What changed in this filing

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Item 1. Business

2023-03-01 compared with 2022-03-01 · 67 added, 60 removed, 703 unchanged (15% of the section changed)

15 unchanged sentences

As of December 31, 2022, the Corporation and its subsidiaries had 2,124 full-time equivalent employees.

Our stated mission to be the most responsive, knowledgeable, and high performing bank requires a dedicated and talented team of colleagues to succeed.

Our stated mission to be the most attentive, knowledgeable, and high performing bank requires a dedicated and talented team of colleagues to succeed.

Our employees prepare, every day, to deliver a customer and colleague experience that grows the Corporation.

We seek to attract, retain and develop a team of diverse, committed colleagues who are capable of delivering a whole-bank delivery approach.

And, we promote a work culture of development, growth, internal promotion and career pathing.

In late 2021, we adopted a new Our Team statement:

And, we promote a work culture of development, growth, internal promotion and career pathing as expressed in Our Team statement:

We are a collection of dynamic colleagues with diverse experiences and perspectives who share a passion for positively impacting lives.

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Best Places to Work / Employer of Choice :

FMB will continue to participate in the Best Places to Work surveys in the four states we operate.

The Bank will continue to participate in the Best Places to Work surveys in the four states we operate.

We constantly strive to be an employer of choice.

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Trust, respect, integrity and commitment are at the core of our success.

A significant event in 2022 was the adoption of a Human and Workforce Rights Policy.

Employee Engagement :

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Results show consistently strong employee engagement with over 70 percent of our employees considered to be “highly engaged.” Our response rates are high (88 percent) with the survey results providing valuable feedback that helps managers promote work satisfaction and high contribution.

Our next scheduled survey is scheduled for Summer, 2022.

Education Assistance :

First Merchants offers an education assistance program that supports full- and part-time colleagues as they seek degree programs that will help them advance their careers.

From 2018-2021, 181 employees participated in the Education Assistance program with a total investment of approximately $776,000.

In 2022, over 50 employees participated in this program.

Corporate Training :

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We continue that work through our highest profile employee resource groups ("ERGs"), First Women Connections and People of Color ERGs, by promoting the development and career growth of those employees.

In 2022, we launched two additional ERGs - Pride and Emerging Professionals.

Additionally, we have created a DEI Employee Community, which hosts bi-weekly calls that are attended by over 150 employees.

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Talent Assessment, Succession Planning and Career Path :

Nearly 1,000 of our employees participated in our annual Calibration Process (9 Box Talent Assessment) with the goal of identifying specific development action plans to help retain employees with high potential and performance, increase job satisfaction and improve productivity.

Over 1,000 of our employees participated in our annual Calibration Process (9 Box Talent Assessment) with the goal of identifying specific development action plans to help retain employees with high potential and performance, increase job satisfaction and improve productivity.

Talent calibration supports succession and career planning for the Corporation.

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The Corporation anticipates that it will continue its policy of geographic expansion of its banking business through the acquisition of banks whose operations are consistent with its banking philosophy.

Management routinely explores opportunities to acquire financial institutions and other financial services-related businesses and to enter into strategic alliances to expand the scope of its services and its customer base.

Future acquisitions and divestitures will be driven by a disciplined financial evaluation process and will be consistent with the Corporation's strategy of community banking, client relationships and consistent quality earnings.

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Certain merger or acquisition transactions, including those involving the acquisition of a depository institution or the assumption of the deposits of any depository institution, require formal approval from various bank regulatory authorities, which will be subject to a variety of factors and considerations.

On November 4, 2021, the Corporation and Level One Bancorp, Inc., a Michigan corporation (“Level One”), entered into an Agreement and Plan of Merger, pursuant to which Level One will, subject to the terms and conditions of the merger agreement, merge with and into the Corporation (the "Merger"), whereupon the separate corporate existence of Level One will cease and the Corporation will survive.

Immediately following the Merger, Level One’s wholly owned subsidiary, Level One Bank, will be merged with and into the Bank, with the Bank as the surviving entity.

The merger agreement provides that upon the effective date of the Merger, the common shareholders of Level One will be entitled to receive, for each outstanding share of Level One common stock, (a) a 0.7167 share of the Corporation’s common stock, in a tax-free exchange, and (b) a cash payment of $10.17.

At the effective time of the merger, each share of 7.50 percent Non-Cumulative Perpetual Preferred Stock, Series B, of Level One outstanding immediately prior to such time will be converted into the right to receive one share of a newly created series of preferred stock of the Corporation having voting powers, preferences and special rights that are substantially identical to the Level One Series B preferred stock.

The Federal Reserve and the FDIC have granted approvals in connection with the transaction.

However, consummation of the Merger remains subject to the requisite approval of the holders of Level One common stock, the approval of the Indiana DFI, and satisfaction of certain customary closing conditions.

The shareholders of Level One are considering the approval of the merger agreement on March 1, 2022, and the Indiana DFI expects to meet during March 2022 to consider the matter.

The parties are diligently pursuing satisfaction of the other closing conditions and expect the closing to occur by early second quarter of 2022, subject to satisfaction of those conditions.

On April 1, 2022, the Corporation acquired 100 percent of Level One Bancorp, Inc.

("Level One").

Level One was headquartered in Farmington Hills, Michigan and had 17 banking centers serving the Michigan market.

Pursuant to the merger agreement, each common shareholder of Level One received, for each outstanding share of Level One common stock held, (a) a 0.7167 share of the Corporation's common stock, and (b) a cash payment of $10.17.

The Corporation issued 5.6 million shares of common stock and paid $79.3 million in cash in exchange for all outstanding shares of Level One common stock.

Additionally, 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.

As part of the preferred stock exchange, each outstanding Level One depositary share representing a 1/100th interest in a share of the Level One Series B preferred stock was converted into a depositary share of the Corporation representing a 1/100th interest in a share of its newly issued preferred stock (Nasdaq:

Details of the Level One acquisition can be found in NOTE 2.

ACQUISITIONS of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

On April 1, 2021, the Bank acquired 100 percent of Hoosier Trust Company ("Hoosier") through a merger of Hoosier with and into the Bank.

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ACQUISITIONS of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

On September 1, 2019, the Corporation acquired 100 percent of MBT.

MBT was headquartered in Monroe, Michigan and had 20 banking centers serving the Monroe market.

Pursuant to the merger agreement, each MBT shareholder received 0.275 shares of the Corporation's common stock for each outstanding share of MBT common stock held.

The Corporation issued approximately 6.4 million shares of common stock, which was valued at approximately $229.9 million.

The Bank is located in Indiana, Ohio, Michigan and Illinois counties where other financial services companies provide similar banking services.

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This treatment is permanently grandfathered as tier 1 capital even if the Corporation should ever exceed $15 billion in assets due to organic growth but not following certain mergers or acquisitions.

As a result, while the Corporation’s total assets exceeded $15 million as of December 31, 2021, the Corporation has continued to treat its trust preferred securities as Tier 1 capital as of such date.

As a result, while the Corporation’s total assets exceeded $15 billion as of December 31, 2021, the Corporation has continued to treat its trust preferred securities as tier 1 capital as of such date.

However, under certain amendments to the “transition rules” of Basel III, if a bank holding company that held less than $15 billion of assets as of December 31, 2009 (which would include the Corporation) acquires a bank holding company with under $15 billion in assets at the time of acquisition (which would include Level One), and the resulting organization has total consolidated assets of $15 billion or more as reported on the resulting organization’s call report for the period in which the transaction occurred, the resulting organization must begin reflecting its trust preferred securities as tier 2 capital at such time.

As a result, following the consummation of the pending merger with Level One, the Corporation would begin reflecting all of its trust preferred securities as Tier 2 capital in the period the transaction closes.

As a result, effective with the April 1, 2022 consummation of the Level One merger, the Corporation began reflecting all of its trust preferred securities as tier 2 capital.

Basel III permits banks with less than $250 billion in assets to choose to continue excluding unrealized gains and losses on certain securities holdings for purposes of calculating regulatory capital.

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Tier 1 capital to average assets 9.10 % 4.00 %

(1) The Basel III Minimum Capital Required are inclusive of the 2.5 percent capital conservation buffer where applicable.

Impact of CECL Implementation on Regulatory Capital

As discussed in NOTE 1.

NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K, the FASB issued the “current expected credit losses” (“CECL”) accounting standard in 2016 to address concerns relating to the ability to record credit losses that are expected, but do not yet meet the “probable” threshold by replacing the current “incurred loss” model for recognizing credit losses with an “expected life of loan loss” model referred to as the CECL model.

NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES and NOTE 5.

LOANS AND ALLOWANCE FOR CREDIT LOSSES of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K, the FASB issued the “current expected credit losses” (“CECL”) accounting standard in 2016 to address concerns relating to the ability to record credit losses that are expected, but do not yet meet the “probable” threshold by replacing the current “incurred loss” model for recognizing credit losses with an “expected life of loan loss” model referred to as the CECL model.

While the original implementation date of the CECL model was January 1, 2020, the CARES Act and a related joint statement of federal banking regulators provided financial institutions with optional temporary relief from having to comply with implementation of the CECL standard.

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The Corporation elected to delay implementation of CECL following the approval of the CARES Act and, with the enactment of the 2021 CAA, the Corporation elected to adopt CECL on January 1, 2021.

This allowed the Corporation to utilize the CECL standard for the entire year of 2021, while its 2019 and 2020 financial statements were prepared under the incurred loss model.

As a result, while the Corporation has utilized the CECL standard for both 2022 and 2021, its 2020 financial statements have been prepared under the incurred loss model.

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.

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The Consumer Financial Protection Bureau (“CFPB”), an independent federal agency created under the Dodd-Frank Act, was granted broad rulemaking, supervisory and enforcement powers under various federal consumer financial protection laws, primarily with authority over banks and their affiliates with assets of more than $10 billion.

The quarter ended December 31, 2019 was the fourth consecutive quarter that the Bank reported assets exceeding $10 billion.

As a result, effective as of the beginning of the second quarter of 2020, the Bank and its affiliates became subject to CFPB supervisory and enforcement authority.

As the quarter ended December 31, 2019 was the fourth consecutive quarter that the Bank reported assets exceeding $10 billion, effective as of the beginning of the second quarter of 2020, the Bank and its affiliates became subject to CFPB supervisory and enforcement authority.

See “- Dodd-Frank Wall Street Reform and Consumer Protection Act” and “- Consumer Financial Protection” below for additional information.

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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, tier 1 and common equity tier 1 capital 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.

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.

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• increases to the cost of the Corporation’s operations due to greater regulatory oversight, supervision and examination of banks and bank holding companies, including higher deposit insurance premiums;

• limitations on the Corporation’s ability to raise additional capital through the use of trust preferred securities, as new issuances of these securities may no longer be included as Tier 1 capital;

• limitations on the Corporation’s ability to raise additional capital through the use of trust preferred securities, as new issuances of these securities can no longer be included as tier 1 capital;

• reduced flexibility for the Corporation to generate or originate certain revenue-producing assets based on increased regulatory capital standards;

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In particular, the asset threshold at which banks are subject to annual company-run stress tests were increased from $10 billion to $250 billion under the Economic Growth Act.

As a result, the Corporation and the Bank will not be subject to the Dodd-Frank Act stress testing requirements.

As a result, the Corporation and the Bank are not subject to the Dodd-Frank Act stress testing requirements.

The Corporation’s management continues to take the steps necessary to minimize the adverse impact of the Dodd-Frank Act on its business, financial condition and results of operation.

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The Federal Reserve also has rules governing routing and exclusivity that require issuers to offer two unaffiliated networks for routing transactions on each debit or prepaid product.

As the Corporation's assets exceeded $10 billion, compliance with the Durbin Amendment began July 1, 2020.

As the Corporation's assets exceeded $10 billion during the quarter ended March 31, 20, compliance with the Durbin Amendment began July 1, 2020 (six quarters after exceeding $10 billion in total assets).

For the last six months of 2020, compliance with the Durbin Amendment resulted in a material reduction of interchange fee income paid by merchants when debit cards were used as a source of payment.

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The Community Reinvestment Act of 1977 (the “CRA”) requires depository institutions to assist in meeting the credit needs of their market areas consistent with safe and sound banking practice.

Under the CRA, each depository institution is required to help meet the credit needs of its market areas by, among other things, providing credit to low- and moderate-income individuals and communities.

Under the CRA, each depository institution is required to help meet the credit needs of its market areas by, among other things, providing investment in and credit to low- and moderate-income individuals and small businesses in those communities.

These factors are also considered in evaluating mergers, acquisitions and applications to open a branch or facility.

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The USA Patriot Act of 2001 (the “USA Patriot Act”) substantially broadened the scope of United States anti-money laundering laws and regulations by imposing significant new compliance and due diligence obligations on financial institutions, creating new crimes and penalties and expanding the extra-territorial jurisdiction of the United States.

The Bank Secrecy Act (the “BSA”) requires financial institutions to develop policies, procedures, and practices to prevent and deter money laundering, and mandates that every bank have a written, board-approved program that is reasonably designed to assure and monitor compliance with the BSA.

In addition, banks are required to adopt a customer identification program as part of its BSA compliance program, and are required to file Suspicious Activity Reports when they detect certain known or suspected violations of federal law or suspicious transactions related to a money laundering activity or a violation of the BSA.

The Bank Secrecy Act (the “BSA”) requires financial institutions to develop policies, procedures, and practices to prevent and deter money laundering, and mandates that every bank has a written, board-approved program that is reasonably designed to assure and monitor compliance with the BSA.

In addition, banks are required to adopt a customer identification program as part of their BSA compliance program, and are required to file Suspicious Activity Reports when they detect certain known or suspected violations of federal law or suspicious transactions related to a money laundering activity or a violation of the BSA.

The Bank is also required to (1) identify and verify, subject to certain exceptions, the identity of the beneficial owners of all legal entity customers at the time a new account is opened, and (2) include, in its anti-money laundering program, risk-based procedures for conducting ongoing customer due diligence, which are to include procedures that:

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In the two years since then, the pandemic has dramatically impacted global health and the economic environment, including millions of confirmed cases and deaths, business slowdowns or shutdowns, labor shortfalls, supply chain challenges, regulatory challenges, and market volatility.

In response, the U.S.

Congress, through the enactment of the CARES Act in March 2020, and the federal banking agencies, though rulemaking, interpretive guidance and modifications to agency policies and procedures, have taken a series of actions to provide emergency economic relief measures including, among others, the following:

In response to the COVID-19 outbreak in January 2020, the U.S.

Congress, through the enactment of the CARES Act in March 2020, and the federal banking agencies, though rulemaking, interpretive guidance and modifications to agency policies and procedures, took a series of actions to provide emergency economic relief measures including, among others, the following:

Paycheck Protection Program .

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The Bank actively participated in assisting its customers with PPP funding during all phases of the program.

The vast majority of the Bank’s PPP loans made in 2020 have two-year maturities, while the loans made in 2021 have five-year maturities.

The application period for new PPP loans ended May 31, 2021.

The vast majority of the Bank’s PPP loans made in 2020 had two-year maturities, while the loans made in 2021 had five-year maturities.

Loans under the program earn interest at a fixed rate of 1 percent.

Consistent with the terms of the program, virtually all of the Corporation's PPP loans have been forgiven by the SBA.

As of December 31, 2022, the Corporation had $4.7 million of PPP loans outstanding compared to the December 31, 2021 balance of $106.6 million.

The Corporation will continue to monitor legislative, regulatory, and supervisory developments related to the PPP.

However, it anticipates that the majority of the Bank’s remaining PPP loans will be forgiven by the SBA in accordance with the terms of the program.

Loan Modifications and Troubled Debt Restructures .

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These included short-term, 180 days or less, modifications in the form of payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that were insignificant.

The Corporation did not have any COVID-19 modifications outstanding as of December 31, 2022 or 2021.

Regulatory Capital .

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(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.

(6) Commercial loans included $106.6 million and $667.1 million of Paycheck Protection Program ("PPP") loans at December 31, 2021 and 2020, respectively.

(6) Commercial loans included $4.7 million, $106.6 million and $667.1 million of Paycheck Protection Program ("PPP") loans at December 31, 2022, 2021 and 2020, respectively.

ANALYSIS OF CHANGES IN NET INTEREST INCOME

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INVESTMENT SECURITIES

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 I and Level II 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.

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Fair value of securities classified as Level 3 in the valuation hierarchy were determined using a discounted cash flow model that incorporated market estimates of interest rates and volatility in markets that have not been active.

The following table summarizes the amortized cost, gross unrealized gains and losses and approximate fair value of investment securities available for sale at the dates.

The following table summarizes the amortized cost, gross unrealized gains and losses and approximate fair value of investment securities available for sale at the dates indicated.

Cost Gross Unrealized

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Available for sale at December 31, 2021

Treasury $ 1,000 $ — $ 1 $ 999

Government-sponsored agency securities 96,244 437 1,545 95,136

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Total available for sale $ 1,807,389 $ 112,079 $ 349 $ 1,919,119

The following table summarizes the amortized cost, gross unrealized gains and losses, approximate fair value and allowance for credit losses on investment securities held to maturity at the dates.

The following table summarizes the amortized cost, gross unrealized gains and losses, approximate fair value and allowance for credit losses on investment securities held to maturity at the dates indicated.

Cost Allowance for Credit Losses Net Carrying Amount Gross Unrealized

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Furthermore, as of December 31, 2022, there were no past due principal and interest payments associated with these securities.

An allowance for credit losses of $245,000 was recorded on the state and municipal securities classified as held to maturity based on applying the long-term historical credit loss rate, as published by Moody’s, for similarly rated securities.

At CECL adoption, an allowance for credit losses of $245,000 was recorded on the state and municipal securities classified as held to maturity based on applying the long-term historical credit loss rate, as published by Moody’s, for similarly rated securities.

The balance of the allowance for credit losses on investments securities remained unchanged at $245,000 as of December 31, 2022.

The cost and yield for Federal Home Loan Bank stock is included in the table below.

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Net Loans $ 11,780,617 $ 9,046,464 $ 9,112,526 $ 8,379,026 $ 7,143,915

As of December 31, 2021, the Corporation had $106.6 million of Paycheck Protection Program ("PPP") loans compared to the December 31, 2020 balance of $667.1 million.

As of December 31, 2022, the Corporation had $4.7 million of Paycheck Protection Program ("PPP") loans compared to the December 31, 2021 and 2020 balances of $106.6 million and $667.1 million, respectively.

PPP loans are included in the commercial and industrial loan class.

Public finance and other commercial loans is primarily comprised of loans secured by states and political subdivisions in the United States.

At December 31, 2021 and 2020, the remaining fair value discount on acquired loans was $10.9 million and $23.0 million, respectively.

At December 31, 2022, 2021, 2020, 2019, and 2018, the remaining fair value discount on acquired loans was $31.3 million, $10.9 million, $23.0 million, $36.6 million, and $30.1 million, respectively.

LOAN MATURITIES

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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.

At December 31, 2021, non-accrual loans totaled $43.1 million, a decrease of $18.4 million from December 31, 2020.

The decrease in non-accrual loans was primarily attributed to the payoff of one senior living sector relationship totaling $23.4 million.

At December 31, 2021, 2020, 2019, 2018, and 2017, non-accrual loans include assets acquired of $3.2 million, $7.9 million, $3.7 million, $0, and $4.8 million, respectively.

Other real estate owned ("OREO") at December 31, 2021 decreased $558,000 from the December 31, 2020 balance of $940,000.

At December 31, 2022, non-accrual loans totaled $42.3 million, a decrease of $738,000 from December 31, 2021.

At December 31, 2022, 2021, 2020, 2019, and 2018, non-accrual loans include assets acquired of $8.2 million, $3.2 million, $7.9 million, $3.7 million, and $0, respectively.

Other real estate owned ("OREO") at December 31, 2022 increased $5.9 million from the December 31, 2021 balance of $558,000.

The increase is primarily related to one loan with a balance of $5.8 million.

At December 31, 2022, 2021 and 2020, OREO did not include any acquired assets.

OREO did include assets that were acquired from MBT of $136,000 as of December 31, 2019.

OREO did not include any assets acquired as of the years ended 2018 and 2017, respectively.

OREO did not include any assets acquired as of the year ended 2018.

Renegotiated loans are loans for which concessions are granted to the borrower due to deterioration in the financial condition of the borrower, resulting in the inability of the borrower to meet the original contractual terms of the loans.

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Provisions for credit losses — — 58,673 2,800 7,227

CECL Day 1 non-PCD provision for credit losses 13,955 — — — —

CECL Day 1 PCD ACL 16,599 — — — —

Balance at December 31 $ 223,277 $ 195,397 $ 130,648 $ 80,284 $ 80,552

Ratio of net charge-offs during the period to average loans outstanding during the period 0.02 % 0.10 % 0.09 % 0.04 % 0.02 %

(1) Category includes commercial and industrial, agricultural land, production and other loans to farmers, and other commercial loans.

(2) Category includes commercial real estate, non-owner occupied and commercial real estate, owner occupied.

In calculating the allowance for credit losses, the loan portfolio was pooled into loan segments with similar credit risk characteristics.

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Additionally, prior to CECL adoption, construction loans were classified within the commercial real estate segment, but after CECL adoption, construction loans were classified as a separate segment.

The acquisition of Level One added $16.6 million in allowance for credit losses on PCD loans and an additional $14.0 million in provision for credit losses on non-PCD loans.

Details of the Allowance for Credit Losses and non-performing loans are discussed within the “LOAN QUALITY" section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included as Item 7 of this Annual Report on Form 10-K.

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Totals $ 223,277 100.0 % $ 195,397 100.0 % $ 130,648 100.0 % $ 80,284 100.0 % $ 80,552 100.0 %

The primary increase in the allowance is due to the adoption of ASU No.

2016-13, Financial Instruments - Credit Losses (Topic 326).

The allowance for credit losses increased $27.9 million during the twelve months ended December 31, 2022.

The allowance increased primarily due to $16.6 million of allowance for credit losses on PCD loans acquired in the Level One acquisition established through accounting adjustments on the acquisition date.

In addition, a provision of $14.0 million was recorded to establish an allowance for credit losses on non-PCD loans acquired in the Level One acquisition.

These increases in the allowance were offset by net charge offs of $2.7 million for the twelve months ended December 31, 2022.

Loan concentrations are considered to exist when there are amounts loaned to multiple borrowers engaged in similar activities, which would cause them to be similarly impacted by economic or other conditions.

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CREDIT LOSS CHARGE-OFF PROCEDURES

The Corporation maintains an allowance to cover probable credit losses in its loan portfolio.

The Corporation maintains an allowance to cover estimated credit losses in its loan portfolio.

The allowance is increased by the provision for credit losses and decreased by charge-offs less recoveries.

All charge-offs are approved by the senior loan officers or loan committees, depending on the amount of the charge-off.

and are reported to the Risk and Credit Policy Committee of the Board of Directors.

All charge-offs are approved by the senior loan officers or loan committees, depending on the amount of the charge-off and are reported to the Risk and Credit Policy Committee of the Board of Directors.

Loans are charged off when a determination is made that all or a portion of a loan is uncollectible.

___________________________

(1) Category includes the charge-offs for commercial and industrial, agricultural land, production and other loans to farmers, and other commercial loans.

(2) Category includes the charge-offs for commercial real estate, non-owner occupied and commercial real estate, owner occupied.

(3) Category includes the recoveries for commercial and industrial, agricultural land, production and other loans to farmers, and other commercial loans.

(4) Category includes the recoveries for commercial real estate, non-owner occupied and commercial real estate, owner occupied.

PROVISION FOR CREDIT LOSSES

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Federal Home Loan Bank advances (short-term portion) 460,097 75,097 55,097

Subordinated debentures and other borrowings (short-term portion) $ 1,182 $ — $ —

Total short-term borrowings $ 800,252 $ 256,674 $ 232,199

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Federal Home Loan Bank advances (short-term portion) 2.4 % 2.1 % 1.8 %

Subordinated debentures and other borrowings (short-term portion) 1.0 % — % — %

Total short-term borrowings 2.4 % 0.7 % 0.6 %

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Federal Home Loan Bank advances (short-term portion) 2.5 % 2.0 % 1.9 %

Subordinated debentures and other borrowings (short-term portion) 0.7 % — % — %

Total short-term borrowings 1.8 % 0.7 % 0.8 %

3 unchanged sentences

Federal Home Loan Bank advances (short-term portion) 460,000 75,000 131,300

Subordinated debentures and other borrowings (short-term portion) $ 1,230 $ — $ —

Total short-term borrowings $ 920,518 $ 274,104 $ 409,228

3 unchanged sentences

Federal Home Loan Bank advances (short-term portion) 265,822 64,356 67,408

Subordinated debentures and other borrowings (short-term portion) $ 1,212 $ — $ —

Total short-term borrowings $ 496,157 $ 238,812 $ 261,274

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business