INCOME TAXES

9 Months Ended

Sep. 30, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

For the Third quarter 2021, income tax expense was $7.0 million, resulting in an effective tax rate of 10.5% compared with income tax expense of $9.3 million and an effective tax rate 18.3% for the comparable period in 2020. The decrease in the effective tax rate is primarily due to investment in various tax credits, which were partially offset by higher pre-tax income in the third quarter of 2021 as compared to the third quarter of 2020. For the first nine months of 2021, income tax expense was $28.1 million, resulting in an effective tax rate of 15.1% compared with income tax expense of $23.2 million and an effective tax rate of 17.8% for the comparable period in 2020. The decrease in the effective tax rate is primarily due to investment in various tax credits, which were partially offset by higher pre-tax income in the first nine months of 2021 as compared to the first nine months of 2020.

At both September 30, 2021 and December 31, 2020, First Financial had $1.9 million of unrecognized tax benefits, as determined under FASB ASC Topic 740-10, Income Taxes, that if recognized would favorably impact the effective income tax rate in future periods. The unrecognized tax benefits relate to state income tax exposures where the Company believes it is likely that, upon examination, a state may take a position contrary to the position taken by First Financial. The Company believes that resolution regarding our uncertain tax positions is reasonably possible within the next twelve months and could result in full, partial or no recognition of the benefit. First Financial recognizes interest accrued related to unrecognized tax benefits and penalties as income tax expense. At September 30, 2021 and December 31, 2020, the Company had no interest or penalties recorded.

First Financial and its subsidiaries are subject to U.S. federal income tax as well as state and local income tax in several jurisdictions.  Tax years prior to 2018 have been closed and are no longer subject to U.S. federal income tax examinations. Tax years 2018 through 2020 remain open to examination by the federal taxing authority. With limited exception, First Financial is no longer subject to state and local income tax examinations for years prior to 2017.