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 as the loans are considered to be performing under FASB ASC Topic 310-30.



	As of September 30, 2018
	Commercial		Real Estate				Lease
(Dollars in thousands)	& industrial		Construction		Commercial		financing		Total
Pass	$	2,335,925	$	552,973	$	3,757,627	$	92,551	$	6,739,076
Special Mention	39,060		12,094		49,463		0		100,617
Substandard	51,605		10		61,053		2,766		115,434
Doubtful	0		0		0		0		0
Total	$	2,426,590	$	565,077	$	3,868,143	$	95,317	$	6,955,127



	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 September 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	$	1,991	$	1,613	$	2,662	$	6,266	$	2,414,484	$	2,420,750	$	5,840	$	2,426,590	$	0
Lease financing	0		0		0		0		95,317		95,317		0		95,317		0
Construction real estate	283		0		0		283		564,535		564,818		259		565,077		0
Commercial real estate	4,513		407		16,296		21,216		3,789,238		3,810,454		57,689		3,868,143		0
Residential real estate	2,796		1,828		2,825		7,449		888,367		895,816		37,146		932,962		0
Home equity	3,435		1,336		3,153		7,924		804,670		812,594		3,539		816,133		0
Installment	201		21		282		504		96,360		96,864		549		97,413		0
Credit card	301		179		144		624		45,117		45,741		0		45,741		144
Total	$	13,520	$	5,384	$	25,362	$	44,266	$	8,698,088	$	8,742,354	$	105,022	$	8,847,376	$	144



	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 by the borrower to adhere to contractual payment terms, 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 187 TDRs totaling $25.0 million at September 30, 2018, including $20.3 million on accrual status and $4.7 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 $2.3 million related to TDRs at September 30, 2018. For the three months ended September 30, 2018 and 2017, the Company charged off $0.7 million and $0.1 million, respectively, for the portion of TDRs determined to be uncollectible. For the nine months ended September 30, 2018 and 2017, the Company charged off $0.8 million and $0.2 million, respectively, for the portion of TDRs determined to be uncollectible. Additionally, as of September 30, 2018, $12.6 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
	September 30, 2018					September 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	0	$	0	$	0	1	$	45	$	37
Construction real estate	0	0		0		0	0		0
Commercial real estate	0	0		0		1	285		285
Residential real estate	1	148		143		6	416		315
Home equity	1	10		10		1	39		39
Installment	0	0		0		0	0		0
Total	2	$	158	$	153	9	$	785	$	676

	Nine months ended
	September 30, 2018					September 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	7	$	5,724	$	5,661
Construction real estate	0	0		0		0	0		0
Commercial real estate	6	2,119		2,088		7	1,791		1,734
Residential real estate	4	442		437		6	416		315
Home equity	1	10		10		1	39		39
Installment	0	0		0		0	0		0
Total	23	$	9,720	$	9,631	21	$	7,970	$	7,749



	Three months ended				Nine months ended
	September 30,				September 30,
(Dollars in thousands)	2018		2017		2018		2017
Extended maturities	$	143	$	0	$	3,031	$	3,261
Adjusted interest rates	0		0		52		2,767
Combination of rate and maturity changes	0		285		0		465
Forbearance	0		354		6,199		1,181
Other ⁽¹⁾	10		37		349		75
Total	$	153	$	676	$	9,631	$	7,749

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.

For the nine months ended September 30, 2018, 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. 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 months ended September 30, 2018 or the three or nine month periods ended September 30, 2017.



(Dollars in thousands)	September 30, 2018		December 31, 2017
Impaired loans
Nonaccrual loans⁽¹⁾
Commercial & industrial	$	4,310	$	5,229
Lease financing	0		82
Construction real estate	10		29
Commercial real estate	20,338		10,616
Residential real estate	11,365		4,140
Home equity	6,018		3,743
Installment	327		243
Nonaccrual loans	42,368		24,082
Accruing troubled debt restructurings	20,313		17,545
Total impaired loans	$	62,681	$	41,627



	Three months ended				Nine months ended
	September 30,				September 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	$	1,192	$	761	$	3,126	$	2,735
Interest included in income
Nonaccrual loans	169		140		395		445
Troubled debt restructurings	187		168		500		563
Total interest included in income	356		308		895		1,008
Net impact on interest income	$	836	$	453	$	2,231	$	1,727

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 September 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	$	9,209	$	13,034	$	0	$	7,162	$	8,460	$	0
Lease financing	0		0		0		82		82		0
Construction real estate	10		27		0		29		60		0
Commercial real estate	26,722		32,706		0		18,423		20,837		0
Residential real estate	14,277		17,083		0		6,876		8,145		0
Home equity	6,554		7,337		0		4,356		5,399		0
Installment	332		639		0		255		422		0
Total	57,104		70,826		0		37,183		43,405		0

Loans with an allowance recorded
Commercial & industrial	2,776		2,776		1,562		169		169		169
Lease financing	0		0		0		0		0		0
Construction real estate	0		0		0		0		0		0
Commercial real estate	1,668		2,322		66		3,119		3,120		448
Residential real estate	1,033		1,033		160		1,056		1,063		160
Home equity	100		100		2		100		100		2
Installment	0		0		0		0		0		0
Total	5,577		6,231		1,790		4,444		4,452		779

Total
Commercial & industrial	11,985		15,810		1,562		7,331		8,629		169
Lease financing	0		0		0		82		82		0
Construction real estate	10		27		0		29		60		0
Commercial real estate	28,390		35,028		66		21,542		23,957		448
Residential real estate	15,310		18,116		160		7,932		9,208		160
Home equity	6,654		7,437		2		4,456		5,499		2
Installment	332		639		0		255		422		0
Total	$	62,681	$	77,057	$	1,790	$	41,627	$	47,857	$	779



	Three months ended
	September 30, 2018				September 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	$	10,033	$	63	$	13,730	$	63
Lease financing	0		0		91		1
Construction real estate	17		0		950		0
Commercial real estate	28,689		136		23,187		147
Residential real estate	13,247		86		7,569		55
Home equity	6,463		31		3,791		26
Installment	318		1		290		1
Total	58,767		317		49,608		293

Loans with an allowance recorded
Commercial & industrial	1,578		28		1,832		2
Lease financing	0		0		0		0
Construction real estate	0		0		0		0
Commercial real estate	1,012		3		652		5
Residential real estate	1,036		7		1,067		7
Home equity	100		1		101		1
Installment	0		0		0		0
Total	3,726		39		3,652		15

Total
Commercial & industrial	11,611		91		15,562		65
Lease financing	0		0		91		1
Construction real estate	17		0		950		0
Commercial real estate	29,701		139		23,839		152
Residential real estate	14,283		93		8,636		62
Home equity	6,563		32		3,892		27
Installment	318		1		290		1
Total	$	62,493	$	356	$	53,260	$	308



	Nine months ended
	September 30, 2018				September 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	$	8,950	$	162	$	14,669	$	259
Lease financing	21		0		120		3
Construction real estate	22		2		744		0
Commercial real estate	25,044		375		21,563		451
Residential real estate	9,875		209		7,801		147
Home equity	5,339		78		3,951		77
Installment	299		2		351		4
Total	49,550		828		49,199		941

Loans with an allowance recorded
Commercial & industrial	891		34		1,463		26
Lease financing	0		0		0		0
Construction real estate	0		0		0		0
Commercial real estate	1,376		9		2,513		18
Residential real estate	1,043		21		1,126		20
Home equity	100		3		101		3
Installment	0		0		0		0
Total	3,410		67		5,203		67

Total
Commercial & industrial	9,841		196		16,132		285
Lease financing	21		0		120		3
Construction real estate	22		2		744		0
Commercial real estate	26,420		384		24,076		469
Residential real estate	10,918		230		8,927		167
Home equity	5,439		81		4,052		80
Installment	299		2		351		4
Total	$	52,960	$	895	$	54,402	$	1,008

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 $105.0 million at September 30, 2018, which included $18.0 million acquired in the merger with MSFG.



	Three months ended						Nine months ended
	September 30,						September 30,
(Dollars in thousands)	2018			2017			2018			2017
Balance at beginning of period	$	1,853		$	5,961		$	2,781		$	6,284
Additions
Commercial & industrial	79			1,559			1,269			1,731
Residential real estate	739			235			1,723			2,313
Total additions	818			1,794			2,992			4,044
Disposals
Commercial & industrial	(181		)	(3,684		)	(2,611		)	(5,291		)
Residential real estate	(117		)	(821		)	(527		)	(1,506		)
Total disposals	(298		)	(4,505		)	(3,138		)	(6,797		)
Valuation adjustment
Commercial & industrial	(258		)	(102		)	(355		)	(264		)
Residential real estate	(197		)	(32		)	(362		)	(151		)
Total valuation adjustment	(455		)	(134		)	(717		)	(415		)
Balance at end of period	$	1,918		$	3,116		$	1,918		$	3,116