Allowance for Loan and Lease Losses

Management maintains the ALLL at a level that it considers sufficient to absorb probable incurred loan and lease losses inherent in the portfolio. Management determines the adequacy of the ALLL based on historical loss experience as well as other significant factors such as composition of the portfolio, economic conditions, geographic footprint, the results of periodic internal and external evaluations of delinquent, nonaccrual and classified loans and any other adverse situations that may affect a specific borrower's ability to repay, including the timing of future payments. For further discussion of First Financial's allowance methodology, see Note 1 – Summary of Significant Accounting Policies.

The ALLL is increased by provision expense and decreased by charge-offs, net of recoveries of amounts previously charged-off. First Financial's policy is to charge-off all or a portion of a loan when, in management's opinion, it is unlikely to collect the principal amount owed in full, either through payments from the borrower, or from the liquidation of collateral.

Changes in the ALLL by loan category as of December 31 were as follows:



	2018
						Real Estate
(Dollars in thousands)	Commercial & industrial			Lease financing		Construction			Commercial			Residential			Home equity			Installment			Credit card			Total
Allowance for loan and lease losses
Balance at beginning of year	$	17,598		$	675	$	3,577		$	20,930		$	4,683		$	4,935		$	307		$	1,316		$	54,021
Provision for loan and lease losses	10,615			454		(310		)	847			492			829			(85		)	1,744			14,586
Gross charge-offs	(11,533		)	0		0			(4,835		)	(422		)	(1,725		)	(435		)	(1,720		)	(20,670		)
Recoveries	2,066			1		146			4,106			211			1,309			575			191			8,605
Total net charge-offs	(9,467		)	1		146			(729		)	(211		)	(416		)	140			(1,529		)	(12,065		)
Ending allowance for loan and lease losses	$	18,746		$	1,130	$	3,413		$	21,048		$	4,964		$	5,348		$	362		$	1,531		$	56,542



	2017
							Real Estate
(Dollars in thousands)	Commercial & industrial			Lease financing			Construction			Commercial			Residential			Home equity			Installment			Credit card			Total
Allowance for loan and lease losses
Balance at beginning of year	$	19,225		$	716		$	3,282		$	26,540		$	3,208		$	3,043		$	388		$	1,559		$	57,961
Provision for loan and lease losses	6,917			(42		)	207			(7,291		)	1,695			1,778			(90		)	408			3,582
Gross charge-offs	(10,194		)	0			(1		)	(1,038		)	(435		)	(913		)	(225		)	(857		)	(13,663		)
Recoveries	1,650			1			89			2,719			215			1,027			234			206			6,141
Total net charge-offs	(8,544		)	1			88			1,681			(220		)	114			9			(651		)	(7,522		)
Ending allowance for loan and lease losses	$	17,598		$	675		$	3,577		$	20,930		$	4,683		$	4,935		$	307		$	1,316		$	54,021



	2016
							Real Estate
(Dollars in thousands)	Commercial & industrial			Lease financing			Construction			Commercial			Residential			Home equity			Installment			Credit card			Total
Allowance for loan and lease losses
Balance at beginning of year	$	16,995		$	821		$	1,810		$	23,656		$	4,014		$	3,943		$	386		$	1,773		$	53,398
Provision for loan and lease losses	3,705			(106		)	1,280			5,365			(655		)	(175		)	53			673			10,140
Gross charge-offs	(2,630		)	0			(93		)	(4,983		)	(387		)	(1,445		)	(386		)	(1,190		)	(11,114		)
Recoveries	1,155			1			285			2,502			236			720			335			303			5,537
Total net charge-offs	(1,475		)	1			192			(2,481		)	(151		)	(725		)	(51		)	(887		)	(5,577		)
Ending allowance for loan and lease losses	$	19,225		$	716		$	3,282		$	26,540		$	3,208		$	3,043		$	388		$	1,559		$	57,961

The ALLL balance and the recorded investment in loans by portfolio segment and based on impairment method as of December 31 were as follows:



	December 31, 2018
					Real Estate
(Dollars in thousands)	Commercial & industrial		Lease financing		Construction		Commercial		Residential		Home equity		Installment		Credit card		Total
Ending allowance on loans individually evaluated for impairment	$	667	$	0	$	0	$	461	$	32	$	0	$	0	$	0	$	1,160
Ending allowance on loans collectively evaluated for impairment	18,079		1,130		3,413		20,587		4,932		5,348		362		1,531		55,382
Ending allowance for loan and lease losses	$	18,746	$	1,130	$	3,413	$	21,048	$	4,964	$	5,348	$	362	$	1,531	$	56,542

Loans and Leases
Ending balance of loans individually evaluated for impairment	$	37,633	$	22	$	9	$	25,022	$	17,598	$	6,351	$	174	$	0	$	86,809
Ending balance of loans collectively evaluated for impairment	2,477,028		93,393		548,926		3,729,659		938,048		810,931		93,038		46,382		8,737,405
Total loans	$	2,514,661	$	93,415	$	548,935	$	3,754,681	$	955,646	$	817,282	$	93,212	$	46,382	$	8,824,214



	December 31, 2017
					Real Estate
(Dollars in thousands)	Commercial & industrial		Lease financing		Construction		Commercial		Residential		Home equity		Installment		Credit card		Total
Ending allowance on loans individually evaluated for impairment	$	169	$	0	$	0	$	448	$	160	$	2	$	0	$	0	$	779
Ending allowance on loans collectively evaluated for impairment	17,429		675		3,577		20,482		4,523		4,933		307		1,316		53,242
Ending allowance for loan and lease losses	$	17,598	$	675	$	3,577	$	20,930	$	4,683	$	4,935	$	307	$	1,316	$	54,021

Loans and Leases
Ending balance of loans individually evaluated for impairment	$	7,331	$	82	$	29	$	21,542	$	7,932	$	4,456	$	255	$	0	$	41,627
Ending balance of loans collectively evaluated for impairment	1,905,412		89,265		467,701		2,468,549		463,459		489,148		41,331		46,691		5,971,556
Total loans	$	1,912,743	$	89,347	$	467,730	$	2,490,091	$	471,391	$	493,604	$	41,586	$	46,691	$	6,013,183