# First Merchants Corp: Form 10-Q for the period ended Mar 31, 2024

- Company: [First Merchants Corp](/companies/frme.md) (CIK 712534)
- Form: 10-Q
- Filed: 2024-05-01
- Accepted by EDGAR: May 1, 2024, 14:57 ET
- Period: 2024-03-31
- Accession: 0000712534-24-000162
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/712534/000071253424000162/frme-20240331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/712534/000071253424000162/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Interest expense | 3 months, 2024-01-01 to 2024-03-31 | $108.8m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-01-01 to 2024-03-31 | $6.8m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | $47.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-01-01 to 2024-03-31 | $0.80 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | $0.80 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-01-01 to 2024-03-31 | 59,273,014 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-01-01 to 2024-03-31 | $58.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Dividends paid | 3 months, 2024-01-01 to 2024-03-31 | $20.2m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 3 months, 2024-01-01 to 2024-03-31 | $30.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Total assets | at 2024-03-31 | $18.32bn | us-gaap:Assets |
| Total liabilities | at 2024-03-31 | $16.09bn | us-gaap:Liabilities |
| Shareholders' equity | at 2024-03-31 | $2.22bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 52,349 characters.

*TANGIBLE EARNINGS PER SHARE, RETURN ON TANGIBLE ASSETS AND RETURN ON TANGIBLE EQUITY - non-GAAP*

*(Dollars in thousands, except per share amounts)*

|  | Three Months Ended March 31, 2024 | 2023 |
| --- | ---: | ---: |
| Average goodwill (GAAP) | $712,002 | $712,002 |
| Average other intangibles (GAAP) | 26,017 | 34,630 |
| Average deferred tax on other intangibles (GAAP) | (5,587) | (7,442) |
| Intangible adjustment (non-GAAP) | $732,432 | $739,190 |
| Average stockholders' equity (GAAP) | $2,242,139 | $2,083,125 |
| Average preferred stock (GAAP) | (25,125) | (25,125) |
| Intangible adjustment (non-GAAP) | (732,432) | (739,190) |
| Average tangible capital (non-GAAP) | $1,484,582 | $1,318,810 |
| Average assets (GAAP) | $18,430,521 | $18,022,195 |
| Intangible adjustment (non-GAAP) | (732,432) | (739,190) |
| Average tangible assets (non-GAAP) | $17,698,089 | $17,283,005 |
| Net income available to common stockholders (GAAP) | $47,472 | $63,610 |
| Other intangible amortization, net of tax (GAAP) | 1,546 | 1,734 |
| Preferred stock dividend | 469 | 469 |
| Tangible net income available to common stockholders (non-GAAP) | $49,487 | $65,813 |
| **Per Share Data:** |  |  |
| Diluted net income available to common stockholders (GAAP) | $0.80 | $1.07 |
| Diluted tangible net income available to common stockholders (non-GAAP) | $0.83 | $1.11 |
| **Ratios:** |  |  |
| Return on average GAAP capital (ROE) | 8.47% | 12.21% |
| Return on average tangible capital | 13.21% | 19.82% |
| Return on average assets (ROA) | 1.04% | 1.42% |
| Return on average tangible assets | 1.12% | 1.52% |

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 82.7 percent of revenues for the three months ended March 31, 2024. 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 a fully taxable equivalent ("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 2024 and 2023. The 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.

Net interest margin, on an FTE basis, decreased 48 basis points to 3.10 percent for the three months ended March 31, 2024 compared to 3.58 percent for the same period in 2023.

#### Average Balance Sheet

Average earning assets for the three months ended March 31, 2024 increased $299.4 million compared to the same period in 2023. The increase for the three months ended March 31, 2024 was driven by an increase in interest-bearing deposits of $402.9 million as deposit growth and proceeds from investment securities principal and interest cashflows were held in cash for liquidity purposes. Organic loan growth within the residential real estate and commercial portfolios of $216.3 million and $114.2 million, respectively, also contributed to the increase in average earning assets.

Offsetting the increases in interest-bearing deposits and loans was a decrease in the average investment securities portfolio, which was $447.1 million for the three months ended March 31, 2024, when compared to the same period in 2023. The Corporation is reinvesting cashflows into the investment securities portfolio on a limited basis with a primary focus of using liquidity to paydown borrowings and fund loan growth. Additionally, there was an increase of $27.9 million in unrealized losses in the available for sale portfolio during the first three months of 2024. The investment portfolio as a percentage of total assets was 20.7 percent at March 31, 2024, which is down from the peak at December 31, 2021 of 29.3 percent, and 22.2 percent at March 31, 2023. This decline reflects progress towards a more normalized earning asset mix.

Total average deposits for the three months ended March 31, 2024 increased $457.8 million when compared to the same period in 2023. Average interest-bearing deposits for the three months ended March 31, 2024 increased $1.2 billion compared to the same period in 2023, with the largest increases in the certificates and other time deposit portfolio, money market and interest-bearing demand deposits. Noninterest bearing deposits act to mitigate deposit yield increases as interest rates rise and represented 16.3 percent of the deposit portfolio, which is a decline from the peak in the second quarter of 2022 of 23.6 percent, and 21.6 percent for the three months ended March 31, 2023. Noninterest bearing deposits declined $693.1 million in the three months ended March 31, 2024 when compared to the same period in 2023. The decline is the result of a mix shift occurring across the industry as clients move into higher yielding deposit products.

Average borrowings decreased $281.5 million for the three months ended March 31, 2024 compared to the same period in 2023. Average securities sold under repurchase, Federal Funds purchased and FHLB advances decreased $35.3 million, $98.5 million and $127.1 million, respectively, in the first quarter of 2024 compared to the same period in 2023 as the Corporation utilized excess liquidity to pay down borrowings in 2024. Additionally, average subordinated debt decreased $27.6 million due to the paydown of $40.0 million in principal on the scheduled interest payment date during the first quarter of 2024. Additionally, the Corporation issued notice in the first quarter of 2024 to the holders of subordinated debt that it intends to exercise its rights to redeem $25.0 million in principal in the second quarter of 2024.

#### Interest Income/Expense and Average Yields

In the first quarter of 2024, FTE asset yields increased 59 basis points compared to the same period in 2023. The increase in interest income, on an FTE basis, of $29.0 million during the three months ended March 31, 2024 compared to the same period in 2023 was primarily due to an increase in average earning assets. Additionally, the Corporation's loan portfolio is 66.4 percent variable and repricing occurred when the Federal Open Market Committee's ("FOMC") increased interest rates a total of 100 basis points in 2023. The FOMC interest rate increases in 2023 and 2022 also resulted in increased yields on new and renewed loans, which were 8.15 percent for the three months ended March 31, 2024 compared to 7.08 percent for the same period in 2023. The Corporation also recognized fair value accretion income on purchased loans, which is included in interest income, of $1.4 million, which accounted for 3 basis points of net interest margin in the three months ended March 31, 2024. Comparatively, the Corporation recognized $2.4 million of accretion income for the three months ended March 31, 2023, or 6 basis points of net interest margin.

Interest costs increased 125 basis points, which mitigated the 59 basis point increase in asset yields and resulted in a 66 basis point FTE decrease in net interest spread when compared to the same period in 2023. Interest costs have increased during the quarter and year due to deposit pricing pressure and deposit portfolio mix changes as a result of customers migrating out of noninterest-bearing deposit products into interest-bearing deposit products.

As customers have migrated to higher yielding interest-bearing deposit products, interest expense increased 47.6 million for the three months ended March 31, 2024, or 137 basis points when compared to the same period in 2023. Offsetting some of the increase in deposit costs, borrowing costs declined 58 basis points. Total cost of funds was 3.23 percent for the three months ended March 31, 2024 compared to 1.98 percent during the same period in 2023.

The following table presents 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, 2024 and 2023.

*(Dollars in Thousands)*

| Assets: | Three Months Ended March 31, 2024 Average Balance | Interest Income / Expense | Average Rate | March 31, 2023 Average Balance | Interest Income / Expense | Average Rate |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Interest-bearing deposits | $575,699 | $6,493 | 4.51% | $172,814 | $637 | 1.47% |
| Federal Home Loan Bank stock | 41,764 | 835 | 8.00 | 39,759 | 542 | 5.45 |
| Investment Securities: (1) |  |  |  |  |  |  |
| Taxable | 1,783,057 | 8,748 | 1.96 | 1,924,079 | 9,087 | 1.89 |
| Tax-Exempt (2) | 2,246,265 | 17,229 | 3.07 | 2,552,371 | 20,342 | 3.19 |
| Total Investment Securities | 4,029,322 | 25,977 | 2.58 | 4,476,450 | 29,429 | 2.63 |
| Loans held for sale | 21,782 | 328 | 6.02 | 23,538 | 360 | 6.12 |
| Loans: (3) |  |  |  |  |  |  |
| Commercial | 8,598,110 | 159,209 | 7.41 | 8,483,879 | 139,661 | 6.58 |
| Real estate mortgage | 2,130,947 | 22,357 | 4.20 | 1,914,640 | 18,391 | 3.84 |
| Installment | 821,815 | 16,129 | 7.85 | 840,450 | 13,941 | 6.64 |
| Tax-Exempt (2) | 904,412 | 10,367 | 4.59 | 872,877 | 9,758 | 4.47 |
| Total Loans | 12,477,066 | 208,390 | 6.68 | 12,135,384 | 182,111 | 6.00 |
| Total Earning Assets | 17,123,851 | 241,695 | 5.65% | 16,824,407 | 212,719 | 5.06% |
| Total Non-Earning Assets | 1,306,670 |  |  | 1,197,788 |  |  |
| **Total Assets** | $18,430,521 |  |  | $18,022,195 |  |  |
| **Liabilities:** |  |  |  |  |  |  |
| Interest-Bearing Deposits: |  |  |  |  |  |  |
| Interest-bearing deposits | $5,419,821 | $39,491 | 2.91% | $5,263,601 | $24,662 | 1.87% |
| Money market deposits | 3,045,478 | 27,383 | 3.60 | 2,746,047 | 13,577 | 1.98 |
| Savings deposits | 1,559,877 | 3,801 | 0.97 | 1,826,209 | 2,965 | 0.65 |
| Certificates and other time deposits | 2,427,859 | 27,610 | 4.55 | 1,466,275 | 9,481 | 2.59 |
| Total Interest-Bearing Deposits | 12,453,035 | 98,285 | 3.16 | 11,302,132 | 50,685 | 1.79 |
| Borrowings | 1,011,812 | 10,552 | 4.17 | 1,293,309 | 11,594 | 3.59 |
| Total Interest-Bearing Liabilities | 13,464,847 | 108,837 | 3.23 | 12,595,441 | 62,279 | 1.98 |
| Noninterest-bearing deposits | 2,428,170 |  |  | 3,121,277 |  |  |
| Other liabilities | 295,365 |  |  | 222,352 |  |  |
| Total Liabilities | 16,188,382 |  |  | 15,939,070 |  |  |
| Stockholders' Equity | 2,242,139 |  |  | 2,083,125 |  |  |
| **Total Liabilities and Stockholders' Equity** | $18,430,521 | 108,837 |  | $18,022,195 | 62,279 |  |
| **Net Interest Income (FTE)** |  | $132,858 |  |  | $150,440 |  |
| **Net Interest Spread (FTE) (4)** |  |  | 2.42% |  |  | 3.08% |
| **Net Interest Margin (FTE):** |  |  |  |  |  |  |
| Interest Income (FTE) / Average Earning Assets |  |  | 5.65% |  |  | 5.06% |
| Interest Expense / Average Earning Assets |  |  | 2.55% |  |  | 1.48% |
| **Net Interest Margin (FTE) (5)** |  |  | **3.10%** |  |  | **3.58%** |
| (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 2024 and 2023. These totals equal $5,795 and $6.321 for the three months ended March 31, 2024 and 2023, 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. |  |  |  |  |  |  |

44

### NONINTEREST INCOME

Noninterest income totaled $26.6 million for the first quarter of 2024, a $1.6 million, or 6.6 percent, increase from the first quarter of 2023. The first quarter of 2024 included $2,000 of net realized losses on sales of available for sale securities, compared to $1.6 million in the same period of 2023.

### NONINTEREST EXPENSE

Noninterest expense totaled $96.9 million for the first quarter of 2024, a $3.2 million, or 3.4 percent, increase from the first quarter of 2023. The increase was primarily due to non-core charges incurred during the three months ended March 31, 2024 of $3.5 million, which included a $1.1 million accrual estimate for an additional FDIC special assessment, and $2.4 million of digital platform conversion costs.

Partially offsetting these increases, other expenses decreased $1.9 million in the first quarter of 2024 compared to the same period of 2023, primarily due to gains on the sales of former banking center facilities recorded in the first quarter of 2024.

### INCOME TAXES

Income tax expense for the three months ended March 31, 2024 was $6.8 million on pre-tax net income of $54.8 million. For the same period in 2023, income tax expense was $11.3 million on pre-tax income of $75.4 million. The effective income tax rates for the first quarters of 2024 and 2023 were 12.5 percent and 15.0 percent, respectively.

The lower effective income tax rate for the three months ended March 31, 2024 when compared to the same period in 2023 was primarily a result of tax-exempt interest income being a larger portion of pre-tax income in 2024.

The detailed reconciliation of federal statutory to actual tax expense is shown in NOTE 10. 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 $25.0 million of outstanding preferred stock at March 31, 2024 and December 31, 2023. During the three months ended March 31, 2024 and 2023, the Corporation declared and paid dividends of $46.88 per share (equivalent to $0.4688 per depository share) equal to $469,000. 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.

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. For the three months ended March 31, 2024, the Corporation recorded excise tax of $297,000 related to its share repurchases during the first quarter of 2024, 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.

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, 2024, 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 Economice 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 is fully reflected in regulatory capital on January 1, 2024.

The Corporation's and Bank's actual and required capital ratios as of March 31, 2024 and December 31, 2023 were as follows:

| March 31, 2024 Total risk-based capital to risk-weighted assets | Actual Amount | Ratio | Prompt Corrective Action Thresholds Basel III Minimum Capital Required Amount | Ratio | Well Capitalized Amount | Ratio |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| First Merchants Corporation | $1,976,448 | 13.34% | $1,555,978 | 10.50% | N/A | N/A |
| First Merchants Bank | 1,909,328 | 12.87 | 1,557,432 | 10.50 | $1,483,268 | 10.00% |
| Tier 1 capital to risk-weighted assets |  |  |  |  |  |  |
| First Merchants Corporation | $1,692,633 | 11.42% | $1,259,601 | 8.50% | N/A | N/A |
| First Merchants Bank | 1,723,518 | 11.62 | 1,260,778 | 8.50 | $1,186,615 | 8.00% |
| CET1 capital to risk-weighted assets |  |  |  |  |  |  |
| First Merchants Corporation | $1,667,633 | 11.25% | $1,037,319 | 7.00% | N/A | N/A |
| First Merchants Bank | 1,723,518 | 11.62 | 1,038,288 | 7.00 | $964,124 | 6.50% |
| Tier 1 capital to average assets |  |  |  |  |  |  |
| First Merchants Corporation | $1,692,633 | 9.56% | $708,018 | 4.00% | N/A | N/A |
| First Merchants Bank | 1,723,518 | 9.74 | 707,625 | 4.00 | $884,532 | 5.00% |

| December 31, 2023 Total risk-based capital to risk-weighted assets | Actual Amount | Ratio | Prompt Corrective Action Thresholds Basel III Minimum Capital Required Amount | Ratio | Well Capitalized Amount | Ratio |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| First Merchants Corporation | $2,021,124 | 13.67% | $1,552,685 | 10.50% | N/A | N/A |
| First Merchants Bank | 1,931,810 | 13.06 | 1,553,600 | 10.50 | $1,479,619 | 10.00% |
| Tier 1 capital to risk-weighted assets |  |  |  |  |  |  |
| First Merchants Corporation | $1,703,626 | 11.52% | $1,256,935 | 8.50% | N/A | N/A |
| First Merchants Bank | 1,746,299 | 11.80 | 1,257,676 | 8.50 | $1,183,695 | 8.00% |
| Common equity tier 1 capital to risk-weighted assets |  |  |  |  |  |  |
| First Merchants Corporation | $1,678,626 | 11.35% | $1,035,123 | 7.00% | N/A | N/A |
| First Merchants Bank | 1,746,299 | 11.80 | 1,035,733 | 7.00 | $961,752 | 6.50% |
| Tier 1 capital to average assets |  |  |  |  |  |  |
| First Merchants Corporation | $1,703,626 | 9.64% | $707,091 | 4.00% | N/A | N/A |
| First Merchants Bank | 1,746,299 | 9.89 | 706,331 | 4.00 | $882,913 | 5.00% |

46

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 and (b) 6.75 percent Fixed-to-Floating Rate Subordinated Notes due October 30, 2028 in the aggregate principal amount of $65 million. As of December 31, 2023 the Corporation began the five year phase-out (at a rate of 20 percent per year) as defined in the Basel III capital rules, which resulted in a reduction of $13 million in tier 2 capital. Additionally, subordinated debt decreased due to the paydown of $40 million in principal on the scheduled interest payment date during the first quarter of 2024, which resulted in an additional reduction of $32 million in tier 2 capital. As of March 31, 2024, $25 million remains outstanding under these instruments, and $20 million is included in tier 2 capital after the 20 percent phase-out.

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.

*(Dollars in thousands)*

| Total Risk-Based Capital | March 31, 2024 First Merchants Corporation | First Merchants Bank | December 31, 2023 First Merchants Corporation | First Merchants Bank |
| --- | ---: | ---: | ---: | ---: |
| Total Stockholders' Equity (GAAP) | $2,224,803 | $2,257,109 | $2,247,713 | $2,291,788 |
| Adjust for Accumulated Other Comprehensive (Income) Loss (1) | 198,029 | 196,163 | 175,970 | 174,103 |
| Less: Preferred Stock | (25,125) | (125) | (25,125) | (125) |
| Add: Qualifying Capital Securities | 25,000 |  | 25,000 | — |
| Less: Disallowed Goodwill and Intangible Assets | (729,734) | (729,286) | (731,315) | (730,867) |
| Add: Modified CECL Transition Amount | — | — | 11,514 | 11,514 |
| Less: Disallowed Deferred Tax Assets | (340) | (343) | (131) | (114) |
| **Total Tier 1 Capital (Regulatory)** | 1,692,633 | 1,723,518 | 1,703,626 | 1,746,299 |
| Qualifying Subordinated Debentures | 98,176 |  | 132,174 | — |
| Allowance for Loan Losses Includible in Tier 2 Capital | 185,639 | 185,810 | 185,324 | 185,511 |
| **Total Risk-Based Capital (Regulatory)** | $1,976,448 | $1,909,328 | $2,021,124 | $1,931,810 |
| **Net Risk-Weighted Assets (Regulatory)** | $14,818,838 | $14,832,683 | $14,787,474 | $14,796,189 |
| **Average Assets (Regulatory)** | $17,700,447 | $17,690,630 | $17,677,268 | $17,658,269 |
| **Total Risk-Based Capital Ratio (Regulatory)** | 13.34% | 12.87% | 13.67% | 13.06% |
| **Tier 1 Capital to Risk-Weighted Assets** | 11.42% | 11.62% | 11.52% | 11.80% |
| **Tier 1 Capital to Average Assets** | 9.56% | 9.74% | 9.64% | 9.89% |
| **CET1 Capital Ratio** |  |  |  |  |
| Total Tier 1 Capital (Regulatory) | $1,692,633 | $1,723,518 | $1,703,626 | $1,746,299 |
| Less: Qualified Capital Securities | (25,000) | — | (25,000) | — |
| **CET1 Capital (Regulatory)** | $1,667,633 | $1,723,518 | $1,678,626 | $1,746,299 |
| **Net Risk-Weighted Assets (Regulatory)** | $14,818,838 | $14,832,683 | $14,787,474 | $14,796,189 |
| **CET1 Capital Ratio (Regulatory)** | 11.25% | 11.62% | 11.35% | 11.80% |

(1) Includes net unrealized gains or losses on available for sale securities, net gains or losses on cash flow hedges, 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 8.32 percent at March 31, 2024, and 8.44 percent at December 31, 2023. At March 31, 2024 and December 31, 2023, the Corporation had net unrealized losses associated with its investment securities available for sale of $247.7 million and $219.7 million, respectively. This decrease in value is due to interest rate changes and not due to credit quality.

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 gains (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, 2024 and December 31, 2023.

### 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, 2024 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.

*(Dollars in Thousands)*

|  | Maturing Within 1 Year | Maturing 1-5 Years | Maturing Over 5 Years | Total |
| --- | ---: | ---: | ---: | ---: |
| Commercial and industrial loans | $742,794 | $2,640,946 | $338,625 | $3,722,365 |
| Agricultural land, production and other loans to farmers | 65,777 | 39,671 | 128,983 | 234,431 |
| Real estate loans: |  |  |  |  |
| Construction | 390,187 | 378,326 | 173,213 | 941,726 |
| Commercial real estate, non-owner occupied | 421,956 | 975,532 | 970,872 | 2,368,360 |
| Commercial real estate, owner occupied | 100,208 | 600,087 | 437,599 | 1,137,894 |
| Residential | 19,731 | 150,826 | 2,145,933 | 2,316,490 |
| Home Equity | 24,943 | 31,939 | 561,376 | 618,258 |
| Individuals' loans for household and other personal expenditures | 15,692 | 95,811 | 49,956 | 161,459 |
| Public finance and other commercial loans | 2,698 | 59,026 | 902,875 | 964,599 |
| Total | $1,783,986 | $4,972,164 | $5,709,432 | $12,465,582 |

*(Dollars in Thousands)*

|  | Maturing Within 1 Year | Maturing 1-5 Years | Maturing Over 5 Years | Total |
| --- | ---: | ---: | ---: | ---: |
| Commercial and industrial loans | $37,298 | $424,315 | $165,021 | $626,634 |
| Agricultural land, production and other loans to farmers | 1,919 | 27,561 | 10,374 | 39,854 |
| Real estate loans: |  |  |  |  |
| Construction | 14,834 | 26,621 | 135,137 | 176,592 |
| Commercial real estate, non-owner occupied | 122,262 | 451,414 | 145,253 | 718,929 |
| Commercial real estate, owner occupied | 58,199 | 374,809 | 125,507 | 558,515 |
| Residential | 13,677 | 114,157 | 923,224 | 1,051,058 |
| Home Equity | 5,794 | 10,983 | 10,474 | 27,251 |
| Individuals' loans for household and other personal expenditures | 3,051 | 72,406 | 19,987 | 95,444 |
| Public finance and other commercial loans | 2,646 | 34,945 | 873,061 | 910,652 |
| Total loans with fixed interest rates | $259,680 | $1,537,211 | $2,408,038 | $4,204,929 |

*(Dollars in Thousands)*

|  | Maturing Within 1 Year | Maturing 1-5 Years | Maturing Over 5 Years | Total |
| --- | ---: | ---: | ---: | ---: |
| Commercial and industrial loans | $705,496 | $2,216,631 | $173,604 | $3,095,731 |
| Agricultural land, production and other loans to farmers | 63,858 | 12,110 | 118,609 | 194,577 |
| Real estate loans: |  |  |  |  |
| Construction | 375,353 | 351,705 | 38,076 | 765,134 |
| Commercial real estate, non-owner occupied | 299,694 | 524,118 | 825,619 | 1,649,431 |
| Commercial real estate, owner occupied | 42,009 | 225,278 | 312,092 | 579,379 |
| Residential | 6,054 | 36,669 | 1,222,709 | 1,265,432 |
| Home Equity | 19,149 | 20,956 | 550,902 | 591,007 |
| Individuals' loans for household and other personal expenditures | 12,641 | 23,405 | 29,969 | 66,015 |
| Public finance and other commercial loans | 52 | 24,081 | 29,814 | 53,947 |
| Total loans with variable interest rates | $1,524,306 | $3,434,953 | $3,301,394 | $8,260,653 |

48

### 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, 2024, non-accrual loans totaled $62.5 million, an increase of $8.9 million from December 31, 2023, primarily due to an $11.5 million commercial real estate, non-owner occupied loan that moved to non-accrual in the first quarter of 2024. The increase was partially offset by a decline in non-accrual balances within commercial and industrial and construction of $1.9 million during the first quarter of 2024.

Other real estate owned and repossessions, totaling $4.9 million at March 31, 2024, increased $55,000 from December 31, 2023. For other real estate owned, current appraisals are obtained to determine fair value as management continues to aggressively market these real estate assets.

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

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

*(Dollars in Thousands)*

| Nonperforming Assets: | March 31, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Non-accrual loans | $62,478 | $53,580 |
| OREO and Repossessions | 4,886 | 4,831 |
| Nonperforming assets (NPA) | 67,364 | 58,411 |
| Loans 90-days or more delinquent and still accruing | 2,838 | 172 |
| NPAs and loans 90-days or more delinquent | $70,202 | $58,583 |

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)*

| Nonperforming assets and loans 90-days or more delinquent: | March 31, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Commercial and industrial loans | $8,725 | $9,136 |
| Agricultural land, production and other loans to farmers | 56 | 58 |
| Real estate loans: |  |  |
| Construction | — | 520 |
| Commercial real estate, non-owner occupied | 27,933 | 16,652 |
| Commercial real estate, owner occupied | 2,687 | 3,041 |
| Residential | 27,251 | 25,178 |
| Home equity | 3,517 | 3,945 |
| Individuals' loans for household and other personal expenditures | 33 | 19 |
| Public finance and other commercial loans | — | 34 |
| Nonperforming assets and loans 90-days or more delinquent: | $70,202 | $58,583 |

### Provision and Allowance for Credit Losses on Loans

The Corporation adopted FASB Accounting Standards Update (ASU) No. 2016-13, *Financial Instruments - Credit Losses (Topic 326)*: M*easurement of Credit Losses on Financial Instruments* on January 1, 2021. CECL replaced the previous "incurred loss" model with an "expected loss" model of measuring credit losses, which encompasses allowances for losses expected to be incurred over the life of the portfolio. 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 3. LOANS AND ALLOWANCE 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.

The Corporation’s loan balances, excluding loans held for sale, decreased $20.4 million from December 31, 2023 to $12.5 billion at March 31, 2024. At March 31, 2024, the allowance for credit losses totaled $204.7 million, which represents a decrease of $253,000 from December 31, 2023. As a percentage of loans, the allowance for credit losses was 1.64 percent at March 31, 2024 and December 31, 2023.

Net charge-offs totaling $2.3 million were recognized for the three months ended March 31, 2024, and provision for credit losses of $2.0 million was recorded for the same period in 2024. Net charge-offs totaling $225,000 were recognized for the three months ended March 31, 2023, with no provision for credit losses recorded in the same period in 2023.

For the three months ended March 31, 2024 and 2023, there were no individual charge-offs or recoveries greater than $500,000. The distribution of the net charge-offs (recoveries) for the three months ended March 31, 2024 and 2023 are reflected in the following table.

*(Dollars in Thousands)*

| Net charge-offs (recoveries): | Three Months Ended March 31, 2024 | 2023 |
| --- | ---: | ---: |
| Commercial and industrial loans | $1,280 | $(287) |
| Real estate loans: |  |  |
| Commercial real estate, non-owner occupied | 342 | (44) |
| Commercial real estate, owner occupied | (44) | (8) |
| Residential | 366 | 30 |
| Home equity | 50 | 183 |
| Individuals' loans for household and other personal expenditures | 259 | 351 |
| Total net charge-offs (recoveries) | $2,253 | $225 |

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 allowance for credit losses remains robust, along with $21.8 million of fair value accretion remaining on the acquired 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 $1.6 billion at March 31, 2024, a decrease of $6.9 million, or 0.4 percent, from December 31, 2023. 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 $13.0 million at March 31, 2024. 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 utilized as a funding source. At March 31, 2024, total borrowings from the FHLB were $612.8 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, 2024 was $721.2 million and $1.1 billion, respectively.

In March 2023, the Federal Reserve created the Bank Term Funding Program (“BTFP”). The BTFP was a new facility established in response to recent liquidity concerns within the banking industry in part due to recent deposit runs that resulted in a few large bank failures. The BTFP was designed to provide available additional funding to eligible depository institutions in order to help assure that banks have the ability to meet the needs of all their depositors. Under the program, eligible depository institutions could obtain loans of up to one year in length by pledging U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral. These assets were valued at par. The BTFP was intended to eliminate the need for depository institutions to quickly sell their securities if they were experiencing stress on their liquidity. As of March 11, 2024, the program was discontinued and the Bank had no outstanding balance as of March 31, 2024.

The Corporation and the Bank receive outside credit ratings from Moody's. Both the Corporation and the Bank currently have Issuer Ratings of Baa1. Additionally, the Bank has a Baseline Credit Assessment Rating of a3. Management considers these ratings to be indications of a sound capital base and strong liquidity and believes that these ratings would help ensure the ready marketability of its commercial paper. Because of the Corporation's and Bank's current levels of long-term debt, management believes it could generate additional liquidity from various sources should the need arise.

The following table presents the Corporation's material cash requirements from known contractual and other obligations at March 31, 2024:

*(Dollars in Thousands)*

|  | Payments Due In One Year or Less | Over One Year | Total |
| --- | ---: | ---: | ---: |
| Deposits without stated maturity | $12,451,569 | $— | $12,451,569 |
| Certificates and other time deposits | 2,349,132 | 83,883 | 2,433,015 |
| Securities sold under repurchase agreements | 130,264 | — | 130,264 |
| Federal Home Loan Bank advances | 80,000 | 532,778 | 612,778 |
| Subordinated debentures and other borrowings | 1,326 | 117,286 | 118,612 |
| Total | $15,012,291 | $733,947 | $15,746,238 |

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, 2024 are as follows:

*(Dollars in Thousands)*

| Amounts of commitments: | March 31, 2024 |
| --- | ---: |
| Loan commitments to extend credit | $4,993,077 |
| Standby and commercial letters of credit | 72,956 |
|  | $5,066,033 |

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, 2024, 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 that 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 basis points and falling 100 basis points scenarios below, as of March 31, 2024 and December 31, 2023, 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 basis points and falling 100 basis points interest rate scenarios are listed below based upon the Corporation’s rate sensitive assets and liabilities at March 31, 2024 and December 31, 2023. 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, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Rising 200 basis points from base case | 2.6% | 4.0% |
| Falling 100 basis points from base case | (4.2)% | (5.0)% |

### 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).

## Market risk

As filed, 242 characters.

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”.

## Controls and procedures

As filed, 1,161 characters.

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.

## Risk factors

As filed, 162 characters.

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, 2023.

Filed May 1, 2024.
Source: SEC EDGAR, the filing index for accession 0000712534-24-000162. Last ingested by Listed: Nov 3, 2026, 03:19 ET. No prices; not investment advice.