As of March 31, 2025 and December 31, 2024, there was no outstanding balance on the line of credit.

• U.S. Bank, N.A. On September 30, 2024, the Corporation entered into a Credit Agreement with U.S. Bank, N.A. Under the terms of the Credit Agreement, the Lender has provided the Corporation with a revolving line of credit of up to $ 75.0 million. The outstanding principal balance under the Credit Facility bears interest at a variable rate equal to the one-month Term SOFR rate plus 2.25 percent. Interest on the outstanding balance is payable quarterly, and the Credit Facility has a maturity date of September 30, 2025. Additionally, the Corporation is subject to a non-refundable facility fee equal to 0.40 percent per annum on the average daily unused amount of the Credit Facility, payable quarterly. The Credit Agreement contains customary representations, warranties and covenants. As of March 31, 2025 and December 31, 2024, the Corporation's outstanding principal balance under the Credit Facility was zero and the Corporation was in compliance with all covenants.

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

NOTE 9

ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table summarizes the changes in the balances of each component of accumulated other comprehensive loss, net of tax, as of March 31, 2025 and 2024:


	Accumulated Other Comprehensive Loss
	Unrealized Gains (Losses) on Securities Available for Sale		Unrealized Gains (Losses) on Defined Benefit Plans		Total
Balance at December 31, 2024	$	( 188,412 )	$	( 273 )	$	( 188,685 )
Other comprehensive loss before reclassifications	( 1,632 )		—		( 1,632 )
Amounts reclassified from accumulated other comprehensive loss	6		—		6
Period change	( 1,626 )		—		( 1,626 )

Balance at March 31, 2025	$	( 190,038 )	$	( 273 )	$	( 190,311 )


Balance at December 31, 2023	$	( 173,654 )	$	( 2,316 )	$	( 175,970 )
Other comprehensive loss before reclassifications	( 22,061 )		—		( 22,061 )
Amounts reclassified from accumulated other comprehensive loss	2		—		2
Period change	( 22,059 )		—		( 22,059 )

Balance at March 31, 2024	$	( 195,713 )	$	( 2,316 )	$	( 198,029 )

The following tables present the reclassification adjustments out of accumulated other comprehensive loss that were included in net income in the Consolidated Condensed Statements of Income for the three months ended March 31, 2025 and 2024.


	Amount Reclassified from Accumulated Other Comprehensive Loss For the Three Months Ended March 31,
Details about Accumulated Other Comprehensive Loss Components	2025		2024		Affected Line Item in the Statements of Income
Unrealized gains (losses) on available for sale securities (1)
Realized securities gains (losses) reclassified into income	$	( 7 )	$	( 2 )	Other income - net realized gains (losses) on sales of available for sale securities
Related income tax benefit (expense)	1		—		Income tax expense












Total reclassifications for the period, net of tax	$	( 6 )	$	( 2 )

(1) For additional detail related to unrealized gains (losses) on available for sale securities and related amounts reclassified from accumulated other comprehensive loss see NOTE 3. INVESTMENT SECURITIES of these Notes to Consolidated Condensed Financial Statements.

NOTE 10

SHARE-BASED COMPENSATION

Stock options and Restricted Stock Awards ("RSA") have been issued to directors, officers and other management employees under the Corporation's 2019 Long-term Equity Incentive Plan, the 2024 Long-term Equity Incentive Plan, the Level One Bancorp, Inc. 2007 Stock Option Plan and the Equity Compensation Plan for Non-Employee Directors. The stock options, which have a ten year life, become 100 percent vested based on time ranging from one year to two years and are fully exercisable when vested. Option exercise prices equal the Corporation's common stock closing price on NASDAQ on the date of grant. The RSAs issued to employees and non-employee directors provide for the issuance of shares of the Corporation's common stock at no cost to the holder and generally vest after three years . The RSAs vest only if the employee is actively employed by the Corporation on the vesting date. For non-employee directors, the RSAs vest only if the non-employee director remains as an active board member on the vesting date. The RSAs for employees and non-employee directors are either immediately vested at retirement, disability or death, or, continue to vest after retirement, disability or death, depending on the plan under which the shares were granted.

The Corporation’s 2024 Employee Stock Purchase Plan ("ESPP") provides eligible employees of the Corporation and its subsidiaries an opportunity to purchase shares of common stock of the Corporation through quarterly offerings financed by payroll deductions. The price of the stock to be paid by the employees shall be equal to 85 percent of the average of the closing price of the Corporation’s common stock on each trading day during the offering period. However, in no event shall such purchase price be less than the lesser of an amount equal to 85 percent of the market price of the Corporation’s stock on the offering date or an amount equal to 85 percent of the market value on the date of purchase. Common stock purchases are made quarterly and are paid through advance payroll deductions up to a calendar year maximum of $ 25,000 .

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

Compensation expense related to unvested share-based awards is recorded by recognizing the unamortized grant date fair value of these awards over the remaining service periods of those awards, with no change in historical reported fair values and earnings. Awards are valued at

fair value in accordance with provisions of share-based compensation guidance and are recognized on a straight-line basis over the service periods of each award. To complete the exercise of vested stock options, RSA’s and ESPP options, the Corporation generally issues new shares from its authorized but unissued share pool. Share-based compensation has been recognized as a component of salaries and benefits expense in the accompanying Consolidated Condensed Statements of Income.

The following table summarizes the components of the Corporation's share-based compensation awards recorded as an expense and the income tax benefit of such awards.


	Three Months Ended March 31,
	2025		2024
Stock and ESPP Options
Pre-tax compensation expense	$	27	$	67
Income tax expense (benefit)	—		—
Stock and ESPP option expense, net of income taxes	$	27	$	67
Restricted Stock Awards
Pre-tax compensation expense	$	1,568	$	1,335
Income tax expense (benefit)	( 328 )		( 264 )
Restricted stock awards expense, net of income taxes	$	1,240	$	1,071
Total Share-Based Compensation
Pre-tax compensation expense	$	1,595	$	1,402
Income tax expense (benefit)	( 328 )		( 264 )
Total share-based compensation expense, net of income taxes	$	1,267	$	1,138

The grant date fair value of ESPP options was estimated to be approximately $ 27,000 at the beginning of the January 1, 2025 quarterly offering period. The ESPP options vested during the three months ended March 31, 2025, leaving no unrecognized compensation expense related to unvested ESPP options at March 31, 2025.

Stock option activity under the Corporation's stock option plans as of March 31, 2025 and changes during the three months ended March 31, 2025, were as follows:


	Number of Shares	Weighted-Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value
Outstanding at January 1, 2025	40,991	$	22.44


Exercised	( 5,752 )	$	21.79

Outstanding March 31, 2025	35,239	$	22.55	1.53	$	630
Vested and Expected to Vest at March 31, 2025	35,239	$	22.55	1.53	$	630
Exercisable at March 31, 2025	35,239	$	22.55	1.53	$	630

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Corporation's closing stock price on the last trading day of the first three months of 2025 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their stock options on March 31, 2025. The amount of aggregate intrinsic value will change based on the fair value of the Corporation's common stock.

The aggregate intrinsic value of stock options exercised during the three months ended March 31, 2025 was $ 107,000 . Cash receipts of stock options exercised during the same period was $ 126,000 . There were no stock options exercised during the three months ended March 31, 2024.

The following table summarizes information on unvested RSAs outstanding as of March 31, 2025:


	Number of Shares	Weighted-Average Grant Date Fair Value
Unvested RSAs at January 1, 2025	554,436	$	36.47
Granted	7,486	$	40.49
Vested	( 5,666 )	$	41.77
Forfeited	( 950 )	$	36.73
Unvested RSAs at March 31, 2025	555,306	$	36.47

As of March 31, 2025, unrecognized compensation expense related to RSAs was $ 9.2 million and is expected to be recognized over a weighted-average period of 1.4 years. The Corporation did no t have any unrecognized compensation expense related to stock options as of March 31, 2025.

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

NOTE 11

INCOME TAX

The following table summarizes the major components creating differences between income taxes at the federal statutory and the effective tax rate recorded in the consolidated condensed statements of income for the three months ended March 31, 2025 and 2024:


	Three Months Ended March 31,
	2025			2024








Reconciliation of Federal Statutory to Actual Tax Expense:
Federal statutory income tax at 21%	$	13,275		$	11,501
Tax-exempt interest income	( 4,598 )			( 4,352 )
Non-deductible FDIC premiums	129			139

Tax-exempt earnings and gains on life insurance	( 458 )			( 334 )
Tax credits	( 903 )			( 304 )

State Income Tax	307			34
Other	125			141
Actual Tax Expense	$	7,877		$	6,825

Effective Tax Rate	12.5		%	12.5		%

NOTE 12

NET INCOME PER COMMON SHARE

Basic net income per common share is computed by dividing net income available to common stockholders by the weighted-average common shares outstanding during the reporting period. Diluted net income per common share is computed by dividing net income available to common stockholders by the combination of the weighted-average common shares outstanding during the reporting period and all potentially dilutive common shares. Potentially dilutive common shares include stock options and RSAs issued under the Corporation's share-based compensation plans. Potentially dilutive common shares are excluded from the computation of diluted earnings per common share in the periods where the effect would be antidilutive.

The following tables reconcile basic and diluted net income per common share for the three months ended March 31, 2025 and 2024.


	Three Months Ended March 31,
	2025					2024
	Net Income Available to Common Stockholders		Weighted-Average Common Shares	Per Share Amount		Net Income Available to Common Stockholders		Weighted-Average Common Shares	Per Share Amount
Net income available to common stockholders	$	54,870	57,969,053	$	0.95	$	47,472	59,066,789	$	0.80
Effect of potentially dilutive stock options and restricted stock awards			273,179					206,225
Diluted net income per common share	$	54,870	58,242,232	$	0.94	$	47,472	59,273,014	$	0.80
RSAs excluded from the diluted average common share calculation (1)			47,494					87,287

(1) Anti-dilution occurs when the unrecognized compensation cost per share of an RSA exceeds the market price of the Corporation's stock.

NOTE 13

SEGMENT INFORMATION

The Corporation has one reportable segment, community banking. The Corporation’s reportable segment is determined by the Chief Executive Officer, who is the designated chief operating decision maker (“CODM”), based upon information provided about the Corporation’s products and services offered. The CODM will evaluate the financial performance of the Corporation’s business components by evaluating revenue streams, significant expenses, and budget to actual results in assessing the Corporation’s segment. The Corporation generates revenue primarily by providing banking services to its customers. Interest expense, provisions for credit losses and salaries and employee benefits are the significant expenses in the banking operations. The CODM evaluates performance, allocates resources and makes key operating decisions based on consolidated net income that is reported in the Consolidated Statements of Income. The measure of segment assets is reported on the Consolidated Balance Sheets as total consolidated assets. All operations are domestic.

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

NOTE 14

GENERAL LITIGATION AND REGULATORY EXAMINATIONS

The Corporation is subject to claims and lawsuits that arise primarily in the ordinary course of business. Additionally, the Corporation is also subject to periodic examinations by various regulatory agencies. It is the general opinion of management that the disposition or ultimate resolution of any such routine litigation or regulatory examinations will not have a material adverse effect on the consolidated financial position, results of operations and cash flow of the Corporation.

PART I. FINANCIAL INFORMATION

ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(table dollar amounts in thousands, except share data)

(Unaudited)

NOTE 15

SUBSEQUENT EVENT

In April 2025, the Corporation received $ 22.0 million in principal payments related to a multi-family construction relationship that was in nonaccrual status as of March 31, 2025. The payments represented full collection of principal.

PART I: FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

From time to time, we include forward-looking statements in our oral and written communication. We may include forward-looking statements in filings with the Securities and Exchange Commission, such as this Quarterly Report on Form 10-Q, in other written materials and in oral statements made by senior management to analysts, investors, representatives of the media and others. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we are including this statement for purposes of these safe harbor provisions. Forward-looking statements can often be identified by the use of words like “believe”, “continue”, “pattern”, “estimate”, “project”, “intend”, “anticipate”, “expect” and similar expressions or future or conditional verbs such as “will”, “would”, “should”, “could”, “might”, “can”, “may”, or similar expressions. These forward-looking statements include:

• statements of the Corporation's goals, intentions and expectations;

• statements regarding the Corporation's business plan and growth strategies;

• statements regarding the asset quality of the Corporation's loan and investment portfolios; and

• estimates of the Corporation's risks and future costs and benefits.

These forward-looking statements are subject to significant risks, assumptions and uncertainties, including, among other things, the following important factors which could affect the actual outcome of future events:

• fluctuations in market rates of interest and loan and deposit pricing, which could negatively affect our net interest margin, asset valuations and expense expectations;

• adverse changes in the economy, which might affect our business prospects and could cause credit-related losses and expenses;

• the impacts of epidemics, pandemics or other infectious disease outbreaks;

• the impacts related to or resulting from recent bank failures or adverse developments at other banks on general investor sentiment regarding the stability and liquidity of banks;

• adverse developments in our loan and investment portfolios;

• competitive factors in the banking industry, such as the trend towards consolidation in our market;

• changes in the banking legislation or the regulatory requirements of federal and state agencies applicable to bank holding companies and banks like our affiliate bank;

• acquisitions of other businesses by us and integration of such acquired businesses;

• changes in market, economic, operational, liquidity, credit and interest rate risks associated with our business; and

• the continued availability of earnings and excess capital sufficient for the lawful and prudent declaration and payment of cash dividends.

Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. In addition, our past results of operations do not necessarily indicate our anticipated future results.

BUSINESS SUMMARY

First Merchants Corporation (the “Corporation”) is a financial holding company headquartered in Muncie, Indiana and was organized in September 1982. The Corporation’s common stock is traded on the Nasdaq’s Global Select Market System under the symbol FRME. The Corporation conducts its banking operations through First Merchants Bank (the “Bank”), a wholly-owned subsidiary that opened for business in Muncie, Indiana, in March 1893. The Bank also operates First Merchants Private Wealth Advisors (a division of First Merchants Bank). The Bank operates 111 banking locations in Indiana, Ohio, and Michigan. In addition to its branch network, the Corporation offers comprehensive electronic and mobile delivery channels to its customers. The Corporation’s business activities are currently limited to one significant business segment, which is community banking.

Through the Bank, the Corporation offers a broad range of commercial and consumer banking services to meet the diverse needs of our customers. Our commercial banking team offers a full spectrum of debt capital, treasury management services and depository products. The consumer banking group offers a variety of consumer deposit and lending products. The mortgage banking team offers consumer mortgage solutions to assist with the purchase, refinance, construction or renovation of residential properties. Private Wealth Advisors offers personal wealth management services with expertise in investment management, private banking, fiduciary estate and financial planning.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Generally accepted accounting principles are complex and require us to apply significant judgments to various accounting, reporting and disclosure matters. Management must use assumptions and estimates to apply those principles where actual measurement is not possible or practical. The judgments and assumptions made are based upon historical experience or other factors that management believes to be reasonable under the circumstances. Because of the nature of the judgments and assumptions, actual results could differ from estimates, which could have a material effect on our financial condition and results of operations. There have been no significant changes during the three months ended March 31, 2025 to the items disclosed as our critical accounting policies and estimates in Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2024. For a complete discussion of our significant accounting policies, see “Notes to the Consolidated Financial Statements” in our Annual Report on Form 10-K for the year ended December 31, 2024.

PART I: FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FINANCIAL HIGHLIGHTS

The table below includes certain financial data of the Corporation for the previous five quarters:


	Three Months Ended
Dollars in Thousands, Except Per Share Amounts	March 31,			December 31,			September 30,			June 30,			March 31,
	2025			2024			2024			2024			2024
Income Statement:
Net interest income	$	130,270		$	134,370		$	131,110		$	128,571		$	127,063
Provision for credit losses	4,200			4,200			5,000			24,500			2,000
Noninterest income	30,048			42,742			24,866			31,334			26,638
Noninterest expense	92,902			96,289			94,629			91,413			96,935
Net income available to common shareholders	54,870			63,880			48,719			39,456			47,472
Per Share Data:
Average diluted common shares outstanding (in thousands)	58,242			58,247			58,289			58,328			59,273
Diluted net income available to common stockholders	$	0.94		$	1.10		$	0.84		$	0.68		$	0.80
Cash dividends paid to common stockholders	0.35			0.35			0.35			0.35			0.34
Common dividend payout ratio (1)	37.23		%	32.11		%	41.67		%	51.47		%	42.50		%
Book value per share	$	39.91		$	39.32		$	39.18		$	37.68		$	37.56
Tangible common book value per share (2)	27.34			26.78			26.64			25.10			25.07
Performance Ratios:
Return on average assets	1.21		%	1.39		%	1.07		%	0.87		%	1.04		%
Return on average stockholders' equity	9.38			11.05			8.66			7.16			8.47
Return on tangible common stockholders' equity (2)	14.12			16.75			13.39			11.29			13.21
Net interest margin (FTE) on average earning assets (3)	3.22			3.28			3.23			3.16			3.10
Efficiency ratio (2)	54.54			48.48			53.76			53.84			59.21
Net charge-offs as % of average loans (annualized)	0.15			0.02			0.21			1.26			0.07
Allowance for credit losses - loans as % of total loans	1.47			1.50			1.48			1.50			1.64
NPAs / actual assets %	0.47			0.43			0.35			0.36			0.37
Balance Sheet:
Total securities	$	3,427,121		$	3,460,695		$	3,662,145		$	3,753,088		$	3,783,574
Total loans	13,027,909			12,873,022			12,687,460			12,671,942			12,480,700
Total assets	18,439,787			18,311,969			18,347,552			18,303,423			18,317,803
Total deposits	14,461,978			14,521,626			14,365,100			14,569,070			14,884,584
Total borrowings	1,343,044			1,158,185			1,081,085			1,173,972			861,654
Total stockholders' equity	2,332,214			2,304,983			2,302,373			2,212,525			2,224,803
Capital Ratios:
Total shareholders' equity to assets	12.65		%	12.59		%	12.55		%	12.09		%	12.15		%
Tangible common equity to tangible assets (2)	8.90			8.81			8.76			8.27			8.32
Total risk-based capital to risk-weighted assets	13.22			13.31			13.18			12.95			13.34
Tier 1 capital to risk-weighted assets	11.67			11.59			11.41			11.19			11.25
Common equity tier 1 capital to risk-weighted assets	11.50			11.43			11.25			11.02			11.25
Tier 1 capital to average assets	10.20			9.96			9.79			9.63			9.56
(1) Cash dividends paid per common share divided by diluted net income per common share.
(2) Non-GAAP financial measures. Refer to the Non-GAAP Financial Measures" section for reconciliations to GAAP financial measures.
(3) Calculated using a marginal tax rate of 21 percent for all periods.

RESULTS OF OPERATIONS

The Corporation reported first quarter 2025 net income available to common stockholders and diluted earnings per common share of $54.9 million and $0.94 per diluted share, respectively, compared to $47.5 million and $0.80 per diluted share, respectively, during the first quarter of 2024.

When adjusting for certain non-recurring items, adjusted net income available to common stockholders was $54.9 million and adjusted diluted earnings per common share totaled $0.94 for the first quarter of 2025, compared to $50.1 million and $0.85, respectively, in the first quarter of 2024. These adjusted net income and earnings per share amounts are non-GAAP measures. For reconciliations of GAAP earnings per share measures to the corresponding non-GAAP measures provided above, refer to the "NON-GAAP FINANCIAL MEASURES" section of this Management's Discussion and Analysis of Financial Condition and Results of Operations.

PART I: FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

As of March 31, 2025, total assets equaled $18.4 billion, an increase of $127.8 million or 0.7 percent from December 31, 2024.

Cash and due from banks and interest-bearing deposits increased $31.1 million from December 31, 2024. Total investment securities decreased $33.6 million from December 31, 2024, primarily due to $35.3 million in maturities and redemptions of available for sale securities and held to maturity securities. The investment portfolio as a percentage of total assets was 18.6 percent at March 31, 2025 and 18.9 percent at December 31, 2024. Additional details of the Corporation's investment securities portfolio are discussed within NOTE 3. INVESTMENT SECURITIES of the Notes to Consolidated Condensed Financial Statements of this Quarterly Report on Form 10-Q.

The Corporation's total loan portfolio increased $154.9 million, or 4.8 percent on an annualized basis, since December 31, 2024. The composition of the loan portfolio is 75.4 percent commercial oriented with the largest loan classes of commercial and industrial and commercial real estate, non-owner occupied, representing 33.1 percent and 16.7 percent of the total loan portfolio, respectively. The increase was primarily driven by an increase in commercial and industrial, commercial real estate, owner occupied, public finance and residential loans. Partially offsetting those increases was a decrease in commercial real estate, non-owner occupied, construction, home equity, and individuals' loans for household and other personal expenditures. Additional details of the changes in the Corporation's loans are discussed within NOTE 4. LOANS AND ALLOWANCE FOR CREDIT LOSSES of the Notes to Consolidated Condensed Financial Statements of this Quarterly Report on Form 10-Q, and the "LOAN QUALITY AND PROVISION FOR CREDIT LOSSES ON LOANS" section of this Management's Discussion and Analysis of Financial Condition and Results of Operations.

The Corporation’s ACL - loans totaled $192.0 million as of March 31, 2025 and equaled 1.47 percent of total loans, compared to $192.8 million and 1.50 percent of total loans at December 31, 2024. The ACL - loans decreased $0.7 million from December 31, 2024. During the three months ended March 31, 2025, the Corporation recorded net charge-offs of $4.9 million and $4.2 million of provision for credit losses - loans. During the three months ended March 31, 2024, the Corporation recorded net charge-offs of $2.3 million and $2.0 million of provision for credit losses - loans. Nonaccrual loans at March 31, 2025 were $81.9 million and increased $8.1 million from December 31, 2024 primarily due to increases of $6.8 million and $1.9 million in non-accrual balances in commercial real estate, owner occupied and residential, respectively. The increases were partially offset by a decline in non-accrual balances within the commercial and industrial loan portfolio of $2.0 million. The Corporation's reserve for unfunded commitments was $18.0 million at March 31, 2025 and December 31, 2024, and is recorded in Other Liabilities. Additional details of the Corporation's allowance methodology and asset quality are discussed within NOTE 4. LOANS AND ALLOWANCE FOR CREDIT LOSSES of the Notes to Consolidated Condensed Financial Statements of this Quarterly Report on Form 10-Q and within the “LOAN QUALITY AND PROVISION FOR CREDIT LOSSES ON LOANS” section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The Corporation's other assets decreased $18.0 million from December 31, 2024 and was driven by a decline in the fair value of derivatives included in other assets from $77.1 million at December 31, 2024 to $63.7 million at March 31, 2025. The decrease in derivatives is due primarily to a decrease in market interest rates.

As of March 31, 2025, total deposits equaled $14.5 billion, a decrease of $59.6 million from December 31, 2024, or 1.6 percent on an annualized basis. The Corporation experienced decreases from December 31, 2024 in time deposits of $213.8 million and demand deposits of $193.5 million. Partially offsetting these decreases was an increase in savings deposits of $269.1 million and brokered certificates of deposits of $78.5 million from December 31, 2024. The overall deposit decrease was driven by a decrease in public funds and partially offset by an increase in wholesale deposits. Total deposits less time deposits greater than $100,000, or core deposits, represented 91.3 percent of the deposit portfolio at March 31, 2025. Noninterest bearing deposits represents 15.1 percent of the deposit portfolio at March 31, 2025, compared to 16.0 percent at December 31, 2024. The loan to deposit ratio increased to 90.1 percent at period end from 88.6 percent as of December 31, 2024.

The average account balance within the deposit portfolio was $36,000 at March 31, 2025. Insured deposits totaled 69.6 percent of total deposits, with the State of Indiana's Public Deposit Insurance Fund, which insures certain public deposits, providing insurance to 12.4 percent of deposits and the Federal Deposit Insurance Corporation ("FDIC") providing insurance to the remaining 57.2 percent. Only 30.4 percent of deposits are uninsured and our available liquidity is ample to cover those when considering both on balance sheet sources of liquidity and unused capacity from the Federal Reserve Discount Window, FHLB and unsecured borrowing sources.

Total borrowings increased $184.9 million as of March 31, 2025, compared to December 31, 2024. This increase was primarily driven by an increase of $149.9 million in FHLB advances and $85.8 million in federal funds purchased from December 31, 2024. Subordinated debentures and other borrowings decreased $30.9 million compared to December 31, 2024 as the Corporation utilized excess liquidity to pay down $30.0 million of subordinated debentures during the first quarter of 2025. Securities sold under repurchase agreements decreased $19.9 million from December 31, 2024 as clients moved into other deposit products.

The Corporation continued to maintain all regulatory capital ratios in excess of the regulatory definition of “well-capitalized.” Details of the Stock Repurchase Program and regulatory capital ratios are discussed within the “CAPITAL” section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

NON-GAAP FINANCIAL MEASURES

The Corporation's accounting and reporting policies conform to GAAP and general practices within the banking industry. As a supplement to GAAP, the Corporation provides non-GAAP performance measures, which management believes are useful because they assist investors in assessing the Corporation's performance. Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure can be found in the following tables.

PART I: FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Adjusted net income available to common stockholders and adjusted diluted earnings per common share are meaningful non-GAAP financial measures for management, as they provide a meaningful foundation for period-to-period and company-to-company comparisons, which management believes will aid both investors and analysts in analyzing our financial measures and predicting future performance.

Net interest income and net interest margin presented on a fully taxable equivalent ("FTE") basis, reflecting the income tax savings when comparing tax-exempt and taxable assets using the federal statutory rate of 21 percent, are non-GAAP financial measures used by management to assess what our tax-exempt assets would need to yield in order to achieve the same after-tax yield as a taxable asset. Management believes that it is standard practice in the banking industry to present net interest income and net interest margin on an FTE basis and that it provides useful information for management and investors for peer comparison purposes. Non-GAAP financial measures such as tangible common equity, tangible assets, tangible common equity to tangible assets, tangible book value per common share, tangible net income available to common stockholders, diluted tangible net income per common share, return on average tangible capital and return on average tangible assets are important measures of the strength of the Corporation's capital and ability to generate earnings on tangible common equity invested by our shareholders. These non-GAAP measures provide useful supplemental information and may assist investors in analyzing the Corporation’s financial position without regard to the effects of intangible assets and preferred stock, but do retain the effect of accumulated other comprehensive losses in stockholders' equity. Disclosure of these measures also allows analysts and banking regulators to assess our capital adequacy on these same bases.


ADJUSTED NET INCOME AND DILUTED EARNINGS PER COMMON SHARE - NON-GAAP
(Dollars in thousands, except per share amounts)

	Three Months Ended
	March 31,		December 31,		March 31,
	2025		2024		2024
Net Income Available to Common Stockholders (GAAP)	$	54,870	$	63,880	$	47,472
Adjustments:
Net realized losses on sales of available for sale securities	7		11,592		2


Gain on branch sale	—		(19,983)		—
Non-core expenses 1, 2	—		762		3,481
Tax on adjustment	(2)		1,851		(848)
Adjusted Net Income Available to Common Stockholders (non-GAAP)	$	54,875	$	58,102	$	50,107

Average Diluted Common Shares Outstanding (in thousands)	58,242		58,247		59,273

Diluted Earnings Per Common Share (GAAP)	$	0.94	$	1.10	$	0.80
Adjustments:
Net realized losses on sales of available for sale securities	—		0.20		—


Gain on branch sale	—		(0.34)
Non-core expenses 1, 2	—		0.01		0.06
Tax on adjustment	—		0.03		(0.01)
Adjusted Diluted Earnings Per Common Share (non-GAAP)	$	0.94	$	1.00	$	0.85

1 - Non-core expenses in the three months ended December 31, 2024 included $0.8 million of costs directly related to the branch sale.
2 - Non-core expenses in the three months ended March 31, 2024 included $2.4 million from duplicative online banking conversion costs and $1.1 million from the FDIC special assessment.


NET INTEREST INCOME (FTE) AND NET INTEREST MARGIN (FTE) (NON-GAAP)
(Dollars in Thousands, Except Per Share Amounts)
	Three Months Ended
	March 31,			March 31,
	2025			2024
Net Interest Income (GAAP)	$	130,270		$	127,063
FTE Adjustment	6,127			5,795
Net Interest Income (FTE) (non-GAAP)	136,397			132,858

Average Earning Assets (GAAP)	$	16,960,475		$	17,123,851
Net Interest Margin (GAAP)	3.07		%	2.97		%
Net Interest Margin (FTE) (non-GAAP)	3.22		%	3.10		%

PART I: FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS (NON-GAAP)
(Dollars in thousands, except per share amounts)

	March 31, 2025			December 31, 2024
Total Stockholders' Equity (GAAP)	$	2,332,214		$	2,304,983
Less: Preferred stock (GAAP)	(25,125)			(25,125)
Less: Intangible assets (GAAP)	(730,304)			(731,830)
Tangible common equity (non-GAAP)	$	1,576,785		$	1,548,028
Total assets (GAAP)	$	18,439,787		$	18,311,969
Less: Intangible assets (GAAP)	(730,304)			(731,830)
Tangible assets (non-GAAP)	$	17,709,483		$	17,580,139
Stockholders' Equity to Assets (GAAP)	12.65		%	12.59		%
Tangible common equity to tangible assets (non-GAAP)	8.90		%	8.81		%

Tangible common equity (non-GAAP)	$	1,576,785		$	1,548,028
Plus: Tax benefit of intangibles (non-GAAP)	3,939			4,263
Tangible common equity, net of tax (non-GAAP)	$	1,580,724		$	1,552,291
Common Stock outstanding	57,810			57,975
Book value per common share (GAAP)	$	39.91		$	39.33
Tangible book value per common share (non-GAAP)	$	27.34		$	26.78


TANGIBLE NET INCOME PER COMMON SHARE, RETURN ON TANGIBLE ASSETS AND RETURN ON TANGIBLE EQUITY (NON-GAAP)
(Dollars in thousands, except per share amounts)

	Three Months Ended March 31,
	2025			2024
Average goodwill (GAAP)	$	712,002		$	712,002
Average other intangibles (GAAP)	19,003			26,017
Average deferred tax on other intangibles (GAAP)	(4,088)			(5,587)
Intangible adjustment (non-GAAP)	$	726,917		$	732,432
Average stockholders' equity (GAAP)	$	2,340,874		$	2,242,139
Average preferred stock (GAAP)	(25,125)			(25,125)

Intangible adjustment (non-GAAP)	(726,917)			(732,432)
Average tangible capital (non-GAAP)	$	1,588,832		$	1,484,582
Average assets (GAAP)	$	18,341,738		$	18,430,521
Intangible adjustment (non-GAAP)	(726,917)			(732,432)
Average tangible assets (non-GAAP)	$	17,614,821		$	17,698,089
Net income available to common stockholders (GAAP)	$	54,870		$	47,472
Other intangible amortization, net of tax (GAAP)	1,206			1,546
Preferred stock dividend	469			469
Tangible net income available to common stockholders (non-GAAP)	$	56,545		$	49,487
Per Share Data:
Diluted net income per common share (GAAP)	$	0.94		$	0.80
Diluted tangible net income per common share (non-GAAP)	$	0.96		$	0.83
Ratios:
Return on average capital (GAAP)	9.38		%	8.47		%
Return on average tangible capital (non-GAAP)	14.12		%	13.21		%
Return on average assets (GAAP)	1.21		%	1.04		%
Return on average tangible assets (non-GAAP)	1.28		%	1.12		%

Return on average tangible capital is tangible net income available to common stockholders (annualized) expressed as a percentage of average tangible capital. Return on average tangible assets is tangible net income available to common stockholders (annualized) expressed as a percentage of average tangible assets.

NET INTEREST INCOME

Net interest income is the most significant component of our earnings, comprising 81.3 percent of revenues for the three months ended March 31, 2025. Net interest income and margin are influenced by many factors, primarily the volume and mix of earning assets, funding sources, and interest rate fluctuations. Other factors include the level of accretion income on purchased loans, prepayment risk on loan and investment-related assets, and the composition and maturity of earning assets and interest-bearing liabilities. Loans typically generate more interest income than investment securities with similar maturities. Funding from customer deposits generally costs less than wholesale funding sources. Factors such as general economic activity, Federal Reserve Board monetary policy, and price volatility of competing alternative investments, can also exert significant influence on our ability to optimize the mix of assets and funding and the net interest income and margin.

Net interest income is the excess of interest received from earning assets over interest paid on interest-bearing liabilities. For analytical purposes, net interest income is also presented on an FTE basis in the table that follows to reflect what our tax-exempt assets would need to yield in order to achieve the same after-tax yield as a taxable asset. The federal statutory rate of 21 percent was used for 2025 and 2024. The

PART I: FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FTE analysis portrays the income tax benefits associated with tax-exempt assets and helps to facilitate a comparison between taxable and tax-exempt assets. Management believes that it is a standard practice in the banking industry to present net interest margin and net interest income on a fully taxable equivalent basis. Therefore, management believes these measures provide useful information for both management and investors by allowing them to make peer comparisons. For reconciliations of GAAP net interest margin to the corresponding non-GAAP measures provided below, refer to the "NON-GAAP FINANCIAL MEASURES" section of this Management's Discussion and Analysis of Financial Condition and Results of Operations.

Net interest margin, on an FTE basis, increased 12 basis points to 3.22 percent for the three months ended March 31, 2025 compared to 3.10 percent for the same period in 2024.

Average Balance Sheet

Average earning assets for the three months ended March 31, 2025 decreased $163.4 million compared to the same period in 2024. The decrease for the three months ended March 31, 2025 was driven by a decrease in the average investment securities portfolio and interest-bearing deposits of $348.2 million and $281.7 million, respectively, as the Corporation repositioned the securities portfolio in the second half of 2024 by selling $268.5 million of lower-yielding securities. Offsetting these decreases was an increase in average loan balances of $464.3 million, primarily in the commercial and tax-exempt portfolios.

Total average deposits for the three months ended March 31, 2025 decreased $461.9 million, when compared to the same period in 2024. The decline was primarily due to $267.4 million of deposits sold in the Illinois branch sale that closed in the fourth quarter of 2024. Average interest-bearing deposits for the three months ended March 31, 2025 decreased $245.3 million compared to the same period in 2024, with the largest decreases in certificates and other time deposits and savings deposits, partially offset by an increase in money market deposits and interest-bearing demand deposits. Average noninterest-bearing deposits declined $216.5 million in the three months ended March 31, 2025 when compared to the same period in 2024. This decrease reflects clients continuing to move funds from noninterest-bearing accounts into interest-bearing deposit products.

Average borrowings increased $251.1 million for the three months ended March 31, 2025, compared to the same period in 2024. Average FHLB advances and federal funds purchased increased $243.8 million and $62.8 million, respectively, during the three months ended March 31, 2025 when compared to the same period in 2024 as the Corporation utilized funding sources to fund loan growth and supplement deposits. These increases were partially offset by a $13.4 million decrease in average securities sold under repurchase agreements for the same period. Additionally, average subordinated debt decreased $41.9 million for the three months ended March 31, 2025 when compared to the same period in 2024, due to the Corporation's redemption of $65.0 million of subordinated debt in the first and second quarters of 2024 and $30.0 million in the first quarter of 2025.

Interest Income/Expense and Average Yields

In the first quarter of 2025, FTE asset yields decreased 26 basis points compared to the same period in 2024 and was primarily due to the Federal Open Market Committee ("FOMC") decreasing interest rates a total of 100 basis points in the second half of 2024. This resulted in a decrease in interest income, on an FTE basis, of $13.1 million during the three months ended March 31, 2025 compared to the same period in 2024. The Corporation's loan portfolio is 68.3 percent variable and repricing occurred when the FOMC decreased interest rates. As a result, yields on new and renewed loans were 6.96 percent for the three months ended March 31, 2025 compared to 8.15 percent for the same period in 2024. The Corporation also recognized fair value accretion income on purchased loans, which is included in interest income, of $1.1 million, which accounted for 3 basis points of net interest margin in the three months ended March 31, 2025. Comparatively, the Corporation recognized $1.4 million of accretion income for the three months ended March 31, 2024, or 3 basis points of net interest margin.

Interest expense on deposits decreased $17.7 million for the three months ended March 31, 2025, or 52 basis points, when compared to the same period in 2024. The total cost of interest-bearing liabilities was 2.74 percent for the three months ended March 31, 2025 compared to 3.23 percent during the same period in 2024. The total cost of interest-bearing liabilities decreased 49 basis points, which mitigated the 26 basis point decrease in asset yields and resulted in a 23 basis point increase in FTE net interest spread when compared to the same period in 2024. The decrease in interest expense was primarily due to a decrease in the cost of all deposit products and borrowings as the average balance of total interest-bearing liabilities was comparable to the prior year period.

PART I: FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following tables present the Corporation’s average balance sheet, interest income/interest expense, and the average rate as a percent of average earning assets/liabilities for the three months ended March 31, 2025 and 2024.


	Three Months Ended
	March 31, 2025						March 31, 2024
	Average Balance		Interest Income / Expense		Average Rate		Average Balance		Interest Income / Expense		Average Rate
Assets:

Interest-bearing deposits	$	294,016	$	2,372	3.23	%	$	575,699	$	6,493	4.51	%
Federal Home Loan Bank stock	43,980		997		9.07		41,764		835		8.00
Investment Securities: (1)
Taxable	1,634,452		8,372		2.05		1,783,057		8,748		1.96
Tax-Exempt (2)	2,046,674		15,844		3.10		2,246,265		17,229		3.07
Total Investment Securities	3,681,126		24,216		2.63		4,029,322		25,977		2.58
Loans held for sale	20,965		319		6.09		21,782		328		6.02
Loans: (3)
Commercial	8,770,282		147,772		6.74		8,598,110		159,209		7.41
Real estate mortgage	2,191,384		24,446		4.46		2,130,947		22,357		4.20
HELOC and installment	828,874		15,191		7.33		821,815		16,129		7.85
Tax-Exempt (2)	1,129,848		13,332		4.72		904,412		10,367		4.59
Total Loans	12,941,353		201,060		6.21		12,477,066		208,390		6.68
Total Earning Assets	16,960,475		228,645		5.39	%	17,123,851		241,695		5.65	%
Total Non-Earning Assets	1,381,263						1,306,670
Total Assets	$	18,341,738					$	18,430,521
Liabilities:
Interest-Bearing Deposits:
Interest-bearing deposits	$	5,522,434	$	34,606	2.51	%	$	5,419,821	$	39,491	2.91	%
Money market deposits	3,437,998		25,952		3.02		3,045,478		27,383		3.60
Savings deposits	1,299,405		2,445		0.75		1,559,877		3,801		0.97
Certificates and other time deposits	1,947,854		17,544		3.60		2,427,859		27,610		4.55
Total Interest-Bearing Deposits	12,207,691		80,547		2.64		12,453,035		98,285		3.16
Borrowings	1,262,926		11,701		3.71		1,011,812		10,552		4.17
Total Interest-Bearing Liabilities	13,470,617		92,248		2.74		13,464,847		108,837		3.23
Noninterest-bearing deposits	2,211,647						2,428,170
Other liabilities	318,600						295,365
Total Liabilities	16,000,864						16,188,382
Stockholders' Equity	2,340,874						2,242,139
Total Liabilities and Stockholders' Equity	$	18,341,738	92,248				$	18,430,521	108,837
Net Interest Income (FTE)			$	136,397					$	132,858
Net Interest Spread (FTE) (4)					2.65	%					2.42	%

Net Interest Margin (FTE):
Interest Income (FTE) / Average Earning Assets					5.39	%					5.65	%
Interest Expense / Average Earning Assets					2.17	%					2.55	%
Net Interest Margin (FTE) (5)					3.22	%					3.10	%

(1) Average balance of securities is computed based on the average of the historical amortized cost balances without the effects of the fair value adjustments. Annualized amounts are computed utilizing a 30/360 day basis.
(2) Tax-exempt securities and loans are presented on a fully taxable equivalent basis, using a marginal tax rate of 21 percent for 2025 and 2024. These totals eq ual $6,127 and $5,795 for the three months ended March 31, 2025 and 2024, respectively.
(3) Nonaccruing loans have been included in the average balances.
(4) Net Interest Spread (FTE) is interest income expressed as a percentage of average earning assets minus interest expense expressed as a percentage of average interest-bearing liabilities.
(5) Net Interest Margin (FTE) is interest income expressed as a percentage of average earning assets minus interest expense expressed as a percentage of average earning assets.

PART I: FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

NONINTEREST INCOME

Noninterest income totaled $30.0 million for the three months ended March 31, 2025, a $3.4 million, or 12.8 percent, increase compared to the three months ended March 31, 2024. The increase was primarily driven by a $1.8 million increase in net gains and fees on sales of loans and a $0.6 million increase in earnings on cash surrender value of life insurance.

NONINTEREST EXPENSE

Noninterest expense totaled $92.9 million for the three months ended March 31, 2025, a $4.0 million, or 4.2 percent, decrease from the first quarter of 2024. There was a $3.3 million decrease in salaries and employee benefits expenses related to lower headcount driven by the voluntary early retirement program and the Illinois branch sale that both occurred in 2024. Additionally, there was a $1.0 million decrease in outside data processing fees due to digital platform conversion costs in the first quarter of 2024.

INCOME TAXES

Income tax expense for the three months ended March 31, 2025 was $7.9 million on pre-tax net income of $63.2 million. For the same period in 2024, income tax expense was $6.8 million on pre-tax income of $54.8 million. The effective income tax rates for the first quarter of 2025 and 2024 were 12.5 percent.

The effective income tax rate for the three months ended March 31, 2025 when compared to the same period in 2024 experienced a favorable rate impact due to increased tax credits offset by tax-exempt interest income being a smaller portion of pre-tax income in 2025.

The detailed reconciliation of federal statutory to actual tax expense is shown in NOTE 11. INCOME TAX of the Notes to Consolidated Condensed Financial Statements of this Quarterly Report on Form 10-Q.

CAPITAL

Preferred Stock

As part of the Level One acquisition, the Corporation issued 10,000 shares of newly created 7.5 percent non-cumulative perpetual preferred stock, with a liquidation preference of $2,500 per share, in exchange for the outstanding Level One Series B preferred stock, and as part of that exchange, each outstanding Level One depository share representing a 1/100th interest in a share of the Level One preferred stock was converted into a depository share of the Corporation representing a 1/100th interest in a share of its newly issued preferred stock. The Corporation had $25 million of outstanding preferred stock at March 31, 2025 and December 31, 2024. During the three months ended March 31, 2025 and 2024, the Corporation declared and paid dividends of $46.88 per share (equivalent to $0.4688 per depository share) equal to $0.5 million. The Series A preferred stock qualifies as tier 1 capital for purposes of the regulatory capital calculations.

Stock Repurchase Program

On January 27, 2021, the Board of Directors of the Corporation approved a stock repurchase program of up to 3,333,000 shares of the Corporation's outstanding common stock; provided, however, that the total aggregate investment in shares repurchased under the program may not exceed $100,000,000. On a share basis, the amount of common stock subject to the repurchase program represented approximately 6 percent of the Corporation's outstanding shares at the time the program became effective. The Corporation repurchased 0.9 million shares of its common stock pursuant to the repurchase program during the three months ended March 31, 2024. As of March 31, 2024 the Corporation had approximately 1.8 million shares at an aggregate value of $44.6 million available to repurchase under the program. The stock repurchase program approved in 2021 was discontinued as of March 18, 2025.

On March 18, 2025, the Board of Directors of the Corporation approved a stock repurchase program of up to 2,927,000 shares of the Corporation's outstanding common stock; provided, however, that the total aggregate investment in shares repurchased under the program may not exceed $100,000,000. On a share basis, the amount of common stock subject to the repurchase program represented approximately 5 percent of the Corporation's outstanding shares at the time the program became effective. The Corporation repurchased 0.2 million shares of its common stock pursuant to the repurchase program during the three months ended March 31, 2025. As of March 31, 2025, the Corporation had approximately 2.7 million shares at an aggregate value of $90.0 million available to repurchase under the program approved in 2025.

In August 2022, the Inflation Reduction Act of 2022 (the "IRA") was enacted. Among other things, the IRA imposes a new 1 percent excise tax on the fair market value of stock repurchased after December 31, 2022 by publicly traded U.S. corporations (like the Corporation). With certain exceptions, the value of stock repurchased is determined net of stock issued in the year, including shares issued pursuant to compensatory arrangements. During the three months ended March 31, 2025 and 2024, the Corporation recorded excise tax of $0.1 million and $0.3 million, respectively, related to its share repurchases during the period, which is reflected in the Statement of Stockholders' Equity as a component of additional paid-in capital.

Regulatory Capital

Capital adequacy is an important indicator of financial stability and performance. The Corporation and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies and are assigned to a capital category. The assigned capital category is largely determined by four ratios that are calculated according to the regulations: total risk-based capital, tier 1 risk-based capital, common equity tier 1 ("CET1"), and tier 1 leverage ratios. The ratios are intended to measure capital relative to assets and credit risk associated with those assets and off-balance sheet exposures of the entity. The capital category assigned to an entity can also be affected by qualitative judgments made by regulatory agencies about the risk inherent in the entity's activities that are not part of the calculated ratios.

PART I: FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

There are five capital categories defined in the regulations, ranging from well capitalized to critically undercapitalized. Classification of a bank in any of the undercapitalized categories can result in actions by regulators that could have a material effect on a bank's operations. Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of total risk-based capital, tier 1 capital, and common equity tier 1 capital, in each case, to risk-weighted assets, and of tier 1 capital to average assets, or leverage ratio, all of which are calculated as defined in the regulations. Banks with lower capital levels are deemed to be undercapitalized, significantly undercapitalized or critically undercapitalized, depending on their actual levels. The appropriate federal regulatory agency may also downgrade a bank to the next lower capital category upon a determination that the bank is in an unsafe or unsound practice. Banks are required to monitor closely their capital levels and to notify their appropriate regulatory agency of any basis for a change in capital category.

Basel III requires the Corporation and the Bank to maintain the minimum capital and leverage ratios as defined in the regulation and as illustrated in the table below, which capital to risk-weighted asset ratios include a 2.5 percent capital conservation buffer. Under Basel III, in order to avoid limitations on capital distributions, including dividends, the Corporation must hold a 2.5 percent capital conservation buffer above the adequately capitalized CET1 to risk-weighted assets ratio (which buffer is reflected in the required ratios below). Under Basel III, the Corporation and Bank elected to opt-out of including accumulated other comprehensive income in regulatory capital. As of March 31, 2025, the Bank met all capital adequacy requirements to be considered well capitalized under the fully phased-in Basel III capital rules. There is no threshold for well capitalized status for bank holding companies.

As part of a March 27, 2020 joint statement of federal banking regulators, an interim final rule that allowed banking organizations to mitigate the effects of the CECL accounting standard on their regulatory capital was announced. Banking organizations could elect to mitigate the estimated cumulative regulatory capital effects of CECL for up to two years. This two-year delay was to be in addition to the three-year transition period that federal banking regulators had already made available. While the Consolidated Appropriations Act of 2021 provided for a further extension of the mandatory adoption of CECL until January 1, 2022, the federal banking regulators elected to not provide a similar extension to the two year mitigation period applicable to regulatory capital effects. Instead, the federal banking regulators require that, in order to utilize the additional two-year delay, banking organizations must have adopted the CECL standard no later than December 31, 2020, as required by the Coronavirus Aid, Relief and Economic Security Act, or CARES Act. As a result, because implementation of the CECL standard was delayed by the Corporation until January 1, 2021, it began phasing in the cumulative effect of the adoption on its regulatory capital, at a rate of 25 percent per year, over a three-year transition period that began on January 1, 2021. Under that phase-in schedule, the cumulative effect of the adoption was fully reflected in regulatory capital on January 1, 2024.

The Corporation's and Bank's actual and required capital ratios as of March 31, 2025 and December 31, 2024 were as follows:


					Prompt Corrective Action Thresholds
	Actual				Basel III Minimum Capital Required				Well Capitalized
March 31, 2025	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total risk-based capital to risk-weighted assets
First Merchants Corporation	$	2,037,746	13.22	%	$	1,617,920	10.50	%	N/A		N/A
First Merchants Bank	1,989,507		12.90		1,619,102		10.50		$	1,542,002	10.00	%
Tier 1 capital to risk-weighted assets
First Merchants Corporation	$	1,797,552	11.67	%	$	1,309,745	8.50	%	N/A		N/A
First Merchants Bank	1,796,554		11.65		1,310,702		8.50		$	1,233,602	8.00	%
CET1 capital to risk-weighted assets
First Merchants Corporation	$	1,772,552	11.50	%	$	1,078,613	7.00	%	N/A		N/A
First Merchants Bank	1,796,554		11.65		1,079,401		7.00		$	1,002,301	6.50	%
Tier 1 capital to average assets
First Merchants Corporation	$	1,797,552	10.20	%	$	704,676	4.00	%	N/A		N/A
First Merchants Bank	1,796,554		10.10		711,219		4.00		$	889,023	5.00	%


					Prompt Corrective Action Thresholds
	Actual				Basel III Minimum Capital Required				Well Capitalized
December 31, 2024	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total risk-based capital to risk-weighted assets
First Merchants Corporation	$	2,030,362	13.31	%	$	1,601,175	10.50	%	N/A		N/A
First Merchants Bank	1,967,738		12.89		1,602,417		10.50		$	1,526,112	10.00	%
Tier 1 capital to risk-weighted assets
First Merchants Corporation	$	1,767,468	11.59	%	$	1,296,189	8.50	%	N/A		N/A
First Merchants Bank	1,776,738		11.64		1,297,195		8.50		$	1,220,889	8.00	%
Common equity tier 1 capital to risk-weighted assets
First Merchants Corporation	$	1,742,468	11.43	%	$	1,067,450	7.00	%	N/A		N/A
First Merchants Bank	1,776,738		11.64		1,068,278		7.00		$	991,973	6.50	%
Tier 1 capital to average assets
First Merchants Corporation	$	1,767,468	9.96	%	$	710,089	4.00	%	N/A		N/A
First Merchants Bank	1,776,738		9.92		716,172		4.00		$	895,215	5.00	%

On November 1, 2013, the Corporation completed the private issuance and sale to four institutional investors of an aggregate of $70.0 million of debt comprised of (a) 5.00 percent Fixed-to-Floating Rate Senior Notes due 2028 in the aggregate principal amount of $5 million and (b) 6.75 percent Fixed-to-Floating Rate Subordinated Notes due October 30, 2028 in the aggregate principal amount of $65.0 million. The Corporation exercised its right to redeem $65 million of the subordinated debt on the scheduled interest payment date during the first half of 2024.

PART I: FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

On April 1, 2022, the Corporation assumed $30.0 million of subordinated notes in conjunction with its acquisition of Level One. On February 14, 2025, the Corporation, through its trustee, distributed notice of redemption of all $30.0 million in principal amount of its 4.75% Fixed-to-Floating Subordinated Notes due December 18, 2029. The Corporation exercised its right to redeem $30 million of the subordinated debt on the scheduled interest payment date of March 18, 2025.

Management believes the disclosed capital ratios are meaningful measurements for evaluating the safety and soundness of the Corporation. Traditionally, the banking regulators have assessed bank and bank holding company capital adequacy based on both the amount and the composition of capital, the calculation of which is prescribed in federal banking regulations. The Federal Reserve focuses its assessment of capital adequacy on a component of tier 1 capital known as CET1. Because the Federal Reserve has long indicated that voting common stockholders equity (essentially tier 1 risk-based capital less preferred stock and non-controlling interest in subsidiaries) generally should be the dominant element in tier 1 risk-based capital, this focus on CET1 is consistent with existing capital adequacy categories. Tier I regulatory capital consists primarily of total common stockholders’ equity and subordinated debentures issued to business trusts categorized as qualifying borrowings, less non-qualifying intangible assets and unrealized net securities gains or losses.

A reconciliation of regulatory measures are detailed in the following table as of the dates indicated.


	March 31, 2025						December 31, 2024
(Dollars in thousands)	First Merchants Corporation			First Merchants Bank			First Merchants Corporation			First Merchants Bank
Total Risk-Based Capital
Total Stockholders' Equity (GAAP)	$	2,332,214		$	2,332,623		$	2,304,983		$	2,315,701
Adjust for Accumulated Other Comprehensive Loss (1)	190,311			188,434			188,685			186,808
Less: Preferred Stock	(25,125)			(125)			(25,125)			(125)
Add: Qualifying Capital Securities	25,000			—			25,000			—

Less: Disallowed Goodwill and Intangible Assets	(724,275)			(723,827)			(725,504)			(725,056)


Less: Disallowed Deferred Tax Assets	(573)			(551)			(571)			(590)
Total Tier 1 Capital (Regulatory)	1,797,552			1,796,554			1,767,468			1,776,738
Qualifying Subordinated Debentures	47,380			—			72,040			—
Allowance for Credit Losses Includible in Tier 2 Capital	192,814			192,953			190,854			191,000
Total Risk-Based Capital (Regulatory)	$	2,037,746		$	1,989,507		$	2,030,362		$	1,967,738

Net Risk-Weighted Assets (Regulatory)	$	15,408,760		$	15,420,021		$	15,249,287		$	15,261,118
Average Assets (Regulatory)	$	17,616,890		$	17,780,468		$	17,752,227		$	17,904,307

Total Risk-Based Capital Ratio (Regulatory)	13.22		%	12.90		%	13.31		%	12.89		%
Tier 1 Capital to Risk-Weighted Assets	11.67		%	11.65		%	11.59		%	11.64		%
Tier 1 Capital to Average Assets	10.20		%	10.10		%	9.96		%	9.92		%

CET1 Capital Ratio
Total Tier 1 Capital (Regulatory)	$	1,797,552		$	1,796,554		$	1,767,468		$	1,776,738
Less: Qualified Capital Securities	(25,000)			—			(25,000)			—


CET1 Capital (Regulatory)	$	1,772,552		$	1,796,554		$	1,742,468		$	1,776,738

Net Risk-Weighted Assets (Regulatory)	$	15,408,760		$	15,420,021		$	15,249,287		$	15,261,118
CET1 Capital Ratio (Regulatory)	11.50		%	11.65		%	11.43		%	11.64		%

(1) Includes net unrealized gains or losses on available for sale securities and amounts resulting from the application of the applicable accounting guidance for defined benefit and other postretirement plans.

In management's view, certain non-GAAP financial measures, when taken together with the corresponding GAAP financial measures and ratios, provide meaningful supplemental information regarding our performance. We believe investors benefit from referring to these non-GAAP financial measures and ratios in assessing our operating results, related trends and when forecasting future periods. However, these non-GAAP financial measures should be considered in addition to, and not a substitute for or preferable to, financial measures and ratios presented in accordance with GAAP.

The Corporation's tangible common equity measures are capital adequacy metrics that are meaningful to the Corporation, as well as analysts and investors, in assessing the Corporation's use of equity and in facilitating period-to-period and company-to-company comparisons. Tangible common equity to tangible assets ratio was 8.90 percent at March 31, 2025, and 8.81 percent at December 31, 2024.

Non-GAAP financial measures such as tangible common equity to tangible assets, tangible earnings per share, return on average tangible assets and return on average tangible equity are important measures of the strength of the Corporation's capital and ability to generate earnings on tangible common equity invested by our shareholders. These non-GAAP measures provide useful supplemental information and may assist investors in analyzing the Corporation’s financial position without regard to the effects of intangible assets and preferred stock, but retain the effect of accumulated other comprehensive losses in shareholder's equity. Disclosure of these measures also allows analysts and banking regulators to assess our capital adequacy on these same bases.

The tables within the “NON-GAAP FINANCIAL MEASURES” section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations reconcile traditional GAAP measures to these non-GAAP financial measures at March 31, 2025 and December 31, 2024.

PART I: FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

LOAN QUALITY AND PROVISION FOR CREDIT LOSSES ON 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 Maturities

The following tables present the maturity distribution of our loan portfolio, excluding loans held for sale, by collateral classification at March 31, 2025 according to contractual maturities of (1) one year or less, (2) after one year but within five years and (3) after five years. The tables also present the portion of loans by loan classification that have fixed interest rates or variable interest rates that fluctuate over the life of the loans in accordance with changes in an interest rate index.


	March 31, 2025
(Dollars in Thousands)	Maturing Within 1 Year		Maturing 1-5 Years		Maturing Over 5 Years		Total
Commercial and industrial loans	$	762,002	$	3,127,162	$	417,433	$	4,306,597
Agricultural land, production and other loans to farmers	73,515		37,352		132,997		243,864
Real estate loans:
Construction	379,061		284,590		129,524		793,175
Commercial real estate, non-owner occupied	373,711		1,160,255		643,903		2,177,869
Commercial real estate, owner occupied	189,540		574,603		450,596		1,214,739
Residential	27,455		157,833		2,204,564		2,389,852
Home Equity	27,740		21,100		601,659		650,499
Individuals' loans for household and other personal expenditures	21,835		85,301		33,818		140,954
Public finance and other commercial loans	38,603		103,343		945,410		1,087,356
Total	$	1,893,462	$	5,551,539	$	5,559,904	$	13,004,905


	March 31, 2025
(Dollars in Thousands)	Maturing Within 1 Year		Maturing 1-5 Years		Maturing Over 5 Years		Total
Commercial and industrial loans	$	37,661	$	463,084	$	150,376	$	651,121
Agricultural land, production and other loans to farmers	1,419		27,642		7,064		36,125
Real estate loans:
Construction	5,105		9,339		116,008		130,452
Commercial real estate, non-owner occupied	120,011		398,816		109,675		628,502
Commercial real estate, owner occupied	128,117		301,270		95,972		525,359
Residential	17,141		109,315		879,479		1,005,935
Home Equity	11,509		7,846		10,416		29,771
Individuals' loans for household and other personal expenditures	1,893		64,303		17,372		83,568
Public finance and other commercial loans	8,423		73,723		918,864		1,001,010
Total loans with fixed interest rates	$	331,279	$	1,455,338	$	2,305,226	$	4,091,843


	March 31, 2025
(Dollars in Thousands)	Maturing Within 1 Year		Maturing 1-5 Years		Maturing Over 5 Years		Total
Commercial and industrial loans	$	724,341	$	2,664,078	$	267,057	$	3,655,476
Agricultural land, production and other loans to farmers	72,096		9,710		125,933		207,739
Real estate loans:
Construction	373,956		275,251		13,516		662,723
Commercial real estate, non-owner occupied	253,700		761,439		534,228		1,549,367
Commercial real estate, owner occupied	61,423		273,333		354,624		689,380
Residential	10,314		48,518		1,325,085		1,383,917
Home Equity	16,231		13,254		591,243		620,728
Individuals' loans for household and other personal expenditures	19,942		20,998		16,446		57,386
Public finance and other commercial loans	30,180		29,620		26,546		86,346
Total loans with variable interest rates	$	1,562,183	$	4,096,201	$	3,254,678	$	8,913,062

PART I: FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 March 31, 2025, non-accrual loans totaled $81.9 million, an increase of $8.1 million from December 31, 2024, primarily due to increases of $6.8 million and $1.9 million in non-accrual balances in commercial real estate, owner occupied and residential, respectively. The increase was offset by a decline in non-accrual balances within the commercial and industrial loan portfolio of $2.0 million.

At March 31, 2025, loans 90-days or more delinquent and still accruing totaled $4.3 million, a decrease of $1.6 million from December 31, 2024.

The Corporation's nonperforming assets plus accruing loans 90-days or more delinquent loans are presented in the table below.


(Dollars in Thousands)	March 31, 2025		December 31, 2024
Nonperforming Assets:
Non-accrual loans	$	81,922	$	73,773
OREO and Repossessions	4,966		4,948
Nonperforming assets (NPA)	86,888		78,721
Loans 90-days or more delinquent and still accruing	4,280		5,902
NPAs and loans 90-days or more delinquent	$	91,168	$	84,623

The composition of nonperforming assets plus accruing loans 90-days or more delinquent is reflected in the following table by loan class.


(Dollars in Thousands)	March 31, 2025		December 31, 2024
Nonperforming assets and loans 90-days or more delinquent:
Commercial and industrial loans	$	10,041	$	10,100
Agricultural land, production and other loans to farmers	70		75
Real estate loans:
Construction	24,520		28,312
Commercial real estate, non-owner occupied	18,123		16,838
Commercial real estate, owner occupied	9,391		2,440
Residential	23,785		21,927
Home equity	5,238		4,924
Individuals' loans for household and other personal expenditures	—		7

Nonperforming assets and loans 90-days or more delinquent:	$	91,168	$	84,623

In April 2025, the Corporation received $22.0 million in principal payments related to a multi-family construction relationship that was in

nonaccrual status as of March 31, 2025. The payments represented full collection of principal.

Provision and Allowance for Credit Losses on Loans

The CECL model requires the measurement of all expected credit losses for financial assets measured at amortized cost based on historical experiences, current conditions and reasonable and supportable forecasts. CECL also requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses, as well as credit quality and underwriting standards of an organization's portfolio. Additional details of the Corporation's CECL methodology and allowance calculation are discussed within NOTE 4. LOANS AND ALLOWANCE FOR CREDIT LOSSES of the Notes to Consolidated Condensed Financial Statements of this Quarterly Report on Form 10-Q.

The CECL allowance is maintained through the provision for credit losses, which is a charge against earnings. Based on management’s judgment as to the appropriate level of the allowance for credit losses, the amount provided in any period may be greater or less than net loan losses for the same period. The determination of the provision amount and the adequacy of the allowance in any period is based on management’s continuing review and evaluation of the loan portfolio.

PART I: FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Corporation’s loan balances, excluding loans held for sale, increased $150.5 million from December 31, 2024 to $13.0 billion at March 31, 2025. At March 31, 2025, the ACL -loans totaled $192.0 million, which represents a decrease of $0.7 million from December 31, 2024. As a percentage of loans, the ACL - loans was 1.47 percent and 1.50 percent at March 31, 2025 and December 31, 2024, respectively.

Net charge-offs totaling $4.9 million were recognized for the three months ended March 31, 2025, and provision for credit losses of $4.2 million was recorded for the same period in 2025. Net charge-offs totaling $2.3 million were recognized for the three months ended March 31, 2024, with $2.0 million in provision for credit losses recorded in the same period in 2024.

The distribution of the net charge-offs (recoveries) for the three months ended March 31, 2025 and 2024 is reflected in the following table.


	Three Months Ended March 31,
(Dollars in Thousands)	2025		2024
Net charge-offs (recoveries):
Commercial and industrial loans	$	3,929	$	1,280

Real estate loans:

Commercial real estate, non-owner occupied	192		342
Commercial real estate, owner occupied	204		(44)
Residential	370		366
Home equity	(65)		50
Individuals' loans for household and other personal expenditures	296		259

Total net charge-offs (recoveries)	$	4,926	$	2,253

Management continually evaluates the commercial loan portfolio by including consideration of specific borrower cash flow analysis and estimated collateral values, types and amounts on nonperforming loans, past and anticipated credit loss experience, changes in the composition of the loan portfolio, and the current condition and amount of loans outstanding. The determination of the provision for credit losses in any period is based on management’s continuing review and evaluation of the loan portfolio, and its judgment as to the impact of current economic conditions on the portfolio. The Corporation continues to monitor economic forecast changes, loan growth and credit quality to determine provision needs in the future.

LIQUIDITY

Liquidity management is the process by which the Corporation ensures that adequate liquid funds are available for the holding company and its subsidiaries. These funds are necessary in order to meet financial commitments on a timely basis. These commitments include withdrawals by depositors, funding credit obligations to borrowers, paying dividends to stockholders, paying operating expenses, funding capital expenditures, and maintaining deposit reserve requirements. Liquidity is monitored and closely managed by the asset/liability committee.

The Corporation’s liquidity is dependent upon the receipt of dividends from the Bank, which is subject to certain regulatory limitations and access to other funding sources. Liquidity of the Bank is derived primarily from core deposit growth, principal payments received on loans, the sale and maturity of investment securities, net cash provided by operating activities, and access to other funding sources.

The principal source of asset-funded liquidity is investment securities classified as available for sale, the market values of which totaled $1.4 billion at March 31, 2025, a decrease of $8.0 million, or 0.6 percent, from December 31, 2024. Securities classified as held to maturity that are maturing within a short period of time can also be a source of liquidity. Securities classified as held to maturity and that are maturing in one year or less totaled $5.3 million at March 31, 2025. In addition, other types of assets such as cash and interest-bearing deposits with other banks, federal funds sold and loans maturing within one year are sources of liquidity.

The most stable source of liability-funded liquidity for both the long-term and short-term is deposit growth and retention in the core deposit base. Federal funds purchased and securities sold under agreements to repurchase are also considered a source of liquidity. In addition, FHLB advances and Federal Reserve Discount Window borrowings are utilized as a funding source. At March 31, 2025, total borrowings from the FHLB were $972.5 million and there were no outstanding borrowings from the Federal Reserve Discount Window. The Bank has pledged certain mortgage loans and investments to the FHLB and Federal Reserve. The total available remaining borrowing capacity from the FHLB and Federal Reserve at March 31, 2025 was $625.4 million and $2.4 billion, respectively.

The following table presents the Corporation's material cash requirements from known contractual and other obligations at March 31, 2025:


	Payments Due In
(Dollars in Thousands)	One Year or Less		Over One Year		Total
Deposits without stated maturity	$	12,578,428	$	—	$	12,578,428
Certificates and other time deposits	1,651,113		232,437		1,883,550
Securities sold under repurchase agreements	122,947		—		122,947
Federal Home Loan Bank advances	175,000		797,478		972,478
Federal Funds Purchased	185,000		—		185,000
Subordinated debentures and other borrowings	1,311		61,308		62,619
Total	$	14,713,799	$	1,091,223	$	15,805,022

PART I: FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Also, in the normal course of business, the Bank is a party to a number of other off-balance sheet activities that contain credit, market and operational risk that are not reflected in whole or in part in our consolidated financial statements. These activities primarily consist of traditional off-balance sheet credit-related financial instruments such as loan commitments and standby letters of credit.

Summarized credit-related financial instruments at March 31, 2025 are as follows:


(Dollars in Thousands)	March 31, 2025
Amounts of commitments:
Loan commitments to extend credit	$	5,321,554
Standby and commercial letters of credit	65,210
	$	5,386,764

Since many of the commitments are expected to expire unused or be only partially used, the total amount of unused commitments in the preceding table does not necessarily represent future cash requirements.

INTEREST SENSITIVITY AND DISCLOSURE ABOUT MARKET RISK

Asset/Liability management has been an important factor in the Corporation's ability to record consistent earnings growth through periods of interest rate volatility and product deregulation. Management and the Board of Directors monitor the Corporation's liquidity and interest sensitivity positions at regular meetings to review how changes in interest rates may affect earnings. Decisions regarding investment and the pricing of loan and deposit products are made after analysis of reports designed to measure liquidity, rate sensitivity, the Corporation’s exposure to changes in net interest income given various rate scenarios and the economic and competitive environments.

It is the objective of the Corporation to monitor and manage risk exposure to net interest income caused by changes in interest rates. It is the goal of the Corporation’s Asset/Liability management function to provide optimum and stable net interest income. To accomplish this, management uses two asset liability tools. GAP/Interest Rate Sensitivity Reports and Net Interest Income Simulation Modeling are constructed, presented and monitored quarterly. Management believes that the Corporation's liquidity and interest sensitivity position at March 31, 2025, remained adequate to meet the Corporation’s primary goal of achieving optimum interest margins while avoiding undue interest rate risk.

Net interest income simulation modeling, or earnings-at-risk, measures the sensitivity of net interest income to various interest rate movements. The Corporation's asset liability process monitors simulated net interest income under three separate interest rate scenarios; base, rising and falling. Estimated net interest income for each scenario is calculated over a twelve-month horizon. The immediate and parallel changes to the base case scenario used in the model are presented below. The interest rate scenarios are used for analytical purposes and do not necessarily represent management's view of future market movements. Rather, these are intended to provide a measure of the degree of volatility interest rate movements may introduce into the earnings of the Corporation.

The base scenario is highly dependent on numerous assumptions embedded in the model, including assumptions related to future interest rates. While the base sensitivity analysis incorporates management's best estimate of interest rate and balance sheet dynamics under various market rate movements, the actual behavior and resulting earnings impact will likely differ from those projected. For certain assets, the base simulation model captures the expected prepayment behavior under changing interest rate environments. Assumptions and methodologies regarding the interest rate or balance behavior of indeterminate maturity products, such as savings, money market, interest-bearing and demand deposits, reflect management's best estimate of expected future behavior. Historical retention rate assumptions are applied to non-maturity deposits for modeling purposes.

The comparative rising 200 and 100 basis points and falling 200 and 100 basis points scenarios below, as of March 31, 2025 and December 31, 2024, assume further interest rate changes in addition to the base simulation discussed above. These changes are immediate and parallel changes to the base case scenario.

Results for the rising 200 and 100 basis points and falling 200 and 100 basis points interest rate scenarios are listed below based upon the Corporation’s rate sensitive assets and liabilities at March 31, 2025 and December 31, 2024. The change from the base scenario represents cumulative net interest income over a twelve-month time horizon. Balance sheet assumptions used for the base scenario are the same for the rising and falling simulations.


	March 31, 2025		December 31, 2024
Rising 200 basis points from base case	2.8	%	4.1	%
Rising 100 basis points from base case	1.5	%	2.5	%
Falling 100 basis points from base case	(2.2)	%	(2.2)	%
Falling 200 basis points from base case	(4.8)	%	(4.5)	%

OTHER

The Securities and Exchange Commission maintains a web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission, including the Corporation, and that address is (http://www.sec.gov).

PART I: FINANCIAL INFORMATION

ITEM 3. QUANTITATIVE AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required under this item is included as part of Management’s Discussion and Analysis of Financial Condition and Results of Operations, under the headings “LIQUIDITY” and “INTEREST SENSITIVITY AND DISCLOSURE ABOUT MARKET RISK”.

ITEM 4. CONTROLS AND PROCEDURES

At the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective. Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 are recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

There have been no changes in the Corporation’s internal control over financial reporting identified in connection with the evaluation discussed above that occurred during the Corporation’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

PART II: OTHER INFORMATION

ITEM 1., ITEM 1A., ITEM 2., ITEM 3., ITEM 4. AND ITEM 5.

(table dollar amounts in thousands, except share data)

ITEM 1. LEGAL PROCEEDINGS

There are no pending legal proceedings, other than litigation incidental to the ordinary business of the Corporation or its subsidiaries, of a material nature to which the Corporation or its subsidiaries is a party or of which any of their properties is subject. Further, there are no material legal proceedings in which any director, officer, principal shareholder, or affiliate of the Corporation, or any associate of any such director, officer or principal shareholder, is a party, or has a material interest, adverse to the Corporation or any of its subsidiaries.

None of the routine legal proceedings, individually or in the aggregate, in which the Corporation or its affiliates are involved are expected to have a material adverse impact on the financial position or the results of operations of the Corporation.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors previously disclosed in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2024.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

a. None

b. None

c. Issuer Purchases of Equity Securities

The following table presents information relating to our purchases of equity securities during the three months ended March 31, 2025.


Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as part of Publicly announced Plans or Programs (2)	Maximum Number of Shares that may yet be Purchased Under the Plans or Programs (2)
January, 2025	—	$	—	—	—
February, 2025	—	$	—	—	—
March, 2025	194,493	$	40.68	194,311	2,732,689
Total	194,493			194,311

(1) During the three months ended March 31, 2025, there were 194,311 shares repurchased pursuant to the Corporation's share repurchase program described in note (2) below. The amount in March 2025 also includes 182 shares repurchased pursuant to net settlement by employees in satisfaction of income tax withholding obligations incurred through the vesting of the Corporation's restricted stock awards and are not a part of the Corporation's share repurchase program described in note (2) below.

(2) On March 18, 2025, the Board of Directors of the Corporation approved a stock repurchase program of up to 2,927,000 shares of the Corporation's outstanding common stock; provided, however, that the total aggregate investment in shares repurchased under the program may not exceed $100,000,000. The program does not have an expiration date. However, it may be discontinued by the Board at any time.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable

ITEM 5. OTHER INFORMATION

a. None

b. None

c. During the three months ended March 31, 2025, no director or officer of the Corporation adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.

PART II: OTHER INFORMATION

ITEM 6. EXHIBITS


Exhibit No:			Description of Exhibits:

3.1			First Merchants Corporation Articles of Incorporation, as amended (Incorporated by reference to Exhibit 3.1 of registrant’s Form 8-K filed on May 22, 2024) (SEC No. 000-17071)
3.2			Bylaws of First Merchants Corporation effective as of May 20, 2024 (Incorporated by reference to Exhibit 3.2 of registrant’s Form 8-K filed on May 22, 2024) (SEC No. 001-41342)
4.1			First Merchants Corporation Amended and Restated Declaration of Trust of First Merchants Capital Trust II dated as of July 2, 2007 (Incorporated by reference to Exhibit 4.1 of registrant's Form 8-K filed on July 3, 2007) (SEC No. 000-17071)
4.2			Indenture dated as of July 2, 2007 (Incorporated by reference to Exhibit 4.2 of registrant's Form 8-K filed on July 3, 2007) (SEC No. 000-17071)
4.3			Guarantee Agreement dated as of July 2, 2007 (Incorporated by reference to Exhibit 4.3 of registrant's Form 8-K filed on July 3, 2007) (SEC No. 000-17071)
4.4			Form of Capital Securities Certification of First Merchants Capital Trust II (Incorporated by reference to Exhibit 4.4 of registrant's Form 8-K filed on July 3, 2007) (SEC No. 000-17071)
4.5			First Merchants Corporation Dividend Reinvestment and Stock Purchase Plan (Incorporated by reference to registrant’s Prospectus filed pursuant to Rule 424(b)(3) on July 17, 2020) (SEC No. 333-229527)
4.6			Upon request, the registrant agrees to furnish supplementally to the Commission a copy of the instruments defining the rights of holders of its (a) 5.00% Fixed-to-Floating Rate Senior Notes due 2028 in the aggregate principal amount of $5 million and (b) 6.75% Fixed-to-Floating Rate Subordinated Notes due 2028 in aggregate principal amount of $65 million.
4.7			Deposit Agreement by and among First Merchants Corporation, Broadridge Corporate Issuer Solutions, Inc., as depositary, and holders from time to time of the depositary receipts described therein, as amended on March 30, 2022 (Incorporated by reference to Exhibit 4.1 of registrant’s Form 8-A filed on March 30, 2022) (SEC No. 001-41342)
4.8			Form of Depositary Receipt (Incorporated by reference to Exhibit 4.2 of registrant’s Form 8-A filed on March 30, 2022) (SEC No. 001-41342)
4.9			Indenture, dated as of December 18, 2019, between First Merchants Corporation (as successor to Level One Bancorp, Inc.) and Wilmington Trust, National Association, as trustee (Incorporated by reference to Exhibit 4.1 of Level One Bancorp, Inc.’s Form 8-K filed on December 19, 2019) (SEC No. 001-38458)
4.10			First Supplemental Indenture, dated as of March 31, 2022, among First Merchants Corporation, Level One Bancorp, Inc. and Wilmington Trust, National Association, as trustee (Incorporated by reference to Exhibit 4.11 of registrant’s Form 10-K filed on March 1, 2023) (SEC No. 001-41342)
4.11			Form of 4.75% Fixed-to-Floating Rate Subordinated Notes due 2029 (Incorporated by reference to Exhibit 4.2 of Level One Bancorp, Inc.’s Form 8-K filed on December 19, 2019) (SEC No. 001-38458)
31.1			Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes - Oxley Act of 2002 (1)
31.2			Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes - Oxley Act of 2002 (1)
32			Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes - Oxley Act of 2002 (2)
101.INS			Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document (1)
101.SCH			Inline XBRL Taxonomy Extension Schema Document (1)
101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document (1)
101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document (1)
101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document (1)
101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document (1)
104			Cover Page Interactive Data File (formatted as Inline XBRL and included in Exhibit 101)

(1)			Filed herewith.
(2)			Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


			First Merchants Corporation
			(Registrant)


May 1, 2025			by /s/ Mark K. Hardwick
			Mark K. Hardwick
			Chief Executive Officer
			(Principal Executive Officer)

May 1, 2025			by /s/ Michele M. Kawiecki
			Michele M. Kawiecki
			Executive Vice President, Chief Financial Officer
			(Principal Financial and Accounting Officer)

TABLE OF CONTENTS

Part I: Financial Information Item 3. Quantitative and Qualitative Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures Part Ii: Other Information Item 1. , Item 1A. , Item 2. , Item 3. , Item 4. and Item 5 Item 1. Legal Proceedings Item 1A. Risk Factors Item 2. Unregistered Sales Of Equity Securities and Use Of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Mine Safety Disclosures Item 5. Other Information Part Ii: Other Informationitem 6. Exhibits Item 6. Exhibits

Exhibits

FRME 10-Q Quarter ended March 31, 2025

Exhibits