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LOANS AND LEASES
 12 Months Ended
Dec. 31, 2022
Receivables [Abstract]  
LOANS AND LEASES Loans and Leases
First Financial offers clients a variety of commercial and consumer loan and lease products with various 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 that are secured by commissions and cash collateral accounts to insurance agents and brokers.

Credit quality. To facilitate the monitoring of credit quality for commercial loans, First Financial utilizes the following categories of credit grades:

Pass - Higher quality loans that do not fit any of the other categories described below.

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 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 of 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.

The credit grades previously described are derived from standard regulatory rating definitions and are assigned upon initial approval of credit to borrowers and updated periodically thereafter.

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. In 2022 and all years prior that are presented below, consumer loans that have been modified in a TDR are classified as nonperforming.
The following table sets forth the Company's loan portfolio at December 31, 2023 by risk attribute and origination date as well as detailing current period chargeoffs by year of origination:
(Dollars in thousands)20232022202120202019PriorTerm TotalRevolvingTotal
Commercial & industrial
Pass$848,448 $736,213 $414,460 $265,143 $113,296 $226,970 $2,604,530 $774,080 $3,378,610 
Special mention0 13,373 4,970 882 19,560 1,328 40,113 8,882 48,995 
Substandard3,133 21,505 11,483 1,205 1,023 9,990 48,339 25,277 73,616 
Doubtful0 0 0 0 0 0 0 0 0 
Total$851,581 $771,091 $430,913 $267,230 $133,879 $238,288 $2,692,982 $808,239 $3,501,221 
YTD Gross chargeoffs$10 $2,978 $7,267 $7,055 $936 $929 $19,175 $0 $19,175 
Lease financing
Pass$261,064 $186,997 $6,404 $1,189 $2,222 $523 $458,399 $0 $458,399 
Special mention4,7618,047000012,808012,808
Substandard1,4071,96197014503,61003,610
Doubtful000000000
Total$267,232 $197,005 $6,501 $1,189 $2,367 $523 $474,817 $0 $474,817 
YTD Gross chargeoffs$0 $0 $4,423 $0 $0 $0 $4,423 $0 $4,423 
Construction real estate
Pass$170,259 $208,446 $108,886 $27,686 $7,784 $6,165 $529,226 $19,275 $548,501 
Special mention0 0 0 16,331 0 0 16,331 0 16,331 
Substandard0 0 0 0 0 0 0 0 0 
Doubtful0 0 0 0 0 0 0 0 0 
Total$170,259 $208,446 $108,886 $44,017 $7,784 $6,165 $545,557 $19,275 $564,832 
YTD Gross chargeoffs$0 $0 $0 $0 $0 $0 $0 $0 $0 
Commercial real estate - investor
Pass$468,579 $595,423 $473,325 $261,794 $554,893 $636,598 $2,990,612 $39,668 $3,030,280 
Special mention7,894 9,345 12,134 110 32,756 14,204 76,443 0 76,443 
Substandard0 0 0 6,238 0 25,668 31,906 0 31,906 
Doubtful0 0 0 0 0 0 0 0 0 
Total$476,473 $604,768 $485,459 $268,142 $587,649 $676,470 $3,098,961 $39,668 $3,138,629 
YTD Gross chargeoffs$0 $0 $859 $2,030 $0 $3,119 $6,008 $0 $6,008 
Commercial real estate - owner
Pass$138,932 $175,336 $130,240 $138,919 $86,182 $215,458 $885,067 $22,639 $907,706 
Special mention396 45 179 2,403 462 19,807 23,292 0 23,292 
Substandard0 0 3,919 835 1,324 5,234 11,312 0 11,312 
Doubtful0 0 0 0 0 0 0 0 0 
Total$139,328 $175,381 $134,338 $142,157 $87,968 $240,499 $919,671 $22,639 $942,310 
YTD Gross chargeoffs$0 $0 $0 $2,643 $1 $71 $2,715 $0 $2,715 
Residential real estate
Performing$325,304 $234,583 $255,964 $188,212 $101,663 $210,583 $1,316,309 $0 $1,316,309 
Nonperforming243 917 2,584 3,496 2,160 7,965 17,365 0 17,365 
Total$325,547 $235,500 $258,548 $191,708 $103,823 $218,548 $1,333,674 $0 $1,333,674 
YTD Gross chargeoffs$0 $0 $8 $1 $27 $3 $39 $0 $39 
Home equity
Performing$28,979 $23,175 $29,084 $32,917 $9,883 $22,419 $146,457 $606,183 $752,640 
Nonperforming20 69 258 162 138 317 964 5,072 6,036 
Total$28,999 $23,244 $29,342 $33,079 $10,021 $22,736 $147,421 $611,255 $758,676 
YTD Gross chargeoffs$0 $0 $7 $0 $174 $159 $340 $0 $340 
Installment
Performing$16,026 $39,212 $22,961 $3,923 $1,691 $3,768 $87,581 $68,673 $156,254 
Nonperforming196 1,142 742 12 12 30 2,134 690 2,824 
Total$16,222 $40,354 $23,703 $3,935 $1,703 $3,798 $89,715 $69,363 $159,078 
YTD Gross chargeoffs$168 $3,189 $2,903 $154 $5 $23 $6,442 $0 $6,442 
Credit cards
Performing$0 $0 $0 $0 $0 $0 $0 $59,438 $59,438 
Nonperforming0 0 0 0 0 0 0 501 501 
Total$0 $0 $0 $0 $0 $0 $0 $59,939 $59,939 
YTD Gross chargeoffs$0 $0 $0 $0 $0 $0 $0 $1,173 $1,173 
Grand Total Loans$2,275,641 $2,255,789 $1,477,690 $951,457 $935,194 $1,407,027 $9,302,798 $1,630,378 $10,933,176 
Grand Total YTD Gross Chargeoffs$178 $6,167 $15,467 $11,883 $1,143 $4,304 $39,142 $1,173 $40,315 
The following table sets forth the Company's loan portfolio at December 31, 2022 by risk attribute and origination date:
(Dollars in thousands)20222021202020192018PriorTerm TotalRevolvingTotal
Commercial & industrial
Pass$879,836 $561,890 $348,123 $209,758 $112,282 $206,656 $2,318,545 $971,080 $3,289,625 
Special mention2,740 13,821 4,125 14,047 8,523 5,544 48,800 18,055 66,855 
Substandard2,335 5,176 11,886 8,016 3,331 13,812 44,556 9,236 53,792 
Doubtful0 0 0 0 0 0 0 0 0 
Total$884,911 $580,887 $364,134 $231,821 $124,136 $226,012 $2,411,901 $998,371 $3,410,272 
Lease financing
Pass$167,035 $25,638 $13,705 $12,797 $9,402 $2,930 $231,507 $0 $231,507 
Special mention007000070070 
Substandard4,363001641194,54704,547 
Doubtful000000000 
Total$171,398 $25,638 $13,775 $12,961 $9,413 $2,939 $236,124 $0 $236,124 
Construction real estate
Pass$89,116 $276,639 $96,823 $4,902 $390 $353 $468,223 $23,266 $491,489 
Special mention0 14,395 0 0 6,166 0 20,561 0 20,561 
Substandard0 0 0 0 0 0 0 0 0 
Doubtful0 0 0 0 0 0 0 0 0 
Total$89,116 $291,034 $96,823 $4,902 $6,556 $353 $488,784 $23,266 $512,050 
Commercial real estate - investor
Pass$643,174 $470,085 $301,510 $719,699 $300,772 $508,639 $2,943,879 $26,153 $2,970,032 
Special mention0 13,090 23,111 9,297 26,079 13,804 85,381 861 86,242 
Substandard0 6,950 6 4,025 17,178 9,631 37,790 0 37,790 
Doubtful0 0 0 0 0 0 0 0 0 
Total$643,174 $490,125 $324,627 $733,021 $344,029 $532,074 $3,067,050 $27,014 $3,094,064 
Commercial real estate - owner
Pass$165,411 $155,041 $170,587 $101,137 $112,063 $211,377 $915,616 $11,125 $926,741 
Special mention0 0 0 1,479 0 14,040 15,519 0 15,519 
Substandard0 525 844 5,114 3,501 6,451 16,435 0 16,435 
Doubtful0 0 0 0 0 0 0 0 0 
Total$165,411 $155,566 $171,431 $107,730 $115,564 $231,868 $947,570 $11,125 $958,695 
Residential real estate
Performing$320,676 $274,816 $205,948 $110,745 $51,583 $114,642 $1,078,410 $0 $1,078,410 
Nonperforming414 1,615 1,286 2,554 1,755 6,231 13,855 0 13,855 
Total$321,090 $276,431 $207,234 $113,299 $53,338 $120,873 $1,092,265 $0 $1,092,265 
Home equity
Performing$26,411 $33,414 $38,226 $11,733 $8,051 $24,985 $142,820 $585,712 $728,532 
Nonperforming5 136 298 78 104 430 1,051 4,208 5,259 
Total$26,416 $33,550 $38,524 $11,811 $8,155 $25,415 $143,871 $589,920 $733,791 
Installment
Performing$100,256 $38,694 $7,244 $3,915 $2,861 $3,242 $156,212 $51,854 $208,066 
Nonperforming650 794 18 6 20 42 1,530 299 1,829 
Total$100,906 $39,488 $7,262 $3,921 $2,881 $3,284 $157,742 $52,153 $209,895 
Credit cards
Performing$0 $0 $0 $0 $0 $0 $0 $51,287 $51,287 
Nonperforming0 0 0 0 0 0 0 528 528 
Total$0 $0 $0 $0 $0 $0 $0 $51,815 $51,815 
Grand Total$2,402,422 $1,892,719 $1,223,810 $1,219,466 $664,072 $1,142,818 $8,545,307 $1,753,664 $10,298,971 

Delinquency. Loans are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement or any portion thereof remains unpaid after the due date of the scheduled payment.
Loan delinquency, including nonaccrual loans, was as follows:
 As of December 31, 2023
(Dollars in thousands)30 – 59
days
past due		60 – 89
days
past due		> 90 days
past due		Total
past
due		CurrentTotal> 90 days
past due
and still
accruing
Loans      
Commercial & industrial$1,717 $733 $4,822 $7,272 $3,493,949 $3,501,221 $376 
Lease financing790 1,028 4,224 6,042 468,775 474,817 1,151 
Construction real estate0 0 0 0 564,832 564,832 0 
Commercial real estate-investor19 16,455 6,238 22,712 3,115,917 3,138,629 0 
Commercial real estate-owner269 205 5,290 5,764 936,546 942,310 0 
Residential real estate4,786 1,929 3,744 10,459 1,323,215 1,333,674 0 
Home equity1,998 1,082 1,919 4,999 753,677 758,676 0 
Installment1,157 864 669 2,690 156,388 159,078 0 
Credit card320 211 501 1,032 58,907 59,939 501 
Total$11,056 $22,507 $27,407 $60,970 $10,872,206 $10,933,176 $2,028 
 As of December 31, 2022
(Dollars in thousands)30 - 59
days
past due		60 - 89
days
past due		> 90 days
past due		Total
past
due		CurrentTotal> 90 days
past due and still accruing
Loans      
Commercial & industrial$5,375 $72 $501 $5,948 $3,404,324 $3,410,272 $0 
Lease financing5,212 1,052 843 7,107 229,017 236,124 742 
Construction real estate0 0 0 0 512,050 512,050 0 
Commercial real estate-investor0 0 0 0 3,094,064 3,094,064 0 
Commercial real estate-owner26 5,216 44 5,286 953,409 958,695 0 
Residential real estate4,254 2,074 3,260 9,588 1,082,677 1,092,265 0 
Home equity1,725 729 1,209 3,663 730,128 733,791 0 
Installment874 490 414 1,778 208,117 209,895 0 
Credit card261 150 116 527 51,288 51,815 115 
Total$17,727 $9,783 $6,387 $33,897 $10,265,074 $10,298,971 $857 

Financial Difficulty Modifications. Effective January 1, 2023, First Financial prospectively adopted ASU 2022-02 which eliminated the accounting for TDRs while establishing a new standard for the treatment of modifications made to borrowers experiencing financial difficulties, defined by First Financial as FDMs. As such, effective with the adoption of the standard, the Company prospectively will not include FDMs in the calculation of nonperforming loans, nonperforming assets or classified assets. Prior period data, which included TDRs, has not been adjusted.

FDM might result when a borrower is in financial distress, and may be in the form of principal forgiveness, an interest rate reduction, a term extension or an other-than-insignificant payment delay. In some cases, the Company might provide multiple types of modifications for a single loan. One type of modification, such as payment delay, may be granted initially, however, if the borrower continues to experience financial difficulty, another modification, such as term extension and/or interest rate reduction might be granted. Loans included in the "combination" column in the table that follows have more than one modification made to the same loan within the current reporting period. Additionally, modifications with a term extension or interest rate reduction are intended to reduce the borrower’s monthly payment, while modifications with a payment delay, which typically allow borrowers to make monthly payments, interest only payments for a period of time, are structured to cure the payment defaults by making delinquent payments due at maturity. Payment deferrals may be up to one year and have minimal financial impact since the deferred payments are paid at maturity.
The following table provides the amortized cost basis of FDM that had a payment default during the year ended December 31, 2023 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty during the year by class and type of modification:
Year ended December 31, 2023
(Dollars in thousands)Principal forgivenessPayment delayTerm extensionInterest rate reductionCombination: Term extension and interest rate reductionTotalPercent of total class of loans
Commercial & industrial$0 $1,181 $3,329 $0 $0 $4,510 0.13 %
Residential real estate0 1,889 96 0 55 2,040 0.15 %
Home equity0 181 0 0 0 181 0.02 %
Total$0 $3,251 $3,425 $0 $55 $6,731 0.06 %
 
The following table provides the financial effect of FDM during the year ended December 31, 2023 by class of loans:
Year ended December 31, 2023
(Dollars in thousands)Principal forgivenessWeighted average interest rate reductionWeighted average term extension
Commercial & industrial$0 0.00 %0.2 years
Residential real estate0 2.00 %11.4 years
Total$0 2.00 %0.7 years
.

The Company has committed to lend no additional amounts to the borrowers who have been classified as FDM. Additionally, there were 18 FDMs with a balance of $4.4 million that defaulted during the year ended December 31, 2023.

The Company closely monitors the performance of FDMs to understand the effectiveness of its modification efforts. The following table provides the performance of loans that have been modified since the January 1, 2023 adoption date of ASU 2022-02:
Payment status as of
December 31, 2023
(Dollars in thousands)Current30 – 59 days past due60 – 89 days past due> 89 days past dueTotal
Commercial & industrial$1,181 $821 $0 $2,508 $4,510 
Residential real estate1,021 500 240 279 2,040 
Home equity111 70 0 0 181 
Total$2,313 $1,391 $240 $2,787 $6,731 

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 none of the principal and interest is due and unpaid, and the Bank expects repayment of the remaining contractual principal and interest.

Nonperforming loans. Effective January 1, 2023, loans classified as nonaccrual are considered nonperforming. Prior to the adoption of ASU 2022-02, nonperforming loans included nonaccrual loans as well as TDRs.

First Financial individually reviews all nonperforming loan relationships greater than $250,000 to determine if a specific reserve is required based on the borrower’s overall financial condition, resources and payment record, support from guarantors
and the realizable value of any collateral. Specific reserves 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.

The following table provides information on nonperforming loans as of December 31:
202320222021
(Dollars in thousands)Nonaccrual loans with a related ACLNonaccrual loans with no related ACLTotal nonaccrualNonaccrual loans with a related ACLNonaccrual loans with no related ACLTotal nonaccrualNonaccrual loans with a related ACLNonaccrual loans with no related ACLTotal nonaccrual
Nonaccrual loans (1)
  
Commercial & industrial$3,329 $12,417 $15,746 $6,692 $1,550 $8,242 $11,077 $6,285 $17,362 
Lease financing1,505 2,105 3,610 0 178 178 0 203 203 
Construction real estate0 0 0 0 0 0 0 0 0 
Commercial real estate16,356 11,628 27,984 5,216 570 5,786 17,716 1,796 19,512 
Residential real estate0 14,067 14,067 0 10,691 10,691 0 8,305 8,305 
Home equity0 3,476 3,476 0 3,123 3,123 0 2,922 2,922 
Installment0 870 870 0 603 603 0 88 88 
Total nonaccrual loans$21,190 $44,563 $65,753 $11,908 $16,715 $28,623 $28,793 $19,599 $48,392 
Interest income effect202320222021
Gross amount of interest that would have been recorded under original terms$5,694 $3,247 $5,132 
Interest included in income
Nonaccrual loans1,673 1,134 1,618 
Troubled debt restructurings0 424 314 
Total interest included in income1,673 1,558 1,932 
Net impact on interest income$4,021 $1,689 $3,200 
Commitments outstanding to borrowers with nonaccrual loans$0 $0 $0 
(1) Nonaccrual loans include nonaccrual TDRs of $10.0 million and $16.0 million as of December 31, 2022 and 2021, respectively.
A loan is considered to be collateral dependent when the borrower is experiencing financial difficulty and the repayment is expected to be provided substantially through the operation or sale of collateral. The following table presents the amortized cost basis of collateral dependent loans by class of loan.
December 31, 2023
Type of Collateral
(Dollar in thousands)Business assetsCommercial real estateEquipmentLandResidential real estateOtherTotal
Class of loan
Commercial & industrial$10,952 $0 $3,869 $0 $0 $925 $15,746 
Lease financing00 3,610 0 0 0 3,610 
Commercial real estate-investor022,694 0 0 0 0 22,694 
Commercial real estate-owner03,397 1,893 0 0 0 5,290 
Residential real estate00 0 0 14,067 0 14,067 
Home equity00003,476 03,476 
Installment00000870870 
Total$10,952 10952000$26,091 $9,372 $0 $17,543 $1,795 $65,753 
December 31, 2022
Type of Collateral
(Dollar in thousands)Business assetsCommercial real estateEquipmentLandResidential real estateOtherTotal
Class of loan
Commercial & industrial$8,205 $0 $0 $0 $0 $37 $8,242 
Lease financing00178000178 
Commercial real estate-investor035300220375 
Commercial real estate-owner03,3991,893119005,411 
Residential real estate000010,691010,691 
Home equity00003,12303,123 
Installment00000603603 
Total$8,205 $3,752 $2,071 $119 $13,836 $640 $28,623 

Lease financing - Lessor. First Financial originates both sales-type and direct financing leases, and the Company manages and reviews lease residuals in accordance with its credit policies. Payments are generally fixed, however, in some agreements, lease payments may be indexed. Sales-type lease contracts contain the ability to purchase the underlying equipment at lease maturity and profit or loss is recognized at lease commencement.  Direct financing leases are generally three to five years in length and may be extended at maturity, however, early cancellation may result in a fee to the borrower.  For direct financing leases, the net unearned income is deferred and amortized over the life of the lease. 

The components of the Company's net investments in direct financing and sales-type leases, which are included in Lease financing on the Consolidated Balance Sheets are as follows:
(Dollar in thousands)December 31, 2023December 31, 2022
Direct financing leases
Lease receivables$16,272 $35,081 
Unguaranteed residual values11,402 16,058 
Sales-type leases
Lease receivables444,144 184,985 
Unguaranteed residual values2,999 0 
Total net investment in direct financing and sales-type leases$474,817 $236,124 
Interest income for direct financing and sales-type leases was $25.2 million, $11.8 million and $2.7 million for the years ended December 31, 2023, 2022 and 2021, respectively.

The remaining maturities of lease receivables were as follows:
(Dollars in thousands)Direct financing and Sales-type
2024$139,108 
2025129,796 
2026109,181 
202782,552 
202838,694 
Thereafter30,422 
Total lease payments529,753 
Less: unearned interest income(69,337)
Net lease receivables$460,416 

OREO. OREO is comprised of properties acquired by the Company primarily through the loan foreclosure or repossession process, that result in partial or total satisfaction of problem loans.

Changes in OREO were as follows:
 Years ended December 31,
(Dollars in thousands)202320222021
Balance at beginning of year$191 $98 $1,287 
Additions
Commercial real estate0 0 98 
Residential real estate387 327 0 
Total additions387 327 98 
Disposals  
Commercial real estate0 (98)(947)
Residential real estate(288)(94)(331)
Total disposals(288)(192)(1,278)
Valuation adjustments  
Commercial real estate0 0 (9)
Residential real estate(184)(42)0 
Total valuation adjustments(184)(42)(9)
Balance at end of year$106 $191 $98