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DERIVATIVES
 3 Months Ended
Mar. 31, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVES DERIVATIVES

First Financial uses certain derivative instruments, including interest rate caps, floors and swaps, to meet the needs of its clients while managing the interest rate risk associated with certain transactions.  First Financial does not use derivatives for speculative purposes.

First Financial primarily utilizes interest rate swaps as a means to offer borrowers credit-based products that meet their needs. First Financial may also utilize interest rate swaps to manage the interest rate risk profile of the Company.

Interest rate payments are exchanged with counterparties based on the notional amount established in the interest rate agreement. As only interest rate payments are exchanged, the cash requirements and credit risk associated with interest rate swaps are significantly less than the notional amount and the Company’s credit risk exposure is limited to the market value of the instruments. First Financial manages market value credit risk through counterparty credit policies, which require the Company to maintain a total derivative notional position of less than 35% of assets, total credit exposure of less than 3% of capital and no single counterparty credit risk exposure greater than $20.0 million. The Company is currently below all single counterparty and portfolio limits.

Client Derivatives. First Financial utilizes interest rate swaps as a means to offer commercial borrowers fixed rate funding while providing the Company with floating rate assets.  The following table details the classification and amounts recognized in the Consolidated Balance Sheets for client derivatives:
  
 
 
 
March 31, 2019
 
December 31, 2018
 
 
 
 
 
 
Estimated fair value
 
 
 
Estimated fair value
(Dollars in thousands)
 
Balance sheet classification
 
Notional
amount
 
Gain
 
Loss
 
Notional
amount
 
Gain
 
Loss
Client derivatives - instruments associated with loans
 
 
 
 
 
 
 
 
 
 
 
 
Matched interest rate swaps with borrower
 
Accrued interest and other assets
 
$
1,406,914

 
$
33,221

 
$
(5,580
)
 
$
1,359,990

 
$
17,402

 
$
(11,787
)
Matched interest rate swaps with counterparty
 
Accrued interest and other liabilities
 
1,406,914

 
5,580

 
(33,228
)
 
1,359,990

 
11,787

 
(17,401
)
Total
 
 
 
$
2,813,828

 
$
38,801

 
$
(38,808
)
 
$
2,719,980

 
$
29,189

 
$
(29,188
)


At March 31, 2019, the Company had a total counterparty notional amount outstanding of $1.4 billion, spread among thirteen counterparties, with an outstanding liability from these contracts of $27.1 million. At December 31, 2018, the Company had a total counterparty notional amount outstanding of $1.4 billion, spread among thirteen counterparties, with an outstanding liability from these contracts of $4.9 million.

First Financial monitors its derivative credit exposure to borrowers by monitoring the creditworthiness of the related loan customers through the Company's normal credit review processes. Additionally, the Company's ALLL Committee monitors derivative credit risk exposure related to problem loans through the Company's ALLL committee. First Financial considers the market value of a derivative instrument to be part of the carrying value of the related loan for these purposes as the borrower is contractually obligated to pay First Financial this amount in the event the derivative contract is terminated.

In connection with its use of derivative instruments, First Financial and its counterparties may be required to post cash collateral to offset the market position of the derivative instruments. First Financial maintains the right to offset these derivative positions with the collateral posted against them by or with the relevant counterparties. First Financial classifies the derivative cash collateral outstanding with its counterparties as an adjustment to the fair value of the derivative contracts within Accrued interest and other assets or Accrued interest and other liabilities in the Consolidated Balance Sheets.

The following table discloses the gross and net amounts of client derivative liabilities recognized in the Consolidated Balance Sheets:
 
 
March 31, 2019
 
December 31, 2018
(Dollars in thousands)
 
Gross amounts of recognized liabilities
 
Gross amounts offset in the Consolidated Balance Sheets
 
Net amounts of liabilities presented in the Consolidated Balance Sheets
 
Gross amounts of recognized liabilities
 
Gross amounts offset in the Consolidated Balance Sheets
 
Net amounts of liabilities presented in the Consolidated Balance Sheets
Client derivatives
 
 
 
 
 
 
 
 
 
 
 
 
Matched interest rate swaps with counterparty
 
$
38,808

 
$
(36,980
)
 
$
1,828

 
$
29,189

 
$
(14,577
)
 
$
14,612



The following table details the derivative financial instruments, the average remaining maturities and the weighted-average interest rates being paid and received by First Financial at March 31, 2019:
 
 
 
 
 
 
 
 
Weighted-average rate
(Dollars in thousands)
 
Notional
amount
 
Average
maturity
(years)
 
Fair
value
 
Receive
 
Pay
Client derivatives
 
 
 
 
 
 
 
 
 
 
Receive fixed, matched interest rate swaps with borrower
 
$
1,406,914

 
6.1
 
$
27,641

 
4.70
%
 
4.80
%
Pay fixed, matched interest rate swaps with counterparty
 
1,406,914

 
6.1
 
(27,648
)
 
4.80
%
 
4.70
%
Total client derivatives
 
$
2,813,828

 
6.1
 
$
(7
)
 
4.75
%
 
4.75
%


Credit Derivatives. In conjunction with participating interests in commercial loans, First Financial periodically enters into risk participation agreements with counterparties whereby First Financial assumes a portion of the credit exposure associated with an interest rate swap on the participated loan in exchange for a fee. Under these agreements, First Financial will make payments to the counterparty if the loan customer defaults on its obligation to perform under the interest rate swap contract with the counterparty. The total notional value of these agreements totaled $119.8 million as of March 31, 2019 and $138.4 million as of December 31, 2018. The fair value of these agreements is recorded in Accrued interest and other liabilities on the Consolidated Balance Sheets and was $0.1 million at both March 31, 2019 and December 31, 2018.

Mortgage Derivatives. First Financial enters into IRLCs and forward commitments for the future delivery of mortgage loans to third party investors, which are considered derivatives. When borrowers secure an IRLC with First Financial and the loan is intended to be sold, First Financial will enter into forward commitments for the future delivery of the loans to third party investors in order to hedge against the effect of changes in interest rates impacting IRLCs and loans held for sale. At March 31, 2019, the notional amount of the IRLCs was $32.8 million and the notional amount of forward commitments was $32.8 million. As of December 31, 2018, the notional amount of IRLCs was $20.8 million and the notional amount of forward commitments was $12.3 million. The fair value of these agreements was $0.1 million at March 31, 2019 and insignificant at December 31, 2018 and was recorded in Accrued interest and other assets on the Consolidated Balance Sheets.