First Financial offers clients a variety of commercial and consumer loan and lease products with distinct interest rates and payment terms. Commercial loan categories include C&I, CRE, construction real estate and lease financing. Consumer loan categories include residential real estate, home equity, installment and credit card.

Lending activities are primarily concentrated in states where the Bank operates banking centers (Ohio, Indiana, Kentucky and Illinois). First Financial also offers two nationwide lending platforms, one that provides equipment and leasehold improvement financing for franchisees in the quick service and casual dining restaurant sector and another that provides loans primarily to insurance agents and brokers that are secured by commissions and cash collateral.

Special Mention - First Financial assigns a special mention rating to loans and leases with potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or lease or in First Financial's credit position at some future date.

Substandard - First Financial assigns a substandard rating to loans or leases that are inadequately protected by the current sound financial worth and paying capacity of the borrower or of the collateral pledged, if any. Substandard loans and leases have well-defined weaknesses that jeopardize repayment of the debt. Substandard loans and leases are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not addressed.

Doubtful - First Financial assigns a doubtful rating to loans and leases with all the attributes of a substandard rating with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable, on the basis of currently existing facts, conditions and values. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors that may work to the advantage and strengthening of the credit quality of the loan or lease, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors include proposed merger, acquisition or liquidation procedures, capital injection, perfecting liens on additional collateral and refinancing plans.

First Financial considers repayment performance to be the best indicator of credit quality for consumer loans. Consumer loans that have principal and interest payments that are past due by 90 days or more are generally classified as nonperforming. Additionally, consumer loans that have been modified in a TDR are classified as nonperforming. Purchased impaired loans are not classified as nonperforming assets as the loans are considered to be performing under FASB ASC Topic 310-30.



	As of June 30, 2018
	Commercial		Real Estate				Lease
(Dollars in thousands)	& industrial		Construction		Commercial		financing		Total
Pass	$	2,367,649	$	543,479	$	3,794,902	$	94,763	$	6,800,793
Special Mention	24,261		11,947		29,399		0		65,607
Substandard	48,686		42		64,692		1,435		114,855
Doubtful	0		0		0		0		0
Total	$	2,440,596	$	555,468	$	3,888,993	$	96,198	$	6,981,255



	As of December 31, 2017
	Commercial		Real Estate				Lease
(Dollars in thousands)	& industrial		Construction		Commercial		financing		Total
Pass	$	1,882,464	$	467,687	$	2,446,999	$	88,078	$	4,885,228
Special Mention	6,226		0		4,436		0		10,662
Substandard	24,053		43		38,656		1,269		64,021
Doubtful	0		0		0		0		0
Total	$	1,912,743	$	467,730	$	2,490,091	$	89,347	$	4,959,911



	As of June 30, 2018
(Dollars in thousands)	30 – 59 days past due		60 – 89 days past due		> 90 days past due		Total past due		Current		Subtotal		Purchased impaired		Total		> 90 days past due and still accruing
Loans
Commercial & industrial	$	1,885	$	389	$	2,814	$	5,088	$	2,429,204	$	2,434,292	$	6,304	$	2,440,596	$	0
Lease financing	0		0		0		0		96,198		96,198		0		96,198		0
Construction real estate	447		0		0		447		554,754		555,201		267		555,468		0
Commercial real estate	3,291		1,829		15,999		21,119		3,803,534		3,824,653		64,340		3,888,993		16
Residential real estate	1,962		601		2,945		5,508		872,404		877,912		40,992		918,904		0
Home equity	3,834		750		3,443		8,027		822,359		830,386		4,645		835,031		0
Installment	165		22		263		450		99,669		100,119		607		100,726		0
Credit card	427		216		311		954		47,711		48,665		0		48,665		311
Total	$	12,011	$	3,807	$	25,775	$	41,593	$	8,725,833	$	8,767,426	$	117,155	$	8,884,581	$	327



	As of December 31, 2017
(Dollars in thousands)	30 – 59 days past due		60 – 89 days past due		> 90 days past due		Total past due		Current		Subtotal		Purchased impaired		Total		> 90 days past due and still accruing
Loans
Commercial & industrial	$	755	$	1,657	$	5,078	$	7,490	$	1,901,821	$	1,909,311	$	3,432	$	1,912,743	$	0
Lease financing	485		0		0		485		88,862		89,347		0		89,347		0
Construction real estate	234		0		0		234		467,216		467,450		280		467,730		0
Commercial real estate	1,716		201		8,777		10,694		2,419,969		2,430,663		59,428		2,490,091		0
Residential real estate	526		811		1,992		3,329		430,500		433,829		37,562		471,391		0
Home equity	2,716		394		1,753		4,863		485,127		489,990		3,614		493,604		0
Installment	179		29		205		413		40,529		40,942		644		41,586		0
Credit card	285		87		62		434		46,257		46,691		0		46,691		62
Total	$	6,896	$	3,179	$	17,867	$	27,942	$	5,880,281	$	5,908,223	$	104,960	$	6,013,183	$	62

Nonaccrual. Loans are classified as nonaccrual when, in the opinion of management, collection of principal or interest is doubtful or when principal or interest payments are 90 days or more past due. Generally, loans are classified as nonaccrual due to the continued failure to adhere to contractual payment terms by the borrower, coupled with other pertinent factors. When a loan is classified as nonaccrual, the accrual of interest income is discontinued and previously accrued but unpaid interest is reversed. Any payments received while a loan is on nonaccrual status are applied as a reduction to the carrying value of the loan. A loan classified as nonaccrual may return to accrual status if collection of future principal and interest payments is no longer doubtful.

Purchased impaired loans are classified as performing, even though they may be contractually past due, as any nonpayment of contractual principal or interest is considered in the periodic re-estimation of expected cash flows and is included in the resulting recognition of current period provision for loan and lease losses or prospective yield adjustments.

Troubled Debt Restructurings. A loan modification is considered a TDR when the borrower is experiencing financial difficulty and concessions are made by the Company that would not otherwise be considered for a borrower with similar credit characteristics. The most common types of modifications include interest rate reductions, maturity extensions and modifications to principal amortization, including interest-only structures. Modified terms are dependent upon the financial position and needs of the individual borrower. If the modification agreement is violated, the loan is managed by the Company’s credit administration group for resolution, which may result in foreclosure in the case of real estate.

First Financial had 205 TDRs totaling $27.8 million at June 30, 2018, including $21.8 million on accrual status and $5.9 million classified as nonaccrual. First Financial had an insignificant amount of commitments outstanding to lend additional funds to borrowers whose loan terms have been modified through TDRs, and the ALLL included reserves of $1.1 million related to TDRs at June 30, 2018. For each of the three and six month periods ended June 30, 2018 and 2017, the Company charged off $0.1 million for the portion of TDRs determined to be uncollectible. Additionally, as of June 30, 2018, $13.1 million of accruing TDRs have been performing in accordance with the restructured terms for more than one year.

First Financial had 214 TDRs totaling $23.9 million at December 31, 2017, including $17.5 million of loans on accrual status and $6.4 million classified as nonaccrual. First Financial had an insignificant amount of commitments outstanding to lend additional funds to borrowers whose loan terms had been modified through TDRs. At December 31, 2017, the ALLL included reserves of $1.3 million related to TDRs, and $17.2 million of the accruing TDRs had been performing in accordance with the restructured terms for more than one year.



	Three months ended
	June 30, 2018					June 30, 2017
(Dollars in thousands)	Number of loans	Pre-modification loan balance		Period end balance		Number of loans	Pre-modification loan balance		Period end balance
Commercial & industrial	8	$	6,221	$	6,183	4	$	2,177	$	2,183
Construction real estate	0	0		0		0	0		0
Commercial real estate	4	2,047		2,016		6	1,506		1,449
Residential real estate	1	201		201		0	0		0
Home equity	0	0		0		0	0		0
Installment	0	0		0		0	0		0
Total	13	$	8,469	$	8,400	10	$	3,683	$	3,632

	Six months ended
	June 30, 2018					June 30, 2017
(Dollars in thousands)	Number of loans	Pre-modification loan balance		Period end balance		Number of loans	Pre-modification loan balance		Period end balance
Commercial & industrial	12	$	7,149	$	7,096	6	$	5,679	$	5,624
Construction real estate	0	0		0		0	0		0
Commercial real estate	6	2,119		2,088		6	1,506		1,449
Residential real estate	3	294		294		0	0		0
Home equity	0	0		0		0	0		0
Installment	0	0		0		0	0		0
Total	21	$	9,562	$	9,478	12	$	7,185	$	7,073



	Three months ended				Six months ended
	June 30,				June 30,
(Dollars in thousands)	2018		2017		2018		2017
Extended maturities	$	2,000	$	2,587	$	2,888	$	3,261
Adjusted interest rates	0		0		52		2,767
Combination of rate and maturity changes	0		180		0		180
Forbearance	6,199		827		6,199		827
Other ⁽¹⁾	201		38		339		38
Total	$	8,400	$	3,632	$	9,478	$	7,073

First Financial considers repayment performance as an indication of the effectiveness of the Company's loan modifications. Borrowers that are 90 days or more past due on any principal or interest payments, or who prematurely terminate a restructured loan agreement without paying the contractual principal balance (for example, in a deed-in-lieu arrangement), are considered to be in payment default of the terms of the TDR agreement.

There was one TDR, insignificant in amount, for which there was a payment default during the period that occurred within twelve months of the loan modification for the three and six months ended June 30, 2018. There were no TDRs for which there was a payment default during the period that occurred within twelve months of the loan modification for the three or six month periods ended June 30, 2017.



(Dollars in thousands)	June 30, 2018		December 31, 2017
Impaired loans
Nonaccrual loans⁽¹⁾
Commercial & industrial	$	3,448	$	5,229
Lease financing	0		82
Construction real estate	24		29
Commercial real estate	21,593		10,616
Residential real estate	9,278		4,140
Home equity	5,820		3,743
Installment	299		243
Nonaccrual loans	40,462		24,082
Accruing troubled debt restructurings	21,839		17,545
Total impaired loans	$	62,301	$	41,627



	Three months ended				Six months ended
	June 30,				June 30,
(Dollars in thousands)	2018		2017		2018		2017
Interest income effect on impaired loans
Gross amount of interest that would have been recorded under original terms	$	1,132	$	1,158	$	1,934	$	1,974
Interest included in income
Nonaccrual loans	146		163		226		305
Troubled debt restructurings	189		169		313		395
Total interest included in income	335		332		539		700
Net impact on interest income	$	797	$	826	$	1,395	$	1,274

First Financial individually reviews all impaired commercial loan relationships, as well as consumer loan TDRs, greater than $250,000, to determine if a specific allowance is necessary based on the borrower’s overall financial condition, payment record, support from guarantors and the realizable value of any collateral. Specific allowances are based on discounted cash flows using the loan's initial effective interest rate or the fair value of the collateral for certain collateral dependent loans.



	As of June 30, 2018						As of December 31, 2017
(Dollars in thousands)	Current balance		Contractual principal balance		Related allowance		Current balance		Contractual principal balance		Related allowance
Loans with no related allowance recorded
Commercial & industrial	$	10,856	$	14,647	$	0	$	7,162	$	8,460	$	0
Lease financing	0		0		0		82		82		0
Construction real estate	24		57		0		29		60		0
Commercial real estate	30,655		36,421		0		18,423		20,837		0
Residential real estate	12,216		14,383		0		6,876		8,145		0
Home equity	6,372		7,311		0		4,356		5,399		0
Installment	304		603		0		255		422		0
Total	60,427		73,422		0		37,183		43,405		0

Loans with an allowance recorded
Commercial & industrial	379		379		179		169		169		169
Lease financing	0		0		0		0		0		0
Construction real estate	0		0		0		0		0		0
Commercial real estate	356		356		25		3,119		3,120		448
Residential real estate	1,039		1,039		160		1,056		1,063		160
Home equity	100		100		2		100		100		2
Installment	0		0		0		0		0		0
Total	1,874		1,874		366		4,444		4,452		779

Total
Commercial & industrial	11,235		15,026		179		7,331		8,629		169
Lease financing	0		0		0		82		82		0
Construction real estate	24		57		0		29		60		0
Commercial real estate	31,011		36,777		25		21,542		23,957		448
Residential real estate	13,255		15,422		160		7,932		9,208		160
Home equity	6,472		7,411		2		4,456		5,499		2
Installment	304		603		0		255		422		0
Total	$	62,301	$	75,296	$	366	$	41,627	$	47,857	$	779



	Three months ended
	June 30, 2018				June 30, 2017
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Loans with no related allowance recorded
Commercial & industrial	$	9,714	$	73	$	17,198	$	87
Lease financing	0		0		98		1
Construction real estate	25		1		1,075		0
Commercial real estate	27,516		140		25,465		144
Residential real estate	9,173		76		7,605		46
Home equity	5,222		27		3,926		27
Installment	305		1		357		1
Total	51,955		318		55,724		306

Loans with an allowance recorded
Commercial & industrial	309		6		2,301		11
Lease financing	0		0		0		0
Construction real estate	0		0		0		0
Commercial real estate	358		3		658		8
Residential real estate	1,042		7		1,126		6
Home equity	101		1		101		1
Installment	0		0		0		0
Total	1,810		17		4,186		26

Total
Commercial & industrial	10,023		79		19,499		98
Lease financing	0		0		98		1
Construction real estate	25		1		1,075		0
Commercial real estate	27,874		143		26,123		152
Residential real estate	10,215		83		8,731		52
Home equity	5,323		28		4,027		28
Installment	305		1		357		1
Total	$	53,765	$	335	$	59,910	$	332



	Six months ended
	June 30, 2018				June 30, 2017
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Loans with no related allowance recorded
Commercial & industrial	$	8,863	$	99	$	15,607	$	196
Lease financing	27		0		149		2
Construction real estate	26		2		538		0
Commercial real estate	24,485		239		19,939		304
Residential real estate	8,407		123		8,032		92
Home equity	4,933		47		4,111		51
Installment	288		1		413		3
Total	47,029		511		48,789		648

Loans with an allowance recorded
Commercial & industrial	262		6		1,094		24
Lease financing	0		0		0		0
Construction real estate	0		0		0		0
Commercial real estate	1,278		6		4,374		13
Residential real estate	1,047		14		1,185		13
Home equity	100		2		101		2
Installment	0		0		0		0
Total	2,687		28		6,754		52

Total
Commercial & industrial	9,125		105		16,701		220
Lease financing	27		0		149		2
Construction real estate	26		2		538		0
Commercial real estate	25,763		245		24,313		317
Residential real estate	9,454		137		9,217		105
Home equity	5,033		49		4,212		53
Installment	288		1		413		3
Total	$	49,716	$	539	$	55,543	$	700

Acquired loans. Acquired loans are recorded at their estimated fair value at the time of acquisition. Estimated fair values for acquired loans are based on a discounted cash flow methodology that considers various factors including the type of loan and related collateral, classification status, interest rate, term of loan, whether or not the loan was amortizing and a discount rate reflecting the Company's assessment of risk inherent in the cash flow estimates. Acquired loans are grouped together according to similar characteristics and treated in the aggregate when applying various valuation techniques.

First Financial evaluates acquired loans for impairment in accordance with the provisions of FASB ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. Acquired loans with evidence of credit deterioration since origination are accounted for under FASB ASC Topic 310-30 and are referred to as purchased impaired loans. Interest income, through accretion of the difference between the carrying value of the loans and the expected cash flows (accretable difference) is recognized on all purchased impaired loans. First Financial had purchased impaired loans totaling $117.2 million at June 30, 2018, which included $24.1 million acquired in the merger with MSFG. Accretable yield, or income expected to be collected, and nonaccretable yield on the purchase impaired loans acquired in the MSFG merger was $1.2 million and $2.7 million, respectively, on the date of acquisition. First Financial had $105.0 million of purchased impaired loans at December 31, 2017.

Acquired loans outside of the scope of FASB ASC Topic 310-30 are accounted for under FASB ASC Topic 310-20, Receivables-Nonrefundable Fees and Costs. In its merger with MSFG, First Financial acquired loans with a fair value of $2.7 billion and gross contractual amounts receivable of $2.9 billion on the date of acquisition that were accounted for in accordance with FASB ASC Topic 310-20.



	Three months ended						Six months ended
	June 30,						June 30,
(Dollars in thousands)	2018			2017			2018			2017
Balance at beginning of period	$	1,065		$	5,300		$	2,781		$	6,284
Additions
Commercial & industrial	1,020			50			1,190			172
Residential real estate	525			1,913			984			2,078
Total additions	1,545			1,963			2,174			2,250
Disposals
Commercial & industrial	(326		)	(682		)	(2,430		)	(1,607		)
Residential real estate	(292		)	(448		)	(410		)	(685		)
Total disposals	(618		)	(1,130		)	(2,840		)	(2,292		)
Valuation adjustment
Commercial & industrial	0			(116		)	(97		)	(162		)
Residential real estate	(139		)	(56		)	(165		)	(119		)
Total valuation adjustment	(139		)	(172		)	(262		)	(281		)
Balance at end of period	$	1,853		$	5,961		$	1,853		$	5,961